What changed in this filing

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Item 1. Financial Statements

2022-08-08 compared with 2022-05-09 · 119 added, 94 removed, 790 unchanged (21% of the section changed)

4 unchanged sentences

(Dollars in thousands, except per share amounts)

March 31, September 30,

June 30, September 30,

Cash and cash equivalents (includes interest-earning deposits of $ 31,589 and $ 24,289 )

6 unchanged sentences

Premises and equipment, net 96,008 99,127

Income taxes receivable, net 1,993 —

Deferred income tax assets, net 19,636 —

12 unchanged sentences

Common stock, $ .01 par value;

1,400,000,000 shares authorized, 138,846,684 and 138,832,284 shares issued and outstanding as of March 31, 2022 and September 30, 2021, respectively

1,400,000,000 shares authorized, 138,854,084 and 138,832,284 shares issued and outstanding as of June 30, 2022 and September 30, 2021, respectively

Additional paid-in capital 1,190,117 1,189,633

9 unchanged sentences

(Dollars in thousands, except per share amounts)

For the Three Months Ended For the Six Months Ended

March 31, March 31,

For the Three Months Ended For the Nine Months Ended

June 30, June 30,

2022 2021 2022 2021

3 unchanged sentences

FHLB stock 2,695 944 6,166 2,964

Investment securities 800 629 1,608 1,312

Cash and cash equivalents 3,968 26 4,931 117

Investment securities 815 763 2,423 2,075

Total interest and dividend income 69,412 61,872 196,100 194,413

INTEREST EXPENSE:

Deposits 8,389 12,529 17,656 26,596

Borrowings 11,644 7,826 27,961 26,885

Deposits 7,787 11,475 25,443 38,071

Total interest expense 19,431 19,301 53,404 64,956

33 unchanged sentences

(Dollars in thousands)

For the Three Months Ended For the Six Months Ended

March 31, March 31,

For the Three Months Ended For the Nine Months Ended

June 30, June 30,

2022 2021 2022 2021

3 unchanged sentences

( 31,117 ) 5,703 ( 107,544 ) ( 14,091 )

Changes in unrealized losses on cash flow hedges, net of taxes of $( 4,153 ), $( 4,309 ), $( 5,430 ), and $( 5,529 )

Changes in unrealized gains/losses on cash flow hedges, net of taxes of $( 1,646 ), $ 29 , $( 7,076 ), and $( 5,500 )

5,099 ( 88 ) 21,924 17,258

5 unchanged sentences

(Dollars in thousands, except per share amounts)

For the Six Months Ended March 31, 2022

For the Nine Months Ended June 30, 2022

Additional Unearned Total

17 unchanged sentences

Balance at March 31, 2022 $ 1,388 $ 1,189,999 $ ( 30,561 ) $ 89,833 $ ( 75,907 ) $ 1,174,752

Net income 21,152 21,152

Other comprehensive loss, net of tax ( 26,018 ) ( 26,018 )

ESOP activity ( 5 ) 413 408

Restricted stock activity, net ( 3 ) ( 3 )

Stock-based compensation 126 126

Cash dividends to stockholders ($ 0.285 per share)

( 38,677 ) ( 38,677 )

Balance at June 30, 2022 $ 1,388 $ 1,190,117 $ ( 30,148 ) $ 72,308 $ ( 101,925 ) $ 1,131,740

CAPITOL FEDERAL FINANCIAL, INC.

2 unchanged sentences

(Dollars in thousands, except per share amounts)

For the Six Months Ended March 31, 2021

For the Nine Months Ended June 30, 2021

Additional Unearned Total

20 unchanged sentences

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

Net income 18,187 18,187

Other comprehensive income, net of tax 5,615 5,615

ESOP activity 118 413 531

Restricted stock activity, net ( 5 ) ( 5 )

Stock-based compensation 127 127

Stock options exercised 300 300

Cash dividends to stockholders ($ 0.485 per share)

( 65,726 ) ( 65,726 )

Balance at June 30, 2021 $ 1,388 $ 1,189,466 $ ( 31,801 ) $ 91,909 $ ( 13,338 ) $ 1,237,624

See accompanying notes to consolidated financial statements.

