WASHINGTON FEDERAL INC
WAFD 10-K Fiscal year ended Sept. 30, 2025
WASHINGTON FEDERAL INC
10-Ks and 10-Qs
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United States
Securities and Exchange Commission
Washington, D.C. 20549
____________________________________________________________
FORM
10-K
____________________________________________________________
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For the fiscal year ended
September 30
, 2025
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
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For the transition period from to
Commission File Number:
001-34654
____________________________________________________________
(Exact name of registrant as specified in its charter)
____________________________________________________________
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(State or other jurisdiction of incorporation or
organization)
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(I.R.S. Employer Identification No.)
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(Address of Principal Executive Offices)
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(Zip Code)
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Registrant’s telephone number, including area code: (
206
)
624-7930
_____________________________________
Securities registered pursuant to Section 12(b) of the Act:
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Title of each Class
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Trading Symbol(s)
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Name of each exchange on which registered
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Depositary Shares, Each Representing a
1/40th Interest in a Share of 4.875% Fixed
Rate Series A Non-Cumulative Perpetual
Preferred Stock
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Securities registered pursuant to section 12(g) of the Act:
None
____________________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes
☒
No
☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
☐
No
☒
Indicate by check mark whether the registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the
past 90 days.
Yes
☒
No
☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such
files).
Yes
☒
No
☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an
emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in
Rule 12b-2 of the Exchange Act.
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Accelerated filer
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☐
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Non-accelerated filer
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Smaller reporting company
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Emerging growth company
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its
audit report.
Yes
☒
No
☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing
reflect the correction of an error to previously issued financial statements.
☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by
any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).
☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
☐
No
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The aggregate market value of the registrant's common stock ("Common Stock") held on
March 31, 2025
, the last business day of the registrant's second fiscal
quarter by non-affiliates was
$
2,276,388,597
based on the NASDAQ Stock Market closing price of
$28.58
per share on that date. This is based on
79,649,706
shares of Common Stock that were issued and outstanding on this date, which excludes
1,108,968
shares held by all affiliates.
At
November 14, 2025
, there were
76,701,002
shares of Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the Registrant’s definitive proxy statement for its Annual Meeting of Shareholders to be held on
February 3, 2026
are incorporated into Part III,
Items 10-14 of this Form 10-K.
WAFD, INC. AND SUBSIDIARIES
FORM 10-K ANNUAL REPORT
SEPTEMBER 30,
2025
PART I
PART II
PART III
PART IV
4
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS AND RISK FACTOR SUMMARY
WaFd, Inc. ("we" or the "Company") makes statements in this Annual Report on Form 10-K that constitute forward-
looking statements. Words such as “expects,” “anticipates,” “believes,” “estimates,” “intends,” “forecasts,” “projects” and other
similar expressions or future or conditional verbs such as “will,” “should,” “would” and “could” are intended to help identify
such forward-looking statements. These statements are not historical facts, but instead represent current expectations, plans or
forecasts of the Company and are based on the beliefs and assumptions of the management of the Company and the information
available to management at the time that these disclosures were prepared. The Company intends for all such forward-looking
statements to be covered by the safe harbor provisions for forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995 and the provisions of Section 27A of the Securities Act of 1933 and Section 21E of
the Securities Exchange Act of 1934. These statements are not guarantees of future results or performance and involve certain
risks, uncertainties and assumptions that are difficult to predict and often are beyond the Company's control. Actual outcomes
and results may differ materially from those expressed in, or implied by, the Company's forward-looking statements.
You should not place undue reliance on any forward-looking statement and should consider the following uncertainties
and risks, as well as the risks and uncertainties discussed elsewhere in this report, including under Item 1A. “Risk Factors,” and
in any of the Company's other subsequent Securities and Exchange Commission filings, which could cause the Company's
future results to differ materially from the plans, objectives, goals, estimates, intentions and expectations expressed in forward-
looking statements:
Operational Risks:
•
fluctuating interest rates and the impact of inflation on the Company's business and financial results;
•
risks associated with cybersecurity incidents and threat actors;
•
risks associated with changes in business structure and divestitures of lines of business, including the Bank's exit from
the single family mortgage lending market;
•
economic uncertainty or a deterioration in economic conditions or slowdowns in economic growth, including financial
stress on borrowers (consumers and businesses);
•
risks associated with changes to monetary policy by the Federal Reserve;
•
global economic trends, including developments related to Ukraine and Russia, the Middle East, and related negative
financial impacts on our borrowers, the financial markets and the global economy;
•
risks associated with inflationary pressures and rising prices;
•
risks associated with the development and use of artificial intelligence;
•
risks related to operational, technological, and third-party provided technology infrastructure;
•
risks associated with data privacy laws and regulations;
•
possible additional provisions for loan losses and charge-offs; credit risks of lending activities and deterioration in
asset or credit quality; and our ability to make accurate assumptions and judgments about the collectability of our loan
portfolio, including the creditworthiness of our borrowers and the value of the assets securing these loans;
•
risks associated with failures of our risk management framework;
•
risks associated with our failure to retain or attract key employees;
•
risks related to the impacts of climate change on our business or reputation;
•
the effects of natural or man-made disasters, calamities, or conflicts, including terrorist events and pandemics (such as
the COVID-19 pandemic), related regulations, and potential impacts on the creditworthiness of our customers;
Regulatory and Litigation Risk:
•
non-compliance with the Community Reinvestment Act, USA PATRIOT Act, Bank Secrecy Act, Home Mortgage
Disclosure Act, or other laws and regulations;
•
legislative and regulatory limitations, and potential limitations in the manner in which the Company conducts its
business and undertakes new investments and activities;
•
risks associated with changes in regulation, regulatory capital requirements or regulatory oversight, accounting rules,
and laws;
•
risks associated with increases to deposit insurance premiums or special assessments;
•
litigation risks resulting in significant expenses, losses and reputational damage;
•
environmental risks resulting from our real estate lending business;
Market and Industry Risk:
•
eroding confidence in the banking system and regional banks in particular;
•
downturns in the real estate market;
5
•
changes in banking operations, including a shift from retail to online activities;
•
risks associated with inadequate or faulty underwriting and loan collection practices;
•
risks associated with our geographic concentration, including the effects of a severe economic downturn, including
high unemployment rates and declines in housing prices and both commercial and residential property values, in our
primary market areas;
•
impairment of goodwill and other intangible assets;
Competitive Risks:
•
competition from other financial institutions and new market participants, offering services similar to those offered by
the Bank, and consolidation in the industry resulting in the creation of larger competitors with greater financial
resources;
•
the ability of the Company to obtain external financing to fund its operations or obtain financing on favorable terms,
when needed;
•
our ability to grow organically or through acquisitions;
•
risks associated with our entry into the California market;
Security Ownership Risks:
•
negative effects of activist shareholders;
•
our ability to continue to pay dividends, including on our outstanding Series A Preferred Stock; and make stock
repurchases;
•
risks related to the volatility of our Common Stock, and future dilution;
•
risks related to Washington's anti-takeover statute;
General Risks:
•
the success of the Company at managing the risks involved in the foregoing and managing its business; and
•
the timing and occurrence or non-occurrence of events that may be subject to circumstances beyond the Company's
control.
For the reasons described above, we caution you against relying on any forward-looking statements. You should not
consider the summary of such factors to be an exhaustive statement of all risks, uncertainties, or potentially inaccurate
assumptions that could cause our current expectations or beliefs to change. Further, all
forward-looking statements speak only
as of the date on which such statements are made, and the Company undertakes no obligation to update or revise any forward-
looking statements to reflect changed assumptions, the occurrence of unanticipated events, changes to future operating results
over time, or the impact of circumstances arising after the date the forward-looking statement was made.
6
Item 1. Business
General
WaFd Bank, a federally-insured Washington state chartered commercial bank formerly known as Washington Federal Bank
(the "Bank" or "WaFd Bank"), was founded on April 24, 1917 in Ballard, Washington and is engaged primarily in providing
lending, depository, insurance and other banking services to consumers, small, mid-sized and large businesses, and owners and
developers of commercial real estate. Effective September 25, 2025, the Bank formally changed its name from Washington Federal
Bank to WaFd Bank by filing its Second Amended and Restated Articles of Incorporation with the Washington Secretary of State.
WaFd, Inc., a Washington corporation, was formed as the Bank’s holding company in November, 1994. As used throughout this
document, the terms "WaFd," the "Company" or "we" or "us" and "our" refer to WaFd, Inc. and its consolidated subsidiaries, and
the term "Bank" or "WaFd Bank" refers to its bank operating subsidiary. The Company is headquartered in Seattle, Washington.
On November 9, 1982 the Company listed and began trading on the NASDAQ. Profitable operations have been recorded
every year since going public. As of
September 30, 2025
, the stock traded at
82
times its original 1982 offering price, has paid
170
consecutive quarterly cash dividends and has returned
14,253%
total shareholder return to those who invested
43
years ago.
On February 29, 2024, WaFd, Inc. closed its merger with Luther Burbank Corporation ("Luther Burbank" or "LBC"), a
California corporation, effective as of 12:00am on March 1, 2024. Pursuant to the Merger Agreement, at the Effective Time Luther
Burbank merged with and into the Company (the “Corporate Merger”), with the Company surviving the Corporate Merger.
Promptly following the Corporate Merger, Luther Burbank’s wholly-owned bank subsidiary, Luther Burbank Savings, merged with
and into WaFd Bank with WaFd Bank as the surviving institution (the “Bank Merger”). The Corporate Merger and the Bank Merger
are collectively referred to in this Annual Report on Form 10-K as the “Merger.” The Merger added approximately $7.7 billion of
LBC assets at fair value to the Company's balance sheet, and the Company assumed $50,175,000 in floating rate junior subordinated
debentures, due June 2036 and June 2037, and $93,514,000 in 6.5% senior unsecured term notes which matured and were paid off
on September 30, 2024. The Merger expanded WaFd Bank's footprint to nine western states with the addition of ten California
branches of Luther Burbank.
The Company's fiscal year end is September 30th. All references herein to
2025
,
2024
and
2023
represent balances as of
September 30, 2025
,
September 30, 2024
and
September 30, 2023
, respectively, or activity for the fiscal years then ended.
The business of the Bank consists primarily of accepting deposits from the general public and investing these funds in loans of
various types, including construction loans, land acquisition and development loans, loans on multi-family, commercial real estate
and other income producing properties, and business loans, including U.S. Small Business Administration (“SBA”) loans. In
January, 2025, the Bank announced it will no longer originate consumer single family home loans and home equity lines of credit.
Our existing consumer home loans still make up a significant portion of our loan portfolio. The Bank also invests in certain United
States government and agency obligations and other investments permitted by applicable laws and regulations. As of
September 30,
2025
, WaFd Bank has
208
branches located in Washington, Oregon, Idaho, Arizona, Utah, Nevada, New Mexico, California and
Texas. The Bank delivers its financial products and services to customers through both its branch network and digital channels,
including its website and mobile banking application (information contained on our website and mobile application are not
incorporated by reference into this Annual Report on Form 10-K). The Company is also engaged in insurance brokerage activities
through the Bank’s subsidiary, WaFd Insurance Group, Inc., and wealth management products and services through WaFd Wealth,
Inc., a subsidiary of the Company.
The principal sources of funds for the Company's activities are retained earnings, loan repayments, net deposit inflows,
borrowings and repayments and sales of investments. WaFd's principal sources of revenue are interest on loans and interest and
dividends on investments. Its principal expenses are interest paid on deposits, credit costs, general and administrative expenses,
interest on borrowings and income taxes.
The Bank is subject to extensive regulation, supervision and examination by its primary state regulator, the Washington
State Department of Financial Institutions (the "WDFI"), the Federal Deposit Insurance Corporation ("FDIC"), its primary federal
regulator, which insures its deposits up to applicable limits, and the Consumer Financial Protection Bureau (the "CFPB"). The
Company, as a bank holding company, is subject to extensive regulation, supervision and examination by the Board of Governors of
the Federal Reserve System ("Federal Reserve").
The regulatory structure gives the regulatory authorities extensive discretion in connection with their supervisory and
enforcement activities. Any change in such regulation, whether by the WDFI, the FDIC, the Federal Reserve, the CFPB or the U.S.
Congress, could have a significant impact on the Company and its operations. See “WaFd Bank, wholly-owned operating subsidiary
— Regulation” section below.
7
Lending Activities
The Company's net loan portfolio totaled
$20,088,618,000
at
September 30, 2025
and represents
75.2%
of total assets. Lending activities include the origination of
commercial loans secured by real estate, adjustable-rate construction loans, adjustable-rate land development loans, fixed-rate and adjustable-rate multi-family loans, fixed-
rate and adjustable-rate commercial real estate loans and fixed-rate and adjustable-rate business loans. Beginning in January 2025, the Bank announced it will no longer
originate consumer single family home loans and home equity lines of credit, however, existing consumer home loans still make up a significant portion of our loan
portfolio.
The following table is a summary of loans receivable by loan portfolio segment and class.
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September 30, 2025
|
September 30, 2024
|
September 30, 2023
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($ in thousands)
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|||||
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Gross loans by category
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Commercial loans
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Multi-family
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$
4,718,480
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22.2
%
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$
4,658,119
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20.8
%
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$
2,907,086
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14.8
%
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Commercial real estate
|
3,604,600
|
16.9
|
3,757,040
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16.8
|
3,344,959
|
17.0
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|
Commercial & industrial
|
2,392,685
|
11.2
|
2,337,139
|
10.5
|
2,321,717
|
11.8
|
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Construction
|
1,756,890
|
8.3
|
2,174,254
|
9.7
|
3,318,994
|
16.9
|
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Land - acquisition & development
|
179,099
|
0.8
|
200,713
|
0.9
|
201,538
|
1.0
|
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Total commercial loans
|
12,651,754
|
59.5
|
13,127,265
|
58.7
|
12,094,294
|
61.6
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Consumer loans
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Single-family residential
|
8,053,771
|
37.9
|
8,399,030
|
37.6
|
6,451,270
|
32.8
|
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Construction - custom
|
150,237
|
0.7
|
384,161
|
1.7
|
672,643
|
3.4
|
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Land - consumer lot loans
|
89,298
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0.4
|
108,791
|
0.5
|
125,723
|
0.6
|
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HELOC
|
267,871
|
1.3
|
266,151
|
1.2
|
234,410
|
1.2
|
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Consumer
|
61,461
|
0.3
|
73,998
|
0.3
|
70,164
|
0.4
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Total consumer loans
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8,622,638
|
40.5
|
9,232,131
|
41.3
|
7,554,210
|
38.4
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Total gross loans
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21,274,392
|
100
%
|
22,359,396
|
100
%
|
19,648,504
|
100
%
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Less:
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Allowance for credit losses
(1)
|
199,720
|
203,753
|
177,207
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Loans in process
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773,606
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1,009,798
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1,895,940
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Net deferred fees, costs and discounts
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212,448
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229,491
|
98,807
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Total loan contra accounts
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1,185,774
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1,443,042
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2,171,954
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Net loans
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$
20,088,618
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$
20,916,354
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$
17,476,550
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__________________
(1) The ACL within the table does not include the reserve for unfunded commitments which was
$21,500,000
,
$21,500,000
and
$24,500,000
as of
September 30, 2025
,
2024
and
2023
, respectively.
8
Lending Programs and Policies.
The Bank's lending activities include commercial and consumer loans, including the
following loan categories.
Commercial real estate loans
. The Bank makes loans on a variety of commercial real estate (“CRE”) types which are
generally secured by the subject property. Management differentiates multi-family properties from the rest of our CRE
portfolio as these loans have key differences in their risk profile.
The following table provides detail of the amortized cost of non-multi family CRE loans by property type:
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September 30, 2025
|
September 30, 2024
|
September 30, 2023
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($ in thousands)
|
|||
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Office
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$
802,868
|
$
783,363
|
$
815,776
|
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Industrial
|
816,758
|
705,401
|
591,507
|
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Retail
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356,229
|
399,276
|
377,300
|
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Warehouse/Self Storage
|
293,693
|
295,275
|
252,677
|
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Medical/dental
|
231,622
|
265,495
|
198,208
|
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Mixed Use
|
188,298
|
229,351
|
232,564
|
|
Hotel/motel
|
192,148
|
205,895
|
228,503
|
|
Other
|
707,334
|
848,099
|
613,566
|
|
Total commercial real estate loans
|
$
3,588,950
|
$
3,732,155
|
$
3,310,101
|
Within the types listed above, a CRE subject property could be either owner or non-owner occupied. The following table
provides the amortized cost of CRE loans by occupation status:
|
|
September 30, 2025
|
September 30, 2024
|
September 30, 2023
|
|||
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($ in thousands)
|
||||||
|
Non-owner occupied
|
$
2,988,265
|
83
%
|
$
3,130,637
|
84
%
|
$
2,715,693
|
82
%
|
|
Owner occupied
|
600,685
|
17
%
|
601,518
|
16
%
|
594,408
|
18
%
|
|
Total commercial real estate loans
|
$
3,588,950
|
100
%
|
$
3,732,155
|
100
%
|
$
3,310,101
|
100
%
|
In underwriting, the Bank considers a number of factors, which include the historic and projected net cash flows to the
loan's debt service requirement, the age and condition of the collateral, the financial resources and income level of the borrower
and the borrower's experience in owning or managing similar properties. CRE loans are originated in amounts up to 75% of the
appraised value of the property securing the loan.
With CRE loans, credit risk is a result of several factors, including the concentration of principal in a limited number of
loans and borrowers, the effects of general economic and societal conditions on income-producing properties and the primary
source of cash flow for repayment being spread across multiple tenants (non-owner). Repayment of CRE loans depends upon
the successful operation of the related real estate property. If the cash flow from the property is reduced, the borrower's ability
to repay the loan may be impaired. The Bank seeks to minimize these risks through its underwriting policies, which require
such loans to be qualified at origination on the basis of the property's income and debt service ratio.
Multi-family residential loans
. Multi-family residential (five or more dwelling units) loans generally are secured by
multi-family rental properties, such as apartment buildings. In underwriting multi-family residential loans, the Bank considers
the same factors considered for CRE loans. Like CRE, multi-family residential loans are originated in amounts up to 75% of the
appraised value of the property securing the loan.
Loans secured by multi-family residential real estate generally involve different credit risk than single-family residential
loans and carry larger loan balances. This different credit risk is a result of several factors, including the concentration of
principal in a limited number of loans and borrowers, the effects of general economic and societal conditions on income-
9
producing properties, the primary source of cash flow for repayment being spread across multiple tenants, the effects of
government orders such as eviction forbearance and the increased difficulty of evaluating and monitoring these types of loans.
It is the Bank's policy to obtain title insurance ensuring that it has a valid first lien on the mortgaged real estate serving as
collateral for the loan. Borrowers must also obtain hazard insurance prior to closing and, when required by regulation, flood
insurance. Borrowers may be required to advance funds on a monthly basis, together with each payment of principal and
interest, to a mortgage escrow account from which the Bank makes disbursements for items such as real estate taxes, hazard
insurance premiums and private mortgage insurance premiums when due.
Commercial and industrial loans
. The Bank makes various types of business loans to customers in its market area for
working capital, acquiring real estate, SBA program financing, financing equipment or other business purposes, such as
acquisitions. The terms of these loans generally range from less than one year to a maximum of ten years. The loans are either
negotiated on a fixed-rate basis or carry adjustable interest rates indexed to the Secured Overnight Funding Rate ("SOFR"),
Prime Rate or another market rate.
Commercial loans are made based upon assessment of the borrower's ability and willingness to repay along with an
evaluation of secondary repayment sources such as the value and marketability of collateral. Most such loans are extended to
closely held businesses and the personal guaranty of the principal is usually obtained. Commercial loans have a relatively high
risk of default compared to residential real estate loans. Pricing of commercial loans is based on the credit risk of the borrower
with consideration given to the overall relationship of the borrower, including deposits and contributed equity/loan-to-value
ratio. The acquisition of business deposits is an important focus of this business line. The Bank provides a full line of treasury
management products to support the depository needs of its customers.
Construction loans
. The Bank originates construction loans to finance construction of single-family and multi-family
residences as well as commercial properties. Loans made to builders are generally tied to an interest rate index and normally
have maturities of two years or less or are structured such that they convert to a permanent loan after the completion of
construction or stabilization of the property. Legacy loans made to individuals for construction of their home generally are 30-
year fixed rate loans. The Bank's policies provided that for residential construction loans, loans may be made for 85% or less of
the construction cost or 80% of the appraised value of the property upon completion, whichever is less. As a result of activity
over the past four decades, the Bank believes that builders of single-family residences in its primary market areas consider the
Bank to be a construction lender of choice. Because of this history, the Bank has developed a staff with in-depth land
development and construction experience and working relationships with selected builders based on their operating histories
and financial stability.
Construction lending involves a higher level of risk than single-family residential lending due to the concentration of
principal in a limited number of loans and borrowers and the effects of general economic conditions in the home building
industry. Moreover, a construction loan can involve additional risks because of the complexities of completing the
construction, the inherent difficulty in estimating the cost (including interest) of the project, the future cash flows and the
property's value at completion of the project.
Land development loans
. The Bank's land development loans are of a short-term nature and are generally made for 75%
or less of the appraised value of the unimproved property. Funds are disbursed periodically at various stages of completion as
authorized by the Bank's personnel. The interest rate on these loans typically adjust daily or monthly in accordance with a
designated index.
Land development loans involve a higher degree of credit risk than long-term financing on owner-occupied real estate.
Mitigation of risk of loss on a land development loan is dependent largely upon the accuracy of the initial estimate of the
property's value at completion of development compared to the estimated cost (including interest) of development and the
financial strength of the borrower.
Consumer loans
. The Bank's non-mortgage consumer loan portfolio consists of prime quality student loans acquired
from an independent financial investment firm that retains 1% of each loan, plus various other non-mortgage consumer loans
including personal lines of credit and credit cards.
Single-family residential loans
. In January 2025, the Bank announced its exit from the single-family mortgage lending
market, including home equity lines of credit ("HELOC"). Prior to this exit, the Bank originated 30-year fixed-rate mortgage
loans and HELOCs secured by single-family residences. Mortgage lending prior to exit was subject to written,
nondiscriminatory underwriting standards, loan origination procedures and lending policies approved by the Company's Board
of Directors (the "Board"). Although the Bank is no longer originating these loans, there are currently no plans to sell loans
from the existing portfolio.
10
Property valuations were required on all real estate loans. Appraisals were prepared by independent appraisers, reviewed
by staff of the Bank, and approved by the Bank's management. Property evaluations were sometimes utilized in lieu of
appraisals on single-family real estate loans of $250,000 or less and were reviewed by the Bank's staff. Detailed loan
applications were obtained to determine the borrower's ability to repay and the more significant items on these applications are
verified through the use of credit reports, financial statements or written confirmations.
Depending on the size of the loan involved, a varying number of officers of the Bank must approve the loan application
before the loan could be granted. Federal guidelines limit the amount of a real estate loan made to a specified percentage of the
value of the property securing the loan, as determined by an evaluation at the time the loan is originated. This is referred to as
the loan-to-value ratio. The Board sets the maximum loan-to-value ratios for each type of real estate loan offered by the Bank.
When establishing general reserves for loans with loan-to-value ratios exceeding 80% that are not insured by private
mortgage insurance, the Bank considers the additional risk inherent in these products, as well as their relative loan loss
experience, and provides reserves when deemed appropriate. The total balance for loans with loan-to-value ratios exceeding
80% at origination as of
September 30, 2025
, was
$136,605,000
, with allocated reserves of
$1,256,000
.
Origination and Purchase of Loans.
The Bank has general authority to lend anywhere in the United States; however, its
primary lending areas are within the states of Washington, Oregon, Idaho, Arizona, Utah, Nevada, New Mexico, California and
Texas. Loan originations come from a variety of sources, although most business purpose loans are obtained primarily by
direct solicitation of borrowers and ongoing relationships.
The Bank also purchases loans and mortgage-backed securities when lending rates and volume for new loan
originations in its market area do not fulfill its needs.
11
The table below shows the Bank's total loan origination, purchase and repayment activities.
|
Twelve Months Ended September 30,
|
2025
|
2024
|
2023
|
||
|
|
(In thousands)
|
||||
|
Commercial loan originations
(1)
|
|||||
|
Multi-family
|
$
104,035
|
$
60,730
|
$
136,788
|
||
|
Commercial Real Estate
|
384,749
|
246,930
|
223,361
|
||
|
Commercial & Industrial
|
1,667,064
|
1,677,371
|
2,032,460
|
||
|
Construction
|
1,038,182
|
603,829
|
1,046,971
|
||
|
Land – Acquisition & Development
|
94,864
|
45,406
|
34,946
|
||
|
Total commercial loans
|
3,288,894
|
2,634,266
|
3,474,526
|
||
|
Consumer loan originations
(1)
|
|||||
|
Single-family residential
|
211,686
|
430,272
|
610,130
|
||
|
Construction – custom
|
95,835
|
209,781
|
346,784
|
||
|
Land – Consumer Lot Loans
|
7,340
|
21,187
|
21,133
|
||
|
HELOC
|
145,501
|
161,917
|
154,030
|
||
|
Consumer
|
206,943
|
174,648
|
95,553
|
||
|
Total consumer loans
|
667,305
|
997,805
|
1,227,630
|
||
|
Total loans originated
|
3,956,199
|
3,632,071
|
4,702,156
|
||
|
Loans purchased
(3)
|
113,069
|
6,207,393
|
80,015
|
||
|
Loans sold
(4)
|
—
|
(3,017,506)
|
—
|
||
|
Loan principal repayments
|
(5,145,176)
|
(4,302,359)
|
(4,435,269)
|
||
|
Net change in loans in process, discounts, etc.
(2)
|
248,172
|
920,205
|
1,016,084
|
||
|
Net loan activity increase (decrease)
|
$
(827,736)
|
$
3,439,804
|
$
1,362,986
|
||
|
Beginning balance
|
$
20,916,354
|
$
17,476,550
|
$
16,113,564
|
||
|
Ending balance
|
$
20,088,618
|
$
20,916,354
|
$
17,476,550
|
||
___________________
(1)
Includes undisbursed loan in process.
(2)
Includes non-cash transactions.
(3)
Loans purchased in fiscal 2024 refer to those obtained in the Merger
(4)
Loans sold in fiscal 2024 refer to multi-family and single-family residential loans obtained in the Merger and were classified as held
for sale.
Interest Rates, Loan Fees and Service Charges.
Interest rates charged by the Bank on loans are primarily determined by the
competitive loan rates offered in its lending areas and in the secondary market. Loan rates reflect factors such as general interest
rates, the supply of money available to the industry and the demand for such loans. General economic conditions, the regulatory
programs and policies of federal and state agencies, including the Federal Reserve Bank’s monetary policies, changes in tax
laws and governmental budgetary programs influence these factors.
The Bank receives fees for originating loans in addition to various fees and charges related to existing loans, including
prepayment charges, late charges and assumption fees. The Bank normally charges an origination fee and as part of the loan
application, the borrower paid the Bank for out-of-pocket costs, such as the appraisal fee, whether or not the borrower closes
the loan. The interest rate charged is normally the prevailing rate at the time the loan application is approved and accepted.
Investment Activities
The Bank is obligated by its regulators to maintain adequate liquidity and does so by holding cash and cash equivalents
and by investing in securities. These investments may include, among other things, certain certificates of deposit, repurchase
agreements, bankers’ acceptances, loans to financial institutions whose deposits are federally-insured, federal funds, corporate
and municipal debt, United States government and agency obligations and mortgage-backed securities.
12
Sources of Funds
General.
Deposits are the primary source of the Bank’s funds for use in lending and other general business purposes. In
addition to deposits, the Bank derives funds from loan repayments, advances from the Federal Home Loan Bank of Des Moines
("FHLB - DM"), borrowings from the Federal Reserve Bank ("FRB"), and from investment repayments and sales. Loan
repayments are a relatively stable source of funds influenced by prevailing market rates that drive refinancing activity, while
deposit inflows and outflows are influenced by both market and offered interest rates, money market conditions, the availability
of FDIC insurance and the market perception of the Company’s financial stability. Borrowings may be used on a short-term
basis to compensate for reductions in normal sources of funds, such as deposit inflows at lower than projected levels.
Borrowings may also be used on a longer-term basis to support expanded activities and to manage interest rate risk. Borrowing
capacity and availability is influenced by interest rates, market conditions, availability of collateral and the market's perception
of the Bank's financial stability.
Deposits.
The Bank relies on a mix of deposit types, including business and personal checking accounts, term certificates of
deposit, and other savings deposit alternatives that have no fixed term, such as money market accounts and passbook savings
accounts. The Bank offers several consumer checking account products, both interest bearing and non-interest bearing and
several business checking accounts, some of which target small businesses with relatively simple and straightforward banking
needs and some for larger, more complex business depositors with an account that prices monthly based on the volume and type
of activity. Savings and money market accounts are offered to both businesses and consumers, with interest paid after certain
threshold amounts are exceeded.
The Bank’s deposits are obtained primarily from residents of Washington, Oregon, Idaho, Arizona, Utah, Nevada, New
Mexico, California and Texas.
Borrowings.
The Bank has a credit line with the FHLB - DM for up to
45%
of total assets depending on specific collateral
eligibility. The Bank obtains advances from the FHLB - DM based upon the security of the FHLB capital stock it owns and
certain of its loans, provided certain standards related to credit worthiness have been met. Such advances are made pursuant to
several different credit programs. Each credit program has its own interest rate and range of maturities, and the FHLB - DM
prescribes acceptable uses to which the advances pursuant to each program may be put, as well as limitations on the size of such
advances. Depending on the program, such limitations are based either on a fixed percentage of assets or the Company's credit
worthiness. FHLB advances are used to meet seasonal and other withdrawals of deposit accounts and to fund expansion of the
Bank's lending.
The Bank may need to borrow funds for short periods of time to meet day-to-day financing needs. In these instances,
funds are borrowed from other financial institutions or the Federal Reserve Bank, for periods generally ranging from one to
seven days at the then current borrowing rate.
The Bank also participates in the FRB of San Francisco Borrower-in-Custody program which collateralizes primary credit
borrowings and serves as a backstop for the FHLB - DM credit line. Due to differing program requirements between the FHLB
- DM and FRB of San Francisco, participating in both increases the amount of eligible collateral that may be pledged in support
of contingent liquidity needs.
The Bank Merger with LBC provided a credit line with the Federal Home Loan Bank of San Francisco (FHLB - SF) in
support of LBC borrowings, but the Bank is unable to take down new advances against this line as the Bank is not allowed to
belong to more than one FHLB. The FHLB - SF credit line is secured by a line-item pledge of securities.
For further information on these activities, see
Note L to the Consolidated Financial Statements in “Item 8. Financial
Subsidiaries
The Company is a bank holding company that conducts its primary business through its wholly-owned subsidiary, WaFd
Bank. The Company has nine active direct and indirect wholly-owned subsidiaries, discussed further below.
WAFD Insurance Group, Inc.
is incorporated under the laws of the state of Washington and is an insurance agency that
offers a full line of individual and business insurance policies to customers of the Bank, as well as to the general public. As of
September 30, 2025
and
September 30, 2024
, WAFD Insurance Group, Inc. had total assets of
$22,465,000
and
$23,174,000
,
respectively.
13
Statewide Mortgage Services Company
is incorporated under the laws of the state of Washington and it holds and
markets real estate owned. As of
September 30, 2025
and
September 30, 2024
, Statewide Mortgage Services Company had
total assets of
$2,472,000
and
$2,506,000
, respectively.
Washington Services, Inc.
is incorporated under the laws of the state of Washington. It acts as a trustee under deeds of
trust as to which the Bank is beneficiary. As of both
September 30, 2025
and
September 30, 2024
, Washington Services, Inc.
had total assets of
$13,000
.
WAFD Wealth, Inc.
is a subsidiary of the Company and is incorporated under the laws of the state of Deleware and offers
personalized financial guidance and investment services. As of
September 30, 2025
, WAFD Wealth, Inc. had total assets of
$4,784,000
. WAFD Wealth was not a subsidiary as of
September 30, 2024
.
Pike Street Labs, Inc.
is incorporated under the laws of the state of Washington. It provides technology and data services
to the Bank. As of
September 30, 2025
, Pike Street Labs, Inc. had total assets of
$4,644,000
. Pike Street Labs, Inc. was not a
subsidiary as of
September 30, 2024
.
The Company also owns Burbank Financial Inc., an inactive real estate investment company, and all the common interests
in Luther Burbank Statutory Trusts I and II, entities created to issue trust preferred securities that were acquired in connection
with the Merger. The Company also obtained in the Merger with LBC a LIHTC investment in Raymond James Housing
Opportunities Fund 76 LLC, a Florida limited liability company. WaFd is the only investor member and is allocated 99.99% of
any tax credits and operating profits and losses from the LLC but the day-today management and control is in the hands of the
management member, and affiliate of Raymond James Financial, Inc.
Human Capital
At WaFd Bank, our culture is defined by our corporate values of integrity, teamwork, ownership, simplicity, service and
discipline. We value our employees by investing in a healthy work-life balance, competitive compensation and benefit packages
and a vibrant, team-oriented environment centered on professional service and open communication amongst employees. We
strive to build and maintain a high-performing culture and be an “employer of choice” by creating a work environment that
attracts and retains outstanding, engaged employees who embody our company mantra of “Love what you do. Make a
difference.”
Demographics.
As of
September 30, 2025
, we employed 2037 full and part time employees. None of these employees
are represented by a collective bargaining agreement. During fiscal year
2025
we hired
441
employees. Our voluntary turnover
rate was
18.12%
in fiscal year
2025
, an increase from
15.80%
in
2024
.
As of
September 30, 2025
, the population of our workforce was as follows:
Headcount by Ethnicity & Gender 2025
14
Learning and Development.
We invest in the growth and development of our employees by providing a multi-
dimensional approach to learning that empowers, intellectually grows, and professionally develops our colleagues. Our
employees, including leadership, receive continuing education courses that are relevant to the banking industry and their job
function within the Company. All new employees attend our two-day new hire orientation, Welcome to WaFd. In addition, we
offer our Education Tuition Assistance Program, designed to encourage an employee's advancement and growth. We also offer
the Retail Bank Peer Mentor Program and branch banking certifications for our branch employees. These resources provide
employees with the skills they need to achieve their career goals, build management skills and become leaders within our
Company.
Compensation and Benefits.
We provide a competitive compensation and benefits program to help meet the needs of
our employees. In addition to salaries, these programs include annual bonuses, stock awards, a 401(k) Plan with an employer
matching contribution in addition to an employer annual contribution, healthcare and insurance benefits, health savings, flexible
spending accounts, paid time off, family leave and an employee assistance program.
Workplace Safety & Wellness.
We prioritize the importance of our employees’ health and the health of their families.
We offer healthcare plans where the Company pays a significant portion of the monthly premiums for employees and their
children. Our benefits program also includes a Health Savings Account ("HSA") option in addition to Flexible Spending
Accounts ("FSA"). We believe maintaining a competitive benefits program is a sound investment in attracting newcomers and
retaining loyal, dedicated and enthusiastic colleagues. Benefits we offer to employees include:
•
Health insurance including dental & vision.
•
Flexible spending plans for healthcare and childcare expenses.
•
Employer-paid life insurance & accidental death and dismemberment coverage.
•
Long-term disability insurance.
•
Employee assistance program to provide access to counseling and support well-being.
Corporate Social and Environmental Responsibility
We recognize the social and environmental responsibility that arises from the impact of our activities on peoples’ lives
and our community. The Company's Corporate and Social Environmental Policy integrates social, environmental and ethical
concerns into our daily business activities and our approach to stakeholder relationships. Through this policy, we strive to carry
out our banking activities in a responsible manner, placing the financial needs of our customers and economic health of our
communities at the core of our focus. Below is a summary of our community activities and financial contributions in
2025
.
15
The Company
General.
The Company is registered as a bank holding company and is subject to regulation, examination, supervision and
reporting requirements of the Federal Reserve Bank.
Regulation.
The Company operates in a highly regulated industry. The regulatory structure governing the Company’s
operations is designed primarily for the protection of the deposit insurance funds and consumers, and not to benefit our
shareholders. As part of this regulatory structure, the Company is subject to policies and other guidance developed by the
regulatory agencies with respect to capital levels, the timing and amount of dividend payments, the classification of assets and
the establishment of adequate loan loss reserves for regulatory purposes. Under this structure, regulators have broad discretion
to impose restrictions and limitations on the Company’s operations if they determine, among other things, that such operations
are unsafe or unsound, fail to comply with applicable law or are otherwise inconsistent with laws and regulations or with the
supervisory policies of these agencies.
Failure to comply with applicable laws and regulations can result in a range of sanctions and enforcement actions,
including the imposition of civil money penalties, formal agreements and cease and desist orders. In order to ensure the
Company's programs and operations are in compliance with regulatory requirements, the Company has and will continue to
incur significant costs in order to comply in accordance with its responsibilities.
For further information on regulatory matters, see
Note A to the Consolidated Financial Statements in “Item 8. Financial
Statements and Supplementary Data”
as well as the
"Risk Factors"
section of this report and the
"USA Patriot Act of 2001"
discussion
below.
Sections below include a description of certain laws and regulations that relate to the regulation of the Company and the
Bank. The description of these laws and regulations, and descriptions of laws and regulations contained elsewhere herein, do
not purport to be complete and are qualified in their entirety by reference to applicable laws and regulations.
Restrictions on Activities and Acquisitions.
Bank holding companies are subject to a variety of restrictions on their activities
and the acquisitions they can make. Generally, the activities or acquisition of a bank holding company that is not a financial
holding company are limited to those that constitute banking or managing or controlling banks or which are closely related to
banking. In addition, without the prior approval of the FRB, bank holding companies are generally prohibited from acquiring
more than 5% of the outstanding shares of any class of voting securities of a bank or bank holding company, taking any action
16
that causes a bank to become a subsidiary of the bank holding company, acquiring all or substantially all of the assets of a bank,
or merging with another bank holding company.
Control of Company or Bank.
Pursuant to the Change in Bank Control Act, (the “CIBC Act”) individuals, corporations or
other entities acquiring Company equity interests may, alone or together with other investors, be deemed to control a holding
company or a bank. If an acquisition is deemed to constitute control of the holding company or bank and is not subject to
approval under the Bank Holding Company Act or certain other statutes, such person or group will be required to file a notice
under the CIBC Act. Generally, ownership of, or power to vote, more than 25% of any class of voting securities constitutes
control. In the case of a bank or bank holding company the securities of which are registered with the SEC, ownership of or
power to vote more than 10% of any class of voting securities creates a presumption of control.
Source of Strength.
Under long-standing FRB policy, a bank holding company is expected to serve as a source of financial and
management strength to its subsidiary bank. Under this policy, a bank holding company is expected to stand ready to provide
adequate capital funds to its subsidiary bank during periods of financial adversity and to maintain financial flexibility and
capital raising capacity to assist its subsidiary bank. The Dodd-Frank Act codified the source of strength doctrine by adopting a
statutory provision requiring, among other things, that bank holding companies serve as a source of financial strength to their
subsidiary banks.
Restrictions on Company Dividends.
The Company’s ability to pay dividends to its shareholders is affected by several
factors. Since the Company is a separate legal entity from the Bank and its subsidiaries and does not have significant operations
of its own, the Company may not be able to pay dividends to its shareholders if the Bank is unable to pay dividends to the
Company. The Bank’s ability to pay dividends is subject to various regulatory restrictions.
In addition, the Company’s ability to pay dividends is subject to rules and policies of the FRB. It is the policy of the
Federal Reserve that bank holding companies should pay cash dividends only out of income available over the past year and
only if prospective earnings retention is consistent with the company’s expected future needs and financial condition. Capital
rules adopted by the Federal Reserve, effective January 2015, may limit the Company’s ability to pay dividends if the Company
fails to meet certain requirements under the rules. In addition, if we do not or are unable to pay quarterly dividends on our
Series A Preferred Stock, we may not pay a dividend to the holders of our Common Stock. See “
WaFd Bank, wholly-owned
Since the Company is a Washington state corporation, it is also subject to restrictions under Washington corporate law
relating to dividends. Generally, under Washington law, a corporation may not pay a dividend if, after giving effect to the
dividend, the corporation would be unable to pay its liabilities as they become due in the ordinary course of business or the
corporation’s total assets would be less than the sum of its total liabilities plus (with some exceptions) the amount that would be
needed, if the corporation were to be dissolved at the time of the dividend payment, to satisfy the dissolution preferences of
senior equity securities.
Enterprise Risk Management.
The Company faces a number of risks, including credit risk, interest rate risk, liquidity risk,
operations risk, cybersecurity risk, regulatory risk, compliance and legal risk, strategic risk, and reputational risk. The Risk
Management Committee of the Board (“RMC”) establishes the Company's risk appetite and sets appropriate risk limits and
policies. The RMC is responsible for providing ongoing review, guidance and oversight of the Company's enterprise risk
management function. Management is responsible for managing the Company's risks on a day-to-day basis in accordance with
the policies established by the Board.
The Company's Chief Risk Officer (“CRO”) chairs the Enterprise Risk Management Committee (“ERMC”), a
management-level committee that is responsible for executing the risk management framework adopted by the Board. The
ERMC maintains enterprise-wide oversight of risk assessment, monitoring and reporting. The ERMC meets at least quarterly
to identify, evaluate, monitor, and account for new, existing and emerging risks to the Company. Identified risks are evaluated,
analyzed, prioritized and tracked by the ERMC in a manner to be compatible with effective internal controls, risk management
practices and the policies adopted by the Board. The ERMC develops risk management programs and processes to incorporate
risk considerations into day-to-day business activities across the Company’s risk categories, business lines and functions. To
support the ERMC’s risk management function, certain types of risks are overseen by other management level committees. For
example, the Company’s Asset Liability Committee is responsible for managing interest rate and liquidity risks and the credit
administration department tracks credit risks.
On at least a quarterly basis, the Company’s CRO, Chief Financial Officer, Chief Information Officer, Chief Information
Security Officer, Chief Credit Officer, and other members of management report directly to the RMC to provide reporting on
17
risk levels, key risks, emerging risks and the Company’s compliance with the risk management framework, risk limits and risk
appetites adopted by the RMC.
The Company carries out its risk management practices through its “three lines of defense” model, which is designed to
establish effective checks and balances within its risk management framework. The first line of defense is business units and
process owners within the Company which are responsible for maintaining effective internal controls and executing risk and
control procedures on a day to day basis. The second line of defense is the Company’s risk management, compliance and other
control functions which are responsible for ensuring that the first line of defense is properly designed, in place, and operating
effectively. The third line of defense is the Company’s internal audit function, which provides independent assessment and
assurance regarding the effectiveness of governance, risk management and internal controls.
WaFd Bank, wholly-owned operating subsidiary
General.
The Bank is a federally-insured Washington state chartered commercial bank. The WDFI is the Bank's primary state
regulator and the FDIC is its primary federal regulatory. The Bank is a member of the FDIC and its deposits are insured up to
applicable limits of the Depository Insurance Fund (“DIF”), which is administered by the FDIC.
Regulation.
The WDFI and FDIC have extensive authority over the operations of the Bank. As part of this authority, the Bank
is required to file periodic reports with and is subject to periodic examinations by both the WDFI and FDIC.
As a Washington
state chartered commercial bank with branches in the states of Washington, Oregon, Idaho, Utah, Nevada, Arizona, New
Mexico, California and Texas, the Bank is subject not only to the applicable laws and regulations of Washington State, but is
also subject to the applicable laws and regulations of these other states in which it does business. Various
laws and regulations
prescribe the investment and lending authority of the Bank, and the Bank is prohibited from engaging in any activities not
permitted by such laws and regulations. While the Bank has broad authority to engage in all types of lending activities, a variety
of restrictions apply to certain other investments by the Bank, as discussed below.
Interstate Banking
. Subject to certain limitations and restrictions, a bank holding company, with prior approval of the FRB,
may acquire an out-of-state bank; banks in states that do not prohibit out-of-state mergers may merge with the approval of the
appropriate federal banking agency, and a bank may establish a de novo branch out of state if such branching is permitted by
the other state.
Insurance of Deposit Accounts.
Under the Dodd-Frank Act, the maximum amount of federal deposit insurance coverage was
permanently increased from $100,000 to $250,000 per depositor, per institution. The Dodd-Frank Act also broadened the base
for FDIC insurance assessments. Assessments are now based on the average consolidated total assets less tangible equity capital
of a financial institution. In addition, the Dodd-Frank Act raised the minimum designated reserve ratio, which the FDIC is
required to set each year for the DIF, to 1.35%. The Dodd-Frank Act eliminated the requirement that the FDIC pay dividends to
depository institutions when the reserve ratio exceeds certain thresholds. The FDIC has established a higher reserve ratio of 2%
as a long-term goal beyond what is required by statute.
Brokered Deposits.
