WAFD 10-K & 10-Q changes, risk factors and insider trading

SignificantOur increasesearnings inand marketcash flows are largely dependent upon our net interest income, which is significantly affected by interest rates. Interest rates onare loans,highly orsensitive theto perceptionfactors thatbeyond anour increasecontrol, maysuch occur,as general economic conditions and policies set by governmental and regulatory bodies. We principally manage interest rate risk by managing our volume and mix of our earning assets and funding liabilities. If we are unable to manage this risk effectively, our business, financial condition and results of operations could adverselybe affectmaterially both our ability to originate new loans and our ability to grow. Beginning early in 2022, in response to growing signs of inflation, the Federal Reserve Bank increased interest rates rapidly, causing the federal funds rate to reach a 22-year high. Although the FRB reduced its benchmark rates in September 2024, the inflationary outlook in the United States is currently uncertain.affected. Rapid changes in interest rates make it difficult for the Bank to balance its loan and deposit portfolios, which may adversely affect our results of operations by, for example, reducing asset yields or spreads, creating operating and system issues, or having other adverse impacts on our business. PersistentHigher than expected inflation could lead to higher interest rates, which could, in turn, increase the borrowing costs of our customers, making it more difficult for them to repay their loans or other obligations. High interest rates could also push down asset prices and weaken economic activity. Conversely, falling rates can initially reduce our net interest income as our floating-rate assets tend to be more immediately responsive to changes in market rates than most deposit liabilities. In addition, a decline in market interest rates could increase loan prepayments, leading to reinvestment in lower-yielding assets, reducing income.

Further, our profitability is dependent to a large extent uponOur net interest income, whichincome is the difference (or “spread”) between the interest earned on loans, securities and other interest-earning assets and the interest paid on deposits, borrowings, and other interest-bearing liabilities. The level of net interest income is a function of the average balances of interest-earning assets and interest-bearing liabilities and the spread between the amounts of the yield on such assets and the cost of such liabilities. These factors are influenced by both the pricing and the mix of interest-earning assets and interest-bearing liabilities which, in turn, are impacted by such external factors as the local economy, competition for loans and deposits, the monetary policy of the Federal Open Market Committee of the Federal Reserve Board of Governors (the “FOMC”) and market interest rates. Furthermore, movements in interest rates, the pace at which such movements occur and the volume and mix of our interest-bearing assets and liabilities influence the level of net interest income. The cost of customer deposits is largely based on short-term interest rates, the level of which is driven by the FOMC. However, the yields generated by long-term loans, such as single-family residential and multifamily mortgage loans, and securities are typically driven by longer-term (10 year) interest rates, which are set by the market and vary from day to day.

As a result of the interest rate increases experienced in 2022 and 2023, our interest expense on both deposits and borrowings increased significantly. Because of the differences in maturities and repricing characteristics of our interest-earning assets and interest-bearing liabilities, changes in interest rates do not produce equivalent changes in interest income earned on interest-earning assets and interest paid on interest-bearing liabilities. Accordingly, fluctuations in interest rates could adversely affect our interest rate spread, and, in turn, our profitability. For example, if the interest rates on interest-bearing liabilities increase at a faster pace than the interest rates on interest-earning assets,assets decline more quickly than the rates on interest-bearing liabilities, as we saw in our recent fiscal year, the result could beis a reduction in our net interest income and with it, a reduction in earnings. The same could be true if the interest rates on interest-earning assets decline faster than the rates on interest-bearing liabilities.liabilities Netincrease interestat incomea andfaster earningspace would be similarly impacted ifthan the interest rates on interest-earning assets decline more quickly than the interest rates on interest-bearing liabilities.assets. In addition, changes in interest rates could affect the Bank's ability to originate loans and attract and retain deposits; the fair values of its securities and other financial assets; the fair values of its liabilities; and the average lives of its loan and securities portfolios. Additionally, decreasesDecreases in interest rates could lead to increased loan refinancing activity, which, in turn, would alter the balance of our interest-earning assets and impact net interest income. Increases in interest rates could reduce loan refinancing activity, which could result in compression of the spread between loan yields and more quickly rising funding rates. We may also be exposed to movements in market rates to a degree not experienced by other financial institutions, as a result of our significant portfolio of fixed-rate single-family home loans, which are longer-term in nature than the customer accounts and borrowed money that constitute our liabilities.

We are currently anticipating that there will be further decreasesoperating in thean target federal funds rateenvironment in 2025which butthe Federal Reserve has shifted toward reducing interest rates, although modestly, with cuts implemented in September and October 2025. However, the inflationary outlook remains uncertain.uncertain However, if interest rates do not decrease, orand if the Federal Reserve were to reverse course and rapidly increase the target federal funds rate, the increase in rates could continue to constrain our interest rate spread and may adversely affect our business forecasts. On the other hand, further rapid decreases in interest rates, may result in a change in the mix of noninterest and interest-bearing accounts. WeNew are unableappointments to predictthe changesBoard of Governors at the Federal Reserve could result in interesta rates,change whichin aremonetary affected by factors beyond our control, including inflation, deflation, recession, unemployment, money supplypolicy and otherinterest changes in financial markets.rates.

We are continuously enhancing and expanding our digital products and services to meet customer and business needs with desired outcomes. These digital products and services often include storing, transmitting, and processing confidential customer, employee, financial, and business information. Due to the nature of this information, and the value it has for internal and external threat actors, we, and our third-party service providers, continue to be subject to cyber-attacks and fraud activityactivity, including through the use of rapidly evolving AI technologies, that attempts to gain unauthorized access, misuse information and information systems, steal information, disrupt or degrade information systems, spread malicious software, and other illegal activities.

We believe we have robust preventive, detective, and administrative safeguards and security controls to minimize the probability and magnitude of a material event. However, if we are unable to maintain them, we may fall victim to a material adverse cybersecurity event. Because the tactics and techniques used by threat actors to bypass safeguards and security controls change frequently, and often are not recognized until after an event has occurred, we may be unable to anticipate future tactics and techniques, or to implement adequate and timely protective measures. The use of AI technologies by cybercriminals continues to be a major concern, as deep-fake technologies continue to improve, allowing bad actors to manipulate or fabricate visual and audio content and convincingly fake identities.