3 unchanged sentences

(Dollars in thousands)

For the Six Months Ended

For the Nine Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

12 unchanged sentences

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

Unrestricted cash collateral (provided to)/received from derivative counterparties, net 2,620 —

Other assets, net 6,307 8,776

12 unchanged sentences

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

Proceeds from sale of assets held-for-sale — 977

Proceeds from bank-owned life insurance ("BOLI") death benefit 1,023 443

4 unchanged sentences

(Dollars in thousands)

For the Six Months Ended

For the Nine Months Ended

CASH FLOWS FROM FINANCING ACTIVITIES:

8 unchanged sentences

Net cash (used in) provided by financing activities ( 90,184 ) 109,802

NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH 102,157 ( 68,256 )

NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH ( 15,503 ) ( 113,213 )

CASH, CASH EQUIVALENTS AND RESTRICTED CASH:

17 unchanged sentences

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

Cash, Cash Equivalents and Restricted Cash - Cash, cash equivalents and restricted cash reported in the statement of cash flows include cash and cash equivalents of $ 166.9 million and $ 42.3 million at March 31, 2022 and September 30, 2021, respectively, and restricted cash of $ 5.6 million and $ 28.0 million at March 31, 2022 and September 30, 2021, respectively, which was included in other assets on the consolidated balance sheet.

Cash, Cash Equivalents and Restricted Cash - Cash, cash equivalents and restricted cash reported in the statement of cash flows included cash and cash equivalents of $ 54.8 million and $ 42.3 million at June 30, 2022 and September 30, 2021, respectively, and included restricted cash of $ 28.0 million at September 30, 2021, which was included in other assets on the consolidated balance sheet.

There was no restricted cash at June 30, 2022.

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

13 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 Six Months Ended

March 31, March 31,

For the Three Months Ended For the Nine Months Ended

June 30, June 30,

2022 2021 2022 2021

3 unchanged sentences

Net income available to common stockholders $ 21,141 $ 18,175 $ 64,926 $ 57,490

Average common shares outstanding 135,634,964 135,409,120 135,630,733 135,403,116

Average committed ESOP shares outstanding 41,758 41,758 20,876 20,876

Total basic average common shares outstanding 135,724,658 135,504,869 135,675,959 135,450,951

7 unchanged sentences

The majority of the MBS and investment securities portfolios are composed of securities issued by United States Government-Sponsored Enterprises ("GSEs").

March 31, 2022

June 30, 2022

Gross Gross Estimated

4 unchanged sentences

GSE debentures 519,976 — 36,783 483,193

Corporate bonds 4,000 19 9 4,010

Municipal bonds 210 — — 210

10 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.

March 31, 2022

June 30, 2022

Less Than 12 Months Equal to or Greater Than 12 Months

4 unchanged sentences

GSE debentures 209,978 15,022 273,215 21,761

Corporate bonds 1,991 9 — —

Municipal bonds — — — —

9 unchanged sentences

$ 1,398,300 $ 12,488 $ 10,612 $ 65

The unrealized losses at March 31, 2022 were a result of an increase in market yields from the time the securities were purchased.

The unrealized losses at June 30, 2022 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 an ACL on securities in an unrealized loss position at March 31, 2022 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, 2022, by contractual maturity, are shown below.

Management did not record an ACL on securities in an unrealized loss position at June 30, 2022 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 June 30, 2022, by contractual maturity, are shown below.

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

6 unchanged sentences

One year through five years 519,976 483,193

Five years through ten years 4,000 4,010

524,186 487,413

2 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 Six Months Ended

March 31, March 31,

For the Three Months Ended For the Nine Months Ended

June 30, June 30,

2022 2021 2022 2021

4 unchanged sentences

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

March 31, 2022 September 30, 2021

June 30, 2022 September 30, 2021

(Dollars in thousands)

5 unchanged sentences

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, 2022 and March 31, 2021 were the result of principal repayments, calls, or maturities.

