What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-11-29 compared with 2022-11-23 · 181 added, 185 removed, 1299 unchanged (22% of the section changed)

53 unchanged sentences

The forecast-adjusted loss rate is applied to the loans over their remaining contractual lives, adjusted for prepayments and curtailments.

The ACL model generates aggregated estimated cash flows for the time period that remains in each loan's contractual life which are discounted back to the reporting date using each loan's effective yield, to arrive at a present value of future cash flows which is compared to the amortized cost basis of the loan pool to determine

the amount of ACL necessary.

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 the ACL, including the third party provided economic forecast used and qualitative factor adjustments.

The ACL model generates aggregated estimated cash flows for the time period that remains in each loan's contractual life, which are discounted back to the reporting date using each loan's effective yield to arrive at a present value of future cash flows, which is compared to the amortized cost basis of the loan pool to determine the

amount of ACL necessary.

Management evaluates qualitative factors not included in historical loss rates, macroeconomic forecasts, or other model inputs and/or other ACL assumptions, 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 estimated by the third-party economic forecast and qualitative factor adjustments as a critical audit matter because of the significant estimates and assumptions required by management in determining the ACL.

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 significant estimates and assumptions.

3 unchanged sentences

• 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 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.

• We evaluated the magnitude and proportion of the overall allowance, including the directional consistency and magnitude of the qualitative adjustments.

• We reviewed independent economic statistics, such as common macroeconomic indicators as well as industry peers, and we used data analytics to identify changes in the loan portfolio to assess the completeness of management’s qualitative adjustments.

22 unchanged sentences

Advances by borrowers 62,993 80,067

Income taxes payable, net — 918

Deferred income tax liabilities, net — 5,810

Other liabilities 140,069 121,311

8 unchanged sentences

Retained earnings ( 104,565 ) 80,266

Accumulated other comprehensive (loss) income ("AOCI"), net of tax ( 145,633 ) ( 16,305 )

Accumulated other comprehensive income (loss) ("AOCI"), net of tax 8,700 ( 145,633 )

Total stockholders' equity 1,044,054 1,096,499

8 unchanged sentences

Loans receivable $ 280,087 $ 228,531 $ 229,897

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

Cash and cash equivalents 43,796 18,304 144

Mortgage-backed securities ("MBS") 18,520 19,406 21,399

FHLB stock 13,821 10,031 3,916

12 unchanged sentences

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

Net loss from securities transactions ( 192,622 ) — —

Other non-interest income 4,935 6,085 5,388

5 unchanged sentences

Regulatory and outside services 6,039 6,192 5,764

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

Federal insurance premium 4,456 3,020 2,545

Advertising and promotional 4,305 5,178 5,133

Deposit and loan transaction costs 2,694 2,797 2,761

3 unchanged sentences

Total non-interest expense 113,934 112,851 115,569

INCOME BEFORE INCOME TAX EXPENSE 107,203 96,028 80,630

INCOME TAX EXPENSE 22,750 19,946 16,090

NET INCOME $ 84,453 $ 76,082 $ 64,540

Basic earnings per share ("EPS") $ 0.62 $ 0.56 $ 0.47

(LOSS) INCOME BEFORE INCOME TAX (BENEFIT) EXPENSE ( 138,955 ) 107,203 96,028

INCOME TAX (BENEFIT) EXPENSE ( 37,296 ) 22,750 19,946

NET (LOSS) INCOME $ ( 101,659 ) $ 84,453 $ 76,082

Basic (loss) earnings per share ("EPS") $ ( 0.76 ) $ 0.62 $ 0.56

Diluted EPS $ ( 0.76 ) $ 0.62 $ 0.56

5 unchanged sentences

2023 2022 2021

Net income $ 84,453 $ 76,082 $ 64,540

Net (loss) income $ ( 101,659 ) $ 84,453 $ 76,082

Other comprehensive income (loss), net of tax:

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

Unrealized gains (losses) on AFS securities arising during the period, net of taxes of $( 2,696 ), $ 51,565 , and $ 6,116

8,355 ( 159,770 ) ( 19,077 )

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

Reclassification adjustment for net losses on AFS securities included in net income, net of taxes of $( 47,000 ), $ 0 , and $ 0

Unrealized gains (losses) on cash flow hedges arising during the period, net of taxes of $( 1,923 ), $( 8,177 ), and $( 1,775 )

5,957 25,339 5,712

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

Reclassification adjustment for cash flow hedge amounts included in net income, net of taxes of $ 1,808 , $( 1,647 ), and $( 4,378 )

( 5,601 ) 5,103 13,565

Comprehensive income (loss) $ 52,674 $ ( 44,875 ) $ 76,282

See accompanying notes to consolidated financial statements.

