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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This discussion should be read in conjunction with our Consolidated Financial Statements and related notes in “Item 8. Financial Statements and Supplementary Data” of this report. In the following discussion, unless otherwise noted, references to increases or decreases in average balances in items of income and expense for a particular period and balances at a particular date refer to the comparison with corresponding amounts for the period or date for the previous year.

In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under “Risk Factors” and elsewhere in this Annual Report on Form 10-K. This section of this Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022. For management's review of the factors that affected our results of operations for the years ended September 30, 2022 and 2021, refer to our Annual Report on Form 10-K for the year ended September 30, 2022, which was filed with the Securities and Exchange Commission on November 18, 2022.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to use judgment in making estimates and assumptions that affect the reported amounts within the consolidated financial statements. Actual results may differ from these estimates. While our significant accounting policies are described in more detail in Note A to the Consolidated Financial Statements, we believe that the accounting policies discussed below are critical for understanding our historical and future performance. Critical accounting policies and estimates are those that we consider the most important to the portrayal of our financial condition and results of operations because they require our most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of the matters that are inherently uncertain.

Allowance for Credit Losses. Management’s determination of the amount of the ACL is a critical accounting estimate as it requires significant reliance on the credit risk we ascribe to individual borrowers, the use of estimates and significant judgment as to the amount and timing of expected future cash flows on individually evaluated loans, significant reliance on historical loss rates on homogeneous portfolios, consideration of our quantitative and qualitative evaluation of past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts.

Going forward, the methodology used to calculate the ACL will be significantly influenced by the composition, characteristics and quality of our loan portfolio, as well as the prevailing economic conditions and forecasts utilized. Material changes to these and other relevant factors may result in greater volatility to the allowance for credit losses, and therefore, greater volatility in our reported earnings.

Goodwill. Goodwill represents the excess of the acquisition consideration over the fair value of assets acquired and liabilities assumed. We have determined our goodwill balance is all related to a single reporting unit and perform an annual impairment assessment on August 31st, or sooner if an impairment indicator exists. We perform a quantitative impairment assessment and, upon performing the quantitative test, if the carrying value of the reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.

When performing the quantitative assessment of goodwill impairment, we estimate the fair value of our reporting unit using the market capitalization approach, based on quoted market prices of our securities, adjusted for the effect of a control premium. Based on the results of the annual quantitative evaluation for 2023, the fair value of our single reporting unit exceeded its respective carrying value and did not result in impairment for the reporting unit.

The Company continuously monitors for events and circumstances that could negatively impact the key assumptions in determining fair value. While the Company believes the judgments and assumptions used in the goodwill impairment test are reasonable, different assumptions or changes in general industry, market and macro-economic conditions could change the estimated fair values and, therefore, future impairment charges could be required, which could be material to the consolidated financial statements.

Select information regarding the ACL is under the "Allowance for Credit Losses" heading within this section below. For further details on the ACL or goodwill, see Notes A andE to the Consolidated Financial Statements in “Item 8. Financial Statements and Supplementary Data.”

UPDATE ON LUTHER BURBANK MERGER

On November 13, 2022, the Company announced that it had entered into a definitive agreement and plan of reorganization with Luther Burbank Corporation (“Luther Burbank”), pursuant to which Luther Burbank will be merged with and into WaFd with WaFd as the surviving institution, promptly followed by the merger of Luther Burbank’s wholly-owned bank subsidiary, Luther Burbank Savings, (“LBS”) with and into WaFd Bank (the “Merger”). The proposed Merger is an all-stock transaction valued at approximately $654 million based upon the closing price of the Company’s Common Stock on November 11, 2022. As part of the merger agreement, Luther Burbank shares of Common Stock will be converted into, and canceled in exchange for, the right to receive 0.3353 shares of the Company’s Common Stock, with Luther Burbank shareholders receiving cash in lieu of fractional shares of Company Common Stock. The Company has submitted an application for approval of the Merger to the Washington State Department of Financial Institutions (“WDFI”), the Federal Deposit Insurance Corporation (“FDIC”) and the Board of Governors of the Federal Reserve System (“Federal Reserve”). Shareholders of both companies approved the Merger at special meetings of their respective shareholders on May 4, 2023. On October 13, 2023, the WDFI approved the Merger subject to approval by the Federal Reserve and the FDIC. The Company continues to work with the Federal Reserve and the FDIC to receive their approval. Luther Burbank is headquartered in Santa Rosa, CA and operates 10 full service branches in

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

California, 1 full service branch in Washington, 6 loan production offices in California and one loan production office in Oregon. If approved, the Merger will result in the Bank’s footprint expanding to include the state of California.

RECENT INDUSTRY DEVELOPMENTS

During the first calendar quarter of 2023, the banking industry experienced significant volatility with multiple high-profile bank failures, primarily due to liquidity concerns. This resulted in industry-wide uncertainty and concerns related to liquidity, deposit outflows, unrealized securities losses and eroding consumer confidence in the banking system. The Company took a number of preemptive actions which included proactive outreach to clients and actions to maximize funding sources in response to these recent developments. These actions included increasing the target cash balance range, enhancing deposit flow and concentration monitoring, and utilizing the Federal Reserve's Bank Term Funding Program as an additional source of liquidity.

Despite these negative industry developments, the Company's liquidity position and balance sheet remain strong and the Company did not experience negative impacts to its financial condition outside of those observed generally across the industry, such as increasing funding costs. The Company experienced net deposit inflows for the year ending September 30, 2023 with total deposits increasing slightly by 0.25%. Our deposit base is highly diversified with little industry or customer concentration and 74% of total deposits are FDIC insured or collateralized as of September 30, 2023. Furthermore, the Company remains well capitalized. The Company's capital at September 30, 2023 remains at high levels with common equity tier 1 capital ("CET1") and total risk-based capital ratios of 10.37% and 13.31%, respectively, for the Company and 11.63% and 12.81% for the Bank, respectively, which exceed the regulatory minimum well-capitalized guidelines of 6.50% and 10.00%.

The FDIC has approved a final rule to implement a special assessment to recover the loss to the DIF following the recent bank closures. The special assessment will be 13.4 basis points applied to estimated uninsured deposits greater than $5 billion, collected over eight quarterly assessment periods beginning in the first quarterly assessment period of 2024. The assessment is subject to true ups based on the changes to the estimated loss from the receiverships and corrective amendments to the amount of uninsured deposits reported for December 31, 2022. Management does not expect the resulting expense to be material to its financial results given the Company's low level of uninsured deposits.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ALLOWANCE FOR CREDIT LOSSES

The following table provides detail regarding the Company's allowance for credit losses (periods prior to 2020 applied the incurred loss model as the current expected credit loss methodology ("CECL") was implemented in 2020).

(In thousands)

Charge-offs:

Commercial loans

Multi-Family — — — — —

Construction — — — — —

Land – Acquisition & Development — 11 2 11 107

Consumer loans

Construction – Custom — — — — 1,973

Recoveries:

Commercial loans

Multi-Family — — — 498 —

Consumer loans

Construction – Custom — — — — —

(1) This does not include a reserve for unfunded commitments of $24,500,000, $32,500,000, $27,500,000, $25,000,000 and $6,900,000 as of September 30, 2023, 2022, 2021, 2020 and 2019 respectively.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following table shows changes in the Company's allowance for credit losses since the prior year.

(In thousands)

Allowance for credit losses:

Commercial loans

Consumer loans

The allowance for loan losses increased by $4,399,000, or 2.55%, from $172,808,000 as of September 30, 2022, to $177,207,000 at September 30, 2023. As of September 30, 2023, the allowance of $177,207,000 is for loans that are evaluated on a pooled basis, which was comprised of $107,049,000 related to the quantitative component and $70,158,000 related to management's qualitative overlays.

The Company recorded a provision for credit losses of $41,500,000 in 2023, compared to a provision of $3,000,000 for 2022. These amounts are net of provision and recapture related to the unfunded commitments reserve. In 2023, provisioning was largely due to adjustments resulting from one large charge-off taken, offset by reduced unfunded commitment balances. For the year ended September 30, 2023, net charge-offs were $45,101,000, compared to recoveries of $3,508,000 in the prior year. The ratio of the total ACL to total gross loans decreased to 1.03% as of September 30, 2023, as compared to 1.06% as of September 30, 2022. The decrease was primarily related to a shift in mix of loan types within the portfolio. Loan portfolios with lower historical losses, like multi-family and single family residential saw increased balances while those with higher historical losses, like construction, saw decreases.

The reserve for unfunded loan commitments was $24,500,000 as of September 30, 2023, compared to $32,500,000 as of September 30, 2022.

Management believes the total ACL is sufficient to absorb estimated losses inherent in the portfolio of loans and unfunded commitments.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following table sets forth the amount of the Company’s allowance for loan losses by loan portfolio and class (periods prior to 2020 applied the incurred loss model as CECL was implemented in 2020).

($ in thousands)

Commercial loans

Consumer loans

___________________

(1)Represents the loans receivable for each respective loan class as a % of total loans receivable.

(2)Represents the allowance for each respective loan class as a % of loans receivable for that same loan class. The underlying commercial & industrial loan balances for September 30, 2023, 2022, 2021, 2020 include PPP loans for which no allowance was recorded. These PPP loan balances were $1,000,000, $10,000,000, $312,000,000 and $745,000,000 as of September 30, 2023, 2022, 2021, and 2020 respectively.

