1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended.......................June 30, 2002
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to __________________
For Quarter Ended June 30, 2002 Commission file number 0-25454
WASHINGTON FEDERAL, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Washington 91-1661606
-------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
425 Pike Street Seattle, Washington 98101
-----------------------------------------------------
(Address of principal executive offices and Zip Code)
(206) 624-7930
----------------------------------------------------
(Registrant's telephone number, including area code)
--------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
(1) Yes [X]. No [ ].
(2) Yes [X]. No [ ].
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
TITLE OF CLASS: AT AUGUST 1, 2002
Common stock, $1.00 par value 63,436,611
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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
PART I
Item 1. Financial Statements
The Consolidated Financial Statements of Washington Federal,Inc. and
Subsidiaries filed as a part of the report are as follows:
Consolidated Statements of Financial Condition
as of June 30, 2002 and September 30, 2001 ................................ Page 3
Consolidated Statements of Operations for the three
and nine months ended June 30, 2002 and 2001 .............................. Page 4
Consolidated Statements of Cash Flows for the
nine months ended June 30, 2002 and 2001 .................................. Page 5
Notes to Consolidated Financial Statements ................................ Page 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations .......................................... Page 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk ...................... Page 12
PART II
Item 1. Legal Proceedings ............................................................ Page 13
Item 2. Changes in Securities ........................................................ Page 13
Item 3. Defaults Upon Senior Securities .............................................. Page 13
Item 4. Submission of Matters to a Vote of Stockholders .............................. Page 13
Item 5. Other Information ............................................................ Page 13
Item 6. Exhibits and Reports on Form 8-K ............................................. Page 13
Signatures ................................................................. Page 14
Section 906 Certification................................................... Page 16
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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
June 30, 2002 September 30, 2001
-------------- ------------------
(In thousands, except per share data)
ASSETS
Cash and cash equivalents ......................................... $ 587,489 $ 30,331
Available-for-sale securities, including mortgage-backed
securities of $863,262.......................................... 940,690 1,079,896
Held-to-maturity securities, including mortgage-backed
securities of $165,180......................................... 182,027 248,032
Securitized assets subject to repurchase .......................... 835,814 1,180,336
Loans receivable, net ............................................. 4,292,434 4,207,769
Interest receivable ............................................... 40,610 48,280
Premises and equipment, net ....................................... 55,314 54,242
Real estate held for sale ......................................... 17,001 16,778
FHLB stock ........................................................ 130,349 124,361
Costs in excess of net assets acquired ............................ 35,703 35,703
Other assets ...................................................... 843 1,015
----------- -----------
$ 7,118,274 $ 7,026,743
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Customer accounts
Savings and demand accounts ................................... $ 4,416,902 $ 4,251,113
Repurchase agreements with customers .......................... 71,987 65,579
----------- -----------
4,488,889 4,316,692
FHLB advances ..................................................... 1,550,000 1,637,500
Other borrowings................................................... - 30,000
Advance payments by borrowers for taxes and insurance ............. 12,795 23,196
Federal and state income taxes .................................... 80,065 94,118
Accrued expenses and other liabilities ............................ 52,087 51,228
----------- -----------
6,183,836 6,152,734
STOCKHOLDERS' EQUITY
Common stock, $1.00 par value, 100,000,000 shares authorized;
76,164,489 and 75,906,790 shares issued; and 63,598,394
and 63,647,717 shares outstanding ............................ 76,164 69,006
Paid-in capital ................................................... 967,923 893,633
Accumulated other comprehensive income, net of taxes .............. 50,000 51,000
Treasury stock, at cost; 12,566,095 and 12,259,073 shares ......... (195,478) (189,212)
Retained earnings ................................................. 35,829 49,582
----------- -----------
934,438 874,009
----------- -----------
$ 7,118,274 $ 7,026,743
=========== ===========
CONSOLIDATED FINANCIAL HIGHLIGHTS
Stockholders' equity per share .................................... $ 14.69 $ 13.73
Stockholders' equity to total assets .............................. 13.13% 12.44%
Loans serviced for others ......................................... $ 18,742 $ 26,068
Weighted average rates at period end:
Loans and mortgage-backed securities ............................ 7.35% 7.61%
Investment securities* .......................................... 3.09 8.01
Combined rate on loans, mortgage-backed securities...............
