SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 10-K


(Mark One)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
    OF 1934 For the fiscal year ended December 31, 2001

                                       OR

|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

For the transition period from......................to..........................

Commission file number 1-3521

                        WASHINGTON MUTUAL FINANCE CORPORATION
               (Exact name of registrant as specified in its charter)

                 DELAWARE                           95-4128205
      (State or other jurisdiction of            (I.R.S. Employer
      incorporation or organization)          Identification Number)
     8900 Grand Oak Circle, Tampa, FL               33637-1050
 (Address of principal executive offices)           (Zip Code)

                                 (813) 632-4500
              (Registrant's telephone number, including area code)


          Securities registered pursuant to Section 12 (b) of the Act:

                                                         Name of each exchange
   Title of each class                                    on which registered

 6 7/8 % Senior Notes due May 15, 2011                 New York Stock Exchange

Securities  registered  pursuant to Section 12 (g) of the Act:  None

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed  by  Section  13 or 15 (d) of the  Securities  Exchange  Act of 1934
during the preceding 12 months (or for such shorter  period that the  registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days.

                      Yes X                No

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best  of  the  registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K:

                               Not applicable

The aggregate  market value of Common Stock held by  non-affiliates:  None
As of February 28, 2002, there were 1,000 shares of Common Stock outstanding.

Documents incorporated by reference:                  None

Registrant meets the conditions set forth in General  Instruction  (I)(1)(a) and
(b) of Form 10-K and is therefore  filing this Form with the reduced  disclosure
format.

<PAGE> 2

                      WASHINGTON MUTUAL FINANCE CORPORATION

                           ANNUAL REPORT ON FORM 10-K

                                Table of Contents


                                                                            Page
                                    PART I


Item 1.           Business.....................................................3
Item 2.           Properties..................................................11
Item 3.           Legal Proceedings...........................................11
Item 4.           Submission of Matters to a Vote of Security Holders .........*

                                    PART II

Item 5.           Market for the Registrant's Common Equity
                     and Related Stockholder Matters..........................12
Item 6.           Selected Financial Data ....................................12
Item 7.           Management's Discussion and Analysis of Financial Condition
                     and Results of Operations................................13
Item 7A.          Quantitative and Qualitative Disclosures About Market Risk..25
Item 8.           Financial Statements and Supplementary Data.................27
Item 9.           Changes in and Disagreements with Accountants on
                     Accounting and Financial Disclosure......................48

                                    PART III

Item 10.          Directors and Executive Officers of the Registrant ..........*
Item 11.          Executive Compensation.......................................*
Item 12.          Security Ownership of Certain Beneficial Owners and
                     Management ...............................................*
Item 13.          Certain Relationships and Related Transactions...............*

                                    PART IV

Item 14.          Exhibits, Financial Statement Schedules and
                     Reports on Form 8-K......................................49


       *          Items 4, 10, 11, 12 and 13 are  not included as per conditions
                  met by Registrant set forth in General Instruction I(1)(a) and
                  (b) of Form 10-K.

<PAGE> 3

                                    PART I

Item 1.  Business

General

Washington Mutual Finance Corporation ("WMF"), incorporated in Delaware in 1986,
as Aristar,  Inc., is a holding company  headquartered  in Tampa,  Florida whose
subsidiaries are engaged in the consumer financial services business. Washington
Mutual Finance Corporation is an indirect, wholly-owned subsidiary of Washington
Mutual, Inc. ("Washington  Mutual").  When we refer to "we", "our", "us", or the
"Company" in this Form 10-K, we mean Washington  Mutual Finance  Corporation and
its subsidiaries, all of which are wholly-owned.

Our Company's  operations consist principally of a network of 449 branch offices
located in 24 states,  primarily  in the  southeast,  southwest  and  California
("consumer  finance").  These offices operate under the name  Washington  Mutual
Finance.  Our branch  offices are  typically  located in small- to  medium-sized
communities  in  suburban  or rural  areas and are  managed by  individuals  who
generally have  considerable  consumer lending  experience.  We make secured and
unsecured consumer  installment loans, and purchase  installment  contracts from
local retail establishments.  The consumer credit transactions are primarily for
personal, family, or household purposes. From time to time, we purchase consumer
loans from national mortgage banking operations,  servicing  released,  that are
secured by real estate.

We also provide  consumer  financial  services  through our  industrial  banking
subsidiary,  First Community Industrial Bank ("FCIB"),  which has 10 branches in
Colorado and Utah ("consumer banking"). In addition to making consumer loans and
purchasing retail installment  contracts,  FCIB also accepts deposits insured by
the Federal Deposit Insurance Corporation ("FDIC").

For  consumer  finance and  consumer  banking,  combined,  we have 459  physical
locations doing business in 25 states. Additionally,  we have a consumer banking
credit  collection  office in Colorado  Springs,  Colorado,  a consumer  finance
customer care center in Pensacola,  Florida ("C3"), and a headquarters  facility
in Tampa, Florida to support the entire operation.

As part of our ongoing  strategy,  we  continually  review our branch network to
determine  how to best deploy our capital and  resources.  In December  2001, we
closed 50 of our consumer  finance  branches.  The branches were selected  based
upon  profitability,  growth  prospects  for a given market,  and/or  geographic
proximity to other WMF branch locations. All of the accounts were transferred to
nearby branches or to C3, dependent upon proximity to other branches and/or loan
delinquency status.  Many employees were offered alternative  positions at other
WMF facilities and/or encouraged to seek other opportunities within the Company.

<PAGE> 4

Portfolio Composition

The  following  table  provides  an  analysis  by type of our  consumer  finance
receivables  (excluding  unearned finance charges and deferred loan fees) at the
dates shown:

<TABLE>

(Dollars in thousands)                                  December 31,
                                         -------------------------------------------
                                            2001            2000            1999
Notes and contracts receivable:          -----------    ------------    ------------
Type:
<S>                                      <C>             <C>             <C>
   Real estate secured loans             $ 2,100,566     $ 1,990,907     $ 1,432,841
   Other installment loans                 1,417,682       1,401,859       1,334,350
   Retail installment contracts              337,098         335,584         294,566
                                         -----------     -----------     -----------
     Total                               $ 3,855,346     $ 3,728,350     $ 3,061,757
                                         ===========     ===========     ===========
     Number of accounts                      995,287       1,016,403       1,001,302
Type as a percent of total receivables:
   Real estate secured loans                    54.5%           53.4%           46.8%
   Other installment loans                      36.8            37.6            43.6
   Retail installment contracts                  8.7             9.0             9.6
                                         -----------     -----------     -----------
                                               100.0%          100.0%          100.0%
                                         ===========     ===========     ===========
</TABLE>


For the year ended  December 31, 2001,  real estate  secured  loans  outstanding
(excluding  unearned  finance charges and deferred loan fees)  increased  $109.7
million,  or 5.5%, as compared to an increase of $558.1 million,  or 38.9%,  for
the prior  year.  Real  estate  loans are  typically  secured by first or second
mortgages and are primarily used by the customer for purchases of consumer goods
or debt  consolidation.  We have focused on  increasing  our  percentage of real
estate loans portfolio due to the better credit quality inherent in the customer
base, since the primary sources of these loans are existing  customers that have
maintained a high level of payment  performance over an extended period of time.
In 2001, approximately 81% of the real estate secured loans originated were made
to  customers  with whom we had a current  or former  lending  relationship.  In
addition,  the underlying security in real estate secured loans reduces our risk
of loss.  Also,  the  larger  average  balance  makes  this  loan type more cost
effective to originate and service.  At December 31, 2001 and 2000,  the average
balance of a real estate secured loan was approximately $30,600 and $30,400.

During 2001, other  installment loans  outstanding  (excluding  unearned finance
charges and deferred loan fees) remained relatively flat,  increasing only $15.8
million,  or 1.1% over 2000,  as compared to an  increase of $67.5  million,  or
5.1%,  in 2000.  This slowing of growth is due primarily to our focus on growing
the real  estate  portfolio.  Other  installment  loans are  either  secured  by
consumer  goods or  unsecured  and are  primarily  used by the  customer to make
specific purchases of consumer goods or undertake  personal debt  consolidation.
At December 31, 2001 and 2000, the average balance of an other  installment loan
was approximately $2,500 and $2,400.

During  2001,  retail  installment  contracts  outstanding  (excluding  unearned
finance  charges and deferred loan fees) remained  relatively  flat,  increasing
only $1.5  million,  or 0.5%,  as compared to an increase of $41.0  million,  or
13.9% in 2000. This slowing of growth is due primarily to the change in consumer
purchasing  habits  caused by the  downturn  of the  economy.  This loan type is
generally  utilized as a source for new  customers,  and it has been  determined
that maintaining  this portfolio at  approximately  10% of total net outstanding
loans  is  the   appropriate   portfolio   mix  for   generating   cross-selling

<PAGE> 5

opportunities,  while  minimizing  the  impact  on  yields.  Retail  installment
contracts are generally  acquired without  recourse to the originating  merchant
and establish a customer relationship for developing future loan business. These
contracts result from the sale of consumer goods and, payment is secured by such
goods.   Retail  installment   contracts  are  generally  acquired  through  the
originating  merchant.  We had such  arrangements  with over 2,200  merchants at
December  31,  2001.  At December  31, 2001 and 2000,  the average  balance of a
retail installment contract was approximately $940.

Consumer  loans  are  typically   fixed-rate  and  are  originated  by  customer
application and periodic purchases of receivable  portfolios.  Loan originations
are a  result  of  business  development  efforts  consisting  of  direct  mail,
telemarketing and branch office sales personnel.  Consumer loans written in 2001
had  original  terms  generally  ranging  from 12 to 240 months and  averaged 76
months. Of the loans originated in 2001,  approximately  72.4% were unsecured or
secured  by  consumer  goods,   automobiles  or  other  personal  property,  and
approximately  27.6% were  secured by real  estate.  In  addition,  the  Company
purchases loan portfolios from its competitors and secondary  markets.  In 2001,
$270.4  million  of loans  were  purchased.  Of these,  approximately  5.2% were
unsecured or secured by consumer goods,  automobiles or other personal property,
and approximately 94.8% were secured by real estate.

As part of our  consumer  finance line of business,  we make  available,  at the
option of our customers,  various credit insurance and ancillary products. These
products  include credit life insurance,  credit accident and health  insurance,
credit property and casualty insurance,  term life protector,  group debtor life
insurance,   accidental   death   and   dismemberment   insurance,   involuntary
unemployment insurance and appliance warranty programs. We do not sell insurance
to non-customers.  Credit insurance we sell is written by unaffiliated insurance
companies,  and we  substantially  reinsure  all of these  policies,  and earn a
reinsurance premium thereon, except for the involuntary  unemployment insurance,
for which we earn a direct commission.

Yield Written

For the years ended December 31, 2001, 2000 and 1999 the average portfolio yield
written during the year, by loan type, was as follows:
                                              2001           2000          1999
                                             -----          -----         -----
         Real estate secured loans           12.36%         12.40%        12.53%
         Other installment loans             24.36          24.75         24.88
         Retail installment contracts        19.60          19.08         18.94

The yield written  includes the stated coupon rate of interest plus initial fees
charged at the time of loan  origination.  These  initial  finance  charges  are
recognized on an accrual basis, using the interest method.

<PAGE> 6

Geographic Distribution

Geographic   diversification  of  consumer  finance   receivables   reduces  the
concentration of credit risk associated with a recession in any one region.  The
concentration  of  consumer  finance  receivables  (excluding  unearned  finance
charges and deferred loan fees) by state was as follows (note that these results
are based on the state where the customer resides):

<TABLE>

(Dollars in thousands)                          December 31,
                 ----------------------------------------------------------------------
                           2001                     2000                    1999
                 ---------------------    ---------------------   ---------------------
                     Amount    Percent        Amount    Percent       Amount    Percent
                 -----------  --------    -----------   -------   -----------   -------
<S>              <C>             <C>      <C>             <C>     <C>              <C>
California       $   474,181     12%      $   388,825     10%     $   228,334      7%
Texas                422,184     11           363,407     10          295,465     10
Tennessee            345,587      9           339,852      9          291,946     10
Colorado             311,877      8           328,652      9          314,677     10
North Carolina       291,929      8           292,893      8          264,909      9
Florida              222,324      6           222,010      6          190,120      6
South Carolina       179,379      5           182,669      5          166,533      5
Virginia             157,217      4           161,247      4          144,560      5
Louisiana            145,127      4           146,147      4          133,372      4
Mississippi          127,565      3           128,653      3          116,468      4
Other              1,177,976     30         1,173,995     32          915,373     30
                 -----------  -----       -----------   ----      -----------   ----
Total            $ 3,855,346    100%      $ 3,728,350    100%     $ 3,061,757    100%
                 ===========  =====       ===========   ====      ===========   ====
</TABLE>

The relatively high proportion of the business in Colorado reflects the presence
of our banking subsidiary, FCIB, in that state.

Credit Loss Experience

We closely monitor portfolio delinquency and loss rates in measuring the quality
of the portfolio and the potential  for ultimate  credit  losses.  An account is
considered  delinquent  when a payment is 60 days or more past due, based on the
original  terms of the  contract.  Under our  policy,  non-real  estate  secured
delinquent  accounts  generally are charged off (i.e.  fully reserved) when they
become  180 days  contractually  delinquent.  Real  estate  secured,  delinquent
accounts  are handled on a  case-by-case  basis,  with  foreclosure  proceedings
typically  beginning when the accounts are between 60 and 90 days  contractually
delinquent.  Collection  efforts  continue after an account has been charged off
until it is  determined  that  the  cost of  collection  efforts  outweighs  the
benefits received.

We attempt to control customer  delinquency  through careful  evaluation of each
borrower's  application and credit history at the time the loan is originated or
purchased,  and through appropriate  collection activity. We also seek to reduce
our risk by  focusing on consumer  lending,  making a greater  number of smaller
loans than would be practical in commercial markets, and maintaining disciplined
control over the underwriting process.


<PAGE> 7

We  maintain  an  allowance  for  credit  losses  inherent  in  the  receivables
portfolio.  The  allowance  is based on an ongoing  assessment  of the  probable
estimated losses inherent in the portfolio.  This analysis  provides a mechanism
for ensuring  that  estimated  losses  reasonably  approximate  actual  observed
losses. See discussion in "Allowance for Credit Losses" in Item 7.

Funding Composition

A  relatively  high ratio of  borrowings  to invested  capital is  customary  in
consumer  finance  activities due to the quality and term of the assets employed
by the  business.  As a result,  the spread  between the revenues  received from
loans and  interest  expense  is a  significant  factor in  determining  our net
income.

We fund our  operations  principally  through  net  cash  flows  from  operating
activities,  short-term borrowings in the commercial paper market,  issuances of
senior debt, customer deposits and borrowings from the Federal Home Loan Bank of
Topeka (the "FHLB").

