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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 March 31, 20202021
or
☐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)
 
Washington91-1661606
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
425 Pike StreetSeattleWashington98101
(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 ClassTrading Symbol(s)Name of each exchange on which registered
Common Stock, $1.00 par value per shareWAFDNASDAQ Stock Market
Depositary Shares, Each Representing a 1/40th Interest in a Share of 4.875% Fixed Rate Series A Non-Cumulative Perpetual Preferred StockWAFDPNASDAQ 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“emerging growth company"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 75,706,10072,404,471 shares of common stock as of May 05, 2020.April 30, 2021.

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

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)




March 31, 2020September 30, 2019March 31, 2021September 30, 2020
(In thousands, except share data)(In thousands, except share data)
ASSETSASSETSASSETS
Cash and cash equivalentsCash and cash equivalents$1,495,574  $419,158  Cash and cash equivalents$2,318,447 $1,702,977 
Available-for-sale securities, at fair valueAvailable-for-sale securities, at fair value1,693,047  1,485,742  Available-for-sale securities, at fair value2,438,902 2,249,492 
Held-to-maturity securities, at amortized costHeld-to-maturity securities, at amortized cost920,255  1,443,480  Held-to-maturity securities, at amortized cost494,089 705,838 
Loans receivable, net of allowance for loan losses of $139,501 and $131,53411,974,241  11,930,575  
Loans receivable, net of allowance for loan losses of $172,653 and $166,955Loans receivable, net of allowance for loan losses of $172,653 and $166,95513,035,423 12,792,317 
Interest receivableInterest receivable46,076  48,857  Interest receivable54,073 53,799 
Premises and equipment, netPremises and equipment, net245,613  274,015  Premises and equipment, net259,560 252,805 
Real estate ownedReal estate owned5,463  6,781  Real estate owned5,316 4,966 
FHLB and FRB stockFHLB and FRB stock155,990  123,990  FHLB and FRB stock119,991 141,990 
Bank owned life insuranceBank owned life insurance224,926  222,076  Bank owned life insurance230,520 227,749 
Intangible assets, including goodwill of $302,691 and $301,368310,977  309,247  
Intangible assets, including goodwill of $302,707 and $302,707Intangible assets, including goodwill of $302,707 and $302,707309,086 309,906 
Federal and state income tax assets, netFederal and state income tax assets, net0 5,708 
Other assetsOther assets303,467  210,989  Other assets268,174 346,508 
$17,375,629  $16,474,910  $19,533,581 $18,794,055 
LIABILITIES AND SHAREHOLDERS’ EQUITYLIABILITIES AND SHAREHOLDERS’ EQUITYLIABILITIES AND SHAREHOLDERS’ EQUITY
LiabilitiesLiabilitiesLiabilities
Customer accountsCustomer accountsCustomer accounts
Transaction deposit accountsTransaction deposit accounts$7,664,038  $7,083,801  Transaction deposit accounts$11,228,666 $9,806,432 
Time deposit accountsTime deposit accounts4,424,382  4,906,963  Time deposit accounts3,590,755 3,973,192 
12,088,420  11,990,764  14,819,421 13,779,624 
FHLB advancesFHLB advances3,050,000  2,250,000  FHLB advances2,150,000 2,700,000 
Advance payments by borrowers for taxes and insuranceAdvance payments by borrowers for taxes and insurance41,488  57,830  Advance payments by borrowers for taxes and insurance36,289 49,462 
Federal and state income tax liabilities, netFederal and state income tax liabilities, net2,431  5,104  Federal and state income tax liabilities, net13,424 0 
Accrued expenses and other liabilitiesAccrued expenses and other liabilities207,323  138,217  Accrued expenses and other liabilities181,494 250,836 
15,389,662  14,441,915  17,200,628 16,779,922 
Commitments and contingencies (see Note I)Commitments and contingencies (see Note I)Commitments and contingencies (see Note I)00
Shareholders’ equityShareholders’ equityShareholders’ equity
Common stock, $1.00 par value, $300,000,000 shares authorized; 135,742,217 and 135,539,806 shares issued; 75,706,100 and 78,841,463 shares outstanding135,742  135,540  
Preferred stock, $1.00 par value, 5,000,000 shares authorized; 300,000 and 0 shares issued; 300,000 and 0 shares outstandingPreferred stock, $1.00 par value, 5,000,000 shares authorized; 300,000 and 0 shares issued; 300,000 and 0 shares outstanding300,000 0 
Common stock, $1.00 par value, 300,000,000 shares authorized; 135,980,008 and 135,727,237 shares issued; 73,084,591 and 75,689,364 shares outstandingCommon stock, $1.00 par value, 300,000,000 shares authorized; 135,980,008 and 135,727,237 shares issued; 73,084,591 and 75,689,364 shares outstanding135,980 135,727 
Additional paid-in capitalAdditional paid-in capital1,675,828  1,672,417  Additional paid-in capital1,675,772 1,678,843 
Accumulated other comprehensive income (loss), net of taxesAccumulated other comprehensive income (loss), net of taxes6,461  15,292  Accumulated other comprehensive income (loss), net of taxes81,176 16,953 
Treasury stock, at cost; 60,036,117 and 56,698,343 shares(1,238,252) (1,126,163) 
Treasury stock, at cost; 62,895,417 and 60,037,873 sharesTreasury stock, at cost; 62,895,417 and 60,037,873 shares(1,328,068)(1,238,296)
Retained earningsRetained earnings1,406,188  1,335,909  Retained earnings1,468,093 1,420,906 
1,985,967  2,032,995  2,332,953 2,014,133 
$17,375,629  $16,474,910  $19,533,581 $18,794,055 


SEE NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

Three Months Ended March 31,Six Months Ended March 31, Three Months Ended March 31,Six Months Ended March 31,
2020201920202019 2021202020212020
(In thousands, except share data)(In thousands, except share data)(In thousands, except share data)(In thousands, except share data)
INTEREST INCOMEINTEREST INCOMEINTEREST INCOME
Loans receivableLoans receivable$138,549  $141,061  $280,695  $278,126  Loans receivable$132,757 $138,549 $266,428 $280,695 
Mortgage-backed securitiesMortgage-backed securities14,341  19,343  29,953  38,535  Mortgage-backed securities6,696 14,341 13,926 29,953 
Investment securities and cash equivalentsInvestment securities and cash equivalents6,728  7,178  13,794  13,543  Investment securities and cash equivalents7,301 6,728 14,222 13,794 
159,618  167,582  324,442  330,204  146,754 159,618 294,576 324,442 
INTEREST EXPENSEINTEREST EXPENSEINTEREST EXPENSE
Customer accountsCustomer accounts28,638  29,666  60,119  56,245  Customer accounts10,729 28,638 24,839 60,119 
FHLB advancesFHLB advances13,368  17,846  27,026  34,737  FHLB advances11,991 13,368 25,189 27,026 
42,006  47,512  87,145  90,982  22,720 42,006 50,028 87,145 
Net interest incomeNet interest income117,612  120,070  237,297  239,222  Net interest income124,034 117,612 244,548 237,297 
Provision (release) for credit lossesProvision (release) for credit losses6,200  750  5,200  250  Provision (release) for credit losses0 8,200 3,000 4,450 
Net interest income after provision (release)Net interest income after provision (release)111,412  119,320  232,097  238,972  Net interest income after provision (release)124,034 109,412 241,548 232,847 
OTHER INCOMEOTHER INCOMEOTHER INCOME
Gain (loss) on sale of investment securitiesGain (loss) on sale of investment securities15,028  —  15,028  (9) Gain (loss) on sale of investment securities0 15,028 0 15,028 
Gain (loss) on termination of hedging derivativesGain (loss) on termination of hedging derivatives14,110 0 14,110 0 
Prepayment penalty on long-term debtPrepayment penalty on long-term debt(13,809) —  (13,809) —  Prepayment penalty on long-term debt(13,788)(13,809)(13,788)(13,809)
Loan fee incomeLoan fee income3,048  667  4,852  1,637  Loan fee income872 3,048 3,264 4,852 
Deposit fee incomeDeposit fee income6,099  5,886  12,359  12,129  Deposit fee income5,960 6,099 11,986 12,359 
Other incomeOther income5,875  6,257  44,187  18,062  Other income7,323 5,875 12,775 44,187 
16,241  12,810  62,617  31,819  
14,477 16,241 28,347 62,617 
OTHER EXPENSEOTHER EXPENSEOTHER EXPENSE
Compensation and benefitsCompensation and benefits38,617  32,774  75,248  66,657  Compensation and benefits43,632 38,617 86,355 75,248 
OccupancyOccupancy10,913  9,830  21,048  19,098  Occupancy10,473 10,913 20,065 21,048 
FDIC insurance premiumsFDIC insurance premiums2,470  1,978  4,940  4,840  FDIC insurance premiums3,755 2,470 7,018 4,940 
Product deliveryProduct delivery3,897  3,545  8,164  7,566  Product delivery4,401 3,897 9,338 8,164 
Information technologyInformation technology11,501  8,755  28,608  17,795  Information technology10,696 11,501 22,527 28,608 
Other expenseOther expense12,035  11,085  24,061  23,683  Other expense8,789 12,035 17,853 24,061 
79,433  67,967  162,069  139,639  81,746 79,433 163,156 162,069 
Gain (loss) on real estate owned, netGain (loss) on real estate owned, net31  808  (855) 1,128  Gain (loss) on real estate owned, net34 31 (415)(855)
Income before income taxesIncome before income taxes48,251  64,971  131,790  132,280  Income before income taxes56,799 46,251 106,324 132,540 
Income tax expenseIncome tax expense10,301  13,873  28,137  28,240  Income tax expense11,928 9,874 22,502 28,297 
NET INCOME$37,950  $51,098  $103,653  $104,040  
Net incomeNet income44,871 36,377 83,822 104,243 
Dividends on preferred stockDividends on preferred stock2,722 0 2,722 0 
Net income available to common shareholdersNet income available to common shareholders$42,149 $36,377 $81,100 $104,243 
PER SHARE DATAPER SHARE DATAPER SHARE DATA
Basic earnings per share$0.49  $0.63  $1.33  $1.28  
Diluted earnings per share0.49  0.63  1.33  1.28  
Basic earnings per common shareBasic earnings per common share$0.56 $0.47 $1.07 $1.34 
Diluted earnings per common shareDiluted earnings per common share0.56 0.47 1.07 1.34 
Dividends paid on common stock per shareDividends paid on common stock per share0.22  0.20  0.43  0.38  Dividends paid on common stock per share0.23 0.22 0.45 0.43 
Basic weighted average number of shares outstandingBasic weighted average number of shares outstanding76,987,53280,968,05077,737,97781,384,456Basic weighted average number of shares outstanding75,354,76576,987,53275,576,28877,737,977
Diluted weighted average number of shares outstandingDiluted weighted average number of shares outstanding77,007,11880,990,12677,776,30481,415,697Diluted weighted average number of shares outstanding75,393,46477,007,11875,582,42677,776,304

SEE NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)

 Three Months Ended March 31,Six Months Ended March 31,
 2020201920202019
(In thousands)(In thousands)
Net income$37,950  $51,098  $103,653  $104,040  
Other comprehensive income (loss) net of tax:
Net unrealized gain (loss) on available-for-sale investment securities15,086  13,585  12,937  17,082  
Reclassification adjustment of net (gain) loss from sale of available-for-sale securities included in net income(15,028) —  (15,028) 9  
Related tax benefit (expense)(13) (3,091) 412  (3,889) 
45  10,494  (1,679) 13,202  
Net unrealized gain (loss) on borrowings cash flow hedges(12,428) (6,150) (9,313) (16,650) 
Related tax benefit (expense)2,858  1,399  2,161  3,788  
(9,570) (4,751) (7,152) (12,862) 
Other comprehensive income (loss) net of tax(9,525) 5,743  (8,831) 340  
Comprehensive income$28,425  $56,841  $94,822  $104,380  
 Three Months Ended March 31,
 20212020
(In thousands)
Net income$44,871 $36,377 
Other comprehensive income (loss) net of tax:
Net unrealized gain (loss) during the period on available-for-sale investment securities, net of tax of $1,114 and $(3,468)(3,729)11,617 
Reclassification adjustment of net (gain) loss from sale of available-for-sale securities included in net income, net of tax of $0 and $3,4560 (11,572)
(3,729)45 
Net unrealized gain (loss) during the period on borrowings cash flow hedges, net of tax of $(16,230) and $2,85854,335 (9,570)
Reclassification adjustment of net (gain) loss included in net income during the period from hedging derivatives, net of tax of $3,245 and $0(10,865)0 
43,470 (9,570)
Other comprehensive income (loss)39,741 (9,525)
Comprehensive income$84,612 $26,852 

 Six Months Ended March 31,
 20212020
(In thousands)
Net income$83,822 $104,243 
Other comprehensive income (loss) net of tax:
Net unrealized gain (loss) during the period on available-for-sale investment securities, net of tax of $(1,572) and $(3,043)5,262 9,893 
Reclassification adjustment of net (gain) loss from sale of available-for-sale securities included in net income, net of tax of $0 and $3,4560 (11,572)
5,262 (1,679)
Net unrealized gain (loss) during the period on borrowings cash flow hedges, net of tax of $(20,857) and $2,16169,826 (7,152)
Reclassification adjustment of net (gain) loss included in net income during the period from hedging derivatives, net of tax of $3,245 and $0(10,865)0 
58,961 (7,152)
Other comprehensive income (loss)64,223 (8,831)
Comprehensive income$148,045 $95,412 


SEE NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(UNAUDITED) 

(in thousands)Common StockAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Treasury StockTotal
Balance at January 1, 2020$135,720  $1,673,666  $1,385,179  $15,986  $(1,159,642) $2,050,909  
Net income—  —  37,950  —  —  37,950  
Other comprehensive income (loss)—  —  —  (9,525) —  (9,525) 
Dividends on common stock ($0.22 per share)—  —  (16,941) —  —  (16,941) 
Proceeds from stock-based awards3  62  —  —  —  65  
Stock-based compensation expense19  2,100  —  —  —  2,119  
Treasury stock acquired—  —  —  —  (78,610) (78,610) 
Balance at March 31, 2020$135,742  $1,675,828  $1,406,188  $6,461  $(1,238,252) $1,985,967  
(in thousands)Common StockAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Treasury StockTotal
Balance at January 1, 2019$135,496  $1,668,666  $1,227,275  $2,891  $(1,051,239) $1,983,089  
Net income—  —  51,098  —  —  51,098  
Other comprehensive income (loss)—  —  —  5,743  —  5,743  
Dividends on common stock ($0.20 per share)—  —  (16,137) —  —  (16,137) 
Proceeds from stock-based awards8  87  —  —  —  95  
Stock-based compensation expense3  1,107  —  —  —  1,110  
Treasury stock acquired—  —  —  —  (20,718) (20,718) 
Balance at March 31, 2019$135,507  $1,669,860  $1,262,236  $8,634  $(1,071,957) $2,004,280  



(CONTINUED)
(in thousands)Preferred StockCommon StockPaid-in CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Treasury StockTotal
Balance at January 1, 2021$0 $135,938 $1,680,111 $1,443,280 $41,435 $(1,238,997)$2,061,767 
Net income— — — 44,871 — — 44,871 
Other comprehensive income (loss)— — — — 39,741 — 39,741 
Issuance of preferred stock, net300,000 — (6,675)— — — 293,325 
Dividends on common stock ($0.23 per share)— — — (17,336)— — (17,336)
Dividends on preferred stock ($9.0729 per share)— — — (2,722)— — (2,722)
Proceeds from stock-based awards— 18 282 — — — 300 
Stock-based compensation expense— 24 2,054 — — — 2,078 
Treasury stock acquired— — — — — (89,071)(89,071)
Balance at March 31, 2021$300,000 $135,980 $1,675,772 $1,468,093 $81,176 $(1,328,068)$2,332,953 
(in thousands)Preferred StockCommon StockPaid-in CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Treasury StockTotal
Balance at January 1, 2020$— $135,720 $1,673,666 $1,365,397 $15,986 $(1,159,642)$2,031,127 
Net income— — — 36,377 — — 36,377 
Other comprehensive income (loss)— — — — (9,525)— (9,525)
Dividends on common stock ($0.22 per share)— — — (16,941)— — (16,941)
Proceeds from stock-based awards— 3 62 — — — 65 
Stock-based compensation expense— 19 2,100 — — — 2,119 
Treasury stock acquired— — — — — (78,610)(78,610)
Balance at March 31, 2020$— $135,742 $1,675,828 $1,384,833 $6,461 $(1,238,252)$1,964,612 







(CONTINUED)






SEE NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(UNAUDITED) 

(in thousands)Common StockAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Treasury StockTotal
Balance at October 1, 2019$135,540  $1,672,417  $1,335,909  $15,292  $(1,126,163) $2,032,995  
Net income—  —  103,653  —  —  103,653  
Other comprehensive income (loss)—  —  —  (8,831) —  (8,831) 
Dividends on common stock ($0.43 per share)—  —  (33,374) —  —  (33,374) 
Proceeds from stock-based awards6  109  —  —  —  115  
Stock-based compensation expense196  3,302  —  —  —  3,498  
Treasury stock acquired—  —  —  —  (112,089) (112,089) 
Balance at March 31, 2020$135,742  $1,675,828  $1,406,188  $6,461  $(1,238,252) $1,985,967  
(in thousands)Common StockAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Treasury StockTotal
Balance at October 1, 2018$135,343  $1,666,609  $1,188,971  $8,294  $(1,002,309) $1,996,908  
Net income—  —  104,040  —  —  104,040  
Other comprehensive income (loss)—  —  —  340  —  340  
Dividends on common stock ($0.38 per share)—  —  (30,775) —  —  (30,775) 
Proceeds from stock-based awards24  529  —  —  —  553  
Stock-based compensation expense101  2,761  —  —  —  2,862  
Exercise of stock warrants39  (39) —  —  —  —  
Treasury stock acquired—  —  —  —  (69,648) (69,648) 
Balance at March 31, 2019$135,507  $1,669,860  $1,262,236  $8,634  $(1,071,957) $2,004,280  




(in thousands)Preferred StockCommon StockPaid-in CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Treasury StockTotal
Balance at October 1, 2020$0 $135,727 $1,678,843 $1,420,906 $16,953 $(1,238,296)$2,014,133 
Net income— — — 83,822 — — 83,822 
Other comprehensive income (loss)— — — — 64,223 — 64,223 
Issuance of preferred stock, net300,000 — (6,675)— — — 293,325 
Dividends on common stock ($0.45 per share)— — — (33,913)— — (33,913)
Dividends on preferred stock ($9.0729 per share)— — — (2,722)— — (2,722)
Proceeds from stock-based awards— 20 310 — — — 330 
Stock-based compensation expense— 233 3,294 — — — 3,527 
Treasury stock acquired— — — — — (89,772)(89,772)
Balance at March 31, 2021$300,000 $135,980 $1,675,772 $1,468,093 $81,176 $(1,328,068)$2,332,953 
(in thousands)Preferred StockCommon StockPaid-in CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Treasury StockTotal
Balance at October 1, 2019$— $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— — — 104,243 — — 104,243 
Other comprehensive income (loss)— — — — (8,831)— (8,831)
Dividends on common stock ($0.43 per share)— — — (33,374)— — (33,374)
Proceeds from stock-based awards— 6 109 — — — 115 
Stock-based compensation expense— 196 3,302 — — — 3,498 
Treasury stock acquired— — — — — (112,089)(112,089)
Balance at March 31, 2020$— $135,742 $1,675,828 $1,384,833 $6,461 $(1,238,252)$1,964,612 










