Q3 Thrifts & Mortgage Finance Earnings: Ellington Financial (NYSE:EFC) Impresses

The end of an earnings season can be a great time to discover new stocks and assess how companies are handling the current business environment. Let’s take a look at how Ellington Financial and the rest of the thrifts & mortgage finance stocks fared in Q3.

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 14 thrifts & mortgage finance stocks we track reported a satisfactory Q3. As a group, revenues beat analysts’ consensus estimates by 5.6% while next quarter’s revenue guidance was 0.5% below.

In light of this news, share prices of the companies have held steady as they are up 3.3% on average since the latest earnings results.

Best Q3: Ellington Financial

Operating under the guidance of Ellington Management Group, a respected name in structured credit markets, Ellington Financial 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. This print exceeded analysts’ expectations by 4.9%. Overall, it was an exceptional quarter for the company with a beat of analysts’ EPS and revenue estimates.

“Robust securitization activity, excellent results from our securities businesses, and continued solid credit performance across our diversified loan businesses, including Longbridge, drove Ellington Financial’s strong results for the quarter,” said Laurence Penn, Chief Executive Officer and President.

Unsurprisingly, the stock is down 1.3% since reporting and currently trades at $13.49.

Is now the time to buy Ellington Financial? Access our full analysis of the earnings results here, it’s free for active Edge members.

PennyMac Financial Services

Founded during the 2008 financial crisis to help address the mortgage market meltdown, PennyMac Financial Services is a specialty financial services company that originates, services, and manages investments related to residential mortgage loans in the United States.

PennyMac Financial Services reported revenues of $637.1 million, up 11.3% year on year, outperforming analysts’ expectations by 10.7%. The business had an exceptional quarter with an impressive beat of analysts’ net interest income estimates and a solid beat of analysts’ revenue estimates.

The market seems happy with the results as the stock is up 10.9% since reporting. It currently trades at $134.09.

Is now the time to buy PennyMac Financial Services? Access our full analysis of the earnings results here, it’s free for active Edge members.

Weakest Q3: WaFd Bank

Founded in 1917 and rebranded from Washington Federal in 2023, 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, falling short of analysts’ expectations by 2%. It was a disappointing quarter as it posted a significant miss of analysts’ net interest income estimates and a significant miss of analysts’ EPS estimates.

Interestingly, the stock is up 15.4% since the results and currently trades at $32.12.

Read our full analysis of WaFd Bank’s results here.

Walker & Dunlop

Originating as a small mortgage banking firm during the Great Depression in 1937, Walker & Dunlop provides commercial real estate financing, property sales, appraisal, and investment management services with a focus on multifamily properties.

Walker & Dunlop reported revenues of $337.7 million, up 15.5% year on year. This result beat analysts’ expectations by 3.5%. More broadly, it was a slower quarter as it produced a significant miss of analysts’ net interest income estimates and a narrow beat of analysts’ EPS estimates.

The stock is down 19.4% since reporting and currently trades at $64.41.

Read our full, actionable report on Walker & Dunlop here, it’s free for active Edge members.

PennyMac Mortgage Investment Trust

Operating as a real estate investment trust since 2009 to maintain tax advantages, PennyMac Mortgage Investment Trust is a specialty finance company that invests in mortgage-related assets and operates a correspondent lending business.

PennyMac Mortgage Investment Trust reported revenues of $99.23 million, up 22.7% year on year. This number topped analysts’ expectations by 2.1%. It was an exceptional quarter as it also put up a beat of analysts’ EPS estimates and a solid beat of analysts’ net interest income estimates.

The stock is up 10.1% since reporting and currently trades at $12.88.

Read our full, actionable report on PennyMac Mortgage Investment Trust here, it’s free for active Edge members.