What changed in this filing

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Item 1. Financial Statements

2023-05-10 compared with 2023-02-08 · 166 added, 80 removed, 690 unchanged (26% of the section changed)

4 unchanged sentences

(Dollars in thousands, except per share amounts)

December 31, September 30,

March 31, September 30,

Cash and cash equivalents (includes interest-earning deposits of $ 21,830 and $ 27,467 )

19 unchanged sentences

Common stock, $ .01 par value;

1,400,000,000 shares authorized, 136,134,225 and 138,858,884 shares issued and outstanding as of December 31, 2022 and September 30, 2022, respectively

1,400,000,000 shares authorized, 136,144,725 and 138,858,884 shares issued and outstanding as of March 31, 2023 and September 30, 2022, respectively

Additional paid-in capital 1,168,059 1,190,213

9 unchanged sentences

(Dollars in thousands, except per share amounts)

For the Three Months Ended

For the Three Months Ended For the Six Months Ended

March 31, March 31,

2023 2022 2023 2022

INTEREST AND DIVIDEND INCOME:

11 unchanged sentences

PROVISION FOR CREDIT LOSSES 891 ( 3,188 ) 4,551 ( 6,627 )

NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 42,168 49,053

NET INTEREST INCOME AFTER

PROVISION FOR CREDIT LOSSES 41,068 50,289 83,236 99,342

NON-INTEREST INCOME:

10 unchanged sentences

Federal insurance premium 1,246 777 2,058 1,416

Office supplies and related expense 633 468

Deposit and loan transaction costs 690 689 1,301 1,386

Office supplies and related expense 631 502 1,264 970

Other non-interest expense 1,280 1,217 2,389 2,136

12 unchanged sentences

(Dollars in thousands)

For the Three Months Ended

For the Three Months Ended For the Six Months Ended

March 31, March 31,

2023 2022 2023 2022

Net income $ 14,189 $ 21,623 $ 30,429 $ 43,809

3 unchanged sentences

Changes in unrealized gains/losses on cash flow hedges, net of taxes of $ 910 , $( 4,153 ), $ 915 , and $( 5,430 )

( 2,818 ) 12,864 ( 2,837 ) 16,825

Comprehensive income $ 28,148 $ ( 30,958 ) $ 57,419 $ ( 15,793 )

4 unchanged sentences

(Dollars in thousands, except per share amounts)

For the Three Months Ended December 31, 2022

For the Six Months Ended March 31, 2023

Additional Unearned Total

10 unchanged sentences

Balance at December 31, 2022 $ 1,361 $ 1,168,061 $ ( 29,322 ) $ 47,297 $ ( 132,602 ) $ 1,054,795

For the Three Months Ended December 31, 2021

Net income 14,189 14,189

Other comprehensive income, net of tax 13,959 13,959

ESOP activity ( 76 ) 412 336

Stock-based compensation 74 74

Cash dividends to stockholders ($ 0.085 per share)

( 11,319 ) ( 11,319 )

Balance at March 31, 2023 $ 1,361 $ 1,168,059 $ ( 28,910 ) $ 50,167 $ ( 118,643 ) $ 1,072,034

For the Six Months Ended March 31, 2022

Additional Unearned Total

10 unchanged sentences

Balance at December 31, 2021 $ 1,388 $ 1,189,827 $ ( 30,974 ) $ 79,745 $ ( 23,326 ) $ 1,216,660

Net income 21,623 21,623

Other comprehensive loss, net of tax ( 52,581 ) ( 52,581 )

ESOP activity 48 413 461

Stock-based compensation 124 124

Cash dividends to stockholders ($ 0.085 per share)

( 11,535 ) ( 11,535 )

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

CAPITOL FEDERAL FINANCIAL, INC.

2 unchanged sentences

(Dollars in thousands)

For the Three Months Ended

For the Six Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

11 unchanged sentences

Stock-based compensation 163 247

Unrestricted cash collateral received from derivative counterparties, net 530 —

Unrestricted cash collateral from derivative counterparties, net ( 2,500 ) —

Other assets, net 1,461 5,092

4 unchanged sentences

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of AFS securities — ( 58,546 )

Proceeds from calls, maturities and principal reductions of AFS securities 95,393 188,658

5 unchanged sentences

Proceeds from sale of other real estate owned ("OREO") 347 487

Proceeds from bank-owned life insurance ("BOLI") death benefit — 803

Net cash (used in) provided by investing activities ( 424,258 ) 107,964

3 unchanged sentences

(Dollars in thousands)

For the Three Months Ended

For the Six Months Ended

CASH FLOWS FROM FINANCING ACTIVITIES:

26 unchanged sentences

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

Cash, Cash Equivalents and Restricted Cash - Cash, cash equivalents and restricted cash reported in the statement of cash flows consisted entirely of cash and cash equivalents of $ 49.7 million and $ 49.2 million at December 31, 2022 and September 30, 2022, respectively.

