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Washington Federal (WAFD) Stock Up 3.7% on Q1 Earnings Beat
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Shares of Washington Federal Inc. (WAFD - Free Report) jumped 3.7% following the release of its first-quarter fiscal 2018 (ended Dec 31) results. Earnings of 59 cents per share in the quarter beat the Zacks Consensus Estimate of 51 cents. The number also reflects year-over-year growth of 28.3%.
Results were mainly driven by 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.
Results in the reported quarter included one-time charges of $9 million and $8.6 million related to the tax act and termination of its loss share agreements with the FDIC, respectively. After considering one-time charges, Washington Federal’s net income came in at $51.7 million, up 25.3% from the prior-year quarter.
Higher Revenues Offset by Rise in Expenses
Net revenues were $122.5 million, up 6.5% from the year-ago quarter. However, the figure lagged the Zacks Consensus Estimate of $125 million.
Revenues in the reported quarter included above-mentioned one-time charge related to the termination of loss sharing agreement. After excluding the same, adjusted net revenues were $131.1 million, up 13.9% year over year.
Net interest income was $115.7 million, up 12.2% from the year-ago quarter. Also, net interest margin increased 24 basis points year over year to 3.26%.
Adjusted other income jumped 29% year over year to $15.345 million. The rise was mainly driven by increase in deposit fee income and other income.
Operating expenses rose 14% from the prior-year quarter to $61.9 million. The rise was largely due to higher compensation and benefit, information technology costs and other expenses.
The company’s adjusted efficiency ratio came in at 47.25%, up marginally from 47.23% 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 10.25%, up from 8.31% at the end of the prior-year quarter. Return on average assets was 1.35% compared with 1.11% in the year-ago quarter.
Loans & Deposits Rise
As of Dec 31, 2017, net loans receivables were $11.1 billion, up 2.1% sequentially. Also, customer deposit accounts were $11 billion, up 1.5% from the prior quarter.
Improvement in Credit Quality
As of Dec 31, 2017, the ratio of non-performing assets to total assets was 0.41% compared with 0.56% as of Dec 31, 2016. Provision for loan losses was nil during the reported quarter as net recoveries and improvement in credit conditions were offset by strong growth in the loan portfolio.
Further, the allowance for loan losses and reserve for unfunded commitments were 1.08% of gross loans outstanding, marginally up from the Sep 30, 2017 level.
Share Repurchases
During the reported quarter, Washington Federal repurchased 1.1 million shares at an average price of $33.98 per share. As of Dec 31, 2017, the company had authorization to buy back nearly 0.7 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. While the company’s sizeable exposure to risky loan portfolios and rising expenses are matters of concern, lower tax rates will support its financials.
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 fourth-quarter 2017 results on Jan 22, Jan 23 and Jan 31, respectively.
Zacks Top 10 Stocks for 2018
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2018?
Last year's 2017 Zacks Top 10 Stocks portfolio produced double-digit winners, including FMC Corp. and VMware which racked up stellar gains of +67.9% and +61%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
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Washington Federal (WAFD) Stock Up 3.7% on Q1 Earnings Beat
Shares of Washington Federal Inc. (WAFD - Free Report) jumped 3.7% following the release of its first-quarter fiscal 2018 (ended Dec 31) results. Earnings of 59 cents per share in the quarter beat the Zacks Consensus Estimate of 51 cents. The number also reflects year-over-year growth of 28.3%.
Results were mainly driven by 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.
Results in the reported quarter included one-time charges of $9 million and $8.6 million related to the tax act and termination of its loss share agreements with the FDIC, respectively. After considering one-time charges, Washington Federal’s net income came in at $51.7 million, up 25.3% from the prior-year quarter.
Higher Revenues Offset by Rise in Expenses
Net revenues were $122.5 million, up 6.5% from the year-ago quarter. However, the figure lagged the Zacks Consensus Estimate of $125 million.
Revenues in the reported quarter included above-mentioned one-time charge related to the termination of loss sharing agreement. After excluding the same, adjusted net revenues were $131.1 million, up 13.9% year over year.
Net interest income was $115.7 million, up 12.2% from the year-ago quarter. Also, net interest margin increased 24 basis points year over year to 3.26%.
Adjusted other income jumped 29% year over year to $15.345 million. The rise was mainly driven by increase in deposit fee income and other income.
Operating expenses rose 14% from the prior-year quarter to $61.9 million. The rise was largely due to higher compensation and benefit, information technology costs and other expenses.
The company’s adjusted efficiency ratio came in at 47.25%, up marginally from 47.23% 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 10.25%, up from 8.31% at the end of the prior-year quarter. Return on average assets was 1.35% compared with 1.11% in the year-ago quarter.
Loans & Deposits Rise
As of Dec 31, 2017, net loans receivables were $11.1 billion, up 2.1% sequentially. Also, customer deposit accounts were $11 billion, up 1.5% from the prior quarter.
Improvement in Credit Quality
As of Dec 31, 2017, the ratio of non-performing assets to total assets was 0.41% compared with 0.56% as of Dec 31, 2016. Provision for loan losses was nil during the reported quarter as net recoveries and improvement in credit conditions were offset by strong growth in the loan portfolio.
Further, the allowance for loan losses and reserve for unfunded commitments were 1.08% of gross loans outstanding, marginally up from the Sep 30, 2017 level.
Share Repurchases
During the reported quarter, Washington Federal repurchased 1.1 million shares at an average price of $33.98 per share. As of Dec 31, 2017, the company had authorization to buy back nearly 0.7 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. While the company’s sizeable exposure to risky loan portfolios and rising expenses are matters of concern, lower tax rates will support its financials.
Washington Federal, Inc. Price, Consensus and EPS Surprise
Washington Federal, Inc. Price, Consensus and EPS Surprise | Washington Federal, Inc. Quote
Currently, Washington Federal sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Earnings Release Dates for other Banks
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 fourth-quarter 2017 results on Jan 22, Jan 23 and Jan 31, respectively.
Zacks Top 10 Stocks for 2018
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2018?
Last year's 2017 Zacks Top 10 Stocks portfolio produced double-digit winners, including FMC Corp. and VMware which racked up stellar gains of +67.9% and +61%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
Access Zacks Top 10 Stocks for 2018 today >>