WASHINGTON FEDERAL, INC.
ANNUAL REPORT 2001
[Washington Federal Savings Logo]
WASHINGTON FEDERAL SAVINGS
425 Pike Street, Seattle, WA 98101
www.washingtonfederal.com
TABLE OF CONTENTS
Financial Highlights 1
To Our Stockholders 2
Management's Discussion 4
Selected Financial Data 7
Financial Statements 8
Notes to Financial Statements 12
Accountant's Report 27
General Information 27
Directors, Officers, Offices 28
A SHORT HISTORY
Washington Federal, Inc. (Company) is a savings and loan holding company
headquartered in Seattle, Washington. Its principal subsidiary is Washington
Federal Savings (Association) which operates 111 branches in seven western
states.
The Association had its origin on April 24, 1917 as Ballard Savings and Loan
Association. In 1935, the state-chartered Association converted to a federal
charter, became a member of the Federal Home Loan Bank System and obtained
federal insurance. In 1958, Ballard Federal Savings and Loan Association merged
with Washington Federal Savings and Loan Association of Bothell, and the latter
name was retained for its wider geographic acceptance. In 1971, Seattle Federal
Savings and Loan Association, then with three offices, was merged into the
Association, and at the end of 1978, was joined by the 10 offices of First
Federal Savings and Loan Association of Mount Vernon.
On November 17, 1982, the Association converted from a federal mutual to a
federal stock association. In 1987 and 1988, acquisitions of United First
Federal, Provident Federal Savings and Loan, and Northwest Federal Savings and
Loan, all headquartered in Boise, Idaho, added 28 Idaho offices to the
Association. In 1988, the acquisition of Freedom Federal Savings and Loan
Association in Corvallis, Oregon, added 13 Oregon offices, followed in 1990 by
the eight Oregon offices of Family Federal Savings Association.
In 1991, the acquisition of First Federal Savings and Loan Association of
Idaho Falls, Idaho, added three branches to our system. That same year, we
acquired the deposits of First Western Savings Association of Las Vegas, Nevada,
doing business in Portland and Eugene, Oregon, as Metropolitan Savings
Association. In 1992, we changed the name of all our Oregon division branches
from Freedom Federal Savings to Washington Federal Savings and shortened our
original corporate name to Washington Federal Savings. In 1993, the Association
completed its purchase of First Federal Savings Bank of Salt Lake City, Utah,
which provided 10 branches in the state. Then, during 1994, we expanded into
Arizona and began operating five branch offices in Tucson. In 1995, the
stockholders voted to approve a reorganization whereby Washington Federal
Savings became a wholly-owned subsidiary of a newly formed holding company,
Washington Federal, Inc. The Company purchased West Coast Mutual Savings Bank
which included its one branch office in Centralia, Washington. Also during the
year, we sold our Burley, Idaho branch office and opened three new offices in
Washington, two more in Tucson, Arizona, and one each in Oregon and Utah. In
1996, we opened one new office in Oregon, one in Washington, and three in
Phoenix, Arizona. In November 1996, we purchased Metropolitan Bancorp of
Seattle, Washington, which added eight branches in the Puget Sound region. In
1997, we opened three new offices, one each in: Portland, Oregon; Tucson,
Arizona; and Phoenix, Arizona. We also closed one of our offices in Idaho Falls,
Idaho, consolidating the deposits into our main Idaho Falls office. In 1998, we
opened two new branches in Phoenix, Arizona, and one in Portland, Oregon. We
also consolidated two Tucson, Arizona offices into one. In 1999, we consolidated
two offices into one in Salt Lake City, Utah, and opened a new office in
Riverton, Utah. We also opened one new office in Phoenix, Arizona. In 2000, we
consolidated two offices into one in Boise, Idaho, sold our Mountain Home
branch, and opened one new branch each in Phoenix and Tucson, Arizona. We also
opened our first branch in Las Vegas, Nevada.
In 2001, we opened two new branches in Mesa and Gilbert, Arizona. We also
opened our first branch in the Park Cities area of Dallas, Texas.
The Association obtains its funds primarily through savings deposits from
the general public, from repayments of loans and from borrowings and retained
earnings. These funds are used largely to make first lien loans to borrowers for
the purchase of new and existing homes, the acquisition and development of land
for residential lots, the construction of homes, the financing of other real
estate, and for investment in obligations of the U.S. government, its agencies
and municipalities. The Association also has a wholly-owned subsidiary, First
Insurance Agency, Inc., which provides general insurance to the public.
FINANCIAL HIGHLIGHTS
September 30, 2001 2000 % Change
- -----------------------------------------------------------------------------------------------------------
(In thousands, except per share data)
Assets ...................................................... $7,026,743 $6,719,841 +5%
Investment securities ....................................... 145,724 142,992 +2
Loans receivable and securitized assets subject to repurchase 5,388,105 4,949,235 +9
Mortgage-backed securities .................................. 1,182,204 1,328,105 -11
Customer accounts ........................................... 4,316,692 3,465,270 +25
Federal Home Loan Bank advances and other borrowings ........ 1,667,500 2,363,509 -29
Stockholders' equity ........................................ 874,009 759,165 +15
Net income .................................................. 113,614 105,679 +8
Diluted earnings per share .................................. 1.95 1.82 +7
Dividends per share ......................................... 0.94 0.89 +6
Stockholders' equity per share .............................. 15.11 13.24 +14
Shares outstanding .......................................... 57,862 57,333 +1
Return on average stockholders' equity ...................... 14.59% 14.27% +2
Return on average assets .................................... 1.65 1.65 --
TOTAL ASSETS
[BAR GRAPH]
Dollars in millions (At September 30)
1981 699
1986 1,302
1991 2,785
1996 5,115
2001 7,027
STOCKHOLDER'S EQUITY
[BAR CHART]
Dollars in millions (At September 30)
1981 66
1986 156
1991 368
1996 578
2001 874
NET INCOME PER DILUTED SHARE
[BAR GRAPH]
$
1997 1.66
1998 1.75
1999 1.86
2000 1.82
2001 1.95
CASH DIVIDENDS PER SHARE
[BAR GRAPH]
$
1997 0.68
1998 0.74
1999 0.82
2000 0.89
2001 0.94
RETURN ON AVERAGE EQUITY
[BAR GRAPH]
Annualized %
1997 16.5
1998 15.68
1999 15.47
2000 14.27
2001 14.59
INTEREST RATE SPREADS
[BAR GRAPH]
Fiscal Years: 1999 2000 2001
End of Quarter % Dec 31 2.69 2.62 2
Mar 31 2.76 2.47 2.43
Jun 30 2.78 2.14 2.73
Sep 30 2.72 2.04 3
TO OUR STOCKHOLDERS
It is a privilege to report to you that your Company was once again able to
achieve outstanding results during the past fiscal year. After beginning the
year with the narrowest net interest spread in our history as a public company,
we were able to take full advantage of the lower short-term rates that the
Federal Reserve began targeting in January. Thereafter, our net interest spread
improved continually to a six-year high of 3.09% at year-end, enabling the
Company to achieve earnings growth in each successive quarter. Net income for
the year measured $113,614,000, an increase of 8% over the $105,679,000 reported
last year. Earnings per share increased for the 17th time in 19 years to a
record $1.95, up from $1.82 in the prior year, a 7% improvement. The fiscal year
produced a return on average assets of 1.65% and a return on equity of 14.59%.
While we rarely measure success at Washington Federal by anything other than
profitability, it is interesting to note that for the first time in our history,
total assets exceeded $7 billion at year-end. Most of this growth can be
attributed to an 8.9% increase in loans, the result of excellent new loan
production totaling $1.74 billion. Permanent single-family mortgage loans, the
safest loans that we or any other financial institution place on the balance
sheet, represent the majority of new loan originations. Three out of four of
these loans were extended for the purpose of purchasing or constructing a home,
with refinances totaling only one-fourth of new mortgage loan production, a much
lower percentage than the industry as a whole. Due to the slowing economy, land
and construction loans outstanding actually declined during the fiscal year.
This is a testament not only to the disciplined credit culture we maintain, but
also to the experience and conservatism of the homebuilders and developers to
which we lend. Finally, we continued to expand our multi-family lending program.
That portfolio increased by 36% to $392 million during the year and is the
fastest growing part of our business. Asset quality overall remained high. Loan
delinquencies, non-performing assets and charge-offs continue to rank among the
best in the industry and we believe that the Company is well positioned to
absorb any losses inherent in the portfolio.
In your review of the accompanying financial statements, you will notice
that during the year, we completed the securitization of over 13,000
single-family mortgage loans, which were reclassified on the balance sheet as
Securitized Assets Subject to Repurchase. This transaction resulted in no
additional credit risk to the Company, as repayment still relies upon the
underlying mortgage loans; however, it does create important financial benefits
that will improve profitability in future periods.
A particularly encouraging event in 2001 was the dramatic increase in
customer deposit accounts. Seeking safety and predictable returns, consumers in
our market territory responded to an aggressive marketing program, which
resulted in $851 million in additional deposits, nearly a 25% increase over the
prior year-end. The growth in deposits allowed us to reduce borrowed funds and
provides the Company a great deal of flexibility in managing interest rate risk
and funding future asset growth.
As always, expense control and capital management continued to be important
areas of management attention. The Company's industry-leading efficiency ratio
improved to 18.9% for the year and our operating expense ratio improved to .71%
of assets. Higher profitability and an increase in the value of our
mark-to-market assets enabled the Company's capital to assets ratio to increase
to a very strong 12.44%, which is approximately double the industry average.
This increase came after the payout of $54 million in cash dividends. In
January, a 10% stock dividend was also declared, marking the 16th time that a
stock split or stock dividend has been declared in the past 19 years.
Geographic expansion also continued during the year. In Phoenix, we added
two new offices and the Company entered the Texas market with its first branch,
located in the Park Cities area of Dallas. Two additional offices are under
construction in the Phoenix market and one in the Lake Oswego area of Portland.
In Las Vegas, the Summerlin branch finished its first year as the fastest
growing office in our history. A second Nevada office located in the Henderson
area will open this fall and we believe that it will be equally successful. We
will, of course, continue to review expansion opportunities in each of our
current markets.
We also commenced conversion to a new branch platform system in order to
maintain the high quality of customer service for which we are known. We were
actually quite happy with the old system, which had been in place for 20 years;
however, it had become nearly impossible to find parts for the old hardware! I
am also pleased to report that the Company's emergency planning and preparedness
allowed business to continue uninterrupted during the major earthquake in the
Puget Sound area of Washington and in the wake of the September 11th terrorist
attacks on the East Coast.
Importantly, the Company continued to implement the designed transition of
its senior management team during the year. As planned and after 33 years in the
job, Executive Vice President Chuck Richmond transferred many of his day-to-day
responsibilities and the Chief Lending Officer role to Jack Jacobson in January
2001. Jack's promotion came after a number of years managing corporate real
estate, multi-family lending and special assets at Washington Federal. We are
very fortunate to have someone of his talent and dedication to step forward in
this critical role and I look forward to working with him on the Management
Committee for many years to come. We are equally delighted that Chuck, like
2
Chairman and former CEO Guy Pinkerton, continues to devote as much time as we
ask of him to the Company.
In July 2001 Bill Cassells, Executive Vice President and another
long-standing member of the Management Committee, retired after 24 years with
Washington Federal. Bill's professional oversight of our information technology
platform was a primary driver of the Company's efficiency over the years. Bill
brought a calming presence, ready wisdom and frugal practicality to the
Management Committee that will be difficult to replace. We wish him all the best
in a well-earned retirement.
Finally, I wish to advise you that Richard (Dick) Reed will retire from the
Board effective January 1, 2002 and assume Emeritus status after many years of
dedicated service. Dick's intellect always served to enliven board discussions
and we will miss his articulate presence and broad knowledge of the Company and
its history. The directors and management of Washington Federal wish to express
their sincere appreciation for his valuable counsel as a director over the past
35 years.
