UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended December 31, ~~2020~~2021


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

For the transition period from to

Commission file number 001-34654

WASHINGTON FEDERAL INC

(Exact name of registrant as specified in its charter)

Washington

91-1661606

(State or other jurisdiction of incorporation or organization)

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

425 Pike Street

Seattle

Washington

98101

(Address of Principal Executive Offices)

(Zip Code)

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

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

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


Title of Each Class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $1.00 par value per share	WAFD	NASDAQ Stock Market
Depositary Shares, Each Representing a 1/40th Interest in a Share of 4.875% Fixed Rate Series A Non-Cumulative Perpetual Preferred Stock	WAFDP	NASDAQ Stock Market

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and ~~"emerging~~“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 ☒

The registrant had outstanding ~~75,891,386~~65,301,395 shares of common stock as of January ~~26, 2021.~~27, 2022.

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

PART I

Item 1.

Financial Statements (Unaudited)

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

Consolidated Statements of Financial Condition as of December 31, ~~2020~~2021 and September 30, ~~2020~~2021

Consolidated Statements of Operations for the three months ended December 31, ~~2020~~2021 and December 31, ~~2019~~2020

Consolidated Statements of Comprehensive Income for the three months ended December 31, ~~2020~~2021 and December 31, ~~2019~~2020

Consolidated Statements of Shareholders' Equity for the three months ended December 31, ~~2020~~2021 and December 31, ~~2019~~2020

Consolidated Statements of Cash Flows for the three months ended December 31, ~~2020~~2021 and December 31, ~~2019~~2020

Notes to Interim Consolidated Financial Statements

Item 2.

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

3534

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

4644

Item 4.

Controls and Procedures

Unregistered Sales of Equity Securities and Use of Proceeds

4846

Item 3.

Defaults Upon Senior Securities

4846

Item 4.

Mine Safety Disclosures

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(UNAUDITED)


		December 31, 2020		September 30, 2020			December 31, 2021		September 30, 2021
		(In thousands, except share data)					(In thousands, except share data)
ASSETS	ASSETS					ASSETS
Cash and cash equivalents	Cash and cash equivalents	$	1,830,722	$	1,702,977	Cash and cash equivalents	$	1,880,647	$	2,090,809
Available-for-sale securities, at fair value	Available-for-sale securities, at fair value	2,482,944		2,249,492		Available-for-sale securities, at fair value	1,946,139		2,138,259
Held-to-maturity securities, at amortized cost	Held-to-maturity securities, at amortized cost	586,870		705,838		Held-to-maturity securities, at amortized cost	326,387		366,025
Loans receivable, net of allowance for loan losses of $170,189 and $166,955		12,881,010		12,792,317
Loans receivable, net of allowance for loan losses of $171,411 and $171,300						Loans receivable, net of allowance for loan losses of $171,411 and $171,300	14,592,202		13,833,570
Interest receivable	Interest receivable	52,671		53,799		Interest receivable	51,751		50,636
Premises and equipment, net	Premises and equipment, net	256,242		252,805		Premises and equipment, net	253,488		255,152
Real estate owned	Real estate owned	4,463		4,966		Real estate owned	5,737		8,204
FHLB and FRB stock	FHLB and FRB stock	137,991		141,990		FHLB and FRB stock	102,863		102,863
Bank owned life insurance	Bank owned life insurance	229,175		227,749		Bank owned life insurance	234,660		233,263
Intangible assets, including goodwill of $302,707 and $302,707		309,425		309,906
Intangible assets, including goodwill of $303,457 and $303,457						Intangible assets, including goodwill of $303,457 and $303,457	309,747		310,019
Federal and state income tax assets, net	Federal and state income tax assets, net	0		5,708		Federal and state income tax assets, net	—		3,877
Other assets	Other assets	292,109		346,508		Other assets	269,550		257,897
		$	19,063,622	$	18,794,055		$	19,973,171	$	19,650,574
LIABILITIES AND SHAREHOLDERS’ EQUITY	LIABILITIES AND SHAREHOLDERS’ EQUITY					LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities	Liabilities					Liabilities
Customer accounts	Customer accounts					Customer accounts
Transaction deposit accounts	Transaction deposit accounts	$	10,381,459	$	9,806,432	Transaction deposit accounts	$	12,550,062	$	12,108,025
Time deposit accounts	Time deposit accounts	3,785,082		3,973,192		Time deposit accounts	3,351,984		3,434,087
		14,166,541		13,779,624			15,902,046		15,542,112
FHLB advances	FHLB advances	2,600,000		2,700,000		FHLB advances	1,720,000		1,720,000
Advance payments by borrowers for taxes and insurance	Advance payments by borrowers for taxes and insurance	15,539		49,462		Advance payments by borrowers for taxes and insurance	17,551		47,016
Federal and state income tax liabilities, net	Federal and state income tax liabilities, net	8,294		0		Federal and state income tax liabilities, net	2,728		—
Accrued expenses and other liabilities	Accrued expenses and other liabilities	211,481		250,836		Accrued expenses and other liabilities	181,720		215,382
		17,001,855		16,779,922			17,824,045		17,524,510
Commitments and contingencies (see Note I)	Commitments and contingencies (see Note I)	0		0		Commitments and contingencies (see Note I)	0		0
Shareholders’ equity	Shareholders’ equity					Shareholders’ equity
Common stock, $1.00 par value, $300,000,000 shares authorized; 135,937,934 and 135,727,237 shares issued; 75,867,105 and 75,689,364 shares outstanding		135,938		135,727
Preferred stock, $1.00 par value, 5,000,000 shares authorized; 300,000 and 300,000 shares issued; 300,000 and 300,000 shares outstanding						Preferred stock, $1.00 par value, 5,000,000 shares authorized; 300,000 and 300,000 shares issued; 300,000 and 300,000 shares outstanding	300,000		300,000
Common stock, $1.00 par value, 300,000,000 shares authorized; 136,195,838 and 135,993,254 shares issued; 65,263,738 and 65,145,268 shares outstanding						Common stock, $1.00 par value, 300,000,000 shares authorized; 136,195,838 and 135,993,254 shares issued; 65,263,738 and 65,145,268 shares outstanding	136,196		135,993
Additional paid-in capital	Additional paid-in capital	1,680,111		1,678,843		Additional paid-in capital	1,680,637		1,678,622
Accumulated other comprehensive income (loss), net of taxes	Accumulated other comprehensive income (loss), net of taxes	41,435		16,953		Accumulated other comprehensive income (loss), net of taxes	61,876		69,785
Treasury stock, at cost; 60,070,829 and 60,037,873 shares		(1,238,997)		(1,238,296)
Treasury stock, at cost; 70,932,100 and 70,847,986 shares						Treasury stock, at cost; 70,932,100 and 70,847,986 shares	(1,589,920)		(1,586,947)
Retained earnings	Retained earnings	1,443,280		1,420,906		Retained earnings	1,560,337		1,528,611
		2,061,767		2,014,133			2,149,126		2,126,064
		$	19,063,622	$	18,794,055		$	19,973,171	$	19,650,574

SEE NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Table of Contents

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)


		Three Months Ended December 31,				Three Months Ended December 31,
		2020		2019				2021		2020
		(In thousands, except share data)				(In thousands, except share data)
INTEREST INCOME	INTEREST INCOME						INTEREST INCOME
Loans receivable	Loans receivable	$	133,671	$	142,146		Loans receivable	$	138,509	$	133,671
Mortgage-backed securities	Mortgage-backed securities	7,230		15,612			Mortgage-backed securities	4,792		7,230
Investment securities and cash equivalents	Investment securities and cash equivalents	6,921		7,066			Investment securities and cash equivalents	7,139		6,921
		147,822		164,824				150,440		147,822
INTEREST EXPENSE	INTEREST EXPENSE						INTEREST EXPENSE
Customer accounts	Customer accounts	14,110		31,481			Customer accounts	8,461		14,110
FHLB advances	FHLB advances	13,198		13,658			FHLB advances	7,843		13,198
		27,308		45,139				16,304		27,308
Net interest income	Net interest income	120,514		119,685			Net interest income	134,136		120,514
Provision (release) for credit losses	Provision (release) for credit losses	3,000		(3,750)			Provision (release) for credit losses	500		3,000
Net interest income after provision (release)	Net interest income after provision (release)	117,514		123,435			Net interest income after provision (release)	133,636		117,514

OTHER INCOME	OTHER INCOME						OTHER INCOME

Gain (loss) on sale of investment securities							Gain (loss) on sale of investment securities	81		—

Loan fee income	Loan fee income	2,392		1,804			Loan fee income	1,921		2,392
Deposit fee income	Deposit fee income	6,026		6,260			Deposit fee income	6,443		6,026
Other income	Other income	5,452		38,312			Other income	10,236		5,452
		13,870		46,376
								18,681		13,870
OTHER EXPENSE	OTHER EXPENSE						OTHER EXPENSE
Compensation and benefits	Compensation and benefits	42,723		36,631			Compensation and benefits	47,425		42,723
Occupancy	Occupancy	9,592		10,135			Occupancy	10,090		9,592
FDIC insurance premiums	FDIC insurance premiums	3,263		2,470			FDIC insurance premiums	3,100		3,263
Product delivery	Product delivery	4,937		4,267			Product delivery	4,721		4,937
Information technology	Information technology	11,831		17,107			Information technology	11,421		11,831
Other expense	Other expense	9,064		12,026			Other expense	12,856		9,064
		81,410		82,636				89,613		81,410
Gain (loss) on real estate owned, net	Gain (loss) on real estate owned, net	(449)		(886)			Gain (loss) on real estate owned, net	562		(449)
Income before income taxes	Income before income taxes	49,525		86,289			Income before income taxes	63,266		49,525
Income tax expense	Income tax expense	10,574		18,423			Income tax expense	12,985		10,574
NET INCOME		$	38,951	$	67,866

Net income							Net income	50,281		38,951
Dividends on preferred stock							Dividends on preferred stock	3,656		—
Net income available to common shareholders							Net income available to common shareholders	$	46,625	$	38,951
PER SHARE DATA	PER SHARE DATA						PER SHARE DATA
Basic earnings per share		$	0.51	$	0.86
Diluted earnings per share		0.51		0.86
Basic earnings per common share							Basic earnings per common share	$	0.72	$	0.51
Diluted earnings per common share							Diluted earnings per common share	0.71		0.51
Dividends paid on common stock per share	Dividends paid on common stock per share	0.22		0.21			Dividends paid on common stock per share	0.23		0.22
Basic weighted average number of shares outstanding	Basic weighted average number of shares outstanding	75,792,995		78,480,264			Basic weighted average number of shares outstanding	65,207,837		75,792,995
Diluted weighted average number of shares outstanding	Diluted weighted average number of shares outstanding	75,798,460		78,535,299			Diluted weighted average number of shares outstanding	65,350,174		75,798,460

SEE NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Table of Contents

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

Three Months Ended December 31,
2020 2019
(In thousands)
Net income $ 38,951 $ 67,866
Other comprehensive income (loss) net of tax:
Net unrealized gain (loss) during the period on available-for-sale investment securities, net of tax of $(2,686) and $425 8,991 (1,724)
8,991 (1,724)
Net unrealized gain (loss) during the period on borrowings cash flow hedges, net of tax of $(4,627) and $(697) 15,491 2,418
15,491 2,418
Other comprehensive income (loss) 24,482 694
Comprehensive income $ 63,433 $ 68,560


	Three Months Ended December 31,
	2021		2020
	(In thousands)
Net income	$	50,281	$	38,951
Other comprehensive income (loss) net of tax:
Net unrealized gain (loss) during the period on available-for-sale investment securities, net of tax of $3,864 and $(2,686)	(12,934)		8,991
Reclassification adjustment of net (gain) loss from sale of available-for-sale securities included in net income, net of tax of $(19) and $0	62		—
Net unrealized gain (loss) from investment securities, net of reclassification adjustment	(12,872)		8,991
Net unrealized gain (loss) during the period on borrowings cash flow hedges, net of tax of $(1,483) and $(4,627)	4,963		15,491
Reclassification adjustment of net (gain) loss included in net income during the period from hedging derivatives, net of tax of $0 and $0	—		—
Net unrealized gain (loss) in cash flow hedging instruments, net of reclassification adjustment	4,963		15,491

Other comprehensive income (loss)	(7,909)		24,482
Comprehensive income	$	42,372	$	63,433

SEE NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Table of Contents

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(UNAUDITED)

(in thousands) Common Stock Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Treasury Stock Total
Balance at October 1, 2020 $ 135,727 $ 1,678,843 $ 1,420,906 $ 16,953 $ (1,238,296) $ 2,014,133
Net income — — 38,951 — — 38,951
Other comprehensive income (loss) — — — 24,482 — 24,482
Dividends on common stock ($0.22 per share) — — (16,577) — — (16,577)
Proceeds from stock-based awards 2 28 — — — 30
Stock-based compensation expense 209 1,240 — — — 1,449
Treasury stock acquired — — — — (701) (701)
Balance at December 31, 2020 $ 135,938 $ 1,680,111 $ 1,443,280 $ 41,435 $ (1,238,997) $ 2,061,767
(in thousands) Common Stock Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Treasury Stock Total
Balance at October 1, 2019 $ 135,540 $ 1,672,417 $ 1,335,909 $ 15,292 $ (1,126,163) $ 2,032,995
Adjustment pursuant to adoption of ASU 2016-13 — — (21,945) — — (21,945)
Net income — — 67,866 — — 67,866
Other comprehensive income (loss) — — — 694 — 694
Dividends on common stock ($0.21 per share) — — (16,433) — — (16,433)
Proceeds from stock-based awards 3 47 — — — 50
Stock-based compensation expense 177 1,202 — — — 1,379
Treasury stock acquired — — — — (33,479) (33,479)
Balance at December 31, 2019 $ 135,720 $ 1,673,666 $ 1,365,397 $ 15,986 $ (1,159,642) $ 2,031,127


(in thousands)	Preferred Stock		Common Stock		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total
Balance at October 1, 2021	$	300,000	$	135,993	$	1,678,622	$	1,528,611	$	69,785	$	(1,586,947)	$	2,126,064

Net income	—		—		—		50,281		—		—		50,281
Other comprehensive income (loss)	—		—		—		—		(7,909)		—		(7,909)

Dividends on common stock ($0.23 per share)	—		—		—		(14,899)		—		—		(14,899)
Dividends on preferred stock ($12.1875 per share)	—		—		—		(3,656)		—		—		(3,656)
Proceeds from stock-based awards	—		30		798		—		—		—		828

Stock-based compensation expense	—		173		1,217		—		—		—		1,390

Treasury stock acquired	—		—		—		—		—		(2,973)		(2,973)
Balance at December 31, 2021	$	300,000	$	136,196	$	1,680,637	$	1,560,337	$	61,876	$	(1,589,920)	$	2,149,126

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

Net income	—		—		—		38,951		—		—		38,951
Other comprehensive income (loss)	—		—		—		—		24,482		—		24,482
Dividends on common stock ($0.22 per share)	—		—		—		(16,577)		—		—		(16,577)
Proceeds from stock-based awards	—		2		28		—		—		—		30

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

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

SEE NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Table of Contents

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

Three Months Ended December 31,
2020 2019
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 38,951 $ 67,866
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization, accretion and other, net 9,211 15,275
Stock-based compensation expense 1,449 1,379
Provision (release) for credit losses 3,000 (3,750)
Net realized (gain) loss on sales of premises, equipment, and real estate owned 15 (32,734)
Impairment loss on premises and equipment 0 5,931
Decrease (increase) in accrued interest receivable 1,128 2,132
Decrease (increase) in federal and state income tax receivable 5,708 0
Decrease (increase) in cash surrender value of bank owned life insurance (1,426) (1,457)
Decrease (increase) in other assets 71,923 (3,793)
Increase (decrease) in federal and state income tax liabilities 981 14,654
Increase (decrease) in accrued expenses and other liabilities (36,761) 8,092
Net cash provided by (used in) operating activities 94,179 73,595
CASH FLOWS FROM INVESTING ACTIVITIES
Origination of loans and principal repayments, net (91,857) 20,131
FHLB & FRB stock purchased (108,001) (77,200)
FHLB & FRB stock redeemed 112,000 77,200
Available-for-sale securities purchased (379,760) (82,028)
Principal payments and maturities of available-for-sale securities 157,246 69,085
Principal payments and maturities of held-to-maturity securities 116,223 81,329
Proceeds from sales of real estate owned 357 820
Net cash received (paid) in business combinations 0 (1,725)
Proceeds from sales of premises and equipment 0 53,790
Premises and equipment purchased and REO improvements (8,388) (4,931)
Net cash provided by (used in) investing activities (202,180) 136,471
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in customer accounts 386,917 (58,626)
Proceeds from borrowings 2,700,007 1,930,000
Repayments of borrowings (2,800,007) (1,930,000)
Proceeds from stock-based awards 30 50
Dividends paid on common stock (16,577) (16,433)
Treasury stock purchased (701) (33,479)
Increase (decrease) in advances payments by borrowers for taxes and insurance (33,923) (36,931)
Net cash provided by (used in) financing activities 235,746 (145,419)
Increase (decrease) in cash and cash equivalents 127,745 64,647
Cash, cash equivalents and restricted cash at beginning of period 1,702,977 419,158
Cash, cash equivalents and restricted cash at end of period $ 1,830,722 $ 483,805


	Three Months Ended December 31,
	2021		2020
	(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	50,281	$	38,951
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization, accretion and other, net	7,944		9,211

Stock-based compensation expense	1,390		1,449
Provision (release) for credit losses	500		3,000
Loss (gain) on sale of investment securities	(81)		—

Net realized (gain) loss on sales of premises, equipment, and real estate owned	(355)		15



Decrease (increase) in accrued interest receivable	(1,115)		1,128

Decrease (increase) in federal and state income tax receivable	3,877		5,708
Decrease (increase) in cash surrender value of bank owned life insurance	(1,397)		(1,426)
Decrease (increase) in other assets	(3,422)		71,923
Increase (decrease) in federal and state income tax liabilities	5,090		981
Increase (decrease) in accrued expenses and other liabilities	(35,871)		(36,761)
Net cash provided by (used in) operating activities	26,841		94,179
CASH FLOWS FROM INVESTING ACTIVITIES
Origination of loans and principal repayments, net	(347,596)		(91,857)
Loans purchased	(413,326)		—
FHLB & FRB stock purchased	(56,000)		(108,001)
FHLB & FRB stock redeemed	56,000		112,000
Available-for-sale securities purchased	—		(379,760)
Principal payments and maturities of available-for-sale securities	170,847		157,246
Proceeds from sales of available-for-sale securities	4,510		—

Principal payments and maturities of held-to-maturity securities	38,679		116,223

Proceeds from sales of real estate owned	2,883		357




Proceeds from sales of premises and equipment	2		—
Premises and equipment purchased and REO improvements	(2,771)		(8,388)
Net cash provided by (used in) investing activities	(546,772)		(202,180)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in customer accounts	359,934		386,917
Proceeds from borrowings	1,400,000		2,700,007
Repayments of borrowings	(1,400,000)		(2,800,007)

Proceeds from stock-based awards	828		30

Dividends paid on common stock	(14,899)		(16,577)
Dividends paid on preferred stock	(3,656)		—

Treasury stock purchased	(2,973)		(701)
Increase (decrease) in advances payments by borrowers for taxes and insurance	(29,465)		(33,923)
Net cash provided by (used in) financing activities	309,769		235,746
Increase (decrease) in cash and cash equivalents	(210,162)		127,745
Cash, cash equivalents and restricted cash at beginning of period	2,090,809		1,702,977
Cash, cash equivalents and restricted cash at end of period	$	1,880,647	$	1,830,722

(CONTINUED)

SEE NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Table of Contents

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

Three Months Ended December 31,
2020 2019
(In thousands)
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Non-cash investing activities
Real estate acquired through foreclosure $ (161) $ 272
Non-cash financing activities
Stock issued upon exercise of warrants 0 0
Cash paid (received) during the period for
Interest 23,164 45,954
Income taxes (19) 0


	Three Months Ended December 31,
	2021		2020
	(In thousands)
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Non-cash investing activities
Real estate acquired through foreclosure	$	—	$	(161)
Other personal property acquired through foreclosure	422		—
Non-cash financing activities
Preferred stock dividend payable	3,656		—
Cash paid (received) during the period for
Interest	13,275		23,164
Income taxes	—		(19)

SEE NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE A – Summary of Significant Accounting Policies

Company and Nature of Operations - Washington Federal Bank, National Association, a federally-insured national bank dba WaFd Bank (the “Bank” or “WaFd Bank”), was founded on April 24, 1917 in Ballard, Washington and is engaged primarily in providing lending, depository, insurance and other banking services to consumers, mid-sized to large businesses, and owners and developers of commercial real estate. Washington Federal, Inc., a Washington corporation (the “Company”), was formed as the Bank’s holding company in November, 1994. As used throughout this document, the terms “Washington Federal” or the “Company” refer to the Company and its consolidated subsidiaries, and the term “Bank” refers to the operating subsidiary, Washington Federal Bank, National Association. The Company is headquartered in Seattle, Washington. The Bank conducts its activities through a network of ~~234~~219 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 ~~2020~~2021 Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on November ~~23, 2020~~19, 2021 ("~~2020~~2021 Annual Financial Statements"). Interim results are not necessarily indicative of results for a full year.