(3)This does not include a reserve for unfunded commitments of $24,500,000, $32,500,000, $27,500,000, $25,000,000 and $6,900,000 as of September 30, 2023, 2022, 2021, 2020 and 2019, respectively.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ASSET QUALITY

Troubled debt restructured loans ("TDRs"). TDRs are reserved for under the Company's CECL methodology. Most TDRs are performing and accruing loans where the borrower has proactively approached the Company about modifications due to temporary financial difficulties. Each request is individually evaluated for merit and likelihood of success. The concession for these loans is typically a payment reduction through a rate reduction of 100 to 200 basis points for a specific term, usually six to twelve months. Interest-only payments may also be approved during the modification period.

Concessions for construction, land A&D and multi-family loans are typically an extension of maturity combined with a rate reduction of normally 100 basis points. Before granting approval to modify a loan in a TDR, a borrower’s ability to repay is considered by evaluating current income levels, debt-to-income ratio, credit score, loan payment history and an updated evaluation of the secondary repayment source.

If a loan is on non-accrual status before becoming a TDR, it will stay on non-accrual status following restructuring until it has been performing for at least six months, at which point it may be moved to accrual status. If a loan is on accrual status before it becomes a TDR, and it is concluded that a full repayment is highly probable, it will remain on accrual status following restructuring. If the homogeneous restructured loan does not perform, it is placed in non-accrual status when it is 90 days delinquent. For commercial loans, six consecutive payments on newly restructured loan terms are required prior to returning the loan to accrual status. After the required six consecutive payments are made, a management assessment may conclude that collection of the entire principal and interest due is still in doubt. In those instances, the loan will remain non-accrual. A loan that defaults and is subsequently modified would impact the Company's delinquency trend, which is part of the qualitative risk factors component of the CECL methodology. Any modified loan that re-defaults and is charged-off would impact the quantitative component of the CECL methodology.

Non-Performing Assets. When a borrower violates a condition of a loan, the Bank attempts to cure the default by contacting the borrower. In most cases, defaults are cured promptly. If the default is not cured within an appropriate time frame, typically 90 days, the Bank may institute appropriate action to collect the loan, such as making demand for payment or initiating foreclosure proceedings on the collateral. If foreclosure occurs, the collateral will typically be sold at public auction and may be purchased by the Bank.

Loans are placed on nonaccrual status when, in the judgment of management, the probability of collecting interest or principal is deemed to be insufficient to warrant further accrual. When a loan is placed on nonaccrual status, previously accrued but unpaid interest is deducted from interest income. The Bank does not accrue interest on loans 90 days past due or more. See Note A to the Consolidated Financial Statements included in Item 8 hereof for additional information.

The Bank will consider modifying the interest rate and terms of a loan if it determines that a modification is deemed to be the best option available for collection in full or to minimize the loss to the Bank. Most loans restructured in TDRs are accruing and performing loans where the borrower has proactively approached the Bank about a modification due to temporary financial difficulties. Each request is individually evaluated for merit and likelihood of success. The modification of these loans is typically a payment reduction through a rate reduction of between 100 to 200 bps for a specific term, usually six to twelve months. Interest-only payments may also be approved during the modification period. Principal forgiveness generally is not an available option for restructured loans. As of September 30, 2023, single-family residential loans comprised 84.7% of restructured loans. The Bank reserves for restructured loans within its pool based general reserve methodology, except in instances where management considers it appropriate to evaluate individually.

Real estate acquired by foreclosure or deed-in-lieu thereof (“REO” or “Real Estate Owned”) is classified as real estate held for sale. When property is acquired, it is recorded at the fair market value less estimated selling costs at the date of acquisition. Interest accrual ceases on the date of acquisition and all costs incurred in maintaining the property from that date forward are expensed as incurred. Costs incurred for the improvement or development of such property are capitalized. See Note A to the Consolidated Financial Statements included in Item 8 hereof for additional information.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following table sets forth information regarding the Company's restructured loans and non-performing assets.

(In thousands)

Non-accrual loans:

Commercial loans

Land – acquisition & development — — 2,340 — 169

Consumer loans

Construction – custom 88 435 — — —

Total non-performing assets to total assets 0.26 % 0.21 % 0.22 % 0.20 % 0.27 %

___________________

(1) For the year ended September 30, 2023, the Company recognized $2,824,000 in interest income on cash payments received from borrowers on non-accrual loans. The Company would have recognized interest income of $1,981,000 for the same period had these loans performed according to their original contract terms. The recognized interest income may include more than twelve months of interest for some of the non-accrual loans that were brought current or paid off. In addition to the non-accrual loans reflected in the above table, the Company had $263,075,000 of loans that were less than 90 days delinquent at September 30, 2023 but were classified as substandard for one or more reasons. If these loans were deemed non-performing, the Company's ratio of total non-performing assets and performing restructured loans as a percent of total assets would have increased to 1.63% at September 30, 2023. For a discussion of the Company's policy for placing loans on non-accrual status, see Note A to the Consolidated Financial Statements included in Item 8 of this report.

Non-performing assets increased 30.0% to $57,924,000, or 0.26% of total assets, at September 30, 2023, compared to $44,554,000, or 0.21% of total assets, at September 30, 2022. The increase was primarily a result of an increase of $15,888,000 in non-accrual loans partially offset by a $2,518,000 decline in real estate owned. Other property owned of $3,353,000 as of September 30, 2023 is comprised entirely of a government guarantee related to equipment obtained via a commercial loan foreclosure.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

TDRs declined to $46,117,000 as of September 30, 2023, from $56,817,000 as of September 30, 2022. As of September 30, 2023, $45,167,000 or 97.9% of TDRs were performing. Non-performing TDRs of $950,000 are included in NPAs. Total NPAs and performing TDRs as a percent of total assets have declined to 0.46% as of September 30, 2023, from 0.48% as of September 30, 2022. During 2023, there were no TDR additions and reductions of $10,700,223 due to prepayments and normal payment activity. As of September 30, 2023, 84.7% of TDRs are comprised of single-family residential loans.

As of September 30, 2023, real estate owned totaled $4,149,000, a decrease of $2,518,000, or 37.8%, from $6,667,000 as of September 30, 2022, primarily due to sales of REO properties offset by new REO additions. During 2023, the Company sold real estate owned properties for total net proceeds of $7,192,000. The majority of REO properties are former bank premises that are expected to be sold.

The ratio of the allowance for loan losses to non-accrual loans decreased to 351% as of September 30, 2023, from 500% as of September 30, 2022.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CHANGES IN FINANCIAL CONDITION

Cash and cash equivalents: Cash and cash equivalents increased to $980,649,000 at September 30, 2023, as compared to $683,965,000 at September 30, 2022. The change was meant to increase balance sheet liquidity and was used to fund growth in the loan portfolio. The increase in cash was the result of the $40,759,000 increase in customer accounts and $1,525,000,000 increase in borrowings.

Available-for-sale investment securities: Available-for-sale securities decreased $55,940,000, or 2.7%, during the year ended September 30, 2023, to $1,995,097,000, primarily due to principal repayments of $420,154,000, which exceeded purchases of $376,481,000, a $9,360,000 decline in the value of available-for-sale securities, and sales of $1,169,000. As of September 30, 2023, the Company had a net unrealized loss on available-for-sale securities of $123,519,000, which is recorded net of tax within AOCI, compared to an unrealized loss of $111,700,000 as of September 30, 2022.

Substantially all of the Company’s available-for-sale 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. The remaining securities are issued by highly-rated municipalities or corporate borrowers. The Company does not believe that any of its available-for-sale debt securities have credit loss impairment as of September 30, 2023, therefore, no allowance was recorded. 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.

Held-to-maturity investment securities: Held-to-maturity securities decreased by $39,713,000 to $423,586,000, or 8.6%, during the year ended September 30, 2023, primarily due to principal repayments and maturities of $39,414,000. There were no held-to-maturity securities sold during the year ended September 30, 2023. As of September 30, 2023, the net unrealized loss on held-to-maturity securities was $68,398,000, compared to $56,439,000 the year prior, which management attributes to the change in interest rates since acquisition.

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, thus the Company did not record an allowance for credit losses for held-to-maturity securities as of September 30, 2023. 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 table below shows the available-for-sale and held-for-investment securities portfolios categorized by maturity band.

September 30, 2023 AmortizedCost Weighted Average Yield

($ in thousands)

For further information on our investment portfolio, see Note C to the Consolidated Financial Statements in “Item 8. Financial Statements and Supplementary Data” of this report.

Loans receivable: Loans receivable, net of related contra accounts, increased $1,362,986,000, or 8.5%, to $17,476,550,000 at September 30, 2023, from $16,113,564,000 one year earlier. The increase resulted primarily from originations of $4,702,156,000, a decrease to loans-in-process of $1,110,083,000 and loan purchases of $80,015,000, partially offset by loan repayments of $4,435,269,000 during the year ended September 30, 2023. Commercial loan originations accounted for 73.9% of total originations and consumer originations were 26.1% as the Company continues to focus on commercial lending, coupled with growing economies in all major markets in which we operate.

The following table presents loan balances by category and the year-over-year change.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

($ in thousands) ($ in thousands) $ %

Gross loans by category

Commercial loans

Consumer loans

Less:

The following table summarizes the Company’s loan portfolio balances, at amortized cost, due for the periods indicated based on contractual terms to maturity or repricing.

September 30, 2023 Total Less than1 Year 1 to 5Years 5 to 15Years After 15Years

(In thousands)

Commercial loans

Consumer loans

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The contractual loan payment period for residential mortgage loans originated by the Company normally ranges from 15 to 30 years. Experience during recent years has indicated that, because of prepayments in connection with refinancing and sales of property, residential loans typically have a weighted average life of approximately five years.

The following tables provide information regarding loans receivable by loan class and geography.

