SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549


                                   FORM 10-KSB

[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
         EXCHANGE ACT OF 1934 [FEE REQUIRED]

         For the Fiscal Year Ended June 30, 1997

                                       OR

[  ]     TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  
         SECURITIES  EXCHANGE  ACT OF 1934 [NO FEE REQUIRED]

         For the transition period from ________________ to ___________________

         Commission File Number 0-25076

                               WASHINGTON BANCORP
              (Exact Name of Small Business Issuer in its Charter)

             Iowa                                          42-1446740
-------------------------------                ---------------------------------
(State or Other Jurisdiction of                (IRS Employer Identification No.)
Incorporation or Organization)

           102 East Main Street
             Washington, Iowa                                52353
----------------------------------------                    --------
(Address of Principal Executive Offices)                    Zip Code

         Issuer's telephone number, including area code: (319) 653-7256

         Securities Registered under Section 12(b) of the Exchange Act:

                                      None

         Securities Registered under Section 12(g) of the Exchange Act:

                     Common Stock, par value $.01 per share
                                (Title of Class)

Check  whether the Issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such requirements for the past 90 days. YES X . NO ___.

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure  will 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-KSB or any
amendment to this Form 10-KSB. [X]

The Issuer had $5,221,000 in revenues for the fiscal year ended June 30, 1997.

As of September 8, 1997, there were issued and outstanding 651,133 shares of the
Issuer's  Common Stock.  The aggregate  market value of the voting stock held by
non-affiliates of the Issuer, computed by reference to the last known sale price
of such stock as of September 8, 1997,  was $11.2  million.  (The exclusion from
such amount of the market  value of the shares  owned by any person shall not be
deemed an  admission  by the  Issuer  that such  person is an  affiliate  of the
Issuer.)

                       DOCUMENTS INCORPORATED BY REFERENCE

Part II of Form  10-KSB -  Portions  of Annual  Report to  Stockholders  for the
Fiscal Year Ended June 30, 1997. Part III of Form 10-KSB - Portions of the Proxy
Statement for the 1997 Annual Meeting of Shareholders.

<PAGE>


                                     PART I

Item 1.  Description of Business

Forward-Looking Statements

When used in this Form 10-K or future filings by the Company with the Securities
and Exchange  Commission,  in the  Company's  press  releases or other public or
shareholder  communications,  or in oral statements made with the approval of an
authorized  executive  officer,  the words or phrases "will likely result," "are
expected  to,"  "will  continue,"  "is  anticipated,"   "estimate,"   "project,"
"believe"  or similar  expressions  are  intended to  identify  "forward-looking
statements" within the meaning of the Private  Securities  Litigation Reform Act
of 1995.  The Company  wishes to caution  readers not to place undue reliance on
any such forward-looking  statements,  which speak only as of the date made, and
to advise readers that various factors, including regional and national economic
conditions,  changes in levels of market interest rates, credit risks of lending
activities,  and competitive and regulatory factors,  could affect the Company's
financial  performance  and could cause the Company's  actual results for future
periods to differ materially from those anticipated or projected.

The Company does not undertake,  and specifically disclaims any obligations,  to
revise any  forward-looking  statements to reflect the occurrence of anticipated
or unanticipated events or circumstances after the date of such statements.

General

Washington Bancorp  ("Washington" or the "Company") is an Iowa corporation which
was organized in October 1995 by Washington  Federal  Savings Bank  ("Washington
Federal" or the  "Bank") for the purpose of becoming a savings and loan  holding
company.  Washington Federal is a federally chartered savings bank headquartered
in  Washington,  Iowa.  Originally  chartered in 1934,  the Bank  converted to a
federal  savings bank in 1994. Its deposits are insured up to applicable  limits
by the Federal Deposit Insurance Corporation ("FDIC").

In March 1996, the Bank converted to the stock form of organization  through the
sale and issuance of its common stock to the Company. The principal asset of the
Company is the outstanding stock of the Bank, its wholly owned  subsidiary.  The
Company  presently has no separate  operation  and its business  consists of the
business of the Bank. All references to the Company, unless otherwise indicated,
at or before March 11, 1996 refer to the Bank.

Washington  attracts  deposits from the general  public in its local market area
and uses such deposits  primarily to invest in one- to  four-family  residential
loans secured by owner occupied  properties and non-residential  properties,  as
well as construction loans on such properties.  Washington also makes commercial
loans,  consumer loans,  automobile loans, and has occasionally been a purchaser
of fixed-rate mortgage-backed securities.

In  anticipation  of  possible  federal  legislation  that  may  inhibit  future
branching  opportunities  for savings  associations,  Washington  Federal  filed
applications with the Office of Thrift  Supervision  ("OTS") on October 20, 1995
for three  branch  offices.  These  applications  were  approved  but have since
expired.  The purpose of these applications was to possibly preserve  Washington
Federal's  branching  opportunities.  If future  applications are submitted,  no
assurance can be given that such  applications  will satisfy the legislation nor
that Washington Federal will open any branch offices.

As of June 24, 1997, the Company entered into a definitive  agreement to acquire
Rubio  Savings  Bank of  Brighton  ("Rubio")  pursuant  to a merger in which the
Company will pay Rubio  stockholders  a total of  approximately  $4.6 million in
cash (the "Rubio Merger").  Rubio is  headquartered in Brighton,  Iowa and as of
June  30,  1997  had  assets  of  approximately   $21.3  million,   deposits  of
approximately  $17.9  million and  stockholder's  equity of  approximately  $3.2
million.  The Rubio  Merger will be accounted  for as a purchase,  is subject to
regulatory  and  stockholder  approval and is expected to close by calendar year
end.

At June 30,  1997,  the  Company  had  assets of  approximately  $65.9  million,
deposits  of   approximately   $44.8   million  and   stockholders'   equity  of
approximately $10.7 million.

The  executive  office  of the  Company  is  located  at 102 East  Main  Street,
Washington, Iowa 52353, telephone (319) 653-7256.
<PAGE>

Lending Activities

General.  Washington's loan portfolio  predominantly  consists of mortgage loans
secured by one- to four-family residences. Washington also makes home equity and
second   mortgage  loans,   multi-family   and  commercial  real  estate  loans,
construction loans, commercial business loans and consumer loans.

At June 30, 1997,  Washington's net loan portfolio totalled $52.5 million. Loans
secured by first  mortgages on one- to  four-family  residences  totalled  $40.7
million,  or 77% of  Washington's  loan  portfolio at June 30, 1997,  before net
items.  Washington originates and retains substantially all of its mortgage loan
portfolio,  and currently originates only a limited number of mortgage loans for
sale to the secondary market.

Loan  Approval  Authority.  Loans for the purchase of real estate,  construction
loans,  first mortgage  refinances,  second  mortgages,  or commercial  loans to
existing customers for more than $100,000,  secured consumer loans for more than
$30,000,  unsecured consumer loans for more than $20,000 and commercial loans to
new customers for more than $40,000 require loan committee  approval.  All other
loans  require the  approval of two loan  officers.  The Board of  Directors  is
provided a listing of all loans granted on a monthly basis for ratification.

Loans to One  Borrower.  Savings  banks are  subject to the same limits as those
applicable to national banks, which under current regulations limit loans-to-one
borrower to an amount equal to 15% of unimpaired  capital and retained income on
an unsecured basis and an additional  amount equal to 10% of unimpaired  capital
and  retained  income if the loan is secured by  readily  marketable  collateral
(generally  financial  instruments,  not real estate) or $500,000,  whichever is
higher.  Washington's  maximum loan-to-one borrower limit was approximately $2.1
million as of June 30, 1997.  Washington's  largest  amount  outstanding  to one
borrower  or  group  of  related  borrowers  was a group  of  loans  secured  by
commercial real estate and equipment in the aggregate amount of $552,000. All of
the loans to this borrower have  performed in accordance  with their terms since
their origination. In addition to regulatory limitations, Washington has adopted
an internal maximum loan-to-one-borrower limit of $750,000.

Loan Portfolio Composition. The following information sets forth the composition
of Washington's loan portfolio in dollar amounts and in percentages at the dates
indicated.  All of the loans in the table have fixed interest rates,  except for
the  commercial   business  loans  which  have  adjustable  rates,  and  certain
adjustable rate one- to four-family real estate loans offered beginning in March
1996.  The amount of  adjustable  rate one- to  four-family  loans totaled $16.1
million at June 30, 1997.
<TABLE>
                                                                                   At June 30,
                                            ----------------------------------------------------------------------------------------
                                                  1997             1996              1995               1994             1993
                                            ----------------------------------------------------------------------------------------
                                            Amount   Percent  Amount   Percent  Amount   Percent   Amount   Percent  Amount  Percent
                                            ----------------------------------------------------------------------------------------
                                                                         (Dollars in Thousands)
<S>                                         <C>      <C>       <C>     <C>      <C>      <C>       <C>      <C>      <C>     <C>
Real Estate Loans

One- to four-family .....................   $40,696   77.14%  $33,914   78.66%  $33,328   82.01%   $30,496   80.97%  $28,895  86.41%
Home equity and second mortgage .........     1,233    2.34     1,569    3.64     1,669    4.11        956    2.54       786   2.35
Multi-family and commercial real estate .     4,775    9.05     2,896    6.72     1,741    4.28      1,825    4.85       330   0.99
Other ...................................        99    0.19       115    0.27       472    1.16        299    0.79       753   2.25
                                            ---------------------------------------------------------------------------------------
     Total mortgages ....................    46,803   88.72    38,494   89.29    37,210   91.56     33,576   89.15    30,764  92.00
Construction loans ......................       694    1.32     1,119    2.60       589    1.45        438    1.16       209   0.63
                                            ---------------------------------------------------------------------------------------
     Total real estate loans ............    47,497   90.03    39,613   91.89    37,799   93.01     34,014   90.31    30,973  92.63
                                            ---------------------------------------------------------------------------------------

Commercial Business Loans ...............     2,715    5.15     1,546    3.59     1,084    2.67      1,780    4.73       219   0.65
                                            ---------------------------------------------------------------------------------------

Consumer Loans 
  Automobile ............................     1,899    3.60      1,134   2.62       785    1.93        685    1.82       793   2.37
  Deposit account .......................       645    1.22        822   1.90       970    2.39      1,185    3.14     1,456   4.35
                                            ---------------------------------------------------------------------------------------
     Total consumer loans ...............     2,544    4.82      1,956   4.52     1,755    4.32      1,870    4.96     2,249   6.72
                                            ---------------------------------------------------------------------------------------
Total Loans .............................    52,756  100.00%    43,115 100.00%   40,638  100.00%    37,664  100.00%   33,441 100.00%
                                                     =======           =======           =======            =======          =======

Less
Allowance for loan losses ...............       226               209               203                203               202
                                            -------           -------           -------            -------           -------  
     Total loans receivable, net ........   $52,530           $42,906           $40,435            $37,461           $33,239
                                            =======           =======           =======            =======           =======       
</TABLE>
<PAGE>

There are no foreign loans outstanding for any of the years presented.

Loan Maturities. The following schedule illustrates the contractual maturity and
weighted  average rates of Washington's  loan portfolio at June 30, 1997.  Loans
which have  adjustable or  renegotiable  interest rates are shown as maturing in
the period  during which the contract is due. The schedule  does not reflect the
effects of possible prepayments or enforcement of due-on-sale clauses.
<TABLE>

                                  Real Estate
                   ----------------------------------------
                         Mortgage          Construction       Commercial Business        Consumer                  Total
                   -------------------  -------------------   -------------------    -------------------    -------------------
                              Weighted             Weighted              Weighted               Weighted               Weighted
                              Average              Average               Average                Average                Average
                    Amount     Rate      Amount      Rate      Amount      Rate       Amount      Rate       Amount      Rate
                   -------   ---------  -------    --------    -------   --------    -------   ----------   -------    ---------
                                                                  (In Thousands)
<S>                <C>       <C>        <C>        <C>         <C>       <C>         <C>       <C>          <C>        <C>   
    Due during
  period ending
    June 30,
-----------------

1998 ...........   $ 7,617     8.49%    $   694      8.50%     $   973       9.47%   $   706      9.56%     $ 9,990       8.66%
                                                                                                               
1999 ...........    10,370     8.63          --        --          100       8.02        394     11.28       10,864       8.72
                                                                                                          
2000 ...........     8,378     8.53          --        --          585       9.07        534     11.22        9,497       8.71
                                                                                                        
2001 and 2002 ..     2,644     8.40          --        --          698       7.98        884      9.77        4,226       8.62
                                                                                                          
2003 to 2007 ...     2,035     8.07          --        --          211       9.96         20     10.42        2,266       8.27
                                                                                                            
2008 to 2012 ...     2,651     8.08          --        --           --                     6      9.26        2,657       8.08     

2013 and
thereafter .....    13,108     8.08          --        --          148       9.50         --        --       13,256       8.10
                  --------              -------              ---------               -------             ----------
                  $ 46,803              $   694              $   2,715               $ 2,544             $   52,756
                  ========              =======              =========               =======             ==========
</TABLE>

As of June 30,  1997,  the total  amount of loans due after June 30,  1998 which
have predetermined  interest rates was $24.7 million,  while the total amount of
loans due after such date which have floating or adjustable  interest  rates was
$18.1 million.

