1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended.......................December 31, 2003
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to __________________
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.
Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act).
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 JANUARY 30, 2004
--------------- -------------------
Common stock, $1.00 par value 71,310,113
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2
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 December 31, 2003 and September 30, 2003 ............................ Page 3
Consolidated Statements of Operations for the quarters
ended December 31, 2003 and 2002 .......................................... Page 4
Consolidated Statements of Cash Flows for the
quarters ended December 31, 2003 and 2002 ................................. 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
Item 4. Controls and Procedures .......................................................... Page 12
PART II
Item 1. Legal Proceedings ............................................................. Page 14
Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of
Equity Securities ............................................................. Page 14
Item 3. Defaults Upon Senior Securities ............................................... Page 14
Item 4. Submission of Matters to a Vote of Security Holders ........................... Page 14
Item 5. Other Information ............................................................. Page 14
Item 6. Exhibits and Reports on Form 8-K .............................................. Page 14
Signatures .................................................................. Page 16
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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
December 31, 2003 September 30, 2003
----------------- ------------------
(In thousands, except per share data)
ASSETS
Cash and cash equivalents ......................................... $ 1,457,023 $ 1,437,208
Available-for-sale securities, including encumbered
securities of $66,401 and $76,921, at fair value ............... 741,309 804,186
Held-to-maturity securities, including encumbered
securities of $68,690 and $75,690, at amortized cost .......... 185,762 154,178
Securitized assets subject to repurchase, net ..................... 172,669 210,782
Loans receivable, net ............................................. 4,666,904 4,606,726
Interest receivable ............................................... 29,413 29,489
Premises and equipment, net ....................................... 60,962 60,942
Real estate held for sale ......................................... 13,872 16,204
FHLB stock ........................................................ 145,666 143,851
Intangible assets ................................................. 59,968 60,336
Other assets ...................................................... 11,296 12,073
----------- -----------
$ 7,544,844 $ 7,535,975
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Customer accounts
Savings and demand accounts ................................... $ 4,524,690 $ 4,520,051
Repurchase agreements with customers .......................... 54,470 57,547
----------- -----------
4,579,160 4,577,598
FHLB advances ..................................................... 1,650,000 1,650,000
Other borrowings................................................... 100,000 100,000
Advance payments by borrowers for taxes and insurance ............. 10,064 23,281
Federal and state income taxes .................................... 80,757 70,011
Accrued expenses and other liabilities ............................ 54,663 59,489
----------- -----------
6,474,644 6,480,379
STOCKHOLDERS' EQUITY
Common stock, $1.00 par value, 100,000,000 shares authorized;
85,662,183 and 85,553,789 shares issued; 71,281,881
and 71,173,487 shares outstanding ............................ 85,662 85,554
Paid-in capital ................................................... 1,087,400 1,085,650
Accumulated other comprehensive income, net of taxes .............. 30,721 34,624
Treasury stock, at cost; 14,380,302 shares ........................ (207,337) (207,337)
Retained earnings ................................................. 73,754 57,105
----------- -----------
1,070,200 1,055,596
----------- -----------
$ 7,544,844 $ 7,535,975
=========== ===========
CONSOLIDATED FINANCIAL HIGHLIGHTS
Stockholders' equity per share .................................... $ 15.01 $ 14.83
Stockholders' equity to total assets .............................. 14.18% 14.01%
Weighted average rates at period end
Loans and mortgage-backed securities* ........................... 6.31% 6.40%
Investment securities** ......................................... 1.75 1.98
Combined rate on loans, mortgage-backed securities...............
