EX-99.1 2 exhibit991_march2023earnin.htm EX-99.1 Document


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Thursday, April 13, 2023
FOR IMMEDIATE RELEASE


Washington Federal Announces Quarterly Earnings Per Share Of $0.95

SEATTLE, WASHINGTON – Washington Federal, Inc. (Nasdaq: WAFD) (the "Company"), parent company of Washington Federal Bank ("WaFd Bank"), today announced quarterly earnings of $65,934,000 for the quarter ended March 31, 2023, an increase of 33.6% from $49,359,000 for the quarter ended March 31, 2022. After the effect of dividends on preferred stock, net income available for common shareholders was $0.95 per diluted share for the quarter ended March 31, 2023, compared to $0.70 per diluted share for the quarter ended March 31, 2022, a $0.25 or 35.7% increase in fully diluted earnings per common share. Return on common shareholders' equity for the quarter ended March 31, 2023 was 12.0% compared to 9.8% for the quarter ended March 31, 2022. Return on assets for the quarter ended March 31, 2023 was 1.2% compared to 1.0% for the same quarter in the prior year.
During the month of March 2023, the United States saw the 2nd and 3rd largest bank failures in its history due to sudden customer deposit outflows. WaFd Bank had net deposit inflows of $25 million in the same month. For the quarter ended March 31, 2023, WaFd Bank had net deposit outflows of $99 million or 0.6% of total deposits. Only 27% of the Bank’s deposits were uninsured as of quarter end, which is a decrease from 31% as of December 31, 2022. The Bank’s held to maturity (“HTM”) investments were $445 million as of March 31, 2023 with a net unrealized loss of $35 million. Although not permitted by U.S. Generally Accepted Accounting Principles, including these unrealized losses in accumulated other comprehensive income (“AOCI”) would result in a ratio of shareholder’s equity to total assets of 10.48%. compared to 10.64%, as reported.
President and Chief Executive Officer Brent J. Beardall commented, "We were disappointed to see the failures of both Silicon Valley Bank and Signature Bank last quarter.
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What is most important at this point is customers having confidence in the banking system. It is the job of management, directors and the regulatory agencies to ensure banks are run in a safe and sound manner so that customers do not have to worry. Any losses from bank failures should be absorbed by the FDIC insurance fund and replenished by surviving banks that benefit from the security that comes from FDIC insurance. We are grateful for the trust and confidence our clients have placed in WaFd Bank and work each day to earn that trust by managing the bank for the long-term, which at times translates into accepting less in short term earnings.
This is a challenging interest rate environment for bank earnings. Presently, the yield curve is inverted with long-term rates being lower than short-term rates. The degree to which the yield curve is inverted is near a historical high. The 10 year U.S. Treasury rate was recently at 3.35% and the 3 month rate at 4.88%, a 153 basis point inversion, the second largest since 1962, which is as far back as the data is kept. As a result, bank margins are compressing. WaFd saw its net interest margin decrease from 3.69% in the December quarter to 3.51% in the March quarter. While this is a significant decline in margin, the previous quarter had represented a 25 year high in margin for the Bank and our current margin is still meaningfully higher than the 2.90% margin reported in the March 2022 quarter.
While credit quality remains strong, with delinquent loans representing only 0.2% of total loans, we did experience our first quarterly net charge-off in almost a decade. We are monitoring our portfolio closely for signs of deterioration which we expect will occur as the stress of higher interest rates is realized throughout the economy. With an allowance for loan losses of over $205 million and robust capital, we believe the Bank is well positioned to withstand a credit cycle if that is what materializes over the next few quarters.
There has been a significant amount of speculation about looming deterioration in the values of commercial real estate as the market adjusts to higher vacancies and capitalization rates. We understand the macro pressures on commercial real estate and believe they will be most acute in the largest metropolitan areas. We are gratified that our loan portfolio is spread over eight western states that are generally experiencing net immigration and strong job growth. Importantly, the Bank has been conservative in its commercial real estate lending
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requiring substantial equity from borrowers that would absorb the first portion of any losses in value. Based on December 31, 2022 estimates, the average current loan to value ratio of our multifamily loans was 49%, on commercial office 52% and on other commercial real estate 44%.
Banking is a noble profession that enables consumers to safely manage their savings, businesses to securely pay their obligations and borrowers to conservatively leverage their assets for growth. Despite potential short-term challenges, the economic vitality of the markets we operate in is strong, our bankers are experienced, and we take pride in being a source of strength and consistent support for our clients."
Total assets were $22.3 billion as of March 31, 2023, compared to $20.8 billion at September 30, 2022, primarily due to the $1.2 billion, or 7.2%, increase in net loans. In addition, cash increased by $434.6 million while investment securities decreased by $62.8 million.
Customer deposits totaled $15.9 billion as of March 31, 2023, a decrease of $168.6 million or 1.1% since September 30, 2022. Transaction accounts decreased by $811.2 million or 6.4% during that period, while time deposits increased $642.6 million or 19.2%. As of March 31, 2023, 74.9% of the Company’s deposits were 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 92.3% of deposits at 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 March 31, 2023, an increase from $2.1 billion at September 30, 2022. The effective weighted average interest rate of borrowings was 3.69% as of March 31, 2023, an increase from 2.02% at September 30, 2022.
The Company had loan originations of $1.0 billion for the second fiscal quarter of 2023, compared to $2.2 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 $1.5
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billion, respectively. The Company has intentionally slowed new loan production, given the uncertain economic environment, with repayments exceeding originations. Even so, net loans outstanding grew for the quarter due to the funding of construction loans previously originated. Commercial loans represented 73% of all loan originations during the second fiscal quarter of 2023 and consumer loans accounted for the remaining 27%. Commercial loans are preferable as they generally have floating interest rates and shorter durations. The weighted average interest rate on the loan portfolio was 4.96% at March 31, 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 is being monitored closely in light of the shifting economic and monetary environment. As of March 31, 2023, non-performing assets remained low from a historical perspective and totaled $46.8 million, or 0.2% of total assets, compared to 0.2% at March 31, 2022 and 0.2% at September 30, 2022. Delinquent loans were 0.2% of total loans at March 31, 2023, compared to 0.3% at March 31, 2022 and 0.2% at September 30, 2022. The allowance for credit losses (including the reserve for unfunded commitments) totaled $206 million as of March 31, 2023, and was 1.0% of gross loans outstanding, as compared to $205 million, or 1.1% of gross loans outstanding, at September 30, 2022. Net charge-offs were $5.9 million for the second fiscal quarter of 2023, compared to net recoveries of $0.5 million for the prior year same quarter.
The Company recorded a $3.5 million provision for credit losses in the second fiscal quarter of 2023, compared to a $0.5 million release of allowance for credit losses in the same quarter of fiscal 2022. The provision in the quarter ended March 31, 2023 was primarily due to growth in net loans receivable combined with the changing economic outlook amid concerns around a looming recession and recent macro-economic events.
The Company paid a quarterly dividend on the 4.875% Series A preferred stock on January 15, 2023. On March 10, 2023, the Company paid a regular cash dividend on common stock of $0.25 per share, which represented the 160th consecutive quarterly cash dividend. Tangible common shareholders' equity per share increased by $1.36, or 5.3%, to $26.85 since
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September 30, 2022. The ratio of total tangible shareholders' equity to tangible assets was 9.4% as of March 31, 2023.
Net interest income was $175.0 million for the second fiscal quarter of 2023, an increase of $40.0 million or 29.6% from the same quarter in the prior year. The increase in net interest income was primarily due to an increase in the interest rate spread of 28 basis points. This was the result of the increase of 187 basis points in the average rate earned on interest-earning assets outpacing the 159 basis point increase in the average rate paid on interest-bearing liabilities. Net interest margin improved to 3.51% in the second fiscal quarter of 2023 compared to 2.90% for the prior year quarter.
Total other income was $10.1 million for the second fiscal quarter of 2023 compared to $15.7 million in the prior year same quarter. The decrease in other income was primarily due to unrealized gains of $1.2 million for certain equity investments which were recorded in the quarter ended March 31, 2022. There were unrealized losses of $4.0 million on the same investments in the quarter ended March 31, 2023. In addition, loan fee income decreased by $1.8 million when compared to the same quarter in the prior year due to a reduction in loan production. Originations for the second fiscal quarter of 2023 were $1.0 billion compared to $2.2 billion in the prior year same quarter.
Total other expense was $96.9 million in the second fiscal quarter of 2023, an increase of $8.5 million, or 9.6%, from the prior year's quarter. Compensation and benefits costs increased by $4.3 million, or 9.2%, over the prior year quarter primarily due to annual merit increases and investments in talent, strategic initiatives and a reduction in capitalized compensation as loan originations have decreased. Merger related expenses of $1.2 million were also included in total other expense. Despite these increases, the Company’s efficiency ratio in the second fiscal quarter of 2023 improved to 52.3%, compared to 58.7% for the same period one year ago as a result of income growth outpacing expense growth.
Income tax expense totaled $18.6 million for the second fiscal quarter of 2023, as compared to $13.6 million for the prior year same quarter. The effective tax rate for the quarter ended March 31, 2023 was 22.00% compared to 21.60% in the prior year same quarter
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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.

