ITEM 1. BUSINESS
GENERAL
Washington Federal, Inc. (the 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 the 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 107 offices located in Washington, Oregon, Idaho, Arizona, and Utah, 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). For additional information in this regard, see Note B to the Consolidated Financial Statements included in Item 14 hereof.
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."
AVERAGE STATEMENTS OF FINANCIAL CONDITION
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(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.
LENDING ACTIVITIES
GENERAL. The Company's net portfolio of loans and mortgage-backed securities totaled $5.7 billion at September 30, 1999, 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), and the Federal Home Loan Mortgage Corporation (FHLMC) and certain privately insured mortgage-backed securities amounted to $1.353 billion (net of discounts and premiums) at September 30, 1999, 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 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.
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.
(1) Includes construction loans that have been modified to monthly payment loans, due in full in approximately one year, in the amount of $6.1 million, $15.9 million, $17.8 million, $17.6 million, and $10.4 million at September 30, 1995, 1996, 1997, 1998, and 1999, 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 at amounted to $4.11 billion, $4.60 billion, $5.10 billion, $5.10 billion, and $5.7 billion, at September 30, 1995, 1996, 1997, 1998, and 1999, 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.
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, 1999. 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.
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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 $791 million or 13% of the Association's gross loan portfolio (including mortgage-backed securities) at September 30, 1999. The Association offers a multi-family (five or more dwelling units) lending program with strict underwriting guidelines, including a $1 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 traditional Association 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, and 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 the 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, 1999, $5.2 billion or 85% 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).
The Association offers a 99% loan-to-value ratio conventional loan program for first time home buyers. The high-ratio conventional lending program presents greater risk to the Association. To mitigate the risk, the program has stringent underwriting and property requirements that include home ownership/money management counseling and property condition inspections. A general loss reserve is established, which considers the greater risk inherent with these loans, as well as, their relative loan loss experience. The Association is authorized by its Board to originate $100 million of loans under this program. As of September 30, 1999, loans under this program amounted to $46.1 million.
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 and are prepared by independent appraisers approved by the Association's Board of Directors and the appraisals are 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 now 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 we deem appropriate. This total reserve balance at September 30, 1999, 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. 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 as they fall 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, is western Washington, western Oregon, southern Idaho, southern Arizona, and northern Utah.
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.
At September 30, 1999, the Association was servicing approximately $48.2 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 most 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.
The table below shows total loan origination, purchase, sale, and repayment activities of the Association on a consolidated basis for the years indicated.
(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.
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 causes 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. 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.
The following table sets forth information regarding restructured and nonaccrual loans, and REO held by the Association at the dates indicated.
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(1) Performing in accordance with restructured terms.
(2) The Association recognized interest income on nonaccrual loans of approximately $1,099,000 in 1999. Had these loans performed according to their original contract terms, the Association would have recognized interest income of approximately $1,548,000 in 1999.
In addition to the nonaccrual loans reflected in the above table, at September 30, 1999, the Association had $13.8 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 .77% at September 30, 1999. 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 I to the Consolidated Financial Statements included in Item 14 hereof.
The following table analyzes the Company's allowance for loan losses at the dates indicated.
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The following table sets forth the allocation of the Company's allowance for loan losses at the dates indicated.
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 impairment and loss exposure because of the significant number of loans, their relatively small balances, and their historically low level of losses. Residential construction, commercial real estate, and commercial business loans were evaluated individually for impairment, which resulted in an allocation of $13.0 million of the allowance for loan loss at year-end 1999, compared with an allocation of $11.2 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 the 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 required to maintain certain liquidity ratios and does so by investing in securities that qualify as liquid assets under federal regulations. These include, among other things, certain certificates of deposit, bankers' acceptances, loans to financial institutions whose deposits are federally-insured, federal funds, and United States Government and agency obligations.
The following table sets forth the composition of the Company's investment portfolio at the dates indicated.
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The investment portfolio at September 30, 1999 categorized by maturity is as follows:
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 1997, 1998, and 1999 amounted to approximately $375,000, $464,000, and $403,000, respectively.
The Association offers a single performance checking account. This account pays interest on balances over $1,000 and charges a service fee if balances drop below $1,000.
The Association's deposits are obtained primarily from residents of Washington, Oregon, Idaho, Arizona, and Utah and the Association does not advertise for deposits outside of these states. At September 30, 1999, management believed that less than 3% of the Association's deposits were held by nonresidents of Washington, Oregon, Idaho, Arizona, and Utah.
