WaFd, Inc. (Nasdaq: WAFD) (the "Company"), parent company of
Washington Federal Bank ("WaFd Bank" or the "Bank"), today
announced quarterly earnings of $58,453,000 for the quarter ended
December 31, 2023, an increase of 16% from net earnings of
$50,208,000 for the quarter ended September 30, 2023 and a decrease
of 26% from net earnings of $79,509,000 for the quarter ended
December 31, 2022. After the effect of dividends on preferred
stock, net income available for common shareholders was $0.85 per
diluted share for the quarter ended December 31, 2023, compared to
$0.72 per diluted share for the quarter ended September 30, 2023, a
$0.13 or 18% increase, and $1.16 per diluted share for the quarter
ended December 31, 2022, a $0.31 or 27% decrease in fully diluted
earnings per common share. Return on common shareholders' equity
for the quarter ended December 31, 2023 was 10.21% compared to
8.73% for the quarter ended September 30, 2023 and 15.15% for the
quarter ended December 31, 2022. Return on assets for the quarter
ended December 31, 2023 was 1.0% compared to 0.9% for the previous
quarter and 1.5% for the same quarter in the prior year.
President and CEO Brent Beardall commented, "We are disappointed
but not surprised to see WaFd's net interest margin dip below 3% to
2.91% for the quarter, a decrease from the record high margin of
3.69% for the same quarter last year. The Federal Reserve increased
interest rates over 500 basis points over the last two years,
resulting in over seventeen months of a consistently inverted yield
curve. In that context, we believe 2.91% to be a solid result.
"After two consecutive quarters of meaningful credit losses
related to one large idiosyncratic loan, we are very pleased to
post net recoveries for this quarter and report continued strong
credit metrics. Delinquencies were only 0.33% and the ratio of
non-performing loans to total loans was only 0.26%. During the
quarter we saw a significant shift in the market perception of the
path of future interest rates, with an expectation that the Federal
Reserve will start easing monetary policy starting in 2024. This
shift has caused over a 100-basis point decrease in long-term
interest rates (10-year U.S. Treasury Bond), which is a very good
thing for both borrowers and banks. Much has been speculated about
the potential downturn of the commercial real estate market, and we
don't know with certainty how or if that will occur, yet we do know
that this decline in long-term rates narrows the refinance gap for
borrowers and thus lowers credit risk for banks.
"Competition for deposits remains intense; our objective is to
deliver value to our clients beyond the rate they earn by making
banking with WaFd simple, reliable and fast. We aim to accomplish
this through excellent client service combined with technology. We
believe our strategic investments favorably position the Bank to be
nimble in adopting new technologies and thus better serve our
clients. Our clients are noticing as our Net Promoter Score, a
measure of how likely clients are to recommend a company, is at an
all-time high of 57.
"Looking forward, we remain optimistic that our previously
announced acquisition of Luther Burbank Corporation will be
approved during this current quarter and if the market sentiment is
correct and the Federal Reserve does, in fact, begin decreasing
interest rates, both occurrences should drive improved
profitability for the Bank."
Total assets were $22.6 billion as of December 31, 2023,
compared to $22.5 billion at September 30, 2023, primarily due to
small increases in cash and net loans. Net loans increased by $108
million, or 0.6%, and cash increased $164 million, or 16.7%. These
increases were offset by a $95 million reduction in the fair value
of our hedge assets. Investment securities increased slightly by
$15 million during the quarter.
Customer deposits totaled $16.0 billion as of December 31, 2023,
a decrease of 0.2% since September 30, 2023. Transaction accounts
decreased by $107 million or 1.0% during that period, while time
deposits increased $76 million or 1.4%. As of December 31, 2023,
66.5% of the Company’s deposits were transaction accounts, compared
to 67.0% at September 30, 2023. Core deposits, defined as all
transaction accounts and time deposits less than $250,000, totaled
87.6% of deposits at December 31, 2023. Deposits that are uninsured
or not collateralized were 26.1% as of December 31, 2023, a slight
increase from 25.7% as of September 30, 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 $3.9 billion as of December 31, 2023, up from
$3.7 billion at September 30, 2023. The effective weighted average
interest rate of borrowings was 3.99% as of December 31, 2023,
compared to 3.98% at September 30, 2023.
