8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of

The Securities Exchange Act of 1934

Date of Report: January 17, 2007

Washington Mutual, Inc.

(Exact name of registrant as specified in its charter)

Washington	1-14667	91-1653725
(State or other jurisdiction	(Commission	(IRS Employer
of incorporation)	File Number)	Identification No.)

1301 Second Avenue, Seattle, Washington	98101
(Address of principal executive offices)	(Zip Code)

(206) 461-2000

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition

On January 17, 2007, Washington Mutual, Inc. held a conference call regarding its results of operations and financial condition for the quarter and twelve months ended December 31, 2006. The text of the press release is included as Exhibit 99.1 to this report, financial supplement is included as Exhibit 99.2 to this report and management’s prepared remarks for the conference call is included as Exhibit 99.3 to this report. The information included in the press release text, financial supplement and management’s prepared remarks for the conference call is considered to be “furnished” under the Securities Exchange Act of 1934. The Company will include final financial statements and additional analyses for the year ended December 31, 2006, as part of its Form 10-K covering that period.

Item 9.01 Financial Statements and Exhibits

(d) The following exhibits are being furnished herewith:

Exhibit No.	Exhibit Description
99.1	Press release text of Washington Mutual, Inc. dated January 17, 2007.
99.2	Financial supplement of Washington Mutual, Inc.
99.3	Management’s prepared remarks for the Washington Mutual, Inc. Conference Call held on January 17, 2007.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

	WASHINGTON MUTUAL, INC.
Dated: January 17, 2007	By: /s/ Fay L. Chapman
	Fay L. Chapman
	Senior Executive Vice President

EX-99.1

Exhibit 99.1

Jan. 17, 2007

For Immediate Release

WaMu Reports Fourth Quarter Earnings Per Share of $1.10 and

2006 Earnings Per Share of $3.64

Announces $2.7 Billion Accelerated Share Repurchase and

Increases Cash Dividend to 54 Cents

SEATTLE - Washington Mutual, Inc. (NYSE: WM) today reported fourth quarter 2006 net income of $1.06 billion, or $1.10 per diluted share, compared with net income of $865 million, or $0.85 per diluted share, in the fourth quarter of 2005. Net income for 2006 was $3.56 billion, or $3.64 per diluted share, compared with net income of $3.43 billion, or $3.73 per diluted share, in 2005.

Fourth quarter 2006 earnings included an after tax gain of $415 million on the previously announced sale of WM Advisors, Inc., the company’s retail mutual fund asset-management company. The gain from the sale of WM Advisors more than offset fourth quarter and full year after tax charges of $100 million and $202 million, respectively, related to the company’s ongoing efficiency initiatives and after tax charges of $137 million associated with the sale in 2006 of a significant portion of the company’s mortgage servicing rights and the related facility and employee transfers.

On Jan. 3, 2007, the company entered into an accelerated share repurchase agreement with a dealer, buying back $2.7 billion of its common stock. The company also increased its cash dividend to 54 cents per common share, up from 53 cents per share in the previous quarter.

“We achieved solid performances in our Retail Banking, Card Services and Commercial Group businesses in the fourth quarter and for the full year despite a difficult interest rate and operating environment, which particularly impacted the results in our Home Loans business,” said Kerry Killinger, WaMu Chairman and CEO. “For the full year, we successfully reduced our cost structure and repositioned the balance sheet while continuing to expand our consumer and small business banking franchise. In 2006, we opened a record 1.23 million net new checking accounts, added a record 848,000 net new retail households and experienced strong cross-sales of the WaMu credit card to our retail banking customers.”

Killinger noted that opportunities to grow the balance sheet at attractive risk-adjusted returns are limited, making the accelerated share repurchase transaction a superior use of capital.

“Our outlook for 2007 reflects the strategic actions we took in 2006 to prepare the company for the future,” Killinger added. “Those decisive actions have positioned us well to deliver stronger operating performance in 2007.”

FOURTH QUARTER AND FULL YEAR FINANCIAL SUMMARY AND HIGHLIGHTS

Financial Summary	Three Months Ended									Year Ended
(in millions, except per share data)	Dec. 31, 2006			Sept. 30, 2006			Dec. 31, 2005			Dec. 31, 2006			Dec. 31, 2005
Income Statement
Net interest income	$	1,998		$	1,947		$	2,241		$	8,121		$	8,218
Provision for loan and lease losses		344			166			217			816			316
Noninterest income		1,592			1,570			1,526			6,377			5,097
Noninterest expense		2,257			2,184			2,214			8,807			7,620
Income from discontinued operations, net of taxes		418			9			8			444			38
Net income		1,058			748			865			3,558			3,432
Diluted earnings per common share	$	1.10		$	0.77		$	0.85		$	3.64		$	3.73
Balance Sheet
Total assets, end of period	$	346,288		$	348,877		$	343,573		$	346,288		$	343,573
Average total assets		353,056			349,542			349,172			348,758			326,233
Average interest-earning assets		314,784			312,827			314,490			312,178			294,829
Average total deposits		214,801			208,912			196,799			203,829			186,023
Profitability ratios
Return on average common equity		16.03	%		11.47	%		12.85	%		13.52	%		14.91	%
Net interest margin		2.58			2.53			2.88			2.60			2.79
Efficiency ratio		62.87			62.09			58.75			60.75			57.23
Nonperforming assets/total assets, end of period		0.80			0.69			0.57			0.80			0.57
Tangible equity/total tangible assets, end of period		6.04			5.86			5.62			6.04			5.62

· Reduction of low margin loans accelerated in balance sheet repositioning. During the fourth quarter, $17.79 billion of medium-term adjustable-rate loans with a weighted average yield of approximately 5.75 percent that were held for investment were transferred to held for sale and targeted for sale in the first quarter. During the quarter, the company recognized a gain of $74 million related to the transfer of these assets and the associated derivatives executed to hedge this transaction. The sale of these loans is expected to increase the company’s net interest margin, improve the company’s interest rate risk profile and reduce its geographic credit concentration. In conjunction with the sale, the company also sold $4.73 billion of mortgage-backed securities with a weighted average yield of 5.26 percent at a slight gain.

· Sale of WM Advisors completed. On Dec. 31, WaMu completed the sale of its retail mutual fund asset-management company, WM Advisors, Inc., to the Principal Financial Group. The sale resulted in a pretax gain of $667 million which was included in income from discontinued operations, net of taxes.

· Company grows franchise while reducing overall cost structure. During the year, the company continued to grow its franchise, opening 144 new retail banking stores, adding 848,000 net new households and 3 million new card accounts while reducing its operating expense run rate. The company’s efficiency initiatives contributed to a reduction in headcount of more than 10,000, or 18 percent, during the year. Noninterest expense of $2.26 billion during the fourth quarter included charges related to the company’s efficiency initiatives of $155 million, without which the expense run rate would have been down 5 percent from the fourth quarter of 2005.

· Asset repricing contributes to a 5 basis point increase in net interest margin. During the fourth quarter the Fed funds rate remained unchanged and the yield curve continued to be inverted. The ongoing repricing of the company’s assets in the fourth quarter more than offset the slight increase in its cost of deposits and wholesale funding, leading to a 5 basis point increase in the net interest margin to 2.58 percent. For the full year, the 19 basis point decrease in the net interest margin to 2.60 percent from the prior year reflected increases in short-term interest rates during the first half of 2006.

2

Net interest income was up 3 percent from the prior quarter due to the increase in the net interest margin but was down slightly year over year as the increase in average interest-earning assets was more than offset by margin compression.

· Strong account growth produces increased noninterest income. Reflecting the year’s record growth in checking accounts, depositor fees of $692 million in the fourth quarter were up 6 percent from the third quarter and at $2.57 billion for the year were up 17 percent from 2005. The company’s continued success in attracting credit card customers, including WaMu retail customers, contributed to an increase in managed card receivables and higher credit card fee income.

· Increase in nonperforming assets reflects more difficult credit environment. Weaker credit performance, particularly in the company’s single-family residential real estate loan portfolios, contributed to the rise in the level of nonperforming assets as a percentage of total assets to 80 basis points at year end from 69 basis points at Sept. 30 and 57 basis points at the end of 2005. The company continued its practice of selectively selling nonperforming loans, selling $176 million in the fourth quarter and $155 million in the third quarter.

· Provision driven by credit card growth. The increase in the fourth quarter provision for loan and lease losses to $344 million in part reflected the growth of the company’s on-balance sheet credit card receivables, which increased the provision by $95 million compared with the prior quarter. During the quarter, the company also revised its accounting for credit card receivables held for sale and refined its provisioning methodology for multi-family loans. The impact of these two changes was a net increase to the fourth quarter provision of $25 million. The increase in the provision for 2006 to $816 million from $316 million in 2005 was primarily due to the addition of the company’s credit card business acquired Oct. 1, 2005.

· Subprime mortgage industry significantly weakens during the fourth quarter. During the fourth quarter, subprime mortgage delinquencies continued to rise as credit conditions deteriorated in the subprime mortgage industry. Weakening subprime mortgage credit performance and market conditions negatively impacted the company’s fourth quarter pretax earnings by approximately $160 million. This result was driven by a reduction in fourth quarter gain on sale of approximately $110 million, as well as a reduction of approximately $50 million in the value of the company’s subprime mortgage residuals to a balance of $168 million at year end.

FOURTH QUARTER AND FULL YEAR OPERATING SEGMENT RESULTS

In the fourth quarter, the company adopted several new management accounting methodologies used for operating segment reporting. The company changed its funds transfer pricing methodology to better reflect current market interest rates and deposit pricing. The company’s new provisioning methodology eliminates the distinction that existed between segment and corporate reporting. The segment results for all periods have been restated to reflect these revisions.

Retail Banking Group

Selected Segment Information	Three Months Ended						Year Ended
(in millions, except accounts and households)	Dec. 31, 2006		Sept. 30, 2006		Dec. 31, 2005		Dec. 31, 2006		Dec. 31, 2005
Net interest income	$	1,239	$	1,260	$	1,278	$	5,171	$	4,890
Provision for loan and lease losses		47		53		26		167		118
Noninterest income		774		738		730		2,919		2,580
Noninterest expense		1,103		1,079		1,100		4,380		4,187
Net income from continuing operations		544		546		553		2,228		1,994
Average loans	$	172,031	$	180,839	$	166,810	$	177,473	$	163,561
Average retail deposits		143,513		139,954		140,212		140,344		136,894
Net change in number of retail checking accounts		179,784		307,433		203,190		1,231,564		902,447
Net change in retail households		123,000		256,000		143,000		848,000		633,000

3

· Full year results show strong performance. While net income from continuing operations of $544 million was flat with the third quarter, it was up 12 percent year over year as the Retail Bank continued to successfully market its products and services to new and existing customers. Excluding the contribution from portfolio management, which has been impacted by rising short-term interest rates and an inverted yield curve, net income from continuing operations for the Retail Bank network was up 5 percent from the prior quarter and 22 percent in 2006 compared with 2005.

· WaMu Free Checking™ drives record checking account growth in 2006. During 2006, the company opened a record 1.23 million net new checking accounts, exceeding its stated goal of 1 million and up 36 percent from 902,447 net new accounts in 2005. During the second half of the year, the company broadened its retail sales focus on expanding customer relationships to products beyond deposits and home equity loans. As a result, the sale of home loans, credit cards and small business accounts has been very strong, increasing the Retail Bank’s cross sale ratio to 6.66 products and services at year end from 6.31 at the end of 2005.

· Continued solid growth in Retail Banking fees. Reflecting the continued successful marketing of WaMu’s products and services and an increase in fees, depositor and other retail banking fees in the Retail Bank were up over 6 percent from the third quarter and up 17 percent year over year.

Card Services Group (managed basis)

Selected Segment Information	Three Months Ended									Year Ended
(in millions)	Dec. 31, 2006			Sept. 30, 2006			Dec. 31, 2005			Dec. 31, 2006			Dec. 31, 20051
Net interest income	$	664		$	633		$	645		$	2,530		$	645
Provision for loan and lease losses		555			345			454			1,647			454
Noninterest income		451			343			352			1,528			352
Noninterest expense		316			294			268			1,201			268
Net income		149			207			172			745			172
Average managed receivables	$	22,875		$	21,706		$	19,472		$	21,294		$	4,908
Period end managed receivables		23,501			21,921			19,973			23,501			19,973
30+ day managed delinquency rate		5.25	%		5.53	%		5.07	%		5.25	%		5.07	%
Managed net credit losses		5.84			5.68			7.28			5.83			7.28
1 2005 reflects the inclusion of Card Services as of the date of acquisition on Oct. 1.

· Card Services continues strong performance. Card Services reported net income of $149 million, reflecting the continued strong risk-adjusted return of the portfolio and growth in managed receivables. The quarter’s results included an increase to the provision of $95 million as the company retained a higher level of its receivables on balance sheet and an increase to the provision of $92 million related to the revised accounting for credit card receivables held for sale. The effect of the accounting policy revision on Card Services’ quarterly results was small, as the increase to the provision was largely offset by the revision’s impact on credit card noninterest income.

· Retail channel accelerates customer and loan growth. Card Services continued to successfully leverage the company’s Retail Bank franchise, which contributed to the opening of 839,000 new credit card accounts in the fourth quarter. New accounts were up 3 percent from the prior quarter and up 17 percent from last year’s fourth quarter, which was Card Services’ first quarter of operation as part of WaMu. Managed card receivables of $23.50 billion at Dec. 31 were up 7 percent from the prior quarter end and up 18 percent from the end of 2005.   Card Services’ credit quality continues to be favorable. At 5.25 percent of period end managed receivables, the 30+ day managed delinquency rate was down from the prior quarter due to growth in managed receivables and completion of the sale of a portfolio of higher risk accounts. Managed net credit losses were 5.84 percent for the quarter, up from 5.68 percent in the third quarter as contractual and bankruptcy losses increased following the historically low levels earlier in the year.

