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Washington Federal's (WAFD) Q2 Earnings Beat on Solid Revenues

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Washington Federal’s (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.

Our View

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.

Washington Federal, Inc. Price, Consensus and EPS Surprise

Washington Federal, Inc. Price, Consensus and EPS Surprise

Washington Federal, Inc. price-consensus-eps-surprise-chart | 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.

Earnings Release Schedule of Major Banks

Both State Street Corporation (STT - Free Report) and The Bank of New York Mellon Corporation (BK - Free Report) are scheduled to release quarterly number on Apr 16. KeyCorp (KEY - Free Report) will announce results on Apr 20.

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