What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-11-23 compared with 2021-11-24 · 246 added, 329 removed, 1238 unchanged (32% of the section changed)

2 unchanged sentences

To the stockholders and the Board of Directors of Capitol Federal Financial, Inc.

and subsidiary

Opinion on Internal Control over Financial Reporting

24 unchanged sentences

To the stockholders and the Board of Directors of Capitol Federal Financial, Inc.

and subsidiary

Opinion on the Financial Statements

26 unchanged sentences

Management evaluates qualitative factors not included in historical loss rates, macroeconomic forecasts, or other model inputs and/or other ACL processes, considering risks related to loan portfolio attributes and external factors and adjusts the modeled ACL as deemed appropriate based upon the assessment.

We identified the allowance for credit losses as a critical audit matter because of the significant estimates and assumptions required by management in determining qualitative factor adjustments.

This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our credit specialists, when performing audit procedures to evaluate the reasonableness of management's qualitative factor adjustments.

We identified the allowance for credit losses as a critical audit matter because of the significant estimates and assumptions required by management in determining the ACL, including the third party provided economic forecast used and qualitative factor adjustments.

How the Critical Audit Matter Was Addressed in the Audit

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• We tested the effectiveness of controls over the Company's ACL model including those over the determination of the qualitative adjustments and management's review of the adequacy of the ACL.

• With the assistance of our credit specialists, we evaluated the appropriateness of the ACL model, evaluated data elements utilized in the ACL model such as portfolio segmentation into loan pools, forecast and reversion to mean time periods, and economic forecasts, and evaluated reasonableness of the use of qualitative adjustments to the outputs of the modeled ACL.

• We evaluated the qualitative adjustments including reasonableness and basis for the adjustments which include market and economic conditions and/or portfolio performance metrics.

• With the assistance of our credit specialists, we evaluated the appropriateness of the ACL model, data elements utilized in the ACL model such as portfolio segmentation into loan pools, forecast and reversion to mean time periods, and economic forecasts, and evaluated reasonableness of the use of qualitative factor adjustments to the outputs of the modeled ACL.

• We evaluated the weighted economic forecast used including reasonableness and basis for the selected economic forecast by comparing to internal and external sources.

• We evaluated the qualitative factor adjustments including reasonableness and basis for the adjustments which include market and economic conditions and/or portfolio performance metrics.

• We evaluated the appropriateness and relevance of the data elements by comparing to relevant internal and external sources.

17 unchanged sentences

Premises and equipment, net 94,820 99,127

Income taxes receivable, net 1,266 —

Deferred income tax assets, net 33,884 —

Other assets 317,594 320,686

2 unchanged sentences

Borrowings 2,132,154 1,582,850

Advance payments by borrowers for taxes and insurance 72,729 65,721

Advances by borrowers 80,067 72,729

Income taxes payable, net — 918

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Mortgage-backed securities ("MBS") 19,406 21,399 23,009

Cash and cash equivalents 18,304 144 1,181

FHLB stock 10,031 3,916 5,827

Investment securities 3,268 2,825 4,467

Cash and cash equivalents 144 1,181 5,806

Total interest and dividend income 279,540 258,181 304,978

INTEREST EXPENSE:

Deposits 48,406 67,598 66,201

Borrowings 52,490 34,774 48,045

Deposits 34,456 48,406 67,598

Total interest expense 86,946 83,180 115,643

4 unchanged sentences

Deposit service fees 13,798 12,282 11,285

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

Insurance commissions 2,947 3,030 2,487

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

Other non-interest income 6,085 5,388 5,827

6 unchanged sentences

Advertising and promotional 5,178 5,133 4,889

Loss on interest rate swap termination 4,752 — —

Deposit and loan transaction costs 2,761 2,890 2,478

Federal insurance premium 3,020 2,545 914

Deposit and loan transaction costs 2,797 2,761 2,890

Office supplies and related expense 1,951 1,715 2,195

Loss on interest rate swap termination — 4,752 —

Other non-interest expense 4,432 4,930 5,514

13 unchanged sentences

Other comprehensive income (loss), net of tax:

Unrealized gains (losses) on AFS securities arising during the period, net of taxes of $ 6,116 , $( 4,359 ), and $( 3,468 )

Changes in unrealized gains/losses on AFS securities, net of taxes of $ 51,565 , $ 6,116 , and $( 4,359 )

( 159,770 ) ( 19,077 ) 13,578

Unrealized gains on securities reclassified from held-to-maturity ("HTM") to AFS during the period, net of taxes of $ 0 , $ 0 , and $( 750 )

Changes in unrealized gains/losses on cash flow hedges, net of taxes of $( 9,824 ), $( 6,153 ), and $ 4,875

30,442 19,277 ( 15,184 )

Comprehensive income $ 76,282 $ 62,934 $ 75,004

Comprehensive (loss) income $ ( 44,875 ) $ 76,282 $ 62,934

See accompanying notes to consolidated financial statements.

8 unchanged sentences

Net income, fiscal year 2020 64,540 64,540

Other comprehensive loss, net of tax ( 19,239 ) ( 19,239 )

Cumulative effect of adopting Accounting Standards Update ("ASU") 2016-02 88 88

Other comprehensive loss, net of tax ( 1,606 ) ( 1,606 )

ESOP activity 336 1,652 1,988

1 unchanged sentence

Stock-based compensation 570 570

Repurchase of common stock ( 26 ) ( 21,897 ) ( 1,881 ) ( 23,804 )

Stock options exercised 1 637 638

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Balance at September 30, 2020 1,389 1,189,853 ( 33,040 ) 143,162 ( 16,505 ) 1,284,859

Net income, fiscal year 2020 64,540 64,540

Cumulative effect of adopting ASU 2016-13 ( 2,288 ) ( 2,288 )

Other comprehensive loss, net of tax ( 1,606 ) ( 1,606 )

Net income, fiscal year 2021 76,082 76,082

Other comprehensive income, net of tax 200 200

ESOP activity 383 1,653 2,036

6 unchanged sentences

Balance at September 30, 2021 1,388 1,189,633 ( 31,387 ) 98,944 ( 16,305 ) 1,242,273

Cumulative effect of adopting ASU 2016-13 ( 2,288 ) ( 2,288 )

Net income, fiscal year 2022 84,453 84,453

Other comprehensive income, net of tax 200 200

Other comprehensive loss, net of tax ( 129,328 ) ( 129,328 )

ESOP activity 88 1,652 1,740

1 unchanged sentence

Stock-based compensation 498 498

Repurchase of common stock ( 1 ) ( 1,407 ) ( 122 ) ( 1,530 )

Stock options exercised 324 324

Cash dividends to stockholders ($ 0.76 per share)

22 unchanged sentences

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

Unrestricted cash collateral (provided to)/received from derivative counterparties, net — — ( 9,970 )

Unrestricted cash collateral received from derivative counterparties, net 12,050 — —

Other assets, net 6,661 12,751 9,105

5 unchanged sentences

Proceeds from calls, maturities and principal reductions of AFS securities 323,025 594,294 667,952

Proceeds from calls, maturities and principal reductions of HTM securities — — 165,336

Proceeds from the redemption of FHLB stock 302,243 25,386 10,421

3 unchanged sentences

Proceeds from sale of other real estate owned ("OREO") 692 194 993

Proceeds from the redemption of common equity securities related to the redemption of junior subordinated debentures — — 302

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

1 unchanged sentence

Proceeds from bank-owned life insurance ("BOLI") death benefit 1,023 443 490

Net cash (used in) provided by investing activities ( 326,668 ) ( 151,290 ) 233,259

Net cash used in investing activities ( 167,576 ) ( 326,668 ) ( 151,290 )

CAPITOL FEDERAL FINANCIAL, INC.

8 unchanged sentences

Repayments on borrowings ( 906,902 ) ( 1,346,800 ) ( 2,112,600 )

Change in advance payments by borrowers for taxes and insurance 7,008 35 422

Change in advances by borrowers 7,338 7,008 35

Payment of FHLB prepayment penalties — ( 5,077 ) ( 4,215 )

2 unchanged sentences

Net cash provided by financing activities 49,177 82,785 44,370

NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS ( 169,416 ) ( 13,992 ) 114,645

CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS:

NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH ( 21,098 ) ( 169,416 ) ( 13,992 )

CASH, CASH EQUIVALENTS AND RESTRICTED CASH:

Beginning of year 70,292 239,708 253,700

6 unchanged sentences

Operating lease liabilities obtained $ — $ — $ 16,726

Transfer of HTM securities, at amortized cost, to AFS securities $ — $ — $ 444,732

See accompanying notes to consolidated financial statements.

