What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-05-10 compared with 2021-02-09 · 209 added, 125 removed, 829 unchanged (29% of the section changed)

4 unchanged sentences

(Dollars in thousands, except per share amounts)

December 31, September 30,

March 31, September 30,

Cash and cash equivalents (includes interest-earning deposits of $ 121,430 and $ 172,430 )

13 unchanged sentences

Deferred income tax liabilities, net 6,530 8,180

Accounts payable and accrued expenses 139,585 146,942

Other liabilities 118,383 146,942

Total liabilities 8,419,424 8,202,359

3 unchanged sentences

Common stock, $ .01 par value;

1,400,000,000 shares authorized, 138,792,496 and 138,956,296 shares issued and outstanding as of December 31, 2020 and September 30, 2020, respectively

1,400,000,000 shares authorized, 138,809,796 and 138,956,296 shares issued and outstanding as of March 31, 2021 and September 30, 2020, respectively

Additional paid-in capital 1,188,926 1,189,853

9 unchanged sentences

(Dollars in thousands, except per share amounts)

For the Three Months Ended

For the Three Months Ended For the Six Months Ended

March 31, March 31,

2021 2020 2021 2020

INTEREST AND DIVIDEND INCOME:

11 unchanged sentences

PROVISION FOR CREDIT LOSSES ( 2,964 ) 22,075 ( 4,496 ) 22,300

NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 45,345 48,472

NET INTEREST INCOME AFTER

PROVISION FOR CREDIT LOSSES 46,037 26,593 91,382 75,065

NON-INTEREST INCOME:

Gain on sale of Visa Class B shares 7,386 — 7,386 —

Deposit service fees 2,814 2,783 5,761 5,845

6 unchanged sentences

Occupancy, net 3,523 3,449 6,902 6,656

Loss on interest rate swap termination 4,752 — 4,752 —

Regulatory and outside services 1,234 1,297 2,819 2,640

17 unchanged sentences

(Dollars in thousands)

For the Three Months Ended

For the Three Months Ended For the Six Months Ended

March 31, March 31,

2021 2020 2021 2020

Net income $ 20,444 $ 4,276 $ 39,342 $ 26,787

3 unchanged sentences

Changes in unrealized gains (losses) on cash flow hedges, net of taxes of $( 4,309 ), $ 7,200 , $( 5,529 ), and $ 5,459

13,352 ( 22,429 ) 17,346 ( 17,005 )

Comprehensive income $ 12,862 $ ( 7,775 ) $ 36,894 $ 19,708

4 unchanged sentences

(Dollars in thousands, except per share amounts)

For the Three Months Ended December 31, 2020

For the Six Months Ended March 31, 2021

Additional Unearned Total

12 unchanged sentences

Balance at December 31, 2020 1,388 1,188,636 ( 32,627 ) 130,522 ( 11,371 ) 1,276,548

For the Three Months Ended December 31, 2019

Net income 20,444 20,444

Other comprehensive loss, net of tax ( 7,582 ) ( 7,582 )

ESOP activity 132 413 545

Stock-based compensation 134 134

Stock options exercised 24 24

Cash dividends to stockholders ($ 0.085 per share)

( 11,518 ) ( 11,518 )

Balance at March 31, 2021 $ 1,388 $ 1,188,926 $ ( 32,214 ) $ 139,448 $ ( 18,953 ) $ 1,278,595

For the Six Months Ended March 31, 2020

Additional Unearned Total

12 unchanged sentences

Balance at December 31, 2019 1,415 1,211,172 ( 34,279 ) 138,213 ( 9,927 ) 1,306,594

Net income 4,276 4,276

Other comprehensive loss, net of tax ( 12,051 ) ( 12,051 )

ESOP activity 117 413 530

Stock-based compensation 152 152

Stock options exercised 25 25

Cash dividends to stockholders ($ 0.085 per share)

( 11,733 ) ( 11,733 )

Balance at March 31, 2020 $ 1,415 $ 1,211,466 $ ( 33,866 ) $ 130,756 $ ( 21,978 ) $ 1,287,793

See accompanying notes to consolidated financial statements.

3 unchanged sentences

(Dollars in thousands)

For the Three Months Ended

For the Six Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

11 unchanged sentences

Stock-based compensation 252 318

Gain on the sale of Visa Class B shares ( 7,386 ) —

Other assets, net 6,731 3,649

1 unchanged sentence

Deferred income tax liabilities, net ( 94 ) ( 1,800 )

Accounts payable and accrued expenses ( 6,266 ) ( 2,312 )

Other liabilities ( 9,313 ) ( 12,413 )

Net cash provided by operating activities 32,054 38,376

6 unchanged sentences

Proceeds from sale of other real estate owned ("OREO") 97 987

Proceeds from the sale of Visa Class B shares 7,386 —

Proceeds from bank-owned life insurance ("BOLI") death benefit 443 490

4 unchanged sentences

(Dollars in thousands)

For the Three Months Ended

For the Six Months Ended

CASH FLOWS FROM FINANCING ACTIVITIES:

31 unchanged sentences

Interim results are not necessarily indicative of results for a full year.

Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents - Cash, cash equivalents, restricted cash and restricted cash equivalents reported in the statement of cash flows include cash and cash equivalents of $ 168.0 million and $ 185.1 million at December 31, 2020 and September 30, 2020, respectively, and restricted cash and cash equivalents of $ 48.8 million and $ 54.6 million at December 31, 2020 and September 30, 2020, respectively, which was included in other assets on the consolidated balance sheet.

Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents - Cash, cash equivalents, restricted cash and restricted cash equivalents reported in the statement of cash flows include cash and cash equivalents of $ 139.5 million and $ 185.1 million at March 31, 2021 and September 30, 2020, respectively, and restricted cash and cash equivalents of $ 32.0 million and $ 54.6 million at March 31, 2021 and September 30, 2020, respectively, which was included in other assets on the consolidated balance sheet.

