UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________________

Form 10-Q

________________________

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June 30,~~December 31, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __ to __

Commission File Number: 001-34814

Capitol Federal Financial, Inc.

(Exact name of registrant as specified in its charter)


Maryland			27-2631712
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

700 South Kansas Avenue,	Topeka,	Kansas	66603
(Address of principal executive offices)			(Zip Code)

(785) 235-1341

(Registrant's telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	CFFN	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐

Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~August~~February 2, ~~2022,~~2023, there were ~~138,858,884~~136,144,725 shares of Capitol Federal Financial, Inc. common stock outstanding.


PART I - FINANCIAL INFORMATION		Page Number
Item 1.	Financial Statements (Unaudited)	3
	Consolidated Balance Sheets at ~~June 30,~~December 31, 2022 and September 30, ~~2021~~2022	3
	Consolidated Statements of Income for the three ~~and nine~~ months ended ~~June 30,~~December 31, 2022 and 2021	4
	Consolidated Statements of Comprehensive Income for the three ~~and nine~~ months ended ~~June 30,~~December 31, 2022 and 2021	5
	Consolidated Statements of Stockholders' Equity for the three ~~and nine~~ months ended ~~June 30,~~December 31, 2022 and 2021	6
	Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~June 30,~~December 31, 2022 and 2021	87
	Notes to Consolidated Financial Statements	109
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	3027
	Financial Condition - Loans Receivable	3330
	Financial Condition - Asset Quality	3634
	Financial Condition - Liabilities	4139
	Financial Condition - Stockholders' Equity	4442
	Operating Results	4543
	Comparison of Operating Results for the three months ended ~~June 30,~~December 31, 2022 and ~~March 31,~~September 30, 2022	46
	~~Comparison of Operating Results for the nine months ended June 30, 2022 and 2021~~	5247
	Comparison of Operating Results for the three months ended ~~June 30,~~December 31, 2022 and 2021	5850

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	6655
Item 4.	Controls and Procedures	7059


PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	7160
Item 1A.	Risk Factors	7160
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	7160
Item 3.	Defaults Upon Senior Securities	7160
Item 4.	Mine Safety Disclosures	7160
Item 5.	Other Information	7160
Item 6.	Exhibits	7160


INDEX TO EXHIBITS		7261


SIGNATURES		7463

PART I -- FINANCIAL INFORMATION

Item 1. Financial Statements


CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY	CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY					CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (Unaudited)	CONSOLIDATED BALANCE SHEETS (Unaudited)					CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollars in thousands, except per share amounts)	(Dollars in thousands, except per share amounts)					(Dollars in thousands, except per share amounts)

		June 30,		September 30,			December 31,		September 30,
		2022		2021			2022		2022
ASSETS:	ASSETS:					ASSETS:
Cash and cash equivalents (includes interest-earning deposits of $31,589 and $24,289)		$	54,789	$	42,262
Cash and cash equivalents (includes interest-earning deposits of $20,243 and $27,467)						Cash and cash equivalents (includes interest-earning deposits of $20,243 and $27,467)	$	49,686	$	49,194

Available-for-sale ("AFS") securities, at estimated fair value (amortized cost of $1,830,262 and $2,008,456)		1,694,160		2,014,608
Available-for-sale ("AFS") securities, at estimated fair value (amortized cost of $1,716,608 and $1,768,490)						Available-for-sale ("AFS") securities, at estimated fair value (amortized cost of $1,716,608 and $1,768,490)	1,528,686		1,563,307

Loans receivable, net (allowance for credit losses ("ACL") of $16,283 and $19,823)		7,236,196		7,081,142
Loans receivable, net (allowance for credit losses ("ACL") of $19,189 and $16,371)						Loans receivable, net (allowance for credit losses ("ACL") of $19,189 and $16,371)	7,783,358		7,464,208
Federal Home Loan Bank Topeka ("FHLB") stock, at cost	Federal Home Loan Bank Topeka ("FHLB") stock, at cost	87,696		73,421		Federal Home Loan Bank Topeka ("FHLB") stock, at cost	124,119		100,624
Premises and equipment, net	Premises and equipment, net	96,008		99,127		Premises and equipment, net	93,507		94,820
Income taxes receivable, net	Income taxes receivable, net	1,993		—		Income taxes receivable, net	124		1,266
Deferred income tax assets, net	Deferred income tax assets, net	19,636		—		Deferred income tax assets, net	29,924		33,884
Other assets	Other assets	285,575		320,686		Other assets	320,356		317,594
TOTAL ASSETS	TOTAL ASSETS	$	9,476,053	$	9,631,246	TOTAL ASSETS	$	9,929,760	$	9,624,897

LIABILITIES:	LIABILITIES:					LIABILITIES:
Deposits	Deposits	$	6,329,883	$	6,597,396	Deposits	$	6,074,549	$	6,194,866
Borrowings	Borrowings	1,869,897		1,582,850		Borrowings	2,645,195		2,132,154

Advance payments by borrowers for taxes and insurance		55,955		72,729
Income taxes payable, net		—		918
Deferred income tax liabilities, net		—		5,810
Advances by borrowers						Advances by borrowers	36,207		80,067

Other liabilities	Other liabilities	88,578		129,270		Other liabilities	119,014		121,311
Total liabilities	Total liabilities	8,344,313		8,388,973		Total liabilities	8,874,965		8,528,398

STOCKHOLDERS' EQUITY:	STOCKHOLDERS' EQUITY:					STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; 100,000,000 shares authorized, no shares issued or outstanding	Preferred stock, $.01 par value; 100,000,000 shares authorized, no shares issued or outstanding	—		—		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, 138,854,084 and 138,832,284 shares issued and outstanding as of June 30, 2022 and September 30, 2021, respectively		1,388		1,388
Common stock, $.01 par value; 1,400,000,000 shares authorized, 136,134,225 and 138,858,884 shares issued and outstanding as of December 31, 2022 and September 30, 2022, respectively						Common stock, $.01 par value; 1,400,000,000 shares authorized, 136,134,225 and 138,858,884 shares issued and outstanding as of December 31, 2022 and September 30, 2022, respectively	1,361		1,388
Additional paid-in capital	Additional paid-in capital	1,190,117		1,189,633		Additional paid-in capital	1,168,061		1,190,213
Unearned compensation, Employee Stock Ownership Plan ("ESOP")	Unearned compensation, Employee Stock Ownership Plan ("ESOP")	(30,148)		(31,387)		Unearned compensation, Employee Stock Ownership Plan ("ESOP")	(29,322)		(29,735)
Retained earnings	Retained earnings	72,308		98,944		Retained earnings	47,297		80,266
Accumulated other comprehensive (loss) income ("AOCI"), net of tax	Accumulated other comprehensive (loss) income ("AOCI"), net of tax	(101,925)		(16,305)		Accumulated other comprehensive (loss) income ("AOCI"), net of tax	(132,602)		(145,633)
Total stockholders' equity	Total stockholders' equity	1,131,740		1,242,273		Total stockholders' equity	1,054,795		1,096,499
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	9,476,053	$	9,631,246	TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	9,929,760	$	9,624,897

See accompanying notes to consolidated financial statements.	See accompanying notes to consolidated financial statements.					See accompanying notes to consolidated financial statements.


CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY	CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY									CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)	CONSOLIDATED STATEMENTS OF INCOME (Unaudited)									CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars in thousands, except per share amounts)	(Dollars in thousands, except per share amounts)									(Dollars in thousands, except per share amounts)

		For the Three Months Ended				For the Nine Months Ended					For the Three Months Ended
		June 30,				June 30,					December 31,
		2022		2021		2022		2021			2022		2021
INTEREST AND DIVIDEND INCOME:	INTEREST AND DIVIDEND INCOME:									INTEREST AND DIVIDEND INCOME:
Loans receivable	Loans receivable	$	56,886	$	54,779	$	168,086	$	172,758	Loans receivable	$	64,819	$	55,788
Cash and cash equivalents										Cash and cash equivalents	16,671		14
Mortgage-backed securities ("MBS")	Mortgage-backed securities ("MBS")	5,048		5,360		14,494		16,499		Mortgage-backed securities ("MBS")	4,811		4,625
FHLB stock	FHLB stock	2,695		944		6,166		2,964		FHLB stock	4,158		1,231
Cash and cash equivalents		3,968		26		4,931		117
Investment securities	Investment securities	815		763		2,423		2,075		Investment securities	881		808
Total interest and dividend income	Total interest and dividend income	69,412		61,872		196,100		194,413		Total interest and dividend income	91,340		62,466
INTEREST EXPENSE:	INTEREST EXPENSE:									INTEREST EXPENSE:
Borrowings	Borrowings	11,644		7,826		27,961		26,885		Borrowings	33,608		7,585
Deposits	Deposits	7,787		11,475		25,443		38,071		Deposits	11,904		9,267

Total interest expense	Total interest expense	19,431		19,301		53,404		64,956		Total interest expense	45,512		16,852
NET INTEREST INCOME	NET INTEREST INCOME	49,981		42,571		142,696		129,457		NET INTEREST INCOME	45,828		45,614
PROVISION FOR CREDIT LOSSES	PROVISION FOR CREDIT LOSSES	937		(2,691)		(5,690)		(7,187)		PROVISION FOR CREDIT LOSSES	3,660		(3,439)
NET INTEREST INCOME AFTER
PROVISION FOR CREDIT LOSSES		49,044		45,262		148,386		136,644

NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES										NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES	42,168		49,053
NON-INTEREST INCOME:	NON-INTEREST INCOME:									NON-INTEREST INCOME:
Deposit service fees	Deposit service fees	3,601		3,227		10,331		8,988		Deposit service fees	3,461		3,430
Insurance commissions	Insurance commissions	788		723		2,042		2,249		Insurance commissions	795		711
Gain on sale of Visa Class B shares		—		—		—		7,386

Other non-interest income	Other non-interest income	1,726		1,286		4,664		4,160		Other non-interest income	1,096		1,365
Total non-interest income	Total non-interest income	6,115		5,236		17,037		22,783		Total non-interest income	5,352		5,506
NON-INTEREST EXPENSE:	NON-INTEREST EXPENSE:									NON-INTEREST EXPENSE:
Salaries and employee benefits	Salaries and employee benefits	14,581		13,867		42,332		41,402		Salaries and employee benefits	13,698		13,728
Information technology and related expense	Information technology and related expense	4,343		4,736		13,268		13,568		Information technology and related expense	5,070		4,432
Occupancy, net	Occupancy, net	3,721		3,504		10,593		10,406		Occupancy, net	3,474		3,379
Regulatory and outside services	Regulatory and outside services	1,572		1,469		4,212		4,288		Regulatory and outside services	1,533		1,368
Advertising and promotional	Advertising and promotional	1,068		1,407		3,626		3,729		Advertising and promotional	833		1,064
Federal insurance premium	Federal insurance premium	784		633		2,200		1,888		Federal insurance premium	812		639
Office supplies and related expense										Office supplies and related expense	633		468
Deposit and loan transaction costs	Deposit and loan transaction costs	664		693		2,050		2,123		Deposit and loan transaction costs	611		697
Office supplies and related expense		494		402		1,464		1,289
Loss on interest rate swap termination		—		—		—		4,752

Other non-interest expense	Other non-interest expense	1,163		891		3,299		3,877		Other non-interest expense	1,109		919
Total non-interest expense	Total non-interest expense	28,390		27,602		83,044		87,322		Total non-interest expense	27,773		26,694
INCOME BEFORE INCOME TAX EXPENSE	INCOME BEFORE INCOME TAX EXPENSE	26,769		22,896		82,379		72,105		INCOME BEFORE INCOME TAX EXPENSE	19,747		27,865
INCOME TAX EXPENSE	INCOME TAX EXPENSE	5,617		4,709		17,418		14,576		INCOME TAX EXPENSE	3,507		5,679
NET INCOME	NET INCOME	$	21,152	$	18,187	$	64,961	$	57,529	NET INCOME	$	16,240	$	22,186

Basic earnings per share ("EPS")	Basic earnings per share ("EPS")	$	0.16	$	0.13	$	0.48	$	0.42	Basic earnings per share ("EPS")	$	0.12	$	0.16
Diluted EPS	Diluted EPS	$	0.16	$	0.13	$	0.48	$	0.42	Diluted EPS	$	0.12	$	0.16

Basic weighted average common shares	Basic weighted average common shares	135,724,658		135,504,869		135,675,959		135,450,951		Basic weighted average common shares	134,640,932		135,627,043
Diluted weighted average common shares	Diluted weighted average common shares	135,724,658		135,537,152		135,675,959		135,477,566		Diluted weighted average common shares	134,640,932		135,627,043

See accompanying notes to consolidated financial statements.	See accompanying notes to consolidated financial statements.									See accompanying notes to consolidated financial statements.


CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY	CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY									CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)	CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)									CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
(Dollars in thousands)	(Dollars in thousands)									(Dollars in thousands)

		For the Three Months Ended				For the Nine Months Ended					For the Three Months Ended
		June 30,				June 30,					December 31,
		2022		2021		2022		2021			2022		2021
Net income	Net income	$	21,152	$	18,187	$	64,961	$	57,529	Net income	$	16,240	$	22,186
Other comprehensive income (loss), net of tax:	Other comprehensive income (loss), net of tax:									Other comprehensive income (loss), net of tax:
Changes in unrealized gains/losses on AFS securities, net of taxes of $10,043, $(1,841), $34,710, and $4,506		(31,117)		5,703		(107,544)		(14,091)
Changes in unrealized gains/losses on AFS securities, net of taxes of $(4,211) and $3,544										Changes in unrealized gains/losses on AFS securities, net of taxes of $(4,211) and $3,544	13,050		(10,982)

Changes in unrealized gains/losses on cash flow hedges, net of taxes of $(1,646), $29, $(7,076), and $(5,500)		5,099		(88)		21,924		17,258
Changes in unrealized gains/losses on cash flow hedges, net of taxes of $5 and $(1,277)										Changes in unrealized gains/losses on cash flow hedges, net of taxes of $5 and $(1,277)	(19)		3,961

Comprehensive income (loss)		$	(4,866)	$	23,802	$	(20,659)	$	60,696
Comprehensive income										Comprehensive income	$	29,271	$	15,165

See accompanying notes to consolidated financial statements.	See accompanying notes to consolidated financial statements.									See accompanying notes to consolidated financial statements.


CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY	CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY													CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited)	CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited)													CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited)
(Dollars in thousands, except per share amounts)	(Dollars in thousands, except per share amounts)													(Dollars in thousands, except per share amounts)

		For the Nine Months Ended June 30, 2022													For the Three Months Ended December 31, 2022
				Additional		Unearned						Total					Additional		Unearned						Total
		Common		Paid-In		Compensation		Retained				Stockholders'			Common		Paid-In		Compensation		Retained				Stockholders'
		Stock		Capital		ESOP		Earnings		AOCI		Equity			Stock		Capital		ESOP		Earnings		AOCI		Equity
Balance at September 30, 2021		$	1,388	$	1,189,633	$	(31,387)	$	98,944	$	(16,305)	$	1,242,273
Balance at September 30, 2022														Balance at September 30, 2022	$	1,388	$	1,190,213	$	(29,735)	$	80,266	$	(145,633)	$	1,096,499

Net income	Net income							22,186				22,186		Net income							16,240				16,240
Other comprehensive loss, net of tax										(7,021)		(7,021)

ESOP activity				74		413						487
Restricted stock activity, net				(3)								(3)
Stock-based compensation				123								123

Cash dividends to stockholders ($0.305 per share)								(41,385)				(41,385)
Balance at December 31, 2021		1,388		1,189,827		(30,974)		79,745		(23,326)		1,216,660

Net income								21,623				21,623
Other comprehensive loss, net of tax										(52,581)		(52,581)
Other comprehensive income, net of tax														Other comprehensive income, net of tax									13,031		13,031

ESOP activity	ESOP activity			48		413						461		ESOP activity			(72)		413						341

Stock-based compensation	Stock-based compensation			124								124		Stock-based compensation			89								89
Repurchase of common stock														Repurchase of common stock	(27)		(22,169)								(22,196)

Cash dividends to stockholders ($0.085 per share)								(11,535)				(11,535)
Balance at March 31, 2022		$	1,388	$	1,189,999	$	(30,561)	$	89,833	$	(75,907)	$	1,174,752
Net income								21,152				21,152
Other comprehensive loss, net of tax										(26,018)		(26,018)
Cash dividends to stockholders ($0.365 per share)														Cash dividends to stockholders ($0.365 per share)							(49,209)				(49,209)
Balance at December 31, 2022														Balance at December 31, 2022	$	1,361	$	1,168,061	$	(29,322)	$	47,297	$	(132,602)	$	1,054,795

ESOP activity				(5)		413						408
Restricted stock activity, net				(3)								(3)
Stock-based compensation				126								126

Cash dividends to stockholders ($0.285 per share)								(38,677)				(38,677)
Balance at June 30, 2022		$	1,388	$	1,190,117	$	(30,148)	$	72,308	$	(101,925)	$	1,131,740

												(Continued)






	For the Three Months Ended December 31, 2021
			Additional		Unearned						Total
	Common		Paid-In		Compensation		Retained				Stockholders'
	Stock		Capital		ESOP		Earnings		AOCI		Equity
Balance at September 30, 2021	$	1,388	$	1,189,633	$	(31,387)	$	98,944	$	(16,305)	$	1,242,273


Net income							22,186				22,186
Other comprehensive loss, net of tax									(7,021)		(7,021)

ESOP activity			74		413						487
Restricted stock activity, net			(3)								(3)
Stock-based compensation			123								123


Cash dividends to stockholders ($0.305 per share)							(41,385)				(41,385)
Balance at December 31, 2021	$	1,388	$	1,189,827	$	(30,974)	$	79,745	$	(23,326)	$	1,216,660

CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited)
(Dollars in thousands, except per share amounts)
For the Nine Months Ended June 30, 2021
Additional Unearned Total
Common Paid-In Compensation Retained Stockholders'
Stock Capital ESOP Earnings AOCI Equity
Balance at September 30, 2020 $ 1,389 $ 1,189,853 $ (33,040) $ 143,162 $ (16,505) $ 1,284,859
Cumulative effect of adopting Accounting Standards Update ("ASU") 2016-13 ("CECL"), net of tax (2,288) (2,288)
Net income 18,898 18,898
Other comprehensive income, net of tax 5,134 5,134
ESOP activity 80 413 493
Restricted stock activity, net (8) (8)
Stock-based compensation 118 118
Repurchase of common stock (1) (1,407) (122) (1,530)
Cash dividends to stockholders ($0.215 per share) (29,128) (29,128)
Balance at December 31, 2020 1,388 1,188,636 (32,627) 130,522 (11,371) 1,276,548
Net income 20,444 20,444
Other comprehensive loss, net of tax (7,582) (7,582)
ESOP activity 132 413 545
Stock-based compensation 134 134
Stock options exercised 24 24
Cash dividends to stockholders ($0.085 per share) (11,518) (11,518)
Balance at March 31, 2021 $ 1,388 $ 1,188,926 $ (32,214) $ 139,448 $ (18,953) $ 1,278,595
Net income 18,187 18,187
Other comprehensive income, net of tax 5,615 5,615
ESOP activity 118 413 531
Restricted stock activity, net (5) (5)
Stock-based compensation 127 127
Stock options exercised 300 300
Cash dividends to stockholders ($0.485 per share) (65,726) (65,726)
Balance at June 30, 2021 $ 1,388 $ 1,189,466 $ (31,801) $ 91,909 $ (13,338) $ 1,237,624
See accompanying notes to consolidated financial statements. (Concluded)


CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY	CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY			CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)	CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)			CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in thousands)	(Dollars in thousands)			(Dollars in thousands)
		For the Nine Months Ended			For the Three Months Ended
		June 30,			December 31,
		2022	2021		2022	2021
CASH FLOWS FROM OPERATING ACTIVITIES:	CASH FLOWS FROM OPERATING ACTIVITIES:			CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	Net income	64,961	57,529	Net income	16,240	22,186
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:			Adjustments to reconcile net income to net cash provided by operating activities:
FHLB stock dividends	FHLB stock dividends	(6,166)	(2,964)	FHLB stock dividends	(4,158)	(1,231)
Provision for credit losses	Provision for credit losses	(5,690)	(7,187)	Provision for credit losses	3,660	(3,439)
Originations of loans receivable held-for-sale ("LHFS")	Originations of loans receivable held-for-sale ("LHFS")	(1,089)	(597)	Originations of loans receivable held-for-sale ("LHFS")	—	(678)
Proceeds from sales of LHFS	Proceeds from sales of LHFS	1,113	610	Proceeds from sales of LHFS	—	285
Amortization and accretion of premiums and discounts on securities	Amortization and accretion of premiums and discounts on securities	4,027	4,308	Amortization and accretion of premiums and discounts on securities	837	1,764
Depreciation and amortization of premises and equipment	Depreciation and amortization of premises and equipment	7,020	6,938	Depreciation and amortization of premises and equipment	2,298	2,341
Amortization of intangible assets	Amortization of intangible assets	1,049	1,264	Amortization of intangible assets	274	350
Amortization of deferred amounts related to FHLB advances, net	Amortization of deferred amounts related to FHLB advances, net	1,347	1,132	Amortization of deferred amounts related to FHLB advances, net	459	453
Common stock committed to be released for allocation - ESOP	Common stock committed to be released for allocation - ESOP	1,356	1,569	Common stock committed to be released for allocation - ESOP	341	487
Stock-based compensation	Stock-based compensation	373	379	Stock-based compensation	89	123

Gain on the sale of Visa Class B shares		—	(7,386)

Changes in:	Changes in:			Changes in:
Unrestricted cash collateral (provided to)/received from derivative counterparties, net		2,620	—
Unrestricted cash collateral received from derivative counterparties, net				Unrestricted cash collateral received from derivative counterparties, net	530	—
Other assets, net	Other assets, net	6,307	8,776	Other assets, net	(2,527)	1,452
Income taxes payable/receivable, net	Income taxes payable/receivable, net	(2,921)	(1,703)	Income taxes payable/receivable, net	1,117	2,807
Deferred income tax liabilities, net	Deferred income tax liabilities, net	2,182	(511)	Deferred income tax liabilities, net	(245)	438
Other liabilities	Other liabilities	(13,095)	(10,780)	Other liabilities	(4,314)	(7,069)
Net cash provided by operating activities	Net cash provided by operating activities	63,394	51,377	Net cash provided by operating activities	14,601	20,269

CASH FLOWS FROM INVESTING ACTIVITIES:	CASH FLOWS FROM INVESTING ACTIVITIES:			CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of AFS securities		(86,993)	(953,818)

Proceeds from calls, maturities and principal reductions of AFS securities	Proceeds from calls, maturities and principal reductions of AFS securities	261,160	476,158	Proceeds from calls, maturities and principal reductions of AFS securities	51,045	107,665

Proceeds from the redemption of FHLB stock	Proceeds from the redemption of FHLB stock	188,618	24,225	Proceeds from the redemption of FHLB stock	90,423	1,224
Purchase of FHLB stock	Purchase of FHLB stock	(196,727)	(1,029)	Purchase of FHLB stock	(109,760)	(1,833)
Net change in loans receivable	Net change in loans receivable	(151,805)	179,277	Net change in loans receivable	(327,583)	(12,387)
Proceeds from sale of participating interest in loans receivable				Proceeds from sale of participating interest in loans receivable	5,563	—
Purchase of premises and equipment	Purchase of premises and equipment	(4,492)	(8,108)	Purchase of premises and equipment	(1,093)	(1,526)
Proceeds from sale of other real estate owned ("OREO")	Proceeds from sale of other real estate owned ("OREO")	503	97	Proceeds from sale of other real estate owned ("OREO")	296	120

Proceeds from the sale of Visa Class B shares		—	7,386

Proceeds from sale of assets held-for-sale		—	977
Proceeds from bank-owned life insurance ("BOLI") death benefit		1,023	443
Net cash provided by (used in) investing activities		11,287	(274,392)

			(Continued)

Net cash (used in) provided by investing activities				Net cash (used in) provided by investing activities	(291,109)	93,263

						(Continued)


CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY	CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY			CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)	CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)			CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in thousands)	(Dollars in thousands)			(Dollars in thousands)
		For the Nine Months Ended			For the Three Months Ended
		June 30,			December 31,
		2022	2021		2022	2021
CASH FLOWS FROM FINANCING ACTIVITIES:	CASH FLOWS FROM FINANCING ACTIVITIES:			CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends paid	Cash dividends paid	(91,597)	(106,372)	Cash dividends paid	(49,209)	(41,385)
Net change in deposits	Net change in deposits	(267,513)	446,886	Net change in deposits	(120,317)	50,608
Proceeds from borrowings	Proceeds from borrowings	1,079,402	803,800	Proceeds from borrowings	2,000,100	293,702
Repayments on borrowings	Repayments on borrowings	(793,702)	(1,006,800)	Repayments on borrowings	(1,487,518)	(293,702)

Change in advance payments by borrowers for taxes and insurance		(16,774)	(18,391)
Payment of FHLB prepayment penalties		—	(5,076)
Change in advances by borrowers				Change in advances by borrowers	(43,860)	(34,502)

Repurchase of common stock	Repurchase of common stock	—	(4,569)	Repurchase of common stock	(22,196)	—
Stock options exercised		—	324

Net cash (used in) provided by financing activities		(90,184)	109,802

NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH		(15,503)	(113,213)
Net cash provided by (used in) financing activities				Net cash provided by (used in) financing activities	277,000	(25,279)

NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH				NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	492	88,253

CASH, CASH EQUIVALENTS AND RESTRICTED CASH:	CASH, CASH EQUIVALENTS AND RESTRICTED CASH:			CASH, CASH EQUIVALENTS AND RESTRICTED CASH:
Beginning of period	Beginning of period	70,292	239,708	Beginning of period	49,194	70,292
End of period	End of period	54,789	126,495	End of period	49,686	158,545

See accompanying notes to consolidated financial statements.	See accompanying notes to consolidated financial statements.		(Concluded)	See accompanying notes to consolidated financial statements.		(Concluded)

Notes to Consolidated Financial Statements (Unaudited)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation - The consolidated financial statements include the accounts of Capitol Federal Financial, Inc.® (the "Company") and its wholly-owned subsidiary, Capitol Federal Savings Bank (the "Bank"). The Bank has two wholly-owned subsidiaries, Capitol Funds, Inc. and Capital City Investments, Inc. Capitol Funds, Inc. has a wholly-owned subsidiary, Capitol Federal Mortgage Reinsurance Company. Capital City Investments, Inc. is a real estate and investment holding company. All intercompany accounts and transactions have been eliminated in consolidation. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. These statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, ~~2021,~~2022, filed with the Securities and Exchange Commission ("SEC"). Interim results are not necessarily indicative of results for a full year.

Cash, Cash Equivalents and Restricted Cash - Cash, cash equivalents and restricted cash reported in the statement of cash flows ~~included~~consisted entirely of cash and cash equivalents of ~~$54.8~~$49.7 million and ~~$42.3~~$49.2 million at ~~June 30,~~December 31, 2022 and September 30, ~~2021, respectively, and included~~2022, respectively. At times, the Company holds restricted cash, ~~of $28.0 million at September 30, 2021,~~ which ~~was included~~is reported in other assets on the consolidated balance ~~sheet. There was no restricted cash at June 30, 2022. The restricted cash relates~~sheet, related to ~~the~~ collateral postings to/from the Bank's derivative counterparties associated with the Bank's interest rate swaps. There was no restricted cash at December 31, 2022 or September 30, 2022. See additional discussion regarding the interest rate swaps in Note 5. Borrowed Funds.

Net Presentation of Cash Flows Related to Borrowings - At times, the Bank enters into ~~certain~~ 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.

Recent Accounting Pronouncements - In March 2022, the Financial Accounting Standards Board ("FASB") issued ~~ASU~~Accounting Standards Update ("ASU") 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings ("TDRs") and Vintage Disclosures. This ASU eliminates the accounting guidance for TDRs by creditors, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. Additionally, this ASU requires that an entity disclose current-period gross write-offs by year of origination for financing receivables within the scope of Accounting Standards Codification ("ASC") 326-20, Financial Instruments-Credit Losses-Measured at Amortized Cost. This ASU is effective for the Company on October 1, 2023. ~~The Company is currently evaluating~~While the ~~effect~~adoption of this ASU is expected to result in enhanced disclosures, the Company does not expect the adoption of this ASU to have a material impact on the Company's consolidated financial condition or results of ~~operations and disclosures.~~operations.

109

2. EARNINGS PER SHARE

Shares acquired by the ESOP are not included in basic average shares outstanding until the shares are committed for allocation or vested to an employee's individual account. Unvested shares awarded pursuant to the Company's restricted stock benefit plans are treated as participating securities in the computation of EPS pursuant to the two-class method as they contain nonforfeitable rights to dividends. The two-class method is an earnings allocation that determines EPS for each class of common stock and participating security.


		For the Three Months Ended				For the Nine Months Ended					For the Three Months Ended
		June 30,				June 30,					December 31,
		2022		2021		2022		2021			2022		2021
		(Dollars in thousands, except per share amounts)									(Dollars in thousands, except per share amounts)
Net income	Net income	$	21,152	$	18,187	$	64,961	$	57,529	Net income	$	16,240	$	22,186
Income allocated to participating securities	Income allocated to participating securities	(11)		(12)		(35)		(39)		Income allocated to participating securities	(7)		(12)
Net income available to common stockholders	Net income available to common stockholders	$	21,141	$	18,175	$	64,926	$	57,490	Net income available to common stockholders	$	16,233	$	22,174

Total basic average common shares outstanding	Total basic average common shares outstanding	135,724,658		135,504,869		135,675,959		135,450,951		Total basic average common shares outstanding	134,640,932		135,627,043
Effect of dilutive stock options	Effect of dilutive stock options	—		32,283		—		26,615		Effect of dilutive stock options	—		—
Total diluted average common shares outstanding	Total diluted average common shares outstanding	135,724,658		135,537,152		135,675,959		135,477,566		Total diluted average common shares outstanding	134,640,932		135,627,043

Net EPS:	Net EPS:									Net EPS:
Basic	Basic	$	0.16	$	0.13	$	0.48	$	0.42	Basic	$	0.12	$	0.16
Diluted	Diluted	$	0.16	$	0.13	$	0.48	$	0.42	Diluted	$	0.12	$	0.16

Antidilutive stock options, excluded from the diluted average	Antidilutive stock options, excluded from the diluted average									Antidilutive stock options, excluded from the diluted average
common shares outstanding calculation	common shares outstanding calculation	507,115		93,565		531,305		210,529		common shares outstanding calculation	378,026		543,761

1110

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 the MBS and investment securities portfolios are composed of securities issued by United States Government-Sponsored Enterprises ("GSEs").


		June 30, 2022									December 31, 2022
				Gross		Gross		Estimated					Gross		Gross		Estimated
		Amortized		Unrealized		Unrealized		Fair			Amortized		Unrealized		Unrealized		Fair
		Cost		Gains		Losses		Value			Cost		Gains		Losses		Value
		(Dollars in thousands)									(Dollars in thousands)

MBS	MBS	$	1,306,076	$	1,052	$	100,381	$	1,206,747	MBS	$	1,191,597	$	208	$	139,550	$	1,052,255
GSE debentures	GSE debentures	519,976		—		36,783		483,193		GSE debentures	519,979		—		48,199		471,780
Corporate bonds	Corporate bonds	4,000		19		9		4,010		Corporate bonds	4,000		—		359		3,641
Municipal bonds	Municipal bonds	210		—		—		210		Municipal bonds	1,032		—		22		1,010
		$	1,830,262	$	1,071	$	137,173	$	1,694,160		$	1,716,608	$	208	$	188,130	$	1,528,686


		September 30, 2021									September 30, 2022
				Gross		Gross		Estimated					Gross		Gross		Estimated
		Amortized		Unrealized		Unrealized		Fair			Amortized		Unrealized		Unrealized		Fair
		Cost		Gains		Losses		Value			Cost		Gains		Losses		Value
		(Dollars in thousands)									(Dollars in thousands)

MBS	MBS	$	1,484,211	$	18,690	$	8,908	$	1,493,993	MBS	$	1,243,270	$	365	$	155,011	$	1,088,624
GSE debentures	GSE debentures	519,971		—		3,645		516,326		GSE debentures	519,977		—		50,150		469,827

Corporate bonds										Corporate bonds	4,000		—		305		3,695
Municipal bonds	Municipal bonds	4,274		15		—		4,289		Municipal bonds	1,243		—		82		1,161
		$	2,008,456	$	18,705	$	12,553	$	2,014,608		$	1,768,490	$	365	$	205,548	$	1,563,307

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.


		June 30, 2022									December 31, 2022
		Less Than 12 Months				Equal to or Greater Than 12 Months					Less Than 12 Months				Equal to or Greater Than 12 Months
		Estimated		Unrealized		Estimated		Unrealized			Estimated		Unrealized		Estimated		Unrealized
		Fair Value		Losses		Fair Value		Losses			Fair Value		Losses		Fair Value		Losses
		(Dollars in thousands)									(Dollars in thousands)

MBS	MBS	$	679,499	$	49,094	$	453,856	$	51,287	MBS	$	299,745	$	17,402	$	724,667	$	122,148
GSE debentures	GSE debentures	209,978		15,022		273,215		21,761		GSE debentures	—		—		471,780		48,199
Corporate bonds	Corporate bonds	1,991		9		—		—		Corporate bonds	3,641		359		—		—
Municipal bonds	Municipal bonds	—		—		—		—		Municipal bonds	1,010		22		—		—
		$	891,468	$	64,125	$	727,071	$	73,048		$	304,396	$	17,783	$	1,196,447	$	170,347

September 30, 2021
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 $ 881,975 $ 8,843 $ 10,612 $ 65
GSE debentures 516,325 3,645 — —
Municipal bonds — — — —
$ 1,398,300 $ 12,488 $ 10,612 $ 65


	September 30, 2022
	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	$	338,013	$	22,563	$	715,281	$	132,448
GSE debentures	—		—		469,827		50,150
Corporate bonds	3,695		305		—		—
Municipal bonds	1,161		82		—		—
	$	342,869	$	22,950	$	1,185,108	$	182,598

1211

The unrealized losses at ~~June 30,~~December 31, 2022 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 ~~June 30,~~December 31, 2022 because scheduled coupon payments have been made, management anticipates that the entire principal balance will be collected as scheduled, and neither does the Company intend to sell the securities, nor is it more likely than not that the Company will be required to sell the securities before the recovery of the remaining amortized cost amount, which could be at maturity.

