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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2022
or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission file number 001-34654
WASHINGTON FEDERAL INC
(Exact name of registrant as specified in its charter)
 
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 65,415,338 shares of common stock as of January 31, 2023.


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

2
WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)



December 31, 2022September 30, 2022
(In thousands, except share data)
ASSETS
Cash and cash equivalents$645,862 $683,965 
Available-for-sale securities, at fair value
2,059,837 2,051,037 
Held-to-maturity securities, at amortized cost
453,443 463,299 
Loans receivable, net of allowance for loan losses of $176,797 and $172,808
16,993,588 16,113,564 
Interest receivable75,316 63,872 
Premises and equipment, net240,360 243,062 
Real estate owned6,117 6,667 
FHLB and FRB stock133,073 95,073 
Bank owned life insurance238,370 237,931 
Intangible assets, including goodwill of $303,457 and $303,457
308,767 309,009 
Other assets499,078 504,652 
$21,653,811 $20,772,131 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities
Customer accounts
Transaction deposit accounts$12,547,832 $12,691,527 
Time deposit accounts3,412,203 3,338,043 
15,960,035 16,029,570 
FHLB advances3,075,000 2,125,000 
Advance payments by borrowers for taxes and insurance17,626 50,051 
Federal and state income tax liabilities, net16,995 3,306 
Accrued expenses and other liabilities259,774 289,944 
19,329,430 18,497,871 
Commitments and contingencies (see Note I)
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
300,000 300,000 
Common stock, $1.00 par value, 300,000,000 shares authorized; 136,373,350 and 136,270,886 shares issued; 65,387,745 and 65,330,126 shares outstanding
136,373 136,271 
Additional paid-in capital1,689,209 1,686,975 
Accumulated other comprehensive income (loss), net of taxes41,726 52,481 
Treasury stock, at cost; 70,985,605 and 70,940,760 shares
(1,591,935)(1,590,207)
Retained earnings1,749,008 1,688,740 
2,324,381 2,274,260 
$21,653,811 $20,772,131 


SEE NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
3
WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
 Three Months Ended December 31,
 20222021
(In thousands, except share data)
INTEREST INCOME
Loans receivable$203,946 $138,509 
Mortgage-backed securities10,613 4,792 
Investment securities and cash equivalents18,860 7,139 
233,419 150,440 
INTEREST EXPENSE
Customer accounts31,646 8,461 
FHLB advances18,974 7,843 
50,620 16,304 
Net interest income182,799 134,136 
Provision for credit losses2,500 500 
Net interest income after provision (release)180,299 133,636 
OTHER INCOME
Gain (loss) on sale of investment securities— 81 
Loan fee income1,502 1,921 
Deposit fee income6,353 6,443 
Other income6,169 10,236 
14,024 18,681 
OTHER EXPENSE
Compensation and benefits49,070 47,425 
Occupancy10,102 10,090 
FDIC insurance premiums3,675 3,100 
Product delivery4,621 4,721 
Information technology12,329 11,421 
Other expense12,481 12,856 
92,278 89,613 
Gain (loss) on real estate owned, net(112)562 
Income before income taxes101,933 63,266 
Income tax expense22,424 12,985 
Net income79,509 50,281 
Dividends on preferred stock3,656 3,656 
Net income available to common shareholders$75,853 $46,625 
PER SHARE DATA
Basic earnings per common share$1.16 $0.72 
Diluted earnings per common share1.16 0.71 
Dividends paid on common stock per share0.24 0.23 
Basic weighted average number of shares outstanding65,341,97465,207,837
Diluted weighted average number of shares outstanding65,430,69065,350,174

SEE NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
4
Table of Contents
WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)


 Three Months Ended December 31,
 20222021
(In thousands)
Net income$79,509 $50,281 
Other comprehensive income (loss) net of tax:
Net unrealized gain (loss) during the period on available-for-sale investment securities, net of tax of $1,659 and $3,864
(5,521)(12,934)
Reclassification adjustment of net (gain) loss from sale of available-for-sale securities included in net income, net of tax of $0 and $(19)
— 62 
Net unrealized gain (loss) from investment securities, net of reclassification adjustment(5,521)(12,872)
Net unrealized gain (loss) during the period on borrowings cash flow hedges, net of tax of $1,572 and $(1,483)
(5,234)4,963 
Net unrealized gain (loss) in cash flow hedging instruments, net of reclassification adjustment(5,234)4,963 
Other comprehensive income (loss)(10,755)(7,909)
Comprehensive income$68,754 $42,372 



SEE NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
5
Table of Contents
WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(UNAUDITED) 

(in thousands)Preferred StockCommon StockPaid-in CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Treasury StockTotal
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— — — 79,509 — — 79,509 
Other comprehensive income (loss)— — — — (10,755)— (10,755)
Dividends on common stock ($0.24 per share)
— — — (15,585)— — (15,585)
Dividends on preferred stock ($12.1875 per share)
— — — (3,656)— — (3,656)
Proceeds from stock-based awards— 25 740 — — — 765 
Stock-based compensation expense— 77 1,494 — — — 1,571 
Treasury stock acquired— — — — — (1,728)(1,728)
Balance at December 31, 2022$300,000 $136,373 $1,689,209 $1,749,008 $41,726 $(1,591,935)$2,324,381 
(in thousands)Preferred StockCommon StockPaid-in CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Treasury StockTotal
Balance at October 1, 2021$300,000 $135,993 $1,678,622 $1,528,611 $69,785 $(1,586,947)$2,126,064 
Net income— — — 50,281 — — 50,281 
Other comprehensive income (loss)— — — — (7,909)— (7,909)
Dividends on common stock ($0.23 per share)
— — — (14,899)— — (14,899)
Dividends on preferred stock ($12.1875 per share)
— — — (3,656)— — (3,656)
Proceeds from stock-based awards— 30 798 — — — 828 
Stock-based compensation expense— 173 1,217 — — — 1,390 
Treasury stock acquired— — — — — (2,973)(2,973)
Balance at December 31, 2021$300,000 $136,196 $1,680,637 $1,560,337 $61,876 $(1,589,920)$2,149,126 










SEE NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED) 
 Three Months Ended December 31,
 20222021
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income$79,509 $50,281 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization, accretion and other, net1,613 7,944 
Stock-based compensation expense1,571 1,390 
Provision (release) for credit losses2,500 500 
Loss (gain) on sale of investment securities— (81)
Gain on bank owned life insurance(821)— 
Net realized (gain) loss on sales of premises, equipment, and real estate owned(230)(355)
Decrease (increase) in accrued interest receivable(11,444)(1,115)
Decrease (increase) in federal and state income tax receivable— 3,877 
Decrease (increase) in cash surrender value of bank owned life insurance(439)(1,397)
Decrease (increase) in other assets3,134 (3,422)
Increase (decrease) in federal and state income tax liabilities16,920 5,090 
Increase (decrease) in accrued expenses and other liabilities(26,213)(35,871)
Net cash provided by (used in) operating activities66,100 26,841 
CASH FLOWS FROM INVESTING ACTIVITIES
Origination of loans and principal repayments, net(802,470)(347,596)
Loans purchased(77,484)(413,326)
FHLB & FRB stock purchased(176,000)(56,000)
FHLB & FRB stock redeemed138,000 56,000 
Available-for-sale securities purchased(115,909)— 
Principal payments and maturities of available-for-sale securities100,340 170,847 
Proceeds from sales of available-for-sale securities— 4,510 
Principal payments and maturities of held-to-maturity securities9,793 38,679 
Proceeds from sales of real estate owned744 2,883 
Equity securities purchased(7,500)— 
Proceeds from sales of premises and equipment664 2 
Premises and equipment purchased and REO improvements(2,217)(2,771)
Net cash provided by (used in) investing activities(932,039)(546,772)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in customer accounts(69,535)359,934 
Proceeds from borrowings4,400,000 1,400,000 
Repayments of borrowings(3,450,000)(1,400,000)
Proceeds from stock-based awards765 828 
Dividends paid on common stock(15,585)(14,899)
Dividends paid on preferred stock(3,656)(3,656)
Treasury stock purchased(1,728)(2,973)
Increase (decrease) in advances payments by borrowers for taxes and insurance(32,425)(29,465)
Net cash provided by (used in) financing activities827,836 309,769 
Increase (decrease) in cash and cash equivalents(38,103)(210,162)
Cash, cash equivalents and restricted cash at beginning of period683,965 2,090,809 
Cash, cash equivalents and restricted cash at end of period$645,862 $1,880,647 
(CONTINUED)
SEE NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 Three Months Ended December 31,
 20222021
(In thousands)
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Non-cash investing activities
Real estate acquired through foreclosure$95 $— 
Other personal property acquired through foreclosure— 422 
Non-cash financing activities
Preferred stock dividend payable3,656 3,656 
Cash paid (received) during the period for
Interest48,195 13,275 
Income taxes1,016 — 


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, was formed as the Bank’s holding company in November, 1994. As used throughout this document, the terms “Washington Federal” or the “Company” or “we” or “us” and “our” refer to 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. The Bank conducts its activities through a network of 200 bank branches located in Washington, Oregon, Idaho, Utah, Arizona, Nevada, New Mexico and Texas.

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 2022 Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on November 18, 2022 ("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 2022 Annual Financial Statements. There have not been any significant changes in the Company's significant accounting policies compared to those contained in its 2022 Annual Financial Statements for the year ended September 30, 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 - Based on the level of vault cash on hand, the Company was not required to maintain cash reserve balances with the Federal Reserve Bank as of December 31, 2022. As of December 31, 2022 and September 30, 2022, the Company held counterparty cash collateral of $280,400,000 and pledged cash collateral to counterparties of $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. 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 investments where the Company has significant influence, the Company applies the equity method of accounting, which adjusts the carrying value 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 of these investments are recorded in Other income in the Consolidated Statements of Operations.
•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 Other income in the Consolidated Statements of Operations. Fair value is determined by reference to readily
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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


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 transactions involving the same or similar investments from the same issuer, also referred to as the measurement alternative. 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 December 31, 2022, equity investments held by the Company and recorded at NAV had a carrying amount of $38,385,000 and a remaining unfunded commitment of $7,511,000. These NAV based investments cannot be transferred without consent and we do not have redemption rights. Equity investments measured at NAV are not classified in the 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 loss methodology (“CECL”) requires an estimate of the credit losses expected over the life of an exposure (or pool of exposures) and replaces the incurred loss methodology’s threshold that delayed the recognition of a credit loss until it was probable a loss event was incurred.

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

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

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

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

The Company performs a quarterly asset quality review which includes a review of forecasted gross charge-offs and recoveries, nonperforming assets, criticized loans, risk rating migration, delinquencies, etc. The asset quality review is performed by
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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


management and the results are used to consider a qualitative overlay to the quantitative baseline. The second qualitative adjustment noted above, economic conditions and collateral values, encompasses a one-year reasonable and supportable forecast period. The overlay adjustment for the reasonable and supportable forecast assumes an immediate reversion after the one-year forecast period to historical loss rates for the remaining life of the respective loan pool.

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

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 (or recapture of) for credit losses. Losses are charged against the allowance when management believes the uncollectibility of an AFS security is confirmed or when either of the criteria regarding intent or requirement to sell is met. See Note F "Fair Value Measurements" for more information about AFS debt securities.

Accrued Interest Receivable - The Company made the following elections regarding accrued interest 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. If payment is made on a loan so that the loan becomes less than 90 days past due, and the Bank expects full collection of principal and interest, the loan is returned to full accrual status. Any interest ultimately collected is credited to income in the period of recovery. A loan is charged-off when the loss is estimable and it is confirmed that the borrower is not expected to be able to meet contractual obligations.

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


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

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

Off-balance-sheet credit exposures - The only material off-balance-sheet credit exposures are unfunded loan commitments, which had a combined balance of $4,822,769,000 and $4,947,570,000 at December 31, 2022 and September 30, 2022, respectively. The reserve for unfunded commitments is recognized as a liability (other liabilities in the consolidated statements of financial condition), with adjustments to the reserve recognized through provision for credit losses in the consolidated statements of income. The reserve for unfunded commitments represents the expected lifetime credit losses on off-balance sheet obligations such as commitments to extend credit and standby letters of credit. However, a liability is not recognized for commitments that are unconditionally cancellable by the Company. The reserve for unfunded commitments is determined by estimating future draws, including the effects of risk mitigation actions, and applying the expected loss rates on those draws. Loss rates are estimated by utilizing the same loss rates calculated for the allowance for credit losses related to the respective loan portfolio class. See Note I “Commitments and Contingencies” for more information.


NOTE B – New Accounting Pronouncements

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

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


NOTE C – Dividends and Share Repurchases

On December 2, 2022, the Company paid a regular dividend on common stock of $0.24 per share, which represented the 159th consecutive quarterly cash dividend. Dividends per share were $0.24 and $0.23 for the quarters ended December 31, 2022 and 2021, respectively.

For the three months ended December 31, 2022, the Company repurchased 44,845 shares at an average price of $38.53. As of December 31, 2022, there are 3,679,499 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 January 15, 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.
 December 31, 2022September 30, 2022
(In thousands)(In thousands)
Commercial loans
Multi-family$2,713,331 13.4 %$2,645,801 13.7 %
Commercial real estate3,237,073 16.0 3,133,660 16.2 
Commercial & industrial2,628,131 13.0 2,350,984 12.1 
Construction4,055,474 20.0 3,784,388 19.5 
Land - acquisition & development253,682 1.2 291,301 1.5 
Total commercial loans12,887,691 63.6 12,206,134 63.0 
Consumer loans
Single-family residential6,013,410 29.7 5,771,862 29.8 
Construction - custom926,126 4.6 974,652 5.0 
   Land - consumer lot loans148,246 0.7 153,240 0.8 
   HELOC212,123 1.0 203,528 1.0 
   Consumer73,115 0.4 75,543 0.4 
Total consumer loans7,373,020 36.4 7,178,825 37.0 
Total gross loans20,260,711 100 %19,384,959 100 %
   Less:
      Allowance for credit losses on loans176,797 172,808 
      Loans in process2,997,839 3,006,023 
      Net deferred fees, costs and discounts92,487 92,564 
Total loan contra accounts3,267,123 3,271,395 
Net loans$16,993,588 $16,113,564 

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




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 December 31, 2022, and September 30, 2022, AIR for loans totaled $67,169,000 and $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 $8,636,895,000 and $8,224,951,000 at December 31, 2022 and September 30, 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.
The following table sets forth the amortized cost basis of non-accrual loans and loans 90 days or more past due and accruing.
 
 December 31, 2022September 30, 2022
 (In thousands, except ratio data)
Non-accrualNon-accrual with no ACL90 days or more past due and accruingNon-accrualNon-accrual with no ACL90 days or more past due and accruing
Commercial loans
Multi-family$5,879 $— $— $5,912 $— $— 
Commercial real estate4,635 — — 4,691 — — 
Commercial & industrial906 906 — 5,693 1,308 — 
Construction— — — — — — 
Land - acquisition & development— — — — — — 
   Total commercial loans11,420 906 — 16,296 1,308 — 
Consumer loans
Single-family residential17,084 — — 17,450 — — 
Construction - custom435 — — 435 — — 
Land - consumer lot loans71 — — 84 — — 
HELOC134 — — 233 — — 
Consumer36 — — 36 — — 
   Total consumer loans17,760 — — 18,238 — — 
Total non-accrual loans$29,180 $906 $— $34,534 $1,308 $— 
% of total loans0.17 %0.21 %

The Company recognized interest income on non-accrual loans of approximately $534,000 in the three months ended December 31, 2022. 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 $358,000 for the three months ended December 31, 2022. Recognized interest income for the three months ended December 31, 2022 was higher than what otherwise would have been recognized in the period due to the collection of past due amounts. Interest cash flows collected on non-accrual loans vary from period to period as those loans are brought current or are paid off.

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


The following tables provide details regarding loan delinquencies by loan portfolio and class.
 
