Washington Federal, Inc. (Nasdaq: WAFD) (the “Company”), parent
company of Washington Federal, N.A. today announced record annual
earnings of $173,532,000 or $1.94 per diluted share for the fiscal
year ended September 30, 2017, compared to $164,049,000 or
$1.78 per diluted share for the year ended September 30, 2016,
a $0.16 or 9.0% increase in earnings per diluted share. Return on
equity for the fiscal year ended September 30, 2017 was 8.64%
compared to 8.33% for the year ended September 30, 2016.
Return on assets for the year ended September 30, 2017 was
1.16% compared to 1.12% for the prior year.
President and Chief Executive Officer Brent J. Beardall
commented, “We are pleased to report that Washington Federal closed
its 100th year in business with record earnings, loan originations
and total assets. The market rewarded the Company’s shareholders
with a total return for the fiscal year of 29%. It is gratifying to
see that efforts to reposition the bank’s interest rate risk over
the last few years are paying dividends, as our margin has
increased despite rising short-term rates. The strong financial
performance enabled the Company to return 100% of earnings to
shareholders in the form of cash dividends and share repurchases
during the year and still finish the year with a tangible common
equity to tangible asset ratio of 11.41%.”
Total assets were $15.3 billion as of September 30, 2017, a
$366 million or 2.5% increase from September 30, 2016. The
Company continued to shift its asset mix from cash and investment
securities to loans receivable, which carry a higher yield. Since
September 30, 2016, cash and cash equivalents decreased $137
million or 30.5% while available-for-sale securities decreased $657
million or 34.2% and held-to-maturity securities slightly offset
these with an increase of $229 million or 16.2%. During the same
period, net loans receivable increased by $972 million or 9.8%.
During fiscal 2017, the Company’s focus on improving its deposit
mix resulted in transaction accounts increasing to 58.7% of
deposits at September 30, 2017 from 56.7% of deposits at
September 30, 2016. Customer deposits were $10.8 billion as of
September 30, 2017, an increase of $234 million or 2.2% since
September 30, 2016. Transaction accounts increased by $356
million or 5.9% during the fiscal year 2017, while time deposits
decreased $121 million or 2.6%. As of September 30, 2017,
27.9% of the Company’s deposits were checking accounts and 94.3%
were core deposits.
Borrowings from the Federal Home Loan Bank were $2.2 billion as
of September 30, 2017, a net increase of $145 million or 7.0%
since September 30, 2016. The weighted average rate for FHLB
borrowings was 2.80% as of September 30, 2017 and 3.15% at
September 30, 2016. Of the $2.2 billion borrowed as of
September 30, 2017, $0.8 billion have maturities greater than
one year.
Loan originations of $4.2 billion for fiscal year 2017
established a new record and increased $290 million or 7.4% from
the total of $3.9 billion in fiscal year 2016. Partially offsetting
this strong loan origination volume in 2017 were loan repayments of
$3.1 billion. During fiscal 2016, loan repayments totaled $2.9
billion. Commercial loans represented 66.9% of all loan
originations during fiscal 2017 with consumer loans accounting for
the remaining 33.1%. The Company views organic loan growth as the
highest and best use of its capital and prefers commercial loans in
this low rate environment due to the fact they generally have
floating interest rates and shorter durations. The weighted average
interest rate on loans increased to 4.28% as of September 30,
2017 from 4.26% at September 30, 2016, due to the shift toward
a higher proportion of commercial loans and rising short term
rates, causing variable rate loans to increase in yield.
Asset quality remained strong as the ratio of non-performing
assets to total assets decreased to 0.46% as of September 30,
2017, compared to 0.48% at September 30, 2016. Since
September 30, 2016, real estate owned decreased by $8.4
million, or 28.8%, and non-accrual loans increased by $7.2 million,
or 16.9%. Delinquencies on loans were 0.40% of total loans at
September 30, 2017 compared to 0.68% at September 30,
2016. The Company realized net-recoveries on loans (as opposed to
charge-offs) of $14.3 million for fiscal year 2017. The allowance
for loan losses and reserve for unfunded commitments increased by
$14.1 million to $130.8 million as of September 30, 2017 and
was 1.07% of gross loans outstanding, as compared to 1.07% of gross
loans as of September 30, 2016.
