Washington Federal, Inc. (NASDAQ: WFSL), parent company of
Washington Federal, today announced earnings of $30,666,000 or $.28
per diluted share for the quarter ended September 30, 2011,
compared to $15,963,000 or $.14 per diluted share for the same
period one year ago, a $14.7 million or 92% increase. Earnings for
the fiscal year ended September 30, 2011 of $111,141,000 decreased
$7,512,000 or 6% from the prior year due to two non-recurring items
in 2010, an $85.6 million pre-tax gain resulting from the
acquisition of certain assets and liabilities of the former Horizon
Bank, and a $39 million recovery resulting from the settlement of a
contingent federal tax liability. Excluding these two non-recurring
items from the prior year, net income increased by $86.3 million or
347%. The Company's ratio of tangible common equity to tangible
assets ended the quarter at 12.52% and continues to be among the
best of large regional financial institutions in the U.S.
Chairman, President & CEO Roy M. Whitehead commented, "We
are very pleased to complete the fiscal year in a strong and
healthy financial condition. Earnings from core business operations
improved considerably over last year, and are attributed primarily
to improved asset quality and reduced loan losses. Management
expects that results in fiscal 2012 will be largely consistent with
2011, and that a material improvement in earnings can occur only
after the overall economy, housing values and household incomes
improve."
Non-performing assets amounted to $370 million or 2.76% of total
assets at quarter-end, a $64.2 million or 14.8% decrease from
September 30, 2010. Non-performing assets peaked at $606 million or
5.03% of total assets, on June 30, 2009 and have since decreased by
$236 million or 38.9%. Non-performing loans decreased from $246
million at the Company's September 30, 2010 fiscal year-end, to
$210 million as of September 30, 2011, a 14.3% decrease. Total loan
delinquencies were 3.43% as of September 30, 2011, a decrease from
the 3.53% at September 30, 2010. Delinquencies on single family
mortgage loans, the largest component of the loan portfolio,
increased to 3.25% from 3.11% as of September 30, 2010.
Delinquencies on single family mortgage loans, decreased by 18
basis points on a linked quarter basis to 3.25% from 3.43% as of
June 30, 2011. The Company's single family mortgage loan
delinquency ratio of 3.25% is significantly better than the
national average of 12.0%(i).
Net loan charge-offs decreased from $183 million in the year
ended September 30, 2010 to $98 million in the current year, an $85
million or 46.4% decrease. Net charge offs were centered in the
residential land acquisition and development and speculative
construction portfolios.
Real estate held for sale decreased by $29.1 million or 15.4%
from September 30, 2010 as the Company continues to liquidate
foreclosed properties. During the year the Company sold 570
properties for net proceeds of $110.4 million and a net loss on
sale of $0.3 million. The total net loss on sale of real estate,
measured against the original loan balance of $190.8 million, was
$80.4 million or 42.1% for properties sold in fiscal 2011. As of
September 30, 2011, real estate held for sale consisted of 566
properties totaling $159.8 million. Land represents $95.2 million
or 60% of total real estate held for sale. Net loss on real estate
acquired through foreclosure, which includes gains and losses on
sale, ongoing maintenance expense and periodic write-downs from
lower valuations, decreased by 50% from the prior year to $40.1
million.
Asset quality trends during the quarter and year were generally
positive as noted above with non-performing loans, real estate
owned, delinquencies and net charge-offs all decreasing; however,
real estate values remain weak in many of the Company's primary
markets due to macroeconomic factors including high unemployment
and weak gross domestic product (GDP) growth. Consistent with these
uncertain conditions, the Company increased its general loan loss
reserve. As of September 30, 2011, the general allowance totaled
1.44% of loans, an increase of 27 basis points from the 1.17% as of
September 30, 2010. As of September 30, 2011, the total allowance
for loan losses, including the general and specific reserves was
$157 million or 1.94% of loans.
Total assets decreased by $45.6 million or 0.3% to $13.44
billion from $13.49 billion at September 30, 2010. Specifically,
loans decreased by $488 million, loans covered by an FDIC loss
sharing agreement decreased by $152 million and cash and cash
equivalents decreased by $73 million. These three decreases were
partially offset by a $741 million increase in investment
securities, primarily mortgage backed securities. The Company
sought to diminish the impact of decreasing loan balances by
increasing its investment portfolio. The loan portfolio decreased
as a result of higher loan prepayments stemming from record low
interest rates available on 30 year fixed-rate mortgages in the
market. Competition for the Company's primary asset class,
single-family mortgage loans, remains strong. As of September 30,
2011, the Company's investment portfolio had net unrealized gains
of $139 million.
Customer deposits decreased $187 million or 2.1% during the
year, however the Company was able to grow transaction accounts by
$107 million or 4.2%, while time deposits decreased by $294 million
or 4.7%. The weighted average rate paid on customer deposits during
the year was 1.32%, a decrease of 37 basis points from the previous
year, as a result of the low interest rate environment.
