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Originally published January 12, 2012 at 6:40 PM | Page modified January 12, 2012 at 6:57 PM

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Strong record still fails to ignite Washington Federal shares

The stock of the bank's holding company is trading below its tangible book value, said Washington Federal CEO Roy Whitehead.

Seattle Times staff reporter

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Washington Federal runs one of the most efficient banks in the nation, has paid steady dividends and was profitable yet again in the past quarter, its chief executive said Thursday.

Net income in the quarter ended Dec. 31 was $33.4 million, 36 percent higher than the same period a year ago, while earnings per share rose 41 percent to 31 cents a share, according to the Seattle company.

But the largest Washington bank continues to receive sticks instead of carrots.

Its holding company's stock — which closed down 10 cents Thursday at $15.23 — is trading below its tangible book value, said CEO Roy Whitehead, who addressed portfolio managers and stockbrokers at a private luncheon at Metropolitan Grill.

The premiums the company pays to the Federal Deposit Insurance Corp. (FDIC) skyrocketed to $22 million last year, up from $870,000 in 2008, he said, even though the bank never engaged in the risky mortgage lending that pushed the financial system to the brink.

Moreover, the government's move to raise the level of insured deposits from $100,000 to $250,000 encourages people to shop for banks purely on who pays the highest interest rate, he said.

"It damages the quality institutions that are long-term thinkers like us and [rewards] fly-by-night operators," Whitehead said.

Even worse, the government has effectively socialized the housing-finance system and now backs 97 percent of the mortgage loans in the United States, he said.

"We have conceded the largest asset class in the world to the federal government," he said. "Why did we do that? That was a serious mistake, and I hope we don't do that again."

As a result, Washington Federal is looking to commercial lending for growth; its five previous acquisitions helped it expand its commercial-lending business.

Two of them happened in the past quarter: In October, it successfully bid on some assets of failing Charter Bank in New Mexico. In December, in another FDIC-assisted deal, Washington Federal bought the failed Western National Bank in Arizona.

The company said net income rose in the past quarter primarily because of lower expenses for its troubled loans.

Expenses for provision for loan losses and foreclosed property were nearly $21.8 million, 40 percent less than the same quarter a year ago, the company reported.

Taking advantage of its low stock price, Washington Federal bought back nearly 1.56 million of its shares during the past quarter at a weighted average price of $13.11, the company said.

Shareholders as of Dec. 30 will receive a cash dividend of 8 cents a share Friday, up from 6 cents a share in the previous four quarters.

The company's annual shareholders meeting is at 2 p.m. Wednesday at the Westin Hotel in Seattle.

Sanjay Bhatt: 206-464-3103 or sbhatt@seattletimes.com

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