The restricted cash and cash equivalents relate to the collateral postings to/from the Bank's derivative counterparties associated with the Bank's interest rate swaps.

11 unchanged sentences

Such securities are adjusted for the amortization of premiums and discounts which are recognized as adjustments to interest income over the life of the securities using the level-yield method.

At December 31, 2020 and September 30, 2020, the portfolio did not contain any securities classified as HTM.

At March 31, 2021 and September 30, 2020, the portfolio did not contain any securities classified as HTM.

Securities that management may sell if necessary for liquidity or asset management purposes are classified as AFS and reported at fair value, with unrealized gains and non-credit losses reported as a component of AOCI within stockholders' equity, net of deferred income taxes.

5 unchanged sentences

Securities that are purchased and held principally for resale in the near future are classified as trading securities and are reported at fair value, with unrealized gains and losses included in non-interest income in the consolidated statements of income.

Neither the Company nor the Bank maintained a trading securities portfolio during the three months ended December 31, 2020 or during fiscal year 2020.

Neither the Company nor the Bank maintained a trading securities portfolio during the six months ended March 31, 2021 or during fiscal year 2020.

Allowance for Credit Losses on AFS Debt Securities - Management monitors AFS debt securities for impairment on an ongoing basis and performs a formal review quarterly.

15 unchanged sentences

Losses are charged against the ACL on securities when management believes the collectability of an AFS security is in doubt or when either of the conditions regarding intent or requirement to sell is met.

As of October 1, 2020 and December 31, 2020, the Company did not identify any credit losses related to the Company's AFS debt securities so there was no ACL on AFS debt securities as of those dates.

Interest accrued on AFS debt securities but not received is also reversed against interest income.

As of October 1, 2020 and March 31, 2021, the Company did not identify any credit losses related to the Company's AFS debt securities so there was no ACL on AFS debt securities as of those dates.

Loans Receivable - Loans receivable that management has the intention and ability to hold for the foreseeable future are carried at amortized cost, excluding accrued interest.

10 unchanged sentences

If the change in loan terms is deemed to be minor, the fee received for the endorsement is added to the net remaining unamortized deferred fee or deferred cost balance.

Coronavirus Disease 2019 ("COVID-19") loan modifications - In March 2020, the Bank announced loan modification programs to support and provide relief for its borrowers during the COVID-19 pandemic.

Generally, loan modifications under these programs ("COVID-19 loan modifications") for one- to four-family loans and consumer loans consist of a three-month payment forbearance of principal, interest, and in some cases, escrow.

COVID-19 loan modifications of commercial loans mainly consist of up to a six-month interest-only payment period, but an option for a three- to six-month forbearance of principal and interest was also available to our borrowers.

Coronavirus Disease 2019 ("COVID-19") loan modifications - In March 2020, the Bank announced loan modification programs to support and provide relief for its borrowers during the COVID-19 pandemic ("COVID-19 loan modifications").

The Company has followed the loan modification criteria within the Coronavirus Aid, Relief, and Economic Security ("CARES") Act or Interagency guidance when determining if a borrower's modification is subject to troubled debt restructuring ("TDR") classification.

If it is determined that the modification does not meet the criteria under the CARES Act or Interagency guidance to be excluded from TDR classification, the Company evaluates the loan modifications under its existing TDR framework.

Loans subject to forbearance under the COVID-19 loan modification program are not reported as past due or placed on nonaccrual status during the forbearance time period, and interest income continues to be recognized over the contractual life of the loans.

Loans reported as being modified under the Bank's COVID-19 loan modification program includes all loans modified under the programs, including loans classified as TDRs.

Loans subject to forbearance as a result of COVID-19 loan modifications are not reported as past due or placed on nonaccrual status during the forbearance time period, and interest income continues to be recognized over the contractual life of the loans.

Loans reported as COVID-19 loan modifications include all loans modified under the programs, including loans classified as TDRs.

Troubled debt restructurings - For borrowers experiencing financial difficulties, the Bank may grant a concession to the borrower.

35 unchanged sentences

Generally, the historical time periods are at least one economic cycle.

United States gross domestic product during the same time periods over which the historical loss rates were calculated, and a correlation is estimated using regression analysis.

Each quarter, the Company's ACL model pairs the results of the regression analysis with an economic forecast of these same macroeconomic variables, which is provided by a third party, in order to project future loss rates.

These historical loss rates are compared to historical data related to economic variables including national unemployment rate, changes in commercial real estate price index, changes in home values, and changes in the United States gross domestic product during the same time periods over which the historical loss rates were calculated, and a correlation is estimated using regression analysis.

The forecast is applied for a reasonable and supportable time period, as determined by management, before reverting back to long-term historical averages at the macroeconomic variable level using a straight-line method.

6 unchanged sentences

Additionally, qualitative factors are considered for items not included in historical loss rates, macroeconomic forecasts, or other model inputs and/or other ACL processes, as deemed appropriate by management's current assessment of risks related to loan portfolio attributes and external factors.

Such qualitative factor considerations include changes in the loan portfolio composition and credit concentrations, changes in lending policies and procedures and underwriting standards, changes in balances and/or trends in asset quality and/or loan credit performance, model imprecision, and/or external factors such as significant unique events or conditions.

Such qualitative factor considerations include changes in the Bank's loan portfolio composition and credit concentrations, changes in the balances and/or trends in asset quality and/or loan credit performance, changes in lending underwriting standards, the effect of other external factors such as significant unique events or conditions, and actual and/or expected changes in economic conditions, real estate values, and/or other economic developments in which the Bank operates.

Management assesses the potential impact of such items and adjusts the modeled ACL as deemed appropriate based upon the assessment.

1 unchanged sentence

Expected credit losses on these amounts are calculated using the same methodology that is applied in the ACL model;

however, the estimate of credit risk for off-balance sheet credit exposures also takes into consideration the likelihood that funding of the commitment will occur.

