Wafd, Inc. · NASDAQ:WAFD
Wafd — Washington Federal — D.A. Davidson Bank Tour, Seattle (August 2019)
36 slides from Wafd's conference presentation, Aug 13, 2019
Slide 1: D.A. Davidson Bank Tour, Seattle
D.A. Davidson Bank Tour, Seattle August 13, 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 Federal’s management and are subject to
Slide 2: WAFD Bank Profile
WAFD Bank 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 • Prof
Slide 3: Washington Federal Bank
Washington Federal NASDAQ: WAFD Bank Headquarters Seattle, WA President & Brent Beardall Chief Executive Officer Chief Financial Officer Vince Beatty Assets $16.47 billion Deposits $11.8 billion Stockholder Equity $2.0 billion Branches 235 Footprint 8 states ATMs 293 Employees 1,962 Efficiency Ratio
Slide 4: WAFD Bank Demographics
WAFD Bank 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 2019-2024 2019 2019-2
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 6/30/2008 As of 6/30/2019 Transaction Time Accounts Deposits $1,909 $4,950 27% 42% Transaction Time Accounts Deposits $6,850 $5,265 58% 73% Core Deposits = 93.3% of Total 6
Slide 7: Total Net Loans (in millions)
Total Net Loans (in millions) $12,000 • Mortgage and Consumer are 54 % of total net $10,000 loans $8,000 • Commercial segments growing fastest over last $6,000 three years $4,000 • Will invest primarily in Commercial growth $2,000 $0 FY13 FY14 FY15 FY16 FY17 FY18 3Q19 Commercial & Industrial (C&I) C
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 made • 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 $- 09/17 QTR 12/17 QTR 03/18 QTR 06/18 QTR 09/18 QTR 12/18 QTR 03/19 QTR 06/19 QTR Mortgage & Consumer Commercial Real Estate Commercial & Industrial (C&I) • Fiscal year to date originations are 6% higher date originations are 12%
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% 1.05% ALLL 0.31% 0.50% Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Sep-18 Jun-19 -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 2019 • Recoveries are not budgeted going forward but the Bank continues to work $92 million of loans that were previously charged off • Net
Slide 12: Net Charge-offs
Net Charge-offs: • Recoveries are not budgeted going forward but the Bank continues to work $92 million of loans that were previously charged off • Net Recoveries since 2013 total $59 million 12
Slide 13: Cash and Investments
Cash and Investments as of June 30, 2019 • Investment Portfolio targets low High Quality credit risk / moderate duration Cash Bonds 9% 7% • 93% Cash, US Government backed Agency Bonds and MBS • Current yield on the Investment Portfolio is 3.08% and duration is 5.2 years US Govt Backed 84% US Govt Ba
Slide 14: Interest Rate Risk Sensitivity
Interest Rate Risk Sensitivity IRR measures as of % Change in NPV June 30, 2019: -50% -40% • Net Interest Income (NII) would -30% decrease by 1.65% in +200 bps immediate and parallel shock -20% -10% • Net Portfolio Value after +200 0% bps shock is 17.3% lower at Up 100 Up 200 Up 300 Up 400 12.58% FY
Slide 15: Interest Rate Risk Sensitivity
Interest Rate Risk Sensitivity Net Interest Margin 3.30% 3.20% 3.10% Dn100 3.00% Base 2.90% Up100 2.80% Up200 2.70% Up300 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 scenarios 15
Slide 16: 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 17: Borrowings Outstanding
Borrowings Outstanding $4,000 4.50% 4.30% $3,500 Due within 1 year Borrowings 4.10% Rate $3,000 3.90% $2,500 3.70% $2,000 3.50% 3.30% $1,500 3.10% $1,000 2.90% $500 2.70% $0 2.50% 17
Slide 18: Net Income and Earnings Per Share - Annual
Net Income and Earnings Per Share - Annual • Net income and EPS increasing 18
Slide 19: Net Income and Earnings Per Share - Quarterly
Net Income and Earnings Per Share - Quarterly $60,000 $0.80 Net Income EPS $0.70 $50,000 $0.60 $40,000 $0.50 $30,000 $0.40 $0.30 $20,000 $0.20 $10,000 $0.10 $0 $- Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 • Net income and EPS increasing 19
