Fitch Ratings today placed Washington Federal Inc. (WFSL) and its subsidiary's ratings on Rating Watch Negative to reflect the sizable increase of nonperforming assets that have accumulated over the last six months. Fitch is mindful of WFSL's previous history of strong asset quality; however, macro-economic trends in the Pacific Northwest have placed an unprecedented level of stress on real estate values. Consequently, the ratio of nonperforming assets to loans and other real estate owned increased to 5.34% from 3.23% at year-end (YE) 2008 and 0.20% at YE2007. Despite its land acquisition and development and speculative construction portfolios representing only 8.8% of total loans at March 31, 2009, the performance of the portfolio has been poor, with 30.5% of the loans classified as non-accrual. While charge-offs have not experienced as steep a rise as non-performing assets (NPAs), this can often be a lagging indicator. The impact on operating performance from the increase in problem assets has been limited thus far, although reserve coverage of NPAs is low compared to similarly rated peers. An offsetting factor to the elevated level of NPAs is the strong capital position at March 31, 2009.
The Negative Watch will be resolved following the completion of Fitch's review of prospective charge-offs in the acquisition and development and speculative construction portfolios, the projected impact on capital ratios and profitability, and a comparison of pro-forma metrics to similarly rated peers.
The following ratings have been placed on Rating Watch Negative:
Washington Federal Inc.
-- Long-term issuer default rating (IDR) 'A-';
-- Short-Term IDR 'F1';
-- Individual 'B';
-- Preferred Stock 'BBB+'.
Washington Federal Savings & Loan
--Long-term Issuer Default Rating (IDR) 'A-';
--Short-term IDR 'F1';
--Individual 'B';
--Long-Term deposits 'A';
--Short-Term deposits 'F1'.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
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Fitch Ratings, New York
Eric Newell, +1-212-908-0769
John
Mackerey, +1-212-908-0366
Media Relations:
Brian Bertsch,
+1-212-908-0549
brian.bertsch@fitchratings.com