Each year seems to present its challenges, and this new fiscal year is no
exception. Near-term, the impact of a weakening economy on the housing industry
and consumer saving habits is of primary concern. I wish to remind you that our
conservative operating model has historically allowed us to prosper even in
periods of uncertainty and we believe that will be the case during this downturn
as well. Longer term, perhaps the biggest challenge facing Washington Federal as
a local market, portfolio housing lender is the continued encroachment on our
traditional markets by U.S. government-sponsored enterprises such as Fannie Mae
and Freddie Mac. Even the Federal Home Loan Banks have entered the market
through their direct purchase program and Ginnie Mae is seeking broadened powers
as well. These entities enjoy the advantages of a government funding subsidy,
lower capital requirements and few regulatory constraints. It seems likely that
at some point the sheer magnitude of their debt obligations will require
Congress to reconsider the soundness of this model. Regardless, we believe that
our strong capital position, hallmark efficiency, dedication to asset quality
and local market presence will allow us to continue our long history of high
performance.
In closing, I wish to thank the stockholders for their support during the
past year. I am also grateful to the Board and to my predecessor, Chairman Guy
Pinkerton, for his patient mentoring. Finally, I wish to thank the Management
Committee and all my fellow employees for the dedicated effort that led to the
excellent results posted this past year.
I hope to see you at the Annual Stockholder's Meeting on January 23, 2002,
at 2:00 p.m. at the Sheraton Hotel in Seattle.
Sincerely,
/s/ Roy M. Whitehead
- ---------------------
Roy M. Whitehead
President and Chief
Executive Officer
[GROUP PICTURE]
(Standing - left to right) Ronald L. Saper, Executive Vice President and Chief
Financial Officer, Jack B. Jacobson, Executive Vice President and Chief Lending
Officer, Edwin C. Hedlund, Executive Vice President and Secretary. (Seated) Roy
M. Whitehead, President and Chief Executive Officer.
3
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL Washington Federal, Inc. (Company) is a savings and loan holding
company. The Company's primary operating subsidiary is Washington
Federal Savings (Association).
INTEREST The Company accepts a high level of interest rate volatility as a
RATE RISK result of its policy to originate fixed-rate single family home
loans which are longer-term than the short-term characteristics of
its liabilities of customer accounts and borrowed money. At
September 30, 2001, the Company had approximately $2,500,000,000
more liabilities subject to repricing in the next year than assets
subject to repricing, which amounted to a negative maturity gap of
36% of total assets. The Company's interest rate risk approach has
never resulted in the recording of a monthly operating loss.
The Company experienced a significant increase in interest rate
spreads in fiscal 2001. Spreads increased during the year as the
Federal Reserve lowered short-term interest rates from 6.50% in
January 2001 to 3.00% in September 2001. The year closed with a
3.09% interest rate spread, up from 2.04% at the beginning of the
year. During this phase of the interest rate cycle, the Company
chose to increase its assets. To fund the increase in assets the
Company grew customer deposits by 24.6% in the year to an equivalent
of 61.4% of total assets at September 30, 2001 compared to 51.6% of
total assets at September 30, 2000. This growth in deposits allowed
the Company to decrease its Federal Home Loan Bank (FHLB) advances
and other borrowed money to an equivalent of 23.7% of total assets
at September 30, 2001 compared to 35.2% at September 30, 2000.
ASSET The Company maintains an allowance to absorb losses inherent in the
QUALITY loan portfolio. The allowance is based on ongoing, quarterly
assessments of the probable and estimable losses inherent in the
loan portfolio. In analyzing the existing loan portfolio, the
Company applies specific loss percentage factors to the different
loan types. The loss percentages are based on management's
continuing evaluation of the pertinent factors underlying the
quality of the loan portfolio, including changes in the size and
composition of the loan portfolio, actual loan loss experience and
current economic conditions.
Income property loans, builder construction loans and certain other
loans are reviewed on an individual basis. They are reviewed to
assess the ability of the borrowers to continue to service all of
their principal and interest obligations. If the loans show signs of
weakness, they will be downgraded, and if warranted, placed on
non-accrual status. The Company has an Asset Quality Review
Committee that reports the results of its internal reviews to the
Board of Directors on a quarterly basis.
Non-performing assets increased slightly to $33,800,000 or .48% of
total assets at September 30, 2001 compared to $31,400,000 or .47%
of total assets at September 30, 2000. Total delinquencies over 30
days were $49,400,000 or .70% of total assets at September 30, 2001
compared to $36,100,000 or .54% of total assets at September 30,
2000. The aforementioned asset quality indicators, when compared to
others in the industry, demonstrate the continued quality of the
loan portfolio and reflect the Company's high underwriting
standards.
LIQUIDITY The Company's net worth at September 30, 2001 was $874,009,000 or
AND 12.4% of total assets. This is an increase of $114,844,000 from
CAPITAL September 30, 2000 when net worth was $759,165,000 or 11.3% of total
RESOURCES assets. This increase is attributable to higher profitability and an
increase in the fair value of the available for sale securities. The
ratio of net worth to total assets remains at a high level despite
the distribution of 47.5% of earnings in the form of cash dividends.
The Company's net worth increased due in part to net income of
$113,614,000, proceeds received from the exercise of common stock
options and purchases by the Employee Stock Ownership Plan of
$6,122,000 and appreciation in the valuation reserve for
available-for-sale securities of $48,000,000. Net worth was reduced
by $54,011,000 as a result of cash dividends paid.
Washington Federal's percentage of net worth to total assets is
among the highest in the nation and is approximately three times the
minimum required under Office of Thrift Supervision (OTS)
regulations (see Note O). Management believes this strong net worth
position will help protect the Company against interest rate risk
and will enable it to compete more effectively.
Customer accounts increased $851,422,000 or 24.6% from a year ago,
largely due to our strategy of building deposits in a decreasing
interest rate environment through competitive pricing.
The Company's cash and investment securities amounted to
$176,055,000 at September 30, 2001, a slight increase from
$171,278,000 a year ago. Few investment securities matured during
the year and the Company continued to emphasize origination of
higher yielding loans.
CHANGES IN AVAILABLE-FOR-SALE AND HELD-TO-MATURITY SECURITIES. The Company
FINANCIAL purchased $89,882,000 of mortgage-backed and investment securities,
POSITION all of which have been categorized as available-for-sale.
The Company had $50,282,000 in sales of securities resulting in net
realized gains of $3,235,000. All sales were mortgage-backed
securities which were categorized as available-for-sale. As of
September 30, 2001, the Company had unrealized gains in its
available-for-sale portfolio of $51,000,000, net of tax, which are
recorded as part of stockholders' equity.
In March, the Company completed the securitization of over 13,000
residential mortgage loans into a real estate mortgage investment
conduit (REMIC). The Company is currently the holder of all of the
securities issued by the REMIC. The result of this transaction was a
transfer of securitized loans and related capitalized costs,
deferred loan fees and allowance for loan losses into a new line
item on the balance sheet-securitized assets subject to repurchase,
which continues to be accounted for in a manner similar to
residential mortgage loans.
LOANS RECEIVABLE AND SECURITIZED ASSETS SUBJECT TO REPURCHASE. Loans
receivable and securitized assets subject to repurchase increased
8.9% during fiscal 2001 to $5,388,105,000 at September 30, 2001 from
$4,949,235,000 a year earlier. The loans receivable balance
increased substantially due to a near-record level of loan
originations
4
totaling $1,744,216,000, a 14.6% increase from a year ago. This
level of loan origination reflects the favorable interest rate
environment available during the year.
REAL ESTATE HELD FOR SALE. The balance at September 30, 2001 was
$16,778,000, a slight decrease from $17,416,000 reported one year
ago.
FHLB STOCK. FHLB stock amounted to $124,361,000 at September 30,
2001 compared with $116,314,000 one year ago as the Company received
$8,047,000 in stock dividends during the year.
COSTS IN EXCESS OF NET ASSETS ACQUIRED. As of September 30, 2001,
costs in excess of net assets acquired totaled $35,703,000. The
Company periodically monitors these assets for potential impairment
in accordance with Statement of Financial Accounting Standards
(SFAS) No. 121, "Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of." As of September 30, 2001, there was no
impairment of costs in excess of net assets acquired. The Company
will provide for any diminution in value of these assets should an
impairment be identified. As discussed in Note Q, effective October
1, 2001, new accounting rules will no longer require the periodic
amortization of the Company's intangible assets. During fiscal 2001,
$5,614,000 of costs in excess of net assets acquired were amortized.
CUSTOMER ACCOUNTS. Customer accounts at September 30, 2001 totaled
$4,316,692,000 compared with $3,465,270,000 at September 30, 2000, a
24.6% increase. See "Liquidity and Capital Resources" above.
FHLB ADVANCES AND OTHER BORROWINGS. Total borrowings decreased 29.4%
to $1,667,500,000. See "Interest Rate Risk" above.
GENERAL
RESULTS OF Fiscal 2001 net income increased 8% from fiscal 2000. See Note S,
OPERATIONS "Selected Quarterly Financial Data (Unaudited)" which highlights the
quarter-by-quarter results for the years ended September 30, 2001
and 2000.
Dec 31 Mar 31 Jun 30 Sep 30 Dec 31 Mar 31 Jun 30 Sep 30
1999 2000 2000 2000 2000 2001 2001 2001
------------------------------------------------------------------------------------
Interest rate on loans and
mortgage-backed securities* 7.70% 7.76% 7.86% 7.90% 7.91% 7.80% 7.67% 7.61%
Interest rate on
investment securities** ... 8.11 7.83 7.83 7.82 7.81 7.79 8.01 7.79
------------------------------------------------------------------------------------
Combined .............. 7.72 7.76 7.86 7.90 7.91 7.80 7.68 7.62
Interest rate on
customer accounts ......... 4.84 4.95 5.32 5.57 5.67 5.47 5.08 4.31
Interest rate on
borrowings ................ 5.56 5.85 6.30 6.29 6.26 5.21 4.71 5.09
------------------------------------------------------------------------------------
Combined .............. 5.10 5.29 5.72 5.86 5.91 5.37 4.95 4.53
------------------------------------------------------------------------------------
Interest rate spread .......... 2.62% 2.47% 2.14% 2.04% 2.00% 2.43% 2.73% 3.09%
====================================================================================
*Includes securitized assets subject to repurchase.
**Includes municipal bonds at tax-equivalent rates.
The interest rate spread increased during fiscal 2001 from 2.04% at
September 30, 2000 to 3.09% at September 30, 2001.
COMPARISON OF FISCAL 2001 RESULTS WITH FISCAL 2000
Net interest income increased $17,774,000 (8.9%) in fiscal 2001 over
fiscal 2000 largely due to the Federal Reserve's 350 basis point
decrease of short-term interest rates between January and September
2001.
Interest on loans and mortgage-backed securities increased
$37,895,000 (7.9%) in fiscal 2001 from 2000. The increase is largely
a result of the increase in earning asset volumes as the Company
originated $1,744,216,000 in loans; offsetting loan repayments and
payoffs of $1,320,634,000. Average interest rates on loans and
mortgage-backed securities decreased to 7.61% from 7.90% one year
ago.
Interest and dividends on investment securities increased $488,000
(2.8%) in fiscal 2001 from fiscal 2000. The weighted average yield
declined to 7.79% at September 30, 2001 compared with 7.82% at
September 30, 2000. The combined investment securities and FHLB
stock portfolio increased 4.2% to $270,085,000 at September 30, 2001
versus $259,306,000 one year ago.
Interest on customer accounts increased 12.7% to $194,710,000 for
fiscal 2001 from $172,735,000 for fiscal 2000. The increase related
to an increase in customer accounts to $4,316,692,000 from
$3,465,270,000 the prior year, offset by decrease in the average
cost of customer accounts to 4.31% at year end compared to 5.57% one
year ago.
Interest on FHLB advances and other borrowings decreased slightly to
$125,410,000 in fiscal 2001, from $126,776,000 in fiscal 2000. This
slight decrease was partially due to a decrease in the average rates
paid to 5.09% for the year ended September 30, 2001 compared to
6.29% for the year ended September 30, 2000. This decrease in
average rates was offset by an increase in average borrowings to
$2,264,001,000 in fiscal 2001 from $2,115,423,000 in fiscal 2000.
5
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
The provision for loan losses was $1,850,000 for fiscal 2001
compared to none in fiscal 2000. This increase reflects the amount
required to maintain the allowance for losses at an appropriate
level based upon management's evaluation of the adequacy of the
allowance and an increase in actual charge-offs experienced.
However, non-performing assets remained low at $33,758,000 or .48%
of total assets at September 30, 2001 compared with $31,393,000 or
.47% of total assets at September 30, 2000. Management continued to
maintain the allowance for loan losses at current levels which, at
$19,683,000 or 58% of non-performing assets, is within an acceptable
range of estimated losses inherent in the portfolio.