Loan  Originations,  Purchases  and Sales.  Real estate loans are  originated by
Washington's  staff of salaried  loan  officers  who receive  applications  from
existing customers, walk-in customers from the local community, advertising, and
referrals from realtors and contractors.

While the Company  originates both  adjustable-rate  and fixed-rate  loans,  its
ability to originate  loans is dependent upon the relative  customer  demand for
loans in its market. Demand is affected by the interest rate environment.

The Company  originates  loans for its own  portfolio  and  originates a limited
number of loans for sale on the secondary market.  Washington Federal originated
no loans for the secondary market during fiscal 1997.

In periods of rising  interest rates,  the Company's  ability to originate large
dollar volumes of real estate loans may be substantially  reduced or restricted,
with a resultant decrease in related fee income and operating earnings.
<PAGE>

The following  table shows the loan  origination,  purchase,  sale and repayment
activities of Washington Federal for the periods indicated.

                                                    Year Ended June 30,
                                           -------------------------------------
                                             1997          1996           1995
                                           --------      --------      ---------
                                                      (In Thousands)
Originations by type:
Real estate
One- to four-family ..................     $ 14,265      $  9,915      $  6,988
Home equity and second mortgage ......          751         1,098           182
Multi-family and commercial 
   real estate .......................        5,438           484            --
Construction .........................        1,319         1,647           449
Other ................................           --            --           255
Non real estate
Commercial business ..................        3,666         1,551         1,406
Consumer .............................        2,811         2,198         1,822
     Total loans originated ..........       28,250        16,893        11,102

Purchases ............................           --            --            --
Loans sold to secondary market .......           --          (208)           --
Principal (repayments) ...............      (18,609)      (14,208)       (8,128)

Decrease (increase) in allowance 
 for loan losses .....................          (17)           (6)           --
                                           --------      --------      --------
Net increase (decrease) ..............     $  9,624      $  2,471      $  2,974
                                           ========      ========      ========

One- to Four-Family  Residential Mortgage Lending.  Washington's primary lending
activity  consists of the  origination of residential  mortgage loans secured by
property  located in  Washington's  market area of Washington  County,  Iowa and
adjoining  counties.  Washington  will not  normally  originate  any loan  which
exceeds  90% of the  lesser  of the  appraised  value  or  selling  price of the
mortgaged property.

Prior to March 1996, Washington primarily originated three year balloon mortgage
loans with an  amortization  up to 30 years.  Since March 1996,  Washington  has
primarily originated adjustable rate mortgages for terms of up to 30 years, with
interest rates that primarily  adjust annually after an initial three year term.
Interest  rates  charged on mortgage  loans are  competitively  priced  based on
market conditions and Washington's cost of funds.  Washington generally does not
charge origination fees for loans.  Washington  originates its loans for its own
portfolio  and  originates a limited  number of loans for sale to the  secondary
market. Accordingly, Washington's portfolio lending may not conform to secondary
market  guidelines,  such  as  FHLMC,  primarily  as  it  relates  to  appraisal
requirements.  It is the  current  policy of  Washington  to remain  primarily a
portfolio lender.

Loan originations are generally obtained from existing customers, members of the
local community, advertising, and referrals from realtors and contractors within
Washington's  market area.  Mortgage loans  originated and held by Washington in
its portfolio  generally include  due-on-sale  clauses which provide  Washington
with the contractual  right to deem the loan  immediately due and payable in the
event that the borrower transfers ownership of the property without Washington's
consent.

Washington also has a limited amount of non-owner-occupied permanent residential
one-  to  four-family   mortgage  loans  in  its  portfolio.   These  loans  are
underwritten  using  generally  the same  criteria as  owner-occupied  permanent
residential one- to four-family  mortgage loans,  except that an origination fee
is generally charged.

Home Equity and Second Mortgage Lending.  Washington  originates home equity and
second  mortgage  improvement  loans.  Home  equity and second  mortgage  loans,
together with loans secured by all prior liens, are generally  limited to 90% or
less of the appraised value. Generally,  such loans have a maximum term of up to
three years with an  amortization  of up to 15 years.  As of June 30, 1997, home
equity and second mortgage loans amounted to $1,232,736 which  represented 2.34%
of Washington's total loan portfolio, before net items.
<PAGE>

Multi-Family   and  Commercial  Real  Estate  Loans.   Washington   Federal  has
historically  engaged in a limited amount of  multi-family  and commercial  real
estate  lending.  Generally  such loans adjust to prime  annually with a term of
three years and an  amortization of up to thirty years,  and have  loan-to-value
ratios of up to 80%. At June 30, 1997, $4,775,000 or 9.05% of Washington's total
loan  portfolio,  before  net items,  consisted  of loans  secured  by  existing
multi-family  residential  real estate and  commercial  real  estate,  including
primarily a  professional  building,  grocery  store,  a  condominium  and a hog
confinement  facility.  All of  Washington's  multi-family  and commercial  real
estate loans are secured by properties  located in its market area.  The average
outstanding  balance  of  multi-family  and  commercial  real  estate  loans was
$3,579,000  during the year ended June 30, 1997,  and the largest as of June 30,
1997 was $280,000, secured by farm land and buildings. The loan has performed in
accordance with its terms since origination.

Multi-family  residential  and  commercial  real  estate  lending  is  generally
considered to involve a higher degree of risk than permanent residential one- to
four-family  lending.  Such  lending  typically  involves  large  loan  balances
concentrated in a single borrower or groups of related  borrowers.  In addition,
the  payment  experience  on loans  secured by income  producing  properties  is
typically  dependent  on the  successful  operation  of the related  real estate
project and thus may be subject to a greater extent to adverse conditions in the
real estate market or in the economy generally. Washington generally attempts to
mitigate the risks associated with multi-family  residential and commercial real
estate  lending by, among other  things,  lending on  collateral  located in its
market area and generally to individuals who reside in its market.

Washington requires  appraisals on all properties  securing  non-residential and
multi-family  residential  real estate loans.  Such  appraisals are completed by
Washington's  staff.  If these loans  exceed  $250,000 a certified  appraisal is
completed  by a  fee  appraiser  not  employed  by  Washington.  In  originating
multi-family  residential  and  non-residential  real estate  loans,  Washington
considers  the quality of the property,  the credit of the  borrower,  cash flow
projections, location of real estate and the quality of management involved with
the property.

Construction Loans. Washington makes construction loans primarily to individuals
for the construction of single-family residences. At June 30, 1997, construction
loans amounted to $694,000, or 1.32% of Washington's total loan portfolio, after
net items.  Construction  loan rates are fixed at prime during the  construction
period.  The terms of these  loans are  generally  six months  with an option to
renew for an additional six months,  at which time the loans are due. During the
construction  period,  only  interest  payments  are due,  and on a case by case
basis,  the Company may allow the payment of interest  from loan  proceeds.  The
Washington construction loan agreements generally provide that loan proceeds are
disbursed in  increments as  construction  progresses.  Washington  periodically
reviews the progress of the underlying construction project.  Construction loans
are  underwritten  pursuant to the same general  guidelines used for originating
permanent one- to four-family loans.  Construction  lending is generally limited
to Washington's market area.

Construction  lending is  generally  considered  to  involve a higher  degree of
credit risk than long- term  financing of residential  properties.  Washington's
risk of loss on a  construction  loan is dependent  largely upon the accuracy of
the initial  estimate of the property's  value at completion of construction and
the estimated cost of construction. If the estimate of construction cost and the
marketability  of the  property  upon  completion  of the  project  prove  to be
inaccurate,  Washington may be compelled to advance additional funds to complete
the construction. Furthermore, if the estimate of value proves to be inaccurate,
Washington  may be confronted,  at or prior to the maturity of the loan,  with a
property with a value that is  insufficient  to assure full  repayment.  For the
small number of  speculative  loans  originated to builders,  the ability of the
builder to sell  completed  dwelling units will depend,  among other things,  on
demand,  pricing  and  availability  of  comparable  properties,   and  economic
conditions.  As of June 30, 1997, the Company had $121,700 in speculative  loans
to builders.

Commercial  Business  Lending.  At June  30,  1997,  $2,715,000  or 5.15% of the
Company's total loans were comprised of commercial business loans. The Company's
current  commercial  business  lending  portfolio  is  predominantly  secured by
accounts receivable,  inventory,  and equipment. The largest commercial business
loan was $354,000 at June 30, 1997 and was secured by machinery and equipment.

Unlike residential  mortgage loans, which generally are made on the basis of the
borrower's ability to make repayment from his or her employment and other income
and which are  secured  by real  property,  the value of which  tends to be more
easily ascertainable,  commercial business loans typically are made on the basis
of the borrower's ability to make repayment from the cash flow of the borrower's
business. As a result, the availability of funds for the repayment of commercial
business  loans may be  substantially  dependent  on the success of the business
itself  (which,  in turn,  is likely to be dependent  upon the general  economic
environment).  The Company's  commercial  business loans are sometimes,  but not
always,  secured by business assets.  However, the collateral securing the loans
may  depreciate  over time,  may be difficult  to appraise and may  fluctuate in
value based on the success of the business.
<PAGE>

Consumer  Lending.  Washington  offers a variety of  consumer  loans,  including
automobile loans and loans secured by deposits.  Washington currently originates
substantially  all of its  consumer  loans in its market area  generally  to its
existing  customers.  At June 30, 1997,  Washington's  consumer  loan  portfolio
totalled $2,544,000 or 4.82% of its total loan portfolio, before net items.

A component of  Washington's  consumer  loan  portfolio  consists of  automobile
loans.  Washington  originates new and used automobile  loans on a direct basis,
where the Company extends credit directly to the borrower. These loans generally
have  terms that do not  exceed  five years and carry a fixed rate of  interest.
Generally,  loans on new  vehicles  are made in amounts up to 90% of dealer cost
and loans on used  vehicles  are made in amounts up to 90% of purchase  price or
its  published  value,  whichever  is  less.  At  June  30,  1997,  Washington's
automobile  loans  totalled  $1,899,000  or 3.60%  of  Washington's  total  loan
portfolio, before net items.

Consumer loan terms vary according to the type and value of  collateral,  length
of contract and  creditworthiness  of the borrower.  The underwriting  standards
employed  by  Washington   for  consumer   loans  include  an   application,   a
determination  of  the  applicant's  payment  history  on  other  debts  and  an
assessment of ability to meet existing  obligations and payments on the proposed
loan. Although creditworthiness of the applicant is a primary consideration, the
underwriting process also includes a comparison of the value of the security, if
any, in relation to the proposed loan amount.

Consumer  loans may entail  greater  credit  risk than do  residential  mortgage
loans,  particularly  in the case of consumer  loans which are  unsecured or are
secured  by  rapidly  depreciable  assets,  such as  automobiles.  Further,  any
repossessed collateral for a defaulted consumer loan may not provide an adequate
source of repayment of the  outstanding  loan balance as a result of the greater
likelihood  of  damage,  loss  or  depreciation.   In  addition,  consumer  loan
collections are dependent on the borrower's continuing financial stability,  and
thus  are  more  likely  to  be  affected  by  adverse  personal  circumstances.
Furthermore,  the  application  of various  federal  and state  laws,  including
bankruptcy and  insolvency  laws, may limit the amount which can be recovered on
such  loans.  At June 30,  1997,  $14,000 of  Washington's  consumer  loans were
non-performing.  See "- Non-Performing  Assets and Classified Assets." There can
be no assurances, however, that delinquencies will not increase in the future.

Asset Quality Loan  Delinquencies.  Washington's  collection  procedures provide
that when a mortgage  loan is 15 days past due, a notice of  nonpayment is sent.
If payment is still delinquent after 30 days, the customer will receive a letter
and/or  telephone call from a representative  of Washington.  If the delinquency
continues  to 90 days,  similar  subsequent  efforts are made to  eliminate  the
delinquency.  If the loan  continues in a  delinquent  status for 90 days and no
repayment plan is in effect,  a notice of right to cure default is mailed to the
customer  giving  30  additional  days  to  bring  the  account  current  before
foreclosure is commenced.  The loan committee  meets regularly to determine when
foreclosure  proceedings  should be initiated  and the customer is notified when
foreclosure has been commenced.

