Washington Federal Savings, with thrift operations in eight western states, disclosed last week that it would report the first quarterly loss in its history of approximately $39 million for the quarter ending September 30, as a result of its holdings in Fannie Mae and Freddie Mac Preferred Stock. A look at the company’s third-quarter 10-Q suggests, however, that as the housing market continues to deteriorate, Washington Federal could feel more pain:
- The Company recorded a $13,216,000 provision for loan losses during the quarter ended June 30, 2008, while a $1,000,000 provision was recorded for the same quarter one year ago. Non-performing assets amounted to $85,107,000 or .72% of total assets at June 30, 2008 compared to $12,074,000 or .12% of total assets one year ago.
- The Company believes that higher non-performing assets and charge-offs may continue going forward until the housing market begins to recover.
As of the third-quarter ended June 30, about 68 percent of the company’s total loan portfolio, or approximately $6.7 billion, was held in single-family residential loans — almost equal to the $7.1 in customer account assets (checking, savings, money-market, and CDs). Chairman, President & CEO Roy M. Whitehead admitted Friday the company is bolstering its reserve for possible future loan losses by taking a provision for loan losses of an additional $35 million for the fourth-quarter ended September 30. As of quarter end, non-performing assets are expected to approximate $180 million, or 1.5% of total assets — the highest ratio in the company’s history since the S&L disaster of 1987.
Of additional concern, Washington Federal holds about $1.8 billion in raw land and construction loans. Unknown is how much of this portfolio is considered “sub-standard,” or close to 90-days delinquent. Nonetheless, going forward, I suspect more increases in non-performing assets and writedowns lay ahead for the company.
