10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2006

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 and zip code)

(206) 624-7930

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report.)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x     No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer     x Accelerated filer     ¨ Non-accelerated filer     ¨

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

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Title of class:	at April 25, 2006
Common stock, $1.00 par value	87,221,221

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

PART I
Item 1.	Financial Statements (Unaudited)
	The Condensed Consolidated Financial Statements of Washington Federal, Inc. and Subsidiaries filed as a part of the report are as follows:
	Consolidated Statements of Financial Condition as of March 31, 2006 and September 30, 2005	Page 3
	Consolidated Statements of Operations for the quarter and six months ended March 31, 2006 and 2005	Page 4
	Consolidated Statements of Cash Flows for the six months ended March 31, 2006 and 2005	Page 5
	Notes to Consolidated Financial Statements	Page 6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	Page 8
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	Page 15
Item 4.	Controls and Procedures	Page 16
PART II
Item 1.	Legal Proceedings	Page 17
Item 1A.	Risk Factors	Page 17
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	Page 17
Item 3.	Defaults Upon Senior Securities	Page 17
Item 4.	Submission of Matters to a Vote of Security Holders	Page 17
Item 5.	Other Information	Page 18
Item 6.	Exhibits	Page 18
	Signatures	Page 19

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(UNAUDITED)

	March 31, 2006			September 30, 2005
	(In thousands, except share data)
ASSETS
Cash and cash equivalents	$	383,317		$	637,791
Available-for-sale securities, including encumbered securities of $535,024 and $571,462, at fair value		1,159,869			1,077,856
Held-to-maturity securities, including encumbered securities of $92,265 and $68,759, at amortized cost		196,955			212,479
Loans receivable, net		6,543,126			6,008,932
Interest receivable		36,975			34,048
Premises and equipment, net		63,498			63,287
Real estate held for sale		4,388			5,631
FHLB stock		129,453			129,453
Intangible assets, net		56,734			57,259
Other assets		13,237			7,714
	$	8,587,552		$	8,234,450
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Customer accounts
Savings and demand accounts	$	5,130,275		$	5,002,172
Repurchase agreements with customers		30,107			29,333
		5,160,382			5,031,505
FHLB advances		1,500,000			1,230,000
Other borrowings		600,000			655,000
Advance payments by borrowers for taxes and insurance		22,410			27,533
Federal and state income taxes		37,116			44,617
Accrued expenses and other liabilities		52,204			58,487
		7,372,112			7,047,142
Stockholders' equity
Common stock, $1.00 par value, 300,000,000 shares authorized; 104,336,960 and 104,140,966 shares issued; 87,187,699 and 86,933,294 shares outstanding		104,337			104,141
Paid-in capital		1,242,806			1,240,310
Accumulated other comprehensive loss, net of taxes		(14,868	)		(704	)
Treasury stock, at cost; 17,149,261 and 17,207,672 shares		(205,178	)		(205,874	)
Retained earnings		88,343			49,435
		1,215,440			1,187,308
	$	8,587,552		$	8,234,450

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Quarter Ended March 31,					Six Months Ended March 31,
	2006		2005			2006		2005
	(In thousands, except per share data)
INTEREST INCOME
Loans	$	106,274	$	90,321		$	208,679	$	177,206
Mortgage-backed securities		15,725		23,568			30,093		36,402
Investment securities and cash equivalents		6,660		8,291			14,449		16,115
		128,659		122,180			253,221		229,723
INTEREST EXPENSE
Customer accounts		41,459		26,622			80,308		50,514
FHLB advances and other borrowings		21,724		18,941			43,374		37,195
		63,183		45,563			123,682		87,709
Net interest income		65,476		76,617			129,539		142,014
Provision for loan losses		85		—			85		—
Net interest income after provision for loan losses		65,391		76,617			129,454		142,014
OTHER INCOME
Loss on securities, net		—		(3,476	)		—		(3,412	)
Other		3,404		3,746			6,796		6,260
		3,404		270			6,796		2,848
OTHER EXPENSE
Compensation and fringe benefits		9,040		8,733			17,275		17,067
Occupancy		2,017		3,124			3,930		4,960
Other		2,458		2,106			4,981		3,914
		13,515		13,963			26,186		25,941
Gain on real estate acquired through foreclosure, net		5		581			144		799
Income before income taxes		55,285		63,505			110,208		119,720
Income taxes		18,945		22,544			37,722		42,501
NET INCOME	$	36,340	$	40,961		$	72,486	$	77,219
PER SHARE DATA
Basic earnings	$	0.42	$	0.47		$	0.83	$	0.89
Diluted earnings		.42		.47			.83		.88
Cash dividends		.20		.19			.40		.38
Weighted average number of shares outstanding, including dilutive stock options		87,363,894		87,464,540			87,378,631		87,452,362