To date, we have no knowledge of a material cyber-attack or other material information security incident affecting the systems we operate and control. However, our risk and exposure to these matters remains heightened because of, among other things, the evolving nature of these threats, the continuation of a remote or hybrid work environment for our employees and service providers, and our plans to continue to implement and expand digital banking services, expand operations, and use third-party information systems that includes cloud-based infrastructure, platforms, and software. Recent instances of attacks specifically targeting banks and financial services businesses indicate that the risk to our systems remains significant. We, and our third-party providers, are regularly the subject of attempted attacks and the ability of the attackers and the method of their attacks continues to grow in sophistication. Threat actors, including nation state attackers, could also use artificial intelligence for malicious purposes, increasing the frequency and complexity of their attacks. Potential threats to our technologies, systems, networks, and other devices, as well as those of our employees, third party vendors, and other third parties with whom we interact, include Distributed Denial of Service ("DDoS") attacks, computer viruses, hacking, malware, ransomware, credential stuffing, phishing, and other forms of social engineering. Such cyber-attacks and other security incidents are designed to lead to various harmful outcomes, such as unauthorized transactions against our customers’ accounts, unauthorized or unintended access to confidential information, or the release, gathering, monitoring, disclosure, loss, destruction, corruption, disablement, encryption, misuse, modification or other processing of confidential or sensitive information (including personal information), intellectual property, software, methodologies or business secrets, disruption, sabotage or degradation of service, systems or networks, or other damage. These threats may derive from, among other things, error, fraud or malice on the part of our employees, insiders, or third parties or may result from accidental technological failure. Any of these parties may also attempt to fraudulently induce employees, service providers, customers, partners or other third-party users of our systems or networks to disclose confidential or sensitive information (including personal information) in order to gain access to our systems, networks or data or that of our customers, partners, or third parties with whom we interact, or to unlawfully obtain monetary benefit through misdirected or otherwise improper payment.payments or through the creation of false identifies. A cyber-attack or other security incident on the systems we operate and control could cause us to suffer damage to our reputation, result in productivity losses, require us to incur substantial expenses, including response costs associated with investigation and resumption of services, remediation expenses costs associated with customer notification and credit monitoring services, increased insurance premiums, regulatory penalties and fines, and costs associated with civil litigation, any of which could have a materially adverse effect on our business, financial condition, and results of operations.

The occurrence of any of these risks could result in a diminished ability for us to operate our business, additional costs to correct defects, potential liability to clients,customers, reputational damage, and regulatory intervention, any of which could adversely affect our business, financial condition and results of operations.

WeAn are operating in an uncertain economic environment. The pandemic caused a global economic slowdown, and while we have seen some economic recovery, continuing supply chain issues, labor shortages and inflation risks continue to affect the economic recovery. U.S. debt ceiling and budget deficit concerns have increased the possibility of additional credit-rating downgrades and economic slowdowns,unpredictable or avolatile recessionpolitical environment in the United States.States Therecould remainnegatively increasedimpact risksbusiness and market conditions, economic growth, financial stability, and business, consumer, investor, and regulatory sentiments, any one or more of which could have a governmentmaterial shutdownadverse ifimpact theon spendingour billsfinancial necessarycondition toand fundresults theof governmentoperations. through the fiscal year that ends September 30, 2025 are not passed by Congress. Future deteriorationDeterioration in the U.S. credit and financial markets could result in losses or significant deterioration in the fair value of our U.S. government issued, sponsored or guaranteed investments. At September 30, 2024,2025, we had $2.2$3.5 billion invested in U.S. government and agency obligations, and further downgrades could affect the stability of securities issued or guaranteed by the federal government and the valuation or liquidity of our portfolio of such investment securities.

Economic uncertainty, or a recessionary or stagnant economy, could result in financial stress on the Bank's borrowers, which could adversely affect our business, financial condition and results of operations. Deteriorating conditions in the regional economies we serve, or in certain sectors of those economies, in excess of the reasonable and supportable forecasts we used to estimate credit losses, could drive losses beyond that which isthose provided for in our allowance for loan losses. We could also face the following risks in connection with the following events:

The Federal Reserve is responsible for regulating the supply of money in the United States, including open market operations used to stabilize prices in times of economic stress, as well as setting monetary policies. These activities strongly influence our rate of return on certain investments, our hedge effectiveness for mortgage servicing and our mortgage origination pipeline, as well as our costs of funds for lending and investing,investing. allNew appointments to the Board of Governors at the Federal Reserve, or increased political pressures on the Federal Reserve, could impact monetary policy, which maywill adverselydirectly, impact our liquidity, results of operations, financial condition and capital position.

The global credit and financial markets have from time-to-time experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, high rates of inflation, and uncertainty about economic stability. Changes in trade policies by the United States or other countries, such as tariffs or retaliatory tariffs, may cause inflation which could impact the prices of products sold or purchased by our borrowers and haveor the potential to reduce demand for their productsproducts, negatively impacting their profitability and making it difficult for our borrowers to repay their loans. The financial markets and the global economy may also be adversely affected by the current or anticipated impact of military conflict, including the conflict between Russia and Ukraine, and the evolving conflict in the Middle East. These events have increased and are expected to continue to increase volatility in commodity and energy prices, including oil, and continuing hostilities raise the possibility of supply disruptions. Rising tensions and global instability have the potential to affect consumer confidence in the U.S. and abroad, therefore having a broader effect on financial markets. Changes in trade policies or sanctions imposed by the United States and other countries in response to such conflict could further adversely impact the financial markets and the global economy, and any economic countermeasures by the affected countries or others could exacerbate market and economic instability. Our general business strategy may be adversely affected by any such economic downturn, volatile business environment, hostile third-party action or continued unpredictable and unstable market conditions.

