Item 1. Financial Statements
Item 1. Financial Statements
CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollars in thousands, except per share amounts)
December 31, September 30,
2025 2025
ASSETS:
Cash and cash equivalents (includes interest-earning deposits of $ 210,223 and $ 229,566 )
$ 232,634 $ 252,443
Available-for-sale ("AFS"), at estimated fair value (amortized cost of $ 809,099 and $ 847,369 )
829,704 867,216
Loans receivable, net (allowance for credit losses ("ACL") of $ 24,572 and $ 24,039 )
8,176,736 8,111,961
Federal Home Loan Bank Topeka ("FHLB") stock, at cost 85,060 90,662
Premises and equipment, net 88,753 89,314
Income taxes receivable, net — 220
Deferred federal income tax assets, net 22,744 23,826
Other assets 342,769 343,059
TOTAL ASSETS $ 9,778,400 $ 9,778,701
LIABILITIES:
Deposits $ 6,758,632 $ 6,591,448
Borrowings 1,829,914 1,950,770
Advances by borrowers 28,523 65,416
Income taxes payable, net 237 —
Deferred state income tax liabilities, net 2,228 2,056
Other liabilities 117,546 121,334
Total liabilities 8,737,080 8,731,024
STOCKHOLDERS' EQUITY:
Preferred stock, $ 0.01 par value; 100,000,000 shares authorized, no shares issued or outstanding
— —
Common stock, $ 0.01 par value; 1,400,000,000 shares authorized, 129,836,672 and 132,204,305
shares issued and outstanding as of December 31, 2025 and September 30, 2025, respectively
1,298 1,322
Additional paid-in capital 1,126,227 1,142,711
Unearned compensation, Employee Stock Ownership Plan ("ESOP") ( 24,367 ) ( 24,780 )
Accumulated deficit ( 78,044 ) ( 87,331 )
Accumulated other comprehensive income ("AOCI"), net of tax 16,206 15,755
Total stockholders' equity 1,041,320 1,047,677
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 9,778,400 $ 9,778,701
See accompanying notes to consolidated financial statements.
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CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars in thousands, except per share amounts)
For the Three Months Ended
December 31,
2025 2024
INTEREST AND DIVIDEND INCOME:
Loans receivable $ 89,792 $ 81,394
Mortgage-backed securities ("MBS") 11,341 11,024
Cash and cash equivalents 2,773 1,871
FHLB stock 2,032 2,352
Investment securities 51 981
Total interest and dividend income 105,989 97,622
INTEREST EXPENSE:
Deposits 37,500 37,345
Borrowings 17,172 18,047
Total interest expense 54,672 55,392
NET INTEREST INCOME 51,317 42,230
PROVISION FOR CREDIT LOSSES 1,106 677
NET INTEREST INCOME AFTER
PROVISION FOR CREDIT LOSSES 50,211 41,553
NON-INTEREST INCOME:
Deposit service fees 2,872 2,707
Insurance commissions 789 776
Other non-interest income 1,818 1,210
Total non-interest income 5,479 4,693
NON-INTEREST EXPENSE:
Salaries and employee benefits 15,747 14,232
Information technology and related expense 5,134 4,550
Occupancy, net 3,450 3,333
Regulatory and outside services 1,789 1,113
Federal insurance premium 1,111 1,038
Advertising and promotional 1,056 822
Deposit and loan transaction costs 716 591
Office supplies and related expense 481 399
Other non-interest expense 992 1,070
Total non-interest expense 30,476 27,148
INCOME BEFORE INCOME TAX EXPENSE 25,214 19,098
INCOME TAX EXPENSE 4,910 3,667
NET INCOME $ 20,304 $ 15,431
Basic earnings per share ("EPS") $ 0.16 $ 0.12
Diluted EPS $ 0.16 $ 0.12
Basic weighted average common shares 128,953,166 129,972,969
Diluted weighted average common shares 128,953,166 129,972,969
See accompanying notes to consolidated financial statements.
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CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
(Dollars in thousands)
For the Three Months Ended
December 31,
2025 2024
Net income $ 20,304 $ 15,431
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on AFS securities arising during the period,
net of taxes of $( 184 ) and $ 3,741
574 ( 11,742 )
Unrealized gains on cash flow hedges arising during the period,
net of taxes of $( 26 ) and $( 756 )
83 2,375
Reclassification adjustment for cash flow hedge amounts included in net income,
net of taxes of $ 65 and $ 222
( 206 ) ( 698 )
Total other comprehensive income (loss), net of tax 451 ( 10,065 )
Comprehensive income $ 20,755 $ 5,366
See accompanying notes to consolidated financial statements.
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CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited)
(Dollars in thousands, except per share amounts)
For the Three Months Ended December 31, 2025
Additional Unearned Total
Common Paid-In Compensation Accumulated Stockholders'
Stock Capital ESOP Deficit AOCI Equity
Balance at September 30, 2025 $ 1,322 $ 1,142,711 $ ( 24,780 ) $ ( 87,331 ) $ 15,755 $ 1,047,677
Net income 20,304 20,304
Other comprehensive income, net of tax 451 451
ESOP activity ( 145 ) 413 268
Stock-based compensation 99 99
Repurchase of common stock and
excise taxes ( 24 ) ( 16,438 ) ( 16,462 )
Cash dividends to stockholders ($ 0.085 per share)
( 11,017 ) ( 11,017 )
Balance at December 31, 2025 $ 1,298 $ 1,126,227 $ ( 24,367 ) $ ( 78,044 ) $ 16,206 $ 1,041,320
For the Three Months Ended December 31, 2024
Additional Unearned Total
Common Paid-In Compensation Accumulated Stockholders'
Stock Capital ESOP Deficit AOCI Equity
Balance at September 30, 2024 $ 1,327 $ 1,146,851 $ ( 26,431 ) $ ( 111,104 ) $ 21,627 $ 1,032,270
Net income 15,431 15,431
Other comprehensive loss, net of tax ( 10,065 ) ( 10,065 )
ESOP activity ( 149 ) 412 263
Restricted stock activity, net 1 ( 1 ) —
Stock-based compensation 101 101
Cash dividends to stockholders ($ 0.085 per share)
( 11,061 ) ( 11,061 )
Balance at December 31, 2024 $ 1,328 $ 1,146,802 $ ( 26,019 ) $ ( 106,734 ) $ 11,562 $ 1,026,939
See accompanying notes to consolidated financial statements.
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CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in thousands)
For the Three Months Ended
December 31,
2025 2024
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 20,304 $ 15,431
Adjustments to reconcile net income to net cash provided by operating activities:
FHLB stock dividends ( 2,032 ) ( 2,352 )
Provision for credit losses 1,106 677
Amortization and accretion of premiums and discounts on securities ( 838 ) ( 876 )
Depreciation and amortization of premises and equipment 1,755 1,847
Amortization of intangible assets 63 137
Amortization of deferred amounts related to FHLB advances, net 335 388
Common stock committed to be released for allocation - ESOP 268 263
Stock-based compensation 99 101
Amortization of net deferred loan fees and premiums ( 1,117 ) ( 119 )
Changes in:
Unrestricted cash collateral from derivative counterparties, net 40 2,550
Other assets, net 161 ( 2,785 )
Income taxes receivable, net 457 ( 482 )
Deferred income tax assets, net 1,108 764
Other liabilities ( 4,266 ) ( 9,936 )
Net cash provided by operating activities 17,443 5,608
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of AFS securities ( 1,848 ) ( 71,416 )
Proceeds from calls, maturities and principal reductions of AFS securities 40,956 51,574
Proceeds from the redemption of FHLB stock 7,634 3,163
Net change in loans receivable ( 64,510 ) ( 48,054 )
Purchase of premises and equipment ( 1,608 ) ( 1,152 )
Proceeds from sale of other real estate owned ("OREO") — 110
Net cash (used in) investing activities ( 19,376 ) ( 65,775 )
(Continued)
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CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in thousands)
For the Three Months Ended
December 31,
2025 2024
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends paid ( 11,017 ) ( 11,061 )
Net change in deposits 167,184 76,135
Proceeds from borrowings 50,100 200,000
Repayments on borrowings ( 171,280 ) ( 216,177 )
Change in advances by borrowers ( 36,893 ) ( 35,713 )
Payment of FHLB prepayment penalties ( 11 ) —
Repurchase of common stock and excise tax payments ( 15,959 ) —
Net cash (used in) provided by financing activities ( 17,876 ) 13,184
NET (DECREASE) IN CASH AND CASH EQUIVALENTS ( 19,809 ) ( 46,983 )
CASH AND CASH EQUIVALENTS:
Beginning of period 252,443 217,307
End of period $ 232,634 $ 170,324
See accompanying notes to consolidated financial statements. (Concluded)
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Notes to Consolidated Financial Statements (Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation - The consolidated financial statements include the accounts of Capitol Federal Financial, Inc.® (the "Company") and its wholly-owned subsidiary, Capitol Federal Savings Bank (the "Bank"). The Bank has two wholly-owned subsidiaries, Capitol Funds, Inc. and Capital City Investments, Inc. Capitol Funds, Inc. has a wholly-owned subsidiary, Capitol Federal Mortgage Reinsurance Company. Capital City Investments, Inc. is a real estate and investment holding company. All intercompany accounts and transactions have been eliminated in consolidation. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. These statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2025, filed with the Securities and Exchange Commission ("SEC"). Interim results are not necessarily indicative of results for a full year.