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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED) 
Six Months Ended March 31, Six Months Ended March 31,
20202019 20212020
(In thousands)(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIESCASH FLOWS FROM OPERATING ACTIVITIESCASH FLOWS FROM OPERATING ACTIVITIES
Net incomeNet income$103,653  $104,040  Net income$83,822 $104,243 
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, net464  14,924  
Depreciation, amortization, accretion and other, netDepreciation, amortization, accretion and other, net36,608 464 
Stock-based compensation expenseStock-based compensation expense3,498  2,862  Stock-based compensation expense3,527 3,498 
Provision (release) for loan losses5,200  250  
Provision (release) for credit lossesProvision (release) for credit losses3,000 4,450 
Loss (gain) on sale of investment securitiesLoss (gain) on sale of investment securities(15,028) 9  Loss (gain) on sale of investment securities0 (15,028)
Net realized (gain) loss on sales of premises, equipment, and real estate ownedNet realized (gain) loss on sales of premises, equipment, and real estate owned(33,115) (8,379) Net realized (gain) loss on sales of premises, equipment, and real estate owned37 (33,115)
Impairment loss on premises and equipmentImpairment loss on premises and equipment5,931  —  Impairment loss on premises and equipment0 5,931 
Prepayment penalty from repayment of borrowingsPrepayment penalty from repayment of borrowings13,809  —  Prepayment penalty from repayment of borrowings13,788 13,809 
Gain on early termination of long term borrowing hedgeGain on early termination of long term borrowing hedge(14,110)0 
Decrease (increase) in accrued interest receivableDecrease (increase) in accrued interest receivable2,781  (3,495) Decrease (increase) in accrued interest receivable(274)2,781 
Decrease (increase) in federal and state income tax receivableDecrease (increase) in federal and state income tax receivable—  1,804  Decrease (increase) in federal and state income tax receivable5,708 0 
Decrease (increase) in cash surrender value of bank owned life insuranceDecrease (increase) in cash surrender value of bank owned life insurance(2,850) (2,913) Decrease (increase) in cash surrender value of bank owned life insurance(2,771)(2,850)
Decrease (increase) in other assetsDecrease (increase) in other assets(99,335) 21,460  Decrease (increase) in other assets156,599 (99,335)
Increase (decrease) in federal and state income tax liabilitiesIncrease (decrease) in federal and state income tax liabilities(100) 4,080  Increase (decrease) in federal and state income tax liabilities(5,760)60 
Increase (decrease) in accrued expenses and other liabilitiesIncrease (decrease) in accrued expenses and other liabilities66,649  (25,707) Increase (decrease) in accrued expenses and other liabilities(75,419)66,049 
Net cash provided by (used in) operating activitiesNet cash provided by (used in) operating activities51,557  108,935  Net cash provided by (used in) operating activities204,755 50,957 
CASH FLOWS FROM INVESTING ACTIVITIESCASH FLOWS FROM INVESTING ACTIVITIESCASH FLOWS FROM INVESTING ACTIVITIES
Origination of loans and principal repayments, netOrigination of loans and principal repayments, net(31,859) (417,355) Origination of loans and principal repayments, net(192,028)(31,259)
Loans purchasedLoans purchased(73,208)0 
FHLB & FRB stock purchasedFHLB & FRB stock purchased(201,200) (309,800) FHLB & FRB stock purchased(188,001)(201,200)
FHLB & FRB stock redeemedFHLB & FRB stock redeemed169,200  298,600  FHLB & FRB stock redeemed210,000 169,200 
Available-for-sale securities purchasedAvailable-for-sale securities purchased(159,884) (290,574) Available-for-sale securities purchased(522,454)(159,884)
Principal payments and maturities of available-for-sale securitiesPrincipal payments and maturities of available-for-sale securities132,690  75,483  Principal payments and maturities of available-for-sale securities338,869 132,690 
Proceeds from sales of available-for-sale securitiesProceeds from sales of available-for-sale securities204,351  491  Proceeds from sales of available-for-sale securities0 204,351 
Principal payments and maturities of held-to-maturity securitiesPrincipal payments and maturities of held-to-maturity securities147,142  70,096  Principal payments and maturities of held-to-maturity securities206,868 147,142 
Proceeds from sales of real estate ownedProceeds from sales of real estate owned2,116  5,822  Proceeds from sales of real estate owned637 2,116 
Cash paid for acquisitions(2,777) —  
Net cash received (paid) in business combinationsNet cash received (paid) in business combinations0 (2,777)
Proceeds from sales of premises and equipmentProceeds from sales of premises and equipment53,790  11,622  Proceeds from sales of premises and equipment3,376 53,790 
Premises and equipment purchased and REO improvementsPremises and equipment purchased and REO improvements(10,868) (26,337) Premises and equipment purchased and REO improvements(20,260)(10,868)
Net cash provided by (used in) investing activitiesNet cash provided by (used in) investing activities302,701  (581,952) Net cash provided by (used in) investing activities(236,201)303,301 
CASH FLOWS FROM FINANCING ACTIVITIESCASH FLOWS FROM FINANCING ACTIVITIESCASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in customer accountsNet increase (decrease) in customer accounts97,657  335,369  Net increase (decrease) in customer accounts1,039,797 97,657 
Proceeds from borrowingsProceeds from borrowings5,030,000  7,745,000  Proceeds from borrowings4,700,007 5,030,000 
Repayments of borrowingsRepayments of borrowings(4,243,809) (7,465,000) Repayments of borrowings(5,263,795)(4,243,809)
Proceeds from the early termination of long term borrowing hedgeProceeds from the early termination of long term borrowing hedge14,110 0 
Proceeds from stock-based awardsProceeds from stock-based awards115  553  Proceeds from stock-based awards330 115 
Proceeds from issuance of preferred stock, netProceeds from issuance of preferred stock, net293,325 0 
Dividends paid on common stockDividends paid on common stock(33,374) (30,775) Dividends paid on common stock(33,913)(33,374)
Treasury stock purchasedTreasury stock purchased(112,089) (69,648) Treasury stock purchased(89,772)(112,089)
Increase (decrease) in borrower advances related to taxes and insurance, net(16,342) (31,578) 
Increase (decrease) in advances payments by borrowers for taxes and insuranceIncrease (decrease) in advances payments by borrowers for taxes and insurance(13,173)(16,342)
Net cash provided by (used in) financing activitiesNet cash provided by (used in) financing activities722,158  483,921  Net cash provided by (used in) financing activities646,916 722,158 
Increase (decrease) in cash and cash equivalentsIncrease (decrease) in cash and cash equivalents1,076,416  10,904  Increase (decrease) in cash and cash equivalents615,470 1,076,416 
Cash, cash equivalents and restricted cash at beginning of periodCash, cash equivalents and restricted cash at beginning of period419,158  268,650  Cash, cash equivalents and restricted cash at beginning of period1,702,977 419,158 
Cash, cash equivalents and restricted cash at end of periodCash, cash equivalents and restricted cash at end of period$1,495,574  $279,554  Cash, cash equivalents and restricted cash at end of period$2,318,447 $1,495,574 

(CONTINUED)
SEE NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended March 31, Six Months Ended March 31,
20202019 20212020
(In thousands)(In thousands)
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATIONSUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATIONSUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Non-cash investing activitiesNon-cash investing activitiesNon-cash investing activities
Real estate acquired through foreclosureReal estate acquired through foreclosure$317  $253  Real estate acquired through foreclosure$105 $317 
Non-cash financing activitiesNon-cash financing activitiesNon-cash financing activities
Stock issued upon exercise of warrants—  1,082  
Cash paid during the period for
Preferred stock dividend payablePreferred stock dividend payable2,722 0 
Cash paid (received) during the period forCash paid (received) during the period for
InterestInterest87,948  91,921  Interest41,707 87,948 
Income taxesIncome taxes21,000  15,255  Income taxes14,745 21,000 


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 234232 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 20192020 Annual Report on Form 10-K (“2019filed 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 FASB Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses ("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 20192020 Annual Financial Statements. There have not been any materialsignificant changes in the Company's significant accounting policies compared to those contained in its 20192020 Annual Financial Statements for the year ended September 30, 2019.2020.

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

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 March 31, 2020.2021. As of March 31, 20202021 and September 30, 2019,2020, the Company pledged cash collateral related to derivative contracts of $88,700,000$1,500,000 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
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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


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) - Effective October 1, 2019, the Company has applied ASC 326 for the periods presented herein, so the allowance calculation is based on current expected credit loss methodology ("CECL"). Prior to October 1, 2019, the calculation was based on incurred loss methodology. The Company maintains an allowance for credit losses (“ACL”) for the expected credit losses of the loan portfolio as well as unfunded loan commitments. The amount of ACL is based on ongoing, quarterly assessments by management. The 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
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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


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.

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.
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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)



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.

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 $3,348,654,000 and $2,738,095,000 at March 31, 2021 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. See Note I "Commitments and Contingencies" for more information.


NOTE B – New Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-02,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. We areThe Company is currently in the process of evaluating the amendments and determining the impact to ourits consolidated financial statements.

In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, that clarifies and improves areas of guidance related to the recently issued standards on credit losses (ASU 2016-13), hedging (ASU 2017-12), and recognition and
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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


measurement of financial instruments (ASU 2016-01). The amendments generally have 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. Effective January 1, 2020, the Company adopted the amendments of ASU 2019-04 pertaining to ASU 2017-12 and ASU 2016-01, both of which had been previously adopted. Pursuant to the adoption of ASU 2019-04, the Company elected to reclassify mortgage-backed securities with an amortized cost of $374,680,000 and fair value of $390,669,000 from held-to-maturity to available-for-sale. 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 implementation.

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 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, 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.

In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842) - Targeted Improvements. 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, 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 for the Company). The Company adopted this ASU beginning October 1, 20192020 and elected both transition options.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses. The ASU, 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, 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.

For purchased financial assets with a more-than-insignificant amount of credit deterioration since origination (“PCD assets”) that are measured at amortized cost, an allowance for expected credit losses is recorded as an adjustment to 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.

Credit losses relating to available-for-sale debt securities will be recorded through an allowance for credit losses rather than as a direct write-down to the security's cost basis.

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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


The amendments in this ASU are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years and early adoption is permitted. As such, the ASU will become effective for the Company no later than October 1, 2020. For most debt securities, 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 continuing its implementation efforts and is currently finalizing controls, processes, policies, and disclosures. Additionally, end-to-end parallel runs are being performed and the Company has engaged a third party to perform model validation procedures. The Company is in the process of evaluating the potential of early adopting this ASU. Management estimates that the allowance for credit losses (for both loans and unfunded commitments) under this ASU would be approximately $176 million, or 1.31% of gross loans outstanding as of March 31, 2020. If the Company elects an early adoption of this ASU, a one-time entry to opening retained earnings (as of October 1, 2019) will be recorded to increase the allowance for credit losses and decrease retained earnings based on the final calculation as of that date. The adoption of this ASU wouldit did not have a material impact on the Company’s available-for-sale or held-to-maturity securities as those portfolios consist primarily of U.S. residential agency mortgage-backed securities that management deems to have an immaterial risk of loss.its consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases. 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 represents the lessee's right to use, 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 February 21, 2020,19, 2021, the Company paid a regular dividend on common stock of $0.22$0.23 per share, which represented the 148152thnd consecutive quarterly cash dividend. Dividends per share were $0.22$0.23 and $0.20$0.22 for the quarters ended March 31, 20202021 and 2019,2020, respectively. On April 28, 2020,27, 2021, the Company declared a regular dividend on common stock of $0.22$0.23 per share, which represents its 149th consecutive quarterly cash dividend. This dividend will be paid on May 22, 2020 to common shareholders of record on May 8, 2020.

For the three months ended March 31, 2020, the Company repurchased 2,423,613 shares at an average price of $32.43. As of March 31, 2020, there are 4,628,987 remaining shares authorized to be repurchased under the current Board approved share repurchase program.

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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


NOTE D – Loans Receivable

The following table is a summary of loans receivable.
 March 31, 2020September 30, 2019
(In thousands)(In thousands)
Gross loans by category
   Single-family residential$5,582,244  41.5 %$5,835,194  43.8 %
   Construction2,204,283  16.4  2,038,052  15.3  
   Construction - custom547,731  4.1  540,741  4.1  
   Land - acquisition & development197,010  1.5  204,107  1.5  
   Land - consumer lot loans96,579  0.7  99,694  0.7  
   Multi-family1,467,231  10.9  1,422,674  10.7  
   Commercial real estate1,717,535  12.8  1,631,170  12.3  
   Commercial & industrial1,371,128  10.2  1,268,695  9.5  
   HELOC145,761  1.1  142,178  1.1  
   Consumer105,147  0.8  129,883  1.0  
Total gross loans13,434,649  100 %13,312,388  100 %
   Less:
      Allowance for loan losses139,501  131,534  
      Loans in process1,289,812  1,201,341  
      Net deferred fees, costs and discounts31,095  48,938  
Total loan contra accounts1,460,408  1,381,813  
Net loans$11,974,241  $11,930,575  

The following table sets forth information regarding non-accrual loans.
 March 31, 2020September 30, 2019
 (In thousands, except ratio data)
Non-accrual loans:
Single-family residential$22,859  70.1 %$25,271  74.9 %
Construction3,353  10.3  —  —  
Land - acquisition & development82  0.3  169  0.5  
Land - consumer lot loans408  1.2  246  0.7  
Commercial real estate4,374  13.4  5,835  17.3  
Commercial & industrial470  1.4  1,292  3.8  
HELOC1,064  3.3  907  2.7  
Consumer—  0.0  11  0.0  
Total non-accrual loans$32,610  100 %$33,731  100 %
% of total net loans0.27 %0.28 %

The Company recognized interest income on non-accrual loans of approximately $1,189,000 in the six months ended March 31, 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 $708,000 for the six months ended March 31, 2020. Recognized interest income for the six months ended March 31, 2020 was higher than what otherwise would have been recognized in the period due
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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


represents its 153rd consecutive quarterly cash dividend. This dividend will be paid on May 21, 2021 to common shareholders of record on May 7, 2021.

For the collectionthree months ended March 31, 2021, the Company repurchased 2,824,588 shares at an average price of past due amounts. Interest$31.53. This total includes 1,715,335 shares of common stock repurchased under the modified "Dutch auction" tender offer that was completed in March 2021 for a total cost of $53,780,000, including fees and expenses. As of March 31, 2021, there are 11,769,687 remaining shares authorized to be repurchased under the current Board approved share repurchase program. On January 26, 2021 the Board authorized an additional 10,000,000 shares for repurchase under the program.

On April 2, 2021, the Company declared a cash flows collecteddividend of $9.0729 per share on non-accrualits Series A Preferred Stock. This dividend equals $0.22682250 per depositary share. The Series A Preferred Stock dividend was paid on April 15, 2021, to shareholders of record as of April 13, 2021.

NOTE D – Loans Receivable

For a detailed discussion of loans vary from periodand credit quality, including accounting policies and the CECL methodology used to period asestimate the allowance for credit losses, see Note A "Summary of Significant Accounting Policies" above.

The Company's loans held for investment are divided into two portfolio segments, commercial loans and consumer loans, with each of those loans are brought current or are paid off.segments further split into loan classes for purposes of estimating the allowance for credit losses.

The following tables provide details regarding delinquent loans.
March 31, 2020Loans ReceivableDays Delinquent Based on $ Amount of Loans% based
on $
Type of LoanNet of Loans In ProcessCurrent306090Total Delinquent
(In thousands, except ratio data)
Single-family residential$5,582,243  $5,556,051  $5,154  $3,857  $17,181  $26,192  0.47 %
Construction1,235,731  1,232,378  —  —  3,353  3,353  0.27  
Construction - custom270,880  270,880  —  —  —  —  —  
Land - acquisition & development152,623  152,229  394  —  —  394  0.26  
Land - consumer lot loans96,580  95,796  141  270  373  784  0.81  
Multi-family1,467,208  1,466,852  356  —  —  356  0.02  
Commercial real estate1,717,535  1,712,893  580  414  3,648  4,642  0.27  
Commercial & industrial1,371,128  1,368,840  2,215  —  73  2,288  0.17  
HELOC145,761  144,709  151  37  864  1,052  0.72  
Consumer105,148  104,564  276  86  222  584  0.56  
Total Loans$12,144,837  $12,105,192  $9,267  $4,664  $25,714  $39,645  0.33 %
Delinquency %99.67%0.08%0.04%0.21%0.33%
table is a summary of loans receivable by loan portfolio segment and class.


September 30, 2019Loans ReceivableDays Delinquent Based on $ Amount of Loans% based
on $
Type of LoanNet of Loans In ProcessCurrent306090Total 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 %
Construction1,164,889  1,164,889  —  —  —  —  —  
Construction - custom255,505  255,505  —  —  —  —  —  
Land - acquisition & development161,194  161,194  —  —  —  —  —  
Land - consumer lot loans99,694  98,916  112  619  47  778  0.78  
Multi-family1,422,652  1,422,652  —  —  —  —  —  
Commercial real estate1,631,171  1,625,509  1,614  285  3,763  5,662  0.35  
Commercial & industrial1,268,695  1,267,828  —  —  867  867  0.07  
HELOC142,178  140,718  580  183  697  1,460  1.03  
Consumer129,883  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%

There are no loans greater than 90 days delinquent and still accruing interest as of either date.
 March 31, 2021September 30, 2020
(In thousands)(In thousands)
Commercial loans
Multi-family$2,008,192 13.2 %$1,538,762 10.6 %
Commercial real estate2,226,560 14.6 1,895,086 13.1 
Commercial & industrial (1)2,471,823 16.2 2,132,160 14.7 
Construction2,495,961 16.3 2,403,276 16.6 
Land - acquisition & development185,024 1.2 193,745 1.3 
Total commercial loans9,387,560 61.5 8,163,029 56.3 
Consumer loans
Single-family residential4,828,535 31.6 5,304,689 36.7 
Construction - custom678,469 4.5 674,879 4.7 
   Land - consumer lot loans123,351 0.8 102,263 0.7 
   HELOC144,528 0.9 139,703 1.0 
   Consumer103,145 0.7 83,159 0.6 
Total consumer loans5,878,028 38.5 6,304,693 43.7 
Total gross loans15,265,588 100 %14,467,722 100 %
   Less:
      Allowance for credit losses on loans172,653 166,955 
      Loans in process1,982,225 1,456,072 
      Net deferred fees, costs and discounts75,287 52,378 
Total loan contra accounts2,230,165 1,675,405 
Net loans$13,035,423 $12,792,317 

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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


(1) Includes $711,405,000 and $762,004,000 of SBA Payroll Protection Program loans as of March 31, 2021 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 March 31, 2021, and September 30, 2020, AIR for loans totaled $48,676,000 and $48,704,000, respectively, and is included in the “accrued interest receivable” line item on the Company’s consolidated statements of financial condition.
Loans in the amount of $6,314,864,000 and $5,361,504,000 at March 31, 2021 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 FHLB does not have the right to sell or re-pledge these loans.
The following table sets forth the amortized cost basis of non-accrual loans and loans 90 days or more past due and accruing.
 March 31, 2021September 30, 2020
 (In thousands, except ratio data)
Non-accrualNon-accrual with no ACL90 days or more past due and accruingNon-accrualNon-accrual with no ACL90 days or more past due and accruing
Commercial loans
Multi-family$0 $0 $0 $0 $0 $0 
Commercial real estate9,226 0 0 3,771 0 0 
Commercial & industrial832 0 0 329 0 0 
Construction1,423 0 0 1,669 0 0 
Land - acquisition & development2,340 0 0 0 0 0 
   Total commercial loans13,821 0 0 5,769 0 0 
Consumer loans
Single-family residential25,599 0 0 22,431 0 933 
Construction - custom0 0 0 0 0 0 
Land - consumer lot loans177 0 0 243 0 0 
HELOC306 0 0 553 0 0 
Consumer52 0 0 60 0 17 
   Total consumer loans26,134 0 0 23,287 0 950 
Total non-accrual loans$39,955 $0 $0 $29,056 $0 $950 
% of total loans0.30 %0.22 %

The Company recognized interest income on non-accrual loans of approximately $5,228,000 in the six months ended March 31, 2021. Had these loans been on accrual status and performed according to their original contract terms, the Company would have recognized interest income of approximately $769,000 for the six months ended March 31, 2021. Recognized interest income for the six months ended March 31, 2021 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.

