Washington Federal, Inc. (Nasdaq: WAFD) (the "Company"), parent
company of Washington Federal Bank ("WaFd Bank"), today announced
quarterly earnings of $79,509,000 for the quarter ended December
31, 2022, an increase of 58% from $50,281,000 for the quarter ended
December 31, 2021. After the effect of dividends on preferred
stock, net income available for common shareholders was $1.16 per
diluted share for the quarter ended December 31, 2022, compared to
$0.71 per diluted share for the quarter ended December 31, 2021, a
$0.45 or 63% increase in fully diluted earnings per common share.
Return on common shareholders' equity for the quarter ended
December 31, 2022 was 15.15% compared to 10.12% for the quarter
ended December 31, 2021. Return on assets for the quarter ended
December 31, 2022 was 1.50% compared to 1.02% for the same quarter
in the prior year.
Executive Vice President, Chief Consumer Banker and acting Chief
Executive Officer Cathy Cooper commented, "The first fiscal quarter
of 2023 was a great start to the year. Loan growth was robust,
increasing $880 million or 5.5% for the quarter. Credit quality
remained strong, with yet another quarter of net recoveries and our
allowance for credit losses stands at $208 million. Solid growth in
our fundamental business resulted in a 36.3% increase in net
interest income over the same quarter last year as the increase in
the average rate earned on our interest-earning assets outpaced the
increase in the average rate paid on our interest-bearing
liabilities.
Our results show that the Bank continues to benefit from rising
rates while we hold the line on other expenses, as reflected in our
improved efficiency ratio for the quarter, even as we make
additional investments in technology enhancements such as
voice-authenticated banking and data-driven personalization. It's
not surprising that deposit costs are rising and liquidity in the
system is tightening, for WaFd and the banking industry, which we
view both as important and needed steps for economic stability
On November 13, 2022 we announced the signing of a definitive
merger agreement with Luther Burbank Corporation (NASDAQ: LBC,
“Luther Burbank”), creating a continuous footprint from Seattle to
Austin. We believe our complementary approach to serving the needs
of our clients and communities will lead to successful partnership
opportunities for growth post-merger.
I’m also gratified to report that Brent Beardall, our President
and CEO who is currently on leave, is recovering from multiple
injuries he sustained on January 2, 2023. We expect him to soon be
discharged from the hospital to focus on rehabilitation. Brent and
the entire team at WaFd are grateful for the outpouring of love and
support and we are overwhelmed by the response. It truly is a
privilege for all of us here at WaFd Bank to continue to press
forward on the bank’s strategic initiatives, including our proposed
acquisition of Luther Burbank, while we await Brent’s return to his
normal duties."
Total assets were $21.7 billion as of December 31, 2022,
compared to $20.8 billion at September 30, 2022, primarily due to
continued growth in net loans receivable funded by increased
Federal Home Loan Bank ("FHLB") advances. Net loans increased by
$880 million, or 5.5%, while FHLB advances increased $950 million,
or 44.7%. Investment securities slightly decreased by $1 million
during the quarter.
Customer deposits totaled $16.0 billion as of December 31, 2022,
a decrease of 0.4% since September 30, 2022. Transaction accounts
decreased by $144 million or 1.1% during that period, while time
deposits increased $74 million or 2.2%. Our focus historically on
growing transaction accounts is intended to lessen sensitivity to
rising interest rates and manage interest expense. As of December
31, 2022, 78.6% of the Company’s deposits were transaction
accounts, down from 79.2% at September 30, 2022. Core deposits,
defined as all transaction accounts and time deposits less than
$250,000, totaled 94.0% of deposits at December 31, 2022.
Borrowings from the FHLB totaled $3.08 billion as of December
31, 2022, up from $2.13 billion at September 30, 2022 driven
largely by loan growth and relatively flat customer deposit
balances. The effective weighted average interest rate of FHLB
borrowings was 3.14% as of December 31, 2022, an increase from
2.02% at September 30, 2022.