Recent Accounting Pronouncements - In October 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-06, Disclosure Improvements - Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative. This ASU incorporates a variety of Topics into the FASB Accounting Standards Codification (the "Codification") that are currently included in SEC Regulations S-X and S-K. The ASU is intended to align the accounting standards of GAAP with SEC Regulations S-X and S-K. Each amendment in the ASU will only become effective for the Company if the SEC removes the related disclosure or presentation requirement from its existing regulations by June 30, 2027. The amendments will be applied prospectively by the Company. The adoption of this ASU may result in disclosures currently presented outside of the Company's financial statements being relocated to the Company's financial statements. If the SEC has not removed the applicable requirements from Regulation S-X or S-K by June 30, 2027, the pending content of the related amendment will be removed from the Codification and will not become effective for the Company. The ASU is not expected to have a material impact on the Company's disclosures as the Company is currently subject to SEC Regulations S-X and S-K.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures . This ASU requires public business entities to provide additional annual disclosures regarding specific categories of the income tax rate reconciliation using both percentages and currency amounts with certain reconciling items being further broken out by nature and jurisdiction to the extent those items exceed a certain quantitative threshold. The ASU also requires annual disclosures of income taxes paid (net of refunds received) disaggregated by federal, state, and foreign taxes and the amount of income taxes paid (net of refunds received) disaggregated by individual jurisdictions that meet a certain quantitative threshold. This ASU also discontinues certain other income tax disclosures. The ASU is effective for public business entities for annual periods beginning after December 15, 2024 which is the fiscal year ending September 30, 2026 for the Company. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. This ASU should be applied on a prospective basis; however, retrospective application is permitted. The Company's financial condition, results of operations and cash flows will not be impacted by this guidance; however, the guidance will impact the Company's income tax footnote disclosures. The Company is currently evaluating the effect this ASU will have on the Company's income tax footnote disclosures.
In March 2024, the FASB issued ASU 2024-02, Codification Improvements - Amendments to Remove References to the Concepts Statements . This ASU removes references to various FASB Concept Statements to simplify the Codification and provide a distinction between authoritative and nonauthoritative literature. This ASU is effective for the Company on October 1, 2025, starting with its Form 10-K for the fiscal year ending September 30, 2026. This ASU is not expected to have a material impact on the Company's consolidated financial statements and disclosures.
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures . This ASU requires additional expense disclosures by public entities in the notes to the financial statements. The ASU outlines the specific costs that are required to be disclosed, which include costs such as: purchases of inventory, employee compensation, depreciation, intangible asset amortization, selling costs, and depreciation, depletion, and amortization related to oil and gas production. It also requires qualitative descriptions of the amounts remaining in the relevant expense income statement captions that are not separately disaggregated quantitatively in the notes to the financial statements and the entity's definition of selling expenses. The disclosures are required for each interim and annual reporting period. The ASU is effective for fiscal years beginning after December 15, 2026, which is the fiscal year ending September 30, 2028 for the Company. In January 2025, the FASB issued ASU 2025-1, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures: Clarifying the Effective Date. The FASB clarified the interim date reporting when an entity adopts ASU 2024-03. Per ASU 2025-01, ASU 2024-03 is effective for interim periods within fiscal years beginning after December 15, 2027, which is the quarter ending December 31, 2028
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for the Company. The Company is currently evaluating the effect this ASU will have on the Company's expense disclosures in the notes to the consolidated financial statements.
In September 2025, the FASB issued ASU 2025-06, Intangibles - Goodwill and Other - Internal-use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. This ASU updates Subtopic 350-40 by modernizing the accounting for internal-use software costs, including clarifying when entities should begin capitalizing eligible costs related to developing or obtaining software for internal use, implementing a cloud computing arrangement as a customer, and developing websites. The ASU is effective for fiscal years beginning after December 15, 2027, which is the fiscal year ending September 30, 2029 for the Company, and interim periods within fiscal years beginning after December 15, 2027, which is the quarter ending December 31, 2028 for the Company. Early adoption is permitted for any interim or annual period for which financial statements have not yet been issued or made available for issuance as of the beginning of the entity's fiscal year. The Company is currently evaluating the effect this ASU will have on the Company's consolidated financial statements and disclosures, but it is not expected to have a material impact.
In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements. This ASU does not change the overall purpose of interim reporting or alter the scope of existing disclosure requirements; rather, the ASU is intended to provide more clarity and make interim disclosure requirements under Topic 270 easier to navigate. The ASU also requires entities to disclose events occurring after the end of the most recent annual reporting period that have a material impact on the entity. The ASU is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027, which is the quarter ended December 31, 2028 for the Company. The Company is currently evaluating the impact this ASU will have on the Company's interim consolidated financial statements and disclosures.
In December 2025, the FASB issued ASU 2025-12, Codification Improvements . This ASU is intended to enhance the Codification by refining guidance and simplifying its application through technical corrections, helping to enhance consistency and make the standards easier for preparers and users to interpret. The ASU is effective for fiscal years beginning after December 15, 2026, which is the fiscal year ending September 30, 2028 for the Company, and the interim periods within fiscal years beginning after December 15, 2026, which is the quarter ended December 31, 2027 for the Company. The Company is currently evaluating the impact this ASU will have on the Company's consolidated financial statements and disclosures.
2. EARNINGS PER SHARE
Shares acquired by the ESOP are not included in basic average shares outstanding until the shares are committed for allocation or vested to an employee's individual account. Unvested shares awarded pursuant to the Company's restricted stock benefit plans are treated as participating securities in the computation of EPS pursuant to the two-class method, as they contain nonforfeitable rights to dividends. The two-class method is an earnings allocation that determines EPS for each class of common stock and participating security.
For the Three Months Ended
December 31,
2025 2024
(Dollars in thousands, except per share amounts)
Net income $ 20,304 $ 15,431
Income allocated to participating securities ( 25 ) ( 18 )
Net income available to common stockholders $ 20,279 $ 15,413
Total basic average common shares outstanding 128,953,166 129,972,969
Effect of dilutive stock options — —
Total diluted average common shares outstanding 128,953,166 129,972,969
Net EPS:
Basic $ 0.16 $ 0.12
Diluted $ 0.16 $ 0.12
Antidilutive stock options, excluded from the diluted average
common shares outstanding calculation 220,491 312,841
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3. SECURITIES
The following tables reflect the amortized cost, estimated fair value, and gross unrealized gains and losses of AFS securities at the dates presented. The Company did not hold any tax-exempt securities during the three months ended December 31, 2025 or 2024.
December 31, 2025
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
(Dollars in thousands)
MBS $ 805,099 $ 21,010 $ 148 $ 825,961
Corporate bonds 4,000 — 257 3,743
$ 809,099 $ 21,010 $ 405 $ 829,704
September 30, 2025
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
(Dollars in thousands)
MBS $ 843,369 $ 20,303 $ 172 $ 863,500
Corporate bonds 4,000 — 284 3,716
$ 847,369 $ 20,303 $ 456 $ 867,216
At December 31, 2025, AFS securities included $ 754.5 million of residential MBS and $ 71.4 million of commercial MBS. At September 30, 2025 AFS securities included $ 793.8 million of residential MBS and $ 69.7 million of commercial MBS.
The following tables summarize the estimated fair value and gross unrealized losses of those AFS securities on which an unrealized loss at the dates presented was reported and the continuous unrealized loss position for less than 12 months and equal to or greater than 12 months as of the dates presented.
December 31, 2025
Less Than 12 Months Equal to or Greater Than 12 Months
Estimated Unrealized Estimated Unrealized
Fair Value Losses Fair Value Losses
(Dollars in thousands)
MBS $ 1,839 $ 99 $ 6,257 $ 49
Corporate bonds — — 3,743 257
$ 1,839 $ 99 $ 10,000 $ 306
September 30, 2025
Less Than 12 Months Equal to or Greater Than 12 Months
Estimated Unrealized Estimated Unrealized
Fair Value Losses Fair Value Losses
(Dollars in thousands)
MBS $ 13,946 $ 55 $ 26,144 $ 117
Corporate bonds — — 3,716 284
$ 13,946 $ 55 $ 29,860 $ 401
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The unrealized losses at December 31, 2025 were a result of an increase in market yields from the time the securities were purchased. In general, as market yields rise, the fair value of securities will decrease; as market yields fall, the fair value of securities will increase. Management did not record an ACL on securities in an unrealized loss position at December 31, 2025 as management did not believe any of the securities were impaired due to credit quality reasons. The issuers of these securities continue to make scheduled and timely principal and interest payments, as applicable, under the contractual term of the securities, so management believes the entire principal balance will be collected as scheduled. Additionally, management does not have the intent to sell any of the securities, and believes that it is more likely than not that the Company will not be required to sell the securities before the recovery of the remaining amortized cost, which could be at maturity. The fair value is expected to recover as the securities approach their maturity date, if not before, or if market yields decline.
The amortized cost and estimated fair value of AFS debt securities as of December 31, 2025, by contractual maturity, are shown below. Actual principal repayments may differ from contractual maturities due to prepayment or early call privileges by the issuer. In the case of MBS, borrowers on the underlying loans generally have the right to prepay their loans without penalty. For this reason, MBS are not included in the maturity categories in the table below.
Amortized Estimated
Cost Fair Value
(Dollars in thousands)
Five years through ten years $ 4,000 $ 3,743
4,000 3,743
MBS 805,099 825,961
$ 809,099 $ 829,704
The following table summarizes the carrying value of securities pledged as collateral for the obligations indicated below as of the dates presented.
December 31, 2025 September 30, 2025
(Dollars in thousands)
Public unit deposits $ 157,703 $ 150,916
Federal Reserve Bank of Kansas City ("FRB of Kansas City") borrowings 86,733 91,130
$ 244,436 $ 242,046
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4. LOANS RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES
Loans receivable, net at December 31, 2025 and September 30, 2025 are summarized as follows:
December 31, 2025 September 30, 2025
(Dollars in thousands)
One- to four-family:
Originated $ 3,725,622 $ 3,774,134
Correspondent purchased 1,953,011 2,000,216
Bulk purchased 112,168 114,231
Construction 15,228 16,054
Total 5,806,029 5,904,635
Commercial:
Commercial real estate 1,874,506 1,709,990
Commercial and industrial 219,909 210,119
Commercial construction 184,227 195,886
Total 2,278,642 2,115,995
Consumer:
Home equity 107,490 104,809
Other 7,814 8,436
Total 115,304 113,245
Total loans receivable 8,199,975 8,133,875
Less:
ACL 24,572 24,039
Deferred loan fees/discounts 31,125 31,268
Premiums/deferred costs ( 32,458 ) ( 33,393 )
$ 8,176,736 $ 8,111,961
Lending Practices and Underwriting Standards - The Bank originates one- to four-family loans, originates and participates in commercial loans, and originates consumer loans primarily secured by one- to four-family residential properties. The Bank historically purchased one- to four-family loans from correspondent lenders, but during fiscal year 2024, the Bank suspended its one- to four-family correspondent lending channels for the foreseeable future.
One- to four-family loans - Full documentation to support an applicant's credit and income, and sufficient funds to cover all applicable fees and reserves at closing, are required on all loans. Properties securing one- to four-family loans are appraised by either staff appraisers or fee appraisers, both of which are independent of the loan origination function.
The underwriting standards for loans purchased from correspondent lenders were generally similar to the Bank's internal underwriting standards. The underwriting of loans purchased from correspondent lenders was performed by the Bank's underwriters on a loan-by-loan basis.
The Bank also originates owner-occupied construction-to-permanent loans secured by one- to four-family residential real estate. Construction draw requests and the supporting documentation are reviewed and approved by designated personnel. The Bank also performs regular documented inspections of the construction project to ensure the funds are being used for the intended purpose and the project is being completed according to the plans and specifications provided.
Commercial loans - The Bank's commercial loan portfolio includes loans originated by the Bank or in participation with a lead bank. For commercial participation loans, the Bank performs the same underwriting procedures as if the loan was originated by the Bank.
When underwriting a commercial real estate or commercial construction loan, several factors are considered, such as the income producing potential of the property, cash equity provided by the borrower, the financial strength of the borrower, managerial expertise of the borrower or tenant, feasibility studies, lending experience with the borrower and the marketability of the property. At the time of origination, the loan-to-value ratio ("LTV") on commercial real estate loans generally does not exceed 85 % of the appraised value of the property securing the loans and the minimum debt service coverage ratio ("DSCR") is generally 1.15 x. The Bank generally
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requires a guaranty on all commercial real estate loans, but for an experienced borrower with a strong DSCR and low LTV, the Bank may allow the guaranty percentage to be reduced or phased out, or the Bank may originate the loan as a non-recourse loan.
For commercial construction loans, LTVs generally do not exceed 80 % of the projected appraised value of the property securing the loans and the minimum DSCR is generally 1.15 x, but it applies to the projected cash flows, and the borrower must have successful experience with the construction and operation of properties similar to the subject property. Appraisals on properties securing these loans are performed by independent state certified fee appraisers. For construction loans, guaranties are typically required during the period of construction. After construction is complete, for select experienced borrowers that have a strong DSCR and low LTV, the guaranty may be reduced or phased out when the property meets certain performance metrics. Additionally, the Bank generally requires the borrower to contribute equity at the start of a project and prior to any Bank funding.
The Bank's commercial and industrial loans are generally made to borrowers located in Kansas and are underwritten on the basis of the borrower's ability to service the debt from income. Working capital loans are primarily collateralized by short-term assets whereas term loans are primarily collateralized by longer-term assets. In general, commercial and industrial loans involve different types of credit risk than commercial real estate loans due to the nature of the loans and the type of collateral securing the loans. As a result of these complexities, variables and risks, commercial and industrial loans generally require evaluation of different metrics and factors before origination and require more monitoring and servicing after origination than other types of loans.
Management regularly monitors the level of risk in the entire commercial loan portfolio, including concentrations in factors such as collateral type, geographic location, tenant brand name, borrowing relationship, and, in the case of participation loans, lending relationship, among other factors. Commercial borrowers with total loans of $ 2.5 million or more are reviewed at least annually to monitor financial performance. The annual reviews include evaluating updated financials, as well as performing stress tests to measure the ability of the borrowers to withstand certain stress scenarios such as interest rate increases, revenue decreases and expense increases.
Consumer loans - The Bank offers a variety of consumer loans, the majority of which are home equity loans and lines of credit for which the Bank also has the first mortgage or the first lien position.
The underwriting standards for consumer loans include a determination of an applicant's payment history on other debts and an assessment of an applicant's ability to meet existing obligations and payments on the proposed loan. Although creditworthiness of an applicant is a primary consideration, the underwriting process also includes a comparison of the value of the collateral in relation to the proposed loan amount.
Credit Quality Indicators - Based on the Bank's lending emphasis and underwriting standards, management has segmented the loan portfolio into three segments: (1) one- to four-family; (2) consumer; and (3) commercial. These segments are further divided into classes for purposes of providing disaggregated credit quality information about the loan portfolio. The classes are: one- to four-family - originated, one- to four-family - correspondent purchased, one- to four-family - bulk purchased, consumer - home equity, consumer - other, commercial - commercial real estate, and commercial - commercial and industrial. One- to four-family construction loans are included in the originated class and commercial construction loans are included in the commercial real estate class. As part of the ongoing monitoring of the credit quality of the Company's loan portfolio, management tracks certain credit quality indicators, including trends related to loan classification and delinquency status.
