Market Overview

Washington Federal Announces Quarterly Earnings Per Share Of $0.57

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Washington Federal, Inc. (NASDAQ:WAFD) (the "Company"), parent company
of Washington Federal, National Association, today announced quarterly
earnings of $49,271,000 or $0.57 per diluted share for the quarter ended
March 31, 2018 compared to $42,070,000 or $0.47 per diluted share for
the quarter ended March 31, 2017, a $0.10 or 21% increase in fully
diluted earnings per share. Return on equity for the quarter ended
March 31, 2018 was 9.81% compared to 8.37% for the quarter ended
March 31, 2017. Return on assets for the quarter ended March 31, 2018
was 1.26% compared to 1.13% for the same quarter in the prior year.

President and Chief Executive Officer Brent J. Beardall commented, "We
are pleased with the continued strength of our core operations; net
interest margin for the quarter grew from 3.15% to 3.25% and other key
profitability measures improved markedly versus the same quarter last
year. We are investing heavily in our employees, our technology and our
compliance programs. As a result, expenses have increased and our
efficiency ratio now stands at 50.7%. Next quarter we are delivering a
new treasury management system to our commercial clients that enables
them to process transactions more securely and efficiently than ever
before. Our balance sheet strength and the robust western markets we
serve provide us with reasons to be optimistic about the future."

Total assets were $15.6 billion as of March 31, 2018 compared to $15.3
billion as of September 30, 2017. Asset growth since September 30, 2017
resulted primarily from a $341 million increase in net loans receivable
and a $70 million increase in held-to-maturity securities.

Customer deposits increased by $304 million or 2.8% since September 30,
2017 and totaled $11.1 billion as of March 31, 2018. Transaction
accounts increased by $102 million or 1.6% during that period, while
time deposits increased $202 million or 4.5%. The Company continues to
focus on growing transaction accounts to lessen sensitivity to rising
interest rates and reduce interest expense. As of March 31, 2018, 58.0%
of the Company's deposits were in transaction accounts. Core deposits,
defined as all transaction accounts and time deposits less than
$250,000, totaled 93.4% of deposits at March 31, 2018.

Borrowings from the Federal Home Loan Bank ("FHLB") totaled $2.3 billion
as of March 31, 2018 and $2.2 billion at September 30, 2017. The
weighted average rate for FHLB borrowings was 2.62% as of March 31, 2018
and 2.80% at September 30, 2017, the decline being due to the maturity
of some long-term FHLB advances.

Loan originations totaled $819 million for our second fiscal quarter
2018 compared to $944 million of originations in the same quarter one
year ago. Partially offsetting loan originations in each of these
quarters were loan repayments of $744 million and $711 million,
respectively. Commercial loans represented 64% of all loan originations
during our second fiscal quarter 2018 and consumer loans accounted for
the remaining 36%. The Company views organic loan growth as the highest
and best use of its capital and prefers commercial loans due to the fact
they generally have floating interest rates and shorter durations. The
weighted average interest rate on loans was 4.35% as of March 31, 2018,
an increase from 4.28% as of September 30, 2017.

Asset quality remained strong and the ratio of non-performing assets to
total assets improved to 0.45% as of March 31, 2018 compared to 0.53% at
March 31, 2017 and 0.46% at September 30, 2017. Since September 30,
2017, real estate owned decreased by $5 million, or 23%, and non-accrual
loans increased by $4 million, or 9%. Delinquent loans were 0.40% of
total loans at March 31, 2018 compared to 0.65% at March 31, 2017 and
0.40% at September 30, 2017. The allowance for loan losses and reserve
for unfunded commitments totaled $134 million as of March 31, 2018 and
was 1.07% of gross loans outstanding, as compared to $131 million or
1.07% of gross loans outstanding at September 30, 2017.

On February 23, 2018, the Company paid a regular cash dividend of $0.17
per share, which represented the 140th consecutive quarterly cash
dividend. During the quarter, the Company repurchased 1,673,436 shares
of common stock at a weighted average price of $34.66 per share and has
authorization to repurchase approximately 4,080,149 additional shares.
The Company varies the pace of share repurchases depending on several
factors, including share price, lending opportunities and capital
levels. Since September 30, 2017, tangible common stockholders' equity
per share increased by $0.20 or 1.0% to $19.78 and the ratio of tangible
common equity to tangible assets remained strong at 10.94% as of
March 31, 2018.

