What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2025-02-07 compared with 2024-08-07 · 203 added, 295 removed, 720 unchanged (41% of the section changed)

4 unchanged sentences

(Dollars in thousands, except per share amounts)

June 30, September 30,

December 31, September 30,

Cash and cash equivalents (includes interest-earning deposits of $ 140,287 and $ 192,138 )

19 unchanged sentences

Common stock, $ .01 par value;

1,400,000,000 shares authorized, 132,733,765 and 135,936,375 shares issued and outstanding as of June 30, 2024 and September 30, 2023, respectively

1,400,000,000 shares authorized, 132,774,365 and 132,735,565 shares issued and outstanding as of December 31, 2024 and September 30, 2024, respectively

Additional paid-in capital 1,146,802 1,146,851

9 unchanged sentences

(Dollars in thousands, except per share amounts)

For the Three Months Ended For the Nine Months Ended

June 30, June 30,

2024 2023 2024 2023

For the Three Months Ended

INTEREST AND DIVIDEND INCOME:

1 unchanged sentence

Mortgage-backed securities ("MBS") 11,024 5,859

Cash and cash equivalents 3,875 10,009 13,166 37,657

FHLB stock 2,352 2,586

Cash and cash equivalents 1,871 4,778

Investment securities 981 2,528

6 unchanged sentences

PROVISION FOR CREDIT LOSSES 677 123

NET INTEREST INCOME AFTER

PROVISION FOR CREDIT LOSSES 38,852 33,426 119,341 116,662

NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 41,553 39,470

NON-INTEREST INCOME:

8 unchanged sentences

Occupancy, net 3,333 3,372

Federal insurance premium 1,352 1,231 4,939 3,289

Regulatory and outside services 1,113 1,643

Federal insurance premium 1,038 1,860

Advertising and promotional 822 988

3 unchanged sentences

Total non-interest expense 27,148 28,508

INCOME BEFORE INCOME TAX EXPENSE 15,611 9,904 34,896 47,171

INCOME TAX EXPENSE 5,963 1,602 8,943 8,440

INCOME BEFORE INCOME TAX EXPENSE (BENEFIT) 19,098 2,068

INCOME TAX EXPENSE (BENEFIT) 3,667 ( 475 )

NET INCOME $ 15,431 $ 2,543

8 unchanged sentences

(Dollars in thousands)

For the Three Months Ended For the Nine Months Ended

June 30, June 30,

2024 2023 2024 2023

For the Three Months Ended

Net income $ 15,431 $ 2,543

Other comprehensive income, net of tax:

Unrealized (losses) gains on AFS securities arising during the

period, net of taxes of $ 804 , $ 3,475 , $( 2,780 ), and $( 6,151 )

( 2,412 ) ( 10,765 ) 8,698 19,062

Reclassification adjustment for gross gains on AFS securities

included in net income, net of taxes of $ 0 , $ 0 , $ 383 , and $ 0

Unrealized (losses) gains on AFS securities arising during the period,

net of taxes of $ 3,741 and $( 5,350 )

( 11,742 ) 16,581

Unrealized gains (losses) on cash flow hedges arising during the

period, net of taxes of $( 244 ), $( 1,410 ), $( 91 ), and $( 1,159 )

Reclassification adjustment for gross gains on AFS securities included in net income,

net of taxes of $ 0 and $ 383

Unrealized gains (losses) on cash flow hedges arising during the period,

net of taxes of $( 756 ) and $ 967

2,375 ( 2,998 )

Reclassification adjustment for cash flow hedge amounts included

in net income, net of taxes of $ 502 , $ 538 , $ 1,670 , and $ 1,202

Reclassification adjustment for cash flow hedge amounts included in net income,

net of taxes of $ 222 and $ 626

( 698 ) ( 1,940 )

5 unchanged sentences

(Dollars in thousands, except per share amounts)

For the Nine Months Ended June 30, 2024

For the Three Months Ended December 31, 2024

Additional Unearned Total

3 unchanged sentences

Net income 15,431 15,431

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

Other comprehensive income, net of tax 10,455 10,455

ESOP activity ( 190 ) 412 222

Restricted stock activity, net ( 6 ) ( 6 )

Stock-based compensation 87 87

Repurchase of common stock ( 20 ) ( 11,879 ) ( 11,899 )

Cash dividends to stockholders ($ 0.085 per share)

( 11,308 ) ( 11,308 )

Balance at December 31, 2023 $ 1,339 $ 1,154,655 $ ( 27,671 ) $ ( 113,357 ) $ 19,155 $ 1,034,121

Net income 13,762 13,762

Other comprehensive loss, net of tax ( 10,065 ) ( 10,065 )

2 unchanged sentences

Stock-based compensation 101 101

Repurchase of common stock ( 13 ) ( 7,537 ) ( 7,550 )

