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BUSINESS COMBINATION
 12 Months Ended
Sep. 30, 2025
Business Combination, Asset Acquisition, Transaction between Entities under Common Control, and Joint Venture Formation [Abstract]  
BUSINESS COMBINATION BUSINESS COMBINATION
On March 1, 2024, WaFd, Inc. acquired Luther Burbank, headquartered in Santa Rosa, California.  The Merger was effectively
an all-stock transaction and has been accounted for as a business combination.  Pursuant to the Merger Agreement, on the
Merger Date, each holder of LBC common stock received 0.3353 of a share of WaFd common stock for each share of LBC
common stock held.  As of the Merger Date, WaFd had 64,311,764 shares of common stock outstanding and issued 17,088,886
shares of WaFd common stock to the LBC shareholders which represents approximately 21% of the voting interests in WaFd,
Inc. upon completion of the Merger. 
The purchase price for purposes of the transaction accounting adjustments is calculated based on the number of shares of WaFd
stock issued to LBC shareholders and the closing share price on the Merger Date as shown in the following table (amounts in
thousands except share and per share data).
Number of WaFd shares issued to LBC shareholders
17,089
WaFd market price per share on February 29, 2024
$27.24
Purchase price of shares issued to LBC shareholders
$465,501
Cash in lieu of fractional shares
$3
Purchase price consideration
$465,504
The Merger was accounted for under the acquisition method of accounting. Assets acquired and liabilities assumed in the
Merger were recorded at their respective acquisition date estimated fair values and have been adjusted subsequent to the Merger
Date based on new information. In many cases, the determination of fair value required management to make estimates about
discount rates, expected future cash flows, market conditions and other future events that are highly subjective in nature and
subject to change. As of March 1st 2025, the Company had finalized its valuation of all assets acquired and liabilities assumed
in connection with the Merger.
March 1, 2024
(in thousands)
Total merger consideration
$465,504
Fair value of assets acquired
Cash and cash equivalents
$627,403
Investment securities
518,878
Loans receivable
3,186,891
Loans held for sale
3,017,506
Interest receivable
25,697
Premises and equipment
6,436
FHLB stock
35,831
Bank owned life insurance
17,781
Intangible assets
37,022
Deferred tax asset, net
125,151
Other assets
75,398
Total assets acquired
$7,673,994
Fair value of liabilities assumed
Customer accounts
$5,640,440
Borrowings
1,432,138
Junior subordinated deferrable interest debentures
50,175
Senior Debt
93,514
Accrued expenses and other liabilities
100,113
Total liabilities assumed
$7,316,380
Net Assets Acquired
$357,614
Goodwill
$107,890
In connection with the Merger, the Company recorded approximately $107,890,000 of goodwill. Goodwill represents the
excess of the purchase price over the fair value of the assets acquired net of fair value of liabilities assumed. Information
regarding goodwill and the carrying amount and amortization of intangible assets is provided in Note A.
The following is a description of the methods used to determine the fair values of significant assets and liabilities presented
above.
Cash and cash equivalents – The carrying amount of these items is a reasonable estimate of their fair value based on the short-
term nature of these assets.
Investment securities – Fair values for investment securities are based on quoted market prices. The actual sales prices of
securities were used for those securities sold in March 2024, shortly after the Merger, rather than the quoted market price as
sales prices were determined to be the best indicator of fair value.
Loans receivable –  A valuation of the loans held for investment portfolio was performed by a third party as of the Merger Date
to assess the fair value. The loans held for investment portfolio was segmented into three groups, including performing
purchased credit deteriorated ("PCD") loans, non-performing PCD loans and non-PCD loans. The loans were further pooled
based on loan type and interest rate terms. The loans were valued at the pool level using a discounted cash flow methodology.
The methodology included projecting cash flows based on the contractual terms of the loans and the cash flows were adjusted
to reflect credit loss expectations along with prepayments. Discount rates were developed based on the relative risk of the cash
flows, taking into consideration the loan type, market rates as of the valuation date, recent originations in the portfolio, credit
loss expectations, and liquidity expectations. Lastly, cash flows adjusted for credit loss expectations were discounted to present
value and summed to arrive at the fair value of the loans.
The Company is required to record PCD assets, defined as a more-than-insignificant deterioration in credit quality since
origination or issuance, at the purchase price plus the allowance for credit losses expected at the time of acquisition. Under this
method, there is no credit loss expense affecting net income on acquisition of PCD assets. Changes in estimates of expected
credit losses after acquisition are recognized in subsequent periods as provision for credit losses (or recapture of credit losses)
arises. Any non-credit discount or premium resulting from acquiring a pool of purchased financial assets with credit
deterioration is allocated to each individual asset. At the Merger Date, the initial allowance for credit losses, determined on a
collective basis, is allocated to individual assets to appropriately allocate any non-credit discount or premium. The non-credit
discount or premium, after the adjustment for the allowance for credit losses, is accreted to interest income using the interest
method based on the effective interest rate determined at the Merger Date.
Of the $3.2 billion net loans held for investment acquired, $293 million were identified as PCD loans on the Merger Date. The
following table provides a summary of these PCD loans at acquisition:
March 1, 2024
(In thousands)
Principal of PCD loans acquired
$293,204
PCD ACL at acquisition
(7,403)
Non-credit discount on PCD loans
(45,869)
Fair value of PCD loans
$239,932
Loans held for sale – The loans held for sale portfolio was recorded at fair value based on quotes or bids from third parties.
Premises and equipment - The fair values of premises are based on a market approach by obtaining third-party appraisals and
broker opinions of value for land, office and branch space.
Core deposit intangible – The core deposit intangible represents the low cost of funding acquired core deposits provide relative
to the Company’s marginal cost of funds. The fair value was estimated based on a cost savings methodology that gave
consideration to expected customer attrition rates, net maintenance cost of the deposit base, interest costs associated with
customer deposits, and the alternative cost of funds. The estimated fair value was grossed-up for the expected tax amortization
benefit. The intangible asset is being amortized over 6 years using an accelerated method, based upon the period over which
estimated economic benefits are estimated to be received.
Customer Accounts – The fair values used for the demand and savings deposits equal the amount payable on demand at the
Merger Date. The fair value of time deposits is estimated by discounting the estimated future cash flows using current rates
offered for deposits with similar remaining maturities.
Borrowings – The fair value of Federal Home Loan Bank ("FHLB") advances and Federal Reserve Bank ("FRB") borrowings
is estimated by discounting the estimated future cash flows using rates currently available to the Company for debt with similar
remaining maturities.
The Company's operating results for the year ended September 30, 2024 include the operating results produced by the acquired
assets and assumed liabilities in the Merger for the period March 1, 2024 to September 30, 2024.
The following table shows the impact of merger-related expenses for the years ended September 30, 2025 and September 30,
2024.
Year Ended
Merger-Related Expenses
September 30, 2025
September 30, 2024
(in thousands)
Severance and employee-related
$—
$18,846
Legal and Professional
103
5,573
Charitable contributions
—
1,000
System conversion and integration
136
900
$239
$26,319
The following table presents unaudited pro forma information as if the Merger had occurred on October 1, 2022. The pro forma
adjustments give effect to any change in interest income due to the accretion of the discount (premium) associated with the fair
value adjustments to acquired loans, any change in interest expense due to estimated premium amortization/discount accretion
associated with the fair value adjustment to acquired interest-bearing deposits, borrowings and long-term debt and the
amortization of the core deposit intangible that would have resulted had the deposits been acquired as of October 1, 2022. The
pro forma information is not indicative of what would have occurred had the Merger occurred as of the beginning of the year
prior to the Merger Date. The pro forma amounts below do not reflect the Company's expectations as of the date of the pro
forma information of further operating cost savings and other business synergies expected to be achieved, including revenue
growth as a result of the Merger. As a result, actual amounts differed from the unaudited pro forma information presented.
Unaudited Pro Forma for the
Year Ended
September 30, 2024
September 30, 2023
(in thousands)
Net-interest income
$710,644
$833,957
Non-interest income
63,371
56,331
Net income
207,689
291,832