The Company has a commercial  paper program with several  investment banks which
provides $700 million in borrowing capacity. At December 31, 2001,  thirty-seven
different  commercial paper borrowings totaling $351.1 million were outstanding,
with an  average  cost of  4.93%.  We also  share  with  Washington  Mutual  two
revolving credit facilities:  a $600 million 364-day facility and a $600 million
four-year facility, which provide back-up for our commercial paper programs. The
borrowing  capacity is limited to the total amount of the two  revolving  credit
facilities,  net of the amount of  combined  commercial  paper  outstanding.  At
December 31,  2001,  there was $849 million  available  under these  facilities.
There were no direct  borrowings under these facilities at any point during 2001
or 2000.

Senior notes  outstanding  totaled $2.67  billion at December 31, 2001,  with an
average cost of 6.64%.  In April 2001, we filed a $2 billion shelf  registration
statement  to provide  additional  access to the public debt markets and in May,
2001 we issued $1 billion in senior debt.

FCIB raises funds through both customer  deposits and borrowings  with the FHLB.
At December 31, 2001, customer deposits totaled $236.0 million,  with an average
cost of 5.83%. At December 31, 2001 FHLB borrowings totaled $110.0 million, with
an average cost of 5.18%.

Employee Relations

Our  number  of  full-time   equivalent  employees  at  December  31,  2001  was
approximately  2,650,  a 10.2%  decrease from December 31, 2000 due primarily to
the closing of branches in December (see Item 1. Business - General). We believe
that we have been successful in attracting and retaining  quality  employees and
that our employee relations are good.

<PAGE> 8


Risk Factors

In addition to the other  information  in this Annual  Report on Form 10-K,  the
following factors should be considered carefully:

A decline of  collateral  value may adversely  affect the credit  quality of our
portfolio

Approximately 55% of our consumer finance  receivables  outstanding were secured
by real estate at December 31, 2001. Any material  decline in real estate values
reduces the ability of  borrowers to use home equity to support  borrowings  and
increases  the  loan-to-value  ratios of loans  previously  made by us,  thereby
weakening  collateral  coverage and increasing the  possibility of a loss in the
event of a borrower  default.  Further,  delinquencies,  foreclosures and losses
generally increase during economic slowdowns or recessions. Any sustained period
of such increased delinquencies,  foreclosures and losses could adversely affect
our results of operations and financial condition.

An  increase  in our  delinquency  rate could  adversely  affect our  results of
operations

Our  underwriting  criteria  or  collection  methods  may  not  afford  adequate
protection against the risks inherent in the loans we make to our customers.  In
the event our  portfolio  of consumer  finance  receivables  experiences  higher
delinquencies,   foreclosures  or  losses  than  anticipated,   our  results  of
operations or financial condition could be adversely affected.

Changes in  legislation  or  regulation  could  adversely  affect  our  business
operations

Our lending  activities are subject to federal consumer  protection laws such as
the  Amended  Truth-in-Lending  Act  (including  the Home  Ownership  and Equity
Protection Act of 1994), the Fair Housing Act, the Equal Credit Opportunity Act,
the Fair Credit  Reporting Act, the Real Estate  Settlement  Procedures Act, the
Home  Mortgage  Disclosure  Act and the Fair Debt  Collection  Practices Act and
regulations  promulgated  thereunder.  In December 2001,  amendments to the Home
Ownership  and  Equity  Protection  Act of  1994  ("HOEPA")  were  adopted.  The
amendments  lower  the  rate  and fee  triggers  defining  when  the  additional
disclosure  requirements  and term  restrictions of HOEPA will apply.  Effective
October 1, 2002,  more of our loans are  expected to be subject to HOEPA and the
disclosure  requirements  and  substantive  limitations.   Also,  amendments  to
Regulation C  implementing  the Home Mortgage  Disclosure Act ("HMDA") have been
adopted  and  further  amendments  proposed.  Prior to the  amendments,  we were
generally  exempt from HMDA reporting.  The amendments will require us to report
certain  mortgage loans and will require  certain  additional  data that was not
previously required,  such as designation of HOEPA applicability to the mortgage
loan. In addition, the Gramm-Leach-Bliley Act of 1999 ("GLBA"), and implementing
regulations that created privacy protections for our loan customers requiring us
to provide privacy notices and  opportunities to opt out of information  sharing
with  nonaffiliated  third  parties  continue to be defined by  regulations  and
administrative  interpretations.  We  are  also  under  the  federal  regulatory
oversight of the Federal  Trade  Commission  ("FTC")  which,  from time to time,
promulgates rules which affect our operations.

<PAGE> 9


Our operating  subsidiaries  are subject to state laws and regulatory  oversight
which  laws and  regulations:  (i)  impose  licensing  obligations  on us,  (ii)
establish    eligibility   criteria   for   mortgage   loans,   (iii)   prohibit
discrimination,  (iv) provide for inspections and appraisals of properties,  (v)
require credit reports on loan applicants, (vi) regulate assessment, collection,
foreclosure and claims handling,  (vii) mandate certain  disclosures and notices
to borrowers and (viii) in some cases,  fix maximum  interest rates,  fees, loan
amounts,  prepayment  penalties and refinancing  frequencies.  Failure to comply
with the state and federal requirements can lead to termination or suspension of
our ability to make and collect loans, certain rights of rescission for mortgage
loans,  individual  civil  liability,  class action lawsuits and  administrative
enforcement actions. Although consumer finance laws have been in effect for many
years, amending and new legislation is frequently proposed.  Currently there are
approximately  130-140  subprime  lending bills pending in various states,  with
notable legislation in South Carolina,  California,  Georgia, Colorado, Florida,
Oklahoma and West Virginia.  In general the bills are aimed at lending practices
considered to be  "predatory"  as they have an adverse  effect on borrowers with
weakened credit histories and lower prepayment abilities.  If passed,  generally
the  bills  would  impose  additional  loan  disclosure  requirements,  restrict
prepayment penalties, prohibit frequent loan refinancings without benefit to the
borrower and increase enforcement abilities and penalties for violations.

Due to self-imposed lending guidelines,  we believe that the pending state bills
would  have  minimum  impact  on our  operations  if  passed.  While  the  HOEPA
amendments  are  expected  to subject  more loans to the  regulation,  it is not
anticipated  that this will have a material  adverse impact on our business.  In
anticipation of the HMDA amendments,  we have instituted an implementation  plan
to  insure  that we are in  compliance  with the  regulations  by the  mandatory
compliance  date and the  regulation is not expected to have a material  adverse
impact on the business.  There can be no assurance that more  restrictive  laws,
rules and  regulations  will not be proposed and adopted in the future,  or that
existing laws and  regulations  will not be  interpreted  in a more  restrictive
manner. Such occurrences could make compliance more difficult or expensive.

Additionally,  our sale of credit life,  credit accident and health,  and credit
casualty insurance to our customers is subject to state and federal statutes and
regulations.  Failure  to comply  with any of the  foregoing  state and  federal
requirements could lead to imposition of civil penalties,  class action lawsuits
and administrative  enforcement actions on us. The pending legislation regarding
subprime lending includes  provisions  further  regulating the sale of insurance
products.  If  adopted,  this  legislation  could  adversely  affect our sale of
insurance products.


<PAGE> 10

We have been, and will continue to be, subject to regulatory enforcement actions
and private  causes of action from time to time with  respect to our  compliance
with applicable  laws and  regulations.  Our lending  practices have in the past
been, and currently are, under regulatory  review by various state  authorities.
Additionally,   the  laws  and  regulations   described  above  are  subject  to
administrative and judicial interpretation. Where the law or regulation has been
infrequently   interpreted   (or   there   are  an   insignificant   number   of
interpretations  of recently  enacted  regulations)  ambiguity  with  respect to
permitted  conduct under these laws and  regulations  can result.  Any ambiguity
under  the   regulations  to  which  we  are  subject  may  lead  to  regulatory
investigations  or  enforcement  actions and private  causes of action,  such as
class action  lawsuits,  with respect to our compliance with the applicable laws
and regulations.

We may be  subject to  litigation  that could  adversely  affect our  results of
operations or financial condition

In the ordinary course of our business, we are subject to claims made against us
by borrowers  arising from, among other things,  losses that are claimed to have
been incurred as a result of alleged  failures by us to comply with various laws
and regulations applicable to our business. See Item 3 - "Legal Proceedings" for
more details.  We believe that liability with respect to any currently  asserted
claims or legal actions is not likely to be material to our consolidated results
of operations or financial condition. However, any claims asserted in the future
may result in legal expenses or liabilities  that could have a material  adverse
effect on our results of operations and financial condition.

Fluctuations in interest rates may adversely affect our profitability

Our profitability  may be adversely  affected during any period of rapid changes
in interest rates, as substantially  all consumer loans  outstanding are written
at a fixed rate. A substantial  and sustained  increase in interest  rates could
adversely  affect the spread between the rate of interest  received by us on our
loans and the interest  rates payable under our debt  agreements.  Such interest
rate increases  could also affect our ability to originate  loans. A significant
decline in interest  rates could  decrease the balance of the  consumer  finance
receivables  portfolio  by  increasing  the  level  of  loan  prepayments.   See
"Asset/Liability Management" for sensitivity analysis.

Competition could adversely affect our results of operations

Competition  in the consumer  finance  business is high.  The  consumer  lending
market is highly  fragmented and has been serviced by commercial  banks,  credit
unions and savings institutions, as well as by other consumer finance companies.
Many of  these  competitors  have  greater  financial  resources  and  may  have
significantly lower costs of funds than we do. Even after we have made a loan to
a borrower,  our  competitors  may seek to refinance  the loan in order to offer
additional loan amounts or reduce payments.  In addition,  if we expand into new
geographic  markets,  we will face  competition  from lenders  with  established
positions in these locations.  There can be no assurance that we will be able to
continue to compete successfully in these markets.

<PAGE> 11


Item 2.  Properties

On May 25, 2001, the Company sold its  headquarters  building in Tampa,  Florida
for  gross  sale  proceeds  of $6.7  million.  Concurrent  with  the sale of the
building,  we entered into a leaseback,  whereby we leased our office facilities
from the  purchaser  at a monthly  base rent of $64,000,  with annual  increases
approximating  3.5% per year.  The  lease  term is 5 years,  with an  additional
five-year option to renew. The gain on sale of the building totaled $1.0 million
and is being  amortized over the ten-year  period  representing  the total lease
term.

Our branch  offices are leased  typically  for terms of three to five years with
options to renew.  Typical locations include shopping centers,  office buildings
and  storefronts,  and are  generally of  relatively  small size  sufficient  to
accommodate a staff of three to eight employees.

We lease 50,000  square feet of space in Pensacola,  Florida,  which is used for
centralized underwriting, servicing and collections activities.

See  "Notes  to  Consolidated  Financial  Statements  -  Note  13:  Leases"  for
additional information on rental expense and lease commitments.

Item 3.  Legal Proceedings

Several of the Company's subsidiaries and their current and former employees are
defendants  in a number of suits  pending  in the state  and  federal  courts of
Mississippi.  The lawsuits generally allege unfair lending and insurance related
practices.  Similar suits are pending against other financial services companies
in Mississippi. In one of the pending cases, Carolyn Baker, et al. v. Washington
Mutual Finance Group, LLC f/k/a City Finance  Company,  a jury awarded just over
$71 million against one of the Company's subsidiaries, Washington Mutual Finance
Group, LLC, a Delaware limited  liability  company ("WMF Group").  Pursuant to a
motion filed by WMF Group,  the trial court reduced the verdict to just over $53
million.  WMF Group is in the process of appealing  the verdict and has posted a
bond to stay execution on the judgment pending the appellate court's ruling. The
appeal will be based on numerous  grounds,  including the gross inequity between
the alleged  economic  losses of only  $12,000 and the actual jury award.  Based
upon  information  presently  available,  we believe that the total amounts that
will  ultimately be paid, if any,  arising from these  lawsuits and  proceedings
will  not  have a  material  adverse  effect  on  our  consolidated  results  of
operations and financial position.


<PAGE> 12

                                  PART II

Item 5.  Market  for the  Registrant's  Common  Equity and  Related  Stockholder
         Matters

The Company is an indirect wholly-owned  subsidiary of Washington Mutual and the
Company's  common stock is not traded on any  national  exchange or in any other
established market.

Payment  of  dividends  is  within  the  discretion  of the  Company's  Board of
Directors.  Provisions of certain of our debt agreements restrict the payment of
dividends to a maximum prescribed portion of cumulative earnings and contributed
capital and otherwise  provide for the  maintenance  of minimum levels of equity
and maximum  leverage  ratios.  Dividends will be paid when capital  exceeds the
amount of debt to  tangible  capital  (leverage  ratio)  deemed  appropriate  by
management.   This  leverage  ratio  will  be  managed  with  the  intention  of
maintaining  the existing  credit  ratings on our  outstanding  obligations.  We
declared and paid dividends totaling $43.5 million during 2001 and $25.0 million
during 2000.


Item 6.  Selected Financial Data

The selected financial data is included in Item 7 - Management's  Discussion and
Analysis.  Please refer to Item 7, as the selected financial data should be read
in  conjunction  with the  accompanying  consolidated  financial  statements and
related notes in Item 8 and other  financial  information  included in this Form
10-K.

<PAGE> 13


Item 7.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations

Cautionary Statements

This section contains forward-looking statements, which are not historical facts
and pertain to our 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  report  that are not  historical  facts.  When  used in this
report,  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  due to the  following  factors,
among others: changes in business and economic conditions that negatively affect
credit  quality;  competition;   fluctuations  in  interest  rates;  changes  in
legislation or regulation;  and litigation.  These risk factors are discussed in
further detail under the heading "Risk Factors" included in this Form 10-K.

Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations  should  be read  in  conjunction  with  the  Consolidated  Financial
Statements and related notes in Item 8 and other financial  information included
in this Form 10-K.

Critical Accounting Policies

Various  elements of our accounting  policies,  by their nature,  are inherently
subject to estimation  techniques,  valuation  assumptions and other  subjective
assessments.  In  particular,  we have  identified two policies that, due to the
judgments, estimates and assumptions inherent in those policies, are critical to
an  understanding  of our financial  statements.  These  policies  relate to the
methodology  for the  determination  of our  allowance  for loan  losses and the
valuation  of  derivatives  under  SFAS  No.  133,  "Accounting  for  Derivative
Instruments and Hedging Activities". These policies and judgments, estimates and
assumptions   are  described  in  greater  detail  in  subsequent   sections  of
Management's  Discussion  and  Analysis  and  in  the  notes  to  the  financial
statements included herein. In particular,  Note 2 to the Consolidated Financial
Statements - "Summary of Significant  Accounting  Policies"  describes generally
our  accounting  policies.   We  believe  that  the  judgments,   estimates  and
assumptions used in the preparation of our Consolidated Financial Statements are
appropriate  given the factual  circumstances  at the time.  However,  given the
sensitivity  of  our  Consolidated   Financial   Statements  to  these  critical
accounting policies, changes in circumstances on which judgments,  estimates and
assumptions  are based,  could result in material  differences in our results of
operations or financial condition.