Non-Compliance with banking rules and regulations, including the USA PATRIOT Act, Bank Secrecy Act, Community Reinvestment Act, Fair Lending Laws, Real Estate Settlement Procedures Act, Truth-in-Lending Act, Flood Insurance Reform Act or other laws and regulations could result in fines or sanctions, and curtail our expansion opportunities.

Financial institutions are required under the USA PATRIOT Act of 2001 (the “Patriot Act”) and Bank Secrecy Act ("BSA") to develop programs to prevent financial institutions from being used for money-laundering and terrorist activities. Financial institutions are also obligated to file suspicious activity reports with the U.S. Treasury Department's Office of Financial Crimes Enforcement Network. These rules also require financial institutions to establish procedures for identifying and verifying the identity of customers seeking to open new financial accounts. Failure to comply with applicable laws and regulations can result in a range of sanctions and enforcement actions, including the imposition of civil money penalties, formal agreements and cease and desist orders. The Bank has in the past been subject to a Consent Order from the Office of the Comptroller of the Currency (“OCC”) for its BSA program, which required the Bank to incur significant expenses to implement an effective AML/CFT Program, including payment of a $2,500,000 civil money penalty. In addition, the Bank was previously subject to two Consent Orders for violations of the reporting requirements under the Home Mortgage Disclosure Act (“HMDA”) which included a total of $234,000 in civil money penalties. Our failure or our inability to comply with the Patriot Act andAct, BSA statutes and regulation, HMDA or other applicable regulations could have serious business, financial and reputational consequences for the Bank, and could result in enforcement actions, additional fines or penalties, curtailment of expansion opportunities, enforcementrestrictions actions,on our ability to pay dividends, intervention or sanctions by regulators and costly litigation or expensive additional controls and systems.

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 20242025 and 20232024 items and year-to-year comparisons between 20242025 and 2023.2024. For management's review of the factors that affected our results of operations for the years ended September 30, 20232024 and 2022,2023, refer to our Annual Report on Form 10-K for the year ended September 30, 2023,2024, which was filed with the Securities and Exchange CommissionSEC on November 17,20, 2023.2024.

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 Business Combinations. The Company applies the acquisition method of accounting for business combinations. Under the acquisition method, the acquiring entity recognizes the assets acquired and liabilities assumed at their acquisition date fair values. Management utilizes prevailing valuation techniques appropriate for the asset or liability being measured in determining these fair values. This method often involves estimates based on third party valuations based on discounted cash flow analyses or other valuation techniques, all of which are inherently subjective. Any excess of the purchase price over the fair value of net assets and other identifiable intangible assets acquired is recorded as goodwill.

Management uses various valuation methodologies to estimate the fair value of acquired assets and liabilities which often involve a significant degree of judgement.judgment. Changes in the assumptions utilized within these valuations, including downturns in economic or business conditions, could have a significant adverse impact on the carrying value of assets which could result in impairment losses affecting the Company's financial statements as a whole.

The allowance for loan losses increaseddecreased by $26,546,000,$4,033,000, or 14.98%,1.98%, from $177,207,000$203,753,000 as of September 30, 2023,2024, to $203,753,000$199,720,000 at September 30, 2024.2025. As of September 30, 2024,2025, the allowance of $203,753,000$199,720,000 is for loans that are evaluated on a pooled basis, which was comprised of $144,848,000$131,652,000 related to the quantitative component and $58,905,000$68,068,000 related to management's qualitative overlays. The fluctuations that resulted in the overall increasedecrease from the prior year can be seen in the table above. The allowance for multi-family and single-family residential loans increased largely as a result of the Merger. The allowance for both consumer and commercial construction loans and land A&D loans decreased as projects were completed and paid off or transitioned to CRECRE. Single-family, residential construction and single-familylot loans whichdecreased alsoas contributeda toresult increases.of run-off after the Bank's exit of the residential mortgage market..

The reserveCompany recorded a provision for unfundedcredit loan commitments was $21,500,000 aslosses of September$7,750,000 30,in 2024,2025, compared to $24,500,000a asprovision of September$17,500,000 30,for 2023.2024.

(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, 2022,2022 2021,and 20202021 include PPP loans for which no allowance was recorded. These PPP loan balances were $1,000,000, $10,000,000, $312,000,000$10,000,000 and $745,000,000$312,000,000 as of September 30, 2023, 2022,2022 and 2021 and 2020 respectively.

For commercial loans, six consecutive payments on newly restructured loan terms are generally required prior to returning the loan to accrual status. In some instances after the required six consecutive payments are made, a management assessment will conclude that collection of the entire principal balance is still in doubt. In those instances, the loan will remain on non-accrual. Homogeneous loans may or may not be on accrual status at the time of restructuring, but all are placed on accrual status upon the restructuring of the loan.

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.

Non-performing assets increased 33.7%84.7% to $143,022,000, or 0.54% of total assets, at September 30, 2025, compared to $77,418,000, or 0.28% of total assets, at September 30, 2024,2024 compared to $57,924,000, or 0.26% of total assets, at September 30, 2023. The increase was primarilyas a result of an increase of $19,119,000$59,087,000 in non-accrual loans partiallycombined offset bywith a $418,000$6,517,000 increase in real estate owned. The increase in non-accrual loans is primarily the result of one commercial real estate loan over 90 days past due. Although appropriately non-accrual based on policy, there was no charge-off taken upon revaluation. Management is actively collaborating with the borrower. Other property owned of $3,310,000 as of September 30, 20242025 is comprised entirely of a government guarantee related to equipment obtained via a commercial loan foreclosure.

Cash and cash equivalents: Cash and cash equivalents increaseddecreased to $657,310,000 at September 30, 2025, as compared to $2,381,102,000 at September 30, 2024,2024. asThe comparedprior toyear $980,649,000end atbalances September 30, 2023. This increase reflects cash received from LBC as a result of the Merger combined withreflected cash received from the recentLuther LBCBurbank multi-family and LBC single-family residential loan portfolio sales,sales. offsetThe bydecrease pay-downsin onthe borrowings.current year reflects cash used to reduce borrowings and purchase investment securities during the year.

