EDGAR 10-K Filing

Company CIK: 1490906
Filing Year: 2025
Filename: 1490906_10-K_2025_0001490906-25-000033.json

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ITEM 1. BUSINESS
Item 1. Business
General
The Company is a Maryland corporation with its common stock traded on the Global Select tier of the NASDAQ Stock Market. The Bank is a wholly-owned subsidiary of the Company and is a federally chartered and insured savings bank headquartered in Topeka, Kansas. The Bank continues to transition from a retail oriented financial institution to one with an expanded focus on commercial customers by strategically growing all aspects of commercial banking through investment in technology, people, products, and services.
We attract deposits primarily from the general public and from businesses, and invest those funds primarily in commercial loans, either secured by real estate or for commercial and industrial purposes, and in permanent loans secured by first mortgages on owner-occupied, one- to four-family residences. The Bank is active in commercial lending markets even when the lending opportunity is outside of the Bank's local footprint. We also participate with other lenders in commercial loans, and have previously purchased loans from correspondent lenders secured by mortgages on one- to four-family residences but we suspended that line of business in June 2024. The Bank invests in certain investment securities and mortgage-backed securities ("MBS"). The Bank funds our lending and investing activities from deposits and Federal Home Loan Bank of Topeka ("FHLB") borrowings.
We offer a variety of deposit accounts having a wide range of interest rates and terms, which generally include savings accounts, money market accounts, interest-bearing and non-interest-bearing checking accounts, and certificates of deposit with terms ranging from 91 days to 120 months. We also offer a broad range of banking services, including a full suite of treasury management services designed to support commercial customers in managing their financial operations efficiently and securely. By leveraging treasury management services, we help businesses streamline their operations, reduce financial risk, and maximize liquidity while growing the Bank's non-interest-bearing deposit base and diversifying fee-based income. We also offer tailored banking services for our small business customers and are actively expanding our suite of private banking and trust and wealth management products and services.
The Company's results of operations are primarily dependent on net interest income, which is the difference between the interest earned on loans, securities, and cash, and the interest paid on deposits and borrowings. On a weekly basis, management reviews deposit flows, loan demand, cash levels, and changes in several market interest rates to assess all pricing strategies. The Bank's pricing strategy for commercial loans is generally based on competitor pricing and the credit risk of the borrower, with consideration given to the overall relationship of the borrower. Pricing for first mortgage loan products includes setting interest rates based on secondary market prices and competitor pricing for our local lending
markets. Generally, deposit pricing is based upon a survey of competitors in the Bank's market areas, and the need to attract funding and retain maturing deposits.
The Company is significantly affected by prevailing economic conditions, including federal monetary and fiscal policies and federal regulation of financial institutions. Deposit balances are influenced by a number of factors, including interest rates paid on competing investment products, the level of personal income, and the personal rate of savings within our market areas. Lending activities are influenced by the demand for business and housing activity levels, our loan underwriting guidelines compared to those of our competitors, as well as the interest rate environment and interest rate pricing competition from other lending institutions.
Management Strategy
We seek to offer a comprehensive suite of commercial and consumer banking products and services to our customers. We strive to enhance stockholder value while maintaining a sound asset quality position and strong capital position. To achieve these goals, we focus on the following strategies:
Lending. We offer both commercial and one- to four-family loan products to our customers. We continue to strategically grow our commercial loan portfolio through prospecting for new relationships and maintaining and expanding existing relationships. We maintain strong relationships with local real estate agents to attract one- to four-family loan business. We rely on our marketing efforts and customer service reputation to be top of mind for commercial customers and attract business from walk-in customers, customers that apply online, and existing customers.
We offer several commercial lending options and participate in commercial loans with other lenders, both locally and outside our market areas. We offer both fixed- and adjustable-rate products with various terms to maturity and pricing options. We monitor concentration levels such as collateral type, geographic location, tenant brand name, borrowing relationships, and, in the case of participation loans, lending relationships, among other factors.
We are one of the leading originators of conventional one- to four-family loans in the state of Kansas. We originate these loans primarily for our own portfolio, and we generally service the loans we originate. Historically, we purchased one- to four-family loans from correspondent lenders but suspended that activity during fiscal year 2024. We also originate 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 is in the first lien position.
Deposit Services. We offer a wide array of deposit products and services to our commercial and retail customers. Our deposit product offerings include checking, savings, money market, certificates of deposit, and retirement accounts. Deposit services are provided through our network of traditional branches and retail in-store locations, our call center (which operates on extended hours), mobile banking, telephone banking, and online banking and bill payment services.
We offer a competitive suite of treasury management services to meet the needs of our commercial customers. Our treasury management solutions include services such as cash flow optimization, fraud prevention tools, and payment services tailored to our commercial customers. We listen to the needs of our commercial clients that utilize these services and actively evaluate new technology in order to capture a larger share of their business with additional products and services. We have also deployed a team of business development officers tasked with growing the deposit base within the small business customer segment, focusing on serving small businesses in our market areas with specialized products specifically designed for these customers.
We are preparing to implement a comprehensive suite of private banking products and services in fiscal year 2026 to better serve our customers and grow our non-interest revenue. We believe that our private banking line of business will bridge the gap between high-net-worth depository customers, small business owners or commercial customers, and corporate trustee opportunities for the Bank.
Cost Control. We generally are effective at controlling our costs of operations. We believe our investments in developing a full suite of commercial products and services, and our expanded services in private banking and trust and wealth management, are appropriate and that their successful execution can generate revenue in excess of the related costs. We centralize our loan servicing and deposit support functions for efficient processing. We serve a broad range of customers through relatively few branch locations. Our average deposit base per traditional branch at September 30, 2025 was approximately $128.5 million. This large average deposit base per branch helps to control costs. Our prudent underwriting requirements and our effective management of credit risk allow us to service a large portfolio of loans at efficient levels because it costs less to service a portfolio of performing loans.
Asset Quality. Maintaining strong asset quality has always been a top priority for us, and is even more important now, as we expand our commercial loan portfolio. We utilize underwriting standards for all of our lending products, including the loans we purchase and participate in, that are designed to limit our exposure to credit risk. We require complete documentation for both loans originated by the Bank and for commercial participation loans and make credit decisions based on our assessment of the borrower's ability to repay the loan in accordance with its terms. We monitor concentration levels by collateral type, geographic location, and borrowing relationship. We also monitor the credit quality of existing loans and borrowers, which includes monitoring financial performance at least annually for commercial borrowers with total loans of $2.5 million or more. We strive to work proactively with customers, especially if they face challenging financial conditions.
Capital Position. Our policy has always been to protect the safety and soundness of the Bank through credit and operational risk management, balance sheet strength, and sound operations. The end result of these activities has been capital ratios that meet or exceed the well-capitalized standards set by the Office of the Comptroller of the Currency (the "OCC"). We believe that maintaining a strong capital position safeguards the long-term interests of the Bank, the Company, and our stockholders.
Stockholder Value. We strive to provide long-term, sustainable stockholder value while maintaining a strong capital position. We continue to generate returns to stockholders through dividend payments and share repurchases. Total dividends declared and paid during fiscal year 2025 were $44.3 million. The Company also repurchased 618,260 shares for $3.9 million during fiscal year 2025, all of which occurred during the fourth quarter of the fiscal year. The Company's cash dividend payout policy is reviewed quarterly by management and the Board of Directors, and the ability to pay dividends under the policy depends upon a number of factors, including the Company's financial condition and results of operations, regulatory capital requirements, regulatory limitations on the Bank's ability to make capital distributions to the Company, the Bank's current tax earnings and accumulated earnings and profits, and the amount of cash at the holding company level. For fiscal year 2026, it is the intention of the Company's Board of Directors to pay out a regular quarterly cash dividend of $0.085 per share, totaling $0.34 per share for the year, and to seek further opportunities for value-enhancing share repurchases.
Interest Rate Risk Management. Changes in interest rates are our primary market risk as our balance sheet is almost entirely comprised of interest-earning assets and interest-bearing liabilities. Therefore, fluctuations in interest rates have a significant impact not only upon our net income but also upon the cash flows related to those assets and liabilities and the market value of our assets and liabilities. To maintain what we believe to be acceptable levels of net interest income in varying interest rate environments, we actively manage our interest rate risk and assume a moderate amount of interest rate risk consistent with policies approved by the Board of Directors.
Market Area and Competition
Our corporate office is located in Topeka, Kansas. As of September 30, 2025, we had a network of 46 branches (44 traditional branches and two in-store branches) located in nine counties throughout Kansas and three counties in Missouri. We primarily serve the metropolitan areas of Topeka, Wichita, Lawrence, Manhattan, Emporia, and Salina, Kansas and a portion of the metropolitan area of greater Kansas City.
We operate in a highly competitive environment for quality commercial banking relationships across the markets we serve. Larger national, regional and local financial institutions, as well as credit unions, farm credit lenders, commercial finance companies, insurance companies, and other non-bank lenders have increased their presence in our market areas thereby increasing competition. Additionally, we face competition from smaller local institutions that often offer aggressive pricing and specialized loan structures and banking services. We compete in a number of ways, including a comprehensive suite of products and services, competitive loan pricing, and a strong reputation in the market areas we serve. We provide competitive interest rates on both deposit and lending products and offer a full suite of treasury management services to
commercial customers. Through our treasury management services, we pair our commercial customers with experienced relationship managers who offer a broad range of customized services, digital platforms and sophisticated cash management tools tailored to their business. We offer specialized products and services to our small business customers and have a team of bankers focused on the deposit and loan needs of small businesses in our market areas. We are focused on the financial needs of customers and strategically invest in all aspects of commercial banking by aligning technology, people, products and services to expand the offering of products and services to our customers to remain competitive and grow commercial banking.
Competition in originating one- to four-family and consumer loans and attracting retail deposits primarily comes from local, regional, and national banks, savings institutions, credit unions, mortgage brokerage firms, investment banking and brokerage firms, and online competitors that are not confined to any specific market area. As noted above, the Bank has consistently been one of the top originators of residential one- to four-family loans in the state of Kansas. This has been achieved through strong relationships with real estate agents and marketing which emphasizes the strength of Capitol Federal's brand, competitive pricing, and the Bank's history as a portfolio lender. The Bank offers a diversified retail deposit product line, and we are actively expanding our suite of private banking and trust and wealth management products and services by strategically investing in staff and technology. Management considers our well-established banking network and our reputation for financial strength and customer service to be major factors in our success at attracting and retaining customers in our market areas. The Bank ranked second in deposit market share, at 6.2%, in the state of Kansas as reported in the June 30, 2025 Federal Deposit Insurance Corporation ("FDIC") "Summary of Deposits - Market Share Report."
Available Information
Financial and other Company information, including press releases, Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports can be obtained free of charge from our investor relations website, https://ir.capfed.com. SEC filings are available on our website immediately after they are electronically filed with or furnished to the SEC, and are also available on the SEC's website at www.sec.gov.
Regulation and Supervision
The Bank is examined and regulated by the OCC, its primary regulator, and its deposits are insured up to applicable limits by the Deposit Insurance Fund ("DIF"), which is administered by the FDIC. The Company, as a savings and loan holding company, is examined and regulated by the FRB.
Set forth below is a description of certain laws and regulations that are applicable to the Company and the Bank. This description is intended as a brief summary of selected features of such laws and regulations and is qualified in its entirety by reference to the laws and regulations applicable to the Company and the Bank.
General. The Bank, as a federally chartered savings bank, is subject to regulation and oversight by the OCC in all aspects of its operations. This regulation and oversight of the Bank is intended for the protection of depositors and other customers and not for the purpose of protecting the Company's stockholders. The investment and lending authority of the Bank is prescribed by federal laws and regulations and the Bank is prohibited from engaging in any activities not permitted by such laws and regulations. The Bank and Company are required to maintain minimum levels of regulatory capital and the Bank is subject to limitations on making capital distributions to the Company.
The Company is a unitary savings and loan holding company within the meaning of the Home Owners' Loan Act ("HOLA"). As such, the Company is registered with the FRB and subject to FRB regulations, examinations, supervision, and reporting requirements. In addition, the FRB has enforcement authority over the Company. Among other things, this authority permits the FRB to restrict or prohibit activities by the Company that are determined to be a serious risk to the Bank.
The enforcement authority of the OCC and of the FRB includes, among other things, the ability to assess civil monetary penalties, to issue cease-and-desist or removal orders, and to initiate injunctive actions. In general, these enforcement actions may be initiated for violations of laws and regulations and unsafe or unsound practices. Other actions or inactions may provide the basis for enforcement action, including misleading or untimely filed reports. Except under certain circumstances, public disclosure of final enforcement actions by the OCC or the FRB is required by law.
As a federally chartered savings bank, the Bank is required to maintain a significant portion of its assets in residential housing-related loans and investments in at least nine months of the most recent 12-month period. An institution that fails to do so is immediately subject to restrictions on its operations, including a prohibition against capital distributions, except with the prior approval of both the OCC and the FRB. Failure to meet this qualification is a statutory violation subject to enforcement action. As of September 30, 2025, the Bank met the qualification.
The Bank's relationship with its depositors and borrowers is regulated to a great extent by federal laws and regulations, especially in such matters as the ownership of savings accounts and the form and content of mortgage requirements. In addition, the branching authority of the Bank is regulated by the OCC. The Bank is generally authorized to branch nationwide.
The Bank is subject to a statutory lending limit on aggregate loans to one person or a group of related persons. The general limit is 15% of the Bank's unimpaired capital and surplus, plus an additional 10% for loans fully secured by readily marketable collateral. At September 30, 2025, the Bank's lending limit under this restriction was $144.7 million. The Bank has no loans or loan relationships in excess of its lending limit. Loan commitments and loans outstanding to the Bank's largest borrowing relationship totaled $103.2 million at September 30, 2025, all of which was current according to its terms. As of September 30, 2025, the lending relationship was composed of several commercial and industrial loans with a combined gross balance of $85.1 million and multiple commercial real estate loans with a combined gross balance of $18.1 million. The borrower is located in Kansas and the properties securing the commercial real estate loans are located in Kansas.
The OCC has adopted guidelines establishing safety and soundness standards on matters such as loan underwriting and documentation, asset quality, earnings standards, internal controls and audit systems, interest rate risk exposure, and compensation and other employee benefits. The Bank is subject to periodic examinations by the OCC regarding these and related matters. During these examinations, the examiners may require the Bank to increase its ACL, change the classification of loans, and/or recognize additional charge-offs based on their judgments, which can impact our capital and earnings. In October 2025, the OCC announced several regulatory changes aimed at reducing burdens and tailoring oversight for community banks. Effective January 1, 2026, the OCC will eliminate certain mandatory, non-statutory examination requirements, allowing examiners to adjust exam scope and frequency based on each bank’s size, complexity, and risk profile. The agency also introduced initiatives to simplify model risk-management expectations for smaller institutions and expand eligibility for streamlined licensing procedures for well-managed community banks. Together, these measures are designed to make supervision more risk-focused and less prescriptive, while maintaining safety and soundness standards.
Regulatory Capital Requirements. The Bank and the Company are required to maintain specified levels of regulatory capital under regulations of the OCC and FRB, respectively. See "Part II, Item 8. Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 13. Regulatory Capital Requirements" for additional regulatory capital information. At September 30, 2025, the Bank was considered well capitalized under OCC regulations.
The OCC can establish individual minimum capital requirements for a particular institution which vary from the capital levels that would otherwise be required under the applicable capital regulations based on such factors as concentrations of credit risk, levels of interest rate risk, the risks of non-traditional activities, and other circumstances. The OCC has not imposed any such requirements on the Bank.
The OCC is authorized and, under certain circumstances, required to take certain actions against federal savings banks that are not adequately capitalized because they fail to meet the minimum requirements associated with their elected capital framework. Any such institution must submit a capital restoration plan for OCC approval and may be restricted in, among other things, increasing its assets, acquiring another institution, establishing a branch or engaging in any new activities, and may not make capital distributions. Institutions that are deemed by the OCC to be "critically undercapitalized" are subject to the appointment of a conservator or receiver. As of September 30, 2025, the Bank and the Company met all capital adequacy requirements to which they are subject.
Limitations on Dividends and Other Capital Distributions. OCC regulations impose restrictions on savings institutions with respect to their ability to make distributions of capital, which include dividends, stock redemptions or repurchases, cash-out mergers and other transactions charged to the capital account. Under FRB and OCC safe harbor regulations, a savings institution generally may make capital distributions during any calendar year equal to net income of the previous two calendar years and current year-to-date net income (to the extent not previously distributed). A savings institution that is a
subsidiary of a savings and loan holding company, such as the Company, that proposes to make a capital distribution must submit written notice to the OCC and FRB 30 days prior to such distribution. The OCC and FRB may object to the distribution during that 30-day period based on safety and soundness or other concerns. Savings institutions that desire to make a larger capital distribution, are under special restrictions, or are not, or would not be, sufficiently capitalized following a proposed capital distribution must file an application and obtain regulatory non-objection prior to making such a distribution.
The long-term ability of the Company to pay dividends to its stockholders is based primarily upon the ability of the Bank to make capital distributions to the Company. So long as the Bank remains well capitalized after each capital distribution, and operates in a safe and sound manner, it is management's belief that the OCC and FRB will continue to allow the Bank to distribute its earnings to the Company, although no assurance can be given in this regard.
Insurance of Accounts and Regulation by the FDIC. The Bank also is subject to regulation and examination by the FDIC, which insures the deposits of the Bank to the maximum extent permitted by law. The DIF of the FDIC insures deposit accounts in the Bank up to applicable limits, with a maximum amount of deposit insurance for banks and savings institutions of $250 thousand per separately insured deposit ownership right or category.
The FDIC assesses deposit insurance premiums on all FDIC-insured institutions quarterly based on annualized rates. Under these rules, assessment rates for an institution with total assets of less than $10 billion are determined by CAMELS composite rating (capital adequacy, asset quality, management, earnings, liquidity, and sensitivity to market rates) and certain financial ratios, and range from 2.5 to 32.0 basis points, subject to certain adjustments. Assessment rates for an institution with $10 billion or more in total assets are assigned an individual rate based on a scorecard that measures the institution's composite rating, ability to withstand asset-related and funding-related stress and the magnitude of potential losses to the FDIC in the event of failure. The current assessment rates were set in October 2022, when the FDIC adopted a final rule that increased the initial base deposit assessment rate schedule uniformly by two basis points, beginning with the first quarterly assessment period of 2023. The increased assessment rate will remain in effect unless and until the reserve ratio meets or exceeds 2%, absent further action by the FDIC's Board of Directors. For the fiscal year ended September 30, 2025, the Bank paid $4.3 million in FDIC premiums. Assessment rates are applied to an institution's assessment base, which is its average consolidated total assets minus its average tangible equity during the assessment period.
The FDIC has authority to increase insurance assessments in the future, and any significant increases could have a material adverse effect on the operating expenses and results of operations of the Company. Management cannot predict what assessment rates will be in the future. In a banking industry emergency, the FDIC may also impose a special assessment.
Insurance of deposits may be terminated by the FDIC upon a finding that an institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC. We do not know of any practice, condition, or violation that may lead to termination of our deposit insurance.
Community Reinvestment and Consumer Protection Laws. In connection with its lending activities, the Bank is subject to a number of federal laws designed to protect borrowers and promote lending to various sectors of the economy and population. These include the Equal Credit Opportunity Act, the Truth-in-Lending Act, the Home Mortgage Disclosure Act, the Real Estate Settlement Procedures Act, the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 ("SAFE Act"), Service Members Civil Relief Act, and the Community Reinvestment Act ("CRA"). With respect to federal consumer protection laws, regulations are generally promulgated by the Consumer Financial Protection Bureau ("CFPB"), but the OCC, rather than the CFPB, currently examines the Bank for compliance with such laws and regulations because the Bank's regulatory assets have yet to exceed $10 billion for four consecutive quarter-ends.
The CRA requires the appropriate federal banking agency, in connection with its examination of an FDIC-insured institution, to assess its record in meeting the credit needs of the communities served by the institution, including low and moderate income neighborhoods. The federal banking regulators take into account the institution's record of performance under the CRA when considering applications for mergers, acquisitions, and branches. Under the CRA, institutions are assigned a rating of outstanding, satisfactory, needs to improve, or substantial non-compliance. The Bank received a satisfactory rating in its most recently completed CRA evaluation.
Bank Secrecy Act /Anti-Money Laundering Laws. The Bank is subject to the Bank Secrecy Act and other anti-money laundering laws, including the USA PATRIOT Act of 2001 and regulations thereunder. These laws and regulations require the Bank to implement policies, procedures, and controls to detect, prevent, and report money laundering and terrorist financing, and to verify the identity and source of deposits and wealth of its customers. Violations of these laws and regulations can result in substantial civil and criminal sanctions. In addition, provisions of the USA PATRIOT Act require the federal financial institution regulatory agencies to consider the effectiveness of a financial institution's anti-money laundering activities when reviewing mergers and acquisitions.
Federal Reserve System. In response to the Coronavirus Disease 2019 ("COVID-19") pandemic, the FRB reduced reserve requirement ratios to zero percent effective March 26, 2020, to support lending to households and businesses. At September 30, 2025, the reserve requirement of zero percent was still in place.
The Bank is authorized to borrow from the Federal Reserve Bank "discount window." An eligible institution need not exhaust other sources of funds before going to the discount window, nor are there restrictions on the purposes for which the institution can use primary credit. At September 30, 2025, the Bank had no outstanding borrowings from the discount window.
Federal Home Loan Bank System. The Bank is a member of one of 11 regional Federal Home Loan Banks, each of which serves as a reserve, or central bank, for its members within its assigned region and is funded primarily from proceeds derived from the sale of consolidated obligations of the Federal Home Loan Bank System. The Federal Home Loan Banks make loans, known as advances, to members and provide access to a line of credit in accordance with policies and procedures established by the Board of Directors of FHLB, which are subject to the oversight of the Federal Housing Finance Agency. At September 30, 2025, the Bank had $1.95 billion of FHLB advances, at par. See "Part II, Item 8. Financial Statements and Supplementary Data - Notes to Financial Statements - Note 8. Deposits and Borrowed Funds" for additional information regarding FHLB advances.
As a member, the Bank is required to purchase and maintain capital stock in FHLB. The minimum required FHLB stock amount is generally 4.5% of the Bank's FHLB advances and outstanding balance against the FHLB line of credit, and 2% of the outstanding principal balance of loans sold into the Mortgage Partnership Finance Program. At September 30, 2025, the Bank had $90.7 million in FHLB stock, which was in compliance with the FHLB's stock requirement. In past years, the Bank has received dividends on its FHLB stock, although no assurance can be given that these dividends will continue. See "Part II, Item 8. Financial Statements and Supplementary Data - Notes to Financial Statements - Note 1. Summary of Significant Accounting Policies" for additional information regarding FHLB stock.
Federal Savings and Loan Holding Company Regulation. The HOLA prohibits a savings and loan holding company (directly or indirectly, or through one or more subsidiaries) from acquiring another savings association, or holding company thereof, without prior written approval from the FRB; acquiring or retaining, with certain exceptions, more than 5% of a non-subsidiary savings association, a non-subsidiary holding company, or a non-subsidiary company engaged in activities other than those permitted by the HOLA; or acquiring or retaining control of a depository institution that is not federally insured. In evaluating applications by savings and loan holding companies to acquire savings associations, the FRB must consider the financial and managerial resources and future prospects of the company and institution involved, the effect of the acquisition on the risk to the insurance funds, the convenience and needs of the community, competitive factors, and other factors.
The FRB has long set forth in its regulations its "source of strength" policy, which requires bank holding companies to act as a source of strength to their subsidiary depository institutions by providing capital, liquidity and other support in times of financial stress. This policy also applies to savings and loan holding companies.
Transactions with Affiliates. Transactions between the Bank and its affiliates are required to be on terms as favorable to the institution as transactions with non-affiliates. Certain of these transactions are restricted to a percentage of the Bank's capital, and, in the case of loans, require eligible collateral in specified amounts. The Bank may not lend to any affiliate engaged in activities not permissible for a bank holding company or purchase or invest in the securities of affiliates. In addition, transactions with affiliates must be consistent with safe and sound banking practices and not involve the purchase of low-quality assets.
Taxation
Federal Taxation. The Company and the Bank are subject to federal income taxation in the same general manner as other corporations. The Company files a consolidated federal income tax return. The Company has not received notification from the Internal Revenue Service of any potential tax liability for any years still subject to audit. For federal income tax purposes, the Bank currently reports its income and expenses on the accrual method of accounting and uses a fiscal year ending on September 30 for filing its federal income tax return. Changes to the corporate federal income tax rate would result in changes to the Company's effective income tax rate and would require the Company to remeasure its deferred tax assets and liabilities based on the tax rate in the years in which those temporary differences are expected to be recovered or settled.
Prior to the enactment of the Small Business Job Protection Act (the "1996 Act"), the Bank was permitted to deduct, up to a specified formula limit, a certain percentage of income as bad debts, for which the Bank was not required to establish a deferred tax liability. The difference between actual bad debts and the formula limit bad debt amount ("excess reserves") was recorded in the Bank's retained earnings. As a result of the 1996 Act, savings institutions, like the Bank, were required to use the specific charge-off method in computing bad debts on their tax returns beginning with their 1996 Federal tax returns. The 1996 Act required the recapture of excess reserves over the base year, which was September 30, 1988 for the Bank. The excess reserves established prior to September 30, 1988 remain in retained earnings ("pre-1988 bad debt reserves") subject to recapture by the Bank on the occurrence of certain distributions in excess of current earnings and profits accumulated in tax years beginning after December 31, 1951 ("accumulated earnings and profits"). The Bank had $75.9 million in pre-1988 bad debt reserves at September 30, 2025, which equates to an unrecorded deferred tax liability of $15.9 million. See additional discussion regarding the Bank's pre-1988 bad debt recapture in "Part IA. Risk Factors - Other Risks" and "Part II, Item 8. Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 9. Income Taxes".
State Taxation. The earnings/losses of Capitol Federal Financial, Inc., Capitol Funds, Inc. and Capital City Investments, Inc. are combined for purposes of filing a consolidated Kansas corporate tax return. The Kansas corporate tax rate is 4.0%, plus a surcharge of 3.0% on earnings greater than $50 thousand.
The Bank files a Kansas privilege tax return. For Kansas privilege tax purposes, the minimum tax rate was 4.18% of earnings during fiscal year 2025, which is calculated based on federal taxable income, subject to certain adjustments. The Bank has not received notification from the state of any potential tax liability for any years still subject to audit.
Additionally, the Bank files state tax returns in 16 other states and two cities where it has significant loan balances. In these states and cities, the Bank has either established a nexus under an economic nexus theory or has exceeded enumerated nexus thresholds based on the amount of interest income derived from loans within the state.
Employees and Human Capital Resources
At September 30, 2025, we had a total of 678 employees, including 74 part-time employees. The full-time equivalent of our total employees at September 30, 2025 was 655, an increase from 636 at September 30, 2024.
Our employees are not represented by any collective bargaining group. Management considers its employee relations to be good. We believe our ability to attract and retain employees is a key to our success. Accordingly, we strive to offer competitive salaries and employee benefits to all employees and monitor salaries in our market areas. Physical well-being is supported by the Company's health, dental, vision, life and various other insurances, and a wellness program that encourages employees to live a healthy and balanced lifestyle. Volunteer opportunities are provided and encouraged for all employees. Capitol Federal employees recorded over 4,976 hours in volunteer time for local organizations and charities during fiscal year 2025.
Our Company seeks to recognize and develop the unique contributions each individual brings to our Company, and we are fully committed to maintaining a culture that supports our corporate values. We strive to maintain a workforce reflective of the communities we serve. In addition, our Board of Directors is comprised of members with varying backgrounds, education and experiences to help us understand and support our customers and stockholders. Since 1977, at least one woman has served as a director of the Bank and, since its inception in 1999, at least one woman has served on the Board of Directors of the Company. In addition, since 2012, at least one underrepresented minority has served as a director of the
Company and the Bank. The Board of Directors annually reviews the Company's recruitment efforts and employment statistics.
The Company recruits employees through sources and organizations across a variety of networks and communities. The Company also provides multiple opportunities for professional development and growth, including continuing education when applicable and specialty education within banking. Leadership development is supported through our Leadership Forum services, on a biannual basis, for mid-level leaders within the organization. Education for this program is currently provided by Banktastic. Annual employee educational requirements include respectful treatment of all other employees and customers. All employees receive annual training on providing fair, high-quality service and understanding the causes of legal ramifications of discrimination.
Our employees, together with the Capitol Federal Foundation, contribute to programs that promote educational opportunities in all communities as well as housing in low-and-moderate income communities.

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ITEM 1A. RISK FACTORS
Item 1A. Risk Factors
There are risks inherent in the Bank's and Company's business. The following is a summary of material risks and uncertainties relating to the operations of the Bank and the Company. Adverse experiences with these could have a material impact on the Company's financial condition and results of operations. Some of these risks and uncertainties are interrelated, and the occurrence of one or more of them may exacerbate the effect of others. These material risks and uncertainties are not necessarily presented in order of significance. In addition to the risks set forth below and the other risks described in this Annual Report, there may be risks and uncertainties that are not currently known to us or that we currently deem to be immaterial that could materially and adversely affect our business, financial condition or operating results.
Risks Related to Macroeconomic Conditions
Changes in interest rates could have an adverse impact on our results of operations and financial condition.
Our results of operations are primarily dependent on net interest income, which is the difference between the interest earned on loans, securities, cash at the FRB and dividends received on FHLB stock, and the interest paid on deposits and borrowings. Changes in interest rates could have an adverse impact on our results of operations and financial condition because the majority of our interest-earning assets are long-term, fixed-rate loans, while the majority of our interest-bearing liabilities are shorter term, and therefore subject to a greater degree of interest rate fluctuations. This type of risk is known as interest rate risk and is affected by prevailing economic and competitive conditions that are beyond the Company's control, including general economic conditions, inflationary trends and/or monetary policies of the FRB and fiscal policies of the United States federal government.
The impact of changes in interest rates is generally observed on the income statement. The magnitude of the impact will be determined by the difference between the amount of interest-earning assets and interest-bearing liabilities, both of which either reprice or mature within a given period of time, in addition to the yields earned on interest-earning assets and rates paid on interest-bearing liabilities. This difference provides an indication of the extent to which our net interest rate spread will be impacted by changes in interest rates. In addition, changes in interest rates will impact the expected level of repricing of the Bank's mortgage-related assets and callable debt securities. Generally, as interest rates decline, the amount of interest-earning assets expected to reprice will increase as borrowers have an economic incentive to reduce the cost of their mortgage or debt, which would negatively impact the Bank's interest income to the extent deposits are not repriced lower at a faster pace. Conversely, as interest rates rise, the amount of interest-earning assets expected to reprice will decline as the economic incentive to refinance the mortgage or debt is diminished. As this occurs, the amount of interest-earning assets repricing could diminish to the point where interest-bearing liabilities reprice to a higher interest rate at a faster pace than interest-earning assets, thus negatively impacting the Bank's net interest income. For additional information about the interest-rate risk we face, see "Part II, Item 7A. Quantitative and Qualitative Disclosures about Market Risk."
Changes in interest rates can also have an adverse effect on our financial condition, as available-for-sale ("AFS") securities are reported at estimated fair value. Stockholders' equity, specifically, accumulated other comprehensive income (loss) ("AOCI"), is increased or decreased by the amount of change in the estimated fair value of our AFS securities, net of deferred income taxes. Increases in interest rates generally decrease the fair value of AFS securities, which adversely impacts
stockholders' equity. For additional information, see "Part II, Item 8. Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 15. Accumulated Other Comprehensive Income."
Changes in interest rates, as they relate to customers, can also have an adverse impact on our financial condition and results of operations. In times of rising interest rates, default risk may increase among borrowers with adjustable-rate loans as the rates on their loans adjust upward and their payments increase. Fluctuations in interest rates also affect customer demand for loan and deposit products. Competition from financial institutions and others could affect our ability to attract and retain deposits and could result in the Bank paying more for deposits.
In addition to general changes in interest rates, changes that affect the shape of the yield curve could negatively impact the Bank. The Bank's interest-bearing liabilities are generally priced based on short-term interest rates while the majority of the Bank's interest-earning assets are priced based on long-term interest rates. Income for the Bank is primarily driven by the spread between these rates. As a result, a steeper yield curve, meaning long-term interest rates are higher than short-term interest rates, would provide the Bank with a better opportunity to increase net interest income. When the yield curve is flat, meaning long-term interest rates and short-term interest rates are essentially the same, or when the yield curve is inverted, meaning long-term interest rates are lower than short-term interest rates, the net yield between interest-earning assets and interest-bearing liabilities that reprice is compressed or diminished and would likely negatively impact the Bank's net interest income. See "Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk" for additional information about the Bank's interest rate risk management.
An economic downturn, including a decline in real estate values, especially affecting our geographic market areas and certain regions of the country where we have commercial real estate loans or purchased loans secured by one- to four-family properties, could have an adverse impact on our business and financial results.
As we strategically grow our commercial real estate lending portfolio, we have continued to prospect for new relationships and maintain existing relationships not only in our local markets but in geographically diverse markets. As a result, we are particularly exposed to downturns in regional housing and commercial real estate markets and, to a lesser extent, housing and commercial real estate markets nationwide, along with changes in the levels of unemployment or underemployment. We monitor the current status and trends of local and national employment levels and trends and current conditions in the real estate and housing markets, as well as commercial real estate markets, in our local market areas and certain areas where we have commercial real estate loans and purchased one- to four-family loans. Decreases in real estate values could adversely affect the value of the property used as collateral for our commercial real estate and one- to four-family loans, which could cause us to realize a loss in the event of a foreclosure. Additionally, if insurance obtained by our borrowers is insufficient to cover any losses sustained to the collateral, the decreases in the value of collateral securing our loans as a result of natural disasters or other related events could adversely impact our financial condition and results of operations. If insurance coverage is unavailable to our borrowers due to the reluctance of insurance companies to renew policies covering the collateral or due to other factors, the resulting increase in cost of home ownership could affect the ability of borrowers to repay loans. Adverse conditions in our local economies and in certain areas where we have commercial real estate loans and purchased one-to four-family loans, such as inflation, unemployment, supply chain disruptions, recession, natural disasters or pandemics, or other factors beyond our control, could adversely impact the ability of our borrowers to repay their loans. Declines in collateral values and adverse economic conditions could result in increased delinquencies, non-performing assets, loan losses, and future loan loss provisions.
Risks Related to Lending Activities
The increase in commercial loans in our loan portfolio exposes us to increased lending and credit risks, which could adversely impact our financial condition and results of operations.
As part of the Company's strategic initiatives to develop a full-service commercial banking business, we are growing our commercial loan portfolio. Maintaining strong asset quality in association with the commercial loan growth is a top priority for the Bank. We are applying disciplined underwriting and ongoing credit and performance monitoring and we monitor concentration levels by collateral type, geographic location and borrowing relationship. However, there are still lending and credit risks that could adversely impact our financial condition and results of operations as commercial loans are generally considered to have different and greater credit risks than one- to four-family residential real estate loans.
Commercial loans typically have larger loan balances than one- to four-family residential loans and may involve multiple loans to groups of related borrowers. Repayment of commercial loans often depends on the successful operation of a
business or of the underlying property which may be affected by factors outside the borrower's control, such as adverse conditions in the real estate market, the economy, the implementation of tariffs, environmental factors, natural disasters or pandemics, and/or changes in government regulation. Also, there are risks inherent in commercial real estate construction lending as the value of the project is uncertain prior to the completion of construction and subsequent lease-up. A sudden downturn in the economy, labor and/or supply chain issues, or other unforeseen events could result in stalled projects or collateral shortfalls, thus exposing us to increased credit risk. Additionally, if we foreclose on these loans, our holding period for the collateral may be longer than for a one- to-four family residential property as there are generally fewer potential purchasers of this type of collateral.
