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 June 30, ~~2022~~2023


☐			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 growth company” in Rule 12b-2 of the Exchange Act.


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

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

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

The registrant had outstanding ~~65,324,266~~64,729,528 shares of common stock as of July ~~27, 2022.~~31, 2023.

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 June 30 , ~~2022~~2023 and September 30, ~~2021~~2022

Consolidated Statements of Operations for the three and ~~nin~~enine months ended June 30 , ~~2022~~2023 andJune 30 , ~~2021~~2022

Consolidated Statements of Comprehensive Income for the three and ~~nin~~enine months ended June 30 , ~~2022~~2023 and June 30 , ~~2021~~2022

Consolidated Statements of Shareholders' Equity for the three and nine months ended June 30 , ~~2022~~2023 and June 30 , ~~2021~~2022

Consolidated Statements of Cash Flows for the nine months endedJune 30 , 2023 and June 30 , 2022 ~~and~~ ~~June 30, 2021~~

Notes to Interim Consolidated Financial Statements

Item 2.

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

3841

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

5054

Item 4.

Controls and Procedures

Unregistered Sales of Equity Securities and Use of Proceeds

6557

Item 3.

Defaults Upon Senior Securities

6557

Item 4.

Mine Safety Disclosures

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(UNAUDITED)


		June 30, 2022		September 30, 2021			June 30, 2023		September 30, 2022
		(In thousands, except share data)					(In thousands, except share data)
ASSETS	ASSETS					ASSETS
Cash and cash equivalents	Cash and cash equivalents	$	607,421	$	2,090,809	Cash and cash equivalents	$	1,139,643	$	683,965
Available-for-sale securities, at fair value	Available-for-sale securities, at fair value	2,150,732		2,138,259		Available-for-sale securities, at fair value	2,036,233		2,051,037
Held-to-maturity securities, at amortized cost	Held-to-maturity securities, at amortized cost	477,884		366,025		Held-to-maturity securities, at amortized cost	434,172		463,299
Loans receivable, net of allowance for loan losses of $170,979 and $171,300		15,565,165		13,833,570
Loans receivable, net of allowance for loan losses of $178,069 and $172,808						Loans receivable, net of allowance for loan losses of $178,069 and $172,808	17,384,188		16,113,564
Interest receivable	Interest receivable	55,985		50,636		Interest receivable	81,931		63,872
Premises and equipment, net	Premises and equipment, net	244,232		255,152		Premises and equipment, net	237,339		243,062
Real estate owned	Real estate owned	9,656		8,204		Real estate owned	8,371		6,667
FHLB and FRB stock		78,073		102,863
FHLB stock						FHLB stock	130,875		95,073
Bank owned life insurance	Bank owned life insurance	237,407		233,263		Bank owned life insurance	241,351		237,931
Intangible assets, including goodwill of $303,457 and $303,457	Intangible assets, including goodwill of $303,457 and $303,457	309,254		310,019		Intangible assets, including goodwill of $303,457 and $303,457	309,069		309,009
Federal and state income tax assets, net		—		3,877

Other assets	Other assets	423,022		257,897		Other assets	549,416		504,652
		$	20,158,831	$	19,650,574		$	22,552,588	$	20,772,131
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	$	12,668,251	$	12,108,025	Transaction deposit accounts	$	11,256,575	$	12,691,527
Time deposit accounts	Time deposit accounts	3,297,369		3,434,087		Time deposit accounts	4,863,849		3,338,043
		15,965,620		15,542,112			16,120,424		16,029,570
FHLB advances		1,700,000		1,720,000
Borrowings						Borrowings	3,750,000		2,125,000
Advance payments by borrowers for taxes and insurance	Advance payments by borrowers for taxes and insurance	30,251		47,016		Advance payments by borrowers for taxes and insurance	33,516		50,051
Federal and state income tax liabilities, net	Federal and state income tax liabilities, net	4,394		—		Federal and state income tax liabilities, net	1,091		3,306
Accrued expenses and other liabilities	Accrued expenses and other liabilities	238,455		215,382		Accrued expenses and other liabilities	253,491		289,944
		17,938,720		17,524,510			20,158,522		18,497,871
Commitments and contingencies (see Note I)	Commitments and contingencies (see Note I)	0		0		Commitments and contingencies (see Note I)
Shareholders’ equity	Shareholders’ equity					Shareholders’ equity
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		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; 136,261,099 and 135,993,254 shares issued; 65,321,869 and 65,145,268 shares outstanding		136,261		135,993
Common stock, $1.00 par value, 300,000,000 shares authorized; 136,457,717 and 136,270,886 shares issued; 64,721,190 and 65,330,126 shares outstanding						Common stock, $1.00 par value, 300,000,000 shares authorized; 136,457,717 and 136,270,886 shares issued; 64,721,190 and 65,330,126 shares outstanding	136,458		136,271
Additional paid-in capital	Additional paid-in capital	1,685,219		1,678,622		Additional paid-in capital	1,685,587		1,686,975
Accumulated other comprehensive income (loss), net of taxes	Accumulated other comprehensive income (loss), net of taxes	54,227		69,785		Accumulated other comprehensive income (loss), net of taxes	47,351		52,481
Treasury stock, at cost; 70,939,230 and 70,847,986 shares		(1,590,159)		(1,586,947)
Treasury stock, at cost; 71,736,527 and 70,940,760 shares						Treasury stock, at cost; 71,736,527 and 70,940,760 shares	(1,612,494)		(1,590,207)
Retained earnings	Retained earnings	1,634,563		1,528,611		Retained earnings	1,837,164		1,688,740
		2,220,111		2,126,064			2,394,066		2,274,260
		$	20,158,831	$	19,650,574		$	22,552,588	$	20,772,131

SEE NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Table of Contents

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)


		Three Months Ended June 30,				Nine Months Ended June 30,					Three Months Ended June 30,				Nine Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
		(In thousands, except share data)				(In thousands, except share data)					(In thousands, except share data)				(In thousands, except share data)
INTEREST INCOME	INTEREST INCOME									INTEREST INCOME
Loans receivable	Loans receivable	$	149,113	$	134,193	$	426,882	$	400,621	Loans receivable	$	232,167	$	149,113	$	659,070	$	426,882
Mortgage-backed securities	Mortgage-backed securities	8,618		5,488		18,069		19,414		Mortgage-backed securities	10,454		8,618		31,489		18,069
Investment securities and cash equivalents	Investment securities and cash equivalents	9,417		7,767		23,475		21,989		Investment securities and cash equivalents	29,859		9,417		70,686		23,475
		167,148		147,448		468,426		442,024			272,480		167,148		761,245		468,426
INTEREST EXPENSE	INTEREST EXPENSE									INTEREST EXPENSE
Customer accounts	Customer accounts	9,284		8,906		25,970		33,745		Customer accounts	70,062		9,284		153,831		25,970
FHLB advances		6,118		9,937		21,486		35,126
Borrowings										Borrowings	33,718		6,118		80,877		21,486
		15,402		18,843		47,456		68,871			103,780		15,402		234,708		47,456
Net interest income	Net interest income	151,746		128,605		420,970		373,153		Net interest income	168,700		151,746		526,537		420,970
Provision (release) for credit losses	Provision (release) for credit losses	1,500		(2,000)		1,500		1,000		Provision (release) for credit losses	9,000		1,500		15,000		1,500
Net interest income after provision (release)	Net interest income after provision (release)	150,246		130,605		419,470		372,153		Net interest income after provision (release)	159,700		150,246		511,537		419,470
OTHER INCOME	OTHER INCOME									OTHER INCOME
Gain (loss) on sale of investment securities	Gain (loss) on sale of investment securities	—		—		81		—		Gain (loss) on sale of investment securities	—		—		—		81
Gain (loss) on termination of hedging derivatives		—		—		—		14,110
Prepayment penalty on long-term debt		—		—		—		(13,788)
Gain (loss) on hedging derivatives										Gain (loss) on hedging derivatives	(926)		—		(900)		—

Loan fee income	Loan fee income	1,618		1,748		6,014		5,012		Loan fee income	1,000		1,618		3,154		6,014
Deposit fee income	Deposit fee income	6,613		6,201		19,338		18,187		Deposit fee income	6,660		6,613		19,201		19,338
Other income	Other income	9,319		5,262		26,457		18,037		Other income	7,037		9,319		16,412		26,457
		17,550		13,211		51,890		41,558			13,771		17,550		37,867		51,890
OTHER EXPENSE	OTHER EXPENSE									OTHER EXPENSE
Compensation and benefits	Compensation and benefits	48,073		43,841		142,613		130,196		Compensation and benefits	50,456		48,073		150,970		142,613
Occupancy	Occupancy	10,053		9,725		31,931		29,790		Occupancy	10,444		10,053		31,464		31,931
FDIC insurance premiums	FDIC insurance premiums	2,100		3,900		7,300		10,918		FDIC insurance premiums	5,350		2,100		13,025		7,300
Product delivery	Product delivery	4,667		4,075		14,432		13,413		Product delivery	5,217		4,667		15,154		14,432
Information technology	Information technology	11,831		10,396		34,974		32,923		Information technology	11,661		11,831		36,775		34,974
Other expense	Other expense	10,679		11,703		34,183		29,556		Other expense	11,571		10,679		36,470		34,183
		87,403		83,640		265,433		246,796			94,699		87,403		283,858		265,433
Gain (loss) on real estate owned, net	Gain (loss) on real estate owned, net	448		(151)		1,139		(566)		Gain (loss) on real estate owned, net	722		448		411		1,139
Income before income taxes	Income before income taxes	80,841		60,025		207,066		166,349		Income before income taxes	79,494		80,841		265,957		207,066
Income tax expense	Income tax expense	17,546		12,603		44,131		35,105		Income tax expense	17,719		17,546		58,739		44,131
Net income	Net income	63,295		47,422		162,935		131,244		Net income	61,775		63,295		207,218		162,935
Dividends on preferred stock	Dividends on preferred stock	3,656		3,656		10,969		6,378		Dividends on preferred stock	3,656		3,656		10,969		10,969
Net income available to common shareholders	Net income available to common shareholders	$	59,639	$	43,766	$	151,966	$	124,866	Net income available to common shareholders	$	58,119	$	59,639	$	196,249	$	151,966
PER SHARE DATA	PER SHARE DATA									PER SHARE DATA
Basic earnings per common share	Basic earnings per common share	$	0.91	$	0.61	$	2.33	$	1.68	Basic earnings per common share	$	0.89	$	0.91	$	3.00	$	2.33
Diluted earnings per common share	Diluted earnings per common share	0.91		0.61		2.32		1.68		Diluted earnings per common share	0.89		0.91		3.00		2.32
Dividends paid on common stock per share	Dividends paid on common stock per share	0.24		0.23		0.71		0.68		Dividends paid on common stock per share	0.25		0.24		0.74		0.71
Basic weighted average number of shares outstanding	Basic weighted average number of shares outstanding	65,315,481		71,795,157		65,274,488		74,315,911		Basic weighted average number of shares outstanding	65,194,880		65,315,481		65,348,709		65,274,488
Diluted weighted average number of shares outstanding	Diluted weighted average number of shares outstanding	65,395,666		71,901,068		65,397,579		74,326,693		Diluted weighted average number of shares outstanding	65,212,846		65,395,666		65,442,910		65,397,579

SEE NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Table of Contents

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)


		Three Months Ended June 30,					Three Months Ended June 30,
		2022		2021			2023		2022
		(In thousands)					(In thousands)
Net income	Net income	$	63,295	$	47,422	Net income	$	61,775	$	63,295
Other comprehensive income (loss) net of tax:	Other comprehensive income (loss) net of tax:					Other comprehensive income (loss) net of tax:
Net unrealized gain (loss) during the period on available-for-sale investment securities, net of tax of $12,379 and $(605)		(41,158)		2,027
Reclassification adjustment of net (gain) loss from sale of available-for-sale securities included in net income, net of tax of $0 and $0		—		—
Net unrealized gain (loss) during the period on available-for-sale investment securities, net of tax of $2,350 and $12,379						Net unrealized gain (loss) during the period on available-for-sale investment securities, net of tax of $2,350 and $12,379	(7,822)		(41,158)
Reclassification adjustment of net (gain) loss from sale of available-for-sale securities included in net income, net of tax of $(1) and $0						Reclassification adjustment of net (gain) loss from sale of available-for-sale securities included in net income, net of tax of $(1) and $0	3		—
Net unrealized gain (loss) from investment securities, net of reclassification adjustment	Net unrealized gain (loss) from investment securities, net of reclassification adjustment	(41,158)		2,027		Net unrealized gain (loss) from investment securities, net of reclassification adjustment	(7,819)		(41,158)
Net unrealized gain (loss) during the period on borrowings cash flow hedges, net of tax of $(7,318) and $5,401		23,907		(18,083)
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) during the period on borrowings cash flow hedges, net of tax of $(3,409) and $(7,318)						Net unrealized gain (loss) during the period on borrowings cash flow hedges, net of tax of $(3,409) and $(7,318)	11,348		23,907

Net unrealized gain (loss) in cash flow hedging instruments, net of reclassification adjustment	Net unrealized gain (loss) in cash flow hedging instruments, net of reclassification adjustment	23,907		(18,083)		Net unrealized gain (loss) in cash flow hedging instruments, net of reclassification adjustment	11,348		23,907

Other comprehensive income (loss)	Other comprehensive income (loss)	(17,251)		(16,056)		Other comprehensive income (loss)	3,529		(17,251)
Comprehensive income	Comprehensive income	$	46,044	$	31,366	Comprehensive income	$	65,304	$	46,044


		Nine Months Ended June 30,					Nine Months Ended June 30,
		2022		2021			2023		2022
		(In thousands)					(In thousands)
Net income	Net income	$	162,935	$	131,244	Net income	$	207,218	$	162,935
Other comprehensive income (loss) net of tax:	Other comprehensive income (loss) net of tax:					Other comprehensive income (loss) net of tax:
Net unrealized gain (loss) during the period on available-for-sale investment securities, net of tax of $26,329 and $(2,177)		(87,859)		7,289
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) during the period on available-for-sale investment securities, net of tax of $(1,697) and $26,329						Net unrealized gain (loss) during the period on available-for-sale investment securities, net of tax of $(1,697) and $26,329	5,649		(87,859)
Reclassification adjustment of net (gain) loss from sale of available-for-sale securities included in net income, net of tax of $(1) and $(19)						Reclassification adjustment of net (gain) loss from sale of available-for-sale securities included in net income, net of tax of $(1) and $(19)	3		62
Net unrealized gain (loss) from investment securities, net of reclassification adjustment	Net unrealized gain (loss) from investment securities, net of reclassification adjustment	(87,797)		7,289		Net unrealized gain (loss) from investment securities, net of reclassification adjustment	5,652		(87,797)
Net unrealized gain (loss) during the period on borrowings cash flow hedges, net of tax of $(21,755) and $(15,456)		72,239		51,743
Reclassification adjustment of net (gain) loss included in net income during the period from hedging derivatives, net of tax of $0 and $3,245		—		(10,865)
Net unrealized gain (loss) during the period on borrowings cash flow hedges, net of tax of $3,239 and $(21,755)						Net unrealized gain (loss) during the period on borrowings cash flow hedges, net of tax of $3,239 and $(21,755)	(10,782)		72,239

Net unrealized gain (loss) in cash flow hedging instruments, net of reclassification adjustment	Net unrealized gain (loss) in cash flow hedging instruments, net of reclassification adjustment	72,239		40,878		Net unrealized gain (loss) in cash flow hedging instruments, net of reclassification adjustment	(10,782)		72,239

Other comprehensive income (loss)	Other comprehensive income (loss)	(15,558)		48,167		Other comprehensive income (loss)	(5,130)		(15,558)
Comprehensive income	Comprehensive income	$	147,377	$	179,411	Comprehensive income	$	202,088	$	147,377

SEE NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Table of Contents

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(UNAUDITED)


(in thousands)																(in thousands)	Preferred Stock		Common Stock		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total
Balance at April 1, 2023																Balance at April 1, 2023	$	300,000	$	136,413	$	1,683,720	$	1,795,042	$	43,822	$	(1,583,880)	$	2,375,117

Net income																Net income	—		—		—		61,775		—		—		61,775
Other comprehensive income (loss)																Other comprehensive income (loss)	—		—		—		—		3,529		—		3,529

Dividends on common stock ($0.25 per share)																Dividends on common stock ($0.25 per share)	—		—		—		(15,998)		—		—		(15,998)
Dividends on preferred stock ($12.1875 per share)																Dividends on preferred stock ($12.1875 per share)	—		—		—		(3,655)		—		—		(3,655)
Proceeds from stock-based awards																Proceeds from stock-based awards	—		1		15		—		—		—		16

Stock-based compensation expense																Stock-based compensation expense	—		44		1,852		—		—		—		1,896

Treasury stock acquired																Treasury stock acquired	—		—		—		—		—		(28,614)		(28,614)

Balance at June 30, 2023																Balance at June 30, 2023	$	300,000	$	136,458	$	1,685,587	$	1,837,164	$	47,351	$	(1,612,494)	$	2,394,066

(in thousands)	(in thousands)	Preferred Stock		Common Stock		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total		(in thousands)	Preferred Stock		Common Stock		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total
Balance at April 1, 2022	Balance at April 1, 2022	$	300,000	$	136,244	$	1,683,578	$	1,590,483	$	71,478	$	(1,590,082)	$	2,191,701	Balance at April 1, 2022	$	300,000	$	136,244	$	1,683,578	$	1,590,483	$	71,478	$	(1,590,082)	$	2,191,701

Net income	Net income	—		—		—		63,295		—		—		63,295		Net income	—		—		—		63,295		—		—		63,295
Other comprehensive income (loss)	Other comprehensive income (loss)	—		—		—		—		(17,251)		—		(17,251)		Other comprehensive income (loss)	—		—		—		—		(17,251)		—		(17,251)

Dividends on common stock ($0.24 per share)	Dividends on common stock ($0.24 per share)	—		—		—		(15,559)		—		—		(15,559)		Dividends on common stock ($0.24 per share)	—		—		—		(15,559)		—		—		(15,559)
Dividends on preferred stock ($12.1875 per share)	Dividends on preferred stock ($12.1875 per share)	—		—		—		(3,656)		—		—		(3,656)		Dividends on preferred stock ($12.1875 per share)	—		—		—		(3,656)		—		—		(3,656)
Proceeds from stock-based awards	Proceeds from stock-based awards	—		6		182		—		—		—		188		Proceeds from stock-based awards	—		6		182		—		—		—		188

Stock-based compensation expense	Stock-based compensation expense	—		11		1,459		—		—		—		1,470		Stock-based compensation expense	—		11		1,459		—		—		—		1,470

Treasury stock acquired	Treasury stock acquired	—		—		—		—		—		(77)		(77)		Treasury stock acquired	—		—		—		—		—		(77)		(77)
Balance at June 30, 2022	Balance at June 30, 2022	$	300,000	$	136,261	$	1,685,219	$	1,634,563	$	54,227	$	(1,590,159)	$	2,220,111	Balance at June 30, 2022	$	300,000	$	136,261	$	1,685,219	$	1,634,563	$	54,227	$	(1,590,159)	$	2,220,111

(in thousands)		Preferred Stock		Common Stock		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total
Balance at April 1, 2021		$	300,000	$	135,980	$	1,675,772	$	1,468,093	$	81,176	$	(1,328,068)	$	2,332,953

Net income		—		—		—		47,422		—		—		47,422
Other comprehensive income (loss)		—		—		—		—		(16,056)		—		(16,056)

Dividends on common stock ($0.23 per share)		—		—		—		(16,518)		—		—		(16,518)
Dividends on preferred stock ($12.1875 per share)		—		—		—		(3,656)		—		—		(3,656)
Proceeds from stock-based awards		—		—		8		—		—		—		8

Stock-based compensation expense		—		7		1,383		—		—		—		1,390

Treasury stock acquired		—		—		—		—		—		(118,303)		(118,303)
Balance at June 30, 2021		$	300,000	$	135,987	$	1,677,163	$	1,495,341	$	65,120	$	(1,446,371)	$	2,227,240

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SEE NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Table of Contents

(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 — — — 162,935 — — 162,935
Other comprehensive income (loss) — — — — (15,558) — (15,558)
Dividends on common stock ($0.71 per share) — — — (46,015) — — (46,015)
Dividends on preferred stock ($36.5625 per share) — — — (10,968) — — (10,968)
Proceeds from stock-based awards — 55 1,494 — — — 1,549
Stock-based compensation expense — 213 5,103 — — — 5,316
Treasury stock acquired — — — — — (3,212) (3,212)
Balance at June 30, 2022 $ 300,000 $ 136,261 $ 1,685,219 $ 1,634,563 $ 54,227 $ (1,590,159) $ 2,220,111
(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 — — — 131,244 — — 131,244
Other comprehensive income (loss) — — — — 48,167 — 48,167
Issuance of preferred stock, net 300,000 — (6,675) — — — 293,325
Dividends on common stock ($0.68 per share) — — — (50,431) — — (50,431)
Dividends on preferred stock ($21.2604 per share) — — — (6,378) — — (6,378)
Proceeds from stock-based awards — 20 319 — — — 339
Stock-based compensation expense — 240 4,676 — — — 4,916
Treasury stock acquired — — — — — (208,075) (208,075)
Balance at June 30, 2021 $ 300,000 $ 135,987 $ 1,677,163 $ 1,495,341 $ 65,120 $ (1,446,371) $ 2,227,240


(in thousands)	Preferred Stock		Common Stock		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total
Balance at October 1, 2022	$	300,000	$	136,271	$	1,686,975	$	1,688,740	$	52,481	$	(1,590,207)	$	2,274,260

Net income	—		—		—		207,218		—		—		207,218
Other comprehensive income (loss)	—		—		—		—		(5,130)		—		(5,130)

Dividends on common stock ($0.74 per share)	—		—		—		(47,826)		—		—		(47,826)
Dividends on preferred stock ($24.3750 per share)	—		—		—		(10,968)		—		—		(10,968)
Proceeds from stock-based awards	—		34		1,005		—		—		—		1,039

Stock-based compensation expense	—		153		(2,393)		—		—		8,163		5,923

Treasury stock acquired	—		—		—		—		—		(30,450)		(30,450)

Balance at June 30, 2023	$	300,000	$	136,458	$	1,685,587	$	1,837,164	$	47,351	$	(1,612,494)	$	2,394,066

(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	—		—		—		162,935		—		—		162,935
Other comprehensive income (loss)	—		—		—		—		(15,558)		—		(15,558)

Dividends on common stock ($0.71 per share)	—		—		—		(46,015)		—		—		(46,015)
Dividends on preferred stock ($24.3750 per share)	—		—		—		(10,968)		—		—		(10,968)
Proceeds from stock-based awards	—		55		1,494		—		—		—		1,549

Stock-based compensation expense	—		213		5,103		—		—		—		5,316

Treasury stock acquired	—		—		—		—		—		(3,212)		(3,212)
Balance at June 30, 2022	$	300,000	$	136,261	$	1,685,219	$	1,634,563	$	54,227	$	(1,590,159)	$	2,220,111

SEE NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


		Nine Months Ended June 30,					Nine Months Ended June 30,
		2022		2021			2023		2022
		(In thousands)					(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES	CASH FLOWS FROM OPERATING ACTIVITIES					CASH FLOWS FROM OPERATING ACTIVITIES
Net income	Net income	$	162,935	$	131,244	Net income	$	207,218	$	162,935
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization, accretion and other, net	Depreciation, amortization, accretion and other, net	47,398		26,329		Depreciation, amortization, accretion and other, net	15,667		47,398

Stock-based compensation expense	Stock-based compensation expense	5,316		4,916		Stock-based compensation expense	5,923		5,316
Provision (release) for credit losses	Provision (release) for credit losses	1,500		1,000		Provision (release) for credit losses	15,000		1,500
Loss (gain) on sale of investment securities	Loss (gain) on sale of investment securities	(81)		—		Loss (gain) on sale of investment securities	(3)		(81)

Gain on bank owned life insurance						Gain on bank owned life insurance	(821)		—
Net realized (gain) loss on sales of premises, equipment, and real estate owned	Net realized (gain) loss on sales of premises, equipment, and real estate owned	(516)		(104)		Net realized (gain) loss on sales of premises, equipment, and real estate owned	(1,033)		(516)
Impairment loss on premises and equipment	Impairment loss on premises and equipment	—		574		Impairment loss on premises and equipment	6		—
Prepayment penalty from repayment of borrowings		—		13,788
Gain on early termination of long term borrowing hedge		—		(14,110)

Decrease (increase) in accrued interest receivable	Decrease (increase) in accrued interest receivable	(5,349)		2,255		Decrease (increase) in accrued interest receivable	(18,059)		(5,349)

Decrease (increase) in federal and state income tax receivable	Decrease (increase) in federal and state income tax receivable	3,877		5,708		Decrease (increase) in federal and state income tax receivable	—		3,877
Decrease (increase) in cash surrender value of bank owned life insurance	Decrease (increase) in cash surrender value of bank owned life insurance	(4,144)		(4,133)		Decrease (increase) in cash surrender value of bank owned life insurance	(4,409)		(4,144)
Decrease (increase) in other assets	Decrease (increase) in other assets	(60,525)		153,610		Decrease (increase) in other assets	(50,642)		(60,525)
Increase (decrease) in federal and state income tax liabilities	Increase (decrease) in federal and state income tax liabilities	8,950		(13,470)		Increase (decrease) in federal and state income tax liabilities	(674)		8,950
Increase (decrease) in accrued expenses and other liabilities	Increase (decrease) in accrued expenses and other liabilities	12,046		(57,910)		Increase (decrease) in accrued expenses and other liabilities	(37,095)		12,046
Net cash provided by (used in) operating activities	Net cash provided by (used in) operating activities	171,407		249,697		Net cash provided by (used in) operating activities	131,078		171,407
CASH FLOWS FROM INVESTING ACTIVITIES	CASH FLOWS FROM INVESTING ACTIVITIES					CASH FLOWS FROM INVESTING ACTIVITIES
Origination of loans and principal repayments, net	Origination of loans and principal repayments, net	(1,186,189)		(266,566)		Origination of loans and principal repayments, net	(1,208,282)		(1,186,189)
Loans purchased	Loans purchased	(576,697)		(412,423)		Loans purchased	(79,965)		(576,697)
FHLB & FRB stock purchased		(170,000)		(244,035)
FHLB stock purchased						FHLB stock purchased	(510,805)		(170,000)
FHLB & FRB stock redeemed	FHLB & FRB stock redeemed	194,790		274,000		FHLB & FRB stock redeemed	475,003		194,790
Available-for-sale securities purchased	Available-for-sale securities purchased	(516,163)		(528,937)		Available-for-sale securities purchased	(317,027)		(516,163)
Principal payments and maturities of available-for-sale securities	Principal payments and maturities of available-for-sale securities	384,111		493,520		Principal payments and maturities of available-for-sale securities	339,604		384,111
Proceeds from sales of available-for-sale securities	Proceeds from sales of available-for-sale securities	4,510		—		Proceeds from sales of available-for-sale securities	94		4,510
Held-to-maturity securities purchased	Held-to-maturity securities purchased	(195,358)		—		Held-to-maturity securities purchased	—		(195,358)
Principal payments and maturities of held-to-maturity securities	Principal payments and maturities of held-to-maturity securities	81,497		283,458		Principal payments and maturities of held-to-maturity securities	28,895		81,497

Proceeds from sales of real estate owned	Proceeds from sales of real estate owned	5,280		2,089		Proceeds from sales of real estate owned	2,715		5,280
Proceeds from settlement of bank owned life insurance						Proceeds from settlement of bank owned life insurance	1,809		—

Equity securities purchased						Equity securities purchased	(7,500)		—

Net cash received (paid) in business combinations						Net cash received (paid) in business combinations	(785)		—
Proceeds from sales of premises and equipment	Proceeds from sales of premises and equipment	41		3,376		Proceeds from sales of premises and equipment	947		41
Premises and equipment purchased and REO improvements	Premises and equipment purchased and REO improvements	(8,712)		(24,758)		Premises and equipment purchased and REO improvements	(11,217)		(8,712)
Net cash provided by (used in) investing activities	Net cash provided by (used in) investing activities	(1,982,890)		(420,276)		Net cash provided by (used in) investing activities	(1,286,514)		(1,982,890)
CASH FLOWS FROM FINANCING ACTIVITIES	CASH FLOWS FROM FINANCING ACTIVITIES					CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in customer accounts	Net increase (decrease) in customer accounts	423,508		1,458,734		Net increase (decrease) in customer accounts	90,854		423,508
Proceeds from borrowings	Proceeds from borrowings	4,250,000		6,100,000		Proceeds from borrowings	13,575,000		4,250,000
Repayments of borrowings	Repayments of borrowings	(4,270,000)		(6,863,788)		Repayments of borrowings	(11,950,000)		(4,270,000)
Proceeds from the early termination of long term borrowing hedge		—		14,110

Proceeds from stock-based awards	Proceeds from stock-based awards	1,548		339		Proceeds from stock-based awards	1,039		1,548
Proceeds from issuance of preferred stock, net		—		293,325

Dividends paid on common stock	Dividends paid on common stock	(46,015)		(50,431)		Dividends paid on common stock	(47,826)		(46,015)
Dividends paid on preferred stock	Dividends paid on preferred stock	(10,969)		(2,722)		Dividends paid on preferred stock	(10,968)		(10,969)

Treasury stock purchased	Treasury stock purchased	(3,212)		(208,075)		Treasury stock purchased	(30,450)		(3,212)
Increase (decrease) in advances payments by borrowers for taxes and insurance		(16,765)		(21,932)
Increase (decrease) in advanced payments by borrowers for taxes and insurance						Increase (decrease) in advanced payments by borrowers for taxes and insurance	(16,535)		(16,765)
Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	328,095		719,560		Net cash provided by (used in) financing activities	1,611,114		328,095
Increase (decrease) in cash and cash equivalents	Increase (decrease) in cash and cash equivalents	(1,483,388)		548,981		Increase (decrease) in cash and cash equivalents	455,678		(1,483,388)
Cash, cash equivalents and restricted cash at beginning of period	Cash, cash equivalents and restricted cash at beginning of period	2,090,809		1,702,977		Cash, cash equivalents and restricted cash at beginning of period	683,965		2,090,809
Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period	$	607,421	$	2,251,958	Cash, cash equivalents and restricted cash at end of period	$	1,139,643	$	607,421

(CONTINUED)

SEE NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


		Nine Months Ended June 30,					Nine Months Ended June 30,
		2022		2021			2023		2022
		(In thousands)					(In thousands)
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION	SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION					SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Non-cash investing activities	Non-cash investing activities					Non-cash investing activities
Real estate acquired through foreclosure	Real estate acquired through foreclosure	$	73	$	175	Real estate acquired through foreclosure	$	121	$	73
Other personal property acquired through foreclosure	Other personal property acquired through foreclosure	422		—		Other personal property acquired through foreclosure	—		422
Non-cash financing activities	Non-cash financing activities					Non-cash financing activities
Preferred stock dividend payable	Preferred stock dividend payable	3,656		3,656		Preferred stock dividend payable	3,655		3,656
Cash paid (received) during the period for	Cash paid (received) during the period for					Cash paid (received) during the period for
Interest	Interest	40,196		57,189		Interest	243,465		40,196
Income taxes	Income taxes	19,257		31,154		Income taxes	47,251		19,257

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, a federally-insured Washington state chartered commercial 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, a Washington state chartered commercial bank. The Company is headquartered in Seattle, Washington. The Bank conducts its activities through a network of ~~209~~199 bank branches located in Washington, Oregon, Idaho, Utah, Arizona, Nevada, New Mexico and Texas.

