EX-99.1 2 exhibit991_june2023earning.htm EX-99.1 Document


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Friday, July 14, 2023
FOR IMMEDIATE RELEASE


Washington Federal Announces Quarterly Earnings Per Share Of $0.89

SEATTLE, WASHINGTON – Washington Federal, Inc. (Nasdaq: WAFD) (the "Company"), parent company of Washington Federal Bank (the "Bank"), today announced quarterly earnings of $61,775,000 for the quarter ended June 30, 2023, a decrease of 2.4% from $63,295,000 for the quarter ended June 30, 2022. After the effect of dividends on preferred stock, net income available for common shareholders was $0.89 per diluted share for the quarter ended June 30, 2023, compared to $0.91 per diluted share for the quarter ended June 30, 2022, a $0.02 or 2.1% decrease in fully diluted earnings per common share. Return on common shareholders' equity for the quarter ended June 30, 2023 was 11.1% compared to 12.5% for the quarter ended June 30, 2022. Return on assets for the quarter ended June 30, 2023 was 1.1% compared to 1.3% for the same quarter in the prior year.
President and Chief Executive Officer Brent J. Beardall commented, "I am pleased to share that during the quarter we experienced net deposit inflows totaling $259 million, resulting in positive deposit growth for the fiscal year-to-date. This is a continued reflection of the confidence our clients place in WaFd. Net income is only slightly below the same quarter last year, even with the challenging interest rate environment and the turmoil in the banking industry over the last six months and we view the slowing pace of margin contraction to be a positive sign for our future. Specifically, our net interest margin contracted 42 basis points from 3.68% for the month of December 2022 compared with 3.26% for the month of March 2023. Using a consistent comparison, the contraction was only 5 basis points from March compared to 3.21% for the month of June 2023.
After nine consecutive years of net recoveries, during the last two quarters we have experienced net loan charge-offs. It is clear the rapid rise in interest rates is causing some
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stress for a limited sub-set of borrowers, but taken in its entirety, credit quality remains a positive differentiator for the Bank. Over 85% of our loans are secured by real estate with an estimated average current loan to value ratio under 45%. While there will likely be further stress for certain segments, we believe the Bank's conservative underwriting will accrue to our long-term benefit.
While we cannot directly control market forces affecting the valuation of our stock, we can effect change in tangible book value per share. Over the past 12 months, we increased tangible book value per share by $2.92 or 11.8%. As of June 30, 2023, WaFd stock was trading at 7.4 times annualized quarterly earnings, which we believe trades below our intrinsic value. Ultimately, we will need to demonstrate to investors that our margin is sustainable over the long-term. In the meantime, the current environment is shaping up to be a "reset" for regional banks and we believe we are well positioned to capitalize on disruptions in the market."
Total assets were $22.6 billion as of June 30, 2023, compared to $20.8 billion at September 30, 2022, primarily due to the $1.3 billion, or 7.9%, increase in net loans. In addition, cash increased by $455.7 million while investment securities decreased by $43.9 million.
The Bank's held to maturity ("HTM") investments were $434 million as of June 30, 2023, with a net unrealized loss of $40 million. Although not permitted by U.S. Generally Accepted Accounting Principles ("GAAP"), including these unrealized losses in accumulated other comprehensive income would result in a ratio of shareholder's equity to total assets of 10.44% compared to 10.62%, as reported.
Customer deposits totaled $16.1 billion as of June 30, 2023, an increase of $90.9 million or 0.6% since September 30, 2022. Transaction accounts decreased by $1.4 billion or 11.3% during that period, while time deposits increased $1.5 billion or 45.7%. As of June 30, 2023, 69.8% of the Company’s deposits were held in 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 89.7% of deposits at June 30, 2023. Uninsured deposits were 25%
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as of June 30, 2023, a decrease from 27% as of 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 June 30, 2023, an increase from $2.1 billion at September 30, 2022. The effective weighted average interest rate of borrowings was 3.93% as of June 30, 2023, an increase from 2.02% at September 30, 2022.