7 unchanged sentences

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 Accounting Standards Update ("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)

1 unchanged sentence

Balance at September 30, 2022 1,388 1,190,213 ( 29,735 ) 80,266 ( 145,633 ) 1,096,499

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

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

Net loss, fiscal year 2023 ( 101,659 ) ( 101,659 )

Other comprehensive income, net of tax 154,333 154,333

ESOP activity ( 473 ) 1,652 1,179

Restricted stock activity, net ( 6 ) ( 6 )

Stock-based compensation 327 327

Repurchase of common stock ( 29 ) ( 23,424 ) ( 23,453 )

Cash dividends to stockholders ($ 0.62 per share)

8 unchanged sentences

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income $ 84,453 $ 76,082 $ 64,540

Net (loss) income $ ( 101,659 ) $ 84,453 $ 76,082

Adjustments to reconcile net income to net cash provided by operating activities:

11 unchanged sentences

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

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

Net loss from securities transactions 192,622 — —

Unrestricted cash collateral from derivative counterparties, net 1,940 12,050 —

Other assets, net 2,528 6,661 12,751

8 unchanged sentences

Net change in loans receivable ( 520,229 ) ( 381,561 ) 132,800

Proceeds from sale of participating interest in loans receivable 5,563 — —

Purchase of premises and equipment ( 6,281 ) ( 5,557 ) ( 9,410 )

19 unchanged sentences

Net cash provided by financing activities 477,983 49,177 82,785

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

NET INCREASE / (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH 196,411 ( 21,098 ) ( 169,416 )

CASH, CASH EQUIVALENTS AND RESTRICTED CASH:

4 unchanged sentences

Interest payments $ 188,908 $ 83,833 $ 83,646

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:

Operating lease right-of-use assets obtained $ — $ — $ 16,841

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

See accompanying notes to consolidated financial statements.

5 unchanged sentences

Description of Business - Capitol Federal Financial, Inc.

(the "Company") provides a full range of retail banking services through its wholly-owned subsidiary, Capitol Federal Savings Bank (the "Bank"), a federal savings bank, which has 45 traditional and nine in-store banking offices serving primarily the metropolitan areas of Topeka, Wichita, Lawrence, Manhattan, Emporia and Salina, Kansas and portions of the Kansas City metropolitan area.

(the "Company") provides a full range of retail banking services through its wholly-owned subsidiary, Capitol Federal Savings Bank (the "Bank"), a federal savings bank, which has 46 traditional and five in-store banking offices serving primarily the metropolitan areas of Topeka, Wichita, Lawrence, Manhattan, Emporia and Salina, Kansas and portions of the Kansas City metropolitan area.

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.

9 unchanged sentences

Actual results could differ from these estimates and assumptions.

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.

Cash, Cash Equivalents and Restricted Cash - Cash, cash equivalents, and restricted cash reported in the statement of cash flows which consisted entirely of cash and cash equivalents at September 30, 2023 and 2022, respectively.

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

There was no restricted cash included in other assets on the consolidated balance sheet at September 30, 2023 or September 30, 2022.

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

12 unchanged sentences

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.

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

The Company primarily uses prices obtained from third-party pricing services to determine the fair value of securities.

30 unchanged sentences

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.

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.

3 unchanged sentences

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.

Loans on which the accrual of income has been discontinued are designated as nonaccrual and 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.

14 unchanged sentences

When a non-real estate secured consumer loan is 120 days delinquent, any identified losses are charged-off.

For commercial loans, loans are individually evaluated for loss if management determines they exhibit unique risk characteristics.

Commercial loans are individually evaluated for loss if management determines they exhibit unique risk characteristics.

