# Capitol Federal Financial, Inc. (CFFN) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from Capitol Federal Financial, Inc.'s 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1490906/000149090624000035/cffn-20240930.htm
Accession: 0001490906-24-000035
Filing date: 2024-11-27
Report date: 2024-09-30
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/CFFN/
All MD&A years: /company/CFFN/mda/
Previous year: /company/CFFN/mda/fy2023/ (FY 2023)
Next year: /company/CFFN/mda/fy2025/ (FY 2025)

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis is intended to assist in understanding the financial condition, results of operations, liquidity, and capital resources of the Company. The Bank comprises almost all of the consolidated assets and liabilities of the Company and the Company is dependent primarily upon the performance of the Bank for the results of its operations. Because of this relationship, references to management actions, strategies and results of actions apply to both the Bank and the Company except where the context indicates otherwise.

Executive Summary

The following summary should be read in conjunction with the Management's Discussion and Analysis of Financial Condition and Results of Operations section in its entirety.

In October 2023, the Company initiated a strategic securities transaction ("securities strategy") by selling $1.30 billion of securities, representing 94% of its securities portfolio. Since the Company had the intent to sell the $1.30 billion of securities to maturity at September 30, 2023, the Company recognized an impairment loss on those securities of $192.6 million which was reflected in the Company's financial statements for the fiscal year ended September 30, 2023. During the quarter ended December 31, 2023, the Company sold the securities and recognized $13.3 million ($10.0 million net of tax), or $0.08 per share, of additional loss related to the sale of the securities. The securities strategy was designed to allow the Company to improve its earnings stream going forward, beginning in the current fiscal year, by redeploying most of the proceeds into current market rate securities and to provide liquidity to deleverage the balance sheet utilizing the remaining proceeds. See additional information regarding the impact of the securities strategy on our financial measurements in "Average Balance Sheets" below. The $1.30 billion of securities sold had a weighted average yield of 1.22% and an average duration of 3.6 years. With the proceeds from the sale of the securities, the Company purchased $632.0 million of securities yielding 5.75%, paid down $500.0 million of borrowings with a weighted average cost of 4.70%, and held the remaining cash at the FRB earning interest at the reserve balance rate until such time as it could be used to fund commercial loan activity or for other Bank operations.

A taxable net loss will be reported on the Company's September 30, 2024 federal tax return due to the net losses associated with the securities strategy, which resulted in the Bank and Company having a negative current and accumulated earnings and profit tax position. This required the Bank to draw upon the pre-1988 bad debt reserves for distributions from the Bank to the Company during the current fiscal year. See additional information regarding the Bank's pre-1988 bad debt recapture in "Part II, Item 8. Financial Statements and Supplementary Data - Notes to Financial Statements - Note 9. Income Taxes". During the current year, the Bank was required to pay income taxes on the reductions to the pre-1988 bad debt reserves equal to the current corporate tax rate at the time of the distribution multiplied by the amount of Bank earnings paid to the Company ("pre-1988 bad debt recapture"). The Bank recorded $5.4 million of income tax expense on earnings distributions from the Bank to the Company during the current year due to the pre-1988 bad debt recapture. As of September 30, 2024, the amount of the Bank's remaining pre-1988 bad debt reserves was $75.9 million, or $15.9 million tax effected. It is currently the intention of management and the Board of Directors to make no distributions from the Bank to the Company during fiscal year 2025. By not making distributions during fiscal year 2025, the Bank will not incur income tax expense related to the pre-1988 bad debt recaptures as occurred during the current year. See "Financial Condition - Stockholders' Equity" section below for additional discussion.

The Company recognized net income of $38.0 million, or $0.29 per share, for fiscal year 2024 compared to a net loss of $101.7 million, or $(0.76) per share, for the prior fiscal year. The net loss in the prior year resulted from the impairment loss on securities associated with the securities strategy. Excluding the net loss associated with the securities strategy, earnings per share would have been $0.37 for the current year and $0.33 for the prior year. The increase in earnings per share excluding the effects of the net loss associated with the securities strategy was due primarily to higher net interest income and a lower provision for credit losses in the current year, partially offset by higher income tax expense due primarily to the pre-1988 bad debt recapture.

Periodically at management's discretion, we have utilized a strategy to increase earnings which entails entering into short-term FHLB borrowings and depositing the proceeds from these FHLB borrowings, net of the cost to purchase FHLB stock to meet FHLB stock holding requirements, at the FRB of Kansas City (the "leverage strategy"). See additional discussion regarding the leverage strategy in "Financial Condition - Borrowings" section below. When the leverage strategy is in place, it increases assets and liabilities and reduces the net interest margin due to the amount of earnings from the transaction in

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comparison to the size of the transaction. The leverage strategy was not utilized in the current fiscal year but it was in the prior fiscal year.

The net interest margin increased 34 basis points, from 1.43% for the prior year to 1.77% for the current year. The leverage strategy negatively impacted the net interest margin for the prior year by 12 basis points. The remaining improvement in the net interest margin absent the leverage strategy was due to higher yields on securities and loans, which outpaced the increase in the cost of deposits, largely in retail certificates of deposit.

The Company's efficiency ratio was 66.91% for the current year compared to (626.63)% for the prior year. Excluding the net losses from the securities strategy, the efficiency ratio would have been 61.97% for the current year and 65.31% for the prior year. The improvement in the efficiency ratio, excluding the net losses from the securities strategy, was due primarily to higher net interest income and lower non-interest expense in the current year compared to the prior year.

Total assets were $9.53 billion at September 30, 2024, a decrease of $649.9 million from September 30, 2023. The decrease was due primarily to a $528.2 million decrease in securities, mainly as a result of the securities strategy, along with a $63.6 million decrease in the loan portfolio. The loan portfolio mix shifted toward higher earning commercial loans during the current fiscal year with a $287.2 million decrease in one- to four-family loans, partially offset by a $221.5 million increase in commercial loans. Management expects one- to four-family loans will continue to decrease as a percentage of total loans as cash flows generated from the one- to four-family loan portfolio will be used to fund commercial loan growth.

Total liabilities at September 30, 2024 were $8.50 billion, a decrease of $638.1 million from September 30, 2023. The decrease was due primarily to a $699.6 million decrease in borrowings as some of the funds from the securities strategy were used to repay all $500.0 million of outstanding borrowings under the BTFP and not all maturing FHLB borrowings were replaced during the current fiscal year. The decrease in borrowings was partially offset by an increase in deposits. Total deposits increased $78.8 million from September 30, 2023, primarily in retail certificates of deposit, all in the 14 months or shorter term category, partially offset by a decrease in retail money market accounts as some customers elected to move funds to the Bank's certificate of deposit offerings or the Bank's higher yielding savings account offering.

Total stockholders' equity was $1.03 billion at September 30, 2024, a decrease of $11.8 million from September 30, 2023 due primarily to stock buybacks early in fiscal year 2024, partially offset by an increase in accumulated other comprehensive income, net of tax. The improvement in accumulated other comprehensive income, net of tax, was mainly a result of the securities strategy.

The Bank's asset quality remains strong, reflected in the continued low level of loan delinquency and charge-off ratios. At September 30, 2024, loans 30 to 89 days delinquent were 0.20% of total loans receivable, net, and loans 90 or more days delinquent or in foreclosure were 0.12% of total loans receivable, net. The ratio of net charge-offs (recoveries) ("NCOs") during the current year to average loans outstanding during the current year was 0% as there were only $111 thousand of NCOs during the current year.

At September 30, 2024, the Bank's gap between the amount of interest-earning assets and interest-bearing liabilities projected to reprice within one year was $(1.51) billion, or (15.8)% of total assets, meaning the amount of interest-bearing liabilities exceeded the amount of interest-earning assets maturing or expected to reprice during the same period. See additional discussion in "Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk."

The Bank's Digital Transformation and Business Initiatives

With the implementation of our new core system and its ancillary systems ("digital transformation") in August 2023, we improved our internal and customer-facing technology. The digital transformation implemented technology needed to enhance our customers' experience, deepen our wallet share with existing customers, and attract new customers. In addition to the improvements in technology, management has adjusted staffing in several areas to better align with the Bank's strategy to grow and enhance commercial banking and lending. Pairing improved technology, products and services with the right organizational structure has provided benefits in each of the Bank's customer segments: consumer, small business and commercial.

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The Bank has gained immediate traction with the new and improved True Blue Online ("TBO"), the Bank's digital banking platform for consumers and small businesses. Those gains include:

aMobile app store ratings have improved by over 115% for Android comparing the ratings from the pre-digital transformation to the end of fiscal year 2024 and over 25% for iOS since the digital transformation,

bVolume of deposit accounts opened online through the digital channel is over 62% higher in the current fiscal year compared to the prior fiscal year,

cAchieved over 27,000 active users of our credit score service in TBO since August 2023, and

dContinued growth in person-to-person payment volume following the integration of Zelle into TBO:

iSettlement volume is up 92% year-over-year, and

iiTransaction volume is up 117% year-over-year.

Our small business customers now have access to improved digital services, and management has realigned staffing to focus on growing small business banking. We are in the process of adding more small business services into TBO to continue deposit and fee income growth in this area.

For commercial banking, alignment of technology, people, products and services is crucial to our objective of capturing complete banking relationships as we continue to strategically grow this business. Management has continued to adjust staffing in numerous areas of the Bank, including deposit operations, lending, and commercial banking, to ensure resources are aligned with our priorities and strategies. The technology implemented with the digital transformation provides more flexibility for structuring commercial loan transactions and has allowed us to build digital banking services to meet our customers' deposit and payment requirements to grow deposit and treasury management fee income. During the current fiscal year, several new treasury management services were added in response to the needs of customers in the sales pipeline. Additionally, during the current fiscal year we began a project to improve pricing tools to equip staff to price new business in a profitable manner. The project is expected to be completed mid-fiscal year 2025 and is anticipated to provide immediate benefits to the Bank such as ensuring profitable pricing, more efficient pricing processes, and faster pricing negotiations with our customers. Leveraging our new technology and organizational structure to quickly respond to customer needs in the sales pipeline is central to our growth strategy for commercial deposits.

Critical Accounting Estimates

Our most critical accounting estimate is the methodology used to determine the ACL and reserve for off-balance sheet credit exposures. This estimate is important to the presentation of our financial condition and results of operations, involves a high degree of complexity, and requires management to make difficult and subjective judgments that may require assumptions about highly uncertain matters.  The use of different judgments, assumptions, and estimates could affect reported results materially.  This critical accounting estimate and its application is reviewed at least annually by our audit committee. The following is a description of our critical accounting estimate and an explanation of the methods and assumptions underlying its application.

