<PAGE> 1
================================================================================
FORM 10-K
Securities and Exchange Commission
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 2000.
OR
[ ] 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)
<TABLE>
<S> <C>
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) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (206) 624-7930
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
N/A N/A
Securities registered pursuant to section 12(g) of the Act:
Common Stock, $1.00 par value per share
---------------------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months and (2) has been subject to such filing requirements for the
past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
As of December 1, 2000, the aggregate market value of the 50,555,253 shares of
Common Stock of the Registrant issued and outstanding on such date, excluding
1,618,337 shares held by all directors and executive officers of the Registrant
as a group, was $1,188,048,446. This figure is based on the closing sale price
of $23.50 per share of the Registrant's Common Stock on December 1, 2000, as
reported in The Wall Street Journal on December 4, 2000.
Number of shares of Common Stock outstanding as of December 1, 2000: 52,173,590
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents incorporated by reference and the
Part of Form 10-K into which the document is incorporated:
(1) Portions of the Registrant's Annual Report to Stockholders for the fiscal
year ended September 30, 2000, are incorporated into Part II, Items 5-8 of this
Form 10-K.
(2) Portions of the Registrant's definitive proxy statement for its 2000 Annual
Meeting of Stockholders are incorporated into Part III, Items 10-13 of this Form
10-K.
<PAGE> 2
2
PART I
ITEM 1. BUSINESS
GENERAL
Washington Federal, Inc. (Company), formed in November 1994, is a
Washington corporation headquartered in Seattle, Washington. The Company is a
non-diversified unitary savings and loan holding company within the meaning of
the Home Owners' Loan Act (HOLA) which conducts its operations through a
federally insured savings and loan association subsidiary, Washington Federal
Savings and Loan Association (Washington Federal or Association). As such, the
Company is registered as a holding company with the Office of Thrift Supervision
(OTS) and is subject to OTS regulation, examination, supervision and reporting
requirements.
The Association, doing business as Washington Federal Savings, is a
federally-chartered savings and loan association that began operations in
Washington as a state-chartered mutual association in 1917. In 1935, the
Association converted to a federal charter and became a member of the Federal
Home Loan Bank (FHLB) System. On November 17, 1982, Washington Federal converted
from a federal mutual to a federal capital stock association.
The business of Washington Federal consists primarily of attracting
savings deposits from the general public and investing these funds in loans
secured by first mortgage liens on single-family dwellings, including loans for
the construction of such dwellings, and to a significantly lesser extent, on
commercial property and multi-family dwellings. It also originates other types
of loans for its portfolio and invests in certain United States Government and
agency obligations and other investments permitted by applicable laws and
regulations. Washington Federal has 108 offices located in Washington, Oregon,
Idaho, Arizona, Utah and Nevada, all of which are full service branches. Through
subsidiaries, the Association is engaged in real estate development and
insurance brokerage activities.
The principal sources of funds for the Association's activities are
retained earnings, loan repayments (including prepayments), net savings inflows,
sales of loans, loan participations and other assets and deposits and
borrowings. Washington Federal's principal sources of revenue are interest on
loans, interest and dividends on investments and gains on sale of investments
and real estate. Its principal expenses are interest paid on savings, general
and administrative expenses, interest on borrowings and income taxes.
The Company's growth has been generated both internally and as a result
of eleven mergers and three assumptions of deposits. The most recent acquisition
was completed in November 1996, when the Company purchased Metropolitan Bancorp,
Seattle, Washington (Metropolitan).
The Association is subject to extensive regulation, supervision and
examination by the OTS, as its chartering authority and primary federal
regulator, and by the Federal Deposit Insurance Corporation (FDIC), which
insures its deposits up to applicable limits. Such regulation and supervision
establishes a comprehensive framework of activities in which an association may
engage and is intended primarily for the protection of the Savings Association
Insurance Fund (SAIF) administered by the FDIC and depositors. The regulatory
structure also gives the regulatory authorities extensive discretion in
connection with their supervisory and enforcement activities. Any change in such
regulation, whether by the OTS, the FDIC or the U.S. Congress, could have a
significant impact on the Association and its operations. See "Regulation."
<PAGE> 3
3
AVERAGE STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
Year Ended September 30,
----------------------------------------------------------------------------
1998 1999
--------------------------------------------- -------------------------
Average Average Average
Balance Interest Rate Balance Interest
---------- ---------- ------------- ---------- ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
ASSETS
Loans(1) $4,166,420 $ 364,801 8.76% $4,191,658 $ 353,930
Mortgage-backed securities 907,265 70,099 7.73 1,132,638 82,331
Investment securities 279,442 18,238 6.53 174,848 11,502
FHLB stock 96,405 7,466 7.74 104,013 7,814
---------- ---------- ------------- ---------- ----------
Total interest-earning assets 5,449,532 460,604 8.45 5,603,157 455,577
Other assets 193,397 189,085
---------- ----------
Total assets $5,642,929 $5,792,242
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Checking accounts $ 91,800 2,153 2.35 98,850 2,266
Passbook and statement accounts 173,189 6,048 3.49 166,428 5,225
Insured money market accounts 418,205 16,890 4.04 504,609 20,057
Certificate accounts (time deposits) 2,274,557 126,757 5.57 2,434,148 127,464
Repurchase agreements with customers 79,652 4,252 5.34 98,155 4,930
FHLB advances 1,210,362 67,816 5.60 1,076,263 59,275
Securities sold under
agreements to repurchase 400,202 22,521 5.63 396,098 19,995
Federal funds purchased 102,407 5,796 5.66 105,992 5,278
---------- ---------- ------------- ---------- ----------
Total interest-bearing liabilities 4,750,374 252,233 5.31 4,880,543 244,490
Other liabilities 139,686 150,126
---------- ----------
Total liabilities 4,890,060 5,030,669
Stockholders' equity 752,869 761,573
---------- ----------
Total liabilities
and stockholders' equity $5,642,929 $5,792,242
========== ---------- ------------- ========== ----------
Net interest income/Interest rate spread $ 208,371 3.14% $ 211,087
========== ============= ==========
Net interest margin(2) 3.82%
=============
</TABLE>
<TABLE>
<CAPTION>
Year Ended September 30,
--------------------------------------------------------------
1999 2000
------------- -------------------------------------------
Average Average Average
Rate Balance Interest Rate
------------- ---------- ---------- -------------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
ASSETS
Loans(1) 8.44% $4,624,138 $ 384,852 8.32%
Mortgage-backed securities 7.27 1,323,591 95,737 7.23
Investment securities 6.58 143,810 9,967 6.93
FHLB stock 7.51 111,714 7,470 6.69
------------- ---------- ---------- -------------
Total interest-earning assets 8.13 6,203,253 498,026 8.03
Other assets 190,031
----------
Total assets $6,393,284
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Checking accounts 2.29 101,891 2,371 2.33%
Passbook and statement accounts 3.14 149,199 4,471 3.00
Insured money market accounts 3.97 556,481 22,792 4.10
Certificate accounts (time deposits) 5.24 2,504,682 138,049 5.51
Repurchase agreements with customers 5.02 91,945 5,052 5.49
FHLB advances 5.51 802,818 46,738 5.82
Securities sold under
agreements to repurchase 5.05 960,963 58,818 6.12
Federal funds purchased 4.98 351,642 21,220 6.03
------------- ---------- ---------- -------------
Total interest-bearing liabilities 5.01 5,519,621 299,511 5.43
Other liabilities 137,718
----------
Total liabilities 5,657,339
Stockholders' equity 735,945
----------
Total liabilities
and stockholders' equity $6,393,284
------------- ========== ---------- -------------
Net interest income/Interest rate spread 3.12% $198,515 2.60%
============= ========== =============
Net interest margin(2) 3.77% 3.20%
============= =============
</TABLE>
(1) The average balance of loans includes nonaccruing loans, interest on which
is recognized on a cash basis.
(2) Net interest income divided by average interest-earning assets.
<PAGE> 4
4
LENDING ACTIVITIES
GENERAL. The Association's net portfolio of loans and mortgage-backed
securities totaled $6.277 billion at September 30, 2000, representing
approximately 93% of its total assets. In recent years, the Company has
concentrated its lending activities on the origination of conventional loans,
which are loans that are neither insured nor guaranteed by agencies of the
United States Government. The Company's investment in mortgage-backed securities
issued or guaranteed by the Government National Mortgage Association (GNMA), the
Federal National Mortgage Association (FNMA), the Federal Home Loan Mortgage
Corporation (FHLMC) and certain privately insured mortgage-backed securities
amounted to $1.328 billion (net of discounts and premiums) at September 30,
2000, and is deemed to be part of the Company's loan portfolio.
Washington Federal has historically concentrated its lending activity on
the origination of long-term fixed-rate single-family first lien mortgage loans,
single-family construction loans and land development loans. Although mortgage
loans may be written with adjustable interest rates, the Association does not
emphasize adjustable-rate loans.
<PAGE> 5
5
The following table sets forth the composition of the Company's gross
loan and mortgage-backed securities portfolio, by loan type and security type,
as of September 30 for the years indicated.