Cash dividends to stockholders ($ 0.085 per share)

( 11,061 ) ( 11,061 )

Balance at March 31, 2024 $ 1,327 $ 1,147,029 $ ( 27,258 ) $ ( 110,722 ) $ 14,527 $ 1,024,903

Net income 9,648 9,648

Other comprehensive loss, net of tax ( 3,144 ) ( 3,144 )

ESOP activity ( 197 ) 414 217

Restricted stock activity, net ( 1 ) ( 1 )

Stock-based compensation 97 97

Cash dividends to stockholders ($ 0.085 per share)

( 11,044 ) ( 11,044 )

Balance at June 30, 2024 $ 1,327 $ 1,146,928 $ ( 26,844 ) $ ( 112,118 ) $ 11,383 $ 1,020,676

For the Nine Months Ended June 30, 2023

Balance at December 31, 2024 $ 1,328 $ 1,146,802 $ ( 26,019 ) $ ( 106,734 ) $ 11,562 $ 1,026,939

For the Three Months Ended December 31, 2023

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, 2023 $ 1,359 $ 1,166,643 $ ( 28,083 ) $ ( 104,565 ) $ 8,700 $ 1,044,054

Net income 2,543 2,543

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

Other comprehensive income, net of tax 10,455 10,455

ESOP activity ( 190 ) 412 222

Restricted stock activity, net ( 6 ) ( 6 )

Stock-based compensation 87 87

3 unchanged sentences

Balance at December 31, 2023 $ 1,339 $ 1,154,655 $ ( 27,671 ) $ ( 113,357 ) $ 19,155 $ 1,034,121

Net income 14,189 14,189

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

ESOP activity ( 76 ) 412 336

Stock-based compensation 74 74

Cash dividends to stockholders ($ 0.085 per share)

( 11,319 ) ( 11,319 )

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

Net income 8,302 8,302

Other comprehensive loss, net of tax ( 8,063 ) ( 8,063 )

ESOP activity ( 155 ) 413 258

Stock-based compensation 75 75

Cash dividends to stockholders ($ 0.085 per share)

( 11,321 ) ( 11,321 )

Balance at June 30, 2023 $ 1,361 $ 1,167,979 $ ( 28,497 ) $ 47,148 $ ( 126,706 ) $ 1,061,285

See accompanying notes to consolidated financial statements.

3 unchanged sentences

(Dollars in thousands)

For the Nine Months Ended

For the Three Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

17 unchanged sentences

Other liabilities ( 9,936 ) ( 9,306 )

Net cash provided by operating activities 34,275 34,063

Net cash provided by (used in) operating activities 5,608 ( 5,334 )

CASH FLOWS FROM INVESTING ACTIVITIES:

3 unchanged sentences

Proceeds from the redemption of FHLB stock 3,163 3,134

Purchase of FHLB stock — ( 268,170 )

Net change in loans receivable ( 48,054 ) 22,815

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

Purchase of premises and equipment ( 1,152 ) ( 1,261 )

Proceeds from sale of other real estate owned ("OREO") 110 —

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

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

Net cash provided by (used in) investing activities 630,335 ( 371,438 )

Net cash (used in) provided by investing activities ( 65,775 ) 678,494

CAPITOL FEDERAL FINANCIAL, INC.

2 unchanged sentences

(Dollars in thousands)

For the Nine Months Ended

For the Three Months Ended

CASH FLOWS FROM FINANCING ACTIVITIES:

5 unchanged sentences

Repurchase of common stock — ( 11,900 )

Net cash (used in) provided by financing activities ( 592,394 ) 617,590

NET INCREASE IN CASH AND CASH EQUIVALENTS 72,216 280,215

Net cash provided by (used in) financing activities 13,184 ( 598,408 )

NET (DECREASE) / INCREASE IN CASH AND CASH EQUIVALENTS ( 46,983 ) 74,752

CASH AND CASH EQUIVALENTS:

19 unchanged sentences

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

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

Troubled Debt Restructurings ("TDRs") and Vintage Disclosures .

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

Additionally, this ASU requires that an entity disclose current-period gross write-offs by year of origination for financing receivables within the scope of Accounting Standards Codification ("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 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 disclosure requirements associated with this ASU are included below and in Note 4.

Loans Receivable and Allowance for Credit Losses.

The following significant accounting policies have been updated since the Company's 2023 Annual Report on Form 10-K to reflect the adoption of ASU 2022-02.

Troubled debt restructurings - Prior to the Company's adoption of ASU 2022-02, a loan was accounted for as a TDR if the Bank granted a concession to a borrower experiencing financial difficulties.

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

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

In the case of commercial loans, the Bank 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 on October 1, 2023.