Important Cautionary Statements

The foregoing information should be read in conjunction with the financial statements, notes and other information contained in the Company’s 2022 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, 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 effect of COVID-19 and other infectious illness outbreaks that may arise in the future 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
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developments related to Ukraine and Russia, and related negative financial impacts on our borrowers; (v) fluctuations in interest rate risk and market interest rates, including the effect on our net interest income and net interest margin; (vi) risks related to the proposed merger with Luther Burbank Corporation; and (vii) our ability to identify and address cyber-security risks, including security breaches, “denial of service attacks,” “hacking” and identity theft. The Company undertakes no obligation to update or revise any forward-looking statement.
# # #
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)
March 31, 2023September 30, 2022
 (In thousands, except share and ratio data)
ASSETS
Cash and cash equivalents$1,118,544 $683,965 
Available-for-sale securities, at fair value2,006,286 2,051,037 
Held-to-maturity securities, at amortized cost445,222 463,299 
Loans receivable, net of allowance for loan losses of $177,420 and $172,80817,271,906 16,113,564 
Interest receivable79,069 63,872 
Premises and equipment, net236,054 243,062 
Real estate owned8,826 6,667 
FHLB and FRB stock147,078 95,073 
Bank owned life insurance239,840 237,931 
Intangible assets, including goodwill of $303,457 and $303,457 308,524 309,009 
Federal and state income tax assets, net— — 
Other assets463,862 504,652 
$22,325,211 $20,772,131 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities
Transaction deposits$11,880,343 $12,691,527 
Time deposits3,980,605 3,338,043 
Total customer deposits15,860,948 16,029,570 
 Borrowings3,800,000 2,125,000 
Advance payments by borrowers for taxes and insurance44,312 50,051 
Federal and state income tax liabilities, net2,666 3,306 
Accrued expenses and other liabilities242,168 289,944 
19,950,094 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; 136,412,977 and 136,270,886 shares issued; 65,793,099 and 65,330,126 shares outstanding136,413 136,271 
Additional paid-in capital1,683,720 1,686,975 
Accumulated other comprehensive income (loss), net of taxes43,822 52,481 
Treasury stock, at cost; 70,619,878 and 70,940,760 shares(1,583,880)(1,590,207)
Retained earnings1,795,042 1,688,740 
2,375,117 2,274,260 
$22,325,211 $20,772,131 
CONSOLIDATED FINANCIAL HIGHLIGHTS
Common shareholders' equity per share$31.54 $30.22 
Tangible common shareholders' equity per share26.85 25.49 
Shareholders' equity to total assets10.64 %10.95 %
Tangible shareholders' equity to tangible assets9.39 %9.60 %
Tangible shareholders' equity + allowance for credit losses to tangible assets10.19 %10.45 %
Weighted average rates at period end
   Loans4.96 %4.25 %
   Loans and mortgage-backed securities4.81 4.13 
   Combined loans, mortgage-backed securities and investments4.45 4.04 
   Customer accounts1.48 0.51 
   Borrowings3.69 2.02 
   Combined cost of customer accounts and borrowings1.91 0.68 
   Net interest spread2.86 3.36 