<TABLE>
<CAPTION>
1996 1997 1998
------------------------- ------------------------- ----------
Amount Percent Amount Percent Amount
---------- ---------- ---------- ---------- ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Loans by type of loan Real estate:
Conventional:
Permanent $3,241,789 66.6% $3,719,185 68.9% $3,689,755
Land development 172,146 3.5 158,706 2.9 160,879
Construction(1) 548,302 11.2 542,394 10.0 562,689
Insured or guaranteed:
FHA 18,123 .4 26,641 .5 19,330
VA 18,169 .4 17,797 .3 15,829
Mortgage-backed
securities (residential)(2) 865,887 17.8 931,456 17.3 949,892
Savings account loans 3,576 .1 3,954 .1 3,094
Consumer 1,488 -- 1,089 -- 673
---------- ---------- ---------- ---------- ----------
Total(3) $4,869,480 100.0% $5,401,222 100.0% $5,402,141
========== ========== ========== ========== ==========
Loans by type of security Residential:
Single-family(4) $3,879,092 79.7% $4,222,566 78.2% $4,258,722
Other dwelling units 74,108 1.5 122,038 2.2 105,022
Income property 45,329 .9 120,119 2.2 84,738
Mortgage-backed
securities (residential)(2) 865,887 17.8 931,456 17.3 949,892
Savings account loans 3,576 .1 3,954 .1 3,094
Consumer 1,488 -- 1,089 -- 673
---------- ---------- ---------- ---------- ----------
Total(3) $4,869,480 100.0% $5,401,222 100.0% $5,402,141
========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
1998 1999 2000
---------- ------------------------- -------------------------
Percent Amount Percent Amount Percent
---------- ---------- ---------- ---------- ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Loans by type of loan Real estate:
Conventional:
Permanent 68.3% $3,908,177 64.1% $4,425,790 66.9%
Land development 3.0 170,479 2.8 180,745 2.7
Construction(1) 10.4 620,459 10.2 646,823 9.8
Insured or guaranteed:
FHA .3 14,616 .2 12,200 .2
VA .3 13,217 .2 12,484 .2
Mortgage-backed
securities (residential)(2) 17.6 1,366,278 22.5 1,339,214 20.2
Savings account loans .1 2,731 -- 1,769 --
Consumer -- 395 -- 187 --
---------- ---------- ---------- ---------- ----------
Total(3) 100.0% $6,096,352 100.0% $6,619,212 100.0%
========== ========== ========== ========== ==========
Loans by type of security Residential:
Single-family(4) 78.7% $4,455,275 73.0% $4,989,743 75.4%
Other dwelling units 2.0 206,347 3.4 234,381 3.6
Income property 1.6 65,326 1.1 53,918 .8
Mortgage-backed
securities (residential)(2) 17.6 1,366,278 22.5 1,339,214 20.2
Savings account loans .1 2,731 -- 1,769 --
Consumer -- 395 -- 187 --
---------- ---------- ---------- ---------- ----------
Total(3) 100.0% $6,096,352 100.0% $6,619,212 100.0%
========== ========== ========== ========== ==========
</TABLE>
(1) Includes construction loans that have been modified to monthly payment
loans, due in full in approximately one year, in the amount of $15.9 million,
$17.8 million, $17.6 million, $10.4 million and $8.6 million at September 30,
1996, 1997, 1998, 1999 and 2000, respectively.
(2) For additional information, see Note C to the Consolidated Financial
Statements.
(3) After netting undisbursed proceeds on loans in process, deferred fees,
discounts on loans, and allowances for possible losses against the applicable
loan amounts, the Association's net loan portfolio amounted to $4.6 billion,
$5.1 billion, $5.1 billion, $5.7 billion and $6.3 billion at September 30, 1996,
1997, 1998, 1999 and 2000, respectively.
(4) Includes condominium units (which are deemed to be single-family residences
regardless of the number of units in the structure in which they are located),
as well as land and construction loans for single-family residences.
<PAGE> 6
6
The following table summarizes the scheduled contractual gross loan
maturities for the Association's total loan and mortgage-backed securities
portfolios due for the periods indicated as of September 30, 2000. Amounts are
presented prior to deduction of discounts, premiums, loans in process, deferred
loan origination fees and allowance for loan losses. Adjustable rate loans are
shown in the period in which loan principal payments are contractually due.
<TABLE>
<CAPTION>
Maturity Distribution
------------------------------------------------
Balance Outstanding at Less than 1 to 5 After 5
September 30, 2000 1 year years years
---------------------- ---------- ---------- ----------
(Dollars In Thousands)
<S> <C> <C> <C> <C>
One- to four-family real estate loans $4,162,175 $ 10,080 $ 27,836 $4,124,259
GNMA, FHLMC, FNMA and other
mortgage-backed securities 1,339,214 -- 245 1,338,969
Construction and land development
loans 827,568 612,041 33,991 181,536
Income property and other residential 288,299 6,957 36,340 245,002
Savings account loans 1,769 1,748 -- 21
Consumer loans 187 30 88 69
---------- ---------- ---------- ----------
$6,619,212 $ 630,856 $ 98,500 $5,889,856
========== ========== ========== ==========
</TABLE>
Loans maturing after one year:
<TABLE>
<S> <C>
Fixed-interest rates $5,262,257
Floating or adjustable interest rates 726,099
----------
Total $5,988,356
==========
</TABLE>
<PAGE> 7
7
The original contractual loan payment period for residential loans
originated by the Association normally ranges from 15 to 30 years. Experience
during recent years has indicated that, because of prepayments in connection
with refinancing and sales of property, residential loans remain outstanding an
average of less than ten years.
LENDING PROGRAMS AND POLICIES. The Association specializes in
residential real estate lending and has no present plans to expand its
operations into consumer or commercial business loans. The Association offers
"balloon" payment loans, which are amortized on a 20 or 30 year basis but which
have a maturity date for the principal balance of a much shorter period. The
Association also provides land acquisition and development loans ("land
development loans") and construction loans for single-family residences. The
interest rate on these loans generally adjusts every 90 days in accordance with
a designated index. Land development and construction loans amounted to $827.6
million or 13% of the Association's gross loan portfolio (including
mortgage-backed securities) at September 30, 2000. The Association offers a
multi-family (five or more dwelling units) lending program with strict
underwriting guidelines, including a $2.5 million limit on any one loan.
Many of the associations acquired by Washington Federal offered a
variety of lending products, including commercial real estate and non-real
estate secured loans, consumer secured loans and non-secured lines of credit.
All commercial, consumer and line of credit lending has been discontinued and
lending has been redirected toward the Association's traditional lending
practices of single-family residential loans. The loans acquired, other than
single-family residential real estate loans, are being serviced and payoffs are
encouraged.
As a result of activity over the past three decades, the Association
believes that it is a leading construction lender for single-family residences
in the Seattle metropolitan area. Because of this history, the Association has
developed a staff with in-depth land development and construction experience,
and working relationships with a group of builders which have been selected
based on their operating histories and financial stability.
Construction lending is generally considered to involve a higher level
of risk than single-family residential lending due to the concentration of
principal in a limited number of loans and borrowers, as well as the effects of
general economic conditions on real estate developers and managers. Moreover, a
construction loan can involve additional risks because of the inherent
difficulty in estimating both a property's value at completion of the project
and the estimated cost (including interest) of the project. The nature of these
loans also is such that they are generally more difficult to evaluate and
monitor.
The Association continues to originate medium and long-term permanent
fixed-rate loans, but in most instances only under terms, conditions and
documentation which permit sale in the secondary market (see below). Moreover,
since 1973 it has been the Association's general policy to include in the
documentation evidencing its conventional mortgage loans a due-on-sale clause,
which facilitates adjustment of interest rates on such loans when the property
securing the loan is sold or transferred. At September 30, 2000, $5.854 billion
or 88% of the Association's loan portfolio was represented by medium and
long-term fixed-rate loans secured by single-family residences (including
mortgage-backed securities).
All of the Association's mortgage lending is subject to written,
nondiscriminatory underwriting standards, loan origination procedures, and
lending policies prescribed by the Association's Board of Directors. Property
valuations are required on all real estate loans. Appraisals are prepared by
independent appraisers approved by the Association's Board of Directors and all
appraisals are reviewed
<PAGE> 8
8
by the Association's appraisal staff. Property evaluations are sometimes
utilized on single-family real estate loans of $250,000 or less. These are
prepared by the Association's loan staff and reviewed by the Association's
appraisal staff. Detailed loan applications are obtained to determine the
borrower's ability to repay, and the more significant items on these
applications are verified through the use of credit reports, financial
statements and written confirmations. Depending on the size of the loan
involved, a varying number of senior officers of the Association must approve
the application before the loan can be granted.
Federal regulations limit the amount of a real estate loan made by a
federally-chartered savings institution to a specified percentage of the value
of the property securing the loan, as determined by an appraisal at the time the
loan is originated, referred to as the loan-to-value ratio. The regulation
provides that at the time of origination, a real estate loan may not exceed 100%
of the appraised value of the security property. Maximum loan-to-value ratios
for each type of real estate loan made by an institution are established by the
institution's Board of Directors. In addition, the Board of Directors must
approve each real estate loan (other than a home loan) with a loan-to-value
ratio in excess of 80%.
When establishing general reserves for loans with loan-to-value ratios
exceeding 80% that are not insured by private mortgage insurance, Washington
Federal considers the additional risk inherent with these products, as well as
their relative loan loss experience, and provides reserves when deemed
appropriate. The total reserve balance for loans with loan-to-value ratios
exceeding 80% at September 30, 2000, amounted to $6.5 million.
The Association's residential construction loans and land acquisition
and development loans are of a short-term nature and are generally made for 80%
or less of the appraised value of the property upon completion for residential
construction loans, and 75% or less for land acquisition and development loans.
Funds are disbursed periodically at various stages of completion as authorized
by the Association's personnel.
It is the Association's policy to obtain title insurance ensuring that
the Association has a valid first lien on the mortgaged real estate serving as
collateral. Borrowers must also obtain hazard insurance prior to closing and,
when required by the Department of Housing and Urban Development, flood
insurance. Borrowers may be required to advance funds on a monthly basis,
together with each payment of principal and interest, to a mortgage escrow
account from which the Association makes disbursements for items such as real
estate taxes, hazard insurance premiums and private mortgage insurance premiums
when due.
