Washington Federal Announces Quarterly Earnings Per Share Of $0.91

Rhea-AI Summary

Washington Federal, Inc. (WAFD) reports a robust quarterly earnings of $63.3 million for Q3 2022, marking a 33.5% increase from $47.4 million in Q3 2021. Net income per diluted share rose 49.2% to $0.91. Return on equity improved to 12.50% from 8.71%. The net interest margin expanded to 3.22%. Loan originations reached a record $2.74 billion, with net loans up 15.6%. Customer deposits increased 2.7% to $16.0 billion. Despite macroeconomic challenges, the company maintains strong asset quality.

Positive

• Quarterly earnings increased by 33.5% to $63.3 million.
• Net income per diluted share rose 49.2% to $0.91.
• Return on common shareholders' equity reached 12.50%.
• Net interest margin improved to 3.22% from 2.82% a year ago.
• Loan originations hit a record $2.74 billion for the quarter.
• Customer deposits increased by 2.7% to $16.0 billion.

Negative

• Concerns over potential short-term challenges due to rising inflation.
• Operating expenses increased by 4.5%, mainly from higher compensation costs.

SEATTLE--(BUSINESS WIRE)-- Washington Federal, Inc. (Nasdaq: WAFD) (the "Company"), parent company of Washington Federal Bank ("WaFd Bank"), today announced quarterly earnings of $63,295,000 for the quarter ended June 30, 2022, an increase of 33.5% from $47,422,000 for the quarter ended June 30, 2021. After the effect of dividends on preferred stock, net income available for common shareholders was $0.91 per diluted share for the quarter ended June 30, 2022, compared to $0.61 per diluted share for the quarter ended June 30, 2021, a $0.30 or 49.2% increase in fully diluted earnings per common share. Return on common shareholders' equity for the quarter ended June 30, 2022 was 12.50% compared to 8.71% for the quarter ended June 30, 2021. Return on assets for the quarter ended June 30, 2022 was 1.25% compared to 0.97% for the same quarter in the prior year.

President and Chief Executive Officer Brent J. Beardall commented, "We are pleased to report what is the best quarter in our 105-year history. Our bankers have worked diligently over the last decade to reposition our balance sheet to take advantage of rising interest rates and this quarter’s results reflect those ongoing efforts. Building our franchise by growing core deposits and expanding our commercial banking capabilities directly contributed to our net interest margin expanding from 2.82% a year ago to 3.22% this quarter, which was the primary driver of earnings growth. In addition to margin expansion, we benefited from continued growth of our loan portfolio, with net loans outstanding increasing by 15.6% since June 30, 2021. We believe that this growth rate will moderate going forward as rising costs and interest rates temper activity in the housing market.

"Inflation recently hit a 40-year high and the related cost pressures are real. We are actively managing operating expenses, including the consolidation of 25 branch locations over the last 18 months. Our efficiency ratio decreasing from 59% to 52% is tangible evidence of the operating leverage we've achieved over the last year by controlling expenses and growing revenue. Importantly, even as we focus on operating expenses, we continue to make strategic investments in technology. So far this year, we completed our migration from an on-premise data center to the cloud, built and launched our own internally developed consumer online banking platform and implemented the MX mobile banking solution. Couple these meaningful upgrades with future enhancements and we believe significant strides are being made toward becoming a digital first bank.

"From a macro-economic perspective, we recognize the risks on the horizon and expect future volatility as the Federal Reserve attempts to restore price stability. Given market expectations that a near-term recession is likely, we believe WaFd Bank is well positioned as our asset quality metrics remain very strong. At June 30, 2022, delinquencies totaled just 0.26% of loans outstanding, non-performing assets were only 0.25% of total assets, and net recoveries were $595,000 for the third fiscal quarter of 2022, marking eight consecutive years of net recoveries. At quarter's end, we had credit loss reserves of $203 million and $2.2 billion of shareholders' equity.

"Despite potential short-term challenges, the economic vitality of the markets we operate in is strong and we take pride in being a source of strength and consistent support for our clients."

Total assets were $20.2 billion as of June 30, 2022, compared to $19.7 billion at September 30, 2021, primarily due to the $1.7 billion increase in loans receivable funded by continued growth in customer deposits (noted below) and the $1.5 billion decline in cash. Investment securities increased by $124 million since September 30, 2021.

