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What changed in WAFD INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of WAFD INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+367 added−343 removedSource: 10-K (2023-11-17) vs 10-K (2022-11-18)

Top changes in WAFD INC's 2023 10-K

367 paragraphs added · 343 removed · 262 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

64 edited+15 added−14 removed116 unchanged
Biggest changeSeptember 30, 2022 September 30, 2021 September 30, 2020 September 30, 2019 September 30, 2018 ($ in thousands) Gross loans by category Commercial loans Multi-family $ 2,645,801 13.6 % $ 2,291,477 14.1 % $ 1,538,762 10.6 % $ 1,422,674 10.7 % $ 1,385,125 10.8 % Commercial real estate 3,133,660 16.2 2,443,845 15.0 1,895,086 13.1 1,631,170 12.3 1,452,168 11.3 Commercial & industrial 2,350,984 12.1 2,314,654 14.2 2,132,160 14.7 1,268,695 9.5 1,140,874 8.9 Construction 3,784,388 19.5 2,888,214 17.7 2,403,276 16.6 2,038,052 15.3 1,890,668 14.7 Land - acquisition & development 291,301 1.5 222,457 1.4 193,745 1.3 204,107 1.5 155,204 1.2 Total commercial loans 12,206,134 63.1 10,160,647 62.3 8,163,029 56.4 6,564,698 49.3 6,024,039 46.9 Consumer loans Single-family residential 5,771,862 29.8 4,951,627 30.4 5,304,689 36.7 5,835,194 43.8 5,798,966 45.1 Construction - custom 974,652 5.0 783,221 4.8 674,879 4.7 540,741 4.1 624,479 4.9 Land - consumer lot loans 153,240 0.8 149,956 0.9 102,263 0.7 99,694 0.7 102,036 0.8 HELOC 203,528 1.0 165,989 1.0 139,703 1.0 142,178 1.1 130,852 1.0 Consumer 75,543 0.4 87,892 0.5 83,159 0.6 129,883 1.0 173,306 1.3 Total consumer loans 7,178,825 36.9 6,138,685 37.7 6,304,693 43.6 6,747,690 50.7 6,829,639 53.1 Total gross loans 19,384,959 100 % 16,299,332 100 % 14,467,722 100 % 13,312,388 100 % 12,853,678 100 % Less: Allowance for credit losses (1) 172,808 171,300 166,955 131,534 129,257 Loans in process 3,006,023 2,232,836 1,456,072 1,201,341 1,195,506 Net deferred fees, costs and discounts 92,564 61,626 52,378 48,938 51,834 Total loan contra accounts 3,271,395 2,465,762 1,675,405 1,381,813 1,376,597 Net loans $ 16,113,564 $ 13,833,570 $ 12,792,317 $ 11,930,575 $ 11,477,081 __________________ (1) The reserve for unfunded commitments was $32,500,000, $27,500,000, $25,000,000, $6,900,000 and $7,250,000 as of September 30, 2022, 2021, 2020, 2019 and 2018 respectively. 7 Lending Programs and Policies.
Biggest changeSeptember 30, 2023 September 30, 2022 September 30, 2021 September 30, 2020 September 30, 2019 ($ in thousands) Gross loans by category Commercial loans Multi-family $ 2,907,086 14.8 % $ 2,645,801 13.6 % $ 2,291,477 14.1 % $ 1,538,762 10.6 % $ 1,422,674 10.7 % Commercial real estate 3,344,959 17.0 3,133,660 16.2 2,443,845 15.0 1,895,086 13.1 1,631,170 12.3 Commercial & industrial 2,321,717 11.8 2,350,984 12.1 2,314,654 14.2 2,132,160 14.7 1,268,695 9.5 Construction 3,318,994 16.9 3,784,388 19.5 2,888,214 17.7 2,403,276 16.6 2,038,052 15.3 Land - acquisition & development 201,538 1.0 291,301 1.5 222,457 1.4 193,745 1.3 204,107 1.5 Total commercial loans 12,094,294 61.6 12,206,134 63.0 10,160,647 62.3 8,163,029 56.4 6,564,698 49.3 Consumer loans Single-family residential 6,451,270 32.8 5,771,862 29.8 4,951,627 30.4 5,304,689 36.7 5,835,194 43.8 Construction - custom 672,643 3.4 974,652 5.0 783,221 4.8 674,879 4.7 540,741 4.1 Land - consumer lot loans 125,723 0.6 153,240 0.8 149,956 0.9 102,263 0.7 99,694 0.7 HELOC 234,410 1.2 203,528 1.0 165,989 1.0 139,703 1.0 142,178 1.1 Consumer 70,164 0.4 75,543 0.4 87,892 0.5 83,159 0.6 129,883 1.0 Total consumer loans 7,554,210 38.4 7,178,825 37.0 6,138,685 37.7 6,304,693 43.6 6,747,690 50.7 Total gross loans 19,648,504 100 % 19,384,959 100 % 16,299,332 100 % 14,467,722 100 % 13,312,388 100 % Less: Allowance for credit losses (1) 177,207 172,808 171,300 166,955 131,534 Loans in process 1,895,940 3,006,023 2,232,836 1,456,072 1,201,341 Net deferred fees, costs and discounts 98,807 92,564 61,626 52,378 48,938 Total loan contra accounts 2,171,954 3,271,395 2,465,762 1,675,405 1,381,813 Net loans $ 17,476,550 $ 16,113,564 $ 13,833,570 $ 12,792,317 $ 11,930,575 __________________ (1) The ACL within the table does not include the the reserve for unfunded commitments which was $24,500,000, $32,500,000, $27,500,000, $25,000,000 and $6,900,000 as of September 30, 2023, 2022, 2021, 2020 and 2019 respectively. 7 Lending Programs and Policies.
Compensation and Benefits. We provide a competitive compensation and benefits program to help meet the needs of our employees.
We provide a competitive compensation and benefits program to help meet the needs of our employees.
The Company is registered as a bank holding company and is subject to regulation, examination, supervision and reporting requirements of the Federal Reserve. Regulation. The Company operates in a highly regulated industry. The regulatory structure governing the Company’s operations is designed primarily for the protection of the deposit insurance funds and consumers, and not to benefit our shareholders.
The Company is registered as a bank holding company and is subject to regulation, examination, supervision and reporting requirements of the Federal Reserve Bank. Regulation. The Company operates in a highly regulated industry. The regulatory structure governing the Company’s operations is designed primarily for the protection of the deposit insurance funds and consumers, and not to benefit our shareholders.
In addition, the Company’s ability to pay dividends is subject to rules and policies of the Federal Reserve. It is the policy of the Federal Reserve that bank holding companies should pay cash dividends only out of income available over the past year and only if prospective earnings retention is consistent with the company’s expected future needs and financial condition.
In addition, the Company’s ability to pay dividends is subject to rules and policies of the FRB. It is the policy of the Federal Reserve that bank holding companies should pay cash dividends only out of income available over the past year and only if prospective earnings retention is consistent with the company’s expected future needs and financial condition.
We compete with some competitors within our geographic market area, and with others on a product specific basis, such 19 as the residential mortgage market. Our ability to compete effectively depends on our ability to provide first-rate, friendly and professional customer service and deliver the banking solutions that our customers want and need.
We compete with some competitors within our geographic market area, and with others on a product specific basis, such as the residential mortgage market. Our ability to compete effectively depends on our ability to provide first-rate, friendly and professional customer service and deliver the banking solutions that our customers want and need.
Mitigation of risk of loss on a land development loan is dependent largely upon the accuracy of the initial estimate of the property's value at completion of development compared to the estimated cost (including interest) of development and the financial strength of the borrower. Permanent land loans .
Mitigation of risk of loss on a land development loan is dependent largely upon the accuracy of the initial estimate of the property's 8 value at completion of development compared to the estimated cost (including interest) of development and the financial strength of the borrower. Permanent land loans .
The Bank is a member of the Federal Home Loan Bank ("FHLB") of Des Moines, which is one of 11 regional FHLBs that provide funding to their members for making home mortgage loans, as well as loans for affordable housing and community development.
The Bank is a member of the Federal Home Loan Bank of Des Moines, which is one of 11 regional FHLBs that provide funding to their members for making home mortgage loans, as well as loans for affordable housing and community development.
Moreover, a construction loan can involve additional risks because of the complexities of completing the construction, the inherent difficulty in estimating both the estimated cost (including interest) of the project and the property's value at completion of the project. Land development loans .
Moreover, a construction loan can involve additional risks because of the complexities of completing the construction, the inherent difficulty in estimating both the cost (including interest) of the project and the property's value at completion of the project. Land development loans .
The risk categories range from 0% for low-risk assets such as U.S. Treasury securities and GNMA securities to 1,250% for various types of loans and other assets deemed to be of higher risk. Single-family residential loans having loan-to-value ratios not exceeding 80% and meeting certain additional criteria, as well as certain multi-family residential loans, qualify for a 50% risk-weight treatment.
The risk categories range from 0% for low-risk assets such as U.S. Treasury securities and GNMA securities to 1,250% for various types of loans and other assets deemed to be of higher risk. Single-family residential loans having loan-to-value ratios not exceeding 90% and meeting certain additional criteria, as well as certain multi-family residential loans, qualify for a 50% risk-weight treatment.
Subject to certain limitations and restrictions, a bank holding company, with prior approval of the Federal Reserve, may acquire an out-of-state bank; banks in states that do not prohibit out-of-state mergers may merge with the 15 approval of the appropriate federal banking agency, and a bank may establish a de novo branch out of state if such branching is permitted by the other state for state banks chartered by such other state.
Subject to certain limitations and restrictions, a bank holding company, with prior approval of the FRB, may acquire an out-of-state bank; banks in states that do not prohibit out-of-state mergers may merge with the approval of the 15 appropriate federal banking agency, and a bank may establish a de novo branch out of state if such branching is permitted by the other state for state banks chartered by such other state.
Below is a summary of our community activities and financial contributions in 2022. 13 Additional information will be provided in the Company’s forthcoming 2022 Community and Social Responsibility Report which will be made available on the Company’s website. Nothing on our website, including the aforementioned report, shall be deemed incorporated by reference into this Annual Report. The Company General.
Below is a summary of our community activities and financial contributions in 2023. 13 Additional information will be provided in the Company’s forthcoming 2023 Community and Social Responsibility Report which will be made available on the Company’s website. Nothing on our website, including the aforementioned report, shall be deemed incorporated by reference into this Annual Report. The Company General.
WDFI also has the power to require any bank to suspend the payment of any and all dividends. 16 Federal Home Loan Bank System.
WDFI also has the power to require any bank to suspend the payment of any and all dividends. Federal Home Loan Bank System.
As of September 30, 2022 and September 30, 2021, Statewide Mortgage Services Company had total assets of $785,000 and $785,000, respectively. 11 Washington Services, Inc. is incorporated under the laws of the state of Washington. It acts as a trustee under deeds of trust as to which the Bank is beneficiary.
As of September 30, 2023 and September 30, 2022, Statewide Mortgage Services Company had total assets of $785,000 and $785,000, respectively. 11 Washington Services, Inc. is incorporated under the laws of the state of Washington. It acts as a trustee under deeds of trust as to which the Bank is beneficiary.
The Bank also purchases loans and mortgage-backed securities when lending rates and mortgage volume for new loan originations in its market area do not fulfill its needs. 9 The table below shows the Company's total loan origination, purchase and repayment activities.
The Bank also purchases loans and mortgage-backed securities when lending rates and mortgage volume for new loan originations in its market area do not fulfill its needs. 9 The table below shows the Bank's total loan origination, purchase and repayment activities.
The Company's federal income tax returns are open and subject to potential examination by the IRS for fiscal year 2019 and later. Competition We operate in a highly competitive environment. Our competitors include other banks, savings associations, community banks, credit unions and other financial intermediaries, and new market participants offering services similar to those that we offer.
The Company's federal income tax returns are open and subject to potential examination by the IRS for fiscal year 2020 and later. Competition We operate in a highly competitive environment. Our competitors include other banks, savings associations, community banks, credit unions and other financial intermediaries, and new market participants offering services similar to those that we 19 offer.
Item 1. Business General Washington Federal Bank, a federally-insured Washington state chartered commercial bank dba WaFd Bank (the “Bank” or “WaFd Bank”), was founded on April 24, 1917 in Ballard, Washington and is engaged primarily in providing lending, depository, insurance and other banking services to consumers, mid-sized to large businesses, and owners and developers of commercial real estate.
Item 1. Business General Washington Federal Bank, a federally-insured Washington state chartered commercial bank dba WaFd Bank (the "Bank" or "WaFd Bank"), was founded on April 24, 1917 in Ballard, Washington and is engaged primarily in providing lending, depository, insurance and other banking services to consumers, mid-sized to large businesses, and owners and developers of commercial real estate.
Failure to comply with the Fair Lending Laws could result in enforcement actions by the OCC, the CFPB and other federal regulatory agencies, including the U.S. Department of Justice. USA Patriot Act of 2001.
Failure to comply with the Fair Lending Laws could result in enforcement actions by the FDIC, the CFPB and other federal regulatory agencies, including the U.S. Department of Justice. USA Patriot Act of 2001.
In addition, without the prior approval of the Federal Reserve, bank holding companies are generally prohibited from acquiring more than 5% of the outstanding shares of any class of voting securities of a bank or bank holding company, taking any action that causes a bank to become a subsidiary of the bank holding company, acquiring all or substantially all of the assets of a bank, or merging with another bank holding company.
In addition, without the prior approval of the FRB, bank holding companies are generally prohibited from acquiring more than 5% of the outstanding shares of any class of voting securities of a bank or bank holding company, taking any action that causes a bank to become a subsidiary of the bank holding company, acquiring all or substantially all of the assets of a bank, or merging with another bank holding company.
The principal sources of funds for the Company's activities are retained earnings, loan repayments, net deposit inflows, borrowings and repayments and sales of investments. Washington Federal's principal sources of revenue are interest on loans and interest and dividends on investments. Its principal expenses are interest paid on deposits, credit costs, general and administrative expenses, interest on borrowings and income taxes.
The principal sources of funds for the Company's activities are retained earnings, loan repayments, net deposit inflows, borrowings and repayments and sales of investments. WaFd's principal sources of revenue are interest on loans and interest and dividends on investments. Its principal expenses are interest paid on deposits, credit costs, general and administrative expenses, interest on borrowings and income taxes.
We strive to build and maintain a high-performing culture and be an “employer of choice” by creating a work environment that attracts and retains outstanding, engaged employees who embody our company mantra of “Love what you do. Make a difference.” Demographics. As of September 30, 2022, we employed 2,132 full and part time employees.
We strive to build and maintain a high-performing culture and be an “employer of choice” by creating a work environment that attracts and retains outstanding, engaged employees who embody our company mantra of “Love what you do. Make a difference.” Demographics. As of September 30, 2023, we employed 2,120 full and part time employees.
The Bank also invests in certain United States government and agency obligations and other investments permitted by applicable laws and regulations. As of September 30, 2022, Washington Federal Bank has 201 branches located in Washington, Oregon, Idaho, Arizona, Utah, Nevada, New Mexico and Texas. Through the Bank's subsidiaries, the Company is also engaged in insurance brokerage activities.
The Bank also invests in certain United States government and agency obligations and other investments permitted by applicable laws and regulations. As of September 30, 2023, Washington Federal Bank has 198 branches located in Washington, Oregon, Idaho, Arizona, Utah, Nevada, New Mexico and Texas. Through the Bank's subsidiaries, the Company is also engaged in insurance brokerage activities.
Each FHLB serves members within its assigned region and is funded primarily through proceeds derived from the sale of consolidated obligations of the FHLB system. Loans are made to members in accordance with the policies and procedures established by the Board of Directors of the FHLB. At September 30, 2022, FHLB advances to the Bank amounted to $2,125,000,000.
Each FHLB serves members within its assigned region and is funded primarily through proceeds derived from the sale of consolidated obligations of the FHLB system. Loans are made to members in accordance with the policies and procedures established by the Board of Directors of the FHLB. At September 30, 2023, FHLB advances to the Bank amounted to $2,900,000,000.
In addition to deposits, the Bank derives funds from loan repayments, advances from the Federal Home Loan Bank of Des Moines ("FHLB"), other borrowings, and from investment repayments and sales.
In addition to deposits, the Bank derives funds from loan repayments, advances from the Federal Home Loan Bank of Des Moines ("FHLB"), borrowings from the Federal Reserve Bank ("FRB"), and from investment repayments and sales.
Under long-standing Federal Reserve policy, a bank holding company is expected to serve as a source of financial and management strength to its subsidiary bank.
Under long-standing FRB policy, a bank holding company is expected to serve as a source of financial and management strength to its subsidiary bank.
As of September 30, 2022 and September 30, 2021, WAFD Insurance Group, Inc. had total assets of $18,483,000 and $19,936,000, respectively. Statewide Mortgage Services Company is incorporated under the laws of the state of Washington and it holds and markets real estate owned.
As of September 30, 2023 and September 30, 2022, WAFD Insurance Group, Inc. had total assets of $20,229,000 and $18,483,000, respectively. Statewide Mortgage Services Company is incorporated under the laws of the state of Washington and it holds and markets real estate owned.
The Company’s website also includes the charters for its audit committee, compensation committee, risk management committee, nominating and governance committee and regulatory compliance committee. The address for the Company’s website is www.wafdbank.com.
The Company’s website also includes the charters for its audit committee, compensation committee, risk management committee, executive committee, technology committee and nominating and governance committee. The address for the Company’s website is www.wafdbank.com.
As a member, the Bank is required to purchase and maintain stock in the FHLB of Des Moines. At September 30, 2022, the Bank held $95,073,000 in FHLB of Des Moines stock, which was in compliance with this requirement. Community Reinvestment Act and Fair Lending Laws.
As a member, the Bank is required to purchase and maintain stock in the FHLB of Des 16 Moines. At September 30, 2023, the Bank held $126,820,000 in FHLB of Des Moines stock, which was in compliance with this requirement. Community Reinvestment Act and Fair Lending Laws.
We show our commitment to equal employment opportunity through, among other things, a robust affirmative action plan which includes annual compensation analyses and ongoing reviews of our selection and hiring practices alongside a continued focus on building and maintaining a diverse workforce. As of September 30, 2022, the population of our workforce was as follows: 12 Learning and Development.
We show our commitment to equal employment opportunity through, among other things, our process of performing annual compensation analyses and ongoing reviews of our selection and hiring practices alongside a continued focus on building and maintaining a diverse workforce. As of September 30, 2023, the population of our workforce was as follows: 12 Learning and Development.
EGRRCPA also enacted several important changes in some technical compliance areas that we believe will help reduce our regulatory burden, including: • Prohibiting federal banking regulators from imposing higher capital standards on High Volatility Commercial Real Estate (“HVCRE”) exposures unless they are for acquisition, development or construction (“ADC”), and clarifying ADC status; 18 • Requiring the federal banking agencies to amend the Liquidity Coverage Ratio Rule such that all qualifying investment-grade, liquid and readily-marketable municipal securities are treated as level 2B liquid assets, making them more attractive investment alternatives; • Exempting from appraisal requirements certain transactions involving real property in rural areas and valued at less than $400,000; and • Directing the Consumer Financial Protection Bureau to provide guidance on the applicability of the TILA-RESPA Integrated Disclosure rule to mortgage assumption transactions and construction-to-permanent home loans, as well the extent to which lenders can rely on model disclosures that do not reflect recent regulatory changes.
EGRRCPA also enacted several important changes in some technical compliance areas that we believe will help reduce our regulatory burden, including: • Prohibiting federal banking regulators from imposing higher capital standards on High Volatility Commercial Real Estate (“HVCRE”) exposures unless they are for acquisition, development or construction (“ADC”), and clarifying ADC status; 18 • Exempting from appraisal requirements certain transactions involving real property in rural areas and valued at less than $400,000; and • Directing the Consumer Financial Protection Bureau to provide guidance on the applicability of the TILA-RESPA Integrated Disclosure rule to mortgage assumption transactions and construction-to-permanent home loans, as well the extent to which lenders can rely on model disclosures that do not reflect recent regulatory changes.
Both the Company and the Bank are required to have a common equity Tier 1 capital ratio of 4.5%. In addition, both the 17 Company and the Bank are required to have a Tier 1 leverage ratio of 4.0%, a Tier 1 risk-based ratio of 6.0% and a total risk-based ratio of 8.0%.
In addition, both the Company and the Bank are required to have a Tier 1 leverage ratio of 4.0%, a Tier 1 risk-based ratio of 6.0% and a total risk-based ratio of 8.0%. Both the Company and the Bank are required to establish a “conservation buffer,” consisting of common equity Tier 1 capital, equal to 2.5%.
We invest in the growth and development of our employees by providing a multi-dimensional approach to learning that empowers, intellectually grows, and professionally develops our colleagues. Our employees receive continuing education courses that are relevant to the banking industry and their job function within the Company.
