WAFD INC 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of WaFd, Inc. (the “Company” or “WaFd”) and its financial condition and results of operations should be read together with the financial statements and the related notes included elsewhere herein and the Consolidated Financial Statements, accompanying notes and management’s discussion and analysis of financial condition and results of operations and other disclosures contained in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2024, filed with the Securities and Exchange Commission ("SEC") on November 20, 2024 (the “2024 10-K”). FORWARD LOOKING STATEMENTS This discussion contains forward-looking statements that involve risks and uncertainties. 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, and including the Risk Factors included in the Company’s 2024 10-K, and in any of the Company's other subsequent SEC 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) as a result of high interest rates; inflation; tariffs, including retaliatory tariffs; low consumer confidence; or an uncertain economic environment; • the effects of and changes in monetary and fiscal policies of the Board of Governors of the Federal Reserve System and the U.S. Government; • 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; • the potential for new or increased tariffs, trade restrictions or geopolitical tensions that could affect economic activity or specific industry sectors and the impact they may have on us, our customers and our operations, assets and liabilities; • 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; • risk 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; • risks related to the integration of Luther Burbank Corporation; • risks associated with our failure to retain or attract key employees; • risks associated with failures of our risk management framework; • 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), and the resulting governmental and societal responses, including on our asset credit quality and business operations, as well as its impact on general economic and financial market conditions; 47 Table of Contents WAFD, INC. AND SUBSIDIARIES Regulatory and Litigation Risks: • non-compliance with the USA PATRIOT Act, Bank Secrecy Act, Community Reinvestment Act, Fair Lending Laws, Real Estate Settlement Procedures Act, Truth-in-Lending Act, Flood Insurance Reform Act or other laws and regulations; • the Company’s ability to manage the risks and costs involved in the remediation efforts to the Bank's Home Mortgage Disclosure Act (“HMDA”) compliance and reporting, and the impact of enforcement actions or legal proceedings with respect to the Bank’s HMDA program, including compliance with the Bank's 2013 and 2020 HMDA Consent Orders; • legislative and regulatory limitations, including those arising under the Dodd-Frank Act, the Washington Commercial Bank Act and potential limitations in the manner in which the Company conducts its business and undertakes new investments and activities; • 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 Risks: • eroding confidence in the banking system and regional banks in particular; • downturns in the real estate market; • changes in banking operations, including a shift from retail to online activities; • changes in other economic, competitive, governmental, regulatory and technological factors affecting the Company's markets, operations, pricing, products, services and fees; • 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; • industry deficiencies in foreclosure practices, including delays and challenges in the foreclosure process; • 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; • our ability to grow organically or through acquisitions; • risks associated with our entry into the California market; Security Ownership Risks: • 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; • the ability of the Company to obtain external financing to fund its operations or obtain financing on favorable terms, when needed; • risks related to Washington's anti-takeover statute; • effects of activist shareholders; 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 of the 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- 48 Table of Contents WAFD, INC. AND SUBSIDIARIES 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. GENERAL & BUSINESS DESCRIPTION Washington Federal Bank, a federally-insured Washington state chartered commercial bank dba WaFd 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, 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, the Company filed Articles of Amendment to its Restated Articles of Incorporation, as amended, with the Washington Secretary of State, to change its name from Washington Federal, Inc. to WaFd, Inc. This change was effective on September 29, 2023. 