SEATTLE--(BUSINESS WIRE)--Washington Federal, Inc. (Nasdaq: WAFD) (the "Company"), parent company of Washington Federal Bank, National Association, today announced record quarterly earnings of $53,854,000 or $0.67 per diluted share for the quarter ended June 30, 2019, compared to $51,394,000 or $0.61 per diluted share for the quarter ended June 30, 2018, a $0.06 or 10% increase in fully diluted earnings per share. Return on equity for the quarter ended June 30, 2019 was 10.68% compared to 10.30% for the quarter ended June 30, 2018. Return on assets for the quarter ended June 30, 2019 was 1.31% compared to 1.31% for the same quarter in the prior year.

President and Chief Executive Officer Brent J. Beardall commented, “Our third fiscal quarter produced record net income as we continued to experience steady growth in loans and deposits. Credit risk remains benign, but we have seen an uptick in economic uncertainty related to threatened tariffs and the relatively flat yield curve. However, we are optimistic as our primary markets continue to experience net immigration and robust job growth. Operationally, we have made improvements to our Bank Secrecy Act programs and procedures and will continue to make needed investments. As we transform over the next few years into a digital first bank, we see significant potential to improve our digital platforms with the objective of increasing deposit market share."

Total assets were $16.5 billion as of June 30, 2019, 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 $497 million or 4.33% increase in net loans receivable.

Customer deposits increased by $413 million or 3.6% since September 30, 2018, reaching a total of $11.8 billion as of June 30, 2019. Transaction accounts increased by $268 million or 4.1% during that period, while time deposits increased $146 million or 3.0%. The Company continues to focus on growing transaction accounts to lessen sensitivity to rising interest rates and manage interest expense. As of June 30, 2019, 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 93.3% of deposits at June 30, 2019.

Borrowings from the Federal Home Loan Bank ("FHLB") totaled $2.5 billion as of June 30, 2019, versus $2.3 billion at September 30, 2018. The weighted average rate of FHLB borrowings was 2.58% as of June 30, 2019, versus 2.66% at September 30, 2018, the decrease being due to lower rates on new FHLB advances and maturing advances with higher rates.

Loan originations totaled $1.00 billion for the third fiscal quarter 2019, a decrease of 8.6% from the $1.10 billion of originations in the same quarter one year ago. Partially offsetting loan originations in each of these quarters were loan repayments of $930 million and $891 million, respectively. Commercial loans represented 69% of all loan originations during the third fiscal quarter 2019 and consumer loans accounted for the remaining 31%. 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 in this interest rate environment as they generally have floating interest rates and shorter durations. The weighted average interest rate on the loan portfolio was 4.61% as of June 30, 2019, 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 0.31% as of June 30, 2019, compared to 0.46% at June 30, 2018 and 0.44% at September 30, 2018. Since September 30, 2018, real estate owned decreased by $4 million, or 38%, and non-accrual loans decreased by $15 million, or 26%. Delinquent loans were 0.35% of total loans at June 30, 2019, compared to 0.40% at June 30, 2018 and 0.42% at September 30, 2018. The allowance for loan losses and reserve for unfunded commitments totaled $140 million as of June 30, 2019, and was 1.05% of gross loans outstanding, as compared to $137 million, or 1.06%, of gross loans outstanding at September 30, 2018. Net recoveries were $0.9 million for the third fiscal quarter of 2019, compared to $0.1 million for the prior year's quarter. The Company has recorded net recoveries for 16 consecutive quarters, and in 23 of the last 24 quarters.

On May 24, 2019, the Company paid a regular cash dividend of $0.20 per share, which represented the 145th consecutive quarterly cash dividend. During the quarter, the Company repurchased 1,056,460 shares of common stock at a weighted average price of $32.45 per share and has authorization to repurchase 8,537,241 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, 2018, tangible common stockholders’ equity per share increased by $1.07, or 5.2%, to $21.45. The ratio of tangible common equity to tangible assets remained strong at 10.54% as of June 30, 2019, compared to 10.84% at September 30, 2018.

Net interest income was $122 million for the quarter, an increase of $1.8 million or 1.5% 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 $730 million while interest-bearing liabilities increased by $720 million. Net interest margin decreased to 3.18% in the third fiscal quarter of 2019, from 3.29% for the same quarter in the prior year as the average rate earned on interest-earning assets rose by 24 basis points while the average rate paid on interest-bearing liabilities increased 36 basis points. The compression in the net interest margin is primarily the result of the flat to inverted yield curve.

