WAFD 03.31.2013 10-Q/A
Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
Amendment No. 1
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2013
or
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission file number 001-34654
WASHINGTON FEDERAL, INC.
(Exact name of registrant as specified in its charter)
 
Washington
 
91-1661606
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
425 Pike Street Seattle, Washington 98101
(Address of principal executive offices and zip code)
(206) 624-7930
(Registrant’s telephone number, including area code)
 
(Former name, former address and former fiscal year, if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files)    Yes  x    No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
x
Accelerated filer
o
Non-accelerated filer
o
Smaller reporting company
o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o    No  x
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Table of Contents

Title of class:
at May 3, 2013
Common stock, $1.00 par value
104,190,859
EXPLANATORY NOTE
This Amendment No. 1 on Form 10-Q/A (“Amendment”) amends our quarterly report on Form 10-Q for the fiscal quarter ended March 31, 2013, as filed with the Securities and Exchange Commission on May 8, 2013 (“Original Form 10-Q”), and is being filed solely to correct typographical errors contained in Note D - Loans Receivable (Excluding Covered Loans) and Note E - Allowance for Loan Losses of Part I, Item 1. The corrected information can be found in the table analyzing the age of loans under Non-acquired loans (Note D) and in the Credit Risk Profile Based on Payment Activity (excludes acquired and covered loans) table under Non-Performing Loans (Note E).
No other sections were affected, but for the convenience of the reader, this Amendment contains the complete text of the original report with the corrected information appearing in Part I, Item 1, Notes D and E. Except as specifically noted above, this Form 10-Q/A does not modify or update disclosures in the Original Form 10-Q and continues to speak as of the original filing date of the Original Form 10-Q.

Table of Contents

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
 
 
 
 
  
The Condensed Consolidated Financial Statements of Washington Federal, Inc. and Subsidiaries filed as a part of the report are as follows:
 
 
  
 
 
  
 
 
 
 
 
 
 
 
  
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
  
 


2
Table of Contents



WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
 
March 31, 2013
 
September 30, 2012
 
(In thousands, except share data)
ASSETS
 
 
 
Cash and cash equivalents
$
782,059

 
$
751,430

Available-for-sale securities, at fair value
2,022,668

 
1,781,705

Held-to-maturity securities, at amortized cost
1,469,983

 
1,191,487

Loans receivable, net
7,444,216

 
7,451,998

Covered loans, net
355,515

 
288,376

Interest receivable
45,448

 
46,857

Premises and equipment, net
206,797

 
178,845

Real estate held for sale
97,042

 
99,478

Covered real estate held for sale
32,274

 
29,549

FDIC indemnification asset
80,391

 
87,571

FHLB stock
152,038

 
149,840

Intangible assets, net
263,816

 
256,076

Federal and state income tax assets, net
37,229

 
22,513

Other assets
126,357

 
137,219

 
$
13,115,833

 
$
12,472,944

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Liabilities
 
 
 
Customer accounts
 
 
 
Transaction deposit accounts
$
3,556,616

 
$
2,946,453

Time deposit accounts
5,595,609

 
5,630,165

 
9,152,225

 
8,576,618

FHLB advances
1,930,000

 
1,880,000

Advance payments by borrowers for taxes and insurance
16,192

 
40,041

Federal and State income tax liabilities, net
—

 
—

Accrued expenses and other liabilities
83,066

 
76,533

 
11,181,483

 
10,573,192

Stockholders’ equity
 
 
 
Common stock, $1.00 par value, 300,000,000 shares authorized;
131,979,030 and 129,950,223 shares issued; 105,011,626 and 106,177,615 shares outstanding
131,979

 
129,950

Paid-in capital
1,620,327

 
1,586,295

Accumulated other comprehensive income, net of taxes
11,897

 
13,306

Treasury stock, at cost; 26,967,404 and 23,772,608 shares
(363,803
)
 
(310,579
)
Retained earnings
533,950

 
480,780

 
1,934,350

 
1,899,752

 
$
13,115,833

 
$
12,472,944

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


3
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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
 
Quarter Ended March 31,
 
Six Months Ended March 31,
 
2013
 
2012
 
2013
 
2012
 
(In thousands, except per share data)
INTEREST INCOME
 
 
 
 
 
 
 
Loans
$
112,879

 
$
123,772

 
$
229,722

 
$
251,251

Mortgage-backed securities
10,642

 
28,682

 
22,374

 
54,978

Investment securities and cash equivalents
2,984

 
2,127

 
5,717

 
4,278

 
126,505

 
154,581

 
257,813

 
310,507

INTEREST EXPENSE
 
 
 