4

Commercial Group

Selected Segment Information	Three Months Ended								Year Ended
(in millions)	Dec. 31, 2006			Sept. 30, 2006			Dec. 31, 2005		Dec. 31, 2006			Dec. 31, 2005
Net interest income	$	189		$	159		$	183	$	677		$	731
Provision for loan and lease losses		(69	)		(2	)		9		(81	)		(26	)
Noninterest income		40			25			109		94			195
Noninterest expense		72			60			66		255			240
Net income		140			78			135		368			443
Loan volume	$	4,019		$	3,104		$	2,932	$	12,854		$	11,231
Average loans		37,552			32,414			30,928		33,137			30,154

· Commercial Group posts solid performance for the quarter. Commercial Group net income of $140 million for the fourth quarter was up from $78 million in the prior quarter, including a $69 million reduction in the allowance for loan and lease losses due principally to provisioning methodology changes for multi-family loans. This reduction reflects the characteristics of the portfolio and the company’s long history of credit performance in this area. The decline in net income for all of 2006 versus 2005 reflected the negative impact to the net interest margin of the rise in short-term rates, but also the inclusion, in 2005, of a positive $80 million (on an after tax basis) in one time items.

· Loan volume up 29 percent for the quarter. Loan volume of $4.02 billion was up 29 percent from the prior quarter with CCBI contributing approximately one-third of the increase. Loan volume for the year totaled $12.85 billion, up 14 percent from 2005, primarily driven by strong growth in nonresidential lending.

· Balance sheet growth reflects acquisition of CCBI. Average loans increased 16 percent to $37.55 billion from the third quarter and increased 10 percent to $33.14 billion in 2006 compared with $30.15 billion in 2005. The growth in average loans reflected the impact of CCBI, which added $4.19 billion to the portfolio and continued growth of both multi-family and nonresidential mortgage lending.

Home Loans Group

Selected Segment Information	Three Months Ended								Year Ended
(in millions)	Dec. 31, 2006			Sept. 30, 2006			Dec. 31, 2005		Dec. 31, 2006			Dec. 31, 2005
Net interest income	$	273		$	275		$	473	$	1,174		$	1,985
Provision for loan and lease losses		47			84			22		189			110
Noninterest income		126			314			327		1,297			2,426
Noninterest expense		534			529			678		2,302			2,608
Net income		(122	)		(24	)		57		(48	)		1,029
Loan volume	$	34,897		$	37,200		$	48,701	$	158,458		$	202,697
Average loans		51,046			45,397			68,082		47,518			64,919

· Home Loans net loss reflects industry-wide deterioration in the subprime mortgage business. The quarter’s net loss of $122 million reflected the continued slowing of the housing market and a significant weakening of overall subprime market conditions. The decline in noninterest income from the previous quarter reflected weakening subprime credit performance on loans originated or acquired through the company’s subprime channel and held for sale or previously sold. This deterioration in subprime credit negatively impacted the current quarter by approximately $160 million, driven by a reduction in fourth quarter gain on sale of approximately $110 million, as well as a reduction of approximately $50 million in the value of the company’s subprime residuals.

· Slowing market impacts origination volume. The 6 percent decline in home loan volume from the prior quarter was largely in-line with industry volumes. The 22 percent decline in lending volume year over year reflected not only the slowdown in housing but also the company’s decision to reposition its correspondent business.

5

· Noninterest expense reduced during the year. Noninterest expense was down 12 percent year over year due to the continued success of the company’s efficiency initiatives, which included a 27 percent reduction in staffing.

COMPANY UPDATES

· On Oct. 1, WaMu completed its acquisition of CCBI, a multi-family and small commercial real estate lending institution located in Southern California, in a cash transaction with a purchase price of $989 million.

· WaMu completed the sale of its retail mutual fund asset-management company, WM Advisors, Inc., to the Principal Financial Group on Dec. 31, 2006 for a pretax gain of $667 million.

· On Jan. 3, 2007, the company entered into an accelerated share repurchase agreement with a dealer pursuant to which it repurchased $2.7 billion of its common stock.

· WaMu’s Board of Directors declared a cash dividend of 54 cents per share on the company’s common stock, up from 53 cents per share in the previous quarter. Dividends on the common stock are payable on Feb. 15, 2007 to shareholders of record as of Jan. 31, 2007. In addition to declaring a dividend on the company’s common stock, the company will pay a dividend of $0.38 per depository share of Series K Preferred Stock to be payable on March 15, 2007 to holders of record on March 1, 2007.

About WaMu

WaMu, through its subsidiaries, is one of the nation’s leading consumer and small business banks. At Dec. 31, 2006, WaMu and its subsidiaries had assets of $346.29 billion. The company has a history dating back to 1889 and its subsidiary banks currently operate more than 2,600 consumer and small business banking stores throughout the nation. WaMu’s press releases are available at http://newsroom.wamu.com.

Webcast information: A conference call to discuss the company’s financial results will be held on Wednesday, Jan. 17, 2007, at 5:00 p.m. ET and will be hosted by Kerry Killinger, chairman and chief executive officer and Tom Casey, executive vice president and chief financial officer. The conference call is available by telephone or on the Internet. The dial-in number for the live conference call is 877-352-5208. Participants calling from outside the United States may dial 210-234-0002. The passcode “WaMu” is required to access the call. Via the Internet, the conference call is available on the Investor Relations portion of the company’s web site at www.wamu.com/ir. A transcript of the prepared remarks will be available on the company’s web site prior to the call and archived for 30 days. A recording of the conference call will be available from 7:00 p.m ET on Wednesday, Jan. 17, 2007, through 11:59 p.m. ET on Saturday, Jan. 27, 2007. The recorded message will be available at 866-463-4104. Callers from outside the United States may dial 203-369-1380.

6

Cautionary Statements

This document contains forward-looking statements, which are not historical facts and pertain to future operating results. These forward-looking statements are within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements about our plans, objectives, expectations and intentions and other statements contained in this document that are not historical facts. When used in this presentation, the words “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” or words of similar meaning, or future or conditional verbs, such as “will,” “would,” “should,” “could,” or “may” are generally intended to identify forward-looking statements. These forward-looking statements are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. Actual results may differ materially from the results discussed in these forward-looking statements for the reasons, among others, discussed under the heading “Factors That May Affect Future Results” in Washington Mutual’s 2005 Annual Report on Form 10-K/A and “Cautionary Statements” in our Form 10-Q/A for the quarter ended Mar. 31, 2006 and Forms 10-Q for the quarters ended June 30, 2006 and Sept. 30, 2006 which include:

· Volatile interest rates and the impact on mortgage rates;

· Economic trends that negatively impact the real estate lending environment;

· Risks related to the option adjustable-rate mortgage product;

· Risks related to subprime lending;

· Operational risks;

· Risks related to credit card operations;

· Changes in the regulation of financial services companies, housing government-sponsored enterprises and credit card lenders;

· Competition from banking and nonbanking companies;

· General business and economic conditions, including movements in interest rates, the slope of the yield curve, and the potential overextension of housing prices in certain geographic markets; and

· Reputational risk.

There are other factors not described in our 2005 Form 10-K/A and 2006 Forms 10-Q and which are beyond the Company’s ability to anticipate or control that could cause results to differ.

####

Media Contact	Investor Relations Contact
Alan Gulick	Alan Magleby
Washington Mutual	Washington Mutual
206-500-2760	206-500-4148 (Seattle)
alan.gulick@wamu.net	212-326-6019 (New York)
	alan.magleby@wamu.net

7

EX-99.2

Exhibit 99.2

WM -1

Washington Mutual, Inc.

Selected Financial Information

(dollars in millions, except per share data)

(unaudited)

	Quarter Ended															Year Ended
	Dec. 31,			Sept. 30,			June 30,			Mar. 31,			Dec. 31,			Dec. 31,			Dec. 31,
	2006			2006			2006			2006			2005			2006			2005
PROFITABILITY
Net income	$	1,058		$	748		$	767		$	985		$	865		$	3,558		$	3,432
Net interest income		1,998			1,947			2,060			2,117			2,241			8,121			8,218
Noninterest income		1,592			1,570			1,578			1,638			1,526			6,377			5,097
Noninterest expense		2,257			2,184			2,229			2,138			2,214			8,807			7,620
Diluted earnings per common share:
Income from continuing operations	$	0.66		$	0.76		$	0.78		$	0.97		$	0.84		$	3.18		$	3.69
Income from discontinued operations		0.44			0.01			0.01			0.01			0.01			0.46			0.04
Net income		1.10			0.77			0.79			0.98			0.85			3.64			3.73
Diluted weighted average number of common shares outstanding
(in thousands)		955,817			967,376			975,504			1,003,460			1,011,395			975,406			919,238
Net interest margin		2.58	%		2.53	%		2.65	%		2.75	%		2.88	%		2.60	%		2.79	%
Dividends declared per common share		0.53			0.52			0.51			0.50			0.49			2.06			1.90
Book value per common share (period end)(1)		28.21			27.65			27.31			27.10			27.61			28.21			27.61
Return on average assets(2)		1.20	%		0.86	%		0.88	%		1.15	%		0.99	%		1.02	%		1.05	%
Return on average common equity(2)		16.03			11.47			11.82			14.69			12.85			13.52			14.91
Efficiency ratio(3)(4)		62.87			62.09			61.27			56.95			58.75			60.75			57.23
ASSET QUALITY (period end)
Nonperforming assets(5) to total assets		0.80	%		0.69	%		0.62	%		0.59	%		0.57	%		0.80	%		0.57	%
Allowance as a percentage of total loans held in portfolio		0.72			0.64			0.68			0.68			0.74			0.72			0.74
CREDIT PERFORMANCE
Provision for loan and lease losses	$	344		$	166		$	224		$	82		$	217		$	816		$	316
Net charge-offs		136			154			116			105			137			510			244
CAPITAL ADEQUACY (period end)
Capital Ratios at WMI-consolidated level:
Tangible equity to total tangible assets(6)		6.04	%		5.86	%		5.84	%		5.75	%		5.62	%		6.04	%		5.62	%
Estimated total risk-based capital to total risk-weighted assets(7)		11.78			11.10			11.26			10.77			10.80			11.78			10.80
Capital Ratios at WMB-bank only level
(well-capitalized minimum)(8):
Tier 1 capital to adjusted total assets (5.00%)		6.80			6.47			6.33			6.76			6.47			6.80			6.47
Adjusted tier 1 capital to total risk-weighted assets (6.00%)		8.26			8.12			8.13			8.92			8.49			8.26			8.49
Total risk-based capital to total risk-weighted assets (10.00%)		12.19			11.30			11.39			11.82			11.50			12.19			11.50
SUPPLEMENTAL DATA
Average balance sheet:
Total loans held in portfolio	$	239,265		$	242,165		$	242,334		$	232,505		$	227,568		$	239,094		$	215,434
Total interest-earning assets(3)		314,784			312,827			313,239			307,777			314,490			312,178			294,829
Total assets		353,056			349,542			348,664			343,660			349,172			348,758			326,233
Total deposits		214,801			208,912			200,252			191,034			196,799			203,829			186,023
Total stockholders' equity		26,700			26,147			25,958			26,825			26,949			26,406			23,024
Period-end balance sheet:
Total loans held in portfolio, net of allowance for loan
and lease losses		223,330			240,215			241,840			238,362			227,937			223,330			227,937
Total assets		346,288			348,877			350,884			348,401			343,573			346,288			343,573
Total deposits		213,956			210,882			204,558			200,002			193,167			213,956			193,167
Total stockholders' equity		26,969			26,458			26,131			25,819			27,279			26,969			27,279
Common shares outstanding at the end of period (in thousands)(9)		944,479			945,098			962,880			958,819			993,914			944,479			993,914
Employees at end of period		49,824			51,056			56,247			60,381			60,798			49,824			60,798

____________________
(1)	Excludes six million shares held in escrow for all periods reported.
(2)	Includes income from continuing and discontinued operations.
(3)	Based on continuing operations.
(4)	The efficiency ratio is defined as noninterest expense divided by total revenue (net interest income and noninterest income).
(5)	Excludes nonaccrual loans held for sale.
(6)	Excludes unrealized net gain/loss on available-for-sale securities and derivatives, goodwill and intangible assets (except MSR) and transition adjustments related to the adoption of FASB Statement No. 158, Employer's Accounting for Defined Benefit Pension and Other Postretirement Plans, as of December 31, 2006. Minority interests of $2.45 billion for December 31, 2006, $1.96 billion for September 30, 2006 and June 30, 2006 and $1.97 billion for March 31, 2006 are included in the numerator.
(7)	The total risk-based capital ratio is estimated as if Washington Mutual, Inc. were a bank holding company subject to Federal Reserve Board capital requirements.
(8)	Capital ratios for Washington Mutual Bank ("WMB") at December 31, 2006 are preliminary.
(9)	Includes six million shares held in escrow for all periods reported.

WM-2

Washington Mutual, Inc.