Due to the strong asset quality indicators previously mentioned, the Company did not record any provision for loan losses in the third fiscal quarter of 2019. In the same quarter of fiscal 2018, the Company recorded a provision for loan losses of $1 million.

Total other income was $14.0 million for the third fiscal quarter of 2019, an increase from $12.5 million in the same quarter of the prior year.

Total operating expenses were $70.9 million in the third fiscal quarter of 2019, an increase of $3.9 million, or 5.9%, from the prior year's quarter. Increased operating expenses are the result of ongoing investments in people, process and technology with the objective of growing market share and ultimately earnings. Compensation and benefits costs increased by $3.1 million over the prior year quarter primarily due to the aforementioned investments. Other expenses increased by $1.3 million, primarily due to ongoing Bank Secrecy Act (BSA) program enhancements. In the third fiscal quarter of 2019, the Company had approximately $1.1 million of non-recurring BSA related costs. The Company’s efficiency ratio in the third fiscal quarter of 2019 was 52.2%, compared to 50.6% 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 $11.3 million for the three months ended June 30, 2019, as compared to $13.9 million for the prior quarter and $13.1 million for the three months ended June 30, 2018. Income tax expense totaled $39.5 million for the nine months ended June 30, 2019, as compared to $37.6 million for the nine months ended June 30, 2018. The effective tax rate for the nine months ended June 30, 2019 was 20.0%, compared to 19.8% for the nine months ended June 30, 2018. The Company’s effective tax rate for the nine months ended June 30, 2019 is lower than the statutory rate mainly due to a one-time tax benefit recorded in the third fiscal quarter related to the resolution of a previously unrecognized tax position. The Company estimates that its effective tax rate going forward will be approximately 21%.

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.wafdbank.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 "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.


 



June 30, 2019



 



September 30, 2018



 



(In thousands, except share and ratio data)



ASSETS



 



 



 



Cash and cash equivalents



$



289,828



 



 



$



268,650



 



Available-for-sale securities, at fair value



1,507,937



 



 



1,314,957



 



Held-to-maturity securities, at amortized cost



1,508,175



 



 



1,625,420



 



Loans receivable, net of allowance for loan losses of $134,022 and $129,257



11,974,533



 



 



11,477,081



 



Interest receivable



48,004



 



 



47,295



 



Premises and equipment, net



275,640



 



 



267,995



 



Real estate owned



7,003



 



 



11,298



 



FHLB and FRB stock



134,190



 



 



127,190



 



Bank owned life insurance



220,610



 



 



216,254



 



Intangible assets, including goodwill of $301,368 and $301,368



309,757



 



 



311,286



 



Federal and state income tax assets, net






 



 



1,804



 



Other assets



192,848



 



 



196,494



 



 



$



16,468,525



 



 



$



15,865,724



 



LIABILITIES AND STOCKHOLDERS’ EQUITY



 



 



 



Liabilities



 



 



 



Transaction deposits



$



6,849,850



 



 



$



6,582,343



 



Time deposits



4,950,320



 



 



4,804,803



 



Total customer deposits



11,800,170



 



 



11,387,146



 



FHLB advances



2,505,000



 



 



2,330,000



 



Advance payments by borrowers for taxes and insurance



33,949



 



 



57,417



 



Federal and state income tax liabilities, net



2,364



 



 






 



Accrued expenses and other liabilities



114,308



 



 



94,253



 



 



14,455,791



 



 



13,868,816



 



Stockholders’ equity



 



 



 



Common stock, $1.00 par value, 300,000,000 shares authorized; 135,526,576 and 135,343,417 shares issued; 79,398,713 and 82,710,911 shares outstanding



135,527



 



 



135,343



 



Additional paid-in capital



1,671,198



 



 



1,666,609



 



Accumulated other comprehensive (loss) income, net of taxes



12,137



 



 



8,294



 



Treasury stock, at cost; 56,127,863 and 52,632,506 shares



(1,106,244



)



 



(1,002,309



)



Retained earnings



1,300,116



 



 



1,188,971



 



 



2,012,734



 



 



1,996,908



 



 



$



16,468,525



 



 



$



15,865,724



 



CONSOLIDATED FINANCIAL HIGHLIGHTS



 



 



 



Common stockholders' equity per share



$



25.35



 



 



$



24.14



 



Tangible common stockholders' equity per share



21.45



 



 



20.38



 



Stockholders' equity to total assets



12.22



%



 



12.59



%



Tangible common stockholders' equity (TCE) to tangible assets (TA)



10.54



%



 



10.84



%



TCE + allowance for loan losses to TA



11.37



%



 



11.67



%



Weighted average rates at period end



 



 



 



Loans and mortgage-backed securities



4.32



%



 



