WAFD

WAFD, INC. (WAFD) - Q1 2026 Financial Summary

Business Context and Reporting Period

This report covers the quarterly period ended December 31, 2025 (Fiscal Q1 2026). WAFD, Inc. is the holding company for WaFd Bank, a federally-insured commercial bank headquartered in Seattle, Washington. The Bank operates 208 branches across nine states. Effective September 25, 2025, the Bank formally changed its name from Washington Federal Bank to WaFd Bank. The Company ceased originating consumer single-family home loans and home equity lines of credit in January 2025, though existing loans remain a significant portfolio component.

Key Financial Metrics

Material Changes vs. Prior Period

• Profitability Surge: Net income increased 35.8% year-over-year, driven by a $15.7 million increase in net interest income and a $4.6 million increase in non-interest income.
• Net Interest Margin Expansion: NIM improved to 2.70% from 2.39% in the prior year quarter. This was achieved despite a 22 basis point decrease in the yield on earning assets, as the cost of interest-bearing liabilities fell by 60 basis points.
• Asset Quality Deterioration: Non-performing assets increased by $60.4 million (42.2%) to $203.4 million. Non-accrual loans rose to $191.3 million (0.95% of total loans) from $128.6 million in the prior quarter. This increase was primarily due to two commercial relationships moving over 90 days past due.
• Provisioning: The Company recorded a $3.5 million provision for credit losses, compared to zero in the prior year quarter, reflecting mixed credit metrics and net charge-offs of $3.7 million.
• Balance Sheet Shifts: Loans receivable decreased by $240.5 million quarter-over-quarter due to repayments outpacing originations. Conversely, investment securities increased by $728.1 million, funded by an increase in borrowings of $670.9 million.

Guidance, Outlook, and Risks

• Interest Rate Risk: Management is actively managing interest rate risk by growing shorter-term loans and transaction deposits. The deposit mix is 60% variable and 40% fixed. The Company utilizes interest rate swaps to hedge fair value risk on the investment portfolio and cash flow risk on borrowings.
• CRA Rating Update: The Bank successfully appealed its "Needs to Improve" Community Reinvestment Act (CRA) rating. On January 16, 2026, the FDIC upgraded the overall rating to "Satisfactory."
• Capital Position: The Company remains "well capitalized" under regulatory standards. The Tier 1 Leverage ratio was 9.44% at period end. Share repurchases of $58.0 million and dividends of $24.0 million were executed during the quarter.
• Risk Factors: Key risks include credit deterioration in commercial real estate and construction portfolios, cybersecurity threats, and the impact of inflation and interest rate volatility. The Company notes that a future "Needs to Improve" CRA rating could restrict expansionary activities.

Investor Verification Checklist

• Asset Quality Trends: Verify the trajectory of the $62.7 million increase in non-accrual loans and the specific exposure in the two commercial relationships cited as the primary driver.
• Deposit Stability: Confirm the sustainability of the shift from time deposits (down 6.4% QoQ) to transaction accounts (up 4.5% QoQ) and its impact on future funding costs.
• Investment Portfolio: Review the $728 million increase in investment securities and the associated interest rate risk, noting the net unrealized loss of $667,000 on AFS securities.
• Provision Adequacy: Assess whether the $3.5 million provision is sufficient given the rising delinquency rates (1.07% vs 0.60% prior quarter) and the increase in criticized loans.
• Strategic Pivot: Evaluate the long-term impact of exiting the single-family mortgage origination market on future loan growth and fee income.