Washington Federal, Inc. (Nasdaq: WAFD) (the "Company"), parent
company of Washington Federal, National Association, today
announced record quarterly earnings of $51,394,000 or $0.61 per
diluted share for the quarter ended June 30, 2018 compared to
$44,112,000 or $0.49 per diluted share for the quarter ended
June 30, 2017, a $0.12 or 24% increase in fully diluted
earnings per share. Return on equity for the quarter ended
June 30, 2018 was 10.30% compared to 8.70% for the quarter
ended June 30, 2017. Return on assets for the quarter ended
June 30, 2018 was 1.31% compared to 1.17% for the same quarter
in the prior year.
President and Chief Executive Officer Brent J. Beardall
commented, “The Company’s 24% increase in earnings per share is
attributable to loan growth, improved net interest margin, fewer
shares outstanding and a lower tax rate. It is notable that these
results are inclusive of a 17% increase in operating costs, which
include previously announced investments in our colleagues,
technology and higher regulatory compliance costs. We are pleased
that the impact of rising short-term interest rates on our funding
costs has been more than offset by the combination of the
re-pricing of variable rate assets and loan growth."
On July 17, 2018, the Company and Anchor Bancorp ("Anchor")
mutually agreed to terminate the previously announced Agreement and
Plan of Merger dated as of April 11, 2017, as amended. President
and Chief Executive Officer Brent J. Beardall commented, “We are
disappointed the transaction will not be consummated, but wish to
thank the Board and Management of Anchor for their cooperation
during this process. We wish Anchor the best going forward."
Total assets were $15.8 billion as of June 30, 2018
compared to $15.3 billion as of September 30, 2017, the
Company's fiscal year-end. Asset growth since September 30,
2017 resulted primarily from a $443 million increase in net loans
receivable.
Customer deposits increased by $452 million or 4.2% since
September 30, 2017 and totaled $11.3 billion as of
June 30, 2018. Transaction accounts increased by $212 million
or 3.3% during that period, while time deposits increased $241
million or 5.4%. The Company continues to focus on growing
transaction accounts to lessen sensitivity to rising interest rates
and reduce interest expense. As of June 30, 2018, 58.2% of the
Company’s deposits were in transaction accounts. Core deposits,
defined as all transaction accounts and time deposits less than
$250,000, totaled 93.6% of deposits at June 30, 2018.
Borrowings from the Federal Home Loan Bank ("FHLB") totaled $2.4
billion as of June 30, 2018 and $2.2 billion at
September 30, 2017. The weighted average rate for FHLB
borrowings was 2.64% as of June 30, 2018 and 2.80% at
September 30, 2017, the decline being due to the refinancing
of some long-term FHLB advances that matured.
Loan originations totaled $1,096 million for our third fiscal
quarter 2018 compared to $1,031 million of originations in the same
quarter one year ago. Partially offsetting loan originations in
each of these quarters were loan repayments of $891 million and
$793 million, respectively. Commercial loans represented 68% of all
loan originations during our third fiscal quarter 2018 and consumer
loans accounted for the remaining 32%. 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
4.42% as of June 30, 2018, an increase from 4.28% as of
September 30, 2017.
Asset quality remained strong and the ratio of non-performing
assets to total assets improved to 0.46% as of June 30, 2018
compared to 0.50% at June 30, 2017 and 0.46% at
September 30, 2017. Since September 30, 2017, real estate
owned decreased by $9 million, or 45%, and non-accrual loans
increased by $11 million, or 22%. Delinquent loans were 0.40% of
total loans at June 30, 2018 compared to 0.50% at
June 30, 2017 and 0.40% at September 30, 2017. The
allowance for loan losses and reserve for unfunded commitments
totaled $135 million as of June 30, 2018 and was 1.06% of
gross loans outstanding, as compared to $131 million or 1.07% of
gross loans outstanding at September 30, 2017.
On May 25, 2018, the Company paid a regular cash dividend
of $0.17 per share, which represented the 141st consecutive
quarterly cash dividend. During the quarter, the Company
repurchased 1,224,384 shares of common stock at a weighted average
price of $32.64 per share and has authorization to repurchase
2,855,765 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,
2017, tangible common stockholders’ equity per share increased by
$0.47 or 2.4% to $20.05 and the ratio of tangible common equity to
tangible assets remained strong at 10.83% as of June 30,
2018.
Net interest income was $120 million for the quarter, an
increase of $11.2 million or 10.3% from the same quarter in the
prior year. The increase in net interest income from the prior year
was primarily due to both higher balances and yield. Average
earning assets increased by $710 million, or 5.1%. Net interest
margin increased to 3.29% in the third fiscal quarter of 2018 from
3.13% for the same quarter in the prior year. The margin increase
is primarily due to changes in the mix of interest earning assets,
higher yields on variable rate loans, cash and investments, as well
as a lower rate on FHLB advances due to the maturity of some higher
cost long-term advances.
