10-K

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, 2003
	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 [  ]

As of November 28, 2003, the aggregate market value of the 69,993,599 shares of Common Stock of the Registrant issued and outstanding on such date, which excludes 1,220,515 shares held by all directors and executive officers of the Registrant as a group, was $2,008,116,355. This figure is based on the closing sale price of $28.69 per share of the Registrant’s Common Stock on November 28, 2003, as reported in The Wall Street Journal on December 1, 2003.

Number of shares of Common Stock outstanding as of November 28, 2003: 71,214,114

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, 2003, are incorporated into Part II, Items 5-8 of this Form 10-K.

(2)   Portions of the Registrant’s definitive proxy statement for its 2003 Annual Meeting of Stockholders are incorporated into Part III, Items 10-13 of this Form 10-K.

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TABLE OF CONTENTS

PART I
	Item 1. Business
	Item 2. Properties
	Item 3. Legal Proceedings
	Item 4. Submission of Matters to a Vote of Security Holders
PART II
	Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters
	Item 6. Selected Financial Data
	Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 7A. Market Risk Disclosures
	Item 8. Financial Statements and Supplementary Data
	Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
	Item 9A. Controls and Procedures
PART III
	Item 10. Directors and Executive Officers of the Registrant
	Item 11. Executive Compensation
	Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
	Item 13. Certain Relationships and Related Transactions
	Item 14. Principal Accountant Fees and Services
PART IV
	Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
SIGNATURES
EXHIBIT 13
EXHIBIT 23
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32

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. The Company’s actual results could differ materially from those management expectations. Such forward-looking statements include statements regarding the Company’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 the Company’s operations, markets, products services and fees. The Company 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. (“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 and Loan Association (“Washington Federal” or “Association”). 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 Association, doing business as Washington Federal Savings, is a federally-chartered savings and loan association that began operations in Washington as a state-chartered mutual association in 1917. In 1935, the Association converted to a federal charter and became a member of the Federal Home Loan Bank (FHLB) system. On November 9, 1982, Washington Federal converted from a federal mutual to a federal capital stock association.

     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 118 offices located in Washington, Oregon, Idaho, Arizona, Utah, Nevada and Texas, all of which are full service branches. In 2002 a loan production office was opened in Englewood, Colorado. During fiscal 2003, Washington Federal acquired United Savings and Loan Bank of Seattle (“United”) with its four branches in the Seattle area, opened a new branch in Puyallup, Washington and consolidated one branch in Nampa, Idaho. Through subsidiaries, the Association is engaged in real estate investment and insurance brokerage activities.

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     The principal sources of funds for the Association’s activities are retained earnings, loan repayments (including prepayments), net savings inflows, sales of loans, loan participations and other assets and 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. The aggregate consideration paid to United shareholders was approximately $65.6 million. Shareholders of United elected to be paid in either common stock of the Company or cash, subject to allocation procedures.

     The Association 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 association may engage and is intended primarily for the protection of the Savings Association Insurance Fund (“SAIF”) administered by the FDIC and depositors. 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 Association and its operations. See “Regulation.”

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Average Statements of Financial Condition

			Year Ended September 30,
			2001							2002							2003
			Average				Average			Average				Average			Average				Average
			Balance		Interest		Rate			Balance		Interest		Rate			Balance		Interest		Rate
										(Dollars in Thousands)
Assets
Loans (1)			$	5,203,407	$	426,240		8.19	%	$	5,212,093	$	406,262		7.79	%	$	4,740,877	$	353,286		7.45	%
Mortgage-backed securities				1,237,530		89,952		7.27			1,001,550		76,138		7.60			689,908		62,910		9.12
Investment securities (2)				140,104		9,859		7.04			516,932		14,618		2.83			1,492,547		25,833		1.73
FHLB stock				118,938		8,067		6.78			127,452		7,942		6.23			135,643		8,156		6.01
	Total interest-earning assets			6,699,979		534,118		7.97			6,858,027		504,960		7.36			7,058,975		450,185		6.38
Other assets				231,215							235,117							275,422
Total assets			$	6,931,194						$	7,093,144						$	7,334,397
Liabilities and Stockholders’ Equity
Checking accounts				137,522		2,426		1.76	%		181,310		2,310		1.27	%		213,883		1,655		.77	%
Passbook and statement accounts				133,133		4,066		3.05			145,395		3,201		2.20			166,137		2,114		1.27
Insured money market accounts				595,860		24,514		4.11			921,984		22,231		2.41			1,045,571		14,947		1.43
Certificate accounts (time deposits)				2,759,835		159,566		5.78			3,146,556		122,289		3.89			2,942,724		85,552		2.91
Repurchase agreements with customers				72,215		4,138		5.73			69,621		2,259		3.24			73,322		1,651		2.25
FHLB advances				1,336,025		72,654		5.44			1,558,468		82,359		5.28			1,650,023		85,566		5.19
Securities sold under agreements to repurchase				785,563		45,142		5.75			4,110		140		3.36			100,000		3,387		3.39
Federal funds purchased				142,413		7,614		5.35			5,726		152		2.65			625		12		1.92
		Total interest-bearing liabilities		5,962,566		320,120		5.37			6,033,170		234,941		3.89			6,192,285		194,884		3.15
Other liabilities				157,085							152,206							149,478
		Total liabilities		6,119,651							6,185,376							6,341,763
Stockholders’ equity				811,543							907,768							992,634
		Total liabilities and stockholders’ equity	$	6,931,194						$	7,093,144						$	7,334,397
Net interest income/Interest rate spread					$	213,998		2.60	%			$	270,019		3.47	%			$	255,301		3.23	%
Net interest margin (3)								3.19	%						3.94	%						3.62	%

(1)	The average balance of loans includes securitized assets subject to repurchase and nonaccruing loans, interest on which is recognized on a cash basis. Includes net accretion of deferred loan fees and costs of $14.5, $17.5 and $24.4 million for fiscal years 2001, 2002 and 2003 respectively.
(2)	Includes cash equivalents.
(3)	Net interest income divided by average interest-earning assets.

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Lending Activities

     General. The Association’s net portfolio of loans (including securitized assets subject to repurchase) and mortgage-backed securities totaled $5.465 billion at September 30, 2003, 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. The Company’s investment in mortgage-backed securities issued or guaranteed by the Government National Mortgage Association (“GNMA”), the Federal National Mortgage Association (“FNMA”), the Federal Home Loan Mortgage Corporation (“FHLMC”) and certain privately insured mortgage-backed securities amounted to $648 million (net of discounts and premiums) at September 30, 2003, and is deemed to be part of the Company’s loan portfolio.

     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 and adjustable rate land development loans.

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

					1999					2000					2001					2002					2003
					Amount		Percent			Amount		Percent			Amount		Percent			Amount		Percent			Amount		Percent
															(Dollars in Thousands)
Loans by type of loan
	Real estate:
		Conventional:
			Permanent		$	3,908,177		64.1	%	$	4,425,790		66.9	%	$	4,872,852		70.8	%	$	4,555,553		71.9	%	$	4,296,982		73.6	%
			Land development			170,479		2.8			180,745		2.7			193,424		2.8			179,936		2.8			217,215		3.7
			Construction(1)			620,459		10.2			646,823		9.8			602,129		8.7			587,435		9.3			659,196		11.3
		Insured or guaranteed:
				FHA		14,616		.2			12,200		.2			9,781		.1			7,936		.1			5,520		.1
				VA		13,217		.2			12,484		.2			10,575		.2			8,885		.1			6,509		.1
Savings account loans						3,126		—			1,956		—			1,622		—			1,827		—			1,699		—
						4,730,074					5,279,998					5,690,383					5,341,572					5,187,121
	Mortgage-backed securities(residential)(2)					1,366,278		22.5			1,339,214		20.2			1,200,112		17.4			991,752		15.8			656,218		11.2
				Total(3)	$	6,096,352		100.0	%	$	6,619,212		100.0	%	$	6,890,495		100.0	%	$	6,333,324		100.0	%	$	5,843,339		100.0	%
Loans by type of security
				Residential:
				Single-family	$	4,455,275		73.0	%	$	4,989,743		75.4	%	$	5,292,521		76.9	%	$	4,890,920		77.2	%	$	4,706,293		80.5	%
				Multi-family		206,347		3.4			234,381		3.6			352,043		5.1			408,381		6.5			439,152		7.5
Income Property						65,326		1.1			53,918		.8			44,196		.6			40,444		.6			39,977		.8
Savings account loans						3,126		—			1,956		—			1,623		—			1,827		—			1,699		—
						4,730,074					5,279,998					5,690,383					5,341,572					5,187,121
Mortgage-backed securities(residential)(2)						1,366,278		22.5			1,339,214		20.2			1,200,112		17.4			991,752		15.7			656,218		11.2
				Total(3)	$	6,096,352		100.0	%	$	6,619,212		100.0	%	$	6,890,495		100.0	%	$	6,333,324		100.0	%	$	5,843,339		100.0	%

(1)        Includes construction loans that have been modified to monthly payment loans, due in full in approximately one year, in the amount of $10.4 million, $10.8 million, $16.0 million, $12.6 million and $8.0 million at September 30, 1999, 2000, 2001, 2002 and 2003, respectively.

(2)        For additional information, see Note C to the Consolidated Financial Statements.

(3)        After netting undisbursed proceeds on loans in process, deferred fees, discounts on loans, and allowances for probable losses against the applicable loan amounts, the Association’s net loan portfolio amounted to $5.7 billion, $6.3 billion, $6.6 billion, $6.0 billion and $5.5 billion at September 30, 1999, 2000, 2001, 2002 and 2003, respectively.

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     The following table summarizes the scheduled contractual gross loan maturities for the Association’s total loan and mortgage-backed securities portfolios due for the periods indicated as of September 30, 2003. 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.

				Maturity Distribution
		Balance Outstanding at		Less than		1 to 5		After 5
		September 30, 2003		1 year		years		years
		(Dollars In Thousands)
One- to four-family real estate loans		$	4,706,293	$	608,326	$	172,562	$	3,925,405
Multi-family real estate loans			439,152		3,139		176,033		259,980
Income Property loans			39,977		13,142		4,575		22,260
Savings Account Loans			1,699		1,680		18		1
Mortgage-backed securities			656,218		—		102		656,116
		$	5,843,339	$	626,287	$	353,290	$	4,863,762
Loans maturing after one year:
	Fixed-interest rates			$	4,967,567
	Floating or adjustable interest rates				249,485
	Total			$	5,217,052

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     The original contractual loan payment period for residential loans originated by the Association 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 7 years.

     Lending Programs and Policies. The Association specializes in residential real estate lending and has no present plans to expand its operations into consumer or commercial business loans. The Association 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 Association also provides land acquisition and development loans (“land development loans”) and construction loans for single-family residences. The interest rate on these loans generally adjusts every 90 days in accordance with a designated index. Land development and construction loans amounted to $876.4 million, or 15% of the Association’s gross loan portfolio (including mortgage-backed securities), at September 30, 2003. The Association 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 associations 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 lending has been redirected toward the Association’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.

     As a result of activity over the past three decades, the Association believes that it is a leading construction lender for single-family residences in its market areas. Because of this history, the Association 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. The nature of these loans also is such that they are generally more difficult to evaluate and monitor.

     The Association 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 Association’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, 2003, $4.767 billion or 82% of the Association’s loan portfolio was represented by medium and long-term fixed-rate loans secured by single-family residences (including mortgage-backed securities).

     All of the Association’s mortgage lending is subject to written, nondiscriminatory underwriting standards, loan origination procedures and lending policies prescribed by the Association’s Board of Directors. Property valuations are required on all real estate loans. Appraisals are prepared by

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independent appraisers approved by the Association’s management and all appraisals are reviewed by the Association’s staff. Property evaluations are sometimes utilized on single-family real estate loans of $250,000 or less. These are prepared by the Association’s lending 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 Association 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 appraisal 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 appraised value of the security property. Maximum loan-to-value ratios for each type of real estate loan made by an institution are established by the institution’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, 2003, was $447 million and had allocated reserves of $1.5 million.

     The Association’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 Association’s personnel.

     It is the Association’s policy to obtain title insurance ensuring that the Association 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 Association 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 Association has general authority to lend anywhere in the United States. The Association’s primary lending area, however, includes Washington, Oregon, Idaho, Arizona, Utah, Nevada, Texas and Colorado.

     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 Association, loans referred through mortgage brokers and from refinancing 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 Association.

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     At September 30, 2003, the Association was servicing approximately $35.4 million of loans for others. Sales are made on a yield basis with the difference between the yield to the purchaser and the amount paid by the borrower constituting servicing income to the Association. The sale of loans and loan participations is subject to federal regulations.

     The Association 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. Mortgage-backed securities accounted for a significant portion of the Association’s loan purchases in recent years. Mortgage-backed securities are more liquid than individual mortgage loans and may be used to collateralize borrowings of the Association.

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     The table below shows total loan (including securitized assets subject to repurchase) origination, purchase, sale and repayment activities of the Association on a consolidated basis for the years indicated.

		Year Ended September 30,
		1999			2000			2001			2002			2003
			(Dollars In Thousands)
Loans originated (1):
	Construction	$	425,190		$	451,582		$	369,808		$	363,420		$	487,692
	Land		121,853			118,947			130,161			87,212			163,533
	Loans on existing property		1,058,403			923,290			1,157,278			892,595			1,078,374
	Loans refinanced		164,166			28,471			86,969			87,607			137,513
	Total loans originated		1,769,612			1,522,290			1,744,216			1,430,834			1,867,112
Loans and mortgage-backed securities purchased			767,101			155,927			92,724			241,557			812,882
Mortgage-backed securities sold			(22,726	)		(12,442	)		(50,282	)		—			(60,000	)
Loan and mortgage-backed securities principal repayments			(1,834,818	)		(1,113,917	)		(1,582,951	)		(2,255,421	)		(3,207,547	)
Net change in loans in process, discounts, etc.			(67,096	)		24,777			62,372			30,969			34,959
Net loan activity increase (decrease)		$	612,073		$	576,635		$	266,079		$	(552,061	)	$	(552,594	)

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

     Interest Rates, Loan Fees and Service Charges. Interest rates charged by the Association 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 Association receives loan origination 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.

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     In making one-to-four family home mortgage loans, the Association does not normally charge a commitment fee. As part of the loan application, the borrower pays the Association for its out-of-pocket costs in reviewing the application, such as the appraisal fee, 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 Association normally charges an origination fee. Loan origination fees and other terms of multi-family residential loans are individually negotiated.

     Non-Performing Assets. When a borrower fails to make a required payment on a loan, the Association attempts to cause the deficiency to be cured by contacting the borrower. Contacts are 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 Association may cause the trustee on the deed of trust to institute appropriate action to foreclose the property. If foreclosed, the property will be sold at a public sale and may be purchased by the Association. There are circumstances under which the Association 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 Association 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”) 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 Association at the dates indicated.

			September 30,
			1999			2000			2001			2002			2003
						(Dollars in Thousands)
Restructured loans (1)			$	12,983		$	13,769		$	14,129		$	2,472		$	2,551
Nonaccrual loans:
	Single-family residential			7,949			9,272			14,810			18,835			12,711
	Construction and land			5,434			6,858			10,284			4,526			3,227
	Commercial real estate			92			454			—			—			—
	Consumer			3			—			—			—			—
		Total nonaccrual loans (2)		13,478			16,584			25,094			23,361			15,938
Total REO (3)				6,926			9,463			8,664			10,515			11,496
Total nonperforming assets				20,404			26,047			33,758			33,876			27,434
Total nonperforming assets and restructured loans			$	33,387		$	39,816		$	47,887		$	36,348		$	29,985
Total nonperforming assets and restructured loans as a percent of total assets				.54	%		.59	%		.68	%		.49	%		.40	%

(1)     Performing in accordance with restructured terms.

(2)     The Association recognized interest income on nonaccrual loans of approximately $427,000 in 2003. Had these loans performed according to their original contract terms, the Association would have recognized interest income of approximately $1,234,000 in 2003.

          In addition to the nonaccrual loans reflected in the above table, at September 30, 2003, the Association had $1.7 million of loans that were less than 90 days delinquent but which it had classified as substandard for one or more reasons. If these loans were deemed non-performing, the Association’s ratio of total nonperforming assets and restructured loans as a percent of total assets would have been .43% at September 30, 2003. 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. See Note H to the Consolidated Financial Statements included in Item 8 hereof.

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

			September 30,
			1999			2000			2001			2002			2003
						(Dollars in Thousands)
Beginning balance			$	23,854		$	21,900		$	20,831		$	19,683		$	23,912
Charge-offs:
	Real estate:
		Permanent		733			94			1,047			1,324			566
		Construction		1,326			776			2,251			1,938			683
		Land		817			507			547			139			61
		Multi-family		255			—			—			—			—
				3,131			1,377			3,845			3,401			1,310
Recoveries:
	Real estate:
		Permanent		52			107			10			399			3
		Construction		36			159			828			176			104
		Land		202			42			9			55			—
		Multi-family		203			—			—			—			—
				493			308			847			630			107
Net charge-offs				2,638			1,069			2,998			2,771			1,203
Acquired through acquisition				—			—			—			—			1,597
Provision for loan losses				684			—			1,850			7,000			1,500
Ending balance			$	21,900		$	20,831		$	19,683		$	23,912		$	25,806
Ratio of net charge-offs to average loans outstanding				.06	%		.02	%		.06	%		.05	%		.03	%

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

		September 30,
		1999		2000		2001		2002		2003
				(Dollars in Thousands)
Real estate:
	Permanent single-family	$	7,146	$	7,076	$	6,165	$	7,823	$	9,940
	Construction		3,621		3,597		2,770		2,907		5,795
	Land		2,606		2,305		2,134		3,137		2,929
	Multi-family		7,976		7,068		7,941		9,327		7,142
Unallocated			551		785		673		718		—
		$	21,900	$	20,831	$	19,683	$	23,912	$	25,806

     As part of the process for determining the adequacy of the allowance for loan losses, management reviews the loan portfolio for specific weaknesses. A portion of the allowance is then

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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 changes in the size and composition of the loan portfolio, actual historical loan loss experience and current economic conditions among other factors.

     Real Estate Held for Sale. As one of the Association’s activities, a subsidiary is engaged in the investment and sale of real estate. Also, REO that was acquired in acquisitions of associations has been recorded as real estate held for sale.

     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 inter-period variations in the operating results of the Association’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 deductible from a savings association’s regulatory capital. See “Regulation - The Association - Regulatory Capital Requirements” below.

Investment Activities

     As a federally-chartered savings institution, Washington Federal 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 and mortgage-backed securities.

     As of September 30, 2003, the Association had $1.35 billion invested in repurchase agreements, with various brokers, at a weighted-average rate of 1.02%. All repurchase agreements are 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, 2003 mature within 90 days.

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     The following table sets forth the composition of the Association’s investment portfolio, excluding mortgage-backed securities and mutual fund investments, at the dates indicated.

	September 30,
	2001				2002				2003
	Amortized		Fair		Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value		Cost		Value
					(Dollars In Thousands)
U.S. government and agency obligations	$	114,234	$	110,379	$	93,570	$	100,569	$	120,911	$	127,049
State and political subdivisions		25,490		37,185		16,848		18,565		14,129		15,716
	$	139,724	$	147,564	$	110,418	$	119,134	$	135,040	$	142,765

     The investment portfolio, excluding mortgage-backed securities, at September 30, 2003 was categorized by maturity as follows:

	Amortized		Weighted-
	Cost		Average Yield
	(Dollars in Thousands)
Due in less than one year	$	96,461		7.08	%
Due after one year through five years		—		—
Due after five years through 10 years		14,498		6.34
Due after 10 years		24,081		9.02
	$	135,040		7.35	%

     During the year the Company invested in two mutual funds that invest primarily in adjustable rate mortgage backed securities issued by government sponsored entities. As of September 30, 2003, the Company’s investment in these mutual funds was $170 million and had a fair value of $169 million. Mutual funds have no maturity date. The primary risks associated with these mutual fund investments include price risk resulting from changing interest rates and credit risk associated with the underlying collateral. The weighted-average dividend yield on the two mutual funds was 2.37% as of September 30, 2003.

Sources of Funds

     General. Savings deposits are an important source of the Association’s funds for use in lending and for 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 Association has chosen 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 has allowed the Association to be more competitive in obtaining funds 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, the penalty is 180 days of 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 fiscal 2001, 2002 and 2003 amounted to approximately $452,000, $418,000 and $379,000, respectively.

     The Association offers a single checking account product. This account pays interest on monthly average balances over $1,000 and charges a service fee if monthly average balances drop below $1,000.

     The Association’s deposits are obtained primarily from residents of Washington, Oregon, Idaho, Arizona, Utah, Nevada and Texas. The Association does not advertise for deposits outside of these states. At September 30, 2003, approximately 6.3% of the Association’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 Association’s savings deposits at the dates indicated.

		September 30,
		2001					2002					2003
		Amount		Rate			Amount		Rate			Amount		Rate
							(Dollars in Thousands)
Balance by interest rate:
	Checking accounts	$	152,143		2.13	%	$	191,542		1.97	%	$	190,352		.67	%
	Passbook and statement accounts		135,522		2.50			157,759		2.06			234,023		.75
	Money market accounts		805,759		3.10			972,993		2.17			1,037,641		.92
			1,093,424					1,322,294					1,462,016
Fixed-rate certificates:
	Under 1.00%		—					—					13,831
	1.00% to 1.99%		—					15,580					1,256,783
	2.00% to 2.99%		2,136					1,276,729					557,703
	3.00% to 3.99%		192,355					663,799					180,257
	4.00% to 4.99%		1,851,133					279,672					188,314
	5.00% to 5.99%		764,616					154,793					95,174
	6.00% and above		96,856					9,315					13,870
Jumbo fixed rate certificates ($100,000 or more):
	Under 1.00%		—					—					3,725
1.00% to 1.99%			—					8,602					214,162
2.00% to 2.99%			1,972					318,956					355,720
	3.00% to 3.99%		44,480					271,888					77,389
	4.00% to 4.99%		130,792					93,558					70,561
	5.00% to 5.99%		34,627					34,919					25,786
	6.00% and above		38,722					2,145					4,760
			3,157,689					3,129,956					3,058,035
		$	4,251,113				$	4,452,250				$	4,520,051

The following table sets forth, by various interest rate categories, the amounts of certificates of deposit of the Association at September 30, 2003, which mature during the periods indicated.

		Amounts at September 30, 2003, Maturing in
		1 to 3		4 to 6		7 to 12		13 to 24		25 to 36		37 to 60
		Months		Months		Months		Months		Months		Months		Total
		(Dollars in Thousands)
Fixed-rate certificates:
Under 1.00%		$	16,133	$	1,423	$	—	$	—	$	—	$	—	$	17,556
1.00 to 1.99%			303,940		308,905		768,252		88,846		1,002		—		1,470,945
2.00 to 2.99%			164,434		306,940		302,973		79,937		54,900		4,239		913,423
3.00 to 3.99%			53,185		16,074		31,344		33,013		38,001		86,029		257,646
4.00 to 4.99%			1,280		2,374		13,668		8,808		26,430		206,315		258,875
5.00 to 5.99%			6,672		3,301		9,834		13,215		61,000		26,938		120,960
6.00 and above			1,622		869		422		13,169		2,046		502		18,630
	Total	$	547,266	$	639,886	$	1,126,493	$	236,988	$	183,379	$	324,023	$	3,058,035

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

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management can be achieved on a continuing basis.

     At September 30, 2003, the Association had $752 million of certificates of deposit in amounts of $100,000 or more outstanding, maturing as follows: $129 million within 3 months; $144 million over 3 months through 6 months; $291 million over 6 months through 12 months; and $188 million thereafter.

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

	Year Ended September 30,
	2001		2002		2003
	(Dollars In Thousands)
Deposits	$	3,145,124	$	2,685,813	$	2,224,075
Withdrawals		2,488,412		2,632,871		2,274,318
Net increase (decrease) in deposits before interest credited		656,712		52,942		(50,243	)
Interest credited		194,710		152,288		105,919
Net increase in customer accounts	$	851,422	$	205,230	$	55,676

     Borrowings. The Association 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 - The Association - 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 Association’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 Association also uses reverse repurchase agreements as a form of borrowing. Under reverse repurchase agreements, the Association 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 Association had $100 million of securities sold under such agreements at September 30, 2003.

     The Association 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 are fully collateralized by securities. These obligations are not insured by SAIF and are classified as borrowings for regulatory purposes. The Association had $57.6 million of such agreements outstanding at September 30, 2003.

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

		For the Year Ended September 30,
			2001			2002			2003
		(Dollars in Thousands)
Federal funds and securities sold to dealers under agreements to repurchase:
	Average balance outstanding		$	929,047		$	9,836		$	100,625
	Maximum amount outstanding at any month-end during the period			1,285,857			100,000			100,000
	Weighted-average interest rate during the period(1)			5.68	%		2.97	%		3.39	%
FHLB advances:
	Average balance outstanding		$	1,076,263		$	1,558,384		$	1,650,023
	Maximum amount outstanding at any month-end during the period			1,454,000			1,654,000			1,650,000
	Weighted-average interest rate during the period(1)			5.51	%		5.28	%		5.19	%
Securities sold to customers under agreements to repurchase:
	Average balance outstanding		$	72,203		$	69,621		$	71,855
	Maximum amount outstanding at any month-end during the period			88,137			74,487			76,477
	Weighted-average interest rate during the period(1)			5.72	%		3.25	%		2.32	%
Total average borrowings			$	2,077,513		$	1,637,841		$	1,821,878
	Weighted-average interest rate on total average borrowings(1)			5.60	%		5.18	%		4.98	%

(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.

	Year Ended September 30,
	2001			2002			2003
Return on assets(1)		1.65	%		2.05	%		2.00	%
Return on equity(2)		14.59			16.89			15.60
Average equity to average assets		11.71			12.80			13.53
Dividend payout ratio(3)		48.21			40.00			41.55

(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 Association 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 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.

			Year Ended September 30,
						2001 vs. 2000									2002 vs. 2001						2003 vs. 2002
			Increase (Decrease) Due to									Increase (Decrease) Due to									Increase (Decrease) Due to
			Volume			Rate			Total			Volume			Rate			Total			Volume			Rate			Total
Interest income:
	Loan portfolio		$	47,437		$	(3,756	)	$	43,681		$	800		$	(20,778	)	$	(19,978	)	$	(35,734	)	$	(17,242	)	$	(52,976	)
	Mortgaged-backed securities			(6,308	)		522			(5,786	)		(17,154	)		3,340			(13,814	)		(26,830	)		13,603			(13,227	)
	Investments(1)			279			209			488			16,698			(12,064	)		4,634			23,488			(12,060	)		11,428
		All interest-earning assets		41,408			(3,025	)		38,383			344			(29,502	)		(29,158	)		(39,076	)		(15,699	)		(54,775	)
Interest expense:
	Customer accounts			15,332			6,643			21,975			35,630			(78,052	)		(42,422	)		(769	)		(45,600	)		(46,369	)
	FHLB advances and other borrowings			8,541			(9,907	)		(1,366	)		(36,910	)		(5,847	)		(42,757	)		9,245			(2,933	)		6,312
		All interest-bearing liabilities		23,873			(3,264	)		20,609			(1,280	)		(83,899	)		(85,179	)		8,476			(48,533	)		(40,057	)
	Change in net interest income		$	17,535		$	239		$	17,774		$	1,624		$	54,397		$	56,021		$	(47,552	)	$	32,834		$	(14,718	)

(1) 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 of the Company, 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.

     One approach 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).

September 30, 2003
Change in	Estimated		Estimated Increase
Interest Rates	NPV Amount		(Decrease) in NPV Amount			Percent
(Basis Points)			(Dollars in Thousands)
+300	$	584,485	$	(381,707	)		-40	%
+200		774,603		(191,590	)		-20
+100		915,537		(50,655	)		-5
0		966,193		—			—
-100		941,019		(25,173	)		-3

September 30, 2002
Change in	Estimated		Estimated Increase
Interest Rates	NPV Amount		(Decrease) in NPV Amount			Percent
(Basis Points)			(Dollars in Thousands)
+300	$	370,391	$	(628,226	)		-63	%
+200		641,572		(357,045	)		-36
+100		890,662		(107,955	)		-11
0		998,617		—			0
-100		965,566		(33,051	)		-3

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At September 30, 2003, the Company’s NPV sensitivity decreased compared to the prior year. This decrease was primarily the result of the continued shift in asset mix toward shorter-term assets. If in the future the company chooses 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.

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Subsidiaries

     The Company is a unitary savings and loan holding company that conducts its primary business through its only subsidiary, the Association. The Association 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 Association 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, 2003, the Association was authorized under the current regulations to have a maximum investment of $150.7 million in its service corporations, exclusive of the additional 1% of assets investments permitted for inner-city or community development purposes but inclusive of the ability to make loans to its subsidiaries. On September 30, 2003, the Association’s investment in, and unsecured loans to, its wholly owned service corporations amounted to $5.1 million.

     Washington Services, Inc. (“WSI”), a wholly owned subsidiary of the Association, 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 Association 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 the Association, is an insurance brokerage company that offers a full line of individual and business insurance products to customers of the Association, as well as others.

     Statewide Mortgage Services, Inc., a wholly owned subsidiary of the Association, 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 association 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 Association, which is engaged in such activities, are subject to exclusion from the capital calculation. See “Regulation - The Association - Regulatory Capital Requirements” below.

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Employees

     As of September 30, 2003, the Company had approximately 754 employees, including the full-time equivalent of 31 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 the Association. 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. In October 2001, the USA Patriot Act of 2001 was enacted in response to the terrorist attacks in New York, Pennsylvania and Washington, D.C. which occurred on September 11, 2001. The Patriot Act is intended to strengthen U.S. law enforcement’s and the intelligence communities’ abilities to work cohesively to combat terrorism on a variety of fronts. The potential impact of the Patriot Act on financial institutions of all kinds is significant and wide ranging. The Patriot Act contains sweeping anti-money laundering and financial transparency laws and imposes various regulations, including standards for verifying client identification at account opening, and rules to promote cooperation among financial institutions, regulators and law enforcement entities in identifying parties that may be involved in terrorism or money laundering.

     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 Office of Thrift Supervision 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.

     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

26

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 “The Association - 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 the Association, 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 Association 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 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 Securities and Exchange Commission (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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The Association

     General. The Association 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, the Association is subject to broad federal regulation and oversight by the OTS and the FDIC extending to all aspects of its operations. The Association is a member of the FHLB of Seattle and is subject to certain limited regulations by the Federal Reserve Board. The Association 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 the Association.

     Federal Savings Association Regulations. The OTS has extensive authority over the operations of savings associations. As part of this authority, savings associations 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 the Association 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 associations, and many also apply to state-chartered savings associations.

     Insurance of Accounts. The deposits of the Association are insured up to $100,000 per insured member by the SAIF (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 associations 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 1.60 basis points was added to the SAIF assessment to cover financing corporation debt service payments for fiscal 2003.

     Regulatory Capital Requirements. Federally insured savings associations are required to maintain minimum levels of regulatory capital. Pursuant to federal law, the OTS has established capital standards applicable to all savings associations. 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 associations 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 associations must have tangible capital of at least 1.5% of adjusted total assets, as defined in the regulations. For purposes of this requirement, tangible capital is core capital less all intangibles other than certain purchased mortgage servicing rights, of which the Association 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

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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 core capital, as defined above, of at least 3.0% of adjusted total assets.

     The risk-based capital standard requires savings associations 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 mortgage loans having loan-to-value ratios not exceeding 80% and meeting certain additional criteria, as well as certain multi-family residential property 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 associations 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 the Association.

     For information regarding the Association’s compliance with each of these three capital requirements at September 30, 2003, see Note O to the Consolidated Financial Statements.

     Any savings association 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 association’s operations and/or the appointment of a conservator or receiver. The OTS’ capital regulation provides that such 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 a 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 a 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

29

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, 2003, the Association exceeded the requirements of a well capitalized institution.