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The Bank emphasizes mortgage lending, primarily originating and purchasing one- to four-family loans, and providing personal retail financial services, along with offering commercial banking and lending products.

The Bank is subject to competition from other financial institutions and other companies that provide financial services.

Basis of Presentation - The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, the Bank.

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Actual results could differ from these estimates and assumptions.

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 $ 42.3 million and $ 185.1 million at September 30, 2021 and 2020, respectively, and restricted cash and cash equivalents of $ 28.0 million and $ 54.6 million at September 30, 2021 and 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.

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 $ 49.2 million and $ 42.3 million at September 30, 2022 and 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 September 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.

See additional discussion regarding the interest rate swaps in "Note 8.

Deposits and Borrowed Funds."

Regulations of the Board of Governors of the Federal Reserve System ("FRB") have required federally chartered savings banks to maintain cash reserves against their transaction accounts.

Required reserves were required to be maintained in the form of vault cash, an account at a Federal Reserve Bank, or a pass-through account as defined by the FRB.

The amount of interest-earning deposits held at the Federal Reserve Bank of Kansas City ("FRB of Kansas City") as of September 30, 2021 and 2020 was $ 24.1 million and $ 172.2 million, respectively.

In March 2020, the FRB eliminated reserve requirements for all depository institutions;

thus, there was no reserve requirement in place at September 30, 2021 or 2020.

Securities - Securities include MBS and agency debentures issued primarily by United States Government-Sponsored Enterprises ("GSEs"), including Federal National Mortgage Association, Federal Home Loan Mortgage Corporation and the Federal Home Loan Banks, United States Government agencies, including Government National Mortgage Association, and municipal bonds.

Securities are classified as HTM, AFS, or trading based on management's intention for holding the securities on the date of purchase.

Net Presentation of Cash Flows Related to Borrowings - At times, the Bank enters into certain FHLB advances with contractual maturities of 90 days or less.

Cash flows related to these advances are reported on a net basis in the consolidated statements of cash flows.

Securities - Securities include MBS and agency debentures issued primarily by United States Government-Sponsored Enterprises ("GSEs"), including Federal National Mortgage Association (FNMA), Federal Home Loan Mortgage Corporation (FHLMC) and the Federal Home Loan Banks, United States Government agencies, including Government National Mortgage Association (GNMA), corporate bonds, and municipal bonds.

Securities are classified as held-to-maturity ("HTM"), AFS, or trading based on management's intention for holding the securities on the date of purchase.

Generally, classifications are made in response to liquidity needs, asset/liability management strategies, and the market interest rate environment at the time of purchase.

Accrued interest receivable for all securities is reported in other assets on the consolidated balance sheet.

When the Company adopted ASU 2016-13, Financial Instruments - Credit Losses:

Measurement of Credit Losses on Financial Instruments, the practical expedient to exclude accrued interest from all required disclosures of amortized cost was elected.

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

Accrued interest receivable for all securities is reported in other assets on the consolidated balance sheet and totaled $ 4.2 million and $ 2.9 million at September 30, 2022 and 2021, respectively.

The Company excludes accrued interest from the amortized cost of securities and does not measure ACL for accrued interest.

Interest accrued but not received is reversed against interest income.

Securities that management has the intention and ability to hold to maturity are classified as HTM and reported at amortized cost.

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.

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 September 30, 2022 and 2021, 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.

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

The amortization of premiums and discounts are recognized as adjustments to interest

income over the life of the securities using the level-yield method.

Gains or losses on the disposition of AFS securities are recognized using the specific identification method.

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If the assessment indicates that a credit loss exists, the present value of cash flows expected to be collected is compared to the amortized cost basis of the security.

If the present value of the cash flows expected to be collected is less than the amortized cost basis, a credit loss has occurred, and an ACL is recorded, which became effective October 1, 2020 when the Company adopted ASU 2016-13, Financial Instruments - Credit Losses:

Measurement of Credit Losses on Financial Instruments .

Accrued interest receivable on AFS debt securities is excluded from the estimate of credit losses.

If the present value of the cash flows expected to be collected is less than the amortized cost basis, a credit loss has occurred, and an ACL is recorded.

The ACL is limited by the amount that the fair value is less than the amortized cost basis.

Any impairment not recorded through the provision for credit losses is recognized in other comprehensive income.

Prior to the adoption of ASU 2016-13, management assessed all known facts and circumstances to determine whether an other-than-temporary loss should be recognized for impaired securities.

If an other-than-temporary impairment had occurred, the difference between the amortized cost and fair value was recognized as a loss in earnings and the security was written down to fair value.

Changes in the ACL on AFS debt securities are recorded as an increase or decrease in the provision for credit losses on the consolidated statements of income.

1 unchanged sentence

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

As of October 1, 2020 and September 30, 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.

As of September 30, 2022 and 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.

Amortized cost is the amount of unpaid principal, net of undisbursed loan funds, unamortized premiums and discounts, and deferred loan origination fees and costs.

Net loan origination fees and costs, and premiums and discounts are amortized as yield adjustments to interest income using the level-yield method.

Loans are presented on the consolidated balance sheet net of ACL on loans.

Interest on loans is accrued based on the principal amount outstanding.

When the Company adopted ASU 2016-13, Financial Instruments - Credit Losses:

Measurement of Credit Losses on Financial Instruments, the practical expedient to exclude all accrued interest receivable from all required disclosures of amortized cost was elected.

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

Amortized cost is the amount of unpaid principal, net of undisbursed loan funds, unamortized premiums and discounts, and deferred loan fees and costs.

Net loan fees and costs, and premiums and discounts are amortized as yield adjustments to interest income using the level-yield method.

Loans are presented on the consolidated balance sheet net of the related ACL.

Interest on loans receivable is accrued based on the principal amount outstanding.

Accrued interest receivable for loans is reported in other assets on the consolidated balance sheet and totaled $ 19.4 million and $ 18.7 million at September 30, 2022 and 2021, respectively.

The Company does not calculate ACL for accrued interest.

Interest accrued but not received is reversed against interest income.

Loan endorsements - Certain existing one- to four- family loan customers, including customers whose loans were purchased from a correspondent lender, have the opportunity, for a fee, to endorse their original loan terms to current loan terms being offered by the Bank, without being required to complete the standard application and underwriting process.

The fee received for each endorsement is deferred and amortized as an adjustment to interest income over the life of the loan.

If the change in loan terms resulting from the endorsement is deemed to be more than minor, the loan is treated as a new loan and all existing unamortized deferred loan origination fees and costs are recognized at the time of endorsement.

If the change in loan terms resulting from the endorsement is deemed to be more than minor, all existing unamortized deferred loan origination fees and costs are recognized at the time of endorsement.

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 ("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 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.

Such concessions generally involve extensions of loan maturity dates, the granting of periods during which reduced payment amounts are required, and/or reductions in interest rates.

The Bank does not forgive principal or interest, nor does it commit to lend additional funds to these borrowers, except for situations generally involving the capitalization of delinquent interest and/or escrow on one- to four-family loans and consumer loans, not to exceed the original loan amount.

In the case of commercial loans, the Bank does not forgive principal or interest or commit to lend additional funds unless the borrower provides additional collateral or other enhancements to improve the credit quality.

The Bank does not forgive principal or interest, nor does it commit to lend additional funds to these borrowers, except for situations generally involving the capitalization of

delinquent interest and/or escrow on one- to four-family loans and consumer loans, not to exceed the original loan amount.

In the case of commercial loans, the Bank generally does not forgive principal or interest or commit to lend additional funds unless the borrower provides additional collateral or other enhancements to improve the credit quality.

Delinquent loans - A loan is considered delinquent when payment has not been received within 30 days of its contractual due date.

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Nonaccrual loans - The accrual of income on loans is generally discontinued when interest or principal payments are 90 days in arrears.

We also report certain TDR loans as nonaccrual loans that are required to be reported as such pursuant to regulatory reporting requirements.

Loans on which the accrual of income has been discontinued are designated as nonaccrual and outstanding interest previously credited beyond 90 days delinquent is reversed, except in the case of commercial loans in which all delinquent accrued interest is reversed.

We also report certain troubled debt restructuring ("TDR") loans as nonaccrual loans that are required to be reported as such pursuant to regulatory reporting requirements.

