Washington Federal posts fivefold leap in fiscal 3rd-quarter profit, boosted by Horizon buyout

Washington Federal 3rd-qtr profit leaps fivefold

SEATTLE — Washington Federal Inc. on Monday posted a fivefold leap in its fiscal third-quarter profit with help from revenue from a failed bank it bought early this year.

For the three months that ended June 30, Washington Federal said its net income available to common shareholders rose to $12.7 million, or 11 cents per share, up from $2.5 million, or 3 cents per share, a year earlier.

The bank said the increase was due primarily to a one-time gain of $54.8 million related to the Federal Deposit Insurance Corp.-assisted acquisition in January of Horizon Bank in Bellingham, Wash. Horizon, which had 18 branches and deposits of about $1.1 billion, was the first bank to fail in 2010.

Analysts polled by Thomson Reuters, on average, expected Washington Federal profit of 8 cents per share. Analyst estimates typically do not include one-time gains.

Last year’s profit was reduced by preferred dividends owed to the U.S. Treasury. The bank paid back the $200 million it borrowed from the federal government last year, and the Treasury Department has since auctioned off the warrants that would have allowed it to buy stock in Washington Federal at a reduced price.

Chairman, President & CEO Roy M. Whitehead, in a statement, called the quarterly results “encouraging” and said they “increase our confidence that conditions are stabilizing.”

Washington Federal said net interest income, or earnings from deposits and loans, rose 5 percent to $99.3 million, from $94.3 million last year.

The bank reduced its provision for loan losses, or money set aside to cover souring loans, to $20.7 million, from $52.2 million in the 2009 quarter.

The reduction was reflected in Whitehead’s comments that “the trend toward fewer newly identified problem loans is now well established.” With fewer loans expected to go unpaid, the bank didn’t have to set aside as much money to cover them.

Non-performing assets, or loans that are past due, fell 22 percent to $473 million, from their peak at $606 million a year ago.

Whitehead said one of the most important factor’s in the bank’s results is that the mix of non-performing assets is shifting from mainly loans to foreclosed real estate. “Although painful, this is the natural progression for resolving problem loans and moves them one step closer to cash,” he said.

Net charge-offs, or loans written off as uncollectable, rose to $42 million, from $34 million last year.

In morning trading, Washington Federal shares added 29 cents, to $16.10. The stock has traded between $12.79 and $21.65 in the past year.