Wafd, Inc. · NASDAQ:WAFD
Wafd — Washington Federal, Inc. (WaFd Bank) — D.A. Davidson 22nd Annual Financial Institutions Conference (May 2020)
37 slides from Wafd's conference presentation, May 6, 2020
Slide 1: D.A. Davidson 22nd Annual Financial Institutions Conference
D.A. Davidson 22nd Annual Financial Institutions Conference March 6-8, 2020 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 ma
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 • 234 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 $17.376 billion Deposits $12.088 billion Stockholder Equity $1.986 billion Branches 234 Footprint 8 states ATMs 293 Employees 2,060 Efficiency
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 2020 2010-2020 2020-2025 2020 2020-2
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 3/31/2009 As of 3/31/2020 Transaction Time Accounts Deposits $1,913 $4,424 25% 37% Transaction Accounts Time $7,664 Deposits 63% $5,670 75% Core Deposits = 94.1% of Total 6
Slide 7: Total Net Loans (in millions)
Total Net Loans (in millions) $13,000 • Mortgage and Consumer $11,000 are 51 % of total net loans $9,000 • Commercial segments $7,000 growing fastest over last three years $5,000 • Will invest primarily in $3,000 Commercial growth $1,000 -$1,000 FY13 FY14 FY15 FY16 FY17 FY18 FY19 2Q20 Commercial & 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 2019 Commercial & Industrial (C&I) Commercial Real Estate Mortgage & Consumer • C&I and Commercial Real Estate loans made • Mortgage and Consumer Loans are larg
Slide 9: New Loan Originations (in millions)
New Loan Originations (in millions) $1,400 $1,200 $1,000 $800 $600 $400 $200 $- 03/18 QTR 06/18 QTR 09/18 QTR 12/18 QTR 03/19 QTR 06/19 QTR 09/19 QTR 12/19 QTR 3/20 QTR Mortgage & Consumer Commercial Real Estate Commercial & Industrial (C&I) • Fiscal year to date originations are 28% date originatio
Slide 10: Payroll Protection Program
Payroll Protection Program As of 5/4/2020: 5,200 loans $740,000,000 Existing WaFd Clients by loans 52.8% New WaFd Clients by loans 47.4% Existing WaFd Clients by dollars 56.8% New WaFd Clients by dollars 43.2% • Using nimbleness, technology and hard • PPP efforts providing added benefit of work to s
Slide 11: 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% 1.10% ALLL 0.50% 0.24% Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Sep-18 Sep-19 Dec-19 Mar-20 -0.50% • Steady annual improvement in credit quali
Slide 12: 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 13: 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 13
Slide 14: Cash and Investments
Cash and Investments as of March 31, 2020 • Investment Portfolio targets low credit risk / moderate duration High Quality Bonds 15% • 85% Cash, US Government backed Agency Bonds and MBS • Current yield on the Investment Portfolio is 2.66% and duration is 5 years Cash US Govt Backed 36% 49% US Govt B
Slide 15: Interest Rate Risk Sensitivity
Interest Rate Risk Sensitivity IRR measures as of % Change in NPV March 31, 2020: -60% -50% -40% • Net Interest Income (NII) would -30% increase by 1.89% in +200 bps -20% immediate and parallel shock -10% 0% 10% • Net Portfolio Value after +200 20% bps shock is 1.51% higher at Dn 100 Up 100 Up 200 U
Slide 16: Interest Rate Risk Sensitivity
Interest Rate Risk Sensitivity BPS Change in Margin over 3 years Year 1 Year 2 Year 3 0.35% 0.30% 0.25% 0.20% 0.15% 0.10% 0.05% 0.00% -0.05% -0.10% -0.15% Dn 50 Dn 25 Up 100 Up 200 Up 300 • These scenarios assume no management actions taken to proactively manage the balance sheet in the changing int
Slide 17: Interest Rate Spread vs Net Interest Income
Interest Rate Spread vs Net Interest Income 5.00% $600 Net Interest Spread and Net Interest Income 4.50% 4.14% $500 4.00% 3.81% $400 3.50% 3.17% 3.02% 2.90% 3.00% 2.80% $300 2.65% 2.50% 2.57% 2.47% $200 2.00% 2.16% 2.17% 2.04% 2.05% $100 1.50% 1.00% $0 • Proactive management has managed NII as Sprea
Slide 18: Borrowings Outstanding
Borrowings Outstanding $4,000 5.00% $3,500 Due within 1 year 4.50% Borrowings Rate $3,000 4.00% $2,500 3.50% $2,000 3.00% $1,500 2.50% $1,000 2.00% $500 1.50% $0 1.00% •In March 2020 added $1 billion of FHLB advances with Cash Flow Hedge Paying Fixed for 10 years at 66.1 bps 18
Slide 19: Net Income and Earnings Per Share - Annual
Net Income and Earnings Per Share - Annual $250,000 $2.80 $2.60 Net Income $2.40 $200,000 $2.20 EPS $2.00 $150,000 $1.80 $1.60 $100,000 $1.40 $1.20 $1.00 $50,000 $0.80 $0.60 $0 $0.40 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 19
Slide 20: Net Income and Earnings Per Share - Quarterly
Net Income and Earnings Per Share - Quarterly $70,000 $1.00 Net Income EPS $0.90 $60,000 $0.80 $50,000 $0.70 $0.60 $40,000 $0.50 $30,000 $0.40 $20,000 $0.30 $0.20 $10,000 $0.10 $0 $- Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 20
Slide 21: Yield Curve
Yield Curve 2.0% 1.8% 1.6% 1.4% 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% Overnight 1 Year 5 Year 10 Year 3/31/2016 3/31/2020 • Despite this flattening of the yield curve, net interest margin is nearly unchanged at 3.10% when comparing the quarter ended March 31, 2016 to March 31, 2020. 21
Slide 22: Calendar 2019 Net Income/Market Cap
Calendar 2019 Net Income/Market Cap 9.5% Peer Median: 7.2% 9.1% 8.5% 8.1% 7.8% 7.2% 6.5% 6.6% 2.2% WAFD HMST HFWA COLB BANR WAL UMPQ ZION Top 100 Banks Average 22
Slide 23: Income Statement Comparison
Income Statement Comparison Fiscal YTD 3/31/2020 3/31/2019 $ Change % Change INTEREST INCOME Loans.......................................................................................................... $ 280,695 $ 278,126 $ 2,569 0.9% Mortgage-backed securities....................................
