WAFD's Q2 Earnings Beat Estimates on Higher NII & Fee Income

WaFd, Inc.’s WAFD second-quarter fiscal 2025 (ended March 31) adjusted earnings of 65 cents per share outpaced the Zacks Consensus Estimate of 60 cents. Also, the bottom line increased significantly year over year.

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Results were primarily aided by a rise in net interest income (NII) and non-interest income. Lower non-interest expenses and provision for credit losses also supported WAFD’s performance. However, the decline in loan balance acted as a spoilsport.

Results excluded certain non-recurring items. After considering these, net income available to common shareholders was $52.6 million or 65 cents per share, up from $12.2 million or 17 cents per share in the prior-year quarter.

WaFd’s Revenues Rise, Expenses Decline

Quarterly net revenues were $179.8 million, rising 4.5% from the prior-year quarter. However, the top line lagged the Zacks Consensus Estimate of $184 million.

NII was $160.9 million, growing 1.5% year over year. The net interest margin (NIM) was 2.55%, contracting 18 basis points (bps). Our estimates for NII and NIM were $167.6 million and 2.65%, respectively.

The total non-interest income of $18.9 million rose 41%. Our estimate for the metric was $16.6 million.

Total non-interest expenses were $104.8 million, falling 21.6% year over year. The fall was due to a decrease in all the components except the information technology costs, occupancy charges and product delivery charges. Our estimate for the metric was $114.8 million.

The company’s efficiency ratio was 58.31%, down from 77.74% in the prior-year quarter. A fall in the efficiency ratio reflects improved profitability.

At the end of the fiscal second quarter, the return on average common equity was 7.68%, up from 2.09% at the end of the prior-year quarter. Return on average assets was 0.82%, increasing from 0.26%.

WAFD’s Loans Decline & Deposit Balance Stable

As of March 31, 2025, net loans receivable were $20.92 billion, marginally down from the prior quarter. We projected the metric to be $21.07 billion.

Total customer deposits were $21.43 billion, stable sequentially. Our estimate for the metric was $22.37 billion.

WaFd’s Credit Quality: A Mixed Bag

As of March 31, 2025, allowance for credit losses (including reserve for unfunded commitments) was 1.01% of gross loans outstanding, up from 1.00% in the prior-year quarter. The ratio of non-performing assets to total assets was 0.26%, compared to 0.23% year over year.

In the reported quarter, the provision for credit losses was $2.8 million compared with $16 million in the year-ago quarter.

Update on WAFD’s Share Repurchases

During the reported quarter, WAFD repurchased 0.73 million shares at an average price of $29.39 per share.

Our Viewpoint on WAFD

Relatively higher interest rates, business restructuring and decent balance sheet position are likely to continue aiding WAFD’s financials. The Luther Burbank Corporation acquisition expanded the company’s presence in the lucrative California market and will be accretive to earnings. However, an uncertain macroeconomic backdrop is a near-term headwind for the company.

WaFd, Inc. Price, Consensus and EPS Surprise

WaFd, Inc. price-consensus-eps-surprise-chart | WaFd, Inc. Quote

Currently, WAFD carries a Zacks Rank #4 (Sell).

You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Earnings Dates & Expectations of WaFd’s Peers

Hilltop Holdings HTH is set to announce first-quarter 2025 numbers on April 17.

Over the past month, the Zacks Consensus Estimate for HTH’s quarterly earnings has remained unchanged at 28 cents. This implies a 33.3% decrease from the prior-year quarter.

Bank of Hawaii BOH is scheduled to announce first-quarter 2025 numbers on April 21.

Over the past 30 days, the Zacks Consensus Estimate for BOH’s quarterly earnings has remained unchanged at 89 cents. This shows a 2.3% rise from the prior-year reported number.

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This article originally published on Zacks Investment Research (zacks.com).

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