Loan Classification - In accordance with the Bank's asset classification policy, management regularly reviews the problem loans in the Bank's portfolio to determine whether any require classification. Loan classifications are defined as follows:
• Special mention - These loans are performing loans on which known information about the collateral pledged or the possible credit problems of the borrower(s) have caused management to have doubts as to the ability of the borrower(s) to comply with present loan repayment terms and which may result in the future inclusion of such loans in the nonaccrual loan categories.
• Substandard - A loan is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard loans include those characterized by the distinct possibility the Bank will sustain some loss if the deficiencies are not corrected.
• Doubtful - Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses present make collection or liquidation in full on the basis of currently existing facts and conditions and values highly questionable and improbable.
• Loss - Loans classified as loss are considered uncollectible and of such little value that their continuance as assets on the books is not warranted.
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The following tables set forth, as of the dates indicated, the amortized cost of loans by class of financing receivable, year of origination or most recent credit decision, and loan classification. Amortized cost is the amount of unpaid principal of the loan, net of undisbursed funds, unamortized premiums and discounts, and deferred fees and costs. All revolving lines of credit and revolving lines of credit converted to term loans are presented separately, regardless of origination year. Loans classified as doubtful or loss are individually evaluated for loss. At December 31, 2025 and September 30, 2025, there were no loans classified as doubtful, and all loans classified as loss were fully charged-off. The commercial real estate substandard loan amount presented in the "Current Fiscal Year" column is primarily related to two loans in the same borrowing relationship. These two loans were modified during the prior fiscal year and again in the current fiscal year and were classified as nonaccrual at both December 31, 2025 and September 30, 2025. The loans are recourse loans, have low LTVs, and have personal guarantees. There have been no charge-offs related to these two loans nor has management set aside a specific valuation allowance associated with these loans as of December 31, 2025 due to the low LTVs.
December 31, 2025
Revolving
Line of
Current Fiscal Fiscal Fiscal Fiscal Revolving Credit
Fiscal Year Year Year Year Prior Line of Converted
Year 2025 2024 2023 2022 Years Credit to Term Total
(Dollars in thousands)
One- to four-family:
Originated
Pass $ 67,695 $ 230,356 $ 220,846 $ 286,216 $ 517,254 $ 2,381,029 $ — $ — $ 3,703,396
Special Mention — — 545 1,405 1,214 6,458 — — 9,622
Substandard — — — 362 531 13,535 — — 14,428
Correspondent purchased
Pass — — 505 292,494 431,579 1,242,803 — — 1,967,381
Special Mention — — — 1,787 521 726 — — 3,034
Substandard — — — — 161 4,869 — — 5,030
Bulk purchased
Pass — — — — — 108,798 — — 108,798
Special Mention — — — — — 1,580 — — 1,580
Substandard — — — — — 2,153 — — 2,153
67,695 230,356 221,896 582,264 951,260 3,761,951 — — 5,815,422
Commercial:
Commercial real estate
Pass 260,657 646,049 242,040 405,815 206,103 211,817 9,908 — 1,982,389
Special Mention — 7,219 — — 15,150 79 — — 22,448
Substandard 39,915 — 322 2,654 160 2,700 50 — 45,801
Commercial and industrial
Pass 26,021 84,123 24,882 24,996 12,682 7,027 38,952 — 218,683
Special Mention — 192 — — 37 — 350 — 579
Substandard — — 131 — 77 — 69 — 277
326,593 737,583 267,375 433,465 234,209 221,623 49,329 — 2,270,177
Consumer:
Home equity
Pass 1,531 5,293 5,257 3,353 3,551 3,055 78,165 7,342 107,547
Special Mention — — — 14 — — 49 43 106
Substandard — 99 — — — 8 58 77 242
Other
Pass 719 2,958 1,559 1,152 714 186 403 — 7,691
Special Mention — — — — — — — — —
Substandard — 2 45 33 43 — — — 123
2,250 8,352 6,861 4,552 4,308 3,249 78,675 7,462 115,709
Total $ 396,538 $ 976,291 $ 496,132 $ 1,020,281 $ 1,189,777 $ 3,986,823 $ 128,004 $ 7,462 $ 8,201,308
15
September 30, 2025
Revolving
Line of
Fiscal Fiscal Fiscal Fiscal Fiscal Revolving Credit
Year Year Year Year Year Prior Line of Converted
2025 2024 2023 2022 2021 Years Credit to Term Total
(Dollars in thousands)
One- to four-family:
Originated
Pass $ 233,573 $ 232,879 $ 296,339 $ 529,728 $ 739,138 $ 1,722,587 $ — $ — $ 3,754,244
Special Mention — — 1,409 1,099 1,672 4,614 — — 8,794
Substandard — — 363 568 469 12,005 — — 13,405
Correspondent purchased
Pass — 510 301,792 439,538 524,927 748,902 — — 2,015,669
Special Mention — — 1,441 523 366 367 — — 2,697
Substandard — — — 615 263 4,153 — — 5,031
Bulk purchased
Pass — — — — — 110,862 — — 110,862
Special Mention — — — — — 1,564 — — 1,564
Substandard — — — — — 2,180 — — 2,180
233,573 233,389 601,344 972,071 1,266,835 2,607,234 — — 5,914,446
Commercial:
Commercial real estate
Pass 639,555 292,900 396,152 208,604 111,266 134,388 9,775 — 1,792,640
Special Mention 7,587 — 36,266 16,060 — 80 — — 59,993
Substandard 39,962 142 2,681 — 106 2,609 50 — 45,550
Commercial and industrial
Pass 103,700 25,950 26,082 14,387 5,555 1,923 31,287 — 208,884
Special Mention — — — 44 — — 355 — 399
Substandard — 292 — 87 25 — 69 — 473
790,804 319,284 461,181 239,182 116,952 139,000 41,536 — 2,107,939
Consumer:
Home equity
Pass 5,609 5,532 3,513 3,755 1,064 2,166 75,067 7,937 104,643
Special Mention — — 33 — — — 251 42 326
Substandard 100 — — — — 11 57 42 210
Other
Pass 3,629 1,877 1,354 824 175 49 416 — 8,324
Special Mention — — — — — — — — —
Substandard 8 26 33 45 — — — — 112
9,346 7,435 4,933 4,624 1,239 2,226 75,791 8,021 113,615
Total $ 1,033,723 $ 560,108 $ 1,067,458 $ 1,215,877 $ 1,385,026 $ 2,748,460 $ 117,327 $ 8,021 $ 8,136,000
16
Delinquency Status - The following tables set forth, as of the dates indicated, the amortized cost of current loans, loans 30 to 89 days delinquent, and loans 90 or more days delinquent or in foreclosure ("90+/FC"), by class of financing receivable and year of origination or most recent credit decision as of the dates indicated. All revolving lines of credit and revolving lines of credit converted to term loans are presented separately, regardless of origination year.