Available-for-sale (AFS) investment securities: Available-for-sale securities increased $577,612,000,$960,492,000, or 29.0%,37.3%, during the year ended September 30, 2024,2025, to $2,572,709,000,$3,533,201,000, dueas toa the additionresult of $516,308,000securities inpurchases AFSof investments obtained in the Merger$1,482,058,000 combined with normalunrealized investing activity. During this time, the Bank had purchaseslosses of $549,159,000$9,237,000 and a reclassification of gain into earnings from AFS securities hedging derivatives of $15,452,000 partially offset by principal repayments and maturities of $386,564,000$561,808,000 and sales of $182,682,000.$797,000. As of September 30, 2024, the Company had aThe net unrealized loss onthe available-for-saleyear securitiesended ofSeptember $44,168,000,30, which2025 is recorded net of tax within AOCI, and is decreased compared to an unrealized losslosses of $123,519,000$44,168,000 as of September 30, 2023.2024.

Held-to-maturity (HTM) investment securities: Held-to-maturity securities increased by $13,386,000$208,830,000 to $436,972,000,$645,802,000, or 3.2%,47.8%, during the year ended September 30, 2024,2025, largely due to the purchase of $47,092,000$261,842,000 of HTM securities. These purchases were offset by principal repayments and maturities of $36,013,000$53,030,000 during the period. The increase also included $2,570,000 in HTM securities obtained in the Merger. There were no held-to-maturity securities sold during the year ended September 30, 2024.2025. As of September 30, 2024,2025, the net unrealized loss on held-to-maturity securities was $35,926,000,$33,063,000, compared to $68,398,000$35,926,000 the year prior, which management attributes to the change in interest rates since acquisition.prior.

Loans receivable: Loans receivable, net of related contra accounts, increaseddecreased $3,439,804,000,$827,736,000, or 19.7%,4.0%, to $20,916,354,000$20,088,618,000 at September 30, 2024,2025, from $17,476,550,000$20,916,354,000 one year earlier. The increase resulted primarily from the addition of loans obtained in the Merger. The balance change also reflects originations of $3,632,071,000,$3,956,199,000, a decrease to loans-in-process of $886,142,000$236,192,000 and principal repayments of $4,302,359,000$5,145,176,000 during the year ended September 30, 2024.2025. Commercial loan originations accounted for 72.5%83.1% of total originations and consumer originations were 27.5%16.9% as the Bank exited the residential mortgage market mid-year. Management continues to focus on commercial lending, coupled with growing economies in all major markets in which we operate.

Interest receivable: Interest receivable was $102,827,000$98,589,000 as of September 30, 2024,2025, ana increasedecrease of $15,824,000,$4,238,000, or 18.2%,4.1%, since September 30, 2023.2024. The increasedecrease was the result of a 19.7%4.0% increasedecrease in loans receivable combined with the increasedecrease in interest rates.

Bank Owned Life Insurance: Bank-owned life insurance increased to $275,159,000 as of September 30, 2025 from $267,633,000 as of September 30, 2024 from $242,919,000 as of September 30, 2023,2024, primarily as a result of policies obtainedincreases in the Merger.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 Bank's intangible assets totaled $448,425,000$442,093,000 at September 30, 20242025 compared to $310,619,000$448,425,000 as of September 30, 2023.2024. The increasedecrease is largely the result of the Mergeramortization whichof the core deposit intangible balance created $104,707,000 in Goodwillthe and a Core Deposit Intangible balance of $37,022,000.Merger. The balance at September 30, 20242025 is comprised of $411,360,000$414,722,000 of goodwill and the unamortized balance of the core deposit and other intangibles of $37,065,000.$27,371,000.

Customer accounts: As of September 30, 2024,2025, customer deposits totaled $21,373,970,000$21,437,636,000 compared with $16,070,329,000$21,373,970,000 at September 30, 2023,2024, a $5,303,641,000,$63,666,000, or 33.0%,0.3%, increase largelydriven dueby totransaction deposits obtained in the Merger.accounts. During 2024,2025, transaction accounts increased by $1,051,872,000$489,347,000 or 9.8%4.1% while time deposits increaseddecreased by $4,251,769,000$425,681,000 or 80.1% as 66% of the LBC customer accounts were time deposits.4.5%.

Borrowings: Total borrowings decreased to $3,267,589,000$1,765,604,000 as of September 30, 2024,2025, as compared to $3,650,000,000$3,267,589,000 at September 30, 2023.2024. The weighted average rate for borrowings was 3.93%2.50% as of September 30, 2024,2025, versus 3.98%3.93% at September 30, 2023,2024. theThe decreasedecreases beingin balance and rate are primarily due to the pay-down of higher ratesinterest onborrowings newcombined short-termwith borrowings.decreasing interest rates. The Bank 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, 20242025 was 2.342.19 years.

Net Income: Net income decreasedincreased $57,385,000,$26,027,000, or 22.3%,13.0%, to $226,068,000 for the year ended September 30, 2025, as compared to $200,041,000 for the year ended September 30, 2024, as compared to $257,426,000 for the year ended September 30, 2023.2024. The change was due to the factors described below.

Net Interest Income: For the year ended September 30, 2024,2025, net interest income was $660,832,000,$654,235,000, a decrease of $29,402,000$6,597,000 or 4.3%1.0% from the year ended September 30, 2023.2024. Net interest margin was 2.69%2.58% for the year ended September 30, 20242025 compared to 3.40%2.69% in the prior year. The decrease was the result of the combination of greater growthdecrease in interest-bearingthe liabilitiesrate balancesearned than in interest-payingon assets andcompared a larger increase inwith the rate paid on those liabilities compared to the rates earned on interest-earning assets. Average interest-bearing liabilities grew by 27.2% while average interest-earning assets grew by 20.8%.liabilities. Rates on interest-bearing liabilities increaseddecreased by 12822 basis points outpacingcompared to the 4630 basis points increasedecrease in the average rate on interest-earning assets. This effect was partially offset by the greater increase in interest-earning assets compared to interest bearing liabilities. Average interest-bearing liabilities grew by 2.9% while average interest-earning assets grew by 3.2%.

