Wafd, Inc. · NASDAQ:WAFD
Wafd — Washington Federal — Shareholder Meeting (January 2008)
54 slides from Wafd's shareholder meeting presentation, Jan 23, 2008
Slide 1: Washington Federal, Inc.
(J Washington Federal, Inc.
Slide 2: Cautionary statement
Washington Federal, Inc. Cautionary statement This presentation contains forward-looking statements, which are not historical facts and pertain to future operating results. These forward-looking statements are within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-
Slide 3: Washington Federal Branches
Washington Federal, WASHINGTON Inc. FEDERAL BRANCHES 1
Slide 4: Washington Federal Branches
Slide #1 – Washington Federal Branches We’ll begin with an overview of the company’s branch network. As you can see, Washington Federal operates offices in eight western states as shown. We began the past fiscal year with 123 locations and, after acquiring First Federal Bank of the Southwest, closin
Slide 5: Washington State Branches
WASHINGTON Washington Federal, STATE BRANCHES Inc. After First Mutual transaction 2
Slide 6: Adding First Mutual
Slide # 2 – Adding First Mutual In July, we signed an agreement to acquire First Mutual Bancshares, headquartered in Bellevue, Washington and operating as a state charted savings bank. With closing planned for February 1, just 10 days from today, First Mutual will initially add 12 new locations and
Slide 7: Total Assets
TOTAL ASSETS Washington Federal, Inc. September 30 (In Millions) $11,000 $10,000 $9,000 $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 3
Slide 8: Total Assets
Slide # 3 – Total Assets Turning to the balance sheet, this chart illustrates the Company’s steady asset growth over the years, which increased at a faster pace than usual last fiscal year. In 2007, Total Assets increased by $1.2 Billion, or 13.4% to $10.3 Billion. Approximately 50% of the growth re
Slide 9: Asset Mix
ASSET MIX Washington Federal, September 30, 2007 Inc. (Percent of Total Assets) Commercial Loans 1.3% Investments 3.6% Other 2.4% Cash 0.6% MBS 13.8% Residential Real Estate Loans 78.3% 4
Slide 10: Asset Mix
Slide # 4 – Asset Mix Washington Federal strives to invest in relatively conservative assets. We have always been more concerned with the return of our principal than the return on our principal. Approximately 80% of assets are invested in loans, 99% of which are secured by well-margined real estate
Slide 11: Total Net Loans
TOTAL NET LOANS Washington Federal, Inc. Years Ended September 30 (In Millions) $9,000 $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 82 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 5
Slide 12: Total Loans
Slide #5 – Total Loans Due to the declining real estate market, loan production slowed in Fiscal 2007, and was down from $2.4 billion in ‘06 to $2.3 billion last year. Nonetheless, the addition of the New Mexico loans, coupled with slower prepayments on existing credits, enabled the portfolio in tot
Slide 13: Loans by Type
LOANS BY TYPE Washington Federal, Inc. September 30, 2007 Land A&D Consumer Land (In Millions) $755 or 8.7% $159 or 1.8% Spec. Construction WTD RATE 8.95% WTD RATE 7.25% $708 or 8.1% Multi-Family WTD RATE 9.28% $559 or 6.5% WTD RATE 6.54% Custom Construction Commercial $329 or 3.8% $136 or 1.6% WTD
Slide 14: Washington Federal Loans (by type)
Slide # 6 – Washington Federal Loans (by type) By type, 73% of the company’s loans are single-family mortgage loans – including custom construction loans that convert automatically to a mortgage amortization when the house is complete. Until recently anyway, these have been the safest loans that we,
Slide 15: Loan Quality
Washington Federal, LOAN QUALITY Inc. September 30, 2007 Peer Group Washington AVERAGE * Federal Delinquencies (% Past Due) 1.29% .58% Non Performing Assets / Total Assets 1.26 .15 Net Charge-Offs / Loans .36 .01 * 15 Largest Public Thrifts - Source: FDIC 7
Slide 16: Loan Quality
Slide # 7– Loan Quality The housing market slowed last year and along with it, the quality of the loan portfolio weakened a bit; however, relative to historical and industry averages quality indicators were still quite good. This slide shows three measures of loan quality relative to a peer group of
Slide 17: Historical Non-Performing Assets to Total Assets Ratio
Historical Non-Performing Washington Federal, Assets to Total Assets Ratio Inc. Quarterly – last 20 years 20 year average of 49 bps 1.40% 10 year average of 35 bps 1.20% 1.00% 0.80% 0.60% 0.40% 0.20% 0.15% 0.00% 8
Slide 18: Non-Performing Trend
Slide #8 – Non-Performing Trend Perhaps a better comparison than the industry averages would be the Company’s own performance over time. This slide shows the 20 year trend in non-performing assets, which are defined as loans on which the borrower can no longer make payments plus real estate acquired
Slide 19: Net Charge Offs