The reserve for these off-balance sheet credit exposures is recorded as a liability and is presented in accounts payable and accrued expenses on the consolidated balance sheet.

however, the estimate of credit risk for off-balance sheet credit exposures also takes into consideration the likelihood that funding of the unfunded amount/commitment will occur.

The reserve for these off-balance sheet credit exposures is recorded as a liability and is presented in other liabilities on the consolidated balance sheet.

Changes to the reserve on off-balance sheet credit exposures are recorded through increases or decreases to the provision for credit losses on the consolidated statements of income.

32 unchanged sentences

The Company elected the practical expedient to exclude accrued interest receivable from the amortized cost of financing receivables and AFS debt securities.

Accrued interest totaled $ 20.0 million and $ 3.1 million at December 31, 2020 for loans receivable and AFS securities, respectively, and was included in other assets on the consolidated balance sheet.

Accrued interest totaled $ 19.8 million and $ 3.1 million at March 31, 2021 for loans receivable and AFS securities, respectively, and was included in other assets on the consolidated balance sheet.

Additionally, an election was made not to measure ACL for accrued interest receivables.

All interest accrued on loans but not received is reversed against interest income once it becomes more than 90 days past due.

Interest accrued on AFS debt securities but not received is also reversed against interest income.

The enhanced disclosures required by the ASU, as amended, are included in the relevant significant accounting policies above and in "Note 4.

23 unchanged sentences

The two-class method is an earnings allocation that determines EPS for each class of common stock and participating security.

For the Three Months Ended

For the Three Months Ended For the Six Months Ended

March 31, March 31,

2021 2020 2021 2020

(Dollars in thousands, except per share amounts)

13 unchanged sentences

The majority of the MBS and investment securities portfolios are composed of securities issued by GSEs.

December 31, 2020

March 31, 2021

Gross Gross Estimated

16 unchanged sentences

The following tables summarize the estimated fair value and gross unrealized losses of those AFS securities on which an unrealized loss at the dates presented was reported and the continuous unrealized loss position for less than 12 months and equal to or greater than 12 months as of the dates presented.

December 31, 2020

March 31, 2021

Less Than 12 Months Equal to or Greater Than 12 Months

15 unchanged sentences

$ 282,030 $ 371 $ 118 $ 1

The unrealized losses at December 31, 2020 were a result of an increase in market yields from the time the securities were purchased.

The unrealized losses at March 31, 2021 were a result of an increase in market yields from the time the securities were purchased.

In general, as market yields rise, the fair value of securities will decrease;

as market yields fall, the fair value of securities will increase.

Management did not record ACL on securities in an unrealized loss position at December 31, 2020 because scheduled coupon payments have been made, management anticipates that the entire principal balance will be collected as scheduled, and neither does the Company intend to sell the securities, nor is it more likely than not that the Company will be required to sell the securities before the recovery of the remaining amortized cost amount, which could be at maturity.

The amortized cost and estimated fair value of AFS debt securities as of December 31, 2020, by contractual maturity, are shown below.

Management did not record ACL on securities in an unrealized loss position at March 31, 2021 because scheduled coupon payments have been made, management anticipates that the entire principal balance will be collected as scheduled, and neither does the Company intend to sell the securities, nor is it more likely than not that the Company will be required to sell the securities before the recovery of the remaining amortized cost amount, which could be at maturity.

The amortized cost and estimated fair value of AFS debt securities as of March 31, 2021, by contractual maturity, are shown below.

Actual principal repayments may differ from contractual maturities due to prepayment or early call privileges by the issuer.

In the case of MBS, borrowers on the underlying loans generally have the right to prepay their loans without prepayment penalty.

In the case of MBS, borrowers on the underlying loans generally have the right to prepay their loans without penalty.

For this reason, MBS are not included in the maturity categories.

8 unchanged sentences

The following table presents the taxable and non-taxable components of interest income on investment securities for the periods presented.

For the Three Months Ended

For the Three Months Ended For the Six Months Ended

March 31, March 31,

2021 2020 2021 2020

(Dollars in thousands)

3 unchanged sentences

The following table summarizes the carrying value of securities pledged as collateral for the obligations indicated below as of the dates presented.

December 31, 2020 September 30, 2020

March 31, 2021 September 30, 2020

(Dollars in thousands)

3 unchanged sentences

$ 453,363 $ 590,837

During the current year, the Company sold its Visa Class B shares.

The proceeds and realized gain related to the sale of the Visa Class B shares were each $ 7.4 million.

All other dispositions of securities during the six months ended March 31, 2021 and March 31, 2020 were the result of principal repayments, calls, or maturities.

LOANS RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES

Loans receivable, net at the dates presented is summarized as follows:

December 31, 2020 September 30, 2020

March 31, 2021 September 30, 2020

(Dollars in thousands)

62 unchanged sentences

• Loss - Loans classified as loss are considered uncollectible and of such little value that their continuance as assets on the books is not warranted.

The following table sets forth, as of December 31, 2020, the amortized cost of loans by class of financing receivable, year of origination and loan classification.

The following table sets forth, as of March 31, 2021, the amortized cost of loans by class of financing receivable, year of origination or most recent credit decision, and loan classification.

All revolving lines of credit are presented separately, regardless of origination year.

Loans classified as doubtful or loss are individually evaluated for loss.

At December 31, 2020, there were no loans classified as doubtful, and all loans classified as loss were fully charged-off.

December 31, 2020

At March 31, 2021, there were no loans classified as doubtful, and all loans classified as loss were fully charged-off.

In the table below, certain loans are presented in the "Current Fiscal Year" column and are reported as special mention or substandard.

These loans were generally first originated in prior years but were renewed or modified in the current year.

March 31, 2021

Current Fiscal Fiscal Fiscal Fiscal Revolving

45 unchanged sentences

$ 63,653 $ 31,058

Delinquency Status - The following table sets forth, as of December 31, 2020, the amortized cost of current loans, loans 30 to 89 days delinquent, and loans 90 or more days delinquent or in foreclosure ("90+/FC"), by class of financing receivable and year of origination.