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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


The following tables provide details regarding loan delinquencies by loan portfolio and class.
March 31, 2021Days Delinquent Based on $ Amount of Loans% based
on $
Type of LoanLoans Receivable (Amortized Cost)Current306090Total Delinquent
(In thousands, except ratio data)
Commercial Loans
Multi-family$1,987,120 $1,986,645 $0 $475 $0 $475 0.02 %
Commercial real estate2,211,065 2,206,097 37 111 4,820 4,968 0.22 
Commercial & industrial2,452,585 2,450,623 1,175 0 787 1,962 0.08 
Construction925,017 923,864 0 0 1,153 1,153 0.12 
Land - acquisition & development150,311 147,971 0 0 2,340 2,340 1.56 
   Total commercial loans7,726,098 7,715,200 1,212 586 9,100 10,898 0.14 
Consumer Loans
Single-family residential4,802,575 4,776,367 5,868 960 19,380 26,208 0.55 
Construction - custom308,831 308,831 0 0 0 0 0 
Land - consumer lot loans122,211 121,858 93 185 75 353 0.29 
HELOC145,066 144,667 118 0 281 399 0.28 
Consumer103,294 102,979 174 2 139 315 0.30 
   Total consumer loans5,481,977 5,454,702 6,253 1,147 19,875 27,275 0.50 
Total Loans$13,208,075 $13,169,902 $7,465 $1,733 $28,975 $38,173 0.29 %
Delinquency %99.71%0.06%0.01%0.22%0.29%


September 30, 2020Days Delinquent Based on $ Amount of Loans% based
on $
Type of LoanLoans Receivable (Amortized Cost)Current306090Total Delinquent
(In thousands, except ratio data)
Commercial Loans
Multi-family$1,538,240 $1,538,240 $0 $0 $0 $0 0 %
Commercial real estate1,884,688 1,884,210 0 195 283 478 0.03 
Commercial & industrial2,115,513 2,114,650 0 583 280 863 0.04 
Construction1,352,414 1,350,752 0 0 1,662 1,662 0.12 
Land - acquisition & development153,571 153,571 0 0 0 0 0 
  Total commercial loans7,044,426 7,041,423 0 778 2,225 3,003 0.04 
Consumer Loans
Single-family residential5,293,962 5,267,608 3,922 3,108 19,324 26,354 0.50 
Construction - custom295,953 295,953 0 0 0 0 0 
Land - consumer lot loans101,394 101,029 152 0 213 365 0.36 
HELOC140,222 139,491 275 76 380 731 0.52 
Consumer83,315 82,959 121 11 224 356 0.43 
  Total consumer loans5,914,846 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%


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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. Fiscal 2021 year to date we have assisted over 2,000 small businesses with $235,000,000 in PPP loans.
The Company has actively worked 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 March 31, 2021, 45 mortgage loans totaling $14,000,000 and 10 commercial loans totaling $89,000,000 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 March 31, 2020, 97.2% of the Company's $104,019,000 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 March 31, 2020,2021, 97.7% of the Company's $78,282,000 in TDRs were classified as performing. As of March 31, 2021, single-family residential loans comprised 93.3%92.6% of TDRs.

The Company reserves for restructuredWe evaluate the credit quality of our loans within its allowance for loan loss methodology by taking into account the following performance indicators: 1) time since modification, 2) current payment status and 3) geographic area.


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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 March 31, 2020Beginning
Allowance		Charge-offsRecoveriesProvision &
Transfers		Ending
Allowance
 (In thousands)
Single-family residential$30,700  $—  $192  $(1,612) $29,280  
Construction32,292  —  5  1,986  34,283  
Construction - custom1,399  —  —  181  1,580  
Land - acquisition & development8,746  —  126  (139) 8,733  
Land - consumer lot loans2,090  (77) 476  (383) 2,106  
Multi-family7,404  —  —  1,163  8,567  
Commercial real estate13,035  (13) 1,020  978  15,020  
Commercial & industrial33,540  (129) 57  2,967  36,435  
HELOC1,104  —  1  177  1,282  
Consumer2,203  (230) 360  (118) 2,215  
$132,513  $(449) $2,237  $5,200  $139,501  

Three Months Ended March 31, 2019Beginning
Allowance		Charge-offsRecoveriesProvision &
Transfers		Ending
Allowance
 (In thousands)
Single-family residential$31,484  $(150) $310  $(168) $31,476  
Construction31,463  —  —  1,933  33,396  
Construction - custom1,926  —  —  50  1,976  
Land - acquisition & development9,156  —  1,300  (722) 9,734  
Land - consumer lot loans2,144  (48) —  (20) 2,076  
Multi-family7,884  —  —  (490) 7,394  
Commercial real estate12,711  —  244  (507) 12,448  
Commercial & industrial30,279  (285) 24  556  30,574  
HELOC1,064  (200) 43  175  1,082  
Consumer3,054  (332) 265  (57) 2,930  
$131,165  $(1,015) $2,186  $750  $133,086  


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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


Six Months Ended March 31, 2020Beginning
Allowance		Charge-offsRecoveriesProvision &
Transfers		Ending
Allowance
 (In thousands)
Single-family residential$30,988  $(15) $453  $(2,146) $29,280  
Construction32,304  —  59  1,920  34,283  
Construction - custom1,369  —  —  211  1,580  
Land - acquisition & development9,155  (11) 1,586  (1,997) 8,733  
Land - consumer lot loans2,143  (147) 486  (376) 2,106  
Multi-family7,391  —  498  678  8,567  
Commercial real estate13,170  (111) 1,388  573  15,020  
Commercial & industrial31,450  (179) 201  4,963  36,435  
HELOC1,103  —  94  85  1,282  
Consumer2,461  (604) 669  (311) 2,215  
$131,534  $(1,067) $5,434  $3,600  $139,501  

Six Months Ended March 31, 2019Beginning
Allowance		Charge-offsRecoveriesProvision &
Transfers		Ending
Allowance
 (In thousands)
Single-family residential$33,033  $(175) $539  $(1,921) $31,476  
Construction31,317  —  —  2,079  33,396  
Construction - custom1,842  —  —  134  1,976  
Land - acquisition & development7,978  —  3,082  (1,326) 9,734  
Land - consumer lot loans2,164  (120) 265  (233) 2,076  
Multi-family8,329  —  —  (935) 7,394  
Commercial real estate11,852  (339) 770  165  12,448  
Commercial & industrial28,702  (464) 58  2,278  30,574  
HELOC781  (1,086) 44  1,343  1,082  
Consumer3,259  (472) 477  (334) 2,930  
$129,257  $(2,656) $5,235  $1,250  $133,086  


Primarily due to the economic distress caused by the COVID-19 pandemic, the Company recorded a $6,200,000 provision for credit losses for the three months ended March 31, 2020, compared with a $750,000 provision for the three months ended March 31, 2019. The relatively significant provision in the current year quarter primarily relates to estimated impacts to the energy, hospitality, restaurant and senior living industries. A provision for credit losses of $5,200,000 and $250,000 was recorded during the six months ended March 31, 2020 and March 31, 2019, respectively. Reserving for new loan originations has been largely offset by recoveries of previously charged-off loans. Recoveries, net of charge-offs, totaled $1,788,000 for the three months ended March 31, 2020, compared to net recoveries of $1,171,000 during the three months ended March 31, 2019. Recoveries, net of charge-offs, totaled $4,367,000 for the six months ended March 31, 2020, compared to net recoveries of $2,579,000 during the six months ended March 31, 2019.

Non-performing assets were $41,387,000, or 0.24% of total assets, at March 31, 2020, compared to $43,826,000, or 0.27% of total assets, at September 30, 2019. Non-accrual loans were $32,610,000 at March 31, 2020, compared to $33,731,000 at September 30, 2019. Delinquencies, as a percent of total loans, were 0.33% at March 31, 2020, compared to 0.29% at September 30, 2019.

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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.
March 31, 2020Loans Collectively Evaluated for ImpairmentLoans Individually Evaluated for Impairment
 Allowance AllocationRecorded Investment of LoansRatioAllowance AllocationRecorded Investment of LoansRatio
 (In thousands, except ratio data)(In thousands, except ratio data)
Single-family residential$29,280  $5,566,786  0.5 %$—  $19,606  0.0 %
Construction34,283  1,232,378  2.8  —  3,353  —  
Construction - custom1,580  270,880  0.6  —  —  —  
Land - acquisition & development8,732  152,541  5.7  1  82  1.2  
Land - consumer lot loans2,106  92,881  2.3  —  372  0.0  
Multi-family8,566  1,466,892  0.6  1  316  0.3  
Commercial real estate15,016  1,708,240  0.9  4  9,295  —  
Commercial & industrial36,432  1,370,838  2.7  3  855  0.4  
HELOC1,282  144,119  0.9  —  876  0.0  
Consumer2,215  104,527  2.1  —  —  0.0  
$139,492  $12,110,082  1.2 %$9  $34,755  — %

September 30, 2019Loans Collectively Evaluated for ImpairmentLoans Individually Evaluated for Impairment
 Allowance AllocationRecorded Investment of LoansRatioAllowance AllocationRecorded Investment of LoansRatio
 (In thousands, except ratio data)(In thousands, except ratio data)
Single-family residential$30,988  $5,822,200  0.5 %$—  $17,978  0.0 %
Construction32,304  1,164,889  2.8  —  —  —  
Construction - custom1,369  255,505  0.5  —  —  —  
Land - acquisition & development9,135  160,964  5.7  20  230  8.7  
Land - consumer lot loans2,143  95,574  2.2  —  375  0.0  
Multi-family7,387  1,422,266  0.5  4  385  1.0  
Commercial real estate12,847  1,618,406  0.8  323  12,765  2.5  
Commercial & industrial31,358  1,266,913  2.5  92  1,805  5.1  
HELOC1,103  140,378  0.8  —  837  0.0  
Consumer2,461  129,527  1.9  —  50  0.0  
$131,095  $12,076,622  1.1 %$439  $34,425  1.3 %

As of March 31, 2020, $139,492,000 of the allowance was calculated under the Company's general allowance methodology and the remaining $9,000 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 itsregulatory risk rating, size or potential risk of loss. The construction, land, multi-family, commercial real estateratings and commercial and industrial loans are risk rated on a
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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 March 31, 2021.
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The following tables provide information on loans based on risk rating categories as defined above.
Term Loans Amortized Cost Basis by Origination Year
YTD 20212020201920182017Prior to 2017Revolving LoansRevolving to Term LoansTotal Loans
Commercial loans
Multi-family
Pass$267,297 $507,301 $248,237 $295,532 $247,043 $344,441 $8,221 $0 $1,918,072 
Special Mention0 1,769 0 4,039 2,844 1,934 0 0 10,586 
Substandard0 0 7,546 651 3,746 46,519 0 0 58,462 
Total$267,297 $509,070 $255,783 $300,222 $253,633 $392,894 $8,221 $0 $1,987,120 
Commercial real estate
Pass$252,949 $443,877 $282,617 $274,651 $240,058 $440,678 $2,203 $0 $1,937,033 
Special Mention0 194 4,432 33,380 1,697 23,144 0 0 62,847 
Substandard0 9,012 69,855 22,619 47,503 62,196 0 0 211,185 
Total$252,949 $453,083 $356,904 $330,650 $289,258 $526,018 $2,203 $0 $2,211,065 
Commercial & industrial
Pass$547,764 $631,137 $57,479 $52,576 $78,044 $159,841 $635,066 $11,944 $2,173,851 
Special Mention0��9,798 6,785 630 18 0 31,636 0 48,867 
Substandard12,363 48,216 4,126 6,443 94 48,126 110,227 272 229,867 
Total$560,127 $689,151 $68,390 $59,649 $78,156 $207,967 $776,929 $12,216 $2,452,585 
Construction
Pass$136,932 $311,836 $270,277 $67,312 $0 $0 $94,845 $0 $881,202 
Substandard0 4,321 2,348 0 37,146 0 0 0 43,815 
Total$136,932 $316,157 $272,625 $67,312 $37,146 $0 $94,845 $0 $925,017 
Land - acquisition & development
Pass$22,127 $39,505 $28,645 $18,007 $14,789 $4,011 $5,314 $0 $132,398 
Special Mention0 0 0 0 0 15,573 0 0 15,573 
Substandard0 0 0 0 2,340 0 0 0 2,340 
Total$22,127 $39,505 $28,645 $18,007 $17,129 $19,584 $5,314 $0 $150,311 
Total commercial loans
Pass$1,227,069 $1,933,656 $887,255 $708,078 $579,934 $948,971 $745,649 $11,944 $7,042,556 
Special Mention0 11,761 11,217 38,049 4,559 40,651 31,636 0 137,873 
Substandard12,363 61,549 83,875 29,713 90,829 156,841 110,227 272 545,669 
Total$1,239,432 $2,006,966 $982,347 $775,840 $675,322 $1,146,463 $887,512 $12,216 $7,726,098 

March 31, 2020Internally Assigned Grade
 PassSpecial mentionSubstandardDoubtfulLossTotal Gross Loans
 (In thousands, except ratio data)
Loan type
  Single-family residential$5,557,959  $—  $24,285  $—  $—  $5,582,244  
  Construction2,200,930  —  3,353  —  —  2,204,283  
  Construction - custom547,731  —  —  —  —  547,731  
  Land - acquisition & development194,587  —  2,423  —  —  197,010  
  Land - consumer lot loans95,901  —  678  —  —  96,579  
  Multi-family1,462,588  4,643  —  —  —  1,467,231  
  Commercial real estate1,694,801  2,718  20,016  —  —  1,717,535  
  Commercial & industrial1,302,665  1,621  66,828  14  —  1,371,128  
  HELOC144,697  —  1,064  —  —  145,761  
  Consumer105,147  —  —  —  —  105,147  
Total gross loans$13,307,006  $8,982  $118,647  $14  $—  $13,434,649  
Total grade as a % of total gross loans99.05 %0.07 %0.88 %0.00 %— %
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Term Loans Amortized Cost Basis by Origination Year
YTD 20212020201920182017Prior to 2017Revolving LoansRevolving to Term LoansTotal Loans
Consumer loans
Single-family residential
Current$499,799 $825,204 $512,811 $458,566 $514,115 $1,965,872 $0 $0 $4,776,367 
30 days past due0 0 0 115 0 5,753 0 0 5,868 
60 days past due0 0 0 0 0 960 0 0 960 
90+ days past due0 0 0 466 169 18,745 0 0 19,380 
Total$499,799 $825,204 $512,811 $459,147 $514,284 $1,991,330 $0 $0 $4,802,575 
Construction - custom
Current$50,146 $242,667 $14,955 $1,063 $0 $0 $0 $0 $308,831 
Total$50,146 $242,667 $14,955 $1,063 $0 $0 $0 $0 $308,831 
Land - consumer lot loans
Current$41,526 $35,849 $13,856 $5,304 $6,565 $18,758 $0 $0 $121,858 
30 days past due0 0 0 0 0 93 0 0 93 
60 days past due0 0 0 185 0 0 0 0 185 
90+ days past due0 0 0 0 0 75 0 0 75 
Total$41,526 $35,849 $13,856 $5,489 $6,565 $18,926 $0 $0 $122,211 
HELOC
Current$0 $0 $0 $0 $0 $5,917 $137,531 $1,219 $144,667 
30 days past due0 0 0 0 0 93 25 0 118 
90+ days past due0 0 0 0 0 30 251 0 281 
Total$0 $0 $0 $0 $0 $6,040 $137,807 $1,219 $145,066 
Consumer
Current$10,891 $8,245 $1,011 $45,983 $0 $14,000 $22,849 $0 $102,979 
30 days past due0 0 5 0 75 94 0 0 174 
60 days past due0 0 2 0 0 0 0 0 2 
90+ days past due0 0 37 0 96 6 0 0 139 
Total$10,891 $8,245 $1,055 $45,983 $171 $14,100 $22,849 $0 $103,294 
Total consumer loans
Current$602,362 $1,111,965 $542,633 $510,916 $520,680 $2,004,547 $160,380 $1,219 $5,454,702 
30 days past due0 0 5 115 75 6,033 25 0 6,253 
60 days past due0 0 2 185 0 960 0 0 1,147 
90+ days past due0 0 37 466 265 18,856 251 0 19,875 
Total$602,362 $1,111,965 $542,677 $511,682 $521,020 $2,030,396 $160,656 $1,219 $5,481,977 


September 30, 2019Internally Assigned Grade
 PassSpecial mentionSubstandardDoubtfulLossTotal Gross Loans
 (In thousands, except ratio data)
Loan type
 Single-family residential$5,808,444  $—  $26,750  $—  $—  $5,835,194  
 Construction2,038,052  —  —  —  —  2,038,052  
 Construction - custom540,741  —  —  —  —  540,741  
 Land - acquisition & development200,283  —  3,824  —  —  204,107  
 Land - consumer lot loans98,828  —  866  —  —  99,694  
 Multi-family1,418,837  —  3,837  —  —  1,422,674  
 Commercial real estate1,602,634  2,754  25,782  —  —  1,631,170  
 Commercial & industrial1,229,891  18,125  20,679  —  —  1,268,695  
 HELOC141,271  —  907  —  —  142,178  
 Consumer129,872  —  11  —  —  129,883  
Total gross loans$13,208,853  $20,879  $82,656  $—  $—  $13,312,388  
Total grade as a % of total gross loans99.22 %0.16 %0.62 %— %— %
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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 March 31, 2021Beginning AllowanceCharge-offsRecoveriesProvision &
Transfers		Ending Allowance
 (In thousands)
Commercial loans
   Multi-family$14,363 $0 $0 $3,413 $17,776 
   Commercial real estate23,496 0 1,457 1,869 26,822 
   Commercial & industrial44,317 (18)11 3,484 47,794 
   Construction26,365 0 0 (3,816)22,549 
   Land - acquisition & development10,666 0 410 (573)10,503 
      Total commercial loans119,207 (18)1,878 4,377 125,444 
Consumer loans
   Single-family residential38,613 (106)497 (3,896)35,108 
   Construction - custom3,594 0 0 (346)3,248 
   Land - consumer lot loans2,958 0 7 327 3,292 
   HELOC2,362 0 0 (136)2,226 
   Consumer3,455 (84)290 (326)3,335 
      Total consumer loans50,982 (190)794 (4,377)47,209 
Total loans$170,189 $(208)$2,672 $0 $172,653 


Three Months Ended March 31, 2020Beginning AllowanceCharge-offsRecoveries
Provision &
Transfers (1)
Ending Allowance
 (In thousands)
Commercial loans
   Multi-family$10,506 $0 $0 $1,236 $11,742 
   Commercial real estate13,067 (13)1,020 565 14,639 
   Commercial & industrial33,676 (129)57 4,972 38,576 
   Construction21,919 0 5 1,424 23,348 
   Land - acquisition & development10,413 0 126 (140)10,399 
      Total commercial loans89,581 (142)1,208 8,057 98,704 
Consumer loans
   Single-family residential46,356 0 192 268 46,816 
   Construction - custom2,930 0 0 245 3,175 
   Land - consumer lot loans2,567 (77)476 (388)2,578 
   HELOC2,034 0 1 211 2,246 
   Consumer4,045 (230)360 (593)3,582 
      Total consumer loans57,932 (307)1,029 (257)58,397 
Total loans$147,513 $(449)$2,237 $7,800 $157,101 

