Washington Federal’s ( WAFD Quick Quote WAFD - Free Report) second-quarter fiscal 2021 (ended Mar 31) earnings of 56 cents per share surpassed the Zacks Consensus Estimate of 49 cents. Further, the figure reflects a year-over-year rise of 19.1%.
Results primarily benefited from an increase in revenues. Further, the company’s balance-sheet position remained strong during the quarter. However, elevated expenses and lower other income were undermining factors.
Net income was $45 million, up 25% from the prior year.
Revenues Climb, Expenses Up
Net revenues were $138.5 million, up 3.5% from the year-ago quarter. The top-line figure beat the Zacks Consensus Estimate of $137.2 million.
NII was $124 million, up 5.5% from the year-earlier period. Net interest margin was 2.75%, down 35 basis points (bps) year over year.
Total other income of $14.5 million declined 10.5% from the prior-year quarter. This decrease was due to the significant fall in loan fee income and lower deposit fee income.
Other expenses amounted to $81.7 million, up 2.9% year over year. Higher compensation and benefits, and FDIC insurance premiums mainly led to this upswing.
The company’s efficiency ratio was 59.02%, marginally down from the 59.34% recorded a year ago. A fall in efficiency ratio indicates profitability.
At the end of the fiscal second quarter, return on average common equity was 8.17%, up from the 7.19% witnessed at the end of the year-earlier quarter. Return on average assets was 0.93%, up from 0.89% at the end of the year-ago quarter.
Loans and Deposit Rise
As of Mar 31, 2021, net loans receivables amounted to $13 billion, up 1.6% from the $12.8 billion recorded on Sep 30, 2020. Also, total customer deposits were $14.8 billion, up 7.5% since Sep 30, 2020.
Credit Quality Improves
As of Mar 31, 2020, the ratio of non-performing assets to total assets was 0.25%, down from 0.35% on Dec 31, 2020. Allowance for credit losses (including reserve for unfunded commitments) were 1.30% of gross loans outstanding, down from the 1.33% recorded on Sep 30, 2020.
During the reported quarter, the company recorded no provision for credit losses as against the provision release of the $8.2 million recorded in the prior-year quarter.
Share Repurchase Update
During the reported quarter, Washington Federal repurchased 2.8 million shares at an average price of $31.53 per share.
Solid loans and deposit balances, along with a strong balance-sheet position, will likely continue to support Washington Federal’s profitability. Nevertheless, elevated operating expenses, along with low rates, remain major headwinds.
Currently, Washington Federal carries a Zacks Rank #3 (Hold). You can see
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