UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, ~~2019~~2020


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-34654

WASHINGTON FEDERAL INC

(Exact name of registrant as specified in its charter)

Washington

91-1661606

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

425 Pike Street

Seattle

Washington

98101

(Address of Principal Executive Offices)

(Zip Code)

Registrant’s telephone number, including area code (206) 624-7930

(Former name, former address and former fiscal year, if changed since last report.)

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $1.00 par value per share	WAFD	NASDAQ Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 ("Exchange Act") during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

~~APPLICABLE ONLY TO CORPORATE ISSUERS~~

The registrant had outstanding ~~77,761,773~~75,891,386 shares of common stock as of January ~~29, 2020.~~

26, 2021.

~~Table of Contents~~

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

PART I

Item 1.

Financial Statements (Unaudited)

The Consolidated Financial Statements of Washington Federal, Inc. and Subsidiaries filed as a part of the report are as follows:

Consolidated Statements of Financial Condition as of December 31, ~~2019~~2020 and September 30, ~~2019~~2020

Consolidated Statements of Operations for the three months ended December 31, ~~2019~~2020 and December 31, ~~2018~~2019

Consolidated Statements of Comprehensive Income for the three months ended December 31, ~~2019~~2020 and December 31, ~~2018~~2019

Consolidated Statements of Shareholders' Equity for the three months ended December 31, ~~2019~~2020 and December 31, ~~2018~~2019

Consolidated Statements of Cash Flows for the three months ended December 31, ~~2019~~2020 and December 31, ~~2018~~2019

Notes to Interim Consolidated Financial Statements

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

3435

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

4446

Item 4.

Controls and Procedures

Unregistered Sales of Equity Securities and Use of Proceeds

4548

Item 3.

Defaults Upon Senior Securities

4548

Item 4.

Mine Safety Disclosures

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(UNAUDITED)


		December 31, 2019		September 30, 2019			December 31, 2020		September 30, 2020
		(In thousands, except share data)							(In thousands, except share data)
ASSETS	ASSETS					ASSETS
Cash and cash equivalents	Cash and cash equivalents	$	483,805	$	419,158	Cash and cash equivalents	$	1,830,722	$	1,702,977
Available-for-sale securities, at fair value	Available-for-sale securities, at fair value	1,495,586		1,485,742		Available-for-sale securities, at fair value	2,482,944		2,249,492
Held-to-maturity securities, at amortized cost	Held-to-maturity securities, at amortized cost	1,360,694		1,443,480		Held-to-maturity securities, at amortized cost	586,870		705,838
Loans receivable, net of allowance for loan losses of $132,513 and $131,534		11,904,861		11,930,575
Loans receivable, net of allowance for loan losses of $170,189 and $166,955						Loans receivable, net of allowance for loan losses of $170,189 and $166,955	12,881,010		12,792,317
Interest receivable	Interest receivable	46,725		48,857		Interest receivable	52,671		53,799
Premises and equipment, net	Premises and equipment, net	245,792		274,015		Premises and equipment, net	256,242		252,805
Real estate owned	Real estate owned	6,339		6,781		Real estate owned	4,463		4,966
FHLB and FRB stock	FHLB and FRB stock	123,990		123,990		FHLB and FRB stock	137,991		141,990
Bank owned life insurance	Bank owned life insurance	223,533		222,076		Bank owned life insurance	229,175		227,749
Intangible assets, including goodwill of $302,231 and $301,368		310,477		309,247

Intangible assets, including goodwill of $302,707 and $302,707						Intangible assets, including goodwill of $302,707 and $302,707	309,425		309,906
Federal and state income tax assets, net						Federal and state income tax assets, net	0		5,708
Other assets	Other assets	221,359		210,989		Other assets	292,109		346,508
		$	16,423,161	$	16,474,910		$	19,063,622	$	18,794,055
LIABILITIES AND SHAREHOLDERS’ EQUITY	LIABILITIES AND SHAREHOLDERS’ EQUITY					LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities	Liabilities					Liabilities
Customer accounts	Customer accounts					Customer accounts
Transaction deposit accounts	Transaction deposit accounts	$	7,315,121	$	7,083,801	Transaction deposit accounts	$	10,381,459	$	9,806,432
Time deposit accounts	Time deposit accounts	4,617,017		4,906,963		Time deposit accounts	3,785,082		3,973,192
		11,932,138		11,990,764			14,166,541		13,779,624
FHLB advances	FHLB advances	2,250,000		2,250,000		FHLB advances	2,600,000		2,700,000
Advance payments by borrowers for taxes and insurance	Advance payments by borrowers for taxes and insurance	20,899		57,830		Advance payments by borrowers for taxes and insurance	15,539		49,462
Federal and state income tax liabilities, net	Federal and state income tax liabilities, net	19,443		5,104		Federal and state income tax liabilities, net	8,294		0
Accrued expenses and other liabilities	Accrued expenses and other liabilities	149,772		138,217		Accrued expenses and other liabilities	211,481		250,836
		14,372,252		14,441,915			17,001,855		16,779,922
Commitments and contingencies (see Note I)	Commitments and contingencies (see Note I)					Commitments and contingencies (see Note I)	0		0
Shareholders’ equity	Shareholders’ equity					Shareholders’ equity
Common stock, $1.00 par value, $300,000,000 shares authorized; 135,720,374 and 135,539,806 shares issued; 78,107,870 and 78,841,463 shares outstanding		135,720		135,540
Common stock, $1.00 par value, $300,000,000 shares authorized; 135,937,934 and 135,727,237 shares issued; 75,867,105 and 75,689,364 shares outstanding						Common stock, $1.00 par value, $300,000,000 shares authorized; 135,937,934 and 135,727,237 shares issued; 75,867,105 and 75,689,364 shares outstanding	135,938		135,727
Additional paid-in capital	Additional paid-in capital	1,673,666		1,672,417		Additional paid-in capital	1,680,111		1,678,843
Accumulated other comprehensive income (loss), net of taxes	Accumulated other comprehensive income (loss), net of taxes	15,986		15,292		Accumulated other comprehensive income (loss), net of taxes	41,435		16,953
Treasury stock, at cost; 57,612,504 and 56,698,343 shares		(1,159,642)		(1,126,163)
Treasury stock, at cost; 60,070,829 and 60,037,873 shares						Treasury stock, at cost; 60,070,829 and 60,037,873 shares	(1,238,997)		(1,238,296)
Retained earnings	Retained earnings	1,385,179		1,335,909		Retained earnings	1,443,280		1,420,906
		2,050,909		2,032,995			2,061,767		2,014,133
		$	16,423,161	$	16,474,910		$	19,063,622	$	18,794,055

SEE NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Table of Contents

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

Three Months Ended December 31,
2019 2018
(In thousands, except share data)
INTEREST INCOME
Loans receivable $ 142,146 $ 137,065
Mortgage-backed securities 15,612 19,192
Investment securities and cash equivalents 7,066 6,365
164,824 162,622
INTEREST EXPENSE
Customer accounts 31,481 26,579
FHLB advances 13,658 16,891
45,139 43,470
Net interest income 119,685 119,152
Provision (release) for loan losses (1,000) (500)
Net interest income after provision (release) 120,685 119,652
OTHER INCOME
Gain (loss) on sale of investment securities — (9)
Loan fee income 1,804 970
Deposit fee income 6,260 6,243
Other income 38,312 11,805
46,376 19,009
OTHER EXPENSE
Compensation and benefits 36,631 33,883
Occupancy 10,135 9,268
FDIC insurance premiums 2,470 2,862
Product delivery 4,267 4,021
Information technology 17,107 9,040
Other expense 12,026 12,598
82,636 71,672
Gain (loss) on real estate owned, net (886) 320
Income before income taxes 83,539 67,309
Income tax expense 17,836 14,367
NET INCOME $ 65,703 $ 52,942
PER SHARE DATA
Basic earnings per share $ 0.84 $ 0.65
Diluted earnings per share 0.84 0.65
Dividends paid on common stock per share 0.21 0.18
Basic weighted average number of shares outstanding 78,480,264 81,791,852
Diluted weighted average number of shares outstanding 78,535,299 81,831,478


	Three Months Ended December 31,
	2020		2019
	(In thousands, except share data)
INTEREST INCOME
Loans receivable	$	133,671	$	142,146
Mortgage-backed securities	7,230		15,612
Investment securities and cash equivalents	6,921		7,066
	147,822		164,824
INTEREST EXPENSE
Customer accounts	14,110		31,481
FHLB advances	13,198		13,658
	27,308		45,139
Net interest income	120,514		119,685
Provision (release) for credit losses	3,000		(3,750)
Net interest income after provision (release)	117,514		123,435

OTHER INCOME



Loan fee income	2,392		1,804
Deposit fee income	6,026		6,260
Other income	5,452		38,312
	13,870		46,376

OTHER EXPENSE
Compensation and benefits	42,723		36,631
Occupancy	9,592		10,135
FDIC insurance premiums	3,263		2,470
Product delivery	4,937		4,267
Information technology	11,831		17,107
Other expense	9,064		12,026
	81,410		82,636
Gain (loss) on real estate owned, net	(449)		(886)
Income before income taxes	49,525		86,289
Income tax expense	10,574		18,423
NET INCOME	$	38,951	$	67,866

PER SHARE DATA
Basic earnings per share	$	0.51	$	0.86
Diluted earnings per share	0.51		0.86
Dividends paid on common stock per share	0.22		0.21
Basic weighted average number of shares outstanding	75,792,995		78,480,264
Diluted weighted average number of shares outstanding	75,798,460		78,535,299

SEE NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Table of Contents

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

Three Months Ended December 31,
2019 2018
(In thousands)
Net income $ 65,703 $ 52,942
Other comprehensive income (loss) net of tax:
Net unrealized gain (loss) on available-for-sale investment securities (2,149) 3,515
Reclassification adjustment of net gain (loss) from sale of available-for-sale securities included in net income — (9)
Related tax benefit (expense) 425 (799)
(1,724) 2,707
Net unrealized gain (loss) on borrowings cash flow hedges 3,115 (10,499)
Related tax benefit (expense) (697) 2,389
2,418 (8,110)
Other comprehensive income (loss) net of tax 694 (5,403)
Comprehensive income $ 66,397 $ 47,539


	Three Months Ended December 31,
	2020		2019
	(In thousands)
Net income	$	38,951	$	67,866
Other comprehensive income (loss) net of tax:
Net unrealized gain (loss) during the period on available-for-sale investment securities, net of tax of $(2,686) and $425	8,991		(1,724)

	8,991		(1,724)

Net unrealized gain (loss) during the period on borrowings cash flow hedges, net of tax of $(4,627) and $(697)	15,491		2,418
	15,491		2,418

Other comprehensive income (loss)	24,482		694
Comprehensive income	$	63,433	$	68,560

SEE NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Table of Contents

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(UNAUDITED)

(in thousands) Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Treasury Stock Total
Balance at October 1, 2019 $ 135,540 $ 1,672,417 $ 1,335,909 $ 15,292 $ (1,126,163) $ 2,032,995
Net income — — 65,703 — — 65,703
Other comprehensive income (loss) — — — 694 — 694
Dividends on common stock ($0.21 per share) — — (16,433) — — (16,433)
Proceeds from stock-based awards 3 47 — — — 50
Stock-based compensation expense 177 1,202 — — — 1,379
Treasury stock acquired — — — — (33,479) (33,479)
Balance at December 31, 2019 $ 135,720 $ 1,673,666 $ 1,385,179 $ 15,986 $ (1,159,642) $ 2,050,909
(in thousands) Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Treasury Stock Total
Balance at October 1, 2018 $ 135,343 $ 1,666,609 $ 1,188,971 $ 8,294 $ (1,002,309) $ 1,996,908
Net income — — 52,942 — — 52,942
Other comprehensive income (loss) — — — (5,403) — (5,403)
Dividends on common stock ($0.18 per share) — — (14,638) — — (14,638)
Proceeds from stock-based awards 17 442 — — — 459
Stock-based compensation expense 97 1,654 — — — 1,751
Exercise of stock warrants 39 (39) — — — —
Treasury stock acquired — — — — (48,930) (48,930)
Balance at December 31, 2018 $ 135,496 $ 1,668,666 $ 1,227,275 $ 2,891 $ (1,051,239) $ 1,983,089


(in thousands)	Common Stock		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total
Balance at October 1, 2020	$	135,727	$	1,678,843	$	1,420,906	$	16,953	$	(1,238,296)	$	2,014,133

Net income	—		—		38,951		—		—		38,951
Other comprehensive income (loss)	—		—		—		24,482		—		24,482
Dividends on common stock ($0.22 per share)	—		—		(16,577)		—		—		(16,577)

Proceeds from stock-based awards	2		28		—		—		—		30

Stock-based compensation expense	209		1,240		—		—		—		1,449

Treasury stock acquired	—		—		—		—		(701)		(701)
Balance at December 31, 2020	$	135,938	$	1,680,111	$	1,443,280	$	41,435	$	(1,238,997)	$	2,061,767

(in thousands)	Common Stock		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total
Balance at October 1, 2019	$	135,540	$	1,672,417	$	1,335,909	$	15,292	$	(1,126,163)	$	2,032,995
Adjustment pursuant to adoption of ASU 2016-13	—		—		(21,945)		—		—		(21,945)
Net income	—		—		67,866		—		—		67,866
Other comprehensive income (loss)	—		—		—		694		—		694
Dividends on common stock ($0.21 per share)	—		—		(16,433)		—		—		(16,433)

Proceeds from stock-based awards	3		47		—		—		—		50

Stock-based compensation expense	177		1,202		—		—		—		1,379

Treasury stock acquired	—		—		—		—		(33,479)		(33,479)
Balance at December 31, 2019	$	135,720	$	1,673,666	$	1,365,397	$	15,986	$	(1,159,642)	$	2,031,127

SEE NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Table of Contents

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


		Three Months Ended December 31,								Three Months Ended December 31,
		2019		2018			2020			2019
		(In thousands)								(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES	CASH FLOWS FROM OPERATING ACTIVITIES								CASH FLOWS FROM OPERATING ACTIVITIES
Net income	Net income	$	65,703	$	52,942	Net income	$	38,951		$	67,866
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization, and accretion expense, net		15,275		7,388
Depreciation, amortization, accretion and other, net						Depreciation, amortization, accretion and other, net	9,211			15,275

Stock-based compensation expense	Stock-based compensation expense	1,379		1,751		Stock-based compensation expense	1,449			1,379
Provision (release) for loan losses		(1,000)		(500)
Loss (gain) on sale of investment securities		—		9
Provision (release) for credit losses						Provision (release) for credit losses	3,000			(3,750)

Net realized (gain) loss on sales of premises, equipment, and real estate owned	Net realized (gain) loss on sales of premises, equipment, and real estate owned	(32,734)		(7,054)		Net realized (gain) loss on sales of premises, equipment, and real estate owned	15			(32,734)
Impairment loss on premises and equipment	Impairment loss on premises and equipment	5,931		—		Impairment loss on premises and equipment	0			5,931

Decrease (increase) in accrued interest receivable	Decrease (increase) in accrued interest receivable	2,132		(912)		Decrease (increase) in accrued interest receivable	1,128			2,132

Decrease (increase) in federal and state income tax receivable	Decrease (increase) in federal and state income tax receivable	—		1,804		Decrease (increase) in federal and state income tax receivable	5,708			0
Decrease (increase) in cash surrender value of bank owned life insurance	Decrease (increase) in cash surrender value of bank owned life insurance	(1,457)		(1,497)		Decrease (increase) in cash surrender value of bank owned life insurance	(1,426)			(1,457)
Decrease (increase) in other assets	Decrease (increase) in other assets	(3,793)		16,816		Decrease (increase) in other assets	71,923			(3,793)
Increase (decrease) in federal and state income tax liabilities	Increase (decrease) in federal and state income tax liabilities	14,067		—		Increase (decrease) in federal and state income tax liabilities	981			14,654
Increase (decrease) in accrued expenses and other liabilities	Increase (decrease) in accrued expenses and other liabilities	8,092		(10,482)		Increase (decrease) in accrued expenses and other liabilities	(36,761)			8,092
Net cash provided by (used in) operating activities	Net cash provided by (used in) operating activities	73,595		60,265		Net cash provided by (used in) operating activities	94,179			73,595
CASH FLOWS FROM INVESTING ACTIVITIES	CASH FLOWS FROM INVESTING ACTIVITIES					CASH FLOWS FROM INVESTING ACTIVITIES
Origination of loans and principal repayments, net	Origination of loans and principal repayments, net	20,131		(222,257)		Origination of loans and principal repayments, net	(91,857)			20,131

FHLB & FRB stock purchased	FHLB & FRB stock purchased	(77,200)		(164,200)		FHLB & FRB stock purchased	(108,001)			(77,200)
FHLB & FRB stock redeemed	FHLB & FRB stock redeemed	77,200		155,800		FHLB & FRB stock redeemed	112,000			77,200
Available-for-sale securities purchased	Available-for-sale securities purchased	(82,028)		(172,076)		Available-for-sale securities purchased	(379,760)			(82,028)
Principal payments and maturities of available-for-sale securities	Principal payments and maturities of available-for-sale securities	69,085		38,118		Principal payments and maturities of available-for-sale securities	157,246			69,085
Proceeds from sales of available-for-sale securities		—		491

Principal payments and maturities of held-to-maturity securities	Principal payments and maturities of held-to-maturity securities	81,329		37,736		Principal payments and maturities of held-to-maturity securities	116,223			81,329

Proceeds from sales of real estate owned	Proceeds from sales of real estate owned	820		3,915		Proceeds from sales of real estate owned	357			820

Cash paid for acquisitions		(1,725)		—

Net cash received (paid) in business combinations						Net cash received (paid) in business combinations	0			(1,725)
Proceeds from sales of premises and equipment	Proceeds from sales of premises and equipment	53,790		10,233		Proceeds from sales of premises and equipment	0			53,790
Premises and equipment purchased and REO improvements	Premises and equipment purchased and REO improvements	(4,931)		(18,562)		Premises and equipment purchased and REO improvements	(8,388)			(4,931)
Net cash provided by (used in) investing activities	Net cash provided by (used in) investing activities	136,471		(330,802)		Net cash provided by (used in) investing activities	(202,180)			136,471
CASH FLOWS FROM FINANCING ACTIVITIES	CASH FLOWS FROM FINANCING ACTIVITIES					CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in customer accounts	Net increase (decrease) in customer accounts	(58,626)		174,623		Net increase (decrease) in customer accounts	386,917			(58,626)
Proceeds from borrowings	Proceeds from borrowings	1,930,000		4,105,000		Proceeds from borrowings	2,700,007			1,930,000
Repayments of borrowings	Repayments of borrowings	(1,930,000)		(3,895,000)		Repayments of borrowings	(2,800,007)			(1,930,000)
Proceeds from stock-based awards	Proceeds from stock-based awards	50		459		Proceeds from stock-based awards	30			50
Dividends paid on common stock	Dividends paid on common stock	(16,433)		(14,638)		Dividends paid on common stock	(16,577)			(16,433)

Treasury stock purchased	Treasury stock purchased	(33,479)		(48,930)		Treasury stock purchased	(701)			(33,479)
Increase (decrease) in borrower advances related to taxes and insurance, net		(36,931)		(36,252)
Increase (decrease) in advances payments by borrowers for taxes and insurance						Increase (decrease) in advances payments by borrowers for taxes and insurance	(33,923)			(36,931)
Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	(145,419)		285,262		Net cash provided by (used in) financing activities	235,746			(145,419)
Increase (decrease) in cash and cash equivalents	Increase (decrease) in cash and cash equivalents	64,647		14,725		Increase (decrease) in cash and cash equivalents	127,745			64,647
Cash, cash equivalents and restricted cash at beginning of period	Cash, cash equivalents and restricted cash at beginning of period	419,158		268,650		Cash, cash equivalents and restricted cash at beginning of period	1,702,977			419,158
Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period	$	483,805	$	283,375	Cash, cash equivalents and restricted cash at end of period	$	1,830,722		$	483,805

(CONTINUED)

SEE NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Table of Contents

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


		Three Months Ended December 31,								Three Months Ended December 31,
		2019		2018			2020			2019
		(In thousands)								(In thousands)
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION	SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION								SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Non-cash investing activities	Non-cash investing activities					Non-cash investing activities
Real estate acquired through foreclosure	Real estate acquired through foreclosure	$	272	$	116	Real estate acquired through foreclosure	$	(161)		$	272

Non-cash financing activities	Non-cash financing activities					Non-cash financing activities
Stock issued upon exercise of warrants	Stock issued upon exercise of warrants	—		1,082		Stock issued upon exercise of warrants	0			0
Cash paid during the period for
Cash paid (received) during the period for						Cash paid (received) during the period for
Interest	Interest	45,954		44,177		Interest	23,164			45,954
Income taxes						Income taxes	(19)			0

SEE NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE A – Summary of Significant Accounting Policies

Company and Nature of Operations - Washington Federal Bank, National Association, a federally-insured national 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. Washington Federal, Inc., a Washington corporation (the “Company”), was formed as the Bank’s holding company in November, 1994. As used throughout this document, the terms “Washington Federal” or the “Company” refer to the Company and its consolidated subsidiaries, and the term “Bank” refers to the operating subsidiary, Washington Federal Bank, National Association. The Company is headquartered in Seattle, Washington. The Bank conducts its activities through a network of 234 bank branches located in Washington, Oregon, Idaho, Utah, Arizona, Nevada, New Mexico and Texas.

Risks and Uncertainties - The worldwide spread of coronavirus (“COVID-19”) has created significant uncertainty in the global economy. There have been no comparable recent events that provide guidance as to the effect the spread of COVID-19 as a global pandemic may have, and, as a result, the ultimate impact of COVID-19 and the extent to which COVID-19 and the related government actions impact the Company’s business, results of operations and financial condition will depend on future developments, which are highly uncertain and difficult to predict.

Basis of Presentation - The Company has prepared the consolidated unaudited interim financial statements included in this report. All intercompany transactions and accounts have been eliminated in consolidation. The preparation of financial statements, in conformity with accounting principles generally accepted in the United States of America (“GAAP”), requires management to make estimates and assumptions that affect amounts reported in the financial statements. Actual results could differ from these estimates. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation are reflected in the interim financial statements.

The information included in this Form 10-Q should be read in conjunction with the financial statements and related notes in the Company's ~~2019~~2020 Annual Report on Form 10-K ~~(“2019~~filed with the Securities and Exchange Commission ("SEC") on November 23, 2020 ("2020 Annual Financial ~~Statements”~~Statements"). Interim results are not necessarily indicative of results for a full year.

The Company early adopted ASC 326 during fiscal 2020 and based on the application of the modified retrospective method it became effective on October 1, 2019 for all financial assets measured at amortized cost (primarily loans receivable and held-to-maturity debt securities) and off-balance-sheet credit exposures. The Company recorded a decrease to retained earnings of $21,945,000 as of October 1, 2019 for the cumulative effect of adopting ASC 326.

Summary of Significant Accounting Policies - The significant accounting policies used in preparation of the Company's consolidated financial statements are disclosed in its ~~2019~~2020 Annual Financial Statements. There have not been any ~~material~~significant changes in the Company's significant accounting policies compared to those contained in its ~~2019~~2020 Annual Financial Statements for the year ended September 30, ~~2019.~~2020.

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 December 31, ~~2019.~~2020. As of December 31, ~~2019~~2020 and September 30, ~~2019,~~2020, the Company pledged cash collateral related to derivative contracts of ~~$20,400,000~~$54,800,000 and ~~$31,850,000,~~$97,600,000, respectively.

Equity Securities - The Company records equity securities within Other assets in its Consolidated Statements of Financial Condition. Investments in equity securities with readily determinable fair values (marketable) are measured at fair value, with changes in the fair value recognized as a component of Other income in the Consolidated Statements of Operations. Investments in equity investments that do not have readily determinable fair values (non-marketable) are accounted for at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer, also referred to as the measurement alternative. Any adjustments to the carrying value of these investments are recorded in Other income in the Consolidated Statements of Operations.

Allowance for Credit Losses (Loans Receivable)

~~NOTE B – New Accounting Pronouncements~~

~~In April~~ - Effective October 1, 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Company has applied FASB ASU 2016-13, Financial Instruments ~~that clarifies and improves areas of guidance related~~- Credit Losses ("ASC 326"), so the allowance calculation is based on current expected credit loss methodology ("CECL"). Prior to October 1, 2019, the ~~recently issued standards~~calculation was based on incurred loss methodology. See Note E "Allowance for Losses on Loans" for details. The Company maintains an allowance for credit losses ~~(ASU 2016-13), hedging (ASU 2017-12), and recognition and measurement of financial instruments (ASU 2016-01). The amendments generally have~~(“ACL”) for the same effective dates as their related standards. If already adopted, the amendments of ASU 2016-01 and ASU 2016-13 are effective for fiscal years beginning after December 15, 2019 and the amendments of ASU 2017-12 are effective as of the beginning of the Company’s next annual reporting period; early adoption is permitted. The Company previously adopted both ASU 2017-12 and ASU 2016-01 and does not expect the amendments of ASU 2019-04 will have a material impact on its consolidated financial statements. The Company is continuing to evaluate the impact of ASU 2016-13 and will consider the amendments of ASU 2019-04 as part of that process.

expected

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(UNAUDITED)

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 CECL methodology requires an estimate of the credit losses expected over the life of an exposure (or pool of exposures) and replaces the incurred loss methodology’s threshold that delayed the recognition of a credit loss until it was probable a loss event was incurred.

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.

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.

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(UNAUDITED)

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. Substantially 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. See 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. Although ASC 326 replaced the legacy other-than-temporary impairment (“OTTI”) model with a credit loss model, it retained the fundamental nature of the legacy OTTI model. 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. Under the new guidance, an entity may no longer consider the length of time fair value has been less than amortized cost. 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. See Note F "Fair Value Measurements" for more information about AFS debt securities.

Accrued Interest Receivable - Upon adoption of ASC 326, the Company made the following elections regarding accrued interest receivable:

•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, as described above.

Non-Accrual Loans - Loans are placed on non-accrual 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 non-accrual status, previously accrued but unpaid interest is deducted from interest income. The Bank 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 Bank 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.

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(UNAUDITED)

Collateral-Dependent Loans - A financial asset is considered collateral-dependent when the debtor is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral. For all classes of loans and leases deemed collateral-dependent, the Company elected the practical expedient to estimate expected credit losses based on the collateral’s fair value less cost to sell. In most cases, the Company records a partial charge-off to reduce the loan’s carrying value to the collateral’s fair value less cost to sell. Substantially all of the collateral consists of various types of real estate including residential properties; commercial properties such as retail centers, office buildings, and lodging; agriculture land; and vacant land.

Off-balance-sheet credit exposures - The only material off-balance-sheet credit exposures are unfunded loan commitments, which had a combined balance of $3,011,286,000 and $2,738,095,000 at December 31, 2020 and September 30, 2020, respectively. 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 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.

NOTE B – New Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848). The amendments in this ASU provide temporary, optional guidance to ease the potential burden in accounting for reference rate reform. The ASU provides optional expedients and exceptions for applying GAAP to transactions affected by reference rate reform if certain criteria are met. The ASU primarily includes relief related to contract modifications and hedging relationships, as well as providing a one-time election for the sale or transfer of debt securities classified as held-to-maturity. This guidance is effective immediately and the amendments may be applied prospectively through December 31, 2022. The Company is currently in the process of evaluating the amendments and determining the impact to its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. The amendments in this ASU align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The amendments also require the entity to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement, including reasonably certain renewal periods. The amendments in the ASU are effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. ~~Early adoption is permitted, including adoption in any interim period.~~ The Company ~~is assessing the~~adopted this ASU beginning October 1, 2020 and it did not have a material impact ~~that this guidance will have~~ on its consolidated financial statements.

~~In August 2018, the FASB issued ASU 2018-13,~~
~~Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. This ASU adds, eliminates,~~

NOTE C – Dividends and modifies certain disclosure requirements for fair value measurements. Among the changes, entities will no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. The ASU is effective for interim and annual reporting periods beginning after December 15, 2019; early adoption is permitted. Entities are also allowed to elect early adoption of the eliminated or modified disclosure requirements and delay adoption of the added disclosure requirements until their effective date. The Company early adopted this ASU beginning October 1, 2019 and removed or modified disclosures as permitted.Share Repurchases

~~In July 2018,~~On November 20, 2020, the ~~FASB issued ASU 2018-11,~~ Company paid a regular dividend on common stock of $0.22 per share, which represented the 151~~Leases (Topic 842) - Targeted Improvements.~~st The ASU provides entities with relief from the costs of implementing certain aspects of the new leasing standard, ASU No. 2016-02. Specifically, under the amendments in ASU 2018-11: (1) entities may elect not to recast the comparative periods presented when transitioning to the new leasing standard,consecutive quarterly cash dividend. Dividends per share were $0.22 and ~~(2) lessors may elect to not separate non-lease components from leases when certain conditions are met. The amendments have the same effective date as ASU 2016-02 (October 1, 2019~~$0.21 for the ~~Company). The~~quarters ended December 31, 2020 and 2019, respectively. On January 26, 2021, the Company ~~adopted this ASU beginning October 1, 2019 and elected both transition options.~~

~~In June 2016, the FASB issued ASU 2016-13,~~ declared a regular dividend on common stock of $0.23 per share, which represents its 152~~Financial Instruments - Credit Losses~~nd~~. The ASU, as amended, is intended~~ consecutive quarterly cash dividend. This dividend will be paid on February 19, 2021 to ~~provide financial statement users with more decision-useful information about the expected credit losses~~common shareholders of record on financial instruments that are not accounted for at fair value through net income, including loans held for investment, held-to-maturity debt securities, trade and other receivables, net investments in leases and other commitments to extend credit held by a reporting entity at each reporting date. The amendments require that financial assets measured at amortized cost be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The ASU eliminates the current framework of recognizing probable incurred losses and instead requires an entity to use its current estimate of all expected credit losses over the contractual life. The measurement of expected credit losses is based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the financial assets.February 5, 2021.

For ~~purchased financial assets with a more-than-insignificant amount~~the three months ended December 31, 2020, the Company repurchased 32,956 shares at an average price of ~~credit deterioration since origination (“PCD assets”) that~~$21.29. As of December 31, 2020, there are ~~measured at amortized cost,~~4,594,275 remaining shares authorized to be repurchased under the current Board approved share repurchase program. On January 26, 2021 the Board authorized an ~~allowance~~additional 10,000,000 shares for ~~expected credit losses is recorded as an adjustment to~~repurchase under the ~~cost basis of the asset. Subsequent changes in estimated cash flows would be recorded as an adjustment to the allowance and through the statement of income.~~program.

~~Credit losses relating~~

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(UNAUDITED)

NOTE D – Loans Receivable

For a detailed discussion of loans and credit quality, including accounting policies and the CECL methodology used to ~~available-for-sale debt securities will be recorded through an~~estimate the allowance for credit losses, ~~rather than as a direct write-down to the security's cost basis.~~see Note A "Summary of Significant Accounting Policies" above.

The ~~amendments in this ASU~~Company's loans held for investment are ~~effective~~divided into two portfolio segments, commercial loans and consumer loans, with each of those segments further split into loan classes for ~~fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. For most debt securities,~~purposes of estimating the transition approach requires a cumulative-effect adjustment to the statement of financial position as of the beginning of the first reporting period the guidance is effective. For other-than-temporarily impaired debt securities and PCD assets, the guidance will be applied prospectively. The Company is currently in the process of evaluating the impact of the amended guidance on its consolidated financial statements and the reserveallowance for credit losses may increase upon adoption given that the allowance will be required to cover the full remaining expected life of the portfolio upon adoption, rather than the incurred loss model under current U.S. GAAP. The extent of this increase is still being evaluated and will depend on economic conditions and the composition of the Company’s loan, lease and held-to-maturity securities portfolios at the time of adoption.losses.

The following table is a summary of loans receivable by loan portfolio segment and class.


	December 31, 2020				September 30, 2020
	(In thousands)				(In thousands)
Commercial loans
Multi-family	$	1,610,796	10.9	%	$	1,538,762	10.6	%
Commercial real estate	1,954,154		13.2		1,895,086		13.1
Commercial & industrial (1)	2,256,627		15.3		2,132,160		14.7
Construction	2,687,708		18.2		2,403,276		16.6
Land - acquisition & development	193,239		1.3		193,745		1.3
Total commercial loans	8,702,524		58.9		8,163,029		56.3
Consumer loans
Single-family residential	5,063,053		34.2		5,304,689		36.7
Construction - custom	659,364		4.5		674,879		4.7
Land - consumer lot loans	110,841		0.7		102,263		0.7
HELOC	139,752		0.9		139,703		1.0
Consumer	111,292		0.8		83,159		0.6
Total consumer loans	6,084,302		41.1		6,304,693		43.7
Total gross loans	14,786,826		100	%	14,467,722		100	%
Less:
Allowance for credit losses on loans	170,189				166,955
Loans in process	1,679,972				1,456,072
Net deferred fees, costs and discounts	55,655				52,378
Total loan contra accounts	1,905,816				1,675,405
Net loans	$	12,881,010			$	12,792,317

(1) Includes $646,887,000 and $762,004,000 of SBA Payroll Protection Program loans as of December 31, 2020 and September 30, 2020, respectively.

The Company elected to exclude accrued interest receivable ("AIR") from the amortized cost basis of loans for disclosure purposes and from the calculations of estimated credit losses. As of December 31, 2020, and September 30, 2020, AIR for loans totaled $47,168,000 and $48,704,000, respectively, and is included in the “accrued interest receivable” line item on the Company’s consolidated statements of financial condition.

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(UNAUDITED)

~~In February 2016,~~Loans in the ~~FASB issued ASU 2016-02, Leases.~~amount of $5,153,478,000 and $5,361,504,000 at December 31, 2020 and September 30, 2020, respectively, were pledged to secure borrowings from the Federal Home Loan Bank ("FHLB") as part of our liquidity management strategy. The ASU, as amended, requires lessees to recognize a lease liability, which is a lessee's obligation to make lease payments arising from a lease, and a right-of-use asset, which is an asset that representsFHLB does not have the ~~lessee's~~ right to ~~use,~~sell or control the use of, a specified asset for the lease term. The guidance also simplifies the accounting for sale and leaseback transactions and introduces new disclosure requirements for leasing arrangements. Accounting by lessors is largely unchanged. The amendments are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company adopted this ASU beginning October 1, 2019 utilizing the transition method allowed under ASU 2018-11 and did not restate comparative periods. The Company elected the package of practical expedients permitted under the transition guidance, which allowed us to carry forward our historical lease classifications and our assessment on whether a contract is or contains a lease. We also elected to keep leases with an initial term of 12 months or less off the balance sheet. The adoption of this ASU resulted in an increase in other assets and an increase in other liabilities of $29,013,000 and $29,013,000, respectively. The Company recognized 0 cumulative effect adjustment to the beginning balance of retained earnings upon adoption.

~~NOTE C – Dividends and Share Repurchases~~

~~On November 22, 2019, the Company paid a regular dividend on common stock of $0.21 per share, which represented the 147~~^th consecutive quarterly cash dividend. Dividends per share were $0.21 and $0.18 for the quarters ended December 31, 2019 and 2018, respectively. On January 22, 2020, the Company declared a regular dividend on common stock of $0.22 per share, which represents its 148^th ~~consecutive quarterly cash dividend. This dividend will be paid on February 21, 2020 to common shareholders of record on February 7, 2020.~~

For the three months ended December 31, 2019, the Company repurchased 914,161 shares at an average price of $36.62. As of December 31, 2019, there are 7,052,600 remaining shares authorized to be repurchased under the current Board approved share repurchase program.

~~NOTE D – Loans Receivable~~

~~The following table is a summary of loans receivable.~~

December 31, 2019 September 30, 2019
(In thousands) (In thousands)
Gross loans by category
   Single-family residential $ 5,702,071 42.5 % $ 5,835,194 43.8 %
   Construction 2,174,313 16.2 2,038,052 15.3
   Construction - custom 538,234 4.0 540,741 4.1
   Land - acquisition & development 203,043 1.5 204,107 1.5
   Land - consumer lot loans 97,097 0.7 99,694 0.7
   Multi-family 1,436,715 10.7 1,422,674 10.7
   Commercial real estate 1,643,099 12.3 1,631,170 12.3
   Commercial & industrial 1,352,738 10.1 1,268,695 9.5
   HELOC 141,274 1.1 142,178 1.1
   Consumer 115,829 0.9 129,883 1.0
Total gross loans 13,404,413 100 % 13,312,388 100 %
   Less:
      Allowance for loan losses 132,513 131,534
      Loans in process 1,312,282 1,201,341
      Net deferred fees, costs and discounts 54,757 48,938
Total loan contra accounts 1,499,552 1,381,813
Net loans $ 11,904,861 $ 11,930,575

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~~WASHINGTON FEDERAL, INC. AND SUBSIDIARIES~~

~~NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

re-pledge these loans.

The following table sets forth ~~information regarding non-accrual loans.~~the amortized cost basis of non accrual loans and loans 90 days or more past due and accruing.


		December 31, 2019								September 30, 2019								December 31, 2020							September 30, 2020
		(In thousands, except ratio data)																		(In thousands, except ratio data)
Non-accrual loans:
Single-family residential		$	23,014		76.5	%	$	25,271		74.9	%
													Non-accrual			Non-accrual with no ACL		90 days or more past due and accruing		Non-accrual			Non-accrual with no ACL		90 days or more past due and accruing

Land - acquisition & development		86			0.3		169			0.5
Land - consumer lot loans		334			1.1		246			0.7

Commercial loans												Commercial loans
Multi-family												Multi-family	$	0		$	0	$	0	$	0		$	0	$	0
Commercial real estate	Commercial real estate	5,557			18.5		5,835			17.3		Commercial real estate	31,397			0		0		3,771			0		0
Commercial & industrial	Commercial & industrial	467			1.5		1,292			3.8		Commercial & industrial	594			0		280		329			0		0
Construction												Construction	1,237			0		0		1,669			0		0
Land - acquisition & development												Land - acquisition & development	0			0		0		0			0		0
Total commercial loans												Total commercial loans	33,228			0		280		5,769			0		0
Consumer loans												Consumer loans
Single-family residential												Single-family residential	24,349			0		3,908		22,431			0		933
Construction - custom												Construction - custom	0			0		0		0			0		0
Land - consumer lot loans												Land - consumer lot loans	443			0		168		243			0		0
HELOC	HELOC	630			2.1		907			2.7		HELOC	334			0		0		553			0		0
Consumer	Consumer	1			0.0		11			0.0		Consumer	52			0		6		60			0		17
Total consumer loans												Total consumer loans	25,178			0		4,082		23,287			0		950
Total non-accrual loans	Total non-accrual loans	$	30,089		100	%	$	33,731		100	%	Total non-accrual loans	$	58,406		$	0	$	4,362	$	29,056		$	0	$	950
% of total net loans		0.25		%			0.28		%
% of total loans												% of total loans	0.45		%					0.22		%

The Company recognized interest income on non-accrual loans of approximately ~~$497,000~~$3,489,000 in the three months ended December 31, ~~2019.~~2020. Had these loans been on accrual status and performed according to their original contract terms, the Company would have recognized interest income of approximately ~~$353,000~~$402,000 for the three months ended December 31, ~~2019.~~2020. Recognized interest income for the three months ended December 31, ~~2019~~2020 was higher than what otherwise would have been recognized in the period due to the collection of past due amounts. Interest cash flows collected on non-accrual loans vary from period to period as those loans are brought current or are paid off.

~~The following tables provide details regarding delinquent loans.~~

December 31, 2019 Loans Receivable Days Delinquent Based on $ Amount of Loans % based
on $
Type of Loan Net of Loans In Process Current 30 60 90 Total Delinquent
(In thousands, except ratio data)
Single-family residential $ 5,702,058 $ 5,675,672 $ 6,077 $ 3,718 $ 16,591 $ 26,386 0.46 %
Construction 1,189,457 1,188,042 — 1,415 — 1,415 0.12
Construction - custom 259,944 259,944 — — — — —
Land - acquisition & development 153,942 153,056 810 76 — 886 0.58
Land - consumer lot loans 97,097 96,635 180 136 146 462 0.48
Multi-family 1,436,693 1,436,556 137 — — 137 0.01
Commercial real estate 1,643,099 1,638,407 602 60 4,030 4,692 0.29
Commercial & industrial 1,352,738 1,352,449 223 10 56 289 0.02
HELOC 141,274 139,892 530 427 425 1,382 0.98
Consumer 115,829 115,248 294 184 103 581 0.50
Total Loans $ 12,092,131 $ 12,055,901 $ 8,853 $ 6,026 $ 21,351 $ 36,230 0.30 %
Delinquency % 99.70% 0.07% 0.05% 0.18% 0.30%

1214

Table of Contents

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

September 30, 2019 Loans Receivable Days Delinquent Based on $ Amount of Loans % based
on $
Type of Loan Net of Loans In Process Current 30 60 90 Total Delinquent
(In thousands, except ratio data)
Single-family residential $ 5,835,186 $ 5,809,239 $ 3,672 $ 3,211 $ 19,064 $ 25,947 0.44 %
Construction 1,164,889 1,164,889 — — — — —
Construction - custom 255,505 255,505 — — — — —
Land - acquisition & development 161,194 161,194 — — — — —
Land - consumer lot loans 99,694 98,916 112 619 47 778 0.78
Multi-family 1,422,652 1,422,652 — — — — —
Commercial real estate 1,631,171 1,625,509 1,614 285 3,763 5,662 0.35
Commercial & industrial 1,268,695 1,267,828 — — 867 867 0.07
HELOC 142,178 140,718 580 183 697 1,460 1.03
Consumer 129,883 129,227 295 117 244 656 0.51
Total Loans $ 12,111,047 $ 12,075,677 $ 6,273 $ 4,415 $ 24,682 $ 35,370 0.29 %
Delinquency % 99.71% 0.05% 0.04% 0.20% 0.29%
The following tables provide details regarding loan delinquencies by loan portfolio and class.


December 31, 2020			Days Delinquent Based on $ Amount of Loans										% based on $
Type of Loan	Loans Receivable (Amortized Cost)		Current		30		60		90		Total Delinquent
	(In thousands, except ratio data)
Commercial Loans
Multi-family	$	1,609,800	$	1,609,325	$	475	$	0	$	0	$	475	0.03	%
Commercial real estate	1,942,854		1,914,254		85		3,958		24,557		28,600		1.47
Commercial & industrial	2,243,465		2,242,422		216		0		827		1,043		0.05
Construction	1,393,107		1,389,404		2,550		0		1,153		3,703		0.27
Land - acquisition & development	152,621		152,369		252		0		0		252		0.17
Total commercial loans	7,341,847		7,307,774		3,578		3,958		26,537		34,073		0.46
Consumer Loans
Single-family residential	5,048,435		5,016,530		7,477		5,872		18,556		31,905		0.63
Construction - custom	299,351		299,351		0		0		0		0		0
Land - consumer lot loans	109,845		109,248		95		168		334		597		0.54
HELOC	140,272		138,933		916		116		307		1,339		0.95
Consumer	111,449		111,201		67		27		154		248		0.22
Total consumer loans	5,709,352		5,675,263		8,555		6,183		19,351		34,089		0.60
Total Loans	$	13,051,199	$	12,983,037	$	12,133	$	10,141	$	45,888	$	68,162	0.52	%
Delinquency %			99.48%		0.09%		0.08%		0.35%		0.52%

~~There~~


September 30, 2020			Days Delinquent Based on $ Amount of Loans										% based on $
Type of Loan	Loans Receivable (Amortized Cost)		Current		30		60		90		Total Delinquent
	(In thousands, except ratio data)
Commercial Loans
Multi-family	$	1,538,240	$	1,538,240	$	0	$	0	$	0	$	0	0	%
Commercial real estate	1,884,688		1,884,210		0		195		283		478		0.03
Commercial & industrial	2,115,513		2,114,650		0		583		280		863		0.04
Construction	1,352,414		1,350,752		0		0		1,662		1,662		0.12
Land - acquisition & development	153,571		153,571		0		0		0		0		0
Total commercial loans	7,044,426		7,041,423		0		778		2,225		3,003		0.04
Consumer Loans
Single-family residential	5,293,962		5,267,608		3,922		3,108		19,324		26,354		0.50
Construction - custom	295,953		295,953		0		0		0		0		0
Land - consumer lot loans	101,394		101,029		152		0		213		365		0.36
HELOC	140,222		139,491		275		76		380		731		0.52
Consumer	83,315		82,959		121		11		224		356		0.43
Total consumer loans	5,914,846		5,887,040		4,470		3,195		20,141		27,806		0.47
Total Loans	$	12,959,272	$	12,928,463	$	4,470	$	3,973	$	22,366	$	30,809	0.24	%
Delinquency %			99.76%		0.03%		0.03%		0.17%		0.24%

Table of Contents

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The Company participated in the Small Business Administration’s Paycheck Protection Program ("PPP"). This program came about through the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) passed by Congress to help small businesses keep their employees employed through the COVID-19 shelter in place orders. In 2020, the Company assisted over 6,500 businesses with more than $780,000,000 in PPP loans.