The Company had strong loan originations of $2.04 billion for
the first fiscal quarter of 2023, comparable to $2.13 billion of
originations in the same quarter one year ago. Offsetting loan
originations in each of these quarters were loan repayments of
$1.23 billion and $1.83 billion, respectively. Commercial loans
represented 84% of all loan originations during the first fiscal
quarter of 2023 and consumer loans accounted for the remaining 16%.
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 4.73% as of December 31, 2022, an increase from
4.25% as of September 30, 2022, due primarily to higher rates on
adjustable rate loans and newly originated loans.
Credit quality is being monitored closely in light of the
shifting economic and monetary environment. As of December 31,
2022, non-performing assets remained low from a historical
perspective and totaled $38.7 million, or 0.18% of total assets,
down from $44.6 million, or 0.21%, at September 30, 2022. The
change fiscal year to date is due primarily to non-accrual loans
decreasing by $5.4 million, or 16%, since September 30, 2022.
Delinquent loans decreased to 0.16% of total loans at December 31,
2022, compared to 0.17% at September 30, 2022. The allowance for
credit losses (including the reserve for unfunded commitments)
totaled $208 million as of December 31, 2022, and was 1.03% of
gross loans outstanding, as compared to $205 million, or 1.06% of
gross loans outstanding, at September 30, 2022. Net recoveries were
$0.5 million for the first fiscal quarter of 2023, compared to net
recoveries of $2.1 million for the prior year same quarter. The
Company has recorded net recoveries for nine consecutive years.
The Company recorded a $2.5 million provision for credit losses
in the first fiscal quarter of 2023, compared to a provision for
credit losses of $0.5 million in the same quarter of fiscal 2022.
The provision for loan losses in the quarter ended December 31,
2022 was primarily due to growth in loans receivable largely offset
by continued strong credit performance and collateral
protection.
The Company paid a quarterly dividend on Series A preferred
stock on October 15, 2022. On December 2, 2022, the Company paid a
regular cash dividend on common stock of $0.24 per share, which
represented the 159th consecutive quarterly cash dividend. Tangible
common shareholders' equity per share increased by $0.75, or 2.9%,
to $26.24 since September 30, 2022. The ratio of total tangible
shareholders' equity to tangible assets was 9.44% as of December
31, 2022.
Net interest income was $183 million for the first fiscal
quarter of 2023, an increase of $48.7 million or 36.3% from the
same quarter in the prior year. The increase in net interest income
was primarily due to an increase in the interest rate spread of 63
basis points. This was the result of the increase of 149 basis
points in the average rate earned on interest-earning assets
outpacing the 86 basis point increase in the average rate paid on
interest-bearing liabilities. Net interest margin was 3.69% in the
first fiscal quarter of 2023 compared to 3.64% for the quarter
ended September 30, 2022 and 2.87% for the prior year quarter. This
increase in net interest margin is directly attributable to both
increasing market interest rates and the intentional shift over the
last several years towards transaction deposits and commercial
loans.
Total other income was $14.0 million for the first fiscal
quarter of 2023 compared to $18.7 million in the prior year same
quarter. The decrease in other income was primarily due to
unrealized gains for certain equity investments of $5.1 million
which were recorded in the quarter ended December 31, 2021. There
was no similar gain in the quarter ended December 31, 2022.
Total other expense was $92.3 million in the first fiscal
quarter of 2023, an increase of $2.7 million, or 3.0%, from the
prior year's quarter. Compensation and benefits costs increased by
$1.6 million, or 3.5%, over the prior year quarter primarily due to
annual merit increases and investments in top talent and strategic
initiatives. The Company’s efficiency ratio in the first fiscal
quarter of 2023 was 46.8%, compared to 58.6% for the same period
one year ago due to income growth outpacing expense growth.