Consolidated Statements of Income

(dollars in millions, except per share data)

(unaudited)

	Quarter Ended
	Dec. 31,			Sept. 30,			June 30,			Mar. 31,			Dec. 31,
	2006			2006			2006			2006			2005
Interest Income
Loans held for sale	$	520		$	439		$	398		$	466		$	676
Loans held in portfolio		4,048			4,008			3,884			3,576			3,431
Available-for-sale securities		392			379			368			322			303
Trading assets		102			140			165			198			185
Other interest and dividend income		148			139			120			95			73
Total interest income		5,210			5,105			4,935			4,657			4,668
Interest Expense
Deposits		1,843			1,739			1,461			1,221			1,184
Borrowings		1,369			1,419			1,414			1,319			1,243
Total interest expense		3,212			3,158			2,875			2,540			2,427
Net interest income		1,998			1,947			2,060			2,117			2,241
Provision for loan and lease losses		344			166			224			82			217
Net interest income after provision for loan and lease losses		1,654			1,781			1,836			2,035			2,024
Noninterest Income
Revenue from sales and servicing of home mortgage loans		164			118			222			263			418
Revenue from sales and servicing of consumer loans		372			355			424			376			409
Depositor and other retail banking fees		692			655			641			578			586
Credit card fees		182			165			152			138			139
Securities fees and commissions		54			52			56			52			47
Insurance income		30			31			33			33			37
Trading assets income (loss)		(81	)		68			(129	)		(13	)		(273	)
Gain (loss) from sales of other available-for-sale securities		(1	)		(1	)		-			(7	)		46
Other income		180			127			179			218			117
Total noninterest income		1,592			1,570			1,578			1,638			1,526
Noninterest Expense
Compensation and benefits(1)		945			939			1,021			1,032			1,028
Occupancy and equipment		476			408			435			391			399
Telecommunications and outsourced information services		133			142			145			134			139
Depositor and other retail banking losses		64			57			51			56			60
Advertising and promotion		107			124			117			95			109
Professional fees		89			57			45			36			62
Other expense		443			457			415			394			417
Total noninterest expense		2,257			2,184			2,229			2,138			2,214
Minority interest expense		34			34			37			-			-
Income from continuing operations before income taxes		955			1,133			1,148			1,535			1,336
Income taxes		315			394			389			559			479
Income from continuing operations, net of taxes		640			739			759			976			857
Discontinued Operations(2)
Income from discontinued operations before income taxes		2			14			12			15			12
Gain on disposition of discontinued operations		667			-			-			-			-
Income taxes		251			5			4			6			4
Income from discontinued operations, net of taxes		418			9			8			9			8
Net Income	$	1,058		$	748		$	767		$	985		$	865
Net Income Available to Common Stockholders	$	1,050		$	748		$	767		$	985		$	865
Basic Earnings Per Common Share:
Income from continuing operations	$	0.68		$	0.78		$	0.80		$	1.00		$	0.87
Income from discontinued operations		0.45			0.01			0.01			0.01			0.01
Net income		1.13			0.79			0.81			1.01			0.88
Diluted Earnings Per Common Share:
Income from continuing operations	$	0.66		$	0.76		$	0.78		$	0.97		$	0.84
Income from discontinued operations		0.44			0.01			0.01			0.01			0.01
Net income		1.10			0.77			0.79			0.98			0.85
Dividends declared per common share		0.53			0.52			0.51			0.50			0.49
Basic weighted average number of common shares outstanding (in thousands)		931,484			941,898			947,023			973,614			980,084
Diluted weighted average number of common shares outstanding (in thousands)		955,817			967,376			975,504			1,003,460			1,011,395

____________________
(1)	As of January 1, 2006, the Company applied Statement of Financial Accounting Standards ("Statement") No. 123R, Share-Based Payment. Statement No. 123R requires an entity that previously had a policy of recognizing the effect of forfeitures as they occurred to estimate the number of outstanding instruments for which the requisite service is not expected to be rendered. The effect of this change in accounting principle amounted to $25 million and has been reflected as a decrease to compensation and benefits expense in the first quarter of 2006.
(2)	Represents WM Advisors, Inc., the Company's retail mutual fund management business, which was sold in the fourth quarter of 2006.

WM-3

Washington Mutual, Inc.

Consolidated Statements of Income

(dollars in millions, except per share data)

(unaudited)

	Year Ended
	Dec. 31,			Dec. 31,
	2006			2005
Interest Income
Loans held for sale	$	1,824		$	2,394
Loans held in portfolio		15,516			11,827
Available-for-sale securities		1,460			998
Trading assets		606			469
Other interest and dividend income		501			232
Total interest income		19,907			15,920
Interest Expense
Deposits		6,263			3,728
Borrowings		5,523			3,974
Total interest expense		11,786			7,702
Net interest income		8,121			8,218
Provision for loan and lease losses		816			316
Net interest income after provision for loan and lease losses		7,305			7,902
Noninterest Income
Revenue from sales and servicing of home mortgage loans		768			2,017
Revenue from sales and servicing of consumer loans		1,527			413
Depositor and other retail banking fees		2,567			2,193
Credit card fees		637			139
Securities fees and commissions		215			189
Insurance income		127			172
Trading assets loss		(154	)		(257	)
Loss from sales of other available-for-sale securities		(9	)		(84	)
Other income		699			315
Total noninterest income		6,377			5,097
Noninterest Expense
Compensation and benefits(1)		3,937			3,701
Occupancy and equipment		1,711			1,520
Telecommunications and outsourced information services		554			449
Depositor and other retail banking losses		229			226
Advertising and promotion		443			315
Professional fees		227			181
Other expense		1,706			1,228
Total noninterest expense		8,807			7,620
Minority interest expense		105			-
Income from continuing operations before income taxes		4,770			5,379
Income taxes		1,656			1,985
Income from continuing operations, net of taxes		3,114			3,394
Discontinued Operations(2)
Income from discontinued operations before income taxes		42			58
Gain on disposition of discontinued operations		667			-
Income taxes		265			20
Income from discontinued operations, net of taxes		444			38
Net Income	$	3,558		$	3,432
Net Income Available to Common Stockholders	$	3,550		$	3,432
Basic Earnings Per Common Share:
Income from continuing operations	$	3.27		$	3.80
Income from discontinued operations		0.47			0.04
Net income		3.74			3.84
Diluted Earnings Per Common Share:
Income from continuing operations	$	3.18		$	3.69
Income from discontinued operations		0.46			0.04
Net income		3.64			3.73
Dividends declared per common share		2.06			1.90
Basic weighted average number of common shares outstanding (in thousands)		948,371			894,434
Diluted weighted average number of common shares outstanding (in thousands)		975,406			919,238

____________________
(1)	As of January 1, 2006, the Company applied Statement of Financial Accounting Standards ("Statement") No. 123R, Share-Based Payment. Statement No. 123R requires an entity that previously had a policy of recognizing the effect of forfeitures as they occurred to estimate the number of outstanding instruments for which the requisite service is not expected to be rendered. The effect of this change in accounting principle amounted to $25 million and has been reflected as a decrease to compensation and benefits expense in the first quarter of 2006.
(2)	Represents WM Advisors, Inc., the Company's retail mutual fund management business, which was sold in the fourth quarter of 2006.

WM-4

Washington Mutual, Inc.

Consolidated Statements of Financial Condition

(dollars in millions)

(unaudited)

	Dec. 31,			Sept. 30,			June 30,			Mar. 31,			Dec. 31,
	2006			2006			2006			2006			2005
Assets
Cash and cash equivalents	$	6,948		$	6,649		$	6,675		$	5,868		$	6,214
Federal funds sold and securities purchased under agreements to resell		3,743			5,102			4,112			3,995			2,137
Trading assets		4,434			5,391			7,445			9,958			10,999
Available-for-sale securities, total amortized cost of $25,073, $29,136,
$28,504, $27,424, and $24,810:
Mortgage-backed securities		18,063			22,353			21,438			21,388			20,648
Investment securities		6,915			6,664			6,358			5,586			4,011
Total available-for-sale securities		24,978			29,017			27,796			26,974			24,659
Loans held for sale		44,970			23,720			23,342			25,020			33,582
Loans held in portfolio		224,960			241,765			243,503			240,004			229,632
Allowance for loan and lease losses		(1,630	)		(1,550	)		(1,663	)		(1,642	)		(1,695	)
Total loans held in portfolio, net of allowance for loan and lease losses		223,330			240,215			241,840			238,362			227,937
Investment in Federal Home Loan Banks		2,705			3,013			3,500			4,200			4,257
Mortgage servicing rights		6,193			6,288			9,162			8,736			8,041
Goodwill		9,050			8,368			8,339			8,298			8,298
Other assets		19,937			21,114			18,673			16,990			17,449
Total assets	$	346,288		$	348,877		$	350,884		$	348,401		$	343,573
Liabilities
Deposits:
Noninterest-bearing deposits	$	33,386		$	34,667		$	35,457		$	36,531		$	34,014
Interest-bearing deposits		180,570			176,215			169,101			163,471			159,153
Total deposits		213,956			210,882			204,558			200,002			193,167
Federal funds purchased and commercial paper		4,778			5,282			6,138			6,841			7,081
Securities sold under agreements to repurchase		11,953			13,665			19,866			15,471			15,532
Advances from Federal Home Loan Banks		44,297			47,247			55,311			65,283			68,771
Other borrowings		32,852			33,883			27,995			24,872			23,777
Other liabilities		9,035			9,501			8,926			8,140			7,951
Minority interests(1)		2,448			1,959			1,959			1,973			15
Total liabilities		319,319			322,419			324,753			322,582			316,294
Stockholders' equity		26,969			26,458			26,131			25,819			27,279
Total liabilities and stockholders' equity	$	346,288		$	348,877		$	350,884		$	348,401		$	343,573

⁽¹⁾ Primarily comprises perpetual non-cumulative preferred securities issued in 2006 by Washington Mutual Preferred Funding, LLC, an indirect subsidiary of Washington Mutual, Inc.

WM-5

Washington Mutual, Inc.

Selected Financial Information

(dollars in millions)

(unaudited)

	Quarter Ended
	Dec. 31,			Sept. 30,			June 30,			Mar. 31,			Dec. 31,
	2006			2006			2006			2006			2005
Stockholders' Equity Rollforward
Balance, beginning of period	$	26,458		$	26,131		$	25,819		$	27,279		$	22,259
Net income		1,058			748			767			985			865
Cumulative effect from the adoption of Statement No. 156, net of income taxes(1)		-			-			-			35			-
Other comprehensive income (loss), net of income taxes		(107	)		419			(151	)		(219	)		(91	)
Cash dividends declared on common stock		(496	)		(497	)		(486	)		(499	)		(480	)
Cash dividends declared on preferred stock		(8	)		-			-			-			-
Common stock repurchased and retired		-			(930	)		-			(2,108	)		(723	)
Common stock issued for acquisition		-			-			-			-			5,030
Common stock issued		64			95			182			346			419
Preferred stock issued		-			492			-			-			-
Balance, end of period	$	26,969		$	26,458		$	26,131		$	25,819		$	27,279

⁽¹⁾ As of January 1, 2006, the Company prospectively applied Statement of Financial Accounting Standards ("Statement") No. 156, Accounting for Servicing of Financial Assets. Statement No. 156 permits an entity to choose either to continue the practice of amortizing servicing assets and assess such assets for impairment, or to report servicing assets at fair value. The Company has elected to report its mortgage servicing assets at fair value. Statement No. 156 also permits the one-time transfer of available-for-sale securities being utilized as MSR risk management instruments to trading securities. The cumulative effects, net of income taxes, resulted in a $29 million increase to January 1, 2006 retained earnings from the MSR fair value election and a $6 million increase to January 1, 2006 accumulated other comprehensive income from the transfer of AFS securities, designated as MSR risk management instruments, to the trading portfolio.

WM-6

Washington Mutual, Inc.

Selected Financial Information

(dollars in millions)

(unaudited)

	Quarter Ended															Year Ended
	Dec. 31,			Sept. 30,			June 30,			Mar. 31,			Dec. 31,			Dec. 31,			Dec. 31,
	2006			2006			2006			2006			2005			2006			2005
RETAIL BANKING GROUP
Condensed income statement:
Net interest income	$	1,239		$	1,260		$	1,324		$	1,348		$	1,278		$	5,171		$	4,890
Provision for loan and lease losses		47			53			13			54			26			167			118
Noninterest income		774			738			735			672			730			2,919			2,580
Inter-segment revenue		17			17			16			13			8			63			42
Noninterest expense		1,103			1,079			1,109			1,089			1,100			4,380			4,187
Income from continuing operations before income taxes		880			883			953			890			890			3,606			3,207
Income taxes		336			337			365			340			337			1,378			1,213
Income from continuing operations, net of taxes		544			546			588			550			553			2,228			1,994
Income from discontinued operations, net of taxes		12			9			8			9			8			38			38
Net income	$	556		$	555		$	596		$	559		$	561		$	2,266		$	2,032
Performance and other data:
Efficiency ratio		54.33	%		53.57	%		53.44	%		53.57	%		54.56	%		53.72	%		55.73	%
Average loans	$	172,031		$	180,839		$	182,972		$	174,035		$	166,810		$	177,473		$	163,561
Average assets		182,260			191,299			193,330			184,336			177,317			187,810			173,803
Average deposits:
Checking deposits:
Noninterest bearing		21,873			21,440			21,418			20,346			19,953			21,274			18,948
Interest bearing		33,010			34,792			37,518			40,343			43,192			36,391			46,400
Total checking deposits		54,883			56,232			58,936			60,689			63,145			57,665			65,348
Savings and money market deposits		41,442			38,317			38,143			37,433			36,594			38,843			35,772
Time deposits		47,188			45,405			41,724			40,940			40,473			43,836			35,774
Average total deposits		143,513			139,954			138,803			139,062			140,212			140,344			136,894
Loan volume		7,966			9,006			10,488			7,255			11,563			34,715			46,951
Employees at end of period		27,957			28,319			31,709			33,124			33,104			27,957			33,104
CARD SERVICES GROUP
Managed basis(1)
Condensed income statement:
Net interest income	$	664		$	633		$	615		$	619		$	645		$	2,530		$	645
Provision for loan and lease losses		555			345			417			330			454			1,647			454
Noninterest income		451			343			389			344			352			1,528			352
Inter-segment expense		2			2			1			-			-			5			-
Noninterest expense		316			294			293			298			268			1,201			268
Income before income taxes		242			335			293			335			275			1,205			275
Income taxes		93			128			112			128			103			460			103
Net income	$	149		$	207		$	181		$	207		$	172		$	745		$	172
Performance and other data:
Efficiency ratio		28.41	%		30.16	%		29.19	%		30.95	%		26.86	%		29.62	%		26.86	%
Average loans	$	22,875		$	21,706		$	20,474		$	20,086		$	19,472		$	21,294		$	4,908
Average assets		25,472			24,236			23,044			22,764			22,198			23,888			5,595
Employees at end of period		2,676			2,731			2,597			2,871			3,124			2,676			3,124
Securitization adjustments
Condensed income statement:
Net interest income	$	(437	)	$	(411	)	$	(405	)	$	(432	)	$	(409	)	$	(1,686	)	$	(409	)
Provision for loan and lease losses		(280	)		(220	)		(217	)		(225	)		(259	)		(943	)		(259	)
Noninterest income		157			191			188			207			150			743			150
Performance and other data:
Average loans		(12,811	)		(12,169	)		(11,565	)		(12,107	)		(11,011	)		(12,165	)		(2,775	)
Average assets		(11,035	)		(10,330	)		(9,753	)		(10,219	)		(9,267	)		(10,337	)		(2,336	)
Adjusted basis
Condensed income statement:
Net interest income	$	227		$	222		$	210		$	187		$	236		$	844		$	236
Provision for loan and lease losses		275			125			200			105			195			704			195
Noninterest income		608			534			577			551			502			2,271			502
Inter-segment expense		2			2			1			-			-			5			-
Noninterest expense		316			294			293			298			268			1,201			268
Income before income taxes		242			335			293			335			275			1,205			275
Income taxes		93			128			112			128			103			460			103
Net income	$	149		$	207		$	181		$	207		$	172		$	745		$	172
Performance and other data:
Average loans	$	10,064		$	9,537		$	8,909		$	7,979		$	8,461		$	9,129		$	2,133
Average assets		14,437			13,906			13,291			12,545			12,931			13,551			3,259
COMMERCIAL GROUP(2)
Condensed income statement:
Net interest income	$	189		$	159		$	166		$	163		$	183		$	677		$	731
Provision (reversal of reserve) for loan and lease losses		(69	)		(2	)		(10	)		-			9			(81	)		(26	)
Noninterest income		40			25			17			12			109			94			195
Noninterest expense		72			60			57			67			66			255			240
Income before income taxes		226			126			136			108			217			597			712
Income taxes		86			48			52			41			82			229			269
Net income	$	140		$	78		$	84		$	67		$	135		$	368		$	443
Performance and other data:
Efficiency ratio		31.49	%		32.21	%		31.28	%		38.47	%		22.45	%		33.20	%		25.89	%
Average loans	$	37,552		$	32,414		$	31,505		$	31,011		$	30,928		$	33,137		$	30,154
Average assets		40,216			34,560			33,709			33,334			34,065			35,471			33,197
Average deposits		3,609			2,323			2,242			2,259			2,428			2,611			2,592
Loan volume		4,019			3,104			2,961			2,769			2,932			12,854			11,231
Employees at end of period		1,409			1,242			1,252			1,326			1,319			1,409			1,319
(This table is continued on "WM-7".)

