Washington Federal (WAFD) 10-K 2005 FY Annual report

FORM 10-K

Securities and Exchange Commission

Washington, D.C. 20549

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2005.

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: 0-25454

Washington Federal, Inc.

(Exact name of registrant as specified in its charter)

Washington	91-1661606
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
425 Pike Street, Seattle, Washington	98101
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (206) 624-7930

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

Title of each class	Name of each exchange on which registered
NA	NA

Securities registered pursuant to section 12(g) of the Act:

Common Stock, $1.00 par value per share

(Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months 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 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.    ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  x

As of November 1, 2005, the aggregate market value of the 85,619,797 shares of Common Stock of the Registrant issued and outstanding on such date, which excludes 1,332,616 shares held by all directors and executive officers of the Registrant as a group, was $1,969,255,331. This figure is based on the closing sale price of $23.00 per share of the Registrant’s Common Stock on November 1, 2005, as reported inThe Wall Street Journal on November 2, 2005.

Number of shares of Common Stock outstanding as of November 1, 2005: 86,952,413

DOCUMENTS INCORPORATED BY REFERENCE

List hereunder the following documents incorporated by reference and the Part of Form 10-K into which the document is incorporated:

(1) Portions of the Registrant’s Annual Report to Stockholders for the fiscal year ended September 30, 2005, are incorporated into Part II, Items 5-8 of this Form 10-K.

(2) Portions of the Registrant’s definitive proxy statement for its Annual Meeting of Stockholders to be held on January 18, 2006 are incorporated into Part III, Items 10-14 of this Form 10-K.

PART I

In addition to historical information, this Annual Report on Form 10-K includes certain “forward-looking statements,” as defined in the Securities Act of 1933 and the Securities Exchange Act of 1934, based on current management expectations. Actual results could differ materially from those management expectations. Such forward-looking statements include statements regarding Washington Federal’s intentions, beliefs or current expectations as well as the assumptions on which such statements are based. Stockholders and potential stockholders are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements. Factors that could cause future results to vary from current management expectations include, but are not limited to: general economic conditions; legislative and regulatory changes; monetary fiscal policies of the federal government; changes in tax policies; rates and regulations of federal; state and local tax authorities; changes in interest rates; deposit flows; cost of funds; demand for loan products; demand for financial services; competition; changes in the quality or composition of the Company’s loan and investment portfolios; changes in accounting principles; policies or guidelines and other economic, competitive, governmental and technological factors affecting Washington Federal’s operations, markets, products services and fees. Washington Federal undertakes no obligation to update or revise any forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time.

Item 1.Business

General

Washington Federal, Inc. (“Washington Federal” or “Company”), formed in November 1994, is a Washington corporation headquartered in Seattle, Washington. The Company is a non-diversified unitary savings and loan holding company within the meaning of the Home Owners’ Loan Act (“HOLA”) that conducts its operations through a federally insured savings and loan association subsidiary, Washington Federal Savings. As such, the Company is registered as a holding company with the Office of Thrift Supervision (“OTS”) and is subject to OTS regulation, examination, supervision and reporting requirements.

The Company, doing business as Washington Federal Savings, is a federally-chartered savings and loan association that began operations in Washington as a state-chartered mutual company in 1917. In 1935, the Company converted to a federal charter and became a member of the Federal Home Loan Bank (“FHLB”) system. On November 9, 1982, Washington Federal Savings converted from a federal mutual to a federal capital stock company.

The Company’s fiscal year end is September 30th. All references to 2005 represent balances as of September 30, 2005 or activity for the fiscal year then ended. All references to 2004 represent balances as of September 30, 2004 or activity for the fiscal year then ended.

The business of Washington Federal consists primarily of attracting savings deposits from the general public and investing these funds in loans secured by first mortgage liens on single-family dwellings, including loans for the construction of such dwellings, and loans on multi-family dwellings. It also originates other types of loans for its portfolio and invests in certain United States government and agency obligations and other investments permitted by applicable laws and regulations. Washington Federal has 122 full service branches located in Washington, Oregon, Idaho, Arizona, Utah, Nevada and Texas. During 2005, Washington Federal opened three new offices in Klamath Falls, Oregon, Richardson, Texas and Las Vegas, Nevada. Through its subsidiaries, the Company is engaged in real estate investment and insurance brokerage activities.

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The principal sources of funds for the Company’s activities are retained earnings, loan repayments (including prepayments), net savings inflows, sales of loans, sales of investments, loan participations, deposits and borrowings. Washington Federal’s principal sources of revenue are interest on loans, interest and dividends on investments and gains on sale of investments and real estate. Its principal expenses are interest paid on deposits, general and administrative expenses, interest on borrowings and income taxes.

The Company’s growth has been generated both internally and as a result of 12 mergers and three assumptions of deposits. The most recent acquisition was completed in August 2003 when the Company purchased United Savings and Loan Bank.

The Company is subject to extensive regulation, supervision and examination by the OTS, as its chartering authority and primary federal regulator, and by the Federal Deposit Insurance Corporation (“FDIC”), which insures its deposits up to applicable limits. Such regulation and supervision establishes a comprehensive framework of activities in which an institution may engage and is intended primarily for the protection of the deposits and the Savings Association Insurance Fund (“SAIF”) administered by the FDIC. The regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities. Any change in such regulation, whether by the OTS, the FDIC or the U.S. Congress, could have a significant impact on the Company and its operations. See “Regulation.”

Certain Business Risks

Ownership of the Company’s common stock involves risk. Investors should carefully consider, in addition to the other information set forth herein, the following risk factors.

The Company’s business is subject to interest rate risk and variations in market interest rates may negatively affect its financial performance. Management is unable to predict fluctuations of market interest rates, which are affected by many factors, including:

• Inflation;

• Recession;

• A rise in unemployment;

• Tightening money supply; and

• Domestic and international disorder and instability in domestic and foreign financial markets.

Changes in the interest rate environment may reduce or increase the Company’s profits. The Company expects that it will continue to realize income from the differential or “spread” between the interest earned on loans, securities and other interest-earning assets, and the interest paid on deposits and borrowings. Net interest spreads are affected by the difference between the maturities and repricing characteristics of interest-earning assets and interest-bearing liabilities. Accordingly, changes in market interest rates could materially and adversely affect the Company’s net interest spread, asset quality, levels of prepayments and cash flows as well as the market value of its securities portfolio and overall profitability.

The matching of assets and liabilities may be analyzed by examining the extent to which such assets and liabilities are “interest rate sensitive” and by monitoring a bank’s interest rate sensitivity “gap.” An asset or liability is said to be interest rate sensitive within a specific time frame if it will mature or reprice within that period of time. The interest rate sensitivity gap is defined as the difference between the amount of interest-earning assets estimated to mature or reprice within a specific time frame and the amount of interest-bearing liabilities estimated to mature or reprice within that same period of time. In a rising interest rate environment, an institution with a negative gap would generally be expected, absent the effects of other factors, to experience a greater increase in the cost of its interest-bearing liabilities than it would in the yield on its interest-earning assets, thus producing a decline in its net interest income. Conversely, in a declining rate environment, an institution with a negative gap would generally be expected to experience a lesser reduction in the yield on its interest-earning assets than it would in the cost of its interest-bearing liabilities, thus producing an increase in its net interest income. At September 30, 2005, the Company had a negative one-year gap of 25.8% of total assets, as compared to a negative one-year gap of 24.6% of total assets at September 30, 2004.

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The Company relies, in part, on external financing to fund its operations and the unavailability of such funds in the future could adversely impact its growth and prospects. The Company relies on deposits (primarily certificates of deposit) and advances from the Federal Home Loan Bank of Seattle and other borrowings to fund its operations. Although management has historically been able to replace maturing deposits if desired, no assurance can be given that the Company would be able to replace such funds at any given point in time if its financial condition or market conditions were to change.

Although the Company considers such sources of funds adequate for its liquidity needs, it may seek additional debt in the future to achieve its long-term business objectives. There can be no assurance additional borrowings, if sought, would be available to the Company or, if available, would be on favorable terms. If additional financing sources are unavailable or are not available on reasonable terms, the Company’s growth and future prospects could be adversely impacted.

Washington Federal Savings’ ability to pay dividends is subject to regulatory limitations which, to the extent the Company requires such dividends in the future, may affect Washington Federal Inc.’s ability to pay dividends. Washington Federal, Inc. is a separate legal entity from its primary subsidiary, Washington Federal Savings, and does not have significant operations of its own. The availability of dividends from Washington Federal Savings is limited by various statutes and regulations. It is possible, depending upon the financial condition of Washington Federal Savings and other factors, that the Office of Thrift Supervision, Washington Federal Savings’ primary regulator, could assert that payment of dividends or other payments may result in an unsafe or unsound practice. In the event Washington Federal Savings is unable to pay dividends to the Company, the Company may not be able to pay dividends on its common stock. Consequently, the inability to receive dividends from Washington Federal Savings could adversely affect the Company’s financial condition, results of operations and prospects.

The Company’s allowance for loan losses may not be adequate to cover actual losses. Like all financial institutions, the Company maintains an allowance for loan losses to provide for loan defaults and non-performance. The Company’s allowance for loan losses may not be adequate to cover actual loan losses, and future provisions for loan losses could materially and adversely affect its operating results. The Company’s allowance for loan losses is based on its historical loss experience as well as an evaluation of the risks associated with its loan portfolio, including but not limited to, the size and composition of the loan portfolio, current economic conditions and geographic concentrations within the portfolio. In the last two years, the Company has experienced negligible losses.

The amount of future losses is susceptible to changes in economic, operating and other conditions, including changes in interest rates, that may be beyond the Company’s control, and these losses may exceed current estimates. Federal regulatory agencies, as an integral part of their examination process, review the Company’s loans and allowance for loan losses. While the Company believes that its allowance for loan losses is adequate to cover current losses, the Company cannot provide assurances that it will not need to increase its allowance for loan losses or that regulators will not require an increase in the allowance. Either of these occurrences could materially and adversely affect the Company’s earnings and profitability.

