Washington Federal, Inc. (Nasdaq: WAFD) (the "Company"), parent
company of Washington Federal, National Association, today
announced quarterly earnings of $52,942,000 or $0.65 per diluted
share for the quarter ended December 31, 2018, compared to
$51,670,000 or $0.59 per diluted share for the quarter ended
December 31, 2017, a $0.06 or 10% increase in fully diluted
earnings per share. Return on equity for the quarter ended
December 31, 2018 was 10.64% compared to 10.25% for the
quarter ended December 31, 2017. Return on assets for the
quarter ended December 31, 2018 was 1.32% compared to 1.35%
for the same quarter in the prior year.
President and Chief Executive Officer Brent J. Beardall
commented, “We are pleased to begin the fiscal year with record
quarterly net income and earnings per share. This quarter saw an
acceleration of interest expense as the costs of interest-bearing
liabilities increased by 45% year-over-year, reflecting increased
short-term interest rates. Despite the large increase in interest
expense, we were able to grow net interest income by 3% over the
same period thanks to growth in our loan portfolio and asset
yields. While the flat yield curve poses a challenge for all banks,
we are optimistic that we will continue to be able to grow earning
assets to offset rising deposit costs. With the Company's stock
trading at about 1.3 times tangible book value and 11 times
trailing twelve months earnings, we believe the stock is trading
below its intrinsic value. As a result, we have continued to be
aggressive, repurchasing over 1.7 million shares of stock this
quarter, which was 2.1% of the shares outstanding at the beginning
of the quarter."
Total assets were $16.2 billion as of December 31, 2018,
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 $223 million increase in net
loans receivable.
Customer deposits increased by $175 million or 1.5% since
September 30, 2018, reaching a total of $11.6 billion as of
December 31, 2018. Transaction accounts increased by $162
million or 2.5% during that period, while time deposits increased
$13 million or 0.3%. The Company continues to focus on growing
transaction accounts to lessen sensitivity to rising interest rates
and manage interest expense. As of December 31, 2018, just
over 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 93.4% of deposits at
December 31, 2018.
Borrowings from the Federal Home Loan Bank ("FHLB") totaled $2.5
billion as of December 31, 2018, versus $2.3 billion at
September 30, 2018. The weighted average rate of FHLB
borrowings was 2.75% as of December 31, 2018, versus 2.66% at
September 30, 2018, the increase being due to higher rates on
short-term FHLB advances.
Loan originations totaled $1.045 billion for the first fiscal
quarter 2019, an increase of 9.6% from the $954 million of
originations in the same quarter one year ago. Partially offsetting
loan originations in each of these quarters were loan repayments of
$872 million and $860 million, respectively. Commercial loans
represented 73% of all loan originations during the first fiscal
quarter 2019 and consumer loans accounted for the remaining 27%.
The Company views organic loan growth as the highest and best use
of its capital and prefers commercial loans as they generally have
floating interest rates and shorter durations. The weighted average
interest rate on loans was 4.56% as of December 31, 2018, 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 0.39% as of December 31,
2018, compared to 0.41% at December 31, 2017, and 0.44% at
September 30, 2018. Since September 30, 2018, real estate
owned decreased by $3 million, or 28%, and non-accrual loans
decreased by $4 million, or 8%. Delinquent loans were 0.42% of
total loans at December 31, 2018, compared to 0.43% at
December 31, 2017, and 0.42% at September 30, 2018. The
allowance for loan losses and reserve for unfunded commitments
totaled $137 million as of December 31, 2018, and was 1.06% of
gross loans outstanding, as compared to $137 million or 1.06% of
gross loans outstanding at September 30, 2018.
On November 23, 2018, the Company paid a regular cash
dividend of $0.18 per share, which represented the 143rd
consecutive quarterly cash dividend. During the quarter, the
Company repurchased 1,740,192 shares of common stock at a weighted
average price of $28.12 per share and has authorization to
repurchase 292,406 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 $0.23, or 1.2%, to $20.61, and the ratio of
tangible common equity to tangible assets remained strong at 10.53%
as of December 31, 2018.
Net interest income was $119 million for the quarter, an
increase of $3.4 million or 3.0% 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 $655 million, or 4.6%. Net interest margin decreased
to 3.21% in the first fiscal quarter of 2019, from 3.26% for the
same quarter in the prior year as the average rate earned on
interest-earning assets rose by 27 basis points while the average
rate paid on interest-bearing liabilities increased 33 basis
points.
The Company recorded a release of loan loss allowance of
$500,000 in the first fiscal quarter of 2019, compared with no
provision or release in the same quarter of fiscal 2018. Net
recoveries were $1.4 million for the first fiscal quarter of 2019,
compared to $3.1 million for the prior year's quarter.
Total other income was $19.0 million for the first fiscal
quarter of 2019, an increase of $12.2 million, from $6.8 million in
the same quarter of the prior year. The increase is primarily due
to a net gain of $6.4 million recognized this quarter from the sale
and valuation adjustments of fixed assets as well as $8.6 million
of expense from FDIC loss share valuation adjustments in the prior
year quarter.
