SEATTLE--(BUSINESS WIRE)--Washington Federal, Inc. (Nasdaq: WAFD), parent company of Washington Federal, National Association, today announced quarterly earnings of $44,112,000 or $0.49 per diluted share for the quarter ended June 30, 2017 compared to $43,004,000 or $0.47 per diluted share for the quarter ended June 30, 2016, a $0.02 or 5% increase in fully diluted earnings per share. Return on equity for the quarter ended June 30, 2017 was 8.70% compared to 8.71% for the quarter ended June 30, 2016. Return on assets for the quarter ended June 30, 2017 was 1.17% compared to 1.16% for the same quarter in the prior year.
President & Chief Executive Officer Brent J. Beardall commented, “Our third fiscal quarter results represent a high water mark for both total assets and earnings per share. Asset quality improved, customer deposits grew and loan originations remained strong, exceeding $1 billion for the quarter. We are pleased to note that our efficiency ratio for the quarter improved to 46.6% thanks to revenue growth outpacing expenses. Looking forward, challenges will certainly arise; however, we are optimistic we can continue our legacy of long-term profitable growth.”
Total assets were $15.1 billion as of June 30, 2017 compared to $14.9 billion as of September 30, 2016. The Company continued to shift its asset mix from cash and investment securities to loans receivable. Since September 30, 2016, available-for-sale securities decreased $652 million or 33.9%, held-to-maturity securities increased $234 million or 16.5% and cash and cash equivalents decreased $91 million or 20.2%. During that same period net loans receivable increased by $744 million, or 7.5%, driven primarily by an increase of $253 million in commercial real estate, $181 million in construction, $137 million in commercial & industrial and $137 million in multi-family loans.
Customer deposits increased by $33 million or 0.3% since September 30, 2016 and totaled $10.6 billion as of June 30, 2017. Transaction accounts increased by $198 million or 3.3% during that period, while time deposits decreased $165 million or 3.6%. The mix of customer deposits has continued to shift over the last several years as the Company focuses on growing transaction accounts to lessen sensitivity to rising interest rates and reduce interest expense. As of June 30, 2017, 58.3% of the Company’s deposits were in transaction accounts. Core deposits, defined as all transaction accounts and time deposits less than $250,000, totaled 94.6% of deposits at June 30, 2017.
Borrowings from the Federal Home Loan Bank ("FHLB") totaled $2.3 billion as of June 30, 2017 and $2.1 billion at September 30, 2016. The weighted average rate for FHLB borrowings was 2.88% as of June 30, 2017 and 3.15% at September 30, 2016.
Loan originations totaled $1,031 million for the 3rd fiscal quarter 2017, which was in line with originations in the same quarter one year ago. Partially offsetting loan originations in each of these respective quarters were loan repayments of $793 million and $776 million. Commercial loans represented 67% of all loan originations during the 3rd fiscal quarter 2017 with consumer loans accounting for the remaining 33%. The Company views organic loan growth as the highest and best use of its capital and prefers commercial loans in this low-rate environment because of their shorter duration. The weighted average interest rate on loans was 4.26% as of June 30, 2017 and remained unchanged from September 30, 2016.
Asset quality remains strong and the ratio of non-performing assets to total assets was 0.50% as of June 30, 2017 compared to 0.53% at March 31, 2017 and 0.48% at September 30, 2016. Since September 30, 2016, real estate owned decreased by $10 million, or 34%, and non-accrual loans increased by $14 million, or 33%. Delinquent loans represented 0.50% of total loans at June 30, 2017 compared to 0.65% at March 31, 2017 and 0.68% at September 30, 2016. The allowance for loan losses and reserve for unfunded commitments totaled $129 million as of June 30, 2017 and was 1.08% of gross loans outstanding, as compared to $117 million or 1.07% of gross loans outstanding at September 30, 2016. The slight increase in the ratio of the total allowance and reserve to gross loans since the Company's fiscal year end reflects the continued shift in the mix of the loan portfolio to include a greater proportion of commercial loans outstanding, which generally require a higher level of reserves.