The amortized cost and estimated fair value of AFS debt securities as of ~~June 30,~~December 31, 2022, 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.


		Amortized		Estimated			Amortized		Estimated
		Cost		Fair Value			Cost		Fair Value
		(Dollars in thousands)					(Dollars in thousands)
One year or less	One year or less	$	210	$	210	One year or less	$	25,000	$	24,006
One year through five years	One year through five years	519,976		483,193		One year through five years	494,979		447,774
Five years through ten years	Five years through ten years	4,000		4,010		Five years through ten years	5,032		4,651

		524,186		487,413			525,011		476,431
MBS	MBS	1,306,076		1,206,747		MBS	1,191,597		1,052,255
		$	1,830,262	$	1,694,160		$	1,716,608	$	1,528,686

The following table presents the taxable and non-taxable components of interest income on investment securities for the periods presented.

For the Three Months Ended For the Nine Months Ended
June 30, June 30,
2022 2021 2022 2021
(Dollars in thousands)
Taxable $ 813 $ 740 $ 2,393 $ 1,982
Non-taxable 2 23 30 93
$ 815 $ 763 $ 2,423 $ 2,075



	For the Three Months Ended
	December 31,
	2022		2021
	(Dollars in thousands)
Taxable	$	874	$	790
Non-taxable	7		18
	$	881	$	808

The following table summarizes the carrying value of securities pledged as collateral for the obligations indicated below as of the dates presented.

June 30, 2022 September 30, 2021
(Dollars in thousands)
Public unit deposits $ 123,889 $ 264,885
Federal Reserve Bank of Kansas City ("FRB of Kansas City") 52,394 64,707
Commercial deposits 17,686 66,256
$ 193,969 $ 395,848



	December 31, 2022		September 30, 2022
	(Dollars in thousands)
FHLB advances	$	572,068	$	572,913
Public unit deposits	137,562		125,496
Federal Reserve Bank of Kansas City ("FRB of Kansas City") borrowings	44,498		46,283


	$	754,128	$	744,692

During the prior year, the Company sold its Visa Class B shares. The proceeds and realized gain related to the sale of the Visa Class B shares were each $7.4 million. All other dispositions of securities during the nine months ended June 30, 2022 and June 30, 2021 were the result of principal repayments, calls, or maturities.

1312

4. LOANS RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES

Loans receivable, net at the dates presented is summarized as follows:


		June 30, 2022		September 30, 2021			December 31, 2022		September 30, 2022
		(Dollars in thousands)					(Dollars in thousands)
One- to four-family:	One- to four-family:					One- to four-family:
Originated	Originated	$	3,963,608	$	3,956,064	Originated	$	4,007,596	$	3,988,469
Correspondent purchased	Correspondent purchased	2,070,822		2,003,477		Correspondent purchased	2,353,335		2,201,886
Bulk purchased	Bulk purchased	151,461		173,662		Bulk purchased	145,209		147,939
Construction	Construction	60,426		39,142		Construction	70,869		66,164
Total	Total	6,246,317		6,172,345		Total	6,577,009		6,404,458
Commercial:	Commercial:					Commercial:
Commercial real estate	Commercial real estate	717,947		676,908		Commercial real estate	833,444		745,301
Commercial and industrial	Commercial and industrial	70,932		66,497		Commercial and industrial	88,327		79,981
Construction	Construction	115,031		85,963		Construction	188,516		141,062
Total	Total	903,910		829,368		Total	1,110,287		966,344
Consumer:	Consumer:					Consumer:
Home equity	Home equity	87,235		86,274		Home equity	95,352		92,203
Other	Other	8,289		8,086		Other	9,022		8,665
Total	Total	95,524		94,360		Total	104,374		100,868

Total loans receivable	Total loans receivable	7,245,751		7,096,073		Total loans receivable	7,791,670		7,471,670

Less:	Less:					Less:
ACL	ACL	16,283		19,823		ACL	19,189		16,371
Deferred loan fees/discounts	Deferred loan fees/discounts	29,470		29,556		Deferred loan fees/discounts	30,513		29,736
Premiums/deferred costs	Premiums/deferred costs	(36,198)		(34,448)		Premiums/deferred costs	(41,390)		(38,645)
		$	7,236,196	$	7,081,142		$	7,783,358	$	7,464,208

Lending Practices and Underwriting Standards - Originating and purchasing one- to four-family loans is the Bank's primary lending business. The Bank also originates consumer loans primarily secured by one- to four-family residential properties and originates and participates in commercial loans. The Bank has a loan concentration in one- to four-family loans and a geographic ~~concentration~~concentrations of these loans in Kansas, Missouri, and ~~Missouri.~~Texas.

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. ~~Generally, loans are underwritten according to the "ability to repay" and "qualified mortgage" standards, as issued by the Consumer Financial Protection Bureau ("CFPB").~~ 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 are generally similar to the Bank's internal underwriting standards. The underwriting of loans purchased from correspondent lenders on a loan-by-loan basis is performed by the Bank's underwriters.

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 real estate and commercial construction loans are originated by the Bank or in participation with a lead 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. For commercial real estate and commercial construction participation loans, the Bank performs the

same underwriting procedures as if the loan was being originated by the Bank. At the time of origination, loan-to-value ("LTV")

ratios on commercial real estate loans generally do not exceed 85% of the appraised value of the property securing the loans and the minimum debt service coverage ratio is generally 1.15. For commercial construction loans, LTV ratios generally do not exceed 80% of the projected appraised value of the property securing the loans and the minimum debt service coverage ratio is generally 1.15, 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.

The Bank's commercial and industrial loans are generally made in the Bank's market areas 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 long-term assets. In general, commercial and industrial loans involve more credit risk than commercial real estate loans due to the type of collateral securing commercial and industrial loans. As a result of these additional complexities, variables and risks, commercial and industrial loans require more thorough underwriting and servicing than other types of loans.

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 home equity line of credit is in 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. 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 loans 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.

1514

The following ~~table sets~~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. All revolving lines of credit are presented separately, regardless of origination year. Loans classified as doubtful or loss are individually evaluated for loss. At ~~June 30,~~December 31, 2022 and September 30, ~~2021,~~2022, there were no loans classified as doubtful, and all loans classified as loss were fully charged-off.


		June 30, 2022																	December 31, 2022
		Current		Fiscal		Fiscal		Fiscal		Fiscal				Revolving					Current		Fiscal		Fiscal		Fiscal		Fiscal				Revolving
		Fiscal		Year		Year		Year		Year		Prior		Line of					Fiscal		Year		Year		Year		Year		Prior		Line of
		Year		2021		2020		2019		2018		Years		Credit		Total			Year		2022		2021		2020		2019		Years		Credit		Total
		(Dollars in thousands)																	(Dollars in thousands)
One- to four-family:	One- to four-family:																	One- to four-family:
Originated	Originated																	Originated
Pass	Pass	$	431,090	$	940,258	$	639,580	$	288,707	$	218,917	$	1,467,749	$	—	$	3,986,301	Pass	$	100,424	$	569,293	$	923,122	$	610,572	$	274,505	$	1,562,821	$	—	$	4,040,737
Special Mention	Special Mention	33		255		1,213		621		598		8,261		—		10,981		Special Mention	185		298		583		1,372		1,282		9,037		—		12,757
Substandard	Substandard	—		115		279		1,031		256		8,949		—		10,630		Substandard	—		158		—		277		736		7,641		—		8,812
Correspondent purchased	Correspondent purchased																	Correspondent purchased
Pass	Pass	311,564		667,434		279,606		72,042		107,281		650,328		—		2,088,255		Pass	146,776		538,663		643,407		268,000		67,808		709,034		—		2,373,688
Special Mention	Special Mention	—		—		—		351		979		1,840		—		3,170		Special Mention	—		—		754		—		354		2,589		—		3,697
Substandard	Substandard	—		—		—		168		516		3,813		—		4,497		Substandard	—		—		—		—		168		5,655		—		5,823
Bulk purchased	Bulk purchased																	Bulk purchased
Pass	Pass	—		—		—		—		—		147,961		—		147,961		Pass	—		—		—		—		—		142,131		—		142,131
Special Mention	Special Mention	—		—		—		—		—		—		—		—		Special Mention	—		—		—		—		—		—		—		—
Substandard	Substandard	—		—		—		—		—		4,055		—		4,055		Substandard	—		—		—		—		—		3,602		—		3,602
		742,687		1,608,062		920,678		362,920		328,547		2,292,956		—		6,255,850			247,385		1,108,412		1,567,866		880,221		344,853		2,442,510		—		6,591,247
Commercial:	Commercial:																	Commercial:
Commercial real estate	Commercial real estate																	Commercial real estate
Pass	Pass	218,340		246,384		127,935		87,546		43,322		51,008		6,950		781,485		Pass	178,810		295,202		218,991		116,758		84,688		85,818		8,598		988,865
Special Mention	Special Mention	—		46,366		—		—		—		—		—		46,366		Special Mention	—		28,435		—		—		—		—		—		28,435
Substandard	Substandard	442		599		594		222		230		30		—		2,117		Substandard	—		—		—		594		219		267		—		1,080
Commercial and industrial	Commercial and industrial																	Commercial and industrial
Pass	Pass	26,643		19,019		6,968		4,677		1,134		708		10,846		69,995		Pass	10,927		26,299		15,764		4,980		3,487		1,342		24,205		87,004
Special Mention	Special Mention	—		—		—		—		—		—		—		—		Special Mention	—		—		—		—		—		—		—		—
Substandard	Substandard	—		—		—		—		81		32		852		965		Substandard	—		19		—		73		—		83		1,158		1,333
		245,425		312,368		135,497		92,445		44,767		51,778		18,648		900,928			189,737		349,955		234,755		122,405		88,394		87,510		33,961		1,106,717
Consumer:	Consumer:																	Consumer:
Home equity	Home equity																	Home equity
Pass	Pass	3,832		2,541		1,613		1,041		1,085		2,224		74,406		86,742		Pass	1,376		6,232		2,270		1,382		935		2,845		79,993		95,033
Special Mention	Special Mention	—		—		—		—		—		—		288		288		Special Mention	—		—		—		—		—		—		228		228
Substandard	Substandard	—		—		—		19		—		12		353		384		Substandard	—		—		—		—		18		15		267		300
Other	Other																	Other
Pass	Pass	3,215		2,216		1,014		576		697		212		357		8,287		Pass	1,463		3,810		1,681		715		308		705		317		8,999
Special Mention	Special Mention	—		—		—		—		—		—		—		—		Special Mention	—		—		—		6		—		—		—		6
Substandard	Substandard	—		—		—		—		—		—		—		—		Substandard	—		3		13		1		—		—		—		17
		7,047		4,757		2,627		1,636		1,782		2,448		75,404		95,701			2,839		10,045		3,964		2,104		1,261		3,565		80,805		104,583

Total	Total	$	995,159	$	1,925,187	$	1,058,802	$	457,001	$	375,096	$	2,347,182	$	94,052	$	7,252,479	Total	$	439,961	$	1,468,412	$	1,806,585	$	1,004,730	$	434,508	$	2,533,585	$	114,766	$	7,802,547

1615

In the table below, certain commercial loans are presented in the "Fiscal Year 2021" column and are reported as special mention or substandard. These loans were generally first originated in prior years but were renewed or modified in fiscal year 2021.


		September 30, 2021																	September 30, 2022
		Fiscal		Fiscal		Fiscal		Fiscal		Fiscal				Revolving					Fiscal		Fiscal		Fiscal		Fiscal		Fiscal				Revolving
		Year		Year		Year		Year		Year		Prior		Line of					Year		Year		Year		Year		Year		Prior		Line of
		2021		2020		2019		2018		2017		Years		Credit		Total			2022		2021		2020		2019		2018		Years		Credit		Total
		(Dollars in thousands)																	(Dollars in thousands)
One- to four-family:	One- to four-family:																	One- to four-family:
Originated	Originated																	Originated
Pass	Pass	$	958,080	$	705,561	$	326,156	$	250,846	$	281,104	$	1,434,455	$	—	$	3,956,202	Pass	$	563,460	$	930,019	$	624,274	$	281,342	$	212,037	$	1,406,444	$	—	$	4,017,576
Special Mention	Special Mention	402		443		501		678		237		7,805		—		10,066		Special Mention	47		457		1,111		518		428		7,641		—		10,202
Substandard	Substandard	—		966		867		51		192		11,192		—		13,268		Substandard	158		—		278		1,106		256		8,968		—		10,766
Correspondent purchased	Correspondent purchased																	Correspondent purchased
Pass	Pass	630,977		334,042		88,057		136,572		162,938		664,530		—		2,017,116		Pass	494,854		651,363		273,626		69,752		104,150		627,390		—		2,221,135
Special Mention	Special Mention	760		—		356		—		—		3,160		—		4,276		Special Mention	—		—		—		355		1,186		1,197		—		2,738
Substandard	Substandard	—		—		169		504		—		4,527		—		5,200		Substandard	—		—		—		168		513		4,783		—		5,464
Bulk purchased	Bulk purchased																	Bulk purchased
Pass	Pass	—		—		—		—		—		169,519		—		169,519		Pass	—		—		—		—		—		144,840		—		144,840
Special Mention	Special Mention	—		—		—		—		—		—		—		—		Special Mention	—		—		—		—		—		—		—		—
Substandard	Substandard	—		—		—		—		—		4,848		—		4,848		Substandard	—		—		—		—		—		3,637		—		3,637
		1,590,219		1,041,012		416,106		388,651		444,471		2,300,036		—		6,180,495			1,058,519		1,581,839		899,289		353,241		318,570		2,204,900		—		6,416,358
Commercial:	Commercial:																	Commercial:
Commercial real estate	Commercial real estate																	Commercial real estate
Pass	Pass	272,329		149,244		94,972		61,214		38,962		35,591		5,231		657,543		Pass	366,794		221,001		111,689		86,456		41,322		46,383		7,436		881,081
Special Mention	Special Mention	50,352		—		—		—		—		49,369		—		99,721		Special Mention	565		—		—		—		—		—		—		565
Substandard	Substandard	810		627		225		669		—		34		—		2,365		Substandard	436		—		594		221		239		30		—		1,520
Commercial and industrial	Commercial and industrial																	Commercial and industrial
Pass	Pass	32,651		10,168		6,988		2,213		1,155		595		11,709		65,479		Pass	38,442		17,453		5,708		4,212		919		630		11,413		78,777
Special Mention	Special Mention	—		—		—		—		—		—		—		—		Special Mention	—		—		—		—		—		—		—		—
Substandard	Substandard	—		—		—		86		48		—		765		899		Substandard	—		—		78		—		73		10		1,052		1,213
		356,142		160,039		102,185		64,182		40,165		85,589		17,705		826,007			406,237		238,454		118,069		90,889		42,553		47,053		19,901		963,156
Consumer:	Consumer:																	Consumer:
Home equity	Home equity																	Home equity
Pass	Pass	3,295		2,218		1,428		1,563		536		2,473		74,036		85,549		Pass	6,447		2,375		1,486		982		992		2,020		77,448		91,750
Special Mention	Special Mention	—		—		37		12		—		—		82		131		Special Mention	—		66		—		—		—		—		233		299
Substandard	Substandard	—		60		—		—		—		9		636		705		Substandard	—		—		—		18		—		3		331		352
Other	Other																	Other
Pass	Pass	3,491		1,631		1,086		944		465		105		339		8,061		Pass	4,207		1,977		843		408		651		201		369		8,656
Special Mention	Special Mention	—		—		4		—		—		—		—		4		Special Mention	—		—		7		—		—		—		—		7
Substandard	Substandard	—		3		6		1		3		—		—		13		Substandard	1		—		—		—		—		—		—		1
		6,786		3,912		2,561		2,520		1,004		2,587		75,093		94,463			10,655		4,418		2,336		1,408		1,643		2,224		78,381		101,065

Total	Total	$	1,953,147	$	1,204,963	$	520,852	$	455,353	$	485,640	$	2,388,212	$	92,798	$	7,100,965	Total	$	1,475,411	$	1,824,711	$	1,019,694	$	445,538	$	362,766	$	2,254,177	$	98,282	$	7,480,579

1716

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 are presented separately, regardless of origination year.


		June 30, 2022																	December 31, 2022
		Current		Fiscal		Fiscal		Fiscal		Fiscal				Revolving					Current		Fiscal		Fiscal		Fiscal		Fiscal				Revolving
		Fiscal		Year		Year		Year		Year		Prior		Line of					Fiscal		Year		Year		Year		Year		Prior		Line of
		Year		2021		2020		2019		2018		Years		Credit		Total			Year		2022		2021		2020		2019		Years		Credit		Total
		(Dollars in thousands)																	(Dollars in thousands)
One- to four-family:	One- to four-family:																	One- to four-family:
Originated	Originated																	Originated
Current	Current	$	431,123	$	940,401	$	640,648	$	289,459	$	219,361	$	1,478,318	$	—	$	3,999,310	Current	$	100,609	$	569,591	$	923,705	$	611,905	$	276,447	$	1,574,314	$	—	$	4,056,571
30-89	30-89	—		112		424		610		302		4,573		—		6,021		30-89	—		—		—		316		76		4,309		—		4,701
90+/FC	90+/FC	—		115		—		290		108		2,068		—		2,581		90+/FC	—		158		—		—		—		876		—		1,034
Correspondent purchased	Correspondent purchased																	Correspondent purchased
Current	Current	311,564		666,687		279,606		72,393		107,281		652,183		—		2,089,714		Current	146,776		538,663		644,161		268,000		68,162		712,039		—		2,377,801
30-89	30-89	—		747		—		—		979		1,787		—		3,513		30-89	—		—		—		—		—		1,230		—		1,230
90+/FC	90+/FC	—		—		—		168		516		2,011		—		2,695		90+/FC	—		—		—		—		168		4,009		—		4,177
Bulk purchased	Bulk purchased																	Bulk purchased
Current	Current	—		—		—		—		—		149,444		—		149,444		Current	—		—		—		—		—		143,359		—		143,359
30-89	30-89	—		—		—		—		—		755		—		755		30-89	—		—		—		—		—		865		—		865
90+/FC	90+/FC	—		—		—		—		—		1,817		—		1,817		90+/FC	—		—		—		—		—		1,509		—		1,509
		742,687		1,608,062		920,678		362,920		328,547		2,292,956		—		6,255,850			247,385		1,108,412		1,567,866		880,221		344,853		2,442,510		—		6,591,247
Commercial:	Commercial:																	Commercial:
Commercial real estate	Commercial real estate																	Commercial real estate
Current	Current	218,782		293,349		127,863		87,546		43,213		50,515		6,950		828,218		Current	178,810		323,509		218,991		116,758		84,688		85,796		8,598		1,017,150
30-89	30-89	—		—		72		—		109		494		—		675		30-89	—		128		—		—		—		33		—		161
90+/FC	90+/FC	—		—		594		222		230		29		—		1,075		90+/FC	—		—		—		594		219		256		—		1,069
Commercial and industrial	Commercial and industrial																	Commercial and industrial
Current	Current	26,643		19,019		6,968		4,672		1,116		708		11,698		70,824		Current	10,927		26,299		15,764		5,053		3,487		1,340		25,354		88,224
30-89	30-89	—		—		—		5		18		—		—		23		30-89	—		19		—		—		—		2		9		30
90+/FC	90+/FC	—		—		—		—		81		32		—		113		90+/FC	—		—		—		—		—		83		—		83
		245,425		312,368		135,497		92,445		44,767		51,778		18,648		900,928			189,737		349,955		234,755		122,405		88,394		87,510		33,961		1,106,717
Consumer:	Consumer:																	Consumer:
Home equity	Home equity																	Home equity
Current	Current	3,832		2,541		1,613		1,060		1,085		2,162		74,717		87,010		Current	1,376		6,232		2,270		1,325		935		2,846		80,022		95,006
30-89	30-89	—		—		—		—		—		66		164		230		30-89	—		—		—		57		18		2		369		446
90+/FC	90+/FC	—		—		—		—		—		8		166		174		90+/FC	—		—		—		—		—		12		97		109
Other	Other																	Other
Current	Current	3,209		2,203		1,014		571		697		212		355		8,261		Current	1,463		3,795		1,681		715		297		558		317		8,826
30-89	30-89	6		13		—		5		—		—		2		26		30-89	—		15		—		6		11		147		—		179
90+/FC	90+/FC	—		—		—		—		—		—		—		—		90+/FC	—		3		13		1		—		—		—		17
		7,047		4,757		2,627		1,636		1,782		2,448		75,404		95,701			2,839		10,045		3,964		2,104		1,261		3,565		80,805		104,583

Total	Total	$	995,159	$	1,925,187	$	1,058,802	$	457,001	$	375,096	$	2,347,182	$	94,052	$	7,252,479	Total	$	439,961	$	1,468,412	$	1,806,585	$	1,004,730	$	434,508	$	2,533,585	$	114,766	$	7,802,547

1817


		September 30, 2021																	September 30, 2022
		Fiscal		Fiscal		Fiscal		Fiscal		Fiscal				Revolving					Fiscal		Fiscal		Fiscal		Fiscal		Fiscal				Revolving
		Year		Year		Year		Year		Year		Prior		Line of					Year		Year		Year		Year		Year		Prior		Line of
		2021		2020		2019		2018		2017		Years		Credit		Total			2022		2021		2020		2019		2018		Years		Credit		Total
		(Dollars in thousands)																	(Dollars in thousands)
One- to four-family:	One- to four-family:																	One- to four-family:
Originated	Originated																	Originated
Current	Current	$	958,482	$	706,970	$	327,408	$	251,524	$	281,341	$	1,445,992	$	—	$	3,971,717	Current	$	563,507	$	930,476	$	625,110	$	282,598	$	212,549	$	1,417,268	$	—	$	4,031,508
30-89	30-89	—		—		—		51		—		4,091		—		4,142		30-89	—		—		553		—		64		3,506		—		4,123
90+/FC	90+/FC	—		—		116		—		192		3,369		—		3,677		90+/FC	158		—		—		368		108		2,279		—		2,913
Correspondent purchased	Correspondent purchased																	Correspondent purchased
Current	Current	630,977		334,042		88,413		136,572		162,017		668,685		—		2,020,706		Current	494,854		651,363		273,626		70,107		105,336		629,150		—		2,224,436
30-89	30-89	760		—		—		—		921		948		—		2,629		30-89	—		—		—		—		—		1,117		—		1,117
90+/FC	90+/FC	—		—		169		504		—		2,584		—		3,257		90+/FC	—		—		—		168		513		3,103		—		3,784
Bulk purchased	Bulk purchased																	Bulk purchased
Current	Current	—		—		—		—		—		170,809		—		170,809		Current	—		—		—		—		—		146,399		—		146,399
30-89	30-89	—		—		—		—		—		555		—		555		30-89	—		—		—		—		—		921		—		921
90+/FC	90+/FC	—		—		—		—		—		3,003		—		3,003		90+/FC	—		—		—		—		—		1,157		—		1,157
		1,590,219		1,041,012		416,106		388,651		444,471		2,300,036		—		6,180,495			1,058,519		1,581,839		899,289		353,241		318,570		2,204,900		—		6,416,358
Commercial:	Commercial:																	Commercial:
Commercial real estate	Commercial real estate																	Commercial real estate
Current	Current	323,491		149,244		94,972		61,651		38,962		84,957		5,231		758,508		Current	367,795		221,001		111,689		86,456		41,322		46,383		7,436		882,082
30-89	30-89	—		—		—		—		—		37		—		37		30-89	—		—		—		—		—		—		—		—
90+/FC	90+/FC	—		627		225		232		—		—		—		1,084		90+/FC	—		—		594		221		239		30		—		1,084
Commercial and industrial	Commercial and industrial																	Commercial and industrial
Current	Current	32,651		10,168		6,988		2,212		1,155		595		12,474		66,243		Current	38,442		17,453		5,786		4,212		919		630		12,465		79,907
30-89	30-89	—		—		—		—		—		—		—		—		30-89	—		—		—		—		—		—		—		—
90+/FC	90+/FC	—		—		—		87		48		—		—		135		90+/FC	—		—		—		—		73		10		—		83
		356,142		160,039		102,185		64,182		40,165		85,589		17,705		826,007			406,237		238,454		118,069		90,889		42,553		47,053		19,901		963,156
Consumer:	Consumer:																	Consumer:
Home equity	Home equity																	Home equity
Current	Current	3,295		2,218		1,465		1,575		536		2,357		73,958		85,404		Current	6,447		2,441		1,429		1,000		980		1,999		77,633		91,929
30-89	30-89	—		—		—		—		—		121		375		496		30-89	—		—		57		—		12		24		226		319
90+/FC	90+/FC	—		60		—		—		—		4		421		485		90+/FC	—		—		—		—		—		—		153		153
Other	Other																	Other
Current	Current	3,491		1,631		1,088		944		465		105		339		8,063		Current	4,205		1,964		844		404		651		201		368		8,637
30-89	30-89	—		—		2		—		—		—		—		2		30-89	2		13		6		4		—		—		1		26
90+/FC	90+/FC	—		3		6		1		3		—		—		13		90+/FC	1		—		—		—		—		—		—		1
		6,786		3,912		2,561		2,520		1,004		2,587		75,093		94,463			10,655		4,418		2,336		1,408		1,643		2,224		78,381		101,065

Total	Total	$	1,953,147	$	1,204,963	$	520,852	$	455,353	$	485,640	$	2,388,212	$	92,798	$	7,100,965	Total	$	1,475,411	$	1,824,711	$	1,019,694	$	445,538	$	362,766	$	2,254,177	$	98,282	$	7,480,579

1918

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 ~~June 30,~~December 31, 2022 and September 30, ~~2021,~~2022, all loans 90 or more days delinquent were on nonaccrual status.


		June 30, 2022											December 31, 2022
				90 or More Days		Total				Total					90 or More Days		Total				Total
		30 to 89 Days		Delinquent or		Delinquent		Current		Amortized			30 to 89 Days		Delinquent or		Delinquent		Current		Amortized
		Delinquent		in Foreclosure		Loans		Loans		Cost			Delinquent		in Foreclosure		Loans		Loans		Cost
		(Dollars in thousands)											(Dollars in thousands)
One- to four-family:	One- to four-family:											One- to four-family:
Originated	Originated	$	6,021	$	2,581	$	8,602	$	3,999,310	$	4,007,912	Originated	$	4,701	$	1,034	$	5,735	$	4,056,571	$	4,062,306
Correspondent purchased	Correspondent purchased	3,513		2,695		6,208		2,089,714		2,095,922		Correspondent purchased	1,230		4,177		5,407		2,377,801		2,383,208
Bulk purchased	Bulk purchased	755		1,817		2,572		149,444		152,016		Bulk purchased	865		1,509		2,374		143,359		145,733
Commercial:	Commercial:											Commercial:
Commercial real estate	Commercial real estate	675		1,075		1,750		828,218		829,968		Commercial real estate	161		1,069		1,230		1,017,150		1,018,380
Commercial and industrial	Commercial and industrial	23		113		136		70,824		70,960		Commercial and industrial	30		83		113		88,224		88,337
Consumer:	Consumer:											Consumer:
Home equity	Home equity	230		174		404		87,010		87,414		Home equity	446		109		555		95,006		95,561
Other	Other	26		—		26		8,261		8,287		Other	179		17		196		8,826		9,022
		$	11,243	$	8,455	$	19,698	$	7,232,781	$	7,252,479		$	7,612	$	7,998	$	15,610	$	7,786,937	$	7,802,547


		September 30, 2021											September 30, 2022
				90 or More Days		Total				Total					90 or More Days		Total				Total
		30 to 89 Days		Delinquent or		Delinquent		Current		Amortized			30 to 89 Days		Delinquent or		Delinquent		Current		Amortized
		Delinquent		in Foreclosure		Loans		Loans		Cost			Delinquent		in Foreclosure		Loans		Loans		Cost
		(Dollars in thousands)											(Dollars in thousands)
One- to four-family:	One- to four-family:											One- to four-family:
Originated	Originated	$	4,142	$	3,677	$	7,819	$	3,971,717	$	3,979,536	Originated	$	4,123	$	2,913	$	7,036	$	4,031,508	$	4,038,544
Correspondent purchased	Correspondent purchased	2,629		3,257		5,886		2,020,706		2,026,592		Correspondent purchased	1,117		3,784		4,901		2,224,436		2,229,337
Bulk purchased	Bulk purchased	555		3,003		3,558		170,809		174,367		Bulk purchased	921		1,157		2,078		146,399		148,477
Commercial:	Commercial:											Commercial:
Commercial real estate	Commercial real estate	37		1,084		1,121		758,508		759,629		Commercial real estate	—		1,084		1,084		882,082		883,166
Commercial and industrial	Commercial and industrial	—		135		135		66,243		66,378		Commercial and industrial	—		83		83		79,907		79,990
Consumer:	Consumer:											Consumer:
Home equity	Home equity	496		485		981		85,404		86,385		Home equity	319		153		472		91,929		92,401
Other	Other	2		13		15		8,063		8,078		Other	26		1		27		8,637		8,664
		$	7,861	$	11,654	$	19,515	$	7,081,450	$	7,100,965		$	6,506	$	9,175	$	15,681	$	7,464,898	$	7,480,579

The amortized cost of mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process as of ~~June 30,~~December 31, 2022 and September 30, ~~2021~~2022 was ~~$1.7~~$1.5 million and ~~$799 thousand,~~$2.0 million, respectively, which is included in loans 90 or more days delinquent or in foreclosure in the tables above. The carrying value of residential OREO held as a result of obtaining physical possession upon completion of a foreclosure or through completion of a deed in lieu of foreclosure ~~as of June 30,~~was $182 thousand at December 31, 2022 and $328 thousand at September 30, ~~2021 was $258 thousand and $170 thousand, respectively.~~2022.

2019

The following table presents the amortized cost at ~~June 30,~~December 31, 2022 and September 30, ~~2021,~~2022, by class, of loans classified as nonaccrual. Additionally, the amortized cost of nonaccrual loans that had no related ACL is presented, all of which were individually evaluated for loss and any identified losses have been charged off.


		June 30, 2022				September 30, 2021					December 31, 2022				September 30, 2022
		Nonaccrual Loans		Nonaccrual Loans with No ACL		Nonaccrual Loans		Nonaccrual Loans with No ACL			Nonaccrual Loans		Nonaccrual Loans with No ACL		Nonaccrual Loans		Nonaccrual Loans with No ACL
		(Dollars in thousands)									(Dollars in thousands)
One- to four-family:	One- to four-family:									One- to four-family:
Originated	Originated	$	2,787	$	897	$	4,965	$	2,237	Originated	$	1,253	$	379	$	3,135	$	1,018
Correspondent purchased	Correspondent purchased	2,696		307		3,257		307		Correspondent purchased	4,177		304		3,784		304
Bulk purchased	Bulk purchased	1,817		939		3,134		1,564		Bulk purchased	1,509		987		1,157		630
Commercial:	Commercial:									Commercial:
Commercial real estate	Commercial real estate	1,074		451		1,496		485		Commercial real estate	1,080		446		1,084		449
Commercial and industrial	Commercial and industrial	113		113		134		86		Commercial and industrial	156		156		161		161
Consumer:	Consumer:									Consumer:
Home equity	Home equity	193		19		494		84		Home equity	109		—		172		19
Other	Other	—		—		13		—		Other	17		—		1		—
		$	8,680	$	2,726	$	13,493	$	4,763		$	8,301	$	2,272	$	9,494	$	2,581

TDRs - The following ~~tables present~~table presents the amortized cost prior to restructuring and immediately after restructuring in all loans restructured during the periods presented. ~~These tables do~~This table does not reflect the amortized cost at the end of the periods indicated. Any increase in the amortized cost at the time of the restructuring was generally due to the capitalization of delinquent interest and/or escrow balances.

For the Three Months Ended For the Nine Months Ended
June 30, 2022 June 30, 2022
Number Pre- Post- Number Pre- Post-
of Restructured Restructured of Restructured Restructured
Contracts Outstanding Outstanding Contracts Outstanding Outstanding
(Dollars in thousands)
One- to four-family:
Originated — $ — $ — 2 $ 124 $ 124
Correspondent purchased — — — — — —
Bulk purchased — — — — — —
Commercial:
Commercial real estate — — — — — —
Commercial and industrial — — — 2 124 124
Consumer:
Home equity — — — 1 19 19
Other — — — — — —
— $ — $ — 5 $ 267 $ 267


		For the Three Months Ended					For the Nine Months Ended						For the Three Months Ended
		June 30, 2021					June 30, 2021						December 31, 2022					December 31, 2021
		Number	Pre-		Post-		Number	Pre-		Post-			Number	Pre-		Post-		Number	Pre-		Post-
		of	Restructured		Restructured		of	Restructured		Restructured			of	Restructured		Restructured		of	Restructured		Restructured
		Contracts	Outstanding		Outstanding		Contracts	Outstanding		Outstanding			Contracts	Outstanding		Outstanding		Contracts	Outstanding		Outstanding
		(Dollars in thousands)											(Dollars in thousands)
One- to four-family:	One- to four-family:											One- to four-family:
Originated	Originated	—	$	—	$	—	6	$	1,518	$	1,407	Originated	—	$	—	$	—	1	$	24	$	24
Correspondent purchased	Correspondent purchased	—	—		—		—	—		—		Correspondent purchased	—	—		—		—	—		—
Bulk purchased	Bulk purchased	—	—		—		—	—		—		Bulk purchased	—	—		—		—	—		—
Commercial:	Commercial:											Commercial:
Commercial real estate	Commercial real estate	—	—		—		—	—		—		Commercial real estate	—	—		—		—	—		—
Commercial and industrial	Commercial and industrial	—	—		—		—	—		—		Commercial and industrial	—	—		—		—	—		—
Consumer:	Consumer:											Consumer:
Home equity	Home equity	—	—		—		—	—		—		Home equity	—	—		—		—	—		—
Other	Other	—	—		—		—	—		—		Other	—	—		—		—	—		—
		—	$	—	$	—	6	$	1,518	$	1,407		—	$	—	$	—	1	$	24	$	24

The following table provides information on TDRs that became delinquent during the periods presented within 12 months after being restructured.


