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EX-32.1 - EXHIBIT 32.1 - WASHINGTON FEDERAL INCwafd10-qex3212312017.htm
EX-31.2 - EXHIBIT 31.2 - WASHINGTON FEDERAL INCwafd10-qex31212312017.htm
EX-31.1 - EXHIBIT 31.1 - WASHINGTON FEDERAL INCwafd10-qex31112312017.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2017
or
o
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 and zip code)
(206) 624-7930
(Registrant’s telephone number, including area code)
 
(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 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  x    No  o
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  x    No  o
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
x
Accelerated filer
o
Non-accelerated filer
o
Smaller reporting company
o
Emerging growth company
o
 
 
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. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o    No  x
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Title of class:
January 24, 2018
Common stock, $1.00 par value
85,973,665



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


2

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





 
December 31, 2017
 
September 30, 2017
 
(In thousands, except share data)
ASSETS
 
 
 
Cash and cash equivalents
$
309,713

 
$
313,070

Available-for-sale securities, at fair value
1,245,855

 
1,266,209

Held-to-maturity securities, at amortized cost
1,765,886

 
1,646,856

Loans receivable, net of allowance for loan losses of $127,155 and $123,073
11,107,042

 
10,882,622

Interest receivable
42,146

 
41,643

Premises and equipment, net
264,643

 
263,694

Real estate owned
17,928

 
20,658

FHLB and FRB stock
130,590

 
122,990

Bank owned life insurance
211,833

 
211,330

Intangible assets, including goodwill of $300,288 and $293,153
310,578

 
298,682

Other assets
177,799

 
185,826

 
$
15,584,013

 
$
15,253,580

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Liabilities
 
 
 
Customer accounts
 
 
 
Transaction deposit accounts
$
6,482,612

 
$
6,361,158

Time deposit accounts
4,518,967

 
4,473,850

 
11,001,579

 
10,835,008

FHLB advances
2,415,000

 
2,225,000

Advance payments by borrowers for taxes and insurance
23,924

 
56,631

Accrued expenses and other liabilities
133,892

 
131,253

 
13,574,395

 
13,247,892

Stockholders’ equity
 
 
 
Common stock, $1.00 par value, 300,000,000 shares authorized; 135,274,618 and 134,957,511 shares issued; 86,363,099 and 87,193,362 shares outstanding
135,275

 
134,958

Additional paid-in capital
1,661,866

 
1,660,885

Accumulated other comprehensive income (loss), net of taxes
8,004

 
5,015

Treasury stock, at cost; 48,911,519 and 47,764,149 shares
(877,044
)
 
(838,060
)
Retained earnings
1,081,517

 
1,042,890

 
2,009,618

 
2,005,688

 
$
15,584,013

 
$
15,253,580




SEE NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
3


WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

 
Three Months Ended December 31,
 
2017
 
2016
 
(In thousands, except share data)
INTEREST INCOME
 
 
 
Loans receivable
$
124,511

 
$
114,835

Mortgage-backed securities
16,899

 
12,789

Investment securities and cash equivalents
4,370

 
5,140

 
145,780

 
132,764

INTEREST EXPENSE
 
 
 
Customer accounts
14,638

 
13,017

FHLB advances
15,407

 
16,595

 
30,045

 
29,612

Net interest income
115,735

 
103,152

Provision (release) for loan losses

 

Net interest income after provision (release) for loan losses
115,735

 
103,152

 
 
 
 
OTHER INCOME
 
 
 
Gain on sale of investment securities

 
968

FDIC loss share valuation adjustments
(8,550
)
 

Loan fee income
1,035

 
1,334

Deposit fee income
6,686

 
5,185

Other income
7,624

 
4,409

 
6,795

 
11,896

 
 
 
 
OTHER EXPENSE
 
 
 
Compensation and benefits
29,619

 
26,994

Occupancy
8,671

 
8,450

FDIC insurance premiums
2,820

 
2,839

Product delivery
3,956

 
3,361

Information technology
7,929

 
6,451

Other expense
8,946

 
6,246

 
61,941

 
54,341

Gain (loss) on real estate owned, net
46

 
398

Income before income taxes
60,635

 
61,105

Income tax expense
8,965

 
19,859

NET INCOME
$
51,670

 
$
41,246

 

 


PER SHARE DATA
 
 
 
Basic earnings per share
$
0.59

 
$
0.46

Diluted earnings per share
0.59

 
0.46

Dividends paid on common stock per share
0.15

 
0.14

Basic weighted average number of shares outstanding
86,938,095

 
89,310,958

Diluted weighted average number of shares outstanding
87,082,499

 
89,731,024


SEE NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
4



WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)

 
Three Months Ended December 31,
 
2017
 
2016
 
(In thousands)
Net income
$
51,670

 
$
41,246

 
 
 
 
Other comprehensive income (loss) net of tax:
 
 
 
Net unrealized gain (loss) on available-for-sale investment securities
(1,964
)
 
(17,079
)
Reclassification adjustment of net gain (loss) from sale of available-for-sale securities included in net income

 
968

Related tax benefit (expense)
722

 
5,921

 
(1,242
)
 
(10,190
)
 
 
 
 
Net unrealized gain (loss) on cash flow hedges of borrowings
6,690

 
29,271

Related tax benefit (expense)
(2,459
)
 
(10,757
)
 
4,231

 
18,514

 
 
 
 
Other comprehensive income (loss) net of tax
2,989

 
8,324

Comprehensive income
$
54,659

 
$
49,570





SEE NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
5



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, 2017
$
134,958

$
1,660,885

$
1,042,890

$
5,015

$
(838,060
)
$
2,005,688

Net income




51,670





51,670

Other comprehensive income (loss)



2,989


2,989

Dividends on common stock




(13,043
)




(13,043
)
Compensation expense related to common stock options











Proceeds from exercise of common stock options
14

272







286

Restricted stock expense
194

818







1,012

Exercise of stock warrants
109

(109
)
 
 
 

Treasury stock acquired








(38,984
)
(38,984
)
Balance at December 31, 2017
$
135,275

$
1,661,866

$
1,081,517

$
8,004

$
(877,044
)
$
2,009,618

 
 
 
 
 
 
 
(in thousands)
Common Stock
Additional Paid-in Capital
Retained Earnings
Accumulated Other Comprehensive Income (Loss)
Treasury Stock
Total
Balance at October 1, 2016
$
134,308

$
1,648,388

$
943,877

$
(11,156
)
$
(739,686
)
$
1,975,731

Net income




41,246





41,246

Other comprehensive income (loss)



8,324


8,324

Dividends on common stock




(12,422
)




(12,422
)
Proceeds from exercise of common stock options
190

4,172







4,362

Restricted stock expense
109

2,636







2,745

Exercise of stock warrants
50

(50
)







Treasury stock acquired








(20,385
)
(20,385
)
Balance at December 31, 2016
$
134,657

$
1,655,146

$
972,701

$
(2,832
)
$
(760,071
)
$
1,999,601




SEE NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
6



WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED) 
 
Three Months Ended December 31,
 
2017
 
2016
 
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
 
Net income
$
51,670

 
$
41,246

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation, amortization, and accretion expense, net
15,273

 
12,087

Stock based compensation expense
1,012

 
2,745

Loss (gain) on sale of investment securities

 
(968
)
Decrease (increase) in accrued interest receivable
(503
)
 
(449
)
Decrease (increase) in federal and state income tax receivable

 
16,047

Decrease (increase) in cash surrender value of bank owned life insurance
(1,571
)
 
(1,739
)
Gain on bank owned life insurance
(2,416
)
 
(649
)
Net realized (gain) loss on sales of premises, equipment, and real estate owned
(241
)
 
657

Decrease (increase) in other assets
(7,715
)
 
14,153

Increase (decrease) in accrued expenses and other liabilities
2,595

 
(41,265
)
Net cash provided by (used in) operating activities
58,104

 
41,865

CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
Origination of loans and principal repayments, net
(80,089
)
 
(226,080
)
Loans purchased
(143,605
)
 

FHLB & FRB stock purchased
(123,600
)
 
(9
)
FHLB & FRB stock redeemed
116,000

 
24

Available-for-sale securities purchased
(40,884
)
 

Principal payments and maturities of available-for-sale securities
58,261

 
112,469

Proceeds from sales of available-for-sale securities

 
350,890

Held-to-maturity securities purchased
(170,836
)
 
(415,729
)
Principal payments and maturities of held-to-maturity securities
50,653

 
78,778

Proceeds from sales of real estate owned
3,440

 
6,457

Proceeds from settlement of bank owned life insurance
3,484

 
1,231

Proceeds from sales of premises and equipment
1

 
1,722

Premises and equipment purchased and REO improvements
(6,485
)
 
(2,200
)
Net cash provided by (used in) investing activities
(333,660
)
 