Commercial and industrial loans are primarily made based on the identified cash flow of the borrower and secondarily on the collateral underlying the loans. A borrower's cash flow may prove to be unpredictable, and collateral securing these loans may fluctuate in value. Most often, this collateral consists of accounts receivable, inventory and equipment. Significant adverse changes in a borrower's industries and businesses could cause rapid declines in values of, and collectability associated with, those business assets, which could result in inadequate collateral coverage for our commercial and industrial loans and expose us to future losses. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its clients. Inventory and equipment may depreciate over time, may be difficult to appraise, may be illiquid and may fluctuate in value based on the success of the business. If the cash flow from business operations is reduced, the borrower's ability to repay the loan may be impaired.
The deterioration of one commercial loan or a commercial borrowing relationship could cause a significant increase in the dollar amount of delinquencies, non-performing assets, net charge-offs, and future loan loss provisions. An increase in valuation allowances and charge-offs related to our commercial loan portfolio could have an adverse effect on our business, financial condition, results of operations and future prospects.
Risks Related to Cybersecurity, Third Parties, and Technology.
The occurrence of any information system failure or interruption, breach of security or cyberattack, at the Company, at its third-party service providers or counterparties may have an adverse effect on our business, reputation, financial condition and results of operations.
Information systems are essential to the conduct of our business, as we use such systems to manage our customer relationships, our general ledger, our deposits and our loans. In the normal course of our business, we collect, process, retain and transmit (by email and other electronic means) sensitive and confidential information regarding our customers, employees and others. We also outsource certain aspects of our data processing, data processing operations, remote network monitoring, engineering and managed security services to third-party service providers. In addition to confidential information regarding our customers, employees and others, we, and in some cases a third party, compile, process, transmit and store proprietary, non-public information concerning our business, operations, plans and strategies.
Information security risks for financial institutions continue to increase in part because of evolving technologies, the use of the internet and telecommunications technologies (including mobile devices) to conduct financial and other business transactions and the increased sophistication and activities of organized crime, perpetrators of fraud, hackers, terrorists and others. Cyber criminals use a variety of tactics, such as ransomware, denial of service, and theft of sensitive business and customer information to extort payment or other concessions from victims. In some cases, these attacks have caused significant impacts on other businesses' access to data and ability to provide services. We are not able to anticipate or implement effective preventive measures against all incidents of these types, especially because the techniques used change frequently and because attacks can originate from a wide variety of sources, including attacks on third-party vendors and their applications and products used by the Bank.
We use a variety of physical, procedural and technological safeguards to prevent or limit the impact of system failures, interruptions and security breaches and to protect confidential information from mishandling, misuse or loss, including detection and response mechanisms designed to contain and mitigate security incidents. However, there can be no assurance that such events will not occur or that they will be promptly detected and adequately addressed if they do, and early detection of security breaches may be thwarted by sophisticated attacks and malware designed to avoid detection. If there is a failure in or breach of our information systems, or those of a third-party service provider, the confidential and other information
processed and stored in, and transmitted through, such information systems could be jeopardized, or could otherwise cause interruptions or malfunctions in our operations or the operations of our customers, employees, or others.
Our business and operations depend on the secure processing, storage and transmission of confidential and other information in our information systems and those of our third-party service providers. Although we devote significant resources and management focus to ensuring the integrity of our information systems through information security measures, risk management practices, relationships with threat intelligence providers and business continuity planning, our facilities, computer systems, software and networks, and those of our third-party service providers, may be vulnerable to external or internal security breaches, acts of vandalism, unauthorized access, misuse, computer viruses or other malicious code and cyberattacks that could have a security impact. In addition, breaches of security may occur through intentional or unintentional acts by those having authorized or unauthorized access to our confidential or other information or the confidential or other information of our customers, employees or others. While we regularly conduct security and risk assessments on our systems and those of our third-party service providers, there can be no assurance that their information security protocols are sufficient to withstand a cyberattack or other security breach. Across our industry, the cost of minimizing these risks and investigating incidents has continued to increase with the frequency and sophistication of these threats.
The occurrence of any of the foregoing could subject us to litigation or regulatory scrutiny, cause us significant reputational damage or erode confidence in the security of our information systems, products and services, cause us to lose customers or have greater difficulty in attracting new customers, have an adverse effect on the value of our common stock or subject us to financial losses that may not be covered by insurance, any of which could have an adverse effect on our business, financial condition and results of operations. As information security risks and cyber threats continue to evolve, we may be required to expend significant additional resources to further enhance or modify our information security measures and/or to investigate and remediate any information security vulnerabilities or other exposures arising from operational and security risks.
New or revised laws and regulations may significantly impact our current and planned privacy, data protection and information security-related practices, the collection, use, sharing, retention and safeguarding of consumer and employee information, and current or planned business activities. Compliance with current or future privacy, data protection and information security laws could result in higher compliance and technology costs and could restrict our ability to provide certain products and services, which could have an adverse effect on our business, financial condition and results of operations.
Our customers are also targets of cyberattacks and identity theft. There continues to be instances involving financial services and consumer-based companies reporting the unauthorized disclosure of client or customer information or the destruction or theft of corporate data. Large scale identity theft could result in customers' accounts being compromised and fraudulent activities being performed in their names. We have implemented certain safeguards against these types of activities, but they may not fully protect us from financial losses. The occurrence of a security breach involving our customers' information, regardless of its origin, could damage our reputation and result in a loss of customers and business, subject us to additional regulatory scrutiny, and expose us to litigation and possible financial liability. Any of these events could have an adverse effect on our business, financial condition and results of operations. See "Part I, Item 1C. Cybersecurity" for additional discussion related to cybersecurity.
Third-party vendors subject the Bank and the Company to potential business, reputation and financial risks.
Third-party vendors are sources of operational and information security risk to the Bank and the Company, including risks associated with operation errors, information system interruptions or breaches, and unauthorized disclosures of sensitive or confidential customer information. The Bank and the Company require third-party vendors to maintain certain levels of information security; however, vendors may remain vulnerable to breaches, unauthorized access, misuse, computer viruses, and/or other malicious attacks that could ultimately compromise sensitive information. We have developed procedures and processes for selecting and monitoring third-party vendors, but ultimately are dependent on these third-party vendors to secure their information. If these vendors encounter any of these types of issues, or if we have difficulty communicating with them, we could be exposed to disruption of operations, loss of service or connectivity to customers, reputational damage, and litigation risk that could have an adverse effect on our business, financial condition and results of operations.
The failure of an external vendor to perform in accordance with the contracted arrangements under service level agreements, because of changes in the vendor's organizational structure, financial condition, support for existing products and services or
strategic focus or for any other reason, could be disruptive to our operations, which could have an adverse effect on our business and, in turn, our financial condition and results of operations. Additionally, replacing certain third-party vendors could also entail significant delay and expense.
We are heavily reliant on technology, and a failure to effectively implement technology initiatives or anticipate future technology needs or demands could adversely affect our business or performance.
Like most financial institutions, the Bank significantly depends on technology to deliver its products and services and to otherwise conduct business. The Bank continues to invest in new technological solutions, system upgrades, and other technology initiatives, which allows us to offer new and competitive products and services to our customers. Many of these solutions and initiatives have a significant duration, are tied to critical information systems, and require substantial resources. Although the Bank takes steps to mitigate the risks and uncertainties associated with these solutions and initiatives, there is no guarantee that they will be implemented on time, within budget, or without negative operational or customer impact. The Company and its third-party vendors may develop or incorporate artificial intelligence technology into certain business processes, services or products. The use of artificial intelligence presents several risks, including an uncertain and evolving legal and regulatory environment, along with the reliability of information generated and the complexity and rapid pace of change in artificial intelligence models. The Bank also may not succeed in anticipating its future technology needs, the technology demands of its customers, or the competitive landscape for technology. If the Bank were to falter in any of these areas, it could have an adverse effect on our business, financial condition and results of operations.
Risks Related to Competition
Strong competition may limit our growth and profitability.
The Company operates in a highly competitive environment for quality commercial banking relationships, one-to four-family lending relationships and attracting and growing deposits. Our competition includes larger national, regional and local financial institutions, savings institutions, credit unions, investment banking and mortgage brokerage firms, farm credit lenders, commercial finance companies, insurance companies, online competitors that are not confined to any specific market area, and non-bank lenders and smaller local institutions that offer aggressive pricing and specialized loan structures and banking services. We compete by offering a comprehensive suite of products and services, competitive loan pricing, and we have a strong reputation in the market areas we serve.
Our competitors may offer products and services that we do not or cannot provide if the offerings fall outside our accepted level of risk. Additionally, they may offer deposit and loan rates that we cannot offer as it may adversely impact our net interest income. The Bank cannot grow profitably without growing our deposit portfolio as those funds are generally used to fund loan growth. Our profitability depends upon our ability to compete with other entities for the same customer base.
Risks Related to Regulation
We operate in a highly regulated environment, which limits the manner and scope of our business activities, and we may be adversely affected by new and/or changes in laws and regulations or interpretation of existing laws and regulations.
We are subject to extensive regulation, supervision, and examination by the OCC, the FRB, and the FDIC. These regulatory authorities exercise broad discretion in connection with their supervisory and enforcement activities, including the ability to impose restrictions on a bank's operations, reclassify assets, determine the adequacy of a bank's ACL, and determine the level of deposit insurance premiums assessed. The CFPB has broad powers to supervise and enforce consumer protection laws, including a wide range of consumer protection laws that apply to all banks and savings institutions, like the authority to prohibit unfair, deceptive or abusive acts and practices. The CFPB also has examination and enforcement authority over all banks with regulatory assets exceeding $10 billion at four consecutive quarter-ends. There are increased direct costs, additional regulatory burdens with indirect costs, and lost revenue, mainly related to interchange fees, associated with the Bank being over $10 billion in regulatory assets at certain points in time and for four consecutive quarter-ends. As long as the Bank does not exceed $10 billion in regulatory assets for four consecutive quarter ends, it will continue to be examined for compliance with consumer protection laws and the regulations of the CFPB by the Bank's primary bank regulator, the OCC. The Dodd-Frank Act also weakens the federal preemption rules that have been applicable for national banks and federal savings associations and gives state attorneys general the ability to enforce federal consumer protection laws.
Any change in such regulation and oversight, whether in the form of regulatory policy, regulations, legislation, interpretation or application, could have an adverse impact on our operations. Bank regulatory agencies, such as the OCC, the FRB and the FDIC, govern the activities in which we may engage, primarily for the protection of depositors' funds, the DIF and the safety and soundness of the banking system as a whole, and not for the protection or benefit of investors. The CFPB enforces consumer protection laws and regulations for the benefit of consumers and not the protection or benefit of investors. In addition, changes in laws and regulations, or the application of these laws and regulations, may continue to impact our costs of regulatory compliance and of doing business, and otherwise affect our operations. New Presidential Executive Orders, laws and regulations may significantly affect the markets in which we do business, the markets for and value of our loans and securities, the products we offer, the fees we can charge and our ongoing operations, costs, and profitability.
The Company is also directly subject to the requirements of entities that set and interpret accounting standards such as the Financial Accounting Standards Board, and indirectly subject to the actions and interpretations of the Public Company Accounting Oversight Board, which establishes auditing and related professional practice standards for registered public accounting firms and inspects registered firms to assess their compliance with certain laws, rules, and professional standards in public company audits. These regulations, along with existing tax, accounting, securities, and monetary laws, regulations, rules, standards, policies and interpretations, control the methods by which financial institutions and their holding companies conduct business, engage in strategic and tax planning, implement strategic initiatives, and govern financial reporting.
The Company's failure to comply with laws, regulations or policies, including Presidential Executive Orders, could result in civil or criminal sanctions and money penalties by state and federal agencies, and/or reputational damage, which could have an adverse effect on the Company's business, financial condition and results of operations. See "Part I, Item 1. Business - Regulation and Supervision" for more information about the regulations to which the Company is subject.
Other Risks
The Company's ability to pay dividends and repurchase shares is subject to the ability of the Bank to make capital distributions to the Company.
The long-term ability of the Company to pay dividends to its stockholders and repurchase shares is based primarily upon the ability of the Bank to generate sufficient earnings to make capital distributions to the Company and on the availability of cash at the holding company level in the event the Bank's earnings are not sufficient to make capital distributions to the Company. Under certain circumstances, capital distributions from the Bank to the Company may be subject to regulatory approvals. See "Item 1. Business - Regulation and Supervision" for additional information.
The Company values constructive input from stockholders, and our Board of Directors and management team are committed to acting in the best interests of all stockholders. All publicly traded companies face the risk that stockholders may disagree with the composition of the Board of Directors, the Company's strategic direction, or the way the Company is managed and may seek to effect change through various strategies that range from private engagement to public filings, proxy contests, efforts to force transactions not supported by the Board of Directors, and litigation. Responding to these actions may be costly and time-consuming, disrupt the Company's operations and/or divert the attention of the Board of Directors and executive management. Such activities could interfere with the Company's ability to execute its strategic plan and to attract and retain qualified executive leadership, as well as create perceived uncertainty as to the Company's future direction, which could also affect the market price and volatility of the Company's common stock.
The Bank's bad debt recapture amount may impact the amount and timing of capital distributions to the Company.
The Bank reported a net loss on its fiscal year 2024 federal tax return due to the sale of securities in October 2023 associated with the securities strategy which resulted in negative current and accumulated earnings and profits for fiscal year 2024. As a result of the negative current and accumulated earnings and profits, capital distributions from the Bank to the holding company during fiscal year 2024 were deemed to be drawn out of the Bank's pre-1988 bad debt reserves and resulted in the recognition of income tax expense based on the amount of the capital distribution multiplied by the then-current Bank income tax rate. This additional tax expense reduced the amount of Bank earnings available to be distributed to the holding company during fiscal year 2024. During the fourth quarter of fiscal year 2025, the Bank reached a point where there was sufficient taxable income to replenish the Bank's tax accumulated earnings and profits to a positive level, allowing the Bank to make distributions to the holding company and not have that distribution subject to the pre-1988 bad debt recapture tax. Due to the Bank's expected continuing positive tax accumulated and earnings profit balance, it is anticipated that the Bank will be in a position to distribute earnings to the holding company during fiscal year 2026. Earnings distributions from the Bank to the
holding company will be limited to the extent necessary to prevent the Bank from re-entering a negative accumulated earnings and profit position which would require the payment of the pre-1988 bad debt recapture tax on earnings moved from the Bank to the holding company. See additional discussion regarding the Bank's pre-1988 bad debt recapture in "Part I, Item 1. Business - Taxation" and "Part II, Item 8. Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 9. Income Taxes".
Our risk management and compliance programs and functions may not be effective in mitigating risk and loss.
We maintain an enterprise risk management program that is designed to identify, quantify, monitor, report, and control the risks that we face. These risks include: interest-rate, credit, liquidity, operations, compliance and litigation. We also maintain a compliance program to identify, measure, assess, and report on our adherence to applicable laws, policies and procedures. While we assess and improve these programs on an ongoing basis, there can be no assurance that our risk management or compliance programs, along with other related controls, will effectively mitigate all risk and limit losses in our business. If conditions or circumstances arise that expose flaws or gaps in our risk management or compliance programs, or if our controls do not function as designed, the performance and value of our business could be adversely affected.
The Company may not be able to attract and retain skilled employees.
The Company's success depends, in large part, on its ability to attract and retain key people. Competition for the best people can be intense, and the Company spends considerable time and resources attracting and hiring qualified people for its operations. The unexpected loss of the services of one or more of the Company's key personnel could have an adverse impact on the Company's business because of their skills, knowledge of the Company's market, and years of industry experience, as well as the difficulty of promptly finding qualified replacement personnel.
The Bank and the Company may be adversely affected by an increasing prevalence of fraud and other financial crimes.
Reported instances of fraud and related financial crimes are rising nationwide. Like all financial institutions, the Bank and the Company are vulnerable to increasing fraud losses as fraud schemes perpetrated against the Bank, the Company, and our customers continue to evolve and become more sophisticated. While the Bank and the Company have procedures and systems in place to detect, prevent, and mitigate fraud losses, fraud losses may still occur and could be material to the Bank and the Company's results of operations.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. Unresolved Staff Comments
None.

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ITEM 2. PROPERTIES
Item 2. Properties
At September 30, 2025, we had 44 traditional branch offices and two in-store branch offices. As of September 30, 2025, the Bank owned the office building and related land in which its home office and executive offices are located, and 35 of its other branch offices. The remaining 10 branches are either leased or partially owned.
For additional information regarding our lease obligations, see "Part II, Item 8. Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 5. Premises, Equipment and Leases."
Management believes that the number of branch offices we currently have meets the present and immediately foreseeable needs of our customers. Management will continue to evaluate the performance of these locations through a number of metrics, including but not limited to, customer traffic, and determine on at least an annual basis whether or not we are branched in a way that most effectively serves our existing and prospective customer bases.

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ITEM 3. LEGAL PROCEEDINGS
Item 3. Legal Proceedings
In the normal course of business, the Company and the Bank are involved as parties to various routine legal actions. In our opinion, after consultation with legal counsel, we believe it is unlikely that any such pending legal actions will have a material adverse effect on our financial condition, results of operations or liquidity.
On November 2, 2022, the Bank was served a putative class action lawsuit, captioned Jennifer Harding, et al. vs. Capitol Federal Savings Bank (Case No. 2022-CV-00598), filed in the Third Judicial District Court, Shawnee County, Kansas against the Bank, alleging the Bank improperly charged overdraft fees on (1) debit card transactions that were authorized for payment on sufficient funds but later settled against a negative account balance (commonly known as "authorize positive purportedly settle negative" or "APPSN" transactions) and (2) merchant re-presentments of previously rejected payment requests. The complaint asserts a breach of contract claim (including breach of an implied covenant of good faith and fair dealing) for each practice and seeks restitution for alleged improper fees, alleged actual damages, costs and disbursements, and injunctive relief. On April 5, 2023, the district court granted the Bank's motion to dismiss the complaint, with prejudice. The plaintiffs appealed this decision to the Kansas Court of Appeals, which issued an opinion on October 4, 2024 reversing the district court's ruling. On October 17, 2025, the Kansas Supreme Court affirmed the ruling of the Court of Appeals, remanding the case to the District Court for further proceedings.
The Company assesses the liabilities and loss contingencies in connection with pending or threatened legal and regulatory proceedings on at least a quarterly basis and establishes accruals when it is believed to be probable that a loss may be incurred and that the amount of such loss can be reasonably estimated.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosures
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Stock Listing
Capitol Federal Financial, Inc.'s common stock is traded on the Global Select tier of the NASDAQ Stock Market under the symbol "CFFN". At November 21, 2025, there were approximately 6,576 holders of record of Capitol Federal Financial, Inc. common stock.
Share Repurchases
The following table summarizes our share repurchase activity during the three months ended September 30, 2025. As of September 30, 2025, the Company had $71.1 million remaining authorized under its existing stock repurchase plan. The plan has no expiration date; however, we are required to annually seek the FRB's non-objection for the remaining buyback amount or we can request a new buyback amount. The FRB's current non-objection for the Company to repurchase up to $75.0 million of stock expires in February 2026. Shares may be repurchased from time to time in the open market or in privately negotiated transactions based upon market conditions, available liquidity and other factors. From December 2010 through September 30, 2025, $439.9 million worth of common stock was repurchased.
Total Number of Approximate Dollar
Total Shares Purchased as Value of Shares
Number of Average Part of Publicly that May Yet Be
Shares Price Paid Announced Plans Purchased Under the
Purchased per Share or Programs Plans or Programs
July 1, 2025 through
July 31, 2025 - $ - - $ 75,000,000
August 1, 2025 through
August 31, 2025 469,436 6.15 469,436 72,111,869
September 1, 2025 through
September 30, 2025 148,824 6.48 148,824 71,147,502
Total 618,260 6.23 618,260 71,147,502
Stockholders and General Inquiries
Copies of our Annual Report on Form 10-K for the fiscal year ended September 30, 2025 are available to stockholders at no charge from our investor relations website, https://ir.capfed.com.
Stockholder Return Performance Presentation
The information presented below assumes $100 invested on September 30, 2020 in the Company's common stock and in each of the indices, and assumes the reinvestment of all dividends. Historical stock price performance is not necessarily indicative of future stock price performance.
Period Ending
Index 9/30/2020 9/30/2021 9/30/2022 9/30/2023 9/30/2024 9/30/2025
Capitol Federal Financial, Inc. 100.00 133.08 103.19 64.49 83.95 96.57
NASDAQ Composite Index 100.00 130.26 96.06 121.14 167.95 210.64
S&P U.S. BMI Banks Index 100.00 181.94 139.78 135.41 199.63 270.17
Source: S&P Global Market Intelligence
Restrictions on the Payment of Dividends
The Company's ability to pay dividends is dependent, in part, upon its ability to obtain capital distributions from the Bank. The dividend policy of the Company is subject to the discretion of the Board of Directors and depends upon a number of factors, including the Company's financial condition and results of operations, regulatory capital requirements, regulatory limitations on the Bank's ability to make capital distributions to the Company, and the amount of cash at the holding company level. See "Part I, Item 1. Business - Limitations on Dividends and Other Capital Distributions" and "Part I, Item 1A. Risk Factors - Other Risks" for additional discussion on the Bank's ability to make capital distributions to the Company.

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ITEM 6. SELECTED FINANCIAL DATA
Item 6. [Reserved]

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis is intended to assist in understanding the financial condition, results of operations, liquidity, and capital resources of the Company. The Bank comprises almost all of the consolidated assets and liabilities of the Company and the Company is dependent primarily upon the performance of the Bank for the results of its operations. Because of this relationship, references to management actions, strategies and results of actions apply to both the Bank and the Company except where the context indicates otherwise.
Executive Summary
The following summary should be read in conjunction with the Management's Discussion and Analysis of Financial Condition and Results of Operations section in its entirety.
The Company recognized net income of $68.0 million, or $0.52 per share, for fiscal year 2025 compared to net income of $38.0 million, or $0.29 per share, for the prior fiscal year. The increase in net income was due mainly to higher net interest and non-interest income, partially offset by higher non-interest expense. Non-interest income was lower in the prior fiscal year due mainly to the net losses on the sale of securities associated with the securities strategy. See additional discussion regarding the securities strategy in the "Securities Strategy to Improve Earnings" section below. Excluding the effects of the net loss associated with the securities strategy, earnings per share ("EPS") would have been $0.37 for the prior fiscal year. The increase in EPS, excluding the effects of the net loss associated with the securities strategy, was due primarily to higher net interest income in the current fiscal year.
The net interest margin increased 19 basis points, from 1.77% for the prior fiscal year to 1.96% for the current fiscal year. The increase was due mainly to higher yields on the loan portfolio due to the continued shift of loan balances from the one- to four-family loan portfolio to the higher yielding commercial loan portfolio, which outpaced the increase in the cost of deposits.
The Bank continues to transition from a primarily retail oriented financial institution to one with an expanded focus on commercial customers by strategically growing all aspects of commercial banking through investments in technology, people, products, and services. The Bank is active in commercial lending markets even when the lending opportunity is outside of the Bank's local footprint. For additional discussion, see the "Strategic Banking Initiatives" section below.
The Company's efficiency ratio was 58.33% for the current fiscal year compared to 66.91% for the prior fiscal year. Excluding the net losses from the securities strategy, the efficiency ratio would have been 61.97% for the prior fiscal year. The improvement in the efficiency ratio, excluding the net losses from the securities strategy, was due primarily to higher net interest income compared to the prior fiscal year, partially offset by higher non-interest expense. The Company's operating expense ratio for the current fiscal year was 1.22% compared to 1.17% for the prior fiscal year. The operating expense ratio was higher in the current fiscal year due mainly to higher non-interest expense.
Total assets were $9.78 billion at September 30, 2025, an increase of $251.1 million from September 30, 2024. The increase was due primarily to growth in the loan portfolio, which was largely funded with deposit growth, mainly through the Bank's high yield savings account offering.
Total loans receivable increased $204.6 million from September 30, 2024. The increase was due mainly to the commercial loan portfolio, which increased $607.0 million, or approximately 40%, during the current fiscal year, due primarily to commercial real estate loan growth. The increase was partially offset by a decrease of $400.0 million in one- to four-family loans. It is expected that repayments from our one- to four-family loan portfolio will continue to be directed toward supporting commercial loan growth, aligning with our ongoing commitment to expand commercial banking services. Maintaining strong credit quality remains a top priority as we grow our commercial loan portfolio. The weighted average debt service coverage ratio ("DSCR") for commercial loan originations and purchases during the current fiscal year was 1.76x and the weighted average loan-to-value ("LTV") for commercial real estate and construction loans originated and purchased was 65%. The weighted average DSCR and LTV for our commercial real estate and construction loans was 1.65x and 61%, respectively, at September 30, 2025.
The Bank's asset quality remains strong, reflected in the continued low level of loan delinquency and charge-off ratios. At September 30, 2025, loans 30 to 89 days delinquent were 0.15% of total loans receivable, net, and loans 90 or more days
delinquent or in foreclosure were 0.09% of total loans receivable, net. See "Management's Discussion and Analysis of Financial Condition and Results of Operation - Asset Quality - Delinquent and nonaccrual loans and other real estate owned ("OREO")" below for additional discussion. During the current fiscal year, net charge-offs ("NCOs") were $198 thousand.
Total liabilities at September 30, 2025 were $8.73 billion, an increase of $235.7 million from September 30, 2024. The increase was due mainly to deposit growth, largely through the Bank's high yield savings account offering, which increased $364.5 million. Management has continued to focus on retaining and growing deposits through the Bank's high yield savings account product, which, as of September 30, 2025, had an annual percentage yield of 4.00% for accounts that meet the $10 thousand minimum balance requirement. The increase in deposits was partially offset by a $228.8 million decrease in borrowings due to principal repayments made on the Bank's amortizing FHLB advances, along with borrowings that matured but were not replaced. Management estimates that the Bank had $2.92 billion in liquidity available at September 30, 2025, based on the Bank's blanket collateral agreement with FHLB and unencumbered securities.
Stockholders' equity totaled $1.05 billion at September 30, 2025, an increase of $15.4 million from September 30, 2024. As of September 30, 2025, the Bank's capital ratios exceeded the well-capitalized requirements. The Bank's community bank leverage ratio ("CBLR") as of September 30, 2025 was 9.6%. During the current fiscal year, the Company paid regular quarterly cash dividends totaling $44.2 million, or $0.34 per share and repurchased 618,260 shares for $3.9 million.
At September 30, 2025, the gap between the Bank's interest-earning assets and interest-bearing liabilities projected to reprice within one year was $(983.6) million, or (10.1)% of total assets, compared to $(1.51) billion, or (15.8)% of total assets, at September 30, 2024. As of September 30, 2025, the Bank exceeded internal policy thresholds for sensitivity to changes in interest rates. See additional discussion in "Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk."
Securities Strategy to Improve Earnings
In October 2023, the Company initiated a securities strategy (the "securities strategy") by selling $1.30 billion of securities, representing 94% of its securities portfolio. Since the Company did not have the intent to hold the $1.30 billion of securities to maturity at September 30, 2023, the Company recognized an impairment loss on those securities of $192.6 million which was reflected in the Company's financial statements for the quarter and fiscal year ended September 30, 2023. The securities strategy allowed the Company to improve its earnings stream going forward, beginning in the quarter ended December 31, 2023, by redeploying most of the proceeds into then-current market rate securities. The Company utilized the remaining proceeds to deleverage the balance sheet. During the quarter ended December 31, 2023, the Company completed the sale of securities and recognized $13.3 million ($10.0 million net of tax), or $0.08 per share, of additional loss. See additional information regarding the impact of the securities strategy on our financial measurements in "Management's Discussion and Analysis of Financial Condition and Results of Operation - Average Balance Sheets" below. The $1.30 billion of securities sold had a weighted average yield of 1.22% and an average duration of 3.6 years. With the proceeds from the sale of the securities, the Company purchased $632.0 million of securities yielding 5.75%, paid down $500.0 million of borrowings with a weighted average cost of 4.70%, and held the remaining cash at the FRB of Kansas City earning interest at the reserve balance rate until such time as it could be used to fund commercial lending activities or for other Bank operations.
Strategic Banking Initiatives
The Company is committed to its progression to a full-service commercial bank and is investing in technology, people, products and services to make that happen. Our investments in technology to date have allowed us to launch new services and products, while the addition of seasoned and well-connected commercial bankers, and trust and wealth advisors gives us access to an exciting new customer group. Expanding our product suite of treasury management services enables us to service this new customer group, and expanded marketing and business development has increased the depth of customer relationships. Having completed the second year since embarking on our digital transformation, we have seen our efforts bear fruit and expect progress to accelerate going forward.
Strategic Actions. The long-term success of this transformation is predicated on management's continued focus on deepening relationships with consumer and commercial customers. Management and the Board have committed resources through the growth of talented, skilled and experienced bankers, investments in technology, expanded marketing and outreach, as well as the development and increased internal monitoring of performance metrics that ensure we are on the path to achieve our performance objectives. Through our experienced relationship managers, we deliver customized solutions
using advanced digital platforms, and sophisticated cash management tools. Additionally, we are leveraging our centralized organizational structure to respond quickly to customers. We are actively pursuing opportunities to expand our non-interest-bearing deposit base and diversify fee-based revenue streams through strategic growth in treasury management services, trust and wealth management services, insurance, and small business banking.
Commercial Lending. During the current fiscal year, we closed on $901.9 million in commercial loans compared to $350.6 million in the prior fiscal year and commercial loans continue to grow as a percentage of our overall loan portfolio. As of September 30, 2025, commercial loans comprised 26% of our loan portfolio compared to 19% at the prior fiscal year end. To maintain strong credit quality, in addition to disciplined underwriting and ongoing credit administration, we monitor concentration levels by collateral type, geographic location and borrowing relationship. During the current fiscal year, the Bank implemented commercial loan pricing and profitability software that provides insights based on the full customer banking relationship. We also implemented software that provides market insight regarding competitor pricing to assist loan officers when preparing a loan offering. This has increased our ability to profitably compete with other financial institutions in our markets as well as those outside our markets.
Treasury Management. The Bank services commercial customers through a competitive suite of treasury management products and an experienced team of treasury management officers. This team is focused on the deposit and cash management needs of commercial customers and growing this line of business through the acquisition of new customers located both in our immediate market areas, and those who we lend to outside of our local market areas. Additionally, this fiscal year, the Bank deployed a team of business development officers tasked with growing the deposit base within the small business customer segment, focused on serving small businesses in our market areas with a dedicated line of products specifically designed for these customers. The Bank expects to introduce digital onboarding for small business customers using industry-leading risk management and screening tools, which will replace many manual verification tasks. Additionally, as we add more sophisticated commercial clients, we are evaluating new technology in order to capture a larger share of their business with additional products and services. Within calendar year 2026, we expect to implement new technology for lockbox services, integrated accounts receivables, purchase cards and corporate cards. While the majority of our commercial deposit growth in fiscal year 2025 resulted from commercial loan covenants and provisions, our treasury management officers and business development officers often land depository relationships independent of a lending relationship. This will be a focus area for our sales teams as the Bank continues to diversify funding sources and seeks to increase fee revenue tied to depository accounts.
Digital Banking. We are advancing towards a seamless digital banking experience for all customers, enhancing the Bank's ability to attract and retain deposits. This strategy includes a new deposit account onboarding platform that was implemented in November 2024 and digital banking enhancements for debit cardholders which will allow customers to begin using their card immediately online and in digital wallets without waiting for the delivery of a physical card. These enhancements are projected to be implemented in the second quarter of fiscal year 2026. Since changing core and digital providers in August 2023, the Bank has taken advantage of our open-source platforms through the evaluation of add-on technologies that will integrate into our digital banking experience for consumers, small businesses, and commercial customers.
Private Banking, Trust and Wealth Management. We are preparing to implement a comprehensive suite of private banking products and services which is a new line of business for the Bank. During the fourth quarter of fiscal year 2025, the Bank added several seasoned and well-connected wealth management professionals to focus on these products and services. Their expertise in private banking and related areas will support our new private banking efforts and is expected to transform our trust and wealth management business. Private banking relationships are defined as customers with $5 million or more in personal relationships with the Bank by way of loans, deposits, or assets under management. Private banking customers began onboarding during the first quarter of fiscal year 2026. We believe that our private banking line of business will be a gateway to driving off-balance sheet revenue and bridge the gap between high-net-worth depository customers, small business owners or key commercial customers, and corporate trustee opportunities for the Bank.
Stockholder Value. Delivering long-term sustainable stockholder value will continue to be our North Star while also maintaining a strong capital position. As part of our historically robust and disciplined approach to capital management, our approach continues to generate returns to stockholders through dividend payments and share repurchases. Total dividends declared and paid during fiscal year 2025 were $44.3 million. The Company repurchased 618,260 shares for $3.9 million during fiscal year 2025, all of which occurred in the last quarter of the fiscal year. Since completing our second-step conversion in December 2010, we have returned $2.01 billion to stockholders through $1.57 billion in cash dividends and
$439.9 million of share repurchases. For fiscal year 2026, it is the intention of the Board of Directors to continue the regular quarterly cash dividend of $0.085 per share and to seek further opportunities for value-enhancing share repurchases.
Critical Accounting Estimates
Our most critical accounting estimate is the methodology used to determine the ACL and reserve for off-balance sheet credit exposures. This estimate is important to the presentation of our financial condition and results of operations, involves a high degree of complexity, and requires management to make difficult and subjective judgments that may require assumptions about highly uncertain matters. The use of different judgments, assumptions, and estimates could affect reported results materially. This critical accounting estimate and its application is reviewed at least annually by our audit committee. The following is a description of our critical accounting estimate and an explanation of the methods and assumptions underlying its application.
Allowance for Credit Losses and Reserve for Off-Balance Sheet Credit Exposures. The ACL is a valuation amount that is deducted from the amortized cost basis of loans and represents management's estimate of total expected credit losses for the Company's loans over their remaining contractual lives, as of the balance sheet date. The reserve for off-balance sheet credit exposures represents expected credit losses on unfunded portions of existing loans and commitments to originate or purchase loans that are not unconditionally cancellable by the Company, as of the balance sheet date.
Management estimates the ACL utilizing a discounted cash flow model by projecting future loss rates which are dependent upon forecasted economic indices and applying qualitative factors when deemed appropriate by management. The key assumptions used in projecting future loss rates include the economic forecast, the forecast and reversion to mean time periods, and prepayment and curtailment assumptions. The assumptions are used to calculate and aggregate estimated cash flows for the time period that remains in each loan's contractual life. The cash flows are discounted back to the balance sheet date using each loan's effective yield, to arrive at a present value of expected cash flows, which is compared to the amortized cost basis of the loan pool to determine the amount of ACL required by the calculation. Management then considers qualitative factors when assessing the overall level of ACL. See "Allowance for Credit Losses on Loans Receivable" and "Reserve for Off-Balance Sheet Credit Exposures" within "Part II, Item 8. Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 1. Summary of Significant Accounting Policies" for additional information.
One of the most significant judgments used in projecting loss rates when estimating the ACL is the macroeconomic forecast provided by a third party. The economic indices sourced from the macroeconomic forecast and used in projecting loss rates are the national unemployment rate, changes in commercial real estate prices, changes in home values, changes in the United States consumer price index, and changes in the United States gross domestic product. The economic index used in the calculation to which the calculation is most sensitive is the national unemployment rate. Each reporting period, several macroeconomic forecast scenarios are considered by management. Management selects the macroeconomic forecast(s) that is/are most reflective of expectations at that point in time. Changes in the macroeconomic forecast could significantly impact the calculated estimated credit losses between reporting periods.
Other key assumptions used in the discounted cash flow model include the forecast and reversion to mean time periods and prepayment and curtailment assumptions. The calculation is less sensitive to these assumptions than the macroeconomic forecasts. The macroeconomic forecast is applied for a reasonable and supportable time period before reverting to long-term historical averages for each economic index. The forecast and reversion to mean time period used for each economic index at September 30, 2025 was four quarters. Prepayment and curtailment assumptions are generally based on the Company's historical experience and are adjusted by management as deemed necessary. The prepayment and curtailment assumptions vary for each respective loan pool in the model.
