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, 2022March 31, 2023
or
☐ 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 2, 2022,May 4, 2023, there were 138,858,884136,158,569 shares of Capitol Federal Financial, Inc. common stock outstanding.
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PART I - FINANCIAL INFORMATION | Page Number |
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Item 3. | | |
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PART II - OTHER INFORMATION | |
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Item 1A. | | |
Item 2. | | |
Item 3. | | |
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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, | | March 31, | | September 30, |
| | 2022 | | 2021 | | 2023 | | 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 $21,830 and $27,467) | | Cash and cash equivalents (includes interest-earning deposits of $21,830 and $27,467) | $ | 60,207 | | | $ | 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 $1,671,538 and $1,768,490) | | Available-for-sale ("AFS") securities, at estimated fair value (amortized cost of $1,671,538 and $1,768,490) | 1,505,808 | | | 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 $19,889 and $16,371) | | Loans receivable, net (allowance for credit losses ("ACL") of $19,889 and $16,371) | 7,958,567 | | | 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 | 128,096 | | | 100,624 | |
Premises and equipment, net | Premises and equipment, net | 96,008 | | | 99,127 | | Premises and equipment, net | 92,415 | | | 94,820 | |
Income taxes receivable, net | Income taxes receivable, net | 1,993 | | | — | | Income taxes receivable, net | 3,890 | | | 1,266 | |
Deferred income tax assets, net | Deferred income tax assets, net | 19,636 | | | — | | Deferred income tax assets, net | 24,383 | | | 33,884 | |
Other assets | Other assets | 285,575 | | | 320,686 | | Other assets | 312,404 | | | 317,594 | |
TOTAL ASSETS | TOTAL ASSETS | $ | 9,476,053 | | | $ | 9,631,246 | | TOTAL ASSETS | $ | 10,085,770 | | | $ | 9,624,897 | |
| LIABILITIES: | LIABILITIES: | | LIABILITIES: | |
Deposits | Deposits | $ | 6,329,883 | | | $ | 6,597,396 | | Deposits | $ | 6,144,435 | | | $ | 6,194,866 | |
Borrowings | Borrowings | 1,869,897 | | | 1,582,850 | | Borrowings | 2,696,604 | | | 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 | 60,195 | | | 80,067 | |
| Other liabilities | Other liabilities | 88,578 | | | 129,270 | | Other liabilities | 112,502 | | | 121,311 | |
Total liabilities | Total liabilities | 8,344,313 | | | 8,388,973 | | Total liabilities | 9,013,736 | | | 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, 136,144,725 and 138,858,884 shares issued and outstanding as of March 31, 2023 and September 30, 2022, respectively | | Common stock, $.01 par value; 1,400,000,000 shares authorized, 136,144,725 and 138,858,884 shares issued and outstanding as of March 31, 2023 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 | 1,168,059 | | | 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") | (28,910) | | | (29,735) | |
Retained earnings | Retained earnings | 72,308 | | | 98,944 | | Retained earnings | 50,167 | | | 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 | (118,643) | | | (145,633) | |
Total stockholders' equity | Total stockholders' equity | 1,131,740 | | | 1,242,273 | | Total stockholders' equity | 1,072,034 | | | 1,096,499 | |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 9,476,053 | | | $ | 9,631,246 | | TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 10,085,770 | | | $ | 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 | | For the Six Months Ended |
| | June 30, | | June 30, | | March 31, | | March 31, |
| | 2022 | | 2021 | | 2022 | | 2021 | | 2023 | | 2022 | | 2023 | | 2022 |
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 | $ | 69,319 | | | $ | 55,412 | | | $ | 134,138 | | | $ | 111,200 | |
Cash and cash equivalents | | Cash and cash equivalents | 10,977 | | | 949 | | | 27,648 | | | 963 | |
Mortgage-backed securities ("MBS") | Mortgage-backed securities ("MBS") | 5,048 | | | 5,360 | | | 14,494 | | | 16,499 | | Mortgage-backed securities ("MBS") | 4,748 | | | 4,821 | | | 9,559 | | | 9,446 | |
FHLB stock | FHLB stock | 2,695 | | | 944 | | | 6,166 | | | 2,964 | | FHLB stock | 3,607 | | | 2,240 | | | 7,765 | | | 3,471 | |
Cash and cash equivalents | 3,968 | | | 26 | | | 4,931 | | | 117 | | |
Investment securities | Investment securities | 815 | | | 763 | | | 2,423 | | | 2,075 | | Investment securities | 895 | | | 800 | | | 1,776 | | | 1,608 | |
Total interest and dividend income | Total interest and dividend income | 69,412 | | | 61,872 | | | 196,100 | | | 194,413 | | Total interest and dividend income | 89,546 | | | 64,222 | | | 180,886 | | | 126,688 | |
INTEREST EXPENSE: | INTEREST EXPENSE: | | INTEREST EXPENSE: | |
Borrowings | Borrowings | 11,644 | | | 7,826 | | | 27,961 | | | 26,885 | | Borrowings | 31,447 | | | 8,732 | | | 65,055 | | | 16,317 | |
Deposits | Deposits | 7,787 | | | 11,475 | | | 25,443 | | | 38,071 | | Deposits | 16,140 | | | 8,389 | | | 28,044 | | | 17,656 | |
| Total interest expense | Total interest expense | 19,431 | | | 19,301 | | | 53,404 | | | 64,956 | | Total interest expense | 47,587 | | | 17,121 | | | 93,099 | | | 33,973 | |
NET INTEREST INCOME | NET INTEREST INCOME | 49,981 | | | 42,571 | | | 142,696 | | | 129,457 | | NET INTEREST INCOME | 41,959 | | | 47,101 | | | 87,787 | | | 92,715 | |
PROVISION FOR CREDIT LOSSES | PROVISION FOR CREDIT LOSSES | 937 | | | (2,691) | | | (5,690) | | | (7,187) | | PROVISION FOR CREDIT LOSSES | 891 | | | (3,188) | | | 4,551 | | | (6,627) | |
NET INTEREST INCOME AFTER | NET INTEREST INCOME AFTER | | | | | | | | NET INTEREST INCOME AFTER | | | | | | | |
PROVISION FOR CREDIT LOSSES | PROVISION FOR CREDIT LOSSES | 49,044 | | | 45,262 | | | 148,386 | | | 136,644 | | PROVISION FOR CREDIT LOSSES | 41,068 | | | 50,289 | | | 83,236 | | | 99,342 | |
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 | 3,122 | | | 3,300 | | | 6,583 | | | 6,730 | |
Insurance commissions | Insurance commissions | 788 | | | 723 | | | 2,042 | | | 2,249 | | Insurance commissions | 877 | | | 543 | | | 1,672 | | | 1,254 | |
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 | 1,084 | | | 1,573 | | | 2,180 | | | 2,938 | |
Total non-interest income | Total non-interest income | 6,115 | | | 5,236 | | | 17,037 | | | 22,783 | | Total non-interest income | 5,083 | | | 5,416 | | | 10,435 | | | 10,922 | |
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 | 12,789 | | | 14,023 | | | 26,487 | | | 27,751 | |
Information technology and related expense | Information technology and related expense | 4,343 | | | 4,736 | | | 13,268 | | | 13,568 | | Information technology and related expense | 5,789 | | | 4,493 | | | 10,859 | | | 8,925 | |
Occupancy, net | Occupancy, net | 3,721 | | | 3,504 | | | 10,593 | | | 10,406 | | Occupancy, net | 3,568 | | | 3,493 | | | 7,042 | | | 6,872 | |
Regulatory and outside services | Regulatory and outside services | 1,572 | | | 1,469 | | | 4,212 | | | 4,288 | | Regulatory and outside services | 1,305 | | | 1,272 | | | 2,838 | | | 2,640 | |
Advertising and promotional | Advertising and promotional | 1,068 | | | 1,407 | | | 3,626 | | | 3,729 | | Advertising and promotional | 1,333 | | | 1,494 | | | 2,166 | | | 2,558 | |
Federal insurance premium | Federal insurance premium | 784 | | | 633 | | | 2,200 | | | 1,888 | | Federal insurance premium | 1,246 | | | 777 | | | 2,058 | | | 1,416 | |
Deposit and loan transaction costs | Deposit and loan transaction costs | 664 | | | 693 | | | 2,050 | | | 2,123 | | Deposit and loan transaction costs | 690 | | | 689 | | | 1,301 | | | 1,386 | |
Office supplies and related expense | Office supplies and related expense | 494 | | | 402 | | | 1,464 | | | 1,289 | | Office supplies and related expense | 631 | | | 502 | | | 1,264 | | | 970 | |
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 | 1,280 | | | 1,217 | | | 2,389 | | | 2,136 | |
Total non-interest expense | Total non-interest expense | 28,390 | | | 27,602 | | | 83,044 | | | 87,322 | | Total non-interest expense | 28,631 | | | 27,960 | | | 56,404 | | | 54,654 | |
INCOME BEFORE INCOME TAX EXPENSE | INCOME BEFORE INCOME TAX EXPENSE | 26,769 | | | 22,896 | | | 82,379 | | | 72,105 | | INCOME BEFORE INCOME TAX EXPENSE | 17,520 | | | 27,745 | | | 37,267 | | | 55,610 | |
INCOME TAX EXPENSE | INCOME TAX EXPENSE | 5,617 | | | 4,709 | | | 17,418 | | | 14,576 | | INCOME TAX EXPENSE | 3,331 | | | 6,122 | | | 6,838 | | | 11,801 | |
NET INCOME | NET INCOME | $ | 21,152 | | | $ | 18,187 | | | $ | 64,961 | | | $ | 57,529 | | NET INCOME | $ | 14,189 | | | $ | 21,623 | | | $ | 30,429 | | | $ | 43,809 | |
| Basic earnings per share ("EPS") | Basic earnings per share ("EPS") | $ | 0.16 | | | $ | 0.13 | | | $ | 0.48 | | | $ | 0.42 | | Basic earnings per share ("EPS") | $ | 0.11 | | | $ | 0.16 | | | $ | 0.23 | | | $ | 0.32 | |
Diluted EPS | Diluted EPS | $ | 0.16 | | | $ | 0.13 | | | $ | 0.48 | | | $ | 0.42 | | Diluted EPS | $ | 0.11 | | | $ | 0.16 | | | $ | 0.23 | | | $ | 0.32 | |
| 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 | 133,150,224 | | | 135,676,722 | | | 133,903,769 | | | 135,651,609 | |
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 | 133,150,224 | | | 135,676,722 | | | 133,903,769 | | | 135,651,609 | |
| 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 | | For the Six Months Ended |
| | June 30, | | June 30, | | March 31, | | March 31, |
| | 2022 | | 2021 | | 2022 | | 2021 | | 2023 | | 2022 | | 2023 | | 2022 |
Net income | Net income | $ | 21,152 | | | $ | 18,187 | | | $ | 64,961 | | | $ | 57,529 | | Net income | $ | 14,189 | | | $ | 21,623 | | | $ | 30,429 | | | $ | 43,809 | |
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 $(5,415), $21,123, $(9,626), and $24,667 | | Changes in unrealized gains/losses on AFS securities, net of taxes of $(5,415), $21,123, $(9,626), and $24,667 | 16,777 | | | (65,445) | | | 29,827 | | | (76,427) | |
| 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 $910, $(4,153), $915, and $(5,430) | | Changes in unrealized gains/losses on cash flow hedges, net of taxes of $910, $(4,153), $915, and $(5,430) | (2,818) | | | 12,864 | | | (2,837) | | | 16,825 | |
| Comprehensive income (loss) | $ | (4,866) | | | $ | 23,802 | | | $ | (20,659) | | | $ | 60,696 | | |
Comprehensive income | | Comprehensive income | $ | 28,148 | | | $ | (30,958) | | | $ | 57,419 | | | $ | (15,793) | |
| 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 Six Months Ended March 31, 2023 |
| | | 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) | | |
Other comprehensive income, net of tax | | Other comprehensive income, net of tax | | 13,031 | | | 13,031 | |
| ESOP activity | ESOP activity | | 74 | | | 413 | | | 487 | | ESOP activity | | (72) | | | 413 | | | 341 | |
Restricted stock activity, net | | (3) | | | (3) | | |
| Stock-based compensation | Stock-based compensation | | 123 | | | 123 | | Stock-based compensation | | 89 | | | 89 | |
Repurchase of common stock | | Repurchase of common stock | (27) | | | (22,169) | | | (22,196) | |
| 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 | | |
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 | |
| Net income | Net income | | | | | | | 21,623 | | | | | 21,623 | | Net income | | | | | | | 14,189 | | | | | 14,189 | |
Other comprehensive loss, net of tax | | (52,581) | | | (52,581) | | |
Other comprehensive income, net of tax | | Other comprehensive income, net of tax | | 13,959 | | | 13,959 | |
| ESOP activity | ESOP activity | | 48 | | | 413 | | | 461 | | ESOP activity | | (76) | | | 412 | | | 336 | |
| Stock-based compensation | Stock-based compensation | | 124 | | | 124 | | Stock-based compensation | | 74 | | | 74 | |
| Cash dividends to stockholders ($0.085 per share) | Cash dividends to stockholders ($0.085 per share) | | (11,535) | | | (11,535) | | Cash dividends to stockholders ($0.085 per share) | | (11,319) | | | (11,319) | |
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) | | |
Balance at March 31, 2023 | | Balance at March 31, 2023 | $ | 1,361 | | | $ | 1,168,059 | | | $ | (28,910) | | | $ | 50,167 | | | $ | (118,643) | | | $ | 1,072,034 | |
| | | 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) | |
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| For the Six Months Ended March 31, 2022 |
| | | 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 | |
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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 | |
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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 | |
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Net income | | | | | | | 21,623 | | | | | 21,623 | |
Other comprehensive loss, net of tax | | | | | | | | (52,581) | | | (52,581) | |
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ESOP activity | | | 48 | | | 413 | | | | | | | 461 | |
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Stock-based compensation | | | 124 | | | | | | | | | 124 | |
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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 | |
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CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY |
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) |
(Dollars in thousands, except per share amounts) |
| | | | | | | | | | | |
| For the 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 | |
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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) | |
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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 | |
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Net income | | | | | | | 20,444 | | | | | 20,444 | |
Other comprehensive loss, net of tax | | | | | | | | (7,582) | | | (7,582) | |
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ESOP activity | | | 132 | | | 413 | | | | | | | 545 | |
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Stock-based compensation | | | 134 | | | | | | | | | 134 | |
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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 | |
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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 | |
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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 | |
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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 Six Months Ended |
| | June 30, | | March 31, |
| | 2022 | | 2021 | | 2023 | | 2022 |
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 | 30,429 | | | 43,809 | |
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 | (7,765) | | | (3,471) | |
Provision for credit losses | Provision for credit losses | (5,690) | | | (7,187) | | Provision for credit losses | 4,551 | | | (6,627) | |
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") | (218) | | | (678) | |
Proceeds from sales of LHFS | Proceeds from sales of LHFS | 1,113 | | | 610 | | Proceeds from sales of LHFS | 215 | | | 697 | |
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 | 1,559 | | | 2,983 | |
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 | 4,581 | | | 4,678 | |
Amortization of intangible assets | Amortization of intangible assets | 1,049 | | | 1,264 | | Amortization of intangible assets | 548 | | | 700 | |
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 | 886 | | | 897 | |
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 | 677 | | | 948 | |
Stock-based compensation | Stock-based compensation | 373 | | | 379 | | Stock-based compensation | 163 | | | 247 | |
| 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 from derivative counterparties, net | | Unrestricted cash collateral from derivative counterparties, net | (2,500) | | | — | |
Other assets, net | Other assets, net | 6,307 | | | 8,776 | | Other assets, net | 1,461 | | | 5,092 | |
Income taxes payable/receivable, net | Income taxes payable/receivable, net | (2,921) | | | (1,703) | | Income taxes payable/receivable, net | (2,650) | | | 186 | |
Deferred income tax liabilities, net | Deferred income tax liabilities, net | 2,182 | | | (511) | | Deferred income tax liabilities, net | 787 | | | 1,027 | |
Other liabilities | Other liabilities | (13,095) | | | (10,780) | | Other liabilities | (7,990) | | | (13,996) | |
Net cash provided by operating activities | Net cash provided by operating activities | 63,394 | | | 51,377 | | Net cash provided by operating activities | 24,734 | | | 36,492 | |
| CASH FLOWS FROM INVESTING ACTIVITIES: | CASH FLOWS FROM INVESTING ACTIVITIES: | | CASH FLOWS FROM INVESTING ACTIVITIES: | |
Purchase of AFS securities | Purchase of AFS securities | (86,993) | | | (953,818) | | Purchase of AFS securities | — | | | (58,546) | |
| 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 | 95,393 | | | 188,658 | |
| 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 | 214,120 | | | 95,724 | |
Purchase of FHLB stock | Purchase of FHLB stock | (196,727) | | | (1,029) | | Purchase of FHLB stock | (233,827) | | | (93,288) | |
Net change in loans receivable | Net change in loans receivable | (151,805) | | | 179,277 | | Net change in loans receivable | (503,585) | | | (23,356) | |
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 | (2,269) | | | (2,518) | |
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") | 347 | | | 487 | |
| 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) | |
Proceeds from bank-owned life insurance ("BOLI") death benefit | | Proceeds from bank-owned life insurance ("BOLI") death benefit | — | | | 803 | |
Net cash (used in) provided by investing activities | | Net cash (used in) provided by investing activities | (424,258) | | | 107,964 | |
| | | | (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 Six Months Ended |
| | June 30, | | March 31, |
| | 2022 | | 2021 | | 2023 | | 2022 |
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 | (60,528) | | | (52,920) | |
Net change in deposits | Net change in deposits | (267,513) | | | 446,886 | | Net change in deposits | (50,431) | | | 17,448 | |
Proceeds from borrowings | Proceeds from borrowings | 1,079,402 | | | 803,800 | | Proceeds from borrowings | 3,092,000 | | | 793,702 | |
Repayments on borrowings | Repayments on borrowings | (793,702) | | | (1,006,800) | | Repayments on borrowings | (2,528,436) | | | (793,702) | |
| 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 | (19,872) | | | (6,827) | |
| 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 | 410,537 | | | (42,299) | |
| NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | | NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | 11,013 | | | 102,157 | |
| 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 | 60,207 | | | 172,449 | |
| | | | 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 includedconsisted entirely of cash and cash equivalents of $54.8$60.2 million and $42.3$49.2 million at June 30, 2022March 31, 2023 and September 30, 2021, respectively, and included2022, respectively. At times, the Company holds restricted cash, of $28.0 million at September 30, 2021, which was includedis reported in other assets on the consolidated balance sheet. There was no restricted cash at June 30, 2022. The restricted cash relatessheet, 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 March 31, 2023 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 ASUAccounting 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 evaluatingWhile the effectadoption 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.
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 | | For the Six Months Ended |
| | June 30, | | June 30, | | March 31, | | March 31, |
| | 2022 | | 2021 | | 2022 | | 2021 | | 2023 | | 2022 | | 2023 | | 2022 |
| | (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 | $ | 14,189 | | | $ | 21,623 | | | $ | 30,429 | | | $ | 43,809 | |
Income allocated to participating securities | Income allocated to participating securities | (11) | | | (12) | | | (35) | | | (39) | | Income allocated to participating securities | (6) | | | (12) | | | (14) | | | (24) | |
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 | $ | 14,183 | | | $ | 21,611 | | | $ | 30,415 | | | $ | 43,785 | |
| 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 | 133,150,224 | | | 135,676,722 | | | 133,903,769 | | | 135,651,609 | |
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 | 133,150,224 | | | 135,676,722 | | | 133,903,769 | | | 135,651,609 | |
| Net EPS: | Net EPS: | | Net EPS: | |
Basic | Basic | $ | 0.16 | | | $ | 0.13 | | | $ | 0.48 | | | $ | 0.42 | | Basic | $ | 0.11 | | | $ | 0.16 | | | $ | 0.23 | | | $ | 0.32 | |
Diluted | Diluted | $ | 0.16 | | | $ | 0.13 | | | $ | 0.48 | | | $ | 0.42 | | Diluted | $ | 0.11 | | | $ | 0.16 | | | $ | 0.23 | | | $ | 0.32 | |
| 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 | 373,541 | | | 543,031 | | | 375,808 | | | 543,400 | |
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 | | March 31, 2023 |
| | | 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 | $ | 1,146,526 | | | $ | 196 | | | $ | 124,742 | | | $ | 1,021,980 | |
GSE debentures | GSE debentures | 519,976 | | | — | | | 36,783 | | | 483,193 | | GSE debentures | 519,981 | | | — | | | 40,741 | | | 479,240 | |
Corporate bonds | Corporate bonds | 4,000 | | | 19 | | | 9 | | | 4,010 | | Corporate bonds | 4,000 | | | — | | | 438 | | | 3,562 | |
Municipal bonds | Municipal bonds | 210 | | | — | | | — | | | 210 | | Municipal bonds | 1,031 | | | — | | | 5 | | | 1,026 | |
| | $ | 1,830,262 | | | $ | 1,071 | | | $ | 137,173 | | | $ | 1,694,160 | | | $ | 1,671,538 | | | $ | 196 | | | $ | 165,926 | | | $ | 1,505,808 | |
|
| | | 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 | | March 31, 2023 |
| | 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 | $ | 87,004 | | | $ | 2,056 | | | $ | 911,575 | | | $ | 122,686 | |
GSE debentures | GSE debentures | 209,978 | | | 15,022 | | | 273,215 | | | 21,761 | | GSE debentures | — | | | — | | | 479,240 | | | 40,741 | |
Corporate bonds | Corporate bonds | 1,991 | | | 9 | | | — | | | — | | Corporate bonds | 3,562 | | | 438 | | | — | | | — | |
Municipal bonds | Municipal bonds | — | | | — | | | — | | | — | | Municipal bonds | 1,026 | | | 5 | | | — | | | — | |
| | $ | 891,468 | | | $ | 64,125 | | | $ | 727,071 | | | $ | 73,048 | | | $ | 91,592 | | | $ | 2,499 | | | $ | 1,390,815 | | | $ | 163,427 | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| 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 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
The unrealized losses at June 30, 2022March 31, 2023 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, 2022March 31, 2023 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, 2022,March 31, 2023, 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 | | | $ | 24,286 | | |
One year through five years | One year through five years | 519,976 | | | 483,193 | | | One year through five years | 494,981 | | | 454,954 | | |
Five years through ten years | Five years through ten years | 4,000 | | | 4,010 | | | Five years through ten years | 5,031 | | | 4,588 | | |
| | | 524,186 | | | 487,413 | | | | 525,012 | | | 483,828 | | |
MBS | MBS | 1,306,076 | | | 1,206,747 | | | MBS | 1,146,526 | | | 1,021,980 | | |
| | $ | 1,830,262 | | | $ | 1,694,160 | | | | $ | 1,671,538 | | | $ | 1,505,808 | | |
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 | | For the Six Months Ended |
| March 31, | | March 31, |
| 2023 | | 2022 | | 2023 | | 2022 |
| (Dollars in thousands) |
Taxable | $ | 888 | | | $ | 790 | | | $ | 1,762 | | | $ | 1,580 | |
Non-taxable | 7 | | | 10 | | | 14 | | | 28 | |
| $ | 895 | | | $ | 800 | | | $ | 1,776 | | | $ | 1,608 | |
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 | |
| | | | | | | | | | | |
| |
| March 31, 2023 | | September 30, 2022 |
| (Dollars in thousands) |
FHLB advances | $ | 576,765 | | | $ | 572,913 | |
Public unit deposits | 155,864 | | | 125,496 | |
Federal Reserve Bank of Kansas City ("FRB of Kansas City") borrowings | 42,723 | | | 46,283 | |
| | | |
| | | |
| $ | 775,352 | | | $ | 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.
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 | | March 31, 2023 | | 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 | $ | 4,003,823 | | | $ | 3,988,469 | |
Correspondent purchased | Correspondent purchased | 2,070,822 | | | 2,003,477 | | Correspondent purchased | 2,468,647 | | | 2,201,886 | |
Bulk purchased | Bulk purchased | 151,461 | | | 173,662 | | Bulk purchased | 142,527 | | | 147,939 | |
Construction | Construction | 60,426 | | | 39,142 | | Construction | 68,355 | | | 66,164 | |
Total | Total | 6,246,317 | | | 6,172,345 | | Total | 6,683,352 | | | 6,404,458 | |
Commercial: | Commercial: | | | | Commercial: | | | |
Commercial real estate | Commercial real estate | 717,947 | | | 676,908 | | Commercial real estate | 874,718 | | | 745,301 | |
Commercial and industrial | Commercial and industrial | 70,932 | | | 66,497 | | Commercial and industrial | 90,200 | | | 79,981 | |
Construction | Construction | 115,031 | | | 85,963 | | Construction | 216,685 | | | 141,062 | |
Total | Total | 903,910 | | | 829,368 | | Total | 1,181,603 | | | 966,344 | |
Consumer: | Consumer: | | | | Consumer: | | | |
Home equity | Home equity | 87,235 | | | 86,274 | | Home equity | 92,506 | | | 92,203 | |
Other | Other | 8,289 | | | 8,086 | | Other | 8,664 | | | 8,665 | |
Total | Total | 95,524 | | | 94,360 | | Total | 101,170 | | | 100,868 | |
| Total loans receivable | Total loans receivable | 7,245,751 | | | 7,096,073 | | Total loans receivable | 7,966,125 | | | 7,471,670 | |
| Less: | Less: | | Less: | |
ACL | ACL | 16,283 | | | 19,823 | | ACL | 19,889 | | | 16,371 | |
Deferred loan fees/discounts | Deferred loan fees/discounts | 29,470 | | | 29,556 | | Deferred loan fees/discounts | 30,830 | | | 29,736 | |
Premiums/deferred costs | Premiums/deferred costs | (36,198) | | | (34,448) | | Premiums/deferred costs | (43,161) | | | (38,645) | |
| | $ | 7,236,196 | | | $ | 7,081,142 | | | $ | 7,958,567 | | | $ | 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 concentrationconcentrations 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.