Loans on which the accrual of income has been discontinued are designated as nonaccrual and outstanding interest previously accrued beyond 90 days delinquent is reversed, except in the case of commercial loans in which all delinquent accrued interest is reversed.

A nonaccrual one- to four-family or consumer loan is returned to accrual status once the contractual payments have been made to bring the loan less than 90 days past due or, in the case of a TDR loan, the borrower has made the required consecutive loan payments.

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The Bank's ACL is measured on a collective ("pool") basis, with loans aggregated into pools based on similar risk characteristics such as collateral type, historical loss experience, loan-to-value ("LTV") for one- to four-family loans, and payment sources for commercial loans.

Loans that do not share similar risk characteristics are evaluated on an individual

Loans that do not share similar risk characteristics are evaluated on an individual basis.

Charge-offs against the related ACL amounts for any loan type may be recorded at any time if the Bank has knowledge of the existence of a probable loss.

7 unchanged sentences

In the case of secured loans, the loan is deemed to be collateral dependent when this occurs, and the specific allocation of ACL and/or charge-off amount is based on a comparison of the amounts due from the borrower and calculated current fair value of the collateral after consideration of estimated costs to sell.

The primary credit risk characteristics inherent in the one- to four-family and consumer loan portfolios are a decline in economic conditions, elevated levels of unemployment or underemployment, and declines in residential real estate values.

The primary credit risk characteristics inherent in the one- to four-family and consumer loan portfolios are a decline in economic conditions, such as elevated levels of unemployment or underemployment, and declines in residential real estate values.

Any one or a combination of these events may adversely affect the ability of borrowers to repay their loans, resulting in increased delinquencies, non-performing assets, charge-offs, and provisions for credit losses.

Although the commercial loan portfolio is subject to the same risk of declines in economic conditions, the primary risk characteristics inherent in this portfolio include the ability of the borrower to sustain sufficient cash flows from leases and business operations, the ability to control operational or business expenses to satisfy their contractual debt payments, and the ability to utilize personal or business resources to pay their contractual debt payments if the cash flows are not sufficient.

business resources to pay their contractual debt payments if the cash flows are not sufficient.

Additionally, if the Bank were to repossess the secured collateral of a commercial real estate loan, the pool of potential buyers is more limited than that for a residential property.

5 unchanged sentences

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.

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.

Each quarter, the Company's 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.

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.

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In the case of revolving lines of credit, since the rate of principal reduction is generally at the discretion of the borrower, remaining contractual lives are calculated by estimating future cash flows expected to be received from the borrower until the outstanding balance has been reduced to zero.

Using all of these inputs, the ACL model generates aggregated estimated cash flows for the time period that remains in each loan's contractual life.

Using all of these inputs, the model generates aggregated estimated cash flows for the time period that remains in each loan's contractual life.

These cash flows are discounted back to the reporting date using each loan's effective yield, to arrive at a present value of future cash flows.

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Management conducts a quarterly evaluation to determine if any FHLB stock impairment exists.

The quarterly impairment evaluation focuses primarily on the capital adequacy and liquidity of FHLB, while also considering the impact that legislative and regulatory developments may have on FHLB.

The quarterly impairment evaluation focuses primarily on the capital adequacy and liquidity of FHLB, while also considering the impact that legislative and regulatory developments may have on

Stock and cash dividends received on FHLB stock are reflected as dividend income in the consolidated statements of income.

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Generally, the Company cannot practically determine the interest rate implicit in the lease so the Company's incremental borrowing rate is used as the discount rate for the lease.

The Company uses FHLB advance interest rates, which have been deemed as the Company's incremental borrowing rate, at lease inception

based upon the term of the lease.

The Company uses FHLB advance interest rates, which have been deemed as the Company's incremental borrowing rate, at lease inception based upon the term of the lease.

The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.

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Unvested restricted stock awards contain nonforfeitable rights to dividends and are treated as participating securities in the computation of EPS pursuant to the two-class method.

Recent Accounting Pronouncements - In June 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-13, Financial Instruments - Credit Losses:

Measurement of Credit Losses on Financial Instruments .

The ASU, as amended, replaces the incurred loss methodology in GAAP, which required credit losses to be recognized when it is probable that a loss has been incurred, with an expected credit loss methodology, which is commonly known as the current expected credit loss ("CECL") methodology.

The CECL methodology requires an entity to measure, at each reporting date, the expected credit losses of financial assets not measured at fair value, such as loans and off-balance sheet credit exposures, over their remaining contractual lives.

Under the CECL methodology, expected credit losses are measured at each reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.

Additionally, the ASU amended the credit loss measurements for AFS debt securities.

Credit losses related to AFS debt securities are now recorded through the ACL rather than as a direct write-down.

The ASU also requires enhanced disclosures related to credit quality and significant estimates and judgments used by management when estimating credit losses.

The ASU, as amended, became effective for the Company on October 1, 2020.

The Company adopted the ASU, as amended, on October 1, 2020 using the modified retrospective method for all financial assets measured at amortized cost and off-balance sheet credit exposures.

Financial results for reporting periods beginning on or after October 1, 2020 are reported in accordance with the new ASU, as amended, while prior period amounts continue to be reported in accordance with previous GAAP.

Upon adoption, the Company recorded a cumulative-effect adjustment for the change in the ACL and reserve for off-balance sheet credit exposures of $ 2.3 million, net of tax of $ 739 thousand, which was recognized as a decrease in retained earnings.

The following table presents the impact of the cumulative-effect adjustment for the change in the ACL and reserve for off-balance sheet credit exposures.

September 30,

2020 October 1, 2020

Balance Cumulative-Effect Adjustment Balance

(Dollars in thousands)

One- to four-family:

Originated $ 6,085 $ ( 4,452 ) $ 1,633

Correspondent purchased 2,691 ( 367 ) 2,324

Bulk purchased 467 436 903

Commercial real estate 20,349 699 21,048

Commercial and industrial 1,451 ( 892 ) 559

Home equity 370 ( 289 ) 81

Other 114 104 218

Total ACL 31,527 ( 4,761 ) 26,766

Reserve for off-balance sheet credit exposures — 7,788 7,788

ACL and reserve for off-balance sheet credit exposures $ 31,527 $ 3,027 $ 34,554

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 $ 18.7 million and $ 2.9 million at September 30, 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.

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

Loans Receivable and Allowance for Credit Losses."

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement:

Disclosure Framework - Changes to the Disclosures Requirements for Fair Value Measurement .

This ASU eliminates, modifies and adds certain disclosure requirements for fair value measurements.

The ASU adds disclosure requirements for the changes in unrealized gains and losses included in other comprehensive income for recurring Level 3 fair value measurements and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements.

This ASU, which was adopted on October 1, 2020, did not have a material impact on the Company's consolidated financial condition, results of operations, or disclosures.

In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software:

Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract .

The ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include internal-use software licenses).

The ASU was adopted by the Company on October 1, 2020.

The Company includes hosting arrangements that are service contracts in its evaluation of projects for capitalization.

The adoption of this ASU did not have a material impact on the Company's consolidated financial condition, results of operations, or disclosures.

In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments.

This ASU makes clarifications and corrections to the application of the guidance contained in each of the amended topics.

According to the provisions of the ASU, entities that have not adopted ASU 2017-12 prior to the issuance of ASU 2019-04 must adopt the provisions of both ASUs at the same time.

Since the Company previously adopted ASU 2017-12, the related provisions included in ASU 2019-04 were adopted at the same time.

The Company adopted the non-hedging amendments contained in ASU 2019-04, including amendments related to ASU 2016-13, on October 1, 2020.

The adoption of this ASU did not have a material impact on the Company's consolidated financial condition, results of operations, or disclosures.

For additional information regarding the impact of adopting ASU 2016-13, see ASU 2016-13, Financial Instruments - Credit Losses:

Measurement of Credit Losses on Financial Instruments above.

Recent Accounting Pronouncements - In March 2022, the Financial Accounting Standards Board (FASB) issued ASU 2022-02, Financial Instruments - Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclos ures.

This ASU eliminates the accounting guidance for TDRs by creditors, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty.

Additionally, this ASU requires that an entity disclose current-period gross write-offs by year of origination for financing receivables within the scope of ASC 326-20, Financial Instruments-Credit Losses-Measured at Amortized Cost .

This ASU is effective for the Company on October 1, 2023.

While the adoption of this ASU is expected to result in enhanced disclosures, the Company does not expect the adoption of this ASU to have a material impact on the Company's consolidated financial condition and results of operations.

