Washington Federal Inc. Reports Operating Results (10-Q)

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Aug 07, 2012
Washington Federal Inc. (WFSL, Financial) filed Quarterly Report for the period ended 2012-06-30.

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Highlight of Business Operations:

The interest rate spread decreased to 2.88% at June 30, 2012 from 3.13% at September 30, 2011. The spread decreased due to a decline in the average rate on earning assets. As of June 30, 2012, the weighted average rate on earning assets decreased by 40 basis points compared to September 30, 2011, while the weighted average rates on customer deposit accounts and borrowings

Available-for-sale and held-to-maturity securities: Available-for-sale securities increased $370,971,000, or 11.4%, during the nine months ended June 30, 2012, which included the purchase of $1,499,227,000 of available-for-sale securities. There were $3,500,000 of available-for-sale securities sold during the nine months ended June 30, 2012, resulting in no gain or loss. During the same period, there were no purchases or sales of held-to-maturity securities. As of June 30, 2012, the Company had net unrealized gains on available-for-sale securities of $62,736,000, net of tax, which were recorded as part of stockholders equity. The Company increased its available-for-sale investment portfolio to partially replace some of the lost interest income on maturing and prepaying loans and mortgage-backed securities.

Net Income: The quarter ended June 30, 2012, produced net income of $35,163,000 compared to $30,121,000 for the same quarter one year ago. For the nine months ended June 30, 2012, net income totaled $102,651,000 compared to $80,475,000 for the nine months ended June 30, 2011. The net income for the quarter and nine months ended June 30, 2012 benefited from overall lower credit costs, which included the provision for loan losses, and gains/losses on sales of REO. The provision for loan losses amounted to $10,367,000 and $39,576,000 for the quarter and nine months ended June 30, 2012, as compared to $21,000,000 and $77,750,000 for the three and nine month period one year ago. See related discussion in “Provision for Loan Losses” section below for reasons for the decrease in the provision for loan losses. In addition, gains/losses recognized on real estate acquired through foreclosure was a net gain of $1,146,000 for the three months ended June 30, 2012 and a net loss of $11,005,000 for the nine months ended June 30, 2012 as compared to net losses of $8,171,000 and $28,369,000 for the three and nine month periods one year ago.

The following table sets forth certain information explaining changes in interest income and interest expense for the periods indicated compared to the same periods one year ago. For each category of interest-earning asset and interest-bearing liability, information is provided on changes attributable to (1) changes in volume (changes in volume multiplied by old rate) and (2) changes in rate (changes in rate multiplied by old volume). The change in interest income and interest expense attributable to changes in both volume and rate has been allocated proportionately to the change due to volume and the change due to rate.

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