WASHINGTON FEDERAL INC - FORM 10-Q - May 1, 2018

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EX-32 - EXHIBIT 32 - WASHINGTON FEDERAL INCwafd10-qex323312018.htm
EX-31.2 - EXHIBIT 31.2 - WASHINGTON FEDERAL INCwafd10-qex3123312018.htm
EX-31.1 - EXHIBIT 31.1 - WASHINGTON FEDERAL INCwafd10-qex3113312018.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 March 31, 2018
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:
April 30, 2018
Common stock, $1.00 par value
84,474,615


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)





 
March 31, 2018
 
September 30, 2017
 
(In thousands, except share data)
ASSETS
 
 
 
Cash and cash equivalents
$
256,808

 
$
313,070

Available-for-sale securities, at fair value
1,269,271

 
1,266,209

Held-to-maturity securities, at amortized cost
1,716,566

 
1,646,856

Loans receivable, net of allowance for loan losses of $127,576 and $123,073
11,224,088

 
10,882,622

Interest receivable
43,931

 
41,643

Premises and equipment, net
265,388

 
263,694

Real estate owned
15,904

 
20,658

FHLB and FRB stock
126,990

 
122,990

Bank owned life insurance
213,274

 
211,330

Intangible assets, including goodwill of $301,368 and $293,153
312,303

 
298,682

Federal and state income tax assets, net
1,414

 
—

Other assets
187,193

 
185,826

 
$
15,633,130

 
$
15,253,580

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Liabilities
 
 
 
Customer accounts
 
 
 
Transaction deposit accounts
$
6,463,301

 
$
6,361,158

Time deposit accounts
4,675,555

 
4,473,850

 
11,138,856

 
10,835,008

FHLB advances
2,325,000

 
2,225,000

Advance payments by borrowers for taxes and insurance
41,285

 
56,631

Accrued expenses and other liabilities
139,316

 
131,253

 
13,644,457

 
13,247,892

Stockholders’ equity
 
 
 
Common stock, $1.00 par value, 300,000,000 shares authorized; 135,334,158 and 134,957,511 shares issued; 84,749,203 and 87,193,362 shares outstanding
135,334

 
134,958

Additional paid-in capital
1,664,275

 
1,660,885

Accumulated other comprehensive income (loss), net of taxes
8,899

 
5,015

Treasury stock, at cost; 50,584,955 and 47,764,149 shares
(935,039
)
 
(838,060
)
Retained earnings
1,115,204

 
1,042,890

 
1,988,673

 
2,005,688

 
$
15,633,130

 
$
15,253,580




SEE NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
3

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

 
Three Months Ended March 31,
 
Six Months Ended March 31,
 
2018
 
2017
 
2018
 
2017
 
(In thousands, except share data)
 
(In thousands, except share data)
INTEREST INCOME
 
 
 
 
 
 
 
Loans receivable
$
126,529

 
$
116,034

 
$
251,040

 
$
230,869

Mortgage-backed securities
17,667

 
16,226

 
34,566

 
29,015

Investment securities and cash equivalents
4,883

 
3,938

 
9,253

 
9,078

 
149,079

 
136,198

 
294,859

 
268,962

INTEREST EXPENSE
 
 
 
 
 
 
 
Customer accounts
16,414

 
12,392

 
31,052

 
25,409

FHLB advances
15,364

 
16,079

 
30,771

 
32,674

 
31,778

 
28,471

 
61,823

 
58,083

Net interest income
117,301

 
107,727

 
233,036

 
210,879

Provision (release) for loan losses
(950
)
 
(1,600
)
 
(950
)
 
(1,600
)
Net interest income after provision (release) for loan losses
118,251

 
109,327

 
233,986

 
212,479

 
 
 
 
 
 
 
 
OTHER INCOME
 
 
 
 
 
 
 
Gain on sale of investment securities
—

 
—

 
—

 
968

FDIC loss share valuation adjustments
—

 
—

 
(8,550
)
 