The Company had loan originations of $0.9 billion for the first
fiscal quarter of 2024, compared to $2.0 billion of originations in
the same quarter one year ago. Offsetting loan originations in each
of these quarters were loan repayments of $1.2 billion in both
quarters. The Bank has intentionally slowed new loan production to
temper net loan growth. Even so, net loans outstanding grew for the
quarter due to the funding of construction loans previously
originated. Commercial loans represented 75% of all loan
originations during the first fiscal quarter of 2024 and consumer
loans accounted for the remaining 25%. Commercial loans are
preferable as they generally have floating interest rates and
shorter durations. The weighted average interest rate on the loan
portfolio was 5.25% as of December 31, 2023, an increase from 5.22%
as of September 30, 2023, due primarily to higher rates on
adjustable-rate loans and newly originated loans.
Credit quality continues to be monitored closely in light of the
shifting economic and monetary environment. As of December 31,
2023, non-performing assets decreased to $55 million, or 0.2% of
total assets, from $58 million, or 0.3%, at September 30, 2023. The
change fiscal year to date is due primarily to non-accrual loans
decreasing by $5.2 million, or 10%, since September 30, 2023.
Delinquent loans decreased to 0.3% of total loans at December 31,
2023, compared to 0.4% at September 30, 2023. The allowance for
credit losses (including the reserve for unfunded commitments)
totaled $202 million as of December 31, 2023, and was 1.04% of
gross loans outstanding, as compared to $202 million, or 1.03% of
gross loans outstanding, as of September 30, 2023. Net recoveries
were $113 thousand for the first fiscal quarter of 2024, compared
to net recoveries of $489 thousand for the prior year same
quarter.
The Company did not record a provision for credit losses in the
first fiscal quarter of 2024, compared to a provision for credit
losses of $2.5 million in the same quarter of fiscal 2023. The lack
of provision for loan losses in the quarter ended December 31, 2023
was primarily due to a stable loans receivable balance and
continued strong credit performance and collateral protection.
The Company paid a quarterly dividend on Series A preferred
stock on October 15, 2023. On December 8, 2023, the Company paid a
regular cash dividend on common stock of $0.25 per share, which
represented the 163rd consecutive quarterly cash dividend. During
the quarter, the Company repurchased 697,893 shares of common stock
at a weighted average price of $24.45 per share and has
authorization to repurchase 1,861,290 additional shares. Tangible
common shareholders' equity per share increased by $0.60, or 2.1%,
to $28.65 since September 30, 2023. Over the past 12 months,
tangible book value increased per share by $2.41 or 9.2%. The ratio
of total tangible shareholders' equity to tangible assets increased
to 9.59% as of December 31, 2023.
Net interest income was $152 million for the first fiscal
quarter of 2024, a decrease of $30.6 million or 16.7% from the same
quarter in the prior year. The decrease in net interest income was
primarily due to the 185 basis point increase in the average rate
paid on interest-bearing liabilities outpacing the 76 basis point
increase in the average rate earned on interest-earning assets. Net
interest income also decreased by $11.5 million compared to the
quarter ended September 30, 2023 due to a 36 basis point increase
in the average rate paid on interest bearing liabilities. Net
interest margin was 2.91% in the first fiscal quarter of 2024
compared to 3.13% for the quarter ended September 30, 2023 and
3.69% for the prior year quarter. The Bank's cycle-to-date deposit
beta, the change in deposit costs compared to the change in Federal
interest rates, was 43% as of December 31, 2023 compared to 36% the
prior quarter.
Total other income was $14.2 million for the first fiscal
quarter of 2024 compared to $14.0 million in the prior year same
quarter. The small increase in other income was primarily due to
increased interchange fees as a result of transaction volume.
Total other expense was $96.5 million in the first fiscal
quarter of 2024, an increase of $4.3 million, or 4.6%, from the
prior year's quarter. FDIC premiums increased $2.9 million compared
to the same period last year. Product delivery costs increased by
$1.4 million as result of volume-related interchange costs. Merger
related expenses of $500 thousand were also included in total other
expense for the quarter. Total other expense also increased by $4.4
million compared to the September 30, 2023 quarter as the result of
bonus compensation accruals for fiscal 2024. Increased expenses
combined with decreased net interest income resulted in an increase
in the Company’s efficiency ratio in the first fiscal quarter of
2024 to 58.0%, compared to 51.8% in the prior quarter and 46.8% for
the same period one year ago.
