Let’s dig into the relative performance of WaFd Bank (NASDAQ:WAFD) and its peers as we unravel the now-completed Q3 thrifts & mortgage finance earnings season.
Thrifts & Mortgage Finance institutions operate by accepting deposits and extending loans primarily for residential mortgages, earning revenue through interest rate spreads (difference between lending rates and borrowing costs) and origination fees. The industry benefits from demographic tailwinds as millennials enter prime homebuying age, technological advancements streamlining the loan approval process, and potential interest rate stabilization improving affordability. However, significant headwinds include net interest margin compression during rate volatility, increased competition from fintech disruptors offering digital-first experiences, mounting regulatory compliance costs, and potential housing market corrections that could impact loan portfolios and default rates.
The 15 thrifts & mortgage finance stocks we track reported a mixed Q3. As a group, revenues beat analysts’ consensus estimates by 4.7% while next quarter’s revenue guidance was 2.4% below.
In light of this news, share prices of the companies have held steady as they are up 2.8% on average since the latest earnings results.
Weakest Q3: WaFd Bank (NASDAQ:WAFD)
Founded in 1917 and rebranded from Washington Federal in 2023, WaFd (NASDAQ:WAFD) is a bank holding company that provides lending, deposit services, and insurance through its Washington Federal Bank subsidiary across eight western states.
WaFd Bank reported revenues of $187.2 million, flat year on year. This print fell short of analysts’ expectations by 1.7%. Overall, it was a disappointing quarter for the company with a significant miss of analysts’ net interest income and EPS estimates.
Interestingly, the stock is up 18.6% since reporting and currently trades at $33.02.
Read our full report on WaFd Bank here, it’s free for active Edge members.
Best Q3: Ellington Financial (NYSE:EFC)
Operating under the guidance of Ellington Management Group, a respected name in structured credit markets, Ellington Financial (NYSE:EFC) acquires and manages a diverse portfolio of mortgage-related, consumer-related, and other financial assets to generate returns for investors.
Ellington Financial reported revenues of $82.76 million, up 23.6% year on year, outperforming analysts’ expectations by 4.9%. The business had an exceptional quarter with a beat of analysts’ EPS estimates and a solid beat of analysts’ revenue estimates.
However, the results were likely priced into the stock as it’s traded sideways since reporting. Shares currently sit at $13.74.
Is now the time to buy Ellington Financial? Access our full analysis of the earnings results here, it’s free for active Edge members.
Flagstar Financial (NYSE:FLG)
Tracing its roots back to 1859 and rebranded from New York Community Bancorp in 2024, Flagstar Financial (NYSE:FLG) is a bank holding company that offers commercial and consumer banking services, with specialties in multi-family lending, mortgage originations, and warehouse lending.
Flagstar Financial reported revenues of $497 million, down 23.1% year on year, falling short of analysts’ expectations by 3.7%. It was a softer quarter as it posted a significant miss of analysts’ revenue estimates and a slight miss of analysts’ net interest income estimates.
Interestingly, the stock is up 11.9% since the results and currently trades at $12.93.
Read our full analysis of Flagstar Financial’s results here.
Arbor Realty Trust (NYSE:ABR)
With roots dating back to 2003 and a focus on the stability of multifamily housing, Arbor Realty Trust (NYSE:ABR) is a specialized lender that provides financing solutions for multifamily and commercial real estate while also originating and servicing government-backed mortgage loans.
Arbor Realty Trust reported revenues of $112.4 million, down 28.2% year on year. This print lagged analysts' expectations by 25.8%. Taking a step back, it was a mixed quarter as it also produced a beat of analysts’ EPS estimates but a significant miss of analysts’ revenue estimates.
Arbor Realty Trust had the weakest performance against analyst estimates and slowest revenue growth among its peers. The stock is down 33.3% since reporting and currently trades at $7.70.
Read our full, actionable report on Arbor Realty Trust here, it’s free for active Edge members.
Annaly Capital Management (NYSE:NLY)
Operating as a real estate investment trust since 1996 with a focus on generating income from interest rate spreads, Annaly Capital Management (NYSE:NLY) is a diversified capital manager that invests in agency mortgage-backed securities, residential mortgage loans, and mortgage servicing rights.
Annaly Capital Management reported revenues of $885.6 million, up 637% year on year. This result beat analysts’ expectations by 7.2%. More broadly, it was a mixed quarter as it also recorded a solid beat of analysts’ revenue estimates but a significant miss of analysts’ net interest income estimates.
Annaly Capital Management scored the fastest revenue growth among its peers. The stock is up 7.8% since reporting and currently trades at $22.97.
Market Update
Thanks to the Fed’s rate hikes in 2022 and 2023, inflation has been on a steady path downward, easing back toward that 2% sweet spot. Fortunately (miraculously to some), all this tightening didn’t send the economy tumbling into a recession, so here we are, cautiously celebrating a soft landing. The cherry on top? Recent rate cuts (half a point in September 2024, a quarter in November) have propped up markets, especially after Trump’s November win lit a fire under major indices and sent them to all-time highs. However, there’s still plenty to ponder — tariffs, corporate tax cuts, and what 2025 might hold for the economy.
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