(92,447
)
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
Net increase (decrease) in customer accounts
166,647

 
46,799

Proceeds from borrowings
3,090,000

 

Repayments of borrowings
(2,900,000
)
 

Proceeds from exercise of common stock options and related tax benefit
286

 
4,362

Dividends paid on common stock
(13,043
)
 
(12,422
)
Treasury stock purchased
(38,984
)
 
(20,385
)
Increase (decrease) in borrower advances related to taxes and insurance, net
(32,707
)
 
(19,302
)
Net cash provided by (used in) financing activities
272,199

 
(948
)
Increase (decrease) in cash and cash equivalents
(3,357
)
 
(51,530
)
Cash and cash equivalents at beginning of period
313,070

 
450,368

Cash and cash equivalents at end of period
$
309,713

 
$
398,838

(CONTINUED)

SEE NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
7



WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
Three Months Ended December 31,
 
2017
 
2016
 
(In thousands)
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
 
Non-cash investing activities
 
 
 
Real estate acquired through foreclosure
$
773

 
$
1,589

Non-cash financing activities
 
 
 
Stock issued upon exercise of warrants
3,761

 
1,523

Cash paid during the period for
 
 
 
Interest
29,986

 
28,737

Income taxes
5,225

 




SEE NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
8



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, 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 one-to-four family residential mortgage and construction loans, home equity loans, lines of credit, commercial real estate loans, commercial and industrial loans, multi-family and other forms of real estate 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, 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 2017 Annual Report on Form 10-K (“2017 Annual Financial Statements”). Interim results are not necessarily indicative of results for a full year.
During the three months ended December 31, 2017, an immaterial correction was recorded related to acquisitions of insurance agency businesses in prior years. The balance sheet classification correction resulted in an increase in goodwill of $7,135,000 and finite-lived intangible assets of $5,106,000 and a corresponding decrease in other assets of $12,241,000.
Summary of Significant Accounting Policies - The significant accounting policies used in preparation of the Company's consolidated financial statements are disclosed in its 2017 Annual Financial Statements. There have not been any material changes in our significant accounting policies compared to those contained in our 2017 Annual Financial Statements for the year ended September 30, 2017.
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 $2,088,669,000 and $1,992,905,000 at December 31, 2017 and September 30, 2017, 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 August 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The ASU expands and refines hedge accounting for both financial and non-financial risk components, aligns the recognition and presentation of the effects of hedging instruments and hedge items in the financial statements, and includes certain targeted improvements to ease the application of current guidance related to the assessment of hedge effectiveness. The effective date of the new standard for public companies is for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. The new standard must be adopted using a modified retrospective transition with a cumulative effect adjustment recorded to opening retained earnings as of the initial adoption date. The Company does not anticipate that this guidance will have a material impact on its consolidated financial statements.

In March 2017, the FASB issued ASU 2017-08, Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities. The ASU shortens the amortization period for certain callable debt securities held at a premium. Specifically, the amendments require the premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The ASU is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted, including adoption in an interim period. If an entity early adopts in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The amendments should be applied on a modified retrospective basis, with a cumulative-effect adjustment directly to retained earnings as of the beginning

9

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


of the period of adoption. The Company does not anticipate that this guidance will have a material impact on its consolidated financial statements.

In February 2017, the FASB issued ASU 2017-05, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets. The ASU clarifies that a financial asset is within the scope of Subtopic 610-20 if it meets the definition of an in substance nonfinancial asset. The amendments also define the term in substance nonfinancial asset. The amendments clarify that nonfinancial assets within the scope of Subtopic 610-20 may include nonfinancial assets transferred within a legal entity to a counterparty. A contract that includes the transfer of ownership interests in one or more consolidated subsidiaries is within the scope of Subtopic 610-20 if substantially all of the fair value of the assets that are promised to the counterparty in a contract is concentrated in nonfinancial assets. The amendments clarify that an entity should identify each distinct nonfinancial asset or in substance nonfinancial asset promised to a counterparty and derecognize each asset when a counterparty obtains control of it. The ASU is effective for public business entities for annual periods beginning after December 15, 2017, and interim periods therein. Entities may use either a full or modified approach to adopt the ASU. The Company does not anticipate that this guidance will have a material impact on its consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which eliminates Step 2 from the goodwill impairment test. The ASU also eliminates the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The ASU is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019, with early adoption being permitted for annual or interim goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not anticipate that this guidance will have a material impact on its consolidated financial statements.

