WaFd Bank (WAFD)

Regional banking company WaFd (NASDAQ:WAFD) missed Wall Street’s revenue expectations in Q3 CY2025, with sales falling 1.2% year on year to $185.3 million. Its GAAP profit of $0.73 per share was 4.6% below analysts’ consensus estimates.

Company Overview

Founded in 1917 and rebranded from Washington Federal in 2023, WaFd (NASDAQ:WAFD) is a bank holding company that provides lending, deposit services, and insurance through its Washington Federal Bank subsidiary across eight western states.

Thrifts & Mortgage Finance institutions operate by accepting deposits and extending loans primarily for residential mortgages, earning revenue through interest rate spreads (difference between lending rates and borrowing costs) and origination fees. The industry benefits from demographic tailwinds as millennials enter prime homebuying age, technological advancements streamlining the loan approval process, and potential interest rate stabilization improving affordability. However, significant headwinds include net interest margin compression during rate volatility, increased competition from fintech disruptors offering digital-first experiences, mounting regulatory compliance costs, and potential housing market corrections that could impact loan portfolios and default rates.

WaFd's competitors include regional banks operating in the western United States such as Umpqua Bank (now part of Columbia Banking System, NASDAQ:COLB), Banner Corporation (NASDAQ:BANR), and Zions Bancorporation (NASDAQ:ZION), as well as larger national banks with significant western presence like U.S. Bancorp (NYSE:USB) and Wells Fargo (NYSE:WFC).

Net interest income and and fee-based revenue are the two pillars supporting bank earnings. The former captures profit from the gap between lending rates and deposit costs, while the latter encompasses charges for banking services, credit products, wealth management, and trading activities. Over the last five years, WaFd Bank grew its revenue at a decent 6.7% compounded annual growth rate. Its growth was slightly above the average banking company and shows its offerings resonate with customers.

Long-term growth is the most important, but within financials, a half-decade historical view may miss recent interest rate changes and market returns. WaFd Bank’s recent performance marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 1.4% over the last two years. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, WaFd Bank missed Wall Street’s estimates and reported a rather uninspiring 1.2% year-on-year revenue decline, generating $185.3 million of revenue.

Net interest income made up 92.4% of the company’s total revenue during the last five years, meaning WaFd Bank lives and dies by its lending activities because non-interest income barely moves the needle.

Markets consistently prioritize net interest income growth over fee-based revenue, recognizing its superior quality and recurring nature compared to the more unpredictable non-interest income streams.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

WaFd Bank’s EPS grew at an unimpressive 3.4% compounded annual growth rate over the last five years, lower than its 6.7% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For WaFd Bank, its two-year annual EPS declines of 15.6% show it’s continued to underperform. These results were bad no matter how you slice the data.

In Q3, WaFd Bank reported EPS of $0.73, up from $0.71 in the same quarter last year. Despite growing year on year, this print missed analysts’ estimates. Over the next 12 months, Wall Street expects WaFd Bank’s full-year EPS of $2.65 to grow 15.5%.

The balance sheet drives banking profitability since earnings flow from the spread between borrowing and lending rates. As such, valuations for these companies concentrate on capital strength and sustainable equity accumulation potential.

Because of this, tangible book value per share (TBVPS) emerges as the critical performance benchmark. By excluding intangible assets with uncertain liquidation values, this metric captures real, liquid net worth per share. Other (and more commonly known) per-share metrics like EPS can sometimes be murky due to M&A or accounting rules allowing for loan losses to be spread out.

WaFd Bank’s TBVPS grew at a decent 5.5% annual clip over the last five years. However, TBVPS growth has recently decelerated to 2.3% annual growth over the last two years (from $28.05 to $29.38 per share).

Over the next 12 months, Consensus estimates call for WaFd Bank’s TBVPS to grow by 5.9% to $31.12, mediocre growth rate.

Leverage is core to a financial firm’s business model (loans funded by deposits). To ensure economic stability and avoid a repeat of the 2008 GFC, regulators require certain levels of capital and liquidity, focusing on the Tier 1 capital ratio.

Tier 1 capital is the highest-quality capital that a firm holds, consisting primarily of common stock and retained earnings, but also physical gold. It serves as the primary cushion against losses and is the first line of defense in times of financial distress.

This capital is divided by risk-weighted assets to derive the Tier 1 capital ratio. Risk-weighted means that cash and US treasury securities are assigned little risk while unsecured consumer loans and equity investments get much higher risk weights, for example.

New regulation after the 2008 financial crisis requires that all firms must maintain a Tier 1 capital ratio greater than 4.5%. On top of this, there are additional buffers based on scale, risk profile, and other regulatory classifications, so that at the end of the day, firms generally must maintain a 7-10% ratio at minimum.

Over the last two years, WaFd Bank has averaged a Tier 1 capital ratio of 11.1%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.

Return on equity (ROE) measures how effectively banks generate profit from each dollar of shareholder equity - a critical funding source. High-ROE institutions typically compound shareholder wealth faster over time through retained earnings, share repurchases, and dividend payments.

Over the last five years, WaFd Bank has averaged an ROE of 9%, respectable for a company operating in a sector where the average shakes out around 7.5% and those putting up 15%+ are greatly admired.

It was good to see WaFd Bank narrowly top analysts’ tangible book value per share expectations this quarter. On the other hand, its revenue missed and its net interest income fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock traded down 1.3% to $27.50 immediately after reporting.

Updated: December 3, 2025 at 11:51 PM EST

Before making an investment decision, investors should account for WaFd Bank’s business fundamentals and valuation in addition to what happened in the latest quarter.

WaFd Bank falls short of our quality standards. For starters, its revenue growth was uninspiring over the last five years. And while its projected EPS for the next year implies the company’s fundamentals will improve, the downside is its declining net interest margin shows its loan book is becoming less profitable. On top of that, its net interest margin limits its operating profit potential compared to other banks that can earn more, all else equal..

WaFd Bank’s P/B ratio based on the next 12 months is 0.9x. At this valuation, there’s a lot of good news priced in - we think other companies feature superior fundamentals at the moment.

Wall Street analysts have a consensus one-year price target of $31 on the company (compared to the current share price of $32.30), implying they don’t see much short-term potential in WaFd Bank.