What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-11-27 compared with 2023-11-29 · 464 added, 278 removed, 1202 unchanged (38% of the section changed)

1 unchanged sentence

Report of Independent Registered Public Accounting Firm

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

To the Stockholders and Board of Directors

Capitol Federal Financial, Inc.:

Opinion on Internal Control Over Financial Reporting

We have audited the internal control over financial reporting of Capitol Federal Financial, Inc.

and subsidiary (the “Company”) as of September 30, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended September 30, 2023, of the Company and our report dated November 29, 2023, expressed an unqualified opinion on those financial statements.

We have audited Capitol Federal Financial, Inc.

and subsidiary's (the Company) internal control over financial reporting as of September 30, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of September 30, 2024, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for the year then ended, and the related notes (collectively, the consolidated financial statements), and our report dated November 27, 2024 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

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Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audit also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

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Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Deloitte & Touche LLP

Kansas City, Missouri

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors

Capitol Federal Financial, Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of Capitol Federal Financial, Inc.

and subsidiary (the Company) as of September 30, 2024, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for the year then ended, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2024, and the results of its operations and its cash flows for the year then ended, in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of September 30, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated November 27, 2024 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Allowance for credit losses on loans evaluated on a collective basis

As discussed in Notes 1 and 4 to the consolidated financial statements, the Company’s total allowance for credit losses on loans (ACL) was $23.0 million as of September 30, 2024, a substantial portion of which related to the allowance for credit losses for loans evaluated on a collective basis (the collective ACL).

The collective ACL includes the measure of expected lifetime credit losses on a pool basis, with loans aggregated into pools based on similar risk characteristics.

The Company utilized a discounted cash flow (DCF) methodology to calculate the collective ACL.

Average historical loss rates are calculated for each pool using the Company's historical charge-offs, or peer data when the Company's own historical loss rates are not reflective of future loss expectations, and outstanding loan balances during a historical time period.

These historical loss rates are compared to historical data related to economic indices during the same time periods over which the historical loss rates were calculated, and a correlation is estimated using regression analysis.

The Company's model pairs the results of the regression analysis with an economic forecast of these same economic indices in order to model probabilities of default (PDs).

The PDs are then used to generate expected cash flows using segment-specific risk factors and other assumptions to model loss given defaults (LGDs).

The forecast is applied for a reasonable and supportable time period of four quarters before reverting back to historical loss experience, which is accomplished by reversion to long-term historical

averages at the economic index level using a straight-line method over four quarters.

Contractual cash flows are adjusted for expected prepayment speeds and curtailment rates.

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

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

Each loan pool's allowance estimate is equal to the aggregate shortage, if any, of the present value of future cash flows compared to the amortized cost basis of the loan pool.

Qualitative factors are considered for items not included in historical loss rates, macroeconomic forecasts, or other model inputs based on management's current assessment of risks related to loan portfolio attributes and external factors.

We identified the assessment of the collective ACL as a critical audit matter.

A high degree of audit effort, including specialized skills and knowledge in the industry, and subjective and complex auditor judgment was involved in the assessment of the collective ACL.

Specifically, the assessment encompassed the evaluation of the collective ACL methodology, including the methods and models used to estimate (1) the PD and LGD and their significant assumptions, including the economic forecast and economic indices, the reasonable and supportable forecast and reversion periods, and peer data used for historical loss rates;

(2) expected prepayment speeds and curtailment rates;

and (3) the large dollar commercial loan concentration qualitative factor.

The assessment also included an evaluation of the conceptual soundness and performance of the underlying models and assumptions.

In addition, auditor judgment was required to evaluate the sufficiency of audit evidence obtained.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls related to the measurement of the collective ACL, including controls related to the:

• design of the collective ACL methodology

• continued use and appropriateness of the PD and LGD models

• performance monitoring of the PD and LGD models

• identification and determination of the significant assumptions used in the PD and LGD models

• development of the qualitative factors, including the significant assumptions used in the measurement of the qualitative factors

• analysis of the collective ACL results, trends, and ratios.

We evaluated the Company’s process to develop the collective ACL estimate by testing certain sources of data, factors, and assumptions that the Company used, and considered the relevance and reliability of such data, factors, and assumptions.

In addition, we involved credit risk professionals with specialized skills and knowledge, who assisted in:

• evaluating the Company’s collective ACL methodology for compliance with U.S.

generally accepted accounting principles

• evaluating judgments made by the Company relative to the performance monitoring of the PD and LGD models by comparing them to relevant Company specific metrics and trends and the applicable industry practices and regulatory guidance

• assessing the conceptual soundness and performance testing of the PD and LGD models by inspecting the model documentation to determine whether the model is suitable for its intended use

• evaluating the methodology used to select the economic forecast and economic indices, the reasonable and supportable forecast and reversion periods, peer data used for average historical loss rates, and prepayment speeds and curtailment rates by comparing them to the Company’s business environment and relevant industry practices

• evaluating the methodology used to develop the large dollar commercial loan concentrations qualitative factor and the effect of that factor on the collective ACL by comparing it to relevant credit risk factors and consistency with credit trends.

We also assessed the sufficiency of the audit evidence obtained relative to the collective ACL by evaluating the:

• cumulative results of the audit procedures

• qualitative aspects of the Company’s accounting practices

• potential bias in the accounting estimates

We have served as the Company’s auditor since 2024.

Kansas City, Missouri

November 27, 2024

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Capitol Federal Financial, Inc.

and subsidiary (the "Company") as of September 30, 2023 and 2022, the related consolidated statements of income, comprehensive income, stockholders' equity, and cash flows, for each of the three years in the period ended September 30, 2023, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2023, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of September 30, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated November 29, 2023, expressed an unqualified opinion on the Company's internal control over financial reporting.

We have audited the accompanying consolidated balance sheet of Capitol Federal Financial, Inc.

and subsidiary (the "Company") as of September 30, 2023, the related consolidated statements of income, comprehensive income, stockholders' equity, and cash flows, for each of the two years in the period ended September 30, 2023, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2023, and the results of its operations and its cash flows for each of the two years in the period ended September 30, 2023, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Allowance for Credit Losses — Refer to Notes 1 and 4 to the financial statements

Critical Audit Matter Description

The allowance for credit losses (ACL) is a valuation amount that is deducted from the amortized cost basis of loans, which represents management’s current expectations of total expected credit losses included in the Company’s loan portfolio as of the balance sheet date.

In management’s ACL model, average historical loss rates on loan pools with similar risk characteristics are compared to historical data and a correlation is estimated using regression analysis.

Each quarter, the Company's ACL model pairs the results of the regression analysis with a third party provided economic forecast in order to project future loss rates for a reasonable and supportable time period before reverting back to long-term historical averages for each economic index.

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 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.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the ACL model included the following, among others:

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

• With the assistance of our credit specialists, we evaluated the appropriateness of the ACL model, 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 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 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.

/s/ Deloitte & Touche LLP

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November 29, 2023

We have served as the Company's auditor since 1974.

We began serving as the Company's auditor in 1974.

In 2024 we became the predecessor auditor.

CAPITOL FEDERAL FINANCIAL, INC.

