UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

Commission file number   0­25454

WASHINGTON FEDERAL, INC.

(Exact name of registrant as specified in its charter)

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  ý   No  o

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

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.

PART I – Financial Information

Item 2.    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.

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 both March 31, 2005 and March 31, 2004, the Company had a negative one-year maturity gap of approximately 17% of total assets as the asset mix of the current quarter was similar to that from one year ago.

The interest rate spread decreased to 2.83% at March 31, 2005 from 3.00% at September 30, 2004, due to increasing deposit costs partially offset by growth in long-term assets and borrowings.  The weighted average rate on customer accounts increased by 41 basis points to 2.37% as of March 31, 2005.  As of March 31, 2005, the Company had grown total assets by $419,254,000 from $7,169,205,000 at September 30, 2004.  Short-term investments (original maturities less than one year) decreased $181,083,000 during the six months ended March 31, 2005.  Loans and mortgage-backed securities increased $671,185,000 to $6,405,843,000 during the six month period ended March 31, 2005.  Long-term borrowings increased $300,000,000 during the six months ended March 31, 2005, as the Company chose to lock in long-term funding at a weighted-average rate of 3.79%.  Total short-term assets of $527,278,000, which represent 7% of total assets, provides management with flexibility in managing interest rate risk going forward.

LIQUIDITY AND CAPITAL RESOURCES

The Company’s net worth at March 31, 2005 was $1,149,511,000, or 15.15% of total assets.  This was an increase of $29,323,000 from September 30, 2004 when net worth was $1,120,188,000, or 15.62% of total assets. The increase in the Company’s net worth included $77,219,000 from net income.  Net worth was reduced by $33,091,000 of cash dividend payments.

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 $253,679,000, or 28.2%, during the six months ended March 31, 2005.  For the six months ended March 31, 2005 the Company purchased $464,719,000 of available-for-sale investment securities in addition to selling $78,544,000 of available-for-sale securities at a net gain of $698,000.  In addition, the Company recorded an

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other than temporary impairment charge of $4,111,000 during the second fiscal quarter on Fannie Mae and Freddie Mac preferred stock that were part of the available-for-sale portfolio.  There were no purchases of held-to-maturity securities during the six months ended March 31, 2005.  As of March 31, 2005, the Company had net unrealized losses on available-for-sale securities of $162,000, net of tax, which were recorded as part of stockholders’ equity.

Loans receivable and securitized assets subject to repurchase:  During the six months ended March 31, 2005, the combined total of loans receivable and securitized assets subject to repurchase increased 8.3% to $5,518,087,000 compared to $5,093,443,000 at September 30, 2004.  This growth was consistent with Management’s strategy to increase net loans during this period of increasing home mortgage rates.  Permanent single-family residential loans as a percentage of total loans decreased to 70.6% at March 31, 2005 compared to 71.2% at September 30, 2004.  The aggregate of construction and land loans (gross of loans in process) as a percentage of total loans increased to 21.6% at March 31, 2005 compared to 20.4% at September 30, 2004.

Non-performing assets:  Non-performing assets decreased 39.2% during the six months ended March 31, 2005 to $9,082,000 from $14,945,000 at September 30, 2004 due to a strong housing market in the western United States and increased sales of real estate held for sale.

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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(1)                                  Performing in accordance with restructured terms.

(2)                                  The Company recognized interest income on nonaccrual loans of approximately $287,000 in the quarter ended March 31, 2005.  Had these loans performed according to their original contract terms, the Company would have recognized interest income of approximately $555,000 for the quarter ended March 31, 2005.

In addition to the nonaccrual loans reflected in the above table, at March 31, 2005, the Company had $4,029,000 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 been .18% at March 31, 2005.

(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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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.

(1)          The percentage is based on gross loans (including securitized assets subject to repurchase) before allowance for loan losses, loans in process and deferred loan origination costs.

Customer accounts:  Customer accounts increased $112,231,000, or 2.4%, to $4,722,589,000 at March 31, 2005 compared with $4,610,358,000 at September 30, 2004.

FHLB advances and other borrowings:  Total borrowings increased $300,000,000, or 23.1%, to $1,600,000,000 at March 31, 2005 compared with $1,300,000,000 at September 30, 2004.  The $300,000,000 of 5 year original maturity reverse repurchase agreements had a weighted-average rate of 3.79%.