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

Summary of Significant Accounting Policies - The significant accounting policies used in preparation of the Company's consolidated financial statements are disclosed in its ~~2020~~2021 Annual Financial Statements. There have not been any significant changes in the Company's significant accounting policies compared to those contained in its ~~2020~~2021 Annual Financial Statements for the year ended September 30, ~~2020.~~2021.

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 December 31, ~~2020.~~2021. As of December 31, ~~2020~~2021 and September 30, ~~2020,~~2021, the Company held counterparty cash collateral of $40,350,000 and pledged cash collateral to counterparties of $1,500,000, respectively, related to derivative ~~contracts of $54,800,000 and $97,600,000, respectively.~~contracts.

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

Allowance for Credit Losses (Loans Receivable) - ~~Effective October 1, 2019, the Company has applied FASB ASU 2016-13,~~ ~~Financial Instruments - Credit Losses ("ASC 326"),~~ 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. See Note E "Allowance for Losses on Loans" for details. The Company maintains an allowance for credit losses (“ACL”) for the expected

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~~WASHINGTON FEDERAL, INC. AND SUBSIDIARIES~~

~~NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

credit losses of the loan portfolio as well as unfunded loan commitments. The amount of ACL is based on ongoing, quarterly assessments by management. The CECL methodology requires an estimate of the credit losses expected over the life of an exposure (or pool of exposures) and replaces the incurred loss methodology’s threshold that delayed the recognition of a credit loss until it was probable a loss event was incurred.

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

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(UNAUDITED)

The ACL consists of the allowance for loan losses and the reserve for unfunded commitments. The estimate of expected credit losses under the CECL methodology is based on relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts. Historical loss experience is generally the starting point for estimating expected credit losses. We then consider whether the historical loss experience should be adjusted for asset-specific risk characteristics or current conditions at the reporting date that did not exist over the period that historical experience was based for each loan type. Finally, we consider forecasts about future economic conditions or changes in collateral values that are reasonable and supportable.

Portfolio segment is defined as the level at which an entity develops and documents a systematic methodology to determine its ACL. The Company has designated two loan portfolio segments, commercial loans and consumer loans. These loan portfolio segments are further disaggregated into classes, which represent loans of similar type, risk characteristics, and methods for monitoring and assessing credit risk. The commercial loan portfolio segment is disaggregated into five classes: multi-family, commercial real estate, commercial and industrial, construction, and land acquisition and development. The risk of loss for the commercial loan portfolio segment is generally most indicated by the credit risk rating assigned to each borrower. Commercial loan risk ratings are determined by experienced senior credit officers based on specific facts and circumstances and are subject to periodic review by an independent internal team of credit specialists. The consumer loan portfolio segment is disaggregated into five classes: single-family-residential mortgage, custom construction, consumer lot loans, home equity lines of credit, and other consumer. The risk of loss for the consumer loan portfolio segment is generally most indicated by delinquency status and general economic factors. Each commercial and consumer loan portfolio class may also be further segmented based on risk characteristics.

For most of our loan portfolio classes, the historical loss experience is determined using a cohort methodology. This method pools loans into groups (“cohorts”) sharing similar risk characteristics and tracks each cohort’s net charge-offs over the lives of the loans to calculate a historical loss rate. The historical loss rates for each cohort are then averaged to calculate an overall historical loss rate which is applied to the current loan balance to arrive at the quantitative baseline portion of the allowance for credit losses for the respective loan portfolio class. For certain loan portfolio classes, the Company determined there was not sufficient historical loss information to calculate a meaningful historical loss rate using the cohort methodology. For any such loan portfolio class, the weighted-average remaining maturity (“WARM”) methodology is being utilized until sufficient historical loss data is obtained. The WARM method multiplies an average annual loss rate by the expected remaining life of the loan pool to arrive at the quantitative baseline portion of the allowance for credit losses for the respective loan portfolio class.

The Company also considers qualitative adjustments to the historical loss rate for each loan portfolio class. The qualitative adjustments for each loan class consider the conditions over the period from which historical loss experience was based and are split into two components: 1) asset or class specific risk characteristics or current conditions at the reporting date related to portfolio credit quality, remaining payments, volume and nature, credit culture and management, business environment or other management factors and 2) reasonable and supportable forecast of future economic conditions and collateral values.

The Company performs a quarterly asset quality review which includes a review of forecasted gross charge-offs and recoveries, nonperforming assets, criticized loans, risk rating migration, delinquencies, etc. The asset quality review is performed by management and the results are used to consider a qualitative overlay to the quantitative baseline. The second qualitative adjustment noted above, economic conditions and collateral values, encompasses a one-year reasonable and supportable forecast period. The overlay adjustment for the reasonable and supportable forecast assumes an immediate reversion after the one-year forecast period to historical loss rates for the remaining life of the respective loan pool.

When management deems it to be appropriate, the Company establishes a specific reserve for individually evaluated loans that do not share similar risk characteristics with the loans included in each respective loan pool. These individually evaluated loans are removed from their respective pools and typically represent collateral dependent loans but may also include other non-performing loans or troubled debt restructurings (“TDRs”). In addition, the Company individually evaluates “reasonably expected” TDRs, which are identified by the Company as a loan expected to be classified as a TDR within the next six months. Management judgment is utilized to make this determination.

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~~WASHINGTON FEDERAL, INC. AND SUBSIDIARIES~~

~~NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

Allowance for Credit Losses (Held-to-Maturity Debt Securities) - For held-to-maturity (“HTM”) debt securities, the Company is required to utilize a CECL methodology to estimate expected credit losses. Substantially all of the Company’s HTM debt securities are issued by U.S. government agencies or U.S. government-sponsored enterprises. These securities carry the explicit

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

and/or implicit guarantee of the U.S. government and have a long history of zero credit loss. See Note F "Fair Value Measurements" for more information about HTM debt securities.

Allowance for Credit Losses (Available-for-Sale Debt Securities) - The impairment model for available-for-sale (“AFS”) debt securities differs from the CECL methodology applied for HTM debt securities because AFS debt securities are measured at fair value rather than amortized cost. ~~Although ASC 326 replaced the legacy other-than-temporary impairment (“OTTI”) model with a credit loss model, it retained the fundamental nature of the legacy OTTI model.~~ For AFS debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more likely than not that it will be required to sell, the security before recovery of its amortized cost basis. If either criteria is met, the security’s amortized cost basis is written down to fair value through income. For AFS debt securities where neither of the criteria are met, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the credit rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited to the amount that the fair value is less than the amortized cost basis. Any remaining discount that has not been recorded through an allowance for credit losses is recognized in other comprehensive income. ~~Under the new guidance, an entity may no longer consider the length of time fair value has been less than amortized cost.~~ Changes in the allowance for credit losses are recorded as a provision (or release) for credit losses. Losses are charged against the allowance when management believes the uncollectibility of an AFS security is confirmed or when either of the criteria regarding intent or requirement to sell is met. See Note F "Fair Value Measurements" for more information about AFS debt securities.

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

•Presenting accrued interest receivable balances separately from their underlying instruments within the consolidated statements of financial condition.

•Excluding accrued interest receivable that is included in the amortized cost of financing receivables from related disclosure requirements.

•Continuing our policy to write off accrued interest receivable by reversing interest income in cases where the Company does not reasonably expect to receive payment.

•Not measuring an allowance for credit losses for accrued interest receivable due to the Company’s policy of writing off uncollectible accrued interest receivable balances in a timely manner, as described above.

Non-Accrual Loans - Loans are placed on non-accrual status when, in the judgment of management, the probability of collection of interest is deemed to be insufficient to warrant further accrual. When a loan is placed on non-accrual status, previously accrued but unpaid interest is deducted from interest income. The Bank does not accrue interest on loans 90 days or more past due. If payment is made on a loan so that the loan becomes less than 90 days past due, and the Bank expects full collection of principal and interest, the loan is returned to full accrual status. Any interest ultimately collected is credited to income in the period of recovery. A loan is charged-off when the loss is estimable and it is confirmed that the borrower is not expected to be able to meet contractual obligations.

If a consumer loan is on non-accrual status before becoming a TDR it will stay on non-accrual status following restructuring until it has been performing for at least six months, at which point it may be moved to accrual status. If a loan is on accrual status before it becomes a TDR, and management concludes that full repayment is probable based on internal evaluation, it will remain on accrual status following restructuring. If the restructured consumer loan does not perform, it is placed on non-accrual status when it is 90 days delinquent. For commercial loans, six consecutive payments on newly restructured loan terms are required prior to returning the loan to accrual status. In some instances, after the required six consecutive payments are made, management will conclude that collection of the entire principal and interest due is still in doubt. In those instances, the loan will remain on non-accrual status.

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~~WASHINGTON FEDERAL, INC. AND SUBSIDIARIES~~

~~NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

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

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

estate including residential properties; commercial properties such as retail centers, office buildings, and lodging; agriculture land; and vacant land.

Off-balance-sheet credit exposures - The only material off-balance-sheet credit exposures are unfunded loan commitments, which had a combined balance of ~~$3,011,286,000~~$4,272,929,000 and ~~$2,738,095,000~~$3,804,444,000 at December 31, ~~2020~~2021 and September 30, ~~2020,~~2021, 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”~~("ASU") 2020-04, Reference Rate Reform (Topic 848). The amendments in this ASU provide temporary, optional guidance to ease the potential burden in accounting for reference rate reform. The ASU provides optional expedients and exceptions for applying GAAP to transactions affected by reference rate reform if certain criteria are met. The ASU primarily includes relief related to contract modifications and hedging relationships, as well as providing a one-time election for the sale or transfer of debt securities classified as held-to-maturity. This guidance is effective immediately and the amendments may be applied prospectively through December 31, 2022. The Company ~~is currently~~has evaluated the regulatory requirements to cease the use of LIBOR and has put in ~~the process~~place systems and capabilities for this purpose. The adoption of ~~evaluating the amendments and determining the impact to its consolidated financial statements.~~

~~In August 2018, the FASB issued ASU 2018-15,~~ ~~Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. The amendments in~~ this ASU ~~align the requirements for capitalizing implementation costs incurred in a hosting arrangement that~~ is ~~a service contract with the requirements for capitalizing implementation costs incurred~~not expected 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. The Company adopted this ASU beginning October 1, 2020 and it did not have a material impact on ~~its~~the Company's consolidated financial statements.

NOTE C – Dividends and Share Repurchases

On November ~~20, 2020,~~19, 2021, the Company paid ~~a regular dividend on common stock of $0.22 per share, which represented the 151~~st ~~consecutive quarterly cash dividend. Dividends per share were $0.22 and $0.21 for the quarters ended December 31, 2020 and 2019, respectively. On January 26, 2021, the Company declared~~ a regular dividend on common stock of $0.23 per share, which ~~represents its 152~~represented the 155ndth consecutive quarterly cash dividend. Dividends per share were $0.23 and $0.22 for the quarters ended December 31, 2021 and 2020, respectively. On January 25, 2022, the Company declared a regular dividend on common stock of $0.24 per share, which represents its 156th consecutive quarterly cash dividend to its common shareholders. This dividend will be paid on February ~~19, 2021~~18, 2022 to common shareholders of record onas of February ~~5, 2021.~~4, 2022.

For the three months ended December 31, ~~2020,~~2021, the Company repurchased ~~32,956~~84,114 shares at an average price of ~~$21.29.~~$35.34. As of December 31, ~~2020,~~2021, there are ~~4,594,275~~3,733,004 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.~~

~~Table~~The Company pays a cash dividend, if declared by the Board, of ~~Contents~~

~~WASHINGTON FEDERAL, INC. AND SUBSIDIARIES~~

~~NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~$12.1875 per share on its Series A Preferred Stock quarterly on January 15, April 15, July 15 and October 15. This dividend equals $0.30468750 per depositary share (each dividend, a "Series A Preferred Dividend"). The Company paid the Series A Preferred Dividend on January 15, 2022. On January 25, 2022, the Company declared a Series A Preferred Dividend to be paid on April 15, 2022 to shareholders of record as of March 31, 2022.

NOTE D – Loans Receivable

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" above.

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

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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


		December 31, 2020				September 30, 2020					December 31, 2021				September 30, 2021
		(In thousands)				(In thousands)					(In thousands)				(In thousands)
Commercial loans	Commercial loans									Commercial loans
Multi-family	Multi-family	$	1,610,796	10.9	%	$	1,538,762	10.6	%	Multi-family	$	2,298,155	13.5	%	$	2,291,477	14.0	%
Commercial real estate	Commercial real estate	1,954,154		13.2		1,895,086		13.1		Commercial real estate	2,681,453		15.8		2,443,845		15.0
Commercial & industrial (1)	Commercial & industrial (1)	2,256,627		15.3		2,132,160		14.7		Commercial & industrial (1)	2,373,012		13.9		2,314,654		14.2
Construction	Construction	2,687,708		18.2		2,403,276		16.6		Construction	2,967,644		17.4		2,888,214		17.7
Land - acquisition & development	Land - acquisition & development	193,239		1.3		193,745		1.3		Land - acquisition & development	225,423		1.3		222,457		1.4
Total commercial loans	Total commercial loans	8,702,524		58.9		8,163,029		56.3		Total commercial loans	10,545,687		61.9		10,160,647		62.3
Consumer loans	Consumer loans									Consumer loans
Single-family residential	Single-family residential	5,063,053		34.2		5,304,689		36.7		Single-family residential	5,295,837		31.1		4,951,627		30.4
Construction - custom	Construction - custom	659,364		4.5		674,879		4.7		Construction - custom	787,862		4.6		783,221		4.8
Land - consumer lot loans	Land - consumer lot loans	110,841		0.7		102,263		0.7		Land - consumer lot loans	151,297		0.9		149,956		0.9
HELOC	HELOC	139,752		0.9		139,703		1.0		HELOC	166,601		1.0		165,989		1.0
Consumer	Consumer	111,292		0.8		83,159		0.6		Consumer	77,681		0.5		87,892		0.5
Total consumer loans	Total consumer loans	6,084,302		41.1		6,304,693		43.7		Total consumer loans	6,479,278		38.1		6,138,685		37.7
Total gross loans	Total gross loans	14,786,826		100	%	14,467,722		100	%	Total gross loans	17,024,965		100	%	16,299,332		100	%
Less:	Less:									Less:
Allowance for credit losses on loans	Allowance for credit losses on loans	170,189				166,955				Allowance for credit losses on loans	171,411				171,300
Loans in process	Loans in process	1,679,972				1,456,072				Loans in process	2,207,880				2,232,836
Net deferred fees, costs and discounts	Net deferred fees, costs and discounts	55,655				52,378				Net deferred fees, costs and discounts	53,472				61,626
Total loan contra accounts	Total loan contra accounts	1,905,816				1,675,405				Total loan contra accounts	2,432,763				2,465,762
Net loans	Net loans	$	12,881,010			$	12,792,317			Net loans	$	14,592,202			$	13,833,570

(1) Includes ~~$646,887,000~~$202,261,000 and ~~$762,004,000~~$311,795,000 of ~~SBA Payroll~~Small Business Administration’s Paycheck Protection Program ("PPP") loans as of December 31, ~~2020~~2021 and September 30, ~~2020,~~2021, respectively.

The Company elected to exclude accrued interest receivable ("AIR") from the amortized cost basis of loans for disclosure purposes and from the calculations of estimated credit losses. As of December 31, ~~2020,~~2021, and September 30, ~~2020,~~2021, AIR for loans totaled ~~$47,168,000~~$47,106,000 and ~~$48,704,000,~~$46,234,000, respectively, and is included in the ~~“accrued interest receivable”~~Interest receivable line item balance on the Company’s consolidated statements of financial condition.

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Loans in the amount of ~~$5,153,478,000~~$7,175,190,000 and ~~$5,361,504,000~~$5,930,015,000 at December 31, ~~2020~~2021 and September 30, ~~2020,~~2021, 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~~non-accrual loans and loans 90 days or more past due and accruing.

December 31, 2020 September 30, 2020
(In thousands, except ratio data)
Non-accrual Non-accrual with no ACL 90 days or more past due and accruing Non-accrual Non-accrual with no ACL 90 days or more past due and accruing
Commercial loans
Multi-family $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Commercial real estate 31,397 0 0 3,771 0 0
Commercial & industrial 594 0 280 329 0 0
Construction 1,237 0 0 1,669 0 0
Land - acquisition & development 0 0 0 0 0 0
Total commercial loans 33,228 0 280 5,769 0 0
Consumer loans
Single-family residential 24,349 0 3,908 22,431 0 933
Construction - custom 0 0 0 0 0 0
Land - consumer lot loans 443 0 168 243 0 0
HELOC 334 0 0 553 0 0
Consumer 52 0 6 60 0 17
Total consumer loans 25,178 0 4,082 23,287 0 950
Total non-accrual loans $ 58,406 $ 0 $ 4,362 $ 29,056 $ 0 $ 950
% of total loans 0.45 % 0.22 %


	December 31, 2021							September 30, 2021
	(In thousands, except ratio data)
	Non-accrual			Non-accrual with no ACL		90 days or more past due and accruing		Non-accrual			Non-accrual with no ACL		90 days or more past due and accruing
Commercial loans
Multi-family	$	—		$	—	$	—	$	475		$	—	$	—
Commercial real estate	7,565			—		—		8,038			—		—
Commercial & industrial	15,349			—		—		365			30		—
Construction	611			—		—		505			—		—
Land - acquisition & development	2,340			—		—		2,340			—		—
Total commercial loans	25,865			—		—		11,723			30		—
Consumer loans
Single-family residential	17,751			—		—		19,320			—		—
Construction - custom	465			—		—		—			—		—
Land - consumer lot loans	544			—		—		359			—		—
HELOC	276			—		—		287			—		—
Consumer	58			—		—		60			—		—
Total consumer loans	19,094			—		—		20,026			—		—
Total non-accrual loans	$	44,959		$	—	$	—	$	31,749		$	30	$	—
% of total loans	0.30		%					0.23		%

The Company recognized interest income on non-accrual loans of approximately ~~$3,489,000~~$1,250,000 in the three months ended December 31, ~~2020. Had~~2021. If these loans had been on accrual status and performed according to their original contract terms, the Company would have recognized interest income of approximately ~~$402,000~~$328,000 for the three months ended December 31, ~~2020.~~2021. Recognized interest income for the three months ended December 31, ~~2020~~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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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The following tables provide details regarding loan delinquencies by loan portfolio and class.