We invest in the growth and development of our employees by providing a multi-dimensional approach to learning that empowers, intellectually grows, and professionally develops our colleagues. Our employees, including leadership, receive continuing education courses that are relevant to the banking industry and their job function within the Company. All new employees attend our two-day new hire orientation, Welcome to WaFd.
None of these employees are represented by a collective bargaining agreement. During fiscal year 2022 we hired 626 employees. Our voluntary turnover rate was 21.18% in fiscal year 2022, a slight decrease from 22.37% in 2021. Diversity, Equity and Inclusion.
None of these employees are represented by a collective bargaining agreement. During fiscal year 2023 we hired 470 employees. Our voluntary turnover rate was 15.54% in fiscal year 2023, a decrease from 21.18% in 2022. Diversity, Equity and Inclusion.
(2) (826,335) (834,584) (277,692) (28,355) (47,244) Net loan activity increase (decrease) $ 2,279,994 $ 1,041,253 $ 861,742 $ 453,494 $ 594,459 Beginning balance $ 13,833,570 $ 12,792,317 $ 11,930,575 $ 11,477,081 $ 10,882,622 Ending balance $ 16,113,564 $ 13,833,570 $ 12,792,317 $ 11,930,575 $ 11,477,081 ___________________ (1) Includes undisbursed loan in process. (2) Includes non-cash transactions.
(2) 1,016,084 (826,335) (834,584) (277,692) (28,355) Net loan activity increase (decrease) $ 1,362,986 $ 2,279,994 $ 1,041,253 $ 861,742 $ 453,494 Beginning balance $ 16,113,564 $ 13,833,570 $ 12,792,317 $ 11,930,575 $ 11,477,081 Ending balance $ 17,476,550 $ 16,113,564 $ 13,833,570 $ 12,792,317 $ 11,930,575 ___________________ (1) Includes undisbursed loan in process. (2) Includes non-cash transactions.
Higher or more sensitive risk weights are assigned to various categories of assets, among which are commercial real estate, credit facilities that finance the acquisition, development or construction of real property, certain exposures or credit that are 90 days past due or are nonaccrual, foreign exposures, certain corporate exposures, securitization exposures, equity exposures and in certain cases mortgage servicing rights and deferred tax assets.
Higher or more sensitive risk weights are assigned to various categories of assets, among which are commercial real estate, credit facilities that finance the acquisition, development or construction of real property, certain exposures or credit that are 90 days past due or are nonaccrual, foreign exposures, certain corporate exposures, securitization exposures, equity exposures and in certain cases mortgage servicing rights and deferred tax assets. 17 Both the Company and the Bank are required to have a common equity Tier 1 capital ratio of 4.5%.
All references herein to 2022, 2021 and 2020 represent balances as of September 30, 2022, September 30, 2021 and September 30, 2020, respectively, or activity for the fiscal years then ended.
The Company's fiscal year end is September 30th. All references herein to 2023, 2022 and 2021 represent balances as of September 30, 2023, September 30, 2022 and September 30, 2021, respectively, or activity for the fiscal years then ended.
The prompt corrective action rules, which apply to the Bank but not the Company, are modified to include a common equity Tier 1 risk-based ratio and to increase certain other capital requirements for the various thresholds.
The federal banking agencies have adopted regulations that implement this statutory framework. The prompt corrective action rules, which apply to the Bank but not the Company, are modified to include a common equity Tier 1 risk-based ratio and to increase certain other capital requirements for the various thresholds.
Twelve Months Ended September 30, 2022 2021 2020 2019 2018 (In thousands) Commercial loan originations (1) Multi-family $ 675,534 $ 821,426 $ 403,118 $ 210,589 $ 272,046 Commercial Real Estate 880,850 673,117 466,322 343,172 274,242 Commercial & Industrial 2,569,682 2,509,512 2,168,908 1,020,296 869,337 Construction 2,486,387 2,178,260 1,457,602 1,271,167 1,068,443 Land – Acquisition & Development 175,234 124,871 88,379 123,758 85,208 Total commercial loans 6,787,687 6,307,186 4,584,329 2,968,982 2,569,276 Consumer loan originations (1) Single-family residential 892,608 938,822 910,571 547,057 621,431 Construction – custom 765,696 621,928 576,342 457,328 523,951 Land – Consumer Lot Loans 61,731 94,388 51,678 37,125 33,820 HELOC 171,393 130,988 93,285 101,399 82,508 Consumer 57,078 91,421 4,395 8,580 3,008 Total consumer loans 1,948,506 1,877,547 1,636,271 1,151,489 1,264,718 Total loans originated 8,736,193 8,184,733 6,220,600 4,120,471 3,833,994 Loans purchased 564,584 488,147 15,456 — 143,605 Loan principal repayments (6,194,448) (6,797,043) (5,096,622) (3,638,622) (3,335,896) Net change in loans in process, discounts, etc.
Twelve Months Ended September 30, 2023 2022 2021 2020 2019 (In thousands) Commercial loan originations (1) Multi-family $ 136,788 $ 675,534 $ 821,426 $ 403,118 $ 210,589 Commercial Real Estate 223,361 880,850 673,117 466,322 343,172 Commercial & Industrial 2,032,460 2,569,682 2,509,512 2,168,908 1,020,296 Construction 1,046,971 2,486,387 2,178,260 1,457,602 1,271,167 Land – Acquisition & Development 34,946 175,234 124,871 88,379 123,758 Total commercial loans 3,474,526 6,787,687 6,307,186 4,584,329 2,968,982 Consumer loan originations (1) Single-family residential 610,130 892,608 938,822 910,571 547,057 Construction – custom 346,784 765,696 621,928 576,342 457,328 Land – Consumer Lot Loans 21,133 61,731 94,388 51,678 37,125 HELOC 154,030 171,393 130,988 93,285 101,399 Consumer 95,553 57,078 91,421 4,395 8,580 Total consumer loans 1,227,630 1,948,506 1,877,547 1,636,271 1,151,489 Total loans originated 4,702,156 8,736,193 8,184,733 6,220,600 4,120,471 Loans purchased 80,015 564,584 488,147 15,456 — Loan principal repayments (4,435,269) (6,194,448) (6,797,043) (5,096,622) (3,638,622) Net change in loans in process, discounts, etc.
The Bank's land development loans are of a short-term nature and are generally made for 75% or less of the appraised value of the unimproved property. Funds are disbursed periodically at various stages of completion as authorized by the Company's personnel.
The Bank's land development loans are of a short-term nature and are generally made for 75% or less of the appraised value of the unimproved property. Funds are disbursed periodically at various stages of completion as authorized by the Bank's personnel. The interest rate on these loans typically adjust daily or monthly in accordance with a designated index.
The total balance for loans with loan-to-value ratios exceeding 80% at origination as of September 30, 2022, was $177,087,000, with allocated reserves of $1,578,000. Consumer loans .
The total balance for loans with loan-to-value ratios exceeding 80% at origination as of September 30, 2023, was $271,020,000, with allocated reserves of $2,442,000. Consumer loans .
Financial Statements and Supplementary Data” of this report. Subsidiaries The Company is a bank holding company that conducts its primary business through its only directly-owned subsidiary, WaFd Bank. The Bank has four active wholly-owned subsidiaries, discussed further below.
Subsidiaries The Company is a bank holding company that conducts its primary business through its directly-owned subsidiary, WaFd Bank. The Bank has three active wholly-owned subsidiaries, discussed further below.
Failure of a financial institution to maintain and implement adequate programs to combat money laundering and terrorist financing, or to comply satisfactorily with all relevant Patriot Act and BSA requirements, could have serious legal and reputational consequences for the institution. Regulatory Capital Requirements. Bank holding companies and federally insured banks are required to maintain minimum levels of regulatory capital.
Failure of a financial institution to maintain and implement adequate risk-based programs reasonably designed to combat money laundering and terrorist financing, or to comply satisfactorily with all relevant Patriot Act and BSA requirements, could have serious legal and reputational consequences for the institution. Anti-Money Laundering Act of 2020.
The Bank's policies provide that for residential construction loans, loans may be made for 85% or less of the appraised value of the property upon completion. As a result of activity over the past four decades, the Bank believes that builders of single-family residences in its primary market areas consider the Bank to be a construction lender of choice.
As a result of activity over the past four decades, the Bank believes that builders of single-family residences in its primary market areas consider the Bank to be a construction lender of choice.
We value our employees by investing in a healthy work-life balance, competitive compensation and benefit packages and a vibrant, team-oriented environment centered on professional service and open communication amongst employees.
Human Capital At WaFd Bank, our culture is defined by our corporate values of integrity, teamwork, ownership, simplicity, service and discipline. We value our employees by investing in a healthy work-life balance, competitive compensation and benefit packages and a vibrant, team-oriented environment centered on professional service and open communication amongst employees.
Failure to comply with applicable laws and regulations can result in a range of sanctions and enforcement actions, including the imposition of civil money penalties, formal agreements and cease and desist orders. In order to comply with regulatory requirements, the Bank has and will continue to incur additional significant costs in order to bring programs and operations into compliance.
Failure to comply with applicable laws and regulations can result in a range of sanctions and enforcement actions, including the imposition of civil money penalties, formal agreements and cease and desist orders.
Commercial loans have a relatively high risk of default compared to residential real estate loans. Pricing of commercial loans is based on the credit risk of the borrower with consideration given to the overall relationship of the borrower, including deposits and contributed equity/loan-to-value ratio. The acquisition of business deposits is an important focus of this business line.
Pricing of commercial loans is based on the credit risk of the borrower with consideration given to the overall relationship of the borrower, including deposits and contributed equity/loan-to-value ratio. The acquisition of business deposits is an important focus of this business line. The Bank provides a full line of treasury management products to support the depository needs of its clients.
In addition, we have created learning paths for specific positions that are designed to encourage an employee’s advancement and growth within our organization. We also offer a peer mentor program, leadership and customer service training. These resources provide employees with the skills they need to achieve their career goals, build management skills and become leaders within our Company.
In addition, we offer our Education Assistance Program, designed to encourage an employee's advancement and growth. We also offer the Retail Bank Peer Mentor Program and retail banking certifications for our retail employees. These resources provide employees with the skills they need to achieve their career goals, build management skills and become leaders within our Company. Compensation and Benefits.
Sections below include a description of certain laws and regulations that relate to the regulation of the Company and the Bank. The description of these laws and regulations, and descriptions of laws and regulations contained elsewhere herein, do not purport to be complete and are qualified in their entirety by reference to applicable laws and regulations.
The description of these laws and regulations, and descriptions of laws and regulations contained elsewhere herein, do not purport to be complete and are qualified in their entirety by reference to applicable laws and regulations. Restrictions on Activities and Acquisitions. Bank holding companies are subject to a variety of restrictions on their activities and the acquisitions they can make.
On July 6, 2018, bank regulatory agencies (the Federal Reserve, Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency) issued a joint interagency statement regarding the impact of the Economic Growth, Regulatory Relief, and Consumer Protection Act ("EGRRCPA") on financial institutions.
As of September 30, 2023, the Bank exceeded the requirements of a well-capitalized institution. Dodd-Frank Act Stress Tests ("DFAST"). On July 6, 2018, bank regulatory agencies (the FRB, FDIC and the Office of the Comptroller of the Currency) issued a joint interagency statement regarding the impact of the Economic Growth, Regulatory Relief, and Consumer Protection Act ("EGRRCPA") on financial institutions.
Washington Federal, Inc., a Washington corporation was formed as the Bank’s holding company in November, 1994. As used throughout this document, the terms “Washington Federal,” the “Company” or "we" or "us" and "our" refer to the Washington Federal, Inc. and its consolidated subsidiaries, and the term “Bank” or "WaFd Bank" refers to the operating subsidiary, Washington Federal Bank.
This change was effective on September 29, 2023. As used throughout this document, the terms "WaFd," the "Company" or "we" or "us" and "our" refer to WaFd, Inc. and its consolidated subsidiaries, and the term "Bank" or "WaFd Bank" refers to the operating subsidiary. The Company is headquartered in Seattle, Washington.
The interest rate on these loans typically adjust daily or monthly in accordance with a designated index. 8 Land development loans involve a higher degree of credit risk than long-term financing on owner-occupied real estate.
Land development loans involve a higher degree of credit risk than long-term financing on owner-occupied real estate.
The regulatory structure gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities. Any change in such regulation, whether by the WDFI, the FDIC, the Federal Reserve, the CFPB or the U.S. Congress, could have a significant impact on the Company and its operations. See “Regulation” section below. 6 Lending Activities General.
Any change in such regulation, whether by the WDFI, the FDIC, the Federal Reserve, the CFPB or the U.S. Congress, could have a significant impact on the Company and its operations. See “Regulation” section below. 6 Lending Activities General. The Company's net loan portfolio totaled $17,476,550,000 at September 30, 2023 and represents 77.8% of total assets.
The Company's net loan portfolio totaled $16,113,564,000 at September 30, 2022 and represents 77.6% of total assets. Lending activities include the origination of loans secured by real estate, including long-term fixed-rate and adjustable-rate mortgage loans, adjustable-rate construction loans, adjustable-rate land development loans, fixed-rate and adjustable-rate multi-family loans, fixed-rate and adjustable-rate commercial real estate loans and fixed-rate and adjustable-rate business loans.
Lending activities include the origination of loans secured by real estate, including long-term fixed-rate and adjustable-rate mortgage loans, adjustable-rate construction loans, adjustable-rate land development loans, fixed-rate and adjustable-rate multi-family loans, fixed-rate and adjustable-rate commercial real estate loans and fixed-rate and adjustable-rate business loans. The following table is a summary of loans receivable by loan portfolio segment and class.
Such actions could include a capital directive, a cease and desist or consent order, civil money penalties, restrictions on an institution's operations and/or the appointment of a conservator or receiver. Federal Reserve and WDFI capital regulations provide that such supervisory actions, through enforcement proceedings or otherwise, could require one or more of a variety of corrective actions.
Any bank holding company or bank that fails to meet the capital requirements is subject to possible enforcement actions. Such actions could include a capital directive, a cease and desist or consent order, civil money penalties, restrictions on an institution's operations and/or the appointment of a conservator or receiver.
An institution’s category depends upon its capital levels in relation to relevant capital measures, which include a risk-based capital measure, a leverage ratio capital measure and certain other factors. The federal banking agencies have adopted regulations that implement this statutory framework.
Prompt Corrective Action. Federal statutes establish a supervisory framework based on five capital categories: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized. An institution’s category depends upon its capital levels in relation to relevant capital measures, which include a risk-based capital measure, a leverage ratio capital measure and certain other factors.
These SEC guidelines, and any other regulatory guidance, are in addition to notification and disclosure requirements under state and federal banking law and regulations. In November 2021, the U.S. federal bank regulatory agencies adopted a rule regarding notification requirements for banking organizations related to significant computer security incidents.
We expect this trend of state-level activity in those areas to continue and are continually monitoring developments in the states in which the Company operates. In November 2021, the U.S. federal bank regulatory agencies adopted a rule regarding notification requirements for banking organizations related to significant computer security incidents.
Management believes that the current capital levels of the Company and the Bank are sufficient to be in compliance with the fully phased-in standards under the rules. Any bank holding company or bank that fails to meet the capital requirements is subject to possible enforcement actions.
The Federal Reserve and the FDIC are also authorized to impose capital requirements in excess of these standards on individual institutions on a case-by-case basis. Management believes that the current capital levels of the Company and the Bank are sufficient to be in compliance with the fully phased-in standards under the rules.
For further information on regulatory matters, see Note A to the Consolidated Financial Statements in “Item 8. Financial Statements and Supplementary Data” as well as the "Risk Factors" section of this report and the "USA Patriot Act of 2001" discussion below.
Financial Statements and Supplementary Data” as well as the "Risk Factors" section of this report and the "USA Patriot Act of 2001" discussion below. Sections below include a description of certain laws and regulations that relate to the regulation of the Company and the Bank.
For information regarding compliance with each of these capital requirements by the Company and the Bank as of September 30, 2022, see Note Q to the Consolidated Financial Statements included in Item 8 hereof. Prompt Corrective Action. Federal statutes establish a supervisory framework based on five capital categories: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized.
FRB and WDFI capital regulations provide that such supervisory actions, through enforcement proceedings or otherwise, could require one or more of a variety of corrective actions. For information regarding compliance with each of these capital requirements by the Company and the Bank as of September 30, 2023, see Note Q to the Consolidated Financial Statements included in Item 8 hereof.
As of September 30, 2022, the stock traded at 81 times its original 1982 offering price, has paid 158 consecutive quarterly cash dividends and has returned 13,079% total shareholder return to those who invested 40 years ago. The Company's fiscal year end is September 30th.
On November 9, 1982 the Company listed and began trading on the NASDAQ. Profitable operations have been recorded every year since going public. As of September 30, 2023, the stock traded at 69 times its original 1982 offering price, has paid 162 consecutive quarterly cash dividends and has returned 12,425% total shareholder return to those who invested 41 years ago.
An institution that does not meet the conservation buffer will be subject to restrictions on certain activities including payment of dividends, stock repurchases and discretionary bonuses to executive officers. The Federal Reserve and the FDIC are also authorized to impose capital requirements in excess of these standards on individual institutions on a case-by-case basis.
The capital conservation buffer is designed to ensure that banks build up capital buffers outside periods of stress, which can be drawn down as losses are incurred. An institution that does not meet the conservation buffer will be subject to restrictions on certain activities including payment of dividends, stock repurchases and discretionary bonuses to executive officers.
Commercial loans are made based upon assessment of the borrower's ability and willingness to repay along with an evaluation of secondary repayment sources such as the value and marketability of collateral. Most such loans are extended to closely held businesses and the personal guaranty of the principals is usually obtained.
The loans are either negotiated on a fixed-rate basis or carry adjustable interest rates indexed to the Secured Overnight Funding Rate ("SOFR"), Prime Rate or another market rate. Commercial loans are made based upon assessment of the borrower's ability and willingness to repay along with an evaluation of secondary repayment sources such as the value and marketability of collateral.
A depository institution that is adequately capitalized and accepts brokered deposits under a waiver from the FDIC may not pay an interest rate on any deposit in excess of 75 basis points over certain prevailing market rates. On December 15, 2020, the FDIC issued a final rule intended to modernize its brokered deposit regulations in light of modern deposit-taking methods.
A depository institution that is adequately capitalized and accepts brokered deposits under a waiver from the FDIC may not pay an interest rate on any deposit in excess of national and local rate caps set by the FDIC and published on its website. Transactions with Affiliates; Insider Loans.
In these instances, funds are borrowed from other financial institutions or the Federal Reserve, for periods generally ranging from one to seven days at the then current borrowing rate. At September 30, 2022, the Bank had no such short-term borrowings. For further information on these activities, see Note L to the Consolidated Financial Statements in “Item 8.
In these instances, funds are borrowed from other financial institutions or the Federal Reserve Bank, for periods generally ranging from one to seven days at the then current borrowing rate. The Bank has elected to utilize the FRB's Bank Term Funding program (the "BTFP") to leverage its highly favorable terms to fortify the Bank's liquidity position.
The Bank provides a full line of treasury management products to support the depository needs of its clients. The Company also participated in the Small Business Administration’s Paycheck Protection Program and made various business loans under this program. Construction loans . The Bank originates construction loans to finance construction of single-family and multi-family residences as well as commercial properties.
Construction loans . The Bank originates construction loans to finance construction of single-family and multi-family residences as well as commercial properties.
Removed
The Company is headquartered in Seattle, Washington. On January 3, 2022, the Bank announced that it had applied to the Washington State Department of Financial Institutions (the "WDFI") to convert from a national association to a non-Federal Reserve member Washington state-chartered bank.
Added
WaFd, Inc., a Washington corporation, was formed as the Bank’s holding company in November, 1994 under the name Washington Federal, Inc. On September 27, 2023, the Company filed Articles of Amendment to its Restated Articles of Incorporation, as amended, with the Washington Secretary of State, to change its name from Washington Federal, Inc. to WaFd, Inc.
Removed
The Bank completed the conversion of its charter from a national bank charter, supervised by the Office of the Comptroller of the Currency, to a Washington state chartered commercial bank effective February 4, 2022.
Added
The Bank is subject to extensive regulation, supervision and examination by the Washington State Department of Financial Institutions (the "WDFI"), its primary state regulator, the Consumer Financial Protection Bureau (the "CFPB") and the Federal Deposit Insurance Corporation ("FDIC"), which insures its deposits up to applicable limits.
Removed
The Bank cancelled its holdings of stock in the Federal Reserve Bank of San Francisco as part of the conversion and its legal name changed from “Washington Federal Bank, National Association” to “Washington Federal Bank.” As a result of the conversion, the WDFI is the Bank's primary state regulator and the Federal Deposit Insurance Corporation (the "FDIC") is the Bank's primary federal regulator.
Added
The Company, as a bank holding company, is subject to extensive regulation, supervision and examination by the Board of Governors of the Federal Reserve System ("Federal Reserve"). The regulatory structure gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities.
Removed
The Federal Reserve will continue to regulate the Bank's holding company, Washington Federal, Inc. On November 9, 1982 the Company listed and began trading on the NASDAQ. Profitable operations have been recorded every year since going public.
Added
Most such loans are extended to closely held businesses and the personal guaranty of the principal is usually obtained. Commercial loans have a relatively high risk of default compared to residential real estate loans.
Removed
The following table is a summary of loans receivable by loan portfolio segment and class.
Added
The Bank's policies provide that for residential construction loans, loans may be made for 85% or less of the construction cost or 80% of the appraised value of the property upon completion, whichever is less.
Removed
The loans are either negotiated on a fixed-rate basis or carry adjustable interest rates indexed to the LIBOR rate, SOFR rate, BSBY rate, prime rate or another market rate. In most cases, loan agreements indexed to the LIBOR rate include language that will provide for a replacement for LIBOR as the index rate.
Added
These borrowings are repayable at any time without penalty and are the lowest cost funding source available. For further information on these activities, see Note L to the Consolidated Financial Statements in “Item 8. Financial Statements and Supplementary Data” of this report.
Removed
As of September 30, 2022 and September 30, 2021, Washington Services, Inc. had total assets of $13,000 and $13,000, respectively. Pike Street Labs, LLC was formed in 2019 and is organized under the laws of the state of Washington. It provides data and technology services to the Bank.
Added
As of September 30, 2023 and September 30, 2022, Washington Services, Inc. had total assets of $13,000 and $13,000, respectively. The Company also currently holds a 33.98% interest in Archway Software, Inc. (“Archway”), a Delaware corporation focused on the business of developing and selling technology and software products and services for financial institutions, including the Bank.
Removed
As of September 30, 2022 and September 30, 2021, Pike Street Labs had total assets of $2,934,000 and $802,000, respectively. Human Capital At WaFd Bank, our culture is defined by our corporate values of integrity, teamwork, ownership, simplicity, service and discipline.
Added
Archway was conceived in November 2022 as a joint venture between the Company and certain subsidiaries of Madrona Venture Group.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

89 edited+52 added−52 removed91 unchanged
Biggest changeFor example, Chapter 23B.19 of the Washington Business Corporation Act, with limited exceptions, prohibits a “target corporation” from engaging in specified “significant business transactions” for a period of five years after the share acquisition by an acquiring person, unless: • the prohibited transaction or the acquiring person's purchase of shares was approved by a majority of the members of the target corporation's board of directors prior to the acquiring person's share acquisition; or • the prohibited transaction was both approved by the majority of the members of the target corporation's board and authorized at a shareholder meeting by at least two-thirds of the outstanding voting shares (excluding the acquiring 33 person's shares) at or subsequent to the acquiring person's share acquisition.
Biggest changeFor example, Chapter 23B.19 of the Washington Business Corporation Act, with limited exceptions, prohibits a “target corporation” from engaging in specified “significant business transactions” for a period of five years after the share acquisition by an acquiring person, without complying with certain shareholder approval requirements.
Such estimates rely upon complex modeling inputs and judgments, including forecasts of economic conditions, which may be rendered inaccurate and/or no longer subject to accurate forecasting. • Our ability to assess the creditworthiness of our borrowers may be impaired if the models and approaches we use to select, manage, and underwrite loans become less predictive of future charge-offs. • Regulatory scrutiny of the industry could increase, leading to increased regulation of the industry that could lead to a higher cost of compliance, limit our ability to pursue business opportunities and increase our exposure to litigation or fines. • Ineffective monetary policy or other market conditions could cause rapid changes in interest rates and asset values that would have a materially adverse impact on our profitability and overall financial condition. • Further erosion in the fiscal condition of the U.S.
Such estimates rely upon complex modeling inputs and judgments, including forecasts of economic conditions, which may be rendered inaccurate and/or no longer subject to accurate forecasting. • Our ability to assess the creditworthiness of our borrowers may be impaired if the models and approaches we use to select, manage, and underwrite loans become less predictive of future charge-offs. • Regulatory scrutiny of the industry could increase, leading to increased regulation of the industry that could lead to a higher cost of compliance, limit our ability to pursue business opportunities and increase our exposure to litigation or fines. • Ineffective monetary policy or other market conditions could cause rapid changes in interest rates and asset values that would have a materially adverse impact on our profitability and overall financial condition. 23 • Further erosion in the fiscal condition of the U.S.
A cyber-attack or other security incident on the systems we operate and control could cause us to suffer damage to our reputation, result in productivity losses, require us to incur substantial expenses, including response costs associated with investigation and resumption of services, remediation expenses costs associated with customer notification and credit monitoring services, increased insurance premiums, regulatory penalties and fines, and costs associated civil litigation, any of which could have a materially adverse effect on our business, financial condition, and results of operations.
A cyber-attack or other security incident on the systems we operate and control could cause us to suffer damage to our reputation, result in productivity losses, require us to incur substantial expenses, including response costs associated with 25 investigation and resumption of services, remediation expenses costs associated with customer notification and credit monitoring services, increased insurance premiums, regulatory penalties and fines, and costs associated with civil litigation, any of which could have a materially adverse effect on our business, financial condition, and results of operations.
Even before the adoption of these emergency policies, foreclosure timelines have increased in recent years due to, among other reasons, delays associated with the significant increase in the number of foreclosure cases as a result of economic downturns, additional consumer protection initiatives related to the 30 foreclosure process and voluntary or mandatory programs intended to permit or require lenders to consider loan modifications or other alternatives to foreclosure.
Even before the adoption of these emergency policies, foreclosure timelines have increased in recent years due to, among other reasons, delays associated with the significant increase in the number of foreclosure cases as a result of economic downturns, additional consumer protection initiatives related to the foreclosure process and voluntary or mandatory programs intended to permit or require lenders to consider loan modifications or other alternatives to foreclosure.
Financial institutions are required under the USA PATRIOT Act of 2001 (the “Patriot Act”) and Bank Secrecy Act ("BSA") to develop programs to prevent financial institutions from being used for money-laundering ("AML") and terrorist activities. Financial institutions are also obligated to file suspicious activity reports with the U.S. Treasury Department's Office of Financial Crimes Enforcement Network.
Financial institutions are required under the USA PATRIOT Act of 2001 (the “Patriot Act”) and Bank Secrecy Act ("BSA") to develop programs to prevent financial institutions from being used for money-laundering and terrorist activities. Financial institutions are also obligated to file suspicious activity reports with the U.S. Treasury Department's Office of Financial Crimes Enforcement Network.
The costs associated with investigation or remediation activities could be 28 substantial and could substantially exceed the value of the real property. In addition, as the owner or former owner of a contaminated site, we may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from the property.
The costs associated with investigation or remediation activities could be substantial and could substantially exceed the value of the real property. In addition, as the owner or former owner of a contaminated site, we may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from the property.
Increased competition within our geographic market area may result in reduced loan originations and deposits. Ultimately, competition from current and future competitors may affect our business materially and adversely. We may not be able to continue to grow organically or through acquisitions. 31 Historically, we have expanded through a combination of organic growth and acquisitions.
Increased competition within our geographic market area may result in reduced loan originations and deposits. Ultimately, competition from current and future competitors may affect our business materially and adversely. We may not be able to continue to grow organically or through acquisitions. Historically, we have expanded through a combination of organic growth and acquisitions.
Our risk management framework is comprised of various processes, systems and strategies, and is designed to manage the types of risk to which we are subject, including, among others, credit, market, liquidity, interest rate and compliance. Our framework also includes financial or other modeling methodologies that involve management assumptions and judgment.
Our risk management framework is comprised of various processes, systems and strategies, and is designed to manage the types of risks to which we are subject, including, among others, credit, market, liquidity, interest rate and compliance. Our framework also includes financial or other modeling methodologies that involve management assumptions and judgment.
We could be held liable to a governmental entity or to third parties for property damage, personal injury, investigation and clean-up costs incurred by these parties in connection with environmental contamination, or may be required to investigate or clean up hazardous or toxic substances or chemical releases at such properties.
We could be held liable to a governmental entity or to third parties for property damage, personal injury, investigation and clean-up costs incurred by these parties in connection with environmental contamination, or may be required to investigate or clean up hazardous or toxic 29 substances or chemical releases at such properties.
However, because the tactics and techniques used by threat actors to bypass safeguards and security controls change frequently, and often are not recognized until after an event has occurred, we may be unable to anticipate future tactics and techniques, or to implement adequate and timely protective measures.
Because the tactics and techniques used by threat actors to bypass safeguards and security controls change frequently, and often are not recognized until after an event has occurred, we may be unable to anticipate future tactics and techniques, or to implement adequate and timely protective measures.
The loss of qualified and key personnel, or an inability to continue to attract, retain and motivate key personnel could adversely affect our business and consequently impact our financial condition and results of operations. Our risk management framework may not be effective in mitigating risks and losses to us.
The 26 loss of qualified and key personnel, or an inability to continue to attract, retain and motivate key personnel could adversely affect our business and consequently impact our financial condition and results of operations. Our risk management framework may not be effective in mitigating risks and losses to us.
In addition, 29 any changes in our branch network strategy could adversely impact our business, financial condition or operations if it results in the loss of customers or deposits which we rely on as a low cost and stable source of funds for our loans and operations.
In addition, any changes in our branch network strategy could adversely impact our business, financial condition or operations if it results in the loss of customers or deposits which we rely on as a low cost and stable source of funds for our loans and operations.
Our business, reputation and ability to attract and retain employees may also be harmed if our response to climate change is perceived to be ineffective or insufficient. Furthermore, the long-term impacts of climate change will have a negative impact our customers and their business.
Our business, reputation and ability to attract and retain employees may also be harmed if our response to climate change is perceived to be ineffective or insufficient. Furthermore, the long-term impacts of climate change will have a negative impact on our customers and their business.
All else being equal, if the interest rates on the Company's interest-bearing liabilities increase at a faster pace than the interest rates on our interest-earning assets, the result would be a reduction in net interest income and with it, a reduction in net earnings.
All else being equal, if the interest rates on the Company's interest-bearing liabilities 21 increase at a faster pace than the interest rates on our interest-earning assets, the result would be a reduction in net interest income and with it, a reduction in net earnings.
Physical risks include extreme storms that damage or destroy property and inventory securing loans we make, or may interrupt our customer’s business operations , putting them in financial difficulty, and increasing the risk of default.
Physical risks include extreme storms or wildfires that damage or destroy property and inventory securing loans we make, or may interrupt our customer’s business operations, putting them in financial difficulty, and increasing the risk of default.
These actions could lead to losses on these assets or could adversely impact the carrying value of other long-lived assets and may lead to increased expenditures to renovate and reconfigure remaining branches or to otherwise reform our retail distribution channel.
These actions could lead to losses on these assets or could adversely impact the carrying value of other long-lived assets and may lead to increased expenditures to renovate and reconfigure remaining branches or to otherwise further reform our retail distribution channel.
Such cyber-attacks and other security incidents are designed to lead to various harmful outcomes, such as unauthorized transactions our customers’ accounts, unauthorized or unintended access to or release, gathering, monitoring, disclosure, loss, destruction, corruption, disablement, encryption, misuse, modification or other processing of confidential or sensitive information (including personal information), intellectual property, software, methodologies or business secrets, disruption, sabotage or degradation of service, systems or networks, or other damage.
Such cyber-attacks and other security incidents are designed to lead to various harmful outcomes, such as unauthorized transactions against our customers’ accounts, unauthorized or unintended access to confidential information, or the release, gathering, monitoring, disclosure, loss, destruction, corruption, disablement, encryption, misuse, modification or other processing of confidential or sensitive information (including personal information), intellectual property, software, methodologies or business secrets, disruption, sabotage or degradation of service, systems or networks, or other damage.
Failure to comply with applicable laws and regulations can result in a range of sanctions and enforcement actions, including the imposition of civil money penalties, formal agreements and cease and desist orders; identified deficiencies in our HMDA reporting and BSA/AML programs have resulted in Consent Orders from the CFPB and OCC, required us to incur significant expenses and compliance costs and subjected us to civil penalties.
Failure to comply with applicable laws and regulations can result in a range of sanctions and enforcement actions, including the imposition of civil money penalties, formal agreements and cease and desist orders; identified deficiencies in our HMDA reporting and AML/CFT programs have resulted in Consent Orders from the CFPB and OCC, required us to incur significant expenses and compliance costs and subjected us to civil penalties.
Federal regulatory agencies, as part of their examination process, review our loans and ACL. If our assumptions and judgments used to determine the ACL 22 prove to be incorrect, if the value of the collateral securing the loans decreases substantially or if regulators disagree with its judgments, we may need to increase the ACL in amounts that exceed our expectations.
Federal regulatory agencies, as part of their examination process, review our loans and ACL. If our assumptions and judgments used to determine the ACL prove to be incorrect, if the value of the collateral securing the loans decreases substantially or if regulators disagree with our judgments, we may need to increase the ACL in amounts that exceed our expectations.
A deterioration in economic conditions in the United States and our markets could result in an increase in loan delinquencies and non-performing assets, decreases in loan collateral values and a decrease in demand for our products and services, all of which, in turn, would adversely affect our business, financial condition and results of operations.
A deterioration in economic conditions in the United States and our markets could result in a further increase in loan delinquencies and non-performing assets, decreases in loan collateral values and a decrease in demand for our products and services, all of which, in turn, would adversely affect our business, financial condition and results of operations.
A slow-down or reversal in the economic recovery of the regions in which we conduct our business could result in declines in loan demand and collateral values. Negative impacts on our customers caused by COVID-19 could result in increased risk of delinquencies, defaults, foreclosures and losses on our loans.
A slow-down or reversal in the economic recovery of the regions in which we conduct our business could result in declines in loan demand and collateral values. Negative impacts on our customers caused by COVID-19 or other pathogens could result in increased risk of delinquencies, defaults, foreclosures and losses on our loans.
Our Board of Directors is authorized to cause Washington Federal to issue one or more classes or series of preferred stock junior to our Series A Preferred Stock from time to time without any action on the part of our shareholders, and our Board of Directors also has the power, without shareholder approval, to set the terms of any such classes or series of preferred stock that may be issued, including voting rights, dividend rights, and preferences over the Common Stock with respect to dividends or upon our dissolution, winding up and liquidation and other terms.
Our Board of Directors is authorized to cause the Company to issue one or more classes or series of preferred stock junior to our Series A Preferred Stock from time to time without any action on the part of our shareholders, and our Board of Directors also has the power, without shareholder approval, to set the terms of any such classes or series of preferred stock that may be issued, including voting rights, dividend rights, and preferences over the Common Stock with respect to dividends or upon our dissolution, winding up and liquidation and other terms.
Failure or the inability to comply with the Patriot Act and BSA statutes and regulations could result in fines or penalties, curtailment of expansion opportunities, enforcement actions, intervention or sanctions by regulators and costly litigation or expensive additional controls and systems.
Our failure or our inability to comply with the 27 Patriot Act and BSA statutes and regulations could result in fines or penalties, curtailment of expansion opportunities, enforcement actions, intervention or sanctions by regulators and costly litigation or expensive additional controls and systems.
Due to the COVID-19 emergency, certain states in which we do business enacted temporary stays on evictions and foreclosures, or instituted a right to forbearance for homeowners experiencing financial hardship.
During the COVID-19 emergency, certain states in which we do business enacted temporary stays on evictions and foreclosures, or instituted a right to forbearance for homeowners experiencing financial hardship.
We had previously entered in a consent order with the CFPB in 2013, also relating to HMDA reporting deficiencies, resulting in a 26 $34,000 civil money penalty. The 2013 HMDA Consent Order remains in effect.
We had previously entered into a consent order with the CFPB in 2013, also relating to HMDA reporting deficiencies, resulting in a $34,000 civil money penalty. The 2013 HMDA Consent Order remains in effect.
Continuation of the COVID-19 pandemic, or a similar crisis, could negatively impact our capital, liquidity, and other financial positions and our business, results of operations, and prospects.
A resurgence of the COVID-19 pandemic, or a similar crisis, could negatively impact our capital, liquidity, and other financial positions and our business, results of operations, and prospects.
Further, recent changes in the Federal Reserve's purchase of assets, commonly known as "quantitative easing," have created significant volatility in market interest rates and recent, rapid increases in federal benchmark rates and likely additional increases in such rates are creating additional uncertainty and making it more difficult for us to balance our loan and deposit portfolios.
Further, recent changes in the Federal Reserve Bank's purchase of assets, commonly known as "quantitative easing," have created significant volatility in market interest rates and recent, rapid increases in federal benchmark rates and additional increases in such rates are creating additional uncertainty and making it more difficult for us to balance our loan and deposit portfolios.
Potential threats to our technologies, systems, networks, and other devices, as well as those of our employees, third party vendors, and other third parties with whom we interact, include DDoS attacks, computer viruses, hacking, malware, ransomware, credential stuffing, or phishing or other forms of social engineering.
Potential threats to our technologies, systems, networks, and other devices, as well as those of our employees, third party vendors, and other third parties with whom we interact, include Distributed Denial of Service ("DDoS") attacks, computer viruses, hacking, malware, ransomware, credential stuffing, phishing, and other forms of social engineering.
If the settlement is not approved by the court, or if another class action lawsuit is filed or determined adversely to us, or we were to enter into a settlement agreement in connection with such a matter, we could be exposed to monetary damages, reputational harm, or subject to limits on our ability to operate our business, which could have an adverse effect on our financial condition, and operating results.
If this, or another class action lawsuit is filed or determined adversely to us, or we were to enter into a settlement agreement in connection with such a matter, we could be exposed to monetary damages, reputational harm, or subject to limits on our ability to operate our business, which could have an adverse effect on our financial condition, and operating results.
Throughout the pandemic our operations have been impacted by the need to close certain offices and limit how customers conduct business through our branch network.
Throughout the pandemic our operations were impacted by the need to close certain offices and limit how customers conduct business through our branch network.
While we maintain our ACL to provide for loan defaults and non-performance, losses may exceed the value of the collateral securing the loans and the allowance may not fully cover any excess loss.
We maintain an ACL to provide for loan defaults and non-performance, however, losses may exceed the value of the collateral securing the loans and the allowance may not fully cover any excess loss.
We decreased the expense for credit losses over fiscal year 2021 and 2022 as the economy began to recover, however, deteriorating conditions in the regional economies we serve, or in certain sectors of those economies, could drive losses beyond that which is provided for in our allowance for loan losses.
We decreased the expense for credit losses over fiscal year 2021 and 2022 as the economy began to recover, however, deteriorating conditions in the regional economies we serve, or in certain sectors of those economies, in excess of the reasonable and supportable forecasts used to estimate credit losses, could drive losses beyond that which is provided for in our allowance for loan losses.
Rapid changes in interest rates make it difficult for the Bank to balance its loan and deposit portfolios, which may adversely affect our results of operations by, for example, reducing asset yields or spreads, creating operating and system issues, or having other adverse impacts on our business. Conversely, decreases in interest rates could result in an acceleration of loan prepayments.
Rapid changes in interest rates make it difficult for the Bank to balance its loan and deposit portfolios, which may adversely affect our results of operations by, for example, reducing asset yields or spreads, creating operating and system issues, or having other adverse impacts on our business.
If a key employee or a substantial number of employees depart or become unable to perform their duties, it may negatively impact our ability to conduct business as usual. We might then have to divert resources from other areas of our operations, which could create additional stress for other employees, including those in key positions.
If a key employee or a substantial number of employees depart or become unable to perform their duties, it may negatively impact our ability to conduct business as usual. Unanticipated departures might require us to divert resources from other areas of our operations, which could create additional stress for other employees, including those in key positions.
S. and the financial markets generally (including the effects of the COVID-19 pandemic). • variations in the operating results of the Company and our competitors. • events affecting other companies that the market deems comparable to the Company. • changes in securities analysts' estimates of our future performance and the future performance of our competitors. 32 • announcements by the Company or our competitors of mergers, acquisitions and strategic partnerships. • additions or departure of key personnel. • the presence or absence of short selling of the Company's Common Stock. • future sales by us of our Common Stock or debt securities.
S. and the financial markets generally. • variations in the operating results of the Company and our competitors. • events affecting other companies that the market deems comparable to the Company. • changes in securities analysts' estimates of our future performance and the future performance of our competitors. • announcements by the Company or our competitors of mergers, acquisitions and strategic partnerships, including the pending merger with Luther Burbank. • additions or departure of key personnel. • the presence or absence of short selling of the Company's Common Stock. • future sales by us of our Common Stock or debt securities.
If such claims and legal actions are brought, and are not resolved in a manner favorable to the Company, they could result in financial liability and/or reputational harm, which could have a material adverse effect on our financial condition and results of operations. Banking institutions are also increasingly the target of class action lawsuits.
If such claims and legal actions are brought, and are not resolved in a manner favorable to the Company, they could result in financial liability and/or reputational harm, which could have a material adverse effect on our financial condition and results of operations.
An acquiring person is defined as a person or group of persons that beneficially own 10% or more of the voting securities of the target corporation.
An acquiring person is defined as a person or group of persons that beneficially own 10% or more of our voting securities.