The reserve for off-balance sheet credit exposures is calculated by applying the ACL to loan ratio for each respective loan pool, as calculated by the discounted cash flow model discussed above, to an adjusted off-balance sheet credit exposures balance. The off-balance sheet credit exposures balance is adjusted to account for the likelihood that funding of the related balance will occur. Management generally determines the likelihood of funding based on historical experience, but it may be adjusted by management as deemed necessary based upon their knowledge of the composition of the underlying off-balance sheet credit exposure balances.
The ACL and reserve for off-balance sheet credit exposures may be materially affected by qualitative factors, for items not reflected in the economic forecast and/or discounted cash flow model, but which are deemed appropriate by management's current assessment of the risks related to the loan portfolio and/or external factors. Such qualitative factors may include changes in the Company's loan portfolio composition and credit concentrations, changes in the balances and/or trends in asset quality and/or loan credit performance, changes in lending underwriting standards, the effect of other external factors such as significant unique events or conditions, and actual and/or expected changes in economic conditions, real estate values, and/or other economic developments. Management applied qualitative factors at September 30, 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. The qualitative factors applied at September 30, 2025, and the importance and levels of the qualitative factors applied, may change in future periods depending on the level of changes to items such as the uncertainty of economic conditions and management's assessment of the level of credit risk within the loan portfolio as a result of such changes, compared to the amount of ACL calculated by the model. The evaluation of qualitative factors is inherently imprecise and requires significant management judgment. See "Part II, Item 8. Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 4. Loans Receivable and Allowance for Credit Losses - Allowance for Credit Losses" for additional information regarding the qualitative factors applied at September 30, 2025.
The ACL and the reserve for off-balance sheet credit exposures were $24.0 million and $5.5 million, respectively, at September 30, 2025, compared to $23.0 million and $6.0 million, respectively, at September 30, 2024. During the current fiscal year, the Company updated the regression analyses used in the discounted cash flow model which resulted in some changes to the amounts and levels of ACL calculated by the model for commercial loans. The regression analyses were updated in order to assist management in estimating expected credit losses in the commercial loan portfolio due to growth in this portfolio, including growth in market areas outside of the Bank's local market footprint. See "Management's Discussion and Analysis of Financial Condition and Results of Operation - Allowance For Credit Losses" for additional information regarding the regression analysis update that occurred during fiscal year 2025.
While management utilizes its best judgment and information available, the adequacy of the ACL and reserve for off-balance sheet credit exposures is determined by certain factors outside of the Company's control, such as the performance of our loan portfolio, changes in the economic environment including economic uncertainty, changes in interest rates, and the view of the regulatory authorities toward classification of assets and the level of ACL and reserve for off-balance sheet credit exposures. Additionally, the level of ACL and reserve for off-balance sheet credit exposures may fluctuate based on the balance and mix of the loan portfolio and off-balance sheet credit exposures. If actual results differ significantly from our assumptions, our ACL and reserve for off-balance sheet credit exposures may not be sufficient to cover inherent losses in our loan portfolio, resulting in additions to our ACL and an increase in the provision for credit losses.
Recent Accounting Pronouncements
For a discussion of Recent Accounting Pronouncements, see "Part II, Item 8. Financial Statements and Supplementary Data - Notes to Financial Statements - Note 1. Summary of Significant Accounting Policies."
Financial Condition
The following table summarizes the Company's financial condition at the dates indicated.
September 30, Change expressed in:
2025 2024 Dollars Percent
(Dollars and shares in thousands)
Total assets $ 9,778,701 $ 9,527,608 $ 251,093 2.6 %
AFS securities 867,216 856,266 10,950 1.3
Loans receivable, net 8,111,961 7,907,338 204,623 2.6
Deposits 6,591,448 6,129,982 461,466 7.5
Borrowings 1,950,770 2,179,564 (228,794) (10.5)
Stockholders' equity 1,047,677 1,032,270 15,407 1.5
Equity to total assets at end of period 10.7 % 10.8 %
Average number of basic and diluted
shares outstanding 129,988 130,671 (683) (0.5)
Loans Receivable. The Bank originates or participates with other lenders in commercial loans, either secured by real estate or for commercial and industrial purposes, and first mortgages on owner-occupied, one- to four-family residences. The Bank also originates consumer loans primarily secured by one- to four-family residential properties. The Bank historically purchased loans secured by one- to four-family residences from correspondent lenders but suspended that line of business during fiscal year 2024. During fiscal year 2025, the loan portfolio mix continued to shift from one- to four-family loans to commercial loans. Total loans, net at September 30, 2025 were $8.11 billion, an increase of $204.6 million from September 30, 2024. The increase in the loan portfolio was due mainly to a $607.0 million increase in commercial loans, partially offset by a $400.0 million decrease in one-to four-family loans.
As a result of continued high interest rates and a lack of housing inventory, which has reduced the volume of housing market transactions, our one- to four-family origination and refinance activity has slowed, directly impacting the Bank's one- to four-family loan portfolio. Management expects the Bank's one- to four-family originated loan portfolio will continue to decrease as the affordability of housing remains challenging, there is a limited supply of homes for sale and we compete with nationwide online mortgage originators. It is expected that cash flows generated from the repayments of our one- to four-family portfolio will continue to be used to fund commercial loan growth.
The Bank originates one- to four-family loans primarily in our market areas of Kansas and Missouri. The balance of originated one- to four-family loans was $3.77 billion as of September 30, 2025 and represented 64% of the Bank's one- to four-family loan portfolio.
The Bank previously purchased one- to four-family loans, on a loan-by-loan basis, from a select group of correspondent lenders ("correspondent purchased"). Loan purchases enabled the Bank to attain geographic diversification in its one- to four-family loan portfolio. We generally paid a premium of 0.50% to 1.00% of the loan balance to purchase these loans, and 1.00% of the loan balance to purchase the servicing of these loans. The premium paid is amortized against the interest earned over the life of the loan, which reduces the loan yield. If a loan pays off before the scheduled maturity date, the remaining premium is recognized as a reduction of interest income. At September 30, 2025 the balance of one- to four-family correspondent purchased loans was $2.00 billion, or 34% of the Bank's one- to four-family loan portfolio, and is included in the one- to four-family purchased amount in the tables below. As noted above, the Bank suspended its one- to four-family correspondent lending channels during fiscal year 2024.
The Bank also previously purchased one- to four-family loans from correspondent and nationwide lenders in bulk loan packages. The majority of the Bank's bulk purchased loans as of September 30, 2025 are guaranteed by one seller. The Bank has not experienced any losses with this group of loans since the loan package was purchased in August 2012. At September 30, 2025 the balance of one- to four-family bulk purchased loans was $114.2 million and is included in the one- to four-family purchased amount in the tables below.
The Bank originates owner-occupied construction-to-permanent loans secured by one- to four-family residential real estate. The majority of these loans are secured by properties located in Kansas and Missouri. The Bank's owner-occupied construction-to-permanent loan program combines the construction loan and the permanent loan into one loan, allowing the borrower to secure the same interest rate structure throughout the construction period and the permanent loan term.
The Bank's commercial loan portfolio is composed of commercial real estate loans, commercial construction loans and commercial and industrial loans. Our commercial real estate loans include a variety of property types, including hotels, senior housing facilities, multi-family dwellings, retail buildings, and office buildings located in Kansas, Missouri, Texas, and 19 other states as of September 30, 2025. The Bank's commercial and industrial loan portfolio consists largely of loans secured by accounts receivable, inventory and equipment. These loans are generally made to borrowers located in Kansas and Missouri. The Bank regularly monitors the level of risk in the entire commercial loan portfolio, including concentrations in such factors as geographic location, collateral type, tenant profile, borrowing relationship, and lending relationship in the case of participation loans, among other factors.
Commercial borrowers are generally required to provide financial information annually, including borrower financial statements, subject property rental rates and income, maintenance costs, updated real estate property tax and insurance payments, and personal financial information for the guarantor(s). This allows the Bank to monitor compliance with loan covenants and review the borrower's performance, including cash flows from operations, debt service coverage, and comparison of performance to projections and year-over-year performance trending. Additionally, the Bank monitors and performs site visits, or in the case of participation loans, obtains updates from the lead bank as needed to determine the condition of the collateral securing the loan. Depending on the financial strength of the project and/or the complexity of the borrower's financials, the Bank may also perform a global analysis of cash flows to account for all other properties owned by the borrower or guarantor. If signs of weakness are identified, the Bank may begin performing more frequent financial and/or collateral reviews or initiate contact with the borrower, or the lead bank will contact the borrower if the loan is a participation loan, to ensure cash flows from operations are maintained at a satisfactory level to meet the debt requirements.
The Bank mitigates the risk of commercial real estate construction lending during the construction period by monitoring inspection reports from an independent third-party, project budget, percentage of completion, on-site inspections and percentage of advanced funds. Commercial and industrial loans are monitored through a review of borrower performance as indicated by borrower financial statements, borrowing base reports, accounts receivable aging reports, and inventory aging reports. These reports are required to be provided by the borrowers monthly, quarterly, or annually depending on the nature of the borrowing relationship.
The Bank offers a variety of secured consumer loans, including home equity loans and lines of credit, home improvement loans, vehicle loans, and loans secured by savings deposits. The Bank also originates a very limited amount of unsecured loans. Generally, consumer loans are originated in the Bank's market areas. The majority of our consumer loan portfolio is comprised of home equity lines of credit, which have adjustable interest rates. As of September 30, 2025, the Bank had the first mortgage, or was in the first lien position on the majority of the unpaid principal balance of the Bank's home equity lines of credit.
The following table presents information related to the composition of our loan portfolio in terms of dollar amounts, weighted average rates, and percentage of total as of the dates indicated.
September 30, 2025 September 30, 2024
Amount Rate Amount Rate
(Dollars in thousands)
One- to four-family:
Originated $ 3,774,134 3.78 % $ 3,941,952 3.60 %
Purchased 2,114,447 3.49 2,339,748 3.44
Construction 16,054 6.17 22,970 6.05
Total 5,904,635 3.68 6,304,670 3.55
Commercial:
Commercial real estate 1,709,990 5.82 1,191,624 5.43
Commercial and industrial 210,119 6.92 129,678 6.66
Commercial construction 195,886 6.42 187,676 6.40
Total 2,115,995 5.98 1,508,978 5.65
Consumer loans:
Home equity 104,809 8.15 99,988 8.90
Other 8,436 5.55 9,615 5.72
Total 113,245 7.96 109,603 8.62
Total loans receivable 8,133,875 4.34 7,923,251 4.02
Less:
ACL 24,039 23,035
Deferred loan fees/discounts 31,268 30,336
Premiums/deferred costs (33,393) (37,458)
Total loans receivable, net $ 8,111,961 $ 7,907,338
The following table presents the contractual maturity of our loan portfolio, along with associated weighted average yields, at September 30, 2025. Loans that have adjustable interest rates are shown as maturing in the period during which the contract is due. The table does not reflect the effects of possible prepayments or enforcement of due on sale clauses.
One year or less(1)
Over one year to five years Over five years to 15 years Over 15 years Total
Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
(Dollars in thousands)
One- to four-family:
Originated $ 1,788 3.57 % $ 58,749 3.21 % $ 1,040,213 3.11 % $ 2,673,384 4.09 % $ 3,774,134 3.81 %
Purchased 88 3.07 24,086 2.62 354,073 2.60 1,736,200 3.57 2,114,447 3.39
Construction(2)
- - - - - - 16,054 6.20 16,054 6.20
Total 1,876 3.55 82,835 3.04 1,394,286 2.98 4,425,638 3.89 5,904,635 3.66
Commercial:
Commercial real estate 116,147 5.47 813,170 5.86 545,986 5.57 234,687 5.04 1,709,990 5.63
Commercial and industrial 59,556 7.20 84,635 7.45 60,929 6.20 4,999 4.58 210,119 6.95
Commercial construction(2)
21,630 7.24 112,138 5.87 53,668 7.28 8,450 7.72 195,886 6.49
Total 197,333 6.19 1,009,943 6.00 660,583 5.77 248,136 5.12 2,115,995 5.84
Consumer:
Home equity(3)
2,036 9.88 2,098 7.12 50,309 8.10 50,366 8.09 104,809 8.11
Other 713 2.29 7,279 5.65 402 7.53 42 18.00 8,436 5.52
Total 2,749 7.91 9,377 5.98 50,711 8.09 50,408 8.10 113,245 7.92
Total loans receivable $ 201,958 6.19 $ 1,102,155 5.78 $ 2,105,580 3.98 $ 4,724,182 4.00 8,133,875 4.29
Less:
ACL 24,039
Deferred loan fees/discounts 31,268
Premiums/deferred costs (33,393)
Total loans receivable, net $ 8,111,961
(1)Includes demand loans, loans having no stated maturity, and overdraft loans.
(2)Construction loans are presented based upon the contractual maturity date, which includes the permanent financing period for construction-to-permanent loans.
(3)For home equity loans, including those that do not have a stated maturity date, the maturity date calculated assumes the borrower always makes the required minimum payment. The majority of home equity loans assume a maximum term of 240 months.
The following table presents, as of September 30, 2025, the amount of loans due after September 30, 2026, and whether these loans have fixed or adjustable interest rates.
Fixed Adjustable Total
(Dollars in thousands)
One- to four-family:
Originated $ 3,329,965 $ 442,381 $ 3,772,346
Purchased 1,668,898 445,461 2,114,359
Construction 7,908 8,146 16,054
Total 5,006,771 895,988 5,902,759
Commercial:
Commercial real estate 443,344 1,150,499 1,593,843
Commercial and industrial 54,580 95,983 150,563
Commercial construction 63,566 110,690 174,256
Total 561,490 1,357,172 1,918,662
Consumer:
Home equity 21,676 81,097 102,773
Other 4,154 3,569 7,723
Total 25,830 84,666 110,496
Total loans receivable $ 5,594,091 $ 2,337,826 $ 7,931,917
Loan Activity - The following table summarizes activity in the loan portfolio, along with weighted average rates where applicable, for the periods indicated, excluding changes in ACL, deferred loan fees/discounts, and premiums/deferred costs. Loans that were paid off as a result of refinances are included in repayments. Loan endorsements are not included in the activity in the following table because a new loan is not generated at the time of the endorsement. The endorsed balance and rate are included in the ending loan portfolio balance and rate. Commercial loan renewals are not included in the activity presented in the following table unless new funds are disbursed at the time of renewal. The renewal balance and rate are included in the ending loan portfolio balance and rate.
For the Year Ended
September 30, 2025 September 30, 2024
Amount Rate Amount Rate
(Dollars in thousands)
Beginning balance $ 7,923,251 4.02 % $ 7,984,381 3.76 %
Originated and refinanced 1,149,469 6.80 660,937 7.21
Purchased and participations 104,431 7.10 47,712 7.80
Change in undisbursed loan funds (14,556) 168,483
Repayments (1,026,401) (917,871)
Principal (charge-offs)/recoveries, net (198) (111)
Other (2,121) (20,280)
Ending balance $ 8,133,875 4.34 $ 7,923,251 4.02
The following table presents loan origination, refinance, and participation activity for the periods indicated, excluding endorsement activity, along with associated weighted average rates and percent of total. Commercial loan renewals are not included in the activity in the following table except to the extent new funds are disbursed at the time of renewal. Loan originations, participations, and refinances are reported together.
For the Year Ended
September 30, 2025 September 30, 2024
Amount Rate % of Total Amount Rate % of Total
(Dollars in thousands)
Commercial:
Commercial real estate
Fixed-rate $ 155,315 6.53 % 12.4 % $ 7,920 7.63 % 1.1 %
Adjustable-rate 373,526 6.85 29.8 114,502 7.56 16.2
528,841 6.76 42.2 122,422 7.57 17.3
Commercial and industrial
Fixed-rate 102,489 7.20 8.2 22,251 6.96 3.1
Adjustable-rate 75,375 7.34 6.0 49,593 7.65 7.0
177,864 7.26 14.2 71,844 7.44 10.1
Commercial construction
Fixed-rate 26,235 6.69 2.1 3,632 7.07 0.5
Adjustable-rate 168,957 7.27 13.5 152,739 7.96 21.6
195,192 7.19 15.6 156,371 7.94 22.1
Total commercial
Fixed-rate 284,039 6.79 22.7 33,803 7.13 4.8
Adjustable-rate 617,858 7.02 49.3 316,834 7.77 44.7
901,897 6.95 72.0 350,637 7.71 49.5
One- to four-family and consumer:
One- to four-family
Fixed-rate 181,667 6.18 14.5 232,335 6.41 32.8
Adjustable-rate 109,599 6.17 8.7 70,785 6.40 10.0
291,266 6.17 23.2 303,120 6.40 42.8
Consumer
Fixed-rate 8,034 8.08 0.6 11,377 8.54 1.6
Adjustable-rate 52,703 8.18 4.2 43,515 9.09 6.1
60,737 8.17 4.8 54,892 8.98 7.7
Total one- to four-family and consumer
Fixed-rate 189,701 6.26 15.1 243,712 6.50 34.4
Adjustable-rate 162,302 6.82 12.9 114,300 7.43 16.1
352,003 6.52 28.0 358,012 6.80 50.5
Total commercial, one- to four-family, and consumer
Fixed-rate 473,740 6.57 37.8 277,515 6.58 39.2
Adjustable-rate 780,160 6.98 62.2 431,134 7.68 60.8
$ 1,253,900 6.83 100.0 % 708,649 7.25 100.0 %
Commercial participations included above:
Fixed-rate $ 34,500 6.93 % $ 4,400 7.08 %
Adjustable-rate 69,931 7.19 39,815 8.04
$ 104,431 7.10 $ 44,215 7.95
One- to Four-Family Loans - The following table presents, for our portfolio of one- to four-family loans, the amount, percent of total, weighted average rate, weighted average credit score, weighted average LTV, and average balance per loan as of September 30, 2025. Credit scores were updated in September 2025 from a nationally recognized consumer rating agency. The LTVs were based on the current loan balance and either the lesser of the purchase price or original appraisal, or the most recent Bank appraisal, if available. In most cases, the most recent appraisal was obtained at the time of origination.
% of Credit Average
Amount Total Rate Score LTV Balance
(Dollars in thousands)
Originated $ 3,774,134 63.9 % 3.78 % 770 58 % $ 170
Purchased 2,114,447 35.8 3.49 768 60 382
Construction 16,054 0.3 6.17 775 45 334
$ 5,904,635 100.0 % 3.68 769 59 213
The following table presents origination and refinance activity for our one- to four-family loan portfolio, excluding endorsement activity, along with the weighted average rate, weighted average LTV and weighted average credit score for the current fiscal year. As of September 30, 2025, the Bank had one- to four-family loan and refinance commitments totaling $42.0 million at a weighted average rate of 6.29%.
Credit
Amount Rate LTV Score
(Dollars in thousands)
$ 291,266 6.17 % 74 % 768
Commercial Loans - The table below presents commercial loan origination and participation activity for the year ended September 30, 2025, along with weighted average LTV and weighted average DSCR. For commercial real estate and commercial construction loans, the LTV is calculated using the gross loan amount (composed of unpaid principal and undisbursed amounts) and the collateral value at the time of origination. For existing real estate, the "as is" value is used. If the property is to be constructed, the "as completed" value of the collateral is utilized. The DSCR is calculated based on historical borrower performance, or projected borrower performance for newly formed entities with no performance history.
Originated Participation Total Weighted Weighted
Amount Rate Amount Rate Amount Rate LTV DSCR
(Dollars in thousands)
Commercial real estate $ 493,115 6.74 % $ 35,726 7.02 % $ 528,841 6.76 % 62 % 1.66x
Commercial and industrial 176,964 7.26 900 7.25 177,864 7.26 N/A 2.32
Commercial construction 127,387 7.22 67,805 7.14 195,192 7.19 75 1.50
$ 797,466 6.93 $ 104,431 7.10 $ 901,897 6.95 65 1.76
The following table presents commercial loan disbursements, excluding lines of credit, during the year ended September 30, 2025.
Amount Rate
(Dollars in thousands)
Commercial real estate $ 533,719 6.64 %
Commercial and industrial 107,841 7.31
Commercial construction 211,824 6.68
$ 853,384 6.73
The following table presents the Bank's commercial real estate and commercial construction loans by type of primary collateral as of the dates indicated. Management anticipates fully funding the majority of the undisbursed amounts, as most are not cancellable by the Bank.
September 30, 2025 September 30, 2024
Unpaid Undisbursed Gross Loan Gross Loan
Count Principal Amount Amount Amount
(Dollars in thousands)
Hotel 28 $ 545,782 $ 57,342 $ 603,124 $ 323,396
Senior housing 52 464,611 19,348 483,959 332,334
Multi-family 34 262,414 102,902 365,316 359,707
Retail building 134 285,159 49,506 334,665 316,261
Office building 75 131,316 4,742 136,058 127,961
One- to four-family property 316 66,112 4,308 70,420 63,416
Warehouse/manufacturing 45 55,181 3,672 58,853 34,656
Land 25 34,829 776 35,605 32,943
Single use building 26 33,456 262 33,718 43,438
Other 34 27,016 1,176 28,192 29,070
769 $ 1,905,876 $ 244,034 $ 2,149,910 $ 1,663,182
Weighted average rate 5.88 % 6.90 % 5.99 % 5.77 %
The following table presents the unpaid principal balance of non-owner occupied and owner occupied loans within the Bank's commercial real estate loan portfolio as of the dates indicated.
September 30, 2025 September 30, 2024
(Dollars in thousands)
Non-owner occupied $ 1,271,905 $ 886,101
Owner occupied $ 167,925 $ 165,334
The following table presents management's funding expectations for the Bank's commercial real estate and commercial construction undisbursed amounts and commitments outstanding as of September 30, 2025. Due to the nature of a revolving line of credit, management is unable to project funding expectations for those balances, so those amounts are presented separately.
Projected Disbursements for the Quarters Ending
December 31,
2025 March 31,
2026 June 30,
2026 Thereafter Revolving Lines of Credit Total
(Dollars in thousands)
Undisbursed amounts $ 75,856 $ 61,735 $ 50,395 $ 48,684 $ 7,364 $ 244,034
Commitments 39,606 9,250 27,000 85,038 - 160,894
$ 115,462 $ 70,985 $ 77,395 $ 133,722 $ 7,364 $ 404,928
Weighted average rate 6.71 % 6.97 % 6.94 % 6.89 % 7.32 % 6.87 %
The following table summarizes the Bank's commercial real estate and commercial construction loans by the state in which the collateral is located, as of the dates indicated.
September 30, 2025 September 30, 2024
Unpaid Undisbursed Gross Loan Gross Loan
Count Principal Amount Amount Amount
(Dollars in thousands)
Kansas 562 $ 738,887 $ 60,940 $ 799,827 $ 713,437
Missouri 125 305,078 49,694 354,772 313,146
Texas 21 289,481 23,324 312,805 348,066
Arizona 6 105,934 16,495 122,429 15,452
New York 2 109,828 - 109,828 60,000
California 5 90,256 6,592 96,848 15,040
Colorado 13 58,341 25,858 84,199 50,017
Tennessee 4 41,495 15,286 56,781 35,973
Nebraska 7 17,068 27,139 44,207 32,422
Other 24 149,508 18,706 168,214 79,629
769 $ 1,905,876 $ 244,034 $ 2,149,910 $ 1,663,182
The following table presents the Bank's commercial real estate and commercial construction loans by unpaid principal balance, aggregated by type of primary collateral and state, along with weighted average LTV and weighted average DSCR as of September 30, 2025. The LTV is calculated using the gross loan amount (composed of unpaid principal and undisbursed amounts) as of September 30, 2025 and the most current collateral value available, which is most often the value at origination/purchase. The DSCR is calculated at the time of origination and is updated at the time of subsequent loan renewals, financial reviews (for applicable loans and lending relationships), and any other time management is aware of changes that may impact the DSCR. The DSCR presented in the table below is based on the DSCR at the time of origination unless an updated DSCR has been calculated or the loan has reached the end of its stabilization period. In general, commercial borrowers with total loans of $2.5 million or more are reviewed at least annually to monitor financial performance.
Kansas Missouri Texas New York Arizona California Other Total
(Dollars in thousands)
Hotel $ 41,385 $ 18,059 $ 141,960 $ 109,828 $ 102,093 $ 85,935 $ 46,522 $ 545,782
Senior housing 249,912 142,168 - - - - 72,531 464,611
Retail building 91,574 44,050 66,714 - - - 82,821 285,159
Multi-family 185,815 48,318 20,000 - - - 8,281 262,414
Office building 57,441 7,945 59,907 - 142 - 5,881 131,316
One- to four-family property 44,922 4,592 - - 3,325 1,620 11,653 66,112
Warehouse/manufacturing 35,269 16,729 - - - - 3,183 55,181
Land 7,039 153 900 - - - 26,737 34,829
Single use building 12,126 18,255 - - 374 2,701 - 33,456
Other 13,404 4,809 - - - - 8,803 27,016
$ 738,887 $ 305,078 $ 289,481 $ 109,828 $ 105,934 $ 90,256 $ 266,412 $ 1,905,876
Weighted LTV 66% 68% 52% 47% 51% 50% 66% 61%
Weighted DSCR 1.84x 1.54x 1.41x 1.55x 1.44x 1.49x 1.69x 1.65x
The following table presents the unpaid principal balance of the Bank's commercial real estate and commercial construction loans aggregated by type of primary collateral, along with weighted average rate, LTV, and DSCR as of September 30, 2025.
Unpaid Weighted Weighted Weighted
Count Principal Rate LTV DSCR
(Dollars in thousands)
Hotel 28 $ 545,782 6.46 % 52 % 1.32x
Senior housing 52 464,611 5.11 73 1.52
Retail building 134 285,159 5.32 60 2.02
Multi-family 34 262,414 6.09 64 1.27
Office building 75 131,316 6.44 53 1.94
One- to four-family property 316 66,112 6.08 57 2.42
Warehouse/manufacturing 45 55,181 6.28 65 2.40
Land 25 34,829 6.53 68 3.95
Single use building 26 33,456 6.17 62 1.94
Other 34 27,016 5.84 54 2.05
769 $ 1,905,876 5.88 61 1.65
The following table presents the Bank's commercial real estate and construction loans, including unpaid principal and undisbursed amounts, along with outstanding loan commitments as of September 30, 2025, categorized by aggregate gross loan and commitment amount, along with average loan amount, and weighted average rate, LTV, and DSCR. For loans over $50.0 million, there was $266.5 million of such loans related to hotels in Arizona, California, New York, and Texas, $143.1 million related to multi-family properties in Kansas, and $59.5 million related to an office building in Texas. The largest loan included in the table below was $86.0 million, which was fully disbursed as of September 30, 2025, and is collateralized by a hotel in Arizona.
Gross Loan
and Commitment Average Weighted Weighted Weighted
Count Amounts Amount Rate LTV DSCR
(Dollars in thousands)
Greater than $50 million 7 $ 469,057 $ 67,008 6.31 % 54.4 % 1.37x
>$30 to $50 million 11 415,669 37,788 6.10 63.3 1.34
>$20 to $30 million 16 384,413 24,026 6.22 65.9 1.30
>$15 to $20 million 11 188,214 17,110 6.39 66.4 1.26
>$10 to $15 million 15 183,798 12,253 6.24 70.1 1.77
>$5 to $10 million 36 255,724 7,103 5.52 69.7 1.76
$1 to $5 million 126 295,633 2,346 5.38 58.9 2.02
Less than $1 million 556 118,296 213 6.29 52.6 3.20
778 $ 2,310,804 2,970 6.05 62.3 1.60
The following table summarizes the Bank's commercial and industrial loans by loan purpose as of the dates indicated. Of the $301.9 million of commercial and industrial loans at September 30, 2025, 63%, or $190.2 million, had a gross loan balance of $5 million or more. The largest commercial and industrial lending relationship at September 30, 2025 had a gross loan balance of $81.7 million, which represented 27% of the gross commercial and industrial loan balance at September 30, 2025. This lending relationship is part of the $103.2 million loans- to one-borrower group discussed in "Part I. Item 1. Business - Regulation and Supervision." In addition, the Bank had four commercial and industrial loan commitments totaling $15.7 million, with a weighted average rate of 7.03%, at September 30, 2025. No commitments are presented in the table below. The recent growth in this portfolio aligns with the Bank's strategy to grow all aspects of commercial banking. Management anticipates growth will continue in the commercial and industrial loan portfolio, but it will likely fluctuate over time due to the nature of these loans.
September 30, 2025 September 30, 2024
Unpaid Undisbursed Gross Loan Gross Loan
Count Principal Amount Amount Amount
(Dollars in thousands)
Working capital 193 $ 79,264 $ 74,703 $ 153,967 $ 74,097
Purchase equipment 64 47,043 7,158 54,201 15,457
Purchase/refinance business assets 47 45,579 4,226 49,805 37,950
Finance/lease vehicle 190 33,631 2,775 36,406 28,318
Other 20 4,602 2,906 7,508 7,735
514 $ 210,119 $ 91,768 $ 301,887 $ 163,557
Weighted average rate 6.92 % 7.10 % 6.97 % 6.89 %
The following table summarizes the Bank's commercial and industrial loans by the state in which the borrower is located, as of September 30, 2025.
Unpaid Undisbursed Gross Loan
Principal Amount Amount
(Dollars in thousands)
Kansas $ 122,547 $ 82,061 $ 204,608
Missouri 37,788 170 37,958
Arizona 12,099 - 12,099
Ohio 5,865 4,135 10,000
California 7,882 2,000 9,882
Other 23,938 3,402 27,340
$ 210,119 $ 91,768 $ 301,887
.
The following table presents the Bank's commercial and industrial loan portfolio, including unpaid principal and undisbursed amounts, along with outstanding loan commitments as of September 30, 2025, categorized by aggregate gross loan and commitment amounts and average loan amount. For loans over $15.0 million, there was $54.7 million related to working capital loans in Kansas and $29.9 million related to a loan to purchase equipment in Missouri. The largest loan included in the table below was $36.0 million, of which $28.6 million was undisbursed as of September 30, 2025. The loan is for working capital purposes and the borrower is located in Kansas. This loan is part of the $103.2 million loans- to one-borrower group discussed in "Part I. Item 1. Business - Regulation and Supervision."
Gross Loan
and Commitment Average
Count Amounts Amount DSCR
(Dollars in thousands)
Greater than $15 million 3 $ 84,619 $ 28,206 1.56x
>$10 to $15 million 3 36,325 12,108 2.37
>$5 to $10 million 10 79,288 7,929 1.46
>$1 to $5 million 24 55,827 2,326 9.38
>$500 thousand to $1 million 30 21,983 733 4.75
Less than $500 thousand 448 39,574 88 3.87
518 $ 317,616 613 3.51
Asset Quality
Delinquent and nonaccrual loans and OREO. The following table presents the Company's 30 to 89 day delinquent loans at the dates indicated. The amounts in the table represent the unpaid principal balance of the loans less related charge-offs, if any. Of the loans 30 to 89 days delinquent at September 30, 2025 and 2024, approximately 49% and 66%, respectively, were 59 days or less delinquent.
September 30,
2025 2024
Count Amount Count Amount
(Dollars in thousands)
One- to four-family:
Originated 68 $ 7,338 69 $ 8,884
Purchased 13 3,221 14 3,117
Commercial:
Commercial real estate 7 1,236 11 2,996
Commercial and industrial 1 32 4 391
Consumer 22 520 35 642
111 $ 12,347 133 $ 16,030
Loans 30 to 89 days delinquent
to total loans receivable, net 0.15 % 0.20 %
The following table presents the Company's nonaccrual loans and OREO at the dates indicated. The amounts in the table represent the unpaid principal balance of the loans less related charge-offs, if any. Nonaccrual loans are loans that are 90 or more days delinquent or in foreclosure and other loans required to be reported as nonaccrual pursuant to accounting and/or regulatory reporting requirements and/or internal policies, even if the loans are current. At all dates presented, there were no loans 90 or more days delinquent that were still accruing interest. Non-performing assets include nonaccrual loans and OREO. The increase in nonaccrual commercial real estate loans less than 90 days delinquent from September 30, 2024 to September 30, 2025 was due primarily to two participation loans related to the same borrowing relationship that were moved to substandard during the current fiscal year. See the asset classification discussion below for additional information regarding these loans.
September 30,
2025 2024
Count Amount Count Amount
(Dollars in thousands)
Loans 90 or More Days Delinquent or in Foreclosure:
One- to four-family:
Originated 29 $ 2,754 29 $ 2,274
Purchased 6 1,524 13 5,559
Commercial:
Commercial real estate 11 3,123 7 1,163
Commercial and industrial 2 210 2 82
Consumer 10 94 20 436
58 7,705 71 9,514
Loans 90 or more days delinquent or in foreclosure
as a percentage of total loans 0.09 % 0.12 %
Nonaccrual loans less than 90 Days Delinquent:(1)
Commercial:
Commercial real estate 3 $ 40,249 3 $ 326
Commercial and industrial 2 109 2 252
5 40,358 5 578
Total nonaccrual loans 63 48,063 76 10,092
Nonaccrual loans as a percentage of total loans 0.59 % 0.13 %
OREO:
One- to four-family:
Originated(2)
1 $ 62 1 $ 55
Consumer 1 135 - -
2 197 1 55
Total non-performing assets 65 $ 48,260 77 $ 10,147
Non-performing assets as a percentage of total assets 0.49 % 0.11 %
(1)Includes loans required to be reported as nonaccrual pursuant to internal policies, even if the loans are current.
(2)Real estate-related consumer loans where we also hold the first mortgage are included in the one- to four-family category as the underlying collateral is one- to four-family property.
The following table presents the states where the properties securing ten percent or more of the total amount of the Bank's one- to four-family loans, excluding construction loans, are located and the corresponding balance of loans 30 to 89 days delinquent, 90 or more days delinquent or in foreclosure, and weighted average LTV for loans 90 or more days delinquent or in foreclosure at September 30, 2025. The amounts in the table represent the unpaid principal balance of the loans, less related charge-offs, if any. The LTVs were based on the current loan balance and either the lesser of the purchase price or original appraisal, or the most recent Bank appraisal, if available.
Loans 30 to 89 Loans 90 or More Days Delinquent
One- to Four-Family Days Delinquent or in Foreclosure
State Amount % of Total Amount % of Total Amount % of Total LTV
(Dollars in thousands)
Kansas $ 3,319,387 56.3 % $ 5,667 53.7 % $ 2,626 61.4 % 46 %
Missouri 1,012,083 17.1 3,589 34.0 236 5.5 47
Other states 1,573,165 26.6 1,303 12.3 1,416 33.1 57
$ 5,904,635 100.0 % $ 10,559 100.0 % $ 4,278 100.0 % 50
The following table presents the unpaid principal balance of commercial real estate loans, aggregated by state, that were 30 to 89 days delinquent or 90 or more days delinquent or in foreclosure, and the weighted average LTV and weighted average DSCR for loans 90 or more days delinquent or in foreclosure at September 30, 2025. See additional discussion regarding the Bank's commercial real estate loan DSCRs and LTVs in the "Management's Discussion and Analysis of Financial Condition and Results of Operation - Loans Receivable - Commercial Loans" section above.
Loans 30 to 89 Loans 90 or More Days Delinquent
Days Delinquent or in Foreclosure
State Amount % of Total Amount % of Total LTV DSCR
(Dollars in thousands)
Kansas $ 1,236 100.0 % $ 2,907 93.1 % 50 % 2.14x
Other states - - 216 6.9 19 1.84
$ 1,236 100.0 % $ 3,123 100.0 % 48 2.12
Classified Loans. In accordance with the Bank's asset classification policy, management regularly reviews the problem assets in the Bank's portfolio to determine whether any assets require classification. See "Part II, Item 8. Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 4. Loans Receivable and Allowance for Credit Losses" for asset classification definitions.
The following table presents the amortized cost of loans classified as special mention or substandard at the dates presented. See below for further discussion on the changes in commercial real estate loan classifications across periods.