Provision for Credit Losses: The Company recorded a provision for credit losses of $17,500,000$7,750,000 in 2024,2025, compared to a provision of $41,500,000$17,500,000 for 2023.2024. In 2024, the provision included the initial provision of $16,000,000 recorded on LBC loans acquired, as well as adjustments resulting from qualitative considerations such as prolonged and intensified borrower sensitivity to high interest rates and operating costs due to inflationary pressures. In 2025, the provisioning reflected a shift toward higher reserved commercial originations combined with increasing trends in charge-offs and negative migration of delinquent and nonperforming loans combined with economic concerns. For the year ended September 30, 2024,2025, net charge-offs were $1,356,000,$11,783,000, compared to $45,101,000$1,356,000 in the prior year.

Non-interest Expense: Total non-interest expense was $427,463,000 for the year ended September 30, 2025, a decrease of $20,809,000, or 4.6%, from the $448,272,000 for the year ended September 30, 2024,2024. anThe increase2024 ofresults $72,237,000,included or$25,000,000 19.2%,in fromMerger-related the $376,035,000 for the year ended September 30, 2023.costs. Compensation and benefits costs increaseddecreased $37,614,000$12,002,000 or 19.1%5.1% year-over-year primarilyas duea toresult of Merger-related retention, severance and change-in-control expenses combinedbooked within 2024 and $5,400,000 in restructuring costs arising from the shift in strategy and exit from single family lending. Other non-interest expense also decreased as a largerresult post-Mergerof workforce.Merger-related professional and legal fees recorded in 2024. Additionally, FDIC premiums increaseddecreased $8,845,000$8,670,000 in 20242025 compared to the prior year asresulting from several factors. The previous year's figures had included a result of both the FDIC's special assessment and the Company'sdecrease increasedwas sizefurther post-Merger.influenced Informationby both the contraction of the balance sheet and a lower assessment rate in 2025. Offsetting these decreases, information technology costs increased by $3,859,000$6,795,000 in 20242025 as compared to 20232024 due to increasedstrategic telephone and data lines combined with conversion costs and termination fees related to the Merger. Other expense increased by $18,449,000 and included Merger-related expenses of $8,873,000, a $2,000,000 charitable donation and $6,626,000investments in amortization expense related to the core deposit intangible asset created in the Merger.technology.

GainLoss on Real Estate Owned: GainLoss on real estate owned, net was $627,000 for the year ended September 30, 2025, compared to a net gain of $304,000 for the year ended September 30, 2024, compared to of $176,000 for the year ended September 30, 2023.2024. This amount includes ongoing maintenance expense, periodic valuation adjustments, and gains and losses on sales of REO.

Income Tax Expense: Income tax expense was $63,574,000 for the year ended September 30, 2025, an increase of $7,559,000, or 13.5%, from the $56,015,000 for the year ended September 30, 2024, a decrease of $11,635,000, or 17.2%, from the $67,650,000 for the year ended September 30, 2023.2024. The decreaseincrease is mostlyprimarily due to ana 21.2%13.1% decreaseincrease in pre-tax income. The effective tax rate for 20242025 was 21.88%21.95% as compared to 20.81%21.88% for the year ended September 30, 2023.2024. The Company's effective tax rate varies from the Federal statutory rate of 21% mainly due to state taxes, tax-exempt income and tax-credit investments. For the current year, income tax was also impacted by the LBC Merger and consideration of California State and Local taxes.

For management's review of the factors that affected our results of operations for the years ended September 30, 20232024 and 20222023 refer to our Annual Report on Form 10-K for the year ended September 30, 2023,2024, which was filed with the Securities and Exchange CommissionSEC on November 17,20, 2023.2024.

The Company's shareholders' equity at September 30, 2024,2025, was $3,039,575,000, or 11.38% of total assets, as compared to $3,000,300,000, or 10.69% of total assets, as compared to $2,426,426,000, or 10.80% of total assets, at September 30, 2023.2024. The Company's shareholders' equity was greatly impacted in the year by the stock issued in the Merger valued at $465,504,000. Other itemsItems affecting shareholders' equity were net income of $200,041,000,$226,068,000, the payment of $74,267,000$84,639,000 in Common Stock dividends, the payment of $14,625,000 in preferred stock dividends, $27,069,000$101,931,000 of treasury stock purchases, as well as other comprehensive lossincome of $8,930,000.$1,099,000. The Company paid out 41.2%40.7% of its 20242025 earnings in cash dividends to common shareholders, compared with 26.6%41.2% last year. For the year ended September 30, 2024,2025, the Company returned 50.7%82.5% of net income to shareholders in the form of cash dividends and share repurchases as compared to 36.6%50.7% for the year ended September 30, 2023.2024. Management believes the Company's strong net worthequity 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 - DM of up to 45% of total assets depending on specific collateral eligibility. This line provides the Bank a substantial source of additional liquidity. The Bank has entered into borrowing agreements with the FHLB - DM to borrow funds under a short-term floating rate cash management advance program and fixed-rate term loan agreements. All borrowings are secured by stock of the FHLB - DM, deposits with the FHLB - DM, and a blanket pledge of qualifying loans receivable. The Bank also has a credit line with the FHLB - SF in support of LBC borrowings from the FHLB - SF, but the Bank is unable to take down new advances against this line. The FHLB - SF credit line is secured by a line-item pledge of single-familymortgage residentialbacked mortgages that are specifically identified.securities. Based on collateral pledged as of September 30, 2024,2025, the Bank had $6,029,890,000$6,647,214,000 of additional borrowing capacity at the FHLB - DM.