The Federal Deposit Insurance Act prohibits an insured depository institution from accepting brokered
deposits or offering interest rates on any deposits significantly higher than the prevailing rate in the bank’s normal market area
or nationally (depending upon where the deposits are solicited), unless it is well-capitalized or is adequately capitalized and
receives a waiver from the FDIC. A depository institution that is adequately capitalized and accepts brokered deposits under a
waiver from the FDIC may not pay an interest rate on any deposit in excess of national and local rate caps set by the FDIC and
published on its website.
Transactions with Affiliates; Insider Loans.
Under current federal law, all transactions between and among a bank and its
affiliates, including holding companies, are subject to Sections 23A and 23B of the Federal Reserve Act and Regulation W
promulgated thereunder. Generally, these requirements limit extensions of credit and certain other such transactions by the bank
to affiliates to a percentage of the institution's capital and generally such transactions must be collateralized. Generally, all
affiliate transactions must be on terms at least as favorable to the bank as transactions with non-affiliates. In addition, a bank
may not lend to any affiliate engaged in non-banking activities that are not permissible for a bank holding company or acquire
shares of any affiliate that is not a subsidiary. Federal law authorizes the imposition of additional restrictions on transactions
with affiliates if necessary to protect the safety and soundness of a bank.
Extensions of credit by a bank to executive officers, directors and principal shareholders are subject to Section 22(h) of
the Federal Reserve Act, which, among other things, generally prohibits loans to any such individual where the aggregate
amount exceeds an amount equal to 15% of an institution's unimpaired capital and surplus plus an additional 10% of
18
unimpaired capital and surplus in the case of loans that are fully secured by readily marketable collateral. Section 22(h) permits
loans to directors, executive officers and principal shareholders made pursuant to a benefit or compensation program that is
widely available to employees of a subject bank provided that no preference is given to any officer, director or principal
shareholder, or related interest thereto, over any other employee. In addition, the aggregate amount of extensions of credit by a
bank to all insiders cannot exceed the institution's unimpaired capital and surplus. Furthermore, Section 22(g) places additional
restrictions on loans to executive officers.
The affiliate transaction rules in Sections 23A and 23B of the Federal Reserve Act broaden the definition of affiliate and
apply these rules to securities lending, repurchase agreements and derivatives. These rules also strengthen collateral
requirements and limit Federal Reserve exemptive authority. Further, the definition of “extension of credit” for transactions
with executive officers, directors and principal shareholders includes credit exposure arising from a derivative transaction, a
repurchase or reverse repurchase agreement or a securities lending or borrowing transaction. These provisions have not had a
material effect on the Company or the Bank.
Restrictions on Dividends.
The amount of dividends payable by the Bank to the Company depends upon its earnings and
capital position, and is limited by federal and state laws, regulations and policies, including the capital conservation buffer
requirement. Federal law further provides that no insured depository institution may make any capital distribution (which
includes a cash dividend) if, after making the distribution, the institution would be “undercapitalized,” as defined in the prompt
corrective action regulations. Moreover, the federal bank regulatory agencies also have the general authority to limit the
dividends paid by insured banks if such payments should be deemed to constitute an unsafe and unsound practice. In addition,
under Washington law, no bank may declare or pay any dividend in an amount greater than its retained earnings without the
prior approval of the WDFI. WDFI also has the power to require any bank to suspend the payment of any and all dividends.
Federal Home Loan Bank System.
The Bank is a member of the Federal Home Loan Bank of Des Moines, which is one of 11
regional FHLBs that provide funding to their members for making home mortgage loans, as well as loans for affordable
housing and community development. Each FHLB serves members within its assigned region and is funded primarily through
proceeds derived from the sale of consolidated obligations of the FHLB system. Loans are made to members in accordance with
the policies and procedures established by the Board of Directors of the FHLB. At
September 30, 2025
, total FHLB advances to
the Bank amounted to
$1,765,604,000
. As a member, the Bank is required to purchase and maintain stock in the FHLB of Des
Moines. The Bank also acquired the stock of the FHLB San Francisco in the Merger but is not a member of this FHLB. At
September 30, 2025
, the Bank held
$85,301,000
in FHLB-DM stock and
$2,767,000
in FHLB-SF stock, which was in
compliance with requirements.
Community Reinvestment Act and Fair Lending Laws.
Banks have a responsibility under the Community Reinvestment Act
("CRA") and related regulations of the FDIC to help meet the credit needs of their communities, including low- and moderate-
income neighborhoods. In addition, the Equal Credit Opportunity Act and the Fair Housing Act (together, the "Fair Lending
Laws") prohibit lenders from discriminating in their lending practices on the basis of characteristics specified in those statutes.
An institution's failure to comply with the provisions of the CRA could, at a minimum, result in regulatory restrictions on its
activities. Failure to comply with the Fair Lending Laws could result in enforcement actions by the FDIC, the CFPB and other
federal regulatory agencies, including the U.S. Department of Justice.
USA Patriot Act of 2001.
The USA PATRIOT Act of 2001 ("Patriot Act"), through amendments to the federal Bank Secrecy
Act (“BSA”), substantially broadened the scope of United States anti money-laundering laws and regulations by imposing
significant new compliance and due diligence obligations, creating new crimes and penalties and expanding the extra-territorial
scope of United States jurisdiction. The United States Treasury Department has issued a number of regulations under the Patriot
Act that apply to financial institutions such as the Bank. These regulations impose obligations on financial institutions to
maintain appropriate policies, procedures and controls to detect, prevent and report money laundering and terrorist financing
and to verify the identity of their customers. Failure of a financial institution to maintain and implement adequate risk-based
programs reasonably designed to combat money laundering and terrorist financing, or to comply satisfactorily with all relevant
Patriot Act and BSA requirements, could have serious legal and reputational consequences for the institution.
Anti-Money Laundering Act of 2020.
The Anti-Money Laundering Act of 2020 (“AML Act”) was enacted as part of the
National Defense Authorization Act and requires the U.S. Treasury Department to issue National Anti-Money Laundering and
Countering the Financing of Terrorism Priorities ("AML/CFT"), which occurred in June 2021. The AML Act also includes a
requirement to conduct studies and issue regulations that may alter some of the due diligence, recordkeeping and reporting
requirements that the BSA and Patriot Act impose on financial institutions. The AML Act also promotes increased information-
sharing and use of technology and increases penalties for violations of the BSA and includes whistleblower incentives, both of
which could increase the prospect of regulatory enforcement.
19
Regulatory Capital Requirements.
Bank holding companies and federally insured banks are required to maintain minimum
levels of regulatory capital. The Federal Reserve establishes capital standards applicable to all bank holding companies, and the
WDFI and FDIC establish capital standards applicable to Washington state chartered, non-member banks. The capital rules
reflect, in part, certain standards initially adopted by the Basel Committee on Banking Supervision in December 2010 (which
standards are commonly referred to as “Basel III”) as well as requirements contemplated by the Dodd-Frank Act.
The capital rules require a capital ratio of common equity Tier 1 capital to risk based assets. Common equity Tier 1 capital
generally consists of retained earnings and common stock instruments (subject to certain adjustments) as well as accumulated
other comprehensive income (“AOCI”) except to the extent that the Company and the Bank exercise a one-time irrevocable
option to exclude certain components of AOCI, which the Company and the Bank have done. Tier 1 capital also includes non-
cumulative perpetual preferred stock and limited amounts of minority interests. Regulatory deductions from capital include
goodwill and intangible assets. The capital rules prescribe the manner in which certain capital elements are determined,
including but not limited to, requiring certain deductions related to mortgage servicing rights and deferred tax assets. Total
capital consists of Tier 1 capital and supplementary capital. Supplementary capital consists of certain capital instruments that
do not qualify as core capital as well as general valuation loan and lease loss allowances up to a maximum of 1.25% of risk-
weighted assets. Supplementary capital may be used to satisfy the risk-based requirement only in an amount equal to the
amount of Tier 1 capital.
In determining the required amount of risk-based capital, total assets, including certain off-balance-sheet items, are
multiplied by a risk-weight factor based on the risks inherent in the type of assets held by an institution. The risk categories
range from 0% for low-risk assets such as U.S. Treasury securities and GNMA securities to 1,250% for various types of loans
and other assets deemed to be of higher risk. Single-family residential loans having loan-to-value ratios not exceeding 90% and
meeting certain additional criteria, as well as certain multi-family residential loans, qualify for a 50% risk-weight treatment.
The book value of each asset is multiplied by the risk factor applicable to the asset category, and the sum of the products of this
calculation equals total risk-weighted assets. The rules set forth the methods of calculating certain risk-based assets, which in
turn affects the calculation of risk-based ratios. Higher or more sensitive risk weights are assigned to various categories of
assets, among which are commercial real estate, credit facilities that finance the acquisition, development or construction of real
property, certain exposures or credit that are 90 days past due or are non-accrual, foreign exposures, certain corporate
exposures, securitization exposures, equity exposures and in certain cases mortgage servicing rights and deferred tax assets.
Both the Company and the Bank are required to have a common equity Tier 1 capital ratio of 4.5%. In addition, both the
Company and the Bank are required to have a Tier 1 leverage ratio of 4.0%, a Tier 1 risk-based ratio of 6.0% and a total risk-
based ratio of 8.0%. Both the Company and the Bank are required to establish a “conservation buffer,” consisting of common
equity Tier 1 capital, equal to 2.5%. The capital conservation buffer is designed to ensure that banks build up capital buffers
outside periods of stress, which can be drawn down as losses are incurred. An institution that does not meet the conservation
buffer will be subject to restrictions on certain activities including payment of dividends, stock repurchases and discretionary
bonuses to executive officers.
The Federal Reserve and the FDIC are also authorized to impose capital requirements in excess of these standards on
individual institutions on a case-by-case basis. Management believes that the current capital levels of the Company and the
Bank are sufficient to be in compliance with the fully phased-in standards under the rules.
Any bank holding company or bank that fails to meet the capital requirements is subject to possible enforcement actions.
Such actions could include a capital directive, a cease and desist or consent order, civil money penalties, restrictions on an
institution's operations and/or the appointment of a conservator or receiver. FRB, FDIC and WDFI capital regulations provide
that such supervisory actions, through enforcement proceedings or otherwise, could require one or more of a variety of
corrective actions.
For information regarding compliance with each of these capital requirements by the Company and the Bank as of
Prompt Corrective Action.
Federal statutes establish a supervisory framework based on five capital categories: well
capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized. An
institution’s category depends upon its capital levels in relation to relevant capital measures, which include a risk-based capital
measure, a leverage ratio capital measure and certain other factors. The federal banking agencies have adopted regulations that
implement this statutory framework.
The prompt corrective action rules, which apply to the Bank but not the Company, are modified to include a common
20
equity Tier 1 risk-based ratio and to increase certain other capital requirements for the various thresholds. For example, the
requirements for the Bank to be considered well-capitalized under the rules are a 5.0% Tier 1 leverage ratio, a 6.5% common
equity Tier 1 risk-based ratio, an 8.0% Tier 1 risk-based capital ratio and a 10.0% total risk-based capital ratio. To be
adequately capitalized, those ratios are 4.0%, 4.5%. 6.0% and 8.0%, respectively.
An institution that is not well capitalized is subject to certain restrictions on brokered deposits, including restrictions on
the rates it can offer on its deposits, generally. Any institution that is neither well capitalized nor adequately capitalized is
considered undercapitalized. Federal law authorizes the FDIC to reclassify a well-capitalized institution as adequately
capitalized and may require an adequately capitalized institution or an undercapitalized institution to comply with supervisory
actions as if it were in the next lower category. The FDIC may not reclassify a significantly undercapitalized institution as
critically undercapitalized. As of
September 30, 2025
, the Bank exceeded the requirements of a well-capitalized institution.
Stress Testing.
The Economic Growth, Regulatory Relief, and Consumer Protection Act ("EGRRCPA") set the asset threshold
for enhanced prudential standards and stress testing at $100 billion of total consolidated assets. Neither the Company nor the
Bank are subject to enhanced stress test regulations. The federal bank regulatory agencies (FRB, FDIC and the Office of the
Comptroller of the Currency) have indicated that the capital planning and risk management practices of financial institutions
with total assets less than $100 billion will continue to be reviewed through the regular supervisory process. The Bank
continues to use customized stress testing to support the business and as part of its risk management and capital planning
process.
EGRRCPA also enacted several important changes in some technical compliance areas that we believe will help reduce
our regulatory burden, including:
•
Prohibiting federal banking regulators from imposing higher capital standards on High Volatility Commercial Real
Estate (“HVCRE”) exposures unless they are for acquisition, development or construction (“ADC”), and clarifying
ADC status;
•
Exempting from appraisal requirements certain transactions involving real property in rural areas and valued at less
than $400,000; and
•
Directing the Consumer Financial Protection Bureau to provide guidance on the applicability of the Truth in Lending
and Real Estate Settlement Procedures Act Integrated Disclosure rule to mortgage assumption transactions and
construction-to-permanent home loans, as well the extent to which lenders can rely on model disclosures that do not
reflect recent regulatory changes.
Despite the improvements for mid-size financial institutions such as the Company that has resulted from
EGRRCPA, many provisions of the Dodd-Frank Act and its implementing regulations remain in place and will continue to
result in additional operating and compliance costs that could have a material adverse effect on our business, financial
condition, and results of operation. In addition, the EGRRCPA requires the enactment of a number of implementing
regulations, the details of which may have a material effect on the ultimate impact of the law.
Cybersecurity.
The federal banking regulatory agencies have established certain expectations with respect to an institution's
information security and cybersecurity programs, with an increasing focus on risk management, processes related to
information technology and operational resiliency, and the use of third parties in the provision of financial services. In January
2020, these agencies jointly issued a statement reminding supervised financial institutions of sound cybersecurity risk
management principles that expanded on areas articulated in the Interagency Guidelines Establishing Information Security
Standards written in Section 39 of the Federal Deposit Insurance Act and Sections 501 and 505(b) of the Gramm-Leach-Bliley
Act.
State regulators also continue to be active in implementing privacy and cybersecurity standards and regulations. Several
states have adopted regulations requiring certain financial institutions to implement cybersecurity programs and providing
detailed requirements with respect to these programs, including data encryption requirements. Many states have also
implemented or modified their data breach notification and data privacy requirements. We expect this trend of state-level
activity in those areas to continue and are continually monitoring developments in the states in which the Company operates.
In November 2021, the federal banking regulatory agencies adopted a rule regarding notification requirements for banking
organizations related to significant computer security incidents. Under the final rule, a bank holding company, such as the
Company, and an FDIC-supervised insured depository institution, such as the Bank, are required to notify the Federal Reserve
or FDIC, respectively, within 36 hours of incidents that have materially disrupted or degraded, or are reasonably likely to
materially disrupt or degrade, the banking organization’s ability to deliver services to a material portion of its customer base,
21
jeopardize the viability of key operations of the banking organization, or impact the stability of the financial sector.
Service
providers are required under the rule to notify any affected bank client it provides services to as soon as possible when it
determines it has experienced a computer-security incident that has materially disrupted or degraded, or is reasonably likely to
materially disrupt or degrade, covered services provided by that entity to the Bank for four or more hours.
See
Item 1C - Cybersecurity
, for additional disclosures regarding the Company's cybersecurity risk management, strategy
and governance.
Financial Privacy.
Under the Gramm-Leach-Bliley Act of 1999, as amended, a financial institution may not disclose non-
public personal information about a consumer to unaffiliated third parties unless the institution satisfies various disclosure
requirements and the consumer has not elected to opt out of the information sharing. The financial institution must provide its
customers with a notice of its privacy policies and practices. The Federal Reserve, the FDIC, and other financial regulatory
agencies issued regulations implementing notice requirements and restrictions on a financial institution's ability to disclose non-
public personal information about consumers to unaffiliated third parties.
Additionally, a growing number of states continue to pass laws addressing privacy, information security, cybersecurity,
data breaches, and related notification obligations. As a company subject to the GLBA, we often benefit from an entity-level
exemption under most comprehensive state data privacy statutes. Of the states whose privacy laws provide data-level
exemptions, we are subject to the laws of California. In California, the Company must generally comply with its privacy laws
except for consumer financial data subject to GLBA.
In California, the California Consumer Protection Act (“CCPA”), as amended, took effect on January 1, 2020, and grants
California residents a range of privacy rights, including the right to know what personal information is collected, the right to
correct inaccurate information, the right to request deletion of personal information (subject to certain exceptions) as well as the
right to opt out of the “sale” of personal information (generally understood to be the sharing of personal information with a
third party for its own purposes) and the right to limit use of sensitive information to the use necessary for the purpose for
which the information was collected. CCPA also imposes additional compliance obligations such as the provision of detailed
privacy disclosure, and, starting in the years 2027-2028, the obligation to conduct a cybersecurity audit and a risk assessment
regarding how a company’s use of personal data affects individuals. The CCPA authorizes civil penalties for violations and
provides a private right of action for certain data breaches involving personal information, which increases the risks and
potential exposure associated with breach-related litigation. Since 2023, violations of CCPA are concurrently enforced by the
California Attorney General and by a dedicated privacy regulator, the Privacy Protection Agency (“CPPA”). Both have been
active in enforcing the CPPA and its accompanying regulations over the last few years by bringing enforcement actions that
carry six and seven figure fines, as well as injunctive relief. If this investigative focus continues, our compliance costs are likely
to increase, and we face increased litigation exposure if former employees in California use the laws protections to obtain pre-
complaint information to use in a lawsuit.
Furthermore, privacy and data protection areas are expected to receive further attention at the federal level. Congress and
federal regulatory agencies may enact similar laws or regulations that could create new individual privacy rights and impose
increased obligations on companies handling personal data. Federal privacy legislation continues to focus on sectoral privacy
issues, including financial privacy, rather than advancing a comprehensive federal privacy framework.
Other states may also adopt comprehensive privacy and data security laws modeled after California which could provide
data-level rather than entity level exemptions. This is already the case in several states where the Company does not currently
conduct business. Such new laws may impose new compliance requirements on the Company, or expand the potential for
enforcement against the Company to new jurisdictions and regulators. These evolving laws add complexity and are likely to
result in additional compliance expenditures. They may also require changes in the way we do business, especially in
connection with marketing activities.
Taxation
In addition to federal income tax, the Company is also subject to income, franchise, excise or gross receipts tax in states
(and some cities) where the Company has branches or is deemed to have sufficient nexus for tax purposes.
The Company
generally files consolidated federal and state income tax returns with its subsidiaries.
The Company's federal income tax returns are open and subject to potential examination by the IRS for fiscal year 2022
and later.
22
Competition
We operate in a highly competitive environment. Our competitors include other banks, savings associations, community
banks, credit unions, fintech companies and other financial intermediaries, and new market participants offering services similar
to those that we offer. We compete with some competitors within our geographic market area, and with others on a product
specific basis. Our ability to compete effectively depends on our ability to provide first-rate, friendly and professional customer
service and deliver the banking solutions that our customers want and need. We are also dependent upon our ability to attract
and retain employees while managing compensation and other costs.
Availability of Financial Data
Under the Securities Exchange Act of 1934 ("Exchange Act"), the Company is required to file annual, quarterly and
current reports, proxy statements and other information with the SEC. We file reports on Forms 10-K, 10-Q and 8-K, and
amendments to those reports, with the SEC. The public may obtain copies of these reports at the SEC's website:
www.sec.gov
.
The Company has adopted and posted on its website a code of ethics that applies to its senior financial officers. The
Company’s website also includes the charters for its audit committee, compensation committee, risk management committee,
executive committee, technology committee and nominating and governance committee.
The address for the Company’s website is www.wafdbank.com. The Company makes available on its website, free of
charge, its annual reports on Form 10-K, current quarterly reports on Form 10-Q, reports on Form 8-K, proxy statements and
any amendments to those reports (among others), as soon as reasonably practicable after we electronically file such material
with, or furnish it to, the SEC. We also make available on our website public financial information for which a report is not
required to be filed with or furnished to the SEC. Our SEC reports and such other information can be accessed through the
investor relations section of our website (https://www.wafdbank.com/about-us/investor-relations). The Company’s website
provides a link to all our filings on the SEC’s Edgar website, and the company will provide a printed copy of any of our annual
reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and any amendments to
those reports (among others) to any requesting shareholder, free of charge. The information found on our website is not part of
this or any other report that we file or furnish to the SEC.
23
Item 1A. Risk Factors
Ownership of our Common Stock involves risk. Investors should carefully consider, in addition to the other information
included in this Annual Report on Form 10-K, the following risk factors. The risks described below may adversely affect our
business, financial condition and results of operations. These risks are not the only risks we face; additional risks and
uncertainties not currently known or that are currently considered to be immaterial may also materially and adversely affect
our business.
Operational Risks
Fluctuating interest rates could adversely affect our business.
Our earnings and cash flows are largely dependent upon our net interest income, which is significantly affected by
interest rates. Interest rates are highly sensitive to factors beyond our control, such as general economic conditions and policies
set by governmental and regulatory bodies.
We principally manage interest rate risk by managing our volume and mix of our
earning assets and funding liabilities. If we are unable to manage this risk effectively, our business, financial condition and
results of operations could be materially affected.
Rapid changes in interest rates make it difficult for the Bank to balance its
loan and deposit portfolios, which may adversely affect our results of operations by, for example, reducing asset yields or
spreads, or having other adverse impacts on our business. Higher than expected inflation could lead to higher interest rates,
which could, in turn, increase the borrowing costs of our customers, making it more difficult for them to repay their loans or
other obligations. High interest rates could also push down asset prices and weaken economic activity.
Conversely, falling rates
can initially reduce our net interest income as our floating-rate assets tend to be more immediately responsive to changes in
market rates than most deposit liabilities. In addition, a decline in market interest rates could increase loan prepayments, leading
to reinvestment in lower-yielding assets, reducing income.
Our net interest income is the difference (or “spread”) between the interest earned on loans, securities and other
interest-earning assets and the interest paid on deposits, borrowings, and other interest-bearing liabilities. The level of net
interest income is a function of the average balances of interest-earning assets and interest-bearing liabilities and the spread
between the amounts of the yield on such assets and the cost of such liabilities. These factors are influenced by both the pricing
and the mix of interest-earning assets and interest-bearing liabilities which, in turn, are impacted by such external factors as the
local economy, competition for loans and deposits, the monetary policy of the Federal Open Market Committee of the Federal
Reserve Board of Governors (the “FOMC”) and market interest rates. Furthermore, movements in interest rates, the pace at
which such movements occur and the volume and mix of our interest-bearing assets and liabilities influence the level of net
interest income.
The cost of customer deposits is largely based on short-term interest rates, the level of which is driven by the
FOMC. However, the yields generated by long-term loans, such as single-family residential and multifamily mortgage loans,
and securities are typically driven by longer-term (10 year) interest rates, which are set by the market and vary from day to day.
Because of the differences in maturities and repricing characteristics of our interest-earning assets and interest-bearing
liabilities, changes in interest rates do not produce equivalent changes in interest income earned on interest-earning assets and
interest paid on interest-bearing liabilities. Accordingly, fluctuations in interest rates could adversely affect our interest rate
spread, and, in turn, our profitability. For example, if interest rates on interest-earning assets decline more quickly than the rates
on interest-bearing liabilities, as we saw in our recent fiscal year, the result is a reduction in our net interest income and with it,
a reduction in earnings.
The same could be true if the interest rates on interest-bearing liabilities increase at a faster pace than
the interest rates on interest-earning assets. In addition, changes in interest rates could affect the Bank's ability to originate loans
and attract and retain deposits; the fair values of its securities and other financial assets; the fair values of its liabilities; and the
average lives of its loan and securities portfolios. Decreases in interest rates could lead to increased loan refinancing activity,
which, in turn, would alter the balance of our interest-earning assets and impact net interest income. Increases in interest rates
could reduce loan refinancing activity, which could result in compression of the spread between loan yields and more quickly
rising funding rates.
We may also be exposed to movements in market rates to a degree not experienced by other financial
institutions, as a result of our significant portfolio of fixed-rate single-family home loans, which are longer-term in nature than
the customer accounts and borrowed money that constitute our liabilities.
We are currently operating in an environment in which the Federal Reserve has shifted toward reducing interest rates,
although modestly, with cuts implemented in September and October 2025.
However, the inflationary outlook remains
uncertain and if the Federal Reserve were to reverse course and rapidly increase the target federal funds rate, the increase in
rates could continue to constrain our interest rate spread and may adversely affect our business forecasts. On the other hand,
further rapid decreases in interest rates, may result in a change in the mix of noninterest and interest-bearing accounts. New
appointments to the Board of Governors at the Federal Reserve could result in a change in monetary policy and interest rates.
We are unable to predict changes in interest rates, which are affected by factors beyond our control, including inflation,
deflation, recession, unemployment, money supply and other changes in financial markets.
24
We are exposed to risks related to fraud and cyber-attacks.
Cybersecurity, and the continued development and enhancement of controls, processes, and practices designed to
protect customer information, systems, computers, software, data, and networks from attack, damage, or unauthorized access
remain a priority for the Company. As cybersecurity threats continue to evolve, we may be required to expend additional
resources to continue to enhance, modify, and refine our protective measures against these evolving threats.
We are continuously enhancing and expanding our digital products and services to meet customer and business needs
with desired outcomes. These digital products and services often include storing, transmitting, and processing confidential
customer, employee, financial, and business information. Due to the nature of this information, and the value it has for internal
and external threat actors, we, and our third-party service providers, continue to be subject to cyber-attacks and fraud activity,
including through the use of rapidly evolving AI technologies, that attempts to gain unauthorized access, misuse information
and information systems, steal information, disrupt or degrade information systems, spread malicious software, and other illegal
activities.
We believe we have robust preventive, detective, and administrative safeguards and security controls to minimize the
probability and magnitude of a material event. However, if we are unable to maintain them, we may fall victim to a material
adverse cybersecurity event. Because the tactics and techniques used by threat actors to bypass safeguards and security controls
change frequently, and often are not recognized until after an event has occurred, we may be unable to anticipate future tactics
and techniques, or to implement adequate and timely protective measures. The use of AI technologies by cybercriminals
continues to be a major concern, as deep-fake technologies continue to improve, allowing bad actors to manipulate or fabricate
visual and audio content and convincingly fake identities.
We are subject to additional risk with respect to third-party vendors that process or handle personal and financial data
of our customers, partners, suppliers or employees. These third-party vendors may themselves use other vendors to store or
process our data, which further elevates our risk exposure. Our third-party vendors have been, and may in the future be, subject
to security incidents, including those caused by computer viruses, malware, ransomware, phishing attempts, social engineering,
hacking or other means of unauthorized access. Control failures of security measures managed by our third-party service
providers could cause us to suffer damage to our reputation and could require us to incur substantial expenses, which could
have a materially adverse effect on our business, financial condition, and results of operations.
To date, we have no knowledge of a material cyber-attack or other material information security incident affecting the
systems we operate and control. However, our risk and exposure to these matters remains heightened because of, among other
things, the evolving nature of these threats, the continuation of a remote or hybrid work environment for our employees and
service providers, and our plans to continue to implement and expand digital banking services, expand operations, and use
third-party information systems that includes cloud-based infrastructure, platforms, and software. Recent instances of attacks
specifically targeting banks and financial services businesses indicate that the risk to our systems remains significant. We, and
our third-party providers, are regularly the subject of attempted attacks and the ability of the attackers and the method of their
attacks continues to grow in sophistication. Threat actors, including nation state attackers, could also use artificial intelligence
for malicious purposes, increasing the frequency and complexity of their attacks. Potential threats to our technologies, systems,
networks, and other devices, as well as those of our employees, third party vendors, and other third parties with whom we
interact, include Distributed Denial of Service ("DDoS") attacks, computer viruses, hacking, malware, ransomware, credential
stuffing, phishing, and other forms of social engineering. Such cyber-attacks and other security incidents are designed to lead to
various harmful outcomes, such as unauthorized transactions against our customers’ accounts, unauthorized or unintended
access to confidential information, or the release, gathering, monitoring, disclosure, loss, destruction, corruption, disablement,
encryption, misuse, modification or other processing of confidential or sensitive information (including personal information),
intellectual property, software, methodologies or business secrets, disruption, sabotage or degradation of service, systems or
networks, or other damage. These threats may derive from, among other things, error, fraud or malice on the part of our
employees, insiders, or third parties or may result from accidental technological failure. Any of these parties may also attempt
to fraudulently induce employees, service providers, customers, partners or other third-party users of our systems or networks to
disclose confidential or sensitive information (including personal information) in order to gain access to our systems, networks
or data or that of our customers, partners, or third parties with whom we interact, or to unlawfully obtain monetary benefit
through misdirected or otherwise improper payments or through the creation of false identifies. A cyber-attack or other security
incident on the systems we operate and control could cause us to suffer damage to our reputation, result in productivity losses,
require us to incur substantial expenses, including response costs associated with investigation and resumption of services,
remediation expenses costs associated with customer notification and credit monitoring services, increased insurance premiums,
regulatory penalties and fines, and costs associated with civil litigation, any of which could have a materially adverse effect on
our business, financial condition, and results of operations.
We also face additional costs when our customers become the victims of cyber-attacks. For example, various retailers
have reported that they have been the victims of a cyber-attack in which large amounts of their customers’ data, including debit
25
and credit card information, is obtained. Our customers may be the victims of phishing scams, providing cyber criminals access
to their accounts, or credit or debit card information. In these situations, we incur costs to replace compromised cards and
address fraudulent transaction activity affecting our customers, as well as potential increases to insurance premiums for policies
we may maintain to cover these losses.
Both internal and external fraud and theft are risks. If confidential customer, employee, monetary, or business
information were to be mishandled or misused, we could suffer significant regulatory consequences, reputational damage, and
financial loss. Such mishandling or misuse could include, for example, if such information were erroneously provided to parties
who are not permitted to have the information, either by fault of our systems, employees, or counterparties, or if such
information were to be intercepted or otherwise inappropriately taken by third parties, or if our own employees abused their
access to financial systems to commit fraud against our customers and the Company. These activities can occur in connection
with activities such as the origination of loans and lines of credit, ACH transactions, wire transactions, ATM transactions, and
checking transactions, and result in financial losses as well as reputational damage.
Operational errors can include information system misconfiguration, clerical or record-keeping errors, or disruptions
from faulty or disabled computer or telecommunications systems. Because the nature of the financial services business involves
a high volume of transactions, certain errors, which may be automated or manual, may be repeated or compounded before they
are discovered and successfully rectified. Because of the Company’s large transaction volume and its necessary dependence
upon automated systems to record and process these transactions, there is a risk that technical flaws, tampering, or manipulation
of those automated systems, arising from events wholly or partially beyond its control, may give rise to disruption of service to
customers and to financial loss or liability.
The occurrence of any of these risks could result in a diminished ability for us to operate our business, additional costs
to correct defects, potential liability to customers, reputational damage, and regulatory intervention, any of which could
adversely affect our business, financial condition and results of operations.
Changes in our business operations and divestitures of lines of business may not be successful, resulting in a negative
impact on our operating results and financial condition.
Our ability to compete depends on various factors, including our ability to develop and successfully execute strategic
plans and initiatives. However, we may not achieve some or all of our strategic objectives. Expected cost savings and revenue
growth from these initiatives may not materialize, and the costs of implementation may be greater than anticipated.
Additionally, changes in economic conditions beyond our control, such as fluctuations in interest rates, may affect our ability to
achieve our objectives. Failure to execute or achieve the anticipated outcomes of our strategic initiatives could negatively
impact market perceptions of our company and impede our growth and profitability.
In January 2025, we made a significant shift in focus to our business model and announced that WaFd Bank would be
exiting the single-family mortgage lending market to focus on commercial loans, including small business and SBA loans. We
made this determination for several reasons: first because home loans are seen as a commodity, with the majority of
originations sold to US government sponsored enterprises like Freddie Mac and Fannie Mae, which has caused our profitability
to decrease and credit risk to increase, and second, because technology has made it easy for consumers to refinance, increasing
our interest rate risk. While we have estimated annual expense savings of approximately $17 million from our exit from the
single-family mortgage business, this change involves a number of risks, including costs and expenses (including a $5.4 million
restructuring charge), the potential loss of customer relationships, community goodwill and revenues and earnings. Exiting this
business could impact future earnings if we are unable to offset the loss of revenue associated with the single-family mortgage
business against the anticipated expense savings. In addition, the shift in business focus to commercial loans will require
varying levels of management resources, which may divert our attention from other business operations. If we are unable to
realize the expected benefits of these types of changes in our business operations, or execute on other strategic plans and
initiatives, our consolidated financial position, results of operations and cash flows could be negatively impacted.
Current uncertain economic conditions pose challenges, and could adversely affect our business, financial condition and
results of operations.
We are operating in an uncertain and rapidly changing economic environment. Global trade tensions, AI impacts, and
inflation risks continue to affect the global economic environment. The recent U.S. government shutdown has negatively
impacted U.S. economic growth, and the suspension of government data collection and publication left policymakers without
access to the latest data on employment, inflation, and economic growth, increasing the risk that a wrong decision will be made.
An unpredictable or volatile political environment in the United States could negatively impact business and market conditions,
economic growth, financial stability, and business, consumer, investor, and regulatory sentiments, any one or more of which
could have a material adverse impact on our financial condition and results of operations. Deterioration in the U.S. credit and
financial markets could result in losses or significant deterioration in the fair value of our U.S. government issued, sponsored or
26
guaranteed investments. At
September 30, 2025
, we had
$3.5 billion
invested in U.S. government and agency obligations, and
further downgrades could affect the stability of securities issued or guaranteed by the federal government and the valuation or
liquidity of our portfolio of such investment securities.
Economic uncertainty, or a recessionary or stagnant economy, could result in financial stress on the Bank's borrowers,
which could adversely affect our business, financial condition and results of operations. Deteriorating conditions in the regional
economies we serve, or in certain sectors of those economies, in excess of the reasonable and supportable forecasts we used to
estimate credit losses, could drive losses beyond those provided for in our allowance for loan losses. We could also face the
following risks in connection with the following events:
•
Market developments and economic stagnation or slowdown may affect consumer confidence levels and may cause
adverse changes in payment patterns, resulting in increased delinquencies and default rates on loans and other credit
facilities.
•
The processes we use to estimate the allowance for credit losses and other reserves may prove to be unreliable. Such
estimates rely upon complex modeling inputs and judgments, including forecasts of economic conditions, which may
be rendered inaccurate and/or no longer subject to accurate forecasting.
•
Our ability to assess the creditworthiness of our borrowers may be impaired if the models and approaches we use to
select, manage, and underwrite loans become less predictive of future charge-offs.
•
Regulatory scrutiny of the industry could increase, leading to increased regulation of the industry that could lead to a
higher cost of compliance, limit our ability to pursue business opportunities and increase our exposure to litigation or
fines.
•
Ineffective monetary policy or other market conditions could cause rapid changes in interest rates and asset values that
would have a materially adverse impact on our profitability and overall financial condition.
•
Further erosion in the fiscal condition of the U.S. Treasury could lead to new taxes that would limit our ability to
pursue growth and return profits to shareholders.
If these conditions or similar ones continue to exist or worsen, we could experience continuing or increased adverse
effects on our financial condition.
Changes to monetary policy by the Federal Reserve could adversely impact our results of operations.
The Federal Reserve is responsible for regulating the supply of money in the United States, including open market
operations used to stabilize prices in times of economic stress, as well as setting monetary policies. These activities strongly
influence our rate of return on certain investments, our hedge effectiveness for mortgage servicing and our mortgage origination
pipeline, as well as our costs of funds for lending and investing. New appointments to the Board of Governors at the Federal
Reserve, or increased political pressures on the Federal Reserve, could impact monetary policy, which will directly, impact our
liquidity, results of operations, financial condition and capital position.
Unstable global economic conditions may have serious adverse consequences on our business, financial condition, and
operations.
The global credit and financial markets have from time-to-time experienced extreme volatility and disruptions,
including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth,
increases in unemployment rates, high rates of inflation, and uncertainty about economic stability. Changes in trade policies by
the United States or other countries, such as tariffs or retaliatory tariffs, may cause inflation which could impact the prices of
products sold or purchased by our borrowers or the demand for their products, negatively impacting their profitability and
making it difficult for our borrowers to repay their loans.
The financial markets and the global economy may also be adversely
affected by the current or anticipated impact of military conflict, including the conflict between Russia and Ukraine, and the
evolving conflict in the Middle East. These events have increased and are expected to continue to increase volatility in
commodity and energy prices, including oil, and continuing hostilities raise the possibility of supply disruptions.
Rising
tensions and global instability have the potential to affect consumer confidence in the U.S. and abroad, therefore having a
broader effect on financial markets. Changes in trade policies or sanctions imposed by the United States and other countries in
response to such conflict could further adversely impact the financial markets and the global economy, and any economic
countermeasures by the affected countries or others could exacerbate market and economic instability. Our general business
strategy may be adversely affected by any such economic downturn, volatile business environment, hostile third-party action or
continued unpredictable and unstable market conditions.
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Inflationary pressures and rising prices may affect our results of operations and financial condition.
Inflation rates remained above the FOMC’s target rate in 2025 and were above the target of 2% as of September 30,
2025. Inflation has led to increased costs for our customers, making it more difficult for them to repay their loans or other
obligations and increasing our credit risk. The inflationary outlook in the United States points to the probability of continued,
somewhat elevated inflation, with continued uncertainty around the impact of tariffs. Further reductions in interest rates by the
FOMC could exacerbate inflationary pressures.
If heightened inflation continues, sustained higher interest rates by the FOMC
may be needed, which could push down asset prices and weaken economic activity. A deterioration in economic conditions in
the United States and our markets could result in a further increase in loan delinquencies and non-performing assets, decreases
in loan collateral values and a decrease in demand for our products and services, all of which, could adversely affect our
business, financial condition and results of operations.
The development and use of Artificial Intelligence (“AI”) presents risks and challenges that may adversely impact our
business.
The banking and financial services industry continually experiences technological changes, with frequent introductions
of new technology-driven products and services, including recent and rapid developments in AI, including with agentic AI. Our
future success will depend, in part, upon our ability to address the needs of our clients by using technology to provide products
and services that will satisfy client demands for convenience, as well as to assess the proper operation of AI models and
capabilities to create additional efficiencies in our operations. We may not be able to effectively implement new technology-
driven products and services or be successful in marketing these products and services to our clients. In addition, the
implementation of technological changes and upgrades to maintain current systems and integrate new ones may also create
service interruptions, transaction processing errors, and system conversion delays and may cause us to fail to comply with
applicable laws. There can be no assurance that we will be able to successfully manage the risks associated with our increased
dependency on technology. Failure to successfully keep pace with technological change affecting the banking and financial
services industry could negatively affect our revenue and profitability.
We or our third-party (or fourth party) vendors, customers or counterparties may develop or incorporate AI technology
in certain business processes, services, or products. The development and use of AI presents a number of risks and challenges to
our business. The legal and regulatory environment relating to AI is uncertain and rapidly evolving, both in the U.S. and
internationally, and includes regulatory schemes targeted specifically at AI as well as provisions in intellectual property,
privacy, consumer protection, employment, and other laws applicable to the use of AI. These evolving laws and regulations
could require changes in our implementation of AI technology and increase our compliance costs and the risks to us of non-
compliance. AI models, particularly generative or agentic AI models, may produce outputs or take action that is incorrect, that
reflects biases included in the data on which they are trained, that results in the release of private, confidential, or proprietary
information, that infringes on the intellectual property rights of others, or that is otherwise harmful. In addition, the complexity
of many AI models makes it difficult to understand why they are generating particular outputs. This limited transparency
increases the challenges associated with assessing the proper operation of AI models, understanding and monitoring the
capabilities of the AI models, reducing erroneous output, eliminating bias, and complying with regulations that require
documentation or explanation of the basis on which decisions are made. Further, we may rely on AI models developed by third
parties, and, to that extent, would be dependent in part on the manner in which those third parties develop and train their
models, including risks arising from the inclusion of any unauthorized material in the training data for their models and the
effectiveness of the steps these third parties have taken to limit the risks associated with the output of their models, matters over
which we may have limited visibility. Any of these risks could expose us to liability or adverse legal or regulatory
consequences and harm our reputation and the public perception of our business or the effectiveness of our security measures.
We are exposed to risks related to our operational, technological, and third-party provided technology infrastructure.
We rely extensively on the successful and uninterrupted functioning of information technology and
telecommunications systems to conduct our business. This includes internally developed systems, internally managed systems,
outsourced systems provided by third-party service providers, internet facing digital products and services, mobile technologies
and the on-going operational maintenance of each service. Any disruptions, failures, or inaccuracies of these systems, including
changes and improvements, could result in our inability to service customers, manage operations, manage risk, meet regulatory
obligations, or provide timely and accurate financial reporting which could damage our reputation, result in loss of customer
business, subject us to regulatory scrutiny, or expose us to civil litigation and possible financial liability.
In many instances, the Company’s products and services to customers are dependent upon third-party service
providers, who provide necessary, or critical, services and support. Any disruption of such services, or an unplanned
termination of a third-party license or service agreement related thereto, could adversely affect our ability to provide necessary
products and services for our customers.
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In recent years, we have made a significant ongoing investment to enhance our technological capabilities with the
objectives of enhancing customer experience, growing revenue, and improving operating efficiency. There is a risk that these
investments may not provide the anticipated benefits and/or will prove significantly more costly and time consuming to
produce. If this occurs, we may see a loss of customers, and our financial results and ability to execute on our strategic plan
may be adversely impacted.
We are subject to complex state and federal laws, rules, regulations and standards regarding data privacy and
cybersecurity, which impact how we conduct our business.
We are subject to complex and evolving data privacy laws, rules, regulations, standards and contractual obligations
(collectively “data privacy laws”) that relate to the privacy and security of the personal information of customers, employees or
others. These data privacy laws require, among other things, that we make certain privacy disclosures, maintain a robust
security program, require disclosures and notifications during a cyber or information security incident, and regulate our
collection, use, sharing, retention, and safeguarding of consumer or employee information. State and federal regulators may
also hold us responsible for privacy and data protection obligations performed by our third-party service providers while
providing services to us, as well as disclosures and notifications during a cyber or information security incident. Consumers
also have the option to direct banks and other financial institutions not to share information about transactions and experiences
with affiliated companies for the purpose of marketing products or services.
State regulators have also been increasingly active in implementing privacy and cybersecurity standards and
regulations. Recently, several states have adopted regulations requiring certain financial institutions to implement cybersecurity
programs and provide detailed requirements with respect to these programs, including data encryption requirements. Many
states have also recently implemented or modified their data breach notification and data privacy requirements. We expect this
trend of state-level activity in those areas to continue and are continually monitoring developments in the states in which the
Company operates. As the regulatory environment becomes more rigorous, we anticipate that compliance with these
requirements will result in additional costs and expenses, and may impact the way we conduct business. Our failure to comply
with data privacy laws could result in potentially significant regulatory or governmental investigations, litigation, fines, or
sanctions, or cause damage to our reputation, which could have a material adverse effect on our business, financial condition or
results of operations.
Our allowance for credit losses ("ACL") may not be adequate to cover future loan losses, which could adversely affect
our financial condition and results of operations.
If our customers are unable to repay their loans according to the original terms, and the collateral securing the payment
of those loans is insufficient to pay any remaining loan balance, we will be required to characterize the loan as non-performing
or write it off as a loss. We maintain an ACL to provide for loan defaults and non-performance, however, losses may exceed the
value of the collateral securing the loans and the allowance may not fully cover any excess loss.
We make various assumptions and judgments about the collectability of our loan portfolio, including the
creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for the repayment of
loans. Our ACL is based on these judgments, as well as historical loss experience and an evaluation of the other risks associated
with our loan portfolio, including but not limited to, economic trends and conditions, changes in underwriting standards,
management, competition, and trends in delinquencies, non-accrual and adversely classified loans, the size and composition of
the loan portfolio, current economic conditions and geographic concentrations within the portfolio. Banking regulatory
agencies, as part of their examination process, review our loans and ACL. If our assumptions and judgments used to determine
the ACL prove to be incorrect, if the value of the collateral securing the loans decreases substantially or if regulators disagree
with our judgments, we may need to increase the ACL in amounts that exceed our expectations. Material additions to the ACL,
or losses in excess of the ACL, would adversely affect our results of operations and financial condition.
Our risk management framework may not be effective in mitigating risks and losses to us.
Our risk management framework is comprised of various processes, systems and strategies designed to manage the
types of risks to which we are subject, including, among others, credit, market, liquidity, interest rate, cybersecurity and
compliance. Our framework also includes financial or other modeling methodologies that involve management assumptions and
judgment. Because we rely on assumptions and judgment calls, our risk management framework may not be effective under all
circumstances and may not adequately mitigate any risk of loss to us. If our framework is not effective, we could suffer
unexpected losses and our financial condition, operations or business prospects could be materially and adversely affected. We
may also be subject to potentially adverse regulatory consequences.
29
If we are not able to retain or attract key employees, or if we were to suffer the loss of a significant number of
employees, we could experience a disruption in our business.
