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A Guide to Applying for a Bank Loan

Washington Federal sees boost in earnings

Washington Federal, Inc. parent company of Washington Federal, announced earnings of $40,361,000 or $0.42 per diluted share for the quarter ended March 31, 2015, compared to $38,657,000 or $0.38 per diluted share for the quarter ended March 31, 2014, an increase of 10.5%.   The quarter produced a return on average assets of 1.11% and a return on average equity of 8.29%.

Washington Federal’s footprint in Arizona also continues to grow. Over the past 18 months, as a result of the Bank of America acquisition whereby Washington Federal acquired 13 Bank of America branches, the bank’s has grown to 35 branches across Arizona. In addition, over the past year, Washington Federal has added its first-ever Arizona Regional President in Mike Brown and developed a business banking initiative via the hiring of banking veteran Ben Danner.

Chairman, President & CEO Roy M. Whitehead commented, “It was a good, solid quarter  for  the  Company,  with  virtually  every  key  measure  of  performance  showing improvement. That enabled us to reward shareholders with more aggressive share repurchases and an 18% increase in the cash dividend during the quarter. Due to improved business conditions in our largest markets, we expect the Company to continue to do well.”

Loans receivable grew by $167 million, or 2.0%, during the quarter to $8.4 billion as of March 31, 2015.  The fiscal year to date increase was $273 million or 3.3%.  Loan originations for the quarter totaled $691 million, a $281 million or 69% increase over the same quarter of the prior year.   Commercial loan originations made up 69% of loan originations for the current quarter.   The weighted average interest rate on loans as of March 31, 2015 was 4.61%, which is a decrease from 4.69% as of December 31, 2014. Actual yield earned on loans will be greater than the weighted average rate due to net deferred loan fees and discounts on acquired loans, which are accreted into income over the term of the loans.

Customer deposits also increased during the quarter, by $114 million to $10.7 billion and have held steady since the fiscal year-end on September 30, 2014. The mix of customer deposits has continued to shift.  Transaction accounts increased by $244 million or 4.5% during the quarter and now represent 53% of total deposits, compared to 51% as of September 30, 2014.  Over the last several years, the Company has focused on growing transaction accounts to lessen sensitivity to rising interest rates.

Due primarily to growth in loans receivable, total assets increased by $116 million this quarter to $14.6 billion.  Since the prior fiscal year-end, total assets have decreased by

$145 million or 1.0%, from $14.8 billion at September 30, 2014, primarily driven by a reduction in cash and investments.  Available for sale investments have decreased $293 million or 9.6%, and held to maturity investments decreased $68 million or 4.4% from the prior year end. During the quarter, the Company had an average balance of cash equivalents of $481 million invested overnight at a yield of approximately 0.25%.  Cash and cash equivalents increased to $675 million as of March 31, 2015.

Net interest income for the quarter was $103.9 million, a $3.2 million or 3.2% increase from the quarter ended March 31, 2014. Net interest income was higher as the mix of carrying assets shifted toward higher yielding loans compared to investments.  Reduced interest expense on customer funds was due to more transaction accounts and the continued downward repricing of time deposits.  Borrowing costs were $0.8 million or 4.5% lower for the quarter due to prepayment of an FHLB advance last quarter.  Net interest margin was 3.10% for the quarter ended March 31, 2015, up from 3.01% for the prior quarter and 3.03% for the quarter ended March 31, 2014. Average earning assets increased $95 million or 0.7% compared to the same quarter of the prior year.

Total non-performing assets, including real estate owned as a result of foreclosure, declined by $11 million during the quarter to $153 million or 1.05% of total assets. This includes the addition of $1 million in non-performing loans and $9 million in real estate owned that were acquired from Horizon Bank in 2010, for which a loss share agreement with the FDIC expired after March 31, 2015.  Excluding the one-time reclassification of covered assets, total non-performing assets decreased by 2.8%, from $147 million at September 30, 2014 to $143 million as of March 31, 2015. Total loan delinquencies were 1.20% as of March 31, 2015, a decrease from 1.44% at September 30, 2014 due to credit quality improvements and the inclusion of the covered loans noted above.   Delinquencies on single family mortgage loans, the largest component of the loan portfolio, declined during the fiscal year to 1.42% from 1.63% at September 30, 2014.


The provision for loan losses was a reversal of $3.9 million and $4.3 million for the quarters ended March 31, 2015 and 2014, respectively, as a result of the continued improvement in asset quality.  Net loan recoveries increased to $3.1 million in the most recent quarter from $1.5 million in the quarter ended March 31, 2014.  The Company maintains an allowance for loan losses plus a reserve for unfunded commitments that total $110 million or 1.22% of total gross loans.  This compares to $111 million or 1.26% of total gross loans as of December 31, 2014.


