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Washington Federal, Inc.$33.30($.15)(.45%)

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 Washington Federal Reports Record Earnings
   Wednesday, October 18, 2017 8:00:01 AM ET

Washington Federal, Inc. (WAFD ) (the "Company"), parent company of Washington Federal, N.A. today announced record annual earnings of $173,532,000 or $1.94 per diluted share for the fiscal year ended September 30, 2017, compared to $164,049,000 or $1.78 per diluted share for the year ended September 30, 2016, a $0.16 or 9.0% increase in earnings per diluted share. Return on equity for the fiscal year ended September 30, 2017 was 8.64% compared to 8.33% for the year ended September 30, 2016. Return on assets for the year ended September 30, 2017 was 1.16% compared to 1.12% for the prior year.

President and Chief Executive Officer Brent J. Beardall commented, "We are pleased to report that Washington Federal closed its 100th year in business with record earnings, loan originations and total assets. The market rewarded the Company’s shareholders with a total return for the fiscal year of 29%. It is gratifying to see that efforts to reposition the bank’s interest rate risk over the last few years are paying dividends, as our margin has increased despite rising short-term rates. The strong financial performance enabled the Company to return 100% of earnings to shareholders in the form of cash dividends and share repurchases during the year and still finish the year with a tangible common equity to tangible asset ratio of 11.41%."

Total assets were $15.3 billion as of September 30, 2017, a $366 million or 2.5% increase from September 30, 2016. The Company continued to shift its asset mix from cash and investment securities to loans receivable, which carry a higher yield. Since September 30, 2016, cash and cash equivalents decreased $137 million or 30.5% while available-for-sale securities decreased $657 million or 34.2% and held-to-maturity securities slightly offset these with an increase of $229 million or 16.2%. During the same period, net loans receivable increased by $972 million or 9.8%.

During fiscal 2017, the Company’s focus on improving its deposit mix resulted in transaction accounts increasing to 58.7% of deposits at September 30, 2017 from 56.7% of deposits at September 30, 2016. Customer deposits were $10.8 billion as of September 30, 2017, an increase of $234 million or 2.2% since September 30, 2016. Transaction accounts increased by $356 million or 5.9% during the fiscal year 2017, while time deposits decreased $121 million or 2.6%. As of September 30, 2017, 27.9% of the Company’s deposits were checking accounts and 94.3% were core deposits.

Borrowings from the Federal Home Loan Bank were $2.2 billion as of September 30, 2017, a net increase of $145 million or 7.0% since September 30, 2016. The weighted average rate for FHLB borrowings was 2.80% as of September 30, 2017 and 3.15% at September 30, 2016. Of the $2.2 billion borrowed as of September 30, 2017, $0.8 billion have maturities greater than one year.

Loan originations of $4.2 billion for fiscal year 2017 established a new record and increased $290 million or 7.4% from the total of $3.9 billion in fiscal year 2016. Partially offsetting this strong loan origination volume in 2017 were loan repayments of $3.1 billion. During fiscal 2016, loan repayments totaled $2.9 billion. Commercial loans represented 66.9% of all loan originations during fiscal 2017 with consumer loans accounting for the remaining 33.1%. The Company views organic loan growth as the highest and best use of its capital and prefers commercial loans in this low rate environment due to the fact they generally have floating interest rates and shorter durations. The weighted average interest rate on loans increased to 4.28% as of September 30, 2017 from 4.26% at September 30, 2016, due to the shift toward a higher proportion of commercial loans and rising short term rates, causing variable rate loans to increase in yield.

Asset quality remained strong as the ratio of non-performing assets to total assets decreased to 0.46% as of September 30, 2017, compared to 0.48% at September 30, 2016. Since September 30, 2016, real estate owned decreased by $8.4 million, or 28.8%, and non-accrual loans increased by $7.2 million, or 16.9%. Delinquencies on loans were 0.40% of total loans at September 30, 2017 compared to 0.68% at September 30, 2016. The Company realized net-recoveries on loans (as opposed to charge-offs) of $14.3 million for fiscal year 2017. The allowance for loan losses and reserve for unfunded commitments increased by $14.1 million to $130.8 million as of September 30, 2017 and was 1.07% of gross loans outstanding, as compared to 1.07% of gross loans as of September 30, 2016.

On August 18, 2017, the Company paid a cash dividend of $0.15 per share to common stockholders of record on August 4, 2017. This was the Company’s 138th consecutive quarterly cash dividend. During fiscal 2017, the Company repurchased 3.1 million shares of common stock at a weighted average price of $31.36 per share and has authorization to repurchase approximately 1.7 million additional shares. The Company varies the pace of share repurchases depending on several factors, including share price, business opportunities and capital levels. In 2017, the Company paid $7,631,576 to repurchase 478,399 warrants to purchase our common stock at an average exercise price of $17.46. As of September 30, 2017, 330,217 such warrants remain outstanding. Tangible common stockholders’ equity per share increased by $0.86 or 4.59% during fiscal 2017 to $19.58 and the ratio of tangible common equity to tangible assets was 11.41% as of September 30, 2017.