The Company is actively working with its borrowers to modify consumer mortgage and commercial loans to provide payment deferrals as a result of the COVID-19 pandemic. The terms of the payment deferrals are ~~no loans greater than~~generally 90 days ~~delinquent~~for consumer mortgage loans and ~~still accruing interest~~up to 180 days for commercial loans and borrowers may be eligible for multiple deferrals. Pursuant to the CARES Act, these loan modifications are not accounted for as TDRs. As of ~~either date.~~December 31, 2020, 183 mortgage loans totaling $46,000,000 and 10 commercial loans totaling $32,000,000 that had been modified remain in deferral. These loans are not considered past due until after the deferral period is over and scheduled payments have resumed.

Most ~~loans restructured in~~ TDRs are accruing and performing loans where the borrower has proactively approached the Company about modification due to temporary financial difficulties. ~~As of December 31, 2019, 96.0% of the Company's $110,835,000 in TDRs were classified as performing.~~ Each request for modification is individually evaluated for merit and likelihood of success. The concession granted in a loan modification is typically a payment reduction through a rate reduction of between 100 to 200 basis points for a specific term, usually six to twenty four months. Interest-only payments may also be approved during the modification period. Principal forgiveness is not an available option for restructured loans. As of December 31, ~~2019,~~2020, 97.9% of the Company's $86,314,000 in TDRs were classified as performing. As of December 31, 2020, single-family residential loans comprised ~~92.2%~~92.9% of TDRs.

The ~~Company reserves for restructured loans within its allowance for loan loss~~Company's ACL methodology ~~by taking~~takes into account the following performance ~~indicators:~~indicators for restructured loans: 1) time since modification, 2) current payment status and 3) geographic area.

~~Table of Contents~~

~~WASHINGTON FEDERAL, INC. AND SUBSIDIARIES~~

~~NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~NOTE E – Allowance for Losses on Loans~~

~~The following tables summarize the activity in the allowance for loan losses.~~

Three Months Ended December 31, 2019 Beginning
Allowance Charge-offs Recoveries Provision &
Transfers Ending
Allowance
(In thousands)
Single-family residential $ 30,988 $ (15) $ 261 $ (534) $ 30,700
Construction 32,304 — 54 (66) 32,292
Construction - custom 1,369 — — 30 1,399
Land - acquisition & development 9,155 (11) 1,460 (1,858) 8,746
Land - consumer lot loans 2,143 (70) 10 7 2,090
Multi-family 7,391 — 498 (485) 7,404
Commercial real estate 13,170 (98) 368 (405) 13,035
Commercial & industrial 31,450 (50) 144 1,996 33,540
HELOC 1,103 — 93 (92) 1,104
Consumer 2,461 (374) 309 (193) 2,203
$ 131,534 $ (618) $ 3,197 $ (1,600) $ 132,513

Three Months Ended December 31, 2018 Beginning
Allowance Charge-offs Recoveries Provision &
Transfers Ending
Allowance
(In thousands)
Single-family residential $ 33,033 $ (25) $ 230 $ (1,754) $ 31,484
Construction 31,317 — — 146 31,463
Construction - custom 1,842 — — 84 1,926
Land - acquisition & development 7,978 — 1,782 (604) 9,156
Land - consumer lot loans 2,164 (72) 265 (213) 2,144
Multi-family 8,329 — — (445) 7,884
Commercial real estate 11,852 (339) 525 673 12,711
Commercial & industrial 28,702 (179) 33 1,723 30,279
HELOC 781 (886) 1 1,168 1,064
Consumer 3,259 (140) 213 (278) 3,054
$ 129,257 $ (1,641) $ 3,049 $ 500 $ 131,165

~~The Company recorded a $1,000,000 release~~We evaluate the credit quality of loan loss allowance for the three months ended December 31, 2019, compared to a $500,000 release for the three months ended December 31, 2018. Reserving for new loan originations has been largely offset by recoveries of previously charged-off loans. Recoveries, net of charge-offs, totaled $2,579,000 for the three months ended December 31, 2019, compared to net recoveries of $1,408,000 during the three months ended December 31, 2018.

~~Non-performing assets were $39,742,000, or 0.24% of total assets, at December 31, 2019, compared to $43,826,000, or 0.27% of total assets, at September 30, 2019. Non-accrual~~our loans were $30,089,000 at December 31, 2019, compared to $33,731,000 at September 30, 2019. Delinquencies, as a percent of total loans, were 0.30% at December 31, 2019, compared to 0.29% at September 30, 2019.

~~Table of Contents~~

~~WASHINGTON FEDERAL, INC. AND SUBSIDIARIES~~

~~NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~The following tables show loans collectively and individually evaluated for impairment and the related allocation of general and specific reserves.~~

December 31, 2019 Loans Collectively Evaluated for Impairment Loans Individually Evaluated for Impairment
Allowance Allocation Recorded Investment of Loans Ratio Allowance Allocation Recorded Investment of Loans Ratio
(In thousands, except ratio data) (In thousands, except ratio data)
Single-family residential $ 30,700 $ 5,686,482 0.5 % $ — $ 19,993 0.0 %
Construction 32,292 1,189,457 2.7 — — —
Construction - custom 1,399 259,944 0.5 — — —
Land - acquisition & development 8,731 153,856 5.7 15 86 17.4
Land - consumer lot loans 2,090 93,272 2.2 — 295 0.0
Multi-family 7,403 1,436,313 0.5 1 380 0.3
Commercial real estate 12,861 1,632,612 0.8 174 10,487 1.7
Commercial & industrial 33,470 1,352,116 2.5 70 641 10.9
HELOC 1,104 139,963 0.8 — 483 0.0
Consumer 2,203 115,749 1.9 — 2 0.0
$ 132,253 $ 12,059,764 1.1 % $ 260 $ 32,367 0.8 %

September 30, 2019 Loans Collectively Evaluated for Impairment Loans Individually Evaluated for Impairment
Allowance Allocation Recorded Investment of Loans Ratio Allowance Allocation Recorded Investment of Loans Ratio
(In thousands, except ratio data) (In thousands, except ratio data)
Single-family residential $ 30,988 $ 5,822,200 0.5 % $ — $ 17,978 0.0 %
Construction 32,304 1,164,889 2.8 — — —
Construction - custom 1,369 255,505 0.5 — — —
Land - acquisition & development 9,135 160,964 5.7 20 230 8.7
Land - consumer lot loans 2,143 95,574 2.2 — 375 0.0
Multi-family 7,387 1,422,266 0.5 4 385 1.0
Commercial real estate 12,847 1,618,406 0.8 323 12,765 2.5
Commercial & industrial 31,358 1,266,913 2.5 92 1,805 5.1
HELOC 1,103 140,378 0.8 — 837 0.0
Consumer 2,461 129,527 1.9 — 50 0.0
$ 131,095 $ 12,076,622 1.1 % $ 439 $ 34,425 1.3 %

As of December 31, 2019, $132,253,000 of the allowance was calculated under the Company's general allowance methodology and the remaining $260,000 was specific reserves on loans deemed to be individually impaired. As of September 30, 2019, $131,095,000 of the allowance was calculated under the Company's general allowance methodology and the remaining $439,000 was specific reserves on loans deemed to be individually impaired.

The Company has an asset quality review function that analyzes its loan portfolio and reports the results of the review to its Board of Directors on a quarterly basis. The single-family residential, HELOC and consumer portfolios are evaluated based on ~~their performance as a pool of loans, since no single loan is individually significant or judged by its~~regulatory risk ~~rating, size or potential risk of loss. The construction, land, multi-family, commercial real estate~~ratings and ~~commercial and industrial loans are risk rated on a~~

~~Table of Contents~~

~~WASHINGTON FEDERAL, INC. AND SUBSIDIARIES~~

~~NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~loan by loan basis to determine the relative risk inherent in specific borrowers or loans.~~also consider other factors. Based on ~~that risk rating,~~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.

The following tables present by primary credit quality indicator, loan class, and year of origination, the amortized cost basis of loans receivable as of December 31, 2020.

Table of Contents

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


	Term Loans Amortized Cost Basis by Origination Year
	YTD 2021		2020		2019		2018		2017		Prior to 2017		Revolving Loans		Revolving to Term Loans		Total Loans
Commercial loans
Multi-family
Pass	$	120,709	$	384,701	$	114,454	$	276,390	$	232,338	$	392,183	$	8,195	$	0	$	1,528,970
Special Mention	0		2,418		2,816		4,054		5,092		4,464		0		0		18,844
Substandard	0		0		7,544		3,974		3,769		46,699		0		0		61,986



Total	$	120,709	$	387,119	$	124,814	$	284,418	$	241,199	$	443,346	$	8,195	$	0	$	1,609,800

Commercial real estate
Pass	$	158,763	$	424,621	$	219,629	$	243,656	$	233,589	$	443,025	$	2,217	$	0	$	1,725,500
Special Mention	0		197		9,496		414		1,725		26,103		0		0		37,935
Substandard	0		9,067		29,699		22,688		47,315		70,650		0		0		179,419



Total	$	158,763	$	433,885	$	258,824	$	266,758	$	282,629	$	539,778	$	2,217	$	0	$	1,942,854

Commercial & industrial
Pass	$	157,872	$	801,134	$	60,562	$	83,496	$	75,301	$	165,692	$	616,063	$	12,097	$	1,972,217
Special Mention	0		8,931		6,937		1,163		4,286		0		5,111		0		26,428
Substandard	12,751		45,891		7,296		6,310		104		49,331		123,137		0		244,820
Doubtful	0		0		0		0		0		0		0		0		0


Total	$	170,623	$	855,956	$	74,795	$	90,969	$	79,691	$	215,023	$	744,311	$	12,097	$	2,243,465

Construction
Pass	$	119,251	$	407,194	$	446,042	$	190,227	$	42,695	$	16	$	77,463	$	0	$	1,282,888
Special Mention	0		0		0		32,992		0		0		0		0		32,992
Substandard	0		3,256		36,940		0		37,031		0		0		0		77,227



Total	$	119,251	$	410,450	$	482,982	$	223,219	$	79,726	$	16	$	77,463	$	0	$	1,393,107

Land - acquisition & development
Pass	$	10,965	$	43,159	$	34,967	$	19,309	$	17,706	$	4,513	$	5,307	$	0	$	135,926
Special Mention	0		0		0		0		0		15,573		0		0		15,573
Substandard	0		0		1,122		0		0		0		0		0		1,122



Total	$	10,965	$	43,159	$	36,089	$	19,309	$	17,706	$	20,086	$	5,307	$	0	$	152,621

Total commercial loans
Pass	$	567,560	$	2,060,809	$	875,654	$	813,078	$	601,629	$	1,005,429	$	709,245	$	12,097	$	6,645,501
Special Mention	0		11,546		19,249		38,623		11,103		46,140		5,111		0		131,772
Substandard	12,751		58,214		82,601		32,972		88,219		166,680		123,137		0		564,574
Doubtful	—		0		0		0		0		0		0		0		0


Total	$	580,311	$	2,130,569	$	977,504	$	884,673	$	700,951	$	1,218,249	$	837,493	$	12,097	$	7,341,847

Table of Contents

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


	Term Loans Amortized Cost Basis by Origination Year
	YTD 2021		2020		2019		2018		2017		Prior to 2017		Revolving Loans		Revolving to Term Loans		Total Loans
Consumer loans
Single-family residential
Current	$	250,276	$	824,978	$	578,704	$	525,644	$	607,513	$	2,229,415	$	0	$	0	$	5,016,530
30 days past due	0		0		356		60		1,523		5,538		0		0		7,477
60 days past due	0		473		0		0		357		5,042		0		0		5,872
90+ days past due	0		0		680		0		439		17,437		0		0		18,556

Total	$	250,276	$	825,451	$	579,740	$	525,704	$	609,832	$	2,257,432	$	0	$	0	$	5,048,435

Construction - custom
Current	$	11,469	$	250,459	$	35,802	$	1,621	$	0	$	0	$	0	$	0	$	299,351




Total	$	11,469	$	250,459	$	35,802	$	1,621	$	0	$	0	$	0	$	0	$	299,351

Land - consumer lot loans
Current	$	20,268	$	38,986	$	16,288	$	5,991	$	6,994	$	20,721	$	0	$	0	$	109,248
30 days past due	0		0		72		0		0		23		0		0		95
60 days past due	0		0		0		0		0		168		0		0		168
90+ days past due	0		0		0		152		122		60		0		0		334

Total	$	20,268	$	38,986	$	16,360	$	6,143	$	7,116	$	20,972	$	0	$	0	$	109,845

HELOC
Current	$	0	$	0	$	0	$	0	$	0	$	6,750	$	131,482	$	701	$	138,933
30 days past due	0		0		0		0		0		167		749		0		916
60 days past due	0		0		0		0		0		5		111		0		116
90+ days past due	0		0		0		0		0		30		277		0		307

Total	$	0	$	0	$	0	$	0	$	0	$	6,952	$	132,619	$	701	$	140,272

Consumer
Current	$	11,231	$	8,421	$	1,237	$	51,616	$	180	$	16,175	$	22,341	$	0	$	111,201
30 days past due	0		0		9		0		47		11		0		0		67
60 days past due	0		0		6		0		14		7		0		0		27
90+ days past due	0		0		36		0		112		6		0		0		154

Total	$	11,231	$	8,421	$	1,288	$	51,616	$	353	$	16,199	$	22,341	$	0	$	111,449

Total consumer loans
Current	$	293,244	$	1,122,844	$	632,031	$	584,872	$	614,687	$	2,273,061	$	153,823	$	701	$	5,675,263
30 days past due	0		0		437		60		1,570		5,739		749		0		8,555
60 days past due	0		473		6		0		371		5,222		111		0		6,183
90+ days past due	0		0		716		152		673		17,533		277		0		19,351

Total	$	293,244	$	1,123,317	$	633,190	$	585,084	$	617,301	$	2,301,555	$	154,960	$	701	$	5,709,352

Table of Contents

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE E – Allowance for Losses on Loans

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."

The following tables summarize the activity in the allowance for loan losses by loan portfolio segment and class.


Three Months Ended December 31, 2020	Beginning Allowance		Charge-offs		Recoveries		Provision & Transfers		Ending Allowance
	(In thousands)
Commercial loans
Multi-family	$	13,853	$	0	$	0	$	510	$	14,363
Commercial real estate	22,516		0		789		191		23,496
Commercial & industrial	38,665		(2)		50		5,604		44,317
Construction	24,156		0		0		2,209		26,365
Land - acquisition & development	10,733		0		35		(102)		10,666
Total commercial loans	109,923		(2)		874		8,412		119,207
Consumer loans
Single-family residential	45,186		0		779		(7,352)		38,613
Construction - custom	3,555		0		0		39		3,594
Land - consumer lot loans	2,729		0		7		222		2,958
HELOC	2,571		0		0		(209)		2,362
Consumer	2,991		(150)		226		388		3,455
Total consumer loans	57,032		(150)		1,012		(6,912)		50,982
Total loans	$	166,955	$	(152)	$	1,886	$	1,500	$	170,189


Three Months Ended December 31, 2019	Beginning Allowance		Charge-offs		Recoveries		Provision & Transfers		Ending Allowance
	(In thousands)
Commercial loans
Multi-family	$	10,404	$	0	$	498	$	(396)	$	10,506
Commercial real estate	13,024		(98)		368		(227)		13,067
Commercial & industrial	32,235		(50)		144		1,347		33,676
Construction	22,768		0		54		(903)		21,919
Land - acquisition & development	10,904		(11)		1,460		(1,940)		10,413
Total commercial loans	89,335		(159)		2,524		(2,119)		89,581
Consumer loans
Single-family residential	47,771		(15)		261		(1,661)		46,356
Construction - custom	2,880		0		0		50		2,930
Land - consumer lot loans	2,635		(70)		10		(8)		2,567
HELOC	2,048		0		93		(107)		2,034
Consumer	4,615		(374)		309		(505)		4,045
Total consumer loans	59,949		(459)		673		(2,231)		57,932
Total loans	$	149,284	$	(618)	$	3,197	$	(4,350)	$	147,513

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The Company recorded a $3,000,000 provision for credit losses for the three months ended December 31, 2020, compared with a release of allowance for credit losses of $3,750,000 for the three months ended December 31, 2019. The credit loss provision for the three months ended December 31, 2020 is primarily due to reserving for new loan originations and changes in composition of the loan portfolio. Recoveries, net of charge-offs, totaled $1,734,000 for the three months ended December 31, 2020, compared to net recoveries of $2,579,000 during the three months ended December 31, 2019. NaN allowance was recorded as of December 31, 2020 or as of September 30, 2020 for the $646,887,000 and $762,004,000 of gross PPP loans in the portfolio on each date, respectively, which are included in the commercial & industrial loan category, due to the government guarantee.

Non-performing assets were $66,542,000, or 0.35% of total assets, at December 31, 2020, compared to $37,695,000, or 0.20% of total assets, at September 30, 2020. Non-accrual loans were $58,406,000 at December 31, 2020, compared to $29,056,000 at September 30, 2020. Delinquencies, as a percent of total loans, were 0.52% at December 31, 2020, compared to 0.24% at September 30, 2020.

The Company has an asset quality review function that analyzes its loan portfolio and reports the results of the review to its Board of Directors on a quarterly basis. The single-family residential, HELOC and consumer portfolios are evaluated based on their performance as a pool of loans, since no single loan is individually significant or judged by its risk rating, size or potential risk of loss. The construction, land, multi-family, commercial real estate and commercial and industrial loans are risk rated on a loan by loan basis to determine the relative risk inherent in specific borrowers or loans. Based on that risk rating, the loans are assigned a grade and classified as described in Note D "Loans Receivable."

The following tables provide the amortized cost of loans receivable based on risk rating categories as previously defined.


December 31, 2020	Internally Assigned Grade
	Pass			Special mention			Substandard			Doubtful			Loss			Total
	(In thousands, except ratio data)
Loan type
Commercial loans
Multi-family	$	1,528,970		$	18,844		$	61,986		$	0		$	0		$	1,609,800
Commercial real estate	1,725,500			37,935			179,419			0			0			1,942,854
Commercial & industrial	1,972,217			26,428			244,820			0			0			2,243,465
Construction	1,282,888			32,992			77,227			0			0			1,393,107
Land - acquisition & development	135,926			15,573			1,122			0			0			152,621
Total commercial loans	6,645,501			131,772			564,574			0			0			7,341,847
Consumer loans
Single-family residential	5,018,759			191			29,485			0			0			5,048,435
Construction - custom	299,351			0			0			0			0			299,351
Land - consumer lot loans	109,234			0			611			0			0			109,845
HELOC	139,215			0			1,057			0			0			140,272
Consumer	111,442			0			7			0			0			111,449
Total consumer loans	5,678,001			191			31,160			0			0			5,709,352
Total	$	12,323,502		$	131,963		$	595,734		$	0		$	0		$	13,051,199

Total grade as a % of total loans	94.42		%	1.01		%	4.56		%	0		%	0		%

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


September 30, 2020	Internally Assigned Grade
	Pass			Special mention			Substandard			Doubtful			Loss			Total Gross Loans
	(In thousands, except ratio data)
Loan type
Commercial loans
Multi-family	$	1,506,692		$	13,721		$	17,827		$	0		$	0		$	1,538,240
Commercial real estate	1,681,230			92,184			111,274			0			0			1,884,688
Commercial & industrial	1,898,709			64,695			152,109			0			0			2,115,513
Construction	1,187,786			61,178			103,450			0			0			1,352,414
Land - acquisition & development	137,998			15,573			0			0			0			153,571
Total commercial loans	6,412,415			247,351			384,660			0			0			7,044,426
Consumer loans
Single-family residential	5,270,666			192			23,104			0			0			5,293,962
Construction - custom	295,953			0			0			0			0			295,953
Land - consumer lot loans	101,151			0			243			0			0			101,394
HELOC	139,646			0			576			0			0			140,222
Consumer	83,304			0			11			0			0			83,315
Total consumer loans	5,890,720			192			23,934			0			0			5,914,846
Total loans	$	12,303,135		$	247,543		$	408,594		$	0		$	0		$	12,959,272

Total grade as a % of total gross loans	94.94		%	1.91		%	3.15		%	0		%	0		%

Table of Contents

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The following tables provide information on amortized cost of loans ~~based on risk rating categories as defined above.~~

December 31, 2019 Internally Assigned Grade
Pass Special mention Substandard Doubtful Loss Total Gross Loans
(In thousands, except ratio data)
Loan type
  Single-family residential $ 5,676,712 $ — $ 25,359 $ — $ — $ 5,702,071
  Construction 2,174,313 — — — — 2,174,313
  Construction - custom 538,234 — — — — 538,234
  Land - acquisition & development 200,533 — 2,510 — — 203,043
  Land - consumer lot loans 96,627 — 470 — — 97,097
  Multi-family 1,432,895 — 3,820 — — 1,436,715
  Commercial real estate 1,619,197 3,426 20,476 — — 1,643,099
  Commercial & industrial 1,313,816 714 38,194 14 — 1,352,738
  HELOC 140,644 — 630 — — 141,274
  Consumer 115,828 — 1 — — 115,829
Total gross loans $ 13,308,799 $ 4,140 $ 91,460 $ 14 $ — $ 13,404,413
Total grade as a % of total gross loans 99.29 % 0.03 % 0.68 % 0.00 % — %

September 30, 2019 Internally Assigned Grade
Pass Special mention Substandard Doubtful Loss Total Gross Loans
(In thousands, except ratio data)
Loan type
Single-family residential $ 5,808,444 $ — $ 26,750 $ — $ — $ 5,835,194
Construction 2,038,052 — — — — 2,038,052
Construction - custom 540,741 — — — — 540,741
Land - acquisition & development 200,283 — 3,824 — — 204,107
Land - consumer lot loans 98,828 — 866 — — 99,694
Multi-family 1,418,837 — 3,837 — — 1,422,674
Commercial real estate 1,602,634 2,754 25,782 — — 1,631,170
Commercial & industrial 1,229,891 18,125 20,679 — — 1,268,695
HELOC 141,271 — 907 — — 142,178
Consumer 129,872 — 11 — — 129,883
Total gross loans $ 13,208,853 $ 20,879 $ 82,656 $ — $ — $ 13,312,388
Total grade as a % of total gross loans 99.22 % 0.16 % 0.62 % — % — %

~~Table of Contents~~

~~WASHINGTON FEDERAL, INC. AND SUBSIDIARIES~~

~~NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~The following tables provide information on gross loans~~receivable based on borrower payment activity.


December 31, 2019		Performing Loans						Non-Performing Loans
December 31, 2020										December 31, 2020	Performing Loans				Non-Performing Loans
		Amount		% of Total Gross Loans		Amount		% of Total Gross Loans			Amount		% of Total Loans		Amount		% of Total Loans
		(In thousands, except ratio data)															(In thousands, except ratio data)
Single-family residential		$	5,679,057	99.6	%	$	23,014	0.4	%
Construction		2,174,313		100.0		—		—
Construction - custom		538,234		100.0		—		—
Land - acquisition & development		202,957		100.0		86		0.0
Land - consumer lot loans		96,763		99.7		334		0.3
Commercial loans										Commercial loans
Multi-family	Multi-family	1,436,715		100.0		—		—		Multi-family	$	1,609,800	100.0	%	$	0	0	%
Commercial real estate	Commercial real estate	1,637,542		99.7		5,557		0.3		Commercial real estate	1,911,457		98.4		31,397		1.6
Commercial & industrial	Commercial & industrial	1,352,271		100.0		467		0.0		Commercial & industrial	2,242,871		100.0		594		0
Construction										Construction	1,391,870		99.9		1,237		0.1
Land - acquisition & development										Land - acquisition & development	152,621		100.0		0		0
Total commercial loans										Total commercial loans	7,308,619		99.5		33,228		0.5
Consumer loans										Consumer loans
Single-family residential										Single-family residential	5,024,086		99.5		24,349		0.5
Construction - custom										Construction - custom	299,351		100.0		0		0
Land - consumer lot loans										Land - consumer lot loans	109,402		99.6		443		0.4
HELOC	HELOC	140,644		99.6		630		0.4		HELOC	139,938		99.8		334		0.2
Consumer	Consumer	115,828		100.0		1		0.0		Consumer	111,397		100.0		52		0.0
		$	13,374,324	99.8	%	$	30,089	0.2	%
Total consumer loans										Total consumer loans	5,684,174		99.6		25,178		0.4
Total loans										Total loans	$	12,992,793	99.6	%	$	58,406	0.4	%

September 30, 2019 Performing Loans Non-Performing Loans
Amount % of Total
Gross Loans Amount % of Total
Gross Loans
(In thousands, except ratio data)
Single-family residential $ 5,809,923 99.6 % $ 25,271 0.4 %
Construction 2,038,052 100.0 — —
Construction - custom 540,741 100.0 — —
Land - acquisition & development 203,938 99.9 169 0.1
Land - consumer lot loans 99,448 99.8 246 0.2
Multi-family 1,422,674 100.0 — —
Commercial real estate 1,625,335 99.6 5,835 0.4
Commercial & industrial 1,267,403 99.9 1,292 0.1
HELOC 141,271 99.4 907 0.6
Consumer 129,872 100.0 11 0.0
$ 13,278,657 99.7 % $ 33,731 0.3 %

~~Table of Contents~~

~~WASHINGTON FEDERAL, INC. AND SUBSIDIARIES~~

~~NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~The following tables provide information on impaired loan balances and the related allowances by loan types.~~

December 31, 2019 Recorded
Investment Unpaid
Principal
Balance Related
Allowance Average Recorded Investment
(Year-To-Date)
(In thousands)
Impaired loans with no related allowance recorded:
Single-family residential $ 16,505 $ 17,474 $ — $ 17,242
Land - acquisition & development — — — 39
Land - consumer lot loans 269 845 — 307
Commercial real estate 7,249 11,585 — 7,358
Commercial & industrial 437 4,508 — 776
HELOC 369 369 — 603
Consumer 2 84 — 26
24,831 34,865 — 26,351
Impaired loans with an allowance recorded:
Single-family residential 102,164 104,506 1,110 107,103
Land - acquisition & development 86 150 15 89
Land - consumer lot loans 3,556 3,650 — 3,556
Multi-family 380 380 1 383
Commercial real estate 3,238 3,462 174 3,703
Commercial & industrial 411 519 70 419
HELOC 942 957 — 946
Consumer 58 58 — 59
110,835 113,682 1,370 (1) 116,258
Total impaired loans:
Single-family residential 118,669 121,980 1,110 124,345
Land - acquisition & development 86 150 15 128
Land - consumer lot loans 3,825 4,495 — 3,863
Multi-family 380 380 1 383
Commercial real estate 10,487 15,047 174 11,061
Commercial & industrial 848 5,027 70 1,195
HELOC 1,311 1,326 — 1,549
Consumer 60 142 — 85
$ 135,666 $ 148,547 $ 1,370 (1) $ 142,609

~~(1)Includes $260,000 of specific reserves and $1,110,000 included in the general reserves.~~


September 30, 2020	Performing Loans				Non-Performing Loans
	Amount		% of Total Loans		Amount		% of Total Loans
	(In thousands, except ratio data)
Commercial loans
Multi-family	$	1,538,240	100.0	%	$	0	0	%
Commercial real estate	1,880,917		99.8		3,771		0.2
Commercial & industrial	2,115,184		100.0		329		0
Construction	1,350,745		99.9		1,669		0.1
Land - acquisition & development	153,571		100.0		0		0
Total commercial loans	7,038,657		99.9		5,769		0.1
Consumer loans
Single-family residential	5,271,531		99.6		22,431		0.4
Construction - custom	295,953		100.0		0		0
Land - consumer lot loans	101,151		99.8		243		0.2
HELOC	139,669		99.6		553		0.4
Consumer	83,255		99.9		60		0.1
Total consumer loans	5,891,559		99.6		23,287		0.4
Total loans	$	12,930,216	99.8	%	$	29,056	0.2	%

1922

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~~WASHINGTON FEDERAL, INC. AND SUBSIDIARIES~~

~~NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

September 30, 2019 Recorded
Investment Unpaid
Principal
Balance Related
Allowance Average Recorded Investment
(Year-To-Date)
(In thousands)
Impaired loans with no related allowance recorded:
Single-family residential $ 17,979 $ 19,252 $ — $ 16,685
Construction — — — 1,172
Construction - custom — — — 251
Land - acquisition & development 78 143 — 290
Land - consumer lot loans 344 848 — 287
Multi-family — — — 286
Commercial real estate 7,467 11,881 — 8,890
Commercial & industrial 1,114 5,312 — 7,168
HELOC 837 931 — 597
Consumer 50 119 — 23
27,869 38,486 — 35,649
Impaired loans with an allowance recorded:
Single-family residential 112,042 114,609 2,208 125,976
Land - acquisition & development 91 152 — 99
Land - consumer lot loans 3,556 3,695 20 4,324
Multi-family 385 385 4 418
Commercial real estate 4,168 5,298 323 5,160
Commercial & industrial 426 691 92 2,535
HELOC 949 963 — 961
Consumer 60 282 — 65
121,677 126,075 2,647 (1) 139,538
Total impaired loans:
Single-family residential 130,021 133,861 2,208 142,661
Construction — — — 1,172
Construction - custom — — — 251
Land - acquisition & development 169 295 — 389
Land - consumer lot loans 3,900 4,543 20 4,611
Multi-family 385 385 4 704
Commercial real estate 11,635 17,179 323 14,050
Commercial & industrial 1,540 6,003 92 9,703
HELOC 1,786 1,894 — 1,558
Consumer 110 401 — 88
$ 149,546 $ 164,561 $ 2,647 (1) $ 175,187

~~(1)Includes $439,000 of specific reserves and $2,208,000 included in the general reserves.~~

Table of Contents

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE F – Fair Value Measurements

FASB ASC 820, Fair Value Measurement ("ASC 820") defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active exchange markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active and other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The Company has established and documented the process for determining the fair values of its assets and liabilities, where applicable. Fair value is based on quoted market prices, when available, for identical or similar assets or liabilities. In the absence of quoted market prices, fair value is determined using valuation models or third-party appraisals. The following is a description of the valuation methodologies used to measure and report the fair value of financial assets and liabilities on a recurring or nonrecurring basis.

Measured on a Recurring Basis

Available-for-Sale Securities and Derivative Contracts

Securities available for sale are recorded at fair value on a recurring basis. The fair value of debt securities are priced using model pricing based on the securities' relationship to other benchmark quoted prices as provided by an independent third party, and under GAAP are considered a Level 2 input method. Securities that are traded on active exchanges are measured using the closing price in an active market and are considered a Level 1 input method.

The Company offers interest rate swaps to its variable rate borrowers who want to manage their interest rate risk. At the same time, the Company enters into the opposite trade with a counter party to offset its interest rate risk. The Company has also entered into commercial loan hedges, mortgage pool hedges and borrowings hedges using interest rate swaps. The fair value of these interest rate swaps are estimated by a third party pricing service using a discounted cash flow technique. These are considered a Level 2 input method.

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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The following tables present the balance and level in the fair value hierarchy of assets and liabilities that are measured at fair value on a recurring basis.

December 31, 2019
Level 1 Level 2 Level 3 Total
(In thousands)
Financial Assets
Available-for-sale securities:
U.S. government and agency securities $ — $ 333,514 $ — $ 333,514
Municipal bonds — 22,490 — 22,490
Corporate debt securities — 210,649 — 210,649
Mortgage-backed securities
Agency pass-through certificates — 928,933 — 928,933
Total available-for-sale securities — 1,495,586 — 1,495,586
Client swap program hedges — 14,973 — 14,973
Mortgage loan fair value hedges — 4,765 — 4,765
Total financial assets $ — $ 1,515,324 $ — $ 1,515,324
Financial Liabilities
Client swap program hedges $ — $ 14,973 $ — $ 14,973
Commercial loan fair value hedges — 2,753 — 2,753
Borrowings cash flow hedges — 4,762 — 4,762
Total financial liabilities $ — $ 22,488 $ — $ 22,488


		September 30, 2019															December 31, 2020
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
		(In thousands)															(In thousands)
Financial Assets	Financial Assets									Financial Assets
Available-for-sale securities:	Available-for-sale securities:									Available-for-sale securities:

U.S. government and agency securities	U.S. government and agency securities	$	—	$	270,778	$	—	$	270,778	U.S. government and agency securities	$	0	$	78,281	$	0	$	78,281
Asset-backed securities										Asset-backed securities	0		1,210,356		0		1,210,356
Municipal bonds	Municipal bonds	—		22,642		—		22,642		Municipal bonds	0		38,703		0		38,703

Corporate debt securities	Corporate debt securities	—		209,763		—		209,763		Corporate debt securities	0		287,393		0		287,393
Mortgage-backed securities	Mortgage-backed securities									Mortgage-backed securities
Agency pass-through certificates	Agency pass-through certificates	—		982,559		—		982,559		Agency pass-through certificates	0		868,211		0		868,211

Total available-for-sale securities	Total available-for-sale securities	—		1,485,742		—		1,485,742		Total available-for-sale securities	0		2,482,944		0		2,482,944
Client swap program hedges	Client swap program hedges	—		20,381		—		20,381		Client swap program hedges	0		35,825		0		35,825

Mortgage loan fair value hedges		—		1,608		—		1,608

Borrowings cash flow hedges										Borrowings cash flow hedges	0		2,743		0		2,743
Total financial assets	Total financial assets	$	—	$	1,507,731	$	—	$	1,507,731	Total financial assets	$	0	$	2,521,512	$	0	$	2,521,512

Financial Liabilities	Financial Liabilities									Financial Liabilities
Client swap program hedges	Client swap program hedges	$	—	$	20,381	$	—	$	20,381	Client swap program hedges	$	0	$	35,825	$	0	$	35,825
Commercial loan fair value hedges	Commercial loan fair value hedges	—		4,288		—		4,288		Commercial loan fair value hedges	0		7,508		0		7,508
Mortgage loan fair value hedges										Mortgage loan fair value hedges	0		12,459		0		12,459

Borrowings cash flow hedges		—		7,877		—		7,877
Total financial liabilities	Total financial liabilities	$	—	$	32,546	$	—	$	32,546	Total financial liabilities	$	0	$	55,792	$	0	$	55,792

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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


	September 30, 2020
	Level 1		Level 2		Level 3		Total
	(In thousands)
Financial Assets
Available-for-sale securities:

U.S. government and agency securities	$	0	$	18,824	$	0	$	18,824
Asset-backed securities	0		936,917		0		936,917
Municipal bonds	0		38,315		0		38,315

Corporate debt securities	0		287,184		0		287,184
Mortgage-backed securities
Agency pass-through certificates	0		968,252		0		968,252

Total available-for-sale securities	0		2,249,492		0		2,249,492
Client swap program hedges	0		48,201		0		48,201



Total financial assets	$	0	$	2,297,693	$	0	$	2,297,693

Financial Liabilities
Client swap program hedges	$	0	$	48,201	$	0	$	48,201
Commercial loan fair value hedges	0		8,492		0		8,492
Mortgage loan fair value hedges	0		16,061		0		16,061
Borrowings cash flow hedges	0		17,375		0		17,375
Total financial liabilities	$	0	$	90,129	$	0	$	90,129

Table of Contents

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Measured on a Nonrecurring Basis

Certain assets and liabilities are measured at fair value on a nonrecurring basis after initial recognition such as collateral dependent loans ~~measured for impairment~~ and real estate owned ("REO"). REO consists principally of properties acquired through foreclosure. From time to time, and on a nonrecurring basis, adjustments using fair value measurements are recorded to reflect increases or decreases based on the discounted cash flows, the current appraisal or estimated value of the collateral or REO property.

When management determines that the fair value of the collateral or the ~~real estate owned~~REO requires additional adjustments, either as a result of an updated appraised value or when there is no observable market price, the Company classifies the ~~impaired~~collateral dependent loan or real estate owned as Level 3. Level 3 assets recorded at fair value on a nonrecurring basis at December 31, ~~2019~~2020 included loans for which ~~a specific reserve~~an allowance was established or a partial charge-off was recorded based on the fair value of collateral, as well as real estate owned where the fair value of the property was less than the cost basis.

The following tables present the aggregated balance of assets that were measured at fair value on a nonrecurring basis at December 31, ~~2019~~2020 and December 31, ~~2018,~~2019, and the total gains (losses) resulting from those fair value adjustments during the respective periods. The estimated fair value measurements are shown gross of estimated selling costs.


		December 31, 2019														Three Months Ended December 31, 2019			December 31, 2020				Three Months Ended December 31, 2020
		Level 1		Level 2		Level 3		Total		Total Gains (Losses)			Level 1		Level 2		Level 3		Total		Total Gains (Losses)
		(In thousands)														(In thousands)			(In thousands)				(In thousands)
Impaired loans (1)		$	—	$	—	$	70	$	70	$	(299)
Loans (1)												Loans (1)	$	0	$	0	$	0	$	0	$	(44)
Real estate owned (2)	Real estate owned (2)	—		—		976		976		(2)		Real estate owned (2)	0		0		447		447		(47)
Balance at end of period	Balance at end of period	$	—	$	—	$	1,046	$	1,046	$	(301)	Balance at end of period	$	0	$	0	$	447	$	447	$	(91)

(1)The gains (losses) represent ~~remeasurements~~re-measurements of collateral-dependent loans.

(2)The gains (losses) represent ~~remeasurements of REO.~~aggregate write-downs and charge-offs on real estate owned.


		December 31, 2018														Three Months Ended December 31, 2018			December 31, 2019				Three Months Ended December 31, 2019
		Level 1		Level 2		Level 3		Total		Total Gains (Losses)			Level 1		Level 2		Level 3		Total		Total Gains (Losses)
		(In thousands)														(In thousands)			(In thousands)				(In thousands)
Impaired loans (1)		$	—	$	—	$	1,970	$	1,970	$	(726)
Loans (1)												Loans (1)	$	0	$	0	$	70	$	70	$	(299)
Real estate owned (2)	Real estate owned (2)	—		—		520		520		(32)		Real estate owned (2)	0		0		976		976		(2)
Balance at end of period	Balance at end of period	$	—	$	—	$	2,490	$	2,490	$	(758)	Balance at end of period	$	0	$	0	$	1,046	$	1,046	$	(301)

(1)The gains (losses) represent ~~remeasurements~~re-measurements of collateral-dependent loans.

(2)The gains (losses) represent ~~remeasurements~~aggregate write-downs and charge-offs on real estate owned.

At December 31, 2020, there were $528,000 in foreclosed residential real estate properties held as REO. The recorded investment of ~~REO.~~

consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process was $2,214,000.

Fair Values of Financial Instruments

FASB ASC 825, Financial Instruments ("ASC 825") requires disclosure of fair value information about financial instruments, whether or not recognized on the statement of financial condition, for which it is practicable to estimate those values. Certain financial instruments and all non-financial instruments are excluded from the disclosure requirements. Accordingly, the aggregate fair value estimates presented do not reflect the underlying fair value of the Company. Although management is not aware of any factors that would materially affect the estimated fair value amounts presented below, such amounts have not been comprehensively revalued for purposes of these financial statements since the dates shown, and therefore, estimates of fair value subsequent to those dates may differ significantly from the amounts presented below.

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(UNAUDITED)


			December 31, 2019						September 30, 2019								December 31, 2020				September 30, 2020
		Level in Fair Value Hierarchy	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value			Level in Fair Value Hierarchy	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
			($ in thousands)																($ in thousands)
Financial assets	Financial assets										Financial assets
Cash and cash equivalents	Cash and cash equivalents	1	$	483,805	$	483,805	$	419,158	$	419,158	Cash and cash equivalents	1	$	1,830,722	$	1,830,722	$	1,702,977	$	1,702,977
Available-for-sale securities	Available-for-sale securities										Available-for-sale securities

U.S. government and agency securities	U.S. government and agency securities	2	333,514		333,514		270,778		270,778		U.S. government and agency securities	2	78,281		78,281		18,824		18,824
Asset-backed securities											Asset-backed securities	2	1,210,356		1,210,356		936,917		936,917
Municipal bonds	Municipal bonds	2	22,490		22,490		22,642		22,642		Municipal bonds	2	38,703		38,703		38,315		38,315

Corporate debt securities	Corporate debt securities	2	210,649		210,649		209,763		209,763		Corporate debt securities	2	287,393		287,393		287,184		287,184
Mortgage-backed securities	Mortgage-backed securities										Mortgage-backed securities
Agency pass-through certificates	Agency pass-through certificates	2	928,933		928,933		982,559		982,559		Agency pass-through certificates	2	868,211		868,211		968,252		968,252

Total available-for-sale securities	Total available-for-sale securities		1,495,586		1,495,586		1,485,742		1,485,742		Total available-for-sale securities		2,482,944		2,482,944		2,249,492		2,249,492
Held-to-maturity securities	Held-to-maturity securities										Held-to-maturity securities

Mortgage-backed securities	Mortgage-backed securities										Mortgage-backed securities
Agency pass-through certificates	Agency pass-through certificates	2	1,348,594		1,368,314		1,428,480		1,448,088		Agency pass-through certificates	2	581,313		600,622		698,934		720,516
Commercial MBS	Commercial MBS	2	12,100		12,106		15,000		15,007		Commercial MBS	2	5,557		5,553		6,904		6,852
Total held-to-maturity securities	Total held-to-maturity securities		1,360,694		1,380,420		1,443,480		1,463,095		Total held-to-maturity securities		586,870		606,175		705,838		727,368

Loans receivable	Loans receivable	3	11,904,861		12,479,483		11,930,575		12,617,600		Loans receivable	3	12,881,010		13,433,950		12,792,317		13,392,089

FHLB and FRB stock	FHLB and FRB stock	2	123,990		123,990		123,990		123,990		FHLB and FRB stock	2	137,991		137,991		141,990		141,990
Other assets - client swap program hedges	Other assets - client swap program hedges	2	14,973		14,973		20,381		20,381		Other assets - client swap program hedges	2	35,825		35,825		48,201		48,201

Other assets - mortgage loan fair value hedges		2	4,765		4,765		1,608		1,608

Other assets - borrowings cash flow hedges											Other assets - borrowings cash flow hedges	2	2,743		2,743		0		0

Financial liabilities	Financial liabilities										Financial liabilities
Time deposits	Time deposits	2	4,617,017		4,642,830		4,906,963		4,937,847		Time deposits	2	3,785,082		3,761,325		3,973,192		3,963,203
FHLB advances	FHLB advances	2	2,250,000		2,279,222		2,250,000		2,282,887		FHLB advances	2	2,600,000		2,620,269		2,700,000		2,722,509
Other liabilities - client swap program hedges	Other liabilities - client swap program hedges	2	14,973		14,973		20,381		20,381		Other liabilities - client swap program hedges	2	35,825		35,825		48,201		48,201
Other liabilities - mortgage loan fair value hedges											Other liabilities - mortgage loan fair value hedges	2	12,459		12,459		16,061		16,061
Other liabilities - commercial loan fair value hedges	Other liabilities - commercial loan fair value hedges	2	2,753		2,753		4,288		4,288		Other liabilities - commercial loan fair value hedges	2	7,508		7,508		8,492		8,492
Other liabilities - borrowings cash flow hedges	Other liabilities - borrowings cash flow hedges	2	4,762		4,762		7,877		7,877		Other liabilities - borrowings cash flow hedges	2	0		0		17,375		17,375

The following methods and assumptions were used to estimate the fair value of financial instruments:

Cash and cash equivalents – The carrying amount of these items is a reasonable estimate of their fair value.

Available-for-sale securities and held-to-maturity securities – Securities at fair value are primarily priced using model pricing based on the securities' relationship to other benchmark quoted prices as provided by an independent third party, and are considered a Level 2 input method. Equity securities that are exchange traded are considered a Level 1 input method.

Loans receivable – Fair values are estimated first by stratifying the portfolios of loans with similar financial characteristics. Loans are segregated by type such as multi-family real estate, residential mortgage, construction, commercial, consumer and land loans. Each loan category is further segmented into fixed- and adjustable-rate interest terms. For residential mortgages and multi-family loans, the bank determined that its best exit price was by securitization. MBS benchmark prices are used as a base price, with further loan level pricing adjustments made based on individual loan characteristics such as FICO score, LTV, Property Type and occupancy. For all other loan categories an estimate of fair value is then calculated based on discounted cash flows using a discount rate offered and observed in the market on similar products, plus an adjustment for liquidity to reflect the non-homogeneous nature of the loans, as well as aan annual loss rate based on historical losses to arrive at an estimated exit price ~~fair value. Fair value for impaired loans is also based on recent appraisals or estimated cash flows discounted using rates~~

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(UNAUDITED)

fair value. Fair value for impaired loans is also based on recent appraisals or estimated cash flows discounted using rates commensurate with risk associated with the estimated cash flows. Assumptions regarding credit risk, cash flows and discount rates are judgmentally determined using available market information and specific borrower information.

FHLB and FRB stock – The fair value is based upon the par value of the stock that equates to its carrying value.

Time deposits – The fair value of time deposits is estimated by discounting the estimated future cash flows using rates offered for deposits with similar remaining maturities.

FHLB advances – The fair value of FHLB advances and other borrowings is estimated by discounting the estimated future cash flows using rates currently available to the Company for debt with similar remaining maturities.

Interest rate swaps – The Company offers interest rate swaps to its variable rate borrowers who want to manage their interest rate risk. At the same time, the Company enters into the opposite trade with a counterparty to offset its interest rate risk. The Company also uses interest rate swaps for various fair value hedges and cash flow hedges. The fair value of these interest rate swaps is estimated by a third party pricing service using a discounted cash flow technique.

The following tables provide details about the amortized cost and fair value of available-for-sale and held-to-maturity securities.


		December 31, 2019																										December 31, 2020
		Amortized Cost		Gross Unrealized						Fair Value				Yield	Amortized Cost			Gross Unrealized										Fair Value		Yield
						Gains		Losses												Amortized Cost				Gains			Fair Value					Yield
		($ in thousands)																								($ in thousands)
Available-for-sale securities	Available-for-sale securities											Available-for-sale securities
U.S. government and agency securities due	U.S. government and agency securities due											U.S. government and agency securities due

1 to 5 years												1 to 5 years	$	58,807		$	588		$		0				$	59,395				0.53	%
5 to 10 years												5 to 10 years	18,443		443			0				18,886						2.05

Asset-backed securities												Asset-backed securities

5 to 10 years	5 to 10 years	$	63,512	$	2	$	(979)	$	62,535	2.27	%	5 to 10 years	107,355		206			(1,360)				106,201						0.68
Over 10 years	Over 10 years	272,314		14		(1,349)		270,979		2.82		Over 10 years	1,097,828		7064			(737)				1104155						1.09

Corporate debt securities due	Corporate debt securities due											Corporate debt securities due
Within 1 year	Within 1 year	43,938		307		—		44,245		3.41		Within 1 year	52,756		236			(86)				52,906						1.22
1 to 5 years	1 to 5 years	70,000		977		—		70,977		3.01		1 to 5 years	152,226		6,557			(87)				158,696						1.87
5 to 10 years	5 to 10 years	93,008		2,419		—		95,427		2.95		5 to 10 years	73,340		2,451			0				75,791						1.16

Municipal bonds due	Municipal bonds due											Municipal bonds due

1 to 5 years	1 to 5 years	1,437		23		—		1,460		1.95		1 to 5 years	1,469		33			0				1,502						0

Over 10 years	Over 10 years	20,298		732		—		21,030		6.45		Over 10 years	35,836		1,365			0				37,201						5.40
Mortgage-backed securities	Mortgage-backed securities											Mortgage-backed securities
Agency pass-through certificates	Agency pass-through certificates	905,556		24,998		(1,621)		928,933		3.19		Agency pass-through certificates	833,814		35,980			(1,583)				868,211						2.72

		1,470,063		29,472		(3,949)		1,495,586		3.11			2,431,874		54,923			(3,853)				2,482,944						1.73
Held-to-maturity securities	Held-to-maturity securities											Held-to-maturity securities

Mortgage-backed securities	Mortgage-backed securities											Mortgage-backed securities
Agency pass-through certificates	Agency pass-through certificates	1,348,594		20,018		(298)		1,368,314		3.15		Agency pass-through certificates	581,313		19,309			0				600,622						3.16
Commercial MBS	Commercial MBS	12,100		6		—		12,106		2.61		Commercial MBS	5,557		0			(4)				5,553						1.02
		1,360,694		20,024		(298)		1,380,420		3.14			586,870		19,309			(4)				606,175						3.14
		$	2,830,757	$	49,496	$	(4,247)	$	2,876,006	3.12	%		$	3,018,744	$	74,232		$	(3,857)			$	3,089,119					2.00	%

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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


		September 30, 2019																				September 30, 2020
		Amortized Cost		Gross Unrealized							Fair Value				Yield	Amortized Cost		Gross Unrealized				Fair Value		Yield
						Gains		Losses												Amortized Cost					Fair Value	Yield
		($ in thousands)																				($ in thousands)
Available-for-sale securities	Available-for-sale securities												Available-for-sale securities
U.S. government and agency securities due	U.S. government and agency securities due												U.S. government and agency securities due

5 to 10 years													5 to 10 years	$	18,448	$	376	$	0	$	18,824	2.05	%

Asset-backed securities													Asset-backed securities

5 to 10 years	5 to 10 years	$	65,287	$	39	$	(629)		$	64,697	2.43	%	5 to 10 years	38,289		0		(1,600)		36,689		0.83
Over 10 years	Over 10 years	207,067		1		(987)			206,081		3.02		Over 10 years	906,489		647		(6,908)		900,228		1.14

Corporate debt securities due	Corporate debt securities due												Corporate debt securities due
Within 1 year	Within 1 year	43,903		411		—			44,314		3.65		Within 1 year	54,209		337		(51)		54,495		1.22
1 to 5 years	1 to 5 years	70,000		689		(50)			70,639		3.29		1 to 5 years	128,289		3,366		(428)		131,227		1.78
5 to 10 years	5 to 10 years	92,931		1,879		—			94,810		3.27		5 to 10 years	97,157		4,305		0		101,462		1.50

Municipal bonds due	Municipal bonds due												Municipal bonds due

1 to 5 years	1 to 5 years	1,430		14		—			1,444		1.94		1 to 5 years	1,461		36		0		1,497		0

Over 10 years	Over 10 years	20,303		895		—			21,198		6.45		Over 10 years	36,044		774		0		36,818		5.40
Mortgage-backed securities	Mortgage-backed securities												Mortgage-backed securities
Agency pass-through certificates	Agency pass-through certificates	957,150		26,533		(1,124)			982,559		3.29		Agency pass-through certificates	929,713		39,166		(627)		968,252		2.82

		1,458,071		30,461		(2,790)			1,485,742		3.27			2,210,099		49,007		(9,614)		2,249,492		1.97
Held-to-maturity securities	Held-to-maturity securities												Held-to-maturity securities

Mortgage-backed securities	Mortgage-backed securities												Mortgage-backed securities
Agency pass-through certificates	Agency pass-through certificates	1,428,480		19,945		(337)			1,448,088		3.15		Agency pass-through certificates	698,934		21,582		0		720,516		3.16
Commercial MBS	Commercial MBS	15,000		7		—			15,007		2.89		Commercial MBS	6,904		0		(52)		6,852		1.02
		1,443,480		19,952		(337)			1,463,095		3.15			705,838		21,582		(52)		727,368		3.14
		$	2,901,551	$	50,413	$	(3,127)		$	2,948,837	3.21	%		$	2,915,937	$	70,589	$	(9,666)	$	2,976,860	2.25	%

During fiscal 2020, as permitted in conjunction with the adoption of ASU 2019-04, the Company reclassified $374,680,000 of prepayable debt securities from held-to-maturity to available-for-sale. For available-for-sale investment securities, there were purchases of $379,760,000 during the three months ended December 31, 2020 and purchases of $82,028,000 during the three months ended December 31, ~~2019 and purchases of $172,076,000 during the three months ended December 31, 2018.~~2019. There were 0 sales of available-for-sale investment securities during ~~the three months ended December 31, 2019 and sales of $491,000 during the three months ended December 31, 2018.~~either period. For held-to-maturity investment securities, there were 0 purchases during the three months ended December 31, ~~2019~~2020 and 0 purchases during the three months ended December 31, ~~2018.~~2019. There were 0 sales of held-to-maturity investment securities during either period. Substantially all of the agency mortgage-backed securities have contractual due dates that exceed 10 years.

The Company elected to exclude AIR from the amortized cost basis of debt securities disclosed throughout this footnote. For AFS securities, AIR totaled $3,997,000 and $3,285,000 as of December 31, 2020 and September 30, 2020, respectively. For HTM debt securities, AIR totaled $1,506,000 and $1,811,000 as of December 31, 2020 and September 30, 2020, respectively. AIR is included in the “accrued 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 December 31, ~~2019~~2020 and September 30, ~~2019,~~2020, by length of time that individual securities in each category have been in a continuous loss position. There were 33 and 51 securities with an unrealized loss as of December 31, 2020 and September 30, 2020, 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 other-than-temporarily impaired.

December 31, 2019 Less than 12 months 12 months or more Total
Unrealized
Gross Losses Fair
Value Unrealized
Gross Losses Fair
Value Unrealized
Gross Losses Fair
Value
(In thousands)
U.S. government and agency securities $ (701) $ 156,068 $ (1,627) $ 122,155 $ (2,328) $ 278,223
Mortgage-backed securities (660) 125,407 (1,259) 209,355 (1,919) 334,762
$ (1,361) $ 281,475 $ (2,886) $ 331,510 $ (4,247) $ 612,985

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(UNAUDITED)


September 30, 2019		Less than 12 months						12 months or more								Total
December 31, 2020														December 31, 2020	Less than 12 months				12 months or more				Total
		Unrealized Gross Losses		Fair Value		Unrealized Gross Losses		Fair Value		Unrealized Gross Losses		Fair Value			Unrealized Gross Losses		Fair Value		Unrealized Gross Losses		Fair Value		Unrealized Gross Losses		Fair Value
		(In thousands)																					(In thousands)
Available-for-sale securities														Available-for-sale securities
Corporate debt securities	Corporate debt securities	$	—	$	—	$	(50)	$	24,950	$	(50)	$	24,950	Corporate debt securities	$	(173)	$	45,811	$	0	$	0	$	(173)	$	45,811

U.S. government and agency securities		(656)		152,715		(960)		77,391		(1,616)		230,106

Asset-backed securities														Asset-backed securities	(398)		219,539		(1,699)		141,478		(2,097)		361,017

Mortgage-backed securities	Mortgage-backed securities	(148)		87,895		(1,313)		270,802		(1,461)		358,697		Mortgage-backed securities	(1,174)		52,559		(409)		53,606		(1,583)		106,165
		$	(804)	$	240,610	$	(2,323)	$	373,143	$	(3,127)	$	613,753		(1,745)		317,909		(2,108)		195,084		(3,853)		512,993
Held-to-maturity securities														Held-to-maturity securities
Mortgage-backed securities														Mortgage-backed securities	(4)		5,553		0		0		(4)		5,553
															$	(1,749)	$	323,462	$	(2,108)	$	195,084	$	(3,857)	$	518,546


September 30, 2020	Less than 12 months				12 months or more				Total
	Unrealized Gross Losses		Fair Value		Unrealized Gross Losses		Fair Value		Unrealized Gross Losses		Fair Value
	(In thousands)
Available-for-sale securities
Corporate debt securities	$	(74)	$	45,875	$	(405)	$	24,596	$	(479)	$	70,471


Asset-backed securities	(5,481)		587,746		(3,027)		204,369		(8,508)		792,115

Mortgage-backed securities	(278)		41,897		(349)		56,196		(627)		98,093
	(5,833)		675,518		(3,781)		285,161		(9,614)		960,679
Held-to-maturity securities
Mortgage-backed securities	(52)		6,853		0		0		(52)		6,853
	$	(5,885)	$	682,371	$	(3,781)	$	285,161	$	(9,666)	$	967,532

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 December 31, 2020 or September 30, 2020.

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 December 31, 2020 or September 30, 2020. 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 (rated AA or higher) and the decline in fair value is due to changes in interest rates and other market conditions. The issuer continues to make timely principal and interest payments on the bonds. The fair value is expected to recover as the bonds approach maturity.

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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE G – Derivatives and Hedging Activities

The following tables present the fair value, notional amount and balance sheet classification of derivative assets and liabilities at December 31, ~~2019~~2020 and September 30, ~~2019.~~2020.


December 31, 2019		Derivative Assets								Derivative Liabilities
December 31, 2020												December 31, 2020	Derivative Assets					Derivative Liabilities
Interest rate contract purpose	Interest rate contract purpose	Balance Sheet Location	Notional		Fair Value		Balance Sheet Location	Notional		Fair Value		Interest rate contract purpose	Balance Sheet Location	Notional		Fair Value		Balance Sheet Location	Notional		Fair Value
		(In thousands)								(In thousands)								(In thousands)					(In thousands)
Client swap program hedges	Client swap program hedges	Other assets	$	435,349	$	14,973	Other liabilities	$	435,349	$	14,973	Client swap program hedges	Other assets	$	637,633	$	35,825	Other liabilities	$	637,633	$	35,825
Commercial loan fair value hedges	Commercial loan fair value hedges	Other assets	—		—		Other liabilities	93,316		2,753		Commercial loan fair value hedges	Other assets	0		0		Other liabilities	90,918		7,508
Mortgage loan fair value hedges	Mortgage loan fair value hedges	Other assets	200,000		4,765		Other liabilities	—		—		Mortgage loan fair value hedges	Other assets	0		0		Other liabilities	500,000		12,459
Borrowings cash flow hedges	Borrowings cash flow hedges	Other assets	—		—		Other liabilities	700,000		4,762		Borrowings cash flow hedges	Other assets	1,500,000		2,743		Other liabilities	0		0
			$	635,349	$	19,738		$	1,228,665	$	22,488			$	2,137,633	$	38,568		$	1,228,551	$	55,792


September 30, 2019		Derivative Assets								Derivative Liabilities
September 30, 2020												September 30, 2020	Derivative Assets					Derivative Liabilities
Interest rate contract purpose	Interest rate contract purpose	Balance Sheet Location	Notional		Fair Value		Balance Sheet Location	Notional		Fair Value		Interest rate contract purpose	Balance Sheet Location	Notional		Fair Value		Balance Sheet Location	Notional		Fair Value
		(In thousands)								(In thousands)								(In thousands)					(In thousands)
Client swap program hedges	Client swap program hedges	Other assets	$	425,607	$	20,381	Other liabilities	$	425,607	$	20,381	Client swap program hedges	Other assets	$	656,074	$	48,201	Other liabilities	$	656,074	$	48,201
Commercial loan fair value hedges	Commercial loan fair value hedges	Other assets	—		—		Other liabilities	95,645		4,288		Commercial loan fair value hedges	Other assets	0		0		Other liabilities	93,316		8,492
Mortgage loan fair value hedges	Mortgage loan fair value hedges	Other assets	200,000		1,608		Other liabilities	—		—		Mortgage loan fair value hedges	Other assets	0		0		Other liabilities	500,000		16,061
Borrowings cash flow hedges	Borrowings cash flow hedges	Other assets	—		—		Other liabilities	700,000		7,877		Borrowings cash flow hedges	Other assets	0		0		Other liabilities	1,600,000		17,375
			$	625,607	$	21,989		$	1,221,252	$	32,546			$	656,074	$	48,201		$	2,849,390	$	90,129

The Company enters into interest rate swaps to hedge interest rate risk. These arrangements include 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. These relationships qualify as fair value hedges under FASB ASC 815, Derivatives and Hedging ("ASC 815"), which provides for offsetting of the recognition of gains and losses of the respective interest rate swap and the hedged items. Gains and losses on interest rate swaps designated in these hedge relationships, along with the offsetting gains and losses on the hedged items attributable to the hedged risk, are recognized in current earnings within the same income statement line item.

Upon electing to apply ASC 815 fair value hedge accounting, the carrying value of the hedged item is adjusted to reflect the cumulative impact of changes in fair value attributable to the hedged risk. The hedge basis adjustment remains with the hedged item until the hedged item is de-recognized from the balance sheet. The following tables present the impact of fair value hedge accounting on the carrying value of the hedged items at December 31, ~~2019~~2020 and September 30, ~~2019.~~2020.

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~~WASHINGTON FEDERAL, INC. AND SUBSIDIARIES~~

~~NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~


December 31, 2019
(In thousands)						(In thousands)	December 31, 2020
Balance sheet line item in which hedged item is recorded	Balance sheet line item in which hedged item is recorded	Carrying value of hedged items		Cumulative gain (loss) fair value hedge adjustment included in carrying amount of hedged items		Balance sheet line item in which hedged item is recorded	Carrying value of hedged items		Cumulative gain (loss) fair value hedge adjustment included in carrying amount of hedged items
		(In thousands)
Loans receivable (1) (2)	Loans receivable (1) (2)	$	1,529,862	$	2,012	Loans receivable (1) (2)	$	2,242,120	$	20,208
		$	1,529,862	$	2,012		$	2,242,120	$	20,208

(1) Includes the amortized cost basis of the closed mortgage loan portfolios used to designate the hedging relationships in which the hedged items are the last layer expected to be remaining at the end of the hedging relationships. At December 31, ~~2019,~~2020, the amortized cost basis of the closed loan portfolios used in the hedging relationships was ~~$1,439,103,000,~~$2,143,675,000, the cumulative basis adjustment associated with the hedging relationships was ~~$4,765,000,~~$12,515,000, and the amount of the designated hedged items was ~~$200,000,000.~~$500,000,000.

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(2) Includes the amortized cost basis of commercial loans designated in fair value hedging relationships. At December 31, ~~2019,~~2020, the amortized cost basis of the hedged commercial loans was ~~$90,759,000~~$98,445,000 and the cumulative basis adjustment associated with the hedging relationships was ~~$(2,753,000).~~$7,693,000.


September 30, 2019
(In thousands)						(In thousands)	September 30, 2020
Balance sheet line item in which hedged item is recorded	Balance sheet line item in which hedged item is recorded	Carrying value of hedged items		Cumulative gain (loss) fair value hedge adjustment included in carrying amount of hedged items		Balance sheet line item in which hedged item is recorded	Carrying value of hedged items		Cumulative gain (loss) fair value hedge adjustment included in carrying amount of hedged items
		(In thousands)
Loans receivable (1) (2)	Loans receivable (1) (2)	$	1,612,208	$	(2,680)	Loans receivable (1) (2)	$	2,562,765	$	24,664
		$	1,612,208	$	(2,680)		$	2,562,765	$	24,664

(1) Includes the amortized cost basis of the closed mortgage loan portfolios used to designate the hedging relationships in which the hedged items are the last layer expected to be remaining at the end of the hedging relationships. At September 30, ~~2019,~~2020, the amortized cost basis of the closed loan portfolios used in the hedging relationships was ~~$1,520,647,000,~~$2,461,008,000, the cumulative basis adjustment associated with the hedging relationships was ~~$1,608,000,~~$16,049,000, and the amount of the designated hedged items was ~~$200,000,000.~~$500,000,000.

(2) Includes the amortized cost basis of commercial loans designated in fair value hedging relationships. At September 30, ~~2019,~~2020, the amortized cost basis of the hedged commercial loans was ~~$91,561,000~~$101,757,000 and the cumulative basis adjustment associated with the hedging relationships was ~~$(4,288,000).~~$8,615,000.

The Company has entered into interest rate swaps to convert certain short-term borrowings to fixed rate payments. The primary purpose of these hedges is to mitigate the risk of changes in future cash flows resulting from increasing interest rates. For qualifying cash flow hedges under ASC 815, gains and losses on the interest rate swaps are recorded in accumulated other comprehensive income ("AOCI") and then reclassified into earnings in the same period the hedged cash flows affect earnings and within the same income statement line item as the hedged cash flows. During the three months ended December 31, 2020, a cash flow hedge with a notional amount of $100,000,000 and an effective interest rate of 1.39% was terminated and the FHLB advance was repaid. As of December 31, ~~2019,~~2020, the maturities for hedges of adjustable rate borrowings ranged from less than one year to ~~seven~~nine years, with the weighted average being ~~2.4~~6.8 years.

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~~WASHINGTON FEDERAL, INC. AND SUBSIDIARIES~~

~~NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

The following tables present the gain (loss) recognized in AOCI on derivative instruments related to cash flow hedges on borrowings for the periods presented.


~~(In thousands)~~	~~Three Months Ended December 31,~~
~~Amount of gain/(loss) recognized in AOCI~~	~~2019~~
~~Interest rate contracts:~~
~~Pay fixed/receive floating swaps on borrowings cash flow hedges~~	$	~~3,115~~
~~Total pre-tax gain/(loss) recognized in AOCI~~	$	~~3,115~~


~~(In thousands)~~	~~Three Months Ended December 31,~~
~~Amount of gain/(loss) recognized in AOCI~~	~~2018~~
~~Interest rate contracts:~~
~~Pay fixed/receive floating swaps on borrowings cash flow hedges~~	$	~~(10,499)~~
~~Total pre-tax gain/(loss) recognized in AOCI~~	$	~~(10,499)~~


(In thousands)	Three Months Ended December 31,
Amount of gain/(loss) recognized in AOCI	2020		2019
Interest rate contracts:
Pay fixed/receive floating swaps on borrowings cash flow hedges	$	20,118	$	3,115
Total pre-tax gain/(loss) recognized in AOCI	$	20,118	$	3,115

The following tables present the gain (loss) on derivative instruments in fair value and cash flow accounting hedging relationships under ASC 815 for the periods presented.