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 Company's footnotes.

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.

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.

Recent Accounting Pronouncements - In October 2023, the Financial Accounting Standards Board ("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 FASB Accounting Standards Codification (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.

1 unchanged sentence

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 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.

1 unchanged sentence

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.

6 unchanged sentences

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.

This ASU is effective for the Company on October 1, 2025, starting with its September 30, 2026 Form 10-K.

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 costs such 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.

In January 2025, the FASB issued ASU 2025-1, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures:

Clarifying the Effective

The FASB clarified the interim date reporting when an entity adopts ASU 2024-03.

Per ASU 2025-01, ASU 2024-03 is effective for interim periods within fiscal years beginning after December 15, 2027, which is the quarter ending December 31, 2028 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

2 unchanged sentences

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

For the Three Months Ended For the Nine Months Ended

June 30, June 30,

2024 2023 2024 2023

For the Three Months Ended

(Dollars in thousands, except per share amounts)

10 unchanged sentences

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 our securities are government guaranteed or issued by a Government Sponsored Enterprise ("GSE").

June 30, 2024

The majority of our AFS securities at both dates were government guaranteed or issued by a Government Sponsored Enterprise ("GSE").

December 31, 2024

Gross Gross Estimated

14 unchanged sentences

Corporate bonds 4,000 — 612 3,388

Municipal bonds 942 — — 942

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

At December 31, 2024, AFS securities included $ 717.4 million of residential MBS and $ 68.9 million of commercial MBS.

At September 30, 2024, AFS securities included $ 713.3 million of residential MBS and $ 70.2 million of commercial 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.

June 30, 2024

December 31, 2024

Less Than 12 Months Equal to or Greater Than 12 Months

12 unchanged sentences

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

GSE debentures — — 24,818 182

Corporate bonds — — 3,388 612

$ 10,997 $ 44 $ 6,307 $ 655

The unrealized losses at June 30, 2024 were a result of an increase in market yields from the time the securities were purchased.

The unrealized losses at December 31, 2024 were a result of an increase in market yields from the time the securities were purchased.

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

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

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

Management did not record an ACL on securities in an unrealized loss position at December 31, 2024 as management did 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 for such securities decline.

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

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 December 31, 2024, by contractual maturity, are shown below.

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

In the case of MBS, borrowers on the underlying loans generally have the right to prepay their loans without penalty.

For this reason, MBS are not included in the maturity categories.

For this reason, MBS are not included in the maturity category in the table below.

Amortized Estimated

1 unchanged sentence

(Dollars in thousands)

One year or less $ 19,887 $ 19,885

One year through five years 10,000 9,980

Five years through ten years $ 75,915 $ 75,216

3 unchanged sentences

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

For the Three Months Ended For the Nine Months Ended

June 30, June 30,

2024 2023 2024 2023

For the Three Months Ended

(Dollars in thousands)

3 unchanged sentences

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

June 30, 2024 September 30, 2023

December 31, 2024 September 30, 2024

(Dollars in thousands)

Public unit deposits $ 126,315 $ 178,396

Federal Reserve Bank of Kansas City ("FRB of Kansas City") borrowings $ 102,590 $ 111,281

Public unit deposits 80,858 108,748

$ 183,448 $ 220,029

During the quarter ended December 31, 2023, the Bank sold $ 1.30 billion of AFS securities.

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

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 during the quarter ended December 31, 2023.

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

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

LOANS RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES

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

June 30, 2024 September 30, 2023

December 31, 2024 September 30, 2024

(Dollars in thousands)

19 unchanged sentences

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

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

The Bank has historically also purchased one- to four-family loans from correspondent lenders, but during the prior 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.

2 unchanged sentences

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

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

1 unchanged sentence

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 portfolio includes loans that are originated by the Bank or in participation with a lead bank.

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

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.

At the time of origination, loan-to-value ("LTV") ratios on commercial real estate loans generally do not exceed 85 % of the appraised value of the property securing the loans and the minimum debt service coverage ratio ("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 LTV, the Bank may allow the guaranty percentage to be reduced, phased out or originated as a non-recourse loan.

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 or phased out, or the Bank may originate the loan 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.

1 unchanged sentence

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 LTV, the guaranty may be reduced or phased out when the property meets certain performance metrics.

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 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 generally require more thorough underwriting and servicing 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.

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 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 factors such as geographic locations, collateral types, tenant brand name, borrowing relationships, and, in the case of participation loans, lending relationships, among other factors.

Annual reviews are performed for larger loans and lending relationships.

20 unchanged sentences

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.

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

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

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

At June 30, 2024 and September 30, 2023, there were no loans classified as doubtful, and all loans classified as loss were fully charged-off.

June 30, 2024

At December 31, 2024 and September 30, 2024, there were no loans classified as doubtful, and all loans classified as loss were fully charged-off.

