KBRA Affirms Ratings for WaFd, Inc.

KBRA affirms the senior unsecured debt rating of BBB+, the subordinated debt rating of BBB, the preferred stock rating of BBB-, and the short-term debt rating of K2 for Seattle, Washington-based WaFd, Inc. (NASDAQ: WAFD) ("the company"). In addition, KBRA affirms the deposit and senior unsecured debt ratings of A-, the subordinated debt rating of BBB+, and short-term deposit and debt ratings of K2 for its main subsidiary, WaFd Bank ("the bank"). The Outlook for all long-term ratings is Stable.

Key Credit Considerations

The ratings are supported by consistently favorable operating performance over an extended period, underpinned by a high-quality, long-tenured management team. Senior leadership has fostered a disciplined credit culture, which has contributed to solid asset quality metrics, even as the franchise has navigated challenging economic and interest rate environments. That said, credit risk is expected to incrementally rise as WAFD becomes more commercially oriented through its Build 2030 strategic plan, though we believe this should be offset by stronger earnings power over time.

While profitability and credit quality have exhibited some variability in recent years, key measures remained sound overall during 1H26. ROA tracked around 1.0%, though the legacy balance sheet mix continues to weigh on profitability, including a higher-cost funding base with a total cost of ~2.4% in 2Q26, reflecting a sizable concentration in CDs (39% of total deposits), as well as longer-duration, lower-yielding loans (residential mortgages represented 38% of loans with an average rate of 4.6%). As such, NIM remains firmly below peers at ~2.8% in 1H26, though it has rebounded from its 2024 trough and should improve over the medium term despite management's expectations for relatively flat near-term performance. Idiosyncratic issues across CRE and C&I have contributed to volatility in NPAs (NPA ratio peaked at 1.0% at YE25, though declined to 0.7% at 2Q26) and negative risk rating migration, though NCOs remain negligible (under 10 bps in recent years). Management remains confident in the resolution of these credits, supported by proactive problem loan management and conservative underwriting.

WAFD also maintains a relatively loaned-up balance sheet, with the loan-to-deposit ratio (96% as of 2Q26) tracking near the upper end of similarly rated peers and resulting in some reliance on wholesale funding. However, liquidity resources remain considerable, supported by a sizable, high-quality securities portfolio (21% of total assets) and substantial contingent borrowing capacity. Over time, management is focused on improving the funding mix through greater commercial deposit gathering, with Build 2030 targeting NIB deposits of ~20% of total deposits compared with 13% currently.

KBRA acknowledges the relatively concentrated nature of WAFD’s loan portfolio by lending segment (investor CRE concentration above 340% of Tier 1 capital and LLR at the bank at 2Q26; multifamily and residential mortgage represented 61% of total loans). However, this is offset by a broad operating footprint across nine states, which helps mitigate regional concentration risks. Compared to the rated peer group, WAFD reflects a more geographically diversified presence. Moreover, long-term credit performance across both of its largest lending segments has meaningfully outperformed peers over the past 15 years.

The ratings also recognize WAFD’s respectable core capital position (CET1 ratio of 11.4% as of 2Q26), which should remain fairly stable given the expectations for limited balance sheet growth as the loan portfolio gradually remixes from residential mortgages into C&I and CRE under Build 2030. However, management has contemplated a more accommodative approach to share repurchases given its view of the company’s valuation and limited near-term capital needs. While this could constrain further capital accumulation, we expect WAFD to maintain sound ratios commensurate with its evolving risk profile.

Rating Sensitivities

A rating upgrade is not expected, though execution of the strategic plan through lending, funding, and revenue diversification, while preserving a solid capital and liquidity position, could support positive rating momentum over time. Conversely, a downgrade is not anticipated, but any material degradation in the credit, liquidity, or earnings profile, or a more aggressive capital management strategy could place pressure on the ratings.

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