Washington Federal, Inc. (Nasdaq: WAFD) (the "Company"), parent
company of Washington Federal Bank, N.A. ("WaFd Bank"), today
announced record annual earnings and diluted earnings per share of
$210,256,000 and $2.61 for the fiscal year ended September 30,
2019, compared to $203,850,000 or $2.40 per diluted share for the
year ended September 30, 2018, a $0.21 or 8.8% increase in earnings
per diluted share. Return on equity for the fiscal year ended
September 30, 2019 was 10.46% compared to 10.16% for the year ended
September 30, 2018. Return on assets for the year ended September
30, 2019 was 1.28% compared to 1.31% for the prior year.
President and Chief Executive Officer Brent J. Beardall
commented, “We are pleased to report that thanks to the efforts of
our colleagues and clients, Washington Federal closed its 102nd
year in business with a record year on multiple fronts. Record
earnings and earnings per share were the direct result of record
loans and deposits that were built through organic growth.
Especially noteworthy is the fact the Company was able to produce
these results despite a challenging interest rate environment for
the majority of the year. Higher short-term interest rates caused
interest expense to increase year-over-year by $55 million or 41%
and yet, due to strong growth in core deposits and loans, the
growth of interest income more than offset this increase. Net
interest income increased by $9 million or 2%. With the Federal
Reserve Bank recently decreasing short-term rates by 50 basis
points, we have the potential to benefit from decreasing interest
expense going forward.
We are cognizant that the duration of this bull run in the
economy is now at historic levels and that cycles will occur. To
prepare for a potential downturn, our balance sheet has $1.7
billion of tangible common equity plus an additional $138 million
of reserves for credit losses. Non-performing assets of $44 million
are at a 12-year low, representing only 0.27% of assets.
Strong financial performance enabled the Company to return 89%
of earnings to shareholders during fiscal year 2019 in the form of
cash dividends and share repurchases while still finishing the year
with a tangible common equity to tangible asset ratio of 10.66%,
placing us in the top 10% of the largest 100 publicly traded banks
in the United States. Total shareholder return for fiscal 2019 was
18%. While we have invested heavily in technology and processes to
improve compliance and customer experience, we recognize there is
more work to be done as we compete to grow our market share. We are
gratified to see our net promoter score improve from 17 to 47 over
the last three years. Bottom line, this indicates that our clients
are significantly more likely to recommend us to others, which we
believe is a very good thing for our future prospects.”
Total assets were $16.5 billion as of September 30, 2019, a $609
million or 3.8% increase from September 30, 2018. Asset growth
since September 30, 2018 resulted primarily from a $453 million or
4.0% increase in net loans receivable.
Customer deposits were $12.0 billion as of September 30, 2019,
an increase of $604 million or 5.3% since September 30, 2018.
Transaction accounts increased by $501 million or 7.6% during the
fiscal year 2019, while time deposits increased $102 million or
2.1%. As of September 30, 2019, 59.1% of the Company’s deposits
were in transaction accounts. Core deposits, defined as all
transaction accounts and time deposits less than $250,000, totaled
93.0% of deposits at September 30, 2019. Strong deposit growth led
to an improved loan-to-deposit ratio of 99.5% at September 30, 2019
compared to 100.8% at September 30, 2018.
Borrowings from the Federal Home Loan Bank ("FHLB") totaled
$2.25 billion as of September 30, 2019, a net decrease of $80
million or 3.4% since September 30, 2018. The weighted average rate
for FHLB borrowings was 2.49% as of September 30, 2019 and 2.66% at
September 30, 2018. The decline of 17 basis points is due to lower
rates on new FHLB advances and maturing advances with higher rates.
$1.30 billion of the $2.25 billion advances outstanding at
September 30, 2019 have effective maturities greater than one
year.
Loan originations totaled $4.1 billion for fiscal year 2019
compared to the total of $3.8 billion in fiscal year 2018.
Partially offsetting the loan origination volume in 2019 were loan
repayments of $3.6 billion. During fiscal 2018, loan repayments
totaled $3.3 billion. Commercial loans represented 72% of all loan
originations during fiscal 2019 with consumer loans accounting for
the remaining 28%. 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 4.52% as of September 30, 2019
from 4.48% at September 30, 2018. The increase was due primarily to
changes in loan mix as commercial loans increased to 49.3% of the
portfolio as of September 30, 2019 compared to 46.9% at September
30, 2018.
