Washington Federal, Inc. (Nasdaq: WAFD) (the "Company"), parent
company of Washington Federal Bank, N.A. ("WaFd Bank"), today
announced quarterly earnings of $38,951,000 or $0.51 per diluted
share for the quarter ended December 31, 2020, compared to
$67,866,000 or $0.86 per diluted share for the quarter ended
December 31, 2019, a $0.35 or 41% decrease in fully diluted
earnings per share. Return on equity for the quarter ended December
31, 2020 was 7.65% compared to 13.46% for the quarter ended
December 31, 2019. Return on assets for the quarter ended December
31, 2020 was 0.83% compared to 1.66% for the same quarter in the
prior year.
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President and Chief Executive Officer Brent J. Beardall
commented, “We are pleased to report a strong start to our new
fiscal year with record loan production, solid core deposit growth,
strong asset quality and expansion of our net interest margin.
Considering the ongoing turbulence in the world around us, both
politically and economically, having a balance sheet with $1.8
billion in cash and $2.1 billion in equity provides significant
flexibility to adapt and serve our clients. It is hard to believe
that the majority of our teams have been serving our clients
remotely for over nine months and we want to thank both our staff
and our clients for working together to find solutions – while
staying safe. We are appreciative of the government stimulus being
provided to help those that have been most impacted and look
forward to assisting small businesses with the Paycheck Protection
Program’s (“PPP”) second round of funding in the next few
weeks."
Total assets were $19.1 billion as of December 31, 2020,
compared to $18.8 billion at September 30, 2020, as investment
securities increased $114 million and loans receivable increased by
$89 million. Cash was also $128 million higher as a result of the
large increase in customer deposits noted below.
Customer deposits totaled $14.2 billion as of December 31, 2020,
an increase of $387 million or 2.8% since September 30, 2020.
Transaction accounts increased by $575 million or 5.9% during that
period, while time deposits decreased $188 million or 4.7%. The
shift in deposit mix has been a result of a deliberate deposit
pricing and customer growth strategy and the focus on transaction
accounts is intended to lessen sensitivity to rising interest rates
and manage interest expense. As of December 31, 2020, 73.3% of the
Company’s deposits were in transaction accounts, up from 71.2% at
September 30, 2020. Core deposits, defined as all transaction
accounts and time deposits less than $250,000, totaled 95.9% of
deposits at December 31, 2020.
Borrowings from the Federal Home Loan Bank ("FHLB") totaled $2.6
billion as of December 31, 2020, a decrease of $100 million since
September 30, 2020. The decrease was due to the termination of a
hedged FHLB borrowing that had an effective interest rate of 1.39%.
The weighted average interest rate of FHLB borrowings was 1.82% as
of December 31, 2020, versus 1.79% at September 30, 2020.
The Company had strong loan originations of $1.92 billion for
the first fiscal quarter 2021, an increase of 40% from the $1.37
billion of originations in the same quarter one year ago. Largely
offsetting loan originations in each of these quarters were loan
repayments of $1.60 billion and $1.30 billion, respectively.
Commercial loans represented 75% of all loan originations during
the first fiscal quarter of 2021 and consumer loans accounted for
the remaining 25%. 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 3.64% as of December 31, 2020, a
decrease from 3.71% as of September 30, 2020, due primarily to
payoffs of loans at higher than market interest rates and new loans
originated at market rates.
Credit quality is being monitored closely and the economic
impacts of the pandemic will become clearer over time. As of
December 31, 2020, non-performing assets remained low from a
historical perspective and totaled $66.5 million, or 0.35% of total
assets, compared to 0.24% at September 30, 2020. The change was due
to non-accrual loans increasing by $29.4 million, or 101%, since
September 30, 2020. Delinquent loans increased to 0.52% of total
loans at December 31, 2020, compared to 0.24% at September 30,
2020. The allowance for credit losses (including the reserve for
unfunded commitments) totaled $197 million as of December 31, 2020,
and was 1.33% of gross loans outstanding (1.39% when excluding PPP
loans for which it was determined that no allowance was necessary
due to the government guarantee), as compared to $192 million, or
1.33% of gross loans outstanding, at September 30, 2020. Net
recoveries were $1.7 million for the first fiscal quarter of 2021,
compared to net recoveries of $2.6 million for the prior year same
quarter. The Company has recorded net recoveries in 28 of the last
30 quarters.
