Washington Federal Reports Annual Net Income of $138 Million

Washington Federal Reports Annual Net Income of $138 Million 
SEATTLE, WA -- (Marketwire) -- 10/18/12 --  Washington Federal, Inc.
(NASDAQ: WAFD), parent company of Washington Federal, today announced
earnings of $35,531,000 or $.33 per diluted share for the quarter
ended September 30, 2012, compared to $30,666,000 or $.28 per diluted
share for the same period one year ago, a $4.9 million or 18%
increase per diluted share. Earnings for the fiscal year ended
September 30, 2012 of $138,183,000 or $1.29 per diluted share, an
increase of $18,895,000 or 29% per diluted share from the prior year.
Higher earnings were driven primarily by lower credit costs due to
improved market conditions. Total credit costs were $55 million for
the year, a $78 million or 59% decrease from fiscal 2011. The
Company's ratio of tangible common equity to tangible assets ended
the quarter at 13.45% and its total risk-based capital ratio was
27.29%. Both of these ratios continue to be among the best of large
regional financial institutions in the U.S.  
Chairman, President & CEO Roy M. Whitehead commented, "Financial
performance for the year exceeded our expectations. Much of the
credit goes to improved real estate market conditions that enabled us
to record gains on the sale of properties foreclosed on and written
down in prior years. During the quarter, we also completed important
steps to enhance future profitability. In fiscal 2013, the focus will
largely be on growth in our commercial banking segments. Low interest
rates and a slow economy will challenge earnings growth; however, our
strong financial position will provide tremendous flexibility.
Opportunities to improve shareholder value, including acquisitions
and stock repurchases, will be aggressively pursued." 
Non-performing assets amounted to $273 million or 2.19% of total
assets as of September 30, 2012, a $97 million or 26% decrease from
September 30, 2011. Non-performing assets peaked at $606 million at
5.03% of total assets on June 30, 2009 and have since decreased by
$333 million or 55%. Non-performing loans decreased from $210 million
at the Company's September 30, 2011 fiscal year-end, to $173 million
as of September 30, 2012, an 18% decrease. Total loan delinquencies
were 2.57% as of September 30, 2012, a decrease from the 3.43% at
September 30, 2011. Delinquencies on single family mortgage loans,
the largest component of the loan portfolio, decreased to 2.73% from
3.25% as of September 30, 2011. Delinquencies on single family
mortgage loans decreased by 8 basis points on a linked quarter basis
to 2.73% from 2.81% as of June 30, 2012. The Company's single family
mortgage loan delinquency ratio of 2.73% remains significantly better
than the national average of 10.1%i. 
Net loan charge-offs decreased from $98 million in the year ended
September 30, 2011 to $70 million in the current year, a $28 million
or 29% decrease. Net loan charge offs peaked in fiscal 2010, at $184
million. Total net charge-offs for fiscal 2012 represent a 62%
decrease from the fiscal 2010 high. 
Real estate held for sale decreased by $60 million or 38% from
September 30, 2011 as the Company continues to liquidate foreclosed
properties. During the year, the Company sold 663 properties for net
proceeds of $143 million and a net gain on sale of $16 million over
the current book value. The total net loss on sale of real estate,
measured against the original loan balance of $267 million, was $124
million or 46% of original balances for properties sold in fiscal
2012. As of September 30, 2012, real estate held for sale consisted
of 449 properties totaling $99 million. Land represented $43 million
or 43% of total real estate held for sale at September 30, 2012. 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 75% to $10 million in
2012 from $40 million in the prior year. 
Asset quality trends during the quarter and fiscal year ending
September 30, 2012 were generally positive as noted above with
non-performing loans, real estate owned, delinquencies and net
charge-offs all decreasing. Additionally, the residential real estate
market has shown marked improvement in property values. The table
below shows the change in median home priceii in several of our key
markets. 


