Capitol Federal Financial, Inc. 10-Q

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The Company and the Bank may from time to time make written or oral "forward-looking statements," including statements contained in documents filed or furnished by the Company with the SEC. These forward-looking statements may be included in this Quarterly Report on Form 10-Q and the exhibits attached to it, in the Company's reports to stockholders, in the Company's press releases, and in other communications by the Company, which are made in good faith pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements about our beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions, which are subject to significant risks and uncertainties, and are subject to change based on various factors, some of which are beyond our control. The words "may," "could," "should," "would," "believe," "anticipate," "estimate," "expect," "intend," "plan" and similar expressions are intended to identify forward-looking statements. The following factors, among others, could cause our future results to differ materially from the beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions expressed in the forward-looking statements: • our ability to maintain overhead costs at reasonable levels; • our ability to generate a sufficient volume of loans in order to maintain the loan portfolio balance at a level desired by management; • our ability to invest funds in wholesale or secondary markets at favorable yields; • our ability to access cost-effective funding and maintain sufficient liquidity; • our ability to extend our commercial banking and trust asset management expertise across our market areas; • fluctuations in deposit flows; • transactions or activities that would result in the recapture of base-year, tax basis bad debt reserves; • the future earnings and capital levels of the Bank, the impact of the pre-1988 bad debt recapture and the continued non-objection by our primary federal banking regulators, to the extent required, to distribute capital from the Bank to the Company, which could affect the Company's income tax expense and the Company's ability to pay dividends in accordance with its dividend policy and/or repurchase shares; • the strength of the U.S. economy in general and the strength and/or the availability of labor in the local economies in which we conduct operations, including areas where we have purchased large amounts of correspondent loans, originated commercial loans, and entered into commercial loan participations; • changes in real estate values, unemployment levels, general economic trends, and the level and direction of loan delinquencies and charge-offs may require changes in the estimates of the adequacy of the ACL and may adversely affect our business; • increases in classified and/or non-performing assets, which may require the Bank to increase the ACL, charge-off loans and incur elevated collection and carrying costs related to such non-performing assets; • results of examinations of the Bank and the Company by their respective primary federal banking regulators, including the possibility that the regulators may, among other things, require us to increase our ACL; • changes in accounting principles, policies, or guidelines; • the effects of, and changes in, monetary and interest rate policies of the Board of Governors of the Federal Reserve System ("FRB"); • the effects of, and changes in, trade and fiscal policies and laws of the United States government; • the effects of, and changes in, foreign and military policies of the United States government; • inflation, interest rate, market, monetary, and currency fluctuations and the effects of a potential economic recession or slower economic growth; • the potential imposition of new or increased tariffs or changes to existing trade policies that would affect economic activity or specific industry sectors; • the impact of bank failures or adverse developments at other banks and related negative press about the banking industry in general on investor or depositor sentiment; • the timely development and acceptance of new products and services and the perceived overall value of these products and services by users, including the features, pricing, and quality compared to competitors' products and services; • the willingness of users to substitute competitors' products and services for our products and services; • our success in gaining regulatory approval of our products and services and branching locations, when required; • the impact of interpretations of, and changes in, financial services laws and regulations, including laws concerning taxes, banking, securities, consumer protection, trust and insurance and the impact of other governmental initiatives affecting the financial services industry; • the ability to attract and retain skilled employees; • implementing business initiatives may be more difficult or expensive than anticipated; • significant litigation; • technological changes; • our ability to maintain the security of our financial, accounting, technology, and other operating systems and facilities, including the ability to withstand cyberattacks; 32 • changes in consumer spending, borrowing and saving habits; and • our success at managing the risks involved in our business. This list of factors is not all inclusive. For a discussion of risks and uncertainties related to our business that could adversely impact our operations and/or financial results, see "Part I, Item 1A. Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2024 and Part II, Item 1A. Risk Factors within this Quarterly Report on Form 10-Q. We do not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Company or the Bank. As used in this Form 10-Q, unless we specify or the context indicates otherwise, "the Company," "we," "us," and "our" refer to Capitol Federal Financial, Inc. a Maryland corporation, and its subsidiaries. "Capitol Federal Savings," and "the Bank," refer to Capitol Federal Savings Bank, a federal savings bank and the wholly-owned subsidiary of Capitol Federal Financial, Inc. The following discussion and analysis is intended to assist in understanding the financial condition, results of operations, liquidity, and capital resources of the Company. The Bank comprises almost all of the consolidated assets and liabilities of the Company and the Company is dependent primarily upon the performance of the Bank for the results of its operations. Because of this relationship, references to management actions, strategies and results of actions apply to both the Bank and the Company except where the context indicates otherwise. This discussion and analysis should be read in conjunction with Management's Discussion and Analysis included in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2024, filed with the SEC. Available Information Financial and other Company information, including press releases, Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports can be obtained free of charge from our investor relations website, https://ir.capfed.com. SEC filings are available on our website immediately after they are electronically filed with or furnished to the SEC, and are also available on the SEC's website at www.sec.gov. Critical Accounting Estimates Our most critical accounting estimate is our methodology used to determine the ACL and reserve for off-balance sheet credit exposures. This estimate is important to the presentation of our financial condition and results of operations, involves a high degree of complexity, and requires management to make difficult and subjective judgments that may require assumptions about highly uncertain matters. The use of different judgments, assumptions, and estimates could affect reported results materially. This critical accounting estimate and its application is reviewed at least annually by the audit committee of our Board of Directors. For a full discussion of our critical accounting estimates, see "Part II, Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates" in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2024. Executive Summary The following summary should be read in conjunction with the Management's Discussion and Analysis of Financial Condition and Results of Operations section in its entirety. The Company recognized net income of $30.8 million, or $0.24 per share, for the current year six month period, compared to net income of $16.3 million, or $0.12 per share, for the prior year six month period. The lower net income in the prior year six month period was primarily a result of the net losses on the sale of securities associated with the securities strategy. See additional discussion regarding the securities strategy in the "Securities Strategy to Improve Earnings" section below. Excluding the effects of the net loss associated with the securities strategy, EPS would have been $0.20 for the prior year six month period. The increase in EPS excluding the effects of the net loss associated with the securities strategy was due primarily to higher net interest income in the current year six month period. The net interest margin increased 13 basis points, from 1.76% for the prior year six month period to 1.89% for the current year six month period. The increase was due mainly to higher yields on loans and the continued shift of loan balances from the one- to four-family loan portfolio to the higher yielding commercial loan portfolio, which outpaced the increase in the cost of deposits, largely in retail certificates of deposit. 33 The Bank continues to transition from a retail oriented financial institution to one with an increasing focus on commercial customers. The Bank is active in local markets for lending, commercial deposit and treasury management relationships, even when the lending opportunity may be for locations outside of the Bank's and the customers' local footprint. For the remainder of fiscal year 2025, it is anticipated that the Bank's net interest margin will continue to improve, assuming the continuation of decreasing deposit costs and increasing yields on our loan portfolio. All areas of the Bank's operations continue to focus on the management of costs. The Company's efficiency ratio was 59.23% for the current year six month period compared to 74.29% for the prior year six month period. Excluding the net losses from the securities strategy, the efficiency ratio would have been 63.28% for the prior year six month period. The improvement in the efficiency ratio, excluding the net losses from the securities strategy, was due primarily to higher net interest income compared to the prior year six month period. The Company's operating expense ratio (annualized) for the current year six month period was 1.18%, unchanged from the prior year six month period. Total assets were $9.72 billion at March 31, 2025, a $190.6 million increase from September 30, 2024, due mainly to increases in cash and cash equivalents and securities, partially offset by a decrease in the loan portfolio. The one- to four-family loan portfolio decreased $186.9 million during the current year six month period, partially offset by commercial loan growth of $159.3 million, primarily in the commercial real estate portfolio. Total deposits were $6.37 billion at March 31, 2025, a $242.6 million increase from September 30, 2024. The increase was due primarily to the Bank's high yield savings account offering and retail checking accounts, partially offset by a decrease in retail certificates of deposit. Management has continued to focus on retaining and growing deposits through the Bank's high yield savings account product, which as of March 31, 2025 had an annual percentage yield of 4.30% for accounts meeting the account criteria, including a $10 thousand balance minimum. Total borrowings were $2.14 billion at March 31, 2025, a $36.6 million decrease from September 30, 2024. The decrease was due to principal payments made on the Bank's amortizing FHLB advances. Management estimates that the Bank had $2.96 billion in liquidity available at March 31, 2025 based on the Bank's blanket collateral agreement with FHLB and unencumbered securities. Stockholders' equity totaled $1.04 billion at March 31, 2025, an increase of $4.8 million from September 30, 2024. As of March 31, 2025, the Bank's capital ratios exceeded the well-capitalized requirements. The Bank's community bank leverage ratio ("CBLR") as of March 31, 2025 was 9.5%. The Bank's asset quality remains strong, reflected in the continued low level of loan delinquency and charge-off ratios. At March 31, 2025, loans 30 to 89 days delinquent were 0.18% of total loans receivable, net, and loans 90 or more days delinquent or in foreclosure were 0.12% of total loans receivable, net. See "Asset Quality - Delinquent and nonaccrual loans and OREO" below for additional discussion. During the current year six month period, net charge-offs were $107 thousand. At March 31, 2025 the gap between the Bank's amount of interest-earning assets and interest-bearing liabilities projected to reprice within one year was $(1.11) billion, or (11.4)% of total assets, compared to $(1.51) billion, or (15.8)% of total assets, at September 30, 2024. As of March 31, 2025, the Bank exceeded internal policy thresholds for sensitivity to changes in interest rates. See additional discussion in "Part I, Item 3. Quantitative and Qualitative Disclosures About Market Risk." Securities Strategy to Improve Earnings In October 2023, the Company initiated a securities strategy (the "securities strategy") by selling $1.30 billion of securities, representing 94% of its securities portfolio. Since the Company did not have the intent to hold the $1.30 billion of securities to maturity at September 30, 2023, the Company recognized an impairment loss on those securities of $192.6 million which was reflected in the Company's financial statements for the quarter and fiscal year ended September 30, 2023. The securities strategy allowed the Company to improve its earnings stream going forward, beginning in the quarter ended December 31, 2023, by redeploying most of the proceeds into then current market rate securities and to provide liquidity to deleverage the balance sheet utilizing the remaining proceeds. During the quarter ended December 31, 2023, the Company completed the sale of securities and recognized $13.3 million ($10.0 million net of tax), or $0.08 per share, of additional loss. See additional information regarding the impact of the securities strategy on our financial measurements in "Average Balance Sheets" below. The $1.30 billion of securities sold had a weighted average yield of 1.22% and an average duration of 3.6 years. With the proceeds from the sale of the securities, the Company purchased $632.0 million of securities yielding 5.75%, paid down $500.0 million of borrowings with a weighted average cost of 4.70%, and held the remaining cash at the FRB of Kansas City earning interest at the reserve balance rate until such time as it could be used to fund commercial activity or for other Bank operations. 