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. CRITICAL ACCOUNTING POLICIES See Note A to the Consolidated Financial Statements in "Item 1. Financial Statements" above. Also, refer to "Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations" in the Company's 2024 10-K. ASSET QUALITY & ALLOWANCE FOR CREDIT LOSSES See Notes A, D and E to the Consolidated Financial Statements in "Item 1. Financial Statements" above. Also, refer to "Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations" in the Company's 2024 10-K. INTEREST RATE RISK Based on management's assessment of the current interest rate environment, the Company has taken steps, including growing shorter-term loans and transaction deposit accounts, to reduce its interest rate risk profile. The mix of transaction and savings accounts is 56% and 44%, respectively, of total deposits as of June 30, 2025 while the composition of the investment securities portfolio is 49% variable and 51% fixed rate. The Company entered into $520,000,000 of pay fixed interest rate swaps to hedge the fair value risk of the AFS portfolio which effectively converts 13% of fixed securities to variable as of June 30, 2025. When interest rates rise, the fair value of the investment securities with fixed rates will decrease and vice versa when interest rates decline. The Company has $512,854,000 of mortgage-backed securities that it has designated as HTM and are carried at amortized cost. As of June 30, 2025, the net unrealized loss on these securities was $40,813,000. The Company has $3,387,497,000 of AFS securities that are carried at fair value. As of June 30, 2025, the net unrealized loss on these securities was $38,368,000. The Company recognized in earnings a gain of $13,828,000 on fair value of AFS securities hedged by the fixed interest rate swaps. The Company has executed interest rate swaps to hedge interest rate risk on certain FHLB borrowings. The unrealized gain on these interest rate swaps as of June 30, 2025 was $106,555,000. All of the above are pre-tax net unrealized gains or losses. The Company relies on various measures of interest rate risk, including an asset/liability analysis, modeling of changes in forecasted net interest income under various rate change scenarios, and the impact of interest rate changes on the net portfolio value (“NPV”) of the Company. Net Interest Income Sensitivity - The Company estimates the sensitivity of its 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 the Company's interest-earning assets and interest-bearing liabilities, including the maturity structure of assets and liabilities and their repricing characteristics during the periods of changes in market interest rates. The analysis 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 size and composition 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, 49 Table of Contents WAFD, INC. AND SUBSIDIARIES but is used as a tool for measuring potential risk. This analysis assumes zero balance sheet growth and a constant percentage composition of assets and liabilities. Potential Increase (Decrease) in Net Interest Income - Year 1 Basis Point Increase (Decrease) in Interest Rates June 30, 2025 September 30, 2024 (In thousands, except percentages) (200) $ 52,563 7.14 % $ (8,284) (1.01) % (100) 29,659 4.03 1,832 0.22 100 8,274 1.12 (144) (0.02) 200 17,080 2.32 22,816 2.79 NPV Sensitivity - Another method used to quantify interest rate risk is the NPV analysis. This analysis calculates the difference between the present value of interest-bearing liabilities and the present value of expected cash flows from interest-earning assets and off-balance-sheet contracts. The following table sets forth an analysis of the Company’s interest rate risk as measured by the estimated changes in NPV resulting from instantaneous and sustained parallel shifts in the yield curve (measured in 100-basis-point increments) and compares the current model results to the prior quarter results. Potential Increase (Decrease) in NPV as of Basis Point Increase (Decrease) in Interest Rates June 30, 2025 September 30, 2024 (In thousands, except percentages) (200) $ 570,650 18.95 % $ 393,113 13.35 % (100) 304,822 10.12 256,991 8.73 100 (359,356) (11.93) (293,070) (9.96) 200 (661,283) (21.96) (559,613) (19.01) Prepayment speeds continue to be relatively low at June 30, 2025 but increasing with the Bank's conditional payment rate ("CPR") for single-family mortgages at 9.00%, up from 6.60% the year before. Net Interest Margin - Net interest margin is measured as net interest income divided by average earning assets for the period. Net interest margin was 2.69% for the quarter ended June 30, 2025 compared to 2.56% for the quarter ended June 30, 2024. The yield on interest-earning assets decreased 36 basis points to 5.30% and the cost of interest-bearing liabilities decreased 50 basis points to 3.13% over that same period. The lower yield on interest-earning assets was primarily due to falling intrest rates affecting adjustable rate loans, net cash settlements on our loan and securities fair value hedge programs and interest-bearing cash deposits. 