1 Washington Federal, Inc. 425 Pike Street Seattle, WA 98101 Contact: Cathy Cooper (206) 777-8246 Monday, April 16, 2007 FOR IMMEDIATE RELEASE Washington Federal Announces 2nd Quarter Earnings SEATTLE - Washington Federal, Inc. (Nasdaq: WFSL), parent company of Washington Federal Savings, today announced earnings of $33,483,000 or $.38 per diluted share for the quarter ended March 31, 2007, compared to $36,340,000 or $.42 per diluted share for the quarter ended March 31, 2006, a 7.9% decrease in earnings. For the six months ended March 31, 2007 earnings were $66,867,000 or $.76 per diluted share, compared to $72,486,000 or $.83 per diluted share for the six months ended March 31, 2006, a 7.8% decrease in earnings. The second fiscal quarter produced a return on assets of 1.41%, while return on equity amounted to 10.40% for the quarter. Nonperforming assets totaled $9.2 million or 0.09% of assets as of March 31,2007. Delinquent loans remain near historic lows with only 125 loans of 45,195 in the portfolio more than 30 days past due. Chief Executive Officer Roy M. Whitehead commented, "Lower earnings over the same quarter last year were the result of higher deposit costs, which have increased by 42% on a comparable basis. Relative to the first fiscal quarter earnings increased slightly, reflecting the nearly complete adjustment of deposit costs to current rates. As noted above, asset quality continues to be quite good. We have experienced no systemic deterioration in either the mortgage or the construction loan portfolio. It's also important to note that the company has virtually no exposure to subprime credit or so-called "exotic mortgages". Higher operating expenses during the period related primarily to acquisition- related costs and higher organic payroll expense". During the quarter, 250,000 shares of stock were repurchased as part of an ongoing share repurchase program. As of March 31, 2007, Washington Federal had an existing authorization to repurchase up to 3 million additional shares. On February 13, 2007, Washington Federal completed its acqusition of First Federal Banc of the Southwest, Inc. ("First Federal"). First Federal had $404 million in loans and $383 million in deposits as of the date of acquisition. As a result of the acquisition, Washington Federal added 180 employees and 13 branches, 11 in New Mexico and 2 in El Paso, Texas. On April 20, 2007, Washington Federal will pay a cash dividend of $.205 per share to common stockholders of record on April 6, 2007. This will be the Company's 97th consecutive quarterly cash dividend. Washington Federal Savings, with headquarters in Seattle, Washington, has 136 offices in eight western states. -1- 2 WASHINGTON FEDERAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED) March 31, 2007 September 30, 2006 -------------- ------------------ (In thousands, except per share data) ASSETS Cash and cash equivalents ......................................... $ 209,500 $ 45,722 Available-for-sale securities, including mortgage-backed securities of $1,154,352........................................ 1,365,900 1,451,038 Held-to-maturity securities, including mortgage-backed securities of $139,802 ......................................... 147,921 184,928 Loans receivable, net ............................................. 7,773,994 7,078,443 Interest receivable ............................................... 44,462 42,304 Premises and equipment, net ....................................... 75,208 62,159 Real estate held for sale ......................................... 5,198 3,903 FHLB stock ........................................................ 133,981 129,453 Intangible assets, net ............................................ 108,392 56,259 Other assets ...................................................... 13,239 14,811 ----------- ----------- $ 9,877,795 $ 9,069,020 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Customer accounts Savings and demand accounts .................................... $ 5,956,366 $ 5,285,708 Repurchase agreements with customers ........................... 22,739 26,018 ----------- ----------- 5,979,105 5,311,726 FHLB advances ..................................................... 1,670,060 1,500,000 Other borrowings................................................... 800,167 870,000 Advance payments by borrowers for taxes and insurance ............. 23,499 29,505 Federal and state income taxes .................................... 46,467 39,667 Accrued expenses and other liabilities ............................ 