Cash, Cash Equivalents and Restricted Cash - Cash, cash equivalents and restricted cash reported in the statement of cash flows consisted entirely of cash and cash equivalents of $ 60.2 million and $ 49.2 million at March 31, 2023 and September 30, 2022, respectively.

At times, the Company holds restricted cash, which is reported in other assets on the consolidated balance sheet, related to collateral postings to/from the Bank's derivative counterparties associated with the Bank's interest rate swaps.

There was no restricted cash at December 31, 2022 or September 30, 2022.

There was no restricted cash at March 31, 2023 or September 30, 2022.

See additional discussion regarding the interest rate swaps in Note 5.

12 unchanged sentences

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

For the Three Months Ended

For the Three Months Ended For the Six Months Ended

March 31, March 31,

2023 2022 2023 2022

(Dollars in thousands, except per share amounts)

11 unchanged sentences

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

December 31, 2022

March 31, 2023

Gross Gross Estimated

18 unchanged sentences

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

December 31, 2022

March 31, 2023

Less Than 12 Months Equal to or Greater Than 12 Months

17 unchanged sentences

$ 342,869 $ 22,950 $ 1,185,108 $ 182,598

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

The unrealized losses at March 31, 2023 were a result of an increase in market yields from the time the securities were purchased.

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

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

Management did not record an ACL on securities in an unrealized loss position at December 31, 2022 because scheduled coupon payments have been made, management anticipates that the entire principal balance will be collected as scheduled, and neither does the Company intend to sell the securities, nor is it more likely than not that the Company will be required to sell the securities before the recovery of the remaining amortized cost amount, which could be at maturity.

The amortized cost and estimated fair value of AFS debt securities as of December 31, 2022, by contractual maturity, are shown below.

Management did not record an ACL on securities in an unrealized loss position at March 31, 2023 because scheduled coupon payments have been made, management anticipates that the entire principal balance will be collected as scheduled, and neither does the Company intend to sell the securities, nor is it more likely than not that the Company will be required to sell the securities before the recovery of the remaining amortized cost amount, which could be at maturity.

The amortized cost and estimated fair value of AFS debt securities as of March 31, 2023, by contractual maturity, are shown below.

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

11 unchanged sentences

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

For the Three Months Ended

For the Three Months Ended For the Six Months Ended

March 31, March 31,

2023 2022 2023 2022

(Dollars in thousands)

1 unchanged sentence

Non-taxable 7 10 14 28

$ 895 $ 800 $ 1,776 $ 1,608

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

December 31, 2022 September 30, 2022

March 31, 2023 September 30, 2022

(Dollars in thousands)

5 unchanged sentences

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

December 31, 2022 September 30, 2022

March 31, 2023 September 30, 2022

(Dollars in thousands)

29 unchanged sentences

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.

For commercial real estate and commercial construction participation loans, the Bank performs the

same underwriting procedures as if the loan was being originated by the Bank.

For commercial real estate and commercial construction participation loans, the Bank performs the same underwriting procedures as if the loan

was being originated by the Bank.

At the time of origination, loan-to-value ("LTV") ratios on commercial real estate loans generally do not exceed 85 % of the appraised value of the property securing the loans and the minimum debt service coverage ratio is generally 1.15 .

27 unchanged sentences

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

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

December 31, 2022

At March 31, 2023 and September 30, 2022, there were no loans classified as doubtful, and all loans classified as loss were fully charged-off.

March 31, 2023

Current Fiscal Fiscal Fiscal Fiscal Revolving

69 unchanged sentences

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

December 31, 2022

March 31, 2023

Current Fiscal Fiscal Fiscal Fiscal Revolving

68 unchanged sentences

Delinquent and Nonaccrual Loans - The following tables present the amortized cost, at the dates indicated, by class, of loans 30 to 89 days delinquent, loans 90 or more days delinquent or in foreclosure, total delinquent loans, current loans, and total loans.

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

December 31, 2022

At March 31, 2023 and September 30, 2022, all loans 90 or more days delinquent were on nonaccrual status.

March 31, 2023

90 or More Days Total Total

25 unchanged sentences

$ 6,506 $ 9,175 $ 15,681 $ 7,464,898 $ 7,480,579

The amortized cost of mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process as of December 31, 2022 and September 30, 2022 was $ 1.5 million and $ 2.0 million, respectively, which is included in loans 90 or more days delinquent or in foreclosure in the tables above.