and investment securities ....................................... 6.89 7.62
Customer accounts ............................................... 3.16 4.31
Borrowings ...................................................... 5.24 5.09
Combined cost of customer accounts and borrowings ............. 3.69 4.53
Interest rate spread ............................................ 3.20 3.09
*Includes municipal bonds at tax-equivalent yields and cash equivalents
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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Quarter Ended June 30, Nine Months Ended June 30,
------------------------- --------------------------
2002 2001 2002 2001
-------- -------- --------- ---------
(Dollars in thousands, except per share data)
INTEREST INCOME
Loans and securitized assets subject to repurchase ....... $100,274 $107,718 $309,405 $320,025
Mortgage-backed securities ................................. 18,355 22,296 57,621 68,787
Investment securities ...................................... 5,506 4,587 16,093 13,316
-------- -------- -------- --------
124,135 134,601 383,119 402,128
INTEREST EXPENSE
Customer accounts .......................................... 35,408 48,190 117,931 145,934
FHLB advances and other borrowings ......................... 20,466 29,198 61,575 102,235
-------- -------- -------- --------
55,874 77,388 179,506 248,169
-------- -------- -------- --------
NET INTEREST INCOME ........................................ 68,261 57,213 203,613 153,959
Provision for loan losses .................................. 1,500 500 5,500 650
-------- -------- -------- --------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES ........ 66,761 56,713 198,113 153,309
OTHER INCOME
Gains on sale of securities, net ........................... - - 765 3,235
OTHER ...................................................... 1,719 1,971 5,485 4,737
-------- -------- -------- --------
1,719 1,971 6,250 7,972
OTHER EXPENSE
Compensation and fringe benefits ........................... 8,938 7,567 26,192 20,412
Occupancy expense .......................................... 1,197 1,061 3,490 3,288
Other ...................................................... 3,010 3,981 9,491 11,756
-------- -------- -------- --------
13,145 12,609 39,173 35,456
Gains on real estate owned, net ............................ 83 301 108 360
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES ................................. 55,418 46,376 165,298 126,185
Income taxes ............................................... 19,535 16,526 58,271 44,459
-------- -------- -------- --------
NET INCOME ................................................. $ 35,883 $ 29,850 $107,027 $ 81,726
======== ======== ======== ========
PER SHARE DATA
Basic earnings per share ................................... $ .57 $ .47 $ 1.69 $ 1.29
Diluted earnings per share ................................. .56 .47 1.67 1.28
Cash dividends ............................................. .23 .22 .67 .64
Weighted average number of shares outstanding,
including dilutive stock options ......................... 64,247,057 64,142,996 64,123,519 63,985,822
Return on average assets ................................... 2.04% 1.71% 2.04% 1.59%
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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
----------------------------
June 2002 June 2001
--------- ---------
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income ............................................................. $ 107,027 $ 81,726
Adjustments to reconcile net income to net cash provided by
operating activities
Amortization of fees, discounts and premiums, net .................... (4,096) (157)
Amortization of costs in excess of net assets acquired ............... - 4,253
Depreciation ......................................................... 2,827 2,135
Gains on investment securities and real estate held for sale ......... (873) (3,595)
Decrease (increase)in accrued interest receivable .................... 7,670 (6,443)
Decrease in income taxes payable ..................................... (13,053) (43)
FHLB stock dividends ................................................. (5,988) (5,891)
Decrease (increase) in other assets .................................. 172 2,372
Increase(decrease)in accrued expenses and other liabilities .......... 859 4,268
--------- ---------
Net cash provided by operating activities .............................. 94,545 78,625
CASH FLOWS FROM INVESTING ACTIVITIES
Loans and contracts originated
Loans on existing property ........................................... (648,302) (873,752)
Construction loans ................................................... (264,657) (274,991)
Land loans ........................................................... (68,908) (97,966)
Loans refinanced ..................................................... (70,567) (67,367)
--------- ---------
(1,052,434) (1,314,076)
Savings account loans originated ....................................... (4,725) (2,692)
Loan principal repayments .............................................. 1,370,313 925,137
Decrease in undisbursed loans in process ............................... (11,395) (28,910)
Loans purchased ........................................................ (58,647) (1,825)
Purchase of available-for-sale securities .............................. (180,683) (63,419)
Principal payments and maturities of available-for-sale securities ..... 311,971 138,548