September 30, 2025 September 30, 2024
Special Mention Substandard Special Mention Substandard
(Dollars in thousands)
One- to four-family $ 13,055 $ 20,616 $ 17,528 $ 22,715
Commercial:
Commercial real estate 59,993 45,550 16,169 2,302
Commercial and industrial 399 473 413 335
Consumer 326 322 326 487
$ 73,773 $ 66,961 $ 34,436 $ 25,839
Special Mention: The increase in commercial real estate special mention loans at September 30, 2025 compared to September 30, 2024 was due mainly to a $36.3 million hotel participation loan and a $15.3 million CRA loan that were classified as special mention at September 30, 2025.
The $36.3 million hotel participation loan is taking longer than anticipated to stabilize. During fiscal year 2025, the loan was classified as substandard but the borrower took actions during the last quarter of fiscal year 2025 to strengthen the credit and the occupancy and cashflow for the hotel continued to improve, so the classification was changed to special mention as of
September 30, 2025. As of September 30, 2025, the loan was not delinquent and the Bank's LTV was 44% based on an appraisal completed approximately two years ago.
The $15.3 million CRA loan was classified as special mention at September 30, 2025 because the underlying property has been slow to stabilize and the borrower was delinquent on payments during the current fiscal year; however, the loan has never been 90 or more days delinquent and was not delinquent at September 30, 2025. Based on the original appraisal completed approximately four years ago, the Bank's LTV was 76% as of September 30, 2025.
Substandard: The increase in substandard commercial real estate loans at September 30, 2025 compared to September 30, 2024 was due mainly to two participation loans related to the same borrowing relationship, totaling $40.2 million as of September 30, 2025 and secured by a hotel. The borrower is working on a recapitalization plan which is anticipated to be completed later in calendar year 2025 or early in calendar year 2026. During the quarter ended June 30, 2025, the Bank entered into an agreement with the borrower which allows the borrower to not make payments on these loans until later in calendar year 2025 to allow time to complete the recapitalization process. As a result, the loans were considered nonaccrual and classified as substandard as of September 30, 2025. The loans were not delinquent at September 30, 2025 due to the terms of the agreement. As of September 30, 2025, the combined Bank LTV on the loans was 45% based on an appraisal completed in the past six months. The Bank has had a participation relationship with the lead bank of these two loans for over ten years, and the Bank holds the same percentage interest in the loans as the lead bank. Both loans are recourse with a personal guaranty and have strong LTVs. The borrower group (developer, owner and guarantors) are seasoned commercial real estate developers with over 40 years of experience. There have been no charge-offs, nor has management set aside a specific valuation allowance associated with these loans as of September 30, 2025, due to the strong LTVs.
Allowance for Credit Losses. The following table presents the distribution of our ACL and the ratio of ACL to loans receivable, by loan type, at the dates indicated. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates", "Part II, Item 8. Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 1. Summary of Significant Accounting Policies and Note 4. Loans Receivable and Allowance for Credit Losses" for additional information regarding the Bank's ACL, including management's qualitative factors.
September 30, 2025 September 30, 2024
% of % of % of % of
ACL to ACL to Loans to ACL to ACL to Loans to
Amount Loans Total Total Amount Loans Total Total
of ACL Ratio ACL Loans of ACL Ratio ACL Loans
(Dollars in thousands)
One- to four-family:
Originated $ 1,730 0.05 % 7.2 % 46.4 % $ 1,650 0.04 % 7.2 % 49.8 %
Purchased 1,298 0.06 5.4 26.0 2,007 0.09 8.7 29.5
Construction 18 0.11 0.1 0.2 16 0.07 0.1 0.3
Total 3,046 0.05 12.7 72.6 3,673 0.06 16.0 79.6
Commercial:
Commercial real estate 15,809 0.92 65.7 21.0 15,719 1.32 68.2 15.0
Commercial and industrial 2,499 1.19 10.4 2.6 1,186 0.91 5.1 1.6
Commercial construction 2,468 1.26 10.3 2.4 2,249 1.20 9.8 2.4
Total 20,776 0.98 86.4 26.0 19,154 1.27 83.1 19.0
Consumer loans:
Home equity 133 0.13 0.6 1.3 112 0.11 0.5 1.3
Other consumer 84 1.00 0.3 0.1 96 1.00 0.4 0.1
Total consumer loans 217 0.19 0.9 1.4 208 0.19 0.9 1.4
$ 24,039 0.30 % 100.0 % 100.0 % $ 23,035 0.29 % 100.0 % 100.0 %
The increase in the ratio of ACL to total loans as of September 30, 2205 compared to September 30, 2024 was due primarily to changes in the loan portfolio mix due to the continued growth in commercial loans which have a higher ACL to total loan ratio than one- to four-family loans. The increase was partially offset by the regression analyses update discussed in "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates". Based on management's evaluation of the credit risk within the Bank's commercial real estate loan portfolio, taking into consideration DSCRs and LTVs, management believes the Bank's ACL ratio for commercial real estate loans is appropriate for the related credit risk.
Historically, the Bank has maintained very low delinquency ratios and NCO rates. Over the past two years, the Bank's highest ratio of commercial loans 90 days or more delinquent to total commercial loans at a quarter end was 0.22%. The highest such ratio for one- to four-family originated and correspondent loans, combined, was 0.12%. The amount of total NCOs during the current fiscal year was $198 thousand. The majority of the NCOs during the current fiscal year related to one single-family bulk purchased loan. During the 10-year period ended September 30, 2025, the Bank recognized $999 thousand of total NCOs. As of September 30, 2025, the ACL balance was $24.0 million and the reserve for off-balance sheet credit exposures totaled $5.5 million, which management believes is adequate for the credit risk characteristics in our loan portfolio.
The following table presents ACL activity and related ratios at the dates and for the periods indicated. On October 1, 2023, the Bank adopted Accounting Standards Update ("ASU") 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures ("ASU 2022-02"), which eliminated the accounting guidance for troubled debt restructurings by creditors. The Company applied a modified retrospective approach when adopting ASU 2022-02, resulting in a cumulative-effect adjustment which is reflected in the table below ("ASU 2022-02 Adoption").
At or For the Year Ended September 30,
2025 2024 2023
(Dollars in thousands)
Balance at beginning of period $ 23,035 $ 23,759 $ 16,371
ASU 2022-02 Adoption - 20 -
Charge-offs (271) (160) (115)
Recoveries 73 49 9
Net (charge-offs) recoveries (198) (111) (106)
Provision for credit losses 1,202 (633) 7,494
Balance at end of period $ 24,039 $ 23,035 $ 23,759
Ratio of NCOs during the period
to average non-performing assets 0.68 % 1.12 % 1.09 %
ACL to nonaccrual loans at end of period 50.02 228.25 252.51
ACL to loans receivable, net at end of period 0.30 0.29 0.30
ACL at end of period to NCOs during the period 121x 207x 223x
The ratio of NCOs to average non-performing assets during the current fiscal year was lower than the prior fiscal year due to a higher balance of non-performing assets compared to the prior fiscal year. The ratio of ACL to nonaccrual loans was lower at the end of the current fiscal year compared to the prior fiscal year due to a higher balance of nonaccrual loans. See the "Delinquent and nonaccrual loans and OREO" discussion above for additional discussion regarding the increase in nonaccrual loans from the prior fiscal year. The increase in the ratio of the ACL to total loans as of September 30, 2025 from September 30, 2024 is discussed above. The ratio of ACL at end of period to NCOs during the period was lower in the current fiscal year due to higher NCOs. See "Part II, Item 8. Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 4. Loans Receivable and Allowance for Credit Losses" for additional information related to ACL activity by specific loan categories.
The following table presents NCOs, average loans, and NCOs as a percentage of average loans, by loan type, for the periods indicated.
For the Year Ended September 30,
2025 2024 2023
NCOs Average Loans % of Average Loans NCOs Average Loans % of Average Loans NCOs Average Loans % of Average Loans
(Dollars in thousands)
One- to four-family:
Originated $ (16) $ 3,842,213 - % $ (28) $ 3,951,870 - % $ (6) $ 3,981,468 - %
Purchased 113 2,256,624 0.01 - 2,473,301 - - 2,571,362 -
Construction - 17,158 - - 33,101 - - 65,741 -
Total 97 6,115,995 - (28) 6,458,272 - (6) 6,618,571 -
Commercial:
Commercial real estate (20) 1,452,288 - 80 1,073,219 0.01 (1) 875,850 -
Commercial and industrial 36 151,126 0.02 (5) 120,354 - 75 93,840 0.08
Commercial construction - 176,620 - - 184,848 - - 181,141 -
Total 16 1,780,034 - 75 1,378,421 0.01 74 1,150,831 0.01
Consumer:
Home equity 81 102,042 0.08 46 97,694 0.05 21 94,131 0.02
Other 4 9,360 0.04 18 9,663 0.19 17 8,885 0.19
Total 85 111,402 0.08 64 107,357 0.06 38 103,016 0.04
$ 198 $ 8,007,431 - $ 111 $ 7,944,050 - $ 106 $ 7,872,418 -
While management utilizes its best judgment and information available, the adequacy of the ACL and reserve for off-balance sheet credit exposures is determined by certain factors outside of the Company's control, such as the performance of our loan portfolio, changes in the economic environment including economic uncertainty, changes in interest rates, and the view of regulatory authorities toward classification of assets and the level of ACL and reserve for off-balance sheet credit exposures. Additionally, the level of ACL and reserve for off-balance sheet credit exposures may fluctuate based on the balance and mix of the loan portfolio and off-balance sheet credit exposures. If actual results differ significantly from our assumptions, our ACL and reserve for off-balance sheet credit exposures may not be sufficient to cover inherent losses in our loan portfolio, resulting in additions to our ACL and an increase in the provision for credit losses.
Securities. The following table presents the distribution of our securities portfolio, at amortized cost, at the dates indicated. The majority of our securities are government guaranteed or issued by Government Sponsored Enterprises ("GSEs"). Overall, fixed-rate securities comprised 91% of our securities portfolio at September 30, 2025. The weighted average life ("WAL") is the estimated remaining maturity (in years) after three-month historical prepayment speeds and projected call option assumptions have been applied. Weighted average yields on tax-exempt securities are not calculated on a fully tax-equivalent basis.
September 30, 2025 September 30, 2024
Amount Yield WAL Amount Yield WAL
(Dollars in thousands)
MBS $ 843,369 5.45 % 4.8 $ 756,775 5.63 % 5.7
GSE debentures - - - 69,077 5.63 0.4
Corporate bonds 4,000 5.12 6.6 4,000 5.12 7.6
$ 847,369 5.45 4.8 $ 829,852 5.63 5.2
The composition and maturities of the securities portfolio, based on estimated fair value, at September 30, 2025 is indicated in the following table by remaining contractual maturity, without consideration of call features or pre-refunding dates, along with associated weighted average yields. The weighted average yields are current yields and include the amortization of premiums or discounts and are calculated by multiplying each estimated fair value by its current yield and dividing the sum of these results by the total estimated fair value. There were no tax-exempt investments at September 30, 2025.
1 year or less More than 1 to 5 years More than 5 to 10 years Over 10 years Total Securities
Estimated Estimated Estimated Estimated Estimated
Fair Fair Fair Fair Fair
Value Yield Value Yield Value Yield Value Yield Value Yield
(Dollars in thousands)
MBS $ 51 2.79 % $ 70,303 5.46 % $ 192,462 5.83 % $ 600,684 5.33 % $ 863,500 5.45 %
Corporate bonds - - - - 3,716 5.12 - - 3,716 5.12
$ 51 2.79 $ 70,303 5.46 $ 196,178 5.81 $ 600,684 5.33 $ 867,216 5.45
The following table summarizes the activity in our securities portfolio based on the estimated fair value, which is also the carrying value, for the periods presented. The weighted average yields for the beginning and ending balances are as of the first and last days of the periods presented and are generally derived from recent prepayment activity on the securities in the portfolio. The beginning and ending WALs are the estimated remaining principal repayment terms (in years) after three-month historical prepayment speeds and projected call option assumptions have been applied.
For the Year Ended
September 30, 2025 September 30, 2024
Amount Yield WAL Amount Yield WAL
(Dollars in thousands)
Beginning balance - carrying value $ 856,266 5.63 % 5.2 $ 1,384,482 1.35 % 3.8
Maturities and repayments (233,986) (455,110)
Proceeds from sale - (1,272,512)
Net amortization of (premiums)/discounts 3,296 8,182
Purchases 248,207 4.97 7.5 1,176,645 5.55 5.1
Net loss from securities sales - (13,345)
Change in valuation on AFS securities (6,567) 27,924
Ending balance - carrying value $ 867,216 5.45 4.8 $ 856,266 5.63 5.2
Liabilities. Total liabilities were $8.73 billion at September 30, 2025, compared to $8.50 billion at September 30, 2024. The $235.7 million increase was due primarily to a $461.5 million increase in deposits, partially offset by a $228.8 million decrease in borrowings.
Deposits. The following table presents the amount, weighted average rate and percent of total for the components of our deposit portfolio at the dates presented. The increase in deposits during the current fiscal year was due primarily to the Bank's high yield savings account offering, which increased $364.5 million during the current fiscal year. The decrease in the deposit portfolio rate at September 30, 2025 compared to September 30, 2024 was due mainly to lower rates on retail certificates of deposit.
At September 30,
2025 2024
% of % of
Amount Rate Total Amount Rate Total
(Dollars in thousands)
Non-interest-bearing checking $ 601,371 - % 9.1 % $ 549,596 - % 9.0 %
Interest-bearing checking 859,256 0.21 13.0 847,542 0.23 13.8
High yield savings 460,712 3.88 7.0 96,241 4.09 1.6
Other savings 423,942 0.07 6.5 444,331 0.11 7.2
Money market 1,233,487 1.29 18.7 1,226,962 1.46 20.0
Certificates of deposit 3,012,680 3.74 45.7 2,965,310 4.25 48.4
$ 6,591,448 2.26 100.0 % $ 6,129,982 2.45 100.0 %
The following table presents the amount, weighted average rate, and percent of total for the components of our deposit portfolio, split between retail non-maturity deposits, commercial non-maturity deposits, and certificates of deposit at the dates presented.
At September 30,
2025 2024
% of % of
Amount Rate Total Amount Rate Total
(Dollars in thousands)
Retail non-maturity deposits:
Non-interest-bearing checking $ 409,722 - % 6.2 % $ 418,790 - % 6.8 %
Interest-bearing checking 790,783 0.08 12.0 799,407 0.10 13.0
High yield savings 460,712 3.88 7.0 96,241 4.09 1.6
Other savings 420,330 0.07 6.4 441,265 0.11 7.2
Money market 1,050,841 1.07 15.9 1,149,212 1.37 18.7
Total 3,132,388 0.96 47.5 2,904,915 0.73 47.4
Commercial non-maturity deposits:
Non-interest-bearing checking 191,649 - 2.9 130,806 - 2.1
Interest-bearing checking 68,473 1.72 1.0 48,135 2.40 0.8
Savings 3,612 0.05 0.1 3,066 0.05 0.1
Money market 182,646 2.52 2.8 77,750 2.72 1.3
Total 446,380 1.29 6.8 259,757 1.26 4.2
Certificates of deposit:
Retail certificates of deposit 2,828,982 3.73 43.0 2,830,579 4.23 46.2
Commercial certificates of deposit 61,819 3.64 0.9 58,236 4.40 1.0
Public unit certificates of deposit 121,879 4.06 1.8 76,495 4.62 1.2
Total 3,012,680 3.74 45.7 2,965,310 4.25 48.4
$ 6,591,448 2.26 100.0 % $ 6,129,982 2.45 100.0 %
During the current fiscal year, management focused on retaining and growing deposits through the high-yield savings account which was introduced in fiscal year 2024. As of September 30, 2025, the Bank's high yield savings account offering had an annual percentage yield of 4.00% for accounts that meet the $10 thousand minimum balance requirement. The high-yield
savings account balance was $460.7 million as of September 30, 2025 compared to $96.2 million as of September 30, 2024. Of the $364.5 million increase, approximately 50% related to existing Bank customers increasing their balances during the year by bringing funds from outside the Bank, approximately 40% was from internal Bank transfers from other deposit products, and the remainder was composed of new deposit relationships. While there is an immediate repricing and increase in cost on internal transfers within the Bank, we believe we have captured rate sensitive money by offering this product, rather than having those funds leave the Bank.
The following table presents the amount, weighted average rate, and percent of total for total retail deposits, commercial deposits, and public unit certificates of deposit at the dates noted.
At September 30,
2025 2024
% of % of
Amount Rate Total Amount Rate Total
(Dollars in thousands)
Total retail deposits $ 5,961,370 2.28 % 90.5 % $ 5,735,494 2.46 % 93.6 %
Total commercial deposits 508,199 1.58 7.7 317,993 1.84 5.2
Public unit certificates of deposit 121,879 4.06 1.8 76,495 4.62 1.2
Total $ 6,591,448 2.26 % 100.0 % $ 6,129,982 2.45 % 100.0 %
As of September 30, 2025, approximately $990.2 million (or approximately 15%) of the Bank's Call Report deposit balance was uninsured, of which approximately $567.3 million (or approximately 8% of the Bank's Call Report deposit balance) related to commercial and retail deposit accounts, with the remainder mainly comprised of fully collateralized public unit deposits and intercompany accounts. The uninsured amounts are estimates based on the methodologies and assumptions used for the Bank's regulatory reporting requirements.
The following table sets forth the portion of the Bank's certificate of deposit portfolio, by account, that are in excess of the FDIC insurance limit, by remaining time until maturity, as of September 30, 2025 (dollars in thousands).
3 months or less $ 111,663
Over 3 through 6 months 101,822
Over 6 through 12 months 215,689
Over 12 months 154,972
$ 584,146
Borrowings. Total borrowings at September 30, 2025 were $1.95 billion, which was comprised of $1.85 billion in fixed-rate FHLB advances, $100.0 million in variable-rate FHLB advances tied to interest rate swaps, and $1.1 million in finance leases. Borrowings decreased $228.8 million from September 30, 2024 due to principal repayments made on the Bank's amortizing advances, along with borrowings that matured but were not replaced. Cash flows from the deposit portfolio were used to pay off maturing FHLB borrowings during the current fiscal year.
The following table presents the maturity of term borrowings, which consist of FHLB advances, along with the associated weighted average contractual and effective rates as of September 30, 2025. Amortizing FHLB advances totaling $276.0 million are presented based on their maturity dates versus their quarterly scheduled repayment dates.
Maturity by Contractual Effective
Fiscal Year Amount Rate Rate(1)
(Dollars in thousands)
2026 $ 425,000 2.11 % 2.30 %
2027 742,500 3.49 3.56
2028 565,984 4.32 4.12
2029 132,500 4.45 4.45
2030 85,000 4.20 4.20
$ 1,950,984 3.53 3.54
(1)The effective rate includes the impact of interest rate swaps and the amortization of deferred prepayment penalties resulting from FHLB advances previously prepaid.
The following table presents borrowing activity for the periods shown. The borrowings presented in the table have original contractual terms of one year or longer or are tied to interest rate swaps with original contractual terms of one year or longer. Line of credit borrowings and finance leases are excluded from the table. The effective rate is shown as a weighted average and includes the impact of interest rate swaps and the amortization of deferred prepayment penalties resulting from FHLB advances previously prepaid. The weighted average maturity ("WAM") is the remaining weighted average contractual term in years. The beginning and ending WAMs represent the remaining maturity at each date presented.
For the Year Ended September 30,
2025 2024
Effective Effective
Amount Rate WAM Amount Rate WAM
(Dollars in thousands)
Beginning balance $ 2,180,656 3.29 % 1.6 $ 2,882,828 3.34 % 1.8
Maturities and repayments (879,672) 3.39 - (527,172) 2.95 -
New FHLB borrowings 650,000 4.13 2.9 325,000 4.54 4.4
Bank Term Funding Program ("BTFP"), net - - - (500,000) 4.70 -
Ending balance $ 1,950,984 3.54 1.5 $ 2,180,656 3.29 1.6
During the current fiscal year, the Bank prepaid fixed-rate FHLB advances with a weighted average remaining term of 0.6 years totaling $200.0 million with a weighted average contractual interest rate of 4.70% and replaced these advances with $200.0 million of fixed-rate FHLB advances with a weighted average contractual interest rate of 3.83% and a weighted average term of 2.5 years. The weighted average effective interest rate of the new advances was 3.93%, which includes the impact of deferred prepayment penalties being recognized over the life of the new advances. This activity is reflected in the table above.
In October 2025, the Bank refinanced a $50.0 million fixed-rate advance with a weighted average effective rate of 4.03% and a WAL of 0.5 year, 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. The weighted average effective rate includes the impact of the deferred prepayment penalty that will be recognized over the life of the new advance.
Management will continue to monitor opportunities for wholesale funding and may pay down FHLB advances in future periods. The Bank may also renew certain fixed-rate advances in the future using adjustable-rate advances in order to better match the repricing characteristics of its increasing commercial loan portfolio.
Leverage Strategy
Periodically, the Bank has utilized a leverage strategy to increase earnings, which entails entering into short-term FHLB borrowings and depositing the proceeds from these FHLB borrowings, net of the purchases of FHLB stock made to meet FHLB stock holding requirements, at the FRB. The leverage strategy is not a core operating business for the Company. It provides the Company with the ability to utilize excess capital to generate earnings. Additionally, it is a strategy that can be exited quickly without additional costs. The profitability of the leverage strategy is attributable to net income derived from the dividends received on the increased FHLB stock holdings, plus the net interest rate spread between the yield on the leverage strategy cash at the FRB and the rate paid on the leverage strategy FHLB borrowings, less applicable FDIC premiums and estimated income tax expense. Leverage strategy borrowings are repaid prior to each quarter end so there is no impact to quarter end capital ratios. The leverage strategy was not in place at any time during the current fiscal year or fiscal year 2024 due to the strategy being unprofitable, but it was in place at points during fiscal year 2023. During fiscal year 2023, the average balance of cash associated with the leverage strategy was $882.8 million and interest earned on that cash was $37.8 million, the average balance of FHLB stock associated with the leverage strategy was $41.6 million and dividends earned on that stock were $3.6 million, and the average balance of FHLB borrowings associated with the leverage strategy was $924.4 million and the related interest expense was $39.7 million. Additionally, the Company recognized $406 thousand of FDIC premiums and $215 thousand of income tax expense during fiscal year 2023 related to the leverage strategy. When the leverage strategy is in place, it reduces the net interest margin due to the amount of earnings from the transaction in comparison to the size of the transaction. Management continues to monitor the net interest rate spread and overall profitability of the leverage strategy.
Maturities of Interest-Bearing Liabilities. The following table presents the maturity and weighted average repricing rate, which is also the weighted average effective rate, of certificates of deposit, split between retail/commercial and public unit amounts, and non-amortizing FHLB advances for the next four quarters as of September 30, 2025.
December 31, March 31, June 30, September 30,
2025 2026 2026 2026 Total
(Dollars in thousands)
Retail/Commercial Certificates:
Amount $ 624,804 $ 403,612 $ 593,431 $ 463,792 $ 2,085,639
Repricing Rate 3.94 % 3.66 % 3.82 % 3.66 % 3.79 %
Public Unit Certificates:
Amount $ 14,476 $ 43,772 $ 9,001 $ 16,380 $ 83,629
Repricing Rate 3.87 % 4.11 % 4.22 % 3.94 % 4.05 %
Term Borrowings:
Amount $ 100,000 $ 100,000 $ 100,000 $ 125,000 $ 425,000
Repricing Rate 1.09 % 1.60 % 2.51 % 3.66 % 2.30 %
Total
Amount $ 739,280 $ 547,384 $ 702,432 $ 605,172 $ 2,594,268
Repricing Rate 3.55 % 3.32 % 3.64 % 3.67 % 3.55 %
The following table sets forth the WAM information for our certificates of deposit, in years, as of September 30, 2025.
Retail certificates of deposit 0.8
Commercial certificates of deposit 0.7
Public unit certificates of deposit 0.8
Total certificates of deposit 0.8
Stockholders' Equity. Stockholders' equity totaled $1.05 billion at September 30, 2025. Consistent with our goal to operate a sound and profitable financial organization that delivers long-term stockholder value, we actively seek to maintain a well-capitalized status for the Bank in accordance with regulatory standards. As of September 30, 2025, the Bank's capital ratios exceeded the well-capitalized requirements, and the Bank exceeded internal policy thresholds for sensitivity to changes in interest rates. As of September 30, 2025, the Bank's community bank leverage ratio was 9.6%. See "Part II, Item 8. Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 13. Regulatory Capital Requirements" for additional regulatory capital information.
During the current fiscal year, the Company paid regular quarterly cash dividends totaling $44.3 million, or $0.34 per share. On October 28, 2025, the Company announced a regular cash dividend of $0.085 per share, or approximately $11.0 million, payable on November 21, 2025 to stockholders of record as of the close of business on November 7, 2025.
The Company repurchased 618,260 shares of common stock at an average price of $6.23 per share during the current fiscal year, all in the fourth fiscal quarter. Subsequent to September 30, 2025 and through November 21, 2025, the Company repurchased 400,000 shares at an average price of $6.25 per share. The Company currently has $68.6 million remaining authorized under its existing stock repurchase plan. Shares may be repurchased from time to time based upon market conditions, available liquidity and other factors. Although our existing repurchase plan has no expiration date, we are required to annually seek the FRB's non-objection for the buyback amount. The FRB's current non-objection for the Company to repurchase up to $75 million of stock expires in February 2026.
The Board of Directors continues to evaluate various alternatives for capital allocation to enhance stockholder value, including the repurchase of stock, the payment of additional cash dividends, or retaining earnings to support future growth. Since our second-step conversion in December 2010, we have returned $2.01 billion in capital to stockholders through dividends totaling $1.57 billion and stock repurchases totaling $439.9 million. This is supported by our holistic approach to managing the balance sheet through continuous modeling of the Bank's performance, risk management, our commitment to credit quality and periodic stress testing.
For fiscal year 2026, it is the current intention of the Board of Directors to continue to pay a regular quarterly dividend of $0.085 per share. To the extent that earnings in fiscal year 2026 exceed $0.34 per share, the Board of Directors may consider the payment of additional dividends. Dividend payments depend upon a number of factors, including the Company's financial condition and results of operations, regulatory capital requirements, regulatory limitations on the Bank's ability to make capital distributions to the Company, the Bank's current tax earnings and accumulated earnings and profits, and the amount of cash at the holding company level. Through the payment of the True Blue dividend in prior years, the Company was able to provide stockholder value by reducing its excess capital. The last True Blue dividend occurred in fiscal year 2022. Management and the Board of Directors believe that a tier 1 leverage ratio of about 9% is appropriate to manage the risk profile of the Company. At September 30, 2025, the Bank's Tier 1 leverage ratio was 9.6%.
At September 30, 2025, Capitol Federal Financial, Inc., at the holding company level, had $17.6 million in cash on deposit at the Bank. During the fourth quarter of the current fiscal year, the Bank distributed $14.0 million from the Bank to the Company, which was the only distribution from the Bank to the Company during the current fiscal year. Distributions from the Bank to the Company during the current fiscal year were limited due to the tax associated with the pre-1988 bad debt recapture which is related to the Bank's tax accumulated earnings and profits. See additional information regarding the pre-1988 bad debt recapture in "Part II, Item 8. Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 9. Income Taxes". During the fourth quarter of the current fiscal year, the Bank reached a point where there was sufficient taxable income earned to replenish the Bank's tax accumulated earnings and profits to a positive level, allowing the Bank to make a distribution to the Company and not have that distribution subject to the pre-1988 bad debt recapture tax. Due to the Bank's expected continuing positive tax accumulated earnings and profit balance, it is anticipated that the Bank will be in a position to make earnings distributions to the Company during fiscal year 2026. Earnings distributions from the Bank to the Company will be limited to the extent necessary to prevent the Bank from re-entering a negative accumulated earnings and profit position and have to pay the pre-1988 bad debt recapture tax on earnings moved from the Bank to the Company.
Currently, the Company’s priorities for the use of cash are for cash dividends, share repurchases and operations. The amount of cash available to the Company is dependent upon distributions from the Bank. The Bank’s distributions to the Company are limited based upon the Bank’s balance of tax accumulated earnings and profit as the Bank will incur income tax expense related to the pre-1988 bad debt reserves if the tax accumulated earnings and profit balance is negative. Paying distributions to the Company in excess of Bank earnings may result in the Bank’s balance of tax accumulated earnings and profit becoming negative. The amount of cash available for share repurchases and for dividends in excess of the Board’s and management’s current intention of $0.085 per share per quarter is limited to the earnings distributed from the Bank to the Company less the amount of dividends paid, which was $44.3 million in fiscal year 2025, as well as the need to replenish the cash balance at the Company to be in compliance with Board policies.
The following table presents regular quarterly cash dividends and special cash dividends paid in calendar years 2025, 2024, and 2023.
Calendar Year
2025 2024 2023
Amount Per Share Amount Per Share Amount Per Share
(Dollars in thousands, except per share amounts)
Regular quarterly dividends paid
Quarter ended March 31 $ 11,062 $ 0.085 $ 11,127 $ 0.085 $ 11,319 $ 0.085
Quarter ended June 30 11,063 0.085 11,044 0.085 11,321 0.085
Quarter ended September 30 11,066 0.085 11,043 0.085 11,323 0.085
Quarter ended December 31 11,017 0.085 11,061 0.085 11,308 0.085
Calendar year-to-date dividends paid $ 44,208 $ 0.340 $ 44,275 $ 0.340 $ 45,271 $ 0.340
Rate/Volume Analysis. The table below presents the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities, comparing fiscal years 2025 to 2024. For the comparison of fiscal years 2024 to 2023, see "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2024. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (1) changes in volume, which are changes in the average balance multiplied by the previous year's average rate, and (2) changes in rate, which are changes in the average rate multiplied by the average balance from the previous year. The net changes attributable to the combined impact of both rate and volume have been allocated proportionately to the changes due to volume and the changes due to rate.
For the Year Ended September 30,
2025 vs. 2024
Increase (Decrease) Due to
Volume Rate Total
(Dollars in thousands)
Interest-earning assets:
Loans receivable $ 11,294 $ 12,517 $ 23,811
MBS 11,897 712 12,609
Investment securities (6,139) 767 (5,372)
FHLB stock (861) (151) (1,012)
Cash and cash equivalents (4,953) (2,407) (7,360)
Total interest-earning assets 11,238 11,438 22,676
Interest-bearing liabilities:
Checking 2 29 31
Savings 1,183 8,818 10,001
Money market (1,078) (5,611) (6,689)
Certificates of deposit 3,054 316 3,370
Borrowings (7,934) 5,647 (2,287)
Total interest-bearing liabilities (4,773) 9,199 4,426
Net change in net interest income $ 16,011 $ 2,239 $ 18,250
Average Balance Sheets. The following table presents the average balances of our assets, liabilities, and stockholders' equity, and the related weighted average yields and rates on our interest-earning assets and interest-bearing liabilities for the periods indicated. For fiscal year 2023 information, see "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2024. Weighted average yields are derived by dividing annual income by the average balance of the related assets, and weighted average rates are derived by dividing annual expense by the average balance of the related liabilities, for the periods shown. Average outstanding balances are derived from average daily balances. The weighted average yields and rates include amortization of fees, costs, premiums and discounts, which are considered adjustments to yields/rates. Weighted average yields on tax-exempt securities are not calculated on a fully taxable equivalent basis.
For the Year Ended September 30,
2025 2024
Average Interest Average Interest
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Amount Paid Rate Amount Paid Rate
Assets: (Dollars in thousands)
Interest-earning assets:
One- to four-family loans:
Originated $ 3,859,371 $ 145,552 3.77 % $ 3,984,971 $ 142,011 3.56 %
Purchased 2,256,624 73,932 3.28 2,473,301 79,492 3.21
Total one- to four-family loans 6,115,995 219,484 3.59 6,458,272 221,503 3.43
Commercial loans:
Commercial real estate 1,452,288 82,426 5.60 1,074,424 59,154 5.42
Commercial and industrial 151,126 10,396 6.78 119,156 7,897 6.52
Commercial construction 176,620 11,333 6.33 184,841 10,991 5.85
Total commercial loans 1,780,034 104,155 5.77 1,378,421 78,042 5.57
Consumer loans 111,402 8,879 7.97 107,357 9,162 8.53
Total loans receivable(1)
8,007,431 332,518 4.13 7,944,050 308,707 3.87
MBS(2)
834,345 46,259 5.54 619,521 33,650 5.43
Investment securities(2)(3)
63,650 3,377 5.31 180,640 8,749 4.84
FHLB stock 97,054 8,997 9.27 106,064 10,009 9.44
Cash and cash equivalents 185,052 8,368 4.46 286,988 15,728 5.39
Total interest-earning assets 9,187,532 399,519 4.33 9,137,263 376,843 4.11
Other non-interest-earning assets 460,405 460,278
Total assets $ 9,647,937 $ 9,597,541
Liabilities and stockholders' equity:
Interest-bearing liabilities:
Checking $ 874,377 2,010 0.23 $ 873,097 1,978 0.23
High yield savings 283,605 11,492 4.05 31,345 1,297 4.14
Other savings 437,766 335 0.08 462,111 529 0.11
Money market 1,237,612 15,643 1.26 1,302,817 22,333 1.71
Retail certificates 2,782,181 110,813 3.98 2,680,003 106,204 3.96
Commercial certificates 58,675 2,318 3.95 54,484 2,247 4.12
Wholesale certificates 86,457 3,651 4.22 109,217 4,961 4.54
Total deposits 5,760,673 146,262 2.54 5,513,074 139,549 2.53
Borrowings 2,108,626 72,946 3.46 2,338,222 75,233 3.21
Total interest-bearing liabilities 7,869,299 219,208 2.78 7,851,296 214,782 2.73
Non-interest-bearing deposits 562,084 533,821
Other non-interest-bearing liabilities 177,178 180,979
Stockholders' equity 1,039,376 1,031,445
Total liabilities and stockholders' equity $ 9,647,937 $ 9,597,541
Net interest income(4)
$ 180,311 $ 162,061
Net interest-earning assets $ 1,318,233 $ 1,285,967
Net interest margin(5)
1.96 1.77
Ratio of interest-earning assets to interest-bearing liabilities 1.17x 1.16x
Selected performance ratios:
Return on average assets(6)(10)
0.71 % 0.40 %
Return on average equity(7)(10)
6.54 3.69
Average equity to average assets 10.77 10.75
Operating expense ratio(8)
1.22 1.17
Efficiency ratio(9)(10)
58.33 66.91
(1)Balances are adjusted for unearned loan fees and deferred costs. Loans that are 90 or more days delinquent are included in the loans receivable average balance with a yield of zero percent.
(2)AFS security yields are based upon amortized cost which is adjusted for premiums and discounts.
(3)There were no nontaxable securities in the average balance of securities for the year ended September 30, 2025. The average balance of investment securities includes an average balance of nontaxable securities of $51 thousand for the year ended September 30, 2024.
(4)Net interest income represents the difference between interest income earned on interest-earning assets and interest paid on interest-bearing liabilities. Net interest income depends on the average balance of interest-earning assets and interest-bearing liabilities, and the interest rates earned or paid on them.
(5)Net interest margin represents net interest income as a percentage of average interest-earning assets. Management believes that the net interest margin is important to investors as it is a profitability measure for financial institutions.
(6)Return on average assets represents net income as a percentage of total average assets. Management believes that the return on average assets is important to investors as it shows the Company's profitability in relation to the Company's average assets.
(7)Return on average equity represents net income as a percentage of total average equity. Management believes that the return on average equity is important to investors as it shows the Company's profitability in relation to the Company's average equity.
(8)The operating expense ratio represents non-interest expense as a percentage of average assets. Management believes the operating expense ratio is important to investors as it provides insight into how efficiently the Company is managing its expenses in relation to its assets. It is a financial measurement ratio that does not take into consideration changes in interest rates.
(9)The efficiency ratio represents non-interest expense as a percentage of the sum of net interest income (pre-provision for credit losses) and non-interest income. Management believes the efficiency ratio is important to investors as it is a measure of a financial institution's total non-interest expense as a percentage of the sum of net interest income (pre-provision for credit losses) and non-interest income. A lower value generally indicates that it is costing the financial institution less money to generate revenue, related to its net interest margin and non-interest income.