EARNINGS PER SHARE

8 unchanged sentences

Net income available to common stockholders $ 84,408 $ 76,032 $ 64,488

Average common shares outstanding 135,418,774 137,834,304 137,614,465

Average committed ESOP shares outstanding 62,458 62,400 62,458

Total basic average common shares outstanding 135,700,447 135,481,232 137,896,704

14 unchanged sentences

GSE debentures 519,977 — 50,150 469,827

Corporate bonds 4,000 — 305 3,695

Municipal bonds 1,243 — 82 1,161

17 unchanged sentences

GSE debentures — — 469,827 50,150

Corporate bonds 3,695 305 — —

Municipal bonds 1,161 82 — —

12 unchanged sentences

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

Management did not record ACL on securities in an unrealized loss position at September 30, 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.

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

21 unchanged sentences

(Dollars in thousands)

FHLB advances $ 572,913 $ —

Public unit deposits 125,496 264,885

FRB of Kansas City 64,707 259,851

Federal Reserve Bank of Kansas City ("FRB of Kansas City") borrowings 46,283 64,707

Commercial deposits — 66,256

21 unchanged sentences

ACL 16,371 19,823

Discounts/unearned loan fees 29,556 29,190

Deferred loan fees/discounts 29,736 29,556

Premiums/deferred costs ( 38,645 ) ( 34,448 )

7 unchanged sentences

The Bank also originates consumer loans primarily secured by one- to four-family residential properties and originates and participates in commercial loans.

The Bank has a loan concentration in one- to four-family loans and a geographic concentration of these loans in Kansas and Missouri.

The Bank has a loan concentration in one- to four-family loans and a geographic concentration of these loans in Kansas, Missouri, and Texas.

One- to four-family loans - Full documentation to support an applicant's credit and income, and sufficient funds to cover all applicable fees and reserves at closing, are required on all loans.

Generally, loans are underwritten according to the "ability to repay" and "qualified mortgage" standards, as issued by the Consumer Financial Protection Bureau.

Properties securing one- to four-family loans are appraised by either staff appraisers or fee appraisers, both of which are independent of the loan origination function.

4 unchanged sentences

The Bank also performs regular documented inspections of the construction project to ensure the funds are being used for the intended purpose and the project is being completed according to the plans and specifications provided.

Commercial loans - The Bank's commercial real estate and commercial construction loans are originated by the Bank or are in participation with a lead bank.

Commercial loans - The Bank's commercial real estate and commercial construction loans are originated by the Bank or in participation with a lead bank.

When underwriting a commercial real estate or commercial construction loan, several factors are considered, such as the income producing potential of the property, cash equity provided by the borrower, the financial strength of the borrower, managerial expertise of the borrower or tenant, feasibility studies, lending experience with the borrower and the marketability of the property.

4 unchanged sentences

The Bank's commercial and industrial loans are generally made in the Bank's market areas and are underwritten on the basis of the borrower's ability to service the debt from income.

With the exception of Paycheck Protection Program loans, which are unsecured but are generally guaranteed by the U.S.

Small Business Administration, working capital loans are primarily collateralized by short-term assets whereas term loans are primarily collateralized by long-term assets.

In general, commercial and industrial loans involve more credit risk than commercial real estate loans due to the type of collateral securing these loans.

As a result of these additional complexities, variables and risks, these loans require more thorough underwriting and servicing than other types of loans.

Consumer loans - The Bank offers a variety of secured consumer loans, including home equity loans and lines of credit, home improvement loans, vehicle loans, and loans secured by deposits.

The Bank also originates a very limited amount of unsecured consumer loans.

The majority of the consumer loan portfolio is comprised of home equity lines of credit for which the Bank also has the first mortgage or the home equity line of credit is in the first lien position.

Working capital loans are primarily collateralized by short-term assets whereas term loans are primarily collateralized by long-term assets.

In general, commercial and industrial loans involve more credit risk than commercial real estate loans due to the type of collateral securing commercial and industrial loans.

As a result of these additional complexities, variables and risks, commercial and industrial loans require more thorough underwriting and servicing than other types of loans.

Consumer loans - The Bank offers a variety of consumer loans, the majority of which are home equity loans and lines of credit for which the Bank also has the first mortgage or the home equity line of credit is in the first lien position.

The underwriting standards for consumer loans include a determination of an applicant's payment history on other debts and an assessment of an applicant's ability to meet existing obligations and payments on the proposed loan.

17 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 September 30, 2021, the amortized cost of loans by class of financing receivable, year of origination or most recent credit decision, and loan classification.

The following table sets forth, as of the dates indicated, 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 September 30, 2021, there were no loans classified as doubtful, and all loans classified as loss were fully charged-off.

In the table below, certain commercial 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.

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

September 30, 2022

33 unchanged sentences

Total $ 1,475,411 $ 1,824,711 $ 1,019,694 $ 445,538 $ 362,766 $ 2,254,177 $ 98,282 $ 7,480,579

The following table sets forth the recorded investment in loans classified as special mention or substandard, by class, at September 30, 2020 (prior to the adoption of CECL).

At that date, there were no loans classified as doubtful, and all loans classified as loss were fully charged-off.

Special Mention Substandard

In the table below, certain commercial loans are presented in the "Fiscal Year 2021" column and are reported as special mention or substandard.

These loans were generally first originated in prior years but were renewed or modified in fiscal year 2021.

September 30, 2021

Fiscal Fiscal Fiscal Fiscal Fiscal Revolving

Year Year Year Year Year Prior Line of

2021 2020 2019 2018 2017 Years Credit Total

(Dollars in thousands)

One- to four-family:

Originated $ 9,249 $ 15,729

Pass $ 958,080 $ 705,561 $ 326,156 $ 250,846 $ 281,104 $ 1,434,455 $ — $ 3,956,202

Special Mention 402 443 501 678 237 7,805 — 10,066

Substandard — 966 867 51 192 11,192 — 13,268

Correspondent purchased

Pass 630,977 334,042 88,057 136,572 162,938 664,530 — 2,017,116

Special Mention 760 — 356 — — 3,160 — 4,276

Substandard — — 169 504 — 4,527 — 5,200

Bulk purchased

Pass — — — — — 169,519 — 169,519

Special Mention — — — — — — — —

Substandard — — — — — 4,848 — 4,848

1,590,219 1,041,012 416,106 388,651 444,471 2,300,036 — 6,180,495

Commercial real estate

Pass 272,329 149,244 94,972 61,214 38,962 35,591 5,231 657,543

Special Mention 50,352 — — — — 49,369 — 99,721

Substandard 810 627 225 669 — 34 — 2,365

Commercial and industrial

Home equity 331 581

Pass 32,651 10,168 6,988 2,213 1,155 595 11,709 65,479

Special Mention — — — — — — — —

Substandard — — — 86 48 — 765 899

356,142 160,039 102,185 64,182 40,165 85,589 17,705 826,007

Delinquency Status - The following table sets forth, as of September 30, 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.

Pass 3,295 2,218 1,428 1,563 536 2,473 74,036 85,549

Special Mention — — 37 12 — — 82 131

Substandard — 60 — — — 9 636 705

Pass 3,491 1,631 1,086 944 465 105 339 8,061

Special Mention — — 4 — — — — 4

Substandard — 3 6 1 3 — — 13

6,786 3,912 2,561 2,520 1,004 2,587 75,093 94,463

Total $ 1,953,147 $ 1,204,963 $ 520,852 $ 455,353 $ 485,640 $ 2,388,212 $ 92,798 $ 7,100,965

Delinquency Status - The following tables set forth, as of the dates indicated, 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 as of the dates indicated.

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

34 unchanged sentences

Total $ 1,475,411 $ 1,824,711 $ 1,019,694 $ 445,538 $ 362,766 $ 2,254,177 $ 98,282 $ 7,480,579

Delinquent and Nonaccrual Loans - The following tables present the amortized cost at September 30, 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.

September 30, 2021

Fiscal Fiscal Fiscal Fiscal Fiscal Revolving

Year Year Year Year Year Prior Line of

2021 2020 2019 2018 2017 Years Credit Total

(Dollars in thousands)

One- to four-family:

Current $ 958,482 $ 706,970 $ 327,408 $ 251,524 $ 281,341 $ 1,445,992 $ — $ 3,971,717

30-89 — — — 51 — 4,091 — 4,142

90+/FC — — 116 — 192 3,369 — 3,677

Correspondent purchased

Current 630,977 334,042 88,413 136,572 162,017 668,685 — 2,020,706

30-89 760 — — — 921 948 — 2,629

90+/FC — — 169 504 — 2,584 — 3,257

Bulk purchased

Current — — — — — 170,809 — 170,809

30-89 — — — — — 555 — 555

90+/FC — — — — — 3,003 — 3,003

1,590,219 1,041,012 416,106 388,651 444,471 2,300,036 — 6,180,495

Commercial real estate

Current 323,491 149,244 94,972 61,651 38,962 84,957 5,231 758,508

30-89 — — — — — 37 — 37

90+/FC — 627 225 232 — — — 1,084

Commercial and industrial

Current 32,651 10,168 6,988 2,212 1,155 595 12,474 66,243

30-89 — — — — — — — —

90+/FC — — — 87 48 — — 135

356,142 160,039 102,185 64,182 40,165 85,589 17,705 826,007

Current 3,295 2,218 1,465 1,575 536 2,357 73,958 85,404

30-89 — — — — — 121 375 496

90+/FC — 60 — — — 4 421 485

Current 3,491 1,631 1,088 944 465 105 339 8,063

30-89 — — 2 — — — — 2

90+/FC — 3 6 1 3 — — 13

6,786 3,912 2,561 2,520 1,004 2,587 75,093 94,463

Total $ 1,953,147 $ 1,204,963 $ 520,852 $ 455,353 $ 485,640 $ 2,388,212 $ 92,798 $ 7,100,965

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

15 unchanged sentences

90 or More Days Total Total

30 to 89 Days Delinquent or Delinquent Current Recorded

Delinquent in Foreclosure Loans Loans Investment

30 to 89 Days Delinquent or Delinquent Current Amortized

Delinquent in Foreclosure Loans Loans Cost

(Dollars in thousands)

8 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 September 30, 2021 and 2020 was $ 799 thousand and $ 1.5 million, respectively, which is included in loans 90 or more days delinquent or in foreclosure in the tables above.

The amortized cost of mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process as of September 30, 2022 and 2021 was $ 2.0 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 $ 328 thousand at September 30, 2022 and $ 170 thousand at September 30, 2021.

The following table presents the amortized cost at September 30, 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 September 30, 2021, all of which were individually evaluated for loss and any identified losses have been charged off.

September 30, 2021 September 30, 2020

Nonaccrual Loans Nonaccrual Loans with No ACL Nonaccrual Loans

The following table presents the amortized cost at September 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.

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

(Dollars in thousands)

6 unchanged sentences

Home equity 172 19 494 84

Other 1 — 13 —

$ 9,494 $ 2,581 $ 13,493 $ 4,763

TDRs - The following tables present the amortized cost for the current year and, prior to the adoption of CECL, the recorded investment for prior years, prior to restructuring and immediately after restructuring in all loans restructured during the years presented.

TDRs - The following tables present the amortized cost for the years ended September 30, 2022 and 2021 and the recorded investment for the year ended September 30, 2020, which was prior to the adoption of ASU 2016-13, Financial Instruments - Credit Losses:

Measurement of Credit Losses on Financial Instruments ("CECL"), prior to restructuring and immediately after restructuring in all loans restructured during the years presented.

These tables do not reflect the amortized cost at the end of the periods indicated.

40 unchanged sentences

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

For the Year Ended

For the Years Ended

September 30, 2022 September 30, 2021 September 30, 2020

Number of Amortized Number of Recorded Number of Recorded

Contracts Cost Contracts Investment Contracts Investment

Number of Amortized Number of Amortized Number of Recorded

Contracts Cost Contracts Cost Contracts Investment

(Dollars in thousands)

8 unchanged sentences

3 $ 716 — $ — 3 $ 181

Impaired Loans - The following information pertains to impaired loans, by class, as of September 30, 2020 (prior to the adoption of CECL).

Impaired Loans - The following information pertains to impaired loans, by class, for the year ended September 30, 2020 (prior to the adoption of CECL).

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.

Recorded Principal Related

Investment Balance ACL

(Dollars in thousands)

With no related allowance recorded

One- to four-family:

Originated $ 12,385 $ 12,813 $ —

Correspondent purchased 1,955 2,058 —

Bulk purchased 3,843 4,302 —

Commercial real estate 1,052 1,379 —

Commercial and industrial 99 244 —

Home equity 280 360 —

19,614 21,201 —

With an allowance recorded

One- to four-family:

Originated — — —

Correspondent purchased — — —

Bulk purchased — — —

Commercial real estate 660 660 83

Commercial and industrial 1,269 1,268 240

Home equity — — —

1,929 1,928 323

One- to four-family:

Originated $ 12,385 $ 12,813 —

Correspondent purchased 1,955 2,058 —

Bulk purchased 3,843 4,302 —

Commercial real estate 1,712 2,039 83

Commercial and industrial 1,368 1,512 240

Home equity 280 360 —

$ 21,543 $ 23,129 $ 323

The following information pertains to impaired loans, by class, for the periods presented (prior to the adoption of CECL).

For the Year Ended

September 30, 2020 September 30, 2019

Average Interest Average Interest

Recorded Income Recorded Income

Investment Recognized Investment Recognized

With no related allowance recorded With an allowance recorded Total

Average Interest Average Interest Average Interest

Recorded Income Recorded Income Recorded Income

Investment Recognized Investment Recognized Investment Recognized

(Dollars in thousands)

With no related allowance recorded

One- to four-family:

7 unchanged sentences

$ 21,600 $ 893 $ 1,464 $ 91 $ 23,064 $ 984

With an allowance recorded

One- to four-family:

Originated — — — —

Correspondent purchased — — — —

Bulk purchased — — — —

Commercial real estate 51 — — —

Commercial and industrial 1,413 91 — —

Home equity — — — —

Other — — — —

One- to four-family:

Originated 13,918 606 16,030 671

Correspondent purchased 1,878 73 2,071 82

Bulk purchased 4,720 179 5,257 180

Commercial real estate 776 15 — —

Commercial and industrial 1,454 91 5 —

Home equity 318 20 417 28

Other — — — —

$ 23,064 $ 984 $ 23,780 $ 961

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

Activity during fiscal years 2020 and 2019 occurred prior to the adoption of CECL.

Activity during fiscal year 2020 occurred prior to the adoption of CECL.

For the Year Ended September 30, 2022

4 unchanged sentences

Beginning balance $ 1,612 $ 2,062 $ 304 $ 3,978 $ 15,652 $ 193 $ 19,823

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

Balance at October 1, 2020 1,633 2,324 903 4,860 21,607 299 26,766

Charge-offs ( 9 ) — — ( 9 ) ( 40 ) ( 21 ) ( 70 )

2 unchanged sentences

Ending balance $ 2,066 $ 2,734 $ 206 $ 5,006 $ 11,120 $ 245 $ 16,371

The decrease in ACL during the current year was primarily a result of a negative provision for credit losses due to a reduction in commercial loan qualitative factors, partially offset by an increase in ACL related to loan growth and a less favorable economic forecast compared to the prior year.

For the Year Ended September 30, 2021

4 unchanged sentences

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 )

Balance at October 1, 2020 1,633 2,324 903 4,860 21,607 299 26,766

Charge-offs ( 164 ) — ( 21 ) ( 185 ) ( 515 ) ( 15 ) ( 715 )

12 unchanged sentences

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

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).

One- to Four-Family

Correspondent Bulk

Originated Purchased Purchased Total Commercial Consumer Total

(Dollars in thousands)

Recorded investment in loans:

Collectively evaluated for impairment $ 3,945,350 $ 2,125,733 $ 205,497 $ 6,276,580 $ 822,643 $ 113,612 $ 7,212,835

Individually evaluated for impairment 12,385 1,955 3,843 18,183 3,080 280 21,543

$ 3,957,735 $ 2,127,688 $ 209,340 $ 6,294,763 $ 825,723 $ 113,892 $ 7,234,378

ACL for loans:

Collectively evaluated for impairment $ 6,085 $ 2,691 $ 467 $ 9,243 $ 21,477 $ 484 $ 31,204

Individually evaluated for impairment — — — — 323 — 323

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

The key assumptions in the Company's ACL model at September 30, 2022 include the economic forecast, the forecast and reversion to mean time periods, and prepayment and curtailment assumptions.

1 unchanged sentence

The key assumptions utilized in estimating the Company's ACL at September 30, 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 September 30, 2021.