ORIGINATION, PURCHASE AND SALE OF LOANS. The Association has general
authority to lend anywhere in the United States. The Association's primary
lending area, however, includes Washington, Oregon, Idaho, Arizona, Utah and
most recently Nevada.
Loan originations come from a number of sources. Residential loan
originations result from referrals from real estate brokers, walk-in customers,
purchasers of property in connection with builder projects financed by the
Association, purchasers of property referred through mortgage brokers and from
refinancing for existing customers. Construction loan originations are obtained
primarily by direct solicitation of builders and continued business from
builders who have previously borrowed from the Association.
<PAGE> 9
9
At September 30, 2000, the Association was servicing approximately $37.9
million of loans for others. Sales are made on a yield basis with the difference
between the yield to the purchaser and the amount paid by the borrower
constituting servicing income to the Association. The sale of loans and loan
participations is subject to federal regulations, which until recently, required
that sales be made on a non-recourse basis.
The Association also purchases mortgage-backed securities when lending
rates and mortgage volume for new loan originations in its market area do not
fulfill its needs. Mortgage-backed securities accounted for a significant
portion of the Association's loan purchases in recent years. Mortgage-backed
securities are more liquid than individual mortgage loans and may be used to
collateralize borrowings of the Association.
<PAGE> 10
10
The table below shows total loan origination, purchase, sale and
repayment activities of the Association on a consolidated basis for the years
indicated.
<TABLE>
<CAPTION>
Year Ended September 30,
---------------------------------------------------------------------------
1996 1997 1998 1999 2000
----------- ----------- ----------- ----------- -----------
(Dollars In Thousands)
<S> <C> <C> <C> <C> <C>
Loans originated(1):
Construction $ 428,317 $ 407,135 $ 467,884 $ 425,190 $ 451,582
Land 92,496 77,270 105,901 121,853 118,947
Loans on existing property 972,601 556,063 723,337 1,058,403 923,290
Loans refinanced 62,854 48,240 157,110 164,166 28,471
----------- ----------- ----------- ----------- -----------
Total loans originated 1,556,268 1,088,708 1,454,232 1,769,612 1,522,290
----------- ----------- ----------- ----------- -----------
Loans and mortgage-backed securities purchased:
From acquisition of
associations -- 627,816 -- -- --
Other 60,888 11,310 321,006 767,101 155,927
----------- ----------- ----------- ----------- -----------
60,888 639,126 321,006 767,101 155,927
----------- ----------- ----------- ----------- -----------
Loans and mortgage-backed
securities sold (134,275) (119,851) (55,560) (22,726) (12,442)
----------- ----------- ----------- ----------- -----------
Loan and mortgage-backed
securities principal
repayments (1,016,049) (1,127,923) (1,734,310) (1,834,818) (1,113,917)
----------- ----------- ----------- ----------- -----------
Net change in loans in
process, discounts, etc 7,908 68,224 (3,702) (67,096) 24,777
----------- ----------- ----------- ----------- -----------
Net loan activity increase (decrease)
$ 474,740 $ 548,284 $ (18,334) $ 612,073 $ 576,635
=========== =========== =========== =========== ===========
</TABLE>
(1) Includes undisbursed loans in process and does not include savings account
loans, which were not material during the periods indicated.
INTEREST RATES, LOAN FEES AND SERVICE CHARGES. Interest rates charged by
the Association on mortgage loans are primarily determined by the level of
competitive loan rates offered in its lending areas and in the secondary market.
Mortgage loan rates reflect factors such as general interest rates, the supply
of money available to the savings and loan industry and the demand for such
loans. These factors are in turn affected by general economic conditions, the
regulatory programs and policies of federal and state agencies, changes in tax
laws and governmental budgetary programs.
The Association receives loan origination fees for originating loans and
servicing fees for servicing loans sold by it to others. The Association also
receives commitment fees for making commitments to originate construction,
commercial and multi-family residential loans, as well as various fees and
charges related to existing loans, which include prepayment charges, late
charges and assumption fees.
<PAGE> 11
11
In making one- to four-family home mortgage loans, the Association does
not normally charge a commitment fee. As part of the loan application, the
borrower pays the Association for its out-of-pocket costs in reviewing the
application, such as the appraisal fee, whether or not the borrower closes the
loan. The interest rate charged is normally the prevailing rate at the time the
loan application is approved. In the case of larger construction loans, the
Association normally charges a 1% commitment fee, which may be included in the
loan origination charge when the loan is made. Commitment fees and other terms
of commercial and multi-family residential loans are individually negotiated.
NON-PERFORMING ASSETS. When a borrower fails to make a required payment
on a loan, the Association attempts to cause the deficiency to be cured by
contacting the borrower. Contacts are made after a payment is 30 days past due.
In most cases, deficiencies are cured promptly. If the delinquency is not cured
within 90 days, the Association may cause the trustee on the deed of trust to
institute appropriate action to foreclose the property. If foreclosed, the
property will be sold at a public sale and may be purchased by the Association.
There are circumstances under which the Association may choose to foreclose a
deed of trust as mortgagee and when this procedure is followed, certain
redemption rights are involved.
Loans are placed on nonaccrual status when, in the judgment of
management, the probability of collection of interest is deemed to be
insufficient to warrant further accrual. When a loan is placed on nonaccrual
status, previously accrued but unpaid interest is deducted from interest income.
The Association does not accrue interest on loans 90 days past due or more. See
Note A to the Consolidated Financial Statements included in Item 14 hereof.
Real estate acquired by foreclosure or deed-in-lieu thereof (REO) is
classified as real estate held for sale until it is sold. When property is
acquired, it is recorded at the lower of carrying or fair value at the date of
acquisition; and any writedown resulting therefrom is charged to the allowance
for loan losses. Interest accrual ceases on the date of acquisition and all
costs incurred in maintaining the property from that date forward are expensed
as incurred. Costs incurred for the improvement or development of such property
are capitalized. See Note A to the Consolidated Financial Statements included in
Item 14 hereof.
<PAGE> 12
12
The following table sets forth information regarding restructured and
nonaccrual loans, and REO held by the Association at the dates indicated.
<TABLE>
<CAPTION>
September 30,
-------------------------------------------------------
1996 1997 1998 1999 2000
------- ------- ------- ------- -------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Restructured loans(1) $24,046 $ 8,613 $ 4,005 $12,983 $13,769
Nonaccrual loans:
Single-family residential 5,913 9,571 8,751 7,949 9,272
Construction and land 7,779 4,629 9,932 5,434 6,858
Commercial real estate 482 586 255 92 454
Consumer 4 3 3 3 --
------- ------- ------- ------- -------
Total nonaccrual loans(2) 14,178 14,789 18,941 13,478 16,584
Total REO(3) 20,417 19,339 6,805 6,926 9,463
------- ------- ------- ------- -------
Total nonperforming assets $58,641 $42,741 $29,751 $33,387 $39,816
======= ======= ======= ======= =======
Total nonperforming assets as
a percent of total assets 1.15% .75% .53% .54% .59%
======= ======= ======= ======= =======
</TABLE>
(1) Performing in accordance with restructured terms.
(2) The Association recognized interest income on nonaccrual loans of
approximately $81,000 in 2000. Had these loans performed according to their
original contract terms, the Association would have recognized interest income
of approximately $729,000 in 2000.
In addition to the nonaccrual loans reflected in the above table, at
September 30, 2000, the Association had $13.2 million of loans which were less
than 90 days delinquent but which it had classified as substandard for one or
more reasons. If these loans were deemed non-performing, the Association's ratio
of total nonperforming assets as a percent of total assets would have been .79%
at September 30, 2000. For a discussion of the Company's policy for placing
loans on nonaccrual status, see Note A to the Consolidated Financial Statements
included in Item 14 hereof.
(3) Total REO includes real estate held for sale acquired in settlement of loans
or acquired from purchased institutions in settlement of loans. See Note H to
the Consolidated Financial Statements included in Item 14 hereof.
<PAGE> 13
13
The following table analyzes the Company's allowance for loan losses at
the dates indicated.
<TABLE>
<CAPTION>
September 30,
-------------------------------------------------------
1996 1997 1998 1999 2000
------- ------- ------- ------- -------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Beginning balance $11,651 $15,182 $24,623 $23,854 $21,900
Charge-offs:
Real estate:
Permanent 146 131 546 733 94
Construction 179 592 344 1,326 772
Land 90 413 1,215 817 507
Income property 405 4,796 199 255 --
Other -- -- -- -- 4
------- ------- ------- ------- -------
820 5,932 2,304 3,131 1,377
------- ------- ------- ------- -------
Recoveries:
Real estate:
Permanent 10 14 53 52 107
Construction -- 8 15 36 159
Land -- -- 10 202 42
Income property 513 3,340 717 203 --
Other -- -- -- --
------- ------- ------- ------- -------
-------
523 3,362 795 493 308
------- ------- ------- ------- -------
Net charge-offs 297 2,570 1,509 2,638 1,069
Acquisitions -- 11,198 -- -- --
Provisions for loan losses 3,828 813 740 684 --
------- ------- ------- ------- -------
Ending balance $15,182 $24,623 $23,854 $21,900 $20,831
======= ======= ======= ======= =======
Ratio of net charge-offs to
average loans outstanding .01% .06% .04% .06% .02%
======= ======= ======= ======= =======
</TABLE>
The following table sets forth the allocation of the Company's allowance
for loan losses at the dates indicated.