 
 
 
 
Customer accounts
16,695

 
22,016

 
35,466

 
45,965

FHLB advances and other borrowings
16,787

 
27,963

 
33,890

 
56,226

 
33,482

 
49,979

 
69,356

 
102,191

Net interest income
93,023

 
104,602

 
188,457

 
208,316

Provision for loan losses
—

 
18,000

 
3,600

 
29,210

Net interest income after provision for loan losses
93,023

 
86,602

 
184,857

 
179,106

OTHER INCOME
 
 
 
 
 
 
 
Gain on sale of investments
—

 
—

 
—

 
—

Other
6,046

 
5,028

 
11,003

 
9,674

 
6,046

 
5,028

 
11,003

 
9,674

OTHER EXPENSE
 
 
 
 
 
 
 
Compensation and benefits
23,077

 
20,185

 
44,149

 
38,860

Occupancy
4,825

 
4,094

 
9,272

 
8,025

FDIC insurance premiums
3,107

 
4,350

 
6,450

 
8,543

Other
10,155

 
8,183

 
19,591

 
15,749

 
41,164

 
36,812

 
79,462

 
71,177

Loss on real estate acquired through foreclosure, net
(4,003
)
 
(1,582
)
 
(7,322
)
 
(12,151
)
Income before income taxes
53,902

 
53,236

 
109,076

 
105,452

Income tax provision
17,924

 
19,165

 
37,816

 
37,963

NET INCOME
$
35,978

 
$
34,071

 
$
71,260

 
$
67,489

 

 

 
 
 
 
PER SHARE DATA
 
 
 
 
 
 
 
Basic earnings
$
0.34

 
$
0.32

 
$
0.67

 
$
0.63

Diluted earnings
0.34

 
0.32

 
0.67

 
0.63

Cash dividends per share
0.09

 
0.08

 
0.17

 
0.16

Basic weighted average number of shares outstanding
105,206,491

 
107,198,829

 
105,606,688

 
107,523,686

Diluted weighted average number of shares outstanding, including dilutive stock options
105,258,240

 
107,237,972

 
105,655,770

 
107,549,396

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


4
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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
 
Quarter Ended March 31,
 
Six Months Ended March 31,
 
2013
 
2012
 
2013
 
2012
 
(In thousands)
 
 
 
 
 
 
 
 
Net income
$
35,978

 
$
34,071

 
$
71,260

 
$
67,489

Other comprehensive income (loss) net of tax:
 
 
 
 
 
 
 
Net unrealized gain (loss) on available-for-sales securities
408

 
(30,060
)
 
(2,228
)
 
(32,579
)
Related tax benefit (expense)
(150
)
 
11,047

 
819

 
11,973

Reclassification adjustment of net gain (loss) from sale
 
 
 
 
 
 
 
     of available-for-sale securities included in net income
—

 
—

 
—

 
—

Related tax benefit (expense)
—

 
—

 
—

 
—

Other comprehensive income (loss)
258

 
(19,013
)
 
(1,409
)
 
(20,606
)
Comprehensive income
$
36,236

 
$
15,058

 
$
69,851

 
$
46,883

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



5
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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED) 
 
Six Months Ended
 
March 31, 2013
 
March 31, 2012
 
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
 
Net income
$
71,260

 
$
67,489

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Amortization (accretion) of fees, discounts, premiums and intangible assets, net
2,488

 
20,703

Cash received from (paid to) FDIC under loss share
11,668

 
(4,068
)
Depreciation
4,600

 
3,750

Stock option compensation expense
600

 
600

Provision for loan losses
3,600

 
29,210

Loss (gain) on real estate held for sale, net
3,028

 
(1,285
)
Decrease (increase) in accrued interest receivable
3,440

 
(1,536
)
Increase in FDIC loss share receivable
(777
)
 
(2,052
)
Increase (decrease) in income taxes payable
(13,937
)
 
6,031

Decrease in other assets
35,712

 
8,832

Increase (decrease) in accrued expenses and other liabilities
(8,770
)
 
1,955

Net cash provided by operating activities
112,912

 
129,629

CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
Net principal collections (loan originations)
381,932

 
342,513

FHLB stock redemptions
1,382

 
1,512

Available-for-sale securities purchased
(356,966
)
 