All other dispositions of securities during the nine months ended June 30, 2022 and June 30, 2021 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:

March 31, 2022 September 30, 2021

June 30, 2022 September 30, 2021

(Dollars in thousands)

61 unchanged sentences

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

At March 31, 2022 and September 30, 2021, there were no loans classified as doubtful, and all loans classified as loss were fully charged-off.

March 31, 2022

At June 30, 2022 and September 30, 2021, there were no loans classified as doubtful, and all loans classified as loss were fully charged-off.

June 30, 2022

Current Fiscal Fiscal Fiscal Fiscal Revolving

71 unchanged sentences

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

March 31, 2022

June 30, 2022

Current Fiscal Fiscal Fiscal Fiscal Revolving

68 unchanged sentences

Delinquent and Nonaccrual Loans - The following tables present the amortized cost, at the dates indicated, 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 loans.

At March 31, 2022 and September 30, 2021, all loans 90 or more days delinquent were on nonaccrual status.

March 31, 2022

At June 30, 2022 and September 30, 2021, all loans 90 or more days delinquent were on nonaccrual status.

June 30, 2022

90 or More Days Total Total

25 unchanged sentences

$ 7,861 $ 11,654 $ 19,515 $ 7,081,450 $ 7,100,965

The amortized cost of mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process as of March 31, 2022 and September 30, 2021 was $ 2.9 million and $ 799 thousand, 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 $ 170 thousand at September 30, 2021.

There was no residential OREO held as of March 31, 2022.

The following table presents the amortized cost at March 31, 2022 and September 30, 2021, by class, of loans classified as nonaccrual.

The amortized cost of mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process as of June 30, 2022 and September 30, 2021 was $ 1.7 million and $ 799 thousand, 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 as of June 30, 2022 and September 30, 2021 was $ 258 thousand and $ 170 thousand, respectively.

The following table presents the amortized cost at June 30, 2022 and September 30, 2021, by class, of loans classified as nonaccrual.

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

March 31, 2022 September 30, 2021

June 30, 2022 September 30, 2021

Nonaccrual Loans Nonaccrual Loans with No ACL Nonaccrual Loans Nonaccrual Loans with No ACL

12 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 For the Six Months Ended

March 31, 2022 March 31, 2022

For the Three Months Ended For the Nine Months Ended

June 30, 2022 June 30, 2022

Number Pre- Post- Number Pre- Post-

11 unchanged sentences

— $ — $ — 5 $ 267 $ 267

For the Three Months Ended For the Six Months Ended

March 31, 2021 March 31, 2021

For the Three Months Ended For the Nine Months Ended

June 30, 2021 June 30, 2021

Number Pre- Post- Number Pre- Post-

12 unchanged sentences

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 For the Six Months Ended

March 31, 2022 March 31, 2021 March 31, 2022 March 31, 2021

For the Three Months Ended For the Nine Months Ended

June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

Number of Amortized Number of Amortized Number of Amortized Number of Amortized

11 unchanged sentences

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

For the Three Months Ended March 31, 2022

For the Three Months Ended June 30, 2022

One- to Four-Family

7 unchanged sentences

Ending balance $ 1,904 $ 2,437 $ 224 $ 4,565 $ 11,490 $ 228 $ 16,283

For the Six Months Ended March 31, 2022

For the Nine Months Ended June 30, 2022

One- to Four-Family

7 unchanged sentences

Ending balance $ 1,904 $ 2,437 $ 224 $ 4,565 $ 11,490 $ 228 $ 16,283

For the Three Months Ended March 31, 2021

For the Three Months Ended June 30, 2021

One- to Four-Family

7 unchanged sentences

Ending balance $ 1,535 $ 1,739 $ 674 $ 3,948 $ 16,533 $ 243 $ 20,724

For the Six Months Ended March 31, 2021

For the Nine Months Ended June 30, 2021

One- to Four-Family

10 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 March 31, 2022.

