Washington Federal, Inc. (Nasdaq: WAFD) (the "Company"), parent
company of Washington Federal Bank ("WaFd Bank"), today announced
quarterly earnings of $49,359,000 for the quarter ended March 31,
2022, an increase of 10.0% from $44,871,000 for the quarter ended
March 31, 2021. After the effect of dividends on preferred stock,
net income available for common shareholders was $0.70 per diluted
share for the quarter ended March 31, 2022, compared to $0.56 per
diluted share for the quarter ended March 31, 2021, a $0.14 or 25%
increase in fully diluted earnings per common share. Return on
common shareholders' equity for the quarter ended March 31, 2022
was 9.80% compared to 8.17% for the quarter ended March 31, 2021.
Return on assets for the quarter ended March 31, 2022 was 0.98%
compared to 0.93% for the same quarter in the prior year.
President and Chief Executive Officer Brent J. Beardall
commented, "This was the first full quarter since our exit from the
2018 Bank Secrecy Act ("BSA") Consent Order and we are grateful for
the hard work of WaFd bankers throughout our eight western states
that made these results possible. In the last year, net loans grew
by $2 billion, or 16%, which is even more impressive when you
consider that for the majority of that period loan prepayments
occurred at record levels. Couple the record loan growth with
increasing customer deposits by $1.6 billion, or 11%, over the last
year and we see tangible results from the ongoing investments we
are making in our bankers, technology and processes. Importantly,
our net interest margin improved this quarter and credit quality
continues to improve with decreases in non-performing loans,
delinquencies and yet another quarter of net recoveries from
previously charged off loans.
"While our operating results are strong there are macro-economic
factors that give us reason for concern. Inflation is at a 40-year
high and it appears the Federal Reserve’s initial assessment that
inflation was transitory was incorrect. As a result, interest rates
are surging, with the average 30 year mortgage rate increasing to
above 5%, up from 2.75% a year ago. This will likely cause mortgage
refinancings to dwindle to a fraction of what they have recently
been and unfortunately, will exacerbate the housing affordability
issues we are facing as a country. In addition, there is the
geopolitical risk of the war in Ukraine and impact of related
sanctions on commodity prices.
"While one never hopes for a credit cycle, we are realistic that
they will periodically occur. It has been twelve years since the
last credit cycle so it is just a matter of time. As of March 31,
2022, 83% of our loans are secured by real estate and, based on the
significant increase in real estate values over the last two years,
we believe we have substantial protection should values decline and
borrowers experience financial difficulty.
"Our goal is to operate WaFd Bank in a way to be prepared for
the next credit cycle, so we can once again be a source of strength
to our clients if needed. Based on everything we know today we are
optimistic that we are well positioned to withstand potential
market volatility and continue our organic growth."
Total assets were $20.6 billion as of March 31, 2022, compared
to $19.7 billion at September 30, 2021, primarily due to the $1.3
billion increase in loans receivable funded by continued growth in
customer deposits (noted below) and cash. Investment securities
decreased by $293 million since September 30, 2021.
Customer deposits totaled $16.4 billion as of March 31, 2022, an
increase of $849 million or 5.5% since September 30, 2021.
Transaction accounts increased by $1.0 billion or 8.5% during that
period, while time deposits decreased $183 million or 5.3%. The
shift in deposit mix has been the result of a deliberate deposit
pricing and customer growth strategy. The focus on transaction
accounts is intended to lessen sensitivity to rising interest rates
and manage interest expense. As of March 31, 2022, 80.2% of the
Company’s deposits were transaction accounts, up from 77.9% at
September 30, 2021. Core deposits, defined as all transaction
accounts and time deposits less than $250,000, totaled 97.0% of
deposits at March 31, 2022.
Borrowings from the Federal Home Loan Bank ("FHLB") totaled
$1.72 billion as of March 31, 2022, unchanged since September 30,
2021. The weighted average interest rate of FHLB borrowings was
1.55% as of March 31, 2022, an increase from 1.51% at September 30,
2021.
The Company had strong loan originations of $2.23 billion for
the second fiscal quarter of 2022, compared to $1.98 billion of
originations in the same quarter one year ago. Largely offsetting
loan originations in each of these quarters were loan repayments of
$1.54 billion and $1.55 billion, respectively. Commercial loans
represented 78% of all loan originations during the second fiscal
quarter of 2022 and consumer loans accounted for the remaining 22%.