To ensure ample contingent liquidity the Bank participates in the FRB of San Francisco Borrower-in-Custody program which collateralizes primary credit borrowings and serves as a backstop for the FHLB - DM credit line. Due to differing program requirements between the FHLB - DM and FRB of San Francisco, participating in both increases the amount of eligible collateral that may be pledged in support of contingent liquidity needs. The Bank is also eligible to borrow under the Federal Reserve Bank's primary credit program. The Bank elected to utilize the Federal Reserve's Bank Term Funding Program ("BTFP") to leverage its highly favorable terms to fortify the Bank's liquidity position. These borrowings are repayable at any time without penalty and are currently the lowest cost funding source available. The Federal Reserve ceased making new BTFP loans on March 11, 2024.

The Company's cash and cash equivalents were $2,381,102,000$657,310,000 at September 30, 2024,2025, which is a 142.8%72.4% increasedecrease from the balance of $980,649,000$2,381,102,000 as of September 30, 2023.2024. The prior year end balances reflected cash received from the Luther Burbank multi-family and single-family residential loan portfolio sales. During the year, the Company completedutilized thecash saleto ofreduce approximately $2,800,000,000 in multifamily loansborrowings and approximatelypurchase $400,000,000 in single-family loans from the acquired LBC loan portfolio. The proceeds from the sales have increased liquidity adding approximately $1 billion in cash after paying down borrowings.investments. See “Changes in Financial Condition” above and the “Statement of Cash Flows” included in the financial statements for additional details regarding this change.

Based on management's assessment of the current interest rate environment, the Company has taken steps, including growing shorter-term loans and transaction deposit accounts, to reduce its interest rate risk profile. The mix of customer deposit accounts is 60%61% variable and 40%39% fixed as of MarchJune 31,30, 2026 while the composition of the investment securities portfolio is 45%35% variable and 55%65% fixed rate. TheAs of June 30, 2026 the Company was a party to $610,000,000 of pay fixed interest rate swaps to hedge the fair value risk of the AFS portfolio which effectively converts 12% of fixed securities to variable as of March 31, 2026.variable. When interest rates rise, the fair value of the investment securities with fixed rates will decrease and vice versa when interest rates decline. The Company has $745,727,000$858,261,000 of mortgage-backed securities that it has designated as HTM and are carried at amortized cost. As of MarchJune 31,30, 2026, the net unrealized loss on these securities was $33,610,000.$36,745,000. The Company has $4,352,258,000$4,190,263,000 of AFS securities that are carried at fair value. As of MarchJune 31,30, 2026, the net unrealized loss on these securities was $16,815,000.$39,483,000. The Company recognized in earnings a loss of $6,989,000$13,430,000 on the fair value of AFS securities hedged by the fixed interest rate swaps for the sixnine months ended MarchJune 31,30, 2026. The Company has also executed interest rate swaps to hedge interest rate risk on certain FHLB borrowings. The unrealized gain on these interest rate swaps as of MarchJune 31,30, 2026 was $97,378,000.$104,446,000. All of the above are pre-tax net unrealized gains or losses.

NPV Sensitivity - Another method used to quantify interest rate risk is the NPV analysis. This analysis calculates the difference between the present value of interest-bearing liabilities and the present value of expected cash flows from interest-earning assets and off-balance-sheet contracts. The following table sets forth an analysis of the Company’s interest rate risk as measured by the estimated changes in NPV resulting from instantaneous and sustained parallel shifts in the yield curve (measured in 100-basis-point increments) and compares the current model results to the priorSeptember quarter30, 2025 results.

Prepayment speeds continue to be relatively low at MarchJune 31,30, 2026 with the Bank's conditional payment rate ("CPR") for single-family mortgages at 8.10%,9.50%, compared to 9.0% for the same asquarter the year before.

Net Interest Margin - Net interest margin is measured as net interest income divided by average earning assets for the period. Net interest margin was 2.81% for the quarter ended MarchJune 31,30, 2026 compared to 2.55%2.69% for the quarter ended MarchJune 31,30, 2025. The yield on interest-earning assets decreased 1915 basis points to 5.14%5.15% and the cost of interest-bearing liabilities decreased 5034 basis points to 2.79%2.78% over that same period. The lower yield on interest-earning assets was primarily due to falling interest rates affecting adjustable rate loans, non-accrual interest adjustments, lower net cash settlements on our loan and securities fair value hedge programs and interest-bearing cash deposits.

As of MarchJune 31,30, 2026, total assets had increased by $869,086,000$897,271,000 to $27,568,785,000$27,596,970,000 from $26,699,699,000 at September 30, 2025 primarily due to the purchase of investments during the period. During the sixnine months ended MarchJune 31,30, 2026, loans receivable decreased $121,635,000,$70,742,000, investment and mortgage-backed securities increased by $918,982,000, and$869,521,000, FHLB stock increased by $58,283,000$67,324,000 whileand cash and cash equivalents increased by $12,489,000,$19,157,000, in each case as compared to September 30, 2025.

Management believes the Company's cash and cash equivalents of $669,799,000$676,467,000 and shareholders’ equity of $2,981,283,000$3,022,569,000 as of MarchJune 31,30, 2026 will provide flexibility in managing the Company's interest rate risk going forward.

Customer account balances have decreased by $313,485,000,$505,561,000, or 1.5%,2.4%, to $21,124,151,000$20,932,075,000 at MarchJune 31,30, 2026 compared with $21,437,636,000 at September 30, 2025. Total borrowings were $3,062,441,000$3,263,359,000 as of MarchJune 31,30, 2026, an increase from $1,765,604,000 at September 30, 2025, which were used for securities purchases during the fiscal year to date.

The Company's cash and cash equivalents totaled $669,799,000$676,467,000 at MarchJune 31,30, 2026, an increase from $657,310,000 at September 30, 2025. This increase is the result of normal transactions and activities.