During the year, the company had an average balance of $712
million in cash and cash equivalents invested overnight at a yield
of approximately .25%. The Company is maintaining higher than
normal amounts of liquidity due to concern about potentially rising
interest rates in the future. The period end spread was 3.13% as of
September 30, 2011, an increase from 3.09% as of September 30,
2010.
Net interest income for the year was $416.9 million, a $22.5
million increase from last year. Net interest margin was 3.35% for
the year, compared to 3.17% for the prior year. The margin
benefited from the lower deposit costs, partially offset by lower
asset yields.
During the quarter ended September 30, 2011, net interest income
was $104.5 million, a decrease of $1.6 million from the June 30,
2011 quarter. While deposit costs decreased by $1.5 million in the
quarter, interest income on mortgage backed securities decreased by
$2.7 million as higher pre-payments resulted in accelerated premium
amortization.
The Company's efficiency ratio of 31.3% for the year remains
among the lowest in the industry. The year produced a return on
assets of .83%, while return on equity amounted to 5.99%.
On October 17, 2011, Washington Federal completed its
acquisition and integration of six branches from Charter Bank in
New Mexico and $254 million of deposits, including $70 million of
transaction accounts. As this occurred subsequent to the fiscal
year end, these deposits are not included in the Company's
financial results.
On October 21, 2011, Washington Federal will pay a cash dividend
of $.06 per share to common stockholders of record on October 7,
2011. This will be the Company's 115th consecutive quarterly cash
dividend. During the quarter ended September 30, 2011, Washington
Federal repurchased 1,500,000 shares at a weighted average price of
$15.37. For the fiscal year Washington Federal repurchased
3,804,800 shares at a weighted average price of $15.68. The Company
has an authorization to repurchase up to an additional 9,083,514
shares.
Washington Federal, with headquarters in Seattle, Washington,
has 166 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.
Important Cautionary Statements The foregoing information should
be read in conjunction with the financial statements, notes and
other information contained in the Company's 2010 Annual Report on
Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on
Form 8-K.
This press release contains statements about Washington
Federal's future that are not statements of historical fact. These
statements are "forward-looking statements" for purposes of
applicable securities laws, and are based on current information
and/or management's good faith belief as to future events. The
words "believe," "expect," "anticipate," "project," and similar
expressions signify forward-looking statements. Forward-looking
statements include projections and estimates of loan demand,
revenue growth, credit costs, levels of problem assets, earnings,
interest rates, regulatory actions or other financial or business
items; statements of management's plans, strategies and objectives
for future operations, and statements regarding future economic,
industry or market conditions or performance. Forward-looking
statements of this type speak only as of the date of this press
release. Washington Federal cautions against placing undue reliance
on forward-looking statements, which reflect its good faith beliefs
with respect to future events and are based on information
currently available to it as of the date the forward-looking
statement is made. Forward-looking statements should not be read as
a guarantee of future performance or results and will not
necessarily be accurate indications of the timing when, or by
which, such performance or results will be achieved.
By their nature, forward-looking statements involve inherent
risk and uncertainties, which change over time, and actual
performance or results, could differ materially from those
anticipated by any forward-looking statements. Washington Federal
undertakes no obligation to update or revise any forward-looking
statement. If Washington Federal does update any forward-looking
statement, no inference should be drawn that Washington Federal
will make additional updates with respect to that statement or any
other forward-looking statements. The following important factors,
in addition to those discussed or referenced in Washington
Federal's periodic reports filed with the SEC, may cause actual
results to differ materially from those contemplated by any
forward-looking statements: including, but not limited to, general
economic conditions; legislative and regulatory changes, including
without limitation the potential effect of the Dodd-Frank Wall
Street Reform and Consumer Protection Act and regulations to be
promulgated thereunder; monetary fiscal policies of the federal
government; changes in tax policies; rates and regulations of
federal, state and local tax authorities; changes in interest
rates; deposit flows; cost of funds; the level of success of the
Company's asset/liability management strategies; demand for loan
products; demand for financial services; competition; changes in
the quality or composition of the Company's loan and investment
portfolios; adequacy of the reserve for loan losses; the level of
success in disposing of foreclosed real estate and reducing
nonperforming assets; changes in accounting principles; policies or
guidelines and other economic, competitive, governmental and
technological factors affecting the Company's operations, markets,
products, services and fees, including without limitation the
Bank's ability to comply in a timely and satisfactory manner with
the requirements of the Memorandum of Understanding (MOU) entered
into with the Office of Thrift Supervision (OTS) and being
monitored by the Office of Comptroller of the Currency (OCC), the
Company's new primary regulator.
