8-K: WaFd Reports Fiscal 2025 Earnings, Loan Growth, and Deposit Shift

WaFd, Inc. announced its fourth quarter and fiscal year 2025 results, highlighting a significant increase in loan originations and an improving deposit mix, despite a slight quarterly net income decrease.

Summary

• Fiscal Year 2025 net income increased by 13% to $226 million, up from $200 million in fiscal 2024.
• Diluted earnings per common share for fiscal year 2025 rose by 5.20% to $2.63, compared to $2.50 in fiscal 2024.
• Fourth quarter 2025 net income was $60.6 million, a 2% decrease from $61.95 million in the prior quarter.
• Diluted earnings per common share for the fourth quarter 2025 was $0.72, a slight decrease from $0.73 in the prior quarter.
• Net interest margin (NIM) improved to 2.71% in Q4 2025, up from 2.69% in Q3 2025 and 2.62% in the same quarter one year ago.
• New loan originations increased by 103% over the third quarter, with the loan pipeline building for three consecutive quarters.
• The company is undergoing a business model shift from mortgage lending to providing solutions for businesses, resulting in checking accounts increasing from 33% to 35% of deposits over the year.
• Total assets decreased to $26.7 billion as of September 30, 2025, from $28.1 billion a year prior, primarily due to reduced loans receivable and cash used to reduce borrowings and purchase investments.
• Non-performing assets increased to $143 million (0.54% of total assets) as of September 30, 2025, up from $97 million (0.36%) in June 2025 and $77 million (0.28%) in September 2024.
• Delinquent loans rose to 0.60% of total loans as of September 30, 2025, compared to 0.26% in June 2025 and 0.25% in September 2024, primarily due to one commercial real estate loan.
• The allowance for credit losses (ACL) totaled $221 million, or 1.04% of gross loans outstanding, as of September 30, 2025.
• Net charge-offs were $1.0 million for Q4 2025, down from $5.4 million in Q3 2025. Fiscal year 2025 net charge-offs were $11.8 million, significantly higher than $1.4 million in fiscal 2024.
• The company repurchased 969,653 shares during the quarter at a weighted average price of $29.74, and 3,447,771 shares during the fiscal year at $29.56.

Sentiment

Score: 6

Explanation: The company reported strong fiscal year growth and positive strategic shifts (loan originations, deposit mix, business focus), which are favorable. However, the sequential decline in quarterly net income and the notable increase in non-performing assets and delinquencies, particularly from a single commercial real estate loan, introduce a degree of caution regarding credit quality in the current economic environment.

Positives

• Fiscal year 2025 net income increased by 13% to $226 million.
• Fiscal year 2025 diluted earnings per common share increased by 5.20% to $2.63.
• Net interest margin (NIM) improved for the second consecutive quarter, reaching 2.71% in Q4 2025, driven by decreasing cost of deposits and borrowings.
• New loan originations increased by 103% over Q3 2025, signaling increased client activity.
• The loan pipeline has been building for three consecutive quarters, indicating potential future growth.
• Successful shift in business model towards business solutions, with checking accounts increasing from 33% to 35% of deposits over the year.
• Core deposits (transaction accounts and time deposits less than $250,000) increased to 77.9% of total deposits from 75.1% a year ago.
• Borrowings decreased significantly to $1.8 billion from $3.3 billion year-over-year, with a lower effective weighted average interest rate of 2.5% (down from 3.9%).
• Tangible common equity per share grew from $27.73 as of September 30, 2024, to $29.38 at September 30, 2025.
• The company paid its 170th consecutive quarterly dividend of $0.27 per share.
• Repurchased 3,447,771 shares of common stock during the fiscal year at a weighted average price of $29.56.

Negatives

• Fourth quarter net income decreased by 2% compared to the prior quarter.
• Fourth quarter diluted earnings per common share decreased slightly from $0.73 to $0.72 compared to the prior quarter.
• Non-performing assets increased significantly to $143 million (0.54% of total assets) from $97 million (0.36%) in June 2025 and $77 million (0.28%) in September 2024.
• Delinquent loans increased to 0.60% of total loans from 0.26% in June 2025 and 0.25% in September 2024.
• The increase in non-performing assets is primarily attributed to one commercial real estate loan over 90 days past due.
• Net charge-offs for fiscal year 2025 were $11.8 million, a substantial increase from $1.4 million for fiscal year 2024.
• Total assets decreased by $1.4 billion year-over-year, primarily due to a reduction in loans receivable and cash.
• Cash decreased by $1.7 billion, or 72.4%, year-over-year.
• Non-interest expense increased by $2.7 million (2.6%) from the prior quarter due to strategic investments in staff and technologies, leading to an increased efficiency ratio of 56.82% (up from 56.01%).
• Provision for credit losses increased to $3.0 million for Q4 2025 from $2.0 million in Q3 2025, driven by increasing trends in negative migration of delinquent and nonperforming loans.
• Return on common shareholders' equity decreased to 8.36% from 8.54% quarter-over-quarter.
• Return on assets decreased to 0.91% from 0.92% quarter-over-quarter.