(10)The table below provides a reconciliation between performance measures presented in accordance with accounting principles generally accepted in the United States of America ("GAAP") and the same performance measures absent the impact of the net loss on the securities transactions associated with the securities strategy, which are not presented in accordance with GAAP. The securities strategy was non-recurring in nature; therefore, management believes it is meaningful to investors to present certain financial measures without the securities strategy to better evaluate the Company's core operations. See information regarding the securities strategy in the "Management's Discussion and Analysis of Financial Condition and Results of Operation - Executive Summary" discussion above.
For the Year Ended September 30, 2024
Without
Securities
Actual Securities Strategy
(GAAP) Strategy (Non-GAAP)
Return on average assets 0.40 % (0.10 %) 0.50 %
Return on average equity 3.69 (0.97) 4.66
Efficiency Ratio 66.91 4.94 61.97
EPS (11)
$ 0.29 $ (0.08) $ 0.37
(11)EPS is calculated as net income divided by average shares outstanding. Management believes EPS is an important measure to investors as it shows the Company's earnings in relation to the Company's outstanding shares.
Comparison of Operating Results for the Years Ended September 30, 2025 and 2024
The Company recognized net income of $68.0 million, or $0.52 per share, for the current fiscal year, compared to net income of $38.0 million, or $0.29 per share, for the prior fiscal year. The increase in net income was due mainly to higher net interest and non-interest income, partially offset by higher non-interest expense. Non-interest income was lower in the prior fiscal year due mainly to the net losses on the sale of securities associated with the securities strategy. See additional discussion regarding the securities strategy in the "Management's Discussion and Analysis of Financial Condition and Results of Operation - Executive Summary - Securities Strategy to Improve Earnings" section above. The securities associated with the securities strategy were sold in the prior fiscal year, and in that period the Company incurred $13.3 million ($10.0 million net of tax) of net losses related to that sale. Excluding the effects of the net loss associated with the securities strategy, EPS would have been $0.37 for the prior fiscal year. The increase in EPS excluding the effects of the net loss associated with the securities strategy was due primarily to higher net interest income in the current fiscal year.
The net interest margin increased 19 basis points, from 1.77% for the prior fiscal year to 1.96% for the current fiscal year. The increase was due mainly to higher yields on the loan portfolio due to the continued shift of loan balances from the one- to four-family loan portfolio to the higher yielding commercial loan portfolio, which outpaced the increase in the cost of deposits.
Interest and Dividend Income
The following table presents the components of interest and dividend income for the years presented, along with the change measured in dollars and percent.
For the Year Ended
September 30, Change Expressed in:
2025 2024 Dollars Percent
(Dollars in thousands)
INTEREST AND DIVIDEND INCOME:
Loans receivable $ 332,518 $ 308,707 $ 23,811 7.7 %
MBS 46,259 33,650 12,609 37.5
FHLB stock 8,997 10,009 (1,012) (10.1)
Cash and cash equivalents 8,368 15,728 (7,360) (46.8)
Investment securities 3,377 8,749 (5,372) (61.4)
Total interest and dividend income $ 399,519 $ 376,843 $ 22,676 6.0
The increase in interest income on loans receivable was due primarily to the continued shift of loan balances from the one- to four-family loan portfolio to higher yielding commercial loans. See additional discussion regarding the composition of the loan portfolio in the "Management's Discussion and Analysis of Financial Condition and Results of Operation - Loans Receivable" section above. The increase in interest income on MBS was due mainly to an increase in the average balance of the portfolio, due mainly to securities purchases between periods. Interest income on cash and cash equivalents decreased due largely to a decrease in the average balance, along with a decrease in the weighted average yield compared to the prior fiscal year due to lower FRB interest rates. The decrease in the average balance was mainly a result of the securities strategy in the prior fiscal year, as not all proceeds from the sale of securities were immediately redeployed. The decrease in interest income on investment securities was due to a decrease in average balance, due primarily to the securities purchased as part of the securities strategy being called or maturing during fiscal year 2024 and not being replaced in their entirety. The cash flows from the investment securities portfolio that were not reinvested were generally invested in the MBS portfolio.
Interest Expense
The following table presents the components of interest expense for the years presented, along with the change measured in dollars and percent.
For the Year Ended
September 30, Change Expressed in:
2025 2024 Dollars Percent
(Dollars in thousands)
INTEREST EXPENSE:
Deposits $ 146,262 $ 139,549 $ 6,713 4.8 %
Borrowings 72,946 75,233 (2,287) (3.0)
Total interest expense $ 219,208 $ 214,782 $ 4,426 2.1
The increase in interest expense on deposits was due primarily to growth in the high yield savings account, and to a lesser extent, an increase in the average balance of retail certificates of deposit. The increases were partially offset by a decrease in the weighted average rate paid on, and in the average balance of, money market accounts. See additional discussion regarding high yield savings in the "Management's Discussion and Analysis of Financial Condition and Results of Operation - Deposits" section above.
The decrease in interest expense on borrowings was due to a decrease in the average balance, which was partially offset by a higher weighted average interest rate. The decrease in the average balance of borrowings was due mainly to FHLB borrowings that matured between periods and were not renewed, along with a decrease in borrowings under the Federal Reserve's BTFP, which were repaid during the prior fiscal year using a portion of the proceeds from the securities strategy. Cash flows from the deposit portfolio were generally used to pay off maturing FHLB borrowings. The increase in the weighted average interest rate was due primarily to higher market interest rates on FHLB borrowings that matured and were renewed between periods.
Provision for Credit Losses
The Company recorded a provision for credit losses of $745 thousand during the current fiscal year compared to a provision for credit losses of $1.3 million for the prior fiscal year. The provision for credit losses in the current fiscal year was comprised of a $1.2 million increase in the ACL for loans, partially offset by a $457 thousand decrease in the reserve for off-balance sheet credit exposures. The increase in ACL for loans was due to commercial loan growth during the current fiscal year, partially offset by an update to the ACL model's regression analyses implemented during the current fiscal year which largely impacted the commercial loan portfolio. See additional details in the "Management's Discussion and Analysis of Financial Condition and Results of Operation - Allowance for Credit Losses" discussion above. The decrease in the reserve for off-balance sheet credit exposures was due mainly to a decrease in the balance of commercial real estate off-balance sheet credit exposures.
Non-Interest Income
The following table presents the components of non-interest income for the years presented, along with the change measured in dollars and percent.
For the Year Ended
September 30, Change Expressed in:
2025 2024 Dollars Percent
(Dollars in thousands)
NON-INTEREST INCOME:
Deposit service fees $ 11,043 $ 10,562 $ 481 4.6 %
Insurance commissions 3,605 3,257 348 10.7
Net loss from securities transactions - (13,345) 13,345 100.0
Other non-interest income 6,077 4,770 1,307 27.4
Total non-interest income $ 20,725 $ 5,244 $ 15,481 295.2
The increase in deposit service fees was due mainly to growth in treasury management service fees. The increase in insurance commissions was due primarily to the receipt of commissions exceeding accrued amounts. The net loss from securities transactions in the prior fiscal year was related to the securities strategy, with no similar transaction occurring in fiscal year 2025. Other non-interest income was higher in the current fiscal year due mainly to an increase in bank-owned life insurance ("BOLI") income primarily from an increase in the crediting rate as a result of updates made to certain existing policies that were executed during the current fiscal year. Additionally, in the prior fiscal year there was a net loss on a financial derivative related to a commercial lending relationship and no such loss in the current fiscal year due to the related loan being paid off in the prior fiscal year.
Non-Interest Expense
The following table presents the components of non-interest expense for the years presented, along with the change measured in dollars and percent.
For the Year Ended
September 30, Change Expressed in:
2025 2024 Dollars Percent
(Dollars in thousands)
NON-INTEREST EXPENSE:
Salaries and employee benefits $ 60,383 $ 52,272 $ 8,111 15.5 %
Information technology and related expense 19,690 20,324 (634) (3.1)
Occupancy, net 13,397 13,558 (161) (1.2)
Regulatory and outside services 5,433 5,743 (310) (5.4)
Advertising and promotional 4,950 4,264 686 16.1
Federal insurance premium 4,319 6,052 (1,733) (28.6)
Deposit and loan transaction costs 2,843 2,719 124 4.6
Office supplies and related expense 1,696 1,691 5 0.3
Other non-interest expense 4,559 5,320 (761) (14.3)
Total non-interest expense $ 117,270 $ 111,943 $ 5,327 4.8
The increase in salaries and employee benefits was mainly attributable to an increase in the number of employees between periods, merit increases and salary adjustments to remain market competitive, and a higher accrual of compensation during the current fiscal year than the prior fiscal year related to the Bank's short-term performance plan. The decrease in information technology and related expense was due mainly to a decrease in usage of third-party professional services along with a decrease in depreciation expense during the current fiscal year. The decrease in regulatory and outside services was due to a reduction in usage of certain outside services compared to the prior fiscal year. The increase in advertising and promotional expense was due to timing of campaigns, including campaigns from the prior fiscal year that were delayed until
the current fiscal year. The decrease in the federal insurance premium was due primarily to a decrease in the FDIC assessment rate as a result of the way the assessment rate was adjusted in fiscal year 2024 for the occurrence of the Bank's net loss during the quarter ended September 30, 2023. The decrease in other non-interest expense was due mainly to higher customer fraud losses in the prior fiscal year and the maturity of an interest rate swap agreement during the current fiscal year, which reduced the expense associated with the collateral held in relation to the interest rate swap.
The Company's efficiency ratio was 58.33% for the current fiscal year compared to 66.91% for the prior fiscal year. Excluding the net losses from the securities strategy, the efficiency ratio would have been 61.97% for the prior fiscal year. The improvement in the efficiency ratio, excluding the net losses from the securities strategy, was due primarily to higher net interest income compared to the prior fiscal year, partially offset by higher non-interest expense. The Company's operating expense ratio for the current fiscal year was 1.22% compared to 1.17% for the prior fiscal year. The operating expense ratio was higher in the current fiscal year due mainly to higher non-interest expense.
Income Tax Expense
The following table presents pretax income, income tax expense, and net income for the periods presented, along with the change measured in dollars and percent and effective tax rate.
For the Year Ended
September 30, Change Expressed in:
2025 2024 Dollars Percent
(Dollars in thousands)
Income before income tax expense $ 83,021 $ 54,103 $ 28,918 53.4 %
Income tax expense 14,996 16,093 (1,097) (6.8)
Net income $ 68,025 $ 38,010 $ 30,015 79.0
Effective Tax Rate 18.1 % 29.7 %
Income tax expense was lower in the current fiscal year compared to the prior fiscal year, due mainly to income tax associated with the pre-1988 bad debt recapture in the prior fiscal year, partially offset by higher pretax income in the current fiscal year. Management anticipates the effective tax rate for fiscal year 2026 will be 19% to 20%.
Fiscal Year 2026 Outlook
Salary and employee benefit expense is anticipated to increase approximately 9% from fiscal year 2025 due to the expected hiring of additional professionals, merit increases, continued staff compensation alignment with market compensation levels, and the impact of the first full year of compensation for recently hired sales professionals. Information technology expense in fiscal year 2025 was less than anticipated due primarily to projects being postponed to fiscal year 2026. It is anticipated that information technology expense will increase approximately 11% from fiscal year 2025 due to project postponements to fiscal year 2026, along with several new initiatives that are anticipated to be implemented during fiscal year 2026. Overall, non-interest expense is projected to increase 6% in fiscal year 2026 from the fiscal year 2025 amount. Management anticipates the FRB will continue to reduce rates during our 2026 fiscal year, which could result in a reduction in our deposit interest expense while our loan portfolio yield is expected to remain stable or increase due to the ongoing remixing of our loan portfolio. As a result of the strategic initiatives previously discussed, the Company could grow past $10 billion in total assets in the coming fiscal years.
Comparison of Operating Results for the Years Ended September 30, 2024 and 2023
For this discussion, see "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Comparison of Operating Results for the Years Ended September 30, 2024 and 2023" in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2024.
Liquidity and Capital Resources
Liquidity refers to our ability to generate sufficient cash to fund ongoing operations, to repay maturing certificates of deposit and other deposit withdrawals, to repay maturing borrowings, and to fund loan commitments. Liquidity management is both a daily and long-term function of our business management. The Company's most available liquid assets are represented by cash and cash equivalents and AFS securities. The Bank's primary sources of funds are deposits, FHLB borrowings, repayments and maturities of outstanding loans and MBS and other short-term investments, and funds provided by operations. The Bank's long-term borrowings primarily have been used to manage long-term liquidity needs and the Bank's interest rate risk with the intention to improve the earnings of the Bank while maintaining capital ratios that meet or exceed the regulatory standards for well-capitalized financial institutions. In addition, the Bank's focus on managing risk has provided additional liquidity capacity by maintaining a balance of MBS and investment securities available as collateral for borrowings.
We generally intend to manage cash reserves sufficient to meet short-term liquidity needs, which are routinely forecasted for 10, 30, and 365 days. Additionally, on a monthly basis, we perform a liquidity stress test in accordance with the Interagency Policy Statement on Funding and Liquidity Risk Management. The liquidity stress test incorporates both short-term and long-term liquidity scenarios in order to identify and to quantify liquidity risk. Management also monitors key liquidity statistics related to items such as wholesale funding gaps, borrowings capacity, and available unpledged collateral, as well as various liquidity ratios.
In the event short-term liquidity needs exceed available cash, the Bank has access to a line of credit at the FHLB, in addition to the FRB of Kansas City's discount window. Per FHLB's lending guidelines, total FHLB borrowings cannot exceed 40% of Bank Call Report total assets without the pre-approval of FHLB senior management. The Bank's FHLB borrowing limit was 45% of Bank Call Report total assets as of September 30, 2025, as approved by FHLB senior management. At September 30, 2025, the ratio of the par value of the Bank's FHLB borrowings to the Bank's Call Report total assets was 20%. The Bank's borrowing limit approved by FHLB senior management became 44% starting November 1, 2025. The borrowing limit as of November 1, 2025 was calculated based on a FHLB collateral analysis that is part of FHLB's overall borrowing capacity framework. FHLB borrowings are secured by certain qualifying loans pursuant to a blanket collateral agreement with FHLB. The amount that can be borrowed from the FRB of Kansas City's discount window is based upon the fair value of securities pledged as collateral. At September 30, 2025, the amount of securities pledged for the discount window was $91.1 million. At September 30, 2025, there were no borrowings from the FRB of Kansas City's discount window. Management tests the Bank's access to the FRB of Kansas City's discount window at least annually with a nominal overnight borrowing.
If management observes unusual trends in the amount and frequency of line of credit utilization and/or short-term borrowings that are not in conjunction with a planned strategy, the Bank will likely utilize term wholesale borrowing sources such as FHLB advances to provide term funding. The maturities of our borrowings are generally staggered in order to mitigate the risk of a highly negative cash flow position at maturity. The Bank has used fully-amortizing FHLB advances that require periodic payments of principal over the term of the advance. This type of advance allows the Bank the opportunity to start repricing its liability cash flows sooner in a down-rate environment and generally provides for favorable pricing when compared to similar long term bullet advances with comparable average lives as a result of the current term structure of interest rates. The Bank's internal policy limits total borrowings to 55% of total assets. At September 30, 2025, the Bank had total borrowings, at par, of $1.95 billion, or approximately 20% of the Bank's Call Report total assets. The borrowings balance was composed primarily of FHLB advances, of which, $509.7 million is scheduled to be repaid (amortizing advances) or mature in the next 12 months. Management estimated that the Bank had $2.92 billion in liquidity available at September 30, 2025, based on the Bank's blanket collateral agreement with FHLB and unencumbered securities.
The Bank is a member of the American Finance Exchange ("AFX") through which it may borrow funds on an overnight or short-term basis with other member institutions. The availability of funds changes daily. At September 30, 2025, the Bank did not have any such borrowings outstanding through the AFX.
At September 30, 2025, the Bank had no repurchase agreements. The Bank may enter into repurchase agreements as management deems appropriate, not to exceed 15% of total assets, and subject to the total borrowings internal policy limit of 55% as discussed above.
The Bank has the ability to utilize the repayment and maturity of outstanding loans, MBS, and other investments for liquidity needs rather than reinvesting such funds into the related portfolios. At September 30, 2025, the Bank had $713.6 million of securities that were eligible but unused as collateral for borrowing or other liquidity needs. The Bank also has access to other sources of funds for liquidity purposes, such as brokered and public unit certificates of deposit. As of September 30, 2025, the Bank's policy allowed for combined brokered and public unit certificates of deposit up to 15% of total deposits. At September 30, 2025, the Bank did not have any brokered certificates of deposit, and public unit certificates of deposit were approximately 2% of total deposits. The Bank had pledged securities with an estimated fair value of $150.9 million as collateral for public unit certificates of deposit at September 30, 2025. The securities pledged as collateral for public unit certificates of deposit are held under joint custody with FHLB and generally will be released upon deposit maturity.
At September 30, 2025, $2.17 billion of the Bank's certificate of deposit portfolio was scheduled to mature within the next 12 months, including $83.6 million of public unit certificates of deposit and $53.5 million of commercial certificates of deposit. Based on our deposit retention experience and our current pricing strategy, we anticipate the majority of the maturing retail certificates of deposit will renew or transfer to other deposit products of the Bank at prevailing rates, although no assurance can be given in this regard. Due to the nature of public unit certificates of deposit and commercial certificates of deposit, retention rates are not as predictable as retail certificates of deposit.
The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of customers. These financial instruments consist primarily of commitments to originate, purchase, or participate in loans or fund lines of credit. Additionally, the Company has investments in several low-income housing partnerships and, under the terms of the agreements, the Company has a commitment to fund a specified amount that will be due in installments over the life of the agreements. See "Part II, Item 8. Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 6. Low Income Housing Partnerships and Note 12. Commitments and Contingencies" for additional information regarding these commitments.
While scheduled payments from the amortization of loans and MBS and payments on short-term investments are relatively predictable sources of funds, deposit flows, prepayments on loans and MBS, and calls of investment securities are greatly influenced by general interest rates, economic conditions, and competition, and are less predictable sources of funds. To the extent possible, the Bank manages the cash flows of its loan and deposit portfolios by the rates it offers customers. We anticipate we will continue to have sufficient funds, through the repayments and maturities of loans and securities, deposits and borrowings, to meet our current commitments.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Asset and Liability Management and Market Risk
The rates of interest the Bank earns on its assets and pays on its liabilities are generally established contractually for a period of time. Fluctuations in interest rates have a significant impact not only upon our net income, but also upon the cash flows and market values of our assets and liabilities. Our results of operations, like those of other financial institutions, are impacted by changes in interest rates and the interest rate sensitivity of our interest-earning assets and interest-bearing liabilities. Risk associated with changes in interest rates on the earnings of the Bank and the market value of its financial assets and liabilities is known as interest rate risk. Interest rate risk is our most significant market risk, and our ability to adapt to changes in interest rates is known as interest rate risk management.
The general objective of our interest rate risk management program is to determine and manage an appropriate level of interest rate risk while maximizing net interest income in a manner consistent with our policy to manage, to the extent practicable, the exposure of net interest income to changes in market interest rates. The Board of Directors and Asset and Liability Management Committee ("ALCO") regularly review the Bank's interest rate risk exposure by forecasting the impact of hypothetical, alternative interest rate environments on net interest income and the market value of portfolio equity ("MVPE") at various dates. The MVPE is defined as the net of the present value of cash flows from existing assets, liabilities, and off-balance sheet instruments. The present values are determined based upon market conditions as of the date of the analysis, as well as in alternative interest rate environments providing potential changes in the MVPE under those environments. Net interest income is projected in the same alternative interest rate environments with both a static balance sheet and with management strategies considered. The MVPE and net interest income analyses are also conducted to estimate our sensitivity to rates for future time horizons based upon market conditions as of the date of the analysis. The
MVPE ratio continues to be an important measurement for management as we consider the changes in market rates, liquidity needs, and portfolio balances. MVPE represents a long-term view of the interest sensitivity of the Bank's balance sheet while our net interest income projections inform management of the short-term impacts of pricing decisions. In addition to the interest rate environments presented below, management also reviews the impact of non-parallel rate shock scenarios on a quarterly basis. These scenarios consist of flattening and steepening the yield curve by changing short-term and long-term interest rates independent of each other, and simulating cash flows and determining valuations as a result of these hypothetical changes in interest rates to identify rate environments that pose the greatest risk to the Bank. This analysis helps management quantify the Bank's exposure to changes in the shape of the yield curve.
General assumptions used by management to evaluate the sensitivity of our financial performance to changes in interest rates presented in the tables below are utilized in, and set forth under, the gap table and related notes. 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 September 30, 2025.
Qualitative Disclosure about Market Risk
Gap Table. The following gap table summarizes the anticipated maturities or repricing periods of the Bank's interest-earning assets and interest-bearing liabilities based on the information and assumptions set forth in the notes below. Cash flow projections for mortgage-related assets are calculated based in part on prepayment assumptions at current and projected interest rates. Prepayment projections are subjective in nature, involve uncertainties and assumptions and, therefore, cannot be determined with a high degree of accuracy. Although certain assets and liabilities may have similar maturities or periods to repricing, they may react differently to changes in market interest rates. Assumptions may not reflect how actual yields and costs respond to market interest rate changes. The interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types of assets and liabilities may lag behind changes in market interest rates. Certain assets, such as adjustable-rate loans, have features that restrict changes in interest rates on a short-term basis and over the life of the asset. 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. 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.
More Than More Than
Within One Year to Three Years Over
One Year Three Years to Five Years Five Years Total
Interest-earning assets: (Dollars in thousands)
Loans receivable(1)
$ 2,228,781 $ 1,899,064 $ 1,279,761 $ 2,680,708 $ 8,088,314
Securities(2)
187,493 319,172 166,178 174,526 847,369
Other interest-earning assets 229,134 - - - 229,134
Total interest-earning assets 2,645,408 2,218,236 1,445,939 2,855,234 9,164,817
Interest-bearing liabilities:
Non-maturity deposits(3)
948,416 607,043 438,536 1,602,403 3,596,398
Certificates of deposit 2,169,268 800,449 42,700 263 3,012,680
Borrowings(4)
511,316 1,392,292 56,267 23,311 1,983,186
Total interest-bearing liabilities 3,629,000 2,799,784 537,503 1,625,977 8,592,264
Excess (deficiency) of interest-earning assets over
interest-bearing liabilities $ (983,592) $ (581,548) $ 908,436 $ 1,229,257 $ 572,553
Cumulative excess (deficiency) of interest-earning assets over
interest-bearing liabilities $ (983,592) $ (1,565,140) $ (656,704) $ 572,553
Cumulative excess (deficiency) of interest-earning assets over interest-bearing
liabilities as a percent of total Bank assets at:
September 30, 2025 (10.1) % (16.0) % (6.7) % 5.9 %
September 30, 2024 (15.9)
Cumulative one-year gap - interest rates +200 bps at:
September 30, 2025 (12.2)
September 30, 2024 (17.9)
Cumulative one-year gap - interest rates -200 bps at:
September 30, 2025 (5.8)
September 30, 2024 (12.5)
(1)Adjustable-rate loans are included in the period in which the rate is next scheduled to adjust or in the period in which repayments are expected to occur, or prepayments are expected to be received, prior to their next rate adjustment, rather than in the period in which the loans are due. 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.
(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 September 30, 2025, 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 $3.63 billion, for a cumulative one-year gap of (37.1)% 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 interest rate swaps. The repricing of these liabilities is projected to occur at the maturity date of each interest rate swap.
At September 30, 2025, the Bank's gap between the amount of interest-earning assets and interest-bearing liabilities projected to reprice within one year was $(983.6) million, or (10.1)% of total assets, compared to $(1.51) billion, or (15.8)% of total assets, at September 30, 2024. 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 September 30, 2025, compared to September 30, 2024, due primarily to an increase in the balance of adjustable-rate loans as the Bank continues to shift its loan portfolio from fixed-rate one- to four-family loans to commercial loans, which tend to have adjustable-rate features. The increase in projected asset cash flows, which was primarily driven by an increased balance of commercial loans, was partially offset by a decrease in the amount of fixed-rate mortgage-related asset cash flows as a result of a general decrease in balance as well as to a decrease in projected prepayment speeds, from September 30, 2024, as a result of an increase in intermediate and long-term interest and mortgage rates. Changes in projected liability cash flows, between the two periods, were largely offsetting. Increases resulting from increases in non-maturity deposits were fully offset by projected decreases in the Bank's borrowings portfolio and, to a lesser extent, the certificate of deposit portfolio. The decrease in borrowings was primarily related to the Bank prepaying and replacing $200.0 million of fixed-rate FHLB advances during the prior quarter that went from a weighted average remaining term of 0.6 years to 2.5 years, as well as to a continued decrease in the overall balance of wholesale funds.
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 September 30, 2025, the Bank's one-year gap would have been projected to be $(1.19) billion, or (12.2)% of total assets. If interest rates were to decrease 200 basis points, as of September 30, 2025, the Bank's one-year gap would have been projected to be $(570.8) million, or (5.8)% 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. In higher rate environments, prepayments on mortgage-related assets are projected to be lower and, in lower rate environments, prepayments are projected to be higher. This compares to a projected one-year gap of $(1.71) billion, or (17.9)% of total assets, if interest rates were to have increased 200 basis points as of September 30, 2024, and a projected one-year gap of $(1.19) billion, or (12.5)% of total assets, if interest rates were to have decreased 200 basis points as of the same date.
Change in Net Interest Income. The Bank's net interest income projections reflect simulated responses to interest rates of assets and liabilities that are expected to mature or reprice over the next year. Repricing occurs as a result of cash flows that are received or paid on assets or due on liabilities which would be replaced at then current market interest rates or on adjustable-rate products that reset during the next year. The Bank's borrowings and certificate of deposit portfolios have stated maturities, and the cash flows related to fixed-rate liabilities do not generally fluctuate as a result of changes in interest rates. Cash flows from mortgage-related assets and callable agency debentures can vary significantly as a result of changes in interest rates. As interest rates decrease, borrowers have an economic incentive to lower their cost of debt by refinancing or endorsing their mortgage to a lower interest rate. Similarly, agency debt issuers are more likely to exercise embedded call options and issue new securities at a lower interest rate.
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. The change in each interest rate environment represents the difference between estimated net interest income in the zero basis point interest rate environment ("base case," assumes the forward market and product interest rates implied by the yield curve are realized) and the estimated net interest income in each alternative interest rate environment (assumes market and product interest rates have a parallel shift in rates across all maturities by the indicated change in rates). Projected cash flows for each scenario are based upon varying prepayment assumptions to model anticipated customer behavior changes as market rates change. Estimations of net interest income used in preparing the table below were based upon the assumptions that the total composition of interest-earning assets and interest-bearing liabilities do not change materially and that any repricing of assets or liabilities occurs at anticipated product and market rates for the alternative rate environments as of the dates presented. The estimation of net interest income does not include any projected gains or losses related to the sale of assets, or income derived from non-interest income sources, but does include the use of different prepayment assumptions in the alternative interest rate environments. It is important to consider that estimated changes in net interest income are for a cumulative four-quarter period. These do not reflect the earnings expectations of management.
Change Net Interest Income At September 30,
(in Basis Points) 2025 2024
in Interest Rates(1)
Amount ($) Change ($) Change (%) Amount ($) Change ($) Change (%)
(Dollars in thousands)
-300 bp $ 202,033 $ (8,667) (4.1) % $ 188,322 $ 11,696 6.6 %
-200 bp 203,014 (7,686) (3.7) 183,769 7,143 4.0
-100 bp 206,913 (3,787) (1.8) 180,936 4,310 2.4
000 bp 210,700 - - 176,626 - -
+100 bp 212,822 2,122 1.0 171,222 (5,404) (3.1)
+200 bp 213,755 3,055 1.5 165,422 (11,204) (6.3)
+300 bp 214,061 3,361 1.6 158,758 (17,868) (10.1)
(1)Assumes an instantaneous, parallel, and permanent change in interest rates at all maturities.
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 September 30, 2025 compared to September 30, 2024, due primarily to an increase in the average balance and average rate of the Bank's loan portfolio, lower costing liabilities, as well as to the steepening of the yield curve between the two periods. As a result, interest income projections associated with the Bank's interest-earning asset cash flows, primarily the loan portfolio, increased by more than the increase in interest expense projections on the Bank's interest-bearing liability cash flows. As of September 30, 2025, projected net interest income increased in each of the increasing rate scenarios presented and decreased in each of the decreasing rate scenarios presented, compared to September 30, 2024, where the opposite profile existed. This change was due primarily to growth in the Bank's commercial loan portfolio between the two periods, as well as to a decrease in the amount of projected interest-bearing liabilities coming due between the two periods, mainly within the wholesale borrowings 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. The decrease in borrowings was primarily related to the Bank prepaying and replacing $200.0 million of fixed-rate FHLB advances during the current fiscal year that went from a weighted average remaining term of 0.6 years to 2.5 years, as well as to a continued decrease in the overall balance of wholesale funds.
Change in MVPE. Changes in the estimated market values of our financial assets and liabilities drive changes in estimates of MVPE. The market value of an asset or liability reflects the present value of all the projected cash flows over its remaining life, discounted at market interest rates. As interest rates rise, generally the market value for both financial assets and liabilities decrease. The opposite is generally true as interest rates fall. The MVPE represents the theoretical market value of capital that is calculated by netting the market value of assets, liabilities, and off-balance sheet instruments. If the market values of financial assets increase by more than the market values of financial liabilities, or if the market values of financial liabilities decrease by more than the market values of financial assets, the MVPE will increase. The market value of shorter term-to-maturity and floating/adjustable-rate financial instruments is less sensitive to changes in interest rates than is the case with longer term-to-maturity and fixed-rate financial instruments. As a result, the market values of our certificates of deposit (which generally have relatively shorter average lives) tend to display less sensitivity to changes in interest rates than do our mortgage-related assets (which generally have relatively longer average lives). The average life expected on our mortgage-related assets varies under different interest rate environments because borrowers have the ability to prepay their mortgage loans. Therefore, as interest rates decrease, the WAL of mortgage-related assets typically decreases as well. As interest rates increase, the WAL is expected to increase, which also increases the sensitivity of these assets in higher rate environments.
The following table sets forth the estimated change in the MVPE for each date presented based on the indicated instantaneous, parallel, and permanent change in interest rates. The change in each interest rate environment represents the difference between the MVPE in the base case (assumes the forward market interest rates implied by the yield curve are realized) and the MVPE in each alternative interest rate environment (assumes market interest rates have a parallel shift in rates). Projected cash flows for each scenario are based upon varying prepayment assumptions to model anticipated customer behavior as market rates change. The estimations of the MVPE presented in the table below were based upon the assumption that the total composition of interest-earning assets and interest-bearing liabilities do not change, that any repricing of assets or liabilities occurs at current product or market rates for the alternative rate environments as of the dates presented, and that different prepayment rates were used in each alternative interest rate environment. The estimated MVPE results from the valuation of cash flows from financial assets and liabilities over the anticipated lives of each for each interest rate environment. The table below presents the effects of the changes in interest rates on our assets and liabilities as they mature, repay, or reprice, as shown by the change in the MVPE for alternative interest rates.
Change Market Value of Portfolio Equity At September 30,
(in Basis Points) 2025 2024
in Interest Rates(1)
Amount ($) Change ($) Change (%) Amount ($) Change ($) Change (%)
(Dollars in thousands)
-300 bp $ 1,477,941 $ 315,678 27.2 % $ 1,460,440 $ 359,922 32.7 %
-200 bp 1,362,942 200,679 17.3 1,345,708 245,190 22.3
-100 bp 1,256,515 94,252 8.1 1,218,938 118,420 10.8
000 bp 1,162,263 - - 1,100,518 - -
+100 bp 1,026,750 (135,513) (11.7) 962,354 (138,164) (12.6)
+200 bp 873,123 (289,140) (24.9) 797,497 (303,021) (27.5)
+300 bp 725,096 (437,167) (37.6) 634,145 (466,373) (42.4)
(1)Assumes an instantaneous, parallel, and permanent change in interest rates at all maturities.
The Bank's estimated MVPE remained largely unchanged, increasing from $1.10 billion at September 30, 2024 to $1.16 billion at September 30, 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, helped to offset the impact resulting from an increase in intermediate and long-term market interest rates between the two periods. 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 $400.0 million and the balance of its commercial loans increased $607.0 million.
In elevated interest rate environments, such as the current environment, the estimated market value of the Bank's one- to four-family loan portfolio in the base case scenario is reduced as the average rate of the 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, will continue to increase. The steepening of the yield curve between periods did not result in an overall decrease in the Bank's estimated MVPE in the base case because the shift in the loan portfolio, as described above, had a greater positive impact on MVPE than the change realized on the Bank's liabilities.
As interest rates increase, 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 borrowers to prepay their debt, resulting in an increase in the 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 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 higher projected cash flows on these assets. The resulting shorter expected average lives of those 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 longer duration in these rate scenarios, which equates to greater market value 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 September 30, 2025. Yields presented for interest-earning assets include the amortization of fees, costs, premiums and discounts, which are considered adjustments to the yield. The interest rate presented for term borrowings is the effective rate, which includes the impact of interest rate swaps and the amortization of deferred prepayment penalties resulting from FHLB advances previously prepaid. The WAL presented for term borrowings includes the effect of interest rate swaps.
Amount Yield/Rate WAL % of Category % of Total
(Dollars in thousands)
Securities $ 867,216 5.45 % 3.4 9.3 %
Loans receivable:
Fixed-rate one- to four-family 5,000,714 3.51 6.7 61.5 % 53.4
Fixed-rate commercial 652,018 5.42 2.0 8.0 7.0
All other fixed-rate loans 34,356 7.14 7.1 0.4 0.4
Total fixed-rate loans 5,687,088 3.75 6.2 69.9 60.8
Adjustable-rate one- to four-family 887,867 4.48 4.0 10.9 9.5
Adjustable-rate commercial 1,463,977 6.03 3.5 18.0 15.7
All other adjustable-rate loans 94,943 7.91 3.2 1.2 1.0
Total adjustable-rate loans 2,446,787 5.54 3.7 30.1 26.2
Total loans receivable 8,133,875 4.29 5.4 100.0 % 87.0
FHLB stock 90,662 9.22 1.8 1.0
Cash and cash equivalents 252,443 3.77 - 2.7
Total interest-earning assets $ 9,344,196 4.43 5.0 100.0 %
Non-maturity deposits $ 2,977,397 1.21 5.2 49.7 % 37.5 %
Retail certificates of deposit 2,828,982 3.73 0.8 47.2 35.6
Commercial certificates of deposit 61,819 3.61 0.7 1.0 0.8
Public unit certificates of deposit 121,879 4.06 0.8 2.1 1.5
Total interest-bearing deposits 5,990,077 2.48 3.0 100.0 % 75.4
Term borrowings 1,952,047 3.53 1.5 24.6
Total interest-bearing liabilities $ 7,942,124 2.74 2.6 100.0 %

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Capitol Federal Financial, Inc.:
Opinion on Internal Control Over Financial Reporting
We have audited Capitol Federal Financial, Inc. and subsidiary's (the Company) internal control over financial reporting as of September 30, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of September 30, 2025 and 2024, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the years in the two-year period ended September 30, 2025, and the related notes (collectively, the consolidated financial statements), and our report dated November 26, 2025 expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ KPMG LLP
Kansas City, Missouri
November 26, 2025
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors
Capitol Federal Financial, Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Capitol Federal Financial, Inc. and subsidiary (the Company) as of September 30, 2025 and 2024, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the years in the two-year period ended September 30, 2025, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the two-year period ended September 30, 2025, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of September 30, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated November 26, 2025 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Allowance for credit losses on loans evaluated on a collective basis
As discussed in Notes 1 and 4 to the consolidated financial statements, the Company’s total allowance for credit losses on loans (ACL) was $24.0 million as of September 30, 2025, a substantial portion of which related to the allowance for credit losses for loans evaluated on a collective basis (the collective ACL). The collective ACL includes the measure of expected lifetime credit losses on a pool basis, with loans aggregated into pools based on similar risk characteristics. The Company utilized a discounted cash flow (DCF) methodology to calculate the collective ACL. Average historical loss rates are calculated for each pool using the Company's historical charge-offs, or peer data when the Company's own historical loss rates are not reflective of future loss expectations, and outstanding loan balances during a historical time period. These historical loss rates are compared to historical data related to economic indices during the same time periods over which the historical loss rates were calculated, and a correlation is estimated using regression analysis. The Company's model pairs the results of the regression analysis with an economic forecast of these same economic indices in order to model probabilities of default (PDs). The PDs are then used to generate expected cash flows using segment-specific risk factors and other assumptions to model loss given defaults (LGDs). The forecast is applied for a reasonable and supportable time period of four quarters before reverting back to historical loss experience, which is accomplished by reversion to long-term historical averages at the economic index level using a straight-line method over four quarters. Contractual cash flows are adjusted for
expected prepayment speeds and curtailment rates. Using all of these inputs and assumptions, the DCF methodology generates aggregated estimated cash flows for the time period that remains in each loan's contractual life. These cash flows are discounted back to the reporting date using each loan's effective yield, to arrive at a present value of future cash flows. Each loan pool's allowance estimate is equal to the aggregate shortage, if any, of the present value of future cash flows compared to the amortized cost basis of the loan pool. Qualitative factors are considered for items not included in historical loss rates, macroeconomic forecasts, or other model inputs based on management's current assessment of risks related to loan portfolio attributes and external factors.