Specific allocations of ACL are established and/or losses are charged-off prior to a loan becoming 120 days delinquent when it is determined, through the analysis of any available current financial information regarding the borrower, that the borrower is not able to service the debt and there is little or no prospect for near term improvement.

2 unchanged sentences

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.

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.

Therefore, the Bank could hold the property for an extended period of time, or be forced to sell at a discounted price, resulting in additional losses.

Therefore, the Bank could hold the property for an extended period of time, or be forced to sell at a

discounted price, resulting in additional losses.

Our commercial and industrial loans are primarily secured by accounts receivable, inventory and equipment, which may be difficult to appraise, may be illiquid and may fluctuate in value based on the success of the business.

15 unchanged sentences

Reserve for Off-Balance Sheet Credit Exposures - The Company's off-balance sheet credit exposures are comprised of unfunded portions of existing loans, such as lines of credit and construction loans, and commitments to originate or purchase loans that are not unconditionally cancellable by the Company.

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

Expected credit losses on these amounts are calculated using the same methodology that is applied in the ACL model and qualitative factors are also considered;

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

5 unchanged sentences

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

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.

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

6 unchanged sentences

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

All of the leases in which the Company is the lessee are classified as operating leases.

The Company determines if an arrangement is a lease at inception and if the lease is an operating lease or a finance lease.

28 unchanged sentences

Interest Rate Swaps - The Company uses interest rate swaps as part of its interest rate risk management strategy to hedge the variable cash outflows associated with certain borrowings.

Interest rate swaps are carried at fair value in the Company's consolidated financial statements.

Interest rate swaps are carried at fair value in the Company's

consolidated financial statements.

For interest rate swaps that are designated and qualify as cash flow hedges, the effective portion of changes in the fair value of such agreements are recorded in AOCI and are subsequently reclassified into interest expense in the period that interest on the borrowings affects earnings.

41 unchanged sentences

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.

The Company intends to apply a modified retrospective approach when adopting the ASU.

Upon adoption, a cumulative-effect adjustment will be recognized in retained earnings, net of tax.

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

EARNINGS PER SHARE

5 unchanged sentences

(Dollars in thousands, except per share amounts)

Net income $ 84,453 $ 76,082 $ 64,540

Income allocated to participating securities ( 45 ) ( 50 ) ( 52 )

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

Net (loss) income $ ( 101,659 ) $ 84,453 $ 76,082

Loss (Income) allocated to participating securities 51 ( 45 ) ( 50 )

Net (loss) income available to common stockholders $ ( 101,608 ) $ 84,408 $ 76,032

Total basic average common shares outstanding 133,556,864 135,700,447 135,481,232

24 unchanged sentences

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

Corporate bonds 4,000 — 305 3,695

Municipal bonds 1,243 — 82 1,161

9 unchanged sentences

Corporate bonds — — 3,378 622

Municipal bonds 1,161 82 — —

$ 6,179 $ 109 $ 62,751 $ 1,514

6 unchanged sentences

GSE debentures — — 469,827 50,150

Corporate bonds 3,695 305 — —

Municipal bonds 1,161 82 — —

3 unchanged sentences

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 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.

As of September 30, 2023, management intended to sell securities with an estimated fair value of $ 1.30 billion;

therefore an unrealized loss of $ 192.6 million associated with those securities was recognized in the consolidated statement of income for the year ended September 30, 2023 as a net loss from securities transactions.

Management did not record an ACL on the remaining securities in an unrealized loss position at September 30, 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 September 30, 2023, by contractual maturity, are shown below.

21 unchanged sentences

(Dollars in thousands)

FHLB advances $ 572,913 $ —

Public unit deposits 125,496 264,885

Federal Reserve Bank of Kansas City ("FRB of Kansas City") borrowings $ 519,195 $ 46,283

Commercial deposits — 66,256

Public unit deposits 178,396 125,496

FHLB advances — 572,913

$ 697,591 $ 744,692

2 unchanged sentences

All other dispositions of securities during fiscal years 2023, 2022, and 2021 were the result of principal repayments, calls, or maturities.

In October 2023, the Bank sold $ 1.30 billion of AFS securities.

