What changed in this filing

/stocks — the workspaceLOADING

Item 3. Quantitative and Qualitative Disclosures About Market Risk

2026-05-08 compared with 2026-02-06 · 43 added, 42 removed, 162 unchanged (34% of the section changed)

22 unchanged sentences

Although management finds these assumptions reasonable, the interest rate sensitivity of our assets and liabilities and the estimated effects of changes in interest rates on our net interest income and MVPE indicated in the below tables could vary substantially if different assumptions were used or actual experience differs from the assumptions.

To illustrate this point, the projected cumulative excess (deficiency) of interest-earning assets over interest-bearing liabilities within the next 12 months as a percentage of total assets ("one-year gap") is also provided for up/down 200 basis point scenarios, as of December 31, 2025.

Qualitative Disclosure about Market Risk

7 unchanged sentences

In the event of a change in interest rates, prepayment rates would likely deviate significantly from those assumed in calculating the gap table below.

A positive gap generally means more cash flows from assets are expected to reprice than cash flows from liabilities and suggests that in a rising rate environment, earnings should increase.

A negative gap generally means more cash flows from liabilities are expected to reprice than cash flows from assets and suggests, in a rising rate environment, earnings should decrease.

A positive gap means more cash flows from assets are expected to mature or reprice than cash flows from liabilities and suggests that, generally, in a rising rate environment, earnings should increase.

A negative gap means more cash flows from liabilities are expected to mature or reprice than cash flows from assets and suggests that, generally, in a rising rate environment, earnings should decrease.

For additional information regarding the impact of changes in interest rates, see the following Change in Net Interest Income and Change in MVPE discussions and tables.

23 unchanged sentences

liabilities as a percent of total Bank assets at:

March 31, 2026 (8.1 %) (14.6 %) (6.0 %) 5.3 %

December 31, 2025 (12.6)

1 unchanged sentence

Cumulative one-year gap - interest rates +200 bps at:

March 31, 2026 (10.3)

December 31, 2025 (14.9)

1 unchanged sentence

Cumulative one-year gap - interest rates -200 bps at:

March 31, 2026 (3.6)

December 31, 2025 (8.4)

2 unchanged sentences

Fixed-rate loans are included in the periods in which they are scheduled to be repaid, based on scheduled amortization and prepayment assumptions.

Balances are net of undisbursed amounts and deferred fees and exclude loans 90 or more days delinquent or in foreclosure.

Balances are net of undisbursed amounts and deferred fees and exclude loans 90 or more days delinquent or in foreclosure and large dollar nonaccrual commercial loans.

(2) MBS reflect projected prepayments at amortized cost.

All other securities are presented based on contractual maturities, term to call dates or pre-refunding dates as of December 31, 2025, at amortized cost.

All other securities are presented based on contractual maturities, term to call dates or pre-refunding dates as of March 31, 2026, at amortized cost.

(3) Although the Bank's non-maturity deposits are subject to immediate withdrawal, management considers a substantial amount of these accounts to be core deposits having significantly longer effective maturities.

The decay rates (the assumed rates at which the balances of existing accounts decline) used on these accounts are based on assumptions developed from our actual experiences with these accounts.

If all of the Bank's non-maturity deposits had been assumed to be subject to repricing within one year, interest-bearing liabilities estimated to mature or reprice within one year would have exceeded interest-earning assets with comparable characteristics by $3.87 billion, for a cumulative one-year gap of (39.6%) of total assets.

The decay rates (the assumed rates at which the balances of existing core deposit accounts decline) used on these accounts are based on assumptions developed from our actual experiences with these accounts.

For the purposes of this table, non-core deposit account balances are assumed to be fully subject to repricing within one year (versus decayed over time).

If all of the Bank's non-maturity deposits had been assumed to be non-core and, therefore, subject to repricing within one year, interest-bearing liabilities estimated to mature or reprice within one year would have exceeded interest-earning assets with comparable characteristics by $3.58 billion, for a cumulative one-year gap of (36.4%) of total assets.

(4) Borrowings exclude deferred prepayment penalty costs.

Included in this line item are $100.0 million of FHLB adjustable-rate advances tied to an interest rate swap.

The repricing of these liabilities is projected to occur at the maturity date of the interest rate swap.

At December 31, 2025, the Bank's gap between the amount of interest-earning assets and interest-bearing liabilities projected to reprice within one year was $(1.23) billion, or (12.6%) of total assets, compared to $(983.6) million, or (10.1%) of total assets, at September 30, 2025.

The change in the one-year gap amount was due primarily to an increase in the amount of projected liability cash flows coming due in one year, as of December 31, 2025, compared to September 30, 2025, partially offset by an increase in the amount of comparable asset cash flows.

The increase in projected liabilities was primarily in the deposit portfolio as the Bank's non-maturity deposits increased between the two periods and its certificate of deposit portfolio continued to become more seasoned with a WAM of 0.8 years as of December 31, 2025.

Additionally, the amount of borrowings due within one year increased due to the passage of time.

The increase in projected assets was primarily within the Bank's commercial fixed-rate loan portfolio due to the

origination of short-term fixed-rate loans during the current quarter and, to a lesser extent, the seasoning of its existing fixed-rate commercial loan portfolio.

Included in this line item is a $100.0 million FHLB adjustable-rate advance that is tied to an interest rate swap.

The repricing of this liability is projected to occur at the maturity date of the interest rate swap, which will occur in June 2028.

At March 31, 2026, the Bank's gap between the amount of interest-earning assets and interest-bearing liabilities projected to reprice within one year was $(792.4) million, or (8.1%) of total assets, compared to $(983.6) million, or (10.1%) of total assets, at September 30, 2025.

The change in the one-year gap amount was due primarily to an increase in the amount of projected asset cash

flows coming due in one year, as of March 31, 2026, compared to September 30, 2025, partially offset by an increase in the amount of comparable liability cash flows.

The increase in projected assets cash flows was primarily within the Bank's commercial fixed-rate loan portfolio due to the origination of short-term fixed-rate loans during the current year and, to a lesser extent, the seasoning of its existing fixed-rate commercial loan portfolio, as well as to an increase in the amount of cash and cash equivalents as of March 31, 2026.

The increase in projected liability cash flows was primarily in the deposit portfolio as the Bank's non-maturity deposits increased between the two periods and its certificate of deposit portfolio continued to become more seasoned with a WAM of 0.7 years as of March 31, 2026, compared to a WAM of 0.8 years as of September 30, 2025.

The amount of interest-bearing liabilities expected to reprice in a given period typically is not significantly impacted by changes in interest rates because the Bank's borrowings and certificate of deposit portfolios have contractual maturities and generally cannot be terminated early without a prepayment penalty.

If interest rates were to increase 200 basis points, as of December 31, 2025, the Bank's one-year gap would have been projected to be $(1.46) billion, or (14.9%) of total assets.

If interest rates were to decrease 200 basis points, as of December 31, 2025, the Bank's one-year gap would have been projected to be $(821.4) million, or (8.4%) of total assets.

If interest rates were to increase 200 basis points, as of March 31, 2026, the Bank's one-year gap would have been projected to be $(1.01) billion, or (10.3%) of total assets.

If interest rates were to decrease 200 basis points, as of March 31, 2026, the Bank's one-year gap would have been projected to be $(354.9) million, or (3.6%) of total assets.

The changes in the gap amounts compared to when there is no change in rates was due to changes in the anticipated net cash flows primarily as a result of projected prepayments on mortgage-related assets in each rate environment.

8 unchanged sentences

Similarly, agency debt issuers are more likely to exercise embedded call options and issue new securities at a lower interest rate.

The Bank did not hold any callable agency debentures as of December 31, 2025 or September 30, 2025.

The Bank did not hold any callable agency debentures as of March 31, 2026 or September 30, 2025.

For each date presented in the following table, the estimated change in the Bank's net interest income is based on the indicated instantaneous, parallel and permanent change in interest rates.

6 unchanged sentences

Change Net Interest Income At

(in Basis Points) December 31, 2025 September 30, 2025

(in Basis Points) March 31, 2026 September 30, 2025

in Interest Rates (1)

10 unchanged sentences

In general, increases/(decreases) in the Bank's net interest income projections under the various interest rate scenarios presented are due to the degree in which cash flows are realized and the rates projected to be earned on funds received through loan and securities repayments, in each scenario, are greater/(less) than the rates projected to be paid on deposits and borrowings over the next 12 months.

