WAFD Gains as Q3 Earnings Beat on Fee Income, Weak Lending Hurts NII

Shares of WaFd, Inc. WAFD gained 1.2% in after-hours trading following the announcement of better-than-expected quarterly results. Its third-quarter fiscal 2025 (ended June 30) adjusted earnings of 73 cents per share outpaced the Zacks Consensus Estimate of 67 cents. However, the bottom line decreased 3.9% year over year.Results benefited from an increase in non-interest income and a decline in expenses. However, a fall in net interest income (NII) and lower loan and deposit balances were the major undermining factors. Also, provision for credit losses rose during the quarter.Net income available to common shareholders was $58.3 million, down 4.3% from the prior-year quarter. Our estimate for the metric was $51.9 million.WaFd’s Revenues Fall, Expenses DeclineQuarterly net revenues were $186.261 million, down 4.2% from the prior-year quarter. However, the top line beat the Zacks Consensus Estimate of $185.7 million. NII was $160.9 million, declining 5.2% year over year. The fall was mainly due to a lower loan balance. On the other hand, net interest margin (NIM) rose 13 basis points (bps) to 2.69% as deposit costs declined. Our estimates for NII and NIM were $168 million and 2.52%, respectively.The total non-interest income of $18.3 million rose 5.9%. Our estimate for the metric was $17.2 million.Total non-interest expenses were $104.3 million, falling 5.2% 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 $106.2 million.The company’s efficiency ratio was 56.01%, down from 56.61% in the prior-year quarter. A fall in the efficiency ratio reflects improved profitability.At the end of the fiscal third quarter, the return on average common equity was 8.54%, down from 9.20% at the end of the prior-year quarter. Return on average assets was 0.92%, increasing from 0.87%.WAFD’s Loans & Deposits DeclineAs of June 30, 2025, net loans receivable were $20.28 billion, down 3.1% from the prior quarter. We projected the metric to be $21.45 billion.Total customer deposits were $21.39 billion, down marginally. Our estimate for the metric was $22.12 billion.WaFd’s Credit Quality WorsensAs of June 30, 2025, allowance for credit losses (including reserve for unfunded commitments) was 1.03% of gross loans outstanding, up from 1.00% in the prior-year quarter. The ratio of non-performing assets to total assets was 0.36%, up from 0.24%.In the reported quarter, the provision for credit losses was $2 million, jumping 33.3% from the year-ago quarter.Update on WAFD’s Share RepurchasesDuring the reported quarter, WAFD repurchased 1.66 million shares at an average price of $29.08 per share.Our View on WAFDRelatively 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. QuoteCurrently, WAFD carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.Performance of WaFd’s PeersSynovus Financial Corp. SNV reported second-quarter 2025 adjusted earnings per share of $1.48, which surpassed the Zacks Consensus Estimate of $1.25 per share. This compares favorably with the earnings of $1.16 per share a year ago. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)SNV’s results benefited from strong growth in NII and non-interest revenue, along with a fall in provisions for credit losses. Also, improving loan balances was a tailwind. However, an increase in expenses was a major headwind. Commerce Bancshares Inc.’s CBSH second-quarter 2025 earnings of $1.14 per share surpassed the Zacks Consensus Estimate of $1.02. The bottom line also jumped 10.7% from the prior-year quarter.Results benefited from a rise in NII and non-interest income. An increase in loan balances was also a tailwind. However, increased provisions and higher expenses were headwinds for CBSH.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the favorite stock to gain +100% or more in the months ahead. They includeStock #1: A Disruptive Force with Notable Growth and ResilienceStock #2: Bullish Signs Signaling to Buy the DipStock #3: One of the Most Compelling Investments in the MarketStock #4: Leader In a Red-Hot Industry Poised for GrowthStock #5: Modern Omni-Channel Platform Coiled to SpringMost of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor. While not all picks can be winners, previous recommendations have soared +171%, +209% and +232%.Download Atomic Opportunity: Nuclear Energy's Comeback free today.Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Synovus Financial Corp. (SNV): Free Stock Analysis Report Commerce Bancshares, Inc. (CBSH): Free Stock Analysis Report WaFd, Inc. (WAFD): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks