Oct. 16, 2001

     FOR IMMEDIATE RELEASE

Washington Mutual Announces Record Quarterly Earnings
and Continued Strong Operating Fundamentals;
Board of Directors Increases Cash Dividend

    SEATTLE—Washington Mutual, Inc. (NYSE: WM) today announced record third-quarter earnings of $832.3 million or 94 cents per diluted share. Earnings for third-quarter 2000 were $452.5 million or 57 cents per diluted share.

    Earnings for the third quarter of 2001 included full-quarter results from the former Fleet Mortgage Corp., which was acquired on June 1, 2001, as well as the former mortgage operations of The PNC Financial Services Group, Inc. and Bank United Corp. These acquisitions were accounted for as purchase transactions; therefore, the operating results of the acquired institutions are not included in prior periods.

    Highlights of the recent quarter include:

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A return on common equity of 23.64 percent;



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A 76 percent increase in net interest income over last year driven by a substantially improved net interest margin and the contribution of the company's recent acquisitions;



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Strong gains from mortgage loans of $275.4 million, as well as gains of $317.1 million from securities and $124.9 million ($75.4 million after-tax) from the liquidation of interest rate hedges, reflecting the company's natural business hedging and interest rate management strategies;



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Strong noninterest income, including a 30 percent increase in depositor and other retail banking fees;



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Record loan volume of $47.22 billion, including a 201 percent increase in single-family residential (SFR) loan volume and a 16 percent increase in other loan volume, year over year and including the company's recent acquisitions;



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Record checking account growth of more than 197,000;



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An operating efficiency ratio of 41.29 percent.

    "Despite the slowing economy and the effects of the tragedies of Sept. 11, Washington Mutual posted an impressive quarter," said Kerry Killinger, the company's chairman, president and CEO.

    "Low interest rates continued to have a positive effect on our net interest margin and contributed to extraordinarily strong growth in fee income generated from the sale of fixed-rate residential mortgages originated by our company," said Killinger. "We also continued to generate solid results in other key areas of business, including account and household growth, loan originations and noninterest income generated from retail banking fees.

    "In light of the slowing economy, we also took steps to further strengthen loan loss reserves and adjusted our loan underwriting criteria in selected geographic markets."

BOARD INCREASES CASH DIVIDEND

    The board declared a cash dividend of 24 cents on the company's common stock, up from 23 cents in the previous quarter. Dividends on the common stock are payable Nov. 15, 2001 to shareholders of record as of Oct. 31, 2001. The board also declared a $0.90625 dividend on Washington Mutual's

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Series H Preferred Stock which, together with a related purchase contract adjustment payment of $0.09375, will result in an aggregate payment of $1.00 on each unit of the company's Premium Income Equity Securities (PIES). These amounts are payable on Nov. 16, 2001, to shareholders of record as of Nov. 15, 2001.

THIRD-QUARTER RESULTS

Net Interest and Noninterest Income Grow

    Reflecting the improved net interest margin, which was driven primarily by a 75-basis-point reduction in the Federal funds rate during the period, net interest income increased 76 percent to $1.82 billion in the third quarter versus $1.03 billion a year earlier.

    The net interest spread for the quarter increased to 3.57 percent, compared with 2.19 percent for the same period last year and 3.16 percent in the second quarter of this year, reflecting the company's reduced cost of borrowings. Likewise, the margin was 3.53 percent in the most recent quarter versus 2.31 percent for third quarter 2000 and 3.21 percent in the second quarter of 2001.

    Depositor and other retail banking fees were a record $333.4 million, up 30 percent from $256.4 million a year earlier. During the third quarter, the company added 197,329 net new retail checking accounts.

    Despite the weakening stock market, securities fees and commissions totaled $77.9 million for the third quarter of 2001, very near the $78.4 million generated for the same period one year ago.

    The company's loan servicing operations generated a net loss of $451.5 million, which reflected a $554.2 million addition to the impairment reserve for mortgage servicing rights (MSRs). However, Washington Mutual's natural business and interest rate risk management strategies produced gains that exceeded the amount of the MSR impairment.

    Gain from mortgage loans in the third quarter of 2001 totaled $275.4 million, compared with $55.5 million a year ago. The company also recognized a gain of $317.1 million from securities during the most recent quarter, versus $9.3 million for the same period last year. In addition, Washington Mutual liquidated a portion of its portfolio of interest rate hedges, which resulted in a pre-tax gain, accounted for as an extraordinary item, of $124.9 million ($75.4 million after-tax).

    "Our strategy of combining the natural business hedge that results from the strength of our mortgage operations with instruments that we've purchased for interest rate protection is proving to be successful in the current operating environment," Killinger noted.

Lending

    Robust refinancing activity contributed to record total loan volume of $47.22 billion for the quarter, up 164 percent from $17.89 billion one year ago.

    Including the results from recently acquired companies, SFR loan volume (excluding residential construction) was $43.09 billion, up more than 200 percent from $14.32 billion one year ago. Reflecting the current interest rate environment, 77 percent of the third-quarter's SFR volume (excluding specialty mortgage finance and residential construction) represented fixed-rate mortgages versus last year's 14 percent. In addition, 60 percent of the SFR mortgage loan volume (excluding residential construction) represented refinance activity, compared with last year's 26 percent.