The following table setstables 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, 2022March 31, 2023 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 | | March 31, 2023 |
| | 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 | $ | 166,083 | | | $ | 578,258 | | | $ | 912,340 | | | $ | 597,495 | | | $ | 267,725 | | | $ | 1,511,800 | | | $ | — | | | $ | 4,033,701 | |
Special Mention | Special Mention | 33 | | | 255 | | | 1,213 | | | 621 | | | 598 | | | 8,261 | | | — | | | 10,981 | | Special Mention | 184 | | | 1,192 | | | 760 | | | 1,365 | | | 1,274 | | | 9,070 | | | — | | | 13,845 | |
Substandard | Substandard | — | | | 115 | | | 279 | | | 1,031 | | | 256 | | | 8,949 | | | — | | | 10,630 | | Substandard | — | | | 187 | | | 110 | | | 277 | | | 734 | | | 7,269 | | | — | | | 8,577 | |
Correspondent purchased | Correspondent purchased | | Correspondent purchased | |
Pass | Pass | 311,564 | | | 667,434 | | | 279,606 | | | 72,042 | | | 107,281 | | | 650,328 | | | — | | | 2,088,255 | | Pass | 309,170 | | | 531,455 | | | 633,831 | | | 261,631 | | | 66,403 | | | 690,477 | | | — | | | 2,492,967 | |
Special Mention | Special Mention | — | | | — | | | — | | | 351 | | | 979 | | | 1,840 | | | — | | | 3,170 | | Special Mention | — | | | 396 | | | 1,013 | | | — | | | 353 | | | 1,761 | | | — | | | 3,523 | |
Substandard | Substandard | — | | | — | | | — | | | 168 | | | 516 | | | 3,813 | | | — | | | 4,497 | | Substandard | — | | | — | | | — | | | — | | | 168 | | | 3,313 | | | — | | | 3,481 | |
Bulk purchased | Bulk purchased | | Bulk purchased | |
Pass | Pass | — | | | — | | | — | | | — | | | — | | | 147,961 | | | — | | | 147,961 | | Pass | — | | | — | | | — | | | — | | | — | | | 139,489 | | | — | | | 139,489 | |
Special Mention | Special Mention | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | Special Mention | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Substandard | Substandard | — | | | — | | | — | | | — | | | — | | | 4,055 | | | — | | | 4,055 | | Substandard | — | | | — | | | — | | | — | | | — | | | 3,543 | | | — | | | 3,543 | |
| | 742,687 | | | 1,608,062 | | | 920,678 | | | 362,920 | | | 328,547 | | | 2,292,956 | | | — | | | 6,255,850 | | | 475,437 | | | 1,111,488 | | | 1,548,054 | | | 860,768 | | | 336,657 | | | 2,366,722 | | | — | | | 6,699,126 | |
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 | 228,869 | | | 301,638 | | | 231,200 | | | 120,670 | | | 83,873 | | | 83,290 | | | 8,676 | | | 1,058,216 | |
Special Mention | Special Mention | — | | | 46,366 | | | — | | | — | | | — | | | — | | | — | | | 46,366 | | Special Mention | — | | | 28,439 | | | — | | | — | | | — | | | — | | | — | | | 28,439 | |
Substandard | Substandard | 442 | | | 599 | | | 594 | | | 222 | | | 230 | | | 30 | | | — | | | 2,117 | | Substandard | — | | | — | | | — | | | 594 | | | 219 | | | 288 | | | — | | | 1,101 | |
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 | 19,289 | | | 25,176 | | | 14,267 | | | 4,337 | | | 3,191 | | | 1,063 | | | 22,082 | | | 89,405 | |
Special Mention | Special Mention | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | Special Mention | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Substandard | Substandard | — | | | — | | | — | | | — | | | 81 | | | 32 | | | 852 | | | 965 | | Substandard | — | | | 16 | | | — | | | 73 | | | — | | | 83 | | | 610 | | | 782 | |
| | 245,425 | | | 312,368 | | | 135,497 | | | 92,445 | | | 44,767 | | | 51,778 | | | 18,648 | | | 900,928 | | | 248,158 | | | 355,269 | | | 245,467 | | | 125,674 | | | 87,283 | | | 84,724 | | | 31,368 | | | 1,177,943 | |
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 | 2,548 | | | 5,997 | | | 2,162 | | | 1,342 | | | 890 | | | 2,643 | | | 76,618 | | | 92,200 | |
Special Mention | Special Mention | — | | | — | | | — | | | — | | | — | | | — | | | 288 | | | 288 | | Special Mention | — | | | 46 | | | — | | | — | | | — | | | — | | | 245 | | | 291 | |
Substandard | Substandard | — | | | — | | | — | | | 19 | | | — | | | 12 | | | 353 | | | 384 | | Substandard | — | | | — | | | — | | | — | | | 18 | | | 15 | | | 198 | | | 231 | |
Other | Other | | Other | |
Pass | Pass | 3,215 | | | 2,216 | | | 1,014 | | | 576 | | | 697 | | | 212 | | | 357 | | | 8,287 | | Pass | 2,382 | | | 3,479 | | | 1,301 | | | 549 | | | 221 | | | 389 | | | 333 | | | 8,654 | |
Special Mention | Special Mention | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | Special Mention | — | | | — | | | — | | | 5 | | | — | | | — | | | — | | | 5 | |
Substandard | Substandard | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | Substandard | — | | | — | | | — | | | 4 | | | — | | | — | | | 2 | | | 6 | |
| | 7,047 | | | 4,757 | | | 2,627 | | | 1,636 | | | 1,782 | | | 2,448 | | | 75,404 | | | 95,701 | | | 4,930 | | | 9,522 | | | 3,463 | | | 1,900 | | | 1,129 | | | 3,047 | | | 77,396 | | | 101,387 | |
| Total | Total | $ | 995,159 | | | $ | 1,925,187 | | | $ | 1,058,802 | | | $ | 457,001 | | | $ | 375,096 | | | $ | 2,347,182 | | | $ | 94,052 | | | $ | 7,252,479 | | Total | $ | 728,525 | | | $ | 1,476,279 | | | $ | 1,796,984 | | | $ | 988,342 | | | $ | 425,069 | | | $ | 2,454,493 | | | $ | 108,764 | | | $ | 7,978,456 | |
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 | |
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 | | March 31, 2023 |
| | 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 | $ | 166,267 | | | $ | 579,374 | | | $ | 913,210 | | | $ | 598,648 | | | $ | 269,733 | | | $ | 1,523,705 | | | $ | — | | | $ | 4,050,937 | |
30-89 | 30-89 | — | | | 112 | | | 424 | | | 610 | | | 302 | | | 4,573 | | | — | | | 6,021 | | 30-89 | — | | | 76 | | | — | | | 489 | | | — | | | 3,538 | | | — | | | 4,103 | |
90+/FC | 90+/FC | — | | | 115 | | | — | | | 290 | | | 108 | | | 2,068 | | | — | | | 2,581 | | 90+/FC | — | | | 187 | | | — | | | — | | | — | | | 896 | | | — | | | 1,083 | |
Correspondent purchased | Correspondent purchased | | Correspondent purchased | |
Current | Current | 311,564 | | | 666,687 | | | 279,606 | | | 72,393 | | | 107,281 | | | 652,183 | | | — | | | 2,089,714 | | Current | 309,170 | | | 531,455 | | | 633,934 | | | 261,073 | | | 66,403 | | | 692,624 | | | — | | | 2,494,659 | |
30-89 | 30-89 | — | | | 747 | | | — | | | — | | | 979 | | | 1,787 | | | — | | | 3,513 | | 30-89 | — | | | 396 | | | 910 | | | 558 | | | 353 | | | 1,269 | | | — | | | 3,486 | |
90+/FC | 90+/FC | — | | | — | | | — | | | 168 | | | 516 | | | 2,011 | | | — | | | 2,695 | | 90+/FC | — | | | — | | | — | | | — | | | 168 | | | 1,658 | | | — | | | 1,826 | |
Bulk purchased | Bulk purchased | | Bulk purchased | |
Current | Current | — | | | — | | | — | | | — | | | — | | | 149,444 | | | — | | | 149,444 | | Current | — | | | — | | | — | | | — | | | — | | | 141,522 | | | — | | | 141,522 | |
30-89 | 30-89 | — | | | — | | | — | | | — | | | — | | | 755 | | | — | | | 755 | | 30-89 | — | | | — | | | — | | | — | | | — | | | 289 | | | — | | | 289 | |
90+/FC | 90+/FC | — | | | — | | | — | | | — | | | — | | | 1,817 | | | — | | | 1,817 | | 90+/FC | — | | | — | | | — | | | — | | | — | | | 1,221 | | | — | | | 1,221 | |
| | 742,687 | | | 1,608,062 | | | 920,678 | | | 362,920 | | | 328,547 | | | 2,292,956 | | | — | | | 6,255,850 | | | 475,437 | | | 1,111,488 | | | 1,548,054 | | | 860,768 | | | 336,657 | | | 2,366,722 | | | — | | | 6,699,126 | |
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 | 228,649 | | | 330,077 | | | 231,200 | | | 120,670 | | | 83,873 | | | 83,243 | | | 8,676 | | | 1,086,388 | |
30-89 | 30-89 | — | | | — | | | 72 | | | — | | | 109 | | | 494 | | | — | | | 675 | | 30-89 | 220 | | | — | | | — | | | — | | | — | | | 79 | | | — | | | 299 | |
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 | 19,289 | | | 25,176 | | | 14,267 | | | 4,337 | | | 3,191 | | | 1,063 | | | 22,692 | | | 90,015 | |
30-89 | 30-89 | — | | | — | | | — | | | 5 | | | 18 | | | — | | | — | | | 23 | | 30-89 | — | | | 16 | | | — | | | 73 | | | — | | | — | | | — | | | 89 | |
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 | | | 248,158 | | | 355,269 | | | 245,467 | | | 125,674 | | | 87,283 | | | 84,724 | | | 31,368 | | | 1,177,943 | |
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 | 2,548 | | | 6,043 | | | 2,162 | | | 1,342 | | | 891 | | | 2,609 | | | 76,766 | | | 92,361 | |
30-89 | 30-89 | — | | | — | | | — | | | — | | | — | | | 66 | | | 164 | | | 230 | | 30-89 | — | | | — | | | — | | | — | | | 17 | | | 37 | | | 262 | | | 316 | |
90+/FC | 90+/FC | — | | | — | | | — | | | — | | | — | | | 8 | | | 166 | | | 174 | | 90+/FC | — | | | — | | | — | | | — | | | — | | | 12 | | | 33 | | | 45 | |
Other | Other | | Other | |
Current | Current | 3,209 | | | 2,203 | | | 1,014 | | | 571 | | | 697 | | | 212 | | | 355 | | | 8,261 | | Current | 2,376 | | | 3,460 | | | 1,290 | | | 555 | | | 221 | | | 389 | | | 332 | | | 8,623 | |
30-89 | 30-89 | 6 | | | 13 | | | — | | | 5 | | | — | | | — | | | 2 | | | 26 | | 30-89 | 5 | | | 19 | | | 11 | | | — | | | — | | | — | | | 1 | | | 36 | |
90+/FC | 90+/FC | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | 90+/FC | 1 | | | — | | | — | | | 3 | | | — | | | — | | | 2 | | | 6 | |
| | 7,047 | | | 4,757 | | | 2,627 | | | 1,636 | | | 1,782 | | | 2,448 | | | 75,404 | | | 95,701 | | | 4,930 | | | 9,522 | | | 3,463 | | | 1,900 | | | 1,129 | | | 3,047 | | | 77,396 | | | 101,387 | |
| Total | Total | $ | 995,159 | | | $ | 1,925,187 | | | $ | 1,058,802 | | | $ | 457,001 | | | $ | 375,096 | | | $ | 2,347,182 | | | $ | 94,052 | | | $ | 7,252,479 | | Total | $ | 728,525 | | | $ | 1,476,279 | | | $ | 1,796,984 | | | $ | 988,342 | | | $ | 425,069 | | | $ | 2,454,493 | | | $ | 108,764 | | | $ | 7,978,456 | |
| | | 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 | |
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, 2022March 31, 2023 and September 30, 2021,2022, all loans 90 or more days delinquent were on nonaccrual status.
| | | June 30, 2022 | | March 31, 2023 |
| | | 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 | $ | 4,103 | | | $ | 1,083 | | | $ | 5,186 | | | $ | 4,050,937 | | | $ | 4,056,123 | |
Correspondent purchased | Correspondent purchased | 3,513 | | | 2,695 | | | 6,208 | | | 2,089,714 | | | 2,095,922 | | Correspondent purchased | 3,486 | | | 1,826 | | | 5,312 | | | 2,494,659 | | | 2,499,971 | |
Bulk purchased | Bulk purchased | 755 | | | 1,817 | | | 2,572 | | | 149,444 | | | 152,016 | | Bulk purchased | 289 | | | 1,221 | | | 1,510 | | | 141,522 | | | 143,032 | |
Commercial: | Commercial: | | Commercial: | |
Commercial real estate | Commercial real estate | 675 | | | 1,075 | | | 1,750 | | | 828,218 | | | 829,968 | | Commercial real estate | 299 | | | 1,069 | | | 1,368 | | | 1,086,388 | | | 1,087,756 | |
Commercial and industrial | Commercial and industrial | 23 | | | 113 | | | 136 | | | 70,824 | | | 70,960 | | Commercial and industrial | 89 | | | 83 | | | 172 | | | 90,015 | | | 90,187 | |
Consumer: | Consumer: | | Consumer: | |
Home equity | Home equity | 230 | | | 174 | | | 404 | | | 87,010 | | | 87,414 | | Home equity | 316 | | | 45 | | | 361 | | | 92,361 | | | 92,722 | |
Other | Other | 26 | | | — | | | 26 | | | 8,261 | | | 8,287 | | Other | 36 | | | 6 | | | 42 | | | 8,623 | | | 8,665 | |
| | $ | 11,243 | | | $ | 8,455 | | | $ | 19,698 | | | $ | 7,232,781 | | | $ | 7,252,479 | | | $ | 8,618 | | | $ | 5,333 | | | $ | 13,951 | | | $ | 7,964,505 | | | $ | 7,978,456 | |
| | | 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, 2022March 31, 2023 and September 30, 20212022 was $1.7$1.9 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, 2022was $160 thousand at March 31, 2023 and $328 thousand at September 30, 2021 was $258 thousand and $170 thousand, respectively.2022.
The following table presents the amortized cost at June 30, 2022March 31, 2023 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 | | March 31, 2023 | | 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 | $ | 1,270 | | | $ | 332 | | | $ | 3,135 | | | $ | 1,018 | |
Correspondent purchased | Correspondent purchased | 2,696 | | | 307 | | | 3,257 | | | 307 | | Correspondent purchased | 1,826 | | | — | | | 3,784 | | | 304 | |
Bulk purchased | Bulk purchased | 1,817 | | | 939 | | | 3,134 | | | 1,564 | | Bulk purchased | 1,478 | | | 887 | | | 1,157 | | | 630 | |
Commercial: | Commercial: | | Commercial: | |
Commercial real estate | Commercial real estate | 1,074 | | | 451 | | | 1,496 | | | 485 | | Commercial real estate | 1,100 | | | 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 | 45 | | | — | | | 172 | | | 19 | |
Other | Other | — | | | — | | | 13 | | | — | | Other | 6 | | | — | | | 1 | | | — | |
| | $ | 8,680 | | | $ | 2,726 | | | $ | 13,493 | | | $ | 4,763 | | | $ | 5,881 | | | $ | 1,821 | | | $ | 9,494 | | | $ | 2,581 | |
TDRs - The following tables present the amortized cost prior to restructuring and immediately after restructuring in all loans restructured during the periods presented. These tables do 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 | | For the Three Months Ended | | For the Six Months Ended |
| | June 30, 2022 | | June 30, 2022 | | March 31, 2023 | | March 31, 2023 |
| | 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 | — | | | $ | — | | | $ | — | | | 2 | | | $ | 124 | | | $ | 124 | | Originated | — | | | $ | — | | | $ | — | | | — | | | $ | — | | | $ | — | |
Correspondent purchased | Correspondent purchased | — | | | — | | | — | | | — | | | — | | | — | | Correspondent purchased | — | | | — | | | — | | | — | | | — | | | — | |
Bulk purchased | Bulk purchased | — | | | — | | | — | | | — | | | — | | | — | | Bulk purchased | 1 | | | 239 | | | 257 | | | 1 | | | 239 | | | 257 | |
Commercial: | Commercial: | | Commercial: | |
Commercial real estate | Commercial real estate | — | | | — | | | — | | | — | | | — | | | — | | Commercial real estate | — | | | — | | | — | | | — | | | — | | | — | |
Commercial and industrial | Commercial and industrial | — | | | — | | | — | | | 2 | | | 124 | | | 124 | | Commercial and industrial | — | | | — | | | — | | | — | | | — | | | — | |
Consumer: | Consumer: | | Consumer: | |
Home equity | Home equity | — | | | — | | | — | | | 1 | | | 19 | | | 19 | | Home equity | — | | | — | | | — | | | — | | | — | | | — | |
Other | Other | — | | | — | | | — | | | — | | | — | | | — | | Other | — | | | — | | | — | | | — | | | — | | | — | |
| | — | | | $ | — | | | $ | — | | | 5 | | | $ | 267 | | | $ | 267 | | | 1 | | | $ | 239 | | | $ | 257 | | | 1 | | | $ | 239 | | | $ | 257 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | |
| For the Three Months Ended | | For the Nine Months Ended |
| June 30, 2021 | | June 30, 2021 |
| 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 | — | | | $ | — | | | $ | — | | | 6 | | | $ | 1,518 | | | $ | 1,407 | |
Correspondent purchased | — | | | — | | | — | | | — | | | — | | | — | |
Bulk purchased | — | | | — | | | — | | | — | | | — | | | — | |
Commercial: | | | | | | | | | | | |
Commercial real estate | — | | | — | | | — | | | — | | | — | | | — | |
Commercial and industrial | — | | | — | | | — | | | — | | | — | | | — | |
Consumer: | | | | | | | | | | | |
Home equity | — | | | — | | | — | | | — | | | — | | | — | |
Other | — | | | — | | | — | | | — | | | — | | | — | |
| — | | | $ | — | | | $ | — | | | 6 | | | $ | 1,518 | | | $ | 1,407 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Three Months Ended | | For the Six Months Ended |
| March 31, 2022 | | March 31, 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 | 1 | | $ | 100 | | | $ | 100 | | | 2 | | $ | 124 | | | $ | 124 | |
Correspondent purchased | — | | — | | | — | | | — | | — | | | — | |
Bulk purchased | — | | — | | | — | | | — | | — | | | — | |
Commercial: | | | | | | | | | | | |
Commercial real estate | — | | — | | | — | | | — | | — | | | — | |
Commercial and industrial | 2 | | 124 | | | 124 | | | 2 | | 124 | | | 124 | |
Consumer: | | | | | | | | | | | |
Home equity | 1 | | 19 | | | 19 | | | 1 | | 19 | | | 19 | |
Other | — | | — | | | — | | | — | | — | | | — | |
| 4 | | $ | 243 | | | $ | 243 | | | 5 | | $ | 267 | | | $ | 267 | |
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 | | For the Six Months Ended |
| | June 30, 2022 | | June 30, 2021 | | June 30, 2022 | | June 30, 2021 | | March 31, 2023 | | March 31, 2022 | | March 31, 2023 | | March 31, 2022 |
| | Number of | | Amortized | | Number of | | Amortized | | 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 | | 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 March 31, 2023 |
| One- to Four-Family | | | | | | |
| | | Correspondent | | Bulk | | | | | | | | |
| Originated | | Purchased | | Purchased | | Total | | Commercial | | Consumer | | Total |
| (Dollars in thousands) |
Beginning balance | $ | 2,159 | | | $ | 2,987 | | | $ | 216 | | | $ | 5,362 | | | $ | 13,584 | | | $ | 243 | | | $ | 19,189 | |
Charge-offs | — | | | — | | | — | | | — | | | — | | | (16) | | | (16) | |
Recoveries | — | | | — | | | — | | | — | | | 1 | | | 1 | | | 2 | |
Provision for credit losses | (20) | | | 87 | | | 5 | | | 72 | | | 637 | | | 5 | | | 714 | |
Ending balance | $ | 2,139 | | | $ | 3,074 | | | $ | 221 | | | $ | 5,434 | | | $ | 14,222 | | | $ | 233 | | | $ | 19,889 | |
| | | | For the Nine Months Ended June 30, 2022 | | For the Six Months Ended March 31, 2023 |
| | One- to Four-Family | | | One- to Four-Family | |
| | | Correspondent | | Bulk | | | | | Correspondent | | Bulk | | |
| | Originated | | Purchased | | Purchased | | Total | | Commercial | | Consumer | | Total | | Originated | | Purchased | | Purchased | | Total | | Commercial | | Consumer | | Total |
| | (Dollars in thousands) | | (Dollars in thousands) |
Beginning balance | Beginning balance | $ | 1,612 | | | $ | 2,062 | | | $ | 304 | | | $ | 3,978 | | | $ | 15,652 | | | $ | 193 | | | $ | 19,823 | | Beginning balance | $ | 2,066 | | | $ | 2,734 | | | $ | 206 | | | $ | 5,006 | | | $ | 11,120 | | | $ | 245 | | | $ | 16,371 | |
| Charge-offs | Charge-offs | (4) | | | — | | | — | | | (4) | | | (10) | | | (16) | | | (30) | | Charge-offs | — | | | — | | | — | | | — | | | — | | | (20) | | | (20) | |
Recoveries | Recoveries | 137 | | | — | | | — | | | 137 | | | 101 | | | 12 | | | 250 | | Recoveries | 1 | | | — | | | — | | | 1 | | | 1 | | | 2 | | | 4 | |
Provision for credit losses | Provision for credit losses | 159 | | | 375 | | | (80) | | | 454 | | | (4,253) | | | 39 | | | (3,760) | | Provision for credit losses | 72 | | | 340 | | | 15 | | | 427 | | | 3,101 | | | 6 | | | 3,534 | |
Ending balance | Ending balance | $ | 1,904 | | | $ | 2,437 | | | $ | 224 | | | $ | 4,565 | | | $ | 11,490 | | | $ | 228 | | | $ | 16,283 | | Ending balance | $ | 2,139 | | | $ | 3,074 | | | $ | 221 | | | $ | 5,434 | | | $ | 14,222 | | | $ | 233 | | | $ | 19,889 | |
| | | For the Three Months Ended June 30, 2021 | | For the Three Months Ended March 31, 2022 |
| | One- to Four-Family | | | One- to Four-Family | |
| | | Correspondent | | Bulk | | | | | Correspondent | | Bulk | | |
| | Originated | | Purchased | | Purchased | | Total | | Commercial | | Consumer | | Total | | Originated | | Purchased | | Purchased | | Total | | Commercial | | Consumer | | Total |
| | (Dollars in thousands) | | (Dollars in thousands) |
Beginning balance | Beginning balance | $ | 1,536 | | | $ | 1,705 | | | $ | 747 | | | $ | 3,988 | | | $ | 19,157 | | | $ | 252 | | | $ | 23,397 | | Beginning balance | $ | 1,639 | | | $ | 2,082 | | | $ | 268 | | | $ | 3,989 | | | $ | 13,353 | | | $ | 193 | | | $ | 17,535 | |
Charge-offs | Charge-offs | (18) | | | — | | | — | | | (18) | | | — | | | (1) | | | (19) | | Charge-offs | — | | | — | | | — | | | — | | | — | | | (5) | | | (5) | |
Recoveries | Recoveries | 49 | | | — | | | — | | | 49 | | | 18 | | | 4 | | | 71 | | Recoveries | 2 | | | — | | | — | | | 2 | | | 13 | | | 4 | | | 19 | |
Provision for credit losses | Provision for credit losses | (32) | | | 34 | | | (73) | | | (71) | | | (2,642) | | | (12) | | | (2,725) | | Provision for credit losses | 68 | | | 47 | | | (27) | | | 88 | | | (2,335) | | | 10 | | | (2,237) | |
Ending balance | Ending balance | $ | 1,535 | | | $ | 1,739 | | | $ | 674 | | | $ | 3,948 | | | $ | 16,533 | | | $ | 243 | | | $ | 20,724 | | Ending balance | $ | 1,709 | | | $ | 2,129 | | | $ | 241 | | | $ | 4,079 | | | $ | 11,031 | | | $ | 202 | | | $ | 15,312 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| 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 Six Months Ended March 31, 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) | | | (6) | | | (20) | |
Recoveries | 11 | | | — | | | — | | | 11 | | | 49 | | | 5 | | | 65 | |
Provision for credit losses | 90 | | | 67 | | | (63) | | | 94 | | | (4,660) | | | 10 | | | (4,556) | |
Ending balance | $ | 1,709 | | | $ | 2,129 | | | $ | 241 | | | $ | 4,079 | | | $ | 11,031 | | | $ | 202 | | | $ | 15,312 | |
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, 2022.March 31, 2023. The key assumptions utilized in estimating the Company's ACL at June 30, 2022March 31, 2023 are discussed below.
•Economic Forecast - Management considered several economic forecasts provided by a third party and selected a weightedan economic forecast that was the most appropriate considering the facts and circumstances at June 30, 2022.March 31, 2023. The forecasted economic indices applied to the model at June 30, 2022March 31, 2023 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, 2022March 31, 2023 was the national unemployment rate. The forecastforecasted national unemployment rate in the economic scenario selected by management at June 30, 2022March 31, 2023 had the national unemployment rate gradually increasing to 4.3%3.8% by June 30, 2023March 31, 2024 which was the end of our four quarter forecast time period.
•Forecast and reversion to mean time periodperiods - The forecasted time period and the reversion to mean time period were each four quarters for all of the economic indices at June 30, 2022.March 31, 2023.
•Prepayment and curtailment assumptions - The assumptions used at June 30, 2022March 31, 2023 were generally based on actual historical prepayment and curtailment speeds for each respective loan pool in the model. During the current year, 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, 2022March 31, 2023 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 modificationsOther 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 forAt March 31, 2023 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 $1.02 billion and $992.6 million, respectively.
| | | | | | | | | | | | | | | | | | | | | | | |
| For the Three Months Ended | | For the Six Months Ended |
| March 31, 2023 | | March 31, 2022 | | March 31, 2023 | | March 31, 2022 |
| (Dollars in thousands) | | |
Beginning balance | $ | 5,591 | | | $ | 4,623 | | | $ | 4,751 | | | $ | 5,743 | |
Provision for credit losses | 177 | | | (951) | | | 1,017 | | | (2,071) | |
Ending balance | $ | 5,768 | | | $ | 3,672 | | | $ | 5,768 | | | $ | 3,672 | |
| | | | | | | | | | | | | | |
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, 2022March 31, 2023 and September 30, 2021,2022, the Bank had entered into interest rate swap agreements with a totalan 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, 2022March 31, 2023 and September 30, 2021,2022, the interest rate swap agreements had an average remaining term to maturity of 3.32.6 years and 4.13.1 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 Juneboth March 31, 2023 and September 30, 2022, the interest rate swaps were in a gain position with a total fair value of $1.3$8.8 million and $12.5 million respectively, 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 monthssix month periods ended June 30, 2022,March 31, 2023, $1.3 million and $4.8$2.1 million, respectively, was reclassified from AOCI as a decrease to interest expense. During the three and six month periods ended March 31, 2022, $1.7 million and $3.5 million 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, 2022,March 31, 2023, the Company estimated that $1.4$7.2 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$9.6 million and $12.1 million at JuneMarch 31, 2023 and September 30, 2022, and posted cash collateral of $28.0 million at September 30, 2021.respectively.
During the current year-to-datesix month period, 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 iswas 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 ninesix months ended June 30, 2022March 31, 2023 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 ninesix months ended June 30, 2022March 31, 2023 or during fiscal year 2021.2022. (Level 2)
The following tables provide the level of valuation assumption used to determine the carrying value of the Company's financial instruments measured at fair value on a recurring basis at the dates presented. The Company did not have any Level 3 financial instruments measured at fair value on a recurring basis at June 30, 2022March 31, 2023 or September 30, 2021.2022.
| | | June 30, 2022 | | March 31, 2023 |
| | | 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 | $ | 1,021,980 | | | $ | — | | | $ | 1,021,980 | | | $ | — | |
GSE debentures | GSE debentures | 483,193 | | | — | | | 483,193 | | | — | | GSE debentures | 479,240 | | | — | | | 479,240 | | | — | |
Corporate bonds | Corporate bonds | 4,010 | | | — | | | 4,010 | | | — | | Corporate bonds | 3,562 | | | — | | | 3,562 | | | — | |
Municipal bonds | Municipal bonds | 210 | | | — | | | 210 | | | — | | Municipal bonds | 1,026 | | | — | | | 1,026 | | | — | |
| | $ | 1,694,160 | | | $ | — | | | $ | 1,694,160 | | | $ | — | | | 1,505,808 | | | — | | | 1,505,808 | | | — | |
Interest rate swaps | Interest rate swaps | 1,281 | | | — | | | 1,281 | | | — | | Interest rate swaps | 8,795 | | | — | | | 8,795 | | | — | |
| | $ | 1,695,441 | | | $ | — | | | $ | 1,695,441 | | | $ | — | | | $ | 1,514,603 | | | $ | — | | | $ | 1,514,603 | | | $ | — | |
|
| | | 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 ninesix months ended June 30,March 31, 2023 and 2022 and 2021 that were still held in the portfolio as of June 30,March 31, 2023 and 2022 and 2021 was $4.3$3.6 million and $7.4$4.2 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 toadjust 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 ninesix months ended June 30,March 31, 2023 and March 31, 2022 and June 30, 2021 were downward adjustments to the book value of the
of the collateral for lack of marketability. During the ninesix months ended June 30,March 31, 2023, the adjustments ranged from 8% to 100%, with a weighted average of 21%. During the six months ended March 31, 2022, 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 ninesix months ended June 30, 2022 and 2021March 31, 2023 that was still held in the portfolio as of June 30, 2022 and 2021March 31, 2023 was $258 thousand and $177 thousand, respectively.$93 thousand. There was no OREO measured on a non-recurring basis during the six months ended March 31, 2022. The carrying value of the properties equaled the fair value of the properties at June 30, 2022March 31, 2023 and 2021.2022.
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 | | March 31, 2023 |
| | 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 | $ | 60,207 | | | $ | 60,207 | | | $ | 60,207 | | | $ | — | | | $ | — | |
AFS securities | AFS securities | 1,694,160 | | | 1,694,160 | | | — | | | 1,694,160 | | | — | | AFS securities | 1,505,808 | | | 1,505,808 | | | — | | | 1,505,808 | | | — | |
| Loans receivable | Loans receivable | 7,236,196 | | | 7,052,727 | | | — | | | — | | | 7,052,727 | | Loans receivable | 7,958,567 | | | 7,513,314 | | | — | | | — | | | 7,513,314 | |
| FHLB stock | FHLB stock | 87,696 | | | 87,696 | | | 87,696 | | | — | | | — | | FHLB stock | 128,096 | | | 128,096 | | | 128,096 | | | — | | | — | |
| Interest rate swaps | Interest rate swaps | 1,281 | | | 1,281 | | | — | | | 1,281 | | | — | | Interest rate swaps | 8,795 | | | 8,795 | | | — | | | 8,795 | | | — | |
Liabilities: | Liabilities: | | Liabilities: | |
Deposits | Deposits | 6,329,883 | | | 6,273,934 | | | 4,053,544 | | | 2,220,390 | | | — | | Deposits | 6,144,435 | | | 6,103,436 | | | 3,670,486 | | | 2,432,950 | | | — | |
Borrowings | Borrowings | 1,869,897 | | | 1,766,122 | | | 35,700 | | | 1,730,422 | | | — | | Borrowings | 2,696,604 | | | 2,643,537 | | | 203,400 | | | 2,440,137 | | | — | |
| | | | 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 | | | — | | |
|
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 March 31, 2023 |
| | 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 | $ | (142,069) | | | $ | 9,467 | | | $ | (132,602) | |
| Other comprehensive income (loss), before reclassifications | Other comprehensive income (loss), before reclassifications | (31,117) | | | 3,798 | | | (27,319) | | Other comprehensive income (loss), before reclassifications | 16,777 | | | (1,495) | | | 15,282 | |
Amount reclassified from AOCI, net of taxes of $(420) | — | | | 1,301 | | | 1,301 | | |
Amount reclassified from AOCI, net of taxes of $427 | | Amount reclassified from AOCI, net of taxes of $427 | — | | | (1,323) | | | (1,323) | |
Other comprehensive income (loss) | Other comprehensive income (loss) | (31,117) | | | 5,099 | | | (26,018) | | Other comprehensive income (loss) | 16,777 | | | (2,818) | | | 13,959 | |
| Ending balance | Ending balance | $ | (102,893) | | | $ | 968 | | | $ | (101,925) | | Ending balance | $ | (125,292) | | | $ | 6,649 | | | $ | (118,643) | |
| | | | | | | | | | | | | | | | | |
| For the Six Months Ended March 31, 2023 |
| Unrealized | | Unrealized | | |
| Gains (Losses) | | Gains (Losses) | | |
| on AFS | | on Cash Flow | | Total |
| Securities | | Hedges | | AOCI |
| (Dollars in thousands) |
Beginning balance | $ | (155,119) | | | $ | 9,486 | | | $ | (145,633) | |
| | | | | |
Other comprehensive income (loss), before reclassifications | 29,827 | | | (780) | | | 29,047 | |
Amount reclassified from AOCI, net of taxes of $664 | — | | | (2,057) | | | (2,057) | |
Other comprehensive income (loss) | 29,827 | | | (2,837) | | | 26,990 | |
| | | | | |
Ending balance | $ | (125,292) | | | $ | 6,649 | | | $ | (118,643) | |
| | | | | | | | | | | | | | | | | |
| For the Three Months Ended March 31, 2022 |
| Unrealized | | Unrealized | | |
| Gains (Losses) | | Gains (Losses) | | |
| on AFS | | on Cash Flow | | Total |
| Securities | | Hedges | | AOCI |
| (Dollars in thousands) |
Beginning balance | $ | (6,331) | | | $ | (16,995) | | | $ | (23,326) | |
| | | | | |
Other comprehensive income (loss), before reclassifications | (65,445) | | | 11,151 | | | (54,294) | |
Amount reclassified from AOCI, net of taxes of $(553) | — | | | 1,713 | | | 1,713 | |
Other comprehensive income (loss) | (65,445) | | | 12,864 | | | (52,581) | |
| | | | | |
Ending balance | $ | (71,776) | | | $ | (4,131) | | | $ | (75,907) | |
| | | | | | | | | | | | | | | | | |
| 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 Six Months Ended March 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 | $ | 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 | (76,427) | | | 13,329 | | | (63,098) | |
Amount reclassified from AOCI, net of taxes of $(3,717) | — | | | 11,515 | | | 11,515 | | |
Amount reclassified from AOCI, net of taxes of $(1,128) | | Amount reclassified from AOCI, net of taxes of $(1,128) | — | | | 3,496 | | | 3,496 | |
Other comprehensive income (loss) | Other comprehensive income (loss) | (14,091) | | | 17,258 | | | 3,167 | | Other comprehensive income (loss) | (76,427) | | | 16,825 | | | (59,602) | |
| Ending balance | Ending balance | $ | 9,637 | | | $ | (22,975) | | | $ | (13,338) | | Ending balance | $ | (71,776) | | | $ | (4,131) | | | $ | (75,907) | |
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;funding and maintain sufficient liquidity;
•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, and 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, 20212022 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$30.4 million, or $0.48$0.23 per share, for the current year nine-month period compared to net income of $57.5$43.8 million, or $0.42$0.32 per share, for the prior year nine-month period. The increasedecrease in net income was due primarily to an increase in net interest income, partially offset by higher income tax expense andrecording a lower negative provision for credit losses.losses of $4.6 million for the current year period compared to a $6.6 million release of provision for the prior year period. The net interest margin decreased six24 basis points, from 1.88%1.83% for the prior year period to 1.82%1.59% for the current year period. Excluding the effects of the leverage strategy, the net interest margin would have increased 16decreased 21 basis points, from 1.88%2.00% for the prior year period to 2.04%1.79% for the current year period. The increasedecrease in the net interest margin excluding the effects of the leverage strategy was due mainly to a reductionan increase in the weighted average cost of retailborrowings and deposits, which exceeded the increase in loan yields. Net interest margin compression is anticipated to continue, and the margin is expected to compress more in the near term, due to the shape of the yield curve and with liabilities repricing faster than assets, along with higher costing borrowings in order to fund loan growth, increasing the Bank's money market rates in response to competitor pricing, and deposit funds moving from lower costing deposit accounts to higher costing certificates of deposit and borrowings, which outpaceddeposit. See additional discussion in the decrease in weighted average asset yields."Fiscal Year 2023 Outlook" section below.