RESULTS OF OPERATIONS

Net Income:  The quarter ended March 31, 2005 produced net income of $40,961,000 compared to  $32,520,000 for the same quarter one year ago, an 26.0% increase.  Net income for the six months ended March 31, 2005 was $77,219,000 compared to $65,343,000 for the six months ended March 31, 2004, an 18.2% increase.  Net income increased primarily as a result of increased balances of loans and mortgage-backed securities, reduced borrowing costs and the $4.6 million (after tax) increase in net income which resulted from the Company’s correction of its hedge accounting as described in Note A.

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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Provision for Loan Losses:  The Company recorded no provision for loan losses during either of the quarters or six month periods ended March 31, 2005 and 2004.  Nonperforming assets amounted to $9,082,000 or .12% of total assets at March 31, 2005 compared to $25,216,000 or .33% of total assets one year ago.  Delinquencies on permanent loans decreased from $23,100,000 at March 31, 2004 to $15,100,000 at March 31, 2005.  Net charge-offs of $14,000 for the quarter ended March 31, 2005 remained low and were less than the $169,000 of net charge-offs for the quarter ended March 31, 2004.  During the quarter ended March 31, 2005, the combined total of loans receivable and securitized assets subject to repurchase increased 8.3% to $5,518,087,000 compared to $5,093,443,000 at September 30, 2004.  It should be noted that uncertain economic conditions, including unemployment that is higher than the national average, combined with increasing loan demand continue in the Company’s primary markets.

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

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Other Income:  The quarter ended March 31, 2005 produced total other income of $271,000 compared to $2,322,000 for the same quarter one year ago, an 88.3% decrease.  Total other income for the six months ended March 31, 2005 was $2,850,000 compared to $5,427,000 for the six months ended March 31, 2004, a 47.5% decrease.  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 offset by net gains from the sale of available-for-sale securities of $698,000 for the six months ended March 31, 2005.  In addition, the Company recognized $990,000 as income on the settlement of a contingent obligation during the quarter ended March 31, 2005.  Total other income for the quarter and six months ended March 31, 2004 included a net loss of $659,000 and $122,000, respectively, on the sale of securities.

Other Expense:  The quarter ended March 31, 2005 produced total other expense of $13,964,000 compared to $11,482,000 for the same quarter one year ago, a 21.6% increase.  Total other expense for the six months ended March 31, 2005 was $25,943,000 compared to $22,642,000 for the six months ended March 31, 2004, a 14.6% increase.  The primary reasons for the increases were twofold; first, a bonus compensation accrual of $1,280,000 was recorded in the six month period ended March 31, 2005 due to increased earnings per share.  There was no bonus accrual for the six month period ended March 31, 2004.  Second, in the quarter ended March 31, 2005 the Company recorded a one-time expense of $1,225,000 related to the amortization of leasehold improvements that brings the Company into conformity with a recent clarification of the accounting standard for leases.  The Company now amortizes leasehold improvements over the shorter of the original lease term excluding option periods, or the expected useful life of the improvements.  Total other expense for the quarter and six months ended March 31, 2005 equaled .74% and .69%, respectively, of average assets, compared to .61% and .60%, respectively, for the same period one year ago.  The number of staff, including part-time employees on a full-time equivalent basis, was 756 at March 31, 2005 and 754 at March 31, 2004.

Taxes:  Income taxes increased $4,821,000 or 27.2% and $6,905,000 or 19.4% for the quarter and six months ended March 31, 2005 when compared to the same period one year ago due to a higher taxable income base.  In addition, the effective tax rate increased to 35.50% for the quarter and six months ended March 31, 2005 from 35.25% for the same periods one year ago.

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, 2004.  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 2004 Form 10-K.

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

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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 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, 2005.

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

Item 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 19, 2005.

Three nominees for reelection as Directors, Anna C. Johnson, Thomas F. Kenney and Charles R. Richmond, were reelected for three-year terms.  The votes cast for Anna C. Johnson were 71,692,687 shares.  The votes cast for Thomas F. Kenney were 71,741,074 shares.  The votes cast for Charles R. Richmond were 53,805,148 shares.

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The stockholders approved an amendment to the Company’s Restated Articles of Incorporation to increase the number of authorized shares of common stock from 100,000,000 to 300,000,000 with 51,137,529 shares cast for the proposal.

The stockholders ratified the appointment of Deloitte & Touche LLP as the Company’s independent registered public accountants for fiscal year 2005 with 72,424,239 shares cast for the proposal.

Item 5.           Other Information

Not applicable

Item 6.           Exhibits

(a)                                  Exhibits

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