		For the Three Months Ended						For the Nine Months Ended							For the Three Months Ended
		June 30, 2022			June 30, 2021			June 30, 2022			June 30, 2021				December 31, 2022			December 31, 2021
		Number of	Amortized		Number of	Amortized		Number of	Amortized		Number of	Amortized			Number of	Amortized		Number of	Amortized
		Contracts	Cost		Contracts	Cost		Contracts	Cost		Contracts	Cost			Contracts	Cost		Contracts	Cost
		(Dollars in thousands)													(Dollars in thousands)
One- to four-family:	One- to four-family:													One- to four-family:
Originated	Originated	—	$	—	—	$	—	1	$	684	—	$	—	Originated	1	$	8	1	$	684
Correspondent purchased	Correspondent purchased	—	—		—	—		—	—		—	—		Correspondent purchased	—	—		—	—
Bulk purchased	Bulk purchased	—	—		—	—		—	—		—	—		Bulk purchased	—	—		—	—
Commercial:	Commercial:													Commercial:
Commercial real estate	Commercial real estate	—	—		—	—		—	—		—	—		Commercial real estate	—	—		—	—
Commercial and industrial	Commercial and industrial	—	—		—	—		—	—		—	—		Commercial and industrial	—	—		—	—
Consumer:	Consumer:													Consumer:
Home equity	Home equity	1	19		—	—		1	19		—	—		Home equity	—	—		—	—
Other	Other	—	—		—	—		—	—		—	—		Other	—	—		—	—
		1	$	19	—	$	—	2	$	703	—	$	—		1	$	8	1	$	684

Allowance for Credit Losses - The following is a summary of ACL activity, by loan portfolio segment, for the periods presented.

For the Three Months Ended June 30, 2022
One- to Four-Family
Correspondent Bulk
Originated Purchased Purchased Total Commercial Consumer Total
(Dollars in thousands)
Beginning balance $ 1,709 $ 2,129 $ 241 $ 4,079 $ 11,031 $ 202 $ 15,312
Charge-offs — — — — — (10) (10)
Recoveries 126 — — 126 52 7 185
Provision for credit losses 69 308 (17) 360 407 29 796
Ending balance $ 1,904 $ 2,437 $ 224 $ 4,565 $ 11,490 $ 228 $ 16,283


	For the Three Months Ended December 31, 2022
	One- to Four-Family
			Correspondent		Bulk
	Originated		Purchased		Purchased		Total		Commercial		Consumer		Total
	(Dollars in thousands)
Beginning balance	$	2,066	$	2,734	$	206	$	5,006	$	11,120	$	245	$	16,371


Charge-offs	—		—		—		—		—		(4)		(4)
Recoveries	1		—		—		1		—		1		2
Provision for credit losses	92		253		10		355		2,464		1		2,820
Ending balance	$	2,159	$	2,987	$	216	$	5,362	$	13,584	$	243	$	19,189

For the Nine Months Ended June 30, 2022
One- to Four-Family
Correspondent Bulk
Originated Purchased Purchased Total Commercial Consumer Total
(Dollars in thousands)
Beginning balance $ 1,612 $ 2,062 $ 304 $ 3,978 $ 15,652 $ 193 $ 19,823
Charge-offs (4) — — (4) (10) (16) (30)
Recoveries 137 — — 137 101 12 250
Provision for credit losses 159 375 (80) 454 (4,253) 39 (3,760)
Ending balance $ 1,904 $ 2,437 $ 224 $ 4,565 $ 11,490 $ 228 $ 16,283

For the Three Months Ended June 30, 2021
One- to Four-Family
Correspondent Bulk
Originated Purchased Purchased Total Commercial Consumer Total
(Dollars in thousands)
Beginning balance $ 1,536 $ 1,705 $ 747 $ 3,988 $ 19,157 $ 252 $ 23,397
Charge-offs (18) — — (18) — (1) (19)
Recoveries 49 — — 49 18 4 71
Provision for credit losses (32) 34 (73) (71) (2,642) (12) (2,725)
Ending balance $ 1,535 $ 1,739 $ 674 $ 3,948 $ 16,533 $ 243 $ 20,724

For the Nine Months Ended June 30, 2021
One- to Four-Family
Correspondent Bulk
Originated Purchased Purchased Total Commercial Consumer Total
(Dollars in thousands)
Beginning balance $ 6,085 $ 2,691 $ 467 $ 9,243 $ 21,800 $ 484 $ 31,527
Adoption of CECL (4,452) (367) 436 (4,383) (193) (185) (4,761)
Balance at October 1, 2020 1,633 2,324 903 4,860 21,607 299 26,766
Charge-offs (142) — (21) (163) (515) (11) (689)
Recoveries 140 — — 140 38 29 207
Provision for credit losses (96) (585) (208) (889) (4,597) (74) (5,560)
Ending balance $ 1,535 $ 1,739 $ 674 $ 3,948 $ 16,533 $ 243 $ 20,724


	For the Three Months Ended December 31, 2021
	One- to Four-Family
			Correspondent		Bulk
	Originated		Purchased		Purchased		Total		Commercial		Consumer		Total
	(Dollars in thousands)
Beginning balance	$	1,612	$	2,062	$	304	$	3,978	$	15,652	$	193	$	19,823
Charge-offs	(4)		—		—		(4)		(10)		(1)		(15)
Recoveries	9		—		—		9		36		1		46
Provision for credit losses	22		20		(36)		6		(2,325)		—		(2,319)
Ending balance	$	1,639	$	2,082	$	268	$	3,989	$	13,353	$	193	$	17,535

2321

The key assumptions in the Company's ACL model 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 ~~June 30,~~December 31, 2022. The key assumptions utilized in estimating the Company's ACL at ~~June 30,~~December 31, 2022 are discussed below.

•Economic Forecast - Management considered several economic forecasts provided by a third party and selected ~~a weighted~~an economic forecast that was the most appropriate considering the facts and circumstances at ~~June 30,~~December 31, 2022. The forecasted economic indices applied to the model at ~~June 30,~~December 31, 2022 were the national unemployment rate, changes in commercial real estate price index, changes in home values, and changes in the U.S. gross domestic product. The economic index most impactful to all loan pools within the model at ~~June 30,~~December 31, 2022 was the national unemployment rate. The ~~forecast~~forecasted national unemployment rate in the economic scenario selected by management at ~~June 30,~~December 31, 2022 had the national unemployment rate gradually increasing to ~~4.3%~~4.2% by ~~June 30,~~December 31, 2023 which was the end of our four quarter forecast time period.

•Forecast and reversion to mean time ~~period~~periods - The forecasted time period and the reversion to mean time period were each four quarters for all of the economic indices at ~~June 30,~~December 31, 2022.

•Prepayment and curtailment assumptions - The assumptions used at ~~June 30,~~December 31, 2022 were generally based on actual historical prepayment and curtailment speeds for each respective loan pool in the model. During the current quarter, there was a slowdown in portfolio prepayment speeds which reduced the projected prepayment speeds used in the model for generally all loan categories.

•Qualitative factors - The qualitative factors applied by management at ~~June 30,~~December 31, 2022 included the following:

◦The economic uncertainties related to the unemployment rate, the labor force composition, and the labor participation ~~rate;~~

◦~~The balance and trending of large-dollar special mention commercial loans;~~rate that are not captured in the economic forecasts; and

◦~~Coronavirus Disease 2019 ("COVID-19") loan modifications~~Other management considerations related to commercial real estate loans that were not captured via the model assumptions, such as the balance and trending of large dollar commercial real estate loans.

The decrease in ACL during the current year-to-date period was primarily a result of a negative provision for credit losses of $3.8 million which was due to a reduction in commercial loan qualitative factors, partially offset by an increase in ACL related to loan growth.

Reserve for Off-Balance Sheet Credit Exposures - The following is a summary of the changes in reserve for off-balance sheet credit exposures during the periods indicated. ~~The negative provision for~~At December 31, 2022 and September 30, 2022, the Bank's off-balance sheet credit ~~losses in the current year period was due primarily to a reduction in the commercial loan qualitative factors.~~exposures totaled $1.07 billion and $992.6 million, respectively.


	For the Three Months Ended
	December 31, 2022		December 31, 2021
	(Dollars in thousands)
Beginning balance	$	4,751	$	5,743
Provision for credit losses	840		(1,120)
Ending balance	$	5,591	$	4,623

For the Three Months Ended For the Nine Months Ended
June 30, 2022 June 30, 2022
(Dollars in thousands)
Beginning balance $ 3,672 Beginning balance $ 5,743
Provision for credit losses 141 Provision for credit losses (1,930)
Ending balance $ 3,813 Ending balance $ 3,813

For the Three Months Ended For the Nine Months Ended
June 30, 2021 June 30, 2021
(Dollars in thousands)
Beginning balance $ 6,127 Beginning balance $ —
Provision for credit losses 34 Adoption of CECL 7,788
Ending balance $ 6,161 Balance at October 1, 2020 7,788
Provision for credit losses (1,627)
Ending balance $ 6,161

5. BORROWED FUNDS

FHLB Borrowings and Interest Rate Swaps - At ~~June 30,~~December 31, 2022 and September 30, ~~2021,~~2022, the Bank had entered into interest rate swap agreements with ~~a total~~an aggregate notional amount of $365.0 million in order to hedge the variable cash flows associated with $365.0 million of adjustable-rate FHLB advances. At ~~June 30,~~December 31, 2022 and September 30, ~~2021,~~2022, the interest rate swap agreements had an average remaining term to maturity of ~~3.3~~2.8 years and ~~4.1~~3.1 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 ~~June~~both December 31, 2022 and September 30, 2022, the interest rate swaps were in a gain position with a total fair value of ~~$1.3~~$12.5 million which was reported in other assets on the consolidated balance sheet. ~~At September 30, 2021, the interest rate swaps were in a loss position with a total fair value of $27.7 million, which was reported in~~ ~~other liabilities~~ ~~on the consolidated balance sheet.~~ During the three ~~and nine~~ months ended ~~June 30,~~December 31, 2022, ~~$1.3~~$734 thousand was reclassified from AOCI as a decrease to interest expense. During the three months ended December 31, 2021, $1.8 million ~~and $4.8 million, respectively,~~ was reclassified from AOCI as an increase to interest expense. During the three and nine months ended June 30, 2021, $2.1 million and $11.5 million, respectively, was reclassified from AOCI. Of this amount, for the nine months ended June 30, 2021, $7.9 million was recognized as an increase to interest expense and $3.6 million, net of tax, was reclassified as a result of the termination of the related interest rate swaps, as discussed below, and reported in the loss on interest rate swap termination line item within the consolidated statements of operations. At ~~June 30,~~December 31, 2022, the Company estimated that ~~$1.4~~$9.6 million 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 ~~$2.6~~$12.6 million and $12.1 million at ~~June~~December 31, 2022 and September 30, 2022, ~~and posted cash collateral of $28.0 million at September 30, 2021.~~respectively.

During the current ~~year-to-date period,~~quarter, the Bank utilized a leverage strategy (the "leverage strategy") to increase earnings. The leverage strategy involved borrowing up to ~~$2.10~~$2.60 billion either on the Bank's line of credit with FHLB or by entering into short-term FHLB advances, depending on the rates offered by FHLB, with all of the balance being paid down at ~~each~~ quarter end, or earlier if the strategy is not profitable. The proceeds of the borrowings, net of the required FHLB stock holdings, were deposited at the FRB of Kansas City.

During the prior year-to-date period, the Bank terminated interest rate swaps with a notional amount of $200.0 million which were tied to FHLB advances totaling $200.0 million. 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. Since it was management's intention to prepay the related FHLB advances, it was no longer probable that the original forecasted transactions subject to the cash flow hedges would occur. Therefore, the termination of the interest rate swaps resulted in the reclassification of unrealized losses, net of tax, totaling $3.6 million ($4.8 million pretax) from AOCI into earnings.

6. 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 majority of the securities within the AFS portfolio were issued by GSEs. 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 ~~nine~~three months ended ~~June 30,~~December 31, 2022 or during fiscal year ~~2021.~~2022. The Company's major security types, based on the nature and risks of the securities, are:

•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)

•MBS - Estimated fair values are based on a discounted cash flow method. Cash flows are determined based on prepayment projections of the underlying mortgages and are discounted using current market yields for benchmark securities. (Level 2)

•Corporate Bonds ~~- 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)~~

•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 adjustments to AOCI in stockholders' equity. See "Note 5. Borrowed Funds" for additional information. The estimated fair values of the interest rates 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 ~~nine~~three months ended ~~June 30,~~December 31, 2022 or during fiscal year ~~2021.~~2022. (Level 2)

2623

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 ~~June 30,~~December 31, 2022 or September 30, ~~2021.~~2022.


		June 30, 2022									December 31, 2022
				Quoted Prices		Significant		Significant					Quoted Prices		Significant		Significant
				in Active Markets		Other Observable		Unobservable					in Active Markets		Other Observable		Unobservable
		Carrying		for Identical Assets		Inputs		Inputs			Carrying		for Identical Assets		Inputs		Inputs
		Value		(Level 1)		(Level 2)		(Level 3)			Value		(Level 1)		(Level 2)		(Level 3)
		(Dollars in thousands)									(Dollars in thousands)
Assets:	Assets:									Assets:
AFS Securities:	AFS Securities:									AFS Securities:
MBS	MBS	$	1,206,747	$	—	$	1,206,747	$	—	MBS	$	1,052,255	$	—	$	1,052,255	$	—
GSE debentures	GSE debentures	483,193		—		483,193		—		GSE debentures	471,780		—		471,780		—
Corporate bonds	Corporate bonds	4,010		—		4,010		—		Corporate bonds	3,641		—		3,641		—
Municipal bonds	Municipal bonds	210		—		210		—		Municipal bonds	1,010		—		1,010		—
		$	1,694,160	$	—	$	1,694,160	$	—		1,528,686		—		1,528,686		—
Interest rate swaps	Interest rate swaps	1,281		—		1,281		—		Interest rate swaps	12,523		—		12,523		—
		$	1,695,441	$	—	$	1,695,441	$	—		$	1,541,209	$	—	$	1,541,209	$	—


		September 30, 2021									September 30, 2022
				Quoted Prices		Significant		Significant					Quoted Prices		Significant		Significant
				in Active Markets		Other Observable		Unobservable					in Active Markets		Other Observable		Unobservable
		Carrying		for Identical Assets		Inputs		Inputs			Carrying		for Identical Assets		Inputs		Inputs
		Value		(Level 1)		(Level 2)		(Level 3)			Value		(Level 1)		(Level 2)		(Level 3)
		(Dollars in thousands)									(Dollars in thousands)
Assets:	Assets:									Assets:
AFS Securities:	AFS Securities:									AFS Securities:
MBS	MBS	$	1,493,993	$	—	$	1,493,993	$	—	MBS	$	1,088,624	$	—	$	1,088,624	$	—
GSE debentures	GSE debentures	516,326		—		516,326		—		GSE debentures	469,827		—		469,827		—
Corporate bonds										Corporate bonds	3,695		—		3,695		—
Municipal bonds										Municipal bonds	1,161		—		1,161		—
											1,563,307		—		1,563,307		—
Municipal bonds		4,289		—		4,289		—
Interest rate swaps										Interest rate swaps	12,547		—		12,547		—
		$	2,014,608	$	—	$	2,014,608	$	—		$	1,575,854	$	—	$	1,575,854	$	—

Liabilities:
Interest rate swaps		$	27,719	$	—	$	27,719	$	—

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 the ~~nine~~three months ended ~~June 30,~~December 31, 2022 and 2021 that were still held in the portfolio as of ~~June 30,~~December 31, 2022 and 2021 was ~~$4.3~~$4.1 million and ~~$7.4~~$3.3 million, respectively. 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 ~~make adjustments to~~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 ~~nine~~three months ended ~~June 30,~~December 31, 2022 and ~~June 30,~~December 31, 2021 were downward adjustments to the book value

2724

of the collateral for lack of marketability. During the ~~nine~~three months ended ~~June 30,~~December 31, 2022, the adjustments ranged from 8% to 100%, with a weighted average of 21%. During the three months ended December 31, 2021, the adjustments ranged from 9% to 56%, with a weighted average of 21%~~. During the nine months ended June 30, 2021, the adjustments ranged from 7% to 50%, with a weighted average of 22%~~. The basis utilized in calculating the weighted averages for these adjustments was the original unadjusted value of each collateral item.

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.

OREO - OREO primarily represents real estate acquired as a result of foreclosure or by deed in lieu of foreclosure and is carried at lower of cost or fair value. The fair value for 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 OREO was the appraisal or listing price. 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. The fair value of OREO measured on a non-recurring basis during the ~~nine~~three months ended ~~June 30,~~December 31, 2022 ~~and 2021~~ that was still held in the portfolio as of ~~June 30,~~December 31, 2022 ~~and 2021~~ was ~~$258 thousand and $177 thousand, respectively.~~$93 thousand. There was no OREO measured on a non-recurring basis during the three months ended December 31, 2021. The carrying value of the properties equaled the fair value of the properties at ~~June 30,~~December 31, 2022 and 2021.

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:


		June 30, 2022											December 31, 2022
		Carrying		Estimated Fair Value									Carrying		Estimated Fair Value
		Amount		Total		Level 1		Level 2		Level 3			Amount		Total		Level 1		Level 2		Level 3
		(Dollars in thousands)											(Dollars in thousands)
Assets:	Assets:											Assets:
Cash and cash equivalents	Cash and cash equivalents	$	54,789	$	54,789	$	54,789	$	—	$	—	Cash and cash equivalents	$	49,686	$	49,686	$	49,686	$	—	$	—
AFS securities	AFS securities	1,694,160		1,694,160		—		1,694,160		—		AFS securities	1,528,686		1,528,686		—		1,528,686		—

Loans receivable	Loans receivable	7,236,196		7,052,727		—		—		7,052,727		Loans receivable	7,783,358		7,283,026		—		—		7,283,026

FHLB stock	FHLB stock	87,696		87,696		87,696		—		—		FHLB stock	124,119		124,119		124,119		—		—

Interest rate swaps	Interest rate swaps	1,281		1,281		—		1,281		—		Interest rate swaps	12,523		12,523		—		12,523		—
Liabilities:	Liabilities:											Liabilities:
Deposits	Deposits	6,329,883		6,273,934		4,053,544		2,220,390		—		Deposits	6,074,549		6,010,404		3,860,070		2,150,334		—
Borrowings	Borrowings	1,869,897		1,766,122		35,700		1,730,422		—		Borrowings	2,645,195		2,432,658		145,000		2,287,658		—

		September 30, 2021											September 30, 2022
		Carrying		Estimated Fair Value									Carrying		Estimated Fair Value
		Amount		Total		Level 1		Level 2		Level 3			Amount		Total		Level 1		Level 2		Level 3
		(Dollars in thousands)											(Dollars in thousands)
Assets:	Assets:											Assets:
Cash and cash equivalents	Cash and cash equivalents	$	42,262	$	42,262	$	42,262	$	—	$	—	Cash and cash equivalents	$	49,194	$	49,194	$	49,194	$	—	$	—
AFS securities	AFS securities	2,014,608		2,014,608		—		2,014,608		—		AFS securities	1,563,307		1,563,307		—		1,563,307		—

Loans receivable	Loans receivable	7,081,142		7,534,278		—		—		7,534,278		Loans receivable	7,464,208		6,889,211		—		—		6,889,211

FHLB stock	FHLB stock	73,421		73,421		73,421		—		—		FHLB stock	100,624		100,624		100,624		—		—

Interest rate swaps												Interest rate swaps	12,547		12,547		—		12,547		—
Liabilities:	Liabilities:											Liabilities:
Deposits	Deposits	6,597,396		6,649,954		3,838,656		2,811,298		—		Deposits	6,194,866		6,124,835		3,991,114		2,133,721		—
Borrowings	Borrowings	1,582,850		1,611,414		—		1,611,414		—		Borrowings	2,132,154		1,910,779		75,000		1,835,779		—
Interest rate swaps		27,719		27,719		—		27,719		—

2825

7. ACCUMULATED OTHER COMPREHENSIVE INCOME

The following tables present the changes in the components of AOCI, net of tax, for the periods indicated.


		For the Three Months Ended June 30, 2022							For the Three Months Ended December 31, 2022
		Unrealized		Unrealized					Unrealized		Unrealized
		Gains (Losses)		Gains (Losses)					Gains (Losses)		Gains (Losses)
		on AFS		on Cash Flow		Total			on AFS		on Cash Flow		Total
		Securities		Hedges		AOCI			Securities		Hedges		AOCI
		(Dollars in thousands)							(Dollars in thousands)
Beginning balance	Beginning balance	$	(71,776)	$	(4,131)	$	(75,907)	Beginning balance	$	(155,119)	$	9,486	$	(145,633)

Other comprehensive income (loss), before reclassifications	Other comprehensive income (loss), before reclassifications	(31,117)		3,798		(27,319)		Other comprehensive income (loss), before reclassifications	13,050		715		13,765
Amount reclassified from AOCI, net of taxes of $(420)		—		1,301		1,301
Amount reclassified from AOCI, net of taxes of $237								Amount reclassified from AOCI, net of taxes of $237	—		(734)		(734)
Other comprehensive income (loss)	Other comprehensive income (loss)	(31,117)		5,099		(26,018)		Other comprehensive income (loss)	13,050		(19)		13,031

Ending balance	Ending balance	$	(102,893)	$	968	$	(101,925)	Ending balance	$	(142,069)	$	9,467	$	(132,602)

For the Nine Months Ended June 30, 2022
Unrealized Unrealized
Gains (Losses) Gains (Losses)
on AFS on Cash Flow Total
Securities Hedges AOCI
(Dollars in thousands)
Beginning balance $ 4,651 $ (20,956) $ (16,305)
Other comprehensive income (loss), before reclassifications (107,544) 17,127 (90,417)
Amount reclassified from AOCI, net of taxes of $(1,548) — 4,797 4,797
Other comprehensive income (loss) (107,544) 21,924 (85,620)
Ending balance $ (102,893) $ 968 $ (101,925)

For the Three Months Ended June 30, 2021
Unrealized Unrealized
Gains (Losses) Gains (Losses)
on AFS on Cash Flow Total
Securities Hedges AOCI
(Dollars in thousands)
Beginning balance $ 3,934 $ (22,887) $ (18,953)
Other comprehensive income (loss), before reclassifications 5,703 (2,212) 3,491
Amount reclassified from AOCI, net of taxes of $(686) — 2,124 2,124
Other comprehensive income (loss) 5,703 (88) 5,615
Ending balance $ 9,637 $ (22,975) $ (13,338)


		For the Nine Months Ended June 30, 2021							For the Three Months Ended December 31, 2021
		Unrealized		Unrealized					Unrealized		Unrealized
		Gains (Losses)		Gains (Losses)					Gains (Losses)		Gains (Losses)
		on AFS		on Cash Flow		Total			on AFS		on Cash Flow		Total
		Securities		Hedges		AOCI			Securities		Hedges		AOCI
		(Dollars in thousands)							(Dollars in thousands)
Beginning balance	Beginning balance	$	23,728	$	(40,233)	$	(16,505)	Beginning balance	$	4,651	$	(20,956)	$	(16,305)

Other comprehensive income (loss), before reclassifications	Other comprehensive income (loss), before reclassifications	(14,091)		5,743		(8,348)		Other comprehensive income (loss), before reclassifications	(10,982)		2,178		(8,804)
Amount reclassified from AOCI, net of taxes of $(3,717)		—		11,515		11,515
Amount reclassified from AOCI, net of taxes of $(575)								Amount reclassified from AOCI, net of taxes of $(575)	—		1,783		1,783
Other comprehensive income (loss)	Other comprehensive income (loss)	(14,091)		17,258		3,167		Other comprehensive income (loss)	(10,982)		3,961		(7,021)

Ending balance	Ending balance	$	9,637	$	(22,975)	$	(13,338)	Ending balance	$	(6,331)	$	(16,995)	$	(23,326)

2926

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The Company and the Bank may from time to time make written or oral "forward-looking statements," including statements contained in documents filed or furnished by the Company with the SEC. These forward-looking statements may be included in this Quarterly Report on Form 10-Q and the exhibits attached to it, in the Company's reports to stockholders, in the Company's press releases, and in other communications by the Company, which are made in good faith pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements include statements about our beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions, which are subject to significant risks and uncertainties, and are subject to change based on various factors, some of which are beyond our control. The words "may," "could," "should," "would," "believe," "anticipate," "estimate," "expect," "intend," "plan" and similar expressions are intended to identify forward-looking statements. The following factors, among others, could cause our future results to differ materially from the beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions expressed in the forward-looking statements:

•our ability to maintain overhead costs at reasonable levels;

•our ability to originate and purchase a sufficient volume of one- to four-family loans in order to maintain the balance of that portfolio at a level desired by management;

•our ability to invest funds in wholesale or secondary markets at favorable yields compared to the related funding source;

•our ability to access cost-effective funding;

•the expected synergies and other benefits from our acquisition ~~activities;~~activities might not be realized to the extent anticipated, within the anticipated time frames, or at all;

•our ability to extend our commercial banking and trust asset management ~~expertise;~~expertise across our market areas;

•fluctuations in deposit flows;

•the future earnings and capital levels of the Bank and the continued non-objection by our primary federal banking regulators, to the extent required, to distribute capital from the Bank to the Company, which could affect the ability of the Company to pay dividends in accordance with its dividend policy;

•the strength of the U.S. economy in general and the strength of and/or the availability of labor in the local economies in which we conduct operations, including areas where we have purchased large amounts of correspondent loans, originated commercial loans, and entered into commercial loan participations;

•changes in real estate values, unemployment levels, and the level and direction of loan delinquencies and charge-offs may require changes in the estimates of the adequacy of the ACL, which may adversely affect our business;

•potential adverse impacts of the COVID-19 endemic disease and any governmental or societal responses thereto on economic conditions in the Company's local market areas and other market areas where the Bank has lending relationships, on other aspects of the Company's business operations and on financial markets;

•increases in classified and/or non-performing assets, which may require the Bank to increase the ACL, charge-off loans and incur elevated collection and carrying costs related to such non-performing assets;

•results of examinations of the Bank and the Company by their respective primary federal banking regulators, including the possibility that the regulators may, among other things, require us to increase our ACL;

•changes in accounting principles, policies, or guidelines;

•the effects of, and changes in, monetary and interest rate policies of the Board of Governors of the Federal Reserve System ("FRB");

•the effects of, and changes in, trade and fiscal policies and laws of the United States government;

•the effects of, and changes in, foreign and military policies of the United States government;

•inflation, interest rate, market, monetary, currency fluctuations and the effects of a potential economic recession or slower economic growth;

•the timely development and acceptance of new products and services and the perceived overall value of these products and services by users, including the features, pricing, and quality compared to competitors' products and services;

•the willingness of users to substitute competitors' products and services for our products and services;

•our success in gaining regulatory approval of our products and services and branching locations, when required;

•the impact of interpretations of, and changes in, financial services laws and regulations, including laws concerning taxes, banking, securities, consumer protection, trust and insurance and the impact of other governmental initiatives affecting the financial services industry;

•implementing business initiatives may be more difficult or expensive than anticipated;

•significant litigation;

•technological changes;

•our ability to maintain the security of our financial, accounting, technology, and other operating systems and facilities, including the ability to withstand cyber-attacks;

•changes in consumer spending, borrowing and saving habits; and

•our success at managing the risks involved in our business.

This list of ~~important~~ factors is not all inclusive. For a discussion of risks and uncertainties related to our business that could adversely impact our operations and/or financial results, see "Part I, Item 1A. Risk Factors" in the Company's Annual Report on Form 10-K for the

fiscal year ended September 30, ~~2021~~2022 and Part II, Item 1A. Risk Factors within this Quarterly Report on Form 10-Q. We do not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Company or the Bank.

As used in this Form 10-Q, unless we specify or the context indicates otherwise, "the Company," "we," "us," and "our" refer to Capitol Federal Financial, Inc. a Maryland corporation, and its subsidiaries. "Capitol Federal Savings," and "the Bank," refer to Capitol Federal Savings Bank, a federal savings bank and the wholly-owned subsidiary of Capitol Federal Financial, Inc.

The following discussion and analysis is intended to assist in understanding the financial condition, results of operations, liquidity, and capital resources of the Company. The Bank comprises almost all of the consolidated assets and liabilities of the Company and the Company is dependent primarily upon the performance of the Bank for the results of its operations. Because of this relationship, references to management actions, strategies and results of actions apply to both the Bank and the ~~Company.~~Company except where the context indicates otherwise. This discussion and analysis should be read in conjunction with Management's Discussion and Analysis included in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, ~~2021,~~2022, filed with the SEC.

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 ~~$65.0~~$16.2 million, or ~~$0.48~~$0.12 per share, for the current ~~year nine-month period~~quarter compared to net income of ~~$57.5~~$22.2 million, or ~~$0.42~~$0.16 per share, for the prior year ~~nine-month period.~~quarter. The ~~increase~~decrease in net income was due primarily to ~~an increase in net interest income,~~recording a provision for credit losses of $3.7 million for the current quarter compared to a $3.4 million release of provision for the prior year quarter, partially offset by ~~higher~~lower income tax ~~expense and a lower negative provision for credit losses.~~expense. The net interest margin decreased ~~six~~38 basis points, from ~~1.88%~~1.99% for the prior year ~~period~~quarter to ~~1.82%~~1.61% for the current ~~year period.~~quarter. Excluding the effects of the leverage strategy, the net interest margin ~~would have increased 16~~decreased 11 basis points, from ~~1.88%~~1.99% for the prior year ~~period~~quarter to ~~2.04%~~1.88% for the current ~~year period.~~quarter. The ~~increase~~decrease in the net interest margin excluding the effects of the leverage strategy was due mainly to ~~a reduction~~an increase in the ~~weighted average~~ cost of ~~retail certificates~~borrowings and deposits, partially offset by an increase in loan yields due to higher market interest rates and a shift in the mix of ~~deposit and borrowings, which outpaced the decrease in weighted average asset yields.~~interest-earning assets towards higher-yielding loans.

Total assets were ~~$9.48~~$9.93 billion at ~~June~~December 31, 2022, a $304.9 million increase from September 30, 2022. The increase in assets was primarily a result of loan growth, primarily in the correspondent one- to four-family and commercial loan portfolios. Total deposits were $6.07 billion at December 31, 2022, a decrease of ~~$155.2~~$120.3 million from September 30, ~~2021. During~~2022. The decrease was mainly in money market accounts as depositors likely moved funds to higher yielding investment products outside of the Bank and/or used funds to support spending. As a result of loan growth and a decrease in deposit balances during the current ~~year period, cash and/or securities were partially reinvested in the loan portfolio, which~~quarter, FHLB borrowings increased ~~2.9% on an annualized basis. Total deposits were $6.33~~$513.0 million, to $2.65 billion at ~~June 30,~~December 31, 2022. Stockholders' equity was $1.05 billion at December 31, 2022, a $41.7 million decrease ~~of $267.5 million~~ from September 30, ~~2021.~~2022. The ~~majority~~decrease was due primarily to the payment of ~~the decrease occurred~~dividends and repurchase of shares during the current quarter. ~~Deposit outflows were~~

The rapid increase in short-term rates led by the FRB and the impact of higher long-term rates compared to September 30, 2022 has led to decreases in the Bank's net interest margin. There has been a runoff in deposit balances and management has increased certificate of deposit and money market account rates to stem the outflow. The higher loan rates have made homes less affordable and reduced the turnover of housing inventory, which lowers the likelihood of existing one- to four-family loans at lower rates being paid off with the proceeds being used to fund higher rate loans. These dynamics have caused our balance sheet to change faster than what would occur in more stable rate environments. Net interest margin compression is anticipated to continue, and the margin may compress more in the near term, due to the shape of the yield curve and the pace at which liabilities are repricing compared to assets, along with lower costing deposits being replaced with ~~FHLB advances.~~higher costing borrowings in order to fund loan growth. Loan growth is occurring at market interest rates that are higher than the overall loan portfolio rate; however, the shift to higher-costing borrowings and the pace at which the interest rate increase is occurring for liabilities is more than offsetting the benefit of the higher loan rates. Management continues to evaluate funding options and plans to continue using shorter term advances, as necessary, with the anticipation that when rates begin to decrease, those borrowings can be repriced more quickly to lower cost alternatives.

The Bank's asset quality remained strong, reflected in low delinquency ~~levels~~ and ~~a net recovery during the current year nine-month period.~~charge-off ratios. At ~~June 30,~~December 31, 2022, loans 30 to 89 days delinquent were ~~0.16%~~0.10% of total loans receivable, net, and loans 90 or more days delinquent or in foreclosure were ~~0.12%~~0.10% of total loans receivable, net. During the current ~~year period,~~quarter, net ~~recoveries~~charge-offs ("NCOs") were ~~$220~~$2 thousand.

At ~~June 30,~~December 31, 2022, the Bank had a one-year gap position of ~~$(1.33)~~$(1.02) billion, or ~~(14.0)~~(10.3)% of total assets, meaning the amount of interest-bearing liabilities exceeds the amount of interest-earning assets maturing or repricing during the same period. ~~Despite~~This was compared to $(1.14) billion, or (11.9%) of total assets at September 30, 2022. The change in the one-year gap amount was primarily a ~~negative gap position,~~result of a decrease in the ~~net interest income projection increased as~~amount of ~~June 30,~~liability cash flows coming due in one year at December 31, 2022 compared to September 30, 2021 due to the assumption that the Bank's deposit balances are not expected to reprice to the full extent of the increase in market interest rates. This assumption is based on a historical analysis of the Bank's deposit pricing behavior.2022.

