1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2002 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________________ to __________________ For Quarter Ended March 31, 2002 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.) </TABLE> 425 Pike Street Seattle, Washington 98101 ----------------------------------------------------- (Address of principal executive offices and Zip Code) (206) 624-7930 ---------------------------------------------------- (Registrant's telephone number, including area code) -------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. (1) Yes [X]. No [ ]. (2) Yes [X]. No [ ]. APPLICABLE ONLY TO CORPORATE ISSUERS Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. TITLE OF CLASS: AT MAY 1, 2002 Common stock, $1.00 par value 63,518,477 -1-
2 WASHINGTON FEDERAL, INC. AND SUBSIDIARIES <TABLE> <CAPTION> PART I <S> <C> <C> 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 March 31, 2002 and September 30, 2001 ............................... Page 3 Consolidated Statements of Operations for the three and six months ended March 31, 2002 and 2001 .............................. Page 4 Consolidated Statements of Cash Flows for the six months ended March 31, 2002 and 2001 .................................. Page 5 Notes to Consolidated Financial Statements ................................ Page 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations .......................................... Page 8 Item 3. Quantitative and Qualitative Disclosures About Market Risk ...................... Page 12 PART II Item 1. Legal Proceedings ............................................................ Page 13 Item 2. Changes in Securities ........................................................ Page 13 Item 3. Defaults Upon Senior Securities .............................................. Page 13 Item 4. Submission of Matters to a Vote of Stockholders .............................. Page 13 Item 5. Other Information ............................................................ Page 13 Item 6. Exhibits and Reports on Form 8-K ............................................. Page 13 Signatures ................................................................. Page 14 </TABLE> -2-
3 WASHINGTON FEDERAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED) <TABLE> <CAPTION> March 31, 2002 September 30, 2001 -------------- ------------------ (In thousands, except per share data) <S> <C> <C> ASSETS Cash and cash equivalents ......................................... $ 552,487 $ 30,331 Available-for-sale securities, including mortgage-backed securities of $760,183.......................................... 860,275 1,079,896 Held-to-maturity securities, including mortgage-backed securities of $182,213......................................... 202,963 248,032 Securitized assets subject to repurchase .......................... 915,976 1,180,336 Loans receivable, net ............................................. 4,231,372 4,207,769 Interest receivable ............................................... 42,801 48,280 Premises and equipment, net ....................................... 55,828 54,242 Real estate held for sale ......................................... 20,042 16,778 FHLB stock ........................................................ 128,428 124,361 Costs in excess of net assets acquired ............................ 35,703 35,703 Other assets ...................................................... 980 1,015 ----------- ----------- $ 7,046,855 $ 7,026,743 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Customer accounts Savings and demand accounts ................................... $ 4,390,095 $ 4,251,113 Repurchase agreements with customers .......................... 67,374 65,579 ----------- ----------- 4,457,469 4,316,692 FHLB advances ..................................................... 1,550,000 1,637,500 Other borrowings................................................... - 30,000 Advance payments by borrowers for taxes and insurance ............. 20,173 23,196 Federal and state income taxes .................................... 73,435 94,118 Accrued expenses and other liabilities ............................ 46,926 51,228 ----------- ----------- 6,148,003 6,152,734 STOCKHOLDERS' EQUITY Common stock, $1.00 par value, 100,000,000 shares authorized; 76,069,140 and 75,906,790 shares issued; and 63,503,045 and 63,647,717 shares outstanding ............................ 76,069 69,006 Paid-in capital ................................................... 966,733 893,633 Accumulated other comprehensive income, net of taxes .............. 37,000 51,000 Treasury stock, at cost; 12,566,095 and 12,259,073 shares ......... (195,478) (189,212) Retained earnings ................................................. 14,528 49,582 ----------- ----------- 898,852 874,009 ----------- ----------- $ 7,046,855 $ 7,026,743 =========== =========== CONSOLIDATED FINANCIAL HIGHLIGHTS Stockholders' equity per share .................................... $ 14.15 $ 13.73 Stockholders' equity to total assets .............................. 