The following  table sets forth the  Company's  loan  delinquencies  by type, by
amount and by  percentage  of category at June 30, 1997.  The amounts  presented
represent the total remaining  principal  balances of the elapsed loans,  rather
than the actual payment amounts which are overdue.
<TABLE>
                                                         Loans Delinquent at June 30, 1997 for:
                            -------------------------------------------------------------------------------------------------
                                30-59 Days               60-89 Days              90 Days & Over                 Total
                            ---------------------   -----------------------  ------------------------   ----------------------
                            No.   Amt.    Percent    No.    Amt.    Percent   No.    Amt.     Percent   No.    Amt.    Percent
                            ---  ------   -------   ----    -----   -------   ---   -------   -------   ---   ------   -------
<S>                         <C>  <C>      <C>       <C>     <C>     <C>       <C>   <C>       <C>       <C>   <C>      <C>     
Real Estate:
  Mortgage Loans .........   33  $1,061    94.99%     6      $154    99.35%     6   $   215    93.89%    45   $1,430    95.27%

Consumer .................   10      56     5.01      1         1     0.65      6        14     6.11     17       71     4.73
                            --------------------------------------------------------------------------------------------------
Total ....................   43  $1,117   100.00%     7      $155   100.00%    12   $   229   100.00%    62   $1,501   100.00%
                            ==================================================================================================
</TABLE>
<PAGE>

Non-Performing  Assets.  The following  table sets forth  information  regarding
accruing loans  delinquent  more than 90 days and foreclosed  assets.  Loans are
reviewed on a monthly  basis and are generally  placed on a  non-accrual  status
when the loan  becomes  more than 90 days  delinquent  and,  in the  opinion  of
management, the collection of additional interest is doubtful.  Interest accrued
and unpaid at the time a loan is placed on non-accrual status is charged against
interest  income.  Subsequent  payments,  if  any,  are  either  applied  to the
outstanding  principal balance or recorded as interest income,  depending on the
assessment of the ultimate  collectibility of the loan. For all years presented,
in the opinion of  management,  the  collection of additional  interest on loans
delinquent  more  than  90  days  is  not  doubtful.  Therefore,  there  are  no
nonaccruing  loans.  For all years  presented,  the Company had no troubled debt
restructurings  (which involved  forgiving a portion of interest or principal on
any loans or making loans at a rate materially less than that of market rates).

                                   At June 30,
                                 1997 1996 1995
                             (Dollars in Thousands)

                                                      At June 30,
                                                 ----------------------
                                                 1997    1996      1995
                                                 ----    ----      ----
                                                 (Dollars In Thousands)
Accruing loans delinquent more than 90 days:
    Mortgage ...............................     $215    $ 27      $256
    Consumer ...............................       14      17        39
                                                 ----    ----      ----
                                                  229      44       295
                                                 ----    ----      ----
Foreclosed assets:
    One- to four-family .....................      --      --        --
                                                 ----    ----      ----

Total non-performing assets .................    $229    $ 44      $295
                                                 ====    ====      ====

Total as a percentage of total assets .......    0.35%   0.07%     0.54%
                                                 ====    ====      ====  

Classified  Assets.  OTS  regulations  provide for a  classification  system for
problem assets of insured  institutions  which covers all problem assets.  Under
this  classification   system,   problem  assets  of  insured  institutions  are
classified  as  "substandard,"  "doubtful,"  or "loss."  An asset is  considered
substandard if it is inadequately  protected by the current net worth and paying
capacity of the obligor or of the collateral pledged, if any. Substandard assets
include  those  characterized  by the  "distinct  possibility"  that the insured
institution  will sustain  "some loss" if the  deficiencies  are not  corrected.
Assets  classified  as  doubtful  have all of the  weaknesses  inherent in those
classified  substandard,  with the  added  characteristic  that  the  weaknesses
present  make  "collection  or  liquidation  in full," on the basis of currently
existing facts,  conditions and values,  "highly  questionable  and improbable."
Assets  classified  as loss are  those  considered  "uncollectible"  and of such
little value that their  continuance  as assets without the  establishment  of a
specific loss reserve is not warranted.  Assets may also be designated  "special
mention"   because  of  potential   weakness  that  do  not  currently   warrant
classification in one of the aforementioned categories.

When an insured  institution  classifies problem assets as either substandard or
doubtful,  it may  establish  general  allowances  for loan  losses in an amount
deemed prudent by management. General allowances represent loss allowances which
have been  established  to recognize the inherent risk  associated  with lending
activities,  but which, unlike specific  allowances,  have not been allocated to
particular problem assets. When an insured institution classifies problem assets
as loss,  it is required  either to  establish a specific  allowance  for losses
equal to 100% of that portion of the asset so  classified  or to charge off such
amount.  An institution's  determination as to the  classification of its assets
and the  amount of its  valuation  allowances  is  subject to review by the OTS,
which may  order the  establishment  of  additional  general  or  specific  loss
allowances.  A portion of general loss allowances  established to cover possible
losses  related to assets  classified as substandard or doubtful may be included
in determining an institution's  regulatory  capital,  while specific  valuation
allowances for loan losses  generally do not qualify as regulatory  capital.  At
June 30, 1997,  Washington had classified  $93,000 of its assets as substandard,
and  $2,000 as  doubtful  as  compared  to $53,000  and $1,000 at June 30,  1996
classified as substandard  and doubtful,  respectively.  While there has been an
increase in assets classified as substandard and doubtful, according to industry
standards  the Bank's  classified  assets are still low.  The Bank  continues to
increase reserves for loan losses to cover any additional risk perceived by this
slight increase in classified assets. None of the mortgage loans delinquent more
than 90 days have an outstanding balance in excess of $53,000 at June 30, 1997.
<PAGE>

Other Loans of Concern. In addition to the non-performing loans set forth in the
tables  above,  as of June 30, 1997,  there was $148,000 of loans  designated as
special mention for which known  information  about the possible credit problems
of the  borrowers  or the cash  flows of the  security  properties  have  caused
management to havesome  doubts as to the ability of the borrowers to comply with
present  loan  repayment  terms and which may result in the future  inclusion of
such items in the non-performing  asset categories.  The largest loan classified
as special  mention had an outstanding  balance of $50,000 on June 30, 1997, and
was secured by a multi-family property in Louisa County, Iowa.

Foreclosed  Real  Estate.  Real  estate  acquired by  Washington  as a result of
foreclosure or by deed in lieu of foreclosure is classified as real estate owned
until it is sold.  When property is acquired it is recorded at the fair value at
the date of foreclosure less estimated costs of disposition.

Washington records loans as in-substance foreclosures if the borrower has little
or no equity in the  property  based upon its  documented  current  fair  value,
Washington  can only expect  repayment  of the loan to come from the sale of the
property and if the borrower has effectively abandoned control of the collateral
or has continued to retain  control of the collateral but because of the current
financial  status of the  borrower,  it is doubtful the borrower will be able to
repay  the  loan  in  the  foreseeable  future.  In-substance  foreclosures  are
accounted  for  as  real  estate  acquired  through  foreclosure.  There  may be
significant  other  expenses  incurred such as attorney and other  extraordinary
servicing  costs  involved  with in substance  foreclosures.  Washington  had no
foreclosed real estate at June 30, 1997.

It is  management's  policy to provide for losses on  unidentified  loans in its
loan  portfolio.  A provision for loan losses is charged to operations  based on
management's  evaluation  of  the  potential  losses  that  may be  incurred  in
Washington's  loan portfolio.  Such  evaluation,  which includes a review of all
loans  of  which  full  collectibility  of  interest  and  principal  may not be
reasonably assured, considers Washington's past loan loss experience,  known and
inherent  risks  in the  portfolio,  adverse  situations  that  may  affect  the
borrower's ability to repay, estimated value of any underlying  collateral,  and
current economic conditions. The amount of provisions recorded in future periods
may be significantly  greater or less than the provisions taken in the past. The
allowance for loan losses was $226,000,  or as a ratio of total loans was 1.90%,
at June 30, 1997.

Washington's  reserve for loan loss requirement is calculated as a percentage of
the total  loans  outstanding  and  total  delinquent  loans as of a  particular
quarter  end.  Over the past 12 months the Bank has seen an increase in its loan
portfolio and the Bank's delinquent loans have increased  slightly over the last
year.  This has  resulted  in a greater  than  normal  increase  in the  reserve
allowance  established  by  the  Bank's  Board  of  Directors.   The  Bank  also
anticipates  a stepped up schedule of reserve  deposits to keep up with expected
increases in loans outstanding during the next fiscal year.

Allocation  of Allowance  for Loan Losses.  The  following  table sets forth the
allocation  of  Washington's  allowance for loan losses by loan category and the
percent  of loans  in each  category  to total  loans  receivable  at the  dates
indicated.  The  portion  of the loan  loss  allowance  allocated  to each  loan
category does not represent the total available for future losses that may occur
within the loan  category  because the total loan loss  allowance is a valuation
reserve applicable to the entire loan portfolio.
<TABLE>
                                                                      At June 30,
                                            -------------------------------------------------------------
                                                  1997                  1996                  1995
                                            ------------------- --------------------  -------------------
                                                    Percent of           Percent of           Percent of
                                                     Loans In             Loans In             Loans In
                                                       Each                 Each                 Each
                                                    Category to          Category to          Category to
                                            Amount  Total Loans  Amount  Total Loans  Amount  Total Loans
                                            ------  -----------  ------  -----------  ------  -----------
                                                             (Dollars in Thousands)
<S>                                         <C>     <C>          <C>     <C>          <C>     <C>
Mortgage Loans ...........................   $106     90.03%       $121     88.09%     $ 95      93.01%
Commercial Business Loans ................     68      5.15          13      3.54        11       2.67
Consumer Loans ...........................     41      4.82          36      8.37        30       4.32
Unallocated ..............................     11        --          39        --        67         --
                                             ----    -------       ----    -------     ----     ------- 
                                             $226    100.00%       $209    100.00%     $203     100.00%
                                             ====    =======       ====    =======     ====     =======

</TABLE>
<PAGE>

Analysis  of the  Allowance  for Loan  Losses.  The  following  table sets forth
information with respect to Washington's  allowance for loan losses at the dates
and for the periods indicated:

                                                     Year Ended June 30,
                                                  -------------------------
                                                  1997      1996      1995
                                                  -----     -----     -----
                                                     (Dollars in Thousands)

Balance at beginning of period ................   $ 209     $ 203     $ 203
Charge offs:
    Mortgage ..................................      --        --        --
    Consumer ..................................     (33)      (14)      (19)
                                                  -----     -----     -----
       Total  charge offs .....................     (33)      (14)      (19)
Recoveries ....................................      10         5        19
                                                  -----     -----     -----
Net Charge offs ...............................     (23)       (9)       --
                                                  -----     -----     -----
Provisions charged to operations ..............      40        15        --
                                                  -----     -----     -----
Balance at end of period ......................   $ 226     $ 209     $ 203
                                                  =====     =====     =====

Ratio of net charge offs during the period to
average loans outstanding during the period ...    .04%     0.02%      ---%  
                                                  =====     =====     =====

Ratio of net charge offs during the period to
average nonperforming assets ..................   17.16%    20.45%     ---%
                                                  ======    ======    =====

Investment Activities

Washington is required under federal regulations to maintain a minimum amount of
liquid  assets  which may be invested in  specified  short-term  securities  and
certain other  investments.  See  "Regulation  -- Federal  Regulation of Savings
Associations" and "Management's  Discussion and Analysis of Financial  Condition
and Results of  Operations  -- Liquidity  and Capital  Resources"  in the Annual
Report  to  Stockholders   attached   hereto  as  Exhibit  13.   Washington  has
continuously   maintained  a  liquidity   portfolio  in  excess  of   regulatory
requirements.  Liquidity levels may be increased or decreased depending upon the
yields on  investment  alternatives  and upon  management's  judgment  as to the
attractiveness  of the yields then available in relation to other  opportunities
and its expectation of future yield levels, as well as management's  projections
as  to  the  short-term  demand  for  funds  to be  used  in  Washington's  loan
origination and other activities. At June 30, 1997, Washington had an investment
portfolio of approximately $10.3 million,  consisting primarily of U.S. Treasury
Securities, U.S. government agency obligations and corporations securities. To a
lesser  extent,  the  portfolio  also  includes   mortgage-backed   and  related
securities,  municipal  bonds,  and FHLB stock, as permitted by OTS regulations.
Washington classifies its investments as held to maturity or available for sale.

Washington has found its level of investment  securities and mortgage-backed and
related  securities  has decreased in recent years as a result of increased loan
demand.  Washington  will continue to seek high quality  investments.  Federally
chartered savings  institutions have the authority to invest in various types of
liquid  assets,  including  United States  Treasury  obligations,  securities of
various federal agencies,  certain  certificates of deposit of insured banks and
savings institutions,  certain bankers'  acceptances,  repurchase agreements and
federal funds.  Subject to various  restrictions,  federally  chartered  savings
institutions may also invest their assets in commercial paper,  investment grade
corporate  debt  securities  and  mutual  funds  whose  assets  conform  to  the
investments  that  a  federally   chartered  savings  institution  is  otherwise
authorized to make directly.