—

Loan fee income
780

 
1,087

 
1,815

 
2,421

Deposit fee income
6,403

 
4,904

 
13,089

 
10,089

Other income
5,404

 
4,145

 
13,028

 
8,554

 
12,587

 
10,136

 
19,382

 
22,032

 
 
 
 
 
 
 
 
OTHER EXPENSE
 
 
 
 
 
 
 
Compensation and benefits
31,625

 
28,833

 
61,244

 
55,827

Occupancy
9,013

 
9,091

 
17,684

 
17,541

FDIC insurance premiums
2,852

 
2,910

 
5,672

 
5,749

Product delivery
3,665

 
3,489

 
7,621

 
6,850

Information technology
8,781

 
6,686

 
16,710

 
13,137

Other expense
9,851

 
6,458

 
18,797

 
12,704

 
65,787

 
57,467

 
127,728

 
111,808

Gain (loss) on real estate owned, net
(278
)
 
795

 
(232
)
 
1,193

Income before income taxes
64,773

 
62,791

 
125,408

 
123,896

Income tax expense
15,502

 
20,721

 
24,467

 
40,580

NET INCOME
$
49,271

 
$
42,070

 
$
100,941

 
$
83,316

 

 


 
 
 
 
PER SHARE DATA
 
 
 
 
 
 
 
Basic earnings per share
$
0.58

 
$
0.47

 
$
1.17

 
$
0.93

Diluted earnings per share
0.57

 
0.47

 
1.17

 
0.93

Dividends paid on common stock per share
0.17

 
0.40

 
0.32

 
0.54

Basic weighted average number of shares outstanding
85,647,494

 
89,382,416

 
86,299,885

 
89,346,294

Diluted weighted average number of shares outstanding
85,747,167

 
89,736,320

 
86,422,077

 
89,732,042


SEE NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
4


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

 
Three Months Ended March 31,
 
Six Months Ended March 31,
 
2018
 
2017
 
2018
 
2017
 
(In thousands)
 
(In thousands)
Net income
$
49,271

 
$
42,070

 
$
100,941

 
$
83,316

 
 
 
 
 
 
 
 
Other comprehensive income (loss) net of tax:
 
 
 
 
 
 
 
Net unrealized gain (loss) on available-for-sale investment securities
(11,467
)
 
5,685

 
(13,431
)
 
(11,394
)
Reclassification adjustment of net gain (loss) from sale of available-for-sale securities included in net income
—

 
—

 
—

 
968

Related tax benefit (expense)
3,681

 
(2,089
)
 
4,403

 
3,832

 
(7,786
)
 
3,596

 
(9,028
)
 
(6,594
)
 
 
 
 
 
 
 
 
Net unrealized gain (loss) on cash flow hedges of borrowings
10,332

 
2,395

 
17,022

 
31,666

Related tax benefit (expense)
(1,651
)
 
(880
)
 
(4,110
)
 
(11,637
)
 
8,681

 
1,515

 
12,912

 
20,029

 
 
 
 
 
 
 
 
Other comprehensive income (loss) net of tax
895

 
5,111

 
3,884

 
13,435

Comprehensive income
$
50,166

 
$
47,181

 
$
104,825

 
$
96,751





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

Adjustment pursuant to adoption of ASU 2018-02
—

—

(1,772
)
1,772

—

—

Net income
—

—

100,941

—

—

100,941

Other comprehensive income (loss)
—

—

—

2,112

—

2,112

Dividends on common stock
—

—

(26,855
)
—

—

(26,855
)
Proceeds from exercise of common stock options
56

1,176

—

—

—

1,232

Restricted stock expense
211

2,323

—

—

—

2,534

Exercise of stock warrants
109

(109
)
 
 
 
—

Treasury stock acquired
—

—

—

—

(96,979
)
(96,979
)
Balance at March 31, 2018
$
135,334

$
1,664,275

$
1,115,204

$
8,899

$
(935,039
)
$
1,988,673

 
 
 
 
 
 