34 Strategic Banking Initiatives Management continues to focus on strategically growing commercial banking through the alignment of technology, people, products and services. Management believes we will be successful in this initiative as we are focusing on the financial needs of growing companies and small businesses and pairing these companies with experienced relationship managers who offer a broad range of customized services, digital platforms and sophisticated cash management tools tailored to their businesses. Leveraging our new technology and organizational structure to quickly respond to customer needs in the sales pipeline is central to our growth strategy for commercial deposits. We expect that commercial loan growth will continue to be driven by prospecting for new relationships and maintaining and expanding existing relationships. Strong credit quality remains a priority for the Bank as it seeks to grow commercial lending, and we are now able to offer a full suite of treasury management products to service these new and existing lending relationships. During the current quarter we implemented and began utilizing commercial loan pricing and profitability software which provides pricing and profitability based on the full customer banking relationship. Management intends to implement additional modules associated with the software during the remainder of fiscal year 2025 that should provide market insight regarding competitor pricing to assist loan officers when preparing a loan offering for a customer. We see many opportunities to grow our non-interest bearing deposit base and diversify fee-based revenue streams through growth not only in treasury management services, but also trust and wealth management services, and small business banking. We have a team of bankers focused on the deposit and loan needs of small businesses in our market area. Early in the June 30, 2025 quarter, we plan to launch additional new checking products and digital banking services specifically designed for small businesses. As part of this growth strategy, we intend to create a seamless digital banking experience for all customers, which we believe will better enable the Bank to attract and retain deposits. This includes the new deposit account onboarding platform implemented in November 2024 and digital banking enhancements for debit cardholders which is projected to be implemented in the fourth quarter of fiscal year 2025. Management continues to actively evaluate new and additional services for commercial and small businesses to provide services they need and grow the Bank's fee revenue streams. 35 Financial Condition The following table summarizes the Company's financial condition at the dates indicated. Annualized Annualized March 31, December 31, Percent September 30, Percent 2025 2024 Change 2024 Change (Dollars and shares in thousands) Total assets $ 9,718,184 $ 9,538,167 7.5 % $ 9,527,608 4.0 % AFS securities 961,417 861,501 46.4 856,266 24.6 Loans receivable, net 7,875,905 7,953,556 (3.9) 7,907,338 (0.8) Deposits 6,372,545 6,206,117 10.7 6,129,982 7.9 Borrowings 2,142,956 2,163,775 (3.8) 2,179,564 (3.4) Stockholders' equity 1,037,110 1,026,939 4.0 1,032,270 0.9 Equity to total assets at end of period 10.7 % 10.8 % 10.8 % Average number of basic shares outstanding 130,026 129,973 0.2 129,918 0.2 Average number of diluted shares outstanding 130,026 129,973 0.2 129,918 0.2 Loans receivable, net decreased $77.7 million during the current quarter. The loan portfolio mix continued to shift from one- to four-family loans to commercial loans during the current quarter, with a $96.0 million decrease in one- to four-family loans, partially offset by commercial loan growth of $21.8 million. Management expects the Bank's one- to four-family originated loan portfolio will continue to decrease as the affordability of housing remains challenging and there is a limited supply of homes for sale. Deposits increased $166.4 million, or 10.7% annualized, during the current quarter due mainly to the Bank's high yield savings account offering, which increased $112.4 million during the quarter, to $284.1 million at March 31, 2025. Management has continued to focus on retaining and growing deposits through its high yield savings account product. Excess cash flows generated from the one- to four-family portfolio and from deposit growth are currently being used to fund commercial loan growth or being held as operating cash to accommodate near-term funding needs for commercial loan activities and to repay borrowings coming due early in the June 30, 2025 quarter. 36 Loans Receivable. The following table presents the balance and weighted average rate of our loan portfolio as of the dates indicated. March 31, 2025 December 31, 2024 September 30, 2024 Amount Rate Amount Rate Amount Rate (Dollars in thousands) One- to four-family: Originated $ 3,863,882 3.68 % $ 3,907,809 3.64 % $ 3,941,952 3.60 % Correspondent purchased 2,117,232 3.48 2,163,847 3.48 2,212,587 3.48 Bulk purchased 119,914 3.09 123,029 2.97 127,161 2.80 Construction 16,782 6.53 19,165 6.35 22,970 6.05 Total 6,117,810 3.61 6,213,850 3.58 6,304,670 3.55 Commercial: Commercial real estate 1,340,539 5.50 1,353,482 5.48 1,191,624 5.43 Commercial and industrial 135,884 6.74 131,267 6.66 129,678 6.66 Construction 191,904 6.12 161,744 6.14 187,676 6.40 Total 1,668,327 5.67 1,646,493 5.64 1,508,978 5.65 Consumer loans: Home equity 99,049 8.12 103,006 8.31 99,988 8.90 Other 9,434 5.87 9,680 5.77 9,615 5.72 Total 108,483 7.93 112,686 8.09 109,603 8.62 Total loans receivable 7,894,620 4.10 7,973,029 4.07 7,923,251 4.02 Less: ACL 23,970 24,997 23,035 Deferred loan fees/discounts 30,276 30,973 30,336 Premiums/deferred costs (35,531) (36,497) (37,458) Total loans receivable, net $ 7,875,905 $ 7,953,556 $ 7,907,338 Loan Activity - The following table summarizes activity in the loan portfolio, along with weighted average rates where applicable, for the periods indicated, excluding changes in ACL, deferred loan fees/discounts, and premiums/deferred costs. Loans that were paid off as a result of refinances are included in repayments. Loan endorsements are not included in the activity in the following table because a new loan is not generated at the time of the endorsement. The endorsed balance and rate are included in the ending loan portfolio balance and rate. Commercial loan renewals are not included in the activity presented in the following table unless new funds are disbursed at the time of renewal. The renewal balance and rate are included in the ending loan portfolio balance and rate. For the Three Months Ended For the Six Months Ended March 31, 2025 March 31, 2025 March 31, 2024 Amount Rate Amount Rate Amount Rate (Dollars in thousands) Beginning balance $ 7,973,029 4.07 % $ 7,923,251 4.02 % $ 7,984,381 3.76 % Originated and refinanced 121,990 6.87 387,721 6.79 187,721 7.06 Purchased and participations — — 69,790 7.21 27,944 7.82 Change in undisbursed loan funds 37,061 71 117,888 Repayments (237,346) (486,106) (424,976) Principal (charge-offs)/recoveries, net (114) (107) (1) Other — — (225) Ending balance $ 7,894,620 4.10 $ 7,894,620 4.10 $ 7,892,732 3.86 37 The following table presents loan origination, refinance, and participation activity for the periods indicated, excluding endorsement activity, along with associated weighted average rates and percent of total. Commercial loan renewals are not included in the activity in the following table except to the extent new funds are disbursed at the time of renewal. Loan originations, participations, and refinances are reported together. For the Six Months Ended March 31, 2025 March 31, 2024 Amount Rate % of Total Amount Rate % of Total (Dollars in thousands) Commercial: Commercial real estate Fixed-rate $ 29,808 7.02 % 6.5 % $ 1,156 7.28 % 0.5 % Adjustable-rate 141,870 6.82 31.0 15,506 6.13 7.2 171,678 6.85 37.5 16,662 6.21 7.7 Commercial and industrial Fixed-rate 21,632 7.40 4.7 12,432 6.98 5.8 Adjustable-rate 11,040 7.37 2.4 7,983 7.69 3.7 32,672 7.39 7.1 20,415 7.26 9.5 Commercial construction Fixed-rate 1,135 8.00 0.3 3,632 7.07 1.7 Adjustable-rate 93,269 7.40 20.4 36,641 8.23 17.0 94,404 7.40 20.7 40,273 8.12 18.7 Total commercial Fixed-rate 52,575 7.19 11.5 17,220 7.02 8.0 Adjustable-rate 246,179 7.06 53.8 60,130 7.61 27.9 298,754 7.08 65.3 77,350 7.48 35.9 Consumer: One- to four-family Fixed-rate 108,697 6.06 23.8 77,119 6.66 35.8 Adjustable-rate 26,223 6.25 5.7 37,726 6.42 17.5 134,920 6.10 29.5 114,845 6.58 53.3 Home equity and other Fixed-rate 4,008 8.19 0.9 5,660 8.46 2.6 Adjustable-rate 19,829 8.27 4.3 17,810 9.12 8.2 23,837 8.25 5.2 23,470 8.96 10.8 Total consumer Fixed-rate 112,705 6.14 24.6 82,779 6.78 38.4 Adjustable-rate 46,052 7.12 10.1 55,536 7.29 25.7 158,757 6.42 34.7 138,315 6.98 64.1 Total commercial and consumer Fixed-rate 165,280 6.47 36.1 99,999 6.82 46.4 Adjustable-rate 292,231 7.07 63.9 115,666 7.46 53.6 $ 457,511 6.85 100.0 % $ 215,665 7.16 100.0 % Commercial participations included above: Fixed-rate 24,500 7.00 3,500 7.00 Adjustable-rate 45,290 7.32 20,947 8.27 $ 69,790 7.21 $ 24,447 8.09 38 One- to Four-Family Loans - The following table presents, for our portfolio of one- to four-family loans, the amount, percent of total, weighted average rate, weighted average credit score, weighted average LTV ratio, and average balance per loan as of March 31, 2025. Credit scores were updated in September 2024 from a nationally recognized consumer rating agency. The LTV ratios were based on the current loan balance and either the lesser of the purchase price or original appraisal, or the most recent Bank appraisal, if available. In most cases, the most recent appraisal was obtained at the time of origination. % of Credit Average Amount Total Rate Score LTV Balance (Dollars in thousands) Originated $ 3,863,882 63.1 % 3.68 % 771 58 % $ 169 Correspondent purchased 2,117,232 34.6 3.48 767 62 398 Bulk purchased 119,914 2.0 3.09 773 53 276 Construction 16,782 0.3 6.53 771 46 323 $ 6,117,810 100.0 % 3.61 770 59 213 The following table presents origination and refinance activity in our one- to four-family loan portfolio, excluding endorsement activity, along with the weighted average rate, weighted average LTV and weighted average credit score for the time periods presented. For the Three Months Ended For the Six Months Ended March 31, 2025 March 31, 2025 Credit Credit Amount Rate LTV Score Amount Rate LTV Score (Dollars in thousands) $ 53,375 6.32 % 74 % 769 $ 134,920 6.10 % 73 % 767 The following table presents the amount and weighted average rate of one- to four-family loan origination and refinance commitments as of March 31, 2025. Amount Rate (Dollars in thousands) $ 49,489 6.46 % Commercial Loans - The table below presents commercial loan origination and purchase activity for the time periods presented. For commercial real estate and commercial construction loans, the LTV ratio is calculated using the gross loan amount (composed of unpaid principal and undisbursed amounts) and the collateral value at the time of origination. For existing real estate, the "as is" value is used. If the property is to be constructed, the "as completed" value of the collateral is utilized. The DSCR is calculated based on historical borrower performance, or projected borrower performance for newly formed entities with no performance history. For the Three Months Ended March 31, 2025 Originated Participation Total Weighted Weighted Amount Rate Amount Rate Amount Rate LTV DSCR (Dollars in thousands) Commercial real estate $ 24,128 6.94 % $ — — % $ 24,128 6.94 % 67.6 % 1.52x Commercial and industrial 5,987 7.29 — — 5,987 7.29 N/A 3.91 Commercial construction 27,363 7.23 — — 27,363 7.23 66.8 2.00 $ 57,478 7.11 $ — — $ 57,478 7.11 67.2 1.99 For the Six Months Ended March 31, 2025 Originated Participation Total Weighted Weighted Amount Rate Amount Rate Amount Rate LTV DSCR (Dollars in thousands) Commercial real estate $ 144,873 6.81 % $ 26,804 7.04 % $ 171,677 6.85 % 58.2 % 1.81x Commercial and industrial 32,673 7.39 — — 32,673 7.39 N/A 3.96 Commercial construction 51,418 7.48 42,986 7.31 94,404 7.40 75.4 1.75 $ 228,964 7.05 $ 69,790 7.21 $ 298,754 7.08 64.3 2.02 39 The following table presents commercial loan disbursements, excluding lines of credit, during the six months ended March 31, 2025. Amount Rate (Dollars in thousands) Commercial real estate $ 179,930 6.61 % Commercial and industrial 16,843 7.36 Commercial construction 87,101 6.31 $ 283,874 6.57 The following table presents the Bank's commercial real estate and commercial construction loans by type of primary collateral as of the dates indicated. Management anticipates fully funding the majority of the undisbursed amounts as most are not cancellable by the Bank. At March 31, 2025, the unpaid principal balance of non-owner occupied commercial real estate loans was $1.01 billion and the unpaid principal balance of owner occupied commercial real estate loans was $163.4 million, both of which are included in the table below. March 31, 2025 December 31, 2024 September 30, 2024 Unpaid Undisbursed Gross Loan Gross Loan Gross Loan Count Principal Amount Amount Amount Amount (Dollars in thousands) Hotel 24 $ 392,961 $ 52,524 $ 445,485 $ 432,647 $ 323,396 Multi-family 34 204,276 152,792 357,068 386,341 359,707 Senior housing 37 342,007 2,490 344,497 345,812 332,334 Retail building 131 271,536 48,244 319,780 336,135 316,261 Office building 77 126,617 540 127,157 128,410 127,961 One- to four-family property 316 60,169 5,008 65,177 63,879 63,416 Warehouse/manufacturing 49 36,822 6,742 43,564 34,569 34,656 Single use building 28 35,204 262 35,466 40,061 43,438 Land 26 34,662 193 34,855 15,615 32,943 Other 37 28,189 1,186 29,375 30,110 29,070 759 $ 1,532,443 $ 269,981 $ 1,802,424 $ 1,813,579 $ 1,663,182 Weighted average rate 5.58 % 6.82 % 5.76 % 5.75 % 5.77 % The following table presents management's funding expectations for the Bank's commercial real estate and commercial construction undisbursed amounts and commitments outstanding as of March 31, 2025. Due to the nature of a revolving line of credit, management is unable to project funding expectations for those balances so those amounts are presented separately from management's funding expectations. The majority of the $136.5 million of commitments expected to fund during the June 30, 2025 quarter are related to hotel loans. Management has decided that it will continue to lend to existing borrowing relationships secured by hotels but is not taking on new relationships for hotel lending. Existing hotel lending opportunities in our pipeline will continue to be evaluated. Management believes that our intended level of concentration in this category of lending will be met with our existing portfolio and pipeline opportunities. Projected Disbursements for the Quarters Ending Revolving June 30, 2025 September 30, 2025 December 31, 2025 Thereafter Lines of Credit Total (Dollars in thousands) Undisbursed amounts $ 98,394 $ 82,063 $ 49,769 $ 35,696 $ 4,059 $ 269,981 Commitments 136,516 5,750 13,500 20,400 10,419 186,585 $ 234,910 $ 87,813 $ 63,269 $ 56,096 $ 14,478 $ 456,566 Weighted average rate 6.84 % 6.89 % 7.10 % 7.01 % 7.06 % 6.92 % 40 The following table summarizes the Bank's commercial real estate and commercial construction loans by state as of the dates indicated. March 31, 2025 December 31, 2024 September 30, 2024 Unpaid Undisbursed Gross Loan Gross Loan Gross Loan Count Principal Amount Amount Amount Amount (Dollars in thousands) Kansas 561 $ 604,141 $ 105,148 $ 709,289 $ 709,162 $ 713,437 Texas 19 288,485 30,666 319,151 330,283 348,066 Missouri 129 257,626 41,459 299,085 305,835 313,146 California 4 83,441 11,989 95,430 81,451 15,040 New York 1 60,000 — 60,000 60,000 60,000 Colorado 9 44,953 10,181 55,134 60,805 50,017 Tennessee 3 39,248 1,353 40,601 40,782 35,973 Nebraska 7 11,519 27,139 38,658 59,406 32,422 Arizona 5 10,778 25,663 36,441 36,446 15,452 Arkansas 4 36,322 — 36,322 36,491 36,588 Other 17 95,930 