WASHINGTON FEDERAL INC Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)

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

You should not place undue reliance on any forward-looking statement and should
consider the following uncertainties and risks, as well as the Risk Factors
discussed in Item 1A of this report, 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 or slowdowns in economic growth,
including declines in home sale volumes and financial stress on borrowers
(consumers and businesses) as a result of higher interest rates or an uncertain
economic environment;
•high unemployment rates, inflationary pressures and the impact of inflation on
the Company's business and financial results;
•the effects of natural or man-made disasters, calamities, or conflicts,
including terrorist events and pandemics (such as the COVID-19 pandemic), and
the resulting governmental and societal responses, including on our asset credit
quality and business operations, as well as its impact on general economic and
financial market conditions;
•risks associated with cybersecurity incidents and threat actors, including
increased risks due to COVID-19 and the remote work environment;
•risks related to the impacts of climate change;
•the effects of a severe economic downturn, including high unemployment rates
and declines in housing prices and property values, in our primary market areas;
•the effects of and changes in monetary and fiscal policies of the Board of
Governors of the Federal Reserve System and the U.S. Government, including
responses to the COVID-19 pandemic;
•fluctuations in interest rate risk and changes in market interest rates,
including risk related to LIBOR reform, risk of negative rates or an inverted
yield curve and the effect on our net interest income and net interest margin;
•the Company's ability to make accurate assumptions and judgments about the
collectability of its loan portfolio, including the creditworthiness of its
borrowers and the value of the assets securing these loans;
•legislative and regulatory limitations, including those arising under the
Dodd-Frank Act, the Washington Commercial Bank Act and potential limitations in
the manner in which the Company conducts its business and undertakes new
investments and activities;
•the ability of the Company to obtain external financing to fund its operations
or obtain this financing on favorable terms;
•unanticipated effects and expenses related to the completed charter conversion
of the Bank from a federal to a state charter; and
•global economic trends, including developments related to Ukraine and Russia,
and related negative financial impacts on our borrowers, the financial markets
and the global economy;
•the Company's ability to manage the risks and costs involved in the remediation
efforts to the Bank's Home Mortgage Disclosure Act ("HMDA") compliance and
reporting, and the impact of enforcement actions or legal proceedings with
respect to the Bank's HMDA program;
•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 foregoing and
managing its business; and
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                   WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

•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 AND COMMERCIAL DESCRIPTION

Washington Federal Bank, a federally-insured Washington state chartered
commercial bank dba WaFd Bank (the "Bank" or "WaFd Bank"), was founded on April
24, 1917 in Ballard, Washington and is engaged primarily in providing lending,
depository, insurance and other banking services to consumers, mid-sized to
large businesses, and owners and developers of commercial real estate.
Washington Federal, Inc., a Washington corporation was formed as the Bank's
holding company in November, 1994. As used throughout this document, the terms
"Washington Federal," the "Company" or "we" or "us" and "our" refer to the
Washington Federal, Inc. and its consolidated subsidiaries, and the term "Bank"
refers to the operating subsidiary, Washington Federal Bank. The Company is
headquartered in Seattle, Washington.

On January 3, 2022, the Bank announced that it had applied to the Washington
State Department of Financial Institutions (the "WDFI") to convert from a
national association to a non-Federal Reserve member Washington state-chartered
bank. As described in the Current Report on Form 8-K filed with the SEC on
February 4, 2022, the Bank completed the conversion of its charter from a
national bank charter, supervised by the Office of the Comptroller of the
Currency, to a Washington state chartered commercial bank effective February 4,
2022. The Bank cancelled its holdings of stock in the Federal Reserve Bank of
San Francisco as part of the conversion and its legal name changed from
"Washington Federal Bank, National Association" to "Washington Federal Bank." As
a result of the conversion, the WDFI is the Bank's primary state regulator and
the Federal Deposit Insurance Corporation (the "FDIC") is the Bank's primary
federal regulator. The Federal Reserve will continue to regulate the Bank's
holding company, Washington Federal, Inc.

The closing date of the Company’s financial year is September 30. All references to 2021 represent balances as of September 30, 2021 or activity for the fiscal year then ended.

CRITICAL ACCOUNTING POLICIES

See Note A to the Consolidated Financial Statements in "Item 1. Financial
Statements" above. Also, refer to "Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations" in the Company's 2021 Annual
Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on
November 19, 2021.

ASSET QUALITY AND PROVISION FOR CREDIT LOSSES

See Note A, D and E to the Consolidated Financial Statements in "Item 1.
Financial Statements" above. Also, refer to "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the Company's 2021
Annual Report on Form 10-K filed with the Securities and Exchange Commission
("SEC") on November 19, 2021.

INTEREST RATE RISK

Based on management's assessment of the current interest rate environment, the
Company has taken steps, including growing shorter-term loans and transaction
deposit accounts, to reduce its interest rate risk profile. The mix of
transaction and savings accounts is 79% of total deposits as of June 30, 2022
while the composition of the investment securities portfolio is 41% variable and
59% fixed rate. When interest rates rise, the fair value of the investment
securities with fixed rates will decrease and vice versa when interest rates
decline. The Company has $477,884,000 of mortgage-backed securities that it has
designated as held-to-maturity and are carried at amortized cost. As of June 30,
2022, the net unrealized loss on these securities was $30,055,000. The Company
has $2,150,732,000 of available-for-sale securities that are carried at fair
value. As of June 30, 2022, the net unrealized loss on these securities was
$65,919,000. The Company has executed interest rate swaps to hedge interest rate
risk on certain FHLB borrowings. The unrealized gain on these interest rate
swaps as of June 30, 2022 was $136,436,000. All of the above are pre-tax net
unrealized gains or losses.

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

As of June 30, 2022, in the event of an immediate and parallel increase of 200
basis points in both short and long-term interest rates, the model estimates
that net interest income would increase by 3.9% in the next year. This compares
to an estimated increase of 9.7% as of the September 30, 2021 analysis. The
change is primarily due to a shift in the yield curve as well as shifts in the
mix of fixed versus adjustable rate assets and liabilities and lower cash
balances that immediately reprice to reflect the 200 basis point increase in
interest rates. Management estimates that a gradual increase of 300 basis points
in short term rates and 100 basis points in long-term rates over two years would
result in a net interest income increase of 0.9% in the first year and increase
of 2.9% 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, 2022, in the event of an immediate and parallel increase of 200 basis
points in interest rates, the NPV is estimated to decrease by $592,366,000 or
21.1% and the NPV to total assets ratio to decline to 12.1% from a base of
14.3%. As of September 30, 2021, the NPV in the event of a 200 basis point
increase in rates was estimated to decrease by $207,000,000 or 6.8% and the NPV
to total assets ratio to decline to 15.2% from a base of 15.5%. The change in
NPV sensitivity is due primarily to changes in interest rates and the related
impact on asset prices and sensitivity to expected prepayment speeds on fixed
rate loans and mortgage-backed securities, as well as changes in the mix of
fixed versus adjustable rate assets and liabilities as of June 30, 2022.

Interest Rates - The Company measures the difference between the rate on total
interest-earning assets and the rate on interest-bearing liabilities at the end
of each period. This period-end interest rate spread was 3.07% at June 30, 2022
and 2.45% at September 30, 2021. As of June 30, 2022, the weighted average
period-end rate on interest-earning assets increased by 70 basis points to 3.50%
compared to 2.80% at September 30, 2021, while the weighted average period-end
rate on interest-bearing liabilities increased by 8 basis point to 0.43% from
0.35%. The period-end interest rate spread increased to 3.07% at June 30, 2022
from 2.31% at June 30, 2021.

Net Interest Margin - Net interest margin is measured as net interest income
divided by average earning assets for the period. Net interest margin was 3.22%
for the quarter ended June 30, 2022 compared to 2.82% for the quarter ended
June 30, 2021. The yield on interest-earning assets increased 30 basis points to
3.55% and the cost of interest-bearing liabilities decreased 12 basis points to
0.42% over that same period. The higher yield on interest-earning assets was
primarily due to the impact of rising rates on adjustable rate assets and cash.
Amortization of net loan origination fees on PPP loans declined to $936,000
during the quarter ended June 30, 2022 compared to $6,122,000 in the prior year
quarter. The lower rate in interest-bearing liabilities was primarily due to
replacing high-yielding, long-term FHLB borrowings with new borrowings at lower
rates.