The Bank received gross proceeds of $ 1.27 billion from the sale and realized gross losses of $ 14.9 million and gross gains of $ 1.6 million, which will be reported in the Company's consolidated statement of income for fiscal year 2024.

LOANS RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES

23 unchanged sentences

Loan servicing income includes servicing fees withheld from investors and certain charges collected from borrowers, such as late payment fees.

The Bank held borrowers' escrow balances on loans serviced for others of $ 1.1 million and $ 1.4 million as of September 30, 2022 and 2021, respectively.

Lending Practices and Underwriting Standards - Originating and purchasing one- to four-family loans is the Bank's primary lending business.

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, Missouri, and Texas.

The Bank held borrowers' escrow balances on loans serviced for others of $ 972 thousand and $ 1.1 million as of September 30, 2023 and 2022, respectively.

Lending Practices and Underwriting Standards - Originating one- to four-family loans is the Bank's primary lending business.

The Bank also purchases one- to four-family loans from correspondent lenders and 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.

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.

36 unchanged sentences

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.

All revolving lines of credit and revolving lines of credit converted to term loans are presented separately, regardless of origination year.

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

1 unchanged sentence

September 30, 2023

Current Fiscal Fiscal Fiscal Fiscal Revolving

Fiscal Year Year Year Year Prior Line of

Year 2021 2020 2019 2018 Years Credit Total

Current Fiscal Fiscal Fiscal Fiscal Revolving Credit

Fiscal Year Year Year Year Prior Line of Converted

Year 2022 2021 2020 2019 Years Credit to Term Total

(Dollars in thousands)

29 unchanged sentences

Total $ 1,124,730 $ 1,450,679 $ 1,709,273 $ 904,106 $ 403,494 $ 2,285,008 $ 110,969 $ 6,449 $ 7,994,708

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, 2022

34 unchanged sentences

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.

All revolving lines of credit and revolving lines of credit converted to term loans are presented separately, regardless of origination year.

September 30, 2023

Current Fiscal Fiscal Fiscal Fiscal Revolving

Fiscal Year Year Year Year Prior Line of

Year 2021 2020 2019 2018 Years Credit Total

Current Fiscal Fiscal Fiscal Fiscal Revolving Credit

Fiscal Year Year Year Year Prior Line of Converted

Year 2022 2021 2020 2019 Years Credit to Term Total

(Dollars in thousands)

66 unchanged sentences

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

The increase in loans 30 to 89 days delinquent during the current year was due mainly to delinquencies returning to more historical levels as government payment assistance programs expired.

September 30, 2023

26 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 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 amortized cost of mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process as of September 30, 2023 and 2022 was $ 2.5 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 $ 219 thousand at September 30, 2023 and $ 328 thousand at September 30, 2022.

12 unchanged sentences

$ 9,453 $ 1,990 $ 9,494 $ 2,581

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.

TDRs - The following tables present the amortized cost for the periods presented, 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.

42 unchanged sentences

September 30, 2023 September 30, 2022 September 30, 2021

Number of Amortized Number of Amortized Number of Recorded

Contracts Cost Contracts Cost Contracts Investment

(Dollars in thousands)

One- to four-family:

Originated 2 $ 697 — $ — 1 $ 38

Correspondent purchased — — — — — —

Bulk purchased — — — — 1 134

Commercial real estate — — — — — —

Commercial and industrial — — — — — —

Home equity 1 19 — — 1 9

Other — — — — — —

3 $ 716 — $ — 3 $ 181

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.

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

Number of Amortized Number of Amortized Number of Amortized

Contracts Cost Contracts Cost Contracts Cost

(Dollars in thousands)

8 unchanged sentences

1 $ 8 3 $ 716 — $ —

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

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

Allowance for Credit Losses - The following table summarizes ACL activity, by loan portfolio segment, for the periods presented.

The Bank adopted ASU 2016-13, Financial Instruments - Credit Losses:

Measurement of Credit Losses on Financial Instruments ("CECL") on October 1, 2020.

For the Year Ended September 30, 2023

8 unchanged sentences

Ending balance $ 2,149 $ 2,972 $ 207 $ 5,328 $ 18,180 $ 251 $ 23,759

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.