December 31, 2022Days Delinquent Based on $ Amount of Loans% based
on $
Type of LoanLoans Receivable (Amortized Cost)Current306090Total Delinquent
(In thousands, except ratio data)
Commercial Loans
Multi-family$2,695,759 $2,695,759 $— $— $— $— — %
Commercial real estate3,213,308 3,212,259 533 452 64 1,049 0.03 
Commercial & industrial2,621,266 2,620,020 261 81 904 1,246 0.05 
Construction1,637,499 1,636,565 934 — 934 0.06 
Land - acquisition & development191,162 191,162 — — — — — 
   Total commercial loans10,358,994 10,355,765 1,728 533 968 3,229 0.03 
Consumer Loans
Single-family residential5,967,678 5,946,382 5,661 2,038 13,597 21,296 0.36 
Construction - custom408,563 408,128 — — 435 435 0.11 
Land - consumer lot loans147,078 146,969 49 — 60 109 0.07 
HELOC214,904 212,655 2,121 — 128 2,249 1.05 
Consumer73,168 72,777 54 174 163 391 0.53 
   Total consumer loans6,811,391 6,786,911 7,885 2,212 14,383 24,480 0.36 
Total Loans$17,170,385 $17,142,676 $9,613 $2,745 $15,351 $27,709 0.16 %
Delinquency %99.84%0.06%0.01%0.09%0.16%



September 30, 2022Days Delinquent Based on $ Amount of Loans% based
on $
Type of LoanLoans Receivable (Amortized Cost)Current306090Total Delinquent
(In thousands, except ratio data)
Commercial Loans
Multi-family$2,626,479 $2,626,479 $— $— $— $— — %
Commercial real estate3,111,112 3,110,056 538 450 68 1,056 0.03 
Commercial & industrial2,343,403 2,336,791 — 919 5,693 6,612 0.28 
Construction1,423,891 1,423,891 — — — — 
Land - acquisition & development223,616 223,616 — — — — — 
  Total commercial loans9,728,501 9,720,833 538 1,369 5,761 7,668 0.08 
Consumer Loans
Single-family residential5,726,979 5,708,996 2,796 1,316 13,871 17,983 0.31 
Construction - custom397,343 396,908 — — 435 435 0.11 
Land - consumer lot loans151,945 151,746 — 139 60 199 0.13 
HELOC206,033 205,605 155 46 227 428 0.21 
Consumer75,571 75,357 162 17 35 214 0.28 
  Total consumer loans6,557,871 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%


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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 December 31, 2022, 98.0% of the Company's $55,515,000 in TDRs were classified as performing. As of December 31, 2022, single-family residential loans comprised 82.5% 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 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 December 31, 2022 and September 30, 2022.
December 31, 2022Term Loans Amortized Cost Basis by Origination Year
YTD 20232022202120202019Prior to 2019Revolving LoansRevolving to Term LoansTotal Loans
Commercial loans
Multi-family
Pass$94,649 $666,795 $763,102 $486,468 $167,495 $464,692 $36,361 $— $2,679,562 
Substandard— 3,931 — 4,180 — 8,086 — — 16,197 
Total$94,649 $670,726 $763,102 $490,648 $167,495 $472,778 $36,361 $— $2,695,759 
Commercial real estate
Pass$130,440 $806,478 $722,298 $467,416 $296,176 $705,610 $1,375 $— $3,129,793 
Special Mention— — — — 1,382 — — — 1,382 
Substandard— 5,562 1,584 26,609 30,517 15,291 2,570 — 82,133 
Total$130,440 $812,040 $723,882 $494,025 $328,075 $720,901 $3,945 $— $3,213,308 
Commercial & industrial
Pass$124,523 $272,160 $345,166 $134,933 $34,585 $211,323 $1,350,779 $1,911 $2,475,380 
Special Mention— — 2,601 — — — 2,850 — 5,451 
Substandard— 7,961 12,829 5,292 4,671 25,427 84,255 — 140,435 
Total$124,523 $280,121 $360,596 $140,225 $39,256 $236,750 $1,437,884 $1,911 $2,621,266 
Construction
Pass$17,955 $651,808 $694,514 $155,086 $33,585 $375 $75,930 $— $1,629,253 
Substandard— 5,987 2,259 — — — — — 8,246 
Total$17,955 $657,795 $696,773 $155,086 $33,585 $375 $75,930 $— $1,637,499 
Land - acquisition & development
Pass$4,682 $88,588 $48,857 $17,530 $2,981 $25,932 $2,592 $— $191,162 
Total$4,682 $88,588 $48,857 $17,530 $2,981 $25,932 $2,592 $— $191,162 
Total commercial loans
Pass$372,249 $2,485,829 $2,573,937 $1,261,433 $534,822 $1,407,932 $1,467,037 $1,911 $10,105,150 
Special Mention— — 2,601 — 1,382 — 2,850 — 6,833 
Substandard— 23,441 16,672 36,081 35,188 48,804 86,825 — 247,011 
Total$372,249 $2,509,270 $2,593,210 $1,297,514 $571,392 $1,456,736 $1,556,712 $1,911 $10,358,994 
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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


December 31, 2022Term Loans Amortized Cost Basis by Origination Year
YTD 20232022202120202019Prior to 2019Revolving LoansRevolving to Term LoansTotal Loans
Consumer loans
Single-family residential
Current$219,679 $1,148,027 $1,717,690 $768,368 $313,719 $1,778,899 $— $— $5,946,382 
30 days past due— — 1,637 — 63 3,961 — — 5,661 
60 days past due— — — — — 2,038 — — 2,038 
90+ days past due— — — — 1,084 12,513 — — 13,597 
Total$219,679 $1,148,027 $1,719,327 $768,368 $314,866 $1,797,411 $— $— $5,967,678 
Construction - custom
Current$— $320,079 $82,349 $4,864 $358 $478 $— $— $408,128 
90+ days past due— — 435 — — — — — 435 
Total$— $320,079 $82,784 $4,864 $358 $478 $— $— $408,563 
Land - consumer lot loans
Current$4,355 $50,736 $55,658 $15,336 $5,189 $15,695 $— $— $146,969 
30 days past due— — — — — 49 — — 49 
90+ days past due— — — — — 60 — — 60 
Total$4,355 $50,736 $55,658 $15,336 $5,189 $15,804 $— $— $147,078 
HELOC
Current$— $— $— $— $— $4,846 $207,284 $525 $212,655 
30 days past due— — — — — 260 1,861 — 2,121 
90+ days past due— — — — — — 128 — 128 
Total$— $— $— $— $— $5,106 $209,273 $525 $214,904 
Consumer
Current$108 $2,145 $9,986 $8,023 $203 $28,303 $24,009 $— $72,777 
30 days past due— — — — — 37 17 — 54 
60 days past due— — — — 1 173 — — 174 
90+ days past due— 2 — — 32 129 — — 163 
Total$108 $2,147 $9,986 $8,023 $236 $28,642 $24,026 $— $73,168 
Total consumer loans
Current$224,142 $1,520,987 $1,865,683 $796,591 $319,469 $1,828,221 $231,293 $525 $6,786,911 
30 days past due— — 1,637 — 63 4,307 1,878 — 7,885 
60 days past due— — — — 1 2,211 — — 2,212 
90+ days past due— 2 435 — 1,116 12,702 128 — 14,383 
Total$224,142 $1,520,989 $1,867,755 $796,591 $320,649 $1,847,441 $233,299 $525 $6,811,391 


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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


September 30, 2022Term Loans Amortized Cost Basis by Origination Year
20222021202020192018Prior to 2018Revolving LoansRevolving to Term LoansTotal Loans
Commercial loans
Multi-family
Pass$657,144 $778,936 $500,917 $168,568 $157,144 $315,858 $34,102 $— $2,612,669 
Substandard3,951 — 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 
Substandard259 — 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 Mention2,503 — — — — — 29,153 — 31,656 
Substandard2,021 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 Mention2,503 1,594 — — — — 29,153 — 33,250 
Substandard6,231 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 

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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


September 30, 2022Term Loans Amortized Cost Basis by Origination Year
20222021202020192018Prior to 2018Revolving LoansRevolving to Term LoansTotal 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 due1 — — 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 due1 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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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


NOTE E – Allowance for Losses on Loans

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

The following tables summarize the activity in the allowance for loan losses by loan portfolio segment and class. 
Three Months Ended December 31, 2022Beginning AllowanceCharge-offsRecoveriesProvision &
Transfers(1)		Ending Allowance
 (In thousands)
Commercial loans
   Multi-family$12,013 $— $— $311 $12,324 
   Commercial real estate25,814 — 4 1,562 27,380 
   Commercial & industrial57,210 (82)32 6,713 63,873 
   Construction26,161 — — (28)26,133 
   Land - acquisition & development12,278 — 16 (3,722)8,572 
      Total commercial loans133,476 (82)52 4,836 138,282 
Consumer loans
   Single-family residential25,518 — 430 (473)25,475 
   Construction - custom3,410 — — 90 3,500 
   Land - consumer lot loans5,047 — — (905)4,142 
   HELOC2,482 — 1 105 2,588 
   Consumer2,875 (146)234 (153)2,810 
      Total consumer loans39,332 (146)665 (1,336)38,515 
Total ACL - loans$172,808 $(228)$717 $3,500 $176,797 
(1) Provision & transfer amounts within the table do not include provision recapture for unfunded commitments of $1,000,000.
Three Months Ended December 31, 2021Beginning AllowanceCharge-offsRecoveries
Provision &
Transfers (1)
Ending Allowance
 (In thousands)
Commercial loans
   Multi-family$16,949 $— $— $(956)$15,993 
   Commercial real estate23,437 (529)44 2,770 25,722 
   Commercial & industrial45,957 (43)62 1,255 47,231 
   Construction25,585 — 2,000 (2,819)24,766 
   Land - acquisition & development13,447 (2)20 660 14,125 
      Total commercial loans125,375 (574)2,126 910 127,837 
Consumer loans
   Single-family residential30,978 — 405 (1,277)30,106 
   Construction - custom4,907 — — (1,188)3,719 
   Land - consumer lot loans4,939 (27)5 67 4,984 
   HELOC2,390 — 1 (26)2,365 
   Consumer2,711 (76)251 (486)2,400 
      Total consumer loans45,925 (103)662 (2,910)43,574 
Total loans$171,300 $(677)$2,788 $(2,000)$171,411 
(1) Provision & transfer amounts within the table do not include the provision for unfunded commitments of $2,500,000.

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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)



The Company recorded a $2,500,000 provision for credit losses for the three months ended December 31, 2022, compared with a provision for credit losses of $500,000 for the three months ended December 31, 2021. The provision in the three months ended December 31, 2022 was primarily due to reserving for growth in loans receivable largely offset by improvements in management's assessment of the credit quality of certain loan portfolios. The provision for the three months ended December 31, 2021 was primarily due to reserving for growth in loans receivable and changes in composition of the loan portfolio. Recoveries, net of charge-offs, totaled $489,000 for the three months ended December 31, 2022, compared to $2,111,000 during the three months ended December 31, 2021.

Non-performing assets were $38,650,000, or 0.18% of total assets, at December 31, 2022, compared to $44,554,000, or 0.21% of total assets, at September 30, 2022. Non-accrual loans were $29,180,000 at December 31, 2022, compared to $34,534,000 at September 30, 2022. Delinquencies, as a percent of total loans, were 0.16% at December 31, 2022, compared to 0.17% at September 30, 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.
December 31, 2022Internally Assigned Grade
 PassSpecial mentionSubstandardDoubtfulLossTotal
 (In thousands, except ratio data)
Loan type
Commercial loans
  Multi-family$2,679,562 $— $16,197 $— $— $2,695,759 
  Commercial real estate3,129,793 1,382 82,133 — — 3,213,308 
  Commercial & industrial2,475,380 5,451 140,435 — — 2,621,266 
  Construction1,629,253 — 8,246 — — 1,637,499 
  Land - acquisition & development191,162 — — — — 191,162 
    Total commercial loans10,105,150 6,833 247,011 — — 10,358,994 
Consumer loans
  Single-family residential5,947,295 — 20,383 — — 5,967,678 
  Construction - custom408,127 — 436 — — 408,563 
  Land - consumer lot loans147,007 — 71 — — 147,078 
  HELOC214,771 — 133 — — 214,904 
  Consumer73,161 — 7 — — 73,168 
    Total consumer loans6,790,361 — 21,030 — — 6,811,391 
Total$16,895,511 $6,833 $268,041 $— $— $17,170,385 
Total grade as a % of total loans98.40 %0.04 %1.56 %— %— %


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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


September 30, 2022Internally Assigned Grade
 PassSpecial mentionSubstandardDoubtfulLossTotal Gross Loans
 (In thousands, except ratio data)
Loan type
Commercial loans
  Multi-family$2,612,669 $— $13,810 $— $— $2,626,479 
  Commercial real estate3,054,241 1,594 55,277 — — 3,111,112 
  Commercial & industrial2,196,767 31,656 114,980 — — 2,343,403 
  Construction1,421,634 — 2,257 — — 1,423,891 
  Land - acquisition & development223,616 — — — — 223,616 
    Total commercial loans9,508,927 33,250 186,324 — — 9,728,501 
Consumer loans
  Single-family residential5,706,199 — 20,780 — — 5,726,979 
  Construction - custom396,908 — 435 — — 397,343 
  Land - consumer lot loans151,723 — 222 — — 151,945 
  HELOC205,800 — 233 — — 206,033 
  Consumer75,570 — 1 — — 75,571 
    Total consumer loans6,536,200 — 21,671 — — 6,557,871 
Total loans$16,045,127 $33,250 $207,995 $— $— $16,286,372 
Total grade as a % of total gross loans98.52 %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.

December 31, 2022Performing LoansNon-Performing Loans
 Amount% of Total
Loans		Amount% of Total
Loans
 (In thousands, except ratio data)
Commercial loans
   Multi-family$2,689,880 99.8 %$5,879 0.2 %
   Commercial real estate3,208,673 99.9 4,635 0.1 
   Commercial & industrial2,620,360 100.0 906 — 
   Construction1,637,499 100.0 — 0.0 
   Land - acquisition & development191,162 100.0 — — 
      Total commercial loans10,347,574 99.9 11,420 0.1 
Consumer loans
   Single-family residential5,950,594 99.7 17,084 0.3 
   Construction - custom408,128 99.9 435 0.1 
   Land - consumer lot loans147,007 100.0 71 0.0 
   HELOC214,770 99.9 134 0.1 
   Consumer73,132 100.0 36 0.0 
      Total consumer loans6,793,631 99.7 17,760 0.3 
Total loans$17,141,205 99.8 %$29,180 0.2 %
September 30, 2022Performing LoansNon-Performing Loans
 Amount% of Total
Loans		Amount% of Total
Loans
 (In thousands, except ratio data)
Commercial loans
   Multi-family$2,620,567 99.8 %$5,912 0.2 %
   Commercial real estate3,106,421 99.8 4,691 0.2 
   Commercial & industrial2,337,710 99.8 5,693 0.2 
   Construction1,423,891 100.0 — — 
   Land - acquisition & development223,616 100.0 — — 
      Total commercial loans9,712,205 99.8 16,296 0.2 
Consumer loans
   Single-family residential5,709,529 99.7 17,450 0.3 
   Construction - custom396,908 99.9 435 0.1 
   Land - consumer lot loans151,861 99.9 84 0.1 
   HELOC205,800 99.9 233 0.1 
   Consumer75,535 100.0 36 0.0 
      Total consumer loans6,539,633 99.7 18,238 0.4 
Total loans$16,251,838 99.8 %$34,534 0.2 %


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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


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

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active exchange markets that the entity has the ability to access as of the measurement date.
Level 2: Significant other observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active and other inputs that are observable or can be corroborated by observable market data.
Level 3: Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

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

Available-for-Sale Securities and Derivative Contracts
Securities available for sale are recorded at fair value on a recurring basis. The fair value of debt securities are priced using model pricing based on the securities' relationship to other benchmark quoted prices as provided by an independent third party, and under GAAP are considered a Level 2 input method. Securities that are traded on active exchanges are measured using the closing price in an active market and are considered a Level 1 input method.
The Company offers interest rate swaps to its variable rate borrowers who want to manage their interest rate risk. At the same time, the Company enters into the opposite trade with a counter party to offset its interest rate risk. The Company has also entered into commercial loan hedges, mortgage pool hedges and borrowings hedges using interest rate swaps. The fair value of these interest rate swaps are estimated by a third-party pricing service using a discounted cash flow technique. These are considered a Level 2 input method.
 
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The following tables present the balance and level in the fair value hierarchy of assets and liabilities that are measured at fair value on a recurring basis.
 December 31, 2022
 Level 1Level 2Level 3Total
 (In thousands)
Financial Assets
Available-for-sale securities:
U.S. government and agency securities$— $99,889 $— $99,889 
Asset-backed securities— 696,572 — 696,572 
Municipal bonds— 35,054 — 35,054 
Corporate debt securities— 316,487 — 316,487 
Mortgage-backed securities
Agency pass-through certificates— 911,835 — 911,835 
Total available-for-sale securities— 2,059,837 — 2,059,837 
Client swap program hedges— 63,383 — 63,383 
Commercial loan fair value hedges— 2,446 — 2,446 
Mortgage loan fair value hedges— 33,986 — 33,986 
Borrowings cash flow hedges— 173,139 — 173,139 
Total financial assets$— $2,332,791 $— $2,332,791 
Financial Liabilities
Client swap program hedges$— $63,383 $— $63,383 
Total financial liabilities$— $63,383 $— $63,383 
 September 30, 2022
 Level 1Level 2Level 3Total
 (In thousands)
Financial Assets
Available-for-sale securities:
U.S. government and agency securities$— $39,354 $— $39,354 
Asset-backed securities— 767,001 767,001 
Municipal bonds— 34,962 — 34,962 
Corporate debt securities— 313,757 — 313,757 
Mortgage-backed securities
Agency pass-through certificates— 895,963 — 895,963 
Total available-for-sale securities— 2,051,037 — 2,051,037 
Client swap program hedges— 67,260 — 67,260 
Commercial loan fair value hedges— 2,517 — 2,517 
Mortgage loan fair value hedges— 36,765 — 36,765 
Borrowings cash flow hedges— 179,945 — 179,945 
Total financial assets$— $2,337,524 $— $2,337,524 
Financial Liabilities
Client swap program hedges$— $67,260 $— $67,260 
Total financial liabilities$— $67,260 $— $67,260 
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(UNAUDITED)


Measured on a Nonrecurring Basis

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

When management determines that the fair value of the collateral or the REO requires additional adjustments, either as a result of an updated appraised value or when there is no observable market price, the Company classifies the collateral dependent loan or real estate owned as Level 3. Level 3 assets recorded at fair value on a nonrecurring basis at December 31, 2022 included loans for which an allowance was established or a partial charge-off was recorded based on the fair value of collateral, as well as real estate owned where the fair value of the property was less than the cost basis.

The following tables present the aggregated balance of assets that were measured at fair value on a nonrecurring basis at December 31, 2022 and December 31, 2021, and the total gains (losses) resulting from those fair value adjustments during the respective periods. The estimated fair value measurements are shown gross of estimated selling costs.
 