As a result, the impact of the future regulatory requirements continues to be uncertain. We expect the way we conduct business to continue to be affected by these regulatory requirements, including through limitations on our ability to pursue certain lines of business, capital requirements, enhanced reporting obligations, and increased costs.
We expect the way we conduct business to continue to be affected by these regulatory requirements, including through limitations on our ability to pursue certain lines of business, capital requirements, enhanced reporting obligations, and increased costs.
Net interest income and earnings would be similarly impacted were the interest rates on interest-earning assets to decline more quickly than the interest rates on interest-bearing liabilities.
The same could be true if interest rates on interest-earning assets decline faster than the rates on interest-bearing liabilities. Net interest income and earnings would be similarly impacted were the interest rates on interest-earning assets to decline more quickly than the interest rates on interest-bearing liabilities.
Changes to monetary policy by the Federal Reserve could adversely impact our results of operations. The Federal Reserve is responsible for regulating the supply of money in the United States, including open market operations used to stabilize prices in times of economic stress, as well as setting monetary policies.
The Federal Reserve is responsible for regulating the supply of money in the United States, including open market operations used to stabilize prices in times of economic stress, as well as setting monetary policies.
In such a case, we may incur further write-downs and charge-offs, which could, in turn, adversely affect our business, financial condition and results of operations. Changes in retail distribution strategies and consumer behavior may adversely impact our business, financial condition and results of operations.
In such a case, we may incur further write-downs and charge-offs, which could, in turn, adversely affect our business, financial condition and results of operations.
We are unable to predict changes in interest rates, which are affected by factors beyond our control, including inflation, deflation, recession, unemployment, money supply and other changes in financial markets. Inflationary pressures and rising prices may affect our results of operations and financial condition. Inflation has continued rising in 2022 at levels not seen for over 40 years.
We are unable to predict changes in interest rates, which are affected by factors beyond our control, including inflation, deflation, recession, unemployment, money supply and other changes in financial markets. Inflationary pressures and rising prices may affect our results of operations and financial condition.
Although we consider current sources of funds adequate for our liquidity needs, we may seek additional debt in the future to achieve our long-term business objectives. Such borrowings, if sought, may not be available to us or, if available, may not be on favorable terms.
If we need additional funds for our liquidity needs, we may seek additional debt to achieve our long-term business objectives. Such borrowings, if sought, may not be available to us or, if available, may not be on favorable terms.
A downturn in the real estate market would hurt our business. The Bank’s business activities and credit exposure are concentrated in real estate lending, in particular commercial real estate loans which are generally viewed as having more risk of default than residential real estate loans or certain other types of loans or investments.
The Bank’s business activities and credit exposure are concentrated in real estate lending, in particular commercial real estate loans which are generally viewed as having more risk of default than residential real estate loans or certain other types of loans or investments. The market for real estate is cyclical and the outlook for this sector is uncertain.
Any disruptions, failures, or inaccuracies of these systems, including changes and improvements, could result in our inability to service customers, manage operations, manage risk, meet regulatory obligations, or provide timely and accurate financial reporting which could damage our reputation, result in loss of customer business, subject us to regulatory scrutiny, or expose us to civil litigation and possible financial liability.
Any disruptions, failures, or inaccuracies of these systems, including changes and improvements, could result in our inability to service customers, manage operations, manage risk, meet regulatory obligations, or provide timely and accurate financial reporting which could damage our reputation, result in loss of customer business, subject us to regulatory scrutiny, or expose us to civil litigation and possible financial liability. 24 In many instances, the Company’s products and services to customers are dependent upon third-party service providers, who provide necessary, or critical, services and support.
For example, if the interest rates on interest-bearing liabilities increase at a faster pace than the interest rates on interest-earning assets, the result could be a reduction in our net interest income and with it, a reduction in earnings. The same could be true if interest rates on interest-earning assets decline faster than the rates on interest-bearing liabilities.
Accordingly, fluctuations in interest rates could adversely affect our interest rate spread, and, in turn, our profitability. For example, if the interest rates on interest-bearing liabilities increase at a faster pace than the interest rates on interest-earning assets, the result could be a reduction in our net interest income and with it, a reduction in earnings.
We may also elect to use Common Stock to fund new acquisitions, which will dilute existing shareholders. Holders of our Common Stock have no preemptive rights that entitle holders to purchase their pro rata share of any offering of shares of any class or series and, therefore, such sales or offerings could result in increased dilution to our shareholders.
Holders of our Common Stock have no preemptive rights that 33 entitle holders to purchase their pro rata share of any offering of shares of any class or series and, therefore, such sales or offerings could result in increased dilution to our shareholders.
During the last few years, several banking institutions have received large fines for non-compliance with these laws and regulations, and we were subject to a Consent Order and have paid a civil money penalty with respect to our BSA Program, as described below. In addition, the U.S.
During the last few years, several banking institutions have received large fines for non-compliance with these laws and regulations, and we were subject to a Consent Order and have paid a civil money penalty with respect to our Anti Money Laundering/Combating the Financing of Terrorism Program, (“AML/CFT Program”) (formerly known as our BSA Program), as described below.
However, the Bank remains subject to the BSA, the Patriot Act, and other laws and regulations requiring financial institutions, among other duties, to institute and maintain an effective anti-money laundering program and file suspicious activity and currency transaction reports as appropriate. Failure to maintain an effective BSA program could have serious business, financial and reputational consequences for the Bank.
The OCC terminated the BSA Consent Order in December 2021. However, the Bank remains subject to the BSA, the Patriot Act, and other laws and regulations requiring financial institutions, among other duties, to institute and maintain an effective anti-money laundering program and file suspicious activity and currency transaction reports as appropriate.
Treasury could lead to new taxes that would limit our ability to pursue growth and return profits to shareholders. If these conditions or similar ones continue to exist or worsen, we could experience continuing or increased adverse effects on our financial condition. Fluctuating interest rates could adversely affect our business.
Treasury could lead to new taxes that would limit our ability to pursue growth and return profits to shareholders. If these conditions or similar ones continue to exist or worsen, we could experience continuing or increased adverse effects on our financial condition. Changes to monetary policy by the Federal Reserve could adversely impact our results of operations.
The ongoing COVID-19 pandemic, or a similar health crisis, may adversely affect our business and our customers, counterparties, employees, and third-party service providers in the future. 24 The spread of COVID-19 created a global public-health crisis that resulted in significant economic uncertainty, and has impacted household, business, economic, and market conditions, including in the western United States where we conduct nearly all of our business.
The spread of COVID-19 created a global public-health crisis that resulted in significant economic uncertainty, and has impacted household, business, economic, and market conditions, including in the western United States where we conduct nearly all of our business.
Significant increases in market interest rates on loans, or the perception that an increase may occur, could adversely affect both our ability to originate new loans and our ability to grow. Beginning early in 2022, in response to growing signs of inflation, the Federal Reserve has increased interest rates rapidly.
Significant increases in market interest rates on loans, or the perception that an increase may occur, could adversely affect both our ability to originate new loans and our ability to grow.
The Bank faces strong competition from other financial institutions and new market participants, offering services similar to those offered by the Bank. Many competitors, including fintech companies, offer the same types of loan and deposit services that the Company offers. These competitors include national and multinational banks, other regional banks, savings associations, community banks, credit unions and other financial intermediaries.
Many competitors, including fintech companies, offer the same types of loan and deposit services that the Company offers. These competitors include national and multinational banks, other regional banks, savings associations, community banks, credit unions and other financial intermediaries.
The Dodd-Frank Act has had a substantial impact on the financial services industry since its passage in 2010. The Dodd-Frank Act creates a framework through which regulatory reform has been and continues to be written. While many of the rules required by the Dodd-Frank Act have been implemented, others are still being drafted.
The Dodd-Frank Act creates a framework through which regulatory reform has been and continues to be written. While many of the rules required by the Dodd-Frank Act have been implemented, others are still being drafted. As a result, the impact of the future regulatory requirements continues to be uncertain.
Substantially all of the Bank's loans are to individuals, businesses and real estate developers in the Pacific Northwest, Arizona, Utah, Texas, New Mexico and Nevada. As a result, our business depends significantly on general economic conditions in these market areas.
Our operations are focused in the western United States, subjecting us to the risks of general economic conditions in these market areas. Substantially all of the Bank's loans are to individuals, businesses and real estate developers in the Pacific Northwest, Arizona, Utah, Texas, New Mexico and Nevada.
If a significant decline in market values occurs, the collateral for loans will provide decreasing levels of security. As a result, our ability to recover the principal amount due on defaulted loans by selling the underlying real estate will be diminished, and we will be more likely to suffer losses on defaulted loans.
As a result, our ability to recover the principal amount due on defaulted loans by selling the underlying real estate will be diminished, and we will be more likely to suffer losses on defaulted loans.
It is possible, depending upon the financial condition of the Bank and other factors, that the Bank may not be able to pay dividends to the Company. If the Bank is unable to pay dividends to the Company, then we may not be able to pay dividends on our preferred or common stock to our shareholders.
If the Bank is unable to pay dividends to the Company, then we may not be able to pay dividends on our preferred or Common Stock to our shareholders.
The FDIC charges insured financial institutions premiums to maintain the Deposit Insurance Fund ("DIF") at a specific level. Historically, unfavorable economic conditions increased bank failures and these additional failures decreased the DIF. In order to restore the DIF to its statutorily mandated minimums the FDIC significantly increased deposit insurance premium rates, including the Bank's.
Deposit insurance premiums could increase further in the future. The FDIC insures deposits at FDIC-insured financial institutions, including the Bank. The FDIC charges insured financial institutions premiums to maintain the Deposit Insurance Fund ("DIF") at a specific level. Historically, unfavorable economic conditions increased bank failures and these additional bank failures decreased the DIF.
In addition, the Federal Reserve is responsible for regulating the holding company. This regulatory structure is designed primarily for the protection of the deposit insurance funds and consumers and not to benefit our shareholders.
We are subject to extensive supervision, regulation and examination by the WDFI, CFPB and the FDIC. In addition, the FRB is responsible for regulating the holding company. This regulatory structure is designed primarily for the protection of the deposit insurance funds and consumers and not to benefit our shareholders.
We believe we have robust preventive, detective, and administrative safeguards and security controls to minimize the probability and magnitude of a material event.
We believe we have robust preventive, detective, and administrative safeguards and security controls to minimize the probability and magnitude of a material event. However, if we are unable to maintain them, we may fall victim to a material adverse cybersecurity event.
Our 4.875% Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A (“Series A Preferred Stock”) ranks senior to our Common Stock, and we are prohibited from paying dividends on our common stock unless we have paid dividends on our Series A Preferred.
Our 4.875% Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A (“Series A Preferred Stock”) ranks senior to our Common Stock, and we are prohibited from paying dividends on our Common Stock unless we have paid dividends on our Series A Preferred. 32 Shares of our Series A Preferred Stock rank senior to our Common Stock with respect to the payment of dividends and distributions of assets upon liquidation, dissolution or winding up.
The market for real estate is cyclical and the outlook for this sector is uncertain. A downturn in the real estate market, accompanied by falling values and increased foreclosures would hurt our business because a large majority of our loans are secured by real estate.
A downturn in the real estate market, accompanied by falling values and increased foreclosures would hurt our business because a large majority of our loans are secured by real estate. If a significant decline in market values occurs, the collateral for loans will provide decreasing levels of security.
We expect to see additional volatility in the financial markets due to the uncertainty caused by the continuing COVID-19 pandemic, disruption in global supply chains, uncertainty over the U.S. government debt ceiling and changing Federal Reserve policy.
We expect to see additional volatility in the financial markets due to the uncertainty caused by the continuing global conflicts, commodity shortages and price fluctuations, recent bank failures, uncertainty over the U.S. government debt ceiling, risks of government shutdowns and changing Federal Reserve policy.
These risks are not the only risks we face; additional risks and uncertainties not currently known or that are currently considered to be immaterial may also materially and adversely affect our business. Operational Risks Current uncertain economic conditions pose challenges, and could adversely affect our business, financial condition and results of operations. We are operating in an uncertain economic environment.
These risks are not the only risks we face; additional risks and uncertainties not currently known or that are currently considered to be immaterial may also materially and adversely affect our business. Operational Risks Fluctuating interest rates could adversely affect our business.
The financial markets and the global economy may also be adversely affected by the current or anticipated impact of military conflict, including the current conflict between Russia and Ukraine, which is increasing volatility in commodity and energy prices, creating supply chain issues and causing instability in financial markets.
The financial markets and the global economy may also be adversely affected by the current or anticipated impact of military conflict, including the conflict between Russia and Ukraine, and the evolving conflict in Israel and Gaza.
If this occurs, we may see a loss of customers, and our financial results and ability to execute on our strategic plan may be adversely impacted. We are exposed to risks related to fraud and cyber-attacks.
There is a risk that these investments may not provide the anticipated benefits and/or will prove significantly more costly and time consuming to produce. If this occurs, we may see a loss of customers, and our financial results and ability to execute on our strategic plan may be adversely impacted. We are exposed to risks related to fraud and cyber-attacks.
Although it is expected that the Federal Reserve will continue to 21 increase the target federal funds rate in 2023 to combat recent inflationary trends, if interest rates do not rise, or if the Federal Reserve were to lower the target federal funds rate to below 0%, these low rates could continue to constrain our interest rate spread and may adversely affect our business forecasts.
We are currently anticipating that there will be further increases in the target federal funds rate in 2024 to combat recent inflationary trends; however, if interest rates do not rise, or if the Federal Reserve were to rapidly lower the target federal funds rate, the reduction in rates could continue to constrain our interest rate spread and may adversely affect our business forecasts.
The increased market interest rates could also adversely affect the ability of our floating-rate borrowers to meet their higher payment obligations. If this occurred, it could cause an increase in nonperforming assets and charge offs, which could adversely affect our business.
The increased market interest rates could also adversely affect the ability of our floating-rate borrowers to meet their higher payment obligations.
We have significant investments in bank premises and equipment for our branch network as well as our retail work force and other branch banking assets.
Changes in retail distribution strategies and consumer behavior may adversely impact our business, financial condition and results of operations. 30 We have significant investments in bank premises and equipment for our branch network as well as our retail work force and other branch banking assets.
Any of these results could have a material adverse effect on our business, financial condition and results of operations. We operate in a highly regulated industry, which limits the manner and scope of our business activities. We are subject to extensive supervision, regulation and examination by the WDFI, CFPB and the FDIC.
Failure to maintain an effective AML/CFT program could have serious business, financial and reputational consequences for the Bank. Any of these results could have a material adverse effect on our business, financial condition and results of operations. We operate in a highly regulated industry, which limits the manner and scope of our business activities.
Any increase in the Bank's FDIC premiums could have an adverse effect on its business, financial condition and results of operations. We are subject to various claims and litigation, which could result in significant expenses, losses and damage to our reputation. We are, from time to time, subject to claims and proceedings related to our operations.
FDIC insurance premiums could increase in the future in response to similar declining economic conditions. We are subject to various claims and litigation, which could result in significant expenses, losses and damage to our reputation. We are, from time to time, subject to claims and proceedings related to our operations.
Because of the differences in maturities and repricing characteristics of our interest-earning assets and interest-bearing liabilities, changes in interest rates do not produce equivalent changes in interest income earned on interest-earning assets and interest paid on interest-bearing liabilities. Accordingly, fluctuations in interest rates could adversely affect our interest rate spread, and, in turn, our profitability.
As a result of the high interest rates, our interest expense on both deposits and borrowings has increased significantly. Because of the differences in maturities and repricing characteristics of our interest-earning assets and interest-bearing liabilities, changes in interest rates do not produce equivalent changes in interest income earned on interest-earning assets and interest paid on interest-bearing liabilities.
Government imposed and is expected to continue to expand laws and regulations relating to residential and consumer lending activities that could create significant new compliance burdens and financial costs. The Bank was previously subject to a Consent Order from the OCC for its BSA program that was issued in February 2018 (the “BSA Consent Order”).
In addition, the U.S. Government imposed and is expected to continue to expand laws and regulations relating to residential and consumer lending activities that could create significant new compliance burdens and financial costs.
The pandemic caused a global economic slowdown, and while we have seen economic recovery, continuing supply chain issues, labor shortages and inflation risk are affecting the continued recovery. Continued economic uncertainty and a recessionary or stagnant economy could result in financial stress on the Bank's borrowers, which could adversely affect our business, financial condition and results of operations.
Current uncertain economic conditions pose challenges, and could adversely affect our business, financial condition and results of operations. We are operating in an uncertain economic environment. The pandemic caused a global economic slowdown, and while we have seen some economic recovery, continuing supply chain issues, labor shortages and inflation risks continue to affect the economic recovery.
Future incidents involving this vendor or other third-party service providers could cause us to suffer damage to our reputation and could require us to incur substantial expenses, which could have a materially adverse effect on our business, financial condition, and results of operations. 23 To date, we have no knowledge of a successful cyber-attack or other material information security breach affecting the systems we operate and control.
Control failures of security measures managed by our third-party service providers could cause us to suffer damage to our reputation and could require us to incur substantial expenses, which could have a materially adverse effect on our business, financial condition, and results of operations.
Sustained higher interest rates by the Federal Reserve may be needed to tame persistent inflationary price pressures, which could push down asset prices and weaken economic activity.
Inflation has led to increased costs to our customers, making it more difficult for them to repay their loans or other obligations increasing our credit risk. Sustained higher interest rates by the Federal Reserve may be needed to tame persistent inflationary price pressures, which could push down asset prices and weaken economic activity.
Downturns in the stock market and the market price of our stock, changes in our capital position, and changes in our regulatory standing could each have a negative impact on our ability to complete future acquisitions. Security Ownership Risks Our ability to pay dividends is subject to limitations that may affect our ability to continue to pay dividends to shareholders.
Downturns in the stock market and the market price of our stock, changes in our capital position, and changes in our regulatory standing could each have a negative impact on our ability to complete future acquisitions. The Company’s entry into California may present increased risk that may adversely impact our business, prospects and financial condition.
Our allowance for credit losses ("ACL") may not be adequate to cover future loan losses, which could adversely affect our financial condition and results of operations.
Our general business strategy may be adversely affected by any such economic downturn, volatile business environment, hostile third-party action or continued unpredictable and unstable market conditions. Our allowance for credit losses ("ACL") may not be adequate to cover future loan losses, which could adversely affect our financial condition and results of operations.
If we ever become subject to significant environmental liabilities, our business, financial condition and results of operations could be materially and adversely affected. Market and Industry Risks Our operations are focused in the western United States, subjecting us to the risks of general economic conditions in these market areas.
If we ever become subject to significant environmental liabilities, our business, financial condition and results of operations could be materially and adversely affected. Market and Industry Risks Recent negative developments affecting the banking industry, and resulting media coverage, have eroded customer confidence in the banking system.
Should these stays or rights to forbearance continue, we may be limited in our ability to take timely possession of real estate assets collateralizing loans, which may increase our loan losses. Increases in the foreclosure timeline may also have an adverse effect on collateral values and the our ability to minimize our losses.
Should these stays or rights to forbearance be enacted again, or if new legislation is passed regarding residential foreclosures, we may be limited in our ability to take timely possession of real estate assets collateralizing loans, which may increase our loan losses.

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Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Added
Mine Safety Disclosures Not applicable. 35 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePeriod Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plan Maximum Number of Shares That May Yet Be Purchased Under the Plan at the End of the Period July 1, 2022 to July 31, 2022 570 $ 30.03 570 3,725,304 August 1, 2022 to August 31, 2022 309 34.68 309 3,724,995 September 1, 2022 to September 30, 2022 651 31.26 651 3,724,344 Total 1,530 $ 31.49 1,530 3,724,344 36 Performance Graphs The following graphs compare the cumulative total return to Washington Federal shareholders (stock price appreciation plus reinvested dividends) to the cumulative total return of the Nasdaq Stock Market Index (U.S.
Biggest changePeriod Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plan Maximum Number of Shares That May Yet Be Purchased Under the Plan at the End of the Period July 1, 2023 to July 31, 2023 211 $ 30.25 211 2,559,400 August 1, 2023 to August 31, 2023 217 30.55 217 2,559,183 September 1, 2023 to September 30, 2023 — — — 2,559,183 Total 428 $ 30.41 428 2,559,183 36 Performance Graphs The following graphs compare the cumulative total return to WaFd shareholders (stock price appreciation plus reinvested dividends) to the cumulative total return of the Nasdaq Stock Market Index (U.S.
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities Common Stock The Company’s common stock is traded on the Nasdaq Global Select Market of The Nasdaq Stock Market LLC under the symbol “WAFD.” At September 30, 2022, the number of shareholders of record was 1,134.
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities Common Stock The Company’s Common Stock is traded on the Nasdaq Global Select Market of The Nasdaq Stock Market LLC under the symbol “WAFD.” At September 30, 2023, the number of shareholders of record was 1,045.
The following table shows the share repurchases made for the three months ended September 30, 2022.
The following table shows the share repurchases made for the three months ended September 30, 2023.