December 31, 2025
Revolving
Line of
Current Fiscal Fiscal Fiscal Fiscal Revolving Credit
Fiscal Year Year Year Year Prior Line of Converted
Year 2025 2024 2023 2022 Years Credit to Term Total
(Dollars in thousands)
One- to four-family:
Originated
Current $ 67,695 $ 230,356 $ 221,329 $ 287,917 $ 517,443 $ 2,390,160 $ — $ — $ 3,714,900
30-89 — — 62 — 1,538 7,728 — — 9,328
90+/FC — — — 66 18 3,134 — — 3,218
Correspondent purchased
Current — — 505 293,482 430,728 1,244,258 — — 1,968,973
30-89 — — — 799 1,372 2,948 — — 5,119
90+/FC — — — — 161 1,192 — — 1,353
Bulk purchased
Current — — — — — 111,678 — — 111,678
30-89 — — — — — 721 — — 721
90+/FC — — — — — 132 — — 132
67,695 230,356 221,896 582,264 951,260 3,761,951 — — 5,815,422
Commercial:
Commercial real estate
Current 300,572 651,017 241,952 408,252 221,252 211,897 9,752 — 2,044,694
30-89 — 2,251 88 — — 90 156 — 2,585
90+/FC — — 322 217 161 2,609 50 — 3,359
Commercial and industrial
Current 25,738 84,315 24,883 24,996 12,796 7,027 38,547 — 218,302
30-89 283 — — — — — 755 — 1,038
90+/FC — — 130 — — — 69 — 199
326,593 737,583 267,375 433,465 234,209 221,623 49,329 — 2,270,177
Consumer:
Home equity
Current 1,531 5,392 5,169 3,353 3,482 3,033 78,086 7,188 107,234
30-89 — — 88 14 69 27 166 172 536
90+/FC — — — — — 3 20 102 125
Other
Current 719 2,952 1,559 1,151 711 127 403 — 7,622
30-89 — 6 — 1 34 59 — — 100
90+/FC — 2 45 33 12 — — — 92
2,250 8,352 6,861 4,552 4,308 3,249 78,675 7,462 115,709
Total $ 396,538 $ 976,291 $ 496,132 $ 1,020,281 $ 1,189,777 $ 3,986,823 $ 128,004 $ 7,462 $ 8,201,308
17
September 30, 2025
Revolving
Line of
Fiscal Fiscal Fiscal Fiscal Fiscal Revolving Credit
Year Year Year Year Year Prior Line of Converted
2025 2024 2023 2022 2021 Years Credit to Term Total
(Dollars in thousands)
One- to four-family:
Originated
Current $ 233,573 $ 232,879 $ 298,045 $ 530,487 $ 740,699 $ 1,730,689 $ — $ — $ 3,766,372
30-89 — — 66 908 473 5,873 — — 7,320
90+/FC — — — — 107 2,644 — — 2,751
Correspondent purchased
Current — 510 302,960 440,138 525,556 749,725 — — 2,018,889
30-89 — — 273 161 — 2,664 — — 3,098
90+/FC — — — 377 — 1,033 — — 1,410
Bulk purchased
Current — — — — — 114,315 — — 114,315
30-89 — — — — — 156 — — 156
90+/FC — — — — — 135 — — 135
233,573 233,389 601,344 972,071 1,266,835 2,607,234 — — 5,914,446
Commercial:
Commercial real estate
Current 687,104 292,556 434,882 223,812 111,227 134,468 9,775 — 1,893,824
30-89 — 344 — 852 40 — — — 1,236
90+/FC — 142 217 — 105 2,609 50 — 3,123
Commercial and industrial
Current 103,700 26,100 26,082 14,486 5,580 1,923 31,642 — 209,513
30-89 — — — 32 — — — — 32
90+/FC — 142 — — — — 69 — 211
790,804 319,284 461,181 239,182 116,952 139,000 41,536 — 2,107,939
Consumer:
Home equity
Current 5,709 5,481 3,546 3,755 1,064 2,171 75,137 7,826 104,689
30-89 — 51 — — — — 198 195 444
90+/FC — — — — — 6 40 — 46
Other
Current 3,615 1,847 1,353 856 175 49 416 — 8,311
30-89 15 42 20 — — — — — 77
90+/FC 7 14 14 13 — — — — 48
9,346 7,435 4,933 4,624 1,239 2,226 75,791 8,021 113,615
Total $ 1,033,723 $ 560,108 $ 1,067,458 $ 1,215,877 $ 1,385,026 $ 2,748,460 $ 117,327 $ 8,021 $ 8,136,000
18
Gross Charge-Offs - The following tables present gross charge-offs, for the periods indicated, by class of financing receivable for the year of origination or most recent credit decision.
For the Three Months Ended December 31, 2025
Revolving
Lines
Current Fiscal Fiscal Fiscal Fiscal Revolving of Credit
Fiscal Year Year Year Year Prior Lines of Converted to
Year 2025 2024 2023 2022 Years Credit Term Total
(Dollars in thousands)
One- to four-family:
Originated $ — $ — $ — $ — $ — $ — $ — $ — $ —
Correspondent purchased — — — — — — — — —
Bulk purchased — — — — — — — — —
— — — — — — — — —
Commercial:
Commercial real estate — — — — — — — — —
Commercial and industrial — — 77 — — 25 — — 102
— — 77 — — 25 — — 102
Consumer:
Home equity 8 6 — — — — — — 14
Other — — — — 7 — — — 7
8 6 — — 7 — — — 21
Total $ 8 $ 6 $ 77 $ — $ 7 $ 25 $ — $ — $ 123
For the Three Months Ended December 31, 2024
Revolving
Lines
Fiscal Fiscal Fiscal Fiscal Fiscal Revolving of Credit
Year Year Year Year Year Prior Lines of Converted to
2025 2024 2023 2022 2021 Years Credit Term Total
(Dollars in thousands)
One- to four-family:
Originated $ — $ — $ — $ — $ — $ — $ — $ — $ —
Correspondent purchased — — — — — — — — —
Bulk purchased — — — — — — — — —
— — — — — — — — —
Commercial:
Commercial real estate — — — — — — — — —
Commercial and industrial — — — — — — — — —
— — — — — — — — —
Consumer:
Home equity 5 11 — — — — — — 16
Other — 1 — — — — — — 1
5 12 — — — — — — 17
Total $ 5 $ 12 $ — $ — $ — $ — $ — $ — $ 17
19
Delinquent and Nonaccrual Loans - The following tables present the amortized cost, at the dates indicated, by class, of loans 30 to 89 days delinquent, loans 90 or more days delinquent or in foreclosure, total delinquent loans, current loans, and total loans. At December 31, 2025 and September 30, 2025, all loans 90 or more days delinquent were on nonaccrual status.
December 31, 2025
90 or More Days Total Total
30 to 89 Days Delinquent or Delinquent Current Amortized
Delinquent in Foreclosure Loans Loans Cost
(Dollars in thousands)
One- to four-family:
Originated $ 9,328 $ 3,218 $ 12,546 $ 3,714,900 $ 3,727,446
Correspondent purchased 5,119 1,353 6,472 1,968,973 1,975,445
Bulk purchased 721 132 853 111,678 112,531
Commercial:
Commercial real estate 2,585 3,359 5,944 2,044,694 2,050,638
Commercial and industrial 1,038 199 1,237 218,302 219,539
Consumer:
Home equity 536 125 661 107,234 107,895
Other 100 92 192 7,622 7,814
$ 19,427 $ 8,478 $ 27,905 $ 8,173,403 $ 8,201,308
September 30, 2025
90 or More Days Total Total
30 to 89 Days Delinquent or Delinquent Current Amortized
Delinquent in Foreclosure Loans Loans Cost
(Dollars in thousands)
One- to four-family:
Originated $ 7,320 $ 2,751 $ 10,071 $ 3,766,372 $ 3,776,443
Correspondent purchased 3,098 1,410 4,508 2,018,889 2,023,397
Bulk purchased 156 135 291 114,315 114,606
Commercial:
Commercial real estate 1,236 3,123 4,359 1,893,824 1,898,183
Commercial and industrial 32 211 243 209,513 209,756
Consumer:
Home equity 444 46 490 104,689 105,179
Other 77 48 125 8,311 8,436
$ 12,363 $ 7,724 $ 20,087 $ 8,115,913 $ 8,136,000
The amortized cost of mortgage loans secured by residential real estate for which formal foreclosure proceedings were in process as of December 31, 2025 and September 30, 2025 was $ 1.1 million and $ 1.0 million, respectively, which is included in loans 90 or more days delinquent or in foreclosure in the tables above. The carrying value of residential OREO held as a result of obtaining physical possession upon completion of a foreclosure or through completion of a deed in lieu of foreclosure was $ 426 thousand at December 31, 2025 and $ 197 thousand at September 30, 2025.
20
The following table presents the amortized cost at December 31, 2025 and September 30, 2025, by class, of loans classified as nonaccrual. Nonaccrual loans with no ACL were individually evaluated for loss and any losses have been charged-off. The majority of the balance of commercial real estate nonaccrual loans at December 31, 2025 and September 30, 2025 related to two loans from the same borrowing relationship. The Bank entered into an agreement with the borrower which allows the borrower to not make payments on these two loans in the first quarter of calendar year 2026; therefore, these loans were considered nonaccrual at the dates indicated. See additional discussion related to these loans in the "Credit Quality Indicators - Loan Classification" section above.