(In thousands)

Percentage by geographic area

As % of total gross loans

Percentage by geographic area as a % of each loan type

As % of total gross loans

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following table shows the change in the geographic distribution by state of the loan portfolio since the prior year.

(1) Includes loans from outside of our eight state footprint.

Allowance for credit losses: For details, see the “Allowance for Credit Losses" section above in this report.

Non-performing assets: For details, see the “Asset Quality" section above in this report.

Troubled debt restructured loans ("TDRs"): For details, see the “Asset Quality" section above in this report.

Real estate owned: For details, see the “Asset Quality" section above in this report.

Interest receivable:Interest receivable was $87,003,000 as of September 30, 2023, an increase of $23,131,000, or 36.2%, since September 30, 2022. The increase was the result of an 8.5% increase in loans receivable combined with the increase in interest rates.

Bank Owned Life Insurance: Bank-owned life insurance increased to $242,919,000 as of September 30, 2023 from $237,931,000 as of September 30, 2022, primarily as a result of increases in the cash surrender value of the policies. The investments in bank-owned life insurance serve to assist in funding growing employee benefit costs.

Intangible assets: The Company's intangible assets totaled $310,619,000 at September 30, 2023 compared to $309,009,000 as of September 30, 2022. The balance at September 30, 2023 is comprised of $304,750,000 of goodwill and the unamortized balance of the core deposit and other intangibles of $5,869,000.

Customer accounts: As of September 30, 2023, customer deposits totaled $16,070,329,000 compared with $16,029,570,000 at September 30, 2022, a $40,759,000, or 0.3%, increase. During 2023, transaction accounts decreased by $1,926,214,000 or 15.2% while time deposits increased by $1,966,973,000 or 58.9%.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following table shows customer deposits by account type.

The following table shows the geographic distribution by state for customer deposits.

($ in thousands) September 30, 2023 September 30, 2022 $ Change % Change

The following table sets forth, by various interest rate categories, the amount of fixed-rate time deposits that mature during the periods indicated.

Maturing in

(In thousands)

Fixed-rate time deposits:

Historically, a significant number of time deposit account holders roll over their balances into new time deposits of the same term at the Bank’s then current rate. To ensure a continuity of this trend, the Bank expects to continue to offer market rates of interest. The ability to retain maturing time deposits is difficult to project; however, the Bank believes that by competitively pricing these certificates, levels deemed appropriate by management can be achieved on a continuing basis.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

At September 30, 2023, the Bank had $1,779,272,000 of time deposits in amounts of $250,000 or more outstanding, maturing as follows: $763,615,000 within 3 months; $419,791,000 over 3 months through 6 months; $281,404,000 over 6 months through 12 months; and $314,462,000 thereafter.

Time deposits with a maturity of one year or less have penalties for premature withdrawal equal to 90 days of interest. When the maturity is greater than one year but less than four years, the penalty is 180 days of interest. When the maturity is greater than four years, the penalty is 365 days of interest. Early withdrawal penalty fee income for the years ended 2023, 2022 and 2021 amounted to $1,618,000, $267,000 and $198,000, respectively.

For additional details on customer accounts, including uninsured deposits, see Note K to the Consolidated Financial Statements in “Item 8. Financial Statements and Supplementary Data” of this report.

Borrowings: Total borrowings increased to $3,650,000,000 as of September 30, 2023, as compared to $2,125,000,000 at September 30, 2022. Growth in loans receivable was largely funded by new borrowings from both the FHLB and FRB. The weighted average rate for borrowings was 3.98% as of September 30, 2023, versus 2.02% at September 30, 2022, the increase being primarily due to higher rates on new short-term borrowings. The Company has entered into interest rate swaps to hedge interest rate risk and convert certain FHLB advances to fixed rate payments. Taking into account these hedges, the weighted average effective maturity of FHLB advances at September 30, 2023 is 2.01 years.

RESULTS OF OPERATIONS

COMPARISON OF 2023 RESULTS WITH 2022

Net Income: Net income increased $21,096,000, or 8.9%, to $257,426,000 for the year ended September 30, 2023, as compared to $236,330,000 for the year ended September 30, 2022. The change was due to the factors described below.

Net Interest Income: For the year ended September 30, 2023, net interest income was $690,234,000, an increase of $95,645,000 or 16.1% from the year ended September 30, 2022. Net interest margin was 3.40% for the year ended September 30, 2023 compared to 3.16% in the prior year. The increase in net interest income was primarily due to rising interest rates. The average rate earned on interest-earning assets grew by 159 basis points to 5.13% while the average rate paid on interest-bearing liabilities increased by 168 basis points to 2.18%.

The change in net interest income was also impacted by the $1,514,820,000, or 8.1%, increase in interest earning assets while average interest-bearing liabilities increased by $1,698,461,000 or 11.7%. During 2023, the average balance of loans receivable increased $2,011,903,000 or 13.3%, while the combined average balances of mortgage backed securities, other investment securities and cash decreased by $536,288,000 or 14.7%. Average noninterest-bearing deposits decreased by $279,150,000 over the same period.

Rate/Volume Analysis

The table below sets forth certain information regarding changes in interest income and interest expense of the Company for the years indicated. 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 average 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.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Twelve Months Ended September 30,

Volume Rate Total Volume Rate Total Volume Rate Total

(In thousands) (In thousands) (In thousands)

Interest income:

Interest expense:

___________________

(1)Includes interest on cash equivalents and dividends on stock of the FHLB of Des Moines and FRB of San Francisco.

Provision (Release) for Credit Losses: The Company recorded a provision for credit losses of $41,500,000 in 2023, compared to a provision of $3,000,000 for 2022. In 2023, provisioning was largely due to adjustments made as a result of one large charge-off taken, offset by reduced unfunded commitment balances. For the year ended September 30, 2023, net charge-offs were $45,101,000, compared to recoveries of $3,508,000 in the prior year.

Other Income: Other income was $52,201,000 for the year ended September 30, 2023, a decrease of $14,171,000, or 21.4%, from $66,372,000 for the year ended September 30, 2022. The decrease is primarily due to unrealized gains recorded in the prior year for certain equity investments that resulted in small losses in the current year. This change made up $13,992,730 of the overall decrease.

Other Expense: Operating expense was $376,035,000 for the year ended September 30, 2023, an increase of $17,460,000, or 4.9%, from the $358,575,000 for the year ended September 30, 2022. Compensation and benefits costs increased $2,617,000 or 1.3% year-over-year primarily due to annual merit increases and investments in strategic initiatives combined with reduced cost capitalization as loan originations have decreased. FDIC Premiums increased $10,494,000 in 2023 compared to the prior year as a result of increase FDIC assessment rates. Information technology costs increased by $2,245,000 in 2023 as compared to 2022 as we continue to execute becoming a digital first bank. Also, the Company realized expenses of $2,991,000 in 2023 related to our pending merger with Luther Burbank Corporation.

The Company’s efficiency ratio was 50.7% for 2023 as compared to 54.3% for the prior year. The number of staff, including part-time employees on a full-time equivalent basis, was 2,120 and 2,132 at September 30, 2023 and 2022, respectively. Total operating expense for the years ended September 30, 2023, and 2022 were 1.74% and 1.78%, respectively, of average assets.

Gain on Real Estate Owned: Net gain on real estate owned was $176,000 for the year ended September 30, 2023, compared to a net gain of $651,000 for the year ended September 30, 2022. This amount includes ongoing maintenance expense, periodic valuation adjustments, and gains on sales of REO.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Income Tax Expense: Income tax expense was $67,650,000 for the year ended September 30, 2023, an increase of $3,943,000, or 6.2%, from the $63,707,000 for the year ended September 30, 2022. The increase is mostly due to an 8.3% increase in pre-tax income. The effective tax rate for 2023 was 20.81% as compared to 21.23% for the year ended September 30, 2022. The effective tax rate of 20.81% for 2023 differs from the statutory rate of 21% mainly due to the effects of state taxes, tax exempt income, tax credit investments and certain differences in book and tax deductions.

COMPARISON OF 2022 RESULTS WITH 2021

For management's review of the factors that affected our results of operations for the years ended September 30, 2022 and 2021 refer to our Annual Report on Form 10-K for the year ended September 30, 2022, which was filed with the Securities and Exchange Commission on November 18, 2022.

LIQUIDITY AND CAPITAL RESOURCES

The principal sources of funds for the Company's activities are loan repayments (including prepayments), net deposit inflows, borrowings, repayments and sales of investments 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.

On February 8, 2021, in connection with an underwritten public offering, the Company issued 300,000 shares of 4.875% Noncumulative Perpetual Series A Preferred Stock (“Series A Preferred Stock”). Net proceeds, after underwriting discounts and expenses, were $293,325,000. The public offering consisted of the issuance and sale of 12,000,000 depositary shares, each representing a 1/40th interest in a share of the Series A Preferred Stock, at a public offering price of $25.00 per depositary share. Holders of the depositary shares are entitled to all proportional rights and preferences of the Series A Preferred Stock (including dividend, voting, redemption and liquidation rights). The depositary shares are traded on the NASDAQ under the symbol "WAFDP." The Series A Preferred Stock is redeemable at the option of the Company, subject to all applicable regulatory approvals, on or after April 15, 2026.