On May 19, 2017, the Company paid a regular dividend on common stock of $0.15 per share, which represented the 137th consecutive quarterly cash dividend. During the quarter, the Company repurchased 811,034 shares of common stock at a weighted average price of $32.14 per share and has authorization to repurchase approximately 3.2 million 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, 2016, tangible common stockholders’ equity per share increased by $0.72 or 3.8% to $19.44 and the ratio of tangible common equity to tangible assets remained strong at 11.67% as of June 30, 2017.
Net interest income was $109 million for the quarter, an increase of $4.4 million or 4.2% from the same quarter in the prior year. The increase in net interest income was primarily due to average earning assets increasing by $319 million. Net interest margin increased to 3.13% in the 3rd fiscal quarter of 2017 from 3.07% for same quarter in the prior year. The increase in net interest margin is primarily due to the shift in asset mix from cash and investment securities to higher yielding loans receivable.
The Company did not record any provision for loan losses in the 3rd fiscal quarter of 2017 compared to a release of loan loss allowance of $1.65 million in the same quarter of 2016. Net recoveries were $1.3 million for the 3rd fiscal quarter of 2017 compared to $2.9 million for the prior year's quarter.
Total other income was $13.9 million for the 3rd fiscal quarter of 2017, an increase of $3.4 million from $10.5 million in the same quarter of the prior year. The increase was primarily due to a gain recognized on bank owned life insurance this quarter.
Total operating expenses were $57.1 million in the 3rd fiscal quarter of 2017, an increase of $0.8 million or 1.3% from the prior year's quarter. Compensation and benefits costs increased by $1.6 million primarily due to higher incentive compensation accruals in the current quarter. Information technology costs decreased by $1.1 million from the 3rd fiscal quarter of 2016 primarily because of efficiency gains resulting from the Company's system conversion. The Company’s efficiency ratio was 46.6% in the 3rd fiscal quarter 2017 and is lower than the 49.1% for the same period one year ago due primarily to revenue increasing at a greater rate than expenses.
Net loss on real estate owned was $124,000 for the 3rd fiscal quarter 2017 compared to a net gain of $5.1 million for the same quarter last year. Net gain or loss on real estate owned is expected to vary from quarter to quarter as it includes gains and losses on sales, ongoing maintenance expenses and any additional net valuation adjustments.
For the quarter ended June 30, 2017, the Company recorded federal and state income tax expense of $21.2 million, which equates to a 32.50% effective tax rate. This compares to an effective tax rate of 33.89% for the fiscal year ended September 30, 2016. The decline in the effective tax rate from the prior year is due primarily to increased investments in bank owned life insurance, low income housing tax credits and tax exempt loans.
As announced on April 11, 2017, we have entered into a merger agreement with Anchor Bancorp. This transaction will enhance our presence in southwestern Washington and is expected to be immediately accretive to tangible book value per share as well as accretive to earnings per share once fully integrated. Pending the receipt of requisite regulatory approvals, the approval of Anchor’s shareholders and the satisfaction of other customary closing conditions, the merger is expected to close in the fourth calendar quarter of 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.