Asset quality remained strong as the ratio of non-performing
assets to total assets improved to 0.27% as of September 30, 2019,
compared to 0.44% at September 30, 2018. Since September 30, 2018,
real estate owned decreased by $4.5 million and non-accrual loans
decreased by $22.0 million. Delinquencies on loans were 0.29% of
total loans at September 30, 2019 compared to 0.42% at September
30, 2018. The Company realized net recoveries on loans (as opposed
to charge-offs) of $3.6 million for fiscal year 2019 compared to
net recoveries of $11.1 million in fiscal 2018. The allowance for
loan losses and reserve for unfunded commitments increased by $1.9
million to $138.4 million as of September 30, 2019 and was 1.04% of
gross loans outstanding, as compared to 1.06% of gross loans as of
September 30, 2018. The Company has recorded net recoveries for 17
consecutive quarters, and in 24 of the last 25 quarters.
On August 23, 2019, the Company paid a cash dividend of $0.21
per share to common stockholders of record on August 9, 2019. This
was the Company’s 146th consecutive quarterly cash dividend. During
fiscal 2019, the Company repurchased 4.1 million shares of common
stock at a weighted average price of $30.46 per share and has
authorization to repurchase approximately 8.0 million additional
shares. The Company varies the pace of share repurchases depending
on several factors, including share price, business opportunities
and capital levels. Tangible common stockholders’ equity per share
increased by $1.48 or 7.28% during fiscal 2019 to $21.86 and the
ratio of tangible common equity to tangible assets was 10.66% as of
September 30, 2019.
Net interest income was $481.1 million for fiscal 2019, an
increase of $8.9 million or 1.9% from the prior year. The increase
in net interest income was primarily due to a $744 million, or
5.1%, increase in average interest-earning assets in fiscal 2019.
This was partially offset by a 3.1% decrease in net interest margin
to 3.16% in fiscal 2019 from 3.27% for the prior year.
Due to the strong asset quality indicators previously mentioned,
the Company recorded a release of loan loss allowance of $1.7
million for fiscal 2019. For fiscal 2018, the Company recorded a
release of loan loss allowance of $5.5 million.
Total other income was $62.3 million for fiscal year 2019, an
increase of $18.2 million from $44.1 million in the prior year. The
increase from the prior year was primarily due to a net gain of
$10.2 million recognized in fiscal year 2019 from sales of fixed
assets and $8.6 million of expense in fiscal year 2018 from
valuation adjustments associated with the termination of the
Company's FDIC loss-share agreements. Deposit fee income was $1.0
million lower in fiscal year 2019 than in 2018.
Total operating expenses were $283.1 million for fiscal 2019, an
increase of $18.7 million or 7.1% from the prior year. Increased
operating expenses are the result of ongoing investments in people,
process and technology with the objectives of enhancing compliance,
growing market share and ultimately earnings. Compensation and
benefits costs increased $10.0 million year-over-year primarily due
to the aforementioned investments. Information technology costs
increased by $4.3 million and other expenses increased by $4.5
million as both were elevated primarily due to Bank Secrecy Act
("BSA") program enhancements and other technology platform
improvements. Operating expenses were $72.5 million for the 4th
fiscal quarter of 2019, an increase of $2.9 million or 4.2% from
the same quarter a year ago. Compensation and benefits costs were
$1.5 million higher in the 4th fiscal quarter of 2019 than they
were in the same quarter of the prior year. The Company’s
efficiency ratio increased to 52.1% for fiscal 2019 as compared to
50.4% for the prior year. The efficiency ratio was 53.1% for the
4th fiscal quarter of 2019 as compared to 52.9% for the same
quarter a year ago. The increased efficiency ratios are due to
higher expenses noted above partially offset by higher revenue in
the respective periods.
For the year ended September 30, 2019, the Company recorded
federal and state income tax expense of $52.5 million, which
equates to a 19.99% effective tax rate. This compares to an
effective tax rate of 20.76% for fiscal year 2018. The Company’s
effective tax rate for fiscal 2019 is lower than the statutory rate
mainly due to state taxes, tax-exempt income and the resolution of
a previously unrecognized tax benefit. The Company estimates that
its effective tax rate going forward will be approximately 21%.
Washington Federal Bank, a national bank with headquarters in
Seattle, Washington, has 234 branches in eight western states and
does business as “WaFd Bank.” To find out more, please visit our
website www.wafdbank.com. The Company uses its website to
distribute financial and other material information.