Income tax expense totaled $22.4 million for the first fiscal
quarter of 2023, as compared to $13.0 million for the prior year
same quarter. The effective tax rate for the quarter ended December
31, 2022 was 22.00% compared to 21.23% for the year ended September
30, 2022. The Company’s effective tax rate may vary 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 200
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 2022 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 or current 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. Words
such as “anticipate,” “believe,” “continue,” “expect,” “goal,”
“intend,” “should,” “strategy,” “will,” or 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, including the following risks and uncertainties, and
those risks and uncertainties more fully discussed under “Risk
Factors” in the Company’s September 30, 2022 10-K, which could
cause actual performance to differ materially from that anticipated
by any forward-looking statements. In particular, any
forward-looking statements are subject to risks and uncertainties
related to (i) the effect of COVID-19 and other infectious illness
outbreaks that may arise in the future and the resulting
governmental and societal responses; (ii) current and future
economic conditions, including the effects of declines in the real
estate market, high unemployment rates, inflationary pressures, and
slowdowns in economic growth; (iii) financial stress on borrowers
(consumers and businesses) as a result of higher interest rates or
an uncertain economic environment; (iv) global economic trends,
including developments related to Ukraine and Russia, and related
negative financial impacts on our borrowers; (v) fluctuations in
interest rate risk and market interest rates, including the effect
on our net interest income and net interest margin; (vi) risks
related to the proposed merger with Luther Burbank; and (vii) our
ability to identify and address cyber-security risks, including
security breaches, “denial of service attacks,” “hacking” and
identity theft. 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, 2022
September 30, 2022
(In thousands, except share and
ratio data)
ASSETS
Cash and cash equivalents
$
645,862
$
683,965
Available-for-sale securities, at fair
value
2,059,837
2,051,037
Held-to-maturity securities, at amortized
cost
453,443
463,299
Loans receivable, net of allowance for
loan losses of $176,797 and $172,808
16,993,588
16,113,564
Interest receivable
75,316
63,872
Premises and equipment, net
240,360
243,062
Real estate owned
6,117
6,667
FHLB and FRB stock
133,073
95,073
Bank owned life insurance
238,370
237,931
Intangible assets, including goodwill of
$303,457 and $303,457
308,767
309,009
Other assets
499,078
504,652
$
21,653,811
$
20,772,131
LIABILITIES AND SHAREHOLDERS’
EQUITY
Liabilities
Transaction deposits
$
12,547,832
$
12,691,527
Time deposits
3,412,203
3,338,043
Total customer deposits
15,960,035
16,029,570
FHLB advances
3,075,000
2,125,000
Advance payments by borrowers for taxes
and insurance
17,626
50,051
Federal and state income tax liabilities,
net
16,995
3,306
Accrued expenses and other liabilities
259,774
289,944
19,329,430
18,497,871
Shareholders’ equity
Preferred stock, $1.00 par value,
5,000,000 shares authorized; 300,000 and 300,000 shares issued;
300,000 and 300,000 shares outstanding
300,000
300,000
Common stock, $1.00 par value, 300,000,000
shares authorized; 136,373,350 and 136,270,886 shares issued;
65,387,745 and 65,330,126 shares outstanding
136,373
136,271
Additional paid-in capital
1,689,209
1,686,975
