WAFD INC - Quarter Report: 2019 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



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

For the quarterly period ended June 30, 2019



☐	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.)

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ☒ No ☐

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



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

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

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

APPLICABLE ONLY TO CORPORATE ISSUERS

The registrant had outstanding 79,401,360 shares of common stock as of July 24, 2019.

Table of Contents

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES



PART I

Item 1.	Financial Statements (Unaudited)

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

	Consolidated Statements of Financial Condition as of June 30, 2019 and September 30, 2018	3

	Consolidated Statements of Operations for the three and nine months ended June 30, 2019 and June 30, 2018	4

	Consolidated Statements of Comprehensive Income for the three and nine months ended June 30, 2019 and June 30, 2018	5

	Consolidated Statements of Stockholders' Equity for the three and nine months ended June 30, 2019 and June 30, 2018	6

	Consolidated Statements of Cash Flows for the nine months ended June 30, 2019 and June 30, 2018	8

	Notes to Interim Consolidated Financial Statements	10

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	49

Item 4.	Controls and Procedures	49

PART II

Item 1.	Legal Proceedings	50

Item 1A.	Risk Factors	50

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	50

Item 3.	Defaults Upon Senior Securities	50

Item 4.	Mine Safety Disclosures	50

Item 5.	Other Information	50

Item 6.	Exhibits	50

	Signatures	51

Table of Contents

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(UNAUDITED)



	June 30, 2019			September 30, 2018
	(In thousands, except share data)
ASSETS
Cash and cash equivalents	$	289,828		$	268,650
Available-for-sale securities, at fair value	1,507,937			1,314,957
Held-to-maturity securities, at amortized cost	1,508,175			1,625,420
Loans receivable, net of allowance for loan losses of $134,022 and $129,257	11,974,533			11,477,081
Interest receivable	48,004			47,295
Premises and equipment, net	275,640			267,995
Real estate owned	7,003			11,298
FHLB and FRB stock	134,190			127,190
Bank owned life insurance	220,610			216,254
Intangible assets, including goodwill of $301,368 and $301,368	309,757			311,286
Federal and state income tax assets, net	—			1,804
Other assets	192,848			196,494
	$	16,468,525		$	15,865,724
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Customer accounts
Transaction deposit accounts	$	6,849,850		$	6,582,343
Time deposit accounts	4,950,320			4,804,803
	11,800,170			11,387,146
FHLB advances	2,505,000			2,330,000
Advance payments by borrowers for taxes and insurance	33,949			57,417
Federal and state income tax liabilities, net	2,364			—
Accrued expenses and other liabilities	114,308			94,253
	14,455,791			13,868,816
Stockholders’ equity
Common stock, $1.00 par value, 300,000,000 shares authorized; 135,526,576 and 135,343,417 shares issued; 79,398,713 and 82,710,911 shares outstanding	135,527			135,343
Additional paid-in capital	1,671,198			1,666,609
Accumulated other comprehensive income (loss), net of taxes	12,137			8,294
Treasury stock, at cost; 56,127,863 and 52,632,506 shares	(1,106,244		)	(1,002,309		)
Retained earnings	1,300,116			1,188,971
	2,012,734			1,996,908
	$	16,468,525		$	15,865,724

SEE NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Table of Contents

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)



	Three Months Ended June 30,				Nine Months Ended June 30,
	2019		2018		2019			2018
	(In thousands, except share data)				(In thousands, except share data)
INTEREST INCOME
Loans receivable	$	145,490	$	131,541	$	423,616		$	382,581
Mortgage-backed securities	18,719		18,022		57,254			52,588
Investment securities and cash equivalents	7,617		5,509		21,160			14,762
	171,826		155,072		502,030			449,931
INTEREST EXPENSE
Customer accounts	32,331		18,887		88,576			49,939
FHLB advances	17,829		16,333		52,566			47,104
	50,160		35,220		141,142			97,043
Net interest income	121,666		119,852		360,888			352,888
Provision (release) for loan losses	—		1,000		250			50
Net interest income after provision (release)	121,666		118,852		360,638			352,838

OTHER INCOME
Gain (loss) on sale of investment securities	—		—		(9		)	—
FDIC loss share valuation adjustments	—		—		—			(8,550		)
Loan fee income	1,334		1,094		2,971			2,909
Deposit fee income	6,258		6,411		18,387			19,500
Other income	6,450		4,946		24,512			17,974
	14,042		12,451		45,861			31,833

OTHER EXPENSE
Compensation and benefits	34,297		31,223		100,954			92,467
Occupancy	9,684		9,095		28,782			26,779
FDIC insurance premiums	2,559		2,950		7,399			8,622
Product delivery	3,912		4,356		11,478			11,977
Information technology	9,935		10,118		27,730			26,828
Other expense	10,511		9,235		34,194			28,032
	70,898		66,977		210,537			194,705
Gain (loss) on real estate owned, net	353		168		1,481			(64		)
Income before income taxes	65,163		64,494		197,443			189,902
Income tax expense	11,309		13,100		39,549			37,567
NET INCOME	$	53,854	$	51,394	$	157,894		$	152,335

PER SHARE DATA
Basic earnings per share	$	0.67	$	0.61	$	1.95		$	1.78
Diluted earnings per share	0.67		0.61		1.95			1.78
Dividends paid on common stock per share	0.20		0.17		0.58			0.49
Basic weighted average number of shares outstanding	79,976,574		84,168,992		80,915,162			85,589,588
Diluted weighted average number of shares outstanding	79,992,356		84,252,659		80,941,617			85,698,888

SEE NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)



	Three Months Ended June 30,						Nine Months Ended June 30,
	2019			2018			2019			2018
	(In thousands)						(In thousands)
Net income	$	53,854		$	51,394		$	157,894		$	152,335

Other comprehensive income (loss) net of tax:
Net unrealized gain (loss) on available-for-sale investment securities	14,577			(4,851		)	31,677			(18,282		)
Reclassification adjustment of net gain (loss) from sale of available-for-sale securities included in net income	—			—			(9		)	—
Related tax benefit (expense)	(3,316		)	1,104			(7,204		)	5,506
	11,261			(3,747		)	24,464			(12,776		)

Net unrealized gain (loss) on cash flow hedges of borrowings	(10,043		)	3,865			(26,692		)	20,887
Related tax benefit (expense)	2,285			(879		)	6,071			(4,989		)
	(7,758		)	2,986			(20,621		)	15,898

Other comprehensive income (loss) net of tax	3,503			(761		)	3,843			3,122
Comprehensive income	$	57,357		$	50,633		$	161,737		$	155,457

SEE NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(UNAUDITED)



(in thousands)	Common Stock		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total
Balance at April 1, 2019	$	135,507	$	1,669,860		$	1,262,236		$	8,634		$	(1,071,957	)	$	2,004,280
Net income	—		—			53,854			—			—			53,854
Other comprehensive income (loss)	—		—			—			3,503			—			3,503
Dividends on common stock ($0.20 per share)	—		—			(15,974		)	—			—			(15,974		)
Proceeds from stock-based awards	13		146			—			—			—			159
Stock-based compensation expense	7		1,192			—			—			—			1,199
Treasury stock acquired	—		—			—			—			(34,287		)	(34,287		)
Balance at June 30, 2019	$	135,527	$	1,671,198		$	1,300,116		$	12,137		$	(1,106,244	)	$	2,012,734

(in thousands)	Common Stock		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total
Balance at April 1, 2018	$	135,334	$	1,664,275		$	1,115,204		$	8,899		$	(935,039	)	$	1,988,673
Net income	—		—			51,394			—			—			51,394
Other comprehensive income (loss)	—		—			—			(762		)	—			(762		)
Dividends on common stock ($0.17 per share)	—		—			(14,236		)	—			—			(14,236		)
Proceeds from stock-based awards	4		52			—			—			—			56
Stock-based compensation expense	4		1,096			—			—			—			1,100
Exercise of stock warrants	2		(2		)	—			—			—			—
Treasury stock acquired	—		—			—			—			(39,962		)	(39,962		)
Balance at June 30, 2018	$	135,344	$	1,665,421		$	1,152,362		$	8,137		$	(975,001	)	$	1,986,263

SEE NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Table of Contents

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(UNAUDITED)



(in thousands)	Common Stock		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)		Treasury Stock			Total
Balance at October 1, 2018	$	135,343	$	1,666,609		$	1,188,971		$	8,294	$	(1,002,309	)	$	1,996,908
Net income	—		—			157,894			—		—			157,894
Other comprehensive income (loss)	—		—			—			3,843		—			3,843
Dividends on common stock ($0.58 per share)	—		—			(46,749		)	—		—			(46,749		)
Proceeds from stock-based awards	37		675			—			—		—			712
Stock-based compensation expense	108		3,953			—			—		—			4,061
Exercise of stock warrants	39		(39		)									—
Treasury stock acquired	—		—			—			—		(103,935		)	(103,935		)
Balance at June 30, 2019	$	135,527	$	1,671,198		$	1,300,116		$	12,137	$	(1,106,244	)	$	2,012,734

(in thousands)	Common Stock		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)		Treasury Stock			Total
Balance at October 1, 2017	$	134,958	$	1,660,885		$	1,042,890		$	5,015	$	(838,060	)	$	2,005,688
Adjustment pursuant to adoption of ASU 2018-02	—		—			(1,772		)	1,772		—			—
Net income	—		—			152,335			—		—			152,335
Other comprehensive income (loss)	—		—			—			1,350		—			1,350
Dividends on common stock ($0.49 per share)	—		—			(41,091		)	—		—			(41,091		)
Proceeds from stock-based awards	60		1,228			—			—		—			1,288
Stock-based compensation expense	215		3,419			—			—		—			3,634
Exercise of stock warrants	111		(111		)	—			—		—			—
Treasury stock acquired	—		—			—			—		(136,941		)	(136,941		)
Balance at June 30, 2018	$	135,344	$	1,665,421		$	1,152,362		$	8,137	$	(975,001	)	$	1,986,263

SEE NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Table of Contents

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)



	Nine Months Ended June 30,
	2019			2018
	(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	157,894		$	152,335
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization, and accretion expense, net	20,606			38,980
Cash received from (paid to) FDIC under loss share agreements, net	—			1,595
Stock-based compensation expense	4,061			3,634
Provision (release) for loan losses	250			50
Loss (gain) on sale of investment securities	9			—
Gain on bank owned life insurance	—			(2,416		)
Net realized (gain) loss on sales of premises, equipment, and real estate owned	(9,098		)	(1,333		)
Decrease (increase) in accrued interest receivable	(709		)	(2,027		)
Decrease (increase) in federal and state income tax receivable	1,804			(4,293		)
Decrease (increase) in cash surrender value of bank owned life insurance	(4,356		)	(4,490		)
Decrease (increase) in other assets	(23,046		)	(878		)
Increase (decrease) in federal and state income tax liabilities	1,232			—
Increase (decrease) in accrued expenses and other liabilities	20,055			(40,862		)
Net cash provided by (used in) operating activities	168,702			140,295
CASH FLOWS FROM INVESTING ACTIVITIES
Origination of loans and principal repayments, net	(496,438		)	(308,167		)
Loans purchased	—			(143,605		)
FHLB & FRB stock purchased	(440,600		)	(408,800		)
FHLB & FRB stock redeemed	433,600			403,000
Available-for-sale securities purchased	(327,670		)	(166,696		)
Principal payments and maturities of available-for-sale securities	164,295			156,240
Proceeds from sales of available-for-sale securities	491			—
Held-to-maturity securities purchased	—			(170,836		)
Principal payments and maturities of held-to-maturity securities	114,678			143,837
Proceeds from sales of real estate owned	8,484			11,960
Proceeds from settlement of bank owned life insurance	—			3,484
Cash paid for acquisitions	—			(2,211		)
Proceeds from sales of premises and equipment	11,669			1
Premises and equipment purchased and REO improvements	(30,845		)	(22,604		)
Net cash provided by (used in) investing activities	(562,336		)	(504,397		)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in customer accounts	413,252			452,694
Proceeds from borrowings	11,015,000			10,220,000
Repayments of borrowings	(10,840,000		)	(10,075,000		)
Proceeds from stock-based awards	712			1,288
Dividends paid on common stock	(46,749		)	(41,091		)
Treasury stock purchased	(103,935		)	(136,941		)
Increase (decrease) in borrower advances related to taxes and insurance, net	(23,468		)	(23,999		)
Net cash provided by (used in) financing activities	414,812			396,951
Increase (decrease) in cash and cash equivalents	21,178			32,849
Cash, cash equivalents and restricted cash at beginning of period	268,650			313,070
Cash, cash equivalents and restricted cash at end of period	$	289,828		$	345,919