The Company's shareholders' equity at September 30, 2023, was $2,426,426,000, or 10.80% of total assets, as compared to $2,274,260,000, or 10.95% of total assets, at September 30, 2022. The Company's shareholders' equity was impacted in the year by net income of $257,426,000, the payment of $63,792,000 in Common Stock dividends, payment of $14,625,000 in preferred stock dividends, $30,463,000 of treasury stock purchases, as well as other comprehensive loss of $5,560,000. The Company paid out 26.6% of its 2023 earnings in cash dividends to common shareholders, compared with 28.0% last year. For the year ended September 30, 2023, the Company returned 36.6% of net income to shareholders in the form of cash dividends and share repurchases as compared to 27% for the year ended September 30, 2022. Management believes the Company's strong net worth position allows it to manage balance sheet risk and provide the capital support needed for controlled growth in a regulated environment. The Company’s share repurchase program may be modified, suspended or terminated at any time, and the timing and amount of share repurchases is subject to market conditions and the market price of the Company’s Common Stock, as well as other factors.

The Bank has a credit line with the FHLB of up to 45% of total assets depending on specific collateral eligibility. This line provides a substantial source of additional liquidity if needed. Based on collateral pledged as of September 30, 2023, the Bank had $2,357,588,000 of additional borrowing capacity at the FHLB.

The Bank has entered into borrowing agreements with the FHLB to borrow funds under a short-term floating rate cash management advance program and fixed-rate term advance agreements. All borrowings are secured by stock of the FHLB, deposits with the FHLB, and a blanket pledge of qualifying loans receivable as provided in the agreements with the FHLB.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Bank has elected to utilize the Federal Reserve's Bank Term Funding program to leverage its highly favorable terms to fortify the Bank's liquidity position. These borrowings are repayable at any time without penalty and are the lowest cost funding source available. Based on collateral pledged as of September 30, 2023, the Bank had $1,119,000,000 of additional borrowing capacity within the BTFP. The Bank is also eligible to borrow under the Federal Reserve Bank's primary credit program.

The Company's cash and cash equivalents were $980,649,000 at September 30, 2023, which is a 43.4% increase from the balance of $683,965,000 as of September 30, 2022. The change was meant to increase balance sheet liquidity and was used to fund growth in the loan portfolio. The increase in cash was the result of a $40,759,000 increase in customer accounts and $1,525,000,000 increase in borrowings. The net loans balance increased by $1,362,986,000 during the year ended September 30, 2023. See “Changes in Financial Condition” above and the “Statement of Cash Flows” included in the financial statements for additional details regarding this change.

The following table presents the Company's significant fixed and determinable contractual obligations, within the categories described below, by contractual maturity or payment amount.

September 30, 2023 Total Less than1 Year 1 to 5Years Over 5Years

(In thousands)

(1) Includes non-maturing customer transaction accounts.

(2) Represents contractual maturities of FHLB advances and FRB borrowings. Taking into account cash flow hedges, the weighted average effective maturity of FHLB advances at September 30, 2023 is 2.01 years.

These obligations are included in the Consolidated Statements of Financial Condition. The payment amounts of the operating lease obligations represent those amounts contractually due.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

INTEREST RATE RISK

The primary source of income for the Company is net interest income, which is the difference between the interest income generated by interest-earning assets and the interest expense incurred for interest-bearing liabilities. The level of net interest income is a function of the average balance of interest-earning assets and interest-bearing liabilities and the difference between the yield on earning assets and the cost of interest-bearing liabilities. Both the pricing and mix of the Company's interest-earning assets and interest-bearing liabilities influence these factors. All else being equal, if the interest rates on the Company's interest-bearing liabilities increase at a faster pace than the interest rates on its interest-earning assets, the result would be a reduction in net interest income and with it, a reduction in net earnings.

Interest rate risk arises in part due to the Bank's significant holdings of fixed-rate single-family home loans, which are longer-term than customer accounts that constitute its primary liabilities. Accordingly, assets do not usually respond as quickly to changes in interest rates as liabilities. In the absence of management action, net interest income can be expected to decline when interest rates rise and to expand when interest rates fall. Shortening the maturity or repricing of the investment portfolio is one action that management can take. The composition of the investment portfolio was 45.9% variable rate and 54.1% fixed rate as of September 30, 2023 to provide some protection against rising rates. In addition, the Bank is producing more commercial loans that have shorter terms and/or variable rates. There has also been focus on increasing less rate sensitive transaction deposit accounts. These accounts make up 67.0% of the deposit portfolio as of September 30, 2023.

The Company's balance sheet strategy, in conjunction with low operating costs, has allowed the Company to manage interest rate risk, within guidelines established by the Board, through all interest rate cycles. It is management's objective to grow the dollar amount of net interest income, through the rate cycles, acknowledging that there will be some periods of time when that will not be feasible. Cash and cash equivalents of $980,649,000 and shareholders' equity of $2,426,426,000 provide management with flexibility in managing interest rate risk. Based on management's assessment of the current interest rate environment, the Company has taken steps, including growing commercial loans having shorter average lives and transaction deposit accounts, to position itself for changing interest rates.

Net Interest Income Sensitivity. We estimate the sensitivity of our 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 our 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 presented below 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.

In the event of an immediate and parallel increase of 200 basis points in both short- and long-term interest rates, the model estimates that net interest income would decrease by 2.0% in the next year. This compares to an estimated increase of 1.9% as of the September 30, 2022 analysis. It is noted that a flattening yield curve where the spread between short-term rates and long-term rates decreases would likely result in lower net interest income and vice versa for a steepening yield curve. Management estimates that a gradual increase of 300 basis points in short-term rates and 100 basis points in long-term rates over two years would result in a 0.2% increase in net interest income in the first year and a decrease of 1.0% in the second year, assuming a constant balance sheet and no management intervention. Alternatively, in the event of an immediate and parallel decrease of 100 basis points in both short and long-term interest rates, the model estimates that net interest income would increase by 4.94%.

Net Portfolio Value ("NPV") Sensitivity. The NPV is an estimate of the market value of shareholders' equity at a point in time. It is derived by calculating the difference between the present value of expected cash flows from assets and the present value of expected cash flows from liabilities and off-balance-sheet contracts. The sensitivity of the NPV to changes in interest rates provides a longer term view of interest rate risk of the current balance sheet as it incorporates all future expected cash flows. As of September 30, 2023, in the event of an immediate and parallel increase of 200 basis points in interest rates, the NPV is estimated to decrease by $723,000,000, or 27.4%, and the NPV-to-total assets ratio to decline to 9.5% from a base of 12.4%. As of September 30, 2022, in the event of an immediate and parallel increase of 200 basis points in interest rates, the NPV was estimated to decrease by $617,000,000, or 20.9%, and the NPV-to-total assets ratio to decline to 12.6% from a base of 14.9%. The change in the sensitivity of the NPV ratio to this assumed change in interest rates is primarily due to the

flattening of the yield curve and changes in balance sheet mix year over year. Prepayment speeds for single family mortgages are low at September 30, 2023 with the Bank's conditional payment rate ("CPR") for this portfolio segment at 7.0%, down from 8.1% the year before.

As of September 30, 2023, in the event of an immediate and parallel decrease of 100 basis points in interest rates, the NPV is estimated to increase NPV by $327,000,000, or 12.38%, and increase the NPV to total assets ratio to 13.59% from a base of 12.4%.

Interest Rates. The Company measures the difference between the rate on interest-earning assets and the rate on interest-bearing liabilities at the end of each period. The period end interest rate spread was 2.61% at September 30, 2023 and 3.36% at September 30, 2022. As of September 30, 2023, the weighted-average rate on interest-earning assets increased by 103 basis points to 5.07% compared to September 30, 2022. The higher rate on interest-earning assets is due primarily to the Federal Reserve Bank's rate increases which have led to higher rates on adjustable rate loans, investment securities and cash as well as asset mix shifting to loans receivable. As of September 30, 2023, the weighted-average rate on interest-bearing liabilities increased by 178 basis points to 2.46% compared to September 30, 2022. The higher rate on interest-bearing liabilities primarily resulted from customer deposits repricing and higher rates on new borrowings. The period end interest rate spread for the last eight fiscal quarters is shown below:

The chart below shows the volatility of our period end net interest spread (dashed line measured against the right axis) compared to the relatively consistent growth in net interest income (solid line measured against the left axis). The relative consistency of net interest income is accomplished by actively managing the size and composition of the balance sheet through different rate cycles.

Net Interest Margin. The net interest margin is measured using net interest income divided by average interest-earning assets for the period. The net interest margin increased to 3.40% for the year ended September 30, 2023, from 3.16% for the year ended September 30, 2022. The yield on interest-earning assets increased 159 basis points to 5.13% and the cost of interest-bearing liabilities increased by 168 basis points to 2.18%. The higher yield on interest-earning assets was primarily due to the impact of rising rates on adjustable rate assets and cash. The higher rate in interest-bearing liabilities was primarily due to replacing maturing borrowings at higher rates.

For the year ended September 30, 2023, average interest-earning assets increased by 8.1% to $20,327,301,000, up from $18,812,481,000 for the year ended September 30, 2022. Balance sheet growth in 2023 was primarily due to the growth in loans receivable. During 2023, average loans receivable increased $2,011,903,000, or 13.3%, while the combined average balances of mortgage-backed securities, other investment securities and cash decreased by $536,288,000 or 14.7%. Management views organic loan growth as the highest and best use of capital, thus the focus on primarily growing loans receivable.

During 2023, average interest-bearing customer deposit accounts increased $167,664,000 or 1.3% and the average balance of borrowings increased by $1,530,807,000, or 88.4%, from 2022.

The following table sets forth the information explaining the changes in the net interest income and net interest margin.

Net Interest Income Summary

Year Ended September 30,

($ in thousands)

Assets

Liabilities and Shareholders’ Equity

___________________

(1)Interest income includes net amortization-accretion of deferred loan fees, costs, discounts and premiums of $20,130,000, $29,156,000 and $48,079,000 for year ended 2023, 2022 and 2021, respectively.

