WaFd (WAFD) Q3 2024 earnings summary

Executive summary

• Completed merger with Luther Burbank Corporation, adding $7.7 billion in assets and expanding into California with 10 new branches, effective March 1, 2024.

• Net income for the quarter ended June 30, 2024 was $64.6 million, up 306% sequentially and 5% year-over-year, marking the first full quarter post-Luther Burbank acquisition.

• Financial results for Q3 2024 reflect the combined entity, making direct comparisons to prior periods less meaningful.

• Diluted EPS was $0.75, up from $0.17 in the prior quarter but down from $0.89 a year ago; adjusted EPS was $0.76.

• Integration of Luther Burbank completed; executed a $2.6 billion CRE loan sale at no loss, with proceeds used to pay down $1.6 billion in borrowings.

Financial highlights

• Net income for Q3 2024 was $64.6 million, up 4.5% year-over-year; nine-month net income was $138.9 million, down from $207.2 million in the prior year.

• Net interest income for Q3 2024 was $177.2 million, up 5.0% year-over-year; net interest margin declined to 2.56% from 3.27% due to higher deposit costs.

• Total assets increased to $28.6 billion from $22.5 billion at September 30, 2023, primarily due to the merger.

• Customer deposits increased 31.8% to $21.2 billion since September 30, 2023; time deposits now 43.7% of total.

• Tangible book value per share grew at an 8.2% annualized rate in the quarter to $27.18.

Outlook and guidance

• Management expects the 2.56% margin to be the cycle nadir, with future loan redeployment and sales expected to be accretive to margin.

• Management expects additional liquidity from the pending sale of LBC single-family loans, with proceeds to be used for debt reduction and loan origination.

• Loan production will remain tempered; focus on redeploying liquidity into higher-yielding loans.

• Technology investments to launch new mobile and online account opening apps in coming months.

• Interest rate risk is being managed by growing shorter-term loans and transaction deposits; net interest income is projected to increase if rates rise.