December 31, 2024

Current Fiscal Fiscal Fiscal Fiscal Revolving Credit

69 unchanged sentences

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

June 30, 2024

December 31, 2024

Current Fiscal Fiscal Fiscal Fiscal Revolving Credit

67 unchanged sentences

Total $ 639,789 $ 1,096,101 $ 1,372,917 $ 1,529,818 $ 827,047 $ 2,339,984 $ 118,360 $ 6,357 $ 7,930,373

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 nine month period ended June 30, 2024.

Gross Charge-Offs - The following tables present gross charge-offs, for the periods indicated, by class of financing receivable for the year of origination or most recent credit decision.

For the Three Months Ended December 31, 2024

Current Fiscal Fiscal Fiscal Fiscal Revolving of Credit

14 unchanged sentences

Total $ 5 $ 12 $ — $ — $ — $ — $ — $ — $ 17

For the Three Months Ended December 31, 2023

Fiscal Fiscal Fiscal Fiscal Fiscal Revolving of Credit

Year Year Year Year Year Prior Lines of Converted to

2024 2023 2022 2021 2020 Years Credit Term Total

(Dollars in thousands)

One- to four-family:

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

Correspondent purchased — — — — — — — — —

Bulk purchased — — — — — — — — —

— — — — — — — — —

Commercial real estate — — — — — — — — —

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

— — — — — — — — —

Home Equity 1 1 — — — — — — 2

Other — 5 — — — — — — 5

1 6 — — — — — — 7

Total $ 1 $ 6 $ — $ — $ — $ — $ — $ — $ 7

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 June 30, 2024 and September 30, 2023, all loans 90 or more days delinquent were on nonaccrual status.

June 30, 2024

At December 31, 2024 and September 30, 2024, all loans 90 or more days delinquent were on nonaccrual status.

The increase in the 30 to 89 days delinquent commercial real estate loan balance from September 30, 2024 was due primarily to one Community Reinvestment Act loan.

The borrower is in the process of obtaining tax credit funding, which will service the loan until the project is stabilized.

The tax credit funding is anticipated to be received by the borrower during the quarter ended March 31, 2025.

December 31, 2024

90 or More Days Total Total

25 unchanged sentences

$ 16,049 $ 9,581 $ 25,630 $ 7,904,743 $ 7,930,373

The amortized cost of mortgage loans secured by residential real estate for which formal foreclosure proceedings were in process as of June 30, 2024 and September 30, 2023 was $ 1.9 million and $ 2.5 million, respectively, which is included in loans 90 or more days delinquent or in foreclosure in the tables above.

The amortized cost of mortgage loans secured by residential real estate for which formal foreclosure proceedings were in process as of December 31, 2024 and September 30, 2024 was $ 1.9 million and $ 1.6 million, respectively, which are 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.

There was no residential OREO held at June 30, 2024.

The following table presents the amortized cost at June 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.

June 30, 2024 September 30, 2023

There was no residential OREO held at December 31, 2024.

The following table presents the amortized cost at December 31, 2024 and September 30, 2024, by class, of loans classified as nonaccrual.

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

December 31, 2024 September 30, 2024

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

9 unchanged sentences

$ 11,426 $ 5,271 $ 10,166 $ 3,010

Loan Modifications - The following tables present the amortized cost basis of loans as of June 30, 2024 that were both experiencing financial difficulties and modified during the periods noted, by class of financing receivable and by type of modification.

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

During the three months and nine months ended June 30, 2024, there was a $ 50 thousand charge-off related to a commercial real estate loan modified during the nine months ended June 30, 2024.

Loan Modifications - The following tables present the amortized cost basis of loans, as of the dates indicated, that were both experiencing financial difficulties and modified during the periods noted, by class of financing receivable and by type of modification.

Also presented in the tables is the percentage of the amortized cost basis of loans, at the dates indicated, that were modified to borrowers experiencing financial difficulties as compared to the amortized cost basis of each class of financing receivable during the periods noted.

During the three months ended December 31, 2024 and 2023, there were no charge-offs related to loans modified during those periods.

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

For the Three Months Ended June 30, 2024

Combination- Total

Term Extension Class of

Principal Interest Rate Payment Term and Financing

Forgiveness Reduction Delay Extension Payment Delay Total Receivable

For the Three Months Ended December 31, 2024

Extension Total

Payment Term Payment Financing

Delay Extension Delay Total Receivable

(Dollars in thousands)

12 unchanged sentences

Total $ 417 $ 971 $ 166 $ 1,554 0.02

For the Nine Months Ended June 30, 2024

Combination- Total

Term Extension Class of

Principal Interest Rate Payment Term and Financing

Forgiveness Reduction Delay Extension Payment Delay Total Receivable

For the Three Months Ended December 31, 2023

Extension Total

Payment Financing

Delay Total Receivable

(Dollars in thousands)

6 unchanged sentences

Commercial and industrial — — —

— — — — 678 678 0.05

Consumer loans:

Home equity — — —

Other — — — — — — —

— — — — — — —

Total $ 5,652 $ 5,652 0.07

Financial effect of loan modifications - The loan modifications during the three months and nine months ended June 30, 2024 were term extensions or a combination of term extensions and payment delays.