NET CHARGE OFFs Washington Federal, Inc. Years Ended September 30 (In thousands) $9,000 $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 9
Slide 20: Net Charge-offs
Slide #9 – Net Charge-offs Actual loan losses incurred during the year amounted to $1,156,000. Again, this number is not only quite low relative to the industry, but also by our own historical standards. Bear in mind in viewing this chart that in prior years when charge-offs were much higher, the Co
Slide 21: Total Deposits
TOTAL DEPOSITS Washington Federal, Inc. Years Ended September 30 (In Millions) $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 10
Slide 22: Deposit Trend by Year
Slide #10– Deposit Trend by Year Moving to the funding side of the balance sheet, deposit growth last year amounted to $685 million, or 13% over the prior year-end. Remove the acquired New Mexico deposits from the total and deposit growth was still a healthy 5.8%, consistent with the prior year. Man
Slide 23: Deposits by State
DEPOSITS Washington Federal, Inc. BY STATE (In Millions) # of 9/30/07 % Branches Deposits Washington 42 $ 2,555 42.5% Oregon 27 1,132 18.9% Arizona 20 809 13.5% Idaho 16 562 9.4% New Mexico 11 414 6.9% Utah 10 322 5.4% Nevada 3 118 2.0% Texas 6 85 1.4% 135 $ 5,997 100.0% 11
Slide 24: Deposits by State
Slide # 11 – Deposits by State By state, deposits housed in our home state of Washington now represent just 43% of the total. Oregon is the second largest source of deposits and has seen the fastest growth for the last few years, including a 10.7% increase last year, even with one fewer branch. Depo
Slide 25: Deposits by Type
DEPOSITS BY TYPE Washington Federal, Inc. September 30, 2007 (In Millions) Savings Interest Checking Money Market $199 or 3.3% $320 or 5.3% $739 or 12.3% Non-Interest Checking $89 or 1.5% Certificates of Deposit $4,650 or 77.6% 12
Slide 26: Deposit Mix
Slide #12 – Deposit Mix Because we primarily target low transaction, high balance accounts, the mix of our deposits is naturally skewed to money market accounts and certificates of deposit. We are always mindful of the higher rate of interest paid on these accounts, but we favor them because they co
Slide 27: Long-Term Borrowings
LONG-TERM Washington Federal, Inc. BORROWINGS Years Ended September 30 4.60% (In Millions) $2,560 4.48% $2,200 5.03% 4.52% 5.03% 5.40% $1,750 $1,750 $1,830 $1,550 4.96% $1,300 5.55% $600 00 01 02 03 04 05 06 07 % represent the weighted average interest rate 13
Slide 28: Long-term Borrowings
Slide # 13 – Long-term Borrowings To supplement deposit funding, and to finance the asset growth necessary to offset declining margins, long-term borrowings were increased by $360 million during the past fiscal year. The weighted average cost of borrowings also increased during the year from 4.48% t
Slide 29: Stockholders' Equity
STOCKHOLDERS’ Washington Federal, Inc. EQUITY Years Ended September 30 (In Millions) $1,200 $1,000 $800 $600 $400 $200 $0 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 14
Slide 30: Stockholder's Equity
Slide #14 – Stockholder’s Equity Along with deposits and borrowings, we fund the asset side of the balance sheet with stockholders equity, which increased by $56 million last year. Historically, and may it always be so, the company’s profitability has produced substantial excess capital, so we spend
Slide 31: Capital Ratios
CAPITAL RATIOS Washington Federal, Inc. Peer Group Washington Regulatory Average* Federal Required Q 09-30-07 Q 09-30-07 Minimum Regulatory Capital Ratios Core 7.33% 12.06% 3.0% Risk Based 10.54 21.44 8.0 Capital / Assets 10.60 12.82 *15 Largest Public Thrifts - Source: FDIC 15
Slide 32: Peer Group Capital Comparison
Slide #15 – Peer Group Capital Comparison It’s therefore comforting to note that our capital ratios continue to be among the highest in the nation. Core capital is four times the minimum regulatory requirement and our ratio of Capital to Total Assets was 12.82% at September 30th. That was a ratio th
Slide 33: Interest Rate Spread
INTEREST RATE Washington Federal, Inc. SPREAD Quarterly 4.14% 3.20% 3.00% 2.26% 2.00% 2.05% 16
Slide 34: Primary Interest Spread
Slide #16– Primary Interest Spread Now, how do we make money? It’s the difference between what we earn on assets and what we pay for funding that drives profitability. Expressed as a percentage, that difference is known as net interest spread and you can see that it has been very cyclical. When I sp
Slide 35: Net Interest Income
NET INTEREST Washington Federal, Inc. INCOME Years Ended September 30 (In Millions) $250 $225 $200 $175 $150 $125 $100 $75 $50 $25 $0 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 17
Slide 36: Net Interest Income
Slide # 17– Net Interest Income Net interest income is the spread expressed as dollars. Generally over the years, we have been able to overcome the volatility of net interest spread through careful management of the growth and composition of the balance sheet. The past few years, however, have left
