SOURCE: Washington Federal Savings

October 17, 2008 17:30 ET

Washington Federal Announces 4th Quarter Results

SEATTLE, WA--(Marketwire - October 17, 2008) - Washington Federal, Inc. (NASDAQ: WFSL), parent company of Washington Federal Savings, today affirmed its previously announced net loss of $39,337,000 or $.45 per diluted share for the quarter ended September 30, 2008, compared to net income of $33,885,000 or $.39 per diluted share for the quarter ended September 30, 2007. For the year ended September 30, 2008 earnings were $62,332,000 or $.71 per diluted share, compared to $135,017,000 or $1.54 per diluted share for the year ended September 30, 2007, a 54% decrease in earnings.

The primary cause of the net loss for the quarter and the significant decrease in earnings for the year was an other than temporary impairment charge of $87.7 million pre tax on the Company's investment in Freddie Mac and Fannie Mae Preferred Stock. The value of these securities declined significantly after the U.S. Government placed both companies into conservatorship in September 2008. The securities have a new cost basis of approximately $2.5 million. Additionally, in response to increasing non-performing assets and a deteriorating housing market, the Company recorded a provision for loan losses of $60.5 million for the fiscal year, compared to $1.6 million for fiscal 2007.

The fiscal year produced a return on assets of .55%, while return on equity amounted to 4.59%. Fiscal 2007 produced a return on assets of 1.40%, while return on equity amounted to 10.46%. Non-performing assets totaled $164.2 million or 1.39% of assets as of September 30, 2008, an increase of $148.3 million over the prior year. Net charge-offs amounted to $15,160,000 for the year. The total allowance for loan losses increased during the year from $28.5 million to $85.1 million as of September 30,2008. Net interest spread increased from 2.05% at September 30, 2007 to 2.85% at September 30, 2008, contributing to the $43,606,000 increase in net interest income for the same period.

The fiscal year saw net loans outstanding grow by $1.3 billion or 16.0%. Deposits grew $1.2 billion or 19.6%. The primary driver of both loan and deposit growth during the year was the acquisition of First Mutual Bank on February 1, 2008. As of the date of acquisition, First Mutual had $945,351,000 in net loans, $744,182,000 in customer accounts, 169 employees and 12 offices primarily located on the rapidly growing east side of Seattle.

Chief Executive Officer Roy M. Whitehead commented, "The Company was solidly profitable this year despite the significant one-time charge to the investment portfolio and materially higher credit costs. Of course we're disappointed to report our first quarterly loss since going public in 1982, yet it's important to note that the Company remains very well capitalized and on sound financial footing. We expect credit costs to continue at a higher than normal level, and also believe that growth in net interest income should allow us to report improved results in the 1st fiscal quarter."

On October 17, 2008, Washington Federal paid a cash dividend of $.21 per share to common stockholders of record on October 3rd, 2008. This was the Company's 103rd consecutive quarterly cash dividend.

During the quarter, Washington Federal opened a new branch in Bothell, Washington. This is the Company's second branch in the Bothell area.

Washington Federal Savings, with headquarters in Seattle, Washington, has 148 offices in eight western states.

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.