     Qualified Thrift Lender Test. A savings association 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 association 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 association shall be restricted to those of a national bank; (iii) the association shall not be eligible to obtain any advances from its FHLB; and (iv) payment of dividends by the association shall be subject to the rules regarding payment of dividends by a national bank. Upon the expiration of three years from the date the association 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, 2003, the Association was in compliance with the QTL test of a domestic building and loan association as defined in the Code.

     Transactions with Affiliates. Under federal law, all transactions between and among a savings association 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 association’s capital and require all of them to be on terms at least as favorable to the association as transactions with non-affiliates. In addition, a savings association 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 association. The OTS regulations also set forth various reporting requirements relating to transactions with affiliates.

     Extensions of credit by a savings association 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 association 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.

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     Restrictions on Capital Distributions. OTS regulations impose limitations on capital distributions by savings associations, 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 association.

     Under OTS capital distribution regulations, certain savings institutions are required to file with the OTS. Specifically since Association is a subsidiary of the Company, the regulation requires the Association to provide notice to the OTS of its intent to make capital distributions, unless an application is otherwise required. The Association does not believe that the regulation will adversely affect its ability to make capital distributions.

     Federal Home Loan Bank System. The Association is a member of the FHLB of Seattle, which is one of 12 regional FHLBs that administers the home financing credit function of savings associations. 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, 2003, the Association’s advances from the FHLB amounted to $1.650 billion.

     As a member, the Association 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, 2003, the Association had $143.9 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 associations 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 the Fair Lending Laws. Savings associations 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 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) required 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 will be required to pay approximately $25,406,000 in additional federal income taxes through fiscal 2004, all of which has previously been recognized.

     A deferred tax liability has not been required to be recognized for the tax bad debt base year reserves of the Company. The base year reserves are the balance of reserves as of September 30, 1988, reduced proportionately for reductions in the Company’s loan portfolio since that date. At September 30, 2003, the amount of those reserves was approximately $8,139,000. The amount of the unrecognized deferred tax liability at September 30, 2003 was approximately $2,985,000.

     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 taxable income, as originally reported, 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; 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 8.0% 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 8.0% of apportionable income.

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

     The state of Colorado has a corporate income tax with a statutory rate of 5.0% 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 at www.washingtonfederal.com.

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Item 2. Properties

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

				Building
		Number of						Net Book Value at
Location		Offices		Owned		Leased(1)		September 30, 2003 (2)
								(Dollars In Thousands)
Washington			44		26		18	$	18,869
Idaho			16		14		2		6,898
Oregon			24		17		7		8,942
Utah			11		7		4		6,994
Arizona			20		13		7		12,884
Colorado			1		—		1		1
Texas			1		—		1		1,565
Nevada			2				2		1,061
	Total		119		77		42	$	57,214

(1)  The leases have varying terms expiring from 2004 through 2070, including renewal options.

(2)  Amount represents land and improvements with respect to properties owned by the Association 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 an active program of opening, relocating, remodeling or closing them as necessary to maintain efficient and attractive premises.

     Washington Federal’s net investment in premises, equipment and leaseholds was $60.9 million at September 30, 2003.

Item 3. Legal Proceedings

     The Association 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 condition of the Association.

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 and Related Stockholder Matters

     The information required herein is incorporated by reference from page 27 of the Company’s Annual Report to Stockholders for Fiscal 2003 (Annual Report), which is included herein as Exhibit 13.

Item 6. Selected Financial Data

     The information required herein is incorporated by reference from page 7 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 6 of the Annual Report.

Item 7A. Market Risk Disclosures

     The information required herein is incorporated by reference to Interest Rate Risk commencing on page 22 of this Form 10-K.

Item 8. Financial Statements and Supplementary Data

     The financial statements and supplementary data required herein are incorporated by reference from pages 8 through 27 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 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 which could materially affect, or are reasonably likely to materially affect, these controls subsequent to

35

the date the Company carried out its evaluation.

     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.

PART III

Item 10. Directors and Executive Officers of the Registrant

     The information required herein is incorporated by reference to pages 4 through 14 of the proxy statement dated December 15, 2003.

     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 at www.washingtonfederal.com. If the Company makes any substantive amendments to the code of ethics or grants any waiver from a provision of the code, the Company 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 12 through 14 of the proxy statement dated December 15, 2003.

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 3 and 5 through 8 of the proxy statement dated December 15, 2003.

Item 13. Certain Relationships and Related Transactions

     The information required herein is incorporated by reference to page 16 of the proxy statement dated December 15, 2003.

Item 14. Principal Accountant Fees and Services

     The information required herein is incorporated by reference to page 19 of the proxy statement dated December 15, 2003.

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PART IV

Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a)(1) The following financial statements are incorporated herein by reference from pages 8 through 27 of the Annual Report.

Independent Auditors’ Report

Consolidated Statements of Financial Condition as of September 30, 2003 and 2002

Consolidated Statements of Operations for each of the years in the three-year period ended September 30, 2003

Consolidated Statements of Stockholders’ Equity for each of the years in the three-year period ended September 30, 2003

Consolidated Statements of Cash Flows for each of the years in the three-year period ended September 30, 2003

Notes to Consolidated Financial Statements

(b) The following reports were filed on Form 8-K during the fourth quarter of fiscal 2003:

1.	Report filed July 16, 2003. Item 9. Regulation FD Disclosure. The report stated that the Company announced by press release its earnings for the quarter ended June 30, 2003.
2.	Report filed September 1, 2003. Item 9. Regulation FD Disclosure. The report stated that the Company announced by press release the completion of its acquisition of United Savings and Loan Bank.

(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
3.1	Articles of Incorporation of the Company		(1	)
3.2	Bylaws of the Company		(1	)
4	Specimen Common Stock Certificate		(1	)
10.1	1982 Employee Stock Compensation Program*		(1	)
10.2	1987 Stock Option and Stock Appreciation Rights Plan*		(1	)
10.3	1994 Stock Option and Stock Appreciation Rights Plan*		(1	)
10.4	2001 Long-Term Incentive Plan*		(2	)

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No.	Exhibit	Page
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 Auditors
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, 2002.

     (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.

December 22, 2003	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 John F. Clearman, Director	December 22, 2003
/s/ Derek L. Chinn Derek L. Chinn, Director	December 22, 2003
/s/ H. Dennis Halvorson H. Dennis Halvorson, Director	December 22, 2003
/s/ Kermit O. Hanson Kermit O. Hanson, Director	December 22, 2003
/s/ W. Alden Harris W. Alden Harris, Director	December 22, 2003
/s/ Anna C. Johnson Anna C. Johnson, Director	December 22, 2003
/s/ Thomas F. Kenney Thomas F. Kenney, Director	December 22, 2003
/s/ Guy C. Pinkerton Guy C. Pinkerton, Director, Chairman	December 22, 2003
/s/ Charles R. Richmond Charles R. Richmond, Director	December 22, 2003

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/s/ Roy M. Whitehead Roy M. Whitehead, Director, Vice Chairman, President and Chief Executive Officer	December 22, 2003
/s/ Brent J. Beardall Brent J. Beardall, CPA Senior Vice President and Chief Financial Officer	December 22, 2003

40 EX-13 3 v94943exv13.txt EXHIBIT 13 . . . Exhibit 13 TABLE OF CONTENTS Financial Highlights 1 To Our Stockholders 2 Management's Discussion 4 Selected Financial Data 8 Financial Statements 9 Notes to Financial Statements 14 Independent Auditors' Report 29 General Information 29 Directors, Officers and Offices 30 A SHORT HISTORY Washington Federal, Inc. (Company) is a savings and loan holding company headquartered in Seattle, Washington. Its principal subsidiary is Washington Federal Savings (Association), which operates 119 offices in eight western states. The Association had its origin on April 24, 1917 as Ballard Savings and Loan Association. In 1935, the state-chartered Association converted to a federal charter, became a member of the Federal Home Loan Bank (FHLB) system and obtained federal insurance. In 1958, Ballard Federal Savings and Loan Association merged with Washington Federal Savings and Loan Association of Bothell, and the latter name was retained for wider geographical acceptance. In 1971, Seattle Federal Savings and Loan Association, with three offices, merged into the Association, and at the end of 1978, was joined by the 10 offices of First Federal Savings and Loan Association of Mount Vernon. On November 9, 1982, the Association converted from a federal mutual to a federal stock association. In 1987 and 1988, acquisitions of United First Federal, Provident Federal Savings and Loan, and Northwest Federal Savings and Loan, all headquartered in Boise, Idaho, added 28 Idaho offices to the Association. In 1988, the acquisition of Freedom Federal Savings and Loan Association in Corvallis, Oregon, added 13 Oregon offices, followed in 1990 by the eight Oregon offices of Family Federal Savings. In 1991, the Association added three branches with the acquisition of First Federal Savings and Loan Association of Idaho Falls, Idaho, and acquired the deposits of First Western Savings Association of Las Vegas, Nevada, in Portland and Eugene, Oregon, where they were doing business as Metropolitan Savings Association. In 1993, 10 branches were added with the acquisition of First Federal Savings Bank of Salt Lake City, Utah. In 1994, the Association expanded into Arizona. In 1995, the stockholders approved a reorganization whereby Washington Federal Savings became a wholly owned subsidiary of a newly formed holding company, Washington Federal, Inc. That same year, the Association purchased West Coast Mutual Savings Bank with its one branch in Centralia, Washington, and opened six additional branches. In 1996, the Association acquired Metropolitan Bancorp of Seattle, adding eight offices in Washington in addition to opening four branches in existing markets. Between 1997 and 1999, Washington Federal Savings continued to develop its branch network, opening a total of seven branches and consolidating three offices into existing locations. In 2000, the Association expanded into Las Vegas, opening its first branch in Nevada along with two branches in Arizona. In 2001, the Association opened two additional branches in Arizona and its first branch in Texas with an office in the Park Cities area of Dallas. In 2002, Washington Federal Savings opened five full-service branches in existing markets and entered Colorado with a loan production office. In 2003, the Association purchased United Savings and Loan Bank with its four branches in the Seattle metropolitan area, added one new branch in Puyallup, Washington and consolidated one branch in Nampa, Idaho. The Association obtains its funds primarily through savings deposits from the general public, from repayments of loans, borrowings and retained earnings. These funds are used largely to make first lien loans to borrowers for the purchase of new and existing homes, the acquisition and development of land for residential lots, the construction of homes, the financing of small multi-family housing units, and for investment in obligations of the U.S. government, its agencies and municipalities. The Association also has a wholly-owned subsidiary, First Insurance Agency, Inc., which provides general insurance to the public. FINANCIAL HIGHLIGHTS

September 30, 2003 2002 % Change - ------------------------------------------------------------------------------------------------------------ (In thousands, except per share data) Assets ............................................................ $7,535,975 $7,392,441 +2% Cash and cash equivalents ......................................... 1,437,208 975,153 +47 Investment securities ............................................. 310,218 117,417 +164 Loans receivable and securitized assets subject to repurchase ..... 4,817,508 5,047,964 -5 Mortgage-backed securities ........................................ 648,146 970,284 -33 Customer accounts ................................................. 4,577,598 4,521,922 +1 FHLB advances and other borrowings ................................ 1,750,000 1,750,000 -- Stockholders' equity .............................................. 1,055,596 960,718 +10 Net income ........................................................ 145,544 143,954 +1 Diluted earnings per share ........................................ 2.07 2.04 +1 Dividends per share ............................................... 0.86 0.82 +5 Stockholders' equity per share .................................... 14.83 13.75 +8 Shares outstanding ................................................ 71,173 69,895 -- Return on average stockholders' equity ............................ 15.60% 16.89% -- Return on average assets .......................................... 2.00 2.05 -- Efficiency ratio .................................................. 16.51 17.57 --

TOTAL ASSETS [BAR GRAPH] STOCKHOLDERS' EQUITY [BAR GRAPH] NET INCOME PER DILUTED SHARE [BAR GRAPH] CASH DIVIDENDS PER SHARE [BAR GRAPH] RETURN ON AVERAGE EQUITY [BAR GRAPH] INTEREST RATE SPREAD [BAR GRAPH] 1 TO OUR STOCKHOLDERS Dear Stockholder: It is a privilege to report that your company achieved outstanding financial results again last year. While net income of $145,544,000 represented a modest 1.1% increase over fiscal 2002, it was nonetheless our best year ever. This is the 19th time in 21 years as a public entity that your company has reported an increase in operating results over the prior year. Earnings per share also improved to a record $2.07, a 1.5% increase over last year. Return on assets reached the "gold standard" for our industry of 2.00%, while return on equity amounted to a respectable 15.60%. Continued strong earnings also enabled the board of directors to increase your cash dividend for the 38th time since 1982 to an annualized $.88 per share. During the year, your company's balance sheet also strengthened. Assets grew to $7.536 billion and capital exceeded $1 billion at fiscal year-end for the first time. The quality of the company's assets remained high. Recent industry reports credit Washington Federal with the lowest ratio of past due loans among the largest mortgage servicing companies in the nation, while non-performing assets declined by 19% to $27 million, and net charge-offs fell to $1.2 million, the lowest in three years. Due to management's decision to invest cautiously given historically low interest rates, liquid assets continued to increase. At year-end, over $1.5 billion of the company's assets were invested very short-term, representing a potentially significant increase in future revenues. With three times the minimum capital required by our regulators, strong earnings, unprecedented liquidity and excellent asset quality, we continue to believe that we are indeed "One of America's Strongest Financial Institutions". Having said all that, it's equally important to note that the past two years of peak financial performance occurred in a favorable climate for our business. It would seem imprudent to expect such conditions to persist indefinitely. For example, abnormally high prepayments of mortgage loans and mortgage backed securities during each of the past two years caused a temporary surge in interest income. This occurred because deferred revenues, primarily loan fees collected at origination and securities discounts that normally amortize over a longer period of time, were accelerated into current accounting periods. The company has also benefited from a very steep yield curve, meaning a historically wide spread between short and long-term interest rates, which we know from hard experience won't last forever. In 2003, we also reached a cyclical top in the demand for mortgage loans. With the passing of the refinance boom, we are already experiencing a slowdown in the mortgage market and we expect intensified price competition until the hangover of excess capacity in the industry melts away. The good news is that, in choosing not to maximize current earnings, the flexibility to take advantage of changing market conditions was preserved. During the past year we focused on building liquidity and increasing net worth as a percentage of assets. This approach had a cost to current earnings, but offered the benefit of less interest rate risk and the potential for higher earnings in the future than we might otherwise have achieved. With interest rates higher at present, it appears that we will have the opportunity to invest at better rates than we could have during recent quarters. Therefore, we believe that your company is well positioned to continue its long tradition of outperforming the industry. On August 31st, the acquisition of United Savings and Loan Bank was finalized. This was our first acquisition since 1996, and added $344 million in assets and $268 million in deposits. United was established in 1960 to provide financial services to immigrants to Seattle from Asian countries, primarily China, who at that time had difficulty accessing the banking system. It is a privilege to welcome the employees and customers of this unique company to Washington Federal. With the addition of four United branches in Seattle, one new office in Puyallup, Washington, and the consolidation of one office in Nampa, Idaho, the branch count at year-end totaled 119. During the year, we also completed a management transition that has been underway for many years. Linda Brower, who joined us in January to head Human Resources, was recently promoted to Executive Vice President. Brent Beardall, in his third year with Washington Federal, was promoted to Senior Vice President and Chief Financial Officer. Linda and Brent join Ed Hedlund, Jack Jacobson and myself on the Executive Management Committee. My hope is that this outstanding group of executives will work with the board and me to lead and manage the company for the next ten to fifteen years. Recently, we also added two new members to the Board of Directors. Derek Chinn, former President & CEO of United Savings and Loan Bank joined the board in September. Tom Kenney, VP Finance and the principal financial officer of Haggen, Inc., a Bellingham, Washington based grocery store chain, joined the board in October. Prior to joining Haggen, 2 [GROUP PHOTO] (Standing - left to right) Edwin C. Hedlund, Executive Vice President and Secretary, Roy M. Whitehead, Vice Chairman, President and Chief Executive Officer, Linda S. Brower, Executive Vice President, (Seated - left to right) Jack B. Jacobson, Executive Vice President and Chief Lending Officer, Brent J. Beardall, Senior Vice President and Chief Financial Officer. Inc. in 1996, Mr. Kenney spent 20 years in the financial services industry. Both new directors will serve on the board's Audit Committee and possess the financial literacy necessary to represent shareholder interests in that important capacity. I thank them both for their willingness to serve during a time when so much is expected of directors. Alas, some good people are moving on, too. At the Annual Meeting in January, 2004 Kermit Hanson, Dean Emeritus of the Graduate School of Business at the University of Washington and a director since 1966, will retire from the Board. I hope that you will take a moment at the meeting to thank him for his 38 years of outstanding service to the company. I also wish to recognize Ron Saper, former Executive Vice President, who retired this year after serving 11 years as your company's Chief Financial Officer. The legacy of Ron's financial discipline will benefit stockholders for years to come. In August, Standard & Poor's, in a promotion of sorts, removed Washington Federal from their Small Cap 600 Index and added our stock to their Mid Cap 400 Index. This was nice recognition of the growth in the market value of your company, and exposes our stock to a whole new universe of investors. It's interesting to note that, although we still think of ourselves as a small company, our current market capitalization of nearly $2 billion places us in the top 10% of all NASDAQ companies, and in the top 30% of all NYSE companies. Based on net income last year, our rankings are even higher: top 2% of NASDAQ companies and top 20% of NYSE companies. In closing, I wish to thank our customers, employees, stockholders and directors for their continuing support. Let me also remind you to send your friends, neighbors and relatives to Washington Federal for their home loans and savings needs. I hope to see you at the Annual Stockholders' Meeting scheduled at 2:00 pm, on Wednesday, January 21, 2004 at the Sheraton Hotel in downtown Seattle, Washington. Sincerely, /s/ Roy M. Whitehead Roy M. Whitehead Vice Chairman, President and Chief Executive Officer 3 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL Washington Federal, Inc. (Company) is a savings and loan holding company. The Company's primary operating subsidiary is Washington Federal Savings (Association). CRITICAL Preparation of financial statements in conformity with accounting ACCOUNTING principles generally accepted in the United States of America POLICIES requires the use of estimates and assumptions that affect reported amounts of certain assets, liabilities, revenues and expenses in the Company's consolidated financial statements. Accordingly, estimated amounts may fluctuate from one reporting period to another due to changes in assumptions underlying estimated values. The Company has determined that the only accounting policy deemed critical to an understanding of the consolidated financial statements of Washington Federal, Inc. relates to the methodology for determining the valuation of the allowance for loan losses, as more fully described under "Loans receivable" in Note A to the Consolidated Financial Statements. INTEREST The Company accepts a high level of interest rate volatility as a RATE RISK result of its policy to originate fixed-rate single family home loans that are longer-term than the short-term characteristics of its liabilities of customer accounts and borrowed money. At September 30, 2003, the Company had approximately $1,200,000,000 more liabilities subject to repricing in the next year than assets subject to repricing, which amounted to a negative maturity gap of 16% of total assets, compared to a negative maturity gap of 26% in the prior year. The Company's interest rate risk approach has never resulted in the recording of a monthly operating loss. The Company's net interest spread decreased from 3.01% at September 30, 2002 to 2.47% at September 30, 2003. The spread decreased primarily from record low interest rates on mortgages, as well as a continued shift in the asset mix toward shorter-term assets. As of September 30, 2003, 19.1% of the Company's assets were in short-term investments. During this phase of the interest rate cycle the Company chose to build cash, reduce the amount of loans and mortgage-backed investments and maintain customer deposits with little or no growth. As of September 30, 2003, the Company had accumulated $1,437 million in cash and cash equivalents, which can be invested long-term in the future to generate additional revenues. This cash position was generated principally through the net runoff of loans and mortgage-backed investments of $441 million and $94 million of cash provided by the acquisition of United Savings and Loan Bank (United). ASSET The Company maintains an allowance to absorb losses inherent in QUALITY the loan portfolio. The allowance is based on ongoing, quarterly assessments of the probable and estimable losses inherent in the loan portfolio. In analyzing the existing loan portfolio, the Company applies specific loss percentage factors to the different loan types. The loss percentages are 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 and current economic conditions. Multi-family loans, builder construction loans and certain other loans are reviewed on an individual basis to assess the ability of the borrowers to continue to service all of their principal and interest obligations. If the loans show signs of weakness, they are downgraded and, if warranted, placed on non-accrual status. The Company has an Asset Quality Review Committee that reports the results of its internal reviews to the Board of Directors on a quarterly basis. Non-performing assets were $27,434,000, or .36% of total assets at September 30, 2003 compared to $33,876,000, or .46% of total assets at September 30, 2002. Total delinquencies over 30 days were $34,736,000, or .46% of total assets at September 30, 2003 compared to $37,419,000, or .51% of total assets at September 30, 2002. The aforementioned asset quality indicators, when compared to others in the industry, demonstrate the continued excellent quality of the loan portfolio. LIQUIDITY The Company's net worth at September 30, 2003 was $1,055,596,000, AND CAPITAL or 14.0% of total assets. This is an increase of $94,878,000 from RESOURCES September 30, 2002 when net worth was $960,718,000, or 13.0% of total assets. The Company's net worth increased due in part to net income of $145,544,000, proceeds received from the exercise of common stock options of $4,726,000, purchases by the Employee Stock Ownership Plan of $1,522,000 and acquisition-related stock issuances of $33,282,000. Net worth was reduced by $60,004,000 as a result of cash dividends paid, a decrease in unrealized gains on available-for-sale securities of $21,376,000 and $10,034,000 of stock repurchases. The ratio of net worth to total assets remains at a high level despite the distribution of 41.2% of earnings in the form of cash dividends. Washington Federal's percentage of net worth to total assets is among the highest in the nation and is over three times the minimum required under Office of Thrift Supervision (OTS) regulations (see Note O). Management believes this strong net worth position will help protect the Company against interest rate risk and will enable it to compete more effectively. Customer accounts increased $55,676,000, or 1.2% from one year ago, largely due to the acquisition of $269,924,000 of deposits in connection with the United merger, offset by net runoff of existing deposits of $214,248,000. Management's strategy during this phase of the interest rate cycle has been to keep deposit growth to a minimum until excess cash is deployed into higher yielding investments. The Company's cash and cash equivalents amounted to $1,437,208,000 at September 30, 2003, a significant increase from $975,153,000 one year ago. This continued shift in the balance sheet from long-term assets to short-term assets resulted from the decision to position the balance sheet to protect against the possibility of rising interest rates in the future. See "Interest Rate Risk" above. 4 CHANGES IN AVAILABLE-FOR-SALE AND HELD-TO-MATURITY SECURITIES. The Company FINANCIAL purchased $559,995,000 of mortgage-backed and investment POSITION securities during fiscal 2003, $459,895,000 of which have been categorized as available-for-sale and $100,100,000 of which have been classified as held-to-maturity. The Company had $80,000,000 in sales of available-for-sale securities, resulting in a net realized gain of $992,000. As of September 30, 2003, the Company had unrealized gains in its available-for-sale portfolio of $34,624,000, net of tax, which are recorded as part of stockholders' equity. LOANS RECEIVABLE AND SECURITIZED ASSETS SUBJECT TO REPURCHASE. Loans receivable and securitized assets subject to repurchase decreased 4.6% to $4,817,508,000 at September 30, 2003 from $5,047,964,000 one year earlier. The decrease resulted from Management's decision not to aggressively compete based on price during periods of increased refinancing activity caused by record low home mortgage rates. The allowance for losses on loans and securitized assets subject to repurchase increased $1,894,000 during the year as a result of the United acquisition, which added $1,597,000 in allowance, and provision in excess of net charge-offs of $297,000. The growth in the total allowance resulted primarily from the acquisition of United and changes in both the geographic mix and loan mix of the portfolio. The percentage of loans outside of Washington, Idaho, Oregon, Utah and Arizona increased to 10.5% at September 30, 2003 from 1.6% one year earlier as a result of the purchase of $418,000,000 of whole loans on residences primarily in California. Construction and land loans increased to 16.5% of the portfolio at September 30, 2003 from 14.1% at September 30, 2002. The amount of reserves allocated to impaired loans increased to $1,000,000 at September 30, 2003 from no allocation in the prior year based on the estimated value of the underlying collateral of the impaired loans. REAL ESTATE HELD FOR SALE. The balance at September 30, 2003 was $16,204,000, a decrease from $17,587,000 reported one year ago. FHLB STOCK. FHLB stock amounted to $143,851,000 at September 30, 2003 compared with $132,320,000 one year ago. The Company received $8,155,000 in stock dividends during the year and $3,376,000 in stock that was acquired from United. INTANGIBLE ASSETS. On August 31, 2003, the Company acquired United. The acquisition produced goodwill of $19,263,000, a core deposit intangible of $4,921,000 and a non-compete agreement intangible of $575,000. As a result, goodwill increased to $54,966,000 at September 30, 2003 compared to $35,703,000 one year ago. Additionally, the unamortized balance of the core deposit intangible and the non-compete agreement intangible were $4,805,000 and $565,000, respectively, at September 30, 2003. OTHER ASSETS. Other assets increased $10,682,000 to $12,073,000 at September 30, 2003 from a commitment the Company made to invest a total of $10,000,000 into a partnership to provide low-income housing. As of September 30, 2003, only $100,000 had been invested. Current accounting rules require that the total amount of the unfunded investment commitment, $9,900,000, be reported as both an other liability and an other asset. CUSTOMER ACCOUNTS. Customer accounts at September 30, 2003 totaled $4,577,598,000 compared with $4,521,922,000 at September 30, 2002, a 1.2% increase. See "Liquidity and Capital Resources" above. FHLB ADVANCES AND OTHER BORROWINGS. Total borrowings of $1,750,000,000 at September 30, 2003 remained unchanged from one year ago. See "Interest Rate Risk" above. RESULTS OF GENERAL OPERATIONS Fiscal 2003 net income increased 1% from fiscal 2002. See Note S, "Selected Quarterly Financial Data (Unaudited)," which highlights the quarter-by-quarter results for the years ended September 30, 2003 and 2002.

Dec 31 Mar 31 Jun 30 Sep 30 Dec 31 Mar 31 Jun 30 Sep 30 2001 2002 2002 2002 2002 2003 2003 2003 -------------------------------------------------------------- Interest rate on loans and mortgage-backed securities* ............ 7.49% 7.41% 7.35% 7.26% 7.10% 6.94% 6.68% 6.40% Interest rate on investment securities** ................ 5.50 3.19 3.09 2.82 2.29 2.28 2.00 1.98 -------------------------------------------------------------- Combined ............................... 7.37 6.96 6.89 6.53 6.06 5.84 5.49 5.28 Interest rate on customer accounts ....... 3.78 3.25 3.16 2.94 2.65 2.42 2.19 1.96 Interest rate on borrowings .............. 5.24 5.24 5.24 5.03 5.03 5.03 5.03 5.03 -------------------------------------------------------------- Combined ............................... 4.16 3.76 3.69 3.52 3.32 3.16 3.00 2.81 -------------------------------------------------------------- Interest rate spread ..................... 3.21% 3.20% 3.20% 3.01% 2.74% 2.68% 2.49% 2.47% ==============================================================

* Includes securitized assets subject to repurchase **Includes municipal bonds at tax-equivalent rates and cash equivalents The interest rate spread decreased during fiscal 2003 from 3.01% at September 30, 2002 to 2.47% at September 30, 2003. See "Interest Rate Risk" above. COMPARISON OF FISCAL 2003 RESULTS WITH FISCAL 2002 Interest income on loans, securitized assets subject to repurchase and mortgage-backed securities decreased $66,203,000 (13.7%) in fiscal 2003 from 2002 as interest rates declined to 6.40% from 7.26% one year ago. The Company originated $1,867,112,000 in loans, which was more than offset by loan repayments and payoffs of 5 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) $2,604,297,000 in fiscal 2003. Interest income benefited from $44.5 million of net accretion of loan fees and discounts on mortgage-backed securities during fiscal 2003, an increase of $15.6 million from the prior year caused by record prepayments of mortgages and related securities. If prepayment speeds return to historical levels, this additional accretion will subside. Interest and dividend income on investment securities and cash equivalents increased $11,428,000 (50.7%) in fiscal 2003 from fiscal 2002. Rates declined to 1.98% at September 30, 2003 compared with 2.82% at September 30, 2002. The combined investment securities, cash equivalents and FHLB stock portfolio increased 56.4% to $1,839,847,000 at September 30, 2003 versus $1,176,737,000 one year ago. Interest expense on customer accounts decreased 30.4% to $105,919,000 for fiscal 2003 from $152,288,000 for fiscal 2002. The decrease related to a small increase in customer accounts to $4,577,598,000 from $4,521,922,000 the prior year, coupled with a significant decrease in the cost of customer accounts to 1.96% at year end compared to 2.94% one year ago. Interest expense on FHLB advances and other borrowings increased to $88,965,000 in fiscal 2003 from $82,653,000 in fiscal 2002 primarily due to an increase in average borrowings to $1,750,648,000 as of September 30, 2003 from $1,568,220,000 one year ago. The average cost of borrowings as of September 30, 2003 remained constant at 5.03% from one year ago. The provision for loan losses was $1,500,000 for fiscal 2003 compared to $7,000,000 in fiscal 2002. This decrease reflects the continued decline in the amount of the loan portfolio combined with strong asset quality indicators. Non-performing assets remained low at $27,434,000, or .36% of total assets at September 30, 2003 compared with $33,876,000, or .46% of total assets at September 30, 2002. Management believes the allowance for loan losses, totaling $25,806,000, or 94% of non-performing assets, is adequate to absorb estimated losses inherent in the portfolio. Total other income increased $6,929,000 (85.7%) in fiscal 2003 from fiscal 2002. This increase is primarily the result of fee income related to prepayments and the refinancing of mortgage loans and a $3,382,000 gain on the sale of real estate. Net gains on the sale of securities totaled $992,000 in fiscal 2003 compared to $765,000 in fiscal 2002. Total other expense decreased $4,812,000 (9.8%) in fiscal 2003 over fiscal 2002. Compensation expense decreased $3,213,000 in fiscal 2003, primarily attributable to a larger bonus being paid to all employees in fiscal 2002 versus fiscal 2003. Routine operating expenses, including data processing, decreased $2,044,000 in fiscal 2003 due to reduced depreciation expense of $422,000 and general cost containment measures. Personnel, including part-time employees considered on a full-time equivalent basis, increased to 754 at September 30, 2003 compared to 726 at September 30, 2002. The branch network increased to 119 offices at September 30, 2003 versus 115 offices one year ago. The United acquisition added 36 full-time equivalent employees and four branches. Other expense for fiscal 2003 equaled .61% of average assets compared with .70% in fiscal 2002. Income tax expense increased $621,000 (0.8%) in fiscal 2003. The effective tax rate was 35.19% for fiscal 2003 versus 35.25% for fiscal 2002. COMPARISON OF FISCAL 2002 RESULTS WITH FISCAL 2001 Interest income on loans, securitized assets subject to repurchase and mortgage-backed securities decreased $33,792,000 (6.5%) in fiscal 2002 from 2001 as average interest rates declined to 7.26% from 7.61% one year ago. The Company originated $1,430,834,000 in loans, which was more than offset by loan repayments and payoffs of $1,823,281,000 in fiscal 2002. Interest and dividend income on investment securities and cash equivalents increased $4,634,000 (25.9%) in fiscal 2002 from fiscal 2001. The weighted-average yield declined to 2.82% at September 30, 2002 compared with 7.79% at September 30, 2001. The combined investment securities, cash equivalents and FHLB stock portfolio increased 336% to $1,176,737,000 at September 30, 2002 versus $270,085,000 one year ago. Interest expense on customer accounts decreased 21.8% to $152,288,000 for fiscal 2002 from $194,710,000 for fiscal 2001. The decrease related to an increase in customer accounts to $4,521,922,000 from $4,316,692,000 the prior year coupled with a significant decrease in the average cost of customer accounts to 2.94% at year end compared to 4.31% one year ago. Interest expense on FHLB advances and other borrowings decreased to $82,653,000 in fiscal 2002 from $125,410,000 in fiscal 2001 primarily due to a decline in average borrowings to $1,568,220,000 as of September 30, 2002 from $2,264,001,000 one year ago. This decrease in average volume was coupled with a decrease in average rates to 5.03% as of September 30, 2002 from 5.09% at September 30, 2001. The provision for loan losses was $7,000,000 for fiscal 2002 compared to $1,850,000 in fiscal 2001. This increase reflects the continued decline in economic conditions in the markets the Company serves, including high unemployment levels and a slowdown in the home construction market in the Pacific Northwest. However, non-performing assets remained low at $33,876,000, or .46% of total assets at September 30, 2002 compared with $33,758,000, or .48% of total assets at September 30, 2001. Management believes the allowance for loan losses, totaling $23,912,000, or 71% of non-performing assets, is adequate to absorb estimated losses inherent in the portfolio. Total other income decreased $1,648,000 (16.9%) in fiscal 2002 from fiscal 2001. Net gains on the sale of securities totaled $765,000 in fiscal 2002 compared to $3,235,000 in fiscal 2001. The decline was partially offset by a one time gain of $515,000 on the disposition of a branch in fiscal 2002. Total other expense increased $2,050,000 (4.4%) in fiscal 2002 over fiscal 2001. Compensation expense increased $5,776,000 in fiscal 2002, primarily attributable to a bonus paid to all employees based on improved 6 operating results (adjusted by goodwill amortization); however, this was offset by the elimination of goodwill amortization expense of $5,875,000 over fiscal 2001. Routine operating expenses, including data processing, increased $1,868,000 in fiscal 2002 largely due to the installation of a new teller system. Personnel, including part-time employees considered on a full-time equivalent basis, increased to 726 at September 30, 2002 compared to 714 at September 30, 2001. The branch network increased to 115 offices at September 30, 2002 versus 111 offices one year ago. Other expense for fiscal 2002 equaled .70% of average assets compared with .68% in fiscal 2001. Income tax expense increased $16,550,000 (26.8%) in fiscal 2002. The effective tax rate was 35.25% for both fiscal 2002 and 2001. 7 SELECTED FINANCIAL DATA