Total assets were $9.48$10.09 billion at JuneMarch 31, 2023, a $460.9 million increase from September 30, 2022,2022. The increase in assets was primarily a result of loan growth, mainly in the correspondent one- to four-family and commercial real estate loan portfolios. Total deposits were $6.14 billion at March 31, 2023, a decrease of $155.2$50.4 million from September 30, 2021. During2022. The decrease was mainly in money market account balances, which decreased $284.5 million, partially offset by a $226.3 million increase in retail certificates of deposit since September 30, 2022. The decrease in money market accounts was likely due to customers moving funds to alternative, higher yielding investment products, including certificates of deposit offered by the current year period, cashBank, and/or securities were partially reinvestedwithdrawing funds for customer spending. The growth in the loan portfolio which increased 2.9% onand decrease in deposits resulted in an annualized basis. Total deposits were $6.33increase in FHLB borrowings by $578.4 million during the current year period.
The Bank exceeded $10 billion in total assets at March 31, 2023 and may again at June 30, 2022, a decrease of $267.5 million from2023. It is management's expectation that the Bank will be under $10 billion in total assets at September 30, 2021. The majority2023. There are increased direct costs, additional regulatory burdens with indirect costs, and lost revenue, mainly related to interchange fees, associated with the Bank being over $10 billion in total assets at certain points in time and for consecutive periods of time. Being over $10 billion in total assets at March 31, 2023 did not result in any additional regulatory requirements, increased direct or indirect costs, or lost revenues. We continue to work on limiting the decrease occurred during the current quarter. Deposit outflows were replacedgrowth in total assets by reducing new correspondent one- to four-family purchases to near zero, along with limiting additional use of FHLB advances.advances for operating needs, and evaluating other balance sheet management opportunities.
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, 2022,March 31, 2023, loans 30 to 89 days delinquent were 0.16%0.11% of total loans receivable, net, and loans 90 or more days delinquent or in foreclosure were 0.12%0.07% of total loans receivable, net. During the current quarter and current year period,periods, net recoveriescharge-offs ("NCOs") were $220 thousand.$14 thousand and $16 thousand, respectively.
For short-term liquidity needs, the Bank has access to a line of credit at the FHLB in addition to the FRB of Kansas City discount window and the newly established FRB Bank Term Funding Program ("BTFP"). The Bank's FHLB borrowing limit was 50% of the Bank's Call Report total assets as of March 31, 2023. 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 the amount that can be borrowed through the BTFP is based upon the par value of securities pledged as collateral. Management estimated that the Bank had $2.85 billion in additional liquidity
available at March 31, 2023 based on the Bank's blanket collateral agreement with FHLB and the par value of unencumbered securities.
At June 30, 2022,March 31, 2023, the Bank had a one-year gap position of $(1.33) billion,$(803.5) million, or (14.0)(8.0)% of total assets, meaning the amount of interest-bearing liabilities exceeds the amount of interest-earning assets maturing or repricing during the same period. Despitenext year. This was compared to a negativeone-year gap position of $(1.02) billion, or (10.3)% of total assets, at December 31, 2022. The change in the netone-year gap amount was due primarily to a decrease in the amount of liability cash flows coming due in one year at March 31, 2023 compared to December 31, 2022 and an increase in the amount of asset cash flows coming due for the same time periods. This was primarily attributable to a decrease in the amount of non-maturity deposits projected by the Bank's interest income projection increasedrate risk model to mature within one year as of June 30, 2022March 31, 2023 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 theDecember 31, 2022, partially offset by an increase in market interest rates. This assumption is basedcash flows projected to be received on a historical analysisloans as of the Bank's deposit pricing behavior.March 31, 2023.
Management intends to implementis 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 expectedWe expect the new platform will allow us to better position the Bank for the future and allow for the introduction ofintroduce new products and services quickly, to enhance customer experiences. The implementation ofdrive 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, which will offer real-time alerts. Our customers will also have multiple options for real-time payments, which positions the new core systemBank for faster payment channels in the future. Management anticipates information technology and related conversion of data may resultexpenses will increase in increased third party expenses in the remainder of fiscal year 2022 and during fiscal year 2023.2023 in conjunction with the digital transformation.
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 | | Annualized |
| | June 30, | | March 31, | | Percent | | September 30, | | Percent | | March 31, | | December 31, | | Percent | | September 30, | | Percent |
| | 2022 | | 2022 | | Change | | 2021 | | Change | | 2023 | | 2022 | | Change | | 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 | $ | 10,085,770 | | | $ | 9,929,760 | | | 6.3 | % | | $ | 9,624,897 | | | 9.6 | % |
AFS securities | AFS securities | 1,694,160 | | | 1,780,419 | | | (19.4) | | | 2,014,608 | | | (21.2) | | AFS securities | 1,505,808 | | | 1,528,686 | | | (6.0) | | | 1,563,307 | | | (7.4) | |
Loans receivable, net | Loans receivable, net | 7,236,196 | | | 7,108,810 | | | 7.2 | | | 7,081,142 | | | 2.9 | | Loans receivable, net | 7,958,567 | | | 7,783,358 | | | 9.0 | | | 7,464,208 | | | 13.2 | |
Deposits | Deposits | 6,329,883 | | | 6,614,844 | | | (17.2) | | | 6,597,396 | | | (5.4) | | Deposits | 6,144,435 | | | 6,074,549 | | | 4.6 | | | 6,194,866 | | | (1.6) | |
Borrowings | Borrowings | 1,869,897 | | | 1,583,747 | | | 72.3 | | | 1,582,850 | | | 24.2 | | Borrowings | 2,696,604 | | | 2,645,195 | | | 7.8 | | | 2,132,154 | | | 52.9 | |
Stockholders' equity | Stockholders' equity | 1,131,740 | | | 1,174,752 | | | (14.6) | | | 1,242,273 | | | (11.9) | | Stockholders' equity | 1,072,034 | | | 1,054,795 | | | 6.5 | | | 1,096,499 | | | (4.5) | |
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 | % | | 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 | 133,150 | | | 134,641 | | | (4.4) | | | 135,773 | | | (3.9) | |
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 | 133,150 | | | 134,641 | | | (4.4) | | | 135,773 | | | (3.9) | |
During the current quarter, total assets increased by $156.0 million, which was primarily driven by loan growth of $175.2 million, mainly in the correspondent one- to four-family and commercial real estate loan portfolios. The one- to four-family correspondent loan portfolio increased $115.3 million, or 4.9%, primarily as a result of purchasing loans that were in the pipeline as of December 31, 2022 as the Bank continues to work towards reducing new correspondent purchases to near zero. Commercial loans increased $71.3 million, or 6.4%, during the current quarter, due to $42.0 million in commercial real estate originations and purchases along with $35.0 million in funding on existing construction loans.
Total liabilities increased $138.8 million during the current quarter due to an increase in deposits of $69.9 million, along with new borrowings of $58.4 million. The increase in deposit balances was due primarily to retail/commercial certificates of deposit, which increased $236.7 million, partially offset by a decrease in money market account balances, which decreased $159.3 million during the current quarter. The decrease in money market account balances was likely due to depositors moving funds to alternative, higher yield investment products and/or withdrawing funds for customer spending. Additionally, the Bank held a certificate of deposit promotional campaign during the current quarter which resulted in $177.3 million in new certificates of deposit at a weighted average rate of 4.34%; the majority of these funds were from customer transfers of existing deposits within the Bank. See additional discussion regarding net interest margin compression in "Fiscal Year 2023 Outlook" section below.
During the current fiscal year, loan balances increased $494.4 million and deposit balances decreased $50.4 million, which made it necessary to increase FHLB borrowings by $578.4 million during that time. The loan growth was primarily in the correspondent loan portfolio, as the Bank worked through its existing pipeline of applications, and commercial loan portfolio, which increased $266.8 million and $215.3 million, respectively. The decrease in deposits was primarily in the money market portfolio, partially offset by an increase in certificates of deposit. The FHLB borrowing increase was composed of $550.0 million of new advances with a weighted average maturity ("WAM") of 3.3 years and $128.4 million on the Bank's FHLB line of credit, partially offset by $100.0 million in FHLB advances that matured during the current year period.
At times, the Bank has utilized a leverage strategy to increase earnings. The leverage strategy during the current year involved borrowing up to $2.60 billion by entering into short-term FHLB advances. During the current quarter and current year period, cash flowsperiods, the average outstanding balance of leverage strategy borrowings was $979.2 million and $1.43 billion, respectively. The borrowings were repaid prior to March 31, 2023. The proceeds from the securities portfolio and/or excess operatingborrowings, net of the required FHLB stock holdings, which yielded 8.75% and 8.58% during the current quarter and current year periods, respectively, 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 were partially reinvested intodeposited at the loan portfolio. Loans receivable,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 $110 thousand during the current quarter, compared to $763 thousand for the quarter ended December 31, 2022. The decrease in net increased $155.1 millionincome was due to a lower net interest rate spread associated with the leverage strategy and a reduction in the size of the leverage strategy transaction because the borrowing capacity was needed for operational purposes. Net income attributable to the leverage strategy during the current year period due primarilywas $873 thousand, compared to a $74.5 million increase$545 thousand for the prior year period. Net income was higher in commercial loans and a $74.0 million increase in one- to four-family loans. The majority of the deposit outflows during the current year period occurred duringthan the prior year period as the leverage strategy was utilized more in the current quarteryear period. Management continues to monitor the net interest rate spread and were replaced with FHLB advances. The Bank has begunoverall profitability of the strategy. It is expected that the strategy will continue to increase offered rates on certificates of deposit and money market accounts, which has reducedbe utilized when it is profitable and/or the runoffborrowing capacity does not need to be used for other purposes. When the leverage strategy is 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 inplace, it reduces the fair value of AFS securitiesnet interest margin due to an increasethe amount of earnings from the transaction in market interest rates, along withcomparison to the paymentsize of a $0.20 per share True Blue Capitol dividend in June 2022.
the transaction.
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 10 basis points during the current quarter and 24 basis points during the current year period, due primarily to one- to four-family correspondent and commercial loan growth at interest rates higher than the existing portfolios, 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 approximately 5% during the current quarter and prior quarter, and 7% during the quarter ended September 30, 2022.
| | | June 30, 2022 | | March 31, 2022 | | September 30, 2021 | | March 31, 2023 | | December 31, 2022 | | September 30, 2022 |
| | Amount | | Rate | | 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 | $ | 4,003,823 | | | 3.28 | % | | $ | 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 | 2,468,647 | | | 3.39 | | | 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 | 142,527 | | | 1.36 | | | 145,209 | | | 1.31 | | | 147,939 | | | 1.24 | |
Construction | Construction | 60,426 | | | 2.84 | | | 50,512 | | | 2.78 | | | 39,142 | | | 2.82 | | Construction | 68,355 | | | 3.21 | | | 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 | 6,683,352 | | | 3.28 | | | 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 | 874,718 | | | 4.48 | | | 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 | 90,200 | | | 5.40 | | | 88,327 | | | 5.21 | | | 79,981 | | | 4.30 | |
Construction | Construction | 115,031 | | | 4.33 | | | 133,597 | | | 4.06 | | | 85,963 | | | 4.03 | | Construction | 216,685 | | | 6.30 | | | 188,516 | | | 5.97 | | | 141,062 | | | 5.34 | |
Total | Total | 903,910 | | | 4.11 | | | 883,284 | | | 3.96 | | | 829,368 | | | 3.99 | | Total | 1,181,603 | | | 4.89 | | | 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 | 92,506 | | | 8.17 | | | 95,352 | | | 7.55 | | | 92,203 | | | 6.28 | |
Other | Other | 8,289 | | | 4.14 | | | 7,858 | | | 4.18 | | | 8,086 | | | 4.19 | | Other | 8,664 | | | 4.66 | | | 9,022 | | | 4.43 | | | 8,665 | | | 4.21 | |
Total | Total | 95,524 | | | 4.96 | | | 90,736 | | | 4.54 | | | 94,360 | | | 4.57 | | Total | 101,170 | | | 7.87 | | | 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 | 7,966,125 | | | 3.57 | | | 7,791,670 | | | 3.47 | | | 7,471,670 | | | 3.33 | |
| Less: | Less: | | Less: | |
ACL | ACL | 16,283 | | | 15,312 | | | 19,823 | | | ACL | 19,889 | | | 19,189 | | | 16,371 | | |
Deferred loan fees/discounts | Deferred loan fees/discounts | 29,470 | | | 29,264 | | | 29,556 | | | Deferred loan fees/discounts | 30,830 | | | 30,513 | | | 29,736 | | |
Premiums/deferred costs | Premiums/deferred costs | (36,198) | | | (34,703) | | | (34,448) | | | Premiums/deferred costs | (43,161) | | | (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 | $ | 7,958,567 | | | $ | 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 |
| June 30, 2022 | | June 30, 2022 | | June 30, 2021 |
| Amount | | Rate | | Amount | | Rate | | Amount | | Rate |
| (Dollars in thousands) |
Beginning balance | $ | 7,118,683 | | | 3.16 | % | | $ | 7,096,073 | | | 3.21 | % | | $ | 7,224,996 | | | 3.55 | % |
Originated and refinanced | 260,799 | | | 3.88 | | | 787,635 | | | 3.44 | | | 1,157,075 | | | 2.85 | |
Purchased and participations | 153,362 | | | 3.50 | | | 476,068 | | | 3.06 | | | 620,079 | | | 2.91 | |
Change in undisbursed loan funds | 122 | | | | | (45,115) | | | | | (167,760) | | | |
Repayments | (287,123) | | | | | (1,068,621) | | | | | (1,782,211) | | | |
Principal recoveries/(charge-offs), net | 175 | | | | | 220 | | | | | (482) | | | |
Other | (267) | | | | | (509) | | | | | (72) | | | |
Ending balance | $ | 7,245,751 | | | 3.21 | | | $ | 7,245,751 | | | 3.21 | | | $ | 7,051,625 | | | 3.26 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | |
| For the Three Months Ended | | For the Six Months Ended |
| March 31, 2023 | | March 31, 2023 | | March 31, 2022 |
| Amount | | Rate | | Amount | | Rate | | Amount | | Rate |
| | | | | (Dollars in thousands) |
Beginning balance | $ | 7,791,670 | | | 3.47 | % | | $ | 7,471,670 | | | 3.33 | % | | $ | 7,096,073 | | | 3.21 | % |
Originated and refinanced | 181,011 | | | 5.97 | | | 545,398 | | | 5.41 | | | 526,836 | | | 3.21 | |
Purchased and participations | 215,600 | | | 5.59 | | | 550,905 | | | 5.41 | | | 322,706 | | | 2.86 | |
Change in undisbursed loan funds | (24,949) | | | | | (146,184) | | | | | (45,237) | | | |
Repayments | (197,193) | | | | | (449,992) | | | | | (781,498) | | | |
Principal recoveries/(charge-offs), net | (14) | | | | | (16) | | | | | 45 | | | |
Other | — | | | | | (5,656) | | | | | (242) | | | |
Ending balance | $ | 7,966,125 | | | 3.57 | | | $ | 7,966,125 | | | 3.57 | | | $ | 7,118,683 | | | 3.16 | |
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 Six Months Ended |
| | June 30, 2022 | | June 30, 2021 | | March 31, 2023 | | March 31, 2022 |
| | 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 | $ | 270,613 | | | 5.22 | % | | 24.7 | % | | $ | 509,180 | | | 2.79 | % | | 59.9 | % |
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 | 23,045 | | | 5.28 | | | 2.1 | | | 70,323 | | | 2.86 | | | 8.3 | |
Commercial: | Commercial: | | Commercial: | |
Real estate | Real estate | 43,939 | | | 3.91 | | | 3.5 | | | 18,481 | | | 3.62 | | | 1.1 | | Real estate | 10,628 | | | 6.02 | | | 1.0 | | | 41,444 | | | 3.85 | | | 4.9 | |
Commercial and industrial | Commercial and industrial | 13,039 | | | 3.77 | | | 1.0 | | | 42,582 | | | 2.22 | | | 2.4 | | Commercial and industrial | 15,634 | | | 6.52 | | | 1.4 | | | 7,909 | | | 3.68 | | | 0.9 | |
Construction | Construction | 68,998 | | | 3.27 | | | 5.5 | | | 42,165 | | | 3.65 | | | 2.4 | | Construction | 68,600 | | | 4.87 | | | 6.3 | | | 68,512 | | | 3.26 | | | 8.1 | |
Home equity | Home equity | 3,984 | | | 5.40 | | | 0.3 | | | 2,095 | | | 5.47 | | | 0.1 | | Home equity | 2,587 | | | 7.70 | | | 0.2 | | | 913 | | | 5.17 | | | 0.1 | |
Other | Other | 2,826 | | | 5.53 | | | 0.2 | | | 2,323 | | | 5.43 | | | 0.1 | | Other | 2,124 | | | 6.69 | | | 0.2 | | | 1,473 | | | 5.67 | | | 0.2 | |
Total fixed-rate | Total fixed-rate | 966,126 | | | 3.17 | | | 76.4 | | | 1,449,545 | | | 2.69 | | | 81.6 | | Total fixed-rate | 393,231 | | | 5.26 | | | 35.9 | | | 699,754 | | | 2.93 | | | 82.4 | |
| 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 | 268,836 | | | 4.85 | | | 24.5 | | | 21,739 | | | 2.68 | | | 2.5 | |
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 | 15,414 | | | 4.67 | | | 1.4 | | | 5,991 | | | 2.73 | | | 0.7 | |
Commercial: | Commercial: | | Commercial: | |
Real estate | Real estate | 79,851 | | | 4.08 | | | 6.3 | | | 105,348 | | | 3.63 | | | 5.9 | | Real estate | 202,727 | | | 5.34 | | | 18.5 | | | 57,901 | | | 3.99 | | | 6.8 | |
Commercial and industrial | Commercial and industrial | 31,413 | | | 3.81 | | | 2.5 | | | 9,492 | | | 3.78 | | | 0.5 | | Commercial and industrial | 34,514 | | | 7.15 | | | 3.1 | | | 26,784 | | | 3.80 | | | 3.2 | |
Construction | Construction | 19,742 | | | 4.02 | | | 1.6 | | | 105,555 | | | 4.10 | | | 6.0 | | Construction | 151,326 | | | 6.10 | | | 13.8 | | | 8,786 | | | 3.99 | | | 1.0 | |
Home equity | Home equity | 45,686 | | | 4.53 | | | 3.6 | | | 41,207 | | | 4.43 | | | 2.3 | | Home equity | 29,548 | | | 7.89 | | | 2.7 | | | 27,970 | | | 4.40 | | | 3.3 | |
Other | Other | 1,276 | | | 2.89 | | | 0.1 | | | 1,465 | | | 3.45 | | | 0.1 | | Other | 707 | | | 3.75 | | | 0.1 | | | 617 | | | 2.47 | | | 0.1 | |
Total adjustable-rate | Total adjustable-rate | 297,577 | | | 3.72 | | | 23.6 | | | 327,609 | | | 3.67 | | | 18.4 | | Total adjustable-rate | 703,072 | | | 5.50 | | | 64.1 | | | 149,788 | | | 3.79 | | | 17.6 | |
| 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 | $ | 1,096,303 | | | 5.41 | | | 100.0 | % | | $ | 849,542 | | | 3.08 | | | 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 | $ | 169,653 | | | 5.21 | | | $ | 243,509 | | | 2.73 | | |
| Participations - commercial | 69,057 | | | 3.25 | | | 38,114 | | | 3.62 | | | |
Participations and purchases - commercial | | Participations and purchases - commercial | 3,016 | | | 6.40 | | | 69,057 | | | 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 | 172,669 | | | 5.23 | | | 312,566 | | | 2.84 | | |
| 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 | 197,038 | | | 4.87 | | | 5,140 | | | 2.68 | | |
| Participations - commercial | 13,000 | | | 3.85 | | | 77,000 | | | 4.44 | | | |
Participations and purchases - commercial | | Participations and purchases - commercial | 181,198 | | | 6.18 | | | 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 | 378,236 | | | 5.50 | | | 10,140 | | | 3.33 | | |
Total purchased/participation loans | Total purchased/participation loans | $ | 476,068 | | | 3.06 | | | $ | 620,079 | | | 2.91 | | | Total purchased/participation loans | $ | 550,905 | | | 5.41 | | | $ | 322,706 | | | 2.86 | | |
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, 2022.March 31, 2023. Credit scores are updated at least annually, with the latest update in MarchSeptember 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 | $ | 4,003,823 | | | 60.5 | % | | 3.28 | % | | 771 | | | 60 | % | | $ | 162 | |
Correspondent purchased | Correspondent purchased | 2,070,822 | | | 33.5 | | | 2.99 | | | 765 | | | 64 | | | 412 | | Correspondent purchased | 2,468,647 | | | 37.3 | | | 3.39 | | | 767 | | | 65 | | | 420 | |
Bulk purchased | Bulk purchased | 151,461 | | | 2.4 | | | 1.27 | | | 773 | | | 57 | | | 285 | | Bulk purchased | 142,527 | | | 2.2 | | | 1.36 | | | 771 | | | 56 | | | 288 | |
| | $ | 6,185,891 | | | 100.0 | % | | 3.06 | | | 770 | | | 62 | | | 200 | | | $ | 6,614,997 | | | 100.0 | % | | 3.28 | | | 769 | | | 62 | | | 212 | |
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. The majority of the correspondent loans purchased during the current quarter were from applications in the pipeline at December 31, 2022 as the Bank continues to work to reduce correspondent purchases to near zero.
| | | For the Three Months Ended | | For the Nine Months Ended | | For the Three Months Ended | | For the Six Months Ended |
| | June 30, 2022 | | June 30, 2022 | | March 31, 2023 | | March 31, 2023 |
| | | Credit | | | Credit | | | Credit | | | Credit |
| | Amount | | Rate | | LTV | | Score | | 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 | $ | 84,709 | | | 5.22 | % | | 74 | % | | 769 | | | $ | 211,217 | | | 5.04 | % | | 75 | % | | 766 | |
Correspondent purchased | Correspondent purchased | 145,362 | | | 3.48 | | | 75 | | | 767 | | | 394,011 | | | 3.01 | | | 73 | | | 770 | | Correspondent purchased | 167,220 | | | 5.21 | | | 76 | | | 770 | | | 366,691 | | | 5.03 | | | 77 | | | 769 | |
| | | $ | 345,716 | | | 3.61 | | | 74 | | | 767 | | | $ | 952,949 | | | 3.09 | | | 72 | | | 768 | | | $ | 251,929 | | | 5.22 | | | 75 | | | 770 | | | $ | 577,908 | | | 5.03 | | | 76 | | | 768 | |
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, 2022,March 31, 2023, 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 | | $ | 86,153 | | | 5.67 | % |
Correspondent | Correspondent | | 77,156 | | | 3.82 | | Correspondent | | 14,870 | | | 4.59 | |
| | $ | 259,818 | | | 4.06 | | | $ | 101,023 | | | 5.51 | |
Commercial Loans - During the ninecurrent quarter and six months ended June 30, 2022,March 31, 2023, the Bank originated $174.9$79.9 million and $299.2 million of commercial loans, respectively, and entered into commercial loan participations totaling $82.1 million. During the quarter$48.4 million and nine months ended June 30, 2022, the$184.2 million, respectively. The Bank also processed commercial loan disbursements, excluding lines of credit, during the current quarter and six months ended March 31, 2023 of approximately $57.8$98.9 million and $232.0$306.7 million, respectively, at a weighted average rate of 4.37%6.27% and 4.04%5.45%, respectively.
As of June 30, 2022, March 31, 2023, December 31, 2022, and September 30, 2021,2022, the Bank's commercial and industrial gross loan amounts (unpaid principal plus undisbursed amounts) totaled $95.2$130.3 million, $101.3$113.2 million and $90.7$100.4 million, respectively, and commitments totaled $440 thousand, $1.4$7.0 million, $5.1 million and $16.9 million$458 thousand, 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, 2022,March 31, 2023, the Bank had 2611 commercial real estate and commercial construction loan commitments, totaling $65.5$91.6 million, at a weighted average rate of 4.17%6.78%. 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 March 31, 2023, management anticipates approximately $85 million will be funded during the June 2023 quarter, $84 million during the September 2023 quarter, $89 million during the December 2023 quarter, and $63 million during the March 2024 quarter.
| | | June 30, 2022 | | March 31, 2022 | | September 30, 2021 | | March 31, 2023 | | December 31, 2022 | | September 30, 2022 |
| | | Unpaid | | Undisbursed | | Gross Loan | | Gross Loan | | Gross Loan | | | Unpaid | | Undisbursed | | Gross Loan | | Gross Loan | | Gross Loan |
| | Count | | Principal | | Amount | | Amount | | Amount | | Amount | | Count | | Principal | | Amount | | Amount | | Amount | | Amount |
| | | | (Dollars in thousands) | | | | (Dollars in thousands) |
Retail building | | Retail building | 147 | | | $ | 248,467 | | | $ | 95,258 | | | $ | 343,725 | | | $ | 325,055 | | | $ | 230,153 | |
Senior housing | Senior housing | 34 | | | $ | 248,787 | | | $ | 79,334 | | | $ | 328,121 | | | $ | 331,230 | | | $ | 265,284 | | Senior housing | 35 | | | 281,352 | | | 44,123 | | | 325,475 | | | 327,414 | | | 328,259 | |
Retail building | 138 | | | 196,903 | | | 35,551 | | | 232,454 | | | 226,297 | | | 208,539 | | |
Hotel | Hotel | 11 | | | 160,521 | | | 32,380 | | | 192,901 | | | 194,287 | | | 194,665 | | Hotel | 13 | | | 209,251 | | | 26,463 | | | 235,714 | | | 216,604 | | | 181,546 | |
Multi-family | | Multi-family | 39 | | | 71,941 | | | 161,557 | | | 233,498 | | | 210,255 | | | 122,735 | |
Office building | Office building | 85 | | | 52,738 | | | 50,305 | | | 103,043 | | | 104,787 | | | 109,987 | | Office building | 87 | | | 104,968 | | | 26,730 | | | 131,698 | | | 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 | | | 62,405 | | | 9,299 | | | 71,704 | | | 72,339 | | | 68,907 | |
Single use building | 23 | | | 19,019 | | | 4,773 | | | 23,792 | | | 24,179 | | | 47,028 | | |
Warehouse/manufacturing | | Warehouse/manufacturing | 40 | | | 43,469 | | | 10,030 | | | 53,499 | | | 42,496 | | | 10,891 | |
Other | Other | 94 | | | 32,979 | | | 2,993 | | | 35,972 | | | 35,917 | | | 36,167 | | Other | 101 | | | 69,550 | | | 23,323 | | | 92,873 | | | 87,532 | | | 84,071 | |
| | 791 | | | $ | 832,978 | | | $ | 233,277 | | | $ | 1,066,255 | | | $ | 1,058,797 | | | $ | 997,043 | | | 852 | | | $ | 1,091,403 | | | $ | 396,783 | | | $ | 1,488,186 | | | $ | 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 | | 4.84 | % | | 5.95 | % | | 5.14 | % | | 4.91 | % | | 4.56 | % |
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 | | March 31, 2023 | | December 31, 2022 | | September 30, 2022 |
| | | Unpaid | | Undisbursed | | Gross Loan | | Gross Loan | | Gross Loan | | | Unpaid | | Undisbursed | | Gross Loan | | Gross Loan | | Gross Loan |
| | Count | | Principal | | Amount | | Amount | | Amount | | Amount | | Count | | Principal | | Amount | | Amount | | Amount | | Amount |
| | | | (Dollars in thousands) | | | | (Dollars in thousands) |
Kansas | Kansas | 600 | | | $ | 320,063 | | | $ | 57,888 | | | $ | 377,951 | | | $ | 366,403 | | | $ | 348,835 | | Kansas | 626 | | | $ | 441,411 | | | $ | 131,935 | | | $ | 573,346 | | | $ | 519,419 | | | $ | 423,797 | |
Missouri | Missouri | 157 | | | 227,027 | | | 53,343 | | | 280,370 | | | 281,230 | | | 232,041 | | Missouri | 179 | | | 253,277 | | | 110,155 | | | 363,432 | | | 335,400 | | | 296,443 | |
Texas | Texas | 11 | | | 182,086 | | | 90,688 | | | 272,774 | | | 274,020 | | | 273,124 | | Texas | 15 | | | 240,237 | | | 95,487 | | | 335,724 | | | 336,512 | | | 280,840 | |
Colorado | Colorado | 5 | | | 19,832 | | | 14,139 | | | 33,971 | | | 35,452 | | | 36,099 | | Colorado | 8 | | | 40,157 | | | 15,037 | | | 55,194 | | | 55,705 | | | 34,377 | |
Arkansas | 3 | | | 21,884 | | | 11,618 | | | 33,502 | | | 33,589 | | | 33,763 | | |
Tennessee | | Tennessee | 2 | | | 22,093 | | | 20,475 | | | 42,568 | | | 43,258 | | | — | |
Nebraska | Nebraska | 6 | | | 33,088 | | | 4 | | | 33,092 | | | 33,269 | | | 33,468 | | Nebraska | 8 | | | 33,810 | | | 4,057 | | | 37,867 | | | 37,817 | | | 32,992 | |
Other | Other | 9 | | | 28,998 | | | 5,597 | | | 34,595 | | | 34,834 | | | 39,713 | | Other | 14 | | | 60,418 | | | 19,637 | | | 80,055 | | | 68,428 | | | 67,766 | |
| | 791 | | | $ | 832,978 | | | $ | 233,277 | | | $ | 1,066,255 | | | $ | 1,058,797 | | | $ | 997,043 | | | 852 | | | $ | 1,091,403 | | | $ | 396,783 | | | $ | 1,488,186 | | | $ | 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, 2022.March 31, 2023.
| | | Count | | Amount | | Count | | Amount |
| | (Dollars in thousands) | | (Dollars in thousands) |
Greater than $30 million | Greater than $30 million | 6 | | | $ | 246,066 | | Greater than $30 million | 9 | | | $ | 438,526 | |
>$15 to $30 million | >$15 to $30 million | 16 | | | 335,698 | | >$15 to $30 million | 20 | | | 423,808 | |
>$10 to $15 million | >$10 to $15 million | 6 | | | 71,174 | | >$10 to $15 million | 11 | | | 131,234 | |
>$5 to $10 million | >$5 to $10 million | 20 | | | 131,051 | | >$5 to $10 million | 28 | | | 200,785 | |
$1 to $5 million | $1 to $5 million | 112 | | | 254,323 | | $1 to $5 million | 140 | | | 333,354 | |
Less than $1 million | Less than $1 million | 1,262 | | | 189,051 | | Less than $1 million | 1,238 | | | 189,375 | |
| | 1,422 | | | $ | 1,227,363 | | | 1,446 | | | $ | 1,717,082 | |
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.