The Company’s shareholders' equity at MarchJune 31,30, 2026 was $2,981,283,000,$3,022,569,000, or 10.81%10.95% of total assets. This is a decrease of $58,292,000$17,006,000 from September 30, 2025 when shareholders' equity was $3,039,575,000, or 11.38% of total assets. The Company’s shareholders' equity was impacted in the sixnine months ended MarchJune 31,30, 2026 by net income of $129,744,000,$195,874,000, the payment of $40,519,000$60,181,000 in common stock dividends, the payment of $7,313,000$10,968,000 in preferred stock dividends, treasury stock purchases of $145,224,000,$145,543,000, as well as a decrease in other comprehensive income of $1,865,000.$8,863,000. The Company's tier 1 leverage ratio at MarchJune 31,30, 2026 was 9.10%.9.19%. Management believes the Company's strong equity position allows it to manage balance sheet risk and provide the capital support needed for controlled growth in a regulated environment.

As of MarchJune 31,30, 2026 and September 30, 2025, the Company and the Bank met all capital adequacy requirements to which they are subject, and the Bank's regulators categorized it as well capitalized under the regulatory framework for prompt corrective action.

Cash and cash equivalents - Cash and cash equivalents were $669,799,000$676,467,000 at MarchJune 31,30, 2026, an increase of $12,489,000,$19,157,000, or 1.9%,2.9%, since September 30, 2025. This increase was the result of normal transactions and activities.

Available-for-sale and held-to-maturity investment securities - AFS securities increased $819,057,000,$657,062,000, or 23.2%,18.6%, during the sixnine months ended MarchJune 31,30, 2026, a result of securities purchases of $1,067,724,000$1,161,720,000 offset by unrealized losses during the period of $7,559,000,$30,226,000, a reclassification of loss into earnings from AFS securities hedging derivatives of $6,989,000$13,430,000 and principal repayments and maturities of $247,515,000.$408,047,000. During the same period, the balance of HTM securities increased by $99,925,000$212,459,000 due to purchases of $141,063,000,$278,367,000, offset by principal pay-downs and maturities of $41,409,000.$66,361,000. As of MarchJune 31,30, 2026, the Company had a total net unrealized loss on AFS securities of $16,815,000,$39,483,000, which is included on a net of tax basis in accumulated other comprehensive income (loss).

Substantially all of the Company’s HTM and AFS debt securities are issued by U.S. government agencies or U.S. government-sponsored enterprises. These securities carry the explicit or implicit guarantee of the U.S. government and have a long history of zero credit loss. The Company did not record an allowance for credit losses for HTM securities as of MarchJune 31,30, 2026 or September 30, 2025 as the investment portfolio consists primarily of U.S. government agency mortgage-backed securities that management deems to have immaterial risk of loss. The impact going forward will depend on the composition, characteristics, and credit quality of the securities portfolios as well as the economic conditions at future reporting periods. The Company does not believe that any of its AFS debt securities had credit loss impairment as of MarchJune 31,30, 2026 or September 30, 2025, therefore, no allowance was recorded.

Loans receivable - Loans receivable, net of related contra accounts, decreased by $121,635,000$70,742,000 to $19,966,983,000$20,017,876,000 at MarchJune 31,30, 2026, compared to $20,088,618,000 at September 30, 2025. The decrease was primarily loan principal repayments of $2,479,022,000 outpacing originations,originations net of loans-in-process,the ofgrowth $2,371,682.in loans in process. Commercial loan originations accounted for 95% of total originations and consumer loan originations were 5% for the quarter.nine months ended June 30, 2026. The Company continues to focus on commercial lending, coupled with growing economies in all major markets in which we operate.

Non-performing assets - Non-performing assets decreased $11,038,000$7,274,000 during the sixnine months ended MarchJune 31,30, 2026 to $131,984,000$135,748,000 from $143,022,000 at September 30, 2025. The change is due to a $4,769,000$1,059,000 decrease in non-accrual loans combined with a $2,959,000$2,905,000 decrease in real estate owned and a $3,310,000 decrease in other property owned. Non-performing assets as a percentage of total assets was 0.48%0.49% at MarchJune 31,30, 2026 compared to 0.54% at September 30, 2025.

The Company would have recognized interest income of $3,916,000$5,681,000 for the sixnine months ended MarchJune 31,30, 2026 had non-accrual loans performed according to their original contract terms. In addition to the non-accrual loans reflected in the above table, the Company had $404,010,000$398,190,000 of loans that were less than 90 days delinquent at MarchJune 31,30, 2026 but were classified as substandard for one or more reasons. If these loans were deemed non-performing, the Company's ratio of total NPAs as a percent of total assets would have increased to 1.94%1.93% at MarchJune 31,30, 2026. For the sixnine months ended MarchJune 31,30, 2026, the Company recognized $844,000$1,264,000 in interest income on cash payments received from borrowers on non-accrual loans.

Management believes the allowance for credit losses of $224,450,000,$233,831,000, or 1.05%1.08% of gross loans, is sufficient to absorb estimated losses inherent in the portfolio of loans and unfunded commitments. See Note E and Note I for further details of the allowance for loan losses and reserve for unfunded commitments as of and for the periods ended MarchJune 31,30, 2026 and September 30, 2025.

Real estate owned ("REO") - REO decreased during the sixnine months ended MarchJune 31,30, 2026 by $2,959,000$2,905,000 to $8,125,000.$8,179,000. The decrease was due to the sale of properties.

Intangible assets - Intangible assets increased to $445,511,000$443,670,000 as of MarchJune 31,30, 2026 from $442,093,000 as of September 30, 2025 as the result of small acquisitions made by the Company's insurance subsidiary. This wassubsidiary offset by normal amortization.

Customer accounts - Customer accounts decreased $313,485,000,$505,561,000, or 1.5%,2.4%, to $21,124,151,000$20,932,075,000 at MarchJune 31,30, 2026 compared with $21,437,636,000 at September 30, 2025. Transaction accounts increased by $440,389,000$439,259,000 or 3.6% during that period, while time deposits decreased $753,874,000,$944,820,000, or 8.3%,10.3%, consistent with our strategy to shift away from time deposits in favor of transaction accounts.

