We are downgrading our recommendation on Washington Federal to
Underperform due to its mounting operating expenses. The company's
fiscal second-quarter (ended Mar 31) 2014 earnings were in line
with the Zacks Consensus Estimate. A rise in revenues and benefit
from provisions were offset by higher expenses. Steady capital
deployment activities, inorganic growth strategy and balance sheet
restructuring initiatives are expected to benefit the company's
financials in the long run. However, the company's deposit
re-pricing effort will likely be challenged once the interest rates
start rising. Also, significant exposure to risky loan portfolio
makes us apprehensive.
Headquartered in Seattle, WA, Washington Federal Inc. operates
as a non-diversified unitary savings and loan holding company. The
company conducts operations through its federally insured savings
and loan association subsidiary, Washington Federal Savings, with
231 offices in 8 western states.
Washington Federal's business primarily consists of attracting
deposits from general public and investing these funds in loans of
various types, including first-lien mortgages on single-family
dwellings, construction loans, land acquisition and development
loans, loans on multi-family and other income producing properties,
home equity loans and business loans. It also invests in certain
U.S. government and agency obligations, among others.
Washington Federal's deposit products include checking accounts,
passbook and statement accounts, money market accounts and time
deposits or certificate accounts. The company also engages in real
estate investment and insurance brokerage activities.
In 2007, Washington Federal acquired First Federal Banc of the
Southwest Inc. Further, in 2008, the company acquired First Mutual
Bancshares Inc. In 2010, the company acquired all the deposits of
Horizon Bank of Bellingham, Washington.
In 2011, Washington Federal acquired six branches from Charter
Bank in New Mexico and three branches of Phoenix, AZ-based failed
Western National Bank.
In Jun 2012, Washington Federal completed the divestiture of two
of its branches located in El Paso, TX. The sale included $19
million of deposits. In Oct 2012, the company acquired Oregon-based
South Valley Bancorp Inc.
In Jul 2013, Washington Federal announced its conversion to a
national bank charter after receiving approval from the Office of
the Comptroller of the Currency (OCC). The company also received
approval from the Federal Reserve Bank of San Francisco to become a
bank holding company.
In 2013, Washington Federal completed the acquisition of 51
retail branches of Bank of America located in Washington, Idaho,
Oregon and New Mexico for $39 million.
In May 2014, Washington Federal completed the acquisition of 23
branches from Bank of America. These branches are located in
Arizona and Nevada.
Washington Federal operates with Sep 30 as its fiscal year-end.
As of Mar 31, 2014, the company had total assets of $14.4 billion,
cash and cash equivalents of $608.2 million and stockholders'
equity of $2.0 billion.
Washington Federal Inc. (WAFD): Read the Full
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