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


As of
SUMMARY FINANCIAL DATAMarch 31, 2023December 31, 2022September 30, 2022June 30, 2022March 31, 2022
(In thousands, except share and ratio data)
Cash$1,118,544 $645,862 $683,965 $607,421 $1,947,504 
Loans receivable, net17,271,906 16,993,588 16,113,564 15,565,165 15,094,926 
Allowance for credit losses ("ACL")205,920 208,297 205,308 203,479 201,384 
Available-for-sale securities, at fair value2,006,286 2,059,837 2,051,037 2,150,732 1,909,605 
Held-to-maturity securities, at amortized cost445,222 453,443 463,299 477,884 301,221 
Total assets22,325,211 21,653,811 20,772,131 20,158,831 20,560,279 
Transaction deposits11,880,343 12,547,832 12,691,527 12,668,251 13,139,606 
Time deposits3,980,605 3,412,203 3,338,043 3,297,369 3,251,042 
FHLB advances3,425,000 3,075,000 2,125,000 1,700,000 1,720,000 
Total shareholders' equity2,375,117 2,324,381 2,274,260 2,220,111 2,191,701 
FINANCIAL HIGHLIGHTS
Common shareholders' equity per share31.54 30.96 30.22 29.39 28.97 
Tangible common shareholders' equity per share26.85 26.24 25.49 24.66 24.23 
Shareholders' equity to total assets10.64 %10.73 %10.95 %11.01 %10.66 %
Tangible shareholders' equity to tangible assets9.39 %9.44 %9.60 %9.63 %9.29 %
Tangible shareholders' equity + ACL to tangible assets10.19 %10.27 %10.45 %10.65 %10.29 %
Common shares outstanding65,793,099 65,387,745 65,330,126 65,321,869 65,306,928 
Preferred shares outstanding300,000 300,000 300,000 300,000 300,000 
Loans to customer deposits 108.90 %106.48 %100.52 %97.49 %92.09 %
CREDIT QUALITY
ACL to gross loans1.02 %1.03 %1.06 %1.08 %1.13 %
ACL to non-accrual loans595.04 %713.83 %594.51 %554.76 %598.66 %
Non-accrual loans to net loans0.20 %0.17 %0.21 %0.24 %0.22 %
Non-accrual loans34,606 29,180 34,534 36,679 33,639 
Non-performing assets to total assets0.21 %0.18 %0.21 %0.25 %0.23 %
Non-performing assets46,785 38,650 44,554 50,430 47,243 
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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

 Three Months Ended March 31,Six Months Ended March 31,
 2023202220232022
 (In thousands, except share and ratio data)(In thousands, except share and ratio data)
INTEREST INCOME
Loans receivable$222,957 $139,260 $426,903 $277,769 
Mortgage-backed securities10,422 4,659 21,035 9,451 
Investment securities and cash equivalents21,967 6,919 40,827 14,058 
255,346 150,838 488,765 301,278 
INTEREST EXPENSE
Customer accounts52,123 8,225 83,769 16,686 
FHLB advances and other borrowings28,185 7,525 47,159 15,368 
80,308 15,750 130,928 32,054 
Net interest income175,038 135,088 357,837 269,224 
Provision (release) for credit losses3,500 (500)6,000 — 
Net interest income after provision (release)171,538 135,588 351,837 269,224 
OTHER INCOME
Gain (loss) on sale of investment securities— — — 81 
Gain (loss) on hedging derivatives26 — 26 — 
Prepayment penalty on long-term debt— — — — 
Loan fee income652 2,475 2,154 4,396 
Deposit fee income6,188 6,282 12,541 12,725 
Other income3,206 6,902 9,375 17,138 
10,072 15,659 24,096 34,340 
OTHER EXPENSE
Compensation and benefits51,444 47,115 100,514 94,540 
Occupancy10,918 11,788 21,020 21,878 
FDIC insurance premiums4,000 2,100 7,675 5,200 
Product delivery5,316 5,044 9,937 9,765 
Information technology12,785 11,722 25,114 23,143 
Other expense12,418 10,648 24,899 23,504 
96,881 88,417 189,159 178,030 
Gain (loss) on real estate owned, net(199)129 (311)691 
Income before income taxes84,530 62,959 186,463 126,225 
Income tax provision18,596 13,600 41,020 26,585 
Net income65,934 49,359 145,443 99,640 
Dividends on preferred stock3,656 3,656 7,312 7,312 
Net income available to common shareholders$62,278 $45,703 $138,131 $92,328 
PER SHARE DATA
Basic earnings per common share$0.95 $0.70 $2.11 $1.41 
Diluted earnings per common share0.95 0.70 2.11 1.41 
Cash dividends per common share0.25 0.24 0.49 0.47 
Basic weighted average shares outstanding65,511,13165,301,17165,425,62365,253,991
Diluted weighted average shares outstanding65,551,18565,445,20665,510,27565,397,601
PERFORMANCE RATIOS
Return on average assets1.21 %0.98 %1.36 %1.00 %
Return on average common equity12.01 9.80 13.55 9.96 
Net interest margin3.51 2.90 3.60 2.89 
Efficiency ratio52.34 58.65 49.53 58.65 

