What changed in this filing

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Item 1A. Risk Factors

2025-11-26 compared with 2024-11-27 · 61 added, 57 removed, 119 unchanged (50% of the section changed)

7 unchanged sentences

Changes in interest rates could have an adverse impact on our results of operations and financial condition.

Our results of operations are primarily dependent on net interest income, which is the difference between the interest earned on loans, securities, cash at the Federal Reserve Bank and dividends received on FHLB stock, and the interest paid on deposits and borrowings.

Our results of operations are primarily dependent on net interest income, which is the difference between the interest earned on loans, securities, cash at the FRB and dividends received on FHLB stock, and the interest paid on deposits and borrowings.

Changes in interest rates could have an adverse impact on our results of operations and financial condition because the majority of our interest-earning assets are long-term, fixed-rate loans, while the majority of our interest-bearing liabilities are shorter term, and therefore subject to a greater degree of interest rate fluctuations.

This type of risk is known as interest rate risk and is affected by prevailing economic and competitive conditions that are beyond the

Company's control, including general economic conditions, inflationary trends and/or monetary policies of the FRB and fiscal policies of the United States federal government.

This type of risk is known as interest rate risk and is affected by prevailing economic and competitive conditions that are beyond the Company's control, including general economic conditions, inflationary trends and/or monetary policies of the FRB and fiscal policies of the United States federal government.

The impact of changes in interest rates is generally observed on the income statement.

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In addition, changes in interest rates will impact the expected level of repricing of the Bank's mortgage-related assets and callable debt securities.

Generally, as interest rates decline, the amount of interest-earning assets expected to reprice will increase as borrowers have an economic incentive to reduce the cost of their mortgage or debt, which would negatively impact the Bank's interest income.

Conversely, as interest rates rise, the amount of interest-earning assets expected to reprice will decline as the economic incentive to refinance the mortgage or debt is diminished.

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Stockholders' equity, specifically, accumulated other comprehensive income (loss) ("AOCI"), is increased or decreased by the amount of change in the estimated fair value of our AFS securities, net of deferred income taxes.

Increases in interest rates generally decrease the fair value of AFS securities, which adversely impacts stockholders' equity.

Increases in interest rates generally decrease the fair value of AFS securities, which adversely impacts

stockholders' equity.

For additional information, see "Part II, Item 8.

Management's Discussion and Analysis of Financial Condition and Results of Operations - Strategic Securities Transaction," "Part II, Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations - Stockholders' Equity" and "Part II, Item 8.

Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 15.

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Income for the Bank is primarily driven by the spread between these rates.

As a result, a steeper yield curve, meaning long-term interest rates are significantly higher than short-term interest rates, would provide the Bank with a better opportunity to increase net interest income.

As a result, a steeper yield curve, meaning long-term interest rates are higher than short-term interest rates, would provide the Bank with a better opportunity to increase net interest income.

When the yield curve is flat, meaning long-term interest rates and short-term interest rates are essentially the same, or when the yield curve is inverted, meaning long-term interest rates are lower than short-term interest rates, the net yield between interest-earning assets and interest-bearing liabilities that reprice is compressed or diminished and would likely negatively impact the Bank's net interest income.

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Quantitative and Qualitative Disclosures About Market Risk" for additional information about the Bank's interest rate risk management.

An economic downturn, including a decline in real estate values, especially affecting our geographic market areas and certain regions of the country where we have commercial real estate loans or correspondent loans secured by one- to four-family properties, could have an adverse impact on our business and financial results.

As we have grown our commercial real estate lending portfolio, we have continued to maintain relationships not only in our local markets but in geographically diverse markets.

An economic downturn, including a decline in real estate values, especially affecting our geographic market areas and certain regions of the country where we have commercial real estate loans or purchased loans secured by one- to four-family properties, could have an adverse impact on our business and financial results.

As we strategically grow our commercial real estate lending portfolio, we have continued to prospect for new relationships and maintain existing relationships not only in our local markets but in geographically diverse markets.