(2)Includes cash equivalents and non-mortgage backed security investments, such as U.S. agency obligations, mutual funds, corporate bonds, and municipal bonds.

(3)Net interest income divided by average interest-earning assets.

The following table shows the potential impact of changing interest rates on net income for one year. 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, 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

(In thousands, except percentages)

Actual results will differ from the assumptions used in this model, as management monitors and adjusts both the size and the composition of the balance sheet in order to respond to changing interest rates. In a rising interest rate environment, it is likely that the Company will grow its balance sheet to offset margin compression that may occur. Improvement in the net interest income sensitivity during the year is primarily the result of interest rate swap activity and extension of the maturity of certain borrowings.

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 tables set 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).

The tables below express the NPV under varying interest scenarios.

(Basis Points) (In thousands) (In thousands)

As of September 30, 2023, the Company was in compliance with all of its interest rate risk policy limits.

Item 8. Financial Statements and Supplementary Data

Index to financial statements and financial statement schedules:

Report of Independent Registered Public Accounting Firm (PCAOB ID: 34) 61

Financial statements and supplementary data:

Consolidated Statements of Financial Condition 65

Consolidated Statements of Operations 66

Consolidated Statements of Comprehensive Income 67

Consolidated Statements of Shareholders' Equity 68

Consolidated Statements of Cash Flows 69

Notes to Consolidated Financial Statements 71

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of WaFd, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of financial condition of WaFd, Inc. and subsidiaries (the “Company”) as of September 30, 2023 and 2022, the related consolidated statements of operations, comprehensive income, shareholders' equity, and cash flows for each of the three years in the period ended September 30, 2023, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2023, and 2022, and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2023, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of September 30, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated November 17, 2023, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Allowance for Loan Losses - Refer to Notes A and E to the financial statements

Critical Audit Matter Description

The estimates of the Company's expected credit losses under the CECL methodology is based on relevant information about current conditions, past events, and reasonable and supportable forecasts regarding collectability of the reported amounts. In order to estimate the allowance for loan losses ("ALL"), the Company used either a cohort or weighted average remaining maturities methodology to determine the historical loss rate, by loan portfolio class, then considered whether qualitative adjustments to those historical loss rates were warranted.

Significant management judgments are required in determining whether, and to what extent, qualitative adjustments for each portfolio loan class are required. These adjustments are made after considering the conditions over the period from which historical loss experience was based and are split into two components: 1) asset or class specific risk characteristics or current

conditions at the reporting date related to portfolio credit quality, remaining payments, volume and nature, credit culture and management, business environment or other management factors, not captured in the historical loss rates and 2) reasonable and supportable forecasts of future economic conditions and collateral values.

Given the significance of the ALL, and management judgment required for quantitative and qualitative evaluation of past events, current conditions, and reasonable and supportable forecasts, performing audit procedures to evaluate the ALL requires a high degree of auditor judgment and increased extent of effort.

We have identified the ALL estimate for certain loan portfolio classes as a critical audit matter based upon the above factors.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the ALL estimate for loan portfolio classes for which we concluded the ALL was significant included the following, among others:

•We tested the effectiveness of management’s controls over model applicability, qualitative adjustments, the reasonable and supportable forecast adjustments, and management's review and approval process over the final determination of the ALL.

•We tested the underlying data and mathematical accuracy of the cohort methodology used to determine most loan portfolio class historical loss rates. We also evaluated the reasonableness and conceptual soundness of the methodology.

•To test the qualitative adjustments, we performed analysis to evaluate management’s determination of the qualitative adjustments made to account for specific risk characteristics or current conditions that differ from the period over which the historical loss rate was determined. Our procedures included evaluating management’s inputs and assumptions used in determining the qualitative and forecast adjustments by comparing the information to internal and external source data including, among others, the economic forecasts utilized by the Company and third-party economic forecasts for selected assumptions. In addition, we performed procedures on the overall ALL amount, inclusive of the qualitative adjustments, by evaluating the Company’s analysis of peers’ estimated current expected credit losses for loans to the Company’s recorded ALL.

Goodwill - Refer to Note A to the financial statements

Critical Audit Matter Description

The Company’s goodwill balance as of September 30, 2023, included within Intangible Assets, is related to the Company’s single reporting unit. Goodwill is evaluated for potential impairment on an annual basis and between tests if circumstances such as material adverse changes in legal, business, regulatory and economic factors exist. The Company performed its annual impairment test as of August 31, 2023, using a quantitative impairment approach, and concluded the fair value of the single reporting unit exceeded its respective carrying value and did not result in an impairment for the reporting unit. When performing the quantitative assessment of goodwill impairment, the Company estimated fair value of its reporting unit using the market capitalization approach, based on its stock price, adjusted for the effect of a control premium.

Given the significant judgments made by management to estimate the fair value of its reporting unit, including the selection of a control premium, performing audit procedures to evaluate goodwill for impairment required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the fair value of the reporting unit and selected control premium included the following procedures, among others:

•We tested the effectiveness of controls over management’s goodwill impairment evaluation, including those over the determination of fair value of the reporting unit and selection of the control premium.

•With the assistance of our fair value specialists we:

◦Evaluated the appropriateness of using the market capitalization approach to estimate the fair value of the reporting unit.

◦Evaluated certain inputs and assumptions, within management’s impairment analysis, including assessing including peer company transaction data, to determine applicability.

◦Performed procedures to assess the reasonableness of the control premium assumption used in the Company’s market capitalization approach.

◦Assessed the mathematical accuracy of the valuation used in the impairment test.

/s/ Deloitte & Touche LLP

Seattle, Washington

November 17, 2023

We have served as the Company’s auditor since 1982.

WAFD, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(In thousands, except share data)

ASSETS

Held-to-maturity securities, at amortized cost 423,586 463,299

Federal and state income tax assets, net 8,479 —

LIABILITIES AND SHAREHOLDERS’ EQUITY

Liabilities

Customer accounts

Advance payments by borrowers for taxes and insurance 52,550 50,051

Federal and state income tax liabilities, net — 3,306

Commitments and contingencies (see Note M)

Shareholders’ equity

Accumulated other comprehensive income (loss), net of taxes 46,921 52,481

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

WAFD, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share data)

INTEREST INCOME

INTEREST EXPENSE

OTHER INCOME

Gain (loss) on sale of investment securities 33 99 14

Gain (loss) on termination of hedging derivatives (867) — 14,110

Prepayment penalty on long-term debt — — (13,788)

OTHER EXPENSE

PER SHARE DATA

Basic earnings per common share $ 3.72 $ 3.40 $ 2.39

Diluted earnings per common share 3.72 3.39 2.39

Dividends paid on common stock per share 0.99 0.95 0.91

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

WAFD, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

Other comprehensive income (loss), net of tax:

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

WAFD, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

Other comprehensive income (loss) — — — — 52,832 — 52,832

Dividends on common stock ($0.91 per share) — — — (65,876) — — (65,876)

Dividends on preferred stock ($33.45 per share) — — — (10,034) — — (10,034)

Proceeds from stock issuances — 20 319 — — — 339

Stock-based compensation expense — 246 6,135 — — — 6,381

Other comprehensive income (loss) — — — (17,304) — (17,304)

Dividends on common stock ($0.95 per share) — — — (61,576) — — (61,576)

Dividends on preferred stock ($48.75 per share) — — — (14,625) — — (14,625)

Proceeds from stock issuances — 65 1,758 — — — 1,823

Stock-based compensation expense — 213 6,595 — — — 6,808

Treasury stock purchased — — — — — (3,260) (3,260)

Other comprehensive income (loss) — — — — (5,560) — (5,560)

Dividends on common stock ($0.99 per share) — — — (63,792) — — (63,792)

Dividends on preferred stock ($48.75 per share) — — — (14,625) — — (14,625)

Proceeds from stock issuances — 42 1,224 — — — 1,266

Treasury stock purchased — — — — — (30,463) (30,463)

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

WAFD, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

CASH FLOWS FROM OPERATING ACTIVITIES

Loss (gain) on sale of investment securities (33) (99) (14)

Prepayment penalty on early extinguishment of debt — — 13,788

Gain on early termination of long term borrowing hedge — — (14,110)

Gain on settlements of bank owned life insurance (821) (1,385) —

Impairment loss on premises and equipment 6 — 944

Decrease (increase) in accrued interest receivable (23,131) (13,236) 3,163

CASH FLOWS FROM INVESTING ACTIVITIES

Held-to-maturity securities purchased — (195,357) —

Proceeds from settlements of bank owned life insurance 1,809 2,266 —

Purchase of strategic investments (12,500) — —

Net cash received (paid) in business combinations (2,590) — (1,500)

Proceeds from sales of premises and equipment 1,090 41 3,376

Premises and equipment purchased and REO improvements (15,063) (11,790) (29,472)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from the early termination of long term borrowing hedge — — 14,110

Proceeds from issuance of preferred stock, net — — 293,325

Proceeds from employee stock purchase 177 — —

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

WAFD, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Non-cash investing activities

Real estate acquired through foreclosure $ 121 $ 73 $ 221

Other personal property acquired through foreclosure — 577 —

Non-cash financing activities

Cash paid during the year for

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

WAFD, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED SEPTEMBER 30, 2023, 2022, AND 2021

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Company and nature of operations. 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. WaFd, Inc., a Washington corporation was formed as the Bank’s holding company in November, 1994 under the name Washington Federal, Inc. Washington Federal, Inc. changed its name effective September 29, 2023 to Wafd, Inc. As used throughout this document, the terms “WaFd,” the “Company” or "we" or "us" and "our" refer to the WaFd, Inc. and its consolidated subsidiaries, and the term “Bank” refers to the operating subsidiary, Washington Federal Bank. The Company is headquartered in Seattle, Washington. The Bank conducts its activities through a network of 198 bank branches located in Washington, Oregon, Idaho, Utah, Arizona, Nevada, New Mexico and Texas.