We identified the assessment of the collective ACL as a critical audit matter. A high degree of audit effort, including specialized skills and knowledge in the industry, and subjective and complex auditor judgment was involved in the assessment of the collective ACL. Specifically, the assessment encompassed the evaluation of the collective ACL methodology, including the methods and models used to estimate (1) the PD and LGD and their significant assumptions, including the economic forecast and economic indices, the reasonable and supportable forecast and reversion periods, and peer data used for historical loss rates; (2) expected prepayment speeds and curtailment rates; and (3) the large dollar commercial real estate loan concentration qualitative factor. The assessment also included an evaluation of the conceptual soundness and performance of the underlying models and assumptions. In addition, auditor judgment was required to evaluate the sufficiency of audit evidence obtained.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the measurement of the collective ACL, including controls related to the:
•design of the collective ACL methodology
•continued use and appropriateness of the PD and LGD models
•model validation and performance monitoring of the PD and LGD models
•identification and determination of the significant assumptions used in the PD and LGD models
•development of the qualitative factors, including the significant assumptions used in the measurement of the qualitative factors
•analysis of the collective ACL results, trends, and ratios.
We evaluated the Company’s process to develop the collective ACL estimate by testing certain sources of data, factors, and assumptions that the Company used, and considered the relevance and reliability of such data, factors, and assumptions. In addition, we involved credit risk professionals with specialized skills and knowledge, who assisted in:
•evaluating the Company’s collective ACL methodology for compliance with U.S. generally accepted accounting principles
•evaluating judgments made by the Company relative to the performance monitoring of the PD and LGD models by comparing them to relevant Company specific metrics and trends and the applicable industry practices and regulatory guidance
•assessing the conceptual soundness and performance testing of the PD and LGD models by inspecting the model validation documentation to determine whether the model is suitable for its intended use
•evaluating the methodology used to select the economic forecast and economic indices, the reasonable and supportable forecast and reversion periods, peer data used for average historical loss rates, and prepayment speeds and curtailment rates by comparing them to the Company’s business environment and relevant industry practices
•evaluating the methodology used to develop the large dollar commercial real estate loan concentrations qualitative factor and the effect of that factor on the collective ACL by comparing it to relevant credit risk factors and consistency with credit trends.
We also assessed the sufficiency of the audit evidence obtained relative to the collective ACL by evaluating the:
•cumulative results of the audit procedures
•qualitative aspects of the Company’s accounting practices
•potential bias in the accounting estimates
/s/ KPMG LLP
We have served as the Company’s auditor since 2024.
Kansas City, Missouri
November 26, 2025
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of Capitol Federal Financial, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Capitol Federal Financial, Inc. and subsidiary (the "Company") as of September 30, 2023, the related consolidated statements of income, comprehensive income, stockholders' equity, and cash flows, for the period ended September 30, 2023, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2023, and the results of its operations and its cash flows for the period ended September 30, 2023, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ Deloitte & Touche LLP
Kansas City, Missouri
November 29, 2023
We began serving as the Company's auditor in 1974. In 2024 we became the predecessor auditor.
CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2025 and 2024 (Dollars in thousands, except per share amounts)
2025 2024
ASSETS:
Cash and cash equivalents (includes interest-earning deposits of $229,566 and $192,138)
$ 252,443 $ 217,307
Available-for-sale ("AFS") securities, at estimated fair value (amortized cost of $847,369 and $829,852)
867,216 856,266
Loans receivable, net (allowance for credit losses ("ACL") of $24,039 and $23,035)
8,111,961 7,907,338
Federal Home Loan Bank Topeka ("FHLB") stock, at cost 90,662 101,175
Premises and equipment, net 89,314 91,463
Income taxes receivable, net 220 359
Deferred income tax assets, net 23,826 21,978
Other assets 343,059 331,722
TOTAL ASSETS $ 9,778,701 $ 9,527,608
LIABILITIES:
Deposits $ 6,591,448 $ 6,129,982
Borrowings 1,950,770 2,179,564
Advances by borrowers 65,416 61,801
Deferred income tax liabilities, net 2,056 -
Other liabilities 121,334 123,991
Total liabilities 8,731,024 8,495,338
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; 100,000,000 shares authorized, no shares issued or outstanding
- -
Common stock, $.01 par value; 1,400,000,000 shares authorized, 132,204,305 and 132,735,565 shares issued and outstanding as of September 30, 2025 and 2024, respectively
1,322 1,327
Additional paid-in capital 1,142,711 1,146,851
Unearned compensation, Employee Stock Ownership Plan ("ESOP") (24,780) (26,431)
Accumulated deficit (87,331) (111,104)
Accumulated other comprehensive income ("AOCI"), net of tax 15,755 21,627
Total stockholders' equity 1,047,677 1,032,270
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 9,778,701 $ 9,527,608
See accompanying notes to consolidated financial statements.
CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED SEPTEMBER 30, 2025, 2024, and 2023 (Dollars in thousands, except per share amounts)
2025 2024 2023
INTEREST AND DIVIDEND INCOME:
Loans receivable $ 332,518 $ 308,707 $ 280,087
Mortgage-backed securities ("MBS") 46,259 33,650 18,520
FHLB stock 8,997 10,009 13,821
Cash and cash equivalents 8,368 15,728 43,796
Investment securities 3,377 8,749 3,565
Total interest and dividend income 399,519 376,843 359,789
INTEREST EXPENSE:
Deposits 146,262 139,549 82,267
Borrowings 72,946 75,233 124,250
Total interest expense 219,208 214,782 206,517
NET INTEREST INCOME 180,311 162,061 153,272
PROVISION FOR CREDIT LOSSES 745 1,259 6,838
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 179,566 160,802 146,434
NON-INTEREST INCOME:
Deposit service fees 11,043 10,562 12,745
Insurance commissions 3,605 3,257 3,487
Net loss from securities transactions - (13,345) (192,622)
Other non-interest income 6,077 4,770 4,935
Total non-interest income 20,725 5,244 (171,455)
NON-INTEREST EXPENSE:
Salaries and employee benefits 60,383 52,272 51,491
Information technology and related expense 19,690 20,324 23,425
Occupancy, net 13,397 13,558 14,236
Regulatory and outside services 5,433 5,743 6,039
Advertising and promotional 4,950 4,264 4,305
Federal insurance premium 4,319 6,052 4,456
Deposit and loan transaction costs 2,843 2,719 2,694
Office supplies and related expense 1,696 1,691 2,499
Other non-interest expense 4,559 5,320 4,789
Total non-interest expense 117,270 111,943 113,934
INCOME (LOSS) BEFORE INCOME TAX EXPENSE 83,021 54,103 (138,955)
INCOME TAX EXPENSE (BENEFIT) 14,996 16,093 (37,296)
NET INCOME (LOSS) $ 68,025 $ 38,010 $ (101,659)
Basic earnings (loss) per share ("EPS") $ 0.52 $ 0.29 $ (0.76)
Diluted EPS $ 0.52 $ 0.29 $ (0.76)
See accompanying notes to consolidated financial statements.
CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
YEARS ENDED SEPTEMBER 30, 2025, 2024, and 2023 (Dollars in thousands)
2025 2024 2023
Net income (loss) $ 68,025 $ 38,010 $ (101,659)
Other comprehensive income (loss), net of tax:
Unrealized (losses) gains on AFS securities arising during the period, net of taxes of $1,587, $(7,133), and $(2,696)
(4,980) 22,362 8,355
Reclassification adjustment for net (gains) losses on AFS securities included in net income, net of taxes of $0, $383, and $(47,000)
- (1,188) 145,622
Unrealized gains (losses) on cash flow hedges arising during the period, net of taxes of $(443), $701, and $(1,923)
1,391 (2,135) 5,957
Reclassification adjustment for cash flow hedge amounts included in net income, net of taxes of $727, $1,967, and $1,808
(2,283) (6,112) (5,601)
Total other comprehensive income (loss), net of tax (5,872) 12,927 154,333
Comprehensive income $ 62,153 $ 50,937 $ 52,674
See accompanying notes to consolidated financial statements.
CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 2025, 2024, and 2023 (Dollars in thousands, except per share amounts)
Additional Unearned Total
Common Paid-In Compensation Accumulated Stockholders'
Stock Capital ESOP Deficit AOCI Equity
Balance at September 30, 2022 $ 1,388 $ 1,190,213 $ (29,735) $ 80,266 $ (145,633) $ 1,096,499
Net loss, fiscal year 2023 (101,659) (101,659)
Other comprehensive income, net of tax 154,333 154,333
ESOP activity (473) 1,652 1,179
Stock-based compensation 327 327
Repurchase of common stock (29) (23,424) - (23,453)
Cash dividends to stockholders ($0.62 per share)
(83,172) (83,172)
Balance at September 30, 2023 1,359 1,166,643 (28,083) (104,565) 8,700 1,044,054
Net income, fiscal year 2024 38,010 38,010
Cumulative effect of adopting Accounting Standards Update ("ASU") 2022-02 (27) (27)
Other comprehensive income, net of tax 12,927 12,927
ESOP activity (725) 1,652 927
Restricted stock activity, net 1 (10) (9)
Stock-based compensation 358 358
Repurchase of common stock (33) (19,415) - (19,448)
Cash dividends to stockholders ($0.34 per share)
(44,522) (44,522)
Balance at September 30, 2024 1,327 1,146,851 (26,431) (111,104) 21,627 1,032,270
Net income, fiscal year 2025 68,025 68,025
Other comprehensive loss, net of tax (5,872) (5,872)
ESOP activity (655) 1,651 996
Restricted stock activity, net 1 (4) (3)
Stock-based compensation 400 400
Repurchase of common stock (6) (3,881) (3,887)
Cash dividends to stockholders ($0.34 per share)
(44,252) (44,252)
Balance at September 30, 2025 $ 1,322 $ 1,142,711 $ (24,780) $ (87,331) $ 15,755 $ 1,047,677
See accompanying notes to consolidated financial statements.
CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 2025, 2024, and 2023 (Dollars in thousands)
2025 2024 2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 68,025 $ 38,010 $ (101,659)
Adjustments to reconcile net income to net cash provided by operating activities:
FHLB stock dividends (8,997) (10,009) (13,821)
Provision for credit losses 745 1,259 6,838
Originations of loans receivable held-for-sale ("LHFS") (2,998) (712) (1,217)
Proceeds from sales of LHFS 4,859 725 1,222
Amortization and accretion of premiums and discounts on securities (3,296) (8,182) 3,016
Depreciation and amortization of premises and equipment 7,196 7,929 9,039
Amortization of intangible assets 523 774 1,069
Amortization of deferred amounts related to FHLB advances, net 1,444 1,529 1,643
Common stock committed to be released for allocation - ESOP 996 927 1,179
Stock-based compensation 400 358 327
Provision for deferred income taxes 2,080 3,546 (45,520)
Net loss from securities transactions - 13,345 192,622
Changes in:
Unrestricted cash collateral from derivative counterparties, net (1,220) (11,850) 1,940
Other assets, net 6,321 8,227 2,528
Income taxes receivable, net 114 8,139 (7,303)
Other liabilities (21,151) (22,831) (4,372)
Net cash provided by operating activities 55,041 31,184 47,531
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of AFS securities (248,207) (1,176,645) -
Proceeds from calls, maturities and principal reductions of AFS securities 233,986 455,110 186,860
Proceeds from sale of AFS securities - 1,272,512 -
Proceeds from the redemption of FHLB stock 21,241 19,548 358,491
Purchase of FHLB stock (1,731) - (354,760)
Net change in loans receivable (207,622) 63,626 (520,229)
Proceeds from sale of participating interest in loans receivable - - 5,563
Purchase of premises and equipment (5,202) (7,184) (6,281)
Proceeds from sale of other real estate owned ("OREO") 239 464 533
Proceeds from sale of premises and equipment 43 - -
Proceeds from sale of assets held-for-sale - 629 -
Proceeds from bank-owned life insurance ("BOLI") death benefit 667 1,049 720
Net cash (used in) provided by investing activities (206,586) 629,109 (329,103)
(Continued)
CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 2025, 2024, and 2023 (Dollars in thousands)
2025 2024 2023
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends paid (44,252) (44,522) (83,172)
Net change in deposits 461,466 78,762 (143,646)
Proceeds from borrowings 650,100 350,100 4,293,870
Repayments on borrowings (879,814) (1,052,291) (3,548,542)
Change in advances by borrowers 3,615 (1,192) (17,074)
Payment of FHLB prepayment penalties (547) - -
Repurchase of common stock (3,887) (19,448) (23,453)
Net cash provided by (used in) financing activities 186,681 (688,591) 477,983
NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS 35,136 (28,298) 196,411
CASH AND CASH EQUIVALENTS:
Beginning of year 217,307 245,605 49,194
End of year $ 252,443 $ 217,307 $ 245,605
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Income tax payments $ 1,018 $ 6,017 $ 5,424
Interest payments $ 217,649 $ 224,701 $ 188,908
See accompanying notes to consolidated financial statements. (Concluded)
CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2025, 2024, and 2023
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business - Capitol Federal Financial, Inc. (the "Company") provides a full range of retail banking services through its wholly-owned subsidiary, Capitol Federal Savings Bank (the "Bank"), a federal savings bank, which has 44 traditional and two in-store banking offices serving primarily the metropolitan areas of Topeka, Wichita, Lawrence, Manhattan, Emporia and Salina, Kansas and portions of the Kansas City metropolitan area. The Bank focuses on both commercial and consumer lending, offering a comprehensive range of deposit products and services, as well as treasury management solutions.
Basis of Presentation - The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, 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") and require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from these estimates and assumptions.
Cash, Cash Equivalents and Restricted Cash - Cash, cash equivalents, and restricted cash reported in the statement of cash flows consisted entirely of cash and cash equivalents at September 30, 2025 and 2024, respectively. Restricted cash relates to the collateral postings to/from the Bank's derivative counterparties associated with the Bank's interest rate swaps. There was no restricted cash included in other assets on the consolidated balance sheet at September 30, 2025 or September 30, 2024. See additional discussion regarding the interest rate swaps in "Note 8. Deposits and Borrowed Funds."
Net Presentation of Cash Flows Related to Borrowings - At times, the Bank enters into FHLB advances with contractual maturities of 90 days or less. Cash flows related to these advances are reported on a net basis in the consolidated statements of cash flows.
Securities - Securities include MBS and agency debentures issued primarily by United States Government-Sponsored Enterprises ("GSEs"), including Federal National Mortgage Association (FNMA), Federal Home Loan Mortgage Corporation (FHLMC) and the Federal Home Loan Banks, United States Government agencies, including Government National Mortgage Association (GNMA), corporate bonds, and municipal bonds. Securities are classified as held-to-maturity ("HTM"), AFS, or trading based on management's intention for holding the securities on the date of purchase. Generally, classifications are made in response to liquidity needs, asset/liability management strategies, and the market interest rate environment at the time of purchase.
Accrued interest receivable for all securities is reported in other assets on the consolidated balance sheet and totaled $4.1 million and $4.8 million at September 30, 2025 and 2024, respectively. The Company excludes accrued interest from the amortized cost of securities and does not measure ACL for accrued interest. Interest accrued but not received is reversed against interest income.
Securities that management has the intention and ability to hold to maturity are classified as HTM and reported at amortized cost. Such securities are adjusted for the amortization of premiums and discounts which are recognized as adjustments to interest income over the life of the securities using the level-yield method. At September 30, 2025 and 2024, the portfolio did not contain any securities classified as HTM.
Securities that management may sell if necessary for liquidity or asset management purposes are classified as AFS and reported at fair value, with unrealized gains and non-credit losses reported as a component of AOCI within stockholders' equity, net of deferred income taxes. The amortization of premiums and discounts are recognized as adjustments to interest income over the life of the securities using the level-yield method. Gains or losses on the disposition of AFS securities are
recognized using the specific identification method. The Company primarily uses prices obtained from third-party pricing services to determine the fair value of securities. See additional discussion of fair value of AFS securities in "Note 14. Fair Value of Financial Instruments."
Securities that are purchased and held principally for resale in the near future are classified as trading securities and are reported at fair value, with unrealized gains and losses included in non-interest income in the consolidated statements of income. During the fiscal years ended September 30, 2025 and 2024, neither the Company nor the Bank maintained a trading securities portfolio.
Allowance for Credit Losses on AFS Debt Securities - Management monitors AFS debt securities for impairment on an ongoing basis and performs a formal review quarterly. If an AFS debt security is in an unrealized loss position at the time of the quarterly review, the Company first assesses whether it intends to sell, or if it is more likely than not that it will be required to sell the security before recovery of its amortized cost. If either condition is met, the entire loss in fair value is recognized in current earnings. If neither condition is met, and the Company does not expect to recover the amortized cost basis, the Company determines whether the decline in fair value resulted from credit losses or other factors. In making this assessment, management considers the security structure, the cause(s) and severity of the loss, expectations of future performance (including recent events specific to the issuer or industry and the issuer's financial condition and current ability to make payments in a timely manner), and external credit ratings and recent downgrades in such ratings. Management's assessment involves a high degree of subjectivity and judgment that is based on information available at a point in time. If the assessment indicates that a credit loss might exist, the present value of cash flows expected to be collected is compared to the amortized cost basis of the security. If the present value of the cash flows expected to be collected is less than the amortized cost basis, a credit loss is deemed to have occurred, and an ACL is recorded. The ACL is limited by the amount that the fair value is less than the amortized cost basis.
Changes in the ACL on AFS debt securities are recorded as an increase or decrease in the provision for credit losses on the consolidated statements of income. Losses are charged against the ACL on securities when management believes the collectability of an AFS security is in doubt or when either of the conditions regarding intent or requirement to sell is met. Interest accrued on AFS debt securities but not received is also reversed against interest income. As of September 30, 2025 and 2024, the Company did not identify any credit losses related to the Company's AFS debt securities, so there was no ACL on AFS debt securities as of those dates.
Loans Receivable - Loans receivable that management has the intention and ability to hold for the foreseeable future are carried at amortized cost, excluding accrued interest. Amortized cost is the amount of unpaid principal, net of undisbursed loan funds, unamortized premiums and discounts, and deferred loan fees and costs. Net loan fees and costs, and premiums and discounts are amortized as yield adjustments to interest income using the level-yield method. Loans are presented on the consolidated balance sheet net of the related ACL.
Interest on loans receivable is accrued based on the principal amount outstanding. Accrued interest receivable for loans is reported in other assets on the consolidated balance sheet and totaled $28.0 million and $26.3 million at September 30, 2025 and 2024, respectively. The Company does not calculate ACL for accrued interest. Interest accrued but not received is reversed against interest income.
Loan endorsements - Certain existing one- to four- family loan customers, have the opportunity, for a fee, to endorse their original loan terms to current loan terms being offered by the Bank, without being required to complete the standard application and underwriting process. The fee received for each endorsement is deferred and amortized as an adjustment to interest income over the life of the loan. If the change in loan terms resulting from the endorsement is deemed to be more than minor, all existing unamortized deferred loan origination fees and costs are recognized at the time of endorsement. If the change in loan terms is deemed to be minor, the fee received for the endorsement is added to the net remaining unamortized deferred fee or deferred cost balance.
Loan Modifications - For borrowers experiencing financial difficulty, the Bank may grant a concession to the borrower. Such concessions generally involved extensions of loan maturity dates, the granting of periods during which reduced payment amounts were required, and/or reductions in interest rates. The Bank does not forgive principal or interest, nor does it commit to lend additional funds to these borrowers, except for situations generally involving the capitalization of delinquent loan payments and/or escrow on one- to four-family loans and consumer loans, not to exceed the original loan amount. In the
case of commercial loans, the Bank generally does not forgive principal or interest or commit to lend additional funds unless the borrower provides additional collateral or other enhancements to improve the credit quality.
If the change in the loan terms resulting from the modification is deemed to be more than minor, all existing unamortized deferred loan origination fees and costs are recognized at the time of modification. Modifications of loans to borrowers experiencing financial difficulty that are in the form of principal forgiveness, interest rate reductions, other-than-insignificant payment delays, or a term extension (or a combination thereof) require disclosure in the notes to the Company's consolidated financial statements. The Company's modification disclosures are included in Note 4. Loans Receivable and Allowance for Credit Losses. Modified loans are included in the Company's ACL model based on the risk characteristics of the loan. If a modified loan is deemed uncollectible and no longer shares similar risk characteristics within the respective loan pool in the ACL model, the loan is evaluated on an individual basis and any loss is charged-off against the related ACL.
Delinquent loans - A loan is considered delinquent when payment has not been received within 30 days of its contractual due date. The number of days delinquent is determined by the number of scheduled payments that remain unpaid, assuming a period of 30 days between each scheduled payment.
Nonaccrual loans - The accrual of income on loans is generally discontinued when interest or principal payments are 90 days in arrears. Loans on which the accrual of income has been discontinued are designated as nonaccrual and all delinquent accrued interest is reversed. For the year ended September 30, 2025, accrued interest of $3.0 million was reversed from loan interest income, the majority of which was due to two commercial real estate loans related to the same borrowing relationship that became nonaccrual during the current year. See Note 4. Loans Receivable and Allowance for Credit Losses for additional information regarding these loans. A nonaccrual one- to four-family or consumer loan is returned to accrual status once the contractual payments have been made to bring the loan less than 90 days past due. A nonaccrual commercial loan is returned to accrual status once the loan has been current for a minimum of six months, all fees and interest are paid current, the loan has a sufficient debt service coverage ratio ("DSCR"), and the loan is well secured and within policy.
Allowance for Credit Losses on Loans Receivable - The ACL is a valuation amount that is deducted from the amortized cost basis of loans. It represents management's current expectations of total expected credit losses included in the Company's loan portfolio as of the balance sheet date and is determined using relevant information about past events, including historical credit loss experience on loans with similar risk characteristics, current conditions, and reasonable and supportable forecasts, along with the application of qualitative factors when necessary. Changes in the ACL are recorded through increases or decreases to the provision for credit losses in the consolidated statements of income. The ACL is an estimate that requires significant judgment including projections of the macroeconomic environment as of a point in time. The macroeconomic environment continuously changes, which can cause fluctuations in estimated expected losses.
The Bank's ACL is measured on a collective ("pool") basis, with loans aggregated into pools based on similar risk characteristics such as collateral type, historical loss experience, loan-to-value ("LTV") for originated one- to four-family loans, and payment sources for commercial loans. Loans that do not share similar risk characteristics are evaluated on an individual basis. Charge-offs against the related ACL amounts for any loan type may be recorded if the Bank has knowledge of the existence of a probable loss.
One- to four-family loans and consumer home equity loans are deemed to be collateral dependent and individually evaluated for loss when the loan is generally 180 days delinquent, and any identified losses are charged-off at that time. Losses are based on new collateral values obtained through appraisals, less estimated costs to sell. Anticipated private mortgage insurance proceeds are taken into consideration when calculating the loss amount. If the Bank holds the first and second mortgage, both loans are combined when evaluating whether there is a potential loss on the loan. When a non-real estate secured consumer loan is 120 days delinquent, any identified losses are charged-off. Commercial loans are generally individually evaluated for loss during the quarterly special loan review process, or at any time management determines circumstances warrant. In general, commercial loans are individually evaluated for loss if they are rated substandard or below. Loss amounts are calculated using the market value of collateral adjusted for costs to sell compared to the amount due from the borrower, adjusted for any government guaranty there may be on the loan. If the loss amount is calculated and the Bank's commercial loan committee determines the amount is uncollectible, the amount is charged-off. If the loss amount is determined to be collectible, then the amount is reserved as a specific valuation allowance. The determination of whether the loss is collectible or uncollectible is based on current financial information from the borrower, as well as any facts and information of which the Bank may have knowledge.
The primary credit risk characteristics inherent in the one- to four-family and consumer loan portfolios are a decline in economic conditions, such as elevated levels of unemployment or underemployment, and declines in residential real estate values. Any one or a combination of these events may adversely affect the ability of borrowers to repay their loans, resulting in increased delinquencies, non-performing assets, charge-offs, and provisions for credit losses. Although the commercial loan portfolio is subject to the same risk of declines in economic conditions, the primary risk characteristics inherent in this portfolio include the ability of the borrower to sustain sufficient cash flows from leases and business operations, the ability to control operational or business expenses to satisfy their contractual debt payments, and the ability to utilize personal or business resources to pay their contractual debt payments if the cash flows are not sufficient. Additionally, if the Bank were to repossess the secured collateral of a commercial real estate loan, the pool of potential buyers is typically more limited than that for a residential property. Therefore, the Bank could have to hold the property for an extended period of time, or be forced to sell at a discounted price, resulting in additional losses. Our commercial and industrial loans are primarily secured by accounts receivable, inventory and equipment, which may be difficult to appraise, may be illiquid and may fluctuate in value based on the success of the business.
The Company utilizes a discounted cash flow model for estimating expected credit losses for pooled loans and loan commitments. For loans evaluated for credit losses on a pool basis, average historical loss rates are calculated for each pool using the Company's historical charge-offs, or peer data when the Company's own historical loss rates are not reflective of future loss expectations, and outstanding loan balances during a historical time period. The historical time periods can be different based on the individual pool and represent management's credit expectations for the pool of loans over the remaining contractual life. Generally, the historical time periods are at least two economic cycles. These historical loss rates are compared to historical data related to economic indices including national unemployment rate, changes in commercial real estate price index, changes in home values, changes in the United States consumer price index, and changes in the United States gross domestic product during the same time periods over which the historical loss rates were calculated, and a correlation is estimated using regression analysis. Each quarter, the Company's model pairs the results of the regression analysis with an economic forecast of these same economic indices, which is provided by a third party, in order to model probabilities of default ("PDs"). The PDs are then used to generate expected cash flows using segment-specific risk factors and other assumptions to model loss given defaults ("LGDs"). The forecast is applied for a reasonable and supportable time period, as determined by management, before reverting back to historical loss experience, which is accomplished by reversion to long-term historical averages at the economic index level using a straight-line method. Contractual cash flows are adjusted for expected prepayment speeds and curtailment rates selected by management. The prepayment and curtailment assumptions vary for each respective loan pool in the model. The contractual term excludes expected extensions, renewals and modifications. In the case of revolving lines of credit, since the rate of principal reduction is generally at the discretion of the borrower, remaining contractual lives are calculated by estimating future cash flows expected to be received from the borrower until the outstanding balance has been reduced to zero.
Using all of these inputs and assumptions, the discounted cash flow methodology generates aggregated estimated cash flows for the time period that remains in each loan's contractual life. These cash flows are discounted back to the reporting date using each loan's effective yield, to arrive at a present value of estimated future cash flows. Each loan pool's ACL is equal to the aggregate shortage, if any, of the present value of estimated future cash flows compared to the amortized cost basis of the loan pool.
Additionally, qualitative factors are considered for items not included in historical loss rates, macroeconomic forecasts, or other model inputs, as deemed appropriate by management's current assessment of risks related to loan portfolio attributes and external factors. Such qualitative factor considerations include changes in the Bank's loan portfolio composition and credit concentrations, changes in the loan balances and/or trends in asset quality and/or loan credit performance, changes in lending underwriting standards, the effect of other external factors such as significant unique events or conditions, and actual and/or expected changes in economic conditions, real estate values, and/or other economic developments in the geographic areas in which the Bank operates, and/or other management considerations to account for credit risks not fully reflected in the discounted cash flow model. Management assesses the potential impact of such items and adjusts the modeled ACL as deemed appropriate based upon the assessment.
Reserve for Off-Balance Sheet Credit Exposures - The Company's off-balance sheet credit exposures are comprised of unfunded portions of existing loans, such as lines of credit and construction loans, and commitments to originate or purchase loans that are not unconditionally cancellable by the Company. Expected credit losses on these amounts are calculated using the same ACL to loan ratio that is calculated by the ACL model; however, the estimate of credit risk for off-balance sheet
credit exposures also takes into consideration the likelihood that funding of the unfunded amount/commitment will occur. The reserve for these off-balance sheet credit exposures is recorded as a liability and is presented in other liabilities on the consolidated balance sheet. Changes to the reserve for off-balance sheet credit exposures are recorded through increases or decreases to the provision for credit losses on the consolidated statements of income.
Federal Home Loan Bank Stock - As a member of FHLB, the Bank is required to acquire and hold shares of FHLB stock. The Bank's holding requirement varies based on the Bank's activities, primarily the Bank's outstanding borrowings, with FHLB. FHLB stock is carried at cost and is considered a restricted asset because it cannot be pledged as collateral or bought or sold on the open market and because it has certain redemption restrictions. Management conducts a quarterly evaluation to determine if any FHLB stock impairment exists. The quarterly impairment evaluation focuses primarily on the capital adequacy and liquidity of FHLB, while also considering the impact that legislative and regulatory developments may have on FHLB. Stock and cash dividends received on FHLB stock are reflected as dividend income in the consolidated statements of income.
Premises, Equipment, and Leases - Land is carried at cost. Buildings, leasehold improvements, and furniture, fixtures and equipment are carried at cost less accumulated depreciation and leasehold amortization. Buildings, furniture, fixtures and equipment are depreciated over their estimated useful lives using the straight-line method. Leasehold improvements are amortized over the shorter of their estimated useful lives or the term of the respective leases. The costs for major improvements and renovations are capitalized, while maintenance, repairs and minor improvements are charged to operating expenses as incurred. Gains and losses on dispositions are recorded as non-interest income or non-interest expense as incurred.
The Company leases real estate property for branches, ATMs, and certain equipment. The Company determines if an arrangement is a lease at inception and if the lease is an operating lease or a finance lease. Leases that meet any of the following criteria are considered financing leases: (1) the lease transfers ownership of the underlying asset by the end of the lease term; (2) the lease grants the Company an option to purchase the underlying asset that the Company is reasonably certain to exercise; (3) the lease term is the major part of the remaining economic life of the underlying assets; (4) the present value of the sum of the lease payments and any residual value guaranteed by the Company that is not already reflected in the lease payments equals or exceeds substantially all the fair value of the underlying asset; or (5) the underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term. A lease that does not meet any of these criteria is considered an operating lease.
A right-of-use asset represents the Company's right to use an underlying asset during the lease term. The calculated amounts of the right-of-use assets and lease liabilities are impacted by the length of the lease term and the discount rate used to calculate the present value of the minimum remaining lease payments. The Company's lease agreements often include one or more options to renew at the Company's discretion. If, at lease inception, the Company considers the exercising of a renewal option to be reasonably certain, the Company includes the extended term in the calculation of the right-of-use asset and lease liability. Generally, the Company cannot practically determine the interest rate implicit in the lease, so the Company's incremental borrowing rate is used as the discount rate for the lease. The Company uses FHLB advance interest rates, which have been deemed as the Company's incremental borrowing rate, at lease inception based upon the term of the lease. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The right-of-use assets associated with operating leases are recorded in other assets and for finance leases in premises and equipment on the Company's consolidated balance sheet. The period over which a right-of-use asset is amortized is generally the lesser of the expected remaining term or the remaining useful life of the leased asset. The lease liabilities associated with operating leases are included in other liabilities and for finance leases in borrowings on the Company's consolidated balance sheets. The lease liability is decreased as periodic lease payments are made. For facility-related leases, the Company elected, by lease class, to not separate lease and non-lease components. The Company performs impairment assessments for right-of-use assets when events or changes in circumstances indicate that their carrying values may not be recoverable.
Operating lease expense is recognized over the lease term. Variable lease expense primarily represents payments such as common area maintenance, real estate taxes, and utilities and are recognized as expense in the period when those payment obligations are incurred. Short-term lease expense relates to leases with an initial term of 12 months or less. Operating lease expense, variable lease expense and short-term lease expense associated with operating leases are included in occupancy
expense in the Company's consolidated statements of income. The Company has elected to not record a right-of-use asset or lease liability for short-term leases.
Financing lease right-of-use assets are amortized on a straight-line basis over the lease term and the related expense is reported in occupancy expense in the Company's consolidated statements of income. The lease obligation is increased by the accrual of interest and decreased by subsequent lease payments. Interest expense on finance leases is reported in interest expense on borrowings in the Company's consolidated statements of income.
Low Income Housing Partnerships - As part of the Bank's community reinvestment initiatives, the Bank invests in affordable housing limited partnerships ("low income housing partnerships") that make equity investments in affordable housing properties. The Bank is a limited partner in each partnership in which it invests. A separate, unrelated third party is the general partner. The Bank receives affordable housing tax credits and other tax benefits for these investments.
Other Assets - Included in other assets on the consolidated balance sheet are the Company's intangible assets, which consist of goodwill, deposit intangibles and other intangibles.
Goodwill is assessed for impairment on an annual basis, or more frequently in certain circumstances. The test for impairment is performed by comparing the fair value of the reporting unit with its carrying amount. If the fair value is determined to be less than the carrying amount, an impairment is recorded.
The Company's intangible assets primarily relate to core deposits. These intangible assets are amortized based upon the expected economic benefit over an estimated life determined at the time of acquisition and are tested for impairment whenever certain events occur or circumstances change.
Interest Rate Swaps - The Company uses interest rate swaps as part of its interest rate risk management strategy to hedge the variable cash outflows associated with certain borrowings. Interest rate swaps are carried at fair value in the Company's consolidated financial statements. For interest rate swaps that are designated and qualify as cash flow hedges, changes in the fair value of such agreements are recorded in AOCI and are subsequently reclassified into interest expense in the period that interest on the borrowings affects earnings. Effectiveness is assessed using regression analysis. At the inception of a hedge, the Company documents certain items, including the relationship between the hedging instrument and the hedged item, the risk management objective and the nature of the risk being hedged, a description of how effectiveness will be measured and an evaluation of hedged transaction effectiveness.
Income Taxes - The Company utilizes the asset and liability method of accounting for income taxes. Under this method, deferred income tax assets and liabilities are recognized for the tax consequences of temporary differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities. Deferred income tax expense (benefit) represents the change in deferred income tax assets and liabilities excluding the tax effects of the change in net unrealized gain (loss) on AFS securities and interest rate swaps. Income tax related penalties and interest, if any, are included in income tax expense in the consolidated statements of income.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. To the extent that management considers it more likely than not that a deferred tax asset will not be recovered, a valuation allowance is recorded. All positive and negative evidence is reviewed in determining how much of a valuation allowance is recognized on a quarterly basis.
ASC Topic 740 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of an uncertain tax position taken, or expected to be taken, in a tax return. Interest and penalties related to unrecognized tax benefits are recognized in income tax expense in the consolidated statements of income. Accrued interest and penalties related to unrecognized tax benefits are included within the related tax liabilities line in the consolidated balance sheet.