Total other income decreased $641,000 (6.2%) in fiscal 2001 from
fiscal 2000. Net gains on the sale of available-for-sale securities
totaled $3,235,000 in fiscal 2001 compared to $4,058,000 in fiscal
2000. Other income increased $182,000 over fiscal 2000 due to
increased transactional revenue.
Other expense increased $2,467,000 (5.3%) in fiscal 2001 over fiscal
2000. This increase is primarily attributed to increased
compensation expense resulting from a bonus paid to all employees
based on improved operating results. Personnel, including part-time
employees considered on a full-time equivalent basis, increased to
714 at September 30, 2001 compared to 676 staff at September 30,
2000. The branch network increased to 111 offices at September 30,
2001 versus 108 offices one year ago. Other expense for fiscal 2001
equaled .71% of average assets compared with .73% in fiscal 2000.
Income taxes increased $4,350,000 (7.6%) in fiscal 2001. The
effective tax rate was 35.25% for both fiscal 2001 and 2000.
COMPARISON OF FISCAL 2000 RESULTS WITH FISCAL 1999
Net interest income decreased $12,571,000 (6%) in fiscal 2000 over
fiscal 1999 largely due to increases in short-term interest rates
which the Federal Reserve raised 175 basis points between June 1999
and May 2000.
Interest on loans and mortgage-backed securities increased
$44,328,000 (10%) in fiscal 2000 from 1999. The increase is largely
a result of the increase in earning asset volumes as the Company
originated $1,522,290,000 in loans with refinance activity slowing
dramatically from the prior year when the Company originated a
record $1,769,612,000 in loans. Average interest rates on loans and
mortgage-backed securities increased to 7.90% from 7.66% in the
prior year.
Interest and dividends on investment securities decreased $1,878,000
(10%) in fiscal 2000 from fiscal 1999. The weighted average yield
declined to 7.82% at September 30, 2000 compared with 8.03% at
September 30, 1999. The combined investment securities and FHLB
stock portfolio increased slightly to $259,306,000 at September 30,
2000 versus $250,597,000 one year before.
Interest on customer accounts increased 8% to $172,735,000 for
fiscal 2000 from $159,942,000 for fiscal 1999. The increase related
to an increase in customer accounts to $3,465,270,000 from
$3,379,502,000 the prior year, as well as the average cost of
customer accounts which increased to 5.57% at year end compared to
4.71% one year ago.
Interest on FHLB advances and other borrowings increased $42,228,000
(50%) in fiscal 2000 over fiscal 1999. This increase was partially
due to an increase in average borrowings from $1,578,352,000 to
$2,115,423,000. The average rates paid increased to 6.29% at
September 30, 2000 versus 5.40% at September 30, 1999. The provision
for loan losses was not necessary during fiscal 2000 compared to
$684,000 in fiscal 1999 reflecting management's historical
conservative lending philosophy. Non-performing assets remained low
at $31,393,000 or .47% of total assets at September 30, 2000
compared with $21,300,000 or .35% of total assets at September 30,
1999. Management continued to maintain the allowance for loan losses
at levels which, at $20,831,000 or 66% of non-performing assets, was
within an acceptable range of estimated losses, yet conservative
compared with others in the industry. The lack of provision is
reflective of the excellent economic conditions within the Company's
marketplace during fiscal 2000.
Other income decreased $2,288,000 (18%) in fiscal 2000 from fiscal
1999. Net gains on the sale of available-for-sale securities totaled
$4,058,000 in fiscal 2000 compared to $2,747,000 in fiscal 1999.
Other income included several non-recurring transactions in fiscal
1999, the largest of which provided the Company $2,223,000 of
pre-tax income during the year.
Other expense increased $545,000 (1%) in fiscal 2000 over fiscal
1999. This minimal increase resulted from general inflationary
increases offset by lower deposit insurance premiums which declined
$823,000, as well as a reduction in staff through attrition.
Personnel, including part-time employees considered on a full-time
equivalent basis, declined to 676 at September 30, 2000 compared to
700 staff at September 30, 1999. The branch network increased to 108
offices at September 30, 2000 versus 107 offices one year before.
Other expense for fiscal 2000 equaled .73% of average assets
compared with .80% in fiscal 1999.
Income taxes decreased $5,295,000 (8%) in fiscal 2000. The effective
tax rate was 35.25% for fiscal 2000 compared with 35.50% for fiscal
1999.
IMPACT OF The Consolidated Financial Statements and related Notes presented
INFLATION herein have been prepared in accordance with accounting principles
AND generally accepted in the United States of America, which require,
CHANGING to a large extent, the measurement of financial position and
PRICES operating results in terms of historical dollars without considering
changes in the relative purchasing power of money over time due to
inflation.
Unlike many industrial companies, substantially all of the assets
and virtually all of the liabilities of the Company are monetary in
nature. As a result, interest rates have a more significant impact
on the Company's performance than the general level of inflation.
Over short periods of time, interest rates may not necessarily move
in the same direction or in the same magnitude as inflation.
6
SELECTED FINANCIAL DATA
Year ended September 30, 2001 2000 1999 1998 1997
- ----------------------------------------------------------------------------------------------------
(In thousands, except per share data)
Interest income .............. $536,410 $498,027 $455,577 $460,604 $459,007
Interest expense ............. 320,120 299,511 244,490 252,233 257,447
----------------------------------------------------------------
Net interest income .......... 216,290 198,516 211,087 208,371 201,560
Provision for loan losses .... 1,850 -- 684 740 813
Other income ................. 9,736 10,377 12,665 11,032 5,077
Other expense ................ 48,712 45,714 45,987 44,878 42,486
----------------------------------------------------------------
Income before income taxes 175,464 163,179 177,081 173,785 163,338
Income taxes ................. 61,850 57,500 62,795 61,949 58,288
----------------------------------------------------------------
Net income ............... $113,614 $105,679 $114,286 $111,836 $105,050
================================================================
Per share data
Basic earnings per share . $ 1.97 $ 1.83 $ 1.87 $ 1.76 $ 1.68
Diluted earnings per share 1.95 1.82 1.86 1.75 1.66
Cash dividends ........... 0.94 0.89 0.82 0.75 0.67
September 30, 2001 2000 1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------------
(In thousands)
Total assets ........................ $7,026,743 $6,719,841 $6,163,503 $5,637,011 $5,719,589
Loans and mortgage-backed securities* 6,570,309 6,277,340 5,731,644 5,119,571 5,137,905
Investment securities ............... 145,724 142,992 141,753 234,013 289,750
Customer accounts ................... 4,316,692 3,465,270 3,379,502 3,156,202 2,978,031
FHLB advances ....................... 1,637,500 1,209,000 1,454,000 1,356,500 1,601,000
Other borrowings .................... 30,000 1,154,509 454,257 221,819 303,544
Stockholders' equity ................ 874,009 759,165 750,023 767,172 717,745
Number of
Customer accounts ............... 211,570 191,343 189,419 184,832 180,957
Mortgage loans .................. 42,032 41,741 40,104 40,615 41,820
Offices ......................... 111 108 107 106 104
*Includes securitized assets subject to repurchase#
7
WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
September 30, 2001 2000
- ----------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data)
ASSETS
Cash .................................................................. $ 30,331 $ 28,286
Available-for-sale securities, amortized cost $1,002,496 and $1,173,463 1,079,896 1,178,464
Held-to-maturity securities, fair value $259,937 and $292,264 ......... 248,032 292,633
Securitized assets subject to repurchase, net ......................... 1,180,336 --
Loans receivable, net ................................................. 4,207,769 4,949,235
Interest receivable ................................................... 48,280 40,700
Premises and equipment, net ........................................... 54,242 50,487
Real estate held for sale ............................................. 16,778 17,416
FHLB stock ............................................................ 124,361 116,314
Costs in excess of net assets acquired ................................ 35,703 41,577
Other assets .......................................................... 1,015 4,729
----------------------------------
$7,026,743 $6,719,841
==================================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Customer accounts
Savings and demand accounts ............................... $ 4,251,113 $ 3,375,036
Repurchase agreements with customers ...................... 65,579 90,234
----------------------------------
4,316,692 3,465,270
FHLB advances ................................................. 1,637,500 1,209,000
Other borrowings, primarily securities sold under agreements
to repurchase ................................................. 30,000 1,154,509
Advance payments by borrowers for taxes and insurance ......... 23,196 29,093
Federal and state income taxes, including net deferred
liabilities of $79,208 and $49,999 ............................ 94,118 53,012
Accrued expenses and other liabilities ........................ 51,228 49,792
----------------------------------
6,152,734 5,960,676
STOCKHOLDERS' EQUITY
Common stock, $1.00 par value, 100,000,000 shares authorized,
69,006,173 and 68,525,260 shares issued; 57,861,561 and
57,333,025 shares outstanding ............................. 69,006 62,296
Paid-in capital ............................................... 893,633 785,745
Accumulated other comprehensive income, net of tax ............ 51,000 3,000
Treasury stock, at cost; 11,144,612 and 11,192,235 shares ..... (189,212) (190,018)
Retained earnings ............................................. 49,582 98,142
----------------------------------
874,009 759,165
----------------------------------
$ 7,026,743 $ 6,719,841
==================================
See Notes to Consolidated Financial Statements.