__________________________
(1)	The managed basis presentation treats securitized and sold credit card receivables as if they were still on the balance sheet. The Company uses this basis in assessing the overall performance of this operating segment. Under this presentation, loans securitized and sold are added back to the balance sheet and the related interest, fee income and credit losses are added back to the income statement. These securitization adjustments are eliminated in the reconciliation of management accounting methodologies to the Company's GAAP financial results.
(2)	Effective January 1, 2006, the Company reorganized its single family residential mortgage lending operations. This reorganization combined the Company's subprime mortgage origination business, Long Beach Mortgage, as well as its Mortgage Banker Finance lending operations with the Home Loans Group. Previously, these operations were reported within the Commercial Group. This change in organization was retrospectively applied to prior periods.

WM-7

Washington Mutual, Inc.

Selected Financial Information

(dollars in millions)

(unaudited)

	Quarter Ended															Year Ended
(This table is continued from "WM-6".)	Dec. 31,			Sept. 30,			June 30,			Mar. 31,			Dec. 31,			Dec. 31,			Dec. 31,
	2006			2006			2006			2006			2005			2006			2005
HOME LOANS GROUP(1)
Condensed income statement:
Net interest income	$	273		$	275		$	289		$	337		$	473		$	1,174		$	1,985
Provision for loan and lease losses		47			84			38			21			22			189			110
Noninterest income		126			314			458			399			327			1,297			2,426
Inter-segment expense		15			15			15			13			8			58			42
Noninterest expense		534			529			618			622			678			2,302			2,608
Income (loss) before income taxes		(197	)		(39	)		76			80			92			(78	)		1,651
Income taxes (benefit)		(75	)		(15	)		30			31			35			(30	)		622
Net income (loss)	$	(122	)	$	(24	)	$	46		$	49		$	57		$	(48	)	$	1,029
Performance and other data:
Efficiency ratio		139.14	%		92.14	%		84.34	%		85.97	%		85.56	%		95.38	%		59.69	%
Average loans	$	51,046		$	45,397		$	43,907		$	49,730		$	68,082		$	47,518		$	64,919
Average assets		71,511			70,556			70,875			77,977			94,693			72,706			87,252
Average deposits		19,788			20,659			20,124			16,530			19,134			19,288			19,317
Loan volume		34,897			37,200			41,364			44,998			48,701			158,458			202,697
Employees at end of period		12,993			13,907			15,530			17,616			17,726			12,993			17,726
CORPORATE SUPPORT/TREASURY AND OTHER
Condensed income statement:
Net interest expense	$	(64	)	$	(106	)	$	(60	)	$	(44	)	$	(50	)	$	(275	)	$	(97	)
Provision (reversal of reserve) for loan and lease losses		(2	)		1			(3	)		(1	)		-			(4	)		4
Noninterest income (expense)		142			75			(88	)		150			(14	)		280			(172	)
Noninterest expense		232			222			152			62			102			669			317
Minority interest expense		34			34			37			-			-			105			-
Income (loss) from continuing operations before income taxes		(186	)		(288	)		(334	)		45			(166	)		(765	)		(590	)
Income tax benefit		86			121			133			1			70			342			263
Income (loss) from continuing operations, net of taxes		(100	)		(167	)		(201	)		46			(96	)		(423	)		(327	)
Income from discontinued operations, net of taxes		406			-			-			-			-			406			-
Net income (loss)	$	306		$	(167	)	$	(201	)	$	46		$	(96	)	$	(17	)	$	(327	)
Performance and other data:
Average loans	$	1,294		$	1,245		$	1,178		$	1,142		$	1,148		$	1,215		$	1,087
Average assets		46,414			41,041			39,355			37,414			32,142			41,080			30,723
Average deposits		47,891			45,976			39,083			33,183			35,025			41,586			27,220
Loan volume		144			58			82			24			96			308			278
Employees at end of period		4,789			4,857			5,159			5,444			5,525			4,789			5,525
RECONCILING ADJUSTMENTS
Condensed income statement:
Net interest income(2)	$	134		$	137		$	131		$	126		$	121		$	530		$	473
Provision (reversal of reserve) for loan and lease losses(3)		46			(95	)		(14	)		(97	)		(35	)		(159	)		(85	)
Noninterest income (expense)(4)		(98	)		(116	)		(121	)		(146	)		(128	)		(484	)		(434	)
Income (loss) before income taxes		(10	)		116			24			77			28			205			124
Income taxes (benefit)(5)		(39	)		17			(37	)		20			(8	)		(39	)		41
Net income	$	29		$	99		$	61		$	57		$	36		$	244		$	83
Performance and other data:
Average loans(6)	$	(1,573	)	$	(1,600	)	$	(1,601	)	$	(1,571	)	$	(1,555	)	$	(1,587	)	$	(1,573	)
Average assets(6)		(1,782	)		(1,820	)		(1,896	)		(1,946	)		(1,976	)		(1,860	)		(2,001	)
TOTAL CONSOLIDATED
Condensed income statement:
Net interest income	$	1,998		$	1,947		$	2,060		$	2,117		$	2,241		$	8,121		$	8,218
Provision for loan and lease losses		344			166			224			82			217			816			316
Noninterest income		1,592			1,570			1,578			1,638			1,526			6,377			5,097
Noninterest expense		2,257			2,184			2,229			2,138			2,214			8,807			7,620
Minority interest expense		34			34			37			-			-			105			-
Income from continuing operations before income taxes		955			1,133			1,148			1,535			1,336			4,770			5,379
Income taxes		315			394			389			559			479			1,656			1,985
Income from continuing operations, net of taxes		640			739			759			976			857			3,114			3,394
Income from discontinued operations, net of taxes		418			9			8			9			8			444			38
Net income	$	1,058		$	748		$	767		$	985		$	865		$	3,558		$	3,432
Performance and other data:
Efficiency ratio		62.87	%		62.09	%		61.27	%		56.95	%		58.75	%		60.75	%		57.23	%
Average loans	$	270,414		$	267,832		$	266,870		$	262,326		$	273,874		$	266,885		$	260,281
Average assets		353,056			349,542			348,664			343,660			349,172			348,758			326,233
Average deposits		214,801			208,912			200,252			191,034			196,799			203,829			186,023
Loan volume		47,026			49,368			54,895			55,046			63,292			206,335			261,157
Employees at end of period		49,824			51,056			56,247			60,381			60,798			49,824			60,798

__________________________
(1)	See note 2 on preceding table.&# 160;
(2)	Represents the difference between home loan premium amortization recorded by the Retail Banking Group and the amount recognized in the Company's Consolidated Statements of Income. For management reporting purposes, loans that are held in portfolio by the Retail Banking Group are treated as if they are purchased from the Home Loans Group. Since the cost basis of these loans includes an assumed profit factor paid to the Home Loans Group, the amortization of loan premiums recorded by the Retail Banking Group reflects this assumed profit factor and must therefore be eliminated as a reconciling adjustment.
(3)	Represents the difference between the provision calculated using management accounting methodologies and those used in the Company's consolidated financial statements. < /font>
(4)	Represents the difference between gain from mortgage loans recorded by the Home Loans Group and the gain from mortgage loans recognized in the Company's Consolidated Statements of Income. A substantial amount of loans originated or purchased by this segment are considered to be salable for management reporting purposes.
(5)	Represents the tax effect of reconciling adjustments.
(6)	Includes the inter-segment offset for inter-segment loan premiums that the Retail Banking Group recognized from the transfer of portfolio loans from the Home Loans Group.

WM-8

Washington Mutual, Inc.

Selected Financial Information

(dollars in millions)

(unaudited)

	Quarter Ended
	Dec. 31, 2006							Sept. 30, 2006							Dec. 31, 2005
						Interest							Interest							Interest
						Income/							Income/							Income/
	Balance		Rate			Expense		Balance		Rate			Expense		Balance		Rate			Expense
Average Balances and Weighted Average Interest Rates
Assets
Interest-earning assets:
Federal funds sold and securities purchased under
agreements to resell	$	5,597		5.33	%	$	76	$	5,085		5.38	%	$	70	$	2,380		4.01	%	$	24
Trading assets		4,855		8.39			102		6,264		8.92			140		10,330		7.13			185
Available-for-sale securities(1):
Mortgage-backed securities		21,661		5.58			302		21,488		5.41			291		19,135		5.25			252
Investment securities		6,952		5.15			90		6,910		5.06			88		4,316		4.75			51
Loans held for sale		31,149		6.65			520		25,667		6.82			439		46,306		5.82			676
Loans held in portfolio:
Loans secured by real estate:
Home loans(2)		114,645		6.04			1,729		123,355		5.94			1,830		111,126		5.30			1,472
Specialty mortgage finance(3)		19,196		6.68			321		19,632		6.19			304		22,430		6.06			340
Home equity loans and lines of credit		54,636		7.56			1,040		53,221		7.54			1,010		50,449		6.55			831
Home construction(4)		2,060		6.62			34		2,059		6.41			33		2,008		6.35			32
Multi-family		30,348		6.52			494		27,100		6.42			435		25,312		5.77			365
Other real estate		6,732		6.88			118		5,696		6.76			98		4,953		7.38			92
Total loans secured by real estate		227,617		6.55			3,736		231,063		6.41			3,710		216,278		5.78			3,132
Consumer:
Credit card		9,597		11.28			273		9,058		11.39			260		8,259		11.96			249
Other		280		12.54			9		284		12.57			9		654		10.79			18
Commercial		1,771		6.61			30		1,760		6.41			29		2,377		5.28			32
Total loans held in portfolio		239,265		6.75			4,048		242,165		6.60			4,008		227,568		6.02			3,431
Other		5,305		5.35			72		5,248		5.21			69		4,455		4.29			49
Total interest-earning assets(5)		314,784		6.60			5,210		312,827		6.51			5,105		314,490		5.92			4,668
Noninterest-earning assets:
Mortgage servicing rights		6,230							7,201							7,680
Goodwill		9,011							8,339							8,247
Other assets(6)		23,031							21,175							18,755
Total assets	$	353,056						$	349,542						$	349,172
Liabilities
Interest-bearing liabilities:
Deposits:
Interest-bearing checking deposits	$	33,098		2.78			232	$	34,866		2.90			255	$	43,302		2.23			243
Savings and money market deposits		53,314		3.34			449		49,144		3.19			396		43,831		2.09			231
Time deposits		93,415		4.90			1,162		90,001		4.77			1,088		74,300		3.77			710
Total interest-bearing deposits		179,827		4.05			1,843		174,011		3.95			1,739		161,433		2.90			1,184
Federal funds purchased and commercial paper		6,781		5.40			93		7,382		5.31			99		8,236		4.07			85
Securities sold under agreements to repurchase		12,177		5.43			169		15,676		5.39			216		15,330		4.09			160
Advances from Federal Home Loan Banks		46,005		5.31			625		52,886		5.28			711		70,113		4.06			726
Other		34,420		5.54			482		27,815		5.59			393		24,715		4.38			272
Total interest-bearing liabilities		279,210		4.53			3,212		277,770		4.48			3,158		279,827		3.42			2,427
Noninterest-bearing sources:
Noninterest-bearing deposits		34,974							34,901							35,366
Other liabilities(7)		10,111							8,765							7,015
Minority interests		2,061							1,959							15
Stockholders' equity		26,700							26,147							26,949
Total liabilities and stockholders' equity	$	353,056						$	349,542						$	349,172
Net interest spread and net interest income				2.07		$	1,998				2.03		$	1,947				2.50		$	2,241
Impact of noninterest-bearing sources				0.51							0.50							0.38
Net interest margin				2.58							2.53							2.88

_______________________________
(1)	The average balance and yield are based on average amortized cost balances.
(2)	Capitalized interest recognized in earnings that resulted from negative amortization within the Option ARM portfolio totaled $333 million, $296 million and $133 million for the quarters ended December 31, 2006, September 30, 2006 and December 31, 2005. 0;
(3)	Represents home loans purchased from dedicated subprime lenders and all loans originated by Long Beach Mortgage and held in its investment portfolio.
(4)	Represents loans to builders for the purpose of financing the acquisition, development and construction of single-family residences for sale and construction loans made directly to the intended occupant of a single-family residence.&# 160;
(5)	Nonaccrual assets and related income, if any, are included in their respective categories.
(6)	Includes assets of discontinued operations.
(7)	Includes liabilities of discontinued operations.

WM-9

Washington Mutual, Inc.

