Net Income Totals $7.8 Million, $.20 Per Share

     MINNEAPOLIS, Oct. 21 /PRNewswire/ -- Arcadia Financial Ltd. (NYSE: AAC)
today reported net income of $7,789,000, or $.20 per fully diluted share, on
total revenues of $63,664,000 for the third quarter ended September 30, 1997.
In the 1996 third quarter, the company reported net income of $17,157,000, or
$.44 per fully diluted share, on total revenues of $57,072,000.
     For the nine months ended September 30, 1997, Arcadia reported a net loss
of $61,807,000, or $1.58 per fully diluted share, on total revenues of
$74,640,000 compared to net income of $42,950,000, or $1.20 per fully diluted
share, on total revenues of $150,611,000 in the first nine months of 1996.
     Results for the first nine months of 1997 reflect the effects of special
charges totaling $79.7 million, or $2.03 per share, taken in the first quarter
of the current year. Excluding the effects of the special charges, Arcadia
would have reported net income of $.11 per share for the first quarter of 1997
and $.46 per share for the nine months ended September 30, 1997.
    Richard A. Greenawalt, Arcadia's president and chief executive officer,
said the company's third quarter results show that the revised operating
strategies and loan loss recovery assumptions implemented in the first quarter
are producing controlled, profitable growth, as management intended.  "In the
third quarter, as in the second, our average recovery rate on repossessed
vehicles was modestly better than our assumed wholesale rate.  We achieved
this better-than-wholesale recovery rate even as we continued to liquidate a
higher percentage of repossessions through wholesale channels to maintain our
inventory of repossessed vehicles at an acceptable level," said Greenawalt.
     Greenawalt said 1997 third quarter loan purchases were approximately 5.9%
higher than in the third quarter of 1996, reflecting the company's continuing
emphasis on more selective originations.  "We continue to increase the volume
of loans purchased under our Classic Program because of the attractive risk-
adjusted profitability these loans offer and the lower participation fees they
require," said Greenawalt.  In addition, Greenawalt said the company achieved
an increase in the yield on Premier Program loans purchased during the quarter
as a result of its more discriminating loan purchasing practices.
     "Credit quality trends are tracking our expectations and our ongoing
efforts to strengthen our risk management, underwriting, loan servicing and
retail remarketing are producing the results we expected," said Greenawalt.
"We are confident that our strategies will prove to be a formula for
predictable, sustainable profitability and remain comfortable with the range
of analyst earnings estimates for the coming quarters."

     Portfolio Performance and Credit Quality
     -- Loans delinquent more than 30 days were 2.88% of the company's loan
servicing portfolio at September 30, 1997 compared to 2.66% of the servicing
portfolio at June 30, 1997, 2.34% at March 31, 1997 and 2.64% of the servicing
portfolio at December 31, 1996.
     -- Annualized net losses as a percentage of the servicing portfolio were
3.11% for the three months ending September 30, 1997, compared to 2.83% for
the 1997 second quarter, 4.48% for the 1997 first quarter (after special
charge) and 1.27% for the 1996 fourth quarter.
     -- Reserves for loan losses totaled $218.3 million, or 4.52% of the
quarter ending servicing portfolio at September 30, 1997, compared to
$209.6 million, or 4.64% of the servicing portfolio at June 30, 1997,
$197.1 million, or 4.7% of the servicing portfolio, at March 31, 1997 and
$95 million, or 2.51% of the servicing portfolio, at December 31, 1996.

     1997 Third Quarter Highlights
     -- Loan purchases totaled $760.3 million, up from $718.2 million in the
third quarter of 1996. Higher yielding Classic Program loans accounted for
approximately 57% of third quarter loan purchases compared to approximately
39% of loan purchases in the third quarter of 1996.
     -- The net interest rate spread on $754.2 million of loans securitized
during the third quarter was 8.41% compared to 6.86% for $737 million of loans
securitized during the third quarter of 1996.  The increase in net interest
rate spread results primarily from the increase in the percentage of higher
yielding Classic Program loans securitized during the quarter.
     -- The company's servicing portfolio at September 30, 1997 totaled
$4.8 billion compared to $3.4 billion at September 30, 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 43 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" in the company's Quarterly Report on Form 10-Q filed April 24,
1997, and as set forth under the caption "Risk Factors" in the company's
prospectus supplement dated October 3, 1997 to prospectus dated March 7, 1997.