16,383 112,313 92,918 43,041 759 $ 1,532,443 $ 269,981 $ 1,802,424 $ 1,813,579 $ 1,663,182 The following table presents the Bank's commercial real estate and commercial construction loans by unpaid principal balance, aggregated by type of primary collateral and state, along with weighted average LTV ratio and weighted average DSCR as of March 31, 2025. The LTV ratio is calculated using the gross loan amount (composed of unpaid principal and undisbursed amounts) as of March 31, 2025 and the most current collateral value available, which is most often the value at origination/purchase. The DSCR is calculated at the time of origination, and is updated at the time of subsequent loan renewals, financial reviews (for applicable loans and lending relationships), and any other time management is aware of changes that may impact the DSCR. The DSCR presented in the table below is based on the DSCR at the time of origination unless an updated DSCR has been calculated. Commercial loans that have an outstanding balance of $1.5 million or more, or borrowing relationships with a total relationship exposure of $5.0 million or more are reviewed no less often than annually to monitor financial performance. Weighted Weighted Kansas Texas Missouri California Other Total LTV DSCR (Dollars in thousands) Hotel $ 42,855 $ 140,564 $ 9,518 $ 80,563 $ 119,461 $ 392,961 54.9 % 1.43x Senior housing 176,234 — 109,022 — 56,751 342,007 70.6 1.44 Retail building 85,072 67,486 48,237 — 70,741 271,536 62.9 2.09 Multi-family 135,389 19,177 49,171 — 539 204,276 63.6 1.30 Office building 57,220 60,358 8,700 — 339 126,617 51.7 1.89 One- to four-family property 44,345 — 6,438 — 9,386 60,169 55.9 2.71 Warehouse/manufacturing 31,116 — 2,442 — 3,264 36,822 58.1 3.02 Single use building 13,488 — 18,463 2,878 375 35,204 61.5 1.87 Land 6,286 900 738 — 26,738 34,662 70.6 3.97 Other 12,136 — 4,897 — 11,156 28,189 56.8 2.00 $ 604,141 $ 288,485 $ 257,626 $ 83,441 $ 298,750 $ 1,532,443 61.4 1.73 Weighted LTV 64.0 % 55.5 % 66.5 % 49.2 % 60.6 % 61.4 % Weighted DSCR 1.88x 1.69x 1.70x 1.50x 1.58x 1.73x 41 The following table presents the Bank's commercial loan portfolio and outstanding loan commitments, categorized by aggregate gross loan amount (unpaid principal plus undisbursed amounts) or outstanding loan commitment amount and average loan amount, as of March 31, 2025. For loans and commitments over $50.0 million, $267.4 million was related to hotels in Arizona, California, New York, and Texas, $143.1 million was related to multi-family properties in Kansas, and $60.0 million was related to an office building in Texas. Gross Loan and Commitment Average Weighted Weighted Count Amounts Amount LTV DSCR (Dollars in thousands) Greater than $50 million 7 $ 470,423 $ 67,203 53.8 % 1.36x >$30 to $50 million 7 260,597 37,228 62.2 1.55 >$20 to $30 million 16 388,792 24,300 67.4 1.41 >$15 to $20 million 8 138,665 17,333 63.6 1.42 >$10 to $15 million 12 145,313 12,109 70.4 1.80 >$5 to $10 million 27 192,300 7,122 64.3 1.77 $1 to $5 million 116 268,098 2,311 60.4 2.07 Less than $1 million 576 124,822 217 53.9 3.12 769 $ 1,989,010 2,586 61.4 1.68 The following table summarizes the Bank's commercial and industrial loans by loan purpose as of the dates indicated. As of March 31, 2025, the Bank also had four commercial and industrial loan commitments totaling $4.2 million, at a weighted average rate of 7.00%. March 31, 2025 December 31, 2024 September 30, 2024 Unpaid Undisbursed Gross Loan Gross Loan Gross Loan Count Principal Amount Amount Amount Amount (Dollars in thousands) Working capital 162 $ 51,930 $ 33,283 $ 85,213 $ 86,186 $ 74,097 Purchase/refinance business assets 53 40,724 504 41,228 42,066 37,950 Finance/lease vehicle 230 24,998 2,775 27,773 26,655 28,318 Purchase equipment 66 13,440 9,579 23,019 23,472 15,457 Other 20 4,792 2,537 7,329 8,143 7,735 531 $ 135,884 $ 48,678 $ 184,562 $ 186,522 $ 163,557 Weighted average rate 6.74 % 7.19 % 6.86 % 6.83 % 6.89 % 42 Asset Quality Delinquent and nonaccrual loans and OREO. The following table presents the Company's 30 to 89 day delinquent loans at the dates indicated. The amounts in the table represent the unpaid principal balance of the loans less related charge-offs, if any. Of the loans 30 to 89 days delinquent at March 31, 2025, 64% were 59 days or less delinquent. The decrease in 30-89 day delinquent commercial real estate loans as of March 31, 2025 was due primarily to a $15.5 million Community Reinvestment Act loan that was paid current during the current quarter. Loans Delinquent for 30 to 89 Days at: March 31, December 31, September 30, 2025 2024 2024 Number Amount Number Amount Number Amount (Dollars in thousands) One- to four-family: Originated 73 $ 8,072 79 $ 9,768 69 $ 8,884 Correspondent purchased 9 2,928 11 2,988 12 3,049 Bulk purchased 3 179 1 32 2 68 Commercial: Commercial real estate 5 2,472 7 18,373 11 2,996 Commercial and industrial 2 348 1 125 4 391 Consumer 24 441 35 679 35 642 116 $ 14,440 134 $ 31,965 133 $ 16,030 Loans 30 to 89 days delinquent to total loans receivable, net 0.18 % 0.40 % 0.20 % 43 The following table presents the Company's nonaccrual loans and OREO at the dates indicated. The amounts in the table represent the unpaid principal balance of the loans less related charge-offs, if any. Nonaccrual loans are loans that are 90 or more days delinquent or in foreclosure and other loans required to be reported as nonaccrual pursuant to accounting and/or regulatory reporting requirements and/or internal policies, even if the loans are current. At all dates presented, there were no loans 90 or more days delinquent that were still accruing interest. Non-performing assets include nonaccrual loans and OREO. Nonaccrual Loans and OREO at: March 31, December 31, September 30, 2025 2024 2024 Number Amount Number Amount Number Amount (Dollars in thousands) Loans 90 or More Days Delinquent or in Foreclosure: One- to four-family: Originated 30 $ 2,814 26 $ 2,338 29 $ 2,274 Correspondent purchased 7 1,965 8 3,843 8 4,024 Bulk purchased 3 620 4 1,256 5 1,535 Commercial: Commercial real estate 11 3,315 7 2,038 7 1,163 Commercial and industrial 4 376 3 309 2 82 Consumer 19 473 22 356 20 436 74 9,563 70 10,140 71 9,514 Loans 90 or more days delinquent or in foreclosure as a percentage of total loans 0.12 % 0.13 % 0.12 % Nonaccrual loans less than 90 Days Delinquent: (1) Commercial: Commercial real estate 5 $ 1,128 6 $ 1,096 3 $ 326 Commercial and industrial 2 142 1 125 2 252 7 1,270 7 1,221 5 578 Total nonaccrual loans 81 10,833 77 11,361 76 10,092 Nonaccrual loans as a percentage of total loans 0.14 % 0.14 % 0.13 % OREO: One- to four-family: Originated (2) — $ — — $ — 1 $ 55 — — — — 1 55 Total non-performing assets 81 $ 10,833 77 $ 11,361 77 $ 10,147 Non-performing assets as a percentage of total assets 0.11 % 0.12 % 0.11 % (1) Includes loans required to be reported as nonaccrual pursuant to internal policies, even if the loans are current. (2) Real estate-related consumer loans where we also hold the first mortgage are included in the one- to four-family category as the underlying collateral is one- to four-family property. 44 The following table presents the states where the properties securing ten percent or more of the total amount of our one- to four-family loans are located and the corresponding balance of loans 30 to 89 days delinquent, 90 or more days delinquent or in foreclosure, and weighted average LTV ratios for loans 90 or more days delinquent or in foreclosure at March 31, 2025. The LTV ratios were based on the current loan balance and either the lesser of the purchase price or original appraisal, or the most recent Bank appraisal, if available. At March 31, 2025, potential losses, after taking into consideration anticipated private mortgage insurance proceeds and estimated selling costs, have been charged-off. Loans 30 to 89 Loans 90 or More Days Delinquent One- to Four-Family Days Delinquent or in Foreclosure State Amount % of Total Amount % of Total Amount % of Total LTV (Dollars in thousands) Kansas $ 3,407,773 55.7 % $ 5,896 52.7 % $ 2,645 49.0 % 44 % Missouri 1,052,045 17.2 4,000 35.8 669 12.4 62 Other states 1,657,992 27.1 1,283 11.5 2,085 38.6 59 $ 6,117,810 100.0 % $ 11,179 100.0 % $ 5,399 100.0 % 52 Classified loans. The following table presents the amortized cost of loans classified as special mention or substandard at the dates presented. The increase in commercial real estate substandard loans at March 31, 2025 and December 31, 2024 compared to September 30, 2024 was due mainly to a participation loan for $39.0 million as of March 31, 2025 related to a hotel in Texas. The property is taking longer than projected to stabilize and the borrower is not meeting the debt service coverage loan covenant required by the loan agreement. The borrower projects improved occupancy and cash flow during the remainder of calendar year 2025 and expects the project to fully stabilize during calendar year 2026. As of March 31, 2025, the LTV on this loan was 47% and the loan was not delinquent. March 31, 2025 December 31, 2024 September 30, 2024 Special Mention Substandard Special Mention Substandard Special Mention Substandard (Dollars in thousands) One- to four-family $ 11,793 $ 20,340 $ 12,481 $ 22,255 $ 17,528 $ 22,715 Commercial: Commercial real estate 8,352 45,961 15,106 42,249 16,169 2,302 Commercial and industrial 899 1,054 1,795 435 413 335 Consumer 162 566 219 512 326 487 $ 21,206 $ 67,921 $ 29,601 $ 65,451 $ 34,436 $ 25,839 45 Allowance for Credit Losses. The Bank utilizes a discounted cash flow approach for estimating expected credit losses for pooled loans and loan commitments. Expected credit losses are determined by calculating projected future loss rates which are dependent upon forecasted economic indices and applying qualitative factors when deemed appropriate by management. At March 31, 2025, management selected a slightly worse economic scenario to use in the discounted cash flow model than at December 31, 2024 to account for current economic conditions and future economic uncertainty related to recently issued and proposed federal government policies. Management applied qualitative factors at March 31, 2025 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. See "Part II, Item 8. Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 1. Summary of Significant Accounting Policies" in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2024 and "Part 1, Item 1. Note 4. Loans Receivable and Allowance for Credit Losses" within this Quarterly Report on Form 10-Q for additional information related to the key assumptions used in the discounted cash flow model and the qualitative factors. The distribution of our ACL and the ratio of ACL to loans receivable, by loan type, at the dates indicated is summarized below. The decrease in the ratio of the ACL to total loans as of March 31, 2025 from December 31, 2024 was due primarily to an increase in prepayment speeds on commercial real estate loans which reduced the related model-calculated ACL. The ratio of ACL to loans receivable has been generally consistent over the past three quarters. As of March 31, 2025, management believes there is risk in the economic outlook over the next several quarters but is uncertain of the direction and what the actual impact to the Bank's ACL will be as a result of that uncertainty. Distribution of ACL Ratio of ACL to Loans Receivable March 31, December 31, September 30, March 31, December 31, September 30, 2025 2024 2024 2025 2024 2024 (Dollars in thousands) One- to four-family: Originated $ 1,980 $ 2,028 $ 1,650 0.05 % 0.05 % 0.04 % Correspondent purchased 1,446 1,583 1,861 0.07 0.07 0.08 Bulk purchased 121 131 146 0.10 0.11 0.11 Construction 15 15 16 0.09 0.08 0.07 Total 3,562 3,757 3,673 0.06 0.06 0.06 Commercial: Real estate 16,998 17,812 15,719 1.27 1.32 1.32 Commercial and industrial 1,171 1,209 1,186 0.86 0.92 0.91 Construction 2,007 1,978 2,249 1.05 1.22 1.20 Total 20,176 20,999 19,154 1.21 1.28 1.27 Consumer 232 241 208 0.21 0.21 0.19 Total $ 23,970 $ 24,997 $ 23,035 0.30 0.31 0.29 Historically, the Bank has maintained very low delinquency ratios and net charge-off ("NCO") rates. Over the past two years, the Bank's highest ratio of commercial loans 90 days or more delinquent to total commercial loans at a quarter end was 0.22%. The highest such ratio for one- to four-family originated and correspondent loans, combined, was 0.12%. The amount of total NCOs during the current quarter and current year six month period was $114 thousand and $107 thousand, respectively, the majority of which related to one one- to four- family bulk purchased loan. During the 10-year period ended March 31, 2025, the Bank recognized $1.2 million of total NCOs. As of March 31, 2025, the ACL balance was $24.0 million and the reserve for off-balance sheet credit exposures totaled $5.6 million, which management believes is adequate for the risk characteristics in our loan portfolio. 46 The Bank's commercial real estate ACL ratios in aggregate, continue to be higher than those of our peers. The following tables present the average and median commercial real estate ACL ratios for the Bank and two of the Bank's peer groups for the periods noted. The Office of the Comptroller of the Currency ("OCC") peer group consists of all savings banks with greater than $1 billion in assets, and the asset size peer group consists of all banks between $5 billion and $15 billion in asset size. The peer group information is sourced from the respective peers' Call Reports. Average March 2023 June 2023 September 2023 December 2023 March 2024 June 2024 September 2024 December 2024 March 2025 Bank 1.28 % 1.45 % 1.57 % 1.58 % 1.60 % 1.57 % 1.32 % 1.32 % 1.27 % OCC 1.21 % 1.22 % 1.21 % 1.14 % 1.10 % 1.11 % 1.10 % 1.12 % N/A Asset Size 1.17 % 1.18 % 1.22 % 1.15 % 1.15 % 1.16 % 1.18 % 1.18 % N/A Median March 2023 June 2023 September 2023 December 2023 March 2024 June 2024 September 2024 December 2024 March 2025 Bank 1.28 % 1.45 % 1.57 % 1.58 % 1.60 % 1.57 % 1.32 % 1.32 % 1.27 % OCC 1.00 % 0.98 % 1.03 % 1.00 % 0.98 % 1.02 % 0.99 % 1.06 % N/A Asset Size 1.12 % 1.11 % 1.12 % 1.08 % 1.10 % 1.06 % 1.08 % 1.09 % N/A The following table presents ACL activity and related ratios at the dates and for the periods indicated. On October 1, 2023, the Bank adopted ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures ("ASU 2022-02"), which eliminated the accounting guidance for troubled debt restructurings by creditors. The Company applied a modified retrospective approach when adopting ASU 2022-02, resulting in a cumulative-effect adjustment which is reflected in the table below ("ASU 2022-02 Adoption"). At or For the Six Months Ended March 31, 2025 March 31, 2024 (Dollars in thousands) Balance at beginning of period $ 23,035 $ 23,759 ASU 2022-02 Adoption 20 Charge-offs (140) (25) Recoveries 33 24 Net (charge-offs) recoveries (107) (1) Provision for credit losses 1,042 856 Balance at end of period $ 23,970 $ 24,634 Ratio of NCOs during the period to average non-performing assets 1.02 % 0.01 % ACL to nonaccrual loans at end of period 221.27 280.28 ACL to loans receivable, net at end of period 0.30 0.31 ACL at end of period to NCOs during the period (annualized) 112x 10,971x The ratio of NCOs to average non-performing assets was higher in the current year six month period compared to the prior year six month period, due primarily to higher NCOs in the current year six month period. As noted above, the majority of the NCOs in the current year six month period related to one one- to four- family bulk purchased loan. The ratio of ACL to nonaccrual loans was lower at the end of the current year six month period compared to the end of the prior year period due mainly to a higher balance of nonaccrual loans in the current year six month period compared to the prior year six month period, along with a lower ACL balance at March 31, 2025. The ratio of ACL to loans receivable, net was lower at the end of the current year six month period compared to the end of the prior year six month period due primarily to a reduction in the ACL/loan ratio for commercial real estate loans, partially offset by changes in the loan portfolio mix, specifically commercial loan growth which is at a higher ACL/loan ratio than one- to four-family loans. See "Note 4. Loans Receivable and Allowance for Credit Losses" for additional information related to ACL activity by specific loan categories. ACL at the end of period to NCOs during the period (annualized) was lower compared to the prior year six month period, due primarily to higher NCOs in the current year six month period. 