Washington Federal reports Q2 EPS 95c, consensus $1.07

Reports Q2 NII $175.04M, consensus $181.62M. Reports Q2 loan loss provision $3.5M vs. $0.5M last year. Reports Q2 net charge-offs $5.9M vs. net recoveries of $0.5M a year ago. CEO Brent Beardall commented, "We were disappointed to see the failures of both Silicon Valley Bank and Signature Bank last quarter. What is most important at this point is customers having confidence in the banking system…We are grateful for the trust and confidence our clients have placed in WaFd Bank and work each day to earn that trust by managing the bank for the long-term, which at times translates into accepting less in short-term earnings. Presently, the yield curve is inverted with long-term rates being lower than short-term rates. The degree to which the yield curve is inverted is near a historical high. WaFd saw its net interest margin decrease from 3.69% in the December quarter to 3.51% in the March quarter. While this is a significant decline in margin, the previous quarter had represented a 25-year high in margin for the Bank and our current margin is still meaningfully higher than the 2.90% margin reported in the March 2022 quarter. While credit quality remains strong, with delinquent loans representing only 0.2% of total loans, we did experience our first quarterly net charge-off in almost a decade. We are monitoring our portfolio closely for signs of deterioration which we expect will occur as the stress of higher interest rates is realized throughout the economy. With an allowance for loan losses of over $205M and robust capital, we believe the Bank is well positioned to withstand a credit cycle if that is what materializes over the next few quarters…We are gratified that our loan portfolio is spread over eight western states that are generally experiencing net immigration and strong job growth. Importantly, the Bank has been conservative in its commercial real estate lending requiring substantial equity from borrowers that would absorb the first portion of any losses in value. Based on December 31, 2022 estimates, the average current loan to value ratio of our multifamily loans was 49%, on commercial office 52% and on other commercial real estate 44%…"