 
(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
—

—

83,316

—

—

83,316

Other comprehensive income (loss)
—

—

—

13,435

—

13,435

Dividends on common stock
—

—

(47,995
)
—

—

(47,995
)
Proceeds from exercise of common stock options
282

6,223

—

—

—

6,505

Restricted stock expense
110

4,061

—

—

—

4,171

Exercise of stock warrants
124

(124
)
—

—

—

—

Treasury stock acquired
—

—

—

—

(20,401
)
(20,401
)
Balance at March 31, 2017
$
134,824

$
1,658,548

$
979,198

$
2,279

$
(760,087
)
$
2,014,762




SEE NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
6


WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED) 
 
Six Months Ended March 31,
 
2018
 
2017
 
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
 
Net income
$
100,941

 
$
83,316

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation, amortization, and accretion expense, net
26,756

 
18,770

Cash received from (paid to) FDIC under loss share agreements, net
1,595

 
264

Stock based compensation expense
2,534

 
4,171

Provision (release) for loan losses
(950
)
 
(1,600
)
Loss (gain) on sale of investment securities
—

 
(968
)
Decrease (increase) in accrued interest receivable
(2,288
)
 
(2,904
)
Decrease (increase) in federal and state income tax receivable
(1,414
)
 
16,047

Decrease (increase) in cash surrender value of bank owned life insurance
(3,012
)
 
(3,332
)
Gain on bank owned life insurance
(2,416
)
 
(649
)
Net realized (gain) loss on sales of premises, equipment, and real estate owned
(1,022
)
 
(2,587
)
Decrease (increase) in other assets
(8,797
)
 
15,275

Increase (decrease) in accrued expenses and other liabilities
8,277

 
(41,839
)
Net cash provided by (used in) operating activities
120,204

 
83,964

CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
Origination of loans and principal repayments, net
(199,526
)
 
(477,029
)
Loans purchased
(143,605
)
 
(72,856
)
FHLB & FRB stock purchased
(259,400
)
 
(17,209
)
FHLB & FRB stock redeemed
255,400

 
14,424

Available-for-sale securities purchased
(123,324
)
 
—

Principal payments and maturities of available-for-sale securities
104,733

 
169,937

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
98,781

 
131,556

Proceeds from sales of real estate owned
6,803

 
10,222

Proceeds from settlement of bank owned life insurance
3,484

 
1,231

Cash paid for acquisitions
(2,211
)
 
—

Proceeds from sales of premises and equipment
1

 
3,956

Premises and equipment purchased and REO improvements
(12,819
)
 
(4,872
)
Net cash provided by (used in) investing activities
(442,519
)
 
(305,479
)
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
Net increase (decrease) in customer accounts
304,001

 
30,107

Proceeds from borrowings
6,485,000

 
430,000

Repayments of borrowings
(6,385,000
)
 
(360,000
)
Proceeds from exercise of common stock options and related tax benefit
1,232

 
6,505

Dividends paid on common stock
(26,855
)
 
(47,995
)
Treasury stock purchased
(96,979
)
 
(20,401
)
Increase (decrease) in borrower advances related to taxes and insurance, net
(15,346
)
 
(672
)
Net cash provided by (used in) financing activities
266,053

 
37,544

Increase (decrease) in cash and cash equivalents
(56,262
)
 
(183,971
)
Cash and cash equivalents at beginning of period
313,070

 
450,368

Cash and cash equivalents at end of period
$
256,808

 
$
266,397

(CONTINUED)

SEE NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
7


WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
Six Months Ended March 31,
 
2018
 
2017
 
(In thousands)
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
 
Non-cash investing activities
 
 
 
Real estate acquired through foreclosure
$
1,329

 
$
2,134

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

 
4,036

Cash paid during the period for
 
 
 
Interest
60,870

 
55,599

Income taxes
25,265

 
16,903




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 six months ended March 31, 2018, 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 $2,157,589,000 and $1,992,905,000 at March 31, 2018 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 February 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The ASU was issued to address certain stranded tax effects in accumulated other comprehensive income as a result of the Tax Cuts and Jobs Act of 2017. The guidance is effective for fiscal years beginning after December 15, 2018, including interim periods, therein, and early adoption is permitted. During the quarter ended March 31, 2018, the Company adopted the ASU and made a reclassification adjustment of $1,772,000 to increase accumulated other comprehensive income and decrease retained earnings on the Consolidated Statements of Changes in Stockholders' Equity.