As a result, we are particularly exposed to downturns in regional housing and commercial real estate markets and, to a lesser extent, housing and commercial real estate markets nationwide, along with changes in the levels of unemployment or underemployment.

We monitor the current status and trends of local and national employment levels and trends and current conditions in the real estate and housing markets, as well as commercial real estate markets, in our local market areas and certain areas where we have commercial real estate loans and correspondent loans.

Decreases in local real estate values could adversely affect the value of the property used as collateral for our loans, which could cause us to realize a loss in the event of a foreclosure.

Additionally, if insurance obtained by our

borrowers is insufficient to cover any losses sustained to the collateral, the decreases in the value of collateral securing our loans as a result of natural disasters or other related events could adversely impact our financial condition and results of operations.

Decreases in real estate values could adversely affect the value of the property used as collateral for our commercial real estate and one- to four-family loans, which could cause us to realize a loss in the event of a foreclosure.

Additionally, if insurance obtained by our borrowers is insufficient to cover any losses sustained to the collateral, the decreases in the value of collateral securing our loans as a result of natural disasters or other related events could adversely impact our financial condition and results of operations.

If insurance coverage is unavailable to our borrowers due to the reluctance of insurance companies to renew policies covering the collateral or due to other factors, the resulting increase in cost of home ownership could affect the ability of borrowers to repay loans.

In addition, a decline in commercial real estate values would likewise adversely affect the value of collateral securing commercial real estate loans.

Adverse conditions in our local economies and in certain areas where we have commercial real estate loans and correspondent loans, such as inflation, unemployment, supply chain disruptions, recession, natural disasters or pandemics, or other factors beyond our control, could adversely impact the ability of our borrowers to repay their loans.

Adverse conditions in our local economies and in certain areas where we have commercial real estate loans and purchased one-to four-family loans, such as inflation, unemployment, supply chain disruptions, recession, natural disasters or pandemics, or other factors beyond our control, could adversely impact the ability of our borrowers to repay their loans.

Declines in collateral values and adverse economic conditions could result in increased delinquencies, non-performing assets, loan losses, and future loan loss provisions.

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The increase in commercial loans in our loan portfolio exposes us to increased lending and credit risks, which could adversely impact our financial condition and results of operations.

A growing portion of our loan portfolio consists of commercial loans.

These loan types tend to be larger than and in different geographic regions from most of our existing loan portfolio and are generally considered to have different and greater risks than one- to four-family residential real estate loans and may involve multiple loans to groups of related borrowers.

A growing commercial loan portfolio also subjects us to greater regulatory scrutiny.

Furthermore, these loan types can expose us to a greater risk of delinquencies, non-performing assets, loan losses, and future loan loss provisions than one- to four-family residential real estate loans because repayment of such loans often depends on the successful operation of a business or of the underlying property.

Repayment of such loans may be affected by factors outside the borrower's control, such as adverse conditions in the real estate market, the economy, environmental factors, natural disasters or pandemics, and/or changes in government regulation.

As part of the Company's strategic initiatives to develop a full-service commercial banking business, we are growing our commercial loan portfolio.

Maintaining strong asset quality in association with the commercial loan growth is a top priority for the Bank.

We are applying disciplined underwriting and ongoing credit and performance monitoring and we monitor concentration levels by collateral type, geographic location and borrowing relationship.

However, there are still lending and credit risks that could adversely impact our financial condition and results of operations as commercial loans are generally considered to have different and greater credit risks than one- to four-family residential real estate loans.

Commercial loans typically have larger loan balances than one- to four-family residential loans and may involve multiple loans to groups of related borrowers.

Repayment of commercial loans often depends on the successful operation of a

business or of the underlying property which may be affected by factors outside the borrower's control, such as adverse conditions in the real estate market, the economy, the implementation of tariffs, environmental factors, natural disasters or pandemics, and/or changes in government regulation.