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Unearned compensation, Employee Stock Ownership Plan ("ESOP") ( 26,431 ) ( 28,083 )

Retained earnings ( 104,565 ) 80,266

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

Accumulated deficit ( 111,104 ) ( 104,565 )

Accumulated other comprehensive income ("AOCI"), net of tax 21,627 8,700

Total stockholders' equity 1,032,270 1,044,054

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Loans receivable $ 308,707 $ 280,087 $ 228,531

Cash and cash equivalents 43,796 18,304 144

Mortgage-backed securities ("MBS") 33,650 18,520 19,406

Cash and cash equivalents 15,728 43,796 18,304

FHLB stock 10,009 13,821 10,031

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INTEREST EXPENSE:

Borrowings 124,250 52,490 34,774

Deposits 139,549 82,267 34,456

Borrowings 75,233 124,250 52,490

Total interest expense 214,782 206,517 86,946

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Insurance commissions 3,257 3,487 2,947

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

Net loss from securities transactions ( 13,345 ) ( 192,622 ) —

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Occupancy, net 13,558 14,236 14,370

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

Federal insurance premium 6,052 4,456 3,020

Regulatory and outside services 5,743 6,039 6,192

Advertising and promotional 4,264 4,305 5,178

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Office supplies and related expense 1,691 2,499 1,951

Loss on interest rate swap termination — — 4,752

Other non-interest expense 5,320 4,789 4,432

Total non-interest expense 111,943 113,934 112,851

(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

INCOME (LOSS) BEFORE INCOME TAX EXPENSE (BENEFIT) 54,103 ( 138,955 ) 107,203

INCOME TAX EXPENSE (BENEFIT) 16,093 ( 37,296 ) 22,750

NET INCOME (LOSS) $ 38,010 $ ( 101,659 ) $ 84,453

Basic earnings (loss) per share ("EPS") $ 0.29 $ ( 0.76 ) $ 0.62

Diluted EPS $ 0.29 $ ( 0.76 ) $ 0.62

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2024 2023 2022

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

Net income (loss) $ 38,010 $ ( 101,659 ) $ 84,453

Other comprehensive income (loss), net of tax:

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22,362 8,355 ( 159,770 )

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 )

Reclassification adjustment for net (gains) losses on AFS securities included in net income, net of taxes of $ 383 , $( 47,000 ), and $ 0

( 1,188 ) 145,622 —

Unrealized (losses) gains on cash flow hedges arising during the period, net of taxes of $ 701 , $( 1,923 ), and $( 8,177 )

( 2,135 ) 5,957 25,339

Reclassification adjustment for cash flow hedge amounts included in net income, net of taxes of $ 1,967 , $ 1,808 , and $( 1,647 )

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Additional Unearned Total

Common Paid-In Compensation Retained Stockholders'

Stock Capital ESOP Earnings AOCI Equity

Common Paid-In Compensation Accumulated Stockholders'

Stock Capital ESOP Deficit AOCI Equity

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

Cumulative effect of adopting Accounting Standards Update ("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

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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)

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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)

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Balance at September 30, 2023 1,359 1,166,643 ( 28,083 ) ( 104,565 ) 8,700 1,044,054

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

Net income, fiscal year 2024 38,010 38,010

Cumulative effect of adopting Accounting Standards Update ("ASU") 2022-02 ( 27 ) ( 27 )

Other comprehensive income, net of tax 12,927 12,927

ESOP activity ( 725 ) 1,652 927

Restricted stock activity, net 1 ( 10 ) ( 9 )

Stock-based compensation 358 358

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CASH FLOWS FROM OPERATING ACTIVITIES:

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

Net income (loss) $ 38,010 $ ( 101,659 ) $ 84,453

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

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Provision for deferred income taxes 3,546 ( 45,520 ) 2,047

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

Net loss from securities transactions 13,345 192,622 —

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Other assets, net 8,227 2,528 6,661

Income taxes payable/receivable, net ( 7,303 ) ( 2,197 ) 105

Income taxes receivable, net 8,139 ( 7,303 ) ( 2,197 )

Other liabilities ( 22,831 ) ( 4,372 ) ( 10,823 )

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Proceeds from calls, maturities and principal reductions of AFS securities 455,110 186,860 323,025

Proceeds from sale of AFS securities 1,272,512 — —

Proceeds from the redemption of FHLB stock 19,548 358,491 302,243

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Proceeds from sale of other real estate owned ("OREO") 464 533 692

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

Proceeds from sale of assets held-for-sale 629 — —

Proceeds from bank-owned life insurance ("BOLI") death benefit 1,049 720 1,023

Net cash (used in) investing activities ( 329,103 ) ( 167,576 ) ( 326,668 )

Net cash provided by (used in) investing activities 629,109 ( 329,103 ) ( 167,576 )

CAPITOL FEDERAL FINANCIAL, INC.

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Change in advances by borrowers ( 1,192 ) ( 17,074 ) 7,338

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

Repurchase of common stock ( 19,448 ) ( 23,453 ) —

Stock options exercised — — 324

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

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

CASH, CASH EQUIVALENTS AND RESTRICTED CASH:

Net cash (used in) provided by financing activities ( 688,591 ) 477,983 49,177

NET (DECREASE) / INCREASE IN CASH AND CASH EQUIVALENTS ( 28,298 ) 196,411 ( 21,098 )

CASH AND CASH EQUIVALENTS:

Beginning of year 245,605 49,194 70,292

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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 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.

(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 44 traditional and four 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 one- to four-family loans, and providing personal retail financial services, along with offering commercial banking and lending products.

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

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Actual results could differ from these estimates and assumptions.

Cash, Cash Equivalents 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.

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 at September 30, 2024 and 2023, respectively.

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

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Deposits and Borrowed Funds."

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

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

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

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If neither condition is met, and the Company does not expect to recover the amortized cost basis, the Company determines whether the decline in fair value resulted from credit losses or other factors.

In making this assessment, management considers the security structure, the cause(s) and severity of the loss, expectations of future performance including recent events specific to the issuer or industry including the issuer's financial condition and current ability to make future payments in a timely manner, and external credit ratings and recent downgrades in such ratings.

In making this assessment, management considers the security structure, the cause(s) and severity of the loss, expectations of future performance (including recent events specific to the issuer or industry and the issuer's financial condition and current ability to make payments in a timely manner), and external credit ratings and recent downgrades in such ratings.

Management's assessment involves a high degree of subjectivity and judgment that is based on information available at a point in time.

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

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

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

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

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

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Interest accrued but not received is reversed against interest income.

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

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

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

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

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

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

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

Troubled debt restructurings - Prior to the Company's adoption of ASU 2022-02, Financial Instruments - Credit Losses (Topic 326):

Troubled Debt Restructurings ("TDRs") and Vintage Disclosures on October 1, 2023 , a loan was accounted for as a TDR if the Bank granted a concession to a borrower experiencing financial difficulties.

Such concessions generally involved extensions of loan maturity dates, the granting of periods during which reduced payment amounts were 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 loan payments 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.

Loan modifications - The TDR policy outlined above regarding Bank concessions to a borrower experiencing financial difficulty continues to apply for loan modifications upon adoption of ASU 2022-02.

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

Modifications of loans to borrowers experiencing financial difficulty that are in the form of principal forgiveness, interest rate reductions, other-than-insignificant payment delays, or a term extension (or a combination thereof) require disclosure in the notes to the Company's consolidated financial statements.

The Company's modification disclosures are included in Note 4.

Loans Receivable and Allowance for Credit Losses.

Modified loans are included in the Company's ACL model based on the risk characteristics of the loan.

If a modified loan is deemed uncollectible and no longer shares similar risk characteristics within the respective loan pool in the ACL model, the loan is evaluated on an individual basis and any loss is charged-off against the related ACL.

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

1 unchanged sentence

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

We also report certain 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 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.

A nonaccrual commercial loan is returned to accrual status once the loan has been current for a minimum of six months, all fees and interest are paid current, the loan has a sufficient debt service coverage ratio, and the loan is well secured and within policy.

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.

Allowance for Credit Losses on Loans Receivable - The ACL is a valuation amount that is deducted from the amortized cost basis of loans.

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The macroeconomic environment continuously changes, which can cause fluctuations in estimated expected losses.

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

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

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

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

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

One- to four-family loans and consumer home equity loans are deemed to be collateral dependent and individually evaluated for loss when the loan is generally 180 days delinquent, and any identified losses are charged-off at that time.

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

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.

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

Commercial loans are generally individually evaluated for loss during the quarterly special loan review process, or at any time management determines circumstances warrant.

In general, commercial loans are individually evaluated for loss if they are rated substandard or below.

Loss amounts are calculated using the market value of collateral adjusted for costs to sell compared to the amount due from the borrower, adjusted for any government guaranty there may be on the loan.

If the loss amount is calculated and the Bank's commercial loan committee determines the amount is uncollectible, the amount is charged-off.

