Washington Federal, Inc. (Nasdaq: WAFD) (the “Company”), parent
company of Washington Federal Bank (“WaFd Bank”), today announced
quarterly earnings of $65,934,000 for the quarter ended March 31,
2023, an increase of 33.6% from $49,359,000 for the quarter ended
March 31, 2022. After the effect of dividends on preferred stock,
net income available for common shareholders was $0.95 per diluted
share for the quarter ended March 31, 2023, compared to $0.70 per
diluted share for the quarter ended March 31, 2022, a $0.25 or
35.7% increase in fully diluted earnings per common share. Return
on common shareholders' equity for the quarter ended March 31, 2023
was 12.0% compared to 9.8% for the quarter ended March 31, 2022.
Return on assets for the quarter ended March 31, 2023 was 1.2%
compared to 1.0% for the same quarter in the prior year.
During the month of March 2023, the United States saw the 2nd
and 3rd largest bank failures in its history due to sudden customer
deposit outflows. WaFd Bank had net deposit inflows of $25 million
in the same month. For the quarter ended March 31, 2023, WaFd Bank
had net deposit outflows of $99 million or 0.6% of total deposits.
Only 27% of the Bank’s deposits were uninsured as of quarter end,
which is a decrease from 31% as of December 31, 2022. The Bank’s
held to maturity (“HTM”) investments were $445 million as of March
31, 2023 with a net unrealized loss of $35 million. Although not
permitted by U.S. Generally Accepted Accounting Principles,
including these unrealized losses in accumulated other
comprehensive income (“AOCI”) would result in a ratio of
shareholders’ equity to total assets of 10.48%, compared to 10.64%,
as reported.
President and Chief Executive Officer Brent J. Beardall
commented, “We were disappointed to see the failures of both
Silicon Valley Bank and Signature Bank last quarter. What is most
important at this point is customers having confidence in the
banking system. It is the job of management, directors and the
regulatory agencies to ensure banks are run in a safe and sound
manner so that customers do not have to worry. Any losses from bank
failures should be absorbed by the FDIC insurance fund and
replenished by surviving banks that benefit from the security that
comes from FDIC insurance. We are grateful for the trust and
confidence our clients have placed in WaFd Bank and work each day
to earn that trust by managing the bank for the long-term, which at
times translates into accepting less in short-term earnings.
“This is a challenging interest rate environment for bank
earnings. Presently, the yield curve is inverted with long-term
rates being lower than short-term rates. The degree to which the
yield curve is inverted is near a historical high. The 10-year U.S.
Treasury rate was recently at 3.35% and the 3-month rate at 4.88%,
a 153 basis point inversion, the second largest since 1962, which
is as far back as the data is kept. As a result, bank margins are
compressing. WaFd saw its net interest margin decrease from 3.69%
in the December quarter to 3.51% in the March quarter. While this
is a significant decline in margin, the previous quarter had
represented a 25-year high in margin for the Bank and our current
margin is still meaningfully higher than the 2.90% margin reported
in the March 2022 quarter.
“While credit quality remains strong, with delinquent loans
representing only 0.2% of total loans, we did experience our first
quarterly net charge-off in almost a decade. We are monitoring our
portfolio closely for signs of deterioration which we expect will
occur as the stress of higher interest rates is realized throughout
the economy. With an allowance for loan losses of over $205 million
and robust capital, we believe the Bank is well positioned to
withstand a credit cycle if that is what materializes over the next
few quarters.
“There has been a significant amount of speculation about
looming deterioration in the values of commercial real estate as
the market adjusts to higher vacancies and capitalization rates. We
understand the macro pressures on commercial real estate and
believe they will be most acute in the largest metropolitan areas.
We are gratified that our loan portfolio is spread over eight
western states that are generally experiencing net immigration and
strong job growth. Importantly, the Bank has been conservative in
its commercial real estate lending requiring substantial equity
from borrowers that would absorb the first portion of any losses in
value. Based on December 31, 2022 estimates, the average current
loan to value ratio of our multifamily loans was 49%, on commercial
office 52% and on other commercial real estate 44%.
“Banking is a noble profession that enables consumers to safely
manage their savings, businesses to securely pay their obligations
and borrowers to conservatively leverage their assets for growth.
Despite potential short-term challenges, the economic vitality of
the markets we operate in is strong, our bankers are experienced,
and we take pride in being a source of strength and consistent
support for our clients.”