Total operating expenses were $71.7 million in the first fiscal
quarter of 2019, an increase of $9.7 million, or 15.7%, from the
prior year's quarter. As discussed previously, the Company has
taken the opportunity allotted by the change in the tax law to make
several strategic investments that have resulted in a higher level
of operating expenses year over year. Those investments included a
5% salary increase for all employees earning less than $100,000;
the establishment of a second technology team located in Boise,
Idaho; the creation of an internal training team; and several new
platform and system enhancements. Compensation and benefits costs
increased by $4.3 million over the prior year quarter primarily due
to headcount increases, the aforementioned salary increases and
cost of living adjustments since last year. Information technology
costs increased by $1.1 million and other expenses increased by
$3.7 million, both primarily due to Bank Secrecy Act (BSA) program
enhancements. In the first fiscal quarter of 2019, the Company had
approximately $3.6 million of non-recurring BSA related costs and
estimates that it will incur an additional $2 million of
non-recurring costs for BSA improvements spread over the next two
quarters. The Company’s efficiency ratio in the first fiscal
quarter of 2019 was 51.9%, compared to 47.3% 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 $14.4 million for the three months
ended December 31, 2018, as compared to $9.0 million for the
same period one year ago. The effective tax rate for the three
months ended December 31, 2018 was 21.35% compared to 14.79%
for the three months ended December 31, 2017 and 20.76% for
the full fiscal year ended September 30, 2018. The effective
tax rate for the three months ended December 31, 2017 was
lower due to discrete tax benefits of $3.7 million recognized
related to the revaluation of deferred tax assets and liabilities
stemming from tax reform as well as tax benefits of $2.2 million
related to stock based compensation. The Company estimates that its
annual effective tax rate for fiscal 2019 will be 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.
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
“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)
December 31, 2018 September 30, 2018
(In thousands, except share and ratio data)
ASSETS Cash and
cash equivalents
$ 283,375 $ 268,650
Available-for-sale securities, at fair value
1,451,340
1,314,957 Held-to-maturity securities, at amortized cost
1,586,815 1,625,420 Loans receivable, net of allowance for
loan losses of $131,165 and $129,257
11,700,239 11,477,081
Interest receivable
48,207 47,295 Premises and equipment,
net
276,683 267,995 Real estate owned
8,171 11,298
FHLB and FRB stock
135,590 127,190 Bank owned life insurance
217,751 216,254 Intangible assets, including goodwill of
$301,368 and $301,368
310,776 311,286 Federal and state
income tax assets, net
— 1,804 Other assets
169,179
196,494
$ 16,188,126 $
15,865,724
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities Customer accounts Transaction deposit accounts
$ 6,744,346 $ 6,582,343 Time deposit accounts
4,817,346 4,804,803
11,561,692
11,387,146 FHLB advances
2,540,000 2,330,000 Advance
payments by borrowers for taxes and insurance
21,165 57,417
Federal and state income tax assets, net
7,388 — Accrued
expenses and other liabilities
74,792 94,253
14,205,037 13,868,816
Stockholders’ equity Common
stock, $1.00 par value, 300,000,000 shares authorized; 135,496,280
and 135,343,417 shares issued; 81,123,582 and 82,710,911 shares
outstanding
135,496 135,343 Additional paid-in capital
1,668,666 1,666,609 Accumulated other comprehensive (loss)
income, net of taxes
2,891 8,294 Treasury stock, at cost;
54,372,698 and 52,632,506 shares
(1,051,239 )
(1,002,309 ) Retained earnings
1,227,275 1,188,971
1,983,089 1,996,908
$
16,188,126 $ 15,865,724
CONSOLIDATED
FINANCIAL HIGHLIGHTS Common stockholders' equity per share
$ 24.45 $ 24.14 Tangible common stockholders' equity
per share
20.61 20.38 Stockholders' equity to total assets
12.25 % 12.59 % Tangible common stockholders' equity
to tangible assets
10.53 % 10.84 %
Weighted
average rates at period end Loans and mortgage-backed
securities
4.28 % 4.19 % Combined loans,
mortgage-backed securities and investments
4.17 4.07
Customer accounts
0.99 0.87 Borrowings
2.75 2.66
Combined cost of customer accounts and borrowings
1.31 1.17
Net interest spread
2.86 2.90
WASHINGTON FEDERAL,
INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
(UNAUDITED)
Three Months Ended December 31,
2018
2017 (In thousands, except share and ratio data)
INTEREST INCOME Loans receivable
$ 137,065 $
124,511 Mortgage-backed securities
19,192 16,899 Investment
securities and cash equivalents
6,365 4,370
162,622 145,780
INTEREST EXPENSE Customer accounts
26,579 14,638 FHLB advances and other borrowings
16,891 15,407
43,470 30,045
Net
interest income 119,152 115,735 Provision (release) for
loan losses
(500 ) —
Net interest income
after provision (release) for loan losses 119,652
115,735
OTHER INCOME Gain (loss) on sale of
investment securities
(9 ) — FDIC loss share
valuation adjustments
— (8,550 ) Loan fee income
970
1,035 Deposit fee income
6,243 6,686 Other Income
11,805 7,624
19,009 6,795
OTHER
EXPENSE Compensation and benefits
33,883 29,619
Occupancy
9,268 8,671 FDIC insurance premiums
2,862
2,820 Product delivery
4,021 3,956 Information technology
9,040 7,929 Other
12,598 8,946
71,672 61,941 Gain (loss) on real estate owned, net
320 46 Income before income taxes
67,309 60,635 Income tax provision
14,367
8,965
NET INCOME $ 52,942 $
51,670
PER SHARE DATA Basic earnings per share
$ 0.65 $ 0.59 Diluted earnings per share
0.65
0.59 Cash dividends per share
0.18 0.15 Basic weighted
average shares outstanding
81,791,852 86,938,095 Diluted
weighted average shares outstanding
81,831,478 87,082,499
PERFORMANCE RATIOS Return on average assets
1.32 % 1.35 % Return on average common equity
10.64 10.25 Net interest margin
3.21 3.26 Efficiency
ratio
51.88 47.25
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190114005828/en/
Washington Federal, Inc.425 Pike Street, Seattle, WA 98101Brad
Goode, SVP, Director of
Communications206-626-8178brad.goode@wafd.com
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