(1,241,126
)
Principal payments and maturities of available-for-sale securities
100,906

 
758,676

Available-for-sale securities sold
43,199

 
3,500

Held-to-maturity securities purchased
(407,135
)
 
—

Principal payments and maturities of held-to-maturity securities
132,755

 
8,394

Net cash received from acquisition
202,308

 
50,451

Proceeds from sales of real estate held for sale
59,773

 
90,017

Proceeds from sales of covered REO
7,645

 
22,959

Premises and equipment purchased and REO improvements
(18,048
)
 
(11,737
)
Net cash provided by investing activities
147,751

 
25,159

CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
Net decrease in customer accounts
(161,712
)
 
(3,253
)
Net increase (decrease) in borrowings
27,529

 
(19,700
)
Proceeds from exercise of common stock options
152

 
28

Dividends paid on common stock
(18,930
)
 
(17,078
)
Treasury stock purchased
(53,224
)
 
(30,307
)
Decrease in advance payments by borrowers for taxes and insurance
(23,849
)
 
(10,133
)
Net cash used by financing activities
(230,034
)
 
(80,443
)
Increase in cash and cash equivalents
30,629

 
74,345

Cash and cash equivalents at beginning of period
751,430

 
816,002

Cash and cash equivalents at end of period
$
782,059

 
$
890,347


SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



6
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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
 
Six Months Ended
 
March 31, 2013
 
March 31, 2012
 
(In thousands)
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
 
Non-cash investing activities
 
 
 
Non-covered real estate acquired through foreclosure
$
52,760

 
$
73,466

Covered real estate acquired through foreclosure
5,954

 
6,304

Cash paid during the period for
 
 
 
Interest
71,092

 
103,170

Income taxes
32,465

 
31,947

The following summarizes the non-cash activities related to acquisitions
 
 
 
Fair value of assets acquired
$
819,904

 
$
124,726

Fair value of liabilities assumed
(776,009
)
 
(154,500
)
Net fair value of assets (liabilities)
43,895

 
(29,774
)
 
 
 
 
 
 
 
 

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7
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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTERS AND SIX MONTHS ENDED MARCH 31, 2013 AND 2012
(UNAUDITED)

NOTE A – Summary of Significant Accounting Policies
The consolidated unaudited interim financial statements included in this report have been prepared by Washington Federal, Inc. (“The Company”). The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect amounts reported in the financial statements. Actual results could differ from these estimates. In the opinion of management, all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation are reflected in the interim financial statements. The September 30, 2012 Consolidated Statement of Financial Condition was derived from audited financial statements.
The information included in this Form 10-Q should be read in conjunction with Company’s 2012 Annual Report on Form 10-K (“2012 Form 10-K”) as filed with the SEC. Interim results are not necessarily indicative of results for a full year.
The significant accounting policies used in preparation of our consolidated financial statements are disclosed in our 2012 Form 10-K. Other than as discussed below, there have not been any material changes in our significant accounting policies compared to those contained in our 2012 Form 10-K.
Off-Balance-Sheet Credit Exposures – The only material off-balance-sheet credit exposures are loans in process and unused lines of credit, which had a combined balance at March 31, 2013, excluding covered loans, of $259,266,000. The Company estimates losses on off-balance-sheet credit exposures by including the exposures with the related principal balance outstanding and then applying its general reserve methodology.
Certain reclassifications have been made to the financial statements to conform prior periods to current classifications.

NOTE B - Acquisitions

South Valley Bank and Trust
Effective as of the close of business October 31, 2012, Washington Federal completed the acquisition of South Valley Bank and Trust, headquartered in Klamath Falls, Oregon (“South Valley”). The acquisition provided recorded book values of $383 million of net loans, $107 million of net covered loans, $735 million of deposit accounts, including $533 million in transaction deposit accounts and 24 branch locations in Central and Southern Oregon. Total consideration paid at closing was $44 million, including $34 million of Washington Federal, Inc. stock and $10 million of cash resulting from the collection of certain earn-out assets. If other earn out assets are collected over time, the total purchase price could be reduced by up to $14 million.

The acquisition was accounted for under the acquisition method of accounting. The purchased assets and assumed liabilities were recorded at their respective acquisition date estimated fair values. The purchase accounting for acquired assets and liabilities is subject to future adjustment based on the completion of valuations. All fair value adjustment amounts currently recognized in the financial statements at March 31, 2013 were determined provisionally as the purchase accounting fair value analysis was incomplete as of March 31, 2013. The determination of whether a non-covered loan is impaired and accounted for under ASC 310 was still in process as part of the acquisition date loan valuation; therefore, all non-covered loans are categorized as acquired loans without differentiation between non-impaired and credit impaired at March 31, 2013.