Allowance for Credit Losses and Reserve for Off-Balance Sheet Credit Exposures. The ACL is a valuation amount that is deducted from the amortized cost basis of loans and represents management's estimate of lifetime credit losses expected on the Company's loan portfolio as of the balance sheet date. The reserve for off-balance sheet credit exposures represents expected credit losses on unfunded portions of existing loans and commitments to originate or purchase loans that are not unconditionally cancellable by the Company.

Management estimates the ACL by projecting future loss rates which are dependent upon forecasted economic indices and applying qualitative factors when deemed appropriate by management. The key assumptions used in projecting future loss rates include the economic forecast, the forecast and reversion to mean time periods, and prepayment and curtailment assumptions. The assumptions are used to calculate and aggregate estimated cash flows for the time period that remains in each loan's contractual life. The cash flows are discounted back to the balance sheet date using each loan's effective yield, to arrive at a present value of future cash flows, which is compared to the amortized cost basis of the loan pool to determine the amount of ACL required by the calculation. Management then considers qualitative factors when assessing the overall level of ACL. See "Allowance for Credit Losses on Loans Receivable" and "Reserve for Off-Balance Sheet Credit Exposures" within "Part II, Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 1. Summary of Significant Accounting Policies" for additional information.

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One of the most significant judgments used in projecting loss rates when estimating the ACL and reserves for off-balance sheet credit exposures is the macroeconomic forecast provided by a third party. The economic indices sourced from the macroeconomic forecast and used in projecting loss rates are the national unemployment rate, changes in commercial real estate prices, changes in home values, and changes in the United States gross domestic product. The economic index used in the calculation to which the calculation is most sensitive is the national unemployment rate. Each reporting period, several macroeconomic forecast scenarios are considered by management. Management selects the macroeconomic forecast(s) that is/are most reflective of expectations at that point in time. Changes in the macroeconomic forecast, especially for the national unemployment rate, could significantly impact the calculated estimated credit losses between reporting periods.

Other key assumptions in the calculation of the ACL and reserve for off-balance sheet credit exposures estimates include the forecast and reversion to mean time periods and prepayment and curtailment assumptions. The calculation is less sensitive to these assumptions than the macroeconomic forecasts. The macroeconomic forecast is applied for a reasonable and supportable time period before reverting to long-term historical averages for each economic index. The forecast and reversion to mean time period used for each economic index at September 30, 2024 was four quarters. Prepayment and curtailment assumptions are generally based on the Company's historical experience and are adjusted by management as deemed necessary. The prepayment and curtailment assumptions vary based on loan product type.

The ACL and reserve for off-balance sheet credit exposures may be materially affected by qualitative factors, for items not reflected in the economic forecast and/or discounted cash flow model, but which are deemed appropriate by management's current assessment of the risks related to the loan portfolio and/or external factors. Such qualitative factors may include changes in the Bank's loan portfolio composition and credit concentrations, changes in the balances and/or trends in asset quality and/or loan credit performance, changes in lending underwriting standards, the effect of other external factors such as significant unique events or conditions, and actual and/or expected changes in economic conditions, real estate values, and/or other economic developments. Management applied qualitative factors at September 30, 2024 to account for large dollar commercial loan concentrations and potential downside market risk with the recent housing price appreciation related to one- to four-family loans. The qualitative factors applied at September 30, 2024, and the importance and levels of the qualitative factors applied, may change in future periods depending on the level of changes to items such as the uncertainty of economic conditions and management's assessment of the level of credit risk within the loan portfolio as a result of such changes, compared to the amount of ACL calculated by the model. The evaluation of qualitative factors is inherently imprecise and requires significant management judgment. See "Part II, Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 4. Loans Receivable and Allowance for Credit Losses - Allowance for Credit Losses" for additional information regarding the qualitative factors applied at September 30, 2024.

The ACL and the reserve for off-balance sheet credit exposures were $23.0 million and $6.0 million, respectively at September 30, 2024, compared to $23.8 million and $4.1 million, respectively, at September 30, 2023. The decrease in the ACL between periods was mainly related to one- to four-family loans due to a decrease in the ACL to loan ratio and a decrease in overall one- to four-family loan balances, partially offset by an increase in the ACL for commercial loans due to commercial loan growth. The $1.9 million increase in the reserve for off-balance sheet credit exposures was due primarily to an increase in the balance of off-balance sheet credit exposures and an increase in the ACL to loan ratio, which is applied to the off-balance sheet credit exposures, between periods, specifically for commercial construction loans. See "Part II, Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 4. Loans Receivable and Allowance for Credit Losses - Allowance for Credit Losses" for additional information regarding the assumptions used in the Company's September 30, 2024 estimate of ACL.

While management utilizes its best judgment and information available, the adequacy of the ACL and reserve for off-balance sheet credit exposures is determined by certain factors outside of the Company's control, such as the performance of our loan portfolio, changes in the economic environment including economic uncertainty, changes in interest rates, and the view of the regulatory authorities toward classification of assets and the level of ACL and reserve for off-balance sheet credit exposures. Additionally, the level of ACL and reserve for off-balance sheet credit exposures may fluctuate based on the balance and mix of the loan portfolio and off-balance sheet credit exposures. If actual results differ significantly from our assumptions, our ACL and reserve for off-balance sheet credit exposures may not be sufficient to cover inherent losses in our loan portfolio, resulting in additions to our ACL and an increase in the provision for credit losses.

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Recent Accounting Pronouncements

For a discussion of Recent Accounting Pronouncements, see "Part II, Item 8. Financial Statements and Supplementary Data – Notes to Financial Statements – Note 1. Summary of Significant Accounting Policies."

Financial Condition

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

[[GREPCENT_TABLE]]
[["","September 30,","","Change expressed in:"],["","2024","","2023","","Dollars","","Percent"],["","(Dollars and shares in thousands)"],["Total assets","$","9,527,608","","","$","10,177,461","","","$","(649,853)","","","(6.4)","%"],["AFS securities","856,266","","","1,384,482","","","(528,216)","","","(38.2)"],["Loans receivable, net","7,907,338","","","7,970,949","","","(63,611)","","","(0.8)"],["Deposits","6,129,982","","","6,051,220","","","78,762","","","1.3"],["Borrowings","2,179,564","","","2,879,125","","","(699,561)","","","(24.3)"],["Stockholders' equity","1,032,270","","","1,044,054","","","(11,784)","","","(1.1)"],["Equity to total assets at end of period","10.8","%","","10.3","%"],["Average number of basic shares outstanding","130,671","","","133,557","","","(2,886)","","","(2.2)"],["Average number of diluted shares outstanding","130,671","","","133,557","","","(2,886)","","","(2.2)"]]
[[/GREPCENT_TABLE]]

Loans Receivable. Total loans, net at September 30, 2024 were $7.91 billion, a decrease of $63.6 million from September 30, 2023. The decrease in the loan portfolio was due mainly to a $287.2 million decrease in one- to four-family loans, partially offset by a $221.5 million increase in commercial loans.

Originating 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. In addition, the Bank historically purchased one- to four-family loans from correspondent lenders. The Bank has a portfolio concentration in one- to four-family loans and a geographic concentration of these loans in Kansas and Missouri.

As a result of continued high interest rates and lack of housing inventory which has reduced housing market transactions, our single-family origination activity has slowed which has directly impacted the Bank's one- to four-family loan portfolio. Origination and refinance activity has slowed considerably, and one- to four-family loan balances have been reduced through scheduled repayments and loan payoffs. During the June 30, 2024 quarter, the Bank suspended its one- to four-family correspondent lending channels for the foreseeable future. Management expects that the balance of one- to four-family loans will continue to decrease as a percentage of the Bank's loan portfolio as cash flows generated from one- to four-family loans are used to fund commercial loan growth.

As noted above, the Bank suspended its one- to four-family correspondent lending channels for the foreseeable future during the current year. The Bank previously purchased one- to four-family loans, on a loan-by-loan basis, from a select group of correspondent lenders ("correspondent purchased"). Loan purchases enabled the Bank to attain geographic diversification in the one- to four-family loan portfolio. We generally paid a premium of 0.50% to 1.00% of the loan balance to purchase these loans, and 1.00% of the loan balance to purchase the servicing of these loans. The premium paid is amortized against the interest earned over the life of the loan, which reduces the loan yield. If a loan pays off before the scheduled maturity date, the remaining premium is recognized as reduction in interest income.

In the past, the Bank has also purchased one- to four-family loans from correspondent and nationwide lenders in bulk loan packages ("bulk purchased"). The majority of the Bank's bulk purchased loans were guaranteed by one seller. The Bank has not experienced any losses with this group of loans since the loan package was purchased in August 2012.

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The Bank originates owner-occupied construction-to-permanent loans secured by one- to four-family residential real estate. The majority of these loans are secured by property located within the Bank's Kansas City market area. The Bank's owner-occupied construction-to-permanent loan program combines the construction loan and the permanent loan into one loan, allowing the borrower to secure the same interest rate structure throughout the construction period and the permanent loan term.

The Bank offers a variety of secured consumer loans, including home equity loans and lines of credit, home improvement loans, vehicle loans, and loans secured by savings deposits. The Bank also originates a very limited amount of unsecured loans. Generally, consumer loans are originated in the Bank's market areas. The majority of our consumer loan portfolio is comprised of home equity lines of credit, which have adjustable interest rates. For a majority of the home equity lines of credit, the Bank has the first mortgage or the Bank is in the first lien position.

The Bank's commercial loan portfolio is composed of commercial real estate loans, commercial construction loans and commercial and industrial loans. Our commercial real estate loans include a variety of property types, including multi-family dwellings, senior housing facilities, hotels, retail buildings, and office buildings located in Kansas, Texas, and Missouri, and 15 other states. The Bank's commercial and industrial loan portfolio consists largely of loans secured by accounts receivable, inventory and equipment. These loans are generally made to borrowers and secured by assets located in the Bank's market area.

Commercial borrowers are generally required to provide financial information annually, including borrower financial statements, subject property rental rates and income, maintenance costs, updated real estate property tax and insurance payments, and personal financial information for the guarantor(s). This allows the Bank to monitor compliance with loan covenants and review the borrower's performance, including cash flows from operations, debt service coverage, and comparison of performance to projections and year-over-year performance trending. Additionally, the Bank monitors and performs site visits, or in the case of participation loans, obtains updates from the lead bank as needed to determine the condition of the collateral securing the loan. Depending on the financial strength of the project and/or the complexity of the borrower's financials, the Bank may also perform a global analysis of cash flows to account for all other properties owned by the borrower or guarantor. If signs of weakness are identified, the Bank may begin performing more frequent financial and/or collateral reviews or initiate contact with the borrower, or the lead bank will contact the borrower if the loan is a participation loan, to ensure cash flows from operations are maintained at a satisfactory level to meet the debt requirements. The Bank mitigates the risk of commercial real estate construction lending during the construction period by monitoring inspection reports from an independent third-party, project budget, percentage of completion, on-site inspections and percentage of advanced funds. Commercial and industrial loans are monitored through a review of borrower performance as indicated by borrower financial statements, borrowing base reports, accounts receivable aging reports, and inventory aging reports. These reports are required to be provided by the borrowers monthly, quarterly, or annually depending on the nature of the borrowing relationship. The Bank regularly monitors the level of risk in the entire commercial loan portfolio, including concentrations in such factors as geographic locations, collateral types, tenant brand name, borrowing relationships, and lending relationships in the case of participation loans, among other factors.