47 The following table presents NCOs, average loans, and NCOs as a percentage of average loans, by loan type, for the periods indicated. For the Six Months Ended March 31, 2025 March 31, 2024 NCOs Average Loans % of Average Loans NCOs Average Loans % of Average Loans (Dollars in thousands) One- to four-family: Originated $ (5) $ 3,883,700 — % $ (8) $ 3,965,723 — % Correspondent — 2,189,204 — — 2,391,638 — Bulk purchased 113 124,099 0.09 — 135,228 — Construction — 18,826 — — 40,813 — Total 108 6,215,829 — (8) 6,533,402 — Commercial: Real estate (20) 1,320,441 — 10 1,028,869 — Commercial and industrial (2) 131,315 — (1) 114,314 — Construction — 174,574 — — 185,940 — Total (22) 1,626,330 — 9 1,329,123 — Consumer: Home equity 19 101,008 0.02 3 96,565 — Other 2 9,388 0.02 (3) 9,547 (0.03) Total 21 110,396 0.02 — 106,112 — $ 107 $ 7,952,555 — $ 1 $ 7,968,637 — While management utilizes its best judgment and information available, the adequacy of the ACL and reserve for off-balance sheet credit exposures is determined by certain factors outside of the Company's control, such as the performance of our loan portfolio, changes in the economic environment including economic uncertainty, changes in interest rates, and the view of regulatory authorities toward classification of assets and the level of ACL and reserve for off-balance sheet credit exposures. Additionally, the level of ACL and reserve for off-balance sheet credit exposures may fluctuate based on the balance and mix of the loan portfolio and off-balance sheet credit exposures. If actual results differ significantly from our assumptions, our ACL and reserve for off-balance sheet credit exposures may not be sufficient to cover inherent losses in our loan portfolio, resulting in additions to our ACL and an increase in the provision for credit losses. Securities. The following table presents the distribution of our securities portfolio, at amortized cost, at the dates indicated. The majority of our securities are government guaranteed or issued by GSEs. Overall, fixed-rate securities comprised 92% of our securities portfolio at March 31, 2025. The weighted average life ("WAL") is the estimated remaining maturity (in years) after three month historical prepayment speeds and projected call option assumptions have been applied. Weighted average yields on tax-exempt securities are not calculated on a fully tax-equivalent basis. March 31, 2025 December 31, 2024 September 30, 2024 Amount Yield WAL Amount Yield WAL Amount Yield WAL (Dollars in thousands) MBS $ 867,585 5.48 % 5.8 $ 774,655 5.64 % 4.9 $ 756,775 5.63% 5.7 GSE debentures 70,000 5.25 2.5 71,915 5.37 2.6 69,077 5.63 0.4 Corporate bonds 4,000 5.12 7.1 4,000 5.12 7.4 4,000 5.12 7.6 $ 941,585 5.46 % 5.6 $ 850,570 5.62 % 4.8 $ 829,852 5.63% 5.2 48 The following table summarizes the activity in our securities portfolio for the periods presented. The weighted average yields for the beginning and ending balances are as of the first and last days of the periods presented and are generally derived from recent prepayment activity on the securities in the portfolio. The beginning and ending WALs are the estimated remaining principal repayment terms (in years) after three month historical prepayment speeds and projected call option assumptions have been applied. For the Six Months Ended March 31, 2025 March 31, 2024 Amount Yield WAL Amount Yield WAL (Dollars in thousands) Beginning balance - carrying value $ 856,266 5.63 % 5.2 $ 1,384,482 1.35 % 3.8 Maturities and repayments (99,387) (255,533) Proceeds from sale — (1,272,512) Net amortization of (premiums)/discounts 1,662 5,741 Purchases 209,458 4.96 7.8 980,994 5.60 4.4 Net loss from securities sales — (13,345) Change in valuation on AFS securities (6,582) 13,123 Ending balance - carrying value $ 961,417 5.46 5.6 $ 842,950 5.63 5.4 Liabilities. Total liabilities were $8.68 billion at March 31, 2025, compared to $8.50 billion at September 30, 2024. The increase was due primarily to a $242.6 million increase in deposits, partially offset by a $36.6 million decrease in borrowings due to principal payments made on the Bank's amortizing advances. Deposits. The following table presents the amount, weighted average rate and percent of total for the components of our deposit portfolio at the dates presented. The decrease in the deposit portfolio rate at March 31, 2025 compared to December 31, 2024 and September 30, 2024 was due mainly to lower rates on retail certificates of deposit. March 31, 2025 December 31, 2024 September 30, 2024 % of % of % of Amount Rate Total Amount Rate Total Amount Rate Total (Dollars in thousands) Non-interest-bearing checking $ 574,940 — % 9.0 % $ 556,515 — % 9.0 % $ 549,596 — % 9.0 % Interest-bearing checking 905,922 0.22 14.2 888,287 0.22 14.3 847,542 0.23 13.8 High yield savings 284,097 4.09 4.5 171,656 4.14 2.8 96,241 4.09 1.6 Other savings 448,034 0.07 7.0 439,407 0.07 7.1 444,331 0.11 7.2 Money market 1,247,106 1.21 19.6 1,235,788 1.19 19.9 1,226,962 1.46 20.0 Certificates of deposit 2,912,446 3.99 45.7 2,914,464 4.15 46.9 2,965,310 4.25 48.4 $ 6,372,545 2.28 100.0 % $ 6,206,117 2.34 100.0 % $ 6,129,982 2.45 100.0 % 49 The following table presents the amount, weighted average rate, and percent of total for the components of our deposit portfolio, split between retail non-maturity deposits, commercial non-maturity deposits, and certificates of deposit at the dates presented. March 31, 2025 December 31, 2024 September 30, 2024 % of % of % of Amount Rate Total Amount Rate Total Amount Rate Total (Dollars in thousands) Retail non-maturity deposits: Non-interest-bearing checking $ 442,379 — % 6.9 % $ 434,432 — % 7.0 % $ 418,790 — % 6.8 % Interest-bearing checking 837,294 0.09 13.1 819,644 0.09 13.2 799,407 0.10 13.0 High yield savings 284,097 4.09 4.5 171,656 4.14 2.8 96,241 4.09 1.6 Other savings 444,681 0.07 7.0 436,147 0.07 7.0 441,265 0.11 7.2 Money market 1,138,281 1.08 17.9 1,145,615 1.09 18.5 1,149,212 1.37 18.7 Total 3,146,732 0.79 49.4 3,007,494 0.69 48.5 2,904,915 0.73 47.4 Commercial non-maturity deposits: Non-interest-bearing checking 132,561 — 2.1 122,083 — 2.0 130,806 — 2.1 Interest-bearing checking 68,628 1.83 1.1 68,643 1.75 1.1 48,135 2.40 0.8 Savings 3,353 0.05 0.1 3,260 0.05 0.1 3,066 0.05 0.1 Money market 108,825 2.57 1.7 90,173 2.50 1.5 77,750 2.72 1.3 Total 313,367 1.29 4.9 284,159 1.22 4.6 259,757 1.26 4.2 Certificates of deposit: Retail certificates of deposit 2,790,993 3.99 43.8 2,799,418 4.14 45.1 2,830,579 4.23 46.2 Commercial certificates of deposit 58,545 3.90 0.9 56,564 4.27 0.9 58,236 4.40 1.0 Public unit certificates of deposit 62,908 4.22 1.0 58,482 4.48 0.9 76,495 4.62 1.2 Total 2,912,446 3.99 45.7 2,914,464 4.15 47.0 2,965,310 4.25 48.4 $ 6,372,545 2.28 100.0 % $ 6,206,117 2.34 100.0 % $ 6,129,982 2.45 100.0 % The following table presents the amount, weighted average rate, and percent of total for total retail deposits, commercial deposits, and public unit certificates of deposit at the dates noted. March 31, 2025 December 31, 2024 September 30, 2024 % of % of % of Amount Rate Total Amount Rate Total Amount Rate Total (Dollars in thousands) Total retail deposits $ 5,937,725 2.30 % 93.2 % $ 5,806,912 2.35 % 93.6 % $ 5,735,494 2.46 % 93.6 % Total commercial deposits 371,912 1.70 5.8 340,723 1.72 5.5 317,993 1.84 5.2 Public unit certificates of deposit 62,908 4.22 1.0 58,482 4.48 0.9 76,495 4.62 1.2 $ 6,372,545 2.28 100.0 % $ 6,206,117 2.34 100.0 % $ 6,129,982 2.45 100.0 % As of March 31, 2025, approximately $802.4 million (or approximately 12%) of the Bank's Call Report deposit balance was uninsured, of which approximately $475.3 million related to commercial and retail deposit accounts, with the remainder mainly comprised of fully collateralized public unit deposits and intercompany accounts. The uninsured amounts are estimates based on the methodologies and assumptions used for the Bank's regulatory reporting requirements. 50 Borrowings. Total borrowings at March 31, 2025 were $2.14 billion, which was comprised of $1.94 billion in fixed-rate FHLB advances, $200.0 million in FHLB variable-rate advances tied to interest rate swaps, and $1.1 million in finance leases. The following table presents the maturity of term borrowings, which consist of FHLB advances, along with associated weighted average contractual and effective rates as of March 31, 2025. Amortizing FHLB advances totaling $318.3 million as of March 31, 2025 are presented based on their maturity dates versus their quarterly scheduled repayment dates. Maturity by Contractual Effective Fiscal Year Amount Rate Rate (1) (Dollars in thousands) 2025 $ 300,000 3.73 % 3.19 % 2026 575,000 2.81 2.95 2027 597,500 3.39 3.47 2028 425,820 4.55 4.20 2029 150,000 4.45 4.45 2030 95,000 4.20 4.20 $ 2,143,320 3.62 3.54 (1) The effective rate includes the impact of interest rate swaps and the amortization of deferred prepayment penalties resulting from FHLB advances previously prepaid. The following table presents borrowing activity for the periods shown. The borrowings presented in the table have original contractual terms of one year or longer or are tied to interest rate swaps with original contractual terms of one year or longer. Line of credit borrowings and finance leases are excluded from the table. The effective rate is shown as a weighted average and includes the impact of interest rate swaps and the amortization of deferred prepayment penalties resulting from FHLB advances previously prepaid. The weighted average maturity ("WAM") is the remaining weighted average contractual term in years. The beginning and ending WAMs represent the remaining maturity at each date presented. During the prior year six month period, Federal Reserve's Bank Term Funding Program ("BTFP") borrowings were paid off with the proceeds received from the securities strategy. For the Three Months Ended For the Six Months Ended March 31, 2025 March 31, 2025 March 31, 2024 Effective Effective Effective Amount Rate WAM Amount Rate WAM Amount Rate WAM (Dollars in thousands) Beginning balance $ 2,164,488 3.37 % 1.6 $ 2,180,656 3.29 % 1.6 $ 2,882,828 3.34 % 1.8 Maturities and repayments (171,168) 2.22 (387,336) 2.89 (229,836) 3.26 New FHLB borrowings 150,000 4.35 2.5 350,000 4.30 3.2 200,000 4.54 4.0 BTFP, net — — — — — — (500,000) 4.70 — Ending balance $ 2,143,320 3.54 1.6 $ 2,143,320 3.54 1.6 $ 2,352,992 3.16 1.9 In early April 2025, the Bank paid off a maturing $50.0 million advance with an effective rate of 0.83%. Also in April 2025, the Bank pre-borrowed a $50.0 million FHLB advance in order to fund the repayment of another $50.0 million FHLB advance that matured later in the month. Additionally, during April 2025, the Bank refinanced three of its outstanding fixed-rate advances, totaling $200.0 million, resulting in prepayment fees of $547 thousand. The prepayment fees will be recognized in interest expense over the life of the new FHLB advances. This type of transaction is commonly referred to as a "blend-and-extend" transaction. Following the aforementioned transactions, the balance of the Bank's FHLB advance portfolio was $2.09 billion with a weighted average effective rate of 3.52% and a WAL of 1.9 years. This compares to a balance of $2.14 billion with a weighted average effective rate of 3.54% and a WAL of 1.6 years as of March 31, 2025. Management will continue to monitor opportunities for wholesale funding and may pay down FHLB advances in future periods to limit total growth of the balance sheet. The Bank may also renew certain fixed-rate advances in the future using adjustable-rate advances in order to better match the repricing characteristics of its increasing commercial loan portfolio. 51 Maturities of Interest-Bearing Liabilities. The following table presents the maturity and weighted average repricing rate, which is also the weighted average effective rate, of certificates of deposit, split between retail/commercial and public unit amounts, and non-amortizing FHLB advances for the next four quarters as of March 31, 2025. June 30, September 30, December 31, March 31, 2025 2025 2025 2026 Total (Dollars in thousands) Retail/Commercial Certificates: Amount $ 683,541 $ 457,147 $ 567,822 $ 240,270 $ 1,948,780 Repricing Rate 4.60 % 4.20 % 3.99 % 3.57 % 4.20 % Public Unit Certificates: Amount $ 8,340 $ 10,983 $ 11,996 $ 10,339 $ 41,658 Repricing Rate 4.51 % 4.42 % 3.84 % 4.40 % 4.27 % Term Borrowings: Amount $ 200,000 $ 100,000 $ 200,000 $ 100,000 $ 600,000 Repricing Rate 3.27 % 3.02 % 2.89 % 1.60 % 2.82 % Total Amount $ 891,881 $ 568,130 $ 779,818 $ 350,609 $ 2,590,438 Repricing Rate 4.30 % 4.00 % 3.70 % 3.03 % 3.88 % The following table sets forth the WAM information for our certificates of deposit, in years, as of March 31, 2025. Retail certificates of deposit 0.9 Commercial certificates of deposit 0.7 Public unit certificates of deposit 1.0 Total certificates of deposit 0.9 52 Stockholders' Equity. Stockholders' equity totaled $1.04 billion at March 31, 2025, an increase of $4.8 million from September 30, 2024. Consistent with our goal to operate a sound and profitable financial organization, we actively seek to maintain a well-capitalized status for the Bank in accordance with regulatory standards. As of March 31, 2025, the Bank's capital ratios exceeded the well-capitalized requirements and the Bank exceeded internal policy thresholds for sensitivity to changes in interest rates. See "Liquidity and Capital Resources" below for additional information regarding the Bank's regulatory capital requirements. As of March 31, 2025, the Bank's CBLR was 9.5%. During the six months ended March 31, 2025, the Company paid regular quarterly cash dividends totaling $22.1 million, or $0.17 per share. On April 22, 2025, the Company announced a regular quarterly cash dividend of $0.085 per share, or approximately $11.5 million, payable on May 16, 2025 to stockholders of record as of the close of business on May 2, 2025. At March 31, 2025, Capitol Federal Financial, Inc., at the holding company level, had $27.3 million in cash on deposit at the Bank. For fiscal year 2025, it is the intention of the Company's Board of Directors to pay out the regular quarterly cash dividend of $0.085 per share, totaling $0.34 per share for the year. To the extent that earnings in fiscal year 2025 exceed $0.34 per share, the Board of Directors will consider the payment of additional dividends. Dividend payments depend upon a number of factors, including the