Important Cautionary Statements
The foregoing information should be read in conjunction with the financial statements, notes and other information contained in the Company’s 2016 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, 2017 | September 30, 2016 | ||||||||||
| (In thousands, except share data) | |||||||||||
| ASSETS | |||||||||||
| Cash and cash equivalents | $ | 359,252 | $ | 450,368 | |||||||
| Available-for-sale securities, at fair value | 1,270,414 | 1,922,894 | |||||||||
| Held-to-maturity securities, at amortized cost | 1,651,528 | 1,417,599 | |||||||||
| Loans receivable, net of allowance for loan losses of $122,229 and $113,494 | 10,654,425 | 9,910,920 | |||||||||
| Interest receivable | 38,926 | 37,669 | |||||||||
| Premises and equipment, net | 269,511 | 281,951 | |||||||||
| Real estate owned | 19,112 | 29,027 | |||||||||
| FHLB and FRB stock | 124,990 | 117,205 | |||||||||
| Bank owned life insurance | 211,100 | 208,123 | |||||||||
| Intangible assets, including goodwill of $291,503 | 295,695 | 296,989 | |||||||||
| Federal and state income tax assets, net | — | 16,047 | |||||||||
| Other assets | 189,045 | 199,271 | |||||||||
| $ | 15,083,998 | $ | 14,888,063 | ||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Liabilities | |||||||||||
| Customer accounts | |||||||||||
| Transaction deposit accounts | $ | 6,203,950 | $ | 6,005,592 | |||||||
| Time deposit accounts | 4,430,328 | 4,595,260 | |||||||||
| 10,634,278 | 10,600,852 | ||||||||||
| FHLB advances | 2,275,000 | 2,080,000 | |||||||||
| Advance payments by borrowers for taxes and insurance | 33,701 | 42,898 | |||||||||
| Accrued expenses and other liabilities | 119,833 | 188,582 | |||||||||
| 13,062,812 | 12,912,332 | ||||||||||
| Stockholders’ equity | |||||||||||
|
Common stock, $1.00 par value, 300,000,000 shares authorized; 134,946,383 and 134,307,818 shares issued; 88,750,133 and 89,680,847 shares outstanding |
134,947 |
134,308 |
|||||||||
| Paid-in capital | 1,659,953 | 1,648,388 | |||||||||
| Accumulated other comprehensive (loss) income, net of taxes | 2,478 | (11,156 | ) | ||||||||
| Treasury stock, at cost; 46,196,250 and 44,626,971 shares | (786,156 | ) | (739,686 | ) | |||||||
| Retained earnings | 1,009,964 | 943,877 | |||||||||
| 2,021,186 | 1,975,731 | ||||||||||
| $ | 15,083,998 | $ | 14,888,063 | ||||||||
| CONSOLIDATED FINANCIAL HIGHLIGHTS | |||||||||||
| Common stockholders' equity per share | $ | 22.77 | $ | 22.03 | |||||||
| Tangible common stockholders' equity per share | $ | 19.44 | $ | 18.72 | |||||||
| Stockholders' equity to total assets | 13.40 | % | 13.27 | % | |||||||
| Tangible common stockholders' equity to tangible assets | 11.67 | % | 11.51 | % | |||||||
| Weighted average rates at period end | |||||||||||
| Loans and mortgage-backed securities | 3.93 | % | 3.86 | % | |||||||
| Combined loans, mortgage-backed securities and investments | 3.77 | 3.58 | |||||||||
| Customer accounts | 0.50 | 0.50 | |||||||||
| Borrowings | 2.88 | 3.15 | |||||||||
| Combined cost of customer accounts and borrowings | 0.92 | 0.93 | |||||||||
| Net interest spread | 2.85 | 2.65 | |||||||||
| WASHINGTON FEDERAL, INC. AND SUBSIDIARIES | |||||||||||||||||||||
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CONSOLIDATED STATEMENTS OF OPERATIONS |
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(UNAUDITED) |
