Washington Federal, Inc. (NASDAQ: WFSL) today announced earnings of
$33,418,000, or $.31 per diluted share, for the quarter ended
December 31, 2011, compared to $24,530,000, or $.22 per diluted
share, for the same period one year ago. Net income increased by
36% and earnings per share improved by 41%, driven primarily by
lower credit costs. Credit related expenses, which include the
provision for loan losses and charges related to real estate owned
("REO"), were $21,779,000 for the quarter ended December 31, 2011,
a decrease of $14,774,000, or 40%, from the same quarter one year
ago.
Chairman, President and CEO Roy M. Whitehead commented, "We are
very pleased to report the sixth consecutive quarter of improved
earnings. Loan losses continued to decline, demand for foreclosed
real estate increased noticeably, and improved economic conditions
in virtually all of our markets were reported. Loan demand and
revenue growth remain elusive, but it's a very good start to our
new fiscal year."
During the quarter the Company closed two separate acquisitions.
On October 14th, $254 million in deposits and six branch locations
in New Mexico were acquired from the former Charter Bank. Two of
the acquired branches are in Santa Fe and four are located in
Albuquerque. On December 16th, the Company entered into a
transaction with the FDIC to acquire substantially all of the
assets and liabilities of the former Western National Bank ("WNB"),
headquartered in Phoenix, Arizona. WNB had gross loans of $143
million, along with $135 million in deposits and three branch
locations. The Agreement with the FDIC, which does not include a
loss sharing provision, provided the Company with a discount on
assets of $53 million and no deposit premium. Final purchase
accounting adjustments will be made in the coming quarter, but at
this time the Company does not anticipate recording a significant
upfront gain or goodwill asset as a result of this transaction.
Loans that were classified as non-performing loans by WNB are no
longer classified as non-performing because, at acquisition, the
carrying value of these loans was adjusted to reflect fair value.
Management believes that the new book value reflects an amount that
will ultimately be collected. Due to the Company's existing
presence in the Phoenix market, it is anticipated that two of the
WNB branch locations will be consolidated into nearby Washington
Federal branches.
During the quarter the Company's loan portfolio decreased by
$126 million or 2% as mortgage loans refinanced elsewhere at
historically low interest rates. Investment securities increased by
$288 million or 9% as management invested the proceeds from the two
acquisitions closed during the quarter. As of December 31, 2011,
the investment portfolio had an unrealized gain of $136 million, a
slight decrease from the $139 million at September 30, 2011.
Deposits increased by $210 million or 2% as a result of the two
acquisitions.
Cash and cash equivalents were $910 million at December 31,
2011, an increase of $94 million from the prior quarter. The ratio
of tangible common equity to tangible assets decreased slightly
during the quarter to 12.35% from 12.52%. During the quarter the
Company repurchased 1,550,000 shares at a weighted average price of
$13.11. Under its existing authorization, the Company can
repurchase an additional 7,533,514 shares.
Net interest margin contracted slightly to 3.27% from 3.36% on a
linked quarter basis. The benefit from decreasing interest expense
on deposits was more than offset by the reduced yield on assets as
a result of repayments and reinvestment at lower yields.
The Company's efficiency ratio of 31.7% for the quarter remains
among the lowest in the industry. The quarter produced a return on
assets of .98%, while return on equity amounted to 7.0%, both of
these measures are substantial improvements over the prior
year.
Non-performing assets amounted to $344 million, or 2.52% of
total assets, at quarter-end. This represents an improvement of $99
million or 22% from December 31, 2010, and a $26 million
improvement from September 30, 2011. Non-performing loans totaled
$186 million on December 31, 2011, which is a 62% decline from the
peak of $492 million on June 30, 2009. Net loan charge-offs
decreased from $30 million in the quarter ended December 31, 2010
to $14 million in the current quarter, a $16 million or 53%
decrease.
Overall delinquencies declined to 3.13% in the current quarter
from 3.43% at September 30, 2011; the delinquency rate on
single-family residential mortgages, the largest portion of the
loan portfolio, decreased from 3.25% to 3.17%. The total allowance
for loan losses, including specific reserves accounted for under
ASC 310-10, amounted to $155 million, or 1.88% of total gross
loans. As of quarter end the general allowance for loan losses
totaled $115 million or 1.44% of loans subject to the general
allowance. One year ago, the general allowance for loan losses
totaled $101 million or 1.25% of loans. This increase in the
general reserve was deemed necessary due to the elevated level of
delinquency in the single family portfolio, continued high
unemployment rates and weakness in the housing market. The total
allowance decreased by $2.6 million, on a linked quarter basis due
to improving credit metrics in the portfolio as described in the
preceding paragraphs.
On January 13, 2012, Washington Federal will pay a cash dividend
of $.08 per share to common stockholders of record on December 30,
2011. This will be the Company's 116th consecutive quarterly cash
dividend and represents a 33% increase in the cash dividend of $.06
paid to stockholders in the preceding four quarters.
