Washington Federal Increases Earnings Per Share by 7.14%.
Chairman, President & CEO Roy M. Whitehead commented, "It was a good, solid quarter for the Company, with virtually every measure of performance showing improvement. Results for the quarter benefited from better credit quality, including recoveries on previously charged-off loans and gains on sale of real estate owned. If the current low interest rate environment persists as we expect, continued growth in loans outstanding and core deposits will be key to maintaining our margin going forward."
Total assets were $14.7 billion as of March 31, 2016, a $102 million or 0.70% increase from September 30, 2015. The Company continued to shift its asset mix from investment securities to loans receivable, which carry a higher yield. Available-for-sale securities decreased $283 million or 11.9% and held-to-maturity securities decreased $85 million or 5.2% while net loans receivable increased by $375 million or 4.1% fiscal year to date.
Customer deposits decreased by $88 million or 0.8% during the six months to $10.5 billion as of March 31, 2016. Transaction accounts increased by $55.4 million or 1.0% during
the period while time deposits decreased $143.7 million or 3.0%. The mix of customer deposits has continued to shift over the last several years as the Company focuses on growing transaction accounts to lessen sensitivity to rising interest rates. As of March 31, 2016, 55.7% of the Company's deposits were in transaction accounts.
Borrowings from the Federal Home Loan Bank of Des Moines (FHLB) increased by a net $150 million or 8.20% from September 30, 2015. Specifically, the Company borrowed $200 million in long term advances, using interest rate swaps to fix the weighted average interest rate at 1.49% for 7.5 years as a hedge against rising interest rates. Partially offsetting these additional borrowings was the repayment of $50 million of borrowings with a rate of 0.61% that matured during the quarter.
Loan originations totaled $763 million for 2nd fiscal quarter 2016, a $72 million or 10% increase over the $691 million of originations in the same quarter one year ago. Partially offsetting the strong loan origination volume were loan repayments of $581 million for the 2nd quarter 2016, compared to $597 million for the same quarter 2015. Commercial loans represented 68% of all loan originations during the quarter with consumer loans accounting for the remaining 32%. Single family residential mortgage loan originations continue to be negatively impacted by the implementation of recent regulations requiring additional loan disclosures and procedures. The Company views organic loan growth as the highest and best use of its capital and prefers over-weighting commercial loans in this low rate environment because of their shorter duration. The weighted average interest rate on loans increased to 4.40% as of March 31, 2016 from 4.37% at December 31, 2015, due to the adjustable rate loans increasing 25 basis points after the increase in the Prime Rate in December 2015. Actual yield earned on loans is greater than the weighted-average rate due to net deferred loan fees and discounts on acquired loans, which are accreted into income over the term of the loans.
Asset quality continued to improve as the ratio of non-performing assets to total assets decreased to 0.64% as of March 31, 2016, compared to 0.67% at December 31, 2015 and 0.88% at September 30, 2015. The 0.64% is the lowest level experienced by the Company since March of 2008. The decrease in non-performing assets during the quarter was primarily due to a $3 million or 8% decrease in real estate owned. Delinquencies on loans decreased to 0.90% at
March 31, 2016 from 0.97% at December 31, 2015. The Company realized net-recoveries on loans (as opposed to charge-offs) of $3.5 million for the quarter. The allowance for loan losses and reserve for unfunded commitments totaled $113 million as of March 31, 2016 and was 1.10% of gross loans outstanding, as compared to 1.10% and 1.13% of gross loans as of December 31, 2015 and September 30, 2015, respectively. The 3 basis point decrease since our fiscal year end reflects the continued improvements in economic conditions and the credit quality of the loan portfolio, partially offset by the growth in the loans outstanding.
On February 12, 2016, the Company paid a cash dividend of 14 cents per share to common stockholders of record on February 1, 2016. This was the Company's 132nd consecutive quarterly cash dividend. During the quarter, the Company repurchased 1,639,442 shares of common stock at a weighted average price of $21.05 per share and has authorization to repurchase an additional 2.1 million shares. The Company varies the pace of share repurchases depending on several factors, including share price, lending opportunities and capital levels. Tangible common stockholders' equity per share increased during the 2nd fiscal quarter by $0.25 or 1.4% to $18.24 and the ratio of tangible common equity to tangible assets remained strong at 11.58% as of March 31, 2016.
Net interest income was $106 million for the quarter, an increase of $2 million or 2.4% from the same quarter in the prior year. The increase in net interest income was primarily due to higher average balances of loans receivable. Net interest margin rose to 3.16% in the 2nd fiscal quarter from 3.10% for same quarter in the prior year.
The Company recorded a release of loan loss allowance of $1.5 million for the 2nd fiscal quarter compared to a release of $3.9 million for the same quarter of the prior year. This quarter's release was a result of continued improvement in credit quality, including net recoveries of $3.5 million in the quarter, offset partially by the growth in the loan portfolio.
Total other income was $10.7 million for the 2nd quarter 2016, which is comparable to the $10.8 million recorded in the same quarter of the prior year.
Total operating expenses were $59.2 million in 2nd quarter 2016, an increase of $1.9 million or 3.3% from the prior year quarter, driven primarily by higher information technology
costs related to new systems implemented in November of 2015. The Company's efficiency ratio of 50.6% is slightly higher than the 50.0% for the same period one year ago due primarily to the higher technology costs mentioned above. On a linked quarter basis, the efficiency ratio improved from 54.9% for the December 2015 quarter to 50.6% for the current quarter due to the $6.6 million in non-recurring costs incurred in the Company's first fiscal quarter related to the new system implementation.
Net gain on real estate owned was $3.9 million for 2nd fiscal quarter 2016 compared to a net gain of $1.5 million for the same quarter last year. Net gain or loss on real estate owned includes gains and losses on sales, ongoing maintenance expenses and any additional net valuation adjustments. Going forward it is likely that gains on the sale of real estate owned will diminish as the Company's inventory of real estate owned declines.
For the quarter ended March 31, 2016, the Company recorded federal and state income tax expense of $21.5 million, which equates to a 34.00% effective tax rate. The decline in the effective tax rate is due to recent investments in bank owned life insurance, low income housing tax credits and tax exempt loans. The Company estimates the effective tax rate for the remainder of the fiscal year will be 34.00%.
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|Publication:||Daily the Pak Banker (Lahore, Pakistan)|
|Date:||Apr 22, 2016|
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