Proceeds from sales of available-for-sale securities ................... 10,000 50,282
Principal payments and maturities of held-to-maturity securities ....... 66,875 29,992
Proceeds from sales of real estate held for sale ....................... 16,539 14,697
Premises and equipment purchased, net .................................. (3,899) (4,192)
--------- ---------
Net cash used by investing activities .................................. 463,915 (256,458)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in customer accounts ...................................... 172,197 457,681
Increase (decrease)in borrowings ....................................... (117,500) (182,449)
Proceeds from exercise of common stock options ......................... 2,978 5,476
Proceeds from employee stock ownership plan ............................ 294 573
Treasury stock purchased ............................................... (6,453) -
Dividends .............................................................. (42,417) (40,217)
Decrease in advance payments by borrowers for taxes and insurance ...... (10,401) (16,855)
--------- ---------
Net cash provided by financing activities .............................. (1,302) 224,209
INCREASE IN CASH AND CASH EQUIVALENTS................................... 557,158 46,376
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ....................... 30,331 28,286
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ............................. $ 587,489 $ 74,662
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
NON-CASH INVESTING ACTIVITIES
Real estate acquired through foreclosure ............................. $ 16,654 $ 10,702
NON-CASH OPERATING ACTIVITIES
Assets securitized subject to repurchase, net ........................ - 1,338,197
CASH PAID DURING THE PERIOD FOR
Interest ............................................................. 184,025 249,838
Income taxes ......................................................... 71,767 43,452
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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED JUNE 30, 2002
(Unaudited)
NOTE A - Basis of Presentation
The consolidated interim financial statements included in this report have
been prepared by Washington Federal, Inc. ("Company") without audit. The
preparation of financial statements in conformity with generally accepted
accounting principles ("GAAP") requires management to make estimates and
assumptions that affect amounts reported in the financial statements.
Actual results could differ from these estimates. In the opinion of
management, all adjustments (consisting only of normal recurring accruals)
necessary for a fair presentation are reflected in the interim financial
statements. The September 30, 2001 Consolidated Statement of Financial
Condition was derived from audited financial statements.
The information included in this Form 10-Q should be read in conjunction
with Washington Federal, Inc.'s 2001 Annual Report on Form 10-K to the
Securities and Exchange Commission. Interim results are not necessarily
indicative of results for a full year.
NOTE B - Dividends
Dividends per share increased to 23 cents for the quarter ended June 30, 2002
compared with 22 cents for the same period one year ago. On July 19, 2002
the Company paid its 78th consecutive quarterly cash dividend.
On January 23, 2002, the Board of Directors of the Company declared an
eleven-for-ten stock split in the form of a 10% stock dividend to stockholders
of record on February 8, 2002, which was distributed on February 22, 2002.
All previously reported share and per share amounts have been adjusted
accordingly.
NOTE C - Comprehensive Income
The Company's comprehensive income includes all items which comprise net
income plus the unrealized holding gains (losses) on available-for-sale
securities and forward commitments to purchase or sell mortgage-backed
securities. Total comprehensive income for the quarters ended June 30,
2002 and June 30, 2001 totaled 48,883,000 and $37,850,000, respectively.
The total comprehensive income for the nine months ended June 30, 2002 and
June 30, 2001 totaled $106,448,000 and $105,726,000, respectively. The
difference between the Company's net income and total comprehensive income
equals the change in the net unrealized gain or loss on securities
available-for-sale and forward commitments to purchase mortgage-backed
securities during the applicable periods.
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Note D - Allowance for Losses on Loans and Securitized Assets Subject
to Repurchase
The following table summarizes the activity in the allowance for loan losses
(including securitized assets subject to repurchase) for the three and
nine months ended June 30, 2002 and 2001:
Three Months Ended June, Nine Months Ended June,
2002 2001 2002 2001
---------- ---------- ---------- ----------
(in thousands) (in thousands)
<c> <c> <c> <c>
Balance at beginning of period...... $ 22,474 $ 20,143 $ 19,683 $ 20,831
Provision for loan losses........... 1,500 500 5,500 650
Charge-offs......................... (1,249) (941) (2,825) (2,038)
Recoveries.......................... 155 581 522 840
--------- ---------- --------- ----------
Balance at end of period............ $ 22,880 $ 20,283 $ 22,880 $ 20,283
========= ========== ========= ==========
Note E - New Accounting Pronouncements
In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 141, "Business
Combinations", and No.142, "Goodwill and Other Intangible Assets".