The increase in ACL during the current year was primarily a result of the outlook for worsening economic forecast conditions compared to the prior year, along with a reduction in the projected prepayment speeds used in the model for all loan categories.

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 )

8 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 )

9 unchanged sentences

The economic index most impactful to all loan pools within the model at September 30, 2023 was the national unemployment rate.

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.

The forecasted national unemployment rate in the economic scenario selected by management at September 30, 2023 had the national unemployment rate gradually increasing to 4.1 % by September 30, 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 September 30, 2023.

• 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.

• Prepayment and curtailment assumptions - The assumptions used at September 30, 2023 were generally based on actual historical prepayment and curtailment speeds, adjusted by management as deemed necessary.

The prepayment and curtailment assumptions vary for each respective loan pool in the model.

• Qualitative factors - The qualitative factors applied by management at September 30, 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;

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

◦ The economic uncertainties related to the unemployment rate, the labor force composition, and the labor participation rate that are not captured in the third-party economic forecast scenarios;

◦ Other management considerations related to commercial loans to account for credit risks not fully reflected in the discounted cash flow 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, 2023 and 2022, the Bank's off-balance sheet credit exposures totaled $ 837.7 million and $ 992.6 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

For the Years Ended

September 30, 2023 September 30, 2022

(Dollars in thousands)

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 )

Beginning balance $ 4,751 $ 5,743

(Release)/provision for credit losses ( 656 ) ( 992 )

Ending balance $ 4,095 $ 4,751

8 unchanged sentences

Premises and equipment, net $ 91,531 $ 94,820

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 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.

These leases have remaining terms that range from three months to 44 years, some of which include exercising renewal options that the Company considers to be reasonably certain.

A right-of-use asset of $ 11.3 million and $ 11.6 million was included in other assets and a lease liability of $ 11.6 million and $ 11.8 million was included in other liabilities on the consolidated balance sheets, as of September 30, 2023 and September 30, 2022 respectively.

As of September 30, 2023, for the Company's operating leases, the weighted average remaining lease term was 24.0 years and the weighted average discount rate was 2.59 %.

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

As a result, the Company classified the branch location as held-for-sale and subsequently sold the property.

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 following table presents lease expenses and supplemental cash flow information related to the Company's leases for the years indicated.

20 unchanged sentences

The majority of the commitments at September 30, 2023 are projected to be funded through the end of calendar year 2026 .

For fiscal year 2022, the net income tax benefit associated with these investments, which consists of proportional amortization expense and affordable housing tax credits and other related tax benefits, was reported in income tax expense in the consolidated statements of income.

For fiscal years 2023, 2022, and 2021, the net income tax benefit associated with these investments, which consists of proportional amortization expense and affordable housing tax credits and other related tax benefits, was reported in income tax expense in the consolidated statements of income.

The amount of proportional amortization expense recognized during fiscal years 2023, 2022 and 2021 was $ 10.1 million, $ 9.3 million and $ 8.4 million, respectively, and the amount of affordable housing tax credits and other related tax benefits was $ 12.4 million, $ 11.6 million and $ 10.5 million, respectively, resulting in a net income tax benefit of $ 2.3 million, $ 2.3 million and $ 2.1 million, respectively.

18 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, 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.

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

FHLB advances at September 30, 2022 and 2021 were comprised of the following:

Borrowings - Borrowings at September 30, 2023 consisted of $ 2.38 billion in FHLB advances, of which $ 2.02 billion were fixed-rate advances and $ 365.0 million were variable-rate advances, and $ 500.0 million of borrowings from the Federal Reserve's Bank Term Funding Program ("BTFP").

There were no borrowings against the variable-rate FHLB line of credit at September 30, 2023.

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 of borrowings against the variable-rate FHLB line of credit.

Additionally, the Bank is authorized to borrow from the Federal Reserve Bank's "discount window" but there were no such borrowings at September 30, 2023 or 2022.