In August 2017, the FASB issued 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

9
WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


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 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. During the quarter ended March 31, 2018, the Company adopted the ASU and there was no 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. During the quarter ended March 31, 2018, the Company adopted the ASU and there was no 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

10
WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


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 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

11
WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


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

On February 23, 2018, the Company paid a regular dividend on common stock of $0.17 per share, which represented the 140th consecutive quarterly cash dividend. Dividends per share were $0.17 and $0.40 for the quarters ended March 31, 2018 and 2017, respectively. On April 30, 2018, the Company declared a regular dividend on common stock of $0.17 per share, which represents its 141st consecutive quarterly cash dividend. This dividend will be paid on May 25, 2018 to common shareholders of record on May 11, 2018.

For the three months ended March 31, 2018, the Company repurchased 1,673,436 shares at an average price of $34.66. No shares of common stock were issued during the three months ended March 31, 2018 to investors holding warrants previously issued as part of the 2008 Troubled Asset Relief Program ("TARP"). As of March 31, 2018, 112,649 such warrants remain outstanding. Net of warrant cash repurchase activity, there are 4,080,149 remaining shares authorized to be repurchased under the current Board approved share repurchase program.

NOTE D – Loans Receivable

The following table is a summary of loans receivable.
 
March 31, 2018
 
September 30, 2017
 
(In thousands)
 
(In thousands)
Gross loans by category
 
 
 
 
 
   Single-family residential
$
5,705,350

45.5
%
 
$
5,711,004

46.8
%
   Construction
1,732,202

13.8

 
1,597,996

13.1

   Construction - custom
597,671

4.8

 
602,631

4.9

   Land - acquisition & development
141,628

1.1

 
124,308

1.0

   Land - consumer lot loans
102,779

0.8

 
104,405

0.9

   Multi-family
1,328,049

10.6

 
1,303,148

10.7

   Commercial real estate
1,443,437

11.5

 
1,434,610

11.8

   Commercial & industrial
1,151,108

9.2

 
1,093,360

9.0

   HELOC
135,119

1.1

 
144,850

1.2

   Consumer
202,911

1.6

 
85,075

0.7

Total gross loans
12,540,254

100
%
 
12,201,387

100
%
   Less:
 
 
 
 
 
      Allowance for loan losses
127,576

 
 
123,073

 
      Loans in process
1,141,018

 
 
1,149,934

 
      Net deferred fees, costs and discounts
47,572

 
 
45,758

 
Total loan contra accounts
1,316,166

 
 
1,318,765

 
Net loans
$
11,224,088

 
 
$
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.
 
 
March 31, 2018
 
September 30, 2017
 
(In thousands)
Non-accrual loans:
 
 
 
 
 
 
 
Single-family residential
$
25,319

 
47.1
%
 
$
27,930

 
56.3
%
Construction
2,296

 
4.3

 
—

 
—

Construction - custom
—

 
—

 
91

 
0.2

Land - acquisition & development
2,004

 
3.7

 
296

 
0.6

Land - consumer lot loans
1,045

 
1.9

 
605

 
1.2

Multi-family
—

 
—

 
139

 
0.3

Commercial real estate
9,527

 
17.7

 
11,815

 
23.8

Commercial & industrial
13,362

 
24.8

 
8,082

 
16.3

HELOC
217

 
0.4

 
531

 
1.1

Consumer
38

 
0.1

 
91

 
0.2

Total non-accrual loans
$
53,808

 
100
%
 
$
49,580

 
100
%
% of total net loans
0.48
%
 
 
 
0.46
%
 
 

The Company recognized interest income on non-accrual loans of approximately $3,228,000 in the six months ended March 31, 2018. Had these loans been on accrual status and performed according to their original contract terms, the Company would have recognized interest income of approximately $1,073,000 for the six months ended March 31, 2018. Interest cash flows collected on non-accrual loans vary from period to period as those loans are brought current or are paid off.