The Bank completed the conversion of its charter from a national bank charter, supervised by the Office of the Comptroller of the Currency, to a Washington state chartered commercial bank effective February 4, 2022. The Bank cancelled its holdings of stock in the Federal Reserve Bank of San Francisco as part of the conversion and its legal name changed from “Washington Federal Bank, National Association” to “Washington Federal Bank.” As a result of the conversion, the Washington State Department of Financial Institutions (the "WDFI") is the Bank's primary state regulator and the Federal Deposit Insurance Corporation (the "FDIC") is the Bank's primary federal regulator. The Federal Reserve will continue to regulate the Bank's holding company Washington Federal, Inc.

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 ~~2021~~2022 Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on November ~~19, 2021~~18, 2022 ("~~2021~~2022 Annual Financial Statements"). Interim results are not necessarily indicative of results for a full year.

Summary of Significant Accounting Policies - The significant accounting policies used in preparation of the Company's consolidated financial statements are disclosed in its ~~2021~~2022 Annual Financial Statements. There have not been any significant changes in the Company's significant accounting policies compared to those contained in its ~~2021~~2022 Annual Financial Statements for the year ended September 30, ~~2021.~~2022.

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 - The Company is not required to maintain cash reserve balances with the Federal Reserve Bank as of June 30, ~~2022.~~2023. As of June 30, ~~2022~~2023 and September 30, ~~2021,~~2022, the Company held counterparty cash collateral of ~~$219,650,000~~$285,600,000 and ~~pledged cash collateral to counterparties of $1,500,000,~~$284,400,000, respectively, related to derivative contracts.

Equity Securities - The Company records equity securities within Other assets in its Consolidated Statements of Financial Condition. ~~Investments~~These equity investments are accounted for under different methods.

•Low-income housing tax credit investments are accounted for under the proportional amortization method in accordance with Accounting Standards Update (“ASU”) 2014-01, Equity Method and Joint Ventures (Topic 323).

•For other equity ~~securities with readily determinable fair values (marketable) are measured at fair~~investments where the Company has significant influence, the Company applies the equity method of accounting, which adjusts the carrying value ~~with changes in~~of the investment to recognize a proportionate share of the financial results of the investment entity, regardless of whether any distribution is made. Any adjustments to the fair value ~~recognized as a component~~ of these investments are recorded in Other income in the Consolidated Statements of Operations. ~~Investments~~

•For other equity investments where neither ASU 2014-01 nor the equity method of accounting is applicable, the Company applies the fair value adjustment method of ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (Subtopic 825-10). Any adjustments to the fair value of these investments are recorded in ~~equity~~Other income in the Consolidated Statements of Operations. Fair value is determined by reference to readily determinable market values if applicable. Equity investments that do not have readily determinable fair values (non-marketable) are generally accounted for at cost minus impairment, if any, plus or minus changes resulting from ~~observable price changes in orderly transactions for the~~

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

~~identical~~observable transactions involving the same or similar ~~investment of~~investments from the same issuer, also referred to as the measurement alternative. ~~Any adjustments to~~Under the NAV expedient for fair value measurement, equity investments in qualified real estate funds can use the net asset value (“NAV”) determined by the fund as fair value for the investment. At June 30, 2023, equity investments held by the Company and recorded at NAV had a carrying ~~value~~amount of ~~these~~$35,088,000 and a remaining unfunded commitment of $8,273,000. These NAV based investments cannot be transferred without consent and we do not have redemption rights. Equity investments measured at NAV are ~~recorded in Other income~~not classified in the ~~Consolidated Statements of Operations.~~fair value hierarchy.

Allowance for Credit Losses (Loans Receivable) - The Company maintains an allowance for credit losses (“ACL”) for the expected credit losses of the loan portfolio as well as unfunded loan commitments. The amount of ACL is based on ongoing, quarterly assessments by management. The current expected credit losses ("CECL") methodology requires an estimate of the credit losses expected over the life of an exposure (or pool of exposures) ~~and replaces the incurred loss methodology’s threshold that delayed the recognition of a credit loss until it was probable a loss event was incurred.~~.

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

Portfolio segment is defined as the level at which an entity develops and documents a systematic methodology to determine its ACL. The Company has designated two loan portfolio ~~segments,~~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) a reasonable and supportable forecast of future economic conditions and collateral values.

The Company performs a quarterly asset quality review which includes a review of forecasted gross charge-offs and recoveries, nonperforming assets, criticized loans, risk rating migration, delinquencies, etc. The asset quality review is performed by management and the results are used to consider a qualitative overlay to the quantitative baseline. The second qualitative adjustment noted above, economic conditions and collateral values, encompasses a one-year reasonable and supportable

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

forecast period. The overlay adjustment for the reasonable and supportable forecast assumes an immediate reversion after the one-year forecast period to historical loss rates for the remaining life of the respective loan pool.

When management deems it to be appropriate, the Company establishes a specific reserve for individually evaluated loans that do not share similar risk characteristics with the loans included in each respective loan pool. These individually evaluated loans

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~~NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

are removed from their respective pools and typically represent collateral dependent loans but may also include other non-performing loans or troubled debt restructurings (“TDRs”). In addition, the Company individually evaluates “reasonably expected” TDRs, which are identified by the Company as a loan expected to be classified as a TDR within the next six months. Management judgment is utilized to make this determination.

Allowance for Credit Losses (Held-to-Maturity Debt Securities) - For held-to-maturity (“HTM”) debt securities, the Company is required to utilize a CECL methodology to estimate expected credit losses. Substantially all of the Company’s HTM debt securities are issued by U.S. government agencies or U.S. government-sponsored enterprises. These securities carry the explicit and/or implicit guarantee of the U.S. government and have a long history of zero credit loss. See Note F "Fair Value Measurements" for more information about HTM debt securities.

Allowance for Credit Losses (Available-for-Sale Debt Securities) - The impairment model for available-for-sale (“AFS”) debt securities differs from the CECL methodology applied for HTM debt securities because AFS debt securities are measured at fair value rather than amortized cost. 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. Changes in the allowance for credit losses are recorded as a provision for (or ~~release) for~~release of) 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~~The Company made the following elections regarding accrued interest ~~receivable:~~receivable (“AIR”):

•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, except for situations where principal and interest is considered collectible such as a loan with a guarantee. 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

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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,

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~~NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

management will conclude that collection of the entire principal and interest due is still in doubt. In those instances, the loan will remain on non-accrual status.

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

Off-balance-sheet credit exposures - The only material off-balance-sheet credit exposures are unfunded loan commitments, which had a combined balance of ~~$4,973,336,000~~$4,088,046,000 and ~~$3,804,444,000~~$4,947,570,000 at June 30, ~~2022~~2023 and September 30, ~~2021,~~2022, respectively. The reserve for unfunded commitments is recognized as a liability (included as other liabilities in "Accrued expenses and 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.~~ class, adjusted for probability of potential funding. 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 ~~the anticipated transition away from LIBOR~~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.~~held-to-maturity that reference a rate affected by the new guidance. This guidance is effective immediately and the amendments ~~may~~were originally to be applied prospectively through December 31, 2022. However, the FASB issued ASU 2022-06, deferring the sunset date to December 31, 2024. The Company has evaluated the regulatory requirements to cease the use of LIBOR and has put in place systems and capabilities for this purpose. The transition to the Secured Overnight Financing Rate ("SOFR") has been implemented by the Company, but some LIBOR benchmarked transactions have not yet moved to SOFR due to reset dates after July 1, 2023. All activities associated with reference rate reform will be concluded by the end of the fiscal year and within the specified sunset date for the ASU. The adoption of this ASU is not expected to have a material impact on the Company's consolidated financial statements.

In March 2022, the FASB issued ASU 2022-01, Derivatives and Hedging (Topic 815). The amendments in this ASU clarify the guidance on ASC 815 on fair value hedge accounting of interest rate risk for portfolios and financial assets. Among other things, the amended guidance establishes the "last-of-layer" method for making the fair value hedge accounting for these portfolios more accessible and renames that method the "portfolio layer" method. The amendments in this ASU are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. We do not expect the amendments to have a material effect on our consolidated financial statements.

In March 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit Losses (Topic 326). The amendments in this ASU eliminate the guidance on troubled debt restructurings while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors made to borrowers experiencing financial difficulties. The ASU also requires that

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entities disclose current-period gross charge-offs by year of origination for loans and leases. The amendments in this ASU are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. We do not expect the amendments to have a material effect on our consolidated financial statements.

In December of 2022, the SEC adopted amendments to Rule 10b5-1 and implemented new disclosure requirements in Item 408(a) of Regulation S-K. The requirements include quarterly disclosures on Form 10-Q and annual disclosures on Form 10-K about the adoption, termination and material terms of a Rule 10b5-1 trading plan or other preplanned trading arrangement by an issuer's directors or officers. The new requirements became effective for the first full fiscal period that began on or after April 1, 2023. The Company has currently has no Rule 10b5-1 plans in place but is evaluating the impact of these amendments and will apply as applicable.

In March 2023, the FASB issued ASU 2023-02, Investments - Equity Method and Joint Ventures (Topic 323). The amendments in this ASU expand the population of tax credit investments for which an investor may elect to apply the proportional amortization method ("PAM") and require certain disclosures for tax credit investments. The amendments in this ASU are effective for fiscal years beginning after December 15, 2023, with early adoption permitted. The Company has utilized PAM for low income housing tax credit investments. We do not expect this ASU to have a material effect on our consolidated financial statements.

In May of 2023, the SEC adopted amendments to modernize the disclosure requirement relating to repurchases of an issuer's equity securities, including requiring issuers to provide daily repurchase activity on a quarterly or semi-annual basis, depending on type of issuer. The amendments will require issuers to disclose daily repurchase activity quarterly or semiannually, indicate if certain directors or officers traded in the relevant securities within four business days before or after the public announcement of an issuer's repurchase plan or program, provide narrative disclosure about the issuer's repurchase programs and practices in its periodic reports, and provide quarterly disclosure in an issuer's periodic reports on Forms 10-K and 10-Q related to an issuer's adoption and termination of 10b5-1 trading arrangements. Issuers are required to comply with these amendments on their Forms 10-Q and 10-K beginning with the first filing that covers the first full fiscal quarter that begins on or after October 1, 2023. The Company is currently evaluating the impact of these amendments and will apply as applicable.

NOTE C – Dividends and Share Repurchases

On June ~~3, 2022,~~2, 2023, the Company paid a regular dividend on common stock of ~~$0.24~~$0.25 per share, which represented the ~~157~~161thst consecutive quarterly cash dividend. Dividends per share were ~~$0.24~~$0.25 and ~~$0.23~~$0.24 for the quarters ended June 30, 2023 and 2022, ~~and 2021,~~ respectively.

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~~NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

For the three months ended June 30, ~~2022,~~2023, the Company repurchased ~~2,446~~1,116,649 shares ~~(related to tax withholding on employee equity awards)~~ at an average price of ~~$31.36.~~$25.62. As of June 30, ~~2022,~~2023, there are ~~3,725,874~~2,559,611 remaining shares authorized to be repurchased under the current Board approved share repurchase program.

The Company pays a cash dividend, if declared by the Board, of $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 July 15, ~~2022.~~2023.

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.

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

June 30, 2022 September 30, 2021
(In thousands) (In thousands)
Commercial loans
Multi-family $ 2,494,594 13.2 % $ 2,291,477 14.0 %
Commercial real estate 2,899,057 15.3 2,443,845 15.0
Commercial & industrial (1) 2,351,030 12.4 2,314,654 14.2
Construction 3,896,740 20.6 2,888,214 17.7
Land - acquisition & development 245,233 1.3 222,457 1.4
Total commercial loans 11,886,654 62.9 10,160,647 62.3
Consumer loans
Single-family residential 5,652,897 29.9 4,951,627 30.4
Construction - custom 943,858 5.0 783,221 4.8
   Land - consumer lot loans 158,485 0.8 149,956 0.9
   HELOC 185,427 1.0 165,989 1.0
   Consumer 73,044 0.4 87,892 0.5
Total consumer loans 7,013,711 37.1 6,138,685 37.7
Total gross loans 18,900,365 100 % 16,299,332 100 %
   Less:
      Allowance for credit losses on loans 170,979 171,300
      Loans in process 3,083,573 2,232,836
      Net deferred fees, costs and discounts 80,648 61,626
Total loan contra accounts 3,335,200 2,465,762
Net loans $ 15,565,165 $ 13,833,570

~~(1) Includes $55 million and $312 million of Small Business Administration’s Paycheck Protection Program ("PPP") loans as of June 30, 2022 and September 30, 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 June 30, 2022, and September 30, 2021, AIR for loans

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


	June 30, 2023				September 30, 2022
	(In thousands)				(In thousands)
Commercial loans
Multi-family	$	2,889,635	14.5	%	$	2,645,801	13.7	%
Commercial real estate	3,239,387		16.3		3,133,660		16.2
Commercial & industrial	2,496,778		12.5		2,350,984		12.1
Construction	3,578,430		18.0		3,784,388		19.5
Land - acquisition & development	216,185		1.1		291,301		1.5
Total commercial loans	12,420,415		62.3		12,206,134		63.0
Consumer loans
Single-family residential	6,313,561		31.7		5,771,862		29.8
Construction - custom	757,171		3.8		974,652		5.0
Land - consumer lot loans	134,967		0.7		153,240		0.8
HELOC	224,917		1.1		203,528		1.0
Consumer	76,813		0.4		75,543		0.4
Total consumer loans	7,507,429		37.7		7,178,825		37.0
Total gross loans	19,927,844		100	%	19,384,959		100	%
Less:
Allowance for credit losses on loans	178,069				172,808
Loans in process	2,270,038				3,006,023
Net deferred fees, costs and discounts	95,549				92,564
Total loan contra accounts	2,543,656				3,271,395
Net loans	$	17,384,188			$	16,113,564

The Company elected to exclude accrued interest receivable from the amortized cost basis of loans for disclosure purposes and from the calculations of estimated credit losses. As of June 30, 2023, and September 30, 2022, AIR for loans totaled ~~$49,263,000~~$73,192,000 and ~~$46,234,000,~~$57,070,000, respectively, and is included in the Interest receivable line item balance on the Company’s consolidated statements of financial condition.

Loans in the amount of ~~$7,841,568,000~~$8,963,870,000 and ~~$5,930,015,000~~$8,224,951,000 at June 30, ~~2022~~2023 and September 30, ~~2021,~~2022, 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.

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


		June 30, 2022							September 30, 2021								June 30, 2023							September 30, 2022
		(In thousands, except ratio data)															(In thousands, except ratio data)
		Non-accrual			Non-accrual with no ACL (2)		90 days or more past due and accruing (1)		Non-accrual			Non-accrual with no ACL		90 days or more past due and accruing			Non-accrual			Non-accrual with no ACL (1)		90 days or more past due and accruing		Non-accrual			Non-accrual with no ACL (1)		90 days or more past due and accruing
Commercial loans	Commercial loans															Commercial loans
Multi-family	Multi-family	$	5,944		$	—	$	—	$	475		$	—	$	—	Multi-family	$	5,951		$	—	$	—	$	5,912		$	—	$	—
Commercial real estate	Commercial real estate	5,024			—		—		8,038			—		—		Commercial real estate	1,087			—		—		4,691			—		—
Commercial & industrial	Commercial & industrial	4,288			754		11,439		365			30		—		Commercial & industrial	31,686			—		23		5,693			1,308		—
Construction	Construction	—			—		—		505			—		—		Construction	—			—		—		—			—		—
Land - acquisition & development	Land - acquisition & development	—			—		—		2,340			—		—		Land - acquisition & development	—			—		—		—			—		—
Total commercial loans	Total commercial loans	15,256			754		11,439		11,723			30		—		Total commercial loans	38,724			—		23		16,296			1,308		—
Consumer loans	Consumer loans															Consumer loans
Single-family residential	Single-family residential	20,184			—		—		19,320			—		—		Single-family residential	15,510			—		—		17,450			—		—
Construction - custom	Construction - custom	900			—		—		—			—		—		Construction - custom	87			—		—		435			—		—
Land - consumer lot loans	Land - consumer lot loans	213			—		—		359			—		—		Land - consumer lot loans	122			—		—		84			—		—
HELOC	HELOC	91			—		—		287			—		—		HELOC	801			—		—		233			—		—
Consumer	Consumer	35			—		—		60			—		—		Consumer	32			—		2		36			—		—
Total consumer loans	Total consumer loans	21,423			—		—		20,026			—		—		Total consumer loans	16,552			—		2		18,238			—		—
Total non-accrual loans	Total non-accrual loans	$	36,679		$	754	$	11,439	$	31,749		$	30	$	—	Total non-accrual loans	$	55,276		$	—	$	25	$	34,534		$	1,308	$	—
% of total loans	% of total loans	0.23		%					0.23		%					% of total loans	0.31		%					0.21		%

(1) ~~$10 million of this amount is comprised of one government guaranteed SBA PPP loan for which the entire balance was forgiven by the SBA subsequent to the June 30, 2022 quarter end.~~

~~(2)~~ Amounts in the ~~'Non-Accrual~~'Non-accrual with no ACL' column are a subset of the amounts in the 'Non-accrual' column

The Company recognized interest income on non-accrual loans of approximately ~~$2,544,000~~$2,079,000 in the nine months ended June 30, ~~2022.~~2023. 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 ~~$969,000~~$1,372,000 for the nine months ended June 30, ~~2022.~~2023. Recognized interest income for the nine months ended June 30, ~~2022~~2023 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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(UNAUDITED)

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

June 30, 2022 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 $ 2,478,932 $ 2,478,932 $ — $ — $ — $ — — %
Commercial real estate 2,876,995 2,876,644 — — 351 351 0.01
Commercial & industrial (1) 2,344,046 2,327,625 369 359 15,693 16,421 0.70
Construction 1,407,211 1,407,211 — — — — —
Land - acquisition & development 222,974 222,974 — — — — —
Total commercial loans 9,330,158 9,313,386 369 359 16,044 16,772 0.18
Consumer Loans
Single-family residential 5,619,448 5,597,259 4,611 1,533 16,045 22,189 0.39
Construction - custom 368,839 367,939 — — 900 900 0.24
Land - consumer lot loans 157,076 156,693 206 — 177 383 0.24
HELOC 187,469 187,267 103 16 83 202 0.11
Consumer 73,154 72,902 130 63 59 252 0.34
Total consumer loans 6,405,986 6,382,060 5,050 1,612 17,264 23,926 0.37
Total Loans $ 15,736,144 $ 15,695,446 $ 5,419 $ 1,971 $ 33,308 $ 40,698 0.26 %
Delinquency % 99.74% 0.03% 0.01% 0.21% 0.26%

(1) $10 million of the 90 days past due amount for this loan class is comprised of one government guaranteed SBA PPP loan for which the entire balance was forgiven by the SBA subsequent to the June 30, 2022 quarter end.


June 30, 2023			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	$	2,858,433	$	2,857,937	$	364	$	—	$	132	$	496	0.02	%
Commercial real estate	3,218,451		3,218,451		—		—		—		—		—
Commercial & industrial	2,490,740		2,458,189		342		506		31,703		32,551		1.31
Construction	1,759,434		1,759,434		—		—		—		—		—
Land - acquisition & development	161,658		161,658		—		—		—		—		—
Total commercial loans	10,488,716		10,455,669		706		506		31,835		33,047		0.32
Consumer Loans
Single-family residential	6,258,592		6,239,506		4,488		2,423		12,175		19,086		0.30
Construction - custom	376,045		375,334		623		—		88		711		0.19
Land - consumer lot loans	133,994		133,730		23		122		119		264		0.20
HELOC	228,132		226,684		681		24		743		1,448		0.63
Consumer	76,778		76,238		376		—		164		540		0.70
Total consumer loans	7,073,541		7,051,492		6,191		2,569		13,289		22,049		0.31
Total Loans	$	17,562,257	$	17,507,161	$	6,897	$	3,075	$	45,124	$	55,096	0.31	%
Delinquency %			99.69%		0.04%		0.02%		0.26%		0.31%

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%


September 30, 2022			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	$	2,626,479	$	2,626,479	$	—	$	—	$	—	$	—	—	%
Commercial real estate	3,111,112		3,110,056		538		450		68		1,056		0.03
Commercial & industrial	2,343,403		2,336,791		—		919		5,693		6,612		0.28
Construction	1,423,891		1,423,891		—		—				—		—
Land - acquisition & development	223,616		223,616		—		—		—		—		—
Total commercial loans	9,728,501		9,720,833		538		1,369		5,761		7,668		0.08
Consumer Loans
Single-family residential	5,726,979		5,708,996		2,796		1,316		13,871		17,983		0.31
Construction - custom	397,343		396,908		—		—		435		435		0.11
Land - consumer lot loans	151,945		151,746		—		139		60		199		0.13
HELOC	206,033		205,605		155		46		227		428		0.21
Consumer	75,571		75,357		162		17		35		214		0.28
Total consumer loans	6,557,871		6,538,612		3,113		1,518		14,628		19,259		0.29
Total Loans	$	16,286,372	$	16,259,445	$	3,651	$	2,887	$	20,389	$	26,927	0.17	%
Delinquency %			99.83%		0.02%		0.02%		0.13%		0.17%

1617

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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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 months. Interest-only payments may also be approved during the modification period. Principal forgiveness is not an available option for restructured loans. As of June 30, ~~2022, 97.6%~~2023, 98.6% of the Company's ~~$58,896,000~~$49,307,000 in TDRs were classified as performing. As of June 30, ~~2022,~~2023, single-family residential loans comprised ~~82.7%~~81.3% of TDRs.

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~~effected 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.

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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The following tables present by primary credit quality indicator, loan class, and year of origination, the amortized cost basis of loans receivable as of June 30, 2023 and September 30, 2022.


		Term Loans Amortized Cost Basis by Origination Year
June 30, 2023																				June 30, 2023	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			YTD 2023		2022		2021		2020		2019		Prior to 2019		Revolving Loans		Revolving to Term Loans		Total Loans
Commercial loans	Commercial loans																			Commercial loans
Multi-family	Multi-family																			Multi-family
Pass	Pass	$	584,451	$	717,886	$	463,720	$	140,499	$	162,319	$	373,585	$	26,562	$	—	$	2,469,022	Pass	$	130,850	$	653,216	$	778,677	$	567,639	$	149,644	$	419,753	$	49,512	$	—	$	2,749,291

Special Mention																				Special Mention	—		90,187		—		—		—		—		—		—		90,187
Substandard	Substandard	—		—		1,738		—		6,592		1,580		—		—		9,910		Substandard	—		5,736		2,319		4,137		—		6,763		—		—		18,955

Total	Total	$	584,451	$	717,886	$	465,458	$	140,499	$	168,911	$	375,165	$	26,562	$	—	$	2,478,932	Total	$	130,850	$	749,139	$	780,996	$	571,776	$	149,644	$	426,516	$	49,512	$	—	$	2,858,433

Commercial real estate	Commercial real estate																			Commercial real estate
Pass	Pass	$	605,412	$	678,619	$	432,194	$	273,116	$	243,378	$	549,589	$	2,942	$	—	$	2,785,250	Pass	$	175,648	$	840,908	$	720,872	$	458,063	$	279,974	$	636,672	$	2,380	$	—	$	3,114,517

Special Mention																				Special Mention	—		—		—		—		4,089		19,149		—		—		23,238
Substandard	Substandard	262		—		5,119		66,309		4,895		14,080		1,080		—		91,745		Substandard	500		5,428		3,810		24,552		27,966		18,141		299		—		80,696

Total	Total	$	605,674	$	678,619	$	437,313	$	339,425	$	248,273	$	563,669	$	4,022	$	—	$	2,876,995	Total	$	176,148	$	846,336	$	724,682	$	482,615	$	312,029	$	673,962	$	2,679	$	—	$	3,218,451

Commercial & industrial	Commercial & industrial																			Commercial & industrial
Pass	Pass	$	197,991	$	476,441	$	152,423	$	43,441	$	25,837	$	233,135	$	1,068,341	$	217	$	2,197,826	Pass	$	147,705	$	258,924	$	331,317	$	121,989	$	26,406	$	202,496	$	1,218,139	$	22,699	$	2,329,675
Special Mention	Special Mention	2,506		—		—		—		—		—		30,283		—		32,789		Special Mention	—		—		—		—		3,066		—		3,749		—		6,815
Substandard	Substandard	2,045		12,935		19,866		5,603		4,388		1,983		66,611		—		113,431		Substandard	548		14,210		11,601		3,107		4,112		24,850		95,822		—		154,250

Total	Total	$	202,542	$	489,376	$	172,289	$	49,044	$	30,225	$	235,118	$	1,165,235	$	217	$	2,344,046	Total	$	148,253	$	273,134	$	342,918	$	125,096	$	33,584	$	227,346	$	1,317,710	$	22,699	$	2,490,740

Construction	Construction																			Construction
Pass	Pass	$	381,073	$	623,971	$	252,391	$	70,014	$	374	$	16,316	$	60,816	$	—	$	1,404,955	Pass	$	147,717	$	781,322	$	609,555	$	83,356	$	43,964	$	375	$	65,848	$	—	$	1,732,137

Special Mention																				Special Mention	1,709		3,030		—		—		—		—		—		—		4,739
Substandard	Substandard	—		2,256		—		—		—		—		—		—		2,256		Substandard	2,608		7,680		12,270		—		—		—		—		—		22,558

Total	Total	$	381,073	$	626,227	$	252,391	$	70,014	$	374	$	16,316	$	60,816	$	—	$	1,407,211	Total	$	152,034	$	792,032	$	621,825	$	83,356	$	43,964	$	375	$	65,848	$	—	$	1,759,434

Land - acquisition & development	Land - acquisition & development																			Land - acquisition & development
Pass	Pass	$	83,037	$	73,788	$	20,398	$	4,126	$	10,444	$	28,581	$	2,600	$	—	$	222,974	Pass	$	19,196	$	70,336	$	41,309	$	9,117	$	354	$	18,476	$	2,600	$	—	$	161,388

Substandard																				Substandard	—		270		—		—		—		—		—		—		270

Total	Total	$	83,037	$	73,788	$	20,398	$	4,126	$	10,444	$	28,581	$	2,600	$	—	$	222,974	Total	$	19,196	$	70,606	$	41,309	$	9,117	$	354	$	18,476	$	2,600	$	—	$	161,658

Total commercial loans	Total commercial loans																			Total commercial loans
Pass	Pass	$	1,851,964	$	2,570,705	$	1,321,126	$	531,196	$	442,352	$	1,201,206	$	1,161,261	$	217	$	9,080,027	Pass	$	621,116	$	2,604,706	$	2,481,730	$	1,240,164	$	500,342	$	1,277,772	$	1,338,479	$	22,699	$	10,087,008
Special Mention	Special Mention	2,506		—		—		—		—		—		30,283		—		32,789		Special Mention	1,709		93,217		—		—		7,155		19,149		3,749		—		124,979
Substandard	Substandard	2,307		15,191		26,723		71,912		15,875		17,643		67,691		—		217,342		Substandard	3,656		33,324		30,000		31,796		32,078		49,754		96,121		—		276,729

Total	Total	$	1,856,777	$	2,585,896	$	1,347,849	$	603,108	$	458,227	$	1,218,849	$	1,259,235	$	217	$	9,330,158	Total	$	626,481	$	2,731,247	$	2,511,730	$	1,271,960	$	539,575	$	1,346,675	$	1,438,349	$	22,699	$	10,488,716

1819

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


		Term Loans Amortized Cost Basis by Origination Year
June 30, 2023																				June 30, 2023	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			YTD 2023		2022		2021		2020		2019		Prior to 2019		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	$	1,008,103	$	1,566,179	$	780,090	$	331,798	$	286,311	$	1,624,778	$	—	$	—	$	5,597,259	Current	$	409,516	$	1,368,615	$	1,738,310	$	733,690	$	302,013	$	1,687,362	$	—	$	—	$	6,239,506
30 days past due	30 days past due	2,601		—		—		78		—		1,932		—		—		4,611		30 days past due	—		—		351		456		—		3,681		—		—		4,488
60 days past due	60 days past due	—		—		696		59		—		778		—		—		1,533		60 days past due	—		—		—		675		159		1,589		—		—		2,423
90+ days past due	90+ days past due	—		775		—		699		57		14,514		—		—		16,045		90+ days past due	—		198		669		738		686		9,884		—		—		12,175

Total	Total	$	1,010,704	$	1,566,954	$	780,786	$	332,634	$	286,368	$	1,642,002	$	—	$	—	$	5,619,448	Total	$	409,516	$	1,368,813	$	1,739,330	$	735,559	$	302,858	$	1,702,516	$	—	$	—	$	6,258,592

Construction - custom	Construction - custom																			Construction - custom
Current	Current	$	125,662	$	223,181	$	17,212	$	1,154	$	730	$	—	$	—	$	—	$	367,939	Current	$	50,392	$	304,173	$	16,740	$	3,192	$	358	$	479	$	—	$	—	$	375,334

30 days past due																				30 days past due	—		623		—		—		—		—		—		—		623

90+ days past due	90+ days past due	—		435		465		—		—		—		—		—		900		90+ days past due	—		88		—		—		—		—		—		—		88