Basis of presentation and use of estimates. The Company’s accounting and financial reporting policies conform to accounting principles generally accepted in the United States of America (U.S. GAAP). Inter-company balances and transactions have been eliminated in consolidation. In preparing the consolidated financial statements, the Company makes estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and revenues and expenses during the reporting periods and related disclosures. The areas that require application of significant management judgments often result in the need to make estimates about the effect of matters that are inherently uncertain and may change in future periods. Actual results could differ materially from those estimates. Certain amounts in the financial statements from prior periods have been reclassified to conform to the current financial statement presentation. In certain instances, amounts in text are presented by rounding to the nearest thousand.

The Company's fiscal year end is September 30. All references to 2023, 2022 and 2021 represent balances as of September 30, 2023, September 30, 2022, and September 30, 2021, or activity for the fiscal years then ended.

Preferred stock. On February 8, 2021, in connection with an underwritten public offering, the Company issued 300,000 shares of 4.875% Noncumulative Perpetual Series A Preferred Stock (“Series A Preferred Stock”). Net proceeds, after underwriting discounts and expenses, were $293,325,000. The public offering consisted of the issuance and sale of 12,000,000 depositary shares, each representing a 1/40th interest in a share of the Series A Preferred Stock, at a public offering price of $25.00 per depositary share. Holders of the depositary shares are entitled to all proportional rights and preferences of the Series A Preferred Stock (including, dividend, voting, redemption and liquidation rights). The depositary shares are traded on the NASDAQ Global Select Market under the symbol "WAFDP." The Series A Preferred Stock is redeemable at the option of the Company, subject to all applicable regulatory approvals, on or after April 15, 2026.

Cash and cash equivalents. Cash and cash equivalents include cash on hand, amounts due from banks, overnight investments and repurchase agreements with an initial maturity of three months or less.

Restricted cash balances - Based on the level of vault cash on hand, the Company was not required to maintain cash reserve balances with the Federal Reserve Bank as of September 30, 2023. As of September 30, 2023 and September 30, 2022, the Company held counterparty cash collateral of $326,750,000 and $284,400,000, respectively, related to derivative contracts.

Equity securities - The Company records equity securities within Other assets in its Consolidated Statements of Financial Condition. These equity investments are accounted for under different methods.

•Low-income housing tax credit investments are accounted for under the proportional amortization method.

•For equity investments where the Company has significant influence, the Company applies the equity method of accounting, which adjusts the carrying value of the investment to recognize a proportionate share of the financial results of the investment entity, regardless of whether any distribution is made. Any adjustments to the fair value of these investments are recorded in Other income in the Consolidated Statements of Operations.

•For investments in certain nonmarketable equity securities investments where the equity method of accounting is not applicable, the Company applies the fair value method. Any adjustments to the fair value of these investments are recorded in Other income in the Consolidated Statements of Operations. Fair value is determined by reference to readily determinable market values, if applicable. As these investments do not have readily determinable fair values, they are generally accounted for at cost minus impairment, if any, plus or minus changes resulting from observable

WAFD, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED SEPTEMBER 30, 2023, 2022, AND 2021

transactions involving the same or similar investments from the same issuer. This practice is referred to as the measurement alternative.

•Equity investments in qualified real estate funds can use the NAV expedient for fair value measurement. Under this method, the net asset value (NAV) is determined by the fund as fair value for the investment. At September 30, 2023, equity investments held by the Company and recorded at NAV had a carrying amount of $37,587,000 and a remaining unfunded commitment of $6,039,000. These NAV based investments cannot be transferred without consent and we do not have redemption rights. Equity investments measured at NAV are not classified in the fair value hierarchy.

Debt securities, including mortgage-backed securities. The Company accounts for debt securities in two categories: held-to-maturity and available-for-sale. Premiums and discounts on debt securities are deferred and recognized into income over the contractual life of the asset using the effective interest method.

Held-to-maturity securities are accounted for at amortized cost, but the Company must have both the positive intent and the ability to hold those securities to maturity. There are very limited circumstances under which securities in the held-to-maturity category can be sold without jeopardizing the cost basis of accounting for the remainder of the securities in this category.

Available-for-sale securities are accounted for at fair value. Gains and losses realized on the sale of these securities are accounted for based on the specific identification method. Unrealized gains and losses for available-for-sale securities are excluded from earnings and reported net of the related tax effect in the accumulated other comprehensive income component of shareholders' equity.

Allowance for Credit Losses (Held-to-Maturity Debt Securities). For held-to-maturity (“HTM”) debt securities, the Company is required to utilize a CECL methodology to estimate expected credit losses. All of the Company’s HTM 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 September 30, 2023, the Company determined that the expected credit loss on its corporate and municipal bonds was immaterial, and therefore, an allowance for credit losses was not recorded. See Note C "Investment Securities" and Note F "Fair Value Measurements" for more information about HTM debt securities.

Allowance for Credit Losses (Available-for-Sale Debt Securities). The impairment model for available-for-sale (“AFS”) debt securities differs from the CECL methodology applied for HTM debt securities because AFS debt securities are measured at fair value rather than amortized cost. For AFS debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more likely than not that it will be required to sell, the security before recovery of its amortized cost basis. If either criteria is met, the security’s amortized cost basis is written down to fair value through income. For AFS debt securities where neither of the criteria are met, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the credit rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited to the amount that the fair value is less than the amortized cost basis. Any remaining discount that has not been recorded through an allowance for credit losses is recognized in other comprehensive income. Changes in the allowance for credit losses are recorded as a provision (or release) for credit losses. Losses are charged against the allowance when management believes the uncollectibility of an AFS security is confirmed or when either of the criteria regarding intent or requirement to sell is met. As of September 30, 2023, the Company determined that the unrealized loss positions in AFS securities were not the result of credit losses, and therefore, an allowance for credit losses was not recorded. See Note C "Investment Securities" and Note F "Fair Value Measurements" for more information about AFS debt securities.

Loans receivable. Loans that are performing in accordance with their contractual terms are carried at the unpaid principal balance, net of premiums, discounts and net deferred loan fees. Net deferred loan fees include non-refundable loan origination fees less direct loan origination costs. Net deferred loan fees, premiums and discounts are amortized into interest income using either the interest method or straight-line method over the terms of the loans, adjusted for actual prepayments. In addition to fees and costs for originating loans, various other fees and charges related to existing loans may occur, including prepayment charges, late charges and assumption fees.

WAFD, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED SEPTEMBER 30, 2023, 2022, AND 2021

When a borrower fails to make a required payment on a loan, the Bank attempts to cure the deficiency by contacting the borrower. Contact is made after a payment is 30 days past its grace period. In most cases, deficiencies are cured promptly. If the delinquency is not cured within 90 days, the Bank may institute appropriate action to foreclose on the property. If foreclosed, the property is sold at a public sale and may be purchased by the Bank.

Allowance for Credit Losses (Loans Receivable). The Company maintains an allowance for credit losses (“ACL”) for the expected credit losses of the loan portfolio as well as unfunded loan commitments. The amount of ACL is based on ongoing, quarterly assessments by management. The current expected credit loss methodology ("CECL") requires an estimate of the credit losses expected over the life of an exposure (or pool of exposures). See Note E "Allowance for Losses on Loans" for details.

The ACL consists of the allowance for loan losses and the reserve for unfunded commitments. The estimate of expected credit losses under the CECL methodology is based on relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts. Historical loss experience is generally the starting point for estimating expected credit losses. We then consider whether the historical loss experience should be adjusted for asset-specific risk characteristics or current conditions at the reporting date that did not exist over the period that historical experience was based for each loan type. Finally, we consider forecasts about future economic conditions or changes in collateral values that are reasonable and supportable.

Portfolio segment is defined as the level at which an entity develops and documents a systematic methodology to determine its ACL. The Company has designated two loan portfolio segments, commercial loans and consumer loans. These loan portfolio segments are further disaggregated into classes, which represent loans of similar type, risk characteristics, and methods for monitoring and assessing credit risk. The commercial loan portfolio segment is disaggregated into five classes: multi-family, commercial real estate, commercial and industrial, construction, and land acquisition and development. The risk of loss for the commercial loan portfolio segment is generally most indicated by the credit risk rating assigned to each borrower. Commercial loan risk ratings are determined by experienced senior credit officers based on specific facts and circumstances and are subject to periodic review by an independent internal team of credit specialists. The consumer loan portfolio segment is disaggregated into five classes: single-family-residential mortgage, custom construction, consumer lot loans, home equity lines of credit, and other consumer. The risk of loss for the consumer loan portfolio segment is generally most indicated by delinquency status and general economic factors. Each commercial and consumer loan portfolio class may also be further segmented based on risk characteristics.

For most of our loan portfolio classes, the historical loss experience is determined using a cohort methodology. This method pools loans into groups (“cohorts”) sharing similar risk characteristics and tracks each cohort’s net charge-offs over the lives of the loans to calculate a historical loss rate. The historical loss rates for each cohort are then averaged to calculate an overall historical loss rate which is applied to the current loan balance to arrive at the quantitative baseline portion of the allowance for credit losses for the respective loan portfolio class. For certain loan portfolio classes, the Company determined there was not sufficient historical loss information to calculate a meaningful historical loss rate using the cohort methodology. For any such loan portfolio class, the weighted-average remaining maturity (“WARM”) methodology is being utilized until sufficient historical loss data is obtained. The WARM method multiplies an average annual loss rate by the expected remaining life of the loan pool to arrive at the quantitative baseline portion of the allowance for credit losses for the respective loan portfolio class.

