Washington Federal Inc
) fiscal first quarter 2013 earnings (ended Dec 31) of 33 cents
per share beat the Zacks Consensus Estimate by a penny. This was
also an improvement from the year-ago earnings of 31 cents.
Constantly declining credit costs primarily drove the results.
However, higher operating expenses and lower top line were the
headwinds. Improvement in asset quality and enhanced capital
ratios were the other highlights of the quarter.
Washington Federal's net income in the fiscal first quarter
surged 5.6% to $35.3 million from $33.4 million in the prior-year
Quarter in Detail
Washington Federal's total revenue in the reported quarter was
$136.3 million, declining 15.1% from $160.6 million in the
prior-year quarter. However, total revenue beat the Zacks
Consensus Estimate of $99.0 million by 37.6%.
Net interest income (before provision for loan losses) fell
nearly 8.0% year over year to $95.4 million. Net interest margin
came in at 3.22%, down 6 basis points (bps) from the prior-year
Operating expenses surged 11.5% from the year-ago quarter to
$38.3 million. The rise was mainly a result of higher
compensation and benefits expenses, occupancy costs as well as
other costs, partially mitigated by lower Federal Deposit
Insurance Corporation (FDIC) premiums.
During the reported quarter, credit quality continued to improve
with Washington Federal reporting provision for loan losses of
$3.6 million as of Dec 31, 2012, which dipped 67.9% on a
year-over-year basis. Likewise, net loan charge-offs came in at
$10.0 million, declining 28.6% from the year-ago period.
As of Dec 31, 2012, total loan delinquencies were 2.89% of total
loans as against 3.13% as of Dec 31, 2011. Similarly,
nonperforming assets totaled $264.0 million or 2.02% of total
assets as of Dec 31 2012, falling 23.0% from Dec 31, 2011.
Washington Federal's profitability metrics continued to display
enhancement. As of Dec 31, 2012, return on average common equity
(ROE) was 7.41% compared with 7.02% in the prior-year quarter.
Return on assets (ROA) was 1.11% as compared with 0.98% in the
Washington Federal repurchased nearly 2.7 million shares at an
average price of $16.60 per share in the reported quarter. The
company has an authorization to buyback up to an additional 3.5
During the quarter, Washington Federal successfully completed the
acquisition of South Valley Bank and Trust. Upon closure, the
transaction added $514 million in loans, $743 million in deposits
and 24 branches to Washington Federal's branch network. The deal
was announced in Apr 2012.
Presently, Washington Federal continues to enjoy the benefits of
lower interest rates, but the anticipated rise in interest rates
will likely hurt the company's deposit re-pricing efforts going
forward. Moreover, extensive capital deployment activities along
with the recent acquisitions will boost investors' confidence in
Though Washington Federal is optimistic about the uptrend in the
economy, we remain concerned about the company's sizeable
exposure to real estate markets, where pricing remains soft.
Currently, Washington Federal retains a Zacks Rank #3 (Hold).
Considering the fundamentals, we also maintain a long-term
Neutral recommendation on the stock.
Among Washington Federal's peers,
Sterling Financial Corporation
), which holds a Zacks Rank #2 (Buy), is expected to report its
fourth quarter 2012 results on Jan 24.
STERLING FIN WA (STSA): Free Stock Analysis
WASH FEDL INC (WAFD): Free Stock Analysis
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