8
WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Year ended September 30, 2001 2000 1999
- -----------------------------------------------------------------------------------------------------------
(In thousands, except per share data)
INTEREST INCOME
Loans and securitized assets subject to repurchase .. $ 428,532 $ 384,851 $ 353,930
Mortgage-backed securities .......................... 89,952 95,738 82,331
Investment securities ............................... 17,926 17,438 19,316
-------------------------------------------------
536,410 498,027 455,577
INTEREST EXPENSE
Customer accounts ................................... 194,710 172,735 159,942
FHLB advances and other borrowings .................. 125,410 126,776 84,548
-------------------------------------------------
320,120 299,511 244,490
-------------------------------------------------
NET INTEREST INCOME ................................. 216,290 198,516 211,087
Provision for loan losses ........................... 1,850 -- 684
-------------------------------------------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES . 214,440 198,516 210,403
OTHER INCOME
Gain on sale of mortgage-backed securities, net ..... 3,235 4,058 2,747
Other ............................................... 6,501 6,319 9,918
-------------------------------------------------
9,736 10,377 12,665
OTHER EXPENSE
Compensation and fringe benefits .................... 28,283 26,739 26,485
Amortization of intangibles ......................... 5,875 6,006 6,056
Occupancy expense ................................... 4,497 4,096 4,001
Other ............................................... 10,458 9,805 9,559
-------------------------------------------------
49,113 46,646 46,101
Gain on real estate acquired through foreclosure, net 401 932 114
-------------------------------------------------
INCOME BEFORE INCOME TAXES .......................... 175,464 163,179 177,081
Income taxes
Current ......................................... 58,641 59,045 75,507
Deferred ........................................ 3,209 (1,545) (12,712)
-------------------------------------------------
61,850 57,500 62,795
-------------------------------------------------
NET INCOME .......................................... $ 113,614 $ 105,679 $ 114,286
=================================================
PER SHARE DATA
Basic earnings per share ............................ $ 1.97 $ 1.83 $ 1.87
Diluted earnings per share .......................... 1.95 1.82 1.86
Cash dividends ...................................... 0.94 0.89 0.82
Weighted average number of shares outstanding,
including dilutive stock options ................ 58,232,659 58,206,825 61,387,456
See Notes to Consolidated Financial Statements 9
WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Accumulated
Other
Common Paid-in Retained Comprehensive Treasury
Stock Capital Earnings Income Stock Total
- ------------------------------------------------------------------------------------------------------------------------------------
(In thousands)
Balance at October 1, 1998 ........... $ 56,424 $ 714,700 $ 53,269 $ 35,000 $ (92,221) $767,172
Eleven-for-ten stock split
distributed February 26, 1999 .... 5,643 68,617 (74,360) (100)
Comprehensive income:
Net income ....................... 114,286 114,286
Other comprehensive income,
net of tax:
Unrealized losses on securities (28,228) (28,228)
Reclassification adjustment for
gains on securities sold ... (1,772) (1,772)
---------
Total comprehensive income ........... 84,286
Dividends ............................ (49,209) (49,209)
Proceeds from exercise of
common stock options ............. 125 1,427 1,552
Proceeds from Employee
Stock Ownership Plan ............. 287 973 1,260
Treasury stock ....................... (54,938) (54,938)
---------------------------------------------------------------------------------------
Balance at September 30, 1999 ........ 62,192 785,031 43,986 5,000 (146,186) 750,023
---------------------------------------------------------------------------------------
Comprehensive income:
Net income ....................... 105,679 105,679
Other comprehensive income,
net of tax:
Unrealized gains on securities 628 628
Reclassification adjustment for
gains on securities sold ... (2,628) (2,628)
---------
Total comprehensive income ........... 103,679
Dividends ............................ (51,310) (51,310)
Proceeds from exercise of
common stock options ............. 92 1,117 1,209
Proceeds from Employee
Stock Ownership Plan ............. (604) 4,653 4,049
Restricted stock issuance ............ 12 201 (213) --
Treasury stock ....................... (48,485) (48,485)
---------------------------------------------------------------------------------------
Balance at September 30, 2000 ........ 62,296 785,745 98,142 3,000 (190,018) 759,165
---------------------------------------------------------------------------------------
Eleven-for-ten stock split
distributed February 23, 2001 .... 6,247 101,767 (108,105) (91)
Comprehensive income:
Net income ....................... 113,614 113,614
Other comprehensive income,
net of tax:
Unrealized gains on securities 50,095 50,095
Reclassification adjustment for
gains on securities sold ... (2,095) (2,095)
---------
Total comprehensive income ........... 161,614
Dividends ............................ (54,011) (54,011)
Proceeds from exercise of
common stock options ............. 459 5,663 6,122
Proceeds from Employee
Stock Ownership Plan ............. 346 806 1,152
Restricted stock issuance ............ 4 112 (58) 58
---------------------------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 2001 ........ $ 69,006 $ 893,633 $ 49,582 $ 51,000 $(189,212) $874,009
=======================================================================================
10
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Washington Federal, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended September 30, 2001 2000 1999
- -----------------------------------------------------------------------------------------------------------------------------------
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ........................................................................... $ 113,614 $ 105,679 $ 114,286
Adjustments to reconcile net income to net cash provided by operating activities
Amortization of fees, discounts, and premiums, net ................................ (143) (4,933) (8,855)
Amortization of costs in excess of net assets acquired ............................ 5,874 6,006 6,056
Depreciation ...................................................................... 2,996 2,337 2,263
Gain on investment securities and real estate held for sale ....................... (3,636) (4,990) (2,861)
Increase in accrued interest receivable ........................................... (7,580) (4,179) (1,346)
Increase in income taxes payable .................................................. 15,106 1,508 142
FHLB stock dividends .............................................................. (8,047) (7,470) (7,794)
Decrease in other assets .......................................................... 3,714 603 5,334
Increase in accrued expenses and other liabilities ................................ 1,436 2,682 993
-------------------------------------------
Net cash provided by operating activities ............................................ 123,334 97,243 108,218
-------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Loans and contracts originated
Loans on existing property ........................................................ (1,157,278) (923,290) (1,058,403)
Construction loans ................................................................ (369,808) (451,582) (425,190)
Land loans ........................................................................ (130,161) (118,947) (121,853)
Loans refinanced .................................................................. (86,969) (28,471) (164,166)
-------------------------------------------
(1,744,216) (1,522,290) (1,769,612)
Savings account loans originated ..................................................... (3,342) (3,004) (4,420)
Loan principal repayments ............................................................ 1,320,634 961,634 1,481,097
Increase (decrease) in undisbursed loans in process .................................. (29,503) (17,087) 48,862
Loans purchased ...................................................................... (2,842) (1,630) (1,138)
Available-for-sale securities purchased .............................................. (89,882) (150,287) (765,963)
Principal payments and maturities of available-for-sale securities ................... 216,992 132,608 297,809
Available-for-sale securities sold ................................................... 50,282 12,442 22,726
Held-to-maturity securities purchased ................................................ -- (4,010) --
Principal payments and maturities of held-to-maturity securities ..................... 45,325 36,540 122,621
Proceeds from sales of real estate held for sale ..................................... 19,268 14,335 13,435
Premises and equipment purchased, net ................................................ (6,751) (2,714) (3,491)
-------------------------------------------
Net cash used by investing activities ................................................ (224,035) (543,463) (558,074)
-------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in customer accounts .................................................... 851,422 85,768 223,300
Net increase (decrease) in short-term borrowings ..................................... (1,646,009) 455,252 329,938
Proceeds from long-term borrowings ................................................... 950,000 -- --
Proceeds from exercise of common stock options ....................................... 6,122 1,209 1,552
Dividends paid ....................................................................... (54,044) (51,310) (49,209)
Proceeds from Employee Stock Ownership Plan .......................................... 1,152 4,049 1,260
Treasury stock purchased, net ........................................................ -- (48,485) (54,938)
Increase (decrease) in advance payments by borrowers for taxes and insurance ......... (5,897) 2,986 775
-------------------------------------------
Net cash provided by financing activities ............................................ 102,746 449,469 452,678
-------------------------------------------
Increase in cash ..................................................................... 2,045 3,249 2,822
Cash at beginning of year ............................................................ 28,286 25,037 22,215
-------------------------------------------
Cash at end of year .................................................................. $ 30,331 $ 28,286 $ 25,037
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Non-cash investing activities
Real estate acquired through foreclosure .......................................... $ 18,229 $ 14,140 $ 13,807
Non-cash operating activities
Assets securitized, subject to repurchase, net .................................... 1,388,197 -- --
Cash paid during the year for
Interest .......................................................................... 322,933 295,129 245,987
Income taxes ...................................................................... 45,746 54,744 60,412
See Notes to Consolidated Financial Statements 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999
NOTE A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements
include the accounts of Washington Federal, Inc. (Company) and its
wholly-owned subsidiaries. All significant intercompany transactions
and balances have been eliminated.
DESCRIPTION OF BUSINESS. Washington Federal, Inc. is a savings and loan
holding company. The Company's principal operating subsidiary is
Washington Federal Savings (Association). The Company is principally
engaged in the business of attracting savings deposits from the general
public and investing these funds, together with borrowings and other
funds, in one-to-four family residential real estate loans and, in
limited circumstances, income-producing property real estate loans. The
Company conducts its activities through a network of 111 full-service
branch offices located in Washington, Oregon, Idaho, Utah, Arizona,
Nevada and Texas.
INVESTMENT AND MORTGAGE-BACKED SECURITIES. The Company accounts for
investment and mortgage-backed securities in two categories:
held-to-maturity and available-for-sale.
Held-to-Maturity Securities - Securities classified as held-to-maturity
are accounted for at amortized cost, but the Company must have both the
positive intent and the ability to hold those securities to maturity.
There are very limited circumstances under which securities in the
held-to-maturity category can be sold without jeopardizing the cost
basis of accounting for the remainder of the securities in this
category. Recognition for unrealized losses is provided for if any
market valuation differences are deemed to be other than temporary.
Available-for-Sale Securities - Securities not classified as
held-to-maturity are considered to be available-for-sale. Gains and
losses realized on the sale of these securities are based on the
specific identification method. Unrealized gains and losses for
available-for-sale securities are excluded from earnings and reported
as a net amount in a separate component of stockholders' equity until
realized.
Premiums and discounts on investments. Premiums and discounts on
investments are deferred and recognized over the life of the asset
using the interest method based on actual balances.
Forward contracts to purchase mortgage-backed securities are recorded
at fair value on the balance sheet as available-for-sale securities.
These contracts are designated by the Company as cash flow hedges of
the price risk of the anticipated purchase of securities. Under cash
flow hedge accounting, if specific criteria are met, the unrealized
gains or losses are recognized as a component of stockholders' equity
through comprehensive income until the related forecasted purchase of
securities occurs whereupon the remaining unrealized gains or losses
are included in the basis of the purchased securities. To the extent
that forward contracts to purchase securities fail to meet hedging
criteria, including purchasing the mortgage-backed securities within a
specific time frame, the fair value of the contracts will be included
in earnings.
The Company may enter into certain forward contracts to sell
mortgage-backed securities to hedge the price risk in certain
mortgage-backed securities accounted for as available-for-sale
securities. To the extent forward sales contracts meet specific hedging
criteria, the market value change associated with the contract is
recorded through comprehensive income. To the extent that forward sales
contracts fail to meet hedging criteria, the fair value of the
contracts will be recorded in earnings.
SECURITIZED ASSETS SUBJECT TO REPURCHASE - In March 2001, the Company
transferred some of its permanent single-family residential loans into
a Real Estate Mortgage Investment Conduit (REMIC). The REMIC then
issued securities backed by such loans, all of which were retained by
the Company. The terms of the transfer of the loans to the REMIC
contain a call provision whereby the Company can repurchase the loans
when the outstanding balance of the pool declines to 15% or less of the
original amount, therefore, the transfer did not qualify as a sale
under generally accepted accounting principles. Accordingly, the
retained interests continue to be accounted for in a manner similar to
loans and are included in the accompanying balance sheet as Securitized
Assets Subject to Repurchase.
LOANS RECEIVABLE. Loans receivable more than 90 days past due are
placed on non-accrual status and an allowance for accrued interest is
established. Any interest ultimately collected is credited to income in
the period of recovery.
The Company maintains an allowance for loan losses to absorb losses
inherent in the loan portfolio. The allowance is based on ongoing,
quarterly assessments of the probable and estimable losses inherent in
the loan portfolio. The Company's methodology for assessing the
appropriateness of the allowance consists of several key elements,
which include the formula allowance, specific allowances and the
unallocated allowance.
The formula portion of the general loan loss allowance is established
by applying a loss percentage factor to the different loan types. The
allowances are provided based on management's continuing evaluation of
the pertinent factors underlying the quality of the loan portfolio,
including changes in the size and composition of the loan portfolio,
actual loan loss experience and current economic conditions. The
recovery of the carrying value of loans is susceptible to future market
conditions beyond the Company's control which may result in losses or
recoveries differing from those provided.
Specific allowances are established in cases where management has
identified significant conditions or circumstances related to a loan
that management believes indicate the probability that a loss has been
incurred.
12
The unallocated allowance comprises two components. The first component
recognizes the estimation risk associated with the formula and specific
allowances. The second component is based upon management's evaluation
of various conditions that are not directly measured in the
determination of the formula and specific allowances. The conditions
evaluated in connection with the unallocated allowance may include loan
volumes and concentrations, seasoning of the loan portfolio, specific
industry conditions, recent loss experience within certain parts of the
portfolio and the duration of the current business cycle.
Impaired loans consist of loans receivable that will not be repaid in
accordance with their contractual terms and are measured using a
discounted cash flow methodology or the fair value of the collateral
for certain loans. Smaller balance loans are excluded from this
analysis with limited exceptions.
PREMISES AND EQUIPMENT. Premises and equipment are stated at cost, less
accumulated depreciation and amortization. Depreciation and
amortization are computed on the straight-line method over the
estimated useful lives of the respective assets. Expenditures are
capitalized for betterments and major renewals, and charges for
ordinary maintenance and repairs are expensed to operations as
incurred.
REAL ESTATE HELD FOR SALE. Properties acquired in settlement of loans,
purchased in acquisitions or acquired for development are recorded at
the lower of cost or fair value.
COSTS IN EXCESS OF NET ASSETS ACQUIRED. Costs in excess of fair value
of net assets acquired in business combinations are amortized to
expense over a period not to exceed 15 years using the straight-line
method. From time to time, the Company reviews the status of costs in
excess of net assets acquired to determine that no impairment of the
assets has occurred.
DEFERRED FEES AND DISCOUNTS ON LOANS. Loan discounts and loan fees are
deferred and recognized over the life of the loans using the interest
method based on actual loan payments.
USE OF ESTIMATES. The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Significant estimates reported in the financial
statements include the allowance for loan losses, intangible assets,
deferred taxes and contingent liabilities. Actual results could differ
from these estimates.
In the second quarter of fiscal 2001 and 1999, the Company declared an
eleven-for-ten stock split in the form of a 10% stock dividend. All
share and per share amounts have been adjusted to reflect these stock
splits.
BUSINESS SEGMENTS. The Company has determined that its current business
and operations consist of a single business segment.
RECLASSIFICATIONS. Certain reclassifications have been made to the
financial statements for years prior to September 30, 2001 to conform
to the classifications used in 2001.