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, 2022,March 31, 2023, approximately 61%79% 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, | | March 31, | | December 31, | | September 30, |
| | 2022 | | 2022 | | 2021 | | 2023 | | 2022 | | 2022 |
| | Number | | Amount | | 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 | 45 | | $ | 4,116 | | | 56 | | $ | 4,708 | | | 48 | | $ | 4,134 | |
Correspondent purchased | Correspondent purchased | 9 | | 3,467 | | | 10 | | 2,421 | | | 11 | | 5,133 | | Correspondent purchased | 10 | | 3,436 | | | 4 | | 1,216 | | | 7 | | 1,104 | |
Bulk purchased | Bulk purchased | 4 | | 755 | | | 2 | | 396 | | | 1 | | 154 | | Bulk purchased | 3 | | 287 | | | 3 | | 865 | | | 3 | | 913 | |
Commercial | Commercial | 6 | | 706 | | | 4 | | 373 | | | 2 | | 222 | | Commercial | 5 | | 389 | | | 6 | | 191 | | | — | | — | |
| Consumer | Consumer | 16 | | 256 | | | 14 | | 215 | | | 16 | | 164 | | Consumer | 22 | | 352 | | | 24 | | 626 | | | 24 | | 345 | |
| | 99 | | $ | 11,219 | | | 94 | | $ | 10,336 | | | 104 | | $ | 12,682 | | | 85 | | $ | 8,580 | | | 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 | | 0.11 | % | | 0.10 | % | | 0.09 | % |
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, | | March 31, | | December 31, | | September 30, |
| | 2022 | | 2022 | | 2021 | | 2023 | | 2022 | | 2022 |
| | Number | | Amount | | 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 | 15 | | | $ | 1,084 | | | 13 | | | $ | 1,034 | | | 29 | | | $ | 2,919 | |
Correspondent purchased | Correspondent purchased | 9 | | | 2,659 | | | 11 | | | 3,967 | | | 10 | | | 3,115 | | Correspondent purchased | 7 | | | 1,803 | | | 14 | | | 4,126 | | | 12 | | | 3,737 | |
Bulk purchased | Bulk purchased | 5 | | | 1,807 | | | 5 | | | 1,819 | | | 6 | | | 1,945 | | Bulk purchased | 3 | | | 1,212 | | | 4 | | | 1,492 | | | 3 | | | 1,148 | |
Commercial | Commercial | 7 | | | 1,184 | | | 6 | | | 1,167 | | | 6 | | | 1,170 | | Commercial | 7 | | | 1,152 | | | 7 | | | 1,152 | | | 8 | | | 1,167 | |
Consumer | Consumer | 9 | | | 174 | | | 19 | | | 400 | | | 25 | | | 477 | | Consumer | 7 | | | 51 | | | 11 | | | 126 | | | 9 | | | 154 | |
| | 66 | | | 8,409 | | | 85 | | | 11,352 | | | 95 | | | 10,650 | | | 39 | | | 5,302 | | | 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 | | 0.07 | % | | 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 | 2 | | | $ | 187 | | | 3 | | | $ | 219 | | | 3 | | | $ | 222 | |
Correspondent purchased | Correspondent purchased | — | | | — | | | — | | | — | | | — | | | — | | Correspondent purchased | — | | | — | | | — | | | — | | | — | | | — | |
Bulk purchased | Bulk purchased | — | | | — | | | — | | | — | | | — | | | — | | Bulk purchased | 1 | | | 257 | | | — | | | — | | | — | | | — | |
Commercial | Commercial | 1 | | | 4 | | | 2 | | | 34 | | | 3 | | | 62 | | Commercial | 3 | | | 104 | | | 2 | | | 84 | | | 1 | | | 77 | |
Consumer | Consumer | 1 | | | 19 | | | 2 | | | 27 | | | — | | | — | | Consumer | — | | | — | | | — | | | — | | | 1 | | | 19 | |
| | 4 | | | 230 | | | 9 | | | 566 | | | 8 | | | 513 | | | 6 | | | 548 | | | 5 | | | 303 | | | 5 | | | 318 | |
Total nonaccrual loans | Total nonaccrual loans | 70 | | | 8,639 | | | 94 | | | 11,918 | | | 103 | | | 11,163 | | Total nonaccrual loans | 45 | | | 5,850 | | | 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 | 0.07 | % | | 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 | | | $ | 160 | | | 2 | | | $ | 161 | | | 4 | | | $ | 307 | |
| Consumer | Consumer | 1 | | | 21 | | | — | | | — | | | — | | | — | | Consumer | — | | | — | | | 1 | | | 21 | | | 1 | | | 21 | |
| | | 3 | | | 258 | | | — | | | — | | | 2 | | | 319 | | | 2 | | | 160 | | | 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 | 47 | | | $ | 6,010 | | | 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 | 0.06 | % | | 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.
The following table presents the states where the properties securing fiveten 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, 2022.March 31, 2023. 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, 2022,March 31, 2023, 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 | | $ | 3,574,768 | | | 54.0 | % | | $ | 3,757 | | | 47.9 | % | | $ | 913 | | | 22.3 | % | | 53 | % |
Missouri | Missouri | | 1,053,438 | | | 17.0 | | | 2,511 | | | 24.5 | | | 1,364 | | | 19.4 | | | 63 | | Missouri | | 1,127,878 | | | 17.1 | | | 1,135 | | | 14.5 | | | 419 | | | 10.2 | | | 43 | |
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 | | 1,912,351 | | | 28.9 | | | 2,947 | | | 37.6 | | | 2,767 | | | 67.5 | | | 46 | |
| | | $ | 6,185,891 | | | 100.0 | % | | $ | 10,257 | | | 100.0 | % | | $ | 7,051 | | | 100.0 | % | | 53 | | | $ | 6,614,997 | | | 100.0 | % | | $ | 7,839 | | | 100.0 | % | | $ | 4,099 | | | 100.0 | % | | 47 | |
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 decreaseincrease in commercial special mention loans at June 30, 2022March 31, 2023 compared to September 30, 20212022 was due mainly to two loans in a single commercial loansrelationship moving to the pass classificationspecial mention during the December 31, 20212022 quarter as thecertain 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 comprisedshowed 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 | | March 31, 2023 | | December 31, 2022 | | September 30, 2022 |
| | Special Mention | | Substandard | | 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 | $ | 17,368 | | | $ | 15,636 | | | $ | 16,471 | | | $ | 18,301 | | | $ | 12,950 | | | $ | 19,953 | |
Commercial | Commercial | 46,366 | | | 3,078 | | | 99,729 | | | 3,259 | | Commercial | 28,441 | | | 1,881 | | | 28,441 | | | 2,413 | | | 565 | | | 2,733 | |
Consumer | Consumer | 288 | | | 383 | | | 135 | | | 718 | | Consumer | 296 | | | 237 | | | 234 | | | 318 | | | 306 | | | 354 | |
| | $ | 60,826 | | | $ | 22,780 | | | $ | 114,196 | | | $ | 27,435 | | | $ | 46,105 | | | $ | 17,754 | | | $ | 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 compared to September 30, 2022, due primarily to growth in the commercial loan portfolio, along with a reduction in prepayment speeds for all loan categories. See "Note 4. Loans Receivable and Allowance for Credit Losses" for additional information related to the calculation of ACL as of June 30, 2022.March 31, 2023.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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 |
| March 31, | | December 31, | | September 30, | | March 31, | | December 31, | | September 30, |
| 2023 | | 2022 | | 2022 | | 2023 | | 2022 | | 2022 |
| (Dollars in thousands) | | | | | | |
One- to four-family: | | | | | | | | | | | |
Originated | $ | 2,081 | | | $ | 2,097 | | | $ | 2,012 | | | 0.05 | % | | 0.05 | % | | 0.05 | % |
Correspondent purchased | 3,074 | | | 2,987 | | | 2,734 | | | 0.12 | | | 0.13 | | | 0.12 | |
Bulk purchased | 221 | | | 216 | | | 206 | | | 0.16 | | | 0.15 | | | 0.14 | |
Construction | 58 | | | 62 | | | 54 | | | 0.08 | | | 0.09 | | | 0.08 | |
Total | 5,434 | | | 5,362 | | | 5,006 | | | 0.08 | | | 0.08 | | | 0.08 | |
Commercial: | | | | | | | | | | | |
Real estate | 11,219 | | | 10,799 | | | 8,729 | | | 1.28 | | | 1.30 | | | 1.17 | |
Commercial and industrial | 520 | | | 491 | | | 490 | | | 0.58 | | | 0.56 | | | 0.61 | |
Construction | 2,483 | | | 2,294 | | | 1,901 | | | 1.15 | | | 1.22 | | | 1.35 | |
Total | 14,222 | | | 13,584 | | | 11,120 | | | 1.20 | | | 1.22 | | | 1.15 | |
Consumer | 233 | | | 243 | | | 245 | | | 0.23 | | | 0.23 | | | 0.24 | |
Total | $ | 19,889 | | | $ | 19,189 | | | $ | 16,371 | | | 0.25 | | | 0.25 | | | 0.22 | |
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 to average non-performing assets during the current year period was positive due to average non-performing assetscharge-offs exceeding recoveries, while the prior year period was a negative percentagedue to recoveries exceeding charge-offs. The ratio of ACL to nonaccrual loans was higher at the end of the current year period compared to a positive percentage inthe end of the prior year period due to a net recovery in the current year period and a net charge-off in the prior year period. The ACL to nonaccrual loans at end of period ratio was higher at June 30, 2022 compared to June 30, 2021 duemainly to a lower balance of nonaccrual loans compared to the prior year period, along with higher ACL at June 30, 2022.March 31, 2023. The ratio of ACL to loans receivable, net at end ofNCOs for the prior year period ratio was lower at June 30, 2022not meaningful as recoveries exceeded loan charge-offs, compared to June 30, 2021 due primarily to a lower ACL balance at June 30, 2022.the current year period where loan charge-offs exceeded recoveries. 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 Six Months Ended |
| | June 30, 2022 | | June 30, 2021 | | March 31, 2023 | | March 31, 2022 |
| | (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 | (20) | | | (20) | |
Recoveries | Recoveries | 250 | | | 207 | | Recoveries | 4 | | | 65 | |
Net recoveries (charge-offs) | Net recoveries (charge-offs) | 220 | | | (482) | | Net recoveries (charge-offs) | (16) | | | 45 | |
Provision for credit losses | Provision for credit losses | (3,760) | | | (5,560) | | Provision for credit losses | 3,534 | | | (4,556) | |
Balance at end of period | Balance at end of period | $ | 16,283 | | | $ | 20,724 | | Balance at end of period | $ | 19,889 | | | $ | 15,312 | |
| 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 | 0.20 | % | | (0.35) | % |
| 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 | 339.98 | | | 128.48 | |
| 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 | | | 0.22 | |
| ACL to NCOs (annualized) | ACL to NCOs (annualized) | N/M(1) | | 32.3x | ACL to NCOs (annualized) | 620x | | N/M |
(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 Six Months Ended |
| | June 30, 2022 | | June 30, 2021 | | March 31, 2023 | | March 31, 2022 |
| | 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) | | | $ | 3,985,665 | | | — | % | | $ | (7) | | | $ | 3,925,630 | | | — | % |
Correspondent | Correspondent | — | | | 2,040,934 | | | 0.00 | | | — | | | 2,006,257 | | | 0.00 | | Correspondent | — | | | 2,383,295 | | | — | | | — | | | 2,030,928 | | | — | |
Bulk purchased | Bulk purchased | — | | | 162,151 | | | 0.00 | | | 21 | | | 195,678 | | | 0.01 | | Bulk purchased | — | | | 145,779 | | | — | | | — | | | 165,895 | | | — | |
Construction | Construction | — | | | 45,053 | | | 0.00 | | | — | | | 29,156 | | | 0.00 | | Construction | — | | | 64,484 | | | — | | | — | | | 42,845 | | | — | |
Total | Total | (133) | | | 6,176,269 | | | 0.00 | | | 23 | | | 6,165,023 | | | 0.00 | | Total | (1) | | | 6,579,223 | | | — | | | (7) | | | 6,165,298 | | | — | |
Commercial: | Commercial: | | | | | | | | | | | | Commercial: | | | | | | | | | | | |
Real estate | Real estate | (101) | | | 678,705 | | | (0.01) | | | 477 | | | 625,505 | | | 0.08 | | Real estate | (1) | | | 817,179 | | | — | | | (49) | | | 678,036 | | | (0.01) | |
Commercial and industrial | Commercial and industrial | 10 | | | 73,550 | | | 0.01 | | | — | | | 78,186 | | | 0.00 | | Commercial and industrial | — | | | 84,181 | | | — | | | 10 | | | 71,353 | | | 0.01 | |
Construction | Construction | — | | | 114,601 | | | 0.00 | | | — | | | 77,250 | | | 0.00 | | Construction | — | | | 184,510 | | | — | | | — | | | 105,668 | | | — | |
Total | Total | (91) | | | 866,856 | | | (0.01) | | | 477 | | | 780,941 | | | 0.06 | | Total | (1) | | | 1,085,870 | | | — | | | (39) | | | 855,057 | | | — | |
Consumer: | Consumer: | | | | | | | | | | | | Consumer: | | | | | | | | | | | |
Home equity | Home equity | (2) | | | 84,135 | | | 0.00 | | | (18) | | | 94,291 | | | (0.02) | | Home equity | 8 | | | 93,902 | | | 0.01 | | | (1) | | | 83,752 | | | — | |
Other | Other | 6 | | | 7,844 | | | 0.08 | | | — | | | 8,950 | | | 0.00 | | Other | 10 | | | 8,803 | | | 0.11 | | | 2 | | | 7,821 | | | 0.03 | |
Total | Total | 4 | | | 91,979 | | | 0.00 | | | (18) | | | 103,241 | | | (0.02) | | Total | 18 | | | 102,705 | | | 0.02 | | | 1 | | | 91,573 | | | — | |
| | $ | (220) | | | $ | 7,135,104 | | | 0.00 | | | $ | 482 | | | $ | 7,049,205 | | | 0.01 | | | $ | 16 | | | $ | 7,767,798 | | | — | | | $ | (45) | | | $ | 7,111,928 | | | — | |
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, 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)March 31, 2023. 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.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2023 | | December 31, 2022 | | September 30, 2022 |
| Amount | | Yield | | WAL | | Amount | | Yield | | WAL | | Amount | | Yield | | WAL |
| (Dollars in thousands) | | | | | | |
MBS | $ | 1,146,526 | | | 1.63% | | 5.2 | | $ | 1,191,597 | | | 1.59% | | 5.0 | | $ | 1,243,270 | | | 1.57% | | 4.7 |
GSE debentures | 519,981 | | | 0.64 | | 2.4 | | 519,979 | | | 0.64 | | 2.6 | | 519,977 | | | 0.61 | | 2.9 |
Corporate bonds | 4,000 | | | 5.12 | | 9.1 | | 4,000 | | | 5.12 | | 9.4 | | 4,000 | | | 5.12 | | 9.6 |
Municipal bonds | 1,031 | | | 2.55 | | 4.9 | | 1,032 | | | 2.55 | | 5.1 | | 1,243 | | | 2.63 | | 6.5 |
| $ | 1,671,538 | | | 1.33% | | 4.3 | | $ | 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 Six Months Ended |
| | June 30, 2022 | | June 30, 2021 | | March 31, 2023 | | March 31, 2022 |
| | 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 | (95,393) | | | (188,658) | | |
Net amortization of (premiums)/discounts | Net amortization of (premiums)/discounts | (4,027) | | | (4,308) | | | Net amortization of (premiums)/discounts | (1,559) | | | (2,983) | | |
Purchases | Purchases | 86,993 | | | 2.56 | | | 4.3 | | 953,818 | | | 1.00 | | | 5.1 | Purchases | — | | | — | | | — | | 58,546 | | | 2.26 | | | 4.3 |
Change in valuation on AFS securities | Change in valuation on AFS securities | (142,254) | | | (18,597) | | | Change in valuation on AFS securities | 39,453 | | | (101,094) | | |
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 | $ | 1,505,808 | | | 1.33 | | | 4.3 | | $ | 1,780,419 | | | 1.24 | | | 4.1 |
Liabilities. Total liabilities were $8.34 billion at June 30, 2022, compared to $8.36$9.01 billion at March 31, 2022 and $8.392023, compared to $8.53 billion at September 30, 2021.2022. The decrease in liabilities between March 31, 2022 and June 30, 2022increase 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 The weighted average rate on the deposit portfolio increased balance of retail deposits will be retained by the Bank as depositors return to spending more and/or choose to invest in higher-yielding investment options outside of the Bank. This was the case in35 basis points during the current quarter and led66 basis points during the current year due primarily to retail certificates of deposit repricing to higher offered rates, as well as an increase in rates offered on money market accounts and public unit certificates of deposit. Total commercial deposits were $274.6 million, or 4.5%, of total deposits at March 31, 2023.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2023 | | December 31, 2022 | | September 30, 2022 |
| | | | | % of | | | | | | % of | | | | | | % of |
| Amount | | Rate | | Total | | Amount | | Rate | | Total | | Amount | | Rate | | Total |
| (Dollars in thousands) |
Non-interest-bearing checking | $ | 594,265 | | | — | % | | 9.7 | % | | $ | 597,247 | | | — | % | | 9.8 | % | | $ | 591,387 | | | — | % | | 9.5 | % |
Interest-bearing checking | 1,001,559 | | | 0.16 | | | 16.3 | | | 1,024,806 | | | 0.13 | | | 16.9 | | | 1,027,222 | | | 0.07 | | | 16.6 | |
Savings | 539,428 | | | 0.07 | | | 8.8 | | | 543,514 | | | 0.08 | | | 9.0 | | | 552,743 | | | 0.06 | | | 8.9 | |
Money market | 1,535,234 | | | 0.80 | | | 25.0 | | | 1,694,504 | | | 0.80 | | | 27.9 | | | 1,819,761 | | | 0.47 | | | 29.4 | |
Retail certificates of deposit | 2,299,829 | | | 2.54 | | | 37.4 | | | 2,073,633 | | | 1.83 | | | 34.1 | | | 2,073,542 | | | 1.34 | | | 33.5 | |
Commercial certificates of deposit | 43,590 | | | 2.71 | | | 0.7 | | | 33,134 | | | 1.55 | | | 0.5 | | | 36,275 | | | 0.97 | | | 0.6 | |
Public unit certificates of deposit | 130,530 | | | 4.01 | | | 2.1 | | | 107,711 | | | 3.17 | | | 1.8 | | | 93,936 | | | 1.61 | | | 1.5 | |
| $ | 6,144,435 | | | 1.29 | | | 100.0 | % | | $ | 6,074,549 | | | 0.94 | | | 100.0 | % | | $ | 6,194,866 | | | 0.63 | | | 100.0 | % |
The $69.9 million increase in deposits during the current quarter was mainly in the retail/commercial certificate of deposit portfolio, partially offset by a decrease in the money market account balances. The increase in retail certificates of deposit was primarily in the short-term category, followed by the intermediate-term category. The long-term certificate of deposit category decreased during the current quarter. On average, approximately 78% of the retail certificates of deposits that matured over the past 12 months were retained by the Bank.
The $50.4 million decrease in deposits between September 30, 2022 and March 31, 2023 was due primarily to a reduction in retail checking account balances and continued reductionmoney market accounts, partially offset by an increase in retail certificates of deposit. The decrease in ourmoney market accounts was likely due to customers moving funds to alternative, higher yielding investment products, including a certificate of deposit promotional campaign offered by the Bank, and/or withdrawing funds for customer spending. During the third quarter of the prior fiscal year, the Bank began increasing money market interest rates in response to competitor pricing to help stem the outflow of those funds. The change in the composition of retail certificatescertificate of deposit portfolio categories 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 duringmirrored the current year. The Bank has begunquarter change.
As of March 31, 2023, approximately $634.7 million of the Bank's deposit portfolio was uninsured, or approximately 10% of the Bank's Call Report deposit balance, of which approximately $348.0 million related to increase offered rates on certificatescommercial and retail deposit accounts and the remainder was mainly comprised 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 infully collateralized public unit deposits was due to rapidly increasing costs of available funds in this category, toand intercompany accounts. The uninsured amounts are estimates based on the point that rates were in excess of other funding sources available tomethodologies and assumptions used for 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.Bank's regulatory reporting requirements.
Borrowings. TheHistorically the Bank has primarily usesused long-term fixed-rate borrowings with no embedded options to lengthen the average life of the Bank's liabilities. The fixed-rate characteristicsnew borrowings during the current fiscal year had a weighted average maturity of 3.3 years, which is generally a shorter term than what management has selected in prior periods in anticipation that, when rates begin to decrease, these borrowings lock-incan be repaid or repriced to lower cost options. In consideration of the cost until maturity and thus decreasecurrent interest rate environment, management intends to continue selecting shorter-term borrowings in the amount of liabilities repricing as interest rates move higher compared to funding with lower-cost short-term borrowings. Thesenear term. The fixed-rate borrowings are laddered in order to prevent large amounts of liabilities repricing in any one period.
Total borrowings at March 31, 2023 were $2.70 billion, an increase of $51.4 million and $564.5 million from December 31, 2022 and September 30, 2022, respectively. The increase in borrowings from December 31, 2022 was due mainly to a $58.4 million increase in the drawn amount on the FHLB line of credit during the current quarter. The increase in borrowings from September 30, 2022 was composed of $550.0 million of new advances with a WAM of 3.3 years and $128.4 million on the Bank's FHLB line of credit, partially offset by $100.0 million in FHLB advances that matured during the current year period. The $2.70 billion balance at March 31, 2023 was comprised of $2.13 billion in fixed-rate FHLB advances, $365.0 million in variable-rate advances tied to interest rate swaps, and $203.4 million on the FHLB line of credit. Borrowings increased during the current year period to fund loan growth and deposit outflows. Subsequent to March 31, 2023, the Bank repaid its borrowings on the FHLB line of credit and borrowed $500.0 million under the FRB BTFP, as the rate was more favorable than the rates offered on the FHLB line of credit or the rate on a one-year FHLB advance at that point in time. See additional discussion in "Liquidity and Capital Resources" below.
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, 2022.March 31, 2023. In addition to the term borrowings in the table below, the Bank hadthere were two straight-line amortizing FHLB advances outstanding at March 31, 2023 including a $42.5 million advance at a rate of 3.50% with quarterly payments of $2.5 million through June 2027 and a $90.2 million advance at a rate of 4.45% with quarterly payments of $4.9 million through October 2027, and there was an outstanding balance of $35.7$203.4 million on itsthe Bank's line of credit with FHLB as of June 30, 2022.at March 31, 2023. See additional discussion in "Fiscal Year 2023 Outlook" below.
| | | 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 | | $ | 200,000 | | | 1.98 | % | | 1.98 | % |
2024 | 2024 | | 300,000 | | | 165,000 | | | | 465,000 | | | 2.55 | | | 2.80 | | 2024 | | 490,000 | | | 3.73 | | | 2.84 | |
2025 | 2025 | | 350,000 | | | 100,000 | | | | 450,000 | | | 1.89 | | | 2.25 | | 2025 | | 600,000 | | | 3.13 | | | 2.84 | |
2026 | 2026 | | 250,000 | | | — | | | | 250,000 | | | 0.96 | | | 1.27 | | 2026 | | 525,000 | | | 2.69 | | | 2.85 | |
2027 | 2027 | | 200,000 | | | — | | | | 200,000 | | | 1.57 | | | 1.81 | | 2027 | | 400,000 | | | 2.97 | | | 3.10 | |
2028 | 2028 | | — | | | 100,000 | | | | 100,000 | | | 2.02 | | | 3.45 | | 2028 | | 150,000 | | | 4.87 | | | 3.58 | |
| | $ | 1,475,000 | | | $ | 365,000 | | | | $ | 1,840,000 | | | 1.81 | | | 2.12 | | |
| | | $ | 2,365,000 | | | 3.14 | | | 2.86 | |
(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")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 FHLB advances during the current quarter was due to funding needs primarily in response to deposit outflows.
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| | | | | | | | | | | | | | | | | |
| 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 borrowings were repaid prior to June 30, 2022. In July 2022, the level of borrowings associated with the leverage strategy was increased to $2.60 billion to further increase earnings, in response to the increase in the dividend rate paid by FHLB. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Three Months Ended | | For the Six Months Ended |
| March 31, 2023 | | March 31, 2023 | | March 31, 2022 |
| | | Effective | | | | | | Effective | | | | | | Effective | | |
| Amount | | Rate | | WAM | | Amount | | Rate | | WAM | | Amount | | Rate | | WAM |
| | | | | | | (Dollars in thousands) |
Beginning balance | $ | 2,505,082 | | | 2.80 | % | | 2.4 | | | $ | 2,062,500 | | | 2.44 | % | | 2.5 | | | $ | 1,590,000 | | | 1.88 | % | | 3.3 | |
Maturities and repayments | (107,418) | | | 1.64 | | | | | (114,836) | | | 1.80 | | | | | (100,000) | | | 3.14 | | | |
New FHLB borrowings | 100,000 | | | 4.85 | | | 3.5 | | 550,000 | | | 4.52 | | | 3.3 | | 100,000 | | | 3.44 | | | 6.5 |
Ending balance | $ | 2,497,664 | | | 2.93 | | | 2.3 | | | $ | 2,497,664 | | | 2.93 | | | 2.3 | | | $ | 1,590,000 | | | 1.90 | | | 2.8 | |
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, 2022.March 31, 2023.
| | | September 30, | | December 31, | | March 31, | | June 30, | | | June 30, | | September 30, | | December 31, | | March 31, | |
| | 2022 | | 2022 | | 2023 | | 2023 | | Total | | 2023 | | 2023 | | 2023 | | 2024 | | 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 | $ | 201,179 | | | $ | 253,690 | | | $ | 258,274 | | | $ | 270,075 | | | $ | 983,218 | |
Repricing Rate | Repricing Rate | 1.25 | % | | 1.14 | % | | 1.22 | % | | 0.81 | % | | 1.14 | % | Repricing Rate | 1.05 | % | | 1.72 | % | | 2.50 | % | | 2.79 | % | | 2.08 | % |
Public Unit Certificates: | Public Unit Certificates: | | Public Unit Certificates: | |
Amount | Amount | $ | 36,503 | | | $ | 25,500 | | | $ | 13,516 | | | $ | 3,674 | | | $ | 79,193 | | Amount | $ | 17,984 | | | $ | 28,758 | | | $ | 39,718 | | | $ | 15,250 | | | $ | 101,710 | |
Repricing Rate | Repricing Rate | 0.23 | % | | 1.28 | % | | 0.11 | % | | 0.27 | % | | 0.55 | % | Repricing Rate | 3.78 | % | | 3.44 | % | | 4.27 | % | | 4.22 | % | | 3.94 | % |
Term Borrowings: | Term Borrowings: | | Term Borrowings: | |
Amount | Amount | $ | 75,000 | | | $ | — | | | $ | 100,000 | | | $ | 100,000 | | | $ | 275,000 | | Amount | $ | 100,000 | | | $ | 100,000 | | | $ | 150,000 | | | $ | 65,000 | | | $ | 415,000 | |
Repricing Rate | Repricing Rate | 0.29 | % | | — | % | | 1.46 | % | | 1.82 | % | | 1.27 | % | Repricing Rate | 1.82 | % | | 2.14 | % | | 3.42 | % | | 2.65 | % | | 2.61 | % |
Total | Total | | | | | | | | | | Total | | | | | | | | | |
Amount | Amount | $ | 592,851 | | | $ | 370,184 | | | $ | 365,181 | | | $ | 309,319 | | | $ | 1,637,535 | | Amount | $ | 319,163 | | | $ | 382,448 | | | $ | 447,992 | | | $ | 350,325 | | | $ | 1,499,928 | |
Repricing Rate | Repricing Rate | 1.07 | % | | 1.15 | % | | 1.24 | % | | 1.13 | % | | 1.14 | % | Repricing Rate | 1.45 | % | | 1.96 | % | | 2.97 | % | | 2.83 | % | | 2.35 | % |
The following table sets forth the WAM information for our certificates of deposit, in years, as of June 30, 2022.March 31, 2023.
| | | | | |
Retail certificates of deposit | 1.11.6 | |
Commercial certificates of deposit | 0.61.2 | |
Public unit certificates of deposit | 0.50.7 | |
Total certificates of deposit | 1.11.5 | |
Stockholders' Equity. Stockholders' equity at March 31, 2023 was $1.07 billion, a decrease of $24.5 million from September 30, 2022. During the ninesix months ended June 30, 2022,March 31, 2023, the Company paid cash dividends totaling $91.6$60.5 million. These cash dividends totaled $0.675$0.45 per share and consisted of a $0.22$0.28 per share cash true-up dividend related to fiscal year 20212022 earnings a $0.20 per share True Blue Capitol cash dividend, and threetwo regular quarterly cash dividends of $0.085 per share.