Company's financial condition and results of operations, regulatory capital requirements, regulatory limitations on the Bank's ability to make capital distributions to the Company, the Bank's tax current earnings and accumulated earnings and profits, and the amount of cash at the holding company level. It is the intention of management and the Board of Directors to not make distributions from the Bank to the Company during fiscal year 2025 to limit the tax associated with the pre-1988 bad debt recapture which is related to the Bank's tax accumulated earnings and profits. It is currently anticipated that the Bank will have sufficient taxable income during fiscal year 2025 to replenish the Bank's tax accumulated earnings and profits to a positive level, allowing the Bank to make earnings distributions to the Company during fiscal year 2026 and not have those distributions subject to the pre-1988 bad debt recapture tax. The Company currently has $75.0 million authorized under an existing stock repurchase plan. Shares may be repurchased from time to time based upon market conditions, available liquidity and other factors. This plan has no expiration date; however, the FRB's current approval for the Company to repurchase shares expires in February 2026. There were no share repurchases during the current year six month period. Because the cash at the holding company is limited based on our capital management plan, the Company does not expect to repurchase shares until such time that an excess cash balance is rebuilt at the holding company level, which might occur as early as the beginning of fiscal year 2026. The following table presents regular quarterly cash dividends and special cash dividends paid in calendar years 2025, 2024, and 2023. The amounts represent cash dividends paid during each period. For the quarter ended June 30, 2025, the amount presented represents the dividend payable on May 16, 2025 to stockholders of record as of the close of business on May 2, 2025. Calendar Year 2025 2024 2023 Amount Per Share Amount Per Share Amount Per Share (Dollars in thousands, except per share amounts) Regular quarterly dividends paid Quarter ended March 31 $ 11,062 $ 0.085 $ 11,127 $ 0.085 $ 11,319 $ 0.085 Quarter ended June 30 11,063 0.085 11,044 0.085 11,321 0.085 Quarter ended September 30 — — 11,043 0.085 11,323 0.085 Quarter ended December 31 — — 11,061 0.085 11,308 0.085 Calendar year-to-date dividends paid $ 22,125 $ 0.170 $ 44,275 $ 0.340 $ 45,271 $ 0.340 53 Operating Results The following table presents selected income statement and other information for the quarters indicated. For the Three Months Ended March 31, December 31, September 30, June 30, March 31, 2025 2024 2024 2024 2024 (Dollars in thousands, except per share data) Interest and dividend income: Loans receivable $ 80,867 $ 81,394 $ 79,841 $ 76,803 $ 76,122 MBS 11,264 11,024 10,412 9,585 7,794 FHLB stock 2,285 2,352 2,418 2,477 2,528 Cash and cash equivalents 2,729 1,871 2,562 3,875 4,513 Investment securities 1,030 981 1,634 2,255 2,332 Total interest and dividend income 98,175 97,622 96,867 94,995 93,289 Interest expense: Borrowings 18,482 18,047 18,585 18,438 18,554 Deposits 35,853 37,345 37,458 36,233 33,415 Total interest expense 54,335 55,392 56,043 54,671 51,969 Net interest income 43,840 42,230 40,824 40,324 41,320 Provision for credit losses — 677 (637) 1,472 301 Net interest income (after provision for credit losses) 43,840 41,553 41,461 38,852 41,019 Non-interest income 4,953 4,693 4,786 4,709 4,643 Non-interest expense 29,540 27,148 27,040 27,950 28,445 Income tax expense 3,854 3,667 7,150 5,963 3,455 Net income $ 15,399 $ 15,431 $ 12,057 $ 9,648 $ 13,762 Efficiency ratio 60.54 % 57.86 % 59.29 % 62.07 % 61.89 % Operating expense ratio (annualized) 1.23 % 1.14 % 1.13 % 1.17 % 1.19 % Basic EPS $ 0.12 $ 0.12 $ 0.09 $ 0.07 $ 0.11 Diluted EPS 0.12 0.12 0.09 0.07 0.11 54 Comparison of Operating Results for the Three Months Ended March 31, 2025 and December 31, 2024 For the quarter ended March 31, 2025, the Company recognized net income of $15.4 million, or $0.12 per share, which was unchanged from the prior quarter. Net interest income after provision for credit losses was higher in the current quarter than the prior quarter, but was almost entirely offset by higher non-interest expense in the current quarter. The net interest margin increased six basis points, from 1.86% for the prior quarter to 1.92% for the current quarter due mainly to a decrease in the cost of deposits, specifically retail certificates of deposit. Interest and Dividend Income The following table presents the components of interest and dividend income for the time periods presented, along with the change measured in dollars and percent. For the Three Months Ended March 31, December 31, Change Expressed in: 2025 2024 Dollars Percent (Dollars in thousands) INTEREST AND DIVIDEND INCOME: Loans receivable $ 80,867 $ 81,394 $ (527) (0.6 %) MBS 11,264 11,024 240 2.2 FHLB stock 2,285 2,352 (67) (2.8) Cash and cash equivalents 2,729 1,871 858 45.9 Investment securities 1,030 981 49 5.0 Total interest and dividend income $ 98,175 $ 97,622 $ 553 0.6 The decrease in interest income on loans receivable was due to a lower average balance during the current quarter compared to the prior quarter. During the current quarter, the loan portfolio continued to shift from one- to four-family loans to commercial loans; however, the commercial loan volume during the current quarter did not offset the decrease in the one- to four-family loan portfolio. As of March 31, 2025, the Bank had $136.5 million of commercial real estate loan commitments which are expected to fund early during the June 30, 2025 quarter. See additional discussion regarding the composition of the loan portfolio and management's strategy to shift from one- to four-family loans to commercial loans in the "Executive Summary" section above. The increase in interest income on cash and cash equivalents was due mainly to an increase in the average balance as a higher level of operating cash was maintained during the current quarter to accommodate near-term funding needs for commercial loan activities and to repay borrowings coming due early in the June 30, 2025 quarter. Interest Expense The following table presents the components of interest expense for the time periods presented, along with the change measured in dollars and percent. For the Three Months Ended March 31, December 31, Change Expressed in: 2025 2024 Dollars Percent (Dollars in thousands) INTEREST EXPENSE: Deposits $ 35,853 $ 37,345 $ (1,492) (4.0) % Borrowings 18,482 18,047 435 2.4 Total interest expense $ 54,335 $ 55,392 $ (1,057) (1.9) The decrease in interest expense on deposits was due mainly to a decrease in the weighted average rates on retail certificates of deposit and money market accounts, which were partially offset by increases in the weighted average rate and average balance related to savings accounts, due to growth in the Bank's high yield savings account. The increase in borrowings expense was due to an increase in the weighted average interest rate as borrowings that renewed in the current quarter and prior quarter were at rates which exceeded that of the overall portfolio. 55 Provision for Credit Losses There was no impact to the provision for credit losses during the current quarter as the decrease in the ACL was entirely offset by the increase in the reserve for off-balance sheet credit exposures. The reduction in the ACL in the current quarter was due primarily to an increase in prepayment speeds on commercial real estate loans. The increase in the reserve for off-balance sheet credit exposures was due primarily to an increase in commercial off-balance sheet credit exposures. The Company recorded a provision for credit losses of $677 thousand during the prior quarter. Non-Interest Income The following table presents the components of non-interest income for the time periods presented, along with the change measured in dollars and percent. For the Three Months Ended March 31, December 31, Change Expressed in: 2025 2024 Dollars Percent (Dollars in thousands) NON-INTEREST INCOME: Deposit service fees $ 2,596 $ 2,707 $ (111) (4.1) % Insurance commissions 927 776 151 19.5 Other non-interest income 1,430 1,210 220 18.2 Total non-interest income $ 4,953 $ 4,693 $ 260 5.5 The increase in insurance commissions was due primarily to the receipt of annual contingent insurance commissions during the current quarter, which were higher than anticipated and accrued for in the prior quarter. The increase in other non-interest income was due primarily to an increase in BOLI related to the receipt of death benefits in the current quarter while none were received in the prior quarter. Non-Interest Expense The following table presents the components of non-interest expense for the time periods presented, along with the change measured in dollars and percent. For the Three Months Ended March 31, December 31, Change Expressed in: 2025 2024 Dollars Percent (Dollars in thousands) NON-INTEREST EXPENSE: Salaries and employee benefits $ 14,938 $ 14,232 $ 706 5.0 % Information technology and related expense 4,924 4,550 374 8.2 Occupancy, net 3,502 3,333 169 5.1 Regulatory and outside services 1,469 1,113 356 32.0 Federal insurance premium 1,095 1,038 57 5.5 Advertising and promotional 760 822 (62) (7.5) Deposit and loan transaction costs 879 591 288 48.7 Office supplies and related expense 437 399 38 9.5 Other non-interest expense 1,536 1,070 466 43.6 Total non-interest expense $ 29,540 $ 27,148 $ 2,392 8.8 The increase in salaries and employee benefits was primarily due to compensation-related accrual fluctuations between periods. The increase in information technology and related expense was due mainly to higher software licensing expense and professional services. The increase in regulatory and outside services was due primarily to the timing of outside services. The increase in deposit and loan transaction costs was due mainly to expenses related to calendar year-end statement-related processing that is seasonal and occurred during the current quarter. The increase in other non-interest expense was due primarily to higher customer fraud losses in the current quarter, along with higher costs associated with OREO property, largely related to a one- to four-family bulk purchased OREO, and a loss on a property sold during the current quarter related to an acquisition in 2018. 56 The Company's efficiency ratio was 60.54% for the current quarter compared to 57.86% for the prior quarter. The change in the efficiency ratio was due to higher non-interest expense, partially offset by higher net interest income during the current quarter. The efficiency ratio is a measure of a financial institution's total non-interest expense as a percentage of the sum of net interest income (pre-provision for credit losses) and non-interest income. A higher value generally indicates that it is costing the financial institution more money to generate revenue. The Company's operating expense ratio (annualized) for the current quarter was 1.23% compared to 1.14% in the prior quarter, due mainly to higher non-interest expense. Income Tax Expense The following table presents pretax income, income tax expense, and net income for the time periods presented, along with the change measured in dollars and percent and the effective tax rate. For the Three Months Ended March 31, December 31, Change Expressed in: 2025 2024 Dollars Percent (Dollars in thousands) Income before income tax expense $ 19,253 $ 19,098 $ 155 0.8 % Income tax expense 3,854 3,667 187 5.1 Net income $ 15,399 $ 15,431 $ (32) (0.2) Effective Tax Rate 20.0 % 19.2 % 57 Average Balance Sheet The following table presents the average balances of our assets, liabilities, and stockholders' equity, and the related annualized weighted average yields and rates on our interest-earning assets and interest-bearing liabilities for the periods indicated, as well as selected performance ratios and other information for the periods shown. Weighted average yields are derived by dividing annualized income by the average balance of the related assets, and weighted average rates are derived by dividing annualized expense by the average balance of the related liabilities, for the periods shown. Average outstanding balances are derived from average daily balances. The weighted average yields and rates include amortization of fees, costs, premiums and discounts, which are considered adjustments to yields/rates. Weighted average yields on tax-exempt securities are not calculated on a fully taxable equivalent basis. For the Three Months Ended March 31, 2025 December 31, 2024 Average Interest Average Interest Outstanding Earned/ Yield/ Outstanding Earned/ Yield/ Amount Paid Rate Amount Paid Rate Assets: (Dollars in thousands) Interest-earning assets: One- to four-family loans: Originated $ 3,879,115 $ 36,311 3.74 % $ 3,925,427 $ 36,375 3.71 % Correspondent purchased 2,165,595 17,788 3.29 2,212,300 18,089 3.27 Bulk purchased 122,058 1,044 3.42 126,095 895 2.84 Total one- to four-family loans 6,166,768 55,143 3.58 6,263,822 55,359 3.54 Commercial loans 1,646,347 23,591 5.73 1,606,748 23,756 5.79 Consumer loans 110,126 2,133 7.86 110,661 2,279 8.19 Total loans receivable (1) 7,923,241 80,867 4.08 7,981,231 81,394 4.05 MBS (2) 811,013 11,264 5.56 781,252 11,024 5.64 Investment securities (2)(3) 76,497 1,030 5.39 72,561 981 5.41 FHLB stock 98,231 2,285 9.43 99,151 2,352 9.41 Cash and cash equivalents 248,063 2,729 4.40 154,752 1,871 4.73 Total interest-earning assets 9,157,045 98,175 4.29 9,088,947 97,622 4.27 Other non-interest-earning assets 454,295 463,322 Total assets $ 9,611,340 $ 9,552,269 Liabilities and stockholders' equity: Interest-bearing liabilities: Checking $ 879,218 485 0.22 $ 865,738 531 0.24 High yield savings 227,677 2,335 4.16 126,047 1,322 4.17 Other savings 442,773 77 0.07 441,486 100 0.09 Money market 1,239,709 3,694 1.21 1,245,714 4,212 1.34 Retail certificates 2,789,206 27,981 4.07 2,812,034 29,755 4.20 Commercial certificates 56,580 572 4.10 57,859 636 4.36 Wholesale certificates 66,249 709 4.34 69,487 789 4.50 Total deposits 5,701,412 35,853 2.55 5,618,365 37,345 2.64 Borrowings 2,150,917 18,482 3.48 2,171,476 18,047 3.30 Total interest-bearing liabilities 7,852,329 54,335 2.81 7,789,841 55,392 2.82 Non-interest-bearing deposits 551,549 544,548 Other non-interest-bearing liabilities 173,700 186,227 Stockholders' equity 1,033,762 1,031,653 Total liabilities and stockholders' equity $ 9,611,340 $ 9,552,269 Net interest income (4) $ 43,840 $ 42,230 Net interest-earning assets $ 1,304,716 $ 1,299,106 Net interest margin (5) 1.92 1.86 Ratio of interest-earning assets to interest-bearing liabilities 1.17x 1.17x Selected performance ratios: Return on average assets (annualized) (6) 0.64 % 0.65 % Return on average equity (annualized) (7) 5.96 5.98 Average equity to average assets 10.76 10.80 Operating expense ratio (annualized) (8) 1.23 1.14 Efficiency ratio (9) 60.54 57.86 58 (1) Balances are adjusted for unearned loan fees and deferred costs. Loans that are 90 or more days delinquent are included in the loans receivable average balance with a yield of zero percent. (2) AFS security yields are based upon amortized cost which is adjusted for premiums and discounts. (3) There were no nontaxable securities included in the average balance of investment securities for the quarters ended March 31, 2025 or December 31, 2024. (4) Net interest income represents the difference between interest income earned on interest-earning assets and interest paid on interest-bearing liabilities. Net interest income depends on the average balance of interest-earning assets and interest-bearing liabilities, and the interest rates earned or paid on them. (5) Net interest margin represents annualized net interest income as a percentage of average interest-earning assets. Management believes the net interest margin is important to investors as it is a profitability measure for financial institutions. (6) Return on average assets represents annualized net income as a percentage of total average assets. Management believes that the return on average assets is important to investors as it shows the Company's profitability in relation to the Company's average assets. (7) Return on average equity represents annualized net income as a percentage of total average equity. Management believes that the return on average equity is important to investors as it shows the Company's profitability in relation to the Company's average equity. (8) The operating expense ratio represents annualized non-interest expense as a percentage of average assets. Management believes the operating expense ratio is important to investors as it provides insight into how efficiently the Company is managing its expenses in relation to its assets. It is a financial measurement ratio that does not take into consideration changes in interest rates. (9) The efficiency ratio represents non-interest expense as a percentage of the sum of net interest income (pre-provision for credit losses) and non-interest income. Management believes the efficiency ratio is important to investors as it is a measure of a financial institution's total non-interest expense as a percentage of the sum of net interest income (pre-provision for credit losses) and non-interest income. A higher value generally indicates that it is costing the financial institution more money to generate revenue, related to its net interest margin and non-interest income. Rate/Volume Analysis The table below presents the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities, comparing the three months ended March 31, 2025 to the three months ended December 31, 2024. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (1) changes in volume, which are changes in the average balance multiplied by the previous year's average rate and (2) changes in rate, which are changes in the average rate multiplied by the average balance from the previous year period. The net changes attributable to the combined impact of both rate and volume have been allocated proportionately to the changes due to volume and the changes due to rate. For the Three Months Ended March 31, 2025 vs. December 31, 2024 Increase (Decrease) Due to Volume Rate Total (Dollars in thousands) Interest-earning assets: Loans receivable $ (562) $ 35 $ (527) MBS 414 (174) 240 Investment securities 53 (4) 49 FHLB stock (62) (5) (67) Cash and cash equivalents 998 (140) 858 Total interest-earning assets 841 (288) 553 Interest-bearing liabilities: Checking 6 (52) (46) Savings 277 713 990 Money market (24) (494) (518) Certificates of deposit (436) (1,482) (1,918) Borrowings (219) 654 435 Total interest-bearing liabilities (396) (661) (1,057) Net change in net interest income $ 1,237 $ 373 $ 1,610 59 Comparison of Operating Results for the Six Months Ended March 31, 2025 and 2024 The Company recognized net income of $30.8 million, or $0.24 per share, for the current year period, compared to net income of $16.3 million, or $0.12 per share, for the prior year period. The lower net income in the prior year period was primarily a result of net losses on the sale of securities associated with the securities strategy. See additional discussion regarding the securities strategy in the "Executive Summary - Securities Strategy to Improve Earnings" section above. The securities associated with the securities strategy were sold in the prior year period, and in that period the Company incurred $13.3 million ($10.0 million net of tax) of net losses related to the sale of those securities. Excluding the effects of the net loss associated with the securities strategy, EPS would have been $0.20 for the prior year period. The increase in EPS excluding the effects of the net loss associated with the securities strategy was due primarily to higher net interest income in the current year period. The net interest margin increased 13 basis points, from 1.76% for the prior year period to 1.89% for the current year period. The increase was due mainly to higher yields on loans and the continued shift of loan balances from the one- to four-family loan portfolio to the higher yielding commercial loan portfolio, which outpaced the increase in the cost of deposits, largely in retail certificates of deposit. Interest and Dividend Income The following table presents the components of interest and dividend income for the time periods presented, along with the change measured in dollars and percent. For the Six Months Ended March 31, Change Expressed in: 2025 2024 Dollars Percent (Dollars in thousands) INTEREST AND DIVIDEND INCOME: Loans receivable $ 162,261 $ 152,063 $ 10,198 6.7 % MBS 22,288 13,653 8,635 63.2 FHLB stock 4,637 5,114 (477) (9.3) Cash and cash equivalents 4,600 9,291 (4,691) (50.5) Investment securities 2,011 4,860 (2,849) (58.6) Total interest and dividend income $ 195,797 $ 184,981 $ 10,816 5.8 The increase in interest income on loans receivable was due primarily to the continued shift of loan balances from the one- to four-family loan portfolio to higher yielding commercial loans. See additional discussion regarding the composition of the loan portfolio in the "Financial Condition" section above. The increase in interest income on MBS securities was due mainly to an increase in the average balance of the portfolio, along with an increase in the weighted average yield compared to the prior year period. The increase in the average balance was due mainly to securities purchases between periods. The higher weighted average yield was due mainly to the securities strategy, as the securities that were sold during the prior year period were reinvested into higher yielding securities, and securities purchased between periods were also at higher market yields. Interest income on cash and cash equivalents decreased due largely to a decrease in the average balance as a result of cash balances being drawn down during the prior fiscal year to fund commercial loans and other operational needs. The decrease in interest income on investment securities was due to a decrease in average balance, partially offset by an increase in the weighted average yield. The decrease in the average balance was due primarily to the securities purchased as part of the securities strategy being called or maturing during fiscal year 2024 and not being replaced in their entirety. The increase in the weighted average yield was due to higher yields than the portfolio yields on the securities purchased between periods. 60 Interest Expense The following table presents the components of interest expense for the time periods presented, along with the change measured in dollars and percent. For the Six Months Ended March 31, Change Expressed in: 2025 2024 Dollars Percent (Dollars in thousands) INTEREST EXPENSE: Deposits $ 73,198 $ 65,858 $ 7,340 11.1 % Borrowings 36,529 38,210 (1,681) (4.4) Total interest expense $ 109,727 $ 104,068 $ 5,659 5.4 The increase in interest expense on deposits was due primarily to an increase in the weighted average rate paid on retail certificates of deposit and savings accounts, specifically the high yield savings account product, partially offset by a decrease in the weighted average rate paid on money market accounts. To a lesser extent, the increase in the average balance of retail certificates of deposit also increased interest expense on deposits. The decrease in interest expense on borrowings was due to a decrease in the average balance, which was partially offset by a higher weighted average interest rate. The decrease in the average balance of borrowings was due mainly to FHLB borrowings that matured between periods and were not renewed, along with a decrease in borrowings under the BTFP, which were repaid during the prior year period using some of the proceeds from the securities strategy. The increase in the weighted average interest rate was due primarily to higher market interest rates on borrowings that matured and were renewed between periods. Provision for Credit Losses The Company recorded a provision for credit losses of $677 thousand during the current year period compared to a provision for credit losses of $424 thousand for the prior year period. The provision for credit losses in the current year period was comprised of a $1.0 million increase in the ACL for loans, partially offset by a $365 thousand decrease in the reserve for off-balance sheet credit exposures. The increase in ACL was due mainly to commercial loan growth during the current year period, partially offset by an increase in prepayment rates in the current quarter for commercial real estate loans. The decrease in the reserve for off-balance sheet credit exposures was due primarily to a reduction in the ACL/loan ratio applied to commercial construction off-balance sheet credit exposures, partially offset by an increase in commercial real estate off-balance sheet credit exposures. Non-Interest Income The following table presents the components of non-interest income for the time periods presented, along with the change measured in dollars and percent. For the Six Months Ended March 31, Change Expressed in: 2025 2024 Dollars Percent (Dollars in thousands) NON-INTEREST INCOME: Deposit service fees $ 5,303 $ 5,026 $ 277 5.5 % Insurance commissions 1,703 1,598 105 6.6 Net loss from securities transactions — (13,345) 13,345 100.0 Other non-interest income 2,640 2,470 170 6.9 Total non-interest income $ 9,646 $ (4,251) $ 13,897 326.9 The net loss from securities transactions in the prior year period was related to the securities strategy. 61 Non-Interest Expense The following table presents the components of non-interest expense for the time periods presented, along with the change measured in dollars and percent. For the Six Months Ended March 31, Change Expressed in: 2025 2024 Dollars Percent (Dollars in thousands) NON-INTEREST EXPENSE: Salaries and employee benefits $ 29,170 $ 25,879 $ 3,291 12.7 % Information technology and related expense 9,474 10,323 (849) (8.2) Occupancy, net 6,835 6,853 (18) (0.3) Regulatory and outside services 2,582 3,023 (441) (14.6) Federal insurance premium 2,133 3,587 (1,454) (40.5) Advertising and promotional 1,582 2,259 (677) (30.0) Deposit and loan transaction costs 1,470 1,409 61 4.3 Office supplies and related expense 836 780 56 7.2 Other non-interest expense 2,606 2,840 (234) (8.2) Total non-interest expense $ 56,688 $ 56,953 $ (265) (0.5) The increase in salaries and employee benefits was mainly attributable to raises and salary adjustments to remain market competitive, an increase in the number of employees between periods, and a higher accrual of incentive compensation during the current year period than the prior year period related to the Bank's short-term performance plan. The decrease in information technology and related expense was due mainly to a decrease in usage of third-party professional services along with a decrease in depreciation expense during the current year period. The decrease in regulatory and outside services was due to a reduction in usage related to certain outside services compared to the prior year period. The decrease in the federal insurance premium was due primarily to a decrease in the Federal Deposit Insurance Corporation ("FDIC") assessment rate as a result of the way the assessment rate was adjusted in fiscal year 2024 for the occurrence of the Bank's net loss during the quarter ended September 30, 2023. The decrease in advertising and promotional expense was due mainly to the timing of campaigns compared to the prior year period. The decrease in other non-interest expense was due mainly to higher customer fraud losses in the prior year period and the maturity of an interest rate swap agreement during the current year period which reduced the expense associated with the collateral held in relation to the interest rate swap. The Company's efficiency ratio was 59.23% for the current year period compared to 74.29% for the prior year period. Excluding the net losses from the securities strategy, the efficiency ratio would have been 63.28% for the prior year period. The improvement in the efficiency ratio, excluding net losses from the securities strategy, was due primarily to higher net interest income compared to the prior year period. The Company's operating expense ratio (annualized) for the current year period was 1.18%, unchanged from the prior year period. 62 Income Tax Expense The following table presents pretax income, income tax expense, and net income for the time periods presented, along with the change measured in dollars and percent and effective tax rate. For the Six Months Ended March 31, Change Expressed in: 2025 2024 Dollars Percent (Dollars in thousands) Income before income tax expense $ 38,351 $ 19,285 $ 19,066 98.9 % Income tax expense 7,521 2,980 4,541 152.4 Net income $ 30,830 $ 16,305 $ 14,525 89.1 Effective Tax Rate 19.6 % 15.5 % Included in the prior year period income tax expense and effective tax rate are tax benefits associated with the net loss on the securities strategy. Absent the tax benefits associated with the net loss on the securities strategy, the effective tax rate would have been 19.1% and income tax expense would have been $6.2 million in the prior year period. Income tax expense was higher in the current year period compared to the prior year period, excluding the tax benefits associated with the net losses on the securities strategy, due to higher pretax income in the current year period. 