The carrying value of residential OREO held as a result of obtaining physical possession upon completion of a foreclosure or through completion of a deed in lieu of foreclosure was $ 182 thousand at December 31, 2022 and $ 328 thousand at September 30, 2022.

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

The amortized cost of mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process as of March 31, 2023 and September 30, 2022 was $ 1.9 million and $ 2.0 million, respectively, which is included in loans 90 or more days delinquent or in foreclosure in the tables above.

The carrying value of residential OREO held as a result of obtaining physical possession upon completion of a foreclosure or through completion of a deed in lieu of foreclosure was $ 160 thousand at March 31, 2023 and $ 328 thousand at September 30, 2022.

The following table presents the amortized cost at March 31, 2023 and September 30, 2022, 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.

December 31, 2022 September 30, 2022

March 31, 2023 September 30, 2022

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

9 unchanged sentences

$ 5,881 $ 1,821 $ 9,494 $ 2,581

TDRs - The following table presents the amortized cost prior to restructuring and immediately after restructuring in all loans restructured during the periods presented.

This table does not reflect the amortized cost at the end of the periods indicated.

TDRs - The following tables present the amortized cost prior to restructuring and immediately after restructuring in all loans restructured during the periods presented.

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

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

For the Three Months Ended

December 31, 2022 December 31, 2021

For the Three Months Ended For the Six Months Ended

March 31, 2023 March 31, 2023

Number Pre- Post- Number Pre- Post-

11 unchanged sentences

1 $ 239 $ 257 1 $ 239 $ 257

For the Three Months Ended For the Six Months Ended

March 31, 2022 March 31, 2022

Number Pre- Post- Number Pre- Post-

of Restructured Restructured of Restructured Restructured

Contracts Outstanding Outstanding Contracts Outstanding Outstanding

(Dollars in thousands)

One- to four-family:

Originated 1 $ 100 $ 100 2 $ 124 $ 124

Correspondent purchased — — — — — —

Bulk purchased — — — — — —

Commercial real estate — — — — — —

Commercial and industrial 2 124 124 2 124 124

Home equity 1 19 19 1 19 19

Other — — — — — —

4 $ 243 $ 243 5 $ 267 $ 267

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

For the Three Months Ended

December 31, 2022 December 31, 2021

Number of Amortized Number of Amortized

Contracts Cost Contracts Cost

For the Three Months Ended For the Six Months Ended

March 31, 2023 March 31, 2022 March 31, 2023 March 31, 2022

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

Contracts Cost Contracts Cost Contracts Cost Contracts Cost

(Dollars in thousands)

9 unchanged sentences

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

For the Three Months Ended December 31, 2022

For the Three Months Ended March 31, 2023

One- to Four-Family

7 unchanged sentences

Ending balance $ 2,139 $ 3,074 $ 221 $ 5,434 $ 14,222 $ 233 $ 19,889

For the Three Months Ended December 31, 2021

For the Six Months Ended March 31, 2023

One- to Four-Family

7 unchanged sentences

Ending balance $ 2,139 $ 3,074 $ 221 $ 5,434 $ 14,222 $ 233 $ 19,889

For the Three Months Ended March 31, 2022

One- to Four-Family

Correspondent Bulk

Originated Purchased Purchased Total Commercial Consumer Total

(Dollars in thousands)

Beginning balance $ 1,639 $ 2,082 $ 268 $ 3,989 $ 13,353 $ 193 $ 17,535

Charge-offs — — — — — ( 5 ) ( 5 )

Recoveries 2 — — 2 13 4 19

Provision for credit losses 68 47 ( 27 ) 88 ( 2,335 ) 10 ( 2,237 )

Ending balance $ 1,709 $ 2,129 $ 241 $ 4,079 $ 11,031 $ 202 $ 15,312

For the Six Months Ended March 31, 2022

One- to Four-Family

Correspondent Bulk

Originated Purchased Purchased Total Commercial Consumer Total

(Dollars in thousands)

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

Charge-offs ( 4 ) — — ( 4 ) ( 10 ) ( 6 ) ( 20 )

Recoveries 11 — — 11 49 5 65

Provision for credit losses 90 67 ( 63 ) 94 ( 4,660 ) 10 ( 4,556 )

Ending balance $ 1,709 $ 2,129 $ 241 $ 4,079 $ 11,031 $ 202 $ 15,312

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

Management also considered certain qualitative factors when evaluating the adequacy of the ACL at December 31, 2022.

The key assumptions utilized in estimating the Company's ACL at December 31, 2022 are discussed below.