SFAS No. 141 requires all business combinations initiated after June 30, 2001
to be 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
adopted the provisions of SFAS No. 142 to existing goodwill and other
intangible assets for the fiscal year beginning October 1, 2001. The
adoption of SFAS No. 142 will cease further amortization of goodwill and
will have a pretax impact on income of approximately $5.6 million on an
annual basis. Other expenses were accordingly reduced by $1.4 and $4.2
million for the quarter and nine months ended June 30, 2002, respectively.
The after-tax impact on diluted earnings per share was $.01 for the
three months ended June 30, 2002 and $.04 for the nine months
ended June 30, 2002.
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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
ITEM 2. 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 RATE RISK
The Company assumes 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 in nature than the short-term characteristics of its
liabilities of customer accounts and borrowed money. At June 30, 2002,
the Company had a negative one-year maturity gap of approximately 33%
of total assets, compared to a 50% negative one-year maturity gap as of
June 30, 2001. The decrease in interest rate risk is the result of the
Company lengthening the maturity of its borrowings and building its
short-term assets.
The interest rate spread increased to 3.20% at June 30, 2002 from
3.09% at September 30, 2001. The increase was primarily due to a
reduction in funding costs as certificates of deposits repriced
at lower levels, resulting from the Federal Reserves target rate
being cut to 1.75% during the period. During this phase of the interest
rate cycle the Company decreased earning assets by $68 million or 1.0%,
strengthened its capital position, and deleveraged the balance sheet
by reducing its borrowed money. Additionally, the Company increased
cash and cash equivalents by $557 million in preparation of an increasing
interest rate environment in the future. FHLB advances and other borrowed
money decreased to an equivalent of 21.8% of total assets at
June 30, 2002, compared to 23.7% of total assets at
September 30, 2001.
LIQUIDITY AND CAPITAL RESOURCES
The Company's net worth at June 30, 2002 was $934,438,000, or 13.13% of
total assets. This is an increase of $60,429,000 from September 30, 2001
when net worth was $874,009,000, or 12.44% of total assets. The
increase in the Company's net worth included $107,027,000 from net
income. Net worth was reduced by $42,417,000 of cash dividends paid.
During the nine months ended June 30, 2002, 319,000 shares were repurchased
under the Company's ongoing common stock repurchase program at an average
price of $20.23, which left a total of 3.19 million shares currently
authorized by the Board of Directors as available for repurchase.
The Company's percentage of net worth to total assets is among the
highest in the nation and is nearly three times the minimum
required under Office of Thrift Supervision ("OTS") regulations.
Management believes this strong net worth position will help
protect earnings against interest rate risk and enable it to
compete more effectively for controlled growth through acquisitions,
de novo expansion and increased customer deposits.
The Company's cash and investment securities amounted to $654,668,000,
a $478,613,000 increase from nine months ago. This increase is the result
of higher than normal repayment levels on loans and mortgage-backed
securities during the first three quarters of fiscal 2002, stemming
from record low mortgage rates.
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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Management has elected to keep these funds invested short term to take
advantage of expected rising interest rates in the future (see interest rate
risk above).
CHANGES IN FINANCIAL CONDITION
Available-for-sale and held-to-maturity securities: Available-for-sale
securities decreased $139,206,000 or 12.9% during the nine months ended
June 30, 2002, due to unusually high prepayments, resulting from
extremely low interest rates on mortgage loans, the underlying
collateral for mortgage-backed securities, and the sales of
$10,000,000 of available-for-sale securities, which resulted in a
gain of $650,000. The Company purchased $180,683,000 of mortgage-backed
securities during the nine months ended June 30, 2002, all of which
were categorized as available-for-sale. There were no purchases
of held-to-maturity securities during the nine months ended
June 30, 2002. As of June 30, 2002, the Company had unrealized
gains on available-for-sale securities of $50,000,000, net of tax,
which were recorded as part of stockholders' equity.