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


December 31, 2021			Days Delinquent Based on $ Amount of Loans										% based on $
Type of Loan	Loans Receivable (Amortized Cost)		Current		30		60		90		Total Delinquent
	(In thousands, except ratio data)
Commercial Loans
Multi-family	$	2,278,216	$	2,278,216	$	—	$	—	$	—	$	—	—	%
Commercial real estate	2,667,170		2,663,441		2,282		—		1,447		3,729		0.14
Commercial & industrial (1)	2,365,487		2,348,085		1,031		1,059		15,312		17,402		0.74
Construction	1,235,119		1,235,119		—		—		—		—		—
Land - acquisition & development	202,081		199,741		—		—		2,340		2,340		1.16
Total commercial loans	8,748,073		8,724,602		3,313		1,059		19,099		23,471		0.27
Consumer Loans
Single-family residential	5,286,559		5,266,143		5,099		1,088		14,229		20,416		0.39
Construction - custom	333,583		333,118		—		—		465		465		0.14
Land - consumer lot loans	149,845		149,193		52		75		525		652		0.44
HELOC	167,789		167,273		261		—		255		516		0.31
Consumer	77,764		77,530		69		114		51		234		0.30
Total consumer loans	6,015,540		5,993,257		5,481		1,277		15,525		22,283		0.37
Total Loans	$	14,763,613	$	14,717,859	$	8,794	$	2,336	$	34,624	$	45,754	0.31	%
Delinquency %			99.69%		0.06%		0.02%		0.23%		0.31%

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


September 30, 2021			Days Delinquent Based on $ Amount of Loans										% based on $
Type of Loan	Loans Receivable (Amortized Cost)		Current		30		60		90		Total Delinquent
	(In thousands, except ratio data)
Commercial Loans
Multi-family	$	2,273,689	$	2,273,214	$	—	$	—	$	475	$	475	0.02	%
Commercial real estate	2,429,332		2,428,014		971		64		283		1,318		0.05
Commercial & industrial	2,303,927		2,303,605		—		—		322		322		0.01
Construction	1,117,227		1,117,186		—		—		41		41		—
Land - acquisition & development	192,416		190,076		—		—		2,340		2,340		1.22
Total commercial loans	8,316,591		8,312,095		971		64		3,461		4,496		0.05
Consumer Loans
Single-family residential	4,937,064		4,915,749		3,627		2,165		15,523		21,315		0.43
Construction - custom	347,752		347,752		—		—		—		—		—
Land - consumer lot loans	148,534		147,952		5		307		270		582		0.39
HELOC	166,940		166,627		47		—		266		313		0.19
Consumer	87,989		87,727		152		59		51		262		0.30
Total consumer loans	5,688,279		5,665,807		3,831		2,531		16,110		22,472		0.40
Total Loans	$	14,004,870	$	13,977,902	$	4,802	$	2,595	$	19,571	$	26,968	0.19	%
Delinquency %			99.81%		0.03%		0.02%		0.14%		0.19%

Table of Contents

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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

~~The Company is~~has actively ~~working~~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 December 31, ~~2020, 183~~2021, 16 mortgage loans totaling ~~$46,000,000~~$3,526,000 and 101 commercial ~~loans~~loan totaling ~~$32,000,000~~$475,000 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 TDRs are accruing and performing loans where the borrower has proactively approached the Company about modification due to temporary financial difficulties. 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~~twenty-four months. Interest-only payments may also be approved during the modification period. Principal forgiveness is not an available option for restructured loans. As of December 31, ~~2020, 97.9%~~2021, 97.4% of the Company's ~~$86,314,000~~$60,326,000 in TDRs were classified as performing. As of December 31, ~~2020,~~2021, single-family residential loans comprised ~~92.9%~~92.2% of TDRs. ~~The Company's ACL methodology takes into account the following performance indicators for restructured loans: 1) time since modification, 2) current payment status and 3) geographic area.~~

We evaluate the credit quality of our loans based on regulatory risk ratings and also consider other factors. Based on this evaluation, the loans are assigned a grade and classified as follows:

•Pass – the credit does not meet one of the definitions below.

•Special mention – A special mention credit is considered to be currently protected from loss but is potentially weak. No loss of principal or interest is foreseen; however, proper supervision and management attention is required to deter further deterioration in the credit. Assets in this category constitute some undue and unwarranted credit risk but not to the point of justifying a risk rating of substandard. The credit risk may be relatively minor yet constitutes an unwarranted risk in light of the circumstances surrounding a specific asset.

•Substandard – A substandard credit is an unacceptable credit. Additionally, repayment in the normal course is in jeopardy due to the existence of one or more well defined weaknesses. In these situations, loss of principal is likely if the weakness is not corrected. A substandard asset is inadequately protected by the current sound worth and paying capacity of the borrower or of the collateral pledged, if any. Assets so classified will have a well-defined weakness or weaknesses that jeopardize the collection or liquidation of the debt. Loss potential, while existing in the aggregate amount of substandard assets, does not have to exist in individual assets risk rated substandard.

•Doubtful – A credit classified doubtful has all the weaknesses inherent in one classified substandard with the added characteristic that the weakness makes collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. The probability of loss is high, but because of certain important and reasonably specific pending factors that may work to the advantage and strengthening of the asset, its classification as an estimated loss is deferred until its more exact status may be determined. Pending factors include proposed merger, acquisition, or liquidation procedures, capital injection, perfecting liens on additional collateral, and refinancing plans.

•Loss – Credits classified loss are considered uncollectible and of such little value that their continuance as a bankable asset is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this asset even though partial recovery may be affected in the future. Losses should be taken in the period in which they are identified as uncollectible. Partial charge-off versus full charge-off may be taken if the collateral offers some identifiable protection.

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

Table of Contents

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Term Loans Amortized Cost Basis by Origination Year
YTD 2021 2020 2019 2018 2017 Prior to 2017 Revolving Loans Revolving to Term Loans Total Loans
Commercial loans
Multi-family
Pass $ 120,709 $ 384,701 $ 114,454 $ 276,390 $ 232,338 $ 392,183 $ 8,195 $ 0 $ 1,528,970
Special Mention 0 2,418 2,816 4,054 5,092 4,464 0 0 18,844
Substandard 0 0 7,544 3,974 3,769 46,699 0 0 61,986
Total $ 120,709 $ 387,119 $ 124,814 $ 284,418 $ 241,199 $ 443,346 $ 8,195 $ 0 $ 1,609,800
Commercial real estate
Pass $ 158,763 $ 424,621 $ 219,629 $ 243,656 $ 233,589 $ 443,025 $ 2,217 $ 0 $ 1,725,500
Special Mention 0 197 9,496 414 1,725 26,103 0 0 37,935
Substandard 0 9,067 29,699 22,688 47,315 70,650 0 0 179,419
Total $ 158,763 $ 433,885 $ 258,824 $ 266,758 $ 282,629 $ 539,778 $ 2,217 $ 0 $ 1,942,854
Commercial & industrial
Pass $ 157,872 $ 801,134 $ 60,562 $ 83,496 $ 75,301 $ 165,692 $ 616,063 $ 12,097 $ 1,972,217
Special Mention 0 8,931 6,937 1,163 4,286 0 5,111 0 26,428
Substandard 12,751 45,891 7,296 6,310 104 49,331 123,137 0 244,820
Doubtful 0 0 0 0 0 0 0 0 0
Total $ 170,623 $ 855,956 $ 74,795 $ 90,969 $ 79,691 $ 215,023 $ 744,311 $ 12,097 $ 2,243,465
Construction
Pass $ 119,251 $ 407,194 $ 446,042 $ 190,227 $ 42,695 $ 16 $ 77,463 $ 0 $ 1,282,888
Special Mention 0 0 0 32,992 0 0 0 0 32,992
Substandard 0 3,256 36,940 0 37,031 0 0 0 77,227
Total $ 119,251 $ 410,450 $ 482,982 $ 223,219 $ 79,726 $ 16 $ 77,463 $ 0 $ 1,393,107
Land - acquisition & development
Pass $ 10,965 $ 43,159 $ 34,967 $ 19,309 $ 17,706 $ 4,513 $ 5,307 $ 0 $ 135,926
Special Mention 0 0 0 0 0 15,573 0 0 15,573
Substandard 0 0 1,122 0 0 0 0 0 1,122
Total $ 10,965 $ 43,159 $ 36,089 $ 19,309 $ 17,706 $ 20,086 $ 5,307 $ 0 $ 152,621
Total commercial loans
Pass $ 567,560 $ 2,060,809 $ 875,654 $ 813,078 $ 601,629 $ 1,005,429 $ 709,245 $ 12,097 $ 6,645,501
Special Mention 0 11,546 19,249 38,623 11,103 46,140 5,111 0 131,772
Substandard 12,751 58,214 82,601 32,972 88,219 166,680 123,137 0 564,574
Doubtful — 0 0 0 0 0 0 0 0
Total $ 580,311 $ 2,130,569 $ 977,504 $ 884,673 $ 700,951 $ 1,218,249 $ 837,493 $ 12,097 $ 7,341,847
The following tables present by primary credit quality indicator, loan class, and year of origination, the amortized cost basis of loans receivable as of December 31, 2021.


	Term Loans Amortized Cost Basis by Origination Year
	YTD 2022		2021		2020		2019		2018		Prior to 2018		Revolving Loans		Revolving to Term Loans		Total Loans
Commercial loans
Multi-family
Pass	$	188,312	$	774,664	$	461,598	$	145,568	$	197,475	$	466,643	$	36,205	$	—	$	2,270,465
Special Mention	—		—		1,754		—		3,098		—		—		—		4,852
Substandard	—		—		—		—		650		2,249		—		—		2,899



Total	$	188,312	$	774,664	$	463,352	$	145,568	$	201,223	$	468,892	$	36,205	$	—	$	2,278,216

Commercial real estate
Pass	$	315,441	$	644,455	$	403,955	$	273,743	$	257,052	$	591,343	$	3,075	$	—	$	2,489,064
Special Mention	—		—		—		5,308		32,941		19,800		—		—		58,049
Substandard	—		—		8,308		44,362		17,171		49,124		1,092		—		120,057



Total	$	315,441	$	644,455	$	412,263	$	323,413	$	307,164	$	660,267	$	4,167	$	—	$	2,667,170

Commercial & industrial
Pass	$	96,846	$	617,826	$	179,111	$	46,636	$	32,369	$	233,105	$	954,157	$	97	$	2,160,147
Special Mention	744		13,881		2,782		5,972		—		6		37,377		—		60,762
Substandard	—		69		46,474		2,356		4,532		14,972		76,175		—		144,578



Total	$	97,590	$	631,776	$	228,367	$	54,964	$	36,901	$	248,083	$	1,067,709	$	97	$	2,365,487

Construction
Pass	$	68,058	$	494,383	$	352,324	$	232,534	$	374	$	16,313	$	69,957	$	—	$	1,233,943
Special Mention	—		566		—		—		—		—		—		—		566
Substandard	—		—		610		—		—		—		—		—		610



Total	$	68,058	$	494,949	$	352,934	$	232,534	$	374	$	16,313	$	69,957	$	—	$	1,235,119

Land - acquisition & development
Pass	$	31,257	$	80,472	$	30,263	$	11,800	$	13,730	$	29,619	$	2,600	$	—	$	199,741

Substandard	—		—		—		—		—		2,340		—		—		2,340



Total	$	31,257	$	80,472	$	30,263	$	11,800	$	13,730	$	31,959	$	2,600	$	—	$	202,081

Total commercial loans
Pass	$	699,914	$	2,611,800	$	1,427,251	$	710,281	$	501,000	$	1,337,023	$	1,065,994	$	97	$	8,353,360
Special Mention	744		14,447		4,536		11,280		36,039		19,806		37,377		—		124,229
Substandard	—		69		55,392		46,718		22,353		68,685		77,267		—		270,484



Total	$	700,658	$	2,626,316	$	1,487,179	$	768,279	$	559,392	$	1,425,514	$	1,180,638	$	97	$	8,748,073

Table of Contents

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


		Term Loans Amortized Cost Basis by Origination Year																			Term Loans Amortized Cost Basis by Origination Year
		YTD 2021		2020		2019		2018		2017		Prior to 2017		Revolving Loans		Revolving to Term Loans		Total Loans			YTD 2022		2021		2020		2019		2018		Prior to 2018		Revolving Loans		Revolving to Term Loans		Total Loans
Consumer loans	Consumer loans																			Consumer loans
Single-family residential	Single-family residential																			Single-family residential
Current	Current	$	250,276	$	824,978	$	578,704	$	525,644	$	607,513	$	2,229,415	$	0	$	0	$	5,016,530	Current	$	686,288	$	1,222,748	$	805,399	$	381,245	$	320,431	$	1,850,032	$	—	$	—	$	5,266,143
30 days past due	30 days past due	0		0		356		60		1,523		5,538		0		0		7,477		30 days past due	735		—		—		—		—		4,364		—		—		5,099
60 days past due	60 days past due	0		473		0		0		357		5,042		0		0		5,872		60 days past due	—		—		—		—		—		1,088		—		—		1,088
90+ days past due	90+ days past due	0		0		680		0		439		17,437		0		0		18,556		90+ days past due	—		—		—		348		114		13,767		—		—		14,229

Total	Total	$	250,276	$	825,451	$	579,740	$	525,704	$	609,832	$	2,257,432	$	0	$	0	$	5,048,435	Total	$	687,023	$	1,222,748	$	805,399	$	381,593	$	320,545	$	1,869,251	$	—	$	—	$	5,286,559

Construction - custom	Construction - custom																			Construction - custom
Current	Current	$	11,469	$	250,459	$	35,802	$	1,621	$	0	$	0	$	0	$	0	$	299,351	Current	$	10,516	$	251,800	$	68,238	$	1,928	$	636	$	—	$	—	$	—	$	333,118

90+ days past due																				90+ days past due	—		—		465		—		—		—		—		—		465

Total	Total	$	11,469	$	250,459	$	35,802	$	1,621	$	0	$	0	$	0	$	0	$	299,351	Total	$	10,516	$	251,800	$	68,703	$	1,928	$	636	$	—	$	—	$	—	$	333,583

Land - consumer lot loans	Land - consumer lot loans																			Land - consumer lot loans
Current	Current	$	20,268	$	38,986	$	16,288	$	5,991	$	6,994	$	20,721	$	0	$	0	$	109,248	Current	$	18,436	$	77,593	$	23,409	$	7,629	$	4,062	$	18,064	$	—	$	—	$	149,193
30 days past due	30 days past due	0		0		72		0		0		23		0		0		95		30 days past due	—		—		52		—		—		—		—		—		52
60 days past due	60 days past due	0		0		0		0		0		168		0		0		168		60 days past due	—		—		—		75		—		—		—		—		75
90+ days past due	90+ days past due	0		0		0		152		122		60		0		0		334		90+ days past due	—		—		142		—		—		383		—		—		525

Total	Total	$	20,268	$	38,986	$	16,360	$	6,143	$	7,116	$	20,972	$	0	$	0	$	109,845	Total	$	18,436	$	77,593	$	23,603	$	7,704	$	4,062	$	18,447	$	—	$	—	$	149,845

HELOC	HELOC																			HELOC
Current	Current	$	0	$	0	$	0	$	0	$	0	$	6,750	$	131,482	$	701	$	138,933	Current	$	—	$	—	$	—	$	—	$	—	$	5,378	$	161,644	$	251	$	167,273
30 days past due	30 days past due	0		0		0		0		0		167		749		0		916		30 days past due	—		—		—		—		—		214		38		9		261
60 days past due		0		0		0		0		0		5		111		0		116

90+ days past due	90+ days past due	0		0		0		0		0		30		277		0		307		90+ days past due	—		—		—		—		—		30		225		—		255

Total	Total	$	0	$	0	$	0	$	0	$	0	$	6,952	$	132,619	$	701	$	140,272	Total	$	—	$	—	$	—	$	—	$	—	$	5,622	$	161,907	$	260	$	167,789

Consumer	Consumer																			Consumer
Current	Current	$	11,231	$	8,421	$	1,237	$	51,616	$	180	$	16,175	$	22,341	$	0	$	111,201	Current	$	100	$	10,435	$	8,082	$	488	$	31,853	$	9,374	$	17,198	$	—	$	77,530
30 days past due	30 days past due	0		0		9		0		47		11		0		0		67		30 days past due	—		—		—		10		—		55		4		—		69
60 days past due	60 days past due	0		0		6		0		14		7		0		0		27		60 days past due	—		—		—		4		—		110		—		—		114
90+ days past due	90+ days past due	0		0		36		0		112		6		0		0		154		90+ days past due	—		—		—		34		—		17		—		—		51

Total	Total	$	11,231	$	8,421	$	1,288	$	51,616	$	353	$	16,199	$	22,341	$	0	$	111,449	Total	$	100	$	10,435	$	8,082	$	536	$	31,853	$	9,556	$	17,202	$	—	$	77,764

Total consumer loans	Total consumer loans																			Total consumer loans
Current	Current	$	293,244	$	1,122,844	$	632,031	$	584,872	$	614,687	$	2,273,061	$	153,823	$	701	$	5,675,263	Current	$	715,340	$	1,562,576	$	905,128	$	391,290	$	356,982	$	1,882,848	$	178,842	$	251	$	5,993,257
30 days past due	30 days past due	0		0		437		60		1,570		5,739		749		0		8,555		30 days past due	735		—		52		10		—		4,633		42		9		5,481
60 days past due	60 days past due	0		473		6		0		371		5,222		111		0		6,183		60 days past due	—		—		—		79		—		1,198		—		—		1,277
90+ days past due	90+ days past due	0		0		716		152		673		17,533		277		0		19,351		90+ days past due	—		—		607		382		114		14,197		225		—		15,525

Total	Total	$	293,244	$	1,123,317	$	633,190	$	585,084	$	617,301	$	2,301,555	$	154,960	$	701	$	5,709,352	Total	$	716,075	$	1,562,576	$	905,787	$	391,761	$	357,096	$	1,902,876	$	179,109	$	260	$	6,015,540

Table of Contents

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE E – Allowance for Losses on Loans

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


Three Months Ended December 31, 2021	Beginning Allowance		Charge-offs		Recoveries		Provision & Transfers (1)		Ending Allowance
	(In thousands)
Commercial loans
Multi-family	$	16,949	$	—	$	—	$	(956)	$	15,993
Commercial real estate	23,437		(529)		44		2,770		25,722
Commercial & industrial	45,957		(43)		62		1,255		47,231
Construction	25,585		—		2,000		(2,819)		24,766
Land - acquisition & development	13,447		(2)		20		660		14,125
Total commercial loans	125,375		(574)		2,126		910		127,837
Consumer loans
Single-family residential	30,978		—		405		(1,277)		30,106
Construction - custom	4,907		—		—		(1,188)		3,719
Land - consumer lot loans	4,939		(27)		5		67		4,984
HELOC	2,390		—		1		(26)		2,365
Consumer	2,711		(76)		251		(486)		2,400
Total consumer loans	45,925		(103)		662		(2,910)		43,574
Total loans	$	171,300	$	(677)	$	2,788	$	(2,000)	$	171,411

(1) Provision & transfer amounts within the table do not include the provision for unfunded commitments of $2,500,000.


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

(1) Provision & transfer amounts within the table do not include the provision for unfunded commitments of $1,500,000.

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

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

Table of Contents

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The Company recorded a ~~$3,000,000~~$500,000 provision for credit losses for the three months ended December 31, ~~2020,~~2021, compared with a ~~release of allowance~~provision for credit losses of ~~$3,750,000~~$3,000,000 for the three months ended December 31, ~~2019.~~2020. The provision in the three months ended December 31, 2021 was primarily due to growth in loans receivable and unfunded commitments largely offset by improvements in management's assessment of the credit ~~loss~~quality of certain loan portfolios. The provision for the three months ended December 31, 2020 iswas primarily due to reserving for ~~new loan originations~~growth in loans receivable and changes in composition of the loan portfolio. Recoveries, net of charge-offs, totaled ~~$1,734,000~~$2,111,000 for the three months ended December 31, ~~2020,~~2021, compared to net recoveries of ~~$2,579,000~~$1,734,000 during the three months ended December 31, ~~2019. NaN~~2020. No allowance was recorded as of December 31, ~~2020~~2021 or as of September 30, ~~2020~~2021 for the ~~$646,887,000~~$198,947,000 and ~~$762,004,000~~$305,162,000 of ~~gross~~ PPP loans in the portfolio on each date, respectively, which are included in the commercial & industrial loan category, due to the government guarantee.

Non-performing assets were ~~$66,542,000,~~$54,790,000, or ~~0.35%~~0.27% of total assets, at December 31, ~~2020,~~2021, compared to ~~$37,695,000,~~$43,625,000, or ~~0.20%~~0.22% of total assets, at September 30, ~~2020.~~2021. Non-accrual loans were ~~$58,406,000~~$44,959,000 at December 31, ~~2020,~~2021, compared to ~~$29,056,000~~$31,749,000 at September 30, ~~2020.~~2021. Delinquencies, as a percent of total loans, were ~~0.52%~~0.31% at December 31, ~~2020,~~2021, compared to ~~0.24%~~0.19% at September 30, ~~2020.~~2021.

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

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


December 31, 2020		Internally Assigned Grade
December 31, 2021																			December 31, 2021	Internally Assigned Grade
		Pass			Special mention			Substandard			Doubtful			Loss			Total			Pass			Special mention			Substandard			Doubtful			Loss			Total
		(In thousands, except ratio data)																		(In thousands, except ratio data)
Loan type	Loan type																		Loan type
Commercial loans	Commercial loans																		Commercial loans
Multi-family	Multi-family	$	1,528,970		$	18,844		$	61,986		$	0		$	0		$	1,609,800	Multi-family	$	2,270,465		$	4,852		$	2,899		$	—		$	—		$	2,278,216
Commercial real estate	Commercial real estate	1,725,500			37,935			179,419			0			0			1,942,854		Commercial real estate	2,489,064			58,049			120,057			—			—			2,667,170
Commercial & industrial	Commercial & industrial	1,972,217			26,428			244,820			0			0			2,243,465		Commercial & industrial	2,160,147			60,762			144,578			—			—			2,365,487
Construction	Construction	1,282,888			32,992			77,227			0			0			1,393,107		Construction	1,233,943			566			610			—			—			1,235,119
Land - acquisition & development	Land - acquisition & development	135,926			15,573			1,122			0			0			152,621		Land - acquisition & development	199,741			—			2,340			—			—			202,081
Total commercial loans	Total commercial loans	6,645,501			131,772			564,574			0			0			7,341,847		Total commercial loans	8,353,360			124,229			270,484			—			—			8,748,073
Consumer loans	Consumer loans																		Consumer loans
Single-family residential	Single-family residential	5,018,759			191			29,485			0			0			5,048,435		Single-family residential	5,265,363			—			21,196			—			—			5,286,559
Construction - custom	Construction - custom	299,351			0			0			0			0			299,351		Construction - custom	333,118			—			465			—			—			333,583
Land - consumer lot loans	Land - consumer lot loans	109,234			0			611			0			0			109,845		Land - consumer lot loans	149,225			—			620			—			—			149,845
HELOC	HELOC	139,215			0			1,057			0			0			140,272		HELOC	167,513			—			276			—			—			167,789
Consumer	Consumer	111,442			0			7			0			0			111,449		Consumer	77,752			1			11			—			—			77,764
Total consumer loans	Total consumer loans	5,678,001			191			31,160			0			0			5,709,352		Total consumer loans	5,992,971			1			22,568			—			—			6,015,540
Total	Total	$	12,323,502		$	131,963		$	595,734		$	0		$	0		$	13,051,199	Total	$	14,346,331		$	124,230		$	293,052		$	—		$	—		$	14,763,613

Total grade as a % of total loans	Total grade as a % of total loans	94.42		%	1.01		%	4.56		%	0		%	0		%			Total grade as a % of total loans	97.17		%	0.84		%	1.99		%	—		%	—		%

Table of Contents

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


September 30, 2020		Internally Assigned Grade
September 30, 2021																			September 30, 2021	Internally Assigned Grade
		Pass			Special mention			Substandard			Doubtful			Loss			Total Gross Loans			Pass			Special mention			Substandard			Doubtful			Loss			Total Gross Loans
		(In thousands, except ratio data)																		(In thousands, except ratio data)
Loan type	Loan type																		Loan type
Commercial loans	Commercial loans																		Commercial loans
Multi-family	Multi-family	$	1,506,692		$	13,721		$	17,827		$	0		$	0		$	1,538,240	Multi-family	$	2,252,395		$	4,874		$	16,420		$	—		$	—		$	2,273,689
Commercial real estate	Commercial real estate	1,681,230			92,184			111,274			0			0			1,884,688		Commercial real estate	2,174,386			57,625			197,321			—			—			2,429,332
Commercial & industrial	Commercial & industrial	1,898,709			64,695			152,109			0			0			2,115,513		Commercial & industrial	2,108,152			48,124			147,651			—			—			2,303,927
Construction	Construction	1,187,786			61,178			103,450			0			0			1,352,414		Construction	1,115,791			931			505			—			—			1,117,227
Land - acquisition & development	Land - acquisition & development	137,998			15,573			0			0			0			153,571		Land - acquisition & development	190,076			—			2,340			—			—			192,416
Total commercial loans	Total commercial loans	6,412,415			247,351			384,660			0			0			7,044,426		Total commercial loans	7,840,800			111,554			364,237			—			—			8,316,591
Consumer loans	Consumer loans																		Consumer loans
Single-family residential	Single-family residential	5,270,666			192			23,104			0			0			5,293,962		Single-family residential	4,915,106			—			21,958			—			—			4,937,064
Construction - custom	Construction - custom	295,953			0			0			0			0			295,953		Construction - custom	347,752			—			—			—			—			347,752
Land - consumer lot loans	Land - consumer lot loans	101,151			0			243			0			0			101,394		Land - consumer lot loans	148,010			—			524			—			—			148,534
HELOC	HELOC	139,646			0			576			0			0			140,222		HELOC	166,652			—			288			—			—			166,940
Consumer	Consumer	83,304			0			11			0			0			83,315		Consumer	87,962			—			27			—			—			87,989
Total consumer loans	Total consumer loans	5,890,720			192			23,934			0			0			5,914,846		Total consumer loans	5,665,482			—			22,797			—			—			5,688,279
Total loans	Total loans	$	12,303,135		$	247,543		$	408,594		$	0		$	0		$	12,959,272	Total loans	$	13,506,282		$	111,554		$	387,034		$	—		$	—		$	14,004,870

Total grade as a % of total gross loans	Total grade as a % of total gross loans	94.94		%	1.91		%	3.15		%	0		%	0		%			Total grade as a % of total gross loans	96.44		%	0.80		%	2.76		%	—		%	—		%

Table of Contents

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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


December 31, 2020		Performing Loans				Non-Performing Loans
December 31, 2021										December 31, 2021	Performing Loans				Non-Performing Loans
		Amount		% of Total Loans		Amount		% of Total Loans			Amount		% of Total Loans		Amount		% of Total Loans
		(In thousands, except ratio data)									(In thousands, except ratio data)
Commercial loans	Commercial loans									Commercial loans
Multi-family	Multi-family	$	1,609,800	100.0	%	$	0	0	%	Multi-family	$	2,278,216	100.0	%	$	—	—	%
Commercial real estate	Commercial real estate	1,911,457		98.4		31,397		1.6		Commercial real estate	2,659,605		99.7		7,565		0.3
Commercial & industrial	Commercial & industrial	2,242,871		100.0		594		0		Commercial & industrial	2,350,138		99.4		15,349		0.6
Construction	Construction	1,391,870		99.9		1,237		0.1		Construction	1,234,508		100.0		611		0.0
Land - acquisition & development	Land - acquisition & development	152,621		100.0		0		0		Land - acquisition & development	199,741		98.8		2,340		1.2
Total commercial loans	Total commercial loans	7,308,619		99.5		33,228		0.5		Total commercial loans	8,722,208		99.7		25,865		0.3
Consumer loans	Consumer loans									Consumer loans
Single-family residential	Single-family residential	5,024,086		99.5		24,349		0.5		Single-family residential	5,268,808		99.7		17,751		0.3
Construction - custom	Construction - custom	299,351		100.0		0		0		Construction - custom	333,118		99.9		465		0.1
Land - consumer lot loans	Land - consumer lot loans	109,402		99.6		443		0.4		Land - consumer lot loans	149,301		99.6		544		0.4
HELOC	HELOC	139,938		99.8		334		0.2		HELOC	167,513		99.8		276		0.2
Consumer	Consumer	111,397		100.0		52		0.0		Consumer	77,706		99.9		58		0.1
Total consumer loans	Total consumer loans	5,684,174		99.6		25,178		0.4		Total consumer loans	5,996,446		99.7		19,094		0.3
Total loans	Total loans	$	12,992,793	99.6	%	$	58,406	0.4	%	Total loans	$	14,718,654	99.7	%	$	44,959	0.3	%


September 30, 2020		Performing Loans				Non-Performing Loans
September 30, 2021										September 30, 2021	Performing Loans				Non-Performing Loans
		Amount		% of Total Loans		Amount		% of Total Loans			Amount		% of Total Loans		Amount		% of Total Loans
		(In thousands, except ratio data)									(In thousands, except ratio data)
Commercial loans	Commercial loans									Commercial loans
Multi-family	Multi-family	$	1,538,240	100.0	%	$	0	0	%	Multi-family	$	2,273,214	100.0	%	$	475	—	%
Commercial real estate	Commercial real estate	1,880,917		99.8		3,771		0.2		Commercial real estate	2,421,294		99.7		8,038		0.3
Commercial & industrial	Commercial & industrial	2,115,184		100.0		329		0		Commercial & industrial	2,303,562		100.0		365		—
Construction	Construction	1,350,745		99.9		1,669		0.1		Construction	1,116,722		100.0		505		—
Land - acquisition & development	Land - acquisition & development	153,571		100.0		0		0		Land - acquisition & development	190,076		98.8		2,340		1.2
Total commercial loans	Total commercial loans	7,038,657		99.9		5,769		0.1		Total commercial loans	8,304,868		99.9		11,723		0.1
Consumer loans	Consumer loans									Consumer loans
Single-family residential	Single-family residential	5,271,531		99.6		22,431		0.4		Single-family residential	4,917,744		99.6		19,320		0.4
Construction - custom	Construction - custom	295,953		100.0		0		0		Construction - custom	347,752		100.0		—		—
Land - consumer lot loans	Land - consumer lot loans	101,151		99.8		243		0.2		Land - consumer lot loans	148,175		99.8		359		0.2
HELOC	HELOC	139,669		99.6		553		0.4		HELOC	166,653		99.8		287		0.2
Consumer	Consumer	83,255		99.9		60		0.1		Consumer	87,929		99.9		60		0.1
Total consumer loans	Total consumer loans	5,891,559		99.6		23,287		0.4		Total consumer loans	5,668,253		99.6		20,026		0.4
Total loans	Total loans	$	12,930,216	99.8	%	$	29,056	0.2	%	Total loans	$	13,973,121	99.8	%	$	31,749	0.2	%

Table of Contents

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE F – Fair Value Measurements

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

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

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

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

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

Measured on a Recurring Basis

Available-for-Sale Securities and Derivative Contracts

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

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

Table of Contents

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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


	December 31, 2021
	Level 1		Level 2		Level 3		Total
	(In thousands)
Financial Assets
Available-for-sale securities:

U.S. government and agency securities	$	—	$	57,567	$	—	$	57,567
Asset-backed securities	—		959,894		—		959,894
Municipal bonds	—		40,149		—		40,149

Corporate debt securities	—		348,186		—		348,186
Mortgage-backed securities
Agency pass-through certificates	—		540,343		—		540,343

Total available-for-sale securities	—		1,946,139		—		1,946,139
Client swap program hedges	—		5,944		—		5,944

Mortgage loan fair value hedges	—		2,632		—		2,632
Borrowings cash flow hedges	—		48,888		—		48,888
Total financial assets	$	—	$	2,003,603	$	—	$	2,003,603

Financial Liabilities
Client swap program hedges	$	—	$	5,944	$	—	$	5,944
Commercial loan fair value hedges	—		1,951		—		1,951


Total financial liabilities	$	—	$	7,895	$	—	$	7,895

December 31, 2020
Level 1 Level 2 Level 3 Total
(In thousands)
Financial Assets
Available-for-sale securities:
U.S. government and agency securities $ 0 $ 78,281 $ 0 $ 78,281
Asset-backed securities 0 1,210,356 0 1,210,356
Municipal bonds 0 38,703 0 38,703
Corporate debt securities 0 287,393 0 287,393
Mortgage-backed securities
Agency pass-through certificates 0 868,211 0 868,211
Total available-for-sale securities 0 2,482,944 0 2,482,944
Client swap program hedges 0 35,825 0 35,825
Borrowings cash flow hedges 0 2,743 0 2,743
Total financial assets $ 0 $ 2,521,512 $ 0 $ 2,521,512
Financial Liabilities
Client swap program hedges $ 0 $ 35,825 $ 0 $ 35,825
Commercial loan fair value hedges 0 7,508 0 7,508
Mortgage loan fair value hedges 0 12,459 0 12,459
Total financial liabilities $ 0 $ 55,792 $ 0 $ 55,792


	September 30, 2021
	Level 1		Level 2		Level 3		Total
	(In thousands)
Financial Assets
Available-for-sale securities:

U.S. government and agency securities	$	—	$	61,779	$	—	$	61,779
Asset-backed securities	—		1,078,681		0		1,078,681
Municipal bonds	—		39,984		—		39,984

Corporate debt securities	—		350,988		—		350,988
Mortgage-backed securities
Agency pass-through certificates	—		606,827		—		606,827

Total available-for-sale securities	—		2,138,259		—		2,138,259
Client swap program hedges	—		10,983		—		10,983


Borrowings cash flow hedges	—		42,442		—		42,442
Total financial assets	$	—	$	2,191,684	$	—	$	2,191,684

Financial Liabilities
Client swap program hedges	$	—	$	10,983	$	—	$	10,983
Commercial loan fair value hedges	—		2,177		—		2,177
Mortgage loan fair value hedges	0		1,641		0		1,641

Total financial liabilities	$	—	$	14,801	$	—	$	14,801

Table of Contents

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

September 30, 2020
Level 1 Level 2 Level 3 Total
(In thousands)
Financial Assets
Available-for-sale securities:
U.S. government and agency securities $ 0 $ 18,824 $ 0 $ 18,824
Asset-backed securities 0 936,917 0 936,917
Municipal bonds 0 38,315 0 38,315
Corporate debt securities 0 287,184 0 287,184
Mortgage-backed securities
Agency pass-through certificates 0 968,252 0 968,252
Total available-for-sale securities 0 2,249,492 0 2,249,492
Client swap program hedges 0 48,201 0 48,201
Total financial assets $ 0 $ 2,297,693 $ 0 $ 2,297,693
Financial Liabilities
Client swap program hedges $ 0 $ 48,201 $ 0 $ 48,201
Commercial loan fair value hedges 0 8,492 0 8,492
Mortgage loan fair value hedges 0 16,061 0 16,061
Borrowings cash flow hedges 0 17,375 0 17,375
Total financial liabilities $ 0 $ 90,129 $ 0 $ 90,129

~~Table of Contents~~

~~WASHINGTON FEDERAL, INC. AND SUBSIDIARIES~~

~~NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

Measured on a Nonrecurring Basis

Certain assets and liabilities are measured at fair value on a nonrecurring basis after initial recognition such as collateral dependent loans 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 REO requires additional adjustments, either as a result of an updated appraised value or when there is no observable market price, the Company classifies the collateral dependent loan or real estate owned as Level 3. Level 3 assets recorded at fair value on a nonrecurring basis at December 31, ~~2020~~2021 included loans for which an allowance was established or a partial charge-off was recorded based on the fair value of collateral, as well as real estate owned where the fair value of the property was less than the cost basis.

The following tables present the aggregated balance of assets that were measured at fair value on a nonrecurring basis at December 31, ~~2020~~2021 and December 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.

December 31, 2020 Three Months Ended December 31, 2020
Level 1 Level 2 Level 3 Total Total Gains (Losses)
(In thousands) (In thousands)
Loans (1) $ 0 $ 0 $ 0 $ 0 $ (44)
Real estate owned (2) 0 0 447 447 (47)
Balance at end of period $ 0 $ 0 $ 447 $ 447 $ (91)


	December 31, 2021								Three Months Ended December 31, 2021
	Level 1		Level 2		Level 3		Total		Total Gains (Losses)
	(In thousands)								(In thousands)
Loans (1)	$	—	$	—	$	202	$	202	$	(89)
Real estate owned (2)	—		—		1,390		1,390		(504)
Balance at end of period	$	—	$	—	$	1,592	$	1,592	$	(593)

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

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


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

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

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

At December 31, ~~2020,~~2021, there ~~were $528,000~~was $134,000 in foreclosed residential real estate properties held as REO. The recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process was ~~$2,214,000.~~$3,477,000.

