What changed in this filing

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Item 1. Business

2023-11-17 compared with 2022-11-18 · 62 added, 60 removed, 385 unchanged (24% of the section changed)

Washington Federal Bank, a federally-insured Washington state chartered commercial bank dba WaFd Bank (the "Bank" or "WaFd Bank"), was founded on April 24, 1917 in Ballard, Washington and is engaged primarily in providing lending, depository, insurance and other banking services to consumers, mid-sized to large businesses, and owners and developers of commercial real estate.

Washington Federal, Inc., a Washington corporation was formed as the Bank’s holding company in November, 1994.

As used throughout this document, the terms “Washington Federal,” the “Company” or "we" or "us" and "our" refer to the Washington Federal, Inc.

and its consolidated subsidiaries, and the term “Bank” or "WaFd Bank" refers to the operating subsidiary, Washington Federal Bank.

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.

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.

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.

The Bank completed the conversion of its charter from a national bank charter, supervised by the Office of the Comptroller of the Currency, to a Washington state chartered commercial bank effective February 4, 2022.

The Bank cancelled its holdings of stock in the Federal Reserve Bank of San Francisco as part of the conversion and its legal name changed from “Washington Federal Bank, National Association” to “Washington Federal Bank.” As a result of the conversion, the WDFI is the Bank's primary state regulator and the Federal Deposit Insurance Corporation (the "FDIC") is the Bank's primary federal regulator.

The Federal Reserve will continue to regulate the Bank's holding company, Washington Federal, Inc.

On November 9, 1982 the Company listed and began trading on the NASDAQ.

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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.

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.

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.

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.

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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

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__________________

(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.

(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.

Lending Programs and Policies.

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The terms of these loans generally range from less than one year to a maximum of ten years.

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.

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.

Most such loans are extended to closely held businesses and the personal guaranty of the principals is usually obtained.

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.

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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 .

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Loans made to individuals for construction of their home generally are 30-year fixed rate loans.

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.

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.

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.

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Construction lending involves a higher level of risk than single-family residential lending due to the concentration of principal in a limited number of loans and borrowers and the effects of general economic conditions in the home building industry.

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.

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 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.

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.

Land development loans involve a higher degree of credit risk than long-term financing on owner-occupied real estate.

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.

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 .

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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.

The table below shows the Company's total loan origination, purchase and repayment activities.

The table below shows the Bank's total loan origination, purchase and repayment activities.

Twelve Months Ended September 30, 2023 2022 2021 2020 2019

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Deposits are the primary source of the Bank’s funds for use in lending and other general business purposes.

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.

Loan repayments are a relatively stable source of funds, while deposit inflows and outflows are influenced by general interest rates, money market conditions, the availability of FDIC insurance and the market perception of the Company’s financial stability.

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The Bank may need to borrow funds for short periods of time to meet day-to-day financing needs.

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.

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.

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.

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.

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.

WAFD Insurance Group, Inc.

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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.

As of September 30, 2022 and September 30, 2021, Pike Street Labs had total assets of $2,934,000 and $802,000, 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.

Archway was conceived in November 2022 as a joint venture between the Company and certain subsidiaries of Madrona Venture Group.

As part of the formation of Archway, the Company contributed to Archway its ownership interests in its technology subsidiary, Pike Street Labs, LLC, including some of its related intellectual property, and made an $8 million investment in Archway in return for shares of Archway stock.

Human Capital

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During fiscal year 2023 we hired 470 employees.

Our voluntary turnover rate was 21.18% in fiscal year 2022, a slight decrease from 22.37% in 2021.

Our voluntary turnover rate was 15.54% in fiscal year 2023, a decrease from 21.18% in 2022.

Diversity, Equity and Inclusion.

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To accomplish this, we have established Diversity & Inclusion Advisory Councils in each of our regions made up of a diverse group of employee representatives throughout our footprint.

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.

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:

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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.

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.

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.

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.

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• Employee assistance program to provide access to counseling and support well-being.

The COVID-19 pandemic led us to evaluate how we operate in an effort to ensure our employees are able to continue working safely.

The Company implemented technology upgrades that included providing most of our employees with laptops and virtual interaction platforms that allowed many of them to work remotely.

Corporate Social and Environmental Responsibility

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Nothing on our website, including the aforementioned report, shall be deemed incorporated by reference into this Annual Report.

The Company is registered as a bank holding company and is subject to regulation, examination, supervision and reporting requirements of the Federal Reserve.