4.19



%



Combined loans, mortgage-backed securities and investments



4.21



 



 



4.07



 



Customer accounts



1.13



 



 



0.87



 



Borrowings



2.58



 



 



2.66



 



Combined cost of customer accounts and borrowings



1.39



 



 



1.17



 



Net interest spread



2.82



2.90



 



Three Months Ended June 30,



 



Nine Months Ended June 30,



 



2019



 



2018



 



2019



 



2018



 



(In thousands, except share and ratio data)



 



(In thousands, except share and ratio data)



INTEREST INCOME



 



 



 



 



 



 



 



Loans receivable



$



145,490



 



 



$



131,541



 



 



$



423,616



 



 



$



382,581



 



Mortgage-backed securities



18,719



 



 



18,022



 



 



57,254



 



 



52,588



 



Investment securities and cash equivalents



7,617



 



 



5,509



 



 



21,160



 



 



14,762



 



 



171,826



 



 



155,072



 



 



502,030



 



 



449,931



 



INTEREST EXPENSE



 



 



 



 



 



 



 



Customer accounts



32,331



 



 



18,887



 



 



88,576



 



 



49,939



 



FHLB advances and other borrowings



17,829



 



 



16,333



 



 



52,566



 



 



47,104



 



 



50,160



 



 



35,220



 



 



141,142



 



 



97,043



 



Net interest income



121,666



 



 



119,852



 



 



360,888



 



 



352,888



 



Provision (release) for loan losses






 



 



1,000



 



 



250



 



 



50



 



Net interest income after provision (release)



121,666



 



 



118,852



 



 



360,638



 



 



352,838



 



 



 



 



 



 



 



 



 



OTHER INCOME



 



 



 



 



 



 



 



Gain (loss) on sale of investment securities






 



 






 



 



(9



)



 






 



FDIC loss share valuation adjustments






 



 






 



 






 



 



(8,550



)



Loan fee income



1,334



 



 



1,094



 



 



2,971



 



 



2,909



 



Deposit fee income



6,258



 



 



6,411



 



 



18,387



 



 



19,500



 



Other Income



6,450



 



 



4,946



 



 



24,512



 



 



17,974



 



 



14,042



 



 



12,451



 



 



45,861



 



 



31,833



 



OTHER EXPENSE



 



 



 



 



 



 



 



Compensation and benefits



34,297



 



 



31,223



 



 



100,954



 



 



92,467



 



Occupancy



9,684



 



 



9,095



 



 



28,782



 



 



26,779



 



FDIC insurance premiums



2,559



 



 



2,950



 



 



7,399



 



 



8,622



 



Product delivery



3,912



 



 



4,356



 



 



11,478



 



 



11,977



 



Information technology



9,935



 



 



10,118



 



 



27,730



 



 



26,828



 



Other



10,511



 



 



9,235



 



 



34,194



 



 



28,032



 



 



70,898



 



 



66,977



 



 



210,537



 



 



194,705



 



Gain (loss) on real estate owned, net



353



 



 



168



 



 



1,481



 



 



(64



)



Income before income taxes



65,163



 



 



64,494



 



 



197,443



 



 



189,902



 



Income tax provision



11,309



 



 



13,100



 



 



39,549



 



 



37,567



 



NET INCOME



$



53,854



 



 



$



51,394



 



 



$



157,894



 



 



$



152,335



 



 



 



 



 



 



 



 



 



PER SHARE DATA



 



 



 



 



 



 



 



Basic earnings per share



$



0.67



 



 



$



0.61



 



 



$



1.95



 



 



$



1.78



 



Diluted earnings per share



0.67



 



 



0.61



 



 



1.95



 



 



1.78



 



Cash dividends per share



0.20



 



 



0.17



 



 



0.58



 



 



0.49



 



Basic weighted average shares outstanding



79,976,574



 



84,168,992



 



80,915,162



 



85,589,588



Diluted weighted average shares outstanding



79,992,356



 



84,252,659



 



80,941,617



 



85,698,888



 



 



 



 



 



 



 



 



PERFORMANCE RATIOS



 



 



 



 



 



 



 



Return on average assets



1.31



%



 



1.31



%



 



1.29



%



 



1.31



%



Return on average common equity



10.68



 



 



10.30



 



 



10.51



 



 



10.12



 



Net interest margin



3.18



 



 



3.29



 



 



3.18



 



 



3.27



 



Efficiency ratio



52.24



 



 



50.62



 



 



51.76



 



 



49.51



 


 

Contacts

Washington Federal, Inc.

Brad Goode, SVP, Director of Communications

206-626-8178