Generally,  the investment policy of Washington,  as established by the Board of
Directors,  is to invest  funds among  various  categories  of  investments  and
maturities based upon Washington's liquidity needs,  asset/liability  management
policies, investment quality, marketability and performance objectives.
<PAGE>

Investment  Portfolio.  The  following  table sets forth the  carrying  value of
Washington's  investment  securities  portfolio,  short-term  investments,  FHLB
stock, and  mortgage-backed  and related  securities at the dates indicated.  At
June 30, 1995,  the market  value of  Washington's  held to maturity  investment
securities  portfolio was  $3,091,000.  The net unrealized gain of $12,000 as of
June 30, 1995, on such investment securities is not reflected in the table below
because these  securities  are  classified as held to maturity and are therefore
not reported at fair value. For additional information  concerning  Washington's
investments, see Note 3 of the Notes to Consolidated Financial Statements in the
Annual Report to Stockholders attached hereto as Exhibit 13.
<TABLE>
                                                                       At June 30,
                                              -------------------------------------------------------------
                                                    1997                   1996                1995
                                              ------------------  --------------------- -------------------         
                                                         Percent                Percent             Percent
                                                           Of                     Of                  Of
                                              Book Value  Total   Book Value     Total   Book Value  Total
                                              ---------- -------  ----------    -------  ---------- -------
                                                                 (Dollars in Thousands)
<S>                                           <C>        <C>      <C>           <C>      <C>        <C>
Investment Securities:
   Available for sale (1):
       U.S. Treasury securities .............   $   402     3.90%   $   394        2.63%   $   495     4.17%
       U.S. Government agencies .............     6,999    67.85      7,961       53.08      2,329    19.61
       State and political subdivisions .....       354     3.43        404        2.69         --       --   
       Mortgage-backed securities ...........       140     1.36        152        1.01         --       -- 
       Corporations .........................     1,955    18.95      4,217       28.12      5,616    47.27
       Certificates of deposit with             
         financial institutions .............        --       --      1,500       10.00         --       --
                                                -------   ------    -------      ------    -------   ------    
             Total Available for sale .......     9,850    95.48     14,628       97.53      8,440    71.05
                                                -------   ------    -------      ------    -------   ------

 Held to maturity(1):
    State and political subdivisions ........        --       --        --           --      1,238    10.42
    Mortgage-backed securities ..............        --       --        --           --      1,839    15.48
                                                -------   ------    -------      ------    -------   ------
         Total held to maturity .............        --       --        --           --      3,077    25.90
                                                -------   ------    -------      ------    -------   ------
                                                                                                               
         Total Investment Securities ........        --       --     14,628       97.53     11,517    96.95
                                                -------   ------    -------      ------    -------   ------
FHLB Stock ..................................       466     4.52        369        2.47%       362     3.05
                                                -------   ------    -------      ------    -------   ------
        Total Investment Securities   
          and FHLB Stock ....................   $10,316   100.00%   $14,997      100.00%   $11,879   100.00%
                                                =======   =======   =======      =======   =======   ======= 

Average remaining life of investment 
  securities (excluding FHLB Stock) .........  3.9 Years           3.3 Years              3.2 Years

Interest-Earning Assets:
   Interest-bearing deposits with banks .....   $   575   100.00%   $ 1,110      100.00%   $ 1,290   100.00%
                                                =======   =======   =======      =======   =======   ======= 

---------------------
<FN>

(1)  Securities  classified  as available for sale were carried at fair value at
     June 30, 1997,  1996 and 1995.  Securities  classified  as held to maturity
     were carried at historical cost at all respective dates.
</FN>
</TABLE>

In November,  1995 the  Financial  Accounting  Standards  Board issued a Special
Report  entitled "A Guide  Implementation  of Statement  115 on  Accounting  for
Certain Investments in Debt and Equity Securities". The Special Report contained
guidance on applying the provisions of Statement 115 and, in addition, contained
a provision  which  allowed  entities to reassess  the  classification  of their
investment  securities and to make transfers from the held to maturity  category
without  calling into  question the intent of the entity to hold  securities  to
maturity  in the  future.  Accordingly,  in December  1995,  Washington  Federal
elected to  transfer  all of the  Bank's  investment  securities  in the held to
maturity category to the available for sale category.  The carrying value of the
investment securities transferred was approximately $2,907,000 and an unrealized
loss of  $35,000,  net of related  deferred  income  tax,  was  recorded  in the
Statement of  Stockholders'  Equity.  The fair value of the  available  for sale
investment  portfolio  at June  30,  1997 was $9.8  million  resulting  in a net
unrealized loss at that date of approximately $3,000.
<PAGE>

The category of investment  securities  entitled  "corporations" is comprised of
investments in corporate bonds, except for approximately  $300,000 invested in a
mutual  fund at June 30,  1995.  The  mutual  fund  investment  was sold  during
December of 1995. The corporate bonds are considered investment grade bonds, but
carry additional credit risk compared to bonds guaranteed by the U.S. government
or agencies thereof.  Washington evaluates the benefit of higher yields on these
bonds  versus  increased  credit  risk as  compared  to U.S.  Treasury or agency
securities.  The quality of these bonds is monitored  primarily by reviewing the
investment ratings assigned to the bonds by independent sources such as Standard
& Poors, etc.

Investment  Portfolio  Maturities.   The  following  table  sets  forth  certain
information   regarding  the  carrying  values,   weighted  average  yields  and
maturities of Washington's investment securities portfolio at June 30, 1997.
<TABLE>
                                                                           At June 30, 1997
                                                   ---------------------------------------------------------------------
                                                                                                             Total
                                                   Less Than                                   Over        Investment
                                                    1 Year       1- 5 Years    5-10 Years    10 Years      Securities
                                                   Book Value     Book Value    Book Value   Book Value     Book Value
                                                   ----------    -----------   -----------   ----------    -----------
                                                                    (Dollars in Thousands)
<S>                                                <C>           <C>           <C>           <C>           <C>  

U.S. treasury securities .........................   $  300        $  102       $   --        $   --         $  402
U.S. government agencies .........................       --         5,353        1,646            --          6,999
State and political subdivisions .................       56           238           60            --            354
Mortgage-backed securities .......................       --            --           --           140            140
Corporations .....................................    1,303           652           --            --          1,955
Certificates of deposit with financial 
 institutions ....................................       --            --           --            --             --
                                                     ------        ------       ------        ------         ------
     Total .......................................   $1,659        $6,345       $1,706        $  140         $9,850
                                                     ======        ======       ======        =======        ======

Weighted average yield ...........................    6.15%         6.61%        7.15%          5.94%         6.61%
                                                     ======        ======       ======        =======        ======

</TABLE>

Sources of Funds

General.  Deposits  are the  major  external  source of  Washington's  funds for
lending  and  other   investment   purposes.   Washington   derives  funds  from
amortization and prepayment of loans and, to a much lesser extent, maturities of
investment securities,  borrowings,  mortgage-backed  securities and operations.
Scheduled  loan principal  repayments  are a relatively  stable source of funds,
while  deposit  inflows and  outflows  and loan  prepayments  are  significantly
influenced by general interest rates and market conditions.  Washington had $8.7
million FHLB advances outstanding at June 30, 1997.

Deposits. Consumer and commercial deposits are attracted principally from within
Washington's  market area through the  offering of a broad  selection of deposit
instruments including regular savings accounts,  money market accounts, and term
certificate  accounts.  Washington also offers  individual  retirement  accounts
("IRA"),  NOW accounts  and money  market  deposit  accounts  ("MMDA").  Deposit
account terms vary according to the minimum  balance  required,  the time period
the funds must remain on deposit, and the interest rate, among other factors.

The  interest  rates  paid by  Washington  on  deposits  are set  weekly  at the
direction of the Board of Directors.  Washington determines the interest rate to
offer the public on new and maturing  accounts by reviewing the current Treasury
rate  for the  term  and the  market  interest  rates  offered  by  competitors.
Washington  Federal  reviews,  weekly,  the interest  rates being offered by the
other principal financial institutions within its market area.

Savings  accounts  constituted  $2.2 million,  or 4.9% of  Washington's  deposit
portfolio at June 30, 1997. Certificates of deposit constituted $30.4 million or
68.0% of the  deposit  portfolio  of which $1.2  million or 2.68% of the deposit
portfolio were  certificates  of deposit with balances of $100,000 or more. MMDA
accounts  constituted $9.0 million or 20.2% of Washington's deposit portfolio at
June 30, 1997. As of June 30, 1997, Washington Federal had no brokered deposits.
At June 30, 1997,  transactions and savings deposits were $14.3 million or 32.0%
of total  deposits.  At June 30, 1996,  transactions  and savings  deposits were
$13.9 million or 31.2% of total deposits.
<PAGE>

Savings Deposit Activities.  The following table sets forth the savings activity
at Washington Federal during the period indicated.
<TABLE>
                                                                Year Ended June 30,
                                                          ----------------------------------
                                                           1997          1996         1995
                                                          --------     --------     --------
                                                              (Dollars in Thousands)
<S>                                                        <C>         <C>          <C> 

Opening balance .......................................   $ 44,176     $ 42,950     $ 43,872
Net increase (decrease) before
  interest credited ...................................     (1,226)        (390)      (2,473)
Interest credited .....................................      1,804        1,616        1,551
                                                          --------     --------     --------
Ending balance ........................................   $ 44,754     $ 44,176     $ 42,950
                                                          ========     ========     ========

Net increase (decrease) ...............................   $    578     $  1,226     $   (922)
                                                          ========     ========     ========

Percent increase (decrease) ...........................      1.31%        2.85%      (2.10)%
                                                          ========     ========     ========
</TABLE>

The  following  table sets forth the dollar  amount of savings  deposits  in the
various types of deposit programs offered by Washington  Federal for the periods
indicated.
<TABLE>
                                                                            June 30,
                                                --------------------------------------------------------------------
                                                       1997                    1996                   1995
                                                ----------------------   ------------------    ---------------------
                                                              Percent              Percent                  Percent
                                                 Amount       of Total   Amount    of Total     Amount      of Total
                                                --------      --------   -------   --------    --------     --------
                                                                     (Dollars in Thousands)
<S>                                             <C>           <C>        <C>       <C>         <C>          <C>

Transactions and Savings Deposits
---------------------------------
Demand and NOW Accounts (0.00%-3.35%)           $  3,094        6.88%    $ 2,529       5.70%    $ 2,129       4.93%
Money Market Accounts (2.30% - 5.00%)              9,044       20.11       9,087      20.46       8,310       19.25
Passbook Savings Accounts (2.30% - 3.00%)          2,182        4.85       2,244       5.05       2,187        5.07
                                                --------      ------     -------     ------     -------      ------
Total Non-Certificates                            14,320       31.84      13,860      31.21      12,626       29.25
                                                --------      ------     -------     ------     -------      ------

Certificates
-------------
2.00% - 3.00%                                         13         .03         ---        ---         ---         ---
3.01% - 4.00%                                        ---         ---          28       0.06       1,203        2.79
4.01% - 5.00%                                      2,205        4.90       4,976      11.21       6,160       14.27
5.01% - 6.00%                                     23,247       51.69      14,445      32.53      11,297       26.16
6.01% - 7.00%                                      4,969       11.05      10,867      24.47      11,521       26.68
7.01% - 8.00%                                        ---         ---         ---        ---         143        0.33
8.01% - 9.00%                                        ---         ---         ---        ---         ---         ---
9.01% and over                                       ---         ---         ---        ---         ---         ---
                                                --------      ------     -------     ------     -------      ------
Total Certificates                                30,434       67.67      30,316      68.27      30,324       70.23
                                                --------      ------     -------     ------     -------      ------
Accrued Interest                                     221         .49         231       0.52         226        0.52
                                                --------      ------     -------     ------     -------      ------
Total Deposits and Accrued Interest             $ 44,975      100.00%    $44,407     100.00%    $43,176      100.00%
                                                ========      ======     =======     ======     =======      ======
</TABLE>
<PAGE>

The  following  table  shows  rate and  maturity  information  for  Washington's
certificates of deposit as of June 30, 1997.
<TABLE>
                                           0.00-      4.01-        5.01-       6.01-                   Percent of
                                           4.00%      5.00%        6.00%       7.00%       Total          Total
                                           -----      ------      -------      ------     -------      ----------
                                                               (Dollars in Thousands)
<S>                                        <C>        <C>         <C>          <C>        <C>          <C>
Certificate accounts maturing in
quarter ending:

September 30, 1997                         $  13      $1,440     $  3,333     $   198    $  4,984          16.38
December 31, 1997                            ---         401        3,934          81       4,416          14.51
March 31, 1998                               ---         304        3,684       2,764       6,752          22.19
June 30, 1998                                ---          60        3,514         790       4,364          14.34
September 30, 1998                           ---         ---        1,853         115       1,968           6.47
December 31, 1998                            ---         ---        3,142          85       3,227          10.00
March 31, 1999                               ---         ---          881          39         920           3.02
June 30, 1999                                ---         ---          496          95         591           1.94
September 30, 1999                           ---         ---          446         115         561           1.84
December 31, 1999                            ---         ---        1,111         222       1,333           4.38
March 31, 2000                               ---         ---          205         102         307           1.01
June 30, 2000                                ---         ---          183         128         311           1.02
Thereafter                                   ---         ---          465         235         700           2.30
                                           -----      ------      -------      ------     -------         ------
Total                                      $  13      $2,205      $23,247      $4,969     $30,434         100.00%
                                           =====      ======      =======      ======     =======         ======

   Percent of Total                        0.04%       7.25%       76.39%      16.33%     100.00%
                                           =====      ======      =======      ======     =======
</TABLE>

The following table indicates the amount of Washington's certificates of deposit
by time remaining until maturity as of June 30, 1997.
<TABLE>
                                                                 MATURITY
                                                 ----------------------------------------
                                                 3 Months  Over 3- 6  Over 6-12   Over 12
                                                  or Less    Months     Months     Months     Total
                                                 --------   --------   --------   --------   --------
                                                                  (Dollars in Thousands)
<S>                                              <C>        <C>        <C>        <C>        <C>  
Certificates of Deposit less than
  $100,000 ...................................   $  4,984   $  4,416   $ 10,002   $  9,784   $ 29,186
Certificates of Deposit of $100,000 or More ..         --         --      1,114        134      1,248
                                                 --------   --------   --------   --------   --------
Total Certificates of Deposit ................   $  4,984   $  4,416   $ 11,116   $  9,918   $ 30,434
                                                 ========   ========   ========   ========   ========
</TABLE>

Borrowings

Deposits are the primary source of funds of Washington's  lending and investment
activities and for its general business  purposes.  In addition,  Washington may
obtain advances from the FHLB of Des Moines to supplement its supply of lendable
funds. Advances from the FHLB of Des Moines are typically secured by a pledge of
Washington's stock in the FHLB of Des Moines and a portion of Washington's first
mortgage  loans and certain other assets.  Washington,  if the need arises,  may
also access the Federal  Reserve  discount  window to  supplement  its supply of
lendable funds and to meet deposit  withdrawal  requirements.  At June 30, 1997,
Washington had $8.7 million of borrowings.
<PAGE>

The following table sets forth the maximum month-end balance and average balance
of FHLB advances at and for the dates indicated.

                                             At and For the Year Ended June 30,
                                            ------------------------------------
                                             1997           1996           1995
                                            ------         ------         ------
                                                    (Dollars in Thousands)

Maximum Balance ...................         $9,311         $6,433         $7,230

Average Balance ...................         $6,504         $4,621         $4,773

The  following  table  sets forth  certain  information  as to the  Bank's  FHLB
advances at the dates indicated.
<TABLE>
                                                                   June 30,
                                                      -----------------------------------
                                                        1997         1996         1995
                                                      ---------    ---------    ---------
                                                             (Dollars in Thousands)
<S>                                                   <C>          <C>          <C>
FHLB Advances .....................................   $   8,652    $   5,505    $   7,230

Weighted average interest rate during the period of       5.19%        5.48%        5.13%
FHLB advances

Weighted average interest rate at end of period of
FHLB advances .....................................       5.50%        5.46%        5.85%

</TABLE>

Washington is one of five financial  institutions  serving its immediate  market
area of Washington,  Iowa. The competition  for deposit  products comes from two
banks owned by multi-bank holding companies,  a local independent community bank
and a credit  union.  Deposit  competition  also  includes a number of insurance
products sold by local agents, and investment  products such as mutual funds and
other securities sold by local and regional  brokers.  Loan  competition  varies
depending upon market conditions.

Washington has traditionally  maintained a competitive position in mortgage loan
originations and market share throughout its service area by virtue of its local
presence and its involvement in the community.  Washington  believes that it has
been able to  effectively  market  its loans and other  financial  products  and
services  when  compared  to other  local-based  institutions  and its  superior
customer service when compared to other  institutions and mortgage bankers based
outside of Washington's market area.

Washington believes that it is one of the few area lenders that has consistently
offered  a  variety  of  loans  throughout  all  types of  economic  conditions.
Washington  believes that it has been able to  effectively  market its loans and
other  financial  products  and  services  when  compared  to other  local-based
institutions,  and it has superior  customer service when compared to the branch
of a larger institution based outside of Washington's market area.

Subsidiary Activity

Washington  is permitted  to invest up to 2% of its assets in the capital  stock
of,  or  secured  or  unsecured  loans  to,  subsidiary  corporations,  with  an
additional  investment  of 1% of  assets  when  such  additional  investment  is
utilized primarily for community development  purposes.  Under such limitations,
as of  June  30,  1997,  Washington  Federal  was  authorized  to  invest  up to
approximately  $1,296,000  in the stock of,  or loans to,  service  corporations
(based upon the 2% limitation).

Washington  Federal has one wholly owned  subsidiary.  The  subsidiary  conducts
business  under  the name of  Washington  Financial  Services,  Inc.  Washington
Federal's  investment in its subsidiary  totalled  $74,000 at June 30, 1997. The
subsidiary's  source of  income  is  brokerage  fees,  and it had net  income of
$22,000,  $12,000 and $10,000 for the years ended June 30, 1997,  1996 and 1995,
respectively.  The  primary  activity  of the  subsidiary  is the  brokering  of
mortgage insurance.
<PAGE>

Regulation 

General.  Washington Federal is a federally chartered savings bank, the deposits
of which are  federally  insured  and backed by the full faith and credit of the
United States  Government.  Accordingly,  Washington Federal is subject to broad
federal regulation and oversight extending to all its operations.  The Bank is a
member of the FHLB of Des Moines and is subject to certain limited regulation by
the Board of Governors of the Federal Reserve System ("Federal  Reserve Board").
As the savings and loan holding company of the Bank, the Company also is subject
to federal  regulation  and  oversight.  The  purpose of the  regulation  of the
Company  and  other  holding   companies  is  to  protect   subsidiary   savings
associations.  The Bank is a member of the Savings  Association  Insurance  Fund
("SAIF"),  which  together  with the Bank  Insurance  Fund  ("BIF")  are the two
deposit  insurance funds  administered by the FDIC, and the deposits of the Bank
are  insured  by the FDIC.  As a result,  the FDIC has  certain  regulatory  and
examination authority over the Bank.

Certain of these regulatory requirements and restrictions are discussed below or
elsewhere in this document.

Federal Regulation of Savings Associations. The OTS has extensive authority over
the operations of savings associations.  As part of this authority,  the Bank is
required  to file  periodic  reports  with the OTS and is  subject  to  periodic
examinations  by the OTS and the FDIC.  The last regular OTS  examination of the
Bank was as of  September  30,  1996.  The FDIC has not examined the Bank in the
last five years. Under agency scheduling  guidelines,  it is likely that another
examination  will be initiated in the near future.  When these  examinations are
conducted by the OTS and the FDIC, the examiners may require the Bank to provide
for higher general or specific loan loss reserves.  All savings associations are
subject to a semi-annual assessment,  based upon the savings association's total
assets,  to fund the  operations of the OTS. The Bank's OTS  assessment  for the
fiscal year ended June 30, 1997 was $21,000.

The OTS also has extensive  enforcement  authority over all savings institutions
and  their  holding  companies,   including  the  Bank  and  the  Company.  This
enforcement authority includes,  among other things, the ability to assess civil
money  penalties,  to issue  cease-and-desist  or removal orders and to initiate
injunctive actions.  In general,  these enforcement actions may be initiated for
violations  of laws and  regulations  and  unsafe or  unsound  practices.  Other
actions or inactions  may provide the basis for  enforcement  action,  including
misleading  or  untimely  reports  filed  with the  OTS.  Except  under  certain
circumstances,  public  disclosure  of final  enforcement  actions by the OTS is
required.

In addition,  the  investment,  lending and  branching  authority of the Bank is
prescribed by federal laws, and it is prohibited from engaging in any activities
not permitted by such laws. For instance,  no savings  institution may invest in
non-investment  grade corporate debt  securities.  In addition,  the permissible
level of investment by federal  associations in loans secured by non-residential
real property may not exceed 400% of total capital,  except with approval of the
OTS.  Federal  savings  associations  are also  generally  authorized  to branch
nationwide. The Bank is in compliance with the noted restrictions.

The Bank's general permissible lending limit for  loans-to-one-borrower is equal
to the greater of $500,000 or 15% of unimpaired  capital and surplus (except for
loans fully secured by certain readily marketable collateral, in which case this
limit is increased to 25% of unimpaired capital and surplus).  At June 30, 1997,
the Bank's lending limit under this restriction was $2.1 million. The Bank is in
compliance with the loans-to-one-borrower limitation.

The OTS, as well as the other federal banking agencies,  has adopted  guidelines
establishing safety and soundness standards on such matters as loan underwriting
and  documentation,  asset quality,  earnings  standards,  internal controls and
audit systems,  interest rate risk exposure and  compensation and other employee
benefits. Any institution which fails to comply with these standards must submit
a compliance plan. A failure to submit a plan or to comply with an approved plan
will subject the institution to further enforcement action.
<PAGE>

Insurance of Accounts and Regulation by the FDIC. Washington Federal is a member
of the SAIF,  which is  administered  by the FDIC.  Deposits  are  insured up to
applicable limits by the FDIC and such insurance is backed by the full faith and
credit of the United States  Government.  As insurer,  the FDIC imposes  deposit
insurance  premiums and is authorized to conduct  examinations of and to require
reporting by FDIC-insured  institutions.  It also may prohibit any  FDIC-insured
institution  from engaging in any activity the FDIC  determines by regulation or
order  to pose a  serious  risk to the SAIF or the  BIF.  The FDIC  also has the
authority to initiate  enforcement actions against savings  associations,  after
giving the OTS an opportunity to take such action, and may terminate the deposit
insurance if it determines that the institution has engaged in unsafe or unsound
practices, or is in an unsafe or unsound condition.

The FDIC's deposit  insurance  premiums are assessed through a risk-based system
under  which all  insured  depository  institutions  are placed into one of nine
categories and assessed insurance premiums based upon their level of capital and
supervisory  evaluation.  Under  the  system,  institutions  classified  as well
capitalized  (i.e.,  a core  capital  ratio of at least 5%, a ratio of Tier 1 or
core capital to risk-weighted  assets ("Tier 1 risk-based  capital") of at least
6% and a risk-based  capital ratio of at least 10%) and  considered  healthy pay
the lowest premium while institutions that are less than adequately  capitalized
(i.e., core or Tier 1 risk-based  capital ratios of less than 4% or a risk-based
capital ratio of less than 8%) and considered of substantial supervisory concern
pay the highest premium. Risk classification of all insured institutions will be
made by the FDIC for each semi-annual assessment period.

The FDIC is authorized to increase  assessment  rates, on a semiannual basis, if
it  determines  that  the  reserve  ratio  of the  SAIF  will be less  than  the
designated  reserve  ratio of 1.25% of SAIF insured  deposits.  In setting these
increased  assessments,  the FDIC must seek to restore the reserve ratio to that
designated  reserve  level,  or such higher  reserve ratio as established by the
FDIC.  The FDIC may also impose  special  assessments  on SAIF  members to repay
amounts  borrowed from the United States Treasury or for any other reason deemed
necessary by the FDIC.

For the first six months of 1995,  the  assessment  schedule for BIF members and
SAIF members ranged from .23% to .31% of deposits. As is the case with the SAIF,
the FDIC is authorized to adjust the insurance  premium rates for banks that are
insured by the BIF of the FDIC in order to maintain the reserve ratio of the BIF
at 1.25% of BIF insured deposits.  As a result of the BIF reaching its statutory
reserve ratio the FDIC revised the premium schedule for BIF insured institutions
to provide a range of .04% to .31% of deposits.  The revisions  became effective
in the third quarter of 1995. In addition,  the BIF rates were further  revised,
effective  January  1996,  to  provide  a range of 0% to .27%.  The SAIF  rates,
however,  were  not  adjusted.  At the time the  FDIC  revised  the BIF  premium
schedule,  it noted that, absent  legislative  action (as discussed below),  the
SAIF would not attain its  designated  reserve  ratio until the year 2002.  As a
result, insured members would continue to be generally subject to higher deposit
insurance  premiums  than BIF members  until,  all things being equal,  the SAIF
attains the required reserve ratio.

