2024 Highlights

• Net Income was $200 million or $2.50 per diluted share for fiscal 2024 compared to $257 million or $3.72 per diluted share for 2023.
• The year included the acquisition of California-based Luther Burbank Corporation which added $7.7 billion in assets and resulted in acquisition-related expenses of $26 million.
• The Company completed the sales of $2.8 billion in multifamily loans and $0.4 billion in single family loans obtained in the acquisition.
• Loans receivable increased $3.4 billion, or 19.7%, during 2024.
• Deposits increased $5.3 billion or 33.0% during 2024.
• During the year, the Company repurchased 1,070,207 shares of common stock at a weighted average price of $25.29.
• On September 6, 2024, the Company paid a cash dividend of $0.26 per share. This was the 166^th consecutive quarterly dividend paid. A total of $1.03 was paid as cash dividends during the year. 

WaFd, Inc. (Nasdaq: WAFD) (the "Company"), parent company of Washington Federal Bank ("WaFd Bank" or the "Bank"), today announced annual earnings of $200,041,000 for the fiscal year ended September 30, 2024, including the effects of the acquisition of California-based Luther Burbank Corporation ("LBC"). After the effect of dividends on preferred stock, net income available for common shareholders was $2.50 per share for the year. These results reflect acquisition related costs of $26,319,000 incurred in fiscal 2024. Adjusted for these expenses and non-operating items, earnings per share for the year was $3.02. For a reconciliation, see the Non-GAAP Financial Measures section below.

The following table provides the Company's financial scorecard for the last five quarters:

President and CEO Brent Beardall commented, "Considering what was one of the more challenging macro environments in my twenty-three years at the Bank, our fiscal year 2024 was an excellent year with after tax earnings just north of $200 million. We took material steps to position the balance sheet for the Fed’s much anticipated move to reduce interest rates. As we start fiscal 2025, we have over 19% of our total balance sheet in cash and investments, borrowing capacity of more than $6 billion and problem loans totaling just 0.28% of assets. Optionality is a beautiful thing when the future is uncertain and we believe we are moving forward with a capacity to be relevant and a nimbleness to adapt. WaFd sees significant opportunity for growth in all of our nine western states, where we believe economic growth will outpace overall US growth. Perhaps our biggest concern is the potential for unexpected events. Over the years, we have seen it’s the surprise of what was not modeled, what was not thought likely, that takes down strong financial institutions. This knowledge keeps us humble and operating with a meaningful surplus of capital and liquidity."

As a result of the LBC acquisition on February 29, 2024, the Company's results as of September 30, 2024 reflect seven months of the newly combined entity. Given this, the Company's financial results are not directly comparable to the results of the prior periods. Total assets were $28.1 billion as of September 30, 2024, an increase of 24.9% from $22.5 billion at September 30, 2023. Net loans held for investment increased by $3.4 billion, or 19.7%, from September 30, 2023 to September 30, 2024 reflecting the addition of LBC loans. The Company acquired $6.2 billion in loans in the transaction but sold $2.8 billion in acquired multifamily loans in the June 2024 quarter and $0.4 billion in acquired single family loans in September 2024. Cash and cash equivalents as of September 30, 2024 increased by $1.4 billion, or 142.8%, since September 30, 2023 as a result of the LBC acquisition, and the completion of the LBC loan sales offset by the pay-down of borrowings and debt. Investment securities increased by $591.0 million compared to September 30, 2023 due to the addition of $529.2 million in securities obtained in the acquisition combined with normal activity during the year.

Customer deposits totaled $21.4 billion as of September 30, 2024, an increase of 33.0% since September 30, 2023. Transaction accounts increased by $1.1 billion or 9.8% during the fiscal year 2024, while time deposits increased $4.3 billion, or 80.1%, as 66% of the LBC deposits were time deposits. As a result of this product mix, the Company's transaction accounts as a percentage of total customer deposits decreased to 55.3% compared to 67% at September 30, 2023. Core deposits, defined as all transaction accounts and time deposits less than $250,000, totaled 75.1% of deposits at September 30, 2024. Deposits that are uninsured or not collateralized were 24.0% as of September 30, 2024, a decrease from 25.7% as of September 30, 2023.

Borrowings totaled $3.3 billion as of September 30, 2024, a net decrease of $0.4 billion or 10.5% since September 30, 2023. The Company utilized proceeds from the LBC loan sales to pay off $2.2 billion of borrowings which matured since the acquisition. The acquisition added $1.4 billion in borrowings in addition to net borrowing activity of $400 million during the year. The weighted average effective interest rate as of September 30, 2024, was 3.93% versus 3.98% at September 30, 2023. As of September 30, 2024, $2.3 billion of the $3.3 billion in outstanding borrowings have effective maturities less than one year.

Loan originations totaled $3.6 billion for fiscal year 2024 compared to $4.7 billion in fiscal year 2023. Offsetting the loan origination volume in each of these years were loan repayments of $4.3 billion and $4.4 billion, respectively. The Bank has intentionally slowed new loan production to temper loan growth. Commercial loans represented 73% of all loan originations during fiscal 2024 with consumer loans accounting for the remaining 27%. Commercial loans are viewed by the Bank as preferable as they generally have floating interest rates and shorter durations. The weighted average period end interest rate on the loan portfolio was 5.26% as of September 30, 2024, an increase from 5.22% at September 30, 2023.

Credit quality continues to be monitored closely in light of the shifting economic and monetary environment. As of September 30, 2024, non-performing assets were $77 million, or 0.3% of total assets, compared to 0.3% as of September 30, 2023. The percentage of non-accrual loans to total loans at September 30, 2024 remained largely unchanged from September 30, 2023 at 0.3%. Delinquent loans as a percentage of total loans decreased to 0.3% from 0.4% during the year.

The allowance for credit losses including the reserve for unfunded commitments totaled $225 million as of September 30, 2024, and was 1.01% of gross loans as compared to $202 million or 1.03% of gross loans as of September 30, 2023. Net charge-offs were $1.4 million for fiscal year 2024 compared to net charge-offs of $45.1 million in fiscal 2023. The increase in the ACL reflects the $16.0 million provision recorded on LBC loans held for investment that are not credit deteriorated and the $7.4 million estimated lifetime credit losses for those that are considered purchased credit deteriorated ("PCD").

Net interest income was $660.8 million for fiscal 2024, a decrease of $29.4 million or 4.3% from the prior year. The net interest margin for the year was 2.69% compared to 3.40% the prior year. This decrease was the result of the combination of greater growth in interest-bearing liabilities balances than in interest-paying assets and a larger increase in 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%. Rates on interest-bearing liabilities increased by 128 basis points outpacing the 46 basis point increase in the average rate on interest-earning assets.

Total non-interest income was $60.7 million for fiscal year 2024, an increase of $8.5 million or 16.3% from $52.2 million in the prior year. The increase in other income is primarily due to increased income from the Company's subsidiary, WAFD Insurance Group, and a decrease in unrealized losses recorded for certain equity method investments in fiscal 2024 compared to prior year.

Total non-interest expense was $448.3 million for fiscal 2024, an increase of $72.2 million or 19.2% from the prior year. Compensation and benefits costs increased $37.6 million or 19.14% year-over-year primarily due to acquisition related retention, severance and change-in-control expenses combined with a larger post-acquisition workforce. FDIC premiums increased $8.8 million compared to the same period last year as a result of both the FDIC's special assessment and the Company's increased size post-acquisition. Information technology costs increased by $3.9 million due to increased telephone and data lines combined with lingering conversion costs and termination fees on LBC software. Other expense increased by $18.4 million and included acquisition related expenses of $8.9 million, a $2 million charitable donation and $6.6 million in amortization expense related to the Core Deposit Intangible Asset created in the acquisition.

