WAFD INC

Previous wording

•the effects of natural or man-made disasters, calamities, or conflicts, including terrorist events and pandemics (such as the COVID-19 pandemic), and related regulations, and potential impact on the creditworthiness of our customers;

Current wording

•the effects of natural or man-made disasters, calamities, or conflicts, including terrorist events and pandemics, and related regulations, and potential impact on the creditworthiness of our customers;

Previous wording

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 customer deposit accounts is 60% variable and 40% fixed as of December 31, 2025 while the composition of the investment securities portfolio is 36% variable and 64% fixed rate. The Company was a party to $610,000,000 of pay fixed interest rate swaps to hedge the fair value risk of the AFS portfolio which effectively converts 12% of fixed securities to variable as of December 31, 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 $764,794,000 of mortgage-backed securities that it has designated as HTM and are carried at amortized cost. As of December 31, 2025, the net unrealized loss on these securities was $29,433,000. The Company has $4,142,285,000 of AFS securities that are carried at fair value. As of December 31, 2025, the net unrealized loss on these securities was $667,000. The Company recognized in earnings a gain of $2,094,000 on fair value of AFS securities hedged by the fixed interest rate swaps. The Company has also executed interest rate swaps to hedge interest rate risk on certain FHLB borrowings. The unrealized gain on these interest rate swaps as of December 31, 2025 was $94,529,000. All of the above are pre-tax net unrealized gains or losses.

Current wording

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 customer deposit accounts is 60% variable and 40% fixed as of March 31, 2026 while the composition of the investment securities portfolio is 45% variable and 55% fixed rate. The Company was a party to $610,000,000 of pay fixed interest rate swaps to hedge the fair value risk of the AFS portfolio which effectively converts 12% of fixed securities to variable as of March 31, 2026. 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 $745,727,000 of mortgage-backed securities that it has designated as HTM and are carried at amortized cost. As of March 31, 2026, the net unrealized loss on these securities was $33,610,000. The Company has $4,352,258,000 of AFS securities that are carried at fair value. As of March 31, 2026, the net unrealized loss on these securities was $16,815,000. The Company recognized in earnings a loss of $6,989,000 on fair value of AFS securities hedged by the fixed interest rate swaps for the six months ended March 31, 2026. The Company has also executed interest rate swaps to hedge interest rate risk on certain FHLB borrowings. The unrealized gain on these interest rate swaps as of March 31, 2026 was $97,378,000. All of the above are pre-tax net unrealized gains or losses.

Previous wording

Prepayment speeds continue to be relatively low at December 31, 2025 but increasing with the Bank's conditional payment rate ("CPR") for single-family mortgages at 9.60%, up from 8.10% the year before.

Current wording

Prepayment speeds continue to be relatively low at March 31, 2026 with the Bank's conditional payment rate ("CPR") for single-family mortgages at 8.10%, the same as the year before.

Previous wording

Net Interest Margin - Net interest margin is measured as net interest income divided by average earning assets for the period. Net interest margin was 2.70% for the quarter ended December 31, 2025 compared to 2.39% for the quarter ended December 31, 2024. The yield on interest-earning assets decreased 22 basis points to 5.09% and the cost of interest-bearing liabilities decreased 60 basis points to 2.88% over that same period. The lower yield on interest-earning assets was primarily due to falling interest rates affecting adjustable rate loans, non-accrual interest adjustments, net cash settlements on our loan and securities fair value hedge programs and interest-bearing cash deposits.

Current wording

Net Interest Margin - Net interest margin is measured as net interest income divided by average earning assets for the period. Net interest margin was 2.81% for the quarter ended March 31, 2026 compared to 2.55% for the quarter ended March 31, 2025. The yield on interest-earning assets decreased 19 basis points to 5.14% and the cost of interest-bearing liabilities decreased 50 basis points to 2.79% over that same period. The lower yield on interest-earning assets was primarily due to falling interest rates affecting adjustable rate loans, non-accrual interest adjustments, lower net cash settlements on our loan and securities fair value hedge programs and interest-bearing cash deposits.

Previous wording

As of December 31, 2025, total assets had increased by $586,045,000 to $27,285,744,000 from $26,699,699,000 at September 30, 2025 primarily due to the purchase of investments during the period. During the three months ended December 31, 2025, loans receivable decreased $240,462,000, investment and mortgage-backed securities increased by $728,076,000, and FHLB stock increased by $30,150,000 while cash and cash equivalents increased by $77,605,000, in each case as compared to September 30, 2025.

