Washington Federal, Inc. (Nasdaq: WAFD) (the "Company"), parent
company of Washington Federal, National Association, today
announced quarterly earnings of $51,098,000 or $0.63 per diluted
share for the quarter ended March 31, 2019, compared to
$49,271,000 or $0.57 per diluted share for the quarter ended
March 31, 2018, a $0.06 or 11% increase in fully diluted
earnings per share. Return on equity for the quarter ended
March 31, 2019 was 10.20% compared to 9.81% for the quarter
ended March 31, 2018. Return on assets for the quarter ended
March 31, 2019 was 1.24% compared to 1.26% for the same
quarter in the prior year.
President and Chief Executive Officer Brent J. Beardall
commented, “We are pleased to report another solid quarter of
growth in core earnings, loans and deposits. Credit quality
continues to improve with the economic expansion. We acknowledge
that this is a challenging interest rate environment. Over the past
three and a half years, the Federal Reserve Bank has increased
short-term interest rates from 0.25% to 2.50% while long-term rates
remained relatively flat at around 2.50%. Despite this flattening
of the yield curve, Washington Federal’s net interest margin
declined only 3 basis points from 3.18% to 3.15% and net interest
income grew by 12%1. Those results were possible due to the
progress we have made in growing our commercial banking
capabilities, demonstrated by the significant growth of our
transaction deposits and commercial loans.
"During the quarter we launched a program designed specifically
to help government workers (both current clients and non-clients)
impacted by the government shutdown. In the span of three weeks,
the program generated over 14,000 visits to Washington Federal's
website, 1,700 new loan approvals totaling $24 million of available
credit and 1,700 new checking account openings. Outstanding loan
balances are down to $4 million since, when the government
re-opened, most of those clients chose to repay us immediately. We
expect the remaining loan balances will be repaid over time. Most
importantly, by doing the right thing we were able to help
neighbors in their time of need and gain customers for life. As one
client told us in a letter, it is nice to be with a bank that has
'heart.' We believe that making a reasonable profit and doing what
is right to help our communities often go hand-in-hand."
Total assets were $16.4 billion as of March 31, 2019,
compared to $15.9 billion as of September 30, 2018, the
Company's fiscal year-end. Asset growth since September 30,
2018 is primarily attributable to a $418 million increase in net
loans receivable.
Customer deposits increased by $335 million or 2.9% since
September 30, 2018, reaching a total of $11.7 billion as of
March 31, 2019. Transaction accounts increased by $201 million
or 3.0% during that period, while time deposits increased $135
million or 2.8%. The Company continues to focus on growing
transaction accounts to lessen sensitivity to rising interest rates
and manage interest expense. As of March 31, 2019, 58% of the
Company’s deposits were in transaction accounts. Core deposits,
defined as all transaction accounts and time deposits less than
$250,000, totaled 93.1% of deposits at March 31, 2019.
In 2013 - 2014, the Company acquired 74 branches and $1.9
billion of deposits from Bank of America in rural areas of Arizona,
New Mexico, Nevada, Idaho and Washington. Since the close of those
transactions, the number of accounts in those branches has fallen
by approximately 48%, but the amount of deposit dollars has
increased by 25%.
Borrowings from the Federal Home Loan Bank ("FHLB") totaled $2.6
billion as of March 31, 2019, versus $2.3 billion at
September 30, 2018. The weighted average rate of FHLB
borrowings was 2.77% as of March 31, 2019, versus 2.66% at
September 30, 2018, the increase being due to higher rates on
short-term FHLB advances.
Loan originations totaled $1.0 billion for the second fiscal
quarter 2019, an increase of 22.0% from the $819 million of
originations in the same quarter one year ago. Partially offsetting
loan originations in each of these quarters were loan repayments of
$773 million and $744 million, respectively. Commercial loans
represented 77% of all loan originations during the second fiscal
quarter 2019 and consumer loans accounted for the remaining 23%.
The Company views organic loan growth, funded by low cost core
deposits, as the highest and best use of its capital. Commercial
loans are preferable in this interest rate environment because they
generally have floating interest rates and shorter durations. The
weighted average interest rate on the loan portfolio was 4.61% as
of March 31, 2019, an increase from 4.48% as of
September 30, 2018, due primarily to variable rate loans
increasing in yield with rising short-term rates.
Asset quality remained strong and the ratio of non-performing
assets to total assets improved to 0.36% as of March 31, 2019,
compared to 0.45% at March 31, 2018 and 0.44% at
September 30, 2018. Since September 30, 2018, real estate
owned decreased by $4 million, or 33%, and non-accrual loans
decreased by $7 million, or 12%. Delinquent loans were 0.40% of
total loans at March 31, 2019, compared to 0.40% at
March 31, 2018 and 0.42% at September 30, 2018. The
allowance for loan losses and reserve for unfunded commitments
totaled $139 million as of March 31, 2019, and was 1.05% of
gross loans outstanding, as compared to $137 million, or 1.06%, of
gross loans outstanding at September 30, 2018. Net recoveries
were $1.2 million for the second fiscal quarter of 2019, compared
to $1.4 million for the prior year's quarter. The Company has
recorded net recoveries for 15 consecutive quarters, and in 22 of
the last 23 quarters.