Delinquency Status - The following table sets forth, as of March 31, 2021, the amortized cost of current loans, loans 30 to 89 days delinquent, and loans 90 or more days delinquent or in foreclosure ("90+/FC"), by class of financing receivable and year of origination or most recent credit decision.

All revolving lines of credit are presented separately, regardless of origination year.

December 31, 2020

March 31, 2021

Current Fiscal Fiscal Fiscal Fiscal Revolving

32 unchanged sentences

Total $ 1,023,497 $ 1,327,635 $ 599,621 $ 564,029 $ 584,002 $ 2,803,209 $ 94,940 $ 6,996,933

Delinquent and Nonaccrual Loans - The following tables present the amortized cost at December 31, 2020 and, prior to the adoption of CECL, the recorded investment, which is identical to amortized cost, at September 30, 2020, by class, of loans 30 to 89 days delinquent, loans 90 or more days delinquent or in foreclosure, total delinquent loans, current loans, and total.

At December 31, 2020 and September 30, 2020, all loans 90 or more days delinquent were on nonaccrual status.

December 31, 2020

Delinquent and Nonaccrual Loans - The following tables present the amortized cost at March 31, 2021 and, prior to the adoption of CECL, the recorded investment, which is identical to amortized cost, at September 30, 2020, by class, of loans 30 to 89 days delinquent, loans 90 or more days delinquent or in foreclosure, total delinquent loans, current loans, and total.

At March 31, 2021 and September 30, 2020, all loans 90 or more days delinquent were on nonaccrual status.

March 31, 2021

90 or More Days Total Total

25 unchanged sentences

$ 9,172 $ 11,385 $ 20,557 $ 7,213,821 $ 7,234,378

The amortized cost of mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process as of December 31, 2020 and September 30, 2020 was $ 912 thousand and $ 1.5 million, respectively, which is included in loans 90 or more days delinquent or in foreclosure in the table above.

The carrying value of residential OREO held as a result of obtaining physical possession upon completion of a foreclosure or through completion of a deed in lieu of foreclosure was $ 129 thousand at December 31, 2020 and $ 183 thousand at September 30, 2020.

The following table presents the amortized cost at December 31, 2020 and, prior to the adoption of CECL, the recorded investment at September 30, 2020, by class, of loans classified as nonaccrual.

Additionally, the amortized cost of nonaccrual loans that had no related ACL is presented as of December 31, 2020, all of which were individually evaluated for loss and any identified losses have been charged off.

December 31, 2020 September 30, 2020

The amortized cost of mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process as of March 31, 2021 and September 30, 2020 was $ 910 thousand and $ 1.5 million, respectively, which is included in loans 90 or more days delinquent or in foreclosure in the tables above.

The carrying value of residential OREO held as a result of obtaining physical possession upon completion of a foreclosure or through completion of a deed in lieu of foreclosure was $ 105 thousand at March 31, 2021 and $ 183 thousand at September 30, 2020.

The following table presents the amortized cost at March 31, 2021 and, prior to the adoption of CECL, the recorded investment at September 30, 2020, by class, of loans classified as nonaccrual.

Additionally, the amortized cost of nonaccrual loans that had no related ACL is presented as of March 31, 2021, all of which were individually evaluated for loss and any identified losses have been charged off.

March 31, 2021 September 30, 2020

Nonaccrual Loans Nonaccrual Loans with No ACL Nonaccrual Loans

11 unchanged sentences

Any increase in the amortized cost at the time of the restructuring was generally due to the capitalization of delinquent interest and/or escrow balances.

For the Three Months Ended

December 31, 2020

Number Pre- Post-

of Restructured Restructured

Contracts Outstanding Outstanding

For the Three Months Ended For the Six Months Ended

March 31, 2021 March 31, 2021

Number Pre- Post- Number Pre- Post-

of Restructured Restructured of Restructured Restructured

Contracts Outstanding Outstanding Contracts Outstanding Outstanding

(Dollars in thousands)

6 unchanged sentences

Home equity — — — — — —

Other — — — — — —

2 $ 871 $ 762 6 $ 1,518 $ 1,407

For the Three Months Ended

December 31, 2019

Number Pre- Post-

of Restructured Restructured

Contracts Outstanding Outstanding

For the Three Months Ended For the Six Months Ended

March 31, 2020 March 31, 2020

Number Pre- Post- Number Pre- Post-

of Restructured Restructured of Restructured Restructured

Contracts Outstanding Outstanding Contracts Outstanding Outstanding

(Dollars in thousands)

6 unchanged sentences

Home equity 2 45 44 2 45 44

Other — — — — — —

7 $ 1,212 $ 1,212 10 $ 1,390 $ 1,448

The following table provides information on TDRs that became delinquent during the periods presented within 12 months after being restructured.

For the Three Months Ended

December 31, 2020 December 31, 2019

Number of Amortized Number of Recorded

Contracts Cost Contracts Investment

For the Three Months Ended For the Six Months Ended

March 31, 2021 March 31, 2020 March 31, 2021 March 31, 2020

Number of Amortized Number of Recorded Number of Amortized Number of Recorded

Contracts Cost Contracts Investment Contracts Cost Contracts Investment

(Dollars in thousands)

10 unchanged sentences

Prior to the adoption of CECL, a loan was considered impaired when, based on current information and events, it was probable that the Bank would be unable to collect all amounts due, including principal and interest, according to the original contractual terms of the loan agreement.

For the Three Months Ended

September 30, 2020 December 31, 2019

Unpaid Average Interest

Recorded Principal Related Recorded Income

Investment Balance ACL Investment Recognized

(Dollars in thousands)

For the Three Months Ended For the Six Months Ended

September 30, 2020 March 31, 2020 March 31, 2020

Unpaid Average Interest Average Interest

Recorded Principal Related Recorded Income Recorded Income

Investment Balance ACL Investment Recognized Investment Recognized

With no related allowance recorded

28 unchanged sentences

Allowance for Credit Losses - The following is a summary of ACL activity, by loan portfolio segment, for the periods presented.