Fair Values of Financial Instruments

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

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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


			December 31, 2020				September 30, 2020						December 31, 2021				September 30, 2021
		Level in Fair Value Hierarchy	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value			Level in Fair Value Hierarchy	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
			($ in thousands)										($ in thousands)
Financial assets	Financial assets										Financial assets
Cash and cash equivalents	Cash and cash equivalents	1	$	1,830,722	$	1,830,722	$	1,702,977	$	1,702,977	Cash and cash equivalents	1	$	1,880,647	$	1,880,647	$	2,090,809	$	2,090,809
Available-for-sale securities	Available-for-sale securities										Available-for-sale securities

U.S. government and agency securities	U.S. government and agency securities	2	78,281		78,281		18,824		18,824		U.S. government and agency securities	2	57,567		57,567		61,779		61,779
Asset-backed securities	Asset-backed securities	2	1,210,356		1,210,356		936,917		936,917		Asset-backed securities	2	959,894		959,894		1,078,681		1,078,681
Municipal bonds	Municipal bonds	2	38,703		38,703		38,315		38,315		Municipal bonds	2	40,149		40,149		39,984		39,984

Corporate debt securities	Corporate debt securities	2	287,393		287,393		287,184		287,184		Corporate debt securities	2	348,186		348,186		350,988		350,988
Mortgage-backed securities	Mortgage-backed securities										Mortgage-backed securities
Agency pass-through certificates	Agency pass-through certificates	2	868,211		868,211		968,252		968,252		Agency pass-through certificates	2	540,343		540,343		606,827		606,827

Total available-for-sale securities	Total available-for-sale securities		2,482,944		2,482,944		2,249,492		2,249,492		Total available-for-sale securities		1,946,139		1,946,139		2,138,259		2,138,259
Held-to-maturity securities	Held-to-maturity securities										Held-to-maturity securities

Mortgage-backed securities	Mortgage-backed securities										Mortgage-backed securities
Agency pass-through certificates	Agency pass-through certificates	2	581,313		600,622		698,934		720,516		Agency pass-through certificates	2	326,387		335,895		366,025		379,547
Commercial MBS		2	5,557		5,553		6,904		6,852

Total held-to-maturity securities	Total held-to-maturity securities		586,870		606,175		705,838		727,368		Total held-to-maturity securities		326,387		335,895		366,025		379,547

Loans receivable	Loans receivable	3	12,881,010		13,433,950		12,792,317		13,392,089		Loans receivable	3	14,592,202		14,991,699		13,833,570		14,279,725

FHLB and FRB stock	FHLB and FRB stock	2	137,991		137,991		141,990		141,990		FHLB and FRB stock	2	102,863		102,863		102,863		102,863
Other assets - client swap program hedges	Other assets - client swap program hedges	2	35,825		35,825		48,201		48,201		Other assets - client swap program hedges	2	5,944		5,944		10,983		10,983

Other assets - mortgage loan fair value hedges											Other assets - mortgage loan fair value hedges	2	2,632		2,632		—		—
Other assets - borrowings cash flow hedges	Other assets - borrowings cash flow hedges	2	2,743		2,743		0		0		Other assets - borrowings cash flow hedges	2	48,888		48,888		42,442		42,442

Financial liabilities	Financial liabilities										Financial liabilities
Time deposits	Time deposits	2	3,785,082		3,761,325		3,973,192		3,963,203		Time deposits	2	3,351,984		3,307,120		3,434,087		3,382,206
FHLB advances	FHLB advances	2	2,600,000		2,620,269		2,700,000		2,722,509		FHLB advances	2	1,720,000		1,672,238		1,720,000		1,692,412
Other liabilities - client swap program hedges	Other liabilities - client swap program hedges	2	35,825		35,825		48,201		48,201		Other liabilities - client swap program hedges	2	5,944		5,944		10,983		10,983
Other liabilities - commercial loan fair value hedges											Other liabilities - commercial loan fair value hedges	2	1,951		1,951		2,177		2,177
Other liabilities - mortgage loan fair value hedges	Other liabilities - mortgage loan fair value hedges	2	12,459		12,459		16,061		16,061		Other liabilities - mortgage loan fair value hedges	2	—		—		1,641		1,641
Other liabilities - commercial loan fair value hedges		2	7,508		7,508		8,492		8,492
Other liabilities - borrowings cash flow hedges		2	0		0		17,375		17,375

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

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

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

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

(UNAUDITED)

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

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

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

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

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

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

December 31, 2020
Amortized
Cost Gross Unrealized Fair
Value Yield
Gains Losses
($ in thousands)
Available-for-sale securities
U.S. government and agency securities due
1 to 5 years $ 58,807 $ 588 $ 0 $ 59,395 0.53 %
5 to 10 years 18,443 443 0 18,886 2.05
Asset-backed securities
5 to 10 years 107,355 206 (1,360) 106,201 0.68
Over 10 years 1,097,828 7064 (737) 1104155 1.09
Corporate debt securities due
Within 1 year 52,756 236 (86) 52,906 1.22
1 to 5 years 152,226 6,557 (87) 158,696 1.87
5 to 10 years 73,340 2,451 0 75,791 1.16
Municipal bonds due
1 to 5 years 1,469 33 0 1,502 0
Over 10 years 35,836 1,365 0 37,201 5.40
Mortgage-backed securities
Agency pass-through certificates 833,814 35,980 (1,583) 868,211 2.72
2,431,874 54,923 (3,853) 2,482,944 1.73
Held-to-maturity securities
Mortgage-backed securities
Agency pass-through certificates 581,313 19,309 0 600,622 3.16
Commercial MBS 5,557 0 (4) 5,553 1.02
586,870 19,309 (4) 606,175 3.14
$ 3,018,744 $ 74,232 $ (3,857) $ 3,089,119 2.00 %


	December 31, 2021
	Amortized Cost		Gross Unrealized				Fair Value		Yield
			Gains		Losses
	($ in thousands)
Available-for-sale securities
U.S. government and agency securities due

1 to 5 years	$	57,562	$	93	$	(88)	$	57,567	0.86	%


Asset-backed securities

1 to 5 years	19,280		—		(471)		18,809		0.83
5 to 10 years	66,245		290		(138)		66,397		0.58
Over 10 years	867,872		7,206		(390)		874,688		0.97




Corporate debt securities due

1 to 5 years	226,048		6,355		—		232,403		1.59
5 to 10 years	86,475		409		—		86,884		4.64
Over 10 years	28,833		66		—		28,899		1.95
Municipal bonds due
Within 1 year	1,501		10		—		1,511		—

5 to 10 years	5,774		226		—		6,000		0.22
Over 10 years	29,900		2,738		—		32,638		5.85
Mortgage-backed securities
Agency pass-through certificates	525,179		17,984		(2,820)		540,343		2.57

	1,914,669		35,377		(3,907)		1,946,139		1.72
Held-to-maturity securities







Mortgage-backed securities
Agency pass-through certificates	326,387		9,508		—		335,895		3.17

	326,387		9,508		—		335,895		3.17
	$	2,241,056	$	44,885	$	(3,907)	$	2,282,034	1.91	%

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

September 30, 2020
Amortized
Cost Gross Unrealized Fair
Value Yield
Gains Losses
($ 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 years 38,289 0 (1,600) 36,689 0.83
Over 10 years 906,489 647 (6,908) 900,228 1.14
Corporate debt securities due
Within 1 year 54,209 337 (51) 54,495 1.22
1 to 5 years 128,289 3,366 (428) 131,227 1.78
5 to 10 years 97,157 4,305 0 101,462 1.50
Municipal bonds due
1 to 5 years 1,461 36 0 1,497 0
Over 10 years 36,044 774 0 36,818 5.40
Mortgage-backed securities
Agency pass-through certificates 929,713 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 certificates 698,934 21,582 0 720,516 3.16
Commercial MBS 6,904 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 %


	September 30, 2021
	Amortized Cost		Gross Unrealized					Fair Value		Yield
			Gains		Losses
	($ in thousands)
Available-for-sale securities
U.S. government and agency securities due

1 to 5 years	$	47,339	$	240		$	—	$	47,579	0.44	%
5 to 10 years	14,064		136			—		14,200		2.05

Asset-backed securities

1 to 5 years	19,730		—			(434)		19,296		0.52
5 to 10 years	71,207		412			(97)		71,522		0.57
Over 10 years	973,892		14,069			(98)		987,863		0.94




Corporate debt securities due
Within 1 year	225,928		7,860			—		233,788		1.57
1 to 5 years	86,802		1,345			—		88,147		4.64
5 to 10 years	28,804		249			—		29,053		1.95

Municipal bonds due
Within 1 year	1,493		17			—		1,510		—

5 to 10 years	5,781		294			—		6,075		0.22
Over 10 years	29,909		2,490			—		32,399		5.85
Mortgage-backed securities
Agency pass-through certificates	585,121		23,717			(2,011)		606,827		2.60

	2,090,070		50,829			(2,640)		2,138,259		1.69
Held-to-maturity securities







Mortgage-backed securities
Agency pass-through certificates	366,025		13,522			—		379,547		3.17

	366,025		13,522			—		379,547		3.17
	$	2,456,095	$	64,351		$	(2,640)	$	2,517,806	1.89	%

~~During fiscal 2020, as permitted in conjunction with the adoption of ASU 2019-04, the Company reclassified $374,680,000 of prepayable debt securities from held-to-maturity to available-for-sale.~~ For available-for-sale investment securities, there were no purchases during the three months ended December 31, 2021 and purchases of $379,760,000 during the three months ended December 31, ~~2020 and purchases~~2020. There were $4,510,000 of ~~$82,028,000~~sales of available-for-sale investment securities during the three months ended December 31, ~~2019. There were 0~~2021 and no sales ~~of available-for-sale investment securities~~ during ~~either~~the prior year same period. For held-to-maturity investment securities, there were 0no purchases during the three months ended December 31, ~~2020~~2021 and 0no purchases during the three months ended December 31, ~~2019.~~2020. There were 0no sales of held-to-maturity investment securities during ~~either period.~~the three months ended December 31, 2021 or December 31, 2020. Substantially all of the agency mortgage-backed securities have contractual due dates that exceed 10 years.

The Company elected to exclude AIR from the amortized cost basis of debt securities disclosed throughout this footnote. For AFS securities, AIR totaled ~~$3,997,000~~$3,804,000 and ~~$3,285,000~~$3,458,000 as of December 31, ~~2020~~2021 and September 30, ~~2020,~~2021, respectively. For HTM debt securities, AIR totaled ~~$1,506,000~~$841,000 and ~~$1,811,000~~$944,000 as of December 31, ~~2020~~2021 and September 30, ~~2020,~~2021, respectively. AIR for securities is included in the ~~“accrued interest receivable”~~Interest receivable line item balance on the Company’s consolidated statements of financial condition.

The following tables show the gross unrealized losses and fair value of securities as of December 31, ~~2020~~2021 and September 30, ~~2020,~~2021, by length of time that individual securities in each category have been in a continuous loss position. There were 3336 and 5131 securities with an unrealized loss as of December 31, ~~2020~~2021 and September 30, ~~2020,~~2021, 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

Table of Contents

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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.

~~Table of Contents~~

~~WASHINGTON FEDERAL, INC. AND SUBSIDIARIES~~

~~NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~


December 31, 2021	Less than 12 months				12 months or more				Total
	Unrealized Gross Losses		Fair Value		Unrealized Gross Losses		Fair Value		Unrealized Gross Losses		Fair Value
	(In thousands)
Available-for-sale securities


U.S. government and agency securities	$	(88)	$	13,970	$	—	$	—	$	(88)	$	13,970
Asset-backed securities	(144)		71,099		(855)		87,409		(999)		158,508

Mortgage-backed securities	(755)		56,773		(2,065)		52,747		(2,820)		109,520
	(987)		141,842		(2,920)		140,156		(3,907)		281,998
Held-to-maturity securities
Mortgage-backed securities	—		—		—		—		—		—
	$	(987)	$	141,842	$	(2,920)	$	140,156	$	(3,907)	$	281,998

December 31, 2020 Less than 12 months 12 months or more Total
Unrealized
Gross Losses Fair
Value Unrealized
Gross Losses Fair
Value Unrealized
Gross Losses Fair
Value
(In thousands)
Available-for-sale securities
Corporate debt securities $ (173) $ 45,811 $ 0 $ 0 $ (173) $ 45,811
Asset-backed securities (398) 219,539 (1,699) 141,478 (2,097) 361,017
Mortgage-backed securities (1,174) 52,559 (409) 53,606 (1,583) 106,165
(1,745) 317,909 (2,108) 195,084 (3,853) 512,993
Held-to-maturity securities
Mortgage-backed securities (4) 5,553 0 0 (4) 5,553
$ (1,749) $ 323,462 $ (2,108) $ 195,084 $ (3,857) $ 518,546


September 30, 2020		Less than 12 months				12 months or more				Total
September 30, 2021														September 30, 2021	Less than 12 months				12 months or more				Total
		Unrealized Gross Losses		Fair Value		Unrealized Gross Losses		Fair Value		Unrealized Gross Losses		Fair Value			Unrealized Gross Losses		Fair Value		Unrealized Gross Losses		Fair Value		Unrealized Gross Losses		Fair Value
		(In thousands)													(In thousands)
Available-for-sale securities	Available-for-sale securities													Available-for-sale securities
Corporate debt securities		$	(74)	$	45,875	$	(405)	$	24,596	$	(479)	$	70,471

Asset-backed securities	Asset-backed securities	(5,481)		587,746		(3,027)		204,369		(8,508)		792,115		Asset-backed securities	$	(15)	$	4,639	$	(614)	$	70,058	$	(629)	$	74,697

Mortgage-backed securities	Mortgage-backed securities	(278)		41,897		(349)		56,196		(627)		98,093		Mortgage-backed securities	(1,569)		47,758		(442)		32,266		(2,011)		80,024
		(5,833)		675,518		(3,781)		285,161		(9,614)		960,679			(1,584)		52,397		(1,056)		102,324		(2,640)		154,721
Held-to-maturity securities	Held-to-maturity securities													Held-to-maturity securities
Mortgage-backed securities	Mortgage-backed securities	(52)		6,853		0		0		(52)		6,853		Mortgage-backed securities	—		—		—		—		—		—
		$	(5,885)	$	682,371	$	(3,781)	$	285,161	$	(9,666)	$	967,532		$	(1,584)	$	52,397	$	(1,056)	$	102,324	$	(2,640)	$	154,721

Substantially all of the Company’s held-to-maturity debt securities are issued by U.S. government agencies or U.S. government-sponsored enterprises. These securities carry the explicit and/or implicit guarantee of the U.S. government and have a long history of zero credit loss. Therefore, the Company did not record an allowance for credit losses for these securities as of December 31, ~~2020~~2021 or September 30, ~~2020.~~2021.

The Company does not believe that the available-for-sale debt securities that were in an unrealized loss position have any credit loss impairment as of December 31, ~~2020~~2021 or September 30, ~~2020.~~2021. The Company does not intend to sell the investment securities that were in an unrealized loss position and it is not more likely than not that the Company will be required to sell the investment securities before recovery of their amortized cost basis, which may be at maturity. Available-for-sale debt securities issued by U.S. government agencies or U.S. government-sponsored enterprises carry the explicit and/or implicit guarantee of the U.S. government and have a long history of zero credit loss. Corporate debt securities and municipal bonds are considered to have an issuer of high credit quality (rated AA or higher) and the decline in fair value is due to changes in interest rates and other market conditions. The issuer continues to make timely principal and interest payments on the bonds. The fair value is expected to recover as the bonds approach maturity.

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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE G – Derivatives and Hedging Activities

The following tables present the fair value, notional amount and balance sheet classification of derivative assets and liabilities at December 31, ~~2020~~2021 and September 30, ~~2020.~~2021.


December 31, 2020		Derivative Assets					Derivative Liabilities
December 31, 2021												December 31, 2021	Derivative Assets					Derivative Liabilities
Interest rate contract purpose	Interest rate contract purpose	Balance Sheet Location	Notional		Fair Value		Balance Sheet Location	Notional		Fair Value		Interest rate contract purpose	Balance Sheet Location	Notional		Fair Value		Balance Sheet Location	Notional		Fair Value
		(In thousands)					(In thousands)						(In thousands)					(In thousands)
Client swap program hedges	Client swap program hedges	Other assets	$	637,633	$	35,825	Other liabilities	$	637,633	$	35,825	Client swap program hedges	Other assets	$	633,056	$	5,944	Other liabilities	$	633,056	$	5,944
Commercial loan fair value hedges	Commercial loan fair value hedges	Other assets	0		0		Other liabilities	90,918		7,508		Commercial loan fair value hedges	Other assets	—		—		Other liabilities	42,209		1,951
Mortgage loan fair value hedges	Mortgage loan fair value hedges	Other assets	0		0		Other liabilities	500,000		12,459		Mortgage loan fair value hedges	Other assets	470,000		2,632		Other liabilities	—		—
Borrowings cash flow hedges	Borrowings cash flow hedges	Other assets	1,500,000		2,743		Other liabilities	0		0		Borrowings cash flow hedges	Other assets	1,000,000		48,888		Other liabilities	—		—
			$	2,137,633	$	38,568		$	1,228,551	$	55,792			$	2,103,056	$	57,464		$	675,265	$	7,895


September 30, 2020		Derivative Assets					Derivative Liabilities
September 30, 2021												September 30, 2021	Derivative Assets					Derivative Liabilities
Interest rate contract purpose	Interest rate contract purpose	Balance Sheet Location	Notional		Fair Value		Balance Sheet Location	Notional		Fair Value		Interest rate contract purpose	Balance Sheet Location	Notional		Fair Value		Balance Sheet Location	Notional		Fair Value
		(In thousands)					(In thousands)						(In thousands)					(In thousands)
Client swap program hedges	Client swap program hedges	Other assets	$	656,074	$	48,201	Other liabilities	$	656,074	$	48,201	Client swap program hedges	Other assets	$	644,355	$	10,983	Other liabilities	$	644,355	$	10,983
Commercial loan fair value hedges	Commercial loan fair value hedges	Other assets	0		0		Other liabilities	93,316		8,492		Commercial loan fair value hedges	Other assets	—		—		Other liabilities	44,678		2,177
Mortgage loan fair value hedges	Mortgage loan fair value hedges	Other assets	0		0		Other liabilities	500,000		16,061		Mortgage loan fair value hedges	Other assets	—		—		Other liabilities	470,000		1,641
Borrowings cash flow hedges	Borrowings cash flow hedges	Other assets	0		0		Other liabilities	1,600,000		17,375		Borrowings cash flow hedges	Other assets	1,000,000		42,442		Other liabilities	—		—
			$	656,074	$	48,201		$	2,849,390	$	90,129			$	1,644,355	$	53,425		$	1,159,033	$	14,801

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

Upon electing to apply ASC 815 fair value hedge accounting, the carrying value of the hedged item is adjusted to reflect the cumulative impact of changes in fair value attributable to the hedged risk. The hedge basis adjustment remains with the hedged item until the hedged item is de-recognized from the balance sheet. The following tables present the impact of fair value hedge accounting on the carrying value of the hedged items at December 31, ~~2020~~2021 and September 30, ~~2020.~~2021.


(In thousands)	(In thousands)	December 31, 2020				(In thousands)	December 31, 2021
Balance sheet line item in which hedged item is recorded	Balance sheet line item in which hedged item is recorded	Carrying value of hedged items		Cumulative gain (loss) fair value hedge adjustment included in carrying amount of hedged items		Balance sheet line item in which hedged item is recorded	Carrying value of hedged items		Cumulative gain (loss) fair value hedge adjustment included in carrying amount of hedged items
Loans receivable (1) (2)	Loans receivable (1) (2)	$	2,242,120	$	20,208	Loans receivable (1) (2)	$	1,376,402	$	(260)
		$	2,242,120	$	20,208		$	1,376,402	$	(260)

(1) Includes the amortized cost basis of the closed mortgage loan portfolios used to designate the hedging relationships in which the hedged items are the last layer expected to be remaining at the end of the hedging relationships. At December 31, ~~2020,~~2021, the amortized cost basis of the closed loan portfolios used in the hedging relationships was ~~$2,143,675,000,~~$1,332,154,000, the cumulative basis adjustment associated with the hedging relationships was ~~$12,515,000,~~$(2,357,000), and the amount of the designated hedged items was ~~$500,000,000.~~$470,000,000. During the year ended September 30, 2021, hedge accounting was discontinued on $30,000,000 (30%) of a $100,000,000 last of layer hedge. At December 31, 2021, there is $1,603,000 of remaining unamortized basis adjustment

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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

associated with the terminated portion of the hedge and it will be recognized over the remaining life of the associated pool of loans.

(2) Includes the amortized cost basis of commercial loans designated in fair value hedging relationships. At December 31, ~~2020,~~2021, the amortized cost basis of the hedged commercial loans was ~~$98,445,000~~$44,248,000 and the cumulative basis adjustment associated with the hedging relationships was ~~$7,693,000.~~$2,097,000.

