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Washington Federal (WAFD) Q2 Earnings Miss, Revenues Rise
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Washington Federal’s (WAFD - Free Report) second-quarter fiscal 2023 (ended Mar 31) earnings of 95 cents per share missed the Zacks Consensus Estimate of $1.11 per share. The bottom line, however, reflects a year-over-year jump of 35.7%. Our model projected earnings per share of $1.09.
Results benefited from steady loan balance and higher rates, which, in turn, supported net interest income (NII) growth. However, an increase in other expenses and a fall in other income were headwinds. Also, higher provisions on the back of a deteriorating economic outlook acted as a spoilsport.
Net income available to common shareholders was $62.3 million, up 36.3% from the prior-year quarter. Our estimate for the metric was $71.6 million.
Revenues Improve, Expenses Rise
Net revenues for the quarter were $185.1 million, up 22.8% from the year-ago quarter. However, the top line lagged the Zacks Consensus Estimate of $194 million. Our estimate for net revenues was $194.1 million.
NII was $175 million, rising 29.6%. The net interest margin (NIM) was 3.51%, expanding 61 basis points (bps). Our estimates for NII and NIM were $176.8 million and 3.55%, respectively.
Total other income of $10.1 million plunged 35.7%. The decrease was mainly due to a substantial decline in loan fee income and other income. Our estimate for total other income was $17.3 million.
Total other expenses amounted to $96.9 million, up 9.6%. Higher compensation and benefits, FDIC insurance premiums, information technology and other expenses largely led to the rise. Our estimate for total other expenses was $96.4 million.
The company’s efficiency ratio was 52.34%, down from 58.65% a year ago. A fall in the efficiency ratio indicates improved profitability.
As of Mar 31, 2023, net loans receivable amounted to $17.27 billion, up 1.6% from the prior quarter end. Total customer deposits were $15.86 billion, down marginally.
At the end of the fiscal second quarter, the return on average common equity was 12.01%, up from 9.80% at the end of the prior-year quarter. Return on average assets was 1.21%, up from 0.98%.
Credit Quality: A Mixed Bag
As of Mar 31, the allowance for credit losses (including reserve for unfunded commitments) was 1.02% of gross loans outstanding, down 11 bps from the prior-year quarter. Also, the ratio of non-performing assets to total assets was 0.21%, down 2 bps.
In the reported quarter, the provision for credit losses was $3.5 million against a benefit of $0.5 million in the year-ago quarter. This reflected growth in net loans receivables and expectations of deteriorating economic conditions.
Share Repurchase Update
During the quarter, Washington Federal repurchased 3,239 shares at an average price of $33.48 per share.
Our Viewpoint
Growth in loans, higher interest rates and a robust balance sheet will likely continue aiding Washington Federal’s financials. In November 2022, WAFD announced a deal to acquire Luther Burbank Corporation for $654 million. This acquisition will help the company to enter the lucrative and “fast-growing” California market.
However, elevated operating expenses and a worsening economic backdrop are major near-term headwinds.
Washington Federal, Inc. Price, Consensus and EPS Surprise
Hancock Whitney Corporation (HWC - Free Report) is slated to announce first-quarter 2023 results on Apr 18.
Over the past 30 days, the Zacks Consensus Estimate for HWC’s quarterly earnings has moved down 7.6% to $1.45 per share. The estimate indicates a 12.1% decrease from the prior-year quarter.
Associated Banc-Corp (ASB - Free Report) is scheduled to release its first-quarter 2023 numbers on Apr 20.
Over the past 30 days, the Zacks Consensus Estimate for Associated Banc-Corp’s quarterly earnings has moved up 1.6% to 65 cents per share. The figure implies a 7.14% decrease from the prior-year quarter.
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Washington Federal (WAFD) Q2 Earnings Miss, Revenues Rise
Washington Federal’s (WAFD - Free Report) second-quarter fiscal 2023 (ended Mar 31) earnings of 95 cents per share missed the Zacks Consensus Estimate of $1.11 per share. The bottom line, however, reflects a year-over-year jump of 35.7%. Our model projected earnings per share of $1.09.
Results benefited from steady loan balance and higher rates, which, in turn, supported net interest income (NII) growth. However, an increase in other expenses and a fall in other income were headwinds. Also, higher provisions on the back of a deteriorating economic outlook acted as a spoilsport.
Net income available to common shareholders was $62.3 million, up 36.3% from the prior-year quarter. Our estimate for the metric was $71.6 million.
Revenues Improve, Expenses Rise
Net revenues for the quarter were $185.1 million, up 22.8% from the year-ago quarter. However, the top line lagged the Zacks Consensus Estimate of $194 million. Our estimate for net revenues was $194.1 million.
NII was $175 million, rising 29.6%. The net interest margin (NIM) was 3.51%, expanding 61 basis points (bps). Our estimates for NII and NIM were $176.8 million and 3.55%, respectively.
Total other income of $10.1 million plunged 35.7%. The decrease was mainly due to a substantial decline in loan fee income and other income. Our estimate for total other income was $17.3 million.
Total other expenses amounted to $96.9 million, up 9.6%. Higher compensation and benefits, FDIC insurance premiums, information technology and other expenses largely led to the rise. Our estimate for total other expenses was $96.4 million.
The company’s efficiency ratio was 52.34%, down from 58.65% a year ago. A fall in the efficiency ratio indicates improved profitability.
As of Mar 31, 2023, net loans receivable amounted to $17.27 billion, up 1.6% from the prior quarter end. Total customer deposits were $15.86 billion, down marginally.
At the end of the fiscal second quarter, the return on average common equity was 12.01%, up from 9.80% at the end of the prior-year quarter. Return on average assets was 1.21%, up from 0.98%.
Credit Quality: A Mixed Bag
As of Mar 31, the allowance for credit losses (including reserve for unfunded commitments) was 1.02% of gross loans outstanding, down 11 bps from the prior-year quarter. Also, the ratio of non-performing assets to total assets was 0.21%, down 2 bps.
In the reported quarter, the provision for credit losses was $3.5 million against a benefit of $0.5 million in the year-ago quarter. This reflected growth in net loans receivables and expectations of deteriorating economic conditions.
Share Repurchase Update
During the quarter, Washington Federal repurchased 3,239 shares at an average price of $33.48 per share.
Our Viewpoint
Growth in loans, higher interest rates and a robust balance sheet will likely continue aiding Washington Federal’s financials. In November 2022, WAFD announced a deal to acquire Luther Burbank Corporation for $654 million. This acquisition will help the company to enter the lucrative and “fast-growing” California market.
However, elevated operating expenses and a worsening economic backdrop are major near-term headwinds.
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 #4 (Sell).
You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Earnings Release Dates of Other Banks
Hancock Whitney Corporation (HWC - Free Report) is slated to announce first-quarter 2023 results on Apr 18.
Over the past 30 days, the Zacks Consensus Estimate for HWC’s quarterly earnings has moved down 7.6% to $1.45 per share. The estimate indicates a 12.1% decrease from the prior-year quarter.
Associated Banc-Corp (ASB - Free Report) is scheduled to release its first-quarter 2023 numbers on Apr 20.
Over the past 30 days, the Zacks Consensus Estimate for Associated Banc-Corp’s quarterly earnings has moved up 1.6% to 65 cents per share. The figure implies a 7.14% decrease from the prior-year quarter.