<PAGE> 14


Selected Financial Data

The following selected  financial data is taken from our consolidated  financial
statements.  Per share  information is not included  because all of our stock is
owned by Washington Mutual.
<TABLE>

                                 As of, or For the Years Ended December 31,
                      ----------------------------------------------------------
                          2001        2000        1999        1998        1997
                      ----------  ----------  ----------  ----------  ----------
                                         (Dollars in thousands)

<S>                   <C>         <C>         <C>         <C>         <C>
Net interest income   $  238,898  $  252,000  $  224,805  $  203,432  $  180,605

Noninterest income        28,538      30,421      29,501      27,147      26,555

Noninterest expense      171,181     156,002     135,594     142,992     131,129

Net income                61,125      78,889      72,992      52,887      46,287

Consumer finance
  receivables, net     3,729,324   3,623,763   2,961,449   2,493,903   2,254,389

Total assets           4,072,917   3,927,705   3,227,557   2,744,710   2,509,606

Total debt             3,128,322   3,036,899   2,353,963   1,987,990   1,830,404

Total equity             559,657     539,088     475,158     419,330     398,184

</TABLE>

Overview

The  Company had net income of $61.1  million in 2001,  which  represents  a 23%
decrease  compared  to the $78.9  million  reported  in 2000 and a 16%  decrease
compared to 1999's reported net income of $73.0 million. The primary reasons for
our decline in net income were higher provisions for credit losses and increased
operating expenses, as well as a decline in net interest margin.

The following are key highlights of our performance:

o    Return on average  assets  ("ROA") was 1.53%  compared to 2.17% in 2000 and
     2.48% in 1999.  This  decrease  in ROA was a result of the  decrease in net
     income, as discussed above.

o    Net consumer  finance  receivables  remained  relatively  flat during 2001,
     increasing  only  3.4%.  These  results  reflect   tightened   underwriting
     standards in light of recent economic conditions. Our strategy continues to
     target portfolio  growth;  however,  our loan  underwriting and acquisition
     strategy will continue to take into account the state of the economy in the
     markets we currently serve or into which we anticipate expanding.

o    Yields earned on consumer finance receivables  declined from 15.89% in 2000
     to 15.44% in 2001. This was due primarily to a shift in product mix towards

<PAGE> 15

     lower yielding real estate secured loans and stricter underwriting of other
     installment  loans,  which  resulted  in  lending  larger  amounts at lower
     allowable coupon rates.

o    Net interest spread increased in 2001, as compared to 2000 due primarily to
     a lower average cost incurred on interest-bearing liabilities. However, net
     interest  margin  decreased due to the decline in earned yields on consumer
     finance receivables, as discussed above. Net interest spread represents the
     difference between the yield on the Company's  interest-earning  assets and
     the interest rate paid on its borrowings.  Net interest  margin  represents
     the ratio of net interest income to average earning assets.

o    Operating  efficiency  is  defined  as the  ratio of  noninterest  expense,
     excluding  the  amortization  of  goodwill,  to  total  revenue,  which  is
     comprised of net interest  income  before  provision  for credit losses and
     noninterest  income.  In 2001, our operating  efficiency ratio increased to
     40.1% from 38.9% in 2000. This  deterioration  is due to the lower interest
     margin,  as  well as  increased  noninterest  expense.  See  discussion  in
     "Consolidated Results of Operations - Noninterest Expense."

o    Delinquencies  (accounts  contractually past-due greater than 60 days) as a
     percentage  of net consumer  finance  receivables  increased  from 2.71% at
     December  31, 2000 to 3.51% at December  31, 2001.  This  deterioration  of
     delinquencies is caused primarily by the following two factors: a portfolio
     purchased in 2000 has experienced  higher than expected  delinquency  rates
     and the economic  conditions in 2001 have  negatively  impacted  collection
     efforts.

o    Net credit  losses  totaled  $126.5  million in 2001, as compared to $103.0
     million  in 2000  and  $80.8  million  in  1999.  Net  credit  losses  as a
     percentage of average  consumer  finance  receivables  (excluding  unearned
     finance  charges and deferred loan fees) were 3.3%,  3.0% and 2.9% in 2001,
     2000 and 1999.

Segment Results

The Company is managed along two major segments:  consumer  finance and consumer
banking. Following is an overview of the performance of each segment in 2001:

Consumer Finance

o    Net income  decreased 24.7% to $54.1 million in 2001, from $71.9 million in
     2000. Net income totaled $66.5 million in 1999.

o    Return on assets in 2001 was 1.52% as  compared  to 2.23% and 2.58% in 2000
     and 1999.

o    The consumer  finance  receivables  portfolio growth during 2001 was $140.9
     million, or 4.2%.

o    Net interest  margin  decreased as a result of yield erosion on receivables
     caused by the shift in product  mix toward real  estate  secured  loans and
     larger balance unsecured loans.

<PAGE> 16

o    The efficiency  ratio in 2001 was 40.2%,  as compared to 38.6% and 36.8% in
     2000 and 1999.  Although net  interest  income  increased  due to growth in
     interest-earning  assets, the decline in efficiency was a result of a lower
     interest margin coupled with higher noninterest expenses.

o    Net credit losses  increased to $125.4  million in 2001 from $101.8 million
     in 2000.  Net credit  losses as a percentage  of average  consumer  finance
     receivables  (excluding  unearned  finance charges and deferred loan fees),
     were 3.7% in 2001 as compared to 3.3% in 2000.

Consumer Banking

o    Net income  increased 0.5% to $6.98 million in 2001,  from $6.95 million in
     2000. Net income totaled $6.53 million in 1999.

o    Return on assets in 2001  decreased  to 1.64%  from 1.65% and 1.78% in 2000
     and 1999.

o    The consumer banking  receivables  portfolio  declined $13.9 million during
     2001, or 3.58%.

o    Net  interest  margin  decreased  as a result of slight  yield  erosion  on
     receivables.

o    Net credit  losses were $1.1  million in 2001  compared to $1.2  million in
     2000 and $680,000 in 1999.  Net credit  losses as a  percentage  of average
     consumer  banking  receivables  (excluding  unearned  finance  charges  and
     deferred loan fees), were 0.3% in 2001 and 2000 and 0.2% in 1999.

Consolidated Results of Operations

Net Interest Income before Provision for Credit Losses

Net  interest  income  before  provision  for  credit  losses for the year ended
December 31, 2001 increased 7.65% to $386.7 million,  compared to $359.2 million
in 2000 and $325.4  million  in 1999.  Net  interest  margin for 2001 was 9.67%,
compared to 9.88% in 2000 and 11.02% in 1999.

The increase in net interest  income before  provision for credit losses in 2001
reflects  growth in average net consumer  finance  receivables to $3.79 billion,
which was $331.9  million,  or 9.6%,  greater than the average balance for 2000.
Partially  offsetting  this  portfolio  growth is a 45 basis  point  decrease in
portfolio yield. This yield compression is a result of remixing the portfolio to
a larger  percentage  of  lower-yielding  real estate  secured  loans and larger
balance,  lower  yielding  unsecured  loans.  In order to finance  the growth in
consumer  finance  receivables,  average  debt  outstanding  increased by $406.1
million,  or 13.9%, to $3.33 billion for 2001. In May 2001, we issued $1 billion
of senior notes,  of which $500 million  matures in May 2006 and carries a 6.25%
coupon  and $500  million  which  matures  in May 2011 and  carries  a coupon of

<PAGE> 17

6.875%.  As a result of these  new debt  issuances,  coupled  with  lower  rates
associated with our interest rate swap  activities,  the weighted average senior
debt rate decreased from 7.08% in 2000 to 6.64% in 2001. In addition,  the rates
paid on commercial paper and FHLB borrowings were 170 and 126 basis points lower
than in 2000. As a result of these factors, the overall cost of interest-bearing
liabilities  decreased 59 basis points over 2000. Due to the declining  interest
rates on short-term borrowings, we have shifted our strategy to meet our funding
needs with commercial  paper  borrowings.  Throughout 2002, we intend to utilize
this less costly funding source.

The  following  table  reflects  the average  outstanding  balances  and related
effective yields and costs in 2001, 2000 and 1999, as described above:

<TABLE>

(Dollars in thousands)                                     Year Ended December 31,
                                 ----------------------------------------------------------------------
                                          2001                     2000                   1999
                                 --------------------     --------------------    ---------------------
                                    Average                  Average                 Average
                                    Balance      Rate        Balance      Rate       Balance      Rate
Interest-earning assets:         ----------   -------     ----------    ------     ----------    -----
 Consumer finance receivables:
  Real estate secured
<S>                              <C>            <C>       <C>            <C>       <C>           <C>
   loans                         $ 2,056,399    12.74%    $ 1,781,775    12.61%    $ 1,275,932   12.59%
  Other installment loans          1,399,994    20.82       1,366,146    21.41       1,217,663   22.19
  Retail installment contracts       330,644     9.37         307,172    10.37         280,458   11.89
 Total consumer                  -----------              -----------              -----------
  finance receivables              3,787,037    15.44       3,455,093    15.89       2,774,053   16.73

 Cash, cash equivalents and
  investment securities              212,310     5.95         182,376     6.74         179,294    6.04
                                 -----------              -----------              -----------
Total interest-earning assets    $ 3,999,347    14.93%    $ 3,637,469    15.43%    $ 2,953,347   16.08%
                                 ===========              ===========              ===========
Interest-bearing liabilities:
 Commercial  paper               $   411,271     4.93%    $   420,215     6.63%    $   323,475    5.72%
 Senior debt                       2,575,255     6.64       2,180,747     7.08       1,708,555    6.76
 FHLB advances                       127,442     5.18         142,860     6.44          90,055    5.32
 Customer deposits                   217,102     5.83         181,169     5.83         196,583    5.48
                                 -----------              -----------              -----------
Total interest-bearing
 liabilities                     $ 3,331,070     6.32%    $ 2,924,991     6.91%    $ 2,318,668    6.45%
                                 ===========              ===========              ===========
Net interest spread                              8.61%                    8.52%                   9.63%

Net interest margin                              9.67%                    9.88%                  11.02%

</TABLE>


The dollar amounts of interest income and interest expense  fluctuate  depending
upon  changes in amounts  (volume)  and upon  changes in  interest  rates of our
interest-earning assets and interest-bearing liabilities.

<PAGE> 18

Changes  attributable to (i) changes in volume  (changes in average  outstanding
balances  multiplied by the prior period's rate),  (ii) changes in rate (changes
in average  interest rate  multiplied by the prior period's  volume),  and (iii)
changes in  rate/volume  (changes  in rate times the change in volume  that were
allocated proportionately to the changes in volume and the changes in rate) were
as follows:

<TABLE>

(Dollars in thousands)
                                     Year Ended December 31,                   Year Ended December 31,
                                          2001 vs. 2000                             2000 vs. 1999
                              -------------------------------------     -----------------------------------
                                    Increase/(Decrease) Due to                Increase/(Decrease) Due to
                              -------------------------------------     -----------------------------------
                                Volume       Rate      Total Change       Volume       Rate    Total Change
Interest income:               --------   ---------    ------------     ---------  ---------   ------------
  Consumer finance
<S>                            <C>        <C>          <C>              <C>        <C>         <C>
    receivables                $ 51,236   $ (15,749)   $     35,487     $ 121,169  $ (36,296)  $     84,873
  Investment securities           1,781      (1,432)            349           183      1,275          1,458
                               --------   ---------    ------------     ---------  ---------   ------------
      Total interest income      53,017     (17,181)         35,836       121,352    (35,021)        86,331

Interest expense:
  Interest-bearing
    liabilities                  25,655     (17,297)          8,358        41,302     11,181         52,483
                               --------   ---------    ------------     ---------  ---------    -----------
      Net interest income      $ 27,362   $     116    $     27,478     $  80,050  $ (46,202)   $    33,848
                               ========   =========    ============     =========  =========    ===========
</TABLE>


Provision for Credit Losses

The  provision for credit  losses  during 2001 was $147.8  million,  compared to
$107.2  million in 2000 and $100.6  million in 1999. In 2001,  the provision for
credit  losses  was 3.90% of average  consumer  finance  receivables  (excluding
unearned finance charges and deferred loan fees), compared to 3.10% for 2000 and
3.63% in 1999. See further discussion in "Allowance for Credit Losses."

Noninterest Income

Noninterest  income  decreased 6.2% in 2001 to $28.5 million,  compared to $30.4
million in 2000 and $29.5  million in 1999.  Noninterest  income is comprised of
revenue earned from the sale of various credit insurance and ancillary  products
to  borrowers  at the branch  locations.  These  products  include  credit  life
insurance,   accident  and  health  insurance,   credit  property  and  casualty
insurance,  term life protector,  group debtor life insurance,  accidental death
and dismemberment  insurance,  involuntary  unemployment insurance and appliance
warranty programs.

The decrease in 2001 in income from credit  insurance  products is primarily due
to a decrease in the number of loans  originated  in 2001,  as compared to 2000.
Also  contributing  to the decline was the decision to  discontinue  the sale of
insurance  products in Mississippi  as of June,  and to discontinue  the sale of
single premium credit life and accident and health  insurance on closed-end real
estate  loans in all other  branch  states  as of July in  response  to  growing
concern that the products were not fully meeting the needs of the consumers.  An
alternative product intended to be more responsive to customer needs and desires
has been developed and is being  introduced on a graduated basis in almost every
branch state. The product,  monthly  outstanding  balance credit life insurance,
provides for premiums to be billed monthly  instead of financed at the beginning
of the loan. The product has been  introduced in five branch states in the first
quarter of 2002 and is  anticipated  to be in each of our major branch states by
the end of the second quarter of 2002.

<PAGE> 19

Noninterest Expense

Noninterest  expense  increased  by 9.7% or $15.2  million to $171.2  million in
2001,  compared with 2000 and increased 26.2% or $35.6 million, as compared with
1999.  The  increase  in 2001 is  primarily  a result of the  following:  higher
advertising  expenses  associated  with  our  direct  mail  marketing  strategy;
increased  data  processing  and   telecommunication   charges  associated  with
introducing  a  company-wide  network in our  branch  locations;  and  increased
corporate management charges paid to Washington Mutual.

The  efficiency  ratio  increased  to 40.1%  in 2001  from  38.9% in 2000.  This
increase  was due  primarily  to the  following  strategies:  we  invested  in a
company-wide network platform planned to increase  productivity in the branches;
we  increased  our direct mail  marketing  in order to reach new markets  and/or
lower risk consumers;  and we intentionally slowed growth through tightening our
underwriting standards to better manage risk in a slowing economy.

Provision for Federal and State Income Taxes

The provision for income taxes in 2001 was $35.1  million,  which  represents an
effective rate of 36.50%.  This compares to $47.5 million, or 37.60% in 2000 and
$45.7  million,  or 38.51% in 1999.  We are actively  managing our effective tax
rate by monitoring and, where necessary, adjusting our organizational structure.