12.76% 12.44% Loans serviced for others ......................................... $ 20,628 $ 26,068 Weighted average rates at period end: Loans and mortgage-backed securities ............................ 7.41% 7.61% Investment securities* .......................................... 3.19 8.01 Combined rate on loans, mortgage-backed securities and investment securities ..................................... 6.96 7.62 Customer accounts ............................................... 3.25 4.31 Borrowings ...................................................... 5.24 5.09 Combined cost of customer accounts and borrowings ............. 3.76 4.53 Interest rate spread ............................................ 3.20 3.09 </TABLE> *Includes municipal bonds at tax-equivalent yields and cash equivalents -3-
4 WASHINGTON FEDERAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) <TABLE> <CAPTION> Quarter Ended March 31, Six Months Ended March 31, ------------------------- -------------------------- 2002 2001 2002 2001 -------- -------- --------- --------- (Dollars in thousands, except per share data) <S> <C> <C> <C> <C> INTEREST INCOME Loans and securitized assets subject to repurchase ....... $102,180 $106,805 $209,132 $212,307 Mortgage-backed securities ................................. 18,862 22,969 39,266 46,491 Investment securities ...................................... 6,030 4,332 10,586 8,729 -------- -------- -------- -------- 127,072 134,106 258,984 267,527 INTEREST EXPENSE Customer accounts .......................................... 38,035 48,839 82,522 97,744 FHLB advances and other borrowings ......................... 20,239 34,523 41,109 73,036 -------- -------- -------- -------- 58,274 83,362 123,631 170,780 -------- -------- -------- -------- NET INTEREST INCOME ........................................ 68,798 50,744 135,353 96,747 Provision for loan losses .................................. 2,000 150 4,000 150 -------- -------- -------- -------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES ........ 66,798 50,594 131,353 96,597 OTHER INCOME Gains on sale of securities, net ........................... - 1,535 765 3,234 OTHER ...................................................... 1,549 1,367 3,765 2,766 -------- -------- -------- -------- 1,549 2,902 4,530 6,000 OTHER EXPENSE Compensation and fringe benefits ........................... 8,665 6,666 17,253 12,846 Occupancy expense .......................................... 1,106 1,153 2,293 2,228 Other ...................................................... 3 353 3,920 6,482 7,773 -------- -------- -------- -------- 13,124 11,739 26,028 22,847 Gains on real estate owned, net ............................ 5 22 25 59 -------- -------- -------- -------- INCOME BEFORE INCOME TAXES ................................. 55,228 41,779 109,880 79,809 Income taxes ............................................... 19,469 14,455 38,736 27,933 -------- -------- -------- -------- NET INCOME ................................................. $ 35,759 $ 27,324 $ 71,144 $ 51,876 ======== ======== ======== ======== PER SHARE DATA Basic earnings per share ................................... $ .56 $ .43 $ 1.12 $ .82 Diluted earnings per share ................................. .56 .43 1.11 .81 Cash dividends ............................................. .22 .21 .44 .42 Weighted average number of shares outstanding, including dilutive stock options ......................... 64,149,470 64,119,704 64,045,394 63,899,108 Return on average assets ................................... 2.05% 1.59% 2.05% 1.52% </TABLE> -4-
5 WASHINGTON FEDERAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) <TABLE> <CAPTION> Six Months Ended March 31, ---------------------------- 2002 2001 --------- --------- (In thousands) <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES Net Income ............................................................. $ 71,144 $ 51,876 Adjustments to reconcile net income to net cash provided by operating activities Amortization of fees, discounts and premiums, net .................... (3,347) (1,126) Amortization of costs in excess of net assets acquired ............... - 2,840 Depreciation ......................................................... 1,882 976 Gains on investment securities and real estate held for sale ......... (790) (3,293) Decrease (increase)in accrued interest receivable .................... 5,479 (8,691) Decrease in income taxes payable ..................................... (12,683) (1,881) FHLB stock dividends ................................................. (4,067) (3,795) Decrease (increase) in other assets .................................. 35 2,720 Increase(decrease)in accrued expenses and other liabilities .......... (4,302) 3,541 --------- --------- Net cash provided by operating activities .............................. 