Risks

• Fluctuations in interest rate risk and market interest rates, including the effect on net interest income and net interest margin.
• Current and future economic conditions, including effects of declines in the real estate market, tariffs, high unemployment rates, inflationary pressures, a potential recession, the monetary policies of the Federal Reserve, and slowdowns in economic growth.
• Financial stress on borrowers (consumers and businesses) as a result of higher interest rates or an uncertain economic environment.
• Changes in deposit flows or loan demands.
• The impact of bank failures or adverse developments at other banks and related negative press about regional banks and the banking industry in general.
• The effects of natural or man-made disasters, calamities, or conflicts, including terrorist events and pandemics (such as the COVID-19 pandemic) and the resulting governmental and societal responses.
• Global economic trends, including developments related to Ukraine and Russia, and the evolving conflict in the Middle East, and related negative financial impacts on borrowers.
• Litigation risks resulting in significant expenses, losses, and reputational damage.
• The ability to identify and address cyber-security risks, including security breaches, denial of service attacks, hacking, and identity theft.
• Other economic, competitive, governmental, environmental, regulatory, and technological factors affecting operations, pricing, products, and services.
• Risks related to the integration of the operations of Luther Burbank Corporation.
• The Company's exit from the mortgage lending business.
• The results of examinations by regulatory authorities, including a 'Needs to Improve' CRA rating, which may impose restrictions or penalties on the Company's activities.
• Expectations regarding key growth initiatives and strategic priorities.

Future Outlook

The loan pipeline has been building for the last three quarters, which is a promising sign for growth over the next year. The company is convinced that focusing on businesses will increase the relevancy of its branches and improve long-term shareholder returns.

Management Comments

• "We finished Fiscal 2025 trending in the right direction with an improving margin, a significant increase in loan originations and an improving deposit mix."
• "The margin increased to 2.71% from 2.69% in the 3rd quarter and 2.62% in the same quarter one year ago, driven by decreasing cost of deposits and borrowings."
• "Importantly, we experienced a 103% increase in new loan originations over the 3rd quarter, signaling that our clients are now starting to come off of the sidelines."
• "Our loan pipeline has now been building in each of the last three quarters, a promising sign for growth over the next year."
• "It would be hard to overstate the magnitude of the shift in our business model undertaken in 2025, moving from mortgage lending to providing solutions for businesses."
• "While this is a long-term shift we are very pleased with the early results, specifically the changing mix of our deposits with checking accounts going from 33% of deposits up to 35% of deposits over the year."
• "We are convinced that focusing on businesses will increase the relevancy of our branches and improve long-term shareholder returns."
• Management is actively collaborating with the borrower of the commercial real estate loan causing the increase in non-performing assets, and recent developments indicate positive momentum.

Industry Context

The company is actively shifting its business model from mortgage lending to providing solutions for businesses, aligning with a potential broader trend among regional banks to diversify revenue streams and deposit bases. The improving net interest margin, driven by decreasing cost of deposits and borrowings, suggests effective interest rate management in a dynamic monetary environment. The increase in non-performing assets and delinquencies, particularly from a commercial real estate loan, highlights ongoing credit quality challenges that some banks may face amidst economic uncertainties and higher interest rates. The increase in loan originations indicates a potential rebound in client activity, which could be a positive sign for the banking sector if economic conditions stabilize.

Legal Proceedings

• General litigation risks are identified as a potential challenge that could result in significant expenses, losses, and reputational damage.

Stakeholder Impact

• Shareholders: Positive impact from increased fiscal year earnings, consistent dividend payment, and share repurchases. Potential concern from increased non-performing assets and slight quarterly earnings dip.
• Customers: Potential benefit from the company's strategic shift to providing solutions for businesses, indicating a focused approach to commercial clients.
• Employees: Strategic investments in staff were mentioned as a reason for increased non-interest expense, suggesting continued investment in human capital.

Next Steps

• Host a conference call for investors and analysts on Friday, October 17, 2025, at 7:00 am PDT.

Key Dates

Recommendation

The company demonstrates solid fiscal year growth and strategic progress in shifting its business model and improving its net interest margin. The significant increase in loan originations and the favorable deposit mix are positive indicators for future performance. However, the notable increase in non-performing assets and delinquencies, even if attributed to a single loan, warrants close monitoring of credit quality. The slight sequential decline in quarterly net income and increased efficiency ratio due to strategic investments also suggest a period of transition. Given the mixed signals—strong annual performance and strategic execution versus emerging credit quality concerns—a 'hold' recommendation is appropriate, advising investors to monitor the resolution of credit issues and the continued success of the business model shift.

Keywords

Banking, Financial Services, Regional Bank, Earnings Report, Net Interest Margin, Loan Originations, Deposits, Credit Quality, Non-Performing Assets, Share Repurchase, Commercial Lending, Fiscal Year Results, Quarterly Results, WAFD