Management ~~intends to implement~~is in the process of implementing a new core processing system ("digital transformation") for the Bank, which is expected to be operational by September 2023. ~~The replacement system is expected~~We expect the new platform will allow us to ~~better position the Bank for the future and allow for the introduction of~~introduce new products and services quickly to ~~enhance customer experiences. The implementation of~~drive better efficiencies and provide a more personalized experience for our customers. Our customers will experience a more modern internet banking experience, including both desktop and mobile. Internet banking will deliver real-time alerts and provide our customers the ~~new core system~~ability to manage their own debit cards. Our customers will also have multiple options for real-time payments, which positions the Bank for faster payment channels in the future. Management anticipates information technology and related ~~conversion of data may result~~expenses will increase in ~~increased third party expenses~~fiscal year 2023 in conjunction with the digital transformation. See additional discussion in the ~~remainder of fiscal year 2022 and during fiscal year 2023.~~"Fiscal Year 2023 Projections" section below.

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, http://ir.capfed.com. SEC filings are available on our website immediately after they are electronically filed with or furnished to the SEC, and are also available on the SEC's website at www.sec.gov.

Critical Accounting Estimates

Our most critical accounting estimates are the methodologies used to determine the ACL and reserve for off-balance sheet credit exposures and fair value measurements. These estimates are important to the presentation of our financial condition and results of operations, involve a high degree of complexity, and require 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. These critical accounting estimates and their application are reviewed at least annually by our audit committee. For a full discussion of our critical accounting estimates, see "Part II, Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates" in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, ~~2021.~~2022.

Financial Condition

The following table summarizes the Company's financial condition at the dates indicated.


								Annualized					Annualized									Annualized
		June 30,			March 31,			Percent		September 30,			Percent			December 31,			September 30,			Percent
		2022			2022			Change		2021			Change			2022			2022			Change
		(Dollars in thousands)														(Dollars and shares in thousands)
Total assets	Total assets	$	9,476,053		$	9,531,296		(2.3)	%	$	9,631,246		(2.1)	%	Total assets	$	9,929,760		$	9,624,897		12.7	%
AFS securities	AFS securities	1,694,160			1,780,419			(19.4)		2,014,608			(21.2)		AFS securities	1,528,686			1,563,307			(8.9)
Loans receivable, net	Loans receivable, net	7,236,196			7,108,810			7.2		7,081,142			2.9		Loans receivable, net	7,783,358			7,464,208			17.1
Deposits	Deposits	6,329,883			6,614,844			(17.2)		6,597,396			(5.4)		Deposits	6,074,549			6,194,866			(7.8)
Borrowings	Borrowings	1,869,897			1,583,747			72.3		1,582,850			24.2		Borrowings	2,645,195			2,132,154			96.2
Stockholders' equity	Stockholders' equity	1,131,740			1,174,752			(14.6)		1,242,273			(11.9)		Stockholders' equity	1,054,795			1,096,499			(15.2)
Equity to total assets at end of period	Equity to total assets at end of period	11.9		%	12.3		%			12.9		%			Equity to total assets at end of period	10.6		%	11.4		%
Average number of basic shares outstanding	Average number of basic shares outstanding	135,725			135,677			0.1		135,571			0.2		Average number of basic shares outstanding	134,641			135,773			(3.3)
Average number of diluted shares outstanding	Average number of diluted shares outstanding	135,725			135,677			0.1		135,571			0.2		Average number of diluted shares outstanding	134,641			135,773			(3.3)

During the current quarter, total assets increased by $304.9 million, which was primarily driven by loan growth, mainly in the correspondent one- to four-family and commercial loan portfolios. The one- to four-family correspondent loan portfolio increased $151.4 million, or 6.9%, primarily as a result of purchasing loans that were in the pipeline as of September 30, 2022, while new applications received have tapered off. Also, during the current ~~year period, cash flows from~~quarter we experienced a reduction in prepayment speeds on the ~~securities portfolio and/or excess operating cash were partially reinvested into the~~one- to four-family loan portfolio. ~~Loans receivable, net,~~The commercial loan portfolio increased ~~$155.1~~$143.9 million, or 14.9%, during the current quarter, as funding for construction loans continued and new commercial real estate loans were added.

Total liabilities increased $346.6 million due to new borrowings, partially offset by a decrease in deposits. The decrease in deposit balances was due primarily to a reduction in money market account balances, which decreased $125.3 million during the current ~~year period due primarily~~quarter as depositors likely moved funds to ~~a $74.5 million~~alternative, higher yielding investment products and/or used balances accumulated over the past several years to support spending. The increase in ~~commercial loans~~loan balances and ~~a $74.0~~the decrease in deposit balances made it necessary to enter into new FHLB borrowings totaling $520.0 million ~~increase in one- to four-family loans. The majority of the deposit outflows~~ during the current ~~year period occurred during the current quarter and~~quarter. The new FHLB borrowings were ~~replaced with FHLB advances. The Bank has begun to increase offered rates on certificates~~comprised of deposit and money market accounts, which has reduced the runoff in these portfolios. The decreases in stockholders' equity from September 30, 2021 and March 31, 2022 to June 30, 2022 were due mainly to a reduction in AOCI as a result of changes in the fair value of AFS securities due to an increase in market interest rates, along with the payment of a $0.20 per share True Blue Capitol dividend in June 2022.

$450.0

3229

million of new advances with a weighted average maturity of 3.3 years and $70.0 million on the FHLB line of credit. The overall loan growth during the quarter exceeded management's expectations as of September 30, 2022. While it is still management's expectation that we will stay under $10 billion in total assets at September 30, 2023, it is likely that we will exceed that threshold at several quarter-ends this year. We are working to limit the growth in assets and to limit additional use of FHLB advances for operating needs.

Loans Receivable. The following table presents the balance and weighted average rate of our loan portfolio as of the dates indicated. The loan portfolio rate increased 14 basis points from September 30, 2022 to December 31, 2022, due primarily to one- to four-family correspondent and commercial loan growth, disbursements on higher rate commercial construction loans, and repricing of existing commercial loans to higher market interest rates. The average prepayment speed on one- to four-family loans was 5% during the quarter ended December 31, 2022 compared to 7% during the quarter ended September 30, 2022.


		June 30, 2022				March 31, 2022				September 30, 2021					December 31, 2022				September 30, 2022
		Amount		Rate		Amount		Rate		Amount		Rate			Amount		Rate		Amount		Rate
		(Dollars in thousands)													(Dollars in thousands)
One- to four-family:	One- to four-family:													One- to four-family:
Originated	Originated	$	3,963,608	3.16	%	$	3,943,327	3.14	%	$	3,956,064	3.18	%	Originated	$	4,007,596	3.25	%	$	3,988,469	3.20	%
Correspondent purchased	Correspondent purchased	2,070,822		2.99		1,995,167		2.95		2,003,477		3.02		Correspondent purchased	2,353,335		3.25		2,201,886		3.10
Bulk purchased	Bulk purchased	151,461		1.27		155,657		1.33		173,662		1.65		Bulk purchased	145,209		1.31		147,939		1.24
Construction	Construction	60,426		2.84		50,512		2.78		39,142		2.82		Construction	70,869		3.01		66,164		2.90
Total	Total	6,246,317		3.05		6,144,663		3.03		6,172,345		3.09		Total	6,577,009		3.20		6,404,458		3.12
Commercial:	Commercial:													Commercial:
Commercial real estate	Commercial real estate	717,947		4.09		671,324		3.94		676,908		4.00		Commercial real estate	833,444		4.34		745,301		4.30
Commercial and industrial	Commercial and industrial	70,932		3.98		78,363		3.92		66,497		3.83		Commercial and industrial	88,327		5.21		79,981		4.30
Construction	Construction	115,031		4.33		133,597		4.06		85,963		4.03		Construction	188,516		5.97		141,062		5.34
Total	Total	903,910		4.11		883,284		3.96		829,368		3.99		Total	1,110,287		4.69		966,344		4.45
Consumer loans:	Consumer loans:													Consumer loans:
Home equity	Home equity	87,235		5.03		82,878		4.57		86,274		4.60		Home equity	95,352		7.55		92,203		6.28
Other	Other	8,289		4.14		7,858		4.18		8,086		4.19		Other	9,022		4.43		8,665		4.21
Total	Total	95,524		4.96		90,736		4.54		94,360		4.57		Total	104,374		7.28		100,868		6.10
Total loans receivable	Total loans receivable	7,245,751		3.21		7,118,683		3.16		7,096,073		3.21		Total loans receivable	7,791,670		3.47		7,471,670		3.33

Less:	Less:													Less:
ACL	ACL	16,283				15,312				19,823				ACL	19,189				16,371
Deferred loan fees/discounts	Deferred loan fees/discounts	29,470				29,264				29,556				Deferred loan fees/discounts	30,513				29,736
Premiums/deferred costs	Premiums/deferred costs	(36,198)				(34,703)				(34,448)				Premiums/deferred costs	(41,390)				(38,645)
Total loans receivable, net	Total loans receivable, net	$	7,236,196			$	7,108,810			$	7,081,142			Total loans receivable, net	$	7,783,358			$	7,464,208

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 in the following table unless new funds are disbursed at the time of renewal. The renewal balance and rate are included in the ending loan portfolio balance and rate.


		For the Three Months Ended				For the Nine Months Ended									For the Three Months Ended
		June 30, 2022				June 30, 2022				June 30, 2021					December 31, 2022			December 31, 2021
		Amount		Rate		Amount		Rate		Amount		Rate				Amount		Rate		Amount		Rate
		(Dollars in thousands)														(Dollars in thousands)
Beginning balance	Beginning balance	$	7,118,683	3.16	%	$	7,096,073	3.21	%	$	7,224,996	3.55	%	Beginning balance		$	7,471,670	3.33	%	$	7,096,073	3.21	%
Originated and refinanced	Originated and refinanced	260,799		3.88		787,635		3.44		1,157,075		2.85		Originated and refinanced		364,387		5.13		258,685		3.05
Purchased and participations	Purchased and participations	153,362		3.50		476,068		3.06		620,079		2.91		Purchased and participations		335,305		5.30		167,216		2.80
Change in undisbursed loan funds	Change in undisbursed loan funds	122				(45,115)				(167,760)				Change in undisbursed loan funds		(121,235)				(21,926)
Repayments	Repayments	(287,123)				(1,068,621)				(1,782,211)				Repayments		(252,799)				(391,779)
Principal recoveries/(charge-offs), net	Principal recoveries/(charge-offs), net	175				220				(482)				Principal recoveries/(charge-offs), net		(2)				31
Other	Other	(267)				(509)				(72)				Other		(5,656)				(242)
Ending balance	Ending balance	$	7,245,751	3.21		$	7,245,751	3.21		$	7,051,625	3.26		Ending balance		$	7,791,670	3.47		$	7,108,058	3.18

3331

The following table presents loan origination, refinance, and purchase 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, purchases, and refinances are reported together.


		For the Nine Months Ended													For the Three Months Ended
		June 30, 2022						June 30, 2021							December 31, 2022						December 31, 2021
		Amount		Rate		% of Total		Amount		Rate		% of Total			Amount		Rate		% of Total		Amount		Rate		% of Total
		(Dollars in thousands)													(Dollars in thousands)
Fixed-rate:	Fixed-rate:													Fixed-rate:
One- to four-family	One- to four-family	$	726,704	3.09	%	57.5	%	$	1,243,047	2.65	%	69.9	%	One- to four-family	$	167,439	5.10	%	23.9	%	$	278,612	2.70	%	65.4	%
One- to four-family construction	One- to four-family construction	106,636		3.07		8.4		98,852		2.76		5.6		One- to four-family construction	14,914		5.23		2.1		34,263		2.80		8.1
Commercial:	Commercial:													Commercial:
Real estate	Real estate	43,939		3.91		3.5		18,481		3.62		1.1		Real estate	4,903		5.25		0.7		2,843		4.26		0.7
Commercial and industrial	Commercial and industrial	13,039		3.77		1.0		42,582		2.22		2.4		Commercial and industrial	7,895		5.94		1.1		2,670		3.69		0.6
Construction	Construction	68,998		3.27		5.5		42,165		3.65		2.4		Construction	68,600		4.87		9.8		31,663		3.25		7.4
Home equity	Home equity	3,984		5.40		0.3		2,095		5.47		0.1		Home equity	1,381		7.06		0.2		348		5.17		0.1
Other	Other	2,826		5.53		0.2		2,323		5.43		0.1		Other	1,165		6.58		0.2		700		5.78		0.2
Total fixed-rate	Total fixed-rate	966,126		3.17		76.4		1,449,545		2.69		81.6		Total fixed-rate	266,297		5.09		38.0		351,099		2.79		82.5

Adjustable-rate:	Adjustable-rate:													Adjustable-rate:
One- to four-family	One- to four-family	104,354		3.13		8.3		53,473		2.51		3.0		One- to four-family	136,603		4.62		19.6		6,520		2.54		1.6
One- to four-family construction	One- to four-family construction	15,255		2.95		1.2		11,069		2.64		0.6		One- to four-family construction	7,023		4.48		1.0		5,265		2.73		1.2
Commercial:	Commercial:													Commercial:
Real estate	Real estate	79,851		4.08		6.3		105,348		3.63		5.9		Real estate	163,621		5.08		23.4		27,326		3.89		6.4
Commercial and industrial	Commercial and industrial	31,413		3.81		2.5		9,492		3.78		0.5		Commercial and industrial	19,017		7.04		2.7		20,344		3.66		4.8
Construction	Construction	19,742		4.02		1.6		105,555		4.10		6.0		Construction	91,079		5.99		13.0		1,062		3.85		0.2
Home equity	Home equity	45,686		4.53		3.6		41,207		4.43		2.3		Home equity	15,632		7.34		2.2		14,095		4.42		3.3
Other	Other	1,276		2.89		0.1		1,465		3.45		0.1		Other	420		3.62		0.1		190		2.60		—
Total adjustable-rate	Total adjustable-rate	297,577		3.72		23.6		327,609		3.67		18.4		Total adjustable-rate	433,395		5.28		62.0		74,802		3.73		17.5

Total originated, refinanced and purchased	Total originated, refinanced and purchased	$	1,263,703	3.30		100.0	%	$	1,777,154	2.87		100.0	%	Total originated, refinanced and purchased	$	699,692	5.21		100.0	%	$	425,901	2.96		100.0	%

Purchased and participation loans included above:	Purchased and participation loans included above:													Purchased and participation loans included above:
Fixed-rate:	Fixed-rate:													Fixed-rate:
Correspondent purchased - one- to four-family	Correspondent purchased - one- to four-family	$	346,462	2.99				$	487,001	2.63				Correspondent purchased - one- to four-family	$	101,958	5.11				$	129,696	2.65

Participations - commercial		69,057		3.25				38,114		3.62
Participations and purchases - commercial														Participations and purchases - commercial	870		6.60				31,663		3.25

Total fixed-rate purchased/participations	Total fixed-rate purchased/participations	415,519		3.04				525,115		2.70				Total fixed-rate purchased/participations	102,828		5.12				161,359		2.77

Adjustable-rate:	Adjustable-rate:													Adjustable-rate:
Correspondent purchased - one- to four-family	Correspondent purchased - one- to four-family	47,549		3.10				17,964		2.46				Correspondent purchased - one- to four-family	97,513		4.62				857		2.18

Participations - commercial		13,000		3.85				77,000		4.44
Participations and purchases - commercial														Participations and purchases - commercial	134,964		5.93				5,000		4.00

Total adjustable-rate purchased/participations	Total adjustable-rate purchased/participations	60,549		3.26				94,964		4.07				Total adjustable-rate purchased/participations	232,477		5.38				5,857		3.73
Total purchased/participation loans	Total purchased/participation loans	$	476,068	3.06				$	620,079	2.91				Total purchased/participation loans	$	335,305	5.30				$	167,216	2.80

One- to Four-Family Loans - The following table presents, for our portfolio of one- to four-family loans, the amount, percent of total, weighted average rate, weighted average credit score, weighted average LTV ratio, and average balance per loan as of ~~June 30,~~December 31, 2022. Credit scores are updated at least annually, with the latest update in ~~March~~September 2022, from a nationally recognized consumer rating agency. The LTV ratios were based on the current loan balance and either the lesser of the purchase price or original appraisal, or the most recent Bank appraisal, if available. In most cases, the most recent appraisal was obtained at the time of origination.


				% of				Credit			Average					% of				Credit			Average
		Amount		Total		Rate		Score	LTV		Balance			Amount		Total		Rate		Score	LTV		Balance
		(Dollars in thousands)												(Dollars in thousands)
Originated	Originated	$	3,963,608	64.1	%	3.16	%	772	61	%	$	157	Originated	$	4,007,596	61.6	%	3.25	%	771	60	%	$	160
Correspondent purchased	Correspondent purchased	2,070,822		33.5		2.99		765	64		412		Correspondent purchased	2,353,335		36.2		3.25		766	65		416
Bulk purchased	Bulk purchased	151,461		2.4		1.27		773	57		285		Bulk purchased	145,209		2.2		1.31		770	57		287
		$	6,185,891	100.0	%	3.06		770	62		200			$	6,506,140	100.0	%	3.20		769	62		209

3432

The following table presents originated and correspondent purchased activity in our one- to four-family loan portfolio, excluding endorsement activity, along with associated weighted average rates, weighted average LTVs, and weighted average credit scores for the ~~periods indicated.~~current year-to-date period. Many of the correspondent loans purchased during the current quarter were from applications received during the prior quarter. The Bank is working towards reducing new correspondent purchases to near zero, but continues to work through the loans currently in the pipeline.


		For the Three Months Ended							For the Nine Months Ended
		June 30, 2022							June 30, 2022
								Credit							Credit								Credit
		Amount		Rate		LTV		Score	Amount		Rate		LTV		Score		Amount		Rate		LTV		Score
		(Dollars in thousands)															(Dollars in thousands)
Originated	Originated	$	200,354	3.70	%	74	%	766	$	558,938	3.15	%	71	%	766	Originated	$	126,508	4.92	%	76	%	763
Correspondent purchased	Correspondent purchased	145,362		3.48		75		767	394,011		3.01		73		770	Correspondent purchased	199,471		4.87		77		768

		$	345,716	3.61		74		767	$	952,949	3.09		72		768		$	325,979	4.89		77		766

The following table summarizes our one- to four-family loan origination and refinance commitments and one- to four-family correspondent loan purchase commitments as of ~~June 30,~~December 31, 2022, along with associated weighted average rates. It is expected that some of the loan commitments will expire unfunded, so the amounts reflected in the table below are not necessarily indicative of our future cash needs.


		Amount		Rate			Amount		Rate
		(Dollars in thousands)					(Dollars in thousands)
Originate/refinance	Originate/refinance	$	182,662	4.16	%	Originate/refinance	$	84,108	5.12	%
Correspondent	Correspondent	77,156		3.82		Correspondent	121,250		5.22
		$	259,818	4.06			$	205,358	5.18

Commercial Loans - During the ~~nine months~~quarter ended ~~June 30,~~December 31, 2022, the Bank originated ~~$174.9~~$219.3 million of commercial loans and entered into commercial loan participations totaling ~~$82.1~~$135.8 million. ~~During the quarter and nine months ended June 30, 2022, the~~The Bank also processed commercial loan disbursements, excluding lines of credit, of approximately ~~$57.8~~$207.8 million ~~and $232.0 million, respectively,~~ at a weighted average rate of ~~4.37% and 4.04%, respectively.~~5.05%.

As of ~~June~~December 31, 2022, September 30, 2022, ~~March~~and December 31, ~~2022, and September 30,~~ 2021, the Bank's commercial and industrial gross loan amounts (unpaid principal plus undisbursed amounts) totaled ~~$95.2~~$113.2 million, ~~$101.3~~$100.4 million and ~~$90.7~~$99.8 million, respectively, and commitments totaled ~~$440~~$5.1 million, $458 thousand ~~$1.4 million~~ and ~~$16.9~~$6.4 million respectively.

The following table presents the Bank's commercial real estate and commercial construction loans by type of primary collateral as of the dates indicated. As of ~~June 30,~~December 31, 2022, the Bank had 2618 commercial real estate and commercial construction loan commitments totaling ~~$65.5~~$71.5 million, at a weighted average rate of ~~4.17%~~5.91%. Because the commitments to pay out undisbursed funds are not cancellable by the Bank, unless the loan is in default, we generally anticipate fully funding the related projects. Of the total commercial undisbursed amounts and commitments outstanding as of December 31, 2022, management anticipates approximately $110 million will be funded during the March 2023 quarter, $65 million during the June 2023 quarter, $82 million during the September 2023 quarter, and $74 million during the December 2023 quarter.


		June 30, 2022										March 31, 2022			September 30, 2021				December 31, 2022										September 30, 2022
			Unpaid			Undisbursed			Gross Loan			Gross Loan			Gross Loan					Unpaid			Undisbursed			Gross Loan			Gross Loan
		Count	Principal			Amount			Amount			Amount			Amount				Count	Principal			Amount			Amount			Amount
			(Dollars in thousands)																	(Dollars in thousands)
Senior housing	Senior housing	34	$	248,787		$	79,334		$	328,121		$	331,230		$	265,284		Senior housing	35	$	270,614		$	56,800		$	327,414		$	328,259
Retail building	Retail building	138	196,903			35,551			232,454			226,297			208,539			Retail building	144	231,384			93,671			325,055			230,153
Hotel	Hotel	11	160,521			32,380			192,901			194,287			194,665			Hotel	11	195,590			21,014			216,604			181,546
Multi-family																		Multi-family	38	82,138			128,117			210,255			122,735
Office building	Office building	85	52,738			50,305			103,043			104,787			109,987			Office building	87	82,751			32,093			114,844			109,653
Multi-family		34	59,840			19,706			79,546			71,180			66,199
One- to four-family property	One- to four-family property	372	62,191			8,235			70,426			70,920			69,174			One- to four-family property	390	62,182			10,157			72,339			68,907
Single use building	Single use building	23	19,019			4,773			23,792			24,179			47,028			Single use building	26	22,981			20,471			43,452			41,908
Other	Other	94	32,979			2,993			35,972			35,917			36,167			Other	107	74,320			12,256			86,576			53,054
		791	$	832,978		$	233,277		$	1,066,255		$	1,058,797		$	997,043			838	$	1,021,960		$	374,579		$	1,396,539		$	1,136,215

Weighted average rate	Weighted average rate		4.13		%	4.32		%	4.17		%	3.93		%	4.01		%	Weighted average rate		4.64		%	5.65		%	4.91		%	4.56		%

3533

The following table summarizes the Bank's commercial real estate and commercial construction loans by state as of the dates indicated.


		June 30, 2022							March 31, 2022		September 30, 2021			December 31, 2022							September 30, 2022
			Unpaid		Undisbursed		Gross Loan		Gross Loan		Gross Loan				Unpaid		Undisbursed		Gross Loan		Gross Loan
		Count	Principal		Amount		Amount		Amount		Amount			Count	Principal		Amount		Amount		Amount
			(Dollars in thousands)												(Dollars in thousands)
Kansas	Kansas	600	$	320,063	$	57,888	$	377,951	$	366,403	$	348,835	Kansas	616	$	400,508	$	118,911	$	519,419	$	423,797
Texas													Texas	15	224,792		111,720		336,512		280,840
Missouri	Missouri	157	227,027		53,343		280,370		281,230		232,041		Missouri	177	246,132		89,268		335,400		296,443
Texas		11	182,086		90,688		272,774		274,020		273,124
Colorado	Colorado	5	19,832		14,139		33,971		35,452		36,099		Colorado	8	40,179		15,526		55,705		34,377
Arkansas		3	21,884		11,618		33,502		33,589		33,763
Tennessee													Tennessee	2	20,577		22,681		43,258		—
Nebraska	Nebraska	6	33,088		4		33,092		33,269		33,468		Nebraska	7	33,760		4,057		37,817		32,992
Other	Other	9	28,998		5,597		34,595		34,834		39,713		Other	13	56,012		12,416		68,428		67,766
		791	$	832,978	$	233,277	$	1,066,255	$	1,058,797	$	997,043		838	$	1,021,960	$	374,579	$	1,396,539	$	1,136,215

The following table presents the Bank's commercial loan portfolio and outstanding loan commitments, categorized by gross loan amount (unpaid principal plus undisbursed amounts) or outstanding loan commitment amount, as of ~~June 30,~~December 31, 2022.

Count Amount
(Dollars in thousands)
Greater than $30 million 6 $ 246,066
>$15 to $30 million 16 335,698
>$10 to $15 million 6 71,174
>$5 to $10 million 20 131,051
$1 to $5 million 112 254,323
Less than $1 million 1,262 189,051
1,422 $ 1,227,363

As of June 30, 2022 and March 31, 2022, there were commercial loans with an aggregate gross balance, including undisbursed amounts, of $73.6 million and $74.3 million, respectively, with modifications under the Bank's program to support and provide relief to borrowers during the COVID-19 pandemic ("COVID-19 modifications") that were still in their deferral period. The COVID-19 modifications of these loans occurred during fiscal year 2021.


	Count	Amount
	(Dollars in thousands)
Greater than $30 million	8	$	362,853
>$15 to $30 million	20	424,689
>$10 to $15 million	9	108,638
>$5 to $10 million	24	170,993
$1 to $5 million	137	327,871
Less than $1 million	1,255	191,370
	1,453	$	1,586,414

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 ~~June 30,~~December 31, 2022, approximately ~~61%~~76% were 59 days or less delinquent.


		Loans Delinquent for 30 to 89 Days at:													Loans Delinquent for 30 to 89 Days at:
		June 30,				March 31,				December 31,					December 31,				September 30,
		2022				2022				2021					2022				2022
		Number	Amount			Number	Amount			Number	Amount				Number	Amount			Number	Amount
		(Dollars in thousands)													(Dollars in thousands)
One- to four-family:	One- to four-family:													One- to four-family:
Originated	Originated	64	$	6,035		64	$	6,931		74	$	7,009		Originated	56	$	4,708		48	$	4,134
Correspondent purchased	Correspondent purchased	9	3,467			10	2,421			11	5,133			Correspondent purchased	4	1,216			7	1,104
Bulk purchased	Bulk purchased	4	755			2	396			1	154			Bulk purchased	3	865			3	913
Commercial	Commercial	6	706			4	373			2	222			Commercial	6	191			—	—

Consumer	Consumer	16	256			14	215			16	164			Consumer	24	626			24	345
		99	$	11,219		94	$	10,336		104	$	12,682			93	$	7,606		82	$	6,496

Loans 30 to 89 days delinquent	Loans 30 to 89 days delinquent													Loans 30 to 89 days delinquent
to total loans receivable, net	to total loans receivable, net		0.16		%		0.15		%		0.18		%	to total loans receivable, net		0.10		%		0.09		%

3634

The following table presents the Company's nonaccrual loans and OREO at the dates indicated. The amounts in the table represent the unpaid principal balance of the loans less related charge-offs, if any. Nonaccrual loans are loans that are 90 or more days delinquent or in foreclosure and other loans required to be reported as nonaccrual pursuant to accounting and/or regulatory reporting requirements and/or internal policies, even if the loans are current. At all dates presented, there were no loans 90 or more days delinquent that were still accruing interest. Non-performing assets include nonaccrual loans and OREO.


		Nonaccrual Loans and OREO at:													Nonaccrual Loans and OREO at:
		June 30,				March 31,				December 31,					December 31,				September 30,
		2022				2022				2021					2022				2022
		Number	Amount			Number	Amount			Number	Amount				Number	Amount			Number	Amount
		(Dollars in thousands)													(Dollars in thousands)
Loans 90 or More Days Delinquent or in Foreclosure:	Loans 90 or More Days Delinquent or in Foreclosure:													Loans 90 or More Days Delinquent or in Foreclosure:
One- to four-family:	One- to four-family:													One- to four-family:
Originated	Originated	36	$	2,585		44	$	3,999		48	$	3,943		Originated	13	$	1,034		29	$	2,919
Correspondent purchased	Correspondent purchased	9	2,659			11	3,967			10	3,115			Correspondent purchased	14	4,126			12	3,737
Bulk purchased	Bulk purchased	5	1,807			5	1,819			6	1,945			Bulk purchased	4	1,492			3	1,148
Commercial	Commercial	7	1,184			6	1,167			6	1,170			Commercial	7	1,152			8	1,167
Consumer	Consumer	9	174			19	400			25	477			Consumer	11	126			9	154
		66	8,409			85	11,352			95	10,650				49	7,930			61	9,125

Loans 90 or more days delinquent or in foreclosure	Loans 90 or more days delinquent or in foreclosure													Loans 90 or more days delinquent or in foreclosure
as a percentage of total loans	as a percentage of total loans		0.12		%		0.16		%		0.15		%	as a percentage of total loans		0.10		%		0.12		%

Nonaccrual loans less than 90 Days Delinquent:(1)	Nonaccrual loans less than 90 Days Delinquent:(1)													Nonaccrual loans less than 90 Days Delinquent:(1)
One- to four-family:	One- to four-family:													One- to four-family:
Originated	Originated	2	$	207		5	$	505		5	$	451		Originated	3	$	219		3	$	222
Correspondent purchased	Correspondent purchased	—	—			—	—			—	—			Correspondent purchased	—	—			—	—
Bulk purchased	Bulk purchased	—	—			—	—			—	—			Bulk purchased	—	—			—	—
Commercial	Commercial	1	4			2	34			3	62			Commercial	2	84			1	77
Consumer	Consumer	1	19			2	27			—	—			Consumer	—	—			1	19
		4	230			9	566			8	513				5	303			5	318
Total nonaccrual loans	Total nonaccrual loans	70	8,639			94	11,918			103	11,163			Total nonaccrual loans	54	8,233			66	9,443

Nonaccrual loans as a percentage of total loans	Nonaccrual loans as a percentage of total loans		0.12		%		0.17		%		0.16		%	Nonaccrual loans as a percentage of total loans		0.11		%		0.13		%

OREO:	OREO:													OREO:
One- to four-family:	One- to four-family:													One- to four-family:
Originated(2)	Originated(2)	2	$	237		—	$	—		2	$	319		Originated(2)	2	$	161		4	$	307

Consumer	Consumer	1	21			—	—			—	—			Consumer	1	21			1	21

		3	258			—	—			2	319				3	182			5	328
Total non-performing assets	Total non-performing assets	73	$	8,897		94	$	11,918		105	$	11,482		Total non-performing assets	57	$	8,415		71	$	9,771

Non-performing assets as a percentage of total assets	Non-performing assets as a percentage of total assets		0.09		%		0.13		%		0.12		%	Non-performing assets as a percentage of total assets		0.08		%		0.10		%

(1)Includes 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.

(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.

3735

The following table presents the states where the properties securing ~~five~~ten percent or more of the total amount of our one- to four-family loans are located and the corresponding balance of loans 30 to 89 days delinquent, 90 or more days delinquent or in foreclosure, and weighted average LTV ratios for loans 90 or more days delinquent or in foreclosure at ~~June 30,~~December 31, 2022. The LTV ratios were based on the current loan balance and either the lesser of the purchase price or original appraisal, or the most recent Bank appraisal, if available. At ~~June 30,~~December 31, 2022, potential losses, after taking into consideration anticipated private mortgage insurance proceeds and estimated selling costs, have been charged-off.


						Loans 30 to 89				Loans 90 or More Days Delinquent											Loans 30 to 89				Loans 90 or More Days Delinquent
		One- to Four-Family				Days Delinquent				or in Foreclosure							One- to Four-Family				Days Delinquent				or in Foreclosure
State	State	Amount		% of Total		Amount		% of Total		Amount		% of Total		LTV		State	Amount		% of Total		Amount		% of Total		Amount		% of Total		LTV
		(Dollars in thousands)															(Dollars in thousands)
Kansas	Kansas	$	3,530,724	57.1	%	$	5,169	50.4	%	$	2,328	33.0	%	51	%	Kansas	$	3,583,731	55.1	%	$	3,612	53.2	%	$	1,356	20.4	%	53	%
Missouri	Missouri	1,053,438		17.0		2,511		24.5		1,364		19.4		63		Missouri	1,114,740		17.1		2,312		34.1		794		11.9		56
Texas		577,347		9.3		1,088		10.6		663		9.4		40

Other states	Other states	1,024,382		16.6		1,489		14.5		2,696		38.2		53		Other states	1,807,669		27.8		865		12.7		4,502		67.7		48

		$	6,185,891	100.0	%	$	10,257	100.0	%	$	7,051	100.0	%	53			$	6,506,140	100.0	%	$	6,789	100.0	%	$	6,652	100.0	%	50

Classified loans. The following table presents loans classified as special mention or substandard at the dates presented. The amounts in the table represent the unpaid principal balance of the loans less related charge-offs, if any. The ~~decrease~~increase in commercial special mention loans at ~~June 30,~~December 31, 2022 compared to September 30, ~~2021~~2022 was due mainly to two loans in a single commercial ~~loans~~relationship moving to ~~the pass classification~~special mention during the ~~December 31, 2021~~ quarter as ~~the~~certain underlying economic considerations being monitored by management ~~improved to levels deemed appropriate by the Company. The commercial special mention loan balance at June 30, 2022 was comprised~~showed signs of ~~a single loan which continues to show improvement in its cash flow from operations and other operating metrics.~~deterioration.


		June 30, 2022				September 30, 2021					December 31, 2022				September 30, 2022
		Special Mention		Substandard		Special Mention		Substandard			Special Mention		Substandard		Special Mention		Substandard
		(Dollars in thousands)									(Dollars in thousands)
One- to four-family	One- to four-family	$	14,172	$	19,319	$	14,332	$	23,458	One- to four-family	$	16,471	$	18,301	$	12,950	$	19,953
Commercial	Commercial	46,366		3,078		99,729		3,259		Commercial	28,441		2,413		565		2,733
Consumer	Consumer	288		383		135		718		Consumer	234		318		306		354
		$	60,826	$	22,780	$	114,196	$	27,435		$	45,146	$	21,032	$	13,821	$	23,040

Allowance for Credit Losses. The distribution of our ACL and the ratio of ACL to loans receivable, by loan type, at the dates indicated is summarized below. The ACL increased during the current quarter due primarily to growth in the commercial loan portfolio and a slowdown in portfolio prepayment speeds, which reduced the projected prepayment speeds used in the model for generally all loan categories. The increase in the commercial real estate ACL to loans receivable ratio during the current quarter was due mainly to the slow down of prepayment speeds used in the model and the classification of two loans as special mention. See "Note 4. Loans Receivable and Allowance for Credit Losses" for additional information related to the calculation of ACL as of ~~June 30,~~December 31, 2022.