The graphs assume that $100 was invested on September 30, 2017, and November 9, 1982, respectively, in Washington Federal Common Stock, the Nasdaq Stock Market Index and the Nasdaq Financial Stocks Index, and that all dividends were reinvested.
The graphs assume that $100 was invested on September 30, 2018, and November 9, 1982, respectively, in WaFd Common Stock, the Nasdaq Stock Market Index and the Nasdaq Financial Stocks Index, and that all dividends were reinvested.
Companies) and the KBW Bank Index for the five year period ended September 30, 2022, and since Washington Federal first became a publicly traded company on November 9, 1982, respectively.
Companies) and the KBW Bank Index for the five year period ended September 30, 2023, and since WaFd first became a publicly traded company on November 9, 1982, respectively.
Management of Washington Federal cautions that the stock price performance shown in the graphs below should not be considered indicative of potential future stock price performance. 37 38
Management of WaFd cautions that the stock price performance shown in the graphs below should not be considered indicative of potential future stock price performance. 37 Item 6. [Reserved]

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeSeptember 30, 2022 September 30, 2021 Change ($ in thousands) ($ in thousands) $ % Gross loans by category Commercial loans Multi-family $ 2,645,801 13.6 % $ 2,291,477 14.1 % $ 354,324 15.5% Commercial real estate 3,133,660 16.2 2,443,845 15.0 689,815 28.2 Commercial & industrial (1) 2,350,984 12.1 2,314,654 14.2 36,330 1.6 Construction 3,784,388 19.5 2,888,214 17.7 896,174 31.0 Land - acquisition & development 291,301 1.5 222,457 1.4 68,844 30.9 Total commercial loans 12,206,134 63.1 10,160,647 62.3 2,045,487 20.1 Consumer loans Single-family residential 5,771,862 29.8 4,951,627 30.4 820,235 16.6 Construction - custom 974,652 5.0 783,221 4.8 191,431 24.4 Land - consumer lot loans 153,240 0.8 149,956 0.9 3,284 2.2 HELOC 203,528 1.0 165,989 1.0 37,539 22.6 Consumer 75,543 0.4 87,892 0.5 (12,349) (14.1) Total consumer loans 7,178,825 36.9 6,138,685 37.7 1,040,140 16.9 Total gross loans 19,384,959 100 % 16,299,332 100 % 3,085,627 18.9% Less: Allowance for loan losses 172,808 171,300 1,508 0.9 Loans in process 3,006,023 2,232,836 773,187 34.6 Net deferred fees, costs and discounts 92,564 61,626 30,938 50.2 Total loan contra accounts 3,271,395 2,465,762 805,633 32.7 Net loans $ 16,113,564 $ 13,833,570 $ 2,279,994 16.5% (1) Includes $10,237,000 of SBA Payroll Protection Program loans as of September 30, 2022. 48 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following table summarizes the Company’s loan portfolio, due for the periods indicated based on contractual terms to maturity or repricing.
Biggest changeThe following table presents loan balances by category and the year-over-year change. 47 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS September 30, 2023 September 30, 2022 Change ($ in thousands) ($ in thousands) $ % Gross loans by category Commercial loans Multi-family $ 2,907,086 14.8 % $ 2,645,801 13.6 % $ 261,285 9.9% Commercial real estate 3,344,959 17.0 3,133,660 16.2 211,299 6.7 Commercial & industrial 2,321,717 11.8 2,350,984 12.1 (29,267) (1.2) Construction 3,318,994 16.9 3,784,388 19.5 (465,394) (12.3) Land - acquisition & development 201,538 1.0 291,301 1.5 (89,763) (30.8) Total commercial loans 12,094,294 61.6 12,206,134 63.0 (111,840) (0.9) Consumer loans Single-family residential 6,451,270 32.8 5,771,862 29.8 679,408 11.8 Construction - custom 672,643 3.4 974,652 5.0 (302,009) (31.0) Land - consumer lot loans 125,723 0.6 153,240 0.8 (27,517) (18.0) HELOC 234,410 1.2 203,528 1.0 30,882 15.2 Consumer 70,164 0.4 75,543 0.4 (5,379) (7.1) Total consumer loans 7,554,210 38.4 7,178,825 37.0 375,385 5.2 Total gross loans 19,648,504 100 % 19,384,959 100 % 263,545 1.4% Less: Allowance for loan losses 177,207 172,808 4,399 2.5 Loans in process 1,895,940 3,006,023 (1,110,083) (36.9) Net deferred fees, costs and discounts 98,807 92,564 6,243 6.7 Total loan contra accounts 2,171,954 3,271,395 (1,099,441) (33.6) Net loans $ 17,476,550 $ 16,113,564 $ 1,362,986 8.5% The following table summarizes the Company’s loan portfolio balances, at amortized cost, due for the periods indicated based on contractual terms to maturity or repricing.
For commercial loans, six consecutive payments on newly restructured loan terms are required prior to returning the loan to accrual status. After the required six consecutive payments are made, a management assessment may conclude that collection of the entire principal and interest due is still in doubt. In those instances, the loan will remain on non-accrual.
For commercial loans, six consecutive payments on newly restructured loan terms are required prior to returning the loan to accrual status. After the required six consecutive payments are made, a management assessment may conclude that collection of the entire principal and interest due is still in doubt. In those instances, the loan will remain non-accrual.
When property is acquired, it is recorded at the fair market value less estimated selling costs at the date of acquisition. Interest accrual ceases on the date of acquisition and all costs incurred in maintaining the property from that date forward are expensed as incurred. Costs incurred for the improvement or development of such property is capitalized.
When property is acquired, it is recorded at the fair market value less estimated selling costs at the date of acquisition. Interest accrual ceases on the date of acquisition and all costs incurred in maintaining the property from that date forward are expensed as incurred. Costs incurred for the improvement or development of such property are capitalized.
The impact going forward will depend on the composition, characteristics, and credit quality of the loan and securities portfolios as well as the economic conditions at future reporting periods. The table below shows the available-for-sale and held-for-investment securities portfolios categorized by maturity band.
The impact going forward will depend on the composition, characteristics, and credit quality of the securities portfolios as well as the economic conditions at future reporting periods. The table below shows the available-for-sale and held-for-investment securities portfolios categorized by maturity band.
Time deposits with a maturity of one year or less have penalties for premature withdrawal equal to 90 days of interest. When the maturity is greater than one year but less than four years, the penalty is 180 days of interest.
Time deposits with a maturity of one year or less have penalties for premature withdrawal equal to 90 days of interest. When the maturity is greater than one year but less than four years, the penalty is 180 days of interest. When the maturity is greater than four years, the penalty is 365 days of interest.
Management’s determination of the amount of the ACL is a critical accounting estimate as it requires significant reliance on the credit risk we ascribe to individual borrowers, the use of estimates and significant judgment as to the amount and timing of expected future cash flows on individually evaluated loans, significant reliance on historical loss rates on homogenous portfolios, consideration of our quantitative and qualitative evaluation of past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts.
Management’s determination of the amount of the ACL is a critical accounting estimate as it requires significant reliance on the credit risk we ascribe to individual borrowers, the use of estimates and significant judgment as to the amount and timing of expected future cash flows on individually evaluated loans, significant reliance on historical loss rates on homogeneous portfolios, consideration of our quantitative and qualitative evaluation of past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts.
These securities carry the explicit and/or implicit guarantee of the U.S. government and have a long history of zero credit loss. The remaining securities are issued by highly-rated municipalities or corporate borrowers. The Company does not believe that any of its available-for-sale debt securities have credit loss impairment as of September 30, 2022, therefore, no allowance was recorded.
These securities carry the explicit and/or implicit guarantee of the U.S. government and have a long history of zero credit loss. The remaining securities are issued by highly-rated municipalities or corporate borrowers. The Company does not believe that any of its available-for-sale debt securities have credit loss impairment as of September 30, 2023, therefore, no allowance was recorded.
The Company would have recognized interest income of $1,330,000 for the same period had these loans performed according to their original contract terms. The recognized interest income may include more than twelve months of interest for some of the non-accrual loans that were brought current or paid off.
The Company would have recognized interest income of $1,981,000 for the same period had these loans performed according to their original contract terms. The recognized interest income may include more than twelve months of interest for some of the non-accrual loans that were brought current or paid off.
Management believes the total ACL is sufficient to absorb estimated losses inherent in the portfolio of loans and unfunded commitments. 42 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following table sets forth the amount of the Company’s allowance for loan losses by loan portfolio and class (periods prior to 2020 applied the incurred loss model as the current expected credit loss methodology ("CECL") was implemented in 2020).
Management believes the total ACL is sufficient to absorb estimated losses inherent in the portfolio of loans and unfunded commitments. 42 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following table sets forth the amount of the Company’s allowance for loan losses by loan portfolio and class (periods prior to 2020 applied the incurred loss model as CECL was implemented in 2020).
If these loans were deemed non-performing, the Company's ratio of total non-performing assets and performing restructured loans as a percent of total assets would have increased to 1.32% at September 30, 2022. For a discussion of the Company's policy for placing loans on non-accrual status, see Note A to the Consolidated Financial Statements included in Item 8 of this report.
If these loans were deemed non-performing, the Company's ratio of total non-performing assets and performing restructured loans as a percent of total assets would have increased to 1.63% at September 30, 2023. For a discussion of the Company's policy for placing loans on non-accrual status, see Note A to the Consolidated Financial Statements included in Item 8 of this report.
(3) This does not include a reserve for unfunded commitments of $32,500,000, $27,500,000, $25,000,000, $6,900,000 and $7,250,000 as of September 30, 2022, 2021, 2020, 2019 and 2018, respectively. 43 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ASSET QUALITY Troubled debt restructured loans ("TDRs"). TDRs are reserved for under the Company's CECL methodology.
(3) This does not include a reserve for unfunded commitments of $24,500,000, $32,500,000, $27,500,000, $25,000,000 and $6,900,000 as of September 30, 2023, 2022, 2021, 2020 and 2019, respectively. 43 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ASSET QUALITY Troubled debt restructured loans ("TDRs"). TDRs are reserved for under the Company's CECL methodology.
As of September 30, 2022, single-family residential loans comprised 82.5% of restructured loans. The Bank reserves for restructured loans within its pool based general reserve methodology, except in instances where management considers it appropriate to evaluate individually. Real estate acquired by foreclosure or deed-in-lieu thereof (“REO” or “Real Estate Owned”) is classified as real estate held for sale.
As of September 30, 2023, single-family residential loans comprised 84.7% of restructured loans. The Bank reserves for restructured loans within its pool based general reserve methodology, except in instances where management considers it appropriate to evaluate individually. Real estate acquired by foreclosure or deed-in-lieu thereof (“REO” or “Real Estate Owned”) is classified as real estate held for sale.
This section of this Form 10-K generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021.
This section of this Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
For management's review of the factors that affected our results of operations for the years ended September 30, 2021 and 2020, refer to our Annual Report on Form 10-K for the year ended September 30, 2021, which was filed with the Securities and Exchange Commission on November 19, 2021.
COMPARISON OF 2022 RESULTS WITH 2021 For management's review of the factors that affected our results of operations for the years ended September 30, 2022 and 2021 refer to our Annual Report on Form 10-K for the year ended September 30, 2022, which was filed with the Securities and Exchange Commission on November 18, 2022.
September 30, 2022 2021 Change Washington 32.5 % 36.1 % (3.6) Oregon 13.8 15.9 (2.1) Arizona 14.3 11.9 2.4 Utah 9.6 8.0 1.6 Texas 12.2 10.1 2.1 New Mexico 4.4 4.6 (0.2) Idaho 5.1 5.1 — Nevada 4.2 4.0 0.2 Other (1) 3.9 4.3 (0.4) 100 % 100 % (1) Includes loans from outside of our eight state footprint.
September 30, 2023 2022 Change Washington 31.0 % 32.5 % (1.5) Oregon 13.3 13.8 (0.5) Arizona 13.9 14.3 (0.4) Utah 11.0 9.6 1.4 Texas 13.6 12.2 1.4 New Mexico 4.2 4.4 (0.2) Idaho 5.1 5.1 — Nevada 4.1 4.2 (0.1) Other (1) 3.8 3.9 (0.1) 100 % 100 % (1) Includes loans from outside of our eight state footprint.
In addition to the non-accrual loans reflected in the above table, the Company had $173,348,000 of loans that were less than 90 days delinquent at September 30, 2022 but were classified as substandard for one or more reasons.
In addition to the non-accrual loans reflected in the above table, the Company had $263,075,000 of loans that were less than 90 days delinquent at September 30, 2023 but were classified as substandard for one or more reasons.
Experience during recent years has indicated that, because of prepayments in connection with refinancing and sales of property, residential loans typically have a weighted average life of approximately five years. 49 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following tables provide information regarding loans receivable by loan class and geography.
Experience during recent years has indicated that, because of prepayments in connection with refinancing and sales of property, residential loans typically have a weighted average life of approximately five years. The following tables provide information regarding loans receivable by loan class and geography.
The Bank has a credit line with the FHLB up to 45% of total assets depending on specific collateral eligibility. This line provides a substantial source of additional liquidity if needed. Based on collateral pledged as of September 30, 2022, the Bank had $3,564,720,000 of additional borrowing capacity at the FHLB.
The Bank has a credit line with the FHLB of up to 45% of total assets depending on specific collateral eligibility. This line provides a substantial source of additional liquidity if needed. Based on collateral pledged as of September 30, 2023, the Bank had $2,357,588,000 of additional borrowing capacity at the FHLB.
September 30, 2022 2021 2020 2019 2018 Allowance Loans to Total Loans (1) Coverage Ratio (2) Allowance Loans to Total Loans (1) Coverage Ratio (2) Allowance Loans to Total Loans (1) Coverage Ratio (2) Allowance Loans to Total Loans (1) Coverage Ratio (2) Allowance Loans to Total Loans (1) Coverage Ratio (2) ($ in thousands) Commercial loans Multi-family $ 12,013 16.2 % 0.5 % $ 16,949 16.3 % 0.8 % $ 13,853 11.8 % 0.9 % $ 7,391 11.7 % 0.5 % $ 8,329 11.9 % 0.6 % Commercial real estate 25,814 19.1 0.8 23,437 17.4 1.0 22,516 14.4 1.2 13,170 13.5 0.8 11,852 12.5 0.8 Commercial & industrial 57,210 14.2 2.5 45,957 16.3 2.0 38,665 16.5 1.8 31,450 10.5 2.5 28,702 9.8 2.5 Construction 26,161 8.7 1.9 25,585 7.9 2.3 24,156 10.5 1.8 32,304 9.6 2.8 31,317 9.1 3.0 Land – acquisition & development 12,278 1.3 5.8 13,447 1.3 7.5 10,733 1.2 7.0 9,155 1.3 5.7 7,978 1.1 6.5 Total commercial loans 133,476 125,375 109,923 93,470 88,178 Consumer loans Single-family residential 25,518 35.4 0.4 30,978 35.5 0.6 45,186 40.8 0.9 30,988 48.2 0.5 33,033 49.7 0.6 Construction – custom 3,410 2.4 0.9 4,907 2.5 1.4 3,555 2.3 1.2 1,369 2.1 0.5 1,842 2.5 0.6 Land – consumer lot loans 5,047 0.9 3.4 4,939 1.0 3.4 2,729 0.8 2.7 2,143 0.8 2.2 2,164 0.8 2.2 HELOC 2,482 1.3 1.2 2,390 1.2 1.5 2,571 1.1 1.8 1,103 1.2 0.8 781 1.1 0.6 Consumer 2,875 0.5 4.0 2,711 0.6 3.2 2,991 0.6 3.6 2,461 1.1 1.9 3,259 1.5 1.9 Total consumer loans 39,332 45,925 57,032 38,064 41,079 Total allowance for loan losses (3) $ 172,808 100 % $ 171,300 100 % $ 166,955 100 % $ 131,534 100 % $ 129,257 100 % ___________________ (1) Represents the loans receivable for each respective loan class as a % of total loans receivable.
September 30, 2023 2022 2021 2020 2019 Allowance Loans to Total Loans (1) Coverage Ratio (2) Allowance Loans to Total Loans (1) Coverage Ratio (2) Allowance Loans to Total Loans (1) Coverage Ratio (2) Allowance Loans to Total Loans (1) Coverage Ratio (2) Allowance Loans to Total Loans (1) Coverage Ratio (2) ($ in thousands) Commercial loans Multi-family $ 13,155 16.4 % 0.5 % $ 12,013 16.2 % 0.5 % $ 16,949 16.3 % 0.8 % $ 13,853 11.8 % 0.9 % $ 7,391 11.7 % 0.5 % Commercial real estate 28,842 18.8 0.9 25,814 19.1 0.8 23,437 17.4 1.0 22,516 14.4 1.2 13,170 13.5 0.8 Commercial & industrial 58,773 12.9 2.6 57,210 14.2 2.5 45,957 16.3 2.0 38,665 16.5 1.8 31,450 10.5 2.5 Construction 29,408 10.4 1.6 26,161 8.7 1.9 25,585 7.9 2.3 24,156 10.5 1.8 32,304 9.6 2.8 Land – acquisition & development 7,016 0.9 4.7 12,278 1.3 5.8 13,447 1.3 7.5 10,733 1.2 7.0 9,155 1.3 5.7 Total commercial loans 137,194 133,476 125,375 109,923 93,470 Consumer loans Single-family residential 28,029 36.4 0.4 25,518 35.4 0.4 30,978 35.5 0.6 45,186 40.8 0.9 30,988 48.2 0.5 Construction – custom 2,781 1.8 0.9 3,410 2.4 0.9 4,907 2.5 1.4 3,555 2.3 1.2 1,369 2.1 0.5 Land – consumer lot loans 3,512 0.7 2.9 5,047 0.9 3.4 4,939 1.0 3.4 2,729 0.8 2.7 2,143 0.8 2.2 HELOC 2,859 1.3 1.2 2,482 1.3 1.2 2,390 1.2 1.5 2,571 1.1 1.8 1,103 1.2 0.8 Consumer 2,832 0.4 4.2 2,875 0.5 4.0 2,711 0.6 3.2 2,991 0.6 3.6 2,461 1.1 1.9 Total consumer loans 40,013 39,332 45,925 57,032 38,064 Total allowance for loan losses (3) $ 177,207 100 % $ 172,808 100 % $ 171,300 100 % $ 166,955 100 % $ 131,534 100 % ___________________ (1) Represents the loans receivable for each respective loan class as a % of total loans receivable.
Twelve Months Ended September 30, 2022 2021 2020 2019 2018 (In thousands) Beginning balance $ 171,300 $ 166,955 $ 131,534 $ 129,257 $ 123,073 Charge-offs: Commercial loans Multi-Family — — — — — Commercial Real Estate 529 — 111 428 36 Commercial & Industrial Loans 1,202 31 4,196 5,782 3,574 Construction — — — — — Land – Acquisition & Development 11 2 11 107 13 Total commercial loans 1,742 33 4,318 6,317 3,623 Consumer loans Single-Family Residential — 106 131 268 1,142 Construction – Custom — — — 1,973 50 Land – Consumer Lot Loans 27 — 237 804 67 HELOC — — — 1,086 668 Consumer 370 286 1,069 1,028 382 Total consumer loans 397 392 1,437 5,159 2,309 2,139 425 5,755 11,476 5,932 Recoveries: Commercial loans Multi-Family — — 498 — — Commercial Real Estate 984 2,789 2,447 1,102 189 Commercial & Industrial Loans 73 92 443 3,443 714 Construction 2,179 — 188 99 — Land – Acquisition & Development 70 622 2,070 7,457 14,223 Total commercial loans 3,306 3,503 5,646 12,101 15,126 Consumer loans Single-Family Residential 1,002 2,026 1,394 1,020 757 Construction – Custom — — — — — Land – Consumer Lot Loans 48 168 639 719 35 HELOC 351 52 95 46 71 Consumer 940 1,021 1,252 1,167 993 Total consumer loans 2,341 3,267 3,380 2,952 1,856 5,647 6,770 9,026 15,053 16,982 Net charge-offs (recoveries) (3,508) (6,345) (3,271) (3,577) (11,050) ASC 326 Adoption Impact — — 17,750 — — Provision (release) for loan losses and transfers (2,000) (2,000) 14,400 (1,300) (4,866) Ending balance (1) $ 172,808 $ 171,300 $ 166,955 $ 131,534 $ 129,257 Ratio of net charge-offs (recoveries) to average loans outstanding (0.02) % (0.05) % (0.03) % (0.03) % (0.10) % (1) This does not include a reserve for unfunded commitments of $32,500,000, $27,500,000, $25,000,000, $6,900,000 and $7,250,000 as of September 30, 2022, 2021, 2020, 2019 and 2018 respectively. 41 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following table shows changes in the Company's allowance for credit losses since the prior year.