On February 22, 2019, the Company paid a regular cash
dividend of $0.20 per share, which represented the 144th
consecutive quarterly cash dividend. During the quarter, the
Company repurchased 698,705 shares of common stock at a weighted
average price of $29.65 per share and has authorization to
repurchase 9,593,701 additional shares. The Company varies the pace
of share repurchases depending on several factors, including share
price, lending opportunities and capital levels. Since
September 30, 2018, tangible common stockholders’ equity per
share increased by $0.68, or 3.3%, to $21.06, and the ratio of
tangible common equity to tangible assets remained strong at 10.51%
as of March 31, 2019.
Net interest income was $120 million for the quarter, an
increase of $2.8 million or 2.4% from the same quarter in the prior
year. The increase in net interest income from the prior year was
primarily due to higher balances as average earning assets
increased by $822 million, or 5.7%. Net interest margin decreased
to 3.15% in the second fiscal quarter of 2019, from 3.25% for the
same quarter in the prior year as the average rate earned on
interest-earning assets rose by 26 basis points while the average
rate paid on interest-bearing liabilities increased 40 basis
points. The compression in the net interest margin is the result of
the flat to inverted yield curve.
The Company recorded a provision for loan losses of $750,000 in
the second fiscal quarter of 2019, compared with a release of loan
loss allowance of $950,000 in the same quarter of fiscal 2018. The
increased provision was due to loan growth and a smaller net
recovery of prior charge-offs.
Total other income was $12.8 million for the second fiscal
quarter of 2019, an increase from $12.6 million in the same quarter
of the prior year.
Total operating expenses were $68.0 million in the second fiscal
quarter of 2019, an increase of $2.2 million, or 3.3%, from the
prior year's quarter. Increased operating expenses are the result
of ongoing investments in people, process and technology with the
objective of growing market share and ultimately earnings.
Compensation and benefits costs increased by $1.1 million over the
prior year quarter primarily due to headcount increases, the
aforementioned salary increases and cost of living adjustments
since last year. Other expenses increased by $1.2 million,
primarily due to Bank Secrecy Act (BSA) program enhancements. In
the second fiscal quarter of 2019, the Company had approximately
$1.2 million of non-recurring BSA related costs and estimates that
it will incur an additional $1 million of non-recurring costs for
BSA improvements in the third fiscal quarter. The Company’s
efficiency ratio in the second fiscal quarter of 2019 was 51.2%,
compared to 50.7% for the same period one year ago. The increase in
the efficiency ratio is primarily due to the elevated expenses
noted above.
Income tax expense totaled $13.9 million for the three months
ended March 31, 2019, as compared to $15.5 million for the
same period one year ago. The effective tax rate for the six months
ended March 31, 2019 was 21.35% compared to 19.51% for the six
months ended March 31, 2018 and 20.76% for the full fiscal
year ended September 30, 2018. The effective tax rate for the
six months ended March 31, 2018 and the full fiscal year ended
September 30, 2018 was lower mainly due to discrete tax
benefits related to the revaluation of deferred tax assets and
liabilities based on the new federal statutory rate enacted in
December 2017. The Company estimates that its annual effective tax
rate for fiscal 2019 will be between 20 - 22%.
Washington Federal, a national bank with headquarters in
Seattle, Washington, has 235 branches in eight western states. To
find out more about Washington Federal, please visit our website
www.washingtonfederal.com. Washington
Federal uses its website to distribute financial and other material
information about the Company.
1 Periods being compared are the quarters ended December
31, 2015 and March 31, 2019. The Federal Reserve Bank increased its
target rate upper bound from 0.25% to 0.50% on December 17, 2015
and the target rate upper bound was 2.50% as of March 31, 2019. The
10-year Treasury rate was 2.30% on December 16, 2015 versus 2.41%
on March 31, 2019.
Important Cautionary
Statements
The foregoing information should be read in conjunction with the
financial statements, notes and other information contained in the
Company’s 2018 Annual Report on Form 10-K, Quarterly Reports on
Form 10-Q and Current Reports on Form 8-K.
This press release contains statements about the Company’s
future that are not statements of historical fact. These statements
are “forward looking statements” for purposes of applicable
securities laws, and are based on current information and/or
management's good faith belief as to future events. The words
"estimate," “believe,” “expect,” “anticipate,” “project,” and
similar expressions signify forward-looking statements.
Forward-looking statements should not be read as a guarantee of
future performance. By their nature, forward-looking statements
involve inherent risk and uncertainties, which change over time;
and actual performance could differ materially from those
anticipated by any forward-looking statements. The Company
undertakes no obligation to update or revise any forward-looking
statement.
WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL
CONDITION
(UNAUDITED)
March 31, 2019 September 30, 2018 (In thousands,
except share and ratio data)
ASSETS Cash and cash
equivalents
$ 279,554 $ 268,650 Available-for-sale
securities, at fair value
1,545,606 1,314,957
Held-to-maturity securities, at amortized cost
1,553,683
1,625,420 Loans receivable, net of allowance for loan losses of
$133,086 and $129,257
11,894,836 11,477,081 Interest
receivable
50,790 47,295 Premises and equipment, net
277,010 267,995 Real estate owned
7,522 11,298 FHLB
and FRB stock
138,390 127,190 Bank owned life insurance
219,167 216,254 Intangible assets, including goodwill of
$301,368 and $301,368
310,266 311,286 Federal and state
income tax assets, net
— 1,804 Other assets
158,384
196,494
$ 16,435,208 $
15,865,724
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities Customer accounts Transaction deposits
$
6,782,998 $ 6,582,343 Time deposits
4,939,365
4,804,803
11,722,363 11,387,146 FHLB advances
2,610,000 2,330,000 Advance payments by borrowers for taxes
and insurance
25,839 57,417 Federal and state income tax
liabilities, net
4,180 — Accrued expenses and other
liabilities
68,546 94,253
14,430,928
13,868,816
Stockholders’ equity Common stock, $1.00 par
value, 300,000,000 shares authorized; 135,506,620 and 135,343,417
shares issued; 80,435,217 and 82,710,911 shares outstanding
135,507 135,343 Additional paid-in capital
1,669,860
1,666,609 Accumulated other comprehensive (loss) income, net of
taxes
8,634 8,294 Treasury stock, at cost; 55,071,403 and
52,632,506 shares
(1,071,957 ) (1,002,309 ) Retained
earnings
1,262,236 1,188,971
2,004,280
1,996,908
$ 16,435,208 $
15,865,724
CONSOLIDATED FINANCIAL HIGHLIGHTS Common
stockholders' equity per share
$ 24.92 $ 24.14
Tangible common stockholders' equity per share
21.06 20.38
Stockholders' equity to total assets
12.20 % 12.59 %
Tangible common stockholders' equity to tangible assets
10.51 % 10.84 %
Weighted average rates at
period end Loans and mortgage-backed securities
4.32
% 4.19 % Combined loans, mortgage-backed securities and
investments
4.20 4.07 Customer accounts
1.09 0.87
Borrowings
2.77 2.66 Combined cost of customer accounts and
borrowings
1.39 1.17 Net interest spread
2.81 2.90
WASHINGTON FEDERAL, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
(UNAUDITED)
Three Months Ended March 31, Six Months Ended March 31,
2019 2018
2019 2018 (In thousands,
except share and ratio data) (In thousands, except share and ratio
data)
INTEREST INCOME Loans receivable
$
141,061 $ 126,529
$ 278,126 $ 251,040
Mortgage-backed securities
19,343 17,667
38,535
34,566 Investment securities and cash equivalents
7,178
4,883
13,543 9,253
167,582 149,079
330,204 294,859
INTEREST
EXPENSE Customer accounts
29,666 16,414
56,245
31,052 FHLB advances and other borrowings
17,846
15,364
34,737 30,771
47,512
31,778
90,982 61,823
Net interest income
120,070 117,301
239,222 233,036 Provision (release)
for loan losses
750 (950 )
250 (950 )
Net interest income after provision (release) 119,320
118,251
238,972 233,986
OTHER INCOME Gain
(loss) on sale of investment securities
— —
(9
) — FDIC loss share valuation adjustments
— —
— (8,550 ) Loan fee income
667 780
1,637 1,815
Deposit fee income
5,886 6,403
12,129 13,089 Other
Income
6,257 5,404
18,062 13,028
12,810 12,587
31,819 19,382
OTHER
EXPENSE Compensation and benefits
32,774 31,625
66,657 61,244 Occupancy
9,830 9,013
19,098
17,684 FDIC insurance premiums
1,978 2,852
4,840
5,672 Product delivery
3,545 3,665
7,566 7,621
Information technology
8,755 8,781
17,795 16,710
Other
11,085 9,851
23,683 18,797
67,967 65,787
139,639 127,728 Gain (loss) on
real estate owned, net
808 (278 )
1,128
(232 ) Income before income taxes
64,971 64,773
132,280 125,408 Income tax provision
13,873
15,502
28,240 24,467
NET INCOME
$ 51,098 $ 49,271
$
104,040 $ 100,941
PER SHARE DATA
Basic earnings per share
$ 0.63 $ 0.58
$
1.28 $ 1.17 Diluted earnings per share
0.63 0.57
1.28 1.17 Cash dividends per share
0.20 0.17
0.38 0.32 Basic weighted average shares outstanding
80,968,050 85,647,494
81,384,456 86,299,885 Diluted
weighted average shares outstanding
80,990,126 85,747,167
81,415,697 86,422,077
PERFORMANCE RATIOS
Return on average assets
1.24 % 1.26 %
1.28
% 1.31 % Return on average common equity
10.20 9.81
10.42 10.03 Net interest margin
3.15 3.25
3.18
3.26 Efficiency ratio
51.15 50.65
51.52 48.94
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190415005859/en/
Washington Federal, Inc.Brad Goode, SVP, Director of
Communications206-626-8178brad.goode@wafd.com
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