Total	Total	$	125,662	$	223,616	$	17,677	$	1,154	$	730	$	—	$	—	$	—	$	368,839	Total	$	50,392	$	304,884	$	16,740	$	3,192	$	358	$	479	$	—	$	—	$	376,045

Land - consumer lot loans	Land - consumer lot loans																			Land - consumer lot loans
Current	Current	$	49,972	$	65,286	$	18,076	$	5,825	$	3,464	$	14,070	$	—	$	—	$	156,693	Current	$	14,991	$	45,536	$	42,602	$	12,522	$	4,345	$	13,734	$	—	$	—	$	133,730
30 days past due	30 days past due	—		—		206		—		—		—		—		—		206		30 days past due	—		—		—		—		—		23		—		—		23

60 days past due																				60 days past due	—		—		—		114		—		8		—		—		122
90+ days past due	90+ days past due	—		—		—		—		—		177		—		—		177		90+ days past due	—		—		119		—		—		—		—		—		119

Total	Total	$	49,972	$	65,286	$	18,282	$	5,825	$	3,464	$	14,247	$	—	$	—	$	157,076	Total	$	14,991	$	45,536	$	42,721	$	12,636	$	4,345	$	13,765	$	—	$	—	$	133,994

HELOC	HELOC																			HELOC
Current	Current	$	—	$	—	$	—	$	—	$	—	$	4,794	$	182,091	$	382	$	187,267	Current	$	—	$	—	$	—	$	—	$	—	$	4,298	$	221,068	$	1,318	$	226,684
30 days past due	30 days past due	—		—		—		—		—		—		103		—		103		30 days past due	—		—		—		—		—		163		518		—		681
60 days past due	60 days past due	—		—		—		—		—		—		7		9		16		60 days past due	—		—		—		—		—		—		24		—		24
90+ days past due	90+ days past due	—		—		—		—		—		—		83		—		83		90+ days past due	—		—		—		—		—		—		743		—		743

Total	Total	$	—	$	—	$	—	$	—	$	—	$	4,794	$	182,284	$	391	$	187,469	Total	$	—	$	—	$	—	$	—	$	—	$	4,461	$	222,353	$	1,318	$	228,132

Consumer	Consumer																			Consumer
Current	Current	$	647	$	10,251	$	8,049	$	299	$	25,482	$	7,128	$	21,046	$	—	$	72,902	Current	$	3,057	$	128	$	9,826	$	8,008	$	16	$	24,795	$	30,408	$	—	$	76,238
30 days past due	30 days past due	—		—		—		5		—		123		2		—		130		30 days past due	—		—		—		—		—		366		10		—		376
60 days past due		—		—		—		—		—		63		—		—		63

90+ days past due	90+ days past due	1		—		—		33		—		25		—		—		59		90+ days past due	—		—		—		—		30		134		—		—		164

Total	Total	$	648	$	10,251	$	8,049	$	337	$	25,482	$	7,339	$	21,048	$	—	$	73,154	Total	$	3,057	$	128	$	9,826	$	8,008	$	46	$	25,295	$	30,418	$	—	$	76,778

Total consumer loans	Total consumer loans																			Total consumer loans
Current	Current	$	1,184,384	$	1,864,897	$	823,427	$	339,076	$	315,987	$	1,650,770	$	203,137	$	382	$	6,382,060	Current	$	477,956	$	1,718,452	$	1,807,478	$	757,412	$	306,732	$	1,730,668	$	251,476	$	1,318	$	7,051,492
30 days past due	30 days past due	2,601		—		206		83		—		2,055		105		—		5,050		30 days past due	—		623		351		456		—		4,233		528		—		6,191
60 days past due	60 days past due	—		—		696		59		—		841		7		9		1,612		60 days past due	—		—		—		789		159		1,597		24		—		2,569
90+ days past due	90+ days past due	1		1,210		465		732		57		14,716		83		—		17,264		90+ days past due	—		286		788		738		716		10,018		743		—		13,289

Total	Total	$	1,186,986	$	1,866,107	$	824,794	$	339,950	$	316,044	$	1,668,382	$	203,332	$	391	$	6,405,986	Total	$	477,956	$	1,719,361	$	1,808,617	$	759,395	$	307,607	$	1,746,516	$	252,771	$	1,318	$	7,073,541

1920

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


September 30, 2022	Term Loans Amortized Cost Basis by Origination Year
	2022		2021		2020		2019		2018		Prior to 2018		Revolving Loans		Revolving to Term Loans		Total Loans
Commercial loans
Multi-family
Pass	$	657,144	$	778,936	$	500,917	$	168,568	$	157,144	$	315,858	$	34,102	$	—	$	2,612,669

Substandard	3,951		—		1,729		—		6,560		1,570		—		—		13,810



Total	$	661,095	$	778,936	$	502,646	$	168,568	$	163,704	$	317,428	$	34,102	$	—	$	2,626,479

Commercial real estate
Pass	$	820,490	$	679,321	$	492,826	$	301,033	$	218,171	$	541,008	$	1,391	$	—	$	3,054,240
Special Mention	—		1,594		—		—		—		—		—		—		1,594
Substandard	259		—		6,074		30,579		4,857		10,923		2,586		—		55,278



Total	$	820,749	$	680,915	$	498,900	$	331,612	$	223,028	$	551,931	$	3,977	$	—	$	3,111,112

Commercial & industrial
Pass	$	254,668	$	435,630	$	145,799	$	39,102	$	25,709	$	197,909	$	1,097,696	$	255	$	2,196,768
Special Mention	2,503		—		—		—		—		—		29,153		—		31,656
Substandard	2,021		12,639		9,803		5,029		1,213		25,519		58,755		—		114,979



Total	$	259,192	$	448,269	$	155,602	$	44,131	$	26,922	$	223,428	$	1,185,604	$	255	$	2,343,403

Construction
Pass	$	510,764	$	671,611	$	142,816	$	27,260	$	375	$	—	$	68,808	$	—	$	1,421,634

Substandard	—		2,257		—		—		—		—		—		—		2,257



Total	$	510,764	$	673,868	$	142,816	$	27,260	$	375	$	—	$	68,808	$	—	$	1,423,891

Land - acquisition & development
Pass	$	100,022	$	64,539	$	16,934	$	3,391	$	8,175	$	27,955	$	2,600	$	—	$	223,616





Total	$	100,022	$	64,539	$	16,934	$	3,391	$	8,175	$	27,955	$	2,600	$	—	$	223,616

Total commercial loans
Pass	$	2,343,088	$	2,630,037	$	1,299,292	$	539,354	$	409,574	$	1,082,730	$	1,204,597	$	255	$	9,508,927
Special Mention	2,503		1,594		—		—		—		—		29,153		—		33,250
Substandard	6,231		14,896		17,606		35,608		12,630		38,012		61,341		—		186,324



Total	$	2,351,822	$	2,646,527	$	1,316,898	$	574,962	$	422,204	$	1,120,742	$	1,295,091	$	255	$	9,728,501

Table of Contents

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


September 30, 2022	Term Loans Amortized Cost Basis by Origination Year
	2022		2021		2020		2019		2018		Prior to 2018		Revolving Loans		Revolving to Term Loans		Total Loans
Consumer loans
Single-family residential
Current	$	1,131,152	$	1,652,242	$	771,769	$	320,546	$	276,093	$	1,557,194	$	—	$	—	$	5,708,996
30 days past due	—		—		400		604		—		1,792		—		—		2,796
60 days past due	—		—		—		—		—		1,316		—		—		1,316
90+ days past due	—		—		—		477		—		13,394		—		—		13,871

Total	$	1,131,152	$	1,652,242	$	772,169	$	321,627	$	276,093	$	1,573,696	$	—	$	—	$	5,726,979

Construction - custom
Current	$	235,030	$	150,434	$	9,811	$	1,155	$	478	$	—	$	—	$	—	$	396,908


90+ days past due	—		435		—		—		—		—		—		—		435

Total	$	235,030	$	150,869	$	9,811	$	1,155	$	478	$	—	$	—	$	—	$	397,343

Land - consumer lot loans
Current	$	53,396	$	60,454	$	15,876	$	5,399	$	3,433	$	13,188	$	—	$	—	$	151,746

60 days past due	—		—		139		—		—		—		—		—		139
90+ days past due	—		—		—		—		—		60		—		—		60

Total	$	53,396	$	60,454	$	16,015	$	5,399	$	3,433	$	13,248	$	—	$	—	$	151,945

HELOC
Current	$	—	$	—	$	—	$	—	$	—	$	4,349	$	200,267	$	989	$	205,605
30 days past due	—		—		—		—		—		95		60		—		155
60 days past due	—		—		—		—		—		29		17		—		46
90+ days past due	—		—		—		—		—		—		227		—		227

Total	$	—	$	—	$	—	$	—	$	—	$	4,473	$	200,571	$	989	$	206,033

Consumer
Current	$	1,386	$	10,156	$	8,038	$	215	$	23,919	$	6,449	$	25,194	$	—	$	75,357
30 days past due	—		—		—		2		—		153		7		—		162
60 days past due	—		—		—		—		—		17		—		—		17
90+ days past due	1		—		—		32		—		2		—		—		35

Total	$	1,387	$	10,156	$	8,038	$	249	$	23,919	$	6,621	$	25,201	$	—	$	75,571

Total consumer loans
Current	$	1,420,964	$	1,873,286	$	805,494	$	327,315	$	303,923	$	1,581,180	$	225,461	$	989	$	6,538,612
30 days past due	—		—		400		606		—		2,040		67		—		3,113
60 days past due	—		—		139		—		—		1,362		17		—		1,518
90+ days past due	1		435		—		509		—		13,456		227		—		14,628

Total	$	1,420,965	$	1,873,721	$	806,033	$	328,430	$	303,923	$	1,598,038	$	225,772	$	989	$	6,557,871

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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 June 30, 2022		Beginning Allowance		Charge-offs		Recoveries		Provision & Transfers (1)		Ending Allowance
Three Months Ended June 30, 2023												Three Months Ended June 30, 2023	Beginning Allowance		Charge-offs		Recoveries		Provision & Transfers (1)		Ending Allowance
		(In thousands)											(In thousands)
Commercial loans	Commercial loans											Commercial loans
Multi-family	Multi-family	$	14,463	$	—	$	—	$	(1,889)	$	12,574	Multi-family	$	13,038	$	—	$	—	$	(62)	$	12,976
Commercial real estate	Commercial real estate	24,682		—		23		595		25,300		Commercial real estate	27,803		—		—		329		28,132
Commercial & industrial	Commercial & industrial	53,903		(27)		8		1,040		54,924		Commercial & industrial	63,301		(10,469)		10		9,073		61,915
Construction	Construction	22,707		—		—		3,127		25,834		Construction	26,027		—		—		1,889		27,916
Land - acquisition & development	Land - acquisition & development	13,685		(1)		11		(1,468)		12,227		Land - acquisition & development	7,496		—		24		(274)		7,246
Total commercial loans	Total commercial loans	129,440		(28)		42		1,405		130,859		Total commercial loans	137,665		(10,469)		34		10,955		138,185
Consumer loans	Consumer loans											Consumer loans
Single-family residential	Single-family residential	28,992		—		252		(3,027)		26,217		Single-family residential	26,916		—		18		149		27,083
Construction - custom	Construction - custom	3,129		—		—		225		3,354		Construction - custom	3,456		—		—		(235)		3,221
Land - consumer lot loans	Land - consumer lot loans	5,105		—		2		113		5,220		Land - consumer lot loans	3,945		—		9		(184)		3,770
HELOC	HELOC	2,475		—		249		(92)		2,632		HELOC	2,662		—		—		81		2,743
Consumer	Consumer	2,243		(253)		331		376		2,697		Consumer	2,776		(74)		131		234		3,067
Total consumer loans	Total consumer loans	41,944		(253)		834		(2,405)		40,120		Total consumer loans	39,755		(74)		158		45		39,884
Total loans	Total loans	$	171,384	$	(281)	$	876	$	(1,000)	$	170,979	Total loans	$	177,420	$	(10,543)	$	192	$	11,000	$	178,069

(1) Provision & transfer amounts within the table do not include the recapture of provision for unfunded commitments of ~~$2.5~~$2.0 million.

Three Months Ended June 30, 2021 Beginning Allowance Charge-offs Recoveries
Provision &
Transfers (1)
Ending Allowance
(In thousands)
Commercial loans
   Multi-family $ 17,776 $ — $ — $ (108) $ 17,668
   Commercial real estate 26,822 — 485 (3,422) 23,885
   Commercial & industrial 47,794 (11) 13 (2,258) 45,538
   Construction 22,549 — — 2,274 24,823
   Land - acquisition & development 10,503 — 9 1,093 11,605
      Total commercial loans 125,444 (11) 507 (2,421) 123,519
Consumer loans
   Single-family residential 35,108 — 324 (1,242) 34,190
   Construction - custom 3,248 — — 274 3,522
   Land - consumer lot loans 3,292 — 7 412 3,711
   HELOC 2,226 — 51 (64) 2,213
   Consumer 3,335 (36) 289 41 3,629
      Total consumer loans 47,209 (36) 671 (579) 47,265
Total loans $ 172,653 $ (47) $ 1,178 $ (3,000) $ 170,784

~~(1) Provision & transfer amounts within~~ The total provision recognized for the ~~table do not include the provision for unfunded commitments of $1.0~~three months ended June 30, 2023 was $9.0 million.

2023

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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


Three Months Ended June 30, 2022	Beginning Allowance		Charge-offs		Recoveries		Provision & Transfers (1)		Ending Allowance
	(In thousands)
Commercial loans
Multi-family	$	14,463	$	—	$	—	$	(1,889)	$	12,574
Commercial real estate	24,682		—		23		595		25,300
Commercial & industrial	53,903		(27)		8		1,040		54,924
Construction	22,707		—		—		3,127		25,834
Land - acquisition & development	13,685		(1)		11		(1,468)		12,227
Total commercial loans	129,440		(28)		42		1,405		130,859
Consumer loans
Single-family residential	28,992		—		252		(3,027)		26,217
Construction - custom	3,129		—		—		225		3,354
Land - consumer lot loans	5,105		—		2		113		5,220
HELOC	2,475		—		249		(92)		2,632
Consumer	2,243		(253)		331		376		2,697
Total consumer loans	41,944		(253)		834		(2,405)		40,120
Total loans	$	171,384	$	(281)	$	876	$	(1,000)	$	170,979

(1) Provision & transfer amounts within the table do not include the provision for unfunded commitments of $2.5 million. The total provision recognized for the three months ended June 30, 2022 was $1.5 million.


Nine Months Ended June 30, 2023	Beginning Allowance		Charge-offs		Recoveries		Provision & Transfers (1)		Ending Allowance
	(In thousands)
Commercial loans
Multi-family	$	12,013	$	—	$	—	$	963	$	12,976
Commercial real estate	25,814		—		5		2,313		28,132
Commercial & industrial	57,210		(16,605)		84		21,226		61,915
Construction	26,161		—		—		1,755		27,916
Land - acquisition & development	12,278		—		54		(5,086)		7,246
Total commercial loans	133,476		(16,605)		143		21,171		138,185
Consumer loans
Single-family residential	25,518		(34)		552		1,047		27,083
Construction - custom	3,410		—		—		(189)		3,221
Land - consumer lot loans	5,047		—		14		(1,291)		3,770
HELOC	2,482		—		1		260		2,743
Consumer	2,875		(258)		448		2		3,067
Total consumer loans	39,332		(292)		1,015		(171)		39,884
Total loans	$	172,808	$	(16,897)	$	1,158	$	21,000	$	178,069

(1) Provision & transfer amounts within the table do not include the recapture of provision for unfunded commitments of $6.0 million. The total provision for the nine months ended June 30, 2023 was $15.0 million.

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


Nine Months Ended June 30, 2022	Beginning Allowance		Charge-offs		Recoveries		Provision & Transfers (1)		Ending Allowance
	(In thousands)
Commercial loans
Multi-family	$	16,949	$	—	$	—	$	(4,375)	$	12,574
Commercial real estate	23,437		(529)		820		1,572		25,300
Commercial & industrial	45,957		(943)		72		9,838		54,924
Construction	25,585		—		2,179		(1,930)		25,834
Land - acquisition & development	13,447		(3)		51		(1,268)		12,227
Total commercial loans	125,375		(1,475)		3,122		3,837		130,859
Consumer loans
Single-family residential	30,978		—		804		(5,565)		26,217
Construction - custom	4,907		—		—		(1,553)		3,354
Land - consumer lot loans	4,939		(27)		47		261		5,220
HELOC	2,390		—		350		(108)		2,632
Consumer	2,711		(368)		726		(372)		2,697
Total consumer loans	45,925		(395)		1,927		(7,337)		40,120
Total loans	$	171,300	$	(1,870)	$	5,049	$	(3,500)	$	170,979

(1) Provision & transfer amounts within the table do not include the provision for unfunded commitments of $5.0 million.

Nine Months Ended June 30, 2021 Beginning Allowance Charge-offs Recoveries
Provision &
Transfers (1)
Ending Allowance
(In thousands)
Commercial loans
   Multi-family $ 13,853 $ — $ — $ 3,815 $ 17,668
   Commercial real estate 22,516 — 2,731 (1,362) 23,885
   Commercial & industrial 38,665 (31) 74 6,830 45,538
   Construction 24,156 — — 667 24,823
   Land - acquisition & development 10,733 — 454 418 11,605
      Total commercial loans 109,923 (31) 3,259 10,368 123,519
Consumer loans
   Single-family residential 45,186 (106) 1,600 (12,490) 34,190
   Construction - custom 3,555 — — (33) 3,522
   Land - consumer lot loans 2,729 — 21 961 3,711
   HELOC 2,571 — 51 (409) 2,213
   Consumer 2,991 (270) 805 103 3,629
      Total consumer loans 57,032 (376) 2,477 (11,868) 47,265
Total loans $ 166,955 $ (407) $ 5,736 $ (1,500) $ 170,784

~~(1) Provision & transfer amounts within~~ As such there was $1.5 million provision recognized for the ~~table do not include the provision for unfunded commitments of $2.5 million.~~nine months ended June 30, 2022.

The Company recorded a ~~$1,500,000~~$9,000,000 provision for credit losses for the three months ended June 30, ~~2022,~~2023, compared to a ~~$2,000,000~~$1,500,000 release of allowance for credit losses for the three months ended June 30, ~~2021.~~2022. The provision in the three months ended June 30, 2023 was primarily due to one charge-off, offset by reduced unfunded commitment balances combined with an uncertain economic outlook amid concerns around a looming recession and recent macro-economic events. The provision for the three months ended June 30, 2022 was primarily due to growth in loans receivable and unfunded commitments partially offset by improvements in the credit quality of certain loan portfolios related to strong real estate markets and collateral conditions. The ~~release~~Company recorded a $15,000,000 provision for credit losses for the ~~three~~nine months ended June 30, 2021 was primarily due to improvements in the credit quality of certain loan portfolios related to strong real estate markets and collateral conditions partially offset by growth in loans receivable. The

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~~WASHINGTON FEDERAL, INC. AND SUBSIDIARIES~~

~~NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~Company recorded a~~2023, compared with $1,500,000 provision for credit losses for the nine months ended June 30, ~~2022,~~2022. Charge-offs, net of recoveries, totaled $10,351,000 for the three months ended June 30, 2023, compared ~~with a $1,000,000 provision for credit losses~~to net recoveries of $595,000 during the three months ended June 30, 2022. Charge-offs, net of recoveries, totaled $15,739,000 for the nine months ended June 30, ~~2021. Recoveries, net of charge-offs, totaled $595,000 for the three months ended June 30, 2022,~~2023, compared to net recoveries of ~~$1,131,000 during the three months ended June 30, 2021. Recoveries, net of charge-offs, totaled~~ $3,179,000 ~~for the nine months ended June 30, 2022, compared to net recoveries of $5,329,000~~ during the nine months ended June 30, ~~2021.~~2022. No allowance was recorded as of June 30, 2022 ~~or as of September 30, 2021~~ for the $54,185,000 ~~and $305,162,000~~ of PPP loans in the portfolio ~~on each~~at that date ~~respectively,~~ which are included in the commercial & industrial loan category, due to the government guarantee.

Non-performing assets were ~~$50,430,000,~~$67,000,000, or ~~0.25%~~0.30% of total assets, at June 30, ~~2022,~~2023, compared to ~~$43,625,000,~~$44,554,000, or ~~0.22%~~0.21% of total assets, at September 30, ~~2021.~~2022. Non-accrual loans were ~~$36,679,000~~$55,276,000 at June 30, ~~2022,~~2023, compared to ~~$31,749,000~~$34,534,000 at September 30, ~~2021.~~2022. Delinquencies, as a percent of total loans, were ~~0.26%~~0.31% at June 30, ~~2022,~~2023, compared to ~~0.19%~~0.17% at September 30, ~~2021.~~2022.

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.~~

June 30, 2022 Internally Assigned Grade
Pass Special mention Substandard Doubtful Loss Total
(In thousands, except ratio data)
Loan type
Commercial loans
  Multi-family $ 2,469,022 $ — $ 9,910 $ — $ — $ 2,478,932
  Commercial real estate 2,785,250 — 91,745 — — 2,876,995
  Commercial & industrial 2,197,826 32,789 113,431 — — 2,344,046
  Construction 1,404,955 — 2,256 — — 1,407,211
  Land - acquisition & development 222,974 — — — — 222,974
    Total commercial loans 9,080,027 32,789 217,342 — — 9,330,158
Consumer loans
  Single-family residential 5,595,898 — 23,550 — — 5,619,448
  Construction - custom 367,939 — 900 — — 368,839
  Land - consumer lot loans 156,864 — 212 — — 157,076
  HELOC 187,378 — 91 — — 187,469
  Consumer 73,142 — 12 — — 73,154
    Total consumer loans 6,381,221 — 24,765 — — 6,405,986
Total $ 15,461,248 $ 32,789 $ 242,107 $ — $ — $ 15,736,144
Total grade as a % of total loans 98.25 % 0.21 % 1.54 % — % — %

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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

September 30, 2021 Internally Assigned Grade
Pass Special mention Substandard Doubtful Loss Total
(In thousands, except ratio data)
Loan type
Commercial loans
  Multi-family $ 2,252,395 $ 4,874 $ 16,420 $ — $ — $ 2,273,689
  Commercial real estate 2,174,386 57,625 197,321 — — 2,429,332
  Commercial & industrial 2,108,152 48,124 147,651 — — 2,303,927
  Construction 1,115,791 931 505 — — 1,117,227
  Land - acquisition & development 190,076 — 2,340 — — 192,416
    Total commercial loans 7,840,800 111,554 364,237 — — 8,316,591
Consumer loans
  Single-family residential 4,915,106 — 21,958 — — 4,937,064
  Construction - custom 347,752 — — — — 347,752
  Land - consumer lot loans 148,010 — 524 — — 148,534
  HELOC 166,652 — 288 — — 166,940
  Consumer 87,962 — 27 — — 87,989
    Total consumer loans 5,665,482 — 22,797 — — 5,688,279
Total loans $ 13,506,282 $ 111,554 $ 387,034 $ — $ — $ 14,004,870
Total grade as a % of total loans 96.44 % 0.80 % 2.76 % — % — %
The following tables provide the amortized cost of loans receivable based on risk rating categories as previously defined.


June 30, 2023	Internally Assigned Grade
	Pass			Special mention			Substandard			Doubtful			Loss			Total
	(In thousands, except ratio data)
Loan type
Commercial loans
Multi-family	$	2,749,291		$	90,187		$	18,955		$	—		$	—		$	2,858,433
Commercial real estate	3,114,517			23,238			80,696			—			—			3,218,451
Commercial & industrial	2,329,675			6,815			154,250			—			—			2,490,740
Construction	1,732,137			4,739			22,558			—			—			1,759,434
Land - acquisition & development	161,388			—			270			—			—			161,658
Total commercial loans	10,087,008			124,979			276,729			—			—			10,488,716
Consumer loans
Single-family residential	6,239,912			—			18,680			—			—			6,258,592
Construction - custom	375,957			—			88			—			—			376,045
Land - consumer lot loans	133,758			—			236			—			—			133,994
HELOC	227,331			—			801			—			—			228,132
Consumer	76,765			—			13			—			—			76,778
Total consumer loans	7,053,723			—			19,818			—			—			7,073,541
Total	$	17,140,731		$	124,979		$	296,547		$	—		$	—		$	17,562,257

Total grade as a % of total loans	97.60		%	0.71		%	1.69		%	—		%	—		%

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


September 30, 2022	Internally Assigned Grade
	Pass			Special mention			Substandard			Doubtful			Loss			Total
	(In thousands, except ratio data)
Loan type
Commercial loans
Multi-family	$	2,612,669		$	—		$	13,810		$	—		$	—		$	2,626,479
Commercial real estate	3,054,241			1,594			55,277			—			—			3,111,112
Commercial & industrial	2,196,767			31,656			114,980			—			—			2,343,403
Construction	1,421,634			—			2,257			—			—			1,423,891
Land - acquisition & development	223,616			—			—			—			—			223,616
Total commercial loans	9,508,927			33,250			186,324			—			—			9,728,501
Consumer loans
Single-family residential	5,706,199			—			20,780			—			—			5,726,979
Construction - custom	396,908			—			435			—			—			397,343
Land - consumer lot loans	151,723			—			222			—			—			151,945
HELOC	205,800			—			233			—			—			206,033
Consumer	75,570			—			1			—			—			75,571
Total consumer loans	6,536,200			—			21,671			—			—			6,557,871
Total loans	$	16,045,127		$	33,250		$	207,995		$	—		$	—		$	16,286,372

Total grade as a % of total loans	98.52		%	0.20		%	1.28		%	—		%	—		%

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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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


June 30, 2022		Performing Loans				Non-Performing Loans
June 30, 2023										June 30, 2023	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	$	2,472,988	99.8	%	$	5,944	0.2	%	Multi-family	$	2,852,482	99.8	%	$	5,951	0.2	%
Commercial real estate	Commercial real estate	2,871,971		99.8		5,024		0.2		Commercial real estate	3,217,364		100.0		1,087		—
Commercial & industrial	Commercial & industrial	2,339,758		99.8		4,288		0.2		Commercial & industrial	2,459,054		98.7		31,686		1.3
Construction	Construction	1,407,211		100.0		—		0.0		Construction	1,759,434		100.0		—		0.0
Land - acquisition & development	Land - acquisition & development	222,974		100.0		—		—		Land - acquisition & development	161,658		100.0		—		—
Total commercial loans	Total commercial loans	9,314,902		99.8		15,256		0.2		Total commercial loans	10,449,992		99.6		38,724		0.4
Consumer loans	Consumer loans									Consumer loans
Single-family residential	Single-family residential	5,599,264		99.6		20,184		0.4		Single-family residential	6,243,082		99.8		15,510		0.2
Construction - custom	Construction - custom	367,939		99.8		900		0.2		Construction - custom	375,958		100.0		87		—
Land - consumer lot loans	Land - consumer lot loans	156,863		99.9		213		0.1		Land - consumer lot loans	133,872		99.9		122		0.1
HELOC	HELOC	187,378		100.0		91		—		HELOC	227,331		99.6		801		0.4
Consumer	Consumer	73,119		100.0		35		0.0		Consumer	76,746		100.0		32		0.0
Total consumer loans	Total consumer loans	6,384,563		99.7		21,423		0.3		Total consumer loans	7,056,989		99.8		16,552		0.2
Total loans	Total loans	$	15,699,465	99.8	%	$	36,679	0.2	%	Total loans	$	17,506,981	99.7	%	$	55,276	0.3	%


September 30, 2021		Performing Loans				Non-Performing Loans
September 30, 2022										September 30, 2022	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	$	2,273,214	100.0	%	$	475	—	%	Multi-family	$	2,620,567	99.8	%	$	5,912	0.2	%
Commercial real estate	Commercial real estate	2,421,294		99.7		8,038		0.3		Commercial real estate	3,106,421		99.8		4,691		0.2
Commercial & industrial	Commercial & industrial	2,303,562		100.0		365		—		Commercial & industrial	2,337,710		99.8		5,693		0.2
Construction	Construction	1,116,722		100.0		505		—		Construction	1,423,891		100.0		—		—
Land - acquisition & development	Land - acquisition & development	190,076		98.8		2,340		1.2		Land - acquisition & development	223,616		100.0		—		—
Total commercial loans	Total commercial loans	8,304,868		99.9		11,723		0.1		Total commercial loans	9,712,205		99.9		16,296		0.1
Consumer loans	Consumer loans									Consumer loans
Single-family residential	Single-family residential	4,917,744		99.6		19,320		0.4		Single-family residential	5,709,529		99.7		17,450		0.3
Construction - custom	Construction - custom	347,752		100.0		—		—		Construction - custom	396,908		99.9		435		0.1
Land - consumer lot loans	Land - consumer lot loans	148,175		99.8		359		0.2		Land - consumer lot loans	151,861		99.9		84		0.1
HELOC	HELOC	166,653		99.8		287		0.2		HELOC	205,800		99.9		233		0.1
Consumer	Consumer	87,929		99.9		60		0.1		Consumer	75,535		100.0		36		0.0
Total consumer loans	Total consumer loans	5,668,253		99.6		20,026		0.4		Total consumer loans	6,539,633		99.7		18,238		0.4
Total loans	Total loans	$	13,973,121	99.8	%	$	31,749	0.2	%	Total loans	$	16,251,838	99.8	%	$	34,534	0.2	%

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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~~counterparty to offset its interest rate risk. The Company has also entered into commercial loan hedges, mortgage pool hedges and borrowings hedges using interest rate swaps. The fair value of these interest rate swaps are estimated by a third-party pricing service using a discounted cash flow technique. These are considered a Level 2 input method.

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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.