Twelve Months Ended September 30, 2023 2022 2021 2020 2019 (In thousands) Beginning balance $ 172,808 $ 171,300 $ 166,955 $ 131,534 $ 129,257 Charge-offs: Commercial loans Multi-Family — — — — — Commercial Real Estate — 529 — 111 428 Commercial & Industrial Loans 45,856 1,202 31 4,196 5,782 Construction — — — — — Land – Acquisition & Development — 11 2 11 107 Total commercial loans 45,856 1,742 33 4,318 6,317 Consumer loans Single-Family Residential 34 — 106 131 268 Construction – Custom — — — — 1,973 Land – Consumer Lot Loans — 27 — 237 804 HELOC — — — — 1,086 Consumer 580 370 286 1,069 1,028 Total consumer loans 614 397 392 1,437 5,159 46,470 2,139 425 5,755 11,476 Recoveries: Commercial loans Multi-Family — — — 498 — Commercial Real Estate 103 984 2,789 2,447 1,102 Commercial & Industrial Loans 93 73 92 443 3,443 Construction — 2,179 — 188 99 Land – Acquisition & Development 78 70 622 2,070 7,457 Total commercial loans 274 3,306 3,503 5,646 12,101 Consumer loans Single-Family Residential 568 1,002 2,026 1,394 1,020 Construction – Custom — — — — — Land – Consumer Lot Loans 23 48 168 639 719 HELOC 2 351 52 95 46 Consumer 502 940 1,021 1,252 1,167 Total consumer loans 1,095 2,341 3,267 3,380 2,952 1,369 5,647 6,770 9,026 15,053 Net charge-offs (recoveries) 45,101 (3,508) (6,345) (3,271) (3,577) ASC 326 Adoption Impact — — — 17,750 — Provision (release) for loan losses and transfers 49,500 (2,000) (2,000) 14,400 (1,300) Ending balance (1) $ 177,207 $ 172,808 $ 171,300 $ 166,955 $ 131,534 Ratio of net charge-offs (recoveries) to average loans outstanding 0.26 % (0.02) % (0.05) % (0.03) % (0.03) % (1) This does not include a reserve for unfunded commitments of $24,500,000, $32,500,000, $27,500,000, $25,000,000 and $6,900,000 as of September 30, 2023, 2022, 2021, 2020 and 2019 respectively. 41 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following table shows changes in the Company's allowance for credit losses since the prior year.
(2) Represents contractual maturities of FHLB advances. Taking into account cash flow hedges, the weighted average effective maturity of FHLB advances at September 30, 2022 is 3.25 years. These obligations are included in the Consolidated Statements of Financial Condition. The payment amounts of the operating lease obligations represent those amounts contractually due. 57
(2) Represents contractual maturities of FHLB advances and FRB borrowings. Taking into account cash flow hedges, the weighted average effective maturity of FHLB advances at September 30, 2023 is 2.01 years. These obligations are included in the Consolidated Statements of Financial Condition. The payment amounts of the operating lease obligations represent those amounts contractually due. 55
The Company paid out 28.0% of its 2022 earnings in cash dividends to common shareholders, compared with 38.1% last year. For the year ended September 30, 2022, the Company returned 27.4% of net income to shareholders in the form of cash dividends and share repurchases as compared to 226% for the year ended September 30, 2021.
The Company paid out 26.6% of its 2023 earnings in cash dividends to common shareholders, compared with 28.0% last year. For the year ended September 30, 2023, the Company returned 36.6% of net income to shareholders in the form of cash dividends and share repurchases as compared to 27% for the year ended September 30, 2022.
The ratio of the allowance for loan losses to non-accrual loans decreased to 500% as of September 30, 2022, from 540% as of September 30, 2021. 46 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CHANGES IN FINANCIAL CONDITION Cash and cash equivalents : Cash and cash equivalents decreased to $683,965,000 at September 30, 2022, as compared to $2,090,809,000 at September 30, 2021.
The ratio of the allowance for loan losses to non-accrual loans decreased to 351% as of September 30, 2023, from 500% as of September 30, 2022. 46 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CHANGES IN FINANCIAL CONDITION Cash and cash equivalents : Cash and cash equivalents increased to $980,649,000 at September 30, 2023, as compared to $683,965,000 at September 30, 2022.
September 30, 2022 2021 2020 2019 2018 (In thousands) Performing restructured loans $ 55,823 $ 63,655 $ 89,072 $ 116,659 $ 150,667 Non-performing restructured loans 994 1,473 2,336 5,018 6,191 Total restructured loans 56,817 65,128 91,408 121,677 156,858 Non-accrual loans: Commercial loans Multi-family 5,912 475 — — 27,643 Commercial real estate 4,691 8,038 3,771 5,835 2,427 Commercial & industrial 5,693 365 329 1,292 — Construction — 505 1,669 — 920 Land – acquisition & development — 2,340 — 169 787 Total commercial loans 16,296 11,723 5,769 7,296 31,777 Consumer loans Single-family residential 17,450 19,320 22,431 25,271 — Construction – custom 435 — — — 8,971 Land – consumer lot loans 84 359 243 246 14,394 HELOC 233 287 553 907 523 Consumer 36 60 60 11 21 Total consumer loans 18,238 20,026 23,287 26,435 23,909 Total non-accrual loans (1) 34,534 31,749 29,056 33,731 55,686 Real estate owned 6,667 8,204 4,966 6,781 11,298 Other property owned 3,353 3,672 3,673 3,314 3,109 Total non-performing assets 44,554 43,625 37,695 43,826 70,093 Total non-performing assets and performing restructured loans $ 100,377 $ 107,280 $ 126,767 $ 160,485 $ 220,760 Total non-performing assets and restructured loans as a percent of total assets 0.48 % 0.55 % 0.67 % 0.97 % 1.39 % Total non-performing assets to total assets 0.21 % 0.22 % 0.20 % 0.27 % 0.44 % ___________________ (1) For the year ended September 30, 2022, the Company recognized $3,334,000 in interest income on cash payments received from borrowers on non-accrual loans.
September 30, 2023 2022 2021 2020 2019 (In thousands) Performing restructured loans $ 45,167 $ 55,823 $ 63,655 $ 89,072 $ 116,659 Non-performing restructured loans 950 994 1,473 2,336 5,018 Total restructured loans 46,117 56,817 65,128 91,408 121,677 Non-accrual loans: Commercial loans Multi-family 5,127 5,912 475 — — Commercial real estate 23,435 4,691 8,038 3,771 5,835 Commercial & industrial 6,082 5,693 365 329 1,292 Construction — — 505 1,669 — Land – acquisition & development — — 2,340 — 169 Total commercial loans 34,644 16,296 11,723 5,769 7,296 Consumer loans Single-family residential 14,918 17,450 19,320 22,431 25,271 Construction – custom 88 435 — — — Land – consumer lot loans 9 84 359 243 246 HELOC 736 233 287 553 907 Consumer 27 36 60 60 11 Total consumer loans 15,778 18,238 20,026 23,287 26,435 Total non-accrual loans (1) 50,422 34,534 31,749 29,056 33,731 Real estate owned 4,149 6,667 8,204 4,966 6,781 Other property owned 3,353 3,353 3,672 3,673 3,314 Total non-performing assets 57,924 44,554 43,625 37,695 43,826 Total non-performing assets and performing restructured loans $ 103,091 $ 100,377 $ 107,280 $ 126,767 $ 160,485 Total non-performing assets and restructured loans as a percent of total assets 0.46 % 0.48 % 0.55 % 0.67 % 0.97 % Total non-performing assets to total assets 0.26 % 0.21 % 0.22 % 0.20 % 0.27 % ___________________ (1) For the year ended September 30, 2023, the Company recognized $2,824,000 in interest income on cash payments received from borrowers on non-accrual loans.
As of September 30, 2022, the Company had a net unrealized loss on available-for-sale securities of $111,700,000, which is recorded net of tax as part of shareholders' equity. Substantially all of the Company’s available-for-sale debt securities are issued by U.S. government agencies or U.S. government-sponsored enterprises.
As of September 30, 2023, the Company had a net unrealized loss on available-for-sale securities of $123,519,000, which is recorded net of tax within AOCI, compared to an unrealized loss of $111,700,000 as of September 30, 2022. Substantially all of the Company’s available-for-sale debt securities are issued by U.S. government agencies or U.S. government-sponsored enterprises.
(2) Represents the allowance for each respective loan class as a % of loans receivable for that same loan class. The underlying commercial & industrial loan balances for September 30, 2022, 2021, 2020 include PPP loans for which no allowance was recorded. These PPP loan balances were $10,000,000, $312,000,000, and $745,000,000 as of September 30, 2022, 2021, and 2020, respectively.
(2) Represents the allowance for each respective loan class as a % of loans receivable for that same loan class. The underlying commercial & industrial loan balances for September 30, 2023, 2022, 2021, 2020 include PPP loans for which no allowance was recorded.
The Company's shareholders' equity at September 30, 2022, was $2,274,260,000, or 10.95% of total assets, as compared to $2,126,064,000, or 10.82% of total assets, at September 30, 2021.
The Company's shareholders' equity at September 30, 2023, was $2,426,426,000, or 10.80% of total assets, as compared to $2,274,260,000, or 10.95% of total assets, at September 30, 2022.
Select information regarding the ACL is below in "Allowance for Credit Losses." For further details, see Notes A and E to the Consolidated Financial Statements in “Item 8.
Select information regarding the ACL is under the "Allowance for Credit Losses" heading within this section below. For further details on the ACL or goodwill, see Notes A and E to the Consolidated Financial Statements in “Item 8.
Net proceeds, after underwriting discounts and expenses, were $293,325,000. The public offering consisted of the issuance and sale of 12,000,000 depositary shares, each representing a 1/40th interest in a share of the Series A Preferred Stock, at a public offering price of $25.00 per depositary share.
The public offering consisted of the issuance and sale of 12,000,000 depositary shares, each representing a 1/40th interest in a share of the Series A Preferred Stock, at a public offering price of $25.00 per depositary share.
As of September 30, 2022, real estate owned totaled $6,667,000, a decrease of $1,537,000, or 18.7%, from $8,204,000 as of September 30, 2021, primarily due to sales of REO properties partially offset by new REO additions. During 2022, the Company sold real estate owned properties for total net proceeds of $6,978,000.
As of September 30, 2023, real estate owned totaled $4,149,000, a decrease of $2,518,000, or 37.8%, from $6,667,000 as of September 30, 2022, primarily due to sales of REO properties offset by new REO additions. During 2023, the Company sold real estate owned properties for total net proceeds of $7,192,000.
As of September 30, 2022, the allowance of $172,808,000 is for loans that are evaluated on a pooled basis, which was comprised of $115,245,000 related to the quantitative component and $57,563,000 related to management's qualitative overlays. The Company recorded a provision for credit losses of $3,000,000 in 2022, compared to a provision of $500,000 for 2021.
As of September 30, 2023, the allowance of $177,207,000 is for loans that are evaluated on a pooled basis, which was comprised of $107,049,000 related to the quantitative component and $70,158,000 related to management's qualitative overlays. The Company recorded a provision for credit losses of $41,500,000 in 2023, compared to a provision of $3,000,000 for 2022.
Non-performing assets increased 2.1% to $44,554,000, or 0.21% of total assets, at September 30, 2022, compared to $43,625,000, or 0.22% of total assets, at September 30, 2021. The increase was primarily a result of $2,785,000 higher non-accrual loans partially offset by a $1,537,000 decline in real estate owned.
Non-performing assets increased 30.0% to $57,924,000, or 0.26% of total assets, at September 30, 2023, compared to $44,554,000, or 0.21% of total assets, at September 30, 2022. The increase was primarily a result of an increase of $15,888,000 in non-accrual loans partially offset by a $2,518,000 decline in real estate owned.
The Company's principal sources of revenue are interest on loans and interest and dividends on investments. Additionally, the Company earns fee income for loan, deposit, insurance and other services. On February 8, 2021, in connection with an underwritten public offering, the Company issued 300,000 shares of 4.875% Noncumulative Perpetual Series A Preferred Stock (“Series A Preferred Stock”).
Additionally, the Company earns fee income for loan, deposit, insurance and other services. On February 8, 2021, in connection with an underwritten public offering, the Company issued 300,000 shares of 4.875% Noncumulative Perpetual Series A Preferred Stock (“Series A Preferred Stock”). Net proceeds, after underwriting discounts and expenses, were $293,325,000.
Financial Statements and Supplementary Data.” 40 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ALLOWANCE FOR CREDIT LOSSES The following table provides detail regarding the Company's allowance for credit losses (periods prior to 2020 applied the incurred loss model as the current expected credit loss methodology ("CECL") was implemented in 2020).
Management does not expect the resulting expense to be material to its financial results given the Company's low level of uninsured deposits. 40 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ALLOWANCE FOR CREDIT LOSSES The following table provides detail regarding the Company's allowance for credit losses (periods prior to 2020 applied the incurred loss model as the current expected credit loss methodology ("CECL") was implemented in 2020).
Financial Statements and Supplementary Data” of this report. Loans receivable: Loans receivable, net of related contra accounts, increased $2,279,994,000, or 16.5%, to $16,113,564,000 at September 30, 2022, from $13,833,570,000 one year earlier.
Financial Statements and Supplementary Data” of this report. Loans receivable: Loans receivable, net of related contra accounts, increased $1,362,986,000, or 8.5%, to $17,476,550,000 at September 30, 2023, from $16,113,564,000 one year earlier.
The effective tax rate for 2022 was 21.23% as compared to 21.24% for the year ended September 30, 2021. The effective tax rate of 21.23% for 2022 differs from the statutory rate of 21% mainly due to the effects of state taxes, tax exempt income, tax credit investments and certain differences in book and tax deductions.
The effective tax rate of 20.81% for 2023 differs from the statutory rate of 21% mainly due to the effects of state taxes, tax exempt income, tax credit investments and certain differences in book and tax deductions.
The number of staff, including part-time employees on a full-time equivalent basis, was 2,132 and 2,082 at September 30, 2022 and 2021, respectively. Total operating expense for the years ended September 30, 2022, and 2021 were 1.78% and 1.72%, respectively, of average assets.
The Company’s efficiency ratio was 50.7% for 2023 as compared to 54.3% for the prior year. The number of staff, including part-time employees on a full-time equivalent basis, was 2,120 and 2,132 at September 30, 2023 and 2022, respectively. Total operating expense for the years ended September 30, 2023, and 2022 were 1.74% and 1.78%, respectively, of average assets.
The Company's shareholders' equity was impacted in the year by net income of $236,330,000, the payment of $61,576,000 in common stock dividends, payment of $14,625,000 in preferred stock dividends, $3,260,000 of treasury stock purchases, as well as other comprehensive loss of $17,304,000.
The Company's shareholders' equity was impacted in the year by net income of $257,426,000, the payment of $63,792,000 in Common Stock dividends, payment of $14,625,000 in preferred stock dividends, $30,463,000 of treasury stock purchases, as well as other comprehensive loss of $5,560,000.
($ in thousands) September 30, 2022 September 30, 2021 Deposit Account Balance As a % of Total Deposits Weighted Average Rate Deposit Account Balance As a % of Total Deposits Weighted Average Rate Non-interest checking $ 3,266,734 20.4 % — % $ 3,122,397 20.1 % — % Interest checking 3,497,795 21.8 0.90 3,566,322 22.9 0.20 Savings 1,059,093 6.6 0.13 1,039,336 6.7 0.11 Money market 4,867,905 30.4 0.49 4,379,970 28.2 0.19 Time deposits 3,338,043 20.8 0.74 3,434,087 22.1 0.54 Total $ 16,029,570 100 % 0.51 % $ 15,542,112 100 % 0.23 % The following table shows the geographic distribution by state for customer deposits.
September 30, 2023 September 30, 2022 ($ in thousands) Deposit Account Balance As a % of Total Deposits Weighted Average Rate Deposit Account Balance As a % of Total Deposits Weighted Average Rate Non-interest checking $ 2,706,448 16.8 % — % $ 3,266,734 20.4 % — % Interest checking 3,882,715 24.2 2.28 3,497,795 21.8 0.90 Savings 817,547 5.1 0.21 1,059,093 6.6 0.13 Money market 3,358,603 20.9 1.48 4,867,905 30.4 0.49 Time deposits 5,305,016 33.0 3.77 3,338,043 20.8 0.74 Total $ 16,070,329 100 % 2.12 % $ 16,029,570 100 % 0.51 % The following table shows the geographic distribution by state for customer deposits.
Twelve Months Ended September 30, 2022 vs. 2021 Increase (Decrease) Due to 2021 vs. 2020 Increase (Decrease) Due to 2020 vs. 2019 Increase (Decrease) Due to Volume Rate Total Volume Rate Total Volume Rate Total (In thousands) (In thousands) (In thousands) Interest income: Loan portfolio $ 74,710 $ (10,778) $ 63,932 $ 40,365 $ (48,413) $ (8,048) $ 21,197 $ (43,585) $ (22,388) Mortgage-backed securities (3,101) 4,725 1,624 (16,011) (8,593) (24,604) (13,094) (12,079) (25,173) Investments (1) (9,347) 18,540 9,193 18,824 (15,827) 2,997 19,566 (22,206) (2,640) All interest-earning assets 62,262 12,487 74,749 43,178 (72,833) (29,655) 27,669 (77,870) (50,201) Interest expense: Customer accounts 2,170 (1,442) 728 11,184 (69,183) (57,999) 9,781 (31,685) (21,904) FHLB advances and other borrowings (9,002) (6,457) (15,459) (6,003) (1,254) (7,257) (35) (16,710) (16,745) All interest-bearing liabilities (6,832) (7,899) (14,731) 5,181 (70,437) (65,256) 9,746 (48,395) (38,649) Change in net interest income $ 69,094 $ 20,386 $ 89,480 $ 37,997 $ (2,396) $ 35,601 $ 17,923 $ (29,475) $ (11,552) ___________________ (1) Includes interest on cash equivalents and dividends on stock of the FHLB of Des Moines and FRB of San Francisco.
The change in interest income and interest expense attributable to changes in both volume and rate has been allocated proportionately to the change due to volume and the change due to rate. 52 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Twelve Months Ended September 30, 2023 vs. 2022 Increase (Decrease) Due to 2022 vs. 2021 Increase (Decrease) Due to 2021 vs. 2020 Increase (Decrease) Due to Volume Rate Total Volume Rate Total Volume Rate Total (In thousands) (In thousands) (In thousands) Interest income: Loan portfolio $ 87,565 $ 210,911 $ 298,476 $ 74,710 $ (10,778) $ 63,932 $ 40,365 $ (48,413) $ (8,048) Mortgage-backed securities 5,760 11,092 16,852 (3,101) 4,725 1,624 (16,011) (8,593) (24,604) Investments (1) (13,400) 74,668 61,268 (9,347) 18,540 9,193 18,824 (15,827) 2,997 All interest-earning assets 79,925 296,671 376,596 62,262 12,487 74,749 43,178 (72,833) (29,655) Interest expense: Customer accounts 570 193,622 194,192 2,170 (1,442) 728 11,184 (69,183) (57,999) Borrowings 38,084 48,675 86,759 (9,002) (6,457) (15,459) (6,003) (1,254) (7,257) All interest-bearing liabilities 38,654 242,297 280,951 (6,832) (7,899) (14,731) 5,181 (70,437) (65,256) Change in net interest income $ 41,271 $ 54,374 $ 95,645 $ 69,094 $ 20,386 $ 89,480 $ 37,997 $ (2,396) $ 35,601 ___________________ (1) Includes interest on cash equivalents and dividends on stock of the FHLB of Des Moines and FRB of San Francisco.
The Bank has entered into borrowing agreements with the FHLB to borrow funds under a short-term floating rate cash management advance program and fixed-rate term advance agreements. All borrowings are secured by stock of the FHLB, deposits with the FHLB, and a blanket pledge of qualifying loans receivable as provided in the agreements with the FHLB.
The Bank has entered into borrowing agreements with the FHLB to borrow funds under a short-term floating rate cash management advance program and fixed-rate term advance agreements.
Taking into account these hedges, the weighted average effective maturity of FHLB advances at September 30, 2022 is 3.25 years. 53 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS COMPARISON OF 2022 RESULTS WITH 2021 Net Income : Net income increased $52,715,000, or 28.7%, to $236,330,000 for the year ended September 30, 2022, as compared to $183,615,000 for the year ended September 30, 2021.
Taking into account these hedges, the weighted average effective maturity of FHLB advances at September 30, 2023 is 2.01 years. RESULTS OF OPERATIONS COMPARISON OF 2023 RESULTS WITH 2022 Net Income : Net income increased $21,096,000, or 8.9%, to $257,426,000 for the year ended September 30, 2023, as compared to $236,330,000 for the year ended September 30, 2022.
Other property owned of $3,353,000 as of September 30, 2022 is comprised entirely of a government guarantee related to equipment obtained via a commercial loan foreclosure. TDRs declined to $56,817,000 as of September 30, 2022, from $65,128,000 as of September 30, 2021. As of September 30, 2022, $55,823,000 or 98.3% of TDRs were performing.
Other property owned of $3,353,000 as of September 30, 2023 is comprised entirely of a government guarantee related to equipment obtained via a commercial loan foreclosure. 45 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS TDRs declined to $46,117,000 as of September 30, 2023, from $56,817,000 as of September 30, 2022.