Selected Financial Information

(dollars in millions)

(unaudited)

	Year Ended
	Dec. 31, 2006							Dec. 31, 2005
						Interest							Interest
						Income/							Income/
	Balance		Rate			Expense		Balance		Rate			Expense
Average Balances and Weighted Average Interest Rates
Assets
Interest-earning assets:
Federal funds sold and securities purchased under agreements to resell	$	4,718		5.20	%	$	245	$	2,154		3.42	%	$	74
Trading assets		7,829		7.74			606		7,217		6.50			469
Available-for-sale securities(1):
Mortgage-backed securities		21,288		5.40			1,150		16,347		4.80			784
Investment securities		6,238		4.96			310		4,506		4.74			214
Loans held for sale		27,791		6.56			1,824		44,847		5.34			2,394
Loans held in portfolio:
Loans secured by real estate:
Home loans(2)		120,320		5.83			7,011		110,326		4.97			5,485
Specialty mortgage finance(3)		19,602		6.25			1,226		20,561		5.90			1,214
Home equity loans and lines of credit		52,865		7.34			3,882		47,909		6.01			2,878
Home construction(4)		2,061		6.46			133		2,074		6.22			129
Multi-family		27,386		6.28			1,721		24,070		5.41			1,303
Other real estate		5,797		6.93			402		5,091		7.11			362
Total loans secured by real estate		228,031		6.30			14,375		210,031		5.41			11,371
Consumer:
Credit card		8,733		11.19			977		2,082		11.96			249
Other		444		11.12			50		707		10.67			75
Commercial		1,886		6.06			114		2,614		5.04			132
Total loans held in portfolio		239,094		6.49			15,516		215,434		5.49			11,827
Other		5,220		4.90			256		4,324		3.65			158
Total interest-earning assets(5)		312,178		6.38			19,907		294,829		5.40			15,920
Noninterest-earning assets:
Mortgage servicing rights		7,667							6,597
Goodwill		8,489							6,712
Other assets(6)		20,424							18,095
Total assets	$	348,758						$	326,233
Liabilities
Interest-bearing liabilities:
Deposits:
Interest-bearing checking deposits	$	36,477		2.63			960	$	46,524		1.95			906
Savings and money market deposits		48,866		2.96			1,446		42,555		1.76			750
Time deposits		84,106		4.59			3,857		62,175		3.33			2,072
Total interest-bearing deposits		169,449		3.70			6,263		151,254		2.46			3,728
Federal funds purchased and commercial paper		7,347		5.06			371		5,314		3.56			190
Securities sold under agreements to repurchase		15,257		5.12			781		15,365		3.40			523
Advances from Federal Home Loan Banks		56,619		4.99			2,828		68,713		3.46			2,377
Other		28,796		5.36			1,543		21,603		4.09			884
Total interest-bearing liabilities		277,468		4.25			11,786		262,249		2.94			7,702
Noninterest-bearing sources:
Noninterest-bearing deposits		34,380							34,769
Other liabilities(7)		8,865							6,177
Minority interests		1,639							14
Stockholders' equity		26,406							23,024
Total liabilities and stockholders' equity	$	348,758						$	326,233
Net interest spread and net interest income				2.13		$	8,121				2.46		$	8,218
Impact of noninterest-bearing sources				0.47							0.33
Net interest margin				2.60							2.79

_______________________________
(1)	The average balance and yield are based on average amortized cost balances.
(2)	Capitalized interest recognized in earnings that resulted from negative amortization within the Option ARM portfolio totaled $1.07 billion and $292 million for the years ended December 31, 2006 and December 31, 2005.
(3)	Represents home loans purchased from dedicated subprime lenders and all loans originated by Long Beach Mortgage and held in its investment portfolio.
(4)	Represents loans to builders for the purpose of financing the acquisition, development and construction of single-family residences for sale and construction loans made directly to the intended occupant of a single-family residence. 0;
(5)	Nonaccrual assets and related income, if any, are included in their respective categories.
(6)	Includes assets of discontinued operations.
(7)	Includes liabilities of discontinued operations.

WM-10

Washington Mutual, Inc.

Selected Financial Information

(dollars in millions)

(unaudited)

	Change from
	Sept. 30, 2006			Dec. 31,		Sept. 30,		June 30,		Mar. 31,		Dec. 31,
	to Dec. 31, 2006			2006		2006		2006		2006		2005
Deposits
Retail deposits:
Checking deposits:
Noninterest bearing	$	372		$	22,838	$	22,466	$	22,450	$	22,378	$	20,752
Interest bearing		(1,038	)		32,723		33,761		35,958		39,289		42,253
Total checking deposits		(666	)		55,561		56,227		58,408		61,667		63,005
Savings and money market deposits		2,462			41,943		39,481		37,664		38,197		36,664
Time deposits(1)		(540	)		46,821		47,361		43,685		41,534		40,359
Total retail deposits		1,256			144,325		143,069		139,757		141,398		140,028
Commercial business and other deposits		(656	)		15,175		15,831		15,625		14,559		11,459
Wholesale deposits		3,972			44,638		40,666		37,024		31,277		29,917
Custodial and escrow deposits(2)		(1,498	)		9,818		11,316		12,152		12,768		11,763
Total deposits	$	3,074		$	213,956	$	210,882	$	204,558	$	200,002	$	193,167

(1)	Weighted average remaining maturity of time deposits was 9 months at December 31, 2006, 10 months at September 30, 2006, June 30, 2006 and March 31, 2006, and 11 months at December 31, 2005.
(2)	Substantially all custodial and escrow deposits reside in noninterest-bearing checking accounts.

	Dec. 31,		Sept. 30,		June 30,		Mar. 31,		Dec. 31,
	2006		2006		2006		2006		2005
Retail Deposit Accounts (number of accounts)
Noninterest bearing checking		9,611,706		9,403,072		9,063,458		8,630,646		8,299,031
Interest bearing checking		1,503,365		1,532,215		1,564,396		1,593,018		1,584,476
Savings and money market		6,525,772		6,379,068		6,161,187		5,929,653		5,694,102
Total transaction accounts, end of period(1)		17,640,843		17,314,355		16,789,041		16,153,317		15,577,609
Net change in noninterest bearing checking accounts		208,634		339,614		432,812		331,615		181,111
Net change in checking accounts		179,784		307,433		404,190		340,157		203,190

⁽¹⁾ Transaction accounts include retail checking, small business checking, retail savings and small business savings.  ;

	Dec. 31,			Sept. 30,			June 30,			Mar. 31,			Dec. 31,
	2006			2006			2006			2006			2005
Retail Banking Stores
Stores, beginning of period		2,225			2,201			2,168			2,140			2,051
Stores opened during the quarter		81	(1)		25			35			29			97	(2)
Stores closed during the quarter		(81	)		(1	)		(2	)(2)		(1	)		(8	)
Stores, end of period		2,225			2,225			2,201			2,168			2,140

(1)	Includes 26 retail banking stores acquired through the merger with Commercial Capital Bancorp.
(2)	Includes two retail banking stores acquired through the merger with Providian Financial Corporation. These stores were not considered to be an integral component of Washington Mutual's retail banking franchise and were subsequently sold in April of 2006.

WM-11

Washington Mutual, Inc.    

Selected Financial Information          

(dollars in millions)

(unaudited)

	Quarter Ended
	Dec. 31,		Sept. 30,		June 30,		Mar. 31,		Dec. 31,
	2006		2006		2006		2006		2005
Loan Volume
Home loans:
Short-term adjustable-rate loans(1):
Option ARMs	$	9,487	$	11,601	$	11,256	$	8,777	$	12,565
Other ARMs		13		42		1,859		2,943		1,222
Total short-term adjustable-rate loans		9,500		11,643		13,115		11,720		13,787
Medium-term adjustable-rate loans(2)		17,323		16,707		16,041		14,865		14,581
Fixed-rate loans		7,351		8,818		13,695		17,605		22,061
Total home loan volume		34,174		37,168		42,851		44,190		50,429
Home equity loans and lines of credit		8,098		8,498		8,251		7,306		9,118
Home construction(3)		298		269		421		493		479
Multi-family		2,977		2,186		2,230		2,034		2,595
Other real estate		1,182		983		787		716		419
Total loans secured by real estate		46,729		49,104		54,540		54,739		63,040
Consumer(4)		23		26		36		49		79
Commercial		274		238		319		258		173
Total loan volume	$	47,026	$	49,368	$	54,895	$	55,046	$	63,292
Loan Volume by Channel
Retail	$	24,426	$	22,239	$	23,709	$	22,580	$	27,676
Wholesale		16,002		14,964		14,798		16,722		17,190
Purchased		6,398		11,560		12,033		7,318		10,092
Correspondent		200		605		4,355		8,426		8,334
Total loan volume by channel	$	47,026	$	49,368	$	54,895	$	55,046	$	63,292
Refinancing Activity(5)
Home loan refinancing	$	22,261	$	20,104	$	26,667	$	26,871	$	30,727
Home equity loans and lines of credit and consumer		599		689		161		215		219
Home construction loans		283		254		379		393		381
Multi-family and other real estate		1,254		763		799		774		831
Total refinancing	$	24,397	$	21,810	$	28,006	$	28,253	$	32,158

(1)	Short-term is defined as adjustable-rate loans that reprice within one year or less.
(2)	Medium-term is defined as adjustable-rate loans that reprice after one year.
(3)	Represents loans to builders for the purpose of financing the acquisition, development and construction of single-family residences for sale and construction loans made directly to the intended occupant of a single-family residence.
(4)	Excludes credit card loan volume.
(5)	Includes loan refinancing entered into by both new and pre-existing loan customers.

WM-12

Washington Mutual, Inc.

Selected Financial Information

(dollars in millions)

(unaudited)

	Year Ended
	Dec. 31,		Dec. 31,
	2006		2005
Loan Volume
Home loans:
Short-term adjustable-rate loans(1):
Option ARMs	$	41,122	$	64,126
Other ARMs		4,856		3,800
Total short-term adjustable-rate loans		45,978		67,926
Medium-term adjustable-rate loans(2)		64,936		57,832
Fixed-rate loans		47,469		81,964
Total home loan volume		158,383		207,722
Home equity loans and lines of credit		32,153		39,721
Home construction(3)		1,481		1,352
Multi-family		9,428		9,755
Other real estate		3,668		1,599
Total loans secured by real estate		205,113		260,149
Consumer(4)		134		387
Commercial		1,088		621
Total loan volume	$	206,335	$	261,157
Loan Volume by Channel
Retail	$	92,953	$	116,425
Wholesale		62,486		74,229
Purchased		37,310		31,855
Correspondent		13,586		38,648
Total loan volume by channel	$	206,335	$	261,157
Refinancing Activity(5)
Home loan refinancing	$	95,901	$	119,918
Home equity loans and lines of credit and consumer		1,665		1,331
Home construction loans		1,310		1,094
Multi-family and other real estate		3,590		2,928
Total refinancing	$	102,466	$	125,271

(1)	Short-term is defined as adjustable-rate loans that reprice within one year or less.
(2)	Medium-term is defined as adjustable-rate loans that reprice after one year.
(3)	Represents loans to builders for the purpose of financing the acquisition, development and construction of single-family residences for sale and construction loans made directly to the intended occupant of a single-family residence.
(4)	Excludes credit card loan volume.
(5)	Includes loan refinancing entered into by both new and pre-existing loan customers.

WM-13

Washington Mutual, Inc.

Selected Financial Information

(dollars in millions)

(unaudited)

	Change from
	Sept. 30, 2006			Dec. 31,			Sept. 30,			June 30,			Mar. 31,			Dec. 31,
	to Dec. 31, 2006			2006			2006			2006			2006			2005
Loans by Product Type
Loans held in portfolio:
Loans secured by real estate:
Home:
Short-term adjustable-rate loans(1):
Option ARMs(2)	$	(3,585	)	$	63,557		$	67,142		$	69,224		$	71,153		$	71,201
Other ARMs		(1,284	)		15,091			16,375			15,021			14,797			13,656
Total short-term adjustable-rate loans		(4,869	)		78,648			83,517			84,245			85,950			84,857
Medium-term adjustable-rate loans(3)		(17,966	)		29,774			47,740			52,032			49,391			41,511
Fixed-rate loans		(146	)		9,782			9,928			9,424			8,660			8,922
Total home loans		(22,981	)		118,204			141,185			145,701			144,001			135,290
Home equity loans and lines of credit		560			54,924			54,364			52,981			51,872			50,851
Home construction(4)		5			2,082			2,077			2,082			2,095			2,037
Multi-family		2,754			30,161			27,407			26,749			26,151			25,601
Other real estate		876			6,745			5,869			5,537			5,353			5,035
Total loans secured by real estate(5)		(18,786	)		212,116			230,902			233,050			229,472			218,814
Consumer:
Credit card		2,054			10,861			8,807			8,451			7,906			8,043
Other		(5	)		276			281			287			602			638
Commercial		(68	)		1,707			1,775			1,715			2,024			2,137
Total loans held in portfolio(6)		(16,805	)		224,960			241,765			243,503			240,004			229,632
Less: allowance for loan and lease losses		(80	)		(1,630	)		(1,550	)		(1,663	)		(1,642	)		(1,695	)
Total net loans held in portfolio		(16,885	)		223,330			240,215			241,840			238,362			227,937
Loans held for sale(7)		21,250			44,970			23,720			23,342			25,020			33,582
Total net loans	$	4,365		$	268,300		$	263,935		$	265,182		$	263,382		$	261,519

(1)	Short-term is defined as adjustable-rate loans that reprice within one year or less.
(2)	The total amount by which the unpaid principal balance of Option ARM loans exceeded their original principal amount was $852 million, $681 million, $474 million, $298 million, and $160 million at December 31, 2006, September 30, 2006, June 30, 2006, March 31, 2006 and December 31, 2005.
(3)	Medium-term is defined as adjustable-rate loans that reprice after one year.
(4)	Represents loans to builders for the purpose of financing the acquisition, development and construction of single-family residences for sale and construction loans made directly to the intended occupant of a single-family residence.
(5)	Includes home loans purchased from dedicated subprime lenders and all loans originated by Long Beach Mortgage and held in its investment portfolio. Balances of such loans were $18.79 billion, $20.12 billion, $20.53 billion, $20.25 billion and $21.16 billion at December 31, 2006, September 30, 2006, June 30, 2006, March 31, 2006 and December 31, 2005.
(6)	Includes net unamortized deferred loan origination costs of $1.48 billion, $1.61 billion, $1.62 billion, $1.61 billion, and $1.53 billion, at December 31, 2006, September 30, 2006, June 30, 2006, March 31, 2006, and December 31, 2005.
(7)	Fair value of loans held for sale was $45.06 billion, $23.80 billion, $23.35 billion, $25.03 billion, and $33.70 billion as of December 31, 2006, September 30, 2006, June 30, 2006, March 31, 2006, and December 31, 2005.

WM-14

Washington Mutual, Inc.