Accumulated other comprehensive loss was $118.6 million at March 31, 2023, which was composed of $125.3 million attributable to unrealized losses on AFS securities, partially offset by $6.6 million of unrealized gains on derivatives. The unrealized loss on AFS securities improved at March 31, 2023 from $142.1 million at December 31, 2022, due mainly to changes in market interest rates.
On July 19, 2022,April 25, 2023, the Company announced a regular quarterly cash dividend of $0.085 per share, or approximately $11.5$11.3 million, payable on AugustMay 19, 20222023 to stockholders of record as of the close of business on AugustMay 5, 2022.2023. In the long run, management considers the Bank's equity to total assets ratio of at least 9% an appropriate level of capital. At June 30, 2022,March 31, 2023, this ratio was 10.6%9.7%. Excluding the impact of unrealized losses on AFS securities, this ratio would have been approximately 110 basis points higher.
Consistent with our goal to operate a sound and profitable financial organization, we actively seek to maintain a well-capitalized status for the Bank in accordance with regulatory standards. As of March 31, 2023, the Bank's community bank leverage ratio ("CBLR") was 9.7%, which exceeded the minimum requirement of 9.0%. The CBLR is based on average assets. The leverage strategy increases average assets which in turn reduces the Bank's CBLR. As of March, 31, 2023 the Bank exceeded all internal policy thresholds for sensitivity to changes in interest rates, and the Bank's risk-based tier 1 capital ratio was 19.2%.
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, 2022,March 31, 2023, Capitol Federal Financial, Inc., at the holding company level, had $91.9$56.4 million in cash on deposit at the Bank. The balance of cash at the holding company level has been accumulating over the past several years and is available for the Company to utilize for dividend payments, share repurchases, or for other business strategies at the discretion of the Company. For fiscal year 2022,2023, it is the intention of the Board of Directors to continuepay out the payoutregular quarterly cash dividend of 100%$0.085 per share, as well as any of the Company's earnings to the Company's stockholders.in excess of that amount. 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 has paid a True Blue Capitol cashCapital 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.past. 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 Company earnings and regulatory capital levels and the related 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 SeptemberJune 30, 2022,2023, the amount presented represents the dividend payable on AugustMay 19, 20222023 to stockholders of record as of the close of business on AugustMay 5, 2022.2023.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Calendar Year |
| 2022 | | 2021 | | 2020 |
| Amount | | Per Share | | Amount | | Per Share | | Amount | | Per Share |
| (Dollars in thousands, except per share amounts) |
Regular quarterly dividends paid | | | | | | | | | | | |
Quarter ended March 31 | $ | 11,535 | | | $ | 0.085 | | | $ | 11,518 | | | $ | 0.085 | | | $ | 11,733 | | | $ | 0.085 | |
Quarter ended June 30 | 11,534 | | | 0.085 | | | 11,516 | | | 0.085 | | | 11,733 | | | 0.085 | |
Quarter ended September 30 | 11,536 | | | 0.085 | | | 11,518 | | | 0.085 | | | 11,733 | | | 0.085 | |
Quarter ended December 31 | — | | | — | | | 11,535 | | | 0.085 | | | 11,514 | | | 0.085 | |
True-up dividends paid | — | | | — | | | 29,850 | | | 0.220 | | | 17,614 | | | 0.130 | |
True Blue dividends paid | 27,143 | | | 0.200 | | | 54,210 | | | 0.400 | | | — | | | — | |
Calendar year-to-date dividends paid | $ | 61,748 | | | $ | 0.455 | | | $ | 130,147 | | | $ | 0.960 | | | $ | 64,327 | | | $ | 0.470 | |
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| Calendar Year |
| 2023 | | 2022 | | 2021 |
| Amount | | Per Share | | Amount | | Per Share | | Amount | | Per Share |
| (Dollars in thousands, except per share amounts) |
Regular quarterly dividends paid | | | | | | | | | | | |
Quarter ended March 31 | $ | 11,319 | | | $ | 0.085 | | | $ | 11,535 | | | $ | 0.085 | | | $ | 11,518 | | | $ | 0.085 | |
Quarter ended June 30 | 11,321 | | | 0.085 | | | 11,534 | | | 0.085 | | | 11,516 | | | 0.085 | |
Quarter ended September 30 | — | | | — | | | 11,534 | | | 0.085 | | | 11,518 | | | 0.085 | |
Quarter ended December 31 | — | | | — | | | 11,508 | | | 0.085 | | | 11,535 | | | 0.085 | |
True-up dividends paid | — | | | — | | | 37,701 | | | 0.280 | | | 29,850 | | | 0.220 | |
True Blue Capitol dividends paid | — | | | — | | | 27,143 | | | 0.200 | | | 54,210 | | | 0.400 | |
Calendar year-to-date dividends paid | $ | 22,640 | | | $ | 0.170 | | | $ | 110,955 | | | $ | 0.820 | | | $ | 130,147 | | | $ | 0.960 | |
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, | | March 31, | | December 31, | | September 30, | | June 30, | | March 31, |
| | 2022 | | 2022 | | 2021 | | 2021 | | 2021 | | 2023 | | 2022 | | 2022 | | 2022 | | 2022 |
| | (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 | $ | 69,319 | | | $ | 64,819 | | | $ | 60,445 | | | $ | 56,886 | | | $ | 55,412 | |
Cash and cash equivalents | | Cash and cash equivalents | 10,977 | | | 16,671 | | | 13,373 | | | 3,968 | | | 949 | |
MBS | MBS | 5,048 | | | 4,821 | | | 4,625 | | | 4,900 | | | 5,360 | | MBS | 4,748 | | | 4,811 | | | 4,912 | | | 5,048 | | | 4,821 | |
FHLB stock | FHLB stock | 2,695 | | | 2,240 | | | 1,231 | | | 952 | | | 944 | | FHLB stock | 3,607 | | | 4,158 | | | 3,865 | | | 2,695 | | | 2,240 | |
Cash and cash equivalents | 3,968 | | | 949 | | | 14 | | | 27 | | | 26 | | |
Investment securities | Investment securities | 815 | | | 800 | | | 808 | | | 750 | | | 763 | | Investment securities | 895 | | | 881 | | | 845 | | | 815 | | | 800 | |
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 | 89,546 | | | 91,340 | | | 83,440 | | | 69,412 | | | 64,222 | |
| Interest expense: | Interest expense: | | Interest expense: | |
Borrowings | Borrowings | 11,644 | | | 8,732 | | | 7,585 | | | 7,889 | | | 7,826 | | Borrowings | 31,447 | | | 33,608 | | | 24,529 | | | 11,644 | | | 8,732 | |
Deposits | Deposits | 7,787 | | | 8,389 | | | 9,267 | | | 10,335 | | | 11,475 | | Deposits | 16,140 | | | 11,904 | | | 9,013 | | | 7,787 | | | 8,389 | |
| Total interest expense | Total interest expense | 19,431 | | | 17,121 | | | 16,852 | | | 18,224 | | | 19,301 | | Total interest expense | 47,587 | | | 45,512 | | | 33,542 | | | 19,431 | | | 17,121 | |
| Net interest income | Net interest income | 49,981 | | | 47,101 | | | 45,614 | | | 45,544 | | | 42,571 | | Net interest income | 41,959 | | | 45,828 | | | 49,898 | | | 49,981 | | | 47,101 | |
| Provision for credit losses | Provision for credit losses | 937 | | | (3,188) | | | (3,439) | | | (1,323) | | | (2,691) | | Provision for credit losses | 891 | | | 3,660 | | | 1,060 | | | 937 | | | (3,188) | |
| 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) | 41,068 | | | 42,168 | | | 48,838 | | | 49,044 | | | 50,289 | |
| Non-interest income | Non-interest income | 6,115 | | | 5,416 | | | 5,506 | | | 5,303 | | | 5,236 | | Non-interest income | 5,083 | | | 5,352 | | | 5,793 | | | 6,115 | | | 5,416 | |
Non-interest expense | Non-interest expense | 28,390 | | | 27,960 | | | 26,694 | | | 28,247 | | | 27,602 | | Non-interest expense | 28,631 | | | 27,773 | | | 29,807 | | | 28,390 | | | 27,960 | |
Income tax expense | Income tax expense | 5,617 | | | 6,122 | | | 5,679 | | | 5,370 | | | 4,709 | | Income tax expense | 3,331 | | | 3,507 | | | 5,332 | | | 5,617 | | | 6,122 | |
Net income | Net income | $ | 21,152 | | | $ | 21,623 | | | $ | 22,186 | | | $ | 18,553 | | | $ | 18,187 | | Net income | $ | 14,189 | | | $ | 16,240 | | | $ | 19,492 | | | $ | 21,152 | | | $ | 21,623 | |
| Efficiency ratio | Efficiency ratio | 50.61 | % | | 53.24 | % | | 52.22 | % | | 55.55 | % | | 57.73 | % | Efficiency ratio | 60.86 | % | | 54.27 | % | | 53.52 | % | | 50.61 | % | | 53.24 | % |
| Basic EPS | Basic EPS | $ | 0.16 | | | $ | 0.16 | | | $ | 0.16 | | | $ | 0.14 | | | $ | 0.13 | | Basic EPS | $ | 0.11 | | | $ | 0.12 | | | $ | 0.14 | | | $ | 0.16 | | | $ | 0.16 | |
Diluted EPS | Diluted EPS | 0.16 | | | 0.16 | | | 0.16 | | | 0.14 | | | 0.13 | | Diluted EPS | 0.11 | | | 0.12 | | | 0.14 | | | 0.16 | | | 0.16 | |
Comparison of Operating Results for the Three Months Ended June 30, 2022March 31, 2023 and MarchDecember 31, 2022
For the quarter ended June 30, 2022,March 31, 2023, the Company recognized net income of $21.2$14.2 million, or $0.16$0.11 per share, compared to net income of $21.6$16.2 million, or $0.16$0.12 per share, for the quarter ended MarchDecember 31, 2022. The decrease in net income was due primarily to a higher provision for credit losses, partially offset by an increase inlower net interest income and lower income tax expense.in the current quarter. The net interest margin increased 10decreased five basis points, from 1.69%1.61% for the prior quarter to 1.79%1.56% 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 discussed below, the net interest margin would have increased 10decreased 17 basis points, from 2.01%1.88% for the prior quarter to 2.11%1.71% for the current quarter. The increasedecrease in the net interest margin excluding the effects of the leverage strategy was due mainly to an increase in assetthe cost of deposits and borrowings, partially offset by an increase in loan yields due to higher market interest rates and a changean increase in the mixaverage balance of interest-earning assets, as cash was used to fund loan growth.
At times,loans. Management anticipates 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, plusreduction in 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 increasemargin will continue in the dividend rate paid by FHLB. It is expected that the strategy will continue to be utilized as long as it remains profitable.near term. See additional discussion in "Fiscal Year 2023 Outlook" below.
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 four13 basis points and the weighted average yield on MBS increased eightfour basis points compared to the prior quarter.
| | | For the Three Months Ended | | | For the Three Months Ended | |
| | June 30, | | March 31, | | Change Expressed in: | | March 31, | | December 31, | | Change Expressed in: |
| | 2022 | | 2022 | | Dollars | | Percent | | 2023 | | 2022 | | Dollars | | Percent |
| | (Dollars in thousands) | | | | (Dollars in thousands) | | |
INTEREST AND DIVIDEND INCOME: | INTEREST AND DIVIDEND INCOME: | | INTEREST AND DIVIDEND INCOME: | |
Loans receivable | Loans receivable | $ | 56,886 | | | $ | 55,412 | | | $ | 1,474 | | | 2.7 | % | Loans receivable | $ | 69,319 | | | $ | 64,819 | | | $ | 4,500 | | | 6.9 | % |
Cash and cash equivalents | | Cash and cash equivalents | 10,977 | | | 16,671 | | | (5,694) | | | (34.2) | |
MBS | MBS | 5,048 | | | 4,821 | | | 227 | | | 4.7 | | MBS | 4,748 | | | 4,811 | | | (63) | | | (1.3) | |
FHLB stock | FHLB stock | 2,695 | | | 2,240 | | | 455 | | | 20.3 | | FHLB stock | 3,607 | | | 4,158 | | | (551) | | | (13.3) | |
Cash and cash equivalents | 3,968 | | | 949 | | | 3,019 | | | 318.1 | | |
Investment securities | Investment securities | 815 | | | 800 | | | 15 | | | 1.9 | | Investment securities | 895 | | | 881 | | | 14 | | | 1.6 | |
Total interest and dividend income | Total interest and dividend income | $ | 69,412 | | | $ | 64,222 | | | $ | 5,190 | | | 8.1 | | Total interest and dividend income | $ | 89,546 | | | $ | 91,340 | | | $ | (1,794) | | | (2.0) | |
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 toportfolio, along with an increase in the dividendweighted average yield. The loan growth was mainly in the correspondent one-to four-family and commercial real estate 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 paid by FHLB.and upward repricing of existing adjustable-rate loans due to higher market interest rates. The increasedecrease in interest income on cash and cash equivalents was due mainly to a decrease in the average balance of cash associated with the leverage strategy compared to the prior quarter due to a reduction in the leverage strategy usage in the current quarter, partially offset by an increase in the yield earned on balances held at the FRB of Kansas City due to higher market interest rates. The decrease in dividend income on FHLB stock was due mainly to a decrease in the majorityaverage balance of which were related toFHLB stock associated with the leverage strategy, due topartially offset by an increase in market interest rates.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 33 basis points and the weighted average rate paid on borrowings not associated with the leverage strategy each decreased threeincreased 30 basis points compared to the prior quarter.
| | | For the Three Months Ended | | | For the Three Months Ended | |
| | June 30, | | March 31, | | Change Expressed in: | | March 31, | | December 31, | | Change Expressed in: |
| | 2022 | | 2022 | | Dollars | | Percent | | 2023 | | 2022 | | Dollars | | Percent |
| | (Dollars in thousands) | | | | (Dollars in thousands) | | |
INTEREST EXPENSE: | INTEREST EXPENSE: | | INTEREST EXPENSE: | |
Borrowings | Borrowings | $ | 11,644 | | | $ | 8,732 | | | $ | 2,912 | | | 33.3 | % | Borrowings | $ | 31,447 | | | $ | 33,608 | | | $ | (2,161) | | | (6.4) | % |
Deposits | Deposits | 7,787 | | | 8,389 | | | (602) | | | (7.2) | | Deposits | 16,140 | | | 11,904 | | | 4,236 | | | 35.6 | |
Total interest expense | Total interest expense | $ | 19,431 | | | $ | 17,121 | | | $ | 2,310 | | | 13.5 | | Total interest expense | $ | 47,587 | | | $ | 45,512 | | | $ | 2,075 | | | 4.6 | |
The increasedecrease in interest expense on borrowings was due primarily to an increasea decrease in the rate paid on the short-termaverage balance of borrowings associated with the leverage strategy duringcompared to the currentprior quarter, due to higher market interest rates. Additionally,partially offset by an increase in 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 thefund operational needs. The increase in interest expense. The decrease in interest expense on deposits was due primarily to a decreaseincreases 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 existingcertificate of deposit portfolio.
Provision for Credit Losses
For the quarter ended June 30, 2022,March 31, 2023, the Bank recorded a provision for credit losses of $937$891 thousand, compared to a negative provision for credit losses of $3.2$3.7 million for the prior quarter. The provision for credit losses in the current quarter was comprised of a $796$714 thousand increase in the ACL for loans and a $141$177 thousand increase in reserves for off-balance sheet credit exposures. The provision for credit losses associated with the ACL was due primarily to selecting a weighted economic forecastreduction in prepayment speeds related to incorporate a recessionary outlook into the model, as well as commercial loan growth.portfolio along with commercial loan growth, partially offset by a slightly improved economic forecast. The provision for credit losses associated with the reserves for off-balance sheet credit exposures was primarily related to the commercial loan portfolio for the same reasons noted above for the ACL.
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 | | | For the Three Months Ended | |
| | June 30, | | March 31, | | Change Expressed in: | | March 31, | | December 31, | | Change Expressed in: |
| | 2022 | | 2022 | | Dollars | | Percent | | 2023 | | 2022 | | Dollars | | Percent |
| | (Dollars in thousands) | | | | (Dollars in thousands) | | |
NON-INTEREST INCOME: | NON-INTEREST INCOME: | | NON-INTEREST INCOME: | |
Deposit service fees | Deposit service fees | $ | 3,601 | | | $ | 3,300 | | | $ | 301 | | | 9.1 | % | Deposit service fees | $ | 3,122 | | | $ | 3,461 | | | $ | (339) | | | (9.8) | % |
Insurance commissions | Insurance commissions | 788 | | | 543 | | | 245 | | | 45.1 | | Insurance commissions | 877 | | | 795 | | | 82 | | | 10.3 | |
| Other non-interest income | Other non-interest income | 1,726 | | | 1,573 | | | 153 | | | 9.7 | | Other non-interest income | 1,084 | | | 1,096 | | | (12) | | | (1.1) | |
Total non-interest income | Total non-interest income | $ | 6,115 | | | $ | 5,416 | | | $ | 699 | | | 12.9 | | Total non-interest income | $ | 5,083 | | | $ | 5,352 | | | $ | (269) | | | (5.0) | |
The increasedecrease in deposit service fees was due mainly to increasesdecreases in debit card income and service charges as a result of higherlower transaction activity. The increase in insurance commissions was due primarily toactivity during 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.current quarter.
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 | | | For the Three Months Ended | |
| | June 30, | | March 31, | | Change Expressed in: | | March 31, | | December 31, | | Change Expressed in: |
| | 2022 | | 2022 | | Dollars | | Percent | | 2023 | | 2022 | | Dollars | | Percent |
| | (Dollars in thousands) | | | | (Dollars in thousands) | | |
NON-INTEREST EXPENSE: | NON-INTEREST EXPENSE: | | NON-INTEREST EXPENSE: | |
Salaries and employee benefits | Salaries and employee benefits | $ | 14,581 | | | $ | 14,023 | | | $ | 558 | | | 4.0 | % | Salaries and employee benefits | $ | 12,789 | | | $ | 13,698 | | | $ | (909) | | | (6.6) | % |
Information technology and related expense | Information technology and related expense | 4,343 | | | 4,493 | | | (150) | | | (3.3) | | Information technology and related expense | 5,789 | | | 5,070 | | | 719 | | | 14.2 | |
Occupancy, net | Occupancy, net | 3,721 | | | 3,493 | | | 228 | | | 6.5 | | Occupancy, net | 3,568 | | | 3,474 | | | 94 | | | 2.7 | |
Regulatory and outside services | Regulatory and outside services | 1,572 | | | 1,272 | | | 300 | | | 23.6 | | Regulatory and outside services | 1,305 | | | 1,533 | | | (228) | | | (14.9) | |
Advertising and promotional | Advertising and promotional | 1,068 | | | 1,494 | | | (426) | | | (28.5) | | Advertising and promotional | 1,333 | | | 833 | | | 500 | | | 60.0 | |
Federal insurance premium | Federal insurance premium | 784 | | | 777 | | | 7 | | | 0.9 | | Federal insurance premium | 1,246 | | | 812 | | | 434 | | | 53.4 | |
Deposit and loan transaction costs | Deposit and loan transaction costs | 664 | | | 689 | | | (25) | | | (3.6) | | Deposit and loan transaction costs | 690 | | | 611 | | | 79 | | | 12.9 | |
Office supplies and related expense | Office supplies and related expense | 494 | | | 502 | | | (8) | | | (1.6) | | Office supplies and related expense | 631 | | | 633 | | | (2) | | | (0.3) | |
| Other non-interest expense | Other non-interest expense | 1,163 | | | 1,217 | | | (54) | | | (4.4) | | Other non-interest expense | 1,280 | | | 1,109 | | | 171 | | | 15.4 | |
Total non-interest expense | Total non-interest expense | $ | 28,390 | | | $ | 27,960 | | | $ | 430 | | | 1.5 | | Total non-interest expense | $ | 28,631 | | | $ | 27,773 | | | $ | 858 | | | 3.1 | |
The increasedecrease in salaries and employee benefits was dueattributable mainly to a decrease in incentive compensation. The increase in information technology and related expense was due primarily to third-party project management expenses associated with the Bank's ongoing digital transformation project and an increase in commissions due to an increase in loan origination activity, along with annual merit increases during the current quarter.software licensing. The increasedecrease in regulatory and outside services was due primarily to the timing of external audit expenses as well as anand a decrease in outside consulting services. The 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 primarilymainly to the timing of campaigns and sponsorships. The increase in federal insurance premium
expense was due mainly to an increase in the Federal Deposit Insurance Corporation ("FDIC") assessment rate effective January 1, 2023, which affected all insured depository institutions.
The Company's efficiency ratio was 50.61%60.86% for the current quarter compared to 53.24%54.27% for the prior quarter. The improvementchange in the efficiency ratio was due primarily to higherlower 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 lowerhigher value indicates that it is costing the financial institution lessmore 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 | | | For the Three Months Ended | |
| | June 30, | | March 31, | | Change Expressed in: | | March 31, | | December 31, | | Change Expressed in: |
| | 2022 | | 2022 | | Dollars | | Percent | | 2023 | | 2022 | | Dollars | | Percent |
| | (Dollars in thousands) | | | | (Dollars in thousands) | | |
Income before income tax expense | Income before income tax expense | $ | 26,769 | | | $ | 27,745 | | | $ | (976) | | | (3.5) | % | Income before income tax expense | $ | 17,520 | | | $ | 19,747 | | | $ | (2,227) | | | (11.3) | % |
Income tax expense | Income tax expense | 5,617 | | | 6,122 | | | (505) | | | (8.2) | | Income tax expense | 3,331 | | | 3,507 | | | (176) | | | (5.0) | |
Net income | Net income | $ | 21,152 | | | $ | 21,623 | | | $ | (471) | | | (2.2) | | Net income | $ | 14,189 | | | $ | 16,240 | | | $ | (2,051) | | | (12.6) | |
| Effective Tax Rate | Effective Tax Rate | 21.0 | % | | 22.1 | % | | Effective Tax Rate | 19.0 | % | | 17.8 | % | |
The decrease in income tax expense was due primarily to lower pretax income in the current quarter, along with a decreasepartially offset by an increase 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 therate. The lower effective tax rate for fiscal yearin the prior quarter was due primarily to true-ups related to the preparation of the September 30, 2022 will be approximately 21%.tax returns.
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 | | | For the Three Months Ended |
| | | June 30, 2022 | | March 31, 2022 | | | March 31, 2023 | | December 31, 2022 |
| | | Average | | Interest | | | Average | | Interest | | | | Average | | Interest | | | Average | | Interest | |
| | | Outstanding | | Earned/ | | Yield/ | | Outstanding | | Earned/ | | Yield/ | | | Outstanding | | Earned/ | | Yield/ | | Outstanding | | Earned/ | | Yield/ |
| | | Amount | | Paid | | Rate | | Amount | | Paid | | Rate | | | Amount | | Paid | | Rate | | Amount | | Paid | | Rate |
Assets: | Assets: | | (Dollars in thousands) | Assets: | | (Dollars in thousands) |
Interest-earning assets: | Interest-earning assets: | | | Interest-earning assets: | | |
One- to four-family loans: | One- to four-family loans: | | | One- to four-family loans: | | |
Originated | Originated | | $ | 3,982,602 | | | $ | 32,168 | | | 3.23 | % | | $ | 3,965,844 | | | $ | 31,993 | | | 3.23 | % | Originated | | $ | 4,050,515 | | | $ | 33,660 | | | 3.32 | % | | $ | 4,049,790 | | | $ | 33,364 | | | 3.29 | % |
Correspondent purchased | Correspondent purchased | | 2,060,947 | | | 14,027 | | | 2.72 | | | 2,026,120 | | | 13,060 | | | 2.58 | | Correspondent purchased | | 2,462,960 | | | 19,380 | | | 3.15 | | | 2,305,362 | | | 17,261 | | | 2.99 | |
Bulk purchased | Bulk purchased | | 154,663 | | | 464 | | | 1.20 | | | 161,149 | | | 503 | | | 1.25 | | Bulk purchased | | 144,438 | | | 413 | | | 1.14 | | | 147,091 | | | 434 | | | 1.18 | |
Total one- to four-family loans | Total one- to four-family loans | | 6,198,212 | | | 46,659 | | | 3.01 | | | 6,153,113 | | | 45,556 | | | 2.96 | | Total one- to four-family loans | | 6,657,913 | | | 53,453 | | | 3.21 | | | 6,502,243 | | | 51,059 | | | 3.14 | |
Commercial loans | Commercial loans | | 890,455 | | | 9,104 | | | 4.05 | | | 869,205 | | | 8,851 | | | 4.07 | | Commercial loans | | 1,147,681 | | | 13,924 | | | 4.85 | | | 1,025,402 | | | 11,993 | | | 4.58 | |
Consumer loans | Consumer loans | | 92,790 | | | 1,123 | | | 4.85 | | | 90,326 | | | 1,005 | | | 4.51 | | Consumer loans | | 102,649 | | | 1,942 | | | 7.67 | | | 102,760 | | | 1,767 | | | 6.82 | |
Total loans receivable(1) | Total loans receivable(1) | | 7,181,457 | | | 56,886 | | | 3.16 | | | 7,112,644 | | | 55,412 | | | 3.12 | | Total loans receivable(1) | | 7,908,243 | | | 69,319 | | | 3.51 | | | 7,630,405 | | | 64,819 | | | 3.38 | |
MBS(2) | MBS(2) | | 1,343,891 | | | 5,048 | | | 1.50 | | | 1,357,693 | | | 4,821 | | | 1.42 | | MBS(2) | | 1,173,366 | | | 4,748 | | | 1.62 | | | 1,221,035 | | | 4,811 | | | 1.58 | |
Investment securities(2)(3) | Investment securities(2)(3) | | 522,147 | | | 815 | | | 0.62 | | | 522,019 | | | 800 | | | 0.61 | | Investment securities(2)(3) | | 525,012 | | | 895 | | | 0.68 | | | 525,081 | | | 881 | | | 0.67 | |
FHLB stock(4) | FHLB stock(4) | | 166,879 | | | 2,695 | | | 6.48 | | | 158,546 | | | 2,240 | | | 5.73 | | FHLB stock(4) | | 167,567 | | | 3,607 | | | 8.73 | | | 197,577 | | | 4,158 | | | 8.35 | |
Cash and cash equivalents(5) | Cash and cash equivalents(5) | | 1,930,539 | | | 3,968 | | | 0.81 | | | 1,971,341 | | | 949 | | | 0.19 | | Cash and cash equivalents(5) | | 967,586 | | | 10,977 | | | 4.54 | | | 1,801,493 | | | 16,671 | | | 3.62 | |
Total interest-earning assets | Total interest-earning assets | | 11,144,913 | | | 69,412 | | | 2.49 | | | 11,122,243 | | | 64,222 | | | 2.31 | | Total interest-earning assets | | 10,741,774 | | | 89,546 | | | 3.34 | | | 11,375,591 | | | 91,340 | | | 3.19 | |
Other non-interest-earning assets | Other non-interest-earning assets | | 293,882 | | | 385,323 | | | Other non-interest-earning assets | | 263,916 | | | 248,022 | | |
Total assets | Total assets | | $ | 11,438,795 | | | $ | 11,507,566 | | | Total assets | | $ | 11,005,690 | | | $ | 11,623,613 | | |
| Liabilities and stockholders' equity: | Liabilities and stockholders' equity: | | | Liabilities and stockholders' equity: | | |
Interest-bearing liabilities: | Interest-bearing liabilities: | | | Interest-bearing liabilities: | | |
Checking | Checking | | $ | 1,068,329 | | | 180 | | | 0.07 | | | $ | 1,069,282 | | | 176 | | | 0.07 | | Checking | | $ | 989,440 | | | 368 | | | 0.15 | | | $ | 1,007,569 | | | 289 | | | 0.11 | |
Savings | Savings | | 556,553 | | | 74 | | | 0.05 | | | 540,348 | | | 71 | | | 0.05 | | Savings | | 541,324 | | | 101 | | | 0.08 | | | 545,885 | | | 100 | | | 0.07 | |
Money market | Money market | | 1,861,302 | | | 952 | | | 0.21 | | | 1,879,799 | | | 876 | | | 0.19 | | Money market | | 1,620,451 | | | 3,184 | | | 0.80 | | | 1,759,804 | | | 3,035 | | | 0.68 | |
Retail certificates | Retail certificates | | 2,169,262 | | | 6,383 | | | 1.18 | | | 2,241,080 | | | 7,012 | | | 1.27 | | Retail certificates | | 2,176,103 | | | 11,115 | | | 2.07 | | | 2,064,929 | | | 7,767 | | | 1.49 | |
Commercial certificates | Commercial certificates | | 84,231 | | | 129 | | | 0.61 | | | 116,181 | | | 183 | | | 0.64 | | Commercial certificates | | 38,575 | | | 197 | | | 2.07 | | | 34,298 | | | 104 | | | 1.20 | |
Wholesale certificates | Wholesale certificates | | 113,101 | | | 69 | | | 0.24 | | | 197,335 | | | 71 | | | 0.15 | | Wholesale certificates | | 127,037 | | | 1,175 | | | 3.75 | | | 97,828 | | | 609 | | | 2.47 | |
Total deposits | Total deposits | | 5,852,778 | | | 7,787 | | | 0.53 | | | 6,044,025 | | | 8,389 | | | 0.56 | | Total deposits | | 5,492,930 | | | 16,140 | | | 1.19 | | | 5,510,313 | | | 11,904 | | | 0.86 | |
| Borrowings(6) | Borrowings(6) | | 3,687,592 | | | 11,644 | | | 1.26 | | | 3,499,010 | | | 8,732 | | | 1.01 | | Borrowings(6) | | 3,700,022 | | | 31,447 | | | 3.42 | | | 4,260,685 | | | 33,608 | | | 3.10 | |
Total interest-bearing liabilities | Total interest-bearing liabilities | | 9,540,370 | | | 19,431 | | | 0.81 | | | 9,543,035 | | | 17,121 | | | 0.73 | | Total interest-bearing liabilities | | 9,192,952 | | | 47,587 | | | 2.09 | | | 9,770,998 | | | 45,512 | | | 1.84 | |
Non-interest-bearing deposits | Non-interest-bearing deposits | | 586,876 | | | 577,989 | | | Non-interest-bearing deposits | | 574,495 | | | 576,519 | | |
Other non-interest-bearing liabilities | Other non-interest-bearing liabilities | | 147,938 | | | 177,995 | | | Other non-interest-bearing liabilities | | 172,481 | | | 191,474 | | |
Stockholders' equity | Stockholders' equity | | 1,163,611 | | | 1,208,547 | | | Stockholders' equity | | 1,065,762 | | | 1,084,622 | | |
Total liabilities and stockholders' equity | Total liabilities and stockholders' equity | | $ | 11,438,795 | | | $ | 11,507,566 | | | Total liabilities and stockholders' equity | | $ | 11,005,690 | | | $ | 11,623,613 | | |
| Net interest income(7) | Net interest income(7) | | | $ | 49,981 | | | $ | 47,101 | | | Net interest income(7) | | | $ | 41,959 | | | $ | 45,828 | | |
Net interest-earning assets | Net interest-earning assets | | $ | 1,604,543 | | | | | $ | 1,579,208 | | | | | Net interest-earning assets | | $ | 1,548,822 | | | | | $ | 1,604,593 | | | | |
Net interest margin(8)(9) | Net interest margin(8)(9) | | | | 1.79 | | | | | 1.69 | | Net interest margin(8)(9) | | | | 1.56 | | | | | 1.61 | |
Ratio of interest-earning assets to interest-bearing liabilities | Ratio of interest-earning assets to interest-bearing liabilities | | 1.17x | | 1.17x | Ratio of interest-earning assets to interest-bearing liabilities | | 1.17x | | 1.16x |
| Selected performance ratios: | Selected performance ratios: | | | Selected performance ratios: | | |
Return on average assets (annualized)(9) | Return on average assets (annualized)(9) | | 0.74 | % | | 0.75 | % | Return on average assets (annualized)(9) | | 0.52 | % | | 0.56 | % |
Return on average equity (annualized)(9) | Return on average equity (annualized)(9) | | 7.27 | | | 7.16 | | Return on average equity (annualized)(9) | | 5.33 | | | 5.99 | |
Average equity to average assets | Average equity to average assets | | | 10.17 | | | 10.50 | | Average equity to average assets | | | 9.68 | | | 9.33 | |
Operating expense ratio (annualized)(10) | Operating expense ratio (annualized)(10) | | 0.99 | | | 0.97 | | Operating expense ratio (annualized)(10) | | 1.04 | | | 0.96 | |
Efficiency ratio(9)(11) | Efficiency ratio(9)(11) | | | 50.61 | | | 53.24 | | Efficiency ratio(9)(11) | | | 60.86 | | | 54.27 | |
Pre-tax yield on leverage strategy(12) | Pre-tax yield on leverage strategy(12) | | 0.31 | | | 0.14 | | Pre-tax yield on leverage strategy(12) | | 0.06 | | | 0.20 | |
(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$1.0 million and $2.0$1.1 million for the quarters ended June 30, 2022March 31, 2023 and MarchDecember 31, 2022, respectively.