These securities carry the explicit and/or implicit guarantee of the U.S. government and have a long history of zero credit loss. The Company did not record an allowance for credit losses for held-to-maturity securities as of September 30, 2022 as the investment portfolio consists primarily of U.S. government agency mortgage-backed securities that management deems to have immaterial risk of loss.
All of the Company’s held-to-maturity debt securities are issued by U.S. government agencies or U.S. government-sponsored enterprises. These securities carry the explicit and/or implicit guarantee of the U.S. government and have a long history of zero credit loss, thus the Company did not record an allowance for credit losses for held-to-maturity securities as of September 30, 2023.
September 30, 2022 Amortized Cost Weighted Average Yield ($ in thousands) Due in less than 1 year $ 75,000 3.74 % Due after 1 year through 5 years 214,341 3.50 Due after 5 years through 10 years 358,617 3.05 Due after 10 years 1,978,078 3.27 $ 2,626,036 3.28 % For further information on our investment portfolio, see Note C to the Consolidated Financial Statements in “Item 8.
September 30, 2023 Amortized Cost Weighted Average Yield ($ in thousands) Due in less than 1 year $ 3,500 6.06 % Due after 1 year through 5 years 231,307 4.61 Due after 5 years through 10 years 426,180 4.55 Due after 10 years 1,881,215 4.27 $ 2,542,202 4.35 % For further information on our investment portfolio, see Note C to the Consolidated Financial Statements in “Item 8.
For additional details on customer accounts, including uninsured deposits, see Note K to the Consolidated Financial Statements in “Item 8. Financial Statements and Supplementary Data” of this report. FHLB advances : FHLB advances increased to $2,125,000,000 as of September 30, 2022, as compared to $1,720,000,000 at September 30, 2021.
Early withdrawal penalty fee income for the years ended 2023, 2022 and 2021 amounted to $1,618,000, $267,000 and $198,000, respectively. For additional details on customer accounts, including uninsured deposits, see Note K to the Consolidated Financial Statements in “Item 8. Financial Statements and Supplementary Data” of this report.
Non-performing TDRs of $994,000 are included in NPAs. Total NPAs 45 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS and performing TDRs as a percent of total assets has declined to 0.48% as of September 30, 2022, from 0.55% as of September 30, 2021.
As of September 30, 2023, $45,167,000 or 97.9% of TDRs were performing. Non-performing TDRs of $950,000 are included in NPAs. Total NPAs and performing TDRs as a percent of total assets have declined to 0.46% as of September 30, 2023, from 0.48% as of September 30, 2022.
Troubled debt restructured loans ("TDRs") : For details, see the “Asset Quality" section above in this report. Real estate owned : For details, see the “Asset Quality" section above in this report. Interest receivable : Interest receivable was $63,872,000 as of September 30, 2022, an increase of $13,236,000, or 26.1%, since September 30, 2021.
Real estate owned : For details, see the “Asset Quality" section above in this report. Interest receivable : Interest receivable was $87,003,000 as of September 30, 2023, an increase of $23,131,000, or 36.2%, since September 30, 2022. The increase was the result of an 8.5% increase in loans receivable combined with the increase in interest rates.
Commercial loan originations accounted for 77.7% of 47 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS total originations and consumer originations were 22.3% as the Company continues to focus on commercial lending, coupled with growing economies in all major markets in which we operate. The following table presents loan balances by category and the year-over-year change.
Commercial loan originations accounted for 73.9% of total originations and consumer originations were 26.1% as the Company continues to focus on commercial lending, coupled with growing economies in all major markets in which we operate.
The change was due to the factors described below. Net Interest Income : For the year ended September 30, 2022, net interest income was $594,589,000, an increase of $89,480,000 or 17.7% from the year ended September 30, 2021.
The change was due to the factors described below. Net Interest Income : For the year ended September 30, 2023, net interest income was $690,234,000, an increase of $95,645,000 or 16.1% from the year ended September 30, 2022. Net interest margin was 3.40% for the year ended September 30, 2023 compared to 3.16% in the prior year.
During 2022, the Company was able to increase transaction accounts by $583,502,000 or 4.8% while time deposits decreased by $96,044,000 or 2.8%. 51 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following table shows customer deposits by account type.
During 2023, transaction accounts decreased by $1,926,214,000 or 15.2% while time deposits increased by $1,966,973,000 or 58.9%. 50 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following table shows customer deposits by account type.
During 2022, there were TDR additions of $5,950,000 and reductions of $14,261,000 due to prepayments and transfers to REO. As of September 30, 2022, 82.5% of TDRs are comprised of single-family residential loans.
During 2023, there were no TDR additions and reductions of $10,700,223 due to prepayments and normal payment activity. As of September 30, 2023, 84.7% of TDRs are comprised of single-family residential loans.
The increase resulted primarily from originations of $8,736,193,000 and loan purchases of $564,584,000, partially offset by loan repayments of $6,194,448,000 and a $773,187,000 increase to loans-in-process during the year ended September 30, 2022.
The increase resulted primarily from originations of $4,702,156,000, a decrease to loans-in-process of $1,110,083,000 and loan purchases of $80,015,000, partially offset by loan repayments of $4,435,269,000 during the year ended September 30, 2023.
The increase was primarily a result of a 16.5% increase in loans receivable and the increase in interest rates. Bank Owned Life Insurance : Bank-owned life insurance increased to $237,931,000 as of September 30, 2022 from $233,263,000 as of September 30, 2021, primarily as a result of increases in the cash surrender value of the policies.
Bank Owned Life Insurance : Bank-owned life insurance increased to $242,919,000 as of September 30, 2023 from $237,931,000 as of September 30, 2022, primarily as a result of increases in the cash surrender value of the policies. The investments in bank-owned life insurance serve to assist in funding growing employee benefit costs.
Gain (Loss) on Real Estate Owned : Net gain on real estate owned was $651,000 for the year ended September 30, 2022, compared to a net gain of $427,000 for the year ended September 30, 2021. This amount includes ongoing maintenance expense, periodic valuation adjustments, and gains (losses) on sales of REO.
Gain on Real Estate Owned : Net gain on real estate owned was $176,000 for the year ended September 30, 2023, compared to a net gain of $651,000 for the year ended September 30, 2022.
September 30, 2022 September 30, 2021 $ Change % Change (In thousands) Allowance for credit losses: Commercial loans Multi-family $ 12,013 $ 16,949 $ (4,936) (29) % Commercial real estate 25,814 23,437 2,377 10 % Commercial & industrial 57,210 45,957 11,253 24 % Construction 26,161 25,585 576 2 % Land - acquisition & development 12,278 13,447 (1,169) (9) % Total commercial loans 133,476 125,375 8,101 6 % Consumer loans Single-family residential 25,518 30,978 (5,460) (18) % Construction - custom 3,410 4,907 (1,497) (31) % Land - consumer lot loans 5,047 4,939 108 2 % HELOC 2,482 2,390 92 4 % Consumer 2,875 2,711 164 6 % Total consumer loans 39,332 45,925 (6,593) (14) % Total allowance for loan losses 172,808 171,300 1,508 1 % Reserve for unfunded commitments 32,500 27,500 5,000 18 % Total allowance for credit losses $ 205,308 $ 198,800 $ 6,508 3 % The allowance for loan losses increased by $1,508,000, or 0.88%, from $171,300,000 as of September 30, 2021, to $172,808,000 at September 30, 2022.
September 30, 2023 September 30, 2022 $ Change % Change (In thousands) Allowance for credit losses: Commercial loans Multi-family $ 13,155 $ 12,013 $ 1,142 10 % Commercial real estate 28,842 25,814 3,028 12 % Commercial & industrial 58,773 57,210 1,563 3 % Construction 29,408 26,161 3,247 12 % Land - acquisition & development 7,016 12,278 (5,262) (43) % Total commercial loans 137,194 133,476 3,718 3 % Consumer loans Single-family residential 28,029 25,518 2,511 10 % Construction - custom 2,781 3,410 (629) (18) % Land - consumer lot loans 3,512 5,047 (1,535) (30) % HELOC 2,859 2,482 377 15 % Consumer 2,832 2,875 (43) (1) % Total consumer loans 40,013 39,332 681 2 % Total allowance for loan losses 177,207 172,808 4,399 3 % Reserve for unfunded commitments 24,500 32,500 (8,000) (25) % Total allowance for credit losses $ 201,707 $ 205,308 $ (3,601) (2) % The allowance for loan losses increased by $4,399,000, or 2.55%, from $172,808,000 as of September 30, 2022, to $177,207,000 at September 30, 2023.
Strong growth in in loans receivable were partially funded by new FHLB borrowings. The weighted average rate for FHLB borrowings was 2.02% as of September 30, 2022, versus 1.51% at September 30, 2021, the increase being primarily due to higher rates on new short-term borrowings.
The weighted average rate for borrowings was 3.98% as of September 30, 2023, versus 2.02% at September 30, 2022, the increase being primarily due to higher rates on new short-term borrowings. The Company has entered into interest rate swaps to hedge interest rate risk and convert certain FHLB advances to fixed rate payments.
COMPARISON OF 2021 RESULTS WITH 2020 For management's review of the factors that affected our results of operations for the years ended September 30, 2021 and 2020 refer to our Annual Report on Form 10-K for the year ended September 30, 2021, which was filed with the Securities and Exchange Commission on November 19, 2021. 55 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES The principal sources of funds for the Company's activities are loan repayments (including prepayments), net deposit inflows, borrowings, repayments and sales of investments and retained earnings, if applicable.
For management's review of the factors that affected our results of operations for the years ended September 30, 2022 and 2021, refer to our Annual Report on Form 10-K for the year ended September 30, 2022, which was filed with the Securities and Exchange Commission on November 18, 2022. 38 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CRITICAL ACCOUNTING POLICIES AND ESTIMATES The preparation of consolidated financial statements in conformity with U.S.
The change in net interest income was also impacted by the average rate earned on interest-earning assets increasing by 26 basis points while the average rate paid on interest-bearing liabilities declined by 11 basis points. Rate/Volume Analysis The table below sets forth certain information regarding changes in interest income and interest expense of the Company for the years indicated.
Average noninterest-bearing deposits decreased by $279,150,000 over the same period. Rate/Volume Analysis The table below sets forth certain information regarding changes in interest income and interest expense of the Company for the years indicated.
($ in thousands) September 30, 2022 September 30, 2021 $ Change % Change Washington $ 7,209,123 45.0 % $ 6,742,208 43.4 % $ 466,915 6.9 % Oregon 2,878,933 18.0 3,006,222 19.3 (127,289) (4.2) % Arizona 1,625,957 10.1 1,551,671 10.0 74,286 4.8 % New Mexico 1,363,525 8.5 1,292,965 8.3 70,560 5.5 % Idaho 1,052,550 6.6 1,067,834 6.9 (15,284) (1.4) % Utah 802,635 5.0 1,027,317 6.6 (224,682) (21.9) % Nevada 534,655 3.3 522,988 3.4 11,667 2.2 % Texas 562,192 3.5 330,907 2.1 231,285 69.9 % $ 16,029,570 100 % $ 15,542,112 100 % $ 487,458 3.1 % The following table sets forth, by various interest rate categories, the amount of fixed-rate time deposits that mature during the periods indicated.
($ in thousands) September 30, 2023 September 30, 2022 $ Change % Change Washington $ 7,627,674 47.5 % $ 7,209,123 45.0 % $ 418,551 5.8 % Oregon 2,820,338 17.5 2,878,933 18.0 (58,595) (2.0) % Arizona 1,635,345 10.2 1,625,957 10.1 9,388 0.6 % New Mexico 1,474,986 9.2 1,363,525 8.5 111,461 8.2 % Idaho 972,424 6.1 1,052,550 6.6 (80,126) (7.6) % Utah 662,192 4.1 802,635 5.0 (140,443) (17.5) % Nevada 495,794 3.1 534,655 3.3 (38,861) (7.3) % Texas 381,576 2.4 562,192 3.5 (180,616) (32.1) % $ 16,070,329 100 % $ 16,029,570 100 % $ 40,759 0.3 % The following table sets forth, by various interest rate categories, the amount of fixed-rate time deposits that mature during the periods indicated.
Available-for-sale investment securities : Available-for-sale securities decreased $87,222,000, or 4.1%, during the year ended September 30, 2022, to $2,051,037,000, primarily due to a $123,077,000 decline in the value of available-for-sale securities, principal repayments of $510,156,000 and sales of $5,020,000, partially offset by purchases of $587,942,000.
Available-for-sale investment securities : Available-for-sale securities decreased $55,940,000, or 2.7%, during the year ended September 30, 2023, to $1,995,097,000, primarily due to principal repayments of $420,154,000, which exceeded purchases of $376,481,000, a $9,360,000 decline in the value of available-for-sale securities, and sales of $1,169,000.
The impact going forward will depend on the composition, characteristics, and credit quality of the loan and securities portfolios as well as the economic conditions at future reporting periods.
The impact going forward will depend on the composition, characteristics, and credit quality of the securities portfolios as well as the economic conditions at future reporting periods. Held-to-maturity investment securities : Held-to-maturity securities decreased by $39,713,000 to $423,586,000, or 8.6%, during the year ended September 30, 2023, primarily due to principal repayments and maturities of $39,414,000.
For further information on these activities, see Note D to the Consolidated Financial Statements in “Item 8. Financial Statements and Supplementary Data” of this report. Allowance for credit losses : For details, see the “Allowance for Credit Losses" section above in this report. Non-performing assets : For details, see the “Asset Quality" section above in this report.
Allowance for credit losses : For details, see the “Allowance for Credit Losses" section above in this report. Non-performing assets : For details, see the “Asset Quality" section above in this report. Troubled debt restructured loans ("TDRs") : For details, see the “Asset Quality" section above in this report.
See “Changes in Financial Condition” above and the “Statement of Cash Flows” included in the financial statements for additional details regarding this change. 56 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following table presents the Company's significant fixed and determinable contractual obligations, within the categories described below, by contractual maturity or payment amount.
The following table presents the Company's significant fixed and determinable contractual obligations, within the categories described below, by contractual maturity or payment amount.
For the year ended September 30, 2022, net recoveries were $3,508,000, compared to $6,345,000 in the prior year. 54 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Other Income : Other income was $66,372,000 for the year ended September 30, 2022, an increase of $5,811,000, or 9.6%, from $60,561,000 for the year ended September 30, 2021.
For the year ended September 30, 2023, net charge-offs were $45,101,000, compared to recoveries of $3,508,000 in the prior year. Other Income : Other income was $52,201,000 for the year ended September 30, 2023, a decrease of $14,171,000, or 21.4%, from $66,372,000 for the year ended September 30, 2022.
Provision (Release) for Credit Losses : The Company recorded a provision for credit losses of $3,000,000 in 2022, compared to a provision of $500,000 for 2021.
Provision (Release) for Credit Losses : The Company recorded a provision for credit losses of $41,500,000 in 2023, compared to a provision of $3,000,000 for 2022. In 2023, provisioning was largely due to adjustments made as a result of one large charge-off taken, offset by reduced unfunded commitment balances.
Rising interest rates may cause these securities to be subject to unrealized losses. As of September 30, 2022, the net unrealized loss on held-to-maturity securities was $56,439,000, which management attributes to the change in interest rates since acquisition. Substantially all of the Company’s held-to-maturity debt securities are issued by U.S. government agencies or U.S. government-sponsored enterprises.
There were no held-to-maturity securities sold during the year ended September 30, 2023. As of September 30, 2023, the net unrealized loss on held-to-maturity securities was $68,398,000, compared to $56,439,000 the year prior, which management attributes to the change in interest rates since acquisition.
The balance at September 30, 2022 is comprised of $303,457,000 of goodwill and the unamortized balance of the core deposit and other intangibles of $5,552,000. Customer accounts : As of September 30, 2022, customer deposits totaled $16,029,570,000 compared with $15,542,112,000 at September 30, 2021, a $487,458,000, or 3.1%, increase.
Customer accounts : As of September 30, 2023, customer deposits totaled $16,070,329,000 compared with $16,029,570,000 at September 30, 2022, a $40,759,000, or 0.3%, increase.
No allowance was recorded for PPP loans, which are included in the commercial & industrial loan category, due to the government guarantee. The ratio of the total ACL to total gross loans, excluding PPP loans, decreased to 1.06% as of September 30, 2022, as compared to 1.22% as of September 30, 2021.
The ratio of the total ACL to total gross loans decreased to 1.03% as of September 30, 2023, as compared to 1.06% as of September 30, 2022. The decrease was primarily related to a shift in mix of loan types within the portfolio.
Income Tax Expense : Income tax expense was $63,707,000 for the year ended September 30, 2022, an increase of $14,184,000, or 28.6%, from the $49,523,000 for the year ended September 30, 2021. The increase is mostly due to a 28.7% increase in pre-tax income.
The increase is mostly due to an 8.3% increase in pre-tax income. The effective tax rate for 2023 was 20.81% as compared to 21.23% for the year ended September 30, 2022.
During 2022, the average balance of loans receivable increased $1,873,469,000 or 14.2%, while the combined average balances of mortgage backed securities, other investment securities and cash decreased by $1,061,655,000 or 22.6%. Average noninterest-bearing deposits grew by $569,347,000 over the same period.
The change in net interest income was also impacted by the $1,514,820,000, or 8.1%, increase in interest earning assets while average interest-bearing liabilities increased by $1,698,461,000 or 11.7%. During 2023, the average balance of loans receivable increased $2,011,903,000 or 13.3%, while the combined average balances of mortgage backed securities, other investment securities and cash decreased by $536,288,000 or 14.7%.
September 30, 2022 Total Less than 1 Year 1 to 5 Years Over 5 Years (In thousands) Customer accounts (1) $ 16,029,570 $ 15,476,743 $ 552,827 $ — Debt obligations (2) 2,125,000 2,025,000 100,000 — Operating lease obligations 30,695 6,215 16,697 7,783 $ 18,185,265 $ 17,507,958 $ 669,524 $ 7,783 (1) Includes non-maturing customer transaction accounts.
September 30, 2023 Total Less than 1 Year 1 to 5 Years Over 5 Years (In thousands) Customer accounts (1) $ 16,070,329 $ 15,398,626 $ 671,703 $ — Debt obligations (2) 3,650,000 3,650,000 — — Operating lease obligations 25,934 5,861 13,649 6,424 $ 19,746,263 $ 19,054,487 $ 685,352 $ 6,424 (1) Includes non-maturing customer transaction accounts.
The increase in net interest income from the prior year was primarily due to average interest-earning assets increasing by $776,307,000 or 4.3% while average interest-bearing liabilities increased by $273,037,000 or 1.9%.
The increase in net interest income was primarily due to rising interest rates. The average rate earned on interest-earning assets grew by 159 basis points to 5.13% while the average rate paid on interest-bearing liabilities increased by 168 basis points to 2.18%.
In 2022, provisioning for net growth in unfunded commitments and the loan portfolio was mostly offset by improvements in the credit quality of certain loan portfolios related to strong real estate markets and collateral conditions. For the year ended September 30, 2022, net recoveries were $3,508,000, compared to $6,345,000 in the prior year.
These amounts are net of provision and recapture related to the unfunded commitments reserve. In 2023, provisioning was largely due to adjustments resulting from one large charge-off taken, offset by reduced unfunded commitment balances. For the year ended September 30, 2023, net charge-offs were $45,101,000, compared to recoveries of $3,508,000 in the prior year.
The change was primarily due to funding growth in the loan portfolio of $2,279,994,000 partially offset by the $487,458,000 increase in customer accounts and $405,000,000 increase in FHLB borrowings.
The change was meant to increase balance sheet liquidity and was used to fund growth in the loan portfolio. The increase in cash was the result of the $40,759,000 increase in customer accounts and $1,525,000,000 increase in borrowings.
The Bank is also eligible to borrow under the Federal Reserve Bank's primary credit program. The Company's cash and cash equivalents were $683,965,000 at September 30, 2022, which is a 67.3% decrease from the balance of $2,090,809,000 as of September 30, 2021.
The Company's cash and cash equivalents were $980,649,000 at September 30, 2023, which is a 43.4% increase from the balance of $683,965,000 as of September 30, 2022. The change was meant to increase balance sheet liquidity and was used to fund growth in the loan portfolio.
To ensure a continuity of this trend, the Bank expects to continue to offer market rates of interest. The ability to retain maturing time deposits is difficult to project; however, the Bank believes that by competitively pricing these certificates, levels deemed appropriate by management can be achieved on a continuing basis.
The ability to retain maturing time deposits is difficult to project; however, the Bank believes that by competitively pricing these certificates, levels deemed appropriate by management can be achieved on a continuing basis. 51 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS At September 30, 2023, the Bank had $1,779,272,000 of time deposits in amounts of $250,000 or more outstanding, maturing as follows: $763,615,000 within 3 months; $419,791,000 over 3 months through 6 months; $281,404,000 over 6 months through 12 months; and $314,462,000 thereafter.