Income tax expense totaled $13.2 million the first fiscal
quarter of 2024, as compared to $22.4 million for the prior year
same quarter. The effective tax rate for the quarter ended December
31, 2023 was 18.46% compared to 20.81% for the year ended September
30, 2023. 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 198
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 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 “expects,” “anticipates,” “believes,” “estimates,”
“intends,” “forecasts,” “may,” “potential,” “projects,” and other
similar expressions or future or conditional verbs such as “will,”
“should,” “would,” and “could” are intended to help identify such
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Although the Company
believes any such statements are based on reasonable assumptions,
forward-looking statements should not be read as a guarantee of
future performance, and you are cautioned not to place undue
reliance on any forward-looking statements. The Company undertakes
no obligation to update or revise any forward-looking
statement.
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, 2023
10-K, and Quarterly Reports on Form 10-Q 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)
fluctuations in interest rate risk and market interest rates,
including the effect on our net interest income and net interest
margin; (ii) current and future economic conditions, including the
effects of declines in the real estate market, high unemployment
rates, inflationary pressures, a potential recession, the monetary
policies of the Federal Reserve, and slowdowns in economic growth;
(iii) risks related to the proposed merger with Luther Burbank
Corporation; (iv) financial stress on borrowers (consumers and
businesses) as a result of higher interest rates or an uncertain
economic environment; (v) changes in deposit flows or loan demands;
(vi) the impact of bank failures or adverse developments at other
banks and related negative press about regional banks and the
banking industry in general; (vii) the effects of natural or
man-made disasters, calamities, or conflicts, including terrorist
events and pandemics (such as the COVID-19 pandemic) and the
resulting governmental and societal responses; (viii) global
economic trends, including developments related to Ukraine and
Russia, and the evolving conflict in Israel and Gaza, and related
negative financial impacts on our borrowers; (ix) litigation risks
resulting in significant expenses, losses and reputational damage;
(x) our ability to identify and address cyber-security risks,
including security breaches, “denial of service attacks,” “hacking”
and identity theft; and (ix) other economic, competitive,
governmental, regulatory, and technological factors affecting our
operations, pricing, products and services.
WAFD, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
FINANCIAL CONDITION
(UNAUDITED)
December 31, 2023
September 30, 2023
(In thousands, except share and
ratio data)
ASSETS
Cash and cash equivalents
$
1,144,774
$
980,649
Available-for-sale securities, at fair
value
2,018,445
1,995,097
Held-to-maturity securities, at amortized
cost
415,079
423,586
Loans receivable, net of allowance for
loan losses of $179,320 and $177,207
17,584,622
17,476,550
Interest receivable
87,022
87,003
Premises and equipment, net
237,202
237,011
Real estate owned
6,820
4,149
FHLB stock
137,940
126,820
Bank owned life insurance
244,558
242,919
Intangible assets, including goodwill of
$305,125 and $304,750
311,103
310,619
Federal and state income tax assets,
net
—
8,479
Other assets
452,557
581,793
$
22,640,122
$
22,474,675
LIABILITIES AND SHAREHOLDERS’
EQUITY
Liabilities
Transaction deposits
$
10,658,064
$
10,765,313
Time deposits
5,380,723
5,305,016
Total customer deposits
16,038,787
16,070,329
Borrowings
3,875,000
3,650,000
Advance payments by borrowers for taxes
and insurance
19,244
52,550