On August 18, 2017, the Company paid a cash dividend of
$0.15 per share to common stockholders of record on August 4,
2017. This was the Company’s 138th consecutive quarterly cash
dividend. During fiscal 2017, the Company repurchased 3.1 million
shares of common stock at a weighted average price of $31.36 per
share and has authorization to repurchase approximately 1.7 million
additional shares. The Company varies the pace of share repurchases
depending on several factors, including share price, business
opportunities and capital levels. In 2017, the Company paid
$7,631,576 to repurchase 478,399 warrants to purchase our common
stock at an average exercise price of $17.46. As of
September 30, 2017, 330,217 such warrants remain outstanding.
Tangible common stockholders’ equity per share increased by $0.86
or 4.59% during fiscal 2017 to $19.58 and the ratio of tangible
common equity to tangible assets was 11.41% as of
September 30, 2017.
Net interest income was $432 million for fiscal 2017, an
increase of $11.7 million or 2.8% from the prior year. The increase
in net interest income was primarily due to a higher average
balance of loans receivable in fiscal 2017. Net interest margin
increased to 3.13% in fiscal 2017 from 3.11% for the prior year.
The slight increase is primarily due to changes in the mix of
interest earning assets, including a higher yield on variable rate
loans as well as cash and investments.
The Company recorded a release of loan loss allowance of $2.1
million for fiscal 2017 compared to a release of $6.3 million for
the prior year. The release in fiscal 2017 was a result of
continued strong credit quality, including net recoveries of $14.3
million, partially offset by growth in loans outstanding.
Total other income was $52.2 million for fiscal year 2017, an
increase of $5.2 million from $47.0 million in the prior year.
Fiscal year 2017 included $3.5 million of gain on sale of
investment securities as well as $6.1 million of gains recognized
on bank owned life insurance. Fiscal 2016 included a gain of $3.8
million resulting from the sale-leaseback of a branch property in
Sammamish, Washington.
Total operating expenses were $231.5 million for fiscal 2017, a
decrease of $3.9 million or 1.7% from the prior year, primarily due
to year over year decreases in product delivery costs and
information technology costs related to the Company’s fiscal 2016
implementation of new systems. Operating expenses were $62.6
million for the 4th fiscal quarter of 2017, an increase of $7.2
million or 13.1% from the same quarter a year ago. The increase was
primarily due to elevated information technology and compliance
costs, year-end accrual true-ups and a $1.5 million correction to
amortization of intangible assets stemming from acquisitions of
insurance agency businesses in prior years. The Company’s
efficiency ratio of 47.8% for fiscal 2017 is improved from the
50.8% for the prior year due to lower costs and higher revenue. The
efficiency ratio increased to 48.7% for the 4th fiscal quarter of
2017 from 48.5% for the same quarter a year ago due primarily to
the expenses noted above.
Net gain on real estate owned was $1.5 million for fiscal 2017
compared to a net gain of $10.0 million for the prior year. Net
gain or loss on real estate owned is expected to vary from quarter
to quarter as it includes gains and losses on sales, ongoing
maintenance expenses and any additional net valuation
adjustments.
For the year ended September 30, 2017, the Company recorded
federal and state income tax expense of $82.7 million, which
equates to a 32.27% effective tax rate. This compares to an
effective tax rate of 33.89% for the prior year. The decline in the
effective tax rate from the prior year is primarily due to new
investments in bank owned life insurance, low income housing tax
credits and tax exempt loans since September 30, 2016.