The following table sets forth the information explaining the changes in the net
interest margin for the period indicated compared to the same period one year
ago.
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                                                            Three Months Ended June 30, 2022                                          Three Months Ended June 30, 2021
                                              Average Balance            Interest             Average Rate              Average Balance            Interest             Average Rate
                                                                    ($ in thousands)                                                          ($ in thousands)
Assets
Loans receivable                           $       15,350,905          $ 149,113                       3.90  %       $       13,330,611          $ 134,193                       4.04  %
Mortgage-backed securities                          1,416,212              8,618                       2.44                   1,179,767              5,488                       1.87
Cash & Investments                                  2,056,387              8,281                       1.62                   3,593,905              6,113                       0.68
FHLB & FRB stock                                       78,305              1,136                       5.82                     113,770              1,654                       5.83
Total interest-earning assets                      18,901,809            167,148                       3.55  %               18,218,053            147,448                       3.25  %
Other assets                                        1,383,146                                                                 1,278,879
Total assets                               $       20,284,955                                                        $       19,496,932

Liabilities and Equity
Interest-bearing customer accounts         $       12,852,849          $   9,284                       0.29  %       $       12,080,339          $   8,906                       0.30  %
FHLB advances                                       1,705,824              6,118                       1.44                   1,993,956              9,937                       2.00
Other borrowings                                            -                  -                          -                           -                  -                          -
Total interest-bearing liabilities                 14,558,673             15,402                       0.42  %               14,074,295             18,843                       0.54  %
Noninterest-bearing customer accounts               3,278,346                                                                 2,890,917
Other liabilities                                     238,842                                                                   220,805
        Total liabilities                          18,075,861                                                                17,186,017
Shareholders' equity                                2,209,094                                                                 2,310,915
Total liabilities and equity               $       20,284,955                                                        $       19,496,932
Net interest income/interest rate spread                               $ 151,746                       3.12  %                                   $ 128,605                       2.71  %
Net interest margin (NIM)                                                                              3.22  %                                                                   2.82  %



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                                                             Nine Months Ended June 30, 2022                                           Nine Months Ended June 30, 2021
                                              Average Balance            Interest             Average Rate              Average Balance            Interest             Average Rate
                                                                    ($ in thousands)                                                          ($ in thousands)
Assets
Loans receivable                           $       14,837,421          $ 426,882                       3.85  %       $       12,999,227          $ 400,621                       4.12  %
Mortgage-backed securities                          1,064,725             18,069                       2.27                   1,374,710             19,414                       1.89
Cash & Investments                                  2,783,617             19,821                       0.95                   3,431,104             17,097                       0.67
FHLB & FRB stock                                       90,107              3,654                       5.42                     128,371              4,892                       5.10
Total interest-earning assets                      18,775,870            468,426                       3.34  %               17,933,412            442,024                       3.30  %
Other assets                                        1,313,366                                                                 1,279,851
Total assets                               $       20,089,236                                                        $       19,213,263

Liabilities and Equity
Interest-bearing customer accounts         $       12,754,118          $  25,970                       0.27  %       $       11,838,145          $  33,745                       0.38  %
FHLB advances                                       1,715,275             21,486                       1.67                   2,359,341             35,126                       1.99
Other borrowings                                            -                  -                          -                          15                  -                       0.69
Total interest-bearing liabilities                 14,469,393             47,456                       0.44  %               14,197,501             68,871                       0.65  %
Noninterest-bearing customer accounts               3,221,504                                                                 2,575,191
Other liabilities                                     225,736                                                                   248,384
        Total liabilities                          17,916,633                                                                17,021,076
Shareholders' equity                                2,172,603                                                                 2,192,187
Total liabilities and equity               $       20,089,236                                                        $       19,213,263
Net interest income/interest rate spread                               $ 420,970                       2.90  %                                   $ 373,153                       2.65  %
Net interest margin (NIM)                                                                              3.00  %                                                                   2.77  %



As of June 30, 2022, total assets had increased by $508,257,000 to
$20,158,831,000 from $19,650,574,000 at September 30, 2021. During the nine
months ended June 30, 2022, loans receivable increased $1,731,595,000 while cash
and cash equivalents decreased by $1,483,388,000 and investment securities
increased by $124,332,000. Growth in loans receivable was partially funded by
continued growth in customer deposits as well as the decline in cash.

