WaFd NASDAQ: WAFD reported fiscal second-quarter 2026 net income available to common shareholders of $61.9 million, or $0.82 per diluted share, as management highlighted a return to loan growth and continued capital deployment through share repurchases.
Quarterly results and capital actions
Chief Financial Officer Kelli Holz said earnings rose from $0.79 per share in the prior quarter and $0.65 per share in the year-ago period. Holz attributed the linked-quarter increase to “a modest increase in net interest income, controlled expenses,” and the impact of share repurchases. During the quarter, the company repurchased 2.7 million shares at a weighted average price of $31.85 per share, or about 1.05 times tangible book value. The repurchases were a contributor to per-share earnings growth, and the authorization had 8 million shares remaining, Holz said.
On capital, Holz said WaFd’s capital profile “remains strong,” estimating a common equity Tier 1 (CET1) ratio of 11.4% at quarter end and a total risk-based capital ratio of 14.4%. She also said liquidity was strong, including $4.2 billion of on-balance sheet liquidity and “significant off-balance sheet borrowing capacity.”
Balance sheet: loans up, deposits down seasonally
Holz said loans receivable increased $119 million during the quarter. Growth was concentrated in what the company describes as active loan categories—commercial real estate, multifamily, construction, land acquisition and development, commercial and industrial (C&I), and consumer—which collectively increased by $359 million. Originations and advances in the active portfolio totaled $1.5 billion during the quarter, compared with $900 million in repayments and payoffs. In inactive loan categories, advances were $21 million and repayments and maturities were $276 million.
The weighted average rate on loan originations was 6.22% for the quarter, while repayments and payoffs carried a weighted average rate of 6.12%, according to Holz.
Total investments and mortgage-backed securities increased $191 million, funded in part by higher borrowings, which rose $626 million. Holz said purchases were “primarily discount-priced agency mortgage-backed securities” with an effective yield of 4.8%, and described the increase as part of an investment strategy “currently replacing the single-family mortgage loans balance runoff.”
Total deposits declined $292 million. Non-interest-bearing deposits fell $115 million, or 4.3%, while interest-bearing deposits were essentially stable, down $4 million. Time deposits decreased $174 million, or 2%. Holz attributed the outflows in the first calendar quarter to “predictable seasonal patterns, including annual distributions, tax payments, and bonus disbursements.”
Core deposits represented 80.4% of total deposits at quarter end, up from 79.7% in the December quarter and 77.9% in the September quarter. Non-interest-bearing deposits were 12.2% of total deposits, and the loan-to-deposit ratio was 94.5%, she said.
Net interest margin improves; deferred income accretion noted
Holz said net interest income increased $6.5 million from the prior quarter, helped by a “reduction in interest paid on liabilities outpacing the reduction in interest earned on assets by 5 basis points.” Net interest margin was 2.81% in the March quarter, up from 2.70% in the quarter ended December 31, 2025.
She cited several drivers of the margin change, including a 7-basis-point improvement from recognizing non-accrual interest during the quarter, a 6-basis-point benefit from day count given February’s shorter month, and a 5-basis-point headwind related to securities growth. Holz said the mortgage-backed securities purchases carried an approximately 1% net spread and pressured margin, but added about $1.5 million of quarterly net interest income.
Absent interest rate changes, Holz said management expects margin to be flat in the near term, while noting the March quarter’s day-count benefit and funding dynamics tied to loan growth and deposits.
Holz also pointed to the accretion of $167 million of deferred income related to the interest rate mark on the Luther Burbank loan portfolio. She said it is currently accreting at about $6 million per quarter and is expected to accelerate “as these loans begin to adjust or repay.”
Credit trends improve; large relationship influences metrics
Chief Credit Officer Ryan Mauer said the company delivered “a solid quarter of new loan production along multiple product lines,” with active portfolio production of $1.5 billion. He said production was centered in C&I (37%), construction (35%), and commercial real estate (15%), and that WaFd maintained “a consistent approach to underwriting that maintained a moderate risk profile.”
Mauer said adversely classified loans decreased $65 million and represented 2.6% of net loans at March 31, 2026, down from 2.9% in the December quarter. Total criticized loans also decreased $65 million, to 4.2% of net loans from 4.6% in the prior quarter, though he noted criticized loans were higher than a year earlier and reflected “the economic environment where elevated interest rates and economic uncertainty impacted both commercial and consumer borrowers.”