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 as they generally have floating interest rates
and shorter durations. The weighted average interest rate on the
loan portfolio was 3.44% as of March 31, 2022, a decrease from
3.47% as of September 30, 2021, due primarily to payoffs of loans
at higher than current market interest rates and new loans
originated at current market rates.
Credit quality is being monitored closely as economic stimulus
comes to an end. As of March 31, 2022, non-performing assets
remained low from a historical perspective and totaled $47.2
million, or 0.23% of total assets, compared to 0.22% at September
30, 2021. Delinquent loans were 0.30% of total loans at March 31,
2022, compared to 0.31% at December 31, 2021 and 0.19% at September
30, 2021. The allowance for credit losses (including the reserve
for unfunded commitments) totaled $201 million as of March 31,
2022, and was 1.13% of gross loans outstanding (1.14% when
excluding PPP loans for which it was determined that no allowance
was necessary due to the government guarantee), as compared to $199
million, or 1.22% of gross loans outstanding, at September 30,
2021. Net recoveries were $473 thousand for the second fiscal
quarter of 2022, compared to net recoveries of $2.5 million for the
prior year same quarter. The Company has recorded net recoveries in
33 of the last 35 quarters.
The Company recorded a $500 thousand release of allowance for
credit losses in the second fiscal quarter of 2022, compared to no
provision or release in the same quarter of fiscal 2021. The
release of allowance in the quarter ended March 31, 2022 was
primarily due to improvements in the credit quality of certain loan
portfolios related to strong real estate markets and collateral
conditions mostly offset by growth in loans receivable.
The Company paid a quarterly dividend on the 4.875% Series A
preferred stock on January 15, 2022. On February 18, 2022, the
Company paid a regular cash dividend on common stock of $0.24 per
share, which represented the 156th consecutive quarterly cash
dividend. If the Board declares a cash dividend on common stock at
its May 10, 2022 meeting as anticipated, the record date and
payment date are likely to be May 20, 2022 and June 3, 2022,
respectively. During the second fiscal quarter of 2022, the Company
repurchased 4,684 shares of common stock (related to tax
withholding on employee equity awards) at a weighted average price
of $34.65 per share and has authorization to repurchase 3,728,320
additional shares. The Company varies the size and pace of share
repurchases depending on several factors, including share price,
lending opportunities and capital levels. Since September 30, 2021,
tangible common shareholders' equity per share increased by $0.96,
or 4.1%, to $24.23. The ratio of total tangible shareholders'
equity to tangible assets was 9.29% as of March 31, 2022.
Net interest income was $135 million for the second fiscal
quarter of 2022, an increase of $11.1 million or 8.9% from the same
quarter in the prior year. The increase in net interest income was
primarily due to average interest-earning assets increasing by $861
million or 4.77% from the prior year while average interest-bearing
liabilities increased $374 million or 2.63%. Average
noninterest-bearing deposits grew by $619 million over the same
period. The change in net interest income was also impacted by a 6
basis point decline in the average rate earned on interest-earning
assets while the average rate paid on interest-bearing liabilities
declined by 21 basis points. Net interest margin improved to 2.90%
in the second fiscal quarter of 2022 compared to 2.87% for the
quarter ended December 31, 2021 and 2.75% for the prior year
quarter.
Total other income was $15.7 million for the second fiscal
quarter of 2022 compared to $14.5 million in the prior year same
quarter. The increase in other income was primarily due to loan fee
income being $1.6 million higher in the quarter ended March 31,
2022 due largely to fees collected on loan early repayments.
Total other expense was $88.4 million in the second fiscal
quarter of 2022, an increase of $6.7 million, or 8.2%, from the
prior year's quarter. Compensation and benefits costs increased by
$3.5 million, or 8.0%, over the prior year quarter primarily due to
annual merit increases, higher bonus compensation accruals related
to strong deposit and loan growth and investments in top talent and
contract staff to support strategic initiatives. The Company’s
efficiency ratio in the second fiscal quarter of 2022 was 58.7%,
compared to 59.0% for the same period one year ago.
Income tax expense totaled $13.6 million for the second fiscal
quarter of 2022, as compared to $11.9 million for the prior year
same quarter. The effective tax rate for the quarter ended March
31, 2022 was 21.60% compared to 21.24% for the year ended September
30, 2021. The Company’s effective tax rate may vary from the
statutory rate mainly due to state taxes, tax-exempt income and
tax-credit investments.