Also, there are risks inherent in commercial real estate construction lending as the value of the project is uncertain prior to the completion of construction and subsequent lease-up.

A sudden downturn in the economy, labor and/or supply chain issues, or other unforeseen events could result in stalled projects or collateral shortfalls, thus exposing us to increased credit risk.

Additionally, if we foreclose on these loans, our holding period for the collateral may be longer than for a one- to-four family residential property as there are generally fewer potential purchasers of this type of collateral.

Commercial and industrial loans are primarily made based on the identified cash flow of the borrower and secondarily on the collateral underlying the loans.

The borrowers' cash flow may prove to be unpredictable, and collateral securing these loans may fluctuate in value.

A borrower's cash flow may prove to be unpredictable, and collateral securing these loans may fluctuate in value.

Most often, this collateral consists of accounts receivable, inventory and equipment.

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If the cash flow from business operations is reduced, the borrower's ability to repay the loan may be impaired.

An increase in valuation allowances and charge-offs related to our commercial and industrial loan portfolio could have an adverse effect on our business, financial condition, results of operations and future prospects.

The deterioration of one commercial loan or a commercial borrowing relationship could cause a significant increase in the dollar amount of delinquencies, non-performing assets, net charge-offs, and future loan loss provisions.

An increase in valuation allowances and charge-offs related to our commercial loan portfolio could have an adverse effect on our business, financial condition, results of operations and future prospects.

Risks Related to Cybersecurity, Third Parties, and Technology .

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However, there can be no assurance that such events will not occur or that they will be promptly detected and adequately addressed if they do, and early detection of security breaches may be thwarted by sophisticated attacks and malware designed to avoid detection.

If there is a failure in or breach of our information systems, or those of a third-party service provider, the confidential and other information processed and stored in, and transmitted through, such information systems could be jeopardized, or could otherwise cause interruptions or malfunctions in our operations or the operations of our customers, employees, or others.

If there is a failure in or breach of our information systems, or those of a third-party service provider, the confidential and other information

processed and stored in, and transmitted through, such information systems could be jeopardized, or could otherwise cause interruptions or malfunctions in our operations or the operations of our customers, employees, or others.

Our business and operations depend on the secure processing, storage and transmission of confidential and other information in our information systems and those of our third-party service providers.

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As information security risks and cyber threats continue to evolve, we may be required to expend significant additional resources to further enhance or modify our information security measures and/or to investigate and remediate any information security vulnerabilities or other exposures arising from operational and security risks.

Furthermore, there continues to be heightened legislative and regulatory focus on privacy, data protection and information security.

New or revised laws and regulations may significantly impact our current and planned privacy, data protection and information security-related practices, the collection, use, sharing, retention and safeguarding of consumer and employee information, and current or planned business activities.

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We have implemented certain safeguards against these types of activities, but they may not fully protect us from financial losses.

The occurrence of a security breach involving our customers' information, regardless of its origin, could damage our reputation and result in a loss of customers and business, subject us to additional

regulatory scrutiny, and expose us to litigation and possible financial liability.

Any of these events could have an adverse effect on our business, financial condition and results of operations.

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Cybersecurity" for additional discussion related to cybersecurity.

Third-party vendors subject the Company to potential business, reputation and financial risks.

Third-party vendors are sources of operational and information security risk to the Company, including risks associated with operations errors, information system interruptions or breaches, and unauthorized disclosures of sensitive or confidential customer information.

The Company requires third-party vendors to maintain certain levels of information security;

Third-party vendors subject the Bank and the Company to potential business, reputation and financial risks.

Third-party vendors are sources of operational and information security risk to the Bank and the Company, including risks associated with operation errors, information system interruptions or breaches, and unauthorized disclosures of sensitive or confidential customer information.

The Bank and the Company require third-party vendors to maintain certain levels of information security;

however, vendors may remain vulnerable to breaches, unauthorized access, misuse, computer viruses, and/or other malicious attacks that could ultimately compromise sensitive information.

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If these vendors encounter any of these types of issues, or if we have difficulty communicating with them, we could be exposed to disruption of operations, loss of service or connectivity to customers, reputational damage, and litigation risk that could have an adverse effect on our business, financial condition and results of operations.

The failure of an external vendor to perform in accordance with the contracted arrangements under service level agreements, because of changes in the vendor's organizational structure, financial condition, support for existing products and services or strategic focus or for any other reason, could be disruptive to our operations, which could have an adverse effect on our business and, in turn, our financial condition and results of operations.

strategic focus or for any other reason, could be disruptive to our operations, which could have an adverse effect on our business and, in turn, our financial condition and results of operations.

Additionally, replacing certain third-party vendors could also entail significant delay and expense.

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Like most financial institutions, the Bank significantly depends on technology to deliver its products and services and to otherwise conduct business.

To remain technologically competitive and operationally efficient, the Bank invests in system upgrades, new technological solutions, and other technology initiatives.

The Bank continues to invest in new technological solutions, system upgrades, and other technology initiatives, which allows us to offer new and competitive products and services to our customers.

Many of these solutions and initiatives have a significant duration, are tied to critical information systems, and require substantial resources.

Although the Bank takes steps to mitigate the risks and uncertainties associated with these solutions and initiatives, there is no guarantee that they will be implemented on time, within budget, or without negative operational or customer impact.

The Company and its third-party vendors may develop or incorporate artificial intelligence technology into certain business processes, services or products.

The use of artificial intelligence presents several risks, including an uncertain and evolving legal and regulatory environment, along with the reliability of information generated and the complexity and rapid pace of change in artificial intelligence models.

The Bank also may not succeed in anticipating its future technology needs, the technology demands of its customers, or the competitive landscape for technology.

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Strong competition may limit our growth and profitability.

While we are one of the largest mortgage loan originators in the state of Kansas, we compete in the same market areas as local, regional, and national banks, savings institutions, credit unions, mortgage brokerage firms, investment banking and brokerage firms, mortgage bankers and online competitors.

We also compete with online investment and mortgage brokerages and online banks that are not confined to any specific market area.

Many of these competitors operate on a national or regional level, are a conglomerate of various financial services providers housed under one corporation, or otherwise have substantially greater financial or technological resources than the Bank.

We compete primarily on the basis of the interest rates offered to depositors, the terms of loans offered to borrowers, and the benefits afforded to customers as a local institution and portfolio lender.

Should we face competitive pressure to increase deposit rates or decrease loan rates, our net interest income could be adversely affected.

Additionally, our competitors may offer products and services that we do not or cannot provide, as certain deposit and loan products fall outside of our accepted level of risk.

Our profitability depends upon our ability to compete in our local market areas.

The Company operates in a highly competitive environment for quality commercial banking relationships, one-to four-family lending relationships and attracting and growing deposits.

Our competition includes larger national, regional and local financial institutions, savings institutions, credit unions, investment banking and mortgage brokerage firms, farm credit lenders, commercial finance companies, insurance companies, online competitors that are not confined to any specific market area, and non-bank lenders and smaller local institutions that offer aggressive pricing and specialized loan structures and banking services.

We compete by offering a comprehensive suite of products and services, competitive loan pricing, and we have a strong reputation in the market areas we serve.

Our competitors may offer products and services that we do not or cannot provide if the offerings fall outside our accepted level of risk.

Additionally, they may offer deposit and loan rates that we cannot offer as it may adversely impact our net interest income.

The Bank cannot grow profitably without growing our deposit portfolio as those funds are generally used to fund loan growth.

Our profitability depends upon our ability to compete with other entities for the same customer base.

Risks Related to Regulation

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We are subject to extensive regulation, supervision, and examination by the OCC, the FRB, and the FDIC.