(CONTINUED)

SEE NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)



	Nine Months Ended June 30,
	2019		2018
	(In thousands)
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Non-cash investing activities
Real estate acquired through foreclosure	$	1,669	$	1,517
Non-cash financing activities
Stock issued upon exercise of warrants	1,082		3,836
Cash paid during the period for
Interest	143,740		95,394
Income taxes	25,655		34,160

SEE NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Table of Contents

WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE A – Summary of Significant Accounting Policies

Nature of Operations - Washington Federal, Inc. (the "Company") is a Washington corporation headquartered in Seattle, Washington. The Company is a bank holding company that conducts its operations through its national bank subsidiary, Washington Federal Bank, National Association (the "Bank"). The Bank is principally engaged in the business of attracting deposits from businesses and the general public and investing these funds, together with borrowings and other funds, in commercial and consumer loans. As used throughout this document, the terms "Washington Federal" or the "Company" refer to Washington Federal, Inc. and its consolidated subsidiaries and the term "Bank" refers to the operating subsidiary Washington Federal Bank, National Association.

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. Certain amounts in the financial statements from prior periods have been reclassified to conform to the current financial statement presentation.

The information included in this Form 10-Q should be read in conjunction with the financial statements and related notes in the Company's 2018 Annual Report on Form 10-K (“2018 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 2018 Annual Financial Statements. There have not been any material changes in the Company's significant accounting policies compared to those contained in its 2018 Annual Financial Statements for the year ended September 30, 2018.

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 June 30, 2019. As of June 30, 2019 and September 30, 2018, the Company pledged cash collateral related to derivative contracts of $23,050,000 and $18,000,000, respectively.

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

Off-Balance-Sheet Credit Exposures - The only material off-balance-sheet credit exposures are loans in process and unused lines of credit, which had a combined balance of $2,252,249,000 and $2,180,162,000 at June 30, 2019 and September 30, 2018, respectively. The Company estimates losses on off-balance-sheet credit exposures by allocating a loss percentage derived from historical loss factors for each asset class.

NOTE B – New Accounting Pronouncements

In April 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, that clarifies and improves areas of guidance related to the recently issued standards on credit losses (ASU 2016-13), hedging (ASU 2017-12), and recognition and measurement of financial instruments (ASU 2016-01). The amendments generally have the same effective dates as their related standards. If already adopted, the amendments of ASU 2016-01 and ASU 2016-13 are effective for fiscal years beginning after December 15, 2019 and the amendments of ASU 2017-12 are effective as of the beginning of the Company’s next annual reporting period; early adoption is permitted. The Company previously adopted both ASU 2017-12 and ASU 2016-01 and does not expect the amendments of ASU 2019-04 will have a material impact

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

on its consolidated financial statements. The Company is continuing to evaluate the impact of ASU 2016-13 and will consider the amendments of ASU 2019-04 as part of that process.

In August 2018, the FASB issued ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. The amendments in this ASU align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The amendments also require the entity to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement, including reasonably certain renewal periods. The amendments in the ASU are effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. Early adoption is permitted, including adoption in any interim period. The Company is assessing the impact that this guidance will have on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. This ASU adds, eliminates, and modifies certain disclosure requirements for fair value measurements. Among the changes, entities will no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. The ASU is effective for interim and annual reporting periods beginning after December 15, 2019; early adoption is permitted. Entities are also allowed to elect early adoption of the eliminated or modified disclosure requirements and delay adoption of the added disclosure requirements until their effective date. As the ASU only revises disclosure requirements, this guidance will not have a material impact on the Company's consolidated financial statements.

In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842) - Targeted Improvements to provide entities with relief from the costs of implementing certain aspects of the new leasing standard, ASU No. 2016-02. Specifically, under the amendments in ASU 2018-11: (1) entities may elect not to recast the comparative periods presented when transitioning to the new leasing standard, and (2) lessors may elect to not separate non-lease components from leases when certain conditions are met. The amendments have the same effective date as ASU 2016-02 (October 1, 2019 for the Company). The Company expects to elect both transition options. ASU 2018-11 is not expected to have a material impact on the Company's consolidated financial statements.

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

For purchased financial assets with a more-than-insignificant amount of credit deterioration since origination (“PCD assets”) that are measured at amortized cost, an allowance for expected credit losses is recorded as an adjustment to the cost basis of the asset. Subsequent changes in estimated cash flows would be recorded as an adjustment to the allowance and through the statement of income.

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

The amendments in this ASU are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. For most debt securities, the transition approach requires a cumulative-effect adjustment to the statement of financial position as of the beginning of the first reporting period the guidance is effective. For other-than-temporarily impaired debt securities and PCD assets, the guidance will be applied prospectively. The Company is currently in the process of evaluating the impact of the amended guidance on its consolidated financial statements and the reserve for credit losses may increase upon adoption given that the allowance will be required to cover the full remaining expected life of the portfolio upon adoption, rather than the incurred loss model under current U.S. GAAP. The extent of this increase is still being evaluated and will depend on

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economic conditions and the composition of the Company’s loan, lease and held-to-maturity securities portfolios at the time of adoption.

In February 2016, the FASB issued ASU 2016-02, Leases. The ASU, as amended, requires lessees to recognize a lease liability, which is a lessee's obligation to make lease payments arising from a lease, and a right-of-use asset, which is an asset that represents the lessee's right to use, or control the use of, a specified asset for the lease term. The guidance also simplifies the accounting for sale and leaseback transactions and introduces new disclosure requirements for leasing arrangements. Accounting by lessors is largely unchanged. The amendments are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company will adopt the standard effective October 1, 2019. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. The Company leases a number of properties under non-cancelable operating leases which will be subject to this ASU. We do not expect a material impact to our Consolidated Statement of Operations as a result of this ASU. While the Company has not quantified the impact to its Consolidated Statement of Condition, the Company expects to recognize right-of-use assets and lease liabilities for substantially all of its operating lease commitments based on the present value of unpaid lease payments as of the date of adoption. For information on the Company's future minimum lease payments, refer to Note I Premises and Equipment in our Annual Report on Form 10-K for the year ended September 30, 2018.

NOTE C – Dividends and Share Repurchases

On May 24, 2019, the Company paid a regular dividend on common stock of $0.20 per share, which represented the 145^th consecutive quarterly cash dividend. Dividends per share were $0.20 and $0.17 for the quarters ended June 30, 2019 and 2018, respectively. On July 22, 2019, the Company declared a regular dividend on common stock of $0.21 per share, which represents its 146^th consecutive quarterly cash dividend. This dividend will be paid on August 23, 2019 to common shareholders of record on August 9, 2019.

For the three months ended June 30, 2019, the Company repurchased 1,056,460 shares at an average price of $32.45. As of June 30, 2019, there are 8,537,241 remaining shares authorized to be repurchased under the current Board approved share repurchase program.

NOTE D – Loans Receivable

The following table is a summary of loans receivable.

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	June 30, 2019				September 30, 2018
	(In thousands)				(In thousands)
Gross loans by category
Single-family residential	$	5,873,583	44.1	%	$	5,798,966	45.1	%
Construction	1,997,236		15.0		1,890,668		14.7
Construction - custom	570,897		4.3		624,479		4.9
Land - acquisition & development	203,086		1.5		155,204		1.2
Land - consumer lot loans	95,227		0.7		102,036		0.8
Multi-family	1,403,142		10.5		1,385,125		10.8
Commercial real estate	1,622,943		12.2		1,452,168		11.3
Commercial & industrial	1,256,398		9.4		1,140,874		8.9
HELOC	139,914		1.0		130,852		1.0
Consumer	142,317		1.1		173,306		1.3
Total gross loans	13,304,743		100	%	12,853,678		100	%
Less:
Allowance for loan losses	134,022				129,257
Loans in process	1,148,876				1,195,506
Net deferred fees, costs and discounts	47,312				51,834
Total loan contra accounts	1,330,210				1,376,597
Net loans	$	11,974,533			$	11,477,081

The following table sets forth information regarding non-accrual loans.



	June 30, 2019					September 30, 2018
	(In thousands, except ratio data)
Non-accrual loans:
Single-family residential	$	22,285		54.3	%	$	27,643		49.6	%
Construction	—			—		2,427			4.4
Construction - custom	1,161			2.8		—			—
Land - acquisition & development	173			0.4		920			1.7
Land - consumer lot loans	641			1.6		787			1.4
Multi-family	1,431			3.5		—			—
Commercial real estate	8,464			20.6		8,971			16.1
Commercial & industrial	6,047			14.7		14,394			25.8
HELOC	803			2.0		523			0.9
Consumer	—			—		21			—
Total non-accrual loans	$	41,005		100	%	$	55,686		100	%
% of total net loans	0.34		%			0.49		%

The Company recognized interest income on non-accrual loans of approximately $2,663,000 in the nine months ended June 30, 2019. Had these loans been on accrual status and performed according to their original contract terms, the Company would have recognized interest income of approximately $1,624,000 for the nine months ended June 30, 2019. Recognized interest income for the nine months ended June 30, 2019 was higher than what otherwise would have been collected in the period due to the

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collection of past due amounts. Interest cash flows collected on non-accrual loans vary from period to period as those loans are brought current or are paid off.

The following tables provide details regarding delinquent loans.