The table below presents the financial effects of loan modifications during the three and nine months ended June 30, 2024.

For the Three Months Ended June 30, 2024 For the Nine Months Ended June 30, 2024

Term Payment Term Payment

Extension Delays Extension Delays

Financial effect of loan modifications - The table below presents the financial effects of loan modifications during the three months ended December 31, 2024 and 2023, including the weighted average payment delay and weighted average term extension.

For the Three Months Ended

December 31, 2024 December 31, 2023

Payment Term Payment Term

Delay Extension Delay Extension

One- to four-family:

1 unchanged sentence

Correspondent N/A N/A 4 months 12 months

Commercial real estate N/A N/A 24 months 24 months

Commercial and industrial 9 months 6 months 6 months 6 months

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

Bulk purchased N/A N/A N/A N/A

Commercial real estate 6 months 3 months N/A N/A

Commercial and industrial N/A 6 months N/A N/A

Consumer home equity 7 months N/A N/A N/A

Consumer other N/A N/A N/A N/A

Performance of loan modifications - The following tables provide information about the subsequent performance of loans modified for borrowers experiencing financial difficulty during the periods noted.

For the Three Months Ended December 31, 2024

30 to 89 Days

3 unchanged sentences

Amortized Cost

(in thousands)

(Dollars in thousands)

One- to four-family:

1 unchanged sentence

Correspondent — — — — —

Bulk purchased — — — — —

Commercial real estate — — — 90 90

Commercial & industrial — — — 19 19

Consumer loans:

Home equity — — — 20 20

Other — — — — —

$ 719 $ — $ 719 $ 835 $ 1,554

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

For the Three Months Ended For the Nine Months Ended

June 30, 2023 June 30, 2023

Number Pre- Post- Number Pre- Post-

of Restructured Restructured of Restructured Restructured

Contracts Outstanding Outstanding Contracts Outstanding Outstanding

For the Three Months Ended December 31, 2023

30 to 89 Days

Delinquent 90 or More Days

Delinquent or in Foreclosure Total

Delinquent Loans Current

Amortized Cost

(Dollars in thousands)

1 unchanged sentence

Originated $ 231 $ — $ 231 $ 4,174 $ 4,405

Correspondent — — — 1,247 1,247

Bulk purchased — — — — —

Commercial real estate — — — — —

Commercial & industrial — — — — —

Consumer loans:

Home equity — — — — —

Other — — — — —

$ 231 $ — $ 231 $ 5,421 $ 5,652

During the three months ended June 30, 2023, there were no TDRs that became delinquent within 12 months after being restructured.

During the nine months ended June 30, 2023 there was one one- to four-family originated TDR with an amortized cost of $ 8 thousand that became delinquent within 12 months after being restructured.

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

For the Three Months Ended June 30, 2024

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

For the Three Months Ended December 31, 2024

One- to Four-Family

7 unchanged sentences

Ending balance $ 2,043 $ 1,583 $ 131 $ 3,757 $ 20,999 $ 241 $ 24,997

For the Nine Months Ended June 30, 2024

For the Three Months Ended December 31, 2023

One- to Four-Family

9 unchanged sentences

Ending balance $ 2,094 $ 2,948 $ 206 $ 5,248 $ 18,678 $ 252 $ 24,178

For the Three Months Ended June 30, 2023

One- to Four-Family

Correspondent Bulk

Originated Purchased Purchased Total Commercial Consumer Total

(Dollars in thousands)

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

Charge-offs — — — — — ( 11 ) ( 11 )

Recoveries 1 — — 1 — — 1

Provision for credit losses 15 7 18 40 2,463 17 2,520

Ending balance $ 2,155 $ 3,081 $ 239 $ 5,475 $ 16,685 $ 239 $ 22,399

For the Nine Months Ended June 30, 2023

One- to Four-Family

Correspondent Bulk

Originated Purchased Purchased Total Commercial Consumer Total

(Dollars in thousands)

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

Charge-offs — — — — — ( 31 ) ( 31 )

Recoveries 2 — — 2 1 2 5

Provision for credit losses 87 347 33 467 5,564 23 6,054

Ending balance $ 2,155 $ 3,081 $ 239 $ 5,475 $ 16,685 $ 239 $ 22,399

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

Management also considered certain qualitative factors when evaluating the adequacy of the ACL at June 30, 2024.