(4)Included in this line, for the quarter ended June 30, 2022,March 31, 2023, is FHLB stock related to the leverage strategy with an average outstanding balance of $89.4$44.1 million and dividend income of $1.4 million$951 thousand at a weighted average yield of 6.48%8.75%, and FHLB stock not related to the leverage strategy with an average outstanding balance of $77.5$123.5 million and dividend income of $1.3$2.7 million at a weighted average yield of 6.48%8.72%. Included in this line for the quarter ended MarchDecember 31, 2022 is FHLB stock related to the leverage strategy with an average outstanding balance of $86.2$84.3 million and dividend income of $1.2$1.8 million, at a weighted average yield of 5.75%8.49%, and FHLB stock not related to the leverage strategy with an average outstanding balance of $72.3$113.3 million and dividend income of $1.0$2.4 million, at a weighted average yield of 5.71%8.24%.
(5)The average balance of cash and cash equivalents includes an average balance of cash related to the leverage strategy of $1.89 billion$935.1 million and $1.83$1.79 billion during the quarters ended June 30, 2022March 31, 2023 and MarchDecember 31, 2022 respectively.
(6)Included in this line, for the quarter ended June 30, 2022,March 31, 2023, are FHLB borrowings related to the leverage strategy with an average outstanding balance of $1.99 billion$979.2 million and interest paid of $3.7$11.3 million, at a weighted average rate of 0.73%4.60%, and FHLB borrowings not related to the leverage strategy with an average outstanding balance of $1.70$2.72 billion and interest paid of $8.0$20.2 million, at a weighted average rate of 1.87%3.00%. Included in this line for the quarter ended MarchDecember 31, 2022 are FHLB borrowings related to the leverage strategy with an average outstanding balance of $1.92$1.87 billion and interest paid of $1.3$17.3 million at a weighted average rate of 0.26%3.61%, and FHLB borrowings not related to the leverage strategy with an average outstanding balance of $1.58$2.39 billion and interest paid of $7.5$16.3 million at a weighted average rate of 1.90%2.70%. 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 | | For the Three Months Ended |
| | June 30, 2022 | | March 31, 2022 | | March 31, 2023 | | December 31, 2022 |
| | 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) |
Yield on interest-earning assets | Yield on interest-earning assets | 2.49 | % | | (0.30) | % | | 2.79 | % | | 2.31 | % | | (0.39) | % | | 2.70 | % | Yield on interest-earning assets | 3.34 | % | | 0.14 | % | | 3.20 | % | | 3.19 | % | | 0.13 | % | | 3.06 | % |
Cost of interest-bearing liabilities | Cost of interest-bearing liabilities | 0.81 | | | (0.03) | | | 0.84 | | | 0.73 | | | (0.11) | | | 0.84 | | Cost of interest-bearing liabilities | 2.09 | | | 0.30 | | | 1.79 | | | 1.84 | | | 0.42 | | | 1.42 | |
Return on average assets (annualized) | Return on average assets (annualized) | 0.74 | | | (0.10) | | | 0.84 | | | 0.75 | | | (0.13) | | | 0.88 | | Return on average assets (annualized) | 0.52 | | | (0.04) | | | 0.56 | | | 0.56 | | | (0.07) | | | 0.63 | |
Return on average equity (annualized) | Return on average equity (annualized) | 7.27 | | | 0.42 | | | 6.85 | | | 7.16 | | | 0.18 | | | 6.98 | | Return on average equity (annualized) | 5.33 | | | 0.05 | | | 5.28 | | | 5.99 | | | 0.28 | | | 5.71 | |
Net interest margin | Net interest margin | 1.79 | | | (0.32) | | | 2.11 | | | 1.69 | | | (0.32) | | | 2.01 | | Net interest margin | 1.56 | | | (0.15) | | | 1.71 | | | 1.61 | | | (0.27) | | | 1.88 | |
Efficiency Ratio | Efficiency Ratio | 50.61 | | | (1.31) | | | 51.92 | | | 53.24 | | | (0.58) | | | 53.82 | | Efficiency Ratio | 60.86 | | | (0.07) | | | 60.93 | | | 54.27 | | | (0.87) | | | 55.14 | |
(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, 2022March 31, 2023 to the three months ended MarchDecember 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 | | For the Three Months Ended |
| | June 30, 2022 vs. March 31, 2022 | | March 31, 2023 vs. December 31, 2022 |
| | Increase (Decrease) Due to | | Increase (Decrease) Due to |
| | Volume | | Rate | | Total | | Volume | | Rate | | Total |
| | (Dollars in thousands) | | (Dollars in thousands) |
Interest-earning assets: | Interest-earning assets: | | Interest-earning assets: | |
Loans receivable | Loans receivable | $ | 631 | | | $ | 843 | | | $ | 1,474 | | Loans receivable | $ | 2,510 | | | $ | 1,990 | | | $ | 4,500 | |
MBS | MBS | (49) | | | 276 | | | 227 | | MBS | (192) | | | 129 | | | (63) | |
Investment securities | Investment securities | — | | | 15 | | | 15 | | Investment securities | — | | | 14 | | | 14 | |
FHLB stock | FHLB stock | 131 | | | 324 | | | 455 | | FHLB stock | (709) | | | 158 | | | (551) | |
Cash and cash equivalents | Cash and cash equivalents | (20) | | | 3,039 | | | 3,019 | | Cash and cash equivalents | (9,019) | | | 3,325 | | | (5,694) | |
Total interest-earning assets | Total interest-earning assets | 693 | | | 4,497 | | | 5,190 | | Total interest-earning assets | (7,410) | | | 5,616 | | | (1,794) | |
| Interest-bearing liabilities: | Interest-bearing liabilities: | | Interest-bearing liabilities: | |
Checking | Checking | — | | | 5 | | | 5 | | Checking | (6) | | | 84 | | | 78 | |
Savings | Savings | 3 | | | — | | | 3 | | Savings | (1) | | | 2 | | | 1 | |
Money market | Money market | (7) | | | 83 | | | 76 | | Money market | (269) | | | 418 | | | 149 | |
Certificates of deposit | Certificates of deposit | (473) | | | (213) | | | (686) | | Certificates of deposit | 552 | | | 3,456 | | | 4,008 | |
Borrowings | Borrowings | 644 | | | 2,268 | | | 2,912 | | Borrowings | (6,736) | | | 4,575 | | | (2,161) | |
| Total interest-bearing liabilities | Total interest-bearing liabilities | 167 | | | 2,143 | | | 2,310 | | Total interest-bearing liabilities | (6,460) | | | 8,535 | | | 2,075 | |
| Net change in net interest income | Net change in net interest income | $ | 526 | | | $ | 2,354 | | | $ | 2,880 | | Net change in net interest income | $ | (950) | | | $ | (2,919) | | | $ | (3,869) | |
Comparison of Operating Results for the NineSix Months Ended June 30,March 31, 2023 and 2022 and 2021
The Company recognized net income of $65.0$30.4 million, or $0.48$0.23 per share, for the current year period compared to net income of $57.5$43.8 million, or $0.42$0.32 per share, for the prior year period. The increasedecrease in net income was due primarily to an increase in net interest income, partially offset by higher income tax expense andrecording a lower negative provision for credit losses.losses of $4.6 million for the current year period compared to a release of provision of $6.6 million for the prior year period. The net interest margin decreased six24 basis points, from 1.88%1.83% for the prior year period to 1.82%1.59% for the current year period. Excluding the effects of the leverage strategy, the net interest margin would have increased 16decreased 21 basis points, from 1.88%2.00% for the prior year period to 2.04%1.79% for the current year period. The increasedecrease in the net interest margin excluding the effects of the leverage strategy was due mainly to a reductionan increase in the weighted average cost of retail certificates of depositborrowings and borrowings,deposits, which outpacedexceeded the decreaseincrease in weighted average assetloan 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 | | | For the Six Months Ended | |
| | June 30, | | Change Expressed in: | | March 31, | | Change Expressed in: |
| | 2022 | | 2021 | | Dollars | | Percent | | 2023 | | 2022 | | Dollars | | Percent |
| | (Dollars in thousands) | | | | (Dollars in thousands) | | |
INTEREST AND DIVIDEND INCOME: | INTEREST AND DIVIDEND INCOME: | | INTEREST AND DIVIDEND INCOME: | |
Loans receivable | Loans receivable | $ | 168,086 | | | $ | 172,758 | | | $ | (4,672) | | | (2.7) | % | Loans receivable | $ | 134,138 | | | $ | 111,200 | | | $ | 22,938 | | | 20.6 | % |
Cash and cash equivalents | | Cash and cash equivalents | 27,648 | | | 963 | | | 26,685 | | | 2,771.0 |
MBS | MBS | 14,494 | | | 16,499 | | | (2,005) | | | (12.2) | | MBS | 9,559 | | | 9,446 | | | 113 | | | 1.2 | |
FHLB stock | FHLB stock | 6,166 | | | 2,964 | | | 3,202 | | | 108.0 | | FHLB stock | 7,765 | | | 3,471 | | | 4,294 | | | 123.7 | |
Cash and cash equivalents | 4,931 | | | 117 | | | 4,814 | | | 4,114.5 | | |
Investment securities | Investment securities | 2,423 | | | 2,075 | | | 348 | | | 16.8 | | Investment securities | 1,776 | | | 1,608 | | | 168 | | | 10.4 | |
Total interest and dividend income | Total interest and dividend income | $ | 196,100 | | | $ | 194,413 | | | $ | 1,687 | | | 0.9 | | Total interest and dividend income | $ | 180,886 | | | $ | 126,688 | | | $ | 54,198 | | | 42.8 | |
The decreaseincrease 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 thean increase in the average balance and weighted average yield of the loan portfolio. The decreaseincrease in the weighted average ratebalance was due to endorsements, refinances, originations and purchases at lower market rates at the time of the transactions between periods, which are being fully reflectedmainly in the current year. Premium amortization related to the one- tocorrespondent one-to four-family correspondentand commercial real estate loan portfolio decreased significantly compared to the prior year period due to the slow-down in prepayments and endorsements resulting from anportfolios. The 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 ofwas due primarily to originations and purchases at lowerhigher market yields, between periods, along with a decrease inas well as disbursements on commercial construction loans at rates higher than the average balanceoverall portfolio rate and upward repricing of the portfolio.
existing adjustable-rate loans due to higher market interest rates. The increase in dividend income on FHLB stock and the increase in interest income on cash and cash equivalents werewas due mainly to the leverage strategy being utilized during the current year period and not being utilized during the prior period.
a higher yield on cash related to an increase in FRB interest rates. The increase in interestdividend income on investment securitiesFHLB stock was due primarilymainly to an increase in the average balance of FHLB stock, along with a higher FHLB dividend rate compared to the portfolio.prior year period.
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 | | | For the Six Months Ended | |
| | June 30, | | Change Expressed in: | | March 31, | | Change Expressed in: |
| | 2022 | | 2021 | | Dollars | | Percent | | 2023 | | 2022 | | Dollars | | Percent |
| | (Dollars in thousands) | | | | (Dollars in thousands) | | |
INTEREST EXPENSE: | INTEREST EXPENSE: | | INTEREST EXPENSE: | |
Borrowings | Borrowings | $ | 27,961 | | | $ | 26,885 | | | $ | 1,076 | | | 4.0 | % | Borrowings | $ | 65,055 | | | $ | 16,317 | | | $ | 48,738 | | | 298.7 | % |
Deposits | Deposits | 25,443 | | | 38,071 | | | (12,628) | | | (33.2) | | Deposits | 28,044 | | | 17,656 | | | 10,388 | | | 58.8 | |
Total interest expense | Total interest expense | $ | 53,404 | | | $ | 64,956 | | | $ | (11,552) | | | (17.8) | | Total interest expense | $ | 93,099 | | | $ | 33,973 | | | $ | 59,126 | | | 174.0 | |
The increase in interest expense on borrowings was due primarily to an increase in the weighted average rate on the borrowings associated with the leverage strategy being utilized during a portion of the current year period and not being utilized duringcompared to the prior year period.period along with an increase in the average balance and weighted average rate on borrowings not associated with the leverage strategy. Interest expense on borrowings associated with the leverage strategy totaled $4.9increased $27.3 million duringcompared to the currentprior year period. This was partially offset by a lower cost ofInterest expense on FHLB borrowings not associated with the leverage strategy increased due primarily to terminating or not renewing certainnew borrowings added between periods, at market interest rates higher than the overall portfolio rate, swap agreements, not replacing certain maturing FHLB advances, and prepaying certain advances during fiscal year 2021.
to fund operational needs. The decreaseincrease in interest expense on deposits was due mainly to a decreasean increase in the weighted average rate paid on retailthe deposit portfolio, primarily certificates of deposit along withand money market accounts, partially offset by 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.these portfolios.
Provision for Credit Losses
The Bank recorded a negative provision for credit losses during the current year period of $5.7$4.6 million, compared to a negativerelease of provision for credit losses of $7.2$6.6 million during the prior year period. The negative provision for credit losses in the current year period was comprised of a $3.8$3.6 million decreaseincrease in the ACL for loans and a $1.9$1.0 million decreaseincrease in reserves for off-balance sheet credit exposures. The negative provision for credit losses associated with both 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 reserveand reserves for off-balance sheet credit exposures in the current year period was also due primarily to growth in the commercial loan portfolio and commercial construction off-balance sheet credit exposures, along with a reduction in commercialthe projected prepayment speeds used in the model for all loan qualitative factors.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 Nine Months Ended | | | For the Six Months Ended | |
| | June 30, | | Change Expressed in: | | March 31, | | Change Expressed in: |
| | 2022 | | 2021 | | Dollars | | Percent | | 2023 | | 2022 | | Dollars | | Percent |
| | (Dollars in thousands) | | | | (Dollars in thousands) | | |
NON-INTEREST INCOME: | NON-INTEREST INCOME: | | NON-INTEREST INCOME: | |
Deposit service fees | Deposit service fees | $ | 10,331 | | | $ | 8,988 | | | $ | 1,343 | | | 14.9 | % | Deposit service fees | $ | 6,583 | | | $ | 6,730 | | | $ | (147) | | | (2.2) | % |
Insurance commissions | Insurance commissions | 2,042 | | | 2,249 | | | (207) | | | (9.2) | | Insurance commissions | 1,672 | | | 1,254 | | | 418 | | | 33.3 | |
Gain on sale of Visa Class B shares | — | | | 7,386 | | | (7,386) | | | (100.0) | | |
| | Other non-interest income | Other non-interest income | 4,664 | | | 4,160 | | | 504 | | | 12.1 | | Other non-interest income | 2,180 | | | 2,938 | | | (758) | | | (25.8) | |
Total non-interest income | Total non-interest income | $ | 17,037 | | | $ | 22,783 | | | $ | (5,746) | | | (25.2) | | Total non-interest income | $ | 10,435 | | | $ | 10,922 | | | $ | (487) | | | (4.5) | |
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 lowerreceived being higher than expected,anticipated and the related accrual adjustments. During the prior year period, the Bank sold its Visa Class B shares, resultingadjustments, along with overall commissions being higher in a $7.4 million gain, with no similar transaction during the current year period.year. The increasedecrease in other non-interest income was due primarilymainly to a gainthe prior year period including gains on a loan-related financial derivative agreement.
agreement, with no such gains in the current year period.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 | | | For the Six Months Ended | |
| | June 30, | | Change Expressed in: | | March 31, | | Change Expressed in: |
| | 2022 | | 2021 | | Dollars | | Percent | | 2023 | | 2022 | | Dollars | | Percent |
| | (Dollars in thousands) | | | | (Dollars in thousands) | | |
NON-INTEREST EXPENSE: | NON-INTEREST EXPENSE: | | NON-INTEREST EXPENSE: | |
Salaries and employee benefits | Salaries and employee benefits | $ | 42,332 | | | $ | 41,402 | | | $ | 930 | | | 2.2 | % | Salaries and employee benefits | $ | 26,487 | | | $ | 27,751 | | | $ | (1,264) | | | (4.6) | % |
Information technology and related expense | Information technology and related expense | 13,268 | | | 13,568 | | | (300) | | | (2.2) | | Information technology and related expense | 10,859 | | | 8,925 | | | 1,934 | | | 21.7 | |
Occupancy, net | Occupancy, net | 10,593 | | | 10,406 | | | 187 | | | 1.8 | | Occupancy, net | 7,042 | | | 6,872 | | | 170 | | | 2.5 | |
Regulatory and outside services | Regulatory and outside services | 4,212 | | | 4,288 | | | (76) | | | (1.8) | | Regulatory and outside services | 2,838 | | | 2,640 | | | 198 | | | 7.5 | |
Advertising and promotional | Advertising and promotional | 3,626 | | | 3,729 | | | (103) | | | (2.8) | | Advertising and promotional | 2,166 | | | 2,558 | | | (392) | | | (15.3) | |
Federal insurance premium | Federal insurance premium | 2,200 | | | 1,888 | | | 312 | | | 16.5 | | Federal insurance premium | 2,058 | | | 1,416 | | | 642 | | | 45.3 | |
Deposit and loan transaction costs | Deposit and loan transaction costs | 2,050 | | | 2,123 | | | (73) | | | (3.4) | | Deposit and loan transaction costs | 1,301 | | | 1,386 | | | (85) | | | (6.1) | |
Office supplies and related expense | Office supplies and related expense | 1,464 | | | 1,289 | | | 175 | | | 13.6 | | Office supplies and related expense | 1,264 | | | 970 | | | 294 | | | 30.3 | |
Loss on interest rate swap termination | — | | | 4,752 | | | (4,752) | | | (100.0) | | |
| | Other non-interest expense | Other non-interest expense | 3,299 | | | 3,877 | | | (578) | | | (14.9) | | Other non-interest expense | 2,389 | | | 2,136 | | | 253 | | | 11.8 | |
Total non-interest expense | Total non-interest expense | $ | 83,044 | | | $ | 87,322 | | | $ | (4,278) | | | (4.9) | | Total non-interest expense | $ | 56,404 | | | $ | 54,654 | | | $ | 1,750 | | | 3.2 | |
The increasedecrease in salaries and employee benefits was attributable mainly to a decrease in incentive compensation. The increase in information technology and related expenses was due mainly to third-party project management expenses associated with the Bank's ongoing digital transformation project, along with higher software licensing expenses. The increase in regulatory and outside services was due primarily to merit increases and an increase in incentive compensation, partially offset by aoutside consulting services. The decrease in commissionsadvertising and promotional expense was due to a reduction in loan origination activity comparedmainly to the prior year period.timing of campaigns and sponsorships. The increase in federal insurance premium expense was due mainly to an increase in average assets as a result ofthe FDIC assessment rate for all insured depository institutions, along with the leverage strategy being utilized during the majority of the current year period. Duringperiod and being utilized for only three months during the prior year period,period. The increase in office supplies and related expense was due primarily to the Bank terminated $200.0 millionwrite-off of interest rate swaps, resulting in a lossthe Bank's remaining inventory of $4.8 millionunissued non-contactless debit cards, which was reclassified out of AOCI to earnings.have now become obsolete. The decreaseincrease in other non-interest expense was due primarilymainly to expenses associated with the write-down during the prior year period of a property that had previously served as one ofcollateral received on the Bank's branch locations.interest rate swap agreements.
The Company's efficiency ratio was 51.99%57.43% for the current year period compared to 57.36%52.74% for the prior year period. The improvementchange in the efficiency ratio was due primarily to higherlower net interest income.income and higher non-interest expense in the current year 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 Nine Months Ended | | | For the Six Months Ended | |
| | June 30, | | Change Expressed in: | | March 31, | | Change Expressed in: |
| | 2022 | | 2021 | | Dollars | | Percent | | 2023 | | 2022 | | Dollars | | Percent |
| | (Dollars in thousands) | | | | (Dollars in thousands) | | |
Income before income tax expense | Income before income tax expense | $ | 82,379 | | | $ | 72,105 | | | $ | 10,274 | | | 14.2 | % | Income before income tax expense | $ | 37,267 | | | $ | 55,610 | | | $ | (18,343) | | | (33.0) | % |
Income tax expense | Income tax expense | 17,418 | | | 14,576 | | | 2,842 | | | 19.5 | | Income tax expense | 6,838 | | | 11,801 | | | (4,963) | | | (42.1) | |
Net income | Net income | $ | 64,961 | | | $ | 57,529 | | | $ | 7,432 | | | 12.9 | | Net income | $ | 30,429 | | | $ | 43,809 | | | $ | (13,380) | | | (30.5) | |
| Effective Tax Rate | Effective Tax Rate | 21.1 | % | | 20.2 | % | | Effective Tax Rate | 18.3 | % | | 21.2 | % | |
The increasedecrease in income tax expense was due primarily to higherlower pretax income in the current year period. Additionally,period, 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 to the overall effective rate.
Fiscal Year 2023 Outlook
The rapid increase in short-term rates led by the FRB and the inverted yield curve has led to decreases in the Bank's net interest margin. There has been a runoff in some deposit product balances and management has increased slightlycertificate of deposit and money market account rates to help mitigate the outflow. The higher loan rates have made the purchase of 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 as a result of housing turnover. 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 is expected to 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 higher costing borrowings in order to fund loan growth, and deposit funds moving from lower costing deposit accounts to certificates of deposit. Loan growth is occurring at market interest rates that are higher than the prioroverall 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. As with managing the size of the balance sheet, management continues to evaluate funding options and plans to continue using shorter term borrowings, as necessary, with the anticipation that when rates begin to decrease, those borrowings can be repaid or repriced to lower cost alternatives faster.
Subsequent to March 31, 2023, management increased the rates offered on the Bank's money market accounts in response to competitor pricing. This increase, in combination with the full-quarter impact of the Bank's certificate of deposit promotional campaign and the ongoing repricing of the Bank's certificate of deposit and FHLB advance portfolios, offset by growth in the yield on loans, is expected to reduce the net interest margin by approximately 20 basis points during the June 2023 quarter, excluding the impact of the leverage strategy.
Management intends to implement a new core processing system ("digital transformation") for the Bank by September 2023. The digital transformation is expected to better position the Bank for the future and allow for the introduction of new products and services to enhance customer experiences. Management anticipates information technology and related expenses will be approximately $5 million higher in fiscal year period,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 million higher in line with management's anticipationfiscal year 2023 compared to fiscal year 2022, or approximately $24 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. Previously, management expected an increase in salaries and benefits of an$3.5 million in fiscal year 2023 and now expect salaries and benefits to remain flat in fiscal year 2023. This is due to several factors such as open positions remaining unfilled, reduced incentive compensation expectations, and a lower merit increase than was projected at September 30, 2022. Federal insurance premium expense is anticipated to be approximately $1.3 million higher in fiscal year 2023 compared to fiscal year 2022, due to the increase in the assessment rate that began in January 2023 for all insured depository institutions. Management anticipates the effective tax rate of approximately 21% for fiscal year 2022.
2023 will be approximately 19%.