Year ended September 30, 2003 2002 2001 2000 1999 - --------------------------------------------------------------------------------------------------- (In thousands, except per share data) Interest income ............................. $450,185 $504,960 $534,118 $495,949 $453,620 Interest expense ............................ 194,884 234,941 320,120 299,511 244,490 ---------------------------------------------------- Net interest income ......................... 255,301 270,019 213,998 196,438 209,130 Provision for loan losses ................... 1,500 7,000 1,850 -- 684 Other income ................................ 14,823 8,206 10,137 11,309 12,779 Other expense ............................... 44,059 48,871 46,821 44,568 44,144 ---------------------------------------------------- Income before income taxes ................ 224,565 222,354 175,464 163,179 177,081 Income taxes ................................ 79,021 78,400 61,850 57,500 62,795 ---------------------------------------------------- Net income ................................ $145,544 $143,954 $113,614 $105,679 $114,286 ==================================================== Per share data Basic earnings ............................ $2.09 $2.06 $1.63 $1.51 $1.55 Diluted earnings .......................... 2.07 2.04 1.61 1.50 1.54 Cash dividends ............................ 0.86 0.82 0.77 0.74 0.68

September 30, 2003 2002 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------- (In thousands) Total assets ................................ $7,535,975 $7,392,441 $7,026,743 $6,719,841 $6,163,503 Loans and mortgage-backed securities* ....... 5,465,654 6,018,248 6,570,309 6,277,340 5,731,644 Investment securities** ..................... 1,696,169 1,044,417 145,724 142,992 141,753 Customer accounts ........................... 4,577,598 4,521,922 4,316,692 3,465,270 3,379,502 FHLB advances ............................... 1,650,000 1,650,000 1,637,500 1,209,000 1,454,000 Other borrowings ............................ 100,000 100,000 30,000 1,154,509 454,257 Stockholders' equity ........................ 1,055,596 960,718 874,009 759,165 750,023 Number of Customer accounts ......................... 217,785 213,404 211,570 191,343 189,419 Mortgage loans ............................ 33,975 38,096 42,032 41,741 40,104 Offices ................................... 119 115 111 108 107

* Includes securitized assets subject to repurchase ** Includes cash equivalents 8 WASHINGTON FEDERAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

September 30, 2003 2002 - ------------------------------------------------------------------------------------------------------------------------------------ (In thousands) ASSETS Cash and cash equivalents, including repurchase agreements of $1,350,000 and $925,000 .................. $1,437,208 $ 975,153 Available-for-sale securities, including encumbered securities of $76,921 and $114,583, at fair value .. 804,186 918,776 Held-to-maturity securities, including encumbered securities of $75,690 and $0, at amortized cost ...... 154,178 168,925 Securitized assets subject to repurchase, net .......................................................... 210,782 755,961 Loans receivable, net .................................................................................. 4,606,726 4,292,003 Interest receivable .................................................................................... 29,489 39,503 Premises and equipment, net ............................................................................ 60,942 55,119 Real estate held for sale .............................................................................. 16,204 17,587 FHLB stock ............................................................................................. 143,851 132,320 Intangible assets ...................................................................................... 60,336 35,703 Other assets ........................................................................................... 12,073 1,391 ------------------------- $7,535,975 $7,392,441 ========================= LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Customer accounts Savings and demand accounts .......................................................................... $4,520,051 $4,452,250 Repurchase agreements with customers ................................................................. 57,547 69,672 ------------------------- 4,577,598 4,521,922 FHLB advances .......................................................................................... 1,650,000 1,650,000 Other borrowings, primarily securities sold under agreements to repurchase ............................. 100,000 100,000 Advance payments by borrowers for taxes and insurance .................................................. 23,281 22,704 Federal and state income taxes, including net deferred liabilities of $70,485 and $80,185 .............. 70,011 84,235 Accrued expenses and other liabilities ................................................................. 59,489 52,862 ------------------------- 6,480,379 6,431,723 STOCKHOLDERS' EQUITY Common stock, $1.00 par value, 100,000,000 shares authorized, 85,553,789 and 83,833,244 shares issued; 71,173,487 and 69,894,902 shares outstanding .......................................... 85,554 76,212 Paid-in capital ........................................................................................ 1,085,650 968,858 Accumulated other comprehensive income, net of tax ..................................................... 34,624 56,000 Treasury stock, at cost; 14,380,302 and 13,938,342 shares .............................................. (207,337) (198,279) Retained earnings ...................................................................................... 57,105 57,927 ------------------------- 1,055,596 960,718 ------------------------- $7,535,975 $7,392,441 =========================

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 9 WASHINGTON FEDERAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS

Year ended September 30, 2003 2002 2001 - --------------------------------------------------------------------------------------------------------------------------- (In thousands, except per share data) INTEREST INCOME Loans and securitized assets subject to repurchase ...................... $ 353,286 $ 406,262 $ 426,240 Mortgage-backed securities .............................................. 62,911 76,138 89,952 Investment securities ................................................... 33,988 22,560 17,926 ------------------------------------------------ 450,185 504,960 534,118 INTEREST EXPENSE Customer accounts ....................................................... 105,919 152,288 194,710 FHLB advances and other borrowings ...................................... 88,965 82,653 125,410 ------------------------------------------------ 194,884 234,941 320,120 ------------------------------------------------ NET INTEREST INCOME ..................................................... 255,301 270,019 213,998 Provision for loan losses ............................................... 1,500 7,000 1,850 ------------------------------------------------ NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES ..................... 253,801 263,019 212,148 OTHER INCOME Gain on sale of securities, net ......................................... 992 765 3,235 Gain on sale of real estate ............................................. 3,382 -- -- Other ................................................................... 10,643 7,323 6,501 ------------------------------------------------ 15,017 8,088 9,736 OTHER EXPENSE Compensation and fringe benefits ........................................ 30,846 34,059 28,283 Amortization of intangibles ............................................. 126 -- 5,875 Occupancy expense ....................................................... 5,098 4,778 4,497 Other ................................................................... 7,989 10,034 8,166 ------------------------------------------------ 44,059 48,871 46,821 Gain (loss) on real estate acquired through foreclosure, net ............ (194) 118 401 ------------------------------------------------ INCOME BEFORE INCOME TAXES .............................................. 224,565 222,354 175,464 Income taxes Current ............................................................... 80,403 79,423 58,641 Deferred .............................................................. (1,382) (1,023) 3,209 ------------------------------------------------ 79,021 78,400 61,850 ------------------------------------------------ NET INCOME $ 145,544 $ 143,954 $ 113,614 ================================================ PER SHARE DATA Basic earnings .......................................................... $ 2.09 $ 2.06 $ 1.63 Diluted earnings ........................................................ 2.07 2.04 1.61 Cash dividends .......................................................... 0.86 0.82 0.77 Weighted average number of shares outstanding, including dilutive stock options ...................................... 70,232,695 70,523,160 70,461,517

10 SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS WASHINGTON FEDERAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Accumulated Other Common Paid-in Retained Comprehensive Treasury Stock Capital Earnings Income Stock Total - ---------------------------------------------------------------------------------------------------------------------------------- (In thousands) Balance at October 1, 2000 .................... $ 62,296 $ 785,745 $ 98,142 $ 3,000 $ (190,018) $ 759,165 Eleven-for-ten stock split distributed February 23, 2001 ............... 6,247 101,767 (108,105) (91) Comprehensive income: Net income .................................. 113,614 113,614 Other comprehensive income, net of tax of $26,131: Unrealized gains on securities .............. 50,095 50,095 Reclassification adjustment for gains on securities sold ........................... (2,095) (2,095) -------- Total comprehensive income .................... 161,614 Dividends ..................................... (54,011) (54,011) Proceeds from exercise of common stock options ........................ 459 5,663 6,122 Proceeds from Employee Stock Ownership Plan ........................ 346 806 1,152 Restricted stock .............................. 4 112 (58) 58 ----------------------------------------------------------------------------------- Balance at September 30, 2001 ................. 69,006 893,633 49,582 51,000 (189,212) 874,009 ----------------------------------------------------------------------------------- Eleven-for-ten stock split distributed February 22, 2002 ............... 6,905 70,824 (77,792) (63) Comprehensive income: Net income .................................. 143,954 143,954 Other comprehensive income, net of tax of $2,722: Unrealized gains on securities ............ 5,495 5,495 Reclassification adjustment for gains on securities sold ......................... (495) (495) -------- Total comprehensive income .................... 148,954 Dividends ..................................... (57,383) (57,383) Proceeds from exercise of common stock options ........................ 282 3,462 3,744 Proceeds from Employee Stock Ownership Plan ........................ 461 1,157 1,618 Restricted stock .............................. 19 478 (434) 63 Treasury stock purchases ...................... (10,224) (10,224) ----------------------------------------------------------------------------------- Balance at September 30, 2002 ................. $ 76,212 $ 968,858 $ 57,927 $ 56,000 $ (198,279) $ 960,718 ----------------------------------------------------------------------------------- Eleven-for-ten stock split distributed February 21, 2003 ............... 7,622 79,612 (87,368) (134) Comprehensive income: Net income .................................. 145,544 145,544 Other comprehensive income, net of tax of $11,637: Changes in unrealized gains on securities (20,733) (20,733) Reclassification adjustment for gains on securities sold ......................... (643) (643) -------- Total comprehensive income .................... 124,168 Dividends ..................................... (60,004) (60,004) Proceeds from exercise of common stock options ........................ 357 4,369 4,726 Tax benefit related to exercise of stock options ............................ 1,218 1,218 Proceeds from Employee Stock Ownership Plan ........................ 546 976 1,522 Restricted stock .............................. 14 332 (212) 134 Acquisition-related stock issuance ............ 1,349 31,933 33,282 Treasury stock purchases ...................... (10,034) (10,034) ----------------------------------------------------------------------------------- BALANCE AT SEPTEMBER 30, 2003 ................. $ 85,554 $ 1,085,650 $ 57,105 $ 34,624 $ (207,337) $ 1,055,596 ===================================================================================

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 11 WASHINGTON FEDERAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

Year ended September 30, 2003 2002 2001 - ----------------------------------------------------------------------------------------------------------------------------------- (In thousands) CASH FLOWS FROM OPERATING ACTIVITIES Net income ........................................................................ $ 145,544 $ 143,954 $ 113,614 Adjustments to reconcile net income to net cash provided by operating activities Amortization of fees, discounts and premiums, net ............................... (13,850) (6,103) (143) Amortization of intangible assets ............................................... 126 -- 5,874 Depreciation .................................................................... 3,099 3,521 2,996 Provision for loan losses ....................................................... 1,500 7,000 1,850 Gain on investment securities and real estate held for sale, net ................ (4,180) (883) (3,636) Decrease (increase) in accrued interest receivable .............................. 9,126 8,777 (7,580) Increase (decrease) in income taxes payable ..................................... (5,308) (11,883) 15,106 FHLB stock dividends ............................................................ (8,155) (7,959) (8,047) Decrease (increase) in other assets ............................................. (10,151) (376) 3,714 Increase in accrued expenses and other liabilities .............................. 3,226 1,634 1,436 ---------------------------------------------- Net cash provided by operating activities ......................................... 120,977 137,682 125,184 ---------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Loans and contracts originated Loans on existing property ...................................................... (1,078,374) (892,595) (1,157,278) Construction loans .............................................................. (487,692) (363,420) (369,808) Land loans ...................................................................... (163,533) (87,212) (130,161) Loans refinanced ................................................................ (137,513) (87,607) (86,969) ---------------------------------------------- (1,867,112) (1,430,834) (1,744,216) Savings account loans originated .................................................. (1,866) (5,765) (3,342) Loan principal repayments ......................................................... 2,604,297 1,823,281 1,318,784 Increase (decrease) in undisbursed loans in process ............................... 71,804 (13,323) (29,503) Loans purchased ................................................................... (417,669) (60,874) (2,842) Available-for-sale securities purchased ........................................... (459,895) (180,683) (89,882) Principal payments and maturities of available-for-sale securities ................ 487,438 344,986 216,992 Available-for-sale securities sold ................................................ 80,000 10,000 50,282 Held-to-maturity securities purchased ............................................. (100,100) -- -- Principal payments and maturities of held-to-maturity securities .................. 115,812 80,154 45,325 Cash provided by acquisition ...................................................... 94,314 -- -- Proceeds from sales of real estate held for sale .................................. 16,342 19,603 19,268 Premises and equipment purchased, net ............................................. (4,730) (4,398) (6,751) ---------------------------------------------- Net cash provided (used) by investing activities .................................. 618,635 582,147 (225,885) ---------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Net increase (decrease) in customer accounts ...................................... (214,248) 205,230 851,422 Net decrease in short-term borrowings ............................................. -- (117,500) (1,646,009) Proceeds from long-term borrowings ................................................ -- 200,000 950,000 Proceeds from exercise of common stock options .................................... 5,944 3,744 6,122 Dividends paid .................................................................... (60,004) (57,383) (54,044) Proceeds from Employee Stock Ownership Plan ....................................... 1,522 1,618 1,152 Treasury stock purchased, net ..................................................... (10,034) (10,224) -- Increase (decrease) in advance payments by borrowers for taxes and insurance ...... (737) (492) (5,897) ---------------------------------------------- Net cash provided (used) by financing activities .................................. (277,557) 224,993 102,746 ---------------------------------------------- INCREASE IN CASH AND CASH EQUIVALENTS ............................................. 462,055 944,822 2,045 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR .................................... 975,153 30,331 28,286 ---------------------------------------------- CASH AND CASH EQUIVALENTS AT END OF YEAR .......................................... $ 1,437,208 $ 975,153 $ 30,331 ==============================================

12 SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS WASHINGTON FEDERAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

Year ended September 30, 2003 2002 2001 - ----------------------------------------------------------------------------------------------------------------------------------- (In thousands) SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION NON-CASH INVESTING ACTIVITIES Real estate acquired through foreclosure ........................................ $ 11,771 $ 20,294 $ 18,229 NON-CASH OPERATING ACTIVITIES Assets securitized, subject to repurchase, net .................................. -- -- 1,388,197 CASH PAID DURING THE YEAR FOR Interest ........................................................................ 195,360 237,480 322,933 Income taxes .................................................................... 83,878 90,743 45,746 The following summarizes the non-cash activities relating to the acquisition Fair value of assets and intangibles acquired, including goodwill ............... $ (343,626) $ -- $ -- Fair value of liabilities assumed ............................................... 276,872 -- -- Fair value of stock issued ...................................................... 33,282 -- -- ---------------------------------------------- Cash paid out in acquisition .................................................... (33,472) -- -- Plus cash acquired .............................................................. 127,786 -- -- ---------------------------------------------- Net cash provided by the acquisition ............................................ $ 94,314 $ -- $ -- ==============================================

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 13 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED SEPTEMBER 30, 2003, 2002 AND 2001 NOTE A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include the accounts of Washington Federal, Inc. (Company) and its wholly owned subsidiaries. All significant intercompany transactions and balances have been eliminated. DESCRIPTION OF BUSINESS. Washington Federal, Inc. is a savings and loan holding company. The Company's principal operating subsidiary is Washington Federal Savings (Association). The Company is principally engaged in the business of attracting savings deposits from the general public and investing these funds, together with borrowings and other funds, in one-to-four family residential real estate loans and multi-family real estate loans. The Company conducts its activities from a network of 119 offices located in Washington, Oregon, Idaho, Utah, Arizona, Nevada, Texas and Colorado. CASH AND CASH EQUIVALENTS. Cash and cash equivalents include cash on hand, amounts due from banks, overnight investments and repurchase agreements with an initial maturity of three months or less. INVESTMENTS AND MORTGAGE-BACKED SECURITIES. The Company accounts for investments and mortgage-backed securities in two categories: held-to-maturity and available-for-sale. Held-to-maturity securities - Securities classified as held-to-maturity are accounted for at amortized cost, but the Company must have both the positive intent and the ability to hold those securities to maturity. There are very limited circumstances under which securities in the held-to-maturity category can be sold without jeopardizing the cost basis of accounting for the remainder of the securities in this category. Recognition for unrealized losses is provided if market valuation differences are deemed to be other than temporary. Available-for-sale securities - Securities not classified as held-to-maturity are considered to be available-for-sale. Gains and losses realized on the sale of these securities are based on the specific identification method. Unrealized gains and losses for available-for-sale securities are excluded from earnings and reported as a net amount in the accumulated other comprehensive income component of stockholders' equity. Management evaluates debt and equity securities for other than temporary impairment on a quarterly basis based on the securities' current credit quality, interest rates, term to maturity and management's intent and ability to hold the securities until the principal is recovered. Any other than temporary declines in fair value are recognized in the income statement as loss from securities. Premiums and discounts on investments are deferred and recognized over the life of the asset using the interest method. Forward contracts to purchase mortgage-backed securities are recorded at fair value on the balance sheet as available-for-sale securities. These contracts are designated by the Company as cash flow hedges of the price risk of the anticipated purchase of securities. Under cash flow hedge accounting, if specific criteria are met, the unrealized gains or losses are recognized as a component of stockholders' equity through comprehensive income until the related forecasted purchase of securities occurs, whereupon the remaining unrealized gains or losses are included in the basis of the purchased securities. To the extent that forward contracts to purchase securities fail to meet hedging criteria, including purchasing the mortgage-backed securities within a specific time frame, the fair value of the contracts will be included in earnings. The Company may enter into certain forward contracts to sell mortgage-backed securities to hedge the price risk in certain mortgage-backed securities accounted for as available-for-sale securities. To the extent forward sales contracts meet specific hedging criteria, the market value change associated with the contract is recorded through comprehensive income. To the extent that forward sales contracts fail to meet hedging criteria, the fair value of the contracts will be recorded in earnings. The Company records forward purchases and forward sales contracts net, where it has the legal right of offset, in available-for-sale securities. SECURITIZED ASSETS SUBJECT TO REPURCHASE. In March 2001, the Company transferred some of its permanent single-family residential loans into a Real Estate Mortgage Investment Conduit (REMIC). The REMIC then issued securities backed by such loans, all of which were retained by the Company. The terms of the transfer of the loans to the REMIC contain a call provision whereby the Company can repurchase the loans when the outstanding balance of the pool declines to 15% or less of the original amount; therefore, the transfer did not qualify as a sale under generally accepted accounting principles. Accordingly, the retained interests continue to be accounted for in a manner similar to loans and are included in the accompanying balance sheet as securitized assets subject to repurchase. LOANS RECEIVABLE. Loans receivable more than 90 days past due are placed on non-accrual status and an allowance for accrued interest is established. Any interest ultimately collected is credited to income in the period of recovery. 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, specific allowances and the unallocated allowance. The formula portion of the general loan loss allowance is established by applying a loss percentage factor to the different loan types. The allowances are provided 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 14 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. 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. The unallocated allowance allows for the estimation risk associated with the formula and specific allowances. Impaired loans consist of loans receivable that will not be repaid in accordance with their contractual terms and are measured using the fair value of the collateral. Smaller balance loans are excluded from this analysis. PREMISES AND EQUIPMENT. Premises and equipment are stated at cost, less accumulated depreciation. Depreciation is computed on the straight-line method over the estimated useful lives of the respective assets. Expenditures are capitalized for betterments and major renewals. Charges for ordinary maintenance and repairs are expensed to operations as incurred. REAL ESTATE HELD FOR SALE. Properties acquired in settlement of loans, purchased in acquisitions or acquired for development are recorded at the lower of cost or fair value. INTANGIBLE ASSETS. Goodwill represents the excess of the cost of businesses acquired over the fair value of the net assets acquired. The core deposit intangible and non-compete agreement intangible are acquired assets that lack physical substance but can be distinguished from goodwill. Goodwill is no longer amortized, but rather is evaluated for impairment on an annual basis. Other intangible assets are amortized over their estimated useful lives and are subject to impairment testing when events or circumstances change. If circumstances indicate that the carrying value of the assets may not be recoverable, an impairment charge could be recorded. No impairment of intangible assets has ever been identified. The Company amortizes the core deposit intangible on an accelerated basis over its estimated life of seven years; the non-compete agreement intangible is amortized on a straight-line basis over its life of five years. DEFERRED FEES AND DISCOUNTS ON LOANS. Loan discounts and loan fees are deferred and recognized over the life of the loans using the interest method based on actual loan payments. ACCOUNTING FOR STOCK-BASED COMPENSATION. In October 1995, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation". SFAS No. 123 requires expanded disclosures of stock-based compensation arrangements with employees and encourages application of the fair value recognition provisions in the statement. Companies may continue following rules to recognize and measure compensation as outlined in Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees", but are now required to disclose the pro forma amounts of net income and earnings per share that would have been reported had the Company elected to follow the fair value recognition provisions of SFAS No. 123. The Company adopted the disclosure requirements of SFAS No. 123, but continues to measure its stock-based employee compensation arrangements under the provisions of APB Opinion No. 25 and related Interpretations. In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure" which provides guidance on the transition from the intrinsic value method of accounting for stock-based employee compensation under APB Opinion No. 25 to the fair value method described in SFAS No. 123, if a company elects to do so. The Company has elected to continue to follow the intrinsic value method in accounting for stock options as provided in APB Opinion No. 25. The Company has three stock-option employee compensation plans, which are described more fully in Note N. The fair value of options granted under the Company's stock option plans is estimated on the date of grant using the Black-Scholes option-pricing model which utilizes the weighted-average assumptions in the following table:

Year ended September 30, 2003 2002 2001 ------------------------------------------------------------------------ Annual dividend yield .............. 4.19% 4.00% 4.00% Expected volatility ................ 28% 27% 34% Risk-free interest rate ............ 2.63% 3.52% 3.80% Expected life ...................... 5 YEARS 5 years 5 years

No stock-option employee compensation cost is reflected in net income, as all options granted had an exercise price equal to the market value of the underlying common stock on the date of grant, and the number of shares of each grant is fixed at the grant date. The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123:

Year ended September 30, 2003 2002 2001 ---------------------------------------- (In thousands, except per share data) Net income, as reported ......................................... $145,544 $143,954 $113,614 Deduct: Total stock-based employee compensation expense included in reported net income, net of related tax effects ... (1,111) (1,149) (738) -------- -------- -------- Pro forma net income ............................................ $144,433 $142,805 $112,876 Earnings per share: Basic - as reported ........................................... $ 2.09 $ 2.06 $ 1.63 Basic - pro forma ............................................. 2.07 2.04 1.62 Diluted - as reported ......................................... 2.07 2.04 1.61 Diluted - pro forma ........................................... 2.06 2.02 1.60

15 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED SEPTEMBER 30, 2003, 2002 AND 2001 USE OF ESTIMATES. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates reported in the financial statements include the allowance for loan losses, intangible assets, deferred taxes and contingent liabilities. Actual results could differ from these estimates. In the second quarters of fiscal 2003 and 2002, the Company declared an eleven-for-ten stock split in the form of a 10% stock dividend. All share and per share amounts have been adjusted to reflect these stock dividends. BUSINESS SEGMENTS. The Company has determined that its current business and operations consist of one business segment. ACCOUNTING CHANGES. In April 2003, the FASB issued and the Company adopted SFAS No. 149, "Amendment of Statement No. 133 on Derivative Instruments and Hedging Activities". This Statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". The adoption of SFAS No. 149 did not have a material impact on the Company's financial statements. In November 2002, the FASB issued and the Company adopted Interpretation No. 45 ("FIN 45"), "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others". This interpretation expands the disclosures to be made by a guarantor in its financial statements about its obligations under certain guarantees and requires the guarantor to recognize a liability for the fair value of an obligation assumed under a guarantee. The adoption of FIN 45 did not have a material impact on the Company's financial statements. In January 2003, the FASB issued and the Company adopted Interpretation No. 46 ("FIN 46"), "Consolidation of Variable Interest Entities". This interpretation provides new accounting guidance on how to identify a variable interest entity ("VIE") and determine when the assets, liabilities, non-controlling interest and results of operation of a VIE need to be included in a corporation's consolidated financial statements. The adoption of FIN 46 did not have a material impact on the Company's financial statements. RECLASSIFICATIONS. Certain reclassifications have been made to the financial statements for years prior to September 30, 2003 to conform to current year classifications. 16 NOTE B INVESTMENT SECURITIES

September 30, 2003 --------------------------------------------------------------------------------------------------- (In thousands) Gross Unrealized Amortized ---------------- Fair Cost Gains Losses Value Yield --------------------------------------------------- AVAILABLE-FOR-SALE SECURITIES Mutual fund investments ...................... $ 170,000 $ -- $ (960) $ 169,040 2.37% U.S. government and agency securities due Within 1 year .............................. 96,461 442 (27) 96,876 7.08 1 to 5 years ............................... -- -- -- -- -- 5 to 10 years .............................. 10,509 -- (9) 10,500 5.36 Over 10 years .............................. 13,941 5,732 -- 19,673 9.29 --------------------------------------------------- 290,911 6,174 (996) 296,089 4.37 --------------------------------------------------- HELD-TO-MATURITY SECURITIES Tax-exempt municipal bonds due 5 to 10 years .............................. 3,989 371 -- 4,360 8.92 Over 10 years .............................. 10,140 1,216 -- 11,356 8.67 --------------------------------------------------- 14,129 1,587 -- 15,716 8.74 --------------------------------------------------- $ 305,040 $ 7,761 $ (996) $ 311,805 4.57% ===================================================

September 30, 2002 --------------------------------------------------------------------------------------------------- (In thousands) Gross Unrealized Amortized ---------------- Fair Cost Gains Losses Value Yield --------------------------------------------------- AVAILABLE-FOR-SALE SECURITIES U.S. government and agency securities due Within 1 year .............................. $ 64,500 $ 245 $ -- $ 64,745 7.80% 1 to 5 years ............................... 15,045 1,314 -- 16,359 6.98 5 to 10 years .............................. 4,745 128 (38) 4,835 7.04 Over 10 years .............................. 9,280 5,350 -- 14,630 10.41 --------------------------------------------------- 93,570 7,037 (38) 100,569 7.89 --------------------------------------------------- HELD-TO-MATURITY SECURITIES Tax-exempt municipal bonds due 5 to 10 years .............................. 3,993 521 -- 4,514 8.92 Over 10 years .............................. 12,855 1,205 (9) 14,051 8.95 --------------------------------------------------- 16,848 1,726 (9) 18,565 8.94 --------------------------------------------------- $ 110,418 $ 8,763 $ (47) $ 119,134 8.05% ===================================================

Yields shown in the table above represent tax-equivalent yields, calculated as 1.49 times the tax-free municipal yield. $20.0 million in available-for-sale investment securities were sold in fiscal 2003, resulting in no gain. A $10.0 million available-for-sale security was sold in fiscal 2002, resulting in a gain of $650,000. There were no sales of investment securities during 2001. NOTE C MORTGAGE-BACKED SECURITIES

September 30, 2003 --------------------------------------------------------------------------------------------------- (In thousands) Gross Unrealized Amortized ---------------- Fair Cost Gains Losses Value Yield --------------------------------------------------- AVAILABLE-FOR-SALE SECURITIES GNMA pass-through certificates ............... $ 2,492 $ 8 $ (27) $ 2,473 4.57% FNMA pass-through certificates ............... 13,851 354 -- 14,205 5.47 FHLMC pass-through certificates .............. 439,711 25,161 (25) 464,847 6.20 FHLMC ........................................ 2,811 67 (10) 2,868 3.87 FNMA ......................................... 1,288 34 (6) 1,316 3.75 Forward contracts ............................ -- 28,975 (6,587) 22,388 -- --------------------------------------------------- 460,153 54,599 (6,655) 508,097 6.14 --------------------------------------------------- HELD-TO-MATURITY SECURITIES GNMA pass-through certificates ............... 41 4 -- 45 9.50 FNMA pass-through certificates ............... 1,332 109 -- 1,441 8.59 FHLMC pass-through certificates .............. 138,676 4,393 (1,185) 141,884 6.25 --------------------------------------------------- 140,049 4,506 (1,185) 143,370 6.27 --------------------------------------------------- $ 600,202 $59,105 $(7,840) $ 651,467 6.17% ===================================================

17 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2002 --------------------------------------------------------------------------------------------------- (In thousands) Gross Unrealized Amortized ---------------- Fair Cost Gains Losses Value Yield --------------------------------------------------- AVAILABLE-FOR-SALE SECURITIES GNMA pass-through certificates ............... $ 3,804 $ 13 $ (43) $ 3,774 5.58% FNMA pass-through certificates ............... 8,089 645 -- 8,734 7.78 FHLMC pass-through certificates .............. 716,499 49,440 -- 765,939 6.74 FHLMC ........................................ 4,181 96 (27) 4,250 5.38 FNMA ......................................... 3,456 35 (16) 3,475 5.98 Private issues ............................... 3,984 26 -- 4,010 7.31 Forward contracts ............................ -- 36,212 (8,187) 28,025 -- --------------------------------------------------- 740,013 86,467 (8,273) 818,207 6.73 --------------------------------------------------- HELD-TO-MATURITY SECURITIES GNMA pass-through certificates ............... 43 4 -- 47 9.50 FNMA pass-through certificates ............... 2,917 212 -- 3,129 8.18 FHLMC pass-through certificates .............. 149,117 8,732 -- 157,849 7.02 --------------------------------------------------- 152,077 8,948 -- 161,025 7.04 --------------------------------------------------- $892,090 $95,415 $(8,273) $ 979,232 6.78% ===================================================

$60.0 million in available-for-sale mortgage-backed securities were sold in fiscal 2003, resulting in a net gain of $992,000. There were no sales of mortgage-backed securities during fiscal 2002. $50.3 million of available-for-sale mortgage-backed securities were sold in 2001, resulting in a gain of $3.2 million. Substantially all mortgage-backed securities have contractual due dates that exceed 10 years. The Company accepts a high level of interest rate risk as a result of its policy to originate fixed-rate single family home loans that are longer-term than the short-term characteristics of its liabilities of customer accounts and borrowed money. The Company enters into forward contracts to purchase and sell mortgage-backed securities as part of its interest rate risk management program. These forward contracts are derivative instruments as defined by SFAS No. 133, as amended. The forward contracts allow the Company to hedge the risk of varying mortgage-backed securities prices in the future as the result of changes in interest rates. The Company has determined anticipated purchase dates for each forward commitment to purchase ranging from October 2003 through November 2004. The Company has determined anticipated sale dates for each forward commitment to sell ranging from December 2003 through September 2004. The net fair value of these contracts is included with the available-for-sale securities. The related mortgage-backed securities are designated as available-for-sale securities upon exercise of the commitments to purchase. Cost and fair value of the mortgage-backed securities underlying the forward contracts were as follows:

September 30, 2003 2002 ------------------------------------------------------------------------------------------------------------------- (In thousands) Fair Unrealized Fair Unrealized Cost Value Gain (loss) Cost Value Gain (loss) --------------------------------------------------------------------------------- Commitments to purchase ........ $305,273 $334,182 $28,909 $247,275 $283,487 $36,212 Commitments to sell ............ 163,766 170,287 (6,521) 223,064 231,251 (8,187)

NOTE D LOANS RECEIVABLE AND SECURITIZED ASSETS SUBJECT TO REPURCHASE

September 30, 2003 2002 ---------------------------------------------------------------------------------------- (In thousands) Conventional real estate Permanent single-family residential ................. $3,851,720 $4,145,122 Multi-family ........................................ 479,129 441,648 Land ................................................ 217,214 179,936 Construction ........................................ 639,058 574,866 ------------------------------ 5,187,121 5,341,572 ------------------------------ Less Allowance for probable losses ....................... 25,806 23,912 Loans in process .................................... 307,537 235,733 Deferred loan origination fees ...................... 36,270 33,963 ------------------------------ 369,613 293,608 ------------------------------ $4,817,508 $5,047,964 ==============================

The Company originates adjustable and fixed interest rate loans, which at September 30, 2003 consisted of the following:

Fixed-Rate (In thousands) ------------------------------------------ Term to Maturity Book Value ------------------------------------------ Within 1 year ................ $ 19,615 1 to 3 years ................. 60,009 3 to 5 years ................. 73,552 5 to 10 years ................ 359,443 10 to 20 years ............... 445,831 Over 20 years ................ 3,376,814 ---------- $4,335,264 ==========

Adjustable-Rate (In thousands) ------------------------------------------ Term to Rate Adjustment Book Value ------------------------------------------ Less than 1 year ............. $ 606,672 1 to 3 years ................. 97,430 3 to 5 years ................. 122,196 5 to 10 years ................ 25,559 10 to 20 years ............... -- Over 20 years ................ -- ---------- $ 851,857 ==========

At September 30, 2003 and 2002, approximately $52,287,000 and $36,637,000 of fixed-rate loan origination commitments were outstanding, respectively. Loans serviced for others at September 30, 2003 and 2002 were approximately $35,415,000 and $16,996,000, respectively. Permanent single-family residential loans receivable included adjustable-rate loans of $101,719,000 and $11,448,000 at September 30, 2003 and 2002, respectively. These loans have interest rate adjustment limitations and are generally indexed to the 1-year Treasury Bill rate or the monthly weighted-average cost of funds for Eleventh District savings institutions as published by the FHLB. Loans by geographic concentration were as follows:

September 30, 2003 Washington Idaho Oregon Utah Arizona Other Total -------------------------------------------------------------------------------------------------------------------- (In thousands) Conventional real estate Permanent single-family residential ......... $1,492,999 $ 464,792 $ 624,827 $ 401,448 $ 360,462 $ 507,192 $3,851,720 Multi-family .......... 129,374 33,071 161,633 33,639 99,334 22,078 479,129 Land .................. 114,951 42,694 16,482 20,903 20,181 2,003 217,214 Construction .......... 281,987 89,604 101,895 81,073 70,264 14,235 639,058 ---------------------------------------------------------------------------------------- $2,019,311 $ 630,161 $ 904,837 $ 537,063 $ 550,241 $ 545,508 $5,187,121 ========================================================================================

At September 30, 2003, the Company's recorded investment in impaired loans was $9.6 million with allocated reserves of $1.0 million. At September 30, 2002 the Company's recorded investment in impaired loans was $10.5 million with no related allocated reserves. The average balance of impaired loans during 2003, 2002 and 2001 was $13.3 million, $12.7 million and $13.1 million and interest income from impaired loans was $851,000, $922,000 and $949,000, respectively. 19 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE E ALLOWANCE FOR LOSSES ON LOANS AND SECURITIZED ASSETS SUBJECT TO REPURCHASE

Year ended September 30, 2003 2002 2001 -------------------------------------------------------------------------------------------- (In thousands) Balance at beginning of year ........................... $ 23,912 $ 19,683 $ 20,831 Provision for loan losses .............................. 1,500 7,000 1,850 Charge-offs ............................................ (1,310) (3,401) (3,845) Recoveries ............................................. 107 630 847 Acquired reserves ...................................... 1,597 -- -- ---------------------------------- Balance at end of year ................................. $ 25,806 $ 23,912 $ 19,683 ==================================

NOTE F INTEREST RECEIVABLE

September 30, 2003 2002 -------------------------------------------------------------------------------------------- (In thousands) Loans receivable and securitized assets subject to repurchase ....... $ 24,929 $ 33,067 Allowance for uncollected interest on loans receivable .............. (807) (956) Mortgage-backed securities .......................................... 3,043 5,158 Investment securities ............................................... 2,324 2,234 --------------------- $ 29,489 $ 39,503 =====================

NOTE G PREMISES AND EQUIPMENT

September 30, 2003 2002 -------------------------------------------------------------------------------------------- (In thousands) Estimated Useful Life ----------- Land ................................................ -- $ 18,982 $ 13,643 Buildings ........................................... 25 - 40 55,509 52,975 Leasehold improvements .............................. 7 - 15 5,409 5,302 Furniture, fixtures and equipment ................... 2 - 10 15,446 15,052 --------------------- 95,346 86,972 Less accumulated depreciation ....................................... (34,404) (31,853) --------------------- $ 60,942 $ 55,119 =====================

The Company has non-cancelable operating leases for branch offices. Rental expense, including amounts paid under month-to-month cancelable leases, amounted to $1,862,000, $1,895,000 and $1,606,000 in 2003, 2002 and 2001, respectively. Future minimum net rental commitments for all non-cancelable leases, including maintenance and associated costs, are immaterial. NOTE H REAL ESTATE HELD FOR SALE

September 30, 2003 2002 -------------------------------------------------------------------------------------------- (In thousands) Acquired for development ............................................ $ 4,708 $ 7,072 Acquired in settlement of loans ..................................... 11,496 10,515 --------------------- $ 16,204 $ 17,587 =====================

20 NOTE I CUSTOMER ACCOUNTS

September 30, 2002 2001 ------------------------------------------------------------------------------------------ (In thousands) Checking accounts, .75% and under .............................. $ 190,352 $ 191,542 Passbook and statement accounts, .75% .......................... 234,023 157,759 Insured money market accounts, .50% to 1.00% ................... 1,037,641 972,993 Certificate accounts Less than 3.00% .............................................. 2,401,924 1,619,867 3.00% to 3.99% ............................................... 257,646 935,687 4.00% to 4.99% ............................................... 258,875 373,230 5.00% to 5.99% ............................................... 120,960 189,712 6.00% to 6.99% ............................................... 18,139 11,460 7.00% and over ............................................... 491 -- ------------------------ Total certificates ............................................. 3,058,035 3,129,956 ------------------------ Repurchase agreements with customers, .75% to 1.55% ............ 57,547 69,672 ------------------------ $4,577,598 $4,521,922 ========================

Certificate maturities were as follows:

September 30, 2002 2001 ------------------------------------------------------------------------------------------ (In thousands) Within 1 year .................................................. $2,313,645 $2,590,373 1 to 2 years ................................................... 236,988 156,413 3 to 4 years ................................................... 183,379 62,260 Over 4 years ................................................... 324,023 320,910 ------------------------ $3,058,035 $3,129,956 ========================

Customer accounts over $100,000 totaled $1,133,000,000 as of September 30, 2003 and $1,040,000,000 as of September 30, 2002. Interest expense on customer accounts consisted of the following:

Year ended September 30, 2003 2002 2001 -------------------------------------------------------------------------------------------- (In thousands) Checking accounts ...................................... $ 1,655 $ 2,310 $ 2,426 Passbook and statement accounts ........................ 2,114 3,201 4,066 Insured money market accounts .......................... 14,947 22,231 24,514 Certificate accounts ................................... 85,931 122,705 160,018 ---------------------------------- 104,647 150,447 191,024 Repurchase agreements with customers ................... 1,651 2,259 4,138 ---------------------------------- 106,298 152,706 195,162 Less early withdrawal penalties ........................ (379) (418) (452) ---------------------------------- $105,919 $152,288 $194,710 ================================== Weighted-average interest rate at end of year .......... 1.94% 2.96% 4.31% Weighted daily average interest rate during the year ... 2.38 3.41 5.28

21 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE J FHLB ADVANCES Maturity dates of FHLB advances were as follows:

September 30, 2002 2001 ------------------------------------------------------------------------------------------ (In thousands) FHLB advances due Within 1 year .................................................. $ 250,000 $ -- 1 to 3 years ................................................... 300,000 450,000 4 to 5 years ................................................... 400,000 100,000 More than 5 years .............................................. 700,000 1,100,000 ------------------------ $1,650,000 $1,650,000 ========================

Included in the table above are $1,300,000,000 of FHLB advances that are callable by the FHLB. If these callable advances were called at the earliest call dates, the maturities of all FHLB advances would be as follows:

September 30, 2002 2001 ------------------------------------------------------------------------------------------ (In thousands) FHLB advances due Within 1 year .................................................. $ 850,000 $ 600,000 1 to 3 years ................................................... 700,000 650,000 4 to 5 years ................................................... 100,000 400,000 More than 5 years .............................................. -- -- ------------------------ $1,650,000 $1,650,000 ========================

Financial data pertaining to the weighted-average cost and the amount of FHLB advances were as follows:

September 30, 2003 2002 2001 ------------------------------------------------------------------------------------------------- (In thousands) Weighted-average interest rate at end of year ............. 5.13% 5.13% 5.12% Weighted daily average interest rate during the year ...... 5.19 5.28 5.44 Daily average of FHLB advances ............................ $1,650,023 $1,558,384 $1,336,025 Maximum amount of FHLB advances at any month end .......... 1,654,000 1,654,000 2,107,000 Interest expense during the year .......................... 85,564 82,357 72,654

FHLB advances are collateralized as provided for in the Advances, Pledge and Security Agreement by all FHLB stock owned by the Association, deposits with the FHLB and certain mortgages or deeds of trust securing such properties as provided in the agreements with the FHLB. As a member of the FHLB of Seattle, the Association currently has a credit line of 35% of the total assets of the Association, subject to collateralization requirements. NOTE K OTHER BORROWINGS

September 30, 2002 2001 ------------------------------------------------------------------------------------------ (In thousands) Securities sold under agreements to repurchase Callable once in 2007, matures in 2012 ...................... $ 100,000 $ 100,000 ========================

The Company enters into sales of securities under agreements to repurchase (reverse repurchase agreements). Fixed-coupon reverse repurchase agreements are treated as financings, and the obligations to repurchase securities sold are reflected as a liability in the consolidated statements of financial condition. During the two years ended September 30, 2003 all of the Company's transactions were fixed-coupon reverse repurchase agreements. The dollar amount of securities underlying the agreements remain in the asset accounts. The securities pledged are registered in the Company's name, and principal and interest payments are received by the Company; however, the securities are held by the designated trustee of the broker. Upon maturity of the agreements, the identical securities pledged as collateral will be returned to the Company. 22 Financial data pertaining to the weighted-average cost and the amount of securities sold under agreements to repurchase were as follows:

September 30, 2003 2002 2001 ------------------------------------------------------------------------------------------------- (In thousands) Weighted-average interest rate at end of year ............. 3.44% 3.36% --% Weighted daily average interest rate during the year ...... 3.39 3.36 5.75 Daily average of securities sold under agreements to repurchase ........................................... $ 100,000 $ 4,110 $ 785,563 Maximum securities sold under agreements to repurchase at any month end ........................................ 100,000 100,000 1,074,509 Interest expense during the year .......................... 3,388 140 45,149

NOTE L INCOME TAXES The consolidated statements of financial condition at September 30, 2003 and 2002 include deferred tax liabilities of $70,485,000 and $80,185,000, respectively, that have been provided for the temporary differences between the tax basis and the financial statement carrying amounts of assets and liabilities. The major sources of these temporary differences and their deferred tax effects were as follows:

September 30, 2002 2001 --------------------------------------------------------------------------------------------- (In thousands) Deferred tax assets Real estate valuation reserves .................................. $ -- $ 440 Deferred compensation ........................................... 198 230 Loan loss reserves .............................................. 3,437 -- ------------------------ Total deferred tax assets ....................................... 3,635 670 ------------------------ Deferred tax liabilities FHLB stock dividends ............................................ 31,919 30,538 Core deposit intangible ......................................... 1,748 -- Discounts ....................................................... 413 (8) Loan loss reserves .............................................. -- 742 Valuation adjustment on available-for-sale securities ........... 18,850 30,000 Depreciation .................................................... 3,528 2,085 Loan origination costs .......................................... 13,640 9,214 Securitized asset subject to repurchase valuation adjustment .... 673 2,653 Other, net ...................................................... 3,349 5,631 ------------------------ Total deferred tax liabilities .................................. 74,120 80,855 ------------------------ Net deferred tax liability ........................................ $ 70,485 $ 80,185 ========================

A reconciliation of the statutory federal income tax rate to the effective income tax rate follows:

Year ended September 30, 2003 2002 2001 --------------------------------------------------------------------------------------------- (In thousands) Statutory income tax rate ............................... 35% 35% 35% Dividend received deduction ............................. (1) (1) (1) Other ................................................... (1) -- -- State income tax ........................................ 2 1 1 ---------------------------------- Effective income tax rate ............................... 35% 35% 35% ==================================

The Small Business Job Protection Act of 1996 (the Act) required qualified thrift institutions, such as the Association, 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 beginning in 1999. Accordingly, the Association is required to pay approximately $25,406,000 in additional federal income taxes, all of which has been previously provided, through fiscal 2004. A deferred tax liability has not been required to be recognized for the tax bad debt base year reserves of the Association. The base year reserves are the balance of reserves as of September 30, 1988 reduced proportionately for reductions in the Association's loan portfolio since that date. At September 30, 2003 the amount of those reserves was approximately $8,139,000. The amount of unrecognized deferred tax liability at September 30, 2003 was approximately $2,985,000. 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 taxable income, as originally reported, as a result of this examination. 23 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE M PROFIT SHARING RETIREMENT PLAN AND EMPLOYEE STOCK OWNERSHIP PLAN The Company maintains a Profit Sharing Retirement Plan and Employee Stock Ownership Plan (Plan) for the benefit of its employees. Company contributions are made semi-annually as approved by the Board of Directors. Such amounts are not in excess of amounts permitted by the Employee Retirement Income Security Act of 1974. Employees may contribute up to 7% of their base salaries to the Plan or a portion of their base salaries on a tax-deferred basis through the 401(k) provisions of the Plan with a combined maximum of the lesser of 100% of base salary or $40,000. Under provisions of the Plan, employees are eligible to participate on the date of hire and become fully vested in the Company's contributions following seven years of service. In August 1995 the Company received a favorable determination from the Internal Revenue Service to include an Employee Stock Ownership feature as part of the Plan. This feature allows employees to direct a portion of their vested account balance toward the purchase of Company stock. Company contributions to the Plan amounted to $2,001,000, $2,039,000 and $1,781,000 for the years ended September 30, 2003, 2002 and 2001, respectively. NOTE N STOCK OPTION PLANS The Company has three employee stock option plans which provide a combination of stock options and stock grants. Stockholders authorized 2,246,826 shares, 3,702,563 shares and 3,388,000 shares of common stock, as adjusted for stock splits and stock dividends, to be reserved pursuant to the 1987 Stock Option and Stock Appreciation Rights Plan (the 1987 Plan), the 1994 Stock Option and Stock Appreciation Rights Plan (the 1994 Plan) and the 2001 Long-Term Incentive Plan (the 2001 Plan), respectively. The three plans are substantially similar. Of the 9,337,389 total shares authorized by stockholders under the three plans, 4,773,062 shares remain available for issuance. All equity compensation plans have been approved by stockholders. Options granted under each plan vest at varying percentages commencing as early as one year after the date of grant with expiration dates 10 years after the date of grant.

Weighted-Average Fair Value of Option Average Price(1) Number(1) Shares Granted ------------------------------------------------------------------------------------------------------ Outstanding, October 1, 2000 .............. $ 13.34 2,663,546 Granted in 2001 ........................... 15.34 101,217 $ 4.05 Exercised in 2001 ......................... 10.56 (578,673) Forfeited in 2001 ......................... 13.85 (138,349) ------------------------------ Outstanding, September 30, 2001 ........... 14.18 2,047,741 Granted in 2002 ........................... 18.31 842,655 3.42 Exercised in 2002 ......................... 11.78 (317,935) Forfeited in 2002 ......................... 16.02 (165,210) ------------------------------ Outstanding, September 30, 2002 ........... 15.82 2,407,251 Granted in 2003 ........................... 20.33 82,170 3.54 Exercised in 2003 ......................... 13.10 (391,176) Forfeited in 2003 ......................... 16.63 (158,944) ------------------------------ Outstanding, September 30, 2003 ........... $ 16.49 1,939,301 ==============================

(1)Average price and number of stock options granted, exercised and forfeited have been adjusted for the 10% stock dividends. Financial data pertaining to outstanding stock options were as follows:

September 30, 2003 ---------------------------------------------------------------------------------------------------------- Weighted- Weighted- Weighted- Average Average Average Number of Exercisable Price Ranges of Number of Remaining Exercise Price of Exercisable of Exercisable Exercise Prices Option Shares Contractual Life Option Shares Option Shares Option Shares ---------------------------------------------------------------------------------------------------------- $ 8.91 - 14.18 711,901 5.5 YEARS $ 13.71 236,225 $ 12.82 15.03 - 16.62 156,642 5.7 15.66 36,232 15.87 18.31 - 21.52 1,070,758 7.1 18.46 177,971 18.32 ---------------------------------------------------------------------------------------------------------- 1,939,301 6.4 YEARS $ 16.49 450,428 $ 15.24 ==========================================================================================================

24 NOTE O STOCKHOLDERS' EQUITY In the second quarter of fiscal 2003 and 2002, the Company declared an eleven-for-ten stock split in the form of a 10% stock dividend in addition to the regular quarterly cash dividends on its shares of common stock. The Association is subject to various regulatory capital requirements administered by the Office of Thrift Supervision (OTS). Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary action by regulators that, if undertaken, could have a direct material effect on the Company's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Association must meet specific capital guidelines that involve quantitative measures of the Association's assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The Association's capital amounts and classification are also subject to qualitative judgments by the regulators about capital components, risk-weightings and other factors. As of September 30, 2003 and 2002, the OTS categorized the Association as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Association must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following table. There are no conditions or events since that notification that Management believes have changed the Association's categorization.

Categorized as Well Capitalized Under Capital Prompt Corrective Actual Adequacy Guidelines Action Provisions ---------------------- ---------------------- ---------------------- Capital Ratio Capital Ratio Capital Ratio ---------------------------------------------------------------------------------------------------------------------- September 30, 2003 (Dollars in thousands) Total capital to risk-weighted assets $ 974,775 24.56% $ 317,465 8.00% $ 396,831 10.00% Tier I capital to risk-weighted assets 956,470 24.10 NA NA 238,099 6.00 Core capital to adjusted tangible assets 956,470 12.91 NA NA 370,373 5.00 Core capital to total assets 956,470 12.91 222,224 3.00 NA NA Tangible capital to tangible assets 956,470 12.91 111,112 1.50 NA NA September 30, 2002 Total capital to risk-weighted assets $ 875,847 22.62% $ 309,807 8.00% $ 387,259 10.00% Tier I capital to risk-weighted assets 860,179 22.21 NA NA 232,355 6.00 Core capital to adjusted tangible assets 860,179 11.85 NA NA 363,095 5.00 Core capital to total assets 860,179 11.85 217,857 3.00 NA NA Tangible capital to tangible assets 860,179 11.85 108,928 1.50 NA NA

At periodic intervals, the OTS and the Federal Deposit Insurance Corporation (FDIC) routinely examine the Company's financial statements as part of their oversight of the savings and loan industry. Based on their examinations, these regulators can direct that the Company's financial statements be adjusted in accordance with their findings. The extent to which forthcoming regulatory examinations may result in adjustments to the financial statements cannot be determined; however, no adjustments were proposed as a result of the most recent OTS examination which concluded in August 2003. The Company has an ongoing stock repurchase program. During fiscal 2003, the Company repurchased 510,070 shares at a weighted-average price of $19.67. In fiscal 2002, the Company repurchased 535,150 shares at a weighted-average price of $19.11. As of September 30, 2003, management had authorization from the Board of Directors to repurchase up to 2.8 million additional shares. Information used to calculate earnings per share follows:

Year ended September 30, 2003 2002 2001 ------------------------------------------------------------------------------------------------------ (Dollars in thousands except per share data) Net income .................................................. $ 145,544 $ 143,954 $ 113,614 Weighted-average shares Basic weighted-average number of common shares outstanding ............................... 69,661,074 69,855,216 69,714,999 Dilutive effect of outstanding common stock equivalents ... 571,621 667,944 746,518 --------------------------------------- Diluted weighted-average number of common shares outstanding ............................... 70,232,695 70,523,160 70,461,517 ======================================= Net income per share Basic ..................................................... $ 2.09 $ 2.06 $ 1.63 Diluted ................................................... 2.07 2.04 1.61

25 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE P FAIR VALUES OF FINANCIAL INSTRUMENTS SFAS No. 107, "Disclosures about Fair Value of Financial Instruments," requires disclosure of fair value information about financial instruments, whether or not recognized on the balance sheet, for which it is practicable to estimate those values. SFAS No. 107 excludes certain financial instruments and all non-financial instruments from its disclosure requirements. Accordingly, the aggregate fair value estimates presented do not reflect the underlying fair value of the Company. Although Management is not aware of any factors that would materially affect the estimated fair value amounts presented, such amounts have not been comprehensively revalued for purposes of these financial statements since that date, and therefore, estimates of fair value subsequent to that date may differ significantly from the amounts presented below.

September 30, 2003 2002 --------------------------------------------------------------------------------------------------------- (In thousands) Carrying Estimated Carrying Estimated Amount Fair Value Amount Fair Value ------------------------------------------------------ Financial assets Cash and cash equivalents ..................... $1,437,208 $1,437,208 $ 975,153 $ 975,153 Available-for-sale securities ................. 804,186 804,186 918,776 918,776 Held-to-maturity securities ................... 154,178 159,086 168,925 179,590 Loans receivable and securitized assets ....... 4,817,508 4,899,274 5,047,964 5,743,480 FHLB stock .................................... 143,851 143,851 132,320 132,320 Financial liabilities Customer accounts ............................. 4,577,598 4,590,160 4,521,922 4,538,726 FHLB advances and other borrowings ............ 1,750,000 1,825,532 1,750,000 1,797,468

The following methods and assumptions were used to estimate the fair value of financial instruments: CASH AND CASH EQUIVALENTS - The carrying amount of these items is a reasonable estimate of their fair value. INVESTMENT SECURITIES - The fair value is based on quoted market prices or dealer estimates. LOANS RECEIVABLE AND SECURITIZED ASSETS SUBJECT TO REPURCHASE - For certain homogeneous categories of loans, such as fixed- and variable-rate residential mortgages, fair value is estimated using quoted market prices for securities backed by similar loans, adjusted for differences in loan characteristics. The fair value of other loan types is estimated by discounting the future cash flows and estimated prepayments using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining term. Some loan types were valued at carrying value because of their floating rate or expected maturity characteristics. MORTGAGE-BACKED SECURITIES - Estimated fair value for mortgage-backed securities issued by quasi-governmental agencies is based on quoted market prices. The fair value of all other mortgage-backed securities is based on dealer estimates. FHLB STOCK - The fair value is based upon the redemption value of the stock which equates to its carrying value. CUSTOMER ACCOUNTS - The fair value of demand deposits, savings accounts, and money market accounts is the amount payable on demand at the reporting date. The fair value of fixed-maturity certificates of deposit is estimated by discounting the estimated future cash flows using the rates currently offered for deposits with similar remaining maturities. FHLB ADVANCES AND OTHER BORROWINGS - The fair value of FHLB advances and other borrowings is estimated by discounting the estimated future cash flows using rates currently available to the Association for debt with similar remaining maturities. ACQUISITION AND INTANGIBLE ASSETS NOTE Q On August 31, 2003, the Company acquired United Savings and Loan Bank. The acquisition was accounted for as a purchase transaction with the total cash consideration funded through internal sources. The purchase price was $65,604,000, of which $32,322,000 was paid in cash and $33,282,000 was paid in stock. In addition, the Company paid $1,150,000 in three non-compete agreements, of which $575,000 was allocated to both goodwill and the non-compete agreement intangible. The purchase price has been allocated to the underlying assets and liabilities based on estimated fair values at the date of acquisition. Results of operations are included from the date of acquisition. The Company acquired assets with an estimated fair value of $343,626,000 and assumed liabilities with an estimated fair value of $276,872,000. The acquisition produced goodwill of $19,263,000, a core deposit intangible of $4,921,000 and a non-compete agreement intangible of $575,000. 26 The balance of the Company's intangible assets was as follows:

Core Deposit Non-Compete Goodwill Intangible Agreement Total ---------------------------------------------------------- (In thousands) Balance at September 30, 2001 ...... $ 35,703 $ -- $ -- $ 35,703 Accumulated amortization ........... -- -- -- -- ---------------------------------------------------------- Balance at September 30, 2002 ...... 35,703 -- -- 35,703 United acquisition ................. 19,263 4,921 575 24,759 Accumulated amortization ........... -- (116) (10) (126) ---------------------------------------------------------- Balance at September 30, 2003 ...... $ 54,966 $ 4,805 $ 565 $ 60,336 ==========================================================

The table below presents the estimated intangible asset amortization expense for the next five years:

Year ended September 30, Amortization expense ------------------------------------------------------------------ (In thousands) 2004 ....................................... $1,396 2005 ....................................... 1,198 2006 ....................................... 1,000 2007 ....................................... 801 2008 ....................................... 593

NOTE R FINANCIAL INFORMATION - WASHINGTON FEDERAL, INC. The following Washington Federal, Inc. (parent company only) financial information should be read in conjunction with the other notes to the Consolidated Financial Statements. STATEMENTS OF FINANCIAL CONDITION

September 30, 2003 2002 ----------------------------------------------------------------------------------------------- (In thousands) ASSETS Cash ........................................................ $ 4,527 $ 2,268 Investment in subsidiary .................................... 1,053,451 959,250 Dividend receivable ......................................... 12,000 14,000 -------------------------------- Total assets .............................................. $ 1,069,978 $ 975,518 ================================ LIABILITIES Dividend payable and other liabilities ...................... $ 14,382 $ 14,800 -------------------------------- STOCKHOLDERS' EQUITY Common stock, $1.00 par value: 100,000,000 shares authorized; 85,553,789 and 83,833,244 shares issued; 71,173,487 and 69,894,902 shares outstanding .............. $ 85,554 $ 76,212 Paid-in capital ............................................. 1,085,650 968,858 Accumulated other comprehensive income, net of tax .......... 34,624 56,000 Treasury stock, at cost; 14,380,302 and 13,938,342 shares ... (207,337) (198,279) Retained earnings ........................................... 57,105 57,927 -------------------------------- Total stockholders' equity ................................ 1,055,596 960,718 -------------------------------- Total liabilities and stockholders' equity ................ $ 1,069,978 $ 975,518 ================================

STATEMENTS OF OPERATIONS

Year ended September 30, 2003 2002 2001 ----------------------------------------------------------------------------------------------------------- (In thousands) INCOME Dividends from subsidiary ........................................... $ 63,500 $ 64,000 $ 45,000 EXPENSE Miscellaneous ....................................................... 389 380 354 ---------------------------------- Net income before equity in undistributed net income of subsidiary .. 63,111 63,620 44,646 Equity in undistributed net income of subsidiary ...................... 82,296 80,200 68,843 ---------------------------------- Income before income taxes ............................................ 145,407 143,820 113,489 Income tax benefit .................................................... 137 134 125 ---------------------------------- Net income ............................................................ $ 145,544 $ 143,954 $ 113,614 ==================================

27 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) STATEMENTS OF CASH FLOWS

Year ended September 30, 2003 2002 2001 ------------------------------------------------------------------------------------------------------- (In thousands) CASH FLOWS FROM OPERATING ACTIVITIES Net income ........................................................ $ 145,544 $ 143,954 $ 113,614 Adjustments to reconcile net income to net cash provided by operating activities Equity in undistributed net income of subsidiary ................ (82,296) (80,200) (68,843) Decrease (increase) in dividend receivable ...................... 2,000 (1,875) 1,875 Increase (decrease) in dividend payable ......................... (417) 920 758 ---------------------------------- Net cash provided by operating activities ....................... 64,831 62,799 47,404 Cash Flows From Financing Activities Issuance of common stock through stock option plan ................ 5,944 3,744 6,224 Proceeds from Employee Stock Ownership Plan ....................... 1,522 1,618 1,108 Treasury stock purchased .......................................... (10,034) (10,224) -- Dividends ......................................................... (60,004) (57,383) (54,102) ---------------------------------- Net cash used by financing activities ........................... (62,572) (62,245) (46,770) ---------------------------------- Increase in cash ................................................ 2,259 554 634 Cash at beginning of year ....................................... 2,268 1,714 1,080 ---------------------------------- Cash at end of year ............................................. $ 4,527 $ 2,268 $ 1,714 ==================================

NOTE S SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) The following is a summary of the unaudited interim results of operations by quarter:

FIRST SECOND THIRD FOURTH Year ended September 30, 2003 QUARTER QUARTER QUARTER QUARTER --------------------------------------------------------------------------------------------- (Dollars in thousands, except per share data) Interest income .............................. $ 122,068 $ 114,326 $ 109,961 $ 103,830 Interest expense ............................. 53,703 49,565 46,917 44,699 --------------------------------------------- Net interest income .......................... 68,365 64,761 63,044 59,131 Provision for loan losses .................... 1,250 150 100 -- Other operating income ....................... 1,866 5,491 3,482 3,984 Other operating expense ...................... 11,653 11,868 10,410 10,128 --------------------------------------------- Income before income taxes ................... 57,328 58,234 56,016 52,987 Income taxes ................................. 20,210 20,530 19,605 18,676 --------------------------------------------- Net income ................................... $ 37,118 $ 37,704 $ 36,411 $ 34,311 ============================================= Basic earnings per share ..................... $ .54 $ .54 $ .52 $ .49 ============================================= Diluted earnings per share ................... $ .52 $ .54 $ .52 $ .49 ============================================= Cash dividends per share ..................... $ .21 $ .21 $ .22 $ .22 ============================================= Return of average assets ..................... 2.03% 2.08% 2.02% 1.89% =============================================

FIRST SECOND THIRD FOURTH Year ended September 30, 2002 QUARTER QUARTER QUARTER QUARTER --------------------------------------------------------------------------------------------- (Dollars in thousands, except per share data) Interest income .............................. $ 131,325 $ 126,485 $ 123,543 $ 123,607 Interest expense ............................. 65,357 58,274 55,875 55,435 --------------------------------------------- Net interest income .......................... 65,968 68,211 67,668 68,172 Provision for loan losses .................... 2,000 2,000 1,500 1,500 Other operating income ....................... 3,002 1,553 1,803 1,848 Other operating expense ...................... 12,318 12,536 12,553 11,464 --------------------------------------------- Income before income taxes ................... 54,652 55,228 55,418 57,056 Income taxes ................................. 19,267 19,469 19,535 20,129 --------------------------------------------- Net income ................................... $ 35,385 $ 35,759 $ 35,883 $ 36,927 ============================================= Basic earnings per share ..................... $ .51 $ .51 $ .51 $ .53 ============================================= Diluted earnings per share ................... $ .50 $ .51 $ .51 $ .52 ============================================= Cash dividends per share ..................... $ .20 $ .20 $ .21 $ .21 ============================================= Return of average assets ..................... 2.04% 2.05% 2.04% 2.07% =============================================

28 INDEPENDENT AUDITORS' REPORT Board of Directors and Stockholders Washington Federal, Inc. Seattle, Washington We have audited the accompanying consolidated statements of financial condition of Washington Federal, Inc. and subsidiaries (the "Company") as of September 30, 2003 and 2002, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended September 30, 2003. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Washington Federal, Inc. and subsidiaries as of September 30, 2003 and 2002, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 2003, in conformity with accounting principles generally accepted in the United States of America. /s/ DELOITTE & TOUCHE LLP DELOITTE & TOUCHE LLP Seattle, Washington November 6, 2003 GENERAL CORPORATE AND STOCKHOLDERS' INFORMATION CORPORATE 425 Pike Street HEADQUARTERS Seattle, Washington 98101 (206) 624-7930 INDEPENDENT Deloitte & Touche LLP AUDITORS Seattle, Washington TRANSFER Stockholder inquiries regarding transfer requirements, cash AGENT, or stock dividends, lost certificates, consolidating records, REGISTRAR AND correcting a name or changing an address should be directed DIVIDEND to the transfer agent: DISBURSING Mellon Investor Services L.L.C. AGENT P.O. Box 3315 South Hackensack, NJ 07606, or 85 Challenger Road Ridgefield Park, NJ 07660 Telephone: 1-800-522-6645 www.melloninvestor.com ANNUAL MEETING The annual meeting of stockholders will be held on January 21, 2004, at 2 p.m. at the Sheraton Hotel, 1400 Sixth Avenue, Seattle, Washington FORM 10-K This report and all SEC filings are available on the Company's web site at: www.washingtonfederal.com STOCK INFORMATION Washington Federal, Inc. is traded on the NASDAQ Stock Market. The common stock symbol is WFSL. At September 30, 2003, there were approximately 2,584 stockholders of record.