                  (Selected financial information follows.)

     Arcadia Financial LTD
     Selected Financial and Other Operating Data
     September 30, 1997

                                Three months ended          Nine months ended
                                  September 30,             September 30,
    Dollars in thousands,
     except per share data     1997           1996          1997          1996

    REVENUES:
    Net interest margin    $20,122       $18,079      $57,617       $45,464
    Gain on sale of loans   28,788        30,113     (22,640)        80,794
    Servicing fee income    12,155         7,474       32,680        19,774
    Other non-interest income2,599         1,406        6,983         4,579
                            63,664        57,072       74,640       150,611
    EXPENSES:
    Operating expenses      40,701        23,393      120,269        63,346
    Long term debt and
     other interest expense 10,400         6,660       28,642        18,609
    Total expenses          51,101        30,053      148,911        81,955
    Operating income (loss)
     before income taxes
     and extraordinary item 12,563        27,019     (74,271)        68,656
    Income tax expense
     (benefit)               4,774         9,862     (28,292)        25,706
    Net income (loss) before
     extraordinary item      7,789        17,157     (45,979)        42,950
    Extraordinary item          --            --     (15,828)            --
    Net income (loss)       $7,789       $17,157    $(61,807)       $42,950

     Primary Earnings Per Share:
     Income (loss) per common
      share before
      extraordinary item     $0.20         $0.47      $(1.17)         $1.32
    Extraordinary item
     per common share           --            --       (0.41)            --
    Net income (loss)
     per common share        $0.20         $0.47      $(1.58)         $1.32
    Fully Diluted
     Earnings Per Share:
    Income (loss) per share
    before extraordinary item$0.20         $0.44      $(1.17)         $1.20
    Extraordinary item per share--            --       (0.41)            --
    Net Income (loss)
     per share               $0.20         $0.44      $(1.58)         $1.20

    Weighted average common
     and common equivalent
     shares outstanding
    Primary             39,231,961    35,896,149   39,221,089    31,564,219
    Fully diluted       39,412,220    39,423,446   39,309,403    35,851,933

    Number of buying centers                               18            17
    Servicing portfolio
     (in millions)                                   $4,824.6      $3,394.6
    Delinquencies as a
     percentage of
     servicing portfolio                                2.88%         2.19%
    Book value per
     common share                                         $9.02        $10.85
    Automobile loan
     purchases (in millions)$760.3        $718.2     $2,280.7      $2,009.6
    Annualized net losses as
    a percentage of average
    servicing portfolio      3.11%         0.95%        3.44%         0.88%


    Dollars in thousands          September 30,            December 31,
    ASSETS                            1997                     1996
    Cash and cash equivalents     $17,720                 $16,057
    Due from securitization trust 149,430                 177,076
    Auto loans held for sale       55,630                  36,285
    Finance income receivable     353,019                 362,916
    Restricted cash
     in spread accounts           226,566                 142,977
    Other assets                   49,891                  42,919
    Total assets                 $852,256                $778,230

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Amounts due under
     warehouse facilities        $126,263                $111,140
    Senior term notes             291,886                 145,000
    Subordinated notes             51,294                  53,689
    Capital lease obligations       5,942                   7,729
    Deferred income taxes          16,394                  54,387
    Accounts payable
     and accrued liabilities       16,495                  13,192
    Total liabilities             508,274                 385,137
    Shareholders' equity          343,982                 393,093
    Total liabilities and
     shareholders' equity        $852,256                $778,230

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