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 Nine Months Ended | | For the Six Months Ended |
| | June 30, 2022 | | June 30, 2021 | | March 31, 2023 | | March 31, 2022 | |
| | Average | | Interest | | | Average | | Interest | | | Average | | Interest | | | Average | | Interest | | |
| | Outstanding | | Earned/ | | Yield/ | | Outstanding | | Earned/ | | Yield/ | | Outstanding | | Earned/ | | Yield/ | | Outstanding | | Earned/ | | Yield/ | |
| | Amount | | Paid | | Rate | | Amount | | Paid | | Rate | | Amount | | Paid | | Rate | | Amount | | Paid | | Rate | |
Assets: | Assets: | (Dollars in thousands) | Assets: | (Dollars in thousands) |
Interest-earning assets: | Interest-earning assets: | | Interest-earning assets: | | |
One- to four-family loans: | One- to four-family loans: | | One- to four-family loans: | | |
Originated | Originated | $ | 3,973,184 | | | $ | 96,583 | | | 3.24 | % | | $ | 3,963,088 | | | $ | 104,482 | | | 3.52 | % | Originated | $ | 4,050,149 | | | $ | 67,024 | | | 3.31 | % | | $ | 3,968,475 | | | $ | 64,415 | | | 3.25 | % | |
Correspondent purchased | Correspondent purchased | 2,040,934 | | | 39,832 | | | 2.60 | | | 2,006,257 | | | 35,124 | | | 2.33 | | Correspondent purchased | 2,383,295 | | | 36,642 | | | 3.07 | | | 2,030,928 | | | 25,805 | | | 2.54 | | |
Bulk purchased | Bulk purchased | 162,151 | | | 1,578 | | | 1.30 | | | 195,678 | | | 2,870 | | | 1.96 | | Bulk purchased | 145,779 | | | 847 | | | 1.16 | | | 165,895 | | | 1,114 | | | 1.34 | | |
Total one- to four-family loans | Total one- to four-family loans | 6,176,269 | | | 137,993 | | | 2.98 | | | 6,165,023 | | | 142,476 | | | 3.08 | | Total one- to four-family loans | 6,579,223 | | | 104,513 | | | 3.18 | | | 6,165,298 | | | 91,334 | | | 2.96 | | |
Commercial loans | Commercial loans | 866,856 | | | 26,898 | | | 4.09 | | | 780,941 | | | 26,707 | | | 4.51 | | Commercial loans | 1,085,870 | | | 25,917 | | | 4.72 | | | 855,057 | | | 17,794 | | | 4.12 | | |
Consumer loans | Consumer loans | 91,979 | | | 3,195 | | | 4.64 | | | 103,241 | | | 3,575 | | | 4.63 | | Consumer loans | 102,705 | | | 3,708 | | | 7.24 | | | 91,573 | | | 2,072 | | | 4.54 | | |
Total loans receivable(1) | Total loans receivable(1) | 7,135,104 | | | 168,086 | | | 3.14 | | | 7,049,205 | | | 172,758 | | | 3.26 | | Total loans receivable(1) | 7,767,798 | | | 134,138 | | | 3.45 | | | 7,111,928 | | | 111,200 | | | 3.12 | | |
MBS(2) | MBS(2) | 1,379,334 | | | 14,494 | | | 1.40 | | | 1,424,914 | | | 16,499 | | | 1.54 | | MBS(2) | 1,197,462 | | | 9,559 | | | 1.60 | | | 1,397,056 | | | 9,446 | | | 1.35 | | |
Investment securities(2)(3) | Investment securities(2)(3) | 522,706 | | | 2,423 | | | 0.62 | | | 476,755 | | | 2,075 | | | 0.58 | | Investment securities(2)(3) | 525,047 | | | 1,776 | | | 0.68 | | | 522,986 | | | 1,608 | | | 0.61 | | |
FHLB stock(4) | FHLB stock(4) | 132,657 | | | 6,166 | | | 6.21 | | | 78,784 | | | 2,964 | | | 5.03 | | FHLB stock(4) | 182,737 | | | 7,765 | | | 8.52 | | | 115,546 | | | 3,471 | | | 6.02 | | |
Cash and cash equivalents(5) | Cash and cash equivalents(5) | 1,305,949 | | | 4,931 | | | 0.50 | | | 152,792 | | | 117 | | | 0.10 | | Cash and cash equivalents(5) | 1,389,121 | | | 27,648 | | | 3.94 | | | 993,653 | | | 963 | | | 0.19 | | |
Total interest-earning assets | Total interest-earning assets | 10,475,750 | | | 196,100 | | | 2.49 | | | 9,182,450 | | | 194,413 | | | 2.82 | | Total interest-earning assets | 11,062,165 | | | 180,886 | | | 3.26 | | | 10,141,169 | | | 126,688 | | | 2.49 | | |
Other non-interest-earning assets | Other non-interest-earning assets | 362,229 | | | 443,370 | | | Other non-interest-earning assets | 255,882 | | | 398,355 | | | |
Total assets | Total assets | $ | 10,837,979 | | | $ | 9,625,820 | | | Total assets | $ | 11,318,047 | | | $ | 10,539,524 | | | |
| Liabilities and stockholders' equity: | Liabilities and stockholders' equity: | | Liabilities and stockholders' equity: | | |
Interest-bearing liabilities: | Interest-bearing liabilities: | | Interest-bearing liabilities: | | |
Checking | Checking | $ | 1,063,280 | | | 535 | | | 0.07 | | | $ | 955,731 | | | 588 | | | 0.08 | | Checking | $ | 998,604 | | | 657 | | | 0.13 | | | $ | 1,060,755 | | | 355 | | | 0.07 | | |
Savings | Savings | 539,152 | | | 215 | | | 0.05 | | | 478,011 | | | 209 | | | 0.06 | | Savings | 543,630 | | | 201 | | | 0.07 | | | 530,451 | | | 141 | | | 0.05 | | |
Money market | Money market | 1,835,666 | | | 2,653 | | | 0.19 | | | 1,554,947 | | | 3,220 | | | 0.28 | | Money market | 1,690,893 | | | 6,218 | | | 0.74 | | | 1,822,848 | | | 1,701 | | | 0.19 | | |
Retail certificates | Retail certificates | 2,236,551 | | | 21,230 | | | 1.27 | | | 2,530,969 | | | 31,824 | | | 1.68 | | Retail certificates | 2,119,905 | | | 18,882 | | | 1.79 | | | 2,270,195 | | | 14,847 | | | 1.31 | | |
Commercial certificates | Commercial certificates | 123,398 | | | 584 | | | 0.63 | | | 195,066 | | | 1,208 | | | 0.83 | | Commercial certificates | 36,413 | | | 301 | | | 1.66 | | | 142,982 | | | 455 | | | 0.64 | | |
Wholesale certificates | Wholesale certificates | 170,051 | | | 226 | | | 0.18 | | | 254,606 | | | 1,022 | | | 0.54 | | Wholesale certificates | 112,272 | | | 1,785 | | | 3.19 | | | 198,527 | | | 157 | | | 0.16 | | |
Total deposits | Total deposits | 5,968,098 | | | 25,443 | | | 0.57 | | | 5,969,330 | | | 38,071 | | | 0.85 | | Total deposits | 5,501,717 | | | 28,044 | | | 1.02 | | | 6,025,758 | | | 17,656 | | | 0.59 | | |
| Borrowings(6) | Borrowings(6) | 2,918,291 | | | 27,961�� | | | 1.27 | | | 1,654,544 | | | 26,885 | | | 2.16 | | Borrowings(6) | 3,983,434 | | | 65,055 | | | 3.25 | | | 2,533,641 | | | 16,317 | | | 1.28 | | |
Total interest-bearing liabilities | Total interest-bearing liabilities | 8,886,389 | | | 53,404 | | | 0.80 | | | 7,623,874 | | | 64,956 | | | 1.14 | | Total interest-bearing liabilities | 9,485,151 | | | 93,099 | | | 1.96 | | | 8,559,399 | | | 33,973 | | | 0.79 | | |
Non-interest-bearing deposits | Non-interest-bearing deposits | 571,685 | | | 499,737 | | | Non-interest-bearing deposits | 575,518 | | | 564,089 | | | |
Other non-interest-bearing liabilities | Other non-interest-bearing liabilities | 177,081 | | | 219,204 | | | Other non-interest-bearing liabilities | 182,083 | | | 193,606 | | | |
Stockholders' equity | Stockholders' equity | 1,202,824 | | | 1,283,005 | | | Stockholders' equity | 1,075,295 | | | 1,222,430 | | | |
Total liabilities and stockholders' equity | Total liabilities and stockholders' equity | $ | 10,837,979 | | | $ | 9,625,820 | | | Total liabilities and stockholders' equity | $ | 11,318,047 | | | $ | 10,539,524 | | | |
| | Net interest income(7) | Net interest income(7) | | $ | 142,696 | | | $ | 129,457 | | | Net interest income(7) | | $ | 87,787 | | | $ | 92,715 | | | |
Net interest-earning assets | Net interest-earning assets | $ | 1,589,361 | | | | | $ | 1,558,576 | | | | | Net interest-earning assets | $ | 1,577,014 | | | | | $ | 1,581,770 | | | | | |
Net interest margin(8)(9) | Net interest margin(8)(9) | | | 1.82 | | | | | 1.88 | | Net interest margin(8)(9) | | | 1.59 | | | | | 1.83 | | |
Ratio of interest-earning assets to interest-bearing liabilities | Ratio of interest-earning assets to interest-bearing liabilities | | 1.18x | | 1.20x | Ratio of interest-earning assets to interest-bearing liabilities | | 1.17x | | 1.18x | |
| Selected performance ratios: | Selected performance ratios: | | Selected performance ratios: | | |
Return on average assets (annualized)(9) | Return on average assets (annualized)(9) | | 0.80 | % | | 0.80 | % | Return on average assets (annualized)(9) | | 0.54 | % | | 0.83 | % | |
Return on average equity (annualized)(9) | Return on average equity (annualized)(9) | | 7.20 | | | 5.98 | | Return on average equity (annualized)(9) | | 5.66 | | | 7.17 | | |
Average equity to average assets | Average equity to average assets | | 11.10 | | | 13.33 | | Average equity to average assets | | 9.50 | | | 11.60 | | |
Operating expense ratio (annualized)(10) | Operating expense ratio (annualized)(10) | | 1.02 | | | 1.21 | | Operating expense ratio (annualized)(10) | | 1.00 | | | 1.04 | | |
Efficiency ratio(9)(11) | Efficiency ratio(9)(11) | | 51.99 | | | 57.36 | | Efficiency ratio(9)(11) | | 57.43 | | | 52.74 | | |
Pre-tax yield on leverage strategy(12) | Pre-tax yield on leverage strategy(12) | | 0.23 | | | — | | Pre-tax yield on leverage strategy(12) | | 0.15 | | | 0.15 | | |
(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 and $7.2$3.0 million for the ninesix months ended June 30,March 31, 2023 and March 31, 2022, and June 30, 2021, respectively.
(4)Included in this line, for the ninesix months ended June 30,March 31, 2023 and March 31, 2022, respectively, is FHLB stock related to the leverage strategy with an average outstanding balance $58.2of $64.4 million and $42.6 million, and dividend income of $2.7$2.8 million and $1.2 million at a weighted average yield of 6.12%,8.58% and 5.75% and FHLB stock not related to the leverage strategy with an average outstanding balance of $74.5$118.4 million and $72.9 million and dividend income of $3.5$5.0 million and $2.2 million at a weighted average yield of 6.29%. There was no FHLB stock related to the leverage strategy during the nine months ended June 30, 2021.8.49% and 6.18%, respectively.
(5)The average balance of cash and cash equivalents includes an average balance of cash related to the leverage strategy of $1.23$1.37 billion and $904.6 million during the ninesix months ended June 30, 2022. There were no cashMarch 31, 2023 and cash equivalents related to the leverage strategy during the nine months ended June 30, 2021.March 31, 2022, respectively.
(6)Included in this line, for the ninesix months ended June 30,March 31, 2023 and March 31, 2022 respectively, are FHLB borrowings related to the leverage strategy with an average outstanding balance of $1.30$1.43 billion and $947.3 million, with interest paid of $4.9$28.6 million and $1.3 million, at a weighted average rate of 0.50%3.95% and 0.26%, and FHLB borrowings not related to the leverage strategy with an average outstanding balance of $1.62$2.55 billion and $1.59 billion and interest paid of $23.0$36.5 million and $15.1 million, at a weighted average rate of 2.86% and 1.89%. There were no FHLB borrowings related to the leverage strategy during the nine months ended June 30, 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 Six Months Ended |
| | June 30, 2022 | | June 30, 2021 | | March 31, 2023 | | March 31, 2022 | |
| | 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) | |
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 | 3.26 | % | | 0.13 | % | | 3.13 | % | | 2.49 | % | | (0.22) | % | | 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 | 1.96 | | | 0.36 | | | 1.60 | | | 0.79 | | | (0.07) | | | 0.86 | | |
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) | 0.54 | | | (0.06) | | | 0.60 | | | 0.83 | | | (0.07) | | | 0.90 | | |
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) | 5.66 | | | 0.16 | | | 5.50 | | | 7.17 | | | 0.09 | | | 7.08 | | |
Net interest margin | Net interest margin | 1.82 | | | (0.22) | | | 2.04 | | | 1.88 | | | — | | | 1.88 | | Net interest margin | 1.59 | | | (0.20) | | | 1.79 | | | 1.83 | | | (0.17) | | | 2.00 | | |
Efficiency Ratio | Efficiency Ratio | 51.99 | | | (0.65) | | | 52.64 | | | 57.36 | | | — | | | 57.36 | | Efficiency Ratio | 57.43 | | | (0.50) | | | 57.93 | | | 52.74 | | | (0.29) | | | 53.03 | | |
(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 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 | | | For the Six Months Ended |
| | | June 30, 2022 vs. June 30, 2021 | | | March 31, 2023 vs. March 31, 2022 |
| | | Increase (Decrease) Due to | | | Increase (Decrease) Due to |
| | | Volume(1) | | Rate | | Total | | | Volume | | Rate | | Total |
| | | (Dollars in thousands) | | | (Dollars in thousands) |
Interest-earning assets: | Interest-earning assets: | | | Interest-earning assets: | | |
Loans receivable | Loans receivable | | $ | 2,731 | | | $ | (7,403) | | | $ | (4,672) | | Loans receivable | | $ | 11,860 | | | $ | 11,078 | | | $ | 22,938 | |
MBS | MBS | | (515) | | | (1,490) | | | (2,005) | | MBS | | (1,457) | | | 1,570 | | | 113 | |
Investment securities | Investment securities | | 207 | | | 141 | | | 348 | | Investment securities | | 6 | | | 162 | | | 168 | |
FHLB stock | FHLB stock | | 2,382 | | | 820 | | | 3,202 | | FHLB stock | | 2,507 | | | 1,787 | | | 4,294 | |
Cash and cash equivalents | Cash and cash equivalents | | 3,167 | | | 1,647 | | | 4,814 | | Cash and cash equivalents | | 533 | | | 26,152 | | | 26,685 | |
Total interest-earning assets | Total interest-earning assets | | 7,972 | | | (6,285) | | | 1,687 | | Total interest-earning assets | | 13,449 | | | 40,749 | | | 54,198 | |
| Interest-bearing liabilities: | Interest-bearing liabilities: | | | Interest-bearing liabilities: | | |
Checking | Checking | | 62 | | | (114) | | | (52) | | Checking | | (22) | | | 324 | | | 302 | |
Savings | Savings | | 25 | | | (19) | | | 6 | | Savings | | 4 | | | 56 | | | 60 | |
Money market | Money market | | 516 | | | (1,083) | | | (567) | | Money market | | (132) | | | 4,649 | | | 4,517 | |
Certificates of deposit | Certificates of deposit | | (4,673) | | | (7,342) | | | (12,015) | | Certificates of deposit | | (2,247) | | | 7,756 | | | 5,509 | |
Borrowings | Borrowings | | 4,418 | | | (3,342) | | | 1,076 | | Borrowings | | 12,380 | | | 36,358 | | | 48,738 | |
| Total interest-bearing liabilities | Total interest-bearing liabilities | | 348 | | | (11,900) | | | (11,552) | | Total interest-bearing liabilities | | 9,983 | | | 49,143 | | | 59,126 | |
| Net change in net interest income | Net change in net interest income | | $ | 7,624 | | | $ | 5,615 | | | $ | 13,239 | | Net change in net interest income | | $ | 3,466 | | | $ | (8,394) | | | $ | (4,928) | |
(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,March 31, 2023 and 2022 and 2021
For the quarter ended June 30, 2022,March 31, 2023, the Company recognized net income of $21.2$14.2 million, or $0.16$0.11 per share, compared to net income of $18.2$21.6 million, or $0.13$0.16 per share for the quarter ended June 30, 2021.March 31, 2022. The increasedecrease in net income was due primarily to an increasea decrease in net interest income partially offset byalong with a higher provision for credit losses, and higherpartially offset by lower income tax expense. The net interest margin decreased five13 basis points, from 1.84%1.69% for the prior year quarter to 1.79%1.56% for the current quarter. Excluding the effects of the leverage strategy, the net interest margin would have increased 27decreased 30 basis points, from 1.84%2.01% for the prior year quarter to 2.11%1.71% for the current quarter. The increasedecrease in the net interest margin excluding the effects of the leverage strategy was due mainly to a decreasean increase in the weighted average cost of retail certificates of deposit, a changeborrowings and deposits, which exceeded the increase 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 | | | For the Three Months Ended | |
| | June 30, | | Change Expressed in: | | March 31, | | Change Expressed in: |
| | 2022 | | 2021 | | Dollars | | Percent | | 2023 | | 2022 | | Dollars | | Percent |
| | (Dollars in thousands) | | | | (Dollars in thousands) | | |
INTEREST AND DIVIDEND INCOME: | INTEREST AND DIVIDEND INCOME: | | INTEREST AND DIVIDEND INCOME: | |
Loans receivable | Loans receivable | $ | 56,886 | | | $ | 54,779 | | | $ | 2,107 | | | 3.8 | % | Loans receivable | $ | 69,319 | | | $ | 55,412 | | | $ | 13,907 | | | 25.1 | % |
Cash and cash equivalents | | Cash and cash equivalents | 10,977 | | | 949 | | | 10,028 | | | 1,056.7 | |
MBS | MBS | 5,048 | | | 5,360 | | | (312) | | | (5.8) | | MBS | 4,748 | | | 4,821 | | | (73) | | | (1.5) | |
FHLB stock | FHLB stock | 2,695 | | | 944 | | | 1,751 | | | 185.5 | | FHLB stock | 3,607 | | | 2,240 | | | 1,367 | | | 61.0 | |
Cash and cash equivalents | 3,968 | | | 26 | | | 3,942 | | | 15,161.5 | | |
Investment securities | Investment securities | 815 | | | 763 | | | 52 | | | 6.8 | | Investment securities | 895 | | | 800 | | | 95 | | | 11.9 | |
Total interest and dividend income | Total interest and dividend income | $ | 69,412 | | | $ | 61,872 | | | $ | 7,540 | | | 12.2 | | Total interest and dividend income | $ | 89,546 | | | $ | 64,222 | | | $ | 25,324 | | | 39.4 | |
The increase in interest income on loans receivable was due primarily to an increase in the average balance of the loan portfolio relatedand an increase in the weighted average yield. The increase in the average balance was primarily in the correspondent one-to four-family and commercial real estate 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 loan growth, which has a greater impact on interest incomeconstruction loans at rates higher than other loan typesthe overall portfolio rate and upward repricing of existing adjustable-rate loans 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 themarket interest rates. The increase in interest income on loans receivable.
The decrease in interest income on MBScash and cash equivalents was due to a decrease in the average balance of the portfolio, partially offset by a decrease in premium amortizationhigher yield on cash related to a slowdownan increase in prepayment activity.
FRB interest rates. The increase in dividend income on FHLB stock and the increase in income on cash and cash equivalents werewas due mainly to the leverage strategy being utilized during the current quarter and not being utilized duringa higher FHLB dividend rate compared to 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 | | | For the Three Months Ended | |
| | June 30, | | Change Expressed in: | | March 31, | | Change Expressed in: |
| | 2022 | | 2021 | | Dollars | | Percent | | 2023 | | 2022 | | Dollars | | Percent |
| | (Dollars in thousands) | | | | (Dollars in thousands) | | |
INTEREST EXPENSE: | INTEREST EXPENSE: | | INTEREST EXPENSE: | |
Borrowings | Borrowings | $ | 11,644 | | | $ | 7,826 | | | $ | 3,818 | | | 48.8 | % | Borrowings | $ | 31,447 | | | $ | 8,732 | | | $ | 22,715 | | | 260.1 | % |
Deposits | Deposits | 7,787 | | | 11,475 | | | (3,688) | | | (32.1) | | Deposits | 16,140 | | | 8,389 | | | 7,751 | | | 92.4 | |
Total interest expense | Total interest expense | $ | 19,431 | | | $ | 19,301 | | | $ | 130 | | | 0.7 | | Total interest expense | $ | 47,587 | | | $ | 17,121 | | | $ | 30,466 | | | 177.9 | |
The increase in interest expense on borrowings was due mainlyprimarily to an increase in the average balance and weighted average rate on borrowings not associated with the leverage strategy being utilized duringto fund loan growth and a reduction in deposits, along with an increase in the current quarter and not being utilized duringweighted average rate on the borrowings associated with the leverage strategy compared to the prior year quarter. The decreaseincrease in interest expense on deposits was due to an increase in the weighted average rate paid on the deposit portfolio, primarily tocertificates of deposit and money market accounts, partially offset by a decrease in the average balance and the weighted average rate of the retail certificate of deposit portfolio.these portfolios.
Provision for Credit Losses
The Bank recorded a provision for credit losses during the current quarter of $937$891 thousand, compared to a negativerelease of provision for credit losses of $2.7$3.2 million during the prior year quarter. See "Comparison of Operating Results for the Three Months Ended June 30, 2022March 31, 2023 and MarchDecember 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 | | | For the Three Months Ended | |
| | June 30, | | Change Expressed in: | | March 31, | | Change Expressed in: |
| | 2022 | | 2021 | | Dollars | | Percent | | 2023 | | 2022 | | Dollars | | Percent |
| | (Dollars in thousands) | | | | (Dollars in thousands) | | |
NON-INTEREST INCOME: | NON-INTEREST INCOME: | | NON-INTEREST INCOME: | |
Deposit service fees | Deposit service fees | $ | 3,601 | | | $ | 3,227 | | | $ | 374 | | | 11.6 | % | Deposit service fees | $ | 3,122 | | | $ | 3,300 | | | $ | (178) | | | (5.4) | % |
Insurance commissions | Insurance commissions | 788 | | | 723 | | | 65 | | | 9.0 | | Insurance commissions | 877 | | | 543 | | | 334 | | | 61.5 | |
| Other non-interest income | Other non-interest income | 1,726 | | | 1,286 | | | 440 | | | 34.2 | | Other non-interest income | 1,084 | | | 1,573 | | | (489) | | | (31.1) | |
Total non-interest income | Total non-interest income | $ | 6,115 | | | $ | 5,236 | | | $ | 879 | | | 16.8 | | Total non-interest income | $ | 5,083 | | | $ | 5,416 | | | $ | (333) | | | (6.1) | |
The increase in deposit service feesinsurance commissions was due primarily to an increase in debit card incomeannual contingent insurance commissions received being higher than anticipated and service charges as a result ofthe related accrual adjustments, along with overall commissions being higher transaction and settlement volume, in addition to an increase in the average transaction amount.current quarter. The increasedecrease in other non-interest income was due mainly to an increasethe prior year quarter including gains on a loan-related financial derivative agreement, with no such gains in income on BOLI related to the receipt of death benefits.current quarter.
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 | | | For the Three Months Ended | |
| | June 30, | | Change Expressed in: | | March 31, | | Change Expressed in: |
| | 2022 | | 2021 | | Dollars | | Percent | | 2023 | | 2022 | | Dollars | | Percent |
| | (Dollars in thousands) | | | | (Dollars in thousands) | | |
NON-INTEREST EXPENSE: | NON-INTEREST EXPENSE: | | NON-INTEREST EXPENSE: | |
Salaries and employee benefits | Salaries and employee benefits | $ | 14,581 | | | $ | 13,867 | | | $ | 714 | | | 5.1 | % | Salaries and employee benefits | $ | 12,789 | | | $ | 14,023 | | | $ | (1,234) | | | (8.8) | % |
Information technology and related expense | Information technology and related expense | 4,343 | | | 4,736 | | | (393) | | | (8.3) | | Information technology and related expense | 5,789 | | | 4,493 | | | 1,296 | | | 28.8 | |
Occupancy, net | Occupancy, net | 3,721 | | | 3,504 | | | 217 | | | 6.2 | | Occupancy, net | 3,568 | | | 3,493 | | | 75 | | | 2.1 | |
Regulatory and outside services | Regulatory and outside services | 1,572 | | | 1,469 | | | 103 | | | 7.0 | | Regulatory and outside services | 1,305 | | | 1,272 | | | 33 | | | 2.6 | |
Advertising and promotional | Advertising and promotional | 1,068 | | | 1,407 | | | (339) | | | (24.1) | | Advertising and promotional | 1,333 | | | 1,494 | | | (161) | | | (10.8) | |
Federal insurance premium | Federal insurance premium | 784 | | | 633 | | | 151 | | | 23.9 | | Federal insurance premium | 1,246 | | | 777 | | | 469 | | | 60.4 | |
Deposit and loan transaction costs | Deposit and loan transaction costs | 664 | | | 693 | | | (29) | | | (4.2) | | Deposit and loan transaction costs | 690 | | | 689 | | | 1 | | | 0.1 | |
Office supplies and related expense | Office supplies and related expense | 494 | | | 402 | | | 92 | | | 22.9 | | Office supplies and related expense | 631 | | | 502 | | | 129 | | | 25.7 | |
| Other non-interest expense | Other non-interest expense | 1,163 | | | 891 | | | 272 | | | 30.5 | | Other non-interest expense | 1,280 | | | 1,217 | | | 63 | | | 5.2 | |
Total non-interest expense | Total non-interest expense | $ | 28,390 | | | $ | 27,602 | | | $ | 788 | | | 2.9 | | Total non-interest expense | $ | 28,631 | | | $ | 27,960 | | | $ | 671 | | | 2.4 | |
The increasedecrease in salaries and employee benefits was due primarilyattributable mainly to an increasea decrease in incentive compensation and annual merit increases during the current quarter.compensation. The decreaseincrease 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 third-party project management expenses associated with the timing of campaignsBank's ongoing digital transformation project and sponsorships.an increase in software licensing. The increase in other non-interestfederal insurance premium expense was due mainly to an increase in 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 informationFDIC assessment rate effective January 1, 2023 for the property.all insured depository institutions. The increase in office supplies and related expense was timing related.
The Company's efficiency ratio was 50.61%60.86% for the current quarter compared to 57.73%53.24% for the prior year quarter. The improvementchange in the efficiency ratio was due primarily to higherlower 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 | | | For the Three Months Ended | |
| | June 30, | | Change Expressed in: | | March 31, | | Change Expressed in: |
| | 2022 | | 2021 | | Dollars | | Percent | | 2023 | | 2022 | | Dollars | | Percent |
| | (Dollars in thousands) | | | | (Dollars in thousands) | | |
Income before income tax expense | Income before income tax expense | $ | 26,769 | | | $ | 22,896 | | | $ | 3,873 | | | 16.9 | % | Income before income tax expense | $ | 17,520 | | | $ | 27,745 | | | $ | (10,225) | | | (36.9) | % |
Income tax expense | Income tax expense | 5,617 | | | 4,709 | | | 908 | | | 19.3 | | Income tax expense | 3,331 | | | 6,122 | | | (2,791) | | | (45.6) | |
Net income | Net income | $ | 21,152 | | | $ | 18,187 | | | $ | 2,965 | | | 16.3 | | Net income | $ | 14,189 | | | $ | 21,623 | | | $ | (7,434) | | | (34.4) | |
| Effective Tax Rate | Effective Tax Rate | 21.0 | % | | 20.6 | % | | Effective Tax Rate | 19.0 | % | | 22.1 | % | |
The increasedecrease in income tax expense was due primarily to higherlower pretax income in the current quarter.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 to the overall effective rate.
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 | | | For the Three Months Ended |
| | | June 30, 2022 | | June 30, 2021 | | | March 31, 2023 | | March 31, 2022 |
| | | Average | | Interest | | | Average | | Interest | | | | Average | | Interest | | | Average | | Interest | |
| | | Outstanding | | Earned/ | | Yield/ | | Outstanding | | Earned/ | | Yield/ | | | Outstanding | | Earned/ | | Yield/ | | Outstanding | | Earned/ | | Yield/ |
| | | Amount | | Paid | | Rate | | Amount | | Paid | | Rate | | | Amount | | Paid | | Rate | | Amount | | Paid | | Rate |
Assets: | Assets: | | (Dollars in thousands) | Assets: | | (Dollars in thousands) |
Interest-earning assets: | Interest-earning assets: | | | Interest-earning assets: | | |
One- to four-family loans: | One- to four-family loans: | | | One- to four-family loans: | | |
Originated | Originated | | $ | 3,982,602 | | | $ | 32,168 | | | 3.23 | % | | $ | 3,982,990 | | | $ | 33,727 | | | 3.39 | % | Originated | | $ | 4,050,515 | | | $ | 33,660 | | | 3.32 | % | | $ | 3,965,844 | | | $ | 31,993 | | | 3.23 | % |
Correspondent purchased | Correspondent purchased | | 2,060,947 | | | 14,027 | | | 2.72 | | | 1,971,209 | | | 10,367 | | | 2.10 | | Correspondent purchased | | 2,462,960 | | | 19,380 | | | 3.15 | | | 2,026,120 | | | 13,060 | | | 2.58 | |
Bulk purchased | Bulk purchased | | 154,663 | | | 464 | | | 1.20 | | | 185,198 | | | 826 | | | 1.78 | | Bulk purchased | | 144,438 | | | 413 | | | 1.14 | | | 161,149 | | | 503 | | | 1.25 | |
Total one- to four-family loans | Total one- to four-family loans | | 6,198,212 | | | 46,659 | | | 3.01 | | | 6,139,397 | | | 44,920 | | | 2.93 | | Total one- to four-family loans | | 6,657,913 | | | 53,453 | | | 3.21 | | | 6,153,113 | | | 45,556 | | | 2.96 | |
Commercial loans | Commercial loans | | 890,455 | | | 9,104 | | | 4.05 | | | 805,721 | | | 8,744 | | | 4.29 | | Commercial loans | | 1,147,681 | | | 13,924 | | | 4.85 | | | 869,205 | | | 8,851 | | | 4.07 | |
Consumer loans | Consumer loans | | 92,790 | | | 1,123 | | | 4.85 | | | 96,980 | | | 1,115 | | | 4.61 | | Consumer loans | | 102,649 | | | 1,942 | | | 7.67 | | | 90,326 | | | 1,005 | | | 4.51 | |
Total loans receivable(1) | Total loans receivable(1) | | 7,181,457 | | | 56,886 | | | 3.16 | | | 7,042,098 | | | 54,779 | | | 3.11 | | Total loans receivable(1) | | 7,908,243 | | | 69,319 | | | 3.51 | | | 7,112,644 | | | 55,412 | | | 3.12 | |
MBS(2) | MBS(2) | | 1,343,891 | | | 5,048 | | | 1.50 | | | 1,529,679 | | | 5,360 | | | 1.40 | | MBS(2) | | 1,173,366 | | | 4,748 | | | 1.62 | | | 1,357,693 | | | 4,821 | | | 1.42 | |
Investment securities(2)(3) | Investment securities(2)(3) | | 522,147 | | | 815 | | | 0.62 | | | 533,076 | | | 763 | | | 0.57 | | Investment securities(2)(3) | | 525,012 | | | 895 | | | 0.68 | | | 522,019 | | | 800 | | | 0.61 | |
FHLB stock(4) | FHLB stock(4) | | 166,879 | | | 2,695 | | | 6.48 | | | 73,689 | | | 944 | | | 5.14 | | FHLB stock(4) | | 167,567 | | | 3,607 | | | 8.73 | | | 158,546 | | | 2,240 | | | 5.73 | |
Cash and cash equivalents(5) | Cash and cash equivalents(5) | | 1,930,539 | | | 3,968 | | | 0.81 | | | 97,890 | | | 26 | | | 0.11 | | Cash and cash equivalents(5) | | 967,586 | | | 10,977 | | | 4.54 | | | 1,971,341 | | | 949 | | | 0.19 | |
Total interest-earning assets | Total interest-earning assets | | 11,144,913 | | | 69,412 | | | 2.49 | | | 9,276,432 | | | 61,872 | | | 2.66 | | Total interest-earning assets | | 10,741,774 | | | 89,546 | | | 3.34 | | | 11,122,243 | | | 64,222 | | | 2.31 | |
Other non-interest-earning assets | Other non-interest-earning assets | | 293,882 | | | 430,639 | | | Other non-interest-earning assets | | 263,916 | | | 385,323 | | |
Total assets | Total assets | | $ | 11,438,795 | | | $ | 9,707,071 | | | Total assets | | $ | 11,005,690 | | | $ | 11,507,566 | | |
| Liabilities and stockholders' equity: | Liabilities and stockholders' equity: | | | Liabilities and stockholders' equity: | | |
Interest-bearing liabilities: | Interest-bearing liabilities: | | | Interest-bearing liabilities: | | |
Checking | Checking | | $ | 1,068,329 | | | 180 | | | 0.07 | | | $ | 1,007,242 | | | 182 | | | 0.07 | | Checking | | $ | 989,440 | | | 368 | | | 0.15 | | | $ | 1,069,282 | | | 176 | | | 0.07 | |
Savings | Savings | | 556,553 | | | 74 | | | 0.05 | | | 513,528 | | | 72 | | | 0.06 | | Savings | | 541,324 | | | 101 | | | 0.08 | | | 540,348 | | | 71 | | | 0.05 | |
Money market | Money market | | 1,861,302 | | | 952 | | | 0.21 | | | 1,646,970 | | | 998 | | | 0.24 | | Money market | | 1,620,451 | | | 3,184 | | | 0.80 | | | 1,879,799 | | | 876 | | | 0.19 | |
Retail certificates | Retail certificates | | 2,169,262 | | | 6,383 | | | 1.18 | | | 2,462,543 | | | 9,531 | | | 1.55 | | Retail certificates | | 2,176,103 | | | 11,115 | | | 2.07 | | | 2,241,080 | | | 7,012 | | | 1.27 | |
Commercial certificates | Commercial certificates | | 84,231 | | | 129 | | | 0.61 | | | 216,371 | | | 407 | | | 0.75 | | Commercial certificates | | 38,575 | | | 197 | | | 2.07 | | | 116,181 | | | 183 | | | 0.64 | |
Wholesale certificates | Wholesale certificates | | 113,101 | | | 69 | | | 0.24 | | | 251,571 | | | 285 | | | 0.45 | | Wholesale certificates | | 127,037 | | | 1,175 | | | 3.75 | | | 197,335 | | | 71 | | | 0.15 | |
Total deposits | Total deposits | | 5,852,778 | | | 7,787 | | | 0.53 | | | 6,098,225 | | | 11,475 | | | 0.75 | | Total deposits | | 5,492,930 | | | 16,140 | | | 1.19 | | | 6,044,025 | | | 8,389 | | | 0.56 | |
| Borrowings(6) | Borrowings(6) | | 3,687,592 | | | 11,644 | | | 1.26 | | | 1,582,905 | | | 7,826 | | | 1.97 | | Borrowings(6) | | 3,700,022 | | | 31,447 | | | 3.42 | | | 3,499,010 | | | 8,732 | | | 1.01 | |
Total interest-bearing liabilities | Total interest-bearing liabilities | | 9,540,370 | | | 19,431 | | | 0.81 | | | 7,681,130 | | | 19,301 | | | 1.01 | | Total interest-bearing liabilities | | 9,192,952 | | | 47,587 | | | 2.09 | | | 9,543,035 | | | 17,121 | | | 0.73 | |
Non-interest-bearing deposits | Non-interest-bearing deposits | | 586,876 | | | 539,423 | | | Non-interest-bearing deposits | | 574,495 | | | 577,989 | | |
Other non-interest-bearing liabilities | Other non-interest-bearing liabilities | | 147,938 | | | 203,532 | | | Other non-interest-bearing liabilities | | 172,481 | | | 177,995 | | |
Stockholders' equity | Stockholders' equity | | 1,163,611 | | | 1,282,986 | | | Stockholders' equity | | 1,065,762 | | | 1,208,547 | | |
Total liabilities and stockholders' equity | Total liabilities and stockholders' equity | | $ | 11,438,795 | | | $ | 9,707,071 | | | Total liabilities and stockholders' equity | | $ | 11,005,690 | | | $ | 11,507,566 | | |
| Net interest income(7) | Net interest income(7) | | | $ | 49,981 | | | $ | 42,571 | | | Net interest income(7) | | | $ | 41,959 | | | $ | 47,101 | | |
Net interest-earning assets | Net interest-earning assets | | $ | 1,604,543 | | | | | $ | 1,595,302 | | | | | Net interest-earning assets | | $ | 1,548,822 | | | | | $ | 1,579,208 | | | | |
Net interest margin(8)(9) | Net interest margin(8)(9) | | | | 1.79 | | | | | 1.84 | | Net interest margin(8)(9) | | | | 1.56 | | | | | 1.69 | |
Ratio of interest-earning assets to interest-bearing liabilities | Ratio of interest-earning assets to interest-bearing liabilities | | 1.17x | | 1.21x | Ratio of interest-earning assets to interest-bearing liabilities | | 1.17x | | 1.17x |
| Selected performance ratios: | Selected performance ratios: | | | Selected performance ratios: | | |
Return on average assets (annualized)(9) | Return on average assets (annualized)(9) | | 0.74 | % | | 0.75 | % | Return on average assets (annualized)(9) | | 0.52 | % | | 0.75 | % |
Return on average equity (annualized)(9) | Return on average equity (annualized)(9) | | 7.27 | | | 5.67 | | Return on average equity (annualized)(9) | | 5.33 | | | 7.16 | |
Average equity to average assets | Average equity to average assets | | | 10.17 | | | 13.22 | | Average equity to average assets | | | 9.68 | | | 10.50 | |
Operating expense ratio (annualized)(10) | Operating expense ratio (annualized)(10) | | 0.99 | | | 1.14 | | Operating expense ratio (annualized)(10) | | 1.04 | | | 0.97 | |
Efficiency ratio(9)(11) | Efficiency ratio(9)(11) | | | 50.61 | | | 57.73 | | Efficiency ratio(9)(11) | | | 60.86 | | | 53.24 | |
Pre-tax yield on leverage strategy(12) | Pre-tax yield on leverage strategy(12) | | 0.31 | | | — | | Pre-tax yield on leverage strategy(12) | | 0.06 | | | 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$1.0 million and $5.1$2.0 million for the three months ended June 30,March 31, 2023 and March 31, 2022, and June 30, 2021, respectively.
(4)Included in this line, for the three months ended June 30,March 31, 2023 and March 31, 2022, respectively, is FHLB stock related to the leverage strategy with an average outstanding balance of $89.4$44.1 million and $86.2 million, respectively, and dividend income of $1.4$951 thousand and $1.2 million, respectively, at a weighted average yield of 6.48%8.75% and 5.75%, respectively, and FHLB stock not related to the leverage strategy with an average outstanding balance of $77.5$123.5 million and $72.3 million, respectively, and dividend income of $1.3$2.7 million and $1.0 million, respectively, 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, 2021.8.72% and 5.71%, respectively.
(5)The average balance of cash and cash equivalents includes an average balance of cash related to the leverage strategy of $1.89$935.1 million and $1.83 billion during the three months ended June 30, 2022. There were no cashMarch 31, 2023 and cash equivalents related to the leverage strategy during the three months ended June 30, 2021.March 31, 2022, respectively.
(6)Included in this line, for the three months ended June 30,March 31, 2023 and March 31, 2022, respectively, are FHLB borrowings related to the leverage strategy with an average outstanding balance of $1.99$979.2 million and $1.92 billion, respectively, and interest paid of $3.7$11.3 million and $1.3 million, respectively, at a weighted average rate of 0.73%4.60% and 0.26%, respectively, and FHLB borrowings not related to the leverage strategy with an average outstanding balance of $1.70$2.72 billion and $1.58 billion, respectively, and interest paid of $8.0$20.2 million and $7.5 million, respectively, 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, 2021.3.00% and 1.90%, respectively. 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 | | For the Three Months Ended |
| | June 30, 2022 | | June 30, 2021 | | March 31, 2023 | | March 31, 2022 |
| | 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) |
Yield on interest-earning assets | Yield on interest-earning assets | 2.49 | % | | (0.30) | % | | 2.79 | % | | 2.66 | % | | — | % | | 2.66 | % | Yield on interest-earning assets | 3.34 | % | | 0.14 | % | | 3.20 | % | | 2.31 | % | | (0.39) | % | | 2.70 | % |
Cost of interest-bearing liabilities | Cost of interest-bearing liabilities | 0.81 | | | (0.03) | | | 0.84 | | | 1.01 | | | — | | | 1.01 | | Cost of interest-bearing liabilities | 2.09 | | | 0.30 | | | 1.79 | | | 0.73 | | | (0.11) | | | 0.84 | |
Return on average assets (annualized) | Return on average assets (annualized) | 0.74 | | | (0.10) | | | 0.84 | | | 0.75 | | | — | | | 0.75 | | Return on average assets (annualized) | 0.52 | | | (0.04) | | | 0.56 | | | 0.75 | | | (0.13) | | | 0.88 | |
Return on average equity (annualized) | Return on average equity (annualized) | 7.27 | | | 0.42 | | | 6.85 | | | 5.67 | | | — | | | 5.67 | | Return on average equity (annualized) | 5.33 | | | 0.05 | | | 5.28 | | | 7.16 | | | 0.18 | | | 6.98 | |
Net interest margin | Net interest margin | 1.79 | | | (0.32) | | | 2.11 | | | 1.84 | | | — | | | 1.84 | | Net interest margin | 1.56 | | | (0.15) | | | 1.71 | | | 1.69 | | | (0.32) | | | 2.01 | |
Efficiency Ratio | Efficiency Ratio | 50.61 | | | (1.31) | | | 51.92 | | | 57.73 | | | — | | | 57.73 | | Efficiency Ratio | 60.86 | | | (0.07) | | | 60.93 | | | 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, 2022March 31, 2023 to the three months ended June 30, 2021.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, | | For the Three Months Ended March 31, |
| | 2022 vs. 2021 | | 2023 vs. 2022 |
| | Increase (Decrease) Due to | | Increase (Decrease) Due to |
| | Volume(1) | | Rate | | Total | | Volume | | 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 | $ | 7,203 | | | $ | 6,704 | | | $ | 13,907 | |
MBS | MBS | (680) | | | 368 | | | (312) | | MBS | (700) | | | 627 | | | (73) | |
Investment securities | Investment securities | (16) | | | 68 | | | 52 | | Investment securities | 5 | | | 90 | | | 95 | |
FHLB stock | FHLB stock | 1,452 | | | 299 | | | 1,751 | | FHLB stock | 134 | | | 1,233 | | | 1,367 | |
Cash and cash equivalents | Cash and cash equivalents | 2,909 | | | 1,033 | | | 3,942 | | Cash and cash equivalents | (724) | | | 10,752 | | | 10,028 | |
Total interest-earning assets | Total interest-earning assets | 4,941 | | | 2,599 | | | 7,540 | | Total interest-earning assets | 5,918 | | | 19,406 | | | 25,324 | |
| Interest-bearing liabilities: | Interest-bearing liabilities: | | Interest-bearing liabilities: | |
Checking | Checking | 11 | | | (12) | | | (1) | | Checking | (14) | | | 206 | | | 192 | |
Savings | Savings | 6 | | | (4) | | | 2 | | Savings | — | | | 30 | | | 30 | |
Money market | Money market | 121 | | | (167) | | | (46) | | Money market | (137) | | | 2,445 | | | 2,308 | |
Certificates of deposit | Certificates of deposit | (1,773) | | | (1,870) | | | (3,643) | | Certificates of deposit | (652) | | | 5,873 | | | 5,221 | |
Borrowings | Borrowings | 4,185 | | | (367) | | | 3,818 | | Borrowings | 6,807 | | | 15,908 | | | 22,715 | |
| Total interest-bearing liabilities | Total interest-bearing liabilities | 2,550 | | | (2,420) | | | 130 | | Total interest-bearing liabilities | 6,004 | | | 24,462 | | | 30,466 | |
| Net change in net interest income | Net change in net interest income | $ | 2,391 | | | $ | 5,019 | | | $ | 7,410 | | Net change in net interest income | $ | (86) | | | $ | (5,056) | | | $ | (5,142) | |
(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.
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 ofthat 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.window, and the newly established BTFP. 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, 2022,March 31, 2023, 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 ofexceed 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.borrowing, which was completed during the first quarter of fiscal year 2023. There were no borrowings from the discount window during the current quarter. The amount that can be borrowed under the BTFP is based upon the par value of securities pledged as collateral, the term can be up to one year in length, and the borrowings can be prepaid without penalty. There were no BTFP borrowings during the current quarter. Subsequent to March 31, 2023, the Bank repaid its borrowings on the FHLB line of credit and borrowed $500.0 million under the BTFP as the rate was more favorable than the rates offered on the FHLB line of credit or the rate on a one-year FHLB advance at that point in time.
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, 2022,March 31, 2023, the Bank had total borrowings, at par, of $1.88$2.70 billion, or approximately 20%27% of total assets, all of which were FHLB borrowings. Of this amount, $275.0$444.7 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. Management estimated that the Bank had $2.85 billion in additional liquidity available at March 31, 2023 based on the Bank's blanket collateral agreement with FHLB and unencumbered securities.
At June 30, 2022,March 31, 2023, 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, 2022, the Bank had $1.55 billion 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, 2022,March 31, 2023, the Bank's policy allowed for combined brokered and public unit certificates of deposit up to 15% of total deposits. At June 30, 2022,March 31, 2023, 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$155.9 million as collateral for public unit certificates of deposit at June 30, 2022.March 31, 2023. 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, 2022, $1.36March 31, 2023, $1.08 billion of the Bank's certificate of deposit portfolio was scheduled to mature within the next 12 months, including $79.2$101.7 million of public unit certificates of deposit and $46.7$27.8 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, 2022,March 31, 2023, the Bank's CBLR was 9.4%9.7% and the Company's CBLR was 10.6%, which exceeded the minimum requirements.
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 one with management strategies considered. The MVPE and net interest income analyses are also conducted to estimate our sensitivity to rates for future time horizons based upon market conditions as of the date of the analysis. 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 levelsrates would likely deviate significantly from those assumed in calculating the gap table below. A positive gap indicatesgenerally 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 indicatesgenerally 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 additional information
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) | $ | 1,476,150 | | | $ | 1,788,645 | | | $ | 1,429,946 | | | $ | 3,278,382 | | | $ | 7,973,123 | |
Securities(2) | Securities(2) | 325,627 | | | 524,799 | | | 563,502 | | | 416,334 | | | 1,830,262 | | Securities(2) | 315,359 | | | 725,449 | | | 267,911 | | | 362,819 | | | 1,671,538 | |
Other interest-earning assets | Other interest-earning assets | 31,632 | | | — | | | — | | | — | | | 31,632 | | Other interest-earning assets | 21,679 | | | — | | | — | | | — | | | 21,679 | |
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 | 1,813,188 | | | 2,514,094 | | | 1,697,857 | | | 3,641,201 | | | 9,666,340 | |
| 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) | 880,819 | | | 412,606 | | | 379,717 | | | 2,053,716 | | | 3,726,858 | |
Certificates of deposit | Certificates of deposit | 1,362,534 | | | 732,106 | | | 181,088 | | | 611 | | | 2,276,339 | | Certificates of deposit | 1,086,275 | | | 924,716 | | | 462,762 | | | 196 | | | 2,473,949 | |
Borrowings(4) | Borrowings(4) | 322,147 | | | 938,035 | | | 523,236 | | | 129,495 | | | 1,912,913 | | Borrowings(4) | 649,566 | | | 1,237,478 | | | 721,989 | | | 127,798 | | | 2,736,831 | |
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 | 2,616,660 | | | 2,574,800 | | | 1,564,468 | | | 2,181,710 | | | 8,937,638 | |
| 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 | $ | (803,472) | | | $ | (60,706) | | | $ | 133,389 | | | $ | 1,459,491 | | | $ | 728,702 | |
| 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 | $ | (803,472) | | | $ | (864,178) | | | $ | (730,789) | | | $ | 728,702 | | |
| 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) | | | |
March 31, 2023 | | March 31, 2023 | (8.0) | % | | (8.6) | % | | (7.3) | % | | 7.2 | % | |
December 31, 2022 | | December 31, 2022 | (10.3) | | |
| | | 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) | | | |
March 31, 2023 | | March 31, 2023 | (8.6) | | |
December 31, 2022 | | December 31, 2022 | (10.6) | | |
|
(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. InvestmentAll other securities are presented based on contractual maturities, term to call dates or pre-refunding dates as of June 30, 2022,March 31, 2023, 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$3.65 billion, for a cumulative one-year gap of (44.0)(36.2)% 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, 2022,March 31, 2023, the Bank's gap between the amount of interest-earning assets and interest-bearing liabilities projected to reprice within one year was $(1.33) billion,$(803.5) million, or (14.0)(8.0)% of total assets, compared to $(1.46)$(1.02) billion, or (15.3)(10.3)% of total assets, at MarchDecember 31, 2022. The change in the one-year gap amount was due primarily to a decrease in the amount of liability cash flows projectedcoming due in one year at June 30, 2022March 31, 2023 compared to MarchDecember 31, 2022 specifically due to lower deposit balances. In addition,and an increase in the Bank projected higheramount of asset cash flows on mortgage-related assets at June 30, 2022 comparedcoming due for the same time periods. This was due primarily to March 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 optionsa decrease in order to issue new debt at lower interest rates, which would typically result in lowerthe amount of non-maturity deposits projected cash flows on these assets. However, duringby the current quarter, the Bank upgraded itsBank's interest rate risk model which resultedto mature within one year as of March 31, 2023 compared to December 31, 2022, partially offset by an increase 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 reflectivecash flows projected to be received on loans as of the Bank's actual experience at current market interest rates.March 31, 2023.
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, 2022,March 31, 2023, the Bank's one-year gap is projected to be $(1.36) billion,$(862.4) million, or (14.4)(8.6)% 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 toas a result of lower repaymentsprepayments on mortgage-related assets in the higher
rate environment. This compares to a one-year gap of $(1.54)$(1.05) billion, or (16.2)(10.6)% of total assets, if interest rates were to have increased 200 basis points as of MarchDecember 31, 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) | | March 31, 2023 | | 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 | | $ | 152,998 | | | $ | (4,313) | | | (2.74) | % | | $ | 182,458 | | | $ | (775) | | | (0.42) | % |
-100 bp | -100 bp | | $ | 189,186 | | | $ | (17) | | | (0.01) | % | | N/A | | N/A | | N/A | -100 bp | | 155,540 | | | (1,771) | | | (1.13) | | | 183,363 | | | 130 | | | 0.07 | |
000 bp | 000 bp | | 189,203 | | | — | | | — | | | $ | 185,285 | | | $ | — | | | — | % | 000 bp | | 157,311 | | | — | | | — | | | 183,233 | | | — | | | — | |
+100 bp | +100 bp | | 188,337 | | | (866) | | | (0.46) | | | 190,060 | | | 4,775 | | | 2.58 | | +100 bp | | 158,134 | | | 823 | | | 0.52 | | | 182,737 | | | (496) | | | (0.27) | |
+200 bp | +200 bp | | 187,411 | | | (1,792) | | | (0.95) | | | 191,998 | | | 6,713 | | | 3.62 | | +200 bp | | 158,312 | | | 1,001 | | | 0.64 | | | 182,081 | | | (1,152) | | | (0.63) | |
+300 bp | +300 bp | | 186,422 | | | (2,781) | | | (1.47) | | | 192,590 | | | 7,305 | | | 3.94 | | +300 bp | | 158,385 | | | 1,074 | | | 0.68 | | | 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 higherlower in the base case scenario at June 30, 2022March 31, 2023 compared to September 30, 20212022 due to higher income projections on the Bank's assets thaninterest 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 resultfaster increase in the cost of liabilities during the first six months of fiscal year 2023 which was caused by an increase in certificates of deposit at higher interest rates, at Junean increase in the rates paid on our money market accounts, and an increase in the balance of higher-costing FHLB borrowings since September 30, 2022. In the rising rate scenarios, fewer assets reprice to higher interest rates, resulting in a decrease in projected net interest income. This was notpartially offset by higher projected income on loans receivable due to a higher balance and yield on the case atportfolio compared to September 30, 2021, as interest rates were lower than June 30, 2022, resulting in more mortgage-related cash flows projected to reprice than at June 30, 2022.
In the decreasingrising and declining interest rate scenario at June 30, 2022,scenarios, the variability of net interest income projection remained relatively flat asprojections is not significant. Generally, the increase in net interest income in the rising rate scenarios is due to the degree to which loan repayments that are projected to reprice upward is greater than the projected increase in mortgage-related assets repricingrates on deposits in the next twelve months. In the declining rate scenarios, loan repayments are repriced at rates that do not offset the higher cost of liabilities that are not expected to lower interest rates was largely offset by liability cash flows repricing to lower interest rates as well.reprice in the next twelve months.
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) | | March 31, 2023 | | 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 | | $ | 1,252,631 | | | $ | 263,748 | | | 26.67 | % | | $ | 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 | | 1,115,006 | | | 126,123 | | | 12.75 | | | 1,024,167 | | | 129,180 | | | 14.43 | |
000 bp | 000 bp | | 746,972 | | | — | | | — | | | $ | 1,451,795 | | | $ | — | | | — | % | 000 bp | | 988,883 | | | — | | | — | | | 894,987 | | | — | | | — | |
+100 bp | +100 bp | | 627,443 | | | (119,529) | | | (16.00) | | | 1,354,766 | | | (97,029) | | | (6.68) | | +100 bp | | 857,317 | | | (131,566) | | | (13.30) | | | 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 | | 726,352 | | | (262,531) | | | (26.55) | | | 625,864 | | | (269,123) | | | (30.07) | |
+300 bp | +300 bp | | 392,141 | | | (354,831) | | | (47.50) | | | 968,543 | | | (483,252) | | | (33.29) | | +300 bp | | 600,625 | | | (388,258) | | | (39.26) | | | 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, 2022March 31, 2023 and September 30, 20212022 was negative in all rising interest rate scenarios. The negative impact to the Bank's MVPE, is greateras a percentage change, was slightly lower at June 30, 2022March 31, 2023 compared to September 30, 20212022 due primarily to higher MVPE at March 31, 2023. The increase in the MVPE was due in part to lower long-term rates at March 31, 2023 which resulted in an increase in the durationmarket value of the Bank's mortgage-related assets at June 30, 2022loan portfolio. In addition, the increase in the balance of certificates of deposit and borrowings during the six-month period resulted in less of an increase in the market value of the Bank's deposits compared to September 30, 2021. This was duethe prior year-end. The offsetting impacts of these factors increased our MVPE in the base case and led to higherless sensitivity to changes in rates.
The MVPE ratio continues to be an important measurement for management as we consider the changes in market rates, liquidity needs and portfolio balances. MVPE represents a long-term view of the interest rates at June 30, 2022. sensitivity of the Bank's balance sheet while our net interest income projections inform management of the short-term impacts of pricing decisions.
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, repaymentsprepayments 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 higherlonger 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 increasing rate scenarios, the sensitivity reflects the negative impacts of rates on the value of the Bank's loan and securities portfolio more so than on the deposit and borrowing portfolio. In the decreasing interest rate scenario at June 30, 2022,scenarios, the Bank's MVPE increased due to a larger increase in the market value of the Bank's assetassets than the Bank's liabilities. This is because the Bank's mortgage-related assets continue to have a higherlonger duration in this scenariothese interest rate scenarios which results in greater sensitivity in market value as interest rates change.
The following table presents the weighted average yields/rates and WALs (in years), after applying prepayment, call assumptions, and decay rates for our interest-earning assets and interest-bearing liabilities as of June 30, 2022.March 31, 2023. 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 | $ | 1,505,808 | | | 1.33 | % | | 3.9 | | | 15.6 | % |
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 | 5,726,192 | | | 3.24 | | | 6.7 | | | 71.9 | % | | 59.3 | |
Fixed-rate commercial | Fixed-rate commercial | 435,041 | | | 4.07 | | | 3.9 | | | 6.0 | | | 4.8 | | Fixed-rate commercial | 454,171 | | | 4.16 | | | 3.4 | | | 5.7 | | | 4.7 | |
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 | 80,451 | | | 3.91 | | | 7.2 | | | 1.0 | | | 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 | 6,260,814 | | | 3.31 | | | 6.5 | | | 78.6 | | | 64.9 | |
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 | 888,805 | | | 3.42 | | | 3.8 | | | 11.2 | | | 9.2 | |
Adjustable-rate commercial | Adjustable-rate commercial | 468,869 | | | 4.39 | | | 7.6 | | | 6.5 | | | 5.2 | | Adjustable-rate commercial | 727,432 | | | 5.37 | | | 7.9 | | | 9.1 | | | 7.5 | |
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 | 89,074 | | | 7.86 | | | 3.0 | | | 1.1 | | | 0.9 | |
Total adjustable-rate loans | Total adjustable-rate loans | 1,115,883 | | | 3.44 | | | 5.2 | | | 15.4 | | | 12.3 | | Total adjustable-rate loans | 1,705,311 | | | 4.49 | | | 5.5 | | | 21.4 | | | 17.6 | |
Total loans receivable | Total loans receivable | 7,245,751 | | | 3.22 | | | 6.3 | | | 100.0 | % | | 79.8 | | Total loans receivable | 7,966,125 | | | 3.56 | | | 6.3 | | | 100.0 | % | | 82.5 | |
FHLB stock | FHLB stock | 87,696 | | | 6.47 | | | 2.6 | | | | | 1.0 | | FHLB stock | 128,096 | | | 8.73 | | | 2.5 | | | | | 1.3 | |
Cash and cash equivalents | Cash and cash equivalents | 54,789 | | | 0.94 | | | — | | | 0.6 | | Cash and cash equivalents | 60,207 | | | 1.77 | | | — | | | 0.6 | |
Total interest-earning assets | Total interest-earning assets | $ | 9,082,396 | | | 2.88 | | | 5.8 | | | 100.0 | % | Total interest-earning assets | $ | 9,660,236 | | | 3.27 | | | 5.8 | | | 100.0 | % |
| Non-maturity deposits | Non-maturity deposits | $ | 3,473,159 | | | 0.16 | | | 5.5 | | | 60.4 | % | | 45.6 | % | Non-maturity deposits | $ | 3,076,221 | | | 0.46 | | | 6.2 | | | 55.4 | % | | 37.3 | % |
Retail certificates of deposit | Retail certificates of deposit | 2,129,734 | | | 1.16 | | | 1.1 | | | 37.0 | | | 27.9 | | Retail certificates of deposit | 2,299,829 | | | 2.54 | | | 1.6 | | | 41.4 | | | 27.8 | |
Commercial certificates of deposit | Commercial certificates of deposit | 55,076 | | | 0.68 | | | 0.6 | | | 1.0 | | | 0.7 | | Commercial certificates of deposit | 43,590 | | | 2.71 | | | 1.2 | | | 0.8 | | | 0.5 | |
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 | 130,530 | | | 4.01 | | | 0.7 | | | 2.4 | | | 1.6 | |
Total interest-bearing deposits | Total interest-bearing deposits | 5,749,498 | | | 0.54 | | | 3.8 | | | 100.0 | % | | 75.4 | | Total interest-bearing deposits | 5,550,170 | | | 1.43 | | | 4.1 | | | 100.0 | % | | 67.2 | |
Term borrowings | Term borrowings | 1,840,000 | | | 2.12 | | | 2.6 | | | 98.1 | % | | 24.1 | | Term borrowings | 2,497,664 | | | 2.93 | | | 2.3 | | | 92.5 | % | | 30.3 | |
Line of credit borrowings | Line of credit borrowings | 35,700 | | | 1.63 | | | — | | | 1.9 | | | 0.5 | | Line of credit borrowings | 203,400 | | | 4.99 | | | — | | | 7.5 | | | 2.5 | |
Total borrowings | Total borrowings | 1,875,700 | | | 2.11 | | | 2.5 | | | 100.0 | % | | 24.6 | | Total borrowings | 2,701,064 | | | 3.08 | | | 2.2 | | | 100.0 | % | | 32.8 | |
Total interest-bearing liabilities | Total interest-bearing liabilities | $ | 7,625,198 | | | 0.92 | | | 3.5 | | | | | 100.0 | % | Total interest-bearing liabilities | $ | 8,251,234 | | | 1.97 | | | 3.5 | | | | | 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, 2022.March 31, 2023. Based upon this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that, as of June 30, 2022,March 31, 2023, 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, 2022March 31, 2023 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
TheIn the normal course of business, the Company and the Bank are involved as plaintiff or defendant in various legal actions arising in the normal course of business.actions. 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.
On November 2, 2022, the Bank was served a putative class action lawsuit, captioned Jennifer Harding, et al. vs. Capitol Federal Savings Bank (Case No. 2022-CV-00598), filed in the Third Judicial District Court, Shawnee County, Kansas against the Bank, alleging the Bank improperly charged overdraft fees on (1) debit card transactions that were authorized for payment on sufficient funds but later settled against a negative account balance (commonly known as "authorize positive purportedly settle negative" or "APPSN" transactions) and (2) merchant re-presentments of previously rejected payment requests. The complaint asserts a breach of contract claim (including breach of an implied covenant of good faith and fair dealing) for each practice and seeks restitution for alleged improper fees, alleged actual damages, costs and disbursements, and injunction relief. On April 5, 2023, the court granted the Bank's motion to dismiss the complaint, with prejudice. This decision is still subject to appeal.
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, 2022March 31, 2023 and additional information regarding our stock repurchase program. As of June 30, 2022,March 31, 2023, 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 |
AprilJanuary 1, 20222023 through | | | | | | | |
April 30, 2022January 31, 2023 | — | | | $ | — | | | — | | | $ | 44,665,20522,469,207 | |
MayFebruary 1, 20222023 through | | | | | | | |
May 31, 2022February 28, 2023 | — | | | — | | | — | | | 44,665,20522,469,207 | |
JuneMarch 1, 20222023 through | | | | | | | |
June 30, 2022March 31, 2023 | — | | | — | | | — | | | 44,665,20522,469,207 | |
Total | — | | | — | | | — | | | 44,665,20522,469,207 | |
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.
INDEX TO EXHIBITS
| | | | | | | | |
Exhibit Number | | Document |
| | 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 |
| | 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
|
| | 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 |
| | 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 |
| | 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 |
| | 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 |
| | 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 |
| | 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 |
| | 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 |
| | 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 |
| | 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 |
| | Description of Director Fee Arrangements filed on November 29, 201823, 2022 as Exhibit 10.6 to the Registrant's September 30, 20182022 Form 10-K and incorporated herein by reference |
| | 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 |
| | 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 |
| | 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 |
| | 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 |
| | 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 |
| | 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 |
| | Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002 made by John B. Dicus, Chairman, President and Chief Executive Officer |
| | 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 |
| | 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 |
| | | | | | | | |
101 | | The following information from the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2022,March 31, 2023, filed with the Securities and Exchange Commission on August 8, 2022,May 10, 2023, has been formatted in Inline eXtensible Business Reporting Language ("XBRL"): (i) Consolidated Balance Sheets at June 30, 2022March 31, 2023 and September 30, 2021,2022, (ii) Consolidated Statements of Income for the three and ninesix months ended June 30,March 31, 2023 and 2022, and 2021, (iii) Consolidated Statements of Comprehensive Income for the three and ninesix months ended June 30,March 31, 2023 and 2022, and 2021, (iv) Consolidated Statements of Stockholders' Equity for the three and ninesix months ended June 30,March 31, 2023 and 2022, and 2021, (v) Consolidated Statements of Cash Flows for the ninesix months ended June 30,March 31, 2023 and 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 |
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 8, 2022May 10, 2023 | By: | /s/ John B. Dicus |
| | | John B. Dicus, Chairman, President and Chief Executive Officer |
| | | |
| Date: August 8, 2022May 10, 2023 | By: | /s/ Kent G. Townsend |
| | | Kent G. Townsend, Executive Vice President, |
| | | Chief Financial Officer and Treasurer |