(1) Provision & transfer amounts within the table do not include the provision for unfunded commitments of $400,000
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The following tables provide information on gross loans based on borrower payment activity.
Six Months Ended March 31, 2021Beginning AllowanceCharge-offsRecoveries
Provision &
Transfers (1)
Ending Allowance
 (In thousands)
Commercial loans
   Multi-family$13,853 $0 $0 $3,923 $17,776 
   Commercial real estate22,516 0 2,246 2,060 26,822 
   Commercial & industrial38,665 (20)61 9,088 47,794 
   Construction24,156 0 0 (1,607)22,549 
   Land - acquisition & development10,733 0 445 (675)10,503 
      Total commercial loans109,923 (20)2,752 12,789 125,444 
Consumer loans
   Single-family residential45,186 (106)1,276 (11,248)35,108 
   Construction - custom3,555 0 0 (307)3,248 
   Land - consumer lot loans2,729 0 14 549 3,292 
   HELOC2,571 0 0 (345)2,226 
   Consumer2,991 (234)516 62 3,335 
      Total consumer loans57,032 (340)1,806 (11,289)47,209 
Total loans$166,955 $(360)$4,558 $1,500 $172,653 
(1) Provision & transfer amounts within the table do not include the provision for unfunded commitments of $1,500,000

March 31, 2020Performing LoansNon-Performing Loans
Six Months Ended March 31, 2020Six Months Ended March 31, 2020Beginning AllowanceCharge-offsRecoveries
Provision &
Transfers (1)
Ending Allowance
Amount% of Total
Gross  Loans		Amount% of Total
Gross  Loans		 (In thousands)
(In thousands, except ratio data)
Single-family residential$5,559,385  99.6 %$22,859  0.4 %
Construction2,200,930  99.8  3,353  0.2  
Construction - custom547,731  100.0  —  —  
Land - acquisition & development196,928  100.0  82  0.0  
Land - consumer lot loans96,171  99.6  408  0.4  
Commercial loansCommercial loans
Multi-familyMulti-family1,467,231  100.0  —  —   Multi-family$10,404 $0 $498 $840 $11,742 
Commercial real estateCommercial real estate1,713,161  99.7  4,374  0.3   Commercial real estate13,024 (111)1,388 338 14,639 
Commercial & industrialCommercial & industrial1,370,658  100.0  470  0.0   Commercial & industrial32,235 (179)201 6,319 38,576 
Construction Construction22,768 0 59 521 23,348 
Land - acquisition & development Land - acquisition & development10,904 (11)1,586 (2,080)10,399 
Total commercial loans Total commercial loans89,335 (301)3,732 5,938 98,704 
Consumer loansConsumer loans
Single-family residential Single-family residential47,771 (15)453 (1,393)46,816 
Construction - custom Construction - custom2,880 0 0 295 3,175 
Land - consumer lot loans Land - consumer lot loans2,635 (147)486 (396)2,578 
HELOCHELOC144,697  99.3  1,064  0.7   HELOC2,048 0 94 104 2,246 
ConsumerConsumer105,147  100.0  —  0.0   Consumer4,615 (604)669 (1,098)3,582 
$13,402,039  99.8 %$32,610  0.2 %
Total consumer loans Total consumer loans59,949 (766)1,702 (2,488)58,397 
Total loansTotal loans$149,284 $(1,067)$5,434 $3,450 $157,101 
(1) Provision & transfer amounts within the table do not include the provision for unfunded commitments of $1,000,000

September 30, 2019Performing LoansNon-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 %
Construction2,038,052  100.0  —  —  
Construction - custom540,741  100.0  —  —  
Land - acquisition & development203,938  99.9  169  0.1  
Land - consumer lot loans99,448  99.8  246  0.2  
Multi-family1,422,674  100.0  —  —  
Commercial real estate1,625,335  99.6  5,835  0.4  
Commercial & industrial1,267,403  99.9  1,292  0.1  
HELOC141,271  99.4  907  0.6  
Consumer129,872  100.0  11  0.0  
$13,278,657  99.7 %$33,731  0.3 %

The Company recorded no provision for credit losses for the three months ended March 31, 2021, compared with a provision for credit losses of $8,200,000 for the three months ended March 31, 2020. The relatively large credit loss provision for the three months ended March 31, 2020 is primarily due to the onset of the global pandemic. The Company recorded a provision
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for credit losses of $3,000,000 for the six months ended March 31, 2021, compared with a provision for credit losses of $4,450,000 for the six months ended March 31, 2020. Recoveries, net of charge-offs, totaled $2,464,000 for the three months ended March 31, 2021, compared to net recoveries of $1,788,000 during the three months ended March 31, 2020. Recoveries, net of charge-offs, totaled $4,198,000 for the six months ended March 31, 2021, compared to net recoveries of $4,367,000 during the six months ended March 31, 2020. NaN allowance was recorded as of March 31, 2021 or as of September 30, 2020 for the $695,752,000 and $745,081,000 of 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 $48,943,000, or 0.25% of total assets, at March 31, 2021, compared to $37,695,000, or 0.20% of total assets, at September 30, 2020. Non-accrual loans were $39,955,000 at March 31, 2021, compared to $29,056,000 at September 30, 2020. Delinquencies, as a percent of total loans, were 0.29% at March 31, 2021, 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 informationthe amortized cost of loans receivable based on impaired loan balances and the related allowances by loan types.risk rating categories as previously defined.

March 31, 2020Recorded
Investment		Unpaid
Principal
Balance		Related
Allowance		Average Recorded Investment
(Year-To-Date)
 (In thousands)
Impaired loans with no related allowance recorded:
Single-family residential$16,523  $17,440  $—  $17,002  
Construction3,434  3,434  —  1,145  
Land - acquisition & development—  —  —  26  
Land - consumer lot loans280  350  —  298  
Commercial real estate7,412  11,753  —  7,376  
Commercial & industrial458  464  —  670  
HELOC799  799  —  668  
Consumer—  —  —  17  
28,906  34,240  —  27,202  
Impaired loans with an allowance recorded:
Single-family residential97,024  99,317  1,097  103,743  
Land - acquisition & development82  149  1  86  
Land - consumer lot loans3,418  3,583  —  3,510  
Multi-family316  316  1  360  
Commercial real estate1,883  1,883  4  3,096  
Commercial & industrial397  514  3  411  
HELOC843  859  —  911  
Consumer56  56  —  58  
104,019  106,677  1,106  (1) 112,175  
Total impaired loans:
Single-family residential113,547  116,757  1,097  120,745  
Construction3,434  3,434  —  1,145  
Land - acquisition & development82  149  1  112  
Land - consumer lot loans3,698  3,933  —  3,808  
Multi-family316  316  1  360  
Commercial real estate9,295  13,636  4  10,472  
Commercial & industrial855  978  3  1,081  
HELOC1,642  1,658  —  1,579  
Consumer56  56  —  75  
$132,925  $140,917  $1,106  (1) $139,377  

(1)Includes $9,000 of specific reserves and $1,097,000 included in the general reserves.
March 31, 2021Internally Assigned Grade
 PassSpecial mentionSubstandardDoubtfulLossTotal
 (In thousands, except ratio data)
Loan type
Commercial loans
  Multi-family$1,918,072 $10,586 $58,462 $0 $0 $1,987,120 
  Commercial real estate1,937,033 62,847 211,185 0 0 2,211,065 
  Commercial & industrial2,173,851 48,867 229,867 0 0 2,452,585 
  Construction881,202 0 43,815 0 0 925,017 
  Land - acquisition & development132,398 15,573 2,340 0 0 150,311 
    Total commercial loans7,042,556 137,873 545,669 0 0 7,726,098 
Consumer loans
  Single-family residential4,773,261 189 29,125 0 0 4,802,575 
  Construction - custom308,831 0 0 0 0 308,831 
  Land - consumer lot loans122,034 0 177 0 0 122,211 
  HELOC143,167 0 1,899 0 0 145,066 
  Consumer103,274 0 20 0 0 103,294 
    Total consumer loans5,450,567 189 31,221 0 0 5,481,977 
Total$12,493,123 $138,062 $576,890 $0 $0 $13,208,075 
Total grade as a % of total loans94.59 %1.05 %4.37 %0 %0 %


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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


September 30, 2019Recorded
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 & development78  143  —  290  
Land - consumer lot loans344  848  —  287  
Multi-family—  —  —  286  
Commercial real estate7,467  11,881  —  8,890  
Commercial & industrial1,114  5,312  —  7,168  
HELOC837  931  —  597  
Consumer50  119  —  23  
27,869  38,486  —  35,649  
Impaired loans with an allowance recorded:
Single-family residential112,042  114,609  2,208  125,976  
Land - acquisition & development91  152  —  99  
Land - consumer lot loans3,556  3,695  20  4,324  
Multi-family385  385  4  418  
Commercial real estate4,168  5,298  323  5,160  
Commercial & industrial426  691  92  2,535  
HELOC949  963  —  961  
Consumer60  282  —  65  
121,677  126,075  2,647  (1) 139,538  
Total impaired loans:
Single-family residential130,021  133,861  2,208  142,661  
Construction—  —  —  1,172  
Construction - custom—  —  —  251  
Land - acquisition & development169  295  —  389  
Land - consumer lot loans3,900  4,543  20  4,611  
Multi-family385  385  4  704  
Commercial real estate11,635  17,179  323  14,050  
Commercial & industrial1,540  6,003  92  9,703  
HELOC1,786  1,894  —  1,558  
Consumer110  401  —  88  
$149,546  $164,561  $2,647  (1) $175,187  

September 30, 2020Internally Assigned Grade
 PassSpecial mentionSubstandardDoubtfulLossTotal 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 estate1,681,230 92,184 111,274 0 0 1,884,688 
  Commercial & industrial1,898,709 64,695 152,109 0 0 2,115,513 
  Construction1,187,786 61,178 103,450 0 0 1,352,414 
  Land - acquisition & development137,998 15,573 0 0 0 153,571 
    Total commercial loans6,412,415 247,351 384,660 0 0 7,044,426 
Consumer loans
  Single-family residential5,270,666 192 23,104 0 0 5,293,962 
  Construction - custom295,953 0 0 0 0 295,953 
  Land - consumer lot loans101,151 0 243 0 0 101,394 
  HELOC139,646 0 576 0 0 140,222 
  Consumer83,304 0 11 0 0 83,315 
    Total consumer loans5,890,720 192 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 loans94.94 %1.91 %3.15 %0 %0 %

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

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The following tables provide information on amortized cost of loans receivable based on borrower payment activity.

March 31, 2021Performing LoansNon-Performing Loans
 Amount% of Total
Loans		Amount% of Total
Loans
 (In thousands, except ratio data)
Commercial loans
   Multi-family$1,987,120 100.0 %$0 0 %
   Commercial real estate2,201,839 99.6 9,226 0.4 
   Commercial & industrial2,451,753 100.0 832 0 
   Construction923,594 99.8 1,423 0.2 
   Land - acquisition & development147,971 98.4 2,340 1.6 
      Total commercial loans7,712,277 99.8 13,821 0.2 
Consumer loans
   Single-family residential4,776,976 99.5 25,599 0.5 
   Construction - custom308,831 100.0 0 0 
   Land - consumer lot loans122,034 99.9 177 0.1 
   HELOC144,760 99.8 306 0.2 
   Consumer103,242 99.9 52 0.1 
      Total consumer loans5,455,843 99.5 26,134 0.5 
Total loans$13,168,120 99.7 %$39,955 0.3 %

September 30, 2020Performing LoansNon-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 estate1,880,917 99.8 3,771 0.2 
   Commercial & industrial2,115,184 100.0 329 0 
   Construction1,350,745 99.9 1,669 0.1 
   Land - acquisition & development153,571 100.0 0 0 
      Total commercial loans7,038,657 99.9 5,769 0.1 
Consumer loans
   Single-family residential5,271,531 99.6 22,431 0.4 
   Construction - custom295,953 100.0 0 0 
   Land - consumer lot loans101,151 99.8 243 0.2 
   HELOC139,669 99.6 553 0.4 
   Consumer83,255 99.9 60 0.1 
      Total consumer loans5,891,559 99.6 23,287 0.4 
Total loans$12,930,216 99.8 %$29,056 0.2 %


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(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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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.

 March 31, 2020
 Level 1Level 2Level 3Total
 (In thousands)
Financial Assets
Available-for-sale securities:
U.S. government and agency securities$—  $338,361  $—  $338,361  
Municipal bonds—  21,997  —  21,997  
Corporate debt securities—  259,524  —  259,524  
Mortgage-backed securities
Agency pass-through certificates—  1,073,165  —  1,073,165  
Total available-for-sale securities—  1,693,047  —  1,693,047  
Client swap program hedges—  43,157  —  43,157  
Total financial assets$—  $1,736,204  $—  $1,736,204  
Financial Liabilities
Client swap program hedges$—  $43,157  $—  $43,157  
Commercial loan fair value hedges—  8,703  —  8,703  
Mortgage loan fair value hedges—  13,961  —  13,961  
Borrowings cash flow hedges—  17,189  —  17,189  
Total financial liabilities$—  $83,010  $—  $83,010  

September 30, 2019 March 31, 2021
Level 1Level 2Level 3Total Level 1Level 2Level 3Total
(In thousands) (In thousands)
Financial AssetsFinancial AssetsFinancial Assets
Available-for-sale securities:Available-for-sale securities:Available-for-sale securities:
U.S. government and agency securitiesU.S. government and agency securities$—  $270,778  $—  $270,778  U.S. government and agency securities$0 $71,512 $0 $71,512 
Asset-backed securitiesAsset-backed securities0 1,183,977 0 1,183,977 
Municipal bondsMunicipal bonds—  22,642  —  22,642  Municipal bonds0 38,669 0 38,669 
Corporate debt securitiesCorporate debt securities—  209,763  —  209,763  Corporate debt securities0 380,115 0 380,115 
Mortgage-backed securitiesMortgage-backed securitiesMortgage-backed securities
Agency pass-through certificatesAgency pass-through certificates—  982,559  —  982,559  Agency pass-through certificates0 764,629 0 764,629 
Total available-for-sale securitiesTotal available-for-sale securities—  1,485,742  —  1,485,742  Total available-for-sale securities0 2,438,902 0 2,438,902 
Client swap program hedgesClient swap program hedges—  20,381  —  20,381  Client swap program hedges0 5,104 0 5,104 
Mortgage loan fair value hedgesMortgage loan fair value hedges—  1,608  —  1,608  Mortgage loan fair value hedges0 2,135 0 2,135 
Borrowings cash flow hedgesBorrowings cash flow hedges0 59,198 0 59,198 
Total financial assetsTotal financial assets$—  $1,507,731  $—  $1,507,731  Total financial assets$0 $2,505,339 $0 $2,505,339 
Financial LiabilitiesFinancial LiabilitiesFinancial Liabilities
Client swap program hedgesClient swap program hedges$—  $20,381  $—  $20,381  Client swap program hedges$0 $5,104 $0 $5,104 
Commercial loan fair value hedgesCommercial loan fair value hedges—  4,288  —  4,288  Commercial loan fair value hedges0 4,610 0 4,610 
Borrowings cash flow hedges—  7,877  —  7,877  
Total financial liabilitiesTotal financial liabilities$—  $32,546  $—  $32,546  Total financial liabilities$0 $9,714 $0 $9,714 

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 September 30, 2020
 Level 1Level 2Level 3Total
 (In thousands)
Financial Assets
Available-for-sale securities:
U.S. government and agency securities$0 $18,824 $0 $18,824 
Asset-backed securities0 936,917 0936,917 
Municipal bonds0 38,315 0 38,315 
Corporate debt securities0 287,184 0 287,184 
Mortgage-backed securities
Agency pass-through certificates0 968,252 0 968,252 
Total available-for-sale securities0 2,249,492 0 2,249,492 
Client swap program hedges0 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 hedges0 8,492 0 8,492 
Mortgage loan fair value hedges016,061 016,061 
Borrowings cash flow hedges0 17,375 0 17,375 
Total financial liabilities$0 $90,129 $0 $90,129 

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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 ownedREO requires additional adjustments, either as a result of an updated appraised value or when there is no observable market price, the Company classifies the impairedcollateral dependent loan or real estate owned as Level 3. Level 3 assets recorded at fair value on a nonrecurring basis at March 31, 20202021 included loans for which a specific reservean 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 March 31, 20202021 and March 31, 2019,2020, 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.
 
March 31, 2020Three Months Ended March 31, 2020Six Months Ended March 31, 2020 March 31, 2021Three Months Ended March 31, 2021Six Months Ended March 31, 2021
Level 1Level  2Level  3TotalTotal Gains (Losses) Level 1Level  2Level  3TotalTotal Gains (Losses)
(In thousands)(In thousands) (In thousands)(In thousands)
Impaired loans (1)$—  $—  $810  $810  $(246) $(545) 
Loans (1)Loans (1)$0 $0 $0 $0 $(25)$(69)
Real estate owned (2)Real estate owned (2)—  —  1,675  1,675  145  143  Real estate owned (2)0 0 722 722 148 101 
Balance at end of periodBalance at end of period$—  $—  $2,485  $2,485  $(101) $(402) Balance at end of period$0 $0 $722 $722 $123 $32 

(1)The gains (losses) represent re-measurements of collateral-dependent loans.
(2)The gains (losses) represent re-measurements of REO.aggregate write-downs and charge-offs on real estate owned.