WaFd Bank is headquartered in Seattle, Washington, and has 214
branches in eight western states. To find out more about WaFd Bank,
please visit our website www.wafdbank.com. The Company uses its website to
distribute financial and other material information about the
Company.
Important Cautionary
Statements
The foregoing information should be read in conjunction with the
financial statements, notes and other information contained in the
Company’s 2021 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 or current 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. Words such as “anticipate,”
“believe,” “continue,” “expect,” “goal,” “intend,” “should,”
“strategy,” “will,” or 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, including the
following risks and uncertainties, and those risks and
uncertainties more fully discussed under “Risk Factors” in the
Company’s 2021 10-K, which could cause actual performance to differ
materially from that anticipated by any forward-looking statements.
In particular, any forward-looking statements are subject to risks
and uncertainties related to (i) the COVID-19 pandemic and the
resulting governmental and societal responses; (ii) current and
future economic conditions, including the effects of declines in
the real estate market, high unemployment rates, inflationary
pressures, and slowdowns in economic growth; (iii) financial stress
on borrowers (consumers and businesses) as a result of an uncertain
economic environment; (iv) global economic trends, including
developments related to Ukraine and Russia, and related negative
financial impacts on our borrowers; and (v) fluctuations in
interest rate risk and market interest rates, including the effect
on our net interest income and net interest margin. 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, 2022
September 30, 2021
(In thousands, except share and
ratio data)
ASSETS
Cash and cash equivalents
$
1,947,504
$
2,090,809
Available-for-sale securities, at fair
value
1,909,605
2,138,259
Held-to-maturity securities, at amortized
cost
301,221
366,025
Loans receivable, net of allowance for
loan losses of $171,384 and $171,300
15,094,926
13,833,570
Interest receivable
51,440
50,636
Premises and equipment, net
247,166
255,152
Real estate owned
9,509
8,204
FHLB and FRB stock
78,873
102,863
Bank owned life insurance
236,024
233,263
Intangible assets, including goodwill of
$303,457 and $303,457
309,501
310,019
Federal and state income tax assets,
net
3,821
3,877
Other assets
370,689
257,897
$
20,560,279
$
19,650,574
LIABILITIES AND SHAREHOLDERS’
EQUITY
Liabilities
Transaction deposits
$
13,139,606
$
12,108,025
Time deposits
3,251,042
3,434,087
Total customer deposits
16,390,648
15,542,112
FHLB advances
1,720,000
1,720,000
Advance payments by borrowers for taxes
and insurance
39,426
47,016
Federal and state income tax liabilities,
net
—
—
Accrued expenses and other liabilities
218,504
215,382
18,368,578
17,524,510
Shareholders’ equity
Preferred stock, $1.00 par value,
5,000,000 shares authorized; 300,000 and 300,000 shares issued;
300,000 and 300,000 shares outstanding
300,000
300,000
Common stock, $1.00 par value, 300,000,000
shares authorized; 136,243,712 and 135,993,254 shares issued;
65,306,928 and 65,145,268 shares outstanding
136,244
135,993
Additional paid-in capital
1,683,578
1,678,622
Accumulated other comprehensive income
(loss), net of taxes
71,478
69,785
Treasury stock, at cost; 70,936,784 and
70,847,986 shares
(1,590,082
)
(1,586,947
)
Retained earnings
1,590,483
1,528,611
2,191,701
2,126,064
$
20,560,279
$
19,650,574
CONSOLIDATED FINANCIAL
HIGHLIGHTS
Common shareholders' equity per share
$
28.97
$
28.03
Tangible common shareholders' equity per
share
24.23
23.27
Shareholders' equity to total assets
10.66
%
10.82
%
Tangible shareholders' equity to tangible
assets
9.29
