NASB Financial’s Q1 Earnings: Navigating Mortgage Market Headwinds

NASB Financial, Inc. reported a GAAP EPS of $0.80 for Q1 2025, marking a 27.5% decline from the same period in 2024 and a 27% drop from the prior quarter. While the result reflects broader challenges in the mortgage sector, the thrift’s asset growth and stable dividend offer clues about its resilience amid shifting market dynamics.

Key Financials: A Mixed Start to 2025

NASB’s Q1 net income fell to $5.8 million, driven by a $2.6 million year-over-year decline in non-interest income (to $518,000) and a rise in the provision for credit losses. However, costs were tightly controlled, with non-interest expenses holding steady at $12.24 million. The company’s total assets grew to $3.03 billion, fueled by a $140 million increase in deposits year-over-year, underscoring its ability to attract capital despite profitability headwinds.

Industry Context: Mortgage Sector Struggles and Opportunities

The mortgage industry faces a delicate balance of risks and opportunities. While net interest margins (NIM) for thrifts are projected to dip to 3% by year-end due to deposit cost pressures, lower interest rates could spur refinancing activity. NASB’s $2.16 billion in loans and mortgage-backed securities positions it to capitalize on such trends—if rates stabilize.

However, challenges loom. Home prices rose 4% year-over-year, squeezing affordability for buyers, and delinquency risks are rising among borrowers who locked in high-rate mortgages in 2023–2024. Competitors like NerdWallet (a digital mortgage platform) saw 29% revenue growth in Q1 but struggled with net income due to integration costs, highlighting the sector’s operational complexity. Meanwhile, Invesco Mortgage Capital (IVR) reported a rebound to $0.26 EPS, but its book value dipped as interest rate volatility surged.

Risks and Opportunities for NASB Investors

• Headwinds:
• NIM Compression: NASB’s reliance on net interest income (97% of total revenue) leaves it vulnerable to margin pressures.

• Regulatory Shifts: Stricter CFPB affordability rules could reduce loan volumes for lower-income borrowers.

• Upside:

• Refinancing Boom: A modest dip in mortgage rates (to ~6.7%) could boost origination volumes, lifting income.
• Digital Innovation: NASB’s $58.18 book value per share (up 7% year-over-year) provides capital for tech upgrades, such as AI-driven underwriting tools, to improve efficiency.

The Bottom Line: Caution with a Silver Lining

While NASB’s Q1 EPS decline signals near-term challenges, its $0.25 quarterly dividend (unchanged since 2020) and asset growth suggest management is prioritizing stability. Investors should monitor Q2 results, particularly non-interest income trends and NIM performance, for clues about whether NASB can reverse its earnings slide.

The broader mortgage sector’s path in 2025 hinges on rate stability and regulatory clarity. NASB’s long-standing focus on residential mortgages—a niche less exposed to volatile commercial real estate—could prove advantageous if CRE-heavy rivals stumble. Yet, without a clear catalyst for margin expansion, NASB’s stock (OTCQX: NASB) remains a hold for now, with upside tied to refinancing demand and operational efficiency gains.

In conclusion, NASB’s Q1 results reflect the mortgage industry’s struggle with margin pressures and macroeconomic uncertainty. While the company maintains a solid financial foundation, its ability to grow EPS will depend on navigating these headwinds—and capitalizing on the refinancing opportunities that may yet emerge.