Three Months Ended December 31, 2019 Interest income on loans receivable Interest expense on FHLB advances
(In thousands)
Interest income/(expense), including the effects of fair value and cash flow hedges $ 142,146 $ (13,658)
Gain/(loss) on fair value hedging relationships:
Interest rate contracts
Amounts related to interest settlements on derivatives $ (7)
Recognized on derivatives 4,692
Recognized on hedged items (4,593)
Net income/(expense) recognized on fair value hedges $ 92
Gain/(loss) on cash flow hedging relationships:
Interest rate contracts
Amounts related to interest settlements on derivatives $ (214)
Amount of derivative gain/(loss) reclassified from AOCI into interest income/expense —
Net income/(expense) recognized on cash flow hedges $ (214)

2932

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


Three Months Ended December 31, 2018		Interest income on loans receivable		Interest expense on FHLB advances
							Three Months Ended December 31, 2020				Three Months Ended December 31, 2019
							Interest income on loans receivable		Interest expense on FHLB advances		Interest income on loans receivable		Interest expense on FHLB advances
		(In thousands)							(In thousands)
Interest income/(expense), including the effects of fair value and cash flow hedges	Interest income/(expense), including the effects of fair value and cash flow hedges	$	137,065	$	(16,891)	Interest income/(expense), including the effects of fair value and cash flow hedges	$	133,671	$	(13,198)	$	142,146	$	(13,658)

Gain/(loss) on fair value hedging relationships:	Gain/(loss) on fair value hedging relationships:					Gain/(loss) on fair value hedging relationships:
Interest rate contracts	Interest rate contracts					Interest rate contracts
Amounts related to interest settlements on derivatives	Amounts related to interest settlements on derivatives	$	19			Amounts related to interest settlements on derivatives	$	(1,541)			$	(7)
Recognized on derivatives	Recognized on derivatives	(2,317)				Recognized on derivatives	4,587				4,692
Recognized on hedged items	Recognized on hedged items	2,279				Recognized on hedged items	(4,456)				(4,593)
Net income/(expense) recognized on fair value hedges	Net income/(expense) recognized on fair value hedges	$	(19)			Net income/(expense) recognized on fair value hedges	$	(1,410)			$	92

Gain/(loss) on cash flow hedging relationships:	Gain/(loss) on cash flow hedging relationships:					Gain/(loss) on cash flow hedging relationships:
Interest rate contracts	Interest rate contracts					Interest rate contracts
Amounts related to interest settlements on derivatives	Amounts related to interest settlements on derivatives			$	(551)	Amounts related to interest settlements on derivatives			$	3,597			$	(214)
Amount of derivative gain/(loss) reclassified from AOCI into interest income/expense	Amount of derivative gain/(loss) reclassified from AOCI into interest income/expense			—		Amount of derivative gain/(loss) reclassified from AOCI into interest income/expense			0				0
Net income/(expense) recognized on cash flow hedges	Net income/(expense) recognized on cash flow hedges			$	(551)	Net income/(expense) recognized on cash flow hedges			$	3,597			$	(214)

The Company periodically enters into certain interest rate swap agreements in order to provide commercial loan customers the ability to convert from variable to fixed interest rate payments, while the Company retains a variable rate loan. Under these agreements, the Company enters into a variable rate loan agreement and a swap agreement with the client. The swap agreement effectively converts the client’s variable rate loan into a fixed rate. The Company enters into a corresponding swap agreement with a third party in order to offset its exposure on the variable and fixed components of the client's swap agreement. The interest rate swaps are derivatives under ASC 815, with changes in fair value recorded in earnings. There was no net impact to the statement of operations for the three months ended December 31, ~~2019~~2020 and ~~2018~~2019 as the changes in fair value of the receive fixed swap and pay fixed swap offset each other.

The following tables present the impact of derivative instruments (client swap program) that are not designated in accounting hedges under ASC 815 for the periods presented.


~~(In thousands)~~		~~Three Months Ended December 31,~~
~~Derivative instruments~~	~~Classification of gain/(loss) recognized in income on derivative instrument~~	~~2019~~
~~Interest rate contracts:~~
~~Pay fixed/receive floating swap~~	~~Other noninterest income~~	$	~~5,408~~
~~Receive fixed/pay floating swap~~	~~Other noninterest income~~	~~(5,408)~~
		$	—


(In thousands)		Three Months Ended December 31,
Derivative instruments	Classification of gain/(loss) recognized in income on derivative instrument	2020		2019
Interest rate contracts:
Pay fixed/receive floating swap	Other noninterest income	$	12,376	$	5,408
Receive fixed/pay floating swap	Other noninterest income	(12,376)		(5,408)
		$	0	$	0


~~(In thousands)~~		~~Three Months Ended December 31,~~
~~Derivative instruments~~	~~Classification of gain/(loss) recognized in income on derivative instrument~~	~~2018~~
~~Interest rate contracts:~~
~~Pay fixed/receive floating swap~~	~~Other noninterest income~~	$	~~(9,390)~~
~~Receive fixed/pay floating swap~~	~~Other noninterest income~~	~~9,390~~
		$	—

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE H – Revenue from Contracts with Customers

Since net interest income on financial assets and liabilities is outside the scope of ASU No. 2014-09, Revenue from Contracts with Customers ("ASC 606"), a significant majority of our revenues are not subject to that guidance.

Revenue streams that are within the scope of ASC 606 are presented within non-interest income and are, in general, recognized as revenue at the same time the Company's obligation to the customer is satisfied. Most of the Company's customer contracts that are within the scope of the new guidance are cancelable by either party without penalty and are short-term in nature. These sources of revenue include depositor and other consumer and business banking fees, commission income, as well as debit and credit card interchange fees. In scope revenue streams represented approximately ~~4.4%~~5.4% of our total revenues for the three months ended December 31, ~~2019,~~2020, compared to ~~4.9%~~4.4% for the three months ended December 31, ~~2018.~~2019. As this standard is immaterial to our consolidated financial statements, the Company has omitted certain disclosures in ASC 606, including the disaggregation of revenue table. Sources of non-interest income within the scope of the guidance include the following:

Deposit related and other service charges (recognized in Deposit fee income) - The Company's deposit accounts are governed by standardized contracts customary in the industry. Revenues are earned at a point in time or over time (monthly) from account maintenance fees and charges for specific transactions such as wire transfers, stop payment orders, overdrafts, debit card replacements, check orders and cashier’s checks. The Company’s performance obligation related to each of these fees is generally satisfied, and the related revenue recognized, at the time the service is provided (point in time or monthly). The Company is principal in each of these contracts.

Debit and Credit Card Interchange Fees (recognized in Deposit fee income) - The Company receives interchange fees from the debit card or credit card payment network based on transactions involving debit or credit cards issued by the Company, generally measured as a percentage of the underlying transaction. Interchange fees from debit and credit card transactions are recognized as the transaction processing services are provided by the network. The Company acts as an agent in the card payment network arrangement so the interchange fees are recorded net of any expenses paid to the principal (the card payment network in this case).

Insurance Agency Commissions (recognized in Other income) - WAFD Insurance Group, Inc. is a wholly-owned subsidiary of Washington Federal Bank, N.A. that operates as an insurance agency, selling and marketing property and casualty insurance policies for a small number of high-quality insurance carriers. WAFD Insurance Group, Inc. earns revenue in the form of commissions paid by the insurance carriers for policies that have been sold. In addition to the origination commission, WAFD Insurance Group, Inc. may also receive contingent incentive fees based on the volume of business generated for the insurance carrier and based on policy renewal rates.

NOTE I – Commitments and Contingencies

Lease Commitments -The Company’s lease commitments consist primarily of real estate property for branches and office space under various non-cancellable operating leases that expire between ~~2020~~2021 and 2070.The majority of the leases contain renewal options and provisions for increases in rental rates based on a predetermined schedule or an agreed upon index. If, at lease inception, the Company considers the exercising of a renewal option to be reasonably certain, the Company will include the extended term in the calculation of the right-of-use asset and lease liability.

Operating lease liabilities and right-of-use assets are recognized on the lease commencement date based on the present value of the future minimum lease payments over the lease term. The future lease payments are discounted at a rate that represents the Company's collateralized borrowing rate for financing instruments of a similar term and are included in Accrued expenses and other liabilities. The related right-of-use asset is included in Other assets.

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~~WASHINGTON FEDERAL, INC. AND SUBSIDIARIES~~

~~NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~The table below presents the Company’s operating lease right-of-use asset and the related lease liability.~~


~~(In thousands)~~	~~December 31, 2019~~
~~Operating lease asset~~	$	~~30,220~~
~~Operating lease liability~~	$	~~31,636~~

As of December 31, 2019, the Company’s operating leases have a weighted average remaining lease term of 8.9 years and a weighted average discount rate of 2.0%. Cash paid for amounts included in the measurement of the above operating lease liability was $1,488,000 for the three months ended December 31, 2019. Right-of-use assets obtained in exchange for new operating lease liabilities during the same period were $2,083,000.

The following table presents the components of net lease costs, a component of Occupancy expense. The Company elected not to separate lease and non-lease components and instead account for them as a single lease component. Variable lease costs include subsequent increases in index-based rents and variable payments such as common area maintenance.


~~(In thousands)~~	~~Three Months Ended December 31,~~
	~~2019~~
~~Operating lease cost~~	$	~~1,602~~
~~Variable lease cost~~	~~220~~
~~Sublease income~~	~~(86)~~
~~Net lease cost~~	$	~~1,736~~

~~The following table shows future minimum payments for operating leases as of December 31, 2019 for the respective periods.~~

(In thousands) Year ending September 30,
remainder of 2020 $ 4,623
2021 5,693
2022 5,177
2023 4,518
2024 3,763
Thereafter 11,035
Total minimum payments 34,809
Amounts representing interest (3,173)
Present value of minimum lease payments $ 31,636

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~~WASHINGTON FEDERAL, INC. AND SUBSIDIARIES~~

~~NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~Future minimum lease payments for the Company’s operating leases as of September 30, 2019, prior to the adoption of the new lease guidance, were as follows.~~

(In thousands) Year ending September 30,
2020 $ 5,838
2021 5,246
2022 4,698
2023 4,302
2024 3,596
Thereafter 10,531
Total minimum payments $ 34,211

Financial Instruments with Off-Balance Sheet Risk - The only material off-balance-sheet credit exposures are loans in process and unused lines of credit, which had a combined balance of ~~$2,639,733,000~~$3,011,286,000 and ~~$2,379,089,000~~$2,738,095,000 at December 31, ~~2019~~2020 and September 30, ~~2019,~~2020, respectively. ~~The Company reserves for estimated losses on these off-balance-sheet credit exposures using historical loss factors for each type of credit.~~ The reserve was ~~$7,500,000~~$26,500,000 as of December 31, ~~2019,~~2020, which is an increase from ~~$6,900,000~~$25,000,000 at September 30, ~~2019~~2020. See Note A "Summary of Significant Accounting Policies" for details regarding the reserve methodology.

Legal Proceedings- The Company and its subsidiaries are from time to time defendants in and are threatened with various legal proceedings arising from regular business activities. Management, after consulting with legal counsel, is of the opinion that the ultimate liability, if any, resulting from these pending or threatened actions and proceedings will not have a material effect on the financial statements of the Company.

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

PART I – Financial Information

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

FORWARD LOOKING STATEMENTS

Washington Federal, Inc. (the "Company" or "Washington Federal") makes statements in this Quarterly Report on Form 10-Q that constitute forward-looking statements. Words such as “expects,” “anticipates,” “believes,” “estimates,” “intends,” “forecasts,” “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. These statements are not historical facts, but instead represent current expectations, plans or forecasts of the Company and are based on the beliefs and assumptions of the management of the Company and the information available to management at the time that these disclosures were prepared. The Company intends for all such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements are not guarantees of future results or performance and involve certain risks, uncertainties and assumptions that are difficult to predict and often are beyond the Company's control. Actual outcomes and results may differ materially from those expressed in, or implied by, the Company's forward-looking statements.

You should not place undue reliance on any forward-looking statement and should consider the following uncertainties and risks, as well as the risks and uncertainties discussed elsewhere in this report, including under Item 1A. “Risk Factors,” the Risk Factors included in the Company’s 2020 Form 10-K for the year ended September 30, 2020, and in any of the Company's other subsequent Securities and Exchange Commission ("SEC") filings, which could cause the Company's future results to differ materially from the plans, objectives, goals, estimates, intentions and expectations expressed in forward-looking statements:

•a deterioration in economic conditions, including declines in the real estate market and home sale volumes and financial stress on borrowers (consumers and businesses) as a result of the uncertain economic environment;

•the effects of natural or man-made disasters, calamities, or conflicts, including terrorist events and pandemics (such as the COVID-19 pandemic), including on our asset credit quality and business operations, as well as its impact on general economic and financial market conditions;

•the effects of a severe economic downturn, including high unemployment rates and declines in housing prices and property values, in the Company's primary market areas;

•the effects of and changes in monetary and fiscal policies of the Board of Governors of the Federal Reserve System and the U.S. ~~Government;~~Government, including responses to the COVID-19 pandemic;

•fluctuations in interest rate risk and changes in market interest rates, including risk related to LIBOR ~~reform;~~reform and risk of negative rates;

•the Company's ability to make accurate assumptions and judgments about the collectability of its loan portfolio, including the creditworthiness of its borrowers and the value of the assets securing these loans;

•legislative and regulatory limitations, including those arising under the Dodd-Frank Act and potential limitations

in the manner in which the Company conducts its business and ~~undertake~~undertakes new investments and activities;

•the ability of the Company to obtain external financing to fund its operations or obtain this financing on favorable terms;

•changes in other economic, competitive, governmental, regulatory and technological factors affecting the Company's markets, operations, pricing, products, services and fees;

•the success of the Company at managing the risks involved in the remediation efforts associated with its Bank Secrecy Act ("BSA") program, costs of enhancements to the Bank’s BSA program are greater than anticipated; and governmental authorities undertake enforcement actions or legal proceedings with respect to the Bank’s BSA program beyond those contemplated by the Consent Order, and the potential impact of such matters on the success, timing and ability to pursue the Company’s growth or other business initiatives;

•the success of the Company at managing the risks involved in the remediation efforts associated with its Home Mortgage Disclosure Act (“HMDA”) compliance and reporting, risks the costs of enhancements to the Bank’s HMDA program are greater than anticipated; and risks governmental authorities undertake enforcement actions or legal proceedings with respect to the Bank’s HMDA program beyond those contemplated by the Consent Orders that have been entered into with the Consumer Financial Protection Bureau (the “CFPB”);

•the success of the Company at managing the risks involved in the foregoing and managing its business; and

•the timing and occurrence or non-occurrence of events that may be subject to circumstances beyond the Company's control.

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

All forward-looking statements speak only as of the date on which such statements are made, and the Company undertakes no obligation to update or revise any forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events, changes to future operating results over time, or the impact of circumstances arising after the date the forward-looking statement was made.

GENERAL & BUSINESS DESCRIPTION

Washington Federal Bank, National Association, a federally-insured national 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. Washington Federal, Inc., a Washington corporation (the “Company”), was formed as the Bank’s holding company

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~~WASHINGTON FEDERAL, INC. AND SUBSIDIARIES~~

in November, 1994. As used throughout this document, the terms “Washington Federal” or the “Company” refer to the Company and its consolidated subsidiaries, and the term “Bank” refers to the operating subsidiary, Washington Federal Bank, National Association. The Company is headquartered in Seattle, Washington.

The Company's fiscal year end is September 30^th. All references to ~~2019~~2020 represent balances as of September 30, ~~2019~~2020 or activity for the fiscal year then ended.

CRITICAL ACCOUNTING POLICIES

The Company has determined that the only accounting policy critical to an understanding of the consolidated financial statements of Washington Federal relates to the methodology for determining the amount of the allowance for credit losses (“ACL”). The Company maintains an allowance based on the expected credit losses over the contractual life of the loan portfolio as well as unfunded loan commitments. The allowance is based on ongoing, quarterly assessments by management.

The ACL consists of the allowance for loan losses and the reserve for unfunded commitments. In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (“ASC 326”). The ASC, as amended is intended to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments that are not accounted for at fair value through net income.

As a result of our adoption of ASC 326, our methodology for estimating the ACL changed significantly from September 30, 2019. The standard replaced the “incurred loss” approach with an “expected loss” approach known as current expected credit loss (“CECL”). The CECL methodology requires an estimate of the credit losses expected over the life of an exposure (or pool of exposures) and it removes the incurred loss methodology’s threshold that delayed the recognition of a credit loss until it was “probable” a loss event was deemed to be “incurred.”

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 from which historical experience was based. Finally, we consider forecasts about future economic conditions or changes in collateral values that are reasonable and supportable.

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 criticized loans, significant reliance on historical loss rates on homogenous 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 impact of utilizing the CECL methodology 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. See Notes A, D and E to the Consolidated Financial Statements and the

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“Asset Quality and Allowance for Credit Losses” section below for more information on loans receivable and the allowance for credit losses.

ASSET QUALITY & ALLOWANCE FOR CREDIT LOSSES

The Company maintains an ACL for the expected credit losses over the contractual life of the loan portfolio as well as unfunded loan commitments. The amount of ACL is based on ongoing, quarterly assessments by management.

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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 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.

INTEREST RATE RISK

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 transaction and savings accounts is ~~61%~~73% of total deposits as of December 31, ~~2019~~2020 while the composition of the investment securities portfolio is ~~25%~~36% variable and ~~75%~~64% fixed rate. 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 ~~$1,360,694,000~~$586,870,000 of mortgage-backed securities that it has designated as held-to-maturity and are carried at amortized cost. As of December 31, ~~2019,~~2020, the net unrealized gain on these securities was ~~$19,726,000.~~$19,305,000. The Company has ~~$1,495,586,000~~$2,482,944,000 of available-for-sale securities that are carried at fair value. As of December 31, ~~2019,~~2020, the net unrealized gain on these securities was ~~$25,523,000.~~$51,070,000. The Company has executed interest rate swaps to hedge interest rate risk on certain FHLB borrowings. The unrealized ~~loss~~gain on these interest rate swaps as of December 31, ~~2019~~2020 was ~~$4,762,000.~~$2,743,000. All of the above are pre-tax net unrealized gains or losses.

The Company relies on various measures of interest rate risk, including an asset/liability analysis, modeling of changes in forecasted net interest income under various rate change scenarios, and the impact of interest rate changes on the net portfolio value (“NPV”) of the Company.

Net Interest Income Sensitivity - The Company estimates the sensitivity of its 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 the Company's ~~interest-earnings~~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 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.

As of December 31, ~~2019,~~2020, 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 increase by ~~0.7%~~6.4% in the next year. This compares to an estimated increase of ~~1.4%~~3.4% as of the September 30, ~~2019~~2020 analysis. The change is primarily due to fluctuating interest rates and the impact to expected prepayment speeds as well as shifts in the mix of fixed versus adjustable rate assets and updated deposit betas used for transaction deposits in the Company's asset liability management model. 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 net interest income ~~decrease~~increase of ~~0.1%~~1.5% in the first year and ~~decrease~~increase of ~~3.6%~~4.7% in the second year assuming a constant balance sheet and no management intervention. We have not provided an estimate of any impact on net interest income of a decrease in interest rates at December 31, 2020 as many of our interest rate sensitive assets and liabilities are tied to interest rates that are already at or near their historical minimum levels (i.e., Prime and LIBOR) and, therefore, could not materially decrease further assuming U.S. market interest rates continue to remain above zero percent. Sustained negative interest rates for an economy with the size and complexity of the United States would likely lead to broad macroeconomic impacts that are difficult to foresee. While there is a possibility that U.S market interest rates could fall below zero percent, this has not occurred in the United States.

NPV Sensitivity - NPV is an estimate of the market value of shareholders' equity. NPV is calculated as the difference between the present value of expected cash flows from interest-earning assets and the present value of expected cash flows from interest-paying liabilities and off-balance-sheet contracts. The sensitivity of NPV to changes in interest rates provides a view of interest rate risk as it incorporates all future expected cash flows. As of December 31, ~~2019,~~2020, in the event of an immediate and parallel increase of 200 basis points in interest rates, the NPV is estimated to ~~decline~~increase by ~~$369,764,000~~$206,536,000 or ~~14.5%~~7.4% and the NPV to total assets ratio to ~~decline~~increase to ~~13.9%~~16.2% from a base of ~~15.2%~~14.4%. As of September 30, ~~2019,~~2020, the NPV in the event of a 200 basis point increase in rates was estimated to ~~decline~~increase by ~~$257,638,000~~$141,000,000 or ~~10.5%~~5.3% and the NPV to total assets ratio to ~~decline~~increase to ~~13.9%~~15.6% from a base of ~~14.6%~~14.1%. The change in NPV sensitivity is due primarily to ~~fluctuating~~changes in interest rates that ~~have~~has impacted asset prices as well as sensitivity to expected prepayment speeds on fixed rate loans and mortgage-backed securities as of December 31, ~~2019.~~2020.

Interest Rate Spread - The interest rate spread is measured as the difference between the rate on total loans and investments and the rate on costing liabilities at the end of each period. The interest rate spread ~~decreased to 2.76%~~was 2.34% at December 31, ~~2019 from 2.80%~~2020 and was also 2.34% at September 30, 2019. The spread compression of 4 basis points is primarily due to the decrease in short-term interest rates, which resulted in a lower rate on interest earning assets partially offset by a lower rate on interest-bearing liabilities.2020. As of December 31, ~~2019,~~2020, the weighted average rate ~~earned~~ on interest-earning assets decreased by ~~10 basis points to 4.00% compared to September 30, 2019, while the weighted average rate being paid on interest-bearing liabilities decreased by 6 basis~~11

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basis points to ~~1.24%~~2.92% compared to September 30, 2020, while the weighted average rate on interest-bearing liabilities decreased by 11 basis points to 0.58%. The interest rate spread decreased to 2.34% at December 31, 2020 from 2.76% at December 31, 2019 ~~from 2.86% at December 31, 2018~~ due to the same factors described above.

Net Interest Margin - Net interest margin is measured as net interest income divided by average earning assets for the period. Net interest margin decreased to 2.75% for the quarter ended December 31, 2020 from 3.15% for the quarter ended December 31, ~~2019 from 3.21% for the quarter ended December 31, 2018.~~2019. The yield on interest-earning assets decreased 597 basis points to ~~4.30%~~3.34% and the cost of interest-bearing liabilities ~~increased 3~~decreased 67 basis points to ~~1.27%~~0.76% over that same period. The ~~lower yield on interest-earning assets~~compression in the net interest margin since the prior year same quarter is primarily due to the ~~result of the decrease~~rapid drop in short-term ~~interest~~ rates by the Federal Reserve Bank in response to the COVID-19 pandemic which resulted in the changes in average rates noted above. Additionally, the balance of low yielding cash was relatively high at $1,830,722,000 as of December 31, 2020 and the Company had $646,887,000 in PPP loans as of that date that have a ~~lower rate being earned on cash~~relatively low yield and ~~adjustable rate loans and investment securities.~~were originated since the prior year same quarter. The ~~higher~~lower rate in interest-bearing liabilities was primarily due to ~~the increase in~~lower rates paid on interest-bearing deposits ~~partially offset by lower rates paid on~~as well as FHLB advances.

The following ~~tables set~~table sets forth the information explaining the changes in the net interest margin for the period indicated compared to the same period one year ago.