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


                                                  September     September
                                                  30, 2008      30, 2007
                                                ------------  ------------
                                                (In thousands, except per
                                                        share data)
ASSETS
Cash and cash equivalents                       $     82,600  $     61,378
Available-for-sale securities, including
 mortgage-backed securities of $1,434,835          1,476,067     1,515,688
Held-to-maturity securities, including
 mortgage-backed securities of $116,767              124,537       138,373
Loans receivable, net                              9,501,620     8,188,278
Interest receivable                                   54,365        49,611
Premises and equipment, net                          133,357        74,807
Real estate held for sale                             37,107         4,873
FHLB stock                                           144,874       132,397
Intangible assets, net                               221,294       107,245
Federal and state income taxes                         5,148             -
Other assets                                          15,456        12,767
                                                ------------  ------------
                                                $ 11,796,425  $ 10,285,417
                                                ============  ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Customer accounts
      Savings and demand accounts               $  7,146,045  $  5,979,049
      Repurchase agreements with customers            23,494        17,736
                                                ------------  ------------
                                                   7,169,539     5,996,785
FHLB advances                                      1,998,308     1,760,979
Other borrowings                                   1,177,600     1,075,000
Advance payments by borrowers for taxes and
 insurance                                            37,206        31,824
Federal and state income taxes                             -        38,032
Accrued expenses and other liabilities                81,098        64,670
                                                ------------  ------------
                                                  10,463,751     8,967,290
Stockholders' equity
Common stock, $1.00 par value, 300,000,000
 shares authorized; 105,092,724 and 104,921,450
 shares issued; 87,916,286 and 87,441,750
 shares outstanding                                  105,093       104,921
Paid-in capital                                    1,261,032     1,254,490
Accumulated other comprehensive income (loss),
 net of taxes                                          2,472       (13,033)
Treasury stock, at cost; 17,176,438 and
 17,479,700 shares                                  (210,250)     (213,934)
Retained earnings                                    174,327       185,683
                                                ------------  ------------
                                                   1,332,674     1,318,127
                                                ------------  ------------
                                                $ 11,796,425  $ 10,285,417
                                                ============  ============
CONSOLIDATED FINANCIAL HIGHLIGHTS
Stockholders' equity per share                  $      15.16  $      15.07
Stockholders' equity to total assets                   11.30%        12.82%
Tangible stockholders' equity to tangible
 assets                                                 9.60         11.90
Weighted average rates at period end
   Loans and mortgage-backed securities                 6.33%         6.57%
   Investment securities*                               2.78          4.61
   Combined loans, mortgage-backed securities
    and investment securities                           6.26          6.50
   Customer accounts                                    3.25          4.36
   Borrowings                                           3.77          4.64
   Combined cost of customer accounts and
    borrowings                                          3.41          4.45
   Interest rate spread                                 2.85          2.05
* 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,
                                 2008      2007       2008       2007
                             ---------- ----------  ---------- ----------
                                 (In thousands, except per share data)
INTEREST INCOME
Loans                        $  153,176  $  138,994  $  599,878 $  526,923
Mortgage-backed securities       22,238      19,262      88,425     75,478
Investment securities and
 cash equivalents                 2,090       4,328      13,125     16,281
                             ----------  ----------  ---------- ----------
                                177,504     162,584     701,428    618,682

INTEREST EXPENSE
Customer accounts                59,529      65,139     259,769    243,837
FHLB advances and other
 borrowings                      33,718      31,266     137,872    114,664
                             ----------  ----------  ---------- ----------
                                 93,247      96,405     397,641    358,501
                             ----------  ----------  ---------- ----------

Net interest income              84,257      66,179     303,787    260,181
Provision for loan losses        36,800         350      60,516      1,550
                             ----------  ----------  ---------- ----------
Net interest income after
 provision for loan losses       47,457      65,829     243,271    258,631

OTHER INCOME
Gain on sale of loans                83           -         517          -
Other than temporary impairment
 charge                         (87,747)          -     (87,747)         -
Gain on sale of real estate           -           -      13,123          -
Other                             3,585       3,586      14,916     15,241
                             ----------  ----------  ---------- ----------
                                (84,079)      3,586     (59,191)    15,241

OTHER EXPENSE
Compensation and fringe
 benefits                        14,580      11,576      52,832     43,566
Occupancy                         3,221       2,266      11,213      8,720
Other                             6,697       3,820      23,175     12,602
                             ----------  ----------  ---------- ----------
                                 24,498      17,662      87,220     64,888

Gain (loss) on real estate
 acquired through foreclosure,
 net                               (840)        188      (1,021)       328
                             ----------  ----------  ---------- ----------
Income (loss) before income
 taxes                          (61,960)     51,941      95,839    209,312
Income tax provision (benefit)  (22,623)     18,056      33,507     74,295
                             ----------  ----------  ---------- ----------
NET INCOME (LOSS)            $  (39,337) $   33,885  $   62,332 $  135,017
                             ==========  ==========  ========== ==========

PER SHARE DATA
Basic earnings (loss)        $    (0.45) $      .39  $      .71 $     1.55
Diluted earnings (loss)           (0.45)        .39         .71       1.54
Cash dividends                      .21         .21         .84        .83

Weighted average number of
 shares outstanding,
 including dilutive stock
 options                     87,961,784  87,657,256  87,818,580 87,696,225

PERFORMANCE RATIOS
Return on average assets         - 1.33%       1.34%        .55%      1.40%
Return on average
 stockholders' equity           - 11.52%      10.39%       4.59%     10.46%

Net interest margin                2.97%       2.70%       2.78%      2.77%


Contact Information

  • Washington Federal, Inc.
    425 Pike Street
    Seattle, WA 98101
    Contact:
    Cathy Cooper
    (206) 777-8246