Slide 37: Short Term Interest Rates
SHORT TERM Washington Federal, Inc. INTEREST RATES (Fed Funds Rate) 7.00% 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% 18
Slide 38: Short Term Rate Trends
Slide #18– Short Term Rate Trends The good news is that nothing lasts forever. This slide illustrates the trend in the overnight borrowing rate since 2001. With the reversal of trend in September, we now have reason to be optimistic that as the year unfolds, lower short-term rates will at some point
Slide 39: Efficiency
EFFICIENCY Washington Federal, Inc. Peer Group Washington Average* Federal Q 09-30-07 09-30-07 Efficiency Ratio 57.48% 23.56% G & A Exp. / Average Assets 1.63% .67% *15 Largest Public Thrifts - Source: FDIC 19
Slide 40: Efficiency
Slide #19 – Efficiency Out of net interest income we pay the company’s operating expenses. In a mature industry like ours, managing such expenses to the lowest level possible is critical to success in the short run, and survival in the long haul. Comparing us to the largest 15 public thrift institut
Slide 41: Net Income
NET INCOME Washington Federal, Inc. Years Ended September 30 (In Millions) $150 $135 $120 $105 $90 $75 $60 $45 $30 $15 $0 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 20
Slide 42: Net Income
Slide # 20– Net Income The bottom line was that your company produced net income last year totaling $135,017,000. This represented a 5.7% decline from last year’s earnings of $143,102,000, which can be attributed to the reduced net interest spread caused by the cost of deposits and borrowings I spok
Slide 43: Performance Ratios
PERFORMANCE Washington Federal, Inc. RATIOS Peer Group Washington Average* Federal Q 09-30-07 09-30-07 Return on Average Assets 0.74% 1.40% Return on Stockholders’ Equity 6.81% 10.46% *15 Largest Public Thrifts - Source: FDIC. 21
Slide 44: Performance Ratios
Slide #21 – Performance Ratios This is a profitability comparison to a peer group of like institutions. In the last quarter for which we have peer group numbers (which we used as a proxy for their annual numbers which aren’t yet available), we exceeded the performance of similar institutions by a co
Slide 45: Market Price per Share
MARKET PRICE Washington Federal, Inc. PER SHARE Last Trade Price, Adjusted for Splits As of December 31 $24.13 $21.11 $16.13 $19.05* $12.26 $7.37 $.37 Nov-82 Dec-84 Dec-87 Dec-90 Dec-93 Dec-96 Dec-99 Dec-02 Dec-05 *As of January 21, 2008 22
Slide 46: Market Price per Share
Slide # 22 – Market price per Share In spite of the company’s reasonably good financial performance last year, it was not a very good year for the stock. After reaching an all-time high of $27.09 per share in October, the relentless headlines regarding subprime loan losses and the housing slump caus
Slide 47: Quarterly Cash Dividends
Quarterly Cash Washington Federal, Dividends Inc. $0.22 $0.20 $0.18 $0.16 $0.14 $0.12 $0.10 $0.08 $0.06 $0.04 $0.02 $0.00 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 23
Slide 48: Cash Dividends
Slide #23– Cash Dividends For long-term owners though, which we hope you are and will continue to be, pauses in the market value growth of the stock take on less importance because of the company’s excellent dividend history. You get paid to be patient. Last year, the board of directors approved an
Slide 49: 2007 Summary
2007 Summary Washington Federal, Inc. • Net Income down, but strong by comparison • One of the best years in WFSL history • Good loan and deposit growth • Increased capital from retained earnings • Problem loans manageable • New Mexico acquisition accretive in 2007 • Agreement to acquire First Mutua
Slide 50: 2007 Summary
Slide #24– 2007 Summary I’ll finish by saying that it was a good year for your Company. The acid test is always the bottom line, and while this management team finds reporting a decline in earnings to be very distasteful, Net Income was still strong by comparison to the industry and it was one of th
Slide 51: Looking to 2008
Looking to 2008 Washington Federal, Inc. Question for 2008: Will increased credit costs outweigh the benefits of increased net interest spread? 25
Slide 52: Looking to 2008
Slide #25– Looking to 2008 Now we move on to a new fiscal year that is clearly shaping up to be one of the most challenging that we’ve experienced. Without question, we will experience higher non-performing assets and loan losses during the year. The housing market and the general economy are fallin
Slide 53: (.)
(.) Washington Federal, Inc.
Slide 54: Washington Federal Logo
Slide #24 – Washington Federal Logo Now I would like to ask the Corporate Secretary to report the results of the voting and then we will answer any questions.
Washington Federal — Shareholder Meeting (January 2008) on 6ix