The following tables provide details regarding delinquent loans.
 
March 31, 2018
Loans Receivable
 
Days Delinquent Based on $ Amount of Loans
 
% based
on $
Type of Loan
Net of Loans In Process
 
Current
 
30
 
60
 
90
 
Total Delinquent
 
 
(In thousands)
 
 
Single-family residential
$
5,704,505

 
$
5,675,605

 
$
6,268

 
$
3,621

 
$
19,011

 
$
28,900

 
0.51
%
Construction
916,662

 
913,419

 
948

 
—

 
2,295

 
3,243

 
0.35

Construction - custom
295,699

 
295,699

 
—

 
—

 
—

 
—

 
—

Land - acquisition & development
119,063

 
117,200

 
—

 
—

 
1,863

 
1,863

 
1.56

Land - consumer lot loans
102,705

 
101,837

 
328

 
—

 
540

 
868

 
0.85

Multi-family
1,328,027

 
1,327,864

 
29

 
134

 
—

 
163

 
0.01

Commercial real estate
1,443,437

 
1,441,459

 
1,275

 
98

 
605

 
1,978

 
0.14

Commercial & industrial
1,151,108

 
1,143,385

 
1,850

 
5,752

 
121

 
7,723

 
0.67

HELOC
135,119

 
134,866

 
163

 
30

 
60

 
253

 
0.19

Consumer
202,911

 
202,413

 
348

 
127

 
23

 
498

 
0.25

Total Loans
$
11,399,236

 
$
11,353,747

 
$
11,209

 
$
9,762

 
$
24,518

 
$
45,489

 
0.40
%
Delinquency %
 
 
99.60%
 
0.10%
 
0.09%
 
0.22%
 
0.40%
 
 



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 was 0.40% as of September 30, 2017 and 0.40% as of March 31, 2018. 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 March 31,
 
2018
 
2017
 
 
 
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
12

 
$
2,183

 
$
2,183

 
8

 
$
1,712

 
$
1,712

 
12

 
$
2,183

 
$
2,183

 
8

 
$
1,712

 
$
1,712




14
WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


 
Six Months Ended March 31,
 
2018
 
2017
 
 
 
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
20

 
$
4,195

 
$
4,195

 
20

 
$
3,846

 
$
3,846

   Land - consumer lot loans
—

 
—

 
—

 
1

 
204

 
204

   Commercial & Industrial
3

 
7,256

 
7,256

 
—

 
—

 
—

   HELOC
—

 
—

 
—

 
1

 
228

 
228

 
23

 
$
11,451

 
$
11,451

 
22

 
$
4,278

 
$
4,278


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 March 31,
 
2018
 
2017
 
Number of
 
Recorded
 
Number of
 
Recorded
 
Contracts
 
Investment
 
Contracts
 
Investment
 
(In thousands)
 
(In thousands)
Trouble Debt Restructurings That Subsequently Defaulted:
 
 
 
 
 
 
 
   Single-family residential
1

 
$
162

 
7

 
$
1,192

 
1

 
$
162

 
7

 
$
1,192



 
Six Months Ended March 31,
 
2018
 
2017
 
Number of
 
Recorded
 
Number of
 
Recorded
 
Contracts
 
Investment
 
Contracts
 
Investment
 
(In thousands)
 
(In thousands)
Troubled Debt Restructurings That Subsequently Defaulted:
 
 
 
 
 
 
 
   Single-family residential
2

 
$
206

 
13

 
$
3,185

   Commercial real estate
—

 
—

 
2

 
267

 
2

 
$
206

 
15

 
$
3,452


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 March 31, 2018, 97.7% of the Company's $190,519,000 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 March 31, 2018, single-family residential loans comprised 85.5% of TDRs.

