WAFD INC

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.

The purchase price for purposes of the transaction accounting adjustments is calculated based on the number of shares of WaFd

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).

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.

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.

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:

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.

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.

The following table shows the impact of merger-related expenses for the years ended September 30, 2025 and September 30,

The following table presents unaudited pro forma information as if the Merger had occurred on October 1, 2022. The pro forma

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.

NOTE C -INVESTMENT SECURITIES

The tables below provide detail regarding the amortized cost and fair value of available-for-sale and held-to-maturity

investment securities.

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 wereno 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.

The following tables show the gross unrealized losses and fair value of securities as of September 30, 2025 and September 30,

2024, by length of time that individual securities in each category have been in a continuous loss position. There were 213 and

209 securities with an unrealized loss as of September 30, 2025 and September 30, 2024, respectively. The decline in fair value

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.

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.

NOTE D -LOANS RECEIVABLE

For a detailed discussion of loans and credit quality, including accounting policies and the CECL methodology used to estimate the

allowance for credit losses, see Note A "Summary of Significant Accounting Policies" above.

The Company's loans held for investment are divided intotwo 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.

The following table is a summary of loans receivable by loan portfolio segment and class.

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.

The following summary breaks down the Company's fixed rate and adjustable rate loans by time to maturity or to rate adjustment. The

table below does not account for fixed rate loans that are swapped to floating using derivatives. See Note Gfor 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.

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.

The following table sets forth the amortized cost basis of loans receivable for non-accrual loans and loans 90 days or more past due

and still accruing.

The following tables break down loan delinquencies by loan portfolio segment and class.

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.

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.

The following table presents the amortized basis of loans that were modified to borrowers experiencing financial difficulty during the

period by loan class and modification type. Modifications during the years presented were term extensions or payment deferrals.

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.

None of the loans modified in the twelve months ended September 30, 2025 have defaulted after modification as of September 30,

2025 and onlyone 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.

•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.

The following tables present by credit quality indicator, loan class, and year of origination, the amortized cost basis of loans receivable

as of September 30, 2025 and September 30, 2024.

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

allowance for credit losses, see Note A, "Summary of Significant Accounting Policies."

The following tables summarize the activity in the allowance for loan losses by loan portfolio segment and class.

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.

The following tables provide the amortized cost of loans receivable based on risk rating categories (as previously defined).

The following tables provide information on amortized cost of loans receivable based on borrower payment activity.

NOTE F -FAIR VALUE MEASUREMENTS

FASB ASC 820, Fair Value Measurement ("ASC 820") defines fair value as the exchange price that would be received for an asset

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.

The following tables present the balance and level in the fair value hierarchy for assets and liabilities that are measured at fair value

on a recurring basis (with the exception of those measured using the NAV practical expedient).

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,

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 real 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.

The following tables present the aggregated balance of assets that were measured at fair value on a nonrecurring basis for the

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.

(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.

(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.

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.

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.

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

third-party pricing service using a discounted cash flow technique.

NOTE G -DERIVATIVES AND HEDGING ACTIVITIES

The following tables present the fair value, notional amount and balance sheet classification of derivative assets and liabilities at

September 30, 2025 and September 30, 2024.

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.

(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.

(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

associated with the hedging relationships was$(1,471,000).

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 thanone year tofive years, with the weighted average being 4.1 years.

The following table presents the impact of derivative instruments (cash flow hedges on borrowings) on AOCI for the periods

presented.

The following table presents the gains/(losses) on derivative instruments in fair value and cash flow accounting hedging

relationships under ASC 815 for the period presented.

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.

The following table presents the impact of derivative instruments (client swap program) that are not designated in accounting

hedges under ASC 815 for the periods presented.

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

contingent incentive fees based on the volume of business generated for the insurance carrier and based on policy renewal rates.

NOTE I -INTEREST RECEIVABLE

The following table provides a summary of interest receivable by interest-earning asset type.