Cash and cash equivalents of $607,421,000 and equity of
$2,220,111,000 of the June 30, 2022 provide management with the flexibility to manage interest rate risk in the future.

CASH AND CAPITAL RESOURCES

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

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

The Bank has a line of credit 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.

Strong growth in customer deposit accounts has been a substantial source of funding increases in the loan portfolio. Customer accounts increased
$423,508,000i.e. 2.7%, to $15,965,620,000 at June 30, 2022 compared to
$15,542,112,000 at September 30, 2021. Total total FHLB borrowings
$1,700,000,000 of the June 30, 2022a decrease of $1,720,000,000 at
September 30, 2021.

The Company's cash and cash equivalents totaled $607,421,000 at June 30, 2022, a
decrease from $2,090,809,000 at September 30, 2021. These amounts include the
Bank's operating cash.

The Company's shareholders' equity at June 30, 2022 was $2,220,111,000, or
11.01% of total assets. This is an increase of $94,047,000 from September 30,
2021 when shareholders' equity was $2,126,064,000, or 10.82% of total assets.
The Company's shareholders' equity was impacted in the nine months ended
June 30, 2022 by net income of $162,935,000, the payment of $46,015,000 in
common stock dividends, payment of $10,968,000 in preferred stock dividends,
treasury stock purchases of $3,212,000, as well as other comprehensive loss of
$15,558,000. The ratio of tangible capital to tangible assets at June 30, 2022
was 9.63%. Management believes the Company's strong net worth position allows it
to manage balance sheet risk and provide the capital support needed for
controlled growth in a regulated environment.

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

Federal Bank regulatory agencies establish regulatory capital rules that require
minimum capital ratios and establish criteria for calculating regulatory
capital. Minimum capital ratios for four measures are used for assessing capital
adequacy. The standards are indicated in the table below. The common equity tier
1 capital ratio recognizes common equity as the highest form of capital. The
denominator for all except the leverage ratio is risk weighted assets. The rules
set forth a "capital conservation buffer" of up to 2.5%. In the event that a
bank's capital levels fall below the minimum ratios plus these buffers, the
bank's regulators may place restrictions on it. These restrictions include
reducing dividend payments, share buy-backs, and staff bonus payments. The
purpose of these buffers is to require banks to build up capital outside of
periods of stress that can be drawn down during periods of stress. As a result,
even during periods where losses are incurred, the minimum capital ratios can
still be met.
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There are also standards for Adequate and Well Capitalized criteria that are
used for "Prompt Corrective Action" purposes. To remain categorized as well
capitalized, the Bank and the Company must maintain minimum common equity
risk-based, tier 1 risk-based, total risk-based and tier 1 leverage ratios as
set forth in the following table.

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

June 30, 2022
Common Equity Tier I risk-based
capital ratio:
   The Company                       $ 1,556,947                   9.81  %                                 4.50  %                                              NA
   The Bank                            1,760,344                  11.08  %                                 4.50  %                                         6.50  %
Tier I risk-based capital ratio:
   The Company                         1,856,947                  11.70  %                                 6.00  %                                              NA
   The Bank                            1,760,344                  11.08  %                                 6.00  %                                         8.00  %
Total risk-based capital ratio:
   The Company                         2,055,468                  12.95  %                                 8.00  %                                              NA
   The Bank                            1,958,937                  12.33  %                                 8.00  %                                        10.00  %
Tier 1 Leverage ratio:
   The Company                         1,856,947                   9.35  %                                 4.00  %                                              NA
   The Bank                            1,760,344                   8.86  %                                 4.00  %                                         5.00  %

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


CHANGES IN THE FINANCIAL SITUATION

Cash and cash equivalents – Cash and cash equivalents have been $607,421,000 at
June 30, 2022a decrease of $1,483,388,000i.e. 70.9%, since September 30, 2021. The variation is mainly explained by the funding of new loan originations, partially offset by the growth of customer transaction deposit accounts.