and investment securities ....................................... 5.21 5.28
Customer accounts ............................................... 1.92 1.96
Borrowings ...................................................... 5.03 5.03
Combined cost of customer accounts and borrowings ............... 2.78 2.81
Interest rate spread ............................................ 2.43 2.47
* Includes securitized assets subject to repurchase
** Includes municipal bonds at tax-equivalent yields and cash equivalents
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Quarter Ended December 31,
--------------------------
2003 2002
-------- --------
(In thousands, except per share data)
INTEREST INCOME
Loans and securitized assets subject to repurchase ........ $ 82,395 $ 95,558
Mortgage-backed securities ................................. 11,734 18,215
Investment securities and cash equivalents ................. 8,553 8,295
-------- --------
102,682 122,068
INTEREST EXPENSE
Customer accounts .......................................... 21,636 31,295
FHLB advances and other borrowings ......................... 22,420 22,408
-------- --------
44,056 53,703
-------- --------
NET INTEREST INCOME ........................................ 58,626 68,365
Provision for loan losses .................................. --- 1,250
-------- --------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES ........ 58,626 67,115
OTHER INCOME
Gains on sale of securities, net ........................... 536 ---
Other ...................................................... 2,187 2,193
-------- --------
2,723 2,193
OTHER EXPENSE
Compensation and fringe benefits ........................... 7,560 8,230
Occupancy .................................................. 1,423 1,309
Other ...................................................... 1,796 2,114
-------- --------
10,779 11,653
Gain(loss) on real estate acquired through foreclosure, net. 125 (327)
-------- --------
INCOME BEFORE INCOME TAXES ................................. 50,695 57,328
Income taxes ............................................... 17,873 20,210
-------- --------
NET INCOME ................................................. $ 32,822 $ 37,118
======== ========
PER SHARE DATA
Basic earnings ............................................. $ .46 $ .53
Diluted earnings ........................................... .46 .52
Cash dividends ............................................. .22 .21
Weighted average number of shares outstanding,
including dilutive stock options ......................... 71,931,313 70,081,988
Return on average assets ................................... 1.75% 2.03%
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Quarter Ended
----------------------------
December 2003 December 2002
------------- -------------
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income ............................................................. $ 32,822 $ 37,118
Adjustments to reconcile net income to net cash provided by
operating activities
Amortization of fees, discounts and premiums, net .................... (2,318) (4,375)
Amortization of intangible assets .................................... 368 ---
Depreciation ......................................................... 630 945
Provision for loan losses ............................................ --- 1,250
Loss(gain) on investment securities and real estate held for sale, net (661) 327
Decrease in accrued interest receivable .............................. 76 4,641
Decrease in income taxes payable ..................................... 12,872 14,730
FHLB stock dividends ................................................. (1,815) (2,251)
Decrease in other assets ............................................. 777 1,077
Increase (decrease) in accrued expenses and other liabilities ........ (4,826) 1,803
--------- ---------
Net cash provided by operating activities .............................. 37,925 55,265
CASH FLOWS FROM INVESTING ACTIVITIES
Loans and contracts originated
Loans on existing property ........................................... (283,905) (250,455)
Construction loans ................................................... (114,660) (110,475)
Land loans ........................................................... (63,437) (31,011)
Loans refinanced ..................................................... (21,260) (28,776)
--------- ---------
(483,262) (420,717)
Savings account loans originated ....................................... (254) (418)
Loan principal repayments .............................................. 446,757 698,490
Increase (decrease) in undisbursed loans in process .................... 12,981 (4,506)
Loans purchased ........................................................ (168) (59,731)
Available-for-sale securities purchased ................................ (169,992) (10,000)
Principal payments and maturities of available-for-sale securities ..... 71,364 145,758
Available-for-sale securities sold ..................................... 158,171 ---
Held-to-maturity securities purchased .................................. (56,900) ---
Principal payments and maturities of held-to-maturity securities ....... 25,436 27,421
Proceeds from sales of real estate held for sale ....................... 4,377 2,134
Premises and equipment purchased, net .................................. (650) (3,244)
--------- ---------
Net cash provided by investing activities .............................. 7,860 375,187
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in customer accounts ........................... 1,562 (45,636)
Proceeds from exercise of common stock options ......................... 1,278 632
Dividends paid ......................................................... (15,593) (14,203)
Treasury stock purchased, net .......................................... --- (8,849)
Decrease in advance payments by borrowers for taxes and insurance ...... (13,217) (13,147)
--------- ---------
Net cash used by financing activities .................................. (25,970) (81,203)
INCREASE IN CASH AND CASH EQUIVALENTS................................... 19,815 349,249
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ....................... 1,437,208 975,153
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ............................. $1,457,023 $1,324,402
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
NON-CASH INVESTING ACTIVITIES
Real estate acquired through foreclosure ............................. $ 1,920 $ 1,225
CASH PAID DURING THE PERIOD FOR
Interest ............................................................. 45,817 55,496
Income taxes ......................................................... 5,055 5,500
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED DECEMBER 31, 2003
(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 accounting principles
generally accepted in the United States of America ("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, 2003 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 2003 Annual Report on Form 10-K ("2003 Form
10-K") to the Securities and Exchange Commission ("SEC"). Interim results
are not necessarily indicative of results for a full year.
The Company accounts for stock-based compensation plans based on the
"intrinsic value method" provided in Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees," and related
Interpretations. Because the exercise price of the Company's employee stock
options equals the market price of the underlying stock on the date of grant,
no compensation expense is recognized on options granted. Compensation
expense for restricted stock awards is based on the market price of the stock
on the date of grant and is recognized ratably over the vesting period of the
award. The fair value of options granted under the Company's stock option
plans is estimated on the date of grant using the Black-Scholes option-pricing
model. See Note A and Note N in the 2003 Form 10-K where the Company's three
stock-option employee compensation plans, as well as the weighted-average
assumptions utilized in the Black-Scholes model, are more fully described.
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation," as amended by SFAS No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure," requires disclosures
of net income and earnings per share for companies not adopting its fair value
accounting method for stock-based employee compensation.
The following table illustrates the effect on net income and earnings per
share if the Company had applied the fair value recognition provisions of SFAS
No. 123:
Quarter Ended December 31,
--------------------------
2003 2002
---- ----
(In thousands, except per share data)
Net income, as reported $32,822 $37,118
Deduct: Total stock-based employee compensation
expense determined under fair value based method
for all awards, net of related tax effects (448) (278)
------- -------
Pro forma net income $32,374 $36,840
Earnings per share:
Basic - as reported $ .46 $ .53
Basic - pro forma .45 .53
Diluted - as reported .46 .52
Diluted - pro forma .45 .52
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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED DECEMBER 31, 2003
(Unaudited)
Certain reclassifications have been made to the financial statements to make
prior periods conform to current period classifications.
NOTE B - Dividends
Dividends per share increased to 22 cents for the quarter ended December 31,
2003 compared with 21 cents for the same period one year ago. On January 23,
2004 the Company paid its 84th consecutive quarterly cash dividend.
On January 21, 2004, 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 6, 2004, which will be distributed on February 20, 2004.
Shares outstanding and per share amounts included herein have not been adjusted,
as the press release for the quarter ended December 31, 2003 was previously
released to the public.
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 December 31, 2003 and December 31,
2002 totaled $28,919,000 and $33,118,000, respectively. The difference between
the Company's net income and total comprehensive income equals the change in the
net unrealized gain or loss, net of tax, on securities available-for-sale and
forward commitments to purchase or sell mortgage-backed securities during the
applicable periods.
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 quarter ended
December 31, 2003 and 2002:
Quarter Ended December,
2003 2002
---------- ----------
(in thousands)
<c> <c>
Balance at beginning of period...... $ 25,806 $ 23,912
Provision for loan losses........... --- 1,250
Charge-offs......................... (207) (612)
Recoveries.......................... 31 ---
--------- ----------
Balance at end of period............ $ 25,630 $ 24,550
========= ==========
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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.
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 December 31,
2003, the Company had a negative one-year maturity gap of approximately
17% of total assets, compared to a 21% negative one-year maturity gap as
of December 31, 2002. The decrease in interest rate risk is the result of
the Company building its short-term assets.
The interest rate spread decreased to 2.43% at December 31, 2003 from 2.47%
at September 30, 2003. The decrease was primarily due to the continued
build up of cash and cash equivalents (totaling $1.5 billion) invested at
overnight rates (1.00%). During this phase of the interest rate cycle
(historically low rates for 30 year fixed-rate loans) the Company chose to
position its balance sheet for changing rates in the future by building
cash and stockholders' equity. As of December 31, 2003, the Company had
accumulated $1,457,023,000 in cash and cash equivalents, an increase of
$19,815,000 from September 30, 2003. This liquidity, which represents 19%
of total assets, provides management with flexibility in managing interest
rate risk going forward.
LIQUIDITY AND CAPITAL RESOURCES
The Company's net worth at December 31, 2003 was $1,070,200,000, or 14.18%
of total assets. This was an increase of $14,604,000 from September 30,
2003 when net worth was $1,055,596,000, or 14.01% of total assets. The
increase in the Company's net worth included $32,822,000 from net income.
Net worth was reduced by $15,593,000 of cash dividends paid and a
$3,903,000 decrease in accumulated other comprehensive income. During the
quarter ended December 31, 2003, no additional shares were repurchased under
the Company's ongoing common stock repurchase program, which left a total of
2.81 million shares currently authorized by the Board of Directors for
repurchase.
