WaFd, Inc. Q1 FY2026 earnings call

• Brent Beardall outlined 4 areas to cover: balance sheet/income statement review, loan portfolio credit quality, future prospects/capital management/macro developments, and Q&A. Kelli Holz detailed balance sheet and income statement, noting net income available to common shareholders was $60.5 million or $0.79 per diluted share. Ryan Mauer discussed credit quality, with nonperforming assets increasing and net provision for credit losses at $3.5 million. Brent Beardall emphasized Build 2030 strategy to increase noninterest-bearing deposits to 20% by 2030, progress in SBA lending, and share repurchases. WaFd's efficiency ratio was 55.3%, and they appealed their CRA rating.
• Key points: Build 2030 strategy focus on small businesses, goal to increase noninterest-bearing deposits, progress in SBA lending, share repurchases, and CRA rating appeal.

For the quarter ended December 31, 2025, loans receivable decreased $240 million. Total investments and mortgage-backed securities increased $728 million. Total deposits decreased by $21 million. Net interest income increased $1.2 million, with a net interest margin of 2.7% compared to 2.71% in the prior quarter. Total noninterest income was $20.3 million, and total noninterest expense decreased $1.3 million. Loan originations in active loan types were $1.1 billion, with inactive loan types seeing repayments and maturities of $321 million. Core deposits ended at 79.7% of total deposits, and the loan-to-deposit ratio was 92.7%.

• Goal to get margin up to 3% within 2 years. Lending pipeline up $697 million or 28% over the last quarter. Wealth management assets under management at just over $400 million as of December 31. Share repurchase plan with remaining authorization of 6.3 million shares. Expect to hear CRA rating conclusion soon, anticipating Needs to Improve rating to remain.
• Bullet points: Aim for 3% margin in next 2 years, lending pipeline growth, wealth management asset growth, ongoing share repurchases, and CRA rating outcome anticipation.

• Economic uncertainty impacting borrowers' top line revenue and material costs. Interest rate environment and its impact on loan demand and borrowers' expense structures. Tariffs continuing to impact borrowers. FDIC CRA rating appeal being a long shot with anticipation of maintaining Needs to Improve rating. Potential headwinds from nonaccrual loans and mortgage-backed securities purchases affecting margin.
• Bullet points: Economic uncertainty risks, interest rate impact risks, tariff impact on borrowers, CRA rating appeal outcome uncertainty, margin pressure from nonaccrual loans and MBS purchases.

Q: Around the margin outlook and $800 million of borrowings due/repricing in next 3 months A: Brent Beardall said they will replace with current borrowers, and if Fed cuts rates, rate will come down Q: Interest income reversal dollar amount A: Kelli Holz said nonaccrual interest amounted to just over $5 million Q: Color on 2 new C&I nonaccruals A: Ryan Mauer said one in manufacturing impacted by tariffs and labor costs, the other real estate-related Q: Expense growth, SBA platform build-out, C&I lenders hiring A: Brent Beardall said annual merit increases in March, no significant large team hires planned, but strategic technology investments Q: Margin outlook near term, lapping interest reversal A: Brent Beardall said referring to spot rate, not reported amount Q: Balance sheet mix, target for bond book A: Brent Beardall said WaFd is light in bond book compared to peers, room to grow bond portfolio, maybe 25%-30% over longer term Q: Transactional deposit growth, driver A: Brent Beardall said due to business shift towards C&I/treasury management and calendar year-end seasonality Q: Growth in active portfolio, 8%-12% over 2 years A: Brent Beardall said fiscal 2026 expected 6%-10%, fiscal 2027 higher end, pipeline looks good for next quarter Q: CRA Needs to Improve rating, impact A: Brent Beardall said relates to branching hurdles, mergers/acquisitions difficulty; getting out would be welcome news Q: 3% margin trajectory, rate assumptions A: Brent Beardall said baking in 1-2 rate cuts this year into margin assumption