Net interest income was $432 million for fiscal 2017, an increase of $11.7 million or 2.8% from the prior year. The increase in net interest income was primarily due to a higher average balance of loans receivable in fiscal 2017. Net interest margin increased to 3.13% in fiscal 2017 from 3.11% for the prior year. The slight increase is primarily due to changes in the mix of interest earning assets, including a higher yield on variable rate loans as well as cash and investments.

The Company recorded a release of loan loss allowance of $2.1 million for fiscal 2017 compared to a release of $6.3 million for the prior year. The release in fiscal 2017 was a result of continued strong credit quality, including net recoveries of $14.3 million, partially offset by growth in loans outstanding.

Total other income was $52.2 million for fiscal year 2017, an increase of $5.2 million from $47.0 million in the prior year. Fiscal year 2017 included $3.5 million of gain on sale of investment securities as well as $6.1 million of gains recognized on bank owned life insurance. Fiscal 2016 included a gain of $3.8 million resulting from the sale-leaseback of a branch property in Sammamish, Washington.

Total operating expenses were $231.5 million for fiscal 2017, a decrease of $3.9 million or 1.7% from the prior year, primarily due to year over year decreases in product delivery costs and information technology costs related to the Company’s fiscal 2016 implementation of new systems. Operating expenses were $62.6 million for the 4th fiscal quarter of 2017, an increase of $7.2 million or 13.1% from the same quarter a year ago. The increase was primarily due to elevated information technology and compliance costs, year-end accrual true-ups and a $1.5 million correction to amortization of intangible assets stemming from acquisitions of insurance agency businesses in prior years. The Company’s efficiency ratio of 47.8% for fiscal 2017 is improved from the 50.8% for the prior year due to lower costs and higher revenue. The efficiency ratio increased to 48.7% for the 4th fiscal quarter of 2017 from 48.5% for the same quarter a year ago due primarily to the expenses noted above.

Net gain on real estate owned was $1.5 million for fiscal 2017 compared to a net gain of $10.0 million for the prior year. Net gain or loss on real estate owned is expected to vary from quarter to quarter as it includes gains and losses on sales, ongoing maintenance expenses and any additional net valuation adjustments.

For the year ended September 30, 2017, the Company recorded federal and state income tax expense of $82.7 million, which equates to a 32.27% effective tax rate. This compares to an effective tax rate of 33.89% for the prior year. The decline in the effective tax rate from the prior year is primarily due to new investments in bank owned life insurance, low income housing tax credits and tax exempt loans since September 30, 2016.

Washington Federal, a national bank with headquarters in Seattle, Washington, has 237 branches in eight western states. To find out more about Washington Federal, please visit our website www.washingtonfederal.com. Washington Federal 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 2016 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 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. The words "believe," "expect," "anticipate," "project," and 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, which change over time; and actual performance, could differ materially from those anticipated by any forward-looking statements. The Company undertakes no obligation to update or revise any forward-looking statement.

 
                                                                                                               WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
                                                                                                            CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                                                                                                                              (UNAUDITED)
 