The Bank had loan originations of $0.9 billion for the third fiscal quarter of 2023, compared to $2.7 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 $1.7 billion, respectively. In addition to the slowing repayments, which are directly correlated with the rapid rise in interest rates, 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 63% of all loan originations during the third fiscal quarter of 2023 and consumer loans accounted for the remaining 37%. Commercial loans are preferable as they generally have floating interest rates and shorter durations. The weighted average interest rate on the loan portfolio was 5.11% at June 30, 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 continues to be monitored closely which is of particular importance in light of the shifting economic and monetary environment. As of June 30, 2023, non-performing assets increased to $67.0 million, or 0.3% of total assets as result of the deterioration of one large commercial loan. This compares to 0.3% of total assets at June 30, 2022 and 0.2% at September 30, 2022. Delinquent loans were 0.3% of total loans at June 30, 2023, compared to 0.3% at June 30, 2022 and 0.2% at September 30, 2022. The allowance for credit losses (including the reserve for unfunded commitments) totaled $204.6 million as of June 30, 2023, and was 1.03% of gross loans outstanding, as compared to $205.3 million, or 1.06% of gross loans outstanding, at September 30, 2022. Net charge-offs were $10.4 million
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for the third fiscal quarter of 2023, compared to net recoveries of $0.6 million for the prior year same quarter.
The Bank recorded a $9.0 million provision for credit losses in the third fiscal quarter of 2023, compared to a $1.5 million provision in the same quarter of fiscal 2022. The provision in the quarter ended June 30, 2023 was primarily due to one charge-off, offset by reduced unfunded commitment balances combined with the uncertain economic outlook amid concerns around a possible recession and recent macro-economic events.
The Company paid a quarterly dividend on the 4.875% Series A preferred stock on April 15, 2023. On June 2, 2023, the Company paid a regular cash dividend on common stock of $0.25 per share, which represented the 161st consecutive quarterly cash dividend. During the quarter, the Company repurchased 1,116,649 shares of common stock at a weighted average price of $25.62 per share and has authorization to repurchase 2,559,611 additional shares. Tangible common shareholders' equity per share increased by $2.09, or 8.2%, to $27.58 since September 30, 2022. The ratio of total tangible shareholders' equity to tangible assets was 9.4% as of June 30, 2023.
Net interest income was $168.7 million for the third fiscal quarter of 2023, an increase of $17.0 million or 11.2% from the same quarter in the prior year. The increase in net interest income was primarily due to the $2.0 billion increase in average loans outstanding during the quarter despite a decrease in the interest rate spread of 34 basis points. The decrease in the spread was the result of an increase of 209 basis points in the average rate paid on interest-bearing liabilities outpacing a 174 basis point increase in the average rate earned on interest-earning assets. Net interest margin improved to 3.27% in the third fiscal quarter of 2023 compared to 3.22% for the prior year quarter.
Total other income was $13.8 million for the third fiscal quarter of 2023 compared to $17.6 million in the prior year same quarter. Loan fee income decreased by $0.6 million when compared to the same quarter in the prior year due to a reduction in loan production. In addition, a one-time loss of $0.9 million recorded on our client rate swap program due to the LIBOR rate transition completed this quarter. Other income decreased $2.3 million due to a
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$2.7 million in unrealized gains on certain equity investments which were recorded in the quarter ended June 30, 2022.
Total other expense was $94.7 million in the third fiscal quarter of 2023, an increase of $7.3 million, or 8.3%, from the prior year's quarter. Compensation and benefits costs increased by $2.4 million, or 5.0%, over the prior year quarter primarily due to annual merit increases and investments in strategic initiatives combined with a reduction in capitalized compensation as loan originations have decreased. FDIC premiums increased by $3.3 million compared to the same period last year. Merger related expenses of $0.5 million were also included in total other expense. Despite these increases, the Company’s efficiency ratio in the third fiscal quarter of 2023 remained stable at 51.9%, compared to 51.6% for the same period one year ago.
Income tax expense totaled $17.7 million for the third fiscal quarter of 2023, as compared to $17.5 million for the prior year same quarter. The effective tax rate for the quarter ended June 30, 2023 was 22.29% compared to 21.70% 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.
Non-GAAP Financial Measures
The adjusted ratio of shareholders' equity to total assets on June 30, 2023, discussed above, is calculated by deducting the $40 million in unrealized losses on HTM investments from total GAAP equity of $2.4 billion, then dividing the adjusted equity by total assets of $22.6 billion to arrive at 10.44%. The unadjusted ratio as of June 30, 2023, was 10.62%.