The Company recorded a provision for credit losses of $3.0
million in the first fiscal quarter of 2021, compared to a release
of allowance for credits losses of $3.8 million in the same quarter
of fiscal 2020. The provision in the current quarter is primarily
due to reserving for new loan originations and changes in
composition of the loan portfolio.
On November 20, 2020, the Company paid a regular cash dividend
of $0.22 per share, which represented the 151st consecutive
quarterly cash dividend. During the quarter, the Company
repurchased 32,956 shares, related to tax withholding on employee
equity awards, of common stock at a weighted average price of
$21.29 per share and has authorization to repurchase 4,594,275
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, 2020,
tangible common shareholders’ equity per share increased by $0.58,
or 2.6%, to $23.10 and the ratio of tangible common equity to
tangible assets was 9.34% as of December 31, 2020.
Net interest income was $121 million for the first fiscal
quarter of 2021, an increase of $0.8 million or 0.7% from the same
quarter in the prior year. Average interest-earning assets
increased $2.4 billion or 15.58% from the prior year while average
interest-bearing liabilities increased $1.8 billion or 14.20%. The
average rate earned on interest-earning assets declined by 97 basis
points while the average rate paid on interest-bearing liabilities
declined by 67 basis points. Net interest margin of 2.75% in the
first fiscal quarter of 2021 was up from 2.67% in the prior quarter
and down from 3.15% for the same quarter in the prior year. The
compression in the net interest margin since the prior year same
quarter is primarily due to the rapid drop in short-term rates by
the Federal Reserve Bank in response to the COVID-19 pandemic which
resulted in the changes in average rates noted above.
Total other income was $13.9 million for the first fiscal
quarter of 2021, a decrease from $46.4 million in the prior year
same quarter. The decrease was primarily due to the prior year
quarter including a gain of $32.6 million on sales of fixed assets,
including a branch property in Bellevue, Washington.
Total other expense was $81.4 million in the first fiscal
quarter of 2021, a decrease of $1.2 million, or 1.5%, from the
prior year's quarter. Compensation and benefits costs increased by
$6.1 million, or 16.6%, over the prior year quarter primarily due
to a 4.8% rise in headcount, annual merit increases as well as
higher bonus compensation that reflects increased loan production
activity since the prior year. Information technology costs
decreased by $5.3 million, primarily due to the prior year quarter
including a $5.9 million impairment charge on systems hardware and
software. The Company’s efficiency ratio in the first fiscal
quarter of 2021 was 60.6%, compared to 57.1% for the same period
one year ago. The increase in the efficiency ratio is primarily due
to lower other income as described above.