 
                                                                                               September 30, 2017                         September 30, 2016
                                                                                                                                             ----------------------------------------                                          ---------------------------------------
                                                                                                                                                                                         (In thousands, except share data)
ASSETS
    Cash and cash equivalents                                                                                                                      $    313,070                                                                     $    450,368
    Available-for-sale securities, at fair value                                                                                                      1,266,209                                                                        1,922,894
    Held-to-maturity securities, at amortized cost                                                                                                    1,646,856                                                                        1,417,599
    Loans receivable, net of allowance for loan losses of $123,073                                                                                   10,882,622                                                                        9,910,920
    and $113,494
    Interest receivable                                                                                                                                  41,643                                                                           37,669
    Premises and equipment, net                                                                                                                         263,694                                                                          281,951
    Real estate owned                                                                                                                                    20,658                                                                           29,027
    FHLB and FRB stock                                                                                                                                  122,990                                                                          117,205
    Bank owned life insurance                                                                                                                           211,330                                                                          208,123
    Intangible assets, including goodwill of $293,153 and $291,503                                                                                      298,682                                                                          296,989
    Federal and state income tax assets, net                                                                                                     --                                                                           16,047
    Other assets                                                                                                                                        185,826                                                       199,271  
                                                                                                                                             ---------------------------------------                                           --------------------------------------
                                                                                                                                                   $ 15,253,580                                                  $ 14,888,063  
                                                                                                                                             ======= ========== ====================                                           ====== ========== ====================
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
    Customer accounts
        Transaction deposit accounts                                                                                                               $  6,361,158                                                                     $  6,005,592
        Time deposit accounts                                                                                                                         4,473,850                                                     4,595,260  
                                                                                                                                             ---------------------------------------                                           --------------------------------------
                                                                                                                                                     10,835,008                                                                       10,600,852
    FHLB advances                                                                                                                                     2,225,000                                                                        2,080,000
    Advance payments by borrowers for taxes and insurance                                                                                                56,631                                                                           42,898
    Accrued expenses and other liabilities                                                                                                              131,253                                                       188,582  
                                                                                                                                             ---------------------------------------                                           --------------------------------------
                                                                                                                                                     13,247,892                                                                       12,912,332
Stockholders’ equity
    Common stock, $1.00 par value, 300,000,000 shares authorized; 134,957,511                                                                           134,958                                                                          134,308
    and 134,307,818 shares issued; 87,193,362 and 89,680,847
    shares outstanding
    Paid-in capital                                                                                                                                   1,660,885                                                                        1,648,388
    Accumulated other comprehensive (loss) income, net of taxes                                                                                           5,015                                                                          (11,156 )
    Treasury stock, at cost; 47,764,149 and 44,626,971 shares                                                                                          (838,060 )                                                                       (739,686 )
    Retained earnings                                                                                                                                 1,042,890                                                       943,877  
                                                                                                                                             ---------------------------------------                                           --------------------------------------
                                                                                                                                                      2,005,688                                                     1,975,731  
                                                                                                                                             ---------------------------------------                                           --------------------------------------
                                                                                                                                                   $ 15,253,580                                                  $ 14,888,063  
                                                                                                                                             ======= ========== ====================                                           ====== ========== ====================
CONSOLIDATED FINANCIAL HIGHLIGHTS
    Common stockholders’ equity per share                                                                                                          $      23.00                                                                     $      22.03
    Tangible common stockholders’ equity per share                                                                                                 $      19.58                                                                     $      18.72
    Stockholders’ equity to total assets                                                                                                                  13.15 %                                                                          13.27 %
    Tangible common stockholders’ equity to tangible assets                                                                                               11.41 %                                                                          11.51 %
                                                                                                                                                                                                                                
Weighted average rates at period end
    Loans and mortgage-backed securities                                                                                                                   3.96 %                                                                           3.86 %
    Combined loans, mortgage-backed securities and investments                                                                                             3.82                                                                             3.58
    Customer accounts                                                                                                                                      0.53                                                                             0.50
    Borrowings                                                                                                                                             2.80                                                                             3.15
    Combined cost of customer accounts and borrowings                                                                                                      0.91                                                                             0.93
    Net interest spread                                                                                                                                    2.91                                                                             2.65
                                                                                                                                                                                                                                                  
 
                                                                                                                                                                                 WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
                                                                                                                                                                                   CONSOLIDATED STATEMENTS OF OPERATIONS
                                                                                                                                                                                                (UNAUDITED)
 
 
                                                                                                             Three Months Ended September 30,                                                                                      Twelve Months Ended September 30,
                                                                                                                             ------------------------------------------------------------------------------------------------------------------                                          ------------------------------------------------------------------------------------------------------------------
                                                                                                                                            2017                                    2016                                                                          2017                                    2016
                                                                                                                             -----------------------------------                                          -------------------------------------                                          -----------------------------------                                          -------------------------------------
                                                                                                                                                                      (In thousands, except share data)                                                                                                                           (In thousands, except share data)
INTEREST INCOME
    Loans receivable                                                                                                             $ 122,197                                                                      $ 114,283                                                                    $ 470,523                                                                      $ 454,085
    Mortgage-backed securities                                                                                                      15,605                                                                         13,820                                                                       60,612                                                                         62,949
    Investment securities and cash equivalents                                                                                       4,438                                                       4,769                                                    17,783                                                      19,759  
                                                                                                                             ----------------------------------                                           ------------------------------------                                           ----------------------------------                                           ------------------------------------
                                                                                                                                   142,240                                                                        132,872                                                                      548,918                                                                        536,793
INTEREST EXPENSE
    Customer accounts                                                                                                               13,850                                                                         13,423                                                                       52,023                                                                         52,485
    FHLB advances and other borrowings                                                                                              15,958                                                      16,633                                                    64,969                                                      64,059  
                                                                                                                             ----------------------------------                                           ------------------------------------                                           ----------------------------------                                           ------------------------------------
                                                                                                                                    29,808                                                                         30,056                                                                      116,992                                                                        116,544
Net interest income                                                                                                                112,432                                                                        102,816                                                                      431,926                                                                        420,249
    Provision (release) for loan losses                                                                                               (500 )                                                                       (3,100 )                                                                     (2,100 )                                                                       (6,250 )
                                                                                                                             ----------------------------------                                           ------------------------------------                                           ----------------------------------                                           ------------------------------------
Net interest income after provision (release) for loan losses                                                                      112,932                                                                        105,916                                                                      434,026                                                                        426,499
                                                                                                                                                                                                                                                                                                                                                                       