Activity during the three months ended December 31, 2019 occurred prior to the adoption of CECL.

For the Three Months Ended December 31, 2020

Activity during the three and six months ended March 31, 2020 occurred prior to the adoption of CECL.

For the Three Months Ended March 31, 2021

One- to Four-Family

3 unchanged sentences

Beginning balance $ 1,538 $ 1,758 $ 852 $ 4,148 $ 21,707 $ 270 $ 26,125

Charge-offs ( 110 ) — ( 21 ) ( 131 ) — ( 7 ) ( 138 )

Recoveries 57 — — 57 8 3 68

Provision for credit losses 51 ( 53 ) ( 84 ) ( 86 ) ( 2,558 ) ( 14 ) ( 2,658 )

Ending balance $ 1,536 $ 1,705 $ 747 $ 3,988 $ 19,157 $ 252 $ 23,397

For the Six Months Ended March 31, 2021

One- to Four-Family

Correspondent Bulk

Originated Purchased Purchased Total Commercial Consumer Total

(Dollars in thousands)

Beginning balance $ 6,085 $ 2,691 $ 467 $ 9,243 $ 21,800 $ 484 $ 31,527

Adoption of CECL ( 4,452 ) ( 367 ) 436 ( 4,383 ) ( 193 ) ( 185 ) ( 4,761 )

4 unchanged sentences

Ending balance $ 1,536 $ 1,705 $ 747 $ 3,988 $ 19,157 $ 252 $ 23,397

For the Three Months Ended December 31, 2019

For the Three Months Ended March 31, 2020

One- to Four-Family

7 unchanged sentences

Ending balance $ 6,467 $ 3,355 $ 557 $ 10,379 $ 20,328 $ 489 $ 31,196

For the Six Months Ended March 31, 2020

One- to Four-Family

Correspondent Bulk

Originated Purchased Purchased Total Commercial Consumer Total

(Dollars in thousands)

Beginning balance $ 2,000 $ 1,203 $ 687 $ 3,890 $ 5,171 $ 165 $ 9,226

Charge-offs ( 64 ) — — ( 64 ) ( 349 ) ( 10 ) ( 423 )

Recoveries 3 — — 3 81 9 93

Provision for credit losses 4,528 2,152 ( 130 ) 6,550 15,425 325 22,300

Ending balance $ 6,467 $ 3,355 $ 557 $ 10,379 $ 20,328 $ 489 $ 31,196

The following is a summary of the loan portfolio and related ACL balances by loan portfolio segment disaggregated by the Company's impairment method as of September 30, 2020 (prior to the adoption of CECL).

13 unchanged sentences

The key assumptions in the Company's ACL model include the economic forecast, the forecast and reversion to mean time periods, and prepayment and curtailment assumptions.

Management also considered certain qualitative factors when evaluating the adequacy of the ACL at December 31, 2020.

The key assumptions utilized in estimating the Company's ACL at December 31, 2020 are discussed below.

• Economic Forecast - Management considered several economic forecasts provided by a third party and selected the economic forecast believed to be the most appropriate considering the facts and circumstances at December 31, 2020.

The forecasted economic indices applied to the model at December 31, 2020 were the national unemployment rate, changes in commercial real estate price index, changes in home values, and changes in the U.S.

Management also considered certain qualitative factors when evaluating the adequacy of the ACL at March 31, 2021.

The key assumptions utilized in estimating the Company's ACL at March 31, 2021 are discussed below.

The forecasted economic indices applied to the model at March 31, 2021 were the national unemployment rate, changes in commercial real estate price index, changes in home values, and changes in the U.S.

gross domestic product.

The economic index most impactful to all loan pools within the model at December 31, 2020 was the national unemployment rate.

The forecast national unemployment rate in the economic scenario selected by management at December 31, 2020 had the national unemployment rate peaking at 8.0 % at June 30, 2021 and then a gradual decline to 7.5 % at December 31, 2021 which was the end of our four quarter forecast time period.

• Forecast and reversion to mean time period - The forecasted time period for all of the economic indices was four quarters at December 31, 2020.

The reversion to mean time period was eight quarters for the national unemployment rate and four quarters for all other economic indices at December 31, 2020.

• Prepayment and curtailment assumptions - The assumptions used at December 31, 2020 were generally based on actual prepayment and curtailment speeds for each respective loan pool in the model.

• Qualitative factors - The qualitative considerations by management at December 31, 2020 included the COVID-19 loan modification programs considering the payment performance of the loans that had exited their deferral periods, the increase in special mention commercial loans during the current quarter and the special mention commercial loans still in their COVID-19 loan modification time period, and the economic uncertainties related to the political party changes in U.S.

government offices, the effectiveness of the latest federal stimulus package, potential additional economic stimulus from the federal government, and the impact the increasing COVID-19 cases and limited vaccine distribution may have on the economy.

Management determined a qualitative amount was not necessary at December 31, 2020 for the loans in the COVID-19 loan modification program due to the significant decrease in the dollar amount of the loans in the program and the fact that the majority of the loans that have exited the program are current on their payments.

See discussion below regarding the qualitative amount at December 31, 2020 for special mention commercial loans and the economic uncertainty.

At December 31, 2020, the ACL was composed of $ 15.1 million calculated by the model, $ 6.6 million related to the economic uncertainty qualitative factor, and $ 4.4 million related to the special mention qualitative factor, resulting in a total ACL of $ 26.1 million.

The decrease in ACL during the current quarter was due to net charge-offs of $ 464 thousand and a negative provision for credit losses of $ 177 thousand.

The negative provision for credit losses was due primarily to a reduction in the correspondent one-to four-family loan portfolio during the current quarter, partially offset by an increase in the commercial loan ACL due to the related qualitative factor.

The commercial loan portfolio balance decreased during the current quarter, but due to the related qualitative factors, any reduction in the ACL due to a reduction in the loan balance was offset.

The economic forecast selected at December 31, 2020 improved from October 1, 2020 when CECL was adopted by the Company, but the improvement in the forecast was largely offset by the qualitative factors discussed above.

Reserve for Off-Balance Sheet Credit Exposures - The following is a summary of the changes in reserve for off-balance sheet credit exposures during the three months ended December 31, 2020 (dollars in thousands).

Beginning balance $ —

Adoption of CECL 7,788

Balance at October 1, 2020 7,788

The economic index most impactful to all loan pools within the model at March 31, 2021 was the national unemployment rate.

The forecast national unemployment rate in the economic scenario selected by management at March 31, 2021 had the national unemployment rate peaking at 6.4 % at September 30, 2021 and then a gradual decline to 5.3 % at March 31, 2022 which was the end of our four quarter forecast time period.

• Forecast and reversion to mean time period - The forecasted time period for all of the economic indices was four quarters at March 31, 2021.

The reversion to mean time period was eight quarters for the national unemployment rate and four quarters for all other economic indices at March 31, 2021.

• Prepayment and curtailment assumptions - The assumptions used at March 31, 2021 were generally based on actual prepayment and curtailment speeds for each respective loan pool in the model.

• Qualitative factors - The qualitative considerations by management at March 31, 2021 included the COVID-19 loan modification programs considering the payment performance of the loans that had exited their deferral periods, the balance and trending of large-dollar special mention commercial loans, and the economic uncertainties related to (1) the job market, specifically the unemployment rate, labor participation rate and the effectiveness of the latest federal stimulus package to the unemployed and the economic stimulus payments to qualifying households, (2) the unevenness of the recovery in certain industries, and (3) the impact to the housing market as a result of the foreclosure moratorium and how the housing market may react when the foreclosure moratorium is eventually lifted.

Management determined a qualitative amount was not necessary at March 31, 2021 for the loans in the COVID-19 loan modification program due to the significant decrease in the dollar amount of the loans in the program and the fact that the majority of the loans that have exited the program are current on their payments.

See discussion below regarding the qualitative amount at March 31, 2021 for special mention commercial loans and the economic uncertainty.

The decrease in ACL during the current quarter was primarily a result of a negative provision for credit losses of $ 2.7 million.

The negative provision for credit losses was due primarily to a reduction in commercial loan ACL as a result of improvements in the economic forecast used in the model, partially offset by an increase in qualitative factors, primarily the economic uncertainty qualitative factor, along with a change in the mix of the loan portfolio during the current quarter.

The balance of the one- to four-family loan portfolio decreased during the quarter, partially offset by an increase in commercial loans.

The reduction in ACL related to the decrease in the balance of the one- to four-family loan portfolio during the current quarter was more than offset by the increase in ACL related to an increase in the balance of the commercial loan portfolio.

Reserve for Off-Balance Sheet Credit Exposures - The following is a summary of the changes in reserve for off-balance sheet credit exposures during the periods indicated.

For the Three Months Ended March 31, 2021 For the Six Months Ended March 31, 2021

(Dollars in thousands)

Beginning balance 6,433 Beginning balance $ —

Provision for credit losses ( 306 ) Adoption of CECL 7,788

Ending balance $ 6,127 Balance at October 1, 2020 7,788

Provision for credit losses ( 1,661 )

Ending balance $ 6,127

At December 31, 2020, the Company also applied a qualitative factor for economic uncertainty related to the calculation of the reserve for off-balance sheet credit exposures, but the impact of this qualitative factor was smaller compared to the economic uncertainty factor applied in the calculation of ACL, in consideration of the fact the commitments are being underwritten during a challenging economic environment and are still meeting/exceeding the Bank's conservative underwriting requirements.

The $ 1.4 million reduction in the reserve compared to October 1, 2020, which was recognized as a negative provision for credit losses, was due to an improvement in the economic forecast during the current quarter, partially offset by an increase in the balance of off-balance sheet credit exposures.

At March 31, 2021, the Company also applied a qualitative factor for economic uncertainty related to the calculation of the reserve for off-balance sheet credit exposures;

however, the impact of this qualitative factor was smaller compared to the economic uncertainty factor applied in the calculation of ACL due to consideration of the fact that the majority of off-balance sheet credit exposures are related to credits that have been underwritten during a challenging economic environment and are still meeting/exceeding the Bank's conservative underwriting requirements.

The $ 306 thousand reduction in the reserve during the current quarter, which was recognized as a negative provision for credit losses, was due to an improvement in the economic forecast, along with a change in the mix of off-balance sheet credit exposures.

The balance of off-balance sheet credit exposures increased during the current quarter due to an increase in one- to four-family off-balance sheet credit exposures, partially offset by a decrease in commercial off-balance sheet credit exposures.

Even though the aggregate amount of off-balance sheet credit exposures increased during the current quarter, the related reserve decreased because one- to four-family off-balance sheet credit exposures have a significantly lower reserve rate than commercial off-balance sheet credit exposures due to differences in credit risk.

BORROWED FUNDS

FHLB Borrowings and Interest Rate Swaps - At December 31, 2020 and September 30, 2020, the Bank had entered into interest rate swap agreements with a total notional amount of $ 640.0 million in order to hedge the variable cash flows associated with $ 640.0 million of adjustable-rate FHLB advances.

At December 31, 2020 and September 30, 2020, the interest rate swap agreements had an average remaining term to maturity of 3.2 years and 3.5 years, respectively.

FHLB Borrowings and Interest Rate Swaps - At March 31, 2021 and September 30, 2020, the Bank had entered into interest rate swap agreements with a total notional amount of $ 440.0 million and $ 640.0 million, respectively, in order to hedge the variable cash flows associated with $ 440.0 million and $ 640.0 million, respectively, of adjustable-rate FHLB advances.

