Washington Federal, Inc. (WAFD), a unitary savings and loan holding company, reported Thursday better-than-expected profit in its third quarter on lower provision for loan losses, despite margin pressure.
Chairman, President & CEO Roy Whitehead said, "The quarter produced the ninth consecutive increase in quarterly earnings and the Company's best operating results since the beginning of the recession. Overall, it was another very solid quarter."
The company said its ratio of tangible common equity to tangible assets was 12.69 percent at quarter end and continues to be among the best of large regional financial institutions in the U.S.
Total loan production for the quarter was $430 million, a 63 percent increase from last year as loan demand for business and commercial real estate loans was strong relative to prior periods.
For the quarter, the parent company of Washington Federal said its earnings grew 16.7 percent to $35.16 million or $0.33 per share from prior year's $30.12 million or $0.27 per share.
On average, 12 analysts polled by Thompson Reuters expected the company to report earnings of $0.32 per share for the quarter. Analysts' estimates typically exclude special items.
Higher net income is attributed primarily to the material decline in expenses related to problem assets, which more than offset a decline in net interest income, the company said.
Net interest income for the quarter was $97 million, 9 percent lower than last year caused by the lower asset yields. Net interest margin was 3.05 percent, compared to 3.44 percent one year ago. 3.29 percent for the quarter ended March 31, 2012.
The provision for loan losses decreased to $10 million from $21 million in the prior year.
Looking ahead, Whitehead said, "Management and the Board expect further improvement in overall financial performance in the near term, but recognize the formidable challenges presented longer-term by extraordinarily low interest rates and muddled market conditions."
Consistent with its positive internal credit quality indicators and weak macro-economic conditions, the company decreased its specific loan loss reserve and increased its general loan loss reserve.
The company added that it is maintaining higher than normal amounts of liquidity due to concern for potentially rising interest rates in the future.
On July 19, the company will pay a cash dividend of $0.08 per share, its 118th consecutive quarterly cash dividend
Washington Federal shares closed Wednesday's regular trading at $16.54.
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