If a key employee or a substantial number of employees depart or become unable to perform their duties, it may
negatively impact our ability to conduct business as usual. Unanticipated departures, including in connection with acquisition
activity, such as our recent acquisition of Luther Burbank, might require us to divert resources from other areas of our
operations, which could create additional stress for other employees, including those in key positions. The loss of qualified and
key personnel, or an inability to continue to attract, retain and motivate key personnel could adversely affect our business and
consequently impact our financial condition and results of operations.
Climate change and related legislative and regulatory initiatives may materially affect the Company’s business and
results of operations.
The effects of climate change continue to raise significant concerns about the state of the environment. However,
under the new administration, federal policy has shifted to reduce the emphasis on climate change initiatives and environmental
regulations. This includes scaling back federal participation in international agreements, and reducing regulatory pressures on
businesses, including banks, to address climate-related risks. Federal legislative and regulatory proposals aimed at combating
climate change have and may continue to face greater scrutiny or diminished priority.
However, state and local regulations or
guidance relating to climate change, as well as changes in consumers’ and businesses’ behaviors and business preferences,
continue to affect our business operations.
Regardless of changes in federal policy, the effects of climate change and their unknown long-term impacts could still
have a material adverse effect on our financial condition and results of operations.
The physical effects of climate change, such
as more frequent and severe weather disasters or other catastrophic events, could directly affect our business and those of our
customers, damaging or destroying our property, or the real property and other assets securing loans in our portfolios.
Such
events may also interrupt the business operations of our customers, putting them in financial difficulty, and increasing the risk
of default. If our borrowers’ insurance is insufficient to cover these losses or if insurance becomes unavailable, the value of the
collateral securing our loans could be negatively affected, potentially impacting our financial condition and results of
operations. Moreover, climate change may adversely affect regional and local economic activity, harming our customers and
the communities in which we operate. In addition, our business, reputation and ability to attract and retain employees may also
be harmed if our response to climate change is perceived to be ineffective or insufficient.
Our business is subject to the risks of pandemics, earthquakes, tsunamis, floods, fires and other natural catastrophic
events and other events beyond our control.
A major catastrophe, such as an earthquake, tsunami, flood, fire, or other natural disaster, including those caused or
exacerbated by climate change, public health issues such as the COVID-19 or other pandemics, or other events beyond our
control, could result in a prolonged interruption of our business. For example, our headquarters is located in Seattle,
Washington and we have operations throughout the western United States, a geographical region that has been or may be
affected by earthquakes, wildfires, tsunamis, and flooding activity. Because we primarily serve individuals and businesses in
our nine-state footprint, a natural disaster likely would have a greater impact on our business, operations, and financial
condition than if our business were more geographically diverse throughout the United States.
The occurrence of any of these
natural disasters could negatively impact our performance by disrupting our operations or the operations of our customers,
which could have a material adverse effect on our financial condition, results of operations, and cash flows.
Regulatory and Litigation Risks
Our “Needs to Improve” rating under the Community Reinvestment Act (“CRA”) may restrict our operations and limit
our ability to pursue certain strategic opportunities.
On December 27, 2024, the Bank received an overall CRA rating from the FDIC of “Needs to Improve” for the period
covering June 3, 2020 to March 26, 2024. Based on its performance on the individual components of the CRA tests, the Bank
received a “High Satisfactory” rating on both the Investment Test and the Service Test and a “Needs to Improve” rating on the
Lending Test, which resulted in the overall “Needs to Improve” rating. The Bank disagrees with the overall CRA rating and
has appealed. If our appeal is unsuccessful in changing the overall CRA rating, having a “Needs to Improve” rating will result
in restrictions on certain expansionary activity, including mergers and acquisitions and the establishment and relocation of bank
branches. This rating will also result in a loss of expedited processing of applications to undertake certain activities. It could
also have an impact on our relationships with certain states, counties, municipalities or other public agencies to the extent
applicable law, regulation or policy limits, restricts or influences whether such entity may do business with a company that has
a below “Satisfactory” rating and, in general, could negatively affect our reputation, business, financial condition and results of
30
operations. These restrictions, among others, will remain in place at least until the Bank’s next CRA rating is publicly released
by the FDIC following a subsequent CRA examination which is likely to occur in 2026. As a result of these limitations and
conditions, we may be unable or may fail to pursue, evaluate or complete transactions that might have been strategically or
competitively significant.
Non-Compliance with banking rules and regulations could result in fines or sanctions, and curtail our expansion
opportunities.
Financial institutions are required under the USA PATRIOT Act of 2001 (the “Patriot Act”) and Bank Secrecy Act
("BSA") to develop programs to prevent financial institutions from being used for money-laundering and terrorist activities.
Financial institutions are also obligated to file suspicious activity reports with the U.S. Treasury Department's Office of
Financial Crimes Enforcement Network. These rules also require financial institutions to establish procedures for identifying
and verifying the identity of customers seeking to open new financial accounts. Failure to comply with applicable laws and
regulations can result in a range of sanctions and enforcement actions, including the imposition of civil money penalties, formal
agreements and cease and desist orders. The Bank has in the past been subject to a Consent Order from the Office of the
Comptroller of the Currency (“OCC”) for its BSA program, which required the Bank to incur significant expenses to implement
an effective AML/CFT Program, including payment of a $2,500,000 civil money penalty. In addition, the Bank was previously
subject to two Consent Orders for violations of the reporting requirements under the Home Mortgage Disclosure Act
(“HMDA”) which included a total of $234,000 in civil money penalties. Our failure or our inability to comply with the Patriot
Act, BSA statutes and regulation, HMDA or other applicable regulations could have serious business, financial and reputational
consequences for the Bank, and could result in enforcement actions, additional fines or penalties, curtailment of expansion
opportunities, restrictions on our ability to pay dividends, intervention or sanctions by regulators and costly litigation or
expensive additional controls and systems.
We operate in a highly regulated industry, which limits the manner and scope of our business activities.
We are subject to extensive supervision, regulation and examination by the WDFI, the FDIC and the CFPB. In
addition, the Federal Reserve is responsible for regulating the holding company. This regulatory structure is designed primarily
for the protection of the deposit insurance funds and consumers and not to benefit our shareholders. This regulatory structure
also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and
examination policies to address not only compliance with applicable laws and regulations (including laws and regulations
governing consumer credit, CRA, and anti-money laundering and anti-terrorism laws), but also capital adequacy, asset quality
and risk, management ability and performance, earnings, liquidity, data reporting and various other factors. As part of this
regulatory structure, we are subject to policies and other guidance developed by the regulatory agencies with respect to capital
levels, the timing and amount of dividend payments, the classification of assets and the establishment of adequate loan loss
reserves for regulatory purposes. Under this structure the WDFI, the FDIC, the CFPB and the Federal Reserve have broad
discretion to impose restrictions and limitations on our operations if they determine, among other things, that our operations are
unsafe or unsound, fail to comply with applicable law or are otherwise inconsistent with laws and regulations or with the
supervisory policies of these agencies. This supervisory framework could materially impact the conduct, growth and
profitability of our operations. In particular, the FDIC has specific authority to take “prompt corrective action,” if the Bank’s
capital falls below its current “well capitalized” level, including limiting the Bank’s ability to take brokered deposits, requiring
the Bank to raise additional capital and subject it to progressively more severe restrictions on its operations, management and
capital distributions, and replacement of senior executive officers and directors. If the Bank ever became “critically
undercapitalized,” it would also be subject to the appointment of a conservator or receiver.
Changes in laws, regulations, government policy, oversight or increased enforcement activities by regulatory agencies
may increase our costs and adversely affect our business and operations.
New or amended laws, rules, regulations and policies to which we are subject, including those resulting from changes
in U.S. Presidential administration, could impact our operations, increase our capital requirements or substantially restrict our
growth and adversely affect our ability to operate profitably by making compliance more difficult or expensive, restricting our
ability to originate or sell loans, or impacting the amount of interest or other charges or fees earned on loans or other products.
New appointments to the Federal Reserve Board of Governors could also affect monetary policy and interest rates. Future
legislation, regulation, and changes in trade and fiscal policy, including uncertainty surrounding the ongoing operations of the
CFPB, could affect the banking industry as a whole, including our business and results of operations.
It is difficult to predict
future changes in regulation or the competitive impact that any such changes would have on our business. Any new laws, rules
and regulations could make compliance more difficult, expensive, costly to implement or may otherwise adversely affect our
business, financial condition or growth prospects. Other changes to statutes, regulations, or regulatory policies, including
changes in interpretation or implementation of statutes, regulations, or policies, could affect us in substantial and unpredictable
ways including subjecting us to additional costs, limiting the types of financial services and products we may offer, and
increasing the ability of non-banks to offer competing financial services and products.
31
Additionally, actions by regulatory agencies or significant litigation against us may lead to penalties that materially
affect us. These regulations, along with the current tax, accounting, securities, insurance, and monetary laws, regulations, rules,
standards, policies, and interpretations control the methods by which financial institutions conduct business, implement
strategic initiatives and tax compliance, and govern financial reporting and disclosures. These laws, regulations, rules,
standards, policies, and interpretations are constantly evolving and may change significantly over time. Any new regulations or
legislation or change in existing regulations or oversight, whether a change in regulatory policy or a change in a regulator’s
interpretation of a law or regulation, could have a material impact on our operations, increase our costs of regulatory
compliance and of doing business and/or otherwise adversely affect us and our profitability. Further, changes in accounting
standards can be both difficult to predict and involve judgment and discretion in their interpretation by us and our independent
registered public accounting firm. Changes could materially impact, potentially even retroactively, how we report our financial
condition and results of our operations, as could our interpretation of those changes. We cannot predict what restrictions may be
imposed upon us with future legislation.
Our failure to comply with current, or adapt to new or changing, laws, regulations or policies could result in
enforcement actions and sanctions against us by regulatory agencies, civil money penalties and/or reputation damage, along
with corrective action plans required by regulatory agencies, any of which could have a material adverse effect on our business,
financial condition and results of operations, and the value of our common stock.
Deposit insurance premiums could increase further in the future.
FDIC insurance premiums are risk based and, accordingly, higher premiums are charged to banks that have lower
capital ratios or higher risk profiles. As a result, a decrease in the Bank’s capital ratios, or a negative evaluation by the FDIC,
may increase the Bank’s net funding cost and reduce its earnings.
The deposits of the Bank are insured by the FDIC up to legal limits and, accordingly, subjected to the payment of
FDIC deposit insurance assessments, which are determined in accordance with a defined calculation. The FDIC imposed a
special assessment to recover the losses in connection with the receiverships of Silicon Valley Bank and Signature Bank.
Increases in assessment rates or further special assessments may occur in the future, especially if there are significant additional
financial institution failures. Any future special assessments, increases in assessment rates or required prepayments in FDIC
insurance premiums could reduce our profitability or limit our ability to pursue certain business opportunities, which could have
a material adverse effect on our business, financial condition and results of operations.
We are subject to various claims and litigation, which could result in significant expenses, losses and damage to our
reputation.
We are, from time to time, subject to claims and proceedings related to our operations. These claims and legal actions
could include supervisory or enforcement actions by our regulators, criminal proceedings by prosecutorial authorities, or civil
claims by our customers, former customers, contractual counterparties, and current and former employees. We may also face
class action lawsuits for, among other things, alleged violations of employment, state wage and hour and consumer protection
laws. These claims could involve large monetary demands, including civil money penalties or fines imposed by government
authorities, and significant defense costs. If such claims and legal actions are brought, and are not resolved in a manner
favorable to the Company, they could result in financial liability and/or reputational harm, which could have a material adverse
effect on our financial condition and results of operations.
Banking institutions are also increasingly the target of class action lawsuits, including claims alleging deceptive
practices or violations of account terms in connection with non-sufficient funds or overdraft charges and violations of the Fair
Labor Standards Act (“FLSA”). In 2022, the Bank paid $495,000 plus claims administrative expenses to settle a class action
lawsuit related to allegations of improper assessments of overdraft and insufficient funds fees. In May 2024, we received court
approval for the settlement of a class action claim related to alleged violations of the FLSA associated with claims for allegedly
unpaid wages and overtime for certain of our non-exempt employees under which the Bank ultimately paid approximately $2.1
million. If another class action lawsuit is filed or determined adversely to us, or we were to enter into a settlement agreement in
connection with such a matter, we could be exposed to monetary damages, reputational harm, or subject to limits on our ability
to operate our business, which could have an adverse effect on our financial condition, and operating results.
Our real estate lending also exposes us to the risk of environmental liabilities.
In the course of our business, it is necessary to foreclose and take title to real estate, which could subject us to
environmental liabilities with respect to these properties. Hazardous substances or waste, contaminants, pollutants or sources
thereof may be discovered on properties during our ownership or after a sale to a third party. We could be held liable to a
governmental entity or to third parties for property damage, personal injury, investigation and clean-up costs incurred by these
parties in connection with environmental contamination, or may be required to investigate or clean up hazardous or toxic
32
substances or chemical releases at such properties. The costs associated with investigation or remediation activities could be
substantial and could substantially exceed the value of the real property. In addition, as the owner or former owner of a
contaminated site, we may be subject to common law claims by third parties based on damages and costs resulting from
environmental contamination emanating from the property. We may be unable to recover costs from any third party. These
occurrences may materially reduce the value of the affected property, and we may find it difficult or impossible to use or sell
the property prior to or following any environmental remediation. If we ever become subject to significant environmental
liabilities, our business, financial condition and results of operations could be materially and adversely affected.
Market and Industry Risks
Recent negative developments affecting the banking industry, and resulting media coverage, have eroded customer
confidence in the banking system.
The high-profile bank failures of 2023 generated significant market volatility among publicly traded bank holding
companies and, in particular, regional banks like the Company. These market developments also negatively impacted customer
confidence in the safety and soundness of regional banks. While the Department of the Treasury, the FRB, and the FDIC took
steps to ensure that depositors of the failed banks would have access to their deposits, including uninsured deposit accounts,
there is no guarantee that such actions will be successful in restoring customer confidence in regional banks and the banking
system more broadly.
If other bank failures occur and financial institutions enter receivership or become insolvent in the future
due to financial conditions affecting the banking system and financial markets, it could disrupt the financial services industry
and customers may choose to maintain deposits with larger financial institutions or invest in higher yielding short-term fixed
income securities, all of which could materially adversely impact the Company’s liquidity, loan funding capacity, net interest
margin, capital and results of operations.
If additional bank failures were to occur, we could face increased regulation of our industry, including increased
compliance costs and limitations on our ability to pursue business opportunities; significantly higher FDIC premiums or
additional special assessments; adverse impacts on our stock price and volatility of our Common Stock; and increased
competition for deposits due to a lack of consumer confidence in regional banks. If these conditions or similar ones continue to
exist or worsen, we could experience continuing or increased adverse effects on our financial condition.
A downturn in the real estate market would hurt our business.
The Bank’s business activities and credit exposure are concentrated in real estate lending, in particular commercial real
estate loans which are generally viewed as having more risk of default than residential real estate loans or certain other types of
loans or investments. The market for real estate is cyclical and the outlook for this sector is uncertain. A downturn in the real
estate market, accompanied by falling values and increased foreclosures would hurt our business because a large majority of our
loans are secured by real estate.
If a significant decline in real estate market values occurs, the collateral for loans will provide decreasing levels of
security. As a result, our ability to recover the principal amount due on defaulted loans by selling the underlying real estate will
be diminished, and we will be more likely to suffer losses on defaulted loans.
Because our loan portfolio contains commercial
real estate loans with relatively large balances, the deterioration of these loans may cause a significant increase in our
nonperforming loans which could result in a loss of earnings from these loans, an increase in the provision for loan losses, or an
increase in loan charge-offs, any of which would have an adverse impact, which could be material, on our business, financial
condition, and results of operations.
We own real estate as a result of foreclosures resulting from non-performing loans. If other lenders or borrowers
liquidate significant amounts of real estate in a rapid or disorderly fashion, or if the FDIC elects to dispose of significant
amounts of real estate from failed financial institutions in a similar fashion, it could have an adverse effect on the values of the
properties owned by the Company by depressing the value of these real estate holdings. In such a case, we may incur further
write-downs and charge-offs, which could, in turn, adversely affect our business, financial condition and results of operations.
Changes in retail distribution strategies and consumer behavior may adversely impact our business, financial condition
and results of operations.
We have significant investments in bank premises and equipment for our branch network as well as our retail work
force and other branch banking assets. Advances in technology, as well as changing customer preferences for accessing our
products and services, are requiring us to change our retail distribution strategy. As a result of the current market environment
and customer behavior, we have undertaken a branch optimization strategy that has led to the closure, consolidation or sale of
certain branches in our network. These actions could lead to losses on these assets or could adversely impact the carrying value
33
of other long-lived assets and may lead to increased expenditures to renovate and reconfigure remaining branches or to
otherwise further reform our retail distribution channel. In addition, any changes in our branch network strategy could adversely
impact our business, financial condition or operations if it results in the loss of customers or deposits which we rely on as a low
cost and stable source of funds for our loans and operations.
We may suffer losses in our loan portfolio due to inadequate or faulty underwriting and loan collection practices.
There are risks inherent in any loan portfolio, which we attempt to address by adhering to specific underwriting and
loan collection practices. Underwriting practices often include analysis of a borrower's prior credit history; financial statements;
tax returns; cash flow projections; valuation of collateral; personal guarantees of loans to businesses; and verification of liquid
assets. If the underwriting process fails to capture accurate information or proves to be inadequate, we may incur losses on
loans that appeared to meet our underwriting criteria, and those losses may exceed the amounts set aside as reserves in the
allowance for credit losses. Loan collection resources may be expanded to meet increases in nonperforming loans resulting
from economic downturns or to service any loans acquired, resulting in higher loan administration costs. We are also exposed
to the risk of improper documentation of foreclosure proceedings that would also increase the cost of collection.
Our operations are focused in the western United States, subjecting us to the risks of general economic conditions in
these market areas.
Substantially all of the Bank's loans are to individuals, businesses and real estate developers in the Pacific Northwest,
California, Arizona, Utah, Texas, New Mexico and Nevada. As a result, our business depends significantly on general
economic conditions in these market areas. A substantial increase in unemployment rates, or severe declines in housing prices
and property values in any of these primary market areas could have a material adverse effect on our business due to a number
of factors, including:
•
Loan delinquencies may increase.
•
Problem assets and foreclosures may increase.
•
Demand for the Bank's products and services may decline.
•
Collateral for loans made by the Bank, especially real estate, may decline in value, in turn reducing a customer's
borrowing power and reducing the value of assets and collateral associated with the loans.
•
Natural disasters and catastrophic events such as wildfires, floods and earthquakes may damage or destroy collateral
for loans made by the Bank and negatively impact the collateral’s value and a customer’s ability to repay loans.
Impairment of goodwill may adversely impact future results of operations.
Accounting standards require that we account for acquisitions using a method that could result in goodwill. If the
purchase price of the acquired company exceeds the fair value of the acquired net assets, the excess will be included in the
Company's Statement of Financial Condition as goodwill. The Company has a significant goodwill balance and, in accordance
with GAAP, we evaluate it for impairment at least annually and more often if events or circumstances indicate the possibility of
impairment. Evaluations may be based on many factors, some of which are the price of our Common Stock, discounted cash
flow projections and data from comparable market acquisitions. A significant and sustained decline in our stock price and
market capitalization, a significant decline in our expected future cash flows, a significant adverse change in the business
climate or slower growth rates could result in impairment of our goodwill. Future evaluations of goodwill may result in the
impairment and write-down of our goodwill balance which could have a material adverse impact on our earnings and adversely
affect our operating results.
Competitive Risks
The Bank faces strong competition from other financial institutions and new market participants, offering services
similar to those offered by the Bank.
Many competitors, including fintech companies, offer the same types of loan and deposit services that the Company
offers. These competitors include national and multinational banks, other regional banks, savings associations, community
banks, credit unions, fintechs, and other financial intermediaries. In particular, our competitors include national banks and
major financial companies whose greater resources may afford them a marketplace advantage by enabling them to maintain
numerous banking locations, launch new technologies and mount extensive promotional and advertising campaigns. The
effective use of technology increases efficiency and enables financial institutions to better serve customers and to reduce costs.
Many of our competitors have substantially greater resources to invest in technological improvements than we do. Our future
success will depend, in part, upon our ability to address the needs of our customers by using technology to provide products and
34
services that will satisfy client demands for convenience, as well as to create additional efficiencies in our operations. We may
not be able to effectively implement new technology-driven products and services or be successful in marketing these products
and services to our customers. In addition, the implementation of technological changes and upgrades to maintain current
systems and integrate new ones may also cause service interruptions, transaction processing errors and system conversion
delays and may cause us to fail to comply with applicable laws. There can be no assurance that we will be able to successfully
manage the risks associated with our increased dependency on technology. Additionally, recent technological breakthroughs
have made it possible for other non-traditional competitors to enter the marketplace and compete for traditional banking
services. Increased competition within our geographic market area may result in reduced loan originations and deposits.
Ultimately, competition from current and future competitors may affect our business materially and adversely.
We rely, in part, on external financing to fund our operations and the unavailability of such funding in the future could
adversely impact our growth and prospects.
We rely on customer deposits, advances from the FHLB and other borrowings to fund our operations.
Core deposits
are a low cost and generally stable source of funding and a significant source of funds for our lending activities. Management
has historically been able to replace maturing deposits, if desired; however, we may not be able to replace such funds at any
given point in time if our financial condition or market conditions change or if the cost of doing so might adversely affect our
business, financial condition and results of operations.
If we are forced to seek other sources of funds, such as additional
brokered deposits or borrowings from the FHLB, the interest expense associated with these other funding sources are now and
may be higher than the rates we are currently paying on our deposits, which would adversely impact our net income, and such
sources of funding may be more volatile and unavailable.
If we need additional funds for our liquidity needs, we may seek additional debt to achieve our long-term business
objectives. Such borrowings, if sought, may not be available to us or, if available, may not be on favorable terms. If additional
financing sources are unavailable or are not available on reasonable terms, our business, financial condition and results of
operations may be adversely affected.
We may not be able to continue to grow organically or through acquisitions.
Historically, we have expanded through a combination of organic growth and acquisitions. If market and regulatory
conditions change, we may be unable to grow organically or successfully compete for, complete, and integrate potential future
acquisitions at the same pace as we have achieved in recent years, or at all. We have historically used our strong stock currency
and capital resources to complete acquisitions. Downturns in the stock market and the market price of our stock, changes in our
capital position, and changes in our regulatory standing, including a “Needs to Improve” CRA rating, could each have a
negative impact on our ability to complete future acquisitions.
Our entry into California may present increased risk that may adversely impact our business, prospects and financial
condition.
The Merger with Luther Burbank resulted in the Bank’s initial entry into the state of California. We previously had no
operating experience in California, relied on the experience and expertise of Luther Burbank’s lending and business
development officers to help with our transition. The banking and financial services business in California is highly competitive
and we compete for loans, deposits and customers for financial services with other commercial banks, savings and loan
associations, securities and brokerage companies, mortgage companies, insurance companies, finance companies, money
market funds, credit unions, fintechs, and other nonbank financial service providers. Many of these competitors are much larger
in total assets and capitalization, have greater access to capital markets and offer a broader array of financial services than the
Company. As a result, there can be no assurance that we will be able to compete effectively in California, and if we are unable
to compete effectively in California, the benefits we were anticipating from the Merger may not be fully achieved, and our
results of operations and financial conditions could be materially and adversely affected.
Security Ownership Risks
The Company’s business or the value of its common shares could be negatively affected as a result of actions by activist
shareholders.
The Company values constructive input from shareholders, and our Board of Directors and management team are
committed to acting in the best interests of all of the Company’s shareholders. Activist shareholders who disagree with the
composition of the Board of Directors, the Company’s strategic direction, or the way the Company is managed may seek to
effect change through various strategies that range from private engagement to public filings, proxy contests, efforts to force
transactions not supported by the Board of Directors, and litigation. In recent months, activist investors have increasingly
targeted regional banking institutions, like the Bank, including campaigns at Comerica Incorporated and Eastern Bancshares,
35
Inc.
Responding to some of these actions can be costly and time-consuming, may disrupt the Company’s operations and divert
the attention of the Board of Directors and management. Such activities could interfere with the Company’s ability to execute
its strategic plan and to attract and retain qualified executive leadership. The perceived uncertainty as to the Company’s future
direction resulting from activist strategies could also affect the market price and volatility of the Company’s common shares.
Our ability to pay dividends is subject to limitations that may affect our ability to continue to pay dividends to
shareholders.
The Company is a separate legal entity from the bank subsidiary and does not have significant operations of its own.
The availability of dividends from the Bank is limited by the Bank's earnings and capital, as well as various federal and state
statutes and regulations. It is possible, depending upon the financial condition of the Bank and other factors, that the Bank may
not be able to pay dividends to the Company. If the Bank is unable to pay dividends to the Company, then we may not be able
to pay dividends on our preferred or Common Stock to our shareholders. If the Bank's earnings are not sufficient to make
dividend payments to us while maintaining adequate capital levels, then our liquidity may be affected and our stock price may
be negatively affected by our inability to pay dividends, which will have an adverse impact on both the Company and our
shareholders.
Our 4.875% Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A (“Series A Preferred Stock”) ranks senior
to our Common Stock, and we are prohibited from paying dividends on our Common Stock unless we have paid
dividends on our Series A Preferred.
Shares of our Series A Preferred Stock rank senior to our Common Stock with respect to the payment of dividends and
distributions of assets upon liquidation, dissolution or winding up. Holders of Series A Preferred Stock are entitled to receive,
when, as, and if declared by our Board of Directors (or a duly authorized committee of our Board of Directors), out of assets
legally available for the payment of dividends under Washington law, non-cumulative cash dividends based on the liquidation
preference of the Series A Preferred Stock at a rate equal to 4.875% per annum for each quarterly dividend period, beginning on
April 15, 2021. If we do not or are unable to pay quarterly dividends on our Series A Preferred Stock, we may not pay a
dividend to the holders of our Common Stock. Our stock price may be negatively affected by our inability to pay dividends,
which will have an adverse impact on both the Company and our shareholders.
In addition, if we fail to pay, or declare and set apart for payment, dividends on our Series A Preferred Stock for six
quarterly dividend periods, whether or not consecutive, the number of directors on our Board of Directors will automatically be
increased by two, and the holders of shares of Series A Preferred Stock will have the right to elect two additional members of
our Board of Directors (the “Preferred Stock Directors”) to fill such newly created directorships.
The market price for our Common Stock may be volatile.
The market price of our Common Stock could fluctuate substantially in the future in response to a number of factors,
including those discussed below. The market price of our Common Stock has in the past fluctuated significantly, including in
2023 as a result of the high-profile bank failures and in 2025 following the announcement of new tariff policies by the current
administration. We expect to see additional volatility in the financial markets due to the uncertainty caused by the continuing
global conflicts, U.S. trade policy, AI stock valuation corrections, interest rates and changing Federal Reserve policies. Some
additional factors that may cause the price of our Common Stock to fluctuate include:
•
general conditions in the financial markets and real estate markets.
•
macro-economic and political conditions in the U. S. and the financial markets generally.
•
variations in the operating results of the Company and our competitors.
•
events affecting other companies that the market deems comparable to the Company.
•
changes in securities analysts' estimates of our future performance and the future performance of our competitors.
•
announcements by the Company or our competitors of mergers, acquisitions and strategic partnerships.
•
additions or departure of key personnel.
•
the presence or absence of short selling of the Company's Common Stock.
•
future sales by us of our Common Stock or debt securities.
The stock markets in general have experienced substantial price and trading fluctuations. These fluctuations have
resulted in volatility in the market prices of securities that often has been unrelated or disproportionate to changes in operating
performance. These broad market fluctuations are expected to continue for the near future, and may adversely affect the trading
price of our Common Stock.
36
There may be future sales or other dilution of the Company's equity, which may adversely affect the market price of our
Common Stock or depositary shares.
Our Board of Directors is authorized to cause the Company to issue one or more classes or series of preferred stock
junior to our Series A Preferred Stock from time to time without any action on the part of our shareholders, and our Board of
Directors also has the power, without shareholder approval, to set the terms of any such classes or series of preferred stock that
may be issued, including voting rights, dividend rights, and preferences over the Common Stock with respect to dividends or
upon our dissolution, winding up and liquidation and other terms.
The issuance of any additional shares of common or of preferred stock or convertible securities or the exercise of such
securities could be substantially dilutive to existing shareholders. As we did for the Merger with Luther Burbank, we may also
elect to use Common Stock to fund new acquisitions, which will further dilute existing shareholders. Holders of our Common
Stock have no preemptive rights that entitle holders to purchase their pro rata share of any offering of shares of any class or
series and, therefore, such sales or offerings could result in increased dilution to our shareholders.
A person holding our Common Stock could have the voting power of their shares of Common Stock on all matters
significantly reduced under Washington's anti-takeover statutes, if the person acquires 10% or more of the voting stock
of the Company.
We are incorporated in the state of Washington and subject to Washington state law. Some provisions of Washington
state law could interfere with or restrict takeover bids or other change-in-control events affecting us. For example, Chapter
23B.19 of the Washington Business Corporation Act, with limited exceptions, prohibits a “target corporation” from engaging in
specified “significant business transactions” for a period of five years after the share acquisition by an acquiring person, without
complying with certain shareholder approval requirements. An acquiring person is defined as a person or group of persons that
beneficially own 10% or more of our voting securities. Such prohibited transactions include, among other things:
•
certain mergers, or consolidations with, disposition of assets to, or issuances of stock to or redemption of stock from,
the acquiring person;
•
termination of 5% or more of the employees of the target corporation as a result of the acquiring person's acquisition of
10% or more of the shares;
•
allowing the acquiring person to receive any disproportionate benefit as a shareholder; and
•
liquidating or dissolving the target corporation.
After the five-year period, certain “significant business transactions” are permitted, if they comply with certain “fair
price” provisions of the statute or are approved by a majority of the outstanding shares other than those of which the acquiring
person has beneficial ownership. As a Washington corporation, the Company is not permitted to “opt out” of this statute.
Item 1B. Unresolved Staff Comments
None.
Item 1C. Cybersecurity
We recognize the value of personal and financial information and are dedicated to protecting the confidentiality,
integrity, and availability of our data and systems. From
the Board of Directors to our Customer Service Representatives, all
individuals at the organization are responsible for handling confidential data with care
.
Institutions Examination Council (FFIEC) Examination Guidance, and industry-accepted security standards such as the
National Institute of Standards and Technology (NIST) Cybersecurity Framework, which are at the forefront of cybersecurity
guidelines for federal agencies in the U.S.
We employ a defense in depth strategy that incorporates preventive, detective, and
administrative safeguards including, but not limited to, advanced anti-malware and firewall technologies, anti-phishing and web
filtering controls, robust patch management and vulnerability management processes, configuration hardening, participation
37
with the Financial Services Information Sharing and Analysis Center (FS-ISAC) for sharing and consuming threat information,
and we perform regular security testing to evaluate our defenses against real-world threats. We have an extensive information
security training program that aims to regularly educate our colleagues on current best practices on handling sensitive
information and expectations for protecting the organization and our customers. All employees complete mandatory
cybersecurity training on at least a quarterly basis, including how to identify phishing attacks. Colleagues are tested regularly
with simulated social engineering attacks to ensure awareness and preparedness. As an additional risk mitigation measure, the
Bank maintains cybersecurity insurance in the event that a material incident does occur.
The ability to mitigate cybersecurity risks is dependent upon an effective risk assessment process that identifies,
measures, controls, and monitors material risks stemming from cybersecurity threats. These threats include any potential
unauthorized activities occurring through the Company’s information systems that could adversely affect the confidentiality,
integrity, or availability of the Company’s information systems or the data contained therein.
The Company’s Information
Security Program includes a comprehensive information security risk assessment process that incorporates the following
elements:
•
Identifying threats, measuring risk, defining information security requirements, and implementing controls to reduce
risk.
•
Identifying reasonably foreseeable internal and external threats that may lead to unauthorized disclosure, misuse,
alteration, or destruction of sensitive information or information systems.
•
Assessing the likelihood and potential damage posed by these threats, considering the degree of information sensitivity
and the Company’s operations, inclusive of substantive changes to people, processes and technology.
•
Aligning the Information Security Program with the Company’s enterprise-wide risk management program, which
identifies, measures, mitigates, and monitors risk.
•
Evaluating the adequacy of policies, procedures, information systems, and other arrangements designed to control
identified risks.
•
Providing input for internal and external auditors and independent
third-party engagements
, including in relation to
third party operated penetration tests.
•
Exercising risk oversight to conduct appropriate, risk-based due diligence and monitoring to understand risks
The risk assessment process is designed to identify assets requiring risk reduction strategies and includes an evaluation
of the key factors applicable to the operation. The Company conducts a variety of information security assessments throughout
the year, both internally and through third-party specialists. We partner with the Cybersecurity and Infrastructure Security
Agency (CISA), under the Department of Homeland Security (DHS), to conduct regular vulnerability scanning against our
public facing assets, and on a recurring basis we partner with outside firms to conduct thorough security assessments against
our external and internal environment. Results of those assessments are further evaluated, and remediation activity is
prioritized.
Our cybersecurity and IT teams prepare for and respond to cybersecurity attacks and incidents, including defending
against unauthorized access to our systems, and crafting response plans intended to significantly reduce impacts on operations
and customers. We understand that cyber threats are unwavering and evolving in this digital age, and because of that we
continue to increase investments in people and technology to help us mature our practices and maintain confidence in our
ability to safeguard our assets.
While cybersecurity risks have the potential to materially affect the Company’s business,
financial condition, and results of operations, the Company does not believe that risks from cybersecurity threats or attacks,
including as a result of any previous cybersecurity incidents, have materially affected the Company, including our business
Cybersecurity Governance
update from management on our cybersecurity risk management program.
This includes information on emerging threats, the
company’s cybersecurity posture, progress toward risk mitigation goals, significant cybersecurity incidents or developments,
and the steps management has taken to address these risks.
During these sessions,
the Board committees typically review
materials detailing current and potential risks, as well as the company’s capacity to mitigate those risks.
The committee
members also engage in discussions with our Chief Information Security Officer and Chief Information Officer about these
matters. Additionally, Board committee members are encouraged to engage in ongoing, informal conversations with
management regarding cybersecurity news and updates to our risk management and strategy initiatives
.
Material cybersecurity
38
risks are also reviewed during
Board discussions on key topics such as enterprise risk management, operational budgeting,
have deep technology expertise, while one of those individuals is responsible for leading cloud security at a Fortune 50
technology company.
team with decades of combined experience in information security management, cybersecurity strategy development, and the
certifications.
and remediation of cybersecurity incidents as part of their involvement in the cybersecurity risk management and strategy
Item 2. Properties
The Company owns the building in which its principal executive offices are located in Seattle, Washington, as well as
certain branch properties. The Company evaluates on a continuing basis the suitability and adequacy of its offices, both
branches and administrative centers, and has opened, relocated, remodeled or closed locations as necessary to maintain efficient
and attractive premises. For further information on these activities, see
Notes J and
N to the Consolidated Financial Statements
Item 3. Legal Proceedings
The Company and its consolidated subsidiaries are involved in legal proceedings occurring in the ordinary course of
business that in the aggregate are believed by management to be immaterial to the financial statements of the Company. The
effects of legal proceedings did not have a material impact on the Company's consolidated financial statements.
Item 4. Mine Safety Disclosures
Not applicable.
39
PART II
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity
Securities
Common Stock
The Company’s Common Stock is traded on the Nasdaq Global Select Market of The Nasdaq Stock Market LLC under
the symbol “WAFD.” At
September 30, 2025
, the number of shareholders of record was
928
. This figure does not represent the
actual number of beneficial owners of Common Stock because shares are frequently held in “street name” by securities dealers
and others for the benefit of individual owners who may vote the shares.
Additional information about stock options and other equity compensation plans is included in
Note Q to the
Consolidated Financial Statements in “Item 8. Financial Statements and Supplementary Data”
of this report.
The Company’s ability to pay dividends is subject to bank regulatory requirements, including (but not limited to) the
capital adequacy regulations and policies established by the Board of Governors of the Federal Reserve System. The Board of
Directors' dividend policy is to review our financial performance, capital adequacy, regulatory compliance and cash resources
on a quarterly basis, and, if such review is favorable, to declare and pay a quarterly cash dividend to common shareholders.
The Company’s 4.875% Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A (the “Series A Preferred”),
ranks senior to the Company’s Common Stock with respect to payment of dividends, and dividends (if declared) accrue and are
payable on the Series A Preferred a rate of 4.875% per annum, payable quarterly, in arrears. While the Series A Preferred is
outstanding, unless the full dividend for the preceding quarterly period is paid in full, or declared and a sum set aside, no
dividend may be declared or paid on the Company’s Common Stock.
Issuer Purchases of Equity Securities
The Company’s stock repurchase program was publicly announced by the Board of Directors on February 3, 1995,
amended most recently in May 2024, restated in December 2024, and has no expiration date. Under this program, a total of
86,956,264
shares of the Company’s Common Stock have been authorized for repurchase. The following table shows share
repurchases made for the three months ended
September 30, 2025
.
|
Period
|
Total Number of
Shares Purchased
|
|
Average Price
Paid Per Share
|
|
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans or
Programs
|
Maximum
Number of Shares
That May Yet Be
Purchased Under
the Plans or
Programs
|
|
|
July 1, 2025 to July 31, 2025
|
455,989
|
$
29.52
|
454,561
|
8,674,927
|
|||
|
August 1, 2025 to August 31, 2025
|
512,971
|
29.94
|
512,273
|
8,162,654
|
|||
|
September 1, 2025 to September 30, 2025
|
693
|
31.12
|
—
|
8,162,654
|
|||
|
Total
|
969,653
|
|
$
29.74
|
|
966,834
|
8,162,654
|
40
Performance Graphs
The following graphs compare the cumulative total return to WaFd shareholders (stock price appreciation plus
reinvested dividends) to the cumulative total return of the Nasdaq Stock Market Index (U.S. Companies) and the KBW Bank
Index for the five year period ended
September 30, 2025
, and since WaFd first became a publicly traded company on
November 9, 1982, respectively. The graphs assume that $100 was invested on September 30, 2020, and November 9, 1982,
respectively, in WaFd Common Stock, the Nasdaq Stock Market Index and the Nasdaq Financial Stocks Index, and that all
dividends were reinvested. Management of WaFd cautions that the stock price performance shown in the graphs below should
not be considered indicative of potential future stock price performance.
41
Item 6. [Reserved]
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This discussion should be read in conjunction with our Consolidated Financial Statements and related notes in “Item 8.
Financial Statements and Supplementary Data” of this report. In the following discussion, unless otherwise noted, references to
increases or decreases in average balances in items of income and expense for a particular period and balances at a particular
date refer to the comparison with corresponding amounts for the period or date for the previous year.
In addition to historical financial information, the following discussion and analysis contains forward-looking statements that
involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-
looking statements as a result of many factors, including those discussed under “Risk Factors” and elsewhere in this Annual
Report on Form 10-K. This section of this Form 10-K generally discusses
2025
and
2024
items and year-to-year comparisons
between
2025
and
2024
. For management's review of the factors that affected our results of operations for the years ended
September 30, 2024
and
2023
, refer to our Annual Report on Form 10-K for the year ended
September 30, 2024
, which was
filed with the SEC on November 20, 2024.
42
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to use judgment in
making estimates and assumptions that affect the reported amounts within the consolidated financial statements. Actual results
may differ from these estimates. While our significant accounting policies are described in more detail in
Note A
to the
Consolidated Financial Statements, we believe that the accounting policies discussed below are critical for understanding our
historical and future performance. Critical accounting policies and estimates are those that we consider the most important to
the portrayal of our financial condition and results of operations because they require our most difficult, subjective or complex
judgments, often as a result of the need to make estimates about the effect of the matters that are inherently uncertain.
Allowance for Credit Losses.
Management’s determination of the amount of the ACL is a critical accounting estimate as it
requires significant reliance on the credit risk we ascribe to individual borrowers, the use of estimates and significant judgment
as to the amount and timing of expected future cash flows on individually evaluated loans, significant reliance on historical loss
rates on homogeneous portfolios, consideration of our quantitative and qualitative evaluation of past events, current conditions,
and reasonable and supportable forecasts that affect the collectability of the reported amounts.
Going forward, the methodology used to calculate the ACL will be significantly influenced by the composition, characteristics
and quality of our loan portfolio, as well as the prevailing economic conditions and forecasts utilized. Material changes to these
and other relevant factors may result in greater volatility to the allowance for credit losses, and therefore, greater volatility in
our reported earnings.
Goodwill.
Goodwill represents the excess of the acquisition consideration over the fair value of assets acquired and liabilities
assumed. We have determined our goodwill balance is all related to a single reporting unit and perform an annual impairment
assessment on August 31st, or sooner if an impairment indicator exists. We perform a quantitative impairment assessment and,
upon performing the quantitative test, if the carrying value of the reporting unit exceeds its fair value, an impairment loss is
recognized in an amount equal to that excess.
When performing the quantitative assessment of goodwill impairment, we estimate the fair value of our reporting unit using the
market capitalization approach, based on quoted market prices of our securities, adjusted for the effect of a control premium.
Based on the results of the annual quantitative evaluation for
2025
, the fair value of our single reporting unit exceeded its
respective carrying value and did not result in impairment for the reporting unit.
The Company continuously monitors for events and circumstances that could negatively impact the key assumptions in
determining fair value. While the Company believes the judgments and assumptions used in the goodwill impairment test are
reasonable, different assumptions or changes in general industry, market and macro-economic conditions could change the
estimated fair values and, therefore, future impairment charges could be required, which could be material to the consolidated
financial statements.
Business Combinations.
The Company applies the acquisition method of accounting for business combinations. Under the
acquisition method, the acquiring entity recognizes the assets acquired and liabilities assumed at their acquisition date fair
values. Management utilizes prevailing valuation techniques appropriate for the asset or liability being measured in determining
these fair values. This method often involves estimates based on third party valuations based on discounted cash flow analyses
or other valuation techniques, all of which are inherently subjective. Any excess of the purchase price over the fair value of net
assets and other identifiable intangible assets acquired is recorded as goodwill.
Assets acquired and liabilities assumed from contingencies must also be recognized at fair value if the fair value can be
determined during the measurement period. Acquisition-related costs, including conversion and restructuring charges, are
expensed as incurred. Fair values are subject to refinement over the measurement period, not to exceed one year after the
closing date.
Management uses various valuation methodologies to estimate the fair value of acquired assets and liabilities which often
involve a significant degree of judgment. Changes in the assumptions utilized within these valuations, including downturns in
economic or business conditions, could have a significant adverse impact on the carrying value of assets which could result in
impairment losses affecting the Company's financial statements as a whole.
Select information regarding the ACL is under the "Allowance for Credit Losses" heading within this section below. For further
details on the ACL, business combinations or goodwill, see
Notes A,
B, and
E to the Consolidated Financial Statements in
43
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ALLOWANCE FOR CREDIT LOSSES
The following table provides detail regarding the Company's allowance for credit losses.
|
Twelve Months Ended September 30,
|
2025
|
2024
|
2023
|
2022
|
2021
|
||||
|
|
(In thousands)
|
||||||||
|
Beginning balance
|
$
203,753
|
$
177,207
|
$
172,808
|
$
171,300
|
$
166,955
|
||||
|
Charge-offs:
|
|||||||||
|
Commercial loans
|
|||||||||
|
Multi-Family
|
555
|
—
|
—
|
—
|
—
|
||||
|
Commercial Real Estate
|
9,652
|
203
|
—
|
529
|
—
|
||||
|
Commercial & Industrial Loans
|
1,291
|
2,611
|
45,856
|
1,202
|
31
|
||||
|
Construction
|
—
|
—
|
—
|
—
|
—
|
||||
|
Land – Acquisition & Development
|
—
|
149
|
—
|
11
|
2
|
||||
|
Total commercial loans
|
11,498
|
2,963
|
45,856
|
1,742
|
33
|
||||
|
Consumer loans
|
|||||||||
|
Single-Family Residential
|
338
|
144
|
34
|
—
|
106
|
||||
|
Construction – Custom
|
—
|
—
|
—
|
—
|
—
|
||||
|
Land – Consumer Lot Loans
|
—
|
—
|
—
|
27
|
—
|
||||
|
HELOC
|
—
|
—
|
—
|
—
|
—
|
||||
|
Consumer
|
1,334
|
518
|
580
|
370
|
286
|
||||
|
Total consumer loans
|
1,672
|
662
|
614
|
397
|
392
|
||||
|
13,170
|
3,625
|
46,470
|
2,139
|
425
|
|||||
|
Recoveries:
|
|||||||||
|
Commercial loans
|
|||||||||
|
Multi-Family
|
—
|
—
|
—
|
—
|
—
|
||||
|
Commercial Real Estate
|
169
|
4
|
103
|
984
|
2,789
|
||||
|
Commercial & Industrial Loans
|
252
|
1,069
|
93
|
73
|
92
|
||||
|
Construction
|
—
|
—
|
—
|
2,179
|
—
|
||||
|
Land – Acquisition & Development
|
33
|
105
|
78
|
70
|
622
|
||||
|
Total commercial loans
|
454
|
1,178
|
274
|
3,306
|
3,503
|
||||
|
Consumer loans
|
|||||||||
|
Single-Family Residential
|
572
|
381
|
568
|
1,002
|
2,026
|
||||
|
Construction – Custom
|
4
|
1
|
—
|
—
|
—
|
||||
|
Land – Consumer Lot Loans
|
—
|
58
|
23
|
48
|
168
|
||||
|
HELOC
|
3
|
4
|
2
|
351
|
52
|
||||
|
Consumer
|
354
|
647
|
502
|
940
|
1,021
|
||||
|
Total consumer loans
|
933
|
1,091
|
1,095
|
2,341
|
3,267
|
||||
|
1,387
|
2,269
|
1,369
|
5,647
|
6,770
|
|||||
|
Net charge-offs (recoveries)
|
11,783
|
1,356
|
45,101
|
(3,508)
|
(6,345)
|
||||
|
ASC 326 Adoption Impact
|
—
|
—
|
—
|
—
|
—
|
||||
|
Provision (release) for loan losses and transfers
|
7,750
|
27,902
|
49,500
|
(2,000)
|
(2,000)
|
||||
|
Ending balance (1)
|
$
199,720
|
$
203,753
|
$
177,207
|
$
172,808
|
$
171,300
|
||||
|
Ratio of net charge-offs (recoveries) to
average loans outstanding
|
0.06
%
|
0.01
%
|
0.26
%
|
(0.02)
%
|
(0.05)
%
|
||||
(1) This does not include a reserve for unfunded commitments of
$21,500,000
,
$21,500,000
,
$24,500,000
,
$32,500,000
and
$27,500,000
as of
September 30, 2025
,
2024
,
2023
,
2022
and
2021
respectively.
