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Washington Federal, Inc.
425 Pike Street
Seattle, WA 98101
Contact: Cathy Cooper
(206) 777-8246
Thursday, October 19, 2006
FOR IMMEDIATE RELEASE
Washington Federal Reports Fiscal Year Earnings of $143 Million
SEATTLE - Washington Federal, Inc. (Nasdaq: WFSL), parent company of
Washington Federal Savings, today announced earnings of $143,102,000 or
$1.64 per diluted share for the year ended September 30, 2006, compared
to $145,889,000 or $1.67 per diluted share for the same period one year
ago, a 2% decrease. Earnings for the fourth fiscal quarter amounted to
$35,279,000 or $.40 per diluted share compared to $34,389,000 or $.39
per diluted share for the same period one year ago, a 3% increase.
Roy M. Whitehead, Chairman, President & CEO, commented, "We are proud
to report another year of solid financial performance. Earnings during
the year were maintained by reinvesting cash into longer-term assets
and by modestly leveraging the company's substantial capital position.
These moves were undertaken to offset a significant increase in interest
expense on customer deposits over the prior year. Investors will be
pleased to know that asset quality continues to be quite strong, despite
a clear softening in most of the housing markets served by Washington
Federal. A larger concern at the moment is the negative spread between
short and long-term interest rates. This so-called "inverted yield
curve", along with weaker housing, will likely make earnings growth
difficult during the next few quarters."
The year produced a return on assets of 1.67%, while return on equity
amounted to 11.77%. The company's efficiency ratio (operating expenses
as a percentage of net revenue) of 19.66% for the year remains among
the best in the industry.
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Total assets of $9.069 billion at September 30, 2006, represents an
increase of $835 million or 10% above last year. Total net loans
outstanding increased $1.070 billion to $7.078 billion as of September
30, 2006, an 18% increase over last year. Stockholders' equity
increased $75 million or 6% to $1.263 billion as of September 30, 2006.
Net interest income declined by $10 million or 4% for the year to $257
million due primarily to a 55% or $64 million increase in interest
expense on customer accounts. $46 million of this increase was
attributable to higher interest rates, the remaining $18 million was
due to higher volumes. The weighted average rate on customer accounts
increased from 2.94% at September 30, 2005 to 4.05% as of September 30,
2006. This increase is the result of rising short-term interest rates.
Our period end net interest spread decreased to 2.18% as of September
30, 2006 from 2.54% one year earlier. Due to a change in accounting
rules, fiscal 2006 also included a $1.1 million expense for stock
options granted to employees; 2005 did not include any stock option
expense.
On October 10, 2006, Washington Federal announced the signing of a
definitive merger agreement to acquire First Federal Banc of the
Southwest, Inc. ("First Federal"). First Federal is headquartered in
Roswell, New Mexico with 13 branches in New Mexico and 2 branches in El
Paso, Texas. First Federal reported total assets of $562 million, total
deposits of $392 million and total stockholders' equity of $53 million
as of June 30, 2006. The transaction is expected to close in the first
calendar quarter of 2007.
On October 20, 2006, Washington Federal will pay a cash dividend of $.205
per share to common stockholders of record on October 6, 2006. This will
be the company's 95th consecutive quarterly cash dividend.
During the quarter the Company also opened a new branch location in
Medford, Oregon.
Washington Federal Savings, with headquarters in Seattle, Washington, has
123 offices in seven western states.