In order to eliminate this disparity and any  competitive  disadvantage  between
BIF and SAIF member  institutions  with respect to deposit  insurance  premiums,
legislation  to  recapitalize  the SAIF  was  enacted  in  September  1996.  The
legislation  provides  for a one-time  assessment  to be imposed on all deposits
assessed at the SAIF rates, as of March 31, 1995, in order to  recapitalize  the
SAIF. It also provides for the merger of the BIF and the SAIF on January 1, 1999
if no savings  associations  then exist.  The special  assessment  rate has been
established  at .657% of deposits by the FDIC and the  resulting  assessment  of
$294,000  was paid in  November  1996.  This  special  assessment  significantly
increased  noninterest  expense and  adversely  affected  The Bank's  results of
operations  for the  year  ended  June 30,  1997.  As a  result  of the  special
assessment,  the Bank's  deposit  insurance  premiums  was reduced to 6.48 basis
points  based  upon  its  current  risk  classification  and the new  assessment
schedule for SAIF insured institutions.  These premiums are subject to change in
future periods.

Prior to the  enactment  of the  legislation,  a portion of the SAIF  assessment
imposed  on  savings  associations  was used to repay  obligations  issued  by a
federally chartered  corporation to provide financing ("FICO") for resolving the
thrift  crisis  in the  1980s.  Although  the  FDIC has  proposed  that the SAIF
assessment be equalized with the BIF assessment  schedule,  effective October 1,
1996, SAIF-insured institutions will continue to be subject to a FICO assessment
as a result of this continuing  obligation.  Although the  legislation  also now
requires  assessments  to be made on  BIF-assessable  deposits for this purpose,
effective  January 1, 1997,  that  assessment will be limited to 20% of the rate
imposed on SAIF  assessable  deposits  until the earlier of December 31, 1999 or
when no  savings  association  continues  to exist,  thereby  imposing a greater
burden  on SAIF  member  institutions  such as the  Bank.  Thereafter,  however,
assessments  on  BIF-member  institutions  will  be made on the  same  basis  as
SAIF-member  institutions.  The rates to be established by the FDIC to implement
this  requirement for all  FDIC-insured  institutions is uncertain at this time,
but are  anticipated to be about a 6.5 basis points  assessment on SAIF deposits
and 1.5 basis points on BIF deposits until BIF insured institutions  participate
fully in the assessment.
<PAGE>

Regulatory Capital Requirements. Federally insured savings associations, such as
the Bank,  are required to maintain a minimum level of regulatory  capital.  The
OTS has established capital standards, including a tangible capital requirement,
a  leverage  ratio  (or  core  capital)  requirement  and a  risk-based  capital
requirement applicable to such savings associations.  These capital requirements
must be  generally  as  stringent as the  comparable  capital  requirements  for
national  banks.  The OTS is also  authorized to impose capital  requirements in
excess of these standards on individual associations on a case-by-case basis.

The capital  regulations  require  tangible capital of at least 1.5% of adjusted
total assets (as defined by regulation).  Tangible  capital  generally  includes
common  stockholders'  equity and  retained  income,  and certain  noncumulative
perpetual  preferred  stock and related  income.  In  addition,  all  intangible
assets, other than a limited amount of purchased mortgage servicing rights, must
be deducted from tangible  capital.  At June 30, 1997, the Bank did not have any
intangible assets and an excludable valuation allowable, net of tax of $3,307.

The OTS regulations  establish special  capitalization  requirements for savings
associations that own subsidiaries.  In determining  compliance with the capital
requirements,  all  subsidiaries  engaged solely in activities  permissible  for
national  banks or engaged in certain other  activities  solely as agent for its
customers  are  "includable"  subsidiaries  that are  consolidated  for  capital
purposes in proportion to the association's  level of ownership.  For excludable
subsidiaries the debt and equity  investments in such  subsidiaries are deducted
from  assets  and  capital.  At June  30,  1997,  the  Bank  had one  excludable
subsidiary.

At June 30, 1997,  the Bank had tangible  capital of $8.6 million,  or 13.41% of
adjusted  total assets,  which is  approximately  $7.7 million above the minimum
requirement of 1.5% of adjusted total assets in effect on that date.

The capital standards also require core capital equal to at least 3% of adjusted
total assets.  Core capital generally  consists of tangible capital plus certain
intangible  assets,   including  a  limited  amount  of  purchased  credit  card
relationships.  As a result of the prompt corrective action provisions discussed
below,  however, a savings  association must maintain a core capital ratio of at
least  4%  to  be  considered  adequately  capitalized  unless  its  supervisory
condition is such to allow it to maintain a 3% ratio. At June 30, 1997, the Bank
had no intangibles which were subject to these tests.

At June 30, 1997, the Bank had core capital equal to $8.7 million,  or 13.41% of
adjusted  total assets,  which is $6.7 million above the minimum  leverage ratio
requirement of 3% as in effect on that date.

The OTS  risk-based  requirement  requires  savings  associations  to have total
capital of at least 8% of risk-weighted  assets.  Total capital consists of core
capital,  as defined above, and  supplementary  capital.  Supplementary  capital
consists of certain  permanent  and  maturing  capital  instruments  that do not
qualify as core capital and general  valuation loan and lease loss allowances up
to a maximum of 1.25% of risk-weighted assets. Supplementary capital may be used
to satisfy the  risk-based  requirement  only to the extent of core capital.  At
June 30, 1997, the Bank had no capital instruments that qualify as supplementary
capital and  $226,000  of general  loss  reserves,  which was less than 1.25% of
risk-weighted assets.

Certain  exclusions  from  capital  and assets are  required  to be made for the
purpose  of  calculating  total  capital.  Such  exclusions  consist  of  equity
investments  (as  defined  by  regulation)  and that  portion  of land loans and
nonresidential  construction  loans in excess of an 80% loan-to-value  ratio and
reciprocal holdings of qualifying capital  instruments.  The Bank had $21,000 of
such exclusions from capital and assets at June 30, 1997.

In determining the amount of risk-weighted assets, all assets, including certain
off-balance sheet items, will be multiplied by a risk weight, ranging from 0% to
100%, based on the risk inherent in the type of asset. For example,  the OTS has
assigned  a risk  weight of 50% for  prudently  underwritten  permanent  one- to
four-family  first  lien  mortgage  loans not more than 90 days  delinquent  and
having a loan to value ratio of not more than 80% at origination  unless insured
to such ratio by an insurer approved by the FNMA or FHLMC.
<PAGE>

OTS  regulations  also require  that every  savings  association  with more than
normal  interest  rate risk  exposure  to deduct  from its  total  capital,  for
purposes of determining compliance with such requirement, an amount equal to 50%
of its  interest-rate  risk  exposure  multiplied  by the  present  value of its
assets. This exposure is a measure of the potential decline in the net portfolio
value of a savings  association,  greater  than 2% of the  present  value of its
assets,  based upon a  hypothetical  200 basis  point  increase  or  decrease in
interest rates (whichever results in a greater decline).  Net portfolio value is
the  present  value  of  expected  cash  flows  from  assets,   liabilities  and
off-balance  sheet  contracts.  The rule will not become effective until the OTS
evaluates the process by which savings  associations may appeal an interest rate
risk deduction  determination.  It is also uncertain as to when this  evaluation
may be completed.  Any savings association with less than $300 million in assets
and a total  capital  ratio in  excess of 12% is  exempt  from this  requirement
unless the OTS determines otherwise.

On June 30, 1997,  the Bank had total capital of $8.9 million and  risk-weighted
assets of $42.7 million or total capital of 20.8% of risk-weighted  assets. This
amount was $5.5 million above the 8% requirement in effect on that date.

The OTS and the FDIC are authorized and, under certain  circumstances  required,
to take certain  actions against  savings  associations  that fail to meet their
capital  requirements.  The OTS is generally required to take action to restrict
the activities of an "undercapitalized association" (generally defined to be one
with less than either a 4% core capital ratio, a 4% Tier 1 risked-based  capital
ratio or an 8% risk-based  capital ratio).  Any such  association  must submit a
capital  restoration  plan and until  such plan is  approved  by the OTS may not
increase its assets,  acquire another institution,  establish a branch or engage
in any new activities, and generally may not make capital distributions. The OTS
is  authorized  to impose the  additional  restrictions  that are  applicable to
significantly undercapitalized associations.

As a condition  to the  approval of the capital  restoration  plan,  any company
controlling an undercapitalized association must agree that it will enter into a
limited  capital  maintenance   guarantee  with  respect  to  the  institution's
achievement of its capital requirements.

Any  savings  association  that  fails to  comply  with its  capital  plan or is
"significantly undercapitalized" (i.e., Tier 1 risk-based or core capital ratios
of less  than 3% or a  risk-based  capital  ratio of less  than 6%) must be made
subject  to  one  or  more  of  additional   specified   actions  and  operating
restrictions  which may cover all aspects of its operations and include a forced
merger  or  acquisition  of  the   association.   An  association  that  becomes
"critically  undercapitalized" (i.e., a tangible capital ratio of 2% or less) is
subject to further mandatory restrictions on its activities in addition to those
applicable to significantly  undercapitalized associations. In addition, the OTS
must appoint a receiver (or conservator  with the concurrence of the FDIC) for a
savings  association,  with certain limited exceptions,  within 90 days after it
becomes critically undercapitalized.

Any  undercapitalized  association  is also  subject to the general  enforcement
authority of the OTS and the FDIC, including the appointment of a conservator or
a receiver.

The OTS is also generally  authorized to reclassify an association  into a lower
capital category and impose the restrictions  applicable to such category if the
institution  is  engaged in unsafe or  unsound  practices  or is in an unsafe or
unsound condition.

The  imposition  by the OTS or the FDIC of any of these  measures on  Washington
Federal  may have a  substantial  adverse  effect on the Bank's  operations  and
profitability.   Company   shareholders  do  not  have  preemptive  rights,  and
therefore, if the Company is directed by the OTS or the FDIC to issue additional
shares of Common
                                                                            
Stock,  such issuance may result in the dilution in the  percentage of ownership
of the Company.

Limitations on Dividends and Other Capital Distributions. OTS regulations impose
various  restrictions on savings  associations  with respect to their ability to
make  distributions of capital,  which include  dividends,  stock redemptions or
repurchases,  cash-out  mergers  and other  transactions  charged to the capital
account.  OTS regulations also prohibit a savings  association from declaring or
paying any dividends or from repurchasing any of its stock if, as a result,  the
regulatory capital of the association would be reduced below the amount required
to be maintained for the liquidation  account established in connection with its
mutual to stock conversion.
<PAGE>

Generally,  savings  associations,  such as the Bank,  that before and after the
proposed  distribution  meet  their  capital  requirements,   may  make  capital
distributions  during  any  calendar  year  equal to the  greater of 100% of net
income  for the  year-to-date  plus 50% of the amount by which the lesser of the
association's   tangible,   core  or  risk-based  capital  exceeds  its  capital
requirement  for such  capital  component,  as measured at the  beginning of the
calendar year, or 75% of its net income for the most recent four quarter period.
However,  an association deemed to be in need of more than normal supervision by
the OTS may have its dividend authority  restricted by the OTS. The Bank may pay
dividends in accordance with this general authority.

Savings associations proposing to make any capital distribution need only submit
written  notice  to  the  OTS  30  days  prior  to  such  distribution.  Savings
associations  that do not,  or would  not meet  their  current  minimum  capital
requirements following a proposed capital distribution, however, must obtain OTS
approval  prior  to  making  such  distribution.  The  OTS  may  object  to  the
distribution  during that 30-day  notice  period  based on safety and  soundness
concerns. See "- Regulatory Capital Requirements."

The  OTS  has  proposed  regulations  that  would  revise  the  current  capital
distribution  restrictions.  Under the proposal a savings association may make a
capital  distribution  without notice to the OTS (unless it is a subsidiary of a
holding  company)  provided  that  it  has a  CAMEL  1 or 2  rating,  is  not of
supervisory concern, and would remain adequately  capitalized (as defined in the
OTS prompt corrective action regulations)  following the proposed  distribution.
Savings  associations  that would remain  adequately  capitalized  following the
proposed  distribution but do not meet the other noted  requirements must notify
the OTS 30 days prior to  declaring  a capital  distribution.  The OTS stated it
will generally regard as permissible that amount of capital  distributions  that
do not exceed 50% of the institution's excess regulatory capital plus net income
to date during the calendar year. A savings  association  may not make a capital
distribution  without  prior  approval  of  the  OTS  and  the  FDIC  if  it  is
undercapitalized  before,  or as a result of, such a distribution.  As under the
current  rule,  the  OTS  may  object  to a  capital  distribution  if it  would
constitute  an unsafe  or  unsound  practice.  No  assurance  may be given as to
whether or in what form the regulations may be adopted.