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Six Months Ended
	March 31, 2006			March 31, 2005
	(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	72,486		$	77,219
Adjustments to reconcile net income to net cash provided by operating activities
Amortization (accretion) of fees, discounts, and premiums, net		1,984			(10,204	)
Amortization of intangible assets		525			624
Depreciation		1,345			2,545
Stock option compensation expense		808			—
Provision for loan losses		85			—
Loss (gain) on investment securities and real estate held for sale, net		(145	)		2,613
Increase in accrued interest receivable		(2,927	)		(1,815	)
Increase (decrease) in income taxes payable		729			(9,094	)
FHLB stock dividends		—			(387	)
Decrease (increase) in other assets		(5,523	)		3,525
Decrease in accrued expenses and other liabilities		(6,283	)		(2,032	)
Net cash provided by operating activities		63,084			62,994
CASH FLOWS FROM INVESTING ACTIVITIES
Loans originated
Single-family residential loans		(519,328	)		(535,275	)
Construction loans		(369,680	)		(333,525	)
Land loans		(199,220	)		(148,058	)
Multi-family loans		(70,757	)		(58,519	)
		(1,158,985	)		(1,075,377	)
Savings account loans originated		(648	)		(574	)
Loan principal repayments		869,970			782,581
Increase in undisbursed loans in process		20,507			233
Loans purchased		(266,129	)		(131,058	)
FHLB stock redemption		—			56,208
Available-for-sale securities purchased		(188,504	)		(464,719	)
Repurchase agreement maturity		—			200,000
Principal payments and maturities of available-for-sale securities		82,919			118,371
Available-for-sale securities sold		—			78,544
Principal payments and maturities of held-to-maturity securities		15,651			12,303
Proceeds from sales of real estate held for sale		1,589			3,661
Premises and equipment purchased, net		(1,556	)		(1,396	)
Net cash used by investing activities		(625,186	)		(421,223	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in customer accounts		128,877			112,231
Net increase in borrowings		215,000			300,000
Proceeds from exercise of common stock options		2,412			1,378
Dividends paid		(34,882	)		(33,091	)
Proceeds from Employee Stock Ownership Plan		1,344			947
Decrease in advance payments by borrowers for taxes and insurance		(5,123	)		(4,319	)
Net cash provided by financing activities		307,628			377,146
Increase (decrease) in cash and cash equivalents		(254,474	)		18,917
Cash and cash equivalents at beginning of period		637,791			508,361
Cash and cash equivalents at end of period	$	383,317		$	527,278
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Non-cash investing activities
Real estate acquired through foreclosure	$	201		$	676
Cash paid during the period for
Interest		123,955			86,821
Income taxes		37,705			49,593

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

QUARTER AND SIX MONTHS ENDED MARCH 31, 2006 AND 2005

(UNAUDITED)

NOTE A – Basis of Presentation

The consolidated unaudited interim financial statements included in this report have been prepared by Washington Federal, Inc. (“Company”). The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect amounts reported in the financial statements. Actual results could differ from these estimates. In the opinion of management, all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation are reflected in the interim financial statements. The September 30, 2005 Consolidated Statement of Financial Condition was derived from audited financial statements.

The information included in this Form 10-Q should be read in conjunction with Company’s 2005 Annual Report on Form 10-K (“2005 Form 10-K”) as filed with the SEC. Interim results are not necessarily indicative of results for a full year.

Certain reclassifications have been made to the financial statements to conform prior periods to current classifications. Specifically, securitized assets subject to repurchase have been included with loans receivable.

NOTE B – Dividends

Dividends per share amounted to 20 cents for the quarter ended March 31, 2006 compared with 19 cents for the same period one year ago. On April 14, 2006 the Company paid its 93^rd consecutive quarterly cash dividend.

NOTE C – Comprehensive Income

The Company’s comprehensive income includes all items which comprise net income plus the unrealized gains (losses) on available-for-sale securities. Total comprehensive income for the quarters ended March 31, 2006 and 2005 totaled $30,972,000 and $28,469,000, respectively. Total comprehensive income for the six months ended March 31, 2006 and 2005 totaled $58,322,000 and $59,950,000, respectively. The difference between the Company’s net income and total comprehensive income for the six months ended March 31, 2006 equals the change in the net unrealized gain or loss on available-for-sale securities of $22,394,000. Net of tax of $8,230,000 , the change was $14,164,000.