FHLB advances and BTFP borrowings at September 30, 2023 and 2022 were comprised of the following:

(Dollars in thousands)

FHLB advances $ 2,382,828 $ 2,062,500

Deferred prepayment penalty ( 5,346 ) ( 7,150 )

BTFP borrowings 500,000 —

Deferred prepayment penalty - FHLB advances ( 3,703 ) ( 5,346 )

$ 2,879,125 $ 2,057,154

1 unchanged sentence

Weighted average effective interest rate on FHLB advances (1)

Weighted average contractual interest rate on BTFP borrowings 4.70 —

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

FHLB borrowings are secured by certain qualifying loans pursuant to a blanket collateral agreement with FHLB and certain securities, when necessary.

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

In October 2023, the president of the FHLB approved the increase to 50% through October 2024.

At September 30, 2023, the ratio of the par value of the Bank's FHLB borrowings to the Bank's Call Report total assets was 23 %.

The amount that can be borrowed under the BTFP is based upon the par value of securities pledged as collateral, the term can be up to one year in length, and the borrowings can be prepaid without penalty.

Advances can be requested under the BTFP until at least March 11, 2024.

Subsequent to September 30, 2023, the Bank repaid the $ 500.0 million of BTFP borrowings.

At both September 30, 2023 and 2022, 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.

1 unchanged sentence

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.

At September 30, 2023 and September 30, 2022, the interest rate swaps were in a gain position with a total fair value of $ 13.0 million and $ 12.5 million, respectively, which was reported in other assets on the consolidated balance sheet.

During fiscal year 2023, $ 5.6 million was reclassified from AOCI as a decrease to interest expense.

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.

At September 30, 2023, the Company estimated that $ 7.9 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 $ 12.1 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 Bank has minimum collateral posting thresholds with

its derivative counterparties and posts collateral on a daily basis.

The Bank held cash collateral of $ 14.0 million at September 30, 2023 and $ 12.1 million at September 30, 2022.

During the current and prior 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, depending on the rates offered by FHLB, with all of the balance being paid down at each quarter end, or earlier if the strategy is not profitable.

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

During the prior year, 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.

During the year ended September 30, 2021, 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 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 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.

During the year ended September 30, 2021, 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.

1 unchanged sentence

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

FHLB borrowings are secured by certain qualifying loans pursuant to a blanket collateral agreement with FHLB and certain securities, when necessary.

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 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 %.

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

Advances of Deposit

Amount Amount

Scheduled Repayment of Borrowed Funds and Maturity of Certificates of Deposit - The following table presents the scheduled repayment of FHLB advances and BTFP borrowings, at par, and the maturity of certificates of deposit as of September 30, 2023.

With the exception of amortizing advances, FHLB advances are payable at maturity Amortizing FHLB advances are presented based on scheduled repayment dates.

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

At September 30, 2023, the BTFP borrowings maturity date was May 6, 2024.

Borrowings Amount

(Dollars in thousands)

27 unchanged sentences

ESOP related expenses, net ( 652 ) 0.5 ( 641 ) ( 0.6 ) ( 662 ) ( 0.7 )

Acquired BOLI policies — — — — ( 636 ) ( 0.8 )

Other 251 ( 0.2 ) ( 283 ) ( 0.3 ) ( 575 ) ( 0.6 )

3 unchanged sentences

Deferred income tax assets:

Unrealized loss on AFS securities $ 50,064 $ —

Net loss on securities transactions $ 47,006 $ —

ACL 4,989 3,438

Lease liabilities 2,835 2,883

Salaries, deferred compensation and employee benefits 2,044 2,017

ESOP compensation 1,510 1,472

Salaries, deferred compensation and employee benefits 1,269 2,044

Reserve for off-balance sheet credit exposures 999 1,159

Low income housing partnerships 337 522

Unrealized loss on AFS securities 368 50,064

Net purchase discounts related to acquired loans 149 102

Unrealized loss on interest rate swaps — 6,763

Low income housing partnerships 92 337

Other 912 891

4 unchanged sentences

FHLB stock dividends 17,547 14,590

Unrealized gain on interest rate swaps 3,176 3,061

Premises and equipment 3,164 3,614

ACL 2,936 3,145

Unrealized gain on interest rate swaps 3,061 —

Lease right-of-use assets 2,748 2,821

Deposit intangible 411 692

Unrealized gain on AFS securities — 1,501

Other 512 503

Gross deferred income tax liabilities 30,494 28,426

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

Net deferred tax assets $ 29,605 $ 33,884

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.