June 30, 2019	Loans Receivable		Days Delinquent Based on $ Amount of Loans										% based on $
Type of Loan	Net of Loans In Process		Current		30		60		90		Total Delinquent		% based on $
	(In thousands, except ratio data)
Single-family residential	$	5,872,750	$	5,846,159	$	6,290	$	5,081	$	15,220	$	26,591	0.45	%
Construction	1,168,667		1,168,667		—		—		—		—		—
Construction - custom	294,224		293,063		—		—		1,161		1,161		0.39
Land - acquisition & development	160,383		160,383		—		—		—		—		—
Land - consumer lot loans	95,150		93,829		813		173		335		1,321		1.39
Multi-family	1,403,120		1,401,689		—		—		1,431		1,431		0.10
Commercial real estate	1,622,944		1,618,544		289		1,535		2,576		4,400		0.27
Commercial & industrial	1,256,398		1,250,654		86		1,326		4,332		5,744		0.46
HELOC	139,914		138,400		743		183		588		1,514		1.08
Consumer	142,317		141,820		129		238		130		497		0.35
Total Loans	$	12,155,867	$	12,113,208	$	8,350	$	8,536	$	25,773	$	42,659	0.35	%
Delinquency %			99.65%		0.07%		0.07%		0.21%		0.35%



September 30, 2018	Loans Receivable		Days Delinquent Based on $ Amount of Loans										% based on $
Type of Loan	Net of Loans In Process		Current		30		60		90		Total Delinquent		% based on $
	(In thousands, except ratio data)
Single-family residential	$	5,798,353	$	5,768,253	$	7,983	$	3,562	$	18,555	$	30,100	0.52	%
Construction	1,062,855		1,060,428		—		—		2,427		2,427		0.23
Construction - custom	289,192		289,192		—		—		—		—		—
Land - acquisition & development	123,560		122,620		—		270		670		940		0.76
Land - consumer lot loans	101,908		101,294		144		117		353		614		0.60
Multi-family	1,385,103		1,385,103		—		—		—		—		—
Commercial real estate	1,452,169		1,448,946		316		1,767		1,140		3,223		0.22
Commercial & industrial	1,140,874		1,130,836		—		—		10,038		10,038		0.88
HELOC	130,852		129,510		567		469		306		1,342		1.03
Consumer	173,306		172,777		172		328		29		529		0.31
Total Loans	$	11,658,172	$	11,608,959	$	9,182	$	6,513	$	33,518	$	49,213	0.42	%
Delinquency %			99.58%		0.08%		0.06%		0.29%		0.42%

There are no loans greater than 90 days delinquent and still accruing interest as of either date.

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The following tables provide information related to loans restructured in a troubled debt restructuring ("TDR") during the periods presented.



	Three Months Ended June 30,
	2019					2018
		Pre-Modification		Post-Modification			Pre-Modification		Post-Modification
		Outstanding		Outstanding			Outstanding		Outstanding
	Number of	Recorded		Recorded		Number of	Recorded		Recorded
	Contracts	Investment		Investment		Contracts	Investment		Investment
		($ in thousands)					($ in thousands)
Troubled Debt Restructurings:
Single-family residential	3	$	619	$	619	5	$	714	$	714
HELOC	—	—		—		1	75		75
	3	$	619	$	619	6	$	789	$	789



	Nine Months Ended June 30,
	2019					2018
		Pre-Modification		Post-Modification			Pre-Modification		Post-Modification
		Outstanding		Outstanding			Outstanding		Outstanding
	Number of	Recorded		Recorded		Number of	Recorded		Recorded
	Contracts	Investment		Investment		Contracts	Investment		Investment
		($ in thousands)					($ in thousands)
Troubled Debt Restructurings:
Single-family residential	6	$	942	$	942	25	$	4,909	$	4,909
Land - consumer lot loans	1	40		40		—	—		—
Commercial & Industrial	—	—		—		3	7,256		7,256
HELOC	—	—		—		1	75		75
	7	$	982	$	982	29	$	12,240	$	12,240

The following tables provide information on payment defaults occurring during the periods presented where the loan had been modified in a TDR within 12 months of the payment default.



	Three Months Ended June 30,
	2019		2018
	Number of	Recorded	Number of	Recorded
	Contracts	Investment	Contracts	Investment
	($ in thousands)		($ in thousands)
Trouble Debt Restructurings That Subsequently Defaulted:
	None		None

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	Nine Months Ended June 30,
	2019			2018
	Number of	Recorded		Number of	Recorded
	Contracts	Investment		Contracts	Investment
	($ in thousands)			($ in thousands)
Trouble Debt Restructurings That Subsequently Defaulted:
Single-family residential	5	$	1,298	2	$	206
	5	$	1,298	2	$	206

Most loans restructured in TDRs are accruing and performing loans where the borrower has proactively approached the Company about modification due to temporary financial difficulties. As of June 30, 2019, 96.3% of the Company's $128,858,000 in TDRs were classified as performing. Each request for modification is individually evaluated for merit and likelihood of success. The concession granted in a loan modification is typically a payment reduction through a rate reduction of between 100 to 200 basis points for a specific term, usually six to twenty four months. Interest-only payments may also be approved during the modification period. Principal forgiveness is not an available option for restructured loans. As of June 30, 2019, single-family residential loans comprised 91.5% of TDRs.

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

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NOTE E – Allowance for Losses on Loans

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



Three Months Ended June 30, 2019	Beginning Allowance		Charge-offs			Recoveries		Provision & Transfers			Ending Allowance
	(In thousands)
Single-family residential	$	31,476	$	(65	)	$	47	$	56		$	31,514
Construction	33,396		—			—		661			34,057
Construction - custom	1,976		(339		)	—		247			1,884
Land - acquisition & development	9,734		(65		)	2,025		(2,306		)	9,388
Land - consumer lot loans	2,076		(215		)	—		171			2,032
Multi-family	7,394		—			—		(111		)	7,283
Commercial real estate	12,448		—			90		466			13,004
Commercial & industrial	30,574		(4,034		)	3,218		1,313			31,071
HELOC	1,082		—			1		4			1,087
Consumer	2,930		(34		)	307		(501		)	2,702
	$	133,086	$	(4,752	)	$	5,688	$	—		$	134,022



Three Months Ended June 30, 2018	Beginning Allowance		Charge-offs			Recoveries		Provision & Transfers			Ending Allowance
	(In thousands)
Single-family residential	$	34,144	$	(299	)	$	283	$	273		$	34,401
Construction	27,389		—			—		2,744			30,133
Construction - custom	2,081		—			—		(67		)	2,014
Land - acquisition & development	7,622		(12		)	2,699		(2,609		)	7,700
Land - consumer lot loans	2,853		(1		)	35		20			2,907
Multi-family	7,982		—			—		109			8,091
Commercial real estate	11,588		—			91		(100		)	11,579
Commercial & industrial	29,330		(3,317		)	433		1,069			27,515
HELOC	802		—			—		9			811
Consumer	3,785		(45		)	223		(448		)	3,515
	$	127,576	$	(3,674	)	$	3,764	$	1,000		$	128,666

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Nine Months Ended June 30, 2019	Beginning Allowance		Charge-offs			Recoveries		Provision & Transfers			Ending Allowance
	(In thousands)
Single-family residential	$	33,033	$	(238	)	$	586	$	(1,867	)	$	31,514
Construction	31,317		—			—		2,740			34,057
Construction - custom	1,842		(339		)	—		381			1,884
Land - acquisition & development	7,978		(65		)	5,107		(3,632		)	9,388
Land - consumer lot loans	2,164		(336		)	265		(61		)	2,032
Multi-family	8,329		—			—		(1,046		)	7,283
Commercial real estate	11,852		(339		)	860		631			13,004
Commercial & industrial	28,702		(4,499		)	3,276		3,592			31,071
HELOC	781		(1,086		)	45		1,347			1,087
Consumer	3,259		(506		)	784		(835		)	2,702
	$	129,257	$	(7,408	)	$	10,923	$	1,250		$	134,022



Nine Months Ended June 30, 2018	Beginning Allowance		Charge-offs			Recoveries		Provision & Transfers			Ending Allowance
	(In thousands)
Single-family residential	$	36,892	$	(1,049	)	$	615	$	(2,057	)	$	34,401
Construction	24,556		—			—		5,577			30,133
Construction - custom	1,944		(50		)	—		120			2,014
Land - acquisition & development	6,829		(12		)	7,278		(6,395		)	7,700
Land - consumer lot loans	2,649		(67		)	35		290			2,907
Multi-family	7,862		—			—		229			8,091
Commercial real estate	11,818		(36		)	92		(295		)	11,579
Commercial & industrial	28,524		(3,433		)	603		1,821			27,515
HELOC	855		(1		)	—		(43		)	811
Consumer	1,144		(217		)	785		1,803			3,515
	$	123,073	$	(4,865	)	$	9,408	$	1,050		$	128,666

The Company did not record any provision for loan losses for the three months ended June 30, 2019, compared to a $1,000,000 provision for loan losses for the three months ended June 30, 2018. A provision for loan losses of $250,000 and $50,000 was recorded for the nine months ended June 30, 2019 and June 30, 2018, respectively. Reserving for new loan originations as the loan portfolio grows has been largely offset by recoveries of previously charged-off loans. Recoveries, net of charge-offs, totaled $936,000 for the three months ended June 30, 2019, compared to net recoveries of $90,000 during the three months ended June 30, 2018. Recoveries, net of charge-offs, totaled $3,515,000 for the nine months ended June 30, 2019, compared to net recoveries of $4,543,000 during the nine months ended June 30, 2018.

Non-performing assets were $51,117,000, or 0.31% of total assets, at June 30, 2019, compared to $70,093,000, or 0.44% of total assets, at September 30, 2018. Non-accrual loans were $41,005,000 at June 30, 2019, compared to $55,686,000 at September 30, 2018. Delinquencies, as a percent of total loans, were 0.35% at June 30, 2019, compared to 0.42% at September 30, 2018.

The reserve for unfunded commitments was $6,250,000 as of June 30, 2019, which is a decrease from $7,250,000 at September 30, 2018.

Management believes the allowance for loan losses plus the reserve for unfunded commitments, totaling $140,272,000, or 1.05% of gross loans as of June 30, 2019, is sufficient to absorb estimated losses inherent in the portfolio of loans and unfunded commitments.

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



June 30, 2019	Loans Collectively Evaluated for Impairment						Loans Individually Evaluated for Impairment
	Allowance Allocation		Recorded Investment of Loans		Ratio		Allowance Allocation		Recorded Investment of Loans		Ratio
	(In thousands, except ratio data)						(In thousands, except ratio data)
Single-family residential	$	31,514	$	5,861,596	0.5	%	$	—	$	16,107	—	%
Construction	34,057		1,168,667		2.9		—		—		—
Construction - custom	1,884		293,063		0.6		—		1,161		—
Land - acquisition & development	9,371		160,210		5.8		17		173		9.8
Land - consumer lot loans	2,032		90,629		2.2		—		582		—
Multi-family	7,279		1,401,288		0.5		4		1,832		0.2
Commercial real estate	12,772		1,609,208		0.8		232		13,736		1.7
Commercial & industrial	30,993		1,250,289		2.5		78		6,155		1.3
HELOC	1,087		138,269		0.8		—		692		—
Consumer	2,702		142,210		1.9		—		—		—
	$	133,691	$	12,115,429	1.1	%	$	331	$	40,438	0.8	%



September 30, 2018	Loans Collectively Evaluated for Impairment						Loans Individually Evaluated for Impairment
	Allowance Allocation		Recorded Investment of Loans		Ratio		Allowance Allocation		Recorded Investment of Loans		Ratio
	(In thousands, except ratio data)						(In thousands, except ratio data)
Single-family residential	$	33,033	$	5,782,870	0.6	%	$	—	$	21,345	—	%
Construction	31,317		1,060,428		3.0		—		2,427		—
Construction - custom	1,842		289,192		0.6		—		—		—
Land - acquisition & development	7,969		122,639		6.5		9		920		1.0
Land - consumer lot loans	2,164		96,583		2.2		—		507		—
Multi-family	8,325		1,384,655		0.6		4		448		1.0
Commercial real estate	11,702		1,432,791		0.8		150		19,378		0.8
Commercial & industrial	28,348		1,126,438		2.5		354		14,437		2.5
HELOC	781		128,715		0.6		—		1,162		—
Consumer	3,259		173,181		1.9		—		56		—
	$	128,740	$	11,597,492	1.1	%	$	517	$	60,680	0.9	%

As of June 30, 2019, $133,691,000 of the allowance was calculated under the Company's general allowance methodology and the remaining $331,000 was specific reserves on loans deemed to be individually impaired. As of September 30, 2018, $128,740,000 of the allowance was calculated under the Company's general allowance methodology and the remaining $517,000 was specific reserves on loans deemed to be individually impaired.

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

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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 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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The following tables provide information on loans based on risk rating categories as defined above.



June 30, 2019	Internally Assigned Grade
	Pass			Special mention			Substandard			Doubtful			Loss			Total Gross Loans
	(In thousands, except ratio data)
Loan type
Single-family residential	$	5,846,169		$	—		$	27,414		$	—		$	—		$	5,873,583
Construction	1,997,236			—			—			—			—			1,997,236
Construction - custom	569,736			—			1,161			—			—			570,897
Land - acquisition & development	199,241			—			3,845			—			—			203,086
Land - consumer lot loans	94,413			—			814			—			—			95,227
Multi-family	1,395,316			—			7,826			—			—			1,403,142
Commercial real estate	1,590,337			2,771			29,835			—			—			1,622,943
Commercial & industrial	1,224,843			4,141			26,139			1,275			—			1,256,398
HELOC	139,112			—			802			—			—			139,914
Consumer	142,317			—			—			—			—			142,317
Total gross loans	$	13,198,720		$	6,912		$	97,836		$	1,275		$	—		$	13,304,743

Total grade as a % of total gross loans	99.20		%	0.05		%	0.74		%	0.01		%	—		%



September 30, 2018	Internally Assigned Grade
	Pass			Special mention			Substandard			Doubtful			Loss			Total Gross Loans
	(In thousands, except ratio data)
Loan type
Single-family residential	$	5,766,096		$	—		$	32,870		$	—		$	—		$	5,798,966
Construction	1,886,304			1,937			2,427			—			—			1,890,668
Construction - custom	624,479			—			—			—			—			624,479
Land - acquisition & development	152,984			—			2,220			—			—			155,204
Land - consumer lot loans	101,249			—			787			—			—			102,036
Multi-family	1,378,803			1,633			4,689			—			—			1,385,125
Commercial real estate	1,421,602			7,114			23,452			—			—			1,452,168
Commercial & industrial	1,093,405			16,513			30,956			—			—			1,140,874
HELOC	130,330			—			522			—			—			130,852
Consumer	173,285			—			21			—			—			173,306
Total gross loans	$	12,728,537		$	27,197		$	97,944		$	—		$	—		$	12,853,678

Total grade as a % of total gross loans	99.03		%	0.21		%	0.76		%	—		%	—		%

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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



June 30, 2019	Performing Loans				Non-Performing Loans
	Amount		% of Total Gross Loans		Amount		% of Total Gross Loans
	(In thousands, except ratio data)
Single-family residential	$	5,851,298	99.6	%	$	22,285	0.4	%
Construction	1,997,236		100.0		—		—
Construction - custom	569,736		99.8		1,161		0.2
Land - acquisition & development	202,913		99.9		173		0.1
Land - consumer lot loans	94,586		99.3		641		0.7
Multi-family	1,401,711		99.9		1,431		0.1
Commercial real estate	1,614,479		99.5		8,464		0.5
Commercial & industrial	1,250,351		99.5		6,047		0.5
HELOC	139,111		99.4		803		0.6
Consumer	142,317		100.0		—		—
	$	13,263,738	99.7	%	$	41,005	0.3	%



September 30, 2018	Performing Loans				Non-Performing Loans
	Amount		% of Total Gross Loans		Amount		% of Total Gross Loans
	(In thousands, except ratio data)
Single-family residential	$	5,771,323	99.5	%	$	27,643	0.5	%
Construction	1,888,241		99.9		2,427		0.1
Construction - custom	624,479		100.0		—		—
Land - acquisition & development	154,284		99.4		920		0.6
Land - consumer lot loans	101,249		99.2		787		0.8
Multi-family	1,385,125		100.0		—		—
Commercial real estate	1,443,197		99.4		8,971		0.6
Commercial & industrial	1,126,480		98.7		14,394		1.3
HELOC	130,329		99.6		523		0.4
Consumer	173,285		100.0		21		—
	$	12,797,992	99.6	%	$	55,686	0.4	%

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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



June 30, 2019	Recorded Investment		Unpaid Principal Balance		Related Allowance			Average Recorded Investment (Year-To-Date)
	(In thousands)
Impaired loans with no related allowance recorded:
Single-family residential	$	15,045	$	16,340	$	—		$	16,361
Construction	—		—		—			1,465
Construction - custom	1,257		1,257		—			314
Land - acquisition & development	78		143		—			343
Land - consumer lot loans	466		499		—			273
Multi-family	1,431		1,431		—			358
Commercial real estate	8,854		14,320		—			9,245
Commercial & industrial	5,715		9,904		—			8,682
HELOC	692		785		—			537
Consumer	—		35		—			17
	33,538		44,714		—			37,595
Impaired loans with an allowance recorded:
Single-family residential	117,967		120,785		2,165			129,459
Land - acquisition & development	95		153		—			101
Land - consumer lot loans	4,056		4,472		17			4,516
Multi-family	402		402		4			426
Commercial real estate	4,882		6,002		232			5,408
Commercial & industrial	440		529		78			3,063
HELOC	953		966		—			964
Consumer	62		62		—			66
	128,857		133,371		2,496		(1)	144,003
Total impaired loans:
Single-family residential	133,012		137,125		2,165			145,820
Construction	—		—		—			1,465
Construction - custom	1,257		1,257		—			314
Land - acquisition & development	173		296		—			444
Land - consumer lot loans	4,522		4,971		17			4,789
Multi-family	1,833		1,833		4			784
Commercial real estate	13,736		20,322		232			14,653
Commercial & industrial	6,155		10,433		78			11,745
HELOC	1,645		1,751		—			1,501
Consumer	62		97		—			83
	$	162,395	$	178,085	$	2,496	(1)	$	181,598


(1)	Includes $331,000 of specific reserves and $2,165,000 included in the general reserves.

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)



September 30, 2018	Recorded Investment		Unpaid Principal Balance		Related Allowance			Average Recorded Investment (Year-To-Date)
	(In thousands)
Impaired loans with no related allowance recorded:
Single-family residential	$	18,872	$	20,050	$	—		$	20,097
Construction	2,698		2,818		—			1,349
Construction - custom	—		—		—			74
Land - acquisition & development	814		814		—			572
Land - consumer lot loans	311		336		—			260
Multi-family	—		—		—			70
Commercial real estate	9,425		14,035		—			11,158
Commercial & industrial	10,137		10,146		—			9,208
HELOC	410		1,170		—			450
Consumer	20		56		—			54
	42,687		49,425		—			43,292
Impaired loans with an allowance recorded:
Single-family residential	139,796		143,099		2,871			161,729
Land - acquisition & development	107		157		—			39
Land - consumer lot loans	4,916		5,290		9			6,449
Multi-family	448		448		4			471
Commercial real estate	6,254		7,733		150			10,445
Commercial & industrial	4,291		7,506		354			4,495
HELOC	976		984		—			1,395
Consumer	70		70		—			83
	156,858		165,287		3,388		(1)	185,106
Total impaired loans:
Single-family residential	158,668		163,149		2,871			181,826
Construction	2,698		2,818		—			1,349
Construction - custom	—		—		—			74
Land - acquisition & development	921		971		—			611
Land - consumer lot loans	5,227		5,626		9			6,709
Multi-family	448		448		4			541
Commercial real estate	15,679		21,768		150			21,603
Commercial & industrial	14,428		17,652		354			13,703
HELOC	1,386		2,154		—			1,845
Consumer	90		126		—			137
	$	199,545	$	214,712	$	3,388	(1)	$	228,398


(1)	Includes $517,000 of specific reserves and $2,871,000 included in the general reserves.

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE F – Fair Value Measurements

FASB 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 as well as borrowings hedges using interest rate swaps. The fair value of these interest rate swaps are estimated by a third party pricing service using a discounted cash flow technique. These are considered a Level 2 input method.

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The following tables present the balance of assets and liabilities measured at fair value on a recurring basis.



	June 30, 2019
	Level 1		Level 2		Level 3		Total
	(In thousands)
Financial Assets
Available-for-sale securities:
U.S. government and agency securities	$	—	$	248,942	$	—	$	248,942
Municipal bonds	—		22,885		—		22,885
Corporate debt securities	—		208,707		—		208,707
Mortgage-backed securities
Agency pass-through certificates	—		1,027,403		—		1,027,403
Total available-for-sale securities	—		1,507,937		—		1,507,937
Interest rate contracts	—		13,912		—		13,912
Total financial assets	$	—	$	1,521,849	$	—	$	1,521,849

Financial Liabilities
Interest rate contracts	$	—	$	13,912	$	—	$	13,912
Commercial loan hedges	—		2,585		—		2,585
Borrowings hedges	—		4,442		—		4,442
Total financial liabilities	$	—	$	20,939	$	—	$	20,939

There were no transfers between, into and/or out of Levels 1, 2 or 3 during the nine months ended June 30, 2019.



	September 30, 2018
	Level 1		Level 2		Level 3		Total
	(In thousands)
Financial Assets
Available-for-sale securities:
Equity securities	$	488	$	—	$	—	$	488
U.S. government and agency securities	—		207,293		—		207,293
Municipal bonds	—		22,978		—		22,978
Corporate debt securities	—		184,695		—		184,695
Mortgage-backed securities
Agency pass-through certificates	—		896,041		—		896,041
Commercial MBS	—		3,462		—		3,462
Total available-for-sale securities	488		1,314,469		—		1,314,957
Interest rate contracts	—		12,731		—		12,731
Commercial loan hedges	—		3,857		—		3,857
Borrowings hedges	—		22,250		—		22,250
Total financial assets	$	488	$	1,353,307	$	—	$	1,353,795

Financial Liabilities
Interest rate contracts	$	—	$	12,731	$	—	$	12,731
Total financial liabilities	$	—	$	12,731	$	—	$	12,731

There were no transfers between, into and/or out of Levels 1, 2 or 3 during the fiscal year ended September 30, 2018.

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Measured on a Nonrecurring Basis

Impaired Loans & Real Estate Owned

Real estate owned ("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, but only up to the fair value of the real estate owned as of the initial transfer date less selling costs.

When management determines that the fair value of the collateral or the real estate owned requires additional adjustments, either as a result of an updated appraised value or when there is no observable market price, the Company classifies the impaired loan or real estate owned as Level 3. Level 3 assets recorded at fair value on a nonrecurring basis at June 30, 2019 included loans for which a specific reserve allowance was established or a partial charge-off was recorded based on the fair value of collateral, as well as real estate owned where the fair value of the property was less than the cost basis.

The following tables present the aggregated balance of assets that were measured at fair value on a nonrecurring basis at June 30, 2019 and June 30, 2018, and the total gains (losses) resulting from those fair value adjustments for the three and nine months ended June 30, 2019 and June 30, 2018. The estimated fair value measurements are shown gross of estimated selling costs.



	June 30, 2019								Three Months Ended June 30, 2019			Nine Months Ended June 30, 2019
	Level 1		Level 2		Level 3		Total		Total Gains (Losses)
	(In thousands)								(In thousands)
Impaired loans (1)	$	—	$	—	$	6,007	$	6,007	$	(4,383	)	$	(5,619	)
Real estate owned (2)	—		—		3,084		3,084		(5		)	394
Balance at end of period	$	—	$	—	$	9,091	$	9,091	$	(4,388	)	$	(5,225	)


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


(2)	The gains (losses) represent remeasurements of REO.