44
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table shows changes in the Company's allowance for credit losses since the prior year.
|
September 30, 2025
|
September 30, 2024
|
$ Change
|
% Change
|
||||
|
(In thousands)
|
|||||||
|
Allowance for credit losses:
|
|||||||
|
Commercial loans
|
|||||||
|
Multi-family
|
$
25,953
|
$
25,248
|
$
705
|
3
%
|
|||
|
Commercial real estate
|
41,988
|
39,210
|
2,778
|
7
%
|
|||
|
Commercial & industrial
|
59,163
|
58,748
|
415
|
1
%
|
|||
|
Construction
|
18,136
|
22,267
|
(4,131)
|
(19)
%
|
|||
|
Land - acquisition & development
|
6,894
|
7,900
|
(1,006)
|
(13)
%
|
|||
|
Total commercial loans
|
152,134
|
153,373
|
(1,239)
|
(1)
%
|
|||
|
Consumer loans
|
|||||||
|
Single-family residential
|
38,880
|
40,523
|
(1,643)
|
(4)
%
|
|||
|
Construction - custom
|
610
|
1,427
|
(817)
|
(57)
%
|
|||
|
Land - consumer lot loans
|
2,104
|
2,564
|
(460)
|
(18)
%
|
|||
|
HELOC
|
3,069
|
3,049
|
20
|
1
%
|
|||
|
Consumer
|
2,923
|
2,817
|
106
|
4
%
|
|||
|
Total consumer loans
|
47,586
|
50,380
|
(2,794)
|
(6)
%
|
|||
|
Total allowance for loan losses
|
199,720
|
203,753
|
(4,033)
|
(2)
%
|
|||
|
Reserve for unfunded commitments
|
21,500
|
21,500
|
—
|
—
%
|
|||
|
Total allowance for credit losses
|
$
221,220
|
$
225,253
|
$
(4,033)
|
(2)
%
|
|||
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
. As of
September 30, 2025
, the allowance of
$199,720,000
is for loans that are evaluated
on a pooled basis, which was comprised of
$131,652,000
related to the quantitative component and
$68,068,000
related to
management's qualitative overlays. The fluctuations that resulted in the overall decrease from the prior year can be seen in the
table above. The allowance for both commercial construction loans and land A&D loans decreased as projects were completed
and paid off or transitioned to CRE. Single-family, residential construction and lot loans decreased as a result of run-off after
the Bank's exit of the residential mortgage market..
The Company recorded a provision for credit losses of
$7,750,000
in
2025
, compared to a provision of
$17,500,000
for
2024
.
These amounts are net of provision and recapture related to the unfunded commitments reserve. In 2025, provisioning reflected
increasing trends in charge-offs and negative migration of delinquent and nonperforming loans combined with economic
concerns.
In 2024, provisioning included the initial provision of
$16,000,000
recorded on LBC loans acquired, as well as
adjustments resulting from qualitative considerations such as prolonged and intensified borrower sensitivity to high interest
rates and operating costs due to inflationary pressures. For the year ended
September 30, 2025
, net charge-offs were
$11,783,000
, compared to charge-offs of
$1,356,000
in the prior year. The ratio of the total ACL to total gross loans increased
to
1.04%
as of
September 30, 2025
, as compared to
1.01%
as of
September 30, 2024
. A shift toward commercial loan
originations led to a modified mix of loan types combined with increased qualitative reserve adjustments resulted in this
increase.
The reserve for unfunded loan commitments was
$21,500,000
as of
September 30, 2025
, unchanged compared to
$21,500,000
as of
September 30, 2024
.
Management believes the total ACL is sufficient to absorb estimated losses inherent in the portfolio of loans and unfunded
commitments.
45
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table sets forth the amount of the Bank’s allowance for loan losses by loan portfolio and class.
|
September 30,
|
2025
|
2024
|
2023
|
2022
|
2021
|
|||||||||||||||||||
|
|
Allowance
|
Loans to
Total
Loans (1)
|
Coverage
Ratio
|
Allowance
|
Loans to
Total
Loans (1)
|
Coverage
Ratio
|
Allowance
|
Loans to
Total
Loans (1)
|
Coverage
Ratio (2)
|
Allowance
|
Loans to
Total
Loans (1)
|
Coverage
Ratio (2)
|
Allowance
|
Loans to
Total
Loans (1)
|
Coverage
Ratio (2)
|
|||||||||
|
|
($ in thousands)
|
|||||||||||||||||||||||
|
Commercial loans
|
||||||||||||||||||||||||
|
Multi-family
|
$
25,953
|
22.9
%
|
0.6
%
|
$
25,248
|
21.7
%
|
0.6
%
|
$
13,155
|
16.4
%
|
0.5
%
|
$
12,013
|
16.2
%
|
0.5
%
|
$
16,949
|
16.3
%
|
0.8
%
|
|||||||||
|
Commercial real estate
|
41,988
|
17.7
|
1.2
|
39,210
|
17.7
|
1.1
|
28,842
|
18.8
|
0.9
|
25,814
|
19.1
|
0.8
|
23,437
|
17.4
|
1.0
|
|||||||||
|
Commercial & industrial
|
59,163
|
11.6
|
2.5
|
58,748
|
10.9
|
2.6
|
58,773
|
12.9
|
2.6
|
57,210
|
14.2
|
2.5
|
45,957
|
16.3
|
2.0
|
|||||||||
|
Construction
|
18,136
|
5.4
|
1.7
|
22,267
|
6.7
|
1.6
|
29,408
|
10.4
|
1.6
|
26,161
|
8.7
|
1.9
|
25,585
|
7.9
|
2.3
|
|||||||||
|
Land – acquisition &
development
|
6,894
|
0.7
|
5.2
|
7,900
|
0.7
|
5.2
|
7,016
|
0.9
|
4.7
|
12,278
|
1.3
|
5.8
|
13,447
|
1.3
|
7.5
|
|||||||||
|
Total commercial loans
|
152,134
|
153,373
|
137,194
|
133,476
|
125,375
|
|||||||||||||||||||
|
Consumer loans
|
||||||||||||||||||||||||
|
Single-family residential
|
38,880
|
39.3
|
0.5
|
40,523
|
39.4
|
0.5
|
28,029
|
36.4
|
0.4
|
25,518
|
35.4
|
0.4
|
30,978
|
35.5
|
0.6
|
|||||||||
|
Construction – custom
|
610
|
0.4
|
0.8
|
1,427
|
0.9
|
0.8
|
2,781
|
1.8
|
0.9
|
3,410
|
2.4
|
0.9
|
4,907
|
2.5
|
1.4
|
|||||||||
|
Land – consumer lot
loans
|
2,104
|
0.4
|
2.4
|
2,564
|
0.5
|
2.4
|
3,512
|
0.7
|
2.9
|
5,047
|
0.9
|
3.4
|
4,939
|
1.0
|
3.4
|
|||||||||
|
HELOC
|
3,069
|
1.3
|
1.1
|
3,049
|
1.3
|
1.1
|
2,859
|
1.3
|
1.2
|
2,482
|
1.3
|
1.2
|
2,390
|
1.2
|
1.5
|
|||||||||
|
Consumer
|
2,923
|
0.3
|
5.0
|
2,817
|
0.3
|
4.0
|
2,832
|
0.4
|
4.2
|
2,875
|
0.5
|
4.0
|
2,711
|
0.6
|
3.2
|
|||||||||
|
Total consumer loans
|
47,586
|
50,380
|
40,013
|
39,332
|
45,925
|
|||||||||||||||||||
|
Total allowance for loan
losses (3)
|
$
199,720
|
100
%
|
$
203,753
|
100
%
|
$
177,207
|
100
%
|
$
172,808
|
100
%
|
$
171,300
|
100
%
|
||||||||||||||
___________________
(1)
Represents the loans receivable for each respective loan class as a % of total loans receivable.
(2)
Represents the allowance for each respective loan class as a % of loans receivable for that same loan class. The underlying commercial & industrial loan balances for
September 30, 2023, 2022 and 2021 include PPP loans for which no allowance was recorded. These PPP loan balances were $1,000,000, $10,000,000 and $312,000,000 as of
September 30, 2023, 2022 and 2021 respectively.
(3)
This does not include a reserve for unfunded commitments of
$21,500,000
,
$21,500,000
,
$24,500,000
,
$32,500,000
and
$27,500,000
as of
September 30, 2025
,
2024
,
2023
,
2022
and
2021
, respectively.
46
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ASSET QUALITY
Modifications to Borrowers Experiencing Financial Difficulty.
Loans may be modified as the result of borrowers
experiencing financial difficulty needing relief from the contractual terms of their loan. Most loan modifications to borrowers
experiencing financial difficulty are accruing and performing loans where the borrower has approached the Bank about
modification due to temporary financial difficulties. Each request for modification is individually evaluated for merit and
likelihood of success. Often a term extension is needed in the short term in order to evaluate the need for further corrective
action. Payment delays and interest-only payments may also be approved during the modification period. Principal forgiveness
is not an available option for restructured loans.
Non-Performing Assets.
When a borrower violates a condition of a loan, the Bank attempts to cure the default by contacting
the borrower. In most cases, defaults are cured promptly. If the default is not cured within an appropriate time frame, typically
90 days, the Bank may institute appropriate action to collect the loan, such as making demand for payment or initiating
foreclosure proceedings on the collateral. If foreclosure occurs, the collateral will typically be sold at public auction and may be
purchased by the Bank.
Loans are placed on non-accrual status when, in the judgment of management, the probability of collecting interest or principal
is deemed to be insufficient to warrant further accrual. When a loan is placed on non-accrual status, previously accrued but
unpaid interest is deducted from interest income. The Bank does not accrue interest on loans 90 days past due or more.
See
Note A to the Consolidated Financial Statements included in Item 8
hereof for additional information.
For commercial loans, six consecutive payments on newly restructured loan terms are generally required prior to returning the
loan to accrual status. In some instances after the required six consecutive payments are made, a management assessment will
conclude that collection of the entire principal balance is still in doubt. In those instances, the loan will remain on non-accrual.
Homogeneous loans may or may not be on accrual status at the time of restructuring, but all are placed on accrual status upon
the restructuring of the loan.
Real estate acquired by foreclosure or deed-in-lieu thereof (“REO” or “Real Estate Owned”) is classified as real estate held for
sale. When property is acquired, it is recorded at the fair market value less estimated selling costs at the date of acquisition.
Interest accrual ceases on the date of acquisition and all costs incurred in maintaining the property from that date forward are
expensed as incurred. Costs incurred for the improvement or development of such property are capitalized. See
Note A to the
Consolidated Financial Statements included in Item 8
hereof for additional information.
47
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table sets forth information regarding the Bank's non-performing assets.
|
September 30,
|
2025
|
2024
|
2023
|
2022
|
2021
|
||||
|
|
(In thousands)
|
||||||||
|
Commercial loans
|
|||||||||
|
Multi-family
|
19,121
|
18,743
|
5,127
|
5,912
|
475
|
||||
|
Commercial real estate
|
69,972
|
26,362
|
23,435
|
4,691
|
8,038
|
||||
|
Commercial & industrial
|
11,047
|
—
|
6,082
|
5,693
|
365
|
||||
|
Construction
|
3,400
|
1,120
|
—
|
—
|
505
|
||||
|
Land – acquisition & development
|
—
|
74
|
—
|
—
|
2,340
|
||||
|
Total commercial loans
|
103,540
|
46,299
|
34,644
|
16,296
|
11,723
|
||||
|
Consumer loans
|
|||||||||
|
Single-family residential
|
23,741
|
21,488
|
14,918
|
17,450
|
19,320
|
||||
|
Construction – custom
|
760
|
848
|
88
|
435
|
—
|
||||
|
Land – consumer lot loans
|
23
|
—
|
9
|
84
|
359
|
||||
|
HELOC
|
412
|
596
|
736
|
233
|
287
|
||||
|
Consumer
|
152
|
310
|
27
|
36
|
60
|
||||
|
Total consumer loans
|
25,088
|
23,242
|
15,778
|
18,238
|
20,026
|
||||
|
Total non-accrual loans (1)
|
128,628
|
69,541
|
50,422
|
34,534
|
31,749
|
||||
|
Real estate owned
|
11,084
|
4,567
|
4,149
|
6,667
|
8,204
|
||||
|
Other property owned
|
3,310
|
3,310
|
3,353
|
3,353
|
3,672
|
||||
|
Total non-performing assets
|
$
143,022
|
$
77,418
|
$
57,924
|
$
44,554
|
$
43,625
|
||||
|
Total non-performing assets to total assets
|
0.54
%
|
0.28
%
|
0.26
%
|
0.21
%
|
0.22
%
|
||||
(1) For the year ended
September 30, 2025
, the Bank recognized
$3,304,802
in interest income on cash payments received from borrowers
on non-accrual loans. The Bank would have recognized interest income of
$4,591,000
for the same period had these loans performed
according to their original contract terms. The recognized interest income may include more than twelve months of interest for some
of the non-accrual loans that were brought current or paid off. In addition to the non-accrual loans reflected in the above table, the
Bank had
$505,815,000
of loans that were less than 90 days delinquent at
September 30, 2025
but were classified as substandard for
one or more reasons. If these loans were deemed non-performing, the Company's ratio of total non-performing assets and performing
restructured loans as a percent of total assets would have increased to
2.43%
at
September 30, 2025
. For a discussion of the Bank's
policy for placing loans on non-accrual status, see
Note A to the Consolidated Financial Statements included in Item 8 of this report.
Non-performing assets
increased
84.7%
to
$143,022,000
, or
0.54%
of total assets, at
September 30, 2025
, compared to
$77,418,000
, or
0.28%
of total assets, at
September 30, 2024
as a result of an increase of
$59,087,000
in non-accrual loans
combined with a
$6,517,000
increase in real estate owned. The increase in non-accrual loans is primarily
the result of one
commercial real estate loan over 90 days past due. Although appropriately non-accrual based on policy, there was no charge-off
taken upon revaluation. Management is actively collaborating with the borrower.
Other property owned of
$3,310,000
as of
September 30, 2025
is comprised entirely of a government guarantee related to equipment obtained via a commercial loan
foreclosure.
As of
September 30, 2025
, real estate owned totaled
$11,084,000
, an increase of
$6,517,000
, or
142.7%
, from
$4,567,000
as of
September 30, 2024
. During
2025
, the Bank sold real estate owned properties for total net proceeds of
$2,865,000
. The majority
of REO properties are former bank premises that are expected to be sold.
The ratio of the allowance for loan losses to non-accrual loans decreased to
155%
as of
September 30, 2025
, from
293%
as of
September 30, 2024
.
48
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CHANGES IN FINANCIAL CONDITION
Cash and cash equivalents
: Cash and cash equivalents decreased to
$657,310,000
at
September 30, 2025
, as compared to
$2,381,102,000
at
September 30, 2024
. The prior year end balances reflected cash received from the Luther Burbank multi-
family and single-family residential loan portfolio sales. The decrease in the current year reflects cash used to reduce
borrowings and purchase investment securities during the year.
Available-for-sale (AFS) investment securities
: Available-for-sale securities increased
$960,492,000
, or
37.3%
, during the year
ended
September 30, 2025
, to
$3,533,201,000
, as a result of securities purchases of
$1,482,058,000
combined with unrealized
losses of
$9,237,000
and a reclassification of gain into earnings from AFS securities hedging derivatives of
$15,452,000
partially offset by principal repayments and maturities of
$561,808,000
and sales of
$797,000
. The net unrealized loss the year
ended
September 30, 2025
is recorded net of tax within AOCI, and is decreased compared to unrealized losses of
$44,168,000
as of
September 30, 2024
.
Substantially all of the Company’s AFS debt securities are issued by U.S. government agencies or U.S. government-sponsored
enterprises. These securities carry the explicit and/or implicit guarantee of the U.S. government and have a long history of zero
credit loss. The remaining securities are issued by highly-rated municipalities or corporate borrowers. The Company does not
believe that any of its AFS debt securities have credit loss impairment as of
September 30, 2025
, therefore, no allowance was
recorded. The impact going forward will depend on the composition, characteristics, and credit quality of the securities
portfolios as well as the economic conditions at future reporting periods.
Held-to-maturity (HTM) investment securities
: Held-to-maturity securities increased by
$208,830,000
to
$645,802,000
, or
47.8%
, during the year ended
September 30, 2025
, largely due to the purchase of
$261,842,000
of HTM securities. These
purchases were offset by principal repayments and maturities of
$53,030,000
during the period. There were no held-to-maturity
securities sold during the year ended
September 30, 2025
. As of
September 30, 2025
, the net unrealized loss on held-to-
maturity securities was
$33,063,000
, compared to
$35,926,000
the year prior.
Substantially all of the Company’s HTM debt securities are issued by U.S. government agencies or U.S. government-sponsored
enterprises. These securities carry the explicit and/or implicit guarantee of the U.S. government and have a long history of zero
credit loss, thus the Company did not record an allowance for credit losses for HTM securities as of
September 30, 2025
. The
impact going forward will depend on the composition, characteristics, and credit quality of the securities portfolios as well as
the economic conditions at future reporting periods.
The table below shows the available-for-sale and held-for-investment securities portfolios categorized by contractual maturity
band.
|
September 30, 2025
|
Amortized
Cost
|
Weighted Average
Yield
|
|
|
|
($ in thousands)
|
||
|
Due in less than 1 year
|
$
21,325
|
4.82
%
|
|
|
Due after 1 year through 5 years
|
460,375
|
4.25
|
|
|
Due after 5 years through 10 years
|
555,355
|
4.74
|
|
|
Due after 10 years
|
3,151,184
|
3.99
|
|
|
$
4,188,239
|
4.12
%
|
||
For further information on our investment portfolio, see
Note C to the Consolidated Financial Statements in “Item 8. Financial
Loans receivable:
Loans receivable, net of related contra accounts, decreased
$827,736,000
, or
4.0%
, to
$20,088,618,000
at
September 30, 2025
, from
$20,916,354,000
one year earlier. The balance change reflects originations of
$3,956,199,000
, a
decrease to loans-in-process of
$236,192,000
and principal repayments of
$5,145,176,000
during the year ended
September 30,
2025
. Commercial loan originations accounted for
83.1%
of total originations and consumer originations were
16.9%
as the
Bank exited the residential mortgage market mid-year. Management continues to focus on commercial lending, coupled with
growing economies in all major markets in which we operate.
The following table presents loan balances by category and the year-over-year change.
49
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
September 30, 2025
|
September 30, 2024
|
Change
|
|||||
|
|
($ in thousands)
|
($ in thousands)
|
$
|
%
|
||||
|
Gross loans by category
|
||||||||
|
Commercial loans
|
||||||||
|
Multi-family
|
$
4,718,480
|
22.2
%
|
$
4,658,119
|
20.8
%
|
$
60,361
|
1.3%
|
||
|
Commercial real estate
|
3,604,600
|
16.9
|
3,757,040
|
16.8
|
(152,440)
|
(4.1)
|
||
|
Commercial & industrial
|
2,392,685
|
11.2
|
2,337,139
|
10.5
|
55,546
|
2.4
|
||
|
Construction
|
1,756,890
|
8.3
|
2,174,254
|
9.7
|
(417,364)
|
(19.2)
|
||
|
Land - acquisition & development
|
179,099
|
0.8
|
200,713
|
0.9
|
(21,614)
|
(10.8)
|
||
|
Total commercial loans
|
12,651,754
|
59.5
|
13,127,265
|
58.7
|
(475,511)
|
(3.6)
|
||
|
Consumer loans
|
||||||||
|
Single-family residential
|
8,053,771
|
37.9
|
8,399,030
|
37.6
|
(345,259)
|
(4.1)
|
||
|
Construction - custom
|
150,237
|
0.7
|
384,161
|
1.7
|
(233,924)
|
(60.9)
|
||
|
Land - consumer lot loans
|
89,298
|
0.4
|
108,791
|
0.5
|
(19,493)
|
(17.9)
|
||
|
HELOC
|
267,871
|
1.3
|
266,151
|
1.2
|
1,720
|
0.6
|
||
|
Consumer
|
61,461
|
0.3
|
73,998
|
0.3
|
(12,537)
|
(16.9)
|
||
|
Total consumer loans
|
8,622,638
|
40.5
|
9,232,131
|
41.3
|
(609,493)
|
(6.6)
|
||
|
Total gross loans
|
21,274,392
|
100
%
|
22,359,396
|
100
%
|
(1,085,004)
|
(4.9)%
|
||
|
Less:
|
||||||||
|
Allowance for loan losses
|
199,720
|
203,753
|
(4,033)
|
(2.0)
|
||||
|
Loans in process
|
773,606
|
1,009,798
|
(236,192)
|
(23.4)
|
||||
|
Net deferred fees, costs and discounts
|
212,448
|
229,491
|
(17,043)
|
(7.4)
|
||||
|
Total loan contra accounts
|
1,185,774
|
1,443,042
|
(257,268)
|
(17.8)
|
||||
|
Net loans
|
$
20,088,618
|
$
20,916,354
|
$
(827,736)
|
(4.0)%
|
||||
The following table summarizes the Bank’s loan portfolio balances, at amortized cost, due for the periods indicated based on
contractual terms to maturity or repricing.
|
September 30, 2025
|
Total
|
Less than
1 Year
|
1 to 5
Years
|
5 to 15
Years
|
After 15
Years
|
||||
|
|
(In thousands)
|
||||||||
|
Commercial loans
|
|||||||||
|
Multi-family
|
$
4,631,321
|
$
2,030,101
|
$
1,591,043
|
$
989,224
|
$
20,953
|
||||
|
Commercial real estate
|
3,588,950
|
1,533,749
|
1,249,774
|
798,074
|
7,353
|
||||
|
Commercial & industrial
|
2,386,363
|
1,836,357
|
284,542
|
244,087
|
21,377
|
||||
|
Construction
|
1,105,101
|
737,737
|
126,115
|
218,574
|
22,675
|
||||
|
Land - acquisition & development
|
139,922
|
132,386
|
6,076
|
1,460
|
—
|
||||
|
Total commercial loans
|
11,851,657
|
6,270,330
|
3,257,550
|
2,251,419
|
72,358
|
||||
|
Consumer loans
|
|||||||||
|
Single-family residential
|
7,936,931
|
372,508
|
949,851
|
528,774
|
6,085,798
|
||||
|
Construction - custom
|
78,243
|
—
|
6,235
|
12,073
|
59,935
|
||||
|
Land - consumer lot loans
|
88,696
|
1,458
|
763
|
14,796
|
71,679
|
||||
|
HELOC
|
271,286
|
271,096
|
145
|
45
|
—
|
||||
|
Consumer
|
61,525
|
32,609
|
2,031
|
26,880
|
5
|
||||
|
Total consumer loans
|
8,436,681
|
677,671
|
959,025
|
582,568
|
6,217,417
|
||||
|
$
20,288,338
|
$
6,948,001
|
$
4,216,575
|
$
2,833,987
|
$
6,289,775
|
|||||
The contractual loan payment period for residential mortgage loans originated by the Bank normally ranges from 15 to 30
years. Experience during recent years has indicated that, because of prepayments in connection with refinancing and sales of
property, residential loans typically have a weighted average life of approximately eight years.
50
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following tables provide information regarding loans receivable by loan class and geography.
|
September 30,
2025
|
Multi-
family
|
Commercial
Real Estate
|
Commercial
and Industrial
|
Construction
|
Land -
A & D
|
Single -
Family
Residential
|
Construction -
custom
|
Land -
Lot Loans
|
Consumer
|
HELOC
|
Total
|
|
|
(In thousands)
|
||||||||||
|
Washington
|
$
527,926
|
$
525,357
|
$
865,595
|
$
165,607
|
$
36,206
|
$
3,233,224
|
$
38,963
|
$
47,053
|
$
15,359
|
$
137,778
|
$
5,593,068
|
|
California
|
1,028,968
|
213,997
|
141,079
|
9,904
|
—
|
1,430,553
|
—
|
—
|
8,327
|
891
|
2,833,719
|
|
Oregon
|
735,256
|
393,679
|
274,219
|
96,550
|
32,399
|
878,150
|
10,345
|
10,576
|
228
|
36,220
|
2,467,622
|
|
Arizona
|
718,584
|
510,283
|
107,703
|
132,102
|
1,829
|
763,326
|
14,388
|
15,419
|
5,322
|
33,703
|
2,302,659
|
|
Texas
|
496,987
|
778,600
|
584,717
|
298,729
|
7,718
|
142,302
|
—
|
86
|
6
|
4,655
|
2,313,800
|
|
Utah
|
582,534
|
340,726
|
142,749
|
170,890
|
46,377
|
578,787
|
4,507
|
1,186
|
24,140
|
13,577
|
1,905,473
|
|
New Mexico
|
195,161
|
295,648
|
20,221
|
55,851
|
2,407
|
206,860
|
3,423
|
2,384
|
77
|
9,382
|
791,414
|
|
Idaho
|
180,661
|
177,648
|
45,778
|
86,432
|
7,562
|
387,351
|
2,412
|
6,943
|
46
|
21,738
|
916,571
|
|
Nevada
|
125,750
|
191,492
|
112,542
|
47,264
|
5,424
|
305,184
|
4,205
|
5,049
|
2,017
|
10,810
|
809,737
|
|
Other
|
39,494
|
161,520
|
91,760
|
41,772
|
—
|
11,194
|
—
|
—
|
6,003
|
2,532
|
354,275
|
|
$
4,631,321
|
$
3,588,950
|
$
2,386,363
|
$
1,105,101
|
$
139,922
|
$
7,936,931
|
$
78,243
|
$
88,696
|
$
61,525
|
$
271,286
|
$
20,288,338
|
|
|
Percentage by geographic area
|
|||||||||||
|
September 30,
2025
|
Multi-
family
|
Commercial
Real Estate
|
Commercial
and Industrial
|
Construction
|
Land -
A & D
|
Single -
Family
Residential
|
Construction -
custom
|
Land -
Lot Loans
|
Consumer
|
HELOC
|
Total
|
|
|
As % of total gross loans
|
||||||||||
|
Washington
|
2.6
%
|
2.6
%
|
4.3
%
|
0.8
%
|
0.2
%
|
15.9
%
|
0.2
%
|
0.2
%
|
0.1
%
|
0.7
%
|
27.6
%
|
|
California
|
5.1
|
1.0
|
0.7
|
—
|
—
|
7.1
|
—
|
—
|
0.1
|
—
|
14.0
|
|
Oregon
|
3.6
|
1.9
|
1.4
|
0.5
|
0.2
|
4.3
|
0.1
|
0.1
|
—
|
0.1
|
12.2
|
|
Arizona
|
3.5
|
2.5
|
0.5
|
0.7
|
—
|
3.7
|
0.1
|
0.1
|
—
|
0.2
|
11.3
|
|
Texas
|
2.4
|
3.9
|
2.9
|
1.5
|
—
|
0.7
|
—
|
—
|
—
|
—
|
11.4
|
|
Utah
|
2.9
|
1.7
|
0.7
|
0.8
|
0.2
|
2.9
|
—
|
—
|
0.1
|
0.1
|
9.4
|
|
New Mexico
|
1.0
|
1.5
|
0.1
|
0.3
|
—
|
1.0
|
—
|
—
|
—
|
—
|
3.9
|
|
Idaho
|
0.9
|
0.9
|
0.2
|
0.4
|
0.1
|
1.9
|
—
|
—
|
—
|
0.1
|
4.5
|
|
Nevada
|
0.6
|
0.9
|
0.6
|
0.2
|
—
|
1.5
|
—
|
—
|
—
|
0.1
|
3.9
|
|
Other
|
0.2
|
0.8
|
0.4
|
0.2
|
—
|
0.1
|
—
|
—
|
—
|
—
|
1.7
|
|
22.8
%
|
17.7
%
|
11.8
%
|
5.4
%
|
0.7
%
|
39.1
%
|
0.4
%
|
0.4
%
|
0.3
%
|
1.3
%
|
100
%
|
|
|
Percentage by geographic area as a % of each loan type
|
||||||||||
|
September 30,
2025
|
Multi-
family
|
Commercial
Real Estate
|
Commercial
and Industrial
|
Construction
|
Land -
A & D
|
Single -
Family
Residential
|
Construction -
custom
|
Land -
Lot Loans
|
Consumer
|
HELOC
|
|
As % of total gross loans
|
||||||||||
|
Washington
|
11.4
%
|
14.6
%
|
36.3
%
|
15.0
%
|
25.9
%
|
40.8
%
|
49.8
%
|
53.1
%
|
25.0
%
|
50.8
%
|
|
California
|
22.2
|
6.0
|
5.9
|
0.9
|
—
|
18.0
|
—
|
—
|
13.5
|
0.3
|
|
Oregon
|
15.9
|
11.0
|
11.5
|
8.7
|
23.2
|
11.1
|
13.2
|
11.9
|
0.4
|
13.4
|
|
Arizona
|
15.5
|
14.2
|
4.5
|
11.9
|
1.3
|
9.6
|
18.4
|
17.4
|
8.6
|
12.4
|
|
Texas
|
10.7
|
21.7
|
24.5
|
27.0
|
5.5
|
1.8
|
—
|
0.1
|
—
|
1.7
|
|
Utah
|
12.6
|
9.5
|
6.0
|
15.5
|
33.1
|
7.3
|
5.7
|
1.3
|
39.2
|
5.0
|
|
New Mexico
|
4.2
|
8.3
|
0.8
|
5.1
|
1.7
|
2.6
|
4.4
|
2.7
|
0.1
|
3.5
|
|
Idaho
|
3.9
|
4.9
|
1.9
|
7.8
|
5.4
|
4.9
|
3.1
|
7.8
|
0.1
|
8.0
|
|
Nevada
|
2.7
|
5.3
|
4.7
|
4.3
|
3.9
|
3.8
|
5.4
|
5.7
|
3.3
|
4.0
|
|
Other
|
0.9
|
4.5
|
3.9
|
3.8
|
—
|
0.1
|
—
|
—
|
9.8
|
0.9
|
|
100
%
|
100
%
|
100
%
|
100
%
|
100
%
|
100
%
|
100
%
|
100
%
|
100
%
|
100
%
|
|
51
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table shows the change in the geographic distribution by state of the loan portfolio since the prior year.
|
September 30,
|
2025
|
2024
|
Change
|
|
Washington
|
27.6
%
|
27.3
%
|
0.3
|
|
California
|
14.0
|
14.4
|
(0.4)
|
|
Oregon
|
12.2
|
11.7
|
0.5
|
|
Arizona
|
11.3
|
11.0
|
0.3
|
|
Texas
|
11.4
|
11.8
|
(0.4)
|
|
Utah
|
9.4
|
9.9
|
(0.5)
|
|
New Mexico
|
3.9
|
3.6
|
0.3
|
|
Idaho
|
4.5
|
4.3
|
0.2
|
|
Nevada
|
4.0
|
3.7
|
0.3
|
|
Other (1)
|
1.7
|
2.3
|
(0.6)
|
|
100
%
|
100
%
|
(1) Includes loans from outside of our nine state footprint.
Allowance for credit losses
: For details,
see the “Allowance for Credit Losses" section above
in this report.
Interest receivable
:
Interest receivable was
$98,589,000
as of
September 30, 2025
, a decrease of
$4,238,000
, or
4.1%
, since
September 30, 2024
. The decrease was the result of a
4.0%
decrease in loans receivable combined with the decrease in interest
rates.
Bank Owned Life Insurance
: Bank-owned life insurance increased to
$275,159,000
as of
September 30, 2025
from
$267,633,000
as of
September 30, 2024
, primarily as a result of increases in the cash surrender value of the policies. The
investments in bank-owned life insurance serve to assist in funding growing employee benefit costs.
Intangible assets
: The Bank's intangible assets totaled
$442,093,000
at
September 30, 2025
compared to
$448,425,000
as of
September 30, 2024
. The decrease is largely the result of the amortization of the core deposit intangible balance created in the
Merger. The balance at
September 30, 2025
is comprised of
$414,722,000
of goodwill and the unamortized balance of the core
deposit and other intangibles of
$27,371,000
.
Customer accounts
:
As of
September 30, 2025
, customer deposits totaled
$21,437,636,000
compared with
$21,373,970,000
at
September 30, 2024
, a
$63,666,000
, or
0.3%
, increase driven by transaction accounts. During
2025
, transaction accounts
increased by
$489,347,000
or
4.1%
while time deposits decreased by
$425,681,000
or
4.5%
.
The following table shows customer deposits by account type.
|
September 30, 2025
|
September 30, 2024
|
||||||||||
|
($ in thousands)
|
Deposit Account
Balance
|
As a % of
Total Deposits
|
Weighted
Average Rate
|
Deposit Account
Balance
|
As a % of
Total Deposits
|
Weighted
Average Rate
|
|||||
|
Non-interest checking
|
$
2,567,539
|
12.0
%
|
—
%
|
$
2,500,467
|
11.7
%
|
—
%
|
|||||
|
Interest checking
|
4,865,808
|
22.7
|
2.55
|
4,486,444
|
21.0
|
2.89
|
|||||
|
Savings
|
701,558
|
3.3
|
0.22
|
718,560
|
3.4
|
0.23
|
|||||
|
Money market
|
4,171,627
|
19.4
|
2.14
|
4,111,714
|
19.2
|
2.22
|
|||||
|
Time deposits
|
9,131,104
|
42.6
|
3.74
|
9,556,785
|
44.7
|
4.58
|
|||||
|
Total
|
$
21,437,636
|
100
%
|
2.60
%
|
$
21,373,970
|
100
%
|
3.09
%
|
|||||
52
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table shows the geographic distribution by state for customer deposits.
|
($ in thousands)
|
September 30, 2025
|
September 30, 2024
|
$ Change
|
% Change
|
||
|
Washington
|
$
8,685,124
|
40.5
%
|
$
8,528,608
|
39.9
%
|
$
156,516
|
1.8
%
|
|
California
|
3,726,997
|
17.4
|
4,448,018
|
20.8
|
(721,021)
|
(16.2)
%
|
|
Oregon
|
2,724,526
|
12.7
|
2,696,243
|
12.6
|
28,283
|
1.0
%
|
|
Arizona
|
1,641,460
|
7.7
|
1,619,101
|
7.6
|
22,359
|
1.4
%
|
|
New Mexico
|
1,802,886
|
8.4
|
1,622,534
|
7.6
|
180,352
|
11.1
%
|
|
Idaho
|
935,047
|
4.4
|
949,025
|
4.4
|
(13,978)
|
(1.5)
%
|
|
Utah
|
601,054
|
2.8
|
584,001
|
2.7
|
17,053
|
2.9
%
|
|
Nevada
|
559,906
|
2.5
|
527,704
|
2.5
|
32,202
|
6.1
%
|
|
Texas
|
760,636
|
3.6
|
398,736
|
1.9
|
361,900
|
90.8
%
|
|
$
21,437,636
|
100
%
|
$
21,373,970
|
100
%
|
$
63,666
|
0.3
%
|
|
The following table sets forth, by various interest rate categories, the amount of fixed-rate time deposits that mature during the
periods indicated.
|
|
Maturing in
|
||||||||||||
|
September 30, 2025
|
1 to 3
Months
|
4 to 6
Months
|
7 to 12
Months
|
13 to 24
Months
|
25 to 36
Months
|
37 to 60
Months
|
Total
|
||||||
|
|
(In thousands)
|
||||||||||||
|
Fixed-rate time deposits:
|
|||||||||||||
|
Under 1.00%
|
$
27,541
|
$
855
|
$
—
|
$
3,559
|
$
2,766
|
$
10,479
|
$
45,200
|
||||||
|
1.00% to 1.99%
|
462
|
682
|
—
|
23,382
|
—
|
—
|
24,526
|
||||||
|
2.00% to 2.99%
|
343
|
712
|
55,437
|
126,434
|
43,611
|
—
|
226,537
|
||||||
|
3.00% to 3.99%
|
2,891,632
|
1,815,237
|
2,485,957
|
104,813
|
12,886
|
—
|
7,310,525
|
||||||
|
4.00% to 4.99%
|
505,616
|
550,275
|
391,818
|
76,017
|
—
|
—
|
1,523,726
|
||||||
|
5.00% and higher
|
590
|
—
|
—
|
—
|
—
|
—
|
590
|
||||||
|
Total
|
$
3,426,184
|
$
2,367,761
|
$
2,933,212
|
$
334,205
|
$
59,263
|
$
10,479
|
$
9,131,104
|
||||||
Historically, a significant number of time deposit account holders roll over their balances into new time deposits of the same
term at the Bank’s then current rate. To ensure a continuity of this trend, the Bank expects to continue to offer market rates of
interest. The ability to retain maturing time deposits is difficult to project; however, the Bank believes that by competitively
pricing these certificates, roll-over levels deemed appropriate by management can be achieved on a continuing basis.
At
September 30, 2025
, the Bank had
$3,895,726,000
of time deposits in amounts of $250,000 or more outstanding, maturing
as follows:
$1,355,645,000
within 3 months;
$1,116,894,000
over 3 months through 6 months;
$1,207,030,000
over 6 months
through 12 months; and
$216,157,000
thereafter.
Time deposits with a maturity of one year or less have penalties for premature withdrawal equal to 90 days of interest. When
the maturity is greater than one year but less than four years, the penalty is 180 days of interest. When the maturity is greater
than four years, the penalty is 365 days of interest. Early withdrawal penalty fee income for the years ended
2025
,
2024
and
2023
amounted to
$1,230,000
,
$1,082,000
and
$1,618,000
, respectively.
For additional details on customer accounts, including uninsured deposits, see
Note K to the Consolidated Financial Statements
in “Item 8. Financial Statements and Supplementary Data”
of this report.
Borrowings
: Total borrowings decreased to
$1,765,604,000
as of
September 30, 2025
, as compared to
$3,267,589,000
at
September 30, 2024
. The weighted average rate for borrowings was
2.50%
as of
September 30, 2025
, versus
3.93%
at
September 30, 2024
. The decreases in balance and rate are primarily due to the pay-down of higher interest borrowings
combined with decreasing interest rates. The Bank has entered into interest rate swaps to hedge interest rate risk and convert
certain FHLB advances to fixed rate payments. Taking into account these hedges, the weighted average effective maturity of
FHLB advances at
September 30, 2025
was
2.19 years
.
53
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
COMPARISON OF
2025
RESULTS WITH
2024
Net Income
: Net income increased
$26,027,000
, or
13.0%
, to
$226,068,000
for the year ended
September 30, 2025
, as
compared to
$200,041,000
for the year ended
September 30, 2024
. The change was due to the factors described below.
Net Interest Income
: For the year ended
September 30, 2025
, net interest income was
$654,235,000
, a decrease of
$6,597,000
or
1.0%
from the year ended
September 30, 2024
. Net interest margin was
2.58%
for the year ended
September 30, 2025
compared to
2.69%
in the prior year. The decrease was the result of the greater decrease in the rate earned on assets compared
with the rate paid on liabilities. Rates on interest-bearing liabilities decreased by
22
basis points compared to the
30
basis points
decrease in the average rate on interest-earning assets. This effect was partially offset by the greater increase in interest-earning
assets compared to interest bearing liabilities. Average interest-bearing liabilities grew by
2.9%
while average interest-earning
assets grew by
3.2%
.
Rate/Volume Analysis
The table below sets forth certain information regarding changes in interest income and interest expense of the Company for the
years indicated. For each category of interest-earning asset and interest-bearing liability, information is provided on changes
attributable to: (1) changes in volume (changes in volume multiplied by old rate) and (2) changes in rate (changes in rate
multiplied by old average volume). The change in interest income and interest expense attributable to changes in both volume
and rate has been allocated proportionately to the change due to volume and the change due to rate.
|
|
Twelve Months Ended September 30,
|
||||||||||||||||
|
|
2025 vs. 2024
Increase (Decrease) Due to
|
2024 vs. 2023
Increase (Decrease) Due to
|
2023 vs. 2022
Increase (Decrease) Due to
|
||||||||||||||
|
|
Volume
|
Rate
|
Total
|
Volume
|
Rate
|
Total
|
Volume
|
Rate
|
Total
|
||||||||
|
|
(In thousands)
|
(In thousands)
|
(In thousands)
|
||||||||||||||
|
Interest income:
|
|||||||||||||||||
|
Loan portfolio
|
$
8,703
|
$
(54,615)
|
$
(45,912)
|
$
189,770
|
$
76,011
|
$
265,781
|
$
87,565
|
$
210,911
|
$
298,476
|
||||||||
|
Mortgage-backed
securities
|
37,084
|
6,205
|
43,289
|
8,129
|
8,469
|
16,598
|
5,760
|
11,092
|
16,852
|
||||||||
|
Investments (1)
|
(16,317)
|
(13,321)
|
(29,638)
|
34,219
|
12,157
|
46,376
|
(13,400)
|
74,668
|
61,268
|
||||||||
|
All interest-earning
assets
|
29,470
|
(61,731)
|
(32,261)
|
232,118
|
96,637
|
328,755
|
79,925
|
296,671
|
376,596
|
||||||||
|
Interest expense:
|
|||||||||||||||||
|
Customer accounts
|
78,911
|
(6,638)
|
72,273
|
75,680
|
219,521
|
295,201
|
570
|
193,622
|
194,192
|
||||||||
|
Borrowings
|
(65,594)
|
(32,343)
|
(97,937)
|
38,609
|
24,347
|
62,956
|
38,084
|
48,675
|
86,759
|
||||||||
|
All interest-bearing
liabilities
|
13,317
|
(38,981)
|
(25,664)
|
114,289
|
243,868
|
358,157
|
38,654
|
242,297
|
280,951
|
||||||||
|
Change in net
interest income
|
$
16,153
|
$
(22,750)
|
$
(6,597)
|
$
117,829
|
$
(147,231)
|
$
(29,402)
|
$
41,271
|
$
54,374
|
$
95,645
|
||||||||
(1)
Includes interest on cash equivalents and dividends on stock of the FHLB of Des Moines, the FHLB of San Francisco and FRB of
San Francisco.
Provision for Credit Losses
: The Company recorded a provision for credit losses of
$7,750,000
in
2025
, compared to a
provision of
$17,500,000
for
2024
. In
2024
, the provision included the initial provision of
$16,000,000
recorded on LBC loans
acquired, as well as adjustments resulting from qualitative considerations such as prolonged and intensified borrower sensitivity
to high interest rates and operating costs due to inflationary pressures. In
2025
, the provisioning reflected a shift toward higher
reserved commercial originations combined with
increasing trends in charge-offs and negative migration of delinquent and
nonperforming loans combined with economic concerns.
For the year ended
September 30, 2025
, net charge-offs were
$11,783,000
, compared to
$1,356,000
in the prior year.
Non-interest Income
: Non-interest income was
$71,247,000
for the year ended
September 30, 2025
, an increase of
$10,555,000
, or
17.4%
, from
$60,692,000
for the year ended
September 30, 2024
. This increase was the result of increased
54
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
prepayment fees earned on loans plus increased commission income from WaFd Insurance, the Company's insurance
subsidiary.