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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 “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, 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) current and future economic conditions, including the effects of declines in the real estate market, high unemployment rates, inflationary pressures, a potential recession, and slowdowns in economic growth; (ii) fluctuations in interest rate risk and market interest rates, including the effect on our net interest income and net interest margin, (iii) financial stress on borrowers (consumers and businesses) as a result of higher interest rates or an uncertain economic environment; (iv) changes in deposit flows or loan demands; (v) the effect of COVID-19 and other infectious illness outbreaks that may arise in the future and the resulting governmental and societal responses; (vi) global economic trends, including developments related to Ukraine and Russia, and related negative financial impacts on our borrowers; (vii) risks related to the proposed merger with Luther Burbank Corporation; (viii) 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. The Company undertakes no obligation to update or revise any forward-looking statement.
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# # #
Contact:

Washington Federal, Inc.
425 Pike Street, Seattle, WA 98101
Brad Goode, SVP, Chief Marketing Officer
206-626-8178
brad.goode@wafd.com
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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
June 30, 2023September 30, 2022
 (In thousands, except share and ratio data)
ASSETS
Cash and cash equivalents$1,139,643 $683,965 
Available-for-sale securities, at fair value2,036,233 2,051,037 
Held-to-maturity securities, at amortized cost434,172 463,299 
Loans receivable, net of allowance for loan losses of $178,069 and $172,80817,384,188 16,113,564 
Interest receivable81,931 63,872 
Premises and equipment, net237,339 243,062 
Real estate owned8,371 6,667 
FHLB and FRB stock130,875 95,073 
Bank owned life insurance241,351 237,931 
Intangible assets, including goodwill of $303,457 and $303,457 309,069 309,009 
Other assets549,416 504,652 
$22,552,588 $20,772,131 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities
Transaction deposits$11,256,575 $12,691,527 
Time deposits4,863,849 3,338,043 
Total customer deposits16,120,424 16,029,570 
 Borrowings3,750,000 2,125,000 
Advance payments by borrowers for taxes and insurance33,516 50,051 
Federal and state income tax liabilities, net1,091 3,306 
Accrued expenses and other liabilities253,491 289,944 
20,158,522 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 outstanding300,000 300,000 
Common stock, $1.00 par value, 300,000,000 shares authorized; 136,457,717 and 136,270,886 shares issued; 64,721,190 and 65,330,126 shares outstanding136,458 136,271 
Additional paid-in capital1,685,587 1,686,975 
Accumulated other comprehensive income (loss), net of taxes47,351 52,481 
Treasury stock, at cost; 71,736,527 and 70,940,760 shares(1,612,494)(1,590,207)
Retained earnings1,837,164 1,688,740 
2,394,066 2,274,260 
$22,552,588 $20,772,131 
CONSOLIDATED FINANCIAL HIGHLIGHTS
Common shareholders' equity per share$32.36 $30.22 
Tangible common shareholders' equity per share27.58 25.49 
Shareholders' equity to total assets10.62 %10.95 %
Tangible shareholders' equity to tangible assets9.37 %9.60 %
Tangible shareholders' equity + allowance for credit losses to tangible assets10.17 %10.45 %
Weighted average rates at period end
   Loans5.11 %4.25 %
   Loans and mortgage-backed securities4.97 4.13 
   Combined loans, mortgage-backed securities and investments4.74 4.04 
   Customer accounts1.82 0.51 
   Borrowings3.93 2.02 
   Combined cost of customer accounts and borrowings2.22 0.68 
   Net interest spread2.72 3.36 




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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)

As of
SUMMARY FINANCIAL DATAJune 30, 2023March 31, 2023December 31, 2022September 30, 2022June 30, 2022
(In thousands, except share and ratio data)
Cash$1,139,643 $1,118,544 $645,862 $683,965 $607,421 
Loans receivable, net17,384,188 17,271,906 16,993,588 16,113,564 15,565,165 
Allowance for credit losses ("ACL")204,569 205,920 208,297 205,308 203,479 
Available-for-sale securities, at fair value2,036,233 2,006,286 2,059,837 2,051,037 2,150,732 
Held-to-maturity securities, at amortized cost434,172 445,222 453,443 463,299 477,884 
Total assets22,552,588 22,325,211 21,653,811 20,772,131 20,158,831 
Transaction deposits11,256,575 11,880,343 12,547,832 12,691,527 12,668,251 
Time deposits4,863,849 3,980,605 3,412,203 3,338,043 3,297,369 
Borrowings3,750,000 3,800,000 3,075,000 2,125,000 1,700,000 
Total shareholders' equity2,394,066 2,375,117 2,324,381 2,274,260 2,220,111 
FINANCIAL HIGHLIGHTS
Common shareholders' equity per share32.36 31.54 30.96 30.22 29.39 
Tangible common shareholders' equity per share27.58 26.85 26.24 25.49 24.66 
Shareholders' equity to total assets10.62 %10.64 %10.73 %10.95 %11.01 %
Tangible shareholders' equity to tangible assets9.37 %9.39 %9.44 %9.60 %9.63 %
Tangible shareholders' equity + ACL to tangible assets10.17 %10.19 %10.27 %10.45 %10.65 %
Common shares outstanding64,721,190 65,793,099 65,387,745 65,330,126 65,321,869 
Preferred shares outstanding300,000 300,000 300,000 300,000 300,000 
Loans to customer deposits 107.84 %108.90 %106.48 %100.52 %97.49 %
CREDIT QUALITY
ACL to gross loans1.0 %1.0 %1.0 %1.1 %1.1 %
ACL to non-accrual loans370.09 %595.04 %713.83 %594.51 %554.76 %
Non-accrual loans to net loans0.32 %0.20 %0.17 %0.21 %0.24 %
Non-accrual loans$55,276 $34,606 $29,180 $34,534 $36,679 
Non-performing assets to total assets0.30 %0.21 %0.18 %0.21 %0.25 %
Non-performing assets$67,000 $46,785 $38,650 $44,554 $50,430 
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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

 Three Months Ended June 30,Nine Months Ended June 30,
 2023202220232022
 (In thousands, except share and ratio data)(In thousands, except share and ratio data)
INTEREST INCOME
Loans receivable$232,167 $149,113 $659,070 $426,882 
Mortgage-backed securities10,454 8,618 31,489 18,069 
Investment securities and cash equivalents29,859 9,417 70,686 23,475 
272,480 167,148 761,245 468,426 
INTEREST EXPENSE
Customer accounts70,062 9,284 153,831 25,970 
FHLB advances and other borrowings33,718 6,118 80,877 21,486 
103,780 15,402 234,708 47,456 
Net interest income168,700 151,746 526,537 420,970 
Provision (release) for credit losses9,000 1,500 15,000 1,500 
Net interest income after provision (release)159,700 150,246 511,537 419,470 
OTHER INCOME
Gain (loss) on sale of investment securities— — — 81 
Gain (loss) on hedging derivatives(926)— (900)— 
Prepayment penalty on long-term debt— — — — 
Loan fee income1,000 1,618 3,154 6,014 
Deposit fee income6,660 6,613 19,201 19,338 
Other income7,037 9,319 16,412 26,457 
13,771 17,550 37,867 51,890 
OTHER EXPENSE
Compensation and benefits50,456 48,073 150,970 142,613 
Occupancy10,444 10,053 31,464 31,931 
FDIC insurance premiums5,350 2,100 13,025 7,300 
Product delivery5,217 4,667 15,154 14,432 
Information technology11,661 11,831 36,775 34,974 
Other expense11,571 10,679 36,470 34,183 
94,699 87,403 283,858 265,433 
Gain (loss) on real estate owned, net722 448 411 1,139 
Income before income taxes79,494 80,841 265,957 207,066 
Income tax provision17,719 17,546 58,739 44,131 
Net income61,775 63,295 207,218 162,935 
Dividends on preferred stock3,656 3,656 10,969 10,969 
Net income available to common shareholders$58,119 $59,639 $196,249 $151,966 
PER SHARE DATA
Basic earnings per common share$0.89 $0.91 $3.00 $2.33 
Diluted earnings per common share0.89 0.91 3.00 2.32 
Cash dividends per common share0.25 0.24 0.74 0.71 
Basic weighted average shares outstanding65,194,88065,315,48165,348,70965,274,488
Diluted weighted average shares outstanding65,212,84665,395,66665,442,91065,397,579
PERFORMANCE RATIOS
Return on average assets1.12 %1.25 %1.28 %1.08 %
Return on average common equity11.09 12.50 12.72 10.82 
Net interest margin3.27 3.22 3.49 3.00 
Efficiency ratio51.90 51.63 50.29 56.13 

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

 Three Months Ended
 June 30, 2023March 31, 2023December 31, 2022September 30, 2022June 30, 2022
 (In thousands, except share and ratio data)
INTEREST INCOME
Loans receivable$232,167 $222,957 $203,946 $174,710 $149,113 
Mortgage-backed securities10,454 10,422 10,613 8,263 8,618 
Investment securities and cash equivalents29,859 21,967 18,860 14,960 9,417 
272,480 255,346 233,419 197,933 167,148 
INTEREST EXPENSE
Customer accounts70,062 52,123 31,646 17,071 9,284 
FHLB advances and other borrowings33,718 28,185 18,974 7,243 6,118 
103,780 80,308 50,620 24,314 15,402 
Net interest income168,700 175,038 182,799 173,619 151,746 
Provision (release) for credit losses9,000 3,500 2,500 1,500 1,500 
Net interest income after provision (release)159,700 171,538 180,299 172,119 150,246 
OTHER INCOME
Gain (loss) on sale of investment securities— — — 18 — 
Gain (loss) on hedging derivatives(926)26 — — — 
Loan fee income1,000 652 1,502 1,154 1,618 
Deposit fee income6,660 6,188 6,353 6,604 6,613 
Other income7,037 3,206 6,169 6,706 9,319 
13,771 10,072 14,024 14,482 17,550 
OTHER EXPENSE
Compensation and benefits50,456 51,444 49,070 51,304 48,073 
Occupancy10,444 10,918 10,102 10,568 10,053 
FDIC insurance premiums5,350 4,000 3,675 2,231 2,100 
Product delivery5,217 5,316 4,621 5,104 4,667 
Information technology11,661 12,785 12,329 12,228 11,831 
Other expense11,571 12,418 12,481 11,707 10,679 
94,699 96,881 92,278 93,142 87,403 
Gain (loss) on real estate owned, net722 (199)(112)(488)448 
Income before income taxes79,494 84,530 101,933 92,971 80,841 
Income tax provision17,719 18,596 22,424 19,576 17,546 
Net income61,775 65,934 79,509 73,395 63,295 
Dividends on preferred stock3,656 3,656 3,656 3,656 3,656 
Net income available to common shareholders$58,119 $62,278 $75,853 $69,739 $59,639 
PER SHARE DATA
Basic earnings per common share$0.89 $0.95 $1.16 $1.07 $0.91 
Diluted earnings per common share0.89 0.95 1.16 1.07 0.91 
Cash dividends per common share0.25 0.25 0.24 0.24 0.24 
Basic weighted average shares outstanding65,194,88065,511,13165,341,97465,326,70665,315,481
Diluted weighted average shares outstanding65,212,84665,551,18565,430,69065,423,81765,395,666
PERFORMANCE RATIOS
Return on average assets1.12 %1.21 %1.50 %1.44 %1.25 %
Return on average common equity11.09 12.01 15.15 14.22 12.50 
Net interest margin3.27 3.51 3.69 3.64 3.22 
Efficiency ratio51.90 52.34 46.78 49.52 51.63 
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