 December 31, 2022Three Months Ended December 31, 2022
 Level 1Level  2Level  3TotalTotal Gains (Losses)
 (In thousands)(In thousands)
Loans (1)$— $— $— $— $(123)
Real estate owned (2)— — — — — 
Balance at end of period$— $— $— $— $(123)

(1)The gains (losses) represent re-measurements of collateral-dependent loans.
(2)The gains (losses) represent aggregate write-downs and charge-offs on real estate owned.
December 31, 2021Three Months Ended December 31, 2021
Level 1Level  2Level  3TotalTotal Gains (Losses)
(In thousands)(In thousands)
Loans (1)$— $— $202 $202 $(89)
Real estate owned (2)— — 1,390 1,390 (504)
Balance at end of period$— $— $1,592 $1,592 $(593)

(1)The gains (losses) represent re-measurements of collateral-dependent loans.
(2)The gains (losses) represent aggregate write-downs and charge-offs on real estate owned.
At December 31, 2022, there was $93,000 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 $2,807,000.
Fair Values of Financial Instruments
FASB ASC 825, Financial Instruments ("ASC 825") requires disclosure of fair value information about financial instruments, whether or not recognized on the statement of financial condition, for which it is practicable to estimate those values. Certain financial instruments and all non-financial instruments are excluded from the disclosure requirements. Accordingly, the aggregate fair value estimates presented do not reflect the underlying fair value of the Company. Although management is not aware of any factors that would materially affect the estimated fair value amounts presented below, such amounts have not been comprehensively revalued for purposes of these financial statements since the dates shown, and therefore, estimates of fair value subsequent to those dates may differ significantly from the amounts presented below.
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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


 December 31, 2022September 30, 2022
 Level in Fair Value HierarchyCarrying
Amount		Estimated
Fair Value		Carrying
Amount		Estimated
Fair Value
 ($ in thousands)
Financial assets
Cash and cash equivalents1$645,862 $645,862 $683,965 $683,965 
Available-for-sale securities
U.S. government and agency securities299,889 99,889 39,354 39,354 
Asset-backed securities2696,572 696,572 767,001 767,001 
Municipal bonds235,054 35,054 34,962 34,962 
Corporate debt securities2316,487 316,487 313,757 313,757 
Mortgage-backed securities
Agency pass-through certificates2911,835 911,835 895,963 895,963 
Total available-for-sale securities2,059,837 2,059,837 2,051,037 2,051,037 
Held-to-maturity securities
Mortgage-backed securities
Agency pass-through certificates2453,443 402,055 463,299 406,860 
Total held-to-maturity securities453,443 402,055 463,299 406,860 
Loans receivable316,993,588 16,310,687 16,113,564 15,417,635 
FHLB and FRB stock2133,073 133,073 95,073 95,073 
        Other assets - client swap program hedges263,383 63,383 67,260 67,260 
        Other assets - commercial fair value loan hedges22,446 2,446 2,517 2,517 
        Other assets - mortgage loan fair value hedges233,986 33,986 36,765 36,765 
        Other assets - borrowings cash flow hedges2173,139 173,139 179,945 179,945 
Financial liabilities
Time deposits23,412,203 3,329,708 3,338,043 3,249,169 
FHLB advances23,075,000 3,067,487 2,125,000 1,940,813 
        Other liabilities - client swap program hedges263,383 63,383 67,260 67,260 

The following methods and assumptions were used to estimate the fair value of financial instruments:
Cash and cash equivalents – The carrying amount of these items is a reasonable estimate of their fair value. 
Available-for-sale securities and held-to-maturity securities – Securities at fair value are primarily priced using model pricing based on the securities' relationship to other benchmark quoted prices as provided by an independent third party, and are considered a Level 2 input method. Equity securities that are exchange traded are considered a Level 1 input method.
Loans receivable – Fair values are estimated first by stratifying the portfolios of loans with similar financial characteristics. Loans are segregated by type such as multi-family real estate, residential mortgage, construction, commercial, consumer and land loans. Each loan category is further segmented into fixed- and adjustable-rate interest terms. For residential mortgages and multi-family loans, the bank determined that its best exit price was by securitization. MBS benchmark prices are used as a base price, with further loan level pricing adjustments made based on individual loan characteristics such as FICO score, LTV, Property Type and occupancy. For all other loan categories an estimate of fair value is then calculated based on discounted cash flows using a discount rate offered and observed in the market on similar products, plus an adjustment for liquidity to reflect the non-homogeneous nature of the loans, as well as an annual loss rate based on historical losses to arrive at an estimated exit price fair value. Fair value for impaired loans is also based on recent appraisals or estimated cash flows discounted using rates
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(UNAUDITED)


commensurate with risk associated with the estimated cash flows. Assumptions regarding credit risk, cash flows and discount rates are judgmentally determined using available market information and specific borrower information.
FHLB and FRB stock – The fair value is based upon the par value of the stock that equates to its carrying value.
Time deposits – The fair value of time deposits is estimated by discounting the estimated future cash flows using rates offered for deposits with similar remaining maturities.
FHLB advances – The fair value of FHLB advances and other borrowings is estimated by discounting the estimated future cash flows using rates currently available to the Company for debt with similar remaining maturities.
Interest rate swaps – The Company offers interest rate swaps to its variable rate borrowers who want to manage their interest rate risk. At the same time, the Company enters into the opposite trade with a counterparty to offset its interest rate risk. The Company also uses interest rate swaps for various fair value hedges and cash flow hedges. The fair value of these interest rate swaps is estimated by a third-party pricing service using a discounted cash flow technique.
The following tables provide details about the amortized cost and fair value of available-for-sale and held-to-maturity securities.
 December 31, 2022
 Amortized
Cost		Gross UnrealizedFair
Value		Yield
 GainsLosses
 ($ in thousands)
Available-for-sale securities
U.S. government and agency securities due
1 to 5 years$36,531 $— $(925)$35,606 4.33 %
Over 10 years64,060 223 — 64,283 3.90 
Asset-backed securities
1 to 5 years21,033 — (1,524)19,509 4.58 
5 to 10 years67,783 — (1,025)66,758 5.01 
Over 10 years627,579 365 (17,639)610,305 5.12 
Corporate debt securities due
Within 1 year75,000 29 (212)74,817 5.08 
1 to 5 years151,531 232 (3,435)148,328 4.49 
5 to 10 years114,116 — (20,774)93,342 3.87 
Municipal bonds due
5 to 10 years5,743 — (360)5,383 3.00 
Over 10 years29,861 350 (540)29,671 5.85 
Mortgage-backed securities
Agency pass-through certificates985,480 11 (73,656)911,835 2.98 
2,178,717 1,210 (120,090)2,059,837 3.99 
Held-to-maturity securities
Mortgage-backed securities
Agency pass-through certificates453,443 23 (51,411)402,055 2.88 
453,443 23 (51,411)402,055 2.88 
$2,632,160 $1,233 $(171,501)$2,461,892 3.80 %



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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)



 
 September 30, 2022
 Amortized
Cost		Gross UnrealizedFair
Value		Yield
 GainsLosses
 ($ in thousands)
Available-for-sale securities
U.S. government and agency securities due
1 to 5 years$40,403 $— $(1,049)$39,354 3.03 %
Asset-backed securities
1 to 5 years22,527 — (1,141)21,386 3.27 
5 to 10 years82,962 4 (547)82,419 3.53 
Over 10 years668,482 783 (6,069)663,196 3.86 
Corporate debt securities due
Within 1 year75,000 4 (200)74,804 3.74 
1 to 5 years151,411 — (2,748)148,663 3.59 
5 to 10 years114,414 — (24,124)90,290 3.87 
Municipal bonds due
5 to 10 years5,751 — (361)5,390 3.00 
Over 10 years29,871 400 (699)29,572 5.85 
Mortgage-backed securities
Agency pass-through certificates971,916 117 (76,070)895,963 2.81 
2,162,737 1,308 (113,008)2,051,037 3.36 
Held-to-maturity securities
Mortgage-backed securities
Agency pass-through certificates463,299 22 (56,461)406,860 2.88 
463,299 22 (56,461)406,860 2.88 
$2,626,036 $1,330 $(169,469)$2,457,897 3.28 %


For AFS investment securities, there were purchases of $115,909,000 during the three months ended December 31, 2022 and no purchases during the three months ended December 31, 2021. There were no sales of AFS investment securities during the three months ended December 31, 2022 and $4,510,000 of sales during the prior year same period. For HTM investment securities, there were no purchases during the three months ended December 31, 2022 and no purchases during the three months ended December 31, 2021. There were no sales of HTM investment securities during the three months ended December 31, 2022 or December 31, 2021. 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 $7,063,000 and $5,694,000 as of December 31, 2022 and September 30, 2022, respectively. For HTM debt securities, AIR totaled $1,084,000 and $1,108,000 as of December 31, 2022 and September 30, 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 December 31, 2022 and September 30, 2022, by length of time that individual securities in each category have been in a continuous loss position. There were 227 and 223 securities with an unrealized loss as of December 31, 2022 and September 30, 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 consider it more likely than not that it will be required to sell these securities before the recovery of amortized cost basis, which may be upon maturity, the Company does not consider these investments to have any credit impairment.
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(UNAUDITED)


 
December 31, 2022Less than 12 months12 months or moreTotal
 Unrealized
Gross Losses		Fair
Value		Unrealized
Gross Losses		Fair
Value		Unrealized
Gross Losses		Fair
Value
 (In thousands)
Available-for-sale securities
Corporate debt securities$(24,421)$217,278 $— $— $(24,421)$217,278 
Municipal bonds(900)14,704 — — (900)14,704 
U.S. government and agency securities$(120)$28,002 $(805)$7,604 $(925)$35,606 
Asset-backed securities(16,304)593,310 (3,884)72,112 (20,188)665,422 
Mortgage-backed securities(59,338)833,728 (14,318)77,584 (73,656)911,312 
(101,083)1,687,022 (19,007)157,300 (120,090)1,844,322 
Held-to-maturity securities
Mortgage-backed securities(51,411)400,422 — — (51,411)400,422 
$(152,494)$2,087,444 $(19,007)$157,300 $(171,501)$2,244,744 

September 30, 2022Less than 12 months12 months or moreTotal
 Unrealized
Gross Losses		Fair
Value		Unrealized
Gross Losses		Fair
Value		Unrealized
Gross Losses		Fair
Value
 (In thousands)
Available-for-sale securities
Corporate debt securities$(27,072)$288,753 $— $— $(27,072)$288,753 
Municipal bonds due(1,061)14,561 — — (1,061)14,561 
U.S. government and agency securities(1,049)39,354 — — (1,049)39,354 
Asset-backed securities$(6,374)$601,248 $(1,383)$50,070 $(7,757)$651,318 
Mortgage-backed securities(63,738)833,683 (12,331)53,533 (76,069)887,216 
(99,294)1,777,599 (13,714)103,603 (113,008)1,881,202 
Held-to-maturity securities
Mortgage-backed securities(56,461)405,166 — — (56,461)405,166 
$(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 December 31, 2022 or September 30, 2022.

The Company does not believe that the AFS debt securities that were in an unrealized loss position have any credit loss impairment as of December 31, 2022 or September 30, 2022. The Company does not intend to sell the investment securities that were in an unrealized loss position and it is more likely than not the Company will not be required to sell the investment securities before recovery of their amortized cost basis, which may be at maturity. AFS 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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(UNAUDITED)


NOTE G – Derivatives and Hedging Activities

The following tables present the fair value, notional amount and balance sheet classification of derivative assets and liabilities at December 31, 2022 and September 30, 2022.

December 31, 2022Derivative AssetsDerivative Liabilities
Interest rate contract purposeBalance Sheet LocationNotionalFair ValueBalance Sheet LocationNotionalFair Value
(In thousands)(In thousands)
Client swap program hedgesOther assets$583,782 $63,383 Other liabilities$583,782 $63,383 
Commercial loan fair value hedgesOther assets39,661 2,447 Other liabilities— — 
Mortgage loan fair value hedgesOther assets470,000 33,986 Other liabilities— — 
Borrowings cash flow hedgesOther assets1,000,000 173,139 Other liabilities— — 
$2,093,443 $272,955 $583,782 $63,383 

September 30, 2022Derivative AssetsDerivative Liabilities
Interest rate contract purposeBalance Sheet LocationNotionalFair ValueBalance Sheet LocationNotionalFair Value
(In thousands)(In thousands)
Client swap program hedgesOther assets$588,676 $67,260 Other liabilities$588,676 $67,260 
Commercial loan fair value hedgesOther assets42,209 2,517 Other liabilities— — 
Mortgage loan fair value hedgesOther assets470,000 36,765 Other liabilities— — 
Borrowings cash flow hedgesOther assets1,000,000 179,945 Other liabilities— — 
$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 December 31, 2022 and September 30, 2022.

(In thousands)December 31, 2022
Balance sheet line item in which hedged item is recordedCarrying value of hedged itemsCumulative gain (loss) fair value hedge adjustment included in carrying amount of hedged items
Loans receivable (1) (2)$1,131,282 $(35,958)
$1,131,282 $(35,958)

(1) Includes the amortized cost basis of the closed mortgage loan portfolios used to designate the hedging relationships in which the hedged items are the last layer expected to be remaining at the end of the hedging relationships. At December 31, 2022, the amortized cost basis of the closed loan portfolios used in the hedging relationships was $1,094,211,000, the cumulative basis adjustment associated with the hedging relationships was $(33,423,000), and the amount of the designated hedged items was $470,000,000.

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(2) Includes the amortized cost basis of commercial loans designated in fair value hedging relationships. At December 31, 2022, the amortized cost basis of the hedged commercial loans was $37,071,000 and the cumulative basis adjustment associated with the hedging relationships was $(2,535,000).


(In thousands)September 30, 2022
Balance sheet line item in which hedged item is recordedCarrying value of hedged itemsCumulative gain (loss) fair value hedge adjustment included in carrying amount of hedged items
Loans receivable (1) (2)$1,159,496 $(39,090)
$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, 2022, the amortized cost basis of the closed loan portfolios used in the hedging relationships was $1,119,975,000, the cumulative basis adjustment associated with the hedging relationships was $(36,458,000), and the amount of the designated hedged items was $470,000,000.

(2) Includes the amortized cost basis of commercial loans designated in fair value hedging relationships. At September 30, 2022, the amortized cost basis of the hedged commercial loans was $39,521,000 and the cumulative basis adjustment associated with the hedging relationships was $(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. As of December 31, 2022, the maturities for hedges of adjustable rate borrowings ranged from two years to eight years, with the weighted average being 6.3 years.

The following table presents the impact of derivative instruments (cash flow hedges on borrowings) on AOCI for the periods presented.

(In thousands)Three Months Ended December 31,
Amount of gain/(loss) recognized in AOCI on derivatives in cash flow hedging relationships20222021
Interest rate contracts:
Pay fixed/receive floating swaps on borrowings cash flow hedges$(6,806)$6,446 
Total pre-tax gain/(loss) recognized in AOCI $(6,806)$6,446 


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


Three Months Ended December 31, 2022Three Months Ended December 31, 2021
Interest income on loans receivableInterest expense on FHLB advancesInterest income on loans receivableInterest expense on FHLB advances
(In thousands)(In thousands)
Interest income/(expense), including the effects of fair value and cash flow hedges$203,946 $(18,974)$138,509 $(7,843)
Gain/(loss) on fair value hedging relationships:
Interest rate contracts
Amounts related to interest settlements on derivatives$3,167 $(1,371)
Recognized on derivatives(2,849)4,500 
Recognized on hedged items3,132 (4,475)
Net income/(expense) recognized on fair value hedges$3,450 $(1,346)
Gain/(loss) on cash flow hedging relationships:
Interest rate contracts
Amounts related to interest settlements on derivatives$7,274 $2,021 
Amount of derivative gain/(loss) reclassified from AOCI into interest income/expense— — 
Net income/(expense) recognized on cash flow hedges$7,274 $2,021 



The Company periodically enters into certain interest rate swap agreements in order to provide commercial loan customers the ability to convert from variable to fixed interest rate payments, while the Company retains a variable rate loan. Under these agreements, the Company enters into a variable rate loan agreement and a swap agreement with the client. The swap agreement effectively converts the client’s variable rate loan into a fixed rate. The Company enters into a corresponding swap agreement with a third party in order to offset its exposure on the variable and fixed components of the client's swap agreement. The interest rate swaps are derivatives under ASC 815, with changes in fair value recorded in earnings. There was no net impact to the statement of operations for the three months ended December 31, 2022 and 2021 as the changes in fair value of the receive fixed swap and pay fixed swap offset each other.

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

(In thousands)Three Months Ended December 31,
Derivative instrumentsClassification of gain/(loss) recognized in income on derivative instrument20222021
Interest rate contracts:
Pay fixed/receive floating swapOther noninterest income$(3,878)$5,039 
Receive fixed/pay floating swapOther noninterest income3,878 (5,039)
$— $— 


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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


NOTE H – Revenue from Contracts with Customers

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

Revenue streams that are within the scope of ASC 606 are presented within non-interest income and are, in general, recognized as revenue at the same time the Company's obligation to the customer is satisfied. Most of the Company's customer contracts that are within the scope of the new guidance are cancelable by either party without penalty and are short-term in nature. These sources of revenue include depositor and other consumer and business banking fees, commission income, as well as debit and credit card interchange fees. In scope revenue streams represented approximately 3.9% of our total revenues for the three months ended December 31, 2022, compared to 5.6% for the three months ended December 31, 2021. As this standard is immaterial to our consolidated financial statements, the Company has omitted certain disclosures in ASC 606, including the disaggregation of revenue table. Sources of non-interest income within the scope of the guidance include the following:

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

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

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


NOTE I – Commitments and Contingencies

Lease Commitments - The Company’s lease commitments consist primarily of real estate property for branches and office space under various non-cancellable operating leases that expire between 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 unfunded loan commitments, which had a combined balance of $4,822,769,000 and $4,947,570,000 at December 31, 2022 and September 30, 2022, respectively. The reserve was $31,500,000 as of December 31, 2022, which is an decrease from $32,500,000 at September 30, 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” or “Washington Federal”) makes statements in this Quarterly Report on Form 10-Q that constitute forward-looking statements. Words such as “expects,” “anticipates,” “believes,” “estimates,” “intends,” “forecasts,” “projects” and other similar expressions or future or conditional verbs such as “will,” “should,” “would” and “could” are intended to help identify such forward-looking statements. These statements are not historical facts, but instead represent current expectations, plans or forecasts of the Company and are based on the beliefs and assumptions of the management of the Company and the information available to management at the time that these disclosures were prepared. The Company intends for all such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements are not guarantees of future results or performance and involve certain risks, uncertainties and assumptions that are difficult to predict and often are beyond the Company's control. Actual outcomes and results may differ materially from those expressed in, or implied by, the Company's forward-looking statements.
You should not place undue reliance on any forward-looking statement and should consider the following uncertainties and risks, as well as the risks and uncertainties discussed elsewhere in this report, and including 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;
•fluctuating interest rates 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 our failure to retain or attract key employees;
•risks associated with failures of our risk management framework;
•risks related to the impacts of climate change on our business or reputation;
•risks related to the Company’s pending merger with Luther Burbank Corporation.

Regulatory and Litigation Risk:
•Unanticipated effects and expenses related to the completed charter conversion of the Bank from a federal to a state charter;
•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;
•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;
•litigation risks resulting in significant expenses, losses and reputational damage;
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•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;
•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
•the timing and occurrence or non-occurrence of events that may be subject to circumstances beyond the Company's control.
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.
GENERAL & BUSINESS DESCRIPTION

Washington Federal Bank, a federally-insured national bank dba WaFd Bank (the “Bank” or “WaFd Bank”), was founded on April 24, 1917 in Ballard, Washington and is engaged primarily in providing lending, depository, insurance and other banking services to consumers, mid-sized to large businesses, and owners and developers of commercial real estate. Washington Federal, Inc., a Washington corporation was formed as the Bank’s holding company in November, 1994. As used throughout this document, the terms “Washington Federal,” the “Company” or “we” or “us” and “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. 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.

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

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 2022 Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on November 18, 2022.

ASSET QUALITY & ALLOWANCE FOR CREDIT LOSSES

See Note A, D and E to the Consolidated Financial Statements in "Item 1. Financial Statements" above. Also, refer to "Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations" in the Company's 2022 Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on November 18, 2022.

INTEREST RATE RISK
Based on management's assessment of the current interest rate environment, the Company has taken steps, including growing shorter-term loans and transaction deposit accounts, to reduce its interest rate risk profile. The mix of transaction and savings accounts is 79% of total deposits as of December 31, 2022 while the composition of the investment securities portfolio is 39% variable and 61% 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 $453,443,000 of mortgage-backed securities that it has designated as HTM and are carried at amortized cost. As of December 31, 2022, the net unrealized loss on these securities was $51,388,000. The Company has $2,059,837,000 of AFS securities that are carried at fair value. As of December 31, 2022, the net unrealized loss on these securities was $118,880,000. The Company has executed interest rate swaps to hedge interest rate risk on certain FHLB borrowings. The unrealized gain on these interest rate swaps as of December 31, 2022 was $173,139,000. All of the above are pre-tax net unrealized gains or losses.

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

Net Interest Income Sensitivity - The Company estimates the sensitivity of its net interest income to changes in market interest rates using an interest rate simulation model that includes assumptions related to the level of balance sheet growth, deposit repricing characteristics and the rate of prepayments for multiple interest rate change scenarios. Interest rate sensitivity depends on certain repricing characteristics in the Company's interest-earning assets and interest-bearing liabilities, including the maturity structure of assets and liabilities and their repricing characteristics during the periods of changes in market interest rates. The analysis assumes a constant balance sheet. Actual results would differ from the assumptions used in this model, as management monitors and adjusts loan and deposit pricing and the size and composition of the balance sheet to respond to changing interest rates.

As of December 31, 2022, in the event of an immediate and parallel increase of 200 basis points in both short and long-term interest rates, the model estimates that net interest income would increase by 0.4% in the next year. This compares to an estimated increase of 1.9% as of the September 30, 2022 analysis. The change between periods 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. Management estimates that a gradual increase of 300 basis points in short term rates and 100 basis points in long-term rates over two years would result in a net interest income decrease of 13.8% in the first year and decrease of 12.2% 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 2.54%.

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 December 31, 2022, in the event of an immediate and parallel increase of 200 basis points in interest rates, the NPV is estimated to decrease by $662,443,000 or 23.4% and the NPV to total assets ratio to decline to 11.2% from a base of 13.7%. As of September 30, 2022, the NPV in the event of a 200 basis point increase in rates was estimated to decrease by $617,000,000 or 20.9% and the NPV to total assets ratio to decline to 12.6% from a base of 14.9%. The change in NPV sensitivity over the quarter is due primarily to changes in interest rates and the related
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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 December 31, 2022. Prepayment speeds are historically low at December 31, 2022. For example, the Bank's conditional payment rate ("CPR") for single family mortgages has fallen to 6.3% from 25.0% the year before.

As of December 31, 2022, in the event of an immediate and parallel decrease of 100 basis points in interest rates is estimated to increase NPV by $283,953,000 or 10.0% and the NPV to total assets ratio to grow to 14.6% from a base of 13.7%.
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 3.17% at December 31, 2022 and 3.36% at September 30, 2022. As of December 31, 2022, the weighted average period-end rate on interest-earning assets increased by 42 basis points to 4.46% compared to September 30, 2022, while the weighted average period-end rate on interest-bearing liabilities increased by 61 basis points to 1.29%. The period-end interest rate spread increased to 3.17% at December 31, 2022 from 2.48% at December 31, 2021 as the weighted average period-end rate on interest-earning assets increased by 163 basis points while the weighted average period-end rate on interest-bearing liabilities increased by 94 basis points.

Net Interest Margin - Net interest margin is measured as net interest income divided by average earning assets for the period. Net interest margin was 3.69% for the quarter ended December 31, 2022 compared to 2.87% for the quarter ended December 31, 2021. The yield on interest-earning assets increased 149 basis points to 4.71% and the cost of interest-bearing liabilities increased 86 basis points to 1.31% over that same period. The higher yield on interest-earning assets was primarily due to the impact of rising rates on adjustable rate assets and cash. The higher rate in interest-bearing liabilities resulted primarily from customer deposits repricing and a higher rate on FHLB 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 December 31, 2022Three Months Ended December 31, 2021
 Average BalanceInterestAverage RateAverage BalanceInterestAverage Rate
($ in thousands)($ in thousands)
Assets
Loans receivable$16,580,235 $203,946 4.88 %$14,297,907 $138,509 3.84 %
Mortgage-backed securities1,368,759 10,613 3.08 925,028 4,792 2.06 
Cash & Investments1,592,201 17,486 4.36 3,207,877 5,783 0.72 
FHLB & FRB stock117,899 1,374 4.62 102,863 1,356 5.23 
Total interest-earning assets19,659,094 233,419 4.71 %18,533,675 150,440 3.22 %
Other assets1,500,892 1,272,163 
Total assets$21,159,986 $19,805,838 
Liabilities and Equity
Interest-bearing customer accounts$12,611,624 $31,646 1.00 %$12,530,492 $8,461 0.27 %
FHLB advances2,695,652 18,974 2.79 1,720,000 7,843 1.81 
Other borrowings— — — — — — 
Total interest-bearing liabilities15,307,276 50,620 1.31 %14,250,492 16,304 0.45 %
Noninterest-bearing customer accounts3,245,264 3,188,223 
Other liabilities304,240 223,421 
               Total liabilities18,856,780 17,662,136 
Shareholders' equity2,303,206 2,143,702 
Total liabilities and equity$21,159,986 $19,805,838 
Net interest income/interest rate spread$182,799 3.40 %$134,136 2.77 %
Net interest margin (NIM)3.69 %2.87 %

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As of December 31, 2022, total assets had increased by $881,680,000 to $21,653,811,000 from $20,772,131,000 at September 30, 2022. During the three months ended December 31, 2022, loans receivable increased $880,024,000 and FHLB stock increased by $38,000,000 while cash and cash equivalents decreased by $38,103,000 and investment securities decreased by $1,056,000. The growth in loans receivable during the three months ended December 31, 2022 was primarily funded by the increase in FHLB advances during the period.
Cash and cash equivalents of $645,862,000 and shareholders’ equity of $2,324,381,000 as of December 31, 2022 provide management with flexibility in managing interest rate risk going forward.

LIQUIDITY AND CAPITAL RESOURCES
The principal sources of funds for the Company's activities are loan repayments (including prepayments), net deposit inflows, repayments and sales of investments and borrowings and retained earnings, if applicable. The Company's principal sources of revenue are interest on loans and interest and dividends on investments. Additionally, the Company earns fee income for loan, deposit, insurance and other services.
On February 8, 2021, in connection with an underwritten public offering, the Company issued 300,000 shares of 4.875% Noncumulative Perpetual Series A Preferred Stock (“Series A Preferred Stock”). Net proceeds, after underwriting discounts and expenses, were $293,325,000. The public offering consisted of the issuance and sale of 12,000,000 depositary shares, each representing a 1/40th interest in a share of the Series A Preferred Stock, at a public offering price of $25.00 per depositary share. Holders of the depositary shares are entitled to all proportional rights and preferences of the Series A Preferred Stock (including dividend, voting, redemption and liquidation rights). The depositary shares are traded on the NASDAQ under the symbol “WAFDP.” The Series A Preferred Stock is redeemable at the option of the Company, subject to all applicable regulatory approvals, on or after April 15, 2026.
The 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.
The Bank has entered into borrowing agreements with the FHLB to borrow funds under a short-term floating rate cash management advance program and fixed-rate term loan agreements. All borrowings are secured by stock of the FHLB, deposits with the FHLB, and a blanket pledge of qualifying loans receivable as provided in the agreements with the FHLB. The Bank is also eligible to borrow under the Federal Reserve Bank's primary credit program.
Customer account balances have remained stable, decreasing only $69,535,000, or 0.4%, to $15,960,035,000 at December 31, 2022 compared with $16,029,570,000 at September 30, 2022. Total FHLB borrowings totaled $3,075,000,000 as of December 31, 2022 an increase from $2,125,000,000 at September 30, 2022.
The Company's cash and cash equivalents totaled $645,862,000 at December 31, 2022, a decrease from $683,965,000 at September 30, 2022. These amounts include the Bank's operating cash.
The Company’s shareholders' equity at December 31, 2022 was $2,324,381,000, or 10.73% of total assets. This is an increase of $50,121,000 from September 30, 2022 when shareholders' equity was $2,274,260,000, or 10.95% of total assets. The Company’s shareholders' equity was impacted in the three months ended December 31, 2022 by net income of $79,509,000, the payment of $15,585,000 in common stock dividends, payment of $3,656,000 in preferred stock dividends, treasury stock purchases of $1,728,000, as well as the other comprehensive loss of $10,755,000. The ratio of tangible capital to tangible assets at December 31, 2022 was 9.44%. Management believes the Company's strong equity position allows it to manage balance sheet risk and provide the capital support needed for controlled growth in a regulated environment.
Washington Federal, Inc. and its banking subsidiary are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can result in certain mandatory and possibly discretionary actions by regulators that, if undertaken, could have a material adverse effect on the Company's financial statements.
Federal banking agencies establish regulatory capital rules that require minimum capital ratios and establish criteria for calculating regulatory capital. Minimum capital ratios for four measures are used for assessing capital adequacy. The standards are indicated in the table below. The common equity tier 1 capital ratio recognizes common equity as the highest form of capital. The denominator for all except the leverage ratio is risk weighted assets. The rules set forth a “capital conservation
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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.
There are also standards for Adequate and Well Capitalized criteria that are used for “Prompt Corrective Action” purposes. To remain categorized as well capitalized, the Bank and the Company must maintain minimum common equity risk-based, tier 1 risk-based, total risk-based and tier 1 leverage ratios as set forth in the following table.
ActualMinimum Capital
Adequacy Guidelines		Minimum Well-Capitalized Guidelines
($ in thousands)CapitalRatioRatioRatio
 
December 31, 2022
Common Equity Tier I risk-based capital ratio:
      The Company$1,674,182 9.92 %4.50 %NA
      The Bank1,805,270 10.70 %4.50 %6.50 %
Tier I risk-based capital ratio:
      The Company1,974,182 11.70 %6.00 %NA
      The Bank1,805,270 10.70 %6.00 %8.00 %
Total risk-based capital ratio:
      The Company2,182,479 12.93 %8.00 %NA
      The Bank2,013,566 11.94 %8.00 %10.00 %
Tier 1 Leverage ratio:
      The Company1,974,182 9.41 %4.00 %NA
      The Bank1,805,270 8.61 %4.00 %5.00 %
September 30, 2022
Common Equity Tier 1 risk-based capital ratio:
      The Company$1,613,075 9.86 %4.50 %NA
      The Bank1,781,932 10.89 %4.50 %6.50 %
Tier I risk-based capital ratio:
      The Company1,913,075 11.69 %6.00 %NA
      The Bank1,781,932 10.89 %6.00 %8.00 %
Total risk-based capital ratio:
      The Company2,117,574 12.94 %8.00 %NA
      The Bank1,986,434 12.14 %8.00 %10.00 %
Tier 1 Leverage ratio:
      The Company1,913,075 9.51 %4.00 %NA
      The Bank1,781,932 8.86 %4.00 %5.00 %

CHANGES IN FINANCIAL CONDITION
Cash and cash equivalents - Cash and cash equivalents were $645,862,000 at December 31, 2022, a decrease of $38,103,000, or 5.6%, since September 30, 2022. The change is primarily due to funding of new loan originations.

Available-for-sale and held-to-maturity investment securities - AFS securities increased $8,800,000, or 0.4%, during the three months ended December 31, 2022, mostly due to securities purchases of $115,909,000 offset by principal repayments and
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maturities of $100,340,000. During the same period, the balance of HTM securities decreased by $9,856,000 primarily due to principal pay-downs and maturities of $9,793,000. As of December 31, 2022, the Company had a net unrealized loss on AFS securities of $118,880,000, which is included on a net of tax basis in accumulated other comprehensive income (loss).

The majority of the Company’s HTM and 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 HTM securities as of December 31, 2022 or September 30, 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 AFS debt securities had credit loss impairment as of December 31, 2022 or September 30, 2022, therefore, no allowance was recorded.

Loans receivable - Loans receivable, net of related contra accounts, increased by $880,024,000 to $16,993,588,000 at December 31, 2022, compared to $16,113,564,000 at September 30, 2022. The increase was primarily the net result of originations of $2,042,678,000, purchases of single-family residential mortgages of $77,484,000, partially offset by loan principal repayments of $1,233,319,000. Commercial loan originations accounted for 84% of total originations and consumer loan originations were 16% during the period. The mix of loan originations is consistent with management's strategy to produce more multifamily, commercial real estate, construction and commercial and industrial loans that generally have adjustable interest rates or a shorter duration.
The following table shows the loan portfolio by category and the change.
 December 31, 2022September 30, 2022Change
($ in thousands)($ in thousands)$%
Commercial loans
Multi-family$2,713,331 13.4 %$2,645,801 13.7 %$67,530 2.6 %
Commercial real estate3,237,073 16.0 3,133,660 16.2 103,413 3.3 
Commercial & industrial2,628,131 13.0 2,350,984 12.1 277,147 11.8 
Construction4,055,474 20.0 3,784,388 19.5 271,086 7.2 
Land - acquisition & development253,682 1.2 291,301 1.5 (37,619)(12.9)
Total commercial loans12,887,691 63.6 12,206,134 63.0 681,557 5.6 
Consumer loans
Single-family residential6,013,410 29.7 5,771,862 29.8 241,548 4.2 
Construction - custom926,126 4.6 974,652 5.0 (48,526)(5.0)
   Land - consumer lot loans148,246 0.7 153,240 0.8 (4,994)(3.3)
   HELOC212,123 1.0 203,528 1.0 8,595 4.2 
   Consumer73,115 0.4 75,543 0.4 (2,428)(3.2)
Total consumer loans7,373,020 36.4 7,178,825 37.0 194,195 2.7 
Total gross loans20,260,711 100 %19,384,959 100 %875,752 4.5 
   Less:
      Allowance for credit losses on loans176,797 172,808 3,989 2.3 
      Loans in process2,997,839 3,006,023 (8,184)(0.3)
      Net deferred fees, costs and discounts92,487 92,564 (77)(0.1)
Total loan contra accounts3,267,123 3,271,395 (4,272)(0.1)
Net loans$16,993,588 $16,113,564 $880,024 5.5 %

Non-performing assets - Non-performing assets decreased $5,904,000 during the three months ended December 31, 2022 to $38,650,000 from $44,554,000 at September 30, 2022. The change is primarily due to a $5,354,000 decrease in non-accrual loans. Non-performing assets as a percentage of total assets was 0.18% at December 31, 2022 compared to 0.21% at September 30, 2022.
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The following table sets forth information regarding troubled debt restructured loans and non-performing assets.
December 31,
2022		September 30,
2022
 ($ in thousands)
Troubled debt restructured loans:
Multi - family$5,937 10.7 %$6,044 10.6 %
Commercial real estate2,139 3.9 2,166 3.8 
Commercial & industrial1 — 1 — 
Construction— — — — 
Land - acquisition & development— — — — 
Single-family residential45,786 82.5 46,902 82.5 
Construction - custom— — — — 
Land - consumer lot loans1,542 2.8 1,590 2.8 
HELOC82 0.1 83 0.1 
Consumer28 0.1 31 0.1 
Total restructured loans (1)$55,515 100 %$56,817 100 %
Non-accrual loans:
Multi - family$5,879 20.1 %$5,912 17.1 %
Commercial real estate4,635 15.9 4,691 13.6 
Commercial & industrial906 3.1 5,693 16.5 
Construction— — — 0.1 
Land - acquisition & development— — — — 
Single-family residential17,084 58.5 17,450 50.5 
Construction - custom435 1.5 435 1.3 
Land - consumer lot loans71 0.2 84 0.2 
HELOC134 0.5 233 0.7 
Consumer36 0.1 36 0.1 
Total non-accrual loans29,180 100 %34,534 100 %
Real estate owned6,117 6,667 
Other property owned3,353 3,353 
Total non-performing assets$38,650 $44,554 
Total non-performing assets and performing restructured loans as a percentage of total assets0.43 %0.48 %
Total Assets
(1)    Restructured loans were as follows:
Performing$54,393 98.0 %$55,823 98.3 %
Non-performing (included in non-accrual loans above)1,122 2.0 994 1.7 
$55,515 100 %$56,817 100 %

For the three months ended December 31, 2022, the Company recognized $534,000 in interest income on cash payments received from borrowers on non-accrual loans. The Company would have recognized interest income of $358,000 for the same period had these loans performed according to their original contract terms. Recognized interest income for the three months ended December 31, 2022 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 $252,828,000 of loans that were less than 90 days delinquent at December 31, 2022 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 1.60% at December 31, 2022.
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Restructured single-family residential loans are reserved for under the Company’s general reserve methodology. If any individual loan is significant in balance, the Company may establish a specific reserve as warranted.
 
Most restructured loans are accruing and performing loans where the borrower has proactively approached the Bank about modifications due to temporary financial difficulties. Each request is individually evaluated for merit and likelihood of success. Single-family residential loans comprised 82.5% of restructured loans as of December 31, 2022. The concession for these loans is typically a payment reduction through a rate reduction of 100 to 200 bps for a specific term, usually six to twenty-four months. Interest-only payments may also be approved during the modification period.

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

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

Allowance for credit losses - The following table shows the composition of the Company’s allowance for credit losses.
December 31, 2022September 30, 2022Change
Allowance for credit losses:($ in thousands)($ in thousands)$%
Commercial loans
   Multi-family$12,324 7.0 %12,013 7.0 %$311 2.6 %
   Commercial real estate27,380 15.5 25,814 14.9 1,566 6.1 
   Commercial & industrial63,873 36.1 57,210 33.1 6,663 11.6 
   Construction26,133 14.8 26,161 15.1 (28)(0.1)
   Land - acquisition & development8,572 4.8 12,278 7.1 (3,706)(30.2)
      Total commercial loans138,282 78.2 133,476 77.2 4,806 3.6 
Consumer loans
   Single-family residential25,475 14.4 25,518 14.8 (43)(0.2)
   Construction - custom3,500 2.0 3,410 2.0 90 2.6 
   Land - consumer lot loans4,142 2.3 5,047 2.9 (905)(17.9)
   HELOC2,588 1.5 2,482 1.4 106 4.3 
   Consumer2,810 1.6 2,875 1.7 (65)(2.3)
      Total consumer loans38,515 21.8 39,332 22.8 (817)(2.1)
Total allowance for loan losses176,797 100.0 %172,808 100.0 %3,989 2.3 
Reserve for unfunded commitments31,500 32,500 (1,000)(3.1)
Total allowance for credit losses$208,297 $205,308 $2,989 1.5 %

Management believes the allowance for credit losses of $208,297,000, or 1.03% of gross loans, is sufficient to absorb estimated losses inherent in the portfolio of loans and unfunded commitments. See Note E and Note I for further details of the allowance for loan losses and reserve for unfunded commitments as of and for the period ended December 31, 2022 and September 30, 2022.

Real estate owned ("REO") - REO decreased during the three months ended December 31, 2022 by $550,000 to $6,117,000. The decrease was due to REO sales.

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Intangible assets - Intangible assets decreased to $308,767,000 as of December 31, 2022 from $309,009,000 as of September 30, 2022. The decrease was due to normal amortization of finite-lived intangible assets.

Customer accounts - Customer accounts decreased $69,535,000, or 0.4%, to $15,960,035,000 at December 31, 2022 compared with $16,029,570,000 at September 30, 2022. Transaction accounts decreased by $143,695,000 or 1.1% during that period, while time deposits increased $74,160,000 or 2.2%.

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

  
December 31, 2022September 30, 2022
 Deposit Account BalanceAs a % of Total DepositsWeighted
Average
Rate		Deposit Account BalanceAs a % of Total DepositsWeighted
Average
Rate
($ in thousands)
Non-interest checking$3,070,895 19.2 %— %$3,266,734 20.4 %— %
Interest checking3,971,814 25.0 1.59 3,497,795 21.8 0.90 
Savings1,002,034 6.3 0.15 1,059,093 6.6 0.13 
Money market4,503,089 28.2 0.81 4,867,905 30.4 0.49 
Time deposits3,412,203 21.3 1.42 3,338,043 20.8 0.74 
Total$15,960,035 100 %0.94 %$16,029,570 100 %0.51 %

FHLB advances and other borrowings - Total borrowings were $3,075,000,000 as of December 31, 2022 an increase from $2,125,000,000 as of September 30, 2022. This increase was driven by loan growth combined with relatively flat customer deposits. The weighted average rate for FHLB borrowings was 3.14% as of December 31, 2022 and 2.02% at September 30, 2022.

Shareholders' equity - The Company’s shareholders' equity at December 31, 2022 was $2,324,381,000, or 10.73% of total assets. This is an increase of $50,121,000 from September 30, 2022 when shareholders' equity was $2,274,260,000, or 10.95% of total assets. The Company’s shareholders' equity was impacted in the three months ended December 31, 2022 by net income of $79,509,000, the payment of $15,585,000 in common stock dividends, payment of $3,656,000 in preferred stock dividends, treasury stock purchases of $1,728,000, as well as the other comprehensive loss of $10,755,000.


RESULTS OF OPERATIONS

Net Income - The Company recorded net income of $79,509,000 for the three months ended December 31, 2022 compared to $50,281,000 for the prior year quarter. The changes are due to the factors described below.

Net Interest Income - For the three months ended December 31, 2022, net interest income was $182,799,000, which is $48,663,000 higher than the same quarter of the prior year. Net interest margin was 3.69% for the quarter ended December 31, 2022 compared to 2.87% for the quarter ended December 31, 2021. The increase in net interest income is mostly due to rising interest rates. The average rate earned on interest-earning assets grew by 149 basis points to 4.71% while the average rate paid on interest-bearing liabilities increased by 86 basis points to 1.31%. Additionally, average interest-earning assets increased by $1,125,419,000 from the same quarter last year while average interest-bearing liabilities increased by $1,056,784,000.

The following table sets forth certain information explaining changes in interest income and interest expense for the period indicated compared to the same period one year ago. For each category of interest-earning asset and interest-bearing liability, information is provided on changes attributable to (1) changes in volume (changes in volume multiplied by old rate) and (2) changes in rate (changes in rate multiplied by old volume). The change in interest income and interest expense attributable to changes in both volume and rate has been allocated proportionately to the change due to volume and the change due to rate.
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Rate / Volume Analysis:
 Comparison of Three Months Ended
 12/31/2022 and 12/31/2021
($ in thousands)VolumeRateTotal
Interest income:
Loans receivable$24,260 $41,177 $65,437 
Mortgage-backed securities2,862 2,959 5,821 
Investments (1)(4,802)16,523 11,721 
All interest-earning assets22,320 60,659 82,979 
Interest expense:
Customer accounts55 23,130 23,185 
FHLB advances and other borrowings5,691 5,440 11,131 
All interest-bearing liabilities5,746 28,570 34,316 
Change in net interest income$16,574 $32,089 $48,663 
___________________ 
(1)Includes interest on cash equivalents and dividends on FHLB & FRB stock.
Provision for Credit Losses - The Company recorded a $2,500,000 provision for credit losses for the three months ended December 31, 2022, compared with a provision for credit losses of $500,000 for the three months ended December 31, 2021. The provision in the three months ended December 31, 2022 was primarily due to reserving for growth in loans receivable largely offset by changes in management's assessment of the credit quality of certain loan portfolios. Recoveries, net of charge-offs, totaled $489,000 for the three months ended December 31, 2022, compared to $2,111,000 during the three months ended December 31, 2021.

Other Income - The three months ended December 31, 2022 results include total other income of $14,024,000 compared to $18,681,000 for the same period one year ago, a $4,657,000 decrease. The decrease in other income was primarily due to a gain of $5,135,000 that was recorded for certain equity investments in the three months ended December 31, 2021.

Other Expense - Total other expense was $92,278,000 for the three months ended December 31, 2022, an increase of $2,665,000 from $89,613,000 for the prior year quarter. Compensation and benefits costs increased by $1,645,000, or 3.5%, over the prior year quarter due to annual merit increases and investments in top talent to support strategic initiatives. Total other expense for the three months ended December 31, 2022 and December 31, 2021 equaled 1.74% and 1.81%, respectively, of average assets.

Gain (Loss) on Real Estate Owned - Results for the three months ended December 31, 2022 include a net loss on REO of $112,000, compared to a net gain of $562,000 for the prior year quarter. The loss during the three months ended December 31, 2022 was due to normal REO maintenance offset by property sales.

Income Tax Expense - Income tax expense totaled $22,424,000 for the three months ended December 31, 2022, compared to $12,985,000 for the prior year quarter. The effective tax rate was 22.00% and 20.52% for the three months ended December 31, 2022 and December 31, 2021, respectively. The Company’s effective tax rate varies from the statutory rate mainly due to state taxes, tax-exempt income and tax-credit investments.

Item 3.                Quantitative and Qualitative Disclosures About Market Risk
Management believes that there have been no material changes in the Company’s quantitative and qualitative information about market risk since September 30, 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 2022 Form 10-K.

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

PART I – Financial Information

Item 4.                Controls and Procedures


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

(b) Changes in Internal Control over Financial Reporting. During the period to which this report relates, there have not been any changes in the Company's internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or that are reasonably likely to materially affect, such controls.
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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 the Company believes would have a material impact on the Company’s consolidated financial statements.
As previously reported, the Bank was named as a defendant in a class action lawsuit alleging that it has been charging customers overdraft fees on items re-presented for payment. In May 2022, the Bank settled the lawsuit for a payment of $495,000 plus claims administrative expenses. In November 2022, the court issued a final order approving the settlement, and dismissing the case with prejudice which became effective in Dece

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 it's actual results to differ materially from its historical results or the results contemplated by the forward-looking statements contained in this report.


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

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. The transaction is subject to shareholder and regulatory approval and other customary closing conditions, and 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.
•The shareholders of Luther Burbank or the Company may not approve the merger or the related issuance of shares of the Company’s common stock.
•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.
•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.
•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 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.
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•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.
•The combined company may be unable to retain Washington Federal and/or Luther Burbank personnel.
•The Company may incur substantial costs associated with the merger and the integration of Luther Burbank.


Item 2.                 Unregistered Sales of Equity Securities and Use of Proceeds
The following table provides information with respect to purchases made by or on behalf of the Company of the Company’s common stock during the three months ended December 31, 2022. 
PeriodTotal Number of
Shares Purchased		 Average Price
Paid Per Share		 Total Number of
Shares Purchased
as Part of  Publicly
Announced Plan (1)		Maximum
Number of Shares
That May Yet Be
Purchased Under
the Plan at the
End of the Period
October 1, 2022 to October 31, 20221,115 $35.45 1,115 3,723,229 
November 1, 2022 to November 30, 202243,418 38.65 43,418 3,679,811 
December 1, 2022 to December 31, 2022312 33.98 312 3,679,499 
Total44,845   $38.53   44,845 3,679,499 
 ___________________
(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
Not applicable

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Item 6.                Exhibits
(a)Exhibits
101Financial Statements from the Company’s Form 10-Q for the three months ended December 31, 2021 formatted in iXBRL *
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). *
* Filed herewith
** Schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule will be furnished supplementally to the SEC upon request; provided, however, that the parties may request confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, for any document so furnished.

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SIGNATURES
Pursuant to the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
February 3, 2023
/S/    CATHY E. COOPER
CATHY E. COOPER
Executive Vice President, Chief Consumer Banker & Acting Chief Executive Officer
February 3, 2023
/S/    KELLI J. HOLZ  
KELLI J. HOLZ
Executive Vice President and Chief Financial Officer

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Content Copyright ©2018 Newport Group, Inc. All Rights Reserved. WAFD BANK DEFERRED COMPENSATION PLAN Effective Date January 1, 2023

 
WaFd Bank Deferred Compensation Plan Content Copyright ©2018 Newport Group, Inc. All Rights Reserved. Page 1 of 30 ARTICLE I Establishment and Purpose ..................................................................................................1 ARTICLE II Definitions............................................................................................................................1 ARTICLE III Eligibility and Participation .................................................................................................8 ARTICLE IV Deferrals ...............................................................................................................................9 ARTICLE V Company Contributions .....................................................................................................12 ARTICLE VI Payments from Accounts ...................................................................................................14 ARTICLE VII Valuation of Account Balances; Investments ....................................................................17 ARTICLE VIII Administration ...................................................................................................................19 ARTICLE IX Amendment and Termination ............................................................................................20 ARTICLE X Informal Funding ...............................................................................................................21 ARTICLE XI Claims ................................................................................................................................21 ARTICLE XII General Provisions .............................................................................................................27

 
WaFd Bank Deferred Compensation Plan Content Copyright ©2018 Newport Group, Inc. All Rights Reserved. Page 1 of 30 ARTICLE I Establishment and Purpose Washington Federal Bank (the “Company”) has adopted this WaFd Bank Deferred Compensation Plan, applicable to Compensation deferred under Compensation Deferral Agreements submitted on and after the Effective Date and Company Contributions credited on or after the Effective Date. The purpose of the Plan is to attract and retain key employees by providing them with an opportunity to defer receipt of a portion of their salary, bonus, and other specified compensation. The Plan is not intended to meet the qualification requirements of Code Section 401(a) but is intended to meet the requirements of Code Section 409A and shall be operated and interpreted consistent with that intent. The Plan constitutes an unsecured promise by a Participating Employer to pay benefits in the future. Participants in the Plan shall have the status of general unsecured creditors of the Company or the Participating Employer, as applicable. Each Participating Employer shall be solely responsible for payment of the benefits attributable to services performed for it. The Plan is unfunded for Federal tax purposes and is intended to be an unfunded arrangement for eligible employees who are part of a select group of management or highly compensated employees of the Employer within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA and independent contractors. Any amounts set aside to defray the liabilities assumed by the Company or a Participating Employer will remain the general assets of the Company or the Participating Employer and shall remain subject to the claims of the Company’s or the Participating Employer's creditors until such amounts are distributed to the Participants. ARTICLE II Definitions 2.1 Account. Account means a bookkeeping account maintained by the Committee to record the payment obligation of a Participating Employer to a Participant as determined under the terms of the Plan. The Committee may maintain an Account to record the total obligation to a Participant and component Accounts to reflect amounts payable at different times and in different forms. Reference to an Account means any such Account established by the Committee, as the context requires. Accounts are intended to constitute unfunded obligations within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA. 2.2 Account Balance. Account Balance means, with respect to any Account, the total payment obligation owed to a Participant from such Account as of the most recent Valuation Date. 2.3 Affiliate. Affiliate means a corporation, trade or business that, together with the Company, is treated as a single employer under Code Section 414(b) or (c).

 
WaFd Bank Deferred Compensation Plan Content Copyright ©2018 Newport Group, Inc. All Rights Reserved. Page 2 of 30 2.4 Beneficiary. Beneficiary means a natural person, estate, or trust designated by a Participant in accordance with Section 6.4 hereof to receive payments to which a Beneficiary is entitled in accordance with provisions of the Plan. 2.5 Board of Directors. Board of Directors means, for a Participating Employer organized as a corporation, its board of directors and for a Participating Employer organized as a limited liability company, its board of managers. 2.6 Business Day. Business Day means each day on which the New York Stock Exchange is open for business. 2.7 Cause. Cause shall mean: (a) the willful and continued failure of the Participant to perform substantially the Participant’s duties with the Company or one of its affiliates (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Participant by the Board or the Chief Executive Officer of the Company which specifically identifies the manner in which the Board or Chief Executive Officer believes that the Participant has not substantially performed the Participant’s duties, or (b) the willful engaging by the Participant in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company. For purposes of this provision, no act or failure to act on the part of the Participant shall be considered “willful” unless it is done, or omitted to be done, by the Participant in bad faith or without reasonable belief that the Participant’s action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board of Directors or upon the instructions of the Chief Executive Officer or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Participant in good faith and in the best interests of the Company. The cessation of employment of the Participant shall not be deemed to be for Cause unless and until there shall have been delivered to the Participant a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Participant and the Participant is given an opportunity, together with counsel, to be heard before the Board of Directors), finding that, in the good faith opinion of the Board of Directors, the Participant is guilty of the conduct described in subparagraph (a) or (b) above, and specifying the particulars thereof in detail. 2.8 Change in Control. Change in Control means, with respect to a Participating Employer that is organized as a corporation, any of the following events: (i) a change in the ownership of the Participating Employer, (ii) a change in the effective control of the Participating Employer, or (iii) a change in the ownership of a substantial portion of the assets of the Participating Employer.

 
WaFd Bank Deferred Compensation Plan Content Copyright ©2018 Newport Group, Inc. All Rights Reserved. Page 3 of 30 Change in Ownership. For purposes of this Section, a change in the ownership of the Participating Employer occurs on the date on which any one person, or more than one person acting as a group, acquires ownership of stock of the Participating Employer that, together with stock held by such person or group constitutes more than 50% of the total fair market value or total voting power of the stock of the Participating Employer. The acquisition by a person or group owning more than 50% of the total fair market value or total voting power of the stock of such Participating Employer of additional shares of such Participating Employer shall not constitute a “change of the ownership” of such Participating Employer. Change in Effective Control. A change in the effective control of the Participating Employer occurs on the date on which either: (i) a person, or more than one person acting as a group, acquires ownership of stock of the Participating Employer possessing 30% or more of the total voting power of the stock of the Participating Employer, taking into account all such stock acquired during the 12-month period ending on the date of the most recent acquisition, provided that the acquisition by a person or group owning more than 30% of the total fair market value or total voting power of the stock of such Participating Employer of additional shares of such Participating Employer shall not constitute a “change of effective control” of such Participating Employer, or (ii) a majority of the members of the Participating Employer’s Board of Directors is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of such Board of Directors prior to the date of the appointment or election, but only if no other corporation is a majority shareholder of the Participating Employer. Change in Ownership of Substantial Portion of Assets. A change in the ownership of a substantial portion of assets occurs on the date on which any one person, or more than one person acting as a group, other than a person or group of persons that is related to the Participating Employer, acquires assets from the Participating Employer that have a total gross fair market value equal to or more than 40% of the total gross fair market value of all of the assets of the Participating Employer immediately prior to such acquisition or acquisitions, taking into account all such assets acquired during the 12-month period ending on the date of the most recent acquisition. A transfer of assets shall not be treated as a “change in the ownership of a substantial portion of the assets” when such transfer is made to an entity that is controlled by the shareholders of the transferor corporation as determined under Treas. Reg. section 1.409A-3(i)(5)(vii)(B). An event constitutes a Change in Control with respect to a Participant only if the Participant performs services for the Participating Employer that has experienced the Change in Control, or the Participant’s relationship to the affected Participating Employer otherwise satisfies the requirements of Treasury Regulation Section 1.409A-3(i)(5)(ii). Notwithstanding anything to the contrary herein, with respect to a Participating Employer that is a partnership or limited liability company, Change in Control means only a change in the ownership of such entity or a change in the ownership of a substantial portion of

 
WaFd Bank Deferred Compensation Plan Content Copyright ©2018 Newport Group, Inc. All Rights Reserved. Page 4 of 30 the assets of such entity, and the provisions set forth above respecting such changes relative to a corporation shall be applied by analogy. Any reference to a “majority shareholder” shall be treated as referring to a partner or member that (a) owns more than 50% of the capital and profits interest of such entity, and (b) alone or together with others is vested with the continuing exclusive authority to make management decisions necessary to conduct the business for which the partnership or limited liability company was formed. 2.9 Claimant. Claimant means a Participant or Beneficiary filing a claim under Article XI of this Plan. 2.10 Code. Code means the Internal Revenue Code of 1986, as amended from time to time. 2.11 Code Section 409A. Code Section 409A means section 409A of the Code, and regulations and other guidance issued by the Treasury Department and Internal Revenue Service thereunder. 2.12 Committee. Committee means the Company or a committee appointed by the Company to administer the Plan. 2.13 Company. Company means Washington Federal Bank. 2.14 Company Contribution. Company Contribution means a credit by a Participating Employer to a Participant’s Account(s) in accordance with the provisions of Article V of the Plan. Unless the context clearly indicates otherwise, a reference to Company Contribution shall include Earnings attributable to such contribution. 2.15 Company Contribution Account. Company Contribution Account means an Account established by the Committee to record discretionary contributions that the Company elects to allocate to such Account. The Committee shall establish the Payment Schedule for a Participant’s Company Contribution Account on or before the date the first Company Contribution to be credited to such Account is awarded to the Participant. The Committee may establish more than one Company Contribution Account for a Participant. 2.16 Compensation. Compensation means a Participant’s salary, bonus, commission, and such other cash compensation approved by the Committee as Compensation that may be deferred under Section 4.2 of this Plan. Compensation includes restricted stock awards issued by the Company with respect to its common stock. Compensation excludes any compensation that has been previously deferred under this Plan or any other arrangement subject to Code Section 409A and excluding any compensation that is not U.S. source income. 2.17 Compensation Deferral Agreement. Compensation Deferral Agreement means an agreement (which may be in electronic form) between a Participant and a Participating Employer that specifies: (i) the amount of each component of Compensation that the

 
WaFd Bank Deferred Compensation Plan Content Copyright ©2018 Newport Group, Inc. All Rights Reserved. Page 5 of 30 Participant has elected to defer to the Plan in accordance with the provisions of Article IV, (ii) the Payment Schedule applicable to one or more Accounts and (iii) the Participant’s allocation of his or her Deferrals among his or her Accounts. 2.18 Deferral. Deferral means a credit to a Participant’s Account(s) that records that portion of the Participant’s Compensation that the Participant has elected to defer to the Plan in accordance with the provisions of Article IV. Unless the context of the Plan clearly indicates otherwise, a reference to Deferrals includes Earnings attributable to such Deferrals. 2.19 Earnings. Earnings means an adjustment to the value of an Account in accordance with Article VII. 2.20 Effective Date. Effective Date means September 1, 2022. 2.21 Eligible Employee. Eligible Employee means an Employee who is a member of a select group of management or highly compensated employees who has been notified during an applicable enrollment of his or her status as an Eligible Employee. The Committee has the discretion to determine which Employees are Eligible Employees for each enrollment. 2.22 Employee. Employee means a common-law employee of an Employer. 2.23 Employer. Employer means the Company and each Affiliate. 2.24 ERISA. ERISA means the Employee Retirement Income Security Act of 1974, as amended from time to time. 2.25 Flex Account. Flex Account means a Separation Account or Specified Date Account established under the terms of a Participant’s Compensation Deferral Agreement. Unless the Committee specifies otherwise during an applicable enrollment, a Participant may maintain no more than five (5) Flex Accounts at any one time. 2.26 Good Reason. Good Reason means a voluntary termination by the Participant if the termination occurs within two (2) years following the initial existence of any one of the following conditions arising without the consent of the Participant: (a) a material diminution by the Employer of the Participant’s authority, duties, or responsibilities; (b) a material diminution in Participant’s annual base salary; (c) a material change in the geographic location at which Participant must perform the services, including relocation of the offices at which Participant is principally employed to a location more than 30 miles from the location of such offices); (d) a material diminution in the authority, duties, or responsibilities of the supervisor to whom Participant is required to report, including a requirement that Participant report to a corporate officer or employee instead of reporting directly to the Company’s Board of Directors; (e) a material diminution in the budget over which Participant retains authority; or

 
WaFd Bank Deferred Compensation Plan Content Copyright ©2018 Newport Group, Inc. All Rights Reserved. Page 6 of 30 (f) any action or inaction that constitutes a material breach by the Employer of an employment agreement. The Participant shall provide notice to the Company of the existence of a condition described in (a) through (d) above within 90 days of the initial existence of the condition, upon the notice of which the Company shall be provided a period of 30 days during which it may remedy the condition. A determination of “Good Reason” made by the Participant with which the Company does not agree shall be resolved pursuant to the following dispute resolution procedure. First, the parties shall in good faith attempt to resolve any dispute arising hereunder. Second, if such efforts are unsuccessful, the parties shall submit to nonbinding mediation. Thereafter, if the parties continue to be unsuccessful, the parties may seek adjudication. In the event of a conflict between the foregoing definition of Good Reason and the definition set forth in a Participant’s employment agreement (including any procedures for the determination of Good Reason), the terms of the employment agreement will control. 2.27 Participant. Participant means an individual described in Article III. 2.28 Participating Employer. Participating Employer means the Company and each Affiliate who has adopted the Plan with the consent of the Company. Each Participating Employer shall be identified on Schedule A attached hereto. 2.29 Payment Schedule. Payment Schedule means the date as of which payment of an Account under the Plan will commence and the form in which payment of such Account will be made. 2.30 Performance-Based Compensation. Performance-Based Compensation means Compensation where the amount of, or entitlement to, the Compensation is contingent on the satisfaction of pre-established organizational or individual performance criteria relating to a performance period of at least 12 consecutive months. Organizational or individual performance criteria are considered pre-established if established in writing by not later than 90 days after the commencement of the period of service to which the criteria relate, provided that the outcome is substantially uncertain at the time the criteria are established. Performance-Based Compensation shall not include any Compensation payable upon the Participant’s death or disability (as defined in Treas. Section 1.409A- 1(e)) without regard to the satisfaction of the performance criteria. 2.31 Plan. Plan means “WaFd Bank Deferred Compensation Plan” as documented herein and as may be amended from time to time hereafter. However, to the extent permitted or required under Code Section 409A, the term Plan may in the appropriate context also means a portion of the Plan that is treated as a single plan under Treas. Reg. Section 1.409A-1(c), or the Plan or portion of the Plan and any other nonqualified deferred compensation plan or portion thereof that is treated as a single plan under such section.

 
WaFd Bank Deferred Compensation Plan Content Copyright ©2018 Newport Group, Inc. All Rights Reserved. Page 7 of 30 2.32 Plan Year. Plan Year means January 1 through December 31. 2.33 Retirement Account. Retirement Account means an Account established by the Committee to record Company Contributions as described in Section 5.1 and Deferrals allocated to the Retirement Account pursuant to a Participant’s Compensation Deferral Agreement, payable to a Participant upon Separation from Service in accordance with Section 6.3. 2.34 Separation Account. Separation Account means an Account established by the Committee in accordance with a Participant’s Compensation Deferral Agreement to record Deferrals allocated to such Account by the Participant and which are payable upon the Participant’s Separation from Service as set forth in Section 6.3. 2.35 Separation from Service. Separation from Service means an Employee’s termination of employment with the Employer and all Affiliates. Except in the case of an Employee on a bona fide leave of absence as provided below, an Employee is deemed to have incurred a Separation from Service if the Employer and the Employee reasonably anticipated that the level of services to be performed by the Employee after a date certain would be reduced to 20% or less of the average services rendered by the Employee during the immediately preceding 36-month period (or the total period of employment, if less than 36 months), disregarding periods during which the Employee was on a bona fide leave of absence. An Employee who is absent from work due to military leave, sick leave, or other bona fide leave of absence shall incur a Separation from Service on the first date immediately following the later of: (i) the six month anniversary of the commencement of the leave, or (ii) the expiration of the Employee’s right, if any, to reemployment under statute or contract. If a Participant ceases to provide services as an Employee and begins providing services as an independent contractor for the Employer, a Separation from Service shall occur only if the parties anticipate that the level of services to be provided as an independent contractor are such that a Separation from Service would have occurred if the Employee had continued to provide services at that level as an Employee. If, in accordance with the preceding sentence, no Separation from Service occurs as of the date the individual’s employment status changes, a Separation from Service shall occur thereafter only upon the 12-month anniversary of the date all contracts with the Employer have expired, provided the Participant does not perform services for the Employer during that time. For purposes of determining whether a Separation from Service has occurred, the Employer means the Employer as defined in Section 2.22 of the Plan, except that in applying Code sections 1563(a)(1), (2) and (3) for purposes of determining whether another organization is an Affiliate of the Company under Code Section 414(b), and in applying Treasury Regulation Section 1.414(c)-2 for purposes of determining whether another organization is an Affiliate of the Company under Code Section 414(c), “at least

 
WaFd Bank Deferred Compensation Plan Content Copyright ©2018 Newport Group, Inc. All Rights Reserved. Page 8 of 30 50 percent” shall be used instead of “at least 80 percent” each place it appears in those sections. The Committee specifically reserves the right to determine whether a sale or other disposition of substantial assets to an unrelated party constitutes a Separation from Service with respect to a Participant providing services to the seller immediately prior to the transaction and providing services to the buyer after the transaction. 2.36 Specified Date Account. Specified Date Account means an Account established by the Committee to record the amounts payable in a future year as specified in the Participant’s Compensation Deferral Agreement. 2.37 Unforeseeable Emergency. Unforeseeable Emergency means a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant’s spouse, the Participant’s dependent (as defined in Code section 152, without regard to section 152(b)(1), (b)(2), and (d)(1)(B)), or a Beneficiary; loss of the Participant’s property due to casualty (including the need to rebuild a home following damage to a home not otherwise covered by insurance, for example, as a result of a natural disaster); or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. The types of events which may qualify as an Unforeseeable Emergency may be limited by the Committee. 2.38 Valuation Date. Valuation Date means each Business Day. ARTICLE III Eligibility and Participation 3.1 Eligibility and Participation. All Eligible Employees may enroll in the Plan. Eligible Employees become Participants on the first to occur of (i) the date on which the first Compensation Deferral Agreement becomes irrevocable under Article IV, or (ii) the date Company Contributions are credited to an Account on behalf of such Eligible Employee. 3.2 Duration. Only Eligible Employees may submit Compensation Deferral Agreements during an enrollment and receive Company Contributions during the Plan Year. A Participant who is no longer an Eligible Employee but has not incurred a Separation from Service will not be allowed to submit Compensation Deferral Agreements but may otherwise exercise all of the rights of a Participant under the Plan with respect to his or her Account(s). On and after a Separation from Service, a Participant shall remain a Participant as long as his or her Account Balance is greater than zero (0). All Participants, regardless of employment status, will continue to be credited with Earnings and during such time may continue to make allocation elections as provided in Section 7.4. An individual shall cease being a Participant in the Plan when his Account has been reduced to zero (0). 3.3 Rehires. An Eligible Employee who Separates from Service and who subsequently resumes performing services for an Employer in the same calendar year (regardless of

 
WaFd Bank Deferred Compensation Plan Content Copyright ©2018 Newport Group, Inc. All Rights Reserved. Page 9 of 30 eligibility) will have his or her Compensation Deferral Agreement for such year, if any, reinstated, but his or her eligibility to participate in the Plan in years subsequent to the year of rehire shall be governed by the provisions of Section 3.1. ARTICLE IV Deferrals 4.1 Deferral Elections, Generally. (a) An Eligible Employee may make an initial election to defer Compensation by submitting a Compensation Deferral Agreement during the enrollment periods established by the Committee and in the manner specified by the Committee, but in any event, in accordance with Section 4.2. Unless an earlier date is specified in the Compensation Deferral Agreement, deferral elections with respect to a Compensation source (such as salary, bonus or other Compensation) become irrevocable on the latest date applicable to such Compensation source under Section 4.2. (b) A Compensation Deferral Agreement that is not timely filed with respect to a service period or component of Compensation, or that is submitted by a Participant who Separates from Service prior to the latest date such agreement would become irrevocable under Section 409A, shall be considered null and void and shall not take effect with respect to such item of Compensation. The Committee may modify or revoke any Compensation Deferral Agreement prior to the date the election becomes irrevocable under the rules of Section 4.2. (c) The Committee may permit different deferral amounts for each component of Compensation and may establish a minimum or maximum deferral amount for each such component. Unless otherwise specified by the Committee in the Compensation Deferral Agreement, Participants may defer a minimum of 5% and a maximum of 75% of their base compensation and commissions, and a minimum of 5% up to a maximum of 90% of bonus or other Compensation earned during a Plan Year. (d) Deferrals of cash Compensation shall be calculated with respect to the gross cash Compensation payable to the Participant prior to any deductions or withholdings but shall be reduced by the Committee as necessary so as not to exceed 100% of the cash Compensation of the Participant remaining after deduction of all required income and employment taxes, required employee benefit deductions, deferrals to 401(k) plans and other deductions required by law. Changes to payroll withholdings that affect the amount of Compensation being deferred to the Plan shall be allowed only to the extent permissible under Code Section 409A. (e) The Eligible Employee shall specify on his or her Compensation Deferral Agreement the amount of Deferrals and whether to allocate Deferrals to the

 
WaFd Bank Deferred Compensation Plan Content Copyright ©2018 Newport Group, Inc. All Rights Reserved. Page 10 of 30 Retirement Account or to one or more Flex Accounts. If no designation is made, Deferrals shall be allocated to the Retirement Account. 4.2 Timing Requirements for Compensation Deferral Agreements. (a) Initial Eligibility. The Committee may permit an Eligible Employee to defer Compensation earned in the first year of eligibility. The Compensation Deferral Agreement must be filed within 30 days after attaining Eligible Employee status and becomes irrevocable not later than the 30th day. A Compensation Deferral Agreement filed under this paragraph applies to Compensation earned for services performed after the date that the Compensation Deferral Agreement becomes irrevocable. (b) Prior Year Election. Except as otherwise provided in this Section 4.2, the Committee may permit an Eligible Employee to defer Compensation by filing a Compensation Deferral Agreement no later than December 31 of the year prior to the year in which the Compensation to be deferred is earned. A Compensation Deferral Agreement filed under this paragraph shall become irrevocable with respect to such Compensation not later than the December 31 filing deadline. (c) Performance-Based Compensation. The Committee may permit an Eligible Employee to defer Compensation which qualifies as Performance-Based Compensation by filing a Compensation Deferral Agreement no later than the date that is six months before the end of the applicable performance period, provided that: (i) the Participant performs services continuously from the later of the beginning of the performance period or the date the performance criteria are established through the date the Compensation Deferral Agreement is submitted; and (ii) the Compensation is not readily ascertainable as of the date the Compensation Deferral Agreement is filed. Any election to defer Performance-Based Compensation that is made in accordance with this paragraph and that becomes payable as a result of the Participant’s death or disability (as defined in Treas. Reg. Section 1.409A-1(e)) or upon a change in control (as defined in Treas. Reg. Section 1.409A-3(i)(5)) prior to the satisfaction of the performance criteria, will be void unless it would be considered timely under another rule described in this Section. (d) Certain Forfeitable Rights. With respect to a legally binding right to a payment in a subsequent year that is subject to a forfeiture condition requiring the Participant’s continued services for a period of at least 12 months from the date the Participant obtains the legally binding right, the Committee may permit an

 
WaFd Bank Deferred Compensation Plan Content Copyright ©2018 Newport Group, Inc. All Rights Reserved. Page 11 of 30 Eligible Employee to defer such Compensation by filing a Compensation Deferral Agreement on or before the 30th day after the legally binding right to the Compensation accrues, provided that the Compensation Deferral Agreement is submitted at least 12 months in advance of the earliest date on which the forfeiture condition could lapse. The Compensation Deferral Agreement described in this paragraph becomes irrevocable not later than such 30th day. If the forfeiture condition applicable to the payment lapses before the end of such 12-month period as a result of the Participant’s death or disability (as defined in Treas. Reg. Section 1.409A-3(i)(4)) or upon a change in control (as defined in Treas. Reg. Section 1.409A-3(i)(5)), the Compensation Deferral Agreement will be void unless it would be considered timely under another rule described in this Section. (e) “Evergreen” Deferral Elections. The Committee, in its discretion, may provide that Compensation Deferral Agreements will continue in effect for subsequent years or performance periods by communicating that intention to Participants in writing prior to the date Compensation Deferral Agreements become irrevocable under this Section 4.2. An evergreen Compensation Deferral Agreement may be revoked or modified in writing prospectively by the Participant or the Committee with respect to Compensation for which such election remains revocable under this Section 4.2. A Compensation Deferral Agreement is deemed to be revoked for subsequent years if the Participant is not an Eligible Employee as of the last permissible date for making elections under this Section 4.2 or if the Compensation Deferral Agreement is cancelled in accordance with Section 4.6. 4.3 Allocation of Deferrals. A Compensation Deferral Agreement may allocate Deferrals to the Retirement Account or to one or more Flex Accounts. The Committee may, in its discretion, establish in a written communication during enrollment a minimum deferral period for the establishment of a Specified Date Account (for example, the second Plan Year following the year Compensation is first allocated to such Accounts). In the event a Participant’s Compensation Deferral Agreement allocates a component of Compensation to a Specified Date Account that commences payment in the year such Compensation is earned, the Compensation Deferral Agreement shall be deemed to allocate the Deferral to the Participant’s Specified Date Account having the next earliest payment year. If the Participant has no other Specified Date Accounts, the Committee will allocate the Deferral to the Retirement Account. 4.4 Deductions from Pay. The Committee has the authority to determine the payroll practices under which any component of Compensation subject to a Compensation Deferral Agreement will be deducted from a Participant’s Compensation. 4.5 Vesting. Participant Deferrals of cash Compensation shall be 100% vested at all times. Deferrals of vesting awards of Compensation shall become vested in accordance with the provisions of the underlying award.

 
WaFd Bank Deferred Compensation Plan Content Copyright ©2018 Newport Group, Inc. All Rights Reserved. Page 12 of 30 4.6 Cancellation of Deferrals. The Committee may cancel a Participant’s Deferrals: (i) for the balance of the Plan Year in which an Unforeseeable Emergency occurs, and (ii) during periods in which the Participant is unable to perform the duties of his or her position or any substantially similar position due to a mental or physical impairment that can be expected to result in death or last for a continuous period of at least six months, provided cancellation occurs by the later of the end of the taxable year of the Participant or the 15th day of the third month following the date the Participant incurs the disability (as defined under subsection (ii) of this paragraph). ARTICLE V Company Contributions 5.1 Discretionary Company Contributions. A Participating Employer may, from time to time in its sole and absolute discretion, credit discretionary Company Contributions in the form of matching, profit sharing or other contributions to any Participant in any amount determined by the Participating Employer. Discretionary Company Contributions are credited at the sole discretion of the Participating Employer and the fact that a discretionary Company Contribution is credited in one year shall not obligate the Participating Employer to continue to make such Company Contributions in subsequent years. Make-Up Matching Contribution. Company Contributions may take the form of “make- up” matching contributions, at the same matching contribution rate provided under the Company 401(k) plan with respect to Deferrals that reduce 401(k) plan compensation below the limitation set forth in Code Section 401(a)(17). Make-up matching contributions are credited to the Participant’s Retirement Account. Supplemental Matching Contribution. Company Contributions may take the form of “supplemental” matching contributions, credited at the same contribution rate provided under the Company 401(k) plan with respect to compensation deferred above the compensation limit set forth in Code Section 401(a)(17). Supplemental matching contributions are credited to the Participant’s Retirement Account. Supplemental Non-elective Contributions. Company Contributions may take the form of “supplemental non-elective contributions”, credited at the same contribution rate provided under the Company 401(k) plan with respect to compensation above the compensation limit set forth in Code Section 401(a)(17). Supplemental non-elective contributions are credited to the Participant’s Retirement Account. 5.2 Vesting. Make-up, supplemental matching and supplemental non-elective contributions that are based on the Company’s 401(k) plan contributions vest at the same rate provided under the Company’s 401(k) profit sharing plan.

 
WaFd Bank Deferred Compensation Plan Content Copyright ©2018 Newport Group, Inc. All Rights Reserved. Page 13 of 30 Incentive/retention Company Contributions vest based on the vesting schedule provided by the Company on or before the date such Company Contribution is made. Nothing in this Plan document shall be construed to limit the Company’s right to a claw back of deferred compensation to the extent permitted or required by an employment agreement or a governmental agency’s enforcement of applicable banking laws, rules and regulations. In addition, any vested amounts remain subject to any limitation on vesting imposed the Participant’s employment agreement(s) as a result of the application of Code Section 280G. The determination of whether a termination is for Cause or Good Reason is subject at all times to the terms and conditions of any employment agreement to which the Participant is a party. To the extent not otherwise vested, Company Contributions credited to the Retirement Account become 100% vested upon the death of the Participant or a Change in Control that occurs while the Participant is employed. Company Contributions that are not otherwise vested under this Section 5.2 or the terms of the Participant’s employment agreements shall be forfeited upon a Participant’s termination of employment. ARTICLE VI Payments from Accounts 6.1 General Rules. A Participant’s Accounts become payable upon the first to occur of the payment years or events applicable to such Account under Sections 6.2 (if elected) through 6.7. Payment events and Payment Schedules elected by the Participant shall be set forth in a valid Compensation Deferral Agreement that establishes the Account to which such elections apply in accordance with Article IV or in a valid modification election applicable to such Account as described in Section 6.9. Payment Schedules for a Company Contribution Account are established by the Company in writing on or before the date the Participant acquires a legally binding right to the first contribution credited to such Account. Payment amounts are based on the vested Account Balances as of the first Valuation Date of the month in which actual payment is made.

 
WaFd Bank Deferred Compensation Plan Content Copyright ©2018 Newport Group, Inc. All Rights Reserved. Page 14 of 30 6.2 Specified Date Accounts. Commencement. Payment of a Specified Date Account is made or begins in the calendar year designated by the Participant for such Account. Form of Payment. Payment from a Specified Date Account will be made in a lump sum, unless the Participant elected to receive such Account in a designated number of annual installments up to five (5) years. 6.3 Separation from Service. Upon a Participant’s Separation from Service other than death, the Participant is entitled to receive the Account Balance of his or her (a) Retirement Account, (b) Separation Accounts, (c) Specified Date Accounts, as provided below, and (d) Company Contribution Accounts Commencement. All such Accounts will be paid or commence payment in the calendar year next following the calendar year in which Separation from Service occurs, unless a Participant elects a later calendar year for his or her Retirement Account or a Separation Account. A Participant’s Specified Date Accounts payable under this Section 6.3 will commence payment at the same time as payments commence from his or her Retirement Account. Notwithstanding the foregoing, such Accounts will be paid in the year next following Separation from Service if the Participant has not attained age 55 with at least ten (10) years of continuous employment with the Company or an Affiliate as of his or her Separation from Service. Notwithstanding any other provision of this Plan, payment to a Participant who is a “specified employee” as defined in Code Section 409A(a)(2)(B) will commence no earlier than six months following his or her Separation from Service. Form of Payment for Retirement Account and Flex Accounts. A Participant’s Retirement Account and Flex Accounts will be paid in a lump sum, unless (i) a Participant elects to receive a Retirement Account or Separation Account in a designated number of annual installments up to ten (10) years and (ii) prior to Separation from Service, the Participant has attained age 55 with at least ten (10) years of continuous employment with the Company or an Affiliate. If a Participant has attained age 55 and ten (10) years of service, the Participant’s Specified Date Accounts that have not commenced payment under Section 6.2 as of the Participant’s Separation from Service will be paid in the same form as the form of payments from his or her Retirement Account, and Specified Date Accounts that have commenced will continue to pay as elected under Section 6.2. Form of Payment for Company Contribution Accounts. A Company Contribution Account will be paid in the form specified by the Committee on or before the date the Participant obtains a legally binding right to the initial contribution to such Account,

 
WaFd Bank Deferred Compensation Plan Content Copyright ©2018 Newport Group, Inc. All Rights Reserved. Page 15 of 30 regardless of a Participant’s age and service with the Company or an Affiliate. 6.4 Death. Notwithstanding anything to the contrary in this Article VI, upon the death of the Participant (regardless of whether such Participant is an Employee at the time of death), all remaining vested Account Balances shall be paid to his or her Beneficiary in a single lump sum no later than December 31 of the calendar year following the year of the Participant’s death. (a) Designation of Beneficiary in General. The Participant shall designate a Beneficiary in the manner and on such terms and conditions as the Committee may prescribe. No such designation shall become effective unless filed with the Committee during the Participant’s lifetime. Any designation shall remain in effect until a new designation is filed with the Committee; provided, however, that in the event a Participant designates his or her spouse as a Beneficiary, such designation shall be automatically revoked upon the dissolution of the marriage unless, following such dissolution, the Participant submits a new designation naming the former spouse as a Beneficiary. A Participant may from time to time change his or her designated Beneficiary without the consent of a previously- designated Beneficiary by filing a new designation with the Committee. (b) No Beneficiary. If a designated Beneficiary does not survive the Participant, or if there is no valid Beneficiary designation, amounts payable under the Plan upon the death of the Participant shall be paid to the Participant’s spouse, or if there is no surviving spouse, then to the duly appointed and currently acting personal representative of the Participant’s estate. 6.5 Unforeseeable Emergency. A Participant who experiences an Unforeseeable Emergency may submit a written request to the Committee to receive payment of all or any portion of his or her vested Accounts. If the emergency need cannot be relieved by cessation of Deferrals to the Plan, the Committee may approve an emergency payment therefrom not to exceed the amount reasonably necessary to satisfy the need, taking into account the additional compensation that is available to the Participant as the result of cancellation of deferrals to the Plan, including amounts necessary to pay any taxes or penalties that the Participant reasonably anticipates will result from the payment. The amount of the emergency payment shall be subtracted from the Retirement Account and Separation Accounts and then from the Specified Date Accounts, starting with the Account having the latest commencement date until fully distributed, then continuing in this manner with the next latest Account until the full amount of the distribution is made. Emergency payments shall be paid in a single lump sum within the 90-day period following the date the payment is approved by the Committee. The Committee may specify that Deferrals will be distributed before any Company Contributions. 6.6 Administrative Cash-Out of Small Balances. Notwithstanding anything to the contrary in this Article VI, the Committee may at any time and without regard to whether a payment event has occurred, direct in writing an immediate lump sum payment of the Participant’s Accounts if the balance of such Accounts, combined with any other amounts required to

 
WaFd Bank Deferred Compensation Plan Content Copyright ©2018 Newport Group, Inc. All Rights Reserved. Page 16 of 30 be treated as deferred under a single plan pursuant to Code Section 409A, does not exceed the applicable dollar amount under Code Section 402(g)(1)(B), provided any other such aggregated amounts are also distributed in a lump sum at the same time. 6.7 Acceleration of or Delay in Payments. Notwithstanding anything to the contrary in this Article VI, the Committee, in its sole and absolute discretion, may elect to accelerate the time or form of payment of an Account, provided such acceleration is permitted under Treas. Reg. Section 1.409A-3(j)(4). The Committee may also, in its sole and absolute discretion, delay the time for payment of an Account, to the extent permitted under Treas. Reg. Section 1.409A-2(b)(7). 6.8 Rules Applicable to Installment Payments. If a Payment Schedule specifies installment payments, payment will be made beginning as of the payment commencement date for such installments and shall continue to be made in each subsequent payment period until the number of installment payments specified in the Payment Schedule has been paid. The amount of each installment payment shall be determined by dividing (a) by (b), where (a) equals the Account Balance as of the first Valuation Date in the month of payment and (b) equals the remaining number of installment payments. For purposes of Section 6.9, installment payments will be treated as a single payment. If an Account is payable in installments, the Account will continue to be credited with Earnings in accordance with Article VII hereof until the Account is completely distributed. 6.9 Modifications to Payment Schedules. A Participant may modify the Payment Schedule with respect to any Account (including any Company Contribution Account), consistent with the permissible Payment Schedules available under Sections 6.2 and 6.3, as applicable, provided such modification complies with the requirements of this Section 6.9. Company Contribution Accounts may be modified consistent with the forms of payment permitted for the Retirement Account under Section 6.3. (a) Time of Election. The modification election must be submitted to the Committee not less than 12 months prior to the date payments would have commenced under the Payment Schedule in effect prior to modification (the “Prior Election”). (b) Date of Payment under Modified Payment Schedule. The date payments are to commence under the modified Payment Schedule must be no earlier than five years after the year payment would have commenced under the Prior Election. Under no circumstances may a modification election result in an acceleration of payments in violation of Code Section 409A. If the Participant modifies only the form, and not the commencement date for payment, payments shall commence on the fifth anniversary of the date payment would have commenced under the Prior Election. (c) Irrevocability; Effective Date. A modification election is irrevocable when filed and becomes effective 12 months after the filing date.

 
WaFd Bank Deferred Compensation Plan Content Copyright ©2018 Newport Group, Inc. All Rights Reserved. Page 17 of 30 (d) Effect on Accounts. An election to modify a Payment Schedule is specific to the Account or payment event to which it applies and shall not be construed to affect the Payment Schedules or payment events of any other Accounts. ARTICLE VII Valuation of Account Balances; Investments 7.1 Valuation. Deferrals shall be credited to appropriate Accounts on the date such Compensation would have been paid to the Participant absent the Compensation Deferral Agreement. Valuation of Accounts shall be performed under procedures approved by the Committee. 7.2 Earnings Credit. Each Account will be credited with Earnings on each Business Day, based upon the Participant’s investment allocation among a menu of investment options selected in advance by the Committee, in accordance with the provisions of this Article VII (“investment allocation”). 7.3 Investment Options. Investment options will be determined by the Committee. The Committee, in its sole discretion, shall be permitted to add or remove investment options from the Plan menu from time to time, provided that any such additions or removals of investment options shall not be effective with respect to any period prior to the effective date of such change. 7.4 Investment Allocations. A Participant’s investment allocation constitutes a deemed, not actual, investment among the investment options comprising the investment menu. At no time shall a Participant have any real or beneficial ownership in any investment option included in the investment menu, nor shall the Participating Employer or any trustee acting on its behalf have any obligation to purchase actual securities as a result of a Participant’s investment allocation. A Participant’s investment allocation shall be used solely for purposes of adjusting the value of a Participant’s Account Balances. A Participant shall specify an investment allocation for each of his Accounts in accordance with procedures established by the Committee. Allocation among the investment options must be designated in increments of 1%. The Participant’s investment allocation will become effective on the same Business Day or, in the case of investment allocations received after a time specified by the Committee, the next Business Day. A Participant may change an investment allocation on any Business Day, both with respect to future credits to the Plan and with respect to existing Account Balances, in accordance with procedures adopted by the Committee. Changes shall become effective on the same Business Day or, in the case of investment allocations received after a time specified by the Committee, the next Business Day, and shall be applied prospectively. 7.5 Unallocated Deferrals and Accounts. If the Participant fails to make an investment allocation with respect to an Account, such Account shall be invested in an investment

 
WaFd Bank Deferred Compensation Plan Content Copyright ©2018 Newport Group, Inc. All Rights Reserved. Page 18 of 30 option, the primary objective of which is the preservation of capital, as determined by the Committee. 7.6 Valuations Final After 180 Days. The Participant shall have 180 days following the Valuation Date on which the Participant failed to receive the full amount of Earnings and to file a claim under Article XI for the correction of such error. ARTICLE VIII Administration 8.1 Plan Administration. This Plan shall be administered by the Committee which shall have discretionary authority to make, amend, interpret and enforce all appropriate rules and regulations for the administration of this Plan and to utilize its discretion to decide or resolve any and all questions, including but not limited to eligibility for benefits and interpretations of this Plan and its terms, as may arise in connection with the Plan. Claims for benefits shall be filed with the Committee and resolved in accordance with the claims procedures in Article XI. 8.2 Administration Upon Change in Control. Upon a Change in Control, the Committee, as constituted immediately prior to such Change in Control, shall continue to act as the Committee. The Committee, by a vote of a majority of its members, shall have the authority (but shall not be obligated) to appoint an independent third party to act as the Committee. Upon such Change in Control, the Company may not remove the Committee or its members, unless a majority of Participants and Beneficiaries with Account Balances consent to the removal and replacement of the Committee. Notwithstanding the foregoing, the Committee shall not have authority to direct investment of trust assets under any rabbi trust described in Section 10.2. The Participating Employers shall, with respect to the Committee identified under this Section: (i) pay all reasonable expenses and fees of the Committee, (ii) indemnify the Committee (including individuals serving as Committee members) against any costs, expenses and liabilities including, without limitation, attorneys’ fees and expenses arising in connection with the performance of the Committee’s duties hereunder, except with respect to matters resulting from the Committee’s gross negligence or willful misconduct, and (iii) supply full and timely information to the Committee on all matters related to the Plan, any rabbi trust, Participants, Beneficiaries and Accounts as the Committee may reasonably require. 8.3 Withholding. The Participating Employer shall have the right to withhold from any payment due under the Plan (or with respect to any amounts credited to the Plan) any taxes required by law to be withheld in respect of such payment (or credit). Withholdings with respect to amounts credited to the Plan shall be deducted from Compensation that has not been deferred to the Plan.

 
WaFd Bank Deferred Compensation Plan Content Copyright ©2018 Newport Group, Inc. All Rights Reserved. Page 19 of 30 8.4 Indemnification. The Participating Employers shall indemnify and hold harmless each employee, officer, director, or agent to whom or to which are delegated duties, responsibilities, and authority under the Plan or otherwise with respect to administration of the Plan, including, without limitation, the Committee, its delegees and its agents, against all claims, liabilities, fines and penalties, and all expenses reasonably incurred by or imposed upon him or it (including but not limited to reasonable attorney fees) which arise as a result of his or its actions or failure to act in connection with the operation and administration of the Plan to the extent lawfully allowable and to the extent that such claim, liability, fine, penalty, or expense is not paid for by liability insurance purchased or paid for by the Participating Employer. Notwithstanding the foregoing, the Participating Employer shall not indemnify any person if his or its actions or failure to act are due to gross negligence or willful misconduct or for any such amount incurred through any settlement or compromise of any action unless the Participating Employer consents in writing to such settlement or compromise. 8.5 Delegation of Authority. In the administration of this Plan, the Committee may, from time to time, employ agents and delegate to them such administrative duties as it sees fit, and may from time to time consult with legal counsel who shall be legal counsel to the Company. 8.6 Binding Decisions or Actions. The decision or action of the Committee in respect of any question arising out of or in connection with the administration, interpretation and application of the Plan and the rules and regulations thereunder shall be final and conclusive and binding upon all persons having any interest in the Plan. ARTICLE IX Amendment and Termination 9.1 Amendment and Termination. The Company may at any time and from time to time amend the Plan or may terminate the Plan as provided in this Article IX. Each Participating Employer may also terminate its participation in the Plan. 9.2 Amendments. The Company, by action taken by its Board of Directors, may amend the Plan at any time and for any reason, provided that any such amendment shall not reduce the vested Account Balances of any Participant accrued as of the date of any such amendment or restatement (as if the Participant had incurred a voluntary Separation from Service on such date). The Board of Directors of the Company may delegate to the Committee the authority to amend the Plan without the consent of the Board of Directors for the purpose of: (i) conforming the Plan to the requirements of law; (ii) facilitating the administration of the Plan; (iii) clarifying provisions based on the Committee’s interpretation of the Plan documents; and (iv) making such other amendments as the Board of Directors may authorize. No amendment is needed to revise the list of Participating Employers set forth on Schedule A attached hereto.

 
WaFd Bank Deferred Compensation Plan Content Copyright ©2018 Newport Group, Inc. All Rights Reserved. Page 20 of 30 9.3 Termination. The Company, by action taken by its Board of Directors, may terminate the Plan and pay Participants and Beneficiaries their Account Balances, to the extent and in accordance with Treas. Reg. Section 1.409A-3(j)(4)(ix). 9.4 Accounts Taxable Under Code Section 409A. The Plan is intended to constitute a plan of deferred compensation that meets the requirements for deferral of income taxation under Code Section 409A. The Committee, pursuant to its authority to interpret the Plan, may sever from the Plan or any Compensation Deferral Agreement any provision or exercise of a right that otherwise would result in a violation of Code Section 409A. ARTICLE X Informal Funding 10.1 General Assets. Obligations established under the terms of the Plan may be satisfied from the general funds of the Participating Employers, or a trust described in this Article X. No Participant, spouse or Beneficiary shall have any right, title or interest whatever in assets of the Participating Employers. Nothing contained in this Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship, between the Participating Employers and any Employee, spouse, or Beneficiary. To the extent that any person acquires a right to receive payments hereunder, such rights are no greater than the right of an unsecured general creditor of the Participating Employer. 10.2 Rabbi Trust. A Participating Employer may, in its sole discretion, establish a grantor trust, commonly known as a rabbi trust, as a vehicle for accumulating assets to pay benefits under the Plan. Payments under the Plan may be paid from the general assets of the Participating Employer or from the assets of any such rabbi trust. Payment from any such source shall reduce the obligation owed to the Participant or Beneficiary under the Plan. If a rabbi trust is in existence upon the occurrence of a “change in control”, as defined in such trust, the Participating Employer shall, upon such change in control, and on each anniversary of the change in control, contribute in cash or liquid securities such amounts as are necessary so that the value of assets after making the contributions exceed 125% of the total value of all Account Balances, provided such funding is not prohibited under Code Section 409A and the regulations promulgated thereunder. ARTICLE XI Claims 11.1 Filing a Claim. Any controversy or claim arising out of or relating to the Plan shall be filed in writing with the Committee which shall make all determinations concerning such claim. Any claim filed with the Committee and any decision by the Committee denying such claim shall be in writing and shall be delivered to the Participant or Beneficiary filing the claim (the “Claimant”). Notice of a claim for payments shall be delivered to the Committee within 90 days of the latest date upon which the payment could have been timely made in accordance with the terms of the Plan and Code Section 409A, and if not

