(Source: MARKET WIRE)
Washington Federal, Inc. (NASDAQ: WFSL), parent company of Washington Federal Savings, today announced earnings of $8,410,000 or $.10 per diluted share for the quarter ended March 31, 2009, compared to $35,452,000 or $.40 per diluted share for the same period one year ago. Earnings decreased by $27,042,000 or 76% primarily as a result of higher credit costs. The provision for loan losses was $54 million for the quarter ended March 31, 2009, a $44.5 million increase over the $9.5 million provided for the same quarter one year ago. During the quarter, the Company's already strong capital position improved as the ratio of tangible common equity to tangible assets increased to 10%, making it one of the best capitalized regional institutions in the U.S.
Chairman, President & CEO Roy M. Whitehead commented, "Lower earnings over the same period last year are the result of a substantial increase in loan loss provision primarily related to the residential land and construction portfolio and centered in a few large credits. We are pleased to have been solidly profitable again last quarter, given the extraordinarily difficult economic conditions. Investors should expect loan loss provisions to continue at a high level next quarter. We also foresee revenues next quarter being adversely impacted by the higher level of non-performing assets along with accelerated mortgage prepayments due to refinancing. On a positive note, we continue to experience improvement in funding expense due to declining deposit costs. Next quarter approximately $2.3 billion, or 38% of our deposits, will reprice downward, which will add considerably to net interest margin."
Non-performing assets amounted to $492 million or 4.01% of total assets at quarter-end. This is an increase of $328 million from September 30, 2008, and is concentrated in our portfolio of land and speculative construction loans. The gross amount of loans outstanding in these two portfolios totaled $1,036 million as of March 31, 2009, a decrease of $128 million or 11% from September 30, 2008. In response to the deteriorating credit conditions, the Company increased its allowance for loan losses from $85 million as of September 30, 2008, to $143 million as of March 31, 2009, a $58 million or 68% increase.
In March, the Company began to more aggressively market foreclosed real estate. Special mortgage loan products, beginning at a rate of 3.99% were introduced to facilitate the sale of real estate owned. The Company currently owns and is marketing 250 separate properties, of which 50 have pending sales.
Total assets increased by $466 million or 4% to $12,262,172,000 from $11,796,425,000 at September 30, 2008. Specifically, investment securities increased by $481 million or 30% during the six months ended March 31, 2009, as the Company purchased agency mortgage backed securities in anticipation of a potential increase in refinance activity. As of March 31, 2009, the Company's investment portfolio had net unrealized gains of $81 million, an increase of $78 million from September 30, 2008. During the quarter, total loans outstanding decreased from $9.5 billion to $9.4 billion as a result of increased loan prepayments stemming from record low interest rates available on 30 year fixed rate mortgages in the market.
Net interest income for the current quarter increased by 27% or $20 million from the quarter ended March 31, 2008. This increase is the result of significant growth in earning assets as well as increased net interest spread as deposit rates have fallen. The Company's period end spread increased to 3.11% as of March 31, 2009, compared to 2.30% one year ago.
The Company's efficiency ratio of 25.6% for the quarter remains among the lowest in the industry. The quarter produced a return on assets of .27%, while return on equity amounted to 2.40%. These ratios represent 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 April 24, 2009, Washington Federal will pay a cash dividend of $.05 per share to common stockholders of record on April 10, 2009. This will be the Company's 105th consecutive quarterly cash dividend.
Washington Federal Savings, with headquarters in Seattle, Washington, has 150 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 2008 Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.