%
9.39
%
Tangible shareholders' equity + allowance
for credit losses to tangible assets
10.29
%
10.42
%
Weighted average rates at period
end
Loans and mortgage-backed securities
3.37
%
3.37
%
Combined loans, mortgage-backed securities
and investments
2.93
2.80
Customer accounts
0.24
0.23
Borrowings
1.55
1.51
Combined cost of customer accounts and
borrowings
0.36
0.35
Net interest spread
2.57
2.45
WASHINGTON FEDERAL, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
FINANCIAL CONDITION
(UNAUDITED)
As of
SUMMARY FINANCIAL DATA
March 31, 2022
December 31, 2021
September 30, 2021
June 30, 2021
March 31, 2021
(In thousands, except share and
ratio data)
Cash
1,947,504
1,880,647
2,090,809
2,251,958
2,318,447
Loans receivable, net
15,094,926
14,592,202
13,833,570
13,467,997
13,035,423
Allowance for credit losses ("ACL")
201,384
201,411
198,800
198,284
199,153
Available-for-sale securities, at fair
value
1,909,605
1,946,139
2,138,259
2,292,656
2,438,902
Held-to-maturity securities, at amortized
cost
301,221
326,387
366,025
415,748
494,089
Total assets
20,560,279
19,973,171
19,650,574
19,649,509
19,533,581
Transaction deposits
13,139,606
12,550,062
12,108,025
11,700,467
11,228,666
Time deposits
3,251,042
3,351,984
3,434,087
3,537,891
3,590,755
FHLB advances
1,720,000
1,720,000
1,720,000
1,950,000
2,150,000
Total shareholders' equity
2,191,701
2,149,126
2,126,064
2,227,240
2,332,953
FINANCIAL HIGHLIGHTS
Common shareholders' equity per share
28.97
28.33
28.03
27.74
27.82
Tangible common shareholders' equity per
share
24.23
23.59
23.27
23.30
23.59
Shareholders' equity to total assets
10.66
%
10.76
%
10.82
%
11.33
%
11.94
%
Tangible shareholders' equity to tangible
assets
9.29
%
9.35
%
9.39
%
9.92
%
10.53
%
Tangible shareholders' equity + ACL to
tangible assets
10.29
%
10.38
%
10.42
%
10.94
%
11.56
%
Common shares outstanding
65,306,928
65,263,738
65,145,268
69,472,423
73,084,591
Preferred shares outstanding
300,000
300,000
300,000
300,000
300,000
Loans to customer deposits
92.09
%
91.76
%
89.01
%
88.38
%
87.96
%
CREDIT QUALITY
ACL to gross loans
1.13
%
1.18
%
1.22
%
1.26
%
1.30
%
ACL to non-accrual loans
598.66
%
447.99
%
626.16
%
582.40
%
498.44
%
Non-accrual loans to net loans
0.22
%
0.31
%
0.23
%
0.25
%
0.31
%
Non-accrual loans
33,639
44,959
31,749
34,046
39,955
Non-performing assets to total assets
0.23
%
0.27
%
0.22
%
0.23
%
0.25
%
Non-performing assets
47,243
54,790
43,625
45,650
48,943
WASHINGTON FEDERAL, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
(UNAUDITED)
Three Months Ended March 31,
Six Months Ended March 31,
2022
2021
2022
2021
(In thousands, except share and
ratio data)
(In thousands, except share and
ratio data)
INTEREST INCOME
Loans receivable
$
139,260
$
132,757
$
277,769
$
266,428
Mortgage-backed securities
4,659
6,696
9,451
13,926
Investment securities and cash
equivalents
6,919
7,301
14,058
14,222
150,838
146,754
301,278
294,576
INTEREST EXPENSE
Customer accounts
8,225
10,729
16,686
24,839
FHLB advances and other borrowings
7,525
11,991
15,368
25,189
15,750
22,720
32,054
50,028
Net interest income
135,088
124,034
269,224
244,548
Provision (release) for credit losses
(500
)
—
—
3,000
Net interest income after provision
(release)
135,588
124,034
269,224
241,548
OTHER INCOME
Gain (loss) on sale of investment
securities
—
—
81
—
Gain (loss) on termination of hedging
—
14,110
—
14,110
Prepayment penalty on long-term debt
—
(13,788
)
—
(13,788
)
Loan fee income
2,475
872
4,396
3,264
Deposit fee income
6,282
5,960
12,725
11,986
Other Income
6,902
7,323
17,138
12,775
15,659
14,477
34,340
28,347
OTHER EXPENSE
Compensation and benefits
47,115
43,632
94,540
86,355
Occupancy
11,788
10,473
21,878
20,065
FDIC insurance premiums
2,100
3,755
5,200
7,018
Product delivery
5,044
4,401
9,765
9,338
Information technology
11,722
10,696
23,143
22,527
Other
10,648
8,789