Total assets were $22.3 billion as of March 31, 2023, compared
to $20.8 billion at September 30, 2022, primarily due to the $1.2
billion, or 7.2%, increase in net loans. In addition, cash
increased by $434.6 million while investment securities decreased
by $62.8 million.
Customer deposits totaled $15.9 billion as of March 31, 2023, a
decrease of $168.6 million or 1.1% since September 30, 2022.
Transaction accounts decreased by $811.2 million or 6.4% during
that period, while time deposits increased $642.6 million or 19.2%.
As of March 31, 2023, 74.9% 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 92.3% of deposits at March 31, 2023.
Our focus historically has been on growing transaction accounts to
lessen sensitivity to rising interest rates and manage interest
expense, however, the current rate environment has resulted in
increased demand for higher yielding deposits.
Borrowings totaled $3.8 billion as of March 31, 2023, an
increase from $2.1 billion at September 30, 2022. The effective
weighted average interest rate of borrowings was 3.69% as of March
31, 2023, an increase from 2.02% at September 30, 2022.
The Company had loan originations of $1.0 billion for the second
fiscal quarter of 2023, compared to $2.2 billion of originations in
the same quarter one year ago. Offsetting loan originations in each
of these quarters were loan repayments of $1.1 billion and $1.5
billion, respectively. The Company has intentionally slowed new
loan production, given the uncertain economic environment, with
repayments exceeding originations. Even so, net loans outstanding
grew for the quarter due to the funding of construction loans
previously originated. Commercial loans represented 73% of all loan
originations during the second fiscal quarter of 2023 and consumer
loans accounted for the remaining 27%. Commercial loans are
preferable as they generally have floating interest rates and
shorter durations. The weighted average interest rate on the loan
portfolio was 4.96% at March 31, 2023, an increase from 4.25% as of
September 30, 2022, due primarily to higher rates on adjustable
rate loans as well as higher rates on newly originated loans.
Credit quality is being monitored closely in light of the
shifting economic and monetary environment. As of March 31, 2023,
non-performing assets remained low from a historical perspective
and totaled $46.8 million, or 0.2% of total assets, compared to
0.2% at March 31, 2022 and 0.2% at September 30, 2022. Delinquent
loans were 0.2% of total loans at March 31, 2023, compared to 0.3%
at March 31, 2022 and 0.2% at September 30, 2022. The allowance for
credit losses (including the reserve for unfunded commitments)
totaled $206 million as of March 31, 2023, and was 1.0% of gross
loans outstanding, as compared to $205 million, or 1.1% of gross
loans outstanding, at September 30, 2022. Net charge-offs were $5.9
million for the second fiscal quarter of 2023, compared to net
recoveries of $0.5 million for the prior year same quarter.
The Company recorded a $3.5 million provision for credit losses
in the second fiscal quarter of 2023, compared to a $0.5 million
release of allowance for credit losses in the same quarter of
fiscal 2022. The provision in the quarter ended March 31, 2023 was
primarily due to growth in net loans receivable combined with the
changing economic outlook amid concerns around a looming recession
and recent macro-economic events.
The Company paid a quarterly dividend on the 4.875% Series A
preferred stock on January 15, 2023. On March 10, 2023, the Company
paid a regular cash dividend on common stock of $0.25 per share,
which represented the 160th consecutive quarterly cash dividend.
Tangible common shareholders' equity per share increased by $1.36,
or 5.3%, to $26.85 since September 30, 2022. The ratio of total
tangible shareholders' equity to tangible assets was 9.4% as of
March 31, 2023.
Net interest income was $175.0 million for the second fiscal
quarter of 2023, an increase of $40.0 million or 29.6% 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 28
basis points. This was the result of the increase of 187 basis
points in the average rate earned on interest-earning assets
outpacing the 159 basis point increase in the average rate paid on
interest-bearing liabilities. Net interest margin improved to 3.51%
in the second fiscal quarter of 2023 compared to 2.90% for the
prior year quarter.
Total other income was $10.1 million for the second fiscal
quarter of 2023 compared to $15.7 million in the prior year same
quarter. The decrease in other income was primarily due to
unrealized gains of $1.2 million for certain equity investments
which were recorded in the quarter ended March 31, 2022. There were
unrealized losses of $4.0 million on the same investments in the
quarter ended March 31, 2023. In addition, loan fee income
decreased by $1.8 million when compared to the same quarter in the
prior year due to a reduction in loan production. Originations for
the second fiscal quarter of 2023 were $1.0 billion compared to
$2.2 billion in the prior year same quarter.
Total other expense was $96.9 million in the second fiscal
quarter of 2023, an increase of $8.5 million, or 9.6%, from the
prior year's quarter. Compensation and benefits costs increased by
$4.3 million, or 9.2%, over the prior year quarter primarily due to
annual merit increases and investments in talent, strategic
initiatives and a reduction in capitalized compensation as loan
originations have decreased. Merger related expenses of $1.2
million were also included in total other expense. Despite these
increases, the Company’s efficiency ratio in the second fiscal
quarter of 2023 improved to 52.3%, compared to 58.7% for the same
period one year ago as a result of income growth outpacing expense
growth.
Income tax expense totaled $18.6 million for the second fiscal
quarter of 2023, as compared to $13.6 million for the prior year
same quarter. The effective tax rate for the quarter ended March
31, 2023 was 22.00% compared to 21.60% in the prior year same
quarter and 21.23% for the year ended September 30, 2022. The
Company’s effective tax rate varies from the statutory rate mainly
due to state taxes, tax-exempt income, tax-credit investments and
miscellaneous non-deductible expenses.
WaFd Bank is headquartered in Seattle, Washington, and has 199
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)
March 31, 2023
September 30, 2022
(In thousands, except share and
ratio data)
ASSETS
Cash and cash equivalents
$
1,118,544
$
683,965
Available-for-sale securities, at fair
value
2,006,286
2,051,037
Held-to-maturity securities, at amortized
cost
445,222
463,299
Loans receivable, net of allowance for
loan losses of $177,420 and $172,808
17,271,906
16,113,564
Interest receivable
79,069
63,872
Premises and equipment, net
236,054
243,062
Real estate owned
8,826
6,667
FHLB and FRB stock
147,078
95,073
Bank owned life insurance
239,840
237,931
Intangible assets, including goodwill of
$303,457 and $303,457
308,524
309,009
Federal and state income tax assets,
net
—
—
Other assets
463,862
504,652
$
22,325,211
$
20,772,131
LIABILITIES AND SHAREHOLDERS’
EQUITY
Liabilities
Transaction deposits
$
11,880,343
$
12,691,527
Time deposits
3,980,605
3,338,043
Total customer deposits
15,860,948
16,029,570
Borrowings
3,800,000
2,125,000
Advance payments by borrowers for taxes
and insurance
44,312
50,051
Federal and state income tax liabilities,
net
2,666
3,306
Accrued expenses and other liabilities
242,168
289,944
19,950,094
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; 136,412,977 and 136,270,886 shares issued;
65,793,099 and 65,330,126 shares outstanding
136,413
136,271
Additional paid-in capital
1,683,720
1,686,975
Accumulated other comprehensive income
(loss), net of taxes
43,822
52,481
Treasury stock, at cost; 70,619,878 and
70,940,760 shares
(1,583,880
)
(1,590,207
)
Retained earnings
1,795,042
1,688,740
2,375,117
2,274,260
$
22,325,211
$
20,772,131
CONSOLIDATED FINANCIAL
HIGHLIGHTS
Common shareholders' equity per share
$
31.54
$
30.22
Tangible common shareholders' equity per
share
26.85
25.49
Shareholders' equity to total assets
10.64
%
10.95
%
Tangible shareholders' equity to tangible
assets
9.39
%
9.60
%
Tangible shareholders' equity + allowance
for credit losses to tangible assets
10.19
%
10.45
%
Weighted average rates at period
end
Loans
4.96
%
4.25
%
Loans and mortgage-backed securities
4.81
4.13
Combined loans, mortgage-backed securities
and investments
4.45
4.04
Customer accounts
1.48
0.51
Borrowings
3.69
2.02
Combined cost of customer accounts and
borrowings
1.91
0.68
Net interest spread
2.86
3.36
WASHINGTON FEDERAL, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
