Washington Federal's Earnings Per Share Increase 13%; The Company is

    Business Editors/Financial Editors

    SEATTLE--(BUSINESS WIRE)--April 20, 2005--Washington Federal, Inc. (Nasdaq:WFSL), parent company of Washington Federal Savings, today announced earnings of $36,333,000 or $.42 per diluted share for the quarter ended March 31, 2005, compared to $32,520,000 or $.37 per diluted share for the same period one year ago, a 13.5% increase. Return on assets improved to 1.92% from 1.73% for the quarters ended March 31, 2005 and March 31, 2004, respectively. Return on equity also improved in the period, from 12.04% last year to 12.68% in the quarter just ended.
    Chief Executive Officer Roy M. Whitehead commented, "Loan demand and quality continued to be very strong, capital strengthened once again, and we were able to absorb a sizable increase in interest expense related to Fed tightening over the last nine months. This was a solid quarter for the Company."
    Increased earnings over the same quarter one year ago were attributable primarily to growth in the loan portfolio of $609 million or 12.4% from March 31, 2004. Total interest income increased by 8%, or $8,352,000, which more than offset a 25%, or $5,388,000, increase in interest expense paid on customer accounts. Interest expense on borrowed funds declined by 15% or $3,231,000 from the same quarter last year. The Company's efficiency ratio increased slightly to 18.84% for the six months ended March 31, 2005, compared to 18.36% for the same period last year. This increase was due to a one-time expense of $1,225,000 related to the amortization of leasehold improvements that brings the Company into conformity with a recent clarification of the accounting standard for leases. The Company now amortizes leasehold improvements over the shorter of the original lease term excluding option periods, or the expected useful life of the improvements.
    Earnings for the six months ended March 31, 2005 were $72,591,000 or $.83 per diluted share, compared to $65,343,000 or $.75 per diluted share for the same period one year ago, a 10.7 % per share increase.
    On April 15, 2005, Washington Federal paid a cash dividend of $.19 per share to common stockholders of record on April 1, 2005. This was the Company's 89th consecutive quarterly cash dividend.
    During the quarter the Company opened two new branches; one in Las Vegas, Nevada and another in Klamath Falls, Oregon.
    The Company also announced that in response to a comment letter from the Securities and Exchange Commission (SEC), it is reviewing its accounting for derivatives, which consist solely of forward contracts to purchase mortgage-backed securities. At March 31, 2005, the Company had $50 million notional amount of forward contracts to purchase mortgage-backed securities outstanding, which represents 0.66% of total assets. Specifically, the SEC is questioning whether the Company's documentation of its derivatives was sufficient to meet the requirements of Statement of Financial Accounting Standards No. 133 and Emerging Issues Task Force Topic D-102. As of the date of this release, this matter has not yet been resolved and discussions with the SEC are ongoing. However, if the Company is required to change its accounting and restate its financial statements to reflect changes in the fair value of these derivatives directly into income, the Company estimates that the cumulative impact on net income from October 1, 2000 through March 31, 2005 would be to decrease net income by $3,810,000 or 0.62% of cumulative net income of $615,306,000 for the same period. The estimated impact of such a restatement, if required, would affect reported net income for fiscal years September 30, 2004, 2003, 2002, 2001 as well as for the six months ended March 31, 2005 as set forth in the table below (such amounts have not been reviewed by the Company's auditor and consequently are estimates and subject to revision).

Fiscal Years Ended September 30, ------------------------------------------------------- 2001 2002 2003 2004 ------------ ------------ ------------ ------------

Net Income as previously reported $117,464,000 $148,384,000 $144,999,000 $131,868,000

Potential derivatives adjustment 13,862,000 (1,469,170) (3,941,039) (7,971,845)

------------- ------------- ------------- ------------- Adjusted Net Income $131,326,000 $146,914,830 $141,057,961 $123,896,155 ============ ============ ============ ============

% Change 11.80% -0.99% -2.72% -6.05% ============ ============ ============ ============

Six Months Ended 3/31/2005 -------------

Net Income as previously reported $ 72,591,000

Potential derivatives adjustment (4,290,000)

------------ Adjusted Net Income $ 68,301,000 ============

% Change -5.91% ============

Washington Federal Savings, with headquarters in Seattle, Washington, has 121 branches in seven western states.