Loans that were classified as non-performing loans by South Valley are no longer classified as non-performing because, at acquisition, the carrying value of the loans was adjusted to reflect fair value. Management believes that the new book value reflects an amount that will ultimately be collected.

The operating results of the Company include the operating results produced by the acquired assets and assumed liabilities for the period from November 1, 2012 to March 31, 2013.
 
The table below displays the adjusted fair value as of the acquisition date for each major class of assets acquired and liabilities assumed:


8
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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTERS AND SIX MONTHS ENDED MARCH 31, 2013 AND 2012
(UNAUDITED)


 
 
 
 
 
Adjusted Fair Value Recorded by
 
 
Washington Federal
 
 
(In thousands)
 Assets:
 
 
 Cash and cash equivalents
 
$
212,711

 Available for sale securities
 
43,679

 FHLB stock
 
5,211

 Loans receivable, net
 
360,719

 Covered loans receivable, net
 
107,946

 FDIC indemnification asset
 
16,596

 Property and equipment, net
 
24,259

 Core deposit intangible
 
1,433

 Real estate held for sale
 
9,794

 Covered real estate held for sale
 
5,224

 Goodwill
 
7,107

 Other assets
 
25,225

   Total Assets
 
819,904

 
 
 
 Liabilities:
 
 
 Customer accounts
 
737,395

 FHLB advances
 
22,471

 Other liabilities
 
16,143

   Total Liabilities
 
776,009

 
 
 
 Net assets acquired
 
$
43,895

 
 
 
Consideration provided:
 
 
 Equity Issued
 
$
33,492

 Cash paid
 
10,403

 
 
$
43,895






9
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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTERS AND SIX MONTHS ENDED MARCH 31, 2013 AND 2012
(UNAUDITED)



NOTE C – Dividends
On April 19, 2013, the Company paid its 121st consecutive quarterly cash dividend on common stock. Dividends per share were $.09 and $.08 for the quarters ended March 31, 2013 and 2012, respectively.


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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTERS AND SIX MONTHS ENDED MARCH 31, 2013 AND 2012
(UNAUDITED)


NOTE D – Loans Receivable (excluding Covered Loans)

 
March 31, 2013
 
September 30, 2012
 
(In thousands)
Non-acquired loans
 
 
 
 
 
 
 
  Single-family residential
$
5,374,977

 
68.6
%
 
$
5,778,922

 
73.5
%
  Construction - speculative
120,617

 
1.5

 
129,637

 
1.6

  Construction - custom
217,036

 
2.8

 
211,690

 
2.7

  Land - acquisition & development
93,496

 
1.2

 
124,677

 
1.6

  Land - consumer lot loans
130,056

 
1.7

 
141,844

 
1.8

  Multi-family
725,322

 
9.3

 
710,140

 
9.0

  Commercial real estate
385,587

 
4.9

 
319,210

 
4.1

  Commercial & industrial
190,598

 
2.4

 
162,823

 
2.1

  HELOC
111,622

 
1.4

 
112,902

 
1.4

  Consumer
53,956

 
0.7

 
63,374

 
0.8

Total non-acquired loans
7,403,267

 
94.5

 
7,755,219

 
98.6

Acquired loans
 
 
 
 
 
 
 
  Single-family residential
15,428

 
0.2

 
—

 
—

  Construction - speculative
177

 
—

 
—

 
—

  Construction - custom
313

 
—

 
—

 
—

  Land - acquisition & development
3,436

 
—

 
—

 
—

  Land - consumer lot loans
3,819

 
0.1

 
—

 
—

  Multi-family
7,714

 
0.2

 
—

 
—

  Commercial real estate
177,101

 
2.1

 
—

 
—

  Commercial & industrial
96,255

 
1.3

 
—

 
—

  HELOC
13,094

 
0.2

 
—

 
—

  Consumer
10,046

 
0.1

 
—

 
—

Total acquired loans
327,383

 
4.2

 
—

 
—

Credit-impaired acquired loans
 
 
 
 
 
 
 