53,351 43,167 CASH FLOWS FROM INVESTING ACTIVITIES Loans and contracts originated Loans on existing property ........................................... (395,280) (505,778) Construction loans ................................................... (151,956) (175,462) Land loans ........................................................... (39,777) (61,320) Loans refinanced ..................................................... (53,859) (34,763) --------- --------- (640,872) (777,323) Savings account loans originated ....................................... (3,879) (1,629) Loan principal repayments .............................................. 971,240 528,739 Decrease in undisbursed loans in process ............................... (41,447) (44,653) Loans purchased ........................................................ (55,919) (1,556) Purchase of available-for-sale securities .............................. (55,498) (44,839) Principal payments and maturities of available-for-sale securities ..... 245,986 66,132 Proceeds from sales of available-for-sale securities ................... 10,000 50,282 Principal payments and maturities of held-to-maturity securities ....... 45,738 16,500 Proceeds from sales of real estate held for sale ....................... 8,971 6,986 Premises and equipment purchased, net .................................. (3,468) (2,249) --------- --------- Net cash used by investing activities .................................. 480,852 (203,610) CASH FLOWS FROM FINANCING ACTIVITIES Net increase in customer accounts ...................................... 140,777 144,110 Increase (decrease)in borrowings ....................................... (117,500) 54,716 Proceeds from exercise of common stock options ......................... 1,829 3,472 Proceeds from employee stock ownership plan ............................ 294 574 Treasury stock purchased ............................................... (6,453) - Dividends .............................................................. (27,971) (26,389) Decrease in advance payments by borrowers for taxes and insurance ...... (3,023) (8,801) --------- --------- Net cash provided by financing activities .............................. (12,047) 167,682 INCREASE IN CASH AND CASH EQUIVALENTS................................... 522,156 7,239 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ....................... 30,331 28,286 --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD ............................. $ 552,487 $ 35,525 ========= ========= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION NON-CASH INVESTING ACTIVITIES Real estate acquired through foreclosure ............................. $ 12,210 $ 4,483 NON-CASH OPERATING ACTIVITIES Assets securitized subject to repurchase, net ........................ - 1,338,197 CASH PAID DURING THE PERIOD FOR Interest ............................................................. 128,901 170,345 Income taxes ......................................................... 51,825 27,552 </TABLE> -5-
6 WASHINGTON FEDERAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THREE AND SIX MONTHS ENDED MARCH 31, 2001 (Unaudited) NOTE A - Basis of Presentation The consolidated interim financial statements included in this report have been prepared by Washington Federal, Inc. ("Company") without audit. The preparation of financial statements in conformity with generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that affect amounts reported in the financial statements. Actual results could differ from these estimates. In the opinion of management, all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation are reflected in the interim financial statements. The September 30, 2001 Consolidated Statement of Financial Condition was derived from audited financial statements. The information included in this Form 10-Q should be read in conjunction with Washington Federal, Inc.'s 2001 Annual Report on Form 10-K to the Securities and Exchange Commission. Interim results are not necessarily indicative of results for a full year. NOTE B - Dividends Dividends per share increased to 22 cents for the quarter ended March 31, 2002 compared with 21 cents for the same period one year ago. On April 26, 2002 the Company paid its 77th consecutive quarterly cash dividend. On January 23, 2002, the Board of Directors of the Company declared an eleven-for-ten stock split in the form of a 10% stock dividend to stockholders of record on February 8, 2002, which was distributed on February 22, 2002. All previously reported per share amounts have been adjusted accordingly. NOTE C - Comprehensive Income The Company's comprehensive income includes all items which comprise net income plus the unrealized holding gains (losses) on available-for-sale securities and forward commitments to purchase or sell mortgage-backed securities. Total comprehensive income for the quarters ended March 31, 2001 and March 31, 2001 totaled 31,759,000 and $37,324,000, respectively. The total comprehensive income for the six months ended March 31, 2002 and March 31, 2001 totaled $57,565,000 and $83,876,000, respectively. The difference between the Company's net income and total comprehensive income equals the change in the net unrealized gain or loss on securities available-for-sale and forward commitments to purchase mortgage-backed securities during the applicable periods. -6-