The Company also considers qualitative adjustments to the historical loss rate for each loan portfolio class. The qualitative adjustments for each loan class consider the conditions over the period from which historical loss experience was based and are split into two components: 1) asset or class specific risk characteristics or current conditions at the reporting date related to portfolio credit quality, remaining payments, volume and nature, credit culture and management, business environment or other management factors and 2) reasonable and supportable forecast of future economic conditions and collateral values.

The Company performs a quarterly asset quality review which includes a review of forecasted gross charge-offs and recoveries, nonperforming assets, criticized loans, risk rating migration, delinquencies, etc. The asset quality review is performed by management and the results are used to consider a qualitative overlay to the quantitative baseline. The second qualitative adjustment noted above, economic conditions and collateral values, encompasses a one-year reasonable and supportable forecast period. The overlay adjustment for the reasonable and supportable forecast assumes an immediate reversion after the one-year forecast period to historical loss rates for the remaining life of the respective loan pool.

WAFD, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED SEPTEMBER 30, 2023, 2022, AND 2021

When management deems it to be appropriate, the Company establishes a specific reserve for individually evaluated loans that do not share similar risk characteristics with the loans included in each respective loan pool. These individually evaluated loans are removed from their respective pools and typically represent collateral dependent loans but may also include other non-performing loans or troubled debt restructurings (“TDRs”). In addition, the Company individually evaluates “reasonably expected” TDRs, which are identified by the Company as a loan expected to be classified as a TDR within the next six months. Management judgment is utilized to make this determination.

Troubled debt restructured loans ("TDRs"). The Company will consider modifying the interest rates and terms of a loan if it determines that a modification is a better alternative to foreclosure. Most TDRs are accruing and performing loans where the borrower has proactively approached the Company about modifications due to temporary financial difficulties. Each request is individually evaluated for merit and likelihood of success. The concession for these loans is typically a payment reduction through a rate reduction of 100 to 200 bps for a specific term, usually six to 12 months. Interest-only payments may also be approved during the modification period. Principal forgiveness is generally not an available option for restructured loans. Before granting approval to modify a loan in a TDR, the borrower’s ability to repay is evaluated, including: current income levels and debt to income ratio, borrower’s credit score, payment history of the loan and updated evaluation of the secondary repayment source. The Company also modifies some loans that are not classified as TDRs as the modification is due to a restructuring where the effective interest rate on the debt is reduced to reflect a decrease in market interest rates. The Company's ACL reflects the effects of a TDR when management reasonably expects at the reporting date that a TDR will be executed with an individual borrower.

Non-accrual loans. Loans are placed on nonaccrual status when, in the judgment of management, the probability of collection of interest is deemed to be insufficient to warrant further accrual. When a loan is placed on nonaccrual status, previously accrued but unpaid interest is deducted from interest income. The Company does not accrue interest on loans 90 days or more past due. If payment is made on a loan so that the loan becomes less than 90 days past due, and the Company expects full collection of principal and interest, the loan is returned to full accrual status. Any interest ultimately collected is credited to income in the period of recovery. 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 contractual obligations.

If a consumer loan is on non-accrual status before becoming a TDR it will stay on non-accrual status following restructuring until it has been performing for at least six months, at which point it may be moved to accrual status. If a loan is on accrual status before it becomes a TDR, and management concludes that full repayment is probable based on internal evaluation, it will remain on accrual status following restructuring. If the restructured consumer loan does not perform, it is placed on non-accrual status when it is 90 days delinquent. For commercial loans, six consecutive payments on newly restructured loan terms are required prior to returning the loan to accrual status. In some instances, after the required six consecutive payments are made, management will conclude that collection of the entire principal and interest due is still in doubt. In those instances, the loan will remain on non-accrual status.

Accrued interest receivable. The Company has made the following elections regarding accrued interest receivable ("AIR"):

•Presenting accrued interest receivable balances separately from their underlying instruments within the consolidated statements of financial condition.

•Excluding accrued interest receivable that is included in the amortized cost of financing receivables from related disclosure requirements.

•Continuing our policy to write off accrued interest receivable by reversing interest income in cases where the Company does not reasonably expect to receive payment.

•Not measuring an allowance for credit losses for accrued interest receivable due to the Company’s policy of writing off uncollectible accrued interest receivable balances in a timely manner. We believe accrued interest receivable recorded as of September 30, 2023 is collectible.

Off-balance-sheet credit exposures. The only material off-balance-sheet credit exposures are loans in process and unused lines of credit. The reserve for unfunded commitments is recognized as a liability (other liabilities in the consolidated statements of financial condition), with adjustments to the reserve recognized through provision for credit losses in the consolidated statements of income. The reserve for unfunded commitments represents the expected lifetime credit losses on off-balance sheet obligations such as commitments to extend credit and standby letters of credit. However, a liability is not recognized for commitments that are unconditionally cancellable by the Company. The reserve for unfunded commitments is determined by estimating future draws, including the effects of risk mitigation actions, and applying the expected loss rates on

WAFD, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED SEPTEMBER 30, 2023, 2022, AND 2021

those draws. Loss rates are estimated by utilizing the same loss rates calculated for the allowance for credit losses related to the respective loan portfolio class. See Note M "Commitments and Contingencies" for details.

Client swap program hedges. Interest rate swap agreements are provided to certain clients who desire to convert their obligations from variable to fixed interest rates. Under these agreements, the Bank enters into a variable-rate loan agreement with a customer in addition to a swap agreement, and then enters into a corresponding swap agreement with a third party in order to offset its exposure on the customer swap agreement. As the interest rate swap agreements with the customers and third parties are not designated as accounting hedges under FASB ASC 815, the instruments are marked to market in earnings. The change in fair value of the offsetting swaps are included in other noninterest income and there is minimal impact on net income. There is fee income earned on the swaps that is included in loan fee income.

Borrowings cash flow hedges. The Company has entered into interest rate swaps to convert a series of future short-term borrowings to fixed-rate payments. These interest rate swaps qualify as cash flow hedging instruments under ASC 815 so gains and losses are recorded in Other Comprehensive Income to the extent the hedge is effective. Gains and losses on the interest rate swaps are reclassified from OCI to earnings in the period the hedged transaction affects earnings and are included in the same income statement line item that the hedged transaction is recorded.

Mortgage loan "last-of-layer" portfolio hedges. The Company has entered into interest rate swaps to hedge the portion of the respective closed portfolios of prepayable mortgage loans that are expected to remain at the end of the hedge term. These hedges qualify as last-of-layer hedges under ASC 815 and provide for matching of the recognition of the gains and losses on the interest rate swap and the related hedged item.

Commercial loan fair value hedges. The Company has entered into interest rate swaps to hedge long term fixed rate commercial loans. These hedges qualify as fair value hedges under ASC 815 and provide for matching of the recognition of the gains and losses on the interest rate swap and the related hedged loan.

Premises and equipment. Premises and equipment are stated at cost, less accumulated depreciation. Depreciation is computed on the straight-line method over the estimated useful lives of the respective assets. Costs for improvements are capitalized. Charges for ordinary maintenance and repairs are expensed to operations as incurred.

Real estate owned. Real estate properties acquired through foreclosure of loans or through acquisitions are recorded initially at fair value less selling costs and are subsequently recorded at lower of cost or fair value. Costs for improvements are capitalized. Any gains (losses) and maintenance costs are recorded in Gain (loss) on real estate owned, net.

Intangible assets. Goodwill represents the excess of the cost of businesses acquired over the fair value of the net assets acquired. Other intangibles, including core deposit intangibles, are acquired assets that lack physical substance but can be distinguished from goodwill. Goodwill is not amortized but is evaluated for potential impairment on an annual basis and between tests if circumstances such as material adverse changes in legal, business, regulatory and economic factors exist. We have determined our goodwill balance is all related to a single reporting unit and perform a quantitative impairment assessment. An impairment loss is recorded when the carrying amount of goodwill exceeds its implied fair value. If circumstances indicate that the carrying value of the assets may not be recoverable, an impairment charge could be recorded. Other intangible assets are amortized over their estimated lives and are subject to impairment testing when events or circumstances change.

The Company performed its annual impairment assessment as of August 31, 2023 and concluded the fair value of our single reporting unit exceeded its respective carrying value and did not result in impairment for the reporting unit. When performing the quantitative assessment of goodwill impairment, we estimated the fair value of our reporting unit using the market capitalization approach, based on our stock price, adjusted for the effect of a control premium.

The Company continuously monitors for events and circumstances that could negatively impact the key assumptions in determining fair value. While the Company believes the judgments and assumptions used in the goodwill impairment test is reasonable, different assumptions or changes in general industry, market and macro-economic conditions could change the estimated fair values and, therefore, future impairment charges could be required, which could be material to the consolidated financial statements.

WAFD, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED SEPTEMBER 30, 2023, 2022, AND 2021

The table below provides detail regarding the Company's intangible assets.

Goodwill Core Deposit and Other Intangibles Total

(In thousands)

Additions — — —

The table below presents the estimated future amortization expense of other intangibles for the next five years.