 
WaFd Bank Deferred Compensation Plan Content Copyright ©2018 Newport Group, Inc. All Rights Reserved. Page 21 of 30 paid, the Participant or Beneficiary must file a claim under this Article XI not later than 180 days after such latest date. If the Participant or Beneficiary fails to file a timely claim, the Participant forfeits any amounts to which he or she may have been entitled to receive under the claim. (a) In General. Notice of a denial of benefits (other than claims based on disability) will be provided within 90 days of the Committee’s receipt of the Claimant's claim for benefits. If the Committee determines that it needs additional time to review the claim, the Committee will provide the Claimant with a notice of the extension before the end of the initial 90-day period. The extension will not be more than 90 days from the end of the initial 90-day period and the notice of extension will explain the special circumstances that require the extension and the date by which the Committee expects to make a decision. (b) Disability Benefits. Notice of denial of claims based on disability will be provided within forty-five (45) days of the Committee’s receipt of the Claimant’s claim for disability benefits. If the Committee determines that it needs additional time to review the disability claim, the Committee will provide the Claimant with a notice of a 30-day extension before the end of the initial 45-day period. If the Committee determines that a decision cannot be made within the first extension period due to matters beyond the control of the Committee, the time period for making a determination may be further extended for an additional 30 days. If such an additional extension is necessary, the Committee shall notify the Claimant prior to the expiration of the initial 30-day extension. Any notice of extension shall indicate the circumstances necessitating the extension of time, the date by which the Committee expects to furnish a notice of decision, the specific standards on which such entitlement to a benefit is based, the unresolved issues that prevent a decision on the claim and any additional information needed to resolve those issues. A Claimant will be provided a minimum of 45 days to submit any necessary additional information to the Committee. In the event that a 30-day extension is necessary due to a Claimant’s failure to submit information necessary to decide a claim, the period for furnishing a notice of decision shall be tolled from the date on which the notice of the extension is sent to the Claimant until the earlier of the date the Claimant responds to the request for additional information or the response deadline. (c) Contents of Notice. If a claim for benefits is completely or partially denied, notice of such denial shall be in writing. Any electronic notification shall comply with the standards imposed by Department of Labor Regulation 29 CFR 2520.104b- 1(c)(1)(i), (iii), and (iv). The notice of denial shall set forth the specific reasons for denial in plain language. The notice shall: (i) cite the pertinent provisions of the Plan document, and (ii) explain, where appropriate, how the Claimant can perfect the claim, including a description of any additional material or information necessary to complete the claim and why such material or information is necessary. The claim denial also shall include an explanation of the claims review procedures and the time limits applicable to such procedures, including the right

 
WaFd Bank Deferred Compensation Plan Content Copyright ©2018 Newport Group, Inc. All Rights Reserved. Page 22 of 30 to appeal the decision, the deadline by which such appeal must be filed and a statement of the Claimant’s right to bring a civil action under Section 502(a) of ERISA following an adverse decision on appeal and the specific date by which such a civil action must commence under Section 11.4. In the case of a complete or partial denial of a disability benefit claim, the notice shall provide such information and shall be communicated in the manner required under applicable Department of Labor regulations. 11.2 Appeal of Denied Claims. A Claimant whose claim has been completely or partially denied shall be entitled to appeal the claim denial by filing a written appeal with a committee designated to hear such appeals (the “Appeals Committee”). A Claimant who timely requests a review of the denied claim (or his or her authorized representative) may review, upon request and free of charge, copies of all documents, records and other information relevant to the denial and may submit written comments, documents, records and other information relating to the claim to the Appeals Committee. All written comments, documents, records, and other information shall be considered “relevant” if the information: (i) was relied upon in making a benefits determination, (ii) was submitted, considered or generated in the course of making a benefits decision regardless of whether it was relied upon to make the decision, or (iii) demonstrates compliance with administrative processes and safeguards established for making benefit decisions. The review shall take into account all comments, documents, records, and other information submitted by the Claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination. The Appeals Committee may, in its sole discretion and if it deems appropriate or necessary, decide to hold a hearing with respect to the claim appeal. (a) In General. Appeal of a denied benefits claim (other than a disability benefits claim) must be filed in writing with the Appeals Committee no later than 60 days after receipt of the written notification of such claim denial. The Appeals Committee shall make its decision regarding the merits of the denied claim within 60 days following receipt of the appeal (or within 120 days after such receipt, in a case where there are special circumstances requiring extension of time for reviewing the appealed claim). If an extension of time for reviewing the appeal is required because of special circumstances, written notice of the extension shall be furnished to the Claimant prior to the commencement of the extension. The notice will indicate the special circumstances requiring the extension of time and the date by which the Appeals Committee expects to render the determination on review. The review will take into account comments, documents, records and other information submitted by the Claimant relating to the claim without regard to whether such information was submitted or considered in the initial benefit determination. (b) Disability Benefits. Appeal of a denied disability benefits claim must be filed in writing with the Appeals Committee no later than 180 days after receipt of the written notification of such claim denial. The review shall be conducted in

 
WaFd Bank Deferred Compensation Plan Content Copyright ©2018 Newport Group, Inc. All Rights Reserved. Page 23 of 30 accordance with applicable Department of Labor regulations. The Appeals Committee shall make its decision regarding the merits of the denied claim within 45 days following receipt of the appeal (or within 90 days after such receipt, in a case where there are special circumstances requiring extension of time for reviewing the appealed claim). If an extension of time for reviewing the appeal is required because of special circumstances, written notice of the extension shall be furnished to the Claimant prior to the commencement of the extension. The notice will indicate the special circumstances requiring the extension of time and the date by which the Appeals Committee expects to render the determination on review. Following its review of any additional information submitted by the Claimant, the Appeals Committee shall render a decision on its review of the denied claim. (c) Contents of Notice. If a benefits claim is completely or partially denied on review, notice of such denial shall be in writing. Any electronic notification shall comply with the standards imposed by Department of Labor Regulation 29 CFR 2520.104b-1(c)(1)(i), (iii), and (iv). Such notice shall set forth the reasons for denial in plain language. The decision on review shall set forth: (i) the specific reason or reasons for the denial, (ii) specific references to the pertinent Plan provisions on which the denial is based, (iii) a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to and copies of all documents, records, or other information relevant (as defined above) to the Claimant’s claim, and (iv) a statement of the Claimant’s right to bring an action under Section 502(a) of ERISA, following an adverse decision on review and the specific date by which such a civil action must commence under Section 11.4. For the denial of a disability benefit, the notice will also include such additional information and be communicated in the manner required under applicable Department of Labor regulations. 11.3 Claims Appeals Upon Change in Control. Upon a change in control, the Appeals Committee, as constituted immediately prior to such change in control, shall continue to act as the Appeals Committee. The Company may not remove any member of the Appeals Committee but may replace resigning members if 2/3rds of the members of the Board of Directors of the Company and a majority of Participants and Beneficiaries with Account Balances consent to the replacement. The Appeals Committee shall have the exclusive authority at the appeals stage to interpret the terms of the Plan and resolve appeals under the Claims Procedure. Each Participating Employer shall, with respect to the Committee identified under this Section: (i) pay its proportionate share of all reasonable expenses and fees of the Appeals Committee, (ii) indemnify the Appeals Committee (including individual committee

 
WaFd Bank Deferred Compensation Plan Content Copyright ©2018 Newport Group, Inc. All Rights Reserved. Page 24 of 30 members) against any costs, expenses and liabilities including, without limitation, attorneys’ fees and expenses arising in connection with the performance of the Appeals Committee hereunder, except with respect to matters resulting from the Appeals Committee’s gross negligence or willful misconduct, and (iii) supply full and timely information to the Appeals Committee on all matters related to the Plan, any rabbi trust, Participants, Beneficiaries and Accounts as the Appeals Committee may reasonably require. 11.4 Legal Action. A Claimant may not bring any legal action, including commencement of any arbitration, relating to a claim for benefits under the Plan unless and until the Claimant has followed the claims procedures under the Plan and exhausted his or administrative remedies under Sections 11.1 and 11.2. No such legal action may be brought more than twelve (12) months following the notice of denial of benefits under Section 11.2, or if no appeal is filed by the applicable appeals deadline, twelve (12) months following the appeals deadline. 11.5 Discretion of Appeals Committee. All interpretations, determinations and decisions of the Appeals Committee with respect to any claim shall be made in its sole discretion and shall be final and conclusive. 11.6 Arbitration. (a) Prior to Change in Control. If, prior to a change in control, any claim or controversy between a Participating Employer and a Participant or Beneficiary is not resolved through the claims procedure set forth in Article XI, such claim shall be submitted to and resolved exclusively by expedited binding arbitration by a single arbitrator. Arbitration shall be conducted in accordance with the following procedures: The complaining party shall promptly send written notice to the other party identifying the matter in dispute and the proposed remedy. Following the giving of such notice, the parties shall meet and attempt in good faith to resolve the matter. In the event the parties are unable to resolve the matter within 21 days, the parties shall meet and attempt in good faith to select a single arbitrator acceptable to both parties. If a single arbitrator is not selected by mutual consent within ten Business Days following the giving of the written notice of dispute, an arbitrator shall be selected from a list of nine persons each of whom shall be an attorney who is either engaged in the active practice of law or recognized arbitrator and who, in either event, is experienced in serving as an arbitrator in disputes between employers and employees, which list shall be provided by the main office of either JAMS, the American Arbitration Association (“AAA”) or the Federal Mediation and Conciliation Service. If, within three Business Days of the parties’ receipt of such list, the parties are unable to agree on an arbitrator from the list, then the parties shall each strike names alternatively from the list, with the first to strike being determined by the flip of a coin. After each party has had four strikes, the remaining name on the list shall be the arbitrator. If such person is unable to

 
WaFd Bank Deferred Compensation Plan Content Copyright ©2018 Newport Group, Inc. All Rights Reserved. Page 25 of 30 serve for any reason, the parties shall repeat this process until an arbitrator is selected. Unless the parties agree otherwise, within 60 days of the selection of the arbitrator, a hearing shall be conducted before such arbitrator at a time and a place agreed upon by the parties. In the event the parties are unable to agree upon the time or place of the arbitration, the time and place shall be designated by the arbitrator after consultation with the parties. Within 30 days of the conclusion of the arbitration hearing, the arbitrator shall issue an award, accompanied by a written decision explaining the basis for the arbitrator’s award. In any arbitration hereunder, the Participating Employer shall pay all administrative fees of the arbitration and all fees of the arbitrator, except that the Participant or Beneficiary may, if he/she/it wishes, pay up to one-half of those amounts. Each party shall pay its own attorneys’ fees, costs, and expenses, unless the arbitrator orders otherwise. The prevailing party in such arbitration, as determined by the arbitrator, and in any enforcement or other court proceedings, shall be entitled, to the extent permitted by law, to reimbursement from the other party for all of the prevailing party’s costs (including but not limited to the arbitrator’s compensation), expenses, and attorneys’ fees. The arbitrator shall have no authority to add to or to modify this Plan, shall apply all applicable law, and shall have no lesser and no greater remedial authority than would a court of law resolving the same claim or controversy. The arbitrator shall, upon an appropriate motion, dismiss any claim without an evidentiary hearing if the party bringing the motion establishes that it would be entitled to summary judgment if the matter had been pursued in court litigation. The parties shall be entitled to discovery as follows: Each party may take no more than three depositions. The Participating Employer may depose the Participant or Beneficiary plus two other witnesses, and the Participant or Beneficiary may depose the Participating Employer, pursuant to Rule 30(b)(6) of the Federal Rules of Civil Procedure, plus two other witnesses. Each party may make such reasonable document discovery requests as are allowed in the discretion of the arbitrator. The decision of the arbitrator shall be final, binding, and non-appealable, and may be enforced as a final judgment in any court of competent jurisdiction. This arbitration provision of the Plan shall extend to claims against any parent, subsidiary, or affiliate of each party, and, when acting within such capacity, any officer, director, shareholder, Participant, Beneficiary, or agent of any party, or of any of the above, and shall apply as well to claims arising out of state and federal statutes and local ordinances as well as to claims arising under the common law or under this Plan.

 
WaFd Bank Deferred Compensation Plan Content Copyright ©2018 Newport Group, Inc. All Rights Reserved. Page 26 of 30 Notwithstanding the foregoing, and unless otherwise agreed between the parties, either party may apply to a court for provisional relief, including a temporary restraining order or preliminary injunction, on the ground that the arbitration award to which the applicant may be entitled may be rendered ineffectual without provisional relief. Any arbitration hereunder shall be conducted in accordance with the Federal Arbitration Act: provided, however, that, in the event of any inconsistency between the rules and procedures of the Act and the terms of this Plan, the terms of this Plan shall prevail. If any of the provisions of this Section 11.6(a) are determined to be unlawful or otherwise unenforceable, in the whole part, such determination shall not affect the validity of the remainder of this section and this section shall be reformed to the extent necessary to carry out its provisions to the greatest extent possible and to insure that the resolution of all conflicts between the parties, including those arising out of statutory claims, shall be resolved by neutral, binding arbitration. If a court should find that the provisions of this Section 11.6(a) are not absolutely binding, then the parties intend any arbitration decision and award to be fully admissible in evidence in any subsequent action, given great weight by any finder of fact and treated as determinative to the maximum extent permitted by law. The parties do not agree to arbitrate any putative class action or any other representative action. The parties agree to arbitrate only the claims(s) of a single Participant or Beneficiary. (b) Upon Change in Control. Upon a change in control, Section 11.6(a) shall not apply and any legal action initiated by a Participant or Beneficiary to enforce his or her rights under the Plan may be brought in any court of competent jurisdiction. ARTICLE XII General Provisions 12.1 Assignment. No interest of any Participant, spouse or Beneficiary under this Plan and no benefit payable hereunder shall be assigned as security for a loan, and any such purported assignment shall be null, void and of no effect, nor shall any such interest or any such benefit be subject in any manner, either voluntarily or involuntarily, to anticipation, sale, transfer, assignment or encumbrance by or through any Participant, spouse or Beneficiary. Notwithstanding anything to the contrary herein, however, the Committee has the discretion to make payments to an alternate payee in accordance with the terms of a domestic relations order (as defined in Code Section 414(p)(1)(B)). The Company may assign any or all of its liabilities under this Plan in connection with any restructuring, recapitalization, sale of assets or other similar transactions affecting a Participating Employer without the consent of the Participant.

 
WaFd Bank Deferred Compensation Plan Content Copyright ©2018 Newport Group, Inc. All Rights Reserved. Page 27 of 30 12.2 No Legal or Equitable Rights or Interest. No Participant or other person shall have any legal or equitable rights or interest in this Plan that are not expressly granted in this Plan. Participation in this Plan does not give any person any right to be retained in the service of the Participating Employer. The right and power of a Participating Employer to dismiss or discharge an Employee is expressly reserved. The Participating Employers make no representations or warranties as to the tax consequences to a Participant or a Participant’s beneficiaries resulting from a deferral of income pursuant to the Plan. 12.3 No Employment Contract. Nothing contained herein shall be construed to constitute a contract of employment between an Employee and a Participating Employer. Nothing contained herein shall be construed as changing a Participant’s status from employee to independent contractor or from independent contractor to employee. 12.4 Notice. Any notice or filing required or permitted to be delivered to the Committee under this Plan shall be delivered in writing, in person, or through such electronic means as is established by the Committee. Notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification. Written transmission shall be sent by certified mail to: WASHINGTON FEDERAL BANK 425 PIKE STREET SEATTLE, WA 98101 ATTN: HUMAN RESOURCES Any notice or filing required or permitted to be given to a Participant under this Plan shall be sufficient if in writing and hand-delivered or sent by mail to the last known address of the Participant. 12.5 Headings. The headings of Sections are included solely for convenience of reference, and if there is any conflict between such headings and the text of this Plan, the text shall control. 12.6 Invalid or Unenforceable Provisions. If any provision of this Plan shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions hereof and the Committee may elect in its sole discretion to construe such invalid or unenforceable provisions in a manner that conforms to applicable law or as if such provisions, to the extent invalid or unenforceable, had not been included. 12.7 Facility of Payment to a Minor. If a distribution is to be made to a minor, or to a person who is otherwise incompetent, then the Committee may, in its discretion, make such distribution: (i) to the legal guardian, or if none, to a parent of a minor payee with whom the payee maintains his or her residence, or (ii) to the conservator or committee or, if none, to the person having custody of an incompetent payee. Any such distribution shall fully discharge the Committee, the Company, and the Plan from further liability on account thereof.

 
WaFd Bank Deferred Compensation Plan Content Copyright ©2018 Newport Group, Inc. All Rights Reserved. Page 28 of 30 12.8 Governing Law. To the extent not preempted by ERISA, the laws of the State of Washington shall govern the construction and administration of the Plan. 12.9 Compliance With Code Section 409A; No Guarantee. This Plan is intended to be administered in compliance with Code Section 409A and each provision of the Plan shall be interpreted consistent with Code Section 409A, such that additions to and amounts represented by a Participant’s or Beneficiary’s Accounts hereunder shall be includable as gross income of the Participant or Beneficiary, for U.S. Federal income tax purposes, only as and when cash distributions are received. Although intended to comply with Code Section 409A, this Plan shall not constitute a guarantee to any Participant or Beneficiary that the Plan in form or in operation will result in the deferral of federal or state income tax liabilities or that the Participant or Beneficiary will not be subject to the additional taxes imposed under Section 409A. No Employer shall have any legal obligation to a Participant with respect to taxes imposed under Code Section 409A. IN WITNESS WHEREOF, the undersigned executed this Plan as of the _____ day of _______________, 2022, to be effective as of the Effective Date. WASHINGTON FEDERAL BANK By: _______________________________ (Print Name) Its: ________________________________ (Title) _____________________________________________ (Signature)

 
WaFd Bank Deferred Compensation Plan Content Copyright ©2018 Newport Group, Inc. All Rights Reserved. Page 29 of 30 Schedule A Participating Employers Washington Federal Bank

 

Exhibit 31.1
WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
CERTIFICATION
I, Cathy E. Cooper, certify that:
1.I have reviewed this quarterly report on Form 10-Q of Washington Federal, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)Disclosed in this quarterly report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date:February 3, 2023/s/ Cathy E. Cooper
CATHY E. COOPER
Executive Vice President, Chief Consumer Banker & Acting Chief Executive Officer

Exhibit 31.2
WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
CERTIFICATION
I, Kelli J. Holz, certify that:
1.I have reviewed this quarterly report on Form 10-Q of Washington Federal, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)Disclosed in this quarterly report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
 
 
Date:February 3, 2023  /s/ Kelli J. Holz
  KELLI J. HOLZ
  Executive Vice President and Chief Financial Officer

Exhibit 32
WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Washington Federal, Inc. (the “Company”) on Form 10-Q for the period ended December 31, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned hereby certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to the undersigned's best knowledge and belief:
(a) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(b) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: February 3, 2023
 
Washington Federal, Inc.
(Company)
/s/ Cathy E. Cooper
CATHY E. COOPER
Executive Vice President, Chief Consumer Banker & Acting Chief Executive Officer
/s/ Kelli J. Holz
KELLI J. HOLZ
Executive Vice President and Chief Financial Officer