Selected Financial Information

(dollars in millions)

(unaudited)

						Weighted					Weighted					Weighted
	Change from					Average					Average					Average
	Sept. 30, 2006			Dec. 31,		Coupon			Sept. 30,		Coupon			Dec. 31,		Coupon
	to Dec. 31, 2006			2006		Rate			2006		Rate			2005		Rate
Selected Loans Secured by Real Estate and MBS
Home loans held in portfolio:
Short-term adjustable-rate loans(1):
Option ARMs	$	(3,585	)	$	63,557		7.44	%	$	67,142		7.13	%	$	71,201		5.88	%
Other ARMs		(1,284	)		15,091		7.17			16,375		7.01			13,656		6.43
Total short-term adjustable-rate loans		(4,869	)		78,648		7.39			83,517		7.11			84,857		5.97
Fixed-rate loans		(146	)		9,782		6.65			9,928		6.59			8,922		6.56
Total home loans held in portfolio		(22,981	)		118,204		6.92			141,185		6.60			135,290		5.89
Home equity loans and lines of credit:
Short-term (Prime-based or treasury-based)(1)		(1,618	)		34,213		8.40			35,831		8.40			37,112		7.26
Fixed-rate loans		2,178			20,711		7.45			18,533		7.16			13,739		6.56
Total home equity loans and lines of credit		560			54,924		8.04			54,364		7.98			50,851		7.07
Multi-family loans held in portfolio:
Short-term adjustable-rate loans(1):
Option ARMs		197			9,164		7.18			8,967		6.95			9,529		5.74
Other ARMs		1,615			7,473		7.12			5,858		6.94			6,406		5.92
Total short-term adjustable-rate loans		1,812			16,637		7.15			14,825		6.95			15,935		5.81
Medium-term adjustable-rate loans(2)		851			11,757		5.68			10,906		5.59			8,118		5.29
Fixed-rate loans		91			1,767		6.44			1,676		6.45			1,548		6.59
Total multi-family loans held in portfolio		2,754			30,161		6.54			27,407		6.38			25,601		5.69
Total selected loans held in portfolio secured by real estate(3)		(19,667	)		203,289		7.17			222,956		6.90			211,742		6.15
Loans held for sale(4)		21,337			44,724		6.32			23,387		6.64			32,928		6.15
Total selected loans secured by real estate		1,670			248,013		7.01			246,343		6.88			244,670		6.15
MBS(5):
Short-term adjustable-rate MBS(1)		(2,026	)		6,056		5.68			8,082		5.55			7,965		4.88
Medium-term adjustable-rate MBS(2)		(2,844	)		2,459		5.08			5,303		5.09			4,504		4.97
Fixed-rate MBS		580			9,548		5.27			8,968		5.31			8,179		5.11
Total MBS(6)		(4,290	)		18,063		5.38			22,353		5.35			20,648		4.99
Total selected loans secured by real estate and MBS	$	(2,620	)	$	266,076		6.90		$	268,696		6.75		$	265,318		6.06

(1)	Short-term is defined as adjustable-rate loans and MBS that reprice within one year or less.
(2)	Medium-term is defined as adjustable-rate loans and MBS that reprice after one year.
(3)	At December 31, 2006, September 30, 2006, and December 31, 2005, the adjustable-rate loans with lifetime caps were $169.60 billion, $190.36 billion, and $184.87 billion with a lifetime weighted average cap rate of 12.29%, 12.13% and 12.25%.
(4)	Excludes credit card and student loans.
(5)	Includes only those securities designated as available-for-sale. Excludes principal-only strips and interest-only strips.
(6)	At December 31, 2006, September 30, 2006 and December 31, 2005, the par value of adjustable-rate MBS with lifetime caps were $8.17 billion, $13.20 billion and $12.46 billion with a lifetime weighted average cap rate of 10.54%, 10.41% and 10.31%.

	Sept. 30, 2006			Dec. 31, 2005
	to Dec. 31, 2006			to Dec. 31, 2006
Rollforward of Loans Held for Sale
Balance, beginning of period	$	23,720		$	33,582
Mortgage loans originated, purchased and transferred from held in portfolio		47,091			138,620
Mortgage loans transferred to held in portfolio		(1,156	)		(3,918	)
Mortgage loans sold and other(1)		(24,599	)		(122,905	)
Net change in consumer loans held for sale		(86	)		(409	)
Balance, end of period	$	44,970		$	44,970
Rollforward of Home Loans Held in Portfolio
Balance, beginning of period	$	141,185		$	135,290
Loans originated, purchased and transferred from held for sale		6,990			45,204
Loan payments, transferred to held for sale and other		(29,971	)		(62,290	)
Balance, end of period	$	118,204		$	118,204

⁽¹⁾ The unpaid principal balance ("UPB") of home loans sold was $26.34 billion for the three months ended December 31, 2006 and $122.91 billion for the twelve months ended December 31, 2006.

WM-15

Washington Mutual, Inc.

Selected Financial Information

(dollars in millions)

(unaudited)

	Quarter Ended
													Pro Forma Results Assuming Retrospective Application of SFAS No. 156
Detail of Revenue from Sales and Servicing of Home Mortgage Loans(1)	Dec. 31,			Sept. 30,			June 30,			Mar. 31,			Dec. 31,
	2006			2006			2006			2006			2005
Gain from home mortgage loans and originated mortgage-backed securities,
net of hedging and risk management instruments(2):
Gain from home mortgage loans and originated mortgage-backed securities	$	64		$	206		$	190		$	166		$	218
Revaluation gain (loss) from derivatives economically hedging loans held for sale		91			(87	)		61			43			20
Gain from home mortgage loans and originated mortgage-backed securities,
net of hedging and risk management instruments		155			119			251			209			238
Home mortgage loan servicing revenue (expense):
Home mortgage loan servicing revenue(3)		497			525			586			572			544
Change in MSR fair value due to payments on loans and other(1)		(375	)		(410	)		(460	)		(409	)		(483	)
Net mortgage loan servicing revenue		122			115			126			163			61
Change in MSR fair value due to valuation inputs or assumptions(1)		(80	)		(469	)		435			413			805
Revaluation gain (loss) from derivatives economically hedging MSR(1)		(33	)		353			(433	)		(522	)		(654	)
Adjustment to MSR fair value for MSR sale		-			-			(157	)		-			-
Home mortgage loan servicing revenue (expense), net of MSR valuation
changes and derivative risk management instruments		9			(1	)		(29	)		54			212
Total revenue from sales and servicing of home mortgage loans	$	164		$	118		$	222		$	263			450
Reconciliation from pro forma to GAAP results(1):
Deduct: Increase in MSR fair value not recorded due to lower of cost or fair value accounting														(39	)
Other														7
Total GAAP revenue from sales and servicing of home mortgage loans													$	418

	Year Ended
				Pro Forma Results Assuming Retrospective Application of SFAS No. 156
Detail of Revenue from Sales and Servicing of Home Mortgage Loans(1)	Dec. 31,			Dec. 31,
	2006			2005
Gain from home mortgage loans and originated mortgage-backed securities,
net of hedging and risk management instruments(2):
Gain from home mortgage loans and originated mortgage-backed securities	$	626		$	873
Revaluation gain from derivatives economically hedging loans held for sale		109			76
Gain from home mortgage loans and originated mortgage-backed securities,
net of hedging and risk management instruments		735			949
Home mortgage loan servicing revenue (expense):
Home mortgage loan servicing revenue(3)		2,181			2,110
Change in MSR fair value due to payments on loans and other(1)		(1,654	)		(1,729	)
Net mortgage loan servicing revenue		527			381
Change in MSR fair value due to valuation inputs or assumptions(1)		299			1,538
Revaluation loss from derivatives economically hedging MSR(1)		(636	)		(814	)
Adjustment to MSR fair value for MSR sale		(157	)		-
Home mortgage loan servicing revenue, net of MSR valuation
changes and derivative risk management instruments		33			1,105
Total revenue from sales and servicing of home mortgage loans	$	768			2,054
Reconciliation from pro forma to GAAP results(1):
Deduct: Increase in MSR fair value not recorded due to lower of cost or fair value accounting					(57	)
Other					20
Total GAAP revenue from sales and servicing of home mortgage loans				$	2,017

(1)	The results for the quarters ended December 31, 2006, September 30, 2006, June 30, 2006, March 31, 2006 and the year ended December 31, 2006 reflect the adoption of the fair value measurement method of accounting for mortgage servicing rights ("MSR") permitted by Statement of Financial Accounting Standards No. 156, Accounting for Servicing of Financial Assets, an amendment to FASB Statement No. 140. The Company adopted Statement No. 156 effective January 1, 2006, and the retrospective application of this Statement to prior periods is not permitted. Management believes that due to the significant differences between the fair value measurement method and the amortization method of accounting for MSR, comparative information prepared on a similar basis of accounting is valuable to users of this financial information. The information for 2005 is a non-GAAP measure, and incorporates the following assumptions: 1) the fair value measurement method of accounting for MSR was in effect during 2005, 2) MSR are initially capitalized at fair value instead of allocated book value, and 3) the change in value of available-for-sale securities that were on the balance sheet at December 31, 2005 and designated as MSR risk management instruments are reported as revaluation gain (loss) on trading securities.  A reconciliation  of the non-GAAP amounts to the previously disclosed GAAP results has been provided.
(2)	Originated mortgage-backed securities represent available-for-sale securities retained on the balance sheet subsequent to the securitization of mortgage loans that were originated by the Company.
(3)	Includes late charges and loan pool expenses (the shortfall of the scheduled interest required to be remitted to investors compared to what is collected from the borrowers upon payoff).

WM-16

Washington Mutual, Inc.

Selected Financial Information

(dollars in millions)

(unaudited)

	Quarter Ended
													Pro Forma Results Assuming Retrospective Application of SFAS No. 156
	Dec. 31,			Sept. 30,			June 30,			Mar. 31,			Dec. 31,
	2006			2006			2006			2006			2005
MSR Risk Management(1):
Change in MSR fair value due to valuation inputs or assumptions(2)	$	(80	)	$	(469	)	$	435		$	413		$	805
Gain (loss) on MSR risk management instruments:
Revaluation gain (loss) from derivatives		(33	)		353			(433	)		(522	)		(654	)
Revaluation gain (loss) from certain trading securities(2)		(5	)		39			(47	)		(42	)		(165	)
Loss from certain available-for-sale securities		-			(1	)		-			-			-
Total gain (loss) on MSR risk management instruments		(38	)		391			(480	)		(564	)		(819	)
Total MSR risk management	$	(118	)	$	(78	)	$	(45	)	$	(151	)	$	(14	)
Reconciliation from pro forma to GAAP results(2):
Revaluation loss from certain trading securities													$	(165	)
Add back: Decrease in value of trading securities assumed transferred
from the available-for-sale securities portfolio														8
Total GAAP impact of MSR risk management trading securities													$	(157	)

	Year Ended
					Pro Forma Results Assuming Retrospective Application of SFAS No. 156
	Dec. 31,				Dec. 31,
	2006				2005
MSR Risk Management(1):
Change in MSR fair value due to valuation inputs or assumptions(2)		$	299		$	1,538
Gain (loss) on MSR risk management instruments:
Revaluation loss from derivatives			(636	)		(814	)
Revaluation loss from certain trading securities(2)			(55	)		(233	)
Loss from certain available-for-sale securities			(1	)		(18	)
Total loss on MSR risk management instruments			(692	)		(1,065	)
Total MSR risk management		$	(393	)	$	473
Reconciliation from pro forma to GAAP results(2):
Revaluation loss from certain trading securities					$	(233	)
Add back: Decrease in value of trading securities assumed transferred						10
from the available-for-sale securities portfolio
Total GAAP impact of MSR risk management trading securities					$	(223	)

(1)	Excludes $157 million downward adjustment to MSR fair value recognized in the quarter ended June 30, 2006.
(2)	Refer to footnote (1) on table WM-15.

WM-17

Washington Mutual, Inc.

Selected Financial Information

(dollars in millions)

(unaudited)

	Quarter Ended
		Dec. 31,			Sept. 30,			June 30,			Mar. 31,			Dec. 31,
		2006			2006			2006			2006			2005
Rollforward of Mortgage Servicing Rights(1)(2)
Balance, beginning of period		$	6,288		$	9,162		$	8,736		$	8,041		$	7,042
Home loans:
Additions			357			533			607			633			703
Change in MSR fair value due to payments on loans and other			(375	)		(410	)		(460	)		(409	)		-
Change in MSR fair value due to valuation inputs or
assumptions			(80	)		(469	)		435			413			-
Adjustment to MSR fair value for MSR sale			-			-			(157	)		-			-
Fair value basis adjustment(3)			-			-			-			57			-
Amortization			-			-			-			-			(482	)
Impairment reversal			-			-			-			-			353
Statement No. 133 MSR accounting valuation adjustments			-			-			-			-			419
Sale of MSR			1			(2,527	)		-			-			-
Net change in commercial real estate MSR			2			(1	)		1			1			6
Balance, end of period		$	6,193		$	6,288		$	9,162		$	8,736		$	8,041
Rollforward of Valuation Allowance for MSR Impairment
Balance, beginning of period		$	-		$	-		$	-		$	914		$	1,312
Impairment reversal			-			-			-			-			(353	)
Other-than-temporary impairment			-			-			-			-			(43	)
Other			-			-			-			(914	)(3)		(2	)
Balance, end of period		$	-		$	-		$	-		$	-		$	914
Rollforward of Mortgage Loans Serviced for Others
Balance, beginning of period		$	439,208		$	570,352		$	569,501		$	563,208		$	547,578
Home loans:
Additions			25,833			29,899			30,949			35,026			51,642
Sale of servicing			-			(141,842	)		(9	)		-			-
Loan payments and other			(20,744	)		(19,288	)		(30,368	)		(29,063	)		(37,245	)
Net change in commercial real estate loans			399			87			279			330			1,233
Balance, end of period		$	444,696		$	439,208		$	570,352		$	569,501		$	563,208

	Dec. 31,		Sept. 30,		June 30,		Mar. 31,		Dec. 31,
	2006		2006		2006		2006		2005
Total Servicing Portfolio
Mortgage loans serviced for others	$	444,696	$	439,208	$	570,352	$	569,501	$	563,208
Consumer loans serviced for others		12,415		13,112		12,644		12,194		11,421
Servicing on retained MBS without MSR		1,140		1,199		1,262		1,334		1,404
Servicing on owned loans		251,766		245,925		247,489		245,469		242,114
Subservicing portfolio		84,797		137,089		552		588		926
Total servicing portfolio	$	794,814	$	836,533	$	832,299	$	829,086	$	819,073

	December 31, 2006
	Unpaid		Weighted
	Principal		Average
	Balance		Servicing Fee
			(in basis points,
Mortgage Loans Serviced for Others by Loan Type			annualized)
Agency		240,429		31
Private		169,315		52
Specialty home loans		34,952		50
Total mortgage loans serviced for others(4)	$	444,696		41

(1)	Net of valuation allowance for the quarter ended December 31, 2005.
(2)	MSR as a percentage of mortgage loans serviced for others was 1.39%, 1.43%, 1.61%, 1.53%, and 1.43% at December 31, 2006, September 30, 2006, June 30, 2006, March 31, 2006, and December 31, 2005.
(3)	The Company adopted Statement No. 156, Accounting for Servicing of Financial Assets, on January 1, 2006, and elected to measure mortgage servicing assets at fair value. In accordance with this Statement, this new accounting principle has been applied prospectively to all new and existing mortgage servicing assets. Upon adoption of the fair value election, the valuation allowance was written off against the recorded value of the MSR, and the $57 million difference between the net carrying value and fair value was recorded as an increase to the basis of the Company's mortgage servicing rights.
(4)	Weighted average coupon rate was 6.28% at December 31, 2006.

WM-18

Washington Mutual, Inc.

Selected Financial Information

(dollars in millions)

(unaudited)

	Quarter Ended
		Dec. 31,			Sept. 30,			June 30,			Mar. 31,			Dec. 31,
		2006			2006			2006			2006			2005
Allowance for Loan and Lease Losses
Balance, beginning of quarter		$	1,550		$	1,663		$	1,642		$	1,695		$	1,264
Allowance transferred to loans held for sale			(158	)		(125	)		(87	)		(30	)		(241	)
Allowance acquired through business combinations			30			-			-			-			592
Provision for loan and lease losses			344			166			224			82			217
			1,766			1,704			1,779			1,747			1,832
Loans charged off:
Loans secured by real estate:
Home loans			(16	)		(12	)		(11	)		(12	)		(6	)
Specialty mortgage finance(1)			(52	)		(47	)		(21	)		(20	)		(15	)
Home equity loans and lines of credit			(13	)		(8	)		(6	)		(4	)		(6	)
Home construction(2)			(4	)		(3	)		-			-			-
Other real estate			(1	)		(2	)		-			(3	)		(1	)
Total loans secured by real estate			(86	)		(72	)		(38	)		(39	)		(28	)
Consumer:
Credit card			(68	)		(98	)		(94	)		(63	)		(138	)
Other			(3	)		(3	)		(6	)		(7	)		(8	)
Commercial			(9	)		(6	)		(4	)		(8	)		(16	)
Total loans charged off			(166	)		(179	)		(142	)		(117	)		(190	)
Recoveries of loans previously charged off:
Loans secured by real estate:
Home loans			-			-			1			-			-
Specialty mortgage finance(1)			4			-			1			1			1
Home equity loans and lines of credit			2			2			3			1			7
Multi-family			-			-			1			-			-
Other real estate			-			-			1			1			-
Total loans secured by real estate			6			2			7			3			8
Consumer:
Credit card			18			16			15			4			40
Other			3			4			3			4			3
Commercial			3			3			1			1			2
Total recoveries of loans previously charged off			30			25			26			12			53
Net charge-offs			(136	)		(154	)		(116	)		(105	)		(137	)
Balance, end of quarter		$	1,630		$	1,550		$	1,663		$	1,642		$	1,695
Net charge-offs (annualized) as a percentage
of average loans held in portfolio			0.23	%		0.26	%		0.19	%		0.18	%		0.24	%
Allowance as a percentage of total loans held in portfolio			0.72			0.64			0.68			0.68			0.74

______________________________
(1)	Represents home loans purchased from dedicated subprime lenders and all loans originated by Long Beach Mortgage and held in its investment portfolio.
(2)	Represents loans to builders for the purpose of financing the acquisition, development and construction of single-family residences for sale and construction loans made directly to the intended occupant of a single-family residence.

WM-19

Washington Mutual, Inc.

Selected Financial Information

(dollars in millions)

(unaudited)

	Dec. 31,			Sept. 30,			June 30,			Mar. 31,			Dec. 31,
	2006			2006			2006			2006			2005
Nonperforming Assets and Restructured Loans
Nonaccrual loans(1)(2):
Loans secured by real estate:
Home loans	$	640		$	568		$	512		$	490		$	565
Specialty mortgage finance(3)		1,273			1,120			1,092			1,013			873
Home equity loans and lines of credit		241			163			103			91			87
Home construction(4)		27			35			31			15			10
Multi-family		46			31			19			21			25
Other real estate		51			53			56			69			70
Total nonaccrual loans secured by real estate		2,278			1,970			1,813			1,699			1,630
Consumer		1			1			1			6			8
Commercial		16			16			16			26			48
Total nonaccrual loans held in portfolio		2,295			1,987			1,830			1,731			1,686
Foreclosed assets(5)		480			405			330			309			276
Total nonperforming assets	$	2,775		$	2,392		$	2,160		$	2,040		$	1,962
As a percentage of total assets		0.80	%		0.69	%		0.62	%		0.59	%		0.57	%
Restructured loans	$	18		$	19		$	20		$	21		$	22
Total nonperforming assets and restructured loans	$	2,793		$	2,411		$	2,180		$	2,061		$	1,984

(1)	Nonaccrual loans held for sale, which are excluded from the nonaccrual balances presented above, were $185 million, $129 million, $122 million, $201 million, and $245 million at December 31, 2006, September 30, 2006, June 30, 2006, March 31, 2006, and December 31, 2005. Loans held for sale are accounted for at lower of aggregate cost or fair value, with valuation changes included as adjustments to noninterest income.
(2)	Credit card loans are exempt under regulatory rules from being classified as nonaccrual because they are charged off when they are determined to be uncollectible, or by the end of the month in which the account becomes 180 days past due.
(3)	Represents home loans purchased from dedicated subprime lenders and all loans originated by Long Beach Mortgage and held in its investment portfolio.
(4)	Represents loans to builders for the purpose of financing the acquisition, development and construction of single-family residences for sale and construction loans made directly to the intended occupant of a single-family residence.
(5)	Foreclosed real estate securing Government National Mortgage Association (“GNMA”) loans of $99 million, $129 million, $142 million, $167 million, and $79 million at December 31, 2006, September 30, 2006, June 30, 2006, March 31, 2006, and December 31, 2005 have been excluded. These assets are fully collectible as the corresponding GNMA loans are insured by the Federal Housing Administration (“FHA”) or guaranteed by the Department of Veteran’s Affairs (“VA”).

EX-99.3

Exhibit 99.3

 

Washington Mutual, Inc.

Prepared Remarks for Fourth Quarter and Year End 2006 Earnings Conference Call

January 17, 2007

Please see the Forward-Looking Statement at the end of this document

Remarks of Kerry Killinger Chairman and CEO

Good afternoon, everyone. Thank you for joining us today as we review our fourth quarter and full-year 2006 results and take a look ahead to 2007.

Joining me today on the call is Tom Casey, our CFO. And our President, Steve Rotella, will also be available to answer questions at the end of our remarks today.

Now, let’s get started.

Fourth Quarter and Full-Year 2006 Earnings

During the fourth quarter, we continued to achieve strong performance in our Retail Banking, Card Services and Commercial Groups which I’ll discuss in more detail in my review of our business segments. At the same time, our results were impacted by the continuation of the very difficult interest rate and operating environment, which, along with a significant weakening of subprime mortgage credit, had a particularly negative impact on the performance of our Home Loans business.

Although 2006 proved to be a challenging year with difficult business and interest rate conditions, we remained focused on executing on our strategies and took advantage of several opportunities to better position the company going into 2007.

Now earlier today, we announced fourth quarter net income of $1.06 billion or $1.10 per diluted share. Our fourth quarter earnings included an after tax gain of $415 million on the sale of our mutual fund subsidiary, WM Advisors, which closed on December 31. We also incurred after tax charges of $100 million related to our ongoing efficiency initiatives.

So for the full year, our net income totaled $3.56 billion, or $3.64 per diluted share, compared with net income in 2005 of $3.43 billion, or $3.73 per diluted share. During 2006, we incurred after tax charges of $202 million associated with our efficiency initiatives, which we accelerated after deciding to sell WM Advisors, as well as after tax charges of  $137 million associated with the sale of a significant portion of our mortgage servicing rights during the year. When we announced the sale of WM Advisors, we told you that we expected the gain from the sale to more than offset those charges for the year, which it did.

And, for the 46^th consecutive quarter, The Board once again increased the quarterly cash dividend by one cent to 54 cents per share.

So, let me walk you through some of the significant transactions, strategic initiatives and efficiency efforts undertaken in the fourth quarter and earlier in the year.

First, at the beginning of this year (2007), we executed an accelerated share repurchase agreement to buy back $2.7 billion of our common stock. We determined that in the current environment share buyback and dividends offer a better return on capital than growing the balance sheet.

  | Prepared Remarks - January 17, 2007 Page 2

During the fourth quarter, we saw an opportunity to further reposition our balance sheet to reduce interest rate risk and geographic credit concentrations in our portfolio. As the bond market rallied in December we saw the market value of our portfolio rise. As a result, we identified and transferred $17.8 billion of low margin loans to loans held for sale and we executed hedges to lock in those favorable prices. We also identified and sold $4.7 billion in available for sale mortgage-backed securities. These actions are expected to have a positive impact on our net interest margin in 2007.

As I mentioned, we also completed the sale of our retail mutual fund asset management company at the end of the fourth quarter for an after tax gain of $415 million, which allowed us to significantly accelerate our productivity and efficiency efforts.

This summer’s sale of a significant portion of our MSRs reduced our market risk profile, accelerated the winding down of certain non-strategic home loan products and enhanced our ability to focus on higher margin products.

In 2006, we also made considerable progress on our efficiency initiatives which contributed to a reduction of more than 10,000 positions, or 18 percent during the year. We continued to focus on managing our expenses, achieving a quarterly run rate, excluding efficiency initiatives, of $2.1 billion in the fourth quarter of 2006, down 5 percent from a run rate of $2.2 billion in the fourth quarter of 2005. We achieved this while continuing to grow our consumer and small business banking franchise.

On October 1st, we completed the acquisition of Commercial Capital Bancorp, which enhanced our commercial and retail banking business in California.

I’m very pleased with the efforts of our entire team, the result of which have put us in a strong position going into 2007. Tom will provide more details on many of these actions, as well as review our expectations around our 2007 earnings drivers, in his remarks.

Now, I’d like to give you some of the highlights from our business segment performance in the quarter and for the year, as well as provide some insight into our plans for 2007.

Retail Banking 

Looking first at the strong performance from Retail Banking, net income from continuing operations for the full year of $2.2 billion was up 12 percent from 2005. Excluding the contribution from portfolio management, which was impacted by rising short-term interest rates and an inverted yield curve, net income from continuing operations for full-year 2006 was up 22 percent from 2005.

  | Prepared Remarks - January 17, 2007 Page 3

We continued to attract new households and grow accounts. By the end of the year, we had added a record 848,000 net new retail households. The introduction of our new WaMu Free Checking™ product in March contributed to a record 1.23 million net new checking accounts opened during the year - far exceeding our stated goal of one million accounts.

Growing small business continues to be an area of focus. For 2006, small business checking accounts grew 33 percent over 2005, contributing to the growth in net new checking accounts opened during the year. In the fourth quarter, we also saw strong quarter-over-quarter growth in small business deposits and loan originations.

 

As a result of the record growth in checking accounts in the year and an increase in fees, depositor and other retail banking fees in the fourth quarter were up 6 percent from the third quarter. For the full year, depositor and other retail banking fees were up 17 percent - at the high end of our guidance range.

During the year, the Retail Banking group broadened its focus on expanding relationships with our customers, particularly in mortgage and card products. As a result, our customer key products cross-sell ratio reached 6.66 at the end of the year.

  | Prepared Remarks - January 17, 2007 Page 4

We opened 55 new stores during the fourth quarter, bringing total new stores to 144 for the year. As previously disclosed, we also consolidated 81 underperforming stores and added 26 CCBI retail branches, to end the year with 2,225 retail banking stores.

In line with 2006, we currently expect to open approximately 150 new stores in 2007 and are targeting growth of about one million net new checking accounts.

2006 was a record year for growth in Retail Banking and we’re looking forward to another outstanding year in 2007.

Card Services

Turning to Card Services, the group turned in another strong performance in the fourth quarter, as it continued to successfully leverage our retail banking franchise. We opened 839,000 new credit card accounts in the fourth quarter bringing total new accounts to 3.2 million for the year, with over one million coming from the retail channel.

Managed card receivables of $23.5 billion ended the year up $3.5 billion, or 18 percent, from the end of 2005. Reflecting the fourth quarter growth in on-balance sheet receivables, we saw a corresponding increase in the provision for loan and lease losses.

Credit ratios for the quarter and year remained strong. The 30-plus day delinquency rate of 5.25 percent of managed receivables at quarter end was down from 5.5 percent in the third quarter, primarily attributable to growth in card receivables and the sale of higher risk accounts. The net credit loss ratio declined to 5.83 percent for 2006, from 7.28 percent in 2005, primarily reflecting the benign bankruptcy environment we experienced this year.

Card Services has been a great addition to our company, contributing significantly to our net income in 2006, and we look forward to continued strong performance in 2007, as we continue to leverage our retail banking franchise.

Commercial Group

The Commercial Group also continued its solid performance in the fourth quarter. Net income of $140 million for the fourth quarter was up slightly from $135 million in the same quarter last year.

  | Prepared Remarks - January 17, 2007 Page 5

The acquisition of Commercial Capital Bancorp, Inc. (CCBI) on October 1 is meeting our financial targets and the integration is on track. The addition in the fourth quarter of $4.2 billion in loans and $812 million in deposits from CCBI to the Commercial Group, contributed to a 16 percent increase in average loans and a 55 percent increase in average deposits from the prior the quarter.

The Commercial Group finished the year with good momentum heading into 2007, producing loan volume of $4.0 billion in the fourth quarter, up 29 percent from the third quarter of 2006. Loan volume for the full year of $12.9 billion was up 14 percent from 2005, driven primarily by strong growth in nonresidential loan volume.

For 2007, we expect to continue to ramp up our small-balance Commercial Mortgage Lending division, which has been successfully leveraging our existing multi-family footprint and efficient delivery model, in its expansion efforts. We’re also looking to expand our multi-family presence on the East Coast. Our Commercial Group continues to be a very lean organization with our cost to originate among the lowest in the industry, which allows us to compete very effectively in this business.