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The following table presents information related to the composition of our loan portfolio in terms of dollar amounts, weighted average rates, and percentage of total as of the dates indicated.

[[GREPCENT_TABLE]]
[["","September 30, 2024","","September 30, 2023"],["","Amount","","Rate","","Amount","","Rate"],["","(Dollars in thousands)"],["One- to four-family:"],["Originated","$","3,941,952","","","3.60","%","","$","3,978,837","","","3.39","%"],["Correspondent purchased","2,212,587","","","3.48","","","2,405,911","","","3.44"],["Bulk purchased","127,161","","","2.80","","","137,193","","","1.85"],["Construction","22,970","","","6.05","","","69,974","","","3.68"],["Total","6,304,670","","","3.55","","","6,591,915","","","3.38"],["Commercial:"],["Commercial real estate","1,191,624","","","5.43","","","995,788","","","5.29"],["Commercial and industrial","129,678","","","6.66","","","112,953","","","6.36"],["Construction","187,676","","","6.40","","","178,746","","","5.01"],["Total","1,508,978","","","5.65","","","1,287,487","","","5.35"],["Consumer loans:"],["Home equity","99,988","","","8.90","","","95,723","","","8.83"],["Other","9,615","","","5.72","","","9,256","","","5.20"],["Total","109,603","","","8.62","","","104,979","","","8.51"],["Total loans receivable","7,923,251","","","4.02","","","7,984,381","","","3.76"],["Less:"],["ACL","23,035","","","","","23,759"],["Deferred loan fees/discounts","30,336","","","","","31,335"],["Premiums/deferred costs","(37,458)","","","","","(41,662)"],["Total loans receivable, net","$","7,907,338","","","","","$","7,970,949"]]
[[/GREPCENT_TABLE]]

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The following table presents the contractual maturity of our loan portfolio, along with associated weighted average yields, at September 30, 2024. Loans that have adjustable interest rates are shown as maturing in the period during which the contract is due. The table does not reflect the effects of possible prepayments or enforcement of due on sale clauses.

[[GREPCENT_TABLE]]
[["","One year or less(1)","","Over one year to five years","","Over five years to 15 years","","Over 15 years","","Total"],["","Amount","","Yield","","Amount","","Yield","","Amount","","Yield","","Amount","","Yield","","Amount","","Yield"],["","(Dollars in thousands)"],["One- to four-family:"],["Originated","$","1,128","","","3.83","%","","$","59,901","","","3.33","%","","$","1,097,701","","","2.99","%","","$","2,783,222","","","3.88","%","","$","3,941,952","","","3.62","%"],["Correspondent purchased","43","","","3.02","","","16,997","","","2.59","","","375,859","","","2.46","","","1,819,688","","","3.57","","","2,212,587","","","3.38"],["Bulk purchased","6","","","7.06","","","234","","","5.12","","","26,033","","","4.54","","","100,888","","","2.46","","","127,161","","","2.89"],["Construction(2)","\u2014","","","\u2014","","","\u2014","","","\u2014","","","1,778","","","4.67","","","21,192","","","6.21","","","22,970","","","6.09"],["Total","1,177","","","3.82","","","77,132","","","3.17","","","1,501,371","","","2.89","","","4,724,990","","","3.74","","","6,304,670","","","3.53"],["Commercial:"],["Commercial real estate","118,520","","","6.22","","","328,552","","","5.15","","","510,013","","","4.99","","","234,539","","","6.62","","","1,191,624","","","5.48"],["Commercial and industrial","28,039","","","7.19","","","52,771","","","7.18","","","43,669","","","5.81","","","5,199","","","4.57","","","129,678","","","6.62"],["Construction(2)","11,014","","","7.94","","","156,617","","","6.21","","","14,302","","","7.05","","","5,743","","","6.57","","","187,676","","","6.39"],["Total","157,573","","","6.51","","","537,940","","","5.66","","","567,984","","","5.11","","","245,481","","","6.58","","","1,508,978","","","5.69"],["Consumer:"],["Home equity(3)","640","","","9.90","","","1,924","","","6.53","","","46,934","","","8.66","","","50,490","","","8.59","","","99,988","","","8.59"],["Other","479","","","1.73","","","8,146","","","5.62","","","941","","","7.60","","","49","","","18.00","","","9,615","","","5.68"],["Total","1,119","","","6.40","","","10,070","","","5.80","","","47,875","","","8.63","","","50,539","","","8.60","","","109,603","","","8.33"],["Total loans receivable","$","159,869","","","6.49","","","$","625,142","","","5.35","","","$","2,117,230","","","3.61","","","$","5,021,010","","","3.93","","","7,923,251","","","4.01"],["Less:"],["ACL","","","","","","","","","","","","","","","","","23,035"],["Deferred loan fees/discounts","","","","","","","","","","","","","","","","30,336"],["Premiums/deferred costs","","","","","","","","","","","","","","","","(37,458)"],["Total loans receivable, net","","","","","","","","","","","","","","","","$","7,907,338"]]
[[/GREPCENT_TABLE]]

(1)Includes demand loans, loans having no stated maturity, and overdraft loans.

(2)Construction loans are presented based upon the contractual maturity date, which includes the permanent financing period for construction-to-permanent loans.

(3)For home equity loans, including those that do not have a stated maturity date, the maturity date calculated assumes the borrower always makes the required minimum payment. The majority of home equity loans assume a maximum term of 240 months.

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The following table presents, as of September 30, 2024, the amount of loans due after September 30, 2025, and whether these loans have fixed or adjustable interest rates.

[[GREPCENT_TABLE]]
[["","Fixed","","Adjustable","","Total"],["","(Dollars in thousands)"],["One- to four-family:"],["Originated","$","3,535,348","","","$","405,476","","","$","3,940,824"],["Correspondent purchased","1,836,292","","","376,252","","","2,212,544"],["Bulk purchased","3,671","","","123,484","","","127,155"],["Construction","9,211","","","13,759","","","22,970"],["Total","5,384,522","","","918,971","","","6,303,493"],["Commercial:"],["Commercial real estate","310,636","","","762,468","","","1,073,104"],["Commercial and industrial","41,628","","","60,011","","","101,639"],["Construction","74,805","","","101,857","","","176,662"],["Total","427,069","","","924,336","","","1,351,405"],["Consumer:"],["Home equity","20,639","","","78,709","","","99,348"],["Other","6,015","","","3,121","","","9,136"],["Total","26,654","","","81,830","","","108,484"],["Total loans receivable","$","5,838,245","","","$","1,925,137","","","$","7,763,382"]]
[[/GREPCENT_TABLE]]

Loan Activity - The following table summarizes activity in the loan portfolio, along with weighted average rates where applicable, for the periods indicated, excluding changes in ACL, deferred loan fees/discounts, and premiums/deferred costs. Loans that were paid off as a result of refinances are included in repayments. Loan endorsements are not included in the activity in the following table because a new loan is not generated at the time of the endorsement. The endorsed balance and rate are included in the ending loan portfolio balance and rate. Commercial loan renewals are not included in the activity presented in the following table unless new funds are disbursed at the time of renewal. The renewal balance and rate are included in the ending loan portfolio balance and rate.

[[GREPCENT_TABLE]]
[["","For the Year Ended"],["","September 30, 2024","","September 30, 2023"],["","Amount","","Rate","","Amount","","Rate"],["","(Dollars in thousands)"],["Beginning balance","$","7,984,381","","","3.76","%","","$","7,471,670","","","3.33","%"],["Originated and refinanced","660,937","","","7.21","","","930,362","","","5.96"],["Purchased and participations","47,712","","","7.80","","","644,072","","","5.59"],["Change in undisbursed loan funds","168,483","","","","","(99,179)"],["Repayments","(917,871)","","","","","(956,562)"],["Principal (charge-offs)/recoveries, net","(111)","","","","","(106)"],["Other","(20,280)","","","","","(5,876)"],["Ending balance","$","7,923,251","","","4.02","","","$","7,984,381","","","3.76"]]
[[/GREPCENT_TABLE]]

29

The following table presents loan origination, refinance, and purchase/participation activity for the periods indicated, excluding endorsement activity, along with associated weighted average rates and percent of total. Commercial loan renewals are not included in the activity in the following table except to the extent new funds are disbursed at the time of renewal. Loan originations, purchases/participations, and refinances are reported together.

[[GREPCENT_TABLE]]
[["","For the Year Ended"],["","September 30, 2024","","September 30, 2023"],["","Amount","","Rate","","% of Total","","Amount","","Rate","","% of Total"],["","(Dollars in thousands)"],["Fixed-rate:"],["One- to four-family","$","207,757","","","6.39","%","","29.3","%","","$","404,598","","","5.47","%","","25.7","%"],["One- to four-family construction","24,578","","","6.56","","","3.5","","","39,599","","","5.72","","","2.5"],["Commercial:"],["Real estate","7,920","","","7.63","","","1.1","","","43,408","","","7.48","","","2.7"],["Commercial and industrial","22,251","","","6.96","","","3.1","","","40,238","","","7.81","","","2.6"],["Construction","3,632","","","7.07","","","0.5","","","149,046","","","5.89","","","9.5"],["Home equity","8,402","","","9.00","","","1.2","","","6,080","","","8.20","","","0.4"],["Consumer other","2,975","","","7.22","","","0.4","","","4,620","","","6.93","","","0.3"],["Total fixed-rate","277,515","","","6.58","","","39.1","","","687,589","","","5.87","","","43.7"],["Adjustable-rate:"],["One- to four-family","53,910","","","6.37","","","7.6","","","342,093","","","4.97","","","21.7"],["One- to four-family construction","16,875","","","6.51","","","2.4","","","28,545","","","5.22","","","1.8"],["Commercial:"],["Real estate","114,502","","","7.56","","","16.2","","","223,910","","","5.60","","","14.2"],["Commercial and industrial","49,593","","","7.65","","","7.0","","","57,295","","","7.28","","","3.6"],["Construction","152,739","","","7.96","","","21.5","","","177,471","","","6.22","","","11.3"],["Home equity","40,248","","","9.39","","","5.7","","","55,896","","","8.43","","","3.6"],["Consumer other","3,267","","","5.42","","","0.5","","","1,635","","","4.25","","","0.1"],["Total adjustable-rate","431,134","","","7.68","","","60.9","","","886,845","","","5.75","","","56.3"],["Total originated, refinanced and purchased/participations","$","708,649","","","7.25","","","100.0","%","","$","1,574,434","","","5.81","","","100.0","%"],["Purchased and participation loans included above:"],["Fixed-rate:"],["Correspondent purchased - one- to four-family","$","2,978","","","6.43","","","","","$","199,858","","","5.20"],["Participations and purchases - commercial","4,400","","","7.08","","","","","19,016","","","9.43"],["Total fixed-rate purchased/participations","7,378","","","6.82","","","","","218,874","","","5.57"],["Adjustable-rate:"],["Correspondent purchased - one- to four-family","519","","","2.93","","","","","215,939","","","4.86"],["Participations and purchases - commercial","39,815","","","8.04","","","","","209,259","","","6.36"],["Total adjustable-rate purchased/participations","40,334","","","7.98","","","","","425,198","","","5.60"],["Total purchased/participation loans","$","47,712","","","7.80","","","","","$","644,072","","","5.59"]]
[[/GREPCENT_TABLE]]

30

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 loan-to-value ("LTV") ratio, and average balance per loan as of September 30, 2024. Credit scores were updated in September 2024, 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.