Loans receivable and securitized assets subject to repurchase: During the
nine months ended June 30, 2002, the combined total of loans receivable and
securitized assets subject to repurchase decreased 4.8% to $5,128,248,000
at June 30, 2002 from $5,388,105,000 at September 30, 2001. The decrease
resulted from Management's unwillingness to aggressively compete during
this period of increased refinancing activity caused by near record
low home mortgage rates.
Non-performing assets: Non-performing assets increased 10.0% during
the nine months ended June 30, 2002 to $37,141,000 from $33,758,000
at September 30, 2001. The increase is attributable primarily to
the continuing softening of the economy.
Costs in excess of net assets acquired: The Company periodically monitors
costs in excess of net assets acquired for potential impairment; there
was no impairment at June 30, 2002. The Company will continue to evaluate
these assets and, if appropriate, provide for any diminution in value.
Customer accounts: Customer accounts increased $172,197,000, or 3.99%,
to $4,488,889,000 at June 30, 2002 compared with $4,316,692,000 at
September 30, 2001. This increase was due to attractive pricing
and continued uncertainty in the equity markets.
FHLB advances and other borrowings: Total borrowings decreased 7.0% during
the nine months to $1,550,000,000 at June 30, 2002. See Interest Rate
Risk above.
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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net Income: The quarter ended June 30, 2002 produced net income of
$35,883,000 compared $29,850,000 for the same quarter one year ago,
a 20.2% increase. Net income for the nine months ended June 30, 2002
was $107,027,000 compared to $81,726,000 for the nine months ended
June 30, 2001, a 31.0% increase. Net income for the three and
nine months ended June 30, 2002 increased primarily as a result of
increased net interest income, which was partially offset by
increased compensation expenses, an increased provision for loan
losses and a significant increase in income tax expense.
Net Interest Income: The largest component of the Company's
earnings is net interest income, which is the difference between
the interest and dividends earned on loans and other investments
and the interest paid on customer deposits and borrowings. Net
interest income is impacted primarily by two factors; first, the
volume of earning assets and liabilities and second, the rate
earned on those assets or the rate paid on those liabilities.
The following table sets forth certain information explaining
changes in interest income and interest expense of the Company
for the periods indicated. For each category of interest-earning
asset and interest-bearing liability, information is provided on
changes attributable to (1) changes in volume (changes in volume
multiplied by old rate) and (2) changes in rate (changes in rate
multiplied by old volume). The change in interest income and
interest expense attributable to change in both volume and rate
has been allocated proportionately to the change due to volume
and the change due to rate.
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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Rate / Volume Analysis:
Three Months Ended Nine Months Ended
June 30,2002 June 30, 2002
Volume Rate Total Volume Rate Total
------- ------- ------- ------- ------- --------
<c> <c> <c> <c> <c> <c>
Interest Income:
Loan Portfolio $(2,727) $(4,717) $ (7,444) $ 6,855 $(17,475) $ (10,620)
Mortgaged-backed securities (4,450) 509 (3,941) (13,920) 2,754 (11,166)
Investments 4,630 (3,711) 919 10,354 (7,577) 2,777
------- ------- ------- ------- ------- --------
All interest-earning assets (2,547) (7,919) (10,466) 3,289 (22,298) (19,009)
Interest Expense:
Customer Accounts 8,951 (21,733) (12,782) 31,817 (59,820) (28,003)
FHLB advances and other
borrowings (10,402) 1,670 (8,732) (33,142) (7,518) (40,660)
------- ------- ------- ------- ------- -------
All interest-bearing liabilities (1,451) (20,063) (21,514) (1,325) (67,338) (68,663)
Change in net interest income $(1,096) $ 12,144 $ 11,048 $ 4,614 $45,040 $49,654
======= ======== ======== ======= ======= =======
(1) Includes interest on cash equivalents and dividends on stock of
the FHLB of Seattle
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12
WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
The Company provided $1,500,000 for loan losses during the quarter, compared
to $500,000 for the same quarter last year. For the nine months ended
June 30, 2002, the total provision was $5,500,000, compared to $650,000
for the same period one year ago. This increase was due to the continued
decline in economic conditions in the markets the Company serves, including
high unemployment levels and a slow down in the new home construction market.