The net interest income projection was higher in the base case scenario at December 31, 2025 compared to September 30, 2025, due primarily to an increase in the average balance and average rate of the Bank's loan portfolio.

Projected interest expense on deposits

increased between the two periods as a result of an increase in the overall balance of the portfolio but was offset by a decrease in the balance of borrowings and the continued decrease in the average rate paid on deposits.

As of December 31, 2025, projected net interest income increased more in each of the increasing rate scenarios presented and decreased more in each of the decreasing rate scenarios presented, compared to September 30, 2025.

The marginal increase in net interest income sensitivity is largely a result of continued growth in the Bank's commercial loan portfolio.

The net interest income projection was higher in the base case scenario at March 31, 2026 compared to September 30, 2025, due primarily to an increase in the average rate of the Bank's loan portfolio and a decrease in the balance of FHLB borrowings, as the Bank paid off certain maturing borrowings, made payments on its amortizing borrowings, and restructured certain fixed-rate FHLB borrowings during the current fiscal year.

As of March 31, 2026, projected net interest income increased more in each of the increasing rate scenarios presented and decreased more in each of the decreasing rate scenarios presented, compared to September 30, 2025.

The marginal changes in net interest income sensitivity was largely a result of continued growth in the Bank's commercial loan portfolio.

Commercial loans often have adjustable-rate features, which makes the projected amount of interest income on these assets more sensitive to changes in interest rates as they reprice on a more frequent basis.

19 unchanged sentences

Change Market Value of Portfolio Equity At

(in Basis Points) December 31, 2025 September 30, 2025

(in Basis Points) March 31, 2026 September 30, 2025

in Interest Rates (1)

9 unchanged sentences

(1) Assumes an instantaneous, parallel, and permanent change in interest rates at all maturities.

The Bank's estimated MVPE remained largely unchanged, increasing from $1.16 billion at September 30, 2025 to $1.20 billion at December 31, 2025.

Compositional changes on the balance sheet, including within the Bank's loan portfolio as it continues to shift from one- to four-family to commercial loans, coupled with decreases (or tightening) in discount spreads applied to its mortgage-related assets drove the marginal increase in MVPE.

This increase was partially offset by decreases in benchmark interest rates along the short-end of the yield curve as the Federal Open Market Committee ("FOMC") resumed cutting the Fed Funds target rate and the Bank generally has more interest-bearing liability cash flows tied to the short-end of the yield curve than it does interest-earning asset cash flows.

Our one- to four-family loans are predominately fixed-rate loans with long maturities and, therefore, are more economically sensitive to changes in market interest rates whereas commercial loans often have shorter average lives and floating/adjustable-rate features, which results in less sensitivity to changes in market interest rates.

Between the two periods, the balance of

the Bank's one- to four-family loans decreased $98.6 million, net, and the balance of its commercial loans increased $162.6 million, net.

In elevated interest rate environments, such as the current environment, the estimated market value of the Bank's fixed-rate one- to four-family loan portfolio in the base case scenario is reduced as the average rate of that portfolio is less than current market rates.

The Bank's commercial loans have, predominately, been originated more recently at current market rates, giving them higher estimated values in the base case compared to the Bank's one- to four-family loans.

To the extent that the balance of the Bank's one- to four-family loan portfolio, with overall average rates less than current market rates, continues to decrease and the balance of commercial loans, with average rates closer to or above current market rates, continues to increase, the estimated market value of the Bank's overall loan portfolio, in the base case scenario, is expected to continue to increase.

Changes to the slope and/or relative levels of benchmark interest rates could also have a material impact on the estimated market value of the Bank’s loan portfolio.

As interest rates increase, fixed- rate borrowers generally have less economic incentive to prepay or to refinance their mortgages and agency debt issuers have less economic incentive or opportunity to exercise their call options in order to issue new debt at lower interest rates, resulting in lower projected cash flows on these assets.

As interest rates increase in the rising interest rate scenarios, prepayments on mortgage-related assets are more likely to decrease and only be realized through significant changes in borrowers' lives such as divorce, death, job-related relocations, or other major events as there is less economic incentive for them to prepay their debt, resulting in an increase in the estimated average lives of those mortgage-related assets.

The Bank's estimated MVPE remained largely unchanged, increasing from $1.16 billion at September 30, 2025 to $1.18 billion at March 31, 2026.