Slide 24: Income Statement Comparison
Income Statement Comparison Fiscal YTD 3/31/2020 3/31/2019 $ Change % Change OTHER INCOME $ 62,617 $ 31,819 $ 30,798 96.8% OTHER EXPENSE Compensation and benefits...................................................................... 75,248 66,657 8,591 12.9% Occupancy................................
Slide 25: Non-Interest Income
Non-Interest Income Other Income Deposit Fees Loan Fees Gain on Sale of Investments • Non-Interest Income growth driven by deposit $70,000 transaction fees + BOLI Thousands and the Sale of Buildings $60,000 • Strategic Objective to $50,000 grow non-interest income $40,000 $30,000 $20,000 $10,000 $0
Slide 26: Expenses
Expenses • Other expense includes marketing, Other expense Occupancy Compensation printing, professional services, and $300,000 regulatory fees $250,000 • 2016 Efficiency Ratio: 50.8% $200,000 • 2017 Efficiency Ratio: 47.8% $150,000 • 2018 Efficiency Ratio: 50.4% $100,000 $50,000 • 2019 Efficiency R
Slide 27: BSA Improvements
BSA Improvements • BSA Consent order was issued in February 2018 • Recognized $.5 million in non-recurring BSA related costs during Q2 2020 • Management is committed to turning a weakness into a strength. • Over 30 WAFD Employees ACAMS Certified. • 63 FTE on our BSA team currently. 27
Slide 28: Capital Ratios
Capital Ratios Capital Management WAFD does not seek to maximize leverage. Sep 2016 Sep 2017 Sep 2018 Sep 2019 Mar 2020 Rather, we aspire to be the bank that can Tangible Common best weather the Equity + Allowance for next storm on the Loan Loss Reserve 12.28% 12.24% 11.67% 11.48% 10.63% horizon. /T
Slide 29: Returning Capital to Shareholders
Returning Capital to Shareholders Return of Income to Shareholders Percent of Recent Capital Activities Stock Buyback & Income returned Net Income Dividends to Shareholders WAFD will paid its 148th consecutive quarterly cash dividend on February 21st 2014 157,364 146,347 93% 2015 160,316 177,791 111
Slide 30: 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 31: 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. 31 ©2018 Washington Federal. All Right Reserved www.washingtonfederal.com
Slide 32: z ©2018 Washington Federal. All Right Reserved www.washingtonfederal.com
z 32 ©2018 Washington Federal. All Right Reserved www.washingtonfederal.com
Slide 33: 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 34: Stock Price & Book Value Per Share
Stock Price & Book Value Per Share $40 $35 $30 $25 Stock Price Book Value per Share $20 $15 $10 $5 $0 As of 3/31/2020: Book Value per Share $26.23 Tangible Book Value per Share $22.12 Price to BV: .99 Price to TBV: 1.17 34
Slide 35: Perspective through the last Credit Cycle
Perspective through the last Credit Cycle Stock Performance Comparison as of 3/31/2020 2.50 2.00 1.50 Managing 1.00 Capital Text 0.50 Text Text Tex 0.00 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 *Stock prices obtained from Yahoo! Finance and reflect monthly adjusted (stoc
Slide 36: Ready to Help Small Businesses and Individuals
Ready to Help Small Businesses and Individuals: WaFd has approved Paycheck Protection 5,200 Applications have been $744 Million, with another Program (PPP) approved and processed. $63 Million application in process Available up to $200,000 and are Offering nearly 1,000 Small Business Lifeline intere
Slide 37: 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