(i) OCC Mortgage Metrics Report, 2nd Quarter 2011
WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
September 30, September 30,
2011 2010
------------- -------------
(In thousands, except per
share data)
ASSETS
Cash and cash equivalents $ 816,002 $ 888,622
Available-for-sale securities 3,255,144 2,481,093
Held-to-maturity securities 47,036 80,107
Loans receivable, net 7,935,877 8,423,703
Covered loans, net 382,183 534,474
Interest receivable 52,332 49,020
Premises and equipment, net 166,593 162,721
Real estate held for sale 159,829 188,998
Covered real estate held for sale 56,383 44,155
FDIC indemnification asset 98,871 131,128
FHLB stock 151,755 151,748
Intangible assets, net 256,271 257,718
Federal and state income taxes - 8,093
Other assets 62,473 84,799
------------- -------------
$ 13,440,749 $ 13,486,379
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Customer accounts
Transaction deposit accounts $ 2,662,188 $ 2,554,762
Time deposit accounts 6,003,715 6,297,778
------------- ------------
8,665,903 8,852,540
FHLB advances 1,962,066 1,865,548
Other borrowings 800,000 800,000
Advance payments by borrowers for taxes and
insurance 39,548 39,504
Federal and state income taxes 1,535 -
Accrued expenses and other liabilities 65,164 87,640
------------- ------------
11,534,216 11,645,232
Stockholders' Equity
Common stock, $1.00 par value, 300,000,000
shares authorized; 129,853,534 and
129,555,956 shares issued; 108,976,410 and
112,483,632 shares outstanding 129,854 129,556
Paid-in capital 1,582,843 1,578,527
Accumulated other comprehensive income, net of
taxes 85,789 49,682
Treasury stock, at cost; 20,877,124 and
17,072,324 shares (268,665) (208,985)
Retained earnings 376,712 292,367
------------- ------------
1,906,533 1,841,147
------------- ------------
$ 13,440,749 $ 13,486,379
============= =============
CONSOLIDATED FINANCIAL HIGHLIGHTS
Common stockholders' equity per share $ 17.49 $ 16.37
Tangible common stockholders' equity per share 15.14 14.08
Stockholders' equity to total assets 14.18% 13.65%
Tangible common stockholders' equity to
tangible assets 12.52 11.97
Weighted average rates at period end
Loans and mortgage-backed securities 5.43% 5.75%
Combined loans, mortgage-backed securities
and investment securities 4.97 5.21
Customer accounts 1.14 1.51
Borrowings 4.04 4.14
Combined cost of customer accounts and
borrowings 1.84 2.12
Interest rate spread 3.13 3.09
* Includes municipal bonds at tax equivalent yields and cash equivalents
WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Twelve Months Ended
Quarter Ended September 30, September 30,
---------------------------- ----------------------------
2011 2010 2011 2010
------------- ------------- ------------- -------------
(In thousands, except per share data)
INTEREST INCOME
Loans & covered
assets $ 127,943 $ 139,557 $ 522,230 $ 561,069
Mortgage-backed
securities 27,822 21,606 108,207 91,775
Investment
securities and
cash
equivalents 3,210 4,322 14,198 10,716
------------- ------------- ------------- ------------
158,975 165,485 644,635 663,560
INTEREST EXPENSE
Customer
accounts 26,070 34,495 115,835 146,360
FHLB advances
and other
borrowings 28,387 30,621 111,861 122,741
------------- ------------- ------------- ------------
54,457 65,116 227,696 269,101
------------- ------------- ------------- ------------
Net interest
income 104,518 100,369 416,939 394,459
Provision for
loan losses 15,354 26,000 93,104 179,909
------------- ------------- ------------- ------------
Net interest
income after
provision for
loan losses 89,164 74,369 323,835 214,550
OTHER INCOME
Gain on FDIC
assisted
transaction - - - 85,608
Prepayment
penalty on FHLB
advance - (8,150) - (8,150)
Gain on sale of
investments - 1,981 8,147 22,409
Other 4,719 6,153 17,786 20,563
------------- ------------- ------------- ------------
4,719 (16) 25,933 120,430
OTHER EXPENSE
Compensation and
benefits 18,015 15,308 72,034 69,879
Occupancy 3,700 3,575 14,480 13,933
FDIC premiums 5,283 5,313 20,582 18,626
Other 7,287 7,469 28,963 29,042
------------- ------------- ------------- ------------
34,285 31,665 136,059 131,480
Loss on real
estate acquired
through
foreclosure,
net (11,681) (20,089) (40,050) (80,475)
------------- ------------- ------------- ------------
Income before
income taxes 47,917 22,599 173,659 123,025
Income taxes
provision
(benefit) 17,251 6,636 62,518 4,372
------------- ------------- ------------- ------------
NET INCOME $ 30,666 $ 15,963 $ 111,141 $ 118,653
============= ============= ============= ============
PER SHARE DATA
Basic earnings $ .28 $ .14 $ 1.00 $ 1.06
Diluted earnings .28 .14 1.00 1.05
Cash Dividends
per share .06 .05 .24 .20
Basic weighted
average number
of shares
outstanding 109,666,258 112,478,697 111,383,877 112,438,059
Diluted weighted
average number
of shares
outstanding,
including
dilutive stock
options 109,748,550 112,672,316 111,460,106 112,745,261
PERFORMANCE
RATIOS
Return on
average assets .91% .47% .83% .89%
Return on
average common
equity 6.55% 3.46% 5.99% 6.55%
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