50 Table of Contents WAFD, INC. AND SUBSIDIARIES The following tables set forth the information explaining the changes in the net interest margin for the periods indicated compared to the respective periods one year ago. Three Months Ended June 30, 2025 Three Months Ended June 30, 2024 Average Balance Interest Average Rate Average Balance Interest Average Rate ($ in thousands) ($ in thousands) Assets Loans receivable $ 20,592,807 $ 279,476 5.44 % $ 23,536,530 $ 337,118 5.76 % Mortgage-backed securities 2,708,789 27,855 4.12 1,765,314 17,523 3.99 Cash & Investments 1,683,378 21,544 5.13 2,386,434 33,693 5.68 FHLB stock 106,816 2,839 10.66 164,018 3,608 8.84 Total interest-earning assets 25,091,790 331,714 5.30 % 27,852,296 391,942 5.66 % Other assets 1,721,710 1,851,041 Total assets $ 26,813,500 $ 29,703,337 Liabilities and Equity Interest-bearing customer accounts $ 18,769,137 $ 146,735 3.14 % $ 18,398,704 $ 154,359 3.37 % Borrowings 2,226,086 16,991 3.06 5,406,585 60,397 4.49 Total interest-bearing liabilities 20,995,223 163,726 3.13 % 23,805,289 214,756 3.63 % Noninterest-bearing customer accounts 2,493,365 2,593,381 Other liabilities 294,167 357,611 Total liabilities 23,782,755 26,756,281 Shareholders' equity 3,030,745 2,947,056 Total liabilities and equity $ 26,813,500 $ 29,703,337 Net interest income/interest rate spread $ 167,988 2.17 % $ 177,186 2.03 % Net interest margin (NIM) 2.69 % 2.56 % 51 Table of Contents WAFD, INC. AND SUBSIDIARIES Nine Months Ended June 30, 2025 Nine Months Ended June 30, 2024 Average Balance Interest Average Rate Average Balance Interest Average Rate ($ in thousands) ($ in thousands) Assets Loans receivable $ 20,822,283 $ 848,150 5.45 % $ 20,245,730 $ 857,251 5.66 % Mortgage-backed securities 2,318,554 70,118 4.04 1,523,673 41,694 3.66 Cash & Investments 2,254,121 87,116 5.17 2,085,208 89,947 5.76 FHLB stock 112,011 7,531 8.99 142,097 8,721 8.20 Total interest-earning assets 25,506,969 1,012,915 5.31 % 23,996,708 997,613 5.55 % Other assets 1,723,318 1,655,369 Total assets $ 27,230,287 $ 25,652,077 Liabilities and Equity Interest-bearing customer accounts $ 18,797,319 $ 460,833 3.28 % $ 15,567,225 $ 367,194 3.15 % Borrowings 2,616,896 67,753 3.46 4,479,958 142,399 4.25 Total interest-bearing liabilities 21,414,215 528,586 3.30 % 20,047,183 509,593 3.40 % Noninterest-bearing customer accounts 2,488,886 2,595,259 Other liabilities 298,952 332,769 Total liabilities 24,202,053 22,975,211 Shareholders' equity 3,028,234 2,676,866 Total liabilities and equity $ 27,230,287 $ 25,652,077 Net interest income/interest rate spread $ 484,329 2.01 % $ 488,020 2.16 % Net interest margin (NIM) 2.54 % 2.72 % As of June 30, 2025, total assets had decreased by $1,328,415,000 to $26,731,915,000 from $28,060,330,000 at September 30, 2024 primarily due to a reduction in loans receivable and cash used to reduce borrowings and purchase investments during the period. During the nine months ended June 30, 2025, loans receivable decreased $639,190,000, investment and mortgage-backed securities increased by $890,670,000, and FHLB stock increased by $282,000 while cash and cash equivalents decreased by $1,571,850,000, in each case as compared to September 30, 2024. Management believes the Company's cash and cash equivalents of $809,252,000 and shareholders’ equity of $3,014,325,000 as of June 30, 2025 will provide flexibility in managing the Company's interest rate risk going forward. LIQUIDITY AND CAPITAL RESOURCES The principal sources of funds for the Company's activities are loan repayments (including prepayments), net deposit inflows, sales and repayments of investments and borrowings 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 Bank has a credit line with the Federal Home Loan Bank of Des Moines ("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 Federal Home 52 Table of Contents WAFD, INC. AND SUBSIDIARIES Loan Bank of San Francisco ("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. 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. Customer account balances have remained stable, increasing by $12,601,000, or 0.1%, to $21,386,571,000 at June 30, 2025 compared with $21,373,970,000 at September 30, 2024. Total borrowings were $1,939,675,000 as of June 30, 2025, a decrease from $3,267,589,000 at September 30, 2024. The Company's cash and cash equivalents totaled $809,252,000 at June 30, 2025, a decrease from $2,381,102,000 at September 30, 2024. This decrease served to fund purchases of investment securities and pay down borrowings. The Company’s shareholders' equity at June 30, 2025 was $3,014,325,000, or 11.28% of total assets. This is an increase of $14,025,000 from September 30, 2024 when shareholders' equity was $3,000,300,000, or 10.69% of total assets. The Company’s shareholders' equity was impacted in the nine months ended June 30, 2025 by net income of $165,471,000, the payment of $63,785,000 in common stock dividends, the payment of $10,969,000 in preferred stock dividends, treasury stock purchases of $73,092,000, as well as the other comprehensive loss of $14,320,000. The ratio of tangible capital to tangible assets at June 30, 2025 was 9.78%. 