7 Note D - Allowance for Losses on Loans and Securitized Assets Subject to Repurchase The following table summarizes the activity in the allowance for loan losses (including securitized assets subject to repurchase) for the three months ended March 31, 2002 and 2001: <TABLE> <CAPTION> Three Months Ended March, Six Months Ended March, 2002 2001 2002 2001 ---------- ---------- ---------- ---------- (in thousands) (in thousands) <c> <c> <c> <c> Balance at beginning of period...... $ 20,752 $ 20,312 $ 19,683 $ 20,831 Provision for loan losses........... 2,000 150 4,000 150 Charge-offs......................... (357) (389) (1,576) (1,096) Recoveries.......................... 79 70 367 258 --------- ---------- --------- ---------- Balance at end of period............ $ 22,474 $ 20,143 $ 22,474 $ 20,143 ========= ========== ========= ========== </TABLE> Note E - New Accounting Pronouncements In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standard ("SFAS") No. 141, "Business Combinations", and No.142, "Goodwill and Other Intangible Assets". SFAS No. 141 requires all business combinations initiated after June 30, 2001 to be accounted for using the purchase method. SFAS No. 142 eliminates the amortization of goodwill relating to past and future acquisitions and instead subjects goodwill to an impairment assessment at least annually. The Company adopted the provisions of SFAS No. 142 to existing goodwill and other intangible assets for the fiscal year beginning October 1, 2001. The adoption of SFAS No. 142 will cease further amortization of goodwill and will have a pretax impact on income of approximately $5.6 million on an annual basis. Other expenses were accordingly reduced by $1.4 and $2.8 million for the quarter and six months ended March 31, 2002, respectively. The after-tax impact on diluted earnings per share was $.01 for the three months ended March 31, 2001 and $.03 for the six months ended March 31, 2001. -7-
8 WASHINGTON FEDERAL, INC. AND SUBSIDIARIES PART I - FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL Washington Federal, Inc. ("Company") is a savings and loan holding company. The Company's primary operating subsidiary is Washington Federal Savings ("Association"). INTEREST RATE RISK The Company assumes a high level of interest rate risk as a result of its policyto 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 March 31, 2002, the Company had a negative one-year maturity gap of approximately 26% of total assets, compared to a 45% negative one-year maturity gap as of March 31, 2001. The decrease in interest rate risk is the result of the Company lengthening the maturity of its borrowings and building its short-term assets. The interest rate spread increased to 3.20% at March 31, 2002 from 3.09% at September 30, 2001. The increase was primarily due to a reduction in funding costs as certificates of deposits repriced at lower levels, resulting from the Federal Reserves target rate being cut to 1.75% during the period. During this phase of the interest rate cycle the Company decreased earning assets by $21 million or .3%, strengthened its capital position, and deleveraged the balance sheet by reducing its borrowed money. Additionally, the Company increased cash and cash equivalents by $522 million in preparation of an increasing interest rate environment in the future. FHLB advances and other borrowed money decreased to an equivalent of 22.0% of total assets at March 31, 2002, compared to 23.7% of total assets at September 30, 2001. LIQUIDITY AND CAPITAL RESOURCES The Company's net worth at March 31, 2002 was $898,852,000, or 12.76% of total assets. This is an increase of $24,843,000 from September 30, 2001 when net worth was $874,009,000, or 12.44% of total assets. The increase in the Company's net worth included $71,144,000 from net income. Net worth was reduced by $27,971,000 of cash dividends paid and a reduction in other comprehensive income of $14,000,000. During the six months ended March 31, 2002, 319,000 shares were repurchased under the Company's ongoing common stock repurchase program at an average price of $20.23, which left a total of 3.19 million shares currently authorized by the Board of Directors as available for repurchase. The Company's percentage of net worth to total assets is among the highest in the nation and is nearly three times the minimum required under Office of Thrift Supervision ("OTS") regulations. Management believes this strong net worth position will help protect earnings against interest rate risk and enable it to compete more effectively for controlled growth through acquisitions, de novo expansion and increased customer deposits. The Company's cash and investment securities amounted to $624,669,000, a $448,614,000 increase from six months ago. This increase is the result of higher than normal repayment levels on loans and mortgage-backed securities during the first half of 2002, stemming from record low mortgage rates. Management has -8-