Liquidity. All savings associations,  including Washington Federal, are required
to  maintain  an  average  daily  balance  of liquid  assets  equal to a certain
percentage of the sum of its average daily balance of net  withdrawable  deposit
accounts and  borrowings  payable in one year or less.  For a discussion of what
Washington Federal includes in liquid assets,  see "Management's  Discussion and
Analysis of  Financial  Condition  and  Results of  Operations  - Liquidity  and
Capital  Resources"  in the Annual  Report to  Stockholders  filed as Exhibit 13
hereto.  This liquid asset ratio requirement may vary from time to time (between
4% and 10%) depending upon economic  conditions and savings flows of all savings
associations. At the present time, the minimum liquid asset ratio is 5%.

In addition,  short-term  liquid  assets  (e.g.,  cash,  certain time  deposits,
certain bankers  acceptances and short-term United States Treasury  obligations)
currently must constitute at least 1% of the association's average daily balance
of net withdrawable  deposit accounts and current  borrowings.  Penalties may be
imposed  upon   associations   for  violations  of  either  liquid  asset  ratio
requirement.  At June 30, 1997,  Washington  Federal was in compliance with both
requirements,  with an  overall  liquid  asset  ratio of 8.65% and a  short-term
liquid assets ratio of 3.56%.

Accounting.  An OTS policy  statement  applicable  to all  savings  associations
clarifies  and  re-emphasizes  that  the  investment  activities  of  a  savings
association  must be in  compliance  with  approved  and  documented  investment
policies and  strategies,  and must be accounted  for in  accordance  with GAAP.
Under the policy  statement,  management must support its  classification of and
accounting for loans and securities (i.e., whether held for investment,  sale or
trading) with  appropriate  documentation.  The Bank is in compliance with these
amended rules.

OTS  accounting  regulations,  which may be made more stringent than GAAP by the
OTS, require that  transactions be reported in a manner that best reflects their
underlying  economic substance and inherent risk and that financial reports must
incorporate any other accounting regulations or orders prescribed by the OTS.

Qualified  Thrift Lender Test. All savings  associations,  including  Washington
Federal,  are required to meet a qualified  thrift lender  ("QTL") test to avoid
certain  restrictions  on  their  operations.   This  test  requires  a  savings
association  to have  at  least  65% of its  portfolio  assets  (as  defined  by
regulation) in qualified thrift investments on a monthly average for nine out of
every 12 months on a rolling basis. As an alternative,  the savings  association
may maintain 60% of its assets in those assets specified in Section  7701(a)(19)
of the Code.  Under either test,  such assets  primarily  consist of residential
housing related loans and investments. At
<PAGE>
                                                                               
June 30,  1997,  the Bank met the test and has  always  met the test  since  its
effectiveness.

Any  savings  association  that  fails to meet the QTL test  must  convert  to a
national bank charter,  unless it requalifies as a QTL and thereafter  remains a
QTL. If an  association  does not  requalify  and  converts  to a national  bank
charter,  it must remain  SAIF-insured  until the FDIC permits it to transfer to
the BIF.  If such an  association  has not yet  requalified  or  converted  to a
national  bank,  its  new  investments  and  activities  are  limited  to  those
permissible  for both a  savings  association  and a  national  bank,  and it is
limited to national bank branching  rights in its home state.  In addition,  the
association is immediately  ineligible to receive any new FHLB borrowings and is
subject to national  bank limits for payment of dividends.  If such  association
has not requalified or converted to a national bank within three years after the
failure,  it must  divest  of all  investments  and  cease  all  activities  not
permissible  for a  national  bank.  In  addition,  it must repay  promptly  any
outstanding FHLB borrowings,  which may result in prepayment  penalties.  If any
association  that fails the QTL test is  controlled by a holding  company,  then
within one year after the failure,  the holding  company must register as a bank
holding  company  and  become  subject  to  all  restrictions  on  bank  holding
companies. See "- Holding Company Regulation."

Community  Reinvestment Act. Under the Community Reinvestment Act ("CRA"), every
FDIC insured institution has a continuing and affirmative  obligation consistent
with safe and sound  banking  practices  to help  meet the  credit  needs of its
entire community, including low and moderate income neighborhoods.  The CRA does
not  establish   specific   lending   requirements  or  programs  for  financial
institutions nor does it limit an institution's  discretion to develop the types
of products  and  services  that it believes  are best suited to its  particular
community, consistent with the CRA. The CRA requires the OTS, in connection with
the examination of the Bank, to assess the  institution's  record of meeting the
credit  needs of its  community  and to take such  record  into  account  in its
evaluation of certain  applications,  such as a merger or the establishment of a
branch, by the Bank. An  unsatisfactory  rating may be used as the basis for the
denial of an application by the OTS.

The federal banking  agencies,  including the OTS, have recently revised the CRA
regulations and the methodology for determining an institution's compliance with
the CRA. The Bank was examined for CRA  compliance  in April 1996 and received a
rating of Satisfactory - "2".

Transactions  with  Affiliates.   Generally,   transactions  between  a  savings
association or its  subsidiaries  and its affiliates are required to be on terms
as  favorable  to  the  association  as  transactions  with  non-affiliates.  In
addition,  certain of these  transactions,  such as loans to an  affiliate,  are
restricted to a percentage of the association's capital.  Affiliates of the Bank
include the Company and any company which is under common control with the Bank.
In addition,  a savings  association  may not lend to any  affiliate  engaged in
activities not  permissible for a bank holding company or acquire the securities
of most affiliates. The Bank's subsidiaries are not deemed affiliates,  however;
the OTS has the  discretion to treat  subsidiaries  of savings  associations  as
affiliates on a case by case basis.

Certain  transactions with directors,  officers or controlling  persons are also
subject to conflict of interest  regulations enforced by the OTS. These conflict
of interest  regulations and other statutes also impose restrictions on loans to
such persons and their related interests. Among other things, such loans must be
made on terms substantially the same as for loans to unaffiliated individuals.

Holding  Company  Regulation.  The Company is a unitary savings and loan holding
company  subject to  regulatory  oversight  by the OTS. As such,  the Company is
required to register and file reports with the OTS and is subject to  regulation
and examination by the OTS. In addition,  the OTS will has enforcement authority
over the Company and its non-savings association subsidiaries which also permits
the OTS to restrict or prohibit  activities  that are determined to be a serious
risk to the subsidiary savings association.
<PAGE>

As a unitary  savings and loan  holding  company,  the Company  generally is not
subject to activity  restrictions.  If the Company  acquires  control of another
savings association as a separate subsidiary, it would become a multiple savings
and loan  holding  company,  and the  activities  of the  Company and any of its
subsidiaries (other than the Bank or any other SAIF-insured savings association)
would become subject to such  restrictions  unless such other  associations each
qualify as a QTL and were acquired in a supervisory acquisition.

If  Washington  fails the QTL test,  the Company must obtain the approval of the
OTS prior to  continuing  after such  failure,  directly  or  through  its other
subsidiaries,  any  business  activity  other than those  approved  for multiple
savings and loan holding companies or their  subsidiaries.  In addition,  within
one year of such failure the Company must  register as, and will become  subject
to, the  restrictions  applicable  to bank  holding  companies.  The  activities
authorized  for a bank holding  company are more limited than are the activities
authorized for a unitary or multiple  savings and loan holding  company.  See "-
Qualified Thrift Lender Test."

The Company must obtain  approval from the OTS before  acquiring  control of any
other SAIF-insured  association.  Such acquisitions are generally  prohibited if
they result in a multiple savings and loan holding company  controlling  savings
associations in more than one state. However,  such interstate  acquisitions are
permitted based on specific state authorization or in a supervisory  acquisition
of a failing savings association.

Federal  Securities  Law.  The stock of the Company is  registered  with the SEC
under the Securities  Exchange Act of 1934, as amended (the "Exchange Act"). The
Company is subject  to the  information,  proxy  solicitation,  insider  trading
restrictions and other requirements of the SEC under the Exchange Act.

Company stock held by persons who are affiliates (generally officers,  directors
and  principal   stockholders)   of  the  Company  may  not  be  resold  without
registration or unless sold in accordance with certain resale  restrictions.  If
the Company  meets  specified  current  public  information  requirements,  each
affiliate  of the  Company  is  able  to  sell  in the  public  market,  without
registration, a limited number of shares in any three-month period.

Federal  Reserve  System.  The Federal  Reserve  Board  requires all  depository
institutions  to maintain  non-interest  bearing  reserves at  specified  levels
against  their  transaction  accounts  (primarily  checking,  NOW and  Super NOW
checking  accounts).  At June 30, 1997,  Washington was in compliance with these
reserve  requirements.  The balances maintained to meet the reserve requirements
imposed  by  the  Federal  Reserve  Board  may  be  used  to  satisfy  liquidity
requirements that may be imposed by the OTS. See "- Liquidity."

Savings  associations  are  authorized  to borrow from the Federal  Reserve Bank
"discount window," but Federal Reserve Board regulations require associations to
exhaust  other  reasonable   alternative   sources  of  funds,   including  FHLB
borrowings, before borrowing from the Federal Reserve Bank.

Federal Home Loan Bank System. The Bank is a member of the FHLB of Dallas, which
is one of 12 regional FHLBs, that administers the home financing credit function
of savings  associations.  Each FHLB serves as a reserve or central bank for its
members within its assigned region. It is funded primarily from proceeds derived
from the sale of consolidated  obligations of the FHLB System. It makes loans to
members (i.e.,  advances) in accordance with policies and procedures established
by the board of directors of the FHLB. These policies and procedures are subject
to the  regulation  and  oversight of the Federal  Housing  Finance  Board.  All
advances from the FHLB are required to be fully secured by sufficient collateral
as determined by the FHLB. In addition,  all long-term  advances are required to
provide funds for residential home financing.

As a member,  the Bank is required to purchase and maintain stock in the FHLB of
Des Moines.  At June 30,  1997,  Washington  Federal had $466,000 in FHLB stock,
which was in compliance with this requirement. In past years, Washington Federal
has received substantial  dividends on its FHLB stock. Over the past five fiscal
years, such dividends have averaged 7.58% and were 7.00% for fiscal year 1997.

Under federal law, the FHLBs are required to provide funds for the resolution of
troubled savings  associations  and to contribute to low- and moderately  priced
housing programs through direct loans or interest subsidies on advances targeted
for community  investment and low- and moderate-income  housing projects.  These
contributions have affected adversely the level of FHLB dividends paid and could
continue to do so in the future.  These contributions could also have an adverse
effect  on the  value  of FHLB  stock in the  future.  A  reduction  in value of
Washington  Federal's FHLB stock may result in a corresponding  reduction in the
Bank's capital.
<PAGE>

Federal and State Taxation

Federal  Taxation.  Savings  associations  such as the Bank  that  meet  certain
definitional  tests relating to the  composition of assets and other  conditions
prescribed by the Internal  Revenue Code of 1986,  as amended (the "Code"),  had
been permitted to establish  reserves for bad debts and to make annual additions
thereto which may, within specified  formula limits,  be taken as a deduction in
computing taxable income for federal income tax purposes.  The amount of the bad
debt  reserve  deduction  for  "non-qualifying  loans"  is  computed  under  the
experience  method. The amount of the bad debt reserve deduction for "qualifying
real property  loans"  (generally  loans secured by improved real estate) may be
computed under either the experience  method or the percentage of taxable income
method (based on an annual election).

Under  the  experience  method,  the bad debt  reserve  deduction  is an  amount
determined under a formula based generally upon the bad debts actually sustained
by the savings association over a period of years.

The  percentage of specially  computed  taxable income that is used to compute a
savings association's bad debt reserve deduction under the percentage of taxable
income method (the  "percentage  bad debt  deduction") is 8%. The percentage bad
debt deduction  thus computed is reduced by the amount  permitted as a deduction
for  non-qualifying  loans under the experience  method. The availability of the
percentage of taxable income method permits qualifying  savings  associations to
be taxed at a lower  effective  federal income tax rate than that  applicable to
corporations generally  (approximately 31.3% assuming the maximum percentage bad
debt deduction).

If an association's  specified assets  (generally,  loans secured by residential
real  estate  or  deposits,  educational  loans,  cash  and  certain  government
obligations)  constitute less than 60% of its total assets,  the association may
not deduct  any  addition  to a bad debt  reserve  and  generally  must  include
existing reserves in income over a four-year period.