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. WaFd, Inc. and its banking subsidiary are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can result in certain mandatory and possibly discretionary actions by regulators that, if undertaken, could have a material adverse effect on the Company's financial statements. Federal banking agencies establish regulatory capital rules that require minimum capital ratios and establish criteria for calculating regulatory capital. Minimum capital ratios for four measures are used for assessing capital adequacy. The standards are indicated in the table below. The common equity tier 1 capital ratio recognizes common equity as the highest form of capital. The denominator for all except the leverage ratio is risk weighted assets. The rules set forth a “capital conservation buffer” of up to 2.5%. In the event that a bank’s capital levels fall below the minimum ratios plus these buffers, the bank's regulators may place restrictions on it. These restrictions include reducing dividend payments, share buy-backs, and staff bonus payments. The purpose of these buffers is to require banks to build up capital outside of periods of stress that can be drawn down during periods of stress. As a result, even during periods where losses are incurred, the minimum capital ratios can still be met. There are also standards for Adequate and Well Capitalized criteria that are used for “Prompt Corrective Action” purposes. To remain categorized as well capitalized, the Bank and the Company must maintain minimum common equity risk-based, tier 1 risk-based, total risk-based and tier 1 leverage ratios as set forth in the following table. 53 Table of Contents WAFD, INC. AND SUBSIDIARIES As of June 30, 2025 and September 30, 2024, the Company and the Bank met all capital adequacy requirements to which they are subject, and the Bank's regulators categorized it as well capitalized under the regulatory framework for prompt corrective action. Actual Minimum Capital Adequacy Guidelines Minimum Well-Capitalized Guidelines ($ in thousands) Capital Ratio Ratio Ratio June 30, 2025 Common Equity Tier I risk-based capital ratio: The Company $ 2,189,703 11.75 % 4.50 % NA The Bank 2,502,215 13.43 % 4.50 % 6.50 % Tier I risk-based capital ratio: The Company 2,489,703 13.36 % 6.00 % NA The Bank 2,502,215 13.43 % 6.00 % 8.00 % Total risk-based capital ratio: The Company 2,754,285 14.78 % 8.00 % NA The Bank 2,715,386 14.58 % 8.00 % 10.00 % Tier 1 Leverage ratio: The Company 2,489,703 9.44 % 4.00 % NA The Bank 2,502,215 9.49 % 4.00 % 5.00 % September 30, 2024 Common Equity Tier 1 risk-based capital ratio: The Company $ 2,153,721 11.31 % 4.50 % NA The Bank 2,463,266 12.94 % 4.50 % 6.50 % Tier I risk-based capital ratio: The Company 2,453,721 12.88 % 6.00 % NA The Bank 2,463,266 12.94 % 6.00 % 8.00 % Total risk-based capital ratio: The Company 2,722,290 14.29 % 8.00 % NA The Bank 2,681,116 14.08 % 8.00 % 10.00 % Tier 1 Leverage ratio: The Company 2,453,721 8.90 % 4.00 % NA The Bank 2,463,266 8.94 % 4.00 % 5.00 % CHANGES IN FINANCIAL CONDITION Cash and cash equivalents - Cash and cash equivalents were $809,252,000 at June 30, 2025, a decrease of $1,571,850,000, or 66.0%, since September 30, 2024. This decrease served to fund purchases of investment securities and pay down borrowings. Available-for-sale and held-to-maturity investment securities - AFS securities increased $814,788,000, or 31.7%, during the nine months ended June 30, 2025, a result of securities purchases of $1,218,796,000 combined with unrealized gains during the period of $6,123,000 and a reclassification of gain into earnings from AFS securities hedging derivatives of $13,828,000 partially offset by principal repayments and maturities of $412,578,000. During the same period, the balance of HTM securities increased by $75,882,000 primarily due to purchases of $114,182,000 partially offset by principal pay-downs and maturities of $38,269,000. As of June 30, 2025, the Company had a total net unrealized loss on AFS securities of $38,368,000, which is included on a net of tax basis in accumulated other comprehensive income (loss). 54 Table of Contents WAFD, INC. AND SUBSIDIARIES Substantially all of the Company’s HTM and AFS debt securities are issued by U.S. government agencies or U.S. government-sponsored enterprises. These securities carry the explicit or implicit guarantee of the U.S. government and have a long history of zero credit loss. The Company did not record an allowance for credit losses for HTM securities as of June 30, 2025 or September 30, 2024 as the investment portfolio consists primarily of U.S. government agency mortgage-backed securities that management deems to have immaterial risk of loss. 