WaFd Bank(WAFD) - 2024 Q4 - Annual Report

Credit Losses and Allowances - The allowance for credit losses increased by $26,546,000, or 14.98%, from $177,207,000 as of September 30, 2023, to $203,753,000 at September 30, 2024[254]. - The total allowance for credit losses as of September 30, 2024, is $225,253,000, reflecting a $23,546,000 increase from $201,707,000 in the prior year[254]. - The allowance for multi-family loans increased by 92% from $13,155,000 to $25,248,000, while the allowance for single-family residential loans increased by 45% from $28,029,000 to $40,523,000[254]. - The total allowance for commercial loans rose by 12% from $137,194,000 to $153,373,000[254]. - The ending balance of the allowance for credit losses as of September 30, 2024, includes $144,848,000 related to the quantitative component and $58,905,000 related to qualitative overlays[254]. - The Company recorded a provision for credit losses of $17,500,000 in 2024, down from $41,500,000 in 2023, reflecting a significant decrease in provisioning needs[256]. - The provision for loan losses decreased from $49,500,000 to $27,902,000, reflecting a reduction in expected losses[252]. - The ratio of total allowance for credit losses (ACL) to total gross loans decreased to 1.01% as of September 30, 2024, from 1.03% in the previous year[256]. - The reserve for unfunded loan commitments was $21,500,000 as of September 30, 2024, down from $24,500,000 in the prior year[257]. - The Company maintains an allowance for credit losses (ACL) for loans receivable based on ongoing quarterly assessments, utilizing the current expected credit loss (CECL) methodology[413]. - The ACL consists of the allowance for loan losses and the reserve for unfunded commitments, with estimates based on historical loss experience and current conditions[414]. - The Company performs a quarterly asset quality review, which includes assessments of forecasted gross charge-offs, nonperforming assets, and delinquencies[420]. Loan Performance and Quality - The ratio of net charge-offs to average loans outstanding decreased to 0.01% from 0.26%[252]. - Net charge-offs for the year ended September 30, 2024, were $1,356,000, compared to $45,101,000 in the prior year, indicating improved asset quality[256]. - The ratio of the allowance for loan losses to non-accrual loans decreased to 293% as of September 30, 2024, from 351% in the prior year[269]. - Non-performing assets increased by 33.7% to $77,418,000, or 0.28% of total assets, as of September 30, 2024, compared to $57,924,000, or 0.26% of total assets, in 2023[266]. - Loans are placed on non-accrual status when the probability of collection is deemed insufficient, with interest not accrued on loans 90 days or more past due[428]. Financial Performance - As of September 30, 2024, net income decreased by $57,385,000, or 22.3%, to $200,041,000 compared to $257,426,000 for the same period in 2023[301]. - Net interest income for the year ended September 30, 2024, was $660,832,000, a decrease of $29,402,000 or 4.3% from the previous year, with a net interest margin of 2.69% compared to 3.40% in 2023[301]. - Non-interest income increased by $8,491,000, or 16.3%, to $60,692,000 for the year ended September 30, 2024, primarily due to increased income from WAFD Insurance Group[305]. - Total non-interest expense rose by $72,237,000, or 19.2%, to $448,272,000 for the year ended September 30, 2024, driven by merger-related costs and increased compensation[306]. - The efficiency ratio for 2024 was 62.1%, compared to 50.7% in the prior year, indicating increased operational costs relative to income[307]. - Basic earnings per common share decreased to $2.50 in 2024 from $3.72 in 2023, a decline of 32.4%[378]. - The company reported a comprehensive income of $208,971,000 for the year ended September 30, 2024, compared to $251,866,000 in 2023[381]. Assets and Liabilities - Cash and cash equivalents rose to $2,381,102,000 at September 30, 2024, compared to $980,649,000 at the same date in 2023, reflecting cash received from the Merger[271]. - The total assets of the company as of September 30, 2024, were $3,000,300,000, reflecting growth in the asset base[384]. - The company reported accumulated other comprehensive income of $55.85 million, up from $46.92 million, indicating an increase of approximately 19%[376]. - The fair value of net acquired assets from the merger was $360,797,000, with liabilities assumed at $7,316,380,000[389]. - Total borrowings decreased to $3,267,589,000 as of September 30, 2024, from $3,650,000,000 in the previous year, with a weighted average rate of 3.93%[300]. - The average balance of borrowings increased by $980,514,000, or 30.1%, from 2023, primarily due to the Merger[338]. Deposits and Customer Accounts - As of September 30, 2024, total customer deposits increased to $21,373,970,000, a rise of $5,303,641,000 or 33.0% compared to $16,070,329,000 in 2023, primarily due to deposits obtained in the Merger[292]. - Time deposits surged by $4,251,769,000 or 80.1%, with 66% of the LBC customer accounts being time deposits[292]. - Non-interest checking deposits decreased to $2,500,467,000, representing 11.7% of total deposits, down from 16.8% in 2023[294]. - Customer accounts increased significantly, with transaction deposit accounts rising to $11.82 billion from $10.77 billion, a growth of about 10%[376]. Mergers and Acquisitions - The company completed a merger with Luther Burbank Corporation, with the total purchase consideration allocated to acquired loans receivable valued at $3.2 billion and core deposit intangible assets at $37 million[364]. - The Company recorded $104,707,000 in goodwill and $37,022,000 in core deposit intangible assets as a result of the Merger[442]. - The Company completed the sale of approximately $2,800,000,000 in multifamily loans and $400,000,000 in single-family loans from the acquired LBC loan portfolio during the year[318]. Interest Rates and Yield - The period end interest rate spread was 1.91% at September 30, 2024, down from 2.61% at September 30, 2023[331]. - The weighted-average rate on interest-earning assets increased by 4 basis points to 5.11% as of September 30, 2024, while the weighted-average rate on interest-bearing liabilities increased by 74 basis points to 3.20%[331]. - The yield on interest-earning assets increased by 46 basis points to 5.59%[336]. - The cost of interest-bearing liabilities increased by 128 basis points to 3.46%[336]. Cash Flow and Investments - Net cash provided by operating activities increased to $439,233,000 in 2024, up from $213,957,000 in 2023, representing a 105.5% increase[386]. - The company reported a net cash provided by investing activities of $3,287,218,000 in 2024, a significant increase from a net cash used of $1,377,917,000 in 2023[386]. - Proceeds from borrowings amounted to $17,037,035,000 in 2024, slightly down from $17,175,000,000 in 2023[386]. Intangible Assets and Goodwill - The Bank's intangible assets totaled $448,425,000 as of September 30, 2024, compared to $310,619,000 in 2023, largely due to the Merger which created $104,707,000 in Goodwill[291]. - The core deposit intangible asset is amortized on an accelerated basis over 6 years[442]. - The fair value assessment of core deposit intangible assets considered expected customer attrition rates and maintenance costs, highlighting the subjective nature of the valuation process[368]. Interest Rate Risk Management - Interest rate swap agreements are utilized to convert variable obligations to fixed rates, with minimal impact on net income from changes in fair value[431]. - The Company has entered into interest rate swaps to hedge long-term fixed-rate commercial loans, qualifying as fair value hedges under ASC 815[436]. - Gains and losses on interest rate swaps are recorded in Other Comprehensive Income to the extent the hedge is effective[432].