Three Months Ended December 31, 2019 Three Months Ended December 31, 2018
Average Balance Interest Average Rate Average Balance Interest Average Rate
($ in thousands) ($ in thousands)
Assets
Loans receivable $ 11,942,498 $ 142,146 4.72 % $ 11,542,621 $ 137,065 4.71 %
Mortgaged-backed securities 2,360,374 15,612 2.62 2,592,535 19,192 2.94
Cash & Investments 776,633 5,425 2.77 579,580 4,752 3.25
FHLB & FRB stock 124,568 1,641 5.23 132,305 1,613 4.84
Total interest-earning assets 15,204,073 164,824 4.30 % 14,847,041 162,622 4.35 %
Other assets 1,189,996 1,167,575
Total assets $ 16,394,069 $ 16,014,616
Liabilities and Equity
Customer accounts $ 11,888,167 $ 31,481 1.05 % $ 11,436,685 $ 26,579 0.92 %
FHLB advances 2,264,457 13,658 2.39 2,457,880 16,891 2.73
Total interest-bearing liabilities 14,152,624 45,139 1.27 % 13,894,565 43,470 1.24 %
Other liabilities 202,675 129,396
Total liabilities 14,355,299 14,023,961
Shareholders' equity 2,038,770 1,990,655
Total liabilities and equity $ 16,394,069 $ 16,014,616
Net interest income $ 119,685 $ 119,152
Net interest margin (NIM) 3.15 % 3.21 %


	Three Months Ended December 31, 2020						Three Months Ended December 31, 2019
	Average Balance		Interest		Average Rate		Average Balance		Interest		Average Rate
	($ in thousands)						($ in thousands)
Assets
Loans receivable	$	12,824,870	$	133,671	4.14	%	$	11,924,778	$	142,146	4.73	%
Mortgage-backed securities	1,582,286		7,230		1.81		2,360,374		15,612		2.62
Cash & Investments	3,004,224		5,265		0.70		776,633		5,425		2.77
FHLB & FRB stock	140,730		1,656		4.67		124,568		1,641		5.23
Total interest-earning assets	17,552,110		147,822		3.34	%	15,186,353		164,824		4.31	%
Other assets	1,307,937						1,189,996
Total assets	$	18,860,047					$	16,376,349

Liabilities and Equity
Interest-bearing customer accounts	$	11,619,857	$	14,110	0.48	%	$	10,247,113	$	31,481	1.22	%
FHLB advances	2,668,478		13,198		1.96		2,264,457		13,658		2.39

Total interest-bearing liabilities	14,288,335		27,308		0.76	%	12,511,570		45,139		1.43	%
Noninterest-bearing customer accounts	2,258,685						1,641,054
Other liabilities	275,834						206,876
Total liabilities	16,822,854						14,359,500
Shareholders' equity	2,037,193						2,016,849
Total liabilities and equity	$	18,860,047					$	16,376,349
Net interest income			$	120,514					$	119,685
Net interest margin (NIM)					2.75	%					3.15	%

As of December 31, ~~2019,~~2020, total assets had ~~decreased~~increased by ~~$51,749,000~~$269,567,000 to ~~$16,423,161,000~~$19,063,622,000 from ~~$16,474,910,000~~$18,794,055,000 at September 30, ~~2019.~~2020. During the three months ended December 31, ~~2019,~~2020, cash and cash equivalents increased by ~~$64,647,000,~~$127,745,000 and loans receivable ~~decreased $25,714,000, and investment securities decreased by $72,942,000.~~increased $88,693,000.

Cash and cash equivalents of ~~$483,805,000~~$1,830,722,000 and shareholders’ equity of ~~$2,050,909,000~~$2,061,767,000 as of December 31, ~~2019~~2020 provide management with flexibility in managing interest rate risk going forward.

LIQUIDITY AND CAPITAL RESOURCES

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

The Company is actively working with its borrowers to modify consumer mortgage and commercial loans to provide payment deferrals as a result of the COVID-19 pandemic. The terms of the payment deferrals are generally 90 days for consumer mortgage loans and up to 180 days for commercial loans and borrowers may be eligible for multiple deferrals. Pursuant to the CARES Act, these loan modifications are not accounted for as TDRs. As of December 31, 2020, 183 mortgage loans totaling $46,000,000 and 10 commercial loans totaling $32,000,000 that had been modified remain in deferral. These loans are not considered past due until after the deferral period is over and scheduled payments have resumed.

The Bank has a credit line with the Federal Home Loan Bank of Des Moines ("FHLB") up to 45% of total assets depending on specific collateral eligibility. This line provides a substantial source of additional liquidity if needed.

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~~WASHINGTON FEDERAL, INC. AND SUBSIDIARIES~~

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 loan 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. The Bank is also eligible to borrow under the Federal Reserve Bank's primary credit program.

The Company's cash and cash equivalents totaled ~~$483,805,000~~$1,830,722,000 at December 31, ~~2019,~~2020, an increase from ~~$419,158,000~~$1,702,977,000 at September 30, ~~2019.~~2020. These amounts include the Bank's operating cash.

The Company’s shareholders' equity at December 31, ~~2019~~2020 was ~~$2,050,909,000,~~$2,061,767,000, or ~~12.49%~~10.82% of total assets. This is an increase of ~~$17,914,000~~$47,634,000 from September 30, ~~2019~~2020 when net worth was ~~$2,032,995,000,~~$2,014,133,000, or ~~12.34%~~10.72% of total assets. The Company’s shareholders' equity was impacted in the three months ended December 31, ~~2019~~2020 by net income of ~~$65,703,000,~~$38,951,000, the payment of ~~$16,433,000~~$16,577,000 in cash dividends, treasury stock purchases of ~~$33,479,000,~~$701,000, as well as other comprehensive income of ~~$694,000.~~$24,482,000. The ratio of tangible capital to tangible assets at December 31, ~~2019~~2020 was ~~10.80%~~9.34%. 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.

Washington Federal, Inc. and its banking subsidiary are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly discretionary actions by regulators that, if undertaken, could have a direct material adverse effect on the Company's financial statements.

Federal banking agencies establish regulatory capital rules that require minimum capital ratios and establish criteria for calculating regulatory capital. Minimum capital ratios for four measures are used for assessing capital adequacy. The standards are indicated in the table below. The common equity tier 1 capital ratio recognizes common equity as the highest form of capital. The denominator for all except the leverage ratio is risk weighted assets. The rules set forth a “capital conservation buffer” of up to 2.5%. In the event that a bank’s capital levels fall below the minimum ratios plus these buffers, the bank's regulators may place restrictions on it. These restrictions include reducing dividend payments, share buy-backs, and staff bonus payments. The purpose of these buffers is to require banks to build up capital outside of periods of stress that can be drawn down during periods of stress. As a result, even during periods where losses are incurred, the minimum capital ratios can still be met.

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There are also standards for Adequate and Well Capitalized criteria that are used for “Prompt Corrective Action” purposes. To remain categorized as well capitalized, the Bank and the Company must maintain minimum common equity risk-based, tier 1 risk-based, total risk-based and tier 1 leverage ratios as set forth in the following table.


		Actual						Minimum Capital Adequacy Guidelines				Minimum Well-Capitalized Guidelines	Actual				Minimum Capital Adequacy Guidelines		Minimum Well-Capitalized Guidelines
($ in thousands)	($ in thousands)	Capital		Ratio		Ratio		Ratio		($ in thousands)	Capital		Ratio		Ratio		Ratio

December 31, 2019
December 31, 2020										December 31, 2020
Common Equity Tier I risk-based capital ratio:	Common Equity Tier I risk-based capital ratio:									Common Equity Tier I risk-based capital ratio:
The Company	The Company	$	1,726,579	14.17	%	4.50	%	NA		The Company	$	1,711,296	12.65	%	4.50	%	NA
The Bank	The Bank	1,679,075		13.88	%	4.50	%	6.50	%	The Bank	1,665,018		12.31	%	4.50	%	6.50	%
Tier I risk-based capital ratio:	Tier I risk-based capital ratio:									Tier I risk-based capital ratio:
The Company	The Company	1,726,579		14.17	%	6.00	%	NA		The Company	1,711,296		12.65	%	6.00	%	NA
The Bank	The Bank	1,679,075		13.88	%	6.00	%	8.00	%	The Bank	1,665,018		12.31	%	6.00	%	8.00	%
Total risk-based capital ratio:	Total risk-based capital ratio:									Total risk-based capital ratio:
The Company	The Company	1,866,593		15.32	%	8.00	%	NA		The Company	1,880,718		13.90	%	8.00	%	NA
The Bank	The Bank	1,819,089		15.04	%	8.00	%	10.00	%	The Bank	1,834,435		13.56	%	8.00	%	10.00	%
Tier 1 Leverage ratio:	Tier 1 Leverage ratio:									Tier 1 Leverage ratio:
The Company	The Company	1,726,579		10.72	%	4.00	%	NA		The Company	1,711,296		9.25	%	4.00	%	NA
The Bank	The Bank	1,679,075		10.42	%	4.00	%	5.00	%	The Bank	1,665,018		9.00	%	4.00	%	5.00	%

September 30, 2019
September 30, 2020										September 30, 2020
Common Equity Tier 1 risk-based capital ratio:	Common Equity Tier 1 risk-based capital ratio:									Common Equity Tier 1 risk-based capital ratio:
The Company	The Company	$	1,710,147	14.30	%	4.50	%	NA		The Company	$	1,687,676	12.93	%	4.50	%	NA
The Bank	The Bank	1,666,426		13.93	%	4.50	%	6.50	%	The Bank	1,625,478		12.46	%	4.50	%	6.50	%
Tier I risk-based capital ratio:	Tier I risk-based capital ratio:									Tier I risk-based capital ratio:
The Company	The Company	1,710,147		14.30	%	6.00	%	NA		The Company	1,687,676		12.93	%	6.00	%	NA
The Bank	The Bank	1,666,426		13.93	%	6.00	%	8.00	%	The Bank	1,625,478		12.46	%	6.00	%	8.00	%
Total risk-based capital ratio:	Total risk-based capital ratio:									Total risk-based capital ratio:
The Company	The Company	1,848,581		15.45	%	8.00	%	NA		The Company	1,851,136		14.19	%	8.00	%	NA
The Bank	The Bank	1,804,860		15.09	%	8.00	%	10.00	%	The Bank	1,788,904		13.71	%	8.00	%	10.00	%
Tier 1 Leverage ratio:	Tier 1 Leverage ratio:									Tier 1 Leverage ratio:
The Company	The Company	1,710,147		10.51	%	4.00	%	NA		The Company	1,687,676		9.28	%	4.00	%	NA
The Bank	The Bank	1,666,426		10.24	%	4.00	%	5.00	%	The Bank	1,625,478		8.94	%	4.00	%	5.00	%

CHANGES IN FINANCIAL CONDITION

Cash and cash equivalents - Cash and cash equivalents are ~~$483,805,000~~$1,830,722,000 at December 31, ~~2019,~~2020, an increase of ~~$64,647,000,~~$127,745,000, or ~~15.4%~~7.5%, since September 30, ~~2019.~~2020. The change is primarily due to the large increase in deposits.

Available-for-sale and held-to-maturity investment securities - Available-for-sale securities increased ~~$9,844,000,~~$233,452,000, or ~~0.7%~~10.4%, during the three months ended December 31, ~~2019,~~2020, mostly due to purchases of ~~$82,028,000, partially~~$379,760,000, offset by principal repayments and maturities of ~~$69,085,000 and a decrease to net unrealized gain of $2,149,000.~~$157,246,000. During the same period, the balance of held-to-maturity securities decreased by ~~$82,786,000~~$118,968,000 primarily due to principal pay-downs and maturities of ~~$81,329,000.~~$116,223,000. As of December 31, ~~2019,~~2020, the Company had a net unrealized gain on available-for-sale securities of ~~$25,523,000,~~$51,070,000, which is included on a net of tax basis in accumulated other comprehensive income (loss).

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Substantially all of the Company’s held-to-maturity and 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 Company did not record an allowance for credit losses for held-to-maturity securities as of December 31, 2020 or September 30, 2020 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 loan and securities portfolios as well as the economic conditions at future reporting periods. The Company does not believe that any of its available-for-sale debt securities had credit loss impairment as of December 31, 2020 or September 30, 2020, therefore, no allowance was recorded.

Loans receivable - Loans receivable, net of related contra accounts, ~~decreased~~increased by ~~$25,714,000~~$88,693,000 to ~~$11,904,861,000~~$12,881,010,000 at December 31, ~~2019,~~2020, compared to ~~$11,930,575,000~~$12,792,317,000 at September 30, ~~2019.~~2020. The ~~decrease resulted~~increase was primarily ~~from~~the net result of originations of $1,915,025,000 and loan principal repayments of ~~$1,301,419,000 and an~~$1,600,257,000 as well as a $223,900,000 increase in loans in ~~process of $110,941,000, partially offset by originations of $1,371,315,000.~~process. Commercial loan originations accounted for ~~76%~~75% of total originations and consumer loan originations were ~~24%~~25% during the period. The mix of loan originations is consistent with management's strategy during low rate environments to produce more construction, multifamily, commercial real estate, and commercial and industrial loans that generally have adjustable interest rates or a shorter duration.

The following table shows the loan portfolio by category and the change.


	December 31, 2020				September 30, 2020				Change
	($ in thousands)				($ in thousands)				$		%
Commercial loans
Multi-family	$	1,610,796	10.9	%	$	1,538,762	10.6	%	$	72,034	4.7	%
Commercial real estate	1,954,154		13.2		1,895,086		13.1		59,068		3.1
Commercial & industrial (1)	2,256,627		15.3		2,132,160		14.7		124,467		5.8
Construction	2,687,708		18.2		2,403,276		16.6		284,432		11.8
Land - acquisition & development	193,239		1.3		193,745		1.3		(506)		(0.3)
Total commercial loans	8,702,524		58.9		8,163,029		56.3		539,495		6.6
Consumer loans
Single-family residential	5,063,053		34.2		5,304,689		36.7		(241,636)		(4.6)
Construction - custom	659,364		4.5		674,879		4.7		(15,515)		(2.3)
Land - consumer lot loans	110,841		0.7		102,263		0.7		8,578		8.4
HELOC	139,752		0.9		139,703		1.0		49		—
Consumer	111,292		0.8		83,159		0.6		28,133		33.8
Total consumer loans	6,084,302		41.1		6,304,693		43.7		(220,391)		(3.5)
Total gross loans	14,786,826		100	%	14,467,722		100	%	319,104		2.2
Less:
Allowance for credit losses on loans	170,189				166,955				3,234		1.9
Loans in process	1,679,972				1,456,072				223,900		15.4
Net deferred fees, costs and discounts	55,655				52,378				3,277		6.3
Total loan contra accounts	1,905,816				1,675,405				230,411		13.8
Net loans	$	12,881,010			$	12,792,317			$	88,693	0.7	%

(1) Includes $762,004,000 of PPP loans as of September 30, 2020 and $646,887,000 as of December 31, 2020.

December 31, 2019 September 30, 2019 Change
($ in thousands) ($ in thousands) $ %
Gross loans by category
   Single-family residential $ 5,702,071 42.5 % $ 5,835,194 43.8 % $ (133,123) (2.3) %
   Construction 2,174,313 16.2 2,038,052 15.3 136,261 6.7
   Construction - custom 538,234 4.0 540,741 4.1 (2,507) (0.5)
   Land - acquisition & development 203,043 1.5 204,107 1.5 (1,064) (0.5)
   Land - consumer lot loans 97,097 0.7 99,694 0.7 (2,597) (2.6)
   Multi-family 1,436,715 10.7 1,422,674 10.7 14,041 1.0
   Commercial real estate 1,643,099 12.3 1,631,170 12.3 11,929 0.7
   Commercial & industrial 1,352,738 10.1 1,268,695 9.5 84,043 6.6
   HELOC 141,274 1.1 142,178 1.1 (904) (0.6)
   Consumer 115,829 0.9 129,883 1.0 (14,054) (10.8)
Total gross loans 13,404,413 100 % 13,312,388 100 % 92,025 0.7 %
   Less:
      Allowance for loan losses 132,513 131,534 979 0.7 %
      Loans in process 1,312,282 1,201,341 110,941 9.2
      Net deferred fees, costs and discounts 54,757 48,938 5,819 11.9
Total loan contra accounts 1,499,552 1,381,813 117,739 8.5
Net Loans $ 11,904,861 $ 11,930,575 $ (25,714) (0.2) %

Non-performing assets - Non-performing assets ~~decreased $4,084,000~~increased $28,847,000 during the three months ended December 31, ~~2019~~2020 to ~~$39,742,000~~$66,542,000 from ~~$43,826,000~~$37,695,000 at September 30, ~~2019.~~2020. The change is due to a ~~$3,642,000 decrease~~$29,350,000 increase in non-accrual loans and ~~$442,000~~$503,000 decline in real estate owned ("REO"). Non-performing assets as a percentage of total assets was ~~0.24%~~0.35% at December 31, ~~2019~~2020 compared to ~~0.27%~~0.20% at September 30, ~~2019.~~

2020.

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The following table sets forth information regarding troubled debt restructured loans and non-performing assets.


		December 31, 2019								September 30, 2019								December 31, 2020					September 30, 2020
		($ in thousands)																			($ in thousands)
Restructured loans:
Single-family residential		$	102,164		92.2	%	$	111,886		92.0	%

Land - acquisition & development		86			0.1		90			0.1
Land - consumer lot loans		3,556			3.2		3,714			3.1
Troubled debt restructured loans:												Troubled debt restructured loans:
Multi - family	Multi - family	380			0.3		385			0.3		Multi - family	$	288		0.3	%	$	304		0.3	%
Commercial real estate	Commercial real estate	3,238			2.9		4,168			3.4		Commercial real estate	2,476			2.9		1,462			1.6
Commercial & industrial	Commercial & industrial	411			0.4		425			0.3		Commercial & industrial	48			0.1		51			0.1
Construction												Construction	—			—		—			—
Land - acquisition & development												Land - acquisition & development	—			—		—			—
Single-family residential												Single-family residential	80,155			92.9		85,607			93.6
Construction - custom												Construction - custom	—			—		—			—
Land - consumer lot loans												Land - consumer lot loans	2,714			3.1		3,106			3.4
HELOC	HELOC	942			0.8		949			0.8		HELOC	584			0.7		826			0.9
Consumer	Consumer	58			0.1		60			—		Consumer	49			—		52			0.1
Total restructured loans (1)	Total restructured loans (1)	$	110,835		100	%	$	121,677		100	%	Total restructured loans (1)	$	86,314		100	%	$	91,408		100	%
Non-accrual loans:	Non-accrual loans:											Non-accrual loans:
Single-family residential		$	23,014		76.5	%	$	25,271		74.9	%

Land - acquisition & development		86			0.3		169			0.5
Land - consumer lot loans		334			1.1		246			0.7

Multi - family												Multi - family	$	—		—	%	$	—		—	%
Commercial real estate	Commercial real estate	5,557			18.5		5,835			17.3		Commercial real estate	31,397			53.8		3,771			13.0
Commercial & industrial	Commercial & industrial	467			1.6		1,292			3.8		Commercial & industrial	594			1.0		329			1.1
Construction												Construction	1,237			2.1		1,669			5.8
Land - acquisition & development												Land - acquisition & development	—			—		—			—
Single-family residential												Single-family residential	24,349			41.7		22,431			77.2
Construction - custom												Construction - custom	—			—		—			—
Land - consumer lot loans												Land - consumer lot loans	443			0.8		243			0.8
HELOC	HELOC	630			2.1		907			2.7		HELOC	334			0.6		553			1.9
Consumer	Consumer	1			—		11			—		Consumer	52			0.1		60			0.2
Total non-accrual loans	Total non-accrual loans	30,089			100	%	33,731			100	%	Total non-accrual loans	58,406			100	%	29,056			100	%
Real estate owned	Real estate owned	6,339					6,781					Real estate owned	4,463					4,966
Other property owned	Other property owned	3,314					3,314					Other property owned	3,673					3,673
Total non-performing assets	Total non-performing assets	$	39,742				$	43,826				Total non-performing assets	$	66,542				$	37,695
Total non-performing assets and performing restructured loans as a percentage of total assets	Total non-performing assets and performing restructured loans as a percentage of total assets	0.89		%			0.97		%			Total non-performing assets and performing restructured loans as a percentage of total assets	0.79		%			0.67		%
Total Assets	Total Assets											Total Assets
(1) Restructured loans were as follows:	(1) Restructured loans were as follows:											(1) Restructured loans were as follows:
Performing	Performing	$	106,380		96.0	%	$	116,659		95.9	%	Performing	$	84,482		97.9	%	$	89,072		97.4	%
Non-performing (included in non-accrual loans above)	Non-performing (included in non-accrual loans above)	4,455			4.0		5,018			4.1		Non-performing (included in non-accrual loans above)	1,832			2.1		2,336			2.6
		$	110,835		100	%	$	121,677		100	%		$	86,314		100	%	$	91,408		100	%

For the three months ended December 31, ~~2019,~~2020, the Company recognized ~~$497,000~~$3,489,000 in interest income on cash payments received from borrowers on non-accrual loans. The Company would have recognized interest income of ~~$353,000~~$402,000 for the same period had these loans performed according to their original contract terms. Recognized interest income for the three months ended December 31, ~~2019~~2020 was higher than what otherwise would have been recognized in the period due to the collection of past due amounts. In addition to the non-accrual loans reflected in the above table, the Company had ~~$64,511,000~~$535,586,000 of loans that were less than 90 days delinquent at December 31, ~~2019~~2020 but were classified as substandard for one or more reasons. If these loans were deemed non-performing, the Company's ratio of total NPAs and performing restructured loans as a percent of total assets would have increased to ~~1.28%~~3.60% at December 31, ~~2019.~~2020.

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Restructured single-family residential loans are reserved for under the Company’s general reserve methodology. If any individual loan is significant in balance, the Company may establish a specific reserve as warranted.

Most restructured loans are accruing and performing loans where the borrower has proactively approached the Bank about modifications due to temporary financial difficulties. Each request is individually evaluated for merit and likelihood of success. Single-family residential loans comprised ~~92.2%~~92.9% of restructured loans as of December 31, ~~2019.~~2020. The concession for these loans

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is typically a payment reduction through a rate reduction of 100 to 200 bps for a specific term, usually six to twenty-four months. Interest-only payments may also be approved during the modification period.

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. Homogeneous loans are restructured only if the borrower can demonstrate the ability to meet the restructured payment terms; otherwise, collection is pursued and the loan remains on non-accrual status until liquidated. If the homogeneous restructured loan does not perform, it will be placed in non-accrual status when it is 90 days delinquent.

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 ~~general reserve~~allowance for credit losses calculation. Any modified loan that re-defaults and is charged-off would impact the historical loss factors component of the Company's general reserve calculation.