Federal and state income tax liabilities,
net
1,478
—
Accrued expenses and other liabilities
253,609
275,370
20,188,118
20,048,249
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; 136,679,479 and 136,466,579 shares issued;
64,254,700 and 64,736,916 shares outstanding
136,679
136,467
Additional paid-in capital
1,691,102
1,687,634
Accumulated other comprehensive income
(loss), net of taxes
47,014
46,921
Treasury stock, at cost; 72,424,779 and
71,729,663 shares
(1,629,348
)
(1,612,345
)
Retained earnings
1,906,557
1,867,749
2,452,004
2,426,426
$
22,640,122
$
22,474,675
CONSOLIDATED FINANCIAL
HIGHLIGHTS
Common shareholders' equity per share
$
33.49
$
32.85
Tangible common shareholders' equity per
share
28.65
28.05
Shareholders' equity to total assets
10.83
%
10.80
%
Tangible shareholders' equity to tangible
assets
9.59
%
9.55
%
Tangible shareholders' equity + allowance
for credit losses to tangible assets
10.39
%
10.35
%
Weighted average rates at period
end
Loans and mortgage-backed securities
5.11
%
5.08
%
Combined loans, mortgage-backed securities
and investments
5.09
5.07
Customer accounts
2.27
2.12
Borrowings
3.99
3.98
Combined cost of customer accounts and
borrowings
2.60
2.46
Net interest spread
2.49
2.61
WAFD, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
FINANCIAL CONDITION
(UNAUDITED)
As of
SUMMARY FINANCIAL DATA
December 31, 2023
September 30, 2023
June 30, 2023
March 31, 2023
December 31, 2022
(In thousands, except share and
ratio data)
Cash
$
1,144,774
$
980,649
$
1,139,643
$
1,118,544
$
645,862
Loans receivable, net
17,584,622
17,476,550
17,384,188
17,271,906
16,993,588
Allowance for credit losses ("ACL")
201,820
201,707
204,569
205,920
208,297
Available-for-sale securities, at fair
value
2,018,445
1,995,097
2,036,233
2,006,286
2,059,837
Held-to-maturity securities, at amortized
cost
415,079
423,586
434,172
445,222
453,443
Total assets
22,640,122
22,474,675
22,552,588
22,325,211
21,653,811
Transaction deposits
10,658,064
10,765,313
11,256,575
11,880,343
12,547,832
Time deposits
5,380,723
5,305,016
4,863,849
3,980,605
3,412,203
Borrowings
3,875,000
3,650,000
3,750,000
3,800,000
3,075,000
Total shareholders' equity
2,452,004
2,426,426
2,394,066
2,375,117
2,324,381
FINANCIAL HIGHLIGHTS
Common shareholders' equity per share
$
33.49
$
32.85
$
32.36
$
31.54
$
30.96
Tangible common shareholders' equity per
share
$
28.65
$
28.05
$
27.58
$
26.85
$
26.24
Shareholders' equity to total assets
10.83
%
10.80
%
10.62
%
10.64
%
10.73
%
Tangible shareholders' equity to tangible
assets
9.59
%
9.55
%
9.37
%
9.39
%
9.44
%
Tangible shareholders' equity + ACL to
tangible assets
10.39
%
10.35
%
10.17
%
10.19
%
10.27
%
Common shares outstanding
64,254,700
64,736,916
64,721,190
65,793,099
65,387,745
Preferred shares outstanding
300,000
300,000
300,000
300,000
300,000
Loans to customer deposits
109.64
%
108.75
%
107.84
%
108.90
%
106.48
%
CREDIT QUALITY
ACL to gross loans
1.04
%
1.03
%
1.03
%
1.02
%
1.03
%
ACL to non-accrual loans
445.93
%
400.04
%
370.09
%
595.04
%
713.83
%
Non-accrual loans to net loans
0.26
%
0.29
%
0.32
%
0.20
%
0.17
%
Non-accrual loans
$
45,258
$
50,422
$
55,276
$
34,606
$
29,180
Non-performing assets to total assets
0.24
%
0.26
%
0.30
%
0.21
%
0.18
%
Non-performing assets
$
55,388
$
57,924
$
67,000
$
46,785
$
38,650
WAFD, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
(UNAUDITED)
Three Months Ended December
31,
2023
2022
(In thousands, except share and
ratio data)
INTEREST INCOME
Loans receivable
$
245,792
$
203,946
Mortgage-backed securities
11,266
10,613
Investment securities and cash
equivalents
29,788
18,860
286,846
233,419
INTEREST EXPENSE
Customer accounts
96,671
31,646
Borrowings
37,938
18,974
134,609
50,620
Net interest income
152,237
182,799
Provision (release) for credit losses
—
2,500
Net interest income after provision
(release)
152,237
180,299
OTHER INCOME
Gain (loss) on sale of investment
securities
81
—