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

15
WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)



The Company's remaining outstanding balance of assets subject to FDIC loss share agreements was $54,626,000 (including $50,777,000 of loans receivable) at March 31, 2018 compared to $67,914,000 (including $61,810,000 of loans receivable) as of September 30, 2017. As of March 31, 2018, 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 March 31, 2018 and $37,143,000 as of September 30, 2017. In March 2018, the Company reached a preliminary agreement with the FDIC to terminate its remaining FDIC loss share agreements early, which relate to the Horizon Bank and Home Valley Bank acquisitions. The preliminary agreement is consistent with the estimates recorded by the Company as of December 31, 2017 and final settlement is expected to occur in the third fiscal quarter of 2018. All future recoveries, gains, losses and expenses related to the previously covered assets will now be recognized entirely by the Company and the FDIC will no longer share in such gains or losses.



16
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 March 31, 2018
Beginning
Allowance
 
Charge-offs
 
Recoveries
 
Provision &
Transfers
 
Ending
Allowance
 
(In thousands)
Single-family residential
$
35,928

 
$
(290
)
 
$
211

 
$
(1,705
)
 
$
34,144

Construction
25,214

 
—

 
—

 
2,175

 
27,389

Construction - custom
2,052

 
—

 
—

 
29

 
2,081

Land - acquisition & development
7,355

 
—

 
1,207

 
(940
)
 
7,622

Land - consumer lot loans
2,906

 
(18
)
 
—

 
(35
)
 
2,853

Multi-family
7,904

 
—

 
—

 
78

 
7,982

Commercial real estate
11,625

 
(36
)
 
1

 
(2
)
 
11,588

Commercial & industrial
29,268

 
—

 
115

 
(53
)
 
29,330

HELOC
808

 
(1
)
 
—

 
(5
)
 
802

Consumer
4,095

 
(94
)
 
276

 
(492
)
 
3,785

 
$
127,155

 
$
(439
)
 
$
1,810

 
$
(950
)
 
$
127,576

Three Months Ended March 31, 2017
Beginning
Allowance
 
Charge-offs
 
Recoveries
 
Provision &
Transfers
 
Ending
Allowance
 
(In thousands)
Single-family residential
$
38,206

 
$
(381
)
 
$
223

 
$
(884
)
 
$
37,164

Construction
21,934

 
—

 
—

 
3,127

 
25,061

Construction - custom
1,110

 
(3
)
 
—

 
69

 
1,176

Land - acquisition & development
6,665

 
(43
)
 
4,211

 
(4,164
)
 
6,669

Land - consumer lot loans
2,501

 
—

 
180

 
(168
)
 
2,513

Multi-family
7,629

 
—

 
—

 
300

 
7,929

Commercial real estate
10,168

 
—

 
1,164

 
(560
)
 
10,772

Commercial & industrial
27,736

 
(105
)
 
217

 
517

 
28,365

HELOC
832

 
(53
)
 
—

 
47

 
826

Consumer
1,675

 
(508
)
 
314

 
(34
)
 
1,447

 
$
118,456

 
$
(1,093
)
 
$
6,309

 
$
(1,750
)
 
$
121,922



17
WASHINGTON FEDERAL, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


Six Months Ended March 31, 2018
Beginning
Allowance
 
Charge-offs
 
Recoveries
 
Provision &
Transfers
 
Ending
Allowance
 
(In thousands)
Single-family residential
$
36,892

 
$
(750
)
 
$
331

 
$
(2,329
)
 
$
34,144

Construction
24,556

 
—

 
—

 
2,833

 
27,389

Construction - custom
1,944

 
(50
)
 
—

 
187

 
2,081

Land - acquisition & development
6,829

 
—

 
4,579

 
(3,786
)
 
7,622

Land - consumer lot loans
2,649

 
(66
)
 
—

 
270

 
2,853

Multi-family
7,862

 
—

 
—

 
120

 
7,982

Commercial real estate
11,818

 
(36
)
 
1

 
(195
)
 
11,588

Commercial & industrial
28,524

 
(116
)
 
170

 
752

 
29,330

HELOC
855

 
(1
)
 
1

 
(53
)
 
802

Consumer
1,144

 
(172
)
 
562

 
2,251

 
3,785

 
$
123,073

 
$
(1,191
)
 
