WAFD — WaFd, Inc.

Summary of WaFd Q3 2026 Earnings Call

1. Key Financial Results and Metrics

• Net Income: $62.5 million, or $0.84 per diluted share, up from $0.73 per share in Q3 2025 and $0.82 in Q2 2026.
• Loan Growth: Total loans receivable increased by $51 million; active loan types rose by $315 million, with originations of $1.5 billion outpacing repayments of $1 billion.
• Net Interest Income: Increased by $3.8 million, with a stable net interest margin of 2.81%.
• Deposits: Total deposits decreased by $192 million, although non-interest-bearing deposits increased by 2.7%.
• Capital Ratios: CET1 ratio at 11.4% and total risk-based capital ratio at 14.4%.
• Efficiency Ratio: Improved to 53.7% from 55.6% in the prior quarter.

2. Strategic Updates and Business Highlights

• Loan Portfolio Strategy: Shift towards higher-yielding loan origination pipeline, particularly in commercial and industrial (C&I) lending.
• Build 2030 Initiative: Focus on increasing non-interest-bearing deposits from 11% to 20% by 2030, currently at 12.6%.
• M&A Outlook: Interest in pursuing M&A opportunities, though disciplined in approach to avoid overpaying.
• Operational Efficiency: Continued emphasis on maintaining a strong efficiency ratio while investing in growth.

3. Forward Guidance and Outlook

• Loan Growth: Anticipated growth in the active loan portfolio by 8%-12% going forward, despite challenges in the inactive portfolio.
• Margin Stability: Expected to remain stable in the near term, influenced by potential rate hikes and the performance of the Luther Burbank portfolio.
• Capital Utilization: Plans to prioritize organic growth, M&A, and share repurchases, contingent on capital relief from regulatory changes.

4. Challenges and Points of Concern

• Deposit Outflows: Significant decrease in total deposits, attributed to tax-related dynamics and competition for higher-yielding alternatives.
• Credit Quality: Increase in criticized loans to 4.9% of net loans, with concerns over economic conditions impacting borrower performance.
• Market Competition: Intense competition for deposits and loans, particularly from larger banks, which may pressure margins and deposit costs.
• Economic Headwinds: Elevated interest rates and economic uncertainty affecting borrowers' financial stability.

5. Notable Q&A Insights

• Growth Expectations: Management acknowledged that net growth could be low single digits if inactive loans continue to decline.
• Credit Reserves: No specific reserves set aside for a large C&I non-performer, but general reserves were increased in part due to this relationship.
• Deposit Costs: Marginal cost of deposits is rising due to competitive pressures, with expectations for continued increases in deposit rates.
• M&A Strategy: Emphasis on being disciplined in M&A pursuits, with a focus on strategic acquisitions that enhance funding and asset quality.

Overall, WaFd reported solid earnings growth and loan production while facing challenges related to deposit dynamics and credit quality. The company remains focused on strategic growth initiatives and maintaining operational efficiency amidst a competitive banking landscape.