<TABLE>
<CAPTION>
September 30,
---------------------------------------------------
1996 1997 1998 1999 2000
------- ------- ------- ------- -------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Real estate:
Permanent single-family $ 5,239 $ 5,755 $ 5,515 $ 5,385 $ 6,739
Construction 2,945 3,053 3,059 3,064 3,919
Land 2,525 1,763 1,912 2,307 1,773
Income property 1,843 7,081 6,257 7,650 6,007
Other -- -- -- -- --
Unallocated 2,630 6,971 7,111 3,494 2,393
------- ------- ------- ------- -------
$15,182 $24,623 $23,854 $21,900 $20,831
======= ======= ======= ======= =======
</TABLE>
As part of the process for determining the adequacy of the allowance for loan
losses, management reviews the loan portfolio for specific weaknesses. A portion
of the allowance is then allocated to reflect the loss exposure. Residential
real estate loans are not individually analyzed for
<PAGE> 14
14
impairment and loss exposure because of the significant number of loans, their
relatively small balances and their historically low level of losses.
Residential construction, land development, commercial real estate and
commercial business loans were evaluated individually for impairment, which
resulted in an allocation of $11.7 million of the allowance for loan loss at
year-end 2000, compared with an allocation of $13.0 million a year earlier.
Unallocated reserves are established for loss exposure that may exist in
the remainder of the loan portfolio but has yet to be identified. In determining
the adequacy of unallocated reserves, management considers changes in the size
and composition of the loan portfolio, actual historical loan loss experience
and current economic conditions.
REAL ESTATE HELD FOR SALE. As one of the Association's activities, a
subsidiary is engaged in the development and sale of real estate. Also, REO
which was acquired in acquisitions of insolvent associations has been recorded
as real estate held for sale.
The business of real estate development involves substantial risks, and
the results of such activities depend upon a number of factors, including:
seasonality, the type, location and size of each project, the stage of project
development, general economic conditions and the level of mortgage interest
rates. Consequently, there may be substantial inter-period variations in the
operating results of the Association's real estate development activities.
Moreover, because investing in real estate and real estate development
activities are not permissible activities for national banks, the amount of the
investment in, and loans to, any subsidiary engaged in such activities is
deductible from a savings association's regulatory capital. See "Regulation -
The Association-Regulatory Capital Requirements."
INVESTMENT ACTIVITIES
As a federally-chartered savings institution, Washington Federal is
obligated to maintain certain liquidity requirements and does so by investing in
securities that qualify as liquid assets under federal regulations. These
investments may include, among other things, certain certificates of deposit,
bankers' acceptances, loans to financial institutions whose deposits are
federally-insured, federal funds, United States Government and agency
obligations and certain unpledged mortgage-backed securities.
The following table sets forth the composition of the Association's
investment portfolio, excluding mortgage-backed securities, at the dates
indicated.
<TABLE>
<CAPTION>
September 30,
--------------------------------------------------------------------
1998 1999 2000
--------------------------------------------------------------------
Amortized Fair Amortized Fair Amortized Fair
Cost Value Cost Value Cost Value
-------- -------- -------- -------- -------- --------
(Dollars In Thousands)
<S> <C> <C> <C> <C> <C> <C>
U.S. Government and agency
obligations $198,540 $210,540 $115,278 $120,278 $115,504 $117,505
State and political subdivisions 23,473 25,439 21,475 22,719 25,487 26,660
-------- -------- -------- -------- -------- --------
$222,013 $235,979 $136,753 $142,997 $140,991 $144,165
======== ======== ======== ======== ======== ========
</TABLE>
<PAGE> 15
15
The investment portfolio, excluding mortgage-backed securities, at
September 30, 2000 was categorized by maturity as follows:
<TABLE>
<CAPTION>
Amortized Weighted Average
Cost Yield
-------- --------
(Dollars in Thousands)
<S> <C> <C>
Due in less than one year $ 81,123 6.11%
Due after one year through five years 22,752 6.88
Due after ten years 37,116 8.20
-------- --------
$140,991 6.79%
======== ========
</TABLE>
SOURCES OF FUNDS
GENERAL. Savings deposits are an important source of the Association's
funds for use in lending and for other general business purposes. In addition to
savings deposits, Washington Federal derives funds from loan repayments,
advances from the FHLB and other borrowings and, to a lesser extent, from loan
sales. Loan repayments are a relatively stable source of funds while savings
inflows and outflows are significantly influenced by general interest rates and
money market conditions. Borrowings may be used on a short-term basis to
compensate for reductions in normal sources of funds such as savings inflows at
less than projected levels. They may also be used on a longer-term basis to
support expanded activities.
SAVINGS. In recent years, the Association has chosen to rely on term
certificate accounts and other deposit alternatives which have no fixed term and
pay interest rates that are more responsive to market interest rates than
passbook accounts. This greater variety of deposits has allowed the Association
to be more competitive in obtaining funds to more effectively manage its
liabilities.
Certificates with a maturity of one year or less have penalties for
premature withdrawal equal to 90 days of interest. When the maturity is greater
than one year, the penalty is 180 days of interest. For jumbo certificates, the
penalty depends on the original term. If the original term is 90 days or less,
the penalty is the greater of 30 days interest or all interest earned. If the
original term is 90 days or more, the penalty is the greater of 90 days interest
or all interest earned. Early withdrawal penalties during fiscal 1998, 1999 and
2000 amounted to approximately $464,000, $403,000 and $563,000, respectively.
The Association offers a single performance checking account. This
account pays interest on monthly average balances over $1,000 and charges a
service fee if monthly average balances drop below $1,000.
The Association's deposits are obtained primarily from residents of
Washington, Oregon, Idaho, Arizona, Utah and Nevada and the Association does not
advertise for deposits outside of these states. At September 30, 2000,
management believed that approximately 2% of the Association's deposits were
held by nonresidents of Washington, Oregon, Idaho, Arizona, Utah and Nevada.
<PAGE> 16
16
The following table sets forth certain information relating to the
Association's savings deposits at the dates indicated. September 30,
<TABLE>
<CAPTION>
September 30,
-------------------------------------------------------------------------------------------
1998 1999 2000
----------------------------- ---------------------------- ----------------------------
Amount Rate Amount Rate Amount Rate
------------- ------------- ------------- ------------- ------------- -------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance by interest rate:
Checking accounts $ 93,942 2.60% $ 101,950 2.60% $ 99,888 2.60%
Passbook and statement
accounts 168,921 3.50 160,518 3.00 139,409 3.00
Money market accounts 443,395 4.14 549,420 4.02 542,148 4.24
------------- ------------- -------------
706,258 811,888 781,445
------------- ------------- -------------
Fixed-rate certificates:
3.00% - 3.99% 234 271 112
4.00% - 4.99% 20,641 1,042,849 88,838
5.00% - 5.99% 1,972,501 1,206,119 994,117
6.00% - 6.99% 201,227 9002 1,240,352
7.00% and above 1435 494 321
Jumbo certificates
($90,000 or more):
3.00% - 3.99% -- -- --
4.00% - 4.99% 5,793 40,263 --
5.00% - 5.99% 156,192 179,409 28,582
6.00% - 6.99% 4,298 695 238,545
7.00% and above 2,596 867 2,724
------------- ------------- -------------
2,364,917 2,479,969 2,593,591
------------- ------------- -------------
$ 3,071,175 $ 3,291,857 $ 3,375,036
============= ============= =============
</TABLE>
The following table sets forth, by various interest rate categories, the
amounts of certificates of deposit of the Association at September 30, 2000,
which mature during the periods indicated.
<TABLE>
<CAPTION>
Amounts at September 30, 2000, Maturing in
--------------------------------------------------------------------
1 to 3 4 to 6 7 to 12 13 to 24 25 to 36 37 to 60 After
Months Months Months Months Months Months 60 Months
-------- -------- -------- -------- -------- -------- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
3.00 to 3.99% $ 12 $ -- $ 100 $ -- $ -- $ -- $ --
4.00 to 4.99% 27,141 27,485 25,201 4,913 748 3,350 --
5.00 to 5.99% 378,991 277,820 205,026 72,645 60,677 27,540 --
6.00 to 6.99% 214,629 585,456 592,383 73,007 207 13,215 --
7.00% and above 7 690 2,342 -- 6 -- --
-------- -------- -------- -------- -------- -------- --------
Total $620,780 $891,451 $825,052 $150,565 $, 61,638$ 44,105 $
======== ======== ======== ======== ======== ======== ========
</TABLE>
Historically, a significant number of certificate holders roll over
their balances into new certificates of the same term at the Association's then
current rate. To ensure a continuity of this trend, the Association expects to
continue to offer market rates of interest. The Association's ability to retain
deposits maturing in negotiated-rate certificate accounts is more difficult to
project. The Association is confident, however, that by competitively pricing
these certificates, balance levels deemed appropriate by management can be
achieved on a continuing basis.
At September 30, 2000, the Association had $269.9 million of
certificates of deposit in amounts of $90,000 or more outstanding, maturing as
follows: $154.2 million within 3 months; $47.7 million over 3 months through 6
months; $67.4 million over 6 months through 12 months; and $.6 million
thereafter.
<PAGE> 17
17
The following table sets forth the customer account activities of the
Association for the years indicated.