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

 Three Months Ended
 March 31, 2023December 31, 2022September 30, 2022June 30, 2022March 31, 2022
 (In thousands, except share and ratio data)
INTEREST INCOME
Loans receivable$222,957 $203,946 $174,710 $149,113 $139,260 
Mortgage-backed securities10,422 10,613 8,263 8,618 4,659 
Investment securities and cash equivalents21,967 18,860 14,960 9,417 6,919 
255,346 233,419 197,933 167,148 150,838 
INTEREST EXPENSE
Customer accounts52,123 31,646 17,071 9,284 8,225 
FHLB advances and other borrowings28,185 18,974 7,243 6,118 7,525 
80,308 50,620 24,314 15,402 15,750 
Net interest income175,038 182,799 173,619 151,746 135,088 
Provision (release) for credit losses3,500 2,500 1,500 1,500 (500)
Net interest income after provision (release)171,538 180,299 172,119 150,246 135,588 
OTHER INCOME
Gain (loss) on sale of investment securities— — 18 — — 
Gain (loss) on hedging derivatives26 — — — — 
Loan fee income652 1,502 1,154 1,618 2,475 
Deposit fee income6,188 6,353 6,604 6,613 6,282 
Other income3,206 6,169 6,706 9,319 6,902 
10,072 14,024 14,482 17,550 15,659 
OTHER EXPENSE
Compensation and benefits51,444 49,070 51,304 48,073 47,115 
Occupancy10,918 10,102 10,568 10,053 11,788 
FDIC insurance premiums4,000 3,675 2,231 2,100 2,100 
Product delivery5,316 4,621 5,104 4,667 5,044 
Information technology12,785 12,329 12,228 11,831 11,722 
Other expense12,418 12,481 11,707 10,679 10,648 
96,881 92,278 93,142 87,403 88,417 
Gain (loss) on real estate owned, net(199)(112)(488)448 129 
Income before income taxes84,530 101,933 92,971 80,841 62,959 
Income tax provision18,596 22,424 19,576 17,546 13,600 
Net income65,934 79,509 73,395 63,295 49,359 
Dividends on preferred stock3,656 3,656 3,656 3,656 3,656 
Net income available to common shareholders$62,278 $75,853 $69,739 $59,639 $45,703 
PER SHARE DATA
Basic earnings per common share$0.95 $1.16 $1.07 $0.91 $0.70 
Diluted earnings per common share0.95 1.16 1.07 0.91 0.70 
Cash dividends per common share0.25 0.24 0.24 0.24 0.24 
Basic weighted average shares outstanding65,511,13165,341,97465,326,70665,315,48165,301,171
Diluted weighted average shares outstanding65,551,18565,430,69065,423,81765,395,66665,445,206
PERFORMANCE RATIOS
Return on average assets1.21 %1.50 %1.44 %1.25 %0.98 %
Return on average common equity12.01 15.15 14.22 12.50 9.80 
Net interest margin3.51 3.69 3.64 3.22 2.90 
Efficiency ratio52.34 46.78 49.52 51.63 58.65 
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