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

• Economic Forecast - Management considered several economic forecasts provided by a third party and selected an economic forecast that was the most appropriate considering the facts and circumstances at June 30, 2024.

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

Management also considered certain qualitative factors when evaluating the adequacy of the ACL at December 31, 2024.

The key assumptions utilized in estimating the Company's ACL at December 31, 2024 are discussed below.

The forecasted economic indices applied to the model at December 31, 2024 were the national unemployment rate, changes in commercial real estate price index, changes in home values, and changes in the U.S.

gross domestic product.

The economic index most impactful to all loan pools within the model at June 30, 2024 was the national unemployment rate.

The forecasted national unemployment rate in the economic scenario selected by management at June 30, 2024 had the national unemployment rate at 4.1 % through June 30, 2025, which was the end of our four-quarter forecast time period.

• Forecast and reversion to mean time periods - The forecasted time period and the reversion to mean time period were each four quarters for all of the economic indices at June 30, 2024.

• Prepayment and curtailment assumptions - The assumptions used at June 30, 2024 were generally based on actual historical prepayment and curtailment speeds, adjusted by management as deemed necessary.

The economic index most impactful to all loan pools within the model at December 31, 2024 was the national unemployment rate.

The forecasted national unemployment rate in the economic scenario selected by management at December 31, 2024 had the national unemployment rate remaining at 4.1 % through December 31, 2025, which was the end of our four-quarter forecast time period.

• Forecast and reversion to mean time periods - The forecasted time period and the reversion to mean time period were each four quarters for all of the economic indices at December 31, 2024.

• Prepayment and curtailment assumptions - The assumptions used at December 31, 2024 were generally based on actual historical prepayment and curtailment speeds, adjusted by management as deemed necessary.

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

• Qualitative factors - The qualitative factors applied by management at June 30, 2024 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.

At June 30, 2024 and September 30, 2023, the Bank's off-balance sheet credit exposures totaled $ 754.6 million and $ 837.7 million, respectively.

For the Three Months Ended For the Nine Months Ended

June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023

• Qualitative factors - Management applied qualitative factors at December 31, 2024 to account for large dollar commercial loan concentrations and potential risk of loss in market value for newer 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 risk of loss in market value for 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 December 31, 2024, management considered external historical home price index

trending information, along with the Bank's recent origination/purchase activity, historical loan loss experience and the current trend of this portfolio balance, 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.

Reserve for Off-Balance Sheet Credit Exposures - At December 31, 2024 and September 30, 2024, the Bank's off-balance sheet credit exposures totaled $ 723.3 million and $ 826.5 million, respectively.

The following table summarizes the change in reserve for off-balance sheet credit exposures during the periods indicated.

The provision release for the three months ended December 31, 2024 was due primarily to a decrease in the balance of commercial off-balance sheet credit exposures during the quarter.

The increase in the reserve for off-balance sheet credit exposures as of December 31, 2024 compared to December 31, 2023 was due to an increase in the ACL to loan ratio, specifically for commercial construction loans, partially offset by a decrease in the balance of commercial off-balance sheet credit exposures.

For the Three Months Ended

December 31, 2024 December 31, 2023

(Dollars in thousands)

1 unchanged sentence

Adoption of ASU 2022-02 — 16

(Release)/provision for credit losses 195 ( 1,196 ) ( 237 ) ( 179 )

Provision for credit losses ( 1,278 ) ( 277 )

Ending balance $ 4,725 $ 3,834

BORROWED FUNDS

Borrowings - Borrowings at June 30, 2024 consisted of $ 2.29 billion in FHLB advances, of which $ 1.99 billion were fixed-rate advances and $ 300.0 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").

During the current year period, the Bank paid off the $ 500.0 million of BTFP borrowings.

As of June 30, 2024 and September 30, 2023, the Bank held interest rate swap agreements with an aggregate notional amount of $ 300.0 million and $ 365.0 million, respectively, in order to hedge the variable cash flows associated with $ 300.0 million and $ 365.0 million, respectively, of adjustable-rate FHLB advances.

At June 30, 2024 and September 30, 2023, the interest rate swap agreements had an average remaining term to maturity of 1.7 years and 2.1 years, respectively.

FHLB Borrowings and Interest Rate Swaps - As of December 31, 2024 and September 30, 2024, the Bank held interest rate swap agreements with a total notional amount of $ 200.0 million in order to hedge the variable cash flows associated with $ 200.0 million of adjustable-rate FHLB advances.

At December 31, 2024 and September 30, 2024, the interest rate swap agreements had an average remaining term to maturity of 2.0 years and 2.3 years, respectively.

