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Washington Federal (WAFD) Q3 Earnings Beat, Revenues Rise

Zacks Equity Research

Washington Federal’s WAFD third-quarter fiscal 2019 (ended Jun 30) earnings came in at 67 cents per share, surpassing the Zacks Consensus Estimate of 64 cents. The figure also reflects year-over-year growth of 10%.

Results benefited from a rise in revenues, decent growth in loan and deposit balances, and no provisions. However, higher expense was an undermining factor.

Net income increased 5% year over year to $53.9 million.

Revenues & Costs Increase

Net revenues came in at $135.7 million, up 3% from the year-ago quarter. The figure beat the Zacks Consensus Estimate of $134.2 million.

Net interest income was $121.7 million, up 2% from the year-earlier quarter. However, net interest margin declined 11 basis points (bps) to 3.18%.

Total other income of $14.0 million grew 13% from the prior-year quarter. This upside was driven by increase in other income and loan fee income.

Operating expenses were up 6% from the prior-year quarter to $70.9 million. Higher compensation and benefit, occupancy and other expenses led to this upswing. Moreover, the company incurred Bank Secrecy Act-related costs of nearly $1.1 million in the quarter under review.

The company’s efficiency ratio was 52.24%, up from 50.62% 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 10.68%, up from 10.30% witnessed at the end of the prior-year quarter. Return on average assets was 1.31%, on par with the year-ago quarter.

Loans & Deposits Rise

As of Jun 30, 2019, net loans receivables amounted to $12 billion, up from $11.5 billion recorded as of Sep 30, 2018. Also, customer deposit accounts were $11.8 billion, up from $11.4 billion as of Sep 30, 2018.

Credit Quality Improves

As of Jun 30, 2019, the ratio of non-performing assets to total assets was 0.31%, down 15 bps year over year. Furthermore, the allowance for loan losses and reserve for unfunded commitments were 1.05% of gross loans outstanding, down from 1.06% recorded as of Sep 30, 2018.

Additionally, provision for loan losses was nil during the reported quarter against $1 million recorded in the prior-year quarter.

Share Repurchase Update

During the fiscal third quarter, Washington Federal repurchased 1.1 million shares at average price of $32.45 per share. Moreover, as of Jun 30, 2019, authorization to buy back additional 8.6 million shares remained.

Our View

Washington Federal is well poised to grow organically, supported by continued rise in loan balances. Also, its solid balance sheet position and impressive credit quality will support financials. However, persistently rising expenses are expected to hamper the company’s bottom-line growth.

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 #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earnings Release Dates of Other Banks

Prosperity Bancshares, Inc. PB and BankUnited, Inc. BKU are scheduled to announce second-quarter results on Jul 24, while Associated Banc-Corp ASB is slated to report on Jul 25.

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