63 Average Balance Sheets The following table presents the average balances of our assets, liabilities, and stockholders' equity, and the related annualized weighted average yields and rates on our interest-earning assets and interest-bearing liabilities for the periods indicated, as well as selected performance ratios and other information for the periods shown. Weighted average yields are derived by dividing annualized income by the average balance of the related assets, and weighted average rates are derived by dividing annualized expense by the average balance of the related liabilities, for the periods shown. Average outstanding balances are derived from average daily balances. The weighted average yields and rates include amortization of fees, costs, premiums and discounts, which are considered adjustments to yields/rates. Weighted average yields on tax-exempt securities are not calculated on a fully taxable equivalent basis. For the Six Months Ended March 31, 2025 March 31, 2024 Average Interest Average Interest Outstanding Earned/ Yield/ Outstanding Earned/ Yield/ Amount Paid Rate Amount Paid Rate Assets: (Dollars in thousands) Interest-earning assets: One- to four-family loans: Originated $ 3,902,526 $ 72,686 3.73 % $ 4,006,536 $ 70,211 3.50 % Correspondent purchased 2,189,204 35,877 3.28 2,391,638 38,934 3.26 Bulk purchased 124,099 1,939 3.12 135,228 1,429 2.11 Total one- to four-family loans 6,215,829 110,502 3.56 6,533,402 110,574 3.38 Commercial loans 1,626,330 47,347 5.76 1,329,123 36,974 5.47 Consumer loans 110,396 4,412 8.01 106,112 4,515 8.51 Total loans receivable (1) 7,952,555 162,261 4.07 7,968,637 152,063 3.80 MBS (2) 795,969 22,288 5.60 532,774 13,653 5.13 Investment securities (2)(3) 74,507 2,011 5.40 221,601 4,860 4.39 FHLB stock 98,696 4,637 9.42 108,108 5,114 9.46 Cash and cash equivalents 200,895 4,600 4.53 338,528 9,291 5.40 Total interest-earning assets 9,122,622 195,797 4.28 9,169,648 184,981 4.02 Other non-interest-earning assets 458,858 467,011 Total assets $ 9,581,480 $ 9,636,659 Liabilities and stockholders' equity: Interest-bearing liabilities: Checking $ 872,404 1,016 0.23 $ 882,409 883 0.20 High yield savings 176,304 3,657 4.16 4,539 92 4.04 Other savings 442,122 177 0.08 467,495 270 0.12 Money market 1,242,744 7,906 1.28 1,349,997 12,443 1.84 Retail certificates 2,800,744 57,736 4.13 2,589,307 48,496 3.75 Commercial certificates 57,227 1,208 4.23 50,426 973 3.86 Wholesale certificates 67,886 1,498 4.42 121,518 2,701 4.45 Total deposits 5,659,431 73,198 2.59 5,465,691 65,858 2.41 Borrowings 2,161,309 36,529 3.39 2,414,384 38,210 3.16 Total interest-bearing liabilities 7,820,740 109,727 2.81 7,880,075 104,068 2.64 Non-interest-bearing deposits 548,010 532,735 Other non-interest-bearing liabilities 180,034 187,477 Stockholders' equity 1,032,696 1,036,372 Total liabilities and stockholders' equity $ 9,581,480 $ 9,636,659 Net interest income (4) $ 86,070 $ 80,913 Net interest-earning assets $ 1,301,882 $ 1,289,573 Net interest margin (5) 1.89 1.76 Ratio of interest-earning assets to interest-bearing liabilities 1.17x 1.16x Selected performance ratios: Return on average assets (annualized) (6)(10) 0.64 % 0.34 % Return on average equity (annualized) (7)(10) 5.97 3.15 Average equity to average assets 10.78 10.75 Operating expense ratio (8) 1.18 1.18 Efficiency ratio (9)(10) 59.23 74.29 64 (1) Balances are adjusted for unearned loan fees and deferred costs. Loans that are 90 or more days delinquent are included in the loans receivable average balance with a yield of zero percent. (2) AFS security yields are based upon amortized cost which is adjusted for premiums and discounts. (3) There were no nontaxable securities in the average balance securities for the six month period ended March 31, 2025. The average balance of investment securities includes an average balance of nontaxable securities of $101 thousand for the six month period ended March 31, 2024. (4) Net interest income represents the difference between interest income earned on interest-earning assets and interest paid on interest-bearing liabilities. Net interest income depends on the average balance of interest-earning assets and interest-bearing liabilities, and the interest rates earned or paid on them. (5) Net interest margin represents annualized net interest income as a percentage of average interest-earning assets. Management believes the net interest margin is important to investors as it is a profitability measure for financial institutions. (6) Return on average assets represents annualized net income as a percentage of total average assets. Management believes that the return on average assets is important to investors as it shows the Company's profitability in relation to the Company's average assets. (7) Return on average equity represents annualized net income as a percentage of total average equity. Management believes that the return on average equity is important to investors as it shows the Company's profitability in relation to the Company's average equity. (8) The operating expense ratio represents annualized non-interest expense as a percentage of average assets. Management believes the operating expense ratio is important to investors as it provides insight into how efficiently the Company is managing its expenses in relation to its assets. It is a financial measurement ratio that does not take into consideration changes in interest rates. (9) The efficiency ratio represents non-interest expense as a percentage of the sum of net interest income (pre-provision for credit losses) and non-interest income. Management believes the efficiency ratio is important to investors as it is a measure of a financial institution's total non-interest expense as a percentage of the sum of net interest income (pre-provision for credit losses) and non-interest income. A higher value generally indicates that it is costing the financial institution more money to generate revenue, related to its net interest margin and non-interest income. (10) The table below provides a reconciliation between performance measures presented in accordance with GAAP and the same performance measures absent the impact of the net loss on the securities transactions associated with the securities strategy, which are not presented in accordance with GAAP. The securities strategy was non-recurring in nature; therefore, management believes it is meaningful to investors to present certain financial measures without the securities strategy to better evaluate the Company's core operations. See information regarding the securities strategy in the "Executive Summary" discussion above. For the Six Months Ended March 31, 2024 Without Securities Actual Securities Strategy (GAAP) Strategy (Non-GAAP) Return on average assets (annualized) 0.34 % (0.21 %) 0.55 % Return on average equity (annualized) 3.15 (1.94) 5.09 Efficiency Ratio 74.29 11.01 63.28 EPS (11) $ 0.12 $ (0.08) $ 0.20 (11) EPS is calculated as net income divided by average shares outstanding. Management believes EPS is an important measure to investors as it shows the Company's earnings in relation to the Company's outstanding shares. 65 Rate/Volume Analysis The table below presents the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities, comparing the periods indicated. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (1) changes in volume, which are changes in the average balance multiplied by the previous period's average rate, and (2) changes in rate, which are changes in the average rate multiplied by the average balance from the previous period. The net changes attributable to the combined impact of both rate and volume have been allocated proportionately to the changes due to volume and the changes due to rate. For the Six Months Ended March 31, 2025 vs. March 31, 2024 Increase (Decrease) Due to Volume Rate Total (Dollars in thousands) Interest-earning assets: Loans receivable $ 3,008 $ 7,190 $ 10,198 MBS 7,271 1,364 8,635 Investment securities (3,779) 930 (2,849) FHLB stock (469) (8) (477) Cash and cash equivalents (3,360) (1,331) (4,691) Total interest-earning assets 2,671 8,145 10,816 Interest-bearing liabilities: Checking (10) 143 133 Savings 145 3,328 3,473 Money market (935) (3,602) (4,537) Certificates of deposit 3,102 5,169 8,271 Borrowings (4,469) 2,788 (1,681) Total interest-bearing liabilities (2,167) 7,826 5,659 Net change in net interest income $ 4,838 $ 319 $ 5,157 Comparison of Operating Results for the Three Months Ended March 31, 2025 and 2024 For the quarter ended March 31, 2025, the Company recognized net income of $15.4 million, or $0.12 per share, compared to net income of $13.8 million, or $0.11 per share for the quarter ended March 31, 2024. The increase in net income was due primarily to an increase in net interest income partially offset by higher non-interest expense. The net interest margin increased 10 basis points, from 1.82% for the prior year quarter to 1.92% for the current year quarter, due primarily to higher yields on loans and the continued shift within the loan portfolio from one- to four-family loans to higher yielding commercial loans, which outpaced the increase in the cost of deposits, largely in retail certificates of deposits. Interest and Dividend Income The following table presents the components of interest and dividend income for the time periods presented along with the change measured in dollars and percent. For the Three Months Ended March 31, Change Expressed in: 2025 2024 Dollars Percent (Dollars in thousands) INTEREST AND DIVIDEND INCOME: Loans receivable $ 80,867 $ 76,122 $ 4,745 6.2 % MBS 11,264 7,794 3,470 44.5 FHLB stock 2,285 2,528 (243) (9.6) Cash and cash equivalents 2,729 4,513 (1,784) (39.5) Investment securities 1,030 2,332 (1,302) (55.8) Total interest and dividend income $ 98,175 $ 93,289 $ 4,886 5.2 66 The increase in interest income on loans receivable was due primarily to the continued shift within the loan portfolio from one- to four-family loans to higher yielding commercial loans. The increase in interest income on MBS was due to an increase in the average balance compared to the prior year quarter as excess operating cash, cash flows from the investment securities portfolio, and deposit inflows were used to purchase MBS between periods. The decrease in interest income on cash was due mainly to a decrease in the average balance, along with lower yields compared to the prior year period. The decrease in interest income on investment securities was due to a decrease in average balance as a result of the securities purchased as part of the securities strategy being called or maturing during fiscal year 2024 and not being replaced in their entirety. Interest Expense The following table presents the components of interest expense for the periods presented, along with the change measured in dollars and percent. For the Three Months Ended March 31, Change Expressed in: 2025 2024 Dollars Percent (Dollars in thousands) INTEREST EXPENSE: Deposits $ 35,853 $ 33,415 $ 2,438 7.3 % Borrowings 18,482 18,554 (72) (0.4) Total interest expense $ 54,335 $ 51,969 $ 2,366 4.6 The increase in interest expense on deposits was due mainly to an increase in the weighted average rate paid on retail certificates of deposit and savings accounts, specifically the high yield savings account product, partially offset by a decrease in the weighted average rate paid on money market accounts. To a lesser extent, the increase in the average balance of retail certificates of deposit also increased interest expense on deposits. Provision for Credit Losses There was no impact to the provision for credit losses during the current quarter as the decrease in the ACL was entirely offset by the increase in the reserve for off-balance sheet credit exposures. The Bank recorded a provision for credit losses during the prior year quarter of $301 thousand. See Comparison of "Operating Results for the Three Months Ended March 31, 2025 and December 31, 2024" above for additional discussion regarding the provision for credit losses during the current quarter. Non-Interest Income The following table presents the components of non-interest income for the time periods presented, along with the change measured in dollars and percent. For the Three Months Ended March 31, Change Expressed in: 2025 2024 Dollars Percent (Dollars in thousands) NON-INTEREST INCOME: Deposit service fees $ 2,596 $ 2,451 $ 145 5.9 % Insurance commissions 927 735 192 26.1 Other non-interest income 1,430 1,457 (27) (1.9) Total non-interest income $ 4,953 $ 4,643 $ 310 6.7 The increase in insurance commissions was due primarily to the receipt of annual contingent insurance commissions during the current quarter, which were higher than anticipated and higher than the prior year quarter. 67 Non-Interest Expense The following table presents the components of non-interest expense for the time periods presented, along with the change measured in dollars and percent. For the Three Months Ended March 31, Change Expressed in: 2025 2024 Dollars Percent (Dollars in thousands) NON-INTEREST EXPENSE: Salaries and employee benefits $ 14,938 $ 12,887 $ 2,051 15.9 % Information technology and related expense 4,924 4,954 (30) (0.6) Occupancy, net 3,502 3,481 21 0.6 Regulatory and outside services 1,469 1,380 89 6.4 Federal insurance premium 1,095 1,727 (632) (36.6) Advertising and promotional 760 1,271 (511) (40.2) Deposit and loan transaction costs 879 867 12 1.4 Office supplies and related expense 437 419 18 4.3 Other non-interest expense 1,536 1,459 77 5.3 Total non-interest expense $ 29,540 $ 28,445 $ 1,095 3.8 The increase in salaries and employee benefits was mainly attributable to raises and salary adjustments to remain market competitive, an increase in the number of employees between periods, and a higher accrual of incentive compensation during the current year quarter than the prior year quarter related to the Bank's short-term performance plan. The decrease in the federal insurance premium was due primarily to a decrease in the FDIC assessment rate as a result of the way the assessment rate was adjusted in fiscal year 2024 for the occurrence of the Bank's net loss during the quarter ended September 30, 2023. The decrease in advertising and promotional expense was due mainly to the timing of campaigns compared to the prior year quarter. The Company's efficiency ratio was 60.54% for the current quarter compared to 61.89% for the prior year quarter. The improvement in the efficiency ratio was due primarily to higher net interest income in the current quarter, which was partially offset by higher non-interest expense compared to the prior year quarter. The Company's operating expense ratio (annualized) for the current quarter was 1.23% compared to 1.19% for the prior year quarter, due mainly to higher non-interest expense. Income Tax Expense The following table presents pretax income, income tax expense, and net income for the time periods presented, along with the change measured in dollars and percent and the effective tax rate. For the Three Months Ended March 31, Change Expressed in: 2025 2024 Dollars Percent (Dollars in thousands) Income before income tax expense $ 19,253 $ 17,217 $ 2,036 11.8 % Income tax expense 3,854 3,455 399 11.5 Net income $ 15,399 $ 13,762 $ 1,637 11.9 Effective Tax Rate 20.0 % 20.1 % Income tax expense was higher in the current year quarter due to higher pretax income compared to the prior year quarter. 