 
                                               
                                               
                                               
               Sep-12      Sep-11    % Change  
            ----------- ----------- ---------- 
                ($ in thousands)               
                                               
Seattle     $       378 $       350        8.0%
Portland            241         225        7.1%
Boise               180         166        8.4%
Salt Lake           212         199        6.5%
Las Vegas           130         120        8.3%
Phoenix             160         157        1.9%
Albuquerque         165         164        0.6%
Dallas              150         129       16.3%

 
Consistent with these improving conditions, total loan loss reserve as
a percentage of total gross loans has decreased. As of September 30,
2012, the allowance totaled 1.69% of loans, a decrease of 20 basis
points from the 1.89% as of September 30, 2011. As of September 30,
2012, the general allowance for loan losses was $117 million or 1.56%
of loans subject to the general allowance. 
Total assets decreased by $968 million or 7% to $12.5 billion at
September 30, 2012, from $13.4 billion at September 30, 2011. As
previously disclosed, during the fourth quarter the Company took
steps intended to reduce the Company's interest rate risk and improve
its future earnings potential. During the quarter, the Company sold
$2.3 billion of fixed rate mortgage-backed securities for a pre-tax
gain of $95 million. In the same period, the Company pre-paid $876
million of long term debt at a pre-tax loss of $95 million. The
weighted average rate on the retired debt was 3.94%. In related
transactions, the Company also purchased a mix of short and longer
term assets totaling $2.0 billion with an anticipated weighted
average yield of 1.83%, and restructured an additional $830 million
of long term debt to lengthen maturity and reduce the weighted
average rate from 4.48% to 3.43%. These transactions are expected to
reduce the volatility of net interest income and stabilize the margin
going forward. 
For the fiscal year ended September 30, 2012, loans decreased by $484
million or 6%, as the low interest rate environment caused loan
repayments to accelerate. Total loan repayments for fiscal 2012 were
$2.0 billion, a $142 million or 7.8% increase from the prior year.
Loan originations in 2012 totaled $1.4 billion, an $83 million or 6%
increase over 2011. Importantly, commercial loan originations
increased $172 million or 41% as a result of improved economic
conditions and the Company's continued phased rollout of its
commercial business lines. Loans covered by an FDIC loss sharing
agreement decreased by $94 million, investment securities decreased
$329 million and cash and cash equivalents decreased by $65 million.
Other assets increased by $78 million or 130% in 2012 as a result of
the capitalization of prepayment fees associated with the balance
sheet restructuring described above. As of September 30, 2012, the
Company's investment portfolio had net unrealized gains of $47
million. 
Customer deposits decreased $89 million or 1% during the year,
however; the Company was able to grow transaction accounts by $284
million or 11%, while time deposits decreased by $374 million or 6%.
The weighted average rate paid on customer deposits during the year
was 0.99%, a decrease of 33 basis points from the previous year, as a
result of the low interest rate environment. 
Federal Home Loan Bank (FHLB) and other borrowings decreased by $882
million or 32% as a result of the balance sheet restructuring. The
weighted average rate on FHLB borrowings as of September 30, 2012 was
3.59%, a decrease of 51 basis points from the prior year. 
During the year, the Company had an average balance of $848 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 2.80% as of September
30, 2012, a decrease from 3.13% as of September 30, 2011. 
Net interest income for the year was $397 million, a $20 million
decrease from last year. Net interest margin was 3.18% for the year,
compared to 3.35% for the prior year. The margin was pressured as
lower asset yields offset decreasing interest expense.  
Total credit costs, which include the provision for loan losses and
net loss on real estate acquired, were the key driver for improved
earnings this year. The table below shows the Company's total credit
costs for the last twelve quarters and fiscal years ending September
30, 2010, 2011 and 2012. 


 
                                                      
                                                      
                    Total Credit                      
   Quarter Ended        Costs     $ Change   % Change 
------------------  ------------  --------   -------- 
                   ($ in thousands)                   
Quarter Ending                                        
------------------                                    
            Dec-09  $     82,470                      
            Mar-10        80,058    (2,412)      -2.9%
            Jun-10        51,767   (28,291)     -35.3%
            Sep-10        46,089    (5,678)     -11.0%
            Dec-10        36,553    (9,536)     -20.7%
            Mar-11        40,395     3,842       10.5%
            Jun-11        29,171   (11,224)     -27.8%
            Sep-11        27,035    (2,136)      -7.3%
            Dec-11        21,779    (5,256)     -19.4%
            Mar-12        19,582    (2,197)     -10.1%
            Jun-12         9,221   (10,361)     -52.9%
            Sep-12         4,194    (5,027)     -54.5%
                                                      
Fiscal Year Ending                                    
------------------                                    
              2010  $    260,384                      
              2011       133,154  (127,230)     -48.9%
              2012        54,776   (78,378)     -58.9%

