SEATTLE, WA -- (Marketwire) -- 07/23/09 -- Washington Federal, Inc. (NASDAQ: WFSL), parent company of Washington Federal Savings, today announced earnings of $2,500,000 or $.03 per diluted share for the quarter ended June 30, 2009, compared to $33,169,000 or $.38 per diluted share for the same period one year ago. Earnings decreased by $30,669,000 or 92%, primarily as a result of higher credit costs and FDIC insurance premiums. The provision for loan losses was $52.2 million for the quarter ended June 30, 2009, a $39.0 million increase over the $13.2 million provided for the same quarter one year ago. FDIC premiums increased by $6.6 million over the same period one year ago. During the quarter, the Company also repurchased $200 million of preferred stock held by the U.S. Treasury under the TARP, resulting in a charge of $2.0 million. The Company has decided not to repurchase the 1.7 million warrants issued in conjunction with the preferred stock at this time due to the contractual restrictions on negotiating the value of such warrants. As of June 30, 2009 the ratio of tangible common equity to tangible assets was 9.64%, significantly above regulatory requirements to be classified as well capitalized.

Chairman, President & CEO Roy M. Whitehead commented, "Strong operating results, instigated by lower funding expense, enabled the Company to report a profit despite record high credit costs and one-time charges. During the quarter we continued to aggressively write down problem assets, with losses again centered in the residential land and construction portfolio. We are cautiously optimistic that charges in that area peaked last quarter, although losses from the mortgage portfolio are increasing with rising unemployment in the markets we serve. We are pleased to report continued profits in this hazardous economic environment."

Non-performing assets amounted to $605 million or 5.03% of total assets at quarter end. This is an increase of $441 million from September 30, 2008, and is concentrated in the Company's portfolio of land and speculative construction loans. The gross amount of loans outstanding in these two portfolios totaled $925 million as of June 30, 2009, a decrease of $238 million or 20% from September 30, 2008. In response to deteriorating credit conditions, the Company has increased its allowance for loan losses from $85 million as of September 30, 2008, to $162 million as of June 30, 2009, a $77 million or 91% increase.

Overall delinquencies were 5.81% as of June 30, 2009, compared to 1.67% one year ago. However, single family residential mortgage loans, which represent 73% of the total portfolio, experienced delinquencies of only 2.74%, which compares favorably to the national average mortgage delinquencies of 9.12%(1).

At quarter end, the Company owned 325 properties acquired through, or in lieu of, foreclosure, of which approximately 60 have sales pending. During the quarter the company sold 108 properties.

Total assets increased by $212 million or 2% to $12.0 billion from $11.8 billion at September 30, 2008. Specifically, investment securities increased by $437 million or 27% during the nine months ended June 30, 2009, as the Company purchased agency mortgage backed securities in anticipation of a potential increase in refinance activity. As of June 30, 2009, the Company's investment portfolio had net unrealized gains of $70 million, an increase of $67 million from September 30, 2008. During the year, total loans outstanding decreased from $9.5 billion to $9.1 billion as a result of increased loan prepayments stemming from record low interest rates available on 30 year fixed-rate mortgages.

During the quarter the Company became aware of a potential tax liability of $39 million resulting from the acquisition of First Mutual, Inc. in February 2008. The only income statement impact was $1.5 million of additional tax in the current quarter, resulting from interest due on the potential tax liability. Although substantial uncertainty remains as to the ultimate outcome of this matter, under current U.S. accounting rules, the Company was required to record this as an income tax liability and a corresponding increase to goodwill. The Company is in discussions with the IRS regarding this matter and will pursue all available remedies to mitigate the financial impact to the Company.

Net interest income for the current quarter increased by 17% or $14 million from the quarter ended June 30, 2008. This increase is the result of expanding net interest spread, driven by falling deposit rates. The Company's period end spread increased to 3.27% as of June 30, 2009, compared to 2.69% one year ago. In the next quarter the Company has $1.5 billion of deposits that will mature with a weighted average rate of 2.72%.

The Company's efficiency ratio of 31.06% for the quarter, an increase from 27.81% from one year ago, remains among the lowest in the industry. The $6.6 million increase in FDIC insurance costs caused the higher efficiency ratio. The quarter produced a return on assets of .08%, while return on equity amounted to .71%. These ratios represent historical lows for the Company and are indicative of the effects of the significant declines in real estate values throughout the western United States.

On July 24, 2009, Washington Federal will pay a cash dividend of $.05 per share to common stockholders of record on July 10, 2009.