If the loss amount is determined to be collectible, then the amount is reserved as a specific valuation allowance.

The determination of whether the

loss is collectible or uncollectible is based on current financial information from the borrower, as well as any facts and information of which the Bank may have knowledge.

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

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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.

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

Therefore, the Bank could have to 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.

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

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

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

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

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

The contractual term excludes expected extensions, renewals and modifications unless there is a reasonable expectation that a TDR will be executed.

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

Each quarter, the Company's model pairs the results of the regression analysis with an economic forecast of these same economic indices, which is provided by a third party, in order to model probabilities of default ("PDs").

The PDs are then used to generate expected cash flows using segment-specific risk factors and other assumptions to model loss given defaults ("LGDs").

The forecast is applied for a reasonable and supportable time period, as determined by management, before reverting back to historical loss experience, which is accomplished by reversion to long-term historical averages at the economic index level using a straight-line method.

Contractual cash flows are adjusted for expected prepayment speeds and curtailment rates selected by management.

The contractual term excludes expected extensions, renewals and modifications.

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

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

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

Each loan pool's ACL is equal to the aggregate shortage, if any, of the present value of future cash flows compared to the amortized cost basis of the loan pool.

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

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

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

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

Each loan pool's ACL is equal to the aggregate shortage, if any, of the present value of estimated future cash flows compared to the amortized cost basis of the loan pool.

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

Such qualitative factor considerations include changes in the Bank's loan portfolio composition and credit concentrations, changes in the loan balances and/or trends in asset quality and/or loan credit performance, changes in lending underwriting standards, the effect of other external factors such as significant unique events or conditions, and actual and/or expected changes in economic conditions, real estate values, and/or other economic developments in the geographic areas in which the Bank operates, and/or other management considerations to account for credit risks not fully reflected in the discounted cash flow model.

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

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 and qualitative factors are also considered;

Expected credit losses on these amounts are calculated using the same ACL to loan ratio that is calculated by the ACL model;

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

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

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

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

Federal Home Loan Bank Stock - As a member of FHLB, the Bank is required to acquire and hold shares of FHLB stock.

The Bank's holding requirement varies based on the Bank's activities, primarily the Bank's outstanding borrowings, with FHLB.

FHLB stock is carried at cost and is considered a restricted asset because it cannot be pledged as collateral or bought or sold on the open market and it also has certain redemption restrictions.

FHLB stock is carried at cost and is considered a restricted asset because it cannot be pledged as collateral or bought or sold on the open market and because it has certain redemption restrictions.

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

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

Operating lease right-of-use assets represent the Company's right to use an underlying asset during the lease term and operating lease liabilities represent the Company's obligation to make lease payments arising from the lease.

The right-of-use assets associated with operating leases are recorded in other assets in the Company's consolidated balance sheets.

The lease liabilities associated with operating leases are included in other liabilities on the consolidated balance sheets.

The period over which the right-of-use asset is amortized is generally the lesser of the expected remaining term or the remaining useful life of the leased asset.

The lease liability is decreased as periodic lease payments are made.

The Company performs impairment assessments for right-of-use assets when events or changes in circumstances indicate that their carrying values may not be recoverable.

Leases that meet any of the following criteria are considered financing leases:

(1) the lease transfers ownership of the underlying asset by the end of the lease term;

(2) the lease grants the Company an option to purchase the underlying asset that the Company is reasonably certain to exercise;

(3) the lease term is the major part of the remaining economic life of the underlying assets;

(4) the present value of the sum of the lease payments and any residual value guaranteed by the Company that is not already reflected in the lease payments equals or exceeds substantially all the fair value of the underlying asset;

or (5) the underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term.

A right-of-use asset represents the Company's right to use an underlying asset during the lease term.

The calculated amounts of the right-of-use assets and lease liabilities are impacted by the length of the lease term and the discount rate used to calculate the present value of the minimum remaining lease payments.

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

Lease expense, variable lease expense and short-term lease expense are included in occupancy expense in the Company's consolidated statements of income.

The right-of-use assets associated with operating leases are recorded in other assets and for finance leases in premises and equipment on the Company's consolidated balance sheet.

The lease liabilities associated with operating leases are included in other liabilities and for finance leases in borrowings on the Company's consolidated balance sheets.

The period over which a right-of-use asset is amortized is generally the lesser of the expected remaining term or the remaining useful life of the leased asset.

The lease liability is decreased as periodic lease payments are made.

For facility-related leases, the Company elected, by lease class, to not separate lease and non-lease components.

Lease expense is recognized on a straight-line basis over the lease term.

Variable lease expense primarily represents payments such as common area maintenance, real estate taxes, and utilities and are recognized as expense in the period when those payments are incurred.

The Company performs impairment assessments for right-of-use assets when events or changes in circumstances indicate that their carrying values may not be recoverable.

Operating lease expense is recognized over the lease term.

Variable lease expense primarily represents payments such as common area maintenance, real estate taxes, and utilities and are recognized as expense in the period when those payment

obligations are incurred.

Short-term lease expense relates to leases with an initial term of 12 months or less.

Operating lease expense, variable lease expense and short-term lease expense associated with operating leases are included in occupancy expense in the Company's consolidated statements of income.

The Company has elected to not record a right-of-use asset or lease liability for short-term leases.

Financing lease right-of-use assets are amortized on a straight-line basis over the lease term and the related expense is reported in occupancy expense in the Company's consolidated statements of income.

The lease obligation is increased by the accrual of interest and decreased by subsequent lease payments.

Interest expense on finance leases is reported in interest expense on borrowings in the Company's consolidated statements of income.

Low Income Housing Partnerships - As part of the Bank's community reinvestment initiatives, the Bank invests in affordable housing limited partnerships ("low income housing partnerships") that make equity investments in affordable housing properties.

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The Company's intangible assets primarily relate to core deposits.

These intangible assets are amortized based upon the expected economic benefit over an estimated life determined at the time of acquisition and are tested for impairment whenever events or circumstances change.

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.

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.

The ineffective portion of the change in fair value of the interest rate swap is recognized directly in earnings.

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, 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.

Effectiveness is assessed using regression analysis.

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The ESOP shares pledged as collateral are reported as a reduction of stockholders' equity at cost.

As ESOP shares are committed to be released from collateral each quarter, the Company records compensation expense based on the average market price of the Company's stock during the quarter.

As ESOP shares are committed to be released from collateral each quarter, the Company records compensation expense based on the average market price of the Company's common stock during the quarter.

Additionally, the ESOP shares become outstanding for EPS computations once they are committed to be released.

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

Dividends - Dividends paid are recognized as a reduction to retained earnings.

As a result, if the Company is in an accumulated deficit position, a dividend payment will increase the accumulated deficit.

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

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

The Company adopted the ASU on October 1, 2023 on a prospective basis, except for the amendments impacting the measurement of the ACL for TDRs, which were adopted on a modified retrospective approach.

Upon adoption, the Company recorded a $20 thousand increase in ACL, a $16 thousand increase in reserves for off-balance sheet credit exposures, and a cumulative effect-adjustment to accumulated deficit of $27 thousand, net of tax.

The adjustments are attributable to including TDRs in the ACL model, as of

October 1, 2023.

The new required disclosures associated with this ASU are included above and in Note 4.

Loans Receivable and Allowance for Credit Losses.

In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements - Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative.

This ASU incorporates a variety of Topics into the Codification that are currently included in SEC Regulations S-X and S-K.

The ASU is intended to align the accounting standards of GAAP with SEC Regulations S-X and S-K.

Each amendment in the ASU will only become effective for the Company if the SEC removes the related disclosure or presentation requirement from its existing regulations by June 30, 2027.

This may result in disclosures currently presented outside of the Company's financial statements being relocated to the Company's financial statements.

The amendments will be applied prospectively by the Company.

The ASU is not expected to have a material impact on the Company's disclosures as the Company is currently subject to SEC Regulations S-X and S-K.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures .

This ASU requires enhanced disclosures of segment information for all public entities, including those that have a single reportable segment, primarily in the area of segment revenues and expenses.

Entities that have a single reportable segment, like the Company, will be required to provide all the disclosures required by this ASU and all existing segment disclosures requirements in ASC 280, Segment Reporting .

This ASU is effective for fiscal years beginning after December 15, 2023, which is the fiscal year ending September 30, 2025 for the Company, and interim periods within fiscal years beginning after December 15, 2024, which is the quarter ending December 31, 2025 for the Company.

The Company is currently evaluating the effect this ASU will have on the Company's segment disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures .

This ASU requires public entities to provide additional annual disclosures regarding specific categories of the income tax rate reconciliation and additional information for reconciling items within the income tax rate reconciliation that meet a certain quantitative threshold.

This ASU is effective for the Company on October 1, 2025, starting with its Form 10-Q for the quarter ending December 31, 2025.

The Company is currently evaluating the effect this ASU will have on the Company's income tax disclosures.

In March 2024, the FASB issued ASU 2024-02, Codification Improvements - Amendments to Remove References to the Concepts Statements .

This ASU removes references to various Concept Statements to simplify the Codification and provide a distinction between authoritative and nonauthoritative literature.

This ASU is effective for the Company on October 1, 2025.

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.

The Company is currently evaluating this ASU, but it is not expected to have a significant impact on the Company's consolidated financial condition or results of operation, or the Company's disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures .

This ASU requires additional expense disclosures by public entities in the notes to the financial statements.

The ASU outlines the specific costs that are required to be disclosed which include such costs as:

purchases of inventory, employee compensation, depreciation, intangible asset amortization, selling costs, and depreciation, depletion, and amortization related to oil and gas production.

It also requires qualitative descriptions of the amounts remaining in the relevant expense income statement captions that are not separately disaggregated quantitatively in the notes to the financial statements and the entity's definition of selling expenses.

The disclosures are required for each interim and annual reporting period.

The ASU is effective for fiscal years beginning after December 15, 2026, which is the fiscal year ending September 30, 2028 for the Company, and interim periods beginning after December 15, 2027, which is the quarter ending December 31, 2027 for the Company.

The Company is currently evaluating the effect this ASU will have on the Company's expense disclosures in the notes to the consolidated financial statements.

EARNINGS PER SHARE

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

For the Year Ended September 30,

2024 2023 2022

(Dollars in thousands, except per share amounts)

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

Net income $ 38,010 $ ( 101,659 ) $ 84,453

Income allocated to participating securities ( 33 ) 51 ( 45 )

Net income available to common stockholders $ 37,977 $ ( 101,608 ) $ 84,408

Total basic average common shares outstanding 130,670,780 133,556,864 135,700,447

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The following tables reflect the amortized cost, estimated fair value, and gross unrealized gains and losses of AFS securities at the dates presented.

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

The majority of our AFS securities at both dates presented were government guaranteed or issued by a GSE.

September 30, 2024

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Corporate bonds 4,000 — 612 3,388

Municipal bonds 942 — — 942

$ 829,852 $ 27,113 $ 699 $ 856,266

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$ 1,385,992 $ 113 $ 1,623 $ 1,384,482

At September 30, 2024, there was $ 713.3 million of residential MBS and $ 70.2 million of commercial MBS.

At September 30, 2023 all MBS were residential MBS.

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.

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MBS $ 10,997 $ 44 $ 2,919 $ 43

GSE debentures — — 24,818 182

Corporate bonds — — 3,388 612

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Corporate bonds — — 3,378 622

Municipal bonds 1,161 82 — —

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

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

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.

Management did not record an ACL on securities in an unrealized loss position at September 30, 2024 as management does not believe any of the securities were impaired due to credit quality reasons.

The issuers of these securities continue to make scheduled and timely principal and interest payments, as applicable, under the contractual term of the securities so management believes the entire principal balance will be collected as scheduled.

Additionally, management does not have the intent to sell any of the securities, and believes that it is more likely than not that the Company will not be required to sell the securities before the recovery of the remaining amortized cost, which could be at maturity.

The fair value is expected to recover as the securities approach their maturity date, if not before, or if market yields decline.

The amortized cost and estimated fair value of AFS debt securities as of September 30, 2024, by contractual maturity, are shown below.

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(Dollars in thousands)

One year or less $ 72,800 $ 72,618

One year through five years $ 10,000 $ 10,000

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$ 829,852 $ 856,266

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

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

For the Year Ended September 30,

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Public unit deposits 108,748 178,396

FHLB advances — 572,913

$ 220,029 $ 697,591

During fiscal year 2021, the Company sold its Visa Class B shares.

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

All other dispositions of securities during 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.

At 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.

The Bank sold $ 1.30 billion of AFS securities during the current fiscal year.

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, resulting in a net loss of $ 13.3 million on the sale.

All other dispositions of securities during the current year and prior year periods were the result of principal repayments, calls, or maturities.

LOANS RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES

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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 $ 972 thousand and $ 1.1 million as of September 30, 2023 and 2022, respectively.

The Bank held borrowers' escrow balances on loans serviced for others of $ 942 thousand and $ 972 thousand as of September 30, 2024 and 2023, 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 also originates consumer loans primarily secured by one- to four-family residential properties and originates and participates in commercial loans.

The Bank has historically also purchased one- to four-family loans from correspondent lenders, but during the current fiscal year the Bank suspended its one- to four-family correspondent lending channels for the foreseeable future.

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

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

The underwriting standards for loans purchased from correspondent lenders are generally similar to the Bank's internal underwriting standards.

The underwriting of loans purchased from correspondent lenders on a loan-by-loan basis is performed by the Bank's underwriters.

The underwriting standards for loans purchased from correspondent lenders were generally similar to the Bank's internal underwriting standards.

The underwriting of loans purchased from correspondent lenders on a loan-by-loan basis was performed by the Bank's underwriters.

The Bank also originates owner-occupied construction-to-permanent loans secured by one- to four-family residential real estate.

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

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

Commercial loans - The Bank's commercial portfolio includes loans that are originated by the Bank or in participation with a lead bank.

For commercial participation loans, the Bank performs the same underwriting procedures as if the loan was originated by the Bank.

The Bank's commercial loan portfolio has a concentration in commercial real estate and commercial construction loans and a geographic concentration in Kansas, Texas, and Missouri.

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.

At the time of origination, 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 .

For commercial construction loans, LTV ratios generally do not exceed 80 % of the projected appraised value of the property securing the loans and the minimum debt service coverage ratio is generally 1.15 , but it applies to the projected cash flows, and the borrower must have successful experience with the construction and operation of properties similar to the subject property.

At the time of origination, 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 DSCR is generally 1.15 x.

The Bank generally requires a guaranty on all commercial real estate loans, but for an experienced borrower with a strong DSCR and low LTV ratio, the Bank may allow the guaranty percentage to be reduced, phased out, or originated as a non-recourse loan.

For commercial construction loans, LTV ratios generally do not exceed 80 % of the projected appraised value of the property securing the loans and the minimum DSCR is generally 1.15 x, but it applies to the projected cash flows, and the borrower must have successful experience with the construction and operation of properties similar to the subject property.

Appraisals on properties securing these loans are performed by independent state certified fee appraisers.

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

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

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

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

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

For construction loans, guaranties are typically required during the period of construction.

After construction is complete, for select experienced borrowers that have a strong DSCR and low LTV ratio, the guaranty may be reduced or phased out when the property meets certain performance metrics.

Additionally, the Bank generally requires the borrower to contribute equity at the start of a project and prior to any Bank funding.

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

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

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

As a result of these different complexities, variables and risks, commercial and industrial loans generally require evaluation of different metrics and factors before origination, and require more monitoring and servicing after origination than other types of loans.

Management regularly monitors the level of risk in the entire commercial loan portfolio, including concentrations in such factors as geographic locations, collateral types, tenant brand name, borrowing relationships, and lending relationships in the case of participation loans, among other factors.

Annual reviews are performed for larger loans and lending relationships.