Information technology costs increased by $4,465,000 in 2022 as compared to 2021 as we continue to execute becoming a digital first bank. The Company’s efficiency ratio was 54.3% for 2022 as compared to 58.8% for the prior year.
FDIC Premiums increased $10,494,000 in 2023 compared to the prior year as a result of increase FDIC assessment rates. Information technology costs increased by $2,245,000 in 2023 as compared to 2022 as we continue to execute becoming a digital first bank. Also, the Company realized expenses of $2,991,000 in 2023 related to our pending merger with Luther Burbank Corporation.
The increase is primarily due to unrealized gains recorded for certain equity investments being $3,555,000 higher in the year ended September 30, 2022. Other Expense : Operating expense was $358,575,000 for the year ended September 30, 2022, an increase of $26,116,000, or 7.9%, from the $332,459,000 for the year ended September 30, 2021.
Other Expense : Operating expense was $376,035,000 for the year ended September 30, 2023, an increase of $17,460,000, or 4.9%, from the $358,575,000 for the year ended September 30, 2022. Compensation and benefits costs increased $2,617,000 or 1.3% year-over-year primarily due to annual merit increases and investments in strategic initiatives combined with reduced cost capitalization as loan originations have decreased.
The investments in bank-owned life insurance serve to assist in funding growing employee benefit costs. Intangible assets : The Company's intangible assets totaled $309,009,000 at September 30, 2022 compared to $310,019,000 as of September 30, 2021.
Intangible assets : The Company's intangible assets totaled $310,619,000 at September 30, 2023 compared to $309,009,000 as of September 30, 2022. The balance at September 30, 2023 is comprised of $304,750,000 of goodwill and the unamortized balance of the core deposit and other intangibles of $5,869,000.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

22 edited+3 added−2 removed17 unchanged
Biggest changeThe period end interest rate spread for the last eight fiscal quarters is shown below: SEP 2022 JUN 2022 MAR 2022 DEC 2021 SEP 2021 JUN 2021 MAR 2021 DEC 2020 Interest rate on loans and mortgage-backed securities 4.13 % 3.67 % 3.37 % 3.30 % 3.37 % 3.30 % 3.38 % 3.48 % Interest rate on other interest-earning assets 3.16 2.02 0.85 0.67 0.53 0.58 0.54 0.64 Combined, all interest-earning assets 4.04 3.50 2.93 2.83 2.80 2.72 2.75 2.92 Interest rate on customer accounts 0.51 0.32 0.24 0.23 0.23 0.24 0.25 0.36 Interest rate on borrowings (1) 2.02 1.43 1.55 1.49 1.51 1.74 1.84 1.82 Combined cost of funds 0.68 0.43 0.36 0.35 0.35 0.41 0.45 0.58 Interest rate spread 3.36 % 3.07 % 2.57 % 2.48 % 2.45 % 2.31 % 2.30 % 2.34 % (1) Represents the effective rate taking into consideration cash flow hedges on FHLB borrowings.
Biggest changeThe period end interest rate spread for the last eight fiscal quarters is shown below: SEP 2023 JUN 2023 MAR 2023 DEC 2022 SEP 2022 JUN 2022 MAR 2022 DEC 2021 Interest rate on loans and mortgage-backed securities 5.08 % 4.97 % 4.81 % 4.59 % 4.13 % 3.67 % 3.37 % 3.30 % Interest rate on other interest-earning assets 4.98 4.74 4.45 3.19 3.16 2.02 0.85 0.67 Combined, all interest-earning assets 5.07 4.94 4.77 4.46 4.04 3.50 2.93 2.83 Interest rate on customer accounts 2.12 1.82 1.48 0.94 0.51 0.32 0.24 0.23 Interest rate on borrowings (1) 3.98 3.93 3.69 3.14 2.02 1.43 1.55 1.49 Combined cost of funds 2.46 2.22 1.91 1.29 0.68 0.43 0.36 0.35 Interest rate spread 2.61 % 2.72 % 2.86 % 3.17 % 3.36 % 3.07 % 2.57 % 2.48 % (1) Represents the effective rate taking into consideration cash flow hedges on FHLB borrowings. 57 The chart below shows the volatility of our period end net interest spread (dashed line measured against the right axis) compared to the relatively consistent growth in net interest income (solid line measured against the left axis).
As of September 30, 2022, in the event of an immediate and parallel increase of 200 basis points in interest rates, the NPV is estimated to decrease by $617,000,000, or 20.9%, and the NPV-to-total assets ratio to decline to 12.6% from a base of 14.9%.
As of September 30, 2022, in the event of an immediate and parallel increase of 200 basis points in interest rates, the NPV was estimated to decrease by $617,000,000, or 20.9%, and the NPV-to-total assets ratio to decline to 12.6% from a base of 14.9%.
(2) Includes cash equivalents and non-mortgage backed security investments, such as U.S. agency obligations, mutual funds, corporate bonds, and municipal bonds. (3) Net interest income divided by average interest-earning assets. 61 The following table shows the potential impact of rising interest rates on net income for one year.
(2) Includes cash equivalents and non-mortgage backed security investments, such as U.S. agency obligations, mutual funds, corporate bonds, and municipal bonds. (3) Net interest income divided by average interest-earning assets. 59 The following table shows the potential impact of changing interest rates on net income for one year.
The change in the sensitivity of the NPV ratio to this assumed change in interest rates is primarily due to the flattening of the yield curve and changes in balance sheet mix year over year. 58 Interest Rate Spread.
The change in the sensitivity of the NPV ratio to this assumed change in interest rates is primarily due to the 56 flattening of the yield curve and changes in balance sheet mix year over year.
In the event of an immediate and parallel increase of 200 basis points in both short- and long-term interest rates, the model estimates that net interest income would increase by 1.9% in the next year. This compares to an estimated increase of 9.7% as of the September 30, 2021 analysis.
In the event of an immediate and parallel increase of 200 basis points in both short- and long-term interest rates, the model estimates that net interest income would decrease by 2.0% in the next year. This compares to an estimated increase of 1.9% as of the September 30, 2022 analysis.
It is management's objective to grow the dollar amount of net interest income, through the rate cycles, acknowledging that there will be some periods of time when that will not be feasible. Cash and cash equivalents of $683,965,000 and shareholders' equity of $2,274,260,000 provide management with flexibility in managing interest rate risk.
It is management's objective to grow the dollar amount of net interest income, through the rate cycles, acknowledging that there will be some periods of time when that will not be feasible. Cash and cash equivalents of $980,649,000 and shareholders' equity of $2,426,426,000 provide management with flexibility in managing interest rate risk.
Management estimates that a gradual increase of 300 basis points in short-term rates and 100 basis points in long-term rates over two years would result in a 0.5% increase in net interest income in the first year and an increase of 1.8% in the second year, assuming a constant balance sheet and no management intervention. Net Portfolio Value ("NPV") Sensitivity.
Management estimates that a gradual increase of 300 basis points in short-term rates and 100 basis points in long-term rates over two years would result in a 0.2% increase in net interest income in the first year and a decrease of 1.0% in the second year, assuming a constant balance sheet and no management intervention.
The composition of the investment portfolio was 39.1% variable rate and 60.9% fixed rate as of September 30, 2022 to provide some protection against rising rates. In addition, the Bank is producing more commercial loans that have shorter terms and/or variable rates and has increased less rate sensitive transaction deposit accounts to 79.2% of the deposit portfolio.
The composition of the investment portfolio was 45.9% variable rate and 54.1% fixed rate as of September 30, 2023 to provide some protection against rising rates. In addition, the Bank is producing more commercial loans that have shorter terms and/or variable rates. There has also been focus on increasing less rate sensitive transaction deposit accounts.
The interest rate spread is measured as the difference between the rate on interest-earning assets and the rate on interest-bearing liabilities at the end of each period. The period end interest rate spread was 3.36% at September 30, 2022 and 2.45% at September 30, 2021.
The Company measures the difference between the rate on interest-earning assets and the rate on interest-bearing liabilities at the end of each period. The period end interest rate spread was 2.61% at September 30, 2023 and 3.36% at September 30, 2022.
As of September 30, 2022, the weighted-average rate on interest-bearing liabilities increased by 33 basis points to 0.68% compared to September 30, 2021. The higher rate on interest-bearing liabilities primarily resulted from customer deposits repricing and a higher rate on new FHLB borrowings.
As of September 30, 2023, the weighted-average rate on interest-bearing liabilities increased by 178 basis points to 2.46% compared to September 30, 2022. The higher rate on interest-bearing liabilities primarily resulted from customer deposits repricing and higher rates on new borrowings.
Potential Increase (Decrease) in Net Interest Income Basis Point Increase (Decrease) in Interest Rates September 30, 2022 September 30, 2021 (In thousands, except percentages) (200) $ (18,501) (2.40) % N/A N/A (100) (10,525) (1.37) N/A N/A 100 4,788 0.62 $ 24,612 4.76 % 200 14,381 1.87 50,065 9.67 300 21,110 2.74 72,721 14.05 Actual results will differ from the assumptions used in this model, as management monitors and adjusts both the size and the composition of the balance sheet in order to respond to changing interest rates.
Potential Increase (Decrease) in Net Interest Income Basis Point Increase (Decrease) in Interest Rates September 30, 2023 September 30, 2022 (In thousands, except percentages) (200) $ 57,103 7.79 % $ (18,501) (2.40) % (100) 36,168 4.94 (10,525) (1.37) 100 (9,507) (1.30) 4,788 0.62 200 (14,907) (2.03) 14,381 1.87 300 (22,737) (3.10) 21,110 2.74 Actual results will differ from the assumptions used in this model, as management monitors and adjusts both the size and the composition of the balance sheet in order to respond to changing interest rates.
As of September 30, 2022, the weighted-average rate on interest-earning assets increased by 124 basis points to 4.04% compared to September 30, 2021.
As of September 30, 2023, the weighted-average rate on interest-earning assets increased by 103 basis points to 5.07% compared to September 30, 2022.
As of September 30, 2021, in the event of an immediate and parallel increase of 200 basis points in interest rates, the NPV was estimated to decrease by $207,000,000, or 6.8%, and the NPV-to-total assets ratio to decline to 15.2% from a base of 15.5%.
As of September 30, 2023, in the event of an immediate and parallel increase of 200 basis points in interest rates, the NPV is estimated to decrease by $723,000,000, or 27.4%, and the NPV-to-total assets ratio to decline to 9.5% from a base of 12.4%.
The Company's balance sheet strategy, in conjunction with low operating costs, has allowed the Company to manage interest rate risk, within guidelines established by the Board, through all interest rate cycles.
These accounts make up 67.0% of the deposit portfolio as of September 30, 2023. The Company's balance sheet strategy, in conjunction with low operating costs, has allowed the Company to manage interest rate risk, within guidelines established by the Board, through all interest rate cycles.
The NPV is an estimate of the market value of shareholders' equity at a point in time. It is derived by calculating the difference between the present value of expected cash flows from assets and the present value of expected cash flows from liabilities and off-balance-sheet contracts.
It is derived by calculating the difference between the present value of expected cash flows from assets and the present value of expected cash flows from liabilities and off-balance-sheet contracts.
Net Interest Income Summary Year Ended September 30, 2022 2021 2020 Average Balance Interest Average Rate Average Balance Interest Average Rate Average Balance Interest Average Rate ($ in thousands) Assets Loans receivable (1) $ 15,083,111 $ 601,593 3.99 % $ 13,209,642 $ 537,660 4.07 % $ 12,266,430 $ 545,708 4.44 % Mortgage-backed securities 1,141,501 26,332 2.31 1,290,901 24,707 1.91 2,060,804 49,312 2.39 Cash and other investment securities (2) 2,500,008 33,555 1.34 3,412,263 23,051 0.68 1,587,602 20,112 1.26 FHLB & FRB stock 87,861 4,879 5.55 123,368 6,192 5.02 135,294 6,133 4.52 Total interest-earning assets 18,812,481 666,359 3.54 % 18,036,174 591,610 3.28 % 16,050,130 621,265 3.86 % Other assets 1,343,848 1,279,085 1,254,061 Total assets $ 20,156,329 $ 19,315,259 $ 17,304,191 Liabilities and Shareholders’ Equity Interest-bearing customer accounts $ 12,738,719 43,041 0.34 % $ 11,962,764 42,312 0.35 % $ 10,647,044 100,312 0.94 % FHLB advances 1,731,110 28,729 1.66 2,234,027 44,188 1.98 2,532,596 51,445 2.03 Other borrowings 10 — 2.49 11 — 0.69 19 — 0.46 Total interest-bearing liabilities 14,469,839 71,770 0.50 % 14,196,802 86,500 0.61 % 13,179,659 151,757 1.15 % Noninterest-bearing customer accounts 3,249,120 2,679,773 1,870,032 Other liabilities 245,213 249,134 244,203 Total liabilities 17,964,172 17,125,709 15,293,894 Shareholders’ equity 2,195,157 2,189,550 2,010,297 Total liabilities and shareholders’ equity $ 20,159,329 $ 19,315,259 $ 17,304,191 Net interest income/interest rate spread $ 594,589 3.04 % $ 505,110 2.67 % $ 469,508 2.71 % Net interest margin (3) 3.16 % 2.80 % 2.93 % ___________________ (1) Interest income includes net amortization-accretion of deferred loan fees, costs, discounts and premiums of $29,156,000, $48,079,000 and $25,060,000 for year ended 2022, 2021 and 2020, respectively.
Net Interest Income Summary Year Ended September 30, 2023 2022 2021 Average Balance Interest Average Rate Average Balance Interest Average Rate Average Balance Interest Average Rate ($ in thousands) Assets Loans receivable (1) $ 17,095,014 $ 900,068 5.27 % $ 15,083,111 $ 601,593 3.99 % $ 13,209,642 $ 537,660 4.07 % Mortgage-backed securities 1,362,415 43,184 3.17 1,141,501 26,332 2.31 1,290,901 24,707 1.91 Cash and other investment securities (2) 1,742,806 91,058 5.22 2,500,008 33,555 1.34 3,412,263 23,051 0.68 FHLB & FRB stock 127,066 8,645 6.80 87,861 4,879 5.55 123,368 6,192 5.02 Total interest-earning assets 20,327,301 1,042,955 5.13 % 18,812,481 666,359 3.54 % 18,036,174 591,610 3.28 % Other assets 1,484,271 1,343,848 1,279,085 Total assets $ 21,811,572 $ 20,156,329 $ 19,315,259 Liabilities and Shareholders’ Equity Interest-bearing customer accounts $ 12,906,383 237,233 1.84 % $ 12,738,719 43,041 0.34 % $ 11,962,764 42,312 0.35 % FHLB advances 3,261,917 115,488 3.54 1,731,110 28,729 1.66 2,234,027 44,188 1.98 Other borrowings — — — 10 — 2.49 11 — 0.69 Total interest-bearing liabilities 16,168,300 352,721 2.18 % 14,469,839 71,770 0.50 % 14,196,802 86,500 0.61 % Noninterest-bearing customer accounts 2,969,970 3,249,120 2,679,773 Other liabilities 296,840 242,213 249,134 Total liabilities 19,435,110 17,961,172 17,125,709 Shareholders’ equity 2,376,462 2,195,157 2,189,550 Total liabilities and shareholders’ equity $ 21,811,572 $ 20,156,329 $ 19,315,259 Net interest income/interest rate spread $ 690,234 2.95 % $ 594,589 3.04 % $ 505,110 2.67 % Net interest margin (3) 3.40 % 3.16 % 2.80 % ___________________ (1) Interest income includes net amortization-accretion of deferred loan fees, costs, discounts and premiums of $20,130,000, $29,156,000 and $48,079,000 for year ended 2023, 2022 and 2021, respectively.
The net interest margin increased to 3.16% for the year ended September 30, 2022, from 2.80% for the year 59 ended September 30, 2021. The yield on interest-earning assets increased 26 basis points to 3.54% and the cost of interest-bearing liabilities decreased by 11 basis points to 0.50%.
The net interest margin increased to 3.40% for the year ended September 30, 2023, from 3.16% for the year ended September 30, 2022. The yield on interest-earning assets increased 159 basis points to 5.13% and the cost of interest-bearing liabilities increased by 168 basis points to 2.18%.
During 2022, average interest-bearing customer deposit accounts increased $775,955,000 or 6.5% and the average balance of FHLB borrowings decreased by $502,917,000, or 22.5%, from 2021. 60 The following table sets forth the information explaining the changes in the net interest income and net interest margin.
During 2023, average interest-bearing customer deposit accounts increased $167,664,000 or 1.3% and the average balance of borrowings increased by $1,530,807,000, or 88.4%, from 2022. 58 The following table sets forth the information explaining the changes in the net interest income and net interest margin.
September 30, 2022 Change in Interest Rates Estimated NPV Amount Estimated Increase/(Decrease) in NPV Amount NPV as % of Assets (Basis Points) (In thousands) (In thousands) 300 $ 1,987,904 $ (956,559) 11.06 % 200 2,327,875 (616,588) 12.57 100 2,647,946 (296,517) 13.86 No change 2,944,463 — 14.93 September 30, 2021 Change in Interest Rates Estimated NPV Amount Estimated Increase/(Decrease) in NPV Amount NPV as % of Assets (Basis Points) (In thousands) (In thousands) 300 $ 2,705,037 $ (353,315) 14.88 % 200 2,851,010 (207,342) 15.24 100 2,973,814 (84,538) 15.45 No change 3,058,352 — 15.46 As of September 30, 2022, the Company was in compliance with all of its interest rate risk policy guidelines. 62
September 30, 2023 Change in Interest Rates Estimated NPV Amount Estimated Increase/(Decrease) in NPV Amount NPV as % of Assets (Basis Points) (In thousands) (In thousands) 300 $ 1,550,686 $ (1,088,444) 7.88 % 200 1,915,842 (723,288) 9.50 100 2,276,765 (362,365) 11.00 No change 2,639,130 — 12.42 (100) 2,965,913 326,783 13.59 (200) 3,221,892 582,792 14.33 September 30, 2022 Change in Interest Rates Estimated NPV Amount Estimated Increase/(Decrease) in NPV Amount NPV as % of Assets (Basis Points) (In thousands) (In thousands) 300 $ 1,987,904 $ (956,559) 11.06 % 200 2,327,875 (616,588) 12.57 100 2,647,946 (296,517) 13.86 No change 2,944,463 — 14.93 (100) 2,981,579 37,115 14.77 (200) 3,163,345 218,882 15.08 As of September 30, 2023, the Company was in compliance with all of its interest rate risk policy limits. 60
The lower rate in interest-bearing liabilities was primarily due to replacing high-yielding, long-term FHLB borrowings with new borrowings at lower rates. For the year ended September 30, 2022, average interest-earning assets increased by 4.3% to $18,812,481,000, up from $18,036,174,000 for the year ended September 30, 2021.
For the year ended September 30, 2023, average interest-earning assets increased by 8.1% to $20,327,301,000, up from $18,812,481,000 for the year ended September 30, 2022. Balance sheet growth in 2023 was primarily due to the growth in loans receivable.
Management views organic loan growth as the highest and best use of capital; thus the focus on primarily growing loans receivable.
During 2023, average loans receivable increased $2,011,903,000, or 13.3%, while the combined average balances of mortgage-backed securities, other investment securities and cash decreased by $536,288,000 or 14.7%. Management views organic loan growth as the highest and best use of capital, thus the focus on primarily growing loans receivable.
The higher yield on interest-earning assets was primarily due to the impact of rising rates on adjustable rate assets and cash. Amortization of net loan origination fees on PPP loans declined to $6,536,000 during the year ended September 30, 2022 compared to $10,291,000 in the prior year.
The higher yield on interest-earning assets was primarily due to the impact of rising rates on adjustable rate assets and cash. The higher rate in interest-bearing liabilities was primarily due to replacing maturing borrowings at higher rates.
Removed
The chart below shows the volatility of our period end net interest spread (dashed line measured against the right axis) compared to the relatively consistent growth in net interest income (solid line measured against the left axis).
Added
Alternatively, in the event of an immediate and parallel decrease of 100 basis points in both short and long-term interest rates, the model estimates that net interest income would increase by 4.94%. Net Portfolio Value ("NPV") Sensitivity. The NPV is an estimate of the market value of shareholders' equity at a point in time.
Removed
The substantial balance sheet growth in 2022 was primarily due to the growth in loans receivable. During 2022, average loans receivable increased $1,873,469,000, or 14.2%, while the combined average balances of mortgage-backed securities, other investment securities and cash decreased by $1,061,655,000 or 22.6%.
Added
Prepayment speeds for single family mortgages are low at September 30, 2023 with the Bank's conditional payment rate ("CPR") for this portfolio segment at 7.0%, down from 8.1% the year before.
Added
As of September 30, 2023, in the event of an immediate and parallel decrease of 100 basis points in interest rates, the NPV is estimated to increase NPV by $327,000,000, or 12.38%, and increase the NPV to total assets ratio to 13.59% from a base of 12.4%. Interest Rates.

Other WAFDP 10-K year-over-year comparisons