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

QUARTER AND SIX MONTHS ENDED MARCH 31, 2006 AND 2005

(UNAUDITED)

NOTE D – Allowance for Losses on Loans

The following table summarizes the activity in the allowance for loan losses for the quarter and six months ended March 31, 2006 and 2005:

	Quarter Ended March 31,						Six Months Ended March 31,
	2006			2005			2006			2005
	(In thousands)						(In thousands)
Balance at beginning of period	$	24,736		$	25,008		$	24,756		$	25,140
Provision for loan losses		85			—			85			—
Charge-offs		(11	)		(14	)		(31	)		(146	)
Recoveries		—			—			—			—
Balance at end of period	$	24,810		$	24,994		$	24,810		$	24,994

NOTE E – New Accounting Pronouncements

On October 1, 2005 the Company adopted Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment (“SFAS 123R”). SFAS 123R eliminates the alternative of applying the intrinsic value measurement provisions of Opinion 25 to stock compensation awards issued to employees. SFAS 123R now requires companies to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date estimated fair value of the award. That estimated cost will be recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).

In addition, SFAS 123R requires the use of the Modified Prospective Application Method. Under this method SFAS 123R is applied to new awards and to awards modified, repurchased or cancelled after the effective date. Additionally, compensation cost for the portion of awards for which the requisite service has not been rendered (such as unvested options) that are outstanding as of the date of adoption shall be recognized as the remaining requisite services are rendered. The compensation cost relating to unvested awards at the date of adoption shall be based on the grant-date estimated fair value of those awards as calculated under the pro forma disclosure provisions of SFAS 123.

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. See Note A and Note L in the 2005 Form 10-K where the Company’s three stock-option employee compensation plans, as well as the weighted-average assumptions utilized in the Black-Scholes model, are more fully described.

Total compensation cost for stock options recognized for the quarter and six months ended March 31, 2006 was approximately $420,000 and $808,000, respectively.

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

PART I – Financial Information

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

FORWARD LOOKING STATEMENTS

In addition to historical information, this Quarterly Report on Form 10-Q includes certain “forward-looking statements,” as defined in the Securities Act of 1933 and the Securities Exchange Act of 1934, based on current management expectations. Actual results could differ materially from those management expectations. Such forward-looking statements include statements regarding Washington Federal, Inc. (“Company”) 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.

GENERAL

The Company is a savings and loan holding company. The Company’s primary operating subsidiary is Washington Federal Savings.

INTEREST RATE RISK

The Company assumes a high level of interest rate risk as a result of its policy to originate and hold for investment fixed-rate single-family home loans, which are longer-term in nature than the short-term characteristics of its liabilities of customer accounts and borrowed money. At March 31, 2006, the Company had a negative one-year maturity gap of approximately 31% of total assets, compared to a 26% negative one-year maturity gap as of September 30, 2005. The increase in interest rate risk is the result of the Company investing a portion of its short-term assets into longer-term assets over the course of the six months.

The interest rate spread decreased to 2.45% at March 31, 2006 from 2.54% at September 30, 2005. The spread decreased primarily because weighted average rates on customer accounts increased by 44 basis points since September 30, 2005, however this was partially offset by an increase in the weighted average rates on earning assets of 24 basis points over the same period. As of March 31, 2006, the Company had grown total assets by $353,102,000 from $8,234,450,000 at September 30, 2005. Cash and cash equivalents decreased $254,474,000 during the six months ended March 31, 2006. Loans and mortgage-backed securities increased $605,757,000, or 8.6%, to $7,690,031,000 during the six months ended March 31, 2006 as the Company grew long-term assets to offset the impact of increasing deposit costs. Long-term borrowings increased

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PART I – Financial Information

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

$215,000,000 during the six months ended March 31, 2006 as the Company replaced $185,000,000 of borrowings held at September 30, 2005 with a weighted average rate of 5.09% with $400,000,000 of borrowings with a weighted average rate of 4.65%. Cash and cash equivalents of $383,317,000 and stockholders’ equity of $1,215,440,000 provide management with flexibility in managing interest rate risk.

LIQUIDITY AND CAPITAL RESOURCES

The Company’s net worth at March 31, 2006 was $1,215,440,000, or 14.15% of total assets. This was an increase of $28,132,000 from September 30, 2005 when net worth was $1,187,308,000, or 14.42% of total assets. The increase in the Company’s net worth included $72,486,000 from net income. Net worth was reduced by $34,882,000 of cash dividend payments and a $14,164,000 increase in accumulated other comprehensive loss.