Allowance for ~~loan~~credit losses - The following ~~tables show~~table shows the composition of the Company’s allowance for ~~loan losses by loan category.~~credit losses.


December 31, 2019		Loans Collectively Evaluated for Impairment										Loans Individually Evaluated for Impairment
		Allowance Allocation		Recorded Investment of Loans		Ratio		Allowance Allocation		Recorded Investment of Loans		Ratio
		($ in thousands)										($ in thousands)															December 31, 2020	September 30, 2020	Change
Single-family residential		$	30,700	$	5,686,482	0.5	%	$	—	$	19,993	—	%
Construction		32,292		1,189,457		2.7		—		—		—
Construction - custom		1,399		259,944		0.5		—		—		—
Land - acquisition & development		8,731		153,856		5.7		15		86		17.4
Land - consumer lot loans		2,090		93,272		2.2		—		295		—
Allowance for credit losses:														Allowance for credit losses:	($ in thousands)				($ in thousands)				$		%
Commercial loans														Commercial loans
Multi-family	Multi-family	7,403		1,436,313		0.5		1		380		0.3		Multi-family	$	14,363	8.4	%	$	13,853	8.3	%	$	510	3.7	%
Commercial real estate	Commercial real estate	12,861		1,632,612		0.8		174		10,487		1.7		Commercial real estate	23,496		13.8		22,516		13.5		980		4.4
Commercial & industrial	Commercial & industrial	33,470		1,352,116		2.5		70		641		10.9		Commercial & industrial	44,317		26.0		38,665		23.2		5,652		14.6
Construction														Construction	26,365		15.5		24,156		14.5		2,209		9.1
Land - acquisition & development														Land - acquisition & development	10,666		6.3		10,733		6.4		(67)		(0.6)
Total commercial loans														Total commercial loans	119,207		70.0		109,923		65.8		9,284		8.4
Consumer loans														Consumer loans
Single-family residential														Single-family residential	38,613		22.7		45,186		27.1		(6,573)		(14.5)
Construction - custom														Construction - custom	3,594		2.1		3,555		2.1		39		1.1
Land - consumer lot loans														Land - consumer lot loans	2,958		1.7		2,729		1.6		229		8.4
HELOC	HELOC	1,104		139,963		0.8		—		483		—		HELOC	2,362		1.4		2,571		1.5		(209)		(8.1)
Consumer	Consumer	2,203		115,749		1.9		—		2		—		Consumer	3,455		2.0		2,991		1.8		464		15.5
Total consumer loans														Total consumer loans	50,982		30.0		57,032		34.2		(6,050)		(10.6)
Total allowance for loan losses														Total allowance for loan losses	170,189		100.0	%	166,955		100.0	%	3,234		1.9
Reserve for unfunded commitments														Reserve for unfunded commitments	26,500				25,000				1,500		2.2
Total allowance for credit losses														Total allowance for credit losses	$	196,689			$	191,955			$	4,734	2.5	%
		$	132,253	$	12,059,764	1.1	%	$	260	$	32,367	0.8	%

September 30, 2019 Loans Collectively Evaluated for Impairment Loans Individually Evaluated for Impairment
Allowance Allocation Recorded Investment of Loans Ratio Allowance Allocation Recorded Investment of Loans Ratio
($ in thousands) ($ in thousands)
Single-family residential $ 30,988 $ 5,822,200 0.5 % $ — $ 17,978 — %
Construction 32,304 1,164,889 2.8 — — —
Construction - custom 1,369 255,505 0.5 — — —
Land - acquisition & development 9,135 160,964 5.7 20 230 8.7
Land - consumer lot loans 2,143 95,574 2.2 — 375 —
Multi-family 7,387 1,422,266 0.5 4 385 1.0
Commercial real estate 12,847 1,618,406 0.8 323 12,765 2.5
Commercial & industrial 31,358 1,266,913 2.5 92 1,805 5.1
HELOC 1,103 140,378 0.8 — 837 —
Consumer 2,461 129,527 1.9 — 50 —
$ 131,095 $ 12,076,622 1.1 % $ 439 $ 34,425 1.3 %

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~~Reserve for losses on unfunded commitments~~ ~~- Unfunded commitments tend to vary depending on the Company's loan mix and the proportionate share of commercial loans. The balance of unfunded commitments~~No allowance was $2,639,733,000 and $2,379,089,000 at December 31, 2019 and September 30, 2019, respectively. The Company reserves for estimated losses on these off-balance-sheet credit exposures using historical loss factors for each type of credit. The reserve for unfunded commitments was $7,500,000recorded as of December 31, ~~2019,~~2020 for the $646,887,000 of SBA Payroll Protection Program loans, which ~~is an increase from $6,900,000 at September 30, 2019.~~

are included in commercial & industrial, due to the government guarantee. Management believes the allowance for ~~loan~~credit losses ~~plus the reserve for unfunded commitments, totaling $140,013,000,~~of $196,689,000, or ~~1.04%~~1.33% 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 period ended December 31, ~~2019.~~2020.

Real estate owned - REO decreased during the three months ended December 31, ~~2019~~2020 by ~~$442,000~~$503,000 to ~~$6,339,000,~~$4,463,000, primarily due to sales of REO properties during the period.

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Intangible assets - Intangible assets ~~increased~~decreased to ~~$310,477,000~~$309,425,000 as of December 31, ~~2019~~2020 from ~~$309,247,000~~$309,906,000 as of September 30, ~~2019.~~2020. The ~~increase~~decrease was due to ~~the purchase of a small insurance agency, partially offset by~~normal amortization of finite-lived intangible assets.

Customer accounts - Customer accounts ~~decreased $58,626,000,~~increased $386,917,000, or ~~0.5%~~2.8%, to ~~$11,932,138,000~~$14,166,541,000 at December 31, ~~2019~~2020 compared with ~~$11,990,764,000~~$13,779,624,000 at September 30, ~~2019.~~2020.

The following table shows the composition of the Bank’s customer accounts by deposit type.

December 31, 2019 September 30, 2019
Deposit Account Balance As a % of Total Deposits Weighted
Average
Rate Deposit Account Balance As a % of Total Deposits Weighted
Average
Rate
($ in thousands)
Non-interest checking $ 1,593,392 13.4 % — % $ 1,621,343 13.5 % — %
Interest checking 2,125,878 17.8 0.57 1,984,576 16.6 0.61
Savings 748,505 6.3 0.12 753,574 6.3 0.13
Money market 2,847,346 23.8 0.84 2,724,308 22.7 0.82
Time deposits 4,617,017 38.7 1.82 4,906,963 40.9 1.91
Total $ 11,932,138 100 % 1.02 % $ 11,990,764 100 % 1.08 %


	December 31, 2020						September 30, 2020
	Deposit Account Balance		As a % of Total Deposits		Weighted Average Rate		Deposit Account Balance		As a % of Total Deposits		Weighted Average Rate
($ in thousands)
Non-interest checking	$	2,336,294	16.5	%	—	%	$	2,164,071	15.7	%	—	%
Interest checking	3,175,494		22.4		0.20		3,029,576		22.0		0.24
Savings	914,655		6.5		0.11		872,087		6.3		0.11
Money market	3,955,016		27.9		0.22		3,740,698		27.1		0.30
Time deposits	3,785,082		26.7		0.90		3,973,192		28.8		1.17
Total	$	14,166,541	100	%	0.36	%	$	13,779,624	100	%	0.48	%

FHLB advances and other borrowings - Total borrowings totaled ~~$2,250,000,000~~$2,600,000,000 as of December 31, ~~2019, unchanged~~2020, a decrease from ~~$2,250,000,000~~$2,700,000,000 as of September 30, ~~2019.~~2020. The decrease was due to the termination of a hedged FHLB borrowing that had an effective interest rate of 1.39%. The weighted average rate for FHLB borrowings was ~~2.46%~~1.82% as of December 31, ~~2019~~2020 and ~~2.49%~~1.79% at September 30, ~~2019. The decrease was due to lower rates on new FHLB advances.~~2020.

Shareholders' equity - The Company’s total shareholders' equity at December 31, ~~2019~~2020 was ~~$2,050,909,000,~~$2,061,767,000, or ~~12.49%~~10.82% of total assets. This was an increase of ~~$17,914,000~~$47,634,000 from the September 30, ~~2019~~2020 total of ~~$2,032,995,000,~~$2,014,133,000, or ~~12.34%~~10.72% of total assets. The Company’s equity was impacted in the three months ended December 31, ~~2019~~2020 by net income of ~~$65,703,000,~~$38,951,000, the payment of ~~$16,433,000~~$16,577,000 in cash dividends, treasury stock purchases of ~~$33,479,000,~~$701,000, as well as other comprehensive income of ~~$694,000.~~$24,482,000.

RESULTS OF OPERATIONS

Net Income - The Company recorded net income of ~~$65,703,000~~$38,951,000 for the three months ended December 31, ~~2019~~2020 compared to ~~$52,942,000~~$67,866,000 for the prior year quarter. The decrease is due to the factors described below.

Net Interest Income - For the three months ended December 31, ~~2019,~~2020, net interest income was ~~$119,685,000,~~$120,514,000, which is ~~$533,000~~$829,000 higher than the same quarter of the prior year. Net interest margin was ~~3.15%~~2.75% for the quarter ended December 31, ~~2019~~2020 compared to 3.21% for the quarter ended December 31, 2018. The increase in net interest income was primarily due to the average balance of earning assets increasing by $357,032,000, partially offset by a $258,059,000 increase in average balance on interest-bearing liabilities. The compression in net interest margin to 3.15% for the quarter ended December 31, ~~2019~~2019. Average interest-earning assets increased $2,365,757,000 or 15.58% from

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~~3.21% for~~ the ~~quarter ended December 31, 2018 was due to the yield~~prior year while average interest-bearing liabilities increased $1,776,765,000 or 14.20%. The average rate earned on ~~earning~~interest-earning assets ~~decreasing~~declined by 597 basis points to ~~4.30% and~~3.34% while the ~~cost of interest bearing~~average rate paid on interest-bearing liabilities ~~increasing 3~~declined by 67 basis points to ~~1.27% over that~~0.76%. The compression in the net interest margin since the prior year same ~~period. The lower yield on earning assets~~quarter is the result of the decrease in short-term interest rates, which resulted in a lower rate being earned on cash and adjustable rate loans and investment securities. The higher rate in interest-bearing liabilities was primarily due to the ~~increase~~rapid drop in short-term rates by the Federal Reserve Bank in response to the COVID-19 pandemic which led to changes in the rates on ~~interest-bearing deposits partially offset by lower rates paid on FHLB advances~~earning assets and bearing liabilities noted above. Additionally, the balance of cash was relatively high at $1,830,722,000 as of December 31, 2020 and the loan portfolio at December 31, 2020 contained $634,850,000 in PPP loans, which carry a 1% note rate.

The following table sets forth certain information explaining changes in interest income and interest expense for the period indicated compared to the same period one year ago. 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 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.

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

Rate / Volume Analysis:


		Comparison of Three Months Ended 12/31/19 and 12/31/18											Comparison of Three Months Ended 12/31/20 and 12/31/19
($ in thousands)	($ in thousands)	Volume		Rate		Total		($ in thousands)	Volume		Rate		Total
Interest income:	Interest income:							Interest income:
Loans receivable	Loans receivable	$	4,787	$	294	$	5,081	Loans receivable	$	10,063	$	(18,538)	$	(8,475)
Mortgaged-backed securities		(1,616)		(1,964)		(3,580)
Mortgage-backed securities								Mortgage-backed securities	(4,319)		(4,063)		(8,382)
Investments (1)	Investments (1)	1,547		(846)		701		Investments (1)	7,661		(7,806)		(145)
All interest-earning assets	All interest-earning assets	4,718		(2,516)		2,202		All interest-earning assets	13,405		(30,407)		(17,002)
Interest expense:	Interest expense:							Interest expense:
Customer accounts	Customer accounts	1,070		3,832		4,902		Customer accounts	3,719		(21,090)		(17,371)
FHLB advances and other borrowings	FHLB advances and other borrowings	(1,251)		(1,982)		(3,233)		FHLB advances and other borrowings	2,194		(2,654)		(460)
All interest-bearing liabilities	All interest-bearing liabilities	(181)		1,850		1,669		All interest-bearing liabilities	5,913		(23,744)		(17,831)
Change in net interest income	Change in net interest income	$	4,899	$	(4,366)	$	533	Change in net interest income	$	7,492	$	(6,663)	$	829

___________________

(1)Includes interest on cash equivalents and dividends on FHLB & FRB stock.

Provision (Release) for ~~Loan~~Credit Losses - The Company recorded a ~~$1,000,000 release of loan loss allowance~~$3,000,000 provision for credit losses for the three months ended December 31, ~~2019,~~2020, compared with a ~~$500,000~~ release of allowance for credit losses of $3,750,000 for the three months ended December 31, ~~2018. Reserving for new loan originations has been largely offset by recoveries of previously charged-off loans. Recoveries, net of charge-offs, totaled $2,579,000~~2019. The credit loss provision for the three months ended December 31, ~~2019,~~2020 is primarily due to reserving for new loan originations and changes in composition of the loan portfolio. Recoveries, net of charge-offs, totaled $1,734,000 for the three months ended December 31, 2020, compared to net recoveries of ~~$1,408,000~~$2,579,000 during the three months ended December 31, ~~2018.~~2019. No allowance was recorded as of December 31, 2020 for the $646,887,000 of PPP loans, which are included in the commercial & industrial loan category, due to the government guarantee.

Other Income - The three months ended December 31, ~~2019~~2020 results include total other income of ~~$46,376,000~~$13,870,000 compared to ~~$19,009,000~~$46,376,000 for the same period one year ago, a ~~$27,367,000 increase.~~$32,506,000 decrease. The ~~increase is~~decrease was primarily due to ~~the three months ended December 31, 2019 including a gain of $32,600,000 on sales of fixed assets, while the three months ended December 31, 2018 included~~ a net gain of ~~$6,400,000 recognized on~~$30,700,000 from the sale ~~and valuation adjustments~~ of fixed ~~assets.~~assets, including a branch property in Bellevue, Washington during the first quarter of fiscal 2020.

Other Expense - ~~Other expenses have increased as a result of ongoing investments in people, process and technology with~~Total other expense was $81,410,000 for the ~~objective of growing market share and ultimately earnings. The~~ three months ended December 31, ~~2019 results include total other expense~~2020, a decrease of $1,226,000 from $82,636,000 ~~compared to $71,672,000~~ for the same period one year ~~ago,~~ago. Compensation and benefits costs increased by $6,092,000, or 16.6%, over the prior year quarter due to a ~~$10,964,000 increase. The increase is~~4.8% rise in headcount, annual merit increases as well as higher bonus compensation that reflects increased loan production activity since the prior year. Information technology costs decreased by $5,276,000, primarily due to ~~information technology being higher by $8,067,000 which was largely from~~the prior year quarter including a ~~$5,931,000~~$5,900,000 impairment charge on systems hardware and software. In addition, compensation and benefits costs increased by $2,748,000 primarily due to an increase in headcount. The number of staff, including part-time employees on a full-time equivalent basis, increased by 4.8% to 2,001 at December 31, 2019 from 1,910 at December 31, 2018. Total other expense for the three months ended December 31, ~~2019~~2020 and December 31, ~~2018~~2019 equaled ~~2.02%~~1.73% and ~~1.79%~~2.02%, respectively, of average assets.

Gain (Loss) on Real Estate Owned - Results for the three months ended December 31, ~~2019~~2020 include a net loss on real estate owned of ~~$886,000,~~$449,000, compared to a net ~~gain~~loss of ~~$320,000~~$886,000 for the ~~same period one~~prior year ~~ago.~~quarter.

Income Tax Expense - Income tax expense totaled ~~$17,836,000~~$10,574,000 for the three months ended December 31, ~~2019,~~2020, compared to ~~$14,367,000~~$18,423,000 for the ~~same period one~~prior year ~~ago.~~quarter. The effective tax rate for both the three months ended December 31, 2020 and the three months ended December 31, 2019 was 21.35%. The effective tax rate for the three months ended December 31, ~~2019 was 21.35% compared to 21.34% for the three months ended December 31, 2018. The effective tax rate for the three months ended December 31, 2019~~2020 differs from the statutory rate mainly due to state taxes, tax-exempt income and ~~tax-exempt income.~~tax-credit investments.

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~~WASHINGTON FEDERAL, INC. AND SUBSIDIARIES~~

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Management believes that there have been no material changes in the Company’s quantitative and qualitative information about market risk since September 30, ~~2019.~~2020. For a complete discussion of the Company’s quantitative and qualitative market risk, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s ~~2019~~2020 Form 10-K.

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

PART I – Financial Information

Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures. The Company maintains a set of disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to the Company's management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Management has evaluated, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this quarterly report (the "Evaluation Date"). Based on the evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the Evaluation Date, the Company's disclosure controls and procedures are effective.

(b) Changes in Internal Control over Financial Reporting. During the period to which this report relates, there have not been any changes in the Company's internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or that are reasonably likely to materially affect, such controls.

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

PART II – Other Information

Item 1. Legal Proceedings

From time to time, the Company and its subsidiaries are engaged in legal proceedings in the ordinary course of business, none of which are considered to have a material impact on the Company’s consolidated financial statements.

Item 1A. Risk Factors

In addition to the other information set forth below and in this report, you should carefully consider the factors discussed under "Part I--Item 1A--Risk Factors" in the ~~2019~~Company's Form 10-K for the year ended September 30, ~~2019.~~2020. These factors could materially and adversely affect the Company's business, financial condition, liquidity, results of operations and capital position, and could cause its actual results to differ materially from its historical results or the results contemplated by the forward-looking statements contained in this report.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information with respect to purchases made by or on behalf of the Company of the Company’s common stock during the three months ended December 31, ~~2019.~~2020.

Period Total Number of
Shares Purchased Average Price
Paid Per Share Total Number of
Shares Purchased
as Part of Publicly
Announced Plan (1) Maximum
Number of Shares
That May Yet Be
Purchased Under
the Plan at the
End of the Period
October 1, 2019 to October 31, 2019 270,038 $ 36.43 270,038 7,696,723
November 1, 2019 to November 30, 2019 375,419 36.80 375,419 7,321,304
December 1, 2019 to December 31, 2019 268,704 36.58 268,704 7,052,600
Total 914,161 $ 36.62 914,161 7,052,600


Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan (1)	Maximum Number of Shares That May Yet Be Purchased Under the Plan at the End of the Period
October 1, 2020 to October 31, 2020	32,956	$	21.29	32,956	4,594,275
November 1, 2020 to November 30, 2020	—	—		—	4,594,275
December 1, 2020 to December 31, 2020	—	—		—	4,594,275
Total	32,956	$	21.29	32,956	4,594,275

___________________

(1)The Company's stock repurchase program was publicly announced by its Board of Directors on February 3, 1995 and has no expiration date. Under this ongoing program, a total of 66,956,264 shares were authorized for repurchase. This does not include the 10,000,000 additional shares authorized by the Board of Directors on January 26, 2021.

Item 3. Defaults Upon Senior Securities

Not applicable

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

Not applicable

Item 6. Exhibits


(a)		Exhibits


	31.1		Section 302 Certification by the Chief Executive Officer
	31.2			Section 302 Certification by the Chief Financial Officer
	32			Section 906 Certification by the Chief Executive Officer and Chief Financial Officer
	101			Financial Statements from the Company’s Form 10-Q for the three months ended December 31, ~~2019~~2020 formatted in iXBRL

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

SIGNATURES

Pursuant to the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


January ~~30, 2020~~28, 2021			/S/ BRENT J. BEARDALL
			BRENT J. BEARDALL President & Chief Executive Officer

January ~~30, 2020~~28, 2021			/S/ VINCENT L. BEATTY
			VINCENT L. BEATTY Executive Vice President and Chief Financial Officer

January ~~30, 2020~~28, 2021			/S/ CORY D. STEWART
			CORY D. STEWART Senior Vice President and Principal Accounting Officer

4649


Three Months Ended December 31, 2019	Beginning Allowance		Charge-offs		Recoveries		Provision & Transfers		Ending Allowance
	(In thousands)
Single-family residential	$	30,988	$	(15)	$	261	$	(534)	$	30,700
Construction	32,304		—		54		(66)		32,292
Construction - custom	1,369		—		—		30		1,399
Land - acquisition & development	9,155		(11)		1,460		(1,858)		8,746
Land - consumer lot loans	2,143		(70)		10		7		2,090
Multi-family	7,391		—		498		(485)		7,404
Commercial real estate	13,170		(98)		368		(405)		13,035
Commercial & industrial	31,450		(50)		144		1,996		33,540
HELOC	1,103		—		93		(92)		1,104
Consumer	2,461		(374)		309		(193)		2,203
	$	131,534	$	(618)	$	3,197	$	(1,600)	$	132,513


December 31, 2019	Recorded Investment		Unpaid Principal Balance		Related Allowance			Average Recorded Investment (Year-To-Date)
	(In thousands)
Impaired loans with no related allowance recorded:
Single-family residential	$	16,505	$	17,474	$	—		$	17,242


Land - acquisition & development	—		—		—			39
Land - consumer lot loans	269		845		—			307

Commercial real estate	7,249		11,585		—			7,358
Commercial & industrial	437		4,508		—			776
HELOC	369		369		—			603
Consumer	2		84		—			26
	24,831		34,865		—			26,351
Impaired loans with an allowance recorded:
Single-family residential	102,164		104,506		1,110			107,103


Land - acquisition & development	86		150		15			89
Land - consumer lot loans	3,556		3,650		—			3,556
Multi-family	380		380		1			383
Commercial real estate	3,238		3,462		174			3,703
Commercial & industrial	411		519		70			419
HELOC	942		957		—			946
Consumer	58		58		—			59
	110,835		113,682		1,370		(1)	116,258
Total impaired loans:
Single-family residential	118,669		121,980		1,110			124,345


Land - acquisition & development	86		150		15			128
Land - consumer lot loans	3,825		4,495		—			3,863
Multi-family	380		380		1			383
Commercial real estate	10,487		15,047		174			11,061
Commercial & industrial	848		5,027		70			1,195
HELOC	1,311		1,326		—			1,549
Consumer	60		142		—			85
	$	135,666	$	148,547	$	1,370	(1)	$	142,609


(In thousands)	Year ending September 30,

remainder of 2020	$	4,623
2021	5,693
2022	5,177
2023	4,518
2024	3,763
Thereafter	11,035
Total minimum payments	34,809
Amounts representing interest	(3,173)
Present value of minimum lease payments	$	31,636