$
5,644

 
$
50

 
$
127,576


Six Months Ended March 31, 2017
Beginning
Allowance
 
Charge-offs
 
Recoveries
 
Provision &
Transfers
 
Ending
Allowance
 
(In thousands)
Single-family residential
$
37,796

 
$
(496
)
 
$
374

 
$
(510
)
 
$
37,164

Construction
19,838

 
—

 
—

 
5,223

 
25,061

Construction - custom
1,080

 
(3
)
 
—

 
99

 
1,176

Land - acquisition & development
6,023

 
(63
)
 
8,229

 
(7,520
)
 
6,669

Land - consumer lot loans
2,535

 
(17
)
 
250

 
(255
)
 
2,513

Multi-family
6,925

 
—

 
—

 
1,004

 
7,929

Commercial real estate
8,588

 
(11
)
 
1,520

 
675

 
10,772

Commercial & industrial
28,008

 
(163
)
 
942

 
(422
)
 
28,365

HELOC
813

 
(90
)
 
1

 
102

 
826

Consumer
1,888

 
(654
)
 
693

 
(480
)
 
1,447

 
$
113,494

 
$
(1,497
)
 
$
12,009

 
$
(2,084
)
 
$
121,922


The Company recorded a release of allowance for loan losses of $950,000 for the three months ended March 31, 2018, compared to a $1,600,000 release of allowance for loan losses for the three months ended March 31, 2017. A release of allowance for loan losses of $950,000 and $1,600,000 was recorded during the six months ended March 31, 2018 and March 31, 2017, respectively. Reserving for new loan originations as the loan portfolio grows has been largely offset by recoveries of previously charged-off loans. Recoveries, net of charge-offs, totaled $1,371,000 for the three months ended March 31, 2018, compared to net recoveries of $5,216,000 during the three months ended March 31, 2017. Recoveries, net of charge-offs, totaled $4,453,000 for the six months ended March 31, 2018, compared to net recoveries of $10,512,000 during the six months ended March 31, 2017.

Non-performing assets were $69,712,000, or 0.45%, of total assets at March 31, 2018, compared to $70,238,000, or 0.46%, of total assets at September 30, 2017. Non-accrual loans were $53,808,000 at March 31, 2018, compared to $49,580,000 at September 30, 2017. Delinquencies, as a percent of total loans, were 0.40% at March 31, 2018, compared to 0.40% at September 30, 2017.

The reserve for unfunded commitments was $6,750,000 as of March 31, 2018, 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 $134,326,000, or 1.07% of gross loans as of March 31, 2018, is sufficient to absorb estimated inherent losses.


18
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.
 
March 31, 2018
Loans Collectively Evaluated for Impairment
 
Loans Individually Evaluated for Impairment
 
Allowance Allocation
 
Recorded Investment of Loans
 
Ratio
 
Allowance Allocation
 
Recorded Investment of Loans
 
Ratio
 
(In thousands)
 
(In thousands)
Single-family residential
$
34,144

 
$
5,684,940

 
0.6
%
 
$
—

 
$
27,608

 
—
%
Construction
27,389

 
911,650

 
3.0

 
—

 
5,012

 
—

Construction - custom
2,081

 
295,699

 
0.7

 
—

 
—

 
—

Land - acquisition & development
7,622

 
116,877

 
6.5

 
—

 
2,186

 
—

Land - consumer lot loans
2,853

 
95,482

 
3.0

 
—

 
495

 
—

Multi-family
7,978

 
1,324,959

 
0.6

 
4

 
3,068

 
0.1

Commercial real estate
11,484

 
1,385,851

 
0.8

 
104

 
39,861

 
0.3

Commercial & industrial
28,784

 
1,114,171

 
2.6

 
546

 
36,888

 
1.5

HELOC
802

 
133,152

 
0.6

 
—

 
273

 
—

Consumer
3,785

 
202,766

 
1.9

 
—

 
38

 
—

 
$
126,922

 
$
11,265,547

 
1.1
%
 
$
654

 
$
115,429

 
0.6
%

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
$
36,892

 
$
5,713,576

 
0.7
%
 
$
—

 
$
5,552

 
—
%
Construction
24,556

 
793,958

 
3.1

 
—