SOURCE: Washington Federal

Washington Federal

January 19, 2010 08:30 ET

Washington Federal Reports First Quarter Earnings of $7.9 Million

SEATTLE, WA--(Marketwire - January 19, 2010) - Washington Federal, Inc. (NASDAQ: WFSL), parent company of Washington Federal Savings, today announced earnings of $7,911,000, or $.07, per diluted share for the quarter ended December 31, 2009, compared to $20,169,000, or $.23, per diluted share for the same period one year ago. Earnings decreased by $12,258,000, or 61%, primarily as a result of higher credit costs. Total credit costs, which include the provision for loan losses and Real Estate Owned ("REO") expenses, were $82,500,000 for the quarter ended December 31, 2009, an increase of $46,261,000, or 128%, over the previous year.

Chairman, President and Chief Executive Officer Roy M. Whitehead commented, "Last quarter the company took a more aggressive approach to the writedown of problem assets. High unemployment, the planned unwinding of central bank support for the mortgage-backed securities market, pending FDIC liquidations in our markets, and changing social attitudes about mortgage default collectively drove us to the conclusion that the supply/demand imbalance in residential real estate will persist longer than we had previously believed. Washington Federal is fortunate to be in a position to absorb higher losses, which on individual properties can be astonishing, while remaining profitable and in a fortress-level capital position.

"That financial strength, at a time of extraordinary weakness for most in the industry, enables us to take advantage of unique opportunities to expand at a reasonable cost. The acquisition of the former Horizon Bank on January 8th, for example, will add materially to earnings in the current quarter and beyond, with limited risk to shareholders due to a loss sharing agreement with the FDIC. Victories are relative in these tough economic times, and while these are relatively good times for Washington Federal we continue to be realistic about near-term prospects for a rebound in the overall economy."

Non-performing assets amounted to $553 million, or 4.37%, of total assets at quarter-end. This is a decrease of $4 million from September 30, 2009. There has been a meaningful decrease in non-performing loans over the last 6 months due to payoffs, writedowns and the migration of problem real estate loans to REO. As of June 30, 2009 non-performing loans totaled $492 million and as of December 31, 2009 have decreased to $369 million, a 25% decline. Overall delinquencies declined to 4.74% in the current quarter from 4.86% at September 30, 2009; however the delinquency rate on single family residential mortgages, the largest portion of the loan portfolio, increased slightly from 2.91% to 3.20%. In response to the continued declines in real estate values and weak credit conditions of its loan portfolio, the Company increased its provision for loan loss expense from $35 million for the quarter ended December 31, 2008 to $70 million for the quarter ended December 31, 2009. As of quarter end the allowance for loan losses totaled $191 million.

During the quarter the Company sold $316 million out of its investment portfolio and realized a gain of $20 million and increased its cash position to $937 million from $498 million. This cash position, combined with its substantial capital base, will provide the Company with the flexibility to manage through potentially higher interest rates in the future.

The Company's efficiency ratio of 26.6% for the quarter remains among the lowest in the industry. The quarter produced a return on assets of .25%, while return on equity amounted to 1.8%. These ratios represent near historical lows for the Company and are reflective of the effects of the significant declines in real estate values throughout the western United States.

On January 15, 2010, Washington Federal paid a cash dividend of $.05 per share to common stockholders of record on January 4, 2010. This was the Company's 108th consecutive quarterly cash dividend.

The Company's Annual Meeting of Stockholders will be held at 2:00 p.m. on January 20, 2010, at the Sheraton Hotel, 1400 6th Avenue, in Seattle, Washington.

Washington Federal Savings, with headquarters in Seattle, Washington, has 168 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)