The Company’s business is subject to various lending and other economic risks that could adversely impact its operating results and financial condition. Changes in economic conditions, particularly an economic slowdown in the Pacific Northwest, could hurt business. The Company’s business is directly affected by political and market conditions, broad trends in industry and finance, legislative and regulatory changes, changes in governmental monetary and fiscal policies and inflation, all of which are beyond its control. Investments in Government Sponsored Entities may decline in value based on legislative or regulatory changes. A deterioration in economic conditions could result in the following consequences, any of which could have a material adverse effect on the Company’s business:

• Loan delinquencies may increase;

• Problem assets and foreclosures may increase;

• Demand for its products and services may decline; and

• Collateral for loans made by us, especially real estate, may decline in value, in turn reducing a customer’s borrowing power, and reducing the value of assets and collateral associated with its loans.

• Investments in mortgage-backed securities may decline in value as a result of the diminution of the value of the underlying real estate collateral

A downturn in the real estate market could hurt the Company’s business. The Company’s business activities and credit exposure are concentrated in real estate lending. A downturn in the real estate market could hurt the Company’s

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business because the vast majority of its loans are secured by real estate. If there is a significant decline in market values, the collateral for the Company’s loans will provide less security. As a result, the Company’s ability to recover the principal amount due on defaulted loans by selling the underlying real estate would be diminished, and it would be more likely to suffer losses on defaulted loans.

The Company may suffer losses in its loan portfolio despite its underwriting practices. The Company seeks to mitigate the risks inherent in its loan portfolio by adhering to specific underwriting practices. These practices often include analysis of a borrower’s credit history, financial statements, tax returns and cash flow projections; valuation of collateral based on reports of independent appraisers; and verification of liquid assets. Although the Company believes that its underwriting criteria are appropriate for the various kinds of loans it makes, it may incur losses on loans that meet its underwriting criteria, and these losses may exceed the amounts set aside as reserves in the allowance for loan losses.

The Company is subject to extensive regulation that could adversely affect its performance. The Company’s operations are subject to extensive regulation by federal, state and local government authorities and are subject to various laws and judicial and administrative requirements and restrictions. The Company’s business is highly regulated and the laws, rules and regulations applicable to it are subject to regular modification and change. There can be no assurance that there will be no laws, rules or regulations adopted in the future which could make compliance more difficult or expensive, or otherwise adversely affect the Company’s business, financial condition or prospects.

The Company faces strong competition from other financial institutions, offering services similar to those offered by it, which could hurt business. Many competitors offer the types of loans and deposit services that the Company offers. These competitors include other savings associations, community banks, credit unions and other financial intermediaries. In particular, the Company’s competitors include national banks and major financial companies whose greater resources may afford them a marketplace advantage by enabling them to maintain numerous banking locations and mount extensive promotional and advertising campaigns. Increased competition within the Company’s market area may result in reduced loan originations and deposits. Ultimately, the Company may not be able to compete as successfully against current and future competitors.

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Average Statements of Financial Condition

	Year Ended September 30,
	2003							2004						2005
	Average Balance		Interest			Average Rate		Average Balance		Interest		Average Rate		Average Balance		Interest		Average Rate
	(In thousands)
Assets
Loans (1)	$	4,740,877	$	353,286		7.45	%	$	4,912,166	$	330,967	6.74	%	$	5,531,687	$	369,023	6.67	%
Mortgage-backed securities		664,702		62,021		9.33			632,095		48,554	7.68			867,348		61,459	7.09
Investment securities (2)		1,492,547		25,833		1.73			1,475,807		28,338	1.92			971,553		31,032	3.19
FHLB stock		135,643		8,155		6.01			142,986		5,913	4.13			102,616		387	.38
Total interest-earning assets		7,033,769		449,295		6.39			7,163,054		413,772	5.78			7,473,204		461,901	6.18
Other assets		300,628							258,543						223,881
Total assets	$	7,334,397						$	7,421,597					$	7,697,085
Liabilities and Stockholders’ Equity
Checking accounts	$	213,883		1,655		.77	%	$	198,071		1,199	.61	%	$	201,908		1,342	.66	%
Passbook and statement accounts		166,137		2,114		1.27			227,805		1,703	.75			209,340		1,985	.95
Insured money market accounts		1,045,571		14,947		1.43			970,580		8,185	.84			919,551		15,154	1.65
Certificate accounts (time deposits)		2,942,724		85,552		2.91			3,121,161		74,155	2.38			3,320,582		96,677	2.91
Repurchase agreements with customers		73,322		1,651		2.25			48,515		858	1.77			35,131		668	1.90
FHLB advances		1,650,023		85,566	��	5.19			1,539,594		80,258	5.21			1,206,267		62,049	5.14
Securities sold under agreements to repurchase		100,000		3,387		3.39			100,000		3,395	3.40			458,082		17,381	3.79
Federal funds purchased		625		12		1.92			—		—	—			288		4	1.39
Total interest-bearing liabilities		6,192,285		194,884		3.15			6,205,726		169,753	2.74			6,351,149		195,260	3.07
Other liabilities		149,478							128,131						191,070
Total liabilities		6,341,763							6,333,857						6,542,219
Stockholders’ equity		992,634							1,087,740						1,154,866
Total liabilities and stockholders’ equity	$	7,334,397						$	7,421,597					$	7,697,085
Net interest income/Interest rate spread			$	254,411		3.24	%			$	244,019	3.04	%			$	266,641	3.11	%
Net interest margin (3)						3.62	%					3.41	%					3.57	%

(1) The average balance of loans includes securitized assets subject to repurchase and nonaccruing loans, interest on which is recognized on a cash basis. It also includes net accretion of deferred loan fees and costs of $24.4 million $18.3 million and $21.0 million for years 2003, 2004 and 2005, respectively.

(2) Includes cash equivalents and repurchase agreements.

(3) Net interest income divided by average interest-earning assets.

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Lending Activities

General. The Company’s net portfolio of loans (including securitized assets subject to repurchase) totaled $6.0 billion at September 30, 2005, representing approximately 73% of its total assets. The Company concentrates its lending activities on the origination of conventional mortgage loans, which are loans that are neither insured nor guaranteed by agencies of the United States government.

Washington Federal has historically concentrated its lending activity on the origination of long-term fixed-rate single-family first lien mortgage loans, single-family adjustable rate construction loans, adjustable rate land development loans and fixed rate multi-family loans.

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The following table sets forth the composition of the Company’s gross loan portfolio, by loan type, as of September 30 for the years indicated.

	2001 Amount			%		2002 Amount			%		2003					2004					2005
											Amount			%		Amount			%		Amount			%
	(Dollars in thousands)
Loans secured by real estate:
Single-family residential	$	4,502,558		79.1	%	$	4,145,122		77.5	%	$	3,851,720		74.3	%	$	3,982,632		71.2	%	$	4,630,411		70.2	%
Multi-family		392,272		6.9	%		441,648		8.3	%		479,129		9.2	%		467,354		8.4	%		501,824		7.6	%
Land (1)		193,424		3.4	%		179,936		3.4	%		217,214		4.2	%		297,350		5.3	%		438,621		6.7	%
Construction (2)		602,129		10.6	%		574,866		10.8	%		639,058		12.3	%		845,260		15.1	%		1,021,419		15.5	%
GROSS LOANS	$	5,690,383		100.0	%	$	5,341,572		100.0	%	$	5,187,121		100.0	%	$	5,592,596		100.0	%	$	6,592,275		100.0	%
Less LIP, Allowance and net def. costs & fees		(302,278	)				(293,608	)				(369,613	)				(499,153	)				(583,343	)
NET LOANS	$	5,388,105				$	5,047,964				$	4,817,508				$	5,093,443				$	6,008,932

(1) Represents loans to builders / intended occupants for the purpose of financing the acquisition and development of single-family residences.

(2) Represents loans to builders / intended occupants for the purpose of financing the construction of single-family or multi-family residences.

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The following table summarizes the scheduled contractual gross loan maturities for the Company’s total loan portfolio due for the periods indicated as of September 30, 2005. Amounts are presented prior to deduction of discounts, premiums, loans in process, deferred loan origination fees and allowance for loan losses. Adjustable-rate loans are shown in the period in which loan principal payments are contractually due.

Contractual Maturities:	Total		Less than 1 Year		1 to 5 Years		After 5 Years
	(In thousands)
Single-family residential	$	4,630,411	$	41,083	$	171,400	$	4,417,928
Multi-family		501,824		38,135		299,933		163,756
Land		438,621		316,588		4,977		117,056
Construction		1,021,419		630,358		11,593		379,468
	$	6,592,275	$	1,026,164	$	487,903	$	5,078,208
Loans maturing after one year:
Adjustable rate	$	362,734
Fixed rate		5,203,377
Total	$	5,566,111

The original contractual loan payment period for residential loans originated by the Company normally ranges from 15 to 30 years. Experience during recent years has indicated that, because of prepayments in connection with refinancing and sales of property, residential loans remain outstanding an average of less than seven years.

Lending Programs and Policies. The Company specializes in residential real estate lending and has no present plans to expand its operations into consumer or commercial business loans. The Company offers ‘balloon’ payment loans, which are amortized on a 20- or 30-year basis, but which have a maturity date for the principal balance of a much shorter period. The Company also provides land acquisition and development loans (“land development loans”) and construction loans for single-family and multi-family residences. The interest rate on these loans generally adjusts every 90 days in accordance with a designated index. Land development, permanent land and construction loans amounted to $1,460 million, or 22% of the Company’s gross loan portfolio at September 30, 2005. The Company offers a multi-family (five or more dwelling units) lending program with underwriting guidelines, including a $3.5 million limit on any one loan.

Many of the institutions previously acquired by Washington Federal offered a variety of lending products, including commercial real estate and non-real estate secured loans, consumer secured loans and non-secured lines of credit. All commercial, consumer and line of credit lending has been discontinued and redirected toward the Company’s traditional lending practices of single-family residential loans. The loans acquired, other than single-family residential real estate loans, are being serviced and payoffs are encouraged.

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As a result of activity over the past three decades, the Company believes that it is a construction lender of choice by builders of single-family residences in its market areas. Because of this history, the Company has developed a staff with in-depth land development and construction experience and working relationships with a group of builders that have been selected based on their operating histories and financial stability.

