Washington Federal Inc.
) fiscal fourth quarter 2012 earnings (ended September 30) of 33
cents per share, slightly beat the Zacks Consensus Estimate of 31
cents. This was also an improvement from the year-ago quarter's
earnings of 28 cents.
STERLING FIN WA (STSA): Free Stock Analysis
WASH FEDL INC (WAFD): Free Stock Analysis
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For fiscal 2012, Washington Federal's earnings of $1.29 per share
were marginally ahead of the Zacks Consensus Estimate of $1.27.
Moreover, this compares favorably with the prior-year earnings of
Constantly declining credit costs were largely responsible for
the improved results. However, higher operating expenses coupled
with a decline in top line were the headwinds. Overall,
continuous improvement in asset quality and enhanced capital
ratios were impressive.
Washington Federal's net income in the fiscal fourth quarter
surged 15.9% to $35.5 million from $30.7 million in the
Quarter in Detail
Washington Federal's total revenue in the fiscal fourth quarter
was $137.6 million, declining 15.9% from $163.7 million in the
prior-year quarter. However, total revenue beat the Zacks
Consensus Estimate of $101.0 million.
In fiscal 2012, total revenue was $606.8 million, down 12.1% from
$690.6 million in fiscal 2011. Total revenue significantly
surpassed the Zacks Consensus Estimate of $423.0 million.
Net interest income (before provision for loan losses) fell 11.8%
year over year to $92.2 million mainly due to lower asset yields,
partially offset by lower interest expenses.
Operating expenses surged 5.2% from the year-ago quarter to $35.7
million in the quarter under review. 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 fiscal 2012, credit quality continued to improve with
Washington Federal reporting provision for loan losses of $45.0
million as of September 30, 2012, which dipped 51.7% on a
year-over-year basis. Likewise, net loan charge-offs for fiscal
2012 came in at $70.0 million, declining 29% from the year-ago
As of September 30, 2012, total loan delinquencies were 2.57% of
total loans as against 3.43% as of September 30, 2011. Similarly,
nonperforming assets totaled $273.0 million or 2.19% of total
assets at September-end, falling 26% from September 30, 2011.
Washington Federal's profitability metrics continued to display
enhancement. As of September 30, 2012, return on equity (ROE) was
7.23% compared with 5.99% in the prior-year. Return on assets
(ROA) was 1.03% as compared with 0.83% in the year-ago period.
During fiscal 2012, Washington Federal repurchased nearly 3.0
million shares at an average price of $14.48 per share. The
company has an authorization to buyback up to an additional 6.2
During the fiscal fourth quarter, Washington Federal received
approval from the regulators to complete its acquisition of South
Valley Bank and Trust. The deal is expected to close on October
31. Earlier in April, the company had announced a deal to acquire
South Valley. Upon closure, the transaction is expected to be
immediately accretive to earnings.
During the quarter, Washington Federal's first Eastern Washington
branch was opened in Yakima, Washington.
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 #3 Rank, which
translates into a short-term Hold rating. Considering the
fundamentals, we also maintain a long-term 'Neutral'
recommendation on the stock.
Among Washington Federal's peers,
Sterling Financial Corporation
) is expected to report its third quarter 2012 earnings results
on October 25.