Available-for-sale and held-to-maturity investment securities -
Available-for-sale securities increased $12,473,000, or 0.6%, during the nine
months ended June 30, 2022, mostly due to purchases of $516,163,000, partially
offset by principal repayments and maturities of $384,111,000 and an unrealized
loss of $87,859,000. During the same period, the balance of held-to-maturity
securities increased by $111,859,000 due primarily to purchases of $195,358,000,
partially offset by principal pay-downs and maturities of $81,497,000. As of
June 30, 2022, the Company had a net unrealized loss on available-for-sale
securities of $65,919,000, which is included on a net of tax basis in
accumulated other comprehensive income (loss).

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                   WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
The majority of the Company's held-to-maturity and available-for-sale debt
securities are issued by U.S. government agencies or U.S. government-sponsored
enterprises. These securities carry the explicit and/or implicit guarantee of
the U.S. government and have a long history of zero credit loss. The Company did
not record an allowance for credit losses for held-to-maturity securities as of
June 30, 2022 or September 30, 2021 as the investment portfolio consists
primarily of U.S. government agency mortgage-backed securities that management
deems to have immaterial risk of loss. The impact going forward will depend on
the composition, characteristics, and credit quality of the loan and securities
portfolios as well as the economic conditions at future reporting periods. The
Company does not believe that any of its available-for-sale debt securities had
credit loss impairment as of June 30, 2022 or September 30, 2021, therefore, no
allowance was recorded.

Loans receivable - Loans receivable, net of related contra accounts, increased
by $1,731,595,000 to $15,565,165,000 at June 30, 2022, compared to
$13,833,570,000 at September 30, 2021. The increase was primarily the net result
of originations of $7,104,309,000, purchases of single-family residential
mortgages of $576,697,000, partially offset by loan principal repayments of
$5,068,452,000 as well as a $850,737,000 increase in loans in process.
Commercial loan originations accounted for 78% of total originations and
consumer loan originations were 22% during the period. The mix of loan
originations is consistent with management's strategy during low rate
environments to produce more construction, multifamily, commercial real estate,
and commercial and industrial loans that generally have adjustable interest
rates or a shorter duration.

The following table presents the loan portfolio by category and the evolution.

                                               June 30, 2022                       September 30, 2021                         Change
                                             ($ in thousands)                       ($ in thousands)                      $             %
Commercial loans
Multi-family                          $      2,494,594        13.2  %      

$2,291,477 14.0% $203,117 8.9% Business real estate

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

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

Non-performing assets - Non-performing assets increased $6,805,000 during the
nine months ended June 30, 2022 to $50,430,000 from $43,625,000 at September 30,
2021. The change is primarily due to a $4,930,000 increase in non-accrual loans.
Non-performing assets as a percentage of total assets was 0.25% at June 30, 2022
compared to 0.22% at September 30, 2021.
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                   WASHINGTON FEDERAL, INC. AND SUBSIDIARIES

The following table presents information on restructured distressed debt loans and non-performing assets.

                                                             June 30,                                 September 30,
                                                               2022                                       2021
                                                                               ($ in thousands)
Troubled debt restructured loans:
Multi - family                                  $    6,099                  10.4  %       $        223                   0.3  %
Commercial real estate                               2,194                   3.7                 2,275                   3.5
Commercial & industrial                                 34                   0.1                    40                   0.1

Single-family residential                           48,730                  82.7                60,011                  92.0