<PAGE> 20

Financial Condition

Allowance for Credit Losses

Activity in the Company's allowance for credit losses is as follows:

<TABLE>

                                                                 Year Ended December 31,
                                                     ---------------------------------------
(Dollars in thousands)                                   2001          2000            1999
                                                     ---------     ---------      ----------
<S>              <C>                                 <C>           <C>            <C>
Balance, January 1                                   $ 104,587     $ 100,308      $   80,493
Provision for credit losses                            147,823       107,243         100,590
Amounts charged off:
   Real estate secured loans                            (7,480)       (2,684)         (1,807)
   Other installment loans                            (124,380)     (104,365)        (82,438)
   Retail installment contracts                        (13,456)      (13,017)        (12,558)
                                                     ---------     ---------      ----------
                                                      (145,316)     (120,066)        (96,803)
Recoveries:
   Real estate secured loans                               310           241             398
   Other installment loans                              16,034        14,171          12,629
   Retail installment contracts                          2,434         2,690           3,001
                                                    ----------     ---------      ----------
                                                        18,778        17,102          16,028
                                                    ----------     ---------      ----------
Net charge offs                                       (126,538)     (102,964)        (80,775)

Allowances on notes purchased                              150          -                -
                                                    ----------     ---------      ----------
Balance, December 31                                $  126,022     $ 104,587      $  100,308
                                                    ==========     =========      ==========
Allowance for credit losses as a percentage
  of  December 31 consumer finance receivables
  (excluding unearned finance charges and
  deferred loan fees)                                     3.27%         2.81%           3.28%

Net charge offs as a percentage of average
  consumer finance receivables (excluding unearned
  finance charges and deferred loan fees)                 3.34%         2.98%           2.91%

Provision for credit losses as a percentage of
  average consumer finance receivables (excluding
  unearned finance charges and deferred loan fees)        3.90%         3.10%           3.63%

</TABLE>

<PAGE> 21

In order to establish  our  allowance for credit  losses,  the consumer  finance
receivables portfolio is segmented into two categories:  real estate secured and
non-real  estate  secured  (other   installment  loans  and  retail  installment
contracts).  The  determination  of the level of the allowance for credit losses
and, correspondingly, the provision for credit losses for these homogeneous loan
pools rests upon various  judgments and  assumptions  used to determine the risk
characteristics  of each  portfolio.  These  judgments are supported by analyses
that fall into three general categories:  (i) economic conditions as they relate
to our current  customer  base and  geographic  distribution;  (ii) a predictive
analysis of the outcome of the current  portfolio  (a migration  analysis);  and
(iii) prior loan loss experience.  Additionally,  every real estate secured loan
that  reaches 60 days  delinquency  is  reviewed  by our  credit  administration
management to assess  collectibility and determine a future course of action, at
times resulting in the need to foreclose on the property.

Management establishes the allowance for credit losses based on estimated losses
inherent in the portfolio. There are several underlying factors in our portfolio
that support our current  level of allowance for credit  losses.  We analyze our
reserves based on both trailing coverage and forward looking coverage.  Trailing
coverage  represents  the  percentage  of  coverage  we  currently  have  in the
allowance,  based on the previous 12 months of losses.  Forward looking coverage
represents  the  percentage  of  coverage  we have in the  allowance,  based  on
estimated losses inherent in the portfolio over the next 12 months. Our trailing
coverage is slightly lower  compared to the end of 2000 and our forward  looking
coverage has improved over the same period of time.

Loan to value ("LTV")  represents dollars loaned as a percentage of the value of
the collateral of our real estate secured loans. Lower LTV means lower risk. Our
active  management of the real estate secured  portfolio has focused on reducing
the LTV on new  originations,  which has  resulted in a reduction of the LTV for
the overall portfolio to an all time low in 2001.

Based on industry-defined economic status, we have identified states that are in
or  near  recession,  and  have  focused  our  unsecured  lending  efforts  into
non-recessionary  states. As a result of our stricter underwriting standards, we
have slowed the growth of unsecured loans and continued to remix toward a higher
percentage of real estate  secured  loans.  The increased  proportion of secured
loans in the portfolio,  combined with the stronger collateral position, as well
as improved unsecured  guidelines,  is expected to result in a relative decrease
in credit losses as the portfolio begins to season in 2002 and beyond.

In light of the terrorist  attacks on America on September 11, 2001, and as many
economic  experts had predicted,  the entire nation fell into recession in 2001.
Historically,  our portfolios in recessionary states have performed consistently
with  the  total  portfolio,  in some  cases  outperforming.  Additionally,  the
economies for some of the markets in which we have a large presence  continue to
grow at a moderate pace,  outperforming the rest of the country.  In particular,
the economies of Texas,  Florida and California have maintained  steady,  albeit
slower growth,  although it remains to be seen how these economies will continue
to fare. Although the recession appears to have been short-lived,  its impact on
our  portfolio  is not fully  determinable  at this  time.  As a  result,  close
scrutiny of our portfolio  performance is warranted,  which, going forward,  may
require additional adjustments of the allowance for loan losses.

<PAGE> 22

The  following  table  sets  forth,  by loan  type,  the  amount of  receivables
delinquent  for 60 days or more, on a contractual  basis,  and the ratio of that
amount to the gross consumer finance receivables outstanding in each category:

<TABLE>

(Dollars in thousands)                                    December 31,
                               ------------------------------------------------------------
                                        2001                  2000                 1999
                               ------------------    ------------------    ----------------
<S>                            <C>           <C>     <C>           <C>     <C>         <C>
Real estate secured loans      $  48,386     2.06%   $  31,634     1.40%   $  9,259    0.57%
Other installment loans           93,987     5.76       74,851     4.56      62,875    4.01
Retail installment contracts      10,734     2.79        9,335     2.46       9,137    2.79
                               ---------             ---------             --------
Total                          $ 153,107     3.51%   $ 115,820     2.71%   $ 81,271    2.31%
                               =========             =========             ========
</TABLE>

The increase in delinquency,  particularly in the real estate secured portfolio,
is due  primarily  to higher  than  expected  delinquency  rates in a  portfolio
purchased in 2000,  and thus is not  indicative of the overall credit quality of
the  portfolio.  Absent  this  purchased  portfolio,  the amount of  receivables
delinquent for 60 days or more, on a contractual  basis,  would have been $137.9
million, or 3.19% of gross consumer finance receivables.

At  December  31,  2001 and 2000,  the  Company  held  foreclosed  single-family
dwellings with a carrying value of approximately $11.7 million and $8.9 million.
These balances total 0.6% and 0.5% of the real estate secured loans  outstanding
as of December 31, 2001 and 2000.

Asset / Liability Management

Our  long-range  profitability  depends not only on the success of the  services
offered to our customers and the credit  quality of our  portfolio,  but also on
the extent to which earnings are not negatively  affected by changes in interest
rates.  Accordingly,  our philosophy is to maintain an approximate  match of the
interest rate sensitivity between our  interest-bearing  assets and liabilities.
Our consumer finance receivables are primarily fixed rate and have initial terms
generally ranging from 12 to 240 months.  However,  loans are generally paid off
or refinanced prior to their stated  maturity.  Therefore,  our  asset/liability
management  requires  a high  degree of  analysis  and  estimation.  We fund our
interest-bearing  assets through both internally  generated  equity and external
debt financing.

Liquidity

We fund our operations  through a variety of corporate  borrowings.  The primary
source of these  borrowings is corporate debt securities  issued by the Company.
At December 31, 2001,  nine  different  fixed-rate  senior debt issues  totaling
$2.65 billion were outstanding, with a weighted-average coupon of 6.90%. To meet
our  short-term  funding needs,  we issue  commercial  paper.  The Company has a
commercial  paper  program with several  investment  banks which  provides  $700
million in borrowing  capacity.  At December 31,  2001,  thirty-seven  different
commercial paper  borrowings  totaling $351.1 million were  outstanding,  with a
weighted-average cost of 3.05%.

<PAGE> 23


FCIB raises funds through both customer  deposits and borrowings  with the FHLB.
At December 31, 2001, the banking  subsidiary's  outstanding debt totaled $345.9
million, with a weighted-average cost of 4.71%.

We also share with Washington  Mutual two revolving  credit  facilities:  a $600
million 364-day facility and a $600 million  four-year  facility,  which provide
back up for our commercial paper programs.  The borrowing capacity is limited to
the total amount of the two revolving  credit  facilities,  net of the amount of
combined  commercial  paper  outstanding.  At December 31, 2001,  there was $849
million available under these facilities.  There were no direct borrowings under
these facilities at any point during 2001 or 2000.

The following table shows selected sources (uses) of cash:

<TABLE>

(Dollars in thousands)                          Year Ended December 31,
                                        ---------------------------------------
                                           2001           2000           1999
                                        ---------      ---------     ----------
<S>                                     <C>            <C>           <C>
Operations                              $ 199,145      $ 150,123     $  230,737
Net issuances and repayments of debt      138,464        681,585        367,500
Net originations and purchases
   of consumer finance receivables       (263,000)      (778,120)      (573,333)
Dividends paid                            (43,500)       (25,000)       (14,500)

</TABLE>

Capital Management

We establish  equity  leverage  targets based upon the ratio of debt  (including
customer  deposits)  to tangible  equity.  The debt to tangible  equity ratio at
December 31, 2001 of 6.50:1 is  consistent  with the ratio of 6.55:1 at December
31, 2000.  The  determination  of our dividend  payments and  resulting  capital
leverage is managed in a manner  consistent  with our desire to maintain  strong
and improved  credit  ratings.  In addition,  provisions  of certain of our debt
agreements restrict the payment of dividends to a maximum prescribed  proportion
of  cumulative   earnings  and  contributed   capital.  At  December  31,  2001,
approximately $168.9 million was available under the debt agreement  restriction
for future dividends.

In  addition,  FCIB  met  all  FDIC  requirements  to  be  categorized  as  well
capitalized at December 31, 2001.

Recently Issued Accounting Standards Adopted

We  adopted  the  provisions  of  SFAS  No.  133,   "Accounting  for  Derivative
Instruments and Hedging Activities",  as amended by SFAS No. 137 and 138, and as
interpreted  by the  FASB  and  the  Derivatives  Implementation  Group  through
"Statement 133 Implementation Issues", as of January 1, 2001. We believe that we
have properly identified all derivative  instruments and any embedded derivative
instruments that require bifurcation.

<PAGE> 24

Amortization of goodwill and other  intangible  assets of $4.6 million  remained
unchanged for the  year-ended  December 31, 2001 compared to 2000. In July 2001,
the Financial  Accounting Standards Board ("FASB") issued SFAS No. 141, Business
Combinations,  and SFAS No. 142, Goodwill and Other Intangible Assets.  SFAS No.
141  requires  all  business  combinations  initiated  after June 30, 2001 to be
accounted  for  using  the  purchase   method.   SFAS  No.  142  eliminates  the
amortization of goodwill  relating to past and future  acquisitions  and instead
subjects  goodwill to an impairment  assessment.  The provisions of SFAS No. 142
will apply to existing goodwill and other intangible assets effective January 1,
2002. The adoption of SFAS No. 142 will cease further  amortization  of goodwill
and will have an impact of  approximately  $4.6 million ($2.9 million after tax)
of goodwill  amortization on an annual basis.  The adoption of SFAS No. 141 will
not have an impact on our historical financial statements.

In June 2001,  the FASB  issued SFAS No. 143,  Accounting  for Asset  Retirement
Obligations.  SFAS No. 143  addresses  financial  accounting  and  reporting for
obligations  associated with the retirement of tangible,  long-lived  assets and
the associated retirement costs. This Statement is effective January 1, 2003 and
is not  expected  to have a  material  impact on our  results of  operations  or
financial condition of the Company.

In August 2001,  the FASB issued SFAS No. 144,  Accounting for the Impairment or
Disposal  of  Long-Lived  Assets.  This  Statement   supercedes  SFAS  No.  121,
Accounting for the Impairment of Long-Lived  Assets and for Long-Lived Assets to
Be Disposed  Of, but  retains  the  requirements  relating  to  recognition  and
measurement of an impairment  loss and resolves  certain  implementation  issues
resulting from SFAS No. 121. This Statement became effective January 1, 2002 and
is not  expected  to have a  material  impact on our  results of  operations  or
financial condition of the Company.

Transactions with Related Parties

Significant   transactions  with  Washington  Mutual  or  its  subsidiaries  are
identified as follows:

o    Certain  administrative  services,   including  human  resources  and  cash
     management were provided, for which we paid management fees of $5.3 million
     in 2001,  $2.4  million in 2000 and $1.7  million  in 1999.  These fees are
     allocated  by  Washington  Mutual  to its  subsidiaries  based  on  various
     business factors,  including the number of employees and total assets,  and
     include a reasonable market value adjustment.

o    We made payments to Washington  Mutual,  which made payments on our behalf,
     pursuant to a tax allocation  policy and in connection  with the retirement
     and savings  plans,  totaling  approximately  $41.6 million in 2001and $3.6
     million in 2000.

o    Included  in  accounts  payable  and other  liabilities  are amounts due to
     Washington  Mutual for operating  expenses and tax remittances  paid on our
     behalf.  At December 31, 2001 and 2000, these amounts totaled $12.9 million
     and $11.5 million.

<PAGE> 25

o    On February 1, 2002,  the Company  sold,  at book value,  $46.3  million of
     single family residence loans and $3.4 million of foreclosed  single-family
     dwellings to Ahmanson  Obligation  Company,  a wholly owned  subsidiary  of
     Washington  Mutual.  The loans had been  acquired  in 2000 from Long  Beach
     Mortgage  Company ("Long Beach"),  a wholly owned  subsidiary of Washington
     Mutual.  The loans were reported as consumer  finance  receivables  and the
     foreclosed  assets  were  included  in  other  assets  on the  Consolidated
     Statements of Financial Condition.


Item 7A.  Quantitative and Qualitative Disclosures About Market Risk.

Certain of the statements  contained within this section that are not historical
facts  are  forward-looking   statements  within  the  meaning  of  the  Private
Securities  Litigation  Reform Act of 1995.  These  statements  are  intended to
assist in the  understanding of how our financial  performance would be affected
by the  circumstances  described  in this  section.  However,  such  performance
involves  risks  and  uncertainties  that may  cause  actual  results  to differ
materially  from  those  expressed  in  the  forward-looking   statements.   See
"Cautionary Statements."

Market  risk is defined as the  sensitivity  of income and capital to changes in
interest rates,  foreign  currency  exchange rates,  commodity  prices and other
relevant market rates or prices. The primary market risk to which we are exposed
is  interest  rate risk.  Our risk  management  policy  provides  for the use of
certain  derivatives and financial  instruments in managing certain risks. We do
not enter  into  derivatives  or other  financial  instruments  for  trading  or
speculative purposes.

Increases  or  decreases  in  interest  rates  can cause  change in net  income,
fluctuations  in the fair  value of  assets  and  liabilities,  and  changes  in
noninterest  income and  noninterest  expense.  Our  interest  rate risk  arises
because assets and liabilities  reprice,  mature or prepay at different times or
frequencies as market interest rates change. Our loan volume and mix also varies
as interest rates change.

Management of Interest Rate Risk

Interest  rate risk is  managed  within an  overall  asset/liability  management
framework.  The principal  objective of asset/liability  management is to manage
the sensitivity of net income to changing interest rates.

