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Washington Federal Announces 5% Increase in Quarterly Earnings Per Share

SEATTLE--(BUSINESS WIRE)--Washington Federal, Inc. (Nasdaq: WAFD), parent company of Washington Federal, National Association, today announced quarterly earnings of $44,112,000 or $0.49 per diluted share for the quarter ended June 30, 2017 compared to $43,004,000 or $0.47 per diluted share for the quarter ended June 30, 2016, a $0.02 or 5% increase in fully diluted earnings per share. Return on equity for the quarter ended June 30, 2017 was 8.70% compared to 8.71% for the quarter ended June 30, 2016. Return on assets for the quarter ended June 30, 2017 was 1.17% compared to 1.16% for the same quarter in the prior year.

President & Chief Executive Officer Brent J. Beardall commented, “Our third fiscal quarter results represent a high water mark for both total assets and earnings per share. Asset quality improved, customer deposits grew and loan originations remained strong, exceeding $1 billion for the quarter. We are pleased to note that our efficiency ratio for the quarter improved to 46.6% thanks to revenue growth outpacing expenses. Looking forward, challenges will certainly arise; however, we are optimistic we can continue our legacy of long-term profitable growth.”

Total assets were $15.1 billion as of June 30, 2017 compared to $14.9 billion as of September 30, 2016. The Company continued to shift its asset mix from cash and investment securities to loans receivable. Since September 30, 2016, available-for-sale securities decreased $652 million or 33.9%, held-to-maturity securities increased $234 million or 16.5% and cash and cash equivalents decreased $91 million or 20.2%. During that same period net loans receivable increased by $744 million, or 7.5%, driven primarily by an increase of $253 million in commercial real estate, $181 million in construction, $137 million in commercial & industrial and $137 million in multi-family loans.

Customer deposits increased by $33 million or 0.3% since September 30, 2016 and totaled $10.6 billion as of June 30, 2017. Transaction accounts increased by $198 million or 3.3% during that period, while time deposits decreased $165 million or 3.6%. The mix of customer deposits has continued to shift over the last several years as the Company focuses on growing transaction accounts to lessen sensitivity to rising interest rates and reduce interest expense. As of June 30, 2017, 58.3% of the Company’s deposits were in transaction accounts. Core deposits, defined as all transaction accounts and time deposits less than $250,000, totaled 94.6% of deposits at June 30, 2017.

Borrowings from the Federal Home Loan Bank ("FHLB") totaled $2.3 billion as of June 30, 2017 and $2.1 billion at September 30, 2016. The weighted average rate for FHLB borrowings was 2.88% as of June 30, 2017 and 3.15% at September 30, 2016.

Loan originations totaled $1,031 million for the 3rd fiscal quarter 2017, which was in line with originations in the same quarter one year ago. Partially offsetting loan originations in each of these respective quarters were loan repayments of $793 million and $776 million. Commercial loans represented 67% of all loan originations during the 3rd fiscal quarter 2017 with consumer loans accounting for the remaining 33%. The Company views organic loan growth as the highest and best use of its capital and prefers commercial loans in this low-rate environment because of their shorter duration. The weighted average interest rate on loans was 4.26% as of June 30, 2017 and remained unchanged from September 30, 2016.

Asset quality remains strong and the ratio of non-performing assets to total assets was 0.50% as of June 30, 2017 compared to 0.53% at March 31, 2017 and 0.48% at September 30, 2016. Since September 30, 2016, real estate owned decreased by $10 million, or 34%, and non-accrual loans increased by $14 million, or 33%. Delinquent loans represented 0.50% of total loans at June 30, 2017 compared to 0.65% at March 31, 2017 and 0.68% at September 30, 2016. The allowance for loan losses and reserve for unfunded commitments totaled $129 million as of June 30, 2017 and was 1.08% of gross loans outstanding, as compared to $117 million or 1.07% of gross loans outstanding at September 30, 2016. The slight increase in the ratio of the total allowance and reserve to gross loans since the Company's fiscal year end reflects the continued shift in the mix of the loan portfolio to include a greater proportion of commercial loans outstanding, which generally require a higher level of reserves.

On May 19, 2017, the Company paid a regular dividend on...