14 unchanged sentences

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.

The Bank has agreed to make cash contributions to the ESOP trust on an annual basis sufficient to enable the ESOP trust to make the required annual loan payments to the Company on September 30 of each year.

The loan for the shares acquired in the initial public offering matured on September 30, 2013 .

7 unchanged sentences

Compensation expense related to the ESOP was $ 1.2 million for the year ended September 30, 2023, $ 1.7 million for the year ended September 30, 2022, and $ 2.3 million for the year ended September 30, 2021.

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.

Of these amounts, $ 472 thousand of income, $ 88 thousand of expense, and $ 383 thousand of expense 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, 2023, 2022, and 2021, respectively.

The Company's stock market price averaged below $10 per share during the year ended September 30, 2023 which is why income rather than expense was recognized for market price differences.

There was no compensation expense for dividends on unallocated ESOP shares in excess of the debt service payments for the years ended September 30, 2023 or 2022;

25 unchanged sentences

Restricted Stock Plans – The Equity Incentive Plan had 2,363,000 shares originally eligible to be granted as restricted stock and, as of September 30, 2023, the Company had 1,528,475 shares available for future grants of restricted stock 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 or forfeited.

As noted above, 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 or forfeited.

The vesting period of the restricted stock awards under the Equity Incentive Plan has generally ranged from 3 years to 5 years.

29 unchanged sentences

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 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.

The Bank is required to maintain a capital conservation buffer of 2.50% above certain minimum risk-based capital ratios for capital adequacy purposes in order to be considered well capitalized and to avoid certain restrictions on capital distributions and other payments including dividends, share repurchases, and certain compensation.

Management believes, as of September 30, 2023, that the Bank and Company met all capital adequacy requirements to which they were subject, including the capital conservation buffer, and there were no conditions or events subsequent to September 30, 2023 that would change the Bank's or Company's category.

At September 30, 2022, the Bank and Company met the requirements to elect the community bank leverage ratio ("CBLR").

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 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 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.

Actual Adequacy Purposes

Amount Ratio Amount Ratio

For Capital Corrective Action

Actual Adequacy Purposes Provisions

Amount Ratio Amount Ratio Amount Ratio

(Dollars in thousands)

As of September 30, 2023

Bank $ 1,090,222 9.0 % $ 1,090,015 9.0 %

Company 1,230,851 10.2 1,089,869 9.0

Tier 1 leverage $ 903,969 8.5 % $ 423,358 4.0 % $ 529,197 5.0 %

Common Equity Tier 1 ("CET1") capital 903,969 16.0 254,670 4.5 367,856 6.5

Tier 1 capital 903,969 16.0 339,559 6.0 452,746 8.0

Total capital 931,823 16.5 452,746 8.0 565,932 10.0

As of September 30, 2022

Bank 1,114,325 11.5 822,194 8.5

Company 1,246,259 12.9 822,053 8.5

CBLR 1,090,222 9.0 1,090,015 9.0 N/A N/A

As of September 30, 2023

Tier 1 leverage 1,024,880 9.7 423,312 4.0 N/A N/A

CET1 capital 1,024,880 18.1 254,681 4.5 N/A N/A

Tier 1 capital 1,024,880 18.1 339,574 6.0 N/A N/A

Total capital 1,052,734 18.6 452,766 8.0 N/A N/A

As of September 30, 2022

CBLR 1,230,851 10.2 1,089,869 9.0 N/A N/A

Generally, savings institutions, such as the Bank, may make capital distributions during any calendar year equal to the earnings of the previous two calendar years and current year-to-date earnings.

4 unchanged sentences

As of September 30, 2023, the balance of this liquidation account was $ 85.3 million.

Under applicable federal banking regulations, neither the Company nor the Bank is permitted to pay dividends on its capital stock to its stockholders if stockholders' equity would be reduced below the amount of the liquidation account at that time.

Under applicable federal banking regulations, neither the Company nor the Bank is permitted to pay dividends to its stockholders if stockholders' equity would be reduced below the amount of the liquidation account at that time.