Construction lending is generally considered to involve a higher level of risk than single-family residential lending due to the concentration of principal in a limited number of loans and borrowers, as well as the effects of general economic conditions on real estate developers and managers. Moreover, a construction loan can involve additional risks because of the inherent difficulty in estimating both a property’s value at completion of the project and the estimated cost (including interest) of the project. These loans are generally more difficult to evaluate and monitor.

The Company continues to originate medium- and long-term permanent fixed-rate loans, but in most instances under terms, conditions and documentation that permit sale in the secondary market (see below). Moreover, since 1973, it has been the Company’s general policy to include in the documentation evidencing its conventional mortgage loans a due-on-sale clause, which facilitates adjustment of interest rates on such loans when the property securing the loan is sold or transferred. At September 30, 2005, $4.6 billion, or 70% of the Company’s gross loan portfolio, was represented by medium- and long-term fixed-rate loans secured by single-family residences.

All of the Company’s mortgage lending is subject to written, nondiscriminatory underwriting standards, loan origination procedures and lending policies prescribed by the Company’s Board of Directors. Property valuations are required on all real estate loans. Appraisals are prepared by independent appraisers approved by the Company’s management, and reviewed by the Company’s staff. Property evaluations are sometimes utilized on single-family real estate loans of $250,000 or less and are prepared by the Company’s staff. Detailed loan applications are obtained to determine the borrower’s ability to repay and the more significant items on these applications are verified through the use of credit reports, financial statements and written confirmations. Depending on the size of the loan involved, a varying number of senior officers of the Company must approve the application before the loan can be granted.

Federal guidelines limit the amount of a real estate loan made by a federally-chartered savings institution to a specified percentage of the value of the property securing the loan as determined by an evaluation at the time the loan is originated, referred to as the loan-to-value ratio. The guidelines provide that at the time of origination a real estate loan may not exceed 100% of the value of the security property. Maximum loan-to-value ratios for each type of real estate loan are established by the Company’s Board of Directors.

When establishing general reserves for loans with loan-to-value ratios exceeding 80% that are not insured by private mortgage insurance, Washington Federal considers the additional risk inherent with these products, as well as their relative loan loss experience, and provides reserves when deemed appropriate. The total balance for loans with loan-to-value ratios exceeding 80% at September 30, 2005, was $486 million, with allocated reserves of $1.1 million.

The Company’s residential construction loans and land acquisition and development loans are of a short-term nature and are generally made for 80% or less of the appraised value of the property upon completion for residential construction loans, and 75% or less for land acquisition and development loans. Funds are disbursed periodically at various stages of completion as authorized by the Company’s personnel.

The Company’s permanent land loans are generally made on improved land, with the intent of building a

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primary or secondary residence. These loans are limited to 80% or less of the appraised value of the property, up to a maximum loan amount of $250,000. Permanent land loans amounted to $121 million or 1.8% of the gross loan portfolio, as of September 30, 2005.

It is the Company’s policy to obtain title insurance ensuring that the Company has a valid first lien on the mortgaged real estate serving as collateral. Borrowers must also obtain hazard insurance prior to closing and, when required by regulation, flood insurance. Borrowers may be required to advance funds on a monthly basis, together with each payment of principal and interest, to a mortgage escrow account from which the Company makes disbursements for items such as real estate taxes, hazard insurance premiums and private mortgage insurance premiums when due.

Origination, Purchase and Sale of Loans. The Company has general authority to lend anywhere in the United States; however, the primary lending areas are within the states of Washington, Oregon, Idaho, Arizona, Utah, Nevada and Texas.

Loan originations come from a number of sources. Residential loan originations result from referrals from real estate brokers, walk-in customers, purchasers of property in connection with builder projects financed by the Company, mortgage brokers and refinancings for existing customers. Construction loan originations are obtained primarily by direct solicitation of builders and continued business from builders who have previously borrowed from the Company.

The Company also purchases loans and mortgage-backed securities when lending rates and mortgage volume for new loan originations in its market area do not fulfill its needs. The table below shows total loan (including securitized assets subject to repurchase) origination, purchase, sale and repayment activities of the Company for the years indicated.

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	2001			2002			2003			2004			2005
	(In thousands)
Loans originated (1):
Construction	$	369,808		$	363,420		$	487,692		$	580,882		$	716,569
Land		130,161			87,212			163,533			244,048			358,863
Single-family residential		1,104,869			851,279			1,059,450			1,108,216			1,209,555
Multi-family		139,379			128,923			156,437			137,838			151,839
Total loans originated		1,744,217			1,430,834			1,867,112			2,070,984			2,436,826
Loans purchased (2)		2,842			60,874			594,030			31,911			331,456
Loan principal repayments		(1,318,784	)		(1,823,281	)		(2,604,297	)		(1,693,142	)		(1,769,058	)
Net change in loans in process, discounts, etc.		10,595			(8,568	)		(87,301	)		(133,818	)		(83,735	)
Net loan activity increase (decrease)	$	438,870		$	(340,141	)	$	(230,456	)	$	275,935		$	915,489
Begining balance	$	4,949,235		$	5,388,105		$	5,047,964		$	4,817,508		$	5,093,443
Ending balance	$	5,388,105		$	5,047,964		$	4,817,508		$	5,093,443		$	6,008,932

(1) Includes undisbursed loans in process and does not include savings account loans, which were not material during the periods indicated.

(2) Includes loans acquired through acquisitions and whole loan purchases.

Interest Rates, Loan Fees and Service Charges. Interest rates charged by the Company on mortgage loans are primarily determined by the level of competitive loan rates offered in its lending areas and in the secondary market. Mortgage loan rates reflect factors such as general interest rates, the supply of money available to the savings and loan industry and the demand for such loans. These factors are in turn affected by general economic conditions, the regulatory programs and policies of federal and state agencies, changes in tax laws and governmental budgetary programs.

The Company receives fees for originating loans in addition to various fees and charges related to existing loans, which may include prepayment charges, late charges and assumption fees.

In making one-to-four family home mortgage loans, the Company does not normally charge a commitment fee. As part of the loan application, the borrower pays the Company for out-of-pocket costs, such as the appraisal fee, in reviewing the application, whether or not the borrower closes the loan. The interest rate charged is normally the prevailing rate at the time the loan application is approved. In the case of construction loans, the Company normally charges an origination fee. Loan origination fees and other terms of multi-family residential loans are individually negotiated.

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Nonperforming Assets. When a borrower fails to make a required payment on a loan, the Company attempts to cure the deficiency by contacting the borrower. Contact is made after a payment is 30 days past due. In most cases, deficiencies are cured promptly. If the delinquency is not cured within 90 days, the Company may cause the trustee on the deed of trust to institute appropriate action to foreclose on the property. If foreclosed, the property will be sold at a public sale and may be purchased by the Company. There are circumstances under which the Company may choose to foreclose a deed of trust as mortgagee, and when this procedure is followed, certain redemption rights are involved.

Loans are placed on nonaccrual status when, in the judgment of management, the probability of collection of interest is deemed to be insufficient to warrant further accrual. When a loan is placed on nonaccrual status, previously accrued but unpaid interest is deducted from interest income. The Company does not accrue interest on loans 90 days past due or more. See Note A to the Consolidated Financial Statements included in Item 8 hereof.

Real estate acquired by foreclosure or deed-in-lieu thereof (“REO” or “Real Estate Owned”) is classified as real estate held for sale until it is sold. When property is acquired, it is recorded at the lower of carrying or fair value at the date of acquisition, and any writedown resulting therefrom is charged to the allowance for loan losses. Interest accrual ceases on the date of acquisition and all costs incurred in maintaining the property from that date forward are expensed as incurred. Costs incurred for the improvement or development of such property are capitalized. See Note A to the Consolidated Financial Statements included in Item 8 hereof.

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The following table sets forth information regarding restructured and nonaccrual loans and REO held by the Company at the dates indicated.

	2001			2002			2003			2004			2005
	(In thousands)
Restructured loans (1)	$	14,129		$	2,472		$	2,551		$	803		$	573
Nonaccrual loans:
Single-family residential		14,670			11,539			12,711			7,345			5,765
Construction		8,756			4,521			1,788			2,965			0
Land		1,214			7,301			1,439			252			403
Multifamily		454			—			—			322			420
Total nonaccrual loans (2)		25,094			23,361			15,938			10,884			6,588
Total REO (3)		8,664			10,515			11,496			3,817			756
Total nonperforming assets	$	33,758		$	33,876		$	27,434		$	14,701		$	7,344
Total nonperforming assets and restructured loans	$	47,887		$	36,348		$	29,985		$	15,504		$	7,917
Total nonperforming assets and restructured loans as a percent of total assets		0.68	%		0.49	%		0.40	%		0.22	%		0.09	%

(1) Performing in accordance with restructured terms.

(2) The Company recognized interest income on nonaccrual loans of approximately $240,000 in 2005. Had these loans performed according to their original contract terms, the Company would have recognized interest income of approximately $475,000 in 2005.

In addition to the nonaccrual loans reflected in the above table, at September 30, 2005, the Company had $1.9 million of loans that were less than 90 days delinquent but which were classified as substandard for one or more reasons. If these loans were deemed nonperforming, the Company’s ratio of total nonperforming assets and restructured loans as a percent of total assets would have been .11% at September 30, 2005. For a discussion of the Company’s policy for placing loans on nonaccrual status, see Note A to the Consolidated Financial Statements included in Item 8 hereof.

(3) Total REO includes real estate held for sale acquired in settlement of loans or acquired from purchased institutions in settlement of loans.

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The following table analyzes the Company’s allowance for loan losses at the dates indicated.