The Company’s percentage of net worth to total assets is among the highest in the industry and is over three times the minimum required under Office of Thrift Supervision regulations. Management believes this strong net worth position will help protect earnings against interest rate risk and enable it to compete more effectively for controlled growth through acquisitions, de novo expansion and increased customer deposits.

CHANGES IN FINANCIAL CONDITION

Available-for-sale and held-to-maturity securities: Available-for-sale securities increased $82,013,000, or 7.6%, during the six months ended March 31, 2006. For the six months ended March 31, 2006 the Company purchased $188,504,000 of available-for-sale investment securities. During the same period there were no sales of available-for-sale securities nor were there any purchases or sales of held-to-maturity securities. As of March 31, 2006, the Company had net unrealized losses on available-for-sale securities of $14,868,000, net of tax, which were recorded as part of stockholders’ equity.

Loans receivable: During the six months ended March 31, 2006, the balance of loans receivable increased 8.9% to $6,543,126,000 compared to $6,008,932,000 at September 30, 2005. This growth was consistent with Management’s strategy to grow the loan portfolio to offset rising deposit costs. Permanent single-family residential loans as a percentage of total loans increased to 70.6% at March 31, 2006 compared to 70.2% at September 30, 2005. The aggregate of construction and land loans (gross of loans in process) as a percentage of total loans was 22.2% at both March 31, 2006 and September 30, 2005.

Non-performing assets: Non-performing assets decreased 5.3% during the six months ended March 31, 2006 to $6,957,000 from $7,344,000 at September 30, 2005. Non-performing assets as a percentage of total assets was .08% at March 31, 2006 as compared to .09% at September 30, 2005.

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

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PART I – Financial Information

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

	March 31, 2006			September 30, 2005
	(In thousands)
Restructured loans (1)	$	284		$	573
Nonaccrual loans:
Single-family residential		6,523			5,765
Construction		—			—
Land		—			403
Multi-family		434			420
Total nonaccrual loans (2)		6,957			6,588
Total REO (3)		—			756
Total non-performing assets	$	6,957		$	7,344
Total non-performing assets and restructured loans	$	7,241		$	7,917
Total non-performing assets and restructured loans as a percentage of total assets		0.08	%		0.09	%

(1) Performing in accordance with restructured terms.

(2) The Company recognized interest income on nonaccrual loans of approximately $214,000 in the quarter ended March 31, 2006. Had these loans performed according to their original contract terms, the Company would have recognized interest income of approximately $371,000 for the quarter ended March 31, 2006.

In addition to the nonaccrual loans reflected in the above table, at March 31, 2006, the Company had $615,000 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 nonperforming, the Company’s ratio of total nonperforming assets and restructured loans as a percent of total assets would have increased to .09% at March 31, 2006.

(3) Total REO (included in real estate held for sale on the Statement of Financial Condition) includes real estate held for sale acquired in settlement of loans or acquired from purchased institutions in settlement of loans.

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PART I – Financial Information

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Allocation of the allowance for loan losses: The following table shows the allocation of the Company’s allowance for loan losses at the dates indicated.

	March 31, 2006				September 30, 2005
	Amount		Loans to Total Loans 1		Amount		Loans to Total Loans 1
	(In thousands)
Real estate:
Single-family residential	$	8,904	70.6	%	$	8,643	70.2	%
Multi-family		5,192	7.2			5,776	7.6
Land		4,168	7.1			3,360	6.7
Construction		6,546	15.1			6,977	15.5
	$	24,810	100.0	%	$	24,756	100.0	%

¹ The percentage is based on gross loans before allowance for loan losses, loans in process and deferred loan origination costs.

Customer accounts: Customer accounts increased $128,877,000, or 2.6%, to $5,160,382,000 at March 31, 2006 compared with $5,031,505,000 at September 30, 2005.

FHLB advances and other borrowings: Total borrowings increased $215,000,000, or 11.4%, to $2,100,000,000 at March 31, 2006 compared with $1,885,000,000 at September 30, 2005. See Interest Rate Risk on page 8.