These regulatory authorities exercise broad discretion in connection with their supervisory and enforcement activities, including the ability to

impose restrictions on a bank's operations, reclassify assets, determine the adequacy of a bank's ACL, and determine the level of deposit insurance premiums assessed.

These regulatory authorities exercise broad discretion in connection with their supervisory and enforcement activities, including the ability to impose restrictions on a bank's operations, reclassify assets, determine the adequacy of a bank's ACL, and determine the level of deposit insurance premiums assessed.

The CFPB has broad powers to supervise and enforce consumer protection laws, including a wide range of consumer protection laws that apply to all banks and savings institutions, like the authority to prohibit unfair, deceptive or abusive acts and practices.

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Any change in such regulation and oversight, whether in the form of regulatory policy, regulations, legislation, interpretation or application, could have an adverse impact on our operations.

Moreover, bank regulatory agencies have been active in responding to concerns and trends identified in examinations and have issued formal enforcement orders requiring capital ratios in excess of regulatory requirements and/or assessing monetary penalties.

Bank regulatory agencies, such as the OCC, the FRB and the FDIC, govern the activities in which we may engage, primarily for the protection of depositors' funds, the DIF and the safety and soundness of the banking system as a whole, and not for the protection or benefit of investors.

The CFPB enforces consumer protection laws and regulations for the benefit of consumers and not the protection or benefit of investors.

In addition, new laws and regulations, including those related to environmental, social, and governance initiatives, may continue to increase our costs of regulatory compliance and of doing business, and otherwise affect our operations.

New laws and regulations may significantly affect the markets in which we do business, the markets for and value of our loans and securities, the products we offer, the fees we can charge and our ongoing operations, costs, and profitability.

In addition, changes in laws and regulations, or the application of these laws and regulations, may continue to impact our costs of regulatory compliance and of doing business, and otherwise affect our operations.

New Presidential Executive Orders, laws and regulations may significantly affect the markets in which we do business, the markets for and value of our loans and securities, the products we offer, the fees we can charge and our ongoing operations, costs, and profitability.

The Company is also directly subject to the requirements of entities that set and interpret accounting standards such as the Financial Accounting Standards Board, and indirectly subject to the actions and interpretations of the Public Company Accounting Oversight Board, which establishes auditing and related professional practice standards for registered public accounting firms and inspects registered firms to assess their compliance with certain laws, rules, and professional standards in public company audits.

These regulations, along with existing tax, accounting, securities, and monetary laws, regulations, rules, standards, policies and interpretations, control the methods by which financial institutions and their holding companies conduct business, engage in strategic and tax planning, implement strategic initiatives, and govern financial reporting.

The Company's failure to comply with laws, regulations or policies could result in civil or criminal sanctions and money penalties by state and federal agencies, and/or reputational damage, which could have an adverse effect on the Company's business, financial condition and results of operations.

The Company's failure to comply with laws, regulations or policies, including Presidential Executive Orders, could result in civil or criminal sanctions and money penalties by state and federal agencies, and/or reputational damage, which could have an adverse effect on the Company's business, financial condition and results of operations.

See "Part I, Item 1.

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Business – Regulation and Supervision" for additional information.

The Company values constructive input from stockholders, and our Board of Directors and management team are committed to acting in the best interests of all stockholders .

All publicly traded companies face the risk that stockholders may disagree with the composition of the Board of Directors, the Company's strategic direction, or the way the Company is managed and may seek to effect change through various strategies that range from private engagement to public filings, proxy contests, efforts to force transactions not supported by the Board of Directors, and litigation.

Responding to these actions may be costly and time-consuming, disrupt the Company's operations and/or divert the attention of the Board of Directors and executive management.

Such activities could interfere with the Company's ability to execute its strategic plan and to attract and retain qualified executive leadership, as well as create perceived uncertainty as to the Company's future direction, which could also affect the market price and volatility of the Company's common stock.

The Bank's bad debt recapture amount may impact the amount and timing of capital distributions to the Company.