STOCK PRICES ---------------- QUARTER ENDED HIGH LOW DIVIDENDS ------------------------------------------------------------- DECEMBER 31, 2001 $21.41 $18.18 $0.20 MARCH 31, 2002 23.76 21.39 0.20 JUNE 30, 2002 24.92 21.85 0.21 SEPTEMBER 30, 2002 23.87 19.32 0.21 DECEMBER 31, 2002 23.03 18.77 0.21 MARCH 31, 2003 23.51 20.91 0.21 JUNE 30, 2003 23.92 21.06 0.22 SEPTEMBER 30, 2003 26.41 23.19 0.22

ALL PRICES SHOWN HAVE BEEN ADJUSTED FOR STOCK SPLITS. LARGEST MARKET MAKERS: McAdams Wright Ragen, Inc. Cincinnati Stock Exchange Goldman, Sachs & Co. Archipelago Exchange Knight Equity Markets, L.P. Archipelago, L.L.C. Merrill Lynch, Pierce, Fenner & Smith, Inc. Citigroup Global Markets, Inc. Schwab Capital Markets Alternate Display Facility Morgan Stanley & Co., Inc. Prudential Equity Group, Inc. Deutsche Banc Alex Brown Investment Technology Group Instinet Corporation 29 DIRECTORS, OFFICERS AND OFFICES CORPORATE EXECUTIVE MANAGEMENT DEPARTMENT SUBSIDIARIES HEADQUARTERS COMMITTEE MANAGERS FIRST INSURANCE 425 Pike Street BRENT J. BEARDALL APPRAISAL AGENCY, INC. Seattle, WA 98101 Senior Vice President HEATHER ST. CLAIR 317 S. 2nd Street (206) 624-7930 and Chief Financial Mount Vernon, WA 98273 Officer BRANCH LOAN 1-800-562-2555 BOARD OF DIRECTORS UNDERWRITING (360) 336-9630 LINDA S. BROWER GUY C. PINKERTON Executive Vice President MICHAEL BUSH DUANE HENSON Chairman Vice President WASHINGTON SERVICES, INC. EDWIN C. HEDLUND 6125 South Morgan Road ROY M. WHITEHEAD Executive Vice President CREDIT Freeland, WA 98249 Vice Chairman, President and Secretary ADMINISTRATION- and Chief Executive CONSTRUCTION AND Officer JACK B. JACOBSON LAND Executive Vice President DEREK L. CHINN and Chief Lending JAMES E. CADY Former President and Officer Senior Vice President Chief Executive Officer, United Savings and Loan ROY M. WHITEHEAD DALE SULLIVAN Bank Vice Chairman, President Vice President and Chief Executive Officer JOHN F. CLEARMAN CORPORATE REAL ESTATE Former Chief Financial AND TAXES Officer, Milliman KEITH D. TAYLOR USA, Inc. Senior Vice President and Treasurer H. DENNIS HALVORSON Former Chief Executive DATA PROCESSING Officer, United Bank TERRY O. PERMENTER Senior Vice President KERMIT O. HANSON Dean Emeritus DEPOSIT OPERATIONS University of Washington BEN A. WHITMARSH Graduate School of Senior Vice President Business Administration INTERNAL AUDIT W. ALDEN HARRIS BARBARA A. MURPHY Former Executive Vice President Vice President LEGAL/SPECIAL CREDITS ANNA C. JOHNSON PAUL TYLER Senior Partner Vice President and Scan East West Travel Counsel THOMAS F. KENNEY LOAN OPERATIONS Vice President Finance LEANN BURKE Haggen, Inc. Officer CHARLES R. RICHMOND LOAN SERVICING Former Executive LARRY PLUMB Vice President Senior Vice President DIRECTORS EMERITI MANUALS/TRAINING LINDA NICHOLL E.W. MERSEREAU, JR. Assistant Vice President RICHARD C. REED MARKETING AND INVESTOR RELATIONS CATHY COOPER Vice President MULTI-FAMILY LOANS J. TIMOTHY GRANT Senior Vice President PERMANENT LOAN PRODUCTION JOHN WUNDERLICH Vice President PERMANENT LOAN UNDERWRITING AND WHOLESALE LENDING COLLEEN WELLS Vice President DIVISION/REGIONS SOUTH SOUND WASHINGTON SOUTHERN OREGON 16 OFFICE LOCATIONS 15 OFFICE LOCATIONS DIVISION MANAGER DIVISION MANAGER RONDA TOMLINSON PEGGY HOBIN Vice President Senior Vice President 9919 Bridgeport Way S.W. 300 Ellsworth St. SW Lakewood, WA 98499 Albany, OR 97321 MIDSOUND WASHINGTON NORTHERN OREGON 14 OFFICE LOCATIONS 10 OFFICE LOCATIONS DIVISION MANAGER INTERIM DIVISION MANAGER E. CRAIG WILSON DALE SULLIVAN Vice President Vice President 5809 196th S.W. 14990 S.W. Bangy Road Lynnwood, WA 98036 Lake Oswego, OR 97035 CENTRAL SEATTLE 4 OFFICE LOCATIONS UTAH REGIONAL MANAGER 10 OFFICE LOCATIONS ROBERT ZIRK DIVISION MANAGER Vice President RICHARD FISHER 601 S. Jackson Senior Vice President Seattle, WA 98104 505 East 200 South Salt Lake City, UT 84102 NORTHERN WASHINGTON 10 OFFICE LOCATIONS PHOENIX, ARIZONA DIVISION MANAGER 12 OFFICE LOCATIONS DOUGLAS A. ROWELL DIVISION MANAGER Senior Vice President WENDY YATES 317 S. 2nd Street Vice President Mount Vernon, WA 98273 2196 E. Camelback Road, Suite 100 Phoenix, AZ 85016 WESTERN IDAHO 12 OFFICE LOCATIONS TUCSON, ARIZONA DIVISION MANAGER 8 OFFICE LOCATIONS ROBERT P. LINK DIVISION MANAGER Senior Vice President GEORGIA VELARDE 1001 W. Idaho St. Vice President Boise, ID 83701 5151 E. Broadway Blvd., Suite 105 Tucson, AZ 85711 EASTERN IDAHO 4 OFFICE LOCATIONS NEVADA DIVISION MANAGER 2 OFFICE LOCATIONS LARRY WADSWORTH DIVISION MANAGER Senior Vice President PAMELA K. CALLAHAN 500 North Capital Vice President Idaho Falls, ID 83402 9340 Sun City Blvd. #103 Las Vegas, NV 89134 TEXAS 1 OFFICE LOCATION DIVISION MANAGER VAUGHN PEARSON Senior Vice President 7001 Preston Road, Suite 110 Dallas, TX 75205 COLORADO 1 LOAN PRODUCTION OFFICE SCOTT BRKOVICH Officer 384 Inverness Drive South, Suite 105 Englewood, CO 80112 A complete listing of our branch locations can be found at www.washingtonfederal.com 30 EX-23 4 v94943exv23.txt EXHIBIT 23 EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statements No. 333-20191, No. 333-51143, No. 333-46588 and No. 333-81242 of Washington Federal, Inc. on Form S-8 of our report dated November 6, 2003, incorporated by reference in the Annual Report on Form 10-K of Washington Federal, Inc. for the year ended September 30, 2003. /s/ Deloitte & Touche, LLP - ----------------------------- DELOITTE & TOUCHE LLP December 22, 2003 Seattle, Washington EX-31.1 5 v94943exv31w1.txt EXHIBIT 31.1 EXHIBIT 31.1 SECTION 302 CERTIFICATION BY THE CHIEF EXECUTIVE OFFICER CERTIFICATION I, Roy M. Whitehead, certify that: 1. I have reviewed this annual report on Form 10-K of Washington Federal, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: December 22, 2003 /s/ Roy M. Whitehead -------------------- ROY M. WHITEHEAD Vice Chairman, President and Chief Executive Officer EX-31.2 6 v94943exv31w2.txt EXHIBIT 31.2 EXHIBIT 31.2 SECTION 302 CERTIFICATION BY THE CHIEF FINANCIAL OFFICER CERTIFICATION I, Brent J. Beardall, certify that: 1. I have reviewed this annual report on Form 10-K of Washington Federal, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: December 22, 2003 /s/ Brent J. Beardall --------------------- BRENT J. BEARDALL Senior Vice President and Chief Financial Officer EX-32 7 v94943exv32.txt EXHIBIT 32 EXHIBIT 32 SECTION 906 CERTIFICATION PURSUANT TO THE SARBANES-OXLEY ACT OF 2002 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Washington Federal, Inc. (the "Company") on Form 10-K for the period ended September 30, 2003, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned hereby certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to the undersigned's best knowledge and belief: (a) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and (b) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated this 22nd day of December 2003. Washington Federal, Inc. (Company) /s/ Roy M. Whitehead -------------------- ROY M. WHITEHEAD Vice Chairman, President and Chief Executive Officer /s/ Brent J. Beardall --------------------- BRENT J. BEARDALL Senior Vice President and Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----

EX-13

                                                                               .
                                                                               .
                                                                               .
                                                                     Exhibit 13

TABLE OF CONTENTS

                                                                           
Financial Highlights                                                           1
To Our Stockholders                                                            2
Management's Discussion                                                        4
Selected Financial Data                                                        8
Financial Statements                                                           9
Notes to Financial Statements                                                 14
Independent Auditors' Report                                                  29
General Information                                                           29
Directors, Officers and Offices                                               30



A SHORT HISTORY

    Washington Federal, Inc. (Company) is a savings and loan holding company
headquartered in Seattle, Washington. Its principal subsidiary is Washington
Federal Savings (Association), which operates 119 offices in eight western
states.

    The Association had its origin on April 24, 1917 as Ballard Savings and Loan
Association. In 1935, the state-chartered Association converted to a federal
charter, became a member of the Federal Home Loan Bank (FHLB) system and
obtained federal insurance. In 1958, Ballard Federal Savings and Loan
Association merged with Washington Federal Savings and Loan Association of
Bothell, and the latter name was retained for wider geographical acceptance. In
1971, Seattle Federal Savings and Loan Association, with three offices, merged
into the Association, and at the end of 1978, was joined by the 10 offices of
First Federal Savings and Loan Association of Mount Vernon.

    On November 9, 1982, the Association converted from a federal mutual to a
federal stock association. In 1987 and 1988, acquisitions of United First
Federal, Provident Federal Savings and Loan, and Northwest Federal Savings and
Loan, all headquartered in Boise, Idaho, added 28 Idaho offices to the
Association. In 1988, the acquisition of Freedom Federal Savings and Loan
Association in Corvallis, Oregon, added 13 Oregon offices, followed in 1990 by
the eight Oregon offices of Family Federal Savings.

    In 1991, the Association added three branches with the acquisition of First
Federal Savings and Loan Association of Idaho Falls, Idaho, and acquired the
deposits of First Western Savings Association of Las Vegas, Nevada, in Portland
and Eugene, Oregon, where they were doing business as Metropolitan Savings
Association. In 1993, 10 branches were added with the acquisition of First
Federal Savings Bank of Salt Lake City, Utah. In 1994, the Association expanded
into Arizona.

    In 1995, the stockholders approved a reorganization whereby Washington
Federal Savings became a wholly owned subsidiary of a newly formed holding
company, Washington Federal, Inc. That same year, the Association purchased West
Coast Mutual Savings Bank with its one branch in Centralia, Washington, and
opened six additional branches. In 1996, the Association acquired Metropolitan
Bancorp of Seattle, adding eight offices in Washington in addition to opening
four branches in existing markets. Between 1997 and 1999, Washington Federal
Savings continued to develop its branch network, opening a total of seven
branches and consolidating three offices into existing locations.

    In 2000, the Association expanded into Las Vegas, opening its first branch
in Nevada along with two branches in Arizona. In 2001, the Association opened
two additional branches in Arizona and its first branch in Texas with an office
in the Park Cities area of Dallas. In 2002, Washington Federal Savings opened
five full-service branches in existing markets and entered Colorado with a loan
production office. In 2003, the Association purchased United Savings and Loan
Bank with its four branches in the Seattle metropolitan area, added one new
branch in Puyallup, Washington and consolidated one branch in Nampa, Idaho.

    The Association obtains its funds primarily through savings deposits from
the general public, from repayments of loans, borrowings and retained earnings.
These funds are used largely to make first lien loans to borrowers for the
purchase of new and existing homes, the acquisition and development of land for
residential lots, the construction of homes, the financing of small multi-family
housing units, and for investment in obligations of the U.S. government, its
agencies and municipalities. The Association also has a wholly-owned subsidiary,
First Insurance Agency, Inc., which provides general insurance to the public.

FINANCIAL HIGHLIGHTS



September 30,                                                            2003           2002        % Change
- ------------------------------------------------------------------------------------------------------------
                                                                       (In thousands, except per share data)
                                                                                           
Assets ............................................................   $7,535,975     $7,392,441         +2%
Cash and cash equivalents .........................................    1,437,208        975,153        +47
Investment securities .............................................      310,218        117,417       +164
Loans receivable and securitized assets subject to repurchase .....    4,817,508      5,047,964         -5
Mortgage-backed securities ........................................      648,146        970,284        -33
Customer accounts .................................................    4,577,598      4,521,922         +1
FHLB advances and other borrowings ................................    1,750,000      1,750,000         --
Stockholders' equity ..............................................    1,055,596        960,718        +10
Net income ........................................................      145,544        143,954         +1
Diluted earnings per share ........................................         2.07           2.04         +1
Dividends per share ...............................................         0.86           0.82         +5
Stockholders' equity per share ....................................        14.83          13.75         +8
Shares outstanding ................................................       71,173         69,895         --
Return on average stockholders' equity ............................        15.60%         16.89%        --
Return on average assets ..........................................         2.00           2.05         --
Efficiency ratio ..................................................        16.51          17.57         --


TOTAL ASSETS

[BAR GRAPH]

STOCKHOLDERS' EQUITY

[BAR GRAPH]

NET INCOME PER DILUTED SHARE

[BAR GRAPH]

CASH DIVIDENDS PER SHARE

[BAR GRAPH]

RETURN ON AVERAGE EQUITY

[BAR GRAPH]

INTEREST RATE SPREAD

[BAR GRAPH]


                                                                               1

TO OUR STOCKHOLDERS

Dear Stockholder:

    It is a privilege to report that your company achieved outstanding financial
results again last year. While net income of $145,544,000 represented a modest
1.1% increase over fiscal 2002, it was nonetheless our best year ever. This is
the 19th time in 21 years as a public entity that your company has reported an
increase in operating results over the prior year. Earnings per share also
improved to a record $2.07, a 1.5% increase over last year. Return on assets
reached the "gold standard" for our industry of 2.00%, while return on equity
amounted to a respectable 15.60%. Continued strong earnings also enabled the
board of directors to increase your cash dividend for the 38th time since 1982
to an annualized $.88 per share.

    During the year, your company's balance sheet also strengthened. Assets grew
to $7.536 billion and capital exceeded $1 billion at fiscal year-end for the
first time. The quality of the company's assets remained high. Recent industry
reports credit Washington Federal with the lowest ratio of past due loans among
the largest mortgage servicing companies in the nation, while non-performing
assets declined by 19% to $27 million, and net charge-offs fell to $1.2 million,
the lowest in three years. Due to management's decision to invest cautiously
given historically low interest rates, liquid assets continued to increase. At
year-end, over $1.5 billion of the company's assets were invested very
short-term, representing a potentially significant increase in future revenues.
With three times the minimum capital required by our regulators, strong
earnings, unprecedented liquidity and excellent asset quality, we continue to
believe that we are indeed "One of America's Strongest Financial Institutions".

    Having said all that, it's equally important to note that the past two years
of peak financial performance occurred in a favorable climate for our business.
It would seem imprudent to expect such conditions to persist indefinitely. For
example, abnormally high prepayments of mortgage loans and mortgage backed
securities during each of the past two years caused a temporary surge in
interest income. This occurred because deferred revenues, primarily loan fees
collected at origination and securities discounts that normally amortize over a
longer period of time, were accelerated into current accounting periods. The
company has also benefited from a very steep yield curve, meaning a historically
wide spread between short and long-term interest rates, which we know from hard
experience won't last forever. In 2003, we also reached a cyclical top in the
demand for mortgage loans. With the passing of the refinance boom, we are
already experiencing a slowdown in the mortgage market and we expect intensified
price competition until the hangover of excess capacity in the industry melts
away.

    The good news is that, in choosing not to maximize current earnings, the
flexibility to take advantage of changing market conditions was preserved.
During the past year we focused on building liquidity and increasing net worth
as a percentage of assets. This approach had a cost to current earnings, but
offered the benefit of less interest rate risk and the potential for higher
earnings in the future than we might otherwise have achieved. With interest
rates higher at present, it appears that we will have the opportunity to invest
at better rates than we could have during recent quarters. Therefore, we believe
that your company is well positioned to continue its long tradition of
outperforming the industry.

    On August 31st, the acquisition of United Savings and Loan Bank was
finalized. This was our first acquisition since 1996, and added $344 million in
assets and $268 million in deposits. United was established in 1960 to provide
financial services to immigrants to Seattle from Asian countries, primarily
China, who at that time had difficulty accessing the banking system. It is a
privilege to welcome the employees and customers of this unique company to
Washington Federal. With the addition of four United branches in Seattle, one
new office in Puyallup, Washington, and the consolidation of one office in
Nampa, Idaho, the branch count at year-end totaled 119.

    During the year, we also completed a management transition that has been
underway for many years. Linda Brower, who joined us in January to head Human
Resources, was recently promoted to Executive Vice President. Brent Beardall, in
his third year with Washington Federal, was promoted to Senior Vice President
and Chief Financial Officer. Linda and Brent join Ed Hedlund, Jack Jacobson and
myself on the Executive Management Committee. My hope is that this outstanding
group of executives will work with the board and me to lead and manage the
company for the next ten to fifteen years.

    Recently, we also added two new members to the Board of Directors. Derek
Chinn, former President & CEO of United Savings and Loan Bank joined the board
in September. Tom Kenney, VP Finance and the principal financial officer of
Haggen, Inc., a Bellingham, Washington based grocery store chain, joined the
board in October. Prior to joining Haggen,


2

                                 [GROUP PHOTO]

(Standing - left to right) Edwin C. Hedlund, Executive Vice President and
Secretary, Roy M. Whitehead, Vice Chairman, President and Chief Executive
Officer, Linda S. Brower, Executive Vice President, (Seated - left to right)
Jack B. Jacobson, Executive Vice President and Chief Lending Officer, Brent J.
Beardall, Senior Vice President and Chief Financial Officer.

Inc. in 1996, Mr. Kenney spent 20 years in the financial services industry. Both
new directors will serve on the board's Audit Committee and possess the
financial literacy necessary to represent shareholder interests in that
important capacity. I thank them both for their willingness to serve during a
time when so much is expected of directors.

    Alas, some good people are moving on, too. At the Annual Meeting in January,
2004 Kermit Hanson, Dean Emeritus of the Graduate School of Business at the
University of Washington and a director since 1966, will retire from the Board.
I hope that you will take a moment at the meeting to thank him for his 38 years
of outstanding service to the company. I also wish to recognize Ron Saper,
former Executive Vice President, who retired this year after serving 11 years as
your company's Chief Financial Officer. The legacy of Ron's financial discipline
will benefit stockholders for years to come.

    In August, Standard & Poor's, in a promotion of sorts, removed Washington
Federal from their Small Cap 600 Index and added our stock to their Mid Cap 400
Index. This was nice recognition of the growth in the market value of your
company, and exposes our stock to a whole new universe of investors. It's
interesting to note that, although we still think of ourselves as a small
company, our current market capitalization of nearly $2 billion places us in the
top 10% of all NASDAQ companies, and in the top 30% of all NYSE companies. Based
on net income last year, our rankings are even higher: top 2% of NASDAQ
companies and top 20% of NYSE companies.

    In closing, I wish to thank our customers, employees, stockholders and
directors for their continuing support. Let me also remind you to send your
friends, neighbors and relatives to Washington Federal for their home loans and
savings needs. I hope to see you at the Annual Stockholders' Meeting scheduled
at 2:00 pm, on Wednesday, January 21, 2004 at the Sheraton Hotel in downtown
Seattle, Washington.


Sincerely,

/s/ Roy M. Whitehead

Roy M. Whitehead
Vice Chairman, President and Chief Executive Officer


                                                                               3

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

GENERAL       Washington Federal, Inc. (Company) is a savings and loan holding
              company. The Company's primary operating subsidiary is Washington
              Federal Savings (Association).

CRITICAL      Preparation of financial statements in conformity with accounting
ACCOUNTING    principles generally accepted in the United States of America
POLICIES      requires the use of estimates and assumptions that affect reported
              amounts of certain assets, liabilities, revenues and expenses in
              the Company's consolidated financial statements. Accordingly,
              estimated amounts may fluctuate from one reporting period to
              another due to changes in assumptions underlying estimated values.

              The Company has determined that the only accounting policy deemed
              critical to an understanding of the consolidated financial
              statements of Washington Federal, Inc. relates to the methodology
              for determining the valuation of the allowance for loan losses, as
              more fully described under "Loans receivable" in Note A to the
              Consolidated Financial Statements.

INTEREST      The Company accepts a high level of interest rate volatility as a
RATE RISK     result of its policy to originate fixed-rate single family home
              loans that are longer-term than the short-term characteristics of
              its liabilities of customer accounts and borrowed money. At
              September 30, 2003, the Company had approximately $1,200,000,000
              more liabilities subject to repricing in the next year than assets
              subject to repricing, which amounted to a negative maturity gap of
              16% of total assets, compared to a negative maturity gap of 26% in
              the prior year. The Company's interest rate risk approach has
              never resulted in the recording of a monthly operating loss.

              The Company's net interest spread decreased from 3.01% at
              September 30, 2002 to 2.47% at September 30, 2003. The spread
              decreased primarily from record low interest rates on mortgages,
              as well as a continued shift in the asset mix toward shorter-term
              assets. As of September 30, 2003, 19.1% of the Company's assets
              were in short-term investments.

              During this phase of the interest rate cycle the Company chose to
              build cash, reduce the amount of loans and mortgage-backed
              investments and maintain customer deposits with little or no
              growth. As of September 30, 2003, the Company had accumulated
              $1,437 million in cash and cash equivalents, which can be invested
              long-term in the future to generate additional revenues. This cash
              position was generated principally through the net runoff of loans
              and mortgage-backed investments of $441 million and $94 million of
              cash provided by the acquisition of United Savings and Loan Bank
              (United).

ASSET         The Company maintains an allowance to absorb losses inherent in
QUALITY       the loan portfolio. The allowance is based on ongoing, quarterly
              assessments of the probable and estimable losses inherent in the
              loan portfolio. In analyzing the existing loan portfolio, the
              Company applies specific loss percentage factors to the different
              loan types. The loss percentages are 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 and
              current economic conditions.

              Multi-family loans, builder construction loans and certain other
              loans are reviewed on an individual basis to assess the ability of
              the borrowers to continue to service all of their principal and
              interest obligations. If the loans show signs of weakness, they
              are downgraded and, if warranted, placed on non-accrual status.
              The Company has an Asset Quality Review Committee that reports the
              results of its internal reviews to the Board of Directors on a
              quarterly basis.

              Non-performing assets were $27,434,000, or .36% of total assets at
              September 30, 2003 compared to $33,876,000, or .46% of total
              assets at September 30, 2002. Total delinquencies over 30 days
              were $34,736,000, or .46% of total assets at September 30, 2003
              compared to $37,419,000, or .51% of total assets at September 30,
              2002. The aforementioned asset quality indicators, when compared
              to others in the industry, demonstrate the continued excellent
              quality of the loan portfolio.

LIQUIDITY     The Company's net worth at September 30, 2003 was $1,055,596,000,
AND CAPITAL   or 14.0% of total assets. This is an increase of $94,878,000 from
RESOURCES     September 30, 2002 when net worth was $960,718,000, or 13.0% of
              total assets. The Company's net worth increased due in part to net
              income of $145,544,000, proceeds received from the exercise of
              common stock options of $4,726,000, purchases by the Employee
              Stock Ownership Plan of $1,522,000 and acquisition-related stock
              issuances of $33,282,000. Net worth was reduced by $60,004,000 as
              a result of cash dividends paid, a decrease in unrealized gains on
              available-for-sale securities of $21,376,000 and $10,034,000 of
              stock repurchases. The ratio of net worth to total assets remains
              at a high level despite the distribution of 41.2% of earnings in
              the form of cash dividends.

              Washington Federal's percentage of net worth to total assets is
              among the highest in the nation and is over three times the
              minimum required under Office of Thrift Supervision (OTS)
              regulations (see Note O). Management believes this strong net
              worth position will help protect the Company against interest rate
              risk and will enable it to compete more effectively.

              Customer accounts increased $55,676,000, or 1.2% from one year
              ago, largely due to the acquisition of $269,924,000 of deposits in
              connection with the United merger, offset by net runoff of
              existing deposits of $214,248,000. Management's strategy during
              this phase of the interest rate cycle has been to keep deposit
              growth to a minimum until excess cash is deployed into higher
              yielding investments.

              The Company's cash and cash equivalents amounted to $1,437,208,000
              at September 30, 2003, a significant increase from $975,153,000
              one year ago. This continued shift in the balance sheet from
              long-term assets to short-term assets resulted from the decision
              to position the balance sheet to protect against the possibility
              of rising interest rates in the future. See "Interest Rate Risk"
              above.


4

CHANGES IN    AVAILABLE-FOR-SALE AND HELD-TO-MATURITY SECURITIES. The Company
FINANCIAL     purchased $559,995,000 of mortgage-backed and investment
POSITION      securities during fiscal 2003, $459,895,000 of which have been
              categorized as available-for-sale and $100,100,000 of which have
              been classified as held-to-maturity.

              The Company had $80,000,000 in sales of available-for-sale
              securities, resulting in a net realized gain of $992,000. As of
              September 30, 2003, the Company had unrealized gains in its
              available-for-sale portfolio of $34,624,000, net of tax, which are
              recorded as part of stockholders' equity.

              LOANS RECEIVABLE AND SECURITIZED ASSETS SUBJECT TO REPURCHASE.
              Loans receivable and securitized assets subject to repurchase
              decreased 4.6% to $4,817,508,000 at September 30, 2003 from
              $5,047,964,000 one year earlier. The decrease resulted from
              Management's decision not to aggressively compete based on price
              during periods of increased refinancing activity caused by record
              low home mortgage rates. The allowance for losses on loans and
              securitized assets subject to repurchase increased $1,894,000
              during the year as a result of the United acquisition, which added
              $1,597,000 in allowance, and provision in excess of net
              charge-offs of $297,000. The growth in the total allowance
              resulted primarily from the acquisition of United and changes in
              both the geographic mix and loan mix of the portfolio. The
              percentage of loans outside of Washington, Idaho, Oregon, Utah and
              Arizona increased to 10.5% at September 30, 2003 from 1.6% one
              year earlier as a result of the purchase of $418,000,000 of whole
              loans on residences primarily in California. Construction and land
              loans increased to 16.5% of the portfolio at September 30, 2003
              from 14.1% at September 30, 2002. The amount of reserves
              allocated to impaired loans increased to $1,000,000 at September
              30, 2003 from no allocation in the prior year based on the
              estimated value of the underlying collateral of the impaired
              loans.

              REAL ESTATE HELD FOR SALE. The balance at September 30, 2003 was
              $16,204,000, a decrease from $17,587,000 reported one year ago.

              FHLB STOCK. FHLB stock amounted to $143,851,000 at September 30,
              2003 compared with $132,320,000 one year ago. The Company received
              $8,155,000 in stock dividends during the year and $3,376,000 in
              stock that was acquired from United.

              INTANGIBLE ASSETS. On August 31, 2003, the Company acquired
              United. The acquisition produced goodwill of $19,263,000, a core
              deposit intangible of $4,921,000 and a non-compete agreement
              intangible of $575,000. As a result, goodwill increased to
              $54,966,000 at September 30, 2003 compared to $35,703,000 one year
              ago. Additionally, the unamortized balance of the core deposit
              intangible and the non-compete agreement intangible were
              $4,805,000 and $565,000, respectively, at September 30, 2003.

              OTHER ASSETS. Other assets increased $10,682,000 to $12,073,000 at
              September 30, 2003 from a commitment the Company made to invest a
              total of $10,000,000 into a partnership to provide low-income
              housing. As of September 30, 2003, only $100,000 had been
              invested. Current accounting rules require that the total amount
              of the unfunded investment commitment, $9,900,000, be reported as
              both an other liability and an other asset.

              CUSTOMER ACCOUNTS. Customer accounts at September 30, 2003 totaled
              $4,577,598,000 compared with $4,521,922,000 at September 30, 2002,
              a 1.2% increase. See "Liquidity and Capital Resources" above.

              FHLB ADVANCES AND OTHER BORROWINGS. Total borrowings of
              $1,750,000,000 at September 30, 2003 remained unchanged from one
              year ago. See "Interest Rate Risk" above.

RESULTS OF    GENERAL
OPERATIONS    Fiscal 2003 net income increased 1% from fiscal 2002. See Note S,
              "Selected Quarterly Financial Data (Unaudited)," which highlights
              the quarter-by-quarter results for the years ended September 30,
              2003 and 2002.