In January 2017, the FASB issued ASU 2017-01, Business Combinations Clarifying the Definition of a Business (Topic 805), for determining whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The ASU is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017, with early adoption permitted for transactions that occurred before the issuance date or effective date of the standard if the transactions were not reported in financial statements that have been issued or made available for issuance. The ASU must be applied prospectively and upon adoption the standard will impact how we assess acquisitions (or disposals) of assets or businesses. The Company does not anticipate that this guidance will have a material impact on its consolidated financial statements.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash: a Consensus of the FASB Emerging Issues Task Force. This ASU requires a company’s cash flow statement to explain the changes during a reporting period of the totals for cash, cash equivalents, restricted cash, and restricted cash equivalents. Additionally, amounts for restricted cash and restricted cash equivalents are to be included with cash and cash equivalents if the cash flow statement includes a reconciliation of the total cash balances for a reporting period. This ASU is effective for public business entities for annual periods, including interim periods within those annual periods, beginning after December 15, 2017, with early application permitted. The Company does not anticipate that this guidance will have a material impact on its consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments. The amendments in this ASU address eight specific cash flow issues with the objective of reducing diversity in practice. The specific issues identified include: debt prepayments or extinguishment costs; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies (including bank-owned life insurance policies); distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle. This ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within that reporting period; however, early adoption is permitted. The Company is currently evaluating the guidance to determine its adoption method and does not expect this guidance to have a material impact on its consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses. The amendments in this ASU were issued 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

10

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


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. While the Company is currently in the process of evaluating the impact of the amended guidance on its consolidated financial statements, it currently expects the ALLL to 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 economic conditions and the composition of the Company’s loan and lease portfolio at the time of adoption.

In February 2016, the FASB issued ASU 2016-02, Leases. The amendments require 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. The amendments are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted upon issuance. 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. Lessees and lessors may not apply a full retrospective transition approach. The Company is currently in the process of accumulating the lease data necessary to apply the amended guidance. The Company is continuing to evaluate the impact of the amended guidance on its consolidated financial statements, but the effects of recognizing most operating leases is not expected to be material. 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.

In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, to require all equity investments to be measured at fair value with changes in the fair value recognized through net income (other than those accounted for under equity method of accounting or those that result in consolidation of the investee). The amendments in this ASU also require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. This ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within that reporting period. The Company does not expect this guidance to have a material impact on its consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). The guidance in this update supersedes the revenue recognition requirements in ASC Topic 605, Revenue Recognition, and most industry-specific guidance throughout the industry topics of the codification. For public companies, this update was to be effective for interim and annual periods beginning after December 15, 2016. However, in August 2015, the FASB issued ASU 2015-14, which delayed the effective date of ASU 2014-09 by one year and permits companies to voluntarily adopt the new standard as of the original effective date. The Company does not expect this guidance to have a material impact on its consolidated financial statements.


NOTE C – Dividends and Share Repurchases

11

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



On November 20, 2017, the Company paid a regular dividend on common stock of $0.15 per share, which represented the 139th consecutive quarterly cash dividend. Dividends per share were $0.15 and $0.14 for the quarters ended December 31, 2017 and 2016, respectively. On January 24, 2018, the Company declared a regular dividend on common stock of $0.17 per share, which represents its 140th consecutive quarterly cash dividend. This dividend will be paid on February 23, 2018 to common shareholders of record on February 9, 2018.

For the three months ended December 31, 2017, the Company repurchased 1,147,370 shares at an average price of $33.98. Additionally, 108,704 shares of common stock were issued during the three months ended December 31, 2017 to investors that exercised warrants previously issued as part of the 2008 Troubled Asset Relief Program ("TARP"). As of December 31, 2017, 112,649 such warrants remain outstanding. Net of warrant cash repurchase activity, there are 753,585 remaining shares authorized to be repurchased under the current Board approved share repurchase program. On January 24, 2018, the Board approved an additional 5,000,000 shares available under the repurchase program.

NOTE D – Loans Receivable

The following table is a summary of loans receivable.
 