Washington Federal, a national bank with headquarters in
Seattle, Washington, has 237 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 2016 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)
September 30, 2017
September 30, 2016 (In thousands, except share data)
ASSETS Cash and cash equivalents
$ 313,070 $
450,368 Available-for-sale securities, at fair value
1,266,209 1,922,894 Held-to-maturity securities, at
amortized cost
1,646,856 1,417,599 Loans receivable, net of
allowance for loan losses of
$123,073 and $113,494
10,882,622 9,910,920 Interest receivable
41,643
37,669 Premises and equipment, net
263,694 281,951 Real
estate owned
20,658 29,027 FHLB and FRB stock
122,990
117,205 Bank owned life insurance
211,330 208,123 Intangible
assets, including goodwill of
$293,153 and $291,503
298,682 296,989 Federal and state income tax assets, net
— 16,047 Other assets
185,826 199,271
$ 15,253,580 $ 14,888,063
LIABILITIES AND STOCKHOLDERS’ EQUITY Liabilities
Customer accounts Transaction deposit accounts
$
6,361,158 $ 6,005,592 Time deposit accounts
4,473,850
4,595,260
10,835,008 10,600,852 FHLB advances
2,225,000 2,080,000 Advance payments by borrowers for taxes
and insurance
56,631 42,898 Accrued expenses and other
liabilities
131,253 188,582
13,247,892
12,912,332
Stockholders’ equity Common stock, $1.00 par
value, 300,000,000 shares authorized;
134,957,511 and
134,307,818 shares issued;
87,193,362 and 89,680,847 shares
outstanding
134,958 134,308 Paid-in capital
1,660,885
1,648,388 Accumulated other comprehensive (loss) income, net of
taxes
5,015 (11,156 ) Treasury stock, at cost;
47,764,149 and 44,626,971 shares
(838,060 )
(739,686 ) Retained earnings
1,042,890 943,877
2,005,688 1,975,731
$ 15,253,580
$ 14,888,063
CONSOLIDATED FINANCIAL HIGHLIGHTS
Common stockholders' equity per share
$ 23.00 $ 22.03
Tangible common stockholders' equity per share
$
19.58 $ 18.72 Stockholders' equity to total assets
13.15 % 13.27 % Tangible common stockholders' equity
to tangible assets
11.41 % 11.51 %
Weighted
average rates at period end Loans and mortgage-backed
securities
3.96 % 3.86 % Combined loans,
mortgage-backed securities and investments
3.82 3.58
Customer accounts
0.53 0.50 Borrowings
2.80 3.15
Combined cost of customer accounts and borrowings
0.91 0.93
Net interest spread
2.91 2.65
WASHINGTON FEDERAL, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
(UNAUDITED)
Three Months Ended September 30,
Twelve Months Ended September 30,
2017
2016
2017 2016 (In thousands, except
share data) (In thousands, except share data)
INTEREST
INCOME Loans receivable
$ 122,197 $ 114,283
$ 470,523 $ 454,085 Mortgage-backed securities
15,605 13,820
60,612 62,949 Investment securities and
cash equivalents
4,438 4,769
17,783
19,759
142,240 132,872
548,918 536,793
INTEREST EXPENSE Customer accounts
13,850 13,423
52,023 52,485 FHLB advances and other borrowings
15,958 16,633
64,969 64,059
29,808 30,056
116,992 116,544
Net interest
income 112,432 102,816
431,926 420,249 Provision
(release) for loan losses
(500 ) (3,100 )
(2,100 ) (6,250 )
Net interest income after
provision (release) for loan losses 112,932 105,916
434,026 426,499
OTHER INCOME Gain on sale of
investments
2,531 —
3,499 — Loan fee income
980 1,764
4,290 5,548 Deposit fee income
6,840
5,174
22,643 21,738 Other income
5,910 8,248
21,783 19,750
16,261 15,186
52,215 47,036
OTHER EXPENSE Compensation and benefits
27,483 26,668
112,257 112,884 Occupancy
8,890
7,492
35,260 33,568 FDIC insurance premiums
2,819
3,581
11,410 11,824 Product delivery
3,876 3,421
13,972 17,060 Information technology
9,105 7,150
28,859 30,982 Other expense
10,476 7,095
29,761 29,129
62,649 55,407
231,519 235,447 Gain (loss) on real estate owned, net
425 (356 )
1,494 10,046 Income
before income taxes
66,969 65,339
256,216 248,134
Income tax provision
20,865 21,115
82,684 84,085
NET INCOME $
46,104 $ 44,224
$ 173,532
$ 164,049
PER SHARE DATA Basic earnings
$ 0.53 $ 0.49
$ 1.95 $ 1.79 Diluted
earnings
0.52 0.49
1.94 1.78 Cash dividends per share
0.15 0.14
0.84 0.55 Basic weighted average number of
shares outstanding
87,742,200 89,902,181
88,905,457
91,399,038 Diluted weighted average number of shares outstanding
87,952,087 90,468,107
89,224,207 91,912,918
PERFORMANCE RATIOS Return on average assets
1.22
% 1.19 %
1.16 % 1.12 % Return on average
common equity
9.18 8.96
8.64 8.33 Net interest margin
3.22 3.01
3.13 3.11 Efficiency ratio
48.68
48.54
47.82 50.80
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171018005133/en/
Washington Federal, Inc.Investor RelationsBrad Goode,
206-626-8178SVP / Director of Communicationsbrad.goode@wafd.com
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