Net interest income was $117 million for the quarter, an increase of
$9.6 million or 8.9% from the same quarter in the prior year. The
increase in net interest income from the prior year was primarily due to
both higher balances and yield. Average earning assets increased by $759
million, or 5.5%. Net interest margin increased to 3.25% in the first
fiscal quarter of 2018 from 3.15% for the same quarter in the prior
year. The margin increase is primarily due to changes in the mix of
interest earning assets, higher yields on variable rate loans, cash and
investments, as well as a lower rate on FHLB advances due to the
maturity of some higher cost long-term advances.

The Company recorded a release of loan loss allowance of $950 thousand
in the second fiscal quarter of 2018 compared with a release of $1.6
million in the same quarter of 2017 as net recoveries in both quarters
were largely offset by strong growth in the loan portfolio. Net
recoveries were $1.4 million for the second fiscal quarter of 2018
compared to $5.2 million for the prior year's quarter.

Total other income was $12.6 million for the second fiscal quarter of
2018, an increase of $2.5 million from $10.1 million in the same quarter
of the prior year. The increase from the prior year was primarily due to
a $1.5 million increase in deposit fee income, which was driven by the
2017 launch of the Company's new "Green Checking" product. In March
2018, the Company reached a preliminary agreement with the FDIC to
terminate its loss share agreements. The preliminary agreement is
consistent with the estimates that had been recorded by the Company as
of December 31, 2017 and final settlement is expected to occur in the
third fiscal quarter of 2018. All future recoveries, gains, losses and
expenses related to the previously covered assets will now be recognized
entirely by the Company and the FDIC will no longer share in such gains
or losses.

Total operating expenses were $65.8 million in the second fiscal quarter
of 2018, an increase of $8.3 million or 14.5% from the prior year's
quarter. Compensation and benefits costs increased by $2.8 million
primarily due to headcount increases and cost of living adjustments
since last year. Information technology costs increased by $2.1 million
and other expenses increased by $3.4 million as both were elevated due
to ongoing initiatives to enhance the Company's overall technology
platform and its Bank Secrecy Act program. The Company's efficiency
ratio in the second fiscal quarter of 2018 was 50.7% compared to 48.8%
for the same period one year ago. The increase in the efficiency ratio
is due to the aforementioned elevated expenses. The efficiency ratio was
48.9% for the six months ended March 31, 2018.

On December 22, 2017, the Tax Cuts and Jobs Act was enacted and it
provides for significant changes to the U.S. Internal Revenue Code of
1986, as amended, such as a reduction in the federal corporate tax rate
from 35% to 21% effective from January 1, 2018 forward and changes or
limitations to certain tax deductions. The Company has a fiscal year end
of September 30, so the change to the corporate tax rate results in a
blended federal statutory tax rate for its fiscal year 2018. The
financial statements for the first fiscal quarter of 2018 were impacted
by discrete tax benefits of $3.7 million recognized related to the
revaluation of deferred tax assets and liabilities as well as tax
benefits related to stock based compensation. For the six months ended
March 31, 2018, the Company recorded federal and state income tax
expense of $24.5 million, which equates to a 19.5% effective tax rate.
The Company estimates that its annual effective tax rate for its full
fiscal 2018 (blended rate year) will be approximately 21-23%. This
compares to an effective tax rate of 32.3% for the fiscal year ended
September 30, 2017. Looking forward, the Company expects the effective
tax rate for fiscal 2019 to be approximately 20-22%.

Washington Federal, a national bank with headquarters in Seattle,
Washington, has 237 branches in eight western states. To find out more
about Washington Federal, please visit our website www.washingtonfederal.com.
Washington Federal uses its website to distribute financial and other
material information about the Company.

Non-GAAP Financial Measures

Adjusted pre-tax income of $134.0 million for the six months ended
March 31, 2018 is calculated by adding back the FDIC loss share
valuation adjustments of $8.6 million to pre-tax income of $125.4
million.

Adjusted other income of $27.9 million for the six months ended
March 31, 2018 is calculated by adding back the FDIC loss share
valuation adjustments of $8.6 million to other income of $19.4 million.