Under the percentage of taxable income method, the percentage bad debt deduction
cannot  exceed the amount  necessary  to increase the balance in the reserve for
"qualifying  real  property  loans"  to an  amount  equal  to 6% of  such  loans
outstanding  at the end of the  taxable  year or the  greater  of (i) the amount
deductible  under the  experience  method or (ii) the amount which when added to
the bad debt deduction for "non-qualifying loans" equals the amount by which 12%
of the  amount  comprising  savings  accounts  at  year-end  exceeds  the sum of
surplus,  undivided  profits and reserves at the  beginning of the year. At June
30, 1997,  the 6% and 12%  limitations  did not restrict the percentage bad debt
deduction available to the Bank. It is not expected that these limitations would
be a limiting factor in the foreseeable future.

In August  1996,  legislation  was enacted  that  repeals the reserve  method of
accounting  (including  the  percentage of taxable  income  method) used by many
thrifts,  including  the Bank,  to calculate  their bad debt reserve for federal
income tax purposes.  As a result,  large thrifts must recapture that portion of
the  reserve  that  exceeds  the amount  that  could  have been taken  under the
specific  charge-off  method for  post-1987  tax  years.  The  legislation  also
requires thrifts to account for bad debts for federal income tax purposes on the
same basis as commercial  banks for tax years beginning after December 31, 1995.
The recapture will occur over a six-year  period,the  commencement of which will
be delayed  until the first  taxable  year  beginning  after  December 31, 1997,
provided the institution meets certain  residential  lending  requirements.  The
management of the Company and the Bank do not believe that the legislation  will
have a material  impact on the  Company or the Bank.  In addition to the regular
income  tax,  corporations,  including  savings  associations  such as the Bank,
generally are subject to a minimum tax. An alternative minimum tax is imposed at
a minimum tax rate of 20% on alternative  minimum taxable  income,  which is the
sum of a corporation's regular taxable income (with certain adjustments) and tax
preference items, less any available  exemption.  The alternative minimum tax is
imposed to the extent it exceeds the  corporation's  regular  income tax and net
operating  losses can  offset no more than 90% of  alternative  minimum  taxable
income.  For taxable years beginning  after 1986 and before 1996,  corporations,
including  savings  associations  such  as the  Bank,  are  also  subject  to an
environmental  tax equal to 0.12% of the excess of alternative  minimum  taxable
income for the taxable year  (determined  without regard to net operating losses
and the deduction for the environmental tax) over $2 million.
<PAGE>

To the extent earnings appropriated to a savings association's bad debt reserves
for  "qualifying  real  property  loans" and  deducted  for  federal  income tax
purposes  exceed  the  allowable  amount  of such  reserves  computed  under the
experience method and to the extent of the association's  supplemental  reserves
for  losses  on  loans("Excess"),  such  Excess  may not,  without  adverse  tax
consequences,   be  utilized  for  the  payment  of  cash   dividends  or  other
distributions   to  a  shareholder   (including   distributions  on  redemption,
dissolution or  liquidation) or for any other purpose (except to absorb bad debt
losses).  As of June 30,  1997  the  Bank's  Excess  for tax  purposes  totalled
approximately $418,000.

The Company  files  consolidated  federal  income tax returns with the Bank on a
fiscal year basis using the accrual method of accounting.  Savings associations,
such as the Bank, that file federal income tax returns as part of a consolidated
group are required by applicable  Treasury  regulations  to reduce their taxable
income for purposes of computing the  percentage  bad debt  deduction for losses
attributable  to  activities  of  the  non-savings  association  members  of the
consolidated  group  that are  functionally  related  to the  activities  of the
savings association member.

The  Company  has not been  audited  by the IRS for the last  five  years.  With
respect  to years  examined  by the  IRS,  either  all  deficiencies  have  been
satisfied or  sufficient  reserves  have been  established  to satisfy  asserted
deficiencies.  In the  opinion  of  management,  any  examination  of still open
returns would not result in a
                                                                          
deficiency which could have a material adverse effect on the financial condition
of the Company.

Iowa Taxation.  Washington Federal is subject to a franchise tax by the state of
Iowa.  The  franchise  tax is  imposed  annually  in an  amount  equal  to 5% of
Washington  Federal's  adjusted federal taxable income,  computed before any net
operating loss  deduction.  An alternative  minimum tax is imposed on Washington
Federal  to the  extent  such  tax  exceeds  Washington  Federal's  regular  tax
liability.  The  franchise  tax  is in  lieu  of  Iowa  income  tax  imposed  on
corporations  doing business within the State. The Company is not subject to the
Iowa franchise tax, but is subject to Iowa's regular corporate income tax.

Executive Officers

Set forth  below are the  names,  ages and  positions  of each of the  executive
officers of the Company.  Except as otherwise indicated,  the persons named have
served as  officers of the  Company  since it became the holding  company of the
Bank, and all offices and positions described below are with the Company and the
Bank. There are no arrangements or understandings  between the persons named and
any other person pursuant to which such officers were selected.

Stan Carlson,  age 40, was appointed  President and Chief  Executive  Officer of
Washington  Federal in 1993.  Prior to joining the Bank, he was  Executive  Vice
President of Northwoods State Bank, Northwoods, Iowa.

Sandra K. Bush, age 28, has been an employee of Washington  Federal for thirteen
years.  Mrs.  Bush is the Vice  President  of customer  service  for  Washington
Federal and is primarily responsible for deposits.

Jeff Johnson,  age 38, became Vice  President of  Washington  Federal  primarily
responsible for the Bank's lending  department in June 1995. Prior to that time,
he was branch manager with Midland Savings Bank, Des Moines, Iowa.

Leisha A. Linge,  age 32, has been an employee  of  Washington  Federal for five
years.  She  became  Controller  of  Washington  Federal in 1995 and acts as the
Bank's chief  financial and  accounting  officer.  Prior to that time, she was a
loan officer.

Employees

As of June 30, 1997  Washington  Federal had 14  full-time  and 7 part-time  and
seasonal employees.  None of Washington Federal's employees are represented by a
collective  bargaining group.  Washington Federal believes that its relationship
with its employees is satisfactory.
<PAGE>

Item 2. Description of Property

Washington  Federal  operates  from its main office and one  drive-up  facility.
Washington's  total  investment  in offices,  office  property and  equipment is
$1,191,000  with a net book value of $550,000 at June 30,  1997.  The  following
table sets forth information regarding Washington's properties:

                                                Net Book Value
                                               Of Real Property
                                Leased/    or Leasehold Improvements      Year
                                 Owned         At June 30, 1997          Opened
                                -------    -------------------------     ------
Location:
Main Office              
102 East Main Street
Washington, Iowa                 Owned             $215,000                1976

Drive-thru                                      
220 East Washington Street
Washington, Iowa                 Owned             $222,965                1994


Item 3. Legal Proceedings

Washington, from time to time, is a party to ordinary routine litigation,  which
arises in the  normal  course of  business,  such as  claims to  enforce  liens,
condemnation  proceedings  on  properties  in which  Washington  holds  security
interests, claims involving the making and servicing of real property loans, and
other issues incident to the business of Washington  Federal.  The resolution of
these  proceedings  should not have a material  adverse effect on the Company or
Washington.

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

No matter was submitted to a vote of security holders,  through the solicitation
of proxies or otherwise, during the quarter ended June 30, 1997.

                                     PART II

Item 5. Market for Common Equity and Related Stockholder Matters

Pages 48 and 49 of the  attached  1997 Annual  Report to  Stockholder  is herein
incorporated by reference.

Item 6. Management's Discussion and Analysis or Plan of Operations

Pages 6 to 17 of the  attached  1997 Annual  Report to  Stockholders  are herein
incorporated by reference.

Item 7. Financial Statements

Pages 18 to 46 of the Company's  1997 Annual Report to  Stockholders  are herein
incorporated by reference.

Item  8.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
          Financial Disclosure

          Not applicable.

                                    PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
        with Section 16(a) of the Exchange Act

Directors

Information  concerning  directors  and  executive  officers  of the  Company is
incorporated  herein by reference from the Company's  definitive Proxy Statement
for the Annual Meeting of Shareholders,  a copy of which will be filed not later
than 120 days after the close of the fiscal year.

Executive Officers

Information  regarding the business  experience of the executive officers of the
Company and the Bank who are not also directors contained in Part I of this Form
10-KSB is incorporated herein by reference.
<PAGE>

Compliance With Section 16(a) of the Exchange Act

Section 16(a) of the Exchange Act requires the Company's directors and executive
officers,  and  persons  who own  more  than  10% of a  registered  class of the
Company's equity  securities,  to file with the SEC initial reports of ownership
and reports of changes in  ownership  of Company  common  stock and other equity
securities  of the  Company  by the  tenth  of the  month  following  a  change.
Officers,  directors  and  greater  than 10%  stockholders  are  required by SEC
regulation  to furnish the Company  with copies of all Section  16(a) forms they
file.

To the  Company's  knowledge,  based  solely on a review  of the  copies of such
reports  furnished  to the  Company and  written  representations  that no other
reports were  required,  during the fiscal year ended June 30, 1997, all Section
16(a)  filing  requirements  applicable  to  its  officers,  directors  and  10%
beneficial owners were complied with.

Item 10. Executive Compensation

Information   concerning  executive   compensation  is  incorporated  herein  by
reference from the Company's  definitive  Proxy Statement for the Annual Meeting
of Shareholders, a copy of which will be filed not later than 120 days after the
close of the fiscal year.

Item 11. Security Ownership of Certain Beneficial Owners and Management

Information  concerning  security  ownership  of certain  beneficial  owners and
management is  incorporated  herein by reference  from the Company's  definitive
Proxy Statement for the Annual Meeting of Shareholders,  a copy of which will be
filed not later than 120 days after the close of the fiscal year.

Item 12. Certain Relationships and Related Transactions

Information  concerning  certain  relationships and transactions is incorporated
herein by reference from the Company's definitive Proxy Statement for the Annual
Meeting of  Shareholders,  a copy of which will be filed not later than 120 days
after the close of the fiscal year.


<PAGE>


Item 13. Exhibits and Reports on Form 8-K

         (a) Exhibits:


                                                                   Reference to
                                                                 Prior Filing or
Regulation S-B                                                    Exhibit Number
Exhibit Number                    Document                       Attached Hereto
--------------   ----------------------------------------------  ---------------
                                 
   2             Plan of Acquisition, Reorganization, 
                   Arrangement, Liquidation or Succession               None
   4.1           Articles of Incorporation and                           *
                   amendments thereto
   4.2           Bylaws                                                 4.2
   9             Voting Trust Agreement                                 None
  10             Executive Compensation Plans and Arrangements:
                   Employment Agreement with Stan Carlson                *
                   Employee Stock Ownership Plan                         *
                   Stock Option Plan                                     *
                   Recognition and Retention Plan                        *
  11             Statement re computation of per share earnings          11
  13             Annual Report to Security Holders                       13
  16             Letter re change in certifying accountant              None
  18             Letter re change in accounting principles              None
  21             Subsidiaries of Registrant                              21
  22             Published report regarding matter submitted            None
                   to vote
  23             Consent of  Accountants                                None
  24             Power of Attorney                                  Not Required
  27             Financial Data Schedule                                 27
  99             Additional Exhibits                                    None

--------------------- 

*    Filed  on  January  3,  1996,  as  exhibits  to  the  Company's   Form  S-1
     registration statement (File number 33-98778). All of such previously filed
     documents are hereby  incorporated  herein by reference in accordance  with
     Item 601 of Regulation S-B.

(b)  Reports on Form 8-K:

     No current reports on Form 8-K were filed by the Company during the three
     months ended June 30, 1997.


<PAGE>


                                   SIGNATURES

In  accordance  with  Section 13 or 15(d) of the Exchange  Act,  the  Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

WASHINGTON BANCORP


Date:  September 26, 1997                  By: /S/ STAN CARLSON
                                               ----------------
                                               Stan Carlson
                                               (Duly Authorized Representative)

In  accordance  with the Exchange  Act, this report has been signed below by the
following  persons on behalf of the  Registrant and in the capacities and on the
dates indicated.


/S/STAN CARLSON                                  /S/RICK R. HOFER
----------------------------------------         -------------------------------
Stan Carlson, President, Chief Executive         Rick R. Hofer, Chairman of the 
 Officer and Director                              Board
Date: September 26, 1997                         Date: September 26, 1997



/S/MYRON L. GRABER                               /S/RICHARD L. WEEKS
----------------------------------------         -------------------------------
Myron L. Graber, Director                        Richard L. Weeks, Director
Date: September 26, 1997                         Date: September 26, 1997


/S/MARY LEVY                                     /S/JAMES D. GORHAM
----------------------------------------         -------------------------------
Mary Levy, Director                              James D. Gorham, Director
Date: September 26, 1997                         Date: September 26, 1997


/S/J. RICHARD WILEY                              /S/LEISHA A. LINGE
----------------------------------------         -------------------------------
J. Richard Wiley, Director                       Leisha A. Linge, Treasurer
(Principal Financial and Accounting
Officer)
Date: September 26, 1997                         Date: September 26, 1997