December 31, 2025 September 30, 2025
Nonaccrual Loans Nonaccrual Loans with No ACL Nonaccrual Loans Nonaccrual Loans with No ACL
(Dollars in thousands)
One- to four-family:
Originated $ 3,218 $ 1,753 $ 2,751 $ 1,833
Correspondent purchased 1,353 269 1,409 —
Bulk purchased 132 — 135 —
Commercial:
Commercial real estate 43,364 43,364 43,087 43,087
Commercial and industrial 278 278 320 320
Consumer:
Home equity 125 — 46 —
Other 92 14 48 14
$ 48,562 $ 45,678 $ 47,796 $ 45,254
Loan Modifications - The following tables present the amortized cost basis of loans, as of the dates indicated, that were both experiencing financial difficulties and modified during the periods noted, by class of financing receivable and by type of modification. Also presented in the tables is the percentage of the amortized cost basis of loans, at the dates indicated, that were modified to borrowers experiencing financial difficulties as compared to the amortized cost basis of each class of financing receivable during the periods noted. During the three months ended December 31, 2025 and 2024, there were no charge-offs related to loans modified during the respective periods. The Company has not committed to lend additional amounts to borrowers included in these tables. The commercial real estate payment delay modification during the three months ended December 31, 2025 was due primarily to two loans, discussed above, where the Bank entered into an agreement with the borrower which allows the borrower to not make payments until the first quarter of calendar year 2026. These two commercial loans were classified as substandard and nonaccrual at December 31, 2025.
For the Three Months Ended December 31, 2025
Term
Extension Total
and Class of
Payment Term Payment Financing
Delay Extension Delay Total Receivable
(Dollars in thousands)
One- to four-family:
Originated $ 138 $ 2,778 $ 619 $ 3,535 0.1 %
Correspondent purchased — 351 — 351 —
Bulk purchased 1,580 — — 1,580 1.4
1,718 3,129 619 5,466 0.1
Commercial:
Commercial real estate 39,914 — — 39,914 1.9
Commercial and industrial — — — — —
39,914 — — 39,914 1.8
Consumer loans:
Home equity — — — — —
Other — — — — —
— — — — —
Total $ 41,632 $ 3,129 $ 619 $ 45,380 0.6
21
For the Three Months Ended December 31, 2024
Term
Extension Total
and Class of
Payment Term Payment Financing
Delay Extension Delay Total Receivable
(Dollars in thousands)
One- to four-family:
Originated $ 342 $ 917 $ 166 $ 1,425 0.04 %
Correspondent purchased — — — — —
Bulk purchased — — — — —
342 917 166 1,425 0.02
Commercial:
Commercial real estate 55 35 — 90 0.01
Commercial and industrial — 19 — 19 0.01
55 54 — 109 0.01
Consumer loans:
Home equity 20 — — 20 0.02
Other — — — — —
20 — — 20 0.02
Total $ 417 $ 971 $ 166 $ 1,554 0.02
Financial effect of loan modifications - The table below presents the financial effect of loan modifications during the periods noted, including the weighted average payment delay and weighted average term extension.
For the Three Months Ended
December 31, 2025 December 31, 2024
Payment Term Payment Term
Delay Extension Delay Extension
One- to four-family:
Originated 8 months 48 months 8 months 15 months
Correspondent purchased N/A 21 months N/A N/A
Bulk purchased 10 months N/A N/A N/A
Commercial:
Commercial real estate 11 months N/A 6 months 3 months
Commercial and industrial N/A N/A N/A 6 months
Consumer:
Consumer home equity N/A N/A 7 months N/A
22
Performance of loan modifications - The Company closely monitors the performance of loans modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table presents the performance of such loans, based on amortized cost, by class of financing receivable as of December 31, 2025 and December 31, 2024, on loans modified during the preceding 12-months for borrowers experiencing financial difficulty that were delinquent as of December 31, 2025 and December 31, 2024, respectively. All other loans modified to borrowers experiencing financial difficulty during the periods noted were current as of December 31, 2025 and December 31, 2024.
As of December 31, 2025 As of December 31, 2024
30 to 89 Days
Delinquent 90 or More Days
Delinquent or in Foreclosure Total
Delinquent Loans 30 to 89 Days
Delinquent 90 or More Days
Delinquent or in Foreclosure Total
Delinquent Loans
(Dollars in thousands)
One- to four-family:
Originated $ 652 $ 727 $ 1,379 $ 1,644 $ 187 $ 1,831
Correspondent purchased — — — 461 — 461
Bulk purchased — — — — — —
Commercial:
Commercial real estate — — — — 192 192
Commercial and industrial — — — — 227 227
Consumer loans:
Home equity — — — — — —
Other — — — — — —
Total $ 652 $ 727 $ 1,379 $ 2,105 $ 606 $ 2,711
The following table presents the amortized cost basis of loans that had a payment default during the three months ended December 31, 2025 or December 31, 2024 and were modified to borrowers experiencing financial difficulty in the 12-months prior to the default date, by class of financing receivable and by type of modification. The Company considers "default" to mean 90 days or more past due under the modified terms.
For the Three Months Ended
December 31, 2025 December 31,
2024
Term Term
Extension Extension
and and
Term Payment Payment
Extension Delay Total Delay
(Dollars in thousands)
One- to four-family:
Originated $ 442 $ 285 $ 727 $ 213
Correspondent purchased — — — 422
Bulk purchased — — — —
Commercial:
Commercial real estate — — — 192
Commercial and industrial — — — 227
Consumer loans:
Home equity — — — —
Other — — — —
Total $ 442 $ 285 $ 727 $ 1,054
23
Allowance for Credit Losses - The following table summarizes ACL activity, by loan portfolio segment, for the periods presented.
For the Three Months Ended December 31, 2025
Commercial
One- to four- Commercial Commercial
Family Real Estate and Industrial Total Consumer Total
(Dollars in thousands)
Beginning balance $ 3,046 $ 18,277 $ 2,499 $ 20,776 $ 217 $ 24,039
Charge-offs — — ( 102 ) ( 102 ) ( 21 ) ( 123 )
Recoveries — — 2 2 2 4
Provision for credit losses ( 204 ) 1,419 ( 573 ) 846 10 652
Ending balance $ 2,842 $ 19,696 $ 1,826 $ 21,522 $ 208 $ 24,572
For the Three Months Ended December 31, 2024
Commercial
One- to four- Commercial Commercial
Family Real Estate and Industrial Total Consumer Total
(Dollars in thousands)
Beginning balance $ 3,673 $ 17,968 $ 1,186 $ 19,154 $ 208 $ 23,035
Charge-offs — — — — ( 17 ) ( 17 )
Recoveries 3 20 — 20 1 24
Provision for credit losses 81 1,802 23 1,825 49 1,955
Ending balance $ 3,757 $ 19,790 $ 1,209 $ 20,999 $ 241 $ 24,997
The key assumptions in the Company's ACL model at December 31, 2025 include the economic forecast, the forecast and reversion to mean time periods, and prepayment and curtailment assumptions. Management also considered certain qualitative factors when evaluating the adequacy of the ACL at December 31, 2025. The key assumptions utilized in estimating the Company's ACL at December 31, 2025 are discussed below.
• Economic Forecast - Management considered several economic forecasts provided by a third party and selected an economic forecast that was the most appropriate considering the facts and circumstances at December 31, 2025. The forecasted economic indices applied to the model at December 31, 2025 were the national unemployment rate, changes in commercial real estate price index, changes in home values, changes in the U.S. consumer price index, and changes in the U.S. gross domestic product. The economic index most impactful to all loan pools within the model at December 31, 2025 was the national unemployment rate. The forecasted national unemployment rate in the economic scenario selected by management at December 31, 2025 had the national unemployment rate gradually increasing to 4.8 % by December 31, 2026, which was the end of our four-quarter forecast time period.
• Forecast and reversion to mean time periods - The forecasted time period and the reversion to mean time period were each four quarters for all of the economic indices at December 31, 2025.
• Prepayment and curtailment assumptions - The assumptions used at December 31, 2025 were generally based on actual historical prepayment and curtailment speeds, adjusted by management as deemed necessary. The prepayment and curtailment assumptions vary for each respective loan pool in the model.