[[GREPCENT_TABLE]]
[["","","","% of","","","","Credit","","","","Average"],["","Amount","","Total","","Rate","","Score","","LTV","","Balance"],["","(Dollars in thousands)"],["Originated","$","3,941,952","","","62.5","%","","3.60","%","","771","","","59","%","","$","168"],["Correspondent purchased","2,212,587","","","35.1","","","3.48","","","767","","","63","","","404"],["Bulk purchased","127,161","","","2.0","","","2.80","","","772","","","54","","","280"],["Construction","22,970","","","0.4","","","6.05","","","778","","","52","","","410"],["","$","6,304,670","","","100.0","%","","3.55","","","770","","","60","","","214"]]
[[/GREPCENT_TABLE]]

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 LTV ratios and weighted average credit scores for the current year.

[[GREPCENT_TABLE]]
[["","","","","","","","Credit"],["","Amount","","Rate","","LTV","","Score"],["","(Dollars in thousands)"],["Originated","$","299,623","","","6.41","%","","75","%","","770"],["Correspondent purchased","3,497","","","5.91","","","70","","","765"],["","$","303,120","","","6.40","","","75","","","770"]]
[[/GREPCENT_TABLE]]

As of September 30, 2024, the Bank had one- to four-family loan origination and refinance commitments of $46.3 million at a weighted average rate of 6.10%. There were no one- to four-family correspondent loan purchase commitments at September 30, 2024, as during the current year the Bank suspended purchasing one- to four-family loans from correspondent lenders.

Commercial Loans - During the year ended September 30, 2024, the Bank originated commercial loans and entered into commercial loan participations totaling $350.6 million, which was comprised of $156.4 million in commercial construction real estate loans, $122.4 million in commercial real estate loans, and $71.8 million in commercial and industrial loans. During the current fiscal year, the Bank also processed commercial loan disbursements, excluding lines of credit, of approximately $326.7 million at a weighted average rate of 6.58%, which included $245.0 million, $60.1 million, and $21.6 million of disbursements on new and existing commercial construction, commercial real estate, and commercial and industrial loans, respectively.

As of September 30, 2024 and September 30, 2023, the Bank's commercial and industrial gross loan amounts (unpaid principal plus undisbursed amounts) totaled $163.6 million and $158.5 million, respectively, and commitments totaled $3.2 million and $2.6 million, respectively. Of the $163.6 million outstanding at September 30, 2024, $74.1 million, or 46%, of the portfolio related to working capital loans, $43.8 million, or 27%, related to financing/leasing/purchasing vehicles and equipment, and $37.9 million, or 24%, related to purchasing/refinancing business/assets.

31

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 September 30, 2024, the Bank had 12 commercial real estate and commercial construction loan commitments totaling $186.1 million, at a weighted average rate of 7.19%. Management anticipates fully funding the majority of the undisbursed amounts as most are not cancellable by the Bank. Of the total commercial real estate and commercial construction undisbursed amounts and commitments outstanding as of September 30, 2024, management anticipates funding approximately $150 million during the December 2024 quarter, $78 million during the March 2025 quarter, $83 million during the June 2025 quarter, and $149.7 million during the September 2025 quarter or later. At September 30, 2024, the unpaid principal balance of non-owner occupied commercial real estate loans was $886.1 million and the unpaid principal balance of owner occupied commercial real estate loans was $165.3 million, which are included in the table below.

[[GREPCENT_TABLE]]
[["","September 30, 2024","","September 30, 2023"],["","","","Unpaid","","Undisbursed","","Gross Loan","","Gross Loan"],["","Count","","Principal","","Amount","","Amount","","Amount"],["","","","(Dollars in thousands)"],["Multi-family","38","","","$","172,674","","","$","187,033","","","$","359,707","","","$","308,846"],["Senior housing","36","","","327,144","","","5,190","","","332,334","","","331,207"],["Hotel","20","","","293,720","","","29,676","","","323,396","","","233,012"],["Retail building","133","","","263,877","","","52,384","","","316,261","","","352,499"],["Office building","77","","","127,289","","","672","","","127,961","","","130,921"],["One- to four-family property","321","","","59,467","","","3,949","","","63,416","","","70,265"],["Single use building","32","","","43,176","","","262","","","43,438","","","47,193"],["Warehouse/manufacturing","47","","","34,243","","","413","","","34,656","","","35,963"],["Other","69","","","57,710","","","4,303","","","62,013","","","53,032"],["","773","","","$","1,379,300","","","$","283,882","","","$","1,663,182","","","$","1,562,938"],["Weighted average rate","","","5.56","%","","6.79","%","","5.77","%","","5.47","%"]]
[[/GREPCENT_TABLE]]

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

[[GREPCENT_TABLE]]
[["","September 30, 2024","","September 30, 2023"],["","","","Unpaid","","Undisbursed","","Gross Loan","","Gross Loan"],["","Count","","Principal","","Amount","","Amount","","Amount"],["","","","(Dollars in thousands)"],["Kansas","571","","","$","562,079","","","$","151,358","","","$","713,437","","","$","670,498"],["Texas","21","","","301,486","","","46,580","","","348,066","","","348,707"],["Missouri","140","","","260,890","","","52,256","","","313,146","","","332,610"],["New York","1","","","60,000","","","\u2014","","","60,000","","","\u2014"],["Colorado","8","","","42,604","","","7,413","","","50,017","","","49,385"],["Arkansas","5","","","35,522","","","1,066","","","36,588","","","33,046"],["Nebraska","7","","","32,418","","","4","","","32,422","","","37,609"],["California","2","","","12,271","","","2,769","","","15,040","","","\u2014"],["Other","18","","","72,030","","","22,436","","","94,466","","","91,083"],["","773","","","$","1,379,300","","","$","283,882","","","$","1,663,182","","","$","1,562,938"]]
[[/GREPCENT_TABLE]]

32

The following table presents the Bank's commercial real estate and commercial construction loans by unpaid principal balance, aggregated by type of primary collateral and state, along with weighted average LTV ratio and weighted average debt service coverage ratio ("DSCR") as of September 30, 2024. The LTV ratio is calculated using the gross loan amount (composed of unpaid principal and undisbursed amounts) as of September 30, 2024 and the most current collateral value available, which is most often the value at origination/purchase. For existing real estate, the "as is" value is used. If the property is to be constructed, the "as completed" value of the collateral is utilized. The DSCR is calculated based on historical borrower performance, or projected borrower performance for newly formed entities with no performance history. The DSCR is calculated at the time of origination, and is updated at the time of subsequent loan renewals or reviews of borrower financials. The DSCR presented in the table below is based on the DSCR at the time of origination unless an updated DSCR has been calculated. As of September 30, 2024 approximately 50% of the loans, based on unpaid principal balance, had updated DSCRs.

[[GREPCENT_TABLE]]
[["","","","","","","","","","","","","","Weighted","","Weighted"],["","Kansas","","Texas","","Missouri","","New York","","Other","","Total","","LTV","","DSCR"],["","(Dollars in thousands)"],["Senior Housing","$","161,146","","$","\u2014","","$","109,820","","$","\u2014","","$","56,178","","$","327,144","","70.2","%","","1.41x"],["Hotel","42,633","","140,054","","9,672","","60,000","","41,361","","293,720","","57.3","%","","1.45"],["Retail Building","85,366","","84,515","","50,317","","\u2014","","43,678","","263,876","","60.5","%","","1.91"],["Multi-family","95,935","","15,546","","40,517","","\u2014","","20,677","","172,675","","62.6","%","","1.41"],["Office Building","57,477","","60,471","","8,983","","\u2014","","358","","127,289","","49.0","%","","2.68"],["Other","119,522","","900","","41,581","","\u2014","","32,593","","194,596","","51.6","%","","3.10"],["","$","562,079","","$","301,486","","$","260,890","","$","60,000","","$","194,845","","$","1,379,300","","59.6","%","","1.87"],["Weighted LTV","60.0","%","","59.4","%","","59.7","%","","46.2","%","","62.8","%","","59.6","%"],["Weighted DSCR","2.05x","","1.50x","","2.18x","","1.18x","","1.74x","","1.87x"]]
[[/GREPCENT_TABLE]]

The following table presents the Bank's commercial real estate and construction loans and outstanding loan commitments, categorized by aggregate gross loan amount (unpaid principal plus undisbursed amounts) or outstanding loan commitment amount, average loan amount, weighted average LTV ratio and weighted average DSCR, as of September 30, 2024. See information above for the weighted average LTV ratio and DSCR calculations. For loans and commitments over $50.0 million, $182.2 million were related to hotels in California, New York, and Texas, $143.1 million were related to multi-family properties located in Kansas, and $60.0 million was related to an office building in Texas.

