FORM 10-K/A

OR

Commission File Number: 0-25454

Washington Federal, Inc.

Registrant’s telephone number, including area code: (206) 624-7930

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to section 12(g) of the Act:

Common Stock, $1.00 par value per share

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 o

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/A or any amendment to this Form 10-K/A.

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

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/A 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/A.

(2) Portions of the Registrant’s definitive proxy statement for its 2003 Annual Meeting of Stockholders are incorporated into Part III, Items 10-14 of this Form 10-K/A.

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Table of Contents

INTRODUCTORY NOTE

     The purpose of this Form 10-K/A (Amendment No. 1) is to restate the accompanying consolidated statements of financial condition of Washington Federal, Inc. (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. Subsequent to the issuance of the Company’s September 30, 2003 consolidated financial statements and the filing of its 2003 Annual Report on Form 10-K with the Securities and Exchange Commission, management determined that the accounting for certain components of its derivative instruments was incorrect. The Company has corrected its accounting with respect to the treatment of its derivatives. See Note A to the Company’s Consolidated Financial Statements for a description of the impact of this restatement.

     The Company’s correction of its accounting for certain derivatives effected the 12 quarter period beginning with the three months ended December 31, 2000, through the September 30, 2003 quarter. The accounting policy the Company previously used resulted in the understatement of net income in fiscal 2001 by $3.8 million, in fiscal 2002 by $4.4 million and an overstatement of net income in fiscal 2003 of $.5 million. The cumulative impact of the restatement is an increase in net income of approximately $7.7 million or 1.92% in the aggregate, when compared with the aggregate of previously reported net income for fiscal years 2001 through 2003.

     In addition, this restatement includes a reclassification the Company has made to the consolidated statements of financial condition to reclassify the fair value of the forward contracts (derivatives) from available for sale securities to other assets.

     This Amendment No. 1 on Form 10-K/A makes revisions to Item 1, Item 5, Item 6, Item 7, Item 8, Item 9A, Item 14 and Item 15.

     The principal effects of the restatement on the accompanying financial statements are presented in Note A to the Company’s consolidated financial statements. For purposes of this Form 10-K/A, and in accordance with Rule 12b-15 under the Securities and Exchange Act of 1934, as amended, the Company has amended and restated in its entirety each item of the Corporation’s Form 10-K for the year ended September 30, 2003, which has been affected by this restatement. This Form 10-K/A does not reflect events occurring after the filing of the original Form 10-K, or modify or update those disclosures in any way, except as required to reflect the effects of this restatement.

PART I

     In addition to historical information, this Annual Report on Form 10-K/A 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,

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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.

     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, other assets, 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 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

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Lending Activities

     General. The Association’s net portfolio of loans (including securitized assets subject to repurchase) totaled $4.8 billion at September 30, 2003, representing approximately 64% 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.

     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 portfolio, by loan type, as of September 30 for the years indicated.

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     The following table summarizes the scheduled contractual gross loan maturities for the Association’s total loan portfolio 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.

     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 seven 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 $856.2 million, or 16.5% of the Association’s gross loan portfolio, 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 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.

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     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, $3.9 billion, or 74% of the Association’s loan portfolio, was represented by medium- and long-term fixed-rate loans secured by single-family residences.

     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 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, with 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.

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     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, mortgage brokers, and refinancings 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. 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 as of September 30 for the years 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

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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.

     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 out-of-pocket costs, such as the appraisal fee, in reviewing the application, 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.

     Nonperforming Assets. When a borrower fails to make a required payment on a loan, the Association attempts to cure the deficiency 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 B to the Consolidated Financial Statements included in Item 8 hereof.

     Real estate acquired by foreclosure or deed-in-lieu thereof (“REO” or “Real Estate Owned”) 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 B 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 as of September 30 for the years indicated.

(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 nonperforming, 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 B 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.

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

(1) Represents the total amount of the loan category as a % of total loans outstanding.

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

     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 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. A portion of the allowance is then 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.

     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.

     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 interperiod 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 deducted in determining 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.

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     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.

     The following table sets forth the composition of the Association’s investment portfolio, excluding mutual fund investments, as of September 30 for the years indicated.

     The investment portfolio at September 30, 2003 was categorized by maturity as follows:

     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, with 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

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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. Borrowings may also be used on a longer-term basis to support expanded activities.

     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.

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.

     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.

     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.

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Other Ratios

     The following table sets forth certain ratios related to the Company for the periods indicated.

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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 old 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.

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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).