The Company recorded a provision for loan losses of $1.0 million
in the third fiscal quarter of 2018 compared with no provision in
the same quarter of 2017. Net recoveries were $90 thousand for the
third fiscal quarter of 2018 compared to $1.3 million for the prior
year's quarter.
Total other income was $12.5 million for the third fiscal
quarter of 2018, a decrease of $1.5 million from $13.9 million in
the same quarter of the prior year. The decrease is primarily due
to gains recognized on bank owned life insurance in the prior year.
Deposit fee income increased by $0.7 million from the prior year
due to the full roll-out of the Company's new "Green Checking"
product since that time. In May 2018, the Company terminated all of
its FDIC loss share agreements. All future recoveries, gains,
losses and expenses related to the previously covered assets will
now be recognized entirely by the Company and the FDIC will no
longer share in such gains or losses.
Total operating expenses were $67.0 million in the third fiscal
quarter of 2018, an increase of $9.9 million or 17.4% from the
prior year's quarter. In the current quarter the Company had Bank
Secrecy Act (BSA) related costs of approximately $4.9 million and
projects that it will incur an additional $10 million of
non-recurring costs for BSA improvements spread over the next four
quarters. Once the program is steadied, BSA costs are expected to
be approximately $2 million per quarter. Compensation and benefits
costs increased by $2.3 million over the prior year quarter
primarily due to headcount increases and cost of living adjustments
since last year. Information technology costs increased by $3.5
million and other expenses increased by $2.7 million as both were
elevated primarily due to the aforementioned BSA program
enhancements and other technology platform improvements. The
Company’s efficiency ratio in the third fiscal quarter of 2018 was
50.6% compared to 46.6% for the same period one year ago. The
increase in the efficiency ratio is due to the elevated expenses
noted above. The efficiency ratio was 49.5% for the nine months
ended June 30, 2018.
On December 22, 2017, a new tax law was enacted that provides
for significant changes to the U.S. Internal Revenue Code of 1986,
as amended, such as a reduction in the federal corporate tax rate
from 35% to 21% effective from January 1, 2018 forward and changes
or limitations to certain tax deductions. The Company has a fiscal
year end of September 30, resulting in a blended federal statutory
tax rate for its fiscal year 2018. The financial statements for the
first fiscal quarter of 2018 were impacted by discrete tax benefits
of $3.7 million related to the revaluation of deferred tax assets
and liabilities as well as tax benefits related to stock based
compensation. For the nine months ended June 30, 2018, the
Company recorded federal and state income tax expense of $37.6
million, which equates to a 19.8% effective tax rate. The Company
estimates that its annual effective tax rate for its full fiscal
2018 (blended rate year) will be approximately 21%. This compares
to an effective tax rate of 32.3% for the fiscal year ended
September 30, 2017.
Washington Federal, a national bank with headquarters in
Seattle, Washington, has 236 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.
Non-GAAP Financial
Measures
Adjusted pre-tax income of $198.5 million for the nine months
ended June 30, 2018 is calculated by adding back the FDIC loss
share valuation adjustments of $8.6 million to pre-tax income of
$189.9 million. The $8.6 million valuation adjustment was recorded
in the quarter ended December 31, 2017.
Adjusted other income of $40.4 million for the nine months ended
June 30, 2018 is calculated by adding back the FDIC loss share
valuation adjustments of $8.6 million to other income of $31.8
million.
Adjusted efficiency ratio of 49.5% for the nine months ended
June 30, 2018 is calculated by dividing total operating
expense of $194.7 million by adjusted total income of $393.3
million (net interest income of $352.9 million plus adjusted other
income of $40.4 million).
