Improved asset quality, lower credit costs and gains on investment securities powered Washington Federal Inc. in Seattle to a $30.1 million profit in the quarter that ended June 30, an increase of 138% over the same period in 2010.

The fiscal-year 2011 third-quarter was Seattle company's best quarter since the start of the financial crisis, though its top executive warned that unpredictable credit costs and continued weak loan demand could slow the momentum.

"Company trends are mostly positive," Chairman, President and Chief Executive Officer Roy M. Whitehead said in a news release Thursday. "Investors should be aware, though, that improved economic conditions will likely be necessary to achieve significant earnings growth from this point." 

The $13.3 billion-asset company said that its real estate held for sale declined by 14.3% since Sept. 30, to $162 million, as it continued to liquidate foreclosed properties. In all, its total nonperforming assets amounted to $395 million, or 2.96% of total assets, at June 30, down from a peak of $606 million, or 5.03% of assets, two years ago. Loan delinquencies, however, ticked up 11 basis points since Sept. 30, to 3.66% of total loans.

While total loans declined during the quarter, the company's net interest income was buoyed by gains in investment securities and lower credit costs. Income from mortgage-backed securities increased by 40% from the same period a year earlier, to $30.5 million, while its interest expense declined by nearly 19%, to $55.4 million.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.