The Company recorded a provision for credit losses of $17.5 million in the year ended September 30, 2024, compared to a provision for credit losses of $41.5 million in 2023. The provision for loan losses included the initial provision recorded on LBC loans, as well as other qualitative considerations such as prolonged and intensified borrower sensitivity to high interest rates and operating costs due to inflationary pressures.

For the year ended September 30, 2024, the Company recorded federal and state income tax expense of $56.0 million, which equates to a 21.88% effective tax rate. This compares to an effective tax rate of 20.81% for fiscal year 2023. Although the Company's effective tax rate may vary from the statutory rate mainly due to state taxes, tax-exempt income and tax-credit investments, some of the change in the current year resulted specifically from the LBC acquisition and consideration of California State and Local taxes.

WaFd Bank is headquartered in Seattle, Washington and has 210 branches in nine western states. To find out more, please visit our website www.wafdbank.com. The Company uses its website to distribute financial and other material information about the Company.

Non-GAAP Financial Measures and Management Projections

The Company has presented certain non-GAAP measures within this document to remove the effect of certain income and expenses to provide investors with information useful in understanding our financial performance. The Company considers these items to be non-operating in nature as they are items that Management does not consider indicative of the Company's on-going financial performance. We believe that the tables presented reflect our on-going performance in the periods presented and, accordingly, are useful to consider in addition to our GAAP financial results. These measures should not be considered a substitution for GAAP basis disclosures.

Other companies may use similarly titled non-GAAP financial measures that are calculated differently from the way they are calculated herein. Because of this, our non-GAAP financial measures may not be comparable to similar measures used by others. We caution investors not to place undue reliance on such measures. See the following unaudited tables for reconciliations of our non-GAAP measures to the most directly comparable GAAP financial measures.

Important Cautionary Statements

The foregoing information should be read in conjunction with the financial statements, notes and other information contained in the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

This press release contains statements about the Company’s future that are not statements of historical or current fact. These statements are “forward-looking statements” for purposes of applicable securities laws and are based on current information and/or management's good faith belief as to future events. Words such as “expects,” “anticipates,” “believes,” “estimates,” “intends,” “forecasts,” “may,” “potential,” “projects,” and other similar expressions or future or conditional verbs such as “will,” “should,” “would,” and “could” are intended to help identify such forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although the Company believes any such statements are based on reasonable assumptions, forward-looking statements should not be read as a guarantee of future performance, and you are cautioned not to place undue reliance on any forward-looking statements. The Company undertakes no obligation to update or revise any forward-looking statement.

By their nature, forward-looking statements involve inherent risk and uncertainties including the following risks and uncertainties, and those risks and uncertainties more fully discussed under “Risk Factors” in the Company’s September 30, 2023 10-K, and Quarterly Reports on Form 10-Q which could cause actual performance to differ materially from that anticipated by any forward-looking statements. Forward-looking statements relating to our financial condition or operations are subject to risks and uncertainties related to (i) fluctuations in interest rate risk and market interest rates, including the effect on our net interest income and net interest margin; (ii) current and future economic conditions, including the effects of declines in the real estate market, high unemployment rates, inflationary pressures, a potential recession, the monetary policies of the Federal Reserve, and slowdowns in economic growth; (iii) risks related to the integration of the operations of Luther Burbank Corporation; (iv) financial stress on borrowers (consumers and businesses) as a result of higher interest rates or an uncertain economic environment; (v) changes in deposit flows or loan demands; (vi) the impact of bank failures or adverse developments at other banks and related negative press about regional banks and the banking industry in general; (vii) the effects of natural or man-made disasters, calamities, or conflicts, including terrorist events and pandemics (such as the COVID-19 pandemic) and the resulting governmental and societal responses; (viii) global economic trends, including developments related to Ukraine and Russia, and the evolving conflict in the Middle East, and related negative financial impacts on our borrowers; (ix) litigation risks resulting in significant expenses, losses and reputational damage; (x) our ability to identify and address cyber-security risks, including security breaches, “denial of service attacks,” “hacking” and identity theft; and (xi) other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services.

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