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED) March 31, September 30, 2005 2004 ------------ ------------ (In thousands, except per share data) ASSETS Cash and cash equivalents $527,278 $508,361 Securities purchased under agreements to resell - 200,000 Available-for-sale securities, including mortgage-backed securities of $780,597 1,153,204 899,525 Held-to-maturity securities, including mortgage-backed securities of $107,159 144,219 156,373 Securitized assets subject to repurchase, net 88,346 110,607 Loans receivable, net 5,429,741 4,982,836 Interest receivable 31,647 29,832 Premises and equipment, net 61,900 63,049 Real estate held for sale 6,444 8,630 FHLB stock 81,453 137,274 Intangible assets 58,315 58,939 Other assets 5,912 13,779 ----------- ----------- $7,588,459 $7,169,205 =========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities Customer accounts Savings and demand accounts $4,687,448 $4,569,245 Repurchase agreements with customers 35,141 41,113 ----------- ----------- 4,722,589 4,610,358 FHLB advances 1,200,000 1,200,000 Other borrowings 400,000 100,000 Advance payments by borrowers for taxes and insurance 20,907 25,226 Federal and state income taxes 46,132 62,081 Accrued expenses and other liabilities 49,320 51,352 ----------- ----------- 6,438,948 6,049,017 Stockholders' equity Common stock, $1.00 par value, 300,000,000 shares authorized; 103,939,918 and 103,821,846 shares issued; 86,707,298 and 86,547,557 shares outstanding 103,940 94,383 Paid-in capital 1,237,599 1,161,627 Accumulated other comprehensive income, net of taxes 4,466 17,107 Treasury stock, at cost; 17,232,620 and 17,274,289 shares (206,170) (206,666) Retained earnings 9,676 53,737 ----------- ----------- 1,149,511 1,120,188 ----------- ----------- $7,588,459 $7,169,205 =========== =========== CONSOLIDATED FINANCIAL HIGHLIGHTS Stockholders' equity per share $13.26 $12.94 Stockholders' equity to total assets 15.15% 15.62% Weighted average rates at period end Loans and mortgage-backed securities(a) 6.16% 6.17% Investment securities(b) 3.46 3.01 Combined loans, mortgage-backed securities and investment securities 5.80 5.62 Customer accounts 2.37 1.96 Borrowings 4.74 4.96 Combined cost of customer accounts and borrowings 2.97 2.62 Interest rate spread 2.83 3.00

(a) Includes securitized assets subject to repurchase (b) Includes municipal bonds at tax equivalent yields and cash equivalents

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

Quarter Ended March 31, Six Months Ended March 31, ------------------------- ------------------------- 2005 2004 2005 2004 ----------- ----------- ----------- ----------- (In thousands, except per share data) INTEREST INCOME Loans and securitized assets subject to repurchase $ 90,321 $ 82,388 $ 177,206 $ 164,783 Mortgage-backed securities 12,422 12,379 25,256 24,113 Investment securities and cash equivalents 8,291 7,915 16,115 16,468 ----------- ----------- ----------- ----------- 111,034 102,682 218,577 205,364

INTEREST EXPENSE Customer accounts 26,622 21,234 50,514 42,871 FHLB advances and other borrowings 18,941 22,172 37,195 44,591 ----------- ----------- ----------- ----------- 45,563 43,406 87,709 87,462 ----------- ----------- ----------- -----------

Net interest income 65,471 59,276 130,868 117,902 Provision for loan losses - - - - ----------- ----------- ----------- ----------- Net interest income after provision for loan losses 65,471 59,276 130,868 117,902

OTHER INCOME Gain (loss) on securities, net 495 (659) 559 (122) Other 3,747 2,981 6,262 5,549 ----------- ----------- ----------- ----------- 4,242 2,322 6,821 5,427

OTHER EXPENSE Compensation and fringe benefits 8,733 7,789 17,067 15,349 Occupancy 3,124 1,869 4,960 3,673 Other 2,107 1,824 3,916 3,620 ----------- ----------- ----------- ----------- 13,964 11,482 25,943 22,642 Gain (loss) on real estate acquired through foreclosure, net 581 127 799 252 ----------- ----------- ----------- ----------- Income before income taxes 56,330 50,243 112,545 100,939 Income taxes 19,997 17,723 39,954 35,596 ----------- ----------- ----------- ----------- NET INCOME $ 36,333 $ 32,520 $ 72,591 $ 65,343 =========== =========== =========== ===========

PER SHARE DATA Basic earnings $ .42 $ .38 $ .84 $ .76 Diluted earnings .42 .37 .83 .75 Cash dividends .19 .18 .38 .36

Weighted average number of shares outstanding, including dilutive stock options 87,464,540 87,231,366 87,452,362 87,132,216

PERFORMANCE RATIOS Return on average assets 1.92% 1.73% 1.94% 1.73% Return on average stockholders' equity 12.68% 12.04% 12.76% 12.19%

Net interest margin 3.55% 3.26% 3.60% 3.25%

--30--MRO/se*

CONTACT: Washington Federal, Inc. Cathy Cooper, 206-777-8246

KEYWORD: WASHINGTON INDUSTRY KEYWORD: BANKING EARNINGS SOURCE: Washington Federal

Copyright Business Wire 2005