December 31, 2017
 
September 30, 2017
 
(In thousands)
 
(In thousands)
Gross loans by category
 
 
 
 
 
   Single-family residential
$
5,693,318

45.7
%
 
$
5,711,004

46.8
%
   Construction
1,710,418

13.7

 
1,597,996

13.1

   Construction - custom
583,580

4.7

 
602,631

4.9

   Land - acquisition & development
136,938

1.1

 
124,308

1.0

   Land - consumer lot loans
105,086

0.8

 
104,405

0.9

   Multi-family
1,312,695

10.5

 
1,303,148

10.7

   Commercial real estate
1,436,508

11.5

 
1,434,610

11.8

   Commercial & industrial
1,120,707

9.0

 
1,093,360

9.0

   HELOC
136,995

1.1

 
144,850

1.2

   Consumer
219,971

1.8

 
85,075

0.7

Total gross loans
12,456,216

100
%
 
12,201,387

100
%
   Less:
 
 
 
 
 
      Allowance for loan losses
127,155

 
 
123,073

 
      Loans in process
1,175,642

 
 
1,149,934

 
      Net deferred fees, costs and discounts
46,377

 
 
45,758

 
Total loan contra accounts
1,349,174

 
 
1,318,765

 
Net loans
$
11,107,042

 
 
$
10,882,622

 


12

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


The following table sets forth information regarding non-accrual loans.
 
 
December 31, 2017
 
September 30, 2017
 
(In thousands)
Non-accrual loans:
 
 
 
 
 
 
 
Single-family residential
$
26,219

 
57.7
%
 
$
27,930

 
56.3
%
Construction
364

 
0.8

 

 

Construction - custom

 

 
91

 
0.2

Land - acquisition & development
1,326

 
2.9

 
296

 
0.6

Land - consumer lot loans
976

 
2.1

 
605

 
1.2

Multi-family
250

 
0.5

 
139

 
0.3

Commercial real estate
8,241

 
18.1

 
11,815

 
23.8

Commercial & industrial
7,596

 
16.7

 
8,082

 
16.3

HELOC
476

 
1.0

 
531

 
1.1

Consumer
72

 
0.2

 
91

 
0.2

Total non-accrual loans
$
45,520

 
100
%
 
$
49,580

 
100
%
% of total net loans
0.41
%
 
 
 
0.46
%
 
 

The Company recognized interest income on non-accrual loans of approximately $2,551,000 in the three months ended December 31, 2017. Had these loans been on accrual status and performed according to their original contract terms, the Company would have recognized interest income of approximately $489,000 for the three months ended December 31, 2017. Interest cash flows collected on non-accrual loans varies from period to period as those loans are brought current or are paid off.

The following tables provide details regarding delinquent loans.
 
December 31, 2017
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
 
 
(In thousands)
 
 
Single-family residential
$
5,692,045

 
$
5,655,873

 
$
9,801

 
$
6,073

 
$
20,298

 
$
36,172

 
0.64
%
Construction
852,164

 
847,793

 
1,500

 
2,507

 
364

 
4,371

 
0.51

Construction - custom
292,255

 
292,255

 

 

 

 

 

Land - acquisition & development
112,260

 
111,018

 

 

 
1,242

 
1,242

 
1.11

Land - consumer lot loans
104,996

 
104,246

 
107

 
153

 
490

 
750

 
0.71

Multi-family
1,312,673

 
1,312,423

 

 

 
250

 
250

 
0.02

Commercial real estate
1,436,508

 
1,436,064

 
129

 

 
315

 
444

 
0.03

Commercial & industrial
1,120,707

 
1,117,240

 
2,894

 

 
573

 
3,467

 
0.31

HELOC
136,995

 
136,004

 
439

 
147

 
405

 
991

 
0.72

Consumer
219,971

 
219,404

 
352

 
154

 
61

 
567

 
0.26

Total Loans
$
11,280,574

 
$
11,232,320

 
$
15,222

 
$
9,034

 
$
23,998

 
$
48,254

 
0.43
%
Delinquency %
 
 
99.57%
 
0.13%
 
0.08%
 
0.21%
 
0.43%
 
 



13

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


September 30, 2017
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
 
 
(In thousands)
 
 
Single-family residential
$
5,709,690

 
$
5,671,933

 
$
10,925

 
$
4,810

 
$
22,022

 
$
37,757

 
0.66
%
Construction
793,959

 
793,959

 

 

 

 

 

Construction - custom
277,599

 
277,508

 

 

 
91

 
91

 
0.03

Land - acquisition & development
104,856

 
104,526

 

 

 
330

 
330

 
0.31

Land - consumer lot loans
104,335

 
103,389

 
112

 
680

 
154

 
946

 
0.91

Multi-family
1,303,119

 
1,302,720

 
5

 
255

 
139

 
399

 
0.03

Commercial real estate
1,434,610

 
1,432,052

 
507

 