Non-interest Expense
: Total non-interest expense was
$427,463,000
for the year ended
September 30, 2025
, a decrease of
$20,809,000
, or
4.6%
, from the
$448,272,000
for the year ended
September 30, 2024
. The 2024 results included $25,000,000 in
Merger-related costs. Compensation and benefits costs decreased
$12,002,000
or
5.1%
year-over-year as a result of Merger-
related retention, severance and change-in-control expenses booked in 2024 and $5,400,000 in restructuring costs arising from
the shift in strategy and exit from single family lending. Other non-interest expense also decreased as a result of Merger-related
professional and legal fees recorded in 2024. Additionally, FDIC premiums decreased
$8,670,000
in
2025
compared to the
prior year resulting from several factors. The previous year's figures had included a special assessment and the decrease was
further influenced by both the contraction of the balance sheet and a lower assessment rate in 2025. Offsetting these decreases,
information technology costs increased by
$6,795,000
in
2025
as compared to
2024
due to strategic investments in technology.
The Company’s efficiency ratio was
58.9%
for
2025
as compared to
62.1%
for the prior year. The number of staff, including
part-time employees on a full-time equivalent basis, was
1,979
and
2,208
at
September 30, 2025
and
2024
, respectively. Total
operating expense for the years ended
September 30, 2025
and
2024
were
1.58%
and
1.71%
, respectively, of average assets.
Loss on Real Estate Owned
: Loss on real estate owned, net was
$627,000
for the year ended
September 30, 2025
, compared to
a net gain of
$304,000
for the year ended
September 30, 2024
. This amount includes ongoing maintenance expense, periodic
valuation adjustments, and gains and losses on sales of REO.
Income Tax Expense
: Income tax expense was
$63,574,000
for the year ended
September 30, 2025
, an increase of
$7,559,000
,
or
13.5%
, from the
$56,015,000
for the year ended
September 30, 2024
. The increase is primarily due to a
13.1%
increase in
pre-tax income. The effective tax rate for
2025
was
21.95%
as compared to
21.88%
for the year ended
September 30, 2024
. The
Company's effective tax rate varies from the Federal statutory rate of 21% mainly due to state taxes, tax-exempt income and
tax-credit investments.
On July 4, 2025, the One Big Beautiful Bill Act, officially designated as H.R. 1, was enacted into law. This legislation includes
significant changes to federal tax law and other regulatory provisions that may impact the Company. Key provisions include the
permanent extension of several business tax benefits originally introduced under the 2017 Tax Cuts and Jobs Act. The
Company is currently evaluating the provisions of the new law and the potential effects on its financial position, results of
operations and cash flows. We believe the provisions of the new tax law will have no significant direct impact on our financial
position and results of operation.
COMPARISON OF
2024
RESULTS WITH
2023
For management's review of the factors that affected our results of operations for the years ended
September 30, 2024
and
2023
refer to our Annual Report on Form 10-K for the year ended
September 30, 2024
, which was filed with the SEC on November
20, 2024.
55
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The principal sources of funds for the Company's activities are loan repayments (including prepayments), net deposit inflows,
borrowings, repayments and sales of investments and retained earnings, if applicable. The Company's principal sources of
revenue are interest on loans and interest and dividends on investments. Additionally, the Company earns fee income for loan,
deposit, insurance and other services.
The Company's shareholders' equity at
September 30, 2025
, was
$3,039,575,000
, or
11.38%
of total assets, as compared to
$3,000,300,000
, or
10.69%
of total assets, at
September 30, 2024
. Items affecting shareholders' equity were net income of
$226,068,000
, the payment of
$84,639,000
in Common Stock dividends, the payment of
$14,625,000
in preferred stock
dividends,
$101,931,000
of treasury stock purchases, as well as other comprehensive income of
$1,099,000
. The Company paid
out
40.7%
of its
2025
earnings in cash dividends to common shareholders, compared with
41.2%
last year. For the year ended
September 30, 2025
, the Company returned
82.5%
of net income to shareholders in the form of cash dividends and share
repurchases as compared to
50.7%
for the year ended
September 30, 2024
. Management believes the Company's strong equity
position allows it to manage balance sheet risk and provide the capital support needed for controlled growth in a regulated
environment.
The Company’s share repurchase program may be modified, suspended or terminated at any time, and the timing
and amount of share repurchases is subject to market conditions and the market price of the Company’s Common Stock, as well
as other factors.
The Bank has a credit line with the FHLB - DM of up to
45%
of total assets depending on specific collateral eligibility. This
line provides the Bank a substantial source of additional liquidity. The Bank has entered into borrowing agreements with the
FHLB - DM to borrow funds under a short-term floating rate cash management advance program and fixed-rate term loan
agreements. All borrowings are secured by stock of the FHLB - DM, deposits with the FHLB - DM, and a blanket pledge of
qualifying loans receivable. The Bank also has a credit line with the FHLB - SF in support of LBC borrowings from the FHLB -
SF, but the Bank is unable to take down new advances against this line. The FHLB - SF credit line is secured by a line-item
pledge of mortgage backed securities. Based on collateral pledged as of
September 30, 2025
, the Bank had
$6,647,214,000
of
additional borrowing capacity at the FHLB - DM.
To ensure ample contingent liquidity the Bank participates in the FRB of San Francisco Borrower-in-Custody program which
collateralizes primary credit borrowings and serves as a backstop for the FHLB - DM credit line. Due to differing program
requirements between the FHLB - DM and FRB of San Francisco, participating in both increases the amount of eligible
collateral that may be pledged in support of contingent liquidity needs. The Bank is also eligible to borrow under the Federal
Reserve Bank's primary credit program.
The Company's cash and cash equivalents were
$657,310,000
at
September 30, 2025
, which is a
72.4%
decrease from the
balance of
$2,381,102,000
as of
September 30, 2024
. The prior year end balances reflected cash received from the Luther
Burbank multi-family and single-family residential loan portfolio sales. During the year, the Company utilized cash to
reduce
borrowings and purchase investments.
See “Changes in Financial Condition” above and the “Statement of Cash Flows”
included in the financial statements for additional details regarding this change.
The following table presents the Company's significant fixed and determinable contractual obligations, within the categories
described below, by contractual maturity or payment amount.
|
September 30, 2025
|
Total
|
Less than
1 Year
|
1 to 5
Years
|
Over 5
Years
|
||||
|
|
(In thousands)
|
|||||||
|
Customer accounts (1)
|
$
21,437,636
|
$
21,033,689
|
$
403,943
|
$
4
|
||||
|
Debt obligations (2)
|
1,817,249
|
1,747,041
|
18,563
|
51,645
|
||||
|
Operating lease obligations
|
63,103
|
10,983
|
29,685
|
22,435
|
||||
|
$
23,317,988
|
$
22,791,713
|
$
452,191
|
$
74,084
|
|||||
(1) Includes non-maturing customer transaction accounts.
(2) Represents contractual maturities of FHLB advances and FRB borrowings. Taking into account cash flow hedges, the weighted
average effective maturity of FHLB advances at
September 30, 2025
is
2.19 years
.
These obligations are included in the Consolidated Statements of Financial Condition. The payment amounts of the operating
lease obligations represent those amounts contractually due.
56
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
INTEREST RATE RISK
The primary source of income for the Bank is net interest income, which is the difference between the interest income generated
by interest-earning assets and the interest expense incurred for interest-bearing liabilities. The level of net interest income is a
function of the average balance of interest-earning assets and interest-bearing liabilities and the difference between the yield on
earning assets and the cost of interest-bearing liabilities. Both the pricing and mix of the Company's interest-earning assets and
interest-bearing liabilities influence these factors. All else being equal, if the interest rates on the Company's interest-bearing
liabilities increase at a faster pace than the interest rates on its interest-earning assets, the result would be a reduction in net
interest income and with it, a reduction in net earnings. Conversely, if the interest rates on the Company's interest-bearing
liabilities decrease at a slower pace than the interest rates on its interest-earning assets, the result would be a reduction in net
interest income and with it, a reduction in net earnings.
Interest rates, both in terms of their overall levels and volatility, can greatly influence our profitability. Our goal in managing
interest rate risk is to assess and control how changes in interest rates affect our net interest income, helping us achieve our
financial objectives. We mitigate exposure to interest rate fluctuations through actions determined by the Asset/Liability
Management Committee ("ALCO"). This committee meets at least quarterly to establish asset/liability management policies,
develop and implement strategies to enhance balance sheet positioning and earnings, and assess interest rate sensitivity. The
Company's Board oversees the asset/liability management process, reviews interest rate risk analyses prepared by ALCO, and
annually approves the Financial Management policy.
Interest rate risk arises in part due to the Bank's significant holdings of fixed-rate single-family home loans, which are longer-
term than customer accounts that constitute its primary liabilities. Accordingly, assets do not usually respond as quickly to
changes in interest rates as liabilities. In the absence of management action, net interest income can be expected to decline when
interest rates rise and to expand when interest rates fall. Shortening the maturity or repricing of the investment portfolio is one
action that management can take. The composition of the investment portfolio was
44.6%
variable rate and
55.5%
fixed rate as
of
September 30, 2025
to provide some protection against changing rates. In addition, the Bank is producing more commercial
loans that have shorter terms and/or variable rates. There has also been focus on increasing less rate sensitive transaction
deposit accounts. These accounts make up
57.4%
of the deposit portfolio as of
September 30, 2025
as compared with
55.3%
as
of
September 30, 2024
The Company's balance sheet strategy, in conjunction with low operating costs, has allowed the Company to manage interest
rate risk, within guidelines established by the Board, through all interest rate cycles. It is Management's objective to grow the
dollar amount of net interest income, through the rate cycles, acknowledging that there will be some periods of time when that
will not be feasible. Cash and cash equivalents of
$657,310,000
and shareholders' equity of
$3,039,575,000
provide
management with flexibility in managing interest rate risk. Based on management's assessment of the current interest rate
environment, the Company has taken steps, including growing commercial loans having shorter average lives and transaction
deposit accounts, to position itself for changing interest rates.
Net Interest Income Sensitivity.
The Company estimates the sensitivity of our net interest income to changes in market
interest rates using an interest rate simulation model that includes assumptions related to the level of balance sheet growth,
deposit repricing characteristics and the rate of prepayments for multiple interest rate change scenarios. Interest rate sensitivity
depends on certain repricing characteristics in our interest-earning assets and interest-bearing liabilities, including the maturity
term structure, contractual rate changes and prepayment/attrition characteristics of assets and liabilities, all of which vary with
changes in market interest rates. The analysis presented below assumes a constant balance sheet. Actual results would differ
from the assumptions used in this model, as management monitors and adjusts loan and deposit pricing and the composition and
overall size of the balance sheet to respond to changing interest rates.
The following table models the potential impact of changing interest rates on net income over a twelve-month period and
compares the current results to the results as of the prior year end. The Company's focus is primarily on the impact of abrupt
upward or downward changes in short term rates. It is important to note that this is not a forecast or prediction of future events.
The Company's focus is primarily on the impact of abrupt upward or downward changes in short term rates.
57
|
Hypothetical, Immediate and Parallel
|
Potential Increase (Decrease) in Net Interest Income - Year 1
|
|||
|
Basis Point Increase (Decrease) in Interest Rates
|
September 30, 2025
|
September 30, 2024
|
||
|
|
(In thousands, except percentages)
|
|||
|
(200)
|
$
65,287
|
8.79
%
|
$
(8,284)
|
(1.01)
%
|
|
(100)
|
35,318
|
4.76
|
1,832
|
0.22
|
|
100
|
(407)
|
(0.05)
|
(144)
|
(0.02)
|
|
200
|
6,298
|
0.85
|
22,816
|
2.79
|
Actual results will differ from the assumptions used in this model, as management monitors and adjusts both the size and the
composition of the balance sheet in order to respond to changing interest rates. In a rising interest rate environment, it is likely
that the Company will grow its balance sheet to offset margin compression that may occur. Improvement in the net interest
income sensitivity during the year is primarily the result of interest rate swap activity, as well as increased time deposits and an
increased federal funds balances which help reduce sensitivity in rising shock scenarios.
Net Portfolio Value ("NPV") Sensitivity.
The NPV is an estimate of the market value of shareholders' equity at a point in
time. It is derived by calculating the difference between the present value of expected cash flows from assets and the present
value of expected cash flows from liabilities and off-balance-sheet contracts. The sensitivity of the NPV to changes in interest
rates provides a longer-term view of interest rate risk of the current balance sheet as it incorporates all future expected cash
flows. The following tables set forth an analysis of the Company's interest rate risk as measured by the estimate changes in
NPV resulting from instantaneous and sustained parallel shifts in the yield curve.
|
Hypothetical, Immediate and Parallel
|
Potential Increase (Decrease) in NPV as of
|
|||
|
Basis Point Increase (Decrease) in Interest Rates
|
September 30, 2025
|
September 30, 2024
|
||
|
|
(In thousands, except percentages)
|
|||
|
(200)
|
$
550,692
|
17.96
%
|
$
393,113
|
13.35
%
|
|
(100)
|
317,236
|
10.35
|
256,991
|
8.73
|
|
100
|
(341,329)
|
(11.13)
|
(293,070)
|
(9.96)
|
|
200
|
(649,066)
|
(21.17)
|
(559,613)
|
(19.01)
|
|
Hypothetical, Immediate and Parallel
|
September 30, 2025
|
||||
|
Basis Point Increase (Decrease) in Interest Rates
|
Estimated
NPV Amount
|
NPV as
% of Assets
|
|||
|
(In thousands)
|
|
||||
|
(200)
|
$
3,616,691
|
13.46
%
|
|||
|
(100)
|
3,383,235
|
12.88
|
|||
|
No change
|
3,065,999
|
11.96
|
|||
|
100
|
2,724,670
|
10.89
|
|||
|
200
|
2,416,933
|
9.89
|
|||
Prepayment speeds continue to be relatively low at
September 30, 2025
with the Bank's conditional payment rate ("CPR") for
single-family mortgages at
7.5%
, down slightly from
8.6%
the year before.
As of
September 30, 2025
, the Company was in compliance with all of its interest rate risk policy limits.
58
Interest Rates.
The Company measures the difference between the rate on interest-earning assets and the rate on interest-
bearing liabilities at the end of each period. The period end interest rate spread was
2.32%
at
September 30, 2025
and
1.91%
at
September 30, 2024
. As of
September 30, 2025
, the weighted-average rate on interest-earning assets decreased by
12
basis
points to
5.23%
compared to
September 30, 2024
. The lower rate on interest-earning assets is due primarily to the Federal
Reserve Bank's rate decreases since September 2024, which have led to lower rates on adjustable rate loans, investment
securities and cash. As of
September 30, 2025
, the weighted-average rate on interest-bearing liabilities decreased by
29
basis
points to
2.91%
compared to
September 30, 2024
. The lower rate on interest-bearing liabilities also primarily resulted from the
FRB rate cuts combined with repayments on higher rate borrowings. The period end interest rate spread for the last five fiscal
quarters is shown below:
|
SEP 2025
|
JUN 2025
|
MAR 2025
|
DEC 2024
|
SEP 2024
|
|||||
|
Interest rate on loans and mortgage-backed
securities
|
5.25
%
|
5.28
%
|
5.29
%
|
5.32
%
|
5.16
%
|
||||
|
Interest rate on other interest-earning assets
|
4.96
|
5.03
|
4.62
|
4.77
|
4.85
|
||||
|
Combined, all interest-earning assets
|
5.23
|
5.26
|
5.22
|
5.22
|
5.11
|
||||
|
Interest rate on customer accounts
|
2.95
|
3.05
|
3.16
|
3.30
|
3.09
|
||||
|
Interest rate on borrowings (1)
|
2.50
|
2.76
|
3.30
|
3.62
|
3.93
|
||||
|
Combined cost of funds
|
2.91
|
3.03
|
3.17
|
3.34
|
3.20
|
||||
|
Interest rate spread
|
2.32
%
|
2.23
%
|
2.05
%
|
1.88
%
|
1.91
%
|
||||
|
(1) Represents the effective rate taking into consideration cash flow hedges on FHLB borrowings.
|
|||||||||
The chart below shows the volatility of our period end net interest spread (dashed line measured against the right axis)
compared to the relatively consistent growth in net interest income (solid line measured against the left axis). The relative
consistency of net interest growth is accomplished by actively managing the size and composition of the balance sheet through
different rate cycles.
59
Net Interest Margin.
The net interest margin is measured using net interest income divided by average interest-earning assets
for the period. The net interest margin decreased to
2.58%
for the year ended
September 30, 2025
, from
2.69%
for the year
ended
September 30, 2024
. The yield on interest-earning assets decreased
30
basis points to
5.29%
and the cost of interest-
bearing liabilities decreased by
22
basis points to
3.24%
. The lower yield on interest-earning assets was primarily due to the
impact of falling rates on adjustable rate assets and cash. The lower rate in interest-bearing liabilities was primarily due to lower
rates on interest-bearing customer accounts and combined with the pay-off of higher borrowings.
For the year ended
September 30, 2025
, average interest-earning assets increased by
3.2%
to
$25,337,814,000
, up from
$24,559,665,000
for the year ended
September 30, 2024
. During
2025
, average loans receivable increased
$151,026,000
, or
0.7%
, while the combined average balances of mortgage-backed securities, other investment securities and cash increased by
$652,098,000
or
16.6%
.
During
2025
, average interest-bearing customer deposit accounts increased
$2,408,182,000
or
14.7%
and the average balance
of borrowings decreased by
$1,819,187,000
, or
42.9%
, from
2024
.
60
The following table sets forth the information explaining the changes in the net interest income and net interest margin.
|
Net Interest Income and Margin Summary
|
|||||||||||||||||
|
|
Year Ended September 30,
|
||||||||||||||||
|
|
2025
|
2024
|
2023
|
||||||||||||||
|
|
Average
Balance
|
Interest
|
Average
Rate
|
Average
Balance
|
Interest
|
Average
Rate
|
Average
Balance
|
Interest
|
Average
Rate
|
||||||||
|
|
($ in thousands)
|
||||||||||||||||
|
Assets
|
|||||||||||||||||
|
Loans receivable (1)
|
$
20,651,307
|
$
1,119,937
|
5.42
%
|
$
20,500,281
|
$
1,165,849
|
5.69
%
|
$
17,095,014
|
$
900,068
|
5.27
%
|
||||||||
|
Mortgage-backed securities
|
2,514,511
|
103,071
|
4.10
|
1,597,566
|
59,782
|
3.74
|
1,362,415
|
43,184
|
3.17
|
||||||||
|
Cash & Investments (2)
|
2,065,658
|
106,400
|
5.15
|
2,330,505
|
133,608
|
5.73
|
1,742,806
|
91,058
|
5.22
|
||||||||
|
FHLB & FRB stock
|
106,338
|
10,041
|
9.44
|
131,313
|
12,471
|
9.50
|
127,066
|
8,645
|
6.80
|
||||||||
|
Total interest-earning assets
|
25,337,814
|
1,339,449
|
5.29
%
|
24,559,665
|
1,371,710
|
5.59
%
|
20,327,301
|
1,042,955
|
5.13
%
|
||||||||
|
Other assets
|
1,718,680
|
1,682,721
|
1,484,271
|
||||||||||||||
|
Total assets
|
$
27,056,494
|
$
26,242,386
|
$
21,811,572
|
||||||||||||||
|
Liabilities and Shareholders’ Equity
|
|||||||||||||||||
|
Interest-bearing customer accounts
|
$
18,735,390
|
604,707
|
3.23
%
|
$
16,327,208
|
532,434
|
3.26
%
|
$
12,906,383
|
237,233
|
1.84
%
|
||||||||
|
Borrowings
|
2,423,244
|
80,507
|
3.32
|
4,242,431
|
178,444
|
4.21
|
3,261,917
|
115,488
|
3.54
|
||||||||
|
Total interest-bearing liabilities
|
21,158,634
|
685,214
|
3.24
%
|
20,569,639
|
710,878
|
3.46
%
|
16,168,300
|
352,721
|
2.18
%
|
||||||||
|
Noninterest-bearing customer accounts
|
2,518,248
|
2,593,567
|
2,969,970
|
||||||||||||||
|
Other liabilities
|
352,673
|
322,071
|
296,840
|
||||||||||||||
|
Total liabilities
|
24,029,555
|
23,485,277
|
19,435,110
|
||||||||||||||
|
Shareholders’ equity
|
3,026,939
|
2,757,109
|
2,376,462
|
||||||||||||||
|
Total liabilities and shareholders’ equity
|
$
27,056,494
|
$
26,242,386
|
$
21,811,572
|
||||||||||||||
|
Net interest income/interest rate spread
|
$
654,235
|
2.05
%
|
$
660,832
|
2.13
%
|
$
690,234
|
2.95
%
|
|||||||||||
|
Net interest margin (3)
|
2.58
%
|
2.69
%
|
3.40
%
|
||||||||||||||
___________________
(1)
Interest income includes net amortization-accretion of deferred loan fees, costs, discounts and premiums of
$12,870,000
,
$37,489,000
and
$20,130,000
for year
ended
2025
,
2024
and
2023
, respectively.
(2)
Includes cash equivalents and non-mortgage backed security investments, such as U.S. agency obligations, mutual funds, corporate bonds, and municipal bonds.
(3)
Net interest income divided by average interest-earning assets.
61
Item 8. Financial Statements and Supplementary Data
Index to financial statements and financial statement schedules:
|
|
|
|
Financial statements and supplementary data:
|
|
62
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of WaFd, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of financial condition of WaFd, Inc. and subsidiaries (the
"Company") as of
September 30, 2025
and
2024
, the related consolidated statements of operations, comprehensive income,
shareholders' equity, and cash flows, for each of the three years in the period ended
September 30, 2025
, and the related notes
(collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material
respects, the financial position of the Company as of
September 30, 2025
, and
2024
, and the results of its operations and its
cash flows for each of the three years in the period ended
September 30, 2025
, in conformity with accounting principles
generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company's internal control over financial reporting as of
September 30, 2025
, based on criteria established in
Internal Control - Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated
November 18, 2025
, expressed an unqualified opinion on the Company's internal control over
financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on
the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that
were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that
are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and
we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on
the accounts or disclosures to which they relate.
Allowance for Loan Losses - Refer to Notes A and E to the financial statements
Critical Audit Matter Description
The estimate of the Company’s expected credit losses under the CECL methodology is based on relevant information about
current conditions, past events, and reasonable and supportable forecasts regarding collectability of the reported amounts. In
order to estimate the allowance for loan losses (“ALL”), the Company used either a cohort or weighted average remaining
maturities methodology to determine the historical loss rate, by loan portfolio class, then considered whether qualitative
adjustments to those historical loss rates were warranted.
Significant management judgments are required in determining whether, and to what extent, qualitative adjustments for each
portfolio loan class are required. These adjustments are made after considering the conditions over the period from which
historical loss experience was based and are split into two components: 1) asset or class specific risk characteristics or current
63
conditions at the reporting date related to portfolio credit quality, remaining payments, volume and nature, credit culture and
management, business environment or other management factors, not captured in the historical loss rates and 2) reasonable and
supportable forecasts of future economic conditions and collateral values.
Given the significance of the ALL and management judgment required for quantitative and qualitative evaluation of past
events, current conditions, and reasonable and supportable forecasts, performing audit procedures to evaluate the ALL requires
a high degree of auditor judgment and increased extent of effort.
We have identified the ALL estimate for certain loan portfolio classes as a critical audit matter based upon the above factors.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the ALL estimate for loan portfolio classes for which we concluded the ALL was significant
included the following, among others:
•
We tested the effectiveness of management’s controls over model applicability, qualitative adjustments, the
reasonable and supportable forecast adjustments, and management's review and approval process over the
final determination of the ALL.
•
We tested the underlying data and mathematical accuracy of the cohort methodology used to determine most
loan portfolio class historical loss rates.
•
We involved credit specialists to assist us in evaluating the reasonableness and conceptual soundness of the
methodologies applied in the credit loss estimation model.
•
To test the qualitative adjustments, we performed analysis to evaluate management’s determination of the
qualitative adjustments made to account for specific risk characteristics or current conditions that differ from
the period over which the historical loss rate was determined. Our procedures included evaluating
management’s inputs and assumptions used in determining the qualitative and forecast adjustments by
comparing the information to internal and external source data including, among others, the economic
forecasts utilized by the Company and third-party economic forecasts for selected assumptions. In addition,
we performed procedures on the overall ALL amount, inclusive of the qualitative adjustments, by evaluating
the Company’s analysis of peers’ estimated current expected credit losses for loans to the Company’s
recorded ALL.
/s/
Deloitte & Touche LLP
November 18, 2025
We have served as the Company’s auditor since 1982.
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
64
WAFD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
|
September 30,
2025
|
September 30,
2024
|
||
|
|
(In thousands, except share data)
|
||
|
ASSETS
|
|||
|
Cash and cash equivalents
|
$
|
$
|
|
|
Available-for-sale securities, at fair value
|
|
|
|
|
Held-to-maturity securities, at amortized cost
|
|
|
|
|
Loans receivable, net of allowance for loan losses of
$
|
|
|
|
|
Interest receivable
|
|
|
|
|
Premises and equipment, net
|
|
|
|
|
Real estate owned
|
|
|
|
|
FHLB stock
|
|
|
|
|
Bank owned life insurance
|
|
|
|
|
Intangible assets, including goodwill of
$
|
|
|
|
|
Federal and state income tax assets, net
|
|
|
|
|
Other assets
|
|
|
|
|
$
|
$
|
||
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|||
|
Liabilities
|
|||
|
Customer accounts
|
|||
|
Transaction deposit accounts
|
$
|
$
|
|
|
Time deposit accounts
|
|
|
|
|
|
|
||
|
Borrowings
|
|
|
|
|
Junior subordinated debentures
|
|
|
|
|
Advance payments by borrowers for taxes and insurance
|
|
|
|
|
Accrued expenses and other liabilities
|
|
|
|
|
|
|
||
|
|
|
|
|
|
Shareholders’ equity
|
|||
|
Preferred stock,
$
shares issued;
|
|
|
|
|
Common stock,
$
|
|
|
|
|
Additional paid-in capital
|
|
|
|
|
Accumulated other comprehensive income, net of taxes
|
|
|
|
|
Treasury stock, at cost;
|
(
|
(
|
|
|
Retained earnings
|
|
|
|
|
|
|
||
|
$
|
$
|
||
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
65
WAFD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
|
Year ended September 30,
|
2025
|
2024
|
2023
|
|
|
(In thousands, except share data)
|
||
|
INTEREST INCOME
|
|||
|
Loans receivable
|
$
|
$
|
$
|
|
Mortgage-backed securities
|
|
|
|
|
Investment securities and cash equivalents
|
|
|
|
|
|
|
|
|
|
INTEREST EXPENSE
|
|||
|
Customer accounts
|
|
|
|
|
Borrowings, senior debt and junior subordinated debentures
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
|
|
Provision for credit losses
|
|
|
|
|
Net interest income after provision
|
|
|
|
|
NON-INTEREST INCOME
|
|||
|
Gain on sale of investment securities
|
|
|
|
|
Gain (loss) on termination of hedging derivatives
|
|
|
(
|
|
Loan fee income
|
|
|
|
|
Deposit fee income
|
|
|
|
|
Other income
|
|
|
|
|
Total non-interest income
|
|
|
|
|
NON-INTEREST EXPENSE
|
|||
|
Compensation and benefits
|
|
|
|
|
Occupancy
|
|
|
|
|
FDIC insurance premiums
|
|
|
|
|
Product delivery
|
|
|
|
|
Information technology
|
|
|
|
|
Other expense
|
|
|
|
|
Total non-interest expense
|
|
|
|
|
Gain (loss) on real estate owned, net
|
(
|
|
|
|
Income before income taxes
|
|
|
|
|
Income tax expense
|
|
|
|
|
Net income
|
|
|
|
|
Dividends on preferred stock
|
|
|
|
|
Net income available to common shareholders
|
$
|
$
|
$
|
|
PER SHARE DATA
|
|||
|
Basic earnings per common share
|
$
|
$
|
$
|
|
Diluted earnings per common share
|
|
|
|
|
Dividends paid on common stock per share
|
|
|
|
|
Basic weighted average number of common shares outstanding
|
|
|
|
|
Diluted weighted average number of common shares outstanding
|
|
|
|
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
66
WAFD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
Year ended September 30,
|
2025
|
2024
|
2023
|
||
|
|
(In thousands)
|
||||
|
Net income
|
$
|
$
|
$
|
||
|
Other comprehensive income (loss), net of tax:
|
|||||
|
Net unrealized gain (loss) during the period on available-for-sale debt
securities, net of tax of
$(
|
|
|
(
|
||
|
Reclassification adjustment of net (gain) loss included in net income
during the period from sale of available-for-sale securities, net of tax of
$
|
(
|
|
|
||
|
Net unrealized gain (loss) from investment securities, net of
reclassification adjustment
|
|
|
(
|
||
|
Net unrealized gain (loss) during the period on borrowing cash flow
hedges, net of tax of
$
|
(
|
(
|
|
||
|
Reclassification adjustment of net (gain) loss included in net income
during the period from hedging derivatives, net of tax of
$
$
|
(
|
|
|
||
|
Net unrealized gain (loss) in cash flow hedging instruments, net of
reclassification adjustment
|
(
|
(
|
|
||
|
Other comprehensive income (loss)
|
|
|
(
|
||
|
Comprehensive income
|
$
|
$
|
$
|
||
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
67
WAFD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
|
(In thousands)
|
Preferred
Stock
|
Common
Stock
|
Paid-in
Capital
|
Retained
Earnings
|
Accumulated
Other
Comprehensive
Income (Loss)
|
Treasury
Stock
|
Total
|
|
|
|||||||
|
Balance at September 30, 2022
|
$
|
$
|
$
|
$
|
$
|
$
(
|
$
|
|
Net income
|
—
|
—
|
—
|
|
—
|
—
|
|
|
Other comprehensive income (loss)
|
—
|
—
|
—
|
(
|
—
|
(
|
|
|
Dividends on common stock ($
|
—
|
—
|
—
|
(
|
—
|
—
|
(
|
|
Dividends on preferred stock ($
|
—
|
—
|
—
|
(
|
—
|
—
|
(
|
|
Proceeds from stock issuances
|
—
|
|
|
—
|
—
|
—
|
|
|
Stock-based compensation expense
|
—
|
|
(
|
—
|
—
|
—
|
(
|
|
Repurchase of stock warrants
|
—
|
—
|
—
|
—
|
—
|
|
|
|
Treasury stock purchased
|
—
|
—
|
—
|
—
|
—
|
(
|
(
|
|
Balance at September 30, 2023
|
|
|
|
|
|
(
|
|
|
Net income
|
—
|
—
|
—
|
|
—
|
—
|
|
|
Other comprehensive income (loss)
|
—
|
—
|
—
|
—
|
|
—
|
|
|
Dividends on common stock ($
|
—
|
—
|
—
|
(
|
—
|
—
|
(
|
|
Dividends on preferred stock (
$
|
—
|
—
|
—
|
(
|
—
|
—
|
(
|
|
Stock issued in merger
|
—
|
|
|
—
|
—
|
—
|
|
|
Proceeds from stock issuances
|
—
|
|
|
—
|
—
|
—
|
|
|
Stock-based compensation expense
|
—
|
|
|
—
|
—
|
|
|
|
Treasury stock purchased
|
—
|
—
|
—
|
—
|
—
|
(
|
(
|
|
Balance at September 30, 2024
|
|
|
|
|
|
(
|
|
|
Net income
|
—
|
—
|
—
|
|
—
|
—
|
|
|
Other comprehensive income (loss)
|
—
|
—
|
—
|
—
|
|
—
|
|
|
Dividends on common stock ($
|
—
|
—
|
—
|
(
|
—
|
—
|
(
|
|
Dividends on preferred stock (
$
|
—
|
—
|
—
|
(
|
—
|
—
|
(
|
|
Proceeds from stock issuances
|
—
|
|
|
—
|
—
|
—
|
|
|
Stock-based compensation expense
|
—
|
|
|
—
|
—
|
|
|
|
Treasury stock purchased
|
—
|
—
|
—
|
—
|
—
|
(
|
(
|
|
Balance at September 30, 2025
|
$
|
$
|
$
|
$
|
$
|
$
(
|
$
|
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
68
WAFD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
Year ended September 30,
|
2025
|
2024
|
2023
|
||
|
|
(In thousands)
|
||||
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|||||
|
Net income
|
$
|
$
|
$
|
||
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|||||
|
Depreciation, amortization, accretion and other, net
|
|
|
|
||
|
Stock-based compensation expense
|
|
|
|
||
|
Provision (release) for credit losses
|
|
|
|
||
|
Loss (gain) on sale of investment securities
|
(
|
(
|
(
|
||
|
Gain on settlements of bank owned life insurance
|
|
|
(
|
||
|
Impairment loss on premises and equipment
|
|
|
|
||
|
Net realized (gain) loss on sales of premises, equipment and real estate owned
|
(
|
(
|
(
|
||
|
Decrease (increase) in accrued interest receivable
|
|
|
(
|
||
|
Decrease (increase) in federal and state income tax receivable
|
|
|
(
|
||
|
Decrease (increase) in cash surrender value of bank owned life insurance
|
(
|
(
|
(
|
||
|
Decrease (increase) in other assets
|
(
|
|
(
|
||
|
Increase (decrease) in federal and state income tax liabilities
|
|
|
(
|
||
|
Increase (decrease) in accrued expenses and other liabilities
|
|
(
|
(
|
||
|
Net cash provided by (used in) operating activities
|
|
|
|
||
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|||||
|
Origination of loans and principal repayments, net
|
|
(
|
(
|
||
|
Loans purchased
|
(
|
|
(
|
||
|
FHLB & FRB stock purchase
|
(
|
(
|
(
|
||
|
FHLB & FRB stock redeemed
|
|
|
|
||
|
Available-for-sale securities purchased
|
(
|
(
|
(
|
||
|
Principal payments and maturities of available-for-sale securities
|
|
|
|
||
|
Proceeds from sales of available-for-sale investment securities
|
|
|
|
||
|
Held-to-maturity securities purchased
|
(
|
(
|
|
||
|
Principal payments and maturities of held-to-maturity securities
|
|
|
|
||
|
Proceeds from sales of real estate owned
|
|
|
|
||
|
Proceeds from settlements of bank owned life insurance
|
|
|
|
||
|
Equity method investments purchased
|
(
|
(
|
(
|
||
|
Net cash received (paid) in business combinations
|
(
|
|
(
|
||
|
Proceeds from sales of loans
|
|
|
|
||
|
Proceeds from sales of premises and equipment
|
|
|
|
||
|
Premises and equipment purchased and REO improvements
|
(
|
(
|
(
|
||
|
Net cash provided by (used in) investing activities
|
(
|
|
(
|
||
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|||||
|
Net increase (decrease) in customer accounts
|
|
(
|
|
||
|
Proceeds from borrowings
|
|
|
|
||
|
Repayments of borrowings
|
(
|
(
|
(
|
||
|
Principal payments and maturities of senior debt
|
|
(
|
|
||
|
Proceeds from stock-based awards
|
|
|
|
||
|
Dividends paid on common stock
|
(
|
(
|
(
|
||
|
Dividends paid on preferred stock
|
(
|
(
|
(
|
||
|
Proceeds from employee stock purchase
|
|
|
|
||
|
Treasury stock purchased
|
(
|
(
|
(
|
||
|
Increase (decrease) in advance payments by borrowers for taxes and insurance
|
(
|
|
|
||
|
Net cash provided by (used by) financing activities
|
(
|
(
|
|
||
|
Increase (decrease) in cash and cash equivalents
|
(
|
|
|
||
|
Cash and cash equivalents at beginning of year
|
|
|
|
||
|
Cash and cash equivalents at end of year
|
$
|
$
|
$
|
||
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
69
WAFD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
Year ended September 30,
|
2025
|
2024
|
2023
|
||
|
|
(In thousands)
|
||||
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
|
|||||
|
Non-cash investing activities
|
|||||
|
Real estate acquired through foreclosure
|
$
|
$
|
$
|
||
|
Non-cash financing activities
|
|||||
|
Preferred stock dividend payable
|
|
|
|
||
|
Cash paid during the year for
|
|||||
|
Interest
|
|
|
|
||
|
Income taxes
|
|
|
|
||
|
Summary of non-cash activities related to acquisitions
|
|||||
|
Fair value of assets and intangibles acquired
|
$
|
$
|
$
|
||
|
Fair value of liabilities assumed
|
|
(
|
|
||
|
Net fair value of acquired assets (liabilities)
|
$
|
$
|
$
|
||
70
WAFD, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2025, 2024, AND 2023
NOTE A -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Company and nature of operations.
WaFd Bank, a federally-insured Washington state chartered commercial bank (the
"Bank"), was founded on April 24, 1917 in Ballard, Washington and is engaged primarily in providing lending, depository,
insurance and other banking services to consumers, mid-sized to large businesses, and owners and developers of commercial
real estate. Washington Federal, Inc., a Washington corporation was formed as the Bank’s holding company in November,
1994.
On September 27, 2023, Articles of Amendment were filed with the Washington Secretary of State to change the name of
Washington Federal, Inc. to WaFd, Inc. This change was effective on September 29, 2023. As used throughout this document,
the terms “WaFd” or the “Company” or “we” or “us” and “our” refer to WaFd, Inc. and its consolidated subsidiaries, and the
term “Bank” refers to the operating subsidiary, WaFd Bank.
The Company is headquartered in Seattle, Washington. The Bank conducts its activities through a network of
208
bank
branches located in Washington, Oregon, Idaho, Utah, Arizona, Nevada, New Mexico, California and Texas.
principles generally accepted in the United States of America ("U.S. GAAP"). Inter-company balances and transactions have
been eliminated in consolidation. In preparing the consolidated financial statements, the Company makes estimates and
assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and revenues and
expenses during the reporting periods and related disclosures. The areas that require application of significant management
judgments often result in the need to make estimates about the effect of matters that are inherently uncertain and may change in
future periods. Actual results could differ materially from those estimates. Certain amounts in the financial statements from
prior periods have been reclassified to conform to the current financial statement presentation. In certain instances, amounts in
text are presented by rounding to the nearest thousand.
WaFd, Inc. closed its previously announced merger with Luther Burbank Corporation ("Luther Burbank" or "LBC"), a
California corporation, on March 1, 2024 (the "Merger Date"). Pursuant to the Merger Agreement, Luther Burbank merged with
and into the Company (the “Corporate Merger”), with the Company surviving the Corporate Merger. Promptly following the
Corporate Merger, Luther Burbank’s wholly-owned bank subsidiary, Luther Burbank Savings, merged with and into WaFd
Bank with WaFd Bank as the surviving institution (the “Bank Merger”). The Corporate Merger and the Bank Merger are
collectively referred to in this Annual Report on Form 10-K as the “Merger.”
The Merger was accounted for using the acquisition method of accounting and was effectively an all-stock transaction
accounted for as a business combination. The Company's financial results for any periods ended on and prior to February 29,
2024 reflect WaFd results only on a standalone basis. As a result, financial results for the years ended
September 30, 2025
and
further details.
acquisition method, the acquiring entity recognizes the assets acquired and liabilities assumed at their acquisition date fair
values. Management utilizes prevailing valuation techniques appropriate for the asset or liability being measured in determining
these fair values. This method often involves estimates based on third party valuations based on discounted cash flow analyses
or other valuation techniques, all of which are inherently subjective. Any excess of the purchase price over the fair value of net
assets and other identifiable intangible assets acquired is recorded as goodwill. Assets acquired and liabilities assumed from
contingencies must also be recognized at fair value if the fair value can be determined during the measurement period.
Acquisition-related costs, including conversion and restructuring charges, are expensed as incurred. Fair values are subject to
refinement over the measurement period, not to exceed one year after the closing date.
Preferred stock.
On February 8, 2021, in connection with an underwritten public offering, the Company issued
300,000
shares
of
4.875
%
Noncumulative Perpetual Series A Preferred Stock (“Series A Preferred Stock”). Net proceeds, after underwriting
discounts and expenses, were
$
293,325,000
. The public offering consisted of the issuance and sale of
12,000,000
depositary
71
WAFD, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2025, 2024, AND 2023
shares, each representing a 1/40
th
interest in a share of the Series A Preferred Stock, at a public offering price of
$
25.00
per
depositary share. Holders of the depositary shares are entitled to all proportional rights and preferences of the Series A
Preferred Stock (including, dividend, voting, redemption and liquidation rights). The depositary shares are traded on the
NASDAQ Global Select Market under the symbol "WAFDP." The Series A Preferred Stock is redeemable at the option of the
Company, subject to all applicable regulatory approvals, on or after April 15, 2026.
and repurchase agreements with an initial maturity of three months or less.
$
118,400,000
and
$
168,200,000
, respectively, related to derivative contracts.
Condition. These equity investments are accounted for under different methods.
•
Low-income housing tax credit ("LIHTC") investments are accounted for under the proportional amortization method.
Under this method, the initial book value (gross commitment amount) of the investment is amortized over time in
proportion to the projected tax benefits to be received. This amortization is a component of income tax expense. See
Note N
for more information about the Company's LIHTC investments.
•
For equity investments where the Company has significant influence, the Company applies the equity method of
accounting, which adjusts the carrying value of the investment to recognize a proportionate share of the financial
results of the investment entity, regardless of whether any distribution is made. Any adjustments to the fair value of
these investments are recorded in other non-interest income in the Consolidated Statements of Operations.
•
For certain nonmarketable equity investments where the equity method of accounting is not applicable, the Company
applies the fair value method. Any adjustments to the fair value of these investments are recorded in other income in
the Consolidated Statements of Operations. Fair value is determined by reference to readily determinable market
values, if applicable. As these investments do not have readily determinable fair values, they are generally accounted
for at cost minus impairment, if any, plus or minus changes resulting from observable transactions involving the same
or similar investments from the same issuer. This practice is referred to as the measurement alternative.
•
Equity investments in qualified real estate funds can use the net asset value ("NAV") expedient for fair value
measurement. Under this method, the NAV is determined by the fund as fair value for the investment. At
September
30, 2025
, equity investments held by the Company and recorded at NAV had a carrying amount of
$
35,564,000
and a
remaining unfunded commitment of
$
13,388,000
. These NAV based investments cannot be transferred without
consent and we do not have redemption rights except in certain transformational events. Equity investments measured
at NAV are not classified in the fair value hierarchy.
maturity ("HTM") and available-for-sale ("AFS"). Premiums and discounts on debt securities are deferred and recognized into
income over the contractual life of the asset using the effective interest method.
HTM securities are accounted for at amortized cost, but the Company must have both the positive intent and the ability to hold
those securities to maturity. There are very limited circumstances under which securities in the HTM category can be sold
without jeopardizing the cost basis of accounting for the remainder of the securities in this category.
Available-for-sale securities are accounted for at fair value. Gains and losses realized on the sale of these securities are
accounted for based on the specific identification method. Unrealized gains and losses for AFS securities are excluded from
earnings and reported net of the related tax effect in the accumulated other comprehensive income component of shareholders'
equity.
expected credit loss methodology ("CECL") to estimate expected credit losses. Substantially all of the Company’s HTM debt
securities are issued by U.S. government agencies or U.S. government-sponsored enterprises. These securities carry the explicit
and/or implicit guarantee of the U.S. government and have a long history of zero credit loss. Therefore, the Company did not
record an allowance for credit losses for these securities. As of
September 30, 2025
, the Company determined that the expected
72
WAFD, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2025, 2024, AND 2023
credit loss on its corporate and municipal bonds was immaterial, and therefore, an allowance for credit losses was not recorded.
See
Note C "Investment Securities"
and
Note F "Fair Value Measurements"
for more information about HTM debt securities.
Allowance for Credit Losses (Available-for-Sale Debt Securities).
The impairment model for AFS debt securities differs
from the CECL methodology applied for HTM debt securities because AFS debt securities are measured at fair value rather
than amortized cost. For AFS debt securities in an unrealized loss position, the Company first assesses whether it intends to sell,
or it is more likely than not that it will be required to sell, the security before recovery of its amortized cost basis. If either
criteria is met, the security’s amortized cost basis is written down to fair value through income. For AFS debt securities where
neither of the criteria are met, the Company evaluates whether the decline in fair value has resulted from credit losses or other
factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any
changes to the credit rating of the security by a rating agency, and adverse conditions specifically related to the security, among
other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from
the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected
is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited
to the amount that the fair value is less than the amortized cost basis. Any remaining discount that has not been recorded
through an allowance for credit losses is recognized in other comprehensive income. Changes in the allowance for credit losses
are recorded as a provision for (or recapture of) credit losses. Losses are charged against the allowance when management
believes the uncollectibility of an AFS security is confirmed or when either of the criteria regarding intent or requirement to sell
is met. As of
September 30, 2025
, the Company determined that the unrealized loss positions in AFS securities were not the
Note F "Fair Value Measurements"
for more information about AFS debt securities.
balance, net of premiums, discounts and net deferred loan fees. Net deferred loan fees include non-refundable loan origination
fees less direct loan origination costs. Net deferred loan fees, premiums and discounts are amortized into interest income using
either the interest method or straight-line method over the terms of the loans, adjusted for actual prepayments. The straight-line
method is only utilized for construction and other interest-only loans where the interest method isn't applicable. In addition to
fees and costs for originating loans, various other fees and charges related to existing loans may occur, including prepayment
charges, late charges and assumption fees.