    Lending volume for loans other than SFR totaled $4.13 billion for the most recent quarter, up 16 percent over $3.57 billion in the third quarter of 2000.

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Efficiency Ratio Improves

    The efficiency ratio (defined as noninterest expense, excluding amortization of goodwill and other intangible assets, as a percentage of net interest income, noninterest income and extraordinary items) was 41.29 percent in the most recent quarter.

    Reflecting the addition of the operations of recently acquired companies, noninterest expense totaled $1.15 billion in the third quarter of 2001, compared with third-quarter 2000's figure of $784.7 million.

Company Focuses on Credit Quality

    Killinger said that credit quality, a key focus for Washington Mutual, remains strong and that the company continues to closely monitor it given the slowing national economy. Total nonperforming assets (NPAs) were $2.03 billion at Sept. 30, 2001, versus $1.60 billion at June 30, 2001. Total NPAs represented 0.91 percent of total assets at the end of the third quarter of 2001.

    Reflecting the company's larger and more diversified balance sheet and the slowing national economy, the provision for loan and lease losses was $200.0 million for the third quarter of 2001, versus $47.6 million for the same period in the previous year. Net loan charge offs for the third quarter were $74.8 million, versus $42.9 million a year earlier, but down from the second quarter 2001 level of $75.6 million. At Sept. 30, 2001, the allowance for loan and lease losses totaled $1.29 billion as compared with $1.01 billion at Sept. 30, 2000.

Balance Sheet and Capital Management

    Consolidated assets at Sept. 30, 2001 were $223.64 billion, compared with $229.30 billion at June 30, 2001 and $190.78 billion at Sept. 30, 2000.

    At Sept. 30, 2001, transaction account balances, including checking, savings and money market deposits, represented 60 percent of total deposits, compared with 55 percent at Sept. 30, 2000. Total deposits were $99.73 billion at the end of the third quarter, up from $96.95 billion at June 30, 2001.

    Stockholders' equity at Sept. 30, 2001 was $14.53 billion and the capital ratios of Washington Mutual's banking subsidiaries continued to exceed regulatory requirements for classification as "well-capitalized," the highest regulatory standard.

Company Updates

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During the quarter the company continued preparations for its planned acquisition of Dime Bancorp (NYSE: DME). The transaction, unaffected by the tragic events of Sept. 11, is expected to be completed in January 2002, pending approval by Dime's shareholders and regulatory authorities. Dime's Special Meeting of Shareholders will be convened on Nov. 27, 2001.



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On Sept. 5, Washington Mutual announced the largest-ever community lending commitment by pledging $375 billion over the next 10 years, more than tripling its 1998 commitment to the low- to moderate-income communities it serves. The new commitment is scheduled to begin in 2002 for communities throughout the United States.

    Killinger said at the time of the announcement, "Our continued success as one of America's leading financial services companies provides us with the opportunity to set even higher community service standards for the future. Today, we continue our more than 100-year legacy of making the communities we serve better places to live, work and do business. After carefully assessing the continued growth of our company and the anticipated level of lending resulting from a successful merger with Dime Bancorp, we're confident that we can raise the bar in support of our communities."

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Outlook

    "While it appears that the U.S. economy has entered a recession, we believe that our company is well positioned to compete in a variety of economic conditions given our capital position, the strength of our operating fundamentals and the composition of our balance sheet," said Killinger. "Consequently, we anticipate producing solid results in the year ahead."

    With a history dating back to 1889, Washington Mutual is a national financial services company that provides a diversified line of products and services to consumers and small- to mid-sized businesses. At Sept. 30, 2001, Washington Mutual and its subsidiaries had consolidated assets of $223.64 billion. Washington Mutual currently operates approximately 2,300 consumer banking, mortgage lending, commercial banking, consumer finance and financial services offices throughout the nation. Washington Mutual's press releases are available at www.wamu.com.

    A live webcast of the company's quarterly earnings conference call will be held on Wed., Oct. 17 at 10:30 a.m. Eastern Time at www.wamu.com or via phone at 888.391.7808, passcode "WaMu."

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⁽¹⁾

Includes 18 million shares held in escrow that were not included in the book value per share calculations.

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Washington Mutual, Inc.

Selected Financial Information

(dollars in millions, except per share amounts)

(unaudited)

Note: The following analysis of reported and operating earnings is based upon the Company's opinion and is intended to provide the user additional information about the Company's operations. It is not intended to replace traditional financial statement disclosures in accordance with generally accepted accounting principles and may not be comparable to similarly titled measures reported by other companies.

⁽¹⁾

Represents pro forma impact to quarter-to-date and year-to-date September 30, 2001 net income assuming application of the recently issued business combinations accounting standard, which eliminates the amortization of goodwill from net income.

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⁽¹⁾

Excludes unrealized net gain/loss on available-for-sale securities and derivatives.

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Excludes goodwill and other intangible assets.

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Estimate of what WMI's total risk-based capital ratio would be if it was a bank holding company that complies with Federal Reserve Board capital requirements.

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Retail checking accounts exclude commercial business accounts. The information provided refers to the number of accounts, not dollar volume.

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