Employee Stock Ownership Plan - The funds borrowed by the ESOP from the Company to purchase the Company's common stock are being repaid from dividends paid on unallocated ESOP shares and, if necessary, contributions by the
Bank. The ESOP shares pledged as collateral are reported as a reduction of stockholders' equity at cost. As ESOP shares are committed to be released from collateral each quarter, the Company records compensation expense based on the average market price of the Company's common stock during the quarter. Additionally, the ESOP shares become outstanding for EPS computations once they are committed to be released.
Stock-based Compensation - The Company has share-based plans under which stock options and restricted stock awards have been granted. Compensation expense is recognized over the service period of the share-based payment award. The Company utilizes a fair-value-based measurement method in accounting for the share-based payment transactions. The Company applies the modified prospective method in which compensation cost is recognized over the service period for all awards granted.
Trust Asset Management - Assets (other than cash deposits with the Bank) held in fiduciary or agency capacities for customers are not included in the accompanying consolidated balance sheets, since such items are not assets of the Company or its subsidiaries.
Revenue Recognition - Non-interest income within the scope of ASC Topic 606 is recognized by the Company when performance obligations, under the terms of the contract, are satisfied. This income is measured as the amount of consideration expected to be received in exchange for the providing of services. The majority of the Company's applicable non-interest income continues to be recognized at the time when services are provided to its customers. See "Note 16. Revenue Recognition" for additional information.
Segment Information - The Company's banking operations are considered by management to be aggregated in one reportable operating segment in accordance with Financial Accounting Standards Board ("FASB") ASC Topic 280. These banking operations primarily consist of the delivery of loan products and deposit products to customers. The chief executive officer and chief financial officer are the Company's chief operating decision makers in consultation with other members of executive management. The chief operating decision makers evaluate the performance of the Company's banking operations and decide how to allocate resources based on consolidated net income, which is also reported in the Company's consolidated statements of income. All expenses associated with the Company's banking operations are considered to be significant. Given the Company's single reportable operating segment, assets associated with the Company's banking operations are reflected on the Company's consolidated balance sheets as “total assets” and the amounts of significant segment expenses are disclosed in the Company's consolidated statements of income. The accounting policies for the Company's banking operations are the same as the Company's accounting policies disclosed herein.
Earnings Per Share - Basic EPS is computed by dividing income available to common stockholders by the weighted average number of shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock (such as stock options) were exercised or resulted in the issuance of common stock. These potentially dilutive shares would then be included in the weighted average number of shares outstanding for the period using the treasury stock method. Shares issued and shares reacquired during any period are weighted for the portion of the period that they were outstanding.
In computing both basic and diluted EPS, the weighted average number of common shares outstanding includes the ESOP shares previously allocated to participants and shares committed to be released for allocation to participants and shares of restricted stock which have vested. ESOP shares that have not been committed to be released are excluded from the computation of basic and diluted EPS. Unvested restricted stock awards contain nonforfeitable rights to dividends and are treated as participating securities in the computation of EPS pursuant to the two-class method.
Dividends - Dividends paid are recognized as a reduction to retained earnings. As a result, if the Company is in an accumulated deficit position, a dividend payment will increase the accumulated deficit.
Recent Accounting Pronouncements - In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements - Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative. This ASU incorporates a variety of Topics into the 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 November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures. This ASU requires enhanced disclosures of segment information for all public entities, including those that have a single reportable segment, primarily in the area of significant segment expenses and other items on an annual and interim basis. Entities that have a single reportable segment, like the Company, will be required to provide all the disclosures required by this ASU and all existing segment disclosures required by ASC 280, Segment Reporting. The Company adopted this ASU on September 30, 2025. The new disclosures required by this ASU are included in the "Segment Information" discussion above.
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. The Company is currently evaluating this ASU, but it is not expected to have a significant impact on the Company's consolidated financial condition or results of operation or the Company's disclosures.
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures. This ASU requires additional expense disclosures by public entities in the notes to the financial statements. The ASU outlines the specific costs that are required to be disclosed, which include costs such as: purchases of inventory, employee compensation, depreciation, intangible asset amortization, selling costs, and depreciation, depletion, and amortization related to oil and gas production. It also requires qualitative descriptions of the amounts remaining in the relevant expense income statement captions that are not separately disaggregated quantitatively in the notes to the financial statements and the entity's definition of selling expenses. The disclosures are required for each interim and annual reporting period. The ASU is effective for fiscal years beginning after December 15, 2026, which is the fiscal year ending September 30, 2028 for the Company. In January 2025, the FASB issued ASU 2025-1, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures: Clarifying the Effective 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 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 modernizes the accounting for internal-use software costs under Subtopic 350-40. 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 or the Company's 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 Year Ended September 30,
2025 2024 2023
(Dollars in thousands, except per share amounts)
Net income $ 68,025 $ 38,010 $ (101,659)
Income allocated to participating securities (82) (33) 51
Net income available to common stockholders $ 67,943 $ 37,977 $ (101,608)
Total basic average common shares outstanding 129,988,031 130,670,780 133,556,864
Effect of dilutive stock options - - -
Total diluted average common shares outstanding 129,988,031 130,670,780 133,556,864
Net EPS:
Basic $ 0.52 $ 0.29 $ (0.76)
Diluted $ 0.52 $ 0.29 $ (0.76)
Antidilutive stock options, excluded from the diluted average
common shares outstanding calculation 264,292 326,308 369,421
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 majority of our AFS securities at both dates were government guaranteed or issued by a GSE.
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
September 30, 2024
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
(Dollars in thousands)
MBS $ 756,775 $ 26,885 $ 87 $ 783,573
GSE debentures 69,077 228 - 69,305
Corporate bonds 4,000 - 612 3,388
$ 829,852 $ 27,113 $ 699 $ 856,266
At September 30, 2025, AFS securities included $793.8 million of residential MBS and $69.7 million of commercial MBS. At September 30, 2024 AFS securities included $713.3 million of residential MBS and $70.2 million of commercial MBS.
The following tables summarize the estimated fair value and gross unrealized losses of those AFS securities on which an unrealized loss at the dates presented was reported and the continuous unrealized loss position for less than 12 months and equal to or greater than 12 months as of the dates presented.
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
September 30, 2024
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 $ 10,997 $ 44 $ 2,919 $ 43
Corporate bonds - - 3,388 612
$ 10,997 $ 44 $ 6,307 $ 655
The unrealized losses at September 30, 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 September 30, 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 September 30, 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 $ 3,716
4,000 3,716
MBS 843,369 863,500
$ 847,369 $ 867,216
The following table presents the taxable and non-taxable components of interest income on investment securities for the years presented.
For the Year Ended September 30,
2025 2024 2023
(Dollars in thousands)
Taxable $ 3,377 $ 8,747 $ 3,538
Non-taxable - 2 27
$ 3,377 $ 8,749 $ 3,565
The following table summarizes the carrying value of securities pledged as collateral for the obligations indicated below as of the dates presented.
September 30,
2025 2024
(Dollars in thousands)
Public unit deposits $ 150,916 $ 108,748
Federal Reserve Bank of Kansas City ("FRB of Kansas City") borrowings 91,130 111,281
$ 242,046 $ 220,029
At September 30, 2023, management intended to sell securities with an estimated fair value of $1.30 billion, therefore an unrealized loss of $192.6 million associated with those securities was recognized in the consolidated statement of income for the year ended September 30, 2023 as a net loss from securities transactions. The Bank sold $1.30 billion of AFS securities during fiscal year 2024. The Bank received gross proceeds of $1.27 billion from the sale and realized gross losses of $14.9 million and gross gains of $1.6 million, resulting in a net loss of $13.3 million on the sale during fiscal year 2024. All other dispositions of securities during the current and prior year periods were the result of principal repayments, calls, or maturities.
4. LOANS RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES
Loans receivable, net at September 30, 2025 and 2024 is summarized as follows:
2025 2024
(Dollars in thousands)
One- to four-family:
Originated $ 3,774,134 $ 3,941,952
Correspondent purchased 2,000,216 2,212,587
Bulk purchased 114,231 127,161
Construction 16,054 22,970
Total 5,904,635 6,304,670
Commercial:
Commercial real estate 1,709,990 1,191,624
Commercial and industrial 210,119 129,678
Commercial construction 195,886 187,676
Total 2,115,995 1,508,978
Consumer:
Home equity 104,809 99,988
Other 8,436 9,615
Total 113,245 109,603
Total loans receivable 8,133,875 7,923,251
Less:
ACL 24,039 23,035
Deferred loan fees/discounts 31,268 30,336
Premiums/deferred costs (33,393) (37,458)
$ 8,111,961 $ 7,907,338
As of September 30, 2025 and 2024, the Bank serviced loans for others aggregating $37.0 million and $38.1 million, respectively. Such loans are not included in the accompanying consolidated balance sheets. Servicing loans for others generally consists of collecting mortgage payments, maintaining escrow accounts, disbursing payments to investors and foreclosure processing. Loan servicing income includes servicing fees withheld from investors and certain charges collected from borrowers, such as late payment fees. The Bank held borrowers' escrow balances on loans serviced for others of $1.0 million and $942 thousand as of September 30, 2025 and 2024, respectively.
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 the prior fiscal year, 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, LTVs on commercial real estate loans generally do not exceed 85% of the appraised value of the property securing the loans and the minimum DSCR is generally 1.15x. The Bank generally 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 1.15x, 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 Missouri 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 loans 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 security 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. See discussion regarding the credit risks for these loan segments in "Note 1. Summary of Significant Accounting Policies - Allowance for Credit Losses on Loans Receivable." 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 on-going 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.
The following tables set forth, as of the dates indicated, the amortized cost of loans by class of financing receivable, year of origination or most recent credit decision, and loan classification. Amortized cost is the amount of unpaid principal, net of undisbursed 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 September 30, 2025 and September 30, 2024, 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 current fiscal year and classified as nonaccrual at September 30, 2025. The loans are recourse loans with personal guarantees and have low LTVs. There have been no charge-offs with these two loans nor has management set aside a specific valuation allowance associated with these loans as of September 30, 2025 due to the low LTVs. The commercial real estate special mention loan amount presented in the "Fiscal Year 2023" column is related to one loan that was classified as special mention during the current fiscal year. The loan was not delinquent at September 30, 2025.
September 30, 2025
Revolving
Line of
Current Fiscal Fiscal Fiscal Fiscal Revolving Credit
Fiscal Year Year Year Year Prior Line of Converted
Year 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
September 30, 2024
Revolving
Line of
Fiscal Fiscal Fiscal Fiscal Fiscal Revolving Credit
Year Year Year Year Year Prior Line of Converted
2024 2023 2022 2021 2020 Years Credit to Term Total
(Dollars in thousands)
One- to four-family:
Originated
Pass $ 241,765 $ 325,492 $ 578,275 $ 809,643 $ 521,647 $ 1,447,237 $ - $ - $ 3,924,059
Special Mention - 295 1,229 1,982 772 9,565 - - 13,843
Substandard - 658 49 468 1,398 9,571 - - 12,144
Correspondent purchased
Pass 798 325,384 482,103 570,970 225,650 623,496 - - 2,228,401
Special Mention - 993 659 658 398 977 - - 3,685
Substandard - - 1,662 265 - 5,130 - - 7,057
Bulk purchased
Pass - - - - - 124,076 - - 124,076
Special Mention - - - - - - - - -
Substandard - - - - - 3,514 - - 3,514
242,563 652,822 1,063,977 1,383,986 749,865 2,223,566 - - 6,316,779
Commercial:
Commercial real estate
Pass 326,158 400,649 284,493 135,935 74,174 110,309 23,865 - 1,355,583
Special Mention 12,440 2,543 - - 92 1,094 - - 16,169
Substandard 142 827 - - 647 636 50 - 2,302
Commercial and industrial
Pass 46,335 32,112 18,131 8,075 1,350 2,051 20,876 - 128,930
Special Mention 401 - - - - - 12 - 413
Substandard 227 - - - - 82 26 - 335
385,703 436,131 302,624 144,010 76,263 114,172 44,829 - 1,503,732
Consumer:
Home equity
Pass 7,331 4,377 4,575 1,437 814 2,127 73,020 5,895 99,576
Special Mention - - - - - - 45 281 326
Substandard - 20 - - - 24 120 181 345
Other
Pass 4,112 2,737 1,697 385 101 95 346 - 9,473
Special Mention - - - - - - - - -
Substandard 80 14 44 - 4 - - - 142
11,523 7,148 6,316 1,822 919 2,246 73,531 6,357 109,862
Total $ 639,789 $ 1,096,101 $ 1,372,917 $ 1,529,818 $ 827,047 $ 2,339,984 $ 118,360 $ 6,357 $ 7,930,373
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.
September 30, 2025
Revolving
Line of
Current Fiscal Fiscal Fiscal Fiscal Revolving Credit
Fiscal Year Year Year Year Prior Line of Converted
Year 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
September 30, 2024
Revolving
Line of
Fiscal Fiscal Fiscal Fiscal Fiscal Revolving Credit
Year Year Year Year Year Prior Line of Converted
2024 2023 2022 2021 2020 Years Credit to Term Total
(Dollars in thousands)
One- to four-family:
Originated
Current $ 241,765 $ 326,211 $ 578,430 $ 811,455 $ 521,550 $ 1,459,500 $ - $ - $ 3,938,911
30-89 - 64 1,074 638 1,666 5,422 - - 8,864
90+/FC - 170 49 - 601 1,451 - - 2,271
Correspondent purchased
Current 798 326,377 482,598 571,182 226,048 624,961 - - 2,231,964
30-89 - - 164 446 - 2,479 - - 3,089
90+/FC - - 1,662 265 - 2,163 - - 4,090
Bulk purchased
Current - - - - - 125,982 - - 125,982
30-89 - - - - - 69 - - 69
90+/FC - - - - - 1,539 - - 1,539
242,563 652,822 1,063,977 1,383,986 749,865 2,223,566 - - 6,316,779
Commercial:
Commercial real estate
Current 338,511 403,193 284,493 135,932 74,266 110,448 23,055 - 1,369,898
30-89 229 807 - 3 - 1,094 860 - 2,993
90+/FC - 19 - - 647 497 - - 1,163
Commercial and industrial
Current 46,736 32,112 17,990 8,052 1,350 2,051 20,914 - 129,205
30-89 227 - 141 23 - - - - 391
90+/FC - - - - - 82 - - 82
385,703 436,131 302,624 144,010 76,263 114,172 44,829 - 1,503,732
Consumer:
Home equity
Current 7,331 4,378 4,540 1,437 814 2,133 72,721 6,084 99,438
30-89 - - 35 - - - 349 87 471
90+/FC - 19 - - - 18 115 186 338
Other
Current 4,109 2,728 1,641 327 101 95 344 - 9,345
30-89 3 9 100 58 - - 2 - 172
90+/FC 80 14 - - 4 - - - 98
11,523 7,148 6,316 1,822 919 2,246 73,531 6,357 109,862
Total $ 639,789 $ 1,096,101 $ 1,372,917 $ 1,529,818 $ 827,047 $ 2,339,984 $ 118,360 $ 6,357 $ 7,930,373
Gross Charge-Offs - 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 Year Ended September 30, 2025
Revolving
Lines
Current Fiscal Fiscal Fiscal Fiscal Revolving of Credit
Fiscal Year Year Year Year Prior Lines of Converted to
Year 2024 2023 2022 2021 Years Credit Term Total
(Dollars in thousands)
One- to four-family:
Originated $ - $ - $ - $ 3 $ - $ - $ - $ - $ 3
Correspondent purchased - - - - - - - - -
Bulk purchased - - - - - 113 - - 113
- - - 3 - 113 - - 116
Commercial:
Commercial real estate - - - - - - - - -
Commercial and industrial - 52 - - - 10 - - 62
- 52 - - - 10 - - 62
Consumer:
Home equity 51 12 21 - - - - - 84
Other - 1 4 - - 2 2 - 9
51 13 25 - - 2 2 - 93
Total $ 51 $ 65 $ 25 $ 3 $ - $ 125 $ 2 $ - $ 271
For the Year Ended September 30, 2024
Revolving
Lines
Fiscal Fiscal Fiscal Fiscal Fiscal Revolving of Credit
Year Year Year Year Year Prior Lines of Converted to
2024 2023 2022 2021 2020 Years Credit Term Total
(Dollars in thousands)
One- to four-family:
Originated $ - $ - $ - $ - $ - $ - $ - $ - $ -
Correspondent purchased - - - - - - - - -
Bulk purchased - - - - - - - - -
- - - - - - - - -
Commercial:
Commercial real estate 50 - - - - 30 - - 80
Commercial and industrial - - - - - - - - -
50 - - - - 30 - - 80
Consumer:
Home equity 46 1 - - - - - - 47
Other - 9 15 - - 9 - - 33
46 10 15 - - 9 - - 80
Total $ 96 $ 10 $ 15 $ - $ - $ 39 $ - $ - $ 160
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 September 30, 2025 and 2024, all loans 90 or more days delinquent were on nonaccrual status.
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
September 30, 2024
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 $ 8,864 $ 2,271 $ 11,135 $ 3,938,911 $ 3,950,046
Correspondent purchased 3,089 4,090 7,179 2,231,964 2,239,143
Bulk purchased 69 1,539 1,608 125,982 127,590
Commercial:
Commercial real estate 2,993 1,163 4,156 1,369,898 1,374,054
Commercial and industrial 391 82 473 129,205 129,678
Consumer:
Home equity 471 338 809 99,438 100,247
Other 172 98 270 9,345 9,615
$ 16,049 $ 9,581 $ 25,630 $ 7,904,743 $ 7,930,373
The amortized cost of mortgage loans secured by residential real estate for which formal foreclosure proceedings were in process as of September 30, 2025 and 2024 was $1.0 million and $1.6 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 $197 thousand at September 30, 2025 and $55 thousand at September 30, 2024.
The following table presents the amortized cost at September 30, 2025 and September 30, 2024, by class, of loans classified as nonaccrual. Nonaccrual loans with no ACL were individually evaluated for loss and any losses have been charged-off. The increase in nonaccrual commercial real estate loans as of September 30, 2025 compared to September 30, 2024 was due primarily to two loans that are related to 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 until later in calendar year 2025; therefore, these loans were considered nonaccrual at September 30, 2025.
2025 2024
Nonaccrual Loans Nonaccrual Loans with No ACL Nonaccrual Loans Nonaccrual Loans with No ACL
(Dollars in thousands)
One- to four-family:
Originated $ 2,751 $ 1,833 $ 2,271 $ 764
Correspondent purchased 1,409 - 4,090 182
Bulk purchased 135 - 1,539 812
Commercial:
Commercial real estate 43,087 43,087 1,495 901
Commercial and industrial 320 320 335 335
Consumer:
Home equity 46 - 338 -
Other 48 14 98 16
$ 47,796 $ 45,254 $ 10,166 $ 3,010
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 year ended September 30, 2025, there was a $3 thousand charge-off related to a one- to four-family originated loan modified during the year ended September 30, 2025. During the year ended September 30, 2024, there was a $50 thousand charge-off related to a commercial real estate loan that was modified during the year ended September 30, 2024. The Company has not committed to lend additional amounts to borrowers included in these tables. The commercial real estate payment delay modification during the year ended September 30, 2025 was due primarily to two loans where the Bank entered into an agreement with the borrower which allows the borrower to not make payments until later in calendar year 2025. These two commercial loans were classified as substandard and nonaccrual at September 30, 2025.
For the Year Ended September 30, 2025
Term
Extension Total
and Class of
Payment Term Payment Financing
Delay Extension Delay Total Receivable
(Dollars in thousands)
One- to four-family:
Originated $ 717 $ 5,988 $ 1,647 $ 8,352 0.2 %
Correspondent purchased - 463 709 1,172 0.1
Bulk purchased 1,564 - - 1,564 1.4
2,281 6,451 2,356 11,088 0.2
Commercial:
Commercial real estate 47,550 - - 47,550 2.5
Commercial and industrial - - - - -
47,550 - - 47,550 2.3
Consumer loans:
Home equity 36 35 - 71 0.1
Other - - - - -
36 35 - 71 0.1
Total $ 49,867 $ 6,486 $ 2,356 $ 58,709 0.7
For the Year Ended September 30, 2024
Term Payment
Extension Delay, and Total
and Interest Class of
Payment Term Payment Rate Financing
Delay Extension Delay Reduction Total Receivable
(Dollars in thousands)
One- to four-family:
Originated $ - $ 1,547 $ 6,992 $ - $ 8,539 0.2 %
Correspondent purchased - 338 1,716 - 2,054 0.1
Bulk purchased - - - - - -
- 1,885 8,708 - 10,593 0.2
Commercial:
Commercial real estate 8,196 - 192 - 8,388 0.6
Commercial and industrial - - 653 12 665 0.5
8,196 - 845 12 9,053 0.6
Consumer loans:
Home equity 89 - - - 89 0.1
Other - - - - - -
89 - - - 89 0.1
Total $ 8,285 $ 1,885 $ 9,553 $ 12 $ 19,735 0.2
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, weighted average interest rate reduction, and weighted average term extension.
For the Year Ended September 30, 2025 For the Year Ended September 30, 2024
Payment Term Payment Interest Rate Term
Delay Extension Delay Reduction Extension
One- to four-family:
Originated 8 months 30 months 4 months N/A 33 months
Correspondent purchased 8 months 33 months 4 months N/A 36 months
Commercial:
Commercial real estate 8 months N/A 6 months N/A 24 months
Commercial and industrial N/A N/A 6 months 0.50 % 6 months
Consumer:
Consumer home equity 9 months 14 months 7 months N/A N/A
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 September 30, 2025 and September 30, 2024, on loans modified during the previous 12-months for borrowers experiencing financial difficulty that were delinquent as of September 30, 2025 and September 30, 2024, respectively. All other loans modified to borrowers experiencing financial difficulty during the periods noted were current as of September 30, 2025 and September 30, 2024.
As of September 30, 2025 As of September 30, 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 $ 699 $ 285 $ 984 $ 1,800 $ 720 $ 2,520
Correspondent purchased 186 - 186 284 425 709
Bulk purchased - - - - - -
Commercial:
Commercial real estate - - - 142 50 192
Commercial and industrial - - - 227 - 227
Consumer loans:
Home equity - - - - - -
Other - - - - - -
$ 885 $ 285 $ 1,170 $ 2,453 $ 1,195 $ 3,648
The following table presents the amortized cost basis of loans that had a payment default during the year ended September 30, 2025 or September 30, 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 Year Ended September 30, 2025 For the Year Ended September 30, 2024
Term Term
Extension Extension
and and
Payment Term Payment Payment
Delay Extension Delay Total Delay
(Dollars in thousands)
One- to four-family:
Originated $ 81 $ 230 $ 730 $ 1,041 $ 720
Correspondent purchased - - 424 424 425
Bulk purchased - - - - -
Commercial:
Commercial real estate - - 192 192 50
Commercial and industrial - - 142 142 -
Consumer loans:
Home equity 84 - - 84 -
Other - - - - -
$ 165 $ 230 $ 1,488 $ 1,883 $ 1,195
Troubled Debt Restructurings ("TDRs") - Prior to the adoption of ASU 2022-02 on October 1, 2023, loans were accounted for as TDRs if the Bank granted a concession to a borrower experiencing financial difficulties. The following table presents the amortized cost for the year ended September 30, 2023, prior to restructuring and immediately after restructuring in all loans restructured during the year ended September 30, 2023. During the year ended September 30, 2023, there was one single-family originated TDR with an amortized cost of $8 thousand that became delinquent within 12 months after being restructured.
Number Pre- Post-
of Restructured Restructured
Contracts Outstanding Outstanding
(Dollars in thousands)
One- to four-family:
Originated 1 $ 110 $ 110
Correspondent purchased 1 282 285
Bulk purchased 1 239 257
Commercial:
Commercial real estate - - -
Commercial and industrial - - -
Consumer:
Home equity 1 38 38
Other - - -
4 $ 669 $ 690
Allowance for Credit Losses - The following table summarizes ACL activity, by loan portfolio segment, for the periods presented.
For the Year Ended September 30, 2025
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 (116) - (62) (62) (93) (271)
Recoveries 19 20 26 46 8 73
Provision for credit losses (530) 289 1,349 1,638 94 1,202
Ending balance $ 3,046 $ 18,277 $ 2,499 $ 20,776 $ 217 $ 24,039
For the Year Ended September 30, 2024
Commercial
One- to four- Commercial Commercial
Family Real Estate and Industrial Total Consumer Total
(Dollars in thousands)
Beginning balance $ 5,328 $ 17,076 $ 1,104 $ 18,180 $ 251 $ 23,759
Adoption of ASU 2022-02 18 - 2 2 - 20
Balance at October 1, 2023 5,346 17,076 1,106 18,182 251 23,779
Charge-offs - (80) - (80) (80) (160)
Recoveries 28 - 5 5 16 49
Provision for credit losses (1,701) 972 75 1,047 21 (633)
Ending balance $ 3,673 $ 17,968 $ 1,186 $ 19,154 $ 208 $ 23,035
For the Year Ended September 30, 2023
Commercial
One- to four- Commercial Commercial
Family Real Estate and Industrial Total Consumer Total
(Dollars in thousands)
Beginning balance $ 5,006 $ 10,630 $ 490 $ 11,120 $ 245 $ 16,371
Charge-offs - - (75) (75) (40) (115)
Recoveries 6 1 - 1 2 9
Provision for credit losses 316 6,445 689 7,134 44 7,494
Ending balance $ 5,328 $ 17,076 $ 1,104 $ 18,180 $ 251 $ 23,759
The key assumptions in the Company's ACL model at September 30, 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 September 30, 2025. The key assumptions utilized in estimating the Company's ACL at September 30, 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 September 30, 2025. The forecasted economic indices applied to the model at September 30, 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 September 30, 2025 was the national unemployment rate. The forecasted national unemployment rate in the economic scenario selected by management at September 30, 2025 had the national unemployment rate gradually increasing to 4.7% by September 30, 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 September 30, 2025.
•Prepayment and curtailment assumptions - The assumptions used at September 30, 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 September 30, 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 like more seasoned loans in our portfolio and applied a qualitative factor to account for this risk. To determine the appropriate amount of the one- to four-family loan qualitative factor as of September 30, 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 September 30, 2025 and 2024, the Bank's off-balance sheet credit exposures totaled $821.6 million and $826.5 million, respectively.
The following table summarizes the change in reserve for off-balance sheet credit exposures during the periods indicated. The decrease in the reserve for off-balance sheet credit exposures during the current fiscal year was due mainly to a decrease in commercial off-balance sheet credit exposure balances.
For the Year Ended September 30,
2025 2024
(Dollars in thousands)
Beginning balance $ 6,003 $ 4,095
Adoption of ASU 2022-02 - 16
Provision for credit losses (457) 1,892
Ending balance $ 5,546 $ 6,003
5. PREMISES, EQUIPMENT AND LEASES
A summary of the net carrying value of premises and equipment at September 30, 2025 and 2024 was as follows:
2025 2024
(Dollars in thousands)
Land $ 15,926 $ 16,070
Building and improvements 131,483 128,730
Furniture, fixtures and equipment 55,286 54,485
Total premises and equipment 202,695 199,285
Less accumulated depreciation 113,381 107,822
Premises and equipment, net $ 89,314 $ 91,463
At September 30, 2025, the Company's operating leases had remaining terms that ranged from 1 year to 32 years, some of which included the assumed exercise of renewal options that the Company considers to be reasonably certain. A right-of-use asset of $7.7 million and $8.5 million was included in other assets and a lease liability of $8.3 million and $8.9 million was included in other liabilities for the Company's operating leases on the consolidated balance sheets, as of September 30, 2025 and September 30, 2024 respectively. As of September 30, 2025, for the Company's operating leases, the weighted average remaining lease term was 24.3 years and the weighted average discount rate was 2.71%. The following table presents lease expenses and supplemental cash flow information related to the Company's operating leases for the years indicated.
For the Year Ended September 30,
2025 2024 2023
(Dollars in thousands)
Operating lease expense $ 852 $ 1,141 $ 1,307
Variable lease expense 153 176 189
Short-term lease expense 2 2 41
Cash paid for amounts included in the measurement of lease liabilities 780 1,130 1,211
At September 30, 2025, the Company's finance leases had remaining terms that ranged from 2 years to 22 years. A finance lease right-of-use asset of $971 thousand and $1.0 million was included in premises and equipment, net at September 30, 2025 and September 30, 2024, respectively. The Company included a finance lease liability of $1.1 million in borrowings on the consolidated balance sheets at both September 30, 2025 and September 30, 2024. As of September 30, 2025, for the Company's finance leases, the weighted average remaining lease term was 19 years and the weighted average discount rate was 5.18%. The following table presents lease expense, interest expense, and supplemental cash flow information related to the Company's finance leases for the years indicated. The Company did not have any finance leases during the fiscal year ended September 30, 2023.
For the Year Ended September 30,
2025 2024
(Dollars in thousands)
Lease expense $ 75 $ 59
Interest expense 55 53
Cash paid for amounts included in the measurement of lease liabilities 97 73
The following table presents future minimum payments, for operating and finance leases with initial or remaining terms in excess of one year as of September 30, 2025:
Operating Finance Total
(Dollars in thousands)
Fiscal year 2026 $ 630 $ 100 $ 730
Fiscal year 2027 618 100 718
Fiscal year 2028 585 96 681
Fiscal year 2029 417 83 500
Fiscal year 2030 407 67 474
Thereafter 9,211 1,318 10,529
Total future minimum lease payments 11,868 1,764 13,632
Amounts representing interest (3,601) (701) (4,302)
Present value of net future minimum lease payments $ 8,267 $ 1,063 $ 9,330
6. LOW INCOME HOUSING PARTNERSHIPS
The Bank's investment in low income housing partnerships, which is included in other assets in the consolidated balance sheets, was $140.0 million and $131.4 million at September 30, 2025 and 2024, respectively. The Bank's obligations related to unfunded commitments, which are included in other liabilities in the consolidated balance sheets, were $70.2 million and $74.3 million at September 30, 2025 and 2024, respectively. The majority of the commitments at September 30, 2025 are projected to be funded through the end of calendar year 2028.
For fiscal years 2025, 2024, and 2023, the net income tax benefit associated with these investments, which consists of proportional amortization expense and affordable housing tax credits and other related tax benefits, was reported in income tax expense in the consolidated statements of income. The amount of proportional amortization expense recognized during fiscal years 2025, 2024 and 2023 was $11.4 million, $10.4 million and $10.1 million, respectively, and the amount of affordable housing tax credits and other related tax benefits was $13.8 million, $12.6 million and $12.4 million, respectively, resulting in a net income tax benefit of $2.4 million, $2.2 million and $2.3 million, respectively. There were no impairment losses during fiscal years 2025, 2024, or 2023 resulting from the forfeiture or ineligibility of tax credits or other circumstances.
7. INTANGIBLE ASSETS
Changes in the carrying amount of the Company's intangible assets associated with an acquisition in fiscal year 2018, which are included in other assets on the consolidated balance sheet, are presented in the following table.
Core Deposit and
Goodwill Other Intangibles
(Dollars in thousands)
Balance at September 30, 2022 $ 9,324 $ 2,589
Less: Amortization - (1,069)
Balance at September 30, 2023 9,324 1,520
Less: Amortization - (774)
Balance at September 30, 2024 9,324 746
Less: Amortization - (523)
Balance at September 30, 2025 $ 9,324 $ 223
As of September 30, 2025, there was no impairment recorded on goodwill or other intangible assets.
The core deposit and other intangible assets estimated amortization for fiscal year 2026 is $223 thousand. All future periods of estimated amortization expense related to core deposit and other intangible assets are zero.
8. DEPOSITS AND BORROWED FUNDS
Deposits - Non-interest-bearing deposits totaled $601.4 million and $549.6 million as of September 30, 2025 and 2024, respectively. Certificates of deposit with a minimum denomination of $250 thousand were $584.1 million and $516.3 million as of September 30, 2025 and 2024, respectively. Deposits in excess of $250 thousand may not be fully insured by the Federal Deposit Insurance Corporation.
Borrowings - Borrowings at September 30, 2025 consisted of $1.95 billion in FHLB advances, of which $1.85 billion were fixed-rate advances and $100.0 million were variable-rate advances, and $1.1 million in finance leases. Borrowings at September 30, 2024 consisted of $2.18 billion in FHLB advances, of which $1.98 billion were fixed-rate advances and $200.0 million were variable-rate advances, and $1.1 million in finance leases. There were no borrowings against the variable-rate FHLB line of credit at September 30, 2025 or 2024. Additionally, the Bank is authorized to borrow from the FRB of Kansas City's "discount window," but there were no such borrowings at September 30, 2025 or 2024. The Bank is a member of the American Finance Exchanges ("AFX") through which it may borrow funds on an overnight or short-term basis with other member institutions. The availability of funds changes daily. At September 30, 2025 and 2024, the Bank did not have any such borrowings outstanding through the AFX.
FHLB advances at September 30, 2025 and 2024 were comprised of the following:
2025 2024
(Dollars in thousands)
FHLB advances $ 1,950,984 $ 2,180,656
Deferred prepayment penalty - FHLB advances (1,277) (2,173)
$ 1,949,707 $ 2,178,483
Weighted average contractual interest rate on FHLB advances 3.53 % 3.41 %
Weighted average effective interest rate on FHLB advances(1)
3.54 3.29
(1)The effective interest rate includes the net impact of deferred amounts and interest rate swaps related to the adjustable-rate FHLB advances.
FHLB borrowings are secured by certain qualifying loans pursuant to a blanket collateral agreement with FHLB and certain securities, when necessary. Per FHLB's lending guidelines, total FHLB borrowings cannot exceed 40% of a borrowing institution's regulatory total assets without the pre-approval of FHLB senior management. The Bank's borrowing limit approved by FHLB senior management was 45% as of September 30, 2025, and became 44% starting November 1, 2025. The borrowing limit as of November 1, 2025 was calculated based on a FHLB collateral analysis that is part of FHLB's overall borrowing capacity framework. At September 30, 2025, the ratio of the par value of the Bank's FHLB borrowings to the Bank's Call Report total assets was 20%.
At September 30, 2025 and 2024, the Bank had entered into interest rate swap agreements with a total notional amount of $100.0 million and $200.0 million, respectively, in order to hedge the variable cash flows associated with $100.0 million and $200.0 million, respectively, of adjustable-rate FHLB advances. At September 30, 2025 and 2024, the interest rate swap agreements had an average remaining term to maturity of 2.7 years and 2.3 years, respectively. The interest rate swaps were designated as cash flow hedges and involved the receipt of variable amounts from a counterparty in exchange for the Bank making fixed-rate payments over the life of the interest rate swap agreements. At September 30, 2025 and September 30, 2024, the interest rate swaps were in a gain position with a total fair value of $926 thousand and $2.1 million, respectively, which was reported in other assets on the consolidated balance sheet. During fiscal year 2025 and 2024, $2.3 million and $6.1 million, respectively, was reclassified from AOCI as a decrease to interest expense. At September 30, 2025, the Company estimated that $641 thousand of interest expense associated with the interest rate swaps would be reclassified from AOCI as a decrease to interest expense on FHLB borrowings during the next 12 months. The Bank has minimum collateral posting thresholds with its derivative counterparties and posts collateral on a daily basis. The Bank held cash collateral of $920 thousand at September 30, 2025 and $2.1 million at September 30, 2024.
During the year ended September 30, 2025, the Bank prepaid fixed-rate FHLB advances totaling $200.0 million with a weighted average contractual interest rate of 4.70% and a weighted average remaining term of 0.6 years, and replaced these advances with fixed-rate FHLB advances totaling $200.0 million with a weighted average contractual interest rate of 3.83% and a weighted average term of 2.5 years. The Bank paid penalties of $547 thousand to FHLB as a result of prepaying these advances. The prepayment penalties are being recognized in interest expense over the life of the new FHLB advances. The weighted average effective interest rate of the new advances was 3.93%.
In October 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.