Fiscal Year Expense

(In thousands)

Income taxes. Income taxes are accounted for using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, a deferred tax asset or liability is determined based on the temporary differences between the financial statement and corresponding tax treatment of income, gains, losses, deductions or credits using enacted tax rates in effect for the year in which the differences are expected to reverse. The provision for income taxes includes current and deferred income tax expense based on net income adjusted for temporary and permanent differences such as depreciation, loan loss reserve, tax-exempt interest, and affordable housing tax credits. Reserves for uncertain tax positions, together with any related interest and penalties, if applicable, and amortization of affordable housing tax credit investments are recorded within income tax expense.

Accounting for stock-based compensation. We recognize in the statement of operations the grant-date fair value of stock options and other equity-based forms of compensation issued to employees over the employees' requisite service period (generally the vesting period). The requisite service period may be subject to performance conditions. Stock options and restricted stock awards generally vest ratably over two to five years and are recognized as expense over that same period of time. The exercise price of each option equals the market price of the Company's Common Stock on the date of the grant, and the maximum term is ten years.

Certain grants of restricted stock are subject to performance-based and market-based vesting as well as other approved vesting conditions and cliff vest based on those conditions. Compensation expense is recognized over the service period to the extent restricted stock awards are expected to vest. See Note P "Stock Award Plans" for additional information.

Business segments. As the Company manages its business and operations on a consolidated basis, management has determined that there is one reportable business segment.

Regulatory matters. On October 9, 2013, the CFPB entered a Consent Order against the Bank that required the Bank to pay a civil money penalty of $34,000, and to adopt an enhanced compliance program related to reporting Home Mortgage Disclosure

WAFD, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED SEPTEMBER 30, 2023, 2022, AND 2021

Act ("HMDA") data. The Bank has adopted an enhanced HMDA program, which continues to be subject to review by the CFPB. On October 27, 2020 the CFPB entered a second Consent Order against the Bank for violations related to the Bank’s HMDA reporting obligations. The 2020 Consent Order required the Bank to pay a $200,000 civil money penalty and develop and implement a HMDA compliance management system. Both HMDA Consent Orders remain in place.

NOTE B - NEW ACCOUNTING PRONOUNCEMENTS

In March 2022, the FASB issued ASU 2022-01, Derivatives and Hedging (Topic 815). The amendments in this ASU clarify the guidance on ASC 815 on fair value hedge accounting of interest rate risk for portfolios and financial assets. Among other things, the amended guidance establishes the "last-of-layer" method for making the fair value hedge accounting for these portfolios more accessible and renames that method the "portfolio layer" method. The amendments in this ASU are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. We do not expect the amendments to have a material effect on our consolidated financial statements.

In March 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit Losses (Topic 326). The amendments in this ASU eliminate the guidance on troubled debt restructurings while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors made to borrowers experiencing financial difficulties. The ASU also requires that entities disclose current-period gross charge-offs by year of origination for loans and leases. The amendments in this ASU are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. We do not expect the amendments to have a material effect on our consolidated financial statements.

In March 2023, the FASB issued ASU 2023-02, Investments - Equity Method and Joint Ventures (Topic 323). The amendments in this ASU expand the population of tax credit investments for which an investor may elect to apply the proportional amortization method ("PAM") and require certain disclosures for tax credit investments. For public companies amendments in this ASU are effective for fiscal years beginning after December 15, 2023, with early adoption permitted. The Company has utilized PAM for low income housing tax credit investments. We do not expect this ASU to have a material effect on our consolidated financial statements.

In August 2023, the FASB affirmed ASU 2023-ED100, Income Tax - Improvements to Income Tax Disclosures (Topic 740) which will require reporting companies to break out their income tax expense and tax rate reconciliation in more details. For public companies, the requirements will become effective for fiscal years beginning after December 15, 2024, with early adoption permitted. We do not expect this ASU to have a material effect on our consolidated financial statements.

In October 2023, the FASB issued ASU 2023-6 Disclosure Improvements: Codification Amendments In Response to the SEC's Disclosure Update and Simplification Initiative to clarify or improve disclosure and presentation requirements on a variety of topics and align the requirements in the FASB accounting standard codification with the Securities and Exchange Commission regulations. This guidance is effective for the Company no later than June 30, 2027. We do not expect the amendments in this update to have a material impact on our consolidated financial statements.

WAFD, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED SEPTEMBER 30, 2023, 2022, AND 2021

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.

September 30, 2023 AmortizedCost Gross Unrealized FairValue Yield

Gains Losses

($ in thousands)

Available-for-sale securities

U.S. government and agency securities due

Asset-backed securities due

Corporate debt securities due

Municipal bonds due

Mortgage-backed securities

Held-to-maturity securities

Mortgage-backed securities

WAFD, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED SEPTEMBER 30, 2023, 2022, AND 2021

September 30, 2022 AmortizedCost Gross Unrealized FairValue Yield

Gains Losses

($ in thousands)

Available-for-sale securities

U.S. government and agency securities due

Asset-backed securities due

Corporate debt securities due

Municipal bonds due

Mortgage-backed securities

Held-to-maturity securities

Mortgage-backed securities

The Company purchased $376,481,000 of available-for-sale investment securities and no held-to-maturity investment securities during 2023. Sales of available-for-sale securities totaled $1,169,000 and there were no sales of held-to-maturity investment securities in 2023. Substantially all mortgage-backed securities have contractual due dates that exceed 25 years.

The Company elected to exclude AIR from the amortized cost basis of debt securities disclosed throughout this footnote. For AFS securities, AIR totaled $8,641,000 and $5,694,000 as of September 30, 2023 and September 30, 2022, respectively. For HTM debt securities, AIR totaled $1,013,000 and $1,108,000 as of September 30, 2023 and September 30, 2022, 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, 2023 and September 30, 2022, by length of time that individual securities in each category have been in a continuous loss position. There were 232 and 223 securities with an unrealized loss as of September 30, 2023 and September 30, 2022, 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.

WAFD, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED SEPTEMBER 30, 2023, 2022, AND 2021

September 30, 2023 Less than 12 months 12 months or more Total

(In thousands)

Available-for-sale securities

Held-to-maturity securities

September 30, 2022 Less than 12 months 12 months or more Total

(In thousands)

Available-for-sale securities

Held-to-maturity securities

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, 2023 or September 30, 2022.

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, 2023 or September 30, 2022. 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.

WAFD, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED SEPTEMBER 30, 2023, 2022, AND 2021

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 into two 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.

($ in thousands) ($ in thousands)

Gross loans by category

Commercial loans

Consumer loans

Less:

Net deferred fees, costs and discounts 98,807 92,564

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, 2023 and September 30, 2022, AIR for loans totaled $77,349,000 and $57,070,000, 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 $8,941,201,000 and $8,224,951,000 at September 30, 2023 and September 30, 2022, respectively, were pledged to secure borrowings from the FHLB as part of our liquidity management strategy. The FHLB does not have the right to sell or re-pledge these loans.

WAFD, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED SEPTEMBER 30, 2023, 2022, AND 2021

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

Fixed-Rate Adjustable-Rate

Term To Maturity Loans % of Loans Term To Rate Adjustment Loans % of Loans

(In thousands) (In thousands)

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 $134,860,000 and $144,178,000 at September 30, 2023 and 2022, respectively. As of September 30, 2023, 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.

(In thousands, except ratio data)

Commercial loans

Multi-family $ 5,127 $ — $ — $ 5,912 $ — $ —

Construction — — — — — —

Land - acquisition & development — — — — — —

Consumer loans

Construction - custom 88 — — 435 — —

Land - consumer lot loans 9 — — 84 — —

Consumer 27 — — 36 — —

WAFD, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED SEPTEMBER 30, 2023, 2022, AND 2021

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

September 30, 2023 Days Delinquent Based on $ Amount of Loans % basedon $

Loan type Loans Receivable (Amortized Cost) Current 30 60 90 Total Past Due

($ in thousands)

Commercial loans

Consumer loans

September 30, 2022 Days Delinquent Based on $ Amount of Loans % basedon $

Loan type Loans Receivable (Amortized Cost) Current 30 60 90 Total Past Due

($ in thousands)

Commercial loans

Consumer loans

Most loans classified as TDRs are accruing and performing loans where the borrower has proactively approached the Company about modifications due to temporary financial difficulties. Each request is individually evaluated for merit and likelihood of success. The concession for these loans is typically a payment reduction through a rate reduction of 100 to 200 bps for a specific term, usually six to 12 months. Interest-only payments may also be approved during the modification period. Principal forgiveness is not an available option for restructured loans. As of September 30, 2023, the outstanding balance of TDRs was $46,117,000 as compared to $56,817,000 as of September 30, 2022. As of September 30, 2023, 97.9% of the restructured loans were performing. Single-family

WAFD, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED SEPTEMBER 30, 2023, 2022, AND 2021

residential loans comprised 84.7% of TDRs as of September 30, 2023. The Company's ACL methodology takes into account the following performance indicators for restructured loans: 1) time since modification, 2) current payment status and 3) geographic area.

We evaluate the credit quality of our commercial loans based on regulatory risk ratings and also consider other factors. 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.

WAFD, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED SEPTEMBER 30, 2023, 2022, AND 2021

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, 2023 and September 30, 2022.

September 30, 2023 Term Loans Amortized Cost Basis by Origination Year

Commercial loans

Multi-family

Commercial real estate

Commercial & industrial

Construction

Land - acquisition & development

Substandard — 271 — — — — — — 271

Total commercial loans

WAFD, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED SEPTEMBER 30, 2023, 2022, AND 2021

September 30, 2023 Term Loans Amortized Cost Basis by Origination Year

WAFD US Equity

WAFD · 10-K · period ended 2023-09-30

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data

WAFD US Equity☆

WAFD · 10-K · period ended 2023-09-30

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data

WAFD US Equity