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 Company does not believe that any of its AFS debt securities had credit loss impairment as of June 30, 2025 or September 30, 2024; therefore, no allowance was recorded. Loans receivable - Loans receivable, net of related contra accounts, decreased by $639,190,000 to $20,277,164,000 at June 30, 2025, compared to $20,916,354,000 at September 30, 2024. The decrease was primarily loan principal repayments of $3,644,554,000 outpacing originations of $2,541,479,000 and decreases in loans-in-process of $336,460,000. Commercial loan originations accounted for 77% of total originations and consumer loan originations were 23% during the year to date. The Company continues to focus on commercial lending, coupled with growing economies in all major markets in which we operate. The following table shows the loan portfolio by category and the change from prior fiscal year end. June 30, 2025 September 30, 2024 Change ($ in thousands) ($ in thousands) $ % Commercial loans Multi-family $ 4,881,996 22.9 % $ 4,658,119 20.8 % $ 223,877 4.8 % Commercial real estate 3,615,077 16.9 3,757,040 16.8 (141,963) (3.8) Commercial & industrial 2,295,802 10.7 2,337,139 10.4 (41,337) (1.8) Construction 1,540,474 7.2 2,174,254 9.7 (633,780) (29.1) Land - acquisition & development 175,643 0.8 200,713 1.0 (25,070) (12.5) Total commercial loans 12,508,992 58.5 13,127,265 58.7 (618,273) (4.7) Consumer loans Single-family residential 8,231,623 38.5 8,399,030 37.6 (167,407) (2.0) Construction - custom 188,109 0.9 384,161 1.7 (196,052) (51.0) Land - consumer lot loans 96,582 0.5 108,791 0.5 (12,209) (11.2) HELOC 272,614 1.3 266,151 1.2 6,463 2.4 Consumer 69,912 0.3 73,998 0.3 (4,086) (5.5) Total consumer loans 8,858,840 41.5 9,232,131 41.3 (373,291) (4.0) Total gross loans 21,367,832 100 % 22,359,396 100 % (991,564) (4.4) Less: Allowance for credit losses on loans 198,768 203,753 (4,985) (2.4) Loans in process 673,338 1,009,798 (336,460) (33.3) Net deferred fees, costs and discounts 218,562 229,491 (10,929) (4.8) Total loan contra accounts 1,090,668 1,443,042 (352,374) (24.4) Net loans $ 20,277,164 $ 20,916,354 $ (639,190) (3.1) % 55 Table of Contents WAFD, INC. AND SUBSIDIARIES The following tables provide information regarding loans receivable by loan class and geography. June 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 $ 499,039 $ 507,663 $ 844,426 $ 158,500 $ 23,545 $ 3,301,897 $ 46,219 $ 51,554 $ 15,689 $ 141,946 $ 5,590,478 California 1,038,159 239,422 130,564 7,891 — 1,464,262 — — 10,297 815 2,891,410 Oregon 786,789 401,171 244,036 72,399 38,287 896,078 11,810 11,532 229 36,136 2,498,467 Arizona 716,755 503,407 95,559 128,604 1,829 776,990 17,170 15,821 9,175 34,454 2,299,764 Utah 664,869 345,368 128,688 156,177 45,720 590,664 7,320 1,205 27,382 12,705 1,980,098 Texas 528,335 803,958 619,790 283,070 5,803 144,223 — 338 5 4,957 2,390,479 New Mexico 198,333 296,239 17,110 48,443 2,306 211,395 4,455 2,470 97 10,364 791,212 Idaho 181,610 178,757 44,069 83,077 8,278 398,417 3,632 7,689 50 22,049 927,628 Nevada 126,583 160,843 99,529 43,537 4,267 316,787 4,766 5,326 2,027 10,959 774,624 Other 39,557 155,567 68,311 54,003 — 7,434 — — 5,008 1,893 331,773 $ 4,780,029 $ 3,592,395 $ 2,292,082 $ 1,035,701 $ 130,035 $ 8,108,147 $ 95,372 $ 95,935 $ 69,959 $ 276,278 $ 20,475,933 Percentage by geographic area June 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 2.5 % 2.4 % 4.1 % 0.8 % 0.1 % 16.1 % 0.4 % 0.3 % 0.1 % 0.6 % 27.4 % California 5.1 1.2 0.6 — — 7.2 — — 0.1 — 14.2 Oregon 3.8 2.0 1.2 0.4 0.3 4.4 . 0.1 — 0.1 12.3 Arizona 3.5 2.5 0.5 0.6 — 3.8 0.1 0.1 — 0.2 11.3 Utah 3.2 1.7 0.6 0.8 0.2 2.9 — — 0.1 0.1 9.6 Texas 2.6 3.9 3.0 1.4 — 0.7 — — — — 11.6 New Mexico 1.0 1.4 0.1 0.2 — 1.0 — — — 0.1 3.8 Idaho 0.9 0.9 0.2 0.4 — 1.9 — — — 0.1 4.4 Nevada 0.6 0.8 0.5 0.2 — 1.5 — — — 0.1 3.7 Other 0.2 0.7 0.4 0.3 — 0.1 — — — — 1.7 23.4 % 17.5 % 11.2 % 5.1 % 0.6 % 39.6 % 0.5 % 0.5 % 0.3 % 1.3 % 100 % Percentage by geographic area as a % of each loan type June 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 10.4 % 14.1 % 36.8 % 15.3 % 18.1 % 40.7 % 48.4 % 53.7 % 22.4 % 51.3 % California 21.7 6.7 5.7 0.8 — 18.0 — — 14.7 0.3 Oregon 16.5 11.2 10.7 7.0 29.5 11.1 12.4 12.0 0.3 13.1 Arizona 15.0 14.0 4.2 12.4 1.4 9.6 18.0 16.5 13.1 12.5 Utah 13.9 9.6 5.7 15.1 35.2 7.3 7.7 1.3 39.1 4.6 Texas 11.1 22.4 27.0 27.3 4.5 1.8 — 0.4 — 1.8 New Mexico 4.1 8.2 0.7 4.7 1.8 2.6 4.7 2.6 0.2 3.7 Idaho 3.8 5.0 1.9 8.0 6.4 4.9 3.8 8.0 0.1 8.0 Nevada 2.6 4.5 4.3 4.2 3.3 3.9 5.0 5.5 2.9 4.0 Other 0.9 4.3 3.0 5.2 — 0.1 — — 7.2 0.7 100 % 100 % 100 % 100 % 100 % 100 % 100 % 100 % 100 % 100 % 56 Table of Contents WAFD, INC. AND SUBSIDIARIES The following table shows the geographic distribution by state of the loan portfolio and the change from the prior fiscal year end. June 30, 2025 September 30, 2024 Change Washington 27.4 % 27.3 % 0.1 California 14.2 14.4 (0.2) Oregon 12.3 11.7 0.6 Arizona 11.3 11.0 0.3 Utah 9.6 9.9 (0.3) Texas 11.6 11.8 (0.2) New Mexico 3.8 3.6 0.2 Idaho 4.4 4.3 0.1 Nevada 3.7 3.7 — Other 1 1.7 2.3 (0.6) 100 % 100 % 1 Includes loans from outside of our nine state footprint. Non-performing assets - Non-performing assets increased $19,742,000 during the nine months ended June 