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


(In thousands)	September 30, 2021
Balance sheet line item in which hedged item is recorded	Carrying value of hedged items		Cumulative gain (loss) fair value hedge adjustment included in carrying amount of hedged items
Loans receivable (1) (2)	$	1,515,487	$	4,215
	$	1,515,487	$	4,215

(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, ~~2020,~~2021, the amortized cost basis of the closed loan portfolios used in the hedging relationships was ~~$2,461,008,000,~~$1,468,517,000, the cumulative basis adjustment associated with the hedging relationships was ~~$16,049,000,~~$1,864,000, and the amount of the designated hedged items was ~~$500,000,000.~~$470,000,000. During the year ended September 30, 2021, hedge accounting was discontinued on $30,000,000 (30%) of a $100,000,000 last of layer hedge.

(2) Includes the amortized cost basis of commercial loans designated in fair value hedging relationships. At September 30, ~~2020,~~2021, the amortized cost basis of the hedged commercial loans was ~~$101,757,000~~$46,970,000 and the cumulative basis adjustment associated with the hedging relationships was ~~$8,615,000.~~$2,351,000. During the year ended September 30, 2021, hedge accounting was discontinued on a $46,240,000 commercial loan hedge.

The Company has entered into interest rate swaps to convert certain short-term borrowings to fixed rate payments. The primary purpose of these hedges is to mitigate the risk of changes in future cash flows resulting from increasing interest rates. For qualifying cash flow hedges under ASC 815, gains and losses on the interest rate swaps are recorded in accumulated other comprehensive income ("AOCI") and then reclassified into earnings in the same period the hedged cash flows affect earnings and within the same income statement line item as the hedged cash flows. During the three months ended December 31, 2020, a cash flow hedge with a notional amount of $100,000,000 and an effective interest rate of 1.39% was terminated and the FHLB advance was repaid. As of December 31, ~~2020,~~2021, the maturities for hedges of adjustable rate borrowings ranged from ~~less than one year~~three years to ~~nine~~eight years, with the weighted average being ~~6.8~~7.3 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 December 31,				(In thousands)	Three Months Ended December 31,
Amount of gain/(loss) recognized in AOCI		2020		2019
Amounts recognized in AOCI						Amounts recognized in AOCI	2021		2020
Interest rate contracts:	Interest rate contracts:					Interest rate contracts:
Pay fixed/receive floating swaps on borrowings cash flow hedges	Pay fixed/receive floating swaps on borrowings cash flow hedges	$	20,118	$	3,115	Pay fixed/receive floating swaps on borrowings cash flow hedges	$	6,446	$	20,118
Reclassification adjustment of net (gain)/loss included in net income						Reclassification adjustment of net (gain)/loss included in net income	—		—
Total pre-tax gain/(loss) recognized in AOCI	Total pre-tax gain/(loss) recognized in AOCI	$	20,118	$	3,115	Total pre-tax gain/(loss) recognized in AOCI	$	6,446	$	20,118

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.

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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


		Three Months Ended December 31, 2020				Three Months Ended December 31, 2019					Three Months Ended December 31, 2021				Three Months Ended December 31, 2020
		Interest income on loans receivable		Interest expense on FHLB advances		Interest income on loans receivable		Interest expense on FHLB advances			Interest income on loans receivable		Interest expense on FHLB advances		Interest income on loans receivable		Interest expense on FHLB advances
		(In thousands)									(In thousands)
Interest income/(expense), including the effects of fair value and cash flow hedges	Interest income/(expense), including the effects of fair value and cash flow hedges	$	133,671	$	(13,198)	$	142,146	$	(13,658)	Interest income/(expense), including the effects of fair value and cash flow hedges	$	138,509	$	(7,843)	$	133,671	$	(13,198)

Gain/(loss) on fair value hedging relationships:	Gain/(loss) on fair value hedging relationships:									Gain/(loss) on fair value hedging relationships:
Interest rate contracts	Interest rate contracts									Interest rate contracts
Amounts related to interest settlements on derivatives	Amounts related to interest settlements on derivatives	$	(1,541)			$	(7)			Amounts related to interest settlements on derivatives	$	(1,371)			$	(1,541)
Recognized on derivatives	Recognized on derivatives	4,587				4,692				Recognized on derivatives	4,500				4,587
Recognized on hedged items	Recognized on hedged items	(4,456)				(4,593)				Recognized on hedged items	(4,475)				(4,456)
Net income/(expense) recognized on fair value hedges	Net income/(expense) recognized on fair value hedges	$	(1,410)			$	92			Net income/(expense) recognized on fair value hedges	$	(1,346)			$	(1,410)

Gain/(loss) on cash flow hedging relationships:	Gain/(loss) on cash flow hedging relationships:									Gain/(loss) on cash flow hedging relationships:
Interest rate contracts	Interest rate contracts									Interest rate contracts
Amounts related to interest settlements on derivatives	Amounts related to interest settlements on derivatives			$	3,597			$	(214)	Amounts related to interest settlements on derivatives			$	2,021			$	3,597
Amount of derivative gain/(loss) reclassified from AOCI into interest income/expense	Amount of derivative gain/(loss) reclassified from AOCI into interest income/expense			0				0		Amount of derivative gain/(loss) reclassified from AOCI into interest income/expense			—				—
Net income/(expense) recognized on cash flow hedges	Net income/(expense) recognized on cash flow hedges			$	3,597			$	(214)	Net income/(expense) recognized on cash flow hedges			$	2,021			$	3,597

The Company periodically enters into certain interest rate swap agreements in order to provide commercial loan customers the ability to convert from variable to fixed interest rate payments, while the Company retains a variable rate loan. Under these agreements, the Company enters into a variable rate loan agreement and a swap agreement with the client. The swap agreement effectively converts the client’s variable rate loan into a fixed rate. The Company enters into a corresponding swap agreement with a third party in order to offset its exposure on the variable and fixed components of the client's swap agreement. The interest rate swaps are derivatives under ASC 815, with changes in fair value recorded in earnings. There was no net impact to the statement of operations for the three months ended December 31, ~~2020~~2021 and ~~2019~~2020 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 December 31,				(In thousands)		Three Months Ended December 31,
Derivative instruments	Derivative instruments	Classification of gain/(loss) recognized in income on derivative instrument	2020		2019		Derivative instruments	Classification of gain/(loss) recognized in income on derivative instrument	2021		2020
Interest rate contracts:	Interest rate contracts:						Interest rate contracts:
Pay fixed/receive floating swap	Pay fixed/receive floating swap	Other noninterest income	$	12,376	$	5,408	Pay fixed/receive floating swap	Other noninterest income	$	5,039	$	12,376
Receive fixed/pay floating swap	Receive fixed/pay floating swap	Other noninterest income	(12,376)		(5,408)		Receive fixed/pay floating swap	Other noninterest income	(5,039)		(12,376)
			$	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 ~~5.4%~~5.6% of our total revenues for the three months ended December 31, ~~2020,~~2021, compared to ~~4.4%~~5.4% for the three months ended December 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~~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 ~~2021~~2022 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.

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 ~~$3,011,286,000~~$4,272,929,000 and ~~$2,738,095,000~~$3,804,444,000 at December 31, ~~2020~~2021 and September 30, ~~2020,~~2021, respectively. The reserve was ~~$26,500,000~~$30,000,000 as of December 31, ~~2020,~~2021, which is an increase from ~~$25,000,000~~$27,500,000 at September 30, ~~2020.~~2021. See Note A "Summary of Significant Accounting Policies" for details regarding the reserve methodology.

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

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

PART I – Financial Information

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

FORWARD LOOKING STATEMENTS

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

You should not place undue reliance on any forward-looking statement and should consider the following uncertainties and risks, as well as the risks and uncertainties discussed elsewhere in this report, and including ~~under Item 1A. “Risk Factors,”~~ the Risk Factors included in the Company’s ~~2020~~2021 Form 10-K for the year ended September 30, ~~2020,~~2021, and in any of the Company's other subsequent Securities and Exchange Commission ("SEC") filings, which could cause the Company's future results to differ materially from the plans, objectives, goals, estimates, intentions and expectations expressed in forward-looking statements:

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

•the effects of natural or man-made disasters, calamities, or conflicts, including terrorist events and pandemics (such as the COVID-19 pandemic), and the resulting governmental and societal responses, 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~~our 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, including responses to the COVID-19 pandemic;

•fluctuations in interest rate risk and changes in market interest rates, including risk related to LIBOR 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 undertakes new investments and activities;

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

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

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

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

•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.~~control; and

•the effects and unanticipated expenses related to the proposed charter conversion of the Bank from a federal to a state charter.

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~~WASHINGTON FEDERAL, INC. AND SUBSIDIARIES~~

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

Table of Contents

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

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”~~Federal,” the “Company” or ~~the “Company”~~"we" or "us" and "our" refer to the ~~Company~~Washington Federal, Inc. 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.

On January 3, 2022, the Bank announced that it had applied to the Washington State Department of Financial Institutions to convert from a national association to a non-Federal Reserve member Washington state-chartered bank. If the application is approved and the conversion is completed, then the Washington State Department of Financial Institutions will be the Bank's regulator and the Federal Deposit Insurance Corporation (the "FDIC") will be the Bank's primary federal regulator. The Federal Reserve will continue to regulate the Bank's holding company.The Bank has notified the FDIC and the Federal Reserve System of the proposed charter conversion. The Bank also filed a notice of the charter conversion with its current primary federal regulator, the Office of the Comptroller of the Currency. If the charter conversion application is approved, the Bank will cancel its holdings of stock of the Federal Reserve Bank of San Francisco and terminate its membership in the Federal Reserve System.

The Company's fiscal year end is September 30th. All references to ~~2020~~2021 represent balances as of September 30, ~~2020~~2021 or activity for the fiscal year then ended.

CRITICAL ACCOUNTING POLICIES

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

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

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

The estimate of expected credit losses under the CECL methodology is based on relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts. Historical loss experience is generally the starting point for estimating expected credit losses. We then consider whether the historical loss experience should be adjusted for asset-specific risk characteristics or current conditions at the reporting date that did not exist over the period from which historical experience was based. Finally, we consider forecasts about future economic conditions or changes in collateral values that are reasonable and supportable.

Management’s determination of the amount of the ACL is a critical accounting estimate as it requires significant reliance on the credit risk we ascribe to individual borrowers, the use of estimates and significant judgment as to the amount and timing of expected future cash flows on criticized loans, significant reliance on historical loss rates on homogenous portfolios, consideration of our quantitative and qualitative evaluation of past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts.

Going forward, the impact of utilizing the CECL methodology to calculate the ACL will be significantly influenced by the composition, characteristics and quality of our loan portfolio, as well as the prevailing economic conditions and forecasts utilized. Material changes to these and other relevant factors may result in greater volatility to the allowance for credit losses, and therefore, greater volatility in our reported earnings. See ~~Notes~~Note A ~~D and E~~ to the Consolidated Financial Statements in "Item 1. Financial Statements" above. Also, refer to "Item 7. Management’s Discussion and ~~the~~

~~Table~~Analysis of ~~Contents~~

~~WASHINGTON FEDERAL, INC. AND SUBSIDIARIES~~

~~“Asset Quality~~Financial Condition and ~~Allowance for Credit Losses” section below for more information~~Results of Operations" in the Company's 2021 Annual Report on ~~loans receivable~~Form 10-K filed with the Securities and ~~the allowance for credit losses.~~Exchange Commission ("SEC") on November 19, 2021.

ASSET QUALITY & ALLOWANCE FOR CREDIT LOSSES

~~The Company maintains an ACL for~~See Note A, D and E to the ~~expected credit losses over~~Consolidated Financial Statements in "Item 1. Financial Statements" above. Also, refer to "Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations" in the ~~contractual life of~~Company's 2021 Annual Report on Form 10-K filed with the ~~loan portfolio as well as unfunded loan commitments. The amount of ACL is based~~Securities and Exchange Commission ("SEC") on ~~ongoing, quarterly assessments by management.~~November 19, 2021.

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~~WASHINGTON FEDERAL, INC. AND SUBSIDIARIES~~

The reserve for unfunded commitments represents the expected lifetime credit losses on off-balance sheet obligations such as commitments to extend credit and standby letters of credit. However, a liability is not recognized for commitments that are unconditionally cancellable by the Company. The reserve for unfunded commitments is determined by estimating future draws, including the effects of risk mitigation actions, and applying the expected loss rates on those draws. Loss rates are estimated by utilizing the same loss rates calculated for the allowance for credit losses related to the respective loan portfolio class.

INTEREST RATE RISK

Based on management's assessment of the current interest rate environment, the Company has taken steps, including growing shorter-term loans and transaction deposit accounts, to reduce its interest rate risk profile. The mix of transaction and savings accounts is ~~73%~~79% of total deposits as of December 31, ~~2020~~2021 while the composition of the investment securities portfolio is ~~36%~~56% variable and ~~64%~~44% 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 ~~$586,870,000~~$326,387,000 of mortgage-backed securities that it has designated as held-to-maturity and are carried at amortized cost. As of December 31, ~~2020,~~2021, the net unrealized gain on these securities was ~~$19,305,000.~~$9,508,000. The Company has ~~$2,482,944,000~~$1,946,139,000 of available-for-sale securities that are carried at fair value. As of December 31, ~~2020,~~2021, the net unrealized gain on these securities was ~~$51,070,000.~~$31,470,000. The Company has executed interest rate swaps to hedge interest rate risk on certain FHLB borrowings. The unrealized gain on these interest rate swaps as of December 31, ~~2020~~2021 was ~~$2,743,000.~~$48,888,000. 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-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

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

management monitors and adjusts loan and deposit pricing and the size and composition of the balance sheet to respond to changing interest rates.

As of December 31, ~~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 ~~6.4%~~8.4% in the next year. This compares to an estimated increase of ~~3.4%~~9.7% as of the September 30, ~~2020~~2021 analysis. The change is primarily due to ~~fluctuating interest rates and~~a shift in the ~~impact to expected prepayment speeds~~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~~long-term rates over two years would result in a net interest income increase of ~~1.5%~~0.7% in the first year and increase of ~~4.7%~~4.1% in the second year assuming a constant balance sheet and no management intervention. We have not provided an estimate of any impact on net interest income of a decrease in interest rates at December 31, ~~2020~~2021 as many of our interest rate sensitive assets and liabilities are tied to interest rates that are already at or near their historical minimum levels (i.e., Prime and LIBOR) and, therefore, ~~could~~are 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 occurred in the United States.

NPV Sensitivity - NPV is an estimate of the market value of shareholders' equity. NPV is calculated as the difference between the present value of expected cash flows from interest-earning assets and the present value of expected cash flows from interest-paying liabilities and off-balance-sheet contracts. The sensitivity of NPV to changes in interest rates provides a view of interest rate risk as it incorporates all future expected cash flows. As of December 31, ~~2020,~~2021, in the event of an immediate and parallel increase of 200 basis points in interest rates, the NPV is estimated to ~~increase~~decrease by ~~$206,536,000~~$471,566,000 or ~~7.4%~~14.3% and the NPV to total assets ratio to ~~increase~~decline to ~~16.2%~~14.9% from a base of ~~14.4%~~16.4%. As of September 30, ~~2020,~~2021, the NPV in the event of a 200 basis point increase in rates was estimated to ~~increase~~decrease by ~~$141,000,000~~$207,000,000 or ~~5.3%~~6.8% and the NPV to total assets ratio to ~~increase~~decline to ~~15.6%~~15.2% from a base of ~~14.1%~~15.5%. The change in NPV sensitivity is due primarily to changes in interest rates ~~that has impacted~~and the related impact on asset prices ~~as well as~~and sensitivity to expected prepayment speeds on fixed rate loans and mortgage-backed securities as well as changes in the mix of fixed versus adjustable rate assets and liabilities as of December 31, ~~2020.~~2021.

Interest ~~Rate Spread~~Rates - The ~~interest rate spread is measured as~~Company measures the difference between the rate on total ~~loans and investments~~interest-earning assets and the rate on ~~costing~~interest-bearing liabilities at the end of each period. ~~The~~This period-end interest rate spread was 2.48% at December 31, 2021 and 2.45% at September 30, 2021. As of December 31, 2021, the weighted average period-end rate on interest-earning assets increased by 3 basis points to 2.83% compared to September 30, 2021, while the weighted average period-end rate on interest-bearing liabilities was unchanged and remained at 0.35%. The period-end interest rate spread increased to 2.48% at December 31, 2021 from 2.34% at December 31, 2020 ~~and was also 2.34% at September 30, 2020. As of December 31, 2020,~~as the weighted average period-end rate on interest-earning assets decreased by 11

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~~WASHINGTON FEDERAL, INC. AND SUBSIDIARIES~~

9 basis points ~~to 2.92% compared to September 30, 2020,~~ while the weighted average period-end rate on interest-bearing liabilities ~~decreased~~declined by 1123 basis ~~points to 0.58%. The interest rate spread decreased to 2.34% at December 31, 2020 from 2.76% at December 31, 2019 due to the same factors described above.~~points.

Net Interest Margin - Net interest margin is measured as net interest income divided by average earning assets for the period. Net interest margin ~~decreased~~was 2.87% for the quarter ended December 31, 2021 compared to 2.75% for the quarter ended December 31, ~~2020 from 3.15% for the quarter ended December 31, 2019.~~2020. The yield on interest-earning assets decreased 9712 basis points to ~~3.34%~~3.22% and the cost of interest-bearing liabilities decreased 6731 basis points to ~~0.76%~~0.45% over that same period. Repayments on higher rate loans, the origination of lower yielding loans, and the purchase of mortgage loan pools with an effective yield less than the average of the loan portfolio drove the decline in yield on interest-earning assets. The ~~compression~~benefit from amortization of net loan origination fees on PPP loans also declined to $3,319,000 during the quarter ended December 31, 2021 compared to $4,886,000 in the ~~net interest margin since the~~ prior year same quarter is primarily due to the rapid drop in short-term rates by the Federal Reserve Bank in response to the COVID-19 pandemic which resulted in the changes in average rates noted above. Additionally, the balance of low yielding cash was relatively high at $1,830,722,000 as of December 31, 2020 and the Company had $646,887,000 in PPP loans as of that date that have a relatively low yield and were originated since the prior year same quarter. The lower rate in interest-bearing liabilities was primarily due to lower rates paid on interest-bearing deposits as well as a lower rate on FHLB advances.