The annual reviews include evaluating updated financials, as well as performing stress tests to measure the ability of the loans to withstand certain stress scenarios such as interest rate increases, revenue decreases and expense increases.

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

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

8 unchanged sentences

one- to four-family - originated, one- to four-family - correspondent purchased, one- to four-family - bulk purchased, consumer - home equity, consumer - other, commercial - commercial real estate, and commercial - commercial and industrial.

One- to four-family construction loans are included in the originated class and commercial construction loans are included in the commercial real estate class.

One- to four-family construction loans are included in

the originated class and commercial construction loans are included in the commercial real estate class.

As part of the on-going monitoring of the credit quality of the Company's loan portfolio, management tracks certain credit quality indicators including trends related to loan classification and delinquency status.

Loan Classification - In accordance with the Bank's asset classification policy, management regularly reviews the problem loans in the Bank's portfolio to determine whether any loans require classification.

Loan classifications are defined as follows:

4 unchanged sentences

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

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

The following tables set 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 and revolving lines of credit converted to term loans are presented separately, regardless of origination year.

37 unchanged sentences

September 30, 2023

Fiscal Fiscal Fiscal Fiscal Fiscal Revolving

Year Year Year Year Year Prior Line of

2022 2021 2020 2019 2018 Years Credit Total

Fiscal Fiscal Fiscal Fiscal Fiscal Revolving Credit

Year Year Year Year Year Prior Line of Converted

2023 2022 2021 2020 2019 Years Credit to Term Total

(Dollars in thousands)

67 unchanged sentences

September 30, 2023

Fiscal Fiscal Fiscal Fiscal Fiscal Revolving

Year Year Year Year Year Prior Line of

2022 2021 2020 2019 2018 Years Credit Total

Fiscal Fiscal Fiscal Fiscal Fiscal Revolving Credit

Year Year Year Year Year Prior Line of Converted

2023 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

Gross Charge-Offs - Since the adoption of ASU 2022-02 on October 1, 2023, the Company has been required to present gross charge-offs by class of financing receivable and year of origination or most recent credit decision.

The following table sets forth the required gross charge-off information for the year ended September 30, 2024.

Current Fiscal Fiscal Fiscal Fiscal Revolving of Credit

Fiscal Year Year Year Year Prior Lines of Converted to

Year 2023 2022 2021 2020 Years Credit Term Total

(Dollars in thousands)

One- to four-family:

Originated $ — $ — $ — $ — $ — $ — $ — $ — $ —

Correspondent purchased — — — — — — — — —

Bulk purchased — — — — — — — — —

— — — — — — — — —

Commercial real estate 50 — — — — 30 — — 80

Commercial and Industrial — — — — — — — — —

50 — — — — 30 — — 80

Home Equity 46 1 — — — — — — 47

Other — 9 15 — — 9 — — 33

46 10 15 — — 9 — — 80

Total $ 96 $ 10 $ 15 $ — $ — $ 39 $ — $ — $ 160

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

At September 30, 2024 and 2023, 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, 2024

26 unchanged sentences

$ 16,347 $ 8,936 $ 25,283 $ 7,969,425 $ 7,994,708

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 amortized cost of mortgage loans secured by residential real estate for which formal foreclosure proceedings were in process as of September 30, 2024 and 2023 was $ 1.6 million and $ 2.5 million, respectively, which is included in loans 90 or more days delinquent or in foreclosure in the tables above.

The carrying value of residential OREO held as a result of obtaining physical possession upon completion of a foreclosure or through completion of a deed in lieu of foreclosure was $ 55 thousand at September 30, 2024 and $ 219 thousand at September 30, 2023.

The following table presents the amortized cost at September 30, 2024 and September 30, 2023, by class, of loans classified as nonaccrual.

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

Nonaccrual loans with no ACL were individually evaluated for loss and any losses have been charged off.

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

9 unchanged sentences

$ 10,166 $ 3,010 $ 9,453 $ 1,990

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.

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 Year Ended September 30, 2023

Number Pre- Post-

of Restructured Restructured

Contracts Outstanding Outstanding

Loan Modifications - The following table presents the amortized cost basis of loans as of September 30, 2024 that were both experiencing financial difficulties and modified during the year ended September 30, 2024, by class of financing receivable and by type of modification.

Also presented in the table is the percentage of the amortized cost basis of loans as of September 30, 2024 that were modified for borrowers experiencing financial difficulties as compared to the amortized cost basis of each class of financing receivable as of September 30, 2024.

During the year ended September 30, 2024, there was a $ 50 thousand charge-off related to a commercial real estate loan modified during the year ended September 30, 2024.

The Company has not committed to lend additional amounts to borrowers included in these tables.

Extension Delay, and Total

Interest and Interest Class of

Principal Rate Payment Term Payment Rate Financing

Forgiveness Reduction Delay Extension Delay Reduction Total Receivable

(Dollars in thousands)

1 unchanged sentence

Originated $ — $ — $ — $ 1,547 $ 6,992 $ — $ 8,539 0.22 %

Correspondent purchased 1 282 285

Correspondent — — — 338 1,716 — 2,054 0.09

Bulk purchased — — — — — — — —

— — — 1,885 8,708 — 10,593 0.17

Commercial real estate — — 8,196 — 192 — 8,388 0.61

Commercial and industrial — — — — 653 12 665 0.51

— — 8,196 — 845 12 9,053 0.60

Consumer loans:

Home equity — — 89 — — — 89 0.09

Other — — — — — — — —

— — 89 — — — 89 0.08

Total $ — $ — $ 8,285 $ 1,885 $ 9,553 $ 12 $ 19,735 0.25

Financial effect of loan modifications - The table below presents the financial effects of loan modifications during the year ended September 30, 2024, including the weighted average term extension, weighted average payment delay, and weighted average interest rate reduction.

For the Year Ended September 30, 2024

Term Payment Interest Rate

Extension Delays Reduction

One- to four-family:

Originated 33 months 4 months N/A

Correspondent 36 months 4 months N/A

Commercial real estate 24 months 6 months N/A

Commercial and industrial 6 months 6 months 0.50 %

Consumer home equity N/A 7 months N/A

Performance of loan modifications - The following table provides information about the subsequent performance during the year ended September 30, 2024 of loans modified for borrowers experiencing financial difficulty.

For the Year Ended September 30, 2024

30 to 89 Days

Delinquent 90 or More Days

Delinquent or in Foreclosure Total

Delinquent Loans Current

Amortized Cost

(Dollars in thousands)

One- to four-family:

Originated $ 1,800 $ 720 $ 2,520 $ 6,019 $ 8,539

Correspondent 284 425 709 1,345 2,054

Bulk purchased — — — — —

Commercial real estate 142 50 192 8,196 8,388

Commercial & industrial 227 — 227 438 665

Consumer loans:

Home equity — — — 89 89

Other — — — — —

$ 2,453 $ 1,195 $ 3,648 $ 16,087 $ 19,735

TDRs - Prior to the adoption of ASU 2022-02 on October 1, 2023, loans were accounted for as TDRs if the Bank granted a concession to a borrower experiencing financial difficulties.

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.

For the Year Ended September 30, 2023

Number Pre- Post-

25 unchanged sentences

For the Years Ended

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

Number of Amortized Number of Amortized Number of Amortized

Contracts Cost Contracts Cost Contracts Cost

September 30, 2023 September 30, 2022

Number of Amortized Number of Amortized

Contracts Cost Contracts Cost

(Dollars in thousands)

9 unchanged sentences

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, 2024

4 unchanged sentences

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

Adoption of ASU 2022-02 3 1 14 18 2 — 20

Balance at October 1, 2023 2,152 2,973 221 5,346 18,182 251 23,779

Charge-offs — — — — ( 80 ) ( 80 ) ( 160 )

2 unchanged sentences

Ending balance $ 1,666 $ 1,861 $ 146 $ 3,673 $ 19,154 $ 208 $ 23,035

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, 2023

14 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 )

5 unchanged sentences

The key assumptions utilized in estimating the Company's ACL at September 30, 2024 are discussed below.

