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Washington Federal (WAFD) Beats Q4 Earnings, Stock Up 2.6%
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Shares of Washington Federal Inc. (WAFD - Free Report) have gained 2.6% since the release of its fourth-quarter and fiscal 2017 (ended Sep 30) results on Wednesday. Earnings of 52 cents per share in the quarter beat the Zacks Consensus Estimate of 48 cents. The number also reflects a year-over-year increase of 6.1%.
Results were primarily driven by an increase in net interest revenues and non-interest income. Also, rise in loan and deposit balances, and improving asset quality acted as tailwinds. However, higher operating expenses were an undermining factor.
Washington Federal’s net income came in at $46.1 million, up 4.3% from the prior-year quarter.
For fiscal 2017, net income of $173.5 million or $1.94 per share was up from $164 million or $1.78 per share in the last year.
Higher Revenues Offset by Rise in Expenses
Net revenues for the reported quarter were $128.7 million, up 9.1% year over year. Also, the figure surpassed the Zacks Consensus Estimate of $121 million.
For fiscal 2017, net revenues totaled $484.1 million, up 3.6% from the prior year.
Net interest income was $112.4 million, up 9.4% from the year-ago quarter. Also, net interest margin increased 21 basis points (bps) year over year to 3.22%.
Other income grew 7.1% year over year to $16.3 million. The rise was mainly driven by increase in deposit fee income.
Operating expenses rose 13.1% from the prior-year quarter to $62.6 million. The rise was largely due to higher compensation and benefit, information technology costs and other expenses.
The company’s efficiency ratio came in at 48.68%, up marginally from 48.54% a year ago. A rise in efficiency ratio indicates deterioration in profitability.
At the end of the reported quarter, return on average common equity was 9.18%, up from 8.96% at the end of the prior-year quarter. Return on average assets was 1.22% compared with 1.19% in the year-ago quarter.
Improvement in Credit Quality
As of Sep 30, 2017, the ratio of non-performing assets to total assets was 0.46% compared with 0.48% as of Sep 30, 2016. Provision for loan losses was $0.5 million during the reported quarter, down significantly from $3.1 million in the prior-year quarter.
Further, the allowance for loan losses and reserve for unfunded commitments was 1.07% of gross loans outstanding, in line with Sep 30, 2016 level.
Loans & Deposits Rise
As of Sep 30, 2017, net loans receivables were $10.9 billion, up 9.8% from Sep 30, 2016. Also, customer deposit accounts were $10.8 billion, up 2.2% from the Sep 30, 2016 level.
Share Repurchases
During fiscal 2017, Washington Federal repurchased 3.1 million shares at an average price of $31.36 per share. As of Sep 30, 2017, the company had authorization to buy back nearly 1.7 million shares.
Our View
Washington Federal is well positioned to grow organically supported by a continuous rise in loan balances. Also, its solid capital and liquidity position make it well poised to grow through acquisitions. However, we remain concerned about the company’s sizeable exposure to risky loan portfolios as well as rising expenses.
Washington Federal, Inc. Price, Consensus and EPS Surprise
Among other northeast banks, Community Bank System, Inc. (CBU - Free Report) , First Commonwealth Financial Corporation (FCF - Free Report) and First Bank (FRBA - Free Report) are expected to report third-quarter 2017 results on Oct 23, Oct 25 and Oct 30, respectively.
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Washington Federal (WAFD) Beats Q4 Earnings, Stock Up 2.6%
Shares of Washington Federal Inc. (WAFD - Free Report) have gained 2.6% since the release of its fourth-quarter and fiscal 2017 (ended Sep 30) results on Wednesday. Earnings of 52 cents per share in the quarter beat the Zacks Consensus Estimate of 48 cents. The number also reflects a year-over-year increase of 6.1%.
Results were primarily driven by an increase in net interest revenues and non-interest income. Also, rise in loan and deposit balances, and improving asset quality acted as tailwinds. However, higher operating expenses were an undermining factor.
Washington Federal’s net income came in at $46.1 million, up 4.3% from the prior-year quarter.
For fiscal 2017, net income of $173.5 million or $1.94 per share was up from $164 million or $1.78 per share in the last year.
Higher Revenues Offset by Rise in Expenses
Net revenues for the reported quarter were $128.7 million, up 9.1% year over year. Also, the figure surpassed the Zacks Consensus Estimate of $121 million.
For fiscal 2017, net revenues totaled $484.1 million, up 3.6% from the prior year.
Net interest income was $112.4 million, up 9.4% from the year-ago quarter. Also, net interest margin increased 21 basis points (bps) year over year to 3.22%.
Other income grew 7.1% year over year to $16.3 million. The rise was mainly driven by increase in deposit fee income.
Operating expenses rose 13.1% from the prior-year quarter to $62.6 million. The rise was largely due to higher compensation and benefit, information technology costs and other expenses.
The company’s efficiency ratio came in at 48.68%, up marginally from 48.54% a year ago. A rise in efficiency ratio indicates deterioration in profitability.
At the end of the reported quarter, return on average common equity was 9.18%, up from 8.96% at the end of the prior-year quarter. Return on average assets was 1.22% compared with 1.19% in the year-ago quarter.
Improvement in Credit Quality
As of Sep 30, 2017, the ratio of non-performing assets to total assets was 0.46% compared with 0.48% as of Sep 30, 2016. Provision for loan losses was $0.5 million during the reported quarter, down significantly from $3.1 million in the prior-year quarter.
Further, the allowance for loan losses and reserve for unfunded commitments was 1.07% of gross loans outstanding, in line with Sep 30, 2016 level.
Loans & Deposits Rise
As of Sep 30, 2017, net loans receivables were $10.9 billion, up 9.8% from Sep 30, 2016. Also, customer deposit accounts were $10.8 billion, up 2.2% from the Sep 30, 2016 level.
Share Repurchases
During fiscal 2017, Washington Federal repurchased 3.1 million shares at an average price of $31.36 per share. As of Sep 30, 2017, the company had authorization to buy back nearly 1.7 million shares.
Our View
Washington Federal is well positioned to grow organically supported by a continuous rise in loan balances. Also, its solid capital and liquidity position make it well poised to grow through acquisitions. However, we remain concerned about the company’s sizeable exposure to risky loan portfolios as well as rising expenses.
Washington Federal, Inc. Price, Consensus and EPS Surprise
Washington Federal, Inc. Price, Consensus and EPS Surprise | Washington Federal, Inc. Quote
Currently, Washington Federal carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Among other northeast banks, Community Bank System, Inc. (CBU - Free Report) , First Commonwealth Financial Corporation (FCF - Free Report) and First Bank (FRBA - Free Report) are expected to report third-quarter 2017 results on Oct 23, Oct 25 and Oct 30, respectively.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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