<TABLE>
<CAPTION>
Year Ended September 30,
-------------------------------------
1998 1999 2000
----------- ----------- -----------
(Dollars In Thousands)
<S> <C> <C> <C>
Deposits $ 3,233,094 $ 3,281,349 $ 4,016,400
Withdrawals 3,211,022 3,217,991 4,103,367
----------- ----------- -----------
Net increase (decrease) in deposits
before interest credited 22,072 63,358 (86,967)
Interest credited 156,099 159,942 172,735
----------- ----------- -----------
Net increase in customer accounts $ 178,171 $ 223,300 $ 85,768
=========== =========== ===========
</TABLE>
BORROWINGS. The Association obtains advances from the FHLB upon the
security of the FHLB capital stock it owns and certain of its home mortgages,
provided certain standards related to credit worthiness have been met. See
"Regulation -The Association- Federal Home Loan Bank System." Such advances are
made pursuant to several different credit programs. Each credit program has its
own interest rate and range of maturities, and the FHLB prescribes acceptable
uses to which the advances pursuant to each program may be put, as well as
limitations on the size of such advances. Depending on the program, such
limitations are based either on a fixed percentage of assets or the
Association's creditworthiness. The FHLB is required to review its credit
limitations and standards at least annually. FHLB advances have, from time to
time, been available to meet seasonal and other withdrawals of savings accounts
and to expand Washington Federal's lending program.
The Association also uses reverse repurchase agreements as a form of
borrowing. Under reverse repurchase agreements, the Association sells an
investment security to a dealer for a period of time and agrees to buy back that
security at the end of the period and pay the dealer a stated interest rate for
the use of the dealer's funds. The amount of securities sold under such
agreements depends on many factors, including the terms available for such
transactions, the perceived ability to apply the proceeds to investments
yielding a higher return, the demand for the securities and management's
perception of trends in interest rates. The Association had $1.075 billion of
securities sold under such agreements at September 30, 2000.
The Association also offers two forms of repurchase agreements to its
customers. One form has an interest rate that floats like a money market deposit
account and is offered at a $1,000 minimum for an 84-day term. The other form
has a fixed-rate and is offered in a minimum denomination of $100,000. Both are
fully collateralized by securities. These obligations are not insured by SAIF
and are classified as borrowings for regulatory purposes. The Association had
$90.2 million of such agreements outstanding at September 30, 2000.
<PAGE> 18
18
The following table presents certain information regarding borrowings of
Washington Federal at the dates and for the years indicated.
<TABLE>
<CAPTION>
At or for the Year Ended September 30,
------------------------------------
1998 1999 2000
---------- ---------- ----------
(Dollars in Thousands)
<S> <C> <C> <C>
Federal funds and securities sold
to dealers under agreements to repurchase:
Average balance outstanding $ 502,609 $ 502,090 $1,312,605
Maximum amount outstanding
at any month-end during the period 694,990 731,580 1,539,689
Weighted-average interest rate
during the period(1) 5.63% 5.03% 6.10%
FHLB advances:
Average balance outstanding $1,210,362 $1,076,263 $ 802,818
Maximum amount outstanding at any
month-end during the period 1,523,500 1,454,000 1,209,000
Weighted-average interest rate
during the period(1) 5.60% 5.51% 5.82%
Securities sold to customers
under agreements to repurchase:
Average balance outstanding $ 79,652 $ 98,155 $ 91,945
Maximum amount outstanding at any
month-end during the period 85,027 105,871 99,901
Weighted-average interest rate
during the period(1) 5.34% 5.02% 5.49%
Total average borrowings $1,792,623 $1,676,508 $2,207,368
Weighted-average interest rate
on total average borrowings(1) 5.60% 5.34% 5.97%
</TABLE>
(1) Interest expense divided by average daily balances.
<PAGE> 19
19
OTHER RATIOS
The following table sets forth certain ratios related to the Company for
the periods indicated.
<TABLE>
<CAPTION>
Year Ended September 30,
---------------------
1998 1999 2000
----- ----- -----
<S> <C> <C> <C>
Return on assets(1) 2.00% 1.99% 1.65%
Return on equity(2) 15.68 15.47 14.27
Average equity to average assets 13.34 13.15 11.51
Dividend payout ratio(3) 42.45 43.90 49.00
</TABLE>
---------------------
(1) Net income divided by average total assets.
(2) Net income divided by average equity.
(3) Dividends declared per share divided by net income per share.
<PAGE> 20
20
RATE/VOLUME ANALYSIS
The table below sets forth certain information regarding changes in
interest income and interest expense of the Association for the years 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), (2) changes in rate (changes in rate
multiplied by average volume), and (3) changes in rate-volume (change in rate
multiplied by change in average 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.
<TABLE>
<CAPTION>
Year Ended September 30,
-------------------------------------------------------------------------------------
1998 vs. 1997 1999 vs. 1998
Increase (Decrease) Due to Increase (Decrease) Due to
----------------------------------------- -----------------------------------------
Volume Rate Rate/Vol Total Volume Rate Rate/Vol Total
-------- -------- -------- -------- -------- -------- -------- --------
(Dollars In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income:
Loan portfolio $ 6,541 $ 818 $ (54) $ 7,305 $ 2,211 $(13,332) $ 250 $(10,871)
Mortgaged-backed securities (7,128) 2,909 (349) (4,568) 17,421 (4,173) (1,016) 12,232
Investments(1) (979) (156) (5) (1,140) (6,634) 338 (92) (6,388)
-------- -------- -------- -------- -------- -------- -------- --------
All interest-earning assets (1,566) 3,571 (408) 1,597 12,998 (17,167) (858) (5,027)
-------- -------- -------- -------- -------- -------- -------- --------
Interest expense:
Customer accounts 10,996 2,256 164 13,416 13,610 (9,112) (656) 3,842
FHLB advances and other
borrowings (19,870) 1,450 (210) (18,630) (7,552) (4,282) 249 (11,585)
-------- -------- -------- -------- -------- -------- -------- --------
All interest-bearing liabilities (8,874) 3,706 (46) (5,214) 6,058 (13,394) (407) (7,743)
-------- -------- -------- -------- -------- -------- -------- --------
Change in net interest income $ 7,308 $ (135) $ (362) $ 6,811 $ 6,940 (3,773) $ (451) $ 2,716
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Year Ended September 30,
-----------------------------------------
2000 vs. 1999
Increase (Decrease) Due to
-----------------------------------------
Volume Rate Rate/Vol Total
-------- -------- -------- --------
(Dollars In Thousands)
<S> <C> <C> <C> <C>
Interest income:
Loan portfolio $ 36,501 $ (5,030) $ (550) $ 30,921
Mortgaged-backed securities 13,882 (453) (22) 13,407
Investments(1) (1,617) (307) 46 (1,878)
-------- -------- -------- --------
All interest-earning assets 48,766 (5,790) (526) 42,450
-------- -------- -------- --------
Interest expense:
Customer accounts 4,937 7,595 261 12,793
FHLB advances and other
borrowings 28,787 9,994 3,447 42,228
-------- -------- -------- --------
All interest-bearing liabilities 33,724 17,589 3,708 55,021
-------- -------- -------- --------
Change in net interest income $ 15,042 $(23,379) $ (4,234) $(12,571)
======== ======== ======== ========
</TABLE>
(1) Includes interest on overnight investments and dividends on stock of the
FHLB of Seattle.
<PAGE> 21
21
INTEREST RATE RISK
The Company accepts a high level of interest rate volatility 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. The strong capital position and low
operating costs have allowed the Company to manage interest rate risk, within
guidelines established by the Board of Directors of the Company, through all
interest rate cycles. A significant increase in market interest rates could
adversely affect net interest income of the Company. The Company's interest rate
risk approach has never resulted in the recording of a monthly operating loss.
One approach used to quantify interest rate risk is the net portfolio
value (NPV) analysis. This analysis calculates the difference between the
present value of interest-bearing liabilities and the present value of expected
cash flows from interest-earning assets and off-balance sheet contracts. The
following tables set forth an analysis of the Company's interest rate risk as
measured by the estimated changes in NPV resulting from instantaneous and
sustained parallel shifts in the yield curve (+ or - 300 basis points, measured
in 100 basis point increments).
<TABLE>
<CAPTION>
September 30, 2000
Change in Estimated Estimated Increase
Interest Rates NPV Amount (Decrease) in NPV Amount Percent
-----------------------------------------------------------------------------
(Basis Points) (Dollars in Thousands)
<S> <C> <C> <C> <C>
+300 $ 124,498 $(668,042) -84%
+200 339,032 (453,508) -57
+100 568,105 (224,435) -28
0 792,540 -- 0
-100 977,743 185,203 23
-200 974,783 182,243 23
-300 961,894 169,354 21
</TABLE>
<TABLE>
<CAPTION>
September 30, 1999
Change in Estimated Estimated Increase
Interest Rates NPV Amount (Decrease) in NPV Amount Percent
-------------- --------- ------------------------ ---------
(Basis Points) (Dollars in Thousands)
<S> <C> <C> <C> <C>
+300 $ 151,323 $(569,263) -79%
+200 331,470 (389,116) -54
+100 518,822 (201,764) -28
0 720,586 -- 0
-100 843,086 122,500 17
-200 864,703 144,117 20
-300 821,468 100,882 14
</TABLE>
<PAGE> 22
22
During the early part of fiscal 2000, higher rate mortgages were repaid or
refinanced and replaced with lower coupon loans. This reduced the prepayment
expectations in the portfolio and resulted in a higher NPV sensitivity. In the
later part of fiscal 2000, interest rates began to move higher. This resulted in
a lower NPV and increased the NPV sensitivity even more.
Certain assumptions were used in preparing the above table. These assumptions
relate to interest rates, loan prepayment rates, deposit decay rates, and the
market values of certain assets under the various interest rate scenarios. Even
if interest rates change in the designated amounts, there can be no assurance
that the Company's assets and liabilities would perform as set forth above.