Distribution of ACL Ratio of ACL to
Loans Receivable
June 30, March 31, December 31, June 30, March 31, December 31,
2022 2022 2021 2022 2022 2021
(Dollars in thousands)
One- to four-family:
Originated $ 1,861 $ 1,677 $ 1,611 0.05 % 0.04 % 0.04 %
Correspondent purchased 2,437 2,129 2,082 0.12 0.11 0.10
Bulk purchased 224 241 268 0.15 0.15 0.16
Construction 43 32 28 0.07 0.06 0.06
Total 4,565 4,079 3,989 0.07 0.07 0.06
Commercial:
Real estate 9,720 8,991 11,257 1.35 1.34 1.64
Commercial and industrial 408 389 376 0.58 0.50 0.49
Construction 1,362 1,651 1,720 1.18 1.24 1.63
Total 11,490 11,031 13,353 1.27 1.25 1.54
Consumer 228 202 193 0.24 0.22 0.21
Total $ 16,283 $ 15,312 $ 17,535 0.22 0.22 0.25


	Distribution of ACL				Ratio of ACL to Loans Receivable
	December 31,		September 30,			December 31,		September 30,
	2022		2022			2022		2022
	(Dollars in thousands)
One- to four-family:
Originated	$	2,097	$	2,012		0.05	%	0.05	%
Correspondent purchased	2,987		2,734			0.13		0.12
Bulk purchased	216		206			0.15		0.14
Construction	62		54			0.09		0.08
Total	5,362		5,006			0.08		0.08
Commercial:
Real estate	10,799		8,729			1.30		1.17
Commercial and industrial	491		490			0.56		0.61
Construction	2,294		1,901			1.22		1.35
Total	13,584		11,120			1.22		1.15
Consumer	243		245			0.23		0.24
Total	$	19,189	$	16,371		0.25		0.22

3836

The following table presents ACL activity and related ratios at the dates and for the periods indicated. The ratio of ~~net charge-offs (recoveries) ("NCOs")~~NCOs during the current ~~year period~~quarter to average non-performing assets was ~~a negative percentage compared to a positive percentage in~~higher than the prior year ~~period~~quarter due to a net charge-off in the current quarter compared to a net recovery in the ~~current year period and a net charge-off in the~~ prior year ~~period.~~quarter. The ratio of ACL to nonaccrual loans ~~at end of period ratio~~ was higher at ~~June 30, 2022~~the end of the current quarter compared to ~~June 30, 2021~~the end of the prior year quarter due mainly to a lower balance of nonaccrual loans compared to the prior year period, along with higher ACL at ~~June 30,~~December 31, 2022. The ratio of ACL to ~~loans receivable, net at end of period ratio~~NCOs was ~~lower at June 30, 2022~~higher in the current quarter compared to ~~June 30, 2021~~the prior year quarter due primarily a net charge-off in the current quarter compared to a ~~lower ACL balance at June 30, 2022.~~net recovery in the prior year quarter, along with an increase in ACL. See "Note 4. Loans Receivable and Allowance for Credit Losses" for additional information related to ACL activity by specific loan categories.


		At or For the Nine Months Ended							At or For the Three Months Ended
		June 30, 2022			June 30, 2021				December 31, 2022			December 31, 2021
		(Dollars in thousands)							(Dollars in thousands)
Balance at beginning of period	Balance at beginning of period	$	19,823		$	31,527		Balance at beginning of period	$	16,371		$	19,823
Adoption of CECL		—			(4,761)

Charge-offs	Charge-offs	(30)			(689)			Charge-offs	(4)			(15)
Recoveries	Recoveries	250			207			Recoveries	2			46
Net recoveries (charge-offs)	Net recoveries (charge-offs)	220			(482)			Net recoveries (charge-offs)	(2)			31
Provision for credit losses	Provision for credit losses	(3,760)			(5,560)			Provision for credit losses	2,820			(2,319)
Balance at end of period	Balance at end of period	$	16,283		$	20,724		Balance at end of period	$	19,189		$	17,535

Ratio of NCOs during the period	Ratio of NCOs during the period							Ratio of NCOs during the period
to average non-performing assets	to average non-performing assets	(1.96)		%	3.56		%	to average non-performing assets	0.02		%	(0.25)		%

ACL to nonaccrual loans at end of period	ACL to nonaccrual loans at end of period	188.48			146.23			ACL to nonaccrual loans at end of period	233.07			157.08

ACL to loans receivable, net at end of period	ACL to loans receivable, net at end of period	0.22			0.29			ACL to loans receivable, net at end of period	0.25			0.25

ACL to NCOs (annualized)	ACL to NCOs (annualized)	N/M(1)			32.3x			ACL to NCOs (annualized)	3,032x			N/M(1)

(1)This ratio is not presented due to loan recoveries exceeding loan charge-offs during the period.

The following table presents NCOs, average loans, and NCOs as a percentage of average loans, by loan type, for the periods indicated.


		For the Nine Months Ended													For the Three Months Ended
		June 30, 2022						June 30, 2021							December 31, 2022						December 31, 2021
		NCOs		Average Loans		NCOs as a % of Average Loans		NCOs		Average Loans		NCOs as a % of Average Loans			NCOs		Average Loans		% of Average Loans		NCOs		Average Loans		% of Average Loans
		(Dollars in thousands)													(Dollars in thousands)
One- to four-family:	One- to four-family:													One- to four-family:
Originated	Originated	$	(133)	$	3,928,131	0.00	%	$	2	$	3,933,932	0.00	%	Originated	$	(1)	$	3,984,609	—	%	$	(5)	$	3,929,658	—	%
Correspondent	Correspondent	—		2,040,934		0.00		—		2,006,257		0.00		Correspondent	—		2,305,362		—		—		2,035,631		—
Bulk purchased	Bulk purchased	—		162,151		0.00		21		195,678		0.01		Bulk purchased	—		147,091		—		—		170,537		—
Construction	Construction	—		45,053		0.00		—		29,156		0.00		Construction	—		65,181		—		—		41,391		—
Total	Total	(133)		6,176,269		0.00		23		6,165,023		0.00		Total	(1)		6,502,243		—		(5)		6,177,217		—
Commercial:	Commercial:													Commercial:
Real estate	Real estate	(101)		678,705		(0.01)		477		625,505		0.08		Real estate	—		780,366		—		(36)		683,277		(0.01)
Commercial and industrial	Commercial and industrial	10		73,550		0.01		—		78,186		0.00		Commercial and industrial	—		78,310		—		10		64,476		0.02
Construction	Construction	—		114,601		0.00		—		77,250		0.00		Construction	—		166,726		—		—		93,464		—
Total	Total	(91)		866,856		(0.01)		477		780,941		0.06		Total	—		1,025,402		—		(26)		841,217		—
Consumer:	Consumer:													Consumer:
Home equity	Home equity	(2)		84,135		0.00		(18)		94,291		(0.02)		Home equity	3		93,905		—		—		84,886		—
Other	Other	6		7,844		0.08		—		8,950		0.00		Other	—		8,855		—		—		7,908		—
Total	Total	4		91,979		0.00		(18)		103,241		(0.02)		Total	3		102,760		—		—		92,794		—
		$	(220)	$	7,135,104	0.00		$	482	$	7,049,205	0.01			$	2	$	7,630,405	—		$	(31)	$	7,111,228	—

3937

While management utilizes its best judgment and information available, the adequacy of the ACL is determined by certain factors outside of the Company's control, such as the performance of our portfolios, changes in the economic environment including economic uncertainty, changes in interest rates, and the views of regulatory authorities toward classification of assets and the level of ACL. Additionally, the level of ACL may fluctuate based on the balance and mix of the loan portfolio. If actual results reflect significant underperformance compared to our assumptions and/or if one or more of our assumptions, such as the economic forecast, represents a more negative outlook in a future period, there could be 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. Overall, fixed-rate securities comprised 95% of our securities portfolio at ~~June 30,~~December 31, 2022. ~~Weighted average yields on tax-exempt securities are not calculated on a fully tax-equivalent basis.~~

June 30, 2022 March 31, 2022 September 30, 2021
Amount Yield
WAL(1)
Amount Yield
WAL(1)
Amount Yield
WAL(1)
(Dollars in thousands)
Fixed-rate securities:
MBS $ 1,216,144 1.48 % 4.5 $ 1,255,411 1.44 % 4.3 $ 1,363,645 1.30 % 3.5
GSE debentures 519,976 0.61 3.1 519,974 0.61 3.4 519,971 0.61 3.7
Municipal bonds 210 3.00 0.1 750 2.24 0.1 4,274 1.81 0.3
Total fixed-rate securities 1,736,330 1.22 4.1 1,776,135 1.20 4.0 1,887,890 1.11 3.6
Adjustable-rate securities:
MBS 89,932 2.38 4.1 99,226 2.08 4.3 120,566 1.99 3.2
Corporate bonds 4,000 5.12 7.4 — — — — — —
Total adjustable-rate securities 93,932 2.49 4.2 99,226 2.08 4.3 120,566 1.99 3.2
Total securities portfolio $ 1,830,262 1.29 4.1 $ 1,875,361 1.24 4.1 $ 2,008,456 1.16 3.5

~~(1)~~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.


	December 31, 2022				September 30, 2022
	Amount		Yield	WAL	Amount		Yield	WAL
	(Dollars in thousands)
MBS	$	1,191,597	1.59%	5.0	$	1,243,270	1.57%	4.7
GSE debentures	519,979		0.64	2.6	519,977		0.61	2.9
Corporate bonds	4,000		5.12	9.4	4,000		5.12	9.6
Municipal bonds	1,032		2.55	5.1	1,243		2.63	6.5
	$	1,716,608	1.31%	4.3	$	1,768,490	1.29%	4.2

The following table summarizes the activity in our securities portfolio for the periods presented. ~~The weighted average yields and WALs for purchases are presented as recorded at the time of purchase.~~ 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 Nine Months Ended											For the Three Months Ended
		June 30, 2022					June 30, 2021						December 31, 2022					December 31, 2021
		Amount		Yield		WAL	Amount		Yield		WAL		Amount		Yield		WAL	Amount		Yield		WAL
		(Dollars in thousands)											(Dollars in thousands)
Beginning balance - carrying value	Beginning balance - carrying value	$	2,014,608	1.16	%	3.5	$	1,560,950	1.63	%	3.1	Beginning balance - carrying value	$	1,563,307	1.29	%	4.2	$	2,014,608	1.16	%	3.5
Maturities and repayments	Maturities and repayments	(261,160)					(476,158)					Maturities and repayments	(51,045)					(107,665)
Net amortization of (premiums)/discounts	Net amortization of (premiums)/discounts	(4,027)					(4,308)					Net amortization of (premiums)/discounts	(837)					(1,764)
Purchases		86,993		2.56		4.3	953,818		1.00		5.1

Change in valuation on AFS securities	Change in valuation on AFS securities	(142,254)					(18,597)					Change in valuation on AFS securities	17,261					(14,526)
Ending balance - carrying value	Ending balance - carrying value	$	1,694,160	1.29		4.1	$	2,015,705	1.24		3.8	Ending balance - carrying value	$	1,528,686	1.31		4.3	$	1,890,653	1.15		3.5

4038

Liabilities. Total liabilities were ~~$8.34~~$8.87 billion at ~~June 30,~~December 31, 2022, compared to ~~$8.36 billion at March 31, 2022 and $8.39~~$8.53 billion at September 30, ~~2021.~~2022. The ~~decrease in liabilities between March 31, 2022 and June 30, 2022~~increase was due ~~primarily~~ to new borrowings, partially offset by a decrease in deposits, along with a decrease in escrows due to timing of when funds are received and disbursed, largely offset by an increase in borrowings. The decrease in liabilities between September 30, 2021 and June 30, 2022 was due primarily to a reduction in deposits, along with a decrease in other liabilities mainly related to a reduction in the interest rate swap loss position as a result of an increase in market interest rates and the funding of low income housing partnership commitments, along with a decrease in escrows due to timing of when funds are received and disbursed, largely offset by an increase in borrowings.deposits.

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.

June 30, 2022 March 31, 2022 September 30, 2021
% of % of % of
Amount Rate Total Amount Rate Total Amount Rate Total
(Dollars in thousands)
Non-interest-bearing checking $ 580,385 — % 9.2 % $ 600,457 — % 9.1 % $ 543,849 — % 8.2 %
Interest-bearing checking 1,047,336 0.08 16.6 1,097,287 0.07 16.6 1,037,362 0.07 15.7
Savings 557,832 0.05 8.8 558,337 0.05 8.4 519,069 0.05 7.9
Money market 1,867,991 0.23 29.5 1,885,873 0.19 28.5 1,753,525 0.19 26.6
Retail certificates of deposit 2,129,734 1.16 33.6 2,213,617 1.22 33.5 2,341,531 1.41 35.5
Commercial certificates of deposit 55,076 0.68 0.9 100,739 0.61 1.5 190,215 0.66 2.9
Public unit certificates of deposit 91,529 0.57 1.4 158,534 0.14 2.4 211,845 0.21 3.2
$ 6,329,883 0.49 100.0 % $ 6,614,844 0.49 100.0 % $ 6,597,396 0.59 100.0 %

~~There is some uncertainty regarding how long~~ Deposits decreased $120.3 million during the ~~increased~~current quarter. The decrease was mainly in the money market portfolio. The balance of the retail ~~deposits will be retained by~~certificate of deposit portfolio remained relatively unchanged during the ~~Bank as depositors return~~current quarter; however, the mix within the portfolio changed slightly. There was growth in the medium-term category, generally with terms 18 to ~~spending more and/or choose to invest in higher-yielding investment options outside of~~35 months, while the ~~Bank. This was~~short-term and long-term categories decreased. The rate on the ~~case in~~deposit portfolio increased 31 basis points during the current quarter ~~and led~~due primarily to ~~a reduction in retail checking account balances and continued reduction in retail certificates of deposit. The decrease in our~~ retail certificates of deposit ~~during the current year was generally in accounts with terms of 18 months or longer. Retail certificates of deposit with terms less than 18 months increased during the current year. The Bank has begun~~repricing to ~~increase~~higher offered rates as balances renewed, as well as an increase in rates offered on ~~certificates of deposit and~~ money market accounts, which has reduced the runoff in these portfolios. The decrease in commercial certificates of deposit during the current year was expected, as certain maturities of deposits received in prior fiscal years were anticipated to be used to fund operations at the depositors' related businesses during the current year. The decrease in public unit deposits was due to rapidly increasing costs of available funds in this category, to the point that rates were in excess of other funding sources available to the Bank. During the current quarter, FHLB advances were entered into in response to deposit outflows. The Bank may be required to continue to replace deposit outflows with higher costing borrowings, which would increase the cost of funds over time.accounts.


	December 31, 2022						September 30, 2022
					% of						% of
	Amount		Rate		Total		Amount		Rate		Total
	(Dollars in thousands)
Non-interest-bearing checking	$	597,247	—	%	9.8	%	$	591,387	—	%	9.5	%
Interest-bearing checking	1,024,806		0.13		16.9		1,027,222		0.07		16.6
Savings	543,514		0.08		9.0		552,743		0.06		8.9
Money market	1,694,504		0.80		27.9		1,819,761		0.47		29.4
Retail certificates of deposit	2,073,633		1.83		34.1		2,073,542		1.34		33.5
Commercial certificates of deposit	33,134		1.55		0.5		36,275		0.97		0.6
Public unit certificates of deposit	107,711		3.17		1.8		93,936		1.61		1.5
	$	6,074,549	0.94		100.0	%	$	6,194,866	0.63		100.0	%

Borrowings. Total borrowings at December 31, 2022 were $2.65 billion, an increase of $513.0 million from September 30, 2022. The $2.65 billion was comprised of $2.14 billion in fixed-rate FHLB advances, $365.0 million in variable-rate advances tied to interest rate swaps, and $145.0 million on the FHLB line of credit. Borrowings increased during the current quarter to fund loan growth and offset deposit outflows.

During the current quarter, the Bank utilized the leverage strategy, as discussed in the "Comparison of Operating Results for the Three Months Ended December 31, 2022 and September 30, 2022" section below. These borrowings were repaid prior to December 31, 2022. If the Bank continues to enter into additional FHLB borrowings during the remainder of fiscal year 2023 to fund operations, the amount of the leverage strategy transaction may continue to decrease compared to the fiscal year 2022 amount due to borrowing and collateral capacity levels.

The Bank primarily uses long-term fixed-rate borrowings with no embedded options to lengthen the average life of the Bank's liabilities. The fixed-rate characteristics of these borrowings lock-in the cost until maturity and thus decrease the amount of liabilities repricing as interest rates move higher compared to funding with lower-cost short-term borrowings. These borrowings are laddered in order to prevent large amounts of liabilities repricing in any one period.

4139

The following table presents the maturity of non-amortizing term borrowings, which consist entirely of FHLB advances, along with associated weighted average contractual and effective rates as of ~~June 30,~~December 31, 2022. In addition to the ~~term~~ borrowings in the table below, ~~the Bank had an~~there were two straight-line amortizing FHLB advances outstanding ~~balance~~at December 31, 2022 including a $45.0 million advance at a rate of ~~$35.7~~3.50% with quarterly payments of $2.5 million ~~on its line~~through June 2027 and a $95.1 million advance at a rate of ~~credit~~4.45% with ~~FHLB as~~quarterly payments of ~~June 30, 2022.~~$4.9 million through October 2027.


		Term Borrowings Amount
Maturity by	Maturity by	FHLB		Interest rate		Total		Contractual		Effective		Maturity by			Contractual		Effective
Fiscal Year	Fiscal Year	Advances		swaps(1)		Amount		Rate		Rate(2)		Fiscal Year	Amount		Rate		Rate(1)
		(Dollars in thousands)									(Dollars in thousands)
2022		$	75,000	$	—	$	75,000	0.29	%	0.29	%
2023	2023	300,000		—		300,000		1.70		1.81		2023	$	300,000	1.70	%	1.81	%
2024	2024	300,000		165,000		465,000		2.55		2.80		2024	490,000		3.56		2.85
2025	2025	350,000		100,000		450,000		1.89		2.25		2025	600,000		3.05		2.85
2026	2026	250,000		—		250,000		0.96		1.27		2026	475,000		2.45		2.62
2027	2027	200,000		—		200,000		1.57		1.81		2027	350,000		2.72		2.86
2028	2028	—		100,000		100,000		2.02		3.45		2028	150,000		4.52		3.61
		$	1,475,000	$	365,000	$	1,840,000	1.81		2.12
													$	2,365,000	2.91		2.72

(1)Represents adjustable-rate FHLB advances for which the Bank has entered into interest rate swaps with a notional amount of $365.0 million to hedge the variability in cash flows associated with the advances. Each interest rate swap matures on the same date as the related FHLB advance. The expected WAL of the interest rate swaps and related advances was 3.3 years at June 30, 2022.

~~(2)~~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. 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 new borrowings, the WAMs presented are as of the date of issue. The ~~increase in the balance of~~new FHLB ~~advances~~borrowings added during the current quarter ~~was due to funding needs primarily~~had a WAM of 3.3 years, which is generally a shorter term than what management has selected in ~~response to deposit outflows.~~

For the Three Months Ended For the Nine Months Ended
June 30, 2022 June 30, 2022 June 30, 2021
Effective Effective Effective
Amount Rate WAM Amount Rate WAM Amount Rate WAM
(Dollars in thousands)
Beginning balance $ 1,590,000 1.90 % 2.8 $ 1,590,000 1.88 % 3.3 $ 1,790,000 2.31 % 3.0
Maturities and prepayments — — — (100,000) 3.14 — (965,000) 1.99 —
New FHLB borrowings 250,000 3.51 2.7 350,000 3.49 3.8 765,000 1.86 4.2
Ending balance $ 1,840,000 2.12 2.6 $ 1,840,000 2.12 2.6 $ 1,590,000 2.00 3.5

During the current year-to-date period, the Bank reimplemented the leverage strategy which involved borrowing up to $2.10 billion either on the Bank's line of credit with FHLB or by entering into short-term FHLB advances, depending on the rates offered by FHLB. These borrowingsprior periods. The shorter terms were ~~repaid prior to June 30, 2022. In July 2022, the level of borrowings associated~~selected with the ~~leverage strategy was increased~~anticipation that when rates begin to ~~$2.60 billion~~decrease, the borrowings can be repriced more quickly to ~~further increase earnings, in response to the increase in the dividend rate paid by FHLB.~~lower cost alternatives.


	For the Three Months Ended
	December 31, 2022			December 31, 2021
				Effective					Effective
		Amount		Rate		WAM	Amount		Rate		WAM
		(Dollars in thousands)
Beginning balance		$	2,062,500	2.44	%	2.5	$	1,590,000	1.88	%	3.3
Maturities and repayments		(7,418)		4.13			(100,000)		3.14
New FHLB borrowings		450,000		4.45		3.3	100,000		3.44		6.5
Ending balance		$	2,505,082	2.80		2.4	$	1,590,000	1.90		3.1

4240

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 term borrowings for the next four quarters as of ~~June 30,~~December 31, 2022.


		September 30,			December 31,			March 31,			June 30,							March 31,			June 30,			September 30,			December 31,
		2022			2022			2023			2023			Total				2023			2023			2023			2023			Total
		(Dollars in thousands)																(Dollars in thousands)
Retail/Commercial Certificates:	Retail/Commercial Certificates:																Retail/Commercial Certificates:
Amount	Amount	$	481,348		$	344,684		$	251,665		$	205,645		$	1,283,342		Amount	$	270,624		$	208,654		$	253,360		$	228,152		$	960,790
Repricing Rate	Repricing Rate	1.25		%	1.14		%	1.22		%	0.81		%	1.14		%	Repricing Rate	1.25		%	1.00		%	1.47		%	2.14		%	1.46		%
Public Unit Certificates:	Public Unit Certificates:																Public Unit Certificates:
Amount	Amount	$	36,503		$	25,500		$	13,516		$	3,674		$	79,193		Amount	$	21,682		$	8,734		$	18,008		$	39,717		$	88,141
Repricing Rate	Repricing Rate	0.23		%	1.28		%	0.11		%	0.27		%	0.55		%	Repricing Rate	1.37		%	2.80		%	2.59		%	4.27		%	3.07		%
Term Borrowings:	Term Borrowings:																Term Borrowings:
Amount	Amount	$	75,000		$	—		$	100,000		$	100,000		$	275,000		Amount	$	100,000		$	100,000		$	100,000		$	150,000		$	450,000
Repricing Rate	Repricing Rate	0.29		%	—		%	1.46		%	1.82		%	1.27		%	Repricing Rate	1.46		%	1.82		%	2.14		%	3.42		%	2.34		%
Total	Total																Total
Amount	Amount	$	592,851		$	370,184		$	365,181		$	309,319		$	1,637,535		Amount	$	392,306		$	317,388		$	371,368		$	417,869		$	1,498,931
Repricing Rate	Repricing Rate	1.07		%	1.15		%	1.24		%	1.13		%	1.14		%	Repricing Rate	1.31		%	1.31		%	1.70		%	2.81		%	1.82		%

The following table sets forth the WAM information for our certificates of deposit, in years, as of ~~June 30,~~December 31, 2022.


Retail certificates of deposit			~~1.1~~1.6
Commercial certificates of deposit			~~0.6~~1.1
Public unit certificates of deposit			~~0.5~~0.7
Total certificates of deposit			~~1.1~~1.6

4341

Stockholders' Equity. ~~During~~Stockholders' equity at December 31, 2022 was $1.05 billion, a decrease of $41.7 million from September 30, 2022. The decrease was due primarily to the ~~nine months ended June 30, 2022, the Company paid~~payment of $49.2 million in cash dividends ~~totaling $91.6 million. These cash~~and $22.2 million in share repurchases during the current quarter, partially offset by net income and the decrease in accumulated other comprehensive loss during the quarter.

Cash dividends paid during the current quarter totaled ~~$0.675~~$0.365 per share and consisted of a ~~$0.22~~$0.28 per share cash true-up dividend related to fiscal year ~~2021~~2022 earnings ~~a $0.20 per share True Blue Capitol cash dividend,~~ and ~~three~~a regular quarterly cash ~~dividends~~dividend of $0.085 per share. On ~~July 19, 2022,~~January 24, 2023, the Company announced a regular quarterly cash dividend of $0.085 per share, or approximately ~~$11.5~~$11.3 million, payable on ~~August 19, 2022~~February 17, 2023 to stockholders of record as of the close of business on ~~August 5, 2022.~~February 3, 2023.

At December 31, 2022, the Company's ratio of equity to assets was 10.6%. Excluding the impact of unrealized losses on AFS securities, this ratio would have been approximately 130 basis points higher. In the long run, management considers the Bank's ~~equity to total assets ratio~~Community Bank Leverage Ratio ("CBLR") of at least 9%, which is currently the required percentage under regulatory guidelines, to be an appropriate level of capital. At ~~June 30,~~December 31, 2022, this ratio was ~~10.6%~~9.2%.

During the current quarter, the Company repurchased 2,729,159 shares of common stock at an average price of $8.13 per share. There remains $22.5 million authorized under the existing stock repurchase plan for additional purchases of the Company's common stock. Shares may be repurchased from time to time based upon market conditions, available liquidity and other factors. This plan has no expiration date; however, the Federal Reserve Bank's existing approval for the Company to repurchase shares expires in August 2023.

At ~~June 30,~~December 31, 2022, Capitol Federal Financial, Inc., at the holding company level, had ~~$91.9~~$51.8 million in cash on deposit at the Bank. For fiscal year ~~2022,~~2023, it is the intention of the Board of Directors to continue the payout of 100% of the Company's earnings to the Company's stockholders. 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, and the amount of cash at the holding company level.

As of June 30, 2022, there remained $44.7 million authorized under the existing stock repurchase plan for additional purchases of the Company's common stock. Shares may be repurchased from time to time based upon market conditions, available liquidity and other factors. This plan has no expiration date; however, the FRB's existing approval for the Company to repurchase shares extends through August 2022. The Company plans to request a further extension of the FRB's approval.

The Company works to find multiple ways to provide stockholder value. This has primarily been through the payment of cash dividends and stock ~~buybacks.~~repurchases. The Company has maintained a policy of paying out 100% of its earnings to stockholders in the form of quarterly cash dividends and an annual cash true-up dividend in December of each year. In order to provide additional stockholder value, the Company paid a True Blue Capitol cash dividend of $0.25 per share in June for six consecutive years ending in 2019. Given the state of economic uncertainty in 2020, the Company elected to defer the True Blue dividend originally planned for June 2020. In June 2021, the Company paid a True Blue Capitol cash dividend of $0.40 per share. This cash dividend represented a $0.20 per share cash dividend from fiscal year 2020 and a $0.20 per share cash dividend from fiscal year 2021. In June 2022, the Company paid a True Blue Capitol cash dividend of $0.20 per share. The Company has paid the True Blue Capitol dividend primarily due to excess capital levels at the Company and Bank. The Company considers various business strategies and their impact on capital and asset measures on both a current and future basis, as well as regulatory capital levels and requirements, in determining the amount, if any, and timing of the True Blue Capitol dividend.

The following table presents regular quarterly cash dividends and special cash dividends paid in calendar years 2023, 2022, ~~2021,~~ and ~~2020.~~2021. The amounts represent cash dividends paid during each period. For the quarter ending ~~September 30, 2022,~~March 31, 2023, the amount presented represents the dividend payable on ~~August 19, 2022~~February 17, 2023 to stockholders of record as of the close of business on ~~August 5, 2022.~~February 3, 2023.


		Calendar Year													Calendar Year
		2022				2021				2020					2023				2022				2021
		Amount		Per Share		Amount		Per Share		Amount		Per Share			Amount		Per Share		Amount		Per Share		Amount		Per Share
		(Dollars in thousands, except per share amounts)													(Dollars in thousands, except per share amounts)
Regular quarterly dividends paid	Regular quarterly dividends paid													Regular quarterly dividends paid
Quarter ended March 31	Quarter ended March 31	$	11,535	$	0.085	$	11,518	$	0.085	$	11,733	$	0.085	Quarter ended March 31	$	11,320	$	0.085	$	11,535	$	0.085	$	11,518	$	0.085
Quarter ended June 30	Quarter ended June 30	11,534		0.085		11,516		0.085		11,733		0.085		Quarter ended June 30	—		—		11,534		0.085		11,516		0.085
Quarter ended September 30	Quarter ended September 30	11,536		0.085		11,518		0.085		11,733		0.085		Quarter ended September 30	—		—		11,534		0.085		11,518		0.085
Quarter ended December 31	Quarter ended December 31	—		—		11,535		0.085		11,514		0.085		Quarter ended December 31	—		—		11,508		0.085		11,535		0.085
True-up dividends paid	True-up dividends paid	—		—		29,850		0.220		17,614		0.130		True-up dividends paid	—		—		37,701		0.280		29,850		0.220
True Blue dividends paid		27,143		0.200		54,210		0.400		—		—
True Blue Capitol dividends paid														True Blue Capitol dividends paid	—		—		27,143		0.200		54,210		0.400
Calendar year-to-date dividends paid	Calendar year-to-date dividends paid	$	61,748	$	0.455	$	130,147	$	0.960	$	64,327	$	0.470	Calendar year-to-date dividends paid	$	11,320	$	0.085	$	110,955	$	0.820	$	130,147	$	0.960

4442

Operating Results

The following table presents selected income statement and other information for the quarters indicated.


		For the Three Months Ended																For the Three Months Ended
		June 30,			March 31,			December 31,			September 30,			June 30,				December 31,			September 30,			June 30,			March 31,			December 31,
		2022			2022			2021			2021			2021				2022			2022			2022			2022			2021
		(Dollars in thousands, except per share data)																(Dollars in thousands, except per share data)
Interest and dividend income:	Interest and dividend income:																Interest and dividend income:
Loans receivable	Loans receivable	$	56,886		$	55,412		$	55,788		$	57,139		$	54,779		Loans receivable	$	64,819		$	60,445		$	56,886		$	55,412		$	55,788
Cash and cash equivalents																	Cash and cash equivalents	16,671			13,373			3,968			949			14
MBS	MBS	5,048			4,821			4,625			4,900			5,360			MBS	4,811			4,912			5,048			4,821			4,625
FHLB stock	FHLB stock	2,695			2,240			1,231			952			944			FHLB stock	4,158			3,865			2,695			2,240			1,231
Cash and cash equivalents		3,968			949			14			27			26
Investment securities	Investment securities	815			800			808			750			763			Investment securities	881			845			815			800			808
Total interest and dividend income	Total interest and dividend income	69,412			64,222			62,466			63,768			61,872			Total interest and dividend income	91,340			83,440			69,412			64,222			62,466

Interest expense:	Interest expense:																Interest expense:
Borrowings	Borrowings	11,644			8,732			7,585			7,889			7,826			Borrowings	33,608			24,529			11,644			8,732			7,585
Deposits	Deposits	7,787			8,389			9,267			10,335			11,475			Deposits	11,904			9,013			7,787			8,389			9,267

Total interest expense	Total interest expense	19,431			17,121			16,852			18,224			19,301			Total interest expense	45,512			33,542			19,431			17,121			16,852

Net interest income	Net interest income	49,981			47,101			45,614			45,544			42,571			Net interest income	45,828			49,898			49,981			47,101			45,614

Provision for credit losses	Provision for credit losses	937			(3,188)			(3,439)			(1,323)			(2,691)			Provision for credit losses	3,660			1,060			937			(3,188)			(3,439)

Net interest income	Net interest income																Net interest income
(after provision for credit losses)	(after provision for credit losses)	49,044			50,289			49,053			46,867			45,262			(after provision for credit losses)	42,168			48,838			49,044			50,289			49,053

Non-interest income	Non-interest income	6,115			5,416			5,506			5,303			5,236			Non-interest income	5,352			5,793			6,115			5,416			5,506
Non-interest expense	Non-interest expense	28,390			27,960			26,694			28,247			27,602			Non-interest expense	27,773			29,807			28,390			27,960			26,694
Income tax expense	Income tax expense	5,617			6,122			5,679			5,370			4,709			Income tax expense	3,507			5,332			5,617			6,122			5,679
Net income	Net income	$	21,152		$	21,623		$	22,186		$	18,553		$	18,187		Net income	$	16,240		$	19,492		$	21,152		$	21,623		$	22,186

Efficiency ratio	Efficiency ratio	50.61		%	53.24		%	52.22		%	55.55		%	57.73		%	Efficiency ratio	54.27		%	53.52		%	50.61		%	53.24		%	52.22		%

Basic EPS	Basic EPS	$	0.16		$	0.16		$	0.16		$	0.14		$	0.13		Basic EPS	$	0.12		$	0.14		$	0.16		$	0.16		$	0.16
Diluted EPS	Diluted EPS	0.16			0.16			0.16			0.14			0.13			Diluted EPS	0.12			0.14			0.16			0.16			0.16

~~Comparison of Operating Results for the Three Months Ended June 30, 2022 and March 31, 2022~~

For the quarter ended June 30, 2022, the Company recognized net income of $21.2 million, or $0.16 per share, compared to net income of $21.6 million, or $0.16 per share, for the quarter ended March 31, 2022. The decrease in net income was due primarily to a higher provision for credit losses, partially offset by an increase in net interest income and lower income tax expense. The net interest margin increased 10 basis points, from 1.69% for the prior quarter to 1.79% for the current quarter. When the leverage strategy discussed below 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. Excluding the effects of the leverage strategy, the net interest margin would have increased 10 basis points, from 2.01% for the prior quarter to 2.11% for the current quarter. The increase in the net interest margin excluding the effects of the leverage strategy was due mainly to an increase in asset yields and a change in the mix of interest-earning assets, as cash was used to fund loan growth.

