WaFd, Inc. (NASDAQ:WAFD) is a leading regional bank with a rich history and a compelling growth story. Founded in 1917 in Ballard, Washington, this federally-insured, state-chartered commercial bank has steadily expanded its presence across the Pacific Northwest and beyond, becoming a dominant force in the banking landscape.
Business Overview
Historical Background
The company's origins trace back to its founding in 1917, when it was established as Washington Federal Bank. Over the decades, WaFd has navigated economic cycles and industry changes with a steady hand, growing its asset base and solidifying its position as a trusted financial institution. In November 1994, WaFd, Inc. was formed as the holding company for Washington Federal Bank. The bank demonstrated its resilience by weathering significant challenges throughout its history, including the Great Depression and World War II. In 2023, the company underwent a rebranding effort, changing its name from Washington Federal, Inc. to WaFd, Inc. to better reflect its evolving identity and focus on innovation and growth. A significant milestone in the company's history was the acquisition of California-based Luther Burbank Corporation in 2024, which added $7.7 billion in assets and over 30 branches, further expanding WaFd's geographic footprint. This merger required significant resources and attention to successfully integrate Luther Burbank's operations and culture with WaFd's.
Current Operations
Today, WaFd operates a network of 210 bank branches across nine states, providing a comprehensive suite of lending, depository, insurance, and other banking services to consumers, mid-sized to large businesses, and owners/developers of commercial real estate. The company's diversified loan portfolio includes multi-family, commercial real estate, commercial and industrial, construction, and various consumer loan products.
WaFd operates through two primary business segments: Commercial Banking and Consumer Banking. The Commercial Banking segment offers a range of products and services to commercial customers, including multi-family real estate loans, commercial and industrial loans, commercial real estate loans, construction loans, and land acquisition and development loans. As of December 31, 2024, the commercial loan portfolio totaled $13.12 billion, representing 58.5% of the total loan portfolio. Multi-family, commercial real estate, and commercial and industrial loans comprise the largest portions of the commercial loan portfolio at 21.6%, 16.2%, and 10.7% of total loans, respectively.
The Consumer Banking segment provides various loan and deposit products to individual customers, including single-family residential mortgages, construction loans for custom homes, consumer lot loans, home equity lines of credit (HELOCs), and other consumer loans. As of December 31, 2024, the consumer loan portfolio totaled $9.31 billion, accounting for 41.5% of the total loan portfolio. Single-family residential mortgages represented the largest component of the consumer loan portfolio at 38.0% of total loans.
Financials
Financial Performance
Financially, WaFd has demonstrated resilience and solid performance. As of the company's most recent fiscal year ending September 30, 2024, WaFd reported net income of $200 million, or $2.50 per diluted share, on total revenue of $721.83 million. The company's net interest margin stood at a healthy 2.62%, and its return on average assets and return on average common equity were 0.71% and 6.92%, respectively.
For the most recent quarter ended December 31, 2024, WaFd reported revenue of $15.7 million and net income of $47.27 million. The company's cash position stood at $1.51 million as of the same date.
Balance Sheet Strength
WaFd's balance sheet remains robust, with total assets of $28.06 billion as of September 30, 2024. The company's loan portfolio grew by 19.7% during the fiscal year, reaching $21.12 billion, while deposits increased by 33% to $21.37 billion. WaFd's regulatory capital ratios also remain well above the well-capitalized thresholds, with a common equity tier 1 ratio of 12.94% and a total risk-based capital ratio of 14.08% as of the end of fiscal 2024.
As of December 31, 2024, the credit quality of the commercial loan portfolio appeared stable, with non-accrual commercial loans totaling $52.96 million, or 0.4% of total commercial loans. The allowance for credit losses on commercial loans was $152.47 million, or 1.2% of total commercial loans, providing a solid reserve against potential losses. Commercial loan originations accounted for 68% of total loan originations during the quarter ended December 31, 2024, reflecting the company's strategic focus on growing its commercial lending business.
The consumer loan portfolio showed slightly higher credit risk compared to the commercial segment, with non-accrual consumer loans totaling $19.53 million, or 0.2% of total consumer loans, as of December 31, 2024. The allowance for credit losses on consumer loans was $52.05 million, or 0.6% of total consumer loans. Consumer loan originations accounted for 32% of total loan originations during the quarter ended December 31, 2024.
Liquidity
Asset Quality
Despite the challenges posed by the COVID-19 pandemic, WaFd has navigated the turbulent environment with agility. The company's non-performing assets stood at just 0.28% of total assets as of September 30, 2024, a testament to its prudent underwriting and proactive risk management practices. WaFd also took decisive action to exit the single-family mortgage lending market, a move that is expected to enhance the company's profitability and reduce its interest rate risk exposure.
In addition to its lending activities, the Consumer Banking segment provides deposit products, including transaction deposit accounts (e.g., checking, savings, money market) and time deposits. As of December 31, 2024, total customer accounts were $21.44 billion, with transaction deposit accounts comprising 55.3% of total deposits and time deposits making up the remaining 44.7%. The weighted average rate paid on total deposits was 2.92% as of the end of the quarter.
Future Outlook and Risks
Strategic Initiatives
Looking ahead, WaFd remains focused on leveraging its strong regional presence and diversified business model to drive continued growth and profitability. The company's management team has outlined plans to further expand its commercial and consumer banking operations, enhance its digital capabilities, and pursue selective acquisitions that complement its existing footprint.
Risks facing WaFd include economic conditions in its core markets, rising interest rates, regulatory changes, and competition from larger national and regional banks. However, the company's experienced management team, strong capital position, and history of weathering industry challenges suggest it is well-equipped to navigate these obstacles.
In conclusion, WaFd, Inc. is a well-established regional banking powerhouse with a storied history, a diversified business model, and a proven track record of financial performance. As the company continues to execute on its strategic initiatives and capitalize on growth opportunities, it remains a compelling investment proposition for those seeking exposure to a stable, well-managed regional banking institution with a focus on both commercial and consumer banking segments.