<PAGE> 23
23
SUBSIDIARIES
The Company is a unitary savings and loan holding company which conducts
its primary business through its only subsidiary, the Association. The
Association has three active wholly-owned subsidiaries which are discussed
further below.
Washington Federal is permitted by current federal regulations to invest
an amount up to 2% of its assets in stock, paid-in surplus and unsecured loans
in service corporations. The Association may invest an additional 1% of its
assets when the additional funds are utilized for inner-city or community
development purposes. In addition, federally-chartered savings institutions
which are in compliance with regulatory capital requirements and other
conditions also may make loans to service corporations in an aggregate amount of
up to 50% of the institution's capital as defined in federal regulations.
At September 30, 2000, the Association was authorized under the current
regulations to have a maximum investment of $134.4 million in its service
corporations, exclusive of the additional 1% of assets investments permitted for
inner-city or community development purposes but inclusive of the ability to
make loans to its subsidiaries. On that date, the Association's investment in,
and unsecured loans to, its wholly-owned service corporations amounted to $8.3
million.
At September 30, 2000, Washington Services, Inc. (WSI), a wholly-owned
subsidiary of the Association, was continuing its development of a 301-acre
light industrial center in the technology corridor of South Snohomish County,
Washington, of which 76.3 buildable acres with an investment of $5.2 million,
remained unsold as of September 30, 2000. Based upon the sales history of this
development, the Association believes the net realizable value from the sale of
the remaining properties exceeds the subsidiary's basis in these properties.
First Insurance Agency, Inc., a wholly-owned subsidiary of the
Association, is an insurance brokerage company which offers a full line of
individual and business insurance products to customers of the Association, as
well as others.
Statewide Mortgage Services, Inc., a wholly-owned subsidiary of the
Association, is incorporated under the laws of the State of Washington for the
purpose of operating a commercial office building located in the state.
A savings association is required to deduct the amount of the investment
in, and extensions of credit to, a subsidiary engaged in any activities not
permissible for national banks. Because the acquisition and development of real
estate is not a permissible activity for national banks, the investments in, and
loans to, the subsidiary of the Association which is engaged in such activities
are subject to exclusion from the capital calculation. See "Regulation -The
Association-Regulatory Capital Requirements."
<PAGE> 24
24
EMPLOYEES
As of September 30, 2000, the Company had approximately 676 employees,
including the full-time equivalent of 59 part-time employees and its service
corporation employees. None of these employees are represented by a collective
bargaining agent and the Company has enjoyed harmonious relations with its
personnel.
EXECUTIVE OFFICERS
The following table sets forth certain information concerning
individuals who are deemed to be executive officers of the Company.
<TABLE>
<CAPTION>
Names and Positions
or Offices Age Business Experience during the Last Five Years
--------------------------------- ----- ------------------------------------------------
<S> <C> <C>
Guy C. Pinkerton 66 Chairman since November 1994; Director
Chairman of the Board since October 1991; former Chief
Executive Officer and President
Roy M. Whitehead 48 Chief Executive Officer since October
Director, Chief Executive Officer and President 2000, President and Director since April
1999 and Executive Vice President from
September 1998 to April 1999; Regional
Vice President, Wells Fargo Bank, N.A.
from June 1997 until September 1998 and
President of Wells Fargo Bank (Colorado)
N.A. and First Interstate Bank of
Colorado from December 1993 until June
1998
Charles R. Richmond 61 Executive Vice President and Secretary;
Director, Executive Vice President and Secretary Director since February 1995
Ronald L. Saper 50 Executive Vice President and Chief
Executive Vice President and Chief Financial Financial Officer
Officer
William A. Cassels 59 Executive Vice President
Executive Vice President
Edwin C. Hedlund 44 Executive Vice President since July
Executive Vice President 1999; previously founder, President and
Director of Phoenix Savings Bank from
April 1997 until July 1999; Vice
President of Washington Federal from
November 1996 until April 1997; Vice
President and Secretary of Metropolitan
Savings from November 1994 until it was
acquired by Washington Federal in
November 1996
Keith D. Taylor 44 Senior Vice President and Treasurer
Senior Vice President and Treasurer
</TABLE>
<PAGE> 25
25
REGULATION
Set forth below is a brief description of certain laws and regulations
which relate to the regulation of the Company and the Association. The
description of these laws and regulations, as well as descriptions of laws and
regulations contained elsewhere herein, does not purport to be complete and is
qualified in its entirety by reference to applicable laws and regulations.
Certain federal banking laws have been recently amended. See "Regulation-The
Company-Financial Modernization."
THE COMPANY
GENERAL. The Company is registered as a savings and loan holding company
under the HOLA and is subject to OTS regulation, examination, supervision and
reporting requirements.
FINANCIAL MODERNIZATION. Under the Gramm-Leach-Bliley Act enacted into
law on November 12, 1999, no company may acquire control of a savings and loan
holding company after May 4, 1999, unless the company is engaged only in
activities traditionally permitted to a multiple savings and loan holding
company or newly permitted to a financial holding company under Section 4(k) of
the Bank Holding Company Act. Existing savings and loan holding companies, and
those formed pursuant to an application filed with the Office of Thrift
Supervision before May 4, 1999, may engage in any activity including
non-financial or commercial activities provided such companies control only one
savings and loan association that meets the Qualified Thrift Lender test.
Corporate reorganizations are permitted, but the transfer of grandfathered
unitary thrift holding company status through acquisition is not permitted.
ACTIVITIES RESTRICTIONS. There are generally no restrictions on the
activities of a savings and loan holding company which holds only one subsidiary
savings institution. However, if the savings institution subsidiary of such a
holding company fails to meet a qualified thrift lender (QTL) test, then such
unitary holding company also shall become subject to the activities restrictions
applicable to multiple savings and loan holding companies and, unless the
savings institution requalifies as a QTL within one year thereafter, shall
register as, and become subject to the restrictions applicable to, a bank
holding company. See " The Association-Qualified Thrift Lender Test."
If the Company were to acquire control of another savings institution,
other than through a merger or other business combination with the Association,
the Company would thereupon become a multiple savings and loan holding company.
Except where such acquisition is pursuant to the authority to approve emergency
thrift acquisitions, and where each subsidiary savings institution meets the QTL
test, the activities of the Company and any of its subsidiaries (other than the
Association or other subsidiary savings institutions) would thereafter be
subject to further restrictions. No multiple savings and loan holding company,
or subsidiary thereof, which is not a savings institution shall commence or
continue a business activity for a limited period of time after becoming a
multiple savings and loan holding company or subsidiary thereof, upon prior
notice to and with no objection by the OTS, other than: (i) furnishing or
performing management services for a subsidiary savings institution; (ii)
conducting an insurance agency or escrow business; (iii) holding, managing or
liquidating assets owned by or acquired from a subsidiary savings institution;
(iv) holding or managing properties used or occupied by a subsidiary savings
institution; (v) acting as trustee under deeds of trust; (vi) performing
activities authorized by regulation as of March 5, 1987, to be engaged in by
multiple savings and loan holding companies; or (vii) unless the Director of the
OTS by regulation prohibits or limits such
<PAGE> 26
26
activities for savings and loan holding companies, those activities authorized
by the Federal Reserve Board as permissible for bank holding companies. Those
activities described in (vii) above also must be approved by the Director of the
OTS prior to being engaged in by a multiple savings and loan holding company.
RESTRICTIONS ON ACQUISITIONS. Except under limited circumstances,
savings and loan holding companies are prohibited from acquiring, without prior
approval of the Director of the OTS (i) control of any other savings institution
or savings and loan holding company, or substantially all the assets thereof, or
(ii) more than 5% of the voting shares of a savings institution or holding
company thereof which is not a subsidiary. Except with the prior approval of the
Director of the OTS, no director or officer of a savings and loan holding
company, or person owning or controlling by proxy or otherwise more than 25% of
such company's stock, may acquire control of any savings institution, other than
a subsidiary savings institution, or of any other savings and loan holding
company.
FEDERAL SECURITIES LAWS. The Company's Common Stock is registered with
the Securities and Exchange Commission under Section 12(g) of the Securities
Exchange Act of 1934 (Exchange Act). The Company is subject to the information,
proxy solicitation, insider trading restrictions and other requirements of the
Exchange Act.
THE ASSOCIATION
GENERAL. The Association is a federally-chartered savings association,
the deposits of which are federally insured and backed by the full faith and
credit of the United States Government. Accordingly, the Association is subject
to broad federal regulation and oversight by the OTS and the FDIC extending to
all aspects of its operations. The Association is a member of the FHLB of
Seattle and is subject to certain limited regulations by the Federal Reserve
Board. The Association is a member of the SAIF and its deposits are insured by
the SAIF fund administered by the FDIC. As a result, the FDIC has certain
regulatory and examination authority over the Association.
FEDERAL SAVINGS ASSOCIATION REGULATIONS. The OTS has extensive authority
over the operations of savings associations. As part of this authority, savings
associations are required to file periodic reports with the OTS and are subject
to periodic examinations by the OTS and the FDIC. Such regulation and
supervision is primarily intended for the protection of depositors.
The investment and lending authority of the Association is prescribed by
federal laws and regulations, and it is prohibited from engaging in any
activities not permitted by such laws and regulations. These laws and
regulations generally are applicable to all federally-chartered savings
associations and many also apply to state-chartered savings associations.