Compositional changes on the balance sheet, including within the Bank's loan portfolio as it continues to redirect cash flows from its one- to four-family loan portfolio into the commercial loan portfolio, coupled with decreases (or tightening) in discount spreads applied to its mortgage-related assets, drove the marginal increase in MVPE.

This increase was partially offset by a

general steepening of the benchmark yield curve resulting from a decrease in interest rates along the short-end of the yield curve and increases in interest rates along the intermediate- and long-ends of the yield curve as of March 31, 2026.

The Bank generally has more interest-bearing liability cash flows tied to the short-end of the yield curve than it does interest-earning asset cash flows, and more interest-earning asset cash flows tied to the long-end of the yield curve.

During times of elevated interest rates, such as the current rate environment, the estimated market value of the Bank's fixed-rate one- to four-family loan portfolio in the base case scenario is decreased as the weighted average rate of the portfolio continues to be less than current market rates.

The Bank's commercial loans have been, predominately, originated more recently at current market rates, resulting in greater estimated market values in the base case compared to the Bank's one- to four-family loans.

To the extent that the balance of the Bank's one- to four-family loan portfolio, with overall average rates less than current market rates, continues to decrease and the balance of its commercial loans, with average rates closer to or above current market rates, continues to increase, the estimated market value of the Bank's overall loan portfolio, in the base case scenario, is expected to continue to increase.

Changes to the slope and/or relative levels of benchmark interest rates can also have a material impact on the estimated market value of the Bank’s loan portfolio.

In the increasing interest rate scenarios, the sensitivity reflects the negative impacts of increasing rates on the market value of the Bank's loan and securities portfolios more so than on its deposit and borrowing portfolios.

This is because, as interest rates increase, fixed-rate borrowers generally have less economic incentive to prepay or to refinance their mortgages and agency debt issuers have less economic incentive or opportunity to exercise their call options in order to issue new debt at lower interest rates, resulting in lower projected cash flows on these assets and longer average lives.

As interest rates increase in the rising interest rate scenarios, prepayments on mortgage-related assets are more likely to decrease and increasingly only be realized through significant changes in borrowers' lives such as divorce, death, job-related relocations, or other major events as there is less economic incentive for them to prepay their debt, resulting in an increase in the estimated average lives of those mortgage-related assets.

Similarly, call projections for callable agency debentures decrease as interest rates rise, which results in cash flows related to those assets moving closer to their contractual maturity dates.

The longer expected average lives of those assets increase the sensitivity of their market value to changes in interest rates.

Conversely, as interest rates decrease, borrowers who obtained fixed-rate credit in a higher interest rate environment have more economic incentive to prepay or to refinance their mortgages, and agency debt issuers have more economic incentive and opportunity to exercise their call options in order to re-issue debt at lower interest rates, resulting in increased projected cash flows from these assets.

The resulting shorter expected average lives of the assets result in a decrease in the sensitivity of their market value to changes in interest rates.

In the increasing interest rate scenarios, the sensitivity reflects the negative impacts of rates on the market value of the Bank's loan and securities portfolios more so than on its deposit and borrowing portfolios.

In the decreasing interest rate scenarios, the Bank's MVPE increases due to a larger increase in the estimated market value of the Bank's assets than its liabilities.

This is because the Bank's mortgage-related assets continue to have a longer duration in these rate scenarios, which equates to greater sensitivity as interest rates change.

The following table presents the weighted average yields/rates and WALs (in years), after applying prepayment, call assumptions, and decay rates for our interest-earning assets and interest-bearing liabilities as of December 31, 2025.

This is mainly due to the Bank's mortgage-related assets having greater cash flow sensitivity in these rate scenarios compared to our liabilities.

Cashflows from these assets increase in these rate environments, in general, because borrowers who obtained fixed-rate credit in a higher interest rate environment would have an economic incentive to prepay or to refinance their mortgages.

However, due to the majority of our loans having interest rates less than current market rates, the impact of projected prepayment speed increases due to a decrease in interest rates is not as significant.

The resulting shorter average lives discounted at comparably lower rates generally equates to an increase in their market value in lower interest rate environments.

Yields presented for interest-earning assets include the amortization of fees, costs, premiums and discounts, which are considered adjustments to the yield.

25 unchanged sentences

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

What changed 10-Q

Item 3. Quantitative and Qualitative Disclosures About Market Risk