The following table sets forth certain information relating to the Association's savings deposits at the dates indicated.
The following table sets forth, by various interest rate categories, the amounts of certificates of deposit of the Association at September 30, 1999, which mature during the periods indicated.
Historically, the majority 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, 1999, the Association had $221.2 million of certificates of deposit in amounts of $100,000 or more outstanding, maturing as follows: $89.5 million within 3 months; $45.2 million over 3 months through 6 months; $86.0 million over 6 months through 12 months; and $.5 million thereafter.
The following table sets forth the customer account activities of the Association for the years indicated.
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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 credit worthiness. 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 lending.
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 $303.3 million of securities sold under such agreements at September 30, 1999.
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 $87.6 million of such agreements outstanding at September 30, 1999.
The following table presents certain information regarding borrowings of Washington Federal at the dates and for the years indicated.
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OTHER RATIOS
The following table sets forth certain ratios relating to the Company for the periods indicated.
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(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.
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.
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(1) Includes interest on overnight investments and dividends on stock of the FHLB of Seattle.
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, at September 30, 1999 and September 30, 1998, 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.)
During the early part of fiscal 1999, higher rate mortgages were paidoff 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 1999, 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.
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 several 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, 1999, the Association was authorized under the current regulations to have a maximum investment of $123.3 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 five wholly-owned service corporations amounted to $10.5 million.
At September 30, 1999, Washington Services, Inc. (WSI), a wholly-owned subsidiary of the Association, was developing a 301-acre light industrial center in the technology corridor of South Snohomish County, Washington, of which 85 buildable acres, with an investment of $7.0 million, remained unsold as of September 30, 1999. 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.
Freedom Vineyards, Inc., a wholly-owned subsidiary of WSI, is incorporated under the laws of California for the purpose of operating an agricultural property located in that state. The Association sold this property during the current fiscal year.
Statewide Mortgage Services, Inc., a wholly-owned subsidiary of the Association, is incorporated under the laws of Washington for the purpose of operating a commercial office building located in that 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."
EMPLOYEES
As of September 30, 1999, the Company had approximately 700 employees, including the full-time equivalent of 57 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 Washington Federal as of November 30, 1999.
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 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 (the 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.
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 6.4 basis points is added to the regular SAIF-assessment until December 31, 1999, in order to cover financing corporation debt service payments.
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% 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%. 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 based on the risks inherent in the type of assets. The risk-weighing 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- weighting 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, 1999, see Note P to the Consolidated Financial Statements.
In August 1993, the OTS adopted a final rule incorporating an interest-rate risk component into the risk-based capital regulation. Under this rule, an institution with a greater than normal level of interest rate risk is subject to a deduction of its interest rate risk component from total capital for purposes of calculating its risk-based capital. As a result, such an institution is required to maintain additional capital in order to comply with the risk-based capital requirement. The final rule was originally to be effective as of January 1, 1994; however, its implementation has been delayed several times. In August 1995, the OTS issued Thrift Bulletin No. 67, which allows eligible institutions to request adjustment to their interest rate risk component as calculated by the OTS, or to request to use their own models to calculate their interest rate risk component. The OTS also indicated that it will continue to delay the implementation of its interest rate risk rule requiring institutions with above normal interest rate risk exposure to adjust their regulatory capital requirement until new procedures are implemented and evaluated.
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 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, 1999, the Association exceeded the requirements of a well capitalized institution.
LIQUIDITY REQUIREMENTS. All savings associations are required, for each calendar month, to maintain an average daily balance of liquid assets (including cash, certain time deposits and savings accounts, bankers' acceptances, certain government obligations, 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%.
OTS regulations also require that short-term liquid assets constitute at least 1% of an association's average daily balance of net withdrawable deposit accounts and short term borrowings during the preceding calendar month. 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).
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, 1999, 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 shareholder, 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 account of a savings association to make capital distributions.
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 years. Because the Association is a subsidiary of the Company, the regulation, however, would require the Association to provide notice to the OTS of its intent to make a capital distribution, 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, 1999, the Association's advances from the FHLB amounted to $1.5 billion.
As a member, the Association is required to purchase and maintain stock in the FHLB of Seattle in an amount equal to at least 1% of its aggregate unpaid residential mortgage loans, home purchase contracts, or similar obligations at the beginning of each year. At September 30, 1999, the Association had $108.8 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, and 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.
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 beginning in 1999. Accordingly, the Company will be required to pay approximately $21,770,000 in additional federal income taxes, all of which has been previously provided for, beginning in fiscal 1999 and continuing through fiscal 2004.
A deferred tax liability has not been required to be recognized for the tax bad debt base year reserves of the Company. The base year reserves are the balance of reserves as of September 30, 1988, reduced proportionately for reductions in the Association's loan portfolio since that date. At September 30, 1999, the amount of those reserves was approximately $4,835,000. The amount of the unrecognized deferred tax liability at September 30, 1999, was approximately $1,861,000.
Washington Federal's tax returns have been examined through the year ended September 30, 1990.
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% 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% of apportionable income.
The state of Arizona has a corporate income tax with a statutory rate of 9.0% of apportionable income.
ITEM 2.
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:
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(1) The leases have varying terms expiring from 1999 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 $50.1 million at September 30, 1999.
ITEM 3.
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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5.
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 1999 (Annual Report), which is included herein as Exhibit 13.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
The information required herein is incorporated by reference from page 26 of the Annual Report.
ITEM 7.
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 7 of the Annual Report.
ITEM 7A.
ITEM 7A. MARKET RISK DISCLOSURES
The information required herein is incorporated by reference to Interest Rate Risk commencing on page 22 of this Form 10-K.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data required herein are incorporated by reference from pages 8 through 25 and page 27 of the Annual Report.
ITEM 9.
ITEM 9. CHANGES IN, AND DISAGREEMENTS WITH ACCOUNTANTS, ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required herein is included under Item 1 hereof.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The information required herein is incorporated by reference to pages 12 to 15 of the proxy statement dated December 17, 1999.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required herein is incorporated by reference to pages 2 to 3 and 5 to 9 of the proxy statement dated December 17, 1999.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required herein is incorporated by reference to page 17 of the proxy statement dated December 17, 1999.
PART IV
ITEM 14.
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 25 and page 27 of the Annual Report.
Report of Independent Certified Public Accountants
Consolidated Statements of Financial Condition as of September 30, 1999 and 1998
Consolidated Statements of Operations for each of the years in the three-year period ended September 30, 1999
Consolidated Statements of Stockholders' Equity for each of the years in the three-year period ended September 30, 1999
Consolidated Statements of Cash Flows for each of the years in the three-year period ended September 30, 1999
Notes to Consolidated Financial Statements
(a)(2) There are no financial statement schedules filed herewith. (a)(3) The following exhibits are filed as part of this report:
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* 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.
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 20, 1999 By: /s/ Guy C. Pinkerton - ----------------- ------------------------------ Date Guy C. Pinkerton, Chairman 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 20, 1999 - ----------------------------------- --------------------------- Kermit O. Hanson, Director Date
/s/ W. Alden Harris December 20, 1999 - ----------------------------------- --------------------------- W. Alden Harris, Director Date
/s/ Anna C. Johnson December 20, 1999 - ----------------------------------- --------------------------- Anna C. Johnson, Director Date
/s/ John F. Clearman December 20, 1999 - ----------------------------------- --------------------------- John F. Clearman, Director Date
/s/ H. Dennis Halvorson December 20, 1999 - ----------------------------------- --------------------------- H. Dennis Halvorson, Director Date
/s/ Guy C. Pinkerton December 20, 1999 - --------------------------------------- --------------------------- Guy C. Pinkerton, Director, Chairman Date and Chief Executive Officer
/s/ Richard C. Reed December 20, 1999 - --------------------------------------- --------------------------- Richard C. Reed, Director Date
/s/ Charles R. Richmond December 20, 1999 - --------------------------------------- --------------------------- Charles R. Richmond, Director, Date Executive Vice President and Secretary
/s/ Roy M. Whitehead December 20, 1999 - --------------------------------------- --------------------------- Roy M. Whitehead, Director and Date President
/s/ Ronald L. Saper December 20, 1999 - --------------------------------------- --------------------------- Ronald L. Saper, CPA, Executive Date Vice President and Chief Financial Officer (principal financial officer)
/s/ Joseph R. Runte December 20, 1999 - --------------------------------------- --------------------------- Joseph R. Runte, Vice President Date and Controller (principal accounting officer)