OTHER INCOME
    Gain on sale of investments                                                                                                      2,531                                                                 --                                                                        3,499                                                                 --
    Loan fee income                                                                                                                    980                                                                          1,764                                                                        4,290                                                                          5,548
    Deposit fee income                                                                                                               6,840                                                                          5,174                                                                       22,643                                                                         21,738
    Other income                                                                                                                     5,910                                                       8,248                                                    21,783                                                      19,750  
                                                                                                                             ----------------------------------                                           ------------------------------------                                           ----------------------------------                                           ------------------------------------
                                                                                                                                    16,261                                                                         15,186                                                                       52,215                                                                         47,036
OTHER EXPENSE
    Compensation and benefits                                                                                                       27,483                                                                         26,668                                                                      112,257                                                                        112,884
    Occupancy                                                                                                                        8,890                                                                          7,492                                                                       35,260                                                                         33,568
    FDIC insurance premiums                                                                                                          2,819                                                                          3,581                                                                       11,410                                                                         11,824
    Product delivery                                                                                                                 3,876                                                                          3,421                                                                       13,972                                                                         17,060
    Information technology                                                                                                           9,105                                                                          7,150                                                                       28,859                                                                         30,982
    Other expense                                                                                                                   10,476                                                       7,095                                                    29,761                                                      29,129  
                                                                                                                             ----------------------------------                                           ------------------------------------                                           ----------------------------------                                           ------------------------------------
                                                                                                                                    62,649                                                                         55,407                                                                      231,519                                                                        235,447
    Gain (loss) on real estate owned, net                                                                                              425                                                        (356 )                                                                      1,494                                                      10,046  
                                                                                                                             ----------------------------------                                           ------------------------------------                                           ----------------------------------                                           ------------------------------------
    Income before income taxes                                                                                                      66,969                                                                         65,339                                                                      256,216                                                                        248,134
    Income tax provision                                                                                                            20,865                                                      21,115                                                    82,684                                                      84,085  
                                                                                                                             ----------------------------------                                           ------------------------------------                                           ----------------------------------                                           ------------------------------------
NET INCOME                                                                                                                       $  46,104                                                   $  44,224                                                 $ 173,532                                                   $ 164,049  
                                                                                                                             ===== ======= ====================                                           ======= ======= ====================                                           ===== ======= ====================                                           ======= ======= ====================
                                                                                                                                                                                                                                                                                                                                                                       
PER SHARE DATA
    Basic earnings                                                                                                               $    0.53                                                                      $    0.49                                                                    $    1.95                                                                      $    1.79
    Diluted earnings                                                                                                                  0.52                                                                           0.49                                                                         1.94                                                                           1.78
    Cash dividends per share                                                                                                          0.15                                                                           0.14                                                                         0.84                                                                           0.55
    Basic weighted average number of shares outstanding                                                                         87,742,200                                                                     89,902,181                                                                   88,905,457                                                                     91,399,038
    Diluted weighted average number of shares outstanding                                                                       87,952,087                                                                     90,468,107                                                                   89,224,207                                                                     91,912,918
PERFORMANCE RATIOS
    Return on average assets                                                                                                          1.22 %                                                                         1.19 %                                                                       1.16 %                                                                         1.12 %
    Return on average common equity                                                                                                   9.18                                                                           8.96                                                                         8.64                                                                           8.33
    Net interest margin                                                                                                               3.22                                                                           3.01                                                                         3.13                                                                           3.11
    Efficiency ratio                                                                                                                 48.68                                                                          48.54                                                                        47.82                                                                          50.80

http://cts.businesswire.com/ct/CT?id=bwnews&sty=20171018005133r1&sid=cmtx6&distro=nx&

View source version on businesswire.com: http://www.businesswire.com/news/home/20171018005133/en/

SOURCE: Washington Federal, Inc."> <Property FormalName="PrimaryTwitterHandle" Value="@wafdbank

Washington Federal, Inc. 
Investor Relations 
Brad Goode, 206-626-8178 
SVP / Director of Communications 
brad.goode@wafd.com


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