[[GREPCENT_TABLE]]
[["","","","","","Average","","Weighted","","Weighted"],["","Count","","Amount","","Amount","","LTV","","DSCR"],["","(Dollars in thousands)"],["Greater than $50 million","6","","","$","385,283","","","$","64,214","","","54.4","%","","1.49x"],["$30 to $50 million","6","","","211,210","","","35,202","","","63.4","","","1.41"],["$20 to $30 million","15","","","368,147","","","24,543","","","67.9","","","1.28"],["$15 to $20 million","9","","","153,069","","","17,008","","","61.3","","","1.83"],["$10 to $15 million","12","","","143,695","","","11,975","","","71.8","","","1.57"],["$5 to $10 million","27","","","195,657","","","7,247","","","64.7","","","1.83"],["$1 to $5 million","114","","","263,607","","","2,312","","","59.7","","","2.11"],["Less than $1 million","596","","","128,604","","","216","","","40.0","","","4.06"],["","785","","","$","1,849,272","","","2,356","","","60.0","","","1.77"]]
[[/GREPCENT_TABLE]]

33

Asset Quality

Delinquent and nonaccrual loans and other real estate owned ("OREO"). The following table presents the Company's 30 to 89 day delinquent loans at the dates indicated. The amounts in the table represent the unpaid principal balance of the loans less related charge-offs, if any. Of the loans 30 to 89 days delinquent at September 30, 2024 and 2023, approximately 66% and 72%, respectively, were 59 days or less delinquent. The increase in commercial real estate loans that were 30 to 89 days delinquent from September 30, 2023 was not due to one underlying reason. Management is working closely with the borrowers to address payment issues.

[[GREPCENT_TABLE]]
[["","September 30,"],["","2024","","2023"],["","Number","","Amount","","Number","","Amount"],["","(Dollars in thousands)"],["One- to four-family:"],["Originated","69","","","$","8,884","","","88","","","$","9,078"],["Correspondent purchased","12","","","3,049","","","17","","","5,192"],["Bulk purchased","2","","","68","","","1","","","149"],["Construction","\u2014","","","\u2014","","","4","","","1,123"],["Commercial:"],["Commercial real estate","11","","","2,996","","","1","","","36"],["Commercial and industrial","4","","","391","","","4","","","58"],["Consumer","35","","","642","","","30","","","730"],["","133","","","$","16,030","","","145","","","$","16,366"],["Loans 30 to 89 days delinquent"],["to total loans receivable, net","","0.20","%","","","","0.21","%"]]
[[/GREPCENT_TABLE]]

34

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.

[[GREPCENT_TABLE]]
[["","September 30,"],["","2024","","2023"],["","Number","","Amount","","Number","","Amount"],["","(Dollars in thousands)"],["Loans 90 or More Days Delinquent or in Foreclosure:"],["One- to four-family:"],["Originated","29","","","$","2,274","","","24","","","$","2,246"],["Correspondent purchased","8","","","4,024","","","9","","","3,410"],["Bulk purchased","5","","","1,535","","","2","","","942"],["Commercial:"],["Commercial real estate","7","","","1,163","","","8","","","1,966"],["Commercial and industrial","2","","","82","","","4","","","217"],["Consumer","20","","","436","","","9","","","113"],["","71","","","9,514","","","56","","","8,894"],["Loans 90 or more days delinquent or in foreclosure"],["as a percentage of total loans","","","0.12","%","","","","0.11","%"],["Nonaccrual loans less than 90 Days Delinquent:(1)"],["One- to four-family:"],["Originated","\u2014","","","$","\u2014","","","2","","","$","215"],["Correspondent purchased","\u2014","","","\u2014","","","1","","","282"],["Bulk purchased","\u2014","","","\u2014","","","\u2014","","","\u2014"],["Commercial:"],["Commercial real estate","3","","","326","","","1","","","18"],["Commercial and industrial","2","","","252","","","\u2014","","","\u2014"],["Consumer","\u2014","","","\u2014","","","\u2014","","","\u2014"],["","5","","","578","","","4","","","515"],["Total nonaccrual loans","76","","","10,092","","","60","","","9,409"],["Nonaccrual loans as a percentage of total loans","","0.13","%","","","","0.12","%"],["OREO:"],["One- to four-family:"],["Originated(2)","1","","","$","55","","","\u2014","","","$","\u2014"],["Correspondent purchased","\u2014","","","\u2014","","","1","","","219"],["","1","","","55","","","1","","","219"],["Total non-performing assets","77","","","$","10,147","","","61","","","$","9,628"],["Non-performing assets as a percentage of total assets","0.11","%","","","","0.09","%"]]
[[/GREPCENT_TABLE]]

(1)Includes loans required to be reported as nonaccrual pursuant to accounting 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.

35

The following table presents the states where the properties securing ten percent or more of the total amount of our one- to four-family loans, excluding construction loans, are located and the corresponding balance of loans 30 to 89 days delinquent, 90 or more days delinquent or in foreclosure, and weighted average LTV ratios for loans 90 or more days delinquent or in foreclosure at September 30, 2024. The amounts in the table represent the unpaid principal balance of the loans, less related charge-offs, if any. 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 September 30, 2024, potential losses, after taking into consideration anticipated private mortgage insurance proceeds and estimated selling costs, have been charged-off.

[[GREPCENT_TABLE]]
[["","","","","","","Loans 30 to 89","","Loans 90 or More Days Delinquent"],["","","One- to Four-Family","","Days Delinquent","","or in Foreclosure"],["State","","Amount","","% of Total","","Amount","","% of Total","","Amount","","% of Total","","LTV"],["","","(Dollars in thousands)"],["Kansas","","$","3,491,566","","","55.4","%","","$","7,911","","","65.9","%","","$","2,233","","","28.5","%","","53","%"],["Missouri","","1,084,592","","","17.2","","","3,447","","","28.7","","","991","","","12.7","","","58"],["Other states","","1,728,512","","","27.4","","","643","","","5.4","","","4,609","","","58.8","","","56"],["","","$","6,304,670","","","100.0","%","","$","12,001","","","100.0","%","","$","7,833","","","100.0","%","","56"]]
[[/GREPCENT_TABLE]]

Classified Assets. In accordance with the Bank's asset classification policy, management regularly reviews the problem assets in the Bank's portfolio to determine whether any assets require classification. See "Part II, Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 4. Loans Receivable and Allowance for Credit Losses" for asset classification definitions.

The following table presents 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 increase in commercial real estate special mention loans at September 30, 2024 compared to September 30, 2023 was due mainly to three loans moving to special mention during the current year as certain underlying economic considerations related to the loans are being monitored by management. The decrease in commercial and industrial special mention loans at September 30, 2024 compared to September 30, 2023 was due mainly to two loans being upgraded to pass due to an improvement in financial results.

[[GREPCENT_TABLE]]
[["","September 30, 2024","","September 30, 2023"],["","Special Mention","","Substandard","","Special Mention","","Substandard"],["","(Dollars in thousands)"],["One- to four-family","$","17,528","","","$","22,715","","","$","18,603","","","$","19,314"],["Commercial:"],["Commercial real estate","16,169","","","2,302","","","2,488","","","1,138"],["Commercial and industrial","413","","","335","","","13,919","","","155"],["Consumer","326","","","487","","","327","","","190"],["","$","34,436","","","$","25,839","","","$","35,337","","","$","20,797"]]
[[/GREPCENT_TABLE]]

Allowance for Credit Losses. The following table presents the distribution of our ACL and the ratio of ACL to loans receivable, by loan type, at the dates indicated. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates", "Part II, Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 1. Summary of Significant Accounting Policies and Note 4. Loans Receivable and Allowance for Credit Losses” for additional information regarding the Bank's ACL, including management's qualitative factors.

36

[[GREPCENT_TABLE]]
[["","September 30, 2024","","September 30, 2023"],["","","","","","% of","","% of","","","","","","% of","","% of"],["","","","ACL to","","ACL to","","Loans to","","","","ACL to","","ACL to","","Loans to"],["","Amount","","Loans","","Total","","Total","","Amount","","Loans","","Total","","Total"],["","of ACL","","Ratio","","ACL","","Loans","","of ACL","","Ratio","","ACL","","Loans"],["","(Dollars in thousands)"],["One- to four-family:"],["Originated","$","1,650","","","0.04","%","","7.2","%","","49.8","%","","$","2,084","","","0.05","%","","8.8","%","","49.9","%"],["Correspondent purchased","1,861","","","0.08","","","8.1","","","27.9","","","2,972","","","0.12","","","12.4","","","30.1"],["Bulk purchased","146","","","0.11","","","0.6","","","1.6","","","207","","","0.15","","","0.9","","","1.7"],["Construction","16","","","0.07","","","0.1","","","0.3","","","65","","","0.09","","","0.3","","","0.9"],["Total","3,673","","","0.06","","","16.0","","","79.6","","","5,328","","","0.08","","","22.4","","","82.6"],["Commercial:"],["Real estate","15,719","","","1.32","","","68.2","","","15.0","","","15,589","","","1.57","","","65.6","","","12.5"],["Commercial and industrial","1,186","","","0.91","","","5.1","","","1.6","","","1,104","","","0.98","","","4.6","","","1.4"],["Construction","2,249","","","1.20","","","9.8","","","2.4","","","1,487","","","0.83","","","6.3","","","2.2"],["Total","19,154","","","1.27","","","83.1","","","19.0","","","18,180","","","1.41","","","76.5","","","16.1"],["Consumer loans:"],["Home equity","112","","","0.11","","","0.5","","","1.3","","","142","","","0.15","","","0.6","","","1.2"],["Other consumer","96","","","1.00","","","0.4","","","0.1","","","109","","","1.18","","","0.5","","","0.1"],["Total consumer loans","208","","","0.19","","","0.9","","","1.4","","","251","","","0.24","","","1.1","","","1.3"],["","$","23,035","","","0.29","%","","100.0","%","","100.0","%","","$","23,759","","","0.30","%","","100.0","%","","100.0","%"]]
[[/GREPCENT_TABLE]]

Historically, the Bank has maintained very low delinquency ratios and NCO rates. Over the past two years, the Bank's highest ratio of commercial loans 90 days or more delinquent to total commercial loans at a quarter end was 0.17%. The highest such ratio for one- to four-family originated and correspondent loans, combined, was 0.12%. The amount of total NCOs during fiscal year 2024 was $111 thousand. During the 10-year period ended September 30, 2024, the Bank recognized $1.4 million of total NCOs. As of September 30, 2024, the ACL balance was $23.0 million and the reserve for off-balance sheet credit exposures totaled $6.0 million. Management believes that this level of ACL and reserves is adequate for the risk characteristics in our loan portfolio.

The Bank's commercial real estate ACL ratios, in aggregate, continue to be higher than those of our peers. The following tables present the average and median commercial real estate ACL ratios for the Bank and two of the Bank's peer groups at the month ends for the periods noted. The OCC peer group consists of all savings banks greater than $1 billion in assets and the Asset Size peer group consists of all banks between $5 billion and $15 billion in asset size. The peer group information is sourced from the respective peers' Call Reports.