These factors, with others, resulted in an increase in net charge-offs for
the nine months ended June 30, 2002 by $1,105,000 over the comparable
period in fiscal 2001. Non-performing assets amounted to $37,141,000
or .52% of total assets at June 30, 2002 compared to $31,618,000 or
..45% of total assets one year ago. Delinquencies on permanent loans
have decreased from $29.1 million at June 30, 2001, to $28.0 million
at June 30, 2002.
Total other income decreased $1,722,000 (21.6%) to $6,250,000 for the nine
months ended June 30, 2002 from $7,972,000 for the nine months ended
June 30, 2001. This decrease is attributable primarily to the reduction
in gains realized from the sales of securities. Gains on the sales of
available-for-sale securities totaled $765,000 and $3,235,000 for the
nine months ended June 30, 2002 and June 30, 2001, respectively.
Offsetting this decline in gains on the sales of securities, was a
one-time gain of $515,000 on the disposition of a branch and slight
increases in fee income. Total other income decreased $252,000 (12.8%)
to $1,719,000 for the quarter ended June 30, 2002 from $1,971,000
for the quarter ended June 30, 2001. This decrease is attributable
primarily to a reduction in miscellaneous fee income resulting from
the decrease in the volume of loan originations.
Total other expense increased $3,717,000 (10.5%) to $39,173,000 for the
nine months ended June 30, 2002, compared to $35,456,000 for the nine
months ended June 30, 2001. Total other expense increased $536,000
(4.3%) for quarter ended June 30, 2002 compared to the June 30, 2001
quarter. These changes are primarily the result of earnings-based
bonus accruals and additional staffing. Total other expense for the
quarter and nine months ended June 30, 2002 equaled .75% of average
assets, compared to .72% and .69% for the quarter and nine months ended
June 30, 2001, respectively. The number of staff, including part-time
employees on a full-time equivalent basis, was 741 at June 30, 2002 and
718 at June 30, 2001.
Income taxes increased $13,812,000 (31.1%) and $3,009,000 (18.2%) for
the nine-month period and quarter ended June 30, 2002, respectively,
when compared to the same periods one year ago, due to a higher
taxable income base. The effective tax rates were 35.25% for the
nine-month period ended June 30, 2002 the same period one year ago.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have not been any material changes in quantitative and qualitative
information about market risk since September 30, 2001.
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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
Part II - Other Information
Item 1. Legal Proceedings
From time to time the Company or its subsidiaries are engaged in legal
proceedings in the ordinary course of business, none of which are
considered to have a material impact on the Company's financial
position or results of operations.
Item 2. Changes in Securities
Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Stockholders
Not applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
Exhibit 99.1 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act
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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
/s/ Roy M. Whitehead
August 12, 2002 --------------------------------------
ROY M. WHITEHEAD
President and Chief Executive Officer
/s/ Ronald L. Saper
August 12, 2002 --------------------------------------
RONALD L. SAPER
Executive Vice-President and Chief
Financial Officer (principal financial
officer)
/s/ Brent J. Beardall
August 12, 2002 --------------------------------------
BRENT J. BEARDALL
Controller (principal
accounting officer)
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EXHIBIT 99.1
CERTIFICATION
PURSUANT TO 18 U.S.C SECTION 1350
AS ADOPTED PURSAUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
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CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Washington Federal,
Inc. (the "Company") on Form 10-Q for the nine month period
ending June 30, 2002, as filed with the Securities and Exchange
Commission on the date hereof (the "Report"), the undersigned
hereby certify, pursuant to 18 U.S.C. section 1350, as adopted
pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that
to the undersigned's best knowledge and belief:
(a) the Report fully complies with the requirements of
section 13(a) or 15(d) of the Securities Exchange Act
of 1934; and
(b) the information contained in the Report fairly
presents, in all material respects, the financial
condition and results of operations of the Company.
Dated this 12th day of August, 2002.
Washington Federal, Inc.
("Company")
/s/ Roy M. Whitehead
- ------------------------------
Roy M. Whitehead
Chief Executive Officer
/s/ Ronald L. Saper
- ------------------------------
Ronald L. Saper
Chief Financial Officer
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