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

The forecasted economic indices applied to the model at September 30, 2022 were the national unemployment rate, changes in commercial real estate price index, changes in home values, and changes in the U.S.

1 unchanged sentence

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

The forecast national unemployment rate in the economic scenario selected by management at September 30, 2021 had the national unemployment rate gradually declining to 3.4 % at September 30, 2022 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 September 30, 2021.

The forecasted national unemployment rate in the economic scenario selected by management at September 30, 2022 had the national unemployment rate gradually increasing to 4.7 % at September 30, 2023 which was the end of our four quarter forecast time period.

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

• Prepayment and curtailment assumptions - The assumptions used at September 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 September 30, 2022 included the following:

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

◦ The economic uncertainties related to (1) the job market, specifically the unemployment rate and labor participation rate and how the significant federal aid may be impacting those measures and the true state of the financial position of borrowers and (2) the unevenness of the recovery in certain industries;

◦ COVID-19 loan modifications related to commercial real estate loans.

The decrease in ACL at September 30, 2021 compared to October 1, 2020 (CECL adoption date) was primarily a result of a negative provision for credit losses of $ 6.5 million.

The negative provision for credit losses was due primarily to a reduction in the commercial loan ACL related to improvements in forecasted economic conditions since CECL adoption, partially offset by an increase in commercial loan qualitative factors as 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 period indicated.

The negative provision for credit losses was due primarily to a reduction in the commercial loan reserves related to improvements in forecasted economic conditions since CECL adoption.

For the Year Ended September 30, 2021

◦ The economic uncertainties related to the unemployment rate, the labor force composition, and the labor participation rate that are not captured in the economic forecasts;

◦ Other management considerations related to commercial real estate loans that were not captured via the model.

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.

At September 30, 2022 and 2021, the Bank's off-balance sheet credit exposures totaled $ 992.6 million and $ 883.8 million, respectively.

The negative provision for credit losses in the current year was due primarily to a reduction in the commercial loan qualitative factors, partially offset by growth in commercial construction exposures.

For the Year Ended For the Year Ended

September 30, 2022 September 30, 2021

(Dollars in thousands)

Beginning balance $ —

Adoption of CECL 7,788

Balance at October 1, 2020 7,788

Beginning balance $ 5,743 Beginning balance $ —

Provision for credit losses ( 992 ) Adoption of CECL 7,788

Ending balance $ 4,751 Balance at October 1, 2020 7,788

Provision for credit losses ( 2,045 )

6 unchanged sentences

Furniture, fixtures and equipment 49,795 57,129

192,900 190,665

Total premises and equipment 188,213 192,900

Less accumulated depreciation 93,393 93,773

$ 99,127 $ 101,875

During the current year, management decided to relocate one of the Bank's branches.

Premises and equipment, net $ 94,820 $ 99,127

During fiscal year 2021, management decided to relocate one of the Bank's branches.

As a result, the Company classified as held-for-sale and subsequently sold the property where the branch was previously located.

The sale of this property resulted in a loss of $ 940 thousand, which was included in other non-interest expense on the consolidated statements of income.

The Company leases real estate property for branches, ATMs, and certain equipment.

These leases have remaining terms that range from one year to 46 years, some of which include exercising renewal options that the Company considers to be reasonably certain.

The Company leases real estate for branches, ATMs, and certain equipment.

These leases have remaining terms that range from five months to 45 years, some of which include exercising renewal options that the Company considers to be reasonably certain.

As of September 30, 2022, a right-of-use asset of $ 11.6 million was included in other assets and a lease liability of $ 11.8 million was included in other liabilities on the consolidated balance sheets.

2 unchanged sentences

For the Year Ended September 30,

2022 2021 2020

(Dollars in thousands)

21 unchanged sentences

INTANGIBLE ASSETS

The Company recognized goodwill of $ 8.0 million associated with an acquisition in 2018.

The goodwill was calculated as the consideration exchanged in excess of the fair value of assets, net of the fair value of liabilities assumed.

Certain purchase accounting adjustments were applied during the measurement period in fiscal year 2019, resulting in a $1.3 million increase in goodwill associated with the acquisition.

The Company also recognized $ 10.1 million of other intangible assets in conjunction with the acquisition which is largely composed of core deposit intangibles.

These other intangible assets are being amortized over their estimated lives, which management determined to be 8.0 years at the time of acquisition.

Changes in the carrying amount of the Company's intangible assets, which are included in other assets on the consolidated balance sheet, are presented in the following table.

Changes in the carrying amount of the Company's intangible assets associated with an acquisition in 2018, which are included in other assets on the consolidated balance sheet, are presented in the following table.

Core Deposit and

2 unchanged sentences

Balance at September 30, 2019 $ 9,324 $ 7,503

Purchase accounting adjustments 1,335 —

Amortization — ( 1,964 )

10 unchanged sentences

Deposits in excess of $250 thousand may not be fully insured by the Federal Deposit Insurance Corporation.

Borrowings - FHLB borrowings at September 30, 2021 consisted of $ 1.58 billion in FHLB advances, of which $ 1.23 billion were fixed-rate advances and $ 365.0 million were variable-rate advances, and no borrowings against the variable-rate FHLB line of credit.

Borrowings - FHLB borrowings at September 30, 2022 consisted of $ 2.06 billion in FHLB advances, of which $ 1.70 billion were fixed-rate advances and $ 365.0 million were variable-rate advances, and $ 75.0 million was borrowed against the variable-rate FHLB line of credit.

FHLB borrowings at September 30, 2021 consisted of $ 1.58 billion in FHLB advances, of which $ 1.23 billion were fixed-rate advances and $ 365.0 million were variable-rate advances, and no borrowings against the variable-rate FHLB line of credit.

On November 12, 2021 , the line of credit was renewed by FHLB for a one-year period.

Additionally, the Bank is authorized to borrow from the Federal Reserve Bank's "discount window."

7 unchanged sentences

(1) The effective interest rate includes the net impact of deferred amounts and interest rate swaps related to the adjustable-rate FHLB advances.

At September 30, 2021 and 2020, the Bank had entered into interest rate swap agreements with a total notional amount of $ 365.0 million and $ 640.0 million, respectively, in order to hedge the variable cash flows associated with $ 365.0 million and $ 640.0 million, respectively, of adjustable-rate FHLB advances.

At both September 30, 2022 and 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 September 30, 2022 and 2021, the interest rate swap agreements had an average remaining term to maturity of 3.1 years and 4.1 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 September 30, 2021 and September 30, 2020, the interest rate swaps were in a loss position with a total fair value of $ 27.7 million and $ 53.1 million, respectively, which was reported in other liabilities on the consolidated balance sheet.

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 September 30, 2022, the interest rate swaps were in a gain position with a total fair value of $ 12.5 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 fiscal year 2022, $ 5.1 million was reclassified from AOCI as an increase to interest expense.

During fiscal year 2021, $ 13.6 million was reclassified from AOCI.

Of this amount, $ 10.0 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 fiscal year 2020, $ 6.3 million was reclassified from AOCI as an increase to interest expense.

At September 30, 2021, the Company estimated that $ 9.2 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 September 30, 2022, the Company estimated that $ 5.8 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 $ 28.0 million at September 30, 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.

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.

The Bank held cash collateral of $ 12.1 million at September 30, 2022 and posted cash collateral of $ 28.0 million at September 30, 2021.

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

The leverage strategy involved borrowing up to $ 2.60 billion by entering into short-term FHLB advances, 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, 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 was no longer probable that the original forecasted transactions subject to the cash flow hedges would 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 $ 400.0 million with a weighted average contractual interest rate of 1.29 % and a weighted average remaining term of 0.9 years, and replaced these advances with fixed-rate FHLB advances totaling $ 400.0 million with a weighted average contractual interest rate of 0.80 % and a weighted average term of 5.0 years.

During the prior year, the Bank prepaid fixed-rate FHLB advances totaling $ 400.0 million with a weighted average contractual interest rate of 1.29 % and a weighted average remaining term of 0.9 years, and replaced these advances with fixed-rate FHLB advances totaling $ 400.0 million with a weighted average contractual interest rate of 0.80 % and a weighted average term of 5.0 years.

The Bank paid penalties of $ 5.1 million to FHLB as a result of prepaying these FHLB advances.

The weighted average effective interest rate of the new advances is 1.03 %.

The weighted average effective interest rate of the new advances was 1.03 %.

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

1 unchanged sentence

Per FHLB's lending guidelines, total FHLB borrowings cannot exceed 40 % of a borrowing institution's regulatory total assets without the pre-approval of FHLB senior management.

In July 2021, the president of FHLB approved an increase, through July 2022, in the Bank's borrowing limit to 50 % of Bank Call Report total assets.

In July 2022, the president of FHLB approved an increase, through July 2023, in the Bank's FHLB borrowing limit to 50 % of Bank Call Report total assets.

At September 30, 2022, the ratio of the par value of the Bank's FHLB borrowings to the Bank's Call Report total assets was 22 %.

Maturity of Borrowed Funds and Certificates of Deposit - The following table presents the scheduled maturity of FHLB advances, at par, and certificates of deposit as of September 30, 2021:

Scheduled Repayment of Borrowed Funds and Maturity of Certificates of Deposit - The following table presents the scheduled repayment of FHLB advances, at par, and the maturity of certificates of deposit as of September 30, 2022.

Excluded from the table is $ 75.0 million borrowed against the FHLB line of credit at September 30, 2022, which does not have a scheduled repayment date.

With the exception of amortizing advances, FHLB advances are payable at maturity.

At September 30, 2022, the Bank's FHLB advances had maturities ranging from March 2023 to June 2028.

FHLB Certificates

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$ 22,750 21.2 % $ 19,946 20.8 % $ 16,090 20.0 %

The components of the net deferred income tax liabilities as of September 30, 2021 and 2020 were as follows:

The components of the net deferred income tax assets (liabilities) as of September 30, 2022 and 2021 were as follows:

(Dollars in thousands)

Deferred income tax assets:

Unrealized loss on interest rate swaps $ 6,763 $ 12,916

Unrealized loss on AFS securities $ 50,064 $ —

ACL 3,438 4,163

5 unchanged sentences

Net purchase discounts related to acquired loans 102 287

Unrealized loss on interest rate swaps — 6,763

Other 891 417

5 unchanged sentences

Premises and equipment 3,614 4,256

Lease right-of-use assets 3,088 3,588

ACL 3,145 2,892

Unrealized gain on AFS securities 1,501 7,617

Unrealized gain on interest rate swaps 3,061 —

Lease right-of-use assets 2,821 3,088

Deposit intangible 692 1,047

Unrealized gain on AFS securities — 1,501

Other 503 513

Gross deferred income tax liabilities 28,426 25,860

Net deferred tax liabilities $ 5,810 $ 8,180

Net deferred tax assets (liabilities) $ 33,884 $ ( 5,810 )

The State of Kansas allows for a bad debt deduction on savings and loan institutions' privilege tax returns of up to 5% of Kansas taxable income.

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The Company assesses the available positive and negative evidence surrounding the recoverability of its deferred tax assets and applies its judgment in estimating the amount of valuation allowance necessary under the circumstances.

At September 30, 2021 and 2020, the Company had a valuation allowance of $ 72 thousand and $ 1.8 million, respectively, related to the net operating losses generated by the Company's consolidated Kansas corporate income tax return.

The companies included in the consolidated Kansas corporate income tax return are the holding company, Capitol Funds, Inc.

and Capital City Investments, Inc., as the Bank files a Kansas privilege tax return.

Based on the nature of the operations of the holding company, Capitol Funds, Inc.

and Capital City Investments, Inc., management believes there will not be sufficient taxable income to fully utilize the deferred tax assets noted above;

therefore, a valuation allowance has been recorded for the related amounts at September 30, 2021 and 2020.

The decrease in the valuation allowance at September 30, 2021 compared to September 30, 2020 was due primarily to the expiration of operating losses generated during fiscal year 2011, which resulted in the removal of the related deferred tax asset and corresponding valuation allowance.

At September 30, 2022 and 2021, the Company had a valuation allowance of $ 80 thousand and $ 72 thousand, respectively, related to the net operating losses generated by the Company's consolidated Kansas corporate income tax return as management believes there will not be sufficient taxable income to fully utilize these deferred tax assets.

For this reason, a valuation allowance was recorded for the related amounts at September 30, 2022 and 2021.

No additional valuation allowances were recorded for the Company's other deferred tax assets as management believes it is more likely than not that these amounts will be realized through the reversal of the Company's existing taxable temporary differences and projected future taxable income.

ASC 740 Income Taxes prescribes a process by which a tax position taken, or expected to be taken, on an income tax return is determined based upon the technical merits of the position, along with whether the tax position meets a more-likely-than-not-recognition threshold, to determine the amount, if any, of unrecognized tax benefits to recognize in the financial statements.

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EMPLOYEE STOCK OWNERSHIP PLAN

The ESOP trust acquired 3,024,574 shares ( 6,846,728 shares post-corporate reorganization) of common stock in the Company's initial public offering and 4,726,000 shares of common stock in the Company's corporate reorganization in December of 2010.

Both acquisitions of common stock were made with proceeds from loans from the Company, secured by shares of the Company's stock purchased in each offering.

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Of these amounts, $ 88 thousand, $ 383 thousand, and $ 336 thousand related to the difference between the market price of the Company's stock when the shares were acquired by the ESOP trust and the average market price of the Company's stock during the years ended September 30, 2022, 2021, and 2020, respectively.

The amount included in compensation expense for dividends on unallocated ESOP shares in excess of the debt service payments was $ 219 thousand, $ 0 and $ 906 thousand for the years ended September 30, 2021, 2020, and 2019, respectively.

There was no compensation expense for dividends on unallocated ESOP shares in excess of the debt service payments for the years ended September 30, 2022 or 2020;

for the year ended September 30, 2021, the amount of dividends on unallocated ESOP shares in excess of the debt service payments was $ 219 thousand.

Shares may be withdrawn from the ESOP trust due to diversification (a participant may begin to diversify at least 25 % of their ESOP shares at age 50 ), retirement, termination, or death of the participant.

13 unchanged sentences

The Equity Incentive Plan had 5,907,500 stock options originally eligible to be granted and, as of September 30, 2022, the Company had 4,378,029 stock options still available for future grants under this plan.

This plan will expire on January 24, 2027 and no additional grants may be made after expiration, but awards granted under this plan remain outstanding until they are individually vested, forfeited, or expire.

The Equity Incentive Plan will expire on January 24, 2027 and no additional grants may be made after expiration, but awards granted under this plan remain outstanding until they are individually vested, forfeited, or expire.

The Company may issue incentive and nonqualified stock options under the Equity Incentive Plan.

3 unchanged sentences

The fair value of stock option grants is estimated on the date of the grant using the Black-Scholes option pricing model.

At September 30, 2021, the Company had 545,087 stock options outstanding with a weighted average exercise price of $ 12.32 per option and a weighted average contractual life of 3.3 years, and 545,087 options exercisable with a weighted average exercise price of $ 12.32 per option and a weighted average contractual life of 3.3 years.

At September 30, 2022, the Company had 381,374 stock options outstanding with a weighted average exercise price of $ 12.51 per option and a weighted average contractual life of 3.3 years, all of which were exercisable.

The exercise price may be paid in cash, shares of common stock, or a combination of both.

4 unchanged sentences

At September 30, 2022, the Company had 69,950 unvested shares of restricted stock with a weighted average grant date fair value of $ 12.26 per share.

Compensation expense is calculated based on the fair market value of the common stock at the date of the grant, as defined by the plan, and is recognized over the vesting time period.

Compensation expense is calculated based on the fair market value of the common stock at the date of the grant, as defined by the plan, and is recognized over the vesting period.

Compensation expense attributable to restricted stock awards during the years ended September 30, 2022, 2021, and 2020 totaled $ 492 thousand, $ 480 thousand, and $ 540 thousand, respectively.

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The Bank evaluates each borrower's creditworthiness on a case-by-case basis.

Commitments generally have expiration dates or other termination clauses and one- to four-family loan commitments may require the payment of a rate lock fee.

Commitments generally have expiration dates or other termination clauses, and one- to four-family loan commitments may require the payment of a fee.

Some of the commitments are expected to expire without being fully drawn upon;

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The Bank and the Company must maintain certain minimum capital ratios as set forth in the table below for capital adequacy purposes.

Effective January 1, 2020, the regulatory agencies, including the Office of the Comptroller of Currency and FRB, created a community bank leverage ratio ("CBLR") for institutions with total consolidated assets of less than $10 billion and that meet other qualifying criteria.

Effective January 1, 2020, the regulatory agencies, including the Office of the Comptroller of Currency and the Board of Governors of the Federal Reserve System ("FRB"), created a community bank leverage ratio ("CBLR") for institutions with total consolidated assets of less than $10 billion and that meet other qualifying criteria.

Qualifying institutions that elect to use the CBLR framework and that maintain a leverage ratio of greater than 9% will be considered to have satisfied the generally applicable risk-based and leverage capital requirements in the regulatory agencies' capital rules and to have met the well-capitalized ratio requirements.

Management elected to use the CBLR framework for the Bank and Company as of the effective date.

In April 2020, as directed by Section 4012 of the CARES Act, the regulatory agencies introduced temporary changes to the CBLR.

In April 2020, as directed by Section 4012 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the regulatory agencies introduced temporary changes to the CBLR.

These changes, which subsequently were adopted as a final rule, temporarily reduced the CBLR requirement to 8% through the end of calendar year 2020.

Beginning in calendar year 2021, the CBLR requirement increased to 8.5% and will return to 9% in calendar year 2022.

Beginning in calendar year 2021, the CBLR requirement increased to 8.5%, and the requirement returned to 9% in calendar year 2022.

Management believes, as of September 30, 2022, that the Bank and Company meet all capital adequacy requirements to which they are subject and there were no conditions or events subsequent to September 30, 2022 that would change the Bank's or Company's category.

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The results cannot be determined with precision and may not be realized in an actual sale or immediate settlement of the financial instrument.

The Company bases its fair values on the price that would be received from the sale of a financial instrument in an orderly transaction between market participants at the measurement date under current market conditions.

The Company bases the fair value of its financial instruments on the price that would be received from the sale of an instrument in an orderly transaction between market participants at the measurement date under current market conditions.

The Company maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value.

11 unchanged sentences

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

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

• Corporate Bonds and Municipal 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.

15 unchanged sentences

GSE debentures 469,827 — 469,827 —

Corporate bonds 3,695 — 3,695 —

Municipal bonds 1,161 — 1,161 —

1 unchanged sentence

Interest rate swaps 12,547 — 12,547 —

$ 1,575,854 $ — $ 1,575,854 $ —

September 30, 2021

12 unchanged sentences

The significant unobservable inputs used in the determination of the fair value of assets classified as Level 3 have an inherent measurement uncertainty that, if changed, could result in higher or lower fair value measurements of these assets as of the reporting date.

Loans Receivable – With the adoption of CECL, collateral dependent assets are assets evaluated on an individual basis.

Loans Receivable – Collateral dependent assets are assets evaluated on an individual basis.

Those collateral dependent assets that are evaluated on an individual basis 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 fiscal years 2022 and 2021 that were still held in the portfolio as of September 30, 2022 and 2021 was $ 4.7 million and $ 7.4 million, respectively.

Fair values of collateral dependent loans/loans individually evaluated for loss cannot be determined with precision and may not be realized in an actual sale or immediate settlement of the loan and, as such, are classified as Level 3.

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 %.

1 unchanged sentence

Management does not adjust or apply a discount to the appraised value of one- to four-family loans, except for the estimated sales cost noted above, and the primary unobservable input for these loans was the appraisal.

For commercial loans, if the most recent appraisal or book value of the collateral does not reflect current market conditions due to the passage of time and/or other factors, management will make adjustments to the existing appraised or book value based on knowledge of local market conditions, recent transactions, and estimated selling costs, if applicable.

For commercial loans, if the most recent appraisal or book value of the collateral does not reflect current market conditions due to the passage of time and/or other factors, management will adjust the existing appraised or book value based on knowledge of local market conditions, recent transactions, and estimated selling costs, if applicable.

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

3 unchanged sentences

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

OREO – OREO primarily represents real estate acquired as a result of foreclosure or by deed in lieu of foreclosure and is carried at lower of cost or fair value.

16 unchanged sentences

FHLB stock 100,624 100,624 100,624 — —

Interest rate swaps 12,547 12,547 — 12,547 —

Deposits 6,194,866 6,124,835 3,991,114 2,133,721 —

Borrowings 2,132,154 1,910,779 75,000 1,835,779 —

Interest rate swaps 27,719 27,719 — 27,719 —

Carrying Estimated Fair Value

10 unchanged sentences

The following tables present the changes in the components of AOCI, net of tax, for the years presented.

The amounts reclassified from AOCI related to the Bank's cash flow hedges are reported as increases in interest expense within the consolidated statements of operations for each year presented, except for $ 3.6 million in fiscal year 2021, which was reported in the loss on interest rate swap termination line item within the consolidated statements of operations.

Deposits and Borrowed Funds" for additional information regarding reclassifications from AOCI related to the Bank's cash flow hedges.

For the Year Ended September 30, 2022

29 unchanged sentences

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

Transfer of HTM securities to AFS securities 2,336 — 2,336

Other comprehensive income (loss), before reclassifications 13,578 ( 21,458 ) ( 7,880 )

Amount reclassified from AOCI, net of taxes of $( 2,014 )

— 6,274 6,274

Other comprehensive income (loss) 13,578 ( 15,184 ) ( 1,606 )

1 unchanged sentence

REVENUE RECOGNITION

On October 1, 2018, the Company adopted ASU 2014-09, Revenue from Contracts with Customers , and all subsequent ASUs that modified the principles for recognizing revenue.

The Company's primary sources of revenue consist of net interest income on financial assets and liabilities, which are not within the scope of the amended ASU.

In addition, certain non-interest income revenue streams, such as loan servicing fees, derivatives, and BOLI, are not in-scope of the amended ASU.

Based on an assessment of non-interest income revenue streams and a review of the related contracts with customers, the Company concluded the amended ASU did not significantly change the Company's revenue recognition methods.

The Company elected to implement the amended ASU using the modified retrospective application with a cumulative adjustment, which increased opening retained earnings at October 1, 2018 by $ 394 thousand related to contracts that were not complete upon adoption.

The amount was related to the change in the recognition of revenue related to certain insurance commissions.

Details of the Company's primary types of non-interest income revenue streams by financial statement line item reported in the consolidated statements of income that are within the scope of ASC Topic 606 are below.

16 unchanged sentences

Additionally, the Company earns performance-based incentives ("contingent insurance commissions") based on certain criteria established by the insurance carriers.

Upon adoption of the amended ASU, contingent insurance commissions are accrued based upon management's expectations.

Previously, contingent insurance commissions were recognized when the funds were received.

Contingent insurance commissions are accrued based upon management's expectations.

Other Non-Interest Income

Trust Asset Management Income - The Company provides trust asset management services to customers.

The Company primarily earns fees for these services over time as the monthly services are provided and the Company assesses revenue at each month end.

The Company primarily earns fees for these services over time as the services are provided and the Company assesses fees at each month end.

Fees are charged based on a tiered scale of the market value of the individual trust asset accounts at the end of the month.

14 unchanged sentences

Deferred income tax liabilities, net $ 72 $ 82

Other liabilities — 3,142

Payable to the Bank 81 —

Total liabilities 153 82

18 unchanged sentences

Total interest and dividend income 113,229 133,572 70,365

INTEREST EXPENSE — — 403

NET INTEREST INCOME 133,572 70,365 131,434

NON-INTEREST INCOME — — 14

NON-INTEREST EXPENSE:

19 unchanged sentences

Depreciation of equipment 46 45 45

Loss on disposal of premises and equipment — — 8

Provision for deferred income taxes ( 10 ) ( 9 ) 91

Receivable from the Bank ( 18,257 ) — —

Receivable from/payable to the Bank 18,239 ( 18,257 ) —

Income taxes receivable/payable 13 25 ( 63 )

4 unchanged sentences

Principal collected on note receivable from ESOP 1,446 1,401 1,357

Purchase of equipment — — ( 423 )

Proceeds from the redemption of common equity securities related to the redemption of junior subordinated debentures — — 302

Net cash provided by investing activities 1,446 1,401 1,357

3 unchanged sentences

Repurchase of common stock — ( 4,568 ) ( 20,767 )

Repayment of other borrowings — — ( 10,052 )

Stock options exercised — 324 638

Net cash used in financing activities ( 102,862 ) ( 121,965 ) ( 113,672 )

NET DECREASE IN CASH AND CASH EQUIVALENTS ( 6,913 ) ( 43,854 ) ( 11,364 )

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 28,424 ( 6,913 ) ( 43,854 )

CASH AND CASH EQUIVALENTS:

3 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-K

Item 8. Financial Statements and Supplementary Data