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01/11 11:26
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presents a mixed picture: while there is positive guidance on loan portfolio growth and margin expansion with rate cuts, there are concerns about increasing criticized loans and nonperforming assets. The Q&A reveals some positive sentiments on loan production and capital management, but vague responses on stablecoin partnerships and profitability improvements create uncertainty. The company's market cap of $2.24 billion suggests moderate stock price sensitivity. Overall, the balance of positive and negative factors, alongside the lack of clear guidance on some issues, leads to a neutral prediction for the stock price movement.
Net Income (Q4 2025) $56.9 million or $0.72 per diluted share, compared to $0.71 per share in Q4 2024 and $0.73 per share in Q3 2025. The $0.01 decrease in earnings per share for the quarter was primarily due to modest increases in noninterest expense, offset by modest increases in net interest income and noninterest income.
Net Income (Full Year 2025) $211.4 million or $2.63 per diluted share, compared to $2.50 per share in fiscal 2024. The increase was attributed to overall financial performance improvements.
Loans Receivable Decreased by $188 million during the quarter, primarily due to a $216 million decrease in inactive loan types (single-family mortgage and custom construction).
Loan Originations (Q4 2025) $1.4 billion, compared to $700 million in Q3 2025. Repayments and payoffs were $1.2 billion in both quarters. Active loan types drove the increase.
Deposits (Q4 2025) Increased by $51 million, with noninterest-bearing deposits increasing $80 million (3.2%) and time deposits decreasing $286 million (3%). For the fiscal year, total deposits increased by $64 million.
Net Loan-to-Deposit Ratio Ended the quarter at 93.7%, reflecting the balance between loans and deposits.
Net Interest Income (Q4 2025) Increased by $1.9 million from the prior quarter, with a net interest margin of 2.71% compared to 2.69% in Q3 2025. The yield on interest-earning assets was 5.23%, while the cost of interest-bearing liabilities was 2.91%.
Noninterest Income (Q4 2025) Increased slightly to $18.4 million, including $4.6 million in revenue from WaFd Insurance. For the fiscal year, WaFd Insurance revenue was $19.5 million, a 12.5% increase over the prior year.
Noninterest Expense (Q4 2025) Increased by $2.7 million (2.6%) from the prior quarter due to strategic investments in talent and technology. The efficiency ratio increased to 56.82% from 56.01% in Q3 2025.
Delinquent Loans Ended the quarter at 0.6%, up 34 basis points from Q3 2025 and 35 basis points from Q4 2024. The increase was largely due to a single commercial real estate loan over 90 days past due.
Adversely Classified Loans Decreased by $84 million during the quarter, representing 3.1% of net loans compared to 3.5% in Q3 2025 and 2% in Q4 2024.
Criticized Loans Increased by $57 million to 4.4% of net loans, compared to 4.1% in Q3 2025 and 2.4% in Q4 2024. The increase was not concentrated in any one business line or industry.
Nonperforming Assets Increased by $46 million during the quarter, representing 0.54% of total assets. Adjusted for a single commercial real estate loan, NPAs would be 0.36% of total assets.
Net Loan Charge-Offs (Q4 2025) Totaled $1 million. For the fiscal year, net charge-offs were $11.8 million, representing 6 basis points of average net loans.
Allowance for Credit Losses Provided coverage of 1.04% of gross loans at fiscal year-end, compared to 1.01% in Q4 2024. For commercial loans, the allowance was 1.3% of net loans, compared to 1.26% in Q4 2024.
WaFd Wealth Management launch: WaFd launched WaFd Wealth Management on August 29, 2025, aiming to grow wealth management to $1 billion in assets under management within the first two years.
Digital banking enhancements: Release 2.8 of the digital banking platform was launched, adding features like direct deposit switching, debit card controls, and consumer wire transfers.
Expansion into California: The acquisition of Luther Burbank provided a foundation for WaFd to expand its franchise in California.
Loan production growth: Loan originations increased to $1.4 billion in Q4 2025, up from $700 million in the previous quarter, with significant growth in commercial real estate, C&I, and construction loans.
Deposit growth: Deposits increased by $51 million in Q4 2025, with noninterest-bearing deposits rising by $80 million.
Efficiency improvements: Efficiency ratio increased slightly to 56.82% in Q4 2025 due to strategic investments in talent and technology.
Build 2030 plan: WaFd is shifting focus to serve business banking needs, aiming to increase noninterest-bearing deposits to 20% of total deposits by 2030.
Exit from single-family mortgage lending: WaFd exited the single-family mortgage lending market, including custom construction and HELOCs, to focus on commercial banking.
Delinquent Loans: Delinquent loans increased to 0.6%, up 34 basis points from the previous quarter and 35 basis points from the prior year. This reflects economic uncertainty and elevated interest rates impacting borrowers.
Criticized Loans: Criticized loans increased by $57 million to 4.4% of net loans, up from 4.1% in the previous quarter and 2.4% in the prior year. This rise is attributed to economic uncertainty and elevated interest rates.
Nonperforming Assets: Nonperforming assets increased by $46 million, representing 0.54% of total assets. A significant portion of this increase is due to a single commercial real estate loan over 90 days past due.
Interest Rate Environment: Elevated interest rates have negatively impacted loan demand and borrowers' expense structures, posing a headwind for credit quality.
Economic Uncertainty: Economic uncertainty, including the impact of tariffs, continues to affect borrowers' revenue and material costs, creating challenges for credit quality.
Profitability Lag: WaFd's profitability lags behind peers, with lower return on assets (0.91% vs. peers' 1.22%) and return on tangible common equity (10% vs. peers' 13%). This is primarily due to lower net interest margins and higher cost of deposits.
Single-Family Residential Loans: The bank holds $8.1 billion in single-family residential loans earning only 4.2%, which is below market rates, impacting overall profitability.
Deposit Costs: WaFd's cost of deposits is 2.6%, higher than peers' average of just above 2%, contributing to lower profitability.
Regulatory Challenges: The bank is appealing a CRA 'needs to improve' rating, which could limit its ability to participate in significant M&A activities.
Credit Quality Trends: Negative trends in criticized, nonperforming, and delinquent loans indicate potential risks to credit quality, driven by economic and interest rate challenges.
Future profitability improvement: The company aims to increase noninterest-bearing deposits to 20% of total deposits by the end of fiscal 2030, up from the current 12%. This is expected to drive increased loan demand and branch utilization.
Loan portfolio strategy: The company plans to replace runoff in its single-family residential loan portfolio with agency mortgage-backed securities, which offer higher yields and no credit risk.
Wealth management expansion: WaFd Wealth Management was launched with a goal to organically grow to $1 billion in assets under management within the first two years.
Deposit growth and cost reduction: The company has a deposit pipeline of almost $250 million in net new deposits and aims to continue reducing the weighted rate on deposits.
Business banking focus: The company is focusing on serving small businesses to achieve lower-cost deposits and has reorganized its frontline bankers into specialized teams to support this strategy.
Technology and AI integration: The company plans to leverage technology and AI to enhance treasury management offerings and improve client experience, while also addressing fraud risks.
Macroeconomic outlook: The company anticipates easing interest rate environments in the near term but acknowledges ongoing economic uncertainty and elevated interest rates as headwinds for credit quality.
Mergers and acquisitions: The company is open to acquisitions of the right franchise at the right price but is cautious due to its CRA needs-to-improve rating and relatively low valuation.
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