The Company is registered as a bank holding company and is subject to regulation, examination, supervision and reporting requirements of the Federal Reserve Bank.

The Company operates in a highly regulated industry.

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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.

In order to ensure the Bank's programs and operations are in compliance with regulatory requirements, the Bank has and will continue to incur additional significant costs in order to bring programs and operations into compliance.

For further information on regulatory matters, see Note A to the Consolidated Financial Statements in “Item 8.

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Generally, the activities or acquisition of a bank holding company that is not a financial holding company are limited to those that constitute banking or managing or controlling banks or which are closely related to

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.

Control of Company or Bank.

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Source of Strength.

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.

Under this policy, a bank holding company is expected to stand ready to provide adequate capital funds to its subsidiary bank during periods of financial adversity and to maintain financial flexibility and capital raising capacity to assist its subsidiary bank.

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The Bank’s ability to pay dividends is subject to various regulatory restrictions.

In addition, the Company’s ability to pay dividends is subject to rules and policies of the Federal Reserve.

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.

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Interstate Banking .

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

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

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.

Insurance of Deposit Accounts.

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The Federal Deposit Insurance Act prohibits an insured depository institution from accepting brokered deposits or offering interest rates on any deposits significantly higher than the prevailing rate in the bank’s normal market area or nationally (depending upon where the deposits are solicited), unless it is well-capitalized or is adequately capitalized and receives a waiver from the FDIC.

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.

The final rule established a new framework for certain provisions of the “deposit broker” definition and amends the FDIC’s interest rate methodology for calculating the national rate, the national rate cap, and the local market rate cap.

The final rule became effective on April 1, 2021 with an extended compliance date of January 1, 2022.

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;

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Federal Home Loan Bank System.

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.

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.

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At September 30, 2023, FHLB advances to the Bank amounted to $2,900,000,000.

As a member, the Bank is required to purchase and maintain stock in the FHLB of Des Moines.

As a member, the Bank is required to purchase and maintain stock in the FHLB of Des

At September 30, 2023, the Bank held $126,820,000 in FHLB of Des Moines stock, which was in compliance with this requirement.

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An institution's failure to comply with the provisions of the CRA could, at a minimum, result in regulatory restrictions on its activities.

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.

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.

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These regulations impose obligations on financial institutions to maintain appropriate policies, procedures and controls to detect, prevent and report money laundering and terrorist financing and to verify the identity of their customers.

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.

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 Anti-Money Laundering act of 2020 (“AML Act”) was enacted as part of the National Defense Authorization Act and requires the U.S.

Treasury Department to issue National Anti-Money Laundering and Countering the Financing of Terrorism Priorities, which occurred in June 2021.

The AML Act also includes a requirement to conduct studies and issue regulations that may alter some of the due diligence, recordkeeping and reporting requirements that the BSA and Patriot Act impose on financial institutions.

The AML Act also promotes increased information-sharing and use of technology and increases penalties for violations of the BSA and includes whistleblower incentives, both of which could increase the prospect of regulatory enforcement.

Regulatory Capital Requirements.

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Both the Company and the Bank are required to have a common equity Tier 1 capital ratio of 4.5%.

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%.

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%.

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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.

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.

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Dodd-Frank Act Stress Tests ("DFAST").

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.

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.

The EGRRCPA gave immediate relief from stress testing for applicable bank holding companies but not financial institutions until November 25, 2019.

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• 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;

• 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;

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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 February 2018, the SEC published interpretive guidance to assist public companies in preparing disclosures about cybersecurity risks and incidents.

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.

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Service providers are required under the rule to notify any affected bank client it provides services to as soon as possible when it determines it has experienced a computer-security incident that has materially disrupted or degraded, or is reasonably likely to materially disrupt or degrade, covered services provided by that entity to the Bank for four or more hours.

In July 2023, the SEC adopted rules requiring registrants to disclose material cybersecurity incidents experienced and describe the material aspects of their nature, scope and timing.

The rules, which supersede their previously interpretive guidance published in February 2018, also require annual disclosures describing a company's cybersecurity risk management, strategy and governance.

These SEC rules, and any other regulatory guidance, are in addition to notification and disclosure requirements under state and federal banking law and regulations.

In addition to federal income tax, the Company is also subject to income, franchise, excise or gross receipts tax in states (and some cities) where the Company has branches or is deemed to have sufficient nexus for tax purposes.

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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.

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 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

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.

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The Company has adopted and posted on its website a code of ethics that applies to its senior financial officers.

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 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.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business