• Qualitative factors - Management applied qualitative factors at December 31, 2025 to account for large dollar commercial real estate loan concentrations and potential risk of loss in market value for newer one-to four-family loans. These qualitative factors were applied to account for credit risks not fully reflected in the discounted cash flow model.
◦ The Company's commercial real estate loans generally have low LTVs and strong DSCRs which serve as indicators that losses in the commercial real estate loan portfolio might be unlikely; however, because there is uncertainty surrounding the nature, timing, and amount of expected losses, management believes that in the event of a realized loss within the large dollar commercial real estate loan pool, the magnitude of such a loss could be significant. The large dollar commercial real estate loan concentration qualitative factor addresses the risk associated with a large dollar relationship deteriorating due to a loss event. As part of its analysis, management considered external data including historical commercial real estate price index trending information from a variety of sources to help determine the amount of this qualitative factor.
◦ For one- to four-family loans, management believes there is potential risk of loss in market value in an economic downturn related to, in particular, newer originations where property values have not experienced price appreciation, as compared to more seasoned loans in our portfolio, and applied a qualitative factor to account for this risk. To
24
determine the appropriate amount of the one- to four-family loan qualitative factor as of December 31, 2025, management considered external historical home price index trending information, along with historical loan loss experience, and portfolio balance trending, the one-to four-family loan portfolio composition with regard to loan size, and management's knowledge of the Bank's loan portfolio and the one- to four-family lending industry.
Reserve for Off-Balance Sheet Credit Exposures - At December 31, 2025 and September 30, 2025, the Bank's off-balance sheet credit exposures totaled $ 748.7 million and $ 821.6 million, respectively.
The following table summarizes the change in reserve for off-balance sheet credit exposures during the periods indicated. The increase in the reserve for off-balance sheet credit exposures as of December 31, 2025 compared to December 31, 2024 was due primarily to an increase in commercial off-balance sheet credit exposures between periods.
For the Three Months Ended
December 31, 2025 December 31, 2024
(Dollars in thousands)
Beginning balance $ 5,546 $ 6,003
Provision for credit losses 454 ( 1,278 )
Ending balance $ 6,000 $ 4,725
5. BORROWED FUNDS
FHLB Borrowings and Interest Rate Swap Agreement - At December 31, 2025 and September 30, 2025, the Bank had an interest rate swap agreement with a notional amount of $ 100.0 million in order to hedge the variable cash flows associated with $ 100.0 million of adjustable-rate FHLB advances. At December 31, 2025 and September 30, 2025, the interest rate swap agreement had an average remaining term to maturity of 2.4 years and 2.7 years, respectively. The interest rate swap was designated as a cash flow hedge and involved the receipt of variable amounts from a counterparty in exchange for the Bank making fixed-rate payments over the life of the interest rate swap agreement. At December 31, 2025 and September 30, 2025, the interest rate swap was in a gain position with a fair value of $ 765 thousand and $ 926 thousand, respectively, which was reported in other assets on the consolidated balance sheet. During the three months ended December 31, 2025 and 2024, $ 206 thousand and $ 698 thousand, respectively, was reclassified from AOCI as a decrease to interest expense. At December 31, 2025, the Company estimated that $ 439 thousand of interest expense associated with the interest rate swap would be reclassified from AOCI as a decrease to interest expense on FHLB borrowings during the next 12 months. The Bank has minimum collateral posting thresholds with its derivative counterparties and posts collateral on a daily basis. The Bank held cash collateral of $ 960 thousand at December 31, 2025 and $ 920 thousand at September 30, 2025.
During the three months ended December 31, 2025, the Bank refinanced a $ 50.0 million fixed-rate advance with a weighted average effective rate of 4.03 % and a weighted average life ("WAL") of 0.5 years, and replaced it with a $ 50.0 million fixed-rate advance with a weighted average effective rate of 3.64 % and a WAL of 2.0 years. This transaction resulted in prepayment fees of $ 11 thousand, which will be recognized in interest expense over the life of the new FHLB advance.
6. INCOME TAXES
At December 31, 2025, the Company had a federal and state net operating loss deferred income tax asset of $ 11.5 million. The gross federal net operating loss amount at December 31, 2025 was $ 46.4 million and the gross state net operating loss amount at December 31, 2025 was $ 57.4 million. The gross federal and state net operating losses will carry forward indefinitely . In addition, the Company had a $ 24.8 million and $ 22.3 million deferred tax asset as of December 31, 2025 and September 30, 2025, respectively, related to federal tax credits that will not be utilized on the Company's federal tax return due to income tax return income limitations. The majority of the federal tax credits relate to low income housing tax credits. Federal tax credits carry forward for 20 years.
The Company assesses the available positive and negative evidence surrounding the recoverability of its deferred tax assets and applies its judgment in estimating the amount of the valuation allowance necessary under the circumstances. At December 31, 2025 and September 30, 2025, the Company had a valuation allowance of $ 52 thousand and $ 42 thousand, respectively, related to the net operating losses generated by the Company's consolidated Kansas corporate income tax return, as management believes there will not be sufficient taxable income to fully utilize these deferred tax assets before they begin to expire in 2028 and thereafter. For this reason, a valuation allowance was recorded for the related amounts at December 31, 2025 and September 30, 2025. No additional valuation allowances were recorded for the Company's other deferred tax assets, as management believes it is more likely than not that these amounts will be realized through the reversal of the Company's existing taxable temporary differences and projected future taxable income.
25
On July 4, 2025, the H.R. 1 - One Big Beautiful Bill Act ("OBBBA") was enacted into law. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others being phased in through 2027. The Company has evaluated the potential impact of the OBBBA on its financial statements and, based on its assessment, the legislation is not expected to have a material impact on its financial statements.
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair Value Measurements – The Company uses fair value measurements to record fair value adjustments to certain financial instruments and to determine fair value disclosures in accordance with Accounting Standards Codification ("ASC") 820 and ASC 825. The Company's AFS securities and interest rate swap are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other financial instruments on a non-recurring basis, such as OREO and loans individually evaluated for impairment. These non-recurring fair value adjustments involve the application of lower of cost or fair value accounting or write-downs of individual financial instruments.
The Company groups its financial instruments at fair value in three levels based on the markets in which the financial instruments are traded and the reliability of the assumptions used to determine fair value. These levels are:
• Level 1 - Valuation is based upon quoted prices for identical instruments traded in active markets.
• Level 2 - Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.
• Level 3 - Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect the Company's own estimates of assumptions that market participants would use in pricing the financial instrument. Valuation techniques include the use of option pricing models, discounted cash flow models, and similar techniques. The results cannot be determined with precision and may not be realized in an actual sale or immediate settlement of the financial instrument.
The Company bases the fair value of its financial instruments on the price that would be received from the sale of an instrument in an orderly transaction between market participants at the measurement date under current market conditions. The Company maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value.
The following is a description of valuation methodologies used for financial instruments measured at fair value on a recurring basis.
AFS Securities - The Company's AFS securities portfolio is carried at estimated fair value. The Company primarily uses prices obtained from third-party pricing services to determine the fair value of its securities. On a quarterly basis, management corroborates a sample of prices obtained from the third-party pricing service for Level 2 securities by comparing them to an independent source. If the price provided by the independent source varies by more than a predetermined percentage from the price received from the third-party pricing service, then the variance is researched by management. The Company did not have to adjust prices obtained from the third-party pricing service when determining the fair value of its securities during the three months ended December 31, 2025 or during fiscal year 2025. The Company's major security types, based on the nature and risks of the securities, are:
• MBS - The majority of these securities are issued by Government Sponsored Enterprises ("GSEs"). Estimated fair values are based on a discounted cash flow method. Cash flows are determined based on prepayment projections of the underlying mortgages and are discounted using current market yields for benchmark securities. (Level 2)
• Corporate Bonds and Municipal Bonds - Estimated fair values are based on a discounted cash flow method. Cash flows are determined by taking any embedded options into consideration and are discounted using current market yields for securities with similar credit profiles. (Level 2)
Interest Rate Swap - The Company's interest rate swap is designated as a cash flow hedge and is reported at fair value in other assets on the consolidated balance sheet if in a gain position and in other liabilities if in a loss position, with any unrealized gains and losses, net of taxes, reported as AOCI in stockholders' equity. See "Note 5. Borrowed Funds" for additional information. The estimated fair values of the interest rate swap is obtained from the counterparty and is determined by a discounted cash flow analysis using observable market-based inputs. On a quarterly basis, management corroborates the estimated fair value by internally calculating the estimated fair value using a discounted cash flow analysis with independent observable market-based inputs from a third party. No adjustments were made to the estimated fair value obtained from the counterparty during the three months ended December 31, 2025 or during fiscal year 2025. (Level 2)
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The following tables provide the level of valuation assumption used to determine the carrying value of the Company's financial instruments measured at fair value on a recurring basis at the dates presented. All of the Company's financial instruments measured at fair value on a recurring basis were assets at December 31, 2025 and September 30, 2025. The Company did not have any Level 3 financial instruments measured at fair value on a recurring basis at December 31, 2025 or September 30, 2025.
December 31, 2025
Quoted Prices Significant Significant
in Active Markets Other Observable Unobservable
Carrying for Identical Assets Inputs Inputs
Value (Level 1) (Level 2) (Level 3)
(Dollars in thousands)
AFS Securities:
MBS $ 825,961 $ — $ 825,961 $ —
Corporate bonds 3,743 — 3,743 —
829,704 — 829,704 —
Interest rate swap 765 — 765 —
$ 830,469 $ — $ 830,469 $ —
September 30, 2025
Quoted Prices Significant Significant
in Active Markets Other Observable Unobservable
Carrying for Identical Assets Inputs Inputs
Value (Level 1) (Level 2) (Level 3)
(Dollars in thousands)
AFS Securities:
MBS $ 863,500 $ — $ 863,500 $ —
Corporate bonds 3,716 — 3,716 —
867,216 — 867,216 —
Interest rate swap 926 — 926 —
$ 868,142 $ — $ 868,142 $ —
The following is a description of valuation methodologies used for significant financial instruments measured at fair value on a non-recurring basis. The significant unobservable inputs used in the determination of the fair value of assets classified as Level 3 have an inherent measurement uncertainty that, if changed, could result in higher or lower fair value measurements of these assets as of the reporting date. Collateral dependent assets are assets evaluated on an individual basis. Those collateral dependent assets that are evaluated on an individual basis are considered financial assets measured at fair value on a non-recurring basis.
Loans Receivable – The fair value of collateral dependent loans individually evaluated for loss on a non-recurring basis during the three months ended December 31, 2025 and 2024 that were still held in the portfolio as of December 31, 2025 and 2024 was $ 48.4 million and $ 43.6 million, respectively. Fair values of collateral dependent loans individually evaluated for loss cannot be determined with precision and may not be realized in an actual sale or immediate settlement of the loan and, as such, are classified as Level 3.
The one- to four-family loans included in this amount were individually evaluated to determine if the carrying value of the loan was in excess of the fair value of the collateral, less estimated selling costs of 10 %. Fair values were estimated through current appraisals. Management does not adjust or apply a discount to the appraised value of one- to four-family loans, except for the estimated sales cost noted above, and the primary unobservable input for these loans was the appraisal.
For commercial loans, if the most recent appraisal or book value of the collateral does not reflect current market conditions due to the passage of time and/or other factors, management will adjust the existing appraised or book value based on knowledge of local market conditions, recent transactions, and estimated selling costs, if applicable. Adjustments to appraised or book values are generally based on assumptions not observable in the marketplace. The primary significant unobservable inputs for commercial loans individually evaluated during the three months ended December 31, 2025 or 2024 were downward adjustments to the book value of the collateral for lack of marketability. During the three months ended December 31, 2025, the adjustments ranged from 20 % to 100 %, with a
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weighted average of 23 %. During the three months ended December 31, 2024, the adjustments ranged from 10 % to 99 %, with a weighted average of 21 %. The basis utilized in calculating the weighted averages for these adjustments was the original unadjusted value of each collateral item.
OREO – OREO primarily represents real estate acquired as a result of foreclosure or by deed in lieu of foreclosure and is carried at the lower of cost or fair value. The fair value for one- to four-family OREO is estimated through current appraisals or listing prices, less estimated selling costs of 10 %. Management does not adjust or apply a discount to the appraised value or listing price, except for the estimated sales costs noted above. The primary significant unobservable input for one- to four-family OREO was the appraisal or listing price. The fair value of one- to four-family OREO measured on a non-recurring basis during the three months ended December 31, 2025 that was still held in the portfolio as of December 31, 2025 was $ 90 thousand. The carrying value of the properties equaled the fair value of the properties at December 31, 2025. There was no one- to four-family OREO measured on a non-recurring basis during the three months ended December 31, 2024
For commercial OREO, if the most recent appraisal or book value of the collateral does not reflect current market conditions due to the passage of time and/or other factors, management will adjust the existing appraised or book value based on knowledge of local market conditions, recent transactions, and estimated selling costs, if applicable. Adjustments to appraised or book values are generally based on assumptions not observable in the marketplace. The primary significant unobservable input for commercial OREO is downward adjustments to book value of the collateral for lack of marketability. Fair values of foreclosed property cannot be determined with precision and may not be realized in an actual sale of the property and, as such, are classified as Level 3. There was no commercial OREO measured on a non-recurring basis during the three months ended December 31, 2025 and 2024.
Fair Value Disclosures – The Company estimated fair value amounts using available market information and a variety of valuation methodologies as of the dates presented. Considerable judgment is required to interpret market data to develop the estimates of fair value. The estimates presented are not necessarily indicative of amounts the Company would realize from a current market exchange at subsequent dates.
The carrying amounts and estimated fair values of the Company's financial instruments by fair value hierarchy, at the dates presented, were as follows:
December 31, 2025
Carrying Estimated Fair Value
Amount Total Level 1 Level 2 Level 3
(Dollars in thousands)
Assets:
Cash and cash equivalents $ 232,634 $ 232,634 $ 232,634 $ — $ —
AFS securities 829,704 829,704 — 829,704 —
Loans receivable 8,176,736 8,035,834 — — 8,035,834
FHLB stock 85,060 85,060 85,060 — —
Interest rate swap 765 765 — 765 —
Liabilities:
Deposits 6,758,632 6,766,410 3,760,152 3,006,258 —
Borrowings 1,829,914 1,836,030 — 1,836,030 —
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September 30, 2025
Carrying Estimated Fair Value
Amount Total Level 1 Level 2 Level 3
(Dollars in thousands)
Assets:
Cash and cash equivalents $ 252,443 $ 252,443 $ 252,443 $ — $ —
AFS securities 867,216 867,216 — 867,216 —
Loans receivable 8,111,961 7,902,077 — — 7,902,077
FHLB stock 90,662 90,662 90,662 — —
Interest rate swap 926 926 — 926 —
Liabilities:
Deposits 6,591,448 6,597,102 3,578,768 3,018,334 —
Borrowings 1,950,770 1,952,458 — 1,952,458 —
8. ACCUMULATED OTHER COMPREHENSIVE INCOME
The following tables present the changes in the components of AOCI, net of tax, for the periods presented.
For the Three Months Ended December 31, 2025
Unrealized Unrealized
Gains (Losses) Gains (Losses)
on AFS on Cash Flow Total
Securities Hedges AOCI
(Dollars in thousands)
Beginning balance $ 15,052 $ 703 $ 15,755
Other comprehensive income (loss), before reclassifications 574 83 657
Amount reclassified from AOCI, net of taxes of $ 65
— ( 206 ) ( 206 )
Other comprehensive (loss) 574 ( 123 ) 451
Ending balance $ 15,626 $ 580 $ 16,206
For the Three Months Ended December 31, 2024
Unrealized Unrealized
Gains (Losses) Gains (Losses)
on AFS on Cash Flow Total
Securities Hedges AOCI
(Dollars in thousands)
Beginning balance $ 20,032 $ 1,595 $ 21,627
Other comprehensive income (loss), before reclassifications ( 11,742 ) 2,375 ( 9,367 )
Amount reclassified from AOCI, net of taxes of $ 222
— ( 698 ) ( 698 )
Other comprehensive income (loss) ( 11,742 ) 1,677 ( 10,065 )
Ending balance $ 8,290 $ 3,272 $ 11,562
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.