13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE B INVESTMENT SECURITIES
September 30, 2001
---------------------------------------------------------------------------------------------------------------
(In thousands)
Gross Unrealized
Amortized ------------------------ Fair
Cost Gains Losses Value Yield
-----------------------------------------------------------------
AVAILABLE-FOR-SALE SECURITIES
U.S. government and agency securities due
Within 1 year ........................ $ 79,881 $ 847 $ -- $ 80,728 6.23%
1 to 5 years ......................... 15,073 1,460 -- 16,533 7.25
5 to 10 years ........................ 10,000 -- (145) 9,855 9.88
Over 10 years ........................ 9,280 3,838 -- 13,118 10.38
-----------------------------------------------------------------
114,234 6,145 (145) 120,234 7.08
-----------------------------------------------------------------
HELD-TO-MATURITY SECURITIES
Tax-exempt municipal bonds due
1 to 5 years ......................... 7,650 166 -- 7,816 6.67
5 to 10 years ........................ 4,010 347 -- 4,357 5.65
Over 10 years ........................ 13,830 1,331 (4) 15,157 6.23
-----------------------------------------------------------------
25,490 1,844 (4) 27,330 6.27
-----------------------------------------------------------------
$ 139,724 $ 7,989 $ (149) $ 147,564 6.93%
================================================================
September 30, 2000
---------------------------------------------------------------------------------------------------------------
(In thousands)
Gross Unrealized
Amortized ----------------------- Fair
Cost Gains Losses Value Yield
-----------------------------------------------------------------
AVAILABLE-FOR-SALE SECURITIES
U.S. government and agency securities due
Within 1 year ........................ $ 81,123 $ -- $ (1,617) $ 79,506 6.11%
1 to 5 years ......................... 15,102 538 -- 15,640 6.98
5 to 10 years ........................ 10,000 -- -- 10,000 9.88
Over 10 years ........................ 9,279 3,080 -- 12,359 10.48
-----------------------------------------------------------------
115,504 3,618 (1,617) 117,505 6.90
-----------------------------------------------------------------
HELD-TO-MATURITY SECURITIES
Tax-exempt municipal bonds due
1 to 5 years ......................... 7,650 241 -- 7,891 6.67
Over 10 years ........................ 17,837 932 -- 18,769 6.12
-----------------------------------------------------------------
25,487 1,173 -- 26,660 6.29
-----------------------------------------------------------------
$ 140,991 $ 4,791 $ (1,617) $ 144,165 6.79%
=================================================================
There were no sales of investment securities during 2001 or 2000.
Investment securities with a book value of $9.3 million and a fair
value of $13.1 million at September 30, 2001 were pledged to secure
public deposits.
NOTE C MORTGAGE-BACKED SECURITIES
September 30, 2001
--------------------------------------------------------------------------------------------------------------------
(In thousands)
Gross Unrealized
Amortized -------------------------- Fair
Cost Gains Losses Value Yield
---------------------------------------------------------------------------
AVAILABLE-FOR-SALE SECURITIES
GNMA pass-through certificates $ 5,596 $ 17 $ (63) $ 5,550 7.42%
FNMA pass-through certificates 14,562 830 -- 15,392 7.75
FHLMC pass-through certificates 843,206 36,928 -- 880,134 6.88
FHLMC ............................... 6,662 60 (11) 6,711 8.21
FNMA ................................ 6,019 133 (23) 6,129 7.08
Private issues ...................... 12,217 128 (1) 12,344 7.17
Forward contracts ................... -- 33,402 -- 33,402 --
---------------------------------------------------------------------------
888,262 71,498 (98) 959,662 6.91
---------------------------------------------------------------------------
HELD-TO-MATURITY SECURITIES
GNMA pass-through certificates ...... 74 6 -- 80 9.50
FNMA pass-through certificates ...... 5,073 299 -- 5,372 8.07
FHLMC pass-through certificates ..... 217,395 9,762 (2) 227,155 7.15
---------------------------------------------------------------------------
222,542 10,067 (2) 232,607 7.17
---------------------------------------------------------------------------
$ 1,110,804 $ 81,565 $ (100) $ 1,192,269 6.96%
===========================================================================
14
September 30, 2000
-----------------------------------------------------------------------------------------------------------------
(In thousands)
Gross Unrealized
Amortized -------------------------- Fair
Cost Gains Losses Value Yield
------------------------------------------------------------------------
AVAILABLE-FOR-SALE SECURITIES
GNMA pass-through certificates $ 7,758 $ 23 $ (91) $ 7,690 7.11%
FNMA pass-through certificates 18,992 563 (226) 19,329 7.86
FHLMC pass-through certificates 994,188 6,317 (20,707) 979,798 7.01
FHLMC ............................. 13,153 924 (243) 13,834 7.33
FNMA .............................. 8,720 617 (182) 9,155 7.00
Private issues .................... 15,148 1,057 (268) 15,937 6.80
Forward contracts ................. -- 15,216 -- 15,216 --
------------------------------------------------------------------------
1,057,959 24,717 (21,717) 1,060,959 7.02
------------------------------------------------------------------------
HELD-TO-MATURITY SECURITIES
GNMA pass-through certificates .... 114 6 -- 120 9.64
FNMA pass-through certificates .... 6,558 137 (61) 6,634 8.13
FHLMC pass-through certificates ... 260,474 2,222 (3,846) 258,850 7.23
------------------------------------------------------------------------
267,146 2,365 (3,907) 265,604 7.25
------------------------------------------------------------------------
$ 1,325,105 $ 27,082 $ (25,624) $ 1,326,563 7.07%
========================================================================
Proceeds from sales of mortgage-backed securities in the
available-for-sale portfolio during 2001, 2000 and 1999 were $50.3
million, $12.4 million and $22.7 million, respectively. The Company
realized gains of $3.2 million, $4.1 million and $2.7 million during
2001, 2000 and 1999, respectively. The Company had no losses on sales
during 2001, 2000 or 1999.
Available-for-sale mortgage-backed securities with a book value of
$60.0 million and a fair value of $60.4 million at September 30, 2001
were pledged as collateral for secured repurchase agreements with
customers (see Note I). Substantially all mortgage-backed securities
have contractual due dates which exceed ten years.
The Company accepts a high level of interest rate risk as a result of
its policy to originate fixed-rate single family home loans which are
longer-term than the short-term characteristics of its liabilities of
customer accounts and borrowed money. The Company enters into forward
contracts to purchase mortgage-backed securities as part of its
interest rate risk management program. These forward contracts are
derivative instruments as defined by SFAS 133 "Accounting for
Derivative Instrument and Hedging Activities." The forward contracts
allow the Company to hedge the risk of varying mortgage-backed
securities prices in the future resulting from changes in interest
rates. The Company has determined anticipated purchase dates for each
forward commitment ranging from November 2001 through August 2004. The
fair value of these contracts is included with the available for sale
securities. The related mortgage-backed securities are designated as
available-for-sale securities upon exercise of the commitments to
purchase.
Cost and fair value of the mortgage-backed securities underlying the
forward contracts were as follows:
SEPTEMBER 30, 2001 2000
---------------------------------------------------------------------------------------------
(In thousands)
Fair Fair
Cost Value Cost Value
------------------------------------------
Commitments to purchase ........................ $357,291 $390,693 $453,316 $468,532
==========================================
15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE D LOANS RECEIVABLE AND SECURITIZED ASSETS SUBJECT TO REPURCHASE
September 30, 2001 2000
-----------------------------------------------------------------------------------------------
(In thousands)
Conventional real estate
Permanent single-family residential ........................ $4,511,964 $4,162,175
Income property ............................................ 392,272 288,299
Land ....................................................... 193,424 180,745
Construction ............................................... 591,245 646,823
Other ........................................................ 1,478 1,956
-----------------------------
5,690,383 5,279,998
-----------------------------
Less
Allowance for possible losses .............................. 19,683 20,831
Discount on loans .......................................... 3,574 4,498
Loans in process ........................................... 249,056 278,561
Deferred loan origination fees ............................. 29,965 26,873
-----------------------------
302,278 330,763
-----------------------------
$5,388,105 $4,949,235
=============================
The Company originates adjustable and fixed interest rate loans, which
at September 30, 2001 consisted of the following:
Fixed-Rate Adjustable-Rate
--------------------------------------- --------------------------------------
(In thousands) (In thousands)
Term to Maturity Book Value Term to Rate Adjustment Book Value
--------------------------------------- --------------------------------------
Within 1 year ........... $ 31,019 Less than 1 year .......... $573,525
1 to 3 years ............ 39,790 1 to 3 years .............. 39,529
3 to 5 years ............ 67,185 3 to 5 years .............. 14,818
5 to 10 years ........... 477,151 5 to 10 years ............. --
10 to 20 years .......... 472,592 10 to 20 years ............ --
Over 20 years ........... 3,974,774 Over 20 years ............. --
----------- --------
$ 5,062,511 $627,872
=========== ========
At September 30, 2001 and 2000, approximately $60,641,391 and
$55,490,991 of fixed-rate loan origination commitments were
outstanding, respectively. Loans serviced for others at September 30,
2001 and 2000 were approximately $26,068,000 and $37,912,000,
respectively.
Permanent single-family residential loans receivable included
adjustable-rate loans of $24,254,920 and $48,824,221 at September 30,
2001 and 2000, respectively. These loans have interest rate adjustment
limitations and are generally indexed to the 1-year Treasury Bill rate.
Loans by geographic concentration were as follows:
September 30, 2001 Washington Idaho Oregon Utah Arizona Other Total
--------------------------------------------------------------------------------------------------------------------------
(In thousands)
Conventional real estate
Permanent single-family
residential ............. $2,154,046 $585,126 $ 815,954 $600,305 $333,935 $22,598 $4,511,964
Income property ........... 154,707 20,292 85,513 29,200 89,875 12,685 392,272
Land ...................... 103,991 26,323 15,291 22,704 24,450 665 193,424
Construction .............. 287,321 71,660 93,378 64,213 72,454 2,219 591,245
Other ....................... -- 97 -- 9 -- 1,372 1,478
-----------------------------------------------------------------------------------------
$2,700,065 $703,498 $1,010,136 $716,431 $520,714 $39,539 $5,690,383
=========================================================================================
At September 30, 2001 the Company's recorded investment in impaired
loans was $7.9 million with allocated reserves of $.1 million. At
September 30, 2000 the Company's recorded investment in impaired loans
was $7.1 million with allocated reserves of $.6 million. The average
balance of impaired loans during 2001 and 2000 was $13.1 million and
$10.2 million and interest income from impaired loans was $12,000 and
$207,000, respectively.
16
NOTE E ALLOWANCE FOR LOSSES ON LOANS AND SECURITIZED ASSETS SUBJECT TO
REPURCHASE
Year ended September 30, 2001 2000 1999
----------------------------------------------------------------------------------------------------
(In thousands)
Balance at beginning of year ........................... $20,831 $21,900 $23,854
Provision for loan losses .............................. 1,850 -- 684
Charge-offs ............................................ (3,845) (1,377) (3,131)
Recoveries ............................................. 847 308 493
----------------------------------------
Balance at end of year ................................. $19,683 $20,831 $21,900
========================================
NOTE F INTEREST RECEIVABLE
September 30, 2001 2000
-----------------------------------------------------------------------------------------------------
(In thousands)
Loans receivable and securitized assets subject to repurchase .......... $40,584 $30,769
Allowance for uncollected interest on loans receivable ................. (1,323) (720)
Mortgage-backed securities ............................................. 5,940 7,612
Investment securities .................................................. 3,079 3,039
------------------------
$48,280 $40,700
========================
NOTE G PREMISES AND EQUIPMENT
September 30, 2001 2000
-----------------------------------------------------------------------------------------------------
(In thousands)
Estimated
Useful Life
Land ................................................... -- $13,400 $12,100
Buildings .............................................. 25 - 40 49,965 48,966
Leasehold improvements ................................. 7 - 15 5,043 4,765
Furniture, fixtures and equipment ...................... 4 - 10 15,022 12,691
------------------------
83,430 78,522
Less accumulated depreciation and amortization ........................ (29,188) (28,035)
------------------------
$54,242 $ 50,487
========================
The Company has non-cancelable operating leases for branch offices.
Rental expense, including amounts paid under month-to-month cancelable
leases, amounted to $1,606,000, $1,510,000 and $1,438,000 in 2001, 2000
and 1999, respectively. Future minimum net rental commitments for all
non-cancelable leases, including maintenance and associated costs, are
immaterial.