  Single-family residential
338

 
—

 
342

 
—

  Construction - speculative
1,750

 
—

 
1,889

 
—

  Land - acquisition & development
2,577

 
—

 
3,702

 
0.1

  Multi-family
—

 
—

 
601

 
—

  Commercial real estate
79,868

 
1.1

 
87,154

 
1.1

  Commercial & industrial
2,091

 
—

 
3,292

 
—

  HELOC
12,757

 
0.2

 
14,040

 
0.2

  Consumer
81

 
—

 
97

 
—

Total credit-impaired acquired loans
99,462

 
1.3

 
111,117

 
1.4

Total loans
 
 
 
 
 
 
 
   Single-family residential
5,390,743

 
68.8

 
5,779,264

 
73.5

   Construction - speculative
122,544

 
1.5

 
131,526

 
1.6

   Construction - custom
217,349

 
2.8

 
211,690

 
2.7

   Land - acquisition & development
99,509

 
1.2

 
128,379

 
1.7

   Land - consumer lot loans
133,875

 
1.8

 
141,844

 
1.8

   Multi-family
733,036

 
9.5

 
710,741

 
9

   Commercial real estate
642,556

 
8.1

 
406,364

 
5.2

   Commercial & industrial
288,944

 
3.7

 
166,115

 
2.1


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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTERS AND SIX MONTHS ENDED MARCH 31, 2013 AND 2012
(UNAUDITED)


   HELOC
137,473

 
1.8

 
126,942

 
1.6

   Consumer
64,083

 
0.8

 
63,471

 
0.8

Total loans
7,830,112

 
100
%
 
7,866,336

 
100
%
Less:
 
 
 
 
 
 
 
Allowance for probable losses
122,884

 
 
 
133,147

 
 
Loans in process
189,336

 
 
 
213,286

 
 
Discount on acquired loans
40,346

 
 
 
33,484

 
 
Deferred net origination fees
33,330

 
 
 
34,421

 
 
 
385,896

 
 
 
414,338

 
 
 
$
7,444,216

 
 
 
$
7,451,998

 
 

12
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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTERS AND SIX MONTHS ENDED MARCH 31, 2013 AND 2012
(UNAUDITED)


Changes in the carrying amount and accretable yield for acquired impaired and non-impaired loans for the six months ended March 31, 2013 and the fiscal year ended September 30, 2012 were as follows:

March 31, 2013
Credit impaired acquired loans
 
Acquired Non-impaired
 
Accretable
Yield
 
Carrying
Amount of
Loans
 
Accretable
Yield
 
Carrying
Amount of
Loans
 
(In thousands)
Balance as of beginning of period
$
16,928

 
$
77,613

 
$
—

 
$
—

Reclassification from nonaccretable balance, net
30,026

 
 
 
 
 
 
Additions (1)
—

 
—

 
10,804

 
360,719

Accretion
(4,278
)
 
4,278

 
(658
)
 
658

Transfers to REO
—

 
(3,120
)
 
—

 
(2,681
)
Payments received, net
—

 
(11,233
)
 
—

 
(39,752
)
Balance as of end of period
$
42,676

 
$
67,538

 
$
10,146

 
$
318,944

(1) includes acquired loans which were acquired as part of the South Valley acquisition.
 
 
 
 

September 30, 2012
Credit impaired acquired loans
 
Acquired Non-impaired
 
Accretable
Yield
 
Carrying
Amount of
Loans
 
Accretable
Yield
 
Carrying
Amount of
Loans
 
(In thousands)
Balance as of beginning of period
$
—

 
$
—

 
$
—

 
$
—

Additions (1)
21,384

 
93,691

 
—

 
—

Accretion
(4,456
)
 
4,456

 
—

 
—

Transfers to REO
—

 
(2,616
)
 
—

 
—

Payments received, net
—

 
(17,918
)
 
—

 
—

Balance as of end of period
$
16,928

 
$
77,613

 
$
—

 
$
—

(1) includes acquired impaired loans which were acquired as part of the WNB acquisition.
 