		June 30, 2022									June 30, 2023
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
		(In thousands)									(In thousands)
Financial Assets	Financial Assets									Financial Assets
Available-for-sale securities:	Available-for-sale securities:									Available-for-sale securities:

U.S. government and agency securities	U.S. government and agency securities	$	—	$	45,462	$	—	$	45,462	U.S. government and agency securities	$	—	$	192,559	$	—	$	192,559
Asset-backed securities	Asset-backed securities	—		838,033		—		838,033		Asset-backed securities	—		611,784		—		611,784
Municipal bonds	Municipal bonds	—		37,231		—		37,231		Municipal bonds	—		35,049		—		35,049

Corporate debt securities	Corporate debt securities	—		321,924		—		321,924		Corporate debt securities	—		246,631		—		246,631
Mortgage-backed securities	Mortgage-backed securities									Mortgage-backed securities
Agency pass-through certificates	Agency pass-through certificates	—		908,082		—		908,082		Agency pass-through certificates	—		950,210		—		950,210

Total available-for-sale securities	Total available-for-sale securities	—		2,150,732		—		2,150,732		Total available-for-sale securities	—		2,036,233		—		2,036,233
Client swap program hedges	Client swap program hedges	—		43,219		—		43,219		Client swap program hedges	—		64,869		—		64,869
Commercial loan fair value hedges	Commercial loan fair value hedges	—		1,153		—		1,153		Commercial loan fair value hedges	—		2,341		—		2,341
Mortgage loan fair value hedges	Mortgage loan fair value hedges	—		26,415		—		26,415		Mortgage loan fair value hedges	—		40,707		—		40,707
Borrowings cash flow hedges	Borrowings cash flow hedges	—		136,436		—		136,436		Borrowings cash flow hedges	—		165,924		—		165,924
Total financial assets	Total financial assets	$	—	$	2,357,955	$	—	$	2,357,955	Total financial assets	$	—	$	2,310,074	$	—	$	2,310,074

Financial Liabilities	Financial Liabilities									Financial Liabilities
Client swap program hedges	Client swap program hedges	$	—	$	43,219	$	—	$	43,219	Client swap program hedges	$	—	$	65,772	$	—	$	65,772

Total financial liabilities	Total financial liabilities	$	—	$	43,219	$	—	$	43,219	Total financial liabilities	$	—	$	65,772	$	—	$	65,772


		September 30, 2021									September 30, 2022
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
		(In thousands)									(In thousands)
Financial Assets	Financial Assets									Financial Assets
Available-for-sale securities:	Available-for-sale securities:									Available-for-sale securities:

U.S. government and agency securities	U.S. government and agency securities	$	—	$	61,779	$	—	$	61,779	U.S. government and agency securities	$	—	$	39,354	$	—	$	39,354
Asset-backed securities	Asset-backed securities	—		1,078,681		0		1,078,681		Asset-backed securities	—		767,001				767,001
Municipal bonds	Municipal bonds	—		39,984		—		39,984		Municipal bonds	—		34,962		—		34,962

Corporate debt securities	Corporate debt securities	—		350,988		—		350,988		Corporate debt securities	—		313,757		—		313,757
Mortgage-backed securities	Mortgage-backed securities									Mortgage-backed securities
Agency pass-through certificates	Agency pass-through certificates	—		606,827		—		606,827		Agency pass-through certificates	—		895,963		—		895,963

Total available-for-sale securities	Total available-for-sale securities	—		2,138,259		—		2,138,259		Total available-for-sale securities	—		2,051,037		—		2,051,037
Client swap program hedges	Client swap program hedges	—		10,983		—		10,983		Client swap program hedges	—		67,260		—		67,260

Commercial loan fair value hedges										Commercial loan fair value hedges	—		2,517		—		2,517
Mortgage loan fair value hedges										Mortgage loan fair value hedges	—		36,765		—		36,765
Borrowings cash flow hedges	Borrowings cash flow hedges	—		42,442		—		42,442		Borrowings cash flow hedges	—		179,945		—		179,945
Total financial assets	Total financial assets	$	—	$	2,191,684	$	—	$	2,191,684	Total financial assets	$	—	$	2,337,524	$	—	$	2,337,524

Financial Liabilities	Financial Liabilities									Financial Liabilities
Client swap program hedges	Client swap program hedges	$	—	$	10,983	$	—	$	10,983	Client swap program hedges	$	—	$	67,260	$	—	$	67,260
Commercial loan fair value hedges		—		2,177		—		2,177
Mortgage loan fair value hedges		0		1,641		0		1,641

Total financial liabilities	Total financial liabilities	$	—	$	14,801	$	—	$	14,801	Total financial liabilities	$	—	$	67,260	$	—	$	67,260

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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 June 30, ~~2022~~2023 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 June 30, ~~2022~~2023 and June 30, ~~2021,~~2022, 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.


		June 30, 2022								Three Months Ended June 30, 2022		Nine Months Ended June 30, 2022			June 30, 2023								Three Months Ended June 30, 2023		Nine Months Ended June 30, 2023
		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)	$	—	$	—	$	4,182	$	4,182	$	(40)	$	(1,025)	Loans (1)	$	—	$	—	$	34,535	$	34,535	$	(10,530)	$	(16,773)
Real estate owned (2)	Real estate owned (2)	—		—		1,848		1,848		196		(276)		Real estate owned (2)	—		—		3,672		3,672		(121)		(98)
Balance at end of period	Balance at end of period	$	—	$	—	$	6,030	$	6,030	$	156	$	(1,301)	Balance at end of period	$	—	$	—	$	38,207	$	38,207	$	(10,651)	$	(16,871)

(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.


		June 30, 2021								Three Months Ended June 30, 2021		Nine Months Ended June 30, 2021			June 30, 2022								Three Months Ended June 30, 2022		Nine Months Ended June 30, 2022
		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)	$	—	$	—	$	—	$	—	$	(19)	$	(88)	Loans (1)	$	—	$	—	$	4,182	$	4,182	$	(40)	$	(1,025)
Real estate owned (2)	Real estate owned (2)	—		—		1,542		1,542		(460)		(359)		Real estate owned (2)	—		—		1,848		1,848		196		(276)
Balance at end of period	Balance at end of period	$	—	$	—	$	1,542	$	1,542	$	(479)	$	(447)	Balance at end of period	$	—	$	—	$	6,030	$	6,030	$	156	$	(1,301)

(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 June 30, ~~2022,~~2023, there was ~~$234,000~~$121,000 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 ~~$2,313,000.~~$2,840,000.

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~~reevaluated 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)


			June 30, 2022				September 30, 2021						June 30, 2023				September 30, 2022
		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	$	607,421	$	607,421	$	2,090,809	$	2,090,809	Cash and cash equivalents	1	$	1,139,643	$	1,139,643	$	683,965	$	683,965
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	45,462		45,462		61,779		61,779		U.S. government and agency securities	2	192,559		192,559		39,354		39,354
Asset-backed securities	Asset-backed securities	2	838,033		838,033		1,078,681		1,078,681		Asset-backed securities	2	611,784		611,784		767,001		767,001
Municipal bonds	Municipal bonds	2	37,231		37,231		39,984		39,984		Municipal bonds	2	35,049		35,049		34,962		34,962

Corporate debt securities	Corporate debt securities	2	321,924		321,924		350,988		350,988		Corporate debt securities	2	246,631		246,631		313,757		313,757
Mortgage-backed securities	Mortgage-backed securities										Mortgage-backed securities
Agency pass-through certificates	Agency pass-through certificates	2	908,082		908,082		606,827		606,827		Agency pass-through certificates	2	950,210		950,210		895,963		895,963

Total available-for-sale securities	Total available-for-sale securities		2,150,732		2,150,732		2,138,259		2,138,259		Total available-for-sale securities		2,036,233		2,036,233		2,051,037		2,051,037
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	477,884		447,829		366,025		379,547		Agency pass-through certificates	2	434,172		384,312		463,299		406,860

Total held-to-maturity securities	Total held-to-maturity securities		477,884		447,829		366,025		379,547		Total held-to-maturity securities		434,172		384,312		463,299		406,860

Loans receivable	Loans receivable	3	15,565,165		15,395,375		13,833,570		14,279,725		Loans receivable	3	17,384,188		16,652,719		16,113,564		15,417,635

FHLB and FRB stock		2	78,073		78,073		102,863		102,863
FHLB stock											FHLB stock	2	130,875		130,875		95,073		95,073
Other assets - client swap program hedges	Other assets - client swap program hedges	2	43,219		43,219		10,983		10,983		Other assets - client swap program hedges	2	64,869		64,869		67,260		67,260
Other assets - commercial fair value loan hedges	Other assets - commercial fair value loan hedges	2	1,153		1,153		—		—		Other assets - commercial fair value loan hedges	2	2,341		2,341		2,517		2,517
Other assets - mortgage loan fair value hedges	Other assets - mortgage loan fair value hedges	2	26,415		26,415		—		—		Other assets - mortgage loan fair value hedges	2	40,707		40,707		36,765		36,765
Other assets - borrowings cash flow hedges	Other assets - borrowings cash flow hedges	2	136,436		136,436		42,442		42,442		Other assets - borrowings cash flow hedges	2	165,924		165,924		179,945		179,945

Financial liabilities	Financial liabilities										Financial liabilities
Time deposits	Time deposits	2	3,297,369		3,212,617		3,434,087		3,382,206		Time deposits	2	4,863,849		4,773,772		3,338,043		3,249,169
FHLB advances		2	1,700,000		1,558,021		1,720,000		1,692,412
Borrowings											Borrowings	2	3,750,000		3,738,757		2,125,000		1,940,813
Other liabilities - client swap program hedges	Other liabilities - client swap program hedges	2	43,219		43,219		10,983		10,983		Other liabilities - client swap program hedges	2	65,772		65,772		67,260		67,260
Other liabilities - commercial loan fair value hedges		2	—		—		2,177		2,177
Other liabilities - mortgage loan fair value hedges		2	—		—		1,641		1,641

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 (AFS) securities and held-to-maturity (HTM) 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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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

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

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

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


		June 30, 2022											June 30, 2023
		Amortized Cost		Gross Unrealized				Fair Value		Yield			Amortized Cost		Gross Unrealized				Fair Value		Yield
				Gains		Losses									Gains		Losses
		($ in thousands)											($ in thousands)
Available-for-sale securities	Available-for-sale securities											Available-for-sale securities
U.S. government and agency securities due	U.S. government and agency securities due											U.S. government and agency securities due

Within 1 year												Within 1 year	$	5,251	$	—	$	(39)	$	5,212	5.75	%
1 to 5 years	1 to 5 years	$	46,584	$	—	$	(1,122)	$	45,462	1.87	%	1 to 5 years	22,107		—		(674)		21,433		4.53

5 to 10 years												5 to 10 years	89,610		196		—		89,806		5.51
Over 10 years												Over 10 years	75,618		526		(36)		76,108		5.62
Asset-backed securities	Asset-backed securities											Asset-backed securities

1 to 5 years	1 to 5 years	23,396		—		(1,066)		22,330		2.00		1 to 5 years	19,368		—		(911)		18,457		5.78
5 to 10 years	5 to 10 years	94,022		61		(376)		93,707		2.01		5 to 10 years	42,069		7		(206)		41,870		5.88
Over 10 years	Over 10 years	731,942		780		(10,726)		721,996		2.35		Over 10 years	562,179		469		(11,191)		551,457		6.10

Corporate debt securities due	Corporate debt securities due											Corporate debt securities due
Within 1 year		75,000		83		—		75,083		2.44

1 to 5 years	1 to 5 years	151,290		77		(1,667)		149,700		2.68		1 to 5 years	151,772		1,105		(1,882)		150,995		4.86
5 to 10 years	5 to 10 years	114,712		—		(17,571)		97,141		3.87		5 to 10 years	113,519		—		(17,883)		95,636		3.87

Municipal bonds due	Municipal bonds due											Municipal bonds due
Within 1 year		1,515		—		—		1,515		—

5 to 10 years	5 to 10 years	5,758		—		(246)		5,512		0.16		5 to 10 years	5,728		—		(218)		5,510		3.00
Over 10 years	Over 10 years	29,880		756		(432)		30,204		5.85		Over 10 years	29,842		10		(313)		29,539		5.85
Mortgage-backed securities	Mortgage-backed securities											Mortgage-backed securities
Agency pass-through certificates	Agency pass-through certificates	942,552		855		(35,325)		908,082		2.60		Agency pass-through certificates	1,023,520		55		(73,365)		950,210		3.30

		2,216,651		2,612		(68,531)		2,150,732		2.49			2,140,583		2,368		(106,718)		2,036,233		4.48
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	477,884		115		(30,170)		447,829		2.89		Agency pass-through certificates	434,172		16		(49,876)		384,312		2.88

		477,884		115		(30,170)		447,829		2.89			434,172		16		(49,876)		384,312		2.88
		$	2,694,535	$	2,727	$	(98,701)	$	2,598,561	2.63	%		$	2,574,755	$	2,384	$	(156,594)	$	2,420,545	4.21	%

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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


		September 30, 2021												September 30, 2022
		Amortized Cost		Gross Unrealized					Fair Value		Yield			Amortized Cost		Gross Unrealized					Fair Value		Yield
				Gains		Losses										Gains		Losses
		($ in thousands)												($ in thousands)
Available-for-sale securities	Available-for-sale securities												Available-for-sale securities
U.S. government and agency securities due	U.S. government and agency securities due												U.S. government and agency securities due

1 to 5 years	1 to 5 years	$	47,339	$	240		$	—	$	47,579	0.44	%	1 to 5 years	$	40,403	$	—		$	(1,049)	$	39,354	3.03	%
5 to 10 years		14,064		136			—		14,200		2.05

Asset-backed securities	Asset-backed securities												Asset-backed securities

1 to 5 years	1 to 5 years	19,730		—			(434)		19,296		0.52		1 to 5 years	22,527		—			(1,141)		21,386		3.27
5 to 10 years	5 to 10 years	71,207		412			(97)		71,522		0.57		5 to 10 years	82,962		4			(547)		82,419		3.53
Over 10 years	Over 10 years	973,892		14,069			(98)		987,863		0.94		Over 10 years	668,482		783			(6,069)		663,196		3.86

Corporate debt securities due	Corporate debt securities due												Corporate debt securities due
Within 1 year	Within 1 year	225,928		7,860			—		233,788		1.57		Within 1 year	75,000		4			(200)		74,804		3.74
1 to 5 years	1 to 5 years	86,802		1,345			—		88,147		4.64		1 to 5 years	151,411		—			(2,748)		148,663		3.59
5 to 10 years	5 to 10 years	28,804		249			—		29,053		1.95		5 to 10 years	114,414		—			(24,124)		90,290		3.87

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

5 to 10 years	5 to 10 years	5,781		294			—		6,075		0.22		5 to 10 years	5,751		—			(361)		5,390		3.00
Over 10 years	Over 10 years	29,909		2,490			—		32,399		5.85		Over 10 years	29,871		400			(699)		29,572		5.85
Mortgage-backed securities	Mortgage-backed securities												Mortgage-backed securities
Agency pass-through certificates	Agency pass-through certificates	585,121		23,717			(2,011)		606,827		2.60		Agency pass-through certificates	971,916		117			(76,070)		895,963		2.81

		2,090,070		50,829			(2,640)		2,138,259		1.69			2,162,737		1,308			(113,008)		2,051,037		3.36
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	366,025		13,522			—		379,547		3.17		Agency pass-through certificates	463,299		22			(56,461)		406,860		2.88

		366,025		13,522			—		379,547		3.17			463,299		22			(56,461)		406,860		2.88
		$	2,456,095	$	64,351		$	(2,640)	$	2,517,806	1.89	%		$	2,626,036	$	1,330		$	(169,469)	$	2,457,897	3.28	%

For ~~available-for-sale~~AFS investment securities, there were purchases of $317,027,000 during the nine months ended June 30, 2023 and purchases of $516,163,000 during the nine months ended June 30, ~~2022 and purchases of $528,937,000 during the nine months ended June 30, 2021.~~2022. There were ~~$4,510,000 of~~ sales of ~~available-for-sale~~$94,000 of AFS investment securities during the nine months ended June 30, ~~2022~~2023 and no$4,510,000 in sales during the prior year same period. For ~~held-to-maturity~~HTM investment securities, there were no purchases during the nine months ended June 30, 2023 and purchases of $195,358,000 during the nine months ended June 30, ~~2022 and no purchases during the nine months ended June 30, 2021.~~2022. There were no sales of held-to-maturity investment securities during the nine months ended June 30, ~~2022~~2023 or June 30, ~~2021.~~2022. 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 ~~$5,579,000~~$7,701,000 and ~~$3,458,000~~$5,694,000 as of June 30, ~~2022~~2023 and September 30, ~~2021,~~2022, respectively. For HTM debt securities, AIR totaled ~~$1,143,000~~$1,038,000 and ~~$944,000~~$1,108,000 as of June 30, ~~2022~~2023 and September 30, ~~2021,~~2022, respectively. AIR for securities is included in the "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 June 30, ~~2022~~2023 and September 30, ~~2021,~~2022, by length of time that individual securities in each category have been in a continuous loss position. There were ~~149~~225 and 31223 securities with an unrealized loss as of June 30, ~~2022~~2023 and September 30, ~~2021,~~2022, respectively. The decline in fair value since purchase is attributable to changes in interest rates. Because the Company does not intend to sell these securities and does not

~~Table of Contents~~

~~WASHINGTON FEDERAL, INC. AND SUBSIDIARIES~~

~~NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~consider it more likely than not that~~ expect 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 have any credit impairment.

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


June 30, 2022		Less than 12 months				12 months or more				Total
June 30, 2023														June 30, 2023	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	Corporate debt securities	$	(19,238)	$	226,780	$	—	$	—	$	(19,238)	$	226,780	Corporate debt securities	$	—	$	—	$	(19,764)	$	151,438	$	(19,764)	$	151,438
Municipal bonds	Municipal bonds	(679)		14,960		—		—		(679)		14,960		Municipal bonds	—		—		(531)		15,038		(531)		15,038
U.S. government and agency securities	U.S. government and agency securities	(1,122)		45,462		—		—		(1,122)		45,462		U.S. government and agency securities	(36)		14,964		(712)		26,645		(748)		41,609
Asset-backed securities	Asset-backed securities	(10,232)		651,065		(1,935)		77,426		(12,167)		728,491		Asset-backed securities	(2,406)		79,893		(9,903)		515,348		(12,309)		595,241

Mortgage-backed securities	Mortgage-backed securities	(29,207)		781,357		(6,118)		57,878		(35,325)		839,235		Mortgage-backed securities	(4,663)		205,284		(68,702)		695,528		(73,365)		900,812
		(60,478)		1,719,624		(8,053)		135,304		(68,531)		1,854,928			(7,105)		300,141		(99,612)		1,403,997		(106,717)		1,704,138
Held-to-maturity securities	Held-to-maturity securities													Held-to-maturity securities
Mortgage-backed securities	Mortgage-backed securities	(30,170)		445,576		—		—		(30,170)		445,576		Mortgage-backed securities	(3)		713		(49,874)		382,499		(49,877)		383,212
		$	(90,648)	$	2,165,200	$	(8,053)	$	135,304	$	(98,701)	$	2,300,504		$	(7,108)	$	300,854	$	(149,486)	$	1,786,496	$	(156,594)	$	2,087,350


September 30, 2021		Less than 12 months				12 months or more				Total
September 30, 2022														September 30, 2022	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														Corporate debt securities	$	(27,072)	$	288,753	$	—	$	—	$	(27,072)	$	288,753
Municipal bonds due														Municipal bonds due	(1,061)		14,561		—		—		(1,061)		14,561
U.S. government and agency securities														U.S. government and agency securities	(1,049)		39,354		—		—		(1,049)		39,354
Asset-backed securities	Asset-backed securities	$	(15)	$	4,639	$	(614)	$	70,058	$	(629)	$	74,697	Asset-backed securities	(6,374)		601,248		(1,383)		50,070		(7,757)		651,318

Mortgage-backed securities	Mortgage-backed securities	(1,569)		47,758		(442)		32,266		(2,011)		80,024		Mortgage-backed securities	(63,738)		833,683		(12,331)		53,533		(76,069)		887,216
		(1,584)		52,397		(1,056)		102,324		(2,640)		154,721			(99,294)		1,777,599		(13,714)		103,603		(113,008)		1,881,202
Held-to-maturity securities	Held-to-maturity securities													Held-to-maturity securities
Mortgage-backed securities	Mortgage-backed securities	—		—		—		—		—		—		Mortgage-backed securities	(56,461)		405,166		—		—		(56,461)		405,166
		$	(1,584)	$	52,397	$	(1,056)	$	102,324	$	(2,640)	$	154,721		$	(155,755)	$	2,182,765	$	(13,714)	$	103,603	$	(169,469)	$	2,286,368

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 June 30, ~~2022~~2023 or September 30, ~~2021.~~2022.

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 June 30, ~~2022~~2023 or September 30, ~~2021. The~~2022 based on the fact that (1) changes in fair value were primarily as a result of changes in interest rates, (2) the Company does not intend to sell the investment securities that were in an unrealized loss position, ~~and~~(3) 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~~maturity, and (4) 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 June 30, ~~2022~~2023 and September 30, ~~2021.~~2022.


June 30, 2022		Derivative Assets					Derivative Liabilities
June 30, 2023												June 30, 2023	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	$	565,380	$	43,219	Other liabilities	$	565,380	$	43,219	Client swap program hedges	Other assets	$	819,094	$	64,869	Other liabilities	$	819,094	$	65,772
Commercial loan fair value hedges	Commercial loan fair value hedges	Other assets	42,209		1,153		Other liabilities	—		—		Commercial loan fair value hedges	Other assets	39,661		2,341		Other liabilities	—		—
Mortgage loan fair value hedges	Mortgage loan fair value hedges	Other assets	470,000		26,415		Other liabilities	—		—		Mortgage loan fair value hedges	Other assets	670,000		40,707		Other liabilities	—		—
Borrowings cash flow hedges	Borrowings cash flow hedges	Other assets	1,000,000		136,436		Other liabilities	—		—		Borrowings cash flow hedges	Other assets	1,000,000		165,924		Other liabilities	—		—
			$	2,077,589	$	207,223		$	565,380	$	43,219			$	2,528,755	$	273,841		$	819,094	$	65,772


September 30, 2021		Derivative Assets					Derivative Liabilities
September 30, 2022												September 30, 2022	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	$	644,355	$	10,983	Other liabilities	$	644,355	$	10,983	Client swap program hedges	Other assets	$	588,676	$	67,260	Other liabilities	$	588,676	$	67,260
Commercial loan fair value hedges	Commercial loan fair value hedges	Other assets	—		—		Other liabilities	44,678		2,177		Commercial loan fair value hedges	Other assets	42,209		2,517		Other liabilities	—		—
Mortgage loan fair value hedges	Mortgage loan fair value hedges	Other assets	—		—		Other liabilities	470,000		1,641		Mortgage loan fair value hedges	Other assets	470,000		36,765		Other liabilities	—		—
Borrowings cash flow hedges	Borrowings cash flow hedges	Other assets	1,000,000		42,442		Other liabilities	—		—		Borrowings cash flow hedges	Other assets	1,000,000		179,945		Other liabilities	—		—
			$	1,644,355	$	53,425		$	1,159,033	$	14,801			$	2,100,885	$	286,487		$	588,676	$	67,260

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 June 30, ~~2022~~2023 and September 30, ~~2021.~~2022.


(In thousands)	(In thousands)	June 30, 2022				(In thousands)	June 30, 2023
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)	$	1,210,272	$	(27,410)	Loans receivable (1) (2)	$	1,859,032	$	(42,457)
		$	1,210,272	$	(27,410)		$	1,859,032	$	(42,457)

(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 June 30, ~~2022,~~2023, the amortized cost basis of the closed loan portfolios used in the hedging relationships was ~~$1.2 billion,~~$1,821,860,000, the cumulative basis adjustment associated with the hedging relationships was ~~$(26.2) million,~~$(40,021,000), and the amount of the designated hedged items was ~~$470 million. During the year ended September 30, 2021, hedge accounting was discontinued on $30 million (30%) of a $100~~$670,000,000.

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(UNAUDITED)

million last of layer hedge. At June 30, 2022, there is $1.0 million of remaining unamortized basis adjustment 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 June 30, ~~2022,~~2023, the amortized cost basis of the hedged commercial loans was ~~$41 million~~$37,172,000 and the cumulative basis adjustment associated with the hedging relationships was ~~$(1.2) million.~~$(2,436,000).


(In thousands)	(In thousands)	September 30, 2021				(In thousands)	September 30, 2022
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)	$	1,515,487	$	4,215	Loans receivable (1) (2)	$	1,159,496	$	(39,090)
		$	1,515,487	$	4,215		$	1,159,496	$	(39,090)

(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, ~~2021,~~2022, the amortized cost basis of the closed loan portfolios used in the hedging relationships was ~~$1.5 billion,~~$1,119,975,000, the cumulative basis adjustment associated with the hedging relationships was ~~$1.9 million,~~$(36,458,000), and the amount of the designated hedged items was ~~$470 million. During the year ended September 30, 2021, hedge accounting was discontinued on $30 million (30%) of a $100 million last of layer hedge.~~$470,000,000.

(2) Includes the amortized cost basis of commercial loans designated in fair value hedging relationships. At September 30, ~~2021,~~2022, the amortized cost basis of the hedged commercial loans was ~~$47 million~~$39,521,000 and the cumulative basis adjustment associated with the hedging relationships was ~~$2.4 million. During the year ended September 30, 2021, hedge accounting was discontinued on a $46 million commercial loan hedge.~~

$(2,632,000).

The Company has entered into interest rate swaps to convert certain short-term borrowings to fixed rate payments. The primary purpose of these hedges is to mitigate the risk of changes in future cash flows resulting from increasing interest rates. For qualifying cash flow hedges under ASC 815, gains and losses on the interest rate swaps are recorded in accumulated other comprehensive income ("AOCI") and then reclassified into earnings in the same period the hedged cash flows affect earnings and within the same income statement line item as the hedged cash flows. During the nine months ended June 30, 2021, $400,000,000 of cash flow hedges with an average effective rate of 2.15% were terminated and the associated FHLB borrowings were repaid at their 90-day call date. Additionally, a $200,000,000 partial termination of a cash flow hedge with an average effective rate of 0.79% was executed with the associated FHLB borrowing being repaid and a $14,110,000 gain recorded on the swap. Lastly, a $150,000,000 FHLB borrowing (unhedged) with a rate of 2.91% was repaid prior to maturity. As of June 30, ~~2022,~~2023, the maturities for hedges of adjustable rate borrowings ranged from ~~two years~~one year to ~~eight~~seven years, with the weighted average being ~~6.8~~5.8 years.

~~Table of Contents~~

~~WASHINGTON FEDERAL, INC. AND SUBSIDIARIES~~

~~NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

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


(In thousands)	(In thousands)	Three Months Ended June 30,				(In thousands)	Three Months Ended June 30,
Amounts recognized in AOCI		2022		2021
Amounts of gain/(loss) recognized in AOCI						Amounts of gain/(loss) recognized in AOCI	2023		2022
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	$	31,225	$	(23,485)	Pay fixed/receive floating swaps on borrowings cash flow hedges	$	14,757	$	31,225
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	$	31,225	$	(23,485)	Total pre-tax gain/(loss) recognized in AOCI	$	14,757	$	31,225


(In thousands)	(In thousands)	Nine Months Ended June 30,				(In thousands)	Nine Months Ended June 30,
Amounts recognized in AOCI		2022		2021
Amounts of gain/(loss) recognized in AOCI						Amounts of gain/(loss) recognized in AOCI	2023		2022
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	$	93,994	$	67,198	Pay fixed/receive floating swaps on borrowings cash flow hedges	$	(14,021)	$	93,994
Reclassification adjustment of net (gain)/loss included in net income		—		(14,110)

Total pre-tax gain/(loss) recognized in AOCI	Total pre-tax gain/(loss) recognized in AOCI	$	93,994	$	53,088	Total pre-tax gain/(loss) recognized in AOCI	$	(14,021)	$	93,994

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

Three Months Ended June 30, 2022 Three Months Ended June 30, 2021
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 $ 149,113 $ (6,118) $ 134,193 $ (9,937)
Gain/(loss) on fair value hedging relationships:
Interest rate contracts
Amounts related to interest settlements on derivatives $ (394) $ (1,582)
Recognized on derivatives 8,325 (6,262)
Recognized on hedged items (8,564) 6,292
Net income/(expense) recognized on fair value hedges $ (633) $ (1,552)
Gain/(loss) on cash flow hedging relationships:
Interest rate contracts
Amounts related to interest settlements on derivatives $ 21 $ 2,182
Amount of derivative gain/(loss) reclassified from AOCI into interest income/expense — —
Net income/(expense) recognized on cash flow hedges $ 21 $ 2,182

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(UNAUDITED)


		Nine Months Ended June 30, 2022				Nine Months Ended June 30, 2021					Three Months Ended June 30, 2023				Three Months Ended June 30, 2022
		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	$	426,882	$	(21,486)	$	400,621	$	(35,126)	Interest income/(expense), including the effects of fair value and cash flow hedges	$	232,167	$	(33,718)	$	149,113	$	(6,118)

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	$	(2,964)			$	(4,686)			Amounts related to interest settlements on derivatives	$	4,348			$	(394)
Recognized on derivatives	Recognized on derivatives	31,386				15,816				Recognized on derivatives	13,223				8,325
Recognized on hedged items	Recognized on hedged items	(31,625)				(15,541)				Recognized on hedged items	(13,195)				(8,564)
Net income/(expense) recognized on fair value hedges	Net income/(expense) recognized on fair value hedges	$	(3,203)			$	(4,411)			Net income/(expense) recognized on fair value hedges	$	4,376			$	(633)

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			$	3,757			$	8,846	Amounts related to interest settlements on derivatives			$	10,639			$	21
Amount of derivative gain/(loss) reclassified from AOCI into interest income/expense	Amount of derivative gain/(loss) reclassified from AOCI into interest income/expense			—				14,110		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			$	3,757			$	22,956	Net income/(expense) recognized on cash flow hedges			$	10,639			$	21


	Nine Months Ended June 30, 2023				Nine Months Ended June 30, 2022
	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	$	659,070	$	(80,877)	$	426,882	$	(21,486)

Gain/(loss) on fair value hedging relationships:
Interest rate contracts
Amounts related to interest settlements on derivatives	$	11,753			$	(2,964)
Recognized on derivatives	3,766				31,386
Recognized on hedged items	(3,367)				(31,625)
Net income/(expense) recognized on fair value hedges	$	12,152			$	(3,203)

Gain/(loss) on cash flow hedging relationships:
Interest rate contracts
Amounts related to interest settlements on derivatives			$	27,370			$	3,757
Amount of derivative gain/(loss) reclassified from AOCI into interest income/expense			—				—
Net income/(expense) recognized on cash flow hedges			$	27,370			$	3,757

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,

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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

with changes in fair value recorded in earnings. For the nine months ended June 30, 2023 the net impact to the statement of operations was a decrease in other income of $900,000. There was no net impact to the statement of operations for the nine months ended June 30, ~~2022 and 2021 as the changes in fair value of the receive fixed swap and pay fixed swap offset each other.~~2022.

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 June 30,				(In thousands)		Three Months Ended June 30,
Derivative instruments	Derivative instruments	Classification of gain/(loss) recognized in income on derivative instrument	2022		2021		Derivative instruments	Classification of gain/(loss) recognized in income on derivative instrument	2023		2022
Interest rate contracts:	Interest rate contracts:						Interest rate contracts:
Pay fixed/receive floating swap	Pay fixed/receive floating swap	Other noninterest income	$	15,865	$	10,814	Pay fixed/receive floating swap	Other noninterest income	$	12,612	$	15,865
Receive fixed/pay floating swap	Receive fixed/pay floating swap	Other noninterest income	(15,865)		(10,814)		Receive fixed/pay floating swap	Other noninterest income	(13,538)		(15,865)
			$	—	$	—			$	(926)	$	—

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~~WASHINGTON FEDERAL, INC. AND SUBSIDIARIES~~

~~NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~


(In thousands)	(In thousands)		Nine Months Ended June 30,				(In thousands)		Nine Months Ended June 30,
Derivative instruments	Derivative instruments	Classification of gain/(loss) recognized in income on derivative instrument	2022		2021		Derivative instruments	Classification of gain/(loss) recognized in income on derivative instrument	2023		2022
Interest rate contracts:	Interest rate contracts:						Interest rate contracts:
Pay fixed/receive floating swap	Pay fixed/receive floating swap	Other noninterest income	$	54,202	$	64,119	Pay fixed/receive floating swap	Other noninterest income	$	(2,409)	$	54,202
Receive fixed/pay floating swap	Receive fixed/pay floating swap	Other noninterest income	(54,202)		(64,119)		Receive fixed/pay floating swap	Other noninterest income	1,509		(54,202)
			$	—	$	—			$	(900)	$	—

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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~~cancellable 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 ~~5.9%~~4.0% of our total revenues for the nine months ended June 30, ~~2022,~~2023, compared to 5.9% for the nine months ended June 30, ~~2021.~~2022. As this standard is immaterial to our consolidated financial statements, the Company has omitted certain disclosures in ASC 606, including the disaggregation of revenue table. Sources of non-interest income within the scope of the guidance include the following:

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

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

Insurance Agency Commissions (recognized in Other income) - WAFD Insurance Group, Inc. is a wholly owned subsidiary of Washington Federal Bank 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 ~~2022~~2023 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 ~~$4,973,336,000~~$4,088,046,000 and ~~$3,804,444,000~~$4,947,570,000 at June 30, ~~2022~~2023 and September 30, ~~2021,~~2022, respectively. The reserve was ~~$32,500,000~~$26,500,000 as of June 30, ~~2022,~~2023, which is ~~an increase~~a decrease from ~~$27,500,000~~$32,500,000 at September 30, ~~2021.~~ 2022. See Note A "Summary of Significant Accounting Policies" for details regarding the reserve methodology.

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

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PART I – Financial Information

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

FORWARD LOOKING STATEMENTS

Washington Federal, Inc. (the ~~"Company"~~“Company” or ~~"Washington Federal"~~“Washington Federal”) makes statements in this Quarterly Report on Form 10-Q that constitute forward-looking statements. ~~Many forward-looking statements can be identified using words~~Words such as “expects,” “anticipates,” “believes,” “estimates,” “intends,” “forecasts,” ~~“projects,” "potentially,"~~“projects” and other similar expressions or future or conditional verbs such as ~~"may,"~~ “will,” “should,” “would” and “could” are intended to help identify such forward-looking statements. These statements are not historical ~~or current~~ 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 Risk Factors ~~discussed~~included in Part II. Item 1A ofbelow and the risks and uncertainties discussed elsewhere in this report, and including the Risk Factors included in the Company’s 2022 Form 10-K for the year ended September 30, 2022, 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:

Operational Risks:

•economic uncertainty or a deterioration in economic conditions or slowdowns in economic growth, including declines in home sale volumes and financial stress on borrowers (consumers and businesses) as a result of higher interest rates or an uncertain economic environment;

•~~high unemployment~~fluctuating interest rates ~~inflationary pressures~~ and the impact of inflation on the Company's business and financial results;

•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;

•global economic trends, including developments related to Ukraine and Russia, and related negative financial impacts on our borrowers, the financial markets and the global economy;

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

•risks related to operational, technological, and third-party provided technology infrastructure;

•risks associated with cybersecurity incidents and threat actors;

•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;

•risks associated with ~~cybersecurity incidents and threat actors, including increased~~ our failure to retain or attract key employees;

•risks ~~due to COVID-19 and the remote work environment;~~associated with failures of our risk management framework;

•risks related to the impacts of climate ~~change;~~change on our business or reputation;

•risks related to the ~~effects of a severe economic downturn, including high unemployment rates and declines in housing prices and property values, in our primary market areas;~~Company’s pending merger with Luther Burbank Corporation.

•
~~the effects of~~

Regulatory 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, risk of negative rates or an inverted yield curve and the effect on our net interest income and net interest margin;

•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, the Washington Commercial Bank 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;~~Litigation Risk:

•unanticipated effects and expenses related to the completed charter conversion of the Bank from a federal to a state charter; ~~and~~

•~~global economic trends, including developments related to Ukraine and Russia, and related negative financial impacts on our borrowers, the financial markets and the global economy;~~

•the Company’s ability to manage the risks and costs involved in the remediation efforts to the Bank's Home Mortgage Disclosure Act (“HMDA”) compliance and reporting, and the impact of enforcement actions or legal proceedings with respect to the Bank’s HMDA program;

•compliance risks associated with the USA PATRIOT Act, Bank Secrecy Act, Real Estate Settlement Procedures Act, Truth-in-Lending Act, Community Reinvestment Act, Fair Lending Laws, Flood Insurance Reform Act or other laws and regulations;

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•litigation risks resulting in significant expenses, losses and reputational damage;

•environmental risks resulting from our real estate lending business.

Market and Industry Risk:

•risks associated with our geographic concentration, including the effects of a severe economic downturn, including high unemployment rates and declines in housing prices and property values, in our primary market areas;

•eroding confidence in the banking system and regional banks in particular;

•downturns in the real estate market;

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

•risks associated with inadequate or faulty underwriting and loan collection practices;

•changes in banking operations, including a shift from retail to online activities;

•fluctuations in interest rate risk and changes in market interest rates, including risk related to LIBOR reform, risk of an inverted yield curve and the effect on our net interest income and net interest margin;

•industry deficiencies in foreclosure practices, including delays and challenges in the foreclosure process.

Competitive Risks:

•our ability to effectively compete with government sponsored enterprises entering the market, other financial institutions and new market participants;

•our ability to grow organically or through acquisitions.

Security Ownership Risks:

•our ability to continue to pay dividends, including on our outstanding Series A Preferred Stock;

•risks related to the volatility of our common stock, and future dilution;

•effects of activist shareholders;

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

General Risks:

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

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

~~All~~For the reasons described above, we caution you against relying on any forward-looking statements. You should not consider the summary of such factors to be an exhaustive statement of all of the risks, uncertainties, or potentially inaccurate assumptions that could cause our current expectations or beliefs to change. Further, 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.

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GENERAL & BUSINESS DESCRIPTION

Washington Federal Bank, a federally-insured Washington state chartered ~~commercial~~ 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 was formed as the Bank’s holding company in November, 1994. As used throughout this document, the terms “Washington Federal,” the “Company” or ~~"we"~~“we” or ~~"us"~~“us” and ~~"our"~~“our” refer to ~~the~~ Washington Federal, Inc. and its consolidated subsidiaries, and the term “Bank” refers to the operating subsidiary, Washington Federal Bank. 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 (the "WDFI") to convert from a national association to a non-Federal Reserve member Washington state-chartered bank. ~~As described in the Current Report on Form 8-K filed with the SEC on February 4, 2022, the~~The Bank completed the conversion of its charter from a national bank charter, supervised by the Office of the Comptroller of the Currency, to a Washington state chartered commercial bank effective February 4, 2022. The Bank cancelled its holdings of stock in the Federal Reserve Bank of San Francisco as part of the conversion and its legal name changed from “Washington Federal Bank, National Association” to “Washington Federal Bank.” As a result of the conversion, the WDFI is the Bank's primary state regulator and the Federal Deposit Insurance Corporation (the "FDIC") is the Bank's primary federal regulator. The Federal Reserve will continue to regulate the Bank's holding company, Washington Federal, Inc.

The Company's fiscal year end is September 30th. All references to ~~2021~~2022 represent balances as of September 30, ~~2021~~2022 or activity for the fiscal year then ended.

RECENT INDUSTRY DEVELOPMENTS

During the first calendar quarter of 2023, the banking industry experienced significant volatility with multiple high-profile bank failures, primarily due to liquidity concerns. This resulted in industry-wide uncertainty and concerns related to liquidity, deposit outflows, unrealized securities losses and eroding consumer confidence in the banking system. The Company took a number of preemptive actions which included proactive outreach to clients and actions to maximize funding sources in response to these recent developments. These actions included increasing the target cash balance range, enhancing deposit flow and concentration monitoring, and utilizing the Federal Reserve's Bank Term Funding Program as an additional source of liquidity.

Despite these negative industry developments, the Company's liquidity position and balance sheet remain strong and the Company did not experience negative impacts to its financial condition outside of those observed generally across the industry, such as increasing funding costs. The Company experienced net deposit inflows for the quarter ending June 30, 2023 with total deposits increasing by 1.6%. Our deposit base is highly diversified with little industry or customer concentration and 75% of total deposits are FDIC insured or collateralized as of June 30, 2023. Furthermore, the Company remains well capitalized. The Company's capital at June 30, 2023 remains at high levels with common equity tier 1 capital ("CET1") and total risk-based capital ratios of 10.25% and 13.23%, respectively, for the Company and 11.41% and 12.62% for the Bank, respectively, which exceed the regulatory minimum well-capitalized guidelines of 6.50% and 10.00%.

CRITICAL ACCOUNTING POLICIES

See Note A to the 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 Company's ~~2021~~2022 Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on November ~~19, 2021.~~18, 2022.

ASSET QUALITY & ALLOWANCE FOR CREDIT LOSSES

See ~~Note~~Notes A, D and E to the 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 Company's ~~2021~~2022 Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on November ~~19, 2021.~~18, 2022.

INTEREST RATE RISK

Based on management's assessment of the current interest rate environment, the Company has taken steps to reduce its interest rate risk profile, including growing shorter-term loans and transaction deposit ~~accounts, to reduce its interest rate risk profile.~~accounts. The mix of transaction and savings accounts is ~~79%~~70% of total deposits as of June 30, ~~2022 while~~2023. Although the transaction accounts are greater than time deposits, 83% of total customer deposits are interest-bearing as the current rate environment has resulted in increased consumer demand for

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higher yielding deposit options. The composition of the investment securities portfolio is ~~41%~~40% variable and ~~59%~~60% 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 ~~$477,884,000~~$434,172,000 of mortgage-backed securities that it has designated as ~~held-to-maturity~~HTM and are carried at amortized cost. As of June 30, ~~2022,~~2023, the net unrealized loss on these securities was ~~$30,055,000.~~$49,860,000. The Company has ~~$2,150,732,000~~$2,036,233,000 of available-for-sale securities that are carried at fair value. As of June 30, ~~2022,~~2023, the net unrealized loss on these securities was ~~$65,919,000.~~$104,350,000. 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 June 30, ~~2022~~2023 was ~~$136,436,000.~~$165,924,000. 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.

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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 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 June 30, ~~2022,~~2023, 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 ~~3.9%~~3.0% in the next year. This compares to an estimated increase of ~~9.7%~~1.9% as of the September 30, ~~2021~~2022 analysis. The change is primarily due to a shift in the yield curve as well as shifts in the mix of fixed versus adjustable rate assets and ~~liabilities and lower cash balances that immediately reprice to reflect the 200 basis point increase in interest rates.~~liabilities. Management estimates that a gradual increase of 300 basis points in short term rates and 100 basis points in long-term rates over two years would result in a net interest income increase of ~~0.9%~~1.1% in the first year and increase of ~~2.9%~~1.4% in the second year assuming a constant balance sheet and no management intervention. Alternatively, in the event of an immediate and parallel decrease of 100 basis points in both short and long-term interest rates estimates that net interest income would increase by 3.54%.

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 June 30, ~~2022,~~2023, in the event of an immediate and parallel increase of 200 basis points in interest rates, the NPV is estimated to decrease by ~~$592,366,000~~$643,101,000 or ~~21.1%~~24.2% and the NPV to total assets ratio to decline to ~~12.1%~~9.9% from a base of ~~14.3%~~12.3%. As of September 30, ~~2021,~~2022, the NPV in the event of a 200 basis point increase in rates was estimated to decrease by ~~$207,000,000~~$617,000,000 or ~~6.8%~~20.9% and the NPV to total assets ratio to decline to ~~15.2%~~12.6% from a base of ~~15.5%~~14.9%. The change in NPV sensitivity is due primarily to changes in interest rates and the related impact on asset prices 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 June 30, ~~2022.~~2023. Prepayment speeds for single family mortgages are low at June 30, 2023 with the Bank's conditional payment rate ("CPR") for this loan portfolio segment at 7.9%, down from 13.1% the year before.

As of June 30, 2023, the event of an immediate and parallel decrease of 100 basis points in interest rates is estimated to increase NPV by $294,907,000, or 11.08%, and the NPV to total assets ratio to grow to 13.31% from a base of 12.3%.

Interest Rates - The Company measures the difference between the rate on total interest-earning assets and the rate on interest-bearing liabilities at the end of each period. This period-end interest rate spread was ~~3.07%~~2.72% at June 30, ~~2022~~2023 and ~~2.45%~~3.36% at September 30, ~~2021.~~2022. As of June 30, ~~2022,~~2023, the weighted average period-end rate on interest-earning assets increased by 7090 basis points to ~~3.50%~~4.94% compared to ~~2.80%~~4.04% at September 30, ~~2021,~~2022, while the weighted average period-end rate on interest-bearing liabilities increased by 8154 basis ~~point~~points to ~~0.43%~~2.22% from ~~0.35%~~0.68%. The period-end interest rate spread ~~increased~~decreased to 2.72% at June 30, 2023 from 3.07% at June 30, ~~2022 from 2.31% at June 30, 2021.~~2022.

Net Interest Margin - Net interest margin is measured as net interest income divided by average earning assets for the period. Net interest margin was 3.27% for the quarter ended June 30, 2023 compared to 3.22% for the quarter ended June 30, ~~2022 compared to 2.82% for the quarter ended June 30, 2021.~~2022. The yield on interest-earning assets increased 30174 basis points to ~~3.55%~~5.29% and the cost of interest-bearing liabilities ~~decreased 12~~increased 209 basis points to ~~0.42%~~2.51% over that same period. The higher yield on interest-earning assets was primarily due to the impact of

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rising rates on adjustable rate assets and cash. ~~Amortization of net loan origination fees on PPP loans declined to $936,000 during the quarter ended June 30, 2022 compared to $6,122,000 in the prior year quarter.~~ The ~~lower~~higher rate in interest-bearing liabilities ~~was~~resulted primarily ~~due to replacing high-yielding, long-term~~from customer deposits repricing and a higher rate on FHLB ~~borrowings with new borrowings at lower rates.~~borrowings.

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.


	Three Months Ended June 30, 2023						Three Months Ended June 30, 2022
	Average Balance		Interest		Average Rate		Average Balance		Interest		Average Rate
	($ in thousands)						($ in thousands)
Assets
Loans receivable	$	17,307,298	$	232,167	5.38	%	$	15,350,905	$	149,113	3.90	%
Mortgage-backed securities	1,349,264		10,454		3.11		1,416,212		8,618		2.44
Cash & Investments	1,879,893		27,249		5.81		2,056,387		8,281		1.62
FHLB & FRB stock	131,191		2,610		7.98		78,305		1,136		5.82
Total interest-earning assets	20,667,646		272,480		5.29	%	18,901,809		167,148		3.55	%
Other assets	1,445,635						1,383,146
Total assets	$	22,113,281					$	20,284,955

Liabilities and Equity
Interest-bearing customer accounts	$	13,019,355	$	70,062	2.16	%	$	12,852,849	$	9,284	0.29	%
Borrowings	3,595,879		33,718		3.76		1,705,824		6,118		1.44

Total interest-bearing liabilities	16,615,234		103,780		2.51	%	14,558,673		15,402		0.42	%
Noninterest-bearing customer accounts	2,826,238						3,278,346
Other liabilities	275,522						238,842
Total liabilities	19,716,994						18,075,861
Shareholders' equity	2,396,287						2,209,094
Total liabilities and equity	$	22,113,281					$	20,284,955
Net interest income/interest rate spread			$	168,700	2.78	%			$	151,746	3.12	%
Net interest margin (NIM)					3.27	%					3.22	%

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

Three Months Ended June 30, 2022 Three Months Ended June 30, 2021
Average Balance Interest Average Rate Average Balance Interest Average Rate
($ in thousands) ($ in thousands)
Assets
Loans receivable $ 15,350,905 $ 149,113 3.90 % $ 13,330,611 $ 134,193 4.04 %
Mortgage-backed securities 1,416,212 8,618 2.44 1,179,767 5,488 1.87
Cash & Investments 2,056,387 8,281 1.62 3,593,905 6,113 0.68
FHLB & FRB stock 78,305 1,136 5.82 113,770 1,654 5.83
Total interest-earning assets 18,901,809 167,148 3.55 % 18,218,053 147,448 3.25 %
Other assets 1,383,146 1,278,879
Total assets $ 20,284,955 $ 19,496,932
Liabilities and Equity
Interest-bearing customer accounts $ 12,852,849 $ 9,284 0.29 % $ 12,080,339 $ 8,906 0.30 %
FHLB advances 1,705,824 6,118 1.44 1,993,956 9,937 2.00
Other borrowings — — — — — —
Total interest-bearing liabilities 14,558,673 15,402 0.42 % 14,074,295 18,843 0.54 %
Noninterest-bearing customer accounts 3,278,346 2,890,917
Other liabilities 238,842 220,805
Total liabilities 18,075,861 17,186,017
Shareholders' equity 2,209,094 2,310,915
Total liabilities and equity $ 20,284,955 $ 19,496,932
Net interest income/interest rate spread $ 151,746 3.12 % $ 128,605 2.71 %
Net interest margin (NIM) 3.22 % 2.82 %

~~Table of Contents~~

~~WASHINGTON FEDERAL, INC. AND SUBSIDIARIES~~


		Nine Months Ended June 30, 2022						Nine Months Ended June 30, 2021							Nine Months Ended June 30, 2023						Nine Months Ended June 30, 2022
		Average Balance		Interest		Average Rate		Average Balance		Interest		Average Rate			Average Balance		Interest		Average Rate		Average Balance		Interest		Average Rate
		($ in thousands)						($ in thousands)							($ in thousands)						($ in thousands)
Assets	Assets													Assets
Loans receivable	Loans receivable	$	14,837,421	$	426,882	3.85	%	$	12,999,227	$	400,621	4.12	%	Loans receivable	$	16,992,994	$	659,070	5.19	%	$	14,837,421	$	426,882	3.85	%
Mortgage-backed securities	Mortgage-backed securities	1,064,725		18,069		2.27		1,374,710		19,414		1.89		Mortgage-backed securities	1,357,857		31,489		3.10		1,064,725		18,069		2.27
Cash & Investments	Cash & Investments	2,783,617		19,821		0.95		3,431,104		17,097		0.67		Cash & Investments	1,709,469		64,522		5.05		2,783,617		19,821		0.95
FHLB & FRB stock	FHLB & FRB stock	90,107		3,654		5.42		128,371		4,892		5.10		FHLB & FRB stock	129,445		6,164		6.37		90,107		3,654		5.42
Total interest-earning assets	Total interest-earning assets	18,775,870		468,426		3.34	%	17,933,412		442,024		3.30	%	Total interest-earning assets	20,189,765		761,245		5.04	%	18,775,870		468,426		3.34	%
Other assets	Other assets	1,313,366						1,279,851						Other assets	1,479,537						1,313,366
Total assets	Total assets	$	20,089,236					$	19,213,263					Total assets	$	21,669,302					$	20,089,236

Liabilities and Equity	Liabilities and Equity													Liabilities and Equity
Interest-bearing customer accounts	Interest-bearing customer accounts	$	12,754,118	$	25,970	0.27	%	$	11,838,145	$	33,745	0.38	%	Interest-bearing customer accounts	$	12,792,107	$	153,831	1.61	%	$	12,754,118	$	25,970	0.27	%
FHLB advances		1,715,275		21,486		1.67		2,359,341		35,126		1.99
Other borrowings		—		—		—		15		—		0.69
Borrowings														Borrowings	3,189,011		80,877		3.39		1,715,275		21,486		1.67

Total interest-bearing liabilities	Total interest-bearing liabilities	14,469,393		47,456		0.44	%	14,197,501		68,871		0.65	%	Total interest-bearing liabilities	15,981,118		234,708		1.96	%	14,469,393		47,456		0.44	%
Noninterest-bearing customer accounts	Noninterest-bearing customer accounts	3,221,504						2,575,191						Noninterest-bearing customer accounts	3,040,183						3,221,504
Other liabilities	Other liabilities	225,736						248,384						Other liabilities	290,204						225,736
Total liabilities	Total liabilities	17,916,633						17,021,076						Total liabilities	19,311,505						17,916,633
Shareholders' equity	Shareholders' equity	2,172,603						2,192,187						Shareholders' equity	2,357,797						2,172,603
Total liabilities and equity	Total liabilities and equity	$	20,089,236					$	19,213,263					Total liabilities and equity	$	21,669,302					$	20,089,236
Net interest income/interest rate spread	Net interest income/interest rate spread			$	420,970	2.90	%			$	373,153	2.65	%	Net interest income/interest rate spread			$	526,537	3.08	%			$	420,970	2.90	%
Net interest margin (NIM)	Net interest margin (NIM)					3.00	%					2.77	%	Net interest margin (NIM)					3.49	%					3.00	%

As of June 30, ~~2022,~~2023, total assets had increased by ~~$508,257,000~~$1,780,457,000 to ~~$20,158,831,000~~$22,552,588,000 from ~~$19,650,574,000~~$20,772,131,000 at September 30, ~~2021.~~2022. During the nine months ended June 30, ~~2022,~~2023, loans receivable increased ~~$1,731,595,000~~$1,270,624,000 while cash and cash equivalents ~~decreased~~increased by ~~$1,483,388,000~~$455,678,000 and investment securities ~~increased~~decreased by ~~$124,332,000.~~$43,931,000. Growth in loans receivable was ~~partially~~primarily funded by ~~continued growth~~the increase in ~~customer deposits as well as~~borrowings during the ~~decline in cash.~~

~~Cash and cash equivalents of $607,421,000 and shareholders’ equity of $2,220,111,000 as of June 30, 2022 provide management with flexibility in managing interest rate risk going forward.~~period.

LIQUIDITY AND CAPITAL RESOURCES

The principal sources of funds for the Company's activities are loan repayments (including prepayments), net deposit inflows, sales and repayments 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 Bank maintains a strong liquidity position with a significant cash balance and high-quality securities portfolio. The Company has the intent and ability to hold those AFS investments in a loss position. However, any decision to sell our AFS securities would be based on various factors, which could include liquidity needs. Quarterly liquidity testing shows that these balances combined with ample borrowing capacity provide a strong position even in the most extreme scenarios.

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

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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.~~liquidity.

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~~In addition, the Bank ishas also ~~eligible~~elected to ~~borrow under~~utilize the Federal ~~Reserve~~Reserve's Bank Term Funding program (the "BTFP") to leverage its highly favorable terms to fortify the Bank's ~~primary credit program.~~

~~Strong growth in customer deposit accounts has been a substantial~~liquidity position. These borrowings are repayable at any time without penalty and are the lowest cost funding source for funding increases in the loan portfolio. Customer accounts increased $423,508,000, or 2.7%, to $15,965,620,000 at June 30, 2022 compared with $15,542,112,000 at September 30, 2021. Total FHLB borrowingsavailable. Borrowings totaled ~~$1,700,000,000~~$3,750,000,000 as of June 30, ~~2022, a decrease~~2023, an increase from ~~$1,720,000,000~~$2,125,000,000 at September 30, ~~2021.~~2022. Total borrowings at June 30, 2023 are made up of $3,000,000,000 in FHLB Advances and $750,000,000 borrowed from the BTFP.

Customer deposit account balances have increased $90,854,000, or 0.6%, to $16,120,424,000 at June 30, 2023 compared with $16,029,570,000 at September 30, 2022.

The Company's cash and cash equivalents totaled ~~$607,421,000~~$1,139,643,000 at June 30, ~~2022, a decrease~~2023, an increase from ~~$2,090,809,000~~$683,965,000 at September 30, ~~2021.~~2022. These amounts include the Bank's operating cash.

The Company’s shareholders' equity at June 30, ~~2022~~2023 was ~~$2,220,111,000,~~$2,394,066,000, or ~~11.01%~~10.62% of total assets. This is an increase of ~~$94,047,000~~$119,806,000 from September 30, ~~2021~~2022 when shareholders' equity was ~~$2,126,064,000,~~$2,274,260,000, or ~~10.82%~~10.95% of total assets. The Company’s shareholders' equity was impacted in the nine months ended June 30, ~~2022~~2023 by net income of ~~$162,935,000,~~$207,218,000, the payment of ~~$46,015,000~~$47,826,000 in common stock dividends, payment of $10,968,000 in preferred stock dividends, net treasury stock ~~purchases~~transactions of ~~$3,212,000,~~$30,450,000, as well as an other comprehensive loss of ~~$15,558,000.~~$5,130,000. The ratio of tangible capital to tangible assets at June 30, ~~2022~~2023 was ~~9.63%~~9.37%. 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 bank regulatory 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 Bank regulatory agencies establish regulatory capital rules that require minimum capital ratios and establish criteria for calculating regulatory capital. Minimum capital ratios for four measures are used for assessing capital adequacy. The standards are indicated in the table below. The common equity tier 1 capital ratio recognizes common equity as the highest form of capital. The denominator for all except the leverage ratio is risk weighted assets. The rules set forth a “capital conservation buffer” of up to 2.5%. In the event that a bank’s capital levels fall below the minimum ratios plus these buffers, the bank's regulators may place restrictions on it. These restrictions include reducing dividend payments, share buy-backs, and staff bonus payments. The purpose of these buffers is to require banks to build up capital outside of periods of stress that can be drawn down during periods of stress. As a result, even during periods where losses are incurred, the minimum capital ratios can still be met.

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


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

June 30, 2022
June 30, 2023										June 30, 2023
Common Equity Tier I risk-based capital ratio:	Common Equity Tier I risk-based capital ratio:									Common Equity Tier I risk-based capital ratio:
The Company	The Company	$	1,556,947	9.81	%	4.50	%	NA		The Company	$	1,737,915	10.25	%	4.50	%	NA
The Bank	The Bank	1,760,344		11.08	%	4.50	%	6.50	%	The Bank	1,934,080		11.41	%	4.50	%	6.50	%
Tier I risk-based capital ratio:	Tier I risk-based capital ratio:									Tier I risk-based capital ratio:
The Company	The Company	1,856,947		11.70	%	6.00	%	NA		The Company	2,037,915		12.02	%	6.00	%	NA
The Bank	The Bank	1,760,344		11.08	%	6.00	%	8.00	%	The Bank	1,934,080		11.41	%	6.00	%	8.00	%
Total risk-based capital ratio:	Total risk-based capital ratio:									Total risk-based capital ratio:
The Company	The Company	2,055,468		12.95	%	8.00	%	NA		The Company	2,242,484		13.23	%	8.00	%	NA
The Bank	The Bank	1,958,937		12.33	%	8.00	%	10.00	%	The Bank	2,138,649		12.62	%	8.00	%	10.00	%
Tier 1 Leverage ratio:	Tier 1 Leverage ratio:									Tier 1 Leverage ratio:
The Company	The Company	1,856,947		9.35	%	4.00	%	NA		The Company	2,037,915		9.31	%	4.00	%	NA
The Bank	The Bank	1,760,344		8.86	%	4.00	%	5.00	%	The Bank	1,934,080		8.84	%	4.00	%	5.00	%

September 30, 2021
September 30, 2022										September 30, 2022
Common Equity Tier 1 risk-based capital ratio:	Common Equity Tier 1 risk-based capital ratio:									Common Equity Tier 1 risk-based capital ratio:
The Company	The Company	$	1,446,613	9.50	%	4.50	%	NA		The Company	$	1,613,075	9.86	%	4.50	%	NA
The Bank	The Bank	1,717,014		11.28	%	4.50	%	6.50	%	The Bank	1,781,932		10.89	%	4.50	%	6.50	%
Tier I risk-based capital ratio:	Tier I risk-based capital ratio:									Tier I risk-based capital ratio:
The Company	The Company	1,746,613		11.47	%	6.00	%	NA		The Company	1,913,075		11.69	%	6.00	%	NA
The Bank	The Bank	1,717,014		11.28	%	6.00	%	8.00	%	The Bank	1,781,932		10.89	%	6.00	%	8.00	%
Total risk-based capital ratio:	Total risk-based capital ratio:									Total risk-based capital ratio:
The Company	The Company	1,937,036		12.72	%	8.00	%	NA		The Company	2,117,574		12.94	%	8.00	%	NA
The Bank	The Bank	1,907,408		12.53	%	8.00	%	10.00	%	The Bank	1,986,434		12.14	%	8.00	%	10.00	%
Tier 1 Leverage ratio:	Tier 1 Leverage ratio:									Tier 1 Leverage ratio:
The Company	The Company	1,746,613		9.07	%	4.00	%	NA		The Company	1,913,075		9.51	%	4.00	%	NA
The Bank	The Bank	1,717,014		8.92	%	4.00	%	5.00	%	The Bank	1,781,932		8.86	%	4.00	%	5.00	%

CHANGES IN FINANCIAL CONDITION

Cash and cash equivalents - Cash and cash equivalents were ~~$607,421,000~~$1,139,643,000 at June 30, ~~2022, a decrease~~2023, an increase of ~~$1,483,388,000,~~$455,678,000, or ~~70.9%~~66.6%, since September 30, ~~2021.~~2022. The change is primarily ~~due~~the result of increased borrowings to provide greater balance sheet liquidity offset by the funding of ~~new~~construction loan ~~originations, partially offset by growth in customer transaction deposit accounts.~~advances.

Available-for-sale and held-to-maturity investment securities - ~~Available-for-sale~~AFS securities ~~increased $12,473,000,~~decreased $14,804,000, or ~~0.6%~~0.7%, during the nine months ended June 30, ~~2022,~~2023, mostly due to ~~purchases of $516,163,000, partially offset by~~ principal ~~repayments~~payments and maturities of ~~$384,111,000~~$339,604,000 which were offset by purchases of $317,027,000 and an unrealized ~~loss~~gain of ~~$87,859,000.~~$7,346,000. During the same period, the balance of ~~held-to-maturity~~HTM securities ~~increased~~decreased by ~~$111,859,000~~$29,127,000 due primarily to ~~purchases of $195,358,000, partially offset by~~ principal pay-downs and maturities of ~~$81,497,000.~~$28,895,000. As of June 30, ~~2022,~~2023, the Company had a net unrealized loss on ~~available-for-sale~~AFS securities of ~~$65,919,000,~~$104,350,000, which is included on a net of tax basis in accumulated other comprehensive income (loss).

Because the Company does not intend to sell these securities and does not consider it more likely than not that it

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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 have any credit impairment.

The majority of the Company’s ~~held-to-maturity~~HTM and ~~available-for-sale~~AFS 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~~HTM securities as of June 30, ~~2022~~2023 or September 30, ~~2021~~2022 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 June 30, ~~2022~~2023 or September 30, ~~2021,~~2022, therefore, no allowance was recorded.

Loans receivable - Loans receivable, net of related contra accounts, increased by ~~$1,731,595,000~~$1,270,624,000 to ~~$15,565,165,000~~$17,384,188,000 at June 30, ~~2022,~~2023, compared to ~~$13,833,570,000~~$16,113,564,000 at September 30, ~~2021.~~2022. The increase was primarily the net result of originations of ~~$7,104,309,000,~~$3,953,363,000, purchases of single-family residential mortgages of ~~$576,697,000,~~$79,965,000, partially offset by loan principal repayments of ~~$5,068,452,000~~$3,445,990,000 as well as a ~~$850,737,000 increase~~$735,985,000 decrease in loans in ~~process.~~process as a result of funding draws on construction loans. Commercial loan originations accounted for ~~78%~~77% of total originations and consumer loan originations were ~~22%~~23% 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, construction 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.

June 30, 2022 September 30, 2021 Change
($ in thousands) ($ in thousands) $ %
Commercial loans
Multi-family $ 2,494,594 13.2 % $ 2,291,477 14.0 % $ 203,117 8.9 %
Commercial real estate 2,899,057 15.3 2,443,845 15.0 455,212 18.6
Commercial & industrial (1) 2,351,030 12.4 2,314,654 14.2 36,376 1.6
Construction 3,896,740 20.6 2,888,214 17.7 1,008,526 34.9
Land - acquisition & development 245,233 1.3 222,457 1.4 22,776 10.2
Total commercial loans 11,886,654 62.9 10,160,647 62.3 1,726,007 17.0
Consumer loans
Single-family residential 5,652,897 29.9 4,951,627 30.4 701,270 14.2
Construction - custom 943,858 5.0 783,221 4.8 160,637 20.5
   Land - consumer lot loans 158,485 0.8 149,956 0.9 8,529 5.7
   HELOC 185,427 1.0 165,989 1.0 19,438 11.7
   Consumer 73,044 0.4 87,892 0.5 (14,848) (16.9)
Total consumer loans 7,013,711 37.1 6,138,685 37.7 875,026 14.3
Total gross loans 18,900,365 100 % 16,299,332 100 % 2,601,033 16.0
   Less:
      Allowance for credit losses on loans 170,979 171,300 (321) (0.2)
      Loans in process 3,083,573 2,232,836 850,737 38.1
      Net deferred fees, costs and discounts 80,648 61,626 19,022 30.9
Total loan contra accounts 3,335,200 2,465,762 869,438 35.3
Net loans $ 15,565,165 $ 13,833,570 $ 1,731,595 12.5 %

~~(1) Includes $55 million of PPP loans as of June 30, 2022 and $312 million as of September 30, 2021.~~


	June 30, 2023				September 30, 2022				Change
	($ in thousands)				($ in thousands)				$		%
Commercial loans
Multi-family	$	2,889,635	14.5	%	$	2,645,801	13.7	%	$	243,834	9.2	%
Commercial real estate	3,239,387		16.3		3,133,660		16.2		105,727		3.4
Commercial & industrial	2,496,778		12.5		2,350,984		12.1		145,794		6.2
Construction	3,578,430		18.0		3,784,388		19.5		(205,958)		(5.4)
Land - acquisition & development	216,185		1.1		291,301		1.5		(75,116)		(25.8)
Total commercial loans	12,420,415		62.3		12,206,134		63.0		214,281		1.8
Consumer loans
Single-family residential	6,313,561		31.7		5,771,862		29.8		541,699		9.4
Construction - custom	757,171		3.8		974,652		5.0		(217,481)		(22.3)
Land - consumer lot loans	134,967		0.7		153,240		0.8		(18,273)		(11.9)
HELOC	224,917		1.1		203,528		1.0		21,389		10.5
Consumer	76,813		0.4		75,543		0.4		1,270		1.7
Total consumer loans	7,507,429		37.7		7,178,825		37.0		328,604		4.6
Total gross loans	19,927,844		100	%	19,384,959		100	%	542,885		2.8
Less:
Allowance for credit losses on loans	178,069				172,808				5,261		3.0
Loans in process	2,270,038				3,006,023				(735,985)		(24.5)
Net deferred fees, costs and discounts	95,549				92,564				2,985		3.2
Total loan contra accounts	2,543,656				3,271,395				(727,739)		(22.2)
Net loans	$	17,384,188			$	16,113,564			$	1,270,624	7.9	%

Non-performing assets - Non-performing assets increased ~~$6,805,000~~$22,446,000 during the nine months ended June 30, ~~2022~~2023 to ~~$50,430,000~~$67,000,000 from ~~$43,625,000~~$44,554,000 at September 30, ~~2021.~~2022. The ~~change~~increase is primarily due to the deterioration of one commercial loan combined with a ~~$4,930,000~~$1,704,000 increase in ~~non-accrual loans.~~REO. Non-performing assets as a percentage of total assets was ~~0.25%~~0.30% at June 30, ~~2022~~2023 compared to ~~0.22%~~0.21% at September 30, ~~2021.~~2022.

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


		June 30, 2022					September 30, 2021						June 30, 2023					September 30, 2022
		($ in thousands)											($ in thousands)
Troubled debt restructured loans:	Troubled debt restructured loans:											Troubled debt restructured loans:
Multi - family	Multi - family	$	6,099		10.4	%	$	223		0.3	%	Multi - family	$	5,818		11.8	%	$	6,044		10.6	%
Commercial real estate	Commercial real estate	2,194			3.7		2,275			3.5		Commercial real estate	2,082			4.2		2,166			3.8
Commercial & industrial	Commercial & industrial	34			0.1		40			0.1		Commercial & industrial	—			—		1			—

Single-family residential	Single-family residential	48,730			82.7		60,011			92.0		Single-family residential	40,104			81.3		46,902			82.4

Land - consumer lot loans	Land - consumer lot loans	1,722			2.9		2,292			3.5		Land - consumer lot loans	1,223			2.5		1,590			2.8
HELOC	HELOC	84			0.1		246			0.4		HELOC	57			0.1		83			0.1
Consumer	Consumer	33			0.1		41			0.1		Consumer	23			0.1		31			0.1
Total restructured loans (1)	Total restructured loans (1)	$	58,896		100	%	$	65,128		100	%	Total restructured loans (1)	$	49,307		100	%	$	56,817		100	%
Non-accrual loans:	Non-accrual loans:											Non-accrual loans:
Multi - family	Multi - family	$	5,944		16.2	%	$	475		1.5	%	Multi - family	$	5,951		10.8	%	$	5,912		17.1	%
Commercial real estate	Commercial real estate	5,024			13.7		8,038			25.3		Commercial real estate	1,087			2.0		4,691			13.6
Commercial & industrial	Commercial & industrial	4,288			11.7		365			1.1		Commercial & industrial	31,686			57.3		5,693			16.5
Construction	Construction	—			—		505			1.7		Construction	—			—		—			0.1
Land - acquisition & development		—			—		2,340			7.4

Single-family residential	Single-family residential	20,184			55.0		19,320			60.9		Single-family residential	15,510			28.0		17,450			50.5
Construction - custom	Construction - custom	900			2.5		—			—		Construction - custom	87			0.2		435			1.3
Land - consumer lot loans	Land - consumer lot loans	213			0.6		359			1.1		Land - consumer lot loans	122			0.2		84			0.2
HELOC	HELOC	91			0.2		287			0.9		HELOC	801			1.4		233			0.7
Consumer	Consumer	35			0.1		60			0.2		Consumer	32			0.1		36			0.1
Total non-accrual loans	Total non-accrual loans	36,679			100	%	31,749			100	%	Total non-accrual loans	55,276			100	%	34,534			100	%
Real estate owned	Real estate owned	9,656					8,204					Real estate owned	8,371					6,667
Other property owned	Other property owned	4,095					3,672					Other property owned	3,353					3,353
Total non-performing assets	Total non-performing assets	$	50,430				$	43,625				Total non-performing assets	$	67,000				$	44,554
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	0.54		%			0.55		%			Total non-performing assets and performing restructured loans as a percentage of total assets	0.51		%			0.48		%
Total Assets

(1) Restructured loans were as follows:	(1) Restructured loans were as follows:											(1) Restructured loans were as follows:
Performing	Performing	$	57,492		97.6	%	$	63,655		97.7	%	Performing	$	48,606		98.6	%	$	55,823		98.3	%
Non-performing (included in non-accrual loans above)	Non-performing (included in non-accrual loans above)	1,404			2.4		1,473			2.3		Non-performing (included in non-accrual loans above)	701			1.4		994			1.7
		$	58,896		100	%	$	65,128		100	%		$	49,307		100	%	$	56,817		100	%

For the nine months ended June 30, ~~2022,~~2023, the Company recognized ~~$2,544,000~~$2,079,000 in interest income on cash payments received from borrowers on non-accrual loans. The Company would have recognized interest income of ~~$969,000~~$1,372,000 for the same period had these loans performed according to their original contract terms. Recognized interest income for the nine months ended June 30, ~~2022~~2023 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 ~~$209,166,000~~$241,166,000 of loans that were less than 90 days delinquent at June 30, ~~2022~~2023 but were classified as substandard for one or more reasons. If these loans were deemed non-performing, the Company's ratio of total NPAs and performing restructured loans as a percent of total assets would have increased to ~~1.57%~~1.58% at June 30, ~~2022.~~2023.

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 81.3% of restructured loans as of June 30, 2023. The concession for these loans is

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~~Single-family residential loans comprised 82.7% of restructured loans as of June 30, 2022. The concession for these loans is~~ typically a payment reduction through a rate reduction of 100 to 200 basis points for a specific term, usually six to twenty-four months. Interest-only payments may also be approved during the modification period.

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.


		June 30, 2022				September 30, 2021				Change					June 30, 2023				September 30, 2022				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	$	12,574	7.4	%	16,949		9.9	%	$	(4,375)	(25.8)	%	Multi-family	$	12,976	7.3	%	12,013		7.0	%	$	963	8.0	%
Commercial real estate	Commercial real estate	25,300		14.8		23,437		13.7		1,863		7.9		Commercial real estate	28,132		15.8		25,814		14.9		2,318		9.0
Commercial & industrial	Commercial & industrial	54,924		32.1		45,957		26.8		8,967		19.5		Commercial & industrial	61,915		34.8		57,210		33.1		4,705		8.2
Construction	Construction	25,834		15.1		25,585		14.9		249		1.0		Construction	27,916		15.7		26,161		15.1		1,755		6.7
Land - acquisition & development	Land - acquisition & development	12,227		7.2		13,447		7.8		(1,220)		(9.1)		Land - acquisition & development	7,246		4.1		12,278		7.1		(5,032)		(41.0)
Total commercial loans	Total commercial loans	130,859		76.5		125,375		73.2		5,484		4.4		Total commercial loans	138,185		77.6		133,476		77.2		4,709		3.5
Consumer loans	Consumer loans													Consumer loans
Single-family residential	Single-family residential	26,217		15.3		30,978		18.1		(4,761)		(15.4)		Single-family residential	27,083		15.2		25,518		14.8		1,565		6.1
Construction - custom	Construction - custom	3,354		2.0		4,907		2.9		(1,553)		(31.6)		Construction - custom	3,221		1.8		3,410		2.0		(189)		(5.5)
Land - consumer lot loans	Land - consumer lot loans	5,220		3.1		4,939		2.9		281		5.7		Land - consumer lot loans	3,770		2.1		5,047		2.9		(1,277)		(25.3)
HELOC	HELOC	2,632		1.5		2,390		1.4		242		10.1		HELOC	2,743		1.5		2,482		1.4		261		10.5
Consumer	Consumer	2,697		1.6		2,711		1.6		(14)		(0.5)		Consumer	3,067		1.7		2,875		1.7		192		6.7
Total consumer loans	Total consumer loans	40,120		23.5		45,925		26.8		(5,805)		(12.6)		Total consumer loans	39,884		22.4		39,332		22.8		552		1.4
Total allowance for loan losses	Total allowance for loan losses	170,979		100.0	%	171,300		100.0	%	(321)		(0.2)		Total allowance for loan losses	178,069		100.0	%	172,808		100.0	%	5,261		3.0
Reserve for unfunded commitments	Reserve for unfunded commitments	32,500				30,000				2,500		8.3		Reserve for unfunded commitments	26,500				31,500				(5,000)		(15.9)
Total allowance for credit losses	Total allowance for credit losses	$	203,479			$	201,300			$	2,179	1.1	%	Total allowance for credit losses	$	204,569			$	204,308			$	261	0.1	%

No allowance was recorded as of June 30, 2022 or as of September 30, 2021 for the $54,185,000 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 ~~$203,479,000,~~$204,569,000, or ~~1.08%~~1.03% of gross loans, is sufficient to absorb estimated losses inherent in the portfolio of loans and unfunded commitments. See Note Eand Note I for further details of the allowance for loan losses and reserve for unfunded commitments as of and for the period ended June 30, ~~2022~~2023 and September 30, ~~2021.~~2022.

Real estate owned ("REO") - REO increased during the nine months ended June 30, ~~2022~~2023 by ~~$1,452,000~~$1,704,000 to ~~$9,656,000.~~$8,371,000. The increase was due to REO additions resulting from the Company's branch optimization activities partially offset by ~~sales and the write-down of~~valuation adjustments on certain properties.

Intangible assets - Intangible assets ~~decreased~~increased to ~~$309,254,000~~$309,069,000 as of June 30, ~~2022~~2023 from ~~$310,019,000~~$309,009,000 as of September 30, ~~2021. The decrease was due to normal amortization of finite-lived intangible assets.~~2022.

Customer accounts - Customer accounts increased $90,854,000, or 0.6%, to $16,120,424,000 at June 30, 2023 compared with $16,029,570,000 at September 30, 2022. Transaction accounts decreased by $1,434,952,000 or 11.3% during that period, while time deposits increased $1,525,806,000 or 45.7%. This increase is the result of increased demand for higher yielding deposits as a result of rising interest rates.

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

~~Customer accounts~~ - Customer accounts increased $423,508,000, or 2.7%, to $15,965,620,000 at June 30, 2022 compared with $15,542,112,000 at September 30, 2021. Transaction accounts increased by $560,226,000 or 4.6% during that period, while time deposits decreased $136,718,000 or 4.0%. 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.


		June 30, 2022						September 30, 2021							June 30, 2023						September 30, 2022
		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	$	3,269,773	20.5	%	—	%	$	3,122,397	20.1	%	—	%	Non-interest checking	$	2,729,888	16.9	%	—	%	$	3,266,734	20.4	%	—	%
Interest checking	Interest checking	3,472,402		21.7		0.51		3,566,322		22.9		0.20		Interest checking	4,124,463		25.6		2.04		3,497,795		21.8		0.90
Savings	Savings	1,069,801		6.7		0.12		1,039,336		6.7		0.11		Savings	874,256		5.4		0.20		1,059,093		6.6		0.13
Money market	Money market	4,856,275		30.4		0.31		4,379,970		28.2		0.19		Money market	3,527,968		21.9		1.35		4,867,905		30.4		0.49
Time deposits	Time deposits	3,297,369		20.7		0.53		3,434,087		22.1		0.54		Time deposits	4,863,849		30.2		3.31		3,338,043		20.8		0.74
Total	Total	$	15,965,620	100	%	0.32	%	$	15,542,112	100	%	0.23	%	Total	$	16,120,424	100	%	1.83	%	$	16,029,570	100	%	0.51	%

~~FHLB advances and other borrowings~~Borrowings - Total borrowings were ~~$1,700,000,000~~$3,750,000,000 as of June 30, ~~2022, a decrease~~2023, an increase from ~~$1,720,000,000~~$2,125,000,000 at September 30, ~~2021. Strong~~2022. This increase funded loan growth given relatively flat deposits. This increase also bolstered the Company's liquidity in ~~deposits has provided for substantial funding~~the form of ~~growth in loans receivable, therefore, the use of additional FHLB borrowings has been limited.~~increased cash. The weighted average rate for ~~FHLB~~ borrowings was ~~1.43%~~3.93% as of June 30, ~~2022~~2023 and ~~1.51%~~2.02% at September 30, ~~2021. The decline in the weighted average effective interest rate was the result of replacing high-yielding, long-term FHLB borrowings with new borrowings at lower rate.~~2022.

Shareholders' equity - The Company’s shareholders' equity at June 30, ~~2022~~2023 was ~~$2,220,111,000,~~$2,394,066,000, or ~~11.01%~~10.62% of total assets. This is an increase of ~~$94,047,000~~$119,806,000 from September 30, ~~2021~~2022 when net worth was ~~$2,126,064,000,~~$2,274,260,000, or ~~10.82%~~10.95% of total assets. The Company’s shareholders' equity was impacted in the nine months ended June 30, ~~2022~~2023 by net income of ~~$162,935,000,~~$207,218,000, the payment of ~~$46,015,000~~$47,826,000 in common stock dividends, payment of $10,968,000 in preferred stock dividends, net treasury stock ~~purchases~~transactions of ~~$3,212,000,~~$30,450,000, as well as a change in other comprehensive loss of ~~$15,558,000.~~$5,130,000.

RESULTS OF OPERATIONS

Net Income - The Company recorded net income of ~~$63,295,000~~$61,775,000 for the three months ended June 30, ~~2022~~2023 compared to ~~$47,422,000~~$63,295,000 for the prior year quarter. The Company recorded net income of ~~$162,935,000~~$207,218,000 for the nine months ended June 30, ~~2022~~2023 compared to ~~$131,244,000~~$162,935,000 for the prior year same period. The changes are due to the factors described below.

Net Interest Income - For the three months ended June 30, ~~2022,~~2023, net interest income was ~~$151,746,000,~~$168,700,000, which is ~~$23,141,000~~$16,954,000 higher than the same quarter of the prior year. Net interest margin was 3.27% for the quarter ended June 30, 2023 compared to 3.22% for the quarter ended June 30, ~~2022 compared to 2.82% for the quarter ended June 30, 2021.~~2022. The increase in net interest income was ~~primarily~~mostly due to ~~average interest-earning assets increasing by $683,756,000 or 3.75% from the prior year while average interest-bearing liabilities increased $484,378,000 or 3.44% as well as the impact of~~ rising ~~rates on adjustable rate assets. Average noninterest-bearing deposits grew by $387,429,000 over the same period.~~interest rates. The ~~change in net interest income was also impacted by a 30 basis point increase in the~~ average rate earned on interest-earning assets grew by 174 basis points to ~~3.55%~~5.29% while the average rate paid on interest-bearing liabilities ~~declined~~increased by 12209 basis points to ~~0.42%~~2.51%. ~~During the three months ended June 30, 2022 and 2021, net interest income included $936,000 and $6,122,000, respectively, of net loan origination fee amortization on PPP loans.~~ For the nine months ended June 30, ~~2022,~~2023, net interest income was ~~$420,970,000,~~$526,537,000, which is ~~$47,817,000~~$105,567,000 higher than the same period of the prior year. Net interest margin was ~~3.00%~~3.49% for the nine months ended June 30, ~~2022~~2023 compared to ~~2.77%~~3.00% for the prior year same period.

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 6/30/22 and 6/30/21						Comparison of Nine Months Ended 6/30/22 and 6/30/21							Comparison of Three Months Ended 6/30/23 and 6/30/22						Comparison of Nine Months Ended 6/30/23 and 6/30/22
($ in thousands)	($ in thousands)	Volume		Rate		Total		Volume		Rate		Total		($ in thousands)	Volume		Rate		Total		Volume		Rate		Total
Interest income:	Interest income:													Interest income:
Loans receivable	Loans receivable	$	19,742	$	(4,822)	$	14,920	$	53,933	$	(27,672)	$	26,261	Loans receivable	$	20,870	$	62,184	$	83,054	$	68,283	$	163,905	$	232,188
Mortgage-backed securities	Mortgage-backed securities	1,243		1,887		3,130		(4,855)		3,510		(1,345)		Mortgage-backed securities	(427)		2,263		1,836		5,765		7,655		13,420
Investments (1)	Investments (1)	(4,330)		5,980		1,650		(4,774)		6,260		1,486		Investments (1)	(574)		21,016		20,442		(11,306)		58,517		47,211
All interest-earning assets	All interest-earning assets	16,655		3,045		19,700		44,304		(17,902)		26,402		All interest-earning assets	19,869		85,463		105,332		62,742		230,077		292,819
Interest expense:	Interest expense:													Interest expense:
Customer accounts	Customer accounts	646		(268)		378		2,481		(10,256)		(7,775)		Customer accounts	121		60,657		60,778		77		127,784		127,861
FHLB advances and other borrowings		(1,300)		(2,519)		(3,819)		(8,584)		(5,057)		(13,641)
Borrowings														Borrowings	11,274		16,326		27,600		26,921		32,470		59,391
All interest-bearing liabilities	All interest-bearing liabilities	(654)		(2,787)		(3,441)		(6,103)		(15,313)		(21,416)		All interest-bearing liabilities	11,395		76,983		88,378		26,998		160,254		187,252
Change in net interest income	Change in net interest income	$	17,309	$	5,832	$	23,141	$	50,407	$	(2,589)	$	47,818	Change in net interest income	$	8,474	$	8,480	$	16,954	$	35,744	$	69,823	$	105,567

___________________ ___________________

(1)Includes interest on cash equivalents and dividends on FHLB & FRB stock. ~~The Bank’s FRB stock was redeemed effective February 4, 2022 in connection with its conversion to a Washington state chartered commercial bank.~~

Provision (Release) for Credit Losses - The Company recorded a $9,000,000 provision for credit losses for the three months ended June 30, 2023, compared to a $1,500,000 provision for credit losses for the three months ended June 30, ~~2022, compared to a $2,000,000 release of allowance for credit losses~~2022. The provision for the three months ended June 30, ~~2021.~~2023 was primarily due to one charge-off, offset by reduced unfunded commitment balances combined with the changing outlook amid concerns around a looming recession and recent macro-economic events. The provision infor the three months ended June 30, 2022 was primarily due to growth in loans receivable and unfunded commitments partially offset by improvements in the credit quality of certain loan portfolios related to strong real estate markets and collateral conditions. The ~~release~~Company recorded a $15,000,000 provision for credit losses for the ~~three~~nine months ended June 30, 2021 was primarily due to improvements in the credit quality of certain loan portfolios related to strong real estate markets and collateral conditions partially offset by growth in loans receivable. The Company recorded2023, compared with a $1,500,000 provision for credit losses for the nine months ended June 30, ~~2022,~~2022. Charge-offs, net of recoveries, totaled $10,351,000 for the three months ended June 30, 2023, compared ~~with a $1,000,000 provision for credit losses~~to net recoveries of $595,000 during the three months ended June 30, 2022. Charge-offs, net of recoveries, totaled $15,739,000 for the nine months ended June 30, ~~2021. Recoveries, net of charge-offs, totaled $595,000 for the three months ended June 30, 2022,~~2023, compared to net recoveries of ~~$1,131,000 during the three months ended June 30, 2021. Recoveries, net of charge-offs, totaled~~ $3,179,000 ~~for the nine months ended June 30, 2022, compared to net recoveries of $5,329,000~~ during the nine months ended June 30, 2021. No allowance was recorded as of June 30, 2022 or as of September 30, 2021 for the $54,185,000 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.2022.

Other Income - The results for the three months ended June 30, ~~2022~~2023 include total other income of ~~$17,550,000~~$13,771,000 compared to ~~$13,211,000~~$17,550,000 for the same period one year ago, a ~~$4,339,000 increase. The increase~~$3,779,000 decrease. Loan fee income decreased by $618,000 when compared to the same quarter in ~~other income was primarily~~the prior year due to anreduced loan production. Additionally, a one-time loss of $926,000 was recorded on our client rate swap program due to the LIBOR Rate transition completed in the current quarter. Other income decreased $2,300,000 due to a $2,700,000 unrealized gain ~~of $2,708,000 that was recorded for~~on certain equity investments inwhich were recorded the quarter ended June 30, 2022. Other income was $37,867,000 for the nine months ended June 30, 2023, compared with $51,890,000 for the nine months ended June 30, 2022 ~~compared with $41,558,000~~ for the ~~nine months ended June 30, 2021 and~~same reasons described for the ~~increase was mostly~~quarter. Loan fee income decreased $2,860,000 due to ~~unrealized gains~~reduced loan production, the effect of ~~$9,008,000 that were recorded for certain~~the LIBOR transaction was $900,000 and Other income decreased by $10,045,000 due to a prior year gain on the equity investments previously described which was not repeated in the nine months ended June 30, ~~2022.~~2023.

Other Expense - Total other expense was ~~$87,403,000~~$94,699,000 for the three months ended June 30, ~~2022,~~2023, an increase of ~~$3,763,000~~$7,296,000 from ~~$83,640,000~~$87,403,000 for the prior year quarter. Compensation and benefits costs increased by ~~$4,232,000,~~$2,383,000, or ~~9.7%~~5.0%, over the prior year quarter due to annual merit increases ~~higher bonus compensation accruals related to strong deposit and loan growth~~ and investments in ~~top talent and contract staff~~strategic initiatives combined with reduced cost capitalization as loan originations have decreased. FDIC premiums increased by $3,250,000 compared to ~~support strategic initiatives.~~the same period last year. Also, the Company realized merger related expenses of $500,000 in the three months ended June 30, 2023 as a result of our pending merger with Luther Burbank Corporation. Other expense was $283,858,000 for the nine months ended June 30, 2023, compared with $265,433,000 for the nine months ended June 30, 2022 ~~compared with $246,796,000 for the nine months ended June 30, 2021~~ and the increase was primarily due to the same reasons noted above: compensation and benefits increasing by ~~$12,417,000 for the same reasons noted above. The nine months ended June 30, 2022 also included a tax~~$8,357,000 and FDIC premiums increasing by $5,725,000, combined with merger related ~~accrual~~expenses of $1,700,000. ~~Total other expense for the nine months ended June 30, 2022 and June 30, 2021 equaled 1.76% and 1.71%, respectively, of average assets.~~

Gain (Loss) on Real Estate Owned - Results for the three months ended June 30, ~~2022~~2023 include a net gain on ~~real estate owned~~REO of ~~$448,000,~~$722,000, compared to a net ~~loss~~gain of ~~$151,000~~$448,000 for the prior year quarter. Results for the nine months ended June 30, ~~2022~~2023 include a net gain on real estate owned of ~~$1,139,000,~~$411,000, compared to a net ~~loss~~gain of ~~$566,000~~$1,139,000 for the prior year same period. The ~~gain (loss)~~gains for each respective period isin 2023 are due to property sales offset by normal REO ~~sales valuation adjustments for certain properties.~~

maintenance.

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Income Tax Expense - Income tax expense totaled ~~$17,546,000~~$17,719,000 for the three months ended June 30, ~~2022,~~2023, compared to ~~$12,603,000~~$17,546,000 for the prior year quarter. Income tax expense totaled ~~$44,131,000~~$58,739,000 for the nine months ended June 30, ~~2022,~~2023, compared to ~~$35,105,000~~$44,131,000 for the prior year same period. The effective tax rate was ~~21.31%~~22.09% and ~~21.10%~~21.31% for the nine months ended June 30, ~~2022~~2023 and June 30, ~~2021,~~2022, respectively. The Company’s effective tax rate varies from the statutory rate ~~mainly~~ due to state taxes, tax-exempt income, tax-credit investments and ~~tax-credit investments.~~miscellaneous non-deductible expenses.

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, ~~2021.~~2022. 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 ~~2021~~2022 Form 10-K.

Item 4. Controls and Procedures

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

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

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PART II – Other Information

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

In addition to the risk factors discussed below and the other information set forth 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, 2022. These factors could materially and adversely affect the Company's business, financial condition, liquidity, results of operations and capital position, and could cause its actual results to differ materially from its historical results or the results contemplated by the forward-looking statements contained in this report. The disclosure below relating to potential risks arising in connection with the Company's pending merger with Luther Burbank Corporation contains material changes and/or additions to the Company's earlier disclosures.

~~Operational Risks~~

The Company’s pending merger with Luther Burbank Corporation may expose the Company to certain risks.

~~Current~~On November 13, 2022, the Company announced that it had entered into a definitive merger agreement pursuant to which it intends to acquire Luther Burbank Corporation (“Luther Burbank”) and its wholly-owned subsidiary, Luther Burbank Savings, in an all-stock transaction valued at approximately $654 million based upon the closing price of the Company’s Common Stock on November 11, 2022. On May 4, 2023, the Company's shareholders approved the issuance of shares of Company common stock to the shareholders of Luther Burbank in connection with the merger, and the Luther Burbank shareholders approved the proposed merger agreement and merger with the Company, and a proposal to approve on a non-binding basis the compensation that certain named executives of Luther Burbank may receive that is based on or otherwise relates to the merger. The merger remains subject to regulatory approval and other customary closing conditions, and as such it is possible the transaction may not be consummated as planned or at all, and may expose the Company to certain risks, prior to or after completion, including but not limited to:

•The Company and Luther Burbank will be subject to business uncertainties and contractual restrictions on their respective operations while the merger is pending.

•The announcement and pendency of the merger could cause disruptions in the businesses of the Company and Luther Burbank, which could have an adverse effect on their respective business and financial results, and consequently on the combined company if the merger is consummated.

•Litigation from shareholders of either Luther Burbank or the Company could attempt to prevent or delay the consummation of the merger and result in additional unanticipated costs.

•Regulatory approvals may not be received, may take longer than expected, or may impose conditions not presently anticipated or that could have an adverse effect on the combined company following the merger.

•A February 3, 2023 comment letter to the FDIC from the California Reinvestment Coalition (the "CRC letter"), co-signed by other community groups and organizations, requests that the FDIC extend the comment period and hold public hearings on the bank merger application, and urged the FDIC to deny the bank merger application.

•Termination of the merger agreement or failure to complete the merger for whatever reason could adversely impact the Company.

•The value of the merger consideration to be issued by the Company is uncertain because the market price of the Company’s Common Stock will fluctuate.

•The market price of the Company’s stock after the merger may be affected by factors different from those that currently affect the shares of the Company.

•Changes in the operations and prospects of the Company or Luther Burbank, general market and economic conditions ~~pose challenges,~~ and other factors that may be beyond the control of the Company and Luther Burbank may alter the value of Washington Federal or Luther Burbank or the market price for shares of Company common stock or Luther Burbank common stock by the time the merger is completed.

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•Existing holders of Company Common Stock will have a reduced ownership and voting interest after the merger and will exercise less influence over management if the merger is consummated.

•Combining Luther Burbank with the Company may prove more difficult, costly or time consuming than expected, and the anticipated benefits and cost savings of the merger may not be realized.

•The merger is subject to certain closing conditions that, if not satisfied or waived, will result in the merger not being completed, which may cause the price of the Company’s common stock to decline.

•The growth opportunities and cost savings from the merger may not be fully realized or may take longer to realize than expected.

•Operating costs, customer losses and business disruption following the merger, including adverse effects of relationships with employees, may be greater than expected.

•The interest rate environment may change, causing margins to compress and adversely affecting net interest income.

•The fair value of the Luther Burbank assets to be acquired in the merger are sensitive to the interest rate environment and may fluctuate as a result of changes in interest rates, which could reduce or eliminate the anticipated benefits of the merger for the Company or result in realized losses or require write-downs that could have a material effect on the Company's earnings or financial condition.

•The combined company may be unable to retain Company and/or Luther Burbank personnel.

•The Company may incur substantial costs associated with the merger and the integration of Luther Burbank.

•Issuance of shares of Company common stock in connection with the merger may adversely affect ~~our business,~~the market price of Company common stock.

Recent negative developments affecting the banking industry, and resulting media coverage, have eroded customer confidence in the banking system.

The recent high-profile bank failures have generated significant market volatility among publicly traded bank holding companies and, in particular, regional banks like the Company. These market developments have negatively impacted customer confidence in the safety and soundness of regional banks. While the Department of the Treasury, the Federal Reserve, and the FDIC have made statements ensuring that depositors of these recently failed banks would have access to their deposits, including uninsured deposit accounts, there is no guarantee that such actions will be successful in restoring customer confidence in regional banks and the banking system more broadly. If other banks and financial ~~condition~~institutions enter receivership or become insolvent in the future due to financial conditions affecting the banking system and financial markets, it could cause further disruption to the financial services industry and customers may choose to maintain deposits with larger financial institutions or invest in higher yielding short-term fixed income securities, all of which could materially adversely impact the Company’s liquidity, loan funding capacity, net interest margin, capital and results of operations.

~~We are operating in an~~Reflecting concerns about liquidity and the uncertain economic ~~environment. The pandemic caused~~environment, many lenders have reduced funding to borrowers.This tightening of credit has also contributed to a ~~global economic slowdown,~~lack of consumer confidence and ~~while we have seen some economic recovery, raw material shortages, supply chain issues~~increased market volatility.

A worsening of any of the foregoing conditions would likely exacerbate the adverse effects of these challenging market conditions on us and labor shortages risk slowing or reversing the continued recovery. Continued economic uncertainty and a recessionary or stagnant economy could result in financial stress on the Bank's borrowers, which could adversely affect our business, financial condition and results of operations. We decreased the expense for credit losses over fiscal year 2021 as the economy began to recover, however, deteriorating conditionsothers in the ~~regional economies~~banking industry.In particular, we ~~serve, or in certain sectors of those economies, could drive losses beyond that which is provided for in our allowance for loan losses. We could also~~may face the following risks in connection with ~~the following~~any such events:

•Market developments and economic stagnation or slowdown may affect consumer confidence levels and may cause adverse changes in payment patterns, resulting in increased delinquencies and default rates on loans and other credit facilities.

•~~The processes we use~~We expect to estimate the allowance for credit losses and other reserves may prove to be unreliable. Such estimates rely upon complex modeling inputs and judgments, including forecasts of economic conditions, which may be rendered inaccurate and/or no longer subject to accurate forecasting.

•~~Our ability to assess the creditworthiness of our borrowers may be impaired if the models and approaches we use to select, manage, and underwrite loans become less predictive of future charge-offs.~~

•~~Regulatory scrutiny of the industry could increase, leading to~~face increased regulation of ~~the~~our industry, ~~that could lead to a higher cost of~~and compliance with such regulation may increase our costs and limit our ability to pursue business ~~opportunities and increase our exposure to litigation or fines.~~opportunities.

•~~Ineffective monetary policy or other market conditions could cause rapid changes~~We may be required to pay significantly higher Federal Deposit Insurance Corporation premiums in ~~interest rates and asset values that would have a materially adverse impact on our profitability and overall financial condition.~~the future if losses further deplete the FDIC deposit insurance fund.

•~~Further erosion~~There may be downward pressure on our stock price.

•We may face increased competition for deposits due to the volatility within the financial services industry and a lack of consumer confidence in ~~the fiscal condition of the U.S. Treasury could lead to new taxes that would limit our ability to pursue growth and return profits to shareholders.~~regional banks.

If these conditions or similar ones continue to exist or worsen, we could experience continuing or increased adverse effects on our financial condition.

~~Fluctuating interest rates could adversely affect our business.~~

Significant increases in market interest rates on loans, or the perception that an increase may occur, could adversely affect both our ability to originate new loans and our ability to grow. Conversely, decreases in interest rates could result in an acceleration of loan prepayments. An increase in market interest rates could also adversely affect the ability of our floating-rate borrowers to meet their higher payment obligations. If this occurred, it could cause an increase in nonperforming assets and charge offs, which could adversely affect our business.

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Further, our profitability is dependent to a large extent upon net interest income, which is the difference (or “spread”) between the interest earned on loans, securities and other interest-earning assets and the interest paid on deposits, borrowings, and other interest-bearing liabilities. Because of the differences in maturities and repricing characteristics of our interest-earning assets and interest-bearing liabilities, changes in interest rates do not produce equivalent changes in interest income earned on interest-earning assets and interest paid on interest-bearing liabilities. Accordingly, fluctuations in interest rates could adversely affect our interest rate spread, and, in turn, our profitability. Although it is expected that the Federal Reserve will continue to increase the target federal funds rate in 2022 to combat recent inflationary trends, if interest rates do not rise, or if the Federal Reserve were to lower the target federal funds rate to below 0%, these low rates could continue to constrain our interest rate spread and may adversely affect our business forecasts. On the other hand, increases in interest rates, to combat inflation or otherwise, may result in a change in the mix of noninterest and interest-bearing accounts. We are unable to predict changes in interest rates, which are affected by factors beyond our control, including inflation, deflation, recession, unemployment, money supply and other changes in financial markets.

~~Changes to monetary policy by the Federal Reserve could adversely impact our results of operations.~~

The Federal Reserve is responsible for regulating the supply of money in the United States, including open market operations used to stabilize prices in times of economic stress, as well as setting monetary policies. These activities strongly influence our rate of return on certain investments, our hedge effectiveness for mortgage servicing and our mortgage origination pipeline, as well as our costs of funds for lending and investing, all of which may adversely impact our liquidity, results of operations, financial condition and capital position.

~~Unstable global economic conditions may have serious adverse consequences on our business, financial condition, and operations.~~

The global credit and financial markets have from time to time experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, high rates of inflation, and uncertainty about economic stability. The financial markets and the global economy may also be adversely affected by the current or anticipated impact of military conflict, including the current conflict between Russia and Ukraine, which is increasing volatility in commodity and energy prices, creating supply chain issues and causing instability in financial markets. Sanctions imposed by the United States and other countries in response to such conflict could further adversely impact the financial markets and the global economy, and any economic countermeasures by the affected countries or others could exacerbate market and economic instability. The specific consequences of the conflict in Ukraine on our business is difficult to predict at this time, but in addition to inflationary pressures affecting our operations and those of our customers and borrowers, we may also experience an increase in cyberattacks against us, our customers and borrowers, service providers and other third parties. There can be no assurance that further deterioration in markets and confidence in economic conditions will not occur. Our general business strategy may be adversely affected by any such economic downturn, volatile business environment, hostile third-party action or continued unpredictable and unstable market conditions.

~~Our allowance for credit losses ("ACL") may not be adequate to cover future loan losses, which could adversely affect our financial condition and results of operations.~~

Due to the declining economic conditions, our customers may not be able to repay their loans according to the original terms, and the collateral securing the payment of those loans may be insufficient to pay any remaining loan balance. While we maintain our ACL to provide for loan defaults and non-performance, losses may exceed the value of the collateral securing the loans and the allowance may not fully cover any excess loss.

We make various assumptions and judgments about the collectability of our loan portfolio, including the creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for the repayment of loans. Our ACL is based on these judgments, as well as historical loss experience and an evaluation of the other risks associated with our loan portfolio, including but not limited to, economic trends and conditions, changes in underwriting standards, management, competition, and trends in delinquencies, non-accrual and adversely classified loans. the size and composition of the loan portfolio, current economic conditions and geographic concentrations within the portfolio. We have also included assumptions about the severity and duration of the effects of the COVID-19 pandemic on our borrowers, their industry, and on economic conditions in general, all of which are highly uncertain and for which we have no historical experience to draw upon. Federal regulatory agencies, as part of their examination process, review our loans and ACL. If our assumptions and judgments used to determine the ACL prove to be incorrect, if the value of the collateral securing the loans decreases substantially or if regulators disagree with its judgments, we may need to increase the ACL in amounts that exceed our expectations. Material additions to the ACL would adversely affect our results of operations and financial condition.

~~We are exposed to risks related to our operational, technological, and third-party provided technology infrastructure.~~

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We rely extensively on the successful and uninterrupted functioning of information technology and telecommunications systems to conduct our business. This includes internally developed systems, internally managed systems, outsourced systems provided by third-party service providers, internet facing digital products and services, mobile technologies and the on-going operational maintenance of each service. Any disruptions, failures, or inaccuracies of these systems, including changes and improvements, could result in our inability to service customers, manage operations, manage risk, meet regulatory obligations, or provide timely and accurate financial reporting which could damage our reputation, result in loss of customer business, subject us to regulatory scrutiny, or expose us to civil litigation and possible financial liability.

In many instances, the Company’s products and services to customers are dependent upon third-party service providers, who provide necessary, or critical, services and support. Any disruption of such services, or an unplanned termination of a third-party license or service agreement related thereto, could adversely affect our ability to provide necessary products and services for our customers.

In recent years, we have made a significant ongoing investment to enhance our technological capabilities with the objectives of enhancing customer experience, growing revenue, and improving operating efficiency. There is a risk that these investments may not provide the anticipated benefits and/or will prove significantly more costly and time consuming to produce. If this occurs, we may see a loss of customers, and our financial results and ability to execute on our strategic plan may be adversely impacted.

~~We are exposed to risks related to fraud and cyber-attacks.~~

Cybersecurity, and the continued development and enhancement of controls, processes, and practices designed to protect customer information, systems, computers, software, data, and networks from attack, damage, or unauthorized access remain a priority for the Company. As cybersecurity threats continue to evolve, we may be required to expend additional resources to continue to enhance, modify, and refine our protective measures against these evolving threats.

We are continuously enhancing and expanding our digital products and services to meet customer and business needs with desired outcomes. These digital products and services often include storing, transmitting, and processing confidential customer, employee, financial, and business information. Due to the nature of this information, and the value it has for internal and external threat actors, we, and our third-party service providers, continue to be subject to cyber-attacks and fraud activity that attempts to gain unauthorized access, misuse information and information systems, steal information, disrupt or degrade information systems, spread malicious software, and other illegal activities.

We have recently changed our consumer online and mobile banking platforms to provide more flexibility and customizable feature sets to improve customer experience. This change provides the Company more opportunity to differentiate ourselves in the market, but also increases our direct responsibility for managing cybersecurity risk associated with digital banking, when historically, the responsibility for providing adequate safeguards and security controls was managed by third party vendors.

We believe we have robust preventive, detective, and administrative safeguards and security controls to minimize the probability and magnitude of a material event. However, because the tactics and techniques used by threat actors to bypass safeguards and security controls change frequently, and often are not recognized until after an event has occurred, we may be unable to anticipate future tactics and techniques, or to implement adequate and timely protective measures.

In June 2022, we were notified by a third-party vendor that it experienced a network security incident involving unauthorized access to certain personal and financial data of some of our customers. We immediately suspended services with the vendor. Since the incident was detected, this third-party vendor has engaged a third-party security firm to investigate the incident, provide support to remove the unauthorized access, enhance its security controls, and help our third-party vendor safely resume operations. The investigation into the extent of the data that was compromised is ongoing and we will notify all impacted customers by this breach when the analysis is complete. There was no breach of our own systems due to this incident. After receiving assurances that this third-party is operating in a safe and secure manner, we have resumed operations with it, and continue to have frequent contact to receive updates as to the status of its internal security and progress on its forensic analysis to determine customer impact. We are not aware of any continuing cybersecurity threats or breaches involving this vendor or our systems generally, but we continue to monitor the situation carefully.

To date, we have no knowledge of a successful cyber-attack or other material information security breach affecting the systems we operate and control. However, our risk and exposure to these matters remains heightened because of, among other things, the evolving nature of these threats, the continuation of a remote work environment for our employees and service providers, and our plans to continue to implement and expand digital banking services, expand operations, and use third-party

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information systems that includes cloud-based infrastructure, platforms, and software. Recent instances of attacks specifically targeting banks and financial services businesses indicate that the risk to our systems remains significant. We, and our third-party providers, are regularly the subject of attempted attacks and the ability of the attackers continues to grow in sophistication.~~Potential threats to our~~ technologies, systems, networks, and other devices, as well as those of our employees, third party vendors, and other third parties with whom we interact, include DDOS attacks, computer viruses, hacking, malware, ransomware, credential stuffing, or phishing or other forms of social engineering. Such cyber-attacks and other security incidents are designed to lead to various harmful outcomes, such as unauthorized transactions our customers’ accounts, unauthorized or unintended access to or release, gathering, monitoring, disclosure, loss, destruction, corruption, disablement, encryption, misuse, modification or other processing of confidential or sensitive information (including personal information), intellectual property, software, methodologies or business secrets, disruption, sabotage or degradation of service, systems or networks, or other damage. These threats may derive from, among other things, error, fraud or malice on the part of our employees, insiders, or third parties or may result from accidental technological failure. Any of these parties may also attempt to fraudulently induce employees, service providers, customers, partners or other third-party users of our systems or networks to disclose confidential or sensitive information (including personal information) in order to gain access to our systems, networks or data or that of our customers, partners, or third parties with whom we interact, or to unlawfully obtain monetary benefit through misdirected or otherwise improper payment. For example, any party that obtains our confidential or sensitive information (including personal information) through a cyber-attack or other security incident may use this information for ransom, to be paid by us or a third party, as part of a fraudulent activity that is part of a broader criminal activity, or for other illicit purposes.

A cyber-attack or other security incident on us or a critical third party vendor could cause us to suffer damage to our reputation, productivity losses, response costs associated with investigation and resumption of services, and incur substantial additional expenses, including remediation expenses costs associated with customer notification and credit monitoring services, increased insurance premiums, regulatory penalties and fines, and costs associated civil litigation, any of which could have a materially adverse effect on our business, financial condition, and results of operations.

We also face additional costs when our customers become the victims of cyber-attacks. For example, various retailers have reported that they have been the victims of a cyber-attack in which large amounts of their customers’ data, including debit and credit card information, is obtained. Our customers may be the victims of phishing scams, providing cyber criminals access to their accounts, or credit or debit card information. In these situations, we incur costs to replace compromised cards and address fraudulent transaction activity affecting our customers, as well as potential increases to insurance premiums for policies we may maintain to cover these losses.

Both internal and external fraud and theft are risks. If confidential customer, employee, monetary, or business information were to be mishandled or misused, we could suffer significant regulatory consequences, reputational damage, and financial loss. Such mishandling or misuse could include, for example, if such information were erroneously provided to parties who are not permitted to have the information, either by fault of our systems, employees, or counterparties, or if such information were to be intercepted or otherwise inappropriately taken by third parties, or if our own employees abused their access to financial systems to commit fraud against our customers and the Company. These activities can occur in connection with activities such as the origination of loans and lines of credit, ACH transactions, wire transactions, ATM transactions, and checking transactions, and result in financial losses as well as reputational damage.

Operational errors can include information system misconfiguration, clerical or record-keeping errors, or disruptions from faulty or disabled computer or telecommunications systems. Because the nature of the financial services business involves a high volume of transactions, certain errors may be repeated or compounded before they are discovered and successfully rectified. Because of the Company’s large transaction volume and its necessary dependence upon automated systems to record and process these transactions, there is a risk that technical flaws, tampering, or manipulation of those automated systems, arising from events wholly or partially beyond its control, may give rise to disruption of service to customers and to financial loss or liability.

The occurrence of any of these risks could result in a diminished ability for us to operate our business, additional costs to correct defects, potential liability to clients, reputational damage. and regulatory intervention, any of which could adversely affect our business, financial condition and results of operations.

~~The COVID-19 pandemic increased cyber-security risks.~~

The ongoing COVID-19 pandemic has introduced additional risk to our information systems and security procedures, controls and policies as a result of employees, contractors and other corporate partners working remotely. As a result of the increased remote workforce, we must increasingly rely on information technology systems that are outside our direct control, and these systems are also vulnerable to cyber-based attacks and security breaches. In addition, since the beginning of the pandemic, there has been an increase in attacks by cyber criminals on businesses and individuals, utilizing interest in pandemic-

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related information and the fear and uncertainty caused by the pandemic to increase phishing, malware, and other cybersecurity attacks designed to trick victims into transferring sensitive data or funds, steal credentials or deploy malware that compromises information systems. If one of our employees were to fall victim to one of these attacks, or our information technology systems are compromised, our operations could be disrupted, or we may suffer financial loss, reputational loss, loss of customer business or other critical assets, or become exposed to regulatory fines and intervention or civil litigation.

The ongoing COVID-19 pandemic, and government and multinational actions taken in response to it, could adversely affect our business and our customers, counterparties, employees, and third-party service providers.

The spread of COVID-19 created a global public-health crisis that has impacted household, business, economic, and market conditions, including in the western United States where we conduct nearly all of our business.

Throughout the pandemic our operations have been impacted by the need to close certain offices and limit how customers conduct business through our branch network. Many of our employees continue to work remotely, which exposes us to increased cybersecurity risks such as phishing, malware, and other cybersecurity attacks, all of which could expose us to liability and could seriously disrupt our business operations.

Governments have taken unprecedented steps to partially mitigate the adverse effects of their containment measures. For example, in late March 2020, the CARES Act was enacted to inject more than $2 trillion of financial assistance into the U.S. economy, followed by additional COVID relief legislation of approximately $900 million in December 2020.In March 2021 the American Rescue Plan Act, also called the COVID-19 Stimulus Package or American Rescue Plan, Pub L. No. 117-2, was enacted to inject an additional $1.9 trillion in financial relief and economic stimulus. The Federal Reserve Bank has taken decisive and sweeping actions as well. From March 15, 2020, to September 30,2021, their actions have included a reduction in the target range for the federal funds rate to 0 to 25 basis points, a program to purchase an indeterminate amount of Treasury securities and agency mortgage-backed securities, corporate bonds and other investments, and numerous facilities to support the flow of credit to households and businesses. Beginning early in 2022, in response to growing signs of inflation, the Federal Reserve has increased interest rates rapidly. Further, the Federal Reserve has increased the benchmark rapidly and has announced an intention to take further actions to mitigate inflationary pressures. Rapid changes in interest rates make it difficult for the Bank to balance its loan and deposit portfolios, which may adversely affect our results of operations by, for example, reducing asset yields or spreads, creating operating and system issues, or having other adverse impacts on our business.

The full extent of the impact of the COVID-19 pandemic on our capital, liquidity, and other financial positions and on our business, results of operations, and prospects is still uncertain, and will depend on a number of evolving factors, including:

•~~The duration, extent, and severity of the pandemic~~. COVID-19 has not yet been contained; continuing spread and rise of new variants could affect significantly more households and businesses, or cause additional limitations on commercial activity, increased unemployment, increased property vacancy rates and general economic and financial instability. The continuation of the pandemic may also negatively impact regional economic conditions for a period of time, resulting in declines in loan demand and collateral values. The duration and severity of the pandemic continues to be impossible to predict, as is the potential for a seasonal or other resurgence. We also believe we will continue to see the economic effects of the pandemic even after the COVID-19 outbreak has subsided, which is expected to continue to affect our business, financial position, results of operations and prospects.

•~~The response of governmental authorities~~. To date, many of the actions of governmental authorities, including eviction forbearance, occupancy restrictions and vaccine mandates, have been directed toward curtailing household and business activity to contain COVID-19 while simultaneously deploying fiscal and monetary policy measures to partially mitigate the adverse effects on individual households and businesses. The ultimate success or impact of these actions and their effect on our customers and the economy generally is still unclear. Further, some measures, such as a suspension of mortgage and other loan payments and foreclosures, may have a negative impact on our business.

•~~The effect on our customers, counterparties, employees, and third-party service providers~~. COVID-19 and its associated consequences and uncertainties are affecting individuals, households, and businesses differently and unevenly. Negative impacts on our customers could result in increased risk of delinquencies, defaults, foreclosures and losses on our loans.

•~~The effect on economies and markets~~. Whether the actions of governmental and nongovernmental authorities will be successful in mitigating the adverse effects of COVID-19 is unclear. National, regional, and local economies and markets could suffer disruptions that are lasting. Governmental actions are meaningfully influencing the interest-rate

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~~environment and financial-market activity and could have lasting effects on taxes and other economic factors, which could adversely affect our results of operations and financial condition.~~

As a participating lender in the SBA Paycheck Protection Program (“PPP”), we are subject to additional risks of litigation from our customers or other parties regarding our processing of loans for the PPP and risks that the SBA may not fund some or all PPP loan guaranties.

On March 27, 2020, President Trump signed the CARES Act, which included a loan program administered through the SBA referred to as the PPP. Under the PPP (and its expansion in 2021), small businesses and other entities and individuals were eligible to apply for loans from existing SBA lenders and other approved regulated lenders that enroll in the program, subject to numerous limitations and eligibility criteria. We participated as a lender in the PPP, and ultimately assisted approximately 9,000 businesses with approximately $1.1 billion in PPP loans.

The PPP opened on April 3, 2020; however, because of the short timeframe between the passing of the CARES Act and the opening of the PPP, there was some ambiguity in the laws, rules and guidance regarding the operation of the PPP, which exposes us to potential risks relating to noncompliance with the PPP, and risks related to fair lending, violation of BSA/AML requirements and reputational risk.

Since the opening of the PPP, several other banks have been subject to litigation regarding the process and procedures that such banks used in processing applications for the PPP and claims related to agent fees. We may be exposed to the risk of similar litigation, from both customers and non-customers that approached us regarding PPP loans, regarding our process and procedures used in processing applications or forgiveness requests for the PPP. If any such litigation is filed against us and is not resolved in a favorable manner, it may result in significant financial liability or adversely affect the Company’s reputation. In addition, litigation can be costly, regardless of outcome. Any financial liability, litigation costs or reputational damage caused by PPP-related litigation could have a material adverse impact on our business, financial condition and results of operations.

We also have credit risk on PPP loans if a determination is made by the SBA that there is a deficiency in the manner in which a PPP loan was originated, funded, or serviced by us, such as an issue with the eligibility of a borrower to receive a PPP loan, which may or may not be related to the ambiguity in the laws, rules and guidance regarding the operation of the PPP. In the event of a loss resulting from a default on a PPP loan and a determination by the SBA that there was a deficiency in the manner in which the PPP loan was originated, funded, or serviced by us, the SBA may deny its liability under the guaranty, reduce the amount of the guaranty, or, if it has already paid under the guaranty, seek recovery of any loss related to the deficiency from us. As of June 30, 2022, approximately 8,600 PPP loans totaling approximately $1.04 billion have been forgiven by the SBA, and we continued to hold PPP loans receivable of $54.2 million.

~~If we are not able to retain or attract key employees, or if we were to suffer the loss of a significant number of employees, we could experience a disruption in our business.~~

If a key employee or a substantial number of employees depart or become unable to perform their duties, it may negatively impact our ability to conduct business as usual. We might then have to divert resources from other areas of our operations, which could create additional stress for other employees, including those in key positions. The loss of qualified and key personnel, or an inability to continue to attract, retain and motivate key personnel could adversely affect our business and consequently impact our financial condition and results of operations.

~~Our risk management framework may not be effective in mitigating risks and losses to us.~~

Our risk management framework is comprised of various processes, systems and strategies, and is designed to manage the types of risk to which we are subject, including, among others, credit, market, liquidity, interest rate and compliance. Our framework also includes financial or other modeling methodologies that involve management assumptions and judgment. Our risk management framework may not be effective under all circumstances and may not adequately mitigate any risk of loss to us. If our framework is not effective, we could suffer unexpected losses and our financial condition, operations or business prospects could be materially and adversely affected. We may also be subject to potentially adverse regulatory consequences.

~~Climate change could adversely affect our business, affect client activity levels and damage our reputation.~~

Concerns over the long-term impacts of climate change have led and will continue to lead to governmental efforts around the world to mitigate those impacts. Consumers and businesses are also changing their behavior and business preferences as a result of these concerns. New governmental regulations or guidance relating to climate change, as well as changes in consumers’ and businesses’ behaviors and business preferences, may affect whether and on what terms and conditions we will

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engage in certain activities or offer certain products or services. The governmental and supervisory focus on climate change could also result in our becoming subject to new or heightened regulatory requirements relating to climate change, such as requirements relating to operational resiliency or stress testing for various climate stress scenarios. Any such new or heightened requirements could result in increased regulatory, compliance or other costs or higher capital requirements. In connection with the transition to a low carbon economy, legislative or public policy changes and changes in consumer sentiment could negatively impact the businesses and financial condition of our clients, which may decrease revenues from those clients and increase the credit risk associated with loans and other credit exposures to those clients. Our business, reputation and ability to attract and retain employees may also be harmed if our response to climate change is perceived to be ineffective or insufficient.

~~Regulatory and Litigation Risks~~

Failure to comply with the 2020 and 2013 Consent Orders from the Consumer Financial Protection Bureau regarding our Home Mortgage Disclosure Act submissions could result in additional regulatory enforcement action.

In March 2020, the Consumer Financial Protection Bureau (the “CFPB”) Office of Enforcement formally notified us of alleged violations of the Home Mortgage Disclosure Act (“HMDA”) associated with our HMDA reporting submissions. The CFPB alleged that the Bank did not accurately report all required relevant information within the annual HMDA submissions. We responded to the CFPB, noting that the Bank has instituted enhanced procedures to ensure compliance with HMDA, and submitted amended HMDA filings. In October 2020, after further discussions with the CFPB, we entered into a consent order related to our HMDA reporting, under which we agreed to pay a $200,000 civil money penalty and implement a HMDA compliance management system while adhering to a compliance plan. The consent order will be in effect for 10 years. We had previously entered in a consent order with the CFPB in 2013, also relating to HMDA reporting deficiencies, resulting in a $34,000 civil money penalty. The 2013 HMDA Consent Order remains in effect. Any further deficiencies in our HMDA reporting submissions could result in additional regulatory enforcement actions, cause us to incur additional significant compliance costs and subject us to larger fines. Moreover, continued deficiencies in our HMDA reporting could have serious reputational consequences for the Bank. Any of these results could have a material adverse effect on our business, financial condition and results of operations.

Non-Compliance with the USA PATRIOT Act, Bank Secrecy Act, Real Estate Settlement Procedures Act, Truth-in-Lending Act, Community Reinvestment Act, Fair Lending Laws, Flood Insurance Reform Act or other laws and regulations could result in fines or sanctions, and curtail our expansion opportunities.

Financial institutions are required under the USA PATRIOT Act of 2001 (the “Patriot Act”) and Bank Secrecy Act ("BSA") to develop programs to prevent financial institutions from being used for money-laundering ("AML") and terrorist activities. Financial institutions are also obligated to file suspicious activity reports with the U.S. Treasury Department's Office of Financial Crimes Enforcement Network. These rules also require financial institutions to establish procedures for identifying and verifying the identity of customers seeking to open new financial accounts. Failure or the inability to comply with the Patriot Act and BSA statutes and regulations could result in fines or penalties, curtailment of expansion opportunities, enforcement actions, intervention or sanctions by regulators and costly litigation or expensive additional controls and systems. During the last few years, several banking institutions have received large fines for non-compliance with these laws and regulations, and we were subject to a Consent Order and have paid a civil money penalty with respect to our BSA Program, as described below. In addition, the U.S. Government imposed and is expected to continue to expand laws and regulations relating to residential and consumer lending activities that could create significant new compliance burdens and financial costs.

We were recently subject to a Consent Order with the Office of the Comptroller of the Currency (“OCC”) with respect to our BSA compliance, and any future BSA compliance issues could result in additional regulatory enforcement action, including additional fines or sanctions.

The Bank Secrecy Act, the Patriot Act, and other laws and regulations require 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. The Bank was previously subject to a Consent Order from the OCC for its BSA program that was issued in February 2018 (the “BSA Consent Order”). The BSA Consent Order resulted in the Bank incurring significant expenses to comply with it, including payment of a $2,500,000 civil money penalty. The OCC terminated the BSA Consent Order in December 2021. A copy of the consent order for the civil money penalty was filed with the SEC on October 1, 2021 as an exhibit to the Company’s Current Report on Form 8-K. Similarly, the Company filed a copy of the Order terminating the BSA Consent Order with the SEC on December 20, 2021 as an exhibit to the Company’s Current Report on Form 8-K.