When a borrower fails to make a required payment on a loan, the Bank attempts to cure the deficiency by contacting the
borrower. Contact is made after a payment is
30
days
past its grace period. In most cases, deficiencies are cured promptly. If the
delinquency is not cured within
90
days
, the Bank may institute appropriate action to foreclose on the property. If foreclosed,
the property is sold at a public sale and may be purchased by the Bank.
expected credit losses of the loan portfolio as well as unfunded loan commitments. The amount of ACL is based on ongoing,
quarterly assessments by management. CECL requires an estimate of the credit losses expected over the life of an exposure (or
The ACL consists of the allowance for loan losses and the reserve for unfunded commitments. The estimate of expected credit
losses under the CECL methodology is based on relevant information about past events, current conditions, and reasonable and
supportable forecasts that affect the collectability of the reported amounts. Historical loss experience is generally the starting
point for estimating expected credit losses. We then consider whether the historical loss experience should be adjusted for asset-
specific risk characteristics or current conditions at the reporting date that did not exist over the period that historical experience
was based for each loan type. Finally, we consider forecasts about future economic conditions or changes in collateral values
that are reasonable and supportable.
Portfolio segment is defined as the level at which an entity develops and documents a systematic methodology to determine its
ACL. The Company has designated
two
loan portfolio segments, commercial loans and consumer loans. These loan portfolio
segments are further disaggregated into classes, which represent loans of similar type, risk characteristics, and methods for
monitoring and assessing credit risk. The commercial loan portfolio segment is disaggregated into
five
classes: multi-family,
commercial real estate, commercial and industrial, construction, and land acquisition and development. The risk of loss for the
commercial loan portfolio segment is generally most indicated by the credit risk rating assigned to each borrower. Commercial
loan risk ratings are determined by experienced senior credit officers based on specific facts and circumstances and are subject
73
WAFD, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2025, 2024, AND 2023
to periodic review by an independent internal team of credit specialists. The consumer loan portfolio segment is disaggregated
into
five
classes: single-family-residential mortgage, custom construction, consumer lot loans, home equity lines of credit, and
other consumer. The risk of loss for the consumer loan portfolio segment is generally most indicated by delinquency status and
general economic factors. Each commercial and consumer loan portfolio class may also be further segmented based on risk
characteristics.
For most of our loan portfolio classes, the historical loss experience is determined using a cohort methodology. This method
pools loans into groups (“cohorts”) sharing similar risk characteristics and tracks each cohort’s net charge-offs over the lives of
the loans to calculate a historical loss rate. The historical loss rates for each cohort are then averaged to calculate an overall
historical loss rate which is applied to the current loan balance to arrive at the quantitative baseline portion of the allowance for
credit losses for the respective loan portfolio class. For certain loan portfolio classes, the Company determined there was not
sufficient historical loss information to calculate a meaningful historical loss rate using the cohort methodology. For any such
loan portfolio class, the weighted-average remaining maturity (“WARM”) methodology is being utilized until sufficient
historical loss data is obtained. The WARM method multiplies an average annual loss rate by the expected remaining life of the
loan pool to arrive at the quantitative baseline portion of the allowance for credit losses for the respective loan portfolio class.
The Company also considers qualitative adjustments to the historical loss rate for each loan portfolio class. The qualitative
adjustments for each loan class consider the conditions over the period from which historical loss experience was based and are
split into two components: 1) asset or class specific risk characteristics or current conditions at the reporting date related to
portfolio credit quality, remaining payments, volume and nature, credit culture and management, business environment or other
management factors and 2) reasonable and supportable forecast of future economic conditions and collateral values.
The Company performs a quarterly asset quality review which includes a review of forecasted gross charge-offs and recoveries,
nonperforming assets, criticized loans, risk rating migration, delinquencies, etc. The asset quality review is performed by
management and the results are used to consider a qualitative overlay to the quantitative baseline. The second qualitative
adjustment noted above, economic conditions and collateral values, encompasses a one-year reasonable and supportable
forecast period. The overlay adjustment for the reasonable and supportable forecast assumes an immediate reversion after the
one-year forecast period to historical loss rates for the remaining life of the respective loan pool.
The Company may establish a specific reserve for individually evaluated loans that do not share similar risk characteristics with
the loans included in each respective loan pool if management deems it appropriate. If this occurs, these individually evaluated
loans are removed from their respective pools. These loans typically represent collateral dependent loans, but may also include
other non-performing loans.
difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral. For all classes
of loans and leases deemed collateral-dependent, the Company elected the practical expedient to estimate expected credit losses
based on the collateral’s fair value less cost to sell. In most cases, the Company records a partial charge-off to reduce the loan’s
carrying value to the collateral’s fair value less cost to sell. Substantially all of the collateral consists of various types of real
estate including residential properties; commercial properties such as retail centers, office buildings, and lodging; agricultural
land; and vacant land.
and terms of a loan if it determines that a modification is a better alternative to foreclosure. Most loan modifications to
borrowers experiencing financial difficulty are accruing and performing loans where the borrower has approached the Company
about modifications due to temporary financial difficulties. Each request is individually evaluated for merit and likelihood of
success. Often a term extension is needed in the short term in order to evaluate the need for further action. Payment delays and
interest-only payments may also be approved during the modification period. Principal forgiveness is not an available option
for restructured loans.
For commercial loans, modifications could be any of the above-listed modification types available or a mix thereof.
Modifications to extend the term, lower the payment amount or delay payment could be offered for the purposes of providing
borrowers additional time to return to compliance with the terms of their loans. Renewals of commercial lines to borrowers
experiencing financial difficulty are disclosed within
Note D - Loans Receivable
though many of these modifications are made
in the normal course of business and not as a result of the borrower's difficulties.
74
WAFD, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2025, 2024, AND 2023
For consumer loans, modifications typically consist of minor payment delays or deferrals and may include a modification of the
existing contractual rate or extension of the maturity date, or both, when it is determined the borrowers are likely to successfully
maintain compliance with these modified loan terms.
of interest is deemed to be insufficient to warrant further accrual. When a loan is placed on non-accrual status, previously
accrued but unpaid interest is deducted from interest income. The Company does not accrue interest on loans
90
days
or more
past due. If payment is made on a loan so that the loan becomes less than
90
days
past due, and the Company expects full
collection of principal and interest, the loan is returned to full accrual status. Any interest ultimately collected is credited to
income in the period of recovery. A loan is charged-off when the loss is estimable, and it is confirmed that the borrower is not
expected to be able to meet contractual obligations.
If a consumer loan is on non-accrual status before being modified, it will stay on non-accrual status following restructuring until
it has been performing for at least six months, at which point it may be moved to accrual status. For commercial loans,
six
consecutive payments on newly restructured loan terms are required prior to returning the loan to accrual status. In some
instances, after the required
six
consecutive payments are made, management will conclude that collection of the entire
•
Presenting accrued interest receivable balances separately from their underlying instruments within the consolidated
statements of financial condition.
•
Excluding accrued interest receivable that is included in the amortized cost of financing receivables from related
disclosure requirements.
•
Continuing our policy to write off accrued interest receivable by reversing interest income in cases where the
Company does not reasonably expect to receive payment.
•
Not measuring an allowance for credit losses for accrued interest receivable due to the Company’s policy of writing
off uncollectible accrued interest receivable balances in a timely manner. We believe accrued interest receivable
recorded as of
September 30, 2025
is collectible.
and letters of credit from the Federal Home Loan Banks of both Des Moines and San Francisco ("FHLB-DM" and "FHLB-SF",
respectively), which may be used as collateral for public funds deposits and as confirming letters of credit on letters of credit
issued by the Bank. The reserve for unfunded commitments is recognized as a liability (other liabilities in the consolidated
statements of financial condition), with adjustments to the reserve recognized through provision for credit losses in the
consolidated statements of income. The reserve for unfunded commitments represents the expected lifetime credit losses on off-
balance sheet obligations such as commitments to extend credit and standby letters of credit. However, a liability is not
recognized for commitments that are unconditionally cancellable by the Company. The reserve for unfunded commitments is
determined by estimating future draws, including the effects of risk mitigation actions, and applying the expected loss rates on
those draws. Loss rates are estimated by utilizing the same loss rates calculated for the allowance for credit losses related to the
requirements of its customers. The fair value of derivative instruments is recognized as either assets or liabilities on the
consolidated balance sheet. All derivatives are evaluated at inception as to whether or not they are hedge accounting or non-
hedge accounting relationships. For derivative instruments designated as non-hedge accounting activities, the change in fair
value is recognized currently in earnings. The Company formally assesses, both at the hedge's inception and on an ongoing
basis, whether the derivative instruments that are designated are highly effective in offsetting changes in fair values or cash
flows of the hedged items.
The Company has entered into commercial loan hedges, mortgage loan portfolio hedges and mortgage-backed securities hedges
using interest rate swaps. These hedges qualify as fair value hedges under ASC 815 and provide for matching of the recognition
of the gains and losses on the interest rate swap and the related hedged item to current earnings. The Company has also entered
into interest rate swaps to convert a series of future short-term borrowings to fixed-rate payments. These interest rate swaps
qualify as cash flow hedging instruments under ASC 815 so gains and losses are recorded in Other Comprehensive Income to
the extent the hedge is effective. Gains and losses on the interest rate swaps are reclassified from OCI to earnings in the period
75
WAFD, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2025, 2024, AND 2023
the hedged transaction affects earnings and are included in the same income statement line item that the hedged transaction is
recorded.
The Company also executes interest rate swaps with certain customers who desire to convert their obligations from variable to
fixed interest rates. Under these agreements, the Bank enters into a variable-rate loan agreement with a customer in addition to a
swap agreement and then enters into a corresponding swap agreement with a third party in order to offset its exposure on the
customer swap agreement. As the interest rate swap agreements with the customers and third parties are not designated as
accounting hedges under ASC 815, the instruments are marked to market in earnings. The change in fair value of the offsetting
swaps are included in other non-interest income and there is minimal impact on net income. There is fee income earned on the
swaps that is included in loan fee income.
on the straight-line method over the estimated useful lives of the respective assets. Costs for improvements are capitalized.
Charges for ordinary maintenance and repairs are expensed to operations as incurred.
that there is
one
operating and
one
reportable business segment. The Company's chief operating decision maker ("CODM") is
the Chief Executive Officer who assesses performance and decides how to allocate resources based on consolidated net income.
The CODM uses consolidated net income to evaluate income generation from segment assets in making decisions about the
allocation of resources. The CODM is regularly provided with expense information at a level consistent with the Company's
consolidated statements of income. The significant segment expenses are those presented within the consolidated statement of
operations.
fair value less selling costs and are subsequently recorded at lower of cost or fair value. Costs for improvements are capitalized.
Any gains (losses) and maintenance costs are recorded in Gain (loss) on real estate owned, net.
acquired. Other intangibles, including core deposit intangibles, are acquired assets that lack physical substance but can be
distinguished from goodwill. Goodwill is not amortized but is evaluated for potential impairment on an annual basis and
between tests if circumstances such as material adverse changes in legal, business, regulatory and economic factors exist. We
have determined our goodwill balance is all related to a single reporting unit and perform a quantitative impairment assessment.
An impairment loss is recorded when the carrying amount of goodwill exceeds its implied fair value. If circumstances indicate
that the carrying value of the assets may not be recoverable, an impairment charge could be recorded. Other intangible assets
are amortized over their estimated lives and are subject to impairment testing when events or circumstances change.
The Company performed its annual impairment assessment as of August 31,
2025
and concluded the fair value of our single
reporting unit exceeded its respective carrying value and did not result in impairment for the reporting unit. When performing
the quantitative assessment of goodwill impairment, we estimated the fair value of our reporting unit using the market
capitalization approach, based on our stock price, adjusted for the effect of a control premium.
The Company continuously monitors for events and circumstances that could negatively impact the key assumptions in
determining fair value. While the Company believes the judgments and assumptions used in the goodwill impairment test is
reasonable, different assumptions or changes in general industry, market and macro-economic conditions could change the
estimated fair values and, therefore, future impairment charges could be required, which could be material to the consolidated
financial statements.
As a result of the Merger, the Company recorded
$
107,890,000
in goodwill and
$
37,022,000
in core deposit intangible assets.
Additional information on the Merger and purchase price allocation is provided in Note B "Business Combination". The core
deposit intangible asset value was determined by an analysis of the cost differential between the core deposits acquired,
inclusive of estimated servicing costs, and alternative funding sources for those deposits. The core deposit intangible asset
recorded is amortized on an accelerated basis over
6
years
. In addition to the effects of the Merger, the Company added a small
amount of intangibles during fiscal 2024 and 2025 as the result of acquisitions made by subsidiary WAFD Insurance Group,
Inc.
No
impairment losses separate from the scheduled amortization have been recognized in the periods presented.
76
WAFD, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2025, 2024, AND 2023
|
Goodwill
|
Core Deposit and
Other Intangibles
|
Total
|
|||
|
(In thousands)
|
|||||
|
Balance at September 30, 2023
|
$
|
$
|
$
|
||
|
Additions
|
|
|
|
||
|
Amortization
|
—
|
(
|
(
|
||
|
Balance at September 30, 2024
|
|
|
|
||
|
Additions
|
|
|
|
||
|
Amortization
|
—
|
(
|
(
|
||
|
Balance at September 30, 2025
|
$
|
$
|
$
|
||
|
Fiscal Year
|
Expense
|
|
|
(In thousands)
|
||
|
2026
|
$
|
|
|
2027
|
|
|
|
2028
|
|
|
|
2029
|
|
|
|
2030
|
|
tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements.
Under this method, a deferred tax asset or liability is determined based on the temporary differences between the financial
statement and corresponding tax treatment of income, gains, losses, deductions or credits using enacted tax rates in effect for
the year in which the differences are expected to reverse. The provision for income taxes includes current and deferred income
tax expense based on net income adjusted for temporary and permanent differences such as depreciation, loan loss reserve, tax-
exempt interest, and affordable housing tax credits. Reserves for uncertain tax positions, together with any related interest and
penalties, if applicable, and amortization of affordable housing tax credit investments are recorded within income tax expense.
options and other equity-based forms of compensation issued to employees over the employees' requisite service period
(generally the vesting period). The requisite service period may be subject to performance conditions. Stock options and
restricted stock awards generally vest ratably over
two
to
five years
and are recognized as expense over that same period of
time. The exercise price of each option equals the market price of the Company's Common Stock on the date of the grant, and
the maximum term is
ten years
.
Certain grants of restricted stock are subject to performance-based and market-based vesting as well as other approved vesting
conditions and cliff vest based on those conditions. Compensation expense is recognized over the service period to the extent
Regulatory matters.
On October 9, 2013, the CFPB entered a Consent Order against the Bank that required the Bank to pay a
civil money penalty of
$
34,000
, and to adopt an enhanced compliance program related to reporting Home Mortgage Disclosure
Act ("HMDA") data. On October 27, 2020 the CFPB entered a second Consent Order against the Bank for violations related to
the Bank’s HMDA reporting obligations. The 2020 Consent Order required the Bank to pay a
$
200,000
civil money penalty
77
WAFD, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2025, 2024, AND 2023
and develop and implement a HMDA compliance management system. Both HMDA Consent Orders were closed by the CFPB
in September 2025.
On December 27, 2024, the Bank received an overall CRA rating from the FDIC of “Needs to Improve” for the period covering
June 3, 2020 to March 26, 2024. Based on its performance on the individual components of the CRA tests, the Bank received a
“High Satisfactory” rating on both the Investment Test and the Service Test and a “Needs to Improve” rating on the Lending
Test, which resulted in the overall “Needs to Improve” rating. The Bank disagrees with the overall CRA rating and has
appealed the decision.
Amendments in Response to the SEC's Disclosure Update and Simplification Initiative
to clarify or improve disclosure and
presentation requirements on a variety of topics and align the requirements in the FASB accounting standard codification with
the SEC. The amendments will be effective for the Company only if the SEC removes the related disclosure requirement from
its existing regulations no later than June 30, 2027. If the SEC timely removes such a related requirement from its existing
regulations, the corresponding amendments within the ASU will become effective for the Company on the same date with early
adoption permitted. The Company does not expect the amendments in this update to have a material impact on our consolidated
financial statements.
In November 2024, the FASB issued ASU 2024-03,
Disaggregation of Income Statement Expenses
. This accounting standards
update will require public companies to disclose, in the notes to financial statements, specified information about certain costs
and expenses at each interim and annual reporting period. As clarified by the FASB in ASU 2025-01, the amendments of ASU
2024-03 are effective for fiscal years beginning after December 15, 2026, and for quarterly reporting beginning after December
15, 2027. Early adoption is permitted. The Company does not expect this ASU to have a material effect on our consolidated
financial statements.
In September 2025, the FASB issued ASU 2025-06,
Targeted Improvements to the Accounting for Internal-use Software
. This
ASU eliminates the concept of a software development project stage to better address an agile method of development and
introduces a new threshold for cost capitalization. The standard also provides factors to consider when determining whether
significant development uncertainty exists. The amendments of ASU 2024-03 are effective for annual reporting periods
beginning after December 15, 2027. Early adoption is permitted as of the beginning of the annual period. The Company does
not expect this ASU to have a material effect on our consolidated financial statements.
NOTE B -
BUSINESS COMBINATION
On March 1, 2024, WaFd, Inc. acquired Luther Burbank, headquartered in Santa Rosa, California. The Merger was effectively
an all-stock transaction and has been accounted for as a business combination. Pursuant to the Merger Agreement, on the
Merger Date, each holder of LBC common stock received
0.3353
of a share of WaFd common stock for each share of LBC
common stock held. As of the Merger Date, WaFd had
64,311,764
shares of common stock outstanding and issued
17,088,886
shares of WaFd common stock to the LBC shareholders which represents approximately
21
%
of the voting interests in WaFd,
Inc. upon completion of the Merger.
stock issued to LBC shareholders and the closing share price on the Merger Date as shown in the following table (amounts in
thousands except share and per share data).
|
Number of WaFd shares issued to LBC shareholders
|
|
|
|
WaFd market price per share on February 29, 2024
|
$
|
|
|
Purchase price of shares issued to LBC shareholders
|
$
|
|
|
Cash in lieu of fractional shares
|
$
|
|
|
Purchase price consideration
|
$
|
78
WAFD, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2025, 2024, AND 2023
The Merger was accounted for under the acquisition method of accounting. Assets acquired and liabilities assumed in the
Merger were recorded at their respective acquisition date estimated fair values and have been adjusted subsequent to the Merger
Date based on new information. In many cases, the determination of fair value required management to make estimates about
discount rates, expected future cash flows, market conditions and other future events that are highly subjective in nature and
subject to change. As of March 1st 2025, the Company had finalized its valuation of all assets acquired and liabilities assumed
in connection with the Merger.
|
March 1, 2024
|
||
|
(in thousands)
|
||
|
Total merger consideration
|
$
|
|
|
Fair value of assets acquired
|
||
|
Cash and cash equivalents
|
$
|
|
|
Investment securities
|
|
|
|
Loans receivable
|
|
|
|
Loans held for sale
|
|
|
|
Interest receivable
|
|
|
|
Premises and equipment
|
|
|
|
FHLB stock
|
|
|
|
Bank owned life insurance
|
|
|
|
Intangible assets
|
|
|
|
Deferred tax asset, net
|
|
|
|
Other assets
|
|
|
|
Total assets acquired
|
$
|
|
|
Fair value of liabilities assumed
|
||
|
Customer accounts
|
$
|
|
|
Borrowings
|
|
|
|
Junior subordinated deferrable interest debentures
|
|
|
|
Senior Debt
|
|
|
|
Accrued expenses and other liabilities
|
|
|
|
Total liabilities assumed
|
$
|
|
|
Net Assets Acquired
|
$
|
|
|
Goodwill
|
$
|
|
In connection with the Merger, the Company recorded approximately
$
107,890,000
of goodwill. Goodwill represents the
excess of the purchase price over the fair value of the assets acquired net of fair value of liabilities assumed. Information
regarding goodwill and the carrying amount and amortization of intangible assets is provided in
Note A
.
The following is a description of the methods used to determine the fair values of significant assets and liabilities presented
above.
Cash and cash equivalents
– The carrying amount of these items is a reasonable estimate of their fair value based on the short-
term nature of these assets.
Investment securities
– Fair values for investment securities are based on quoted market prices. The actual sales prices of
securities were used for those securities sold in March 2024, shortly after the Merger, rather than the quoted market price as
sales prices were determined to be the best indicator of fair value.
79
WAFD, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2025, 2024, AND 2023
Loans receivable
–
A valuation of the loans held for investment portfolio was performed by a third party as of the Merger Date
to assess the fair value. The loans held for investment portfolio was segmented into three groups, including performing
purchased credit deteriorated ("PCD") loans, non-performing PCD loans and non-PCD loans. The loans were further pooled
based on loan type and interest rate terms. The loans were valued at the pool level using a discounted cash flow methodology.
The methodology included projecting cash flows based on the contractual terms of the loans and the cash flows were adjusted
to reflect credit loss expectations along with prepayments. Discount rates were developed based on the relative risk of the cash
flows, taking into consideration the loan type, market rates as of the valuation date, recent originations in the portfolio, credit
loss expectations, and liquidity expectations. Lastly, cash flows adjusted for credit loss expectations were discounted to present
value and summed to arrive at the fair value of the loans.
The Company is required to record PCD assets, defined as a more-than-insignificant deterioration in credit quality since
origination or issuance, at the purchase price plus the allowance for credit losses expected at the time of acquisition. Under this
method, there is no credit loss expense affecting net income on acquisition of PCD assets. Changes in estimates of expected
credit losses after acquisition are recognized in subsequent periods as provision for credit losses (or recapture of credit losses)
arises. Any non-credit discount or premium resulting from acquiring a pool of purchased financial assets with credit
deterioration is allocated to each individual asset. At the Merger Date, the initial allowance for credit losses, determined on a
collective basis, is allocated to individual assets to appropriately allocate any non-credit discount or premium. The non-credit
discount or premium, after the adjustment for the allowance for credit losses, is accreted to interest income using the interest
method based on the effective interest rate determined at the Merger Date.
Of the
$
3.2
billion
net loans held for investment acquired,
$
293
million
were identified as PCD loans on the Merger Date.
The
following table provides a summary of these PCD loans at acquisition:
|
March 1, 2024
|
|
|
(In thousands)
|
|
|
Principal of PCD loans acquired
|
$
|
|
PCD ACL at acquisition
|
(
|
|
Non-credit discount on PCD loans
|
(
|
|
Fair value of PCD loans
|
$
|
Loans held for sale
– The loans held for sale portfolio was recorded at fair value based on quotes or bids from third parties.
Premises and equipment
- The fair values of premises are based on a market approach by obtaining third-party appraisals and
broker opinions of value for land, office and branch space.
Core deposit intangible
– The core deposit intangible represents the low cost of funding acquired core deposits provide relative
to the Company’s marginal cost of funds. The fair value was estimated based on a cost savings methodology that gave
consideration to expected customer attrition rates, net maintenance cost of the deposit base, interest costs associated with
customer deposits, and the alternative cost of funds. The estimated fair value was grossed-up for the expected tax amortization
benefit. The intangible asset is being amortized over
6
years
using an accelerated method, based upon the period over which
estimated economic benefits are estimated to be received.
Customer Accounts
– The fair values used for the demand and savings deposits equal the amount payable on demand at the
Merger Date. The fair value of time deposits is estimated by discounting the estimated future cash flows using current rates
offered for deposits with similar remaining maturities.
Borrowings
– The fair value of Federal Home Loan Bank ("FHLB") advances and Federal Reserve Bank ("FRB") borrowings
is estimated by discounting the estimated future cash flows using rates currently available to the Company for debt with similar
remaining maturities.
80
WAFD, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2025, 2024, AND 2023
The Company's operating results for the year ended September 30, 2024 include the operating results produced by the acquired
assets and assumed liabilities in the Merger for the period March 1, 2024 to September 30, 2024.
2024
.
|
Year Ended
|
|||
|
Merger-Related Expenses
|
September 30, 2025
|
September 30, 2024
|
|
|
(in thousands)
|
|||
|
Severance and employee-related
|
$
|
$
|
|
|
Legal and Professional
|
|
|
|
|
Charitable contributions
|
|
|
|
|
System conversion and integration
|
|
|
|
|
$
|
$
|
||
adjustments give effect to any change in interest income due to the accretion of the discount (premium) associated with the fair
value adjustments to acquired loans, any change in interest expense due to estimated premium amortization/discount accretion
associated with the fair value adjustment to acquired interest-bearing deposits, borrowings and long-term debt and the
amortization of the core deposit intangible that would have resulted had the deposits been acquired as of October 1, 2022. The
pro forma information is not indicative of what would have occurred had the Merger occurred as of the beginning of the year
prior to the Merger Date. The pro forma amounts below do not reflect the Company's expectations as of the date of the pro
forma information of further operating cost savings and other business synergies expected to be achieved, including revenue
growth as a result of the Merger. As a result, actual amounts differed from the unaudited pro forma information presented.
|
Unaudited Pro Forma for the
Year Ended
|
|||
|
September 30, 2024
|
September 30, 2023
|
||
|
(in thousands)
|
|||
|
Net-interest income
|
$
|
$
|
|
|
Non-interest income
|
|
|
|
|
Net income
|
|
|
|
81
WAFD, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2025, 2024, AND 2023
NOTE C -
INVESTMENT SECURITIES
investment securities.
|
September 30, 2025
|
Amortized
Cost
|
Gross Unrealized
|
Fair
Value
|
Yield
|
|||||
|
Gains
|
Losses
|
||||||||
|
|
($ in thousands)
|
||||||||
|
Available-for-sale securities
|
|||||||||
|
U.S. government and agency securities due
|
|||||||||
|
Within 1 year
|
$
|
$
|
$
(
|
$
|
|
||||
|
1 to 5 years
|
|
|
|
|
|
||||
|
5 to 10 years
|
|
|
(
|
|
|
||||
|
Over 10 years
|
|
|
(
|
|
|
||||
|
Asset-backed securities due
|
|||||||||
|
Within 1 year
|
|
|
(
|
|
|
||||
|
5 to 10 years
|
|
|
|
|
|
||||
|
Over 10 years
|
|
|
(
|
|
|
||||
|
Corporate debt securities due
|
|||||||||
|
1 to 5 years
|
|
|
(
|
|
|
||||
|
5 to 10 years
|
|
|
(
|
|
|
||||
|
Municipal bonds due
|
|||||||||
|
5 to 10 years
|
|
|
(
|
|
|
||||
|
Over 10 years
|
|
|
(
|
|
|
||||
|
Mortgage-backed securities
|
|||||||||
|
Agency pass-through certificates
|
|
|
(
|
|
|
||||
|
|
|
(
|
|
|
|||||
|
Held-to-maturity securities
|
|||||||||
|
Mortgage-backed securities
|
|||||||||
|
Agency pass-through certificates
|
|
|
(
|
|
|
||||
|
$
|
$
|
$
(
|
$
|
|
|||||
82
WAFD, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2025, 2024, AND 2023
|
September 30, 2024
|
Amortized
Cost
|
Gross Unrealized
|
Fair
Value
|
Yield
|
|||||
|
Gains
|
Losses
|
||||||||
|
|
($ in thousands)
|
||||||||
|
Available-for-sale securities
|
|||||||||
|
U.S. government and agency securities due
|
|||||||||
|
Within 1 year
|
$
|
$
|
$
|
$
|
|
||||
|
1 to 5 years
|
|
|
(
|
|
|
||||
|
5 to 10 years
|
|
|
|
|
|
||||
|
Over 10 years
|
|
|
(
|
|
|
||||
|
Asset-backed securities due
|
|||||||||
|
1 to 5 years
|
|
|
(
|
|
|
||||
|
5 to 10 years
|
|
|
(
|
|
|
||||
|
Over 10 years
|
|
|
(
|
|
|
||||
|
Corporate debt securities due
|
|||||||||
|
Within 1 year
|
|
|
(
|
|
|
||||
|
1 to 5 years
|
|
|
|
|
|
||||
|
5 to 10 years
|
|
|
(
|
|
|
||||
|
Over 10 years
|
|
|
|
|
|
||||
|
Municipal bonds due
|
|||||||||
|
5 to 10 years
|
|
|
(
|
|
|
||||
|
Over 10 years
|
|
|
(
|
|
|
||||
|
Mortgage-backed securities
|
|||||||||
|
Agency pass-through certificates
|
|
|
(
|
|
|
||||
|
|
|
(
|
|
|
|||||
|
Held-to-maturity securities
|
|||||||||
|
Mortgage-backed securities
|
|||||||||
|
Agency pass-through certificates
|
|
|
(
|
|
|
||||
|
$
|
$
|
$
(
|
$
|
|
|||||
The Company purchased
$
1,482,058,000
of available-for-sale investment securities and
$
261,842,000
held-to-maturity
investment securities during
2025
. Sales of available-for-sale securities totaled
$
797,000
and there were
no
sales of held-to-
maturity investment securities in
2025
. Substantially all mortgage-backed securities have contractual due dates that exceed
15
years
.
The Company elected to exclude AIR from the amortized cost basis of debt securities disclosed throughout this footnote. For
AFS securities, AIR totaled
$
11,057,000
and
$
9,311,000
as of
September 30, 2025
and
September 30, 2024
, respectively. For
HTM debt securities, AIR totaled
$
2,089,000
and
$
1,154,000
as of
September 30, 2025
and
September 30, 2024
, respectively.
AIR is included in the “
interest receivable
” line item on the Company’s consolidated statements of financial condition.
2024
, by length of time that individual securities in each category have been in a continuous loss position. There were
213
and
since purchase is attributable to changes in interest rates. Because the Company does not intend to sell these securities and does
not consider it more likely than not that it will be required to sell these securities before the recovery of amortized cost basis,
which may be upon maturity, the Company does not consider these investments to be impaired.
83
WAFD, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2025, 2024, AND 2023
|
September 30, 2025
|
Less than 12 months
|
12 months or more
|
Total
|
||||||||
|
|
Unrealized
Gross Losses
|
Fair
Value
|
Unrealized
Gross Losses
|
Fair
Value
|
Unrealized
Gross Losses
|
Fair
Value
|
|||||
|
|
(In thousands)
|
||||||||||
|
Available-for-sale securities
|
|||||||||||
|
Corporate debt securities
|
$
(
|
$
|
$
(
|
$
|
$
(
|
$
|
|||||
|
Municipal bonds
|
|
|
(
|
|
(
|
|
|||||
|
U.S. government and agency
securities
|
(
|
|
(
|
|
(
|
|
|||||
|
Asset-backed securities
|
(
|
|
(
|
|
(
|
|
|||||
|
Mortgage-backed securities
|
(
|
|
(
|
|
(
|
|
|||||
|
(
|
|
(
|
|
(
|
|
||||||
|
Held-to-maturity securities
|
|||||||||||
|
Mortgage-backed securities
|
|
|
(
|
|
(
|
|
|||||
|
$
(
|
$
|
$
(
|
$
|
$
(
|
$
|
||||||
|
September 30, 2024
|
Less than 12 months
|
12 months or more
|
Total
|
||||||||
|
|
Unrealized
Gross Losses
|
Fair
Value
|
Unrealized
Gross Losses
|
Fair
Value
|
Unrealized
Gross Losses
|
Fair
Value
|
|||||
|
|
(In thousands)
|
||||||||||
|
Available-for-sale securities
|
|||||||||||
|
Corporate debt securities
|
$
|
$
|
$
(
|
$
|
$
(
|
$
|
|||||
|
Municipal bonds due
|
(
|
|
(
|
|
(
|
|
|||||
|
Asset-backed securities
|
(
|
|
(
|
|
(
|
|
|||||
|
Mortgage-backed securities
|
(
|
|
(
|
|
(
|
|
|||||
|
(
|
|
(
|
|
(
|
|
||||||
|
Held-to-maturity securities
|
|||||||||||
|
Mortgage-backed securities
|
|
|
(
|
|
(
|
|
|||||
|
$
(
|
$
|
$
(
|
$
|
$
(
|
$
|
||||||
Substantially all of the Company’s held-to-maturity debt securities are issued by U.S. government agencies or U.S.
government-sponsored enterprises. These securities carry the explicit and/or implicit guarantee of the U.S. government and
have a long history of zero credit loss. Therefore, the Company did not record an allowance for credit losses for these securities
as of
September 30, 2025
or
September 30, 2024
. The Company does not consider HTM investments to have any credit
impairment.
The Company does not believe that the available-for-sale debt securities that were in an unrealized loss position have any credit
loss impairment as of
September 30, 2025
or
September 30, 2024
. The Company does not intend to sell the investment
securities that were in an unrealized loss position and it is not more likely than not that the Company will be required to sell the
investment securities before recovery of their amortized cost basis, which may be at maturity. Available-for-sale debt securities
issued by U.S. government agencies or U.S. government-sponsored enterprises carry the explicit and/or implicit guarantee of
the U.S. government and have a long history of zero credit loss. Corporate debt securities and municipal bonds are considered
to have an issuer of high credit quality and the decline in fair value is due to changes in interest rates and other market
conditions. The issuers continue to make timely principal and interest payments on the bonds. The fair value is expected to
recover as the bonds approach maturity.
84
WAFD, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2025, 2024, AND 2023
NOTE D -
LOANS RECEIVABLE
For a detailed discussion of loans and credit quality, including accounting policies and the CECL methodology used to estimate the
The Company's loans held for investment are divided into
two
portfolio segments, commercial loans and consumer loans, with each of
those segments further split into loan classes for purposes of estimating the allowance for credit losses.
|
|
September 30, 2025
|
September 30, 2024
|
|||
|
|
($ in thousands)
|
($ in thousands)
|
|||
|
Gross loans by category
|
|||||
|
Commercial loans
|
|||||
|
Multi-family
|
$
|
|
$
|
|
|
|
Commercial real estate
|
|
|
|
|
|
|
Commercial & industrial
|
|
|
|
|
|
|
Construction
|
|
|
|
|
|
|
Land - acquisition & development
|
|
|
|
|
|
|
Total commercial loans
|
|
|
|
|
|
|
Consumer loans
|
|||||
|
Single-family residential
|
|
|
|
|
|
|
Construction - custom
|
|
|
|
|
|
|
Land - consumer lot loans
|
|
|
|
|
|
|
HELOC
|
|
|
|
|
|
|
Consumer
|
|
|
|
|
|
|
Total consumer loans
|
|
|
|
|
|
|
Total gross loans
|
|
|
|
|
|
|
Less:
|
|||||
|
Allowance for loan losses
|
|
|
|||
|
Loans in process
|
|
|
|||
|
Net deferred fees, costs and discounts
|
|
|
|||
|
Total loan contra accounts
|
|
|
|||
|
Net loans
|
$
|
$
|
|||
The Company elected to exclude AIR from the amortized cost basis of loans for disclosure purposes and from the calculations of
estimated credit losses. As of
September 30, 2025
and
September 30, 2024
, AIR for loans totaled
$
85,444,000
and
$
92,362,000
,
respectively, and is included in the “
accrued interest receivable
” line item on the Company’s consolidated statements of financial
condition.
Loans in the amount of
$
13,732,150,000
and
$
16,957,014,000
at
September 30, 2025
and
September 30, 2024
, respectively, were
pledged to secure borrowings and available lines of credit.
None of the agencies to which we have pledged loans have the right to sell
or re-pledge them.
85
WAFD, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2025, 2024, AND 2023
table below does not account for fixed rate loans that are swapped to floating using derivatives.
See Note G
for details regarding fair
value hedges of individual fixed rate commercial loans and also hedges of a specified portion of pools of prepayable fixed rate
mortgage loans under the "last of layer" method.
|
September 30, 2025
|
||||||
|
Fixed-Rate
|
Adjustable-Rate
|
|||||
|
Term To Maturity
|
Loans
|
% of Loans
|
Term To Rate Adjustment
|
Loans
|
% of Loans
|
|
|
|
(In thousands)
|
|
(In thousands)
|
|||
|
Within 1 year
|
$
|
|
Less than 1 year
|
$
|
|
|
|
1 to 3 years
|
|
|
1 to 3 years
|
|
|
|
|
3 to 5 years
|
|
|
3 to 5 years
|
|
|
|
|
5 to 10 years
|
|
|
5 to 10 years
|
|
|
|
|
10 to 20 years
|
|
|
10 to 20 years
|
|
|
|
|
Over 20 years
|
|
|
Over 20 years
|
|
|
|
|
$
|
|
$
|
|
|||
The Company has granted loans to officers and directors of the Company and related interests. These loans are made on the same
terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unrelated persons and do
not involve more than the normal risk of collectability. The aggregate dollar amount of these loans, including unfunded commitments
to lend, was
$
89,608,000
and
$
98,271,000
at
September 30, 2025
and
2024
, respectively. As of
September 30, 2025
, all of these loans
were performing in accordance with contractual terms.
and still accruing.
|
|
September 30, 2025
|
September 30, 2024
|
|||||||||
|
|
(In thousands, except ratio data)
|
||||||||||
|
Non-accrual
|
Non-accrual
with no ACL
|
90 days or
more past due
and accruing
|
Non-accrual
|
Non-accrual
with no ACL
|
90 days or
more past due
and accruing
|
||||||
|
Commercial loans
|
|||||||||||
|
Multi-family
|
$
|
$
|
$
|
$
|
$
|
$
|
|||||
|
Commercial real estate
|
|
|
|
|
|
|
|||||
|
Commercial & industrial
|
|
|
|
|
|
|
|||||
|
Construction
|
|
|
|
|
|
|
|||||
|
Land - acquisition & development
|
|
|
|
|
|
|
|||||
|
Total commercial loans
|
|
|
|
|
|
|
|||||
|
Consumer loans
|
|||||||||||
|
Single-family residential
|
|
|
|
|
|
|
|||||
|
Construction - custom
|
|
|
|
|
|
|
|||||
|
Land - consumer lot loans
|
|
|
|
|
|
|
|||||
|
HELOC
|
|
|
|
|
|
|
|||||
|
Consumer
|
|
|
|
|
|
|
|||||
|
Total consumer loans
|
|
|
|
|
|
|
|||||
|
Total loans
|
$
|
$
|
$
|
$
|
$
|
$
|
|||||
|
% of total loans
|
|
|
|||||||||
86
WAFD, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2025, 2024, AND 2023
|
September 30, 2025
|
Days Delinquent Based on $ Amount of Loans
|
% based
on $
|
|||||||||||
|
Loan type
|
Loans
Receivable
(Amortized
Cost)
|
Current
|
30
|
60
|
90
|
Total Past
Due
|
|||||||
|
($ in thousands)
|
|||||||||||||
|
Commercial loans
|
|||||||||||||
|
Multi-Family
|
$
|
$
|
$
|
$
|
$
|
$
|
|
||||||
|
Commercial Real Estate
|
|
|
|
|
|
|
|
||||||
|
Commercial & Industrial
|
|
|
|
|
|
|
|
||||||
|
Construction
|
|
|
|
|
|
|
|
||||||
|
Land - Acquisition & Development
|
|
|
|
|
|
|
|
||||||
|
Total commercial loans
|
|
|
|
|
|
|
|
||||||
|
Consumer loans
|
|||||||||||||
|
Single-Family Residential
|
|
|
|
|
|
|
|
||||||
|
Construction - Custom
|
|
|
|
|
|
|
|
||||||
|
Land - Consumer Lot Loans
|
|
|
|
|
|
|
|
||||||
|
HELOC
|
|
|
|
|
|
|
|
||||||
|
Consumer
|
|
|
|
|
|
|
|
||||||
|
Total consumer loans
|
|
|
|
|
|
|
|
||||||
|
Total Loans
|
$
|
$
|
$
|
$
|
$
|
$
|
|
||||||
|
Delinquency %
|
|
|
|
|
|
||||||||
|
September 30, 2024
|
Days Delinquent Based on $ Amount of Loans
|
% based
on $
|
|||||||||||
|
Loan type
|
Loans Receivable
(Amortized Cost)
|
Current
|
30
|
60
|
90
|
Total Past
Due
|
|||||||
|
($ in thousands)
|
|||||||||||||
|
Commercial loans
|
|||||||||||||
|
Multi-Family
|
$
|
$
|
$
|
$
|
$
|
$
|
|
||||||
|
Commercial Real Estate
|
|
|
|
|
|
|
|
||||||
|
Commercial & Industrial
|
|
|
|
|
|
|
|
||||||
|
Construction
|
|
|
|
|
|
|
|
||||||
|
Land - Acquisition & Development
|
|
|
|
|
|
|
|
||||||
|
Total commercial loans
|
|
|
|
|
|
|
|
||||||
|
Consumer loans
|
|||||||||||||
|
Single-Family Residential
|
|
|
|
|
|
|
|
||||||
|
Construction - Custom
|
|
|
|
|
|
|
|
||||||
|
Land - Consumer Lot Loans
|
|
|
|
|
|
|
|
||||||
|
HELOC
|
|
|
|
|
|
|
|
||||||
|
Consumer
|
|
|
|
|
|
|
|
||||||
|
Total consumer loans
|
|
|
|
|
|
|
|
||||||
|
Total Loans
|
$
|
$
|
$
|
$
|
$
|
$
|
|
||||||
|
Delinquency %
|
|
|
|
|
|
||||||||
Loans are considered collateral-dependent when the debtor is experiencing financial difficulty and repayment is expected to be
provided substantially through the sale or operation of the collateral.
The following table presents the amortized basis of collateral-
dependent loans by loan class and type of collateral securing the assets as of
September 30, 2025
.
87
WAFD, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2025, 2024, AND 2023
|
Collateral dependent loans by type
|
Residential Real Estate
|
Commercial Real Estate
|
General Business Assets
|
|||
|
($ in thousands)
|
||||||
|
Commercial loans
|
||||||
|
Multi-Family
|
$
|
$
|
$
|
|||
|
Commercial Real Estate
|
|
|
|
|||
|
Commercial & Industrial
|
|
|
|
|||
|
Construction
|
|
|
|
|||
|
Land - Acquisition & Development
|
|
|
|
|||
|
Total commercial loans
|
|
|
|
|||
|
Consumer loans
|
||||||
|
Single-Family Residential
|
|
|
|
|||
|
Construction - Custom
|
|
|
|
|||
|
Land - Consumer Lot Loans
|
|
|
|
|||
|
HELOC
|
|
|
|
|||
|
Consumer
|
|
|
|
|||
|
Total consumer loans
|
|
|
|
|||
|
Total Loans
|
$
|
$
|
$
|
|||
Loans may be modified as the result of borrowers experiencing financial difficulty needing relief from the contractual terms of their
loan. Most loan modifications to borrowers experiencing financial difficulty are accruing and performing loans where the borrower
has approached the Company about modification due to temporary financial difficulties. Each request for modification is individually
evaluated for merit and likelihood of success. Often a term extension is needed in the short term in order to evaluate the need for
further corrective action. Payment delays and interest-only payments may also be approved during the modification period. Principal
forgiveness is not an available option for restructured loans.
For commercial loans, modifications could be any of the above-listed modification types available or a mix thereof. Modifications to
extend the term, lower the payment amount or delay payment are made for the purposes of providing borrowers additional time to
return to compliance with the terms of their loans. Renewals of commercial lines to borrowers experiencing financial difficulty are
included within the disclosures below though many of these are made in the normal course of business.
For consumer loans, modifications typically consist of minor payment delays or deferrals and may include a modification of the
existing contractual rate or extension of the maturity date, or both, when it is determined the borrowers are likely to successfully
maintain compliance with these modified loan terms.
period by loan class and modification type. Modifications during the years presented were term extensions or payment deferrals.
88
WAFD, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2025, 2024, AND 2023
|
Twelve Months Ended September 30, 2025
|
|||||||||
|
Term Extension
|
Payment Deferral
|
% of Total
Loan Class
|
Wtd. Avg.
Term Extension
|
Deferral Amount
|
|||||
|
Commercial loans
|
( in thousands)
|
( in thousands)
|
(in months)
|
( in thousands)
|
|||||
|
Multi-family
|
$
|
$
|
|
|
$
|
||||
|
Commercial real estate
|
|
|
|
|
|
||||
|
Commercial & industrial
|
|
|
|
|
|
||||
|
Construction
|
|
|
|
|
|
||||
|
Total commercial loans
|
|
|
|
|
|||||
|
|
|||||||||
|
Consumer loans
|
|||||||||
|
Single-family residential
|
|
|
|
|
|
||||
|
Total consumer loans
|
|
|
|
|
|||||
|
Total Loans
|
$
|
$
|
|
|
$
|
||||
|
Twelve months ended September 30, 2024
|
|||||||||
|
Term Extension
|
Payment Deferral
|
% of Total
Loan Class
|
Wtd. Avg.