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)
September 30, 2019
September 30, 2018
(In thousands, except share and
ratio data)
ASSETS
Cash and cash equivalents
$
419,158
$
268,650
Available-for-sale securities, at fair
value
1,485,742
1,314,957
Held-to-maturity securities, at amortized
cost
1,443,480
1,625,420
Loans receivable, net of allowance for
loan losses of $131,534 and $129,257
11,930,575
11,477,081
Interest receivable
48,857
47,295
Premises and equipment, net
274,015
267,995
Real estate owned
6,781
11,298
FHLB and FRB stock
123,990
127,190
Bank owned life insurance
222,076
216,254
Intangible assets, including goodwill of
$301,368 and $301,368
309,247
311,286
Federal and state income tax assets,
net
—
1,804
Other assets
210,989
196,494
$
16,474,910
$
15,865,724
LIABILITIES AND STOCKHOLDERS’
EQUITY
Liabilities
Customer accounts
Transaction deposit accounts
$
7,083,801
$
6,582,343
Time deposit accounts
4,906,963
4,804,803
11,990,764
11,387,146
FHLB advances
2,250,000
2,330,000
Advance payments by borrowers for taxes
and insurance
57,830
57,417
Federal and state income tax liabilities,
net
5,104
—
Accrued expenses and other liabilities
138,217
94,253
14,441,915
13,868,816
Stockholders’ equity
Common stock, $1.00 par value, 300,000,000
shares authorized; 135,539,806 and 135,343,417 shares issued;
78,841,463 and 82,710,911 shares outstanding
135,540
135,343
Paid-in capital
1,672,417
1,666,609
Accumulated other comprehensive (loss)
income, net of taxes
15,292
8,294
Treasury stock, at cost; 56,698,343 and
52,632,506 shares
(1,126,163
)
(1,002,309
)
Retained earnings
1,335,909
1,188,971
2,032,995
1,996,908
$
16,474,910
$
15,865,724
CONSOLIDATED FINANCIAL
HIGHLIGHTS
Common stockholders' equity per share
$
25.79
$
24.14
Tangible common stockholders' equity per
share
21.86
20.38
Stockholders' equity to total assets
12.34
%
12.59
%
Tangible common stockholders' equity to
tangible assets
10.66
10.84
TCE + allowance for loan losses to
tangible assets
11.48
11.67
Weighted average rates at period
end
Loans and mortgage-backed securities
4.25
%
4.19
%
Combined loans, all interest-earning
assets
4.10
4.07
Customer accounts
1.08
0.87
Borrowings
2.49
2.66
Combined cost of customer accounts and
borrowings
1.30
1.17
Net interest spread
2.80
2.90
WASHINGTON FEDERAL, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
(UNAUDITED)
Three Months Ended September
30,
Twelve Months Ended September
30,
2019
2018
2019
2018
(In thousands, except share and
ratio data)
(In thousands, except share and
ratio data)
INTEREST INCOME
Loans receivable
$
144,480
$
133,226
$
568,096
$
515,807
Mortgage-backed securities
17,231
17,819
74,485
70,407
Investment securities and cash
equivalents
7,725
6,107
28,885
20,869
169,436
157,152
671,466
607,083
INTEREST EXPENSE
Customer accounts
33,640
22,553
122,216
72,492
FHLB advances and other borrowings
15,624
15,348
68,190
62,452
49,264
37,901
190,406
134,944
Net interest income
120,172
119,251
481,060
472,139
Provision (release) for loan losses
(1,900
)
(5,500
)
(1,650
)
(5,450
)
Net interest income after provision
(release)
122,072
124,751
482,710
477,589
OTHER INCOME
Gain (loss) on sale of investment
securities
—
—
(9
)
—
FDIC loss share valuation adjustments
—
—
—
(8,550
)
Loan fee income
970
895
3,941
3,804
Deposit fee income
6,495
6,404
24,882
25,904
Other income
8,992
4,946
33,504
22,920
16,457
12,245
62,318
44,078
OTHER EXPENSE
Compensation and benefits
32,634
31,087
133,588
123,554
Occupancy
9,797
9,674
38,579
36,453
FDIC insurance premiums
2,409
2,970
9,808
11,592
Product delivery
4,456
4,395
15,934
16,372
Information technology
11,225
7,815
38,955
34,643
Other expense
12,005
13,676
46,199
41,708
72,526
69,617
283,063
264,322
Gain (loss) on real estate owned, net
(671
)
(38
)
810
(102
)
Income before income taxes
65,332
67,341
262,775
257,243
Income tax provision
12,970
15,826
52,519
53,393
NET INCOME
$
52,362
$
51,515
$
210,256
$
203,850
PER SHARE DATA
Basic earnings
$
0.66
$
0.62
$
2.61
$
2.40
Diluted earnings
0.66
0.62
2.61
2.40
Cash dividends per share
0.21
0.18
0.79
0.67
Basic weighted average shares
outstanding
79,154,252
83,280,730
80,471,316
85,008,040
Diluted weighted average shares
outstanding
79,201,083
83,361,122
80,495,163
85,109,843
PERFORMANCE RATIOS
Return on average assets
1.26
%
1.31
%
1.28
%
1.31
%
Return on average common equity
10.32
10.29
10.46
10.16
Net interest margin
3.12
3.26
3.16
3.27
Efficiency ratio
53.08
52.94
52.09
50.37
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191015006165/en/
Investor Relations Washington Federal, Inc. 425 Pike Street,
Seattle, WA 98101 Brad Goode, SVP / Director of Communications
206-626-8178 brad.goode@wafd.com
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