63,667 55,402 ----------- ----------- 8,582,965 7,806,300 STOCKHOLDERS' EQUITY Common stock, $1.00 par value, 300,000,000 shares authorized; 104,661,324 and 104,467,245 shares issued; 87,326,643 and 87,338,824 shares outstanding .................................. 104,661 104,467 Paid-in capital ................................................... 1,248,691 1,246,025 Accumulated other comprehensive loss, net of taxes ................ (2,433) (5,975) Treasury stock, at cost; 17,334,681 and 17,128,421 shares.......... (210,260) (204,930) Retained earnings ................................................. 154,171 123,133 ----------- ----------- 1,294,830 1,262,720 ----------- ----------- $ 9,877,795 $ 9,069,020 =========== =========== CONSOLIDATED FINANCIAL HIGHLIGHTS Stockholders' equity per share .................................... $ 14.83 $ 14.46 Stockholders' equity to total assets .............................. 13.11% 13.92% Weighted average rates at period end Loans and mortgage-backed securities ............................ 6.56% 6.48% Investment securities* .......................................... 4.33 4.10 Combined loans, mortgage-backed securities and investment securities .................................... 6.44 6.38 Customer accounts ............................................... 4.24 4.05 Borrowings ...................................................... 4.49 4.55 Combined cost of customer accounts and borrowings ............... 4.31 4.20 Interest rate spread ............................................ 2.13 2.18 *Includes municipal bonds at tax equivalent yields and cash equivalents -2- 3 WASHINGTON FEDERAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Quarter Ended March 31, Six Months Ended March 31, ----------------------- -------------------------- 2007 2006 2007 2006 -------- -------- --------- --------- (In thousands, except per share data) INTEREST INCOME Loans ...................................................... $ 129,297 $106,274 $ 252,472 $ 208,679 Mortgage-backed securities ................................. 18,464 15,725 37,539 30,093 Investment securities and cash equivalents ................. 4,241 6,660 7,467 14,449 -------- -------- -------- -------- 152,002 128,659 297,478 253,221 INTEREST EXPENSE Customer accounts .......................................... 59,037 41,459 114,986 80,308 FHLB advances and other borrowings ......................... 27,772 21,724 54,910 43,374 -------- -------- -------- -------- 86,809 63,183 169,896 123,682 -------- -------- -------- -------- NET INTEREST INCOME ........................................ 65,193 65,476 127,582 129,539 Provision for loan losses .................................. 150 85 200 85 -------- -------- -------- -------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES ........ 65,043 65,391 127,382 129,454 OTHER INCOME Gain (loss) on securities, net ............................. 11 - 11 - Other ...................................................... 3,280 3,404 6,414 6,796 -------- -------- -------- -------- 3,291 3,404 6,425 6,796 OTHER EXPENSE Compensation and fringe benefits ........................... 10,879 9,040 20,414 17,275 Occupancy .................................................. 2,194 2,017 4,153 3,930 Other ...................................................... 2,984 2,458 5,441 4,981 -------- -------- -------- -------- 16,057 13,515 30,008 26,186 Gain (loss) on real estate acquired through foreclosure, net (79) 5 157 144 -------- -------- -------- -------- Income before income taxes ................................. 52,198 55,285 103,956 110,208 Income taxes ............................................... 18,715 18,945 37,089 37,722 -------- -------- -------- -------- NET INCOME ................................................. $ 33,483 $ 36,340 $ 66,867 $ 72,486 ======== ======== ======== ======== PER SHARE DATA Basic earnings ............................................. $ .38 $ .42 $ .77 $ .83 Diluted earnings ........................................... .38 .42 .76 .83 Cash dividends ............................................. .205 .200 .410 .400 Weighted average number of shares outstanding, including dilutive stock options ........................ 87,571,131 87,363,894 87,608,059 87,378,631 PERFORMANCE RATIOS Return on average assets ................................... 1.41% 1.73% 1.43% 1.74% Return on average stockholders' equity ..................... 10.40% 12.02% 10.45% 12.05% Net interest margin ........................................ 2.81% 3.18% 2.81% 3.18% -3-