WAFD Q1 Earnings Beat Estimates on Higher NII, Expenses Decline

Core Insights - WaFd, Inc. (WAFD) reported first-quarter fiscal 2026 earnings of 79 cents per share, exceeding the Zacks Consensus Estimate of 76 cents, with a year-over-year increase of 46% [1][8] Financial Performance - Quarterly net income available to common shareholders was $60.5 million, reflecting a 38.8% increase from the prior-year quarter, surpassing the estimate of $57.3 million [2] - Total net revenues were $191.4 million, an 11.8% increase year over year, although it fell short of the Zacks Consensus Estimate of $193.5 million [3] - Net interest income (NII) for the quarter was $171.1 million, up 10.1% year over year, with a net interest margin (NIM) of 2.70%, an increase of 31 basis points from the previous year [3] - Total non-interest income was $20.3 million, a 29% increase year over year, driven by higher other income and increased deposit fee income, exceeding the estimate of $19.8 million [4] - Total non-interest expenses decreased by 5% to $105.7 million, better than the estimate of $110.2 million [4] Efficiency and Returns - The efficiency ratio improved to 55.25%, down from 65.04% in the prior-year quarter, indicating enhanced profitability [5] - Return on average common equity rose to 8.86%, up from 6.42% in the prior-year quarter, while return on average assets increased to 0.96% from 0.69% [5] Loan and Deposit Trends - As of December 31, 2025, net loans receivable decreased by 5.8% year over year to $19.85 billion, below the projected $20.3 billion [6] - Total customer deposits remained stable at $21.42 billion, nearly flat year over year, compared to the estimate of $21.67 billion [6] Credit Quality - The allowance for credit losses was 1.05% of gross loans outstanding, up from 1.00% in the prior-year quarter, indicating a decline in credit quality [7] - The ratio of non-performing assets to total assets increased to 0.75% from 0.29%, with provisions for credit losses recorded at $3.5 million, compared to none in the previous year [7][8] Share Repurchase Activity - In the reported quarter, WAFD repurchased 1.95 million shares at a weighted average price of $29.75 per share [9] Market Outlook - The company is expected to benefit from declining interest rates, business restructuring, and a solid balance sheet, although it faces near-term challenges from a tough macroeconomic environment and deteriorating asset quality [10]