WAFD INCWAFD
WAFD INC Income Taxes Disclosure
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.
The table below provides a summary of the Company's tax assets and liabilities, including deferred tax assets and deferred tax
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 | $52,275 | $53,227 |
Non-accrual loan interest | 4,752 | 3,124 |
Accrued bonus and deferred compensation | 7,497 | 7,815 |
Stock based compensation | 3,552 | 4,696 |
Lease liability | 12,314 | 9,626 |
Loan purchase discount | 42,273 | 48,064 |
Loss carryover | 62,413 | 68,483 |
Other | 1,289 | 2,219 |
Total deferred tax assets | 186,365 | 197,254 |
Deferred tax liabilities | ||
FHLB stock dividends | 5,932 | 6,171 |
Net unrealized gain on available-for-sale securities and cash flow hedges | 14,097 | 13,758 |
Loan origination fees and costs | 11,475 | 11,777 |
Premises and equipment | 16,637 | 16,390 |
Lease right-of-use assets | 11,337 | 9,304 |
Equity investments | 3,444 | 3,700 |
Acquired intangibles | 11,598 | 12,824 |
Other | 184 | 184 |
Total deferred tax liabilities | 74,704 | 74,108 |
Net deferred tax asset (liability) | 111,661 | 123,146 |
Current tax asset (liability) | 1,123 | (3,898) |
Net tax asset (liability) | $112,784 | $119,248 |
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.
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.
The table below presents a reconciliation of the statutory federal income tax rate to the Company's effective income tax rate.
Year ended September 30, | 2025 | 2024 | 2023 |
Statutory income tax rate | 21.0% | 21.0% | 21.0% |
State income tax | 2.3 | 2.3 | 1.7 |
Tax-exempt interest income | (1.7) | (2.1) | (1.2) |
Interest expense disallowance | 0.9 | 1.2 | 0.5 |
Low-income housing investments | (1.1) | (1.1) | (1.3) |
Other differences | 0.6 | 0.6 | 0.1 |
Effective income tax rate | 22.0% | 21.9% | 20.8% |
The following table summarizes the Company's income tax expense (benefit) for the respective periods.
Year ended September 30, | 2025 | 2024 | 2023 |
(In thousands) | |||
Federal: | |||
Current | $45,850 | $54,817 | $58,667 |
Deferred | 11,115 | (4,767) | 3,334 |
56,965 | 50,050 | 62,001 | |
State: | |||
Current | 6,578 | 7,837 | 4,425 |
Deferred | 31 | (1,872) | 1,224 |
6,609 | 5,965 | 5,649 | |
Total | |||
Current | 52,428 | 62,654 | 63,092 |
Deferred | 11,146 | (6,639) | 4,558 |
$63,574 | $56,015 | $67,650 | |
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 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.
The table below shows the total amounts of tax benefits and the amortization amounts from our LIHTC portfolio that are
recognized in our income tax expense for the fiscal years ended September 30, 2025 and September 30, 2024.
2025 | 2024 | |
(In thousands) | ||
$19,135 | $19,156 | |
16,093 | 16,434 | |
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Nov 18, 2025 | Showing above |
| 2024 | Nov 20, 2024 | |
| 2023 | Nov 17, 2023 | |
| 2022 | Nov 18, 2022 | |
| 2021 | Nov 19, 2021 | |
| 2019 | Nov 20, 2019 | |
| 2017 | Nov 21, 2017 | |
| 2016 | Nov 21, 2016 | |
| 2015 | Dec 3, 2015 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.