WaFd Bank(WAFD) - 2025 Q4 - Annual Report

Loan Losses and Credit Provisions - The allowance for loan losses decreased by $4,033,000, or 1.98%, from $203,753,000 as of September 30, 2024, to $199,720,000 at September 30, 2025[270]. - The Company recorded a provision for credit losses of $7,750,000 in 2025, compared to a provision of $17,500,000 for 2024[270]. - Net charge-offs for the year ended September 30, 2025, were $11,783,000, compared to charge-offs of $1,356,000 in the prior year[270]. - The ratio of the total allowance for credit losses (ACL) to total gross loans increased to 1.04% as of September 30, 2025, compared to 1.01% as of September 30, 2024[270]. - The reserve for unfunded loan commitments remained unchanged at $21,500,000 as of September 30, 2025[270]. - The allowance for credit losses for commercial loans totaled $152,134,000, a decrease of $1,239,000 or 1% from the previous year[269]. - The allowance for credit losses for consumer loans totaled $47,586,000, a decrease of $2,794,000 or 6% from the previous year[269]. - The Company’s allowance for credit losses is comprised of $131,652,000 related to the quantitative component and $68,068,000 related to management's qualitative overlays[270]. - Management believes the total ACL is sufficient to absorb estimated losses inherent in the portfolio of loans and unfunded commitments[270]. Non-Performing Assets - Non-performing assets increased by 84.7% to $143,022,000, representing 0.54% of total assets as of September 30, 2025, compared to $77,418,000, or 0.28% of total assets, as of September 30, 2024[283]. - Total non-accrual loans reached $128,628,000 as of September 30, 2025, up from $69,541,000 in the previous year, primarily due to one commercial real estate loan over 90 days past due[282]. - The allowance for loan losses was $199,720,000, with a coverage ratio of 155% for non-accrual loans as of September 30, 2025, down from 293% the previous year[284]. - The ratio of total non-performing assets to total assets increased to 0.54% as of September 30, 2025, from 0.28% the previous year[283]. - The majority of real estate owned (REO) properties, totaling $11,084,000, are expected to be sold, with an increase of 142.7% from the previous year[284]. Investment Securities - Available-for-sale (AFS) investment securities increased by $960,492,000, or 37.3%, to $3,533,201,000 as of September 30, 2025, due to securities purchases and unrealized losses[286]. - The net unrealized loss for AFS securities decreased to $9,237,000 as of September 30, 2025, compared to $44,168,000 as of September 30, 2024[287]. - Held-to-maturity (HTM) investment securities increased by $208,830,000 to $645,802,000, or 47.8%, during the year ended September 30, 2025[288]. - The net unrealized loss on held-to-maturity securities was $33,063,000, compared to $35,926,000 the year prior[288]. - The composition of the investment portfolio was 44.6% variable rate and 55.5% fixed rate as of September 30, 2025, aimed at mitigating interest rate risk[341]. Financial Performance - Net income increased by $26,027,000, or 13.0%, to $226,068,000 for the year ended September 30, 2025, compared to $200,041,000 for the prior year[318]. - Net interest income for the year ended September 30, 2025, was $654,235,000, a decrease of $6,597,000 or 1.0% from the previous year, with a net interest margin of 2.58%[319]. - Non-interest income increased by $10,555,000, or 17.4%, to $71,247,000 for the year ended September 30, 2025, driven by higher prepayment fees and commission income from WaFd Insurance[323]. - Total non-interest expense decreased by $20,809,000, or 4.6%, to $427,463,000 in 2025, influenced by a reduction in compensation costs and FDIC premiums[324]. - The Company's efficiency ratio improved to 58.9% in 2025 from 62.1% in 2024, with total operating expenses as a percentage of average assets decreasing to 1.58% from 1.71%[325]. Deposits and Borrowings - Customer deposits totaled $21,437,636,000 as of September 30, 2025, reflecting a $63,666,000, or 0.3%, increase from $21,373,970,000 in the prior year[308]. - Transaction accounts increased by $489,347,000, or 4.1%, while time deposits decreased by $425,681,000, or 4.5%[308]. - Total borrowings decreased to $1,765,604,000 as of September 30, 2025, from $3,267,589,000 at the same date in 2024, with a weighted average rate of 2.50%[317]. - The Company has a credit line with the FHLB - DM providing $6,647,214,000 of additional borrowing capacity as of September 30, 2025[332]. Interest Rate and Asset Management - The interest rate spread improved to 2.32% as of September 30, 2025, up from 1.91% a year earlier, with the weighted-average rate on interest-earning assets decreasing by 12 basis points to 5.23%[350]. - Average interest-earning assets increased by 3.2% to $25,337,814,000 for the year ended September 30, 2025, compared to $24,559,665,000 for the previous year[354]. - Average interest-bearing customer deposit accounts rose by $2,408,182,000, or 14.7%, while average borrowings decreased by $1,819,187,000, or 42.9%[355]. - The net interest margin decreased to 2.58% for the year ended September 30, 2025, down from 2.69% for the previous year, with the yield on interest-earning assets decreasing by 30 basis points[353]. - The company was in compliance with all of its interest rate risk policy limits as of September 30, 2025[349]. Tax and Equity - The effective tax rate for 2025 was 21.95%, slightly up from 21.88% in 2024, with income tax expense increasing by $7,559,000, or 13.5%[327]. - Shareholders' equity increased to $3,039,575,000, or 11.38% of total assets, compared to $3,000,300,000, or 10.69% of total assets, in 2024, with 82.5% of net income returned to shareholders[331].