Land - consumer lot loans                            1,722                   2.9                 2,292                   3.5
HELOC                                                   84                   0.1                   246                   0.4
Consumer                                                33                   0.1                    41                   0.1
Total restructured loans (1)                    $   58,896                   100  %       $     65,128                   100  %
Non-accrual loans:
Multi - family                                  $    5,944                  16.2  %       $        475                   1.5  %
Commercial real estate                               5,024                  13.7                 8,038                  25.3
Commercial & industrial                              4,288                  11.7                   365                   1.1
Construction                                             -                     -                   505                   1.7
Land - acquisition & development                         -                     -                 2,340                   7.4
Single-family residential                           20,184                  55.0                19,320                  60.9
Construction - custom                                  900                   2.5                     -                     -
Land - consumer lot loans                              213                   0.6                   359                   1.1
HELOC                                                   91                   0.2                   287                   0.9
Consumer                                                35                   0.1                    60                   0.2
Total non-accrual loans                             36,679                   100  %             31,749                   100  %
Real estate owned                                    9,656                                       8,204
Other property owned                                 4,095                                       3,672
Total non-performing assets                     $   50,430                                $     43,625
Total non-performing assets and performing
restructured loans as a percentage of total
assets                                                0.54  %                                     0.55  %
Total Assets
(1)  Restructured loans were as follows:
Performing                                      $   57,492                  97.6  %       $     63,655                  97.7  %
Non-performing (included in non-accrual loans
above)                                               1,404                   2.4                 1,473                   2.3
                                                $   58,896                   100  %       $     65,128                   100  %



For the nine months ended June 30, 2022, the Company recognized $2,544,000 in
interest income on cash payments received from borrowers on non-accrual loans.
The Company would have recognized interest income of $969,000 for the same
period had these loans performed according to their original contract terms.
Recognized interest income for the nine months ended June 30, 2022 was higher
than what otherwise would have been recognized in the period due to the
collection of past due amounts. In addition to the non-accrual loans reflected
in the above table, the Company had $209,166,000 of loans that were less than 90
days delinquent at June 30, 2022 but were classified as substandard for one or
more reasons. If these loans were deemed non-performing, the Company's ratio of
total NPAs and performing restructured loans as a percent of total assets would
have increased to 1.57% at June 30, 2022.

Restructured single-family residential loans are reserved under the Company’s general allowance methodology. If the balance of an individual loan is large, the Company may constitute a specific reserve, if necessary.

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

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

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

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

                                                June 30, 2022                     September 30, 2021                     Change
Allowance for credit losses:                   ($ in thousands)                    ($ in thousands)                   $            %
Commercial loans
  Multi-family                         $         12,574          7.4  %            16,949          9.9  %       $   (4,375)      (25.8) %
  Commercial real estate                         25,300         14.8               23,437         13.7               1,863         7.9
  Commercial & industrial                        54,924         32.1               45,957         26.8               8,967        19.5
  Construction                                   25,834         15.1               25,585         14.9                 249         1.0
  Land - acquisition & development               12,227          7.2               13,447          7.8              (1,220)       (9.1)
   Total commercial loans                       130,859         76.5              125,375         73.2               5,484         4.4
Consumer loans
  Single-family residential                      26,217         15.3               30,978         18.1              (4,761)      (15.4)
  Construction - custom                           3,354          2.0                4,907          2.9              (1,553)      (31.6)
  Land - consumer lot loans                       5,220          3.1                4,939          2.9                 281         5.7
  HELOC                                           2,632          1.5                2,390          1.4                 242        10.1
  Consumer                                        2,697          1.6                2,711          1.6                 (14)       (0.5)
   Total consumer loans                          40,120         23.5               45,925         26.8              (5,805)      (12.6)
Total allowance for loan losses                 170,979        100.0  %           171,300        100.0  %             (321)       (0.2)
Reserve for unfunded commitments                 32,500                            30,000                            2,500         8.3
Total allowance for credit losses      $        203,479                       $   201,300                       $    2,179         1.1  %



No allowance was recorded as of June 30, 2022 or as of September 30, 2021 for
the $54,185,000 and $305,162,000 of SBA Payroll Protection Program loans in the
portfolio on each date, respectively, which are included in the commercial &
industrial loan category, due to the government guarantee. Management believes
the allowance for credit losses of $203,479,000, or 1.08% of gross loans, is
sufficient to absorb estimated losses inherent in the portfolio of loans and
unfunded commitments. See Note E and Note I for further details of the allowance
for loan losses and reserve for unfunded commitments as of and for the period
ended June 30, 2022 and September 30, 2021.

Real Estate Owned (“REO”) – REO has increased in the nine months ended June 30, 2022 by $1,452,000 at $9,656,000. The increase is due to REO additions partially offset by sales and depreciation of certain properties.