Slide 20: Yield Curve
Yield Curve 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Overnight 1 Year 5 Year 10 Year 12/31/2015 6/30/2019 • Despite this flattening of the yield curve, net interest margin is unchanged at 3.18% when comparing the quarter ended December 31, 2015 to June 30, 2019. 20
Slide 21: Calendar 2018 Net Income/Market Cap
Calendar 2018 Net Income/Market Cap 21
Slide 22: Income Statement Comparison
Income Statement Comparison Fiscal YTD 6/30/2019 6/30/2018 $ Change % Change INTEREST INCOME Loans....................................................................... $ 423,616 $ 382,581 $ 41,035 10.7% Mortgage-backed securities.................................... 57,254 52,588 4,666 8.9% Investm
Slide 23: Income Statement Comparison
Income Statement Comparison Fiscal YTD 6/30/2019 6/30/2018 $ Change % Change OTHER INCOME $ 45,861 $ 31,833 $ 14,028 44.1% OTHER EXPENSE Compensation and benefits.................................... 100,954 92,467 8,487 9.2% Occupancy............................................................... 28
Slide 24: Non Interest Income
Non Interest Income Other Income Deposit Fees Loan Fees Gain on Sale of Investments • Non-Interest Income growth driven by deposit $60,000 transaction fees + BOLI Thousands $50,000 • Strategic Objective to grow non-interest income $40,000 $30,000 $20,000 $10,000 $0 FY12 FY13 FY14 FY15 FY16 FY17 FY18
Slide 25: Expenses
Expenses • Other expense includes Other expense Occupancy Compensation marketing, printing, professional services, and regulatory fees $300,000 • 2016 Efficiency Ratio: $250,000 $200,000 50.8% $150,000 • 2017 Efficiency Ratio: 47.8% $100,000 • 2018 Efficiency Ratio: 50.4% $50,000 • YTD 2019 Efficien
Slide 26: BSA Improvements
BSA Improvements • BSA Consent order was issued in February 2018 • Recognized $1.1 million in non-recurring BSA related costs during Q3 2019 • Management is committed to turning a weakness into a strength. • Over 30 WAFD Employees ACAMS Certified. • Over 65 FTE in our BSA team currently. 26
Slide 27: Capital Ratios
Capital Ratios Capital Management WAFD does not seek to maximize leverage. Sep 2015 Sep 2016 Sep 2017 Sep 2018 Jun 2019 Rather, we aspire to be the bank that can Tangible Common best weather the Equity + Allowance for next storm on the Loan Loss Reserve 12.36% 12.28% 12.24% 11.67% 11.37% horizon. /T
Slide 28: 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 146th consecutive Net Income Dividends to Shareholders quarterly cash dividend on August 9th 2013 151,506 146,398 97% 2014 157,364 146,347 93% Cur
Slide 29: 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 30: 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. 30 ©2018 Washington Federal. All Right Reserved www.washingtonfederal.com
Slide 31: z ©2018 Washington Federal. All Right Reserved www.washingtonfederal.com
z 31 ©2018 Washington Federal. All Right Reserved www.washingtonfederal.com
Slide 32: 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 33: Government shutdown loan and checking offer
% 1,700 0 loan 0% Interest approvals For 90 Days % 1,700 5 checking 5% Interest Through account 12/31/2019 openings % 10 10% Interest $24 million After available 1/1/2020 with final credit payment by Washington Federal offered our neighbors who are Federal government 12/31/2022 employees a solution
Slide 34: Stock Price & Book Value Per Share
Stock Price & Book Value Per Share As of 6/30/2019: Book Value per Share $25.35 Tangible Book Value per Share $21.45 Price to BV: 1.38 Price to TBV: 1.63 34
Slide 35: Perspective through the last Credit Cycle
Perspective through the last Credit Cycle Managing Capital Text Text Text Tex 35
Slide 36: 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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