23,504
17,853
88,417
81,746
178,030
163,156
Gain (loss) on real estate owned, net
129
34
691
(415
)
Income before income taxes
62,959
56,799
126,225
106,324
Income tax provision
13,600
11,928
26,585
22,502
Net income
49,359
44,871
99,640
83,822
Dividends on preferred stock
3,656
2,722
7,312
2,722
Net income available to common
shareholders
$
45,703
$
42,149
$
92,328
$
81,100
PER SHARE DATA
Basic earnings per common share
$
0.70
$
0.56
$
1.41
$
1.07
Diluted earnings per common share
0.70
0.56
1.41
1.07
Cash dividends per common share
0.24
0.23
0.47
0.45
Basic weighted average shares
outstanding
65,301,171
75,354,765
65,253,991
75,576,288
Diluted weighted average shares
outstanding
65,445,206
75,393,464
65,397,601
75,582,426
PERFORMANCE RATIOS
Return on average assets
0.98
%
0.93
%
1.00
%
0.88
%
Return on average common equity
9.80
8.17
9.96
7.91
Net interest margin
2.90
2.75
2.89
2.75
Efficiency ratio
58.65
59.02
58.65
59.79
WASHINGTON FEDERAL, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
(UNAUDITED)
Three Months Ended
March 31, 2022
December 31, 2021
September 30, 2021
June 30, 2021
March 31, 2021
(In thousands, except share and
ratio data)
INTEREST INCOME
Loans receivable
$
139,260
$
138,509
$
137,039
$
134,193
$
132,757
Mortgage-backed securities
4,659
4,792
5,294
5,488
6,696
Investment securities and cash
equivalents
6,919
7,139
7,253
7,767
7,301
150,838
150,440
149,586
147,448
146,754
INTEREST EXPENSE
Customer accounts
8,225
8,461
8,568
8,906
10,729
FHLB advances and other borrowings
7,525
7,843
9,062
9,937
11,991
15,750
16,304
17,630
18,843
22,720
Net interest income
135,088
134,136
131,956
128,605
124,034
Provision (release) for credit losses
(500
)
500
(500
)
(2,000
)
—
Net interest income after provision
(release)
135,588
133,636
132,456
130,605
124,034
OTHER INCOME
Gain (loss) on sale of investment
securities
—
81
14
—
—
Gain (loss) on termination of hedging
derivatives
—
—
—
—
14,110
Prepayment penalty on long-term debt
—
—
—
—
(13,788
)
Loan fee income
2,475
1,921
1,887
1,748
872
Deposit fee income
6,282
6,443
6,499
6,201
5,960
Other Income
6,902
10,236
10,603
5,262
7,323
15,659
18,681
19,003
13,211
14,477
OTHER EXPENSE
Compensation and benefits
47,115
47,425
45,910
43,841
43,632
Occupancy
11,788
10,090
9,820
9,725
10,473
FDIC insurance premiums
2,100
3,100
3,450
3,900
3,755
Product delivery
5,044
4,721
5,092
4,075
4,401
Information technology
11,722
11,421
9,814
10,396
10,696
Other
10,648
12,856
11,577
11,703
8,789
88,417
89,613
85,663
83,640
81,746
Gain (loss) on real estate owned, net
129
562
993
(151
)
34
Income before income taxes
62,959
63,266
66,789
60,025
56,799
Income tax provision
13,600
12,985
14,418
12,603
11,928
Net income
49,359
50,281
52,371
47,422
44,871
Dividends on preferred stock
3,656
3,656
3,656
3,656
2,722
Net income available to common
shareholders
$
45,703
$
46,625
$
48,715
$
43,766
$
42,149
PER SHARE DATA
Basic earnings per common share
$
0.70
$
0.72
$
0.72
$
0.61
$
0.56
Diluted earnings per common share
0.70
0.71
0.72
0.61
0.56
Cash dividends per common share
0.24
0.23
0.23
0.23
0.23
Basic weighted average shares
outstanding
65,301,171
65,207,837
67,227,280
71,795,157
75,354,765
Diluted weighted average shares
outstanding
65,445,206
65,350,174
67,235,846
71,901,068
75,393,464
PERFORMANCE RATIOS
Return on average assets
0.98
%
1.02
%
1.07
%
0.97
%
0.93
%
Return on average common equity
9.80
10.12
10.36
8.71
8.17
Net interest margin
2.90
2.87
2.88
2.82
2.75
Efficiency ratio
58.65
58.64
56.75
58.98
59.02
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version on businesswire.com: https://www.businesswire.com/news/home/20220413005854/en/
Washington Federal, Inc. 425 Pike Street, Seattle, WA 98101 Brad
Goode, SVP, Chief Marketing Officer 206-626-8178
brad.goode@wafd.com
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