The Company's percentage of net worth to total assets is among the highest in
the nation and is over three times the minimum required under Office of
Thrift Supervision 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.
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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
CHANGES IN FINANCIAL CONDITION
Available-for-sale and held-to-maturity securities: Available-for-sale
securities decreased $62,877,000, or 7.8%, during the quarter ended
December 31, 2003, due to unusually high prepayments, resulting from
reduced interest rates on mortgage loans and the underlying collateral
for mortgage-backed securities. The Company purchased $169,992,000 and
$56,900,000 of available-for-sale and held-to-maturity investment
securities, respectively, during the quarter ended December 31, 2003.
In addition, during the first quarter of fiscal 2004, the Company sold
$158,171,000 of available-for-sale securities at a net gain of $536,000.
As of December 31, 2003, the Company had unrealized gains on available-
for-sale securities of $30,721,000, net of tax, which were recorded as
part of stockholders' equity.
Loans receivable and securitized assets subject to repurchase: During
the quarter ended December 31, 2003, the combined total of loans
receivable and securitized assets subject to repurchase increased 0.5%
to $4,839,573,000 compared to $4,817,508,000 at September 30, 2003.
The slight increase was consistent with Management's unwillingness to
aggressively compete during this period of historically low home
mortgage rates. Permanent single-family residential loans as a
percentage of total loans decreased to 73.2% at December 31, 2003
compared to 74.0% at September 30, 2003. The aggregate of construction
and land loans (gross of loans in process) as a percentage of total
loans increased to 17.6% at December 31, 2003 compared to 16.7% at
September 30, 2003.
Non-performing assets: Nonperforming assets decreased 9.7% during the
quarter ended December 31, 2003 to $24,785,000 from $27,434,000 at
September 30, 2003.
Intangible assets: Goodwill represents the excess of the cost of
businesses acquired over the fair value of the net assets acquired.
The core deposit intangible and non-compete agreement intangible are
acquired assets that lack physical substance but can be distinguished
from goodwill. Goodwill is no longer amortized, but rather is evaluated
for impairment on an annual basis. Other intangible assets are
amortized over their estimated useful lives and are subject to impairment
testing when events or circumstances change. If circumstances indicate
that the carrying value of the assets may not be recoverable, an
impairment charge could be recorded. There was no impairment at December
31, 2003. The Company will continue to evaluate these assets and, if
appropriate, provide for any diminution in value.
Customer accounts: Customer accounts increased $1,562,000, or 0.03%, to
$4,579,160,000 at December 31, 2003 compared with $4,577,598,000 at
September 30, 2003.
FHLB advances and other borrowings: Total borrowings remained unchanged
at $1,750,000,000 during the quarter ended December 31, 2003.
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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 December 31, 2003 produced net income
of $32,822,000 compared to $37,118,000 for the same quarter one year
ago, an 11.6% decrease. Net income decreased primarily as a result of
continued margin compression caused primarily by a changing asset mix
(more short-term assets) combined with lower yielding loans.
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 for the periods indicated compared
to the same period one year ago. 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 changes 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:
Comparison of Quarters Ended
12/31/2003 and 12/31/2002
-----------------------------
Volume Rate Total
-------- -------- --------
(In Thousands)
<c> <c> <c>
Interest income:
Loan portfolio $(2,046) $(11,117) $(13,163)
Mortgaged-backed securities (4,572) (1,909) (6,481)
Investments (1) 2,271 (2,013) 258
------- -------- --------
All interest-earning assets (4,347) (15,039) (19,386)
Interest expense:
Customer accounts 281 (9,940) (9,659)
FHLB advances and other
borrowings (20) 32 12
------- ------- -------
All interest-bearing liabilities 261 (9,908) (9,647)
Change in net interest income $(4,608) $ (5,131) $ (9,739)
======= ======== ========
(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
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Accretion of loan fees and discounts on securities for the quarter ended
December 31, 2003 totaled $8,689,000, a $4,503,000 decrease from the same
quarter one year ago. Decreased accretion of loan fees and discounts on
securities occurred due to slowing prepayment speeds on loans and
mortgage-backed securities.
The Company provided no provision for loan losses during the quarter,
compared to $1,250,000 for the same quarter last year. This decrease was
primarily due to strong asset quality indicators. Nonperforming assets
amounted to $24,785,000 or .33% of total assets at December 31, 2003
compared to $33,648,000 or .46% of total assets one year ago.
Delinquencies on permanent loans have decreased from $29,100,000 at
December 31, 2002 to $24,500,000 at December 31, 2003. Additionally, a
classified loan with a specific reserve of $800,000 paid off in full during
the quarter ended December 31, 2003. These factors, with others, resulted
in a decrease in net charge-offs for the quarter ended December 31, 2003 by
$436,000 over the comparable period in fiscal 2003. However, weak economic
conditions, including unemployment that is higher than the national average,
continue in the Company's primary markets.
Other income: The quarter ended December 31, 2003 produced total other
income of $2,723,000 compared to $2,193,000 for the same quarter one ago,
a 24.2% increase. Total other income for the quarter increased primarily as
a result of the $536,000 net gain on sale of securities.
Other expense: The quarter ended December 31, 2003 generated total other
expense of $10,779,000 compared to $11,653,000 for the same quarter one year
ago, a 7.5% decrease. Total other expense for the quarter equaled .58% of
average assets, compared to .64% for the same period one year ago. The
number of staff, including part-time employees on a full-time equivalent
basis, was 751 at December 31, 2003 and 725 at December 31, 2002.
Taxes: Income taxes decreased $2,337,000 or 11.6% for the quarter ended
December 31, 2003 when compared to the same period one year ago, due to a
lower taxable income base. The effective tax rates were 35.25% for both the
quarter ended December 31, 2003 and the same period one year ago.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Management believes that there has been no material changes in the Company's
quantitative and qualitative information about market risk since September
30, 2003. For a complete discussion of the Company's quantitative and
qualitative market risk, see "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in the Company's 2003 Form
10-K.
Item 4. CONTROLS AND PROCEDURES
As of the end of the period covered by this report, the Company carried out
an evaluation, under the supervision and with the participation of the
Company's management, including the Company's President and Chief Executive
Officer along with the Company's Senior Vice President and Chief Financial
Officer, of the effectiveness of the design and operation of the Company's
disclosure controls and procedures pursuant to the Securities Exchange Act of
1934 ("Exchange Act") Rule 13a-14. Based upon that evaluation, the
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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
ITEM 4. CONTROLS AND PROCEDURES
Company's President and Chief Executive Officer along with the Company's
Senior Vice President and Chief Financial Officer concluded that the
Company's disclosure controls and procedures are effective in timely alerting
them to material information relating to the Company (including its
consolidated subsidiaries) required to be included in the Company's periodic
SEC filings. There have been no significant changes in the Company's internal
controls or in other factors that have materially affected, or are reasonably
likely to materially affect, the Company's internal control over financial
reporting.
Disclosure controls and procedures are Company controls and other procedures
that are designed to ensure that information required to be disclosed by the
Company in the reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the SEC's rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that
information required to be disclosed by the Company in the reports that it
files under the Exchange Act is accumulated and communicated to the Company's
management, including its President and Chief Executive Officer and Senior
Vice President and Chief Financial Officer, as appropriate, to allow timely
decisions regarding required disclosure.
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14
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, USE OF PROCEEDS AND ISSUER PURCHASES OF
EQUITY SECURITIES
Not applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
Item 5. OTHER INFORMATION
Not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
31.1 Section 302 certification by the Chief Executive Officer
31.2 Section 302 certification by the Chief Financial Officer
32 Section 906 certification by the Chief Executive Officer
and the Chief Financial Officer
(b) Reports on Form 8-K
1. Report filed October 22, 2003. Item included: Item 9.
Regulation FD Disclosure. The report stated that the Company
announced by press release its earnings for the year ended
September 30, 2003.
2. Report filed October 28, 2003. Item included: Item 9.
Regulation FD Disclosure. The report stated that the Company
announced by press release the promotion of Linda S. Brower to
Executive Vice President and Brent J. Beardall to Senior Vice
President and Chief Financial Officer.
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15
WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
3. Report filed December 16, 2003. Item included: Item 9.
Regulation FD Disclosure. The report stated that the Company
mailed its fiscal 2003 annual report and proxy statement to its
shareholders of record as of November 28, 2003. In addition,
the report stated that both the annual report and proxy statement
are available on the Company's web site.
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16
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
February 6, 2004 -----------------------------------
ROY M. WHITEHEAD
Vice Chairman, President and Chief
Executive Officer
/s/ Brent J. Beardall
February 6, 2004 -----------------------------------
BRENT J. BEARDALL
Senior Vice President and Chief
Financial Officer
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