 
2,051

 
2,558

 
0.18

Commercial & industrial
1,093,360

 
1,092,735

 

 
51

 
574

 
625

 
0.06

HELOC
144,850

 
143,974

 
221

 
342

 
313

 
876

 
0.60

Consumer
85,075

 
84,644

 
245

 
107

 
79

 
431

 
0.51

Total Loans
$
11,051,453

 
$
11,007,440

 
$
12,015

 
$
6,245

 
$
25,753

 
$
44,013

 
0.40
%
Delinquency %
 
 
99.60%
 
0.11%
 
0.06%
 
0.23%
 
0.40%
 
 

The percentage of total delinquent loans increased from 0.40% as of September 30, 2017 to 0.43% as of December 31, 2017 and there are no loans greater than 90 days delinquent and still accruing interest as of either date.

The following table provides information related to loans that were restructured in a troubled debt restructuring ("TDR") during the periods presented:

 
Three Months Ended December 31,
 
2017
 
2016
 
 
 
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
8

 
$
2,012

 
$
2,012

 
12

 
$
2,134

 
$
2,134

   Land - consumer lot loans

 

 

 
1

 
204

 
204

   Commercial & Industrial
3

 
7,256

 
7,256

 

 

 

   HELOC

 

 

 
1

 
228

 
228

 
11

 
$
9,268

 
$
9,268

 
14

 
$
2,566

 
$
2,566




14

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


The following table provides 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 December 31,
 
2017
 
2016
 
Number of
 
Recorded
 
Number of
 
Recorded
 
Contracts
 
Investment
 
Contracts
 
Investment
 
(In thousands)
 
(In thousands)
TDRs That Subsequently Defaulted:
 
 
 
 
 
 
 
   Single-family residential
1

 
$
44

 
6

 
$
1,993

   Commercial real estate

 

 
2

 
267

 
1

 
$
44

 
8

 
$
2,260



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 December 31, 2017, 97.6% of the Company's $199,175,000 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 December 31, 2017, single-family residential loans comprised 85.7% 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.

The Company's remaining outstanding balance of assets subject to FDIC loss share agreements was $58,699,000 (including $54,865,000 of loans receivable) at December 31, 2017 compared to $67,914,000 (including $61,810,114 of loans receivable) as of September 30, 2017. As of December 31, 2017, the associated FDIC indemnification asset was $0 compared to a balance of $8,967,000 as of September 30, 2017. The FDIC clawback liability was $39,906,000 as of December 31, 2017 and $37,143,000 as of September 30, 2017. The Company has made a proposal to the FDIC to early terminate its remaining FDIC loss share agreements, which relate to the Horizon Bank and Home Valley Bank acquisitions. During the three months ended December 31, 2017, the Company recorded an $8,550,000 charge resulting from valuation adjustments related to the FDIC indemnification asset and FDIC clawback liability. The valuation adjustments were based on management's estimate of the amount that would be due to the FDIC to early terminate the loss share agreements.



15

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


NOTE E – Allowance for Losses on Loans
The following tables summarize the activity in the allowance for loan losses. 

Three Months Ended December 31, 2017
Beginning
Allowance
 
Charge-offs
 
Recoveries
 
Provision &
Transfers
 
Ending
Allowance
 
(In thousands)
Single-family residential
$
36,892

 
$
(461
)
 
$
121

 
$
(624
)
 
$
35,928

Construction
24,556

 

 

 
658

 
25,214

Construction - custom
1,944

 
(50
)
 

 
158

 
2,052

Land - acquisition & development
6,829

 

 
3,372

 
(2,846
)
 
7,355

Land - consumer lot loans
2,649

 
(47
)
 

 
304

 
2,906

Multi-family
7,862

 

 

 
42

 
7,904

Commercial real estate
11,818

 

 

 
(193
)
 
11,625

Commercial & industrial
28,524

 
(116
)
 
55

 
805

 
29,268

HELOC
855

 

 

 
(47
)
 
808

Consumer
1,144

 
(78
)
 
286

 
2,743

 
4,095

 
$
123,073

 
$
(752
)
 
$
3,834

 
$
1,000

 
$
127,155

Three Months Ended December 31, 2016
Beginning
Allowance
 
Charge-offs
 
Recoveries
 
Provision &
Transfers
 
Ending
Allowance
 
(In thousands)
Single-family residential
$
37,796

 
$
(115
)
 
$
151

 
$
374

 
$
38,206

Construction
19,838

 

 