                                                December 31,  September 30,
                                                    2009          2009
                                                ------------  ------------
                                                (In thousands, except per
                                                        share data)
ASSETS
Cash and cash equivalents                       $    936,833  $    498,388
Available-for-sale securities                      1,920,165     2,201,083
Held-to-maturity securities                           97,795       103,042
Loans receivable, net                              8,855,533     8,983,430
Interest receivable                                   49,459        53,288
Premises and equipment, net                          134,397       133,477
Real estate held for sale                            183,508       176,863
FHLB stock                                           144,495       144,495
Intangible assets, net                               256,069       256,797
Other assets                                          84,212        31,612
                                                ------------  ------------
                                                $ 12,662,466  $ 12,582,475
                                                ============  ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Customer accounts
  Savings and demand accounts                   $  7,921,117  $  7,786,467
  Repurchase agreements with customers                50,137        55,843
                                                ------------  ------------
                                                   7,971,254     7,842,310
FHLB advances                                      2,074,507     2,078,930
Other borrowings                                     800,000       800,600
Advance payments by borrowers for taxes and
 insurance                                            15,075        38,376
Federal and state income taxes                        13,384        18,075
Accrued expenses and other liabilities                54,496        58,699
                                                ------------  ------------
                                                  10,928,716    10,836,990
Stockholders' equity
Common stock, $1.00 par value, 300,000,000
 shares authorized; 129,512,273 and
 129,320,072 shares issued; 112,439,949 and
 112,247,748 shares outstanding                      129,512       129,320
Paid-in capital                                    1,576,352     1,574,555
Accumulated other comprehensive income (loss),
 net of taxes                                         38,386        54,431
Treasury stock, at cost; 17,072,324 shares          (208,985)     (208,985)
Retained earnings                                    198,485       196,164
                                                ------------  ------------
                                                   1,733,750     1,745,485
                                                ------------  ------------
                                                $ 12,662,466  $ 12,582,475
                                                ============  ============
CONSOLIDATED FINANCIAL HIGHLIGHTS
Common stockholders' equity per share           $      15.42  $      15.55
Tangible common stockholders' equity per share         13.14         13.26
Stockholders' equity to total assets                   13.69%        13.87%
Tangible common stockholders' equity to
 tangible assets                                       11.91         12.08
Weighted average rates at period end
  Loans and mortgage-backed securities                  6.01%         6.04%
  Combined loans, mortgage-backed securities and
   investment securities                                5.49          5.75
  Customer accounts                                     1.75          1.96
  Borrowings                                            4.25          4.25
  Combined cost of customer accounts and
   borrowings                                           2.41          2.58
  Interest rate spread                                  3.08          3.17






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


                                                        Quarter Ended
                                                         December 31,
                                                    ----------------------
                                                       2009        2008
                                                    ----------  ----------
                                                    (In thousands, except
                                                        per share data)
INTEREST INCOME
Loans                                               $  137,451  $  152,319
Mortgage-backed securities                              27,281      25,312
Investment securities and cash
 equivalents                                               938         908
                                                    ----------  ----------
                                                       165,670     178,539

INTEREST EXPENSE
Customer accounts                                       36,485      55,908
FHLB advances and other borrowings                      31,420      32,618
                                                    ----------  ----------
                                                        67,905      88,526
                                                    ----------  ----------

Net interest income                                     97,765      90,013
Provision for loan losses                               69,750      35,000
                                                    ----------  ----------
Net interest income after provision for
 loan losses                                            28,015      55,013

OTHER INCOME
Gain on sale of investments                             20,428           -
Other                                                    3,809       4,175
                                                    ----------  ----------
                                                        24,237       4,175

OTHER EXPENSE
Compensation and fringe benefits                        13,637      14,805
Occupancy                                                3,249       3,174
FDIC insurance                                           3,564         279
Other                                                    6,525       6,329
                                                    ----------  ----------
                                                        26,975      24,587
Gain (loss) on real estate acquired
 through foreclosure, net                              (12,720)     (1,239)
                                                    ----------  ----------
Income (loss) before income taxes                       12,557      33,362
Income taxes                                             4,646      11,844
                                                    ----------  ----------
NET INCOME (LOSS)                                        7,911      21,518
                                                    ----------  ----------
Preferred dividends accrued                                  -       1,349
                                                    ----------  ----------
NET INCOME (LOSS) AVAILABLE TO COMMON
 SHAREHOLDERS                                       $    7,911  $   20,169
                                                    ==========  ==========

PER SHARE DATA
Basic earnings (loss)                               $      .07  $      .23
Diluted earnings (loss)                                    .07         .23
Cash Dividends per share                                   .05         .05
Basic weighted average number of shares
 outstanding                                       112,353,941  87,966,308
Diluted weighted average number of
 shares outstanding, including dilutive
 stock options                                     112,583,127  88,028,272

PERFORMANCE RATIOS
Return on average assets                                   .25%        .66%
Return on average common equity                           1.80%       5.97%