	September 30,
	2001			2002			2003			2004			2005
	(In thousands)
Beginning balance	$	20,831		$	19,683		$	23,912		$	25,806		$	25,140
Charge-offs:
Single-family residential		1,047			1,324			566			338			154
Construction		2,251			1,938			683			146			90
Land		547			139			61			44			—
Multi-family		—			—			—			—			14
		3,845			3,401			1,310			528			258
Recoveries:
Single-family residential		10			399			3			16			8
Construction		828			176			104			—			—
Land		9			55			—			77			—
Multi-family		—			—			—			—			—
		847			630			107			93			8
Net charge-offs		2,998			2,771			1,203			435			250
Acquired through acquisition		—			—			1,597			—			—
Provision (reversal of reserve) for loan losses		1,850			7,000			1,500			(231	)		(134	)
Ending balance	$	19,683		$	23,912		$	25,806		$	25,140		$	24,756
Ratio of net charge-offs to average loans outstanding		.02	%		.06	%		.05	%		.01	%		.01	%

The following table sets forth the allocation of the Company’s allowance for loan losses at the dates indicated.

	September 30,
	2001				2002				2003				2004				2005
	Amount		%(1)		Amount		%(1)		Amount		%(1)		Amount		%(1)		Amount		%(1)
	(In thousands)
Allowance allocation:
Single-family residential	$	6,165	79.1	%	$	7,823	77.5	%	$	9,940	74.3	%	$	8,517	71.2	%	$	8,643	70.2	%
Multi-family		7,941	6.9	%		9,327	8.3	%		7,142	9.2	%		6,084	8.4	%		5,776	7.6	%
Land		2,134	3.4	%		3,137	3.4	%		2,929	4.2	%		3,470	5.3	%		3,360	6.7	%
Construction		2,770	10.6	%		2,907	10.8	%		5,795	12.3	%		7,069	15.1	%		6,977	15.5	%
Unallocated		673				718				—				—				—
Total allowance for loan losses	$	19,683			$	23,912			$	25,806			$	25,140			$	24,756

(1) Represents the total amount of the loan category as a % of total loans outstanding.

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The Company maintains an allowance for loan losses to absorb losses inherent in the loan portfolio. The allowance is based on ongoing, quarterly assessments of the probable and estimable losses inherent in the loan portfolio. The Company’s methodology for assessing the appropriateness of the allowance consists of several key elements, which include the formula allowance and specific allowance. As part of the process for determining the adequacy of the allowance for loan losses, management reviews the loan portfolio for specific weaknesses.

The formula portion of the general loan loss allowance is established by applying a loss percentage factor to the different loan types. The allowance is based on management’s continuing evaluation of the pertinent factors underlying the quality of the loan portfolio, including changes in the size and composition of the loan portfolio, actual loan loss experience, current economic conditions, geographic concentrations, seasoning of the loan portfolio, specific industry conditions, and the duration of the current business cycle. The recovery of the carrying value of loans is susceptible to future market conditions beyond the Company’s control, which may result in losses or recoveries differing from those provided. A portion of the allowance is then allocated to reflect the estimated loss exposure. Residential real estate loans are not individually analyzed for impairment and loss exposure because of the significant number of loans, their relatively small balances and their historically low level of losses. In determining the adequacy of reserves, management considers the above mentioned factors.

Specific allowances are established in cases where management has identified significant conditions or circumstances related to a loan that management believes indicate the probability that a loss has been incurred.

Real Estate Held for Sale. As one of the Company’s activities, a subsidiary is engaged in the investment and sale of real estate.

The business of real estate development involves substantial risks, and the results of such activities depend upon a number of factors, including seasonality, the type, location and size of each project, the stage of project development, general economic conditions and the level of mortgage interest rates. Consequently, there may be substantial interperiod variations in the operating results of the Company’s real estate development activities. Moreover, because investing in real estate and real estate development activities are not permissible activities for national banks, the amount of the investment in, and loans to, any subsidiary engaged in such activities is deducted in determining a savings association’s regulatory capital. See “Regulation—Washington Federal Savings—Regulatory Capital Requirements” below.

Investment Activities

As a federally-chartered savings institution, Washington Federal Savings is obligated to maintain adequate liquidity and does so by investing in securities. These investments may include, among other things, certain certificates of deposit, repurchase agreements, bankers’ acceptances, loans to financial institutions whose deposits are federally-insured, federal funds, United States government and agency obligations, GSE preferred stock and mortgage-backed securities.

As of September 30, 2005, the Company had $575 million invested in repurchase agreements, with various brokers, at a weighted-average rate of 3.77%. All repurchase agreements are

16

collateralized by United States agency mortgage-backed securities with a fair market value of at least 102% of the amount invested. All repurchase agreements outstanding on September 30, 2005 mature within 180 days.

The following table sets forth the composition of the Company’s investment portfolio at the dates indicated.

	2003				2004				2005
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In thousands)
U.S. government and agency securities	$	120,911	$	127,049	$	403,312	$	404,522	$	199,976	$	204,411
State and political subdivisions		14,129		15,716		10,161		11,522		10,158		11,103
Agency mortgage-backed securities		602,997		629,079		620,414		642,273		1,081,314		1,073,938
	$	738,037	$	771,844	$	1,033,887	$	1,058,317	$	1,291,448	$	1,289,452

The investment portfolio at September 30, 2005 was categorized by maturity as follows:

	Amortized Cost		Wtd Avg Yield
	(In thousands)
Due in less than one year	$	72,290	7.52	%
Due after one year through five years		41,994	3.43	%
Due after five years through 10 years		2,800	7.08	%
Due after 10 years		1,174,364	5.77	%
	$	1,291,448	5.80	%

Sources of Funds

General. Savings deposits are an important source of the Company’s funds for use in lending and other general business purposes. In addition to savings deposits, Washington Federal derives funds from loan repayments, advances from the FHLB and other borrowings and, to a lesser extent, from loan sales. Loan repayments are a relatively stable source of funds, while savings inflows and outflows are significantly influenced by general interest rates and money market conditions. Borrowings may be used on a short-term basis to compensate for reductions in normal sources of funds, such as savings inflows at less than projected levels. They may also be used on a longer-term basis to support expanded activities.

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Savings. The Company chooses to rely on term certificate accounts and other deposit alternatives that have no fixed term and pay interest rates that are more responsive to market interest rates than passbook accounts. This greater variety of deposits allows the Company to be more competitive in obtaining funds and to more effectively manage its liabilities.

Certificates with a maturity of one year or less have penalties for premature withdrawal equal to 90 days of interest. When the maturity is greater than one year but less than four years, the penalty is 180 days of interest. When the maturity is greater than 4 years, the penalty is 365 days interest. For jumbo certificates, the penalty depends on the original term. If the original term is 90 days or less, the penalty is the greater of 30 days interest or all interest earned. If the original term is 90 days or more, the penalty is the greater of 90 days interest or all interest earned. Early withdrawal penalties during 2003, 2004 and 2005 amounted to approximately $379,000, $405,000 and $570,000, respectively.

The Company offers two checking account products. Both accounts pay interest on monthly average balances over $1,000 and charge a service fee if monthly average balances drop below $1,000.

The Company’s deposits are obtained primarily from residents of Washington, Oregon, Idaho, Arizona, Utah, Nevada and Texas. The Company does not advertise for deposits outside of these states. At September 30, 2005, approximately 1.2% of the Company’s deposits were held by nonresidents of Washington, Oregon, Idaho, Arizona, Utah, Nevada and Texas.

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The following table sets forth certain information relating to the Company’s savings deposits at the dates indicated.

	September 30,
	2003				2004				2005
	Amount		Rate		Amount		Rate		Amount		Rate
	(In thousands)
Balance by interest rate:
Checking accounts	$	190,352	.67	%	$	196,155	.69	%	$	205,482	1.00	%
Passbook and statement accounts		234,023	.75			224,989	.75			191,919	1.25
Money market accounts		1,037,641	.92			929,952	1.07			871,945	2.40
		1,462,016				1,351,096				1,269,346
Fixed-rate certificates:
Under 1.00%		13,831				11,199				—
1.00% to 1.99%		1,256,783				1,382,182				25,004
2.00% to 2.99%		557,703				546,109				876,136
3.00% to 3.99%		180,257				148,550				1,463,843
4.00% to 4.99%		188,314				195,966				238,582
5.00% to 5.99%		95,174				77,247				65,987
6.00% and above		13,870				11,735				1,482
Jumbo fixed rate certificates ($100,000 or more):
Under 1.00%		3,725				2,324				—
1.00% to 1.99%		214,162				145,307				833
2.00% to 2.99%		355,720				503,182				208,959
3.00% to 3.99%		77,389				81,057				723,607
4.00% to 4.99%		70,561				84,201				104,447
5.00% to 5.99%		25,786				24,725				22,860
6.00% and above		4,760				4,365				1,086
		3,058,035				3,218,149				3,732,826
	$	4,520,051			$	4,569,245			$	5,002,172

The following table sets forth, by various interest rate categories, the amount of certificates of deposit of the Company at September 30, 2005, which mature during the periods indicated.

	Maturing in
	1 to 3 Months		4 to 6 Months		7 to 12 Months		13 to 24 Months		25 to 36 Months		37 to 60 Months		Total
	(In thousands)
Fixed-rate certificates:
Under 1.00%	$	—	$	—	$	—	$	—	$	—	$	—	$	—
1.00 to 1.99%		21,635		2,207		1,749		246		—		—		25,837
2.00 to 2.99%		499,757		431,527		133,900		17,240		2,671		—		1,085,095
3.00 to 3.99%		159,156		514,929		1,157,329		236,689		88,914		30,433		2,187,450
4.00 to 4.99%		228		356		33,559		203,753		2,064		103,069		343,029
5.00 to 5.99%		1,409		3,098		56,809		27,331		200		—		88,847
6.00 and above		691		1,377		—		—		—		500		2,568
Total	$	682,876	$	953,494	$	1,383,346	$	485,259	$	93,849	$	134,002	$	3,732,826

Historically, a significant number of certificate holders roll over their balances into new certificates of the same term at the Company’s then current rate. To ensure a continuity of this trend, the Company expects to continue to offer market rates of interest. Its ability to retain maturing deposits in certificate accounts is more difficult to project; however the Company is confident that by competitively pricing these certificates, levels deemed appropriate by management can be achieved on a continuing basis.

