U.S. Markets open in 6 hrs 30 mins

Washington Federal Announces Quarterly Earnings Per Share Of $0.51

·13 min read

Washington Federal, Inc. (Nasdaq: WAFD) (the "Company"), parent company of Washington Federal Bank, N.A. ("WaFd Bank"), today announced quarterly earnings of $38,951,000 or $0.51 per diluted share for the quarter ended December 31, 2020, compared to $67,866,000 or $0.86 per diluted share for the quarter ended December 31, 2019, a $0.35 or 41% decrease in fully diluted earnings per share. Return on equity for the quarter ended December 31, 2020 was 7.65% compared to 13.46% for the quarter ended December 31, 2019. Return on assets for the quarter ended December 31, 2020 was 0.83% compared to 1.66% for the same quarter in the prior year.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20210114005995/en/

President and Chief Executive Officer Brent J. Beardall commented, "We are pleased to report a strong start to our new fiscal year with record loan production, solid core deposit growth, strong asset quality and expansion of our net interest margin. Considering the ongoing turbulence in the world around us, both politically and economically, having a balance sheet with $1.8 billion in cash and $2.1 billion in equity provides significant flexibility to adapt and serve our clients. It is hard to believe that the majority of our teams have been serving our clients remotely for over nine months and we want to thank both our staff and our clients for working together to find solutions – while staying safe. We are appreciative of the government stimulus being provided to help those that have been most impacted and look forward to assisting small businesses with the Paycheck Protection Program’s ("PPP") second round of funding in the next few weeks."

Total assets were $19.1 billion as of December 31, 2020, compared to $18.8 billion at September 30, 2020, as investment securities increased $114 million and loans receivable increased by $89 million. Cash was also $128 million higher as a result of the large increase in customer deposits noted below.

Customer deposits totaled $14.2 billion as of December 31, 2020, an increase of $387 million or 2.8% since September 30, 2020. Transaction accounts increased by $575 million or 5.9% during that period, while time deposits decreased $188 million or 4.7%. The shift in deposit mix has been a result of a deliberate deposit pricing and customer growth strategy and the focus on transaction accounts is intended to lessen sensitivity to rising interest rates and manage interest expense. As of December 31, 2020, 73.3% of the Company’s deposits were in transaction accounts, up from 71.2% at September 30, 2020. Core deposits, defined as all transaction accounts and time deposits less than $250,000, totaled 95.9% of deposits at December 31, 2020.

Borrowings from the Federal Home Loan Bank ("FHLB") totaled $2.6 billion as of December 31, 2020, a decrease of $100 million since September 30, 2020. The decrease was due to the termination of a hedged FHLB borrowing that had an effective interest rate of 1.39%. The weighted average interest rate of FHLB borrowings was 1.82% as of December 31, 2020, versus 1.79% at September 30, 2020.

The Company had strong loan originations of $1.92 billion for the first fiscal quarter 2021, an increase of 40% from the $1.37 billion of originations in the same quarter one year ago. Largely offsetting loan originations in each of these quarters were loan repayments of $1.60 billion and $1.30 billion, respectively. Commercial loans represented 75% of all loan originations during the first fiscal quarter of 2021 and consumer loans accounted for the remaining 25%. 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 3.64% as of December 31, 2020, a decrease from 3.71% as of September 30, 2020, due primarily to payoffs of loans at higher than market interest rates and new loans originated at market rates.

Credit quality is being monitored closely and the economic impacts of the pandemic will become clearer over time. As of December 31, 2020, non-performing assets remained low from a historical perspective and totaled $66.5 million, or 0.35% of total assets, compared to 0.24% at September 30, 2020. The change was due to non-accrual loans increasing by $29.4 million, or 101%, since September 30, 2020. Delinquent loans increased to 0.52% of total loans at December 31, 2020, compared to 0.24% at September 30, 2020. The allowance for credit losses (including the reserve for unfunded commitments) totaled $197 million as of December 31, 2020, and was 1.33% of gross loans outstanding (1.39% when excluding PPP loans for which it was determined that no allowance was necessary due to the government guarantee), as compared to $192 million, or 1.33% of gross loans outstanding, at September 30, 2020. Net recoveries were $1.7 million for the first fiscal quarter of 2021, compared to net recoveries of $2.6 million for the prior year same quarter. The Company has recorded net recoveries in 28 of the last 30 quarters.

The Company recorded a provision for credit losses of $3.0 million in the first fiscal quarter of 2021, compared to a release of allowance for credits losses of $3.8 million in the same quarter of fiscal 2020. The provision in the current quarter is primarily due to reserving for new loan originations and changes in composition of the loan portfolio.

On November 20, 2020, the Company paid a regular cash dividend of $0.22 per share, which represented the 151st consecutive quarterly cash dividend. During the quarter, the Company repurchased 32,956 shares, related to tax withholding on employee equity awards, of common stock at a weighted average price of $21.29 per share and has authorization to repurchase 4,594,275 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, 2020, tangible common shareholders’ equity per share increased by $0.58, or 2.6%, to $23.10 and the ratio of tangible common equity to tangible assets was 9.34% as of December 31, 2020.

Net interest income was $121 million for the first fiscal quarter of 2021, an increase of $0.8 million or 0.7% from the same quarter in the prior year. Average interest-earning assets increased $2.4 billion or 15.58% from the prior year while average interest-bearing liabilities increased $1.8 billion or 14.20%. The average rate earned on interest-earning assets declined by 97 basis points while the average rate paid on interest-bearing liabilities declined by 67 basis points. Net interest margin of 2.75% in the first fiscal quarter of 2021 was up from 2.67% in the prior quarter and down from 3.15% for the same quarter in the prior year. The compression in the net interest margin since the prior year same quarter is primarily due to the rapid drop in short-term rates by the Federal Reserve Bank in response to the COVID-19 pandemic which resulted in the changes in average rates noted above.

Total other income was $13.9 million for the first fiscal quarter of 2021, a decrease from $46.4 million in the prior year same quarter. The decrease was primarily due to the prior year quarter including a gain of $32.6 million on sales of fixed assets, including a branch property in Bellevue, Washington.

Total other expense was $81.4 million in the first fiscal quarter of 2021, a decrease of $1.2 million, or 1.5%, from the prior year's quarter. Compensation and benefits costs increased by $6.1 million, or 16.6%, over the prior year quarter primarily due to a 4.8% rise in headcount, annual merit increases as well as higher bonus compensation that reflects increased loan production activity since the prior year. Information technology costs decreased by $5.3 million, primarily due to the prior year quarter including a $5.9 million impairment charge on systems hardware and software. The Company’s efficiency ratio in the first fiscal quarter of 2021 was 60.6%, compared to 57.1% for the same period one year ago. The increase in the efficiency ratio is primarily due to lower other income as described above.

Income tax expense totaled $10.6 million for the first fiscal quarter of 2021, as compared to $18.4 million for the prior year same quarter. The effective tax rate for the quarter ended December 31, 2020 was 21.35% and unchanged from the quarter ended December 31, 2019. The Company’s effective tax rate for the quarter ended December 31, 2020 is different 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 234 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 2020 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. In particular, any forward-looking statements are subject to risks and uncertainties related to the COVID-19 pandemic and the resulting governmental and societal responses. 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, 2020

September 30, 2020

(In thousands, except share and ratio data)

ASSETS

Cash and cash equivalents

$

1,830,722

$

1,702,977

Available-for-sale securities, at fair value

2,482,944

2,249,492

Held-to-maturity securities, at amortized cost

586,870

705,838

Loans receivable, net of allowance for loan losses of $170,189 and $166,955

12,881,010

12,792,317

Interest receivable

52,671

53,799

Premises and equipment, net

256,242

252,805

Real estate owned

4,463

4,966

FHLB and FRB stock

137,991

141,990

Bank owned life insurance

229,175

227,749

Intangible assets, including goodwill of $302,707 and $302,707

309,425

309,906

Federal and state income tax assets, net

5,708

Other assets

292,109

346,508

$

19,063,622

$

18,794,055

LIABILITIES AND STOCKHOLDERS’ EQUITY

Liabilities

Transaction deposits

$

10,381,459

$

9,806,432

Time deposits

3,785,082

3,973,192

Total customer deposits

14,166,541

13,779,624

FHLB advances

2,600,000

2,700,000

Advance payments by borrowers for taxes and insurance

15,539

49,462

Federal and state income tax liabilities, net

8,294

Accrued expenses and other liabilities

211,481

250,836

17,001,855

16,779,922

Stockholders’ equity

Common stock, $1.00 par value, 300,000,000 shares authorized; 135,937,934 and 135,727,237 shares issued; 75,867,105 and 75,689,364 shares outstanding

135,938

135,727

Additional paid-in capital

1,680,111

1,678,843

Accumulated other comprehensive income (loss), net of taxes

41,435

16,953

Treasury stock, at cost; 60,070,829 and 60,037,873 shares

(1,238,997)

(1,238,296)

Retained earnings

1,443,280

1,420,906

2,061,767

2,014,133

$

19,063,622

$

18,794,055

CONSOLIDATED FINANCIAL HIGHLIGHTS

Common stockholders' equity per share

$

27.18

$

26.61

Tangible common stockholders' equity per share

23.10

22.52

Stockholders' equity to total assets

10.82

%

10.72

%

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

9.34

%

9.22

%

TCE + allowance for credit losses to TA

10.39

%

10.26

%

Weighted average rates at period end

Loans and mortgage-backed securities

3.48

%

3.55

%

Combined loans, mortgage-backed securities and investments

2.92

3.03

Customer accounts

0.36

0.48

Borrowings

1.82

1.79

Combined cost of customer accounts and borrowings

0.58

0.69

Net interest spread

2.34

2.34

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(UNAUDITED)

Three Months Ended December 31,

2020

2019

(In thousands, except share and ratio data)

INTEREST INCOME

Loans receivable

$

133,671

$

142,146

Mortgage-backed securities

7,230

15,612

Investment securities and cash equivalents

6,921

7,066

147,822

164,824

INTEREST EXPENSE

Customer accounts

14,110

31,481

FHLB advances and other borrowings

13,198

13,658

27,308

45,139

Net interest income

120,514

119,685

Provision (release) for credit losses

3,000

(3,750)

Net interest income after provision (release)

117,514

123,435

OTHER INCOME

Loan fee income

2,392

1,804

Deposit fee income

6,026

6,260

Other Income

5,452

38,312

13,870

46,376

OTHER EXPENSE

Compensation and benefits

42,723

36,631

Occupancy

9,592

10,135

FDIC insurance premiums

3,263

2,470

Product delivery

4,937

4,267

Information technology

11,831

17,107

Other

9,064

12,026

81,410

82,636

Gain (loss) on real estate owned, net

(449)

(886)

Income before income taxes

49,525

86,289

Income tax provision

10,574

18,423

NET INCOME

$

38,951

$

67,866

PER SHARE DATA

Basic earnings per share

$

0.51

$

0.86

Diluted earnings per share

0.51

0.86

Cash dividends per share

0.22

0.21

Basic weighted average shares outstanding

75,792,995

78,480,264

Diluted weighted average shares outstanding

75,798,460

78,535,299

PERFORMANCE RATIOS

Return on average assets

0.83

%

1.66

%

Return on average common equity

7.65

13.46

Net interest margin

2.75

3.15

Efficiency ratio

60.58

57.05

View source version on businesswire.com: https://www.businesswire.com/news/home/20210114005995/en/

Contacts

Washington Federal, Inc.
425 Pike Street, Seattle, WA 98101
Brad Goode, SVP, Chief Marketing Officer
206-626-8178
brad.goode@wafd.com