Important Cautionary
Statements
The foregoing information should be read in conjunction with the
financial statements, notes and other information contained in the
Company’s 2017 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) June 30, 2018 September 30, 2017
(In thousands, except share and ratio data)
ASSETS Cash and
cash equivalents
$ 345,919 $ 313,070
Available-for-sale securities, at fair value
1,255,401
1,266,209 Held-to-maturity securities, at amortized cost
1,670,450 1,646,856 Loans receivable, net of allowance for
loan losses of $128,666 and $123,073
11,325,971 10,882,622
Interest receivable
43,670 41,643 Premises and equipment,
net
269,674 263,694 Real estate owned
11,275 20,658
FHLB and FRB stock
128,790 122,990 Bank owned life insurance
214,752 211,330 Intangible assets, including goodwill of
$301,368 and $293,153
311,796 298,682 Federal and state
income tax assets, net
4,293 — Other assets
184,330
185,826
$ 15,766,321 $
15,253,580
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities Customer accounts Transaction deposit accounts
$ 6,572,766 $ 6,361,158 Time deposit accounts
4,714,707 4,473,850
11,287,473
10,835,008 FHLB advances
2,370,000 2,225,000 Advance
payments by borrowers for taxes and insurance
32,632 56,631
Accrued expenses and other liabilities
89,953 131,253
13,780,058 13,247,892
Stockholders’ equity
Common stock, $1.00 par value, 300,000,000 shares authorized;
135,343,437 and 134,957,511 shares issued; 83,534,098 and
87,193,362 shares outstanding
135,344 134,958 Additional
paid-in capital
1,665,421 1,660,885 Accumulated other
comprehensive (loss) income, net of taxes
8,137 5,015
Treasury stock, at cost; 51,809,339 and 47,764,149 shares
(975,001 ) (838,060 ) Retained earnings
1,152,362 1,042,890
1,986,263
2,005,688
$ 15,766,321 $ 15,253,580
CONSOLIDATED FINANCIAL HIGHLIGHTS Common
stockholders' equity per share
$ 23.78 $ 23.00
Tangible common stockholders' equity per share
20.05 19.58
Stockholders' equity to total assets
12.60 % 13.15 %
Tangible common stockholders' equity to tangible assets
10.83 % 11.41 %
Weighted average rates at
period end Loans and mortgage-backed securities
4.13
% 3.96 % Combined loans, mortgage-backed securities and
investments
4.01 3.82 Customer accounts
0.75 0.54
Borrowings
2.64 2.80 Combined cost of customer accounts and
borrowings
1.08 0.92 Net interest spread
2.93 2.90
WASHINGTON FEDERAL, INC. AND
SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED) Three Months Ended June 30, Nine Months
Ended June 30,
2018 2017
2018 2017 (In
thousands, except share and ratio data) (In thousands, except share
and ratio data)
INTEREST INCOME Loans receivable
$
131,541 $ 117,457
$ 382,581 $ 348,326
Mortgage-backed securities
18,022 15,992
52,588
45,007 Investment securities and cash equivalents
5,509
4,267
14,762 13,345
155,072 137,716
449,931 406,678
INTEREST
EXPENSE Customer accounts
18,887 12,764
49,939
38,173 FHLB advances and other borrowings
16,333
16,337
47,104 49,011
35,220
29,101
97,043 87,184
Net interest income
119,852 108,615
352,888 319,494 Provision (release)
for loan losses
1,000 —
50
(1,600 )
Net interest income after provision (release) for loan
losses 118,852 108,615
352,838 321,094
OTHER INCOME Gain on sale of investment securities
—
—
— 968 FDIC loss share valuation adjustments
— —
(8,550 ) — Loan fee income
1,094 889
2,909 3,310 Deposit fee income
6,411 5,714
19,500 15,803 Other Income
4,946 7,319
17,974 15,873
12,451 13,922
31,833 35,954
OTHER EXPENSE Compensation and benefits
31,223 28,947
92,467 84,774 Occupancy
9,095
8,829
26,779 26,370 FDIC insurance premiums
2,950
2,842
8,622 8,591 Product delivery
4,356 3,246
11,977 10,096 Information technology
10,118 6,617
26,828 19,754 Other
9,235 6,581
28,032 19,285
66,977 57,062
194,705 168,870 Gain (loss) on real estate owned, net
168 (124 )
(64 ) 1,069 Income
before income taxes
64,494 65,351
189,902 189,247
Income tax provision
13,100 21,239
37,567 61,819
NET INCOME $
51,394 $ 44,112
$ 152,335
$ 127,428
PER SHARE DATA Basic earnings per
share
$ 0.61 $ 0.49
$ 1.78 $ 1.43
Diluted earnings per share
0.61 0.49
1.78 1.42 Cash
dividends per share
0.17 0.15
0.49 0.69 Basic
weighted average shares outstanding
84,168,992 89,199,823
85,589,588 89,297,471 Diluted weighted average shares
outstanding
84,252,659 89,497,264
85,698,888
89,653,955
PERFORMANCE RATIOS Return on average
assets
1.31 % 1.17 %
1.31 % 1.14 %
Return on average common equity
10.30 8.70
10.12 8.46
Net interest margin
3.29 3.13
3.27 3.10 Efficiency
ratio (a)
50.62 46.57
49.51 47.51 (a) Efficiency
ratio for the nine months ended June 30, 2018 excludes the impact
of $8.55 million reduction to other income related to FDIC loss
share valuation adjustments.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180718005136/en/
Washington Federal, Inc.Brad Goode, SVP, Director of
Communications206-626-8178brad.goode@wafd.com
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