[[GREPCENT_TABLE]]
[["Average","September 2022","December 2022","March 2023","June 2023","September 2023","December 2023","March 2024","June 2024","September 2024"],["Bank","1.17","%","1.30","%","1.28","%","1.45","%","1.57","%","1.58","%","1.60","%","1.57","%","1.32","%"],["OCC","0.96","","0.92","","1.21","","1.22","","1.21","","1.14","","1.10","","1.11","","N/A"],["Asset Size","1.17","","1.18","","1.18","","1.19","","1.24","","1.16","","1.16","","1.15","","N/A"],["Median","September 2022","December 2022","March 2023","June 2023","September 2023","December 2023","March 2024","June 2024","September 2024"],["Bank","1.17","%","1.30","%","1.28","%","1.45","%","1.57","%","1.58","%","1.60","%","1.57","%","1.32","%"],["OCC","0.90","","0.84","","1.00","","0.98","","1.06","","1.02","","0.98","","1.02","","N/A"],["Asset Size","1.13","","1.15","","1.13","","1.12","","1.12","","1.10","","1.13","","1.06","","N/A"]]
[[/GREPCENT_TABLE]]

37

The following table presents ACL activity and related ratios at the dates and for the periods indicated. On October 1, 2023, the Bank adopted Accounting Standards Update ("ASU") 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures ("ASU 2022-02"), which eliminated the accounting guidance for troubled debt restructurings by creditors. The Company applied a modified retrospective approach when adopting ASU 2022-02, resulting in a cumulative-effect adjustment which is reflected in the table below ("ASU 2022-02 Adoption").

[[GREPCENT_TABLE]]
[["","At or For the Year Ended September 30,"],["","2024","","2023","","2022"],["","(Dollars in thousands)"],["Balance at beginning of period","$","23,759","","","$","16,371","","","$","19,823"],["ASU 2022-02 Adoption","20","","","\u2014","","","\u2014"],["Charge-offs","(160)","","","(115)","","","(70)"],["Recoveries","49","","","9","","","256"],["Net (charge-offs) recoveries","(111)","","","(106)","","","186"],["Provision for credit losses","(633)","","","7,494","","","(3,638)"],["Balance at end of period","$","23,035","","","$","23,759","","","$","16,371"],["Ratio of NCOs during the period"],["to average non-performing assets","1.12","%","","1.09","%","","(1.59)","%"],["ACL to nonaccrual loans at end of period","228.25","","","252.51","","","173.37"],["ACL to loans receivable, net at end of period","0.29","","","0.30","","","0.22"],["ACL at end of period to NCOs during the period","207x","","223x","","N/M"]]
[[/GREPCENT_TABLE]]

The ratio of NCOs to average non-performing assets during the current year was higher than the prior year due to higher NCOs compared to the prior year. The ratio of ACL to nonaccrual loans was lower at the end of the current year compared to the prior year-end due to a higher balance of nonaccrual loans and a lower ACL balance. The decrease in the ratio of the ACL to total loans as of September 30, 2024 from September 30, 2023 was due mainly to a decrease in the one- to four-family ACL to loan ratio and a decrease in overall one- to four-family loan balances, partially offset by an increase in the ACL for commercial loans due to commercial loan growth. The ratio of ACL at end of period to NCOs during the period was lower in the current year due to higher NCOs along with a lower ACL balance compared to the prior year. See "Part II, Item 8. Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 4. Loans Receivable and Allowance for Credit Losses" for additional information related to ACL activity by specific loan categories.

38

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

[[GREPCENT_TABLE]]
[["","For the Year Ended September 30,"],["","2024","","2023","","2022"],["","NCOs","","Average Loans","","% of Average Loans","","NCOs","","Average Loans","","% of Average Loans","","NCOs","","Average Loans","","% of Average Loans"],["","(Dollars in thousands)"],["One- to four-family:"],["Originated","$","(28)","","","$","3,951,870","","","\u2014","%","","$","(6)","","","$","3,981,468","","","\u2014","%","","$","(129)","","","$","3,937,188","","","\u2014","%"],["Correspondent","\u2014","","","2,340,841","","","\u2014","","","\u2014","","","2,428,257","","","\u2014","","","\u2014","","","2,072,677","","","\u2014"],["Bulk purchased","\u2014","","","132,460","","","\u2014","","","\u2014","","","143,105","","","\u2014","","","\u2014","","","159,152","","","\u2014"],["Construction","\u2014","","","33,101","","","\u2014","","","\u2014","","","65,741","","","\u2014","","","\u2014","","","48,079","","","\u2014"],["Total","(28)","","","6,458,272","","","\u2014","","","(6)","","","6,618,571","","","\u2014","","","(129)","","","6,217,096","","","\u2014"],["Commercial:"],["Real estate","80","","","1,073,219","","","0.01","","","(1)","","","875,850","","","\u2014","","","(101)","","","692,115","","","(0.01)"],["Commercial and industrial","(5)","","","120,354","","","\u2014","","","75","","","93,840","","","0.08","","","40","","","74,133","","","0.05"],["Construction","\u2014","","","184,848","","","\u2014","","","\u2014","","","181,141","","","\u2014","","","\u2014","","","117,878","","","\u2014"],["Total","75","","","1,378,421","","","0.01","","","74","","","1,150,831","","","0.01","","","(61)","","","884,126","","","(0.01)"],["Consumer:"],["Home equity","46","","","97,694","","","0.05","","","21","","","94,131","","","0.02","","","1","","","85,514","","","\u2014"],["Other","18","","","9,663","","","0.19","","","17","","","8,885","","","0.19","","","3","","","8,030","","","0.04"],["Total","64","","","107,357","","","0.06","","","38","","","103,016","","","0.04","","","4","","","93,544","","","\u2014"],["","$","111","","","$","7,944,050","","","\u2014","","","$","106","","","$","7,872,418","","","\u2014","","","$","(186)","","","$","7,194,766","","","\u2014"]]
[[/GREPCENT_TABLE]]

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 September 30, 2024. 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.

[[GREPCENT_TABLE]]
[["","September 30, 2024","","September 30, 2023"],["","Amount","","Yield","","WAL","","Amount","","Yield","","WAL"],["","(Dollars in thousands)"],["MBS","$","756,775","","","5.63","%","","5.7","","","$","901,440","","","1.71","%","","4.7"],["Government-sponsored enterprises (\"GSE\") debentures","69,077","","","5.63","","","0.4","","","479,610","","","0.64","","","1.9"],["Corporate bonds","4,000","","","5.12","","","7.6","","","4,000","","","5.12","","","8.6"],["Municipal bonds","\u2014","","","\u2014","","","\u2014","","","942","","","2.55","","","6.9"],["","$","829,852","","","5.63","","","5.2","","","$","1,385,992","","","1.35","","","3.8"]]
[[/GREPCENT_TABLE]]

39

The composition and maturities of the securities portfolio at September 30, 2024 is indicated in the following table by remaining contractual maturity, without consideration of call features or pre-refunding dates, along with associated weighted average yields. The weighted average yields are current yields and includes the amortization of premiums or discounts and are calculated by multiplying each estimated fair value by its current yield and dividing the sum of these results by the total estimated fair value. Yields on tax-exempt investments are not calculated on a fully tax equivalent basis.

[[GREPCENT_TABLE]]
[["","1 year or less","","More than 1 to 5 years","","More than 5 to 10 years","","Over 10 years","","Total Securities"],["","Estimated","","","","Estimated","","","","Estimated","","","","Estimated","","","","Estimated"],["","Fair","","","","Fair","","","","Fair","","","","Fair","","","","Fair"],["","Value","","Yield","","Value","","Yield","","Value","","Yield","","Value","","Yield","","Value","","Yield"],["","(Dollars in thousands)"],["MBS","$","376","","","2.60","%","","$","42,353","","","5.58","%","","$","199,403","","","5.98","%","","$","541,441","","","5.50","%","","$","783,573","","","5.63","%"],["GSE debentures","\u2014","","","\u2014","","","10,000","","","5.52","","","59,305","","","5.64","","","\u2014","","","\u2014","","","69,305","","","5.63"],["Corporate bonds","\u2014","","","\u2014","","","\u2014","","","\u2014","","","3,388","","","5.12","","","\u2014","","","\u2014","","","3,388","","","5.12"],["","$","376","","","2.60","","","$","52,353","","","5.57","","","$","262,096","","","5.90","","","$","541,441","","","5.50","","","$","856,266","","","5.63"]]
[[/GREPCENT_TABLE]]

The following table summarizes the activity in our securities portfolio for the periods presented. The weighted average yields for the beginning and ending balances are as of the first and last days of the periods presented and are generally derived from recent prepayment activity on the securities in the portfolio. The beginning and ending WALs are the estimated remaining principal repayment terms (in years) after three-month historical prepayment speeds and projected call option assumptions have been applied.

[[GREPCENT_TABLE]]
[["","For the Year Ended"],["","September 30, 2024","","September 30, 2023"],["","Amount","","Yield","","WAL","","Amount","","Yield","","WAL"],["","(Dollars in thousands)"],["Beginning balance - carrying value","$","1,384,482","","","1.35","%","","3.8","","","$","1,563,307","","","1.29","%","","4.2"],["Maturities and repayments","(455,110)","","","","","","","(186,860)"],["Proceeds from sale","(1,272,512)","","","","","","","\u2014"],["Net amortization of (premiums)/discounts","8,182","","","","","","","(3,016)"],["Purchases","1,176,645","","","5.55","","","5.1","","","\u2014","","","\u2014","","","\u2014"],["Net loss from securities sales","(13,345)","","","","","","","\u2014"],["Change in valuation on AFS securities","27,924","","","","","","","11,051"],["Ending balance - carrying value","$","856,266","","","5.63","","","5.2","","","$","1,384,482","","","1.35","","","3.8"]]
[[/GREPCENT_TABLE]]

Liabilities. Total liabilities were $8.50 billion at September 30, 2024, compared to $9.13 billion at September 30, 2023. The decrease was due primarily to a decrease in borrowings as some of the funds from the securities strategy were used to repay all $500.0 million of outstanding borrowings under the BTFP, partially offset by an increase in deposits.

40

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. Total deposits increased from September 30, 2023, primarily in retail certificates of deposit, all in the 14 months or shorter term category, partially offset by a decrease in retail money market accounts, as some customers elected to move funds to the Bank's certificate of deposit offerings or the Bank's higher yielding savings account offering. The amount of commercial non-maturity deposits included in the table below at September 30, 2024 and 2023 was $259.7 million and $267.3 million, respectively. The increase in the deposit portfolio rate at September 30, 2024 compared to September 30, 2023 was due mainly to higher rates on retail certificates of deposit.