68 Average Balance Sheet The following table presents the average balances of our assets, liabilities, and stockholders' equity, and the related annualized weighted average yields and rates on our interest-earning assets and interest-bearing liabilities for the periods indicated, as well as selected performance ratios and other information for the periods shown. Weighted average yields are derived by dividing annualized income by the average balance of the related assets, and weighted average rates are derived by dividing annualized expense by the average balance of the related liabilities, for the periods shown. Average outstanding balances are derived from average daily balances. The weighted average yields and rates include amortization of fees, costs, premiums and discounts, which are considered adjustments to yields/rates. Weighted average yields on tax-exempt securities are not calculated on a fully taxable equivalent basis. For the Three Months Ended March 31, 2025 March 31, 2024 Average Interest Average Interest Outstanding Earned/ Yield/ Outstanding Earned/ Yield/ Amount Paid Rate Amount Paid Rate Assets: (Dollars in thousands) Interest-earning assets: One- to four-family loans: Originated $ 3,879,115 $ 36,311 3.74 % $ 3,987,323 $ 35,151 3.53 % Correspondent purchased 2,165,595 17,788 3.29 2,369,131 19,274 3.25 Bulk purchased 122,058 1,044 3.42 133,832 735 2.20 Total one- to four-family loans 6,166,768 55,143 3.58 6,490,286 55,160 3.40 Commercial loans 1,646,347 23,591 5.73 1,351,574 18,708 5.48 Consumer loans 110,126 2,133 7.86 106,267 2,254 8.53 Total loans receivable (1) 7,923,241 80,867 4.08 7,948,127 76,122 3.82 MBS (2) 811,013 11,264 5.56 538,882 7,794 5.78 Investment securities (2)(3) 76,497 1,030 5.39 175,832 2,332 5.31 FHLB stock 98,231 2,285 9.43 107,562 2,528 9.45 Cash and cash equivalents 248,063 2,729 4.40 330,751 4,513 5.40 Total interest-earning assets 9,157,045 98,175 4.29 9,101,154 93,289 4.09 Other non-interest-earning assets 454,295 467,949 Total assets $ 9,611,340 $ 9,569,103 Liabilities and stockholders' equity: Interest-bearing liabilities: Checking $ 879,218 485 0.22 $ 878,243 438 0.20 High yield savings 227,677 2,335 4.16 9,095 91 4.04 Other savings 442,773 77 0.07 462,144 133 0.12 Money market 1,239,709 3,694 1.21 1,335,269 5,706 1.72 Retail certificates 2,789,206 27,981 4.07 2,623,613 25,297 3.88 Commercial certificates 56,580 572 4.10 51,304 510 4.00 Wholesale certificates 66,249 709 4.34 112,077 1,240 4.45 Total deposits 5,701,412 35,853 2.55 5,471,745 33,415 2.46 Borrowings 2,150,917 18,482 3.48 2,360,776 18,554 3.15 Total interest-bearing liabilities 7,852,329 54,335 2.81 7,832,521 51,969 2.67 Non-interest-bearing deposits 551,549 528,278 Other non-interest-bearing liabilities 173,700 172,042 Stockholders' equity 1,033,762 1,036,262 Total liabilities and stockholders' equity $ 9,611,340 $ 9,569,103 Net interest income (4) $ 43,840 $ 41,320 Net interest-earning assets $ 1,304,716 $ 1,268,633 Net interest margin (5) 1.92 1.82 Ratio of interest-earning assets to interest-bearing liabilities 1.17x 1.16x Selected performance ratios: Return on average assets (annualized) (6) 0.64 % 0.58 % Return on average equity (annualized) (7) 5.96 5.31 Average equity to average assets 10.76 10.83 Operating expense ratio (annualized) (8) 1.23 1.19 Efficiency ratio (9) 60.54 61.89 69 (1) Balances are adjusted for unearned loan fees and deferred costs. Loans that are 90 or more days delinquent are included in the loans receivable average balance with a yield of zero percent. (2) AFS security yields are based upon amortized cost which is adjusted for purchase premiums and discounts. (3) There were no nontaxable securities included in the average balance of investment securities for the three months ended March 31, 2025 or March 31, 2024. (4) Net interest income represents the difference between interest income earned on interest-earning assets and interest paid on interest-bearing liabilities. Net interest income depends on the average balance of interest-earning assets and interest-bearing liabilities, and the interest rates earned or paid on them. (5) Net interest margin represents annualized net interest income as a percentage of average interest-earning assets. Management believes the net interest margin is important to investors as it is a profitability measure for financial institutions. (6) Return on average assets represents annualized net income as a percentage of total average assets. Management believes that the return on average assets is important to investors as it shows the Company's profitability in relation to the Company's average assets. (7) Return on average equity represents annualized net income as a percentage of total average equity. Management believes that the return on average equity is important to investors as it shows the Company's profitability in relation to the Company's average equity. (8) The operating expense ratio represents annualized non-interest expense as a percentage of average assets. Management believes the operating expense ratio is important to investors as it provides insight into how efficiently the Company is managing its expenses in relation to its assets. It is a financial measurement ratio that does not take into consideration changes in interest rates. (9) The efficiency ratio represents non-interest expense as a percentage of the sum of net interest income (pre-provision for credit losses) and non-interest income. Management believes the efficiency ratio is important to investors as it is a measure of a financial institution's total non-interest expense as a percentage of the sum of net interest income (pre-provision for credit losses) and non-interest income. A higher value generally indicates that it is costing the financial institution more money to generate revenue, related to its net interest margin and non-interest income. Rate/Volume Analysis The table below presents the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities, comparing the three months ended March 31, 2025 to the three months ended March 31, 2024. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (1) changes in volume, which are changes in the average balance multiplied by the previous year's average rate and (2) changes in rate, which are changes in the average rate multiplied by the average balance from the previous year period. The net changes attributable to the combined impact of both rate and volume have been allocated proportionately to the changes due to volume and the changes due to rate. For the Three Months Ended March 31, 2025 vs. 2024 Increase (Decrease) Due to Volume Rate Total (Dollars in thousands) Interest-earning assets: Loans receivable $ 1,313 $ 3,432 $ 4,745 MBS 3,790 (320) 3,470 Investment securities (1,337) 35 (1,302) FHLB stock (244) 1 (243) Cash and cash equivalents (1,026) (758) (1,784) Total interest-earning assets 2,496 2,390 4,886 Interest-bearing liabilities: Checking — 47 47 Savings 131 2,058 2,189 Money market (393) (1,619) (2,012) Certificates of deposit 1,082 1,132 2,214 Borrowings (1,784) 1,712 (72) Total interest-bearing liabilities (964) 3,330 2,366 Net change in net interest income $ 3,460 $ (940) $ 2,520 70 Liquidity and Capital Resources Liquidity refers to our ability to generate sufficient cash to fund ongoing operations, to repay maturing certificates of deposit and other deposit withdrawals, to repay maturing borrowings, and to fund loan commitments. Liquidity management is both a daily and long-term function of our business management. The Company's most available liquid assets are represented by cash and cash equivalents and AFS securities. The Bank's primary sources of funds are deposits, FHLB borrowings, repayments and maturities of outstanding loans and MBS and other short-term investments, and funds provided by operations. The Bank's long-term borrowings primarily have been used to manage long-term liquidity needs and the Bank's interest rate risk with the intention to improve the earnings of the Bank while maintaining capital ratios that meet or exceed the regulatory standards for well-capitalized financial institutions. In addition, the Bank's focus on managing risk has provided additional liquidity capacity by maintaining a balance of MBS and investment securities available as collateral for borrowings. We generally intend to manage cash reserves sufficient to meet short-term liquidity needs, which are routinely forecasted for 10, 30, and 365 days. Additionally, on a monthly basis, we perform a liquidity stress test in accordance with the Interagency Policy Statement on Funding and Liquidity Risk Management. The liquidity stress test incorporates both short-term and long-term liquidity scenarios in order to identify and to quantify liquidity risk. Management also monitors key liquidity statistics related to items such as wholesale funding gaps, borrowings capacity, and available unpledged collateral, as well as various liquidity ratios. In the event short-term liquidity needs exceed available cash, the Bank has access to a line of credit at the FHLB, in addition to the FRB of Kansas City's discount window. Per FHLB's lending guidelines, total FHLB borrowings cannot exceed 40% of Bank Call Report total assets without the pre-approval of FHLB senior management. The Bank's FHLB borrowing limit was 45% of Bank Call Report total assets as of March 31, 2025, as approved by FHLB senior management. The Bank was below the FHLB borrowing limit as of March 31, 2025. See additional discussion below. FHLB borrowings are secured by certain qualifying loans pursuant to a blanket collateral agreement with FHLB. The amount that can be borrowed from the FRB of Kansas City's discount window is based upon the fair value of securities pledged as collateral. At March 31, 2025, the amount of securities pledged for the discount window was $99.9 million. At March 31, 2025, there were no borrowings from the FRB of Kansas City's discount window. Management tests the Bank's access to the FRB of Kansas City's discount window at least annually with a nominal overnight borrowing. If management observes unusual trends in the amount and frequency of line of credit utilization and/or short-term borrowings that is not in conjunction with a planned strategy the Bank will likely utilize long-term wholesale borrowing sources such as FHLB advances and/or repurchase agreements to provide long-term, fixed-rate funding. The maturities of these long-term borrowings are generally staggered in order to mitigate the risk of a highly negative cash flow position at maturity. The Bank has used fully-amortizing FHLB advances that require periodic payments of principal over the term of the advance. This type of advance allows the Bank the opportunity to start repricing its liability cash flows sooner in a down-rate environment and generally provides for favorable pricing when compared to similar long-term bullet advances with comparable average lives as a result of the current term structure of interest rates. The Bank's internal policy limits total borrowings to 55% of total assets. At March 31, 2025, the Bank had total borrowings, at par, of $2.14 billion, or approximately 22% of the Bank's Call Report total assets. The borrowings balance was composed primarily of FHLB advances, of which, $684.7 million is scheduled to be repaid (amortizing advances) or mature in the next 12 months. Management estimated that the Bank had $2.96 billion in liquidity available at March 31, 2025 based on the Bank's blanket collateral agreement with FHLB and unencumbered securities. At March 31, 2025, the Bank had no repurchase agreements. The Bank may enter into repurchase agreements as management deems appropriate, not to exceed 15% of total assets, and subject to the total borrowings internal policy limit of 55% as discussed above. The Bank has the ability to utilize the repayment and maturity of outstanding loans, MBS, and other investments for liquidity needs rather than reinvesting such funds into the related portfolios. At March 31, 2025, the Bank had $869.6 million of securities that were eligible but unused as collateral for borrowing or other liquidity needs. The Bank also has access to other sources of funds for liquidity purposes, such as brokered and public unit certificates of deposit. As of March 31, 2025, the Bank's policy allowed for combined brokered and public unit certificates of deposit up to 15% of total deposits. At March 31, 2025, the Bank did not have any brokered certificates of deposit, and public unit certificates of deposit were approximately 1% of total deposits. The Bank had pledged securities with an estimated fair value of $88.9 million as collateral for public unit certificates of deposit at March 31, 2025. The securities pledged as collateral for public unit certificates of deposit are held under joint custody with FHLB and generally will be released upon deposit maturity. At March 31, 2025, $1.99 billion of the Bank's certificate of deposit portfolio was scheduled to mature within the next 12 months, including $41.7 million of public unit certificates of deposit and $47.4 million of commercial certificates of deposit. Based on our deposit retention experience and our current pricing strategy, we anticipate the majority of the maturing retail certificates of deposit will renew or transfer to other deposit products of the Bank at prevailing rates, although no assurance can be given in this regard. Due to the nature of public unit certificates of deposit and commercial certificates of deposit, retention rates are not as predictable as for retail certificates of deposit. 71 While scheduled payments from the amortization of loans and MBS and payments on short-term investments are relatively predictable sources of funds, deposit flows, prepayments on loans and MBS, and calls of investment securities are greatly influenced by general interest rates, economic conditions, and competition, and are less predictable sources of funds. To the extent possible, the Bank manages the cash flows of its loan and deposit portfolios by the rates it offers customers. We anticipate we will continue to have sufficient funds, through the repayments and maturities of loans and securities, deposits and borrowings, to meet our current commitments. Limitations on Dividends and Other Capital Distributions OCC regulations impose restrictions on savings institutions with respect to their ability to make distributions of capital, which include dividends and other transactions charged to the capital account. Under FRB and OCC safe harbor regulations, savings institutions generally may make capital distributions during any calendar year equal to earnings of the previous two calendar years and current year-to-date earnings (to the extent not previously distributed). A savings institution that is a subsidiary of a savings and loan holding company, such as the Company, that proposes to make a capital distribution must submit written notice to the OCC and FRB 30 days prior to such distribution. The OCC and FRB may object to the distribution during that 30-day period based on safety and soundness or other concerns. Savings institutions that desire to make a larger capital distribution, are under special restrictions, or are not, or would not be, sufficiently capitalized following a proposed capital distribution must obtain regulatory non-objection prior to making such a distribution. The long-term ability of the Company to pay dividends to its stockholders is based primarily upon the ability of the Bank to make capital distributions to the Company. So long as the Bank remains well capitalized after each capital distribution (as evidenced by maintaining regulatory capital ratios greater than the required percentages) and operates in a safe and sound manner, it is management's belief that the OCC and FRB will continue to allow the Bank to distribute its earnings to the Company, although no assurance can be given in this regard. Management continues to evaluate the timing and amount of capital distributions to be made from the Bank to the holding company during the remainder of the current fiscal year and in future periods in connection with the tax issues associated with the Bank's pre-1988 bad debt recapture. For additional information regarding capital distributions relating to these tax issues, see "Financial Condition - Stockholders' Equity" above. Regulatory Capital Consistent with our goal to operate a sound and profitable financial organization, we actively seek to maintain a well-capitalized status for the Bank per the regulatory framework for prompt corrective action ("PCA"). Qualifying institutions that elect to use the CBLR framework, such as the Bank and the Company, that maintain the required minimum leverage ratio of 9.0% 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 capital requirements for the well-capitalized category under the agencies' PCA framework. As of March 31, 2025, the Bank's CBLR was 9.5% and the Company's CBLR was 10.1%, which exceeded the minimum requirements. The Bank's risk-based tier 1 capital ratio at March 31, 2025 was 16.5%. 72