Non-performing assets fell to $132 million, or 0.48% of total assets, from $203 million, or 0.75%, at December 31, 2025. Mauer said the improvement was driven by non-accrual loans declining $67.5 million, or 35%. Delinquent loans declined to 0.78% of total loans from 1.07% in the prior quarter, though Mauer said both delinquencies and NPAs were influenced by a $51 million commercial relationship that was more than 90 days past due and placed on non-accrual under policy. He said no charge-off was taken “upon revaluation at this point,” and the bank was working with the borrower to resolve issues.
The provision for credit losses was $4 million, which Mauer said was “primarily the net result of increased commercial loan originations.” Net charge-offs were nominal, representing one basis point annualized of gross loans. The allowance for credit losses, including unfunded commitments, covered 1.05% of gross loans at March 31, 2026.
CEO: loan growth and Build 2030 strategy; regulatory proposal could lift capital
President and CEO Brent Beardall called loan growth “the headline for this quarter,” saying that after more than a year of contraction, WaFd posted growth in the overall net loan portfolio, including inactive segments. He also said the active portfolio rose 12% on a linked-quarter basis, and that including yet-to-be-funded loans, gross active loans outstanding increased 20% linked quarter.
Beardall said the strongest contributor to growth on a percentage basis came from C&I lending. He added that earnings per share grew 4% linked quarter and 26% year over year, and that earnings per share for the first six months of the year were up 35% compared with the prior year.
On portfolio composition, Beardall said loans to non-depository financial institutions (NDFIs) were “only a rounding error” at $35 million, or 17 basis points of the loan portfolio, and said the bank has been “very skeptical” of that category.
Beardall described WaFd’s “Build 2030” plan as a shift toward serving businesses, with a key objective of increasing non-interest-bearing deposits to 20% of total deposits by 2030, up from 11% last year. He said the bank stood at 12.2% at quarter end. Beardall outlined steps taken since launching the effort, including becoming a preferred SBA lender, certifying most branch managers in small business banking, and organizing the bank into three business lines: business bank, corporate bank, and commercial real estate bank.
Beardall also reiterated a profitability target tied to margin improvement. He noted the quarter’s net interest margin of 2.81% and return on tangible common equity (ROTCE) of 10.8%, and said that reaching a 3% margin over the next two years—absent interest rate changes—would lift ROTCE to 12.5% “everything else being equal.” In the Q&A, he said the path to higher margin would come from loan repricing, accretion income, shifting mix toward commercial loans, and growth in low-cost deposits. He also said the bank would “take our foot off the gas” on securities purchases going forward, implying fewer incremental margin headwinds from that activity.
On pipelines, Beardall said the lending pipeline declined from $3.6 billion at December 31 to $3.2 billion at March 31 due to robust originations, while the deposit pipeline rose from $264 million to $439 million—an increase of 66% linked quarter.
Beardall discussed deposit competition broadly, including the anticipated entrance of “X Money,” which he said was advertising a 6% rate on FDIC-insured deposits and 3% cash back on debit card purchases, calling them “loss leaders.” He emphasized WaFd’s relationship banking approach and said the development “certainly has our full attention.”
He also provided updates on growth initiatives in wealth management and technology. Beardall said WaFd launched wealth management on August 31 of the prior year and set a goal of reaching $1 billion in assets under management (AUM) in the first two years, with AUM “just under $450 million” as of March 31. He also said the company’s Pike Street Labs subsidiary is building software, and that WaFd planned to launch a next-generation mobile app in the third quarter and an “AI call center agent” to provide 24/7 customer support, while still allowing access to live bankers.
On capital strategy, Beardall said share repurchases were an attractive use of capital when the stock traded near tangible book value, noting the quarter’s 2.7 million shares repurchased represented 3.6% of shares outstanding as of December 31, 2025.
Beardall also highlighted a Federal Reserve proposal that could change risk weightings for certain low loan-to-value single-family residential loans. He said that if approved, the proposal could increase WaFd’s regulatory capital by an estimated $400 million, citing the bank’s $7.5 billion single-family portfolio and a weighted average loan-to-value below 40%.
About WaFd NASDAQ: WAFD
Washington Federal, Inc, doing business as WaFd Bank, is a publicly traded bank holding company headquartered in Seattle, Washington. Through its subsidiary, WaFd Bank, the company provides a range of banking and financial services to individuals, small-to-medium enterprises, and commercial clients. Established in 1917 as Ballard Savings & Loan in Seattle, the institution expanded over decades to serve customers across the Western United States under the Washington Federal name and has operated as a public company since the early 1980s.
WaFd Bank's core offerings encompass deposit accounts such as checking, savings, money market, and certificates of deposit, alongside consumer and commercial lending products.
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