March 31, 2019Three Months Ended March 31, 2019Six Months Ended March 31, 2019March 31, 2020Three Months Ended March 31, 2020Six Months Ended March 31, 2020
Level 1Level  2Level  3TotalTotal Gains (Losses)Level 1Level  2Level  3TotalTotal Gains (Losses)
(In thousands)(In thousands)(In thousands)(In thousands)
Impaired loans (1)$—  $—  $3,316  $3,316  $(511) $(1,237) 
Loans (1)Loans (1)$0 $0 $810 $810 $(246)$(545)
Real estate owned (2)Real estate owned (2)—  —  2,550  2,550  431  399  Real estate owned (2)0 0 1,675 1,675 145 143 
Balance at end of periodBalance at end of period$—  $—  $5,866  $5,866  $(80) $(838) Balance at end of period$0 $0 $2,485 $2,485 $(101)$(402)

(1)The gains (losses) represent re-measurements of collateral-dependent loans.
(2)The gains (losses) represent re-measurementsaggregate write-downs and charge-offs on real estate owned.
At March 31, 2021, there were $676,000 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 $3,134,000.
Fair Values of Financial Instruments
FASB ASC 825, Financial Instruments ("ASC 825") requires disclosure of fair value information about financial instruments, whether or not recognized on the statement of financial condition, for which it is practicable to estimate those values. Certain financial instruments and all non-financial instruments are excluded from the disclosure requirements. Accordingly, the aggregate fair value estimates presented do not reflect the underlying fair value of the Company. Although management is not aware of any factors that would materially affect the estimated fair value amounts presented below, such amounts have not been
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comprehensively revalued for purposes of these financial statements since the dates shown, and therefore, estimates of fair value subsequent to those dates may differ significantly from the amounts presented below. 
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March 31, 2020September 30, 2019 March 31, 2021September 30, 2020
Level in Fair Value HierarchyCarrying
Amount		Estimated
Fair Value		Carrying
Amount		Estimated
Fair Value		 Level in Fair Value HierarchyCarrying
Amount		Estimated
Fair Value		Carrying
Amount		Estimated
Fair Value
($ in thousands) ($ in thousands)
Financial assetsFinancial assetsFinancial assets
Cash and cash equivalentsCash and cash equivalents1$1,495,574  $1,495,574  $419,158  $419,158  Cash and cash equivalents1$2,318,447 $2,318,447 $1,702,977 $1,702,977 
Available-for-sale securitiesAvailable-for-sale securitiesAvailable-for-sale securities
U.S. government and agency securitiesU.S. government and agency securities2338,361  338,361  270,778  270,778  U.S. government and agency securities271,512 71,512 18,824 18,824 
Asset-backed securitiesAsset-backed securities21,183,977 1,183,977 936,917 936,917 
Municipal bondsMunicipal bonds221,997  21,997  22,642  22,642  Municipal bonds238,669 38,669 38,315 38,315 
Corporate debt securitiesCorporate debt securities2259,524  259,524  209,763  209,763  Corporate debt securities2380,115 380,115 287,184 287,184 
Mortgage-backed securitiesMortgage-backed securitiesMortgage-backed securities
Agency pass-through certificatesAgency pass-through certificates21,073,165  1,073,165  982,559  982,559  Agency pass-through certificates2764,629 764,629 968,252 968,252 
Total available-for-sale securitiesTotal available-for-sale securities1,693,047  1,693,047  1,485,742  1,485,742  Total available-for-sale securities2,438,902 2,438,902 2,249,492 2,249,492 
Held-to-maturity securitiesHeld-to-maturity securitiesHeld-to-maturity securities
Mortgage-backed securitiesMortgage-backed securitiesMortgage-backed securities
Agency pass-through certificatesAgency pass-through certificates2913,243  941,181  1,428,480  1,448,088  Agency pass-through certificates2489,915 503,723 698,934 720,516 
Commercial MBS Commercial MBS27,012  7,012  15,000  15,007   Commercial MBS24,174 4,174 6,904 6,852 
Total held-to-maturity securitiesTotal held-to-maturity securities920,255  948,193  1,443,480  1,463,095  Total held-to-maturity securities494,089 507,897 705,838 727,368 
Loans receivableLoans receivable311,974,241  12,328,962  11,930,575  12,617,600  Loans receivable313,035,423 13,419,101 12,792,317 13,392,089 
FHLB and FRB stockFHLB and FRB stock2155,990  155,990  123,990  123,990  FHLB and FRB stock2119,991 119,991 141,990 141,990 
Other assets - client swap program hedges Other assets - client swap program hedges243,157  43,157  20,381  20,381   Other assets - client swap program hedges25,104 5,104 48,201 48,201 
Other assets - commercial fair value loan hedges Other assets - commercial fair value loan hedges20 0 0 0 
Other assets - mortgage loan fair value hedges Other assets - mortgage loan fair value hedges2—  —  1,608  1,608   Other assets - mortgage loan fair value hedges22,135 2,135 0 0 
Other assets - borrowings cash flow hedges Other assets - borrowings cash flow hedges259,198 59,198 0 0 
Financial liabilitiesFinancial liabilitiesFinancial liabilities
Time depositsTime deposits24,424,382  4,451,266  4,906,963  4,937,847  Time deposits23,590,755 3,543,588 3,973,192 3,963,203 
FHLB advancesFHLB advances23,050,000  3,023,003  2,250,000  2,282,887  FHLB advances22,150,000 2,115,171 2,700,000 2,722,509 
Other liabilities - client swap program hedges Other liabilities - client swap program hedges243,157  43,157  20,381  20,381   Other liabilities - client swap program hedges25,104 5,104 48,201 48,201 
Other liabilities - commercial loan fair value hedgesOther liabilities - commercial loan fair value hedges24,610 4,610 8,492 8,492 
Other liabilities - mortgage loan fair value hedgesOther liabilities - mortgage loan fair value hedges213,961  13,961  —  —  Other liabilities - mortgage loan fair value hedges20 0 16,061 16,061 
Other liabilities - commercial loan fair value hedges28,703  8,703  4,288  4,288  
Other liabilities - borrowings cash flow hedges Other liabilities - borrowings cash flow hedges217,189  17,189  7,877  7,877   Other liabilities - borrowings cash flow hedges20 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
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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)


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.
 March 31, 2020
 Amortized
Cost		Gross UnrealizedFair
Value		Yield
 GainsLosses
 ($ in thousands)
Available-for-sale securities
U.S. government and agency securities due
5 to 10 years$61,083  $286  $(2,069) $59,300  1.71 %
Over 10 years286,932  —  (7,871) 279,061  1.89  
Corporate debt securities due
Within 1 year43,973  7  (4) 43,976  2.34  
1 to 5 years70,000  69  (3,222) 66,847  2.81  
5 to 10 years150,205  1,982  (3,486) 148,701  2.85  
Municipal bonds due
1 to 5 years1,445  20  —  1,465  1.96  
Over 10 years20,293  239  —  20,532  6.45  
Mortgage-backed securities
Agency pass-through certificates1,033,536  41,612  (1,983) 1,073,165  3.10  
1,667,467  44,215  (18,635) 1,693,047  2.83  
Held-to-maturity securities
Mortgage-backed securities
Agency pass-through certificates913,243  27,938  —  941,181  3.17  
Commercial MBS7,012  —  —  7,012  1.67  
920,255  27,938  —  948,193  3.16  
$2,587,722  $72,153  $(18,635) $2,641,240  2.95 %
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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


September 30, 2019 March 31, 2021
Amortized
Cost		Gross UnrealizedFair
Value		Yield Amortized
Cost		Gross UnrealizedFair
Value		Yield
GainsLosses Amortized
Cost		Fair
Value		Yield
($ in thousands)($ in thousands)
Available-for-sale securitiesAvailable-for-sale securitiesAvailable-for-sale securities
U.S. government and agency securities dueU.S. government and agency securities dueU.S. government and agency securities due
1 to 5 years1 to 5 years$54,992 $516 $0 $55,508 0.50 %
5 to 10 years5 to 10 years15,897 107 0 16,004 2.05 
Asset-backed securitiesAsset-backed securities
5 to 10 years5 to 10 years$65,287  $39  $(629) $64,697  2.43 %5 to 10 years102,141 447 (718)101,870 0.68 
Over 10 yearsOver 10 years207,067  1  (987) 206,081  3.02  Over 10 years1,071,530 10,994 (417)1,082,107 1.07 
Corporate debt securities dueCorporate debt securities dueCorporate debt securities due
Within 1 yearWithin 1 year43,903  411  —  44,314  3.65  Within 1 year31,742 126 (28)31,840 1.98 
1 to 5 years1 to 5 years70,000  689  (50) 70,639  3.29  1 to 5 years195,442 7,120 0 202,562 1.67 
5 to 10 years5 to 10 years92,931  1,879  —  94,810  3.27  5 to 10 years65,888 751 (710)65,929 3.14 
Over 10 yearsOver 10 years80,560 0 (776)79,784 3.44 
Municipal bonds dueMunicipal bonds dueMunicipal bonds due
1 to 5 years1 to 5 years1,430  14  —  1,444  1.94  1 to 5 years1,477 28 0 1,505 0 
5 to 10 years5 to 10 years5,797 275 0 6,072 0.27 
Over 10 yearsOver 10 years20,303  895  —  21,198  6.45  Over 10 years29,929 1,163 0 31,092 5.85 
Mortgage-backed securitiesMortgage-backed securitiesMortgage-backed securities
Agency pass-through certificatesAgency pass-through certificates957,150  26,533  (1,124) 982,559  3.29  Agency pass-through certificates737,281 29,622 (2,274)764,629 2.67 
1,458,071  30,461  (2,790) 1,485,742  3.27  2,392,676 51,149 (4,923)2,438,902 1.80 
Held-to-maturity securitiesHeld-to-maturity securitiesHeld-to-maturity securities
Mortgage-backed securitiesMortgage-backed securitiesMortgage-backed securities
Agency pass-through certificatesAgency pass-through certificates1,428,480  19,945  (337) 1,448,088  3.15  Agency pass-through certificates489,915 13,808 0 503,723 3.16 
Commercial MBSCommercial MBS15,000  7  —  15,007  2.89  Commercial MBS4,174 0 0 4,174 0.98 
1,443,480  19,952  (337) 1,463,095  3.15  494,089 13,808 0 507,897 3.14 
$2,901,551  $50,413  $(3,127) $2,948,837  3.21 %$2,886,765 $64,957 $(4,923)$2,946,799 2.02 %
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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


 September 30, 2020
 Amortized
Cost		Gross UnrealizedFair
Value		Yield
 GainsLosses
 ($ in thousands)
Available-for-sale securities
U.S. government and agency securities due
5 to 10 years$18,448 $376 $0 $18,824 2.05 %
Asset-backed securities
5 to 10 years38,289 0 (1,600)36,689 0.83 
Over 10 years906,489 647 (6,908)900,228 1.14 
Corporate debt securities due
Within 1 year54,209 337 (51)54,495 1.22 
1 to 5 years128,289 3,366 (428)131,227 1.78 
5 to 10 years97,157 4,305 0 101,462 1.50 
Municipal bonds due
1 to 5 years1,461 36 0 1,497 0 
Over 10 years36,044 774 0 36,818 5.40 
Mortgage-backed securities
Agency pass-through certificates929,713 39,166 (627)968,252 2.82 
2,210,099 49,007 (9,614)2,249,492 1.97 
Held-to-maturity securities
Mortgage-backed securities
Agency pass-through certificates698,934 21,582 0 720,516 3.16 
Commercial MBS6,904 0 (52)6,852 1.02 
705,838 21,582 (52)727,368 3.14 
$2,915,937 $70,589 $(9,666)$2,976,860 2.25 %


During the quarter ended March 31,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 $522,454,000 during the six months ended March 31, 2021 and purchases of $159,884,000 during the six months ended March 31, 2020 and purchases of $290,574,000 during the six months ended March 31, 2019.2020. There were 0 sales totaling $204,351,000 of available-for-sale investment securities during the six months ended March 31, 20202021 and sales of $491,000totaled $204,351,000 during the six months ended March 31, 2019.prior year same period. For held-to-maturity investment securities, there were 0 purchases during the six months ended March 31, 20202021 and 0 purchases during the six months ended March 31, 2019.2020. 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 $4,128,000 and $3,285,000 as of March 31, 2021 and September 30, 2020, respectively. For HTM debt securities, AIR totaled $1,269,000 and $1,811,000 as of March 31, 2021 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 March 31, 20202021 and September 30, 2019,2020, by length of time that individual securities in each category have been in a continuous loss position. There were 38 and 51 securities with an unrealized loss as of March 31, 2021 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.have any credit impairment.
 
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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


March 31, 2020Less than 12 months12 months or moreTotal
March 31, 2021March 31, 2021Less than 12 months12 months or moreTotal
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 securitiesAvailable-for-sale securities
Corporate debt securitiesCorporate debt securities$(1,620) $51,306  $(5,092) $75,094  $(6,712) 126,400  Corporate debt securities$(1,514)$125,191 $0 $0 $(1,514)$125,191 
U.S. government and agency securities$(5,699) $151,823  $(4,241) $165,987  $(9,940) $317,810  
Asset-backed securitiesAsset-backed securities(77)80,046 (1,058)125,681 (1,135)205,727 
Mortgage-backed securitiesMortgage-backed securities(82) 18,751  (1,901) 184,405  (1,983) 203,156  Mortgage-backed securities(1,963)55,679 (311)31,951 (2,274)87,630 
$(7,401) $221,880  $(11,234) $425,486  $(18,635) $647,366  (3,554)260,916 (1,369)157,632 (4,923)418,548 
Held-to-maturity securitiesHeld-to-maturity securities
Mortgage-backed securitiesMortgage-backed securities0 0 0 0 0 0 
$(3,554)$260,916 $(1,369)$157,632 $(4,923)$418,548 

September 30, 2019Less than 12 months12 months or moreTotal
September 30, 2020September 30, 2020Less than 12 months12 months or moreTotal
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 securitiesAvailable-for-sale securities
Corporate debt securitiesCorporate debt securities$—  $—  $(50) $24,950  $(50) $24,950  Corporate debt securities$(74)$45,875 $(405)$24,596 $(479)$70,471 
U.S. government and agency securities(656) 152,715  (960) 77,391  (1,616) 230,106  
Asset-backed securitiesAsset-backed securities(5,481)587,746 (3,027)204,369 (8,508)792,115 
Mortgage-backed securitiesMortgage-backed securities(148) 87,895  (1,313) 270,802  (1,461) 358,697  Mortgage-backed securities(278)41,897 (349)56,196 (627)98,093 
$(804) $240,610  $(2,323) $373,143  $(3,127) $613,753  (5,833)675,518 (3,781)285,161 (9,614)960,679 
Held-to-maturity securitiesHeld-to-maturity securities
Mortgage-backed securitiesMortgage-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 March 31, 2021 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 March 31, 2021 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 March 31, 20202021 and September 30, 2019.2020.

March 31, 2020Derivative AssetsDerivative Liabilities
March 31, 2021March 31, 2021Derivative AssetsDerivative Liabilities
Interest rate contract purposeInterest rate contract purposeBalance Sheet LocationNotionalFair ValueBalance Sheet LocationNotionalFair ValueInterest rate contract purposeBalance Sheet LocationNotionalFair ValueBalance Sheet LocationNotionalFair Value
(In thousands)(In thousands)(In thousands)(In thousands)
Client swap program hedgesClient swap program hedgesOther assets$471,522  $43,157  Other liabilities$471,522  $43,157  Client swap program hedgesOther assets$653,904 $5,104 Other liabilities$653,904 $5,104 
Commercial loan fair value hedgesCommercial loan fair value hedgesOther assets—  —  Other liabilities93,316  8,703  Commercial loan fair value hedgesOther assets0 0 Other liabilities90,918 4,610 
Mortgage loan fair value hedgesMortgage loan fair value hedgesOther assets—  —  Other liabilities500,000  13,961  Mortgage loan fair value hedgesOther assets500,000 2,135 Other liabilities0 0 
Borrowings cash flow hedgesBorrowings cash flow hedgesOther assets—  —  Other liabilities1,600,000  17,189  Borrowings cash flow hedgesOther assets1,200,000 59,198 Other liabilities0 0 
$471,522  $43,157  $2,664,838  $83,010  $2,353,904 $66,437 $744,822 $9,714 


September 30, 2019Derivative AssetsDerivative Liabilities
September 30, 2020September 30, 2020Derivative AssetsDerivative Liabilities
Interest rate contract purposeInterest rate contract purposeBalance Sheet LocationNotionalFair ValueBalance Sheet LocationNotionalFair ValueInterest rate contract purposeBalance Sheet LocationNotionalFair ValueBalance Sheet LocationNotionalFair Value
(In thousands)(In thousands)(In thousands)(In thousands)
Client swap program hedgesClient swap program hedgesOther assets$425,607  $20,381  Other liabilities$425,607  $20,381  Client swap program hedgesOther assets$656,074 $48,201 Other liabilities$656,074 $48,201 
Commercial loan fair value hedgesCommercial loan fair value hedgesOther assets—  —  Other liabilities95,645  4,288  Commercial loan fair value hedgesOther assets0 0 Other liabilities93,316 8,492 
Mortgage loan fair value hedgesMortgage loan fair value hedgesOther assets200,000  1,608  Other liabilities—  —  Mortgage loan fair value hedgesOther assets0 0 Other liabilities500,000 16,061 
Borrowings cash flow hedgesBorrowings cash flow hedgesOther assets—  —  Other liabilities700,000  7,877  Borrowings cash flow hedgesOther assets0 0 Other liabilities1,600,000 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 March 31, 20202021 and September 30, 2019.2020.

March 31, 2020
(In thousands)(In thousands)March 31, 2021
Balance sheet line item in which hedged item is recordedBalance sheet line item in which hedged item is recordedCarrying value of hedged itemsCumulative gain (loss) fair value hedge adjustment included in carrying amount of hedged itemsBalance sheet line item in which hedged item is recordedCarrying value of hedged itemsCumulative gain (loss) fair value hedge adjustment included in carrying amount of hedged items
(In thousands)
Loans receivable (1) (2)Loans receivable (1) (2)$3,140,304  $22,832  Loans receivable (1) (2)$1,934,688 $2,831 
$3,140,304  $22,832  $1,934,688 $2,831 

(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 March 31, 2020,2021, the amortized cost basis of the closed loan portfolios used in the hedging relationships was $1,839,169,000, the cumulative basis adjustment associated with the hedging relationships was $(1,929,000), and the amount of the designated hedged items was $500,000,000.
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(UNAUDITED)


amortized cost basis of the closed loan portfolios used in the hedging relationships was $3,037,918,000, the cumulative basis adjustment associated with the hedging relationships was $13,950,000, and the amount of the designated hedged items was $500,000,000.

(2) Includes the amortized cost basis of commercial loans designated in fair value hedging relationships. At March 31, 2020,2021, the amortized cost basis of the hedged commercial loans was $102,386,000$95,519,000 and the cumulative basis adjustment associated with the hedging relationships was $8,882,000.$4,760,000.

September 30, 2019
(In thousands)(In thousands)September 30, 2020
Balance sheet line item in which hedged item is recordedBalance sheet line item in which hedged item is recordedCarrying value of hedged itemsCumulative gain (loss) fair value hedge adjustment included in carrying amount of hedged itemsBalance sheet line item in which hedged item is recordedCarrying value of hedged itemsCumulative 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 six months ended March 31, 2021, $200,000,000 of cash flow hedges with an average effective rate of 1.37% were terminated and the associated FHLB borrowings were repaid at their 90-day call date. Additionally, a $200,000,000 partial termination of a cash flow hedge with an average effective rate of 0.79% was executed with the associated FHLB borrowing being repaid and a $14,110,000 gain recorded on the swap. Lastly, a $150,000,000 FHLB borrowing (unhedged) with a rate of 2.91% was repaid prior to maturity. As of March 31, 2020,2021, the maturities for hedges of adjustable rate borrowings ranged from less than one year to ten years, with the weighted average being 7.26.7 years.

The following tables present the gain (loss) recognized in AOCI on derivative instruments related to cash flow hedges on borrowings for the periods presented.presented, as well as the effect of reclassification adjustments.

