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WAFD Misses on Q1 Earnings, Exits Single-Family Mortgage Lending
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Shares of WaFd, Inc. (WAFD - Free Report) lost 3.4% in after-hours trading in response to lower-than-expected first-quarter fiscal 2025 (ended Dec. 31) results. Adjusted earnings of 62 cents per share lagged the Zacks Consensus Estimate of 69 cents. Also, the bottom line declined 26.2% year over year.
See the Zacks Earnings Calendar to stay ahead of market-making news.
Results were adversely impacted by a rise in non-interest expenses. However, higher net interest income (NII) and non-interest income (driven by the acquisition of Luther Burbank Corporation in February 2024) majorly supported WAFD’s performance. Higher loan balances and nil provisions were other positives.
During the reported quarter, WAFD recorded a restructuring charge of $5.4 million related to “a significant shift in focus for our business model.” As part of the initiative, the company is exiting the single-family mortgage lending market. As such, by June 2025-end, the company projects annual cost savings of almost $17 million. Management further noted that exiting mortgage lending and right-sizing other support areas will lead to an 8% reduction in the workforce. Nonetheless, the company intends to retain all existing home loans and HELOC’s on its books, ensuring no disruption for its current customers.
Results excluded certain non-recurring items. After considering these, net income available to common shareholders was $43.6 million or 54 cents per share, down from $54.8 million or 85 cents per share in the prior-year quarter.
WaFd’s Revenues Rise, Expenses Up
Quarterly net revenues were $171.1 million, rising 2.8% from the prior-year quarter. However, the top line lagged the Zacks Consensus Estimate of $193 million.
NII was $155.4 million, growing 2.1% year over year. The net interest margin (NIM) was 2.39%, contracting 52 basis points (bps) because of a valuation adjustment to hedges obtained in the Luther Burbank acquisition and a higher earning assets repricing. Our estimates for NII and NIM were $175.2 million and 2.64%, respectively.
The total non-interest income of $15.7 million rose 10.8%. Our estimate for the metric was $17.8 million.
Total non-interest expenses were $111.3 million, climbing 15.3%. The rise was due to an increase in all the components except the FDIC insurance premiums and product delivery charges. It also included the above-mentioned restructuring charge. Our estimate for the metric was $112.7 million.
The company’s efficiency ratio was 65.04%, up from 58.02% in the prior-year quarter. A rise in the efficiency ratio reflects a deterioration in profitability.
At the end of the fiscal fourth quarter, the return on average common equity was 6.42%, down from 10.21% at the end of the prior-year quarter. Return on average assets was 0.69%, declining from 1.04%.
WAFD’s Loans Rise & Deposit Balance Stable
As of Dec. 31, 2024, net loans receivable was $20.1 billion, growing marginally from the prior quarter. We projected the metric to be $20.9 billion.
Total customer deposits were $21.4 billion, stable sequentially. Our estimate for the metric was $20.3 billion.
WaFd’s Credit Quality Improves
As of Dec. 31, 2024, allowance for credit losses (including reserve for unfunded commitments) was 1% of gross loans outstanding, down from 1.03% in the prior-year quarter.
In the reported and last year's quarter, the provision for credit losses was nil. The ratio of non-performing assets to total assets was 0.3%, stable year over year.
Update on WAFD’s Share Repurchases
During the reported quarter, WAFD repurchased 0.09 million shares at an average price of $38.09 per share.
Our Viewpoint on WAFD
Decent loan growth, relatively lower interest rates, business restructuring and a robust balance sheet are likely to continue aiding WAFD’s financials. The LBC acquisition expanded the company’s presence in the lucrative California market and will be accretive to earnings. However, elevated expenses are a near-term headwind.
BankUnited (BKU - Free Report) is scheduled to announce fourth-quarter and full-year 2024 numbers on Jan. 22.
Over the past 30 days, the Zacks Consensus Estimate for BKU’s quarterly earnings has remained unchanged at 71 cents. This shows a 1.4% fall from the prior-year reported number.
Hilltop Holdings (HTH - Free Report) is set to announce fourth-quarter and full-year 2024 numbers on Jan.30.
Over the past month, the Zacks Consensus Estimate for HTH’s quarterly earnings has remained unchanged at 28 cents. This implies a 36.4% decrease from the prior-year quarter.