Current wording

As of March 31, 2026, total assets had increased by $869,086,000 to $27,568,785,000 from $26,699,699,000 at September 30, 2025 primarily due to the purchase of investments during the period. During the six months ended March 31, 2026, loans receivable decreased $121,635,000, investment and mortgage-backed securities increased by $918,982,000, and FHLB stock increased by $58,283,000 while cash and cash equivalents increased by $12,489,000, in each case as compared to September 30, 2025.

Previous wording

Management believes the Company's cash and cash equivalents of $734,915,000 and shareholders’ equity of $3,029,407,000 as of December 31, 2025 will provide flexibility in managing the Company's interest rate risk going forward.

Current wording

Management believes the Company's cash and cash equivalents of $669,799,000 and shareholders’ equity of $2,981,283,000 as of March 31, 2026 will provide flexibility in managing the Company's interest rate risk going forward.

Previous wording

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 Loan Bank of San Francisco ("FHLB - SF") in support of Luther Burbank Corporation ("LBC") borrowings from the FHLB - SF as a result of the merger with LBC effective March 1, 2024, 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.

Current wording

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 Loan Bank of San Francisco ("FHLB - SF") in support of Luther Burbank Corporation ("LBC") borrowings from the FHLB -

Previous wording

Customer account balances have decreased by $20,666,000, or 0.1%, to $21,416,970,000 at December 31, 2025 compared with $21,437,636,000 at September 30, 2025. Total borrowings were $2,436,532,000 as of December 31, 2025, an increase from $1,765,604,000 at September 30, 2025, which funded the securities purchases during the quarter.

Current wording

Customer account balances have decreased by $313,485,000, or 1.5%, to $21,124,151,000 at March 31, 2026 compared with $21,437,636,000 at September 30, 2025. Total borrowings were $3,062,441,000 as of March 31, 2026, an increase from $1,765,604,000 at September 30, 2025, which were used for securities purchases during the fiscal year to date.

Previous wording

The Company's cash and cash equivalents totaled $734,915,000 at December 31, 2025, an increase from $657,310,000 at September 30, 2025. This increase is the result of normal transactions and activities.

Current wording

The Company's cash and cash equivalents totaled $669,799,000 at March 31, 2026, an increase from $657,310,000 at September 30, 2025. This increase is the result of normal transactions and activities.

Previous wording

The Company’s shareholders' equity at December 31, 2025 was $3,029,407,000, or 11.10% of total assets. This is a decrease of $10,168,000 from September 30, 2025 when shareholders' equity was $3,039,575,000, or 11.38% of total assets. The Company’s shareholders' equity was impacted in the three months ended December 31, 2025 by net income of $64,196,000, the payment of $20,362,000 in common stock dividends, the payment of $3,656,000 in preferred stock dividends, treasury stock purchases of $58,017,000, as well as an increase in other comprehensive income of $4,954,000. The tier 1 leverage ratio at December 31, 2025 was 9.44%. 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.

Current wording

The Company’s shareholders' equity at March 31, 2026 was $2,981,283,000, or 10.81% of total assets. This is a decrease of $58,292,000 from September 30, 2025 when shareholders' equity was $3,039,575,000, or 11.38% of total assets. The Company’s shareholders' equity was impacted in the six months ended March 31, 2026 by net income of $129,744,000, the payment of $40,519,000 in common stock dividends, the payment of $7,313,000 in preferred stock dividends, treasury stock purchases of $145,224,000, as well as a decrease in other comprehensive income of $1,865,000. The tier 1 leverage ratio at March 31, 2026 was 9.10%. 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.

Previous wording

Cash and cash equivalents - Cash and cash equivalents were $734,915,000 at December 31, 2025, an increase of $77,605,000, or 11.8%, since September 30, 2025. This increase was the result of normal transactions and activities.

Current wording

Cash and cash equivalents - Cash and cash equivalents were $669,799,000 at March 31, 2026, an increase of $12,489,000, or 1.9%, since September 30, 2025. This increase was the result of normal transactions and activities.