30, 2025 to $97,160,000 from $77,418,000 at September 30, 2024. The change is due to a $13,155,000 increase in non-accrual loans and a $6,587,000 increase in real estate owned. Non-performing assets as a percentage of total assets was 0.36% at June 30, 2025 compared to 0.28% at September 30, 2024. The following table sets forth information regarding non-performing assets. June 30, 2025 September 30, 2024 ($ in thousands) Non-accrual loans: Multi - family $ 11,601 14.0 % $ 18,743 27.0 % Commercial real estate 46,720 56.5 26,362 37.9 Commercial & industrial 33 0.1 — — Construction 3,400 4.1 1,120 1.6 Land - acquisition & development — — 74 0.1 Single-family residential 19,246 23.3 21,488 30.9 Construction - custom 847 1.0 848 1.2 Land - consumer lot loans 8 — — — HELOC 662 0.8 596 0.9 Consumer 179 0.2 310 0.4 Total non-accrual loans 82,696 100 % 69,541 100 % Real estate owned 11,154 4,567 Other property owned 3,310 3,310 Total non-performing assets $ 97,160 $ 77,418 Total non-performing assets as a percentage of total assets 0.36 % 0.28 % The Company would have recognized interest income of $2,834,000 for the same period had non-accrual loans performed according to their original contract terms. In addition to the non-accrual loans reflected in the above table, the Company had 57 Table of Contents WAFD, INC. AND SUBSIDIARIES $687,436,000 of loans that were less than 90 days delinquent at June 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 NPAs as a percent of total assets would have increased to 2.94% at June 30, 2025. For the nine months ended June 30, 2025, the Company recognized $2,694,000 in interest income on cash payments received from borrowers on non-accrual loans. Loans may be modified as the result of borrowers experiencing financial difficulty needing relief from the contractual terms of their loan. Most loan modifications to borrowers experiencing financial difficulty are accruing and performing loans where the borrower has approached the Company about modification due to temporary financial difficulties. Each request for modification is individually evaluated for merit and likelihood of success. Often a term extension is needed in the short term in order to evaluate the need for further corrective action. Payment delays and interest-only payments may also be approved during the modification period. Principal forgiveness is not an available option for restructured loans. For commercial loans, six consecutive payments on newly restructured loan terms are generally required prior to returning the loan to accrual status. In some instances after the required six consecutive payments are made, a management assessment will conclude that collection of the entire principal balance is still in doubt. In those instances, the loan will remain on non-accrual. Homogeneous loans may or may not be on accrual status at the time of restructuring, but all are placed on accrual status upon the restructuring of the loan. Homogeneous loans are restructured only if the borrower can demonstrate the ability to meet the restructured payment terms; otherwise, collection is pursued and the loan remains on non-accrual status until liquidated. If the homogeneous restructured loan does not perform, it will be placed in non-accrual status when it is 90 days delinquent. Allowance for credit losses - The following table shows the composition of the Company’s allowance for credit losses and the change since the prior fiscal year end. June 30, 2025 September 30, 2024 Change Allowance for credit losses: ($ in thousands) ($ in thousands) $ % Commercial loans Multi-family $ 26,806 13.5 % 25,248 12.4 % $ 1,558 6.2 % Commercial real estate 42,275 21.3 39,210 19.2 3,065 7.8 Commercial & industrial 56,773 28.5 58,748 28.8 (1,975) (3.4) Construction 17,113 8.6 22,267 10.9 (5,154) (23.1) Land - acquisition & development 6,407 3.3 7,900 3.9 (1,493) (18.9) Total commercial loans 149,374 75.2 153,373 75.3 (3,999) (2.6) Consumer loans Single-family residential 39,998 20.1 40,523 19.9 (525) (1.3) Construction - custom 746 0.3 1,427 0.7 (681) (47.7) Land - consumer lot loans 2,277 1.1 2,564 1.3 (287) (11.2) HELOC 3,122 1.7 3,049 1.5 73 2.4 Consumer 3,251 1.6 2,817 1.4 434 15.4 Total consumer loans 49,394 24.8 50,380 24.7 (986) (2.0) Total allowance for loan losses 198,768 100.0 % 203,753 100.0 % (4,985) (2.4) Reserve for unfunded commitments 20,500 21,500 (1,000) (4.7) Total allowance for credit losses $ 219,268 $ 225,253 $ (5,985) (2.7) % Management believes the allowance for credit losses of $219,268,000, or 1.03% of gross loans, is sufficient to absorb estimated losses inherent in the portfolio of loans and unfunded commitments. See Note E and Note I for further details of the allowance for loan losses and reserve for unfunded commitments as of and for the periods ended June 30, 2025 and September 30, 2024. Real estate owned ("REO") - REO increased during the nine months ended June 30, 2025 by $6,587,000 to $11,154,000. The increase was due to the foreclosure of two commercial properties and one residential property and the transfer of three former branch properties. 