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

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Three Months Ended December 31, 2020 Three Months Ended December 31, 2019
Average Balance Interest Average Rate Average Balance Interest Average Rate
($ in thousands) ($ in thousands)
Assets
Loans receivable $ 12,824,870 $ 133,671 4.14 % $ 11,924,778 $ 142,146 4.73 %
Mortgage-backed securities 1,582,286 7,230 1.81 2,360,374 15,612 2.62
Cash & Investments 3,004,224 5,265 0.70 776,633 5,425 2.77
FHLB & FRB stock 140,730 1,656 4.67 124,568 1,641 5.23
Total interest-earning assets 17,552,110 147,822 3.34 % 15,186,353 164,824 4.31 %
Other assets 1,307,937 1,189,996
Total assets $ 18,860,047 $ 16,376,349
Liabilities and Equity
Interest-bearing customer accounts $ 11,619,857 $ 14,110 0.48 % $ 10,247,113 $ 31,481 1.22 %
FHLB advances 2,668,478 13,198 1.96 2,264,457 13,658 2.39
Total interest-bearing liabilities 14,288,335 27,308 0.76 % 12,511,570 45,139 1.43 %
Noninterest-bearing customer accounts 2,258,685 1,641,054
Other liabilities 275,834 206,876
Total liabilities 16,822,854 14,359,500
Shareholders' equity 2,037,193 2,016,849
Total liabilities and equity $ 18,860,047 $ 16,376,349
Net interest income $ 120,514 $ 119,685
Net interest margin (NIM) 2.75 % 3.15 %
WASHINGTON FEDERAL, INC. AND SUBSIDIARIES


	Three Months Ended December 31, 2021						Three Months Ended December 31, 2020
	Average Balance		Interest		Average Rate		Average Balance		Interest		Average Rate
	($ in thousands)						($ in thousands)
Assets
Loans receivable	$	14,297,907	$	138,509	3.84	%	$	12,824,870	$	133,671	4.14	%
Mortgage-backed securities	925,028		4,792		2.06		1,582,286		7,230		1.81
Cash & Investments	3,207,877		5,783		0.72		3,004,224		5,265		0.70
FHLB & FRB stock	102,863		1,356		5.23		140,730		1,656		4.67
Total interest-earning assets	18,533,675		150,440		3.22	%	17,552,110		147,822		3.34	%
Other assets	1,272,163						1,307,937
Total assets	$	19,805,838					$	18,860,047

Liabilities and Equity
Interest-bearing customer accounts	$	12,530,492	$	8,461	0.27	%	$	11,619,857	$	14,110	0.48	%
FHLB advances	1,720,000		7,843		1.81		2,668,478		13,198		1.96
Other borrowings	—		—		—		—		—		—
Total interest-bearing liabilities	14,250,492		16,304		0.45	%	14,288,335		27,308		0.76	%
Noninterest-bearing customer accounts	3,188,223						2,258,685
Other liabilities	223,421						275,834
Total liabilities	17,662,136						16,822,854
Shareholders' equity	2,143,702						2,037,193
Total liabilities and equity	$	19,805,838					$	18,860,047
Net interest income/interest rate spread			$	134,136	2.77	%			$	120,514	2.65	%
Net interest margin (NIM)					2.87	%					2.75	%

As of December 31, ~~2020,~~2021, total assets had increased by ~~$269,567,000~~$322,597,000 to ~~$19,063,622,000~~$19,973,171,000 from ~~$18,794,055,000~~$19,650,574,000 at September 30, ~~2020.~~2021. During the three months ended December 31, ~~2020,~~2021, loans receivable increased $758,632,000 while cash and cash equivalents ~~increased~~decreased by ~~$127,745,000~~$210,162,000 and investment securities decreased by $231,758,000. Growth in loans receivable ~~increased $88,693,000.~~were also substantially funded by the $359,934,000 increase in customer deposits.

Cash and cash equivalents of ~~$1,830,722,000~~$1,880,647,000 and shareholders’ equity of ~~$2,061,767,000~~$2,149,126,000 as of December 31, ~~2020~~2021 provide management with flexibility in managing interest rate risk going forward.

LIQUIDITY AND CAPITAL RESOURCES

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~~WASHINGTON FEDERAL, INC. AND SUBSIDIARIES~~

The principal sources of funds for the Company's activities are loan repayments (including prepayments), net deposit inflows, repayments and sales of investments and borrowings and retained earnings, if applicable. The Company's principal sources of revenue are interest on loans and interest and dividends on investments. Additionally, the Company earns fee income for loan, deposit, insurance and other services.

~~The Company participated~~On February 8, 2021, 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,connection with an underwritten public offering, the Company ~~assisted over 6,500 businesses with more than $780,000,000~~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 ~~PPP loans.~~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.

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

The Company ishas actively ~~working~~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 December 31, ~~2020, 183~~2021, 16 mortgage loans totaling ~~$46,000,000~~$3,526,000 and 101 commercial ~~loans~~loan totaling ~~$32,000,000~~$475,000 that had been modified remain in deferral. These loans are not considered past due until after the deferral period is over and scheduled payments have resumed.

The Bank has a credit line with the Federal Home Loan Bank of Des Moines ("FHLB") 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 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 provided the primary source for funding increases in the loan portfolio. Customer accounts increased $359,934,000, or 2.3%, to $15,902,046,000 at December 31, 2021 compared with $15,542,112,000 at September 30, 2021. Total FHLB borrowings totaled $1,720,000,000 as of December 31, 2021 and was unchanged from September 30, 2021.

The Company's cash and cash equivalents totaled ~~$1,830,722,000~~$1,880,647,000 at December 31, ~~2020,~~2021, an ~~increase~~decrease from ~~$1,702,977,000~~$2,090,809,000 at September 30, ~~2020.~~2021. These amounts include the Bank's operating cash.

The Company’s shareholders' equity at December 31, ~~2020~~2021 was ~~$2,061,767,000,~~$2,149,126,000, or ~~10.82%~~10.76% of total assets. This is an increase of ~~$47,634,000~~$23,062,000 from September 30, ~~2020~~2021 when net worth was ~~$2,014,133,000,~~$2,126,064,000, or ~~10.72%~~10.82% of total assets. The Company’s shareholders' equity was impacted in the three months ended December 31, ~~2020~~2021 by net income of ~~$38,951,000,~~$50,281,000, the payment of ~~$16,577,000~~$14,899,000 in ~~cash~~common stock dividends, payment of $3,656,000 in preferred stock dividends, treasury stock purchases of ~~$701,000,~~$2,973,000, as well as the other comprehensive ~~income~~loss of ~~$24,482,000.~~$7,909,000. The ratio of tangible capital to tangible assets at December 31, ~~2020~~2021 was ~~9.34%~~9.35%. Management believes the Company's strong net worth position allows it to manage balance sheet risk and provide the capital support needed for controlled growth in a regulated environment.

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

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

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

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

December 31, 2020
Common Equity Tier I risk-based capital ratio:
      The Company $ 1,711,296 12.65 % 4.50 % NA
      The Bank 1,665,018 12.31 % 4.50 % 6.50 %
Tier I risk-based capital ratio:
      The Company 1,711,296 12.65 % 6.00 % NA
      The Bank 1,665,018 12.31 % 6.00 % 8.00 %
Total risk-based capital ratio:
      The Company 1,880,718 13.90 % 8.00 % NA
      The Bank 1,834,435 13.56 % 8.00 % 10.00 %
Tier 1 Leverage ratio:
      The Company 1,711,296 9.25 % 4.00 % NA
      The Bank 1,665,018 9.00 % 4.00 % 5.00 %
September 30, 2020
Common Equity Tier 1 risk-based capital ratio:
      The Company $ 1,687,676 12.93 % 4.50 % NA
      The Bank 1,625,478 12.46 % 4.50 % 6.50 %
Tier I risk-based capital ratio:
      The Company 1,687,676 12.93 % 6.00 % NA
      The Bank 1,625,478 12.46 % 6.00 % 8.00 %
Total risk-based capital ratio:
      The Company 1,851,136 14.19 % 8.00 % NA
      The Bank 1,788,904 13.71 % 8.00 % 10.00 %
Tier 1 Leverage ratio:
      The Company 1,687,676 9.28 % 4.00 % NA
      The Bank 1,625,478 8.94 % 4.00 % 5.00 %


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

December 31, 2021
Common Equity Tier I risk-based capital ratio:
The Company	$	1,477,844	9.98	%	4.50	%	NA
The Bank	1,746,080		11.79	%	4.50	%	6.50	%
Tier I risk-based capital ratio:
The Company	1,777,844		12.00	%	6.00	%	NA
The Bank	1,746,080		11.79	%	6.00	%	8.00	%
Total risk-based capital ratio:
The Company	1,963,161		13.26	%	8.00	%	NA
The Bank	1,931,396		13.04	%	8.00	%	10.00	%
Tier 1 Leverage ratio:
The Company	1,777,844		9.14	%	4.00	%	NA
The Bank	1,746,080		8.98	%	4.00	%	5.00	%

September 30, 2021
Common Equity Tier 1 risk-based capital ratio:
The Company	$	1,446,613	9.50	%	4.50	%	NA
The Bank	1,717,014		11.28	%	4.50	%	6.50	%
Tier I risk-based capital ratio:
The Company	1,746,613		11.47	%	6.00	%	NA
The Bank	1,717,014		11.28	%	6.00	%	8.00	%
Total risk-based capital ratio:
The Company	1,937,036		12.72	%	8.00	%	NA
The Bank	1,907,408		12.53	%	8.00	%	10.00	%
Tier 1 Leverage ratio:
The Company	1,746,613		9.07	%	4.00	%	NA
The Bank	1,717,014		8.92	%	4.00	%	5.00	%

CHANGES IN FINANCIAL CONDITION

Cash and cash equivalents - Cash and cash equivalents ~~are $1,830,722,000~~were $1,880,647,000 at December 31, ~~2020, an increase~~2021, a decrease of ~~$127,745,000,~~$210,162,000, or ~~7.5%~~10.1%, since September 30, ~~2020.~~2021. The change is primarily due to ~~the large increase~~funding of new loan originations, partially offset by growth in ~~deposits.~~customer transaction deposit accounts.

Available-for-sale and held-to-maturity investment securities - Available-for-sale securities ~~increased $233,452,000,~~decreased $192,120,000, or ~~10.4%~~9.0%, during the three months ended December 31, ~~2020,~~2021, mostly due to ~~purchases of $379,760,000, offset by~~ principal repayments and maturities of ~~$157,246,000.~~$170,847,000. During the same period, the balance of held-to-maturity securities decreased by ~~$118,968,000~~$39,638,000 primarily due to principal pay-downs and maturities of ~~$116,223,000.~~$38,679,000. As of December 31, ~~2020,~~2021, the Company had a net unrealized gain on available-for-sale securities of ~~$51,070,000,~~$31,470,000, which is included on a net of tax basis in accumulated other comprehensive income (loss).

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~~Substantially all~~The majority of the Company’s held-to-maturity and available-for-sale debt securities are issued by U.S. government agencies or U.S. government-sponsored enterprises. These securities carry the explicit and/or implicit guarantee of the U.S. government and have a long history of zero credit loss. The Company did not record an allowance for credit losses for held-to-maturity securities as of December 31, ~~2020~~2021 or September 30, ~~2020~~2021 as the investment portfolio consists primarily of U.S. government agency mortgage-backed securities that management deems to have immaterial risk of loss. The impact going forward will depend on the composition, characteristics, and credit quality of the loan and securities portfolios as well as the economic conditions at future reporting periods. The Company does not believe that any of its available-for-sale debt securities had credit loss impairment as of December 31, ~~2020~~2021 or September 30, ~~2020,~~2021, therefore, no allowance was recorded.

Loans receivable - Loans receivable, net of related contra accounts, increased by ~~$88,693,000~~$758,632,000 to ~~$12,881,010,000~~$14,592,202,000 at December 31, ~~2020,~~2021, compared to ~~$12,792,317,000~~$13,833,570,000 at September 30, ~~2020.~~2021. The increase was primarily the net result of originations of ~~$1,915,025,000 and~~$2,134,338,000, purchases of single-family residential mortgages of $413,326,000, partially offset by loan principal repayments of ~~$1,600,257,000~~$1,833,099,000 as well as a ~~$223,900,000 increase~~$24,956,000 decrease in loans in process. Commercial loan originations accounted for ~~75%~~79% of total originations and consumer loan originations were ~~25%~~21% during the period. The mix of loan originations is consistent with management's strategy during low rate environments to produce more construction, multifamily, commercial real estate, and commercial and industrial loans that generally have adjustable interest rates or a shorter duration.

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


		December 31, 2020				September 30, 2020				Change					December 31, 2021				September 30, 2021				Change
		($ in thousands)				($ in thousands)				$		%			($ in thousands)				($ in thousands)				$		%
Commercial loans	Commercial loans													Commercial loans
Multi-family	Multi-family	$	1,610,796	10.9	%	$	1,538,762	10.6	%	$	72,034	4.7	%	Multi-family	$	2,298,155	13.5	%	$	2,291,477	14.0	%	$	6,678	0.3	%
Commercial real estate	Commercial real estate	1,954,154		13.2		1,895,086		13.1		59,068		3.1		Commercial real estate	2,681,453		15.8		2,443,845		15.0		237,608		9.7
Commercial & industrial (1)	Commercial & industrial (1)	2,256,627		15.3		2,132,160		14.7		124,467		5.8		Commercial & industrial (1)	2,373,012		13.9		2,314,654		14.2		58,358		2.5
Construction	Construction	2,687,708		18.2		2,403,276		16.6		284,432		11.8		Construction	2,967,644		17.4		2,888,214		17.7		79,430		2.8
Land - acquisition & development	Land - acquisition & development	193,239		1.3		193,745		1.3		(506)		(0.3)		Land - acquisition & development	225,423		1.3		222,457		1.4		2,966		1.3
Total commercial loans	Total commercial loans	8,702,524		58.9		8,163,029		56.3		539,495		6.6		Total commercial loans	10,545,687		61.9		10,160,647		62.3		385,040		3.8
Consumer loans	Consumer loans													Consumer loans
Single-family residential	Single-family residential	5,063,053		34.2		5,304,689		36.7		(241,636)		(4.6)		Single-family residential	5,295,837		31.1		4,951,627		30.4		344,210		7.0
Construction - custom	Construction - custom	659,364		4.5		674,879		4.7		(15,515)		(2.3)		Construction - custom	787,862		4.6		783,221		4.8		4,641		0.6
Land - consumer lot loans	Land - consumer lot loans	110,841		0.7		102,263		0.7		8,578		8.4		Land - consumer lot loans	151,297		0.9		149,956		0.9		1,341		0.9
HELOC	HELOC	139,752		0.9		139,703		1.0		49		—		HELOC	166,601		1.0		165,989		1.0		612		0.4
Consumer	Consumer	111,292		0.8		83,159		0.6		28,133		33.8		Consumer	77,681		0.5		87,892		0.5		(10,211)		(11.6)
Total consumer loans	Total consumer loans	6,084,302		41.1		6,304,693		43.7		(220,391)		(3.5)		Total consumer loans	6,479,278		38.1		6,138,685		37.7		340,593		5.5
Total gross loans	Total gross loans	14,786,826		100	%	14,467,722		100	%	319,104		2.2		Total gross loans	17,024,965		100	%	16,299,332		100	%	725,633		4.5
Less:	Less:													Less:
Allowance for credit losses on loans	Allowance for credit losses on loans	170,189				166,955				3,234		1.9		Allowance for credit losses on loans	171,411				171,300				111		0.1
Loans in process	Loans in process	1,679,972				1,456,072				223,900		15.4		Loans in process	2,207,880				2,232,836				(24,956)		(1.1)
Net deferred fees, costs and discounts	Net deferred fees, costs and discounts	55,655				52,378				3,277		6.3		Net deferred fees, costs and discounts	53,472				61,626				(8,154)		(13.2)
Total loan contra accounts	Total loan contra accounts	1,905,816				1,675,405				230,411		13.8		Total loan contra accounts	2,432,763				2,465,762				(32,999)		(1.3)
Net loans	Net loans	$	12,881,010			$	12,792,317			$	88,693	0.7	%	Net loans	$	14,592,202			$	13,833,570			$	758,632	5.5	%

(1) Includes ~~$762,004,000~~$202,261,000 of PPP loans as of December 31, 2021 and $311,795,000 as of September 30, ~~2020 and $646,887,000 as of December 31, 2020.~~2021.

Non-performing assets - Non-performing assets increased ~~$28,847,000~~$11,165,000 during the three months ended December 31, ~~2020~~2021 to ~~$66,542,000~~$54,790,000 from ~~$37,695,000~~$43,625,000 at September 30, ~~2020.~~2021. The change is primarily due to a ~~$29,350,000~~$13,210,000 increase in non-accrual ~~loans and $503,000 decline in real estate owned ("REO").~~loans. Non-performing assets as a percentage of total assets was ~~0.35%~~0.27% at December 31, ~~2020~~2021 compared to ~~0.20%~~0.22% at September 30, ~~2020.~~2021.

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


		December 31, 2020					September 30, 2020						December 31, 2021					September 30, 2021
		($ in thousands)											($ in thousands)
Troubled debt restructured loans:	Troubled debt restructured loans:											Troubled debt restructured loans:
Multi - family	Multi - family	$	288		0.3	%	$	304		0.3	%	Multi - family	$	201		0.3	%	$	223		0.3	%
Commercial real estate	Commercial real estate	2,476			2.9		1,462			1.6		Commercial real estate	2,248			3.7		2,275			3.5
Commercial & industrial	Commercial & industrial	48			0.1		51			0.1		Commercial & industrial	38			0.1		40			0.1
Construction	Construction	—			—		—			—		Construction	—			—		—			—
Land - acquisition & development	Land - acquisition & development	—			—		—			—		Land - acquisition & development	—			—		—			—
Single-family residential	Single-family residential	80,155			92.9		85,607			93.6		Single-family residential	55,625			92.2		60,011			92.0
Construction - custom	Construction - custom	—			—		—			—		Construction - custom	—			—		—			—
Land - consumer lot loans	Land - consumer lot loans	2,714			3.1		3,106			3.4		Land - consumer lot loans	1,933			3.2		2,292			3.5
HELOC	HELOC	584			0.7		826			0.9		HELOC	242			0.4		246			0.4
Consumer	Consumer	49			—		52			0.1		Consumer	39			0.1		41			0.1
Total restructured loans (1)	Total restructured loans (1)	$	86,314		100	%	$	91,408		100	%	Total restructured loans (1)	$	60,326		100	%	$	65,128		100	%
Non-accrual loans:	Non-accrual loans:											Non-accrual loans:
Multi - family	Multi - family	$	—		—	%	$	—		—	%	Multi - family	$	—		—	%	$	475		1.5	%
Commercial real estate	Commercial real estate	31,397			53.8		3,771			13.0		Commercial real estate	7,565			16.8		8,038			25.3
Commercial & industrial	Commercial & industrial	594			1.0		329			1.1		Commercial & industrial	15,349			34.1		365			1.1
Construction	Construction	1,237			2.1		1,669			5.8		Construction	611			1.4		505			1.7
Land - acquisition & development	Land - acquisition & development	—			—		—			—		Land - acquisition & development	2,340			5.2		2,340			7.4
Single-family residential	Single-family residential	24,349			41.7		22,431			77.2		Single-family residential	17,751			39.5		19,320			60.9
Construction - custom	Construction - custom	—			—		—			—		Construction - custom	465			1.0		—			—
Land - consumer lot loans	Land - consumer lot loans	443			0.8		243			0.8		Land - consumer lot loans	544			1.2		359			1.1
HELOC	HELOC	334			0.6		553			1.9		HELOC	276			0.6		287			0.9
Consumer	Consumer	52			0.1		60			0.2		Consumer	58			0.1		60			0.2
Total non-accrual loans	Total non-accrual loans	58,406			100	%	29,056			100	%	Total non-accrual loans	44,959			100	%	31,749			100	%
Real estate owned	Real estate owned	4,463					4,966					Real estate owned	5,737					8,204
Other property owned	Other property owned	3,673					3,673					Other property owned	4,094					3,672
Total non-performing assets	Total non-performing assets	$	66,542				$	37,695				Total non-performing assets	$	54,790				$	43,625
Total non-performing assets and performing restructured loans as a percentage of total assets	Total non-performing assets and performing restructured loans as a percentage of total assets	0.79		%			0.67		%			Total non-performing assets and performing restructured loans as a percentage of total assets	0.57		%			0.55		%
Total Assets	Total Assets											Total Assets
(1) Restructured loans were as follows:	(1) Restructured loans were as follows:											(1) Restructured loans were as follows:
Performing	Performing	$	84,482		97.9	%	$	89,072		97.4	%	Performing	$	58,782		97.4	%	$	63,655		97.7	%
Non-performing (included in non-accrual loans above)	Non-performing (included in non-accrual loans above)	1,832			2.1		2,336			2.6		Non-performing (included in non-accrual loans above)	1,544			2.6		1,473			2.3
		$	86,314		100	%	$	91,408		100	%		$	60,326		100	%	$	65,128		100	%

For the three months ended December 31, ~~2020,~~2021, the Company recognized ~~$3,489,000~~$1,250,000 in interest income on cash payments received from borrowers on non-accrual loans. The Company would have recognized interest income of ~~$402,000~~$328,000 for the same period had these loans performed according to their original contract terms. Recognized interest income for the three months ended December 31, ~~2020~~2021 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 ~~$535,586,000~~$248,068,000 of loans that were less than 90 days delinquent at December 31, ~~2020~~2021 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 ~~3.60%~~1.81% at December 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 ~~92.9%~~92.2% of restructured loans as of December 31, ~~2020.~~2021. The concession for these loans is typically a payment reduction through a rate reduction of 100 to 200 bps for a specific term, usually six to twenty-four months. Interest-only payments may also be approved during the modification period.