Income tax expense totaled $10.6 million for the first fiscal
quarter of 2021, as compared to $18.4 million for the prior year
same quarter. The effective tax rate for the quarter ended December
31, 2020 was 21.35% and unchanged from the quarter ended December
31, 2019. The Company’s effective tax rate for the quarter ended
December 31, 2020 is different 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 234
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 2020 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. In particular, any
forward-looking statements are subject to risks and uncertainties
related to the COVID-19 pandemic and the resulting governmental and
societal responses. 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, 2020
September 30, 2020
(In thousands, except share and
ratio data)
ASSETS
Cash and cash equivalents
$
1,830,722
$
1,702,977
Available-for-sale securities, at fair
value
2,482,944
2,249,492
Held-to-maturity securities, at amortized
cost
586,870
705,838
Loans receivable, net of allowance for
loan losses of $170,189 and $166,955
12,881,010
12,792,317
Interest receivable
52,671
53,799
Premises and equipment, net
256,242
252,805
Real estate owned
4,463
4,966
FHLB and FRB stock
137,991
141,990
Bank owned life insurance
229,175
227,749
Intangible assets, including goodwill of
$302,707 and $302,707
309,425
309,906
Federal and state income tax assets,
net
—
5,708
Other assets
292,109
346,508
$
19,063,622
$
18,794,055
LIABILITIES AND STOCKHOLDERS’
EQUITY
Liabilities
Transaction deposits
$
10,381,459
$
9,806,432
Time deposits
3,785,082
3,973,192
Total customer deposits
14,166,541
13,779,624
FHLB advances
2,600,000
2,700,000
Advance payments by borrowers for taxes
and insurance
15,539
49,462
Federal and state income tax liabilities,
net
8,294
—
Accrued expenses and other liabilities
211,481
250,836
17,001,855
16,779,922
Stockholders’ equity
Common stock, $1.00 par value, 300,000,000
shares authorized; 135,937,934 and 135,727,237 shares issued;
75,867,105 and 75,689,364 shares outstanding
135,938
135,727
Additional paid-in capital
1,680,111
1,678,843
Accumulated other comprehensive income
(loss), net of taxes
41,435
16,953
Treasury stock, at cost; 60,070,829 and
60,037,873 shares
(1,238,997)
(1,238,296)
Retained earnings
1,443,280
1,420,906
2,061,767
2,014,133
$
19,063,622
$
18,794,055
CONSOLIDATED FINANCIAL
HIGHLIGHTS
Common stockholders' equity per share
$
27.18
$
26.61
Tangible common stockholders' equity per
share
23.10
22.52
Stockholders' equity to total assets
10.82
%
10.72
%
Tangible common stockholders' equity (TCE)
to tangible assets (TA)
9.34
%
9.22
%
TCE + allowance for credit losses to
TA
10.39
%
10.26
%
Weighted average rates at period
end
Loans and mortgage-backed securities
3.48
%
3.55
%
Combined loans, mortgage-backed securities
and investments
2.92
3.03
Customer accounts
0.36
0.48
Borrowings
1.82
1.79
Combined cost of customer accounts and
borrowings
0.58
0.69
Net interest spread
2.34
2.34
WASHINGTON FEDERAL, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
FINANCIAL CONDITION
(UNAUDITED)
Three Months Ended December
31,
2020
2019
(In thousands, except share and
ratio data)
INTEREST INCOME
Loans receivable
$
133,671
$
142,146
Mortgage-backed securities
7,230
15,612
Investment securities and cash
equivalents
6,921
7,066
147,822
164,824
INTEREST EXPENSE
Customer accounts
14,110
31,481
FHLB advances and other borrowings
13,198
13,658
27,308
45,139
Net interest income
120,514
119,685
Provision (release) for credit losses
3,000
(3,750)
Net interest income after provision
(release)
117,514
123,435
OTHER INCOME
Loan fee income
2,392
1,804
Deposit fee income
6,026
6,260
Other Income
5,452
38,312
13,870
46,376
OTHER EXPENSE
Compensation and benefits
42,723
36,631
Occupancy
9,592
10,135
FDIC insurance premiums
3,263
2,470
Product delivery
4,937
4,267
Information technology
11,831
17,107
Other
9,064
12,026
81,410
82,636
Gain (loss) on real estate owned, net
(449)
(886)
Income before income taxes
49,525
86,289
Income tax provision
10,574
18,423
NET INCOME
$
38,951
$
67,866
PER SHARE DATA
Basic earnings per share
$
0.51
$
0.86
Diluted earnings per share
0.51
0.86
Cash dividends per share
0.22
0.21
Basic weighted average shares
outstanding
75,792,995
78,480,264
Diluted weighted average shares
outstanding
75,798,460
78,535,299
PERFORMANCE RATIOS
Return on average assets
0.83
%
1.66
%
Return on average common equity
7.65
13.46
Net interest margin
2.75
3.15
Efficiency ratio
60.58
57.05
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version on businesswire.com: https://www.businesswire.com/news/home/20210114005995/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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