(In thousands)(In thousands)Three Months Ended March 31,(In thousands)Three Months Ended March 31,
Amount of gain/(loss) recognized in AOCI20202019
Amounts recognized in AOCIAmounts recognized in AOCI20212020
Interest rate contracts:Interest rate contracts:Interest rate contracts:
Pay fixed/receive floating swaps on borrowings cash flow hedgesPay fixed/receive floating swaps on borrowings cash flow hedges$(12,428) $(6,150) Pay fixed/receive floating swaps on borrowings cash flow hedges$70,565 $(12,428)
Reclassification adjustment of net (gain)/loss included in net incomeReclassification adjustment of net (gain)/loss included in net income(14,110)0 
Total pre-tax gain/(loss) recognized in AOCITotal pre-tax gain/(loss) recognized in AOCI$(12,428) $(6,150) Total pre-tax gain/(loss) recognized in AOCI$56,455 $(12,428)


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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


(In thousands)Six Months Ended March 31,
Amount of gain/(loss) recognized in AOCI20202019
Interest rate contracts:
Pay fixed/receive floating swaps on borrowings cash flow hedges$(9,313) $(16,650) 
Total pre-tax gain/(loss) recognized in AOCI$(9,313) $(16,650) 

(In thousands)Six Months Ended March 31,
Amounts recognized in AOCI20212020
Interest rate contracts:
Pay fixed/receive floating swaps on borrowings cash flow hedges$90,683 $(9,313)
Reclassification adjustment of net (gain)/loss included in net income(14,110)0 
Total pre-tax gain/(loss) recognized in AOCI$76,573 $(9,313)

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 March 31, 2020Three Months Ended March 31, 2019Three Months Ended March 31, 2021Three Months Ended March 31, 2020
Interest income on loans receivableInterest expense on FHLB advancesInterest income on loans receivableInterest expense on FHLB advancesInterest income on loans receivableInterest expense on FHLB advancesInterest income on loans receivableInterest expense on FHLB advances
(In thousands)(In thousands)(In thousands)
Interest income/(expense), including the effects of fair value and cash flow hedgesInterest income/(expense), including the effects of fair value and cash flow hedges$138,549  $(13,368) $141,061  $(17,846) Interest income/(expense), including the effects of fair value and cash flow hedges$132,757 $(11,991)$138,549 $(13,368)
Gain/(loss) on fair value hedging relationships:Gain/(loss) on fair value hedging relationships:Gain/(loss) on fair value hedging relationships:
Interest rate contractsInterest rate contractsInterest rate contracts
Amounts related to interest settlements on derivativesAmounts related to interest settlements on derivatives$(112) $58  Amounts related to interest settlements on derivatives$(1,563)$(112)
Recognized on derivativesRecognized on derivatives(24,676) (1,600) Recognized on derivatives17,491 (24,676)
Recognized on hedged itemsRecognized on hedged items24,666  1,602  Recognized on hedged items(17,377)24,666 
Net income/(expense) recognized on fair value hedgesNet income/(expense) recognized on fair value hedges$(122) $60  Net income/(expense) recognized on fair value hedges$(1,449)$(122)
Gain/(loss) on cash flow hedging relationships:Gain/(loss) on cash flow hedging relationships:Gain/(loss) on cash flow hedging relationships:
Interest rate contractsInterest rate contractsInterest rate contracts
Amounts related to interest settlements on derivativesAmounts related to interest settlements on derivatives$498  $(854) Amounts related to interest settlements on derivatives$3,066 $498 
Amount of derivative gain/(loss) reclassified from AOCI into interest income/expenseAmount of derivative gain/(loss) reclassified from AOCI into interest income/expense—  —  Amount of derivative gain/(loss) reclassified from AOCI into interest income/expense14,110 0 
Net income/(expense) recognized on cash flow hedgesNet income/(expense) recognized on cash flow hedges$498  $(854) Net income/(expense) recognized on cash flow hedges$17,176 $498 


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(UNAUDITED)


Six Months Ended March 31, 2020Six Months Ended March 31, 2019
Interest income on loans receivableInterest expense on FHLB advancesInterest income on loans receivableInterest expense on FHLB advances
(In thousands)(In thousands)
Interest income/(expense), including the effects of fair value and cash flow hedges$280,695  $(27,026) $278,126  $(34,737) 
Gain/(loss) on fair value hedging relationships:
Interest rate contracts
Amounts related to interest settlements on derivatives$(186) $77  
Recognized on derivatives(19,984) (3,917) 
Recognized on hedged items20,073  3,881  
Net income/(expense) recognized on fair value hedges$(97) $41  
Gain/(loss) on cash flow hedging relationships:
Interest rate contracts
Amounts related to interest settlements on derivatives$284  $(1,404) 
Amount of derivative gain/(loss) reclassified from AOCI into interest income/expense—  —  
Net income/(expense) recognized on cash flow hedges$284  $(1,404) 

Six months ended March 31, 2021Six months ended March 31, 2020
Interest income on loans receivableInterest expense on FHLB advancesInterest income on loans receivableInterest expense on FHLB advances
(In thousands)(In thousands)
Interest income/(expense), including the effects of fair value and cash flow hedges$266,428 $(25,189)$280,695 $(27,026)
Gain/(loss) on fair value hedging relationships:
Interest rate contracts
Amounts related to interest settlements on derivatives$(3,104)$(186)
Recognized on derivatives22,078 (19,984)
Recognized on hedged items(21,833)20,073 
Net income/(expense) recognized on fair value hedges$(2,859)$(97)
Gain/(loss) on cash flow hedging relationships:
Interest rate contracts
Amounts related to interest settlements on derivatives$6,664 $284 
Amount of derivative gain/(loss) reclassified from AOCI into interest income/expense14,110 0 
Net income/(expense) recognized on cash flow hedges$20,774 $284 

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 six months ended March 31, 20202021 and 20192020 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)(In thousands)Three Months Ended March 31,(In thousands)Three Months Ended March 31,
Derivative instrumentsDerivative instrumentsClassification of gain/(loss) recognized in income on derivative instrument20202019Derivative instrumentsClassification of gain/(loss) recognized in income on derivative instrument20212020
Interest rate contracts:Interest rate contracts:Interest rate contracts:
Pay fixed/receive floating swapPay fixed/receive floating swapOther noninterest income$(28,184) $(6,163) Pay fixed/receive floating swapOther noninterest income$40,929 $(28,184)
Receive fixed/pay floating swapReceive fixed/pay floating swapOther noninterest income28,184  6,163  Receive fixed/pay floating swapOther noninterest income(40,929)28,184 
$—  $—  $0 $0 


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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


(In thousands)(In thousands)Six Months Ended March 31,(In thousands)Six Months Ended March 31,
Derivative instrumentsDerivative instrumentsClassification of gain/(loss) recognized in income on derivative instrument20202019Derivative instrumentsClassification of gain/(loss) recognized in income on derivative instrument20212020
Interest rate contracts:Interest rate contracts:Interest rate contracts:
Pay fixed/receive floating swapPay fixed/receive floating swapOther noninterest income$(22,776) $(15,553) Pay fixed/receive floating swapOther noninterest income$53,305 $(22,776)
Receive fixed/pay floating swapReceive fixed/pay floating swapOther noninterest income22,776  15,553  Receive fixed/pay floating swapOther noninterest income(53,305)22,776 
$—  $—  $0 $0 

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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 4.7%5.7% of our total revenues for the six months ended March 31, 2020,2021, compared to 4.9%4.7% for the six months ended March 31, 2019.2020. 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 20202021 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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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)March 31, 2020
Operating lease asset$29,035 
Operating lease liability$30,522 


As of March 31, 2020, 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 $3,178,000 for the six months ended March 31, 2020. Right-of-use assets obtained in exchange for new operating lease liabilities during the same period were $2,734,000.

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 March 31,Six Months Ended March 31,
20202020
Operating lease cost$1,671  $3,273  
Variable lease cost335  555  
Sublease income(93) (179) 
      Net lease cost$1,913  $3,649  


The following table shows future minimum payments for operating leases as of March 31, 2020 for the respective periods.

(In thousands)Year ending September 30,
remainder of 2020$3,014  
20215,621  
20225,125  
20234,574  
20243,826  
Thereafter11,420  
Total minimum payments33,580  
Amounts representing interest(3,058) 
Present value of minimum lease payments$30,522  


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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  
20215,246  
20224,698  
20234,302  
20243,596  
Thereafter10,531  
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 $2,646,603,000$3,348,654,000 and $2,379,089,000$2,738,095,000 at March 31, 20202021 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 $8,500,000$26,500,000 as of March 31, 2020,2021, which is an increase from $6,900,000$25,000,000 at September 30, 20192020. 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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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, and including under Item 1A. “Riskthe 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 in the Company's primary market areas, including high unemployment rates, declines in the real estate markethousing prices and home sale volumesproperty values, and other 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 undertakeundertakes 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, civil money penalties are levied by government authorities against the Bank, 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 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.

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
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unanticipated events, changes to future operating results over time, or the impact of circumstances arising after the date the forward-looking statement was made.
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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 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 30th. All references to 20192020 represent balances as of September 30, 20192020 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.

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.

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 homogeneous portfolios, consideration of our quantitative and qualitative evaluation of past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts.

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

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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.

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.

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,
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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 63%76% of total deposits as of March 31, 20202021 while the composition of the investment securities portfolio is 27%54% variable and 73%47% 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 $920,255,000$494,089,000 of mortgage-backed securities that it has designated as held-to-maturity and are carried at amortized cost. As of March 31, 2020,2021, the net unrealized gain on these securities was $27,938,000.$13,808,000. The Company has $1,693,047,000$2,438,902,000 of available-for-sale securities that are carried at fair value. As of March 31, 2020,2021, the net unrealized gain on these securities was $25,580,000.$46,226,000. The Company has executed interest rate swaps to hedge interest rate risk on certain FHLB borrowings. The unrealized lossgain on these interest rate swaps as of March 31, 20202021 was $17,189,000.$59,198,000. 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-earningsinterest-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 March 31, 2020,2021, 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 1.9%9.9% in the next year. This compares to an estimated increase of 1.4%3.4% as of the September 30, 20192020 analysis. The change is primarily due to fluctuating interest rates and the impact to expected prepayment speedssteepening of the yield curve 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.liabilities. 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 decreaseincrease of 0.3%1.4% in the first year and increase of 0.2%4.9% 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 March 31, 20202021 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, couldare not expected to 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 historically 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 March 31, 2020,2021, in the event of an immediate and parallel increase of 200 basis points in interest rates, the NPV is estimated to increasedecrease by $29,689,000$37,000,000 or 1.5%1.1% and the NPV to total
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assets ratio to increase to 12.1%18.2% from a base of 11.4%17.4%. As of September 30, 2019,2020, the NPV in the event of a 200 basis point increase in rates was estimated to declineincrease by $257,638,000$141,000,000 or 10.5%5.3% and the NPV to total assets ratio to declineincrease to 13.9%15.6% from a base of 14.6%14.1%. The change in NPV sensitivity is due primarily to the dropchanges in interest rates that has impacted asset prices as well asand sensitivity to expected prepayment speeds on fixed rate loans and mortgage-backed securities as well as changes in mix of fixed versus adjustable rate assets and liabilities as of March 31, 2020.2021.
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 2.70%was 2.30% at March 31, 2020 from 2.80%2021 and 2.34% at September 30, 2019. The spread compression of 10 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 March 31, 2020,2021, the weighted average rate earned on interest-earning assets decreased by 5128 basis points to 3.59%2.75% compared to September 30, 2019,2020, while the weighted average rate being paid on interest-bearing liabilities decreased by 4124 basis
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points to 0.89%0.45%. The interest rate spread decreased to 2.30% at March 31, 2021 from 2.70% at March 31, 2020 from 2.81% at March 31, 2019 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 March 31, 2021 from 3.10% for the quarter ended March 31, 2020 from 3.15% for the quarter ended March 31, 2019.2020. The yield on interest-earning assets decreased 2392 basis points to 4.22%3.30% and the cost of interest-bearing liabilities increased 16decreased 70 basis points to 1.19%0.65% over that same period. The lower yield on interest-earning assetscompression in the net interest margin since the prior year same quarter is primarily due to the result of the decreaserapid 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 $2,318,447,000 as of March 31, 2021 and the Company had $711,405,000 in PPP loans as of that date that have a lower rate being earned on cashrelatively low yield and adjustable rate loans and investment securities.were originated since the prior year same quarter. The lower rate in interest-bearing liabilities was primarily due to lower rates paid on FHLB advancesinterest-bearing deposits as well as a decrease in rates on interest-bearing deposits.FHLB advances. Net interest margin decreased to 2.75% for the six months ended March 31, 2021 from 3.13% for the prior year same period. The change was due to the same factors noted above.
The following tables settable 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 March 31, 2020Three Months Ended March 31, 2019Three Months Ended March 31, 2021Three Months Ended March 31, 2020
Average BalanceInterestAverage RateAverage BalanceInterestAverage Rate Average BalanceInterestAverage RateAverage BalanceInterestAverage Rate
($ in thousands)($ in thousands)($ in thousands)($ in thousands)
AssetsAssetsAssets
Loans receivableLoans receivable$11,905,574  $138,549  4.67 %$11,824,247  $141,061  4.84 %Loans receivable$12,842,392 $132,756 4.19 %$11,890,545 $138,549 4.67 %
Mortgaged-backed securities2,194,479  14,341  2.62  2,573,669  19,343  3.05  
Mortgage-backed securitiesMortgage-backed securities1,359,631 6,696 2.00 2,194,479 14,341 2.62 
Cash & InvestmentsCash & Investments951,719  5,281  2.23  727,540  5,523  3.08  Cash & Investments3,702,861 5,720 0.63 951,719 5,281 2.23 
FHLB & FRB stockFHLB & FRB stock122,320  1,447  4.74  138,646  1,655  4.84  FHLB & FRB stock130,502 1,582 4.92 122,320 1,447 4.74 
Total interest-earning assetsTotal interest-earning assets15,174,092  159,618  4.22 %15,264,102  167,582  4.45 %Total interest-earning assets18,035,386 146,754 3.30 %15,159,063 159,618 4.22 %
Other assetsOther assets1,204,060  1,156,071  Other assets1,252,122 1,204,060 
Total assetsTotal assets$16,378,152  $16,420,173  Total assets$19,287,508 $16,363,123 
Liabilities and EquityLiabilities and EquityLiabilities and Equity
Customer accounts$11,919,451  $28,638  0.96 %$11,602,579  $29,666  1.04 %
Interest-bearing customer accountsInterest-bearing customer accounts$11,816,399 $10,729 0.37 %$10,309,374 $28,638 1.11 %
FHLB advancesFHLB advances2,208,242  13,368  2.43  2,616,389  17,846  2.77  FHLB advances2,412,778 11,991 2.02 2,208,242 13,368 2.43 
Other borrowingsOther borrowings77  —  —  —  —  —  Other borrowings44 — — 77 — — 
Total interest-bearing liabilitiesTotal interest-bearing liabilities14,127,770  42,006  1.19 %14,218,968  47,512  1.36 %Total interest-bearing liabilities14,229,221 22,720 0.65 %12,517,693 42,006 1.35 %
Noninterest-bearing customer accountsNoninterest-bearing customer accounts2,579,497 1,610,077 
Other liabilitiesOther liabilities207,358  196,926  Other liabilities248,210 212,129 
Total liabilities Total liabilities14,335,128  14,415,894   Total liabilities17,056,928 14,339,899 
Shareholders' equityShareholders' equity2,043,024  2,004,279  Shareholders' equity2,230,580 2,023,224 
Total liabilities and equityTotal liabilities and equity$16,378,152  $16,420,173  Total liabilities and equity$19,287,508 $16,363,123 
Net interest incomeNet interest income$117,612  $120,070  Net interest income$124,034 $117,612 
Net interest margin (NIM)Net interest margin (NIM)3.10 %3.15 %Net interest margin (NIM)2.75 %3.10 %


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Six Months Ended March 31, 2020Six Months Ended March 31, 2019Six Months Ended March 31, 2021Six Months Ended March 31, 2020
Average BalanceInterestAverage RateAverage BalanceInterestAverage Rate Average BalanceInterestAverage RateAverage BalanceInterestAverage Rate
($ in thousands)($ in thousands)($ in thousands)($ in thousands)
AssetsAssetsAssets
Loans receivableLoans receivable$11,924,137  $280,695  4.70 %$11,681,886  $278,126  4.77 %Loans receivable$12,833,535 $266,428 4.16 %$11,907,755 $280,695 4.70 %
Mortgaged-backed securities2,277,880  29,953  2.62  2,583,206  38,535  2.99  
Mortgage-backed securitiesMortgage-backed securities1,472,181 13,926 1.90 2,277,880 29,953 2.62 
Cash & InvestmentsCash & Investments863,698  10,706  2.47  652,747  10,274  3.16  Cash & Investments3,349,703 10,985 0.66 863,698 10,706 2.47 
FHLB & FRB stockFHLB & FRB stock123,450  3,088  4.99  135,441  3,269  4.84  FHLB & FRB stock135,672 3,238 4.79 123,450 3,088 4.99 
Total interest-earning assetsTotal interest-earning assets15,189,165  324,442  4.26 %15,053,280  330,204  4.40 %Total interest-earning assets17,791,091 294,577 3.32 %15,172,783 324,442 4.26 %
Other assetsOther assets1,196,989  1,161,886  Other assets1,280,338 1,196,990 
Total assetsTotal assets$16,386,154  $16,215,166  Total assets$19,071,429 $16,369,773 
Liabilities and EquityLiabilities and EquityLiabilities and Equity
Customer accounts$11,903,723  $60,119  1.01 %$11,518,720  $56,245  0.98 %
Interest-bearing customer accountsInterest-bearing customer accounts$11,717,048 $24,838 0.43 %$10,278,073 $60,119 1.17 %
FHLB advancesFHLB advances2,236,503  27,026  2.41  2,536,264  34,737  2.75  FHLB advances2,542,033 25,190 1.99 2,236,503 27,026 2.41 
Other liabilities38  —  —  —  —  —  
Other borrowingsOther borrowings22 — — 38 — — 
Total interest-bearing liabilitiesTotal interest-bearing liabilities14,140,264  87,145  1.23 %14,054,984  90,982  1.30 %Total interest-bearing liabilities14,259,103 50,028 0.70 %12,514,614 87,145 1.39 %
Noninterest-bearing customer accountsNoninterest-bearing customer accounts2,417,328 1,625,650 
Other liabilitiesOther liabilities205,005  162,790  Other liabilities262,174 209,490 
Total liabilities Total liabilities14,345,269  14,217,774   Total liabilities16,938,605 14,349,754 
Shareholders' equityShareholders' equity2,040,885  1,997,392  Shareholders' equity2,132,824 2,020,019 
Total liabilities and equityTotal liabilities and equity$16,386,154  $16,215,166  Total liabilities and equity$19,071,429 $16,369,773 
Net interest incomeNet interest income$237,297  $239,222  Net interest income$244,549 $237,297 
Net interest margin (NIM)Net interest margin (NIM)3.12 %3.18 %Net interest margin (NIM)2.75 %3.13 %

As of March 31, 2020,2021, total assets had increased by $900,719,000$739,526,000 to $17,375,629,000$19,533,581,000 from $16,474,910,000$18,794,055,000 at September 30, 2019.2020. During the six months ended March 31, 2020,2021, cash and cash equivalents increased by $1,076,416,000,$615,470,000 and loans receivable decreased $43,666,000, and investment securities decreased by $315,920,000.increased $243,106,000.
Cash and cash equivalents of $1,495,574,000$2,318,447,000 and shareholders’ equity of $1,985,967,000$2,332,953,000 as of March 31, 20202021 provide management with flexibility in managing interest rate risk going forward.