INSURANCE OF ACCOUNTS. The deposits of the Association are insured up to
$100,000 per insured member by the SAIF (as defined by law and regulation), and
are backed by the full faith and credit of the United States Government. As
insurer, the FDIC is authorized to conduct examinations of, and to require
reporting by, FDIC-insured institutions. It also may prohibit any FDIC-insured
institution from engaging in any activity the FDIC determines by regulation or
order to pose a serious threat to the FDIC. The FDIC also has the authority to
initiate enforcement actions against savings associations after giving the OTS
an opportunity to take such action.
<PAGE> 27
27
Assessment rates for SAIF-insured institutions range from 0% of insured
deposits for well-capitalized institutions with minor supervisory concerns to
.27% of insured deposits for undercapitalized institutions with substantial
supervisory concerns. See "Prompt Corrective Action" below. In addition, an
assessment of 2.06 basis points was added to the SAIF-assessment to cover
financing corporation debt service payments for fiscal 2000.
REGULATORY CAPITAL REQUIREMENTS. Federally insured savings associations
are required to maintain minimum levels of regulatory capital. Pursuant to
federal law, the OTS has established capital standards applicable to all savings
associations. These standards generally must be as stringent as the comparable
capital requirements imposed on national banks. The OTS also is authorized to
impose capital requirements in excess of these standards on individual
associations on a case-by-case basis.
The capital regulations create three capital requirements: a tangible
capital requirement, a leverage or core capital requirement and a risk-based
capital requirement. All savings associations must have tangible capital of at
least 1.5% of adjusted total assets, as defined in the regulations. For purposes
of this requirement, tangible capital is core capital less all intangibles other
than certain purchased mortgage servicing rights, of which the Association has
none. Core capital includes common stockholders' equity, non-cumulative
perpetual preferred stock and related surplus and minority interests in
consolidated subsidiaries, less intangibles (unless included under certain
limited conditions, but in no event exceeding 25% of core capital), plus
purchased mortgage servicing rights in an amount not to exceed 50% of core
capital.
The current leverage or core capital requirement is core capital, as
defined above, of at least 3.0% of adjusted total assets.
The risk-based capital standard requires savings associations to
maintain a minimum ratio of total capital to risk-weighted assets of 8.0%. Total
capital consists of core capital (defined above) and supplementary capital.
Supplementary capital consists of certain capital instruments that do not
qualify as core capital, and general valuation loan and lease loss allowances up
to a maximum of 1.25% of risk-weighted assets. Supplementary capital may be used
to satisfy the risk-based requirement only in an amount equal to the amount of
core capital. In determining the required amount of risk-based capital, total
assets, including certain off-balance sheet items, are multiplied by a
risk-weight factor based on the risks inherent in the type of assets held by an
institution. The risk categories range from 0% for low-risk assets such as U.S.
Treasury securities and GNMA securities to 100% for various types of loans and
other assets deemed to be of higher risk. Single-family mortgage loans having
loan-to-value ratios not exceeding 80% and meeting certain additional criteria,
as well as certain multi-family residential property loans, qualify for a 50%
risk-weight treatment. The book value of each asset is multiplied by the risk
factor applicable to the asset category, and the sum of the products of this
calculation equals total risk-weighted assets.
OTS regulations impose special capitalization standards for savings
associations that own service corporations and other subsidiaries. In addition,
certain exclusions from capital and assets are required when calculating total
capital in addition to the adjustments for calculating core capital. These
adjustments do not materially affect the regulatory capital of the Association.
For information regarding the Association's compliance with each of its
three capital requirements at September 30, 2000, see Note O to the Consolidated
Financial Statements.
<PAGE> 28
28
Any savings association that fails any of the capital requirements is
subject to possible enforcement actions by the OTS or the FDIC. Such actions
could include a capital directive, a cease and desist order, civil money
penalties, the establishment of restrictions on an association's operations
and/or the appointment of a conservator or receiver. The OTS' capital regulation
provides that such actions, through enforcement proceedings or otherwise, could
require one or more of a variety of corrective actions.
PROMPT CORRECTIVE ACTION. Under federal law, each federal banking agency
has implemented a system of prompt corrective action for institutions which it
regulates. Under OTS regulations, an institution shall be deemed to be (i) well
capitalized if it has total risk-based capital of 10.0% or more, a Tier 1
risk-based capital ratio of 6.0% or more, a Tier 1 leverage capital ratio of
5.0% or more and is not subject to any written agreement, order or capital
directive to meet and maintain a specific capital level for any capital measure;
(ii) adequately capitalized if it has a total risk-based capital ratio of 8.0%
or more, a Tier 1 risk-based capital ratio of 4.0% or more, a Tier 1 leverage
capital ratio of 4.0% or more (3.0% under certain circumstances) and does not
meet the definition of well capitalized, (iii) undercapitalized if it has a
total risk-based capital ratio that is less than 8.0%, a Tier 1 risk-based
capital ratio that is less than 4.0% or a Tier 1 leverage capital ratio that is
less than 4.0% (3.0% under certain circumstances), (iv) significantly
undercapitalized if it has a total risk-based capital ratio that is less than
6.0%, a Tier 1 risk-based capital ratio that is less than 3.0% or a Tier 1
leverage capital ratio that is less than 3.0%, and; (v) critically
undercapitalized if it has a ratio of tangible equity to total assets that is
equal to or less than 2.0%. Federal law authorizes the OTS to reclassify a well
capitalized institution as adequately capitalized and may require an adequately
capitalized institution or an undercapitalized institution to comply with
supervisory actions as if it were in the next lower category. (The FDIC may not
reclassify a significantly undercapitalized institution as critically
undercapitalized). As of September 30, 2000, the Association exceeded the
requirements of a well capitalized institution.
LIQUIDITY REQUIREMENTS. All savings associations are required, for each
calendar quarter, to maintain an average daily balance of liquid assets
(including cash, certain time deposits and savings accounts, bankers
acceptances, certain government obligations, unpledged mortgage-backed
securities and certain other investments) which is not less than a certain
percentage of the sum of its average daily balance of net withdrawable deposit
accounts and borrowings payable in one year or less during the preceding
calendar month. The liquidity requirement may be changed by the OTS to any
amount between 4% and 10% depending upon economic conditions and savings flows
of all savings associations. This amount is currently 4%. Monetary penalties may
be imposed upon associations for violations of liquidity requirements.
QUALIFIED THRIFT LENDER TEST. A savings association that does not meet a
QTL test set forth in the HOLA and implementing regulations must either convert
to a bank charter or comply with the following restrictions on its operations:
(i) the association may not engage in any new activity or make any new
investment, directly or indirectly, unless such activity or investment is
permissible for a national bank; (ii) the branching powers of the association
shall be restricted to those of a national bank; (iii) the association shall not
be eligible to obtain any advances from its FHLB; and (iv) payment of dividends
by the association shall be subject to the rules regarding payment of dividends
by a national bank. Upon the expiration of three years from the date the
association ceases to be a QTL, it must cease any activity, and not retain any
investment not permissible for a national bank, and immediately repay any
outstanding FHLB advances (subject to safety and soundness considerations).
<PAGE> 29
29
Under recent legislation and applicable regulations, any savings
institution is a QTL if: (i) it qualifies as a domestic building and loan
association under Section 7701(a)(19) of the Internal Revenue Code (which
generally requires that at least 60% of the institution's assets constitute
housing-related and other qualifying assets) or, (ii) at least 65% of the
institution's portfolio assets (as defined) consist of certain housing and
consumer-related assets on a monthly average basis in at least nine out of every
12 months. At September 30, 2000, the Association was in compliance with the QTL
test of a domestic building and loan association as defined in the Code.
TRANSACTIONS WITH AFFILIATES. Under federal law, all transactions
between and among a savings association and its affiliates, which include
holding companies, are subject to Sections 23A and 23B of the Federal Reserve
Act. Generally, these requirements limit these transactions to a percentage of
the association's capital and require all of them to be on terms at least as
favorable to the association as transactions with non-affiliates. In addition, a
savings association may not lend to any affiliate engaged in non-banking
activities not permissible for a bank holding company, or acquire shares of any
affiliate not a subsidiary. The OTS is authorized to impose additional
restrictions on transactions with affiliates if necessary to protect the safety
and soundness of a savings association. The OTS regulations also set forth
various reporting requirements relating to transactions with affiliates.
Extensions of credit by a savings association to executive officers,
directors and principal shareholders are subject to Section 22(h) of the Federal
Reserve Act, which among other things, generally prohibits loans to any such
individual where the aggregate amount exceeds an amount equal to 15% of an
institution's unimpaired capital and surplus plus an additional 10% of
unimpaired capital and surplus in the case of loans that are fully secured by
readily marketable collateral.
Section 22(h) permits loans to directors, executive officers and
principal stockholders made pursuant to a benefit or compensation program that
is widely available to employees of a subject savings association provided that
no preference is given to any officer, director or principal stockholder, or
related interest thereto, over any other employee. In addition, the aggregate
amount of extensions of credit by a savings institution to all insiders cannot
exceed the institution's unimpaired capital and surplus. Furthermore, Section
22(g) places additional restrictions on loans to executive officers.
RESTRICTIONS ON CAPITAL DISTRIBUTIONS. OTS regulations impose
limitations on capital distributions by savings associations, including cash
dividends, stock redemptions or repurchases, cash-out mergers, interest payments
on certain convertible debt and other transactions charged to the capital
accounts of a savings association.
In January 1999, the OTS amended its capital distribution regulation to
bring such regulations into greater conformity with the other bank regulatory
agencies. Under the regulation, certain savings institutions would not be
required to file with the OTS. Specifically, savings institutions that would be
well capitalized following a capital distribution would not be subject to any
requirement for notice or application unless the total amount of all capital
distributions, including any proposed capital distribution, for the applicable
calendar year would exceed an amount equal to the savings institution's net
income for that year to date plus the savings institution's retained net income
for the preceding two
<PAGE> 30
30
years. Because the Association is a subsidiary of the Company, the regulation
requires the Association to provide notice to the OTS of its intent to make
capital distributions, unless an application is otherwise required. The
Association does not believe that the regulation will adversely affect its
ability to make capital distributions.
