WaFd Inc (WAFDP) Q1 2026 Earnings Report

WaFd Inc reported QQ1 2026 results with net income of $64.2 million ($0.79 per diluted share), reflecting a modest year-over-year EPS improvement of 5.3% and a linked-quarter rise of 21.5%. Net interest income rose modestly (+$1.2 million QoQ), yet net interest margin (NIM) compressed to 2.7% in the December quarter from 2.71% in the prior quarter, driven by a combination of nonaccrual interest effects and mortgage-backed securities (MBS) portfolio adjustments. Spot-rate assets yielded 5.05% against a funding cost of 2.76%, yielding a realized margin of 2.77%, with 9 bps attributed to nonaccrual interest reversals and 3 bps to MBS purchases.

WaFd continued to expand its balance sheet with a $728 million increase in investments and MBS (funded by $671 million of higher borrowings) as the bank shifts away from runoff in single-family mortgage balances toward a higher-yielding, discount-priced agency MBS. The quarter also featured modest loan portfolio recast: loans declined by $240 million as inactive loan types (SFR, custom construction, consumer lot) fell by $256 million, while active loan originations outpaced repayments ($1.1B vs. $1.0B). Deposits declined $21 million on the quarter, but noninterest-bearing deposits rose 4.9% to 12.6% of total, with core deposits rising to 79.7% of total deposits and the loan-to-deposit ratio at 92.7%. The efficiency ratio improved to 55.3% (vs. 56.8% prior quarter).

Management reaffirmed a forward-looking margin target of roughly 3% in the near term as it continues to replace runoff with higher-quality funding and balance-sheet optimization, while highlighting a robust lending pipeline of $3.2B (up from $2.5B at 9/30/2025), and a strategic push into C&I and CRE lending under the Build 2030 program. Wealth management (WaFd Wealth Management) has begun contributing to noninterest income, with AUM just over $400 million as of December 31, and management expects to grow that to about $1B within two years. The company also signaled a continued buyback approach given strong capital levels, repurchasing 2.0 million shares in the quarter.

Key risks include elevated credit-quality metrics driven by two large commercial relationships (>90 days delinquent) that elevated nonaccruals and delinquencies in the period, tariff-driven macro headwinds, and potential margin pressure from future MBS purchases. WaFd is pursuing a higher-modernized SBA and small-business banking footprint to drive C&I loan growth and transaction deposits, albeit with execution risk and potential near-term margin pressure until balance-sheet mix shifts complete.