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| Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||||||||
|
2017 |
2016 |
2017 | 2016 | ||||||||||||||||||
|
(In thousands, except share data) |
(In thousands, except share data) |
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| INTEREST INCOME | |||||||||||||||||||||
| Loans receivable | $ | 117,457 | $ | 113,728 | $ | 348,326 | $ | 339,802 | |||||||||||||
| Mortgage-backed securities | 15,992 | 15,297 | 45,007 | 49,130 | |||||||||||||||||
| Investment securities and cash equivalents | 4,267 | 4,710 | 13,345 | 14,990 | |||||||||||||||||
| 137,716 | 133,735 | 406,678 | 403,922 | ||||||||||||||||||
|
INTEREST EXPENSE |
|||||||||||||||||||||
| Customer accounts | 12,764 | 13,274 | 38,173 | 39,062 | |||||||||||||||||
| FHLB advances and other borrowings | 16,337 | 16,221 | 49,011 | 47,426 | |||||||||||||||||
| 29,101 | 29,495 | 87,184 | 86,488 | ||||||||||||||||||
| Net interest income | 108,615 | 104,240 | 319,494 | 317,434 | |||||||||||||||||
| Provision (release) for loan losses | — |
(1,650 |
) |
(1,600 |
) |
(3,150 |
) |
||||||||||||||
| Net interest income after provision (release) for loan losses | 108,615 | 105,890 | 321,094 | 320,584 | |||||||||||||||||
| OTHER INCOME | |||||||||||||||||||||
| Gain on sale of investment securities | — | — | 968 | — | |||||||||||||||||
| Loan fee income | 889 | 1,101 | 3,310 | 3,784 | |||||||||||||||||
| Deposit fee income | 5,714 | 5,297 | 15,803 | 16,564 | |||||||||||||||||
| Other Income | 7,319 | 4,088 | 15,873 | 11,502 | |||||||||||||||||
| 13,922 | 10,486 | 35,954 | 31,850 | ||||||||||||||||||
| OTHER EXPENSE | |||||||||||||||||||||
| Compensation and benefits | 28,947 | 27,333 | 84,774 | 86,217 | |||||||||||||||||
| Occupancy | 8,829 | 8,515 | 26,370 | 26,075 | |||||||||||||||||
| FDIC insurance premiums | 2,842 | 2,869 | 8,591 | 8,243 | |||||||||||||||||
| Product delivery | 3,246 | 3,822 | 10,096 | 13,639 | |||||||||||||||||
| Information technology | 6,617 | 7,669 | 19,754 | 23,832 | |||||||||||||||||
| Other | 6,581 | 6,097 | 19,285 | 22,034 | |||||||||||||||||
| 57,062 | 56,305 | 168,870 | 180,040 | ||||||||||||||||||
| Gain (loss) on real estate owned, net |
(124 |
) |
5,087 | 1,069 | 10,401 | ||||||||||||||||
| Income before income taxes | 65,351 | 65,158 | 189,247 | 182,795 | |||||||||||||||||
| Income tax provision | 21,239 | 22,154 | 61,819 | 62,970 | |||||||||||||||||
|
NET INCOME |
$ |
44,112 |
$ |
43,004 |
$ |
127,428 |
$ |
119,825 |
|||||||||||||
| PER SHARE DATA | |||||||||||||||||||||
| Basic earnings per share | $ | 0.49 | $ | 0.47 | $ | 1.43 | $ | 1.30 | |||||||||||||
| Diluted earnings per share | 0.49 | 0.47 | 1.42 | 1.3 | |||||||||||||||||
| Cash dividends per share | 0.15 | 0.14 | 0.69 | 0.41 | |||||||||||||||||
| Basic weighted average shares outstanding | 89,199,823 | 90,928,847 | 89,297,471 | 91,901,632 | |||||||||||||||||
| Diluted weighted average shares outstanding | 89,497,264 | 91,468,662 | 89,653,955 | 92,393,644 | |||||||||||||||||
| PERFORMANCE RATIOS | |||||||||||||||||||||
| Return on average assets | 1.17 | % | 1.16 | % | 1.14 | % | 1.09 | % | |||||||||||||
| Return on average common equity | 8.7 | 8.71 | 8.46 | 8.12 | |||||||||||||||||
| Net interest margin | 3.13 | 3.07 | 3.1 | 3.14 | |||||||||||||||||
| Efficiency ratio | 46.57 | 49.08 | 47.51 | 51.55 | |||||||||||||||||
