Washington Federal (WAFD) Stock Up 3.7% on Q1 Earnings Beat

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Shares of Washington Federal Inc. WAFD jumped 3.7% following the release of its first-quarter fiscal 2018 (ended Dec 31) results. Earnings of 59 cents per share in the quarter beat the Zacks Consensus Estimate of 51 cents. The number also reflects year-over-year growth of 28.3%.

Results were mainly driven by increase in net interest revenues and non-interest income. Also, rise in loan and deposit balances, and improving asset quality acted as tailwinds. However, higher operating expenses were an undermining factor.

Results in the reported quarter included one-time charges of $9 million and $8.6 million related to the tax act and termination of its loss share agreements with the FDIC, respectively. After considering one-time charges, Washington Federal's net income came in at $51.7 million, up 25.3% from the prior-year quarter.

Higher Revenues Offset by Rise in Expenses

Net revenues were $122.5 million, up 6.5% from the year-ago quarter. However, the figure lagged the Zacks Consensus Estimate of $125 million.

Revenues in the reported quarter included above-mentioned one-time charge related to the termination of loss sharing agreement. After excluding the same, adjusted net revenues were $131.1 million, up 13.9% year over year.

Net interest income was $115.7 million, up 12.2% from the year-ago quarter. Also, net interest margin increased 24 basis points year over year to 3.26%.

Adjusted other income jumped 29% year over year to $15.345 million. The rise was mainly driven by increase in deposit fee income and other income.

Operating expenses rose 14% from the prior-year quarter to $61.9 million. The rise was largely due to higher compensation and benefit, information technology costs and other expenses.

The company's adjusted efficiency ratio came in at 47.25%, up marginally from 47.23% 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 10.25%, up from 8.31% at the end of the prior-year quarter. Return on average assets was 1.35% compared with 1.11% in the year-ago quarter.

Loans & Deposits Rise

As of Dec 31, 2017, net loans receivables were $11.1 billion, up 2.1% sequentially. Also, customer deposit accounts were $11 billion, up 1.5% from the prior quarter.

Improvement in Credit Quality

As of Dec 31, 2017, the ratio of non-performing assets to total assets was 0.41% compared with 0.56% as of Dec 31, 2016. Provision for loan losses was nil during the reported quarter as net recoveries and improvement in credit conditions were offset by strong growth in the loan portfolio.

Further, the allowance for loan losses and reserve for unfunded commitments were 1.08% of gross loans outstanding, marginally up from the Sep 30, 2017 level.

Share Repurchases

During the reported quarter, Washington Federal repurchased 1.1 million shares at an average price of $33.98 per share. As of Dec 31, 2017, the company had authorization to buy back nearly 0.7 million shares.

Our View

Washington Federal is well positioned to grow organically supported by a continuous rise in loan balances. Also, its solid capital and liquidity position make it well poised to grow through acquisitions. While the company's sizeable exposure to risky loan portfolios and rising expenses are matters of concern, lower tax rates will support its financials.

Washington Federal, Inc. Price, Consensus and EPS Surprise

Washington Federal, Inc. Price, Consensus and EPS Surprise | Washington Federal, Inc. Quote

Currently, Washington Federal sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

Earnings Release Dates for other Banks

Among other northeast banks, Community Bank System, Inc. CBU , First Commonwealth Financial Corporation FCF and First Bank FRBA are expected to report fourth-quarter 2017 results on Jan 22, Jan 23 and Jan 31, respectively.

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Washington Federal, Inc. (WAFD): Free Stock Analysis Report

Community Bank System, Inc. (CBU): Free Stock Analysis Report

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First Bank (FRBA): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: WAFD , CBU , FCF , FRBA

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