SEATTLE, WA -- (Marketwire) -- 01/19/09 -- Washington Federal, Inc. (NASDAQ: WFSL), parent company of Washington Federal Savings, today announced earnings of $20,169,000 or $.23 per diluted share for the quarter ended December 31, 2008, compared to $33,048,000 or $.38 per diluted share for the same period one year ago. Earnings decreased by $12,879,000 or 39% primarily as a result of higher credit costs. Actual results were consistent with earnings guidance released by the Company on December 29, 2008.

Chairman, President and Chief Executive Officer Roy M. Whitehead commented, "In light of overall economic and industry conditions, we are satisfied with the quarterly results and want investors to know that the Company continues to be strong and well capitalized. It should be noted though that near-term earnings, including last quarter, are being adversely impacted by large writedowns in the land and construction loan portfolio. General economic conditions and substantially lower demand for housing has caused values in many markets to drop considerably. Investors are cautioned to expect more charges of a similar or larger magnitude in future quarters."

Non-performing assets amounted to $305 million or 2.44% of total assets at quarter-end. This is an increase of $141 million from September 30, 2008, and is concentrated in our portfolio of land and speculative construction loans. The gross amount of loans outstanding in these two portfolios totaled $1,091 million as of December 31, 2008, a decrease of $73 million or 6% from September 30, 2008. In response to the deteriorating credit conditions of its loan portfolio, the Company increased its provision for loan loss expense from $1 million for the quarter ended December 31, 2007 to $35 million for the quarter ended December 31, 2008. As of quarter end the allowance for loan losses totaled $105 million.

Total assets increased by $725 million or 6% to $12,521,883,000 from $11,796,425,000 at September 30, 2008. Specifically, investment securities increased by $502 million or 31% during the quarter, as the Company purchased agency mortgage backed securities in anticipation of a potential increase in refinance activity. As of December 31, 2008, the Company's investment portfolio had net unrealized gains of $59 million, an increase of $56 million from September 30, 2008.

Net interest income for the current quarter increased by 38% or $25 million from the quarter ended December 31, 2007. This increase is the result of the significant growth in earning assets as well as increased net interest spread as deposit rates have fallen. The Company's period end spread increased to 2.91% as of December 31, 2008, compared to 2.04% one year ago.

The Company's efficiency ratio of 25.8% for the quarter remains among the lowest in the industry. The quarter produced a return on assets of .66%, while return on equity amounted to 5.97%. These ratios represent historical lows for the Company and are reflective of the effects of the significant declines in real estate values throughout the western United States.

On January 16, 2009, Washington Federal paid a cash dividend of $.05 per share to common stockholders of record on January 2, 2009. This was the Company's 104th consecutive quarterly cash dividend.

On November 14, 2008, Washington Federal entered into a Letter Agreement, with the United States Department of the Treasury pursuant to which the Company issued and sold to the Treasury (i) 200,000 shares of the Company's Fixed Rate Cumulative Perpetual Preferred Stock, and (ii) a warrant to purchase 1,707,456 shares of the Company's common stock, par value $1.00 per share, for an aggregate purchase price for both the preferred stock and warrants of $200 million in cash ("TARP funds"). The Preferred Stock qualifies as Tier 1 capital and will pay cumulative dividends at a rate of 5% per annum for the first five years, and 9% per annum thereafter.

In response to questions from the public about how the TARP funds are being deployed, we wish to report that the proceeds were initially invested in mortgage-backed securities to offset the cost of the funding. During the quarter the Company then originated $503 million in new loans, despite limited demand as households and businesses strive to deleverage by paying down debt and increasing capital and liquidity. When the economy improves and confidence returns to the market, lending opportunities will increase, enabling the Company to more fully and safely leverage its capital base, including TARP funds. The Company does not intend to use the TARP funds in ways that will materially increase its risk profile, such as lending imprudently. The Company's first priority is to make certain that the TARP funds can be repaid to taxpayers, along with interest, as soon as the financial crisis subsides.

Mr. Whitehead commented further, "As we have done throughout our history, the Company is working closely with troubled borrowers to avoid foreclosure whenever possible and warranted. Recently, we established a Mortgage Resource Center staffed by seasoned mortgage professionals to handle all requests for mortgage relief and to bring consistency and fairness to the process. Our experience to date is that approximately one-third of the requests result in some form of relief being clearly warranted, one-third are clearly unwarranted requests, some designed to take advantage of current conditions and one third fall somewhere in between.