                                                          Dec 31  Mar 31  Jun 30  Sep 30  Dec 31  Mar 31  Jun 30  Sep 30
                                                           2001    2002    2002    2002    2002    2003    2003    2003
                                                          --------------------------------------------------------------
                                                                                          
              Interest rate on loans and
                mortgage-backed securities* ............   7.49%   7.41%   7.35%   7.26%   7.10%   6.94%   6.68%   6.40%
              Interest rate on
                investment securities** ................   5.50    3.19    3.09    2.82    2.29    2.28    2.00    1.98
                                                          --------------------------------------------------------------
                Combined ...............................   7.37    6.96    6.89    6.53    6.06    5.84    5.49    5.28
              Interest rate on customer accounts .......   3.78    3.25    3.16    2.94    2.65    2.42    2.19    1.96
              Interest rate on borrowings ..............   5.24    5.24    5.24    5.03    5.03    5.03    5.03    5.03
                                                          --------------------------------------------------------------
                Combined ...............................   4.16    3.76    3.69    3.52    3.32    3.16    3.00    2.81
                                                          --------------------------------------------------------------
              Interest rate spread .....................   3.21%   3.20%   3.20%   3.01%   2.74%   2.68%   2.49%   2.47%
                                                          ==============================================================


              * Includes securitized assets subject to repurchase
              **Includes municipal bonds at tax-equivalent rates and cash
                equivalents

              The interest rate spread decreased during fiscal 2003 from 3.01%
              at September 30, 2002 to 2.47% at September 30, 2003. See
              "Interest Rate Risk" above.

              COMPARISON OF FISCAL 2003 RESULTS WITH FISCAL 2002

              Interest income on loans, securitized assets subject to repurchase
              and mortgage-backed securities decreased $66,203,000 (13.7%) in
              fiscal 2003 from 2002 as interest rates declined to 6.40% from
              7.26% one year ago. The Company originated $1,867,112,000 in
              loans, which was more than offset by loan repayments and payoffs
              of


                                                                               5

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)

              $2,604,297,000 in fiscal 2003. Interest income benefited from
              $44.5 million of net accretion of loan fees and discounts on
              mortgage-backed securities during fiscal 2003, an increase of
              $15.6 million from the prior year caused by record prepayments of
              mortgages and related securities. If prepayment speeds return to
              historical levels, this additional accretion will subside.

              Interest and dividend income on investment securities and cash
              equivalents increased $11,428,000 (50.7%) in fiscal 2003 from
              fiscal 2002. Rates declined to 1.98% at September 30, 2003
              compared with 2.82% at September 30, 2002. The combined
              investment securities, cash equivalents and FHLB stock portfolio
              increased 56.4% to $1,839,847,000 at September 30, 2003 versus
              $1,176,737,000 one year ago.

              Interest expense on customer accounts decreased 30.4% to
              $105,919,000 for fiscal 2003 from $152,288,000 for fiscal 2002.
              The decrease related to a small increase in customer accounts to
              $4,577,598,000 from $4,521,922,000 the prior year, coupled with a
              significant decrease in the cost of customer accounts to 1.96% at
              year end compared to 2.94% one year ago.

              Interest expense on FHLB advances and other borrowings increased
              to $88,965,000 in fiscal 2003 from $82,653,000 in fiscal 2002
              primarily due to an increase in average borrowings to
              $1,750,648,000 as of September 30, 2003 from $1,568,220,000 one
              year ago. The average cost of borrowings as of September 30, 2003
              remained constant at 5.03% from one year ago.

              The provision for loan losses was $1,500,000 for fiscal 2003
              compared to $7,000,000 in fiscal 2002. This decrease reflects the
              continued decline in the amount of the loan portfolio combined
              with strong asset quality indicators. Non-performing assets
              remained low at $27,434,000, or .36% of total assets at September
              30, 2003 compared with $33,876,000, or .46% of total assets at
              September 30, 2002. Management believes the allowance for loan
              losses, totaling $25,806,000, or 94% of non-performing assets, is
              adequate to absorb estimated losses inherent in the portfolio.

              Total other income increased $6,929,000 (85.7%) in fiscal 2003
              from fiscal 2002. This increase is primarily the result of fee
              income related to prepayments and the refinancing of mortgage
              loans and a $3,382,000 gain on the sale of real estate. Net gains
              on the sale of securities totaled $992,000 in fiscal 2003 compared
              to $765,000 in fiscal 2002.

              Total other expense decreased $4,812,000 (9.8%) in fiscal 2003
              over fiscal 2002. Compensation expense decreased $3,213,000 in
              fiscal 2003, primarily attributable to a larger bonus being paid
              to all employees in fiscal 2002 versus fiscal 2003. Routine
              operating expenses, including data processing, decreased
              $2,044,000 in fiscal 2003 due to reduced depreciation expense of
              $422,000 and general cost containment measures. Personnel,
              including part-time employees considered on a full-time equivalent
              basis, increased to 754 at September 30, 2003 compared to 726 at
              September 30, 2002. The branch network increased to 119 offices at
              September 30, 2003 versus 115 offices one year ago. The United
              acquisition added 36 full-time equivalent employees and four
              branches. Other expense for fiscal 2003 equaled .61% of average
              assets compared with .70% in fiscal 2002.

              Income tax expense increased $621,000 (0.8%) in fiscal 2003. The
              effective tax rate was 35.19% for fiscal 2003 versus 35.25% for
              fiscal 2002.

              COMPARISON OF FISCAL 2002 RESULTS WITH FISCAL 2001

              Interest income on loans, securitized assets subject to repurchase
              and mortgage-backed securities decreased $33,792,000 (6.5%) in
              fiscal 2002 from 2001 as average interest rates declined to 7.26%
              from 7.61% one year ago. The Company originated $1,430,834,000 in
              loans, which was more than offset by loan repayments and payoffs
              of $1,823,281,000 in fiscal 2002.

              Interest and dividend income on investment securities and cash
              equivalents increased $4,634,000 (25.9%) in fiscal 2002 from
              fiscal 2001. The weighted-average yield declined to 2.82% at
              September 30, 2002 compared with 7.79% at September 30, 2001. The
              combined investment securities, cash equivalents and FHLB stock
              portfolio increased 336% to $1,176,737,000 at September 30, 2002
              versus $270,085,000 one year ago.

              Interest expense on customer accounts decreased 21.8% to
              $152,288,000 for fiscal 2002 from $194,710,000 for fiscal 2001.
              The decrease related to an increase in customer accounts to
              $4,521,922,000 from $4,316,692,000 the prior year coupled with a
              significant decrease in the average cost of customer accounts to
              2.94% at year end compared to 4.31% one year ago.

              Interest expense on FHLB advances and other borrowings decreased
              to $82,653,000 in fiscal 2002 from $125,410,000 in fiscal 2001
              primarily due to a decline in average borrowings to $1,568,220,000
              as of September 30, 2002 from $2,264,001,000 one year ago. This
              decrease in average volume was coupled with a decrease in average
              rates to 5.03% as of September 30, 2002 from 5.09% at September
              30, 2001.

              The provision for loan losses was $7,000,000 for fiscal 2002
              compared to $1,850,000 in fiscal 2001. This increase reflects the
              continued decline in economic conditions in the markets the
              Company serves, including high unemployment levels and a slowdown
              in the home construction market in the Pacific Northwest. However,
              non-performing assets remained low at $33,876,000, or .46% of
              total assets at September 30, 2002 compared with $33,758,000, or
              .48% of total assets at September 30, 2001. Management believes
              the allowance for loan losses, totaling $23,912,000, or 71% of
              non-performing assets, is adequate to absorb estimated losses
              inherent in the portfolio.

              Total other income decreased $1,648,000 (16.9%) in fiscal 2002
              from fiscal 2001. Net gains on the sale of securities totaled
              $765,000 in fiscal 2002 compared to $3,235,000 in fiscal 2001. The
              decline was partially offset by a one time gain of $515,000 on the
              disposition of a branch in fiscal 2002.

              Total other expense increased $2,050,000 (4.4%) in fiscal 2002
              over fiscal 2001. Compensation expense increased $5,776,000 in
              fiscal 2002, primarily attributable to a bonus paid to all
              employees based on improved


6

              operating results (adjusted by goodwill amortization); however,
              this was offset by the elimination of goodwill amortization
              expense of $5,875,000 over fiscal 2001. Routine operating
              expenses, including data processing, increased $1,868,000 in
              fiscal 2002 largely due to the installation of a new teller
              system. Personnel, including part-time employees considered on a
              full-time equivalent basis, increased to 726 at September 30, 2002
              compared to 714 at September 30, 2001. The branch network
              increased to 115 offices at September 30, 2002 versus 111 offices
              one year ago. Other expense for fiscal 2002 equaled .70% of
              average assets compared with .68% in fiscal 2001.

              Income tax expense increased $16,550,000 (26.8%) in fiscal 2002.
              The effective tax rate was 35.25% for both fiscal 2002 and 2001.


                                                                               7

SELECTED FINANCIAL DATA



Year ended September 30,                         2003       2002       2001       2000       1999
- ---------------------------------------------------------------------------------------------------
                                                      (In thousands, except per share data)
                                                                            
Interest income .............................  $450,185   $504,960   $534,118   $495,949   $453,620
Interest expense ............................   194,884    234,941    320,120    299,511    244,490
                                               ----------------------------------------------------
Net interest income .........................   255,301    270,019    213,998    196,438    209,130
Provision for loan losses ...................     1,500      7,000      1,850         --        684
Other income ................................    14,823      8,206     10,137     11,309     12,779
Other expense ...............................    44,059     48,871     46,821     44,568     44,144
                                               ----------------------------------------------------
  Income before income taxes ................   224,565    222,354    175,464    163,179    177,081
Income taxes ................................    79,021     78,400     61,850     57,500     62,795
                                               ----------------------------------------------------
  Net income ................................  $145,544   $143,954   $113,614   $105,679   $114,286
                                               ====================================================

Per share data
  Basic earnings ............................     $2.09      $2.06      $1.63      $1.51      $1.55
  Diluted earnings ..........................      2.07       2.04       1.61       1.50       1.54
  Cash dividends ............................      0.86       0.82       0.77       0.74       0.68




September 30,                                     2003         2002         2001         2000         1999
- -------------------------------------------------------------------------------------------------------------
                                                                       (In thousands)
                                                                                    
Total assets ................................  $7,535,975   $7,392,441   $7,026,743   $6,719,841   $6,163,503
Loans and mortgage-backed securities* .......   5,465,654    6,018,248    6,570,309    6,277,340    5,731,644
Investment securities** .....................   1,696,169    1,044,417      145,724      142,992      141,753
Customer accounts ...........................   4,577,598    4,521,922    4,316,692    3,465,270    3,379,502
FHLB advances ...............................   1,650,000    1,650,000    1,637,500    1,209,000    1,454,000
Other borrowings ............................     100,000      100,000       30,000    1,154,509      454,257
Stockholders' equity ........................   1,055,596      960,718      874,009      759,165      750,023

Number of
  Customer accounts .........................     217,785      213,404      211,570      191,343      189,419
  Mortgage loans ............................      33,975       38,096       42,032       41,741       40,104
  Offices ...................................         119          115          111          108          107


* Includes securitized assets subject to repurchase
** Includes cash equivalents


8

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION



September 30,                                                                                                2003           2002
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                (In thousands)
                                                                                                                   
ASSETS
Cash and cash equivalents, including repurchase agreements of $1,350,000 and $925,000 ..................  $1,437,208     $  975,153
Available-for-sale securities, including encumbered securities of $76,921 and $114,583, at fair value ..     804,186        918,776
Held-to-maturity securities, including encumbered securities of $75,690 and $0, at amortized cost ......     154,178        168,925
Securitized assets subject to repurchase, net ..........................................................     210,782        755,961
Loans receivable, net ..................................................................................   4,606,726      4,292,003
Interest receivable ....................................................................................      29,489         39,503
Premises and equipment, net ............................................................................      60,942         55,119
Real estate held for sale ..............................................................................      16,204         17,587
FHLB stock .............................................................................................     143,851        132,320
Intangible assets ......................................................................................      60,336         35,703
Other assets ...........................................................................................      12,073          1,391
                                                                                                          -------------------------
                                                                                                          $7,535,975     $7,392,441
                                                                                                          =========================

LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Customer accounts
  Savings and demand accounts ..........................................................................  $4,520,051     $4,452,250
  Repurchase agreements with customers .................................................................      57,547         69,672
                                                                                                          -------------------------
                                                                                                           4,577,598      4,521,922
FHLB advances ..........................................................................................   1,650,000      1,650,000
Other borrowings, primarily securities sold under agreements to repurchase .............................     100,000        100,000
Advance payments by borrowers for taxes and insurance ..................................................      23,281         22,704
Federal and state income taxes, including net deferred liabilities of $70,485 and $80,185 ..............      70,011         84,235
Accrued expenses and other liabilities .................................................................      59,489         52,862
                                                                                                          -------------------------
                                                                                                           6,480,379      6,431,723
STOCKHOLDERS' EQUITY
Common stock, $1.00 par value, 100,000,000 shares authorized, 85,553,789 and 83,833,244
  shares issued; 71,173,487 and 69,894,902 shares outstanding ..........................................      85,554         76,212
Paid-in capital ........................................................................................   1,085,650        968,858
Accumulated other comprehensive income, net of tax .....................................................      34,624         56,000
Treasury stock, at cost; 14,380,302 and 13,938,342 shares ..............................................    (207,337)      (198,279)
Retained earnings ......................................................................................      57,105         57,927
                                                                                                          -------------------------
                                                                                                           1,055,596        960,718
                                                                                                          -------------------------
                                                                                                          $7,535,975     $7,392,441
                                                                                                          =========================



SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                 9

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS



Year ended September 30,                                                       2003              2002              2001
- ---------------------------------------------------------------------------------------------------------------------------
                                                                                 (In thousands, except per share data)
                                                                                                      
INTEREST INCOME

Loans and securitized assets subject to repurchase ......................  $    353,286      $    406,262      $    426,240
Mortgage-backed securities ..............................................        62,911            76,138            89,952
Investment securities ...................................................        33,988            22,560            17,926
                                                                           ------------------------------------------------
                                                                                450,185           504,960           534,118
INTEREST EXPENSE

Customer accounts .......................................................       105,919           152,288           194,710
FHLB advances and other borrowings ......................................        88,965            82,653           125,410
                                                                           ------------------------------------------------
                                                                                194,884           234,941           320,120
                                                                           ------------------------------------------------
NET INTEREST INCOME .....................................................       255,301           270,019           213,998
Provision for loan losses ...............................................         1,500             7,000             1,850
                                                                           ------------------------------------------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES .....................       253,801           263,019           212,148

OTHER INCOME

Gain on sale of securities, net .........................................           992               765             3,235
Gain on sale of real estate .............................................         3,382                --                --
Other ...................................................................        10,643             7,323             6,501
                                                                           ------------------------------------------------
                                                                                 15,017             8,088             9,736

OTHER EXPENSE

Compensation and fringe benefits ........................................        30,846            34,059            28,283
Amortization of intangibles .............................................           126                --             5,875
Occupancy expense .......................................................         5,098             4,778             4,497
Other ...................................................................         7,989            10,034             8,166
                                                                           ------------------------------------------------
                                                                                 44,059            48,871            46,821
Gain (loss) on real estate acquired through foreclosure, net ............          (194)              118               401
                                                                           ------------------------------------------------
INCOME BEFORE INCOME TAXES ..............................................       224,565           222,354           175,464
Income taxes
  Current ...............................................................        80,403            79,423            58,641
  Deferred ..............................................................        (1,382)           (1,023)            3,209
                                                                           ------------------------------------------------
                                                                                 79,021            78,400            61,850
                                                                           ------------------------------------------------
NET INCOME                                                                 $    145,544      $    143,954      $    113,614
                                                                           ================================================

PER SHARE DATA
Basic earnings ..........................................................  $       2.09      $       2.06      $       1.63
Diluted earnings ........................................................          2.07              2.04              1.61
Cash dividends ..........................................................          0.86              0.82              0.77
Weighted average number of shares outstanding,
  including dilutive stock options ......................................    70,232,695        70,523,160        70,461,517



10                                SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY



                                                                                            Accumulated
                                                                                              Other
                                                   Common        Paid-in      Retained     Comprehensive   Treasury
                                                   Stock         Capital      Earnings        Income         Stock        Total
- ----------------------------------------------------------------------------------------------------------------------------------
                                                                                 (In thousands)
                                                                                                      
Balance at October 1, 2000 ....................  $    62,296   $   785,745   $    98,142  $       3,000  $  (190,018)  $   759,165
Eleven-for-ten stock split
  distributed February 23, 2001 ...............        6,247       101,767      (108,105)                                      (91)
Comprehensive income:
  Net income ..................................                                  113,614                                   113,614
  Other comprehensive income,
  net of tax of $26,131:
    Unrealized gains on securities ..............                                                50,095                     50,095
    Reclassification adjustment for gains on
     securities sold ...........................                                                 (2,095)                    (2,095)
                                                                                                                           --------
Total comprehensive income ....................                                                                            161,614
Dividends .....................................                                  (54,011)                                  (54,011)
Proceeds from exercise of
  common stock options ........................          459         5,663                                                   6,122
Proceeds from Employee
  Stock Ownership Plan ........................                        346                                       806         1,152
Restricted stock ..............................            4           112           (58)                                       58
                                                 -----------------------------------------------------------------------------------
Balance at September 30, 2001 .................       69,006       893,633        49,582          51,000      (189,212)    874,009
                                                 -----------------------------------------------------------------------------------

Eleven-for-ten stock split
  distributed February 22, 2002 ...............        6,905        70,824       (77,792)                                      (63)
Comprehensive income:
  Net income ..................................                                  143,954                                   143,954
  Other comprehensive income,
  net of tax of $2,722:
    Unrealized gains on securities ............                                                    5,495                     5,495
    Reclassification adjustment for gains on
      securities sold .........................                                                     (495)                     (495)
                                                                                                                           --------
Total comprehensive income ....................                                                                            148,954
Dividends .....................................                                  (57,383)                                  (57,383)
Proceeds from exercise of
  common stock options ........................          282         3,462                                                   3,744
Proceeds from Employee
  Stock Ownership Plan ........................                        461                                       1,157       1,618
Restricted stock ..............................           19           478          (434)                                       63
Treasury stock purchases ......................                                                                (10,224)    (10,224)
                                                 -----------------------------------------------------------------------------------
Balance at September 30, 2002 .................  $    76,212   $   968,858   $    57,927   $      56,000   $  (198,279) $   960,718
                                                 -----------------------------------------------------------------------------------

Eleven-for-ten stock split
  distributed February 21, 2003 ...............        7,622        79,612       (87,368)                                      (134)
Comprehensive income:
  Net income ..................................                                  145,544                                    145,544
  Other comprehensive income,
  net of tax of $11,637:
      Changes in unrealized gains on securities                                                  (20,733)                   (20,733)
      Reclassification adjustment for gains on
        securities sold .........................                                                   (643)                      (643)
                                                                                                                           --------
Total comprehensive income ....................                                                                             124,168
Dividends .....................................                                  (60,004)                                   (60,004)
Proceeds from exercise of
  common stock options ........................          357         4,369                                                    4,726
Tax benefit related to exercise
  of stock options ............................                                    1,218                                      1,218
Proceeds from Employee
  Stock Ownership Plan ........................                        546                                         976        1,522
Restricted stock ..............................           14           332          (212)                                       134
Acquisition-related stock issuance ............        1,349        31,933                                                   33,282
Treasury stock purchases ......................                                                                (10,034)     (10,034)
                                                 -----------------------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 2003 .................  $    85,554   $ 1,085,650   $    57,105   $      34,624   $  (207,337)  $ 1,055,596
                                                 ===================================================================================



SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                11

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS



Year ended September 30,                                                                 2003             2002             2001
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                                     (In thousands)
                                                                                                              
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ........................................................................  $    145,544     $    143,954     $    113,614
Adjustments to reconcile net income to net cash provided by operating activities
  Amortization of fees, discounts and premiums, net ...............................       (13,850)          (6,103)            (143)
  Amortization of intangible assets ...............................................           126               --            5,874
  Depreciation ....................................................................         3,099            3,521            2,996
  Provision for loan losses .......................................................         1,500            7,000            1,850
  Gain on investment securities and real estate held for sale, net ................        (4,180)            (883)          (3,636)
  Decrease (increase) in accrued interest receivable ..............................         9,126            8,777           (7,580)
  Increase (decrease) in income taxes payable .....................................        (5,308)         (11,883)          15,106
  FHLB stock dividends ............................................................        (8,155)          (7,959)          (8,047)
  Decrease (increase) in other assets .............................................       (10,151)            (376)           3,714
  Increase in accrued expenses and other liabilities ..............................         3,226            1,634            1,436
                                                                                     ----------------------------------------------
Net cash provided by operating activities .........................................       120,977          137,682          125,184
                                                                                     ----------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES
Loans and contracts originated
  Loans on existing property ......................................................    (1,078,374)        (892,595)      (1,157,278)
  Construction loans ..............................................................      (487,692)        (363,420)        (369,808)
  Land loans ......................................................................      (163,533)         (87,212)        (130,161)
  Loans refinanced ................................................................      (137,513)         (87,607)         (86,969)
                                                                                     ----------------------------------------------
                                                                                       (1,867,112)      (1,430,834)      (1,744,216)

Savings account loans originated ..................................................        (1,866)          (5,765)          (3,342)
Loan principal repayments .........................................................     2,604,297        1,823,281        1,318,784
Increase (decrease) in undisbursed loans in process ...............................        71,804          (13,323)         (29,503)
Loans purchased ...................................................................      (417,669)         (60,874)          (2,842)
Available-for-sale securities purchased ...........................................      (459,895)        (180,683)         (89,882)
Principal payments and maturities of available-for-sale securities ................       487,438          344,986          216,992
Available-for-sale securities sold ................................................        80,000           10,000           50,282
Held-to-maturity securities purchased .............................................      (100,100)              --               --
Principal payments and maturities of held-to-maturity securities ..................       115,812           80,154           45,325
Cash provided by acquisition ......................................................        94,314               --               --
Proceeds from sales of real estate held for sale ..................................        16,342           19,603           19,268
Premises and equipment purchased, net .............................................        (4,730)          (4,398)          (6,751)
                                                                                     ----------------------------------------------
Net cash provided (used) by investing activities ..................................       618,635          582,147         (225,885)
                                                                                     ----------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in customer accounts ......................................      (214,248)         205,230          851,422
Net decrease in short-term borrowings .............................................            --         (117,500)      (1,646,009)
Proceeds from long-term borrowings ................................................            --          200,000          950,000
Proceeds from exercise of common stock options ....................................         5,944            3,744            6,122
Dividends paid ....................................................................       (60,004)         (57,383)         (54,044)
Proceeds from Employee Stock Ownership Plan .......................................         1,522            1,618            1,152
Treasury stock purchased, net .....................................................       (10,034)         (10,224)              --
Increase (decrease) in advance payments by borrowers for taxes and insurance ......          (737)            (492)          (5,897)
                                                                                     ----------------------------------------------
Net cash provided (used) by financing activities ..................................      (277,557)         224,993          102,746
                                                                                     ----------------------------------------------
INCREASE IN CASH AND CASH EQUIVALENTS .............................................       462,055          944,822            2,045
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR ....................................       975,153           30,331           28,286
                                                                                     ----------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR ..........................................  $  1,437,208     $    975,153     $     30,331
                                                                                     ==============================================



12                                SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)



Year ended September 30,                                                                 2003             2002             2001
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                                     (In thousands)
                                                                                                              
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
NON-CASH INVESTING ACTIVITIES
  Real estate acquired through foreclosure ........................................  $     11,771     $     20,294     $     18,229
NON-CASH OPERATING ACTIVITIES
  Assets securitized, subject to repurchase, net ..................................            --               --        1,388,197
CASH PAID DURING THE YEAR FOR
  Interest ........................................................................       195,360          237,480          322,933
  Income taxes ....................................................................        83,878           90,743           45,746

The following summarizes the non-cash activities relating to the acquisition
  Fair value of assets and intangibles acquired, including goodwill ...............  $   (343,626)    $         --     $         --
  Fair value of liabilities assumed ...............................................       276,872               --               --
  Fair value of stock issued ......................................................        33,282               --               --
                                                                                     ----------------------------------------------
  Cash paid out in acquisition ....................................................       (33,472)              --               --
  Plus cash acquired ..............................................................       127,786               --               --
                                                                                     ----------------------------------------------
  Net cash provided by the acquisition ............................................  $     94,314     $         --     $         --
                                                                                     ==============================================



SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                13

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2003, 2002 AND 2001

NOTE A        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

              PRINCIPLES OF CONSOLIDATION. The consolidated financial statements
              include the accounts of Washington Federal, Inc. (Company) and its
              wholly owned subsidiaries. All significant intercompany
              transactions and balances have been eliminated.

              DESCRIPTION OF BUSINESS. Washington Federal, Inc. is a savings and
              loan holding company. The Company's principal operating subsidiary
              is Washington Federal Savings (Association). The Company is
              principally engaged in the business of attracting savings deposits
              from the general public and investing these funds, together with
              borrowings and other funds, in one-to-four family residential real
              estate loans and multi-family real estate loans. The Company
              conducts its activities from a network of 119 offices located in
              Washington, Oregon, Idaho, Utah, Arizona, Nevada, Texas and
              Colorado.

              CASH AND CASH EQUIVALENTS. Cash and cash equivalents include cash
              on hand, amounts due from banks, overnight investments and
              repurchase agreements with an initial maturity of three months or
              less.

              INVESTMENTS AND MORTGAGE-BACKED SECURITIES. The Company accounts
              for investments and mortgage-backed securities in two categories:
              held-to-maturity and available-for-sale.

              Held-to-maturity securities - Securities classified as
              held-to-maturity are accounted for at amortized cost, but the
              Company must have both the positive intent and the ability to hold
              those securities to maturity. There are very limited circumstances
              under which securities in the held-to-maturity category can be
              sold without jeopardizing the cost basis of accounting for the
              remainder of the securities in this category. Recognition for
              unrealized losses is provided if market valuation differences are
              deemed to be other than temporary.

              Available-for-sale securities - Securities not classified as
              held-to-maturity are considered to be available-for-sale. Gains
              and losses realized on the sale of these securities are based on
              the specific identification method. Unrealized gains and losses
              for available-for-sale securities are excluded from earnings and
              reported as a net amount in the accumulated other comprehensive
              income component of stockholders' equity.

              Management evaluates debt and equity securities for other than
              temporary impairment on a quarterly basis based on the securities'
              current credit quality, interest rates, term to maturity and
              management's intent and ability to hold the securities until the
              principal is recovered. Any other than temporary declines in fair
              value are recognized in the income statement as loss from
              securities.

              Premiums and discounts on investments are deferred and recognized
              over the life of the asset using the interest method.

              Forward contracts to purchase mortgage-backed securities are
              recorded at fair value on the balance sheet as available-for-sale
              securities. These contracts are designated by the Company as cash
              flow hedges of the price risk of the anticipated purchase of
              securities. Under cash flow hedge accounting, if specific criteria
              are met, the unrealized gains or losses are recognized as a
              component of stockholders' equity through comprehensive income
              until the related forecasted purchase of securities occurs,
              whereupon the remaining unrealized gains or losses are included in
              the basis of the purchased securities. To the extent that forward
              contracts to purchase securities fail to meet hedging criteria,
              including purchasing the mortgage-backed securities within a
              specific time frame, the fair value of the contracts will be
              included in earnings.

              The Company may enter into certain forward contracts to sell
              mortgage-backed securities to hedge the price risk in certain
              mortgage-backed securities accounted for as available-for-sale
              securities. To the extent forward sales contracts meet specific
              hedging criteria, the market value change associated with the
              contract is recorded through comprehensive income. To the extent
              that forward sales contracts fail to meet hedging criteria, the
              fair value of the contracts will be recorded in earnings. The
              Company records forward purchases and forward sales contracts net,
              where it has the legal right of offset, in available-for-sale
              securities.

              SECURITIZED ASSETS SUBJECT TO REPURCHASE. In March 2001, the
              Company transferred some of its permanent single-family
              residential loans into a Real Estate Mortgage Investment Conduit
              (REMIC). The REMIC then issued securities backed by such loans,
              all of which were retained by the Company. The terms of the
              transfer of the loans to the REMIC contain a call provision
              whereby the Company can repurchase the loans when the outstanding
              balance of the pool declines to 15% or less of the original
              amount; therefore, the transfer did not qualify as a sale under
              generally accepted accounting principles. Accordingly, the
              retained interests continue to be accounted for in a manner
              similar to loans and are included in the accompanying balance
              sheet as securitized assets subject to repurchase.

              LOANS RECEIVABLE. Loans receivable more than 90 days past due are
              placed on non-accrual status and an allowance for accrued interest
              is established. Any interest ultimately collected is credited to
              income in the period of recovery.

              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,
              specific allowances and the unallocated allowance.

              The formula portion of the general loan loss allowance is
              established by applying a loss percentage factor to the different
              loan types. The allowances are provided 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


14

              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.

              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. The unallocated allowance allows for the
              estimation risk associated with the formula and specific
              allowances.

              Impaired loans consist of loans receivable that will not be repaid
              in accordance with their contractual terms and are measured using
              the fair value of the collateral. Smaller balance loans are
              excluded from this analysis.

              PREMISES AND EQUIPMENT. Premises and equipment are stated at cost,
              less accumulated depreciation. Depreciation is computed on the
              straight-line method over the estimated useful lives of the
              respective assets. Expenditures are capitalized for betterments
              and major renewals. Charges for ordinary maintenance and repairs
              are expensed to operations as incurred.

              REAL ESTATE HELD FOR SALE. Properties acquired in settlement of
              loans, purchased in acquisitions or acquired for development are
              recorded at the lower of cost or fair value.

              INTANGIBLE ASSETS. Goodwill represents the excess of the cost of
              businesses acquired over the fair value of the net assets
              acquired. The core deposit intangible and non-compete agreement
              intangible are acquired assets that lack physical substance but
              can be distinguished from goodwill. Goodwill is no longer
              amortized, but rather is evaluated for impairment on an annual
              basis. Other intangible assets are amortized over their estimated
              useful lives and are subject to impairment testing when events or
              circumstances change. If circumstances indicate that the carrying
              value of the assets may not be recoverable, an impairment charge
              could be recorded. No impairment of intangible assets has ever
              been identified. The Company amortizes the core deposit intangible
              on an accelerated basis over its estimated life of seven years;
              the non-compete agreement intangible is amortized on a
              straight-line basis over its life of five years.

              DEFERRED FEES AND DISCOUNTS ON LOANS. Loan discounts and loan fees
              are deferred and recognized over the life of the loans using the
              interest method based on actual loan payments.

              ACCOUNTING FOR STOCK-BASED COMPENSATION. In October 1995, the
              Financial Accounting Standards Board (FASB) issued Statement of
              Financial Accounting Standards (SFAS) No. 123, "Accounting for
              Stock-Based Compensation". SFAS No. 123 requires expanded
              disclosures of stock-based compensation arrangements with
              employees and encourages application of the fair value recognition
              provisions in the statement. Companies may continue following
              rules to recognize and measure compensation as outlined in
              Accounting Principles Board (APB) Opinion No. 25, "Accounting for
              Stock Issued to Employees", but are now required to disclose the
              pro forma amounts of net income and earnings per share that would
              have been reported had the Company elected to follow the fair
              value recognition provisions of SFAS No. 123. The Company adopted
              the disclosure requirements of SFAS No. 123, but continues to
              measure its stock-based employee compensation arrangements under
              the provisions of APB Opinion No. 25 and related Interpretations.
              In December 2002, the FASB issued SFAS No. 148, "Accounting for
              Stock-Based Compensation - Transition and Disclosure" which
              provides guidance on the transition from the intrinsic value
              method of accounting for stock-based employee compensation under
              APB Opinion No. 25 to the fair value method described in SFAS No.
              123, if a company elects to do so. The Company has elected to
              continue to follow the intrinsic value method in accounting for
              stock options as provided in APB Opinion No. 25.