[[GREPCENT_TABLE]]
[["","At September 30,"],["","2024","","2023"],["","","","","","% of","","","","","","% of"],["","Amount","","Rate","","Total","","Amount","","Rate","","Total"],["","(Dollars in thousands)"],["Non-interest-bearing checking","$","549,596","","","\u2014","%","","9.0","%","","$","558,326","","","\u2014","%","","9.2","%"],["Interest-bearing checking","847,542","","","0.23","","","13.8","","","901,994","","","0.19","","","14.9"],["Savings","540,572","","","0.82","","","8.8","","","480,091","","","0.12","","","7.9"],["Money market","1,226,962","","","1.46","","","20.0","","","1,380,617","","","1.96","","","22.8"],["Retail certificates of deposit","2,830,579","","","4.23","","","46.2","","","2,533,954","","","3.47","","","41.9"],["Commercial certificates of deposit","58,236","","","4.40","","","1.0","","","48,751","","","3.56","","","0.8"],["Public unit certificates of deposit","76,495","","","4.62","","","1.2","","","147,487","","","4.44","","","2.5"],["","$","6,129,982","","","2.45","","","100.0","%","","$","6,051,220","","","2.07","","","100.0","%"]]
[[/GREPCENT_TABLE]]

During the current year, management sought to grow certificates of deposit with terms of 14 months or less by offering market competitive rates. We focused on terms that should allow us to price down certificates of deposit as and when the FRB reduces overnight rates, which first occurred in September 2024 and occurred again in November 2024. The weighted average maturity ("WAM") of our retail certificate of deposit portfolio as of September 30, 2024 was approximately 10 months. Our retail certificate of deposit retention rate has been approximately 87% over the past 12-months. Additionally, management focused on retaining and growing deposits through the introduction of a high-yield savings account early in fiscal year 2024 which had an annual percentage yield of 4.30% for balances over $10 thousand as of September 30, 2024. The high-yield savings account balance was $96.2 million as of September 30, 2024. Of this amount, approximately 45% relates to existing Bank customers increasing their balances during the year by bringing in funds from outside the Bank, approximately 40% is from internal Bank transfers from other deposit products, largely the money market portfolio, and the remaining 15% is composed of new deposit relationships. While there is an immediate repricing and increase in cost on internal transfers within the Bank, we believe we have captured rate sensitive money by offering this product, rather than having those funds leave the Bank.

As of September 30, 2024 and 2023, approximately $766.8 million (or approximately 12%) and $789.0 million (or approximately 13%), respectively, of the Bank's Call Report deposit balance was uninsured. Of the $766.8 million at September 30, 2024, approximately $460.1 million related to commercial and retail deposit accounts, with the remainder mainly comprised of fully collateralized public unit deposits and intercompany accounts. The uninsured amounts are estimates based on the methodologies and assumptions used for the Bank's regulatory reporting requirements.

The following table sets forth the portion of the Bank's certificate of deposit portfolio, by account, that are in excess of the FDIC insurance limit, by remaining time until maturity, as of September 30, 2024 (dollars in thousands).

[[GREPCENT_TABLE]]
[["3 months or less","$","139,686"],["Over 3 through 6 months","124,002"],["Over 6 through 12 months","137,847"],["Over 12 months","114,722"],["","$","516,257"]]
[[/GREPCENT_TABLE]]

41

Borrowings. Total borrowings at September 30, 2024 were $2.18 billion, which was comprised of $1.98 billion in fixed-rate FHLB advances, $200.0 million in FHLB variable-rate advances tied to interest rate swaps, and $1.1 million in finance leases. Borrowings decreased $699.6 million from September 30, 2023 as some of the funds from the securities strategy were used to repay all $500.0 million of outstanding borrowings under the BTFP and not all maturing FHLB borrowings were replaced during the current fiscal year.

The following table presents the maturity of term borrowings, which consist of FHLB advances, along with associated weighted average contractual and effective rates as of September 30, 2024. Amortizing FHLB advances are presented based on their maturity dates versus their quarterly scheduled repayment dates.

[[GREPCENT_TABLE]]
[["Maturity by","","","","Contractual","","Effective"],["Fiscal Year","","Amount","","Rate","","Rate(1)"],["","","(Dollars in thousands)"],["2025","","650,000","","","3.23","","","2.94"],["2026","","575,000","","","2.81","","","2.95"],["2027","","477,500","","","3.14","","","3.24"],["2028","","310,656","","","4.78","","","4.13"],["2029","","167,500","","","4.44","","","4.44"],["","","$","2,180,656","","","3.41","","","3.29"]]
[[/GREPCENT_TABLE]]

(1)The effective rate includes the impact of interest rate swaps and the amortization of deferred prepayment penalties resulting from FHLB advances previously prepaid.

The following table presents borrowing activity for the periods shown. The borrowings presented in the table have original contractual terms of one year or longer or are tied to interest rate swaps with original contractual terms of one year or longer. Line of credit borrowings and finance leases are excluded from the table. The effective rate is shown as a weighted average and includes the impact of interest rate swaps and the amortization of deferred prepayment penalties resulting from FHLB advances previously prepaid. The WAM is the remaining weighted average contractual term in years. The beginning and ending WAMs represent the remaining maturity at each date presented. During the current year, management paid down BTFP borrowings with the proceeds received from the securities strategy.

[[GREPCENT_TABLE]]
[["","For the Year Ended September 30,"],["","2024","","2023"],["","","","Effective","","","","","","Effective"],["","Amount","","Rate","","WAM","","Amount","","Rate","","WAM"],["","(Dollars in thousands)"],["Beginning balance","$","2,882,828","","","3.34","%","","1.8","","","$","2,062,500","","","2.44","%","","2.5"],["Maturities and repayments","(527,172)","","","2.95","","","\u2014","","","(329,672)","","","2.01","","","\u2014"],["New FHLB borrowings","325,000","","","4.54","","","4.4","","","650,000","","","4.47","","","3.2"],["BTFP, net","(500,000)","","","4.70","","","\u2014","","","500,000","","","4.70","","","1.0"],["Ending balance","$","2,180,656","","","3.29","","","1.6","","","$","2,882,828","","","3.34","","","1.8"]]
[[/GREPCENT_TABLE]]

Leverage Strategy

Periodically, the Bank has utilized a leverage strategy to increase earnings, which entails entering into short-term FHLB borrowings and depositing the proceeds from these FHLB borrowings, net of the purchases of FHLB stock made to meet FHLB stock holding requirements, at the FRB. The leverage strategy is not a core operating business for the Company. It provides the Company the ability to utilize excess capital to generate earnings. Additionally, it is a strategy that can be exited quickly without additional costs. The profitability of the leverage strategy is attributable to net income derived from the dividends received on the increased FHLB stock holdings, plus the net interest rate spread between the yield on the leverage strategy cash at the FRB and the rate paid on the leverage strategy FHLB borrowings, less applicable FDIC premiums and estimated income tax expense. Leverage strategy borrowings are repaid prior to each quarter end so there is no impact to

42

quarter end capital ratios. The leverage strategy was not in place at any time during the current year due to the strategy being unprofitable, but it was in place at points during the prior year. During the prior year, the average balance of cash associated with the leverage strategy was $882.8 million and interest earned on that cash was $37.8 million, the average balance of FHLB stock associated with the leverage strategy was $41.6 million and dividends earned on that stock were $3.6 million, and the average balance of FHLB borrowings associated with the leverage strategy was $924.4 million and the related interest expense was $39.7 million. Additionally, the Company recognized $406 thousand of FDIC premiums and $215 thousand of income tax expense during the prior year related to the leverage strategy. When the leverage strategy is in place, it reduces the net interest margin due to the amount of earnings from the transaction in comparison to the size of the transaction. Management continues to monitor the net interest rate spread and overall profitability of the leverage strategy.

Maturities of Interest-Bearing Liabilities. The following table presents the maturity and weighted average repricing rate, which is also the weighted average effective rate, of certificates of deposit, split between retail/commercial and public unit amounts, and non-amortizing term borrowings for the next four quarters as of September 30, 2024.

[[GREPCENT_TABLE]]
[["","December 31,","","March 31,","","June 30,","","September 30,"],["","2024","","2025","","2025","","2025","","Total"],["","(Dollars in thousands)"],["Retail/Commercial Certificates:"],["Amount","$","681,571","","","$","636,105","","","$","520,483","","","$","307,071","","","$","2,145,230"],["Repricing Rate","4.49","%","","4.56","%","","4.61","%","","4.41","%","","4.53","%"],["Public Unit Certificates:"],["Amount","$","30,025","","","$","17,526","","","$","5,841","","","$","5,853","","","$","59,245"],["Repricing Rate","4.68","%","","4.90","%","","4.62","%","","4.64","%","","4.74","%"],["Term Borrowings:"],["Amount","$","200,000","","","$","150,000","","","$","200,000","","","$","100,000","","","$","650,000"],["Repricing Rate","3.35","%","","1.93","%","","3.27","%","","2.97","%","","2.94","%"],["Total"],["Amount","$","911,596","","","$","803,631","","","$","726,324","","","$","412,924","","","$","2,854,475"],["Repricing Rate","4.25","%","","4.08","%","","4.24","%","","4.07","%","","4.17","%"]]
[[/GREPCENT_TABLE]]

The following table sets forth the WAM information for our certificates of deposit, in years, as of September 30, 2024.

[[GREPCENT_TABLE]]
[["Retail certificates of deposit","0.8"],["Commercial certificates of deposit","0.6"],["Public unit certificates of deposit","0.6"],["Total certificates of deposit","0.8"]]
[[/GREPCENT_TABLE]]

Stockholders' Equity. Stockholders' equity totaled $1.03 billion at September 30, 2024. During the year ended September 30, 2024, the Company repurchased $19.3 million of shares and paid regular quarterly cash dividends totaling $44.5 million, or $0.34 per share. On October 22, 2024, the Company announced a regular quarterly cash dividend of $0.085 per share, or approximately $11.1 million, payable on November 15, 2024 to stockholders of record as of the close of business on November 1, 2024.

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 September 30, 2024, the Bank's capital ratios exceeded the well-capitalized requirements and the Bank exceeded all internal policy thresholds for sensitivity to changes in rates. As of September 30, 2024, the Bank's community bank leverage ratio was 9.2%. See "Part II, Item 8. Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 13. Regulatory Capital Requirements" for additional regulatory capital information.

43

During the current year, the Company repurchased 3,280,110 shares of common stock at an average price of $5.87 per share. These repurchases occurred in the first half of the current year. The Company currently has $75.0 million authorized for repurchase under existing stock repurchase plans. The FRB's current approval for the Company to repurchase shares up to the $75.0 million authorization expires in February 2025. Shares may be repurchased from time to time based upon market conditions, available liquidity and other factors.

