Aug 20 - Seattle-based Washington Federal Inc. (WAFD), parent company of Washington Federal, has taken steps intended to reduce the company's interest rate risk and improve its future earnings potential. In the preceding ten days, the company sold $2.4 billion of fixed rate mortgage-backed securities for a pre-tax gain of $95 million. The securities sold yielded an annualized 3.22 percent in the month of July 2012. In the same period, the company pre-paid $876 million of long term debt at a pre-tax loss of $95 million. The weighted average rate on the retired debt was 3.94 percent.
In related transactions, the company also purchased a mix of short and long-term assets totaling $1.7 billion with an anticipated weighted average yield of 1.85 percent, and restructured an additional $100 million of long term debt to lengthen maturity and reduce the weighted average rate from 4.04 percent to 3.33 percent. An ongoing review of the investment portfolio and long-term debt likely will result in additional transactions of a similar nature.
"Given current interest rate conditions, we decided it prudent to harvest most of the steadily diminishing gain in the securities portfolio and prepay high-cost debt. Other balance sheet restructuring is intended to shorten asset duration and lengthen the maturity of liabilities to position the Company for continued long term success," said Roy M. Whitehead, chairman, president and CEO. "The transactions detailed above are not expected to have a material effect on net earnings this quarter, and will limit potential margin compression from prepayments on securities and provide more financial flexibility in the future."
About Washington Federal
Washington Federal, with headquarters in Seattle, has 165 offices in eight western states. To find out more about the company, please visit the website. The company uses its website to distribute financial and other material information about the company, which is routinely posted on and accessible at www.washingtonfederal.com.