Customer deposits totaled $16.0 billion as of June 30, 2022, an increase of $424 million or 2.7% since September 30, 2021. Transaction accounts increased by $560 million or 4.6% during that period, while time deposits decreased $137 million or 4.0%. The shift in deposit mix has been the result of a deliberate deposit pricing and customer growth strategy. The focus on transaction accounts is intended to lessen sensitivity to rising interest rates and manage interest expense. As of June 30, 2022, 79.3% of the Company’s deposits were transaction accounts, up from 77.9% at September 30, 2021. Core deposits, defined as all transaction accounts and time deposits less than $250,000, totaled 96.3% of deposits at June 30, 2022.

Borrowings from the Federal Home Loan Bank ("FHLB") totaled $1.70 billion as of June 30, 2022, a decrease from $1.72 billion at September 30, 2021. The weighted average effective interest rate of FHLB borrowings was 1.43% as of June 30, 2022, a decrease from 1.51% at September 30, 2021. The decline in the weighted average effective interest rate was the result of replacing high-yielding, long-term FHLB borrowings with new borrowings at lower rates.

The Company had record loan originations of $2.74 billion for the third fiscal quarter of 2022, compared to $2.10 billion of originations in the same quarter one year ago. Largely offsetting loan originations in each of these quarters were loan repayments of $1.69 billion and $1.96 billion, respectively. Commercial loans represented 77% of all loan originations during the third fiscal quarter of 2022 and consumer loans accounted for the remaining 23%. 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 3.77% as of June 30, 2022, an increase from 3.47% as of September 30, 2021, due primarily to higher rates on adjustable rate loans as well as higher rates on newly originated loans.

Credit quality is being monitored closely as economic stimulus comes to an end. As of June 30, 2022, non-performing assets remained low from a historical perspective and totaled $50.4 million, or 0.25% of total assets, compared to 0.23% at March 31, 2022 and 0.22% at September 30, 2021. Delinquent loans were 0.26% of total loans at June 30, 2022, compared to 0.30% at March 31, 2022 and 0.19% at September 30, 2021. The allowance for credit losses (including the reserve for unfunded commitments) totaled $203 million as of June 30, 2022, and was 1.08% of gross loans outstanding, as compared to $199 million, or 1.22% of gross loans outstanding, at September 30, 2021. Net recoveries were $595 thousand for the third fiscal quarter of 2022, compared to net recoveries of $1.1 million for the prior year same quarter. The Company has recorded net recoveries in 34 of the last 36 quarters.

The Company recorded a $1.5 million provision for credit losses in the third fiscal quarter of 2022, compared to a $2.0 million release of allowance for credit losses in the same quarter of fiscal 2021. The provision in the quarter ended June 30, 2022 was primarily due to growth in loans receivable partially offset by improvements in the credit quality of certain loan portfolios related to strong real estate markets and collateral conditions.

The Company paid a quarterly dividend on the 4.875% Series A preferred stock on April 15, 2022. On June 3, 2022, the Company paid a regular cash dividend on common stock of $0.24 per share, which represented the 157^th consecutive quarterly cash dividend. If the Board declares a cash dividend on common stock at its August 9, 2022 meeting as anticipated, the record date and payment date are likely to be August 19, 2022 and September 2, 2022, respectively. During the third fiscal quarter of 2022, the Company repurchased 2,446 shares of common stock (related to tax withholding on employee equity awards) at a weighted average price of $31.36 per share and has authorization to repurchase 3,725,874 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, 2021, tangible common shareholders' equity per share increased by $1.39, or 6.0%, to $24.66. The ratio of total tangible shareholders' equity to tangible assets was 9.63% as of June 30, 2022.

Net interest income was $152 million for the third fiscal quarter of 2022, an increase of $23.1 million or 18.0% from the same quarter in the prior year. The increase in net interest income was due primarily to growth in average interest-earning assets outpacing growth in average interest-bearing liabilities as well as the impact of rising rates on adjustable rate assets. Average interest-earning assets increased by $684 million or 3.75% from the prior year while average interest-bearing liabilities increased $484 million or 3.44%. Average noninterest-bearing deposits grew by $387 million over the same period. The average rate earned on interest-earning assets increased by 30 basis points while the average rate paid on interest-bearing liabilities declined by 12 basis points. Net interest margin improved to 3.22% in the third fiscal quarter of 2022 compared to 2.90% for the quarter ended March 31, 2022 and 2.82% for the prior year quarter.