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

At June 30, 2024 and September 30, 2023, the interest rate swaps were in a gain position with a total fair value of $ 6.6 million and $ 13.0 million, respectively, which was reported in other assets on the consolidated balance sheet.

During the three and nine month periods ended June 30, 2024, $ 1.6 million and $ 5.2 million, respectively, was reclassified from AOCI as a decrease to interest expense.

During the three and nine month periods ended June 30, 2023, $ 1.7 million and $ 3.7 million, respectively, was reclassified from AOCI as a decrease to interest expense.

At June 30, 2024, the Company estimated that $ 4.3 million of interest expense associated with the interest rate swaps would be reclassified from AOCI as a decrease to interest expense on FHLB borrowings during the next 12 months.

At December 31, 2024 and September 30, 2024, the interest rate swaps were in a gain position with a total fair value of $ 4.3 million and $ 2.1 million, respectively, which was reported in other assets on the consolidated balance sheet.

During the three months ended December 31, 2024 and December 31, 2023, $ 698 thousand and $ 1.9 million, respectively, was reclassified from AOCI as a decrease to interest expense.

At December 31, 2024, the Company estimated that $ 2.1 million of interest expense associated with the interest rate swaps would be reclassified from AOCI as a decrease to interest expense on FHLB borrowings during the next 12 months.

The Bank has minimum collateral posting thresholds with its derivative counterparties and posts collateral on a daily basis.

The Bank held cash collateral of $ 7.3 million and $ 14.0 million at June 30, 2024 and September 30, 2023, respectively, in compliance with its minimum posting requirements.

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 nine month period due to the strategy being unprofitable, but it was in place at points during the prior year nine month period.

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.

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.

Rather, the difference was recorded in the Bank's retained earnings.

As a result of the 1996 Act, savings institutions, like the Bank, have been required to use the specific charge-off method in computing bad debt deductions beginning with their 1996 Federal tax return.

Pre-1988 bad debt reserves in retained earnings remain 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").

The Bank estimates its pre-1988 bad debt reserves to be $ 85.5 million at June 30, 2024, which equates to an unrecorded deferred tax liability of $ 18.0 million at June 30, 2024.

Any distributions from the Bank to Capitol Federal Financial, Inc., which would be deemed to be drawn out of the Bank's pre-1988 bad debt reserves, would require a payment of taxes at the then-current rate by the Bank on the amount of earnings deemed to be removed from the bad debt reserves for such distribution, thereby reducing the amount of cash that can be distributed to the Company.

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 anticipates it will report a taxable net loss on its September 30, 2024 corporate income tax return.

Due to the anticipated taxable net loss in fiscal year 2024, the Bank's earning distributions to the Company during fiscal year 2024 will be deemed to draw upon the Bank's pre-1988 bad debt reserves.

This has resulted and will continue to result in an increase in income tax expense in fiscal year 2024 equivalent to the distributions paid by the Bank that are deemed to be drawn upon the Bank's pre-1988 bad debt reserves times the Bank's current statutory tax rate.

These amounts will be treated as discrete tax items when the distributions are paid and will offset the Bank's net operating loss deferred tax asset.

During the current fiscal year, the Bank has recorded $ 3.4 million of income tax expense related to these distributions.

During the current fiscal year, 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 anticipated taxable net loss, or net operating loss, was $ 36.2 million at June 30, 2024.

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 tax return income limitations.

The related deferred tax asset at June 30, 2024 was $ 10.0 million.

Federal net operating losses carry forward indefinitely and federal tax credits carry forward for 20 years.

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 June 30, 2024, the Company does not believe a valuation allowance is necessary on the deferred income tax assets recorded during the current quarter as 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.

The Bank held cash collateral of $ 4.7 million and $ 2.1 million at December 31, 2024 and September 30, 2024, respectively.

At December 31, 2024 and September 30, 2024, the Company had a net operating loss deferred income tax asset of $ 26.4 million and $ 30.5 million, respectively.

The gross federal and state net operating loss amount at December 31, 2024 was $ 109.0 million and will carry forward indefinitely .

Additionally, the Company had a $ 15.5 million and $ 12.8 million deferred tax asset related to the Bank's low income housing tax credits as of December 31, 2024 and September 30, 2024, respectively, as the credits are not currently able to be utilized due to income tax return income limitations.

Federal tax credits carryforward for 20 years.

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 the valuation allowance necessary under the circumstances.

At December 31, 2024 and September 30, 2024, the Company had a valuation allowance of $ 33 thousand and $ 27 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 December 31, 2024 and September 30, 2024.

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.

FAIR VALUE OF FINANCIAL INSTRUMENTS

18 unchanged sentences

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

The Company did not have to adjust prices obtained from the third-party pricing service when determining the fair value of its securities during the nine months ended June 30, 2024 or during fiscal year 2023.