	June 30, 2018								Three Months Ended June 30, 2018			Nine Months Ended June 30, 2018
	Level 1		Level 2		Level 3		Total		Total Gains (Losses)
	(In thousands)								(In thousands)
Impaired loans (1)	$	—	$	—	$	15,125	$	15,125	$	(3,120	)	$	(4,094	)
Real estate owned (2)	—		—		6,354		6,354		(97		)	(656		)
Balance at end of period	$	—	$	—	$	21,479	$	21,479	$	(3,217	)	$	(4,750	)


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


(2)	The gains (losses) represent remeasurements of REO.

Impaired loans - The Company adjusts the carrying amount of impaired loans when there is evidence of probable loss and the expected fair value of the loan is less than its contractual amount. The amount of the impairment may be determined based on the estimated present value of future cash flows or the fair value of the underlying collateral. Impaired loans with a specific reserve allowance based on cash flow analysis or the value of the underlying collateral are classified as Level 3 assets.

The evaluations for impairment are prepared by the Company's Problem Loan Review Committee, which is chaired by the Chief Credit Officer and includes the Loan Review manager and Special Credits manager, as well as senior credit officers, division managers and group executives, as applicable. These evaluations are performed in conjunction with the quarterly allowance for loan loss process.

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Applicable loans included in the previous quarter's review are reevaluated and if their values are materially different from the prior quarter evaluation, the underlying information (loan balance and collateral value) are compared. Material differences are evaluated for reasonableness and discussions are held between the relationship manager and their division manager to understand the difference and determine if any adjustment is necessary.

The inputs are developed and substantiated on a quarterly basis, based on current borrower developments, market conditions and collateral values. The following methods are used to value impaired loans:

•

The fair value of the collateral, which may take the form of real estate or personal property, is based on internal estimates, field observations, assessments provided by third-party appraisers and other valuation models. The Company performs or reaffirms valuations of collateral-dependent impaired loans at least annually. Adjustments are made if management believes that more recent information is available and relevant with respect to the fair value of the collateral.


•	The present value of the expected future cash flows of the loans is used for measurement of non-collateral-dependent loans to test for impairment.

Real estate owned - When a loan is reclassified from loan status to real estate owned due to the Company taking possession of the collateral, a special credits officer, along with the special credits manager, obtains a valuation, which may include appraisals or third-party price opinions, which is used to establish the fair value of the underlying collateral. The determined fair value, less selling costs, becomes the carrying value of the REO asset.

The fair value of REO assets is re-evaluated quarterly and the REO asset is adjusted to reflect the fair value as necessary. After foreclosure, the valuations are updated periodically and current market conditions may require the assets to be written down further or up to the cost basis established on the date of transfer. The carrying balance of REO assets are also written down once a bona fide offer is contractually accepted, through execution of a purchase and sale agreement, where the accepted price is lower than the cost established on the transfer date.

Fair Values of Financial Instruments

FASB 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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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)



		June 30, 2019				September 30, 2018
	Level in Fair Value Hierarchy	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
		($ in thousands)
Financial assets
Cash and cash equivalents	1	$	289,828	$	289,828	$	268,650	$	268,650
Available-for-sale securities
Equity securities	1	—		—		488		488
U.S. government and agency securities	2	248,942		248,942		207,293		207,293
Municipal bonds	2	22,885		22,885		22,978		22,978
Corporate debt securities	2	208,707		208,707		184,695		184,695
Mortgage-backed securities
Agency pass-through certificates	2	1,027,403		1,027,403		896,041		896,041
Commercial MBS	2	—		—		3,462		3,462
Total available-for-sale securities		1,507,937		1,507,937		1,314,957		1,314,957
Held-to-maturity securities
Mortgage-backed securities
Agency pass-through certificates	2	1,493,175		1,496,671		1,610,420		1,533,742
Commercial MBS	2	15,000		15,008		15,000		15,028
Total held-to-maturity securities		1,508,175		1,511,679		1,625,420		1,548,770

Loans receivable	3	11,974,533		12,485,465		11,477,081		11,556,326
FHLB and FRB stock	2	134,190		134,190		127,190		127,190
Other assets - interest rate contracts	2	13,912		13,912		12,731		12,731
Other assets - commercial loan hedges	2	—		—		3,857		3,857
Other assets - borrowings hedges	2	—		—		22,250		22,250

Financial liabilities
Time deposit accounts	2	4,950,320		4,959,058		4,804,803		4,779,040
FHLB advances	2	2,505,000		2,531,425		2,330,000		2,316,964
Other liabilities - interest rate contracts	2	13,912		13,912		12,731		12,731
Other liabilities - commercial loan hedges	2	2,585		2,585		—		—
Other liabilities - borrowings hedges	2	4,442		4,442		—		—

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, a 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 commensurate with risk associated

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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 deposit accounts – The fair value of certificates of deposit 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 contracts – 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 fair value of these interest rate swaps is estimated by a third party pricing service using a discounted cash flow technique.

Commercial loan hedges – The fair value of the interest rate swaps is estimated by a third party pricing service using a discounted cash flow technique.

Borrowings hedges – The fair value of the interest rate swaps is estimated by a third party pricing service using a discounted cash flow technique.

The following tables provide a reconciliation of amortized cost to fair value of available-for-sale and held-to-maturity securities.



	June 30, 2019
	Amortized Cost		Gross Unrealized					Fair Value		Yield
	Amortized Cost		Gains		Losses			Fair Value		Yield
	($ in thousands)
Available-for-sale securities
U.S. government and agency securities due
5 to 10 years	$	68,503	$	3	$	(881	)	$	67,625	2.69	%
Over 10 years	182,384		20		(1,087		)	181,317		3.40
Corporate debt securities due
Within 1 year	33,867		413		—			34,280		3.95
1 to 5 years	80,000		599		(149		)	80,450		3.70
5 to 10 years	92,853		1,124		—			93,977		3.59
Municipal bonds due
1 to 5 years	1,422		12		—			1,434		1.93
Over 10 years	20,308		1,143		—			21,451		6.45
Mortgage-backed securities
Agency pass-through certificates	1,008,446		20,877		(1,920		)	1,027,403		3.36
	1,487,783		24,191		(4,037		)	1,507,937		3.33
Held-to-maturity securities
Mortgage-backed securities
Agency pass-through certificates	1,493,175		10,797		(7,301		)	1,496,671		3.16
Commercial MBS	15,000		8		—			15,008		3.26
	1,508,175		10,805		(7,301		)	1,511,679		3.16
	$	2,995,958	$	34,996	$	(11,338	)	$	3,019,616	3.29	%

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)



	September 30, 2018
	Amortized Cost		Gross Unrealized						Fair Value		Yield
	Amortized Cost		Gains		Losses				Fair Value		Yield
	($ in thousands)
Available-for-sale securities
U.S. government and agency securities due
5 to 10 years	$	60,872	$	—		$	(1,473	)	$	59,399	2.55	%
Over 10 years	148,099		109			(314		)	147,894		3.05
Equity securities
1 to 5 years	500		—			(12		)	488		1.80
Corporate bonds due
1 to 5 years	113,762		1,875			(13		)	115,624		3.59
5 to 10 years	69,965		35			(929		)	69,071		3.23
Municipal bonds due
1 to 5 years	1,398		—			(24		)	1,374		2.05
Over 10 years	20,323		1,281			—			21,604		6.45
Mortgage-backed securities
Agency pass-through certificates	908,092		1,383			(13,434		)	896,041		3.29
Commercial MBS	3,460		2			—			3,462		4.36
	1,326,471		4,685			(16,199		)	1,314,957		3.30
Held-to-maturity securities
Mortgage-backed securities
Agency pass-through certificates	1,610,420		305			(76,983		)	1,533,742		3.16
Other Commercial MBS	15,000		28			—			15,028		3.03
	1,625,420		333			(76,983		)	1,548,770		3.16
	$	2,951,891	$	5,018		$	(93,182	)	$	2,863,727	3.22	%

For available-for-sale investment securities, there were sales totaling $491,000 during the nine months ended June 30, 2019 and no sales during the nine months ended June 30, 2018. There were purchases of $327,670,000 of available-for-sale investment securities during the nine months ended June 30, 2019 and purchases of $166,696,000 during the nine months ended June 30, 2018. For held-to-maturity investment securities, there were no purchases during the nine months ended June 30, 2019 and purchases of $170,836,000 during the nine months ended June 30, 2018. There were no sales of held-to-maturity investment securities during either period. Substantially all of the agency mortgage-backed securities have contractual due dates that exceed 10 years.

The following tables show the unrealized gross losses and fair value of securities as of June 30, 2019 and September 30, 2018, by length of time that individual securities in each category have been in a continuous loss position. The decline in fair value since purchase is attributable to changes in interest rates. Because the Company does not intend to sell these securities and does not consider it more likely than not that it will be required to sell these securities before the recovery of amortized cost basis, which may be upon maturity, the Company does not consider these investments to be other than temporarily impaired.

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)



June 30, 2019	Less than 12 months					12 months or more					Total
	Unrealized Gross Losses			Fair Value		Unrealized Gross Losses			Fair Value		Unrealized Gross Losses			Fair Value
	(In thousands)
Corporate debt securities	$	—		$	—	$	(149	)	$	49,851	$	(149	)	49,851
U.S. government and agency securities	(158		)	63,483		(1,809		)	145,522		(1,967		)	209,005
Mortgage-backed securities	(98		)	94,553		(9,124		)	990,089		(9,222		)	1,084,642
	$	(256	)	$	158,036	$	(11,082	)	$	1,185,462	$	(11,338	)	$	1,343,498



September 30, 2018	Less than 12 months					12 months or more					Total
	Unrealized Gross Losses			Fair Value		Unrealized Gross Losses			Fair Value		Unrealized Gross Losses			Fair Value
	(In thousands)
Corporate debt securities	$	(929	)	$	49,072	$	(14	)	$	24,988	$	(943	)	$	74,060
Municipal bonds due	(24		)	1,374		—			—		(24		)	1,374
U.S. government and agency securities	(141		)	37,565		(1,645		)	76,499		(1,786		)	114,064
Equity securities	(12		)	488		—			—		(12		)	488
Mortgage-backed securities	(28,748		)	1,035,754		(61,669		)	1,183,017		(90,417		)	2,218,771
	$	(29,854	)	$	1,124,253	$	(63,328	)	$	1,284,504	$	(93,182	)	$	2,408,757

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE G – Derivatives and Hedging Activities

On October 1, 2018, the Company early adopted ASU 2017-12, Targeted Improvements to Accounting for Hedge Activities. This standard primarily impacts the accounting for derivatives designated as fair value and cash flow accounting hedges.

The following tables present the fair value, notional amount and balance sheet classification of derivative assets and liabilities at June 30, 2019 and September 30, 2018.



June 30, 2019	Derivative Assets					Derivative Liabilities
	Balance Sheet Location	Notional		Fair Value		Balance Sheet Location	Notional		Fair Value
	(In thousands)					(In thousands)
Client swap program	Other assets	$	429,310	$	13,912	Other liabilities	$	429,310	$	13,912
Commercial loan fair value hedges	Other assets	—		—		Other liabilities	95,645		2,585
Borrowings cash flow hedges	Other assets	—		—		Other liabilities	700,000		4,442
		$	429,310	$	13,912		$	1,224,955	$	20,939



September 30, 2018	Derivative Assets					Derivative Liabilities
Interest rate contract purpose	Balance Sheet Location	Notional		Fair Value		Balance Sheet Location	Notional		Fair Value
	(In thousands)					(In thousands)
Client swap program	Other assets	$	395,396	$	12,731	Other liabilities	$	395,396	$	12,731
Commercial loan fair value hedges	Other assets	97,927		3,857		Other liabilities	—		—
Borrowings cash flow hedges	Other assets	700,000		22,250		Other liabilities	—		—
		$	1,193,323	$	38,838		$	395,396	$	12,731

The Company enters into interest rate swaps to hedge the interest rate risk of individual fixed rate commercial loans and these relationships qualify as fair value hedges under ASC 815, which provides for offsetting of the recognition of gains and losses of the respective interest rate swap and the hedged item. Gains and losses on the 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 table presents the impact of fair value hedge accounting on the carrying value of the hedged items (fixed rate commercial loans) at June 30, 2019.



(In thousands)	June 30, 2019
Balance sheet line item in which hedged item is recorded	Carrying value of hedged items		Cumulative gain (loss) fair value hedge adjustment included in carrying amount of hedged items
Loans receivable	$	93,271	$	(2,585	)
	$	93,271	$	(2,585	)

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

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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 June 30, 2019, the maturities for hedges of adjustable rate borrowings ranged from one to seven years, with the weighted average being 2.9 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 June 30,
Amount of gain/(loss) recognized in AOCI on derivatives in cash flow hedging relationships	2019
Interest rate contracts:
Pay fixed/receive floating swaps on cash flow hedges of borrowings	$	(10,043	)
Total pre-tax gain/(loss) recognized in AOCI	$	(10,043	)



(In thousands)	Nine Months Ended June 30,
Amount of gain/(loss) recognized in AOCI on derivatives in cash flow hedging relationships	2019
Interest rate contracts:
Pay fixed/receive floating swaps on cash flow hedges of borrowings	$	(26,692	)
Total pre-tax gain/(loss) recognized in AOCI	$	(26,692	)

The following table presents the gains/(losses) on derivative instruments in fair value and cash flow accounting hedging relationships under ASC 815 for the period presented.



Three Months Ended June 30, 2019	Interest income on loans receivable			Interest expense on FHLB advances
	(In thousands)
Interest income/(expense), including the effects of fair value and cash flow hedges	$	145,490		$	(17,829	)

Gain/(loss) on fair value hedging relationships:
Interest rate contracts
Amounts related to interest settlements on derivatives	$	50
Recognized on derivatives	(2,491		)
Recognized on hedged items	2,489
Net income/(expense) recognized on fair value hedges	$	48

Gain/(loss) on cash flow hedging relationships:
Interest rate contracts
Amounts related to interest settlements on derivatives				$	(817	)
Amount of derivative gain/(loss) reclassified from AOCI into interest income/expense				—
Net income/(expense) recognized on cash flow hedges				$	(817	)

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)



Nine Months Ended June 30, 2019	Interest income on loans receivable			Interest expense on FHLB advances
	(In thousands)
Interest income/(expense), including the effects of fair value and cash flow hedges	$	423,616		$	(52,566	)

Gain/(loss) on fair value hedging relationships:
Interest rate contracts
Amounts related to interest settlements on derivatives	$	127
Recognized on derivatives	(6,409		)
Recognized on hedged items	6,369
Net income/(expense) recognized on fair value hedges	$	87

Gain/(loss) on cash flow hedging relationships:
Interest rate contracts
Amounts related to interest settlements on derivatives				$	(2,222	)
Amount of derivative gain/(loss) reclassified from AOCI into interest income/expense				—
Net income/(expense) recognized on cash flow hedges				$	(2,222	)

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 FASB ASC 815, Derivatives and Hedging, with changes in fair value recorded in earnings. There was no net impact to the statement of operations for the nine months ended June 30, 2019 and 2018 as the changes in fair value of the receive fixed swap and pay fixed swap offset each other.

The following table presents 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 June 30,
Derivative instruments	Classification of gain/(loss) recognized in income on derivative instrument	2019
Interest rate contracts:
Pay fixed/receive floating swap	Other noninterest income	$	(11,091	)
Receive fixed/pay floating swap	Other noninterest income	11,091
		$	—



(In thousands)		Nine Months Ended June 30,
Derivative instruments	Classification of gain/(loss) recognized in income on derivative instrument	2019
Interest rate contracts:
Pay fixed/receive floating swap	Other noninterest income	$	(26,643	)
Receive fixed/pay floating swap	Other noninterest income	26,643
		$	—

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE H – Revenue from Contracts with Customers

On October 1, 2018, the Company adopted ASU No. 2014-09, Revenue from Contracts with Customers ("ASC 606"). Since net interest income on financial assets and liabilities is excluded from this guidance, a significant majority of our revenues are not subject to the new guidance.

Revenue streams that are within the scope of the new guidance are presented within noninterest 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. For the nine months ended June 30, 2019, in scope revenue streams represented approximately 5.0% of our total revenues. 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 noninterest income within the scope of the new 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, 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.

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

PART I – Financial Information

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

FORWARD LOOKING STATEMENTS

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

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


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


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


•	the effects of and changes in monetary and fiscal policies of the Board of Governors of the Federal Reserve System and the U.S. Government;


•	fluctuations in interest rate risk and changes in market interest rates;


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


•	the Company's ability to successfully complete merger and acquisition activities and realize expected strategic and operating efficiencies associated with such activities;


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

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


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


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

•

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


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


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

All forward-looking statements speak only as of the date on which such statements are made, and the Company undertakes no obligation to update or revise any forward-looking statements to reflect changed assumptions, the occurrence of 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, Inc. is a bank holding company headquartered in Seattle, Washington that conducts its operations through Washington Federal Bank, National Association (“Bank”), a federally chartered national bank subsidiary. Washington Federal,

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

Inc. and its consolidated subsidiaries are 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.

The Company's fiscal year end is September 30^th. All references to 2018 represent balances as of September 30, 2018 or activity for the fiscal year then ended.

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 58% of total deposits as of June 30, 2019 while the composition of the investment securities portfolio is 24% variable and 76% fixed rate. When interest rates rise, the fair value of the investment securities with fixed rates will decrease and vice versa when interest rates decline. The Company has $1,508,175,000 of mortgage-backed securities that it has designated as held-to-maturity and are carried at amortized cost. As of June 30, 2019, the net unrealized gain on these securities was $3,504,000. The Company has $1,507,937,000 of available-for-sale securities that are carried at fair value. As of June 30, 2019, the net unrealized gain on these securities was $20,154,000. The Company has executed interest rate swaps to hedge interest rate risk on certain FHLB borrowings. The unrealized loss on these interest rate swaps as of June 30, 2019 was $4,442,000. All of the above are pre-tax net unrealized gains or losses.

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

Net Interest Income Sensitivity. The Company estimates the sensitivity of its net interest income to changes in market interest rates using an interest rate simulation model that includes assumptions related to the level of balance sheet growth, deposit repricing characteristics and the rate of prepayments for multiple interest rate change scenarios. Interest rate sensitivity depends on certain repricing characteristics in the Company's interest-earnings 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.

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 decrease by 1.7% in the next year. This compares to an estimated decrease of 2.3% as of the September 30, 2018 analysis. The change is primarily due to fluctuating interest rates and the impact to expected prepayment speeds as well as and shifts in the mix of fixed versus adjustable rate assets and updated deposit betas used for transaction deposits in the Company's asset liability management model. Management estimates that a gradual increase of 300 basis points in short term rates and 100 basis points in long term rates over two years would result in a net interest income decrease of 1.1% in the first year and decrease of 5.1% in the second year assuming a constant balance sheet and no management intervention.

NPV Sensitivity. NPV is an estimate of the market value of shareholders' equity. NPV is calculated as the difference between the present value of expected cash flows from interest-earning assets and the present value of expected cash flows from interest-paying liabilities and off-balance-sheet contracts. The sensitivity of NPV to changes in interest rates provides a view of interest rate risk as it incorporates all future expected cash flows. As of June 30, 2019, in the event of an immediate and parallel increase of 200 basis points in interest rates, the NPV is estimated to decline by $410,329,000 or 17.3% and the NPV to total assets ratio to decline to 12.6% from a base of 14.2%. As of September 30, 2018, the NPV in the event of a 200 basis point increase in rates was estimated to decline by $452,713,000 or 20.5% and the NPV to total assets ratio to decline to 12.1% from a base of 14.2%. The change in NPV sensitivity is due primarily to fluctuating interest rates that have impacted asset prices as well as sensitivity to expected prepayment speeds on fixed rate loans and mortgage-backed securities as of June 30, 2019.

Interest Rate Spread. The interest rate spread is measured as the difference between the rate on total loans and investments and the rate on costing liabilities at the end of each period. The interest rate spread decreased to 2.82% at June 30, 2019 from 2.90% at September 30, 2018. The spread decrease of 8 basis points is primarily due to the rise in short-term interest rates, which resulted in a higher rate being paid on interest-bearing deposits partially offset by a lower rate paid on short-term FHLB borrowings and a higher rate being earned on cash and adjustable rate loans and investment securities. As of June 30, 2019, the weighted average rate on earning assets increased by 14 basis points to 4.21% compared to September 30, 2018, while the weighted average rate being paid on interest-bearing deposits increased by 26 basis points to 1.13% and the overall cost of funds increased by 22 basis points to 1.39%. The interest rate spread decreased to 2.82% at June 30, 2019 from 2.93% at June 30, 2018 due to the same factors described above.

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

Net Interest Margin. Net interest margin is measured as net interest income divided by average earning assets for the period. Net interest margin decreased to 3.18% for the quarter ended June 30, 2019 from 3.29% for the quarter ended June 30, 2018. The yield on earning assets increased 24 basis points to 4.50% and the cost of interest bearing liabilities increased 36 basis points to 1.40% over that same period. The higher yield on earning assets is the result of the rise in short-term interest rates, which resulted in a higher rate being earned on cash and adjustable rate loans and investment securities, as well as the shift in mix from investment securities into a higher proportion of loans receivable that carry higher yields on average. The higher rate in interest bearing liabilities was primarily due to the increase in rates on interest-bearing deposits and short-term FHLB advances partially offset by the maturity of certain long-term FHLB advances with higher rates.

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



	Three Months Ended June 30, 2019						Three Months Ended June 30, 2018
	Average Balance		Interest		Average Rate		Average Balance		Interest		Average Rate
	($ in thousands)						($ in thousands)
Assets
Loans receivable	$	11,925,478	$	145,490	4.89	%	$	11,322,932	$	131,541	4.66	%
Mortgaged-backed securities	2,563,070		18,719		2.93		2,550,004		18,022		2.83
Cash & Investments	696,640		5,956		3.43		584,918		4,077		2.80
FHLB & FRB stock	138,144		1,661		4.82		135,313		1,432		4.24
Total interest-earning assets	15,323,332		171,826		4.50	%	14,593,167		155,072		4.26	%
Other assets	1,139,374						1,154,328
Total assets	$	16,462,706					$	15,747,495

Liabilities and Equity
Customer accounts	$	11,724,841	$	32,331	1.11	%	$	11,075,998	$	18,887	0.68	%
FHLB advances	2,603,846		17,829		2.75		2,533,077		16,333		2.59
Total interest-bearing liabilities	14,328,687		50,160		1.40	%	13,609,075		35,220		1.04	%
Other liabilities	117,299						142,557
Total liabilities	14,445,986						13,751,632
Stockholders' equity	2,016,720						1,995,863
Total liabilities and equity	$	16,462,706					$	15,747,495
Net interest income			$	121,666					$	119,852
Net interest margin (NIM)					3.18	%					3.29	%

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES



	Nine Months Ended June 30, 2019						Nine Months Ended June 30, 2018
	Average Balance		Interest		Average Rate		Average Balance		Interest		Average Rate
	($ in thousands)						($ in thousands)
Assets
Loans receivable	$	11,763,084	$	423,616	4.81	%	$	11,148,291	$	382,581	4.59	%
Mortgaged-backed securities	2,576,494		57,254		2.97		2,554,324		52,588		2.75
Cash & Investments	667,378		16,230		3.25		574,564		11,017		2.56
FHLB & FRB stock	136,342		4,930		4.83		130,913		3,745		3.82
Total interest-earning assets	15,143,298		502,030		4.43	%	14,408,092		449,931		4.18	%
Other assets	1,154,381						1,153,944
Total assets	$	16,297,679					$	15,562,036

Liabilities and Equity
Customer accounts	$	11,587,427	$	88,576	1.02	%	$	10,971,247	$	49,939	0.61	%
FHLB advances	2,558,791		52,566		2.75		2,423,077		47,104		2.60
Other borrowings	—		—		—		11		—		—
Total interest-bearing liabilities	14,146,218		141,142		1.33	%	13,394,335		97,043		0.97	%
Other liabilities	147,626						160,581
Total liabilities	14,293,844						13,554,916
Stockholders' equity	2,003,835						2,007,120
Total liabilities and equity	$	16,297,679					$	15,562,036
Net interest income			$	360,888					$	352,888
Net interest margin (NIM)					3.18	%					3.27	%

As of June 30, 2019, total assets had increased by $602,801,000 to $16,468,525,000 from $15,865,724,000 at September 30, 2018. During the nine months ended June 30, 2019, cash and cash equivalents increased by $21,178,000, loans receivable increased $497,452,000, and investment securities increased by $75,735,000.

Cash and cash equivalents of $289,828,000 and stockholders’ equity of $2,012,734,000 as of June 30, 2019 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.

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

The Bank has entered into borrowing agreements with the FHLB to borrow funds under a short-term floating rate cash management advance program and fixed-rate term loan agreements. All borrowings are secured by stock of the FHLB, deposits with the FHLB, and a blanket pledge of qualifying loans receivable as provided in the agreements with the FHLB. The Bank is also eligible to borrow under the Federal Reserve Bank's primary credit program.

The Company's cash and cash equivalents totaled $289,828,000 at June 30, 2019, an increase from $268,650,000 at September 30, 2018. These amounts include the Bank's operating cash.

The Company’s shareholders' equity at June 30, 2019 was $2,012,734,000, or 12.22% of total assets. This is an increase of $15,826,000 from September 30, 2018 when net worth was $1,996,908,000, or 12.59% of total assets. The Company’s shareholders'

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equity was impacted in the nine months ended June 30, 2019 by net income of $157,894,000, the payment of $46,749,000 in cash dividends, treasury stock purchases of $103,935,000, as well as other comprehensive income of $3,843,000. The ratio of tangible capital to tangible assets at June 30, 2019 was 10.54%. Management believes the Company's strong net worth position allows it to manage balance sheet risk and provide the capital support needed for controlled growth in a regulated environment.

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

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

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



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

June 30, 2019
Common Equity Tier I risk-based capital ratio:
The Company	$	1,692,430	14.17	%	4.50	%	NA
The Bank	1,667,350		13.97	%	4.50	%	6.50	%
Tier I risk-based capital ratio:
The Company	1,692,430		14.17	%	6.00	%	NA
The Bank	1,667,350		13.97	%	6.00	%	8.00	%
Total risk-based capital ratio:
The Company	1,832,702		15.35	%	8.00	%	NA
The Bank	1,807,621		15.14	%	8.00	%	10.00	%
Tier 1 Leverage ratio:
The Company	1,692,430		10.47	%	4.00	%	NA
The Bank	1,667,350		10.32	%	4.00	%	5.00	%

September 30, 2018
Common Equity Tier 1 risk-based capital ratio:
The Company	$	1,678,475	14.71	%	4.50	%	NA
The Bank	1,661,628		14.55	%	4.50	%	6.50	%
Tier I risk-based capital ratio:
The Company	1,678,475		14.71	%	6.00	%	NA
The Bank	1,661,628		14.55	%	6.00	%	8.00	%
Total risk-based capital ratio:
The Company	1,814,981		15.91	%	8.00	%	NA
The Bank	1,798,135		15.75	%	8.00	%	10.00	%
Tier 1 Leverage ratio:
The Company	1,678,475		10.85	%	4.00	%	NA
The Bank	1,661,628		10.74	%	4.00	%	5.00	%

CHANGES IN FINANCIAL CONDITION

Cash and cash equivalents: Cash and cash equivalents are $289,828,000 at June 30, 2019, an increase of $21,178,000, or 7.9%, since September 30, 2018.

Available-for-sale and held-to-maturity investment securities: Available-for-sale securities increased $192,980,000, or 14.7%, during the nine months ended June 30, 2019, mostly due to purchases of $327,670,000 and an increase to net unrealized gain of $31,677,000, partially offset by principal repayments and maturities of $164,295,000. During the same period, the balance of held-to-maturity securities decreased by $117,245,000 primarily due to principal pay-downs and maturities of $114,678,000. As of June 30, 2019, the Company had a net unrealized gain on available-for-sale securities of $20,154,000, which is included on a net of tax basis in accumulated other comprehensive income (loss).

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Loans receivable: Loans receivable, net of related contra accounts, increased by $497,452,000 to $11,974,533,000 at June 30, 2019, compared to $11,477,081,000 at September 30, 2018. The increase resulted primarily from originations of $3,045,756,000 partially offset by loan principal repayments of $2,574,363,000. Commercial loan originations accounted for 73% of total originations and consumer loan originations were 27% during the period. The increase in the loan portfolio is consistent with management's strategy during low rate environments to produce more construction, multifamily, commercial real estate, and commercial and industrial loans that generally have adjustable interest rates or a shorter duration.

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



	June 30, 2019				September 30, 2018				Change
	($ in thousands)				($ in thousands)				$			%
Gross loans by category
Single-family residential	$	5,873,583	44.1	%	$	5,798,966	45.1	%	$	74,617		1.3	%
Construction	1,997,236		15.0		1,890,668		14.7		106,568			5.6
Construction - custom	570,897		4.3		624,479		4.9		(53,582		)	(8.6	)
Land - acquisition & development	203,086		1.5		155,204		1.2		47,882			30.9
Land - consumer lot loans	95,227		0.7		102,036		0.8		(6,809		)	(6.7	)
Multi-family	1,403,142		10.5		1,385,125		10.8		18,017			1.3
Commercial real estate	1,622,943		12.2		1,452,168		11.3		170,775			11.8
Commercial & industrial	1,256,398		9.4		1,140,874		8.9		115,524			10.1
HELOC	139,914		1.0		130,852		1.0		9,062			6.9
Consumer	142,317		1.1		173,306		1.3		(30,989		)	(17.9	)
Total gross loans	13,304,743		100	%	12,853,678		100	%	451,065			3.5	%
Less:
Allowance for loan losses	134,022				129,257				4,765			3.7	%
Loans in process	1,148,876				1,195,506				(46,630		)	(3.9	)
Net deferred fees, costs and discounts	47,312				51,834				(4,522		)	(8.7	)
Total loan contra accounts	1,330,210				1,376,597				(46,387		)	(3.4	)
Net Loans	$	11,974,533			$	11,477,081			$	497,452		4.3	%

Non-performing assets: Non-performing assets decreased $18,976,000 during the nine months ended June 30, 2019 to $51,117,000 from $70,093,000 at September 30, 2018. The change is due to a $14,681,000 decrease in non-accrual loans and $4,295,000 decline in real estate owned ("REO"). Non-performing assets as a percentage of total assets was 0.31% at June 30, 2019 compared to 0.44% at September 30, 2018.

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



	June 30, 2019					September 30, 2018
	($ in thousands)
Restructured loans:
Single-family residential	$	117,968		91.5	%	$	139,797		89.1	%
Land - acquisition & development	95			0.1		107			0.1
Land - consumer lot loans	4,056			3.1		4,916			3.1
Multi - family	402			0.3		448			0.3
Commercial real estate	4,882			3.8		6,254			4.0
Commercial & industrial	440			0.3		4,290			2.7
HELOC	953			0.7		976			0.6
Consumer	62			—		70			—
Total restructured loans (1)	$	128,858		100	%	$	156,858		100	%
Non-accrual loans:
Single-family residential	$	22,285		54.3	%	$	27,643		49.6	%
Construction	—			—		2,427			4.4
Construction - custom	1,161			2.8		—			—
Land - acquisition & development	173			0.4		920			1.7
Land - consumer lot loans	641			1.6		787			1.4
Multi-family	1,431			3.5		—			—
Commercial real estate	8,464			20.6		8,971			16.1
Commercial & industrial	6,047			14.7		14,394			25.8
HELOC	803			2.0		523			0.9
Consumer	—			—		21			—
Total non-accrual loans	41,005			100	%	55,686			100	%
Real estate owned	7,003					11,298
Other property owned	3,109					3,109
Total non-performing assets	$	51,117				$	70,093
Total non-performing assets and performing restructured loans as a percentage of total assets	1.06		%			1.39		%
Total Assets
(1) Restructured loans were as follows:
Performing	$	124,108		96.3	%	$	150,667		96.1	%
Non-performing (included in non-accrual loans above)	4,750			3.7		6,191			3.9
	$	128,858		100	%	$	156,858		100	%

For the nine months ended June 30, 2019, the Company recognized $2,663,000 in interest income on cash payments received from borrowers on non-accrual loans. The Company would have recognized interest income of $1,624,000 for the same period had these loans performed according to their original contract terms. Recognized interest income for the nine months ended June 30, 2019 was higher than what otherwise would have been collected 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 $65,267,000 of loans that were less than 90 days delinquent at June 30, 2019 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 1.46% at June 30, 2019.

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.

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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 91.5% of restructured loans as of June 30, 2019. 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 general reserve calculation. Any modified loan that re-defaults and is charged-off would impact the historical loss factors component of the Company's general reserve calculation.

Allowance for loan losses: The following table shows the Company’s allowance for loan losses by loan category.



June 30, 2019	Loans Collectively Evaluated for Impairment						Loans Individually Evaluated for Impairment
	Allowance Allocation		Recorded Investment of Loans		Ratio		Allowance Allocation		Recorded Investment of Loans		Ratio
	($ in thousands)						($ in thousands)
Single-family residential	$	31,514	$	5,861,596	0.5	%	$	—	$	16,107	—	%
Construction	34,057		1,168,667		2.9		—		—		—
Construction - custom	1,884		293,063		0.6		—		1,161		—
Land - acquisition & development	9,371		160,210		5.8		17		173		9.8
Land - consumer lot loans	2,032		90,629		2.2		—		582		—
Multi-family	7,279		1,401,288		0.5		4		1,832		0.2
Commercial real estate	12,772		1,609,208		0.8		232		13,736		1.7
Commercial & industrial	30,993		1,250,289		2.5		78		6,155		1.3
HELOC	1,087		138,269		0.8		—		692		—
Consumer	2,702		142,210		1.9		—		—		—
	$	133,691	$	12,115,429	1.1	%	$	331	$	40,438	0.8	%

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September 30, 2018	Loans Collectively Evaluated for Impairment						Loans Individually Evaluated for Impairment
	Allowance Allocation		Recorded Investment of Loans		Ratio		Allowance Allocation		Recorded Investment of Loans		Ratio
	($ in thousands)						($ in thousands)
Single-family residential	$	33,033	$	5,782,870	0.6	%	$	—	$	21,345	—	%
Construction	31,317		1,060,428		3.0		—		2,427		—
Construction - custom	1,842		289,192		0.6		—		—		—
Land - acquisition & development	7,969		122,639		6.5		9		920		1.0
Land - consumer lot loans	2,164		96,583		2.2		—		507		—
Multi-family	8,325		1,384,655		0.6		4		448		1.0
Commercial real estate	11,702		1,432,791		0.8		150		19,378		0.8
Commercial & industrial	28,348		1,126,438		2.5		354		14,437		2.5
HELOC	781		128,715		0.6		—		1,162		—
Consumer	3,259		173,181		1.9		—		56		—
	$	128,740	$	11,597,492	1.1	%	$	517	$	60,680	0.9	%

Reserve for losses on unfunded commitments: Unfunded commitments tend to vary depending on the Company's loan mix and the proportionate share of commercial loans. The balance of unfunded commitments was $2,252,249,000 and $2,180,162,000 at June 30, 2019 and September 30, 2018, respectively. The Company estimates losses on off-balance-sheet credit exposures by allocating a loss percentage derived from historical loss factors for each asset class. The reserve for unfunded commitments was $6,250,000 as of June 30, 2019, which is a decrease from $7,250,000 at September 30, 2018.