9 WASHINGTON FEDERAL, INC. AND SUBSIDIARIES PART I - FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS elected to keep these funds invested short term to take advantage of expected rising interest rates in the future (see interest rate risk above). CHANGES IN FINANCIAL CONDITION Available-for-sale and held-to-maturity securities: Available-for-sale securities decreased $219,621,000 or 20.3% during the six months ended March 31, 2002, due to unusually high prepayments, resulting from extremely low interest rates on mortgage loans, the underlying collateral for mortgage-backed securities, and the sales of $10,000,000 of available-for-sale securities, which resulted in a gain of $650,000. The Company purchased $55,499,000 of mortgage-backed securities during the six months ended March 31, 2002, all of which were categorized as available-for-sale. There were no purchases of held-to-maturity securities during the six months ended March 31, 2002. As of March 31, 2002, the Company had unrealized gains on available-for-sale securities of $37,000,000, net of tax, which were recorded as part of stockholders' equity. Loans receivable and securitized assets subject to repurchase: During the six months ended March 31, 2002, the combined total of loans receivable and securitized assets subject to repurchase decreased 4.5% to $5,147,348,000 at March 31, 2002 from $5,388,105,000 at September 30, 2001. The decrease resulted from Management's unwillingness to aggressively compete during this period of increased refinancing activity caused by near record low home mortgage rates. Non-performing assets: Non-performing assets increased 9.5% during the six months ended March 31, 2002 to $36,974,000 from $33,758,000 at September 30, 2001. The increase is attributable primarily to the continuing softening of the economy. Costs in excess of net assets acquired: The Company periodically monitors costs in excess of net assets acquired for potential impairment; there was no impairment at March 31, 2002. The Company will continue to evaluate these assets and, if appropriate, provide for any diminution in value. Customer accounts: Customer accounts increased $140,777,000, or 3.26%, to $4,457,469,000 at March 31, 2002 compared with $4,316,692,000 at September 30, 2001. This increase was due to attractive pricing and continued uncertainty in the equity markets. FHLB advances and other borrowings: Total borrowings decreased 7.0% during the six months to $1,550,000,000 at March 31, 2002. See Interest Rate Risk above. -9-
10 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 March 31, 2002 produced net income of $35,759,000 compared $27,324,000 for the same quarter one year ago, a 30.9% increase. Net income for the six months ended March 31, 2002 was $71,144,000 compared to $51,876,000 for the six months ended March 31, 2001, a 37.1% increase. Net income for the three and six months ended March 31, 2002 increased primarily as a result of increased net interest income, which was partially offset by increased compensation expenses, an increased provision for loan losses and a significant increase in income tax expense. Net Interest Income: The largest component of the Company's earnings is net interest income, which is the difference between the interest and dividends earned on loans and other investments and the interest paid on customer deposits and borrowings. Net interest income is impacted primarily by two factors; one, the volume of earning assets and liabilities and second, the rate earned on those assets or the rate paid on those liabilities. The following table sets forth certain information explaining changes in interest income and interest expense of the Company for the periods indicated. For each category of interest-earning asset and interest-bearing liability, information is provided on changes attributable to (1) changes in volume (changes in volume multiplied by old rate) and (2) changes in rate (changes in rate multiplied by old volume). The change in interest income and interest expense attributable to change in both volume and rate has been allocated proportionately to the change due to volume and the change due to rate. -10-
11 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: <TABLE> <CAPTION> Three Months Ended Six Months Ended March 31,2002 March 31, 2002 Volume Rate Total Volume Rate Total ------- ------- ------- ------- ------- -------- <c> <c> <c> <c> <c> <c> Interest Income: Loan Portfolio $ 2,424 $(7,049) $ (4,625) $ 9,706 $(12,881) $ (3,175) Mortgaged-backed securities (5,321) 1,214 (4,107) (9,452) 2,227 (7,225) Investments 4,277 (2,579) 1,698 5,438 (3,581) 1,857 ------- ------- ------- ------- ------- -------- All interest-earning assets 1,380 (8,414) (7,034) 5,692 (14,235) (8,543) Interest Expense: Customer Accounts 12,259 (23,063) (10,804) 23,115 (38,337) (15,222) FHLB advances and other borrowings (11,508) (2,776) (14,284) (23,160) (8,767) (31,927) ------- ------- ------- ------- ------- ------- All interest-bearing libilities 751 (25,839) (25,088) (45) (47,104) (47,149) Change in net interest income $ 629 $ 17,425 $ 18,054 $ 5,737 $32,869 $38,606 ======= ======== ======== ======= ======= ======= </TABLE> (1) Includes interest on cash equivalents and dividends on stock of the FHLB of Seattle -11-
