MINNEAPOLIS, Jan. 29 /PRNewswire/ -- Arcadia Financial Ltd. (NYSE: AAC)
today reported net income of $4,000,000, or $.10 per diluted share, on total
revenues of $60,773,000 for the fourth quarter ended December 31, 1997.  In
the comparable 1996 period, the company reported net income of $17,366,000, or
$.45 per diluted share, on total revenues of $62,884,000.
     For the year ended December 31, 1997, Arcadia Financial reported a net
loss of $57,807,000, or $1.49 per diluted share, on total revenues of
$135,413,000 compared to net income of $60,316,000, or $1.65 per diluted
share, on total revenues of $213,495,000 for the prior year.  Results for 1997
reflect the effects of special charges totaling $79.7 million, or $2.05 per
diluted share, taken in March 1997.  Excluding the effects of these charges,
Arcadia would have reported net income of $.56 per diluted share for the year
ended December 31, 1997.
     Richard A. Greenawalt, Arcadia's president and chief executive officer,
said the company's fourth quarter results reflect the effects of a slowdown in
used car sales and the company's continuing emphasis on more selective loan
purchases.  The company previously announced that it expected loan purchases
in the fourth quarter to be less than in the 1997 third quarter.  Arcadia's
1997 fourth quarter loan purchases totaled $582.1 million compared to $760.3
million in the 1997 third quarter and $740.9 million in the 1996 fourth
quarter.
     "The slowdown in used car sales has decreased the flow of loan
applications overall and, in particular, at credit quality levels that fit our
loan programs and our tightened focus on profitable volume," said Greenawalt.
"In addition, the softness in the used car market has adversely affected
recovery rates on repossessed vehicles, which were slightly below 60 percent
for the quarter."  Arcadia's inventory of repossessed vehicles totaled $55
million at December 31, 1997, up from $49 million at September 30, 1997, but
down from $69 million at December 31, 1996, resulting in part from weak demand
for used cars during the quarter.
     Commenting on the performance of the company's loan portfolio, Greenawalt
said that loans purchased in 1995 through mid 1996 are performing below the
company's expectations and adversely affecting delinquencies, defaults and
losses.  "These loans, which make up approximately 30 percent of the servicing
loan portfolio, will be a drag on portfolio performance for the near term.
However, we are adequately reserved for these pools and our more recent loan
purchases, which make up nearly 70 percent of the servicing portfolio, are
performing at or better than our credit-quality expectations and our financial
statement assumptions," said Greenawalt.
     Greenawalt said the company's financial position and liquidity remain
strong. Total cash, including cash in restricted spread accounts, is
approximately $393 million and year-end warehousing capacity totaled $875
million.  "Our decision to slow our growth is benefiting cash flow," said
Greenawalt.  "The increase in the percentage of total loan purchases accounted
for by Classic Program loans, which have lower dealer participation fees, and
the overall slowdown in loan purchases are reducing cash outflows.
Concurrently, cash inflows from restricted cash spread accounts are
increasing. As a result, excess cash releases from restricted cash spread
accounts in the fourth quarter increased to $30.1 million compared to $25.2
million in the third quarter and $14.5 million in the fourth quarter of 1996.
We expect this trend to continue," said Greenawalt.
     Greenawalt noted that the company has recently begun implementing a new
organizational structure designed to help improve efficiency and operating
effectiveness company-wide.  "We have formalized, accelerated and broadened
the scope of our ongoing initiatives to position Arcadia to deliver
predictable, sustainable results.  We are encouraged by the portfolio
performance trends in our more recent originations and will continue to
standardize around the policies, processes and procedures that are producing
these results."
     Portfolio Performance and Credit Quality
     -- Loans delinquent more than 30 days were 3.63 percent of the company's
loan servicing portfolio at December 31, 1997, compared to 2.88 percent at
September 30, 1997 and 2.64 percent at December 31, 1996.
     -- Annualized net losses as a percentage of the average servicing
portfolio were 3.58 percent for the three months ending December 31, 1997,
compared to 3.11 percent for the three month ending September 30, 1997 and
1.27 percent for the three months ending December 31, 1996.
     -- Reserves for loan losses totaled $235.6 million, or 4.75 percent of
the servicing portfolio at December 31, 1997, compared to $218.3 million, or
4.52 percent of the servicing portfolio at September 30, 1997 and $95.0
million, or 2.51 percent of the servicing portfolio, at December 31, 1996.
     1997 Fourth Quarter Highlights
     -- Loan purchases for the fourth quarter totaled $582.1 million.  Classic
loan purchases were 63.1 percent of total loan purchases in the quarter,
compared to 57.1 percent in the third quarter and 45.1 percent in the 1996
fourth quarter.
     -- The net interest rate spread on the $587.8 million of loans
securitized in the fourth quarter was 8.85 percent compared to 8.41 percent
for $754.2 million of loans securitized in the 1997 third quarter and 7.45
percent for $720.2 million of loans securitized in the 1996 fourth quarter.
     -- Operating expenses as a percent of the servicing portfolio have
decreased for four consecutive quarters, a trend we hope to continue in future
quarters from a high of 4.09 percent in the March 1997 quarter to 3.41 percent
in the current quarter.
     -- The company's servicing portfolio at December 31, 1997 totaled $5.0
billion compared to $3.8 billion at December 31, 1996.
     Arcadia Financial Ltd. is a Minneapolis-based consumer financial services
company specializing in purchasing, selling and servicing retail installment
contracts for new and used automobiles originated in 45 states.  The company,
founded in 1990, is the nation's largest independent provider of automobile
financing.  Its 18 Regional Buying Centers are located in Arizona; northern
and southern California; Colorado; Florida; Georgia; Maryland; Massachusetts;
Minnesota; Missouri; New York; North Carolina; Ohio; Tennessee; north, south
and west Texas; and Washington.
     This news release contains forward-looking statements that are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those projected.  The most significant among these risks and
uncertainties are (1) the company's ability to achieve adequate interest rate
spreads, (2) the level of delinquencies, gross charge-offs and net losses, and
(3) the level of operating expenses.  Earnings may also be affected by the
effects of economic factors on consumer debt and by competitive pressures.
Additional risks which may affect the company's future performance are
detailed under the caption "Management's Discussion and Analysis -- Cautionary
Statements" and under the caption "Cautionary Statements" in Exhibit 99.1 in
the company's Quarterly Report on Form 10-Q filed November 13, 1997.