At March 31, 2021 and September 30, 2020, the interest rate swap agreements had an average remaining term to maturity of 3.9 years and 3.5 years, respectively.

The interest rate swaps were designated as cash flow hedges and involve the receipt of variable amounts from a counterparty in exchange for the Bank making fixed-rate payments over the life of the interest rate swap agreements.

At December 31, 2020 and September 30, 2020, the interest rate swaps were in a loss position with a total fair value of $ 47.9 million and $ 53.1 million, respectively, which was reported in accounts payable and accrued expenses on the consolidated balance sheet.

During the three months ended December 31, 2020, $ 3.0 million was reclassified from AOCI as an increase to interest expense.

During the three months ended December 31, 2019, $ 709 thousand was reclassified from AOCI as an increase to interest expense.

At December 31, 2020, the Company estimated that $ 15.0 million of interest expense associated with the interest rate swaps will be reclassified from AOCI as an increase to interest expense on FHLB borrowings during the next 12 months.

At March 31, 2021 and September 30, 2020, the interest rate swaps were in a loss position with a total fair value of $ 30.3 million and $ 53.1 million, respectively, which was reported in other liabilities on the consolidated balance sheet.

During the three and six months ended March 31, 2021, $ 6.4 million and $ 9.4 million, respectively, was reclassified from AOCI.

Of this amount, for the three months ended March 31, 2021, $ 2.8 million was recognized as an increase to interest expense and $ 3.6 million, net of tax, was reclassified as a result of the termination of the related interest rate swaps, as discussed below, and reported in the loss on interest rate swap termination line item within the consolidated statements of operations.

During the three and six months ended March 31, 2020, $ 983 thousand and $ 1.7 million, respectively, was reclassified from AOCI as an increase to interest expense.

At March 31, 2021, the Company estimated that $ 10.0 million of interest expense associated with the interest rate swaps will be reclassified from AOCI as an increase to interest expense on FHLB borrowings during the next 12 months.

The Bank has minimum collateral posting thresholds with its derivative counterparties and posts collateral on a daily basis.

The Bank posted cash collateral of $ 48.8 million at December 31, 2020 and $ 54.6 million at September 30, 2020.

During the current quarter, the Bank prepaid a fixed-rate FHLB advance totaling $ 100.0 million with a contractual interest rate of 2.21 % and a remaining term of 1.2 years, and replaced this advance with a $ 100.0 million fixed-rate FHLB advance with a contractual interest rate of 0.62 % and a term of 5.0 years.

The Bank paid a penalty of $ 2.3 million to FHLB as a result of prepaying the FHLB advance.

The effective interest rate of the new advance is 1.09 %.

The prepayment penalty is being recognized in interest expense over the life of the new FHLB advance

The Bank posted cash collateral of $ 32.0 million at March 31, 2021 and $ 54.6 million at September 30, 2020.

During the current fiscal year, the Bank terminated interest rate swaps with a notional amount of $ 200.0 million which were tied to FHLB advances totaling $ 200.0 million.

The interest rate swaps were designated as cash flow hedges and involved the receipt of variable amounts from a counterparty in exchange for the Bank making fixed-rate payments over the life of the interest rate swap agreements.

Since it was management's intention to prepay the related FHLB advances, it is no longer probable that the original forecasted transactions subject to the cash flow hedges will occur.

Therefore, the termination of the interest rate swaps resulted in the reclassification of unrealized losses, net of tax, totaling $ 3.6 million ($ 4.8 million pretax) from AOCI into earnings.

During the current fiscal year, the Bank prepaid fixed-rate FHLB advances totaling $ 200.0 million with a weighted average contractual interest rate of 2.23 % and a weighted average remaining term of 1.3 years, and replaced these advances with fixed-rate FHLB advances totaling $ 200.0 million with a weighted average contractual interest rate of 0.69 % and a weighted average term of 5.5 years.

The Bank paid penalties of $ 5.0 million to FHLB as a result of prepaying these FHLB advances.

The weighted average effective interest rate of the new advances is 1.16 %.

The prepayment penalties are being recognized in interest expense over the life of the new FHLB advances.

FAIR VALUE OF FINANCIAL INSTRUMENTS

19 unchanged sentences

If the price provided by the independent source varies by more than a predetermined percentage from the price received from the third party pricing service, then the variance is researched by management.

The Company did not have to adjust prices obtained from the third party pricing service when determining the fair value of its securities during the three months ended December 31, 2020 or during fiscal year 2020.

The Company did not have to adjust prices obtained from the third party pricing service when determining the fair value of its securities during the six months ended March 31, 2021 or during fiscal year 2020.

The Company's major security types, based on the nature and risks of the securities, are:

5 unchanged sentences

Cash flows are determined by taking any embedded options into consideration and are discounted using current market yields for securities with similar credit profiles.

Interest Rate Swaps - The Company's interest rate swaps are designated as cash flow hedges and are reported at fair value in other assets on the consolidated balance sheet if in a gain position, and in accounts payable and accrued expenses if in a loss position, with any unrealized gains and losses, net of taxes, reported as AOCI in stockholders' equity.

Interest Rate Swaps - The Company's interest rate swaps are designated as cash flow hedges and are reported at fair value in other assets on the consolidated balance sheet if in a gain position, and in other liabilities if in a loss position, with any unrealized gains and losses, net of taxes, reported as AOCI in stockholders' equity.

Borrowed Funds" for additional information.

1 unchanged sentence

On a quarterly basis, management corroborates the estimated fair values by internally calculating the estimated fair value using a discounted cash flow analysis with independent observable market-based inputs from a third party.

No adjustments were made to the estimated fair values during the three months ended December 31, 2020 or during fiscal year 2020.

No adjustments were made to the estimated fair values obtained from the counterparty during the six months ended March 31, 2021 or during fiscal year 2020.