At times, the Bank has utilized a leverage strategy to increase earnings. The leverage strategy during the current quarter involved borrowing up to $2.10 billion by entering into short-term FHLB advances. The borrowings were repaid prior to quarter end. The proceeds from the borrowings, net of the required FHLB stock holdings which yielded 6.5% during the current quarter, were deposited at the FRB of Kansas City. Net income attributable to the leverage strategy is largely derived from the dividends received on FHLB stock holdings, plus the net interest rate spread between the yield on the cash deposited at the FRB of Kansas City and the rate paid on the related FHLB borrowings, less applicable federal insurance premiums and estimated taxes. Net income attributable to the leverage strategy was $1.2 million during the current quarter and $1.8 million during the current year-to-date period. Management continues to monitor the net interest rate spread and overall profitability of the strategy. In July 2022, the Bank increased the level of borrowings associated with the leverage strategy to $2.60 billion to further increase earnings in response to the increase in the dividend rate paid by FHLB. It is expected that the strategy will continue to be utilized as long as it remains profitable.

~~Interest and Dividend Income~~

The following table presents the components of interest and dividend income for the time periods presented, along with the change measured in dollars and percent. The weighted average yield on loans receivable increased four basis points and the weighted average yield on MBS increased eight basis points compared to the prior quarter.

For the Three Months Ended
June 30, March 31, Change Expressed in:
2022 2022 Dollars Percent
(Dollars in thousands)
INTEREST AND DIVIDEND INCOME:
Loans receivable $ 56,886 $ 55,412 $ 1,474 2.7 %
MBS 5,048 4,821 227 4.7
FHLB stock 2,695 2,240 455 20.3
Cash and cash equivalents 3,968 949 3,019 318.1
Investment securities 815 800 15 1.9
Total interest and dividend income $ 69,412 $ 64,222 $ 5,190 8.1

The increase in interest income on loans receivable was due primarily to a decrease in correspondent loan premium amortization related to a reduction in payoff activity, as well as growth in the correspondent loan portfolio. The increase in interest income on MBS was due mainly to a decrease in premium amortization related to a slowdown in prepayment activity. The increase in dividend income on FHLB stock was due mainly to an increase in the dividend rate paid by FHLB. The increase in interest income on cash and cash equivalents was due to an increase in the yield earned on balances held at the FRB of Kansas City, the majority of which were related to the leverage strategy, due to an increase in market interest rates.

~~Interest Expense~~

The following table presents the components of interest expense for the time periods presented, along with the change measured in dollars and percent. The weighted average rate paid on deposits and the weighted average rate paid on borrowings not associated with the leverage strategy each decreased three basis points compared to the prior quarter.

For the Three Months Ended
June 30, March 31, Change Expressed in:
2022 2022 Dollars Percent
(Dollars in thousands)
INTEREST EXPENSE:
Borrowings $ 11,644 $ 8,732 $ 2,912 33.3 %
Deposits 7,787 8,389 (602) (7.2)
Total interest expense $ 19,431 $ 17,121 $ 2,310 13.5

The increase in interest expense on borrowings was due primarily to an increase in the rate paid on the short-term borrowings associated with the leverage strategy during the current quarter, due to higher market interest rates. Additionally, the average balance of borrowings not associated with the leverage strategy increased compared to the prior quarter due to new borrowings added near the end of the quarter, totaling $250.0 million at a weighted average rate of 3.51%, which contributed to the increase in interest expense. The decrease in interest expense on deposits was due primarily to a decrease in the weighted average rate paid on retail certificates of deposit and a decrease in the average balance of the portfolio, as maturing accounts either were not renewed or were replaced at offered rates, which were lower than the existing portfolio.

~~Provision for Credit Losses~~

For the quarter ended June 30, 2022, the Bank recorded a provision for credit losses of $937 thousand, compared to a negative provision for credit losses of $3.2 million for the prior quarter. The provision for credit losses in the current quarter was comprised of a $796 thousand increase in the ACL for loans and a $141 thousand increase in reserves for off-balance sheet credit exposures. The provision for credit losses was due primarily to selecting a weighted economic forecast to incorporate a recessionary outlook into the model, as well as commercial loan growth.

~~Non-Interest Income~~

~~The following table presents the components of non-interest income for the time periods presented, along with the change measured in dollars and percent.~~

For the Three Months Ended
June 30, March 31, Change Expressed in:
2022 2022 Dollars Percent
(Dollars in thousands)
NON-INTEREST INCOME:
Deposit service fees $ 3,601 $ 3,300 $ 301 9.1 %
Insurance commissions 788 543 245 45.1
Other non-interest income 1,726 1,573 153 9.7
Total non-interest income $ 6,115 $ 5,416 $ 699 12.9

The increase in deposit service fees was due mainly to increases in debit card income and service charges as a result of higher transaction activity. The increase in insurance commissions was due primarily to the receipt of annual contingent insurance commissions in the prior quarter, which were lower than expected, and the related accrual adjustments. The increase in other non-interest income was due mainly to an increase in income on BOLI related to the receipt of death benefits.

~~Non-Interest Expense~~

~~The following table presents the components of non-interest expense for the time periods presented, along with the change measured in dollars and percent.~~

For the Three Months Ended
June 30, March 31, Change Expressed in:
2022 2022 Dollars Percent
(Dollars in thousands)
NON-INTEREST EXPENSE:
Salaries and employee benefits $ 14,581 $ 14,023 $ 558 4.0 %
Information technology and related expense 4,343 4,493 (150) (3.3)
Occupancy, net 3,721 3,493 228 6.5
Regulatory and outside services 1,572 1,272 300 23.6
Advertising and promotional 1,068 1,494 (426) (28.5)
Federal insurance premium 784 777 7 0.9
Deposit and loan transaction costs 664 689 (25) (3.6)
Office supplies and related expense 494 502 (8) (1.6)
Other non-interest expense 1,163 1,217 (54) (4.4)
Total non-interest expense $ 28,390 $ 27,960 $ 430 1.5

The increase in salaries and employee benefits was due mainly to an increase in commissions due to an increase in loan origination activity, along with annual merit increases during the current quarter. The increase in regulatory and outside services was due primarily to the timing of external audit expenses, as well as an increase in consulting expenses related to the Bank's upcoming implementation of a new core processing system. The decrease in advertising and promotional expense was due primarily to the timing of campaigns and sponsorships.

The Company's efficiency ratio was 50.61% for the current quarter compared to 53.24% for the prior quarter. The improvement in the efficiency ratio was due primarily to higher net interest income. The efficiency ratio is a measure of a financial institution's total non-interest expense as a percentage of the sum of net interest income (pre-provision for credit losses) and non-interest income. A lower value indicates that it is costing the financial institution less money to generate revenue, relative to the net interest margin and non-interest income.

~~Income Tax Expense~~

~~The following table presents pretax income, income tax expense, and net income for the time periods presented, along with the change measured in dollars and percent and the effective tax rate.~~

For the Three Months Ended
June 30, March 31, Change Expressed in:
2022 2022 Dollars Percent
(Dollars in thousands)
Income before income tax expense $ 26,769 $ 27,745 $ (976) (3.5) %
Income tax expense 5,617 6,122 (505) (8.2)
Net income $ 21,152 $ 21,623 $ (471) (2.2)
Effective Tax Rate 21.0 % 22.1 %

The decrease in income tax expense was due primarily to lower pretax income in the current quarter, along with a decrease in the effective tax rate as a result of higher deductible expenses associated with dividends paid on allocated ESOP shares due to the True Blue Capitol dividend paid in June 2022. Management anticipates the effective tax rate for fiscal year 2022 will be approximately 21%.

~~Average Balance Sheet~~

The following table presents the average balances of our assets, liabilities, and stockholders' equity, and the related annualized weighted average yields and rates on our interest-earning assets and interest-bearing liabilities for the periods indicated, as well as selected performance ratios and other information for the periods shown. Weighted average yields are derived by dividing annualized income by the average balance of the related assets, and weighted average rates are derived by dividing annualized expense by the average balance of the related liabilities, for the periods shown. Average outstanding balances are derived from average daily balances. The weighted average yields and rates include amortization of fees, costs, premiums and discounts, which are considered adjustments to yields/rates. Weighted average yields on tax-exempt securities are not calculated on a fully taxable equivalent basis.

For the Three Months Ended
June 30, 2022 March 31, 2022
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 $ 3,982,602 $ 32,168 3.23 % $ 3,965,844 $ 31,993 3.23 %
Correspondent purchased 2,060,947 14,027 2.72 2,026,120 13,060 2.58
Bulk purchased 154,663 464 1.20 161,149 503 1.25
Total one- to four-family loans 6,198,212 46,659 3.01 6,153,113 45,556 2.96
Commercial loans 890,455 9,104 4.05 869,205 8,851 4.07
Consumer loans 92,790 1,123 4.85 90,326 1,005 4.51
Total loans receivable(1)
7,181,457 56,886 3.16 7,112,644 55,412 3.12
MBS(2)
1,343,891 5,048 1.50 1,357,693 4,821 1.42
Investment securities(2)(3)
522,147 815 0.62 522,019 800 0.61
FHLB stock(4)
166,879 2,695 6.48 158,546 2,240 5.73
Cash and cash equivalents(5)
1,930,539 3,968 0.81 1,971,341 949 0.19
Total interest-earning assets 11,144,913 69,412 2.49 11,122,243 64,222 2.31
Other non-interest-earning assets 293,882 385,323
Total assets $ 11,438,795 $ 11,507,566
Liabilities and stockholders' equity:
Interest-bearing liabilities:
Checking $ 1,068,329 180 0.07 $ 1,069,282 176 0.07
Savings 556,553 74 0.05 540,348 71 0.05
Money market 1,861,302 952 0.21 1,879,799 876 0.19
Retail certificates 2,169,262 6,383 1.18 2,241,080 7,012 1.27
Commercial certificates 84,231 129 0.61 116,181 183 0.64
Wholesale certificates 113,101 69 0.24 197,335 71 0.15
Total deposits 5,852,778 7,787 0.53 6,044,025 8,389 0.56
Borrowings(6)
3,687,592 11,644 1.26 3,499,010 8,732 1.01
Total interest-bearing liabilities 9,540,370 19,431 0.81 9,543,035 17,121 0.73
Non-interest-bearing deposits 586,876 577,989
Other non-interest-bearing liabilities 147,938 177,995
Stockholders' equity 1,163,611 1,208,547
Total liabilities and stockholders' equity $ 11,438,795 $ 11,507,566
Net interest income(7)
$ 49,981 $ 47,101
Net interest-earning assets $ 1,604,543 $ 1,579,208
Net interest margin(8)(9)
1.79 1.69
Ratio of interest-earning assets to interest-bearing liabilities 1.17x 1.17x
Selected performance ratios:
Return on average assets (annualized)(9)
0.74 % 0.75 %
Return on average equity (annualized)(9)
7.27 7.16
Average equity to average assets 10.17 10.50
Operating expense ratio (annualized)(10)
0.99 0.97
Efficiency ratio(9)(11)
50.61 53.24
Pre-tax yield on leverage strategy(12)
0.31 0.14

~~(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 securities are adjusted for unamortized purchase premiums or discounts.~~

~~(3)~~The average balance of investment securities includes an average balance of nontaxable securities of $326 thousand and $2.0 million for the quarters ended June 30, 2022 and March 31, 2022, respectively.

~~(4)~~Included in this line, for the quarter ended June 30, 2022, is FHLB stock related to the leverage strategy with an average outstanding balance of $89.4 million and dividend income of $1.4 million at a weighted average yield of 6.48%, and FHLB stock not related to the leverage strategy with an average outstanding balance of $77.5 million and dividend income of $1.3 million at a weighted average yield of 6.48%. Included in this line for the quarter ended March 31, 2022 is FHLB stock related to the leverage strategy with an average outstanding balance of $86.2 million and dividend income of $1.2 million, at a weighted average yield of 5.75%, and FHLB stock not related to the leverage strategy with an average outstanding balance of $72.3 million and dividend income of $1.0 million, at a weighted average yield of 5.71%.

~~(5)~~The average balance of cash and cash equivalents includes an average balance of cash related to the leverage strategy of $1.89 billion and $1.83 billion during the quarters ended June 30, 2022 and March 31, 2022 respectively.

~~(6)~~Included in this line, for the quarter ended June 30, 2022, are FHLB borrowings related to the leverage strategy with an average outstanding balance of $1.99 billion and interest paid of $3.7 million, at a weighted average rate of 0.73%, and FHLB borrowings not related to the leverage strategy with an average outstanding balance of $1.70 billion and interest paid of $8.0 million, at a weighted average rate of 1.87%. Included in this line for the quarter ended March 31, 2022 are FHLB borrowings related to the leverage strategy with an average outstanding balance of $1.92 billion and interest paid of $1.3 million at a weighted average rate of 0.26%, and FHLB borrowings not related to the leverage strategy with an average outstanding balance of $1.58 billion and interest paid of $7.5 million at a weighted average rate of 1.90%. The FHLB advance amounts and rates included in this line include the effect of interest rate swaps and are net of deferred prepayment penalties.

~~(7)~~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.

~~(8)Net interest margin represents annualized net interest income as a percentage of average interest-earning assets.~~

~~(9)~~The table below provides a reconciliation between certain performance ratios presented in accordance with GAAP and the performance ratios excluding the effects of the leverage strategy, which are not presented in accordance with GAAP. Management believes it is important for comparability purposes to provide the performance ratios without the leverage strategy because of the unique nature of the leverage strategy. The leverage strategy reduces some of our performance ratios due to the amount of earnings associated with the transaction in comparison to the size of the transaction, while increasing our net income.

For the Three Months Ended
June 30, 2022 March 31, 2022
Actual Leverage Adjusted Actual Leverage Adjusted
(GAAP) Strategy (Non-GAAP) (GAAP) Strategy (Non-GAAP)
Yield on interest-earning assets 2.49 % (0.30) % 2.79 % 2.31 % (0.39) % 2.70 %
Cost of interest-bearing liabilities 0.81 (0.03) 0.84 0.73 (0.11) 0.84
Return on average assets (annualized) 0.74 (0.10) 0.84 0.75 (0.13) 0.88
Return on average equity (annualized) 7.27 0.42 6.85 7.16 0.18 6.98
Net interest margin 1.79 (0.32) 2.11 1.69 (0.32) 2.01
Efficiency Ratio 50.61 (1.31) 51.92 53.24 (0.58) 53.82

~~(10)The operating expense ratio represents annualized non-interest expense as a percentage of average assets.~~

~~(11)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.~~

~~(12)The pre-tax yield on the leverage strategy represents annualized pre-tax income resulting from the transaction as a percentage of the average interest-earning assets associated with the transaction.~~

~~Rate/Volume Analysis~~

The table below presents the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities, comparing the three months ended June 30, 2022 to the three months ended March 31, 2022. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (1) changes in volume, which are changes in the average balance multiplied by the previous year's average rate and (2) changes in rate, which are changes in the average rate multiplied by the average balance from the previous year period. The net changes attributable to the combined impact of both rate and volume have been allocated proportionately to the changes due to volume and the changes due to rate.

For the Three Months Ended
June 30, 2022 vs. March 31, 2022
Increase (Decrease) Due to
Volume Rate Total
(Dollars in thousands)
Interest-earning assets:
Loans receivable $ 631 $ 843 $ 1,474
MBS (49) 276 227
Investment securities — 15 15
FHLB stock 131 324 455
Cash and cash equivalents (20) 3,039 3,019
Total interest-earning assets 693 4,497 5,190
Interest-bearing liabilities:
Checking — 5 5
Savings 3 — 3
Money market (7) 83 76
Certificates of deposit (473) (213) (686)
Borrowings 644 2,268 2,912
Total interest-bearing liabilities 167 2,143 2,310
Net change in net interest income $ 526 $ 2,354 $ 2,880

~~Comparison of Operating Results for the Nine Months Ended June 30, 2022 and 2021~~

The Company recognized net income of $65.0 million, or $0.48 per share, for the current year period compared to net income of $57.5 million, or $0.42 per share, for the prior year period. The increase in net income was due to an increase in net interest income, partially offset by higher income tax expense and a lower negative provision for credit losses. The net interest margin decreased six basis points, from 1.88% for the prior year period to 1.82% for the current year period. Excluding the effects of the leverage strategy, the net interest margin would have increased 16 basis points, from 1.88% for the prior year period to 2.04% for the current year period. The increase in net interest margin excluding the effects of the leverage strategy was due mainly to a reduction in the weighted average cost of retail certificates of deposit and borrowings, which outpaced the decrease in weighted average asset yields.

~~Interest and Dividend Income~~

~~The following table presents the components of interest and dividend income for the time periods presented, along with the change measured in dollars and percent.~~

For the Nine Months Ended
June 30, Change Expressed in:
2022 2021 Dollars Percent
(Dollars in thousands)
INTEREST AND DIVIDEND INCOME:
Loans receivable $ 168,086 $ 172,758 $ (4,672) (2.7) %
MBS 14,494 16,499 (2,005) (12.2)
FHLB stock 6,166 2,964 3,202 108.0
Cash and cash equivalents 4,931 117 4,814 4,114.5
Investment securities 2,423 2,075 348 16.8
Total interest and dividend income $ 196,100 $ 194,413 $ 1,687 0.9

The decrease in interest income on loans receivable was due to a decrease in the weighted average rate on the originated and correspondent one- to four-family loan portfolio, partially offset by the increase in the average balance of the loan portfolio. The decrease in the weighted average rate was due to endorsements, refinances, originations and purchases at lower market rates at the time of the transactions between periods, which are being fully reflected in the current year. Premium amortization related to the one- to four-family correspondent loan portfolio decreased significantly compared to the prior year period due to the slow-down in prepayments and endorsements resulting from an increase in market interest rates, partially offsetting the decrease in the weighted average rate.

The decrease in interest income on the MBS portfolio was due primarily to a decrease in the weighted average yield as a result of purchases at lower market yields between periods, along with a decrease in the average balance of the portfolio.

The increase in dividend income on FHLB stock and the increase in interest income on cash and cash equivalents were due mainly to the leverage strategy being utilized during the current year period and not being utilized during the prior period.

~~The increase in interest income on investment securities was due primarily to an increase in the average balance of the portfolio.~~

~~Interest Expense~~

~~The following table presents the components of interest expense for the time periods presented, along with the change measured in dollars and percent.~~

For the Nine Months Ended
June 30, Change Expressed in:
2022 2021 Dollars Percent
(Dollars in thousands)
INTEREST EXPENSE:
Borrowings $ 27,961 $ 26,885 $ 1,076 4.0 %
Deposits 25,443 38,071 (12,628) (33.2)
Total interest expense $ 53,404 $ 64,956 $ (11,552) (17.8)

The increase in interest expense on borrowings was due to the leverage strategy being utilized during a portion of the current year period and not being utilized during the prior year period. Interest expense on borrowings associated with the leverage strategy totaled $4.9 million during the current year period. This was partially offset by a lower cost of FHLB borrowings not associated with the leverage strategy due primarily to terminating or not renewing certain interest rate swap agreements, not replacing certain maturing FHLB advances, and prepaying certain advances during fiscal year 2021.

The decrease in interest expense on deposits was due mainly to a decrease in the weighted average rate paid on retail certificates of deposit, along with a decrease in the average balance of the portfolio. Retail certificates of deposit repriced downward between periods as they were renewed or were replaced at lower offered rates, along with some certificates of deposit not renewing.

~~Provision for Credit Losses~~

The Bank recorded a negative provision for credit losses during the current year period of $5.7 million, compared to a negative provision for credit losses of $7.2 million during the prior year period. The negative provision in the current year period was comprised of a $3.8 million decrease in the ACL for loans and a $1.9 million decrease in reserves for off-balance sheet credit exposures. The negative provision for credit losses associated with the ACL in the current year period was due primarily to a reduction in commercial loan qualitative factors, partially offset by an increase in ACL related to loan growth during the current year period. The negative provision for credit losses associated with the reserve for off-balance sheet credit exposures in the current year period was also due primarily to a reduction in commercial loan qualitative factors.

~~Non-Interest Income~~

~~The following table presents the components of non-interest income for the time periods presented, along with the change measured in dollars and percent.~~

For the Nine Months Ended
June 30, Change Expressed in:
2022 2021 Dollars Percent
(Dollars in thousands)
NON-INTEREST INCOME:
Deposit service fees $ 10,331 $ 8,988 $ 1,343 14.9 %
Insurance commissions 2,042 2,249 (207) (9.2)
Gain on sale of Visa Class B shares — 7,386 (7,386) (100.0)
Other non-interest income 4,664 4,160 504 12.1
Total non-interest income $ 17,037 $ 22,783 $ (5,746) (25.2)

The increase in deposit service fees was due primarily to an increase in debit card income and service charges as a result of higher transaction and settlement volume, in addition to an increase in the average transaction amount. The decrease in insurance commissions was due primarily to the receipt of annual contingent insurance commissions, which were lower than expected, and the related accrual adjustments. During the prior year period, the Bank sold its Visa Class B shares, resulting in a $7.4 million gain, with no similar transaction during the current year period. The increase in other non-interest income was due primarily to a gain on a loan-related financial derivative agreement.

~~Non-Interest Expense~~

~~The following table presents the components of non-interest expense for the time periods presented, along with the change measured in dollars and percent.~~

For the Nine Months Ended
June 30, Change Expressed in:
2022 2021 Dollars Percent
(Dollars in thousands)
NON-INTEREST EXPENSE:
Salaries and employee benefits $ 42,332 $ 41,402 $ 930 2.2 %
Information technology and related expense 13,268 13,568 (300) (2.2)
Occupancy, net 10,593 10,406 187 1.8
Regulatory and outside services 4,212 4,288 (76) (1.8)
Advertising and promotional 3,626 3,729 (103) (2.8)
Federal insurance premium 2,200 1,888 312 16.5
Deposit and loan transaction costs 2,050 2,123 (73) (3.4)
Office supplies and related expense 1,464 1,289 175 13.6
Loss on interest rate swap termination — 4,752 (4,752) (100.0)
Other non-interest expense 3,299 3,877 (578) (14.9)
Total non-interest expense $ 83,044 $ 87,322 $ (4,278) (4.9)

The increase in salaries and employee benefits was due primarily to merit increases and an increase in incentive compensation, partially offset by a decrease in commissions due to a reduction in loan origination activity compared to the prior year period. The increase in federal insurance premium expense was due mainly to an increase in average assets as a result of the leverage strategy being utilized during the current year period. During the prior year period, the Bank terminated $200.0 million of interest rate swaps, resulting in a loss of $4.8 million which was reclassified out of AOCI to earnings. The decrease in other non-interest expense was due primarily to the write-down during the prior year period of a property that had previously served as one of the Bank's branch locations.

The Company's efficiency ratio was 51.99% for the current year period compared to 57.36% for the prior year period. The improvement in the efficiency ratio was due primarily to higher net interest income.

~~Income Tax Expense~~

~~The following table presents pretax income, income tax expense, and net income for the time periods presented, along with the change measured in dollars and percent and effective tax rate.~~

For the Nine Months Ended
June 30, Change Expressed in:
2022 2021 Dollars Percent
(Dollars in thousands)
Income before income tax expense $ 82,379 $ 72,105 $ 10,274 14.2 %
Income tax expense 17,418 14,576 2,842 19.5
Net income $ 64,961 $ 57,529 $ 7,432 12.9
Effective Tax Rate 21.1 % 20.2 %

The increase in income tax expense was due primarily to higher pretax income in the current year period. Additionally, the effective tax rate increased slightly compared to the prior year period, and is in line with management's anticipation of an effective tax rate of approximately 21% for fiscal year 2022.

Average Balance Sheet

For the Nine Months Ended
June 30, 2022 June 30, 2021
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 $ 3,973,184 $ 96,583 3.24 % $ 3,963,088 $ 104,482 3.52 %
Correspondent purchased 2,040,934 39,832 2.60 2,006,257 35,124 2.33
Bulk purchased 162,151 1,578 1.30 195,678 2,870 1.96
Total one- to four-family loans 6,176,269 137,993 2.98 6,165,023 142,476 3.08
Commercial loans 866,856 26,898 4.09 780,941 26,707 4.51
Consumer loans 91,979 3,195 4.64 103,241 3,575 4.63
Total loans receivable(1)
7,135,104 168,086 3.14 7,049,205 172,758 3.26
MBS(2)
1,379,334 14,494 1.40 1,424,914 16,499 1.54
Investment securities(2)(3)
522,706 2,423 0.62 476,755 2,075 0.58
FHLB stock(4)
132,657 6,166 6.21 78,784 2,964 5.03
Cash and cash equivalents(5)
1,305,949 4,931 0.50 152,792 117 0.10
Total interest-earning assets 10,475,750 196,100 2.49 9,182,450 194,413 2.82
Other non-interest-earning assets 362,229 443,370
Total assets $ 10,837,979 $ 9,625,820
Liabilities and stockholders' equity:
Interest-bearing liabilities:
Checking $ 1,063,280 535 0.07 $ 955,731 588 0.08
Savings 539,152 215 0.05 478,011 209 0.06
Money market 1,835,666 2,653 0.19 1,554,947 3,220 0.28
Retail certificates 2,236,551 21,230 1.27 2,530,969 31,824 1.68
Commercial certificates 123,398 584 0.63 195,066 1,208 0.83
Wholesale certificates 170,051 226 0.18 254,606 1,022 0.54
Total deposits 5,968,098 25,443 0.57 5,969,330 38,071 0.85
Borrowings(6)
2,918,291 27,961�� 1.27 1,654,544 26,885 2.16
Total interest-bearing liabilities 8,886,389 53,404 0.80 7,623,874 64,956 1.14
Non-interest-bearing deposits 571,685 499,737
Other non-interest-bearing liabilities 177,081 219,204
Stockholders' equity 1,202,824 1,283,005
Total liabilities and stockholders' equity $ 10,837,979 $ 9,625,820
Net interest income(7)
$ 142,696 $ 129,457
Net interest-earning assets $ 1,589,361 $ 1,558,576
Net interest margin(8)(9)
1.82 1.88
Ratio of interest-earning assets to interest-bearing liabilities 1.18x 1.20x
Selected performance ratios:
Return on average assets (annualized)(9)
0.80 % 0.80 %
Return on average equity (annualized)(9)
7.20 5.98
Average equity to average assets 11.10 13.33
Operating expense ratio (annualized)(10)
1.02 1.21
Efficiency ratio(9)(11)
51.99 57.36
Pre-tax yield on leverage strategy(12)
0.23 —


	For the Three Months Ended
	December 31, 2022						September 30, 2022						December 31, 2021
	Average		Interest				Average		Interest				Average		Interest
	Outstanding		Earned/		Yield/		Outstanding		Earned/		Yield/		Outstanding		Earned/		Yield/
	Amount		Paid		Rate		Amount		Paid		Rate		Amount		Paid		Rate
Assets:	(Dollars in thousands)
Interest-earning assets:
One- to four-family loans:
Originated	$	4,049,790	$	33,364	3.29	%	$	4,021,121	$	32,809	3.26	%	$	3,971,049	$	32,422	3.27	%
Correspondent purchased	2,305,362		17,261		2.99		2,166,869		15,394		2.84		2,035,631		12,746		2.50
Bulk purchased	147,091		434		1.18		150,253		475		1.26		170,537		610		1.43
Total one- to four-family loans	6,502,243		51,059		3.14		6,338,243		48,678		3.07		6,177,217		45,778		2.96
Commercial loans	1,025,402		11,993		4.58		935,374		10,326		4.32		841,217		8,943		4.16
Consumer loans	102,760		1,767		6.82		98,189		1,441		5.82		92,794		1,067		4.56
Total loans receivable(1)	7,630,405		64,819		3.38		7,371,806		60,445		3.27		7,111,228		55,788		3.13
MBS(2)	1,221,035		4,811		1.58		1,279,143		4,912		1.54		1,435,562		4,625		1.29
Investment securities(2)(3)	525,081		881		0.67		524,546		845		0.64		523,931		808		0.62
FHLB stock(4)	197,577		4,158		8.35		198,431		3,865		7.73		73,481		1,231		6.64
Cash and cash equivalents(5)	1,801,493		16,671		3.62		2,322,891		13,373		2.25		37,221		14		0.15
Total interest-earning assets	11,375,591		91,340		3.19		11,696,817		83,440		2.83		9,181,423		62,466		2.71
Other non-interest-earning assets	248,022						288,496						412,115
Total assets	$	11,623,613					$	11,985,313					$	9,593,538

Liabilities and stockholders' equity:
Interest-bearing liabilities:
Checking	$	1,007,569	289		0.11		$	1,035,600	217		0.08		$	1,052,413	179		0.07
Savings	545,885		100		0.07		556,836		84		0.06		520,770		70		0.05
Money market	1,759,804		3,035		0.68		1,856,424		1,925		0.41		1,767,134		825		0.19
Retail certificates	2,064,929		7,767		1.49		2,105,237		6,434		1.21		2,298,678		7,835		1.35
Commercial certificates	34,298		104		1.20		45,901		82		0.71		169,200		272		0.64
Wholesale certificates	97,828		609		2.47		93,232		271		1.15		199,692		86		0.17
Total deposits	5,510,313		11,904		0.86		5,693,230		9,013		0.63		6,007,887		9,267		0.61
Borrowings(6)	4,260,685		33,608		3.10		4,386,450		24,529		2.20		1,589,258		7,585		1.88
Total interest-bearing liabilities	9,770,998		45,512		1.84		10,079,680		33,542		1.31		7,597,145		16,852		0.88
Non-interest-bearing deposits	576,519						580,687						550,492
Other non-interest-bearing liabilities	191,474						184,137						209,890
Stockholders' equity	1,084,622						1,140,809						1,236,011
Total liabilities and stockholders' equity	$	11,623,613					$	11,985,313					$	9,593,538

Net interest income(7)			$	45,828					$	49,898					$	45,614
Net interest-earning assets	$	1,604,593					$	1,617,137					$	1,584,278
Net interest margin(8)(9)					1.61						1.71						1.99
Ratio of interest-earning assets to interest-bearing liabilities					1.16x						1.16x						1.21x

Selected performance ratios:
Return on average assets (annualized)(9)					0.56	%					0.65	%					0.93	%
Return on average equity (annualized)(9)					5.99						6.83						7.18
Average equity to average assets					9.33						9.52						12.88
Operating expense ratio (annualized)(10)					0.96						0.99						1.11
Efficiency ratio(9)(11)					54.27						53.52						52.22
Pre-tax yield on leverage strategy(12)					0.20						0.28						—

5544

(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 securities are adjusted for unamortized purchase premiums or discounts.

(3)The average balance of investment securities includes an average balance of nontaxable securities of ~~$2.1~~$1.1 million, $569 thousand, and ~~$7.2~~$4.0 million for the ~~nine~~three months ended ~~June~~December 31, 2022, September 30, 2022, and ~~June 30,~~December 31, 2021, respectively.

(4)Included in this line, for the ~~nine~~three months ended ~~June~~December 31, 2022 and September 30, 2022 respectively, is FHLB stock related to the leverage strategy with an average outstanding balance ~~$58.2~~$84.3 million and $108.8 million, and dividend income of ~~$2.7~~$1.8 million and $2.1 million at a weighted average yield of ~~6.12%,~~8.49% and 7.75% and FHLB stock not related to the leverage strategy with an average outstanding balance of ~~$74.5~~$113.3 million and $89.6 million and dividend income of ~~$3.5~~$2.4 million and $1.7 million at a weighted average yield of ~~6.29%~~8.24% and 7.70%. There was no FHLB stock related to the leverage strategy during the ~~nine~~three months ended ~~June 30,~~December 31, 2021.

(5)The average balance of cash and cash equivalents includes an average balance of cash related to the leverage strategy of ~~$1.23~~$1.79 billion and $2.31 billion during the ~~nine~~three months ended ~~June~~December 31, 2022 and September 30, ~~2022.~~2022, respectively. There were no cash and cash equivalents related to the leverage strategy during the ~~nine~~three months ended ~~June 30,~~December 31, 2021.

(6)Included in this line, for the ~~nine~~three months ended ~~June~~December 31, 2022 and September 30, 2022 respectively, are FHLB borrowings related to the leverage strategy with an average outstanding balance of ~~$1.30~~$1.87 billion and $2.42 billion, with interest paid of ~~$4.9~~$17.3 million and $13.5 million, at a weighted average rate of ~~0.50%~~3.61% and 2.19%, and FHLB borrowings not related to the leverage strategy with an average outstanding balance of ~~$1.62~~$2.39 billion and $1.97 billion and interest paid of ~~$23.0~~$16.3 million and $11.0 million, at a weighted average rate of ~~1.89%~~2.70% and 2.20%. There were no FHLB borrowings related to the leverage strategy during the ~~nine~~three months ended ~~June 30,~~December 31, 2021. The FHLB advance amounts and rates included in this line item include the effect of interest rate swaps and are net of deferred prepayment penalties.

(7)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.

(8)Net interest margin represents annualized net interest income as a percentage of average interest-earning assets.

(9)The table below provides a reconciliation between certain performance ratios presented in accordance with GAAP and the performance ratios excluding the effects of the leverage strategy, which are not presented in accordance with GAAP. Management believes it is important for comparability purposes to provide the performance ratios without the leverage strategy because of the unique nature of the leverage strategy. The leverage strategy reduces some of our performance ratios due to the amount of earnings associated with the transaction in comparison to the size of the transaction, while increasing our net income.