 
2,096

 
21,934

Construction - custom
1,080

 

 

 
30

 
1,110

Land - acquisition & development
6,023

 
(20
)
 
4,018

 
(3,356
)
 
6,665

Land - consumer lot loans
2,535

 
(17
)
 
70

 
(87
)
 
2,501

Multi-family
6,925

 

 

 
704

 
7,629

Commercial real estate
8,588

 
(11
)
 
356

 
1,235

 
10,168

Commercial & industrial
28,008

 
(58
)
 
725

 
(939
)
 
27,736

HELOC
813

 
(37
)
 
1

 
55

 
832

Consumer
1,888

 
(146
)
 
379

 
(446
)
 
1,675

 
$
113,494

 
$
(404
)
 
$
5,700

 
$
(334
)
 
$
118,456


The Company recorded no provision for loan losses during the three months ended December 31, 2017 or December 31, 2016. Reserving for new loan originations as the loan portfolio grows and the mix changes has been largely offset by recoveries of previously charged-off loans. Recoveries, net of charge-offs, totaled $3,082,000 for the three months ended December 31, 2017, compared with $5,296,000 of net recoveries for the same period one year ago.
Non-performing assets were $63,448,000, or 0.41%, of total assets at December 31, 2017, compared to $70,238,000, or 0.46%, of total assets at September 30, 2017. Non-accrual loans were $45,520,000 at December 31, 2017, compared to $49,580,000 at September 30, 2017. Delinquencies, as a percent of total loans, were 0.43% at December 31, 2017, compared to 0.40% at September 30, 2017.

The reserve for unfunded commitments was $6,750,000 as of December 31, 2017, which is a decrease from $7,750,000 at September 30, 2017.

Management believes the allowance for loan losses plus the reserve for unfunded commitments, totaling $133,905,000, or 1.08% of gross loans as of December 31, 2017, is sufficient to absorb estimated inherent losses.

16

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


The following tables show loans collectively and individually evaluated for impairment and the related allocation of general and specific reserves.
 
December 31, 2017
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
$
35,928

 
$
5,676,565

 
0.6
%
 
$

 
$
24,083

 
%
Construction
25,214

 
851,800

 
3.0

 

 
364

 

Construction - custom
2,052

 
292,255

 
0.7

 

 

 

Land - acquisition & development
7,355

 
110,884

 
6.6

 

 
1,376

 

Land - consumer lot loans
2,906

 
97,291

 
3.0

 

 
416

 

Multi-family
7,899

 
1,311,943

 
0.6

 
5

 
730

 
0.7

Commercial real estate
11,519

 
1,389,749

 
0.8

 
106

 
27,535

 
0.4

Commercial & industrial
28,744

 
1,108,961

 
2.6

 
524

 
11,694

 
4.5

HELOC
808

 
134,320

 
0.6

 

 
620

 

Consumer
4,095

 
219,784

 
1.9

 

 
70

 

 
$
126,520

 
$
11,193,552

 
1.1
%
 
$
635

 
$
66,888

 
0.9
%

September 30, 2017
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
$
36,893

 
$
5,713,576

 
0.7
%
 
$

 
$
5,552

 
%
Construction
24,556

 
793,958

 
3.1

 

 

 

Construction - custom
1,944

 
277,495

 
0.7

 

 
105

 

Land - acquisition & development
6,828

 
104,767

 
6.5

 
1

 
89

 
1.0

Land - consumer lot loans
2,649

 
96,337

 
2.8

 

 
171

 

Multi-family
7,857

 
1,302,625

 
0.6

 
5

 
493

 
1.0

Commercial real estate
11,697

 
1,391,668

 
0.8

 
120

 
21,765

 
0.6

Commercial & industrial
28,524

 
1,093,210

 
2.6

 

 
81

 

HELOC
855

 
141,689

 
0.6

 

 
215

 

Consumer
1,144

 
84,887

 
1.4

 

 
82

 

 
$
122,947

 
$
11,000,212

 
1.1
%
 
$
126

 
$
28,553

 
0.4
%

As of December 31, 2017, $126,520,000 of the allowance was calculated under the formulas contained in our general allowance methodology and the remaining $635,000 was specific reserves on loans deemed to be individually impaired. As of September 30, 2017, $122,947,000 of the allowance was calculated under the formulas contained in our general allowance methodology and the remaining $126,000 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 the Board of Directors on a quarterly basis. The single-family residential, HELOC and consumer portfolios are evaluated based on their performance as a pool of loans, since no single loan is individually significant or judged by its risk rating, size or potential risk of loss. The construction, land, multi-family, commercial real estate and commercial and industrial loans are risk rated on a loan by

17

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


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.