              The Company has three stock-option employee compensation plans,
              which are described more fully in Note N. The fair value of
              options granted under the Company's stock option plans is
              estimated on the date of grant using the Black-Scholes
              option-pricing model which utilizes the weighted-average
              assumptions in the following table:



              Year ended September 30,                 2003         2002         2001
              ------------------------------------------------------------------------
                                                                     
              Annual dividend yield ..............     4.19%        4.00%        4.00%
              Expected volatility ................       28%          27%          34%
              Risk-free interest rate ............     2.63%        3.52%        3.80%
              Expected life ......................  5 YEARS      5 years      5 years


              No stock-option employee compensation cost is reflected in net
              income, as all options granted had an exercise price equal to the
              market value of the underlying common stock on the date of grant,
              and the number of shares of each grant is fixed at the grant date.
              The following table illustrates the effect on net income and
              earnings per share if the Company had applied the fair value
              recognition provisions of SFAS No. 123:



              Year ended September 30,                                             2003            2002            2001
                                                                                 ----------------------------------------
                                                                                   (In thousands, except per share data)
                                                                                                        
              Net income, as reported .........................................  $145,544        $143,954        $113,614
              Deduct: Total stock-based employee compensation expense
                included in reported net income, net of related tax effects ...    (1,111)         (1,149)           (738)
                                                                                 --------        --------        --------
              Pro forma net income ............................................  $144,433        $142,805        $112,876
              Earnings per share:
                Basic - as reported ...........................................  $   2.09        $   2.06        $   1.63
                Basic - pro forma .............................................      2.07            2.04            1.62
                Diluted - as reported .........................................      2.07            2.04            1.61
                Diluted - pro forma ...........................................      2.06            2.02            1.60



                                                                              15

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 2003, 2002 AND 2001

              USE OF ESTIMATES. The preparation of financial statements in
              conformity with accounting principles generally accepted in the
              United States of America requires Management to make estimates and
              assumptions that affect the reported amounts of assets and
              liabilities and disclosure of contingent assets and liabilities at
              the date of the financial statements and the reported amounts of
              revenues and expenses during the reporting period. Significant
              estimates reported in the financial statements include the
              allowance for loan losses, intangible assets, deferred taxes and
              contingent liabilities. Actual results could differ from these
              estimates.

              In the second quarters of fiscal 2003 and 2002, the Company
              declared an eleven-for-ten stock split in the form of a 10% stock
              dividend. All share and per share amounts have been adjusted to
              reflect these stock dividends.

              BUSINESS SEGMENTS. The Company has determined that its current
              business and operations consist of one business segment.

              ACCOUNTING CHANGES. In April 2003, the FASB issued and the Company
              adopted SFAS No. 149, "Amendment of Statement No. 133 on
              Derivative Instruments and Hedging Activities". This Statement
              amends and clarifies financial accounting and reporting for
              derivative instruments, including certain derivative instruments
              embedded in other contracts, and for hedging activities under SFAS
              No. 133, "Accounting for Derivative Instruments and Hedging
              Activities". The adoption of SFAS No. 149 did not have a material
              impact on the Company's financial statements.

              In November 2002, the FASB issued and the Company adopted
              Interpretation No. 45 ("FIN 45"), "Guarantor's Accounting and
              Disclosure Requirements for Guarantees, Including Indirect
              Guarantees of Indebtedness of Others". This interpretation expands
              the disclosures to be made by a guarantor in its financial
              statements about its obligations under certain guarantees and
              requires the guarantor to recognize a liability for the fair value
              of an obligation assumed under a guarantee. The adoption of FIN 45
              did not have a material impact on the Company's financial
              statements.

              In January 2003, the FASB issued and the Company adopted
              Interpretation No. 46 ("FIN 46"), "Consolidation of Variable
              Interest Entities". This interpretation provides new accounting
              guidance on how to identify a variable interest entity ("VIE") and
              determine when the assets, liabilities, non-controlling interest
              and results of operation of a VIE need to be included in a
              corporation's consolidated financial statements. The adoption of
              FIN 46 did not have a material impact on the Company's financial
              statements.

              RECLASSIFICATIONS. Certain reclassifications have been made to the
              financial statements for years prior to September 30, 2003 to
              conform to current year classifications.


16

NOTE B        INVESTMENT SECURITIES



              September 30,                                                           2003
              ---------------------------------------------------------------------------------------------------
                                                                                 (In thousands)
                                                                           Gross Unrealized
                                                              Amortized    ----------------      Fair
                                                                Cost       Gains     Losses      Value     Yield
                                                              ---------------------------------------------------
                                                                                            
              AVAILABLE-FOR-SALE SECURITIES
              Mutual fund investments ......................  $ 170,000   $    --    $ (960)   $ 169,040    2.37%
              U.S. government and agency securities due
                Within 1 year ..............................     96,461       442       (27)      96,876    7.08
                1 to 5 years ...............................         --        --        --           --      --
                5 to 10 years ..............................     10,509        --        (9)      10,500    5.36
                Over 10 years ..............................     13,941     5,732        --       19,673    9.29
                                                              ---------------------------------------------------
                                                                290,911     6,174      (996)     296,089    4.37
                                                              ---------------------------------------------------

              HELD-TO-MATURITY SECURITIES
              Tax-exempt municipal bonds due
                5 to 10 years ..............................      3,989       371        --        4,360    8.92
                Over 10 years ..............................     10,140     1,216        --       11,356    8.67
                                                              ---------------------------------------------------
                                                                 14,129     1,587        --       15,716    8.74
                                                              ---------------------------------------------------
                                                              $ 305,040   $ 7,761    $ (996)   $ 311,805    4.57%
                                                              ===================================================




              September 30,                                                           2002
              ---------------------------------------------------------------------------------------------------
                                                                                 (In thousands)
                                                                           Gross Unrealized
                                                              Amortized    ----------------      Fair
                                                                Cost       Gains     Losses      Value     Yield
                                                              ---------------------------------------------------
                                                                                            
              AVAILABLE-FOR-SALE SECURITIES
              U.S. government and agency securities due
                Within 1 year ..............................  $  64,500   $   245    $   --    $  64,745    7.80%
                1 to 5 years ...............................     15,045     1,314        --       16,359    6.98
                5 to 10 years ..............................      4,745       128       (38)       4,835    7.04
                Over 10 years ..............................      9,280     5,350        --       14,630   10.41
                                                              ---------------------------------------------------
                                                                 93,570     7,037       (38)     100,569    7.89
                                                              ---------------------------------------------------

              HELD-TO-MATURITY SECURITIES
              Tax-exempt municipal bonds due
                5 to 10 years ..............................      3,993       521        --        4,514    8.92
                Over 10 years ..............................     12,855     1,205        (9)      14,051    8.95
                                                              ---------------------------------------------------
                                                                 16,848     1,726        (9)      18,565    8.94
                                                              ---------------------------------------------------
                                                              $ 110,418   $ 8,763    $  (47)   $ 119,134    8.05%
                                                              ===================================================


              Yields shown in the table above represent tax-equivalent yields,
              calculated as 1.49 times the tax-free municipal yield.

              $20.0 million in available-for-sale investment securities were
              sold in fiscal 2003, resulting in no gain. A $10.0 million
              available-for-sale security was sold in fiscal 2002, resulting in
              a gain of $650,000. There were no sales of investment securities
              during 2001.

NOTE C        MORTGAGE-BACKED SECURITIES



              September 30,                                                           2003
              ---------------------------------------------------------------------------------------------------
                                                                                 (In thousands)
                                                                           Gross Unrealized
                                                              Amortized    ----------------      Fair
                                                                Cost       Gains     Losses      Value     Yield
                                                              ---------------------------------------------------
                                                                                            
              AVAILABLE-FOR-SALE SECURITIES
              GNMA pass-through certificates ...............  $   2,492   $     8    $   (27)  $   2,473    4.57%
              FNMA pass-through certificates ...............     13,851       354         --      14,205    5.47
              FHLMC pass-through certificates ..............    439,711    25,161        (25)    464,847    6.20
              FHLMC ........................................      2,811        67        (10)      2,868    3.87
              FNMA .........................................      1,288        34         (6)      1,316    3.75
              Forward contracts ............................         --    28,975     (6,587)     22,388      --
                                                              ---------------------------------------------------
                                                                460,153    54,599     (6,655)    508,097    6.14
                                                              ---------------------------------------------------

              HELD-TO-MATURITY SECURITIES
              GNMA pass-through certificates ...............         41         4         --          45    9.50
              FNMA pass-through certificates ...............      1,332       109         --       1,441    8.59
              FHLMC pass-through certificates ..............    138,676     4,393     (1,185)    141,884    6.25
                                                              ---------------------------------------------------
                                                                140,049     4,506     (1,185)    143,370    6.27
                                                              ---------------------------------------------------
                                                              $ 600,202   $59,105    $(7,840)  $ 651,467    6.17%
                                                              ===================================================



                                                                              17

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



              September 30,                                                           2002
              ---------------------------------------------------------------------------------------------------
                                                                                 (In thousands)
                                                                           Gross Unrealized
                                                              Amortized    ----------------      Fair
                                                                Cost       Gains     Losses      Value     Yield
                                                              ---------------------------------------------------
                                                                                            
              AVAILABLE-FOR-SALE SECURITIES
              GNMA pass-through certificates ...............  $  3,804    $    13    $   (43)  $  3,774     5.58%
              FNMA pass-through certificates ...............     8,089        645         --      8,734     7.78
              FHLMC pass-through certificates ..............   716,499     49,440         --    765,939     6.74
              FHLMC ........................................     4,181         96        (27)     4,250     5.38
              FNMA .........................................     3,456         35        (16)     3,475     5.98
              Private issues ...............................     3,984         26         --      4,010     7.31
              Forward contracts ............................        --     36,212     (8,187)    28,025       --
                                                              ---------------------------------------------------
                                                               740,013     86,467     (8,273)    818,207    6.73
                                                              ---------------------------------------------------

              HELD-TO-MATURITY SECURITIES
              GNMA pass-through certificates ...............        43          4         --          47    9.50
              FNMA pass-through certificates ...............     2,917        212         --       3,129    8.18
              FHLMC pass-through certificates ..............   149,117      8,732         --     157,849    7.02
                                                              ---------------------------------------------------
                                                               152,077      8,948         --     161,025    7.04
                                                              ---------------------------------------------------
                                                              $892,090    $95,415    $(8,273)  $ 979,232    6.78%
                                                              ===================================================


              $60.0 million in available-for-sale mortgage-backed securities
              were sold in fiscal 2003, resulting in a net gain of $992,000.
              There were no sales of mortgage-backed securities during fiscal
              2002. $50.3 million of available-for-sale mortgage-backed
              securities were sold in 2001, resulting in a gain of $3.2 million.

              Substantially all mortgage-backed securities have contractual due
              dates that exceed 10 years.

              The Company accepts a high level of interest rate risk as a result
              of its policy to originate fixed-rate single family home loans
              that are longer-term than the short-term characteristics of its
              liabilities of customer accounts and borrowed money. The Company
              enters into forward contracts to purchase and sell mortgage-backed
              securities as part of its interest rate risk management program.
              These forward contracts are derivative instruments as defined by
              SFAS No. 133, as amended. The forward contracts allow the Company
              to hedge the risk of varying mortgage-backed securities prices in
              the future as the result of changes in interest rates. The Company
              has determined anticipated purchase dates for each forward
              commitment to purchase ranging from October 2003 through November
              2004. The Company has determined anticipated sale dates for each
              forward commitment to sell ranging from December 2003 through
              September 2004. The net fair value of these contracts is included
              with the available-for-sale securities. The related
              mortgage-backed securities are designated as available-for-sale
              securities upon exercise of the commitments to purchase.

              Cost and fair value of the mortgage-backed securities underlying
              the forward contracts were as follows:



              September 30,                                     2003                                       2002
              -------------------------------------------------------------------------------------------------------------------
                                                                                (In thousands)
                                                               Fair        Unrealized                     Fair        Unrealized
                                                  Cost         Value       Gain (loss)       Cost         Value       Gain (loss)
                                                ---------------------------------------------------------------------------------
                                                                                                    
              Commitments to purchase ........  $305,273     $334,182        $28,909       $247,275     $283,487        $36,212
              Commitments to sell ............   163,766      170,287         (6,521)       223,064      231,251         (8,187)


NOTE D        LOANS RECEIVABLE AND SECURITIZED ASSETS SUBJECT TO REPURCHASE



              September 30,                                                2003                2002
              ----------------------------------------------------------------------------------------
                                                                                (In thousands)
                                                                                      
              Conventional real estate
                 Permanent single-family residential .................  $3,851,720          $4,145,122
                 Multi-family ........................................     479,129             441,648
                 Land ................................................     217,214             179,936
                 Construction ........................................     639,058             574,866
                                                                        ------------------------------
                                                                         5,187,121           5,341,572
                                                                        ------------------------------

              Less
                 Allowance for probable losses .......................      25,806              23,912
                 Loans in process ....................................     307,537             235,733
                 Deferred loan origination fees ......................      36,270              33,963
                                                                        ------------------------------
                                                                           369,613             293,608
                                                                        ------------------------------
                                                                        $4,817,508          $5,047,964
                                                                        ==============================


              The Company originates adjustable and fixed interest rate loans,
              which at September 30, 2003 consisted of the following:



                              Fixed-Rate
                            (In thousands)
              ------------------------------------------
              Term to Maturity                Book Value
              ------------------------------------------
                                           
              Within 1 year ................  $   19,615
              1 to 3 years .................      60,009
              3 to 5 years .................      73,552
              5 to 10 years ................     359,443
              10 to 20 years ...............     445,831
              Over 20 years ................   3,376,814
                                              ----------
                                              $4,335,264
                                              ==========




                           Adjustable-Rate
                            (In thousands)
              ------------------------------------------
              Term to Rate Adjustment         Book Value
              ------------------------------------------
                                           
              Less than 1 year .............  $  606,672
              1 to 3 years .................      97,430
              3 to 5 years .................     122,196
              5 to 10 years ................      25,559
              10 to 20 years ...............          --
              Over 20 years ................          --
                                              ----------
                                              $  851,857
                                              ==========


              At September 30, 2003 and 2002, approximately $52,287,000 and
              $36,637,000 of fixed-rate loan origination commitments were
              outstanding, respectively. Loans serviced for others at September
              30, 2003 and 2002 were approximately $35,415,000 and $16,996,000,
              respectively.

              Permanent single-family residential loans receivable included
              adjustable-rate loans of $101,719,000 and $11,448,000 at September
              30, 2003 and 2002, respectively. These loans have interest rate
              adjustment limitations and are generally indexed to the 1-year
              Treasury Bill rate or the monthly weighted-average cost of funds
              for Eleventh District savings institutions as published by the
              FHLB.

              Loans by geographic concentration were as follows:



              September 30, 2003          Washington      Idaho       Oregon        Utah        Arizona       Other        Total
              --------------------------------------------------------------------------------------------------------------------
                                                                               (In thousands)
                                                                                                   
              Conventional real estate
                Permanent
                  single-family
                  residential .........   $1,492,999   $  464,792   $  624,827   $  401,448   $  360,462   $  507,192   $3,851,720
                Multi-family ..........      129,374       33,071      161,633       33,639       99,334       22,078      479,129
                Land ..................      114,951       42,694       16,482       20,903       20,181        2,003      217,214
                Construction ..........      281,987       89,604      101,895       81,073       70,264       14,235      639,058
                                          ----------------------------------------------------------------------------------------
                                          $2,019,311   $  630,161   $  904,837   $  537,063   $  550,241   $  545,508   $5,187,121
                                          ========================================================================================


              At September 30, 2003, the Company's recorded investment in
              impaired loans was $9.6 million with allocated reserves of $1.0
              million. At September 30, 2002 the Company's recorded investment
              in impaired loans was $10.5 million with no related allocated
              reserves. The average balance of impaired loans during 2003, 2002
              and 2001 was $13.3 million, $12.7 million and $13.1 million and
              interest income from impaired loans was $851,000, $922,000 and
              $949,000, respectively.


                                                                              19

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE E        ALLOWANCE FOR LOSSES ON LOANS AND SECURITIZED ASSETS SUBJECT TO
              REPURCHASE



              Year ended September 30,                                    2003         2002         2001
              --------------------------------------------------------------------------------------------
                                                                                  (In thousands)
                                                                                         
              Balance at beginning of year ...........................  $ 23,912     $ 19,683     $ 20,831
              Provision for loan losses ..............................     1,500        7,000        1,850
              Charge-offs ............................................    (1,310)      (3,401)      (3,845)
              Recoveries .............................................       107          630          847
              Acquired reserves ......................................     1,597           --           --
                                                                        ----------------------------------
              Balance at end of year .................................  $ 25,806     $ 23,912     $ 19,683
                                                                        ==================================


NOTE F        INTEREST RECEIVABLE



              September 30,                                                            2003         2002
              --------------------------------------------------------------------------------------------
                                                                                         (In thousands)
                                                                                            
              Loans receivable and securitized assets subject to repurchase .......  $ 24,929     $ 33,067
              Allowance for uncollected interest on loans receivable ..............      (807)        (956)
              Mortgage-backed securities ..........................................     3,043        5,158
              Investment securities ...............................................     2,324        2,234
                                                                                     ---------------------
                                                                                     $ 29,489     $ 39,503
                                                                                     =====================


NOTE G        PREMISES AND EQUIPMENT



              September 30,                                                            2003         2002
              --------------------------------------------------------------------------------------------
                                                                                         (In thousands)
                                                                      Estimated
                                                                     Useful Life
                                                                     -----------
                                                                                         
              Land ................................................         --       $ 18,982     $ 13,643
              Buildings ...........................................    25 - 40         55,509       52,975
              Leasehold improvements ..............................     7 - 15          5,409        5,302
              Furniture, fixtures and equipment ...................     2 - 10         15,446       15,052
                                                                                     ---------------------
                                                                                       95,346       86,972
              Less accumulated depreciation .......................................   (34,404)     (31,853)
                                                                                     ---------------------
                                                                                     $ 60,942     $ 55,119
                                                                                     =====================


              The Company has non-cancelable operating leases for branch
              offices. Rental expense, including amounts paid under
              month-to-month cancelable leases, amounted to $1,862,000,
              $1,895,000 and $1,606,000 in 2003, 2002 and 2001, respectively.
              Future minimum net rental commitments for all non-cancelable
              leases, including maintenance and associated costs, are
              immaterial.

NOTE H        REAL ESTATE HELD FOR SALE



              September 30,                                                            2003         2002
              --------------------------------------------------------------------------------------------
                                                                                         (In thousands)
                                                                                            
              Acquired for development ............................................  $  4,708     $  7,072
              Acquired in settlement of loans .....................................    11,496       10,515
                                                                                     ---------------------
                                                                                     $ 16,204     $ 17,587
                                                                                     =====================



20

NOTE I        CUSTOMER ACCOUNTS



              September 30,                                                        2002          2001
              ------------------------------------------------------------------------------------------
                                                                                     (In thousands)
                                                                                        
              Checking accounts, .75% and under ..............................  $  190,352    $  191,542
              Passbook and statement accounts, .75% ..........................     234,023       157,759
              Insured money market accounts, .50% to 1.00% ...................   1,037,641       972,993
              Certificate accounts
                Less than 3.00% ..............................................   2,401,924     1,619,867
                3.00% to 3.99% ...............................................     257,646       935,687
                4.00% to 4.99% ...............................................     258,875       373,230
                5.00% to 5.99% ...............................................     120,960       189,712
                6.00% to 6.99% ...............................................      18,139        11,460
                7.00% and over ...............................................         491            --
                                                                                ------------------------
              Total certificates .............................................   3,058,035     3,129,956
                                                                                ------------------------
              Repurchase agreements with customers, .75% to 1.55% ............      57,547        69,672
                                                                                ------------------------
                                                                                $4,577,598    $4,521,922
                                                                                ========================


              Certificate maturities were as follows:



              September 30,                                                        2002          2001
              ------------------------------------------------------------------------------------------
                                                                                     (In thousands)
                                                                                        
              Within 1 year ..................................................  $2,313,645    $2,590,373
              1 to 2 years ...................................................     236,988       156,413
              3 to 4 years ...................................................     183,379        62,260
              Over 4 years ...................................................     324,023       320,910
                                                                                ------------------------
                                                                                $3,058,035    $3,129,956
                                                                                ========================


              Customer accounts over $100,000 totaled $1,133,000,000 as of
              September 30, 2003 and $1,040,000,000 as of September 30, 2002.

              Interest expense on customer accounts consisted of the following:



              Year ended September 30,                                    2003         2002         2001
              --------------------------------------------------------------------------------------------
                                                                                  (In thousands)
                                                                                         
              Checking accounts ......................................  $  1,655     $  2,310     $  2,426
              Passbook and statement accounts ........................     2,114        3,201        4,066
              Insured money market accounts ..........................    14,947       22,231       24,514
              Certificate accounts ...................................    85,931      122,705      160,018
                                                                        ----------------------------------
                                                                         104,647      150,447      191,024
              Repurchase agreements with customers ...................     1,651        2,259        4,138
                                                                        ----------------------------------
                                                                         106,298      152,706      195,162
              Less early withdrawal penalties ........................      (379)        (418)        (452)
                                                                        ----------------------------------
                                                                        $105,919     $152,288     $194,710
                                                                        ==================================
              Weighted-average interest rate at end of year ..........      1.94%        2.96%        4.31%
              Weighted daily average interest rate during the year ...      2.38         3.41         5.28



                                                                              21

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE J        FHLB ADVANCES

              Maturity dates of FHLB advances were as follows:



              September 30,                                                        2002          2001
              ------------------------------------------------------------------------------------------
                                                                                     (In thousands)
                                                                                        
              FHLB advances due
              Within 1 year ..................................................  $  250,000    $       --
              1 to 3 years ...................................................     300,000       450,000
              4 to 5 years ...................................................     400,000       100,000
              More than 5 years ..............................................     700,000     1,100,000
                                                                                ------------------------
                                                                                $1,650,000    $1,650,000
                                                                                ========================


              Included in the table above are $1,300,000,000 of FHLB advances
              that are callable by the FHLB. If these callable advances were
              called at the earliest call dates, the maturities of all FHLB
              advances would be as follows:



              September 30,                                                        2002          2001
              ------------------------------------------------------------------------------------------
                                                                                     (In thousands)
                                                                                        
              FHLB advances due
              Within 1 year ..................................................  $  850,000    $  600,000
              1 to 3 years ...................................................     700,000       650,000
              4 to 5 years ...................................................     100,000       400,000
              More than 5 years ..............................................          --            --
                                                                                ------------------------
                                                                                $1,650,000    $1,650,000
                                                                                ========================


              Financial data pertaining to the weighted-average cost and the
              amount of FHLB advances were as follows:



              September 30,                                                   2003         2002         2001
              -------------------------------------------------------------------------------------------------
                                                                                      (In thousands)
                                                                                            
              Weighted-average interest rate at end of year .............        5.13%        5.13%        5.12%
              Weighted daily average interest rate during the year ......        5.19         5.28         5.44
              Daily average of FHLB advances ............................  $1,650,023   $1,558,384   $1,336,025
              Maximum amount of FHLB advances at any month end ..........   1,654,000    1,654,000    2,107,000
              Interest expense during the year ..........................      85,564       82,357       72,654


              FHLB advances are collateralized as provided for in the Advances,
              Pledge and Security Agreement by all FHLB stock owned by the
              Association, deposits with the FHLB and certain mortgages or deeds
              of trust securing such properties as provided in the agreements
              with the FHLB. As a member of the FHLB of Seattle, the Association
              currently has a credit line of 35% of the total assets of the
              Association, subject to collateralization requirements.

NOTE K        OTHER BORROWINGS



              September 30,                                                        2002          2001
              ------------------------------------------------------------------------------------------
                                                                                     (In thousands)
                                                                                        
              Securities sold under agreements to repurchase
                 Callable once in 2007, matures in 2012 ......................  $  100,000    $  100,000
                                                                                ========================


              The Company enters into sales of securities under agreements to
              repurchase (reverse repurchase agreements). Fixed-coupon reverse
              repurchase agreements are treated as financings, and the
              obligations to repurchase securities sold are reflected as a
              liability in the consolidated statements of financial condition.
              During the two years ended September 30, 2003 all of the Company's
              transactions were fixed-coupon reverse repurchase agreements. The
              dollar amount of securities underlying the agreements remain in
              the asset accounts. The securities pledged are registered in the
              Company's name, and principal and interest payments are received
              by the Company; however, the securities are held by the designated
              trustee of the broker. Upon maturity of the agreements, the
              identical securities pledged as collateral will be returned to the
              Company.


22

              Financial data pertaining to the weighted-average cost and the
              amount of securities sold under agreements to repurchase were as
              follows:



              September 30,                                                   2003         2002         2001
              -------------------------------------------------------------------------------------------------
                                                                                      (In thousands)
                                                                                            
              Weighted-average interest rate at end of year .............        3.44%        3.36%          --%
              Weighted daily average interest rate during the year ......        3.39         3.36         5.75
              Daily average of securities sold under agreements
                to repurchase ...........................................  $  100,000   $    4,110   $  785,563
              Maximum securities sold under agreements to repurchase
                at any month end ........................................     100,000      100,000    1,074,509
              Interest expense during the year ..........................       3,388          140       45,149


NOTE L        INCOME TAXES

              The consolidated statements of financial condition at September
              30, 2003 and 2002 include deferred tax liabilities of $70,485,000
              and $80,185,000, respectively, that have been provided for the
              temporary differences between the tax basis and the financial
              statement carrying amounts of assets and liabilities. The major
              sources of these temporary differences and their deferred tax
              effects were as follows:



              September 30,                                                           2002          2001
              ---------------------------------------------------------------------------------------------
                                                                                        (In thousands)
                                                                                           
              Deferred tax assets
                Real estate valuation reserves ..................................  $      --     $      440
                Deferred compensation ...........................................        198            230
                Loan loss reserves ..............................................      3,437             --
                                                                                   ------------------------
                Total deferred tax assets .......................................      3,635            670
                                                                                   ------------------------
              Deferred tax liabilities
                FHLB stock dividends ............................................     31,919         30,538
                Core deposit intangible .........................................      1,748             --
                Discounts .......................................................        413             (8)
                Loan loss reserves ..............................................         --            742
                Valuation adjustment on available-for-sale securities ...........     18,850         30,000
                Depreciation ....................................................      3,528          2,085
                Loan origination costs ..........................................     13,640          9,214
                Securitized asset subject to repurchase valuation adjustment ....        673          2,653
                Other, net ......................................................      3,349          5,631
                                                                                   ------------------------
                Total deferred tax liabilities ..................................     74,120         80,855
                                                                                   ------------------------
              Net deferred tax liability ........................................  $  70,485     $   80,185
                                                                                   ========================


              A reconciliation of the statutory federal income tax rate to the
              effective income tax rate follows:



              Year ended September 30,                                     2003         2002         2001
              ---------------------------------------------------------------------------------------------
                                                                                   (In thousands)
                                                                                          
              Statutory income tax rate ...............................     35%          35%          35%
              Dividend received deduction .............................     (1)          (1)          (1)
              Other ...................................................     (1)          --           --
              State income tax ........................................      2            1            1
                                                                         ----------------------------------
              Effective income tax rate ...............................     35%          35%          35%
                                                                         ==================================


              The Small Business Job Protection Act of 1996 (the Act) required
              qualified thrift institutions, such as the Association, 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 beginning
              in 1999. Accordingly, the Association is required to pay
              approximately $25,406,000 in additional federal income taxes, all
              of which has been previously provided, through fiscal 2004.

              A deferred tax liability has not been required to be recognized
              for the tax bad debt base year reserves of the Association. The
              base year reserves are the balance of reserves as of September 30,
              1988 reduced proportionately for reductions in the Association's
              loan portfolio since that date. At September 30, 2003 the amount
              of those reserves was approximately $8,139,000. The amount of
              unrecognized deferred tax liability at September 30, 2003 was
              approximately $2,985,000.

              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 taxable income, as originally
              reported, as a result of this examination.


                                                                              23

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE M        PROFIT SHARING RETIREMENT PLAN AND EMPLOYEE STOCK OWNERSHIP PLAN
              The Company maintains a Profit Sharing Retirement Plan and
              Employee Stock Ownership Plan (Plan) for the benefit of its
              employees. Company contributions are made semi-annually as
              approved by the Board of Directors. Such amounts are not in excess
              of amounts permitted by the Employee Retirement Income Security
              Act of 1974.

              Employees may contribute up to 7% of their base salaries to the
              Plan or a portion of their base salaries on a tax-deferred basis
              through the 401(k) provisions of the Plan with a combined maximum
              of the lesser of 100% of base salary or $40,000. Under provisions
              of the Plan, employees are eligible to participate on the date of
              hire and become fully vested in the Company's contributions
              following seven years of service. In August 1995 the Company
              received a favorable determination from the Internal Revenue
              Service to include an Employee Stock Ownership feature as part of
              the Plan. This feature allows employees to direct a portion of
              their vested account balance toward the purchase of Company stock.
              Company contributions to the Plan amounted to $2,001,000,
              $2,039,000 and $1,781,000 for the years ended September 30, 2003,
              2002 and 2001, respectively.

NOTE N        STOCK OPTION PLANS

              The Company has three employee stock option plans which provide a
              combination of stock options and stock grants. Stockholders
              authorized 2,246,826 shares, 3,702,563 shares and 3,388,000 shares
              of common stock, as adjusted for stock splits and stock dividends,
              to be reserved pursuant to the 1987 Stock Option and Stock
              Appreciation Rights Plan (the 1987 Plan), the 1994 Stock Option
              and Stock Appreciation Rights Plan (the 1994 Plan) and the 2001
              Long-Term Incentive Plan (the 2001 Plan), respectively. The three
              plans are substantially similar. Of the 9,337,389 total shares
              authorized by stockholders under the three plans, 4,773,062 shares
              remain available for issuance. All equity compensation plans have
              been approved by stockholders.

              Options granted under each plan vest at varying percentages
              commencing as early as one year after the date of grant with
              expiration dates 10 years after the date of grant.



                                                                                                  Weighted-Average
                                                                                                Fair Value of Option
                                                           Average Price(1)      Number(1)         Shares Granted
              ------------------------------------------------------------------------------------------------------
                                                                                       
              Outstanding, October 1, 2000 ..............      $ 13.34          2,663,546
              Granted in 2001 ...........................        15.34            101,217              $ 4.05
              Exercised in 2001 .........................        10.56           (578,673)
              Forfeited in 2001 .........................        13.85           (138,349)
                                                           ------------------------------

              Outstanding, September 30, 2001 ...........        14.18          2,047,741
              Granted in 2002 ...........................        18.31            842,655                3.42
              Exercised in 2002 .........................        11.78           (317,935)
              Forfeited in 2002 .........................        16.02           (165,210)
                                                           ------------------------------

              Outstanding, September 30, 2002 ...........        15.82          2,407,251
              Granted in 2003 ...........................        20.33             82,170                3.54
              Exercised in 2003 .........................        13.10           (391,176)
              Forfeited in 2003 .........................        16.63           (158,944)
                                                           ------------------------------
              Outstanding, September 30, 2003 ...........      $ 16.49          1,939,301
                                                           ==============================


              (1)Average price and number of stock options granted, exercised
              and forfeited have been adjusted for the 10% stock dividends.

              Financial data pertaining to outstanding stock options were as
              follows:



                                                        September 30, 2003
              ----------------------------------------------------------------------------------------------------------
                                                                                                          Weighted-
                                                   Weighted-           Weighted-                           Average
                                                    Average             Average          Number of     Exercisable Price
                 Ranges of        Number of        Remaining       Exercise Price of    Exercisable     of Exercisable
              Exercise Prices   Option Shares   Contractual Life     Option Shares     Option Shares     Option Shares
              ----------------------------------------------------------------------------------------------------------
                                                                                        
              $  8.91 - 14.18       711,901        5.5 YEARS            $ 13.71           236,225          $ 12.82
                15.03 - 16.62       156,642        5.7                    15.66            36,232            15.87
                18.31 - 21.52     1,070,758        7.1                    18.46           177,971            18.32
              ----------------------------------------------------------------------------------------------------------
                                  1,939,301        6.4 YEARS            $ 16.49           450,428          $ 15.24
              ==========================================================================================================



24

NOTE O        STOCKHOLDERS' EQUITY

              In the second quarter of fiscal 2003 and 2002, the Company
              declared an eleven-for-ten stock split in the form of a 10% stock
              dividend in addition to the regular quarterly cash dividends on
              its shares of common stock.