Gain (loss) on termination of hedging
derivatives
109
—
Loan fee income
844
1,502
Deposit fee income
6,802
6,353
Other income
6,331
6,169
14,167
14,024
OTHER EXPENSE
Compensation and benefits
49,841
49,070
Occupancy
9,371
10,102
FDIC insurance premiums
6,570
3,675
Product delivery
6,009
4,621
Information technology
12,866
12,329
Other expense
11,883
12,481
96,540
92,278
Gain (loss) on real estate owned, net
1,826
(112
)
Income before income taxes
71,690
101,933
Income tax provision
13,237
22,424
Net income
58,453
79,509
Dividends on preferred stock
3,656
3,656
Net income available to common
shareholders
$
54,797
$
75,853
PER SHARE DATA
Basic earnings per common share
$
0.85
$
1.16
Diluted earnings per common share
0.85
1.16
Cash dividends per common share
0.25
0.24
Basic weighted average shares
outstanding
64,297,499
65,341,974
Diluted weighted average shares
outstanding
64,312,110
65,430,690
PERFORMANCE RATIOS
Return on average assets
1.04
%
1.50
%
Return on average common equity
10.21
15.15
Net interest margin
2.91
3.69
Efficiency ratio
58.02
46.78
WAFD, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
(UNAUDITED)
Three Months Ended
December 31, 2023
September 30, 2023
June 30, 2023
March 31, 2023
December 31, 2022
(In thousands, except share and
ratio data)
INTEREST INCOME
Loans receivable
$
245,792
$
240,998
$
232,167
$
222,957
$
203,946
Mortgage-backed securities
11,266
11,695
10,454
10,422
10,613
Investment securities and cash
equivalents
29,788
29,017
29,859
21,967
18,860
286,846
281,710
272,480
255,346
233,419
INTEREST EXPENSE
Customer accounts
96,671
83,402
70,062
52,123
31,646
Borrowings
37,938
34,611
33,718
28,185
18,974
134,609
118,013
103,780
80,308
50,620
Net interest income
152,237
163,697
168,700
175,038
182,799
Provision (release) for credit losses
—
26,500
9,000
3,500
2,500
Net interest income after provision
(release)
152,237
137,197
159,700
171,538
180,299
OTHER INCOME
Gain (loss) on sale of investment
securities
81
33
—
—
—
Gain (loss) on termination of hedging
derivatives
109
33
(926
)
26
—
Loan fee income
844
731
1,000
652
1,502
Deposit fee income
6,802
6,849
6,660
6,188
6,353
Other income
6,331
6,688
7,037
3,206
6,169
14,167
14,334
13,771
10,072
14,024
OTHER EXPENSE
Compensation and benefits
49,841
45,564
50,456
51,444
49,070
Occupancy
9,371
10,115
10,444
10,918
10,102
FDIC insurance premiums
6,570
7,000
5,350
4,000
3,675
Product delivery
6,009
5,819
5,217
5,316
4,621
Information technology
12,866
12,672
11,661
12,785
12,329
Other expense
11,883
11,007
11,571
12,418
12,481
96,540
92,177
94,699
96,881
92,278
Gain (loss) on real estate owned, net
1,826
(235
)
722
(199
)
(112
)
Income before income taxes
71,690
59,119
79,494
84,530
101,933
Income tax provision
13,237
8,911
17,719
18,596
22,424
Net income
58,453
50,208
61,775
65,934
79,509
Dividends on preferred stock
3,656
3,656
3,656
3,656
3,656
Net income available to common
shareholders
$
54,797
$
46,552
$
58,119
$
62,278
$
75,853
PER SHARE DATA
Basic earnings per common share
$
0.85
$
0.72
$
0.89
$
0.95
$
1.16
Diluted earnings per common share
0.85
0.72
0.89
0.95
1.16
Cash dividends per common share
0.25
0.25
0.25
0.25
0.24
Basic weighted average shares
outstanding
64,297,499
64,729,006
65,194,880
65,511,131
65,341,974
Diluted weighted average shares
outstanding
64,312,110
64,736,864
65,212,846
65,551,185
65,430,690
PERFORMANCE RATIOS
Return on average assets
1.04
%
0.90
%
1.12
%
1.21
%
1.50
%
Return on average common equity
10.21
8.73
11.09
12.01
15.15
Net interest margin
2.91
3.13
3.27
3.51
3.69
Efficiency ratio
58.02
51.78
51.90
52.34
46.78
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240116724220/en/
WaFd, Inc. 425 Pike Street, Seattle, WA 98101 Brad Goode, SVP,
Chief Marketing Officer 206-626-8178 brad.goode@wafd.com
WaFd (NASDAQ:WAFD)
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WaFd (NASDAQ:WAFD)
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