FINANCIAL CONDITION
(UNAUDITED)
As of
SUMMARY FINANCIAL DATA
March 31,
2023
December 31,
2022
September 30,
2022
June 30,
2022
March 31,
2022
(In thousands, except share and
ratio data)
Cash
$
1,118,544
$
645,862
$
683,965
$
607,421
$
1,947,504
Loans receivable, net
17,271,906
16,993,588
16,113,564
15,565,165
15,094,926
Allowance for credit losses ("ACL")
205,920
208,297
205,308
203,479
201,384
Available-for-sale securities, at fair
value
2,006,286
2,059,837
2,051,037
2,150,732
1,909,605
Held-to-maturity securities, at amortized
cost
445,222
453,443
463,299
477,884
301,221
Total assets
22,325,211
21,653,811
20,772,131
20,158,831
20,560,279
Transaction deposits
11,880,343
12,547,832
12,691,527
12,668,251
13,139,606
Time deposits
3,980,605
3,412,203
3,338,043
3,297,369
3,251,042
FHLB advances
3,425,000
3,075,000
2,125,000
1,700,000
1,720,000
Total shareholders' equity
2,375,117
2,324,381
2,274,260
2,220,111
2,191,701
FINANCIAL HIGHLIGHTS
Common shareholders' equity per share
31.54
30.96
30.22
29.39
28.97
Tangible common shareholders' equity per
share
26.85
26.24
25.49
24.66
24.23
Shareholders' equity to total assets
10.64
%
10.73
%
10.95
%
11.01
%
10.66
%
Tangible shareholders' equity to tangible
assets
9.39
%
9.44
%
9.60
%
9.63
%
9.29
%
Tangible shareholders' equity + ACL to
tangible assets
10.19
%
10.27
%
10.45
%
10.65
%
10.29
%
Common shares outstanding
65,793,099
65,387,745
65,330,126
65,321,869
65,306,928
Preferred shares outstanding
300,000
300,000
300,000
300,000
300,000
Loans to customer deposits
108.90
%
106.48
%
100.52
%
97.49
%
92.09
%
CREDIT QUALITY
ACL to gross loans
1.02
%
1.03
%
1.06
%
1.08
%
1.13
%
ACL to non-accrual loans
595.04
%
713.83
%
594.51
%
554.76
%
598.66
%
Non-accrual loans to net loans
0.20
%
0.17
%
0.21
%
0.24
%
0.22
%
Non-accrual loans
34,606
29,180
34,534
36,679
33,639
Non-performing assets to total assets
0.21
%
0.18
%
0.21
%
0.25
%
0.23
%
Non-performing assets
46,785
38,650
44,554
50,430
47,243
WASHINGTON FEDERAL, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
(UNAUDITED)
Three Months Ended March 31,
Six Months Ended March 31,
2023
2022
2023
2022
(In thousands, except share and
ratio data)
(In thousands, except share and
ratio data)
INTEREST INCOME
Loans receivable
$
222,957
$
139,260
$
426,903
$
277,769
Mortgage-backed securities
10,422
4,659
21,035
9,451
Investment securities and cash
equivalents
21,967
6,919
40,827
14,058
255,346
150,838
488,765
301,278
INTEREST EXPENSE
Customer accounts
52,123
8,225
83,769
16,686
FHLB advances and other borrowings
28,185
7,525
47,159
15,368
80,308
15,750
130,928
32,054
Net interest income
175,038
135,088
357,837
269,224
Provision (release) for credit losses
3,500
(500
)
6,000
—
Net interest income after provision
(release)
171,538
135,588
351,837
269,224
OTHER INCOME
Gain (loss) on sale of investment
securities
—
—
—
81
Gain (loss) on hedging derivatives
26
—
26
—
Prepayment penalty on long-term debt
—
—
—
—
Loan fee income
652
2,475
2,154
4,396
Deposit fee income
6,188
6,282
12,541
12,725
Other income
3,206
6,902
9,375
17,138
10,072
15,659
24,096
34,340
OTHER EXPENSE
Compensation and benefits
51,444
47,115
100,514
94,540
Occupancy
10,918
11,788
21,020
21,878
FDIC insurance premiums
4,000
2,100
7,675
5,200
Product delivery
5,316
5,044
9,937
9,765
Information technology
12,785
11,722
25,114
23,143
Other expense
12,418
10,648
24,899
23,504
96,881
88,417
189,159
178,030
Gain (loss) on real estate owned, net
(199
)
129
(311
)
691
Income before income taxes
84,530
62,959
186,463
126,225
Income tax provision
18,596
13,600
41,020
26,585
Net income
65,934
49,359
145,443
99,640
Dividends on preferred stock
3,656
3,656
7,312
7,312
Net income available to common
shareholders
$
62,278
$
45,703
$
138,131
$
92,328
PER SHARE DATA
Basic earnings per common share
$
0.95
$
0.70
$
2.11
$
1.41
Diluted earnings per common share
0.95
0.70
2.11
1.41
Cash dividends per common share
0.25
0.24
0.49
0.47
Basic weighted average shares
outstanding
65,511,131
65,301,171
65,425,623
65,253,991
Diluted weighted average shares
outstanding
65,551,185
65,445,206
65,510,275
65,397,601
PERFORMANCE RATIOS
Return on average assets
1.21
%
0.98
%
1.36
%
1.00
%
Return on average common equity
12.01
9.80
13.55
9.96
Net interest margin
3.51
2.90
3.60
2.89
Efficiency ratio
52.34
58.65
49.53
58.65
WASHINGTON FEDERAL, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
(UNAUDITED)
Three Months Ended
March 31,
2023
December 31,
2022
September 30,
2022
June 30,
2022
March 31,
2022
(In thousands, except share and
ratio data)
INTEREST INCOME
Loans receivable
$
222,957
$
203,946
$
174,710
$
149,113
$
139,260
Mortgage-backed securities
10,422
10,613
8,263
8,618
4,659
Investment securities and cash
equivalents
21,967
18,860
14,960
9,417
6,919
255,346
233,419
197,933
167,148
150,838
INTEREST EXPENSE
Customer accounts
52,123
31,646
17,071
9,284
8,225
FHLB advances and other borrowings
28,185
18,974
7,243
6,118
7,525
80,308
50,620
24,314
15,402
15,750
Net interest income
175,038
182,799
173,619
151,746
135,088
Provision (release) for credit losses
3,500
2,500
1,500
1,500
(500
)
Net interest income after provision
(release)
171,538
180,299
172,119
150,246
135,588
OTHER INCOME
Gain (loss) on sale of investment
securities
—
—
18
—
—
Gain (loss) on hedging derivatives
26
—
—
—
—
Loan fee income
652
1,502
1,154
1,618
2,475
Deposit fee income
6,188
6,353
6,604
6,613
6,282
Other income
3,206
6,169
6,706
9,319
6,902
10,072
14,024
14,482
17,550
15,659
OTHER EXPENSE
Compensation and benefits
51,444
49,070
51,304
48,073
47,115
Occupancy
10,918
10,102
10,568
10,053
11,788
FDIC insurance premiums
4,000
3,675
2,231
2,100
2,100
Product delivery
5,316
4,621
5,104
4,667
5,044
Information technology
12,785
12,329
12,228
11,831
11,722
Other expense
12,418
12,481
11,707
10,679
10,648
96,881
92,278
93,142
87,403
88,417
Gain (loss) on real estate owned, net
(199
)
(112
)
(488
)
448
129
Income before income taxes
84,530
101,933
92,971
80,841
62,959
Income tax provision
18,596
22,424
19,576
17,546
13,600
Net income
65,934
79,509
73,395
63,295
49,359
Dividends on preferred stock
3,656
3,656
3,656
3,656
3,656
Net income available to common
shareholders
$
62,278
$
75,853
$
69,739
$
59,639
$
45,703
PER SHARE DATA
Basic earnings per common share
$
0.95
$
1.16
$
1.07
$
0.91
$
0.70
Diluted earnings per common share
0.95
1.16
1.07
0.91
0.70
Cash dividends per common share
0.25
0.24
0.24
0.24
0.24
Basic weighted average shares
outstanding
65,511,131
65,341,974
65,326,706
65,315,481
65,301,171
Diluted weighted average shares
outstanding
65,551,185
65,430,690
65,423,817
65,395,666
65,445,206
PERFORMANCE RATIOS
Return on average assets
1.21
%
1.50
%
1.44
%
1.25
%
0.98
%
Return on average common equity
12.01
15.15
14.22
12.50
9.80
Net interest margin
3.51
3.69
3.64
3.22
2.90
Efficiency ratio
52.34
46.78
49.52
51.63
58.65
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230413005732/en/
Washington Federal, Inc. 425 Pike Street, Seattle, WA 98101 Brad
Goode, SVP, Chief Marketing Officer 206-626-8178
brad.goode@wafd.com
WaFd (NASDAQ:WAFD)
Historical Stock Chart
From Feb 2025 to Mar 2025
WaFd (NASDAQ:WAFD)
Historical Stock Chart
From Mar 2024 to Mar 2025
