SOURCE: Washington Federal Savings

October 18, 2007 17:14 ET

Washington Federal Reports Fiscal Year 2007 Earnings of $135 Million

SEATTLE, WA--(Marketwire - October 18, 2007) - Washington Federal, Inc. (NASDAQ: WFSL), parent company of Washington Federal Savings, today announced earnings of $135,017,000 or $1.54 per diluted share for the year ended September 30, 2007, compared to $143,102,000 or $1.64 per diluted share for the same period one year ago, a 6% per share decrease. Earnings for the fourth fiscal quarter amounted to $33,885,000 or $.39 per diluted share compared to $35,279,000 or $.40 per diluted share for the same period one year ago, a 3% per share decrease.

Roy M. Whitehead, Chairman, President & CEO, commented, "We are very pleased with the financial performance of the company last year in light of the national housing slowdown and a difficult interest rate environment. Our portfolio lending model and conservative underwriting have enabled us to avoid the recent problems suffered by many in the mortgage industry. Last month's reduction in the overnight rate by the Federal Reserve also causes us to be hopeful that lower deposit costs and an improved net interest spread will be experienced in the near-term. At the same time, while overall asset quality continues to be good, non-performing assets and loan losses will undoubtedly increase before the cycle is ended, as we have expected for several quarters."

On July 2, 2007, the Company announced the signing of a definitive merger agreement to acquire First Mutual Bancshares ("First Mutual"). The merger agreement calls for the merger of First Mutual with and into the Company, followed by the merger of First Mutual Bank into the Company's wholly owned subsidiary, Washington Federal Savings, in a stock and cash transaction valued at approximately $189.8 million. First Mutual, headquartered in Bellevue, Washington with 12 branches in the greater Seattle / Bellevue area, had total assets of $1.03 billion, total deposits of $759.8 million and total stockholders' equity of $73.7 million as of June 30, 2007. On October 11, 2007 First Mutual's shareholders voted to approve the transaction. The transaction is expected to close in the fourth calendar quarter of 2007, pending the receipt of all requisite regulatory approvals.

Our period end net interest spread decreased during the quarter from 2.12% at June 30, 2007 to 2.05% at September 30, 2007. The decrease resulted primarily from the refinancing of $200 million of long-term debt called during the quarter that carried an average rate of 3.40%. Currently our ratio of non-performing assets as a percentage of total assets is .15%, compared to .12% at June 30, 2007 and .08% at September 30, 2006. The company's average ratio of non-performing assets to total assets over the last ten years is .35%.

The year produced a return on assets of 1.40%, while return on equity amounted to 10.46%. The company's efficiency ratio (operating expenses as a percentage of net revenue) of 23.56% for the year remains among the best in the industry, although it increased from 19.66% last year. Higher operating expenses are attributed to costs associated with the purchase of First Federal Bank of the Southwest, the pending acquisition of First Mutual Bank, higher personnel expenses, including benefits, and additional management and systems installed to support an increase in regulatory burden and the growth of the Company. Although expenses as a percentage of assets and revenues are likely to increase further in the short-term due primarily to the pending acquisition of First Mutual Bank, management believes that efficiency will improve over time as the acquired institutions are fully integrated and recent investments in people and systems are leveraged through growth of the balance sheet.

Total assets of $10.285 billion at September 30, 2007 represents an increase of $1.216 billion or 13% above last year. Total net loans outstanding increased $1.110 billion to $8.188 billion as of September 30, 2007, a 16% increase over last year. Stockholders' equity increased $55 million or 4% to $1.318 billion as of September 30, 2007.

On October 19, 2007, Washington Federal will pay a cash dividend of $.21 per share to common stockholders of record on October 5, 2007. This will be the company's 99th consecutive quarterly cash dividend.

Washington Federal Savings, with headquarters in Seattle, Washington, has 135 offices in eight western states.

                WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
              CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                                (UNAUDITED)


                                              September 30,   September 30,
                                                  2007            2006
                                              -------------  -------------
                                                (In thousands, except per
                                                      share data)
ASSETS
Cash and cash equivalents                     $      61,378  $      45,722
Available-for-sale securities, including
 mortgage-backed securities of $1,283,403         1,515,688      1,451,038
Held-to-maturity securities, including
 mortgage-backed securities of $130,266             138,373        184,928
Loans receivable, net                             8,188,278      7,078,443
Interest receivable                                  49,611         42,304
Premises and equipment, net                          74,807         62,159
Real estate held for sale                             4,873          3,903
FHLB stock                                          132,397        129,453
Intangible assets, net                              107,245         56,259
Other assets                                         12,767         14,811
                                              -------------  -------------
                                              $  10,285,417  $   9,069,020
                                              =============  =============

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Customer accounts
  Savings and demand accounts                 $   5,979,049  $   5,285,708
  Repurchase agreements with customers               17,736         26,018
                                              -------------  -------------
                                                  5,996,785      5,311,726
FHLB advances                                     1,760,979      1,500,000
Other borrowings                                  1,075,116        870,000
Advance payments by borrowers for taxes and
 insurance                                           31,824         29,505
Federal and state income taxes                       38,032         39,667
Accrued expenses and other liabilities               64,554         55,402
                                              -------------  -------------
                                                  8,967,290      7,806,300
Stockholders' equity
Common stock, $1.00 par value, 300,000,000
 shares authorized; 104,921,450 and
 104,467,245 shares issued; 87,441,750 and
 87,338,824 shares outstanding                      104,921        104,467
Paid-in capital                                   1,254,490      1,246,025
Accumulated other comprehensive loss, net of
 taxes                                              (13,033)        (5,975)
Treasury stock, at cost; 17,479,700 and
 17,128,421 shares                                 (213,934)      (204,930)
Retained earnings                                   185,683        123,133
                                              -------------  -------------
                                                  1,318,127      1,262,720
                                              -------------  -------------
                                              $  10,285,417  $   9,069,020
                                              =============  =============
CONSOLIDATED FINANCIAL HIGHLIGHTS
Stockholders' equity per share                $       15.07  $       14.46
Stockholders' equity to total assets                  12.82%         13.92%
Weighted average rates at period end
  Loans and mortgage-backed securities                 6.57%          6.48%
  Investment securities*                               4.61           4.10
  Combined loans, mortgage-backed securities
   and investment securities                           6.50           6.38
  Customer accounts                                    4.36           4.05
  Borrowings                                           4.64           4.55
  Combined cost of customer accounts and
   borrowings                                          4.45           4.20
  Interest rate spread                                 2.05           2.18

* Includes municipal bonds at tax equivalent yields and cash equivalents



            WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
             CONSOLIDATED STATEMENTS OF OPERATIONS
                           (UNAUDITED)


                                    Quarter Ended           Year Ended
                                     September 30,        September 30,
                               ---------  ---------   ---------  ---------
                                  2007       2006       2007        2006
                               ---------  ---------   ---------  ---------
                                   (In thousands, except per share data)
INTEREST INCOME
Loans                           $138,994   $118,334    $526,923   $439,338
Mortgage-backed securities        19,262     19,533      75,478     66,938
Investment securities and cash
 equivalents                       4,328      3,913      16,281     23,607
                               ---------  ---------   ---------  ---------
                                 162,584    141,780     618,682    529,883

INTEREST EXPENSE
Customer accounts                 65,139     52,060     243,837    179,605
FHLB advances and other
 borrowings                       31,266     26,342     114,664     93,756
                               ---------  ---------   ---------  ---------
                                  96,405     78,402     358,501    273,361
                               ---------  ---------   ---------  ---------

Net interest income               66,179     63,378     260,181    256,522
Provision for loan losses            350        350       1,550        535
                               ---------  ---------   ---------  ---------
Net interest income after
 provision for loan losses        65,829     63,028     258,631    255,987

OTHER INCOME
Gain (loss) on securities, net         -          -          11          -
Other                              3,586      5,268      15,230     16,064
                               ---------  ---------   ---------  ---------
                                   3,586      5,268      15,241     16,064

OTHER EXPENSE
Compensation and fringe benefits  11,576      9,459      43,566     36,574
Occupancy                          2,266      1,934       8,720      7,893
Other                              3,820      2,206      12,602      9,112
                                --------  ---------   ---------  ---------

                                  17,662     13,599      64,888     53,579
Gain (loss) on real estate
 acquired through foreclosure,
 net                                 188          4         328        188
                               ---------  ---------   ---------  ---------
Income before income taxes        51,941      54,701    209,312    218,660
Income taxes                      18,056      19,422     74,295     75,558
                               ---------   ---------  ---------  ---------
NET INCOME                       $33,885     $35,279   $135,017   $143,102
                               =========  ==========  =========  =========

PER SHARE DATA
Basic earnings                      $.39        $.40      $1.55      $1.64
Diluted earnings                     .39         .40       1.54       1.64
Cash dividends                      .210        .205       .830       .810

Weighted average number of
 shares outstanding,
 including dilutive
 stock options                87,559,533  87,467,156 87,630,688 87,471,474

PERFORMANCE RATIOS
Return on average assets            1.34%       1.58%      1.40%      1.67%
Return on average
 stockholders' equity              10.39%      11.43%     10.46%     11.77%

Net interest margin                 2.70%       2.91%      2.77%      3.06%

Contact Information

  • Contact:
    Cathy Cooper
    (206) 777-8246