Borrowings - Borrowings were $3,114,548,000$3,315,697,000 as of MarchJune 31,30, 2026, an increase from $1,817,249,000 as of September 30, 2025. The increase was utilized to support asset growth. The weighted average effective rate for borrowings was 3.01%3.08% as of MarchJune 31,30, 2026 and 2.50% at September 30, 2025.

Shareholders' equity - The Company’s shareholders' equity at MarchJune 31,30, 2026 was $2,981,283,000,$3,022,569,000, or 10.81%10.95% of total assets. This is a decrease of $58,292,000$17,006,000 from September 30, 2025 when shareholders' equity was $3,039,575,000, or 11.38% of total assets. The Company’s shareholders' equity was impacted in the sixnine months ended MarchJune 31,30, 2026 by net income of $129,744,000,$195,874,000, the payment of $40,519,000$60,181,000 in common stock dividends, payment of $7,313,000$10,968,000 in preferred stock dividends, treasury stock purchases of $145,224,000,$145,543,000, as well as a decrease in other comprehensive income of $1,865,000.$8,863,000.

Net Income - The Company recorded net income of $65,548,000$66,130,000 for the three months ended MarchJune 31,30, 2026 compared to $56,252,000$61,952,000 for the prior year quarter. All driving factors are described below.

Net Interest Income - For the three months ended MarchJune 31,30, 2026, net interest income was $177,570,000,$181,338,000, which is an increase of $16,660,000$13,350,000 from the same quarter of the prior year. Net interest margin increased to 2.81% for the quarter ended MarchJune 31,30, 2026 compared to 2.55%2.69% for the quarter ended MarchJune 31,30, 2025. The increase in net interest income is largely due to decreased rates on interest-bearing liabilities partially offset by the decrease in rate earned on interest-earning assets. The rate paid on interest-bearing liabilities decreased by 5034 basis points while the rate earned on interest-earning assets fell by 1915 basis points. For the nine months ended June 30, 2026, net interest income was $530,019,000, which is an increase of $45,690,000 from the same period of the prior year. Net interest margin was 2.77% for the nine months ended June 30, 2026 compared to 2.54% for the prior year same period.

Provision for Credit Losses - The Company recorded aan $4,000,000$11,000,000 provision for credit losses for the three months ended MarchJune 31,30, 2026, compared with $2,750,000a $2,000,000 provision for credit losses for the three months ended MarchJune 31,30, 2025. The provision recorded in the three months ended MarchJune 31,30, 2026 was the result of increasedgrowth commercial originations duringin the quarter.active loan portfolio, specifically C&I and Construction loans, in addition to concerns related to possible losses on adversely classified loans. This provision increased the reserve to 1.05%1.08% of gross loans compared with 1.01%1.03% at MarchJune 31,30, 2025. The Company recorded an $18,500,000 provision for credit losses for the nine months ended June 30, 2026 compared to $4,750,000 for the nine months ended June 30, 2025.

Non-Interest Income - The results for the three months ended MarchJune 31,30, 2026 included total non-interest income of $19,813,000$24,178,000 compared to $18,881,000$18,273,000 for the same period one year ago, a $932,000$5,905,000 increase. The increase was primarily due to approximately $3,200,000 of gain recognized on the sale of bank real estate combined with lower losses recognized on equity method investments and increased fee income recognized on loan and deposit accounts. The results for the nine months ended June 30, 2026 include total non-interest income of $64,246,000 compared to $52,856,000 for the nine months ended June 30, 2025, an $11,390,000 increase. This increase was also the result of gains recognized on sales of bank real estate combined with increased fee income on loans and deposits.

Non-Interest Expense - Non-interest expense was $109,857,000$110,334,000 for the three months ended MarchJune 31,30, 2026, an increase of $5,025,000$6,007,000 from $104,832,000$104,327,000 for the prior year quarter, largely a result of increased compensation and technology expenses, reflecting annual merit increases and continued investment in operational efficiency. Non-interest expense for the three months ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025 equaled 1.61%1.60% and 1.53%,1.56%, respectively, of average assets. Non-interest expense was $325,912,000 for the nine months ended June 30, 2026, an increase of $5,442,000 from $320,470,000 for the same period in fiscal 2025. This increase was also the result of increased compensation and technology expenses. Total non-interest expense for the nine months ended June 30, 2026 and June 30, 2025 equaled 1.59% and 1.57%, respectively, of average assets.

Gain (Loss) on Real Estate Owned - Results for the three months ended MarchJune 31,30, 2026 include a net gain on REO of $280,000,$167,000, compared to a net loss of $199,000$176,000 for the prior year quarter. Results for the nine months ended June 30, 2026 included a net gain on REO of $603,000, compared to a net gain of $54,000 in the prior year period.

Income Tax Expense - Income tax expense totaled $18,258,000$18,219,000 for the three months ended MarchJune 31,30, 2026, compared to $15,758,000$17,806,000 for the prior year quarter. The effective tax rate was 21.79%21.60% and 21.88%22.33% for the three months ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025, respectively. Income tax expense totaled $54,582,000 for the nine months ended June 30, 2026, compared to $46,548,000 for the prior year period. The Company’s effective tax rate varieswas from21.79% and 21.95% for the statutorynine ratemonths mainlyended dueJune to30, state taxes, tax-exempt income, tax-credit investments, miscellaneous non-deductible expenses2026 and discreteJune tax30, adjustments2025, for prior periods.respectively.

We account for our portfolio of LIHTC investments under the proportional amortization method. The tax benefits from pass-through tax credits and losses from our LIHTC investments are included in our estimate of income tax liability for the year, and therefore reflected in the Incomeincome Taxtax Expenseexpense line of the statementConsolidated Statement of operations.Operations. We currently estimate that the total amount of tax benefits from our LIHTC investment portfolio that will be recognized during this fiscal year is about $20.0 million.