Washington Federal Earnings Drop 61% in Q409, Driven by Large REO Expenses
Washington Federal, the parent company of Washington Federal Savings, reported $7.9m in earnings for Q409 or $0.07 per share. Earnings dropped 61% from $20.1m or $0.23 per share in Q408, due to higher credit costs including the provision for loan losses and real estate owned (REO) expenses. Those expenses reached $82.5m in Q409, a 128% jump from $46.2m in Q408. Non-performing assets totaled $553m or 4.37% of Washington Federal’s entire portfolio at the end of Q409, a decrease of $4m from the end of Q309. The drop came from writedowns and the movement of distressed property into REO. Overall delinquencies fell to 4.74% from 4.86% in Q409, but the delinquency rate for single-family residences increased to 3.2% from 2.9%. Washington Federal CEO Roy Whitehead said the company took a more aggressive approach to the write down of problem assets. “High unemployment, the planned unwinding of central bank support for the mortgage-backed securities market, pending FDIC liquidations in our markets, and changing social attitudes about mortgage default collectively drove us to the conclusion that the supply/demand imbalance in residential real estate will persist longer than we had previously believed,” Whitehead said. “Washington Federal is fortunate to be in a position to absorb higher losses, which on individual properties can be astonishing, while remaining profitable and in a fortress-level capital position.” During the quarter, Washington Federal sold $316m of its investment portfolio for a realized gain of $20m and increased its cash position to $937m from $498m. Responding to the declines in real estate prices and dry credit lines, Washington Federal bolstered its provision for loan loss expense from $35m in Q408 to $70m in Q409. As of the end of the quarter, the allowance for loan losses reached $191m. Write to Jon Prior.