NOTE H REAL ESTATE HELD FOR SALE
September 30, 2001 2000
----------------------------------------------------------------------------------------------------
(In thousands)
Acquired for development ............................................... $ 8,114 $ 7,953
Acquired in settlement of loans ........................................ 8,664 9,463
------------------------
$16,778 $17,416
========================
17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE I CUSTOMER ACCOUNTS
September 30, 2001 2000
----------------------------------------------------------------------------------------------------
(In thousands)
Checking accounts, 2.13% and under .................................... $ 152,143 $ 99,888
Passbook and statement accounts, 2.50% ................................ 135,522 139,409
Insured money market accounts, 1.50% to 3.50% ......................... 805,759 542,148
Certificate accounts
Less than 3.00% .................................................... 4,109 --
3.00% to 3.99% ..................................................... 236,834 112
4.00% to 4.99% ..................................................... 1,981,925 88,838
5.00% to 5.99% ..................................................... 799,242 1,022,699
6.00% to 6.99% ..................................................... 134,301 1,478,897
7.00% and over ..................................................... 1,278 3,045
---------------------------
Total certificates .................................................... 3,157,689 2,593,591
---------------------------
Repurchase agreements with customers .................................. 65,579 90,234
---------------------------
$4,316,692 $3,465,270
===========================
Certificate maturities were as follows:
September 30, 2001 2000
----------------------------------------------------------------------------------------------------
(In thousands)
Within 1 year ....................................................... $2,814,662 $2,337,283
1 to 2 years ........................................................ 211,362 150,566
2 to 3 years ........................................................ 32,163 61,637
Over 3 years ........................................................ 99,502 44,105
---------------------------
$3,157,689 $2,593,591
===========================
Customer accounts over $100,000 totaled $1,026,000,000 as of September
30, 2001 and $732,000,000 as of September 30, 2000.
Interest expense on customer accounts consisted of the following:
Year ended September 30, 2001 2000 1999
-------------------------------------------------------------------------------------------------------
(In thousands)
Checking accounts ........................................ $ 2,426 $ 2,372 $ 2,266
Passbook and statement accounts .......................... 4,066 4,468 5,225
Insured money market accounts ............................ 24,514 22,793 20,057
Certificate accounts ..................................... 160,018 138,614 127,867
-----------------------------------------
191,024 168,247 155,415
Repurchase agreements with customers ..................... 4,138 5,052 4,930
-----------------------------------------
195,162 173,299 160,345
Less early withdrawal penalties .......................... (452) (564) (403)
-----------------------------------------
$194,710 $172,735 $159,942
=========================================
Weighted average interest rate at end of year ............ 4.31% 5.57% 4.71%
Weighted daily average interest rate during the year ..... 5.28 5.07 4.84
18
NOTE J FHLB ADVANCES
Maturity dates of Federal Home Loan Bank (FHLB) advances were as
follows:
September 30, 2001 2000
----------------------------------------------------------------------------------------------------
(In thousands)
FHLB advances due
Within 1 year ..................................................... $ 287,500 $ 609,000
2 to 3 years ...................................................... 650,000 --
3 to 4 years ...................................................... 700,000 200,000
More than 5 years ................................................. -- 400,000
----------------------------
$ 1,637,500 $1,209,000
============================
FHLB advances totaling $200,000,000 with an interest rate of 5.49% are
callable in 2002. FHLB advances totaling $400,000,000 with an average
interest rate of 5.58% are callable in 2003. FHLB advances totaling
$400,000,000 with an average interest rate of 4.98% are callable in
2005. FHLB advances totaling $200,000,000 with an average interest rate
of 5.04% are callable in 2006.
Financial data pertaining to the weighted average cost and the amount
of FHLB advances were as follows:
September 30, 2001 2000 1999
------------------------------------------------------------------------------------------------------------
(In thousands)
Weighted average interest rate at end of year ........... 5.12% 6.06% 5.42%
Weighted daily average interest rate during the year .... 5.44 5.82 5.51
Daily average of FHLB advances .......................... $1,336,025 $ 802,818 $1,076,263
Maximum amount of FHLB advances at any month end ........ 2,107,000 1,209,000 1,454,000
Interest expense during the year ........................ 72,654 46,738 59,275
FHLB advances are collateralized as provided for in the Advances,
Pledge and Security Agreements by all FHLB stock owned by the
Association, deposits with the FHLB and certain mortgages or deeds of
trust securing such properties as provided in the Agreements. As a
member of the FHLB of Seattle, the Association currently has a credit
line of 35% of the total assets of the Association, subject to
collateralization requirements.
NOTE K OTHER BORROWINGS
September 30, 2001 2000
-----------------------------------------------------------------------------------------------------
(In thousands)
Securities sold under agreements to repurchase
Due within 60 days ............................................... $ -- $1,074,509
Other borrowings
Federal funds purchased, weighted average rate of 3.25%
in 2001, due on demand ........................................ 30,000 80,000
---------------------------
$ 30,000 $1,154,509
===========================
The Company enters into sales of securities under agreements to
repurchase (reverse repurchase agreements). Fixed-coupon reverse
repurchase agreements are treated as financings, and the obligations to
repurchase securities sold are reflected as a liability in the
consolidated statements of financial condition. During the two years
ended September 30, 2001 all of the Company's transactions were
fixed-coupon reverse repurchase agreements. The dollar amount of
securities underlying the agreements remain in the asset accounts. The
securities pledged are registered in the Company's name and principal
and interest payments are received by the Company; however, the
securities are held by the designated trustee of the broker. Upon
maturity of the agreements the identical securities pledged as
collateral will be returned to the Company.
19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Financial data pertaining to the weighted average cost and the amount
of securities sold under agreements to repurchase were as follows:
September 30, 2001 2000 1999
--------------------------------------------------------------------------------------------------------
(In thousands)
Weighted average interest rate at end of year .......... -- % 6.52% 5.30%
Weighted daily average interest rate during the year ... 5.75 6.12 5.05
Daily average of securities sold under agreements
to repurchase ....................................... $ 785,563 $ 960,963 $396,098
Maximum securities sold under agreements to repurchase
at any month end .................................... 1,074,509 1,089,127 620,580
Interest expense during the year ....................... 45,149 58,815 19,994
NOTE L INCOME TAXES
The consolidated statements of financial condition at September 30,
2001 and 2000 include deferred taxes of $79,208,000 and $49,999,000,
respectively, that have been provided for the temporary differences
between the tax basis and the financial statement carrying amounts of
assets and liabilities. The major sources of these temporary
differences and their deferred tax effects were as follows:
September 30, 2001 2000
-----------------------------------------------------------------------------------------------------
(In thousands)
Deferred tax assets
Real estate valuation reserves .................................. $ 440 $ --
Deferred compensation ........................................... 250 265
Discounts ....................................................... 17 28
---------------------------
Total deferred tax assets ....................................... 707 293
---------------------------
Deferred tax liabilities
Federal Home Loan Bank stock dividends ........................... 27,473 24,375
Loan loss reserves ............................................... 6,700 8,968
Valuation adjustment on available-for-sale securities ............ 28,000 2,000
Depreciation ..................................................... 2,600 2,800
Loan origination costs ........................................... 11,559 10,902
Other, net ....................................................... 3,583 1,247
---------------------------
Total deferred tax liabilities ................................... 79,915 50,292
---------------------------
Net deferred tax liability .......................................... $ 79,208 $ 49,999
===========================
A reconciliation of the statutory federal income tax rate to the
effective income tax rate follows:
Year ended September 30, 2001 2000 1999
---------------------------------------------------------------------------------------------------
Statutory income tax rate ............................... 35% 35% 35%
Dividend received deduction ............................. (1) (1) (2)
Tax-exempt interest ..................................... -- -- (1)
State income tax ........................................ 1 1 3
Other, net .............................................. -- -- 1
-------------------------------------
Effective income tax rate ............................... 35% 35% 36%
=====================================
The Small Business Job Protection Act of 1996 (the Act) required
qualified thrift institutions, such as the Association, to recapture
the portion of their tax bad debt reserves that exceeded the September
30, 1988 balance. Such recaptured amounts are to be taken into taxable
income ratably over a six-year period beginning in 1999. Accordingly,
the Association is required to pay approximately $23,469,000 in
additional federal income taxes, all of which has been previously
provided for, beginning in fiscal 1999 and continuing through fiscal
2004.
A deferred tax liability has not been required to be recognized for the
tax bad debt base year reserves of the Association. The base year
reserves are the balance of reserves as of September 30, 1988 reduced
proportionately for reductions in the Association's loan portfolio
since that date. At September 30, 2001 the amount of those reserves was
approximately $4,835,000. The amount of the unrecognized deferred tax
liability at September 30, 2001 was approximately $1,862,000.
The Company has been examined by the Internal Revenue Service through
the year ended September 30, 1990. There were no material changes made
to the Company's taxable income, as originally reported, as a result of
this examination.
20
NOTE M PROFIT SHARING RETIREMENT AND EMPLOYEE STOCK OWNERSHIP PLAN
The Company maintains a Profit Sharing Retirement and Employee Stock
Ownership Plan (the Plan) for the benefit of its employees.
Contributions are made semi-annually as approved by the Board of
Directors. Such amounts are not in excess of amounts permitted by the
Employee Retirement Income Security Act of 1974.
Employees may contribute up to 7% of their base salaries to the Plan or
13% of their base salaries on a tax-deferred basis through the 401(k)
provisions of the Plan with a combined maximum of 13%. Under provisions
of the Plan, employees are eligible to participate on the date of hire
and become vested in the Company's contributions following seven years
of service. During August 1995 the Company received a favorable
determination from the Internal Revenue Service to include an Employee
Stock Ownership feature as part of the Plan. This feature allows the
employee to direct a portion of their vested account balance toward the
purchase of Company stock. Contributions to the Plan amounted to
$1,781,000, $1,724,000 and $1,745,000 for the years ended September 30,
2001, 2000 and 1999, respectively.
NOTE N STOCK OPTION PLANS
The Company has three employee stock option plans which provide a
combination of stock options and stock grants. Stockholders authorized
5,886,669 shares, 1,856,881 shares and 3,059,969 shares of common stock
to be reserved pursuant to the 1982 Employee Stock Compensation Program
(the 1982 Plan), the 1987 Stock Option and Stock Appreciation Rights
Plan (the 1987 Plan) and the 1994 Stock Option and Stock Appreciation
Rights Plan (the 1994 Plan), respectively. The 1987 Plan and 1994 Plan
are substantially similar to the 1982 Plan, but incorporate changes in
the Internal Revenue Code affecting incentive stock options and do not
provide for the grant of performance share awards.
Options granted under each plan vest at varying percentages commencing
as early as one year after the date of grant with expiration dates ten
years after the date of grant.
Weighted Average
Fair Value of Option
Average Price(1) Number(1) Shares Granted
---------------------------------------------------------------------------------------------------
Outstanding, October 1, 1998 ................. $ 15.08 1,867,677
Granted in 1999 .............................. 19.87 61,567 $3.75
Exercised in 1999 ............................ 11.25 (157,343)
Forfeited in 1999 ............................ 16.15 (70,293)
-------------------------
Outstanding, September 30, 1999 .............. 15.56 1,701,608
Granted in 2000 .............................. 17.13 796,468 4.22
Exercised in 2000 ............................ 11.84 (103,825)
Forfeited in 2000 ............................ 17.46 (192,973)
-------------------------
Outstanding, September 30, 2000 .............. 16.14 2,201,278
Granted in 2001 .............................. 18.55 83,650 4.45
Exercised in 2001 ............................ 12.78 (478,242)
Forfeited in 2001 ............................ 16.77 (114,338)
-------------------------
Outstanding, September 30, 2001 .............. $ 17.16 1,692,348
=========================
(1)Average price and number of stock options granted, exercised and
forfeited have been adjusted for 10% stock dividends in the second
quarter of both 2001 and 1999 which had the effect of an eleven-for-ten
stock split.
Financial data pertaining to outstanding stock options were as follows:
September 30, 2001
------------------------------------------------------------------------------------------------------------
Weighted
Weighted Weighted Average
Average Average Number of Exercisable Price
Ranges of Number of Remaining Exercise Price of Exercisable of Exercisable
Exercise Prices Option Shares Contractual Life Option Shares Option Shares Option Shares
------------------------------------------------------------------------------------------------------------
$10.78 - 13.82 408,245 3.4 YEARS $12.61 288,403 $12.20
14.11 - 17.16 761,303 7.6 16.84 123,376 15.74
18.18 - 24.44 522,800 6.7 21.19 112,711 22.12
-------------------------------------------------------------------------------------
1,692,348 6.3 YEARS $17.16 524,490 $15.16
=====================================================================================
In October 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting
for Stock-based Compensation." SFAS No. 123 requires expanded
disclosures of stock-based compensation arrangements with employees and
encourages (but does not require) application of the fair value
recognition provisions in the statement.