Adjusted efficiency ratio of 48.9% for the six months ended March 31,
2018 is calculated by dividing total operating expense of $127.7 million
by adjusted total income of $261.0 million (net interest income of
$233.0 million plus adjusted other income of $27.9 million).

Important Cautionary Statements

The foregoing information should be read in conjunction with the
financial statements, notes and other information contained in the
Company's 2017 Annual Report on Form 10-K, Quarterly Reports on Form
10-Q and Current Reports on Form 8-K.

This press release contains statements about the Company's future that
are not statements of historical fact. These statements are "forward
looking statements" for purposes of applicable securities laws, and are
based on current information and/or management's good faith belief as to
future events. The words "believe," "expect," "anticipate," "project,"
and similar expressions signify forward-looking statements.
Forward-looking statements should not be read as a guarantee of future
performance. By their nature, forward-looking statements involve
inherent risk and uncertainties, which change over time; and actual
performance, could differ materially from those anticipated by any
forward-looking statements. The Company undertakes no obligation to
update or revise any forward-looking statement.

Additional Information

In connection with the proposed transaction with Anchor Bancorp
("Anchor") pursuant to which Anchor will merge with and into the Company
(the "Merger"), the Company has filed a registration statement on Form
S-4 with the Securities and Exchange Commission (the "SEC") which
contains a proxy statement/prospectus to be distributed to the
shareholders of Anchor in connection with their vote on the Merger. Each
party will also file other documents regarding the proposed transaction
with the SEC. Before making any voting or investment decision regarding
the transaction, shareholders of Anchor are encouraged to read the
registration statement and any other relevant documents filed with the
SEC, including the proxy statement/prospectus that is part of the
registration statement, as well as any amendments or supplements to
these documents, when they become available, because they will contain
important information about the Merger. The final proxy
statement/prospectus will be mailed to shareholders of Anchor. Investors
and security holders will be able to obtain the documents free of charge
at the SEC's website, www.sec.gov.
In addition, documents filed with the SEC by the Company will be
available free of charge by accessing the Company's website at www.washingtonfederal.com
or by writing the Company at 425 Pike Street, Seattle, WA 98101,
Attention: Investor Relations or calling (206) 626-8178, or by writing
Anchor at 601 Woodland Square Loop SE, Lacey, WA 98503, Attention:
Corporate Secretary or calling (360) 537-1388.

Participants in the Transaction

The Company, Anchor, their directors, executive officers and certain
other persons may be deemed to be participants in the solicitation of
proxies from Anchor shareholders in favor of the approval of the Merger
with Anchor. Information about the directors and executive officers of
the Company and their ownership of Company stock is included in the
proxy statement for its 2018 annual meeting of shareholders, which was
filed with the SEC on December 7, 2017. Information about the directors
and executive officers of Anchor and their ownership of Anchor stock is
set forth in the proxy statement for its 2017 annual meeting of
shareholders, which was filed with the SEC on November 9, 2017, and also
will be included in the proxy statement/prospectus for the Merger.
Additional information regarding the interests of those participants and
other persons who may be deemed participants in the transaction may be
obtained by reading the registration statement and the proxy
statement/prospectus regarding the proposed Merger when it becomes
available. Free copies of this document may be obtained as described in
the preceding paragraph.

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(UNAUDITED)