Total other income was $17.6 million for the third fiscal quarter of 2022 compared to $13.2 million in the prior year same quarter. The increase in other income was primarily due to an unrealized gain of $2.7 million that was recorded for certain equity investments in the quarter ended June 30, 2022.

Total other expense was $87.4 million in the third fiscal quarter of 2022, an increase of $3.8 million, or 4.5%, from the prior year's quarter. Compensation and benefits costs increased by $4.2 million, or 9.7%, over the prior year quarter primarily due to annual merit increases, higher bonus compensation accruals related to strong deposit and loan growth and investments in top talent and contract staff to support strategic initiatives. The Company’s efficiency ratio in the third fiscal quarter of 2022 improved to 51.6%, compared to 59.0% for the same period one year ago due to income growth outpacing expense growth.

Income tax expense totaled $17.5 million for the third fiscal quarter of 2022, as compared to $12.6 million for the prior year same quarter. The effective tax rate for the quarter ended June 30, 2022 was 21.70% compared to 21.00% in the prior year same quarter and 21.24% for the full year ended September 30, 2021. 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 209 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 2021 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 2021 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 COVID-19 pandemic 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; and (v) fluctuations in interest rate risk and market interest rates, including the effect on our net interest income and net interest margin. 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, 2022				September 30, 2021
	(In thousands, except share and ratio data)
ASSETS
Cash and cash equivalents	$	607,421			$	2,090,809
Available-for-sale securities, at fair value		2,150,732				2,138,259
Held-to-maturity securities, at amortized cost		477,884				366,025
Loans receivable, net of allowance for loan losses of $170,979 and $171,300		15,565,165				13,833,570
Interest receivable		55,985				50,636
Premises and equipment, net		244,232				255,152
Real estate owned		9,656				8,204
FHLB and FRB stock		78,073				102,863
Bank owned life insurance		237,407				233,263
Intangible assets, including goodwill of $303,457 and $303,457		309,254				310,019
Federal and state income tax assets, net		—				3,877
Other assets		423,022				257,897
	$	20,158,831			$	19,650,574
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities
Transaction deposits	$	12,668,251			$	12,108,025
Time deposits		3,297,369				3,434,087
Total customer deposits		15,965,620				15,542,112
FHLB advances		1,700,000				1,720,000
Advance payments by borrowers for taxes and insurance		30,251				47,016
Federal and state income tax liabilities, net		4,394				—
Accrued expenses and other liabilities		238,455				215,382
		17,938,720				17,524,510
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; 136,261,099 and 135,993,254 shares issued; 65,321,869 and 65,145,268 shares outstanding		136,261				135,993
Additional paid-in capital		1,685,219				1,678,622
Accumulated other comprehensive income (loss), net of taxes		54,227				69,785
Treasury stock, at cost; 70,939,230 and 70,847,986 shares		(1,590,159	)			(1,586,947	)
Retained earnings		1,634,563				1,528,611
		2,220,111				2,126,064
	$	20,158,831			$	19,650,574
CONSOLIDATED FINANCIAL HIGHLIGHTS
Common shareholders' equity per share	$	29.39			$	28.03
Tangible common shareholders' equity per share		24.66				23.27
Shareholders' equity to total assets		11.01	%			10.82	%
Tangible shareholders' equity to tangible assets		9.63	%			9.39	%
Tangible shareholders' equity + allowance for credit losses to tangible assets		10.65	%			10.42	%
Weighted average rates at period end
Loans and mortgage-backed securities		3.67	%			3.37	%
Combined loans, mortgage-backed securities and investments		3.50				2.80
Customer accounts		0.32				0.23
Borrowings		1.43				1.51
Combined cost of customer accounts and borrowings		0.43				0.35
Net interest spread		3.07				2.45

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED)
	As of
SUMMARY FINANCIAL DATA	June 30, 2022				March 31, 2022				December 31, 2021				September 30, 2021				June 30, 2021
	(In thousands, except share and ratio data)
Cash	$	607,421			$	1,947,504			$	1,880,647			$	2,090,809			$	2,251,958
Loans receivable, net		15,565,165				15,094,926				14,592,202				13,833,570				13,467,997
Allowance for credit losses ("ACL")		203,479				201,384				201,411				198,800				198,284
Available-for-sale securities, at fair value		2,150,732				1,909,605				1,946,139				2,138,259				2,292,656
Held-to-maturity securities, at amortized cost		477,884				301,221				326,387				366,025				415,748
Total assets		20,158,831				20,560,279				19,973,171				19,650,574				19,649,509
Transaction deposits		12,668,251				13,139,606				12,550,062				12,108,025				11,700,467
Time deposits		3,297,369				3,251,042				3,351,984				3,434,087				3,537,891
FHLB advances		1,700,000				1,720,000				1,720,000				1,720,000				1,950,000
Total shareholders' equity		2,220,111				2,191,701				2,149,126				2,126,064				2,227,240
FINANCIAL HIGHLIGHTS
Common shareholders' equity per share		29.39				28.97				28.33				28.03				27.74
Tangible common shareholders' equity per share		24.66				24.23				23.59				23.27				23.30
Shareholders' equity to total assets		11.01	%			10.66	%			10.76	%			10.82	%			11.33	%
Tangible shareholders' equity to tangible assets		9.63	%			9.29	%			9.35	%			9.39	%			9.92	%
Tangible shareholders' equity + ACL to tangible assets		10.65	%			10.29	%			10.38	%			10.42	%			10.94	%
Common shares outstanding		65,321,869				65,306,928				65,263,738				65,145,268				69,472,423
Preferred shares outstanding		300,000				300,000				300,000				300,000				300,000
Loans to customer deposits		97.49	%			92.09	%			91.76	%			89.01	%			88.38	%
CREDIT QUALITY
ACL to gross loans		1.08	%			1.13	%			1.18	%			1.22	%			1.26	%
ACL to non-accrual loans		554.76	%			598.66	%			447.99	%			626.16	%			582.40	%
Non-accrual loans to net loans		0.24	%			0.22	%			0.31	%			0.23	%			0.25	%
Non-accrual loans		36,679				33,639				44,959				31,749				34,046
Non-performing assets to total assets		0.25	%			0.23	%			0.27	%			0.22	%			0.23	%
Non-performing assets		50,430				47,243				54,790				43,625				45,650

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
	Three Months Ended June 30,								Nine Months Ended June 30,
		2022				2021				2022				2021
	(In thousands, except share and ratio data)								(In thousands, except share and ratio data)
INTEREST INCOME
Loans receivable	$	149,113			$	134,193			$	426,882			$	400,621
Mortgage-backed securities		8,618				5,488				18,069				19,414
Investment securities and cash equivalents		9,417				7,767				23,475				21,989
		167,148				147,448				468,426				442,024
INTEREST EXPENSE
Customer accounts		9,284				8,906				25,970				33,745
FHLB advances and other borrowings		6,118				9,937				21,486				35,126
		15,402				18,843				47,456				68,871
Net interest income		151,746				128,605				420,970				373,153
Provision (release) for credit losses		1,500				(2,000	)			1,500				1,000
Net interest income after provision (release)		150,246				130,605				419,470				372,153
OTHER INCOME
Gain (loss) on sale of investment securities		—				—				81				—
Gain (loss) on termination of hedging		—				—				—				14,110
Prepayment penalty on long-term debt		—				—				—				(13,788	)
Loan fee income		1,618				1,748				6,014				5,012
Deposit fee income		6,613				6,201				19,338				18,187
Other income		9,319				5,262				26,457				18,037
		17,550				13,211				51,890				41,558
OTHER EXPENSE
Compensation and benefits		48,073				43,841				142,613				130,196
Occupancy		10,053				9,725				31,931				29,790
FDIC insurance premiums		2,100				3,900				7,300				10,918
Product delivery		4,667				4,075				14,432				13,413
Information technology		11,831				10,396				34,974				32,923
Other expense		10,679				11,703				34,183				29,556
		87,403				83,640				265,433				246,796
Gain (loss) on real estate owned, net		448				(151	)			1,139				(566	)
Income before income taxes		80,841				60,025				207,066				166,349
Income tax provision		17,546				12,603				44,131				35,105
Net income		63,295				47,422				162,935				131,244
Dividends on preferred stock		3,656				3,656				10,969				6,378
Net income available to common shareholders	$	59,639			$	43,766			$	151,966			$	124,866
PER SHARE DATA
Basic earnings per common share	$	0.91			$	0.61			$	2.33			$	1.68
Diluted earnings per common share		0.91				0.61				2.32				1.68
Cash dividends per common share		0.24				0.23				0.71				0.68
Basic weighted average shares outstanding		65,315,481				71,795,157				65,274,488				74,315,911
Diluted weighted average shares outstanding		65,395,666				71,901,068				65,397,579				74,326,693
PERFORMANCE RATIOS
Return on average assets		1.25	%			0.97	%			1.08	%			0.91	%
Return on average common equity		12.50				8.71				10.82				8.17
Net interest margin		3.22				2.82				3.00				2.77
Efficiency ratio		51.63				58.98				56.13				59.51

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
	Three Months Ended
	June 30, 2022				March 31, 2022				December 31, 2021				September 30, 2021				June 30, 2021
	(In thousands, except share and ratio data)
INTEREST INCOME
Loans receivable	$	149,113			$	139,260			$	138,509			$	137,039			$	134,193
Mortgage-backed securities		8,618				4,659				4,792				5,294				5,488
Investment securities and cash equivalents		9,417				6,919				7,139				7,253				7,767
		167,148				150,838				150,440				149,586				147,448
INTEREST EXPENSE
Customer accounts		9,284				8,225				8,461				8,568				8,906
FHLB advances and other borrowings		6,118				7,525				7,843				9,062				9,937
		15,402				15,750				16,304				17,630				18,843
Net interest income		151,746				135,088				134,136				131,956				128,605
Provision (release) for credit losses		1,500				(500	)			500				(500	)			(2,000	)
Net interest income after provision (release)		150,246				135,588				133,636				132,456				130,605
OTHER INCOME
Gain (loss) on sale of investment securities		—				—				81				14				—
Loan fee income		1,618				2,475				1,921				1,887				1,748
Deposit fee income		6,613				6,282				6,443				6,499				6,201
Other income		9,319				6,902				10,236				10,603				5,262
		17,550				15,659				18,681				19,003				13,211
OTHER EXPENSE
Compensation and benefits		48,073				47,115				47,425				45,910				43,841
Occupancy		10,053				11,788				10,090				9,820				9,725
FDIC insurance premiums		2,100				2,100				3,100				3,450				3,900
Product delivery		4,667				5,044				4,721				5,092				4,075
Information technology		11,831				11,722				11,421				9,814				10,396
Other expense		10,679				10,648				12,856				11,577				11,703
		87,403				88,417				89,613				85,663				83,640
Gain (loss) on real estate owned, net		448				129				562				993				(151	)
Income before income taxes		80,841				62,959				63,266				66,789				60,025
Income tax provision		17,546				13,600				12,985				14,418				12,603
Net income		63,295				49,359				50,281				52,371				47,422
Dividends on preferred stock		3,656				3,656				3,656				3,656				3,656
Net income available to common shareholders	$	59,639			$	45,703			$	46,625			$	48,715			$	43,766
PER SHARE DATA
Basic earnings per common share	$	0.91			$	0.70			$	0.72			$	0.72			$	0.61
Diluted earnings per common share		0.91				0.70				0.71				0.72				0.61
Cash dividends per common share		0.24				0.24				0.23				0.23				0.23
Basic weighted average shares outstanding		65,315,481				65,301,171				65,207,837				67,227,280				71,795,157
Diluted weighted average shares outstanding		65,395,666				65,445,206				65,350,174				67,235,846				71,901,068
PERFORMANCE RATIOS
Return on average assets		1.25	%			0.98	%			1.02	%			1.07	%			0.97	%
Return on average common equity		12.50				9.80				10.12				10.36				8.71
Net interest margin		3.22				2.90				2.87				2.88				2.82
Efficiency ratio		51.63				58.65				58.64				56.75				58.98

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20220713005722/en/

Washington Federal, Inc.

425 Pike Street, Seattle, WA 98101

Brad Goode, SVP, Chief Marketing Officer

206-626-8178

brad.goode@wafd.com

Source: Washington Federal, Inc.

FAQ

What were Washington Federal's earnings for Q3 2022?

Washington Federal reported earnings of $63.3 million for Q3 2022.

What is the net income per share for WAFD in Q3 2022?

The net income per diluted share for WAFD in Q3 2022 was $0.91.

How much did loan originations increase for Washington Federal in Q3 2022?

Loan originations increased to a record $2.74 billion in Q3 2022.

What was the return on equity for WAFD in Q3 2022?

The return on common shareholders' equity was 12.50% in Q3 2022.

What are the current customer deposits for Washington Federal?

Customer deposits totaled $16.0 billion as of June 30, 2022.