The Bank will report a net loss for tax purposes for fiscal year 2024 due to the sale of securities in October 2023 associated with the securities strategy and will therefore have negative current and accumulated earnings and profits for fiscal year 2024.

The Bank reported a net loss on its fiscal year 2024 federal tax return due to the sale of securities in October 2023 associated with the securities strategy which resulted in negative current and accumulated earnings and profits for fiscal year 2024.

As a result of the negative current and accumulated earnings and profits, capital distributions from the Bank to the holding company during fiscal year 2024 were deemed to be drawn out of the Bank's pre-1988 bad debt reserves and resulted in the recognition of income tax expense based on the amount of the capital distribution multiplied by the then-current Bank income tax rate.

This additional tax expense reduced the amount of earnings available to be distributed to the holding company

during fiscal year 2024.

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

Given the amount of cash at the holding company level ($50.1 million as of September 30, 2024), and in an effort to minimize the tax associated with the bad debt recapture, it is currently the intention of management and the Board of Directors to not distribute earnings from the Bank to the Company during fiscal year 2025.

It is anticipated that the Bank will have sufficient taxable income during fiscal year 2025 to replenish tax accumulated earnings and profits to a positive level, allowing the Bank to make capital distributions to the Company during fiscal year 2026 and not be taxed on those distributions.

See additional discussion regarding the Bank's pre-1988 bad debt recapture in "Part II.

Management's Discussion and Analysis of Financial Condition and Results of Operations - Comparison of Operating Results for the Years Ended September 30, 2024 and 2023" and "Part II, Item 8.

This additional tax expense reduced the amount of Bank earnings available to be distributed to the holding company during fiscal year 2024.

During the fourth quarter of fiscal year 2025, the Bank reached a point where there was sufficient taxable income to replenish the Bank's tax accumulated earnings and profits to a positive level, allowing the Bank to make distributions to the holding company and not have that distribution subject to the pre-1988 bad debt recapture tax.

Due to the Bank's expected continuing positive tax accumulated and earnings profit balance, it is anticipated that the Bank will be in a position to distribute earnings to the holding company during fiscal year 2026.

Earnings distributions from the Bank to the

holding company will be limited to the extent necessary to prevent the Bank from re-entering a negative accumulated earnings and profit position which would require the payment of the pre-1988 bad debt recapture tax on earnings moved from the Bank to the holding company.

See additional discussion regarding the Bank's pre-1988 bad debt recapture in "Part I, Item 1.

Business - Taxation" and "Part II, Item 8.

Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 9.

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These risks include:

interest-rate, credit, liquidity, operations, reputation, compliance and litigation.

interest-rate, credit, liquidity, operations, compliance and litigation.

We also maintain a compliance program to identify, measure, assess, and report on our adherence to applicable laws, policies and procedures.

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The unexpected loss of the services of one or more of the Company's key personnel could have an adverse impact on the Company's business because of their skills, knowledge of the Company's market, and years of industry experience, as well as the difficulty of promptly finding qualified replacement personnel.

The Company may be adversely affected by an increasing prevalence of fraud and other financial crimes.

The Bank and the Company may be adversely affected by an increasing prevalence of fraud and other financial crimes.

Reported instances of fraud and related financial crimes are rising nationwide.

Like all financial institutions, the Company is vulnerable to increasing fraud losses as fraud schemes perpetrated against the Company and its customers continue to evolve and become more sophisticated.

While the Company has procedures and systems in place to detect, prevent, and mitigate fraud losses, fraud losses may still occur and could be material to the Company's results of operations.

Like all financial institutions, the Bank and the Company are vulnerable to increasing fraud losses as fraud schemes perpetrated against the Bank, the Company, and our customers continue to evolve and become more sophisticated.

While the Bank and the Company have procedures and systems in place to detect, prevent, and mitigate fraud losses, fraud losses may still occur and could be material to the Bank and the Company's results of operations.

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

What changed 10-K

Item 1A. Risk Factors