WaFd Shares Dip 7.8% in 3 Months: How to Play the Stock Now?

Over the past three months, WaFd, Inc. WAFD shares have declined 7.8%. In comparison, the industry fell 9.9% and the S&P 500 Index slipped 2%. Within its peer group, Columbia Banking System, Inc. COLB shares have dropped 8.7%, whereas Bank of Hawaii Corporation BOH has gained 1.3% over the same time frame.

3-Month Price Performance

Image Source: Zacks Investment Research

Subdued investor interest in WaFd stems from heightened geopolitical tensions, mainly in the Middle East. This has triggered a risk-off environment, leading to a sell-off across the broader markets.

Against this backdrop, the recent decline raises the question of whether the current dip in WAFD’s shares offers a potential buying opportunity. Let us assess the company’s fundamentals before making any decision.

What’s Supporting WaFd’s Performance?

Strong Loan Growth: WaFd’s growth trajectory remains closely tied to its loan portfolio expansion. Over the past three years, net loans saw a compound annual growth rate (CAGR) of 7.6% (2022-2025). Though loan balances declined recently due to the company’s strategic exit from single-family mortgage lending, the increasing focus on commercial loan origination is expected to drive sustainable growth. Driven by this, the company’s revenues witnessed a CAGR of 3.2% over the last three fiscal years (2022-2025).

Net Interest Margin Expansion: Continued loan growth and lower interest rates are expected to support WaFd’s net interest margin (NIM). WaFd’s NIM expanded 31 basis points to 2.70% in the first quarter of fiscal 2026, marking a strong driver of revenue growth. This is a rebound from earlier pressure, when NIM contracted to 2.58% in fiscal 2025 from 2.69% in fiscal 2024 and 3.40% in fiscal 2023 due to elevated funding costs.

Looking ahead, a relatively lower interest rate environment, declining funding costs and the company’s focus on increasing non-interest-bearing deposits (targeting 20% of total deposits by fiscal 2030 from 12.6% as of Dec. 31, 2025) are expected to support NIM expansion.

Growing Non-Interest Income: WaFd is actively expanding its fee-based operations, including wealth management and insurance, to strengthen and diversify its revenue streams. Its non-interest income witnesses a three-year CAGR of 2.4% (ended 2025). The trend continued into the first quarter of fiscal 2026 and the metric increased 29% to $20.3 million, reflecting solid traction in these segments. Continued expansion of non-interest income streams is expected to support more stable revenues and drive long-term growth.

Solid Liquidity Aids Strong Capital Returns: As of Dec. 31, 2025, WaFd had total borrowings of $2.44 billion, and cash and cash equivalents of $734.9 million, reflecting a stable liquidity position.

Supported by its healthy liquidity position, WaFd has been rewarding its shareholders with consistent dividend payments. The company has raised its quarterly dividend steadily since fiscal 2011, with the most recent increase announced in 2025. Currently, the company offers a payout ratio of 38% and has a dividend yield of 3.49%.

WAFD Dividend Yield

Image Source: Zacks Investment Research

Apart from dividends, WaFd returns capital to its shareholders through share repurchases. As of Dec. 31, 2025, 6.3 million shares were available under its existing authorization, and in February, the company increased the repurchase authorization by 4.5 million shares.

What’s Hurting WaFd’s Growth

Elevated Expense Base: WaFd continues to face pressure from rising operating expenses. Over the past three fiscal years, the metric saw a CAGR of 6% (2022-2025) due to higher compensation and technology costs. Although expenses declined in the first quarter of fiscal 2026, ongoing expansion initiatives, technology upgrades and inflationary pressures are expected to keep operating expenses elevated in the near term.

Deteriorating Asset Quality: Weak asset quality will remain concerning for WaFd. Its net charge-offs rose sharply to $11.8 million in fiscal 2025 from $1.4 million in the prior year, and both provisions and charge-offs increased in the first quarter of fiscal 2026. Provisions declined in fiscal 2024 and 2025 after rising in earlier periods as the company built reserves amid a weakening macro backdrop. Given ongoing economic uncertainty, credit costs are expected to remain elevated in the near term.

High Reliance on Commercial Loans: WaFd’s significant concentration in commercial loans adds to its risk exposure. As of Dec. 31, 2025, these loans accounted for 57.6% of total net loans receivable. While such loans generally benefit from floating rates, a rapidly changing economic environment could pressure borrowers’ creditworthiness. This may pressure the company’s financial performance if economic conditions weaken.

How to Approach WaFd Stock Now

Over the past 30 days, the Zacks Consensus Estimate for the company’s fiscal 2026 and fiscal 2027 earnings has been unchanged. The projected figures imply growth of 13.6% and 4.1% for fiscal 2026 and fiscal 2027, respectively.

Earnings Estimates

Image Source: Zacks Investment Research

In terms of valuation, WaFd’s price-to-earnings (P/E) forward 12 months ratio of 9.83X is higher than the industry’s 9.27X. This indicates that the stock is expensive.

P/E Forward 12-Month Ratio

Image Source: Zacks Investment Research

WaFd is currently trading at a discount to BOH, which has a forward 12-month P/E ratio of 12.01X, while it is trading at a premium to Columbia Banking, which has a forward 12-month P/E ratio of 8.47X.

Steady loan growth, improving NIM, rising non-interest income and benefits from its strategic acquisition are likely to support WaFd's overall performance. Its strong liquidity position, along with consistent shareholder returns through dividends and share repurchases, strengthens its long-term growth prospects.

However, rising operating expenses, stemming from continued expansion efforts and technology investments, are expected to weigh on near-term profitability. Deteriorating asset quality and high exposure to commercial loans amid a volatile economic environment pose additional challenges.

Hence, investors should not rush to buy WaFD stock now. Those who already own it can hold on to the stock as it is less likely to disappoint over the long term, given its strong fundamentals.

Currently, WaFd carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

5 Stocks Set to Double

Each was handpicked by a Zacks expert as the favorite stock to gain +100% or more in the months ahead. They include

Stock #1: A Disruptive Force with Notable Growth and Resilience

Stock #2: Bullish Signs Signaling to Buy the Dip

Stock #3: One of the Most Compelling Investments in the Market

Stock #4: Leader In a Red-Hot Industry Poised for Growth

Stock #5: Modern Omni-Channel Platform Coiled to Spring

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor. While not all picks can be winners, previous recommendations have soared +171%, +209% and +232%.

See Our Newest 5 Stocks Set to Double Picks >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

WaFd, Inc. (WAFD): Free Stock Analysis Report

Columbia Banking System, Inc. (COLB): Free Stock Analysis Report

Bank of Hawaii Corporation (BOH): Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research