• Economic Forecast - Management considered several economic forecasts provided by a third party and selected a weighted economic forecast that was the most appropriate considering the facts and circumstances at September 30, 2023.

• 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 September 30, 2024.

The forecasted economic indices applied to the model at September 30, 2024 were the national unemployment rate, changes in commercial real estate price index, changes in home values, and changes in the U.S.

5 unchanged sentences

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 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.

• Qualitative factors - Management applied qualitative factors at September 30, 2024 to account for large dollar commercial loan concentrations and potential downside market risk with the recent housing price appreciation related to one-to four-family loans.

These qualitative factors were applied to account for credit risks not fully reflected in the discounted cash flow model.

◦ The Company's commercial real estate and construction loans generally have low LTV ratios and strong DSCRs which serve as indicators that losses in the commercial real estate and construction loan portfolios might be unlikely;

however, because there is uncertainty surrounding the nature, timing and amount of expected losses, management believes that in the event of a realized loss within the large dollar commercial loan pools, the magnitude of such a loss is likely to be significant.

The large dollar commercial loan concentration qualitative factor addresses the risk associated with a large dollar relationship deteriorating due to a loss event.

As part of its analysis, management considered external data including historical loss information for the industry and commercial real estate price index trending information from a variety of reputable sources to help determine the amount of this qualitative factor.

◦ For one- to four-family loans, management believes there is potential downside market risk with the recent housing price appreciation related to, in particular, newer originations and developed a qualitative factor to account for this risk.

To determine the appropriate amount of the one- to four-family loan qualitative factor as of September 30, 2024, management considered external historical home price index trending information, along with the Bank's recent origination/purchase activity, historical loan loss experience and portfolio balance trending, the one-to four-family loan portfolio composition with regard to loan size, and management's knowledge of the Bank's loan portfolio and the one- to four-family lending industry.

This qualitative factor replaced the economic uncertainties qualitative factor that was in place at September 30, 2023 and was less than the amount of the economic uncertainty qualitative factor at September 30, 2024 resulting in a decrease in ACL for one- to four-family loans compared to the prior year.

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

At September 30, 2024 and 2023, the Bank's off-balance sheet credit exposures totaled $ 826.5 million and $ 837.7 million, respectively.

The increase in the reserve for off-balance sheet credit exposures during the current year was due to an increase in the balance of commercial off-balance sheet credits along with an increase in the ACL to loan ratio, specifically for commercial construction loans.

For the Years Ended

2 unchanged sentences

Beginning balance $ 4,095 $ 4,751

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

Adoption of ASU 2022-02 16 —

Provision for credit losses 1,892 ( 656 )

Ending balance $ 6,003 $ 4,095

8 unchanged sentences

Premises and equipment, net $ 91,463 $ 91,531

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

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.

At September 30, 2024, the Company's operating leases had remaining terms that ranged from 0.1 years to 33 years, some of which included the assumed exercise of renewal options that the Company considers to be reasonably certain.

A right-of-use asset of $ 8.5 million and $ 11.3 million was included in other assets and a lease liability of $ 8.9 million and $ 11.6 million was included in other liabilities for the Company's operating leases on the consolidated balance sheets, as of September 30, 2024 and September 30, 2023 respectively.

As of September 30, 2024, for the Company's operating leases, the weighted average remaining lease term was 24.1 years and the weighted average discount rate was 2.69 %.

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.

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

For the Year Ended September 30,

5 unchanged sentences

Cash paid for amounts included in the measurement of lease liabilities 1,130 1,211 1,312

The following table presents future minimum payments, rounded to the nearest thousand, for operating leases with initial or remaining terms in excess of one year as of September 30, 2023 (dollars in thousands):

The Company entered into finance leases during the current year.

The Company's finance leases as of September 30, 2024 had remaining terms that ranged from 3 years to 23 years.

A finance lease right-of-use asset of $ 1.0 million was included in premises and equipment, net and a finance lease liability of $ 1.1 million was included in borrowings on the consolidated balance sheets, as of September 30, 2024.

As of September 30, 2024, for the Company's finance leases, the weighted average remaining lease term was 20.0 years and the weighted average discount rate was 5.17 %.

During the year ended September 30, 2024, amortization expense of finance lease right-of-use assets, interest expense on finance lease liabilities, and cash paid for amounts included in the measurement of finance lease liabilities was $ 59 thousand, $ 53 thousand and $ 73 thousand, respectively.

The following table presents future minimum payments, for operating and finance leases with initial or remaining terms in excess of one year as of September 30, 2024:

Operating Finance Total

(Dollars in thousands)

Fiscal year 2025 $ 715 $ 91 $ 806

15 unchanged sentences

INTANGIBLE ASSETS

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

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

Core Deposit and

14 unchanged sentences

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

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.

Borrowings - Borrowings at September 30, 2024 consisted of $ 2.18 billion in FHLB advances, of which $ 1.98 billion were fixed-rate advances and $ 200.0 million were variable-rate advances, and $ 1.1 million in finance leases.

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, 2024 or 2023.

Additionally, the Bank is authorized to borrow from the FRB of Kansas City's "discount window" but there were no such borrowings at September 30, 2024 or 2023.

FHLB advances and BTFP borrowings at September 30, 2024 and 2023 were comprised of the following:

10 unchanged sentences

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.

The Bank's borrowing limit approved by FHLB senior management was 50 % as of September 30, 2024 and became 45 % starting November 1, 2024.

At September 30, 2024, 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.

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

Advances could be requested under the BTFP until March 11, 2024.

Subsequent to September 30, 2023, the Bank repaid the $ 500.0 million of BTFP borrowings and did not enter into any additional BTFP borrowings after that point in time.

At September 30, 2024 and 2023, the Bank had entered into interest rate swap agreements with a total notional amount of $ 200.0 million and $ 365.0 million, respectively, in order to hedge the variable cash flows associated with $ 200.0 million and $ 365.0 million, respectively, of adjustable-rate FHLB advances.

At September 30, 2024 and 2023, the interest rate swap agreements had an average remaining term to maturity of 2.3 years and 2.1 years, respectively.

1 unchanged sentence

At September 30, 2024 and September 30, 2023, the interest rate swaps were in a gain position with a total fair value of $ 2.1 million and $ 13.0 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 2024 and 2023, $ 6.1 million and $ 5.6 million, respectively, was reclassified from AOCI as a decrease to interest expense.

At September 30, 2024, the Company estimated that $ 1.8 million of interest expense associated with the interest rate swaps would be reclassified from AOCI as a decrease to interest expense on FHLB borrowings during the next 12 months.

The Bank has minimum collateral posting thresholds with

its derivative counterparties and posts collateral on a daily basis.

The Bank has minimum collateral

posting thresholds with its derivative counterparties and posts collateral on a daily basis.

The Bank held cash collateral of $ 2.1 million at September 30, 2024 and $ 14.0 million at September 30, 2023.

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 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.

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

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

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

During the 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.

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

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

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.

Periodically, management has utilized a leverage strategy to increase earnings which entails entering into short-term FHLB borrowings and depositing the proceeds from these FHLB borrowings, net of the cost to purchase FHLB stock to meet FHLB stock holding requirements, at the FRB of Kansas City ("leverage strategy").

The leverage strategy is not a core operating business for the Company.

It provides the Company the ability to utilize excess capital to generate earnings.

Additionally, it is a strategy that can be exited quickly without additional costs.

Leverage strategy borrowings are repaid prior to each quarter end.

The leverage strategy was not in place during the current year due to the strategy being unprofitable, but it was in place at points during the prior year.

When the leverage strategy is in place, it reduces the net interest margin due to the amount of earnings from the transaction in comparison to the size of the transaction.

Management continues to monitor the net interest rate spread and overall profitability of the leverage strategy.

Scheduled Repayment of Borrowed Funds and Maturity of Certificates of Deposit - The following table presents the scheduled repayment of term borrowings, at par, and the maturity of certificates of deposit as of September 30, 2024.