              The Association is subject to various regulatory capital
              requirements administered by the Office of Thrift Supervision
              (OTS). Failure to meet minimum capital requirements can initiate
              certain mandatory and possibly additional discretionary action by
              regulators that, if undertaken, could have a direct material
              effect on the Company's financial statements. Under capital
              adequacy guidelines and the regulatory framework for prompt
              corrective action, the Association must meet specific capital
              guidelines that involve quantitative measures of the Association's
              assets, liabilities and certain off-balance sheet items as
              calculated under regulatory accounting practices. The
              Association's capital amounts and classification are also subject
              to qualitative judgments by the regulators about capital
              components, risk-weightings and other factors.

              As of September 30, 2003 and 2002, the OTS categorized the
              Association as well capitalized under the regulatory framework for
              prompt corrective action. To be categorized as well capitalized,
              the Association must maintain minimum total risk-based, Tier 1
              risk-based and Tier 1 leverage ratios as set forth in the
              following table. There are no conditions or events since that
              notification that Management believes have changed the
              Association's categorization.



                                                                                                                  Categorized as
                                                                                                              Well Capitalized Under
                                                                                              Capital           Prompt Corrective
                                                                      Actual            Adequacy Guidelines     Action Provisions
                                                             ----------------------   ----------------------  ----------------------
                                                              Capital        Ratio     Capital        Ratio    Capital        Ratio
              ----------------------------------------------------------------------------------------------------------------------
                                                                                                            
              September 30, 2003                                                      (Dollars in thousands)
                Total capital to risk-weighted assets        $ 974,775       24.56%   $ 317,465        8.00%  $ 396,831       10.00%
                Tier I capital to risk-weighted assets         956,470       24.10           NA          NA     238,099        6.00
                Core capital to adjusted tangible assets       956,470       12.91           NA          NA     370,373        5.00
                Core capital to total assets                   956,470       12.91      222,224        3.00          NA          NA
                Tangible capital to tangible assets            956,470       12.91      111,112        1.50          NA          NA

              September 30, 2002
                Total capital to risk-weighted assets        $ 875,847       22.62%   $ 309,807        8.00%  $ 387,259       10.00%
                Tier I capital to risk-weighted assets         860,179       22.21           NA          NA     232,355        6.00
                Core capital to adjusted tangible assets       860,179       11.85           NA          NA     363,095        5.00
                Core capital to total assets                   860,179       11.85      217,857        3.00          NA          NA
                Tangible capital to tangible assets            860,179       11.85      108,928        1.50          NA          NA


              At periodic intervals, the OTS and the Federal Deposit Insurance
              Corporation (FDIC) routinely examine the Company's financial
              statements as part of their oversight of the savings and loan
              industry. Based on their examinations, these regulators can direct
              that the Company's financial statements be adjusted in accordance
              with their findings. The extent to which forthcoming regulatory
              examinations may result in adjustments to the financial statements
              cannot be determined; however, no adjustments were proposed as a
              result of the most recent OTS examination which concluded in
              August 2003.

              The Company has an ongoing stock repurchase program. During fiscal
              2003, the Company repurchased 510,070 shares at a weighted-average
              price of $19.67. In fiscal 2002, the Company repurchased 535,150
              shares at a weighted-average price of $19.11. As of September 30,
              2003, management had authorization from the Board of Directors to
              repurchase up to 2.8 million additional shares.

              Information used to calculate earnings per share follows:



              Year ended September 30,                                           2003          2002         2001
              ------------------------------------------------------------------------------------------------------
                                                                         (Dollars in thousands except per share data)
                                                                                               
              Net income ..................................................  $   145,544   $   143,954  $    113,614
                Weighted-average shares
                Basic weighted-average number of
                  common shares outstanding ...............................   69,661,074    69,855,216    69,714,999
                Dilutive effect of outstanding common stock equivalents ...      571,621       667,944       746,518
                                                                             ---------------------------------------
                Diluted weighted-average number of
                  common shares outstanding ...............................   70,232,695    70,523,160    70,461,517
                                                                             =======================================
              Net income per share
                Basic .....................................................  $      2.09   $      2.06   $      1.63
                Diluted ...................................................         2.07          2.04          1.61



                                                                              25

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE P        FAIR VALUES OF FINANCIAL INSTRUMENTS

              SFAS No. 107, "Disclosures about Fair Value of Financial
              Instruments," requires disclosure of fair value information about
              financial instruments, whether or not recognized on the balance
              sheet, for which it is practicable to estimate those values. SFAS
              No. 107 excludes certain financial instruments and all
              non-financial instruments from its disclosure requirements.
              Accordingly, the aggregate fair value estimates presented do not
              reflect the underlying fair value of the Company. Although
              Management is not aware of any factors that would materially
              affect the estimated fair value amounts presented, such amounts
              have not been comprehensively revalued for purposes of these
              financial statements since that date, and therefore, estimates of
              fair value subsequent to that date may differ significantly from
              the amounts presented below.



              September 30,                                                2003                         2002
              ---------------------------------------------------------------------------------------------------------
                                                                                      (In thousands)
                                                                  Carrying      Estimated      Carrying      Estimated
                                                                   Amount       Fair Value      Amount       Fair Value
                                                                 ------------------------------------------------------
                                                                                                 
              Financial assets
                Cash and cash equivalents .....................  $1,437,208     $1,437,208    $  975,153     $  975,153
                Available-for-sale securities .................     804,186        804,186       918,776        918,776
                Held-to-maturity securities ...................     154,178        159,086       168,925        179,590
                Loans receivable and securitized assets .......   4,817,508      4,899,274     5,047,964      5,743,480
                FHLB stock ....................................     143,851        143,851       132,320        132,320

              Financial liabilities
                Customer accounts .............................   4,577,598      4,590,160     4,521,922      4,538,726
                FHLB advances and other borrowings ............   1,750,000      1,825,532     1,750,000      1,797,468


              The following methods and assumptions were used to estimate the
              fair value of financial instruments:

              CASH AND CASH EQUIVALENTS - The carrying amount of these items is
              a reasonable estimate of their fair value.

              INVESTMENT SECURITIES - The fair value is based on quoted market
              prices or dealer estimates.

              LOANS RECEIVABLE AND SECURITIZED ASSETS SUBJECT TO REPURCHASE -
              For certain homogeneous categories of loans, such as fixed- and
              variable-rate residential mortgages, fair value is estimated using
              quoted market prices for securities backed by similar loans,
              adjusted for differences in loan characteristics. The fair value
              of other loan types is estimated by discounting the future cash
              flows and estimated prepayments using the current rates at which
              similar loans would be made to borrowers with similar credit
              ratings and for the same remaining term. Some loan types were
              valued at carrying value because of their floating rate or
              expected maturity characteristics.

              MORTGAGE-BACKED SECURITIES - Estimated fair value for
              mortgage-backed securities issued by quasi-governmental agencies
              is based on quoted market prices. The fair value of all other
              mortgage-backed securities is based on dealer estimates.

              FHLB STOCK - The fair value is based upon the redemption value of
              the stock which equates to its carrying value.

              CUSTOMER ACCOUNTS - The fair value of demand deposits, savings
              accounts, and money market accounts is the amount payable on
              demand at the reporting date. The fair value of fixed-maturity
              certificates of deposit is estimated by discounting the estimated
              future cash flows using the rates currently offered for deposits
              with similar remaining maturities.

              FHLB ADVANCES AND OTHER BORROWINGS - The fair value of FHLB
              advances and other borrowings is estimated by discounting the
              estimated future cash flows using rates currently available to the
              Association for debt with similar remaining maturities.

              ACQUISITION AND INTANGIBLE ASSETS

NOTE Q        On August 31, 2003, the Company acquired United Savings and Loan
              Bank. The acquisition was accounted for as a purchase transaction
              with the total cash consideration funded through internal sources.
              The purchase price was $65,604,000, of which $32,322,000 was paid
              in cash and $33,282,000 was paid in stock. In addition, the
              Company paid $1,150,000 in three non-compete agreements, of which
              $575,000 was allocated to both goodwill and the non-compete
              agreement intangible. The purchase price has been allocated to the
              underlying assets and liabilities based on estimated fair values
              at the date of acquisition. Results of operations are included
              from the date of acquisition. The Company acquired assets with an
              estimated fair value of $343,626,000 and assumed liabilities with
              an estimated fair value of $276,872,000. The acquisition produced
              goodwill of $19,263,000, a core deposit intangible of $4,921,000
              and a non-compete agreement intangible of $575,000.


26

              The balance of the Company's intangible assets was as follows:



                                                                  Core Deposit      Non-Compete
                                                    Goodwill       Intangible        Agreement         Total
                                                    ----------------------------------------------------------
                                                                          (In thousands)
                                                                                         
              Balance at September 30, 2001 ......  $ 35,703       $       --         $    --        $  35,703
              Accumulated amortization ...........       --                --              --               --
                                                    ----------------------------------------------------------
              Balance at September 30, 2002 ......    35,703               --              --           35,703
              United acquisition .................    19,263            4,921             575           24,759
              Accumulated amortization ...........        --             (116)            (10)            (126)
                                                    ----------------------------------------------------------
              Balance at September 30, 2003 ......  $ 54,966       $    4,805         $   565        $  60,336
                                                    ==========================================================


              The table below presents the estimated intangible asset
              amortization expense for the next five years:



              Year ended September 30,                      Amortization expense
              ------------------------------------------------------------------
                                                               (In thousands)
                                                         
              2004 .......................................         $1,396
              2005 .......................................          1,198
              2006 .......................................          1,000
              2007 .......................................            801
              2008 .......................................            593


NOTE R        FINANCIAL INFORMATION - WASHINGTON FEDERAL, INC.

              The following Washington Federal, Inc. (parent company only)
              financial information should be read in conjunction with the other
              notes to the Consolidated Financial Statements.

              STATEMENTS OF FINANCIAL CONDITION



              September 30,                                                      2003                2002
              -----------------------------------------------------------------------------------------------
                                                                                      (In thousands)
                                                                                           
              ASSETS
              Cash ........................................................  $      4,527        $      2,268
              Investment in subsidiary ....................................     1,053,451             959,250
              Dividend receivable .........................................        12,000              14,000
                                                                             --------------------------------
                Total assets ..............................................  $  1,069,978        $    975,518
                                                                             ================================

              LIABILITIES
              Dividend payable and other liabilities ......................  $     14,382        $     14,800
                                                                             --------------------------------

              STOCKHOLDERS' EQUITY
              Common stock, $1.00 par value: 100,000,000 shares authorized;
                85,553,789 and 83,833,244 shares issued;
                71,173,487 and 69,894,902 shares outstanding ..............  $     85,554        $     76,212
              Paid-in capital .............................................     1,085,650             968,858
              Accumulated other comprehensive income, net of tax ..........        34,624              56,000
              Treasury stock, at cost; 14,380,302 and 13,938,342 shares ...      (207,337)           (198,279)
              Retained earnings ...........................................        57,105              57,927
                                                                             --------------------------------
                Total stockholders' equity ................................     1,055,596             960,718
                                                                             --------------------------------
                Total liabilities and stockholders' equity ................  $  1,069,978        $    975,518
                                                                             ================================


              STATEMENTS OF OPERATIONS



              Year ended September 30,                                                    2003        2002        2001
              -----------------------------------------------------------------------------------------------------------
                                                                                                 (In thousands)
                                                                                                      
              INCOME
                Dividends from subsidiary ...........................................  $   63,500  $   64,000  $   45,000

              EXPENSE
                Miscellaneous .......................................................         389         380         354
                                                                                       ----------------------------------
                Net income before equity in undistributed net income of subsidiary ..      63,111      63,620      44,646
              Equity in undistributed net income of subsidiary ......................      82,296      80,200      68,843
                                                                                       ----------------------------------
              Income before income taxes ............................................     145,407     143,820     113,489
              Income tax benefit ....................................................         137         134         125
                                                                                       ----------------------------------
              Net income ............................................................  $  145,544  $  143,954  $  113,614
                                                                                       ==================================



                                                                              27

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

              STATEMENTS OF CASH FLOWS



              Year ended September 30,                                                2003        2002        2001
              -------------------------------------------------------------------------------------------------------
                                                                                             (In thousands)
                                                                                                  
              CASH FLOWS FROM OPERATING ACTIVITIES

              Net income ........................................................  $  145,544  $  143,954  $  113,614
              Adjustments to reconcile net income to net
                  cash provided by operating activities
                Equity in undistributed net income of subsidiary ................     (82,296)    (80,200)    (68,843)
                Decrease (increase) in dividend receivable ......................       2,000      (1,875)      1,875
                Increase (decrease) in dividend payable .........................        (417)        920         758
                                                                                   ----------------------------------
                Net cash provided by operating activities .......................      64,831      62,799      47,404
              Cash Flows From Financing Activities
              Issuance of common stock through stock option plan ................       5,944       3,744       6,224
              Proceeds from Employee Stock Ownership Plan .......................       1,522       1,618       1,108
              Treasury stock purchased ..........................................     (10,034)    (10,224)         --
              Dividends .........................................................     (60,004)    (57,383)    (54,102)
                                                                                   ----------------------------------
                Net cash used by financing activities ...........................     (62,572)    (62,245)    (46,770)
                                                                                   ----------------------------------
                Increase in cash ................................................       2,259         554         634
                Cash at beginning of year .......................................       2,268       1,714       1,080
                                                                                   ----------------------------------
                Cash at end of year .............................................  $    4,527  $    2,268  $    1,714
                                                                                   ==================================


NOTE S        SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

              The following is a summary of the unaudited interim results of
              operations by quarter:



                                                                FIRST      SECOND       THIRD      FOURTH
              Year ended September 30, 2003                    QUARTER     QUARTER     QUARTER     QUARTER
              ---------------------------------------------------------------------------------------------
                                                              (Dollars in thousands, except per share data)
                                                                                      
              Interest income ..............................  $ 122,068   $ 114,326   $ 109,961   $ 103,830
              Interest expense .............................     53,703      49,565      46,917      44,699
                                                              ---------------------------------------------
              Net interest income ..........................     68,365      64,761      63,044      59,131
              Provision for loan losses ....................      1,250         150         100          --
              Other operating income .......................      1,866       5,491       3,482       3,984
              Other operating expense ......................     11,653      11,868      10,410      10,128
                                                              ---------------------------------------------
              Income before income taxes ...................     57,328      58,234      56,016      52,987
              Income taxes .................................     20,210      20,530      19,605      18,676
                                                              ---------------------------------------------
              Net income ...................................  $  37,118   $  37,704   $  36,411   $  34,311
                                                              =============================================
              Basic earnings per share .....................  $     .54   $     .54   $     .52   $     .49
                                                              =============================================
              Diluted earnings per share ...................  $     .52   $     .54   $     .52   $     .49
                                                              =============================================
              Cash dividends per share .....................  $     .21   $     .21   $     .22   $     .22
                                                              =============================================
              Return of average assets .....................       2.03%       2.08%       2.02%       1.89%
                                                              =============================================




                                                                FIRST      SECOND       THIRD      FOURTH
              Year ended September 30, 2002                    QUARTER     QUARTER     QUARTER     QUARTER
              ---------------------------------------------------------------------------------------------
                                                              (Dollars in thousands, except per share data)
                                                                                      
              Interest income ..............................  $ 131,325   $ 126,485   $ 123,543   $ 123,607
              Interest expense .............................     65,357      58,274      55,875      55,435
                                                              ---------------------------------------------
              Net interest income ..........................     65,968      68,211      67,668      68,172
              Provision for loan losses ....................      2,000       2,000       1,500       1,500
              Other operating income .......................      3,002       1,553       1,803       1,848
              Other operating expense ......................     12,318      12,536      12,553      11,464
                                                              ---------------------------------------------
              Income before income taxes ...................     54,652      55,228      55,418      57,056
              Income taxes .................................     19,267      19,469      19,535      20,129
                                                              ---------------------------------------------
              Net income ...................................  $  35,385   $  35,759   $  35,883   $  36,927
                                                              =============================================
              Basic earnings per share .....................  $     .51   $     .51   $     .51   $     .53
                                                              =============================================
              Diluted earnings per share ...................  $     .50   $     .51   $     .51   $     .52
                                                              =============================================
              Cash dividends per share .....................  $     .20   $     .20   $     .21   $     .21
                                                              =============================================
              Return of average assets .....................       2.04%       2.05%       2.04%       2.07%
                                                              =============================================



28

INDEPENDENT AUDITORS' REPORT

Board of Directors and Stockholders
Washington Federal, Inc.
Seattle, Washington

    We have audited the accompanying consolidated statements of financial
condition of Washington Federal, Inc. and subsidiaries (the "Company") as of
September 30, 2003 and 2002, and the related consolidated statements of
operations, stockholders' equity, and cash flows for each of the three years in
the period ended September 30, 2003. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

    In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Washington Federal, Inc. and
subsidiaries as of September 30, 2003 and 2002, and the results of their
operations and their cash flows for each of the three years in the period ended
September 30, 2003, in conformity with accounting principles generally accepted
in the United States of America.

/s/ DELOITTE & TOUCHE LLP

DELOITTE & TOUCHE LLP
Seattle, Washington
November 6, 2003

GENERAL CORPORATE AND STOCKHOLDERS' INFORMATION

CORPORATE          425 Pike Street
HEADQUARTERS       Seattle, Washington 98101
                   (206) 624-7930

INDEPENDENT        Deloitte & Touche LLP
AUDITORS           Seattle, Washington

TRANSFER           Stockholder inquiries regarding transfer requirements, cash
AGENT,             or stock dividends, lost certificates, consolidating records,
REGISTRAR AND      correcting a name or changing an address should be directed
DIVIDEND           to the transfer agent:
DISBURSING         Mellon Investor Services L.L.C.
AGENT              P.O. Box 3315
                   South Hackensack, NJ 07606, or
                   85 Challenger Road
                   Ridgefield Park, NJ 07660
                   Telephone: 1-800-522-6645
                   www.melloninvestor.com
ANNUAL MEETING     The annual meeting of stockholders will be held on January
                   21, 2004, at 2 p.m. at the Sheraton Hotel, 1400 Sixth Avenue,
                   Seattle, Washington

FORM 10-K          This report and all SEC filings are available on the
                   Company's web site at: www.washingtonfederal.com

STOCK INFORMATION  Washington Federal, Inc. is traded on the NASDAQ Stock
                   Market. The common stock symbol is WFSL. At September 30,
                   2003, there were approximately 2,584 stockholders of record.



                                                     STOCK PRICES
                                                   ----------------
                   QUARTER ENDED                     HIGH       LOW    DIVIDENDS
                   -------------------------------------------------------------
                                                              
                   DECEMBER 31, 2001               $21.41    $18.18        $0.20
                   MARCH 31, 2002                   23.76     21.39         0.20
                   JUNE 30, 2002                    24.92     21.85         0.21
                   SEPTEMBER 30, 2002               23.87     19.32         0.21
                   DECEMBER 31, 2002                23.03     18.77         0.21
                   MARCH 31, 2003                   23.51     20.91         0.21
                   JUNE 30, 2003                    23.92     21.06         0.22
                   SEPTEMBER 30, 2003               26.41     23.19         0.22


                   ALL PRICES SHOWN HAVE BEEN ADJUSTED FOR STOCK SPLITS.

                   LARGEST MARKET MAKERS:
                   McAdams Wright Ragen, Inc.
                   Cincinnati Stock Exchange
                   Goldman, Sachs & Co.
                   Archipelago Exchange
                   Knight Equity Markets, L.P.
                   Archipelago, L.L.C.
                   Merrill Lynch, Pierce, Fenner & Smith, Inc.
                   Citigroup Global Markets, Inc.
                   Schwab Capital Markets
                   Alternate Display Facility
                   Morgan Stanley & Co., Inc.
                   Prudential Equity Group, Inc.
                   Deutsche Banc Alex Brown
                   Investment Technology Group
                   Instinet Corporation


                                                                              29

DIRECTORS, OFFICERS AND OFFICES

                                                                        
CORPORATE                 EXECUTIVE MANAGEMENT         DEPARTMENT                SUBSIDIARIES
HEADQUARTERS              COMMITTEE                    MANAGERS
                                                                                 FIRST INSURANCE
425 Pike Street           BRENT J. BEARDALL            APPRAISAL                 AGENCY, INC.
Seattle, WA 98101         Senior Vice President        HEATHER ST. CLAIR         317 S. 2nd Street
(206) 624-7930            and Chief Financial                                    Mount Vernon, WA 98273
                          Officer                      BRANCH LOAN               1-800-562-2555
BOARD OF DIRECTORS                                     UNDERWRITING              (360) 336-9630
                          LINDA S. BROWER
GUY C. PINKERTON          Executive Vice President     MICHAEL BUSH              DUANE HENSON
Chairman                                               Vice President            WASHINGTON SERVICES, INC.
                          EDWIN C. HEDLUND                                       6125 South Morgan Road
ROY M. WHITEHEAD          Executive Vice President     CREDIT                    Freeland, WA 98249
Vice Chairman, President  and Secretary                ADMINISTRATION-
and Chief Executive                                    CONSTRUCTION AND
Officer                   JACK B. JACOBSON             LAND
                          Executive Vice President
DEREK L. CHINN            and Chief Lending            JAMES E. CADY
Former President and      Officer                      Senior Vice President
Chief Executive Officer,
United Savings and Loan   ROY M. WHITEHEAD             DALE SULLIVAN
Bank                      Vice Chairman, President     Vice President
                          and Chief Executive Officer
JOHN F. CLEARMAN                                       CORPORATE REAL ESTATE
Former Chief Financial                                 AND TAXES
Officer, Milliman                                      KEITH D. TAYLOR
USA, Inc.                                              Senior Vice President
                                                       and Treasurer
H. DENNIS HALVORSON
Former Chief Executive                                 DATA PROCESSING
Officer, United Bank                                   TERRY O. PERMENTER
                                                       Senior Vice President
KERMIT O. HANSON
Dean Emeritus                                          DEPOSIT OPERATIONS
University of Washington                               BEN A. WHITMARSH
Graduate School of                                     Senior Vice President
Business Administration
                                                       INTERNAL AUDIT
W. ALDEN HARRIS                                        BARBARA A. MURPHY
Former Executive                                       Vice President
Vice President
                                                       LEGAL/SPECIAL CREDITS
ANNA C. JOHNSON                                        PAUL TYLER
Senior Partner                                         Vice President and
Scan East West Travel                                  Counsel

THOMAS F. KENNEY                                       LOAN OPERATIONS
Vice President Finance                                 LEANN BURKE
Haggen, Inc.                                           Officer

CHARLES R. RICHMOND                                    LOAN SERVICING
Former Executive                                       LARRY PLUMB
Vice President                                         Senior Vice President

DIRECTORS EMERITI                                      MANUALS/TRAINING
                                                       LINDA NICHOLL
E.W. MERSEREAU, JR.                                    Assistant Vice President
RICHARD C. REED
                                                       MARKETING AND
                                                       INVESTOR RELATIONS
                                                       CATHY COOPER
                                                       Vice President

                                                       MULTI-FAMILY LOANS
                                                       J. TIMOTHY GRANT
                                                       Senior Vice President

                                                       PERMANENT LOAN
                                                       PRODUCTION
                                                       JOHN WUNDERLICH
                                                       Vice President

                                                       PERMANENT LOAN
                                                       UNDERWRITING AND
                                                       WHOLESALE LENDING
                                                       COLLEEN WELLS
                                                       Vice President




                         DIVISION/REGIONS
                              
SOUTH SOUND WASHINGTON           SOUTHERN OREGON
16 OFFICE LOCATIONS              15 OFFICE LOCATIONS
DIVISION MANAGER                 DIVISION MANAGER
RONDA TOMLINSON                  PEGGY HOBIN
Vice President                   Senior Vice President
9919 Bridgeport Way S.W.         300 Ellsworth St. SW
Lakewood, WA 98499               Albany, OR 97321

MIDSOUND WASHINGTON              NORTHERN OREGON
14 OFFICE LOCATIONS              10 OFFICE LOCATIONS
DIVISION MANAGER                 INTERIM DIVISION MANAGER
E. CRAIG WILSON                  DALE SULLIVAN
Vice President                   Vice President
5809 196th S.W.                  14990 S.W. Bangy Road
Lynnwood, WA 98036               Lake Oswego, OR 97035

CENTRAL SEATTLE
4 OFFICE LOCATIONS               UTAH
REGIONAL MANAGER                 10 OFFICE LOCATIONS
ROBERT ZIRK                      DIVISION MANAGER
Vice President                   RICHARD FISHER
601 S. Jackson                   Senior Vice President
Seattle, WA 98104                505 East 200 South
                                 Salt Lake City, UT 84102
NORTHERN WASHINGTON
10 OFFICE LOCATIONS              PHOENIX, ARIZONA
DIVISION MANAGER                 12 OFFICE LOCATIONS
DOUGLAS A. ROWELL                DIVISION MANAGER
Senior Vice President            WENDY YATES
317 S. 2nd Street                Vice President
Mount Vernon, WA 98273           2196 E. Camelback Road, Suite 100
                                 Phoenix, AZ 85016
WESTERN IDAHO
12 OFFICE LOCATIONS              TUCSON, ARIZONA
DIVISION MANAGER                 8 OFFICE LOCATIONS
ROBERT P. LINK                   DIVISION MANAGER
Senior Vice President            GEORGIA VELARDE
1001 W. Idaho St.                Vice President
Boise, ID 83701                  5151 E. Broadway Blvd.,
                                 Suite 105
                                 Tucson, AZ 85711
EASTERN IDAHO
4 OFFICE LOCATIONS               NEVADA
DIVISION MANAGER                 2 OFFICE LOCATIONS
LARRY WADSWORTH                  DIVISION MANAGER
Senior Vice President            PAMELA K. CALLAHAN
500 North Capital                Vice President
Idaho Falls, ID 83402            9340 Sun City Blvd. #103
                                 Las Vegas, NV 89134

                                 TEXAS
                                 1 OFFICE LOCATION
                                 DIVISION MANAGER
                                 VAUGHN PEARSON
                                 Senior Vice President
                                 7001 Preston Road, Suite 110
                                 Dallas, TX 75205

                                 COLORADO
                                 1 LOAN PRODUCTION
                                 OFFICE
                                 SCOTT BRKOVICH
                                 Officer
                                 384 Inverness Drive
                                 South, Suite 105
                                 Englewood, CO 80112


           A complete listing of our branch locations can be found at
                           www.washingtonfederal.com


30

EX-23

                                   EXHIBIT 23

                         CONSENT OF INDEPENDENT AUDITORS




INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in Registration Statements No.
333-20191, No. 333-51143, No. 333-46588 and No. 333-81242 of Washington Federal,
Inc. on Form S-8 of our report dated November 6, 2003, incorporated by reference
in the Annual Report on Form 10-K of Washington Federal, Inc. for the year ended
September 30, 2003.

/s/ Deloitte & Touche, LLP
- -----------------------------
DELOITTE & TOUCHE LLP

December 22, 2003
Seattle, Washington

EX-31.1

                                  EXHIBIT 31.1

            SECTION 302 CERTIFICATION BY THE CHIEF EXECUTIVE OFFICER




                                  CERTIFICATION

I, Roy M. Whitehead, certify that:

1.       I have reviewed this annual report on Form 10-K of Washington Federal,
         Inc.;

2.       Based on my knowledge, this report does not contain any untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statements made, in light of the circumstances under which
         such statements were made, not misleading with respect to the period
         covered by this report;

3.       Based on my knowledge, the financial statements, and other financial
         information included in this report, fairly present in all material
         respects the financial condition, results of operations and cash flows
         of the registrant as of, and for, the periods presented in this report;

4.       The registrant's other certifying officer and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
         registrant and have:

         a)       Designed such disclosure controls and procedures, or caused
                  such disclosure controls and procedures to be designed under
                  our supervision, to ensure that material information relating
                  to the registrant, including its consolidated subsidiaries, is
                  made known to us by others within those entities, particularly
                  during the period in which this report is being prepared;

         b)       Evaluated the effectiveness of the registrant's disclosure
                  controls and procedures and presented in this report our
                  conclusions about the effectiveness of the disclosure controls
                  and procedures, as of the end of the period covered by this
                  report based on such evaluation; and

         c)       Disclosed in this report any change in the registrant's
                  internal control over financial reporting that occurred during
                  the registrant's most recent fiscal quarter that has
                  materially affected, or is reasonably likely to materially
                  affect, the registrant's internal control over financial
                  reporting; and

5.       The registrant's other certifying officer and I have disclosed, based
         on our most recent evaluation of internal control over financial
         reporting, to the registrant's auditors and the audit committee of the
         registrant's board of directors (or persons performing the equivalent
         functions):

         a)       All significant deficiencies and material weaknesses in the
                  design or operation of internal control over financial
                  reporting which are reasonably likely to adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial information; and




         b)       Any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  registrant's internal control over financial reporting.

Date: December 22, 2003                       /s/ Roy M. Whitehead
                                              --------------------
                                              ROY M. WHITEHEAD
                                              Vice Chairman, President and
                                              Chief Executive Officer

EX-31.2

                                  EXHIBIT 31.2

            SECTION 302 CERTIFICATION BY THE CHIEF FINANCIAL OFFICER




                                  CERTIFICATION

I, Brent J. Beardall, certify that:

1.       I have reviewed this annual report on Form 10-K of Washington Federal,
         Inc.;

2.       Based on my knowledge, this report does not contain any untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statements made, in light of the circumstances under which
         such statements were made, not misleading with respect to the period
         covered by this report;

3.       Based on my knowledge, the financial statements, and other financial
         information included in this report, fairly present in all material
         respects the financial condition, results of operations and cash flows
         of the registrant as of, and for, the periods presented in this report;

4.       The registrant's other certifying officer and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
         registrant and have:

         a)       Designed such disclosure controls and procedures, or caused
                  such disclosure controls and procedures to be designed under
                  our supervision, to ensure that material information relating
                  to the registrant, including its consolidated subsidiaries, is
                  made known to us by others within those entities, particularly
                  during the period in which this report is being prepared;

         b)       Evaluated the effectiveness of the registrant's disclosure
                  controls and procedures and presented in this report our
                  conclusions about the effectiveness of the disclosure controls
                  and procedures, as of the end of the period covered by this
                  report based on such evaluation; and

         c)       Disclosed in this report any change in the registrant's
                  internal control over financial reporting that occurred during
                  the registrant's most recent fiscal quarter that has
                  materially affected, or is reasonably likely to materially
                  affect, the registrant's internal control over financial
                  reporting; and

5.       The registrant's other certifying officer and I have disclosed, based
         on our most recent evaluation of internal control over financial
         reporting, to the registrant's auditors and the audit committee of the
         registrant's board of directors (or persons performing the equivalent
         functions):

         a)       All significant deficiencies and material weaknesses in the
                  design or operation of internal control over financial
                  reporting which are reasonably likely to adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial information; and




         b)       Any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  registrant's internal control over financial reporting.

Date: December 22, 2003                       /s/ Brent J. Beardall
                                              ---------------------
                                              BRENT J. BEARDALL
                                              Senior Vice President and
                                              Chief Financial Officer

EX-32

                                   EXHIBIT 32

                    SECTION 906 CERTIFICATION PURSUANT TO THE
                           SARBANES-OXLEY ACT OF 2002




                                  CERTIFICATION
                       PURSUANT TO 18 U.S.C. SECTION 1350
                    AS ADOPTED PURSUANT TO SECTION 906 OF THE
                           SARBANES-OXLEY ACT OF 2002

         In connection with the Annual Report of Washington Federal, Inc. (the
"Company") on Form 10-K for the period ended September 30, 2003, as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), the
undersigned hereby certify, pursuant to 18 U.S.C. section 1350, as adopted
pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to the
undersigned's best knowledge and belief:

         (a) the Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934, as amended; and

         (b) the information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.

Dated this 22nd day of December 2003.

                                              Washington Federal, Inc.
                                              (Company)

                                              /s/ Roy M. Whitehead
                                              --------------------
                                              ROY M. WHITEHEAD
                                              Vice Chairman, President and
                                              Chief Executive Officer

                                              /s/ Brent J. Beardall
                                              ---------------------
                                              BRENT J. BEARDALL
                                              Senior Vice President and
                                              Chief Financial Officer