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WAFD Misses on Q1 Earnings, Exits Single-Family Mortgage Lending
Shares of WaFd, Inc. (WAFD - Free Report) lost 3.4% in after-hours trading in response to lower-than-expected first-quarter fiscal 2025 (ended Dec. 31) results. Adjusted earnings of 62 cents per share lagged the Zacks Consensus Estimate of 69 cents. Also, the bottom line declined 26.2% year over year.
See the Zacks Earnings Calendar to stay ahead of market-making news.
Results were adversely impacted by a rise in non-interest expenses. However, higher net interest income (NII) and non-interest income (driven by the acquisition of Luther Burbank Corporation in February 2024) majorly supported WAFD’s performance. Higher loan balances and nil provisions were other positives.
During the reported quarter, WAFD recorded a restructuring charge of $5.4 million related to “a significant shift in focus for our business model.” As part of the initiative, the company is exiting the single-family mortgage lending market. As such, by June 2025-end, the company projects annual cost savings of almost $17 million. Management further noted that exiting mortgage lending and right-sizing other support areas will lead to an 8% reduction in the workforce. Nonetheless, the company intends to retain all existing home loans and HELOC’s on its books, ensuring no disruption for its current customers.
Results excluded certain non-recurring items. After considering these, net income available to common shareholders was $43.6 million or 54 cents per share, down from $54.8 million or 85 cents per share in the prior-year quarter.
WaFd’s Revenues Rise, Expenses Up
Quarterly net revenues were $171.1 million, rising 2.8% from the prior-year quarter. However, the top line lagged the Zacks Consensus Estimate of $193 million.
NII was $155.4 million, growing 2.1% year over year. The net interest margin (NIM) was 2.39%, contracting 52 basis points (bps) because of a valuation adjustment to hedges obtained in the Luther Burbank acquisition and a higher earning assets repricing. Our estimates for NII and NIM were $175.2 million and 2.64%, respectively.
The total non-interest income of $15.7 million rose 10.8%. Our estimate for the metric was $17.8 million.
Total non-interest expenses were $111.3 million, climbing 15.3%. The rise was due to an increase in all the components except the FDIC insurance premiums and product delivery charges. It also included the above-mentioned restructuring charge. Our estimate for the metric was $112.7 million.
The company’s efficiency ratio was 65.04%, up from 58.02% in the prior-year quarter. A rise in the efficiency ratio reflects a deterioration in profitability.
At the end of the fiscal fourth quarter, the return on average common equity was 6.42%, down from 10.21% at the end of the prior-year quarter. Return on average assets was 0.69%, declining from 1.04%.
WAFD’s Loans Rise & Deposit Balance Stable
As of Dec. 31, 2024, net loans receivable was $20.1 billion, growing marginally from the prior quarter. We projected the metric to be $20.9 billion.
Total customer deposits were $21.4 billion, stable sequentially. Our estimate for the metric was $20.3 billion.
WaFd’s Credit Quality Improves
As of Dec. 31, 2024, allowance for credit losses (including reserve for unfunded commitments) was 1% of gross loans outstanding, down from 1.03% in the prior-year quarter.
In the reported and last year's quarter, the provision for credit losses was nil. The ratio of non-performing assets to total assets was 0.3%, stable year over year.
Update on WAFD’s Share Repurchases
During the reported quarter, WAFD repurchased 0.09 million shares at an average price of $38.09 per share.
Our Viewpoint on WAFD
Decent loan growth, relatively lower interest rates, business restructuring and a robust balance sheet are likely to continue aiding WAFD’s financials. The LBC acquisition expanded the company’s presence in the lucrative California market and will be accretive to earnings. However, elevated expenses are a near-term headwind.
WaFd, Inc. Price, Consensus and EPS Surprise
WaFd, Inc. price-consensus-eps-surprise-chart | WaFd, Inc. Quote
Currently, WAFD carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Earnings Dates & Expectations of WaFd’s Peers
BankUnited (BKU - Free Report) is scheduled to announce fourth-quarter and full-year 2024 numbers on Jan. 22.
Over the past 30 days, the Zacks Consensus Estimate for BKU’s quarterly earnings has remained unchanged at 71 cents. This shows a 1.4% fall from the prior-year reported number.
Hilltop Holdings (HTH - Free Report) is set to announce fourth-quarter and full-year 2024 numbers on Jan.30.
Over the past month, the Zacks Consensus Estimate for HTH’s quarterly earnings has remained unchanged at 28 cents. This implies a 36.4% decrease from the prior-year quarter.