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

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                   WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
Customer accounts - Customer accounts increased $423,508,000, or 2.7%, to
$15,965,620,000 at June 30, 2022 compared with $15,542,112,000 at September 30,
2021. Transaction accounts increased by $560,226,000 or 4.6% during that period,
while time deposits decreased $136,718,000 or 4.0%. The shift in deposit mix has
been a result of a deliberate deposit pricing and customer growth strategy. The
focus on transaction accounts is intended to lessen sensitivity to rising
interest rates and manage interest expense.

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

                                                         June 30, 2022                                                      September 30, 2021
                                                                                   Weighted                                                              Weighted
                                 Deposit Account        As a % of Total            Average             Deposit Account        As a % of Total            Average
                                     Balance                Deposits                 Rate                  Balance                Deposits                 Rate
($ in thousands)
Non-interest checking            $   3,269,773                   20.5  %                   -  %       $    3,122,397                   20.1  %                   -  %
Interest checking                    3,472,402                   21.7                   0.51               3,566,322                   22.9                   0.20
Savings                              1,069,801                    6.7                   0.12               1,039,336                    6.7                   0.11
Money market                         4,856,275                   30.4                   0.31               4,379,970                   28.2                   0.19
Time deposits                        3,297,369                   20.7                   0.53               3,434,087                   22.1                   0.54
Total                            $  15,965,620                    100  %                0.32  %       $   15,542,112                    100  %                0.23  %



FHLB advances and other borrowings - Total borrowings were $1,700,000,000 as of
June 30, 2022, a decrease from $1,720,000,000 at September 30, 2021. Strong
growth in deposits has provided for substantial funding of growth in loans
receivable, therefore, the use of additional FHLB borrowings has been limited.
The weighted average rate for FHLB borrowings was 1.43% as of June 30, 2022 and
1.51% at September 30, 2021. The decline in the weighted average effective
interest rate was the result of replacing high-yielding, long-term FHLB
borrowings with new borrowings at lower rate.

Shareholders' equity - The Company's shareholders' equity at June 30, 2022 was
$2,220,111,000, or 11.01% of total assets. This is an increase of $94,047,000
from September 30, 2021 when net worth was $2,126,064,000, or 10.82% of total
assets. The Company's shareholders' equity was impacted in the nine months ended
June 30, 2022 by net income of $162,935,000, the payment of $46,015,000 in
common stock dividends, payment of $10,968,000 in preferred stock dividends,
treasury stock purchases of $3,212,000, as well as other comprehensive loss of
$15,558,000.


RESULTS OF OPERATIONS

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

Net Interest Income - For the three months ended June 30, 2022, net interest
income was $151,746,000, which is $23,141,000 higher than the same quarter of
the prior year. Net interest margin was 3.22% for the quarter ended June 30,
2022 compared to 2.82% for the quarter ended June 30, 2021. The increase in net
interest income was primarily due to average interest-earning assets increasing
by $683,756,000 or 3.75% from the prior year while average interest-bearing
liabilities increased $484,378,000 or 3.44% as well as the impact of rising
rates on adjustable rate assets. Average noninterest-bearing deposits grew by
$387,429,000 over the same period. The change in net interest income was also
impacted by a 30 basis point increase in the average rate earned on
interest-earning assets to 3.55% while the average rate paid on interest-bearing
liabilities declined by 12 basis points to 0.42%. During the three months ended
June 30, 2022 and 2021, net interest income included $936,000 and $6,122,000,
respectively, of net loan origination fee amortization on PPP loans. For the
nine months ended June 30, 2022, net interest income was $420,970,000, which is
$47,817,000 higher than the same period of the prior year. Net interest margin
was 3.00% for the nine months ended June 30, 2022 compared to 2.77% for the
prior year same period.