 
The Company's efficiency ratio of 34.5% for the year remains among the
lowest in the industry. The year produced a return on assets of
1.03%, while return on equity amounted to 7.23%. 
On October 19, 2012, Washington Federal will pay a cash dividend of
$.08 per share to common stockholders of record on October 5, 2012.
This will be the Company's 119th consecutive quarterly cash dividend.
During the year ended September 30, 2012, Washington Federal
repurchased 2,895,484 shares at a weighted average price of $14.48.
The Company has an authorization to repurchase up to an additional
6,188,030 shares. For the year the Company returned 55% of earnings
to stockholders in the form of cash dividends and share repurchases. 
During the quarter, the Company's first Eastern Washington branch was
opened in Yakima, Washington.  
Status of Proposed South Valley Bank and Trust Acquisition 
Washington Federal has received approval from its primary regulators
to complete its acquisition of South Valley Bank and Trust, which is
anticipated to close on October 31, 2012. The transaction is expected
to be immediately accretive to earnings.  
About Washington Federal
 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. 
This press release contains statements about the Company'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;
the characterization of the future effects of the reposition
transactions on the Company's balance sheet and earnings prospects;
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. The Company 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. The Company undertakes no obligation to
update or revise any forward-looking statement. If the Company does
update any forward-looking statement, no inference should be drawn
that the Company 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
the Company's periodic reports filed with the Securities and Exchange
Commission ("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 Washington
Federal's ability to comply in a timely and satisfactory manner with
the requirements of a memorandum of understanding entered into with
the Office of the Comptroller of the Currency. 


 
                                                                            
                                                                            
                 WASHINGTON FEDERAL, INC. AND SUBSIDIARIES                  
               CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION               
                                (UNAUDITED)                                 
                                                                            
                                               September 30,  September 30, 
                                                    2012           2011     
                                               -------------  ------------- 
                                                 (In thousands, except per  
                                                        share data)         
ASSETS                                                                      
Cash and cash equivalents                      $     751,430  $     816,002 
Available-for-sale securities                      1,781,705      3,255,144 
Held-to-maturity securities                        1,191,487         47,036 
Loans receivable, net                              7,451,998      7,935,877 
Covered loans, net                                   288,376        382,183 
Interest receivable                                   46,857         52,332 
Premises and equipment, net                          178,845        166,593 
Real estate held for sale                             99,478        159,829 
Covered real estate held for sale                     29,549         56,383 
FDIC indemnification asset                            87,571        101,634 
FHLB stock                                           149,840        151,755 
Intangible assets, net                               256,076        256,271 
Federal and state income taxes                        22,513              - 
Other assets                                         137,219         59,710 
                                               -------------  ------------- 
                                               $  12,472,944  $  13,440,749 
                                               =============  ============= 
                                                                            
LIABILITIES AND STOCKHOLDERS' EQUITY                                        
Liabilities                                                                 
Customer accounts                                                           
  Transaction deposit accounts                 $   2,946,453  $   2,662,188 
  Time deposit accounts                            5,630,165      6,003,715 
                                               -------------  ------------- 
                                                   8,576,618      8,665,903 
FHLB advances                                      1,880,000      1,962,066 
Other borrowings                                           -        800,000 
Advance payments by borrowers for taxes and                                 
 insurance                                            40,041         39,548 
Federal and state income taxes                             -          1,535 
Accrued expenses and other liabilities                76,533         65,164 
                                               -------------  ------------- 
                                                  10,573,192     11,534,216 
Stockholders' Equity                                                        
Common stock, $1.00 par value, 300,000,000                                  
 shares authorized; 129,950,223 and                                         
 129,853,534 shares issued; 106,177,615 and                                 
 108,976,410 shares outstanding                      129,950        129,854 
Paid-in capital                                    1,586,295      1,582,843 
Accumulated other comprehensive income, net of                              
 taxes                                                13,306         85,789 
Treasury stock, at cost; 23,772,608 and                                     
 20,877,124 shares                                  (310,579)      (268,665)
Retained earnings                                    480,780        376,712 
                                               -------------  ------------- 
                                                   1,899,752      1,906,533 
                                               -------------  ------------- 
                                               $  12,472,944  $  13,440,749 
                                               =============  ============= 
CONSOLIDATED FINANCIAL HIGHLIGHTS                                           
Common stockholders' equity per share          $       17.89  $       17.49 
Tangible common stockholders' equity per share         15.48          15.14 
Stockholders' equity to total assets                   15.23%         14.18%
Tangible common stockholders' equity to                                     
 tangible assets                                       13.45          12.52 
Weighted average rates at period end                                        
  Loans and mortgage-backed securities                  4.72%          5.43%
  Combined loans, mortgage-backed securities                                
   and investment securities                            4.18           4.97 
  Customer accounts                                     0.90           1.14 
  Borrowings                                            3.59           4.04 
  Combined cost of customer accounts and                                    
   borrowings                                           1.38           1.84 
  Interest rate spread                                  2.80           3.13 
                                                                            