• Economic Forecast - Management considered several economic forecasts provided by a third party and selected an economic forecast that was the most appropriate considering the facts and circumstances at December 31, 2022.

The forecasted economic indices applied to the model at December 31, 2022 were the national unemployment rate, changes in commercial real estate price index, changes in home values, and changes in the U.S.

Management also considered certain qualitative factors when evaluating the adequacy of the ACL at March 31, 2023.

The key assumptions utilized in estimating the Company's ACL at March 31, 2023 are discussed below.

The forecasted economic indices applied to the model at March 31, 2023 were the national unemployment rate, changes in commercial real estate price index, changes in home values, and changes in the U.S.

gross domestic product.

The economic index most impactful to all loan pools within the model at December 31, 2022 was the national unemployment rate.

The forecasted national unemployment rate in the economic scenario selected by management at December 31, 2022 had the national unemployment rate gradually increasing to 4.2 % by December 31, 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 December 31, 2022.

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

During the current quarter, there was a slowdown in portfolio prepayment speeds which reduced the projected prepayment speeds used in the model for generally all loan categories.

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

The economic index most impactful to all loan pools within the model at March 31, 2023 was the national unemployment rate.

The forecasted national unemployment rate in the economic scenario selected by management at March 31, 2023 had the national unemployment rate gradually increasing to 3.8 % by March 31, 2024 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 March 31, 2023.

• Prepayment and curtailment assumptions - The assumptions used at March 31, 2023 were generally based on actual historical prepayment and curtailment speeds for each respective loan pool in the model.

During the current year, there was a slowdown in portfolio prepayment speeds which reduced the projected prepayment speeds used in the model for generally all loan categories.

• Qualitative factors - The qualitative factors applied by management at March 31, 2023 included the following:

◦ 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;

1 unchanged sentence

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 December 31, 2022 and September 30, 2022, the Bank's off-balance sheet credit exposures totaled $ 1.07 billion and $ 992.6 million, respectively.

For the Three Months Ended

December 31, 2022 December 31, 2021

At March 31, 2023 and September 30, 2022, the Bank's off-balance sheet credit exposures totaled $ 1.02 billion and $ 992.6 million, respectively.

For the Three Months Ended For the Six Months Ended

March 31, 2023 March 31, 2022 March 31, 2023 March 31, 2022

(Dollars in thousands)

3 unchanged sentences

BORROWED FUNDS

FHLB Borrowings and Interest Rate Swaps - At December 31, 2022 and September 30, 2022, the Bank had entered into interest rate swap agreements with an aggregate 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 December 31, 2022 and September 30, 2022, the interest rate swap agreements had an average remaining term to maturity of 2.8 years and 3.1 years, respectively.

FHLB Borrowings and Interest Rate Swaps - At March 31, 2023 and September 30, 2022, the Bank had entered into interest rate swap agreements with an aggregate notional amount of $ 365.0 million in order to hedge the variable cash flows associated with $ 365.0 million of adjustable-rate FHLB advances.

At March 31, 2023 and September 30, 2022, the interest rate swap agreements had an average remaining term to maturity of 2.6 years and 3.1 years, respectively.

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

At both December 31, 2022 and 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.

During the three months ended December 31, 2022, $ 734 thousand was reclassified from AOCI as a decrease to interest expense.

During the three months ended December 31, 2021, $ 1.8 million was reclassified from AOCI as an increase to interest expense.

At December 31, 2022, the Company estimated that $ 9.6 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.

At both March 31, 2023 and September 30, 2022, the interest rate swaps were in a gain position with a total fair value of $ 8.8 million and $ 12.5 million respectively, which was reported in other assets on the consolidated balance sheet.

During the three and six month periods ended March 31, 2023, $ 1.3 million and $ 2.1 million, respectively, was reclassified from AOCI as a decrease to interest expense.

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

At March 31, 2023, the Company estimated that $ 7.2 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 held cash collateral of $ 12.6 million and $ 12.1 million at December 31, 2022 and September 30, 2022, respectively.

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

The leverage strategy involved borrowing up to $ 2.60 billion either on the Bank's line of credit with FHLB or by entering into short-term FHLB advances, depending on the rates offered by FHLB, with all of the balance being paid down at quarter end, or earlier if the strategy is not profitable.

The Bank held cash collateral of $ 9.6 million and $ 12.1 million at March 31, 2023 and September 30, 2022, respectively.

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

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

20 unchanged sentences

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

The Company did not have to adjust prices obtained from the third party pricing service when determining the fair value of its securities during the three months ended December 31, 2022 or during fiscal year 2022.