Previous wording

Available-for-sale and held-to-maturity investment securities - AFS securities increased $609,084,000, or 17.2%, during the three months ended December 31, 2025, a result of securities purchases of $724,749,000 combined with unrealized gains during the period of $9,924,000, offset by a reclassification of loss into earnings from AFS securities hedging derivatives of $2,094,000 and principal repayments and maturities of $128,421,000. During the same period, the balance of HTM securities increased by $118,992,000 due to purchases of $141,283,000, offset by principal pay-downs and maturities of $22,428,000. As of December 31, 2025, the Company had a total net unrealized gain on AFS securities of $667,000, which is included on a net of tax basis in accumulated other comprehensive income (loss).

Current wording

Available-for-sale and held-to-maturity investment securities - AFS securities increased $819,057,000, or 23.2%, during the six months ended March 31, 2026, a result of securities purchases of $1,067,724,000 offset by unrealized losses during the period of $7,559,000, a reclassification of loss into earnings from AFS securities hedging derivatives of $6,989,000 and principal repayments and maturities of $247,515,000. During the same period, the balance of HTM securities increased by $99,925,000 due to purchases of $141,063,000, offset by principal pay-downs and maturities of $41,409,000. As of March 31, 2026, the Company had a total net unrealized loss on AFS securities of $16,815,000, which is included on a net of tax basis in accumulated other comprehensive income (loss).

Previous wording

Loans receivable - Loans receivable, net of related contra accounts, decreased by $240,462,000 to $19,848,156,000 at December 31, 2025, compared to $20,088,618,000 at September 30, 2025. The decrease was primarily loan principal repayments of $1,343,635,000 outpacing originations of $1,118,549,000 and decreases in loans-in-process of $9,627,000. Commercial loan originations accounted for 94% of total originations and consumer loan originations were 6% for the quarter. The Company continues to focus on commercial lending, coupled with growing economies in all major markets in which we operate.

Current wording

Loans receivable - Loans receivable, net of related contra accounts, decreased by $121,635,000 to $19,966,983,000 at March 31, 2026, compared to $20,088,618,000 at September 30, 2025. The decrease was primarily loan principal repayments of $2,479,022,000 outpacing originations, net of loans-in-process, of $2,371,682. Commercial loan originations accounted for 95% of total originations and consumer loan originations were 5% for the quarter. The Company continues to focus on commercial lending, coupled with growing economies in all major markets in which we operate.

Previous wording

Non-performing assets - Non-performing assets increased $60,374,000 during the three months ended December 31, 2025 to $203,396,000 from $143,022,000 at September 30, 2025. The change is due to a $62,720,000 increase in non-accrual loans offset by a $2,346,000 decrease in real estate owned. The increase in non-accrual loans is primarily the result of two commercial relationships over 90 days past due. Although appropriately non-accrual based on policy, it was determined no charge-offs were needed for these credits as a result of collateral sufficiency. Management is actively collaborating with the borrowers. Non-performing assets as a percentage of total assets was 0.75% at December 31, 2025 compared to 0.54% at September 30, 2025.

Current wording

Non-performing assets - Non-performing assets decreased $11,038,000 during the six months ended March 31, 2026 to $131,984,000 from $143,022,000 at September 30, 2025. The change is due to a $4,769,000 decrease in non-accrual loans combined with a $2,959,000 decrease in real estate owned and a $3,310,000 decrease in other property owned. Non-performing assets as a percentage of total assets was 0.48% at March 31, 2026 compared to 0.54% at September 30, 2025.

Previous wording

The Company would have recognized interest income of $2,124,000 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 $392,220,000 of loans that were less than 90 days delinquent at December 31, 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 2.18% at December 31, 2025. For the three months ended December 31, 2025, the Company recognized $540,000 in interest income on cash payments received from borrowers on non-accrual loans.

Current wording

The Company would have recognized interest income of $3,916,000 for the six months ended March 31, 2026 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 $404,010,000 of loans that were less than 90 days delinquent at March 31, 2026 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 1.94% at March 31, 2026. For the six months ended March 31, 2026, the Company recognized $844,000 in interest income on cash payments received from borrowers on non-accrual loans.

Previous wording

Management believes the allowance for credit losses of $221,039,000, or 1.05% 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 December 31, 2025 and September 30, 2025.

Current wording

Management believes the allowance for credit losses of $224,450,000, or 1.05% 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 March 31, 2026 and September 30, 2025.