12 WASHINGTON FEDERAL, INC. AND SUBSIDIARIES The Company provided $2,000,000 for loan losses during the quarter, compared to $150,000 for the same quarter last year. For the six months ended March 31, 2002, the total provision was $4,000,000, compared to $150,000 for the same period one year ago. This increase was due to the continued decline in economic conditions in the markets the Company serves, including high unemployment levels and a slow down in the new home construction market. These factors, with others, resulted in an increase in net charge-offs for the six months ended March 31, 2002 by $371,000. Non-performing assets amounted to $36,974,000 or .53% of total assets at March 31, 2002 compared to $32,968,000 or .47% of total assets one year ago. Additionally, delinquencies on permanent loans have increased from $25.5 million at March 31, 2001, to $28.6 million at March 31, 2002. Total other income decreased $1,470,000 (24.5%) to $4,530,000 for the six months ended March 31, 2002 from $6,000,000 for the six months ended March 31, 2001. This decrease is attributable primarily to the reduction in gains realized from the sales of securities. Gains on the sales of available-for-sale securities totaled $765,000 and $3,234,000 for the six months ended March 31, 2002 and March 31, 2001, respectively. Offsetting this decline in gains on the sales of securities, was a one-time gain of $515,000 on the disposition of a branch and slight increases in fee income. Other income decreased $1,353,000 (46.6%) to $1,549,000 for the quarter ended March 31, 2002 from $2,902,000 for the quarter ended March 31, 2001. This decrease is attributable primarily to the lack of gains realized from the sales of securities. Gains on the sales of available-for-sale securities totaled $1,535,000 for the quarter ended March 31, 2001. There were no gains on the sale of securities for the quarter ended March 31, 2002. Total other expense increased $3,181,000 (13.9%) to $26,028,000 for the six months ended March 31, 2002, compared to $22,847,000 for the six months ended March 31, 2001. Total other expense increased $1,385,000 (11.8%) for quarter ended March 31, 2002 compared to the March 31, 2001 quarter. These changes are primarily the result of earnings-based bonus accruals and additional staffing. Total other expense for the quarter and six months ended March 31, 2002 equaled .75% of average assets, compared to .68%, for the same period one year ago. The number of staff, including part-time employees on a full-time equivalent basis, was 731 at March 31, 2002 and 702 March 31, 2001. Income taxes increased $10,803,000 (38.7%) and $5,014,000 (34.7%) for the six-month period and quarter ended March 31, 2002, respectively, when compared to the same periods one year ago, due to a higher taxable income base. The effective tax rates were 35.25% for the six-month period ended March 31, 2002 and 35.0% for the same period one year ago. Item 3. Quantitative and Qualitative Disclosures About Market Risk There have not been any material changes in quantitative and qualitative information about market risk since September 30, 2001. -12-
13 WASHINGTON FEDERAL, INC. AND SUBSIDIARIES Part II - Other Information Item 1. Legal Proceedings From time to time the Company or its subsidiaries are engaged in legal proceedings in the ordinary course of business, none of which are considered to have a material impact on the Company's financial position or results of operations. Item 2. Changes in Securities Not applicable Item 3. Defaults Upon Senior Securities Not applicable Item 4. Submission of Matters to a Vote of Stockholders The Annual Meeting of Stockholders of Washington Federal Savings, Inc. was held on January 23, 2002. Two nominees for reelection as Directors, Anna C. Johnson, and Charles R. Richmond were reelected for three-year terms. The votes cast for Anna C. Johnson were 55,206,345 shares. The votes cast for Charles R. Richmond were 55,054,610 shares. The Washington Federal 2001 Long-Term Incentive Plan was adopted by the stockholders, receiving 41,021,982 votes in favor of the proposal. The stockholders ratified the appointment of Deloitte & Touche LLP as Washington Federal, Inc.'s independent public accountants for fiscal year 2002 with 56,405,611 votes cast for the proposal. Item 5. Other Information Not applicable Item 6. Exhibits and Reports on Form 8-K Not applicable -13-
14 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 May 13, 2002 -------------------------------------- ROY M. WHITEHEAD President and Chief Executive Officer /s/ Ronald L. Saper May 13, 2002 -------------------------------------- RONALD L. SAPER Executive Vice-President and Chief Financial Officer (principal financial officer) /s/ Brent J. Beardall May 13, 2002 -------------------------------------- BRENT J. BEARDALL Controller (principal accounting officer) -14-