For commercial loans, six consecutive payments on newly restructured loan terms are generally required prior to returning the loan to accrual status. In some instances after the required six consecutive payments are made, a management assessment will conclude that collection of the entire principal balance is still in doubt. In those instances, the loan will remain on non-accrual. Homogeneous loans may or may not be on accrual status at the time of restructuring, but all are placed on accrual status upon the restructuring of the loan. Homogeneous loans are restructured only if the borrower can demonstrate the ability to meet the restructured payment terms; otherwise, collection is pursued and the loan remains on non-accrual status until liquidated. If the homogeneous restructured loan does not perform, it will be placed in non-accrual status when it is 90 days delinquent.

A loan that defaults and is subsequently modified would impact the Company’s delinquency trend, which is part of the qualitative risk factors component of the allowance for credit losses calculation. Any modified loan that re-defaults and is charged-off would impact the historical loss factors component of the Company's general reserve calculation.

Allowance for credit losses - The following table shows the composition of the Company’s allowance for credit losses.


		December 31, 2020				September 30, 2020				Change					December 31, 2021				September 30, 2021				Change
Allowance for credit losses:	Allowance for credit losses:	($ in thousands)				($ in thousands)				$		%		Allowance for credit losses:	($ in thousands)				($ in thousands)				$		%
Commercial loans	Commercial loans													Commercial loans
Multi-family	Multi-family	$	14,363	8.4	%	$	13,853	8.3	%	$	510	3.7	%	Multi-family	$	15,993	9.3	%	16,949		9.9	%	$	(956)	(5.6)	%
Commercial real estate	Commercial real estate	23,496		13.8		22,516		13.5		980		4.4		Commercial real estate	25,722		15.0		23,437		13.7		2,285		9.7
Commercial & industrial	Commercial & industrial	44,317		26.0		38,665		23.2		5,652		14.6		Commercial & industrial	47,231		27.6		45,957		26.8		1,274		2.8
Construction	Construction	26,365		15.5		24,156		14.5		2,209		9.1		Construction	24,766		14.4		25,585		14.9		(819)		(3.2)
Land - acquisition & development	Land - acquisition & development	10,666		6.3		10,733		6.4		(67)		(0.6)		Land - acquisition & development	14,125		8.2		13,447		7.8		678		5.0
Total commercial loans	Total commercial loans	119,207		70.0		109,923		65.8		9,284		8.4		Total commercial loans	127,837		74.6		125,375		73.2		2,462		2.0
Consumer loans	Consumer loans													Consumer loans
Single-family residential	Single-family residential	38,613		22.7		45,186		27.1		(6,573)		(14.5)		Single-family residential	30,106		17.6		30,978		18.1		(872)		(2.8)
Construction - custom	Construction - custom	3,594		2.1		3,555		2.1		39		1.1		Construction - custom	3,719		2.2		4,907		2.9		(1,188)		(24.2)
Land - consumer lot loans	Land - consumer lot loans	2,958		1.7		2,729		1.6		229		8.4		Land - consumer lot loans	4,984		2.9		4,939		2.9		45		0.9
HELOC	HELOC	2,362		1.4		2,571		1.5		(209)		(8.1)		HELOC	2,365		1.4		2,390		1.4		(25)		(1.0)
Consumer	Consumer	3,455		2.0		2,991		1.8		464		15.5		Consumer	2,400		1.4		2,711		1.6		(311)		(11.5)
Total consumer loans	Total consumer loans	50,982		30.0		57,032		34.2		(6,050)		(10.6)		Total consumer loans	43,574		25.4		45,925		26.8		(2,351)		(5.1)
Total allowance for loan losses	Total allowance for loan losses	170,189		100.0	%	166,955		100.0	%	3,234		1.9		Total allowance for loan losses	171,411		100.0	%	171,300		100.0	%	111		0.1
Reserve for unfunded commitments	Reserve for unfunded commitments	26,500				25,000				1,500		2.2		Reserve for unfunded commitments	30,000				27,500				2,500		9.1
Total allowance for credit losses	Total allowance for credit losses	$	196,689			$	191,955			$	4,734	2.5	%	Total allowance for credit losses	$	201,411			$	198,800			$	2,611	1.3	%

No allowance was recorded as of December 31, ~~2020~~2021 or as of September 30, 2021 for the ~~$646,887,000~~$198,947,000 and $305,162,000 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 of ~~$196,689,000,~~$201,411,000, or ~~1.33%~~1.18% of gross loans, is sufficient to absorb estimated losses inherent in the portfolio of loans and unfunded commitments. See Note E and Note I for further details of the allowance for loan losses and reserve for unfunded commitments as of and for the period ended December 31, ~~2020.~~2021 and September 30, 2021.

Real estate owned ("REO") - REO decreased during the three months ended December 31, ~~2020~~2021 by ~~$503,000~~$2,467,000 to ~~$4,463,000, primarily~~$5,737,000. The decrease was due to REO sales and the write-down of ~~REO properties during the period.~~

certain properties.

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Intangible assets - Intangible assets decreased to ~~$309,425,000~~$309,747,000 as of December 31, ~~2020~~2021 from ~~$309,906,000~~$310,019,000 as of September 30, ~~2020.~~2021. The decrease was due to normal amortization of finite-lived intangible assets.

Customer accounts - Customer accounts increased ~~$386,917,000,~~$359,934,000, or ~~2.8%~~2.3%, to ~~$14,166,541,000~~$15,902,046,000 at December 31, ~~2020~~2021 compared with ~~$13,779,624,000~~$15,542,112,000 at September 30, ~~2020.~~2021. Transaction accounts increased by $442,037,000 or 3.7% during that period, while time deposits decreased $82,103,000 or 2.4%. 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.


		December 31, 2020						September 30, 2020							December 31, 2021						September 30, 2021
		Deposit Account Balance		As a % of Total Deposits		Weighted Average Rate		Deposit Account Balance		As a % of Total Deposits		Weighted Average Rate			Deposit Account Balance		As a % of Total Deposits		Weighted Average Rate		Deposit Account Balance		As a % of Total Deposits		Weighted Average Rate
($ in thousands)	($ in thousands)													($ in thousands)
Non-interest checking	Non-interest checking	$	2,336,294	16.5	%	—	%	$	2,164,071	15.7	%	—	%	Non-interest checking	$	3,279,841	20.6	%	—	%	$	3,122,397	20.1	%	—	%
Interest checking	Interest checking	3,175,494		22.4		0.20		3,029,576		22.0		0.24		Interest checking	3,688,823		23.3		0.21		3,566,322		22.9		0.20
Savings	Savings	914,655		6.5		0.11		872,087		6.3		0.11		Savings	1,043,002		6.6		0.11		1,039,336		6.7		0.11
Money market	Money market	3,955,016		27.9		0.22		3,740,698		27.1		0.30		Money market	4,538,396		28.5		0.20		4,379,970		28.2		0.19
Time deposits	Time deposits	3,785,082		26.7		0.90		3,973,192		28.8		1.17		Time deposits	3,351,984		21.1		0.53		3,434,087		22.1		0.54
Total	Total	$	14,166,541	100	%	0.36	%	$	13,779,624	100	%	0.48	%	Total	$	15,902,046	100	%	0.22	%	$	15,542,112	100	%	0.23	%

FHLB advances and other borrowings - Total borrowings ~~totaled $2,600,000,000~~were $1,720,000,000 as of December 31, ~~2020, a decrease~~2021 and unchanged from ~~$2,700,000,000~~$1,720,000,000 as of September 30, ~~2020. The decrease was due to the termination~~2021. Strong growth in deposits has provided for substantial funding of ~~a hedged~~growth in loans receivable, therefore, additional FHLB ~~borrowing that had an effective interest rate of 1.39%.~~borrowings have not been necessary. The weighted average rate for FHLB borrowings was ~~1.82%~~1.49% as of December 31, ~~2020~~2021 and ~~1.79%~~1.51% at September 30, ~~2020.~~2021.

Shareholders' equity - The Company’s ~~total~~ shareholders' equity at December 31, ~~2020~~2021 was ~~$2,061,767,000,~~$2,149,126,000, or 10.76% of total assets. This is an increase of $23,062,000 from September 30, 2021 when net worth was $2,126,064,000, or 10.82% of total assets. ~~This was an increase of $47,634,000 from the September 30, 2020 total of $2,014,133,000, or 10.72% of total assets.~~ The Company’s shareholders' equity was impacted in the three months ended December 31, ~~2020~~2021 by net income of ~~$38,951,000,~~$50,281,000, the payment of ~~$16,577,000~~$14,899,000 in ~~cash~~common stock dividends, payment of $3,656,000 in preferred stock dividends, treasury stock purchases of ~~$701,000,~~$2,973,000, as well as the other comprehensive ~~income~~loss of ~~$24,482,000.~~$7,909,000.

RESULTS OF OPERATIONS

Net Income - The Company recorded net income of ~~$38,951,000~~$50,281,000 for the three months ended December 31, ~~2020~~2021 compared to ~~$67,866,000~~$38,951,000 for the prior year quarter. The ~~decrease is~~changes are due to the factors described below.

Net Interest Income - For the three months ended December 31, ~~2020,~~2021, net interest income was ~~$120,514,000,~~$134,136,000, which is ~~$829,000~~$13,622,000 higher than the same quarter of the prior year. Net interest margin was 2.87% for the quarter ended December 31, 2021 compared to 2.75% for the quarter ended December 31, ~~2020 compared~~2020. The increase in net interest income is mostly due to ~~3.15% for the quarter ended December 31, 2019. Average~~average interest-earning assets ~~increased $2,365,757,000~~increasing by $981,565,000 or ~~15.58%~~5.59% from the prior year while average interest-bearing liabilities ~~increased $1,776,765,000~~decreased $37,843,000 or ~~14.20%~~0.26%. The average rate earned on interest-earning assets declined by 9712 basis points to ~~3.34%~~3.22% while the average rate paid on interest-bearing liabilities declined by 6731 basis points to ~~0.76%~~0.45%. ~~The compression in~~During the three months ended December 31, 2021 and 2020, net interest ~~margin since the prior year same quarter is primarily due to the rapid drop in short-term rates by the Federal Reserve Bank in response to the COVID-19 pandemic which led to changes in the rates~~income included $3,319,000 and $4,886,000, respectively, of net loan origination fee amortization on earning assets and bearing liabilities noted above. Additionally, the balance of cash was relatively high at $1,830,722,000 as of December 31, 2020 and the loan portfolio at December 31, 2020 contained $634,850,000 in PPP ~~loans, which carry a 1% note rate.~~loans.

The following table sets forth certain information explaining changes in interest income and interest expense for the period indicated compared to the same period one year ago. For each category of interest-earning asset and interest-bearing liability, information is provided on changes attributable to (1) changes in volume (changes in volume multiplied by old rate) and (2) changes in rate (changes in rate multiplied by old volume). The change in interest income and interest expense attributable to changes in both volume and rate has been allocated proportionately to the change due to volume and the change due to rate.

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Rate / Volume Analysis:


		Comparison of Three Months Ended 12/31/20 and 12/31/19						Comparison of Three Months Ended 12/31/21 and 12/31/20
($ in thousands)	($ in thousands)	Volume		Rate		Total			($ in thousands)	Volume		Rate		Total
Interest income:	Interest income:								Interest income:
Loans receivable	Loans receivable	$	10,063	$	(18,538)	$	(8,475)		Loans receivable	$	14,765	$	(9,927)	$	4,838
Mortgage-backed securities	Mortgage-backed securities	(4,319)		(4,063)		(8,382)			Mortgage-backed securities	(3,314)		876		(2,438)
Investments (1)	Investments (1)	7,661		(7,806)		(145)			Investments (1)	371		(153)		218
All interest-earning assets	All interest-earning assets	13,405		(30,407)		(17,002)			All interest-earning assets	11,822		(9,204)		2,618
Interest expense:	Interest expense:								Interest expense:
Customer accounts	Customer accounts	3,719		(21,090)		(17,371)			Customer accounts	997		(6,646)		(5,649)
FHLB advances and other borrowings	FHLB advances and other borrowings	2,194		(2,654)		(460)			FHLB advances and other borrowings	(4,407)		(948)		(5,355)
All interest-bearing liabilities	All interest-bearing liabilities	5,913		(23,744)		(17,831)			All interest-bearing liabilities	(3,410)		(7,594)		(11,004)
Change in net interest income	Change in net interest income	$	7,492	$	(6,663)	$	829		Change in net interest income	$	15,232	$	(1,610)	$	13,622

___________________

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

Provision (Release) for Credit Losses - The Company recorded a ~~$3,000,000~~$500,000 provision for credit losses for the three months ended December 31, ~~2020,~~2021, compared with a ~~release of allowance~~provision for credit losses of ~~$3,750,000~~$3,000,000 for the three months ended December 31, ~~2019.~~2020. The provision in the three months ended December 31, 2021 was primarily due to growth in loans receivable and unfunded commitments largely offset by improvements in management's assessment of the credit ~~loss~~quality of certain loan portfolios. The provision for the three months ended December 31, 2020 iswas primarily due to reserving for ~~new loan originations~~growth in loans receivable and changes in composition of the loan portfolio. Recoveries, net of charge-offs, totaled ~~$1,734,000~~$2,111,000 for the three months ended December 31, ~~2020,~~2021, compared to net recoveries of ~~$2,579,000~~$1,734,000 during the three months ended December 31, ~~2019.~~2020. No allowance was recorded as of December 31, ~~2020~~2021 or as of September 30, 2021 for the ~~$646,887,000~~$198,947,000 and $305,162,000 of PPP loans in the portfolio on each date, respectively, which are included in the commercial & industrial loan category, due to the government guarantee.

Other Income - The three months ended December 31, ~~2020~~2021 results include total other income of ~~$13,870,000~~$18,681,000 compared to ~~$46,376,000~~$13,870,000 for the same period one year ago, a ~~$32,506,000 decrease.~~$4,811,000 increase. The ~~decrease~~increase in other income was primarily due to a ~~net~~ gain of ~~$30,700,000 from~~$5,135,000 that was recorded for certain equity investments in the ~~sale of fixed assets, including a branch property in Bellevue, Washington during the first quarter of fiscal 2020.~~December 31, 2021.

Other Expense - Total other expense was ~~$81,410,000~~$89,613,000 for the three months ended December 31, ~~2020, a decrease~~2021, an increase of ~~$1,226,000~~$8,203,000 from ~~$82,636,000~~$81,410,000 for the ~~same period one~~prior year ~~ago.~~quarter. Compensation and benefits costs increased by ~~$6,092,000,~~$4,702,000, or ~~16.6%~~11.0%, over the prior year quarter due to ~~a 4.8% rise in headcount,~~ annual merit increases, ~~as well as~~ higher bonus compensation ~~that reflects increased~~accruals related to strong deposit and loan ~~production activity since the prior year. Information technology costs decreased by $5,276,000, primarily due~~growth and investments in top talent and contract staff to ~~the prior year quarter including~~support strategic initiatives. The three months ended December 31, 2021 also included a ~~$5,900,000 impairment charge on systems hardware and software.~~tax related accrual of $2,400,000. Total other expense for the three months ended December 31, ~~2020~~2021 and December 31, ~~2019~~2020 equaled ~~1.73%~~1.81% and ~~2.02%~~1.73%, respectively, of average assets.

Gain (Loss) on Real Estate Owned - Results for the three months ended December 31, ~~2020~~2021 include a net ~~loss~~gain on real estate owned of ~~$449,000,~~$562,000, compared to a net loss of ~~$886,000~~$449,000 for the prior year quarter. The gain during the three months ended December 31, 2021 was due to REO sales, partially offset by the write-down of certain properties.

Income Tax Expense - Income tax expense totaled ~~$10,574,000~~$12,985,000 for the three months ended December 31, ~~2020,~~2021, compared to ~~$18,423,000~~$10,574,000 for the prior year quarter. The effective tax rate ~~for both the three months ended December 31, 2020~~was 20.52% and ~~the three months ended December 31, 2019 was~~ 21.35%~~. The effective tax rate~~ for the three months ended December 31, 2021 and December 31, 2020, ~~differs~~respectively. The Company’s effective tax rate varies from the statutory rate mainly due to state taxes, tax-exempt income and 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, ~~2020.~~2021. 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 ~~2020~~2021 Form 10-K.

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~~WASHINGTON FEDERAL, INC. AND SUBSIDIARIES~~

PART I – Financial Information

Item 4. Controls and Procedures

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

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

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

PART II – Other Information

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

Bank Secrecy Act Consent Order

As set forth in the Current Report on Form 8-K filed with the SEC on December 20, 2021, on December 17, 2021, the Office of the Comptroller of the Currency terminated the February 2018 Bank Secrecy Act (“BSA”) Consent Order issued to the Bank. The Bank remains subject to the BSA, the Patriot Act, and other laws and regulations requiring financial institutions, among other duties, to institute and maintain an effective anti-money laundering program and file suspicious activity and currency transaction reports as appropriate. Failure to maintain an effective BSA program could have serious business, financial and reputational consequences for the Bank. Any of these results could have a material adverse effect on our business, financial condition and results of operations.

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 Company's Form 10-K for the year ended September 30, ~~2020.~~2021. 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. Management is not aware of any other material changes to the risk factors that appeared under “Part I, Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2021.

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

The following table provides information with respect to purchases made by or on behalf of the Company of the Company’s common stock during the three months ended December 31, ~~2020.~~2021.

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


Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan (1)	Maximum Number of Shares That May Yet Be Purchased Under the Plan at the End of the Period
October 1, 2021 to October 31, 2021	80,108	$	35.36	80,108	3,737,010
November 1, 2021 to November 30, 2021	2,989	35.66		2,989	3,734,021
December 1, 2021 to December 31, 2021	1,017	33.11		1,017	3,733,004
Total	84,114	$	35.34	84,114	3,733,004

___________________

(1)The Company's stock repurchase program was publicly announced by its Board of Directors on February 3, 1995 and has no expiration date. Under this ongoing program, a total of ~~66,956,264~~76,956,264 shares were authorized for repurchase. This ~~does not include~~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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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

Item 6. Exhibits

(a)

Exhibits

31.1 *

Section 302 Certification by the Chief Executive Officer

31.2 *

Section 302 Certification by the Chief Financial Officer

32 *

Section 906 Certification by the Chief Executive Officer and Chief Financial Officer

101 *

Financial Statements from the Company’s Form 10-Q for the three months ended December 31, ~~2020~~2021 formatted in iXBRL

104 *

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

* Filed herewith

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

SIGNATURES

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


January ~~28, 2021~~31, 2022			/S/ BRENT J. BEARDALL
			BRENT J. BEARDALL President & Chief Executive Officer

January ~~28, 2021~~31, 2022			/S/ VINCENT L. BEATTY
			VINCENT L. BEATTY Executive Vice President and Chief Financial Officer

January ~~28, 2021~~31, 2022			/S/ CORY D. STEWART
			CORY D. STEWART Senior Vice President and Principal Accounting Officer

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