Management believes the allowance for loan losses plus the reserve for unfunded commitments, totaling $140,272,000, or 1.05% of gross loans, is sufficient to absorb estimated losses inherent in the portfolio of loans and unfunded commitments. See Note E for further discussion and analysis of the allowance for loan losses as of and for the period ended June 30, 2019.

Real estate owned: REO decreased during the nine months ended June 30, 2019 by $4,295,000 to $7,003,000, primarily due to sales of REO properties during the period.

Intangible assets: Intangible assets decreased to $309,757,000 as of June 30, 2019 from $311,286,000 as of September 30, 2018. The decrease was due to amortization of finite-lived intangible assets.

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Customer accounts: Customer accounts increased $413,024,000, or 3.6%, to $11,800,170,000 at June 30, 2019 compared with $11,387,146,000 at September 30, 2018.

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



	June 30, 2019						September 30, 2018
	Deposit Account Balance		As a % of Total Deposits		Weighted Average Rate		Deposit Account Balance		As a % of Total Deposits		Weighted Average Rate
($ in thousands)
Non-interest checking	$	1,454,503	12.3	%	—	%	$	1,401,226	12.3	%	—	%
Interest checking	1,963,698		16.6		0.76		1,778,520		15.6		0.50
Savings	771,473		6.5		0.14		836,501		7.3		0.11
Money market	2,660,176		22.5		0.87		2,566,096		22.5		0.65
Time deposits	4,950,320		42.0		1.91		4,804,803		42.2		1.50
Total	$	11,800,170	100	%	1.13	%	$	11,387,146	100	%	0.87	%

FHLB advances and other borrowings: Total borrowings increased to $2,505,000,000 as of June 30, 2019 from $2,330,000,000 as of September 30, 2018. The weighted average rate for FHLB borrowings was 2.58% as of June 30, 2019 and 2.66% at September 30, 2018. The decrease being due to lower rates on new FHLB advances and maturing advances with higher rates.

Stockholders' equity: The Company’s total stockholders' equity at June 30, 2019 was $2,012,734,000, or 12.22% of total assets. This was an increase of $15,826,000 from the September 30, 2018 total of $1,996,908,000, or 12.59% of total assets. The Company’s equity was impacted in the nine months ended June 30, 2019 by net income of $157,894,000, the payment of $46,749,000 in cash dividends, treasury stock purchases of $103,935,000, as well as other comprehensive income of $3,843,000.

RESULTS OF OPERATIONS

Net Income: The Company recorded net income of $53,854,000 for the three months ended June 30, 2019 compared to $51,394,000 for the prior year quarter. The Company recorded net income of $157,894,000 for the nine months ended June 30, 2019 compared to $152,335,000 for the same period one year ago.

Net Interest Income: For the three months ended June 30, 2019, net interest income was $121,666,000, which is $1,814,000 higher than the same quarter of the prior year. Net interest margin was 3.18% for the quarter ended June 30, 2019 compared to 3.29% for the quarter ended June 30, 2018. The increase in net interest income was primarily due to the average balance of earning assets increasing by $730,165,000 and the yield on earning assets increasing to 4.50% from 4.26%, partially offset by a $719,612,000 increase in average balance on interest-bearing liabilities and the average rate paid increasing to 1.40% for the three months ended June 30, 2019 compared to 1.04% for the same quarter one year ago. For the nine months ended June 30, 2019, net interest income was $360,888,000, which is $8,000,000 higher than the same period for the prior year. Net interest margin was 3.18% for the nine months ended June 30, 2019 compared to 3.27% for the same period of the prior year. The higher yield on earning assets is the result of the rise in short-term interest rates, which resulted in a higher rate being earned on cash and adjustable rate loans and investment securities, as well as the shift in mix from investment securities into a higher proportion of loans receivable that carry higher yields on average. The higher rate on interest-bearing liabilities was primarily due to the increase in rates on interest-bearing deposit accounts, partially offset by the maturity of certain long-term FHLB advances with higher rates.

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 06/30/19 and 06/30/18							Comparison of Nine Months Ended 06/30/19 and 06/30/18
($ in thousands)	Volume		Rate			Total		Volume		Rate			Total
Interest income:
Loans receivable	$	7,237	$	6,712		$	13,949	$	21,954	$	19,081		$	41,035
Mortgaged-backed securities	88		609			697		456		4,210			4,666
Investments (1)	955		1,153			2,108		2,247		4,151			6,398
All interest-earning assets	8,280		8,474			16,754		24,657		27,442			52,099
Interest expense:
Customer accounts	1,138		12,306			13,444		2,985		35,652			38,637
FHLB advances and other borrowings	466		1,030			1,496		2,690		2,772			5,462
All interest-bearing liabilities	1,604		13,336			14,940		5,675		38,424			44,099
Change in net interest income	$	6,676	$	(4,862	)	$	1,814	$	18,982	$	(10,982	)	$	8,000

___________________


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

Provision (Release) for Loan Losses: The Company did not record any provision for loan losses for the three months ended June 30, 2019, compared with a $1,000,000 provision for loan losses for the three months ended June 30, 2018. A provision for loan losses of $250,000 and $50,000 was recorded during the nine months ended June 30, 2019 and June 30, 2018, respectively. Reserving for new loan originations as the loan portfolio grows has been largely offset by recoveries of previously charged-off loans. Recoveries, net of charge-offs, totaled $936,000 for the three months ended June 30, 2019, compared to net recoveries of $90,000 during the three months ended June 30, 2018. Recoveries, net of charge-offs, totaled $3,515,000 for the nine months ended June 30, 2019, compared to net recoveries of $4,543,000 during the nine months ended June 30, 2018.

Other Income: The three months ended June 30, 2019 results include total other income of $14,042,000 compared to $12,451,000 for the same period one year ago, a $1,591,000 increase. Results for the nine months ended June 30, 2019 include total other income of $45,861,000, an increase of $14,028,000 from the $31,833,000 for the same period one year ago. The increase for the year-to-date periods is primarily due to a net gain of $6,400,000 recognized in three months ended December 31, 2018 from the sale and valuation adjustments of fixed assets as well as $8,550,000 of expense from FDIC loss share valuation adjustments recognized in the three months ended December 31, 2017.

Other Expense: Operating expenses have increased as a result of ongoing investments in people, process and technology with the objective of growing market share and ultimately earnings. The three months ended June 30, 2019 results include total other expense of $70,898,000 compared to $66,977,000 for the same period one year ago, a $3,921,000 increase. The increase is primarily due to compensation and benefits costs increasing by $3,074,000 due to the aforementioned factors. The number of staff, including part-time employees on a full-time equivalent basis, increased by 5.0% to 1,962 at June 30, 2019 from 1,869 at June 30, 2018. In addition, other expenses increased by $1.3 million, primarily due to Bank Secrecy Act (BSA) program enhancements. Results for the nine months ended June 30, 2019 include total other expense of $210,537,000, an increase of $15,832,000 from the $194,705,000 for the same period one year ago. The increase is largely due to compensation and benefits costs increasing by $8,487,000 and occupancy costs increasing $2,003,000 because of the investments noted above. Additionally, information technology costs were $902,000 higher and other expenses were $6,162,000 higher than last year, primarily due to BSA program enhancements. Total other expense for the nine months ended June 30, 2019 and June 30, 2018 equaled 1.72% and 1.67%, respectively, of average assets.

Gain (Loss) on Real Estate Owned: Results for the three months ended June 30, 2019 include a net gain on real estate owned of $353,000, compared to a net gain of $168,000 for the same period one year ago. Results for the nine months ended June 30, 2019 include a net gain on real estate owned of $1,481,000, compared to a net loss of $64,000 for the same period one year ago.

Income Tax Expense: Income tax expense totaled $11,309,000 for the three months ended June 30, 2019, compared to $13,100,000 for the same period one year ago. Income tax expense totaled $39,549,000 for the nine months ended June 30, 2019, compared to $37,567,000 for the year ago period. The effective tax rate for the nine months ended June 30, 2019 was 20.03% compared to 19.78% for the nine months ended June 30, 2018 and 20.76% for the full fiscal year ended September 30, 2018. The effective tax

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rate for the nine months ended June 30, 2019 is lower than the statutory rate mainly due to a one-time tax tax benefit recorded during the three months ended June 30, 2019 related to the resolution of a previously unrecognized tax position.

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, 2018. 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 2018 Form 10-K.

Item 4. Controls and Procedures

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

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

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

PART II – Other Information

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

In addition to the other information set forth below and in this report, you should carefully consider the factors discussed under "Part I--Item 1A--Risk Factors" in the 2018 Form 10-K for the year ended September 30, 2018. These factors could materially and adversely affect the Company's business, financial condition, liquidity, results of operations and capital position, and could cause its actual results to differ materially from its historical results or the results contemplated by the forward-looking statements contained in this report.

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

The following table provides information with respect to purchases made by or on behalf of the Company of the Company’s common stock during the three months ended June 30, 2019.



Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan (1)	Maximum Number of Shares That May Yet Be Purchased Under the Plan at the End of the Period
April 1, 2019 to April 30, 2019	3,772	$	31.71	3,772	9,589,929
May 1, 2019 to May 31, 2019	875,676	32.48		875,676	8,714,253
June 1, 2019 to June 30, 2019	177,012	32.35		177,012	8,537,241
Total	1,056,460	$	32.45	1,056,460	8,537,241

___________________


(1)	The Company's stock repurchase program was publicly announced by its Board of Directors on February 3, 1995 and has no expiration date. Under this ongoing program, a total of 66,956,264 shares were authorized for repurchase.

Item 3. Defaults Upon Senior Securities

Not applicable

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

Not applicable

Item 6. Exhibits



(a)	Exhibits

	31.1	Section 302 Certification by the Chief Executive Officer
	31.2	Section 302 Certification by the Chief Financial Officer
	32	Section 906 Certification by the Chief Executive Officer and Chief Financial Officer
	101	Financial Statements from the Company’s Form 10-Q for the three months ended June 30, 2019 formatted in iXBRL

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WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

SIGNATURES

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



July 25, 2019	/S/ BRENT J. BEARDALL
	BRENT J. BEARDALL President & Chief Executive Officer

July 25, 2019	/S/ VINCENT L. BEATTY
	VINCENT L. BEATTY Executive Vice President and Chief Financial Officer

July 25, 2019	/S/ CORY D. STEWART
	CORY D. STEWART Senior Vice President and Principal Accounting Officer