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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
September 30, 2006 September 30, 2005
------------------- ------------------
(In thousands, except per share data)
ASSETS
Cash and cash equivalents ......................................... $ 45,722 $ 637,791
Available-for-sale securities, including mortgage-backed
securities of $1,229,409 ....................................... 1,451,038 1,077,856
Held-to-maturity securities, including mortgage-backed
securities of $149,907 ......................................... 184,928 212,479
Loans receivable, net ............................................. 7,078,443 6,008,932
Interest receivable ............................................... 42,304 34,048
Premises and equipment, net ....................................... 62,159 63,287
Real estate held for sale ......................................... 3,903 5,631
FHLB stock ........................................................ 129,453 129,453
Intangible assets, net ............................................ 56,259 57,259
Other assets ...................................................... 14,811 7,714
----------- -----------
$ 9,069,020 $ 8,234,450
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Customer accounts
Savings and demand accounts .................................... $ 5,285,708 $ 5,002,172
Repurchase agreements with customers ........................... 26,018 29,333
----------- -----------
5,311,726 5,031,505
FHLB advances ..................................................... 1,500,000 1,230,000
Other borrowings................................................... 870,000 655,000
Advance payments by borrowers for taxes and insurance ............. 29,505 27,533
Federal and state income taxes .................................... 39,667 44,617
Accrued expenses and other liabilities ............................ 55,402 58,487
----------- -----------
7,806,300 7,047,142
STOCKHOLDERS' EQUITY
Common stock, $1.00 par value, 300,000,000 shares authorized;
104,467,245 and 104,140,966 shares issued; 87,338,824 and
86,933,294 shares outstanding .................................. 104,467 104,141
Paid-in capital ................................................... 1,246,025 1,240,310
Accumulated other comprehensive loss, net of taxes ................ (5,975) (704)
Treasury stock, at cost; 17,128,421 and 17,207,672 shares ......... (204,930) (205,874)
Retained earnings ................................................. 123,133 49,435
----------- -----------
1,262,720 1,187,308
----------- -----------
$ 9,069,020 $ 8,234,450
=========== ===========
CONSOLIDATED FINANCIAL HIGHLIGHTS
Stockholders' equity per share .................................... $ 14.46 $ 13.66
Stockholders' equity to total assets .............................. 13.92% 14.42%
Weighted average rates at period end
Loans and mortgage-backed securities* ........................... 6.48% 6.19%
Investment securities** ......................................... 4.10 3.74
Combined loans, mortgage-backed securities
and investment securities .................................... 6.38 5.91
Customer accounts ............................................... 4.05 2.94
Borrowings ...................................................... 4.55 4.51
Combined cost of customer accounts and borrowings ............... 4.20 3.37
Interest rate spread ............................................ 2.18 2.54
* Includes securitized assets subject to repurchase
**Includes municipal bonds at tax equivalent yields and cash equivalents
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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Quarter Ended September 30, Year Ended September 30,
--------------------------- ------------------------
2006 2005 2006 2005
------ ------ ------ ------
(In thousands, except per share data)
INTEREST INCOME
Loans ...................................................... $ 118,334 $ 97,611 $ 439,338 $ 369,023
Mortgage-backed securities ................................. 19,533 12,813 66,938 61,459
Investment securities and cash equivalents ................. 3,913 7,752 23,607 31,419
-------- -------- -------- --------
141,780 118,176 529,883 461,901
INTEREST EXPENSE
Customer accounts .......................................... 52,061 34,719 179,605 115,826
FHLB advances and other borrowings ......................... 26,342 21,584 93,756 79,434
-------- -------- -------- --------
78,403 56,303 273,361 195,260
-------- -------- -------- --------
NET INTEREST INCOME ........................................ 63,377 61,873 256,522 266,641
Provision for (reversal of) loan losses .................... 350 - 535 (134)
-------- -------- -------- --------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES ........ 63,027 61,873 255,987 266,775
OTHER INCOME
Loss on securities, net .................................... - - - (3,534)
Loss on extinguishment of debt ............................. - (2,194) - (2,194)
Other ...................................................... 5,266 3,189 16,064 12,137
-------- -------- -------- --------
5,266 995 16,064 6,409
OTHER EXPENSE
Compensation and fringe benefits ........................... 9,459 8,436 36,574 34,197
Occupancy .................................................. 1,934 1,915 7,893 8,788
Other ...................................................... 2,203 3,258 9,112 9,334
-------- -------- -------- --------
13,596 13,609 53,579 52,319
Gain on real estate acquired through foreclosure, net ...... 4 180 188 1,443
-------- -------- -------- --------
Income before income taxes ................................. 54,701 49,439 218,660 222,308
Income taxes ............................................... 19,422 15,050 75,558 76,419
-------- -------- -------- --------
NET INCOME ................................................. $ 35,279 $ 34,389 $143,102 $145,889
======== ======== ======== ========
PER SHARE DATA
Basic earnings ............................................. $ .40 $ .40 $ 1.64 $ 1.68
Diluted earnings ........................................... .40 .39 1.64 1.67
Cash dividends ............................................. .205 .20 .81 .78
Weighted average number of shares outstanding,
including dilutive stock options ........................ 87,467,156 87,544,855 87,471,474 87,478,708
PERFORMANCE RATIOS
Return on average assets ................................... 1.58% 1.71% 1.67% 1.90%
Return on average stockholders' equity ..................... 11.43% 11.63% 11.77% 12.63%
Net interest margin ........................................ 2.91% 3.18% 3.06% 3.57%
%
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