The key assumptions utilized in estimating the Company's ACL at March 31, 2022 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 March 31, 2022.

The forecasted economic indices applied to the model at March 31, 2022 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 June 30, 2022.

The key assumptions utilized in estimating the Company's ACL at June 30, 2022 are discussed below.

• Economic Forecast - Management considered several economic forecasts provided by a third party and selected a weighted economic forecast that was most appropriate considering the facts and circumstances at June 30, 2022.

The forecasted economic indices applied to the model at June 30, 2022 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 March 31, 2022 was the national unemployment rate.

The forecast national unemployment rate in the economic scenario selected by management at March 31, 2022 had the national unemployment rate gradually declining to 3.4 % by March 31, 2023 which was the end of our four quarter forecast time period.

• Forecast and reversion to mean time period - The forecasted time period and the reversion to mean time period were each four quarters for all of the economic indices at March 31, 2022.

• Prepayment and curtailment assumptions - The assumptions used at March 31, 2022 were generally based on actual historical prepayment and curtailment speeds for each respective loan pool in the model.

• Qualitative factors - The qualitative factors applied by management at March 31, 2022 included the following:

◦ The economic uncertainties related to (1) the job market, the labor force composition, the unemployment rate, and labor participation rate and how the significant federal assistance and other factors may be impacting those measures and (2) the unevenness of the recovery in certain industries in which the Bank has lending relationships;

The economic index most impactful to all loan pools within the model at June 30, 2022 was the national unemployment rate.

The forecast national unemployment rate in the economic scenario selected by management at June 30, 2022 had the national unemployment rate gradually increasing to 4.3 % by June 30, 2023 which was the end of our four quarter forecast time period.

• Forecast and reversion to mean time period - The forecasted time period and the reversion to mean time period were each four quarters for all of the economic indices at June 30, 2022.

• Prepayment and curtailment assumptions - The assumptions used at June 30, 2022 were generally based on actual historical prepayment and curtailment speeds for each respective loan pool in the model.

• Qualitative factors - The qualitative factors applied by management at June 30, 2022 included the following:

◦ The economic uncertainties related to the unemployment rate, the labor force composition, and the labor participation rate;

◦ The balance and trending of large-dollar special mention commercial loans;

◦ Coronavirus Disease 2019 ("COVID-19") loan modifications related to commercial real estate loans.

The decrease in ACL during the current year-to-date period was primarily a result of a negative provision for credit losses of $ 4.6 million which was due to (1) a reduction in the large-dollar special mention commercial loan qualitative factor due to two large-dollar special mention commercial loans moving to the pass classification during the December 31, 2021 quarter, (2) a reduction in model-calculated ACL for commercial loans due to an increase in projected commercial loan prepayment speeds as a result of management's outlook for prepayment activity and the composition and nature of our commercial loan portfolio, (3) a decrease in the commercial loan COVID-19 modification qualitative factor due to loans exiting their deferral time periods and resuming full payments per their original contracts during the current quarter, and (4) a decrease in the economic uncertainty qualitative factor for commercial loans due to improvement in economic conditions through March 31, 2022.

The decrease in ACL during the current year-to-date period was primarily a result of a negative provision for credit losses of $ 3.8 million which was due to a reduction in commercial loan qualitative factors, partially offset by an increase in ACL related to loan growth.

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.

The negative provision for credit losses in the current year period was due primarily to a reduction in the commercial loan economic uncertainty qualitative factor and to a reduction in the reserves for commercial construction loans due mainly to a reduction in the model-calculated amount as noted for the ACL.

For the Three Months Ended For the Six Months Ended

March 31, 2022 March 31, 2022

The negative provision for credit losses in the current year period was due primarily to a reduction in the commercial loan qualitative factors.

For the Three Months Ended For the Nine Months Ended

June 30, 2022 June 30, 2022

(Dollars in thousands)

2 unchanged sentences

Ending balance $ 3,813 Ending balance $ 3,813

For the Three Months Ended For the Six Months Ended

March 31, 2021 March 31, 2021

For the Three Months Ended For the Nine Months Ended

June 30, 2021 June 30, 2021

(Dollars in thousands)

5 unchanged sentences

BORROWED FUNDS

FHLB Borrowings and Interest Rate Swaps - At March 31, 2022 and September 30, 2021, the Bank had entered into interest rate swap agreements with a total notional amount of $ 365.0 million in order to hedge the variable cash flows associated with $ 365.0 million of adjustable-rate FHLB advances.

At March 31, 2022 and September 30, 2021, the interest rate swap agreements had an average remaining term to maturity of 3.6 years and 4.1 years, respectively.

FHLB Borrowings and Interest Rate Swaps - At June 30, 2022 and September 30, 2021, the Bank had entered into interest rate swap agreements with a total notional amount of $ 365.0 million in order to hedge the variable cash flows associated with $ 365.0 million of adjustable-rate FHLB advances.

At June 30, 2022 and September 30, 2021, the interest rate swap agreements had an average remaining term to maturity of 3.3 years and 4.1 years, respectively.

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.

At March 31, 2022 and September 30, 2021, the interest rate swaps were in a loss position with a total fair value of $ 5.5 million and $ 27.7 million, respectively, which was reported in other liabilities on the consolidated balance sheet.

During the three and six months ended March 31, 2022, $ 1.7 million and $ 3.5 million, respectively, was reclassified from AOCI as an increase to interest expense.

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.

At March 31, 2022, the Company estimated that $ 3.4 million of interest expense associated with the interest rate swaps would be reclassified from AOCI as an increase to interest expense on FHLB borrowings during the next 12 months.

At June 30, 2022, the interest rate swaps were in a gain position with a total fair value of $ 1.3 million which was reported in other assets on the consolidated balance sheet.

At September 30, 2021, the interest rate swaps were in a loss position with a total fair value of $ 27.7 million, which was reported in other liabilities on the consolidated balance sheet.

During the three and nine months ended June 30, 2022, $ 1.3 million and $ 4.8 million, respectively, was reclassified from AOCI as an increase to interest expense.

During the three and nine months ended June 30, 2021, $ 2.1 million and $ 11.5 million, respectively, was reclassified from AOCI.

Of this amount, for the nine months ended June 30, 2021, $ 7.9 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.

At June 30, 2022, the Company estimated that $ 1.4 million of interest expense associated with the interest rate swaps would be reclassified from AOCI as a decrease 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 $ 5.6 million at March 31, 2022 and $ 28.0 million at September 30, 2021.

During the current quarter, the Bank utilized a leverage strategy (the "leverage strategy") to increase earnings.

The leverage strategy involves borrowing up to $ 2.10 billion either on the Bank's line of credit with FHLB or by entering into short-term FHLB advances, depending on the rates offered by FHLB, with all of the balance being paid down at each quarter end, or earlier if we determine that the strategy is not profitable.

The proceeds of the borrowings, net of the required FHLB stock holdings, are deposited at the FRB of Kansas City.

The Bank held cash collateral of $ 2.6 million at June 30, 2022 and posted cash collateral of $ 28.0 million at September 30, 2021.

During the current year-to-date period, the Bank utilized a leverage strategy (the "leverage strategy") to increase earnings.

The leverage strategy involved borrowing up to $ 2.10 billion either on the Bank's line of credit with FHLB or by entering into short-term FHLB advances, depending on the rates offered by FHLB, with all of the balance being paid down at each quarter end, or earlier if the strategy is not profitable.

The proceeds of the borrowings, net of the required FHLB stock holdings, were deposited at the FRB of Kansas City.

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

23 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 six months ended March 31, 2022 or during fiscal year 2021.

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 nine months ended June 30, 2022 or during fiscal year 2021.

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

3 unchanged sentences

Cash flows are determined based on prepayment projections of the underlying mortgages and are discounted using current market yields for benchmark securities.

• Corporate Bonds - Estimated fair values are based on a discounted cash flow method.

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

• Municipal Bonds - Estimated fair values are based on a discounted cash flow method.

4 unchanged sentences

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 obtained from the counterparty during the six months ended March 31, 2022 or during fiscal year 2021.

No adjustments were made to the estimated fair values obtained from the counterparty during the nine months ended June 30, 2022 or during fiscal year 2021.

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 March 31, 2022 or September 30, 2021.

March 31, 2022

The Company did no t have any Level 3 financial instruments measured at fair value on a recurring basis at June 30, 2022 or September 30, 2021.

June 30, 2022

Quoted Prices Significant Significant

6 unchanged sentences

GSE debentures 483,193 — 483,193 —

Corporate bonds 4,010 — 4,010 —

Municipal bonds 210 — 210 —

1 unchanged sentence

Interest rate swaps 1,281 — 1,281 —

$ 1,695,441 $ — $ 1,695,441 $ —

September 30, 2021

14 unchanged sentences

Those collateral dependent assets that are evaluated on an individual basis are considered financial assets measured at fair value on a non-recurring basis.

The fair value of collateral dependent loans/loans individually evaluated for loss on a non-recurring basis during the six months ended March 31, 2022 and 2021 that were still held in the portfolio as of March 31, 2022 and 2021 was $ 4.2 million and $ 7.4 million, respectively.

The fair value of collateral dependent loans/loans individually evaluated for loss on a non-recurring basis during the nine months ended June 30, 2022 and 2021 that were still held in the portfolio as of June 30, 2022 and 2021 was $ 4.3 million and $ 7.4 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 six months ended March 31, 2022 and March 31, 2021 were downward adjustments to the book value of the collateral for lack of marketability.

During the six months ended March 31, 2022, the adjustments ranged from 9 % to 56 %, with a weighted average of 21 %.

During the six months ended March 31, 2021, the adjustments ranged from 7 % to 50 %, with a

weighted average of 23 %.

The primary significant unobservable inputs for commercial loans individually evaluated during the nine months ended June 30, 2022 and June 30, 2021 were downward adjustments to the book value

of the collateral for lack of marketability.

During the nine months ended June 30, 2022, the adjustments ranged from 9 % to 56 %, with a weighted average of 21 %.

During the nine months ended June 30, 2021, the adjustments ranged from 7 % to 50 %, with a weighted average of 22 %.

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.

There was no OREO measured on a non-recurring basis during the six months ended March 31, 2022.

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

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

The fair value of OREO measured on a non-recurring basis during the nine months ended June 30, 2022 and 2021 that was still held in the portfolio as of June 30, 2022 and 2021 was $ 258 thousand and $ 177 thousand, respectively.

The carrying value of the properties equaled the fair value of the properties at June 30, 2022 and 2021.

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:

March 31, 2022

June 30, 2022

Carrying Estimated Fair Value

5 unchanged sentences

FHLB stock 87,696 87,696 87,696 — —

Interest rate swaps 1,281 1,281 — 1,281 —

Deposits 6,329,883 6,273,934 4,053,544 2,220,390 —

Borrowings 1,869,897 1,766,122 35,700 1,730,422 —

Interest rate swaps 5,464 5,464 — 5,464 —

September 30, 2021

11 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 March 31, 2022

For the Three Months Ended June 30, 2022

Unrealized Unrealized

9 unchanged sentences

Ending balance $ ( 102,893 ) $ 968 $ ( 101,925 )

For the Six Months Ended March 31, 2022

For the Nine Months Ended June 30, 2022

Unrealized Unrealized

9 unchanged sentences

Ending balance $ ( 102,893 ) $ 968 $ ( 101,925 )

For the Three Months Ended March 31, 2021

For the Three Months Ended June 30, 2021

Unrealized Unrealized

9 unchanged sentences

Ending balance $ 9,637 $ ( 22,975 ) $ ( 13,338 )

For the Six Months Ended March 31, 2021

For the Nine Months Ended June 30, 2021

Unrealized Unrealized

10 unchanged sentences

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