FEDERAL HOME LOAN BANK SYSTEM. The Association is a member of the FHLB
of Seattle, which is one of 12 regional FHLBs that administers the home
financing credit function of savings associations. Each FHLB serves as a reserve
or central bank for its members within its assigned region. It is funded
primarily from proceeds derived from the sale of consolidated obligations of the
FHLB system. It makes loans to members (i.e., advances) in accordance with
policies and procedures established by the Board of Directors of the FHLB. At
September 30, 2000, the Association's advances from the FHLB amounted to $1.209
billion.
As a member, the Association is required to purchase and maintain stock
in the FHLB of Seattle in an amount equal to 5% of FHLB advances outstanding. At
September 30, 2000, the Association had $116.3 million in FHLB stock, which was
in compliance with this requirement.
Recent changes in federal law now require the FHLBs to provide funds for
the resolution of troubled savings associations and to contribute to affordable
housing programs through direct loans or interest subsidies on advances targeted
for community investment and low- and moderate-income housing projects. These
contributions have adversely affected the level of FHLB dividends paid and could
continue to do so in the future. These contributions also could have an adverse
effect on the value of FHLB stock in the future.
COMMUNITY REINVESTMENT ACT AND THE FAIR LENDING LAWS. Savings
associations have a responsibility under the Community Reinvestment Act (CRA)
and related regulations of the OTS to help meet the credit needs of their
communities, including low- and moderate-income neighborhoods. In addition, the
Equal Credit Opportunity Act and the Fair Housing Act (together, the Fair
Lending Laws) prohibit lenders from discriminating in their lending practices on
the basis of characteristics specified in those statutes. An institution's
failure to comply with the provisions of CRA could, at a minimum, result in
regulatory restrictions on its activities. Failure to comply with the Fair
Lending Laws could result in enforcement actions by the OTS, as well as other
federal regulatory agencies and the U.S. Department of Justice.
<PAGE> 31
31
TAXATION
FEDERAL TAXATION. For federal and state income tax purposes, the Company
reports its income and expenses on the accrual basis method of accounting and
files its federal and state income tax returns on a September 30 fiscal year
basis. The Company files consolidated federal and state income tax returns with
its wholly-owned subsidiaries.
The Small Business Job Protection Act of 1996 (the Act) required
qualified thrift institutions, such as the Company, 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 which began in 1999. Accordingly, the Company will be required to pay
approximately $23,469,000 in additional federal income taxes through fiscal
2004, all of which has previously been recognized.
A deferred tax liability has not been required to be recognized for the
tax bad debt base year reserves of the Company. The base year reserves are the
balance of reserves as of September 30, 1988 reduced proportionately for
reductions in the Company's loan portfolio since that date. At September 30,
2000 the amount of those reserves was approximately $4,835,000. The amount of
the unrecognized deferred tax liability at September 30, 2000 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.
<PAGE> 32
32
STATE TAXATION. The state of Washington does not have an income tax. A
business and occupation tax based on a percentage of gross receipts is assessed
against businesses; however interest received on loans secured by mortgages or
deeds of trust on residential properties is not subject to this tax.
The state of Idaho has a corporate income tax with a statutory rate of
8.0% of apportionable income.
The state of Oregon has a corporate excise tax with a statutory rate of
6.6% of apportionable income.
The state of Utah has a corporate franchise tax with a statutory rate of
5.0% of apportionable income.
The state of Arizona has a corporate income tax with a statutory rate of
9.0% of apportionable income.
<PAGE> 33
33
ITEM 2. PROPERTIES
The Association owns the building in which its home and executive
offices are located in Seattle, Washington. The following table sets forth
certain information concerning the Association's offices:
<TABLE>
<CAPTION>
Building Net Book Value at
Number of --------------------------- Net Book Value at
Location Offices Owned Leased(1) September 30, 2000(2)
---------------------- --------- ------- --------- ---------------------
(Dollars In Thousands)
<S> <C> <C> <C> <C>
Washington 40 23 17 $17,550
Idaho 17 15 2 5,945
Oregon 23 16 7 7,251
Utah 11 6 5 7,240
Arizona 16 8 8 7,520
Nevada 1 __ 1 254
------- ------- ------- -------
Total 108 68 40 $45,760
======= ======= ======= =======
</TABLE>
(1) The leases have varying terms expiring from 2000 through 2070, including
renewal options.
(2) Amount represents land and improvements with respect to properties owned by
the Association and represents the book value of leasehold improvements,
where applicable.
Washington Federal evaluates on a continuing basis the suitability and
adequacy of its offices, both branches and administrative centers, and has an
active program of opening, relocating, remodeling or closing them as necessary
to maintain efficient and attractive premises.
Washington Federal's net investment in premises, equipment and
leaseholds was $50.5 million at September 30, 2000.
ITEM 3. LEGAL PROCEEDINGS
The Association is involved in legal proceedings occurring in the
ordinary course of business which in the aggregate are believed by management to
be immaterial to the financial condition of the Association.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
<PAGE> 34
34
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information required herein is incorporated by reference from page
27 of the Company's Annual Report to Stockholders for Fiscal 2000 (Annual
Report), which is included herein as Exhibit 13.
ITEM 6. SELECTED FINANCIAL DATA
The information required herein is incorporated by reference from page 7
of the Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required herein is incorporated by reference on pages 4
through 6 of the Annual Report.
ITEM 7A. MARKET RISK DISCLOSURES
The information required herein is incorporated by reference to Interest
Rate Risk commencing on page 21 of this Form 10-K.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data required herein are
incorporated by reference from pages 8 through 27 of the Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required herein is incorporated by reference to pages 3
through 12 of the proxy statement dated December 22, 2000 and is included under
Item 1 hereof.
ITEM 11. EXECUTIVE COMPENSATION
The information required herein is incorporated by reference to pages 13
through 16 of the proxy statement dated December 22, 2000.
<PAGE> 35
35
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required herein is incorporated by reference to pages 2
through 3 and 5 through 9 of the proxy statement dated December 22, 2000.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required herein is incorporated by reference to page 18
of the proxy statement dated December 22, 2000.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) The following financial statements are incorporated herein by
reference from pages 8 through 27 of the Annual Report.
Report of Independent Certified Public Accountants
Consolidated Statements of Financial Condition as of September 30, 2000
and 1999
Consolidated Statements of Operations for each of the years in the
three-year period ended September 30, 2000
Consolidated Statements of Stockholders' Equity for each of the years in
the three-year period ended September 30, 2000
Consolidated Statements of Cash Flows for each of the years in the
three-year period ended September 30, 2000
Notes to Consolidated Financial Statements
<PAGE> 36
36
(a)(2) There are no financial statement schedules filed herewith.
(a)(3) The following exhibits are filed as part of this report:
<TABLE>
<CAPTION>
No. Exhibit Page
--- ------- ----
<S> <C> <C>
3.1 Articles of Incorporation of the Company (1)
3.2 Bylaws of the Company (1)
4 Specimen Common Stock Certificate (1)
10.1 1982 Employee Stock Compensation Program* (1)
10.2 1987 Stock Option and Stock Appreciation Rights Plan* (1)
10.3 1994 Stock Option and Stock Appreciation Rights Plan* (1)
13 Annual Report to Stockholders
21 Subsidiaries of the Company - Reference is made to Item 1, "Business -
Subsidiaries" for the required information
23 Consent of Independent Public Accountants
27 Financial Data Schedule
</TABLE>
* Management contract or compensation plan.
(1) Incorporated by reference from the Registrant's Registration
Statement on Form 8-B filed with the SEC on January 26, 1995.
(c) See (a)(3) above for all exhibits filed herewith and the Exhibit
Index.
(d) All schedules are omitted as the required information is not
applicable or the information is presented in the Consolidated Financial
Statements or related notes.
<PAGE> 37
37
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
WASHINGTON FEDERAL, INC.
December 18, 2000 By: /s/ Roy M. Whitehead
----------------- ---------------------------------
Roy M. Whitehead, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report signed below by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated.
/s/ Kermit O. Hanson December 18, 2000
------------------------------------ -----------------
Kermit O. Hanson, Director
/s/ W. Alden Harris December 18, 2000
------------------------------------ -----------------
W. Alden Harris, Director
/s/ Anna C. Johnson December 18, 2000
------------------------------------ -----------------
Anna C. Johnson, Director
/s/ John F. Clearman December 18, 2000
------------------------------------ -----------------
John F. Clearman, Director
/s/ H. Dennis Halvorson December 18, 2000
------------------------------------ -----------------
H. Dennis Halvorson, Director
/s/ Guy C. Pinkerton December 18, 2000
------------------------------------ -----------------
Guy C. Pinkerton, Director, Chairman
/s/ Richard C. Reed December 18, 2000
------------------------------------ -----------------
Richard C. Reed, Director
<PAGE> 38
38
/s/ Charles R. Richmond December 18, 2000
------------------------------------ -----------------
Charles R. Richmond, Director,
Executive Vice President and Secretary
/s/ Roy M. Whitehead December 18, 2000
------------------------------------ -----------------
Roy M. Whitehead, Director,
President and Chief Executive Officer
/s/ Ronald L. Saper December 18, 2000
------------------------------------ -----------------
Ronald L. Saper, CPA, Executive
Vice President and Chief Financial
Officer (principal financial and accounting
officer)