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At September 30, 2005, the Company had $1.1 billion of certificates of deposit in amounts of $100,000 or more outstanding, maturing as follows: $190 million within 3 months; $261 million over 3 months through 6 months; $411 million over 6 months through 12 months; and $198 million thereafter.

The following table sets forth the customer account activities of the Company for the years indicated.

	September 30,
	2003			2004			2005
	(In thousands)
Deposits	$	2,224,075		$	2,013,879		$	2,622,572
Withdrawals		2,274,318			2,067,218			2,317,251
Net increase (decrease) in deposits before interest credited		(50,243	)		(53,339	)		305,321
Interest credited		105,919			86,099			115,826
Net increase in customer accounts	$	55,676		$	32,760		$	421,147

Borrowings. The Company obtains advances from the FHLB upon the security of the FHLB capital stock it owns and certain of its home mortgages, provided certain standards related to credit worthiness have been met. See “Regulation—Washington Federal Savings - - Federal Home Loan Bank System” below. Such advances are made pursuant to several different credit programs. Each credit program has its own interest rate and range of maturities, and the FHLB prescribes acceptable uses to which the advances pursuant to each program may be put, as well as limitations on the size of such advances. Depending on the program, such limitations are based either on a fixed percentage of assets or the Company’s creditworthiness. The FHLB is required to review its credit limitations and standards at least annually. FHLB advances have, from time to time, been available to meet seasonal and other withdrawals of savings accounts and to expand Washington Federal’s lending program.

The Company also uses reverse repurchase agreements as a form of borrowing. Under reverse repurchase agreements, the Company sells an investment security to a dealer for a period of time and agrees to buy back that security at the end of the period and pay the dealer a stated interest rate for the use of the dealer’s funds. The amount of securities sold under such agreements depends on many factors, including the terms available for such transactions, the perceived ability to apply the proceeds to investments yielding a higher return, the demand for the securities and management’s perception of trends in interest rates. The Company had $600 million of securities sold under such agreements at September 30, 2005, see Note I of the financial statements for additional information.

The Company also offers two forms of repurchase agreements to its customers. One form has an interest rate that floats like a money market deposit account. The other form has a fixed rate and is offered in a minimum denomination of $100,000. Both forms are fully collateralized by securities. These obligations are not insured by SAIF and are classified as borrowings for regulatory purposes. The Company had $29.3 million of such agreements outstanding at September 30, 2005.

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The following table presents certain information regarding borrowings of Washington Federal for the years indicated.

	September 30,
	2003			2004			2005
	(In thousands)
Federal funds and securities sold to dealers under agreements to repurchase:
Average balance outstanding	$	100,625		$	100,000		$	458,082
Maximum amount outstanding at any month-end during the period		100,000			100,000			655,000
Weighted-average interest rate during the period (1)		3.39	%		3.40	%		3.79	%
FHLB advances:
Average balance outstanding	$	1,650,023		$	1,539,594		$	1,206,267
Maximum amount outstanding at any month-end during the period		1,650,000			1,650,323			1,230,000
Weighted-average interest rate during the period (1)		5.19	%		5.21	%		5.14	%
Securities sold to customers under agreements to repurchase:
Average balance outstanding	$	73,322		$	48,515		$	35,131
Maximum amount outstanding at any month-end during the period		76,477			46,205			40,811
Weighted-average interest rate during the period (1)		2.25			1.76			1.90
Total average borrowings	$	1,821,878		$	1,688,109		$	1,699,480
Weighted-average interest rate on total average borrowings (1)		4.98	%		5.00	%		4.71	%

(1) Interest expense divided by average daily balances.

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Other Ratios

The following table sets forth certain ratios related to the Company for the periods indicated.

	September 30,
	2003		2004		2005
Return on assets (1)	1.98	%	1.78	%	1.90	%
Return on equity (2)	14.61		12.12		12.63
Average equity to average assets	13.53		14.66		15.00
Dividend payout ratio (3)	41.55		49.40		46.99

(1) Net income divided by average total assets.

(2) Net income divided by average equity.

(3) Dividends declared per share divided by net income per share.

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Rate/Volume Analysis

The table below sets forth certain information regarding changes in interest income and interest expense of the Company for the years indicated. For each category of interest-earning asset and interest-bearing liability, information is provided on changes attributable to: (1) changes in volume (changes in volume multiplied by old rate) and (2) changes in rate (changes in rate multiplied by old average volume). The change in interest income and interest expense attributable to changes in both volume and rate has been allocated proportionately to the change due to volume and the change due to rate.

	September 30,
	2003 vs. 2002 Increase (Decrease) Due to									2004 vs. 2003 Increase (Decrease) Due to									2005 vs. 2004 Increase (Decrease) Due to
	Volume			Rate			Total			Volume			Rate			Total			Volume			Rate			Total
	(In thousands)									(In thousands)									(In thousands)
Interest income:
Loan portfolio	$	(35,734	)	$	(17,242	)	$	(52,976	)	$	12,378		$	(34,697	)	$	(22,319	)	$	41,516		$	(3,460	)	$	38,056
Mortgage-backed securities(1)		(27,522	)		6,563			(20,959	)		(4,913	)		(8,554	)		(13,467	)		16,878			(3,973	)		12,905
Investments (2)		23,488			(12,060	)		11,428			(204	)		467			263			(13,614	)		10,782			(2,832	)
All interest-earning assets		(39,768	)		(22,739	)		(62,507	)		7,261			(42,784	)		(35,523	)		44,780			3,349			48,129
Interest expense:
Customer accounts		(769	)		(45,600	)		(46,369	)		2,855			(22,675	)		(19,820	)		2,339			27,388			29,727
FHLB advances and other borrowings		9,245			(2,933	)		6,312			(5,491	)		180			(5,311	)		1,261			(5,481	)		(4,220	)
All interest-bearing liabilities		8,476			(48,533	)		(40,057	)		(2,636	)		(22,495	)		(25,131	)		3,600			21,907			25,507
Change in net interest income	$	(48,244	)	$	25,794		$	(22,450	)	$	9,897		$	(20,289	)	$	(10,392	)	$	41,180		$	(18,558	)	$	22,622

(1) 2005 interest income on mortgage-backed securities includes the correction of an error related to hedge accounting as described in Note A

(2) Includes interest on cash equivalents and dividends on stock of the FHLB of Seattle.

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Interest Rate Risk

The Company accepts a high level of interest rate volatility as a result of its policy to originate fixed-rate single-family home loans that are longer-term in nature than the short-term characteristics of its liabilities of customer accounts and borrowed money. The strong capital position and low operating costs have allowed the Company to manage interest rate risk, within guidelines established by the Board of Directors, through all interest rate cycles. A significant increase in market interest rates could adversely affect net interest income of the Company. The Company’s interest rate risk approach has never resulted in the recording of a monthly operating loss.

The following table shows the estimated repricing periods for earning assets and paying liabilities.

	Repricing Period
	Within One Year			After 1 year - before 4 Years			Thereafter			Total
	(In thousands)
As of 9/30/05
Earning Assets *	$	2,547,230		$	2,224,709		$	3,294,572		$	8,066,511
Paying Liabilities		(4,673,467	)		(1,480,044	)		(762,994	)		(6,916,505	)
Excess (Liabilities) Assets	$	(2,126,237	)	$	744,665		$	2,531,578
Excess as % of Total Assets		-25.82	%
Policy limit for one year excess		-60.00	%

* Asset repricing period includes estimated prepayments based on historical activity

At September 30, 2005, the Company had approximately $2,126,237,000 more liabilities subject to repricing in the next year than assets, which amounted to a negative maturity gap of 26% of total assets. As of September 30, 2004, the amount of excess liabilities subject to repricing within one year was $1,761,103,000 or 25% of total assets. The increase of $365,134,000 of liabilities in excess of assets repricing within one year was due to the overall deposit growth and a shift in deposit maturities towards shorter-term maturities. The negative one year maturity gap as a percentage of total assets increased only one percent due to the growth of total assets by 15% to $8,234,450,000. By having an excess of liabilities repricing within one year over assets, the Company is subject to decreasing net interest income should rates rise. However, if the size and/or mix of the balance sheet changes, rising rates may not cause a decrease in net interest income.

Another method used to quantify interest rate risk is the net portfolio value (“NPV”) analysis. This analysis calculates the difference between the present value of interest-bearing liabilities and the present value of expected cash flows from interest-earning assets and off-balance-sheet contracts. The following tables set forth an analysis of the Company’s interest rate risk as measured by the estimated changes in NPV resulting from instantaneous and sustained parallel shifts in the yield curve (measured in 100-basis-point increments).

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September 30, 2005

Change in Interest Rates	Estimated NPV Amount		Estimated Increase (Decrease) in NPV Amount			NPV as % of Assets
(Basis Points)	(In thousands)		(In thousands)
+300	$	646,081	$	(696,594	)	8.73	%
+200		888,102		(454,573	)	11.52
+100		1,134,150		(208,525	)	14.13
0		1,342,675		—		16.12
-100		1,422,074		79,399		16.70

September 30, 2004

Change in Interest Rates	Estimated NPV Amount		Estimated Increase (Decrease) in NPV Amount			NPV as % of Assets
(Basis Points)			(In thousands)
+300	$	648,053	$	(632,647	)	9.79	%
+200		871,437		(409,263	)	12.68
+100		1,098,013		(182,687	)	15.40
0		1,280,700		—		17.40
-100		1,323,981		43,281	)	17.71

At September 30, 2005, the Company’s NPV sensitivity increased compared to the prior year. This increase was primarily the result of the shift in asset mix toward longer-term assets. If in the future the Company chooses to continue to reinvest its current short-term investments in longer-term assets (30-year mortgage loans or mortgage-backed securities), the Company’s NPV sensitivity will increase.

Certain assumptions were used in preparing the above table. These assumptions relate to interest rates, loan prepayment rates, deposit decay rates and the market values of certain assets under the various interest rate scenarios. Even if interest rates change in the designated amounts, there can be no assurance that the Company’s assets and liabilities would perform as set forth above.

The NPV analysis presented assumes zero balance sheet growth and constant percentage composition of assets and liabilities (actual results will differ from this assumption). Prepayment rates are derived from market prepayment rates observed on or about the measurement date. As of September 30, 2005, the prepayment rate for both a 30 year fixed rate mortgage and a 30-year fixed rate mortgage-backed security from 5% to 6% was 13% in the base case, and 7% in the +200 basis point shift.

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The following table sets forth Company guidelines for interest rate risk measured by NPV after shifts in interest rates:

Rate Shock	Minimum NPV Limit
(Basis Points)
+300	-0-
+200	3.0	%
+100	5.0	%
-0-	6.0	%
-100	7.0	%

As of September 30, 2005 and 2004 the Company’s estimated NPV exceed the above guidelines.

Subsidiaries

Washington Federal, Inc., is a unitary savings and loan holding company that conducts its primary business through its only subsidiary, Washington Federal Savings. Washington Federal Savings has three active wholly owned subsidiaries which are discussed further below.

Washington Federal is permitted by current federal regulations to invest an amount up to 2% of its assets in stock, paid-in surplus and unsecured loans in service corporations. The Company may invest an additional 1% of its assets when the additional funds are utilized for inner-city or community development purposes. In addition, federally-chartered savings institutions that are in compliance with regulatory capital requirements and other conditions also may make loans to service corporations in an aggregate amount of up to 50% of the institution’s capital as defined in federal regulations.

At September 30, 2005, Washington Federal Savings was authorized under the current regulations to have a maximum investment of $164.7 million in its service corporations, exclusive of the additional 1% of investment assets permitted for inner-city or community development purposes but inclusive of the ability to make loans to its subsidiaries. On September 30, 2005, Washington Federal Savings’ investment in, and unsecured loans to, its wholly owned service corporations amounted to $5.1 million.

Washington Services, Inc., a wholly owned subsidiary of Washington Federal Savings, is continuing its investment in 29 developable acres zoned light industrial in the technology corridor of South Snohomish County, Washington. Based upon the sales history of this development, the Company believes the net realizable value from the sale of the remaining properties exceeds the subsidiary’s basis in these properties.

First Insurance Agency, Inc., a wholly owned subsidiary of Washington Federal Savings, is an insurance brokerage company that offers a full line of individual and business insurance products to customers of the Company, as well as to others.

Statewide Mortgage Services, Inc., a wholly owned subsidiary of Washington Federal Savings, is incorporated under the laws of the state of Washington for the purpose of operating a commercial warehouse site located in the state.

A savings institution is required to deduct the amount of the investment in, and extensions of credit to, a subsidiary engaged in any activities not permissible for national banks. Because the acquisition and development of real estate is not a permissible activity for national banks, the investments in, and loans to, the subsidiary of the institution which is engaged in such activities are subject to exclusion from the capital calculation. See “Regulation - Washington Federal Savings - Regulatory Capital Requirements” below.

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Employees

As of September 30, 2005, the Company had approximately 749 employees, including the full-time equivalent of 28 part-time employees and its service corporation employees. None of these employees are represented by a collective bargaining agreement, and the Company has enjoyed harmonious relations with its personnel.

Regulation

Set forth below is a brief description of certain laws and regulations that relate to the regulation of the Company and Washington Federal Savings. The description of these laws and regulations, as well as descriptions of laws and regulations contained elsewhere herein, does not purport to be complete and is qualified in its entirety by reference to applicable laws and regulations. Certain federal banking laws have been recently amended. See “Regulation - The Company - Financial Modernization” below.

The Company

General. The Company is registered as a savings and loan holding company under the HOLA and is subject to OTS regulation, examination, supervision and reporting requirements.

USA Patriot Act of 2001. A major focus of governmental policy on financial institutions in recent years has been aimed at combating money laundering and terrorist financing. The USA PATRIOT Act of 2001 (the “Patriot Act”) substantially broadened the scope of United States anti-money laundering laws and regulations by imposing significant new compliance and due diligence obligations, creating new crimes and penalties and expanding the extra-territorial jurisdiction of the United States. The United States Treasury Department has issued a number of implementing regulations which apply to various requirements of the Patriot Act to financial institutions such as Washington Federal Savings. These regulations impose obligations on financial institutions to maintain appropriate policies, procedures and controls to detect, prevent and report money laundering and terrorist financing and to verify the identity of their customers. Failure of a financial institution to maintain and implement adequate programs to combat money laundering and terrorist financing, or to comply with all of the relevant laws or regulations, could have serious legal and reputational consequences for the institution.

Financial Modernization. Under the Gramm-Leach-Bliley Act, enacted into law on November 12, 1999, no company may acquire control of a savings and loan holding company after May 4, 1999, unless the company is engaged only in activities traditionally permitted to a multiple savings and loan holding company or newly permitted to a financial holding company under Section 4(k) of the Bank Holding Company Act. Existing savings and loan holding companies, and those formed pursuant to an application filed with the OTS before May 4, 1999, may engage in any activity, including non-financial or commercial activities, provided such companies control only one savings and loan association that meets the Qualified Thrift Lender (“QTL”) test. Corporate reorganizations are permitted, but the transfer of grandfathered unitary thrift holding company status through acquisition is not permitted.

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Activities Restrictions. There are generally no restrictions on the activities of a savings and loan holding company that holds only one subsidiary savings institution; however, if the savings institution subsidiary of such a holding company fails to meet a QTL test, then such unitary holding company also shall become subject to the activities restrictions applicable to multiple savings and loan holding companies and, unless the savings institution requalifies as a QTL within one year thereafter, shall register as, and become subject to the restrictions applicable to, a bank holding company. See “Washington Federal Savings - Qualified Thrift Lender Test” below.

If the Company were to acquire control of another savings institution, other than through a merger or other business combination with Washington Federal Savings, the Company would thereupon become a multiple savings and loan holding company. Except where such acquisition is pursuant to the authority to approve emergency thrift acquisitions, and where each subsidiary savings institution meets the QTL test, the activities of the Company and any of its subsidiaries (other than the Washington Federal Savings or other subsidiary savings institutions) would thereafter be subject to further restrictions. No multiple savings and loan holding company, or subsidiary thereof, that is not a savings institution shall commence or continue a business activity for a limited period of time after becoming a multiple savings and loan holding company or subsidiary thereof, upon prior notice to and with no objection by the OTS, other than: (i) furnishing or performing management services for a subsidiary savings institution; (ii) conducting an insurance agency or escrow business; (iii) holding, managing or liquidating assets owned by or acquired from a subsidiary savings institution; (iv) holding or managing properties used or occupied by a subsidiary savings institution; (v) acting as trustee under deeds of trust; (vi) performing activities authorized by regulation as of March 5, 1987, to be engaged in by multiple savings and loan holding companies; or (vii) unless the Director of the OTS by regulation prohibits or limits such activities for savings and loan holding companies, those activities authorized by the Federal Reserve Board as permissible for bank holding companies. Those activities described in (vii) above also must be approved by the Director of the OTS prior to being engaged in by a multiple savings and loan holding company.

Restrictions on Acquisitions. Except under limited circumstances, savings and loan holding companies are prohibited from acquiring, without prior approval of the Director of the OTS: (i) control of any other savings institution or savings and loan holding company, or substantially all the assets thereof, or (ii) more than 5% of the voting shares of a savings institution or holding company thereof that is not a subsidiary. Except with the prior approval of the Director of the OTS, no director or officer of a savings and loan holding company, or person owning or controlling by proxy or otherwise more than 25% of such company’s stock, may acquire control of any savings institution, other than a subsidiary savings institution, or of any other savings and loan holding company.

Federal Securities Laws. The Company’s common stock is registered with the Securities and Exchange Commission (“SEC”) under Section 12(g) of the Securities Exchange Act of 1934 (“Exchange Act”). The Company is subject to the information, proxy solicitation, insider trading restrictions and other requirements of the Exchange Act.

Sarbanes-Oxley Act of 2002. On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of 2002, or the SOA. The stated goals of the SOA are to increase corporate responsibility, to provide for enhanced penalties for accounting and auditing improprieties at publicly traded companies and to protect investors by improving the accuracy and reliability of corporate disclosures pursuant to the securities laws. The SOA is the most far-reaching U.S. securities legislation enacted in some time. The SOA generally applies to all companies, both U.S. and non-U.S., that file or are required to file periodic reports with the SEC under the Exchange Act. The SOA includes specific additional disclosure requirements and new corporate governance rules, among other things, applicable to public companies.

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Washington Federal Savings

General. Washington Federal Savings is a federally-chartered savings association, the deposits of which are federally insured and backed by the full faith and credit of the United States government. Accordingly, Washington Federal Savings is subject to broad federal regulation and oversight by the OTS and the FDIC extending to all aspects of its operations. Washington Federal Savings is a member of the FHLB of Seattle and is subject to certain limited regulations by the Federal Reserve Board. Washington Federal Savings is a member of the SAIF and its deposits are insured by the SAIF fund administered by the FDIC. As a result, the FDIC has certain regulatory and examination authority over Washington Federal Savings.

Federal Savings Institution Regulations.The OTS has extensive authority over the operations of savings institutions. As part of this authority, savings institutions are required to file periodic reports with the OTS and are subject to periodic examinations by the OTS and the FDIC. Such regulation and supervision is primarily intended for the protection of depositors.

The investment and lending authority of Washington Federal Savings is prescribed by federal laws and regulations, and it is prohibited from engaging in any activities not permitted by such laws and regulations. These laws and regulations generally are applicable to all federally-chartered savings institutions, and may also apply to state-chartered savings institutions.

Insurance of Accounts.The deposits of Washington Federal Savings are insured by the SAIF up to $100,000 per depositor (as defined by law and regulation) and are backed by the full faith and credit of the United States government. As insurer, the FDIC is authorized to conduct examinations of, and to require reporting by, FDIC-insured institutions. It also may prohibit any FDIC-insured institution from engaging in any activity the FDIC determines by regulation or order to pose a serious threat to the FDIC. The FDIC also has the authority to initiate enforcement actions against savings institutions after giving the OTS an opportunity to take such action.

Assessment rates for SAIF-insured institutions range from 0% of insured deposits for well capitalized institutions with minor supervisory concerns to .27% of insured deposits for undercapitalized institutions with substantial supervisory concerns. See “Prompt Corrective Action” below. In addition, an assessment of 1.34 basis points was added to the SAIF assessment to cover financing corporation debt service payments for 2005.

Regulatory Capital Requirements.Federally insured savings institutions are required to maintain minimum levels of regulatory capital. Pursuant to federal law, the OTS has established capital standards applicable to all savings institutions. These standards generally must be as stringent as the comparable capital requirements imposed on national banks. The OTS also is authorized to impose capital requirements in excess of these standards on individual institutions on a case-by-case basis.

The capital regulations create three capital requirements: a tangible capital requirement, a leverage or core capital requirement and a risk-based capital requirement. All savings institutions must have tangible capital of at least 1.5% of adjusted total assets, as defined by regulation. For purposes of this requirement, tangible capital is core capital less all intangibles other than certain purchased mortgage servicing rights of which Washington Federal Savings has none.

Core capital includes common stockholders’ equity, non-cumulative perpetual preferred stock and related surplus and minority interests in consolidated subsidiaries, less intangibles (unless included under certain limited conditions, but in no event exceeding 25% of core capital), plus purchased mortgage servicing rights in an amount not to exceed 50% of core capital. The current leverage or core capital requirement is at least 3.0% of adjusted total assets.

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The risk-based capital standard requires savings institutions to maintain a minimum ratio of total capital to risk-weighted assets of 8.0%. Total capital consists of core capital (defined above) and supplementary capital. Supplementary capital consists of certain capital instruments that do not qualify as core capital and general valuation loan and lease loss allowances up to a maximum of 1.25% of risk-weighted assets. Supplementary capital may be used to satisfy the risk-based requirement only in an amount equal to the amount of core capital. In determining the required amount of risk-based capital, total assets, including certain off-balance-sheet items, are multiplied by a risk-weight factor based on the risks inherent in the type of assets held by an institution. The risk categories range from 0% for low-risk assets such as U.S. Treasury securities and GNMA securities to 100% for various types of loans and other assets deemed to be of higher risk. Single-family residential loans having loan-to-value ratios not exceeding 80% and meeting certain additional criteria, as well as certain multi-family residential loans, qualify for a 50% risk-weight treatment. The book value of each asset is multiplied by the risk factor applicable to the asset category, and the sum of the products of this calculation equals total risk-weighted assets.

OTS regulations impose special capitalization standards for savings institutions that own service corporations and other subsidiaries. In addition, certain exclusions from capital and assets are required when calculating total capital in addition to the adjustments for calculating core capital. These adjustments do not materially affect the regulatory capital of Washington Federal Savings.

For information regarding Washington Federal Savings’ compliance with each of these three capital requirements at September 30, 2005, see Note M to the Consolidated Financial Statements.

Any savings institution that fails any of the capital requirements is subject to possible enforcement actions by the OTS or the FDIC. Such actions could include a capital directive, a cease and desist order, civil money penalties, the establishment of restrictions on an institution’s operations and/or the appointment of a conservator or receiver. OTS capital regulations provide that such supervisory actions, through enforcement proceedings or otherwise, could require one or more of a variety of corrective actions.

Prompt Corrective Action.Under federal law, each federal banking agency has implemented a system of prompt corrective action for institutions that it regulates. Under OTS regulations, an institution shall be deemed to be: (i) well capitalized if it has total risk-based capital of 10.0% or more, a Tier 1 risk-based capital ratio of 6.0% or more, a Tier 1 leverage capital ratio of 5.0% or more and is not subject to any written agreement, order or capital directive to meet and maintain a specific capital level for any capital measure; (ii) adequately capitalized if it has a total risk-based capital ratio of 8.0% or more, a Tier 1 risk-based capital ratio of 4.0% or more, a Tier 1 leverage capital ratio of 4.0% or more (3.0% under certain circumstances) and does not meet the definition of well capitalized; (iii) undercapitalized if it has total risk-based capital ratio that is less than 8.0%, a Tier 1 risk-based capital ratio that is less than 4.0% or a Tier 1 leverage capital ratio that is less than 4.0% (3.0% under certain circumstances); (iv) significantly undercapitalized if it has total risk-based capital ratio that is less than 6.0%, a Tier 1 risk-based capital ratio that is less than 3.0% or a Tier 1 leverage capital ratio that is less than 3.0%; and (v) critically undercapitalized if it has a ratio of tangible equity to total assets that is equal to or less than 2.0%. Federal law authorizes the OTS to reclassify a well capitalized institution as adequately capitalized and may require an adequately capitalized institution or an undercapitalized institution to comply with supervisory actions as if it were in the next lower category. (The FDIC may not reclassify a significantly undercapitalized institution as critically undercapitalized). As of September 30, 2005, Washington Federal Savings exceeded the requirements of a well capitalized institution.

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Qualified Thrift Lender Test.A savings institution that does not meet a QTL test set forth in the HOLA and implementing regulations must either convert to a bank charter or comply with the following restrictions on its operations: (i) the institution may not engage in any new activity or make any new investment, directly or indirectly, unless such activity or investment is permissible for a national bank; (ii) the branching powers of the institution shall be restricted to those of a national bank; (iii) the institution shall not be eligible to obtain any advances from its FHLB; and (iv) payment of dividends by the institution shall be subject to the rules regarding payment of dividends by a national bank. Upon the expiration of three years from the date the institution ceases to be a QTL, it must cease any activity, not retain any investment not permissible for a national bank and immediately repay any outstanding FHLB advances (subject to safety and soundness considerations).

Under current legislation and applicable regulations, any savings institution is a QTL if: (i) it qualifies as a domestic building and loan association under Section 7701(a)(19) of the Internal Revenue Code (which generally requires that at least 60% of the institution’s assets constitute housing-related and other qualifying assets) or (ii) at least 65% of the institution’s portfolio assets (as defined) consist of certain housing and consumer-related assets on a monthly average basis in at least nine out of every 12 months. At September 30, 2005, Washington Federal Savings was in compliance with the QTL test set forth in the HOLA.

Transactions with Affiliates.Under federal law, all transactions between and among a savings institution and its affiliates, which include holding companies, are subject to Sections 23A and 23B of the Federal Reserve Act and Regulation W promulgated thereunder as interpreted by the OTS. Generally, these requirements limit these transactions to a percentage of the institution’s capital and require all of them to be on terms at least as favorable to the institution as transactions with non-affiliates. In addition, a savings institution may not lend to any affiliate engaged in non-banking activities not permissible for a bank holding company or acquire shares of any affiliate that is not a subsidiary. The OTS is authorized to impose additional restrictions on transactions with affiliates if necessary to protect the safety and soundness of a savings institution. The OTS regulations also set forth various reporting requirements relating to transactions with affiliates.

Extensions of credit by a savings institution to executive officers, directors and principal shareholders are subject to Section 22(h) of the Federal Reserve Act, which, among other things, generally prohibits loans to any such individual where the aggregate amount exceeds an amount equal to 15% of an institution’s unimpaired capital and surplus plus an additional 10% of unimpaired capital and surplus in the case of loans that are fully secured by readily marketable collateral. Section 22(h) permits loans to directors, executive officers and principal stockholders made pursuant to a benefit or compensation program that is widely available to employees of a subject savings institution provided that no preference is given to any officer, director or principal stockholder, or related interest thereto, over any other employee. In addition, the aggregate amount of extensions of credit by a savings institution to all insiders cannot exceed the institution’s unimpaired capital and surplus. Furthermore, Section 22(g) places additional restrictions on loans to executive officers.

Restrictions on Capital Distributions.OTS regulations impose limitations on capital distributions by savings institutions including cash dividends, stock redemptions or repurchases, cash-out mergers, interest payments on certain convertible debt and other transactions charged to the capital accounts of a savings institution. Under OTS capital distribution regulations, certain savings institutions are required to file with the OTS. Specifically, since Washington Federal Savings is a subsidiary of the Company, the regulation requires Washington Federal Savings to provide notice to the OTS of its intent to make capital distributions, unless an application is otherwise required. Washington Federal Savings does not believe that the regulation will adversely affect its ability to make capital distributions.

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Federal Home Loan Bank System.Washington Federal Savings is a member of the FHLB of Seattle, which is one of 12 regional FHLBs that administer the home financing credit function of savings institutions. Each FHLB serves as a reserve or central bank for its members within its assigned region. It is funded primarily from proceeds derived from the sale of consolidated obligations of the FHLB system. It makes loans to members (i.e., advances) in accordance with policies and procedures established by the Board of Directors of the FHLB. At September 30, 2005, the Company’s advances from the FHLB amounted to $1.2 billion.

As a member, the institution is required to purchase and maintain stock in the FHLB of Seattle in an amount equal to 3.50% of FHLB advances outstanding and .75% of mortgage loans and pass-through securities. At September 30, 2005, the Company had $129.5 million in FHLB stock, which was in compliance with this requirement.

Federal law requires the FHLBs to provide funds for the resolution of troubled savings institutions and to contribute to affordable housing programs through direct loans or interest subsidies on advances targeted for community investment and low- and moderate-income housing projects. These contributions have adversely affected the level of FHLB dividends paid and could continue to do so in the future. These contributions also could have an adverse effect on the value of FHLB stock in the future.

Community Reinvestment Act and Fair Lending Laws. Savings institutions have a responsibility under the Community Reinvestment Act (“CRA”) and related regulations of the OTS to help meet the credit needs of their communities, including low- and moderate-income neighborhoods. In addition, the Equal Credit Opportunity Act and the Fair Housing Act (together, the Fair Lending Laws) prohibit lenders from discriminating in their lending practices on the basis of characteristics specified in those statutes. An institution’s failure to comply with the provisions of the CRA could, at a minimum, result in regulatory restrictions on its activities. Failure to comply with the Fair Lending Laws could result in enforcement actions by the OTS, as well as other federal regulatory agencies and the U.S. Department of Justice.

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Taxation

Federal Taxation.For federal and state income tax purposes, the Company reports its income and expenses on the accrual basis method of accounting and files its federal and state income tax returns on a September 30 fiscal year basis. The Company files consolidated federal and state income tax returns with its wholly-owned subsidiaries.

The Small Business Job Protection Act of 1996 (the “Act”) requires qualified thrift institutions, such as the Company, to recapture the portion of their tax bad debt reserves that exceeded the September 30, 1988, balance. Such recaptured amounts are to be taken into taxable income ratably over a six-year period that began in 1999. Accordingly, the Company was required to pay approximately $25,406,000 in additional federal income taxes through fiscal 2004, all of which had previously been recognized.

The Company has been examined by the Internal Revenue Service through the year ended September 30, 1990. There were no material changes made to the Company’s originally reported taxable income as a result of this examination.

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State Taxation.The states of Washington and Nevada do not have an income tax. A business and occupation tax based on a percentage of gross receipts is assessed against businesses in Washington state; however, interest received on loans secured by mortgages or deeds of trust on residential properties is not subject to this tax.

The state of Idaho has a corporate income tax with a statutory rate of 7.6% of apportionable income.

The state of Oregon has a corporate excise tax with a statutory rate of 6.6% of apportionable income.

The state of Utah has a corporate franchise tax with a statutory rate of 5.0% of apportionable income.

The state of Arizona has a corporate income tax with a statutory rate of 7.0% of apportionable income.

The state of Texas has a franchise tax with a statutory rate of 4.5% of apportionable income.

Availability of Financial Data

All financial reports filed with the SEC, including insider transactions, are available through a link at the Company’s website atwww.washingtonfederal.com.

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Item 2.Properties

The Company owns the building in which its home and executive offices are located in Seattle, Washington. The following table sets forth certain information concerning the Company’s offices:

Location	Number of Offices	Building		Net Book Value at September 30, 2005 (2)
		Owned	Leased (1)
				(In thousands)
Washington	43	29	14	$	23,579
Idaho	16	16	—		6,157
Oregon	27	17	10		9,075
Utah	10	6	4		7,380
Arizona	20	13	7		12,315
Texas	3	1	2		3,143
Nevada	3	—	3		1,638
Total	122	82	40	$	63,287

(1) The leases have varying terms expiring from 2005 through 2070, including renewal options.

(2) Amount represents land and improvements with respect to properties owned by the Company and represents the book value of leasehold improvements, where applicable.

Washington Federal evaluates on a continuing basis the suitability and adequacy of its offices, both branches and administrative centers, and has opened, relocated, remodeled or closed them as necessary to maintain efficient and attractive premises.

Washington Federal’s net investment in premises, equipment and leaseholds was $63.3 million at September 30, 2005.

Item 3. Legal Proceedings

The Company is involved in legal proceedings occurring in the ordinary course of business that in the aggregate are believed by management to be immaterial to the financial statements of the Company. The effects of legal proceedings did not have a material impact on the statements of operations for any of the three years ended September 30, 2005.

Item 4. Submission of Matters to a Vote of Security Holders

Not applicable.

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PART II

Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

The information required herein, with the exception of the table below, is incorporated by reference from page 34 of the Company’s Annual Report to Stockholders for 2005 (“Annual Report”), which is included herein as Exhibit 13.

The following table provides information with respect to purchases made by or on behalf of the Company of the Company’s common stock during the three months ended September 30, 2005.

Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan (1)	Maximum Number of Shares That May Yet Be Purchased Under the Plan at the End of the Period
July 1, 2005 to July 31, 2005	—	$	—	—	—
August 1, 2005 to August 31, 2005	—		—	—	—
September 1, 2005 to September 30, 2005	—		—	—	—
Total	—	$	—	—	3,310,014

⁽¹⁾ The Company’s only stock repurchase program was publicly announced by the Board of Directors on February 3, 1995 and has no expiration date. Under this ongoing program, a total of 21,956,264 shares have been authorized for purchase.

Item 6. Selected Financial Data

The information required herein is incorporated by reference from page 9 of the Annual Report.

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

The information required herein is incorporated by reference on pages 4 through 8 of the Annual Report.

Item 7A.Quantitative and Qualitative Disclosures About Market Risk

The information required herein is incorporated by reference to Interest Rate Risk commencing on page 24 of this Form 10-K.

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Item 8. Financial Statements and Supplementary Data

The financial statements and supplementary data required herein are incorporated by reference from pages 10 through 33 of the Annual Report.

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

Not applicable.

Item 9A.Controls and Procedures

As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s President and Chief Executive Officer along with the Company’s Senior Vice President and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to the Securities Exchange Act of 1934 (“Exchange Act”) Rule 13a-14. Based upon that evaluation, the Company’s President and Chief Executive Officer, along with the Company’s Senior Vice President and Chief Financial Officer, concluded that the Company’s disclosure controls and procedures are effective in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company’s periodic SEC filings. There have been no significant changes in the Company’s internal controls or in other factors that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Disclosure controls and procedures are Company controls and other procedures that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files under the Exchange Act is accumulated and communicated to the Company’s management, including its President and Chief Executive Officer and Senior Vice President and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control over Financial Reporting and the Attestation report of the Company’s Registered Public Accounting Firm required herein is incorporated by reference on page 33 of the Annual Report.

Item 9B.Other Information

On March 21, 2005, the Board of Directors of the Company appointed Thomas J. Kelley as a director of the Company. The size of the Company’s Board of Directors was increased to 10 members in connection with this appointment. Mr. Kelley was appointed to the class of directors whose term expires in January 2006. Mr. Kelley will be a nominee for election as a director for a one-year term at the Company’s annual meeting of stockholders scheduled to be held on January 18, 2006. There is no arrangement or understanding between Mr. Kelley and any other persons pursuant to which he was appointed as a director. Mr. Kelley currently serves on the Audit Committee of the Board of Directors.

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PART III

Item 10.Directors and Executive Officers of the Registrant

The information required herein is incorporated by reference to pages 3 through 13 of the proxy statement dated December 16, 2005.

The Company has adopted a code of ethics that applies to all senior financial officers, including its Chief Executive Officer and Chief Financial Officer. The code of ethics is publicly available on the Company’s website atwww.washingtonfederal.com. If the Company makes any substantive amendments to the code of ethics or grants any waiver from a provision of the code, it will disclose the nature of such amendment or waiver on its website or in a report on Form 8-K.

Item 11.Executive Compensation

The information required herein is incorporated by reference to pages 11 through 13 of the proxy statement dated December 16, 2005.

Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required herein is incorporated by reference to pages 2 through 7 of the proxy statement dated December 16, 2005.

The information required in this item 12 regarding equity compensation plans is incorporated by reference to Note L on pages 27 through 28 of the Annual report.

Item 13.Certain Relationships and Related Transactions

The information required herein is incorporated by reference to page 16 of the proxy statement dated December 16, 2005.

Item 14.Principal Accounting Fees and Services

The information required herein is incorporated by reference to page 16 of the proxy statement dated December 16, 2005.

PART IV

Item 15.Exhibits and Financial Statement Schedules

(a)(1) The following financial statements are incorporated herein by reference from pages 10 through 33 of the Annual Report.

Report of Independent Registered Public Accounting Firm

Consolidated Statements of Financial Condition as of September 30, 2005 and 2004

Consolidated Statements of Operations for each of the years in the three-year period ended

September 30, 2005 Consolidated Statements of Stockholders’ Equity for each of the years in the three-year period ended September 30, 2005

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Consolidated Statements of Cash Flows for each of the years in the three-year period ended September 30, 2005

(a)(2) There are no financial statement schedules filed herewith.

(a)(3) The following exhibits are filed as part of this report:

No.	Exhibit	Page/ Footnote
3.1	Articles of Incorporation of the Company	(1)
3.2	Bylaws of the Company	(1)
4	Specimen Common Stock Certificate	(1)
10.1	1987 Stock Option and Stock Appreciation Rights Plan*	(1)
10.2	1994 Stock Option and Stock Appreciation Rights Plan*	(1)
10.3	2001 Long-Term Incentive Plan*	(2)
10.4	Form of award agreement for restricted stock for 2001 Long Term Incentive Plan *
10.5	Form of award agreement for stock options for all plans*
13	Annual Report to Stockholders
21	Subsidiaries of the Company - Reference is made to Item 1, “Business - Subsidiaries” for the required information
23	Consent of Independent Registered Public Accounting Firm
31.1	Section 302 Certification by the Chief Executive Officer
31.2	Section 302 Certification by the Chief Financial Officer
32	Section 906 Certification pursuant to the Sarbanes-Oxley Act of 2002

* Management contract or compensation plan

(1) Incorporated by reference from the Registrant’s Registration Statement on Form 8-B filed with the SEC on January 26, 1995.

(2) Incorporated by reference from the Registrant’s Registration Statement on Form S-8 filed with the SEC on January 23, 2003.

(c) See (a)(3) above for all exhibits filed herewith and the Exhibit Index.

(d) All schedules are omitted as the required information is not applicable or the information is presented in the Consolidated Financial Statements or related notes.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	WASHINGTON FEDERAL, INC.
November 4, 2005	By:	/s/ Roy M. Whitehead
		Roy M. Whitehead, Vice Chairman,
		President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report is signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

/s/ John F. Clearman	November 4, 2005
John F. Clearman, Director
/s/ Derek L. Chinn	November 4, 2005
Derek L. Chinn, Director
/s/ H. Dennis Halvorson	November 4, 2005
H. Dennis Halvorson, Director
/s/ W. Alden Harris	November 4, 2005
W. Alden Harris, Director
/s/ Anna C. Johnson	November 4, 2005
Anna C. Johnson, Director
/s/ Thomas J. Kelley	November 4, 2005
Thomas J. Kelley, Director
/s/ Thomas F. Kenney	November 4, 2005
Thomas F. Kenney, Director
/s/ Guy C. Pinkerton	November 4, 2005
Guy C. Pinkerton, Director, Chairman
/s/ Charles R. Richmond	November 4, 2005
Charles R. Richmond, Director
/s/ Roy M. Whitehead	November 4, 2005
Roy M. Whitehead, Director, Vice Chairman,
President and Chief Executive Officer
/s/ Brent J. Beardall	November 4, 2005
Brent J. Beardall, CPA
Senior Vice President and
Chief Financial Officer

40