Home Loans 

And finally, our Home Loans group. Reflecting the continued slowing of the housing market and a significant weakening of overall subprime mortgage market conditions, our Home Loans group reported a net loss of $122 million in the fourth quarter compared to net income of $57 million in the fourth quarter of 2005. For 2006, our Home Loans group posted a net loss of $48 million versus a net income of $1 billion in 2005.

During the fourth quarter WaMu along with the industry experienced an increased level of delinquencies on subprime mortgage loans. These delinquencies, along with weakening subprime mortgage market conditions, had a negative impact of approximately $160 million on our fourth quarter pretax earnings. The subprime impact included a reduction in fourth quarter gain on sale of approximately $110 million and a reduction of about $50 million in the value of our subprime residuals, which ended the year with a balance of $168 million.

For the past two years, I’ve been saying that an over-inflated housing market was vulnerable to a correction. We accordingly took a series of defensive actions, last year, including the sale of subprime residuals, selling a substantial majority of our originations and generally tightening our underwriting criteria.

  | Prepared Remarks - January 17, 2007 Page 6

I’d like to make a few comments around the deteriorating subprime mortgage industry, in particular. Overcapacity and weak market conditions are causing many subprime mortgage lenders to declare bankruptcy and others to exit the business. While we have said that we are shifting our focus toward adding higher risk-adjusted return assets to our balance sheet, we also told you we’d only do so in a prudent manner. In 2006, we sold nearly all of our subprime mortgage production which helped reduce our subprime outstandings by $2.4 billion from the end of last year. We also significantly reduced production, and as a result, saw our market share position decline from #6 last year to #10 in 2006.

As a result of our efforts to control expenses and scale our business appropriately for the current environment, we’ve reduced staffing by 27 percent over the past twelve months and our noninterest expense for the fourth quarter of 2006 was down 21 percent from last year’s fourth quarter.

Summary

I’ll now turn it over to Tom to go into more detail on our financial performance.

  | Prepared Remarks - January 17, 2007 Page 7

Washington Mutual, Inc.

Prepared Remarks for Fourth Quarter and Year End 2006 Earnings Conference Call

January 17, 2007

Remarks of Tom Casey Executive Vice President and CFO

Thank you, Kerry.

As you said, 2006 has been a very active year, with the company taking a series of steps to position WaMu for stronger performance here in 2007. These efforts extended right through year end.

In looking at the fourth quarter we saw two significant factors impacting our results. First, was the deepening of the inverted yield curve impacting our net interest margin and second, as Kerry mentioned, was the ongoing credit deterioration in the subprime mortgage market sector. So I’ll spend much of my time today on those two issues.

Yield Curve and Net Interest Margin

As all of you know, the interest rate environment during the second half of 2006 was very challenging. The yield curve became inverted in August and has remained that way since. The inversion was severe at the end of the third quarter when the spread between five year swaps and three month LIBOR was a negative 23 basis points versus a positive historical spread of 138 basis points. During the fourth quarter the inverted curve persisted and got worse, widening to a negative 59 basis points before reversing somewhat to a negative 41 basis points by year end.

As of today, the forward yield curve projects that 5 and 10 year rates will remain relatively flat for 2007. Short-term rates are also expected to remain at current levels for most of the year but then decline about 25 basis points near the end of the third quarter. So it appears that the market believes that the inverted yield curve will be with us for most of 2007.

This is a pretty big change since October when the forward yield curve was forecasting a rate cut by June and a second cut by the end of the 2007. The changing outlook for the interest rate environment will have some impact on our net interest margin, and I will give you an update when I provide our 2007 guidance.

  | Prepared Remarks - January 17, 2007 Page 8

For the fourth quarter, the net interest margin was 2.58 percent, up 5 basis points from the third quarter. As we indicated in October, the average yield on our assets continued to increase during the quarter as our adjustable rate loans re-priced to current market rates. The improvement to the NIM, however, was partially offset by the increased cost of deposits and the widening gap of the inverted yield curve, which reduced the margin earned on our loans held for sale. For the quarter, asset yields were up 9 basis points and liabilities were up 5 basis points. For the year, our net interest margin averaged 2.60 percent, coming in at the lower end of our guidance range, which we last updated during our third quarter earnings call.

Asset Growth and Balance Sheet Repositioning

For the full year, average assets were up 7 percent reflecting balance sheet growth from the first half of the year. While we continue to modestly remix our balance sheet, we don’t foresee much absolute balance sheet growth until the interest rate environment improves and risk-adjusted returns increase to acceptable levels.

As I mentioned earlier, the fourth quarter and particularly December were difficult interest rate environments. During December when intermediate rates fell to their lowest levels in 11 months, we seized the opportunity to accelerate the repositioning of our balance sheet for stronger performance in 2007.

We identified approximately $17.8 billion in medium-term adjustable-rate, primarily 5/1 and 7/1 loans in our held for investment portfolio that had weighted average yields of approximately 5.75 percent, which was only about 40 basis points above their related funding costs. In December, we transferred these loans to held for sale and hedged them, and we intend to sell them during the first quarter of 2007. Included in gain on sale for the quarter is $74 million related to the transfer of these assets and the associated derivatives executed to hedge this transaction. At the same time, we sold $4.7 billion of available for sale mortgage-backed securities with a weighted average yield of 5.26 percent at a slight gain.

  | Prepared Remarks - January 17, 2007 Page 9

The impact of these two opportunistic transactions is quite favorable. It improves our 2007 net interest margin by approximately 10 basis points, reduces the company’s interest rate risk profile and we also reduced our geographic credit concentration in the California market.

Capital Management

Let’s move on to capital management. As a result of the asset sale, the gain from the sale of WM Advisors and the limited opportunities to grow the balance sheet, earlier this month we entered into an accelerated share repurchase agreement with a dealer, buying back $2.7 billion of our common stock. The dealer will begin covering the borrowed position in our stock later this month.

At year-end, our tangible capital to tangible asset ratio was 6.04 percent. With this ASR, we expect that ratio to come down but still stay above our target of 5.50 percent.

Credit and Provision for Loan Losses

Now let me shift over to review our credit quality and provision for loan losses. NPAs increased during the fourth quarter due to a higher level of delinquencies in our single-family residential real estate portfolios. Year-end NPAs were up from 69 basis points at the end of the third quarter to 80 basis points, still below our stated goal of keeping average NPAs below 1 percent of assets over the cycle.

Charge offs during the quarter equaled 23 basis points, down slightly from 26 basis points in the third quarter. The decline reflected a lower level of credit card charge offs, in part, resulting from the sale of higher risk accounts in the third and fourth quarter.

The provision for loan and lease losses of $344 million for the fourth quarter was up from $166 million in the prior quarter, $95 million of which was due to the substantial growth of on-balance sheet credit card loans. The card receivables growth of $2.1 billion reflected strong customer growth and management’s decision to securitize less card receivables than in the prior quarter.

Also during the fourth quarter, we revised our accounting for the provisioning for credit card receivables held for sale, which resulted in a provision increase of $92 million. This will largely be offset by higher gain on sale of credit cards in noninterest income. In effect the change in accounting grosses up the provision with an offset in higher gain on sale of consumer loans. This gross up or change in accounting will also change our provision and noninterest income guidance, which I will give you in a few minutes.

  | Prepared Remarks - January 17, 2007 Page 10

In addition, we implemented a change in multi-family loss factors which reduced the allowance by $67 million. The lower allowance reflects the characteristics of the portfolio and the company’s long history of strong credit performance in this portfolio.

While we continue to be comfortable with the credit performance on the majority of our loan portfolio we, along with the industry, are seeing significant weakening subprime credit performance on loans originated or acquired through the company’s subprime channel and held for sale or previously sold. This deterioration in subprime credit has a negative impact on our fourth quarter pretax earnings of approximately $160 million, which included about $110 million in lower gain on sale, as well as an approximately $50 million reduction in the holding value of our subprime residuals, which ended the year at a balance of $168 million.

Earnings Driver Guidance

So with that overview of 2006, let’s look forward to what we anticipate for 2007, given the most current outlook of interest rates and other economic factors.

Average Assets

Let’s start with asset growth. During 2006, average assets were up 7 percent. This growth came primarily in the first half of the year when there was a relatively flat but positive sloping yield curve. Since the yield curve inverted in the second half of the year, we have limited asset growth.

As I mentioned earlier, we’re are planning to sell the $17.8 billion loans transferred to held for sale during the first quarter, which will reduce our asset level approximately 5 percent in the first quarter. Given the market’s expectation of an inverted yield curve for much of 2007, we’re forecasting a 0 to 5 percent decline in average assets during the year. We’ll continue to evaluate balance sheet growth if the market environment changes; however, our outlook right now would favor stock repurchase.

Also remember that the $2.7 billion accelerated share repurchase we completed, assuming today’s share price, will have the effect of reducing our share count by approximately 60 million shares for the entire year.

  | Prepared Remarks - January 17, 2007 Page 11

Net Interest Margin

Moving on to the net interest margin, the continued inversion in the yield curve in the fourth quarter resulted in a net interest margin of 2.58 percent for the fourth quarter and 2.60 percent for the full year of 2006, which was at the low end of our guidance range. Since October, the gap between 3 month LIBOR and 5 year rates has widened to negative 41 basis points and the forward curve does not indicate a Fed cut until sometime late in the third quarter of 2007.

The market expectation of a more challenging interest rate environment in 2007 will place downward pressure on our net interest margin outlook; however, the proactive steps we took to reposition our balance sheet should offset that risk. Therefore, we’re maintaining our net interest margin guidance at 2.85 percent to 2.95 percent for the year.

Credit Provision

There are three items I want to review with you related to our guidance for the credit provision.

First, is the change in accounting for our credit card loans held for sale. That change has the effect of grossing up both the provision and the gain on sale of credit card loans included in noninterest income by approximately $250 million over the course of the full year.

The second factor is the continuing trend of increasing nonperforming assets and the more difficult credit environment for the subprime mortgage market. Those trends will add to our need for higher credit provisioning this year.

The last factor is our outlook for asset growth. As we add assets through the growth of our loan portfolio, we naturally have to support those higher balances with increases to our loan loss reserves. Given our expectation of no asset growth or even shrinking total assets by as much as five percent, our need for additional provision will decline accordingly.

Taking these factors into account we estimate that the provision increases resulting from a more difficult credit environment will generally be offset by our expectation of less asset growth. Therefore the primary change in guidance is due to the accounting change for credit card loans held for sale and that increase will be offset in noninterest income that I will address shortly. As a result, our 2007 credit provision guidance at this time is $1.1 billion to $1.2 billion.

Depositor and other retail banking fees

We continue to see strong account growth and remain comfortable with our guidance for depositor and other retail banking fees of 10 to 12 percent.

Noninterest Income

Our noninterest income guidance is going up by approximately $250 million, due to a boost in credit card related income associated with the change in provisioning I just mentioned. Excluding that impact, we expect the mortgage banking industry to be difficult and the recovery to be slow and the gain on sale levels in the subprime area to be under pressure. As a result, we’re partially offsetting the card related increase by a $100 million reduction and expect noninterest income to be between $6.7 to $6.9 billion for the year.

Noninterest Expense

We’re very pleased with the results of our productivity efforts taken across the company during 2006. With staffing down 18 percent, including approximately 4,000 additional positions shifted offshore and the relocation of a substantial number of positions to lower-cost markets within the U.S., we’re set to operate much more efficiently during 2007 and we expect that to be reflected in our bottom line results.

Now that we’ve completed our planning for 2007 and have a better view of what our noninterest expenses will be, we’re narrowing our guidance range to $8.4 to $8.5 billion for the year.

I’ll now turn it back over to Kerry for his summary comments.

  | Prepared Remarks - January 17, 2007 Page 12

Remarks of Kerry Killinger Chairman and CEO

Thanks, Tom.

Recap 

2006 proved to be a challenging year; nevertheless we remained focused on executing on our strategies and took advantage of several opportunities - for example the sale of MSRs, the sale of WM Advisors, repositioning the balance sheet, accelerating our efficiency efforts and share repurchases - to better position the company going into 2007.

Even though the challenging interest rate and credit environment continue to create difficulties in our Home Loans business, our other businesses continue to perform well and we’re seeing the benefit of our business model diversification.

Looking forward to 2007, we anticipate continued strong performance from our Retail Banking, Card Services and Commercial Groups. And while our Home Loans business enters 2007 as a more efficient organization, the environment continues to be difficult.

The forward curve indicates that the market is anticipating a slight improvement in the rate environment in the second half of the year. So while the interest rate environment continues to be challenging, it may gradually improve in 2007.

So, to sum it up, we remain focused on our strategies and will continue to be opportunistic in our actions. I’m very pleased with the efforts of our team. We are well positioned for even better performance for 2007.

With that let’s open it up to your questions.

  | Prepared Remarks - January 17, 2007 Page 13

Forward Looking Statement

This document contains forward-looking statements, which are not historical facts and pertain to future operating results. These forward-looking statements are within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements about our plans, objectives, expectations and intentions and other statements contained in this document that are not historical facts. When used in this presentation, the words “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” or words of similar meaning, or future or conditional verbs, such as “will,” “would,” “should,” “could,” or “may” are generally intended to identify forward-looking statements. These forward-looking statements are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. Actual results may differ materially from the results discussed in these forward-looking statements for the reasons, among others, discussed under the heading “Factors That May Affect Future Results” in Washington Mutual’s 2005 Annual Report on Form 10-K/A and “Cautionary Statements” in our Form 10-Q/A for the quarter ended Mar. 31, 2006 and Forms 10-Q for the quarters ended June 30, 2006 and Sept. 30, 2006 which include:

·   Volatile interest rates and the impact on mortgage rates;

·   Economic trends that negatively impact the real estate lending environment;

·   Risks related to the option adjustable-rate mortgage product;

·   Risks related to subprime lending;

·   Operational risks;

·   Risks related to credit card operations;

·   Changes in the regulation of financial services companies, housing government-sponsored enterprises and credit card lenders;

·   Competition from banking and nonbanking companies;

·   General business and economic conditions, including movements in interest rates, the slope of the yield curve, and the potential overextension of housing prices in certain geographic markets; and

·   Reputational risk.

There are other factors not described in our 2005 Form 10-K/A and 2006 Forms 10-Q and which are beyond the Company’s ability to anticipate or control that could cause results to differ.