LIQUIDITY AND CAPITAL RESOURCES
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.
On February 8, 2021, in connection with an underwritten public offering, the Company issued 300,000 shares of 4.875% Noncumulative Perpetual Series A Preferred Stock (“Series A Preferred Stock”). Net proceeds, after underwriting discounts and expenses, were $293,325,000. The public offering consisted of the issuance and sale of 12,000,000 depositary shares, each representing a 1/40th interest in a share of the Series A Preferred Stock, at a public offering price of $25.00 per depositary share. Holders of the depositary shares are entitled to all proportional rights and preferences of the Series A Preferred Stock (including dividend, voting, redemption and liquidation rights). The depositary shares are traded on the NASDAQ under the symbol "WAFDP." The Series A Preferred Stock is redeemable at the option of the Company, subject to all applicable regulatory approvals, on or after April 15, 2026.
The Company isparticipated 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
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6,500 businesses with more than $780,000,000 in PPP loans. Fiscal 2021 year to date we have assisted over 2,000 small businesses with $235,000,000 in PPP loans. To date, approximately 3,800 PPP loans totaling $350,000,000 have been forgiven by the SBA.
The Company has actively workingworked 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.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 March 31, 2020, 1332021, 45 mortgage loans totaling $45,000,000$14,000,000 and 710 commercial loans totaling $11,000,000$89,000,000 that had been modified. In addition,modified remain in deferral. These loans are not considered past due until after the Company has participated in the Small Business Administration’s Paycheck Protection Program (“PPP”). This program came about through the Coronavirus Aid, Relief,deferral period is over 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. As of May 4, 2020, the Company had assisted over 5,000 businesses with more than $700,000,000 in PPP loans.scheduled payments have resumed.
The Bank has a credit line with the Federal Home Loan Bank of Des Moines ("FHLB") of up to 45% of total assets depending on specific collateral eligibility. This line provides a substantial source of additional liquidity if needed.
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
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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.
Strong growth in customer deposit accounts has resulted in excess liquidity and consequently the Company has reduced FHLB borrowings. Customer accounts increased $1,039,797,000, or 7.5%, to $14,819,421,000 at March 31, 2021 compared with $13,779,624,000 at September 30, 2020. Total FHLB borrowings totaled $2,150,000,000 as of March 31, 2021, a decrease from $2,700,000,000 as of September 30, 2020.
The Company's cash and cash equivalents totaled $1,495,574,000$2,318,447,000 at March 31, 2020,2021, 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 March 31, 20202021 was $1,985,967,000,$2,332,953,000, or 11.43%11.94% of total assets. This is a decreasean increase of $47,028,000$318,820,000 from September 30, 20192020 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 six months ended March 31, 2020 by2021 as a result of the February 8, 2021 issuance of Series A Preferred Stock and the receipt of net proceeds, after underwriting discounts and expenses, of $293,325,000. Additionally, net income of $103,653,000,$83,822,000, the payment of $33,374,000$33,913,000 in cash dividends, treasury stock purchases of $112,089,000,$89,772,000, as well as anthe change in other comprehensive lossincome of $8,831,000.$64,223,000 impacted shareholders' equity. The ratio of tangible capital to tangible assets at March 31, 20202021 was 9.82%10.53%. 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.
ActualMinimum Capital
Adequacy Guidelines		Minimum Well-Capitalized GuidelinesActualMinimum Capital
Adequacy Guidelines		Minimum Well-Capitalized Guidelines
($ in thousands)($ in thousands)CapitalRatioRatioRatio($ in thousands)CapitalRatioRatioRatio
March 31, 2020
March 31, 2021March 31, 2021
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$1,670,902  13.62 %4.50 %NA   The Company$1,643,068 12.09 %4.50 %NA
The Bank The Bank1,651,265  13.46 %4.50 %6.50 % The Bank1,710,441 12.58 %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 Company1,670,902  13.62 %6.00 %NA   The Company1,943,068 14.29 %6.00 %NA
The Bank The Bank1,651,265  13.46 %6.00 %8.00 % The Bank1,710,441 12.58 %6.00 %8.00 %
Total risk-based capital ratio:Total risk-based capital ratio:Total risk-based capital ratio:
The Company The Company1,818,903  14.82 %8.00 %NA   The Company2,113,350 15.55 %8.00 %NA
The Bank The Bank1,799,266  14.67 %8.00 %10.00 % The Bank1,880,747 13.83 %8.00 %10.00 %
Tier 1 Leverage ratio:Tier 1 Leverage ratio:Tier 1 Leverage ratio:
The Company The Company1,670,902  10.42 %4.00 %NA   The Company1,943,068 10.27 %4.00 %NA
The Bank The Bank1,651,265  10.30 %4.00 %5.00 % The Bank1,710,441 9.04 %4.00 %5.00 %
September 30, 2019
September 30, 2020September 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 Bank1,666,426  13.93 %4.50 %6.50 % The Bank1,625,478 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 Company1,710,147  14.30 %6.00 %NA   The Company1,687,676 12.93 %6.00 %NA
The Bank The Bank1,666,426  13.93 %6.00 %8.00 % The Bank1,625,478 12.46 %6.00 %8.00 %
Total risk-based capital ratio:Total risk-based capital ratio:Total risk-based capital ratio:
The Company The Company1,848,581  15.45 %8.00 %NA   The Company1,851,136 14.19 %8.00 %NA
The Bank The Bank1,804,860  15.09 %8.00 %10.00 % The Bank1,788,904 13.71 %8.00 %10.00 %
Tier 1 Leverage ratio:Tier 1 Leverage ratio:Tier 1 Leverage ratio:
The Company The Company1,710,147  10.51 %4.00 %NA The Company1,687,676 9.28 %4.00 %NA
The Bank The Bank1,666,426  10.24 %4.00 %5.00 % The Bank1,625,478 8.94 %4.00 %5.00 %

CHANGES IN FINANCIAL CONDITION
Cash and cash equivalents - Cash and cash equivalents are $1,495,574,000were $2,318,447,000 at March 31, 2020,2021, an increase of $1,076,416,000,$615,470,000, or 256.8%36.1%, since September 30, 2019.2020. The increasechange is primarily due to FHLB advances being $800,000,000 higher.the large increase in customer transaction deposit accounts.

Available-for-sale and held-to-maturity investment securities - Available-for-sale securities increased $207,305,000,$189,410,000, or 14.0%8.4%, during the six months ended March 31, 2020,2021, mostly due to $374,680,000 of securities reclassified from held-to-maturity pursuant to the adoption of ASU 2019-04 and purchases of $159,884,000, partially$522,454,000, offset by sales of $204,351,000 as well as principal repayments and maturities of $132,690,000.$338,869,000. During the same period, the balance of held-to-maturity securities decreased by $523,225,000$211,749,000 primarily due to $374,680,000 of securities reclassified to available-for-sale pursuant to the adoption of ASU 2019-04 and principal pay-downs and maturities of $147,142,000.$206,868,000. As of March 31, 2020,2021, the Company had a net unrealized gain on available-for-sale securities of $25,580,000,$46,226,000, 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 March 31, 2021 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 March 31, 2021 or September 30, 2020, therefore, no allowance was recorded.

Loans receivable - Loans receivable, net of related contra accounts, increased by $43,666,000$243,106,000 to $11,974,241,000$13,035,423,000 at March 31, 2020,2021, compared to $11,930,575,000$12,792,317,000 at September 30, 2019.2020. The increase was primarily the net result of originations of $2,607,979,000 and$3,890,544,000 partially offset by loan principal repayments of $2,504,601,000.$3,147,829,000 as well as a $526,153,000 increase in loans in process. Commercial loan originations accounted for 76%78% of total originations and consumer loan originations were 24%22% during the period. The mix of loan originations is consistent with management's strategy during low rate environments to produce more construction, multifamily, commercial real estate, and commercial and industrial loans that generally have adjustable interest rates or a shorter duration.
The following table shows the loan portfolio by category and the change.
 March 31, 2021September 30, 2020Change
($ in thousands)($ in thousands)$%
Commercial loans
Multi-family$2,008,192 13.2 %$1,538,762 10.6 %$469,430 30.5 %
Commercial real estate2,226,560 14.6 1,895,086 13.1 331,474 17.5 
Commercial & industrial (1)2,471,823 16.2 2,132,160 14.7 339,663 15.9 
Construction2,495,961 16.3 2,403,276 16.6 92,685 3.9 
Land - acquisition & development185,024 1.2 193,745 1.3 (8,721)(4.5)
Total commercial loans9,387,560 61.5 8,163,029 56.3 1,224,531 15.0 
Consumer loans
Single-family residential4,828,535 31.6 5,304,689 36.7 (476,154)(9.0)
Construction - custom678,469 4.5 674,879 4.7 3,590 0.5 
   Land - consumer lot loans123,351 0.8 102,263 0.7 21,088 20.6 
   HELOC144,528 0.9 139,703 1.0 4,825 3.5 
   Consumer103,145 0.7 83,159 0.6 19,986 24.0 
Total consumer loans5,878,028 38.5 6,304,693 43.7 (426,665)(6.8)
Total gross loans15,265,588 100 %14,467,722 100 %797,866 5.5 
   Less:
      Allowance for credit losses on loans172,653 166,955 5,698 3.4 
      Loans in process1,982,225 1,456,072 526,153 36.1 
      Net deferred fees, costs and discounts75,287 52,378 22,909 43.7 
Total loan contra accounts2,230,165 1,675,405 554,760 33.1 
Net loans$13,035,423 $12,792,317 $243,106 1.9 %
(1) Includes $711,405,000 of PPP loans as of March 31, 2021 and $762,004,000 as of September 30, 2020.

 March 31, 2020September 30, 2019Change
 ($ in thousands)($ in thousands)$%
Gross loans by category
   Single-family residential$5,582,244  41.5 %$5,835,194  43.8 %$(252,950) (4.3)%
   Construction2,204,283  16.4  2,038,052  15.3  166,231  8.2  
   Construction - custom547,731  4.1  540,741  4.1  6,990  1.3  
   Land - acquisition & development197,010  1.5  204,107  1.5  (7,097) (3.5) 
   Land - consumer lot loans96,579  0.7  99,694  0.7  (3,115) (3.1) 
   Multi-family1,467,231  10.9  1,422,674  10.7  44,557  3.1  
   Commercial real estate1,717,535  12.8  1,631,170  12.3  86,365  5.3  
   Commercial & industrial1,371,128  10.2  1,268,695  9.5  102,433  8.1  
   HELOC145,761  1.1  142,178  1.1  3,583  2.5  
   Consumer105,147  0.8  129,883  1.0  (24,736) (19.0) 
Total gross loans13,434,649  100 %13,312,388  100 %122,261  0.9 %
   Less:
      Allowance for loan losses139,501  131,534  7,967  6.1 %
      Loans in process1,289,812  1,201,341  88,471  7.4  
      Net deferred fees, costs and discounts31,095  48,938  (17,843) (36.5) 
Total loan contra accounts1,460,408  1,381,813  78,595  5.7  
Net Loans$11,974,241  $11,930,575  $43,666  0.4 %
Non-performing assets - Non-performing assets decreased $2,439,000increased $11,248,000 during the six months ended March 31, 20202021 to $41,387,000$48,943,000 from $43,826,000$37,695,000 at September 30, 2019.2020. The change is primarily due to a $1,121,000 decrease$10,899,000 increase in non-accrual loans and $1,318,000 decline in real estate owned ("REO").loans. Non-performing assets as a percentage of total assets was 0.24%0.25% at March 31, 20202021 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.
March 31,
2020		September 30,
2019		March 31,
2021		September 30,
2020
($ in thousands) ($ in thousands)
Restructured loans:
Single-family residential$97,025  93.3 %$111,886  92.0 %
Land - acquisition & development82  0.1  90  0.1  
Land - consumer lot loans3,418  3.3  3,714  3.1  
Troubled debt restructured loans:Troubled debt restructured loans:
Multi - familyMulti - family316  0.3  385  0.3  Multi - family$267 0.3 %$304 0.3 %
Commercial real estateCommercial real estate1,883  1.8  4,168  3.4  Commercial real estate2,327 3.0 1,462 1.6 
Commercial & industrialCommercial & industrial396  0.4  425  0.3  Commercial & industrial45 0.1 51 0.1 
ConstructionConstruction— — — — 
Land - acquisition & developmentLand - acquisition & development— — — — 
Single-family residentialSingle-family residential72,512 92.6 85,607 93.6 
Construction - customConstruction - custom— — — — 
Land - consumer lot loansLand - consumer lot loans2,630 3.3 3,106 3.4 
HELOCHELOC843  0.8  949  0.8  HELOC454 0.6 826 0.9 
ConsumerConsumer56  —  60  —  Consumer47 0.1 52 0.1 
Total restructured loans (1)Total restructured loans (1)$104,019  100 %$121,677  100 %Total restructured loans (1)$78,282 100 %$91,408 100 %
Non-accrual loans:Non-accrual loans:Non-accrual loans:
Single-family residential$22,859  70.1 %$25,271  74.9 %
Construction3,353  10.3  —  —  
Land - acquisition & development82  0.3  169  0.5  
Land - consumer lot loans408  1.2  246  0.7  
Multi - familyMulti - family$— — %$— — %
Commercial real estateCommercial real estate4,374  13.4  5,835  17.3  Commercial real estate9,226 23.1 3,771 13.0 
Commercial & industrialCommercial & industrial470  1.4  1,292  3.8  Commercial & industrial832 2.1 329 1.1 
ConstructionConstruction1,423 3.6 1,669 5.8 
Land - acquisition & developmentLand - acquisition & development2,340 5.8 — — 
Single-family residentialSingle-family residential25,599 64.1 22,431 77.2 
Construction - customConstruction - custom— — — — 
Land - consumer lot loansLand - consumer lot loans177 0.4 243 0.8 
HELOCHELOC1,064  3.3  907  2.7  HELOC306 0.8 553 1.9 
ConsumerConsumer—  —  11  —  Consumer52 0.1 60 0.2 
Total non-accrual loansTotal non-accrual loans32,610  100 %33,731  100 %Total non-accrual loans39,955 100 %29,056 100 %
Real estate ownedReal estate owned5,463  6,781  Real estate owned5,316 4,966 
Other property ownedOther property owned3,314  3,314  Other property owned3,672 3,673 
Total non-performing assetsTotal non-performing assets$41,387  $43,826  Total non-performing assets$48,943 $37,695 
Total non-performing assets and performing restructured loans as a percentage of total assetsTotal non-performing assets and performing restructured loans as a percentage of total assets0.82 %0.97 %Total non-performing assets and performing restructured loans as a percentage of total assets0.64 %0.67 %
Total AssetsTotal AssetsTotal Assets
(1) Restructured loans were as follows:(1) Restructured loans were as follows:(1) Restructured loans were as follows:
PerformingPerforming$101,076  97.2 %$116,659  95.9 %Performing$76,458 97.7 %$89,072 97.4 %
Non-performing (included in non-accrual loans above)Non-performing (included in non-accrual loans above)2,943  2.8  5,018  4.1  Non-performing (included in non-accrual loans above)1,824 2.3 2,336 2.6 
$104,019  100 %$121,677  100 %$78,282 100 %$91,408 100 %

For the six months ended March 31, 2020,2021, the Company recognized $1,189,000$5,228,000 in interest income on cash payments received from borrowers on non-accrual loans. The Company would have recognized interest income of $708,000$769,000 for the same period had these loans performed according to their original contract terms. Recognized interest income for the six months ended March 31, 20202021 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 $94,763,000$549,262,000 of loans that were less than 90 days delinquent at March 31, 20202021 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 1.37%3.45% at March 31, 2020.2021.
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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 93.3%92.6% of restructured loans as of March 31, 2020.2021. The concession for these loans is
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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 reserveallowance 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 loancredit losses - The following tables showtable shows the composition of the Company’s allowance for loan losses by loan category.credit losses.
March 31, 2020Loans Collectively Evaluated for ImpairmentLoans Individually Evaluated for Impairment
Allowance AllocationRecorded Investment of LoansRatioAllowance AllocationRecorded Investment of LoansRatio
($ in thousands)($ in thousands)December 31, 2020September 30, 2020Change
Single-family residential$29,280  $5,566,786  0.5 %$—  $19,606  — %
Construction34,283  1,232,378  2.8  —  3,353  —  
Construction - custom1,580  270,880  0.6  —  —  —  
Land - acquisition & development8,732  152,541  5.7  1  82  1.2  
Land - consumer lot loans2,106  92,881  2.3  —  372  —  
Allowance for credit losses:Allowance for credit losses:($ in thousands)($ in thousands)$%
Commercial loansCommercial loans
Multi-familyMulti-family8,566  1,466,892  0.6  1  316  0.3   Multi-family$17,776 10.3 %$13,853 8.3 %$3,923 28.3 %
Commercial real estateCommercial real estate15,016  1,708,240  0.9  4  9,295  —   Commercial real estate26,822 15.5 22,516 13.5 4,306 19.1 
Commercial & industrialCommercial & industrial36,432  1,370,838  2.7  3  855  0.4   Commercial & industrial47,794 27.7 38,665 23.2 9,129 23.6 
Construction Construction22,549 13.1 24,156 14.5 (1,607)(6.7)
Land - acquisition & development Land - acquisition & development10,503 6.1 10,733 6.4 (230)(2.1)
Total commercial loans Total commercial loans125,444 72.7 109,923 65.8 15,521 14.1 
Consumer loansConsumer loans
Single-family residential Single-family residential35,108 20.3 45,186 27.1 (10,078)(22.3)
Construction - custom Construction - custom3,248 1.9 3,555 2.1 (307)(8.6)
Land - consumer lot loans Land - consumer lot loans3,292 1.9 2,729 1.6 563 20.6 
HELOCHELOC1,282  144,119  0.9  —  876  —   HELOC2,226 1.3 2,571 1.5 (345)(13.4)
ConsumerConsumer2,215  104,527  2.1  —  —  —   Consumer3,335 1.9 2,991 1.8 344 11.5 
Total consumer loans Total consumer loans47,209 27.3 57,032 34.2 (9,823)(17.2)
Total allowance for loan lossesTotal allowance for loan losses172,653 100.0 %166,955 100.0 %5,698 3.4 
Reserve for unfunded commitmentsReserve for unfunded commitments26,500 25,000 1,500 2.2 
Total allowance for credit lossesTotal allowance for credit losses$199,153 $191,955 $7,198 3.7 %
$139,492  $12,110,082  1.2 %$9  $34,755  — %

September 30, 2019Loans Collectively Evaluated for ImpairmentLoans Individually Evaluated for Impairment
 Allowance AllocationRecorded Investment of LoansRatioAllowance AllocationRecorded Investment of LoansRatio
 ($ in thousands)($ in thousands)
Single-family residential$30,988  $5,822,200  0.5 %$—  $17,978  — %
Construction32,304  1,164,889  2.8  —  —  —  
Construction - custom1,369  255,505  0.5  —  —  —  
Land - acquisition & development9,135  160,964  5.7  20  230  8.7  
Land - consumer lot loans2,143  95,574  2.2  —  375  —  
Multi-family7,387  1,422,266  0.5  4  385  1.0  
Commercial real estate12,847  1,618,406  0.8  323  12,765  2.5  
Commercial & industrial31,358  1,266,913  2.5  92  1,805  5.1  
HELOC1,103  140,378  0.8  —  837  —  
Consumer2,461  129,527  1.9  —  50  —  
$131,095  $12,076,622  1.1 %$439  $34,425  1.3 %

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The Company is required to adopt FASB's current expected credit losses standard ("CECL") on October 1, 2020. However, in order to improve the comparability of the Company's financial statements with other banks, management is in the process of evaluating the potential of adopting CECL prior to that date. AsNo allowance was recorded as of March 31, 2021 or as of September 30, 2020 management estimates thatfor the $695,752,000 and $745,081,000 of SBA Payroll Protection Program loans in the portfolio on each date, respectively, which are included in the commercial & industrial loan category, due to the government guarantee. Management believes the allowance for credit losses (loans and unfunded commitments) under CECL would be approximately $176,000,000,of $199,153,000, or 1.31% of gross loans outstanding. If the Company elects an early adoption of CECL, a one-time entry to opening retained earnings (October 1, 2019) will be recorded to increase the allowance for credit losses and decrease retained earnings based on the CECL calculation as of that date.
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 was $2,646,603,000 and $2,379,089,000 at March 31, 2020 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 $8,500,000 as of March 31, 2020, which is an increase from $6,900,000 at September 30, 2019.
Management believes the allowance for loan losses plus the reserve for unfunded commitments, totaling $148,001,000, or 1.10%1.30% 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 March 31, 2021 and September 30, 2020.

Real estate owned ("REO") - REO decreasedincreased during the six months ended March 31, 20202021 by $1,318,000$350,000 to $5,463,000, primarily due to sales of REO properties during the period.$5,316,000.