58 Table of Contents WAFD, INC. AND SUBSIDIARIES Intangible assets - Intangible assets decreased to $444,291,000 as of June 30, 2025 from $448,425,000 as of September 30, 2024 as the result of an adjustment to purchase accounting related to the Merger combined with normal amortization. Customer accounts - Customer accounts increased $12,601,000, or 0.1%, to $21,386,571,000 at June 30, 2025 compared with $21,373,970,000 at September 30, 2024. Transaction accounts increased by $151,939,000 or 1.3% during that period, while time deposits decreased $139,338,000, or 1.5%, consistent with our strategy to shift away from time deposits in favor of transaction accounts. The following table shows the composition of the Bank’s customer accounts by deposit type. June 30, 2025 September 30, 2024 Deposit Account Balance As a % of Total Deposits Weighted Average Rate Deposit Account Balance As a % of Total Deposits Weighted Average Rate ($ in thousands) Non-interest checking $ 2,487,816 11.6 % — % $ 2,500,467 11.7 % — % Interest checking 4,705,457 21.9 2.61 4,486,444 21.0 2.89 Savings 703,085 3.5 0.22 718,560 3.4 0.23 Money market 4,072,766 19.0 2.15 4,111,714 19.2 2.22 Time deposits 9,417,447 44.0 3.88 9,556,785 44.7 4.58 Total $ 21,386,571 100 % 2.70 % $ 21,373,970 100 % 3.09 % Borrowings - Borrowings were $1,939,675,000 as of June 30, 2025 a decrease from $3,267,589,000 as of September 30, 2024 as a result of repayments. The weighted average effective rate for borrowings was 2.76% as of June 30, 2025 and 3.93% at September 30, 2024. Shareholders' equity - The Company’s shareholders' equity at June 30, 2025 was $3,014,325,000, or 11.28% of total assets. This is an increase of $14,025,000 from September 30, 2024 when shareholders' equity was $3,000,300,000, or 10.69% of total assets. The Company’s shareholders' equity was impacted in the nine months ended June 30, 2025 by net income of $165,471,000, the payment of $63,785,000 in common stock dividends, payment of $10,969,000 in preferred stock dividends, treasury stock purchases of $73,092,000, as well as changes in other comprehensive income of $14,320,000. RESULTS OF OPERATIONS Net Income - The Company recorded net income of $61,952,000 for the three months ended June 30, 2025 compared to $64,560,000 for the prior year quarter. All driving factors are described below. Net Interest Income - For the three months ended June 30, 2025, net interest income was $167,988,000, which is $9,198,000 less than the same quarter of the prior year. This is largely the result of decreased loan volume as net interest margin was 2.69% for the quarter ended June 30, 2025 compared to 2.56% for the quarter ended June 30, 2024. The decrease in net interest income compared to the June 30, 2024 quarter is largely due to reduced interest-earning asset balances as a result of loan repayments and decreased demand for new loans compared to the reduction in interest-bearing liabilities for the same period. Average interest-earning assets decreased by $2,760,506,000 compared to a decrease of $2,810,066,000 in average interest-bearing liabilities. Although the reduction in liabilities was larger the effect of the lower assets was magnified by the higher yields. The effects of the balance decreases were partially offset by a lower average rate paid on interest-bearing liabilities which decreased by 50 basis points. For the nine months ended June 30, 2025, net interest income was $484,329,000, which is a decrease of $3,691,000 from the same period of the prior year. Net interest margin was 2.54% for the nine months ended June 30, 2025 compared to 2.72% for the prior year same period. The following table sets forth certain information explaining changes in interest income and interest expense for the period indicated compared to the same period one year ago. For each category of interest-earning asset and interest-bearing liability, information is provided on changes attributable to (1) changes in volume (changes in volume multiplied by old rate) and (2) changes in rate (changes in rate multiplied by old volume). The change in interest income and interest expense attributable to changes in both volume and rate has been allocated proportionately to the change due to volume and the change due to rate. 59 Table of Contents WAFD, INC. AND SUBSIDIARIES Rate / Volume Analysis : Comparison of Three Months Ended 6/30/2025 and 6/30/2024 Comparison of Nine Months Ended 6/30/2025 and 6/30/2024 ($ in thousands) Volume Rate Total Volume Rate Total Interest income: Loans receivable $ (39,922) $ (17,720) $ (57,642) $ 23,749 $ (32,850) $ (9,101) Mortgage-backed securities 9,737 595 10,332 23,697 4,727 28,424 Investments (1) (10,417) (2,500) (12,917) 5,971 (9,992) (4,021) All interest-earning assets (40,602) (19,625) (60,227) 53,417 (38,115) 15,302 Interest expense: Customer accounts 3,083 (10,707) (7,624) 78,096 15,544 93,640 Borrowings (28,145) (15,260) (43,405) (51,600) (23,046) (74,646) All interest-bearing liabilities (25,062) (25,967) (51,029) 26,496 (7,502) 18,994 Change in net interest income $ (15,540) $ 6,342 $ (9,198) $ 26,921 $ (30,613) $ (3,692) ___________________ (1) Includes interest on cash equivalents and dividends on FHLB stock. Provision for Credit Losses - The Company recorded $2,000,000 provision for credit losses for the three months ended June 30, 2025, compared with a provision for credit losses of $1,500,000 for the three months ended June 30, 2024. The provision recorded in the three months ended June 30, 2025 was the net result of a decreased loan receivable balance, mixed credit metrics, including the increasing trends in negative migration of criticized and nonperforming loans, and charge-offs taken during the quarter. The provision in 2024 was due to borrower sensitivity to high interest rates and inflationary pressures within the commercial and industrial portfolio. The Company recorded $4,750,000 provision for credit losses for the nine months ended June 30, 2025 compared to $17,500,000 for the nine months ended June 30, 2024. The provision in the prior period included the initial provision of $16,000,000 recorded for the loans acquired in the Merger. Net charge-offs totaled $5,441,000 for the three months ended June 30, 2025, compared to $1,253,000 during the three months ended June 30, 2024. Net charge-offs totaled $10,735,000 for the nine months ended June 30, 2025, compared to $1,286,000 during the nine months ended June 30, 2024. Non-Interest Income - The three months ended June 30, 2025 results included total non-interest income of $18,273,000 compared to $17,255,000 for the same period one year ago, a $1,018,000 increase. The increase was primarily due to increased prepayments and other fees earned on loans. The results for the nine months ended June 30, 2025 include total non-interest income of $52,856,000 compared to $44,814,000 for the nine months ended June 30, 2024, an $8,042,000 increase. This increase was the result of increased prepayment fees earned on loans plus increased commission income from WaFd Insurance, the Company's insurance subsidiary. Non-Interest Expense - Non-interest expense was $104,327,000 for the three months ended June 30, 2025, a decrease of $5,752,000 from $110,079,000 for the prior year quarter, largely a result of reduced compensation costs in the current fiscal year due to restructuring arising from management's decision to exit the single family mortgage lending market combined with reduced FDIC premium costs. Non-interest expense for the three months ended June 30, 2025 and June 30, 2024 equaled 1.56% and 1.48%, respectively, of average assets Non-interest expense was $320,470,000 for the nine months ended June 30, 2025, a decrease of $19,861,000 from $340,331,000 for the same period in fiscal 2024. This decrease was due to the large amount of Merger-related expenses incurred in the first half of fiscal 2024 in addition to the quarter-over-quarter savings described above. Total non-interest expense for the nine months ended June 30, 2025 and June 30, 2024 equaled 1.57% and 1.77%, respectively, of average assets. Gain (Loss) on Real Estate Owned - Results for the three months ended June 30, 2025 include a net loss on REO of $176,000, compared to a net loss of $124,000 for the prior year quarter. Results for the nine months ended June 30, 2025 included a net gain on REO of $54,000, compared to a net gain of $387,000 in the prior year period. Income Tax Expense - Income tax expense totaled $17,806,000 for the three months ended June 30, 2025, compared to $18,178,000 for the prior year quarter. The effective tax rate was 22.33% and 21.97% for the three months ended June 30, 2025 and June 30, 2024, respectively. Income tax expense totaled $46,548,000 for the nine months ended June 30, 2025, compared to $36,489,000 for the prior year period. The effective tax rate was 21.95% and 20.80% for the nine months ended June 30, 2025 and June 30, 2024, respectively. The Company’s effective tax rate varies from the statutory rate mainly due to 60 Table of Contents WAFD, INC. AND SUBSIDIARIES state taxes, tax-exempt income, tax-credit investments, miscellaneous non-deductible expenses and discrete tax adjustments for prior periods. 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. At this time, we believe that there will be no significant impact. We account for our portfolio of LIHTC investments under the proportional amortization method. 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 statement of operations. We currently estimate that the total amount of tax benefits from our LIHTC investment portfolio that will be recognized during this fiscal year is about $19.7 million. The amortization of LIHTC investments is a component of our income tax expense and therefore also reflected in the Income Tax Expense line. We expect the total amount of amortization expense that will be recognized during this fiscal year is about $16.1 million.