Accumulated other comprehensive income
(loss), net of taxes
41,726
52,481
Treasury stock, at cost; 70,985,605 and
70,940,760 shares
(1,591,935
)
(1,590,207
)
Retained earnings
1,749,008
1,688,740
2,324,381
2,274,260
$
21,653,811
$
20,772,131
CONSOLIDATED FINANCIAL
HIGHLIGHTS
Common shareholders' equity per share
$
30.96
$
30.22
Tangible common shareholders' equity per
share
26.24
25.49
Shareholders' equity to total assets
10.73
%
10.95
%
Tangible shareholders' equity to tangible
assets
9.44
%
9.60
%
Tangible shareholders' equity + allowance
for credit losses to tangible assets
10.27
%
10.45
%
Weighted average rates at period
end
Loans and mortgage-backed securities
4.59
%
4.13
%
Combined loans, mortgage-backed securities
and investments
4.46
4.04
Customer accounts
0.94
0.51
Borrowings
3.14
2.02
Combined cost of customer accounts and
borrowings
1.29
0.68
Net interest spread
3.17
3.36
WASHINGTON FEDERAL, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
FINANCIAL CONDITION
(UNAUDITED)
As of
SUMMARY FINANCIAL DATA
December 31, 2022
September 30, 2022
June 30, 2022
March 31, 2022
December 31, 2021
(In thousands, except share and
ratio data)
Cash
$
645,862
$
683,965
$
607,421
$
1,947,504
$
1,880,647
Loans receivable, net
16,993,588
16,113,564
15,565,165
15,094,926
14,592,202
Allowance for credit losses ("ACL")
208,297
205,308
203,479
201,384
201,411
Available-for-sale securities, at fair
value
2,059,837
2,051,037
2,150,732
1,909,605
1,946,139
Held-to-maturity securities, at amortized
cost
453,443
463,299
477,884
301,221
326,387
Total assets
21,653,811
20,772,131
20,158,831
20,560,279
19,973,171
Transaction deposits
12,547,832
12,691,527
12,668,251
13,139,606
12,550,062
Time deposits
3,412,203
3,338,043
3,297,369
3,251,042
3,351,984
FHLB advances
3,075,000
2,125,000
1,700,000
1,720,000
1,720,000
Total shareholders' equity
2,324,381
2,274,260
2,220,111
2,191,701
2,149,126
FINANCIAL HIGHLIGHTS
Common shareholders' equity per share
30.96
30.22
29.39
28.97
28.33
Tangible common shareholders' equity per
share
26.24
25.49
24.66
24.23
23.59
Shareholders' equity to total assets
10.73
%
10.95
%
11.01
%
10.66
%
10.76
%
Tangible shareholders' equity to tangible
assets
9.44
%
9.60
%
9.63
%
9.29
%
9.35
%
Tangible shareholders' equity + ACL to
tangible assets
10.27
%
10.45
%
10.65
%
10.29
%
10.38
%
Common shares outstanding
65,387,745
65,330,126
65,321,869
65,306,928
65,263,738
Preferred shares outstanding
300,000
300,000
300,000
300,000
300,000
Loans to customer deposits
106.48
%
100.52
%
97.49
%
92.09
%
91.76
%
CREDIT QUALITY
ACL to gross loans
1.03
%
1.06
%
1.08
%
1.13
%
1.18
%
ACL to non-accrual loans
713.83
%
594.51
%
554.76
%
598.66
%
447.99
%
Non-accrual loans to net loans
0.17
%
0.21
%
0.24
%
0.22
%
0.31
%
Non-accrual loans
29,180
34,534
36,679
33,639
44,959
Non-performing assets to total assets
0.18
%
0.21
%
0.25
%
0.23
%
0.27
%
Non-performing assets
38,650
44,554
50,430
47,243
54,790
WASHINGTON FEDERAL, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
(UNAUDITED)
Three Months Ended December
31,
2022
2021
(In thousands, except share and
ratio data)
INTEREST INCOME
Loans receivable
$
203,946
$
138,509
Mortgage-backed securities
10,613
4,792
Investment securities and cash
equivalents
18,860
7,139
233,419
150,440
INTEREST EXPENSE
Customer accounts
31,646
8,461
FHLB advances and other borrowings
18,974
7,843
50,620
16,304
Net interest income
182,799
134,136
Provision (release) for credit losses
2,500
500
Net interest income after provision
(release)
180,299
133,636
OTHER INCOME
Gain (loss) on sale of investment
securities
—
81
Loan fee income
1,502
1,921
Deposit fee income