The Company did not have to adjust prices obtained from the third party pricing service when determining the fair value of its securities during the six months ended March 31, 2023 or during fiscal year 2022.

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

9 unchanged sentences

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

No adjustments were made to the estimated fair values obtained from the counterparty during the three months ended December 31, 2022 or during fiscal year 2022.

No adjustments were made to the estimated fair values obtained from the counterparty during the six months ended March 31, 2023 or during fiscal year 2022.

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

The Company did no t have any Level 3 financial instruments measured at fair value on a recurring basis at December 31, 2022 or September 30, 2022.

December 31, 2022

The Company did no t have any Level 3 financial instruments measured at fair value on a recurring basis at March 31, 2023 or September 30, 2022.

March 31, 2023

Quoted Prices Significant Significant

29 unchanged sentences

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

The fair value of collateral dependent loans/loans individually evaluated for loss on a non-recurring basis during the three months ended December 31, 2022 and 2021 that were still held in the portfolio as of December 31, 2022 and 2021 was $ 4.1 million and $ 3.3 million, respectively.

The fair value of collateral dependent loans/loans individually evaluated for loss on a non-recurring basis during the six months ended March 31, 2023 and 2022 that were still held in the portfolio as of March 31, 2023 and 2022 was $ 3.6 million and $ 4.2 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.

4 unchanged sentences

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

The primary significant unobservable inputs for commercial loans individually evaluated during the three months ended December 31, 2022 and December 31, 2021 were downward adjustments to the book value

of the collateral for lack of marketability.

During the three months ended December 31, 2022, the adjustments ranged from 8 % to 100 %, with a weighted average of 21 %.

During the three months ended December 31, 2021, the adjustments ranged from 9 % to 56 %, with a weighted average of 21 %.

The primary significant unobservable inputs for commercial loans individually evaluated during the six months ended March 31, 2023 and March 31, 2022 were downward adjustments to the book value of the

collateral for lack of marketability.

During the six months ended March 31, 2023, the adjustments ranged from 8 % to 100 %, with a weighted average of 21 %.

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

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

4 unchanged sentences

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

The fair value of OREO measured on a non-recurring basis during the three months ended December 31, 2022 that was still held in the portfolio as of December 31, 2022 was $ 93 thousand.

There was no OREO measured on a non-recurring basis during the three months ended December 31, 2021.

The carrying value of the properties equaled the fair value of the properties at December 31, 2022 and 2021.

The fair value of OREO measured on a non-recurring basis during the six months ended March 31, 2023 that was still held in the portfolio as of March 31, 2023 was $ 93 thousand.

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

The carrying value of the properties equaled the fair value of the properties at March 31, 2023 and 2022.

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

2 unchanged sentences

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

December 31, 2022

March 31, 2023

Carrying Estimated Fair Value

21 unchanged sentences

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

For the Three Months Ended December 31, 2022

For the Three Months Ended March 31, 2023

Unrealized Unrealized

9 unchanged sentences

Ending balance $ ( 125,292 ) $ 6,649 $ ( 118,643 )

For the Three Months Ended December 31, 2021

For the Six Months Ended March 31, 2023

Unrealized Unrealized

9 unchanged sentences

Ending balance $ ( 125,292 ) $ 6,649 $ ( 118,643 )

For the Three Months Ended March 31, 2022

Unrealized Unrealized

Gains (Losses) Gains (Losses)

on AFS on Cash Flow Total

Securities Hedges AOCI

(Dollars in thousands)

Beginning balance $ ( 6,331 ) $ ( 16,995 ) $ ( 23,326 )

Other comprehensive income (loss), before reclassifications ( 65,445 ) 11,151 ( 54,294 )

Amount reclassified from AOCI, net of taxes of $( 553 )

— 1,713 1,713

Other comprehensive income (loss) ( 65,445 ) 12,864 ( 52,581 )

Ending balance $ ( 71,776 ) $ ( 4,131 ) $ ( 75,907 )

For the Six Months Ended March 31, 2022

Unrealized Unrealized

Gains (Losses) Gains (Losses)

on AFS on Cash Flow Total

Securities Hedges AOCI

(Dollars in thousands)

Beginning balance $ 4,651 $ ( 20,956 ) $ ( 16,305 )

Other comprehensive income (loss), before reclassifications ( 76,427 ) 13,329 ( 63,098 )

Amount reclassified from AOCI, net of taxes of $( 1,128 )

— 3,496 3,496

Other comprehensive income (loss) ( 76,427 ) 16,825 ( 59,602 )

Ending balance $ ( 71,776 ) $ ( 4,131 ) $ ( 75,907 )

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

What changed 10-Q

Item 1. Financial Statements