Net gain on real estate acquired through foreclosure amounted to $1.5 million during the quarter, as compared to a net gain of $0.3 million for the prior quarter and $0.6 million for the quarter ended March 31, 2014.  The Company expects the amount of gain or loss on real estate acquired to continue to fluctuate in future quarters based primarily on the timing of sales and the amount, if any, of gains or losses related to those sales.  Net gain or loss on real estate acquired through foreclosure includes gains and losses on sales, ongoing maintenance expenses and any additional valuation adjustments.


The Company’s efficiency ratio was 49.97% for the quarter as compared to 48.50% in the same quarter of the prior year.  Total operating expenses increased by $5.3 million or

10.1% for the quarter ended March 31, 2014, largely driven by an increase in employees and branch locations provided by the branch acquisitions of the prior fiscal year and the related costs to service the acquired transaction accounts.  Deposit related service fee income increased by $2.0 million as compared to the same quarter of the prior year.


On February 16, 2015, the Company paid a cash dividend of $.13 per share to common stockholders of record on February 2, 2015.   This was the Company’s 128th quarterly cash dividend. During the quarter, the Company repurchased 2.5 million shares of stock at a weighted average price of $21.21.  For the fiscal year 2015, the Company has repurchased 3.6 million shares of stock at a weighted average price of $21.39 and has further authorization to repurchase an additional 1.4 million shares.  The Company has returned 162% of earnings to shareholders for the quarter and 132% for the six months ended March 31, 2015 through the combination of cash dividends and share repurchases. The ratio of tangible common equity to tangible assets was 11.65% as of March 31, 2015.


University of Phoenix closing 115 locations

For-profit education company Apollo Group Inc. says its net income fell 60 percent in its fiscal fourth quarter, hurt by a sharp drop in enrollment at the University of Phoenix and higher costs.

The company also announced Tuesday that it is closing 115 locations due to shrinking enrollment and higher interest by students in taking courses online.

Apollo reported net income of $75.4 million, or 66 cents per share, for the three months ended Aug. 31. That compares with net income of $188.6 million, or $1.37 per share, a year earlier.

Excluding special items, Apollo’s earnings amounted to 52 cents per share.

Revenue fell 11 percent to $996.5 million from $1.12 billion.

Analysts polled by FactSet expected adjusted earnings of 50 cents per share on $1.01 billion in revenue.

First Job: Roy Vallee, Avnet Inc.

First Job: Roy Vallee, Avnet Inc.

Roy Vallee
Chairman and CEO
Avnet Inc.

Describe your very first job and what lessons you learned from it.
I was 13 years old when I landed my first job selling cosmetics and household products door-to-door. As a salesman, my earnings were based entirely on what I sold. That meant that if I sold nothing, I got paid nothing. While my first job was many years ago, being a door-to-door salesman taught me several valuable lessons that have helped me throughout my career, especially when I began working in technology sales. It taught me to focus on the customer and their needs, how to deal with rejection and use it as a learning experience, and how to motivate myself to keep making calls knowing that the more calls I made the better my odds of making a sale.

Describe your first job in your industry and what you learned from it.
I began my career in technology distribution in 1971 as part of a work-study program where I earned school credits. The job involved stocking shelves in the warehouse of a small electronics distributor in California. This gave me an opportunity to learn and experience first hand how a warehouse operates. Early on, I learned the importance of quality practices around inventory management and processing an order.

What were your salaries at both of these jobs?
As a door-to-door salesman in 1966, I was paid completely on commission and earned 35 percent of what I sold. When I worked at the warehouse stocking shelves, I was paid $2.25 an hour, plus I received school credit. While the money was important at the time, the experience that I gained from these jobs has been invaluable throughout my career.

Who is your biggest mentor and what role did they play?
My most influential mentor was Leon Machiz, the chairman and CEO of Avnet from 1988 to 1998. In 1989, I was a mid-level Avnet manager when he first noticed me during a presentation at one of our top suppliers. He called me into his office a few days later to promote me to president of Avnet’s computing business, a division that had $300 million in annual revenues at the time. This was a significant and unexpected promotion. However, Leon had been impressed by how well I understood our suppliers’ needs, their business challenges, and how Avnet could help them overcome those challenges. As I took on this new role, Leon spent hours with me talking about the business and helping me understand what it would take to be successful. His mentorship helped me understand one of the greatest lessons of my career — my job is not to run the company, but rather to lead it.

What advice would you give to a person just entering your industry?
I am a true believer in doing the right things consistently over time. My observation is that the most successful people in business are relentless about their focus on delivering the highest value to their customers and other partners — and that’s true if you are just starting out or if you are heading a big corporation. If you have your customers’ best interests at heart and approach that with an uncompromising single mindedness, they will reward you with their business.

I also believe that meritocracy is vital to attracting and engaging the best employees. And acting with honesty and integrity is always the right thing to do. Do it even though it might not be what everyone else is doing or it feels uncomfortable at the time. This will give you a solid reputation as an employee, business partner, employer and investment for shareholders.

If you weren’t doing this, what would you be doing instead?
I would probably start my own company or buy into a smaller business and get involved in the strategy and people development. Alternatively, I might work in venture capital or private equity investing.