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Intangible assets - Intangible assets increaseddecreased to $310,977,000$309,086,000 as of March 31, 20202021 from $309,247,000$309,906,000 as of September 30, 2019.2020. The increasedecrease was due to the purchase of small insurance agencies, partially offset bynormal amortization of finite-lived intangible assets.

Customer accounts - Customer accounts increased $97,656,000,$1,039,797,000, or 0.8%7.5%, to $12,088,420,000$14,819,421,000 at March 31, 20202021 compared with $11,990,764,000$13,779,624,000 at September 30, 2019.2020. Transaction accounts increased by $1,422,234,000 or 14.5% during that period, while time deposits decreased $382,437,000 or 9.6%. The shift in deposit mix has been a result of a deliberate deposit pricing and customer growth strategy. The focus on transaction accounts is intended to lessen sensitivity to rising interest rates and manage interest expense.

The following table shows the composition of the Bank’s customer accounts by deposit type.
  
March 31, 2020September 30, 2019
 Deposit Account BalanceAs a % of Total DepositsWeighted
Average
Rate		Deposit Account BalanceAs a % of Total DepositsWeighted
Average
Rate
($ in thousands)
Non-interest checking$1,664,707  13.8 %— %$1,621,343  13.5 %— %
Interest checking2,210,387  18.3  0.19  1,984,576  16.6  0.61  
Savings759,604  6.3  0.12  753,574  6.3  0.13  
Money market3,029,341  25.0  0.42  2,724,308  22.7  0.82  
Time deposits4,424,381  36.6  1.69  4,906,963  40.9  1.91  
Total$12,088,420  100 %0.77 %$11,990,764  100 %1.08 %

  
March 31, 2021September 30, 2020
 Deposit Account BalanceAs a % of Total DepositsWeighted
Average
Rate		Deposit Account BalanceAs a % of Total DepositsWeighted
Average
Rate
($ in thousands)
Non-interest checking$2,655,195 17.9 %— %$2,164,071 15.7 %— %
Interest checking3,353,239 22.6 0.20 3,029,576 22.0 0.24 
Savings976,064 6.6 0.11 872,087 6.3 0.11 
Money market4,244,168 28.6 0.19 3,740,698 27.1 0.30 
Time deposits3,590,755 24.2 0.61 3,973,192 28.8 1.17 
Total$14,819,421 100 %0.25 %$13,779,624 100 %0.48 %

FHLB advances and other borrowings - Total borrowings totaled $3,050,000,000$2,150,000,000 as of March 31, 2020, an increase2021, a decrease from $2,250,000,000$2,700,000,000 as of September 30, 2019. The increase is2020. Strong growth in deposits has resulted in excess liquidity and consequently the Company has reduced FHLB borrowings. Since September 30, 2020, $200,000,000 of cash flow hedges with an average effective rate of 1.37% were terminated and the associated FHLB borrowings were repaid at their 90-day call date. Additionally, a result$200,000,000 partial termination of $1,000,000,000 in newa cash flow hedge with an average effective rate of 0.79% was terminated and the associated FHLB advances offset by repaymentborrowing was repaid. Lastly, a $150,000,000 FHLB borrowing (unhedged) with a rate of $200,000,000 in FHLB advances.2.91% was repaid prior to maturity. The weighted average rate for FHLB borrowings was 1.37%1.84% as of March 31, 20202021 and 2.49%1.79% at September 30, 2019. The decrease is primarily due to lower rates on new FHLB advances.2020.

Shareholders' equity - The Company’s total shareholders' equity at March 31, 20202021 was $1,985,967,000,$2,332,953,000, or 11.43%11.94% of total assets. This was a decreaseis an increase of $47,028,000$318,820,000 from the September 30, 2019 total of $2,032,995,000,2020 when net worth was $2,014,133,000, or 12.34%10.72% of total assets. The Company’s shareholders' equity was impacted in the six months ended March 31, 2020 by2021 as a result of the February 8, 2021 issuance of Series A Preferred Stock with net proceeds, after underwriting discounts and expenses, of $293,325,000. Additionally, net income of $103,653,000,$83,822,000, the payment of $33,374,000$33,913,000 in cash dividends, treasury stock purchases of $112,089,000,$89,772,000, as well as anthe change in other comprehensive lossincome of $8,831,000.$64,223,000 impacted shareholders' equity.


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RESULTS OF OPERATIONS

Net Income - The Company recorded net income of $37,950,000$44,871,000 for the three months ended March 31, 20202021 compared to $51,098,000$36,377,000 for the prior year quarter. The Company recorded net income of $103,653,000$83,822,000 for the six months ended March 31, 20202021 compared to $104,040,000$104,243,000 for the same period one year ago. The changes are due to the factors described below.

Net Interest Income - For the three months ended March 31, 2020,2021, net interest income was $117,612,000,$124,034,000, which is $2,458,000 lower$6,422,000 higher than the same quarter of the prior year. Net interest margin was 2.75% for the quarter ended March 31, 2021 compared to 3.10% for the quarter ended March 31, 2020 compared to 3.15% for the quarter ended March 31, 2019.2020. The decreaseincrease in net interest income andis mostly due to average interest-earning assets increasing by $2,876,323,000 or 18.97% from the prior year while average interest-bearing liabilities increased $1,711,528,000 or 13.67%. The average rate earned on interest-earning assets declined by 92 basis points to 3.30% while the average rate paid on interest-bearing liabilities declined by 70 basis points to 0.65%. The compression in the net interest margin wassince the prior year same quarter is primarily due to the yieldrapid 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 earning assets decreasing by 23 basis points to 4.22%and bearing liabilities noted above. Additionally, the balance of cash was higher at $2,318,447,000 as of March 31, 2021 and the costloan portfolio at March 31, 2021 contained $695,752,000 (inclusive of $15,652,000 of unamortized net fees) in PPP loans, which carry a 1% note rate. During
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the three months ended and six months ended March 31, 2021, net interest bearing liabilities decreasing by 16 basis points to 1.19% over that same period. The lower yieldincome included $6,313,000 and $11,199,000, respectively, of net fee amortization on earning assets 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 lower rate in interest-bearing liabilities was primarily due to the decrease in short-term interest rates resulting in lower rates on new FHLB advances and interest-bearing deposits.PPP loans. For the six months ended March 31, 2020,2021, net interest income was $237,297,000,$244,548,000, which is $1,925,000 lower$7,251,000 higher than the same period of the prior year. Net interest margin was 3.12%2.75% for the six months ended March 31, 20202021 compared to 3.18%3.13% for the same period for the prior year.quarter ended March 31, 2020. The changes period over period are primarily due to the aforementioned factors.

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.
Rate / Volume Analysis:
Comparison of Three Months Ended
3/31/20 and 3/31/19		Comparison of Six Months Ended
3/31/20 and 3/31/19		 Comparison of Three Months Ended
3/31/21 and 3/31/20		Comparison of Six Months Ended
3/31/21 and 3/31/20
($ in thousands)($ in thousands)VolumeRateTotalVolumeRateTotal($ in thousands)VolumeRateTotalVolumeRateTotal
Interest income:Interest income:Interest income:
Loans receivableLoans receivable$1,229  $(3,741) $(2,512) $6,585  $(4,016) $2,569  Loans receivable$9,953 $(15,745)$(5,792)$20,207 $(34,474)$(14,267)
Mortgaged-backed securities(2,556) (2,446) (5,002) (4,193) (4,389) (8,582) 
Mortgage-backed securitiesMortgage-backed securities(4,709)(2,936)(7,645)(9,027)(7,000)(16,027)
Investments (1)Investments (1)1,572  (2,022) (450) 3,101  (2,850) 251  Investments (1)7,780 (7,207)573 15,585 (15,157)428 
All interest-earning assetsAll interest-earning assets245  (8,209) (7,964) 5,493  (11,255) (5,762) All interest-earning assets13,024 (25,888)(12,864)26,765 (56,631)(29,866)
Interest expense:Interest expense:Interest expense:
Customer accountsCustomer accounts946  (1,974) (1,028) 2,021  1,853  3,874  Customer accounts3,639 (21,548)(17,909)7,398 (42,678)(35,280)
FHLB advances and other borrowingsFHLB advances and other borrowings(2,506) (1,972) (4,478) (3,768) (3,943) (7,711) FHLB advances and other borrowings1,118 (2,495)(1,377)3,320 (5,157)(1,837)
All interest-bearing liabilitiesAll interest-bearing liabilities(1,560) (3,946) (5,506) (1,747) (2,090) (3,837) All interest-bearing liabilities4,757 (24,043)(19,286)10,718 (47,835)(37,117)
Change in net interest incomeChange in net interest income$1,805  $(4,263) $(2,458) $7,240  $(9,165) $(1,925) Change in net interest income$8,267 $(1,845)$6,422 $16,047 $(8,796)$7,251 
___________________ 
(1)Includes interest on cash equivalents and dividends on FHLB & FRB stock.
Provision (Release) for Credit Losses - Primarily due to the economic distress caused by the COVID-19 pandemic, theThe Company recorded a $6,200,000no provision for credit losses for the three months ended March 31, 2020,2021, compared with a $750,000provision for credit losses of $8,200,000 for the three months ended March 31, 2020. The relatively large credit loss provision for the three months ended March 31, 2019. The relatively significant provision in the current year quarter2020 is primarily relates to estimated impactsdue to the energy, hospitality, restaurant and senior living industries. Aonset of the global pandemic. The Company recorded a provision for credit losses of $5,200,000 and $250,000 was recorded$3,000,000 for the six months ended March 31, 2021, compared with a provision for credit losses of $4,450,000 for the six months ended March 31, 2020. Recoveries, net of charge-offs, totaled $2,464,000 for the three months ended March 31, 2021, compared to net recoveries of $1,788,000 during the three months ended March 31, 2020. Recoveries, net of charge-offs, totaled $4,198,000 for the six months ended March 31, 2021, compared to net recoveries of $4,367,000 during the six months ended March 31, 2020 and March 31, 2019, respectively. Reserving for new loan originations has been largely offset by recoveries of previously charged-off loans. Recoveries, net of charge-offs, totaled $1,788,000 for the three months ended March 31, 2020, compared to net recoveries of $1,171,000 during the three months ended March 31, 2019. Recoveries, net of charge-offs, totaled $4,367,000 for the six months ended March 31, 2020, compared to net recoveries of $2,579,000 during the six months ended March 31, 2019.2020.

Other Income - The three months ended March 31, 20202021 results include total other income of $16,241,000$14,477,000 compared to $12,810,000$16,241,000 for the same period one year ago, a $3,431,000 increase.$1,764,000 decrease. The increasequarter ended March 31, 2021 included a gain of $3,431,000 is primarily due to a $2,381,000 increase in loan fee income driven by higher loan prepayments and a $15,028,000 gain$14,110,000 on the salepartial termination of $204,351,000 of available-for-sale securities thatan interest rate swap being used to hedge a FHLB borrowing and this was partiallymostly offset by a $13,809,000$13,788,000 loss on early repayment of a $200,000,000fixed-rate FHLB borrowing. The six months ended March 31, 2021 results include total other income of $28,347,000 compared to $62,617,000 for the same period one year ago, a $34,270,000 decrease. The decrease was primarily due to a net gain of $30,700,000 from the sale of fixed assets, including a branch property in Bellevue, Washington during the first quarter of fiscal 2020.

Other Expense - Total other expense was $81,746,000 for the three months ended March 31, 2021, an increase of $2,313,000 from $79,433,000 for the prior year quarter. Compensation and benefits costs increased by $5,015,000, or 13.0%, over the prior year quarter due to a 1.9% rise in headcount, annual merit increases as well as higher bonus compensation that reflects increased loan production activity. Total other expense was $163,156,000 for the six months ended March 31, 2021, an increase of $1,087,000 from $162,069,000 for the same period one year ago. Compensation and benefits costs increased by $11,107,000 over the prior year period while information technology costs decreased by $6,081,000, primarily due to the prior year including a $5,900,000 impairment charge on systems hardware and software, and other expenses including professional fees decreased by $6,208,000. Total other expense for the six months ended March 31, 2021 and March 31, 2020 equaled 1.71% and 1.98%, respectively, of average assets.

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advance that carried an effective rate of 3.86% and was scheduled to mature in August, 2022. The six months ended March 31, 2020 results include total other income of $62,617,000 compared to $31,819,000 for the same period one year ago, a $30,798,000 increase. The increase is primarily due to the six months ended March 31, 2020 including a gain of $32,600,000 on sales of fixed assets, while the six months ended March 31, 2019 included a net gain of $6,400,000 recognized on the sale and valuation adjustments of fixed assets.

Other Expense - Other expenses have increased as a result of ongoing investments in people, process and technology with the objective of growing market share and ultimately earnings. The three months ended March 31, 2020 results include total other expense of $79,433,000 compared to $67,967,000 for the same period one year ago, a $11,466,000 increase. Compensation and benefits costs increased by $5,843,000, or 17.8%, over the prior year quarter primarily due to a 7.2% rise in headcount, including growth in our compliance program, and higher paying positions to advance our digital and technology initiatives. Information technology costs increased by $2,746,000, primarily due to continued investments in new systems hardware and software. The six months ended March 31, 2020 results include total other expense of $162,069,000 compared to $139,639,000 for the same period one year ago, a $22,430,000 increase. The increase is primarily due to information technology being higher by $10,813,000 which was largely from a $5,931,000 impairment charge on systems hardware and software. In addition, compensation and benefits costs increased by $8,591,000 primarily due to the aforementioned factors. The number of staff, including part-time employees on a full-time equivalent basis, increased by 7.2% to 2,060 at March 31, 2020 from 1,921 at March 31, 2019. Total other expense for the six months ended March 31, 2020 and March 31, 2019 equaled 1.98% and 1.72%, respectively, of average assets.

Gain (Loss) on Real Estate Owned - Results for the three months ended March 31, 20202021 include a net gain on real estate owned of $31,000,$34,000, compared to a net gain of $808,000$31,000 for the prior year quarter. Results for the six months ended March 31, 20202021 include a net loss on real estate owned of $855,000,$415,000, compared to a net gainloss of $1,128,000$855,000 for the prior year same period one year ago.period.

Income Tax Expense - Income tax expense totaled $10,301,000$11,928,000 for the three months ended March 31, 2020,2021, compared to $13,873,000$9,874,000 for the prior year quarter. Income tax expense totaled $28,137,000$22,502,000 for the six months ended March 31, 2020,2021, compared to $28,240,000$28,297,000 for the prior year same period one year ago.period. The effective tax rate for the six months ended March 31, 2020 was 21.35% compared to21.16% and 21.35% for the six months ended March 31, 2019.2021 and March 31, 2020, respectively. The Company’s effective tax rate for the six months ended March 31, 2020 differsvaries from the statutory rate mainly due to state taxes, tax-exempt income and tax-exempt income.tax-credit investments.

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 20192020 Form 10-K.

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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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 2019Company'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.

The COVID-19 pandemic is adversely affecting us and our customers, counterparties, employees, and third-party service providers, and the adverse impacts on our business, financial position, results of operations, and prospects could be significant.

The spread of COVID-19 has created a global public-health crisis that has impacted household, business, economic, and market conditions, including in the western United States where we conduct nearly all of our business. The extent of the impact of the COVID-19 pandemic on our capital, liquidity, and other financial positions and on our business, results of operations, and prospects will depend on a number of evolving factors, including:

•The duration, extent, and severity of the pandemic. COVID-19 has not yet been contained and could affect significantly more households and businesses. The duration and severity of the pandemic continue to be impossible to predict, as is the potential for a seasonal or other resurgence after its initial containment.
•The response of governmental and nongovernmental authorities. Many of their actions have been directed toward curtailing household and business activity to contain COVID-19 while simultaneously deploying fiscal- and monetary-policy measures to partially mitigate the adverse effects on individual households and businesses.
•The effect on our customers, counterparties, employees, and third-party service providers. COVID-19 and its associated consequences and uncertainties are affecting individuals, households, and businesses differently and unevenly.
•The effect on economies and markets. Whether the actions of governmental and nongovernmental authorities will be successful in mitigating the adverse effects of COVID-19 is unclear. National, regional, and local economies and markets could suffer disruptions that are lasting. Governmental actions are meaningfully influencing the interest-rate environment and financial-market activity and could have lasting effects on taxes and other economic factors, which could adversely affect our results of operations and financial condition.

During the three months ended March 31, 2020, the most notable impact to our results of operations was a higher provision expense for credit losses. Our provision expense was $6,200,000, primarily due to the unfavorable market conditions associated with COVID-19. Additionally, our operations have been impacted by the need to close certain offices and limit how customers conduct business through our branch network.

Governments have taken unprecedented steps to partially mitigate the adverse effects of their containment measures. For example, in late March 2020, the CARES Act was enacted to inject more than $2 trillion of financial assistance into the U.S. economy. The FRB has taken decisive and sweeping actions as well. Since March 15, 2020, these have included a reduction in the target range for the federal funds rate to 0 to 25 basis points, a program to purchase an indeterminate amount of Treasury securities and agency mortgage-backed securities, and numerous facilities to support the flow of credit to households and businesses. The degree to which our actions and those of governments and others will directly or indirectly assist our customers, counterparties, and third-party service providers and advance our business and the economy generally is not yet clear. The possibility of negative interest rates on U.S. Treasury or other market instruments could adversely affect our results of operations by, for example, reducing asset yields or spreads, creating operating and system issues, or having other adverse impacts on our business.

Failure to comply with the 2013 Consent Order from the Consumer Financial Protection Bureau regarding the Company’s Home Mortgage Disclosure Act submissions could result in additional regulatory enforcement action.

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The Consumer Financial Protection Bureau (the “CFPB”) has formally notified the Company of alleged errors in its Home Mortgage Disclosure Act (“HMDA”) reporting submissions. The CFPB alleges that the Company did not accurately report all required relevant information within the annual HMDA submissions. The Company has responded to the CFPB, noting that it has instituted enhanced procedures to ensure compliance with HMDA and has submitted amended HMDA filings. The Company is still operating under a consent order from 2013 relating to HMDA disclosures and believes that it may be subject to additional enforcement action which may include additional civil money penalties. In 2013, the Company paid a $34,000 civil money penalty associated with previous HMDA violations.


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 March 31, 2020.2021. 
PeriodTotal 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
January 1, 2020 to January 31, 2020510,120  $35.07  510,120  6,542,480  
February 1, 2019 to February 29, 20201,192,844  34.10  1,192,844  5,349,636  
March 1, 2020 to March 31, 2020720,649  27.81  720,649  4,628,987  
Total2,423,613    $32.43    2,423,613  4,628,987  
PeriodTotal 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
January 1, 2021 to January 31, 20212,083 $25.74 2,083 14,592,192 
February 1, 2021 to February 28, 2021830 29.97 830 14,591,362 
March 1, 2021 to March 31, 20212,821,675 31.54 2,821,675 11,769,687 
Total2,824,588   $31.53   2,824,588 11,769,687 
 ___________________
(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 66,956,26476,956,264 shares were authorized for repurchase. This includes 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

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Item 6.                Exhibits
(a)Exhibits
31.1 4.2Form of Depositary Receipt (included in Exhibit 4.1).
101Financial Statements from the Company’s Form 10-Q for the three and six months ended March 31, 20202021 formatted in iXBRL
104*Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
* Filed herewith

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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.
 
May 7, 20204, 2021
/S/    BRENT J. BEARDALL        
BRENT J. BEARDALL
President & Chief Executive Officer
May 7, 20204, 2021
/S/    VINCENT L. BEATTY       
VINCENT L. BEATTY
Executive Vice President and Chief Financial Officer
May 7, 20204, 2021
/S/    CORY D. STEWART      
CORY D. STEWART
Senior Vice President and Principal Accounting Officer

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