The Company's Annual Meeting of Stockholders will be held at
2:00 p.m. on January 18, 2012, at the Westin Hotel, 1900 Fifth
Avenue, Seattle, Washington.
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 2011 Annual Report on Form 10-K, Quarterly Reports on
Form 10-Q and Current Reports on Form 8-K.
Financial information contained in this release should be
considered to be an estimate until the Company files its first
fiscal quarter Form 10-Q for 2012 with the Securities and Exchange
Commission. While the Company is not aware of any need to revise
the results disclosed in this release, accounting literature may
require adverse information received by management on troubled
assets between the date of this release and the filing of the Form
10-Q to be reflected in the results of this quarter, even though
the new information was received by management subsequent to the
date of this release.
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.
WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
December 31, 2011 September 30, 2011
------------------ ------------------
(In thousands, except per share data)
ASSETS
Cash and cash equivalents $ 909,911 $ 816,002
Available-for-sale securities 3,548,076 3,255,144
Held-to-maturity securities 42,226 47,036
Loans receivable, net 7,810,075 7,935,877
Covered loans, net 347,469 382,183
Interest receivable 53,974 52,332
Premises and equipment, net 174,026 166,593
Real estate held for sale 157,882 159,829
Covered real estate held for sale 48,534 56,383
FDIC indemnification asset 92,103 101,634
FHLB stock 153,333 151,755
Intangible assets, net 256,952 256,271
Other assets 55,155 59,710
------------------ ------------------
$ 13,649,716 $ 13,440,749
================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Customer accounts
Transaction deposit accounts $ 2,850,217 $ 2,662,188
Time deposit accounts 6,025,458 6,003,715
------------------ ------------------
8,875,675 8,665,903
FHLB advances 1,960,868 1,962,066
Other borrowings 800,000 800,000
Advance payments by borrowers for
taxes and insurance 15,142 39,548
Federal and state income taxes 19,423 1,535
Accrued expenses and other
liabilities 68,221 65,164
------------------ ------------------
11,739,329 11,534,216
Stockholders' Equity
Common stock, $1.00 par value,
300,000,000 shares authorized;
129,887,559 and 129,853,534 shares
issued; 107,460,435 and 108,976,410
shares outstanding 129,888 129,854
Paid-in capital 1,583,666 1,582,843
Accumulated other comprehensive
income, net of taxes 84,196 85,789
Treasury stock, at cost; 22,427,124
and 20,877,124 shares (288,976) (268,665)
Retained earnings 401,613 376,712
------------------ ------------------
1,910,387 1,906,533
------------------ ------------------
$ 13,649,716 $ 13,440,749
================== ==================
CONSOLIDATED FINANCIAL HIGHLIGHTS
Common stockholders' equity per
share $ 17.78 $ 17.49
Tangible common stockholders' equity
per share 15.39 15.14
Stockholders' equity to total assets 14.00% 14.18%
Tangible common stockholders' equity
to tangible assets 12.35 12.52
Weighted average rates at period end
Loans and mortgage-backed
securities 5.32% 5.43%
Combined loans, mortgage-backed
securities and investment
securities 4.85 4.97
Customer accounts 1.03 1.14
Borrowings 4.04 4.04
Combined cost of customer accounts
and borrowings 1.74 1.84
Interest rate spread 3.11 3.13
WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Quarter Ended December 31,
--------------------------------------
2011 2010
------------------ ------------------
(In thousands, except per share data)
INTEREST INCOME
Loans & covered loans $ 127,480 $ 137,916
Mortgage-backed securities 26,296 23,694
Investment securities and cash
equivalents 2,151 3,980
------------------ ------------------
155,927 165,590
INTEREST EXPENSE
Customer accounts 23,949 32,734
FHLB advances and other borrowings 28,263 28,122
------------------ ------------------
52,212 60,856
------------------ ------------------
Net interest income 103,715 104,734
Provision for loan losses 11,209 26,000
------------------ ------------------
Net interest income after provision
for loan losses 92,506 78,734
OTHER INCOME
Other 4,645 4,426
------------------ ------------------
4,645 4,426
OTHER EXPENSE
Compensation and benefits 18,675 17,723
Occupancy 3,931 3,515
FDIC premiums 4,193 5,099
Other 7,565 7,942
------------------ ------------------
34,364 34,279
Loss on real estate acquired through
foreclosure, net (10,570) (10,553)
------------------ ------------------
Income before income taxes 52,217 38,328
Income taxes provision 18,799 13,798
------------------ ------------------
NET INCOME $ 33,418 $ 24,530
================== ==================
PER SHARE DATA
Basic earnings $ .31 $ .22
Diluted earnings .31 .22
Cash dividends per share .08 .06
Basic weighted average number of
shares outstanding 107,845,011 112,499,175
Diluted weighted average number of
shares outstanding, including
dilutive stock options 107,894,572 112,502,134
PERFORMANCE RATIOS
Return on average assets .98% .73%
Return on average common equity 7.02% 5.30%
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