18

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


The following tables provide information on loans based on risk rating categories as defined above.
December 31, 2017
Internally Assigned Grade
 
 
 
Pass
 
Special mention
 
Substandard
 
Doubtful
 
Loss
 
Total Gross Loans
 
(In thousands)
Loan type
 
 
 
 
 
 
 
 
 
 
 
  Single-family residential
$
5,657,731

 
$

 
$
35,587

 
$

 
$

 
$
5,693,318

  Construction
1,707,044

 

 
3,374

 

 

 
1,710,418

  Construction - custom
583,580

 

 

 

 

 
583,580

  Land - acquisition & development
134,625

 

 
2,313

 

 

 
136,938

  Land - consumer lot loans
104,105

 

 
981

 

 

 
105,086

  Multi-family
1,304,991

 
3,159

 
4,545

 

 

 
1,312,695

  Commercial real estate
1,401,236

 
3,764

 
31,508

 

 

 
1,436,508

  Commercial & industrial
1,077,207

 
10,423

 
33,077

 

 

 
1,120,707

  HELOC
136,287

 

 
708

 

 

 
136,995

  Consumer
219,899

 

 
72

 

 

 
219,971

Total gross loans
$
12,326,705

 
$
17,346

 
$
112,165

 
$

 
$

 
$
12,456,216

 
 
 
 
 
 
 
 
 
 
 
 
Total grade as a % of total gross loans
99.0
%
 
0.1
%
 
0.9
%
 
%
 
%
 
 

September 30, 2017
Internally Assigned Grade
 
 
 
Pass
 
Special mention
 
Substandard
 
Doubtful
 
Loss
 
Total Gross Loans
 
(In thousands)
Loan type
 
 
 
 
 
 
 
 
 
 
 
 Single-family residential
$
5,671,229

 
$

 
$
39,775

 
$

 
$

 
$
5,711,004

 Construction
1,594,926

 

 
3,070

 

 

 
1,597,996

 Construction - custom
602,540

 

 
91

 

 

 
602,631

 Land - acquisition & development
123,028

 
207

 
1,073

 

 

 
124,308

 Land - consumer lot loans
103,787

 

 
618

 

 

 
104,405

 Multi-family
1,295,261

 
5,795

 
2,092

 

 

 
1,303,148

 Commercial real estate
1,391,996

 
5,944

 
36,670

 

 

 
1,434,610

 Commercial & industrial
1,054,972

 
14,814

 
23,574

 

 

 
1,093,360

 HELOC
144,229

 

 
621

 

 

 
144,850

 Consumer
84,984

 

 
91

 

 

 
85,075

Total gross loans
$
12,066,952

 
$
26,760

 
$
107,675

 
$

 
$

 
$
12,201,387

 
 
 
 
 
 
 
 
 
 
 
 
Total grade as a % of total gross loans
98.9
%
 
0.2
%
 
0.9
%
 
%
 
%
 
 




19

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.

December 31, 2017
Performing Loans
 
Non-Performing Loans
 
Amount
 
% of Total
Gross  Loans
 
Amount
 
% of Total
Gross  Loans
 
(In thousands)
Single-family residential
$
5,667,099

 
99.5
%
 
$
26,219

 
0.5
%
Construction
1,710,054

 
100.0

 
364

 

Construction - custom
583,580

 
100.0

 

 

Land - acquisition & development
135,612

 
99.0

 
1,326

 
1.0

Land - consumer lot loans
104,110

 
99.1

 
976

 
0.9

Multi-family
1,312,445

 
100.0

 
250

 

Commercial real estate
1,428,267

 
99.4

 
8,241

 
0.6

Commercial & industrial
1,113,111

 
99.3

 
7,596

 
0.7

HELOC
136,519

 
99.7

 
476

 
0.3

Consumer
219,899

 
100.0

 
72

 

 
$
12,410,696

 
99.6
%
 
$
45,520

 
0.4
%
September 30, 2017
Performing Loans
 
Non-Performing Loans
 
Amount
 
% of Total
Gross  Loans
 
Amount
 
% of Total
Gross  Loans
 
(In thousands)
Single-family residential
$
5,683,074

 
99.5
%
 
$
27,930

 
0.5
%
Construction
1,597,996

 
100.0

 

 

Construction - custom
602,540

 
99.9