The following tables provide the level of valuation assumption used to determine the carrying value of the Company's financial instruments measured at fair value on a recurring basis at the dates presented.

The Company did no t have any Level 3 financial instruments measured at fair value on a recurring basis at December 31, 2020 or September 30, 2020.

December 31, 2020

The Company did no t have any Level 3 financial instruments measured at fair value on a recurring basis at March 31, 2021 or September 30, 2020.

March 31, 2021

Quoted Prices Significant Significant

25 unchanged sentences

Loans Receivable - With the adoption of CECL, collateral dependent assets are assets evaluated as part of the ACL on an individual basis.

Those assets for which there is an associated ACL are considered financial assets measured at fair value on a non-recurring basis.

Those collateral dependent assets for which there is an associated ACL are considered financial assets measured at fair value on a non-recurring basis.

Prior to the adoption of CECL, loans identified as impaired were considered financial assets measured at fair value on a non-recurring basis.

The valuation method for collateral dependent assets and impaired loans is identical.

The fair value of collateral dependent loans/loans individually evaluated for loss on a non-recurring basis during the three months ended December 31, 2020 and 2019 that were still held in the portfolio as of December 31, 2020 and 2019 was $ 5.9 million and $ 3.9 million, respectively.

The fair value of collateral dependent loans/loans individually evaluated for loss on a non-recurring basis during the six months ended March 31, 2021 and 2020 that were still held in the portfolio as of March 31, 2021 and 2020 was $ 7.4 million and $ 4.9 million, respectively.

The one- to four-family loans included in this amount were individually evaluated to determine if the carrying value of the loan was in excess of the fair value of the collateral, less estimated selling costs of 10 %.

3 unchanged sentences

Adjustments to appraised or book values are generally based on assumptions not observable in the marketplace.

The primary significant unobservable inputs for commercial loans individually evaluated during the three months ended December 31, 2020 and December 31, 2019 were downward adjustments to the book value of the collateral for lack of marketability.

During the three months ended December 31, 2020, the adjustments ranged from 10 % to 50 %, with a weighted average of 26 %.

During the three months ended December 31, 2019, the adjustments ranged from 10 % to 50 %, with a weighted average of 18 %.

The primary significant unobservable inputs for commercial loans individually evaluated during the six months ended March 31, 2021 and March 31, 2020 were downward adjustments to the book value of the collateral for lack of marketability.

During the six months ended March 31, 2021, the adjustments ranged from 7 % to 50 %, with a weighted average of 23 %.

During the six months ended March 31, 2020, the adjustments ranged from 10 % to 50 %, with a weighted average of 20 %.

The basis utilized in calculating the weighted averages for these adjustments was the original unadjusted value of each collateral item.

5 unchanged sentences

Fair values of foreclosed property cannot be determined with precision and may not be realized in an actual sale of the property and, as such, are classified as Level 3.

The fair value of OREO measured on a non-recurring basis during the three months ended December 31, 2020 and 2019 that was still held in the portfolio as of December 31, 2020 and 2019 was $ 30 thousand and $ 193 thousand, respectively.

The carrying value of the properties equaled the fair value of the properties at December 31, 2020 and 2019.

The fair value of OREO measured on a non-recurring basis during the six months ended March 31, 2021 and 2020 that was still held in the portfolio as of March 31, 2021 and 2020 was $ 105 thousand and $ 183 thousand, respectively.

The carrying value of the properties equaled the fair value of the properties at March 31, 2021 and 2020.

Fair Value Disclosures - The Company estimated fair value amounts using available market information and a variety of valuation methodologies as of the dates presented.

2 unchanged sentences

The carrying amounts and estimated fair values of the Company's financial instruments by fair value hierarchy, at the dates presented, were as follows:

December 31, 2020

March 31, 2021

Carrying Estimated Fair Value

21 unchanged sentences

The following tables present the changes in the components of AOCI, net of tax, for the periods indicated.

For the Three Months Ended December 31, 2020

For the Three Months Ended March 31, 2021

Unrealized Unrealized

9 unchanged sentences

Ending balance $ 3,934 $ ( 22,887 ) $ ( 18,953 )

For the Three Months Ended December 31, 2019

For the Six Months Ended March 31, 2021

Unrealized Unrealized

6 unchanged sentences

Amount reclassified from AOCI, net of taxes of $( 3,031 )

— 9,391 9,391

Other comprehensive income (loss) ( 19,794 ) 17,346 ( 2,448 )

Ending balance $ 3,934 $ ( 22,887 ) $ ( 18,953 )

For the Three Months Ended March 31, 2020

Unrealized Unrealized

Gains (Losses) Gains (Losses)

on AFS on Cash Flow Total

Securities Hedges AOCI

(Dollars in thousands)

Beginning balance $ 9,698 $ ( 19,625 ) $ ( 9,927 )

Other comprehensive income (loss), before reclassifications 10,378 ( 23,412 ) ( 13,034 )

Amount reclassified from AOCI, net of taxes of $( 315 )

Other comprehensive income (loss) 10,378 ( 22,429 ) ( 12,051 )

Ending balance $ 20,076 $ ( 42,054 ) $ ( 21,978 )

For the Six Months Ended March 31, 2020

Unrealized Unrealized

Gains (Losses) Gains (Losses)

on AFS on Cash Flow Total

Securities Hedges AOCI

(Dollars in thousands)

Beginning balance $ 10,150 $ ( 25,049 ) $ ( 14,899 )

Other comprehensive income (loss), before reclassifications 9,926 ( 18,697 ) ( 8,771 )

Amount reclassified from AOCI, net of taxes of $( 543 )

— 1,692 1,692

Other comprehensive income (loss) 9,926 ( 17,005 ) ( 7,079 )

Ending balance $ 20,076 $ ( 42,054 ) $ ( 21,978 )

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-Q

Item 1. Financial Statements