 
 
 

The following table sets forth information regarding non-accrual loans held by the Company as of the dates indicated:
 

13
Table of Contents
WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTERS AND SIX MONTHS ENDED MARCH 31, 2013 AND 2012
(UNAUDITED)


 
March 31, 2013
 
September 30, 2012
 
(In thousands)
Non-accrual loans:
 
 
 
 
 
 
 
Single-family residential
$
111,572

 
74.8
%
 
$
131,193

 
75.7
%
Construction - speculative
7,943

 
5.3

 
10,634

 
6.1

Construction - custom
105

 
0.1

 
539

 
0.3

Land - acquisition & development
12,177

 
8.2

 
13,477

 
7.8

Land - consumer lot loans
3,385

 
2.3

 
5,149

 
3.0

Multi-family
2,802

 
1.9

 
4,185

 
2.4

Commercial real estate
10,395

 
7.0

 
7,653

 
4.4

Commercial & industrial
210

 
0.1

 
16

 
—

HELOC
247

 
0.2

 
198

 
0.1

Consumer
197

 
0.1

 
383

 
0.2

Total non-accrual loans
$
149,033

 
100
%
 
$
173,427

 
100
%

14
Table of Contents
WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTERS AND SIX MONTHS ENDED MARCH 31, 2013 AND 2012
(UNAUDITED)


The following tables provide an analysis of the age of loans in past due status as of March 31, 2013 and September 30, 2012, respectively.
 
March 31, 2013
Amount of Loans
 
Days Delinquent Based on $ Amount of Loans
 
% based
on $
Type of Loan
Net of LIP & Chg.-Offs
 
Current
 
30
 
60
 
90
 
Total
 
 
(In thousands)
Non-acquired loans
 
 
 
 
 
 
 
 
 
 
 
 
 
Single-Family Residential
$
5,371,033

 
$
5,233,702

 
$
33,155

 
$
19,819

 
$
84,357

 
$
137,331

 
2.56
%
Construction - Speculative
81,265

 
76,540

 
992

 
—

 
3,733

 
4,725

 
5.81

Construction - Custom
120,793

 
120,582

 
—

 
106

 
105

 
211

 
0.17

Land - Acquisition & Development
88,357

 
74,850

 
3,227

 
—

 
10,280

 
13,507

 
15.29

Land - Consumer Lot Loans
129,887

 
125,256

 
805

 
441

 
3,385

 
4,631

 
3.57

Multi-Family
697,943

 
696,286

 
55

 
—

 
1,602

 
1,657

 
0.24

Commercial Real Estate
360,607

 
352,194

 
2,652

 
—

 
5,761

 
8,413

 
2.33

Commercial & Industrial
198,488

 
198,246

 
32

 
—

 
210

 
242

 
0.12

HELOC
111,622

 
111,104

 
281

 
80

 
157

 
518

 
0.46

Consumer
53,955

 
52,480

 
942

 
355

 
178

 
1,475

 
2.73

Total non-acquired loans
7,213,950

 
7,041,240

 
42,141

 
20,801

 
109,768

 
172,710

 
2.39
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Acquired loans
 
 
 
 
 
 
 
 
 
 
 
 
 
Single-Family Residential
15,428

 
15,312

 
$
116

 
—

 
—

 
116

 
0.75
%
Construction - Speculative
177

 
177

 
—

 
—

 
—

 
—

 
—

Construction - Custom
313

 
313

 
—

 
—

 
—

 
—

 
—

Land - Acquisition & Development
3,436

 
3,436

 
—

 
—

 
—

 
—

 
—

Land - Consumer Lot Loans
3,819

 
3,767

 
52

 
—

 
—

 
52

 
1.36

Multi-Family
7,714

 
7,714

 
—

 
—

 
—

 
—

 
—

Commercial Real Estate
177,101

 
176,444

 
657

 
—

 
—

 
657

 
0.37

Commercial & Industrial
96,255

 
95,258

 
997

 
—

 
—

 
997

 
1.04

HELOC
13,094

 
13,094

 
—

 
—

 
—

 
—

 
—

Consumer
10,046

 
9,946

 
77

 
5

 
18

 
100

 
1.00

Total acquired loans
327,383

 
325,461

 
1,899

 
5

 
18

 
1,922

 
0.59
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Credit-impaired acquired loans
 
 
 
 
 
 
 
 
 
 
 
 
 
Single-Family Residential
338

 
338

 
—

 
—

 
—

 
—

 
—
%
Construction - Speculative
1,749

 
1,749

 
—

 
—

 
—

 
—

 
—

Construction - Custom
—

 
—

 
—

 
—

 
—

 
—

 
—

Land - Acquisition & Development
2,577

 
2,577

 
—

 
—

 
—

 
—

 
—

Land - Consumer Lot Loans
—

 
—

 
—

 
—

 
—

 
—

 
—

Multi-Family
—

 
—

 
—

 
—

 
—

 
—

 
—

Commercial Real Estate
79,850

 
75,772

 
1,660

 
292

 
2,126

 
4,078

 
5.11

Commercial & Industrial
2,091

 
2,070

 
21

 
—

 
—

 
21

 
1.00


15
Table of Contents
WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTERS AND SIX MONTHS ENDED MARCH 31, 2013 AND 2012
(UNAUDITED)


