Net Income Totals $5.7 Million, $.15 Per Share

    MINNEAPOLIS, July 23 /PRNewswire/ -- Arcadia Financial Ltd. (NYSE: AAC)
today reported net income of $5,743,000, or $.15 per fully diluted share, on
total revenues of $58,839,000 for the second quarter ended June 30, 1997.  In
the 1996 second quarter, the company reported net income of $14,715,000, or
$.40 per fully diluted share, on total revenues of $49,543,000.
    For the six months ended June 30, 1997, Arcadia reported a net loss of
$69,596,000, or $1.78 per fully diluted share on total revenues of $10,976,000
compared to net income of $25,793,000, or $.76 per fully diluted share, on
total revenues of $93,539,000 in the first six months of 1996.
    Results for the first six 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 $.26 per share for the six months ended June 30, 1997.
    Richard A. Greenawalt, Arcadia's president and chief executive officer,
said the company's second quarter performance was in line with management's
expectations under the new operating strategy and loan loss recovery
assumptions implemented in the first quarter of the current year.  "In the
second quarter, our recovery rate on repossessed vehicles averaged slightly
better than our assumed wholesale rate despite our more aggressive use of
wholesale channels to liquidate repossessions and control inventory size,"
said Greenawalt.
    Greenawalt said the company's second quarter performance also reflected a
healthy but more discriminating volume of loan purchases, including a planned
increase in the volume of Classic Program loans purchased, and the effective
management of net interest rate spreads.  "We remain sharply focused on
delivering predictable, sustainable profitability," said Greenawalt.  "Toward
that end, we continue to strengthen core areas of our business, including risk
management and underwriting, loan servicing and collections, and our retailing
infrastructure.  We are encouraged by the results our strategy is producing.
We currently expect favorable trends to prevail in loan loss recoveries and in
the performance of our portfolio of financed repossessions."

    Portfolio Performance and Credit Quality
    -- Loans delinquent more than 30 days were 2.66% of the company's loan
servicing portfolio at June 30, 1997 compared to 2.34% of the servicing
portfolio 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
2.83% for the three months ended June 30, 1997 compared to 4.48% during the
first quarter of 1997 (after special charge) and 1.27% for the fourth quarter
of 1996.
    -- Reserves for loan losses totaled $209.6 million, or 4.64% of the
quarter ending servicing portfolio at June 30, 1997 compared to
$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 Second Quarter Highlights
    -- Loan purchases totaled $738.5 million, up from $657.9 million in the
second quarter of 1996.  Higher yielding Classic Program loans accounted for
more than half of 1997 second quarter loan purchases compared to approximately
35 percent of loan purchases in the second quarter of 1996.
    -- The net interest rate spread on $747.4 million of loans securitized
during the second quarter was 8.04% compared to 6.64% for $674.4 million of
loans securitized during the second 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 June 30, 1997 totaled $4.5 billion
compared to $3.0 billion at June 30, 1996.
    -- Automobile dealers under contract increased to 8,869 at June 30, 1997
from 6,468 at June 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 by more than 8,800 dealers
in 42 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 "Cautionary Statements" in
Exhibit 99.1 to the company's Annual Report on Form 10-K.

    (Selected financial information follows.)


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

                                Three months ended          Six months ended
    Dollars in thousands,      June 30,     June 30,     June 30,     June 30,
     except per share data       1997         1996         1997         1996
    REVENUES:
       Net interest margin     $19,130      $15,085      $37,495      $27,385
       Gain on sale of loans    26,459       25,452      (51,428)      50,681
       Servicing fee income     11,047        6,557       20,525       12,300
       Other non-interest income 2,203        2,449        4,384        3,173
                                58,839       49,543       10,976       93,539
    EXPENSES:
       Operating expenses       38,925       19,937       79,568       39,953
       Long term debt and other
        interest expense        10,651        6,433       18,242       11,949
          Total expenses        49,576       26,370       97,810       51,902
       Operating income (loss)
        before income taxes and
         extraordinary item      9,263       23,173      (86,834)      41,637
          Income tax expense
           (benefit)             3,520        8,458      (33,066)      15,844
       Net income (loss) before
        extraordinary item       5,743       14,715      (53,768)      25,793
          Extraordinary item        --           --      (15,828)          --
       Net income (loss)        $5,743      $14,715     $(69,596)     $25,793

    Primary Earnings Per Share:
       Income (loss) per common
        share before extraordinary
        item                     $0.15        $0.43       $(1.37)       $0.85
       Extraordinary item per
        common share                --           --        (0.41)          --
       Net income (loss) per
        common share             $0.15        $0.43       $(1.78)       $0.85
    Fully Diluted Earnings Per Share:
       Income (loss) per share before
        extraordinary item       $0.15        $0.40       $(1.37)       $0.76
       Extraordinary item
        per share                   --           --        (0.41)          --
       Net Income (loss)
        per share                $0.15        $0.40       $(1.78)       $0.76

       Weighted average common and
        common equivalent
        shares outstanding
          Primary           39,182,748   33,508,215   39,163,325   29,397,320
          Fully diluted     39,182,748   37,205,287   39,239,574   33,981,805

    Number of automobile dealers                           8,869        6,468
    Number of buying centers                                  18           16
    Servicing portfolio (in millions)                   $4,514.0     $3,004.7
    Delinquencies as a percentage of
     servicing portfolio                                    2.66%        1.95%
    Book value per common share                            $8.81       $10.36
    Automobile loan purchases
     (in millions)              $738.5       $657.9     $1,520.4     $1,291.4
    Annualized net losses as a
     percentage of average
     servicing portfolio          2.83%        0.87%        3.63%        0.83%



    Dollars in thousands                                 June 30, December 31,
    ASSETS                                                 1997        1996
       Cash and cash equivalents                         $28,135      $16,057
       Due from securitization trust                     168,211      177,076
       Auto loans held for sale                           47,472       36,285
       Finance income receivable                         338,092      362,916
       Restricted cash in spread accounts                189,643      142,977
       Other assets                                       51,041       42,919
          Total assets                                  $822,594     $778,230

    LIABILITIES AND SHAREHOLDERS' EQUITY
       Amounts due under warehouse facilities            $97,722     $111,140
       Senior term notes                                 291,671      145,000
       Subordinated notes                                 51,742       53,689
       Capital lease obligations                           6,583        7,729
       Deferred income taxes                              11,620       54,387
       Accounts payable and accrued liabilities           27,986       13,192
          Total liabilities                              487,324      385,137
       Shareholders' equity                              335,270      393,093
          Total liabilities and shareholders' equity    $822,594     $778,230

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