Term Extension
|
Deferral Amount
|
|||||
|
Commercial loans
|
( in thousands)
|
( in thousands)
|
(in months)
|
( in thousands)
|
|||||
|
Commercial real estate
|
$
|
$
|
|
|
$
|
||||
|
Commercial & industrial
|
|
|
|
|
|
||||
|
Construction
|
|
|
|
|
|
||||
|
Total commercial loans
|
|
|
|
|
|||||
|
|
|||||||||
|
Consumer loans
|
|||||||||
|
Single-family residential
|
|
|
|
|
|
||||
|
Total consumer loans
|
|
|
|
|
|||||
|
Total Loans
|
$
|
$
|
|
|
$
|
||||
The Company closely monitors the performance of the loans that are modified to borrowers experiencing financial difficulty to
understand the effectiveness of modification efforts.
The following table presents the performance of such loans that have been
modified for the twelve months ended
September 30, 2025
and
September 30, 2024
,
respectively.
89
WAFD, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2025, 2024, AND 2023
|
September 30, 2025
|
Days Delinquent
|
|||||||||
|
Loan type
|
Current
|
30
|
60
|
90
|
Total
|
|||||
|
(in thousands)
|
||||||||||
|
Commercial loans
|
||||||||||
|
Multi-family
|
$
|
$
|
$
|
$
|
$
|
|||||
|
Commercial real estate
|
|
|
|
|
|
|||||
|
Commercial & industrial
|
|
|
|
|
|
|||||
|
Construction
|
|
|
|
|
|
|||||
|
Total commercial loans
|
|
|
|
|
|
|||||
|
Consumer loans
|
||||||||||
|
Single-family residential
|
|
|
|
|
|
|||||
|
Total consumer loans
|
|
|
|
|
|
|||||
|
Total Loans
|
$
|
$
|
$
|
$
|
$
|
|||||
|
September 30, 2024
|
Days Delinquent
|
|||||||||
|
Loan type
|
Current
|
30
|
60
|
90
|
Total
|
|||||
|
(in thousands)
|
||||||||||
|
Commercial loans
|
||||||||||
|
Commercial real estate
|
$
|
$
|
$
|
$
|
$
|
|||||
|
Commercial & industrial
|
|
|
|
|
|
|||||
|
Construction
|
|
|
|
|
|
|||||
|
Total commercial loans
|
|
|
|
|
|
|||||
|
Consumer loans
|
||||||||||
|
Single-family residential
|
|
|
|
|
|
|||||
|
Total consumer loans
|
|
|
|
|
|
|||||
|
Total Loans
|
$
|
$
|
$
|
$
|
$
|
|||||
None of the loans modified in the twelve months ended
September 30, 2025
have defaulted after modification as of
September 30,
2025
and only
one
single-family residential loan with a balance of
$
446,000
was past due 30 days.
We evaluate the credit quality of our commercial loans based on regulatory risk ratings and also consider other factors. It is important
to note, just because a loan is risk-rated below a "pass" rating, it does not necessarily indicate there will be future charge-offs on that
loan. Loans are downgraded because of either borrower specific or industry-wide financial or operating stresses. Based on this
evaluation, the loans are assigned a grade and classified as follows:
•
Pass
– the credit does not meet one of the definitions below.
•
Special mention
– A special mention credit is considered to be currently protected from loss but is potentially weak. No loss
of principal or interest is foreseen; however, proper supervision and management attention is required to deter further
deterioration in the credit. Assets in this category constitute some undue and unwarranted credit risk but not to the point of
justifying a risk rating of substandard. The credit risk may be relatively minor yet constitutes an unwarranted risk in light of
the circumstances surrounding a specific asset.
90
WAFD, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2025, 2024, AND 2023
•
Substandard
– A substandard credit is an unacceptable credit. Additionally, repayment in the normal course is in jeopardy
due to the existence of one or more well defined weaknesses. In these situations, loss of principal is likely if the weakness is
not corrected. A substandard asset is inadequately protected by the current sound worth and paying capacity of the borrower
or of the collateral pledged, if any. Assets so classified will have a well-defined weakness or weaknesses that jeopardize the
collection or liquidation of the debt. Loss potential, while existing in the aggregate amount of substandard assets, does not
have to exist in individual assets risk rated substandard.
•
Doubtful
– A credit classified doubtful has all the weaknesses inherent in one classified substandard with the added
characteristic that the weakness makes collection or liquidation in full, on the basis of currently existing facts, conditions and
values, highly questionable and improbable. The probability of loss is high, but because of certain important and reasonably
specific pending factors that may work to the advantage and strengthening of the asset, its classification as an estimated loss
is deferred until its more exact status may be determined. Pending factors include proposed merger, acquisition, or liquidation
procedures, capital injection, perfecting liens on additional collateral, and refinancing plans.
•
Loss
– Credits classified loss are considered uncollectible and of such little value that their continuance as a bankable asset is
not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather it is not
practical or desirable to defer writing off this asset even though partial recovery may be affected in the future. Losses should
be taken in the period in which they are identified as uncollectible. Partial charge-off versus full charge-off may be taken if
the collateral offers some identifiable protection.
as of
September 30, 2025
and
September 30, 2024
.
91
WAFD, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2025, 2024, AND 2023
|
September 30, 2025
|
Term Loans Amortized Cost Basis by Origination Year
|
||||||||
|
(In thousands)
|
2025
|
2024
|
2023
|
2022
|
2021
|
Prior to
2021
|
Revolving
Loans
|
Revolving
to Term
Loans
|
Total Loans
|
|
Commercial loans
|
|||||||||
|
Multi-family
|
|||||||||
|
Pass
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
|
Special Mention
|
|
|
|
|
|
|
|
|
|
|
Substandard
|
|
|
|
|
|
|
|
|
|
|
Doubtful
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
|
Gross Charge-offs
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|||||||||
|
Pass
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
|
Special Mention
|
|
|
|
|
|
|
|
|
|
|
Substandard
|
|
|
|
|
|
|
|
|
|
|
Doubtful
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
|
Gross Charge-offs
|
|
|
|
|
|
|
|
|
|
|
Commercial & industrial
|
|||||||||
|
Pass
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
|
Special Mention
|
|
|
|
|
|
|
|
|
|
|
Substandard
|
|
|
|
|
|
|
|
|
|
|
Loss
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
|
Gross Charge-offs
|
|
|
|
|
|
|
|
|
|
|
Construction
|
|||||||||
|
Pass
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
|
Special Mention
|
|
|
|
|
|
|
|
|
|
|
Substandard
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
|
Land - acquisition & development
|
|||||||||
|
Pass
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
|
Substandard
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
|
Total commercial loans
|
|||||||||
|
Pass
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
|
Special Mention
|
|
|
|
|
|
|
|
|
|
|
Substandard
|
|
|
|
|
|
|
|
|
|
|
Doubtful
|
|
|
|
|
|
|
|
|
|
|
Loss
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
|
Gross Charge-offs
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
92
WAFD, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2025, 2024, AND 2023
|
September 30, 2025
|
Term Loans Amortized Cost Basis by Origination Year
|
||||||||
|
(In thousands)
|
2025
|
2024
|
2023
|
2022
|
2021
|
Prior to
2021
|
Revolving
Loans
|
Revolving
to Term
Loans
|
Total
Loans
|
|
Consumer loans
|
|||||||||
|
Single-family residential
|
|||||||||
|
Current
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
|
30 days past due
|
|
|
|
|
|
|
|
|
|
|
60 days past due
|
|
|
|
|
|
|
|
|
|
|
90+ days past due
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
|
Gross Charge-offs
|
|
|
|
|
|
|
|
|
|
|
Construction - custom
|
|||||||||
|
Current
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
|
90+ days past due
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
|
Land - consumer lot loans
|
|||||||||
|
Current
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
|
30 days past due
|
|
|
|
|
|
|
|
|
|
|
60 days past due
|
|
|
|
|
|
|
|
|
|
|
90+ days past due
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
|
HELOC
|
|||||||||
|
Current
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
|
30 days past due
|
|
|
|
|
|
|
|
|
|
|
60 days past due
|
|
|
|
|
|
|
|
|
|
|
90+ days past due
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
|
Consumer
|
|||||||||
|
Current
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
|
30 days past due
|
|
|
|
|
|
|
|
|
|
|
60 days past due
|
|
|
|
|
|
|
|
|
|
|
90+ days past due
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
|
Gross Charge-offs
|
|
|
|
|
|
|
|
|
|
|
Total consumer loans
|
|||||||||
|
Current
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
|
30 days past due
|
|
|
|
|
|
|
|
|
|
|
60 days past due
|
|
|
|
|
|
|
|
|
|
|
90+ days past due
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
|
Gross Charge-offs
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
93
WAFD, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2025, 2024, AND 2023
|
September 30, 2024
|
Term Loans Amortized Cost Basis by Origination Year
|
||||||||
|
(In thousands)
|
2024
|
2023
|
2022
|
2021
|
2020
|
Prior to
2020
|
Revolving
Loans
|
Revolving
to Term
Loans
|
Total Loans
|
|
Commercial loans
|
|||||||||
|
Multi-family
|
|||||||||
|
Pass
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
|
Special Mention
|
|
|
|
|
|
|
|
|
|
|
Substandard
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
|
Commercial real estate
|
|||||||||
|
Pass
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
|
Special Mention
|
|
|
|
|
|
|
|
|
|
|
Substandard
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
|
Gross Charge-offs
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
|
Commercial & industrial
|
|||||||||
|
Pass
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
|
Special Mention
|
|
|
|
|
|
|
|
|
|
|
Substandard
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
|
Gross Charge-offs
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
|
Construction
|
|||||||||
|
Pass
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
|
Special Mention
|
|
|
|
|
|
|
|
|
|
|
Substandard
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
|
Land - acquisition & development
|
|||||||||
|
Pass
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
|
Substandard
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
|
Gross Charge-offs
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
|
Total commercial loans
|
|||||||||
|
Pass
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
|
Special Mention
|
|
|
|
|
|
|
|
|
|
|
Substandard
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
|
Gross Charge-offs
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
94
WAFD, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2025, 2024, AND 2023
|
September 30, 2024
|
Term Loans Amortized Cost Basis by Origination Year
|
||||||||
|
(In thousands)
|
2024
|
2023
|
2022
|
2021
|
2020
|
Prior to
2020
|
Revolving
Loans
|
Revolving
to Term
Loans
|
Total
Loans
|
|
Consumer loans
|
|||||||||
|
Single-family residential
|
|||||||||
|
Current
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
|
30 days past due
|
|
|
|
|
|
|
|
|
|
|
60 days past due
|
|
|
|
|
|
|
|
|
|
|
90+ days past due
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
|
Gross Charge-offs
|
|
|
|
|
|
|
|
|
|
|
Construction - custom
|
|||||||||
|
Current
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
|
90+ days past due
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
|
Land - consumer lot loans
|
|||||||||
|
Current
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
|
Total
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
|
HELOC
|
|||||||||
|
Current
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
|
30 days past due
|
|
|
|
|
|
|
|
|
|
|
60 days past due
|
|
|
|
|
|
|
|
|
|
|
90+ days past due
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
|
Consumer
|
|||||||||
|
Current
|
$
|
$
|
$
(
|
$
|
$
|
$
|
$
|
$
|
$
|
|
30 days past due
|
|
|
|
|
|
|
|
|
|
|
60 days past due
|
|
|
|
|
|
|
|
|
|
|
90+ days past due
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
$
|
$
(
|
$
|
$
|
$
|
$
|
$
|
$
|
|
Gross Charge-offs
|
|
|
|
|
|
|
|
|
|
|
Total consumer loans
|
|||||||||
|
Current
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
|
30 days past due
|
|
|
|
|
|
|
|
|
|
|
60 days past due
|
|
|
|
|
|
|
|
|
|
|
90+ days past due
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
|
Gross Charge-offs
|
|
|
|
|
|
|
|
|
|
95
WAFD, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2025, 2024, AND 2023
NOTE E -
ALLOWANCE FOR LOAN LOSSES
For a detailed discussion of loans and credit quality, including accounting policies and the CECL methodology used to estimate the
|
Twelve Months Ended September 30, 2025
|
Beginning
Allowance
|
Charge-offs
|
Recoveries
|
Provision &
Transfers
|
Ending
Allowance
|
||||
|
|
(In thousands)
|
||||||||
|
Commercial loans
|
|||||||||
|
Multi-family
|
$
|
$
(
|
$
|
$
|
$
|
||||
|
Commercial real estate
|
|
(
|
|
|
|
||||
|
Commercial & industrial
|
|
(
|
|
|
|
||||
|
Construction
|
|
|
|
(
|
|
||||
|
Land - acquisition & development
|
|
|
|
(
|
|
||||
|
Total commercial loans
|
|
(
|
|
|
|
||||
|
Consumer loans
|
|||||||||
|
Single-family residential
|
|
(
|
|
(
|
|
||||
|
Construction - custom
|
|
|
|
(
|
|
||||
|
Land - consumer lot loans
|
|
|
|
(
|
|
||||
|
HELOC
|
|
|
|
|
|
||||
|
Consumer
|
|
(
|
|
|
|
||||
|
Total consumer loans
|
|
(
|
|
(
|
|
||||
|
$
|
$
(
|
$
|
$
|
$
|
|||||
96
WAFD, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2025, 2024, AND 2023
|
Twelve Months Ended September 30, 2024
|
Beginning
Allowance
|
Charge-offs
|
Recoveries
|
Provision &
Transfers
1
|
Ending
Allowance
|
||||
|
(In thousands)
|
|||||||||
|
Commercial loans
|
|||||||||
|
Multi-family
|
$
|
$
|
$
|
$
|
$
|
||||
|
Commercial real estate
|
|
(
|
|
|
$
|
||||
|
Commercial & industrial
|
|
(
|
|
|
$
|
||||
|
Construction
|
|
|
|
(
|
$
|
||||
|
Land - acquisition & development
|
|
(
|
|
|
$
|
||||
|
Total commercial loans
|
|
(
|
|
|
|
||||
|
Consumer loans
|
|||||||||
|
Single-family residential
|
|
(
|
|
|
|
||||
|
Construction - custom
|
|
|
|
(
|
|
||||
|
Land - consumer lot loans
|
|
|
|
(
|
|
||||
|
HELOC
|
|
|
|
|
|
||||
|
Consumer
|
|
(
|
|
(
|
|
||||
|
Total consumer loans
|
|
(
|
|
|
|
||||
|
$
|
$
(
|
$
|
$
|
$
|
|||||
|
1
Provision & transfer amounts within the table include the
$
the
$
commitments of
$
|
|||||||||
The Company recorded a provision for credit losses of
$
7,750,000
in
2025
, compared to a provision of
$
17,500,000
for
2024
which
included the provision for the initial reserves for non-PCD loans acquired in the Merger. The decrease in the overall ACL during
fiscal
2025
was the result of the decrease in net loan balances led by payoffs in single-family, commercial construction and land
A&D. For the year ended
September 30, 2025
, net charge-offs were
$
11,783,000
, compared to
$
1,356,000
in the prior year. A loan
is charged-off when the loss is estimable and it is confirmed that the borrower is not expected to be able to meet its contractual
obligations.
Non-accrual loans increased to
$
128,628,000
as of
September 30, 2025
, from
$
69,541,000
as of
September 30, 2024
. Non-
performing assets totaled
$
143,022,000
, or
0.54
%
of total assets, at
September 30, 2025
, compared to
$
77,418,000
, or
0.28
%
of
total assets, as of
September 30, 2024
.
As of
September 30, 2025
, the allowance for loan losses of
$
199,720,000
is for loans that are evaluated on a pooled basis, which
was comprised of
$
131,652,000
related to the quantitative component and
$
68,068,000
related to management's qualitative overlays
(including the forecast component of the reserve).
The Company has an asset quality review function that analyzes its loan portfolio and reports the results of the review to its Board
of Directors on a quarterly basis. The single-family residential, HELOC and consumer portfolios are evaluated based on their
performance as a pool of loans, since no single loan is individually significant or judged by its risk rating, size or potential risk of
loss. The construction, land, multi-family, commercial real estate and commercial and industrial loans are risk rated on a loan by
loan basis to determine the relative risk inherent in specific borrowers or loans. Based on that risk rating, the loans are assigned a
grade and classified as described in
Note D "Loans Receivable."
It is important to note, just because a loan is risk-rated below a
"pass" rating, it does not necessarily indicate there will be future charge-offs on that loan. Loans are downgraded because of either
borrower specific or industry-wide financial or operating stresses.
97
WAFD, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2025, 2024, AND 2023
|
September 30, 2025
|
Internally Assigned Grade
|
||||||||||
|
|
Pass
|
Special mention
|
Substandard
|
Doubtful
|
Loss
|
Total
|
|||||
|
|
(In thousands)
|
||||||||||
|
Loan type
|
|||||||||||
|
Commercial loans
|
|||||||||||
|
Multi-family
|
$
|
$
|
$
|
$
|
$
|
$
|
|||||
|
Commercial real estate
|
|
|
|
|
|
|
|||||
|
Commercial & industrial
|
|
|
|
|
|
|
|||||
|
Construction
|
|
|
|
|
|
|
|||||
|
Land - acquisition & development
|
|
|
|
|
|
|
|||||
|
Total commercial loans
|
|
|
|
|
|
|
|||||
|
Consumer loans
|
|||||||||||
|
Single-family residential
|
|
|
|
|
|
|
|||||
|
Construction - custom
|
|
|
|
|
|
|
|||||
|
Land - consumer lot loans
|
|
|
|
|
|
|
|||||
|
HELOC
|
|
|
|
|
|
|
|||||
|
Consumer
|
|
|
|
|
|
|
|||||
|
Total consumer loans
|
|
|
|
|
|
|
|||||
|
Total loans
|
$
|
$
|
$
|
$
|
$
|
$
|
|||||
|
Total grade as a % of total loans
|
|
|
|
|
|
||||||
|
September 30, 2024
|
Internally Assigned Grade
|
||||||||||
|
|
Pass
|
Special mention
|
Substandard
|
Doubtful
|
Loss
|
Total Gross
Loans
|
|||||
|
|
(In thousands)
|
||||||||||
|
Loan type
|
|||||||||||
|
Commercial loans
|
|||||||||||
|
Multi-family
|
$
|
$
|
$
|
$
|
$
|
$
|
|||||
|
Commercial real estate
|
|
|
|
|
|
|
|||||
|
Commercial & industrial
|
|
|
|
|
|
|
|||||
|
Construction
|
|
|
|
|
|
|
|||||
|
Land - acquisition & development
|
|
|
|
|
|
|
|||||
|
Total commercial loans
|
|
|
|
|
|
|
|||||
|
Consumer loans
|
|||||||||||
|
Single-family residential
|
|
|
|
|
|
|
|||||
|
Construction - custom
|
|
|
|
|
|
|
|||||
|
Land - consumer lot loans
|
|
|
|
|
|
|
|||||
|
HELOC
|
|
|
|
|
|
|
|||||
|
Consumer
|
|
|
|
|
|
|
|||||
|
Total consumer loans
|
|
|
|
|
|
|
|||||
|
Total gross loans
|
$
|
$
|
$
|
$
|
$
|
$
|
|||||
|
Total grade as a % of total gross loans
|
|
|
|
|
|
||||||
98
WAFD, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2025, 2024, AND 2023
|
September 30, 2025
|
Performing Loans
|
Non-Performing Loans
|
|||||
|
|
Amount
|
% of Total Loans
|
Amount
|
% of Total Loans
|
|||
|
|
(In thousands)
|
(In thousands)
|
|||||
|
Commercial loans
|
|||||||
|
Multi-family
|
$
|
|
$
|
|
|||
|
Commercial real estate
|
|
|
|
|
|||
|
Commercial & industrial
|
|
|
|
|
|||
|
Construction
|
|
|
|
|
|||
|
Land - acquisition & development
|
|
|
|
|
|||
|
Total commercial loans
|
|
|
|
|
|||
|
Consumer loans
|
|||||||
|
Single-family residential
|
|
|
|
|
|||
|
Construction - custom
|
|
|
|
|
|||
|
Land - consumer lot loans
|
|
|
|
|
|||
|
HELOC
|
|
|
|
|
|||
|
Consumer
|
|
|
|
|
|||
|
Total consumer loans
|
|
|
|
|
|||
|
Total
|
$
|
|
$
|
|
|||
|
September 30, 2024
|
Performing Loans
|
Non-Performing Loans
|
|||||
|
|
Amount
|
% of Total Loans
|
Amount
|
% of Total Loans
|
|||
|
|
(In thousands)
|
(In thousands)
|
|||||
|
Commercial loans
|
|||||||
|
Multi-family
|
$
|
|
$
|
|
|||
|
Commercial real estate
|
|
|
|
|
|||
|
Commercial & industrial
|
|
|
|
|
|||
|
Construction
|
|
|
|
|
|||
|
Land - acquisition & development
|
|
|
|
|
|||
|
Total commercial loans
|
|
|
|
|
|||
|
Consumer loans
|
|||||||
|
Single-family residential
|
|
|
|
|
|||
|
Construction - custom
|
|
|
|
|
|||
|
Land - consumer lot loans
|
|
|
|
|
|||
|
HELOC
|
|
|
|
|
|||
|
Consumer
|
|
|
|
|
|||
|
Total consumer loans
|
|
|
|
|
|||
|
Total gross loans
|
$
|
|
$
|
|
|||
99
WAFD, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2025, 2024, AND 2023
NOTE F -
FAIR VALUE MEASUREMENTS
or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly
transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy which requires an
entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The
standard describes three levels of inputs that may be used to measure fair value:
Level 1:
Quoted prices (unadjusted) for identical assets or liabilities in active exchange markets that the entity has the
ability to access as of the measurement date.
Level 2:
Significant other observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities,
quoted prices in markets that are not active and other inputs that are observable or can be corroborated by observable
market data.
Level 3:
Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market
participants would use in pricing an asset or liability.
The Company has established and documented the process for determining the fair values of its assets and liabilities, where
applicable. Fair value is based on quoted market prices, when available, for identical or similar assets or liabilities. In the absence of
quoted market prices, fair value is determined using valuation models or third-party appraisals. The following is a description of the
valuation methodologies used to measure and report the fair value of financial assets and liabilities on a recurring or nonrecurring
basis.
Measured on a Recurring Basis
Available-for-sale investment securities and derivative contracts
Securities available for sale are recorded at fair value on a recurring basis. The fair value of debt securities are priced using model
pricing based on the securities' relationship to other benchmark quoted prices as provided by an independent third party, and under
GAAP are considered a Level 2 input method. Securities that are traded on active exchanges, including the Company's equity
securities, are measured using the closing price in an active market and are considered a Level 1 input method.
The Company offers interest rate swaps to its variable rate borrowers who want to manage their interest rate risk. At the same time,
the Company enters into the opposite trade with a counterparty to offset its interest rate risk. The Company has also entered various
forms of fair value hedges and cash flow hedges using interest rate swaps. The fair value of these interest rate swaps are estimated
by a third party pricing service using a discounted cash flow technique. These are considered a Level 2 input method.
on a recurring basis (with the exception of those measured using the NAV practical expedient).
100
WAFD, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2025, 2024, AND 2023
|
September 30, 2025
|
|||||||
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||
|
(In thousands)
|
|||||||
|
Available-for-sale securities
|
|||||||
|
U.S. government and agency securities
|
$
|
$
|
$
|
$
|
|||
|
Asset-backed securities
|
|
|
|
|
|||
|
Municipal bonds
|
|
|
|
|
|||
|
Corporate debt securities
|
|
|
|
|
|||
|
Mortgage-backed securities
|
|||||||
|
Agency pass-through certificates
|
|
|
|
|
|||
|
Total Available-for-sale securities
|
|
|
|
|
|||
|
Client swap program hedges
|
|
|
|
|
|||
|
Commercial loan hedges
|
|
|
|
|
|||
|
Mortgage loan fair value hedges
|
|
|
|
|
|||
|
Borrowings cash flow hedges
|
|
|
|
|
|||
|
Total Financial Assets
|
$
|
$
|
$
|
$
|
|||
|
Financial Liabilities
|
|||||||
|
Client swap program hedges
|
$
|
$
|
$
|
$
|
|||
|
Mortgage backed securities fair value hedges
|
|
|
|
|
|||
|
Mortgage loan fair value hedges
|
|
|
|
|
|||
|
Total Financial Liabilities
|
$
|
$
|
$
|
$
|
|||
|
September 30, 2024
|
|||||||
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||
|
(In thousands)
|
|||||||
|
Available-for-sale securities
|
|||||||
|
U.S. government and agency securities
|
$
|
$
|
$
|
$
|
|||
|
Asset-backed securities
|
|
|
|
|
|||
|
Municipal bonds
|
|
|
|
|
|||
|
Corporate debt securities
|
|
|
|
|
|||
|
Mortgage-backed securities
|
|||||||
|
Agency pass-through certificates
|
|
|
|
|
|||
|
Total Available-for-sale securities
|
|
|
|
|
|||
|
Client swap program hedges
|
|
|
|
|
|||
|
Commercial loan fair value hedges
|
|
|
|
|
|||
|
Borrowings cash flow hedges
|
|
|
|
|
|||
|
Total Financial Assets
|
$
|
$
|
$
|
$
|
|||
|
Financial Liabilities
|
|||||||
|
Client swap program hedges
|
$
|
$
|
$
|
$
|
|||
|
Mortgage loan fair value hedges
|
|
|
|
|
|||
|
Total Financial Liabilities
|
$
|
$
|
$
|
$
|
|||
101
WAFD, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2025, 2024, AND 2023
There were no transfers between, into and/or out of Level 1, 2 or 3 during the year ended
September 30, 2025
or
September 30,
2024
.
Measured on a Nonrecurring Basis
Certain assets and liabilities are measured at fair value on a nonrecurring basis after initial recognition such as collateral dependent
loans and r
eal estate owned ("REO"). REO consists principally of properties acquired through foreclosure. From time to time, and
on a nonrecurring basis, adjustments using fair value measurements are recorded to reflect increases or decreases based on the
discounted cash flows, the current appraisal or estimated value of the collateral or REO property.
When management determines that the fair value of the collateral or the REO requires additional adjustments, either as a result of an
updated appraised value or when there is no observable market price, the Company classifies the collateral dependent loan or real
estate owned as Level 3. Level 3 assets recorded at fair value on a nonrecurring basis includes loans for which an allowance was
established or a partial charge-off was recorded based on the fair value of collateral, as well as real estate owned where the fair value
of the property was less than the cost basis.
periods presented, and the total losses resulting from those fair value adjustments during the respective periods. The estimated fair
value measurements are shown gross of estimated selling costs.
|
|
September 30, 2025
|
Twelve Months
Ended
September 30,
2025
|
|||||||
|
|
Level 1
|
Level 2
|
Level 3
|
Total
|
Total Gains
(Losses)
|
||||
|
|
(In thousands)
|
||||||||
|
Loans receivable (1)
|
$
|
$
|
$
|
$
|
$
(
|
||||
|
Real estate owned (2)
|
|
|
|
|
(
|
||||
|
Balance at end of period
|
$
|
$
|
$
|
$
|
$
(
|
||||
(1)
The gains (losses) represent re-measurements of collateral-dependent impaired loans.
(2)
The gains (losses) represent aggregate write-downs and charge-offs on real estate owned.
|
|
September 30, 2024
|
Twelve Months
Ended
September 30,
2024
|
|||||||
|
|
Level 1
|
Level 2
|
Level 3
|
Total
|
Total Gains
(Losses)
|
||||
|
|
(In thousands)
|
||||||||
|
Loans receivable (1)
|
$
|
$
|
$
|
$
|
$
(
|
||||
|
Real estate owned (2)
|
|
|
|
|
(
|
||||
|
Balance at end of period
|
$
|
$
|
$
|
$
|
$
(
|
||||
(1)
The gains (losses) represent re-measurements of collateral-dependent impaired loans.
(2)
The gains (losses) represent aggregate write-downs and charge-offs on real estate owned.
At
September 30, 2025
, there was
$
290,000
in foreclosed residential real estate properties held as REO. The recorded investment of
consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process was
$
4,090,000
.
102
WAFD, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2025, 2024, AND 2023
Fair Values of Financial Instruments
U. S. GAAP requires disclosure of fair value information about financial instruments, whether or not recognized on the statement of
financial condition, for which it is practicable to estimate those values. Certain financial instruments and all non-financial
instruments are excluded from the disclosure requirements. Accordingly, the aggregate fair value estimates presented do not reflect
the underlying fair value of the Company.
Although management is not aware of any factors that would materially affect the
estimated fair value amounts presented below, such amounts have not been comprehensively revalued for purposes of these
financial statements since the dates shown, and therefore, estimates of fair value subsequent to those dates may differ significantly
from the amounts presented below.
|
|
September 30, 2025
|
September 30, 2024
|
||||
|
|
Level
|
Carrying
Amount
|
Estimated
Fair Value
|
Carrying
Amount
|
Estimated
Fair Value
|
|
|
|
(In thousands)
|
|||||
|
Financial assets
|
||||||
|
Cash and cash equivalents
|
1
|
$
|
$
|
$
|
$
|
|
|
Available-for-sale securities:
|
||||||
|
U.S. government and agency securities
|
2
|
|
|
|
|
|
|
Asset-backed securities
|
2
|
|
|
|
|
|
|
Municipal bonds
|
2
|
|
|
|
|
|
|
Corporate debt securities
|
2
|
|
|
|
|
|
|
Mortgage-backed securities
|
||||||
|
Agency pass-through certificates
|
2
|
|
|
|
|
|
|
Total available-for-sale securities
|
|
|
|
|
||
|
Held-to-maturity securities:
|
||||||
|
Mortgage-backed securities
|
||||||
|
Agency pass-through certificates
|
2
|
|
|
|
|
|
|
Total held-to-maturity securities
|
|
|
|
|
||
|
Loans receivable
|
3
|
|
|
|
|
|
|
FHLB stock
|
2
|
|
|
|
|
|
|
Other assets - client swap program hedges
|
2
|
|
|
|
|
|
|
Other assets - commercial loan fair value hedges
|
2
|
|
|
|
|
|
|
Other assets - mortgage loan fair value hedges
|
2
|
|
|
|
|
|
|
Other assets - borrowings cash flow hedges
|
2
|
|
|
|
|
|
|
Financial liabilities
|
||||||
|
Time deposits
|
2
|
|
|
|
|
|
|
Borrowings
|
2
|
|
|
|
|
|
|
Junior subordinated deferrable interest debentures
|
3
|
|
|
|
|
|
|
Other liabilities - client swap program hedges
|
2
|
|
|
|
|
|
|
Other liabilities - mortgage backed securities fair value hedges
|
2
|
|
|
|
|
|
|
Other liabilities - mortgage loan fair value hedges
|
2
|
|
|
|
|
|
The following methods and assumptions were used to estimate the fair value of financial instruments:
Cash and cash equivalents
– The carrying amount of these items is a reasonable estimate of their fair value.
Available-for-sale securities and held-to-maturity securities
– Securities at fair value are primarily priced using model pricing based
on the securities' relationship to other benchmark quoted prices as provided by an independent third party and are considered a
Level 2 input method.
103
WAFD, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2025, 2024, AND 2023
Loans receivable
– Fair values are estimated first by stratifying the portfolios of loans with similar financial characteristics. Loans
are segregated by type such as multi-family real estate, residential mortgage, construction, commercial, consumer and land loans.
Each loan category is further segmented into fixed- and adjustable-rate interest terms. For residential mortgages and multi-family
loans, the bank determined that its best exit price was by securitization. MBS benchmark prices are used as a base price, with further
loan level pricing adjustments made based on individual loan characteristics such as FICO score, LTV, Property Type and
occupancy. For all other loan categories an estimate of fair value is then calculated based on discounted cash flows using a discount
rate offered and observed in the market on similar products, plus an adjustment for liquidity to reflect the non-homogeneous nature
of the loans, as well as an annual loss rate based on historical losses to arrive at an estimated exit price fair value. Fair value for
impaired loans is also based on recent appraisals or estimated cash flows discounted using rates commensurate with risk associated
with the estimated cash flows. Assumptions regarding credit risk, cash flows and discount rates are judgmentally determined using
available market information and specific borrower information.
FHLB stock
– The fair value is based upon the par value of the stock which equates to its carrying value.
Time deposits
– The fair value of fixed-maturity time deposits is estimated by discounting the estimated future cash flows using the
rates currently offered for deposits with similar remaining maturities.
Borrowings
– The fair value of FHLB advances and FRB borrowings is estimated by discounting the estimated future cash flows
using rates currently available to the Company for debt with similar remaining maturities.
Junior subordinated deferrable interest debentures
- The fair value of junior subordinated debentures is estimated using an income
approach valuation technique. The significant unobservable input utilized in the estimation of fair value of these instruments is the
credit risk adjusted spread. The credit risk adjusted spread represents the nonperformance risk of the liability, contemplating the
inherent risk of the obligation. The ending carrying (fair) value of the junior subordinated debentures measured at fair value
represents the estimated amount that would be paid to transfer these liabilities in an orderly transaction amongst market participants.
Due to credit concerns in the capital markets and inactivity in the trust preferred markets that have limited the observability of
market spreads, the Company has classified this as a Level 3 fair value measurement.
Interest rate swaps
– The Company offers interest rate swaps to its variable rate borrowers who want to manage their interest rate
risk. At the same time, the Bank enters into the opposite trade with a counterparty to offset its interest rate risk. The Company also
uses interest rate swaps for various fair value hedges and cash flow hedges. The fair value of interest rate swaps are estimated by a
NOTE G -
DERIVATIVES AND HEDGING ACTIVITIES
September 30, 2025
and
September 30, 2024
.
|
September 30, 2025
|
Derivative Assets
|
Derivative Liabilities
|
|||||
|
Interest rate contract purpose
|
Balance Sheet
Location
|
Notional
|
Fair Value
|
Balance Sheet
Location
|
Notional
|
Fair Value
|
|
|
(In thousands)
|
(In thousands)
|
||||||
|
Client swap program hedges
|
Other assets
|
$
|
$
|
Other liabilities
|
$
|
$
|
|
|
Commercial loan fair value hedges
|
Other assets
|
|
|
Other liabilities
|
|
|
|
|
Mortgage loan fair value hedges
|
Other assets
|
|
|
Other liabilities
|
|
|
|
|
Mortgage backed securities fair value hedges
|
Other assets
|
|
|
Other liabilities
|
|
|
|
|
Borrowings cash flow hedges
|
Other assets
|
|
|
Other liabilities
|
|
|
|
|
$
|
$
|
$
|
$
|
||||
104
WAFD, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2025, 2024, AND 2023
|
September 30, 2024
|
Derivative Assets
|
Derivative Liabilities
|
|||||
|
Interest rate contract purpose
|
Balance Sheet
Location
|
Notional
|
Fair Value
|
Balance Sheet
Location
|
Notional
|
Fair Value
|
|
|
(In thousands)
|
(In thousands)
|
||||||
|
Client swap program hedges
|
Other assets
|
$
|
$
|
Other liabilities
|
$
|
$
|
|
|
Commercial loan fair value hedges
|
Other assets
|
|
|
Other liabilities
|
|
|
|
|
Mortgage loan fair value hedges
|
Other assets
|
|
|
Other liabilities
|
|
|
|
|
Borrowings cash flow hedges
|
Other assets
|
|
|
Other liabilities
|
|
|
|
|
$
|
$
|
$
|
$
|
||||
The Company enters into interest rate swaps to hedge interest rate risk. These arrangements include hedges of individual fixed rate
commercial loans and also hedges of a specified portion of pools of prepayable fixed rate mortgage loans under the "last of layer"
method. These relationships qualify as fair value hedges under FASB ASC 815,
Derivatives and Hedging
("ASC 815"), which
provides for offsetting of the recognition of gains and losses of the respective interest rate swap and the hedged items. Gains and
losses on interest rate swaps designated in these hedge relationships, along with the offsetting gains and losses on the hedged items
attributable to the hedged risk, are recognized in current earnings within the same income statement line item.
Upon electing to apply ASC 815 fair value hedge accounting, the carrying value of the hedged items are adjusted to reflect the
cumulative impact of changes in fair value attributable to the hedged risk. The hedge basis adjustment remains with each hedged
item until the hedged item is de-recognized from the balance sheet.
The following tables present the impact of fair value hedge
accounting on the carrying value of the hedged items at
September 30, 2025
and
September 30, 2024
.
|
(In thousands)
|
September 30, 2025
|
|
|
Balance sheet line item in which hedged item is recorded
|
Carrying value of hedged
items
|
Cumulative gain (loss) fair
value hedge adjustment
included in carrying amount of
hedged items
|
|
Loans receivable (1) (2)
|
$
|
$
|
|
Available-for-sale Securities (3)
|
|
|
|
$
|
$
|
|
(1) Includes the amortized cost basis of the closed mortgage loan portfolios used to designate the hedging relationships in
which the hedged items are the last layer expected to be remaining at the end of the hedging relationships. At
September
30, 2025
, the amortized cost basis of the closed loan portfolios used in the hedging relationships was
$
5,393,257,000
, the
cumulative basis adjustment associated with the hedging relationships was
$
8,262,000
, and the amount of the designated
hedged items was
$
1,570,000,000
. During the year, hedge accounting was discontinued on a
$
1,600,000,000
last of
layer hedge. A basis adjustment of
$
4,016,668
associated with the terminated portion of the hedge was deferred and is
being amortized over the remaining life of the associated pool of loans.
(2) Includes the amortized cost basis of commercial loans designated in fair value hedging relationships. At
September
30, 2025
, the amortized cost basis of the hedged commercial loans was
$
32,829,000
and the cumulative basis adjustment
associated with the hedging relationships was
$(
1,468,000
)
.
(3) Includes the fair value basis of mortgage backed securities designated in fair value hedging relationships. At
September 30, 2025, the fair value of the hedged mortgage based securities was
$
940,110,000
, the cumulative basis
adjustment associated with the hedging relationships was
$
15,452,000
, and the amount of the designated hedged items
was
$
610,000,000
.
105
WAFD, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2025, 2024, AND 2023
|
(In thousands)
|
September 30, 2024
|
|
|
Balance sheet line item in which hedged item is recorded
|
Carrying value of hedged
items
|
Cumulative gain (loss) fair
value hedge adjustment
included in carrying amount of
hedged items
|
|
Loans receivable (1) (2)
|
$
|
$
|
|
$
|
$
|
|
(1) Includes the amortized cost basis of the closed mortgage loan portfolios used to designate the hedging relationships in
which the hedged items are the last layer expected to be remaining at the end of the hedging relationships. At
September
30, 2024
, the amortized cost basis of the closed loan portfolios used in the hedging relationships was
$
7,252,017,000
, the
cumulative basis adjustment associated with the hedging relationships was
$
21,476,000
, and the amount of the
designated hedged items was
$
2,570,000,000
. During the year, hedge accounting was discontinued on a
$
300,000,000
last of layer hedge. A basis adjustment of
$
1,232,211
associated with the terminated portion of the hedge was deferred
and is being accreted over the remaining life of the associated pool of loans.
(2) Includes the amortized cost basis of commercial loans designated in fair value hedging relationships. At
September
30, 2024
, the amortized cost basis of the hedged commercial loans was
$
35,523,000
and the cumulative basis adjustment
The Company has entered into interest rate swaps to convert certain short-term borrowings to fixed rate payments. The primary
purpose of these hedges is to mitigate the risk of changes in future cash flows resulting from increasing interest rates. For qualifying
cash flow hedges under ASC 815, gains and losses on the interest rate swaps are recorded in accumulated other comprehensive
income ("AOCI") and then reclassified into earnings in the same period the hedged cash flows affect earnings and within the same
income statement line item as the hedged cash flows. As of
September 30, 2025
, the maturities for hedges of adjustable rate
borrowings ranged from less than
one year
to
five years
, with the weighted average being
4.1
years
.
presented.
|
(In thousands)
|
Twelve Months Ended September 30,
|
|
|
Amount of gain/(loss) recognized in AOCI on derivatives in cash flow hedging
relationships
|
2025
|
2024
|
|
Interest rate contracts:
|
||
|
Pay fixed/receive floating swaps on cash flow hedges of borrowings
|
$
(
|
$
(
|
|
Total pre-tax gain/(loss) recognized in AOCI
|
$
(
|
$
(
|
106
WAFD, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2025, 2024, AND 2023
relationships under ASC 815 for the period presented.
|
Twelve Months Ended September 30, 2025
|
Twelve Months Ended September 30, 2024
|
|||||
|
Interest
income on
loans
receivable
|
Interest on
mortgage-
backed
securities
|
Interest
expense on
FHLB
advances
|
Interest
income on
loans
receivable
|
Interest on
mortgage-
backed
securities
|
Interest
expense on
FHLB
advances
|
|
|
(In thousands)
|
(In thousands)
|
|||||
|
Interest income/(expense), including the effects
of fair value and cash flow hedges
|
$
|
$
|
$
(
|
$
|
$
|
$
(
|
|
Gain/(loss) on fair value hedging relationships:
|
||||||
|
Interest rate contracts
|
||||||
|
Amounts related to interest settlements on
derivatives
|
$
|
$
|
$
|
$
|
||
|
Recognized on derivatives
|
|
(
|
(
|
|
||
|
Recognized on hedged items
|
(
|
|
|
|
||
|
Net income/(expense) recognized on fair
value hedges
|
$
|
$
|
$
|
$
|
||
|
Gain/(loss) on cash flow hedging relationships:
|
||||||
|
Interest rate contracts
|
||||||
|
Amounts related to interest settlements on
derivatives
|
$
|
$
|
||||
|
Amount of derivative gain/(loss) reclassified
from AOCI into interest income/expense
|
|
|
||||
|
Net income/(expense) recognized on cash
flow hedges
|
$
|
$
|
||||
The Company periodically enters into certain interest rate swap agreements in order to provide commercial loan customers the
ability to convert from variable to fixed interest rate payments, while the Company retains a variable rate loan. Under these
agreements, the Company enters into a variable rate loan agreement and a swap agreement with the client. The swap agreement
effectively converts the client’s variable rate loan into a fixed rate. The Company enters into a corresponding swap agreement with a
third party in order to offset its exposure on the variable and fixed components of the client's swap agreement. The interest rate
swaps are derivatives under ASC 815, with changes in fair value recorded in earnings. The net impact to the statement of operations
for the year ended
September 30, 2025
was an increase in other income of
$
159,000
. The net impact for the year ended
September
30, 2024
was an increase in other income of
$
241,000
. As of
September 30, 2025
, none of the outstanding notional balance is
associated with related party loans.
hedges under ASC 815 for the periods presented.
|
(In thousands)
|
Twelve Months Ended September 30,
|
||
|
Derivative instruments
|
Classification of gain/(loss) recognized in
income on derivative instrument
|
2025
|
2024
|
|
Interest rate contracts:
|
|||
|
Pay fixed/receive floating swap
|
Other noninterest income
|
$
(
|
$
(
|
|
Receive fixed/pay floating swap
|
Other noninterest income
|
|
|
|
$
|
$
|
||
107
WAFD, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2025, 2024, AND 2023
NOTE H –
REVENUE FROM CONTRACTS WITH CUSTOMERS
Net interest income on financial assets and liabilities is excluded from the scope of ASU No. 2014-09,
Revenue from Contracts with
Customers ("ASC 606")
thus a significant majority of our revenues are not subject to the referenced guidance.
Revenue streams that are within the scope of the guidance are presented within noninterest income and are, in general, recognized as
revenue at the same time the Company's obligation to the customer is satisfied. Most of the Company's customer contracts that are
within the scope of the guidance are cancelable by either party without penalty and are short-term in nature. These sources of
revenue include depositor and other consumer and business banking fees, commission income, as well as debit and credit card
interchange fees. For fiscal years ended September 30,
2025
and
2024
, in scope revenue streams represented
approximately
3.6
%
and
3.2
%
of our total revenues, respectively. As this standard is immaterial to our consolidated financial
statements, the Company has omitted certain disclosures in ASC 606, including the disaggregation of revenue table. Sources of
noninterest income within the scope of the guidance include the following:
Deposit related and other service charges (recognized in Deposit Fee Income)
: The Company's deposit accounts are governed by
standardized contracts customary in the industry. Revenues are earned at a point in time or over time (monthly) from account
maintenance fees and charges for specific transactions such as wire transfers, stop payment orders, overdrafts, debit card
replacements, check orders and cashiers' checks. The Company’s performance obligation related to each of these fees is generally
satisfied, and the related revenue recognized, at the time the service is provided (point in time or monthly). The Company is
principal in each of these contracts.
Debit and credit card interchange fees (recognized in Deposit Fee Income)
: The Company receives interchange fees from the debit
card and credit card payment networks based on transactions involving debit or credit cards issued by the Company, generally
measured as a percentage of the underlying transaction. Interchange fees from debit and credit card transactions are recognized as
the transaction processing services are provided by the network. The Company acts as an agent in the card payment network
arrangement so the interchange fees are recorded net of any expenses paid to the principal (the card payment networks in this case).