 
  March 31, 2018   September 30, 2017
(In thousands, except share data)
ASSETS
Cash and cash equivalents $ 256,808 $ 313,070
Available-for-sale securities, at fair value 1,269,271 1,266,209
Held-to-maturity securities, at amortized cost 1,716,566 1,646,856
Loans receivable, net of allowance for loan losses of $127,576 and
$123,073
11,224,088 10,882,622
Interest receivable 43,931 41,643
Premises and equipment, net 265,388 263,694
Real estate owned 15,904 20,658
FHLB and FRB stock 126,990 122,990
Bank owned life insurance 213,274 211,330
Intangible assets, including goodwill of $301,368 and $293,153 312,303 298,682
Federal and state income tax assets, net 1,414
Other assets 187,193   185,826  
$ 15,633,130   $ 15,253,580  
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Customer accounts
Transaction deposit accounts $ 6,463,301 $ 6,361,158
Time deposit accounts 4,675,555   4,473,850  
11,138,856 10,835,008
FHLB advances 2,325,000 2,225,000
Advance payments by borrowers for taxes and insurance 41,285 56,631
Accrued expenses and other liabilities 139,316   131,253  
13,644,457 13,247,892
Stockholders' equity
Common stock, $1.00 par value, 300,000,000 shares authorized;
135,334,158 and 134,957,511 shares issued; 84,749,203 and 87,193,362
shares outstanding
135,334 134,958
Additional paid-in capital 1,664,275 1,660,885
Accumulated other comprehensive (loss) income, net of taxes 8,899 5,015
Treasury stock, at cost; 50,584,955 and 47,764,149 shares (935,039 ) (838,060 )
Retained earnings 1,115,204   1,042,890  
1,988,673   2,005,688  
$ 15,633,130   $ 15,253,580  
CONSOLIDATED FINANCIAL HIGHLIGHTS
Common stockholders' equity per share $ 23.47 $ 23.00
Tangible common stockholders' equity per share 19.78 19.58
Stockholders' equity to total assets 12.72 % 13.15 %
Tangible common stockholders' equity to tangible assets 10.94 % 11.41 %
 
Weighted average rates at period end
Loans and mortgage-backed securities 4.06 % 3.96 %
Combined loans, mortgage-backed securities and investments 3.94 3.82
Customer accounts 0.65 0.54
Borrowings 2.62 2.80
Combined cost of customer accounts and borrowings 0.99 0.92
Net interest spread 2.95 2.90
 
WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 
  Three Months Ended March 31,   Six Months Ended March 31,
2018   2017 2018   2017
(In thousands, except share data) (In thousands, except share data)
INTEREST INCOME
Loans receivable $ 126,529 $ 116,034 $ 251,040 $ 230,869
Mortgage-backed securities 17,667 16,226 34,566 29,015
Investment securities and cash equivalents 4,883   3,938   9,253   9,078  
149,079 136,198 294,859 268,962
INTEREST EXPENSE
Customer accounts 16,414 12,392 31,052 25,409
FHLB advances and other borrowings 15,364   16,079   30,771   32,674  
31,778 28,471 61,823 58,083
Net interest income 117,301 107,727 233,036 210,879
Provision (release) for loan losses (950 ) (1,600 ) (950 ) (1,600 )
Net interest income after provision (release) for loan losses 118,251 109,327 233,986 212,479
 
OTHER INCOME
Gain on sale of investment securities 968
FDIC loss share valuation adjustments (8,550 )
Loan fee income 780 1,087 1,815 2,421
Deposit fee income 6,403 4,904 13,089 10,089
Other Income 5,404   4,145   13,028   8,554  
12,587 10,136 19,382 22,032
OTHER EXPENSE
Compensation and benefits 31,625 28,833 61,244 55,827
Occupancy 9,013 9,091 17,684 17,541
FDIC insurance premiums 2,852 2,910 5,672 5,749
Product delivery 3,665 3,489 7,621 6,850
Information technology 8,781 6,686 16,710 13,137
Other 9,851   6,458   18,797   12,704  
65,787 57,467 127,728 111,808
Gain (loss) on real estate owned, net (278 ) 795   (232 ) 1,193  
Income before income taxes 64,773 62,791 125,408 123,896
Income tax provision 15,502   20,721   24,467   40,580  
NET INCOME $ 49,271   $ 42,070   $ 100,941   $ 83,316  
 
PER SHARE DATA
Basic earnings per share $ 0.58 $ 0.47 $ 1.17 $ 0.93
Diluted earnings per share 0.57 0.47 1.17 0.93
Cash dividends per share 0.17 0.40 0.32 0.54
Basic weighted average shares outstanding 85,647,494 89,382,416 86,299,885 89,346,294
Diluted weighted average shares outstanding 85,747,167 89,736,320 86,422,077 89,732,042
 
PERFORMANCE RATIOS
Return on average assets 1.26 % 1.13 % 1.31 % 1.12 %
Return on average common equity 9.81 8.37 10.03 8.34
Net interest margin 3.25 3.15 3.26 3.08
Efficiency ratio (a) 50.65 48.76 48.94 48.00
(a) Efficiency ratio for the six months ended March 31, 2018
excludes the impact of $8.55 million reduction to other income
related to FDIC loss share valuation adjustments.

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