If you want to talk about banks with heavy exposure to the average retail customer, Washington Mutual (NYSE:WM) certainly deserves to be on the list. A very large chunk of the bank's loan assets is made up of mortgages, and then there's also the relatively new addition of Providian and its credit card business -- another business with heavy retail exposure.

Revenue rose 16% and income was up 9% in the first quarter, both of which are performances well ahead of what many other large banks are managing these days. Nevertheless, returns on equity and assets were down on a year-over-year comparison.

Net interest income was up 8% this quarter, but the net interest margin was actually down a bit on a year-over-year basis, and the bank benefited in part from higher asset balances from the credit card business. That said, the non-interest income part of the revenue looked quite strong.

Turning to the balance sheet, loans were up 12% on average and deposits rose 9%. Those are respectable numbers for a large bank, although management is guiding for lower loan growth in the remainder of the year. As so much of this bank's loan assets are tied to residential real estate (over 85% by my count), that slower growth makes sense in the context of a slowing housing market.

One item that concerns me a little more is the possibility that WaMu may soon need to look elsewhere for some of its funding. There's a proposal out there whereby Federal Home Loan Banks might have to boost its retained earnings, and it would seem that the banks in San Francisco and Seattle (where WaMu is a large shareholder) would need the biggest boost.

That, in turn, would reduce the dividends that WaMu gets from them and may potentially reduce the advances that WaMu uses to fund its balance sheet. On one hand, this FHLB financing is usually pretty affordable -- costing the bank about 4.5% this quarter. On the other hand, management doesn't seem particularly worried and believes they can tap other competitively priced sources of funds if need be.

When it's all said and done, WaMu is not unlike National City (NYSE:NCC) or WellsFargo (NYSE:WFC) in having to work around its big mortgage business. But going against WaMu is the fact that it's not really the best of breed in any of its businesses, and it doesn't really have a strong commercial lending franchise yet. Put all that together, and I'd just as soon sit on the sidelines with this one.

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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).