		For the Nine Months Ended													For the Three Months Ended
		June 30, 2022						June 30, 2021							December 31, 2022						September 30, 2022						December 31, 2021
		Actual		Leverage		Adjusted		Actual		Leverage		Adjusted			Actual		Leverage		Adjusted		Actual		Leverage		Adjusted		Actual		Leverage		Adjusted
		(GAAP)		Strategy		(Non-GAAP)		(GAAP)		Strategy		(Non-GAAP)			(GAAP)		Strategy		(Non-GAAP)		(GAAP)		Strategy		(Non-GAAP)		(GAAP)		Strategy		(Non-GAAP)
Yield on interest-earning assets	Yield on interest-earning assets	2.49	%	(0.25)	%	2.74	%	2.82	%	—	%	2.82	%	Yield on interest-earning assets	3.19	%	0.13	%	3.06	%	2.83	%	(0.09)	%	2.92	%	2.71	%	—	%	2.71	%
Cost of interest-bearing liabilities	Cost of interest-bearing liabilities	0.80		(0.05)		0.85		1.14		—		1.14		Cost of interest-bearing liabilities	1.84		0.42		1.42		1.31		0.28		1.03		0.88		—		0.88
Return on average assets (annualized)	Return on average assets (annualized)	0.80		(0.08)		0.88		0.80		—		0.80		Return on average assets (annualized)	0.56		(0.07)		0.63		0.65		(0.11)		0.76		0.93		—		0.93
Return on average equity (annualized)	Return on average equity (annualized)	7.20		0.20		7.00		5.98		—		5.98		Return on average equity (annualized)	5.99		0.28		5.71		6.83		0.46		6.37		7.18		—		7.18
Net interest margin	Net interest margin	1.82		(0.22)		2.04		1.88		—		1.88		Net interest margin	1.61		(0.27)		1.88		1.71		(0.36)		2.07		1.99		—		1.99
Efficiency Ratio	Efficiency Ratio	51.99		(0.65)		52.64		57.36		—		57.36		Efficiency Ratio	54.27		(0.87)		55.14		53.52		(1.53)		55.05		52.22		—		52.22

(10)The operating expense ratio represents annualized non-interest expense as a percentage of average assets.

(11)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.

(12)The pre-tax yield on the leverage strategy represents annualized pre-tax income resulting from the transaction as a percentage of the average interest-earning assets associated with the transaction.

5645

Rate/Volume Analysis

The table below presents the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities, comparing the periods indicated. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (1) changes in volume, which are changes in the average balance multiplied by the previous period's average rate, and (2) changes in rate, which are changes in the average rate multiplied by the average balance from the previous period. The net changes attributable to the combined impact of both rate and volume have been allocated proportionately to the changes due to volume and the changes due to rate.

For the Nine Months Ended
June 30, 2022 vs. June 30, 2021
Increase (Decrease) Due to
Volume(1)
Rate Total
(Dollars in thousands)
Interest-earning assets:
Loans receivable $ 2,731 $ (7,403) $ (4,672)
MBS (515) (1,490) (2,005)
Investment securities 207 141 348
FHLB stock 2,382 820 3,202
Cash and cash equivalents 3,167 1,647 4,814
Total interest-earning assets 7,972 (6,285) 1,687
Interest-bearing liabilities:
Checking 62 (114) (52)
Savings 25 (19) 6
Money market 516 (1,083) (567)
Certificates of deposit (4,673) (7,342) (12,015)
Borrowings 4,418 (3,342) 1,076
Total interest-bearing liabilities 348 (11,900) (11,552)
Net change in net interest income $ 7,624 $ 5,615 $ 13,239

~~(1)~~The increases attributable to changes in volume related to FHLB stock, cash and cash equivalents, and borrowings were due primarily to the leverage strategy being utilized during the current year period and not being utilized during the prior year period.

~~Comparison of Operating Results for the Three Months Ended June 30, 2022 and 2021~~

For the quarter ended June 30, 2022, the Company recognized net income of $21.2 million, or $0.16 per share, compared to net income of $18.2 million, or $0.13 per share for the quarter ended June 30, 2021. The increase in net income was due primarily to an increase in net interest income, partially offset by a higher provision for credit losses and higher income tax expense. The net interest margin decreased five basis points, from 1.84% for the prior year quarter to 1.79% for the current quarter. Excluding the effects of the leverage strategy, the net interest margin would have increased 27 basis points, from 1.84% for the prior year quarter to 2.11% for the current quarter. The increase in the net interest margin excluding the effects of the leverage strategy was due mainly to a decrease in the weighted average cost of retail certificates of deposit, a change in the mix of interest-earning assets as cash was used to fund loan growth, and higher asset yields.

~~Interest and Dividend Income~~

~~The following table presents the components of interest and dividend income for the time periods presented along with the change measured in dollars and percent.~~

For the Three Months Ended
June 30, Change Expressed in:
2022 2021 Dollars Percent
(Dollars in thousands)
INTEREST AND DIVIDEND INCOME:
Loans receivable $ 56,886 $ 54,779 $ 2,107 3.8 %
MBS 5,048 5,360 (312) (5.8)
FHLB stock 2,695 944 1,751 185.5
Cash and cash equivalents 3,968 26 3,942 15,161.5
Investment securities 815 763 52 6.8
Total interest and dividend income $ 69,412 $ 61,872 $ 7,540 12.2

The increase in interest income on loans receivable was due primarily to an increase in the average balance of the loan portfolio related to commercial loan growth, which has a greater impact on interest income than other loan types due to higher yields, along with growth in the one- to four-family correspondent loan portfolio. Additionally, premium amortization related to the one- to four-family correspondent loan portfolio decreased significantly compared to the prior year quarter due to the slow-down in prepayments and endorsements, which contributed to the increase in interest income on loans receivable.

The decrease in interest income on MBS was due to a decrease in the average balance of the portfolio, partially offset by a decrease in premium amortization related to a slowdown in prepayment activity.

The increase in dividend income on FHLB stock and the increase in income on cash and cash equivalents were due mainly to the leverage strategy being utilized during the current quarter and not being utilized during the prior year quarter.

~~Interest Expense~~

~~The following table presents the components of interest expense for the periods presented, along with the change measured in dollars and percent.~~

For the Three Months Ended
June 30, Change Expressed in:
2022 2021 Dollars Percent
(Dollars in thousands)
INTEREST EXPENSE:
Borrowings $ 11,644 $ 7,826 $ 3,818 48.8 %
Deposits 7,787 11,475 (3,688) (32.1)
Total interest expense $ 19,431 $ 19,301 $ 130 0.7

The increase in interest expense on borrowings was due mainly to the leverage strategy being utilized during the current quarter and not being utilized during the prior year quarter. The decrease in interest expense on deposits was due primarily to a decrease in the average balance and the weighted average rate of the retail certificate of deposit portfolio.

~~Provision for Credit Losses~~

The Bank recorded a provision for credit losses during the current quarter of $937 thousand, compared to a negative provision for credit losses of $2.7 million during the prior year quarter. See "Comparison of Operating Results for the Three Months Ended June 30, 2022 and March 31, 2022" above for additional discussion regarding the provision for credit losses during the current quarter.

~~Non-Interest Income~~

~~The following table presents the components of non-interest income for the time periods presented, along with the change measured in dollars and percent.~~

For the Three Months Ended
June 30, Change Expressed in:
2022 2021 Dollars Percent
(Dollars in thousands)
NON-INTEREST INCOME:
Deposit service fees $ 3,601 $ 3,227 $ 374 11.6 %
Insurance commissions 788 723 65 9.0
Other non-interest income 1,726 1,286 440 34.2
Total non-interest income $ 6,115 $ 5,236 $ 879 16.8

The increase in deposit service fees was due primarily to an increase in debit card income and service charges as a result of higher transaction and settlement volume, in addition to an increase in the average transaction amount. The increase in other non-interest income was due mainly to an increase in income on BOLI related to the receipt of death benefits.

~~Non-Interest Expense~~

~~The following table presents the components of non-interest expense for the time periods presented, along with the change measured in dollars and percent.~~

For the Three Months Ended
June 30, Change Expressed in:
2022 2021 Dollars Percent
(Dollars in thousands)
NON-INTEREST EXPENSE:
Salaries and employee benefits $ 14,581 $ 13,867 $ 714 5.1 %
Information technology and related expense 4,343 4,736 (393) (8.3)
Occupancy, net 3,721 3,504 217 6.2
Regulatory and outside services 1,572 1,469 103 7.0
Advertising and promotional 1,068 1,407 (339) (24.1)
Federal insurance premium 784 633 151 23.9
Deposit and loan transaction costs 664 693 (29) (4.2)
Office supplies and related expense 494 402 92 22.9
Other non-interest expense 1,163 891 272 30.5
Total non-interest expense $ 28,390 $ 27,602 $ 788 2.9

The increase in salaries and employee benefits was due primarily to an increase in incentive compensation and annual merit increases during the current quarter. The decrease in information technology and related expense was due mainly to a decrease in professional services and software maintenance. The decrease in advertising and promotional expense was due primarily to the timing of campaigns and sponsorships. The increase in other non-interest expense was due mainly to the prior year quarter including a partial reversal of a write-down of a property that previously served as one of the Bank's branch locations, due to receiving updated pricing information for the property.

The Company's efficiency ratio was 50.61% for the current quarter compared to 57.73% for the prior year quarter. The improvement in the efficiency ratio was due primarily to higher net interest income in the current quarter.

~~Income Tax Expense~~

~~The following table presents pretax income, income tax expense, and net income for the time periods presented, along with the change measured in dollars and percent and the effective tax rate.~~

For the Three Months Ended
June 30, Change Expressed in:
2022 2021 Dollars Percent
(Dollars in thousands)
Income before income tax expense $ 26,769 $ 22,896 $ 3,873 16.9 %
Income tax expense 5,617 4,709 908 19.3
Net income $ 21,152 $ 18,187 $ 2,965 16.3
Effective Tax Rate 21.0 % 20.6 %

~~The increase in income tax expense was due primarily to higher pretax income in the current quarter.~~

~~Average Balance Sheet~~

For the Three Months Ended
June 30, 2022 June 30, 2021
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 $ 3,982,602 $ 32,168 3.23 % $ 3,982,990 $ 33,727 3.39 %
Correspondent purchased 2,060,947 14,027 2.72 1,971,209 10,367 2.10
Bulk purchased 154,663 464 1.20 185,198 826 1.78
Total one- to four-family loans 6,198,212 46,659 3.01 6,139,397 44,920 2.93
Commercial loans 890,455 9,104 4.05 805,721 8,744 4.29
Consumer loans 92,790 1,123 4.85 96,980 1,115 4.61
Total loans receivable(1)
7,181,457 56,886 3.16 7,042,098 54,779 3.11
MBS(2)
1,343,891 5,048 1.50 1,529,679 5,360 1.40
Investment securities(2)(3)
522,147 815 0.62 533,076 763 0.57
FHLB stock(4)
166,879 2,695 6.48 73,689 944 5.14
Cash and cash equivalents(5)
1,930,539 3,968 0.81 97,890 26 0.11
Total interest-earning assets 11,144,913 69,412 2.49 9,276,432 61,872 2.66
Other non-interest-earning assets 293,882 430,639
Total assets $ 11,438,795 $ 9,707,071
Liabilities and stockholders' equity:
Interest-bearing liabilities:
Checking $ 1,068,329 180 0.07 $ 1,007,242 182 0.07
Savings 556,553 74 0.05 513,528 72 0.06
Money market 1,861,302 952 0.21 1,646,970 998 0.24
Retail certificates 2,169,262 6,383 1.18 2,462,543 9,531 1.55
Commercial certificates 84,231 129 0.61 216,371 407 0.75
Wholesale certificates 113,101 69 0.24 251,571 285 0.45
Total deposits 5,852,778 7,787 0.53 6,098,225 11,475 0.75
Borrowings(6)
3,687,592 11,644 1.26 1,582,905 7,826 1.97
Total interest-bearing liabilities 9,540,370 19,431 0.81 7,681,130 19,301 1.01
Non-interest-bearing deposits 586,876 539,423
Other non-interest-bearing liabilities 147,938 203,532
Stockholders' equity 1,163,611 1,282,986
Total liabilities and stockholders' equity $ 11,438,795 $ 9,707,071
Net interest income(7)
$ 49,981 $ 42,571
Net interest-earning assets $ 1,604,543 $ 1,595,302
Net interest margin(8)(9)
1.79 1.84
Ratio of interest-earning assets to interest-bearing liabilities 1.17x 1.21x
Selected performance ratios:
Return on average assets (annualized)(9)
0.74 % 0.75 %
Return on average equity (annualized)(9)
7.27 5.67
Average equity to average assets 10.17 13.22
Operating expense ratio (annualized)(10)
0.99 1.14
Efficiency ratio(9)(11)
50.61 57.73
Pre-tax yield on leverage strategy(12)
0.31 —

~~(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 securities are adjusted for unamortized purchase premiums or discounts.~~

~~(3)~~The average balance of investment securities includes an average balance of nontaxable securities of $326 thousand and $5.1 million for the three months ended June 30, 2022 and June 30, 2021, respectively.

~~(4)~~Included in this line, for the three months ended June 30, 2022, is FHLB stock related to the leverage strategy with an average outstanding balance of $89.4 million and dividend income of $1.4 million at a weighted average yield of 6.48%, and FHLB stock not related to the leverage strategy with an average outstanding balance of $77.5 million and dividend income of $1.3 million at a weighted average yield of 6.48%. There was no FHLB stock related to the leverage strategy during the three months ended June 30, 2021.

~~(5)~~The average balance of cash and cash equivalents includes an average balance of cash related to the leverage strategy of $1.89 billion during the three months ended June 30, 2022. There were no cash and cash equivalents related to the leverage strategy during the three months ended June 30, 2021.

~~(6)~~Included in this line, for the three months ended June 30, 2022, are FHLB borrowings related to the leverage strategy with an average outstanding balance of $1.99 billion and interest paid of $3.7 million, at a weighted average rate of 0.73%, and FHLB borrowings not related to the leverage strategy with an average outstanding balance of $1.70 billion and interest paid of $8.0 million, at a weighted average rate of 1.87%. There were no FHLB borrowings related to the leverage strategy during the three months ended June 30, 2021. The FHLB advance amounts and rates included in this line include the effect of interest rate swaps and are net of deferred prepayment penalties.

~~(8)Net interest margin represents annualized net interest income as a percentage of average interest-earning assets.~~

For the Three Months Ended
June 30, 2022 June 30, 2021
Actual Leverage Adjusted Actual Leverage Adjusted
(GAAP) Strategy (Non-GAAP) (GAAP) Strategy (Non-GAAP)
Yield on interest-earning assets 2.49 % (0.30) % 2.79 % 2.66 % — % 2.66 %
Cost of interest-bearing liabilities 0.81 (0.03) 0.84 1.01 — 1.01
Return on average assets (annualized) 0.74 (0.10) 0.84 0.75 — 0.75
Return on average equity (annualized) 7.27 0.42 6.85 5.67 — 5.67
Net interest margin 1.79 (0.32) 2.11 1.84 — 1.84
Efficiency Ratio 50.61 (1.31) 51.92 57.73 — 57.73

~~(10)The operating expense ratio represents annualized non-interest expense as a percentage of average assets.~~

~~(11)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.~~

~~Rate/Volume Analysis~~

The table below presents the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities, comparing the three months ended June 30, 2022 to the three months ended June 30, 2021. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (1) changes in volume, which are changes in the average balance multiplied by the previous year's average rate and (2) changes in rate, which are changes in the average rate multiplied by the average balance from the previous year period. The net changes attributable to the combined impact of both rate and volume have been allocated proportionately to the changes due to volume and the changes due to rate.


		For the Three Months Ended June 30,							For the Three Months Ended
		2022 vs. 2021							December 31, 2022 vs. September 30, 2022						December 31, 2022 vs. December 31, 2021
		Increase (Decrease) Due to							Increase (Decrease) Due to						Increase (Decrease) Due to
		Volume(1)		Rate		Total			Volume		Rate		Total		Volume(1)		Rate		Total
		(Dollars in thousands)							(Dollars in thousands)
Interest-earning assets:	Interest-earning assets:							Interest-earning assets:
Loans receivable	Loans receivable	$	1,276	$	831	$	2,107	Loans receivable	$	2,375	$	1,999	$	4,374	$	4,690	$	4,341	$	9,031
MBS	MBS	(680)		368		(312)		MBS	(226)		125		(101)		(753)		939		186
Investment securities	Investment securities	(16)		68		52		Investment securities	1		35		36		2		71		73
FHLB stock	FHLB stock	1,452		299		1,751		FHLB stock	(17)		310		293		2,541		386		2,927
Cash and cash equivalents	Cash and cash equivalents	2,909		1,033		3,942		Cash and cash equivalents	(3,494)		6,792		3,298		11,173		5,484		16,657
Total interest-earning assets	Total interest-earning assets	4,941		2,599		7,540		Total interest-earning assets	(1,361)		9,261		7,900		17,653		11,221		28,874

Interest-bearing liabilities:	Interest-bearing liabilities:							Interest-bearing liabilities:
Checking	Checking	11		(12)		(1)		Checking	(6)		78		72		(8)		118		110
Savings	Savings	6		(4)		2		Savings	(1)		17		16		4		26		30
Money market	Money market	121		(167)		(46)		Money market	(105)		1,214		1,109		(3)		2,212		2,209
Certificates of deposit	Certificates of deposit	(1,773)		(1,870)		(3,643)		Certificates of deposit	(145)		1,839		1,694		(1,596)		1,884		288
Borrowings	Borrowings	4,185		(367)		3,818		Borrowings	(978)		10,057		9,079		21,628		4,395		26,023

Total interest-bearing liabilities	Total interest-bearing liabilities	2,550		(2,420)		130		Total interest-bearing liabilities	(1,235)		13,205		11,970		20,025		8,635		28,660

Net change in net interest income	Net change in net interest income	$	2,391	$	5,019	$	7,410	Net change in net interest income	$	(126)	$	(3,944)	$	(4,070)	$	(2,372)	$	2,586	$	214

(1)The increases attributable to changes in volume related to FHLB stock, cash and cash equivalents, and borrowings were due primarily to the leverage strategy being utilized during the current quarter and not being utilized during the prior year quarter.

Comparison of Operating Results for the Three Months Ended December 31, 2022 and September 30, 2022

For the quarter ended December 31, 2022, the Company recognized net income of $16.2 million, or $0.12 per share, compared to net income of $19.5 million, or $0.14 per share, for the quarter ended September 30, 2022. The decrease in net income was due primarily to lower net interest income in the current quarter. The net interest margin decreased 10 basis points, from 1.71% for the prior quarter to 1.61% for the current quarter. Excluding the effects of the leverage strategy discussed below, the net interest margin decreased 19 basis points, from 2.07% for the prior quarter to 1.88% for the current quarter. The decrease in the net interest margin excluding the effects of the leverage strategy was due mainly to an increase in the cost of borrowings and deposits, partially offset by an increase in loan yields due to higher market interest rates. As discussed in the "Executive Summary" above, management anticipates net interest margin compression may continue in the near term.

At times, the Bank has utilized a leverage strategy to increase earnings. During the current quarter, the average outstanding balance of leverage strategy borrowings was $1.87 billion. The borrowings were repaid prior to quarter end. The proceeds from the borrowings, net of the required FHLB stock holdings, which yielded 8.50% during the current quarter, were deposited at the FRB of Kansas City. Net income attributable to the leverage strategy is largely derived from dividends received on FHLB stock holdings, plus the net interest rate spread between the yield on the cash deposited at the FRB of Kansas City and the rate paid on the related FHLB borrowings, less applicable federal insurance premiums and estimated taxes. 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. Net income attributable to the leverage strategy was $763 thousand during the current quarter, compared to $1.3 million for the prior quarter. The decrease was due to a reduction in the size of the leverage strategy transaction because the borrowing capacity was needed for operational liquidity purposes. Management continues to monitor the net interest rate spread and overall profitability of the strategy. It is expected that the strategy will continue to be utilized as long as it remains profitable and/or the borrowing capacity does not need to be used for other purposes.

Interest and Dividend Income

The following table presents the components of interest and dividend income for the time periods presented, along with the change measured in dollars and percent. The weighted average yield on loans receivable increased 11 basis points and the weighted average yield on MBS increased four basis points compared to the prior quarter.


	For the Three Months Ended
	December 31,		September 30,		Change Expressed in:
	2022		2022		Dollars		Percent
	(Dollars in thousands)
INTEREST AND DIVIDEND INCOME:
Loans receivable	$	64,819	$	60,445	$	4,374	7.2	%
Cash and cash equivalents	16,671		13,373		3,298		24.7
MBS	4,811		4,912		(101)		(2.1)
FHLB stock	4,158		3,865		293		7.6
Investment securities	881		845		36		4.3
Total interest and dividend income	$	91,340	$	83,440	$	7,900	9.5

The increase in interest income on loans receivable was due to growth in the loan portfolio, along with an increase in the weighted average yield. The loan growth was mainly in the correspondent one-to four-family and commercial loan portfolios. The increase in the weighted average yield was due primarily to originations and purchases at higher market yields, as well as disbursements on commercial construction loans at rates higher than the overall portfolio rate and upward repricing of existing adjustable-rate loans due to higher market interest rates. The increase in interest income on cash and cash equivalents was due to an increase in the yield earned on balances held at the FRB of Kansas City, the majority of which were related to the leverage strategy. The increase in dividend income on FHLB stock was due to an increase in the dividend rate paid by FHLB.

Interest Expense

The following table presents the components of interest expense for the time periods presented, along with the change measured in dollars and percent. The weighted average rate paid on deposits increased 23 basis points and the weighted average rate paid on borrowings not associated with the leverage strategy increased 50 basis points compared to the prior quarter.


	For the Three Months Ended
	December 31,		September 30,		Change Expressed in:
	2022		2022		Dollars		Percent
	(Dollars in thousands)
INTEREST EXPENSE:
Borrowings	$	33,608	$	24,529	$	9,079	37.0	%
Deposits	11,904		9,013		2,891		32.1
Total interest expense	$	45,512	$	33,542	$	11,970	35.7

The increase in interest expense on borrowings was due primarily to new borrowings added during the current quarter and near the end of the prior quarter, at market interest rates higher than the overall portfolio rate, to fund operational liquidity needs. See additional discussion in the "Financial Condition" section above. Additionally, interest expense on borrowings increased due to an increase in the rate paid on the short-term borrowings associated with the leverage strategy, due to higher market interest rates. The increase in interest expense on deposits was due primarily to an increase in the weighted average rate paid on certificates of deposit and money market accounts, partially offset by a decrease in the average balance of those deposit types.

Provision for Credit Losses

For the quarter ended December 31, 2022, the Bank recorded a provision for credit losses of $3.7 million, compared to a provision for credit losses of $1.1 million for the prior quarter. The provision for credit losses in the current quarter was comprised of a $2.8 million increase in the ACL for loans and an $840 thousand increase in reserves for off-balance sheet credit exposures. The provision for credit losses associated with both the ACL and reserves for off-balance sheet credit exposures was primarily a result of growth in the commercial loan portfolio and the balance of commercial construction off-balance sheet credit exposures, along with a slowdown in portfolio prepayment speeds, which reduced the projected prepayment speeds used in the model for generally all loan categories.

Non-Interest Income

The following table presents the components of non-interest income for the time periods presented, along with the change measured in dollars and percent.


	For the Three Months Ended
	December 31,		September 30,		Change Expressed in:
	2022		2022		Dollars		Percent
	(Dollars in thousands)
NON-INTEREST INCOME:
Deposit service fees	$	3,461	$	3,467	$	(6)	(0.2)	%
Insurance commissions	795		905		(110)		(12.2)



Other non-interest income	1,096		1,421		(325)		(22.9)
Total non-interest income	$	5,352	$	5,793	$	(441)	(7.6)

The decrease in other non-interest income was due mainly to the prior quarter including higher gains on a loan-related financial derivative agreement, which are generally driven by changes in market interest rates.

Non-Interest Expense

The following table presents the components of non-interest expense for the time periods presented, along with the change measured in dollars and percent.


	For the Three Months Ended
	December 31,		September 30,		Change Expressed in:
	2022		2022		Dollars		Percent
	(Dollars in thousands)
NON-INTEREST EXPENSE:
Salaries and employee benefits	$	13,698	$	14,268	$	(570)	(4.0)	%
Information technology and related expense	5,070		5,043		27		0.5
Occupancy, net	3,474		3,777		(303)		(8.0)
Regulatory and outside services	1,533		1,980		(447)		(22.6)
Advertising and promotional	833		1,552		(719)		(46.3)
Federal insurance premium	812		820		(8)		(1.0)
Office supplies and related expense	633		487		146		30.0
Deposit and loan transaction costs	611		747		(136)		(18.2)

Other non-interest expense	1,109		1,133		(24)		(2.1)
Total non-interest expense	$	27,773	$	29,807	$	(2,034)	(6.8)

The decrease in salaries and employee benefits was due mainly to a decrease in loan commissions, as well as one fewer working day in the current quarter compared to the prior quarter. The decrease in occupancy, net was due mainly to lower utility expenses and building maintenance expenses. The decrease in regulatory and outside services was due primarily to lower consulting expenses related to the Bank's ongoing digital transformation project as those third-party services are now directly related to the project and are included in information technology and related expenses. The decrease in advertising and promotional expense was due mainly to the timing of campaigns and sponsorships. The increase in office supplies and related expense was due primarily to the write-off of the Bank's remaining inventory of unissued non-contactless debit cards, which have now become obsolete. The decrease in deposit and loan transaction costs was mainly due to loan-related activities.

The Company's efficiency ratio was 54.27% for the current quarter compared to 53.52% for the prior quarter. The change in the efficiency ratio was due primarily to lower net interest income, partially offset by lower non-interest expense. The efficiency ratio is a measure of a financial institution's total non-interest expense as a percentage of the sum of net interest income (pre-provision for credit losses) and non-interest income. A higher value indicates that it is costing the financial institution more money to generate revenue, relative to the net interest margin and non-interest income.

Income Tax Expense

The following table presents pretax income, income tax expense, and net income for the time periods presented, along with the change measured in dollars and percent and the effective tax rate.


	For the Three Months Ended
	December 31,			September 30,			Change Expressed in:
	2022			2022			Dollars		Percent
	(Dollars in thousands)
Income before income tax expense	$	19,747		$	24,824		$	(5,077)	(20.5)	%
Income tax expense	3,507			5,332			(1,825)		(34.2)
Net income	$	16,240		$	19,492		$	(3,252)	(16.7)

Effective Tax Rate	17.8		%	21.5		%

The decrease in income tax expense was due primarily to lower pretax income in the current quarter, along with a decrease in the effective tax rate. The decrease in the effective tax rate was due primarily to lower projected pretax income in the current year, as the Company's permanent differences, which generally reduce our tax rate, have a larger impact on the overall effective rate.

Comparison of Operating Results for the Three Months Ended December 31, 2022 and 2021

The Company recognized net income of $16.2 million, or $0.12 per share, for the current quarter compared to net income of $22.2 million, or $0.16 per share, for the prior year quarter. The decrease in net income was due primarily to recording a provision for credit losses of $3.7 million for the current quarter compared to a $3.4 million release of provision for the prior year quarter, partially offset by lower income tax expense. The net interest margin decreased 38 basis points, from 1.99% for the prior year quarter to 1.61% for the current quarter. Excluding the effects of the leverage strategy, the net interest margin decreased 11 basis points, from 1.99% for the prior year quarter to 1.88% for the current quarter. The decrease in the net interest margin excluding the effects of the leverage strategy was due mainly to an increase in the cost of borrowings and deposits, partially offset by an increase in loan yields due to higher market interest rates and a shift in the mix of interest-earning assets towards higher-yielding loans.

Interest and Dividend Income

The following table presents the components of interest and dividend income for the time periods presented, along with the change measured in dollars and percent.


	For the Three Months Ended
	December 31,				Change Expressed in:
	2022		2021		Dollars		Percent
	(Dollars in thousands)
INTEREST AND DIVIDEND INCOME:
Loans receivable	$	64,819	$	55,788	$	9,031	16.2	%
Cash and cash equivalents	16,671		14		16,657		N/M
MBS	4,811		4,625		186		4.0
FHLB stock	4,158		1,231		2,927		237.8
Investment securities	881		808		73		9.0
Total interest and dividend income	$	91,340	$	62,466	$	28,874	46.2

The increase in interest income on loans receivable was due to an increase in the average balance and weighted average yield of the loan portfolio. The increase in the average balance was mainly in the correspondent one-to four-family and commercial loan portfolios. The increase in the weighted average yield was due primarily to originations and purchases at higher market yields, as well as disbursements on commercial construction loans at rates higher than the overall portfolio rate and upward repricing of existing adjustable-rate loans due to higher market interest rates. The increase in interest income on cash and cash equivalents and the increase in dividend income on FHLB stock were due mainly to the leverage strategy being utilized during the current quarter and not being utilized during the prior year quarter. Additionally, market interest rates increased between periods resulting in an increase in the yield on cash due to an increase in FRB interest rates, and FHLB increased the dividend rate paid compared to the prior year quarter.

Interest Expense

The following table presents the components of interest expense for the time periods presented, along with the change measured in dollars and percent.


	For the Three Months Ended
	December 31,				Change Expressed in:
	2022		2021		Dollars		Percent
	(Dollars in thousands)
INTEREST EXPENSE:
Borrowings	$	33,608	$	7,585	$	26,023	343.1	%
Deposits	11,904		9,267		2,637		28.5
Total interest expense	$	45,512	$	16,852	$	28,660	170.1

The increase in interest expense on borrowings was due primarily to the leverage strategy being utilized during the current quarter and not being utilized during the prior year quarter. Interest expense on borrowings associated with the leverage strategy totaled $17.3 million during the current quarter. Interest expense on FHLB borrowings not associated with the leverage strategy also increased due to new borrowings added between periods, at market interest rates higher than the overall portfolio rate, to fund operational liquidity needs. See additional discussion in the "Financial Condition" section above. The increase in interest expense on deposits was due to an increase in the weighted average rate paid on the deposit portfolio, primarily money market accounts and certificates of deposit, partially offset by a decrease in the average balance of certificates of deposit.

Provision for Credit Losses

The Bank recorded a provision for credit losses during the current quarter of $3.7 million, compared to a $3.4 million release of provision during the prior year quarter. See "Comparison of Operating Results for the Three Months Ended December 31, 2022 and September 30, 2022" above for additional information regarding the provision for credit losses for the current quarter.

Non-Interest Income

The following table presents the components of non-interest income for the time periods presented, along with the change measured in dollars and percent.


	For the Three Months Ended
	December 31,				Change Expressed in:
	2022		2021		Dollars		Percent
	(Dollars in thousands)
NON-INTEREST INCOME:
Deposit service fees	$	3,461	$	3,430	$	31	0.9	%
Insurance commissions	795		711		84		11.8



Other non-interest income	1,096		1,365		(269)		(19.7)
Total non-interest income	$	5,352	$	5,506	$	(154)	(2.8)

The decrease in other non-interest income was due mainly to the prior year quarter including higher gains on a loan-related financial derivative agreement, along with a decrease in income from bank-owned life insurance.

Non-Interest Expense

The following table presents the components of non-interest expense for the time periods presented, along with the change measured in dollars and percent.


	For the Three Months Ended
	December 31,				Change Expressed in:
	2022		2021		Dollars		Percent
	(Dollars in thousands)
NON-INTEREST EXPENSE:
Salaries and employee benefits	$	13,698	$	13,728	$	(30)	(0.2)	%
Information technology and related expense	5,070		4,432		638		14.4
Occupancy, net	3,474		3,379		95		2.8
Regulatory and outside services	1,533		1,368		165		12.1
Advertising and promotional	833		1,064		(231)		(21.7)
Federal insurance premium	812		639		173		27.1
Office supplies and related expense	633		468		165		35.3
Deposit and loan transaction costs	611		697		(86)		(12.3)


Other non-interest expense	1,109		919		190		20.7
Total non-interest expense	$	27,773	$	26,694	$	1,079	4.0

The increase in information technology and related expenses was due mainly to higher software licensing expenses, as well as third-party project management expenses associated with the Bank's ongoing digital transformation project. The increase in regulatory and outside services was due primarily to an increase in outside consulting services. The decrease in advertising and promotional expense was due mainly to the timing of campaigns and sponsorships. The increase in federal insurance premium expense was due to the leverage strategy being utilized during the current quarter and not being utilized during the prior year quarter. The increase in office supplies and related expense was due primarily to the write-off of the Bank's remaining inventory of unissued non-contactless debit cards, which have now become obsolete. The increase in other non-interest expense was due mainly to expenses associated with the collateral received on the Bank's interest rate swap agreements and higher deposit-related fraud losses in the current quarter.

The Company's efficiency ratio was 54.27% for the current quarter compared to 52.22% for the prior year quarter. The change in the efficiency ratio was due primarily to higher non-interest expense in the current quarter.

Income Tax Expense

The following table presents pretax income, income tax expense, and net income for the time periods presented, along with the change measured in dollars and percent and effective tax rate.


	For the Three Months Ended
	December 31,						Change Expressed in:
	2022			2021			Dollars		Percent
	(Dollars in thousands)
Income before income tax expense	$	19,747		$	27,865		$	(8,118)	(29.1)	%
Income tax expense	3,507			5,679			(2,172)		(38.2)
Net income	$	16,240		$	22,186		$	(5,946)	(26.8)

Effective Tax Rate	17.8		%	20.4		%

Fiscal Year 2023 Projections

As discussed in the "Executive Summary" section above, the rapid increase in short-term rates led by the FRB and the impact of higher long-term rates has resulted in a decrease in our net interest margin. Net interest margin compression is anticipated to continue, and may compress more in the near term, due to the shape of the yield curve and the pace at which liabilities are repricing compared to assets and the replacement of lower cost deposits with higher costing borrowings which are being used to fund loan growth.

Management anticipates information technology and related expenses will be approximately $5.5 million higher in fiscal year 2023 compared to fiscal year 2022 due to the digital transformation. In addition, it is expected there will be approximately $1 million more of information technology and related expenses in fiscal year 2023 related to projects outside of the digital transformation and due to general cost increases. Overall, it is anticipated that information technology and related expenses will be approximately $6.5 million higher in fiscal year 2023 compared to fiscal year 2022, or approximately $24.5 million for the year. In fiscal year 2024, information technology and related expense is expected to decrease approximately $3 million from fiscal year 2023 levels due to a reduction in professional service costs. Salaries and employee benefits are expected to be approximately $3.5 million higher in fiscal year 2023 due primarily to merit increases and salary adjustments. Federal insurance premium expense is anticipated to be approximately $2 million higher in fiscal year 2023, due to the increase in the assessment rate beginning in January 2023.

Management anticipates the effective tax rate for fiscal year 2023 will be approximately 19%. This is lower than the original projection of 20% to 21% previously provided, due mainly to lower projected pretax income as the Company's permanent differences, which generally reduce our tax rate, have a larger impact on the overall effective rate.