Managed  risk  includes the risk  associated  with changes in fair value of long
term fixed rate debt. In accordance with our risk management  policy,  such risk
is hedged by entering into pay floating interest rate exchange  agreements.  The
instruments  designated in these fair value hedges  include  interest rate swaps
that qualify for the "short cut" method of accounting  under SFAS No. 133. Under
the "short cut" method, we assume no ineffectiveness in a hedging  relationship.
Since the terms of the interest rate swap qualify for the use of the "short cut"
method,  it is not necessary to measure  effectiveness and there is no charge to
earnings  for changes in fair value.  All changes in fair value are  recorded as
adjustments to the basis of the hedged  borrowings  based on changes in the fair
value of the derivative  instrument.  When derivative instruments are terminated
prior to their maturity, or the maturity of the hedged liability,  any resulting

<PAGE> 26

gains or losses are included as part of the basis  adjustment of the hedged item
and amortized over the remaining  term of the  liability.  At December 31, 2001,
the unamortized  deferred gain on terminated hedging  transactions totaled $14.1
million. This amount is included in senior debt on the Consolidated Statement of
Financial Condition.

At December 31, 2001, we had three  outstanding  interest  rate swap  agreements
with a  combined  notional  amount of $450.0  million  and a total fair value of
$10.1  million.  This amount is reflected as an adjustment to senior debt on the
Consolidated Statement of Financial Condition.

The table below  indicates the sensitivity of net interest income and net income
before taxes to interest rate movements.  The comparative  scenarios assume that
interest  rates rise or fall in even  monthly  increments  over the next  twelve
months for a total increase of 200 or decrease of 100 basis points. The interest
rate scenarios are used for analytical purposes and do not necessarily represent
management's view of future market movements.

Our net interest income and net income before taxes  sensitivity  profiles as of
year-end 2001 and 2000 are stated below:

<TABLE>

                                                                          Gradual Change in Rates
                                                                     ----------------------------------
<S>                                                                       <C>               <C>
Net interest income change for the one-year period beginning:            -100bp            +200bp
                                                                     ---------------- -----------------
   January 1, 2002                                                         .20%            (.34)%
   January 1, 2001                                                         .81%           (2.44)%

Net income before taxes change for the one-year period beginning:        -100bp            +200bp
                                                                     ---------------- -----------------
   January 1, 2002                                                         .55%            (.92)%
   January 1, 2001                                                        2.12%           (6.40)%

</TABLE>

Our net  interest  income and net income  before  taxes "at risk"  position  has
improved  significantly in 2001 over 2000. This improvement (reduced sensitivity
to interest  rate changes) was  primarily  caused by our  management of interest
expense  through  long term debt  issues.  Assumptions  are made in modeling the
sensitivity of net interest  income and net income before taxes.  The simulation
model  captures  expected  prepayment  behavior  under  changing  interest  rate
environments.  Sensitivity of new loan volume to market  interest rate levels is
included as well.

<PAGE> 27

Item 8.  Financial Statements and Supplementary Data

Independent Auditors' Report

To the Board of Directors and Stockholder of
  Washington Mutual Finance Corporation
   Tampa, Florida

We have audited the accompanying  consolidated statements of financial condition
of Washington Mutual Finance  Corporation and subsidiaries (the "Company") as of
December  31,  2001  and  2000,  and  the  related  consolidated  statements  of
operations,  comprehensive income and retained earnings, and cash flows for each
of the three  years in the period  ended  December  31,  2001.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion,  such consolidated  financial  statements present fairly, in all
material  respects,   the  financial  condition  of  Washington  Mutual  Finance
Corporation  and  subsidiaries as of December 31, 2001 and 2000, and the results
of their  operations  and their  cash  flows for each of the three  years in the
period  ended  December 31,  2001,  in  conformity  with  accounting  principles
generally accepted in the United States of America.




DELOITTE & TOUCHE LLP
Tampa, Florida
January 15, 2002

<PAGE> 28

WASHINGTON MUTUAL FINANCE CORPORATION and Subsidiaries
Consolidated Statements of Financial Condition

<TABLE>

(Dollars in thousands, except par value)                     December 31,
                                                     ---------------------------
                                                          2001            2000
ASSETS                                               -----------     -----------

<S>                                                  <C>             <C>
Consumer finance receivables, net                    $ 3,729,324     $ 3,623,763
Investment securities available for sale                 124,214         185,288
Cash and cash equivalents                                104,898          14,602
Property, equipment and leasehold improvements, net       26,510          25,398
Goodwill, net                                             42,214          46,777
Other assets                                              45,757          31,877
                                                     -----------     -----------
    TOTAL ASSETS                                     $ 4,072,917     $ 3,927,705
                                                     ===========     ===========
LIABILITIES AND STOCKHOLDER'S EQUITY

Liabilities
Commercial paper borrowings                          $   351,141     $   683,654
Senior debt                                            2,667,181       2,196,445
Federal Home Loan Bank borrowings                        110,000         156,800
                                                     -----------     -----------
    Total debt                                         3,128,322       3,036,899
Customer deposits                                        235,971         189,793
Accounts payable and other liabilities                   148,967         161,925
                                                     -----------     -----------
    Total liabilities                                  3,513,260       3,388,617
                                                     -----------     -----------
Commitments and contingencies
  (Notes 12, 13 and 14)

Stockholder's equity
Common stock: $1.00 par value;
  10,000 shares authorized; 1,000
  shares issued and outstanding                                1               1
Paid-in capital                                           57,710          57,710
Retained earnings                                        499,149         481,524
Accumulated other comprehensive gain (loss)                2,797            (147)
                                                     -----------     -----------
      Total stockholder's equity                         559,657         539,088
                                                     -----------     -----------
    TOTAL LIABILITIES AND
      STOCKHOLDER'S EQUITY                           $ 4,072,917     $ 3,927,705
                                                     ===========     ===========

</TABLE>

See Notes to Consolidated Financial Statements.

<PAGE> 29

WASHINGTON MUTUAL FINANCE CORPORATION and Subsidiaries
Consolidated  Statements  of  Operations,   Comprehensive  Income  and  Retained
Earnings

<TABLE>
                                                            Year Ended December 31,
                                                  -----------------------------------------
(Dollars in thousands)                                2001             2000          1999
                                                  ----------      -----------    ----------
Interest income
<S>                                               <C>             <C>            <C>
 Loan interest and fee income                     $  584,539      $   549,052    $  464,179
 Investment securities income                         12,632           12,283        10,825
                                                  ----------      -----------    ----------
  Total interest income                              597,171          561,335       475,004

Interest and debt expense                            210,450          202,092       149,609
                                                  ----------      -----------    ----------
  Net interest income before
   provision for credit losses                       386,721          359,243       325,395

Provision for credit losses                          147,823          107,243       100,590
                                                  ----------      -----------    ----------
   Net interest income                               238,898          252,000       224,805
                                                  ----------      -----------    ----------
Noninterest income                                    28,538          30,421         29,501

Noninterest expense
 Personnel                                            95,047           92,818        78,259
 Occupancy                                            15,142           14,242        11,414
 Advertising                                           8,371            5,368         5,966
 Goodwill amortization                                 4,563            4,563         3,960
 Other                                                48,058           39,011        35,995
                                                  ----------      -----------    ----------
  Total noninterest expense                          171,181          156,002       135,594
                                                  ----------      -----------    ----------
Income before income taxes                            96,255          126,419       118,712

Provision for federal and state income taxes          35,130           47,530        45,720
                                                  ----------      -----------    ----------
Net income                                            61,125           78,889        72,992

Net unrealized holding gains (losses) on
   securities arising during period, net of tax        2,944            1,291        (2,664)
                                                  ----------      -----------    ----------
Comprehensive income                              $   64,069      $    80,180    $   70,328
                                                  ==========      ===========    ==========
Retained earnings
   Beginning of period                            $  481,524      $   427,635    $  369,143
   Net income                                         61,125           78,889        72,992
   Dividends paid                                    (43,500)         (25,000)      (14,500)
                                                  ----------      -----------    ----------
   End of period                                  $  499,149      $   481,524    $  427,635
                                                  ==========      ===========    ==========
</TABLE>

See Notes to Consolidated Financial Statements.


<PAGE> 30

WASHINGTON MUTUAL FINANCE CORPORATION and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
                                                                 Year Ended December 31,
                                                        ----------------------------------------
(Dollars in thousands)                                      2001           2000           1999
                                                        ----------     ----------     ----------
Operating activities
<S>                                                     <C>            <C>            <C>
   Net income                                           $   61,125     $   78,889     $   72,992
   Adjustments to reconcile net income to net
    cash provided by operating activities:
      Provision for credit losses                          147,823        107,243        100,590
      Depreciation and amortization                         18,474         19,405         12,577
      (Decrease) increase in accounts payable
        and other liabilities                              (14,397)       (47,221)        60,165
      Increase in other assets                             (13,880)        (8,193)       (15,587)
                                                        ----------     ----------     ----------
   Net cash provided by operating activities               199,145        150,123        230,737
                                                        ----------     ----------     ----------
Investing activities
   Investment securities purchased                         (10,846)       (89,136)       (46,460)
   Investment securities matured or sold                    76,949         34,872         64,131
   Increase in consumer finance receivables               (263,000)      (778,120)      (573,333)
   Net additions to property, equipment and leasehold
      improvements                                          (6,916)        (8,480)       (12,247)
                                                        ----------     ----------     ----------
   Net cash used in investing activities                  (203,813)      (840,864)      (567,909)
                                                        ----------     ----------     ----------
Financing activities
   Net (decrease) increase in commercial
    paper borrowings                                      (332,513)       441,484       (273,652)
   Proceeds from issuance of senior debt                   995,065        449,347        896,731
   Repayments of senior debt                              (550,000)      (250,000)      (300,000)
   Increase in senior debt from hedging activity            26,534           -               -
   Net (decrease) increase in Federal Home Loan Bank
     borrowings                                            (46,800)        40,895         42,005
   Net increase (decrease) in customer deposits             46,178           (141)         2,416
   Capital contributed by parent                               -            8,750            -
   Dividends paid                                          (43,500)       (25,000)       (14,500)
                                                        ----------     ----------     ----------
   Net cash provided by financing activities                94,964        665,335        353,000
                                                        ----------     ----------     ----------
Net increase (decrease) in cash and cash equivalents        90,296        (25,406)        15,828
                                                        ----------     ----------     ----------
Cash and cash equivalents
   Beginning of period                                      14,602         40,008         24,180
                                                        ----------     ----------     ----------
   End of period                                        $  104,898     $   14,602     $   40,008
                                                        ==========     ==========     ==========
Supplemental disclosures of cash flow information
   Interest paid                                        $  201,683     $  199,501     $  140,127
   Federal and state income taxes paid
      (net of refunds)                                  $   41,553     $   71,346     $   38,794
</TABLE>

See Notes to Consolidated Financial Statements.

<PAGE> 31

WASHINGTON MUTUAL FINANCE CORPORATION and Subsidiaries
Notes to Consolidated Financial Statements

Note 1  Ownership and Operations

Washington Mutual Finance Corporation ("WMF"), incorporated in Delaware in 1986,
as Aristar,  Inc., is a holding company  headquartered  in Tampa,  Florida whose
subsidiaries are engaged in the consumer financial services business. Washington
Mutual Finance Corporation is an indirect, wholly-owned subsidiary of Washington
Mutual, Inc. ("Washington  Mutual").  When we refer to "we", "our", "us", or the
"Company" in this Form 10-K, we mean Washington  Mutual Finance  Corporation and
its subsidiaries, all of which are wholly-owned.

Our Company's  operations consist principally of a network of 449 branch offices
located in 24 states,  primarily  in the  southeast,  southwest  and  California
("consumer  finance").  These offices operate under the name  Washington  Mutual
Finance.  Our branch  offices are  typically  located in small- to  medium-sized
communities  in  suburban  or rural  areas and are  managed by  individuals  who
generally have  considerable  consumer lending  experience.  We make secured and
unsecured consumer  installment loans, and purchase  installment  contracts from
local retail establishments.  The consumer credit transactions are primarily for
personal, family, or household purposes. From time to time, we purchase consumer
loans from national mortgage banking operations,  servicing  released,  that are
secured by real estate.

We also provide  consumer  financial  services  through our  industrial  banking
subsidiary,  First Community Industrial Bank ("FCIB"),  which has 10 branches in
Colorado and Utah ("consumer banking"). In addition to making consumer loans and
purchasing retail installment  contracts,  FCIB also accepts deposits insured by
the Federal Deposit Insurance Corporation ("FDIC").

For  consumer  finance and  consumer  banking,  combined,  we have 459  physical
locations doing business in 25 states. Additionally,  we have a consumer banking
credit  collection  office in Colorado  Springs,  Colorado,  a consumer  finance
customer care center in Pensacola,  Florida ("C3"), and a headquarters  facility
in Tampa, Florida to support the entire operation.

Note 2  Summary of Significant Accounting Policies

Principles of Consolidation.  The consolidated  financial statements include the
accounts of Washington Mutual Finance  Corporation and its subsidiaries,  all of
which are  wholly-owned,  after  elimination  of all  intercompany  balances and
transactions.  Certain amounts in prior years have been  reclassified to conform
to the current year's presentation.

Estimates.  The preparation of financial statements in conformity with generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.

<PAGE> 32

Income  Recognition  from Finance  Operations.  Unearned  finance charges on all
types of consumer finance  receivables are recognized on an accrual basis, using
the interest  method.  Accrual of interest  generally is suspended when payments
are more than three months contractually overdue. When the finance receivable is
secured  by real  estate  and is  well-collateralized,  we  continue  to  accrue
interest past this timeframe,  until foreclosure  proceedings are initiated,  at
which time all interest  accrued but not  collected is reversed.  In those cases
where  the  loan is not  well-collateralized  and  collectibility  is in  doubt,
accrual  of  interest  is  suspended  prior  to the  initiation  of  foreclosure
proceedings.  Loan fees and  directly  related  lending  costs are  deferred and
amortized  using the interest  method over the  contractual  life of the related
receivables.

Derivatives.  On January 1, 2001, the Company adopted the provisions of SFAS No.
133,"Accounting for Derivative Instruments and Hedging Activities". Managed risk
includes the risk  associated with changes in fair value of long term fixed rate
debt.  In accordance  with our risk  management  policy,  such risk is hedged by
entering  into pay  floating  interest  rate swap  agreements.  The  instruments
designated in these fair value hedges  include  interest rate swaps that qualify
for the "short cut" method of  accounting  under SFAS No. 133.  Under the "short
cut" method, we assume no ineffectiveness in a hedging  relationship.  Since the
terms of the  interest  rate swap qualify for the use of the "short cut" method,
it is not necessary to measure  effectiveness and there is no charge to earnings
for changes in fair value. All changes in fair value are recorded as adjustments
to the basis of the hedged  borrowings based on changes in the fair value of the
derivative instrument. When derivative instruments are terminated prior to their
maturity, or the maturity of the hedged liability, any resulting gains or losses
are included as part of the basis  adjustment  of the hedged item and  amortized
over the remaining term of the liability.

Provision and Allowance  for Credit  Losses.  The allowance for credit losses is
maintained at a level sufficient to provide for estimated credit losses based on
evaluating  known  and  inherent  risks  in  the  consumer  finance  receivables
portfolio. We provide, through charges to income, an allowance for credit losses
which,  based  upon  management's  evaluation  of  numerous  factors,  including
economic  conditions,  a  predictive  analysis  of the  outcome  of the  current
portfolio  and  prior  credit  loss  experience,  is  deemed  adequate  to cover
reasonably  expected  losses inherent in outstanding  receivables.  Our consumer
finance receivables are a large group of small-balance homogenous loans that are
collectively evaluated for impairment.  Additionally,  every real estate secured
loan  that  is 60 days  delinquent  is  reviewed  by our  credit  administration
management to assess collectibility and future course of action.