Previous wording

Real estate owned ("REO") - REO decreased during the three months ended December 31, 2025 by $2,346,000 to $8,738,000. The decrease was due to the sale of former branch properties.

Current wording

Real estate owned ("REO") - REO decreased during the six months ended March 31, 2026 by $2,959,000 to $8,125,000. The decrease was due to the sale of properties.

Previous wording

Intangible assets - Intangible assets increased to $443,085,000 as of December 31, 2025 from $442,093,000 as of September 30, 2025 as the result of small acquisitions made by the Company's insurance subsidiary. This was offset by normal amortization.

Current wording

Intangible assets - Intangible assets increased to $445,511,000 as of March 31, 2026 from $442,093,000 as of September 30, 2025 as the result of small acquisitions made by the Company's insurance subsidiary. This was offset by normal amortization.

Previous wording

Customer accounts - Customer accounts decreased $20,666,000, or 0.1%, to $21,416,970,000 at December 31, 2025 compared with $21,437,636,000 at September 30, 2025. Transaction accounts increased by $559,442,000 or 4.5% during that period, while time deposits decreased $580,108,000, or 6.4%, consistent with our strategy to shift away from time deposits in favor of transaction accounts.

Current wording

Customer accounts - Customer accounts decreased $313,485,000, or 1.5%, to $21,124,151,000 at March 31, 2026 compared with $21,437,636,000 at September 30, 2025. Transaction accounts increased by $440,389,000 or 3.6% during that period, while time deposits decreased $753,874,000, or 8.3%, consistent with our strategy to shift away from time deposits in favor of transaction accounts.

Previous wording

Borrowings - Borrowings were $2,436,532,000 as of December 31, 2025, an increase from $1,765,604,000 as of September 30, 2025. The increase was utilized to support asset growth. The weighted average effective rate for borrowings was 2.74% as of December 31, 2025 and 2.50% at September 30, 2025.

Current wording

Borrowings - Borrowings were $3,114,548,000 as of March 31, 2026, an increase from $1,817,249,000 as of September 30, 2025. The increase was utilized to support asset growth. The weighted average effective rate for borrowings was 3.01% as of March 31, 2026 and 2.50% at September 30, 2025.

Previous wording

Shareholders' equity - The Company’s shareholders' equity at December 31, 2025 was $3,029,407,000, or 11.10% of total assets. This is a decrease of $10,168,000 from September 30, 2025 when shareholders' equity was $3,039,575,000, or 11.38% of total assets. The Company’s shareholders' equity was impacted in the three months ended December 31, 2025 by net income of $64,196,000, the payment of $20,362,000 in common stock dividends, payment of $3,656,000 in preferred stock dividends, treasury stock purchases of $58,017,000, as well as changes in other comprehensive income of $4,954,000.

Current wording

Shareholders' equity - The Company’s shareholders' equity at March 31, 2026 was $2,981,283,000, or 10.81% of total assets. This is a decrease of $58,292,000 from September 30, 2025 when shareholders' equity was $3,039,575,000, or 11.38% of total assets. The Company’s shareholders' equity was impacted in the six months ended March 31, 2026 by net income of $129,744,000, the payment of $40,519,000 in common stock dividends, payment of $7,313,000 in preferred stock dividends, treasury stock purchases of $145,224,000, as well as a decrease in other comprehensive income of $1,865,000.

Previous wording

Net Income - The Company recorded net income of $64,196,000 for the three months ended December 31, 2025 compared to $47,267,000 for the prior year quarter. All driving factors are described below.

Current wording

Net Income - The Company recorded net income of $65,548,000 for the three months ended March 31, 2026 compared to $56,252,000 for the prior year quarter. All driving factors are described below.

Previous wording

Net Interest Income - For the three months ended December 31, 2025, net interest income was $171,111,000, which is an increase of $15,680,000 from the same quarter of the prior year. Net interest margin increased to 2.70% for the quarter ended December 31, 2025 compared to 2.39% for the quarter ended December 31, 2024. The increase in net interest income is largely due to decreased rates on interest-bearing liabilities partially offset by the decrease in average interest-earning assets. The rate paid on interest-bearing liabilities decreased by 60 basis points while the rate earned on interest-earning assets fell by 22 basis points. Average interest-earning assets decreased by $681,905,000 compared to a decrease of $791,265,000 in average interest-bearing liabilities, which resulted in lower yields. The effect was driven by the reduction in the loans balance and was magnified by interest adjustments on non-accrual loans.