RESULTS OF OPERATIONS

Net Income: The quarter ended March 31, 2006 produced net income of $36,340,000 compared to $40,961,000 for the same quarter one year ago, an 11.3% decrease. Net income for the six months ended March 31, 2006 was $72,486,000 compared to $77,219,000 for the six months ended March 31, 2005, a 6.1% decrease. Net income decreased primarily as a result of a $7.9 million (after tax) increase in net income recorded in the quarter ended March 31, 2005 which resulted from the Company’s correction of its hedge accounting. See Note A in the 2005 Form 10-K and Note A in the March 31, 2005 Form 10-Q for additional information related to the correction of the Company’s hedge accounting.

Net Interest Income: The largest component of the Company’s earnings is net interest income, which is the difference between the interest and dividends earned on loans and other investments and the interest paid on customer deposits and borrowings. Net interest income is impacted primarily by two factors; first, the

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PART I – Financial Information

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

volume of earning assets and liabilities and second, the rate earned on those assets or the rate paid on those liabilities.

The following table sets forth certain information explaining changes in interest income and interest expense for the periods indicated compared to the same period one year ago. For each category of interest-earning asset and interest-bearing liability, information is provided on changes attributable to (1) changes in volume (changes in volume multiplied by old rate) and (2) changes in rate (changes in rate multiplied by old 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.

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PART I – Financial Information

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Rate / Volume Analysis:

	Comparison of Quarters Ended 3/31/06 and 3/31/05									Comparison of Six Months Ended 3/31/06 and 3/31/05
	Volume			Rate			Total			Volume			Rate			Total
	(In thousands)									(In thousands)
Interest income:
Loan portfolio	$	15,681		$	272		$	15,953		$	31,473		$	—		$	31,473
Mortgaged-backed securities		7,048			(14,891	)		(7,843	)		12,746			(19,055	)		(6,309	)
Investments(1)		(3,608	)		1,977			(1,631	)		(849	)		(817	)		(1,666	)
All interest-earning assets		19,121			(12,642	)		6,479			43,370			(19,872	)		23,498
Interest expense:
Customer accounts		2,872			11,965			14,837			5,175			24,619			29,794
FHLB advances and other borrowings		3,879			(1,096	)		2,783			8,616			(2,437	)		6,179
All interest-bearing liabilities		6,751			10,869			17,620			13,791			22,182			35,973
Change in net interest income	$	12,370		$	(23,511	)	$	(11,141	)	$	29,579		$	(42,054	)	$	(12,475	)

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

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PART I – Financial Information

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Provision for Loan Losses: The Company recorded an $85,000 provision for loan losses during the quarter ended March 31, 2006, while no provision was recorded for the same quarter one year ago. Nonperforming assets amounted to $6,957,000 or .08% of total assets at March 31, 2006 compared to $9,082,000 or .12% of total assets one year ago. Delinquencies on permanent loans decreased from $15,100,000 at March 31, 2005 to $11,700,000 at March 31, 2006. The Company had net charge-offs of $11,000 for the quarter ended March 31, 2006 compared with $14,000 of net charge-offs for the quarter ended March 31, 2005. The balance of loans receivable increased 8.9% to $6,543,126,000 at March 31, 2006 compared to $6,008,932,000 at September 30, 2005, which offset the positive credit trends discussed above.

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

	Quarter Ended March 31,						Six Months Ended March 31,
	2006			2005			2006			2005
	(In thousands)						(In thousands)
Beginning balance	$	24,736		$	25,008		$	24,756		$	25,140
Charge-offs:
Real Estate:
Single-family residential		11			14			31			132
Multi-family		—			—			—			14
Land		—			—			—			—
Construction		—			—			—			—
		11			14			31			146
Recoveries:
Real Estate:
Single-family residential		—			—			—			—
Multi-family		—			—			—			—
Land		—			—			—			—
Construction		—			—			—			—
		—			—			—			—
Net charge-offs		11			14			31			146
Provision for loan losses		85			—			85			—
Ending balance	$	24,810		$	24,994		$	24,810		$	24,994
Ratio of net charge-offs to average loans outstanding		0.00	%		0.00	%		0.00	%		0.00	%

Other Income: The quarter ended March 31, 2006 produced total other income of $3,404,000 compared to $270,000 for the same quarter one year ago, a significant increase. Total other income for the six months ended March 31, 2006 was $6,796,000 compared to $2,848,000 for the six months ended March 31, 2005, a 138.6% increase. Total other income for the quarter and six months ended March 31, 2006 included a

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PART I – Financial Information

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

$577,000 and $1,073,000 gain on the sale of real estate held for investment, respectively. Total other income for the quarter and six months ended March 31, 2005 included a $4,111,000 loss due to the recognition of an other than temporary impairment charge on Freddie Mac and Fannie Mae preferred stock held in the available-for-sale portfolio. This loss was partially offset by net gains from the sale of available-for-sale securities of $698,000 for the six months ended March 31, 2005.

Other Expense: The quarter ended March 31, 2006 produced total other expense of $13,515,000 compared to $13,963,000 for the same quarter one year ago, a 3.2% decrease. Total other expense for the six months ended March 31, 2006 was $26,186,000 compared to $25,941,000 for the six months ended March 31, 2005, a 0.9% increase. Total other expense for the quarter and six months ended March 31, 2006 equaled .64% and .63%, respectively, of average assets, compared to .74% and .69%, respectively, for the same period one year ago. The number of staff, including part-time employees on a full-time equivalent basis, was 751 at March 31, 2006 and 756 at March 31, 2005.

Taxes: Income taxes decreased $3,599,000, or 16.0%, and $4,779,000, or 11.2%, for the quarter and six months ended March 31, 2006 when compared to the same period one year ago due to a lower taxable income base. During the six months ended March 31, 2006, the Company settled a claim with the Internal Revenue Service over the deductibility of supervisory goodwill that resulted in a reduction of income tax expense. As a result, the effective tax rate for the quarter and six months ended March 31, 2006 decreased to 34.20% from 35.50% for the same periods one year ago. The Company expects a 34.25% effective tax rate going forward for the remainder of the fiscal year.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Management believes that there have been no material changes in the Company’s quantitative and qualitative information about market risk since September 30, 2005. For a complete discussion of the Company’s quantitative and qualitative market risk, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s 2005 Form 10-K.

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PART I – Financial Information

Item 4. Controls and Procedures

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

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

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PART II – Other Information

Item 1. Legal Proceedings

From time to time the Company or its subsidiaries are engaged in legal proceedings in the ordinary course of business, none of which are considered to have a material impact on the Company’s financial position or results of operations.

Item 1A. Risk Factors

Not applicable

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information with respect to purchases made by or on behalf of the Company of the Company’s common stock during the three months ended March 31, 2006.

Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan (1)	Maximum Number of Shares That May Yet Be Purchased Under the Plan at the End of the Period
January 1, 2006 to
January 31, 2006	—	$	—	—	3,310,014
February 1, 2006 to
February 28, 2006	—		—	—	3,310,014
March 1, 2006 to
March 31, 2006	—		—	—	3,310,014
Total	—	$	—	—	3,310,014

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

Item 3. Defaults Upon Senior Securities

Not applicable

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

The Annual Meeting of Stockholders of Washington Federal, Inc. was held on January 18, 2006. The two items voted upon by shareholders included the election of three directors for a three-year term and one

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PART II – Other Information

director for a one-year term, and the ratification of the appointment of Deloitte & Touche LLP as the independent registered public accountants for fiscal year 2006. The results of the voting were as follows:

	Votes Cast		Votes	Total
	For	Against	Withheld	Votes Cast
Election of Directors
John F. Clearman — 3-year term	74,164,935	—	299,481	74,464,416
H. Dennis Halvorson — 3-year term	74,204,480	—	259,936	74,464,416
Roy M. Whitehead— 3-year term	73,934,023	—	530,393	74,464,416
Thomas J. Kelley — 1-year term	74,101,991	—	362,425	74,464,416
Ratify appointment of Deloitte & Touche LLP	74,190,861	136,291	137,264	74,464,416

Item 5. Other Information

Not applicable

Item 6. Exhibits

(a) Exhibits

31.1	Section 302 Certification by the Chief Executive Officer
31.2	Section 302 Certification by the Chief Financial Officer
32	Section 906 Certification by the Chief Executive Officer and the Chief Financial Officer

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SIGNATURES

Pursuant to the requirements 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.

April 28, 2006	/s/ Roy M. Whitehead
	ROY M. WHITEHEAD
	Vice Chairman, President and Chief Executive Officer
April 28, 2006	/s/ Brent J. Beardall
	BRENT J. BEARDALL
	Senior Vice President and Chief Financial Officer

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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 quarterly report on Form 10-Q 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 quarterly 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a – 15(f) and 15d-15(f)) 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) 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

d) Disclosed in this quarterly 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: April 28, 2006	/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 quarterly report on Form 10-Q 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 quarterly 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a – 15(f) and 15d-15(f)) 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) 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

d) Disclosed in this quarterly 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: April 28, 2006	/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 Quarterly Report of Washington Federal, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2006, 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 28^th day of April 2006.

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