The Company did not have to adjust prices obtained from the third-party pricing service when determining the fair value of its securities during the three months ended December 31, 2024 or during fiscal year 2024.

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

10 unchanged sentences

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

No adjustments were made to the estimated fair values obtained from the counterparty during the nine months ended June 30, 2024 or during fiscal year 2023.

No adjustments were made to the estimated fair values obtained from the counterparty during the three months ended December 31, 2024 or during fiscal year 2024.

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 June 30, 2024 or September 30, 2023.

June 30, 2024

The Company did no t have any Level 3 financial instruments measured at fair value on a recurring basis at December 31, 2024 or September 30, 2024.

December 31, 2024

Quoted Prices Significant Significant

20 unchanged sentences

Corporate bonds 3,388 — 3,388 —

Municipal bonds 942 — 942 —

856,266 — 856,266 —

5 unchanged sentences

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

The fair value of collateral dependent loans/loans individually evaluated for loss on a non-recurring basis during the nine months ended June 30, 2024 and 2023 that were still held in the portfolio as of June 30, 2024 and 2023 was $ 1.6 million and $ 3.9 million, respectively.

The fair value of collateral dependent loans/loans individually evaluated for loss on a non-recurring basis during the three months ended December 31, 2024 and 2023 that were still held in the portfolio as of December 31, 2024 and 2023 was $ 43.6 million and $ 1.1 million, respectively.

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

4 unchanged sentences

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

The primary significant unobservable inputs for commercial loans individually evaluated during the nine months ended June 30, 2024 and June 30, 2023 were downward adjustments to the book value of the collateral for lack of marketability.

During the nine months ended June 30, 2024, the adjustments ranged from 5 % to 100 %, with a weighted average of 33 %.

During the nine months ended June 30, 2023, the adjustments ranged from 8 % to 100 %, with a weighted average of 21 %.

The primary significant unobservable inputs for commercial loans individually evaluated during the three months ended December 31, 2024 and December 31, 2023 were downward adjustments to the book value of the collateral for lack of marketability.

During the three months ended December 31, 2024, the adjustments ranged from 10 % to 99 %, with a weighted average of 21 %.

During the three months ended December 31, 2023, the adjustments ranged from 5 % to 100 %, with a weighted average of 17 %.

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

3 unchanged sentences

The primary significant unobservable input for one- to four-family OREO was the appraisal or listing price.

There was no one- to four-family OREO measured on a non-recurring basis during the nine months ended June 30, 2024 or June 30, 2023.

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

There was no one- to four-family OREO measured on a non-recurring basis during the three months ended December 31, 2024.

The fair value of one- to four-family OREO measured on a non-recurring basis during the three months ended December 31, 2023 was $ 219 thousand.

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

2 unchanged sentences

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

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

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

June 30, 2024

December 31, 2024

Carrying Estimated Fair Value

21 unchanged sentences

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

For the Three Months Ended June 30, 2024

Unrealized Unrealized

Gains (Losses) Gains (Losses)

on AFS on Cash Flow Total

Securities Hedges AOCI

(Dollars in thousands)

Beginning balance $ 8,780 $ 5,747 14,527

Other comprehensive income (loss), before reclassifications ( 2,412 ) 829 ( 1,583 )

Amount reclassified from AOCI, net of taxes of $ 502

— ( 1,561 ) ( 1,561 )

Other comprehensive income (loss) ( 2,412 ) ( 732 ) ( 3,144 )

Ending balance $ 6,368 $ 5,015 11,383

For the Nine Months Ended June 30, 2024

For the Three Months Ended December 31, 2024

Unrealized Unrealized

7 unchanged sentences

— ( 698 ) ( 698 )

Reclassification adjustment for gross gains on AFS securities

included in net income, net of taxes of $ 383

( 1,188 ) — ( 1,188 )

Other comprehensive income (loss) ( 11,742 ) 1,677 ( 10,065 )

Ending balance 8,290 3,272 11,562

For the Three Months Ended June 30, 2023

For the Three Months Ended December 31, 2023

Unrealized Unrealized

7 unchanged sentences

— ( 1,940 ) ( 1,940 )

Other comprehensive income (loss) ( 10,765 ) 2,702 ( 8,063 )

Ending balance ( 136,057 ) 9,351 ( 126,706 )

For the Nine Months Ended June 30, 2023

Unrealized Unrealized

Gains (Losses) Gains (Losses)

on AFS on Cash Flow Total

Securities Hedges AOCI

(Dollars in thousands)

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

Other comprehensive income (loss), before reclassifications 19,062 3,589 22,651

Amount reclassified from AOCI, net of taxes of $ 1,202

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

( 1,188 ) — ( 1,188 )

2 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements