Washington Federal's (WAFD) Q4 Earnings Beat, Costs Rise

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Washington Federal Inc. WAFD released fourth quarter and fiscal 2018 (ended Sep 30) results. Earnings of 62 cents per share for the quarter surpassed the Zacks Consensus Estimate of 60 cents. Also, the figure reflects year-over-year growth of 19.2%.

Results benefited from a rise in net interest income and decent loan and deposit growth. Also, improvement in credit quality was a positive for the company. However, lower total other income and higher operating expenses were the undermining factors.

Net income for the quarter was $51.5 million, up 11.7% from the prior-year quarter. For fiscal 2018, net income came in at $203.9 million or $2.40 per share, up from $173.5 million or $1.94 per share a year ago.

Revenues Improve, Expenses Rise

Net revenues for the quarter were $131.5 million, up 2.2% from the year-ago quarter. However, the figure lagged the Zacks Consensus Estimate of $133.8 million. For fiscal 2018, net revenues came in at $516.2 million, up 6.6% year over year.

Net interest income for the quarter was $119.3 million, up 6.1% from the year-ago quarter.

Also, net interest margin rose 4 basis points (bps) year over year to 3.26%.

Total other income declined 24.7% to $12.2 million. The decrease was due to a fall in all components of fee income.

Operating expenses increased 11.1% from the prior-year quarter to $69.6 million. The rise was due to an increase in all cost components except information technology costs. Moreover, the company incurred Bank Secrecy Act (BSA)-related costs of nearly $4.1 million in the reported quarter.

Management expects to incur an additional $6 million of non-recurring costs for BSA improvements over the next three quarters. Thereafter, BSA costs are expected to be roughly $2 million per quarter.

The company's efficiency ratio was 52.94%, up from 48.68% 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 10.29%, up from 9.18% at the end of the prior-year quarter. Return on average assets was 1.31% compared with 1.22% in the year-ago quarter.

Loans & Deposits Rise

As of Sep 30, 2018, net loans receivables were $11.5 billion, up from $10.9 billion recorded as of Sep 30, 2017. Also, customer deposit accounts were $11.4 billion, up from $10.8 billion as of Sep 30, 2017.

Improvement in Credit Quality

As of Sep 30, 2018, the ratio of non-performing assets to total assets was 0.44%, down 2 bps year over year. Further, the allowance for loan losses and reserve for unfunded commitments were 1.06% of gross loans outstanding, down 1 bp from the Sep 30, 2017 level.

Moreover, during the reported quarter, the company recorded release for loan losses of $5.5 million compared with $0.5 million in the prior-year quarter.

Share Repurchases

During full-fiscal 2018, Washington Federal repurchased 4.9 million shares at an average price of $33.74 per share.

Our View

Washington Federal is well positioned to grow organically, supported by the continued rise in loan balances. Also, its solid capital and liquidity position makes it well poised to grow through acquisitions. However, persistently rising expenses might hurt bottom-line growth.

Washington Federal, Inc. Price, Consensus and EPS Surprise

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

Currently, Washington Federal has a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Earnings Release Dates for Other Banks

Among other banks, Community Bank System, Inc. CBU is scheduled to release quarterly results on Oct 22. Valley National Bancorp VLY and First Mid-Illinois Bancshares, Inc. FMBH are expected to release results on Oct 25.

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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 , VLY , CBU , FMBH

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