WaMu May Need to Hit the ATM Again

Nonaccrual subprime mortgage loans totaled $3 billion, or 18.68% of total subprime loans as of June 30. The net charge-off rate for the subprime portfolio was 13.44%.

Charge-offs and Capital Erosion

Loan charge-offs will continue to be the focus of attention for investors trying to determine WaMu's capital adequacy. While the second table shows considerable strengthening of reserves and capital ratios, the $2.2 billion in net charge-offs for the second quarter represents a large portion of the $7.2 billion in capital raised.

Washington Mutual's annualized return on common equity for the quarter was a negative 69%, showing that despite the capital raising and efforts to reduce its balance sheet size, several more quarters like this one will lead to another capital shortage.