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, AFS securities, and short-term investment 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 ~~in excess of~~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 FHLB and 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 50% of Bank Call Report total assets as of ~~June 30,~~December 31, 2022, as approved by the president of FHLB. When the leverage strategy is in place, the Bank maintains the resulting excess cash reserves from the FHLB borrowings at the FRB of Kansas City, which can be used to meet any short-term liquidity needs. Additionally, FHLB borrowings may ~~be in excess of~~exceed 40% of Bank Call Report total assets as long as the Bank continues its leverage strategy and FHLB senior management continues to approve the Bank's borrowing limit being in excess of 40% of Call Report total assets. All or a portion of the short-term FHLB borrowings in conjunction with the leverage strategy can be repaid at maturity, if necessary or desired. 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 and certain other characteristics of those securities. Management tests the Bank's access to the FRB of Kansas City's discount window annually with a nominal, overnight borrowing.

If management observes unusual trends in the amount and frequency of line of credit utilization and/or short-term borrowings that is not in conjunction with a planned strategy, such as the leverage strategy, the Bank will likely utilize long-term wholesale borrowing sources such as FHLB advances and/or repurchase agreements to provide long-term, fixed-rate funding. The maturities of these long-term borrowings are generally staggered in order to mitigate the risk of a highly negative cash flow position at maturity. The Bank's internal policy limits total borrowings to 55% of total assets. At ~~June 30,~~December 31, 2022, the Bank had total borrowings, at par, of ~~$1.88~~$2.65 billion, or approximately ~~20%~~27% of total assets, all of which were FHLB borrowings. Of this amount, ~~$275.0~~$479.7 million were advances scheduled to mature in the next 12 months. ~~All~~ FHLB borrowings are secured by certain qualifying loans pursuant to a blanket collateral agreement with FHLB. Additionally, the Bank had pledged securities with an estimated fair value of $572.1 million as collateral for FHLB borrowings at December 31, 2022.

At ~~June 30,~~December 31, 2022, 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 could 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 ~~June 30,~~December 31, 2022, the Bank had ~~$1.55 billion~~$817.3 million of securities that were eligible but unused as collateral for borrowing or other liquidity needs.

The Bank has access to other sources of funds for liquidity purposes, such as brokered and public unit certificates of deposit. As of ~~June 30,~~December 31, 2022, the Bank's policy allowed for combined brokered and public unit certificates of deposit up to 15% of total deposits. At ~~June 30,~~December 31, 2022, the Bank did not have any brokered certificates of deposit, and public unit certificates of deposit were approximately 1%2% of total deposits. The Bank had pledged securities with an estimated fair value of ~~$123.9~~$137.6 million as collateral for public unit certificates of deposit at ~~June 30,~~December 31, 2022. 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 ~~June 30,~~December 31, 2022, ~~$1.36~~$1.05 billion of the Bank's certificate of deposit portfolio was scheduled to mature within the next 12 months, including ~~$79.2~~$88.1 million of public unit certificates of deposit and ~~$46.7~~$22.1 million of commercial certificates of deposit. Based on our deposit retention experience and our current pricing strategy, we anticipate the majority of the maturing retail certificates of deposit will renew or transfer to other deposit products of the Bank at prevailing rates, although no assurance can be given in this regard. Due

to the nature of public unit certificates of deposit and commercial certificates of deposit, retention rates are not as predictable as for retail certificates of deposit.

While scheduled payments from the amortization of loans and MBS and payments on short-term investments are relatively predictable sources of funds, deposit flows, prepayments on loans and MBS, and calls of investment securities are greatly influenced by general interest rates, economic conditions, and competition, and are less predictable sources of funds. To the extent possible, the Bank manages the cash flows of its loan and deposit portfolios by the rates it offers customers. We anticipate we will continue to have sufficient funds, through the repayments and maturities of loans and securities, deposits and borrowings, to meet our current commitments.

Limitations on Dividends and Other Capital Distributions

Office of the Comptroller of the Currency ("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, savings institutions generally may make capital distributions during any calendar year equal to earnings of the previous two calendar years and current year-to-date earnings (to the extent not previously distributed). A savings institution that is a subsidiary of a savings and loan holding company, such as the Company, that proposes to make a capital distribution must submit written notice to the OCC and FRB 30 days prior to such distribution. The OCC and FRB may object to the distribution during that 30-day period based on safety and soundness or other concerns. Savings institutions that desire to make a larger capital distribution, are under special restrictions, or are not, or would not be, sufficiently capitalized following a proposed capital distribution must obtain regulatory non-objection prior to making such a distribution.

The long-term ability of the Company to pay dividends to its stockholders is based primarily upon the ability of the Bank to make capital distributions to the Company. So long as the Bank remains well capitalized after each capital distribution (as evidenced by maintaining a ~~Community Bank Leverage Ratio ("CBLR")~~CBLR greater than the required percentage, which is currently 9%9.0%), 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.

Regulatory Capital

Consistent with our goal to operate a sound and profitable financial organization, we actively seek to maintain a well-capitalized status for the Bank per the regulatory framework for prompt corrective action ("PCA"). Qualifying institutions that elect to use the CBLR framework, such as the Bank and the Company, that maintain the required minimum leverage ratio of 9% will be considered to have satisfied the generally applicable risk-based and leverage capital requirements in the regulatory agencies' capital rules, and to have met the capital requirements for the well capitalized category under the agencies' PCA framework. As of ~~June 30,~~December 31, 2022, the Bank's CBLR was ~~9.4%~~9.2% and the Company's CBLR was ~~10.6%~~10.0%, which exceeded the minimum requirements.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Asset and Liability Management and Market Risk

For a complete discussion of the Bank's asset and liability management policies, as well as the potential impact of interest rate changes upon the market value of the Bank's portfolios, see "Part II, Item 7A. Quantitative and Qualitative Disclosures about Market Risk" in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, ~~2021.~~2022. The analysis presented in the tables below reflects the level of market risk at the Bank, including the cash the holding company has on deposit at the Bank.

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.

On a weekly basis, management reviews deposit flows, loan demand, cash levels, and changes in several market rates to assess all pricing strategies. The Bank's pricing strategy for first mortgage loan products includes setting interest rates based on secondary market prices and competitor pricing for our local and correspondent lending markets. Pricing 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. 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 majority of our loans are fixed-rate products with maturities up to 30 years, while the majority of our retail deposits have stated maturities or repricing dates of less than two years.

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 alternative interest rate environments. Net interest income is projected in the same alternative interest rate environments with both a static balance sheet and 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. 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.

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 and early withdrawal levels would likely deviate significantly from those assumed in calculating the gap table below. A positive gap ~~indicates~~generally means more cash flows from assets are expected to reprice than cash flows from liabilities and ~~would indicate,~~suggests in a rising rate environment, that earnings should increase. A negative gap ~~indicates~~generally means more cash flows from liabilities are expected to reprice than cash flows from assets and ~~would indicate,~~suggests, in a rising rate environment, that earnings should decrease. For

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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												More Than			More Than
		Within			One Year to			Three Years			Over						Within			One Year to			Three Years			Over
		One Year			Three Years			to Five Years			Five Years			Total			One Year			Three Years			to Five Years			Five Years			Total
Interest-earning assets:	Interest-earning assets:	(Dollars in thousands)														Interest-earning assets:	(Dollars in thousands)
Loans receivable(1)	Loans receivable(1)	$	1,300,715		$	1,553,906		$	1,260,483		$	3,128,799		$	7,243,903	Loans receivable(1)	$	1,395,247		$	1,705,470		$	1,356,247		$	3,337,582		$	7,794,546
Securities(2)	Securities(2)	325,627			524,799			563,502			416,334			1,830,262		Securities(2)	323,237			662,372			349,777			381,222			1,716,608
Other interest-earning assets	Other interest-earning assets	31,632			—			—			—			31,632		Other interest-earning assets	15,977			—			—			—			15,977
Total interest-earning assets	Total interest-earning assets	1,657,974			2,078,705			1,823,985			3,545,133			9,105,797		Total interest-earning assets	1,734,461			2,367,842			1,706,024			3,718,804			9,527,131

Interest-bearing liabilities:	Interest-bearing liabilities:															Interest-bearing liabilities:
Non-maturity deposits(3)	Non-maturity deposits(3)	1,300,241			456,002			389,929			1,999,249			4,145,421		Non-maturity deposits(3)	1,078,030			415,046			371,135			2,047,663			3,911,874
Certificates of deposit	Certificates of deposit	1,362,534			732,106			181,088			611			2,276,339		Certificates of deposit	1,048,931			748,562			416,761			224			2,214,478
Borrowings(4)	Borrowings(4)	322,147			938,035			523,236			129,495			1,912,913		Borrowings(4)	626,166			1,202,478			729,407			127,798			2,685,849
Total interest-bearing liabilities	Total interest-bearing liabilities	2,984,922			2,126,143			1,094,253			2,129,355			8,334,673		Total interest-bearing liabilities	2,753,127			2,366,086			1,517,303			2,175,685			8,812,201

Excess (deficiency) of interest-earning assets over	Excess (deficiency) of interest-earning assets over															Excess (deficiency) of interest-earning assets over
interest-bearing liabilities	interest-bearing liabilities	$	(1,326,948)		$	(47,438)		$	729,732		$	1,415,778		$	771,124	interest-bearing liabilities	$	(1,018,666)		$	1,756		$	188,721		$	1,543,119		$	714,930

Cumulative excess of interest-earning assets over
Cumulative excess (deficiency) of interest-earning assets over																Cumulative excess (deficiency) of interest-earning assets over
interest-bearing liabilities	interest-bearing liabilities	$	(1,326,948)		$	(1,374,386)		$	(644,654)		$	771,124				interest-bearing liabilities	$	(1,018,666)		$	(1,016,910)		$	(828,189)		$	714,930

Cumulative excess of interest-earning assets over interest-bearing
Cumulative excess (deficiency) of interest-earning assets over interest-bearing																Cumulative excess (deficiency) of interest-earning assets over interest-bearing
liabilities as a percent of total Bank assets at:	liabilities as a percent of total Bank assets at:															liabilities as a percent of total Bank assets at:
June 30, 2022		(14.0)		%	(14.5)		%	(6.8)		%	8.1		%
March 31, 2022		(15.3)
September 30, 2021		(6.9)
December 31, 2022																December 31, 2022	(10.3)		%	(10.2)		%	(8.3)		%	7.2		%
September 30, 2022																September 30, 2022	(11.9)

Cumulative one-year gap - interest rates +200 bps at:	Cumulative one-year gap - interest rates +200 bps at:															Cumulative one-year gap - interest rates +200 bps at:
June 30, 2022		(14.4)
March 31, 2022		(16.2)
September 30, 2021		(13.4)
December 31, 2022																December 31, 2022	(10.6)
September 30, 2022																September 30, 2022	(12.1)

(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. ~~Investment~~All other securities are presented based on contractual maturities, term to call dates or pre-refunding dates as of ~~June 30,~~December 31, 2022, at amortized cost.

(3)Although the Bank's checking, savings, and money market accounts 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 is based on assumptions developed from our actual experiences with these accounts. If all of the Bank's checking, savings, and money market accounts had been assumed to be subject to repricing within one year, interest-bearing liabilities which were estimated to mature or reprice within one year would have exceeded interest-earning assets with comparable characteristics by ~~$4.17~~$3.85 billion, for a cumulative one-year gap of ~~(44.0)~~(38.8)% of total assets.

(4)Borrowings exclude deferred prepayment penalty costs. Included in this line item are $365.0 million of FHLB adjustable-rate advances tied to interest rate swaps. The repricing for these liabilities is projected to occur at the maturity date of each interest rate swap.

At ~~June 30,~~December 31, 2022, the Bank's gap between the amount of interest-earning assets and interest-bearing liabilities projected to reprice within one year was ~~$(1.33)~~$(1.02) billion, or ~~(14.0)~~(10.3)% of total assets, compared to ~~$(1.46)~~$(1.14) billion, or ~~(15.3)~~(11.9)% of total assets, at ~~March 31,~~September 30, 2022. The change in the one-year gap amount was due primarily to a decrease in the amount of liability cash flows ~~projected~~coming due in one year at ~~June 30,~~December 31, 2022 compared to ~~March~~September 30, 2022. This was due primarily to a decrease in the amount of non-maturity deposits and certificates of deposit projected to mature within one year as of December 31, ~~2022, specifically due to lower deposit balances. In addition, the Bank projected higher cash flows on mortgage-related assets at June 30,~~ 2022 compared to ~~March~~September 30, 2022, partially offset by an increase in borrowings projected to reprice within one year as of December 31, 2022, despite higher interest rates. As interest rates rise, borrowers have less economic incentive 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, which would typically result in lower projected cash flows on these assets. However, during the current quarter, the Bank upgraded its interest rate risk model, which resulted in the third-party mortgage prepayment model projecting faster prepayment speeds for mortgage-related assets, even though

~~interest rates were higher at June 30,~~ 2022. ~~The prepayment speeds in the upgraded interest rate risk model are more reflective of the Bank's actual experience at current market interest rates.~~

The amount of interest-bearing liabilities expected to reprice in a given period is not typically 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 ~~June 30,~~December 31, 2022, the Bank's one-year gap is projected to be ~~$(1.36)~~$(1.05) billion, or ~~(14.4)~~(10.6)% of total assets. The change in the gap compared to when there is no change in rates is due to lower anticipated net cash flows primarily ~~due to~~as a result of lower ~~repayments~~prepayments on mortgage-related assets in the

higher rate environment. This compares to a one-year gap of ~~$(1.54)~~$(1.17) billion, or ~~(16.2)~~(12.1)% of total assets, if interest rates were to have increased 200 basis points as of ~~March 31,~~September 30, 2022.

Change in Net Interest Income. 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 0 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 likely customer behavior changes as market rates change. ~~At September 30, 2021, multiple yields along the yield curve were less than one percent, so the -100 basis points scenario was not applicable.~~ 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 does 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 loans or securities, 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	Change	Net Interest Income At												Change	Net Interest Income At
(in Basis Points)	(in Basis Points)	June 30, 2022						September 30, 2021						(in Basis Points)	December 31, 2022						September 30, 2022
in Interest Rates(1)	in Interest Rates(1)	Amount ($)		Change ($)		Change (%)		Amount ($)		Change ($)		Change (%)		in Interest Rates(1)	Amount ($)		Change ($)		Change (%)		Amount ($)		Change ($)		Change (%)
		(Dollars in thousands)													(Dollars in thousands)
-200 bp														-200 bp	$	160,196	$	134	0.08	%	$	182,458	$	(775)	(0.42)	%
-100 bp	-100 bp	$	189,186	$	(17)	(0.01)	%	N/A		N/A		N/A		-100 bp	160,592		530		0.33		183,363		130		0.07
000 bp	000 bp	189,203		—		—		$	185,285	$	—	—	%	000 bp	160,062		—		—		183,233		—		—
+100 bp	+100 bp	188,337		(866)		(0.46)		190,060		4,775		2.58		+100 bp	158,931		(1,131)		(0.71)		182,737		(496)		(0.27)
+200 bp	+200 bp	187,411		(1,792)		(0.95)		191,998		6,713		3.62		+200 bp	157,539		(2,523)		(1.58)		182,081		(1,152)		(0.63)
+300 bp	+300 bp	186,422		(2,781)		(1.47)		192,590		7,305		3.94		+300 bp	156,129		(3,933)		(2.46)		181,394		(1,839)		(1.00)

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

The net interest income projection was ~~higher~~lower in the base case scenario at ~~June 30,~~December 31, 2022 compared to September 30, ~~2021~~2022 due to higher ~~income projections on the Bank's assets than~~interest expense projections on the Bank's liabilities ascompared to the increase in the interest income projections on the Bank's assets. This was primarily driven by a ~~result~~faster increase in the cost of ~~higher interest rates at June 30, 2022. In~~liabilities during the ~~rising rate scenarios, fewer assets reprice~~quarter ended December 31, 2022 compared to ~~higher interest rates, resulting in~~the prior quarter, which was caused by a decrease in ~~projected net~~the balance of the Bank's lower-costing retail deposits being replaced with higher-costing FHLB borrowings. In addition, higher short-term interest ~~income.~~rates over the past year have resulted in a steady increase in the rate paid on the Bank's deposit portfolio during the quarter. This was ~~not~~partially offset by higher projected income on loans receivable due to a higher balance and yield on the ~~case at September 30, 2021, as interest rates were lower than June 30, 2022, resulting in more mortgage-related cash flows projected~~portfolio compared to ~~reprice than at June 30, 2022.~~the prior quarter.

In the rising interest rate scenarios, the cost of liabilities is projected to continue to increase at a faster pace than asset yields, resulting in a projected decrease in net interest income in these interest rate scenarios. In the decreasing interest rate ~~scenario~~scenarios at ~~June 30,~~December 31, 2022, the net interest income projection remained relatively flat as the projected increase in mortgage-related assets repricing to lower interest rates was largely offset by liability cash flows repricing to lower interest rates as well.

6857

Change in MVPE. 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 likely customer behavior as market rates change. ~~At September 30, 2021, multiple yields along the yield curve were less than one percent, so the -100 basis points scenario was not applicable.~~ The estimations of the MVPE used in preparing the table below were based upon the assumptions that the total composition of interest-earning assets and interest-bearing liabilities does 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	Change	Market Value of Portfolio Equity At												Change	Market Value of Portfolio Equity At
(in Basis Points)	(in Basis Points)	June 30, 2022						September 30, 2021						(in Basis Points)	December 31, 2022						September 30, 2022
in Interest Rates(1)	in Interest Rates(1)	Amount ($)		Change ($)		Change (%)		Amount ($)		Change ($)		Change (%)		in Interest Rates(1)	Amount ($)		Change ($)		Change (%)		Amount ($)		Change ($)		Change (%)
		(Dollars in thousands)													(Dollars in thousands)
-200 bp														-200 bp	$	1,436,543	$	434,151	43.31	%	$	1,299,340	$	404,353	45.18	%
-100 bp	-100 bp	$	841,710	$	94,738	12.68	%	N/A		N/A		N/A		-100 bp	1,145,824		143,432		14.31		1,024,167		129,180		14.43
000 bp	000 bp	746,972		—		—		$	1,451,795	$	—	—	%	000 bp	1,002,392		—		—		894,987		—		—
+100 bp	+100 bp	627,443		(119,529)		(16.00)		1,354,766		(97,029)		(6.68)		+100 bp	856,127		(146,265)		(14.59)		759,165		(135,822)		(15.18)
+200 bp	+200 bp	506,951		(240,021)		(32.13)		1,170,646		(281,149)		(19.37)		+200 bp	713,190		(289,202)		(28.85)		625,864		(269,123)		(30.07)
+300 bp	+300 bp	392,141		(354,831)		(47.50)		968,543		(483,252)		(33.29)		+300 bp	578,563		(423,829)		(42.28)		500,730		(394,257)		(44.05)

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

The percentage change in the Bank's MVPE at ~~June 30,~~December 31, 2022 and September 30, ~~2021~~2022 was negative in all rising interest rate scenarios. The negative impact to the Bank's MVPE, ~~is greater~~as a percentage change, was slightly lower at ~~June 30,~~December 31, 2022 compared to September 30, ~~2021~~2022 due primarily to higher MVPE at December 31, 2022. The increase in the MVPE was due to lower mortgage rates at December 31, 2022 which resulted in an increase in the ~~duration~~market value on the Bank's mortgage-related assets. In addition, the increase in short-term interest rates resulted in a decrease in the market value of the Bank's ~~mortgage-related assets at June 30, 2022~~deposits compared to ~~September 30, 2021. This was due~~the prior quarter.

The MVPE ratio continues to ~~higher~~be negatively impacted in the rising interest ~~rates~~rate scenarios at ~~June 30,~~December 31, 2022. As interest rates increase, borrowers have less economic incentive 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, repayments 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 events as there is less economic incentive for borrowers to prepay their debt, resulting in an increase in the average life of mortgage-related assets. Similarly, call projections for the Bank's callable agency debentures decrease as interest rates rise, which results in cash flows related to these assets moving closer to the contractual maturity dates. The ~~higher~~longer expected average lives of these assets ~~relative to the assumptions in the base case interest rate environment,~~ increases the sensitivity of their market value to changes in interest rates. ~~In addition, as mortgage loans are refinanced or endorsed to lower interest rates, their average lives also increase as further prepayments are expected to be diminished.~~

In the decreasing interest rate ~~scenario~~scenarios at ~~June 30,~~December 31, 2022, the Bank's MVPE increased due to a larger increase in the market value of the Bank's ~~asset~~assets than the Bank's liabilities. This is because the Bank's mortgage-related assets continue to have a ~~higher~~longer duration in ~~this scenario~~these interest rate scenarios which results in greater sensitivity in market value as interest rates change.

6958

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 ~~June 30,~~December 31, 2022. 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			Amount		Yield/Rate		WAL	% of Category		% of Total
		(Dollars in thousands)										(Dollars in thousands)
Securities	Securities	$	1,694,160	1.29	%	4.2			18.6	%	Securities	$	1,528,686	1.31	%	4.1			16.1	%
Loans receivable:	Loans receivable:										Loans receivable:
Fixed-rate one- to four-family	Fixed-rate one- to four-family	5,620,639		3.10		6.7	77.6	%	61.9		Fixed-rate one- to four-family	5,727,412		3.20		6.7	73.5	%	60.3
Fixed-rate commercial	Fixed-rate commercial	435,041		4.07		3.9	6.0		4.8		Fixed-rate commercial	439,609		4.13		3.6	5.6		4.6
All other fixed-rate loans	All other fixed-rate loans	74,188		3.50		7.2	1.0		0.8		All other fixed-rate loans	84,537		3.68		7.3	1.1		0.9
Total fixed-rate loans	Total fixed-rate loans	6,129,868		3.18		6.5	84.6		67.5		Total fixed-rate loans	6,251,558		3.27		6.5	80.2		65.8
Adjustable-rate one- to four-family	Adjustable-rate one- to four-family	565,252		2.46		3.6	7.8		6.2		Adjustable-rate one- to four-family	778,728		3.11		4.1	10.0		8.2
Adjustable-rate commercial	Adjustable-rate commercial	468,869		4.39		7.6	6.5		5.2		Adjustable-rate commercial	670,678		5.11		8.1	8.6		7.1
All other adjustable-rate loans	All other adjustable-rate loans	81,762		4.70		2.7	1.1		0.9		All other adjustable-rate loans	90,706		7.29		3.0	1.2		1.0
Total adjustable-rate loans	Total adjustable-rate loans	1,115,883		3.44		5.2	15.4		12.3		Total adjustable-rate loans	1,540,112		4.23		5.8	19.8		16.3
Total loans receivable	Total loans receivable	7,245,751		3.22		6.3	100.0	%	79.8		Total loans receivable	7,791,670		3.46		6.4	100.0	%	82.1
FHLB stock	FHLB stock	87,696		6.47		2.6			1.0		FHLB stock	124,119		8.47		2.6			1.3
Cash and cash equivalents	Cash and cash equivalents	54,789		0.94		—			0.6		Cash and cash equivalents	49,686		1.79		—			0.5
Total interest-earning assets	Total interest-earning assets	$	9,082,396	2.88		5.8			100.0	%	Total interest-earning assets	$	9,494,161	3.17		5.9			100.0	%

Non-maturity deposits	Non-maturity deposits	$	3,473,159	0.16		5.5	60.4	%	45.6	%	Non-maturity deposits	$	3,262,824	0.47		5.9	59.6	%	40.2	%
Retail certificates of deposit	Retail certificates of deposit	2,129,734		1.16		1.1	37.0		27.9		Retail certificates of deposit	2,073,633		1.83		1.6	37.8		25.5
Commercial certificates of deposit	Commercial certificates of deposit	55,076		0.68		0.6	1.0		0.7		Commercial certificates of deposit	33,134		1.55		1.1	0.6		0.4
Public unit certificates of deposit	Public unit certificates of deposit	91,529		0.57		0.5	1.6		1.2		Public unit certificates of deposit	107,711		3.17		0.7	2.0		1.3
Total interest-bearing deposits	Total interest-bearing deposits	5,749,498		0.54		3.8	100.0	%	75.4		Total interest-bearing deposits	5,477,302		1.04		4.2	100.0	%	67.4
Term borrowings	Term borrowings	1,840,000		2.12		2.6	98.1	%	24.1		Term borrowings	2,505,082		2.80		2.4	94.5	%	30.8
Line of credit borrowings	Line of credit borrowings	35,700		1.63		—	1.9		0.5		Line of credit borrowings	145,000		4.48		—	5.5		1.8
Total borrowings	Total borrowings	1,875,700		2.11		2.5	100.0	%	24.6		Total borrowings	2,650,082		2.89		2.3	100.0	%	32.6
Total interest-bearing liabilities	Total interest-bearing liabilities	$	7,625,198	0.92		3.5			100.0	%	Total interest-bearing liabilities	$	8,127,384	1.65		3.6			100.0	%

Item 4. 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 ~~June 30,~~December 31, 2022. Based upon this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that, as of ~~June 30,~~December 31, 2022, 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.

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 ~~June 30,~~December 31, 2022 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

7059

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

The Company and the Bank are involved as plaintiff or defendant in various legal actions arising in the normal course of business. In our opinion, after consultation with legal counsel, we believe it unlikely that such pending legal actions will have a material adverse effect on our financial condition, results of operations or liquidity.

Item 1A. Risk Factors

There have been no changes to our risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2021.~~2022.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

See "Liquidity and Capital Resources - Limitations on Dividends and Other Capital Distributions" in "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" regarding OCC restrictions on dividends from the Bank to the Company.

The following table summarizes our stock repurchase activity during the three months ended ~~June 30,~~December 31, 2022 and additional information regarding our stock repurchase program. As of ~~June 30,~~December 31, 2022, the Company had ~~$44.7~~$22.5 million of common stock authorized under its existing stock repurchase plan. There is no expiration for this repurchase plan; however, the Federal Reserve Bank's existing approval for the Company to repurchase shares is through August ~~2022.~~2023. Shares may be repurchased from time to time in the open-market or in privately negotiated transactions based upon market conditions and available liquidity.

~~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~~

~~April 1, 2022 through~~

~~April 30, 2022~~

—

~~44,665,205~~

~~May 1, 2022 through~~

~~May 31, 2022~~

—

~~44,665,205~~

~~June 1, 2022 through~~

~~June 30, 2022~~

—

~~44,665,205~~

~~Total~~

—

~~44,665,205~~


				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
October 1, 2022 through
October 31, 2022	238,800	$	8.05	238,800	$	42,743,537
November 1, 2022 through
November 30, 2022	1,528,463	8.13		1,528,463	30,322,055
December 1, 2022 through
December 31, 2022	961,896	8.16		961,896	22,469,207
Total	2,729,159	8.13		2,729,159	22,469,207

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

Item 6. Exhibits

See Index to Exhibits.

7160

INDEX TO EXHIBITS


Exhibit Number						Document
3(i)						Charter of Capitol Federal Financial, Inc., as filed on May 6, 2010, as Exhibit 3(i) to Capitol Federal Financial, Inc.'s Registration Statement on Form S-1 (File No. 333-166578) and incorporated herein by reference
3(ii)						Bylaws of Capitol Federal Financial, Inc., as amended, filed on March 30, 2020, as Exhibit 3.2 to Form 8-K for Capitol Federal Financial Inc. and incorporated herein by reference
10.1(i)						Form of Change of Control Agreement with each of John B. Dicus, Kent G. Townsend, and Rick C. Jackson filed on January 20, 2011 as Exhibit 10.1 to the Registrant's Current Report on Form 8-K and incorporated herein by reference
10.1(ii)						Form of Change of Control Agreement with Natalie G. Haag filed on November 29, 2012 as Exhibit 10.1(iv) to the Registrant's Annual Report on Form 10-K and incorporated herein by reference
10.1(iii)						Form of Change of Control Agreement with Daniel L. Lehman filed on November 29, 2016 as Exhibit 10.1(v) to the Registrant's Annual Report on Form 10-K and incorporated herein by reference
10.1(iv)						Form of Change of Control Agreement with Robert D. Kobbeman filed on November 29, 2018 as Exhibit 10.1(iv) to the Registrant's Annual Report on Form 10-K and incorporated herein by reference
10.1(v)						Form of Change of Control Agreement with Anthony S. Barry filed on May 10, 2019 as Exhibit 10.1(vi) to the Registrant's March 31, 2019 Form 10-Q and incorporated herein by reference
10.2						Capitol Federal Financial's 2000 Stock Option and Incentive Plan (the "Stock Option Plan") filed on April 13, 2000 as Appendix A to Capitol Federal Financial's Revised Proxy Statement (File No. 000-25391) and incorporated herein by reference
10.3						Capitol Federal Financial Deferred Incentive Bonus Plan, as amended, filed on May 8, 2020 as Exhibit 10.3 to the Registrant's March 31, 2020 Form 10-Q and incorporated herein by reference
10.4						Form of Incentive Stock Option Agreement under the Stock Option Plan filed on February 4, 2005 as Exhibit 10.5 to the December 31, 2004 Form 10-Q for Capitol Federal Financial and incorporated herein by reference
10.5						Form of Non-Qualified Stock Option Agreement under the Stock Option Plan filed on February 4, 2005 as Exhibit 10.6 to the December 31, 2004 Form 10-Q for Capitol Federal Financial and incorporated herein by reference
10.6						Description of Director Fee Arrangements filed on November ~~29, 2018~~23, 2022 as Exhibit 10.6 to the Registrant's September 30, ~~2018~~2022 Form 10-K and incorporated herein by reference
10.7						Short-term Performance Plan, as amended, filed on May 8, 2020 as Exhibit 10.7 to the Registrant's March 31, 2020 Form 10-Q and incorporated herein by reference
10.8						Capitol Federal Financial, Inc. 2012 Equity Incentive Plan (the "Equity Incentive Plan") filed on December 22, 2011 as Appendix A to Capitol Federal Financial, Inc.'s Proxy Statement (File No. 001-34814) and incorporated herein by reference
10.9						Form of Incentive Stock Option Agreement under the Equity Incentive Plan filed on February 6, 2012 as Exhibit 10.12 to the Registrant's December 31, 2011 Form 10-Q and incorporated herein by reference
10.10						Form of Non-Qualified Stock Option Agreement under the Equity Incentive Plan filed on February 6, 2012 as Exhibit 10.13 to the Registrant's December 31, 2011 Form 10-Q and incorporated herein by reference
10.11						Form of Stock Appreciation Right Agreement under the Equity Incentive Plan filed on February 6, 2012 as Exhibit 10.14 to the Registrant's December 31, 2011 Form 10-Q and incorporated herein by reference
10.12						Form of Restricted Stock Agreement under the Equity Incentive Plan filed on February 6, 2012 as Exhibit 10.15 to the Registrant's December 31, 2011 Form 10-Q and incorporated herein by reference
31.1						Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002 made by John B. Dicus, Chairman, President and Chief Executive Officer
31.2						Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002 made by Kent G. Townsend, Executive Vice President, Chief Financial Officer and Treasurer
32						Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 made by John B. Dicus, Chairman, President and Chief Executive Officer, and Kent G. Townsend, Executive Vice President, Chief Financial Officer and Treasurer

7261


101						The following information from the Company's Quarterly Report on Form 10-Q for the quarterly period ended ~~June 30,~~December 31, 2022, filed with the Securities and Exchange Commission on ~~August~~February 8, ~~2022,~~2023, has been formatted in Inline eXtensible Business Reporting Language ("XBRL"): (i) Consolidated Balance Sheets at ~~June 30,~~December 31, 2022 and September 30, ~~2021,~~2022, (ii) Consolidated Statements of Income for the three ~~and nine~~ months ended ~~June 30,~~December 31, 2022 and 2021, (iii) Consolidated Statements of Comprehensive Income for the three ~~and nine~~ months ended ~~June 30,~~December 31, 2022 and 2021, (iv) Consolidated Statements of Stockholders' Equity for the three ~~and nine~~ months ended ~~June 30,~~December 31, 2022 and 2021, (v) Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~June 30,~~December 31, 2022 and 2021, and (vi) Notes to the Unaudited Consolidated Financial Statements.
104						Cover Page Interactive Data File, formatted in Inline XBRL and included in Exhibit 101

7362

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


CAPITOL FEDERAL FINANCIAL, INC.



	Date: ~~August~~February 8, ~~2022~~2023	By:	/s/ John B. Dicus
			John B. Dicus, Chairman, President and Chief Executive Officer

	Date: ~~August~~February 8, ~~2022~~2023	By:	/s/ Kent G. Townsend
			Kent G. Townsend, Executive Vice President,
			Chief Financial Officer and Treasurer

7463


	For the Three Months Ended
	June 30, 2022 vs. March 31, 2022
	Increase (Decrease) Due to
	Volume		Rate		Total
	(Dollars in thousands)
Interest-earning assets:
Loans receivable	$	631	$	843	$	1,474
MBS	(49)		276		227
Investment securities	—		15		15
FHLB stock	131		324		455
Cash and cash equivalents	(20)		3,039		3,019
Total interest-earning assets	693		4,497		5,190

Interest-bearing liabilities:
Checking	—		5		5
Savings	3		—		3
Money market	(7)		83		76
Certificates of deposit	(473)		(213)		(686)
Borrowings	644		2,268		2,912

Total interest-bearing liabilities	167		2,143		2,310

Net change in net interest income	$	526	$	2,354	$	2,880


		For the Nine Months Ended
	June 30, 2022 vs. June 30, 2021
	Increase (Decrease) Due to
		Volume(1)		Rate		Total
		(Dollars in thousands)
Interest-earning assets:
Loans receivable		$	2,731	$	(7,403)	$	(4,672)
MBS		(515)		(1,490)		(2,005)
Investment securities		207		141		348
FHLB stock		2,382		820		3,202
Cash and cash equivalents		3,167		1,647		4,814
Total interest-earning assets		7,972		(6,285)		1,687

Interest-bearing liabilities:
Checking		62		(114)		(52)
Savings		25		(19)		6
Money market		516		(1,083)		(567)
Certificates of deposit		(4,673)		(7,342)		(12,015)
Borrowings		4,418		(3,342)		1,076

Total interest-bearing liabilities		348		(11,900)		(11,552)

Net change in net interest income		$	7,624	$	5,615	$	13,239