Wafd, Inc. · NASDAQ:WAFD
Wafd — Washington Federal — Keefe, Bruyette & Woods Winter Financial Services Conference 2019
33 slides from Wafd's conference presentation, Feb 14, 2019
Slide 1: Keefe, Bruyette & Woods Winter Financial Services Conference
Keefe, Bruyette & Woods Winter Financial Services Conference February 14-15, 2019 This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are based upon the current beliefs and expectations of Washington Federa
Slide 2: WAFD Profile
WAFD PROFILE • Established in 1917; IPO in 1982; • National Bank Charter – OCC, Fed, CFPB Regulated • 2nd Largest Bank Headquartered in the Pacific Northwest • 235 Branches • Consumer & Commercial Banking • Strong Capital, High Asset Quality, Low-Cost Provider • Portfolio Mortgage Lender • Profitabl
Slide 3: Washington Federal NASDAQ: WAFD
Washington Federal NASDAQ: WAFD Headquarters Seattle, WA President & Brent Beardall Chief Executive Officer Chief Financial Officer Vince Beatty Assets $16.19 billion Deposits $11.56 billion Stockholder Equity $1.98 billion Branches 235 Footprint 8 states ATMs 293 Employees 1,910 Efficiency Ratio YT
Slide 4: WAFD Demographics
WAFD Demographics Demographic Profile (Washington Federal, Inc) Projected Median Projected Company Deposit Percent of Total Population Population HH HH Income Number Deposits Market National Population Change Change Income Change of in Market Share Franchise 2019 2010-2019 2018-2023 2018 2018-2023 S
Slide 5: History of Acquisitions
History of Acquisitions $547M $945M $1.02B $253M $150M $634M $1.3B $539M 2007 2008 2010 2011 2011 2012 2013 2014 Bank Bank Bank Deposits Bank Bank Deposits Deposits NM Bellevue Bellingham NM AZ OR WA, OR, AZ, NV ID, NM WA WA Since going public in 1982 we have successfully integrated 19 acquisitions
Slide 6: Deposit Mix
Deposit Mix As of 12/31/2007 As of 12/31/2018 Transaction Time Accounts Deposits $1,350 $4,817 22% 42% Time Transaction Deposits Accounts $4,715 $6,744 78% 58% Core Deposits = 93.4% of Total 6
Slide 7: Total Net Loans (in millions)
Total Net Loans (in millions) • Mortgage and Consumer are 55 % of total net $12,000 loans $10,000 • Commercial segments $8,000 growing fastest over last three years $6,000 • Will invest primarily in $4,000 Commercial growth $2,000 $0 FY13 FY14 FY15 FY16 FY17 FY18 1 Q 19 Commercial & Industrial (C&I)
Slide 8: New Loan Originations (in millions)
New Loan Originations (in millions) $4,500 $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $- 2011 2012 2013 2014 2015 2016 2017 2018 Commercial & Industrial (C&I) Commercial Real Estate Mortgage & Consumer • C&I and Commercial Real Estate loans make • Mortgage and Consumer Loans are largely u
Slide 9: New Loan Originations (in millions)
New Loan Originations (in millions) $ 1 ,200 $ 1 ,000 $800 $600 $400 $200 $- 0 3 /17 QTR 0 6 /17 QTR 0 9 /17 QTR 1 2 /17 QTR 0 3 /18 QTR 0 6 /18 QTR 0 9 /18 QTR 1 2 /18 QTR Mor tgage & Consumer Commercial Real Estate Commercial & Industrial (C&I) • Fiscal year to date originations are 10% date origi
Slide 10: Non-Performing Assets & Allowance Trends
Non-Performing Assets & Allowance Trends 5.50% Non-Performing Assets to 4.43% Total Assets 4.50% ALLL to Loans 3.50% 2.50% 1.50% 1.06% ALLL 0.50% 0.39% Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Sep-18 Dec-18 -0.50% • Steady annual improvement in credit quality • Non perfo
Slide 11: Net Loan Charge-offs (Recoveries)
Net Loan Charge-offs (Recoveries) 2.50% As a % of Loans Outstanding 2.00% 1.50% 1.00% 0.50% 0.00% -0.50% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 • Recoveries are not budgeted going forward but the Bank continues to work $92 million of loans that were previously charged off •Net Recove
Slide 12: Cash and Investments
Cash and Investments as of December 31, 2018 • Investment Portfolio targets low credit risk / moderate duration • 93% Cash, US Government backed Agency Bonds and MBS • Current yield on the Investment Portfolio is 3.12% and duration is 5.3 years 12
Slide 13: Interest Rate Risk Sensitivity
Interest Rate Risk Sensitivity IRR measures as of Dec 31, 2018: % Change in NPV -6 0% -5 0% • Net Interest Income (NII) would -4 0% decrease by 2.6% in +200 bps -3 0% immediate and parallel shock -2 0% -1 0% • Net Portfolio Value after +200 bps shock is 22.5% lower at 0% Up 100 Up 200 Up 300 Up 400
Slide 14: Interest Rate Risk Sensitivity
Interest Rate Risk Sensitivity Net Interest Margin 3.50% 3.40% 3.30% 3.20% Dn100 3.10% Base 3.00% Up100 2.90% Up200 2.80% Up300 2.70% 2.60% 2.50% Year 0 Year 1 Year 2 Year 3 • These scenarios assume no management actions taken to proactively manage the balance sheet in the changing interest rate sce
Slide 15: Interest Rate Spread vs Net Interest Income
Interest Rate Spread vs Net Interest Income 5.00% $500 $450 4.50% 4.14% $400 4.00% 3.81% $350 3.50% $300 3.17% 3.02% 2.90% 3.00% $250 2.65% $200 2.50% 2.57% 2.47% $150 2.00% 2.16% 2.17% 2.04% 2.05% $100 1.50% $50 1.00% $0 • Proactively managing interest rate risk has reduced spreads • Objective is t