Losses on receivables  are charged to the allowance for credit losses based upon
the number of days delinquent,  or when collectibility  becomes doubtful and the
underlying  collateral,  if any, is  considered  insufficient  to liquidate  the
receivable  balance.   Non-real  estate  secured,   delinquent  receivables  are
generally  charged  off  when  they are 180 days  contractually  delinquent.  We
typically  begin  foreclosure  procedures  on real  estate  secured,  delinquent
receivables  when  they  reach  60 to 90 days  past  due.  When  foreclosure  is
completed  and we have  obtained  title to the  property,  we establish the real
estate as an asset  valued at fair  value,  and  charge  off any loan  amount in
excess of that value.  Recoveries  on  previously  written-off  receivables  are
credited to the allowance.

<PAGE> 33

Investment  Securities.  Debt and equity  securities are classified as available
for sale and are  reported  at fair  value,  with  unrealized  gains and  losses
excluded from earnings and reported,  net of taxes,  as a separate  component of
stockholder's  equity and comprehensive  income.  Gains and losses on investment
securities are recorded when realized on a specific identity basis.

Property,   Equipment  and  Leasehold  Improvements.   Property,  equipment  and
leasehold  improvements  are stated at cost,  net of  accumulated  depreciation.
Depreciation is provided for, principally,  on the straight-line method over the
estimated useful life, ranging from three to ten years, or, if less, the term of
the  lease.  At  December  31,  2001  and  2000,  accumulated  depreciation  and
amortization totaled $33.1 million and $31.0 million.

Goodwill.  The  excess of cost over the fair  value of net  assets of  companies
acquired is being  amortized  using the  straight-line  method,  generally  over
periods of 6 to 25 years.  The carrying value of goodwill is regularly  reviewed
for indicators of impairment in value,  including  unexpected or adverse changes
in the  following:  1) the  economic  or  competitive  environments  in which we
operate;  2)  profitability  analyses;  and 3) cash flow analyses.  If facts and
circumstances  suggest that goodwill is impaired,  the Company assesses the fair
value of the underlying  business based on expected  undiscounted net cash flows
and reduces goodwill to the estimated fair value. At December 31, 2001 and 2000,
accumulated amortization totaled $78.4 million and $73.8 million.

As of January 1, 2002,  the Company  adopted SFAS No. 142,  "Goodwill  and Other
Intangible  Assets",  which eliminates the amortization of goodwill  relating to
past and future acquisitions. See further discussion under the heading "Recently
Issued Accounting Standards".

Real Estate  Owned.  Real estate  owned is valued at lower of cost or fair value
less estimated  costs to sell and is included in other assets.  These values are
periodically  reviewed and reduced, if necessary.  Costs of holding real estate,
and  related  gains and  losses on  disposition,  are  credited  or  charged  to
noninterest expense as incurred.

Income  Taxes.  We are included in the  consolidated  Federal  income tax return
filed by Washington Mutual.  Federal income taxes are paid to Washington Mutual.
Federal  income  taxes  are  allocated   between   Washington   Mutual  and  its
subsidiaries in proportion to the respective contribution to consolidated income
or loss. State income tax expense  represents the amount of taxes either owed by
us or that we would have paid on a separate  entity basis,  when we are included
in Washington  Mutual's  consolidated state income tax returns.  Deferred income
taxes are  provided  on  elements of income or expense  that are  recognized  in
different periods for financial and tax reporting purposes.

Taxes on income are  determined  by using the asset and liability  method.  This
approach requires the recognition of deferred tax assets and liabilities for the
expected  future tax  consequences  of events that have been  recognized  in the
Company's  financial  statements  or  tax  returns.  In  estimating  future  tax
consequences,  we consider  expected  future  events  other than  enactments  of
changes in the tax law or rates.


<PAGE> 34

The Company has recorded a net deferred tax asset of approximately $35.4 million
at December  31,  2001.  Realization  of the asset is  dependent  on  generating
sufficient taxable income prior to expiration of loss carryforwards available to
the Company. Although realization is not assured, management believes it is more
likely  than  not that all of the  remaining  net  deferred  tax  asset  will be
realized.  The  amount  of the net  deferred  tax asset  considered  realizable,
however, could be reduced in the near term if estimates of future taxable income
during the carryforward period are reduced.

Statements of Cash Flows.  For purposes of reporting cash flows, we consider all
highly liquid investments with a maturity of three months or less when purchased
to be cash equivalents.

Fair Value  Disclosures.  Quoted market  prices are used,  where  available,  to
estimate  the fair  value of the  Company's  financial  instruments.  Because no
quoted market prices exist for a significant  portion of the Company's financial
instruments,  fair value is estimated using comparable market prices for similar
instruments or using  management's  estimates of appropriate  discount rates and
cash  flows for the  underlying  asset or  liability.  A change in  management's
assumptions  could  significantly  affect  these  estimates.   Accordingly,  the
Company's fair value estimates are not necessarily indicative of the value which
would be realized upon disposition of the financial instruments.

Recently Issued  Accounting  Standards.  In June 2001,  SFAS No. 141,  "Business
Combinations",  and SFAS No. 142,  "Goodwill and Other  Intangible  Assets" were
issued. SFAS No. 141 requires all business combinations initiated after June 30,
2001 to be  accounted  for  using  the  purchase  method.  SFAS No.  142  became
effective  January 1, 2002 and eliminates the amortization of goodwill  relating
to past and future  acquisitions  (except  that  goodwill  related  to  business
combinations  initiated  after June 30, 2001 and  consummated  before January 1,
2002 was not  required  to be  amortized).  Instead,  goodwill  is subject to an
impairment  assessment  that must be performed upon adoption of SFAS No. 142 and
at least annually thereafter.

The impairment  assessment in connection  with the initial  adoption of SFAS No.
142 will not have a material  impact on the results of  operations  or financial
condition  of the Company.  For  acquisitions  initiated  prior to July 1, 2001,
pretax  goodwill  amortization of  approximately  $4.6 million will no longer be
expensed.

In June,  2001, the FASB issued SFAS No. 143,  "Accounting for Asset  Retirement
Obligations".  SFAS No. 143  addresses  financial  accounting  and reporting for
obligations  associated with the retirement of tangible,  long-lived  assets and
the associated retirement costs. This Statement is effective January 1, 2003 and
is not  expected  to have a  material  impact on our  results of  operations  or
financial condition of the Company.

In August, 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal  of  Long-Lived  Assets".  This  Statement  supercedes  SFAS  No.  121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed  Of",  but  retains the  requirements  relating to  recognition  and
measurement of an impairment  loss and resolves  certain  implementation  issues
resulting from SFAS No. 121. This Statement became effective January 1, 2002 and
is not  expected  to have a  material  impact on our  results of  operations  or
financial condition of the Company.

<PAGE> 35

Note 3  Consumer Finance Receivables

Consumer  finance  receivables  at December 31, 2001 and 2000 are  summarized as
follows:

<TABLE>

(Dollars in thousands)                        2001               2000
                                         -----------        -----------
Consumer finance receivables:
<S>                                      <C>                <C>
  Real estate secured loans              $ 2,357,780        $ 2,256,044
  Other installment loans                  1,632,337          1,640,846
  Retail installment contracts               385,298            380,073
                                         -----------        -----------
    Gross consumer finance receivables     4,375,415          4,276,963
Less:    Unearned finance charges and
          deferred loan fees                (520,069)          (548,613)
         Allowance for credit losses        (126,022)          (104,587)
                                         -----------        -----------
Consumer finance receivables, net        $ 3,729,324        $ 3,623,763
                                         ===========        ===========
</TABLE>

The amount of gross nonaccruing  consumer finance  receivables was approximately
$113.9  million and $85.8  million at December 31, 2001 and 2000.  The amount of
interest that would have been accrued on these consumer finance  receivables was
approximately $15.4 million in 2001 and $11.5 million in 2000.

Activity in the Company's allowance for credit losses is as follows:

<TABLE>

                                           Year Ended December 31,
                                  ---------------------------------------
(Dollars in thousands)                 2001          2000          1999
                                  ----------     ----------    ----------
<S>              <C>              <C>            <C>           <C>
Balance, January 1                $  104,587     $  100,308    $   80,493
Provision for credit losses          147,823        107,243       100,590
Amounts charged off:
   Real estate secured loans          (7,480)        (2,684)       (1,807)
   Other installment loans          (124,380)      (104,365)      (82,438)
   Retail installment contracts      (13,456)       (13,017)      (12,558)
                                  ----------     ----------    ----------
                                    (145,316)      (120,066)      (96,803)
Recoveries:
   Real estate secured loans             310            241           398
   Other installment loans            16,034         14,171        12,629
   Retail installment contracts        2,434          2,690         3,001
                                  ----------     ----------    ----------
                                      18,778         17,102        16,028
                                  ----------     ----------    ----------
Net charge offs                     (126,538)      (102,964)      (80,775)

Allowances on notes purchased            150           -              -
                                  ----------     ----------    ----------
Balance, December 31              $  126,022     $  104,587    $  100,308
                                  ==========     ==========    ==========

</TABLE>

<PAGE> 36

Contractual  maturities,  excluding  unearned  finance charges and deferred loan
fees, at December 31, 2001 are as follows:

<TABLE>
                                              Over 1 But
                                Within          Within        Over
(Dollars in thousands)          1 year         5 years      5 years          Total
                              ---------      -----------   -----------    -----------
<S>                           <C>            <C>           <C>            <C>
Real estate secured loans     $ 149,048      $   389,758   $ 1,561,760    $ 2,100,566
Other installment loans          62,977        1,346,402         8,303      1,417,682
Retail installment contracts     31,394          300,826         4,878        337,098
                              ---------      -----------   -----------    -----------
                              $ 243,419      $ 2,036,986   $ 1,574,941    $ 3,855,346
                              =========      ===========   ===========    ===========

</TABLE>


The  weighted  average  contractual  term of all  consumer  finance  receivables
written  during the years ended  December 31, 2001 and 2000 was 76 months and 74
months with the majority of loans  providing  for a fixed rate of interest  over
the  contractual  life of the  loan.  Experience  has shown  that a  substantial
portion of the consumer  finance  receivables will be refinanced to lower a rate
or payment or to provide  additional  money to the customer,  or repaid prior to
contractual  maturity.  Therefore,  the preceding  information as to contractual
maturities should not be regarded as a forecast of future cash collections.

Because we primarily  lend to consumers,  we did not have  receivables  from any
industry  group that  comprised  10 percent  or more of total  consumer  finance
receivables at December 31, 2001. Geographic diversification of consumer finance
receivables reduces the concentration of credit risk associated with a recession
in any one region.

The largest concentrations of net consumer finance receivables, by state were as
follows:

<TABLE>

(Dollars in thousands)                December 31,
                 --------------------------------------------------
                           2001                         2000
                 ---------------------       ----------------------
                      Amount   Percent            Amount   Percent
                 -----------   -------       -----------   -------
<S>              <C>                <C>      <C>                <C>
California       $   474,181        12%      $   388,825        10%
Texas                422,184        11           363,407        10
Tennessee            345,587         9           339,852         9
Colorado             311,877         8           328,652         9
North Carolina       291,929         8           292,893         8
Florida              222,324         6           222,010         6
South Carolina       179,379         5           182,669         5
Virginia             157,217         4           161,247         4
Louisiana            145,127         4           146,147         4
Mississippi          127,565         3           128,653         3
Other              1,177,976        30         1,173,995        32
                 -----------   -------       -----------   -------
Total            $ 3,855,346       100%      $ 3,728,350       100%
                 ===========   =======       ===========   =======
</TABLE>


<PAGE> 37


Note 4  Investment Securities

At December 31, 2001 and 2000,  all  investment  securities  were  classified as
available-for-sale  and  reported at fair  value.  Investment  securities  as of
December 31, 2001 and 2000 are as follows:

<TABLE>

(Dollars in thousands)                       December 31, 2001
                          -----------------------------------------------------------
                                                     Gross Unrealized     Approximate
                           Original   Amortized    --------------------       Fair
                             Cost        Cost       Gains       Losses        Value
                          ---------   ---------    --------    --------   -----------
<S>                       <C>         <C>          <C>         <C>          <C>
Government obligations    $  48,116   $  48,270    $  2,056    $     (1)  $    50,325
Corporate obligations        45,526      46,006       1,745         (40)       47,711
Certificates of deposit
 and other                   25,846      25,710         478         (10)       26,178
                          ---------   ---------    --------    --------   -----------
                          $ 119,488   $ 119,986    $  4,279    $    (51)  $   124,214
                          =========   =========    ========    ========   ===========
</TABLE>


<TABLE>
 (Dollars in thousands)                      December 31, 2000
                          -----------------------------------------------------------
                                                     Gross Unrealized     Approximate
                           Original   Amortized    --------------------       Fair
                             Cost        Cost       Gains       Losses       Value
                          ---------   ---------    --------    --------   -----------
<S>                       <C>         <C>          <C>         <C>          <C>
Government obligations    $  80,403   $  80,570    $    804    $   (202)  $    81,172
Corporate obligations        69,673      70,047         123        (915)       69,255
Certificates of deposit
 and other                   35,040      34,866         113        (118)       34,861
                          ---------   ---------    --------    --------   -----------
                          $ 185,116   $ 185,483    $  1,040    $ (1,235)  $   185,288
                          =========   =========    ========    ========   ===========
</TABLE>


There were no significant realized gains or losses during 2001, 2000 or 1999.

The  following  table  presents the  maturity of the  investment  securities  at
December 31, 2001:

<TABLE>

(Dollars in thousands)                               Approximate
                                         Amortized       Fair
                                            Cost         Value
                                         ---------   -----------
<S>                                      <C>           <C>
Due in one year or less                  $  31,081   $    31,579
Due after one year through five years       81,079        84,483
Due after five years through ten years       3,891         4,063
Due after ten years                          3,935         4,089
                                         ---------   -----------
                                         $ 119,986   $   124,214
                                         =========   ===========

</TABLE>


<PAGE> 38

Note 5  Commercial Paper Borrowings

The Company has a commercial  paper program with several  investment banks which
provides  $700 million in borrowing  capacity.  Commercial  paper  borrowings at
December 31, 2001 and 2000 totaled $351.1 million and $683.7  million.  Interest
expense in 2001,  2000 and 1999 related to commercial  paper was $20.3  million,
$27.7 million and $18.5 million.

We also share with Washington  Mutual two revolving  credit  facilities:  a $600
million 364-day facility and a $600 million  four-year  facility,  which provide
back-up for our commercial paper programs.  The borrowing capacity is limited to
the total amount of the two revolving  credit  facilities,  net of the amount of
combined  commercial paper  outstanding.  There were no direct  borrowings under
these facilities at any point during 2001 or 2000.