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

Amortizing FHLB advances are presented based on their maturity dates versus their quarterly scheduled repayment dates.

At September 30, 2024, the Bank's FHLB advances had maturities ranging from October 2024 to August 2029.

Borrowings Amount

7 unchanged sentences

$ 2,180,656 $ 2,965,310

Income tax expense for the years ended September 30, 2023, 2022, and 2021 consisted of the following:

Income tax expense (benefit) for the years ended September 30, 2024, 2023, and 2022 consisted of the following:

2024 2023 2022

15 unchanged sentences

Increases (decreases) in taxes resulting from:

Pre-1988 bad debt recapture 5,406 10.0 — — — —

State taxes, net of Federal tax effect 2,497 4.8 ( 5,412 ) 3.9 3,399 3.2

3 unchanged sentences

$ 16,093 29.7 % $ ( 37,296 ) 26.8 % $ 22,750 21.2 %

Pre-1988 bad debt recapture - Prior to the Small Business Job Protection Act (the "1996 Act"), the Bank was permitted to deduct, up to a specified formula limit, a certain percentage of income as bad debts, for which the Bank was not required to establish a deferred tax liability.

The difference between actual bad debts and the formula limit bad debt amount ("excess reserves") was recorded in the Bank's retained earnings.

As a result of the 1996 Act, savings institutions, like the Bank, were required to use the specific charge-off method in computing bad debts on their tax returns beginning with their 1996 Federal tax returns.

The 1996 Act required the recapture of excess reserves over the base year, which was September 30, 1988 for the Bank.

The excess reserves established prior to September 30, 1988 are to remain in retained earnings ("pre-1988 bad debt reserves") subject to recapture by the Bank on the occurrence of certain distributions in excess of current earnings and profits accumulated in tax years beginning after December 31, 1951 ("accumulated earnings and profits").

For tax purposes, if current and accumulated earnings and profits are negative, distributions from the Bank to Capitol Federal Financial, Inc.

would be deemed to be drawn out of the Bank's pre-1988 bad debt reserve requiring a payment of income tax at the then-current rate by the Bank on the amount of earnings deemed to be removed from the pre-1988 bad debt reserves for such distributions ("pre-1988 bad debt recapture").

The net loss associated with the strategic securities transaction ("securities strategy") that was recognized in fiscal year 2023 net income will be recognized in the Company's fiscal year 2024 income tax return due to the sale of the securities occurring in October 2023 (in fiscal 2024).

As a result, the Company will report a taxable net loss on its September 30, 2024 income tax return, resulting in negative current and accumulated earnings and profits for the Bank for the current fiscal year.

This required the Bank to draw upon the pre-1988 bad debt reserves for distributions from the Bank to the Company during the current fiscal year and resulted in income tax expense in fiscal year 2024 equivalent to the distributions paid by the Bank times the Bank's current statutory tax rate of 21 %.

During the year ended September 30, 2024, the Bank recorded $ 5.4 million of income tax expense related to these distributions.

The Bank estimates its pre-1988 bad debt reserves to be $ 75.9 million at September 30, 2024, which equates to an unrecorded deferred tax liability of $ 15.9 million at September 30, 2024.

The components of the net deferred income tax assets (liabilities) as of September 30, 2024 and 2023 were as follows:

1 unchanged sentence

Deferred income tax assets:

Net loss on securities transactions $ 47,006 $ —

Net operating loss carry forward $ 30,459 $ —

Low income housing tax credit carry forward 12,813 —

ACL 4,837 4,989

1 unchanged sentence

ESOP compensation 1,522 1,510

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

Reserve for off-balance sheet credit exposures 1,451 999

Unrealized loss on AFS securities 368 50,064

Salaries, deferred compensation and employee benefits 1,431 1,269

Net purchase discounts related to acquired loans 116 149

Low income housing partnerships 6 92

Net loss on securities transactions — 47,006

Unrealized loss on AFS securities — 368

Other 829 912

4 unchanged sentences

FHLB stock dividends 18,871 17,547

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

Premises and equipment 3,164 3,614

Unrealized gain on AFS securities 6,382 —

ACL 2,741 2,936

Premises and equipment 2,317 3,164

Lease right-of-use assets 2,043 2,748

Unrealized gain on interest rate swaps 508 3,176

Deposit intangible 200 411

2 unchanged sentences

Net deferred tax assets $ 21,978 $ 29,605

During the year ended September 30, 2024, the Company reversed the $ 47.0 million deferred tax asset as of September 30, 2023 related to the net loss on the securities transaction and recorded a deferred tax asset for the anticipated taxable net loss in the current fiscal year.

The deferred tax asset related to the taxable net loss, or net operating loss, was $ 30.5 million at September 30, 2024.

The gross federal and state net operating loss amount at September 30, 2024 was $ 126.0 million and will carryforward indefinitely .

In addition, the Company recorded a deferred tax asset in the current fiscal year related to its low income housing tax credits that are currently not utilized due to income tax return income limitations.

The related deferred tax asset at September 30, 2024 was $ 12.8 million.

Federal tax credits carry forward for 20 years.

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.

1 unchanged sentence

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

At September 30, 2023 and 2022, the Company had a valuation allowance of $ 30 thousand and $ 80 thousand, respectively, related to the net operating losses generated by the Company's consolidated Kansas corporate income tax return as management believes there will not be sufficient taxable income to fully utilize these deferred tax assets.

At September 30, 2024 and 2023, the Company had a valuation allowance of $ 27 thousand and $ 30 thousand, respectively, related to the net operating losses generated by the Company's consolidated Kansas corporate income tax return as management believes there will not be sufficient taxable income to fully utilize these deferred tax assets before they begin to expire in 2028 and thereafter.

For this reason, a valuation allowance was recorded for the related amounts at September 30, 2024 and 2023.

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

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

Estimated penalties and interest related to unrecognized tax benefits are included in income tax expense in the consolidated statements of income.

For the years ended September 30, 2024, 2023, and 2022 the Company had no unrecognized tax benefits.

The Company files income tax returns in the U.S.

federal jurisdiction and the state of Kansas, as well as other states where it has either established nexus under an economic nexus theory or has exceeded enumerated nexus thresholds based on the amount of interest income derived from sources within a given state.

federal jurisdiction and the state of Kansas, as well as other states where it has either established nexus under an economic nexus theory or has exceeded enumerated nexus thresholds based on the amount of loan interest income derived from sources within a given state.

With few exceptions, the Company is no longer subject to U.S.

12 unchanged sentences

Dividends on unallocated ESOP shares in excess of the debt service payment are recorded as compensation expense and distributed to participants or participants' ESOP accounts.

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, $ 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.

Compensation expense related to the ESOP was $ 927 thousand for the year ended September 30, 2024, $ 1.2 million for the year ended September 30, 2023, and $ 1.7 million for the year ended September 30, 2022.

Of these amounts, $ 725 thousand and $ 472 thousand of income, and $ 88 thousand of expense related to the difference between the market price of the Company's common stock when the shares were acquired by the ESOP trust ($10 per share) and the average market price of the Company's common stock during the years ended September 30, 2024, 2023, and 2022, respectively.

The market price of the Company's common stock averaged below $10 per share during the years ended September 30, 2024 and 2023, which is why income rather than expense was recognized for market price differences for those years.

There was no compensation expense for dividends on unallocated ESOP shares in excess of the debt service payments for the years ended September 30, 2024, 2023, or 2022.

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

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

13 unchanged sentences

The Equity Incentive Plan had 5,907,500 stock options originally eligible to be granted and, as of September 30, 2024, the Company had 4,443,029 stock options still available for future grants under this plan.

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

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

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

The incentive stock options expire no later than 10 years from the date of grant, and the nonqualified stock options expire no later than 15 years from the date of grant.

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

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

The stock option exercise price cannot be less than the market value at the date of the grant as defined by each plan.

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

At September 30, 2023, the Company had 349,374 stock options outstanding with a weighted average exercise price of $ 12.50 per option and a weighted average contractual life of 2.5 years, all of which were exercisable.

