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Washington Federal (WAFD) Q2 Earnings Miss on High Provisions
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Washington Federal’s (WAFD - Free Report) second-quarter fiscal 2020 (ended Mar 31) earnings were 49 cents per share, missing the Zacks Consensus Estimate of 55 cents. The figure also declined 22.2% year over year.
The results reflect a decline in net interest income amid lower interest rates, significant rise in provisions and higher operating expenses. However, improving loan and deposit balances, and increase in total other income were tailwinds.
Net income was $38 million, declining 25.7% from the prior-year quarter.
Revenues & Expenses Rise
Net revenues came in at $133.9 million, up nearly 1% from the year-ago quarter. The figure marginally surpassed the Zacks Consensus Estimate of $133.2 million.
Net interest income was $117.6 million, down 2% from the year-ago quarter. Also, net interest margin declined 5 basis points (bps) to 3.10%.
Total other income of $16.2 million increased 26.8% from the prior-year quarter. This upside was mainly driven by gain on sale of investment securities and higher deposit fee income.
Operating expenses were up 16.9% year over year to $79.4 million. Rise in all cost components led to this increase.
The company’s efficiency ratio was 59.34%, up from 51.15% recorded a year ago. A rise in efficiency ratio indicates deterioration in profitability.
At the end of the fiscal second quarter, return on average common equity was 7.43%, down from 10.20% in the comparable prior-year period. Return on average assets was 0.93%, down from 1.24% in the corresponding period of last year.
As of Mar 31, 2020, net loans receivables were $12 billion compared with $11.9 billion on Sep 30, 2019. Further, customer deposit accounts amounted to $12.1 billion, marginally up from $12 billion reported as of Sep 30, 2019.
Credit Quality Worsens
As of Mar 31, 2020, the ratio of non-performing assets to total assets was 0.24%, down 3 bps from the Sep 30, 2019 level.
However, provision for loan losses increased to $6.2 million from $0.8 million recorded a year ago. Substantially higher provisions reflect the economic slowdown caused by the coronavirus pandemic.
Additionally, allowance for loan losses and reserve for unfunded commitments were 1.10% of gross loans outstanding, up 6 bps from the Sep 30, 2019 figure.
Share Repurchase Update
During the quarter, Washington Federal repurchased 2.4 million shares at weighted average price of $32.43 per share. As of Mar 31, 2020, the company had 4.6 million shares remaining under the buyback authorization.
Our View
Washington Federal’s efforts to grow organically and decent loan demand are likely to support revenues. However, lower interest rates and persistently rising expenses are major near-term concerns.
Washington Federal, Inc. Price, Consensus and EPS Surprise
Bank OZK (OZK - Free Report) , Associated Banc-Corp (ASB - Free Report) and SVB Financial are scheduled to announce first-quarter results on Apr 23.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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Washington Federal (WAFD) Q2 Earnings Miss on High Provisions
Washington Federal’s (WAFD - Free Report) second-quarter fiscal 2020 (ended Mar 31) earnings were 49 cents per share, missing the Zacks Consensus Estimate of 55 cents. The figure also declined 22.2% year over year.
The results reflect a decline in net interest income amid lower interest rates, significant rise in provisions and higher operating expenses. However, improving loan and deposit balances, and increase in total other income were tailwinds.
Net income was $38 million, declining 25.7% from the prior-year quarter.
Revenues & Expenses Rise
Net revenues came in at $133.9 million, up nearly 1% from the year-ago quarter. The figure marginally surpassed the Zacks Consensus Estimate of $133.2 million.
Net interest income was $117.6 million, down 2% from the year-ago quarter. Also, net interest margin declined 5 basis points (bps) to 3.10%.
Total other income of $16.2 million increased 26.8% from the prior-year quarter. This upside was mainly driven by gain on sale of investment securities and higher deposit fee income.
Operating expenses were up 16.9% year over year to $79.4 million. Rise in all cost components led to this increase.
The company’s efficiency ratio was 59.34%, up from 51.15% recorded a year ago. A rise in efficiency ratio indicates deterioration in profitability.
At the end of the fiscal second quarter, return on average common equity was 7.43%, down from 10.20% in the comparable prior-year period. Return on average assets was 0.93%, down from 1.24% in the corresponding period of last year.
As of Mar 31, 2020, net loans receivables were $12 billion compared with $11.9 billion on Sep 30, 2019. Further, customer deposit accounts amounted to $12.1 billion, marginally up from $12 billion reported as of Sep 30, 2019.
Credit Quality Worsens
As of Mar 31, 2020, the ratio of non-performing assets to total assets was 0.24%, down 3 bps from the Sep 30, 2019 level.
However, provision for loan losses increased to $6.2 million from $0.8 million recorded a year ago. Substantially higher provisions reflect the economic slowdown caused by the coronavirus pandemic.
Additionally, allowance for loan losses and reserve for unfunded commitments were 1.10% of gross loans outstanding, up 6 bps from the Sep 30, 2019 figure.
Share Repurchase Update
During the quarter, Washington Federal repurchased 2.4 million shares at weighted average price of $32.43 per share. As of Mar 31, 2020, the company had 4.6 million shares remaining under the buyback authorization.
Our View
Washington Federal’s efforts to grow organically and decent loan demand are likely to support revenues. However, lower interest rates and persistently rising expenses are major near-term concerns.
Washington Federal, Inc. Price, Consensus and EPS Surprise
Washington Federal, Inc. price-consensus-eps-surprise-chart | Washington Federal, Inc. Quote
Currently, the company carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Earnings Release Date of Other Banks
Bank OZK (OZK - Free Report) , Associated Banc-Corp (ASB - Free Report) and SVB Financial are scheduled to announce first-quarter results on Apr 23.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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