                                                                            
                                                                            
                                                                            
                 WASHINGTON FEDERAL, INC. AND SUBSIDIARIES                  
                   CONSOLIDATED STATEMENTS OF OPERATIONS                    
                                (UNAUDITED)                                 
                                                                            
                                                                            
                            Quarter Ended            Twelve Months Ended    
                            September 30,               September 30,       
                     --------------------------  -------------------------- 
                         2012          2011          2012          2011     
                     ------------  ------------  ------------  ------------ 
                              (In thousands, except per share data)         
INTEREST INCOME                                                             
Loans & covered                                                             
 assets              $    115,467  $    127,943  $    484,833  $    522,230 
Mortgage-backed                                                             
 securities                16,062        27,822        96,142       108,207 
Investment                                                                  
 securities and cash                                                        
 equivalents                2,850         3,210         9,296        14,198 
                     ------------  ------------  ------------  ------------ 
                          134,379       158,975       590,271       644,635 
                                                                            
INTEREST EXPENSE                                                            
Customer accounts          20,071        26,070        86,939       115,835 
FHLB advances and                                                           
 other borrowings          22,138        28,387       106,310       111,861 
                     ------------  ------------  ------------  ------------ 
                           42,209        54,457       193,249       227,696 
                     ------------  ------------  ------------  ------------ 
                                                                            
Net interest income        92,170       104,518       397,022       416,939 
Provision for loan                                                          
 losses                     5,379        15,354        44,955        93,104 
                     ------------  ------------  ------------  ------------ 
Net interest income                                                         
 after provision for                                                        
 loan losses               86,791        89,164       352,067       323,835 
                                                                            
OTHER INCOME                                                                
Gain (loss) on sale                                                         
 of investments            95,234             -        95,234         8,147 
Prepayment penalty                                                          
 on long-term debt        (95,565)            -       (95,565)            - 
Other                       3,585         4,719        16,848        17,786 
                     ------------  ------------  ------------  ------------ 
                            3,254         4,719        16,517        25,933 
                                                                            
OTHER EXPENSE                                                               
Compensation and                                                            
 benefits                  19,487        18,015        77,628        72,034 
Occupancy                   4,217         3,700        16,194        14,480 
FDIC premiums               3,550         5,283        16,093        20,582 
Other                       8,459         7,287        32,939        28,963 
                     ------------  ------------  ------------  ------------ 
                           35,713        34,285       142,854       136,059 
Gain (loss) on real                                                         
 estate acquired                                                            
 through                                                                    
 foreclosure, net           1,185       (11,681)       (9,819)      (40,050)
                     ------------  ------------  ------------  ------------ 
Income before income                                                        
 taxes                     55,517        47,917       215,911       173,659 
Income taxes                                                                
 provision (benefit)       19,986        17,251        77,728        62,518 
                     ------------  ------------  ------------  ------------ 
NET INCOME           $     35,531  $     30,666  $    138,183  $    111,141 
                     ============  ============  ============  ============ 
                                                                            
PER SHARE DATA                                                              
Basic earnings       $        .33  $        .28  $       1.29  $       1.00 
Diluted earnings              .33           .28          1.29          1.00 
Cash Dividends per                                                          
 share                        .08           .06           .32           .24 
Basic weighted                                                              
 average number of                                                          
 shares outstanding   106,512,324   109,666,258   107,108,703   111,383,877 
Diluted weighted                                                            
 average number of                                                          
 shares outstanding,                                                        
 including dilutive                                                         
 stock options        106,556,946   109,748,550   107,149,240   111,460,106 
                                                                            
PERFORMANCE RATIOS                                                          
Return on average                                                           
 assets                      1.10%          .91%         1.03%          .83%
Return on average                                                           
 common equity               7.43%         6.55%         7.23%         5.99%

 
(1) OCC Mortgage Metrics Report, 2nd Quarter 2012, which is the most
recent data available 
(2) Multiple Listing Services 
Contact:
Washington Federal, Inc.
425 Pike Street, Seattle, WA 98101
Cathy Cooper
206-777-8246
cathy.cooper@washingtonfederal.com