These revolving credit  agreements have restrictive  covenants which include:  a
minimum  consolidated  net worth test;  a limit on senior debt to the  borrowing
base (up to 10:1);  subsidiary debt  (excluding  bank deposits and  intercompany
debt) not to exceed 30% of total  debt;  and a 60-day  delinquency  ratio not to
exceed 6% of consumer finance  receivables.  As of December 31, 2001, we were in
compliance with all restrictive covenants.

Additional  information  concerning  total  commercial  paper  borrowings  is as
follows:

<TABLE>

                                              Year Ended December 31,
                                     -------------------------------------
(Dollars in thousands)                   2001         2000           1999
                                     ---------    ---------     ----------
Outstanding during the year
<S>                                  <C>          <C>            <C>
   Maximum amount at any month end   $ 703,912    $ 683,654      $ 428,552
   Average amount                      411,271      420,215        323,475
   Average interest rate                  4.93%        6.63%          5.72%

</TABLE>

Average interest rates include the effect of commitment fees.


<PAGE> 39


Note 6  Senior Debt

Senior debt at December 31, 2001 and 2000 was comprised of the following:

<TABLE>

(Dollars in thousands)                   2001               2000
                                    -----------        -----------
Senior notes and debentures (unsecured)


<S>                <C> <C>          <C>                <C>
   7.75%, due June 15, 2001         $      -           $   149,994
   7.25%, due June 15, 2001                -                99,983
   6.0%, due August 1, 2001                -               199,931
   6.75%, due August 15, 2001              -                99,988
   6.0%, due May 15, 2002               149,960            149,852
   6.30%, due October 1, 2002           149,927            149,830
   6.50%, due November 15, 2003         149,771            149,648
   5.85%, due January 27, 2004          199,875            199,814
   7.375%, due September 1, 2004        299,392            299,164
   8.25%, due June 15, 2005             473,734            449,421
   7.25%, due June 15, 2006             249,036            248,820
   6.25%, due June 15, 2006             498,275               -
   6.88%, due June 15, 2011             497,211               -
                                    -----------        -----------
     Total senior debt              $ 2,667,181        $ 2,196,445
                                    ===========        ===========
</TABLE>

Aggregate maturities of senior debt at December 31, 2001 are as follows:  $299.9
million in 2002;  $149.8 million in 2003; $499.3 million in 2004; $473.7 million
in 2005; $747.3 million in 2006; and $497.2 million in 2007 and thereafter.

Interest  expense related to senior debt  outstanding in 2001, 2000 and 1999 was
$170.9 million, $154.5 million, and $115.5 million.

Increase in senior debt  related to hedging  activities  in 2001  totaled  $26.5
million.  This was comprised of $10.1 million total fair value and $16.4 million
deferred gain on terminated hedging transations.  The associated amortization of
the deferred gain was $2.3 million. See Note 9 "Hedging Activities".

<PAGE> 40

Note 7  Federal Home Loan Bank Borrowings

Federal Home Loan Bank  borrowings at December 31, 2001 and 2000 were  comprised
of the following:

<TABLE>

(Dollars in thousands)                              2001           2000
Federal Home Loan Bank notes (secured)           ---------   -----------

<S>                   <C> <C>                    <C>          <C>
   6.62%, due January 16, 2001                   $     -      $   62,400
   6.70%, due January 16, 2001                         -          10,500
   6.50%, due January 29, 2001                         -          10,000
   Variable rate, due March 29, 2001 (6.34% at
    December 31, 2000)                                 -          60,000
   Variable rate, due May 1, 2001 (6.56% at
    December 31, 2000)                                 -           3,900
   Variable rate, due March 20, 2003 (1.95% and
     6.55% at December 31, 2001 and 2000)            10,000       10,000
   4.95%, due April 2, 2003                          50,000         -
   4.88%, due May 23, 2003                           50,000         -
                                                 ----------   ----------
Total Federal Home Loan Bank notes               $  110,000   $  156,800
                                                 ==========   ==========
</TABLE>


All of the $110.0  million in FHLB  borrowings  at  December  31, 2001 mature in
2003.

Interest  expense in 2001,  2000 and 1999  related to FHLB  borrowings  was $6.6
million,  $9.2  million,  and $4.8  million.  FHLB  borrowings  are  secured  by
residential  mortgage loans with a carrying value at December 31, 2001 of $189.4
million.

Note 8  Customer Deposits

The book value of the  Company's  customer  deposits as of December 31, 2001 and
2000 are as follows:

<TABLE>

(Dollars in thousands)           2001               2000
                           -----------         ----------
<S>                        <C>                 <C>
Money market accounts      $    48,873         $   15,835
Savings accounts                 1,446              1,467
Certificates of deposit
  under $100,000               160,187            150,055
Certificates of deposit
  $100,000 and over             25,465             22,436
                           -----------         ----------
                           $   235,971         $  189,793
                           ===========         ==========
</TABLE>

Maturities of time deposits are $140.3  million in 2002,  $34.7 million in 2003,
$6.3 million in 2004 and $4.3 million thereafter.

Interest  expense in 2001, 2000 and 1999 related to customer  deposits was $12.7
million, $10.6 million and $10.8 million.

<PAGE> 41

Note 9  Hedging Activities

Statement of Financial  Accounting  Standards ("SFAS") No. 133,  "Accounting for
Derivative  Instruments  and Hedging  Activities,"  is effective  for all fiscal
years  beginning  after June 15,  2000.  SFAS No. 133,  as amended,  establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts,  and for hedging activities.
Under  SFAS  No.  133,  certain  contracts  that  were not  formerly  considered
derivatives  may now meet the definition of a  derivative. We did not enter into
any agreements,  which met the definition of a derivative instrument at any time
during 2000. We adopted SFAS No. 133 effective January 1, 2001.

Our risk  management  policy  provides  for the use of certain  derivatives  and
financial   instruments  in  managing  certain  risks.  We  do  not  enter  into
derivatives or other financial instruments for trading or speculative purposes.

Managed  risk  includes  the  risk  associated  with  changes  in fair  value of
long-term fixed rate debt. In accordance with our risk management  policy,  such
risk is hedged by entering into pay floating interest rate exchange  agreements.
The  instruments  designated  in these fair value hedges  include  interest rate
swaps that qualify for the "short cut" method of accounting  under SFAS No. 133.
Under  the  "short  cut"  method,  we  assume  no  ineffectiveness  in a hedging
relationship.  Since the terms of the interest  rate swap qualify for the use of
the "short cut" method,  it is not necessary to measure  effectiveness and there
is no charge to earnings  for  changes in fair value.  All changes in fair value
are  recorded  as  adjustments  to the basis of the hedged  borrowings  based on
changes  in  the  fair  value  of the  derivative  instrument.  When  derivative
instruments  are  terminated  prior to their  maturity,  or the  maturity of the
hedged  liability,  any  resulting  gains or losses are  included as part of the
basis adjustment of the hedged item and amortized over the remaining term of the
liability.  At December 31, 2001,  the  unamortized  deferred gain on terminated
hedging  transactions  totaled $14.1 million.  This amount is included in senior
debt on the Consolidated Statement of Financial Condition.

At December 31, 2001, we had three  outstanding  interest  rate swap  agreements
with a  combined  notional  amount of $450.0  million  and a total fair value of
$10.1  million.  This amount is reflected as an adjustment to senior debt on the
Consolidated Statement of Financial Condition.

Note 10  Other Noninterest Expense

The components of other noninterest expense are as follows:
<TABLE>

                                                      Year Ended December 31,
                                           ----------------------------------------
(Dollars in thousands)                         2001           2000            1999
                                           ---------      ---------       ---------
<S>                                        <C>            <C>             <C>
Data Processing and Telecommunication      $  16,446      $  13,752       $  12,200
Taxes, Licenses and Professional Fees         14,964         12,423          12,589
Postage and Office Supplies                    9,180         10,550           8,226
Other                                          7,468          2,286           2,980
                                           ---------      ---------       ---------
                                           $  48,058      $  39,011       $  35,995
                                           =========      =========       =========
</TABLE>


<PAGE> 42

Note 11  Income Taxes

The components of income tax expense (benefit) are as follows:
<TABLE>

                                Year Ended December 31,
                      ----------------------------------------
(Dollars in thousands)    2001           2000            1999
                      ---------      ---------       ---------
Current
<S>                   <C>            <C>             <C>
   Federal            $  41,116      $  41,425       $  35,896
   State                    564         (1,085)          8,032
Deferred                 (6,550)         7,190           1,792
                      ---------      ---------       ---------
                      $  35,130      $  47,530       $  45,720
                      =========      =========       =========
</TABLE>


The  provisions  for  income  taxes  differ  from  the  amounts   determined  by
multiplying  pre-tax income by the statutory  federal income tax rate of 35% for
2001, 2000 and 1999. A reconciliation between these amounts is as follows:

<TABLE>

                                                                Year Ended December 31,
                                      -------------------------------------------------------------------
(Dollars in thousands)                         2001                     2000                   1999
                                      -------------------     --------------------    -------------------
                                                    % of                     % of                   % of
                                                   Pretax                   Pretax                 Pretax
                                         Amount    Income         Amount    Income       Amount    Income
                                      ---------    ------      ---------    ------     --------    ------
<S>                                   <C>           <C>        <C>           <C>       <C>          <C>
Income taxes at statutory rates       $  33,689     35.00%     $  44,247     35.00%    $ 41,549     35.00%
Increase (reduction) in taxes
   resulting from:
    State income taxes, net of
     Federal benefit                      1,395      1.45          3,280      2.59        4,172      3.52
    Other                                    46       .05              3       .01           (1)     (.01)
                                      ---------    ------      ---------    ------     --------    ------
                                      $  35,130     36.50%     $  47,530     37.60%    $ 45,720     38.51%
                                      =========    ======      =========    ======     ========    ======
</TABLE>

<PAGE> 43

Deferred taxes result from temporary  differences in the  recognition of certain
items for tax and financial  reporting purposes.  The significant  components of
the Company's net deferred tax asset (liability) were as follows:

<TABLE>
                                                         December 31,
                                                 ---------      ---------
(Dollars in thousands)                               2001           2000
                                                 ---------      ---------
Deferred tax assets:
<S>                                              <C>            <C>
   Credit loss reserves                          $  37,160      $  29,249
   Unearned insurance commissions                    7,196          9,936
   Employee benefits accruals                        2,963          2,735
   State taxes                                       1,217          2,490
   Other                                               912          1,023
                                                 ---------      ---------
     Total deferred tax assets                      49,448         45,433
                                                 ---------      ---------
Deferred tax liabilities:
   Amortization of intangibles                     (10,498)       (12,352)
   Other                                            (1,390)           (48)
   Basis differences on premises and equipment      (1,193)          (959)
   Loan interest and fee income                       (936)        (1,755)
                                                 ---------      ---------
          Total deferred tax liabilities           (14,017)       (15,114)
                                                 ---------      ---------
Net deferred tax asset                           $  35,431      $  30,319
                                                 =========      =========

</TABLE>

Note 12  Retirement and Savings Plans

Substantially  all of our employees  participate  in a  noncontributory  defined
contribution   pension  plan  maintained  by  Washington  Mutual  ("the  Plan").
Accumulated plan benefits and annual pension cost are derived from an allocation
formula based on our total participants and the Plan's total participants.

Pension cost for our  participants  for the years ended December 31, 2001, 2000,
and 1999 was approximately  $2.2 million,  $1.0 million,  and $1.1 million.  The
significant increase in 2001 was due to actuarial  adjustments to funding of the
pension plan. Due to the Company's  participation  in a  multi-employer  defined
benefit plan,  information as to separate Company  participant assets and vested
benefits is not presented.

Our  employees  also  participate  in an employee  savings  plan  maintained  by
Washington  Mutual,  which  allows  employees  to defer  part of  their  pre-tax
compensation  until  retirement.   Company   contributions   equal  50%  of  the
contributions  made by  employees  up to 6% of salary plus annual  discretionary
amounts,  if any, as determined by  management.  Our cost is based on the actual
contribution  related  to  our  participating   employees.   Total  expense  was
approximately  $3.6  million,  $3.4 million and $3.0 million for the years ended
December 31, 2001, 2000 and 1999.

The Company's  employees who retired prior to July 1, 1997 also  participate  in
Washington  Mutual's  defined benefit  postretirement  plan ("the Benefit Plan")
which  covers a portion of the costs of medical and life  insurance  coverage to
eligible  employees and dependents  based on age and length of service.  Medical


<PAGE> 44

coverage options are the same as available to active employees.  The accumulated
postretirement  benefit  obligation  and related  expense  are  derived  from an
allocation  formula based on our total participants and the Benefit Plan's total
participants.

The net postretirement medical and life insurance expense (benefit) allocated to
us for the  years  ended  December  31,  2001,  2000 and 1999 was  approximately
$202,000, $193,000 and ($245,000).

Note 13  Leases

The Company leases office space,  computers,  office  equipment and automobiles,
generally for terms of five or fewer years.

Under operating leases that have initial or remaining  noncancelable lease terms
in excess of one year,  approximate  aggregate  annual minimum rentals are $11.1
million in 2002;  $7.5 million in 2003;  $5.7  million in 2004;  $3.4 million in
2005;  and $1.4 million in 2006.  Rent expense for the years ended  December 31,
2001, 2000 and 1999 was $12.2 million, $12.1 million and $11.9 million.

On May 25, 2001, the Company sold its  headquarters  building in Tampa,  Florida
for  gross  sale  proceeds  of $6.7  million.  Concurrent  with  the sale of the
building,  we entered into a leaseback,  whereby we leased our office facilities
from the  purchaser  at a monthly  base rent of $64,000,  with annual  increases
approximating  3.5% per year.  The  lease  term is 5 years,  with an  additional
five-year option to renew. The gain on sale of the building totaled $1.0 million
and is being  amortized over the ten-year  period  representing  the total lease
term.

Note 14  Contingencies

The Company and certain of its  subsidiaries are parties to various lawsuits and
proceedings arising in the ordinary course of business.  We have also been named
as a defendant in a number of class action suits, in which various industry-wide
practices  arising from routine  business  activities  are being  challenged and
various  damages are being  sought.  Certain of these  lawsuits and  proceedings
arise in  jurisdictions,  such as Alabama and  Mississippi,  which permit damage
awards  disproportionate  to the actual economic damages incurred.  However,  it
should be noted that the  frequency  of large  damage  awards,  including  large
punitive  damage  awards,  that bear little or no  relation  to actual  economic
damages  incurred by plaintiffs in  jurisdictions  like Alabama and  Mississippi
continues to increase and creates the potential for an unpredictable judgment in
any given suit.

<PAGE> 45

In one of the pending cases,  Carolyn Baker, et al. v. Washington Mutual Finance
Group,  LLC f/k/a City  Finance  Company,  a jury  awarded just over $71 million
against one of the Company's subsidiaries, Washington Mutual Finance Group, LLC,
a Delaware limited liability  company ("WMF Group").  Pursuant to a motion filed
by WMF Group, the trial court reduced the verdict to just over $53 million.  WMF
Group is in the process of  appealing  the verdict and has posted a bond to stay
execution on the judgment pending the appellate court's ruling.  The appeal will
be based on numerous  grounds,  including the gross inequity between the alleged
economic  losses  of  only  $12,000  and  the  actual  jury  award.  Based  upon
information  presently  available,  we believe that the total  amounts that will
ultimately be paid, if any, arising from these lawsuits and proceedings will not
have a material  adverse  effect on our  consolidated  results of operations and
financial position.

