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Washington Federal's (WAFD) Q1 Earnings Beat, Revenues Rise

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Washington Federal’s (WAFD - Free Report) first-quarter fiscal 2019 (ended Dec 31) earnings came in at 65 cents per share, surpassing the Zacks Consensus Estimate of 61 cents. The figure also reflects year-over-year growth of 10.2%.

Results benefited from a rise in revenues, and decent growth in loan and deposit balances. Improvement in credit quality was also a positive. However, expense growth was an undermining factor.

Net income for the quarter increased 2.5% year over year to $52.9 million.

Revenue Growth Offsets Cost Increase

Net revenues for the quarter came in at $138.2 million, up 12.8% from the year-ago quarter. The revenue figure also outpaced the Zacks Consensus Estimate of $133.3 million.

Net interest income for the quarter was $119.2 million, up 3% from the year-ago quarter. However, net interest margin shrunk 5 basis points (bps) year over year to 3.21%.

Total other income of $19 million increased significantly from $6.8 million in the prior-year quarter. This upside mainly stemmed from net gains from sale and valuation adjustments of fixed assets, as well as absence of expense from FDIC loss share valuation adjustments in the prior-year quarter.

Operating expenses flared up 15.7% from the prior-year quarter to $71.7 million. The rise was due to an increase in all-cost components. Moreover, the company incurred Bank Secrecy Act (BSA)-related costs of nearly $3.6 million in the quarter under review.

Management expects to incur an additional $2 million of non-recurring costs for BSA improvements over the next two quarters.

The company’s efficiency ratio was 51.88%, up from 47.25% recorded 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 10.64%, up from 10.25% at the end of the prior-year quarter. Return on average assets was 1.32% compared with 1.35% at the end of the year-ago quarter.

Loans & Deposits Rise

As of Dec 31, 2018, net loans receivables amounted to $11.7 billion, up from $11.5 billion recorded as of Sep 30, 2018. Also, customer deposit accounts were $11.6 billion, up from $11.4 billion as of Sep 30, 2018.

Credit Quality Improves

As of Dec 31, 2018, the ratio of non-performing assets to total assets was 0.39%, down 2 bps year over year. Further, the allowance for loan losses and reserve for unfunded commitments were 1.06% of gross loans outstanding, flat compared with the Sep 30, 2018 level.

Moreover, during the reported quarter, the company recorded release for loan losses of $5 million compared with no provision in the prior-year quarter.

Share Repurchases

During the fiscal first quarter, Washington Federal repurchased 1.7 million shares at an average price of $28.12 per share.

Our View

Washington Federal is well positioned to grow organically, supported by continued rise in loan balances. Additionally, its solid capital and liquidity position makes it well poised to grow through acquisitions. Nevertheless, persistently rising expenses might keep curbing bottom-line growth.

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.

Earnings Release Schedule of Other Banks

Among other banks, FB Financial Corporation (FBK - Free Report) is scheduled to release its quarterly results on Jan 22, Community Bank System, Inc. (CBU - Free Report) on Jan 23, while Atlantic Capital Bancshares, Inc. (ACBI - Free Report) will report earnings on Jan 31.

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