21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Companies may continue following those rules to recognize and measure
compensation as outlined in Accounting Principles Board (APB) Opinion
No. 25, but they will now be required to disclose the pro forma amounts
of net income and earnings per share that would have been reported had
the Company elected to follow the fair value recognition provisions of
SFAS No. 123. The Company adopted the disclosure requirements of
SFAS No. 123, but continues to measure its employee stock-based
compensation arrangements under the provisions of APB No. 25. Had
compensation costs for the Company's compensation plans been determined
consistent with SFAS No. 123, the Company's net income attributable to
common stock would have been reduced by $372,000, $3,058,000 and
$210,000 for 2001, 2000 and 1999, respectively. Net income per share
would have decreased by $.04 per share in 2000 and would have remained
the same in both 2001 and 1999.
The fair value of options granted under the Company's stock option plan
is estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted-average assumptions:
annual dividend yield of 4.00% for 2001, 5.00% for 2000 and 4.00% for
1999; expected volatility of 34% for 2001, 29% for 2000 and 18% for
1999; risk-free interest rate of 3.80% for 2001, 5.80% for 2000 and
5.75% for 1999; an expected life of five years for all three years.
NOTE O STOCKHOLDERS' EQUITY
In the second quarter of fiscal 2001 and 1999, the Company declared an
eleven-for-ten stock split in the form of a 10% stock dividend in
addition to the regular quarterly cash dividends on its shares of
common stock.
The Association is subject to various regulatory capital requirements
administered by the Office of Thrift Supervision (OTS). Failure to meet
minimum capital requirements can initiate certain mandatory and
possibly additional discretionary action by regulators that, if
undertaken, could have a direct material effect on the Company's
financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Association must
meet specific capital guidelines that involve quantitative measures of
the Association's assets, liabilities and certain off-balance sheet
items as calculated under regulatory accounting practices. The
Association's capital amounts and classification are also subject to
qualitative judgments by the regulators about capital components,
risk-weightings and other factors.
As of September 30, 2001 and 2000 the OTS categorized the Association
as well capitalized under the regulatory framework for prompt
corrective action. To be categorized as well capitalized the
Association must maintain minimum total risk-based, Tier 1 risk-based
and Tier 1 leverage ratios as set forth in the following table. There
are no conditions or events since that notification that management
believes have changed the Association's categorization.
To be Categorized as
Well Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
--------------------- -------------------- -----------------
Amount Ratio Amount Ratio Amount Ratio
---------------------------------------------------------------------------------------------------------------------
September 30, 2001 (Dollars in thousands)
Total capital to risk-weighted assets ...... $791,837 20.12% $314,772 8.00% $393,465 10.00%
Tier I capital to risk-weighted assets ..... 781,657 19.87 NA NA 236,079 6.00
Core capital to adjusted tangible assets ... 781,657 11.32 NA NA 345,324 5.00
Core capital to total assets ............... 781,657 11.32 207,194 3.00 NA NA
Tangible capital to tangible assets ........ 781,657 11.32 103,597 1.50 NA NA
September 30, 2000
Total capital to risk-weighted assets ...... $716,441 19.45% $294,646 8.00% $368,308 10.00%
Tier I capital to risk-weighted assets ..... 706,991 19.20 NA NA 220,985 6.00
Core capital to adjusted tangible assets ... 706,991 10.61 NA NA 333,155 5.00
Core capital to total assets ............... 706,991 10.61 199,893 3.00 NA NA
Tangible capital to tangible assets ........ 706,991 10.61 99,947 1.50 NA NA
At periodic intervals, the OTS and the Federal Deposit Insurance
Corporation (FDIC) routinely examine the Company's financial statements
as part of their oversight of the savings and loan industry. Based on
their examinations, these regulators can direct that the Company's
financial statements be adjusted in accordance with their findings. The
extent to which forthcoming regulatory examinations may result in
adjustments to the financial statements cannot be determined; however,
no adjustments were proposed as a result of the most recent OTS
examination which concluded in June 2001.
22
Information used to calculate earnings per share is as follows:
September 30, 2001 2000 1999
-----------------------------------------------------------------------------------------------------------
(Dollars in thousands, except per share data)
Net income ............................................... $ 113,614 $ 105,679 $ 114,286
Weighted average shares
Basic weighted average number of
common shares outstanding .......................... 57,615,702 57,911,542 60,880,283
Dilutive effect of outstanding common stock equivalents 616,957 295,283 507,173
--------------------------------------------
Diluted weighted average number of
common shares outstanding .......................... 58,232,659 58,206,825 61,387,456
============================================
Net income per share
Basic ................................................. $ 1.97 $ 1.83 $ 1.87
Diluted ............................................... 1.95 1.82 1.86
23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE P FAIR VALUES OF FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments,"
requires disclosure of fair value information about financial
instruments, whether or not recognized on the balance sheet, for which
it is practicable to estimate those values. SFAS No. 107 excludes
certain financial instruments and all non-financial instruments from
its disclosure requirements. Accordingly, the aggregate fair value
estimates presented do not reflect the underlying fair value of the
Company. Although management is not aware of any factors that would
materially affect the estimated fair value amounts presented, such
amounts have not been comprehensively revalued for purposes of these
financial statements since that date and, therefore, estimates of fair
value subsequent to that date may differ significantly from the amounts
presented below.
September 30, 2001 2000
-------------------------------------------------------------------------------------------------------------
(In thousands)
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
--------------------------------------------------------------
Financial assets
Cash .................................... $ 30,331 $ 30,331 $ 28,286 $ 28,286
Available-for-sale securities ........... 1,079,896 1,079,896 1,178,464 1,178,317
Held-to-maturity securities ............. 248,032 259,939 292,633 292,264
Loans receivable and securitized assets . 5,388,105 5,636,267 4,949,235 4,924,782
FHLB stock .............................. 124,361 124,361 116,314 116,314
Financial liabilities
Customer accounts ....................... 4,316,692 4,329,833 3,465,270 3,437,663
FHLB advances ........................... 1,637,500 1,660,039 1,209,000 1,200,180
Other borrowings ........................ 30,000 30,000 1,154,509 1,154,509
The following methods and assumptions were used to estimate the fair
value of financial instruments:
CASH - The carrying amount of these items is a reasonable estimate of
their fair value.
INVESTMENT SECURITIES - The fair value is based on quoted market prices
or dealer estimates.
LOANS RECEIVABLE AND SECURITIZED ASSETS SUBJECT TO REPURCHASE - For
certain homogeneous categories of loans, such as fixed- and
variable-rate residential mortgages, fair value is estimated using
quoted market prices for securities backed by similar loans, adjusted
for differences in loan characteristics. The fair value of other loan
types is estimated by discounting the future cash flows and estimated
prepayments using the current rates at which similar loans would be
made to borrowers with similar credit ratings and for the same
remaining term. Some loan types were valued at carrying value because
of their floating rate or expected maturity characteristics.
MORTGAGE-BACKED SECURITIES - Estimated fair value for mortgage-backed
securities issued by quasi-governmental agencies is based on quoted
market prices. The fair value of all other mortgage-backed securities
is based on dealer estimates.
FHLB STOCK - The fair value is based upon the redemption value of the
stock which equates to its carrying value.
CUSTOMER ACCOUNTS - The fair value of demand deposits, savings
accounts, and money market accounts is the amount payable on demand at
the reporting date. The fair value of fixed-maturity certificates of
deposit is estimated by discounting the estimated future cash flows
using the rates currently offered for deposits with similar remaining
maturities.
FHLB ADVANCES AND OTHER BORROWINGS - The fair value of FHLB advances
and other borrowings is estimated by discounting the estimated future
cash flows using rates currently available to the Association for debt
with similar remaining maturities.
NOTE Q ACCOUNTING CHANGES
Effective October 1, 2000, the Company adopted SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." As a
result of the adoption of this new accounting standard, the Company's
forward contracts to purchase mortgage-backed securities were
designated as cash flow hedges of specific forecasted purchases of
securities. Previously, the Company had accounted for the fair value of
these contracts to purchase as available-for-sale securities and
unrealized gains or losses were recognized as a component of
stockholders' equity through comprehensive income. Under the new
accounting standard the unrealized gains or losses on forward
contracts, being designated as cash flow hedges, are also recognized as
a component of stockholders' equity though comprehensive income until
the related forecasted purchase of securities occurs whereupon the
remaining unrealized gains or losses are included in the basis of the
purchased securities. Therefore, there was no material impact upon the
adoption of the new standard and no explicit transition adjustment.
In June 2001, the FASB issued SFAS No. 141, "Business Combinations,"
and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141
requires all business combinations initiated after June 30, 2001, to be
24
accounted for using the purchase method. SFAS No. 142 eliminates the
amortization of goodwill relating to past and future acquisitions and
instead subjects goodwill to an impairment assessment at least
annually. The Company early adopted the provisions of SFAS No. 142 to
existing goodwill and other intangible assets for fiscal years
beginning October 1, 2001. The adoption of SFAS No. 142 will cease
further amortization of goodwill and will have an impact of
approximately $5.6 million (pretax) on an annual basis.
NOTE R FINANCIAL INFORMATION - WASHINGTON FEDERAL, INC.
The following Washington Federal, Inc. (parent company only) financial
information should be read in conjunction with the other notes to the
Consolidated Financial Statements.