Note 15  Transactions with Related Parties

Significant   transactions  with  Washington  Mutual  or  its  subsidiaries  are
identified as follows:

o    Certain  administrative  services,   including  human  resources  and  cash
     management were provided, for which we paid management fees of $5.3 million
     in 2001,  $2.4  million in 2000 and $1.7  million  in 1999.  These fees are
     allocated  by  Washington  Mutual  to its  subsidiaries  based  on  various
     business factors,  including the number of employees and total assets,  and
     include a reasonable market value adjustment.

o    We made payments to Washington  Mutual,  which made payments on our behalf,
     pursuant to a tax allocation  policy and in connection  with the retirement
     and savings plans, totaling approximately $41.6 million and $3.6 million.

o    Included  in  accounts  payable  and other  liabilities  are amounts due to
     Washington  Mutual for operating  expenses and tax remittances  paid on our
     behalf.  At December 31, 2001 and 2000, these amounts totaled $12.9 million
     and $11.5 million.

o    On February 1, 2002,  the Company  sold,  at book value,  $46.3  million of
     single family residence loans and $3.4 million of foreclosed  single-family
     dwellings to Ahmanson  Obligation  Company,  a wholly owned  subsidiary  of
     Washington  Mutual.  The loans had been  acquired  in 2000 from Long  Beach
     Mortgage  Company ("Long Beach"),  a wholly owned  subsidiary of Washington
     Mutual..  The loans were reported as consumer  finance  receivables and the
     foreclosed  assets  were  included  in  other  assets  on the  Consolidated
     Statements of Financial Condition.

Note 16  Lines of Business

We are managed along two major lines of business:  consumer finance and consumer
banking.  The Company provides  information on the performance of these business
segments  which  are  strategic  lines  of  business  managed  by the  Executive
Committee  under the  direction of the Chief  Executive  Officer.  The financial
performance of these business lines is measured by our  profitability  reporting
processes.


<PAGE> 46

Our business segments are managed through the Executive Committee,  which is the
senior  decision  making  group  of the  Company.  The  Executive  Committee  is
comprised of eleven members including the Chairman and Chief Executive  Officer,
the President and Vice Presidents who manage key business and operational  areas
within the Company.

Both segments are managed by an executive  team that is  responsible  for sales,
marketing, sales support,  operations and certain administrative functions. Back
office support is provided to each segment  through  executives  responsible for
lending administration, information systems, finance, legal, marketing and human
resources.

Operating  revenues and expenses are directly  assigned to business  segments in
determining  their operating  income.  The financial results of each segment are
derived from our general ledger systems.  Certain  adjustments have been made to
recorded general ledger accounts to appropriately  reflect results of operations
and financial position transfers among segments.  However,  because our consumer
banking line of business is managed and reported as a separate legal entity, the
results  reported  are  substantially  the same as its results on a  stand-alone
basis.

The organizational structure of the institution and the allocation methodologies
it employs  result in business line financial  results that are not  necessarily
comparable across  companies.  As such, our business line performance may not be
directly  comparable  with  similar  information  from  other  consumer  finance
companies.

Financial highlights by lines of business were as follows:

<TABLE>
(Dollars in thousands)                                               Year Ended December 31,
                                ------------------------------------------------------------------------------------------------
                                              2001                            2000                             1999
                                ------------------------------   ------------------------------  -------------------------------
                                 Consumer  Consumer               Consumer  Consumer              Consumer   Consumer
                                  Finance   Banking     Total      Finance   Banking      Total    Finance    Banking      Total
                                --------- ---------  ---------   ---------  --------  ---------  ---------   --------  ---------
Condensed income statement:
Net interest income after
<S>                             <C>        <C>       <C>         <C>        <C>       <C>        <C>         <C>       <C>
   provision for credit losses  $ 219,700  $ 19,198  $ 238,898   $ 232,469  $ 19,531  $ 252,000  $ 207,160   $ 17,645  $ 224,805
Noninterest income                 28,441        97     28,538      30,148       273     30,421     29,032        469     29,501
Noninterest expenses              163,196     7,985    171,181     147,450     8,552    156,002    128,049      7,545    135,594
                                ---------  --------  ---------   ---------  --------  ---------  ---------   --------  ---------
Income before income
   Taxes                           84,945    11,310     96,255    115,167     11,252    126,419    108,143     10,569    118,712
Income taxes                       30,803     4,327     35,130     43,227      4,303     47,530     41,678      4,042     45,720
                                ---------  --------  ---------   ---------  --------- ---------  ---------   --------  ---------
Net income                      $  54,142  $  6,983  $  61,125   $  71,940  $   6,949 $  78,889  $  66,465   $  6,527  $  72,992
                                =========  ========  =========   =========  ========= =========  =========   ========  =========

</TABLE>

<TABLE>
Other disclosures:
                                                      December 31,
                       -------------------------------------------------------------------------
                                       2001                                  2000
                       -----------------------------------    ----------------------------------
                          Consumer   Consumer                    Consumer  Consumer
                           Finance    Banking        Total        Finance   Banking        Total
                       ----------- ----------  -----------    ----------- ---------  -----------
<S>                    <C>         <C>         <C>            <C>         <C>        <C>
Total assets           $ 3,651,843 $  421,074  $ 4,072,917    $ 3,500,185 $ 427,520  $ 3,927,705

Total equity           $   492,572 $   67,085  $   559,657    $   479,371 $  59,717  $   539,088

</TABLE>


<PAGE> 47

Note 17  Approximate Fair Values of Financial Instruments

A summary  of the  approximate  fair  values of our  financial  instruments,  as
compared to their carrying values, is set forth in the following table:

<TABLE>

(Dollars in thousands)
                                           December 31, 2001           December 31, 2000
                                       -------------------------   ------------------------
                                        Carrying     Approximate    Carrying    Approximate
                                          Value      Fair Value       Value     Fair Value
                                       -----------   -----------   -----------  -----------
<S>                                    <C>           <C>           <C>          <C>
Consumer finance receivables           $ 3,855,346   $ 3,833,061   $ 3,728,350  $ 3,652,121
Investment securities                      124,214       124,214       185,288      185,288
Commercial paper borrowings                351,141       351,247       683,654      684,009
Senior Debt                              2,667,181     2,785,907     2,196,445    2,219,602
Federal Home Loan Bank borrowings          110,000       112,733       156,800      156,842
Customer deposits                          235,971       238,263       189,793      191,966

</TABLE>

In estimating the fair value disclosures for financial instruments,  we used the
following methods and assumptions:

      Consumer  finance  receivables.   The  approximate fair  value of consumer
      finance receivables  was  estimated by discounting  the  future cash flows
      using  current  rates at  which  similar loans would  be made with similar
      maturities  to  borrowers with similar credit ratings.  The fair value was
      not  adjusted  for  the  value  of  potential  loan renewals from existing
      borrowers.

      Investment securities.  Fair values for investment securities are based on
      quoted  market  prices.  If quoted  market prices were not available, fair
      values  were  estimated  based  on  quoted  market  prices  of  comparable
      instruments.

      Cash and cash equivalents.  The carrying  amount reported in the statement
      of financial condition for cash and cash equivalents approximates its fair
      value given its highly liquid nature.

      Debt.  The  carrying  amount  reported  in  the  statement  of   financial
      condition  for  commercial  paper borrowings  approximates its  fair value
      given its brief maximum term.  The approximate fair value for senior  debt
      and FHLB borrowings was estimated using rates currently available for debt
      with similar terms and remaining maturities.

      Customer  deposits.    The  fair  values  disclosed for fixed-rate savings
      certificates  of  deposit  were estimated  using  a  discounted  cash flow
      calculation  that  applies  interest  rates  currently  being  offered  on
      certificates  to  a  schedule  of  aggregate  expected  maturities on time
      deposits.  The fair values disclosed for savings and money market accounts
      are, by definition, equal to the amount payable on demand at the reporting
      date.

      Accounts payable and  other liabilities.  The carrying amounts reported in
      the  statement   of financial  condition  for  accounts  payable and other
      liabilities approximate their fair value, given  the  settlement on demand
      nature of these items.

<PAGE> 48


Note 18  Selected Quarterly Financial Data (Unaudited)

A summary of the quarterly  results of operations  for the years ended  December
31, 2001 and 2000 is set forth below:

<TABLE>

                                                         As of and for the Quarter Ended
                             -----------------------------------------------------------------------------------------------
                                       March 31,               June 30,             September 30,            December 31,
                             ----------------------- ----------------------- ----------------------- -----------------------
(Dollars in thousands)             2001        2000        2001        2000        2001        2000        2001        2000
                             ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Net interest income before
<S>                          <C>         <C>         <C>         <C>         <C>         <C>         <C>         <C>
 provision for credit losses $    92,547 $    86,095 $    96,146 $    89,995 $    97,674 $    91,943 $   100,354 $    91,210
                             ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------
Provision for credit losses       31,584      24,477      32,458      25,363      35,921      26,149      47,860      31,254
Other operating income             7,557       7,872       7,578       7,406       6,165       7,482       7,238       7,661
Other operating expenses          44,392      37,155      41,486      36,408      41,240      37,617      39,500      40,259
Goodwill amortization
 expense                           1,141       1,141       1,140       1,140       1,141       1,141       1,141       1,141
                             ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Income before income taxes        22,987      31,194      28,640      34,490      25,537      34,518      19,091      26,217

Income tax provision               8,390      11,850      10,450      13,110       9,320      12,770       6,970       9,800
                             ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income                   $    14,597 $    19,344 $    18,190 $    21,380 $    16,217 $    21,748 $    12,121 $    16,417
                             =========== =========== =========== =========== =========== =========== =========== ===========
Consumer finance
 receivables, net            $ 3,640,912 $ 3,195,227 $ 3,670,153 $ 3,415,679 $ 3,711,562 $ 3,547,688 $ 3,729,324 $ 3,623,763
                             =========== =========== =========== =========== =========== =========== =========== ===========

</TABLE>

Item  9.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
Financial Disclosure.

None.

<PAGE> 49


                                                       PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K.

(a)  Index of Documents filed as a part of this Report:

        1.    Financial Statements

              Included in Part II of this Report:
                                                                            PAGE

              Report of Independent Certified Public Accountants..............27

              Washington Mutual Finance Corporation and Subsidiaries:
                Consolidated Statements of Financial Condition
                 at December 31, 2001 and 2000................................28
                Consolidated Statements of Operations, Comprehensive Income
                 and Retained Earnings for the Years Ended December 31, 2001,
                 2000 and 1999................................................29
                Consolidated Statements of Cash Flows
                 for the Years Ended December 31, 2001, 2000 and 1999.........30
                Notes to Consolidated Financial Statements....................31

        2.    Financial Statement Schedules

              All schedules are omitted because of the absence of the conditions
              under  which they are required or because the required Information
              is set forth in the financial statements or related notes.

        3.    Exhibits

              Included in Part IV of this Report:

         Exhibit
          Number
         (3)    (a)  Certificate of  Incorporation of  Washington Mutual Finance
                     Corporation. as presently in effect.  (i)
                (b)  By-Laws  of  Washington   Mutual  Finance  Corporation   as
                     presently in effect.  (iii)
         (4)    (a)  Indenture  dated  as of July 1,  1995 between Aristar, Inc.
                     and The Bank of New York, as trustee. (ii)
                (b)  Indenture dated as of October 1, 1997 between Aristar, Inc.
                     and First Union National Bank, as trustee. (iii)
<PAGE> 50

                (c)  Indenture  dated  as of  November 15, 1997 between Aristar,
                     Inc. and First Union National Bank, as trustee. (iv)
                (d)  Indenture dated as of  June 23, 1999 between  Aristar, Inc.
                     and Harris Trust and  Savings Bank, as trustee.(iv)
                (e)  The  registrant  hereby  agrees  to  furnish the Securities
                     and Exchange  Commission  upon  request  with copies of all
                     instruments defining rights of holders of long-term debt of
                     Washington Mutual Finance  Corporation and its consolidated
                     subsidiaries.
(10)     (a)    Income  Tax  Allocation  Agreement  between  Aristar,  Inc.  and
                Washington  Mutual,  as  successor  to  Great  Western Financial
                Corporation (as amended effective August 31, 1999). (v)
         (b)    364-Day  Credit  Agreement  by  and  among Washington Mutual and
                Washington Mutual   Finance  Corporation and The Chase Manhattan
                Bank, as Administrative Agent. (vi)
         (c)    Four-Year Credit Agreement  by and  among Washington  Mutual and
                Aristar,  Inc. and The Chase  Manhattan Bank, as  Administrative
                Agent. (v)
(12)     Statement Re: Computation of Ratios
(23)     Independent Auditors' Consent.


         (i)   Incorporated by reference  to  Registrant's Annual Report on Form
               10-K for the year ended December 31, 1987, Commission file number
               1-3521.
         (ii)  Incorporated  by  reference to  Registrant's Quarterly R eport on
               Form 10-Q  for the  quarter  ended June 30, 1995, Commission file
               number 1-3521.
         (iii) Incorporated  by reference to Registrant's Current Report on Form
               8-K dated October 6, 1997, Commission file number 1-3521.
         (iv)  Incorporated  by reference  to Registrant's  Report on Form 424B2
               dated November 6, 1997, Commission file number 1-3521.
         (v)   Incorporated  by  reference  to Washington  Mutual, Inc.'s Annual
               Report  on  Form  10-K  for  the  year  ended  December 31, 1999,
               Commission file number 1-14667.
         (vi)  Incorporated by reference to Washington  Mutual, Inc.'s Quarterly
               Report  on Form 10-Q  for  the  quarter ended September 30, 2000,
               Commission File No. 1-14667.

(b)      Reports on Form 8-K

         No reports on  Form  8-K  were  filed during the period covered by this
         Report.


<PAGE> 51

                                     Signatures

Pursuant to the requirements of the Section 13 of the Securities Exchange Act of
1934,  the Company has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                   WASHINGTON MUTUAL FINANCE CORPORATION

                                   /s/   Craig J. Chapman
                                   ---------------------------------------------
                                   Craig J. Chapman
                                   Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the  following  persons on behalf of the Company and in
the capacities indicated on March 27, 2002.



/s/   Craig J. Chapman                      /s/   Richard M. Levy
------------------------------------        ------------------------------------
Craig J. Chapman                            Richard M. Levy
Chief Executive Officer and Director        Senior Vice President and Chief
(Principal Executive Officer)               Financial Officer
                                            (Principal Financial Officer)

                                            /s/   Craig A. Stein
                                            ------------------------------------
                                            Craig A. Stein
                                            Vice President and Controller
                                            (Principal Accounting Officer)

/s/   Craig E. Tall                         /s/   Fay L. Chapman
-------------------------------------       -----------------------------------
Craig E. Tall                               Fay L. Chapman
Director                                    Director

                                            /s/   William A. Longbrake
                                            -----------------------------------
                                            William A. Longbrake
                                            Director