Insurance agency commissions (recognized in Other Income)
: WAFD Insurance Group, Inc. is a wholly-owned subsidiary of the
Bank that operates as an insurance agency, selling and marketing property and casualty insurance policies for a small number of
high-quality insurance carriers. WAFD Insurance Group, Inc. earns revenue in the form of commissions paid by the insurance
carriers for policies that have been sold. In addition to the origination commission, WAFD Insurance Group, Inc. may also receive
108
WAFD, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2025, 2024, AND 2023
NOTE I -
INTEREST RECEIVABLE
|
September 30, 2025
|
September 30, 2024
|
||
|
|
(In thousands)
|
||
|
Loans receivable
|
$
|
$
|
|
|
Mortgage-backed securities
|
|
|
|
|
Investment securities
|
|
|
|
|
$
|
$
|
||
NOTE J -
PREMISES AND EQUIPMENT
|
|
September 30, 2025
|
September 30, 2024
|
|
|
|
Estimated
Useful Life
in Years
|
(In thousands)
|
|
|
Land
|
—
|
$
|
$
|
|
Buildings
|
|
|
|
|
Leasehold improvements
|
|
|
|
|
Furniture, software and equipment
|
|
|
|
|
|
|
||
|
Less accumulated depreciation and amortization
|
(
|
(
|
|
|
$
|
$
|
||
NOTE K -
CUSTOMER ACCOUNTS
|
|
September 30, 2025
|
September 30, 2024
|
|||||||||
|
|
Deposit Account
Balance
|
As a % of
Total Deposits
|
Weighted
Average Rate
|
Deposit Account
Balance
|
As a % of
Total Deposits
|
Weighted
Average Rate
|
|||||
|
($ in thousands)
|
|||||||||||
|
Non-interest checking
|
$
|
|
|
$
|
|
|
|||||
|
Interest checking
|
|
|
|
|
|
|
|||||
|
Savings
|
|
|
|
|
|
|
|||||
|
Money market
|
|
|
|
|
|
|
|||||
|
Time deposits
|
|
|
|
|
|
|
|||||
|
Total
|
$
|
|
|
$
|
|
|
|||||
109
WAFD, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2025, 2024, AND 2023
|
Time deposits by rate band are as follows:
|
September 30, 2025
|
September 30, 2024
|
|
|
(In thousands)
|
|
|
Less than 1.00%
|
$
|
$
|
|
1.00% to 1.99%
|
|
|
|
2.00% to 2.99%
|
|
|
|
3.00% to 3.99%
|
|
|
|
4.00% to 4.99%
|
|
|
|
5.00% and higher
|
|
|
|
$
|
$
|
|
|
Time deposits by maturity band are as follows:
|
September 30, 2025
|
September 30, 2024
|
|
|
(In thousands)
|
|
|
Three months or less
|
$
|
$
|
|
Over 3 through 6 months
|
|
|
|
Over 6 through 12 months
|
|
|
|
Over 12 months
|
|
|
|
$
|
$
|
|
Customer accounts with uninsured or uncollateralized deposits totaled
$
5,302,026,000
as of
September 30, 2025
, compared to
$
5,134,192,000
as of
September 30, 2024
.
|
Year ended September 30,
|
2025
|
2024
|
2023
|
|
(In thousands)
|
|||
|
Checking accounts
|
$
|
$
|
$
|
|
Savings accounts
|
|
|
|
|
Money market accounts
|
|
|
|
|
Time deposit accounts
|
|
|
|
|
|
|
|
|
|
Less early withdrawal penalties
|
(
|
(
|
(
|
|
$
|
$
|
$
|
|
|
Weighted average interest rate at end of year
|
|
|
|
|
Daily weighted average interest rate during the year
|
|
|
|
NOTE L -
BORROWINGS
The Company had total borrowings outstanding at
September 30, 2025
with carrying values of
$
1,765,604,000
compared to
$
3,267,589,000
at
September 30, 2024
. The borrowings consisted of FHLB advances and funds received from the FRB's Bank
Term Funding Program.
The table below shows the contractual maturity dates of outstanding FHLB advances.
|
September 30, 2025
|
September 30, 2024
|
|
|
|
(In thousands)
|
|
|
Within 1 year
|
$
|
$
|
|
1 to 3 years
|
|
|
|
3 to 5 years
|
|
|
|
$
|
$
|
|
110
WAFD, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2025, 2024, AND 2023
As of
September 30, 2025
, there are no advances that are callable by the FHLB. Taking into account cash flow hedges, the
weighted average effective maturity of FHLB advances at
September 30, 2025
is
2.19
years
.
|
2025
|
2024
|
2023
|
|
|
|
($ in thousands)
|
||
|
Weighted average interest rate, including cash flow hedges, at end of year
|
|
|
|
|
Weighted daily average interest rate, including cash flow hedges, during the year
|
|
|
|
|
Daily average of FHLB advances during the year
|
$
|
$
|
$
|
|
Maximum amount of FHLB advances at any month end
|
$
|
$
|
$
|
|
Interest expense during the year (including swap interest income and expense)
|
$
|
$
|
$
|
The Bank has a credit line with the FHLB - DM equal to
45
%
of total assets depending on specific collateral eligibility. The
Bank has entered into borrowing agreements with the FHLB - DM to borrow funds under a short-term floating rate cash
management advance program and fixed-rate term loan agreements. All borrowings are secured by stock of the FHLB - DM,
deposits with the FHLB - DM, and a blanket pledge of qualifying loans receivable. The
Bank also has a credit line with the
FHLB - SF in support of LBC borrowings from the FHLB - SF, but the Bank is unable to take down new advances against this
line. The FHLB - SF credit line is secured by a line-item pledge of mortgage backed securities.
The Bank had
$
1,074,714,000
of borrowings from the FRB's Bank Term Funding plan as of
September 30, 2024
which
matured and were repaid during fiscal 2025.
The Bank also participates in the FRB of San Francisco Borrower-in-Custody
program which collateralizes primary credit borrowings. Due to differing program requirements between the FHLB - DM and
FRB of San Francisco, participating in both increases the amount of eligible collateral that may be pledged in support of
contingent liquidity needs. The Bank is also eligible to borrow under the Federal Reserve Bank's primary credit program.
NOTE M -
JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES
The Company acquired
two
wholly-owned trust companies (the "Trusts") in the Merger. Formed by LBC, these Trusts issued
guaranteed preferred beneficial interests (the "Trust Securities") in the LBC’s junior subordinated deferrable interest debentures
(the "Notes"). The Company is not considered the primary beneficiary of the Trusts and therefore, the Trusts are not
consolidated in the Company’s financial statements, but rather the junior subordinated debentures are shown as a liability. The
Company’s investment in the common securities of the Trusts, totaling
$
1.9
million
, is included in other assets in the
consolidated statements of financial condition. The sole asset of the Trusts are the Notes that they hold.
The Trusts have invested the proceeds of such Trust Securities in the Notes. Each of the Notes has an interest rate equal to the
corresponding Trust Securities distribution rate. The Company has the right to defer payment of interest on the Notes at any
time or from time to time for a period not exceeding
five years
provided that no extension period may extend beyond the stated
maturity of the relevant Notes. During any such extension period, distributions on the Trust Securities will also be deferred, and
the Company’s ability to pay dividends on its common stock will be restricted.
The Company assumed LBC's contractual arrangements which, taken collectively, fully and unconditionally guarantee payment
of: (i) accrued and unpaid distributions required to be paid on the Trust Securities; (ii) the redemption price with respect to any
Trust Securities called for redemption by the Trusts; and (iii) payments due upon a voluntary or involuntary dissolution,
winding up or liquidation of the Trusts. The Trust Securities are mandatorily redeemable upon maturity of the Notes, or upon
earlier redemption as provided in the indenture. The Company has the right to redeem the Notes purchased by the Trusts, in
whole or in part, on or after the redemption date. As specified in the indenture, if the Notes are redeemed prior to maturity, the
redemption price will be the principal amount and any accrued but unpaid interest.
111
WAFD, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2025, 2024, AND 2023
|
Issued
Amount
|
Carrying
Amount
1
|
Date
Issued
|
Maturity
Date
|
Rate Index
|
||||||||
|
Issuer
|
Rate
|
(Quarterly Reset)
|
||||||||||
|
($ in thousands)
|
||||||||||||
|
Luther Burbank
Statutory Trust I
|
$
|
$
|
|
3/30/2006
|
6/15/2036
|
3 month CME Term SOFR + Tenor
Spread Adjustment (
|
||||||
|
Luther Burbank
Statutory Trust II
|
$
|
$
|
|
3/30/2007
|
6/15/2037
|
3 month CME Term SOFR + Tenor
Spread Adjustment (
|
||||||
|
1
Includes fair value adjustments made as a result of purchase accounting
|
||||||||||||
NOTE N -
COMMITMENTS AND CONTINGENCIES
Lease Commitments -
The Company’s lease commitments consist primarily of real estate property for branches and office space
under various non-cancellable operating leases that expire betw
een
2026
and
2070
.
Th
e majority of the leases contain renewal
options and provisions for increases in rental rates based on a predetermined schedule or an agreed upon index. If, at lease
inception, the Company considers the exercising of a renewal option to be reasonably certain, the Company will include the
extended term in the calculation of the right-of-use asset and lease liability.
Operating lease liabilities and right-of-use assets are recognized on the lease commencement date based on the present value of
the future minimum lease payments over the lease term. The future lease payments are discounted at a rate that represents the
Company's collateralized borrowing rate for financing instruments of a similar term and are included in
Accrued expenses and
other liabilities
. The related right-of-use asset is included in
Other assets
.
|
(In thousands)
|
September 30, 2025
|
September 30, 2024
|
|
Operating lease asset
|
$
|
$
|
|
Operating lease liability
|
$
|
$
|
As of
September 30, 2025
, the Company’s operating leases have a weighted average remaining lease term of
9.1
years
and a
weighted average discount rate of
3.94
%
. Cash paid for amounts included in the measurement of the above operating lease
liability was
$
10,758,000
and
$
9,627,000
for the
twelve
months ended
September 30, 2025
and
2024
, respectively. Right-of-
use assets obtained in exchange for new operating lease liabilities during the
twelve
months ended
September 30, 2025
and
2024
were
$
19,280,000
and
$
12,890,000
. Right-of-use assets obtained in the Merger for the twelve months ended September
30, 2024 were valued at
$
11,478,000
.
to separate lease and non-lease components and instead account for them as a single lease component. Variable lease costs
include subsequent increases in index-based rents and variable payments such as common area maintenance.
|
(In thousands)
|
Twelve Months Ended
September 30,
|
Twelve Months Ended
September 30,
|
|
2025
|
2024
|
|
|
Operating lease cost
|
$
|
$
|
|
Variable lease cost
|
|
|
|
Sublease income
|
(
|
(
|
|
Net lease cost
|
$
|
$
|
112
WAFD, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2025, 2024, AND 2023
|
(In thousands)
|
Year ending September 30,
|
|
2026
|
$
|
|
2027
|
|
|
2028
|
|
|
2029
|
|
|
2030
|
|
|
Thereafter
|
|
|
Total minimum payments
|
|
|
Amounts representing interest
|
(
|
|
Present value of minimum lease payments
|
$
|
Rental expense, including amounts paid under month-to-month cancelable leases, amounted to
$
12,894,000
and
$
11,025,000
in
2025
, and
2024
, respectively.
Financial Instruments with Off-Balance Sheet Risk
- Off-balance-sheet credit exposures for the Company unfunded loan
commitments and letters of credit from the FHLB - DM and the FHLB - SF. As of
September 30, 2025
, the Bank was
obligated on FHLB letters of credit totaling
$
62,606,000
and unfunded loan commitments of
$
2,841,596,000
. As of
September
30, 2024
FHLB letter of credit obligations were
$
902,606,000
and unfunded loan commitments were
$
2,928,697,000
.
The
reserve for unfunded commitments was
$
21,500,000
as of
September 30, 2025
, which is unchanged from
September 30, 2024
.
See
Note A "Summary of Significant Accounting Policies"
for details regarding the reserve methodology.
Legal Proceedings -
The Company and its subsidiaries are from time to time defendants in and are threatened with various legal
proceedings arising from regular business activities. Management, after consulting with legal counsel, is of the opinion that the
ultimate liability, if any, resulting from these pending or threatened actions and proceedings will not have a material effect on
the financial statements of the Company.
LIHTC Investments
- The Company has LIHTC investments which are designed to promote qualified affordable housing
projects. These investments provide a return through the generation of income tax credits and other income tax benefits and
support the Company's regulatory compliance with the Community Reinvestment Act. The Company has evaluated its
involvement with the low-income housing projects and determined it does not have the ability to exercise significant influence
over or participate in the decision-making activities related to the management of the projects, and therefore, is not the primary
beneficiary, and does not consolidate these interests. LIHTC investments are accounted for using the proportional amortization
method.
Investments in affordable housing partnerships of
$
157,249,000
and
$
112,342,000
as of
September 30, 2025
and September
30, 2024, respectively, are recorded as a component of
other assets
on the Consolidated Statements of Financial Condition and
uses the proportional amortization method to account for the investments. The Company's unfunded contribution commitments
to these investments were
$
73,123,000
and
$
41,702,000
as of
September 30, 2025
and September 30, 2024, respectively, which
are recorded as a component of other liabilities on the Consolidated Statements of Financial Condition. Both the tax benefits
and the amortization expense related to these investments are reflected in the provision for income taxes on the Consolidated
Statements of Operations.
113
WAFD, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2025, 2024, AND 2023
NOTE O -
INCOME TAXES
Under generally accepted accounting principles, the Company uses the asset and liability method of accounting for income
taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis.
Deferred tax assets and liabilities are measured using enacted tax rates applicable to taxable income in the years in which those
temporary differences are expected to reverse.
liabilities by major source. Deferred tax balances represent temporary differences between the financial statement and
corresponding tax treatment of income, gains, losses, deductions or credits. With the completion of the Merger in 2024, the
deferred tax amounts now include a number of deferred tax items carried over from LBC, as well as new deferred tax items
created as a consequence of the purchase accounting process and post-merger asset sales. In particular, deferred tax assets now
include significant new items for loan purchase discount and loss carryover.
|
September 30, 2025
|
September 30, 2024
|
|
|
|
(In thousands)
|
|
|
Deferred tax assets
|
||
|
Allowance for credit losses
|
$
|
$
|
|
Non-accrual loan interest
|
|
|
|
Accrued bonus and deferred compensation
|
|
|
|
Stock based compensation
|
|
|
|
Lease liability
|
|
|
|
Loan purchase discount
|
|
|
|
Loss carryover
|
|
|
|
Other
|
|
|
|
Total deferred tax assets
|
|
|
|
Deferred tax liabilities
|
||
|
FHLB stock dividends
|
|
|
|
Net unrealized gain on available-for-sale securities and cash flow hedges
|
|
|
|
Loan origination fees and costs
|
|
|
|
Premises and equipment
|
|
|
|
Lease right-of-use assets
|
|
|
|
Equity investments
|
|
|
|
Acquired intangibles
|
|
|
|
Other
|
|
|
|
Total deferred tax liabilities
|
|
|
|
Net deferred tax asset (liability)
|
|
|
|
Current tax asset (liability)
|
|
(
|
|
Net tax asset (liability)
|
$
|
$
|
At the end of the fiscal year, the Company had about
$
264
million
of ordinary tax loss to be carried to future years. The loss
carryover amount is primarily attributable to the tax loss realized from the portfolio loan sale following the Luther Burbank
merger. Because of the annual loss limitation rules under Section 382 of the Internal Revenue Code, it will take another
15
years
(or until the end of fiscal 2040) for the Company to utilize all that loss carryover against its future taxable income.
However, there is no applicable time limit in this case, and therefore Company does not anticipate any expiration of the loss
carryover amount.
114
WAFD, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2025, 2024, AND 2023
In its deferred tax assets at the end of the fiscal year, the Company also has about
$
0.6
million
of remaining Oregon tax credits
that the Company previously purchased as part of its community investments to support Oregon farmworkers housing. That
remaining Oregon tax credit will be fully utilized under an installment schedule by the end of the next fiscal year.
|
Year ended September 30,
|
2025
|
2024
|
2023
|
|
Statutory income tax rate
|
|
|
|
|
State income tax
|
|
|
|
|
Tax-exempt interest income
|
(
|
(
|
(
|
|
Interest expense disallowance
|
|
|
|
|
Low-income housing investments
|
(
|
(
|
(
|
|
Other differences
|
|
|
|
|
Effective income tax rate
|
|
|
|
|
Year ended September 30,
|
2025
|
2024
|
2023
|
|
(In thousands)
|
|||
|
Federal:
|
|||
|
Current
|
$
|
$
|
$
|
|
Deferred
|
|
(
|
|
|
|
|
|
|
|
State:
|
|||
|
Current
|
|
|
|
|
Deferred
|
|
(
|
|
|
|
|
|
|
|
Total
|
|||
|
Current
|
|
|
|
|
Deferred
|
|
(
|
|
|
$
|
$
|
$
|
|
The Company does not have a liability for uncertain tax positions as of
September 30, 2025
or
September 30, 2024
.
The Company's federal income tax returns are open and subject to potential examination by the IRS for fiscal years 2022 and
later. State income tax returns are generally subject to examination for a period of
three
to
five years
after filing. The state
impact of any federal changes remains subject to examination by various states for a period of up to
two years
after formal
notification to the states.
As described above in Note N, the Company has LIHTC investments which are designed to promote qualified affordable
housing projects. We account for our portfolio of LHITC investments under the proportional amortization method of ASU
2023-2. The tax benefits from pass-through tax credits and losses from our LIHTC investments are included in our estimate of
income tax liability for the year, and therefore reflected in the Income Tax Expense line of the income statement. The
amortization expense of the LIHTC investments is a component of our income tax expense and therefore also reflected in the
Income Tax Expense line.
115
WAFD, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2025, 2024, AND 2023
recognized in our income tax expense for the fiscal years ended
September 30, 2025
and
September 30, 2024
.
|
2025
|
2024
|
|
|
(In thousands)
|
||
|
|
$
|
$
|
|
|
|
|
NOTE P -
EMPLOYEE BENEFIT
PLANS
401(k) Plan
- The Company maintains a 401(k) Plan (the "Plan") for the benefit of its employees. Company contributions are
made annually as approved by the Board of Directors. Such amounts are not in excess of amounts permitted by the Employee
Retirement Income Security Act of 1974.
Plan participants may make voluntary after-tax contributions of their considered earnings as defined by the Plan. In addition,
participants may make pre-tax contributions up to the statutory limits through the 401(k) provisions of the Plan. The annual
addition from contributions to an individual participant's account in this Plan cannot exceed the lesser of
100
%
of base salary or
$
70,000
.
New employees become eligible to participate in the Plan and make employee contributions on the first day of the calendar
month following the completion of
30
days
of employment. Such eligible employees do not become eligible for profit sharing
or matching contributions until the first day of the quarter (January 1, April 1, July 1 or October 1) following completion of
1
year
of service. A “year of service” is defined as a 12-month period in which the eligible employee works at least 1,000 hours
of service and the first eligibility service period starts on the first day of employment.
The Plan provides for a guaranteed safe harbor matching contribution equal to
100
%
of the first
4
%
of compensation that
employees contribute to their account and this amount is immediately vested. The safe harbor match is not subject to the
six
-
Additionally, the Company anticipates that all eligible employees, regardless of personal plan participation, will continue to
receive an annual discretionary profit-sharing contribution from the Company.
Company contributions to the Plan amounted to
$
8,900,000
,
$
8,185,000
and
$
8,648,000
for the years ended
2025
,
2024
and
2023
, respectively.
Employee Stock Purchase Plan
- Upon approval by our shareholders, the Company implemented a Non-Qualified Employee
Stock Purchase Plan ("ESPP") in 2023 in which substantially all employees of the Company are eligible to participate. The
ESPP provides participants the opportunity to purchase common stock of the Company at
95
%
of the closing stock price on the
last day of the purchase period. Purchase periods are three-month periods that are set as January 1 through March 31, April 1
through June 30, July 1 through September 30, and October 1 through December 31 of each year. A total of
500,000
shares
were made available for issuance under the ESPP. Participants of the ESPP purchased
28,394
shares for
$
841,839
during
2025
.
At
September 30, 2025
there were
428,797
shares remaining for purchase under the ESPP.
Supplemental Executive Retirement Plan
- Also approved by our shareholders, the Company implemented a Supplemental
Executive Retirement Plan ("SERP") during 2023. This deferred compensation plan provides retirement benefits to certain
highly compensated executives. The SERP credits, if vested, will be distributed in the form of WaFd, Inc. common stock, in
ten (
10
) substantially equal annual installments, following retirement of the executive officer.
$
11,700,000
in common stock
units, and related dividend equivalents, were authorized with each unit having a value equal to one share of WaFd, Inc.
common stock.
These units will vest based on the age of each participant as follows:
116
WAFD, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2025, 2024, AND 2023
|
Attained Age
|
Vested Percentage
|
|||
|
Before 62
|
|
|||
|
62
|
|
|||
|
63
|
|
|||
|
64
|
|
During fiscal
2025
,
13,450
units were credited to participant accounts as a result of dividends paid. As a result, there were a
total of
402,418
share units with a weighted average grant date fair value of
$
31.55
held within SERP accounts at
September
30, 2025
. SERP related expense recognized during the year was
$
1,151,000
. There were no shares paid during
2025
and there
NOTE Q -
STOCK AWARD PLANS
The Company's stock-based compensation plan provides for grants of stock options and restricted stock.
On February 11, 2025,
the shareholders approved the 2025 Stock Incentive Plan.
Upon approval of the 2025 Stock Incentive Plan, the 2020 Incentive
Plan terminated with respect to future awards, and the remaining shares that were not awarded under the 2020 Incentive Plan as
of that date were canceled.
A total of
3,250,000
shares were made available for grant under the 2025 Incentive Plan
and
have been approved by the Company’s shareholders.
When applicable, stock options are granted with an exercise price equal to the market price of the Company's stock at the date
of grant; those option awards generally vest based on
three
to
five years
of continuous service and have
10
-year
contractual
terms. The Company's policy is to issue new shares upon option exercises. The fair value of stock options granted is estimated
on the date of grant using the Black-Scholes option-pricing model. Additionally, there may be other factors that would
otherwise have a significant effect on the value of employee stock options granted but are not considered by the model.
Expected volatility is based on the historical volatility of the Company's stock. The risk-free interest rate is based on the U.S.
Treasury yield curve that is in effect at the time of grant with a remaining term equal to the options' expected life. The expected
term represents the period of time that options granted are expected to be outstanding.
Stock Option Awards:
There were
374,029
stock options granted under the 2025 Stock Incentive Plan during
2025
, compared to
no
options granted in
2024
and
779,740
options granted in
2023
under the previous plan.
|
Options
|
Number of Securities
to be Issued Upon
Exercise of
|
Weighted
Average
Exercise
Price
|
Weighted Average
Remaining
Contractual
Term (Years)
|
Aggregate
Intrinsic
Value
(In thousands)
|
|
Outstanding at September 30, 2023
|
|
$
|
|
$
|
|
Granted
|
|
|
||
|
Exercised
|
(
|
|
||
|
Forfeited
|
(
|
|
||
|
Outstanding at September 30, 2024
|
|
|
|
|
|
Granted
|
|
|
||
|
Exercised
|
(
|
|
||
|
Forfeited
|
(
|
|
||
|
Outstanding at September 30, 2025
|
|
$
|
|
$
|
|
Exercisable at September 30, 2025
|
|
$
|
|
$
|
117
WAFD, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2025, 2024, AND 2023
|
Year ended September 30,
|
2025
|
2024
|
2023
|
|
(In thousands, except grant date fair value per stock option)
|
|||
|
Compensation cost for stock options
|
$
|
$
|
$
|
|
Weighted average grant date fair value per stock option
|
|
|
|
|
Total intrinsic value of options exercised
|
|
|
|
|
Grant date fair value of options exercised
|
|
|
|
|
Cash received from option exercises
|
|
|
|
|
Year ended September 30,
|
2025
|
2024
|
2023
|
|||||
|
Unvested Stock Options
|
Options
Outstanding
|
Weighted
Average
Grant Date
Fair Value
|
Options
Outstanding
|
Weighted
Average
Grant Date
Fair Value
|
Options
Outstanding
|
Weighted
Average
Grant Date
Fair Value
|
||
|
Outstanding at beginning of
period
|
|
$
|
|
$
|
|
$
|
||
|
Granted
|
|
|
|
|
|
|
||
|
Vested
|
(
|
|
(
|
|
(
|
|
||
|
Forfeited
|
(
|
|
(
|
|
(
|
|
||
|
Outstanding at end of period
|
|
$
|
|
$
|
|
$
|
||
As of
September 30, 2025
, there was
$
2,799,268
of unrecognized compensation cost related to stock options.
Restricted Stock Awards:
The Company grants shares of restricted stock pursuant to its incentive plans. The restricted stock grants are subject to a service
condition and vest over a period of
one
to
seven years
.
Certain grants of restricted stock to executive officers are also subject to additional market and performance conditions based
upon meeting certain total shareholder return targets pre-established by the Board. The Company had a total of
538,911
shares
of restricted stock outstanding as of
September 30, 2025
, with a total grant date fair value of
$
13,709,896
.
|
Year ended September 30,
|
2025
|
2024
|
2023
|
|||||
|
Non-vested Restricted Stock
|
Outstanding
|
Weighted
Average
Fair Value
|
Outstanding
|
Weighted
Average
Fair Value
|
Outstanding
|
Weighted
Average
Fair Value
|
||
|
Outstanding at beginning of period
|
|
$
|
|
$
|
|
$
|
||
|
Granted
|
|
|
|
|
|
|
||
|
Vested
|
(
|
|
(
|
|
(
|
|
||
|
Forfeited
|
(
|
|
(
|
|
(
|
|
||
|
Outstanding at end of period
|
|
$
|
|
$
|
|
$
|
||
Compensation expense related to restricted stock awards was
$
5,061,000
,
$
5,695,000
, and
$
4,512,000
for the years ended
2025
,
2024
and
2023
, respectively.
118
WAFD, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2025, 2024, AND 2023
NOTE R -
SHAREHOLDERS' EQUITY
The Company and the Bank are subject to various regulatory capital requirements. Quantitative measures established by
regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (set forth in the
following table) of Common Equity Tier 1, Tier 1 and Total capital to risk weighted assets (as defined in the regulations) and Tier
1 capital to average assets (as defined in the regulations). Failure to meet minimum capital requirements can initiate certain
mandatory and possibly additional discretionary action by regulators that, if undertaken, could have a direct material effect on the
Company's financial statements. The Company and the Bank are also subject to certain restrictions on the amount of dividends
that they may declare without prior regulatory approval.
On February 8, 2021, in connection with an underwritten public offering, the Company issued
300,000
shares of
4.875
%
Noncumulative Perpetual Series A Preferred Stock. Net proceeds, after underwriting discounts and expenses, were
$
293,325,000
.
The public offering consisted of the issuance and sale of
12,000,000
depositary shares, each representing a 1/40
th
interest in a
share of the Series A Preferred Stock, at a public offering price of
$
25.00
per depositary share. Holders of the depositary shares
are entitled to all proportional rights and preferences of the Series A Preferred Stock (including, dividend, voting, redemption and
liquidation rights). The depositary shares are traded on the NASDAQ Global Select Market under the symbol "WAFDP." The
Series A Preferred Stock is redeemable at the option of the Company, subject to all applicable regulatory approvals, on or after
April 15, 2026.
and the Bank's regulators categorized it as well capitalized under the regulatory framework for prompt corrective action. To be
categorized as well capitalized, the Bank must maintain minimum Common Equity Tier 1, Tier 1 risk-based, Total risk-based and
Tier 1 leverage ratios as set forth in the following table. The Bank's actual capital amounts and ratios as of these dates are also
presented. There are no conditions or events since that management believes have changed the Bank's categorization.
119
WAFD, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2025, 2024, AND 2023
|
|
Actual
|
Capital
Adequacy
Guidelines
|
Categorized as
Well Capitalized
Under Prompt
Corrective Action
Provisions
|
||
|
|
Capital
|
Ratio
|
Ratio
|
Ratio
|
|
|
September 30, 2025
|
($ in thousands)
|
||||
|
Common Equity Tier 1 risk-based capital ratio:
|
|||||
|
The Company
|
$
|
|
|
NA
|
|
|
The Bank
|
|
|
|
|
|
|
Tier 1 risk-based capital ratio:
|
|||||
|
The Company
|
|
|
|
NA
|
|
|
The Bank
|
|
|
|
|
|
|
Total risk-based capital ratio:
|
|||||
|
The Company
|
|
|
|
NA
|
|
|
The Bank
|
|
|
|
|
|
|
Tier 1 leverage ratio:
|
|||||
|
The Company
|
|
|
|
NA
|
|
|
The Bank
|
|
|
|
|
|
|
September 30, 2024
|
|||||
|
Common Equity Tier 1 risk-based capital ratio:
|
|||||
|
The Company
|
$
|
|
|
NA
|
|
|
The Bank
|
|
|
|
|
|
|
Tier 1 risk-based capital ratio:
|
|||||
|
The Company
|
|
|
|
NA
|
|
|
The Bank
|
|
|
|
|
|
|
Total risk-based capital ratio:
|
|||||
|
The Company
|
|
|
|
NA
|
|
|
The Bank
|
|
|
|
|
|
|
Tier 1 leverage ratio:
|
|||||
|
The Company
|
|
|
|
NA
|
|
|
The Bank
|
|
|
|
|
|
At periodic intervals, the Federal Reserve, the WDFI and the FDIC examine the Company's and the Bank's financial statements as
part of their oversight. Based on their examinations, these regulators can direct that the Company's or Bank's financial statements
be adjusted in accordance with their findings.
The Company and the Bank are subject to regulatory restrictions on paying dividends.
The Company has an ongoing common share repurchase program and
3,338,351
shares were repurchased during
2025
at a
weighted average price of
$
29.56
. In
2024
,
1,058,178
shares were repurchased at a weighted average price of
$
25.29
. As of
September 30, 2025
, management had authorization from the Board of Directors to repurchase up to
8,162,654
additional shares.
120
WAFD, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2025, 2024, AND 2023
|
Year ended September 30,
|
2025
|
2024
|
2023
|
||
|
Weighted average shares outstanding
|
|
|
|
||
|
Weighted average dilutive options
|
|
|
|
||
|
Weighted average diluted shares
|
|
|
|
||
|
Net income available to common shareholders (in thousands)
|
$
|
$
|
$
|
||
|
Basic EPS
|
$
|
$
|
$
|
||
|
Diluted EPS
|
|
|
|
NOTE S -
FINANCIAL INFORMATION – WAFD, INC.
Consolidated Financial Statements.
|
Condensed Statements of Financial Condition
|
||
|
September 30, 2025
|
September 30, 2024
|
|
|
|
(In thousands)
|
|
|
Assets
|
||
|
Cash
|
$
|
$
|
|
Other assets
|
|
|
|
Investment in statutory trust
|
|
|
|
Investment in WaFd Wealth, Inc.
|
|
|
|
Investment in WaFd Bank
|
|
|
|
Total assets
|
$
|
$
|
|
Liabilities
|
||
|
Dividend payable on preferred stock
|
$
|
$
|
|
Junior subordinated deferrable debentures
|
|
|
|
Other liabilities
|
|
|
|
Total liabilities
|
|
|
|
Shareholders’ equity
|
||
|
Total shareholders’ equity
|
|
|
|
Total liabilities and shareholders’ equity
|
$
|
$
|
121
WAFD, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2025, 2024, AND 2023
|
Condensed Statements of Operations
|
|||
|
Twelve Months Ended September 30,
|
2025
|
2024
|
2023
|
|
|
(In thousands)
|
||
|
Income
|
|||
|
Dividends from WaFd Bank
|
$
|
$
|
$
|
|
Interest income
|
|
|
|
|
Total Income
|
|
|
|
|
Expense
|
|||
|
Miscellaneous expense
|
|
|
|
|
Total expense
|
|
|
|
|
Net income (loss) before equity in undistributed net income (loss)
of subsidiary
|
|
|
|
|
Equity in undistributed net income (loss) of subsidiaries
|
|
|
|
|
Income before income taxes
|
|
|
|
|
Income tax benefit (expense)
|
|
|
|
|
Net income
|
|
|
|
|
Dividends on preferred stock
|
|
|
|
|
Net income available to common shareholders
|
$
|
$
|
$
|
122
WAFD, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2025, 2024, AND 2023
|
Condensed Statements of Cash Flows
|
|||
|
Twelve Months Ended September 30,
|
2025
|
2024
|
2023
|
|
|
(In thousands)
|
||
|
Cash Flows From Operating Activities
|
|||
|
Net income
|
$
|
$
|
$
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|||
|
Undistributed earnings from investments in subsidiaries
|
(
|
(
|
(
|
|
Stock based compensation expense
|
|
|
|
|
Net changes in other assets and liabilities
|
|
|
|
|
Net cash provided by operating activities
|
|
|
|
|
Cash Flows From Investing Activities
|
|||
|
Net cash received in business combinations
|
|
|
|
|
Equity method investments purchased
|
|
(
|
(
|
|
Net cash provided by (used in) investing activities
|
|
|
(
|
|
Cash Flows From Financing Activities
|
|||
|
Proceeds from exercise of common stock options and related tax
benefit
|
|
|
|
|
Proceeds from the purchase of common stock through the Employee
Stock Purchase Program
|
|
|
|
|
Repayment of long term senior debt
|
|
(
|
|
|
Treasury stock purchased
|
(
|
(
|
(
|
|
Dividends on preferred stock
|
(
|
(
|
(
|
|
Dividends on common stock
|
(
|
(
|
(
|
|
Net cash provided by (used in) financing activities
|
(
|
(
|
(
|
|
Increase (decrease) in cash
|
|
(
|
(
|
|
Cash at beginning of year
|
|
|
|
|
Cash at end of year
|
$
|
$
|
$
|
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of
September 30, 2025
, the Company carried out an evaluation, under the supervision and participation of the
Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of
the design and operation of the Company’s disclosure controls and procedures pursuant to Rule 13a-15(e) of the Exchange Act.
Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s
disclosure controls and procedures were effective, as of the end of the period covered in this report, to ensure that information
required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed,
summarized and reported within time periods specified in SEC rules and forms and were effective to ensure that such
information is accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief
Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Management’s Report on Internal Control Over Financial Reporting
The Company's management is responsible for establishing and maintaining adequate internal control over financial
reporting. The Company’s internal control system is designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting practices in the United States of America.
The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of
September 30, 2025
. In making the assessment, the Company’s management used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) in the 2013 version of its Internal Control-Integrated
Framework. Based on its assessment, the Company’s management believes that as of
September 30, 2025
, the Company’s
internal control over financial reporting was effective based on this criteria.
The Company’s independent auditors, Deloitte & Touche LLP, an independent registered public accounting firm, have
issued an audit report on the Company’s internal control over financial reporting, which appears in this annual report on Form
10-K.
There have been no changes in the Company’s internal control over financial reporting during the Company’s most recent
fiscal quarter ended
September 30, 2025
that have materially affected, or are reasonably likely to materially affect, the
Company’s internal control over financial reporting.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and Board of Directors of WaFd, Inc.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of WaFd, Inc. and subsidiaries (the “Company”) as of
September 30, 2025
,
based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO). Because management's assessment and our audit were conducted to meet the reporting requirements
of Section 112 of the Federal Deposit Insurance Corporation Improvement Act (FDICIA), management's assessment and our audit of the
Company's internal control over financial reporting included controls over the preparation of the schedules equivalent to the basic financial
statements in accordance with the instructions for the Office of the Comptroller of the Currency Instructions for Call Reports for Balance
Sheet on schedule RC, Income Statement on schedule RI, and Changes in Company Equity Capital on schedule RI-A. In our opinion, the
Company maintained, in all material respects, effective internal control over financial reporting as of
September 30, 2025
, based on criteria
established in Internal Control — Integrated Framework (2013) issued by COSO.
We have not examined and, accordingly, we do not express an opinion or any other form of assurance on management's statement referring
to compliance with laws and regulations.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the
consolidated financial statements as of and for the year ended
September 30, 2025
, of the Company and our report dated
November 18,
2025
, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over
Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our
audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and
the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our
audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists,
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other
procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations
of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of
any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Seattle, Washington
November 18, 2025
Item 9B. Other Information
Rule 10b5-1 Plan and Non-Rule 10b5-1 Trading Arrangement Adoptions, Terminations, and Modifications
During the three months ended
September 30, 2025
, none of the Company’s directors or “officers” (as defined in Rule
16a-1(f) under the Exchange Act)
adopted
or
terminated
a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading
arrangement,” as each term is defined in Item 408 of SEC Regulation S-K.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information required by this item will be set forth in the Company's definitive proxy statement for its Annual
Meeting of Shareholders to be held on February 3, 2026 (the "
2025
Proxy Statement") under the following captions, and is
incorporated herein by reference.
•
Proposal 1: Election of Directors
•
Executive Officers
•
Corporate Governance
•
Delinquent Section 16(a) Reports
Code of Ethics
The Company has adopted a code of ethics that applies to all senior financial officers, including its Chief Executive
Officer and Chief Financial Officer. The code of ethics is publicly available on the Company’s website under "Investor
Relations - Corporate Governance" at
www.wafdbank.com
. If the Company makes any substantive amendments to the code of
ethics or grants any waiver from a provision of the code, it will disclose the nature of such amendment or waiver on its website
or in a report on Form 8-K.
Insider Trading Policy
The Company has adopted insider trading policies and procedures governing the purchase, sale, and/or other dispositions
of the Company’s securities by directors, officers and employees, or the Company itself, that are reasonably designed to
promote compliance with insider trading laws, rules and regulations, and any listing standards applicable to the Company. A
copy of the Company’s Trading Policy has been filed as Exhibit 19.1 to this Annual Report on Form 10-K.
Item 11. Executive Compensation
The information required by this item will be set forth in the
2025
Proxy Statement
under the captions "Executive
Compensation” and “Corporate Governance – Compensation Committee Interlocks And Insider Participation"
and is
incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
The information required by this item will be set forth in the
2025
Proxy Statement
under the caption "Security
Ownership of Certain Beneficial Owners and Management"
and "Equity Compensation Plan Information" and is incorporated
herein by reference.
Additional information about stock options and other equity compensation plans is included in
Note Q to the
Item 13. Certain Relationships and Related Transactions and Director Independence
The information required by this item will be set forth in the
2025
Proxy Statement
under the captions “Corporate
Governance – The Board of Directors and its Committees” and "Corporate Governance - Related Party Transactions"
and is
incorporated herein by reference.
Item 14. Principal Accountant Fees and Services
The information required by this item will be set forth in the
2025
Proxy Statement
under the caption "Principal
Accountant Fees and Services"
and is incorporated herein by reference.
PART IV
Item 15. Exhibits and Financial Statement Schedules
(a) Documents filed as part of this Report:
(1) The Consolidated Financial Statements and related documents set forth in "Item 8. Financial Statements and
Supplementary Data" are filed as part of this report.
(2) All other schedules to the Consolidated Financial Statements required by Regulation S-X are omitted because
they are not applicable, not material or because the information is included in the Consolidated Financial Statements
and related notes in “Item 8. Financial Statements and Supplementary Data” of this report.
(3) The following exhibits are required by Item 601 of Regulation S-K:
|
No.
|
Exhibit
|
Page/
Footnote
|
|
(1)
|
||
|
(1)
|
||
|
(2)
|
||
|
(3)
|
||
|
(4)
|
||
|
(5)
|
||
|
(5)
|
||
|
(5)
|
||
|
(6)
|
||
|
(7)
|
||
|
(1)
|
||
|
(8)
|
||
|
(8)
|
||
|
(9)
|
||
|
(10)
|
||
|
(11)
|
||
|
(12)
|
||
|
(12)
|
||
|
(12)
|
||
|
(12)
|
||
|
+
|
||
|
+
|
||
|
+
|
||
|
+
|
||
|
+
|
||
|
+
|
||
|
+
|
||
|
101
|
Financial Statements for the fiscal year ended
September 30, 2025
formatted in iXBRL
|
+
|
|
104
|
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
|
+
|
___________________
|
*
|
Management contract or compensation plan
|
|
+
|
Filed herewith
|
|
#
|
Furnished herewith
|
(1)
Incorporated by reference from the Registrant's Form 10-K filed with the SEC on November 17, 2023.
(2)
Incorporated by reference from the Registrant's Form 10-K filed with the SEC on November 19, 2021.
(3)
Incorporated by reference from the Registrant's Form 8-K filed with the SEC on February 8, 2021.
(4)
Incorporated by reference from the Registrant's Form 10-K filed with the SEC on November 23, 2020.
(5)
Incorporated by reference from the Registrant's Form 10-K filed with the SEC on November 21, 2016.
(6)
Incorporated by reference from the Registrant's Form 8-K filed with the SEC on October 24, 2016.
(7)
Incorporated by reference from the Registrant's Form 8-K filed with the SEC on August 19, 2015.
(8)
Incorporated by reference from the Registrant's Form 8-K filed with the SEC on February 17, 2023.
(9)
Incorporated by reference from the Registrant's Form 8-K filed with the SEC on May 17, 2024.
(10)
Incorporated by reference from the Registrant's Form 10-Q filed with the SEC on August 2, 2024.
(11)
Incorporated by reference from the Registrant's Form 8-K filed with the SEC on January 21, 2025.
(12)
Incorporated by reference from the Registrant's Form 8-K filed with the SEC on February 13, 2025.
Item 16. Form 10-K Summary
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
WAFD, INC.
|
||
|
November 18, 2025
|
By:
|
/
S
/
BRENT J. BEARDALL
|
|
Brent J. Beardall, Vice Chair, President and Chief Executive Officer
|
||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report is signed below by the following persons
on behalf of the registrant and in the capacities and on the dates indicated.
|
/s/ Brent J. Beardall
|
November 18, 2025
|
|
Brent J. Beardall
Vice Chair, President and Chief Executive Officer
(Principal Executive Officer)
|
|
|
/s/ Kelli J. Holz
|
November 18, 2025
|
|
Kelli J. Holz
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
|
|
|
/s/ Blayne A. Sanden
|
November 18, 2025
|
|
Blayne A. Sanden
Senior Vice President and Principal Accounting Officer
(Principal Accounting Officer)
|
|
|
/s/ Stephen M. Graham
|
November 18, 2025
|
|
Stephen M. Graham, Chairman of the Board
|
|
|
/s/ R. Shawn Bice
|
November 18, 2025
|
|
R. Shawn Bice, Director
|
|
|
/s/ Linda S. Brower
|
November 18, 2025
|
|
Linda S. Brower, Director
|
|
|
/s/ David K. Grant
|
November 18, 2025
|
|
David K. Grant, Director
|
|
|
/s/ Sylvia R. Hampel
|
November 18, 2025
|
|
Sylvia R. Hampel, Director
|
|
|
/s/ Bradley M. Shuster
|
November 18, 2025
|
|
Bradley M. Shuster, Director
|
|
|
/s/ S. Steven Singh
|
November 18, 2025
|
|
S. Steven Singh, Director
|
|
|
/s/ Sean B. Singleton
|
November 18, 2025
|
|
Sean B. Singleton, Director
|
|
|
/s/ Randall H. Talbot
|
November 18, 2025
|
|
Randall H. Talbot, Director
|
|
|
/s/ M. Max Yzaguirre
|
November 18, 2025
|
|
M. Max Yzaguirre, Director
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TABLE OF CONTENTS
Part IPart IIPart IIIPart IVItem 1. BusinessItem 1A. Risk FactorsItem 1B. Unresolved Staff CommentsItem 1C. CybersecurityItem 2. PropertiesItem 3. Legal ProceedingsItem 4. Mine Safety DisclosuresItem 5. Market For Registrant S Common Equity, Related Shareholder Matters and Issuer Purchases Of EquityItem 6. [reserved]Item 7. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsItem 7A. Quantitative and Qualitative Disclosures About Market RiskItem 8. Financial Statements and Supplementary DataItem Until The Hedged Item Is De-recognized From The Balance Sheet. The Following Tables Present The Impact Of Fair Value HedgeItem Until The Hedged Item Is De-recognized From The Balance SheetItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A. Controls and ProceduresItem 9B. Other InformationItem 9C. Disclosure Regarding Foreign Jurisdictions That Prevent InspectionsItem 10. Directors, Executive Officers and Corporate GovernanceItem 11. Executive CompensationItem 12. Security Ownership Of Certain Beneficial Owners and Management and Related Shareholder MattersItem 13. Certain Relationships and Related Transactions and Director IndependenceItem 14. Principal Accountant Fees and ServicesItem 15. Exhibits and Financial Statement SchedulesItem 16. Form 10-k Summary