HELOC
12,757

 
12,440

 
—

 
227

 
90

 
317

 
2.48

Consumer
81

 
81

 
—

 
—

 
—

 
—

 
—

Total credit-impaired acquired loans
99,443

 
95,027

 
1,681

 
519

 
2,216

 
4,416

 
4.44
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total loans
$
7,640,776

 
$
7,461,728

 
$
45,721

 
$
21,325

 
$
112,002

 
$
179,048

 
2.34
%

September 30, 2012
Amount of Loans
 
Days Delinquent Based on $ Amount of Loans
 
% based
on $
Type of Loan
Net of LIP & Chg.-Offs
 
Current
 
30
 
60
 
90
 
Total
 
 
(In thousands)
Single-Family Residential
$
5,776,002

 
$
5,618,261

 
$
34,035

 
$
16,276

 
$
107,430

 
$
157,741

 
2.73
%
Construction - Speculative
88,849

 
85,785

 
142

 
190

 
2,732

 
3,064

 
3.45

Construction - Custom
107,882

 
107,215

 
128

 
—

 
539

 
667

 
0.62

Land - Acquisition & Development
119,192

 
106,321

 
853

 
1,004

 
11,014

 
12,871

 
10.80

Land - Consumer Lot Loans
141,772

 
134,560

 
1,688

 
375

 
5,149

 
7,212

 
5.09

Multi-Family
676,917

 
672,263

 
718

 
67

 
3,869

 
4,654

 
0.69

Commercial Real Estate
292,261

 
284,427

 
699

 
3,153

 
3,982

 
7,834

 
2.68

Commercial & Industrial
162,802

 
162,778

 
8

 
—

 
16

 
24

 
0.01

HELOC
112,902

 
112,482

 
158

 
64

 
198

 
420

 
0.37

Consumer
63,374

 
61,405

 
1,155

 
431

 
383

 
1,969

 
3.11

Total non-acquired loans
$
7,541,953

 
$
7,345,497

 
$
39,584

 
$
21,560

 
$
135,312

 
$
196,456

 
2.60
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Credit-impaired acquired loans
 
 
 
 
 
 
 
 
 
 
 
 
 
Single-Family Residential
342

 
342

 
—

 
—

 
—

 
—

 
—
%
Construction - Speculative
1,889

 
1,889

 
—

 
—

 
—

 
—

 
—

Construction - Custom
—

 
—

 
—

 
—

 
—

 
—

 
—

Land - Acquisition & Development
3,702

 
3,219

 
365

 
—

 
118

 
483

 
13.05

Land - Consumer Lot Loans
—

 
—

 
—

 
—

 
—

 
—

 
—

Multi-Family
601

 
—

 
601

 
—

 
—

 
601

 
—

Commercial Real Estate
87,134

 
78,959

 
412

 
2,549

 
5,214

 
8,175

 
9.38

Commercial & Industrial
3,292

 
3,054

 
238

 
—

 
—

 
238

 
7.23

HELOC
14,040

 
13,950

 
—

 
90

 
—

 
90

 
0.64

Consumer
97

 
95

 
2

 
—

 
—

 
2

 
2.06

Total credit-impaired acquired loans
111,097

 
101,508

 
1,618

 
2,639

 
5,332

 
9,589

 
8.63
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total loans
$
7,653,050

 
$
7,447,005

 
$
41,202

 
$
24,199

 
$
140,644

 
$
206,045

 
2.69
%

Most loans restructured in troubled debt restructurings ("TDRs") are accruing and performing loans where the borrower has proactively approached the Company about modification due to temporary financial difficulties. Each request is individually evaluated for merit and likelihood of success. The concession for these loans is typically a payment reduction through a rate reduction of between 100 to 200 basis points for a specific term, usually six to twelve months. Interest-only payments may also be approved during the modification period. Principal forgiveness is not an available option for restructured loans. As of March 31, 2013, single-family residential loans comprised 86.4% of TDRs.

16
Table of Contents
WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTERS AND SIX MONTHS ENDED MARCH 31, 2013 AND 2012
(UNAUDITED)



The Company reserves for restructured loans within its allowance for loan loss methodology by taking into account the following performance indicators: 1) time since modification, 2) current payment status and 3) geographic area.