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.

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~~We operate in a highly regulated industry, which limits the manner and scope of our business activities.~~

We are subject to extensive supervision, regulation and examination by the WDFI, CFPB and the FDIC. In addition, the Federal Reserve is responsible for regulating the holding company. This regulatory structure is designed primarily for the protection of the deposit insurance funds and consumers and not to benefit our shareholders. This regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and examination policies to address not only compliance with applicable laws and regulations (including laws and regulations governing consumer credit, and anti-money laundering and anti-terrorism laws), but also capital adequacy, asset quality and risk, management ability and performance, earnings, liquidity, data reporting and various other factors. As part of this regulatory structure, we are subject to policies and other guidance developed by the regulatory agencies with respect to capital levels, the timing and amount of dividend payments, the classification of assets and the establishment of adequate loan loss reserves for regulatory purposes. Under this structure the WDFI, the FDIC, the CFPB and the Federal Reserve have broad discretion to impose restrictions and limitations on our operations if they determine, among other things, that our operations are unsafe or unsound, fail to comply with applicable law or are otherwise inconsistent with laws and regulations or with the supervisory policies of these agencies. This supervisory framework could materially impact the conduct, growth and profitability of our operations.

Failure to comply with applicable laws and regulations can result in a range of sanctions and enforcement actions, including the imposition of civil money penalties, formal agreements and cease and desist orders; identified deficiencies in our HMDA reporting and BSA/AML programs have resulted in Consent Orders from the CFPB and OCC, required us to incur significant expenses and compliance costs and subjected us to civil penalties. Failure to meet regulatory requirements could require the Bank to incur additional significant costs in order to bring our programs and operations into compliance, negatively impact our reputation, and have a material adverse effect on our business, financial condition and results of operations.

In addition, the FDIC has specific authority to take “prompt corrective action,” depending on the Bank's capital level. Currently, the Bank is considered “well-capitalized” for prompt corrective action purposes. If the Bank were designated as “adequately capitalized,” its ability to take brokered deposits would become limited. If the Bank were to be designated in one of the lower capital levels “undercapitalized,” “significantly undercapitalized” or “critically undercapitalized,” it would be required to raise additional capital and would be subject to progressively more severe restrictions on its operations, management and capital distributions, and replacement of senior executive officers and directors. If the Bank became “critically undercapitalized,” it would also be subject to the appointment of a conservator or receiver.

Recent national and state legislation and regulatory initiatives to support the financial services industry have been coupled with numerous restrictions and requirements that could detrimentally affect our business.

The Dodd-Frank Act has had a substantial impact on the financial services industry since its passage in 2010. The Dodd-Frank Act creates a framework through which regulatory reform has been and continues to be written. While many of the rules required by the Dodd-Frank Act have been implemented, others are still being drafted. As a result, the impact of the future regulatory requirements continues to be uncertain. We expect the way we conduct business to continue to be affected by these regulatory requirements, including through limitations on our ability to pursue certain lines of business, capital requirements, enhanced reporting obligations, and increased costs.

Other legislative initiatives could detrimentally impact our operations in the future. The extent of the impact of any such legislation will be dependent on the specific details of the final legislation passed, if any.

~~Deposit insurance premiums could increase further in the future.~~

The FDIC insures deposits at FDIC-insured financial institutions, including the Bank. The FDIC charges insured financial institutions premiums to maintain the Deposit Insurance Fund ("DIF") at a specific level. The Bank's FDIC insurance premiums increased substantially beginning in 2009, and could increase significantly in the future. Unfavorable economic conditions, increased bank failures and additional failures decreased the DIF. In order to restore the DIF to its statutorily mandated minimum of 1.35% of total deposits, the FDIC may need to increase deposit insurance premium rates. Insured institutions with assets of $10 billion or more are responsible for funding this increase. The FDIC has issued regulations to implement these provisions of the Dodd-Frank Act. The FDIC has also established a higher reserve ratio of 2% as a long term goal and the minimum level needed to withstand future financial crises of the magnitude of past crises. The FDIC may increase the assessment rates or impose additional special assessments in the future to keep the DIF at the statutory target level. Any increase in the Bank's FDIC premiums could have an adverse effect on its business, financial condition and results of operations.

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~~We are subject to various claims and litigation, which could result in significant expenses, losses and damage to our reputation.~~

We are, from time to time, subject to claims and proceedings related to our operations. These claims and legal actions could include supervisory or enforcement actions by our regulators, criminal proceedings by prosecutorial authorities, or civil claims by our customers, former customers, contractual counterparties, and current and former employees. We may also face class action lawsuits for alleged violations of employment, state wage and hour and consumer protection laws. These claims could involve large monetary demands, including civil money penalties or fines imposed by government authorities, and significant defense costs. If such claims and legal actions are brought, and are not resolved in a manner favorable to the Company, they could result in financial liability and/or reputational harm, which could have a material adverse effect on our financial condition and results of operations.

Banking institutions are also increasingly the target of class action lawsuits. Most recently there has been an increase in claims filed claiming deceptive practices or violations of account terms in connection with non-sufficient funds or overdraft charges. In September 2020, we received notice a similar class action had been filed against the Bank, alleging that we have been improperly charging our customers overdraft fees on items re-presented for payment. In May 2022, the Bank settled this lawsuit for a payment of $495,000 plus claims administrative expenses. In June 2022, the court granted preliminary approval of the settlement, and the claims administration process is ongoing. If the settlement is not approved by the court, or if another class action lawsuit is filed or determined adversely to us, or we were to enter into a settlement agreement in connection with such a matter, we could be exposed to monetary damages, reputational harm, or subject to limits on our ability to operate our business, which could have an adverse effect on our financial condition, and operating results.

~~Our real estate lending also exposes us to the risk of environmental liabilities.~~

In the course of our business, it is necessary to foreclose and take title to real estate, which could subject us to environmental liabilities with respect to these properties. Hazardous substances or waste, contaminants, pollutants or sources thereof may be discovered on properties during our ownership or after a sale to a third party. We could be held liable to a governmental entity or to third parties for property damage, personal injury, investigation and clean-up costs incurred by these parties in connection with environmental contamination, or may be required to investigate or clean up hazardous or toxic substances or chemical releases at such properties. The costs associated with investigation or remediation activities could be substantial and could substantially exceed the value of the real property. In addition, as the owner or former owner of a contaminated site, we may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from the property. We may be unable to recover costs from any third party. These occurrences may materially reduce the value of the affected property, and we may find it difficult or impossible to use or sell the property prior to or following any environmental remediation. If we ever become subject to significant environmental liabilities, our business, financial condition and results of operations could be materially and adversely affected.

~~Market and Industry Risks~~

~~Our operations are focused in the western United States, subjecting us to the risks of general economic conditions in these market areas.~~

Substantially all of the Bank's loans are to individuals, businesses and real estate developers in the Pacific Northwest, Arizona, Utah, Texas, New Mexico and Nevada. As a result, our business depends significantly on general economic conditions in these market areas. A substantial increase in unemployment rates, or severe declines in housing prices and property values in these primary market areas could have a material adverse effect on our business due to a number of factors, including:

•~~Loan delinquencies may increase.~~

•~~Problem assets and foreclosures may increase.~~

•~~Demand for the Bank's products and services may decline.~~

•Collateral for loans made by the Bank, especially real estate, may decline in value, in turn reducing a customer's borrowing power and reducing the value of assets and collateral associated with the loans.

•Natural disasters and catastrophic events such as wildfires, floods and earthquakes may damage or destroy collateral for loans made by the Bank and negatively impact the collateral’s value and a customer’s ability to repay loans.

~~A downturn in the real estate market would hurt our business.~~

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The Bank’s business activities and credit exposure are concentrated in real estate lending. The market for real estate is cyclical and the outlook for this sector is uncertain. A downturn in the real estate market, accompanied by falling values and increased foreclosures would hurt our business because a large majority of our loans are secured by real estate.

If a significant decline in market values occurs, the collateral for loans will provide decreasing levels of security. As a result, our ability to recover the principal amount due on defaulted loans by selling the underlying real estate will be diminished, and we will be more likely to suffer losses on defaulted loans.

We own real estate as a result of foreclosures resulting from non-performing loans. If other lenders or borrowers liquidate significant amounts of real estate in a rapid or disorderly fashion, or if the FDIC elects to dispose of significant amounts of real estate from failed financial institutions in a similar fashion, it could have an adverse effect on the values of the properties owned by the Company by depressing the value of these real estate holdings. In such a case, we may incur further write-downs and charge-offs, which could, in turn, adversely affect our business, financial condition and results of operations.

~~Changes in retail distribution strategies and consumer behavior may adversely impact our business, financial condition and results of operations.~~

We have significant investments in bank premises and equipment for our branch network as well as our retail work force and other branch banking assets. Advances in technology such as e-commerce, telephone, internet and mobile banking, and in-branch self-service technologies including automatic teller machines and other equipment, as well as changing customer preferences for these other methods of accessing our products and services, could decrease the value of our branch network or other retail distribution assets and may cause us to change our retail distribution strategy, close and/or sell certain branches or parcels of land held for development and restructure or reduce our remaining branches and work force. These actions could lead to losses on these assets or could adversely impact the carrying value of other long-lived assets and may lead to increased expenditures to renovate and reconfigure remaining branches or to otherwise reform our retail distribution channel. In addition, any changes in our branch network strategy could adversely impact our business, financial condition or operations if it results in the loss of customers or deposits which we rely on as a low cost and stable source of funds for our loans and operations.

~~We may suffer losses in our loan portfolio due to inadequate or faulty underwriting and loan collection practices.~~

There are risks inherent in any loan portfolio, which we attempt to address by adhering to specific underwriting and loan collection practices. Underwriting practices often include analysis of a borrower's prior credit history; financial statements; tax returns; cash flow projections; valuation of collateral; personal guarantees of loans to businesses; and verification of liquid assets. If the underwriting process fails to capture accurate information or proves to be inadequate, we may incur losses on loans that appeared to meet our underwriting criteria, and those losses may exceed the amounts set aside as reserves in the allowance for credit losses. Loan collection resources may be expanded to meet increases in nonperforming loans resulting from economic downturns or to service any loans acquired, resulting in higher loan administration costs. We are also exposed to the risk of improper documentation of foreclosure proceedings that would also increase the cost of collection.

~~Our business is subject to interest rate risk, and changes in market interest rates may negatively affect our business, financial condition and results of operations.~~

Our primary source of income is net interest income, which is the difference between the interest income generated by interest-earning assets and the interest expense generated by interest-bearing liabilities. The level of net interest income is a function of the average balances of interest-earning assets and interest-bearing liabilities and the spread between the amounts of the yield on such assets and the cost of such liabilities. These factors are influenced by both the pricing and the mix of interest-earning assets and interest-bearing liabilities which, in turn, are impacted by such external factors as the local economy, competition for loans and deposits, the monetary policy of the Federal Open Market Committee of the Federal Reserve Board of Governors (the “FOMC”) and market interest rates. Management is unable to predict these external factors, including the fluctuations of market interest rates, which are affected by many drivers, including inflation, recession, unemployment, monetary policy, domestic and international disorder, instability in domestic and foreign financial markets and investor and consumer demand.

Furthermore, movements in interest rates, the pace at which such movements occur and the volume and mix of our interest-bearing assets and liabilities influence the level of net interest income. The cost of customer deposits is largely based on short-term interest rates, the level of which is driven by the FOMC. However, the yields generated by long-term loans, such as single-family residential and multifamily mortgage loans, and securities are typically driven by longer-term (10 year) interest rates, which are set by the market and vary from day to day. Further, recent changes in ~~the Federal Reserve's purchase of assets, commonly known as "quantitative easing," have created significant volatility in market interest rates and recent, rapid~~

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~~increases in federal benchmark rates and likely additional increases in such rates are creating additional uncertainty and making it more difficult for us to balance our loan and deposit portfolios.~~

For example, if the interest rates on interest-bearing liabilities increase at a faster pace than the interest rates on interest-earning assets, the result could be a reduction in our net interest income and with it, a reduction in earnings. The same could be true if interest rates on interest-earning assets decline faster than the rates on interest-bearing liabilities. Net interest income and earnings would be similarly impacted were the interest rates on interest-earning assets to decline more quickly than the interest rates on interest-bearing liabilities. In addition, changes in interest rates could affect the Bank's ability to originate loans and attract and retain deposits; the fair values of its securities and other financial assets; the fair values of its liabilities; and the average lives of its loan and securities portfolios. Additionally, decreases in interest rates could lead to increased loan refinancing activity, which, in turn, would alter the balance of our interest-earning assets and impact net interest income. Increases in interest rates could reduce loan refinancing activity, which could result in compression of the spread between loan yields and more quickly rising funding rates.

We may also be exposed to movements in market rates to a degree not experienced by other financial institutions, as a result of our significant portfolio of fixed-rate single-family home loans, which are longer-term in nature than the customer accounts and borrowed money that constitute our liabilities.

~~Our liquidity may be adversely impacted by issues arising from certain industry deficiencies in foreclosure practices, including delays and challenges in the foreclosure process.~~

Foreclosure process issues and the potential legal and regulatory responses to them could negatively impact the process and timing to completion of foreclosures for residential mortgage lenders, including the Bank. Due to the COVID-19 emergency, certain states in which we do business have enacted temporary stays on evictions and foreclosures, or instituted a right to forbearance for homeowners experiencing financial hardship. Many of these states have not revised or retracted these policies even as the apparent degree of the emergency appears to have mitigated. Even before the adoption of these emergency policies, foreclosure timelines have increased in recent years due to, among other reasons, delays associated with the significant increase in the number of foreclosure cases as a result of economic downturns, additional consumer protection initiatives related to the foreclosure process and voluntary or mandatory programs intended to permit or require lenders to consider loan modifications or other alternatives to foreclosure. Should these stays or rights to forbearance continue, we may be limited in our ability to take timely possession of real estate assets collateralizing loans, which may increase our loan losses. Increases in the foreclosure timeline may also have an adverse effect on collateral values and the our ability to minimize our losses.

~~The replacement of the LIBOR benchmark interest rate may have an impact on our business, financial condition or results of operations.~~

Certain loans made by us are made at variable rates that use LIBOR as a benchmark for establishing the interest rate. In addition, we also have investments and interest rate derivatives that reference LIBOR. On July 27, 2017, the United Kingdom’s Financial Conduct Authority ("FCA") announced that it intends to stop persuading or compelling banks to submit LIBOR rates after 2021. On November 30, 2020 to facilitate an orderly LIBOR transition the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the Board of Governors of the Federal Reserve jointly announced that entering into new contacts using LIBOR as a reference rate after December 31, 2021 would create a safety and soundness risk. On March 5, 2021, the FCA announced that all LIBOR settings will either cease to be provided by any administrator or no longer be representative immediately after December 31, 2021, in the case of 1-week and 2-month U.S. dollar LIBOR, and immediately after June 30, 2023, in the case of the remaining U.S. dollar LIBOR settings. In the United States, efforts to identify a set of alternative U.S. dollar reference interest rates are ongoing, and the Alternative Reference Rate Committee ("ARRC") has recommended the use of a Secured Overnight Funding Rate ("SOFR"). SOFR is different from LIBOR in that it is a backward looking secured rate rather than a forward looking unsecured rate. These differences could lead to a greater disconnect between the Bank's costs to raise funds for SOFR as compared to LIBOR. For cash products and loans, the ARRC has also recommended Term SOFR, which is a forward looking SOFR based on SOFR futures and may in part reduce differences between SOFR and LIBOR. To further reduce differences between replacement indices and substitute indices market practitioners have also gravitated towards credit sensitive rates, the leading among them being the Bloomberg Short-term Bank Yield Index (“BSBY”). The ARRC announced on October 21, 2020 that they are not well positioned to adjudicate the development of a credit sensitive rate and will not criticize firms solely for using reference rates other than SOFR, such as BSBY. The Company has prepared to originate new loans to customers based on SOFR, Term SOFR and BSBY. There are also operational issues which may create a delay in the transition to SOFR or other substitute indices, leading to uncertainty across the industry. The implementation of a substitute index or indices for the calculation of interest rates under our loan agreements with our borrowers may incur significant expenses in effecting the transition, may result in reduced loan balances if borrowers do not accept the substitute index or indices, and may result in disputes or litigation with customers over the appropriateness or comparability to LIBOR of the substitute index or indices, which could have an adverse effect on our results of operations. These reforms may cause LIBOR to cease to exist, new methods of calculating LIBOR to be established or the establishment of

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multiple alternative reference rate(s). These consequences cannot be entirely predicted and could have an adverse impact on the market value for or value of LIBOR-linked securities, loans, and other financial obligations or extensions of credit held by or due to us.

~~Competitive Risks~~

Our ability to originate mortgage loans has been adversely affected by the increased competition resulting from the involvement of the U.S. Government, the Federal Reserve and Government-Sponsored Enterprises (“GSEs”) in the residential mortgage market.

Over the past few years, we have faced increased competition for mortgage loans due to the increased involvement of the GSEs in the mortgage market, which has caused interest rates for thirty year fixed-rate mortgage loans that conform to GSE guidelines to remain artificially low. Mortgage loan repayments on one-to-four family residential properties have been elevated, and it is possible that these mortgage loan repayments will outpace our loan production as a result of this competition, making it difficult for us to grow our mortgage loan portfolio and balance sheet, and having an adverse effect on our business.

~~The Bank faces strong competition from other financial institutions and new market participants, offering services similar to those offered by the Bank.~~

Many competitors, including fintech companies, offer the same types of loan and deposit services that the Company offers. These competitors include national and multinational banks, other regional banks, savings associations, community banks, credit unions and other financial intermediaries. In particular, our competitors include national banks and major financial companies whose greater resources may afford them a marketplace advantage by enabling them to maintain numerous banking locations and mount extensive promotional and advertising campaigns. Additionally, recent technological breakthroughs have made it possible for other non-traditional competitors to enter the marketplace and compete for traditional banking services. Increased competition within our geographic market area may result in reduced loan originations and deposits. Ultimately, competition from current and future competitors may affect our business materially and adversely.

~~We may not be able to continue to grow organically or through acquisitions.~~

Historically, we have expanded through a combination of organic growth and acquisitions. If market and regulatory conditions change, we may be unable to grow organically or successfully compete for, complete, and integrate potential future acquisitions at the same pace as we have achieved in recent years, or at all. We have historically used our strong stock currency and capital resources to complete acquisitions. Downturns in the stock market and the market price of our stock, changes in our capital position, and changes in our regulatory standing could each have a negative impact on our ability to complete future acquisitions.

~~Security Ownership Risks~~

~~Our ability to pay dividends is subject to limitations that may affect our ability to continue to pay dividends to shareholders.~~

The Company is a separate legal entity from the bank subsidiary and does not have significant operations of its own. The availability of dividends from the Bank is limited by the Bank's earnings and capital, as well as various statutes and regulations. It is possible, depending upon the financial condition of the Bank and other factors, that the Bank may not be able to pay dividends to the Company. If the Bank is unable to pay dividends to the Company, then we may not be able to pay dividends on our preferred or common stock to our shareholders. There are various federal law limitations on the extent to which the Bank can finance or otherwise supply funds to the Company through dividends and loans. These limitations include capital adequacy regulations and policies of its regulators generally and specifically the FDIC’s Prompt Corrective Action regulations, federal banking law requirements concerning the payment of dividends out of net profits or surplus, Sections 23A and 23B of the Federal Reserve Act and Regulation W governing transactions between an insured depository institution and its affiliates, as well as general federal regulatory oversight to prevent unsafe or unsound practices. If the Bank earnings are not sufficient to make dividend payments to us while maintaining adequate capital levels, then our liquidity may be affected and our stock price may be negatively affected by our inability to pay dividends, which will have an adverse impact on both the Company and our shareholders.

Our 4.875% Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A (“Series A Preferred Stock”) ranks senior to our Common Stock, and we are prohibited from paying dividends on our common stock unless we have paid dividends on our Series A Preferred.

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Shares of our Series A Preferred Stock rank senior to our Common stock with respect to the payment of dividends and distributions of assets upon liquidation, dissolution or winding up. Holders of Series A Preferred Stock are entitled to receive, when, as, and if declared by our Board of Directors (or a duly authorized committee of our Board of Directors), out of assets legally available for the payment of dividends under Washington law, non-cumulative cash dividends based on the liquidation preference of the Series A Preferred Stock at a rate equal to 4.875% per annum for each quarterly dividend period, beginning on April 15, 2021. If we do not or are unable to pay quarterly dividends on our Series A Preferred Stock, we may not pay a dividend to the holders of our Common Stock. Our stock price may be negatively affected by our inability to pay dividends, which will have an adverse impact on both the Company and our shareholders.

In addition, if we fail to pay, or declare and set apart for payment, dividends on our Series A Preferred Stock for six quarterly dividend periods, whether or not consecutive, the number of directors on our Board of Directors will automatically be increased by two, and the holders of shares of Series A Preferred Stock will have the right to elect two additional members of our Board of Directors (the “Preferred Stock Directors”) to fill such newly created directorships.

~~The market price for our Common Stock may be volatile.~~

The market price of our Common Stock could fluctuate substantially in the future in response to a number of factors, including those discussed below. The market price of our Common Stock has in the past fluctuated significantly. We expect to see additional volatility in the financial markets due to the uncertainty caused by the continuing COVID-19 pandemic, disruption in global supply chains, uncertainty over the U.S. government debt ceiling and changing Federal Reserve policy. Some additional factors that may cause the price of our common stock to fluctuate include:

•~~general conditions in the financial markets and real estate markets.~~

•~~macro-economic and political conditions in the U. S. and the financial markets generally (including the effects of the COVID-19 pandemic).~~

•~~variations in the operating results of the Company and our competitors.~~

•~~events affecting other companies that the market deems comparable to the Company.~~

•~~changes in securities analysts' estimates of our future performance and the future performance of our competitors.~~

•~~announcements by the Company or our competitors of mergers, acquisitions and strategic partnerships.~~

•~~additions or departure of key personnel.~~

•~~the presence or absence of short selling of the Company's Common Stock.~~

•~~future sales by us of our Common Stock or debt securities.~~

The stock markets in general have experienced substantial price and trading fluctuations. These fluctuations have resulted in volatility in the market prices of securities that often has been unrelated or disproportionate to changes in operating performance. These broad market fluctuations are expected to continue for the near future, and may adversely affect the trading price of our Common Stock.

~~There may be future sales or other dilution of the Company's equity, which may adversely affect the market price of our common stock or depositary shares.~~

We are not restricted from issuing additional shares of common stock, preferred stock, or securities that are convertible into or exchangeable for, or that represent the right to receive, Common Stock or preferred stock. Our Board of Directors is authorized to cause Washington Federal to issue one or more classes or series of preferred stock junior to our Series A Preferred Stock from time to time without any action on the part of our shareholders, and our Board of Directors also has the power, without shareholder approval, to set the terms of any such classes or series of preferred stock that may be issued, including voting rights, dividend rights, and preferences over the Common Stock with respect to dividends or upon our dissolution, winding up and liquidation and other terms. Although the approval of holders of depositary shares representing interests in the Series A Preferred Stock will be needed to issue any equity security ranking above the Series A Preferred Stock, if we were to issue preferred stock in the future that has preference over the Series A Preferred Stock with respect to the payment of dividends or upon liquidation, or if we were to issue preferred stock with voting rights that dilute the voting power of the Series A Preferred Stock or depositary shares, the rights of holders of the depositary shares or the market price of the depositary shares could be adversely affected.

The issuance of any additional shares of common or of preferred stock or convertible securities or the exercise of such securities could be substantially dilutive to existing shareholders. For instance, exercise of the warrant issued to the U.S. Treasury in connection with our participation in the Capital Purchase Program diluted the value of our Common Stock. We may also elect to use Common Stock to fund new acquisitions, which will dilute existing shareholders. Holders of our Common

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~~WASHINGTON FEDERAL, INC. AND SUBSIDIARIES~~

Stock have no preemptive rights that entitle holders to purchase their pro rata share of any offering of shares of any class or series and, therefore, such sales or offerings could result in increased dilution to our shareholders.

~~We rely, in part, on external financing to fund our operations and the unavailability of such funding in the future could adversely impact our growth and prospects.~~

We rely on customer deposits, advances from the FHLB and other borrowings to fund our operations. Management has historically been able to replace maturing deposits, if desired; however, we may not be able to replace such funds at any given point in time if our financial condition or market conditions change or if the cost of doing so might adversely affect our business, financial condition and results of operations.

Although we consider current sources of funds adequate for our liquidity needs, we may seek additional debt in the future to achieve our long-term business objectives. Such borrowings, if sought, may not be available to us or, if available, may not be on favorable terms. If additional financing sources are unavailable or are not available on reasonable terms, our business, financial condition and results of operations may be adversely affected.

A person holding our Common Stock could have the voting power of their shares of Common Stock on all matters significantly reduced under Washington's anti-takeover statutes, if the person acquires 10% or more of the voting stock of the Company.

We are incorporated in the state of Washington and subject to Washington state law. Some provisions of Washington state law could interfere with or restrict takeover bids or other change-in-control events affecting us. For example, Chapter 23B.19 of the Washington Business Corporation Act, with limited exceptions, prohibits a “target corporation” from engaging in specified “significant business transactions” for a period of five years after the share acquisition by an acquiring person, unless:

•the prohibited transaction or the acquiring person's purchase of shares was approved by a majority of the members of the target corporation's board of directors prior to the acquiring person's share acquisition; or

•the prohibited transaction was both approved by the majority of the members of the target corporation's board and authorized at a shareholder meeting by at least two-thirds of the outstanding voting shares (excluding the acquiring person's shares) at or subsequent to the acquiring person's share acquisition. An acquiring person is defined as a person or group of persons that beneficially own 10% or more of the voting securities of the target corporation. Such prohibited transactions include, among other things:

•~~certain mergers, or consolidations with, disposition of assets to, or issuances of stock to or redemption of stock from, the acquiring person;~~

•~~termination of 5% or more of the employees of the target corporation as a result of the acquiring person's acquisition of 10% or more of the shares;~~

•~~allowing the acquiring person to receive any disproportionate benefit as a shareholder; and~~

•~~liquidating or dissolving the target corporation.~~

After the five-year period, certain “significant business transactions” are permitted, if they comply with certain “fair price” provisions of the statute or are approved by a majority of the outstanding shares other than those of which the acquiring person has beneficial ownership. As a Washington corporation, the Company is not permitted to “opt out” of this statute.

~~The Company’s business or the value of its common shares could be negatively affected as a result of actions by activist shareholders.~~

The Company values constructive input from shareholders. Our Board of Directors and management team are committed to acting in the best interests of all of the Company’s shareholders. Activist shareholders who disagree with the composition of the Board of Directors, the Company’s strategic direction, or the way the Company is managed may seek to effect change through various strategies that range from private engagement to public filings, proxy contests, efforts to force transactions not supported by the Board of Directors, and litigation. Responding to some of these actions can be costly and time-consuming, may disrupt the Company’s operations and divert the attention of the Board of Directors and management. Such activities could interfere with the Company’s ability to execute its strategic plan and to attract and retain qualified executive leadership. The perceived uncertainty as to the Company’s future direction resulting from activist strategies could also affect the market price and volatility of the Company’s common shares.

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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 June 30, ~~2022.~~2023.

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
April 1, 2022 to April 30, 2022 1,712 $ 31.70 1,712 3,726,608
May 1, 2022 to May 31, 2022 197 30.56 197 3,726,411
June 1, 2022 to June 30, 2022 537 30.54 537 3,725,874
Total 2,446 $ 31.36 2,446 3,725,874


	Period	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
April 1, 2023 to April 30, 2023	211	$	29.78	211	3,676,049
May 1, 2023 to May 31, 2023	1,116,217	25.62		1,116,217	2,559,832
June 1, 2023 to June 30, 2023	221	29.45		221	2,559,611
Total	1,116,649	$	25.62	1,116,649	2,559,611

___________________

(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 76,956,264 shares were authorized for repurchase. This includes the 10,000,000 additional shares authorized by the Board of Directors on January 26, 2021.

The Company’s ability to pay dividends is subject to bank regulatory requirements, including (but not limited to) the capital adequacy regulations and policies established by the Board of Governors of the Federal Reserve System. The Company’s ~~Board of Directors'~~ dividend policy is to review our financial performance, capital adequacy, regulatory compliance and cash resources on a quarterly basis, and, if such review is favorable, to declare and pay a quarterly cash dividend to common shareholders. The Company’s 4.875% Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A (the “Series A Preferred”), ranks senior to the Company’s common stock with respect to payment of dividends, and dividends (if declared) accrue and are payable on the Series A Preferred a rate of 4.875% per annum, payable quarterly, in arrears. While the Series A Preferred is outstanding, unless the full dividend for the preceding quarterly period is paid in full, or declared and a sum set aside, no dividend may be declared or paid on the Company’s common stock.

Item 3. Defaults Upon Senior Securities

Not applicable

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

~~On July 29, 2022, Broadridge replaced AST~~During the period covered by this Quarterly Report on 10-Q, no director or executive officer of the Company adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," as ~~the transfer agent for the Company's common stock and depositary for the Company's preferred stock.~~each term is defined in Item 408(a) of Regulation S-K.

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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 and nine months ended June 30, ~~2022~~2023 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.


			WASHINGTON FEDERAL, INC.
			(Registrant)

~~July 29, 2022~~August 4, 2023			/S/ BRENT J. BEARDALL
			BRENT J. BEARDALL President & Chief Executive Officer

~~July 29, 2022~~August 4, 2023			/S/ ~~VINCENT L. BEATTY~~KELLI J. HOLZ
			~~VINCENT L. BEATTY~~KELLI J. HOLZ Executive Vice President and Chief Financial Officer

~~July 29, 2022~~August 4, 2023			/S/ ~~CORY D. STEWART~~BLAYNE A. SANDEN
			~~CORY D. STEWART~~BLAYNE A. SANDEN Senior Vice President and Principal Accounting Officer

6659


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
April 1, 2022 to April 30, 2022	1,712	$	31.70	1,712	3,726,608
May 1, 2022 to May 31, 2022	197	30.56		197	3,726,411
June 1, 2022 to June 30, 2022	537	30.54		537	3,725,874
Total	2,446	$	31.36	2,446	3,725,874