The end of the earnings season is always a good time to take a step back and see who shined (and who not so much). Let’s take a look at how thrifts & mortgage finance stocks fared in Q2, starting with Ellington Financial (NYSE: EFC).
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 20 thrifts & mortgage finance stocks we track reported a slower Q2. As a group, revenues missed analysts’ consensus estimates by 26% while next quarter’s revenue guidance was in line.
Thankfully, share prices of the companies have been resilient as they are up 6.4% on average since the latest earnings results.
Best Q2: 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 $92.54 million, up 1.5% year on year. This print exceeded analysts’ expectations by 11.5%. Overall, it was a stunning quarter for the company with an impressive beat of analysts’ tangible book value per share estimates and a beat of analysts’ EPS estimates.
"Ellington Financial delivered a strong second quarter, with broad-based contributions from our diversified investment portfolio and loan origination platforms. We generated net income of $0.45 per share, equating to an annualized economic return of 13.8% for the quarter, with book value per share increasing quarter over quarter to $13.49. Meanwhile, our adjusted distributable earnings per share increased sharply by $0.08 to $0.47, significantly exceeding our $0.39 of dividends," said Laurence Penn, Chief Executive Officer and President.
Interestingly, the stock is up 8.4% since reporting and currently trades at $13.73.
Is now the time to buy Ellington Financial? Access our full analysis of the earnings results here, it’s free.
Walker & Dunlop (NYSE: WD)
Originating as a small mortgage banking firm during the Great Depression in 1937, Walker & Dunlop (NYSE: WD) provides commercial real estate financing, property sales, appraisal, and investment management services with a focus on multifamily properties.
Walker & Dunlop reported revenues of $319.2 million, up 17.9% year on year, outperforming analysts’ expectations by 17.1%. The business had an exceptional quarter with an impressive beat of analysts’ net interest income estimates and a beat of analysts’ EPS estimates.
Walker & Dunlop scored the biggest analyst estimates beat among its peers. The market seems happy with the results as the stock is up 12.7% since reporting. It currently trades at $85.05.
Is now the time to buy Walker & Dunlop? Access our full analysis of the earnings results here, it’s free.
Weakest Q2: Franklin BSP Realty Trust (NYSE: FBRT)
Operating as a specialized real estate investment trust (REIT) with roots dating back to 2012, Franklin BSP Realty Trust (NYSE: FBRT) originates and manages a diversified portfolio of commercial real estate debt investments secured by properties in the United States and abroad.
Franklin BSP Realty Trust reported revenues of $50.78 million, up 171% year on year, falling short of analysts’ expectations by 8.9%. 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 15.7% since the results and currently trades at $11.67.
Read our full analysis of Franklin BSP Realty Trust’s results here.
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 $496 million, down 26.1% year on year. This print missed analysts’ expectations by 4.6%. It was a disappointing quarter as it also produced a significant miss of analysts’ net interest income estimates and EPS in line with analysts’ estimates.
The stock is up 6.2% since reporting and currently trades at $12.78.
Read our full, actionable report on Flagstar Financial here, it’s free.
TFS Financial (NASDAQ: TFSL)
Tracing its roots back to 1938 during the Great Depression era when savings and loans were vital to homeownership, TFS Financial (NASDAQ: TFSL) is a savings and loan holding company that provides mortgage lending, deposit services, and other retail banking products primarily in Ohio and Florida.
TFS Financial reported revenues of $80.54 million, up 6% year on year. This result came in 0.8% below analysts' expectations. It was a slower quarter as it also recorded EPS in line with analysts’ estimates.
The stock is up 11.4% since reporting and currently trades at $14.06.
Read our full, actionable report on TFS Financial here, it’s free.
Market Update
In response to the Fed’s rate hikes in 2022 and 2023, inflation has been gradually trending down from its post-pandemic peak, trending closer to the Fed’s 2% target. Despite higher borrowing costs, the economy has avoided flashing recessionary signals. This is the much-desired soft landing that many investors hoped for. The recent rate cuts (0.5% in September and 0.25% in November 2024) have bolstered the stock market, making 2024 a strong year for equities. Donald Trump’s presidential win in November sparked additional market gains, sending indices to record highs in the days following his victory. However, debates continue over possible tariffs and corporate tax adjustments, raising questions about economic stability in 2025.
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