The following tables provide information related to loans that were restructured during the periods indicated:

 
Quarter Ended March 31,
 
2013
 
2012
 
 
 
Pre-Modification
 
Post-Modification
 
 
 
Pre-Modification
 
Post-Modification
 
 
 
Outstanding
 
Outstanding
 
 
 
Outstanding
 
Outstanding
 
Number of
 
Recorded
 
Recorded
 
Number of
 
Recorded
 
Recorded
 
Contracts
 
Investment
 
Investment
 
Contracts
 
Investment
 
Investment
 
 
 
(In thousands)
 
 
 
(In thousands)
Troubled Debt Restructurings:
 
 
 
 
 
 
 
 
 
 
 
   Single-Family Residential
130

 
$
36,059

 
$
36,059

 
312

 
$
68,460

 
$
68,460

   Construction - Speculative
—

 
—

 
—

 
12

 
4,049

 
4,049

   Construction - Custom
—

 
—

 
—

 
—

 
—

 
—

   Land - Acquisition & Development
—

 
—

 
—

 
4

 
1,823

 
1,823

   Land - Consumer Lot Loans
9

 
1,350

 
1,350

 
14

 
2,116

 
2,116

   Multi-Family
—

 
—

 
—

 
2

 
1,871

 
1,871

   Commercial Real Estate
—

 
—

 
—

 
—

 
—

 
—

   Commercial & Industrial
—

 
—

 
—

 
—

 
—

 
—

   HELOC
1

 
200

 
200

 
—

 
—

 
—

   Consumer
—

 
—

 
—

 
—

 
—

 
—

 
140

 
$
37,609

 
$
37,609

 
344

 
$
78,319

 
$
78,319




17
Table of Contents
WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTERS AND SIX MONTHS ENDED MARCH 31, 2013 AND 2012
(UNAUDITED)


 
Six Months Ended March 31,
 
2013
 
2012
 
 
 
Pre-Modification
 
Post-Modification
 
 
 
Pre-Modification
 
Post-Modification
 
 
 
Outstanding
 
Outstanding
 
 
 
Outstanding
 
Outstanding
 
Number of
 
Recorded
 
Recorded
 
Number of
 
Recorded
 
Recorded
 
Contracts
 
Investment
 
Investment
 
Contracts
 
Investment
 
Investment
 
 
 
(In thousands)
 
 
 
(In thousands)
Troubled Debt Restructurings:
 
 
 
 
 
 
 
 
 
 
 
   Single-Family Residential
230

 
$
63,146

 
$
63,146

 
491

 
$
121,145

 
$
121,145

   Construction - Speculative
1

 
2,492

 
2,492

 
23

 
7,428

 
7,428

   Construction - Custom
—

 
—

 
—

 
—

 
—

 
—

   Land - Acquisition & Development
—

 
—

 
—

 
26

 
6,173

 
6,173

   Land - Consumer Lot Loans
18

 
2,761

 
2,761

 
25

 
3,824

 
3,824

   Multi-Family
1

 
55

 
55

 
2

 
1,871

 
1,871

   Commercial Real Estate
—

 
—

 
—

 
1

 
308

 
308

   Commercial & Industrial
—

 
—

 
—

 
1

 
4

 
4

   HELOC
1

 
200

 
200

 
—

 
—

 
—

   Consumer
—

 
—

 
—

 
—

 
—

 
—

 
251

 
$
68,654

 
$
68,654

 
569

 
$
140,753

 
$
140,753



The following tables provide information on restructured loans for which a payment default occurred during the periods indicated and that had been modified as a TDR within 12 months or less of the payment default:
 
Quarter Ended March 31,
 
2013
 
2012
 
Number of
 
Recorded
 
Number of
 
Recorded
 
Contracts
 
Investment
 
Contracts
 
Investment
 
(In thousands)
 
(In thousands)
Troubled Debt Restructurings That Subsequently Defaulted:
 
 
 
 
 
 
 
   Single-Family Residential
37

 
$
8,579

 
108

 
$
20,419

   Construction - Speculative
—

 
—

 
—

 
—

   Construction - Custom
—

 
—

 
—

 
—

   Land - Acquisition & Development
—

 
—

 
—

 
—

   Land - Consumer Lot Loans
1

 
139

 
5

 
865

   Multi-Family
1

 
55

 
—

 
—

   Commercial Real Estate
—

 
—