N@N

Washington Federal Savings: Washington Federal Reports Net Income of $2.5 Million for Its Third Fiscal Quarter

_{//business-finance.news-articles.net/content/200 .. of-2-5-million-for-its-third-fiscal-quarter.html}
^{Published in Business and Finance on Thursday, July 23rd 2009 at 5:12 GMT, Last Modified on 2009-07-23 05:12:42 by Market Wire}  

SEATTLE, WA--(Marketwire - July 23, 2009) - Washington Federal, Inc. (NASDAQ: [ WFSL ]), parent company of Washington Federal Savings, today announced earnings of $2,500,000 or $.03 per diluted share for the quarter ended June 30, 2009, compared to $33,169,000 or $.38 per diluted share for the same period one year ago. Earnings decreased by $30,669,000 or 92%, primarily as a result of higher credit costs and FDIC insurance premiums. The provision for loan losses was $52.2 million for the quarter ended June 30, 2009, a $39.0 million increase over the $13.2 million provided for the same quarter one year ago. FDIC premiums increased by $6.6 million over the same period one year ago. During the quarter, the Company also repurchased $200 million of preferred stock held by the U.S. Treasury under the TARP, resulting in a charge of $2.0 million. The Company has decided not to repurchase the 1.7 million warrants issued in conjunction with the preferred stock at this time due to the contractual restrictions on negotiating the value of such warrants. As of June 30, 2009 the ratio of tangible common equity to tangible assets was 9.64%, significantly above regulatory requirements to be classified as well capitalized.

Chairman, President & CEO Roy M. Whitehead commented, "Strong operating results, instigated by lower funding expense, enabled the Company to report a profit despite record high credit costs and one-time charges. During the quarter we continued to aggressively write down problem assets, with losses again centered in the residential land and construction portfolio. We are cautiously optimistic that charges in that area peaked last quarter, although losses from the mortgage portfolio are increasing with rising unemployment in the markets we serve. We are pleased to report continued profits in this hazardous economic environment."

Non-performing assets amounted to $605 million or 5.03% of total assets at quarter end. This is an increase of $441 million from September 30, 2008, and is concentrated in the Company's portfolio of land and speculative construction loans. The gross amount of loans outstanding in these two portfolios totaled $925 million as of June 30, 2009, a decrease of $238 million or 20% from September 30, 2008. In response to deteriorating credit conditions, the Company has increased its allowance for loan losses from $85 million as of September 30, 2008, to $162 million as of June 30, 2009, a $77 million or 91% increase.

Overall delinquencies were 5.81% as of June 30, 2009, compared to 1.67% one year ago. However, single family residential mortgage loans, which represent 73% of the total portfolio, experienced delinquencies of only 2.74%, which compares favorably to the national average mortgage delinquencies of 9.12%(1).

At quarter end, the Company owned 325 properties acquired through, or in lieu of, foreclosure, of which approximately 60 have sales pending. During the quarter the company sold 108 properties.

Total assets increased by $212 million or 2% to $12.0 billion from $11.8 billion at September 30, 2008. Specifically, investment securities increased by $437 million or 27% during the nine months ended June 30, 2009, as the Company purchased agency mortgage backed securities in anticipation of a potential increase in refinance activity. As of June 30, 2009, the Company's investment portfolio had net unrealized gains of $70 million, an increase of $67 million from September 30, 2008. During the year, total loans outstanding decreased from $9.5 billion to $9.1 billion as a result of increased loan prepayments stemming from record low interest rates available on 30 year fixed-rate mortgages.

During the quarter the Company became aware of a potential tax liability of $39 million resulting from the acquisition of First Mutual, Inc. in February 2008. The only income statement impact was $1.5 million of additional tax in the current quarter, resulting from interest due on the potential tax liability. Although substantial uncertainty remains as to the ultimate outcome of this matter, under current U.S. accounting rules, the Company was required to record this as an income tax liability and a corresponding increase to goodwill. The Company is in discussions with the IRS regarding this matter and will pursue all available remedies to mitigate the financial impact to the Company.

Net interest income for the current quarter increased by 17% or $14 million from the quarter ended June 30, 2008. This increase is the result of expanding net interest spread, driven by falling deposit rates. The Company's period end spread increased to 3.27% as of June 30, 2009, compared to 2.69% one year ago. In the next quarter the Company has $1.5 billion of deposits that will mature with a weighted average rate of 2.72%.

The Company's efficiency ratio of 31.06% for the quarter, an increase from 27.81% from one year ago, remains among the lowest in the industry. The $6.6 million increase in FDIC insurance costs caused the higher efficiency ratio. The quarter produced a return on assets of .08%, while return on equity amounted to .71%. These ratios represent historical lows for the Company and are indicative of the effects of the significant declines in real estate values throughout the western United States.

On July 24, 2009, Washington Federal will pay a cash dividend of $.05 per share to common stockholders of record on July 10, 2009. This will be the Company's 106th consecutive quarterly cash dividend.

Washington Federal Savings, with headquarters in Seattle, Washington, has 150 offices in eight western states.

The following is a summary of the unusual events that occurred in the current quarter:

 -- Repayment of $200 million TARP preferred stock investment and the associated $2 million charge to earnings available to common shareholders related to the warrants. -- Total credit costs of $57 million ($52.2 million provision + $4.8 million REO expense). -- FDIC insurance premiums of $6.8 million ($5.5 million special assessment and $1.3 ongoing assessment). -- Tax liability on the First Mutual acquisition totaling $39 million, which increased goodwill and taxes payable as of February 1, 2008. Additionally, $1.5 million of income tax expense related to interest on the tax liability. 

To find out more about the Company, please visit our website. The Company uses its website to distribute financial and other material information about the Company, which is routinely posted on and accessible at [ www.washingtonfederal.com ].

Important Cautionary Statements

The foregoing information should be read in conjunction with the financial statements, notes and other information contained in the Company's 2008 Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

Statements contained herein that are not historical facts should be considered forward-looking statements with respect to Washington Federal. Forward-looking statements of this type speak only as of the date of this report. By nature, forward-looking statements involve inherent risk and uncertainties. Various factors, including, but not limited to, unforeseen local, regional, national or global events, economic conditions, asset quality, interest rates, loan demand, changes in business or consumer spending, borrowing or savings habits, deposit growth, adequacy of the reserve for loan losses, competition, stock price volatility, government monetary and economic policy, anticipated expense levels, changes in laws and regulations, the level of success of the company's asset/liability management strategies as well as its marketing, product development, sales and other strategies, the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies as well as the Financial Accounting Standards Board and other accounting standard setters, the costs and effects of litigation and of unexpected or adverse outcomes in such litigation, and changes in the assumptions used in making the forward-looking statements, could cause actual results to differ materially from those contemplated by the forward-looking statements. Washington Federal undertakes no obligation to update or revise forward-looking statements to reflect subsequent circumstances, events or information or for any other reason.

(1) Source: Mortgage statistics as reported by Bloomberg, ticker DLQTDLQT as of 3/31/09

 WASHINGTON FEDERAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED) June 30, September 30, 2009 2008 ------------ ------------ (In thousands, except per share data) ASSETS Cash and cash equivalents $ 166,031 $ 82,600 Available-for-sale securities 1,927,873 1,476,067 Held-to-maturity securities 109,690 124,537 Loans receivable, net 9,111,340 9,501,620 Interest receivable 51,975 54,365 Premises and equipment, net 133,746 133,357 Real estate held for sale 113,591 37,107 FHLB stock 144,494 144,874 Intangible assets, net 257,579 260,158 Other assets 26,299 15,456 ------------ ------------ $ 12,042,618 $ 11,830,141 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities Customer accounts Savings and demand accounts $ 7,622,452 $ 7,146,045 Repurchase agreements with customers 48,528 23,494 ------------ ------------ 7,670,980 7,169,539 FHLB advances 2,087,099 1,998,308 Other borrowings 800,600 1,177,600 Advance payments by borrowers for taxes and insurance 22,726 37,206 Federal and state income taxes 5,669 33,716 Accrued expenses and other liabilities 61,463 81,098 ------------ ------------ 10,648,537 10,497,467 Stockholders' equity Common stock, $1.00 par value, 300,000,000 shares authorized; 105,158,753 and 105,092,724 shares issued; 88,048,226 and 87,916,286 shares outstanding 105,159 105,093 Paid-in capital 1,264,753 1,261,032 Accumulated other comprehensive income (loss), net of taxes 42,060 2,472 Treasury stock, at cost; 17,110,527 and 17,176,438 shares (209,449) (210,250) Retained earnings 191,558 174,327 ------------ ------------ 1,394,081 1,332,674 ------------ ------------ $ 12,042,618 $ 11,830,141 ============ ============ CONSOLIDATED FINANCIAL HIGHLIGHTS Common stockholders' equity per share $ 15.83 $ 15.16 Stockholders' equity to total assets 11.58% 11.27% Tangible common stockholders' equity to tangible assets 9.64 9.27 Weighted average rates at period end Loans and mortgage-backed securities 6.12% 6.33% Combined loans, mortgage-backed securities and investment securities 5.99 6.26 Customer accounts 2.14 3.25 Borrowings 4.25 3.77 Combined cost of customer accounts and borrowings 2.72 3.41 Interest rate spread 3.27 2.85 * Includes municipal bonds at tax equivalent yields and cash equivalents WASHINGTON FEDERAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Quarter Ended Nine Months Ended June 30, June 30, ---------------------- ---------------------- 2009 2008 2009 2008 ---------- ---------- ---------- ---------- (In thousands, except per share data) INTEREST INCOME Loans $ 141,120 $ 155,008 $ 440,477 $ 446,702 Mortgage-backed securities 27,919 22,407 81,572 66,187 Investment securities and cash equivalents 762 3,066 2,459 11,035 ---------- ---------- ---------- ---------- 169,801 180,481 524,508 523,924 INTEREST EXPENSE Customer accounts 44,062 66,195 151,096 200,240 FHLB advances and other borrowings 31,486 33,622 95,665 104,154 ---------- ---------- ---------- ---------- 75,548 99,817 246,761 304,394 ---------- ---------- ---------- ---------- Net interest income 94,253 80,664 277,747 219,530 Provision for loan losses 52,200 13,216 141,200 23,716 ---------- ---------- ---------- ---------- Net interest income after provision for loan losses 42,053 67,448 136,547 195,814 OTHER INCOME Gain on sale of loans - 32 - 433 Gain on sale of real estate - 3,164 - 11,876 Gain on sale of investments 959 - 959 - Other 4,386 4,364 12,949 12,579 ---------- ---------- ---------- ---------- 5,345 7,560 13,908 24,888 OTHER EXPENSE Compensation and fringe benefits 14,522 14,127 43,165 38,252 Occupancy 3,215 2,916 9,748 7,992 FDIC insurance 6,779 170 8,243 792 Other 6,417 6,440 19,423 15,686 ---------- ---------- ---------- ---------- 30,933 23,653 80,579 62,722 Gain (loss) on real estate acquired through foreclosure, net (4,786) 72 (7,745) (182) ---------- ---------- ---------- ---------- Income before income taxes 11,679 51,427 62,131 157,798 Income taxes 5,646 18,258 23,564 56,129 ---------- ---------- ---------- ---------- NET INCOME 6,033 33,169 38,567 101,669 ---------- ---------- ---------- ---------- Preferred dividends accrued 3,533 - 7,488 - ---------- ---------- ---------- ---------- NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $ 2,500 $ 33,169 $ 31,079 $ 101,669 ========== ========== ========== ========== PER SHARE DATA Basic earnings $ .03 $ .38 $ .35 $ 1.16 Diluted earnings .03 .38 .35 1.16 Cash Dividends per share .05 .21 .15 .63 Basic weighted average number of shares outstanding 88,047,527 87,789,556 88,011,571 87,619,645 Diluted weighted average number of shares outstanding, including dilutive stock options 88,082,467 87,811,275 88,043,422 87,756,490 PERFORMANCE RATIOS Return on average assets .08% 1.13% .34% 1.22% Return on average common equity .71% 9.61% 2.99% 10.01%