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

Rate / Volume Analysis:

                                             Comparison of Three Months Ended                             Comparison of Nine Months Ended
                                                    6/30/22 and 6/30/21                                         6/30/22 and 6/30/21
($ in thousands)                        Volume               Rate              Total                Volume                  Rate              Total
Interest income:
Loans receivable                    $     19,742          $ (4,822)         $ 14,920          $    53,933               $ (27,672)         $ 26,261
Mortgage-backed securities                 1,243             1,887             3,130               (4,855)                  3,510            (1,345)
Investments (1)                           (4,330)            5,980             1,650               (4,774)                  6,260             1,486
All interest-earning assets               16,655             3,045            19,700               44,304                 (17,902)           26,402
Interest expense:
Customer accounts                            646              (268)              378                2,481                 (10,256)           (7,775)
FHLB advances and other borrowings        (1,300)           (2,519)           (3,819)              (8,584)                 (5,057)          (13,641)
All interest-bearing liabilities            (654)           (2,787)           (3,441)              (6,103)                (15,313)          (21,416)

Change in net interest income $17,309 $5,832 $23,141 $50,407

               $  (2,589)         $ 47,818


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

Provision (Release) for Credit Losses - The Company recorded a $1,500,000
provision for credit losses for the three months ended June 30, 2022, compared
to a $2,000,000 release of allowance for credit losses for the three months
ended June 30, 2021. The provision in the three months ended June 30, 2022 was
primarily due to growth in loans receivable and unfunded commitments partially
offset by improvements in the credit quality of certain loan portfolios related
to strong real estate markets and collateral conditions. The release for the
three months ended June 30, 2021 was primarily due to improvements in the credit
quality of certain loan portfolios related to strong real estate markets and
collateral conditions partially offset by growth in loans receivable. The
Company recorded a $1,500,000 provision for credit losses for the nine months
ended June 30, 2022, compared with a $1,000,000 provision for credit losses for
the nine months ended June 30, 2021. Recoveries, net of charge-offs, totaled
$595,000 for the three months ended June 30, 2022, compared to net recoveries of
$1,131,000 during the three months ended June 30, 2021. Recoveries, net of
charge-offs, totaled $3,179,000 for the nine months ended June 30, 2022,
compared to net recoveries of $5,329,000 during the nine months ended June 30,
2021. No allowance was recorded as of June 30, 2022 or as of September 30, 2021
for the $54,185,000 and $305,162,000 of PPP loans in the portfolio on each date,
respectively, which are included in the commercial & industrial loan category,
due to the government guarantee.

Other Income - The results for the three months ended June 30, 2022 include
total other income of $17,550,000 compared to $13,211,000 for the same period
one year ago, a $4,339,000 increase. The increase in other income was primarily
due to an unrealized gain of $2,708,000 that was recorded for certain equity
investments in the quarter ended June 30, 2022. Other income was $51,890,000 for
the nine months ended June 30, 2022, compared with $41,558,000 for the nine
months ended June 30, 2021 and the increase was mostly due to unrealized gains
of $9,008,000 that were recorded for certain equity investments in the nine
months ended June 30, 2022.

Other Expense - Total other expense was $87,403,000 for the three months ended
June 30, 2022, an increase of $3,763,000 from $83,640,000 for the prior year
quarter. Compensation and benefits costs increased by $4,232,000, or 9.7%, over
the prior year quarter due to annual merit increases, higher bonus compensation
accruals related to strong deposit and loan growth and investments in top talent
and contract staff to support strategic initiatives. Other expense was
$265,433,000 for the nine months ended June 30, 2022, compared with $246,796,000
for the nine months ended June 30, 2021 and the increase was primarily due to
compensation and benefits increasing by $12,417,000 for the same reasons noted
above. The nine months ended June 30, 2022 also included a tax related accrual
of $1,700,000. Total other expense for the nine months ended June 30, 2022 and
June 30, 2021 equaled 1.76% and 1.71%, respectively, of average assets.

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

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                   WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
Income Tax Expense - Income tax expense totaled $17,546,000 for the three months
ended June 30, 2022, compared to $12,603,000 for the prior year quarter. Income
tax expense totaled $44,131,000 for the nine months ended June 30, 2022,
compared to $35,105,000 for the prior year same period. The effective tax rate
was 21.31% and 21.10% for the nine months ended June 30, 2022 and June 30, 2021,
respectively. The Company's effective tax rate varies from the statutory rate
mainly due to state taxes, tax-exempt income and tax-credit investments.

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