Current wording

Net Interest Income - For the three months ended March 31, 2026, net interest income was $177,570,000, which is an increase of $16,660,000 from the same quarter of the prior year. Net interest margin increased to 2.81% for the quarter ended March 31, 2026 compared to 2.55% for the quarter ended March 31, 2025. The increase in net interest income is largely due to decreased rates on interest-bearing liabilities partially offset by the decrease in rate earned on interest-earning assets. The rate paid on interest-bearing liabilities decreased by 50 basis points while the rate earned on interest-earning assets fell by 19 basis points.

Previous wording

Provision for Credit Losses - The Company recorded $3,500,000 provision for credit losses for the three months ended December 31, 2025, compared with no provision for credit losses for the three months ended December 31, 2024. The provision recorded in the three months ended December 31, 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. This provision increased the reserve to 1.05% of gross loans compared with 1.00% at December 31, 2024.

Current wording

Provision for Credit Losses - The Company recorded a $4,000,000 provision for credit losses for the three months ended March 31, 2026, compared with $2,750,000 provision for credit losses for the three months ended March 31, 2025. The provision recorded in the three months ended March 31, 2026 was the result of increased commercial originations during the quarter. This provision increased the reserve to 1.05% of gross loans compared with 1.01% at March 31, 2025.

Previous wording

Non-Interest Income - The results for the three months ended December 31, 2025 included total non-interest income of $20,255,000 compared to $15,702,000 for the same period one year ago, a $4,553,000 increase. The increase was primarily due to a $3,200,000 gain recorded on the sale of former branch property combined with increased deposit fee income.

Current wording

Non-Interest Income - The results for the three months ended March 31, 2026 included total non-interest income of $19,813,000 compared to $18,881,000 for the same period one year ago, a $932,000 increase. The increase was primarily due to increased fee income on loans and deposits.

Previous wording

Non-Interest Expense - Non-interest expense was $105,721,000 for the three months ended December 31, 2025, a decrease of $5,590,000 from $111,311,000 for the prior year quarter, largely a result of restructuring costs recognized in the quarter ended December 31, 2024. Non-interest expense for the three months ended December 31, 2025 and December 31, 2024 equaled 1.57% and 1.62%, respectively, of average assets.

Current wording

Non-Interest Expense - Non-interest expense was $109,857,000 for the three months ended March 31, 2026, an increase of $5,025,000 from $104,832,000 for the prior year quarter, largely a result of increased compensation and technology expenses, reflecting annual merit increases and continued investment in operational efficiency. Non-interest expense for the three months ended March 31, 2026 and March 31, 2025 equaled 1.61% and 1.53%, respectively, of average assets.

Previous wording

Gain (Loss) on Real Estate Owned - Results for the three months ended December 31, 2025 include a net gain on REO of $156,000, compared to a net gain of $429,000 for the prior year quarter.

Current wording

Gain (Loss) on Real Estate Owned - Results for the three months ended March 31, 2026 include a net gain on REO of $280,000, compared to a net loss of $199,000 for the prior year quarter.

Previous wording

Income Tax Expense - Income tax expense totaled $18,105,000 for the three months ended December 31, 2025, compared to $12,984,000 for the prior year quarter. The effective tax rate was 22.00% and 21.55% for the three months ended December 31, 2025 and December 31, 2024, respectively. The Company’s effective tax rate varies from the statutory rate mainly due to state taxes, tax-exempt income, tax-credit investments, miscellaneous non-deductible expenses and discrete tax adjustments for prior periods.

Current wording

Income Tax Expense - Income tax expense totaled $18,258,000 for the three months ended March 31, 2026, compared to $15,758,000 for the prior year quarter. The effective tax rate was 21.79% and 21.88% for the three months ended March 31, 2026 and March 31, 2025, respectively. The Company’s effective tax rate varies from the statutory rate mainly due to state taxes, tax-exempt income, tax-credit investments, miscellaneous non-deductible expenses and discrete tax adjustments for prior periods.

Previous wording

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 $15.9 million.

Current wording

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 approximately $15.9 million.