Periodically, management has utilized a leverage strategy to increase earnings which entails entering into short-term FHLB borrowings and depositing the proceeds from these FHLB borrowings, net of the cost to purchase FHLB stock to meet FHLB stock holding requirements, at the FRB of Kansas City ("leverage strategy"). The leverage strategy is not a core operating business for the Company. It provides the Company the ability to utilize excess capital to generate earnings. Additionally, it is a strategy that can be exited quickly without additional costs. Leverage strategy borrowings are repaid prior to each quarter end. The leverage strategy was not in place during the current fiscal year or prior fiscal year due to the strategy being unprofitable, but it was in place at points during the fiscal year 2023. When the leverage strategy is in place, it reduces the net interest margin due to the amount of earnings from the transaction in comparison to the size of the transaction. Management continues to monitor the net interest rate spread and overall profitability of the leverage strategy.
Scheduled Repayment of Borrowed Funds and Maturity of Certificates of Deposit - The following table presents the scheduled repayment of term borrowings, at par, and the maturity of certificates of deposit as of September 30, 2025, by fiscal year. With the exception of amortizing FHLB advances, FHLB advances are payable at maturity. Amortizing FHLB advances are presented based on their maturity dates versus their quarterly scheduled repayment dates. At September 30, 2025, the Bank's FHLB advances had maturities ranging from October 2025 to October 2029.
Certificates
of Deposit
Borrowings Amount
(Dollars in thousands)
2026 $ 425,000 $ 2,169,268
2027 742,500 671,257
2028 565,984 129,097
2029 132,500 31,939
2030 85,000 10,856
Thereafter - 263
$ 1,950,984 $ 3,012,680
9. INCOME TAXES
Income tax expense (benefit) for the years ended September 30, 2025, 2024, and 2023 consisted of the following:
2025 2024 2023
(Dollars in thousands)
Current:
Federal $ 12,086 $ 12,153 $ 6,789
State 830 394 1,435
12,916 12,547 8,224
Deferred:
Federal 1,534 1,316 (39,209)
State 546 2,230 (6,311)
2,080 3,546 (45,520)
$ 14,996 $ 16,093 $ (37,296)
The Company's effective tax rates were 18.1%, 29.7%, and 26.8% for the years ended September 30, 2025, 2024, and 2023, respectively. The differences between such effective rates and the statutory Federal income tax rate computed on income before income tax expense resulted from the following:
2025 2024 2023
Amount % Amount % Amount %
(Dollars in thousands)
Federal income tax expense
computed at statutory Federal rate $ 17,434 21.0 % $ 11,362 21.0 % $ (29,180) 21.0 %
Increases (decreases) in taxes resulting from:
State taxes, net of Federal tax effect 1,903 2.3 2,497 4.8 (5,412) 3.9
Federal tax credits, net (2,414) (2.9) (2,244) (4.2) (2,303) 1.6
State tax law enactment (857) (1.0) - - - -
ESOP related expenses, net (435) (0.5) (448) (0.8) (652) 0.5
Pre-1988 bad debt recapture - - 5,406 10.0 - -
Other (635) (0.8) (480) (1.1) 251 (0.2)
$ 14,996 18.1 % $ 16,093 29.7 % $ (37,296) 26.8 %
State tax law enactment - During the current fiscal year, the State of Kansas enacted a change in the tax law that is effective October 1, 2027 for the Company and the Bank. The State of Kansas is changing the way it attributes taxable income to the State, specifically, changing from a three-factor apportionment (property, payroll and receipts) to a single, revenue-based method. Most of the Bank's property and payroll are located in Kansas, but a large amount of its revenue generating activities, predominantly loan interest income, are outside of Kansas. Therefore, the Bank is expecting a decrease in income apportioned to Kansas starting in fiscal year 2028 due to the tax law change. Upon the tax law enactment, the Bank remeasured its state deferred tax assets and liabilities expected as of October 1, 2027. The Bank recorded an $857 thousand reduction in net state income tax expense during the year end September 30, 2025 related to this tax law change.
Pre-1988 bad debt recapture - Prior to the Small Business Job Protection Act (the "1996 Act"), the Bank was permitted to deduct, up to a specified formula limit, a certain percentage of income as bad debts, for which the Bank was not required to establish a deferred tax liability. The difference between actual bad debts and the formula limit bad debt amount ("excess reserves") was recorded in the Bank's retained earnings. As a result of the 1996 Act, savings institutions, like the Bank, were required to use the specific charge-off method in computing bad debts on their tax returns beginning with their 1996 Federal tax returns. The 1996 Act required the recapture of excess reserves over the base year, which was September 30, 1988 for the Bank. The excess reserves established prior to September 30, 1988 are to remain in retained earnings ("pre-1988 bad debt reserves") subject to recapture by the Bank on the occurrence of certain distributions in excess of current earnings and profits accumulated in tax years beginning after December 31, 1951 ("accumulated earnings and profits"). For tax purposes, if current and accumulated earnings and profits are negative, distributions from the Bank to Capitol Federal Financial, Inc. would be deemed to be drawn out of the Bank's pre-1988 bad debt reserve requiring a payment of income tax at the then-current rate by the Bank on the amount of earnings deemed to be removed from the pre-1988 bad debt reserves for such distributions ("pre-1988 bad debt recapture").
The net loss associated with the strategic securities transaction ("securities strategy") that was recognized in fiscal year 2023 net income was recognized in the Company's fiscal year 2024 income tax return due to the sale of the securities occurring in October 2023 (in fiscal 2024). Consequently, the Company reported a taxable net loss on its fiscal year 2024 income tax return, resulting in negative current and accumulated earnings and profits for the Bank for fiscal year 2024. This required the Bank to draw upon the pre-1988 bad debt reserves for distributions from the Bank to the Company during fiscal year 2024 which resulted in income tax expense in fiscal year 2024 equivalent to the distributions paid by the Bank times the Bank's current statutory tax rate of 21%. During the year ended September 30, 2024, the Bank recorded $5.4 million of income tax expense related to these distributions. During the current fiscal year, the Bank reached a point where there was sufficient taxable income to replenish the Bank's accumulated earnings and profits to a positive level. Therefore, the distributions from the Bank to the Company during the current fiscal year were not taxable as distributions from pre-1988 bad debt reserves. The Bank estimates its pre-1988 bad debt reserves to be $75.9 million at September 30, 2025, which equates to an unrecorded deferred tax liability of $15.9 million at September 30, 2025.
One Big Beautiful Bill Act ("OBBBA") - On July 4, 2025, the H.R. 1 - 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 is currently evaluating the effect the OBBBA will have on the Company's consolidated financial condition and results of operations.
Deferred income tax assets and liabilities - The table below presents the components of the net deferred income tax assets (liabilities) as of September 30, 2025 and 2024. The net deferred tax assets of $21.8 million presented in the table below as of September 30, 2025 was composed of the $23.8 million of federal deferred tax assets, net and $2.1 million of state deferred tax liabilities, net.
2025 2024
(Dollars in thousands)
Deferred income tax assets:
Federal tax credit carry forward $ 22,305 $ 12,813
Net operating loss carry forward 15,286 30,459
ACL 5,048 4,837
Lease liabilities 2,209 2,156
Salaries, deferred compensation and employee benefits 1,954 1,431
ESOP compensation 1,480 1,522
Reserve for off-balance sheet credit exposures 1,313 1,451
Net purchase discounts related to acquired loans 86 116
Low income housing partnerships 1 6
Other 648 829
Gross deferred income tax assets 50,330 55,620
Valuation allowance (42) (27)
Gross deferred income tax asset, net of valuation allowance 50,288 55,593
Deferred income tax liabilities:
FHLB stock dividends 16,929 18,871
Unrealized gain on AFS securities 4,795 6,382
Premises and equipment 2,104 2,317
Lease right-of-use assets 2,061 2,043
ACL 1,854 2,741
Unrealized gain on interest rate swaps 224 508
Deposit intangible 64 200
Other 487 553
Gross deferred income tax liabilities 28,518 33,615
Net deferred tax assets $ 21,770 $ 21,978
The gross federal and state net operating loss amount at September 30, 2025 related to the $15.3 million net operating loss carry forward deferred tax asset was $63.1 million, which will carry forward indefinitely. In addition, the Company had a deferred tax asset of $22.3 million as of September 30, 2025 related to federal tax credits that will not be utilized on the Company's fiscal year 2025 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 State of Kansas allows for a bad debt deduction on savings and loan institutions' privilege tax returns of up to 5% of Kansas taxable income. Due to the low level of net loan charge-offs experienced by the Bank historically, at times, the Bank's bad debt deduction on the Kansas privilege tax return has been in excess of actual net charge-offs, resulting in a state deferred tax liability, which is presented separately from the federal deferred tax asset related to ACL.
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 September 30, 2025 and 2024, the Company had a valuation allowance of $42 thousand and $27 thousand, respectively, related to the net operating losses generated by the Company's consolidated Kansas corporate income tax return as management believes there will not be sufficient taxable income to fully utilize these deferred tax assets before they begin to expire in 2028 and thereafter. For this reason, a valuation allowance was recorded for the related amounts at September 30, 2025 and 2024. No additional valuation allowances were recorded for the Company's other deferred tax assets as management believes it is more likely than not that these amounts will be realized through the reversal of the Company's existing taxable temporary differences and projected future taxable income.
For the years ended September 30, 2025, 2024, and 2023, the Company had no unrecognized tax benefits.
The Company files income tax returns in the U.S. federal jurisdiction and the state of Kansas, as well as other states where it has either established a nexus under an economic nexus theory or has exceeded enumerated nexus thresholds based on the amount of loan interest income derived from sources within a given state. With few exceptions, the Company is no longer subject to U.S. federal and state examinations by tax authorities for fiscal years ending before 2022.
10. EMPLOYEE STOCK OWNERSHIP PLAN
The ESOP trust acquired 3,024,574 shares (6,846,728 shares post-corporate reorganization) of common stock in the Company's initial public offering and 4,726,000 shares of common stock in the Company's corporate reorganization in December 2010. Both acquisitions of common stock were made with proceeds from loans from the Company, secured by shares of the Company's stock purchased in each offering. The Bank has agreed to make cash contributions to the ESOP trust on an annual basis sufficient to enable the ESOP trust to make the required annual loan payments to the Company on September 30th of each year. The loan for the shares acquired in the initial public offering matured on September 30, 2013. The loan for the shares acquired in the corporate reorganization matures on September 30, 2040.
As annual loan payments are made on each September 30th, shares are released from collateral and allocated to qualified employees based on the proportion of their qualifying compensation to total qualifying compensation. On September 30, 2025, 165,198 shares were released from collateral. On September 30, 2026, 165,198 shares will be released from collateral. As ESOP shares are committed to be released from collateral, the Company records compensation expense. Dividends on unallocated ESOP shares are applied to the debt service payments of the loan secured by the unallocated shares. Dividends on unallocated ESOP shares in excess of the debt service payment are recorded as compensation expense and distributed to participants or participants' ESOP accounts. Compensation expense related to the ESOP was $997 thousand for the year ended September 30, 2025, $927 thousand for the year ended September 30, 2024, and $1.2 million for the year ended September 30, 2023. Of these amounts, $655 thousand, $725 thousand, and $472 thousand of income is related to the difference between the market price of the Company's common stock when the shares were acquired by the ESOP trust ($10 per share) and the average market price of the Company's common stock during the years ended September 30, 2025, 2024, and 2023, respectively. The market price of the Company's common stock averaged below $10 per share during the years ended September 30, 2025, 2024 and 2023, which is why income rather than expense was recognized for market price differences for those years. There was no compensation expense for dividends on unallocated ESOP shares in excess of the debt service payments for the years ended September 30, 2025, 2024, or 2023.
Shares may be withdrawn from the ESOP trust due to diversification (a participant may begin to diversify at least 25% of their ESOP shares at age 50), retirement, termination, or death of the participant. The following is a summary of shares held in the ESOP trust as of September 30, 2025 and 2024:
2025 2024
(Dollars in thousands)
Allocated ESOP shares 4,223,910 4,239,629
Unreleased ESOP shares 2,477,970 2,643,168
Total ESOP shares 6,701,880 6,882,797
Fair value of unreleased ESOP shares $ 15,753 $ 16,401
11. STOCK-BASED COMPENSATION
The Company has a Stock Option Plan, a Restricted Stock Plan, and an Equity Incentive Plan ("2012 Equity Incentive Plan"), all of which are considered share-based plans. The Stock Option Plan and Restricted Stock Plan expired in April 2015. No additional grants can be made from these two plans; however, awards granted under these two plans remain outstanding until they are individually vested, forfeited or expire. The objectives of the 2012 Equity Incentive Plan are to provide additional compensation to certain officers, directors and key employees by facilitating their acquisition of an equity interest in the Company and enable the Company to retain personnel of experience and ability in key positions of responsibility.
Stock Option Plans - There are currently no stock options outstanding as a result of grants awarded under the original Stock Option Plan. The 2012 Equity Incentive Plan had 5,907,500 stock options originally eligible to be granted and, as of September 30, 2025, the Company had 4,466,029 stock options still available for future grants under this plan. The 2012 Equity Incentive Plan will expire on January 24, 2027 and no additional grants may be made after expiration, but awards granted under this plan will remain outstanding until they are individually vested, forfeited, or expire.
The Company may issue incentive and nonqualified stock options under the 2012 Equity Incentive Plan. The incentive stock options expire no later than 10 years from the date of grant, and the nonqualified stock options expire no later than 15 years from the date of grant. The vesting period of stock options under the 2012 Equity Incentive Plan generally has ranged from 3 to 5 years. The stock option exercise price cannot be less than the market value at the date of the grant as defined by each plan. The fair value of stock option grants is estimated on the date of the grant using the Black-Scholes option pricing model.
At September 30, 2025, the Company had 231,809 stock options outstanding from the 2012 Equity Incentive Plan with a weighted average exercise price of $11.98 and a weighted average contractual life of 1.2 years, all of which were exercisable. The exercise price may be paid in cash, shares of common stock, or a combination of both. New shares are issued by the Company upon the exercise of stock options.
Restricted Stock Plans - The 2012 Equity Incentive Plan had 2,363,000 shares originally eligible to be granted as restricted stock and, as of September 30, 2025, the Company had 1,362,175 shares available for future grants of restricted stock under this plan. As noted above, this plan will expire on January 24, 2027 and no additional grants may be made after expiration, but awards granted under this plan will remain outstanding until they are individually vested or forfeited. The vesting period of the restricted stock awards under the 2012 Equity Incentive Plan has generally ranged from 3 to 5 years. At September 30, 2025, the Company had 166,422 unvested shares of restricted stock with a weighted average grant date fair value of $6.06 per share.
Compensation expense is calculated based on the fair market value of the Company's common stock at the date of the grant, as defined by the plan, and is recognized over the vesting period. Compensation expense attributable to restricted stock awards during the years ended September 30, 2025, 2024, and 2023 totaled $398 thousand, $348 thousand, and $327 thousand, respectively. The fair value of restricted stock that vested during the years ended September 30, 2025, 2024, and 2023 totaled $316 thousand, $213 thousand, and $285 thousand, respectively. As of September 30, 2025, there was $801 thousand of unrecognized compensation cost related to unvested restricted stock to be recognized over a weighted average period of 2.7 years.
12. COMMITMENTS AND CONTINGENCIES
The following table summarizes the Bank's loan commitments as of September 30, 2025 and 2024:
2025 2024
(Dollars in thousands)
Originate fixed-rate $ 89,563 $ 44,191
Originate adjustable-rate 133,791 130,419
Purchase/participate fixed-rate - 24,500
Purchase/participate adjustable-rate - 38,739
$ 223,354 $ 237,849
Commitments to originate loans are commitments to lend to a customer. Commitments to purchase/participate in loans represent commitments to purchase loans from correspondent lenders on a loan-by-loan basis or participate in commercial loans with a lead bank. The Bank evaluates each borrower's creditworthiness on a case-by-case basis. Commitments generally have expiration dates or other termination clauses, and one- to four-family loan commitments may require the payment of a fee. Some of the commitments are expected to expire without being fully drawn upon; therefore, the amount of total commitments disclosed in the table above does not necessarily represent future cash requirements. As of September 30, 2025 and 2024, there were no significant loan-related commitments that met the definition of derivatives or commitments to sell mortgage loans. As of September 30, 2025 and 2024, the Bank had approved but unadvanced lines of credit of $284.0 million and $278.1 million, respectively.
In the normal course of business, the Company and the Bank are named defendants in various lawsuits and counterclaims. In the opinion of management, after consultation with legal counsel, none of the currently pending suits are expected to have a material adverse effect on the Company's consolidated financial statements for the year ended September 30, 2025, or future periods.
13. REGULATORY CAPITAL REQUIREMENTS
The Bank and the Company are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and, possibly additional discretionary, actions by regulators that, if undertaken, could have a material adverse effect on the Company's financial statements. Under regulatory capital adequacy guidelines, the Company and Bank must meet specific capital guidelines that involve quantitative measures of the Company's and Bank's assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. Additionally, the Bank must meet specific capital guidelines to be considered well capitalized per the regulatory framework for prompt corrective action. The Company's and Bank's capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk weightings, and other factors.
The Bank and the Company must maintain certain minimum capital ratios as set forth in the table below for capital adequacy purposes. At September 30, 2025, the Bank and Company met the requirements to elect the community bank leverage ratio ("CBLR"). Qualifying institutions that elect to use the CBLR framework and that maintain a leverage ratio of greater than 9% will be considered to have satisfied the generally applicable risk-based and leverage capital requirements in the regulatory agencies' capital rules and to have met the well capitalized ratio requirements. Management believes that as of September 30, 2025, the Bank and Company met all capital adequacy requirements to which they were subject and that there have been no conditions or events subsequent to September 30, 2025 that would have changed this assessment.
For Capital
Actual Adequacy Purposes
Amount Ratio Amount Ratio
(Dollars in thousands)
As of September 30, 2025
Bank $ 935,267 9.6 % $ 876,469 9.0 %
Company $ 984,902 10.1 % $ 876,448 9.0 %
As of September 30, 2024
Bank $ 874,067 9.2 % $ 853,970 9.0 %
Company $ 957,481 10.1 % $ 853,927 9.0 %
Generally, savings institutions, such as the Bank, may make capital distributions during any calendar year equal to the earnings of the previous two calendar years and current year-to-date earnings. It is generally required that the Bank remain well capitalized before and after the proposed distribution. The Company's ability to pay dividends is dependent, in part, upon its ability to obtain capital distributions from the Bank. So long as the Bank continues to remain well capitalized after each capital distribution and operates in a safe and sound manner, it is management's belief that the regulators will continue to allow the Bank to distribute its net income to the Company, although no assurance can be given in this regard.
In conjunction with the Company's corporate reorganization in December 2010, a "liquidation account" was established for the benefit of certain depositors of the Bank in an amount equal to Capitol Federal Savings Bank MHC's ownership interest in the retained earnings of Capitol Federal Financial as of June 30, 2010. (Prior to the corporate reorganization, Capitol Federal Financial was the Bank's mid-tier holding company and Capitol Federal Savings Bank MHC, a mutual holding company, owned a majority of the stock of Capitol Federal Financial.) As of September 30, 2025, the balance of this liquidation account was $62.5 million. Under applicable federal banking regulations, neither the Company nor the Bank is permitted to pay dividends to its stockholders if stockholders' equity would be reduced below the amount of the liquidation account at that time.
14. 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 ASC 820 and ASC 825. The Company's AFS securities and interest rate swaps 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 years ended September 30, 2025 and 2024. 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 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)
•GSE debentures - 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 similar 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 Swaps - The Company's interest rate swaps are designated as cash flow hedges and are 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 8. Deposits and Borrowed Funds" for additional information. The estimated fair values of the interest rate swaps are obtained from the counterparty and are determined by a discounted cash flow analysis using observable market-based inputs. On a quarterly basis, management corroborates the estimated fair values by internally calculating the estimated fair value using a discounted cash flow analysis with independent observable market-based inputs from a third party. No adjustments were made to the estimated fair values obtained from the counterparty during the years ended September 30, 2025 and 2024. (Level 2)
The following tables provide the level of valuation assumption used to determine the carrying value of the Company's financial instruments measured at fair value on a recurring basis at the dates presented. The Company did not have any Level 3 financial instruments measured at fair value on a recurring basis at September 30, 2025 or 2024.
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)
Assets:
AFS Securities:
MBS $ 863,500 $ - $ 863,500 $ -
Corporate bonds 3,716 - 3,716 -
867,216 - 867,216 -
Interest rate swaps 926 - 926 -
$ 868,142 $ - $ 868,142 $ -
September 30, 2024
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)
Assets:
AFS Securities:
MBS $ 783,573 $ - $ 783,573 $ -
GSE debentures 69,305 - 69,305 -
Corporate bonds 3,388 - 3,388 -
$ 856,266 $ - $ 856,266 $ -
Interest rate swaps 2,103 - 2,103 -
$ 858,369 $ - $ 858,369 $ -
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.
Loans Receivable - 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. The fair value of collateral dependent loans/loans individually evaluated for loss on a non-recurring basis during fiscal years
2025 and 2024 that were still held in the portfolio as of September 30, 2025 and 2024 was $53.9 million and $8.9 million, respectively. The increase in the balance from September 30, 2024 was due primarily to two commercial real estate loans that were modified during the current fiscal year and were reported as substandard and nonaccrual at September, 30, 2025. Fair values of collateral dependent loans/loans individually evaluated for loss cannot be determined with precision and may not be realized in an actual sale or immediate settlement of the loan and, as such, are classified as Level 3.
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 year ended September 30, 2025 were downward adjustments to the book value of the collateral for lack of marketability. During fiscal year 2025, the adjustments ranged from 10% to 99%, with a weighted average of 23%. During fiscal year 2024, the adjustments ranged from 5% to 100%, with a weighted average of 40%. 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 fiscal years 2025 and 2024 that was still held in the portfolio as of September 30, 2025 and 2024 was $197 thousand and $55 thousand, respectively. The carrying value of the properties equaled the fair value of the properties at September 30, 2025 and 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 years ended September 30, 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:
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 swaps 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 -
September 30, 2024
Carrying Estimated Fair Value
Amount Total Level 1 Level 2 Level 3
(Dollars in thousands)
Assets:
Cash and cash equivalents $ 217,307 $ 217,307 $ 217,307 $ - $ -
AFS securities 856,266 856,266 - 856,266 -
Loans receivable 7,907,338 7,660,535 - - 7,660,535
FHLB stock 101,175 101,175 101,175 - -
Interest rate swaps 2,103 2,103 - 2,103 -
Liabilities:
Deposits 6,129,982 6,135,652 3,164,672 2,970,980 -
Borrowings 2,179,564 2,169,403 - 2,169,403 -
15. ACCUMULATED OTHER COMPREHENSIVE INCOME
The following tables present the changes in the components of AOCI, net of tax, for the years presented.
For the Year Ended September 30, 2025
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 (loss) income, before reclassifications (4,980) 1,391 (3,589)
Amount reclassified from AOCI, net of taxes of $727
- (2,283) (2,283)
Other comprehensive (loss) (4,980) (892) (5,872)
Ending balance $ 15,052 $ 703 $ 15,755
For the Year Ended September 30, 2024
Unrealized Unrealized
Gains (Losses) Gains (Losses)
on AFS on Cash Flow Total
Securities Hedges AOCI
(Dollars in thousands)
Beginning balance $ (1,142) $ 9,842 $ 8,700
Other comprehensive income (loss), before reclassifications 22,362 (2,135) 20,227
Amount reclassified from AOCI, net of taxes of $1,967
- (6,112) (6,112)
Reclassification adjustment on AFS securities included in net income, net of taxes of $383
(1,188) - (1,188)
Other comprehensive income (loss) 21,174 (8,247) 12,927
Ending balance $ 20,032 $ 1,595 $ 21,627
For the Year Ended September 30, 2023
Unrealized Unrealized
Gains (Losses) Gains (Losses)
on AFS on Cash Flow Total
Securities Hedges AOCI
(Dollars in thousands)
Beginning balance $ (155,119) $ 9,486 $ (145,633)
Other comprehensive income (loss), before reclassifications 8,355 5,957 14,312
Amount reclassified from AOCI, net of taxes of $1,808
- (5,601) (5,601)
Reclassification adjustment for net losses on AFS securities included in net income, net of taxes of $(47,000)
145,622 - 145,622
Other comprehensive income 153,977 356 154,333
Ending balance $ (1,142) $ 9,842 $ 8,700
16. REVENUE RECOGNITION
Details of the Company's primary types of non-interest income revenue streams by financial statement line item reported in the consolidated statements of income that are within the scope of ASC Topic 606 are below. During fiscal years 2025, 2024 and 2023, revenue from contracts with customers totaled $16.3 million, $15.3 million and $17.6 million, respectively.
Deposit Service Fees
Interchange Transaction Fees - Interchange transaction fee income primarily consists of interchange fees earned on a transactional basis through card payment networks. The performance obligation for these types of transactions is satisfied as services are rendered for each transaction and revenue is recognized daily concurrently with the transaction processing services provided to the cardholder.
In order to participate in the card payment networks, the Company must pay various transaction related costs established by the networks ("interchange network charges"), including membership fees and a per unit charge for each transaction. The Company is acting as an agent for its debit card customers when they are utilizing the card payment networks; therefore, interchange transaction fee income is reported net of interchange network charges. Interchange network charges totaled $4.3 million, $4.2 million and $4.0 million for fiscal years 2025, 2024 and 2023, respectively.
Service Charges on Deposit Accounts - Service charges on deposit accounts consist of account maintenance fees and transaction-based fees such as those for overdrafts, insufficient funds, wire transfers and the use of out-of-network ATMs. The Company's performance obligation is satisfied over a period of time, generally a month, for account maintenance and at the time of service for transaction-based fees. Revenue is recognized after the performance obligation is satisfied. Payments are typically collected from the customer's deposit account at the time the transaction is processed and/or at the end of the customer's statement cycle (typically monthly).
Insurance Commissions
Commissions are received on insurance product sales. The Company acts in the capacity of an agent between the Company's customer and the insurance carrier. The Company's performance obligation is satisfied when the terms of the policy have been agreed upon and the insurance policy becomes effective. Additionally, the Company earns performance-based incentives ("contingent insurance commissions") based on certain criteria established by the insurance carriers. Contingent insurance commissions are accrued based upon management's expectations.
Other Non-Interest Income
Trust Asset Management Income - The Company provides trust asset management services to customers. The Company primarily earns fees for these services over time as the services are provided and the Company assesses fees at each month end. Fees are charged based on a tiered scale of the market value of the individual trust asset accounts at the end of the month.
17. PARENT COMPANY FINANCIAL INFORMATION (PARENT COMPANY ONLY)
The Company serves as the holding company for the Bank (see "Note 1. Summary of Significant Accounting Policies"). The Company's (parent company only) balance sheets at the dates presented, and the related statements of income and cash flows for each of the years presented are as follows:
BALANCE SHEETS
SEPTEMBER 30, 2025 and 2024
(Dollars in thousands, except per share amounts)
2025 2024
ASSETS:
Cash and cash equivalents $ 17,631 $ 50,110
Investment in the Bank 998,042 948,800
Note receivable - ESOP 31,139 32,731
Income taxes receivable, net 479 423
Other assets 527 519
TOTAL ASSETS $ 1,047,818 $ 1,032,583
LIABILITIES:
Deferred income tax liabilities, net $ 58 $ 58
Payable to the Bank, net 41 51
Other liabilities 42 204
Total liabilities 141 313
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; 100,000,000 shares authorized, no shares issued or outstanding
- -
Common stock, $.01 par value; 1,400,000,000 shares authorized, 132,204,305 and 132,735,565 shares issued and outstanding as of September 30, 2025 and 2024, respectively
1,322 1,327
Additional paid-in capital 1,142,711 1,146,851
Unearned compensation - ESOP (24,780) (26,431)
Accumulated deficit (87,331) (111,104)
AOCI, net of tax 15,755 21,627
Total stockholders' equity 1,047,677 1,032,270
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,047,818 $ 1,032,583
STATEMENTS OF INCOME
YEARS ENDED SEPTEMBER 30, 2025, 2024, and 2023
(Dollars in thousands)
2025 2024 2023
INTEREST AND DIVIDEND INCOME:
Dividend income from the Bank $ 14,000 $ 25,745 $ 86,217
Interest income from other investments 1,624 2,442 2,236
Total interest and dividend income 15,624 28,187 88,453
NON-INTEREST EXPENSE:
Salaries and employee benefits 830 994 906
Regulatory and outside services 351 382 275
Other non-interest expense 712 697 694
Total non-interest expense 1,893 2,073 1,875
INCOME BEFORE INCOME TAX EXPENSE (BENEFIT) AND EQUITY IN UNDISTRIBUTED (EXCESS OF DISTRIBUTION OVER) EARNINGS OF SUBSIDIARY 13,731 26,114 86,578
INCOME TAX (BENEFIT) EXPENSE (56) (5) 71
INCOME BEFORE EQUITY IN UNDISTRIBUTED (EXCESS OF DISTRIBUTION OVER) EARNINGS OF SUBSIDIARY 13,787 26,119 86,507
EQUITY IN (EXCESS OF DISTRIBUTION OVER) UNDISTRIBUTED EARNINGS OF SUBSIDIARY 54,238 11,891 (188,166)
NET INCOME (LOSS) $ 68,025 $ 38,010 $ (101,659)
STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 2025, 2024, and 2023
(Dollars in thousands)
2025 2024 2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 68,025 $ 38,010 $ (101,659)
Adjustments to reconcile net income to net cash provided by operating activities:
(Equity in)/Equity in excess of distribution over earnings of subsidiary (54,238) (11,891) 188,166
Depreciation of equipment - 23 45
Provision for deferred income taxes - (2) (12)
Changes in:
Receivable from/payable to the Bank (10) 2,489 (2,519)
Income taxes receivable/payable (56) (92) 123
Other assets (11) (11) (2)
Other liabilities (162) 193 11
Net cash provided by operating activities 13,548 28,719 84,153
CASH FLOWS FROM INVESTING ACTIVITIES:
Principal collected on note receivable from ESOP 1,592 1,542 1,494
Net cash provided by investing activities 1,592 1,542 1,494
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payment from subsidiary related to restricted stock awards 520 419 401
Cash dividends paid (44,252) (44,522) (83,172)
Repurchase of common stock (3,887) (19,448) (23,453)
Net cash used in financing activities (47,619) (63,551) (106,224)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (32,479) (33,290) (20,577)
CASH AND CASH EQUIVALENTS:
Beginning of year 50,110 83,400 103,977
End of year $ 17,631 $ 50,110 $ 83,400

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
None.

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ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, the "Act") as of September 30, 2025. Based upon this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that, as of September 30, 2025, such disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in the reports it files or submits under the Act is accumulated and communicated to the Company's management (including the Chief Executive Officer and Chief Financial Officer) to allow timely decisions regarding required disclosure, and is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms.
Management's Report on Internal Control Over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Act). The Company's internal control system is a process designed to provide reasonable assurance to the Company's management and Board of Directors regarding the preparation and fair presentation of published financial statements.
The Company's internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; provide reasonable assurances that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures are being made only in accordance with authorizations of management and the directors of the Company; and provide reasonable assurance regarding prevention or untimely detection of unauthorized acquisition, use, or disposition of the Company's assets that could have a material effect on the Company's financial statements.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial reporting. Further, because of changes in conditions, the effectiveness of any system of internal control may vary over time. The design of any internal control system also factors in resource constraints and consideration for the benefit of the control relative to the cost of implementing the control. Because of these inherent limitations in any system of internal control, management cannot provide absolute assurance that all control issues and instances of fraud within the Company have been detected.
Management assessed the effectiveness of the Company's internal control over financial reporting as of September 30, 2025. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control - Integrated Framework (2013). Management has concluded that the Company maintained an effective system of internal control over financial reporting based on these criteria as of September 30, 2025.
The Company's independent registered public accounting firm, KPMG LLP, Kansas City, Missouri (Auditor Firm ID: 185), who audited the consolidated financial statements (as of and for the fiscal year ended September 30, 2025) included in Item 8 of this annual report, has issued an audit report on the Company's internal control over financial reporting as of September 30, 2025 and it is included in Item 8.
Changes in Internal Control Over Financial Reporting
There have been no changes in the Company's internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Act) that occurred during the Company's quarter ended September 30, 2025 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

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ITEM 9B. OTHER INFORMATION
Item 9B. Other Information
Trading Plans
During the quarter ended September 30, 2025, no director or officer (as defined in Rule 16a-1(f) under the Act) of the Company adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408(a) of Regulation S-K.

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Directors, Executive Officers and Corporate Governance
Information required by this item concerning the Company's directors and executive officers and any delinquent reports under Section 16(a) of the Act is incorporated herein by reference from the Company's definitive proxy statement for its Annual Meeting of Stockholders to be held in January 2026, a copy of which will be filed not later than 120 days after the close of the fiscal year.
Information required by this item regarding the audit committee of the Company's Board of Directors, including information regarding the audit committee financial experts serving on the committee, is incorporated herein by reference from the Company's definitive proxy statement for its Annual Meeting of Stockholders to be held in January 2026, a copy of which will be filed not later than 120 days after the close of the fiscal year.
Code of Ethics
We have adopted a written code of ethics within the meaning of Item 406 of SEC Regulation S-K that applies to our principal executive officer and senior financial officers, and to all of our other employees and our directors, a copy of which is available free of charge in the Investor Relations section of our website, https://ir.capfed.com.

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ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation
Information required by this item concerning compensation is incorporated herein by reference from the Company's definitive proxy statement for its Annual Meeting of Stockholders to be held in January 2026, a copy of which will be filed not later than 120 days after the close of the fiscal year.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Information required by this item concerning security ownership of certain beneficial owners and management is incorporated herein by reference from the Company's definitive proxy statement for its Annual Meeting of Stockholders to be held in January 2026, a copy of which will be filed not later than 120 days after the close of the fiscal year.
The following table sets forth information as of September 30, 2025 with respect to compensation plans under which shares of our common stock may be issued.
Equity Compensation Plan Information
Number of Shares
Remaining Available
for Future Issuance
Number of Shares Under Equity
to be issued upon Weighted Average Compensation Plans
Exercise of Exercise Price of (Excluding Shares
Outstanding Options, Outstanding Options, Reflected in the
Plan Category Warrants and Rights Warrants and Rights First Column)
Equity compensation plans
approved by stockholders 231,809 $ 11.98 5,828,204 (1)
Equity compensation plans not
approved by stockholders N/A N/A N/A
231,809 $ 11.98 5,828,204
(1)This amount includes 1,362,175 shares available for future grants of restricted stock under the Company's 2012 Equity Incentive Plan.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions, and Director Independence
Information required by this item concerning certain relationships, related transactions and director independence is incorporated herein by reference from the Company's definitive proxy statement for its Annual Meeting of Stockholders to be held in January 2026, a copy of which will be filed not later than 120 days after the close of the fiscal year.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. Principal Accountant Fees and Services
Information required by this item concerning principal accountant fees and services is incorporated herein by reference from the Company's definitive proxy statement for its Annual Meeting of Stockholders to be held in January 2026, a copy of which will be filed not later than 120 days after the close of the fiscal year.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits and Financial Statement Schedules
(a)The following is a list of documents filed as part of this report:
(1)Financial Statements:
The following financial statements are included under Part II, Item 8 of this Form 10-K:
1.Reports of Independent Registered Public Accounting Firms.
2.Consolidated Balance Sheets as of September 30, 2025 and 2024.
3.Consolidated Statements of Income for the Years Ended September 30, 2025, 2024, and 2023.
4.Consolidated Statements of Comprehensive Income for the Years Ended September 30, 2025, 2024, and 2023.
5.Consolidated Statements of Stockholders' Equity for the Years Ended September 30, 2025, 2024, and 2023.
6.Consolidated Statements of Cash Flows for the Years Ended September 30, 2025, 2024, and 2023.
7.Notes to Consolidated Financial Statements for the Years Ended September 30, 2025, 2024, and 2023.
(2)Financial Statement Schedules:
All financial statement schedules have been omitted as the information is not required under the related instructions or is not applicable.
(3)Exhibits:
See "Index to Exhibits."