Slide 16: Borrowings Outstanding
Borrowings Outstanding 3,500 3,000 Sep-O8 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Sep-18 Dec-18 GiB Due withini year G@@BBBorrowings ——RATE
Slide 17: Net Income and Earnings Per Share
Net Income and Earnings Per Share • Net income and EPS increasing 17
Slide 18: Net Income and Earnings Per Share
Net Income and Earnings Per Share • Net income and EPS increasing 18
Slide 19: Income Statement Comparison
Income Statement Comparison Fiscal YTD 12/31/2018 12/31/2017 $ Change % Change INTEREST INCOME Loans....................................................................... $ 137,065 $ 124,511 $ 12,554 10.1% Mortgage-backed securities.................................... 19,192 16,899 2,293 13.6% Inve
Slide 20: Income Statement Comparison
Income Statement Comparison Fiscal YTD 12/31/2018 12/31/2017 $ Change % Change OTHER INCOME $ 19,009 $ 6,795 $ 12,214 179.7% OTHER EXPENSE Compensation and benefits.................................... 33,883 29,619 4,264 14.4% Occupancy...............................................................
Slide 21: Non Interest Income
Non Interest Income • Non-Interest Income growth driven by deposit transaction fees + BOLI • Strategic Objective to grow non-interest income 21
Slide 22: Expenses
Expenses • Other expense includes marketing, printing, professional services, and regulatory fees • 2016 Efficiency Ratio: 50.8% • 2017 Efficiency Ratio: 47.8% • 2018 Efficiency Ratio: 50.4% • Q1 2019 Efficiency Ratio: 51.9% 22
Slide 23: BSA Improvements
BSA Improvements • BSA Consent order was issued in February 2018 • Recognized $3.6 million in non-recurring BSA related costs during Q1 2019 • Estimate that an additional $2 million in non-recurring costs will be recognized over the next two quarters. • Management is committed to turning a weakness
Slide 24: Capital Ratios
Capital Ratios Capital Management WAFD does not seek to maximize leverage. Sep 2015 Sep 2016 Sep 2017 Sep 2018 Dec 2018 Rather, we aspire to be the bank that can best weather the Tangible Common next storm on the Equity/Tangible 11.61% 1.51% 11.41% 10.84% 10.53% Assets horizon. Common Equity Tier 1
Slide 25: Returning Capital to Shareholders
Returning Capital to Shareholders Return of Income to Shareholders Percent of Recent Capital Activities Stock Buyback & Income returned WAFD will pay its 144th consecutive Net Income Dividends to Shareholders quarterly cash dividend on February 22nd 2013 151,506 146,398 97% 2014 157,364 146,347 93%
Slide 26: Next Step in Our Evolution – Organic Growth
Next Step in Our Evolution – ORGANIC GROWTH We aspire to organically grow deposits by substantially increasing checking accounts while replacing wholesale borrowings and reducing CDs 2025 Vision Employer of Choice 2007-2018 Great work culture that attracts and Deposit Focus retains superior Leverage
Slide 27: Who do we want to be in 7 years?
Who do we want to be in 7 years? A highly-profitable, digital-first bank that leverages data to anticipate financial needs and empower our clients by creating frictionless experiences across all interactions and devices. 27 ©2018 Washington Federal. All Right Reserved www.washingtonfederal.com
Slide 28: z ©2018 Washington Federal. All Right Reserved www.washingtonfederal.com
z 28 ©2018 Washington Federal. All Right Reserved www.washingtonfederal.com
Slide 29: Our Vision
• To be the most trusted and highly recommended bank in the markets we serve. • How? – Technology that makes banking with WAFD simple, reliable and fast. Technology should enable a real-time understanding of our clients so we can anticipate their needs and risks – Relationships matter! We work proac
Slide 30: Support for Federal government employees
% 0 1,685 0% Interest clients For 90 Days % 5 5% Interest $23.2 Through 12/31/2019 million credit line % 10 10% Interest After 1/1/2020 with final payment by Washington Federal is offering to help our neighbors who are Federal 12/31/2022 government employees, whether they are currently a client or w
Slide 31: Stock Price & Book Value Per Share
Stock Price & Book Value Per Share As of 1/31/2019: Book Value per Share $24.45 Tangible Book Value per Share $20.61 Price to BV: 1.19 Price to TBV: 1.41 31 PE : 12.1%
Slide 32: Perspective through the last Credit Cycle
Perspective through the last Credit Cycle Stock Performance Comparison as of 1/31/2019 2.50 2.00 1.50 Managing 1.00 Capital Text 0.50 Text Text 0.00 Tex 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 *Stock prices obtained from Yahoo! Finance and reflect monthly adjusted (stock spl
Slide 33: Forward-looking statements
This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are based upon the current beliefs and expectations of Washington Federal’s management and are subject to significant risks and uncertainties. The forward
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