FAIR VALUE OF FINANCIAL INSTRUMENTS

57 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 $ —

The following is a description of valuation methodologies used for significant financial instruments measured at fair value on a non-recurring basis.

7 unchanged sentences

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 adjust the existing appraised or book value based on knowledge of local market conditions, recent transactions, and estimated selling costs, if applicable.

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.

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

The fair value for OREO is estimated through current appraisals or listing prices, less estimated selling costs of 10 %.

2 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 fiscal years 2022 and 2021 that was still held in the portfolio as of September 30, 2022 and 2021 was $ 328 thousand and $ 170 thousand, respectively.

There was no OREO measured on a non-recurring basis during fiscal year 2023 that was still held in the portfolio at September 30, 2023.

The OREO held at September 30, 2023 was measured during fiscal year 2022.

The fair value of OREO measured on a non-recurring basis during fiscal year 2022 that was still held in the portfolio as of September 30, 2022 was $ 328 thousand.

The carrying value of the properties equaled the fair value of the properties at September 30, 2023 and 2022.

20 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 —

ACCUMULATED OTHER COMPREHENSIVE INCOME

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.

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 income 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 income.

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

9 unchanged sentences

— ( 5,601 ) ( 5,601 )

Reclassification adjustment for net losses on AFS securities included in net income, net of taxes of $( 47,000 )

145,622 — 145,622

Other comprehensive income (loss) 153,977 356 154,333

34 unchanged sentences

Interchange network charges totaled $ 4.0 million, $ 3.6 million and $ 3.6 million for fiscal years 2023, 2022 and 2021, respectively.

Service Charges on Deposit Accounts - Service charges on deposit accounts consist of account maintenance and transaction-based fees such as overdrafts, insufficient funds, wire transfers and the use of out-of-network ATMs.

Service Charges on Deposit Accounts - Service charges on deposit accounts consist of account maintenance fees and transaction-based fees such as those for overdrafts, insufficient funds, wire transfers and the use of out-of-network ATMs.

The Company's performance obligation is satisfied over a period of time, generally a month, for account maintenance and at the time of service for transaction-based fees.

27 unchanged sentences

Payable to the Bank — 81

Other liabilities 11 —

Total liabilities 71 153

23 unchanged sentences

Total non-interest expense 1,875 1,716 1,803

INCOME BEFORE INCOME TAX EXPENSE AND EQUITY IN

EXCESS OF DISTRIBUTION OVER EARNINGS OF SUBSIDIARY 111,513 131,769 68,463

INCOME TAX (BENEFIT) EXPENSE ( 49 ) ( 62 ) 28

INCOME BEFORE EQUITY IN EXCESS OF

DISTRIBUTION OVER EARNINGS OF SUBSIDIARY 111,562 131,831 68,435

EQUITY IN EXCESS OF DISTRIBUTION OVER EARNINGS OF SUBSIDIARY ( 27,109 ) ( 55,749 ) ( 3,895 )

NET INCOME $ 84,453 $ 76,082 $ 64,540

INCOME BEFORE INCOME TAX (BENEFIT) EXPENSE AND EQUITY IN UNDISTRIBUTED (EXCESS OF DISTRIBUTION OVER) EARNINGS OF SUBSIDIARY 86,578 111,513 131,769

INCOME TAX EXPENSE (BENEFIT) 71 ( 49 ) ( 62 )

INCOME BEFORE (EXCESS OF DISTRIBUTION OVER) / EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARY 86,507 111,562 131,831

(EXCESS OF DISTRIBUTION OVER)/ EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARY ( 188,166 ) ( 27,109 ) ( 55,749 )

NET (LOSS) INCOME $ ( 101,659 ) $ 84,453 $ 76,082

STATEMENTS OF CASH FLOWS

3 unchanged sentences

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income $ 84,453 $ 76,082 $ 64,540

Net (loss) income $ ( 101,659 ) $ 84,453 $ 76,082

Adjustments to reconcile net income to net cash provided by operating activities:

16 unchanged sentences

Net cash used in financing activities ( 106,224 ) ( 102,862 ) ( 121,965 )

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

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ( 20,577 ) 28,424 ( 6,913 )

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