STATEMENTS OF FINANCIAL CONDITION
September 30, 2001 2000
----------------------------------------------------------------------------------------------------
(In thousands)
ASSETS
Cash ................................................................ $ 1,714 $ 1,080
Investment in subsidiary ............................................ 874,050 757,207
Dividend receivable ................................................. 12,125 14,000
---------------------------
Total assets ..................................................... $ 887,889 $ 772,287
===========================
LIABILITIES
Borrowed money ...................................................... $ -- $ --
Dividend payable .................................................... 13,880 13,100
Other liabilities ................................................... -- 22
---------------------------
Total liabilities ................................................ 13,880 13,122
---------------------------
STOCKHOLDERS' EQUITY
Common stock, $1.00 par value: 100,000,000 shares authorized;
69,006,173 and 68,525,260 shares issued;
57,861,561 and 57,333,025 shares outstanding ..................... 69,006 62,296
Paid-in capital ..................................................... 893,633 785,745
Accumulated other comprehensive income, net of tax .................. 51,000 3,000
Treasury stock, at cost; 11,144,612 and 11,192,235 shares ........... (189,212) (190,018)
Retained earnings ................................................... 49,582 98,142
---------------------------
Total stockholders' equity ....................................... 874,009 759,165
---------------------------
Total liabilities and stockholders' equity ....................... $ 887,889 $ 772,287
===========================
STATEMENTS OF OPERATIONS
Year ended September 30, 2001 2000 1999
----------------------------------------------------------------------------------------------------
(In thousands)
INCOME
Dividends from subsidiary .................................... $ 45,000 $ 97,000 $101,500
Other ........................................................ -- 80 --
-------------------------------
Total Income ................................................. 45,000 97,080 101,500
-------------------------------
EXPENSE
Borrowings ................................................... 5 47 47
Other ........................................................ 348 388 273
-------------------------------
Total expense ................................................ 353 435 320
-------------------------------
Net income before equity in undistributed net income of
subsidiaries .............................................. 44,647 96,645 101,180
Equity in undistributed net income of subsidiaries .............. 68,842 8,909 12,992
-------------------------------
Income before income taxes ...................................... 113,489 105,554 114,172
Income tax benefit .............................................. 125 125 114
-------------------------------
Net income ...................................................... $ 113,614 $105,679 $114,286
===============================
25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
STATEMENTS OF CASH FLOWS
Year ended September 30, 2001 2000 1999
----------------------------------------------------------------------------------------------------
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $113,614 $105,679 $ 114,286
Adjustments to reconcile net income to net
cash provided by operating activities
Equity in undistributed net income of subsidiaries (68,843) (8,909) (12,992)
Decrease (increase) in other assets 1,875 (2,000) (2,099)
Increase in other liabilities 758 568 633
-------------------------------
Net cash provided by operating activities 47,404 95,338 99,828
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in short-term borrowings -- (1,000) 1,000
Issuance of common stock through stock option plan 6,224 1,209 1,552
Proceeds from Employee Stock Ownership Plan 1,108 4,049 1,260
Treasury stock purchased -- (48,485) (54,938)
Dividends (54,102) (51,310) (49,209)
-------------------------------
Net cash used by financing activities (46,770) (95,537) (100,335)
-------------------------------
Increase (decrease) in cash 634 (199) (507)
Cash at beginning of year 1,080 1,279 1,786
-------------------------------
Cash at end of year $ 1,714 $ 1,080 $ 1,279
===============================
NOTE S SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of the unaudited interim results of
operations by quarter:
FIRST SECOND THIRD FOURTH
Year ended September 30, 2001 QUARTER QUARTER QUARTER QUARTER
----------------------------------------------------------------------------------------------
(Dollars in thousands, except per share data)
Interest income .......................... $133,421 $134,106 $134,601 $134,282
Interest expense ......................... 87,419 83,362 77,388 71,951
------------------------------------------------
Net interest income ...................... 46,002 50,744 57,213 62,331
Provision for loan losses ................ -- 150 500 1,200
Other operating income ................... 3,138 2,923 2,272 1,804
Other operating expense .................. 11,108 11,739 12,609 13,657
------------------------------------------------
Income before income taxes ............... 38,032 41,778 46,376 49,278
Income taxes ............................. 13,478 14,455 16,526 17,391
------------------------------------------------
Net income ............................... $ 24,554 $ 27,323 $ 29,850 $ 31,887
================================================
Basic earnings per share ................. $ .43 $ .47 $ .52 $ .55
================================================
Diluted earnings per share ............... $ .42 $ .47 $ .51 $ .55
================================================
Return of average assets ................. 1.45% 1.59% 1.71% 1.83%
================================================
First Second Third Fourth
Year ended September 30, 2000 Quarter Quarter Quarter Quarter
-----------------------------------------------------------------------------------------------
(Dollars in thousands, except per share data)
Interest income ............................ $120,289 $121,574 $125,311 $130,853
Interest expense ........................... 68,153 70,342 76,490 84,526
------------------------------------------------
Net interest income ........................ 52,136 51,232 48,821 46,327
Provision for loan losses .................. -- -- -- --
Other operating income ..................... 1,929 2,584 2,695 3,169
Other operating expense .................... 11,552 12,016 11,169 10,977
------------------------------------------------
Income before income taxes ................. 42,513 41,800 40,347 38,519
Income taxes ............................... 15,092 14,792 14,059 13,557
------------------------------------------------
Net income ................................. $ 27,421 $ 27,008 $ 26,288 $ 24,962
================================================
Basic earnings per share ................... $ .46 $ .46 $ .46 $ .44
================================================
Diluted earnings per share ................. $ .46 $ .46 $ .45 $ .44
================================================
Return on average assets ................... 1.77% 1.71% 1.63% 1.50%
================================================
26
REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
Board of Directors
Washington Federal, Inc.
Seattle, Washington
We have audited the accompanying consolidated statements of financial
condition of Washington Federal, Inc. and subsidiaries (the Company) as of
September 30, 2001 and 2000, and the related consolidated statements of
operations, stockholders' equity, and cash flows for each of the three years in
the period ended September 30, 2001. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Washington Federal, Inc. and
subsidiaries as of September 30, 2001 and 2000, and the results of their
operations and their cash flows for each of the three years in the period ended
September 30, 2001, in conformity with accounting principles generally accepted
in the United States of America.
/s/ DELOITTE & TOUCHE LLP
- -------------------------
DELOITTE & TOUCHE LLP
Seattle, Washington
October 19, 2001
GENERAL CORPORATE AND
STOCKHOLDERS' INFORMATION
CORPORATE 425 Pike Street
HEADQUARTERS Seattle, Washington 98101
(206) 624-7930
INDEPENDENT Deloitte & Touche LLP
ACCOUNTANTS Seattle, Washington
TRANSFER AGENT, Stockholder inquiries regarding transfer
REGISTRAR AND requirements, cash or stock dividends, lost
DIVIDEND certificates, consolidating records, correcting
DISBURSING a name or changing an address should be
AGENT directed to the transfer agent:
Mellon Investor Services LLC
85 Challenger Road
Ridgefield Park, NJ 07606
Telephone: 1-800-522-6645
www.melloninvestor.com
ANNUAL MEETING The annual meeting of stockholders will be
held on January 23, 2002, at 2 p.m. at the
Sheraton Hotel, 1400 Sixth Avenue,
Seattle, Washington.
FORM 10-K This report is available to stockholders
of record upon written request to:
Cathy Cooper
Vice President
Washington Federal, Inc.
425 Pike Street
Seattle, Washington 98101
STOCK INFORMATION Washington Federal, Inc. is traded on the
NASDAQ Stock Market. The common
stock symbol is WFSL. At September 30,
2001, there were approximately 2,617 stock-
holders of record.
STOCK PRICES
----------------
QUARTER ENDED HIGH LOW DIVIDENDS
----------------------------------------------------
DECEMBER 31, 1999 $21.36 $16.08 $.21
MARCH 31, 2000 17.33 13.58 .22
JUNE 30, 2000 19.20 14.94 .23
SEPTEMBER 30, 2000 20.85 16.59 .23
DECEMBER 31, 2000 26.19 18.01 .23
MARCH 31, 2001 27.00 22.50 .23
JUNE 30, 2001 27.25 23.81 .24
SEPTEMBER 30, 2001 27.64 23.07 .24
ALL PRICES SHOWN HAVE BEEN ADJUSTED FOR STOCK SPLITS.
LARGEST MARKET MAKERS:
McAdams Wright Ragen, Inc.
Spear, Leeds & Kellogg
Merrill Lynch, Pierce, Fenner & Smith Inc.
Salomon Smith Barney
Instinet Corporation
Lehman Brothers
Keefe, Bruyette & Woods, Inc.
Knight Securities L.P.
Herzog, Heine, Geduld, Inc.
Schwab Capital Markets
Sherwood Securities Corp.
Redibook ECN LLC
Sandler O'Neill & Partners
Archipelago, L.L.C.
Friedman Billings Ramsey & Co. Inc.
THE BRUT ECN, LLC
Cantor, Fitzgerald & Co.
Island System Corporation
Banc of America Securities LLC
B-Trade Services LLC
Ragen McKenzie
Fox-Pitt, Kelton Inc.
Weeden and Co. Inc.
Jefferies & Company, Inc.
Fleet Securities
Ryan Beck & Co. Inc.
27
DIRECTORS, OFFICERS AND OFFICES
CORPORATE
HEADQUARTERS
425 Pike Street
Seattle, WA 98101
(206) 624-7930
BOARD OF DIRECTORS
GUY C. PINKERTON
Chairman
JOHN F. CLEARMAN
Retired, Former Chief
Financial Officer,
Milliman USA, Inc.
H. DENNIS HALVORSON
Retired, Former Chief
Executive Officer,
United Bank
KERMIT O. HANSON
Dean Emeritus
University of Washington
Graduate School of
Business Administration
W. ALDEN HARRIS
Former Executive
Vice President
ANNA C. JOHNSON
Senior Partner
Scan East West Travel
RICHARD C. REED
Management Consultant
Altman Weil, Inc.
CHARLES R. RICHMOND
Former Executive Vice
President
ROY M.WHITEHEAD
President and
Chief Executive Officer
DIRECTORS
EMERITI
HAROLD C. KEAN
E.W. MERSEREAU, JR.
EXECUTIVE
MANAGEMENT
COMMITTEE
ROY M. WHITEHEAD
President and
Chief Executive Officer
EDWIN C. HEDLUND
Executive Vice President
and Secretary
JACK B. JACOBSON
Executive Vice President
and Chief Lending Officer
RONALD L. SAPER
Executive Vice President
and Chief Financial Officer
CORPORATE DEPARTMENT MANAGERS
ACCOUNTING & FINANCE
BRENT J. BEARDALL
Controller
APPRAISAL
HEATHER LULL
CREDIT ADMINISTRATION-
CONSTRUCTION AND LAND
JAMES E. CADY
Vice President
DALE SULLIVAN
Vice President
CORPORATE REAL ESTATE
AND TAXES
KEITH D. TAYLOR
Senior Vice President
and Treasurer
DATA PROCESSING
TERRY O. PERMENTER
Senior Vice President
DEPOSIT OPERATIONS
BEN A. WHITMARSH
Senior Vice President
FACILITIES
MICHAEL D. MERTINS
HUMAN RESOURCES
ARLINE FONDA
Vice President
INTERNAL AUDIT
BARBARA A. MURPHY
Vice President
LOAN OPERATIONS
MICHAEL BUSH
Vice President
LOAN SERVICING
LARRY PLUMB
Vice President
LEGAL/SPECIAL CREDITS
PAUL TYLER
Vice President and Counsel
MANUALS/TRAINING
LINDA NICHOLL
Assistant Vice President
MARKETING AND INVESTOR RELATIONS
CATHY COOPER
Vice President
MULTI-FAMILY LOANS
J. TIMOTHY GRANT
Vice President
PERMANENT LOAN PRODUCTION
JOHN WUNDERLICH
Vice President
SAVINGS ADMINISTRATION
CYNTHIA L. ARNOLD
Vice President
UNDERWRITING-PERMANENT LOANS
JANE A. NOGLE
Senior Vice President
SUBSIDIARIES
FIRST INSURANCE AGENCY, INC.
317 S. 2nd Street
Mount Vernon, WA 98273
1-800-562-2555
(360) 336-9630
ANN BRITTAIN
Vice President
WASHINGTON SERVICES, INC.
6125 South Morgan Road
Freeland, WA 98249
DIVISION/REGIONS
SOUTHERN WASHINGTON
LAKE WASHINGTON
9 OFFICE LOCATIONS
REGION MANAGER
SEBASTIAN PORTUESI
Vice President
4800 Rainier Ave So.
Seattle, WA 98118
SOUTH SOUND
10 OFFICE LOCATIONS
REGION MANAGER
RONDA TOMLINSON
Vice President
9919 Bridgeport Way S.W.
Lakewood, WA 98499
MIDSOUND
10 OFFICE LOCATIONS
REGION MANAGER
E. CRAIG WILSON
Vice President
5809 196th S.W.
Lynnwood, WA 98036
NORTHERN WASHINGTON
10 OFFICE LOCATIONS
DIVISION MANAGER
DOUGLAS A. ROWELL
Senior Vice President
317 S. 2nd Street
Mount Vernon, WA 98273
WESTERN IDAHO
13 OFFICE LOCATIONS
DIVISION MANAGER
ROBERT P. LINK
Senior Vice President
1001 W. Idaho St.
Boise, ID 83702
EASTERN IDAHO
4 OFFICE LOCATIONS
REGION MANAGER
LARRY WADSWORTH
Vice President
500 North Capital
Idaho Falls, ID 83402
SOUTHERN OREGON
15 OFFICE LOCATIONS
DIVISION MANAGER
PEGGY HOBIN
Senior Vice President
300 Ellsworth St. SW
Albany, OR 97321
NORTHERN OREGON
10 OFFICE LOCATIONS
DIVISION MANAGER
THOMAS A. FRANKLIN
Senior Vice President
14990 S.W. Bangy Road
Lake Oswego, OR 97035
UTAH
10 OFFICE LOCATIONS
DIVISION MANAGER
RICHARD FISHER
Senior Vice President
505 East 200 South
Salt Lake City, UT 84102
PHOENIX, ARIZONA
10 OFFICE LOCATIONS
DIVISION MANAGER
RON SHERIDAN
Senior Vice President
2196 E. Camelback Road, Suite 100
Phoenix, AZ 85016
TUCSON, ARIZONA
8 OFFICE LOCATIONS
DIVISION MANAGER
GEORGIA VELARDE
Vice President
5151 E. Broadway Blvd., Suite 105
Tucson, AZ 85711
NEVADA
1 OFFICE LOCATION
DIVISION MANAGER
PAMELA K. CALLAHAN
Vice President
9340 Sun City Blvd. #103
Las Vegas, NV 89134
TEXAS
1 OFFICE LOCATION
DIVISION MANAGER
NORA MONTGOMERY
Vice President
7001 Preston Road, Suite 110
Dallas, TX 75205
A complete listing of our branch locations can be found at
www.washingtonfederal.com
28