At September 30, 2024, the Company had 316,374 stock options outstanding with a weighted average exercise price of $ 12.48 and a weighted average contractual life of 1.7 years, all of which were exercisable.

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

1 unchanged sentence

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, 2024, the Company had 1,449,175 shares available for future grants of restricted stock under this plan.

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.

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 will 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 to 5 years.

At September 30, 2024, the Company had 131,258 unvested shares of restricted stock with a weighted average grant date fair value of $ 6.51 per share.

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

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

Compensation expense attributable to restricted stock awards during the years ended September 30, 2024, 2023, and 2022 totaled $ 348 thousand, $ 327 thousand, and $ 492 thousand, respectively.

18 unchanged sentences

In the normal course of business, the Company and the Bank are named defendants in various lawsuits and counterclaims.

In the opinion of management, after consultation with legal counsel, none of the currently pending suits are expected to have a materially adverse effect on the Company's consolidated financial statements for the year ended September 30, 2023, or future periods.

In the opinion of management, after consultation with legal counsel, none of the currently pending suits are expected to have a material adverse effect on the Company's consolidated financial statements for the year ended September 30, 2024, or future periods.

REGULATORY CAPITAL REQUIREMENTS

5 unchanged sentences

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

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, 2024, 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 believes that as of September 30, 2024, the Bank and Company met all capital adequacy requirements to which they were subject and that there have been no conditions or events subsequent to September 30, 2024 that would have changed this assessment.

At September 30, 2023, the Bank did not meet the requirements to elect the CBLR and the Company met the requirements but did not elect the CBLR.

Since the Bank did not then meet the CBLR requirements it was required at September 30, 2023 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.

The Bank and Company met all capital adequacy requirements as of September 30, 2023 to which they were subject, including the capital conservation buffer.

For Capital Corrective Action

3 unchanged sentences

As of September 30, 2024

CBLR $ 874,067 9.2 % $ 853,970 9.0 % N/A N/A

As of September 30, 2023

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

9 unchanged sentences

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.

3 unchanged sentences

In conjunction with the Company's corporate reorganization in December 2010, a "liquidation account" was established for the benefit of certain depositors of the Bank in an amount equal to Capitol Federal Savings Bank MHC's ownership interest in the retained earnings of Capitol Federal Financial as of June 30, 2010.

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

(Prior to the corporate reorganization, Capitol Federal Financial was the Bank's mid-tier holding company and Capitol Federal Savings Bank MHC, a mutual holding company, owned a majority of the stock of Capitol Federal Financial.) As of September 30, 2024, the balance of this liquidation account was $ 70.9 million.

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.

16 unchanged sentences

AFS Securities - The Company's AFS securities portfolio is carried at estimated fair value.

The majority of the securities within the AFS portfolio were issued by GSEs.

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

3 unchanged sentences

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

• MBS - The majority of these securities are issued by GSEs.

Estimated fair values are based on a discounted cash flow method.

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

• GSE Debentures - Estimated fair values are based on a discounted cash flow method.

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

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

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

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

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

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

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

Deposits and Borrowed Funds" for additional information.

The estimated fair values of the interest rates swaps are obtained from the counterparty and are determined by a discounted cash flow analysis using observable market-based inputs.

The estimated fair values of the interest rate swaps are obtained from the counterparty and are determined by a discounted cash flow analysis using observable market-based inputs.

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.

1 unchanged sentence

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 September 30, 2023 or 2022.

The Company did not have any Level 3 financial instruments measured at fair value on a recurring basis at September 30, 2024 or 2023.

September 30, 2024

8 unchanged sentences

Corporate bonds 3,388 — 3,388 —

Municipal bonds 942 — 942 —

856,266 — 856,266 —

32 unchanged sentences

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 %.

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

Management does not adjust or apply a discount to the appraised value or listing price, except for the estimated sales costs noted above.

The primary significant unobservable input for OREO was the appraisal or listing price.

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

There was no OREO measured on a non-recurring basis during 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 primary significant unobservable input for one- to four-family OREO was the appraisal or listing price.

The fair value of one- to four-family OREO measured on a non-recurring basis during fiscal year 2024 that was still held in the portfolio as of September 30, 2024 was $ 55 thousand.

There was no one- to four-family OREO measured on a non-recurring basis during fiscal year 2023 that was still held in the portfolio as of September 30, 2023.

The one- to four-family OREO held at September 30, 2023 was measured during fiscal year 2022.

The carrying value of the properties equaled the fair value of the properties at September 30, 2024 and 2023.

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

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

The primary significant unobservable input for commercial OREO is downward adjustments to book value of the collateral for lack of marketability.

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

There was no commercial OREO measured on a non-recurring basis during the years ended September 30, 2024 and 2023.

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:

September 30, 2024

Carrying Estimated Fair Value

8 unchanged sentences

Borrowings 2,179,564 2,169,403 — 2,169,403 —

September 30, 2023

Carrying Estimated Fair Value

10 unchanged sentences

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

The amounts reclassified from AOCI related to the Bank's cash flow hedges are reported as increases in interest expense within the consolidated statements of 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.

For the Year Ended September 30, 2024

8 unchanged sentences

— ( 6,112 ) ( 6,112 )

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

Reclassification adjustment on AFS securities included in net income, net of taxes of $ 383

( 1,188 ) — ( 1,188 )

8 unchanged sentences

Beginning balance $ ( 155,119 ) $ 9,486 $ ( 145,633 )

Other comprehensive income (loss), before reclassifications ( 159,770 ) 25,339 ( 134,431 )

Other comprehensive income, before reclassifications 8,355 5,957 14,312

Amount reclassified from AOCI, net of taxes of $ 1,808

— ( 5,601 ) ( 5,601 )

Other comprehensive income (loss) ( 159,770 ) 30,442 ( 129,328 )

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

145,622 — 145,622

Other comprehensive income 153,977 356 154,333

Ending balance $ ( 1,142 ) $ 9,842 $ 8,700

50 unchanged sentences

Deferred income tax liabilities, net $ 58 $ 60

Payable to the Bank — 81

Payable to the Bank, net 51 —

Other liabilities 204 11

7 unchanged sentences

Unearned compensation - ESOP ( 26,431 ) ( 28,083 )

Retained earnings ( 104,565 ) 80,266

Accumulated deficit ( 111,104 ) ( 104,565 )

AOCI, net of tax 21,627 8,700

14 unchanged sentences

Total non-interest expense 2,073 1,875 1,716

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

INCOME BEFORE INCOME TAX (BENEFIT) EXPENSE AND EQUITY IN

UNDISTRIBUTED (EXCESS OF DISTRIBUTION OVER) EARNINGS OF

SUBSIDIARY 26,114 86,578 111,513

INCOME TAX (BENEFIT) EXPENSE ( 5 ) 71 ( 49 )

INCOME BEFORE (EXCESS OF DISTRIBUTION OVER)/EQUITY IN

UNDISTRIBUTED EARNINGS OF SUBSIDIARY 26,119 86,507 111,562

EQUITY IN/(EXCESS OF DISTRIBUTION OVER) UNDISTRIBUTED EARNINGS OF SUBSIDIARY 11,891 ( 188,166 ) ( 27,109 )

NET INCOME (LOSS) $ 38,010 $ ( 101,659 ) $ 84,453

STATEMENTS OF CASH FLOWS

3 unchanged sentences

CASH FLOWS FROM OPERATING ACTIVITIES:

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

Net income (loss) $ 38,010 $ ( 101,659 ) $ 84,453

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

Equity in excess of distribution over earnings of subsidiary 188,166 27,109 55,749

(Equity in)/Equity in excess of distribution over earnings of subsidiary ( 11,891 ) 188,166 27,109

Depreciation of equipment 23 45 46

12 unchanged sentences

Repurchase of common stock ( 19,448 ) ( 23,453 ) —

Stock options exercised — — 324

Net cash used in financing activities ( 63,551 ) ( 106,224 ) ( 102,862 )

5 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