    (Selected financial information follows.)

    Arcadia Financial LTD
    Selected Financial and Other Operating Data
    December 31, 1997
                                Three months ended      Twelve months ended
                                     December 31,            December 31,
    Dollars in thousands,
    except per share data          1997         1996        1997        1996
    REVENUES:
       Net interest margin        $14,942     $15,240     $64,499     $54,083
       Gain on sale of loans       25,458      34,979       2,818     115,773
       Servicing fee income        20,311      12,551      67,794      43,514
       Other non-interest income       62         114         302         125
                                   60,773      62,884     135,413     213,495
    EXPENSES:
       Operating expenses          41,748      28,952     162,017      92,298
       Long term debt and
        other interest expense     12,574       6,584      41,216      25,193
         Total expenses            54,322      35,536     203,233     117,491
       Operating income (loss)
        before income taxes
        and extraordinary item      6,451      27,348     (67,820)     96,004
      Income tax expense (benefit)  2,451       9,982     (25,841)     35,688
      Net income (loss) before
      extraordinary item            4,000      17,366     (41,979)     60,316
      Extraordinary item               --          --     (15,828)         --
      Net income (loss)            $4,000     $17,366    $(57,807)    $60,316

    Basic Earnings per Share:
        Income (loss) per common
         share before extraordinary
         item                       $0.10       $0.48      $(1.08)      $1.91
        Extraordinary item
        per common share               --          --       (0.41)         --
        Net income (loss)
        per common share            $0.10       $0.48      $(1.49)      $1.91
    Diluted Earnings per Share:
       Income (loss) per share
        before extraordinary item   $0.10       $0.45      $(1.08)      $1.65
       Extraordinary item per share    --          --       (0.41)         --
       Net Income (loss) per share  $0.10       $0.45      $(1.49)      $1.65


   Weighted average shares outstanding
      Basic                    38,806,897  35,883,440  38,700,346  30,897,426
      Diluted                  39,242,445  38,935,961  39,256,788  36,449,995

    Number of buying centers                                   18          17
    Servicing portfolio (in millions)                    $4,956.1    $3,791.9
    Delinquencies as a
     percentage of servicing
     portfolio                                               3.63%       2.64%
    Book value per common share                             $9.13      $10.79
    Automobile loan purchases
     (in millions)                 $582.1      $740.9    $2,862.8    $2,750.6
    Annualized net losses as a
     percentage of
     average servicing               3.58%       1.27%       3.48%       0.99%


Dollars in thousands
                                 December 31,             December 31,
    ASSETS                            1997                     1996
      Cash and cash equivalents   $17,274                 $16,057
      Due from securitization
       trust                      107,207                 177,076
      Auto loans held for sale     49,133                  36,285
      Finance income receivable   371,985                 362,916
      Restricted cash in
        spread accounts           250,297                 142,977
      Other assets                 49,854                  42,919
      Total assets               $845,750                $778,230

    LIABILITIES AND SHAREHOLDERS' EQUITY
      Amounts due under
       warehouse facilities       $30,880                $111,140
      Senior term notes           365,640                 145,000
      Subordinated notes           50,772                  53,689
      Capital lease obligations     5,368                   7,729
      Deferred income taxes        18,846                  54,387
      Accounts payable and
       accrued liabilities         26,302                  13,192
      Total liabilities           497,808                 385,137
      Shareholders' equity        347,942                 393,093
      Total liabilities and
       shareholders' equity      $845,750                $778,230

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