6,353
6,443
Other Income
6,169
10,236
14,024
18,681
OTHER EXPENSE
Compensation and benefits
49,070
47,425
Occupancy
10,102
10,090
FDIC insurance premiums
3,675
3,100
Product delivery
4,621
4,721
Information technology
12,329
11,421
Other
12,481
12,856
92,278
89,613
Gain (loss) on real estate owned, net
(112
)
562
Income before income taxes
101,933
63,266
Income tax provision
22,424
12,985
Net income
79,509
50,281
Dividends on preferred stock
3,656
3,656
Net income available to common
shareholders
$
75,853
$
46,625
PER SHARE DATA
Basic earnings per common share
$
1.16
$
0.72
Diluted earnings per common share
1.16
0.71
Cash dividends per common share
0.24
0.23
Basic weighted average shares
outstanding
65,341,974
65,207,837
Diluted weighted average shares
outstanding
65,430,690
65,350,174
PERFORMANCE RATIOS
Return on average assets
1.50
%
1.02
%
Return on average common equity
15.15
10.12
Net interest margin
3.69
2.87
Efficiency ratio
46.78
58.64
WASHINGTON FEDERAL, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
(UNAUDITED)
Three Months Ended
December 31, 2022
September 30, 2022
June 30, 2022
March 31, 2022
December 31, 2021
(In thousands, except share and
ratio data)
INTEREST INCOME
Loans receivable
$
203,946
$
174,710
$
149,113
$
139,260
$
138,509
Mortgage-backed securities
10,613
8,263
8,618
4,659
4,792
Investment securities and cash
equivalents
18,860
14,960
9,417
6,919
7,139
233,419
197,933
167,148
150,838
150,440
INTEREST EXPENSE
Customer accounts
31,646
17,071
9,284
8,225
8,461
FHLB advances and other borrowings
18,974
7,243
6,118
7,525
7,843
50,620
24,314
15,402
15,750
16,304
Net interest income
182,799
173,619
151,746
135,088
134,136
Provision (release) for credit losses
2,500
1,500
1,500
(500
)
500
Net interest income after provision
(release)
180,299
172,119
150,246
135,588
133,636
OTHER INCOME
Gain (loss) on sale of investment
securities
—
18
—
—
81
Loan fee income
1,502
1,154
1,618
2,475
1,921
Deposit fee income
6,353
6,604
6,613
6,282
6,443
Other income
6,169
6,706
9,319
6,902
10,236
14,024
14,482
17,550
15,659
18,681
OTHER EXPENSE
Compensation and benefits
49,070
51,304
48,073
47,115
47,425
Occupancy
10,102
10,568
10,053
11,788
10,090
FDIC insurance premiums
3,675
2,231
2,100
2,100
3,100
Product delivery
4,621
5,104
4,667
5,044
4,721
Information technology
12,329
12,228
11,831
11,722
11,421
Other expense
12,481
11,707
10,679
10,648
12,856
92,278
93,142
87,403
88,417
89,613
Gain (loss) on real estate owned, net
(112
)
(488
)
448
129
562
Income before income taxes
101,933
92,971
80,841
62,959
63,266
Income tax provision
22,424
19,576
17,546
13,600
12,985
Net income
79,509
73,395
63,295
49,359
50,281
Dividends on preferred stock
3,656
3,656
3,656
3,656
3,656
Net income available to common
shareholders
$
75,853
$
69,739
$
59,639
$
45,703
$
46,625
PER SHARE DATA
Basic earnings per common share
$
1.16
$
1.07
$
0.91
$
0.70
$
0.72
Diluted earnings per common share
1.16
1.07
0.91
0.70
0.71
Cash dividends per common share
0.24
0.24
0.24
0.24
0.23
Basic weighted average shares
outstanding
65,341,974
65,326,706
65,315,481
65,301,171
65,207,837
Diluted weighted average shares
outstanding
65,430,690
65,423,817
65,395,666
65,445,206
65,350,174
PERFORMANCE RATIOS
Return on average assets
1.50
%
1.44
%
1.25
%
0.98
%
1.02
%
Return on average common equity
15.15
14.22
12.50
9.80
10.12
Net interest margin
3.69
3.64
3.22
2.90
2.87
Efficiency ratio
46.78
49.52
51.63
58.65
58.64
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230112005676/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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