Based on the Company's accumulated earnings and profits at the beginning of its 2024 tax year and the current year tax earnings and profits deficit as a result of the losses associated with the securities strategy (See "Comparison of Operating Results for the Years Ended September 30, 2024 and 2023 - Income Tax Expense" below), the Company believes that all dividends paid to stockholders by the Company during fiscal year 2024 should be treated as a return of capital, pursuant to Internal Revenue Code Section 301(c)(2), which reduced the tax basis in the stockholders' shares by the amount of the dividend received. Stockholders should consult their own tax advisors to determine the income tax consequences of their specific situation. The Company is providing this for informational purposes only and not as legal or tax advice. Based on the Company's proposed actions for fiscal year 2025 (as discussed further below), the Company anticipates that the majority, if not all, of the dividend payments to Company stockholders in fiscal year 2025 will be treated as dividends for U.S. federal income tax purposes.

At September 30, 2024, Capitol Federal Financial, Inc. at the holding company level, had $50.1 million in cash on deposit at the Bank. Given the amount of cash at the holding company level, and in an effort to minimize the tax associated with the pre-1988 bad debt recapture, it is currently the intention of management and the Board of Directors to not distribute earnings from the Bank to the Company during fiscal year 2025. See additional information regarding the pre-1988 bad debt recapture in "Part II, Item 8. Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 9. Income Taxes". It is currently anticipated that the Bank will have sufficient taxable income during fiscal year 2025 to replenish tax accumulated earnings and profits to a positive level, allowing the Bank to make earnings distributions to the Company during fiscal year 2026 and not be taxed on those distributions. For fiscal year 2025, it is the intention of the Company's Board of Directors to pay out the regular quarterly cash dividend of $0.085 per share, totaling $0.34 per share for the year. To the extent that earnings in fiscal year 2025 exceed $0.34 per share, the Board of Directors will consider the payment of additional dividends. Dividend payments depend upon a number of factors, including the Company's financial condition and results of operations, regulatory capital requirements, regulatory limitations on the Bank's ability to make capital distributions to the Company, the Bank's taxable current earnings and accumulated earnings and profits, and the amount of cash at the holding company level.

The following table presents regular quarterly cash dividends and special cash dividends paid in calendar years 2024, 2023, and 2022.

[[GREPCENT_TABLE]]
[["","Calendar Year"],["","2024","","2023","","2022"],["","Amount","","Per Share","","Amount","","Per Share","","Amount","","Per Share"],["","(Dollars in thousands, except per share amounts)"],["Regular quarterly dividends paid"],["Quarter ended March 31","$","11,127","","","$","0.085","","","$","11,319","","","$","0.085","","","$","11,535","","","$","0.085"],["Quarter ended June 30","11,044","","","0.085","","","11,321","","","0.085","","","11,534","","","0.085"],["Quarter ended September 30","11,043","","","0.085","","","11,323","","","0.085","","","11,534","","","0.085"],["Quarter ended December 31","11,061","","","0.085","","","11,308","","","0.085","","","11,508","","","0.085"],["True-up dividends paid","\u2014","","","\u2014","","","\u2014","","","\u2014","","","37,701","","","0.280"],["True Blue Capitol dividends paid","\u2014","","","\u2014","","","\u2014","","","\u2014","","","27,143","","","0.200"],["Calendar year-to-date dividends paid","$","44,275","","","$","0.340","","","$","45,271","","","$","0.340","","","$","110,955","","","$","0.820"]]
[[/GREPCENT_TABLE]]

44

Rate/Volume Analysis. The table below presents the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities, comparing fiscal years 2024 to 2023. For the comparison of fiscal years 2023 to 2022, see "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2023. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (1) changes in volume, which are changes in the average balance multiplied by the previous year's average rate, and (2) changes in rate, which are changes in the average rate multiplied by the average balance from the previous year. The net changes attributable to the combined impact of both rate and volume have been allocated proportionately to the changes due to volume and the changes due to rate.

[[GREPCENT_TABLE]]
[["","For the Year Ended September 30,"],["","2024 vs. 2023"],["","Increase (Decrease) Due to"],["","Volume","","Rate","","Total"],["","(Dollars in thousands)"],["Interest-earning assets:"],["Loans receivable","$","6,962","","","$","21,659","","","$","28,621"],["MBS","(11,843)","","","26,973","","","15,130"],["Investment securities","(3,724)","","","8,907","","","5,183"],["FHLB stock","(4,795)","","","982","","","(3,813)"],["Cash and cash equivalents","(36,895)","","","8,827","","","(28,068)"],["Total interest-earning assets","(50,295)","","","67,348","","","17,053"],["Interest-bearing liabilities:"],["Checking","(148)","","","623","","","475"],["Savings","(31)","","","1,369","","","1,338"],["Money market","(3,645)","","","6,552","","","2,907"],["Certificates of deposit","11,380","","","41,183","","","52,563"],["Borrowings","(56,483)","","","7,466","","","(49,017)"],["Total interest-bearing liabilities","(48,927)","","","57,193","","","8,266"],["Net change in net interest income","$","(1,368)","","","$","10,155","","","$","8,787"]]
[[/GREPCENT_TABLE]]

Average Balance Sheets. The following table presents the average balances of our assets, liabilities, and stockholders' equity, and the related weighted average yields and rates on our interest-earning assets and interest-bearing liabilities for the periods indicated. For fiscal year 2022 information, see "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2023. Weighted average yields are derived by dividing annual income by the average balance of the related assets, and weighted average rates are derived by dividing annual expense by the average balance of the related liabilities, for the periods shown. Average outstanding balances are derived from average daily balances. The weighted average yields and rates include amortization of fees, costs, premiums and discounts, which are considered adjustments to yields/rates. Weighted average yields on tax-exempt securities are not calculated on a fully taxable equivalent basis.

45

[[GREPCENT_TABLE]]
[["","For the Year Ended September 30,"],["","2024","","2023"],["","Average","","Interest","","","","Average","","Interest"],["","Outstanding","","Earned/","","Yield/","","Outstanding","","Earned/","","Yield/"],["","Amount","","Paid","","Rate","","Amount","","Paid","","Rate"],["Assets:","(Dollars in thousands)"],["Interest-earning assets:"],["One- to four-family loans:"],["Originated","$","3,984,971","","","$","142,011","","","3.56","%","","$","4,047,209","","","$","135,873","","","3.36","%"],["Correspondent purchased","2,340,841","","","76,493","","","3.27","","","2,428,257","","","76,335","","","3.14"],["Bulk purchased","132,460","","","2,999","","","2.26","","","143,105","","","1,923","","","1.34"],["Total one- to four-family loans","6,458,272","","","221,503","","","3.43","","","6,618,571","","","214,131","","","3.24"],["Commercial loans","1,378,421","","","78,042","","","5.57","","","1,150,831","","","57,991","","","4.97"],["Consumer loans","107,357","","","9,162","","","8.53","","","103,016","","","7,965","","","7.73"],["Total loans receivable(1)","7,944,050","","","308,707","","","3.87","","","7,872,418","","","280,087","","","3.55"],["MBS(2)","619,521","","","33,650","","","5.43","","","1,150,013","","","18,520","","","1.61"],["Investment securities(2)(3)","180,640","","","8,749","","","4.84","","","524,919","","","3,565","","","0.68"],["FHLB stock(4)","106,064","","","10,009","","","9.44","","","157,925","","","13,821","","","8.75"],["Cash and cash equivalents(5)","286,988","","","15,728","","","5.39","","","998,793","","","43,796","","","4.32"],["Total interest-earning assets","9,137,263","","","376,843","","","4.11","","","10,704,068","","","359,789","","","3.35"],["Other non-interest-earning assets","460,278","","","","","","","263,713"],["Total assets","$","9,597,541","","","","","","","$","10,967,781"],["Liabilities and stockholders' equity:"],["Interest-bearing liabilities:"],["Checking","$","873,097","","","1,978","","","0.23","","","$","961,779","","","1,504","","","0.16"],["Savings","493,456","","","1,826","","","0.37","","","525,423","","","488","","","0.09"],["Money market","1,302,817","","","22,333","","","1.71","","","1,567,540","","","19,426","","","1.24"],["Retail certificates","2,680,003","","","106,204","","","3.96","","","2,266,740","","","54,724","","","2.41"],["Commercial certificates","54,484","","","2,247","","","4.12","","","40,258","","","993","","","2.47"],["Wholesale certificates","109,217","","","4,961","","","4.54","","","134,641","","","5,132","","","3.81"],["Total deposits","5,513,074","","","139,549","","","2.53","","","5,496,381","","","82,267","","","1.50"],["Borrowings(6)","2,338,222","","","75,233","","","3.21","","","3,658,015","","","124,250","","","3.38"],["Total interest-bearing liabilities","7,851,296","","","214,782","","","2.73","","","9,154,396","","","206,517","","","2.25"],["Non-interest-bearing deposits","533,821","","","","","","","562,023"],["Other non-interest-bearing liabilities","180,979","","","","","","","179,373"],["Stockholders' equity","1,031,445","","","","","","","1,071,989"],["Total liabilities and stockholders' equity","$","9,597,541","","","","","","","$","10,967,781"],["Net interest income(7)","","","$","162,061","","","","","","","$","153,272"],["Net interest-earning assets","$","1,285,967","","","","","","","$","1,549,672"],["Net interest margin(8)","","","","","1.77","","","","","","","1.43"],["Ratio of interest-earning assets to interest-bearing liabilities","","1.16x","","","","","","1.17x"],["Selected performance ratios:"],["Return on average assets(9)(14)","","","","","0.40","%","","","","","","(0.93)","%"],["Return on average equity(10)(14)","","","","","3.69","","","","","","","(9.48)"],["Average equity to average assets","","","","","10.75","","","","","","","9.77"],["Operating expense ratio(11)","","","","","1.17","","","","","","","1.04"],["Efficiency ratio(12)(14)","","","","","66.91","","","","","","","(626.63)"],["Pre-tax yield on leverage strategy(13)","","","","","\u2014","","","","","","","0.13"]]
[[/GREPCENT_TABLE]]

46

(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 $51 thousand and $1.0 million for the years ended September 30, 2024 and 2023, respectively.

(4)There was no FHLB stock related to the leverage strategy for the year ended September 30, 2024. Included in this line, for the year ended September 30, 2023, is FHLB stock related to the leverage strategy with an average outstanding balance of $41.6 million and dividend income of $3.6 million, at a weighted average yield of 8.69%, and FHLB stock not related to the leverage strategy with an average outstanding balance of $116.3 million, and dividend income of $10.2 million, at a weighted average yield of 8.77%.

(5)There was no cash and cash equivalents related to the leverage strategy during the year ended September 30, 2024. The average balance of cash and cash equivalents includes an average balance of cash related to the leverage strategy of $882.8 million and interest income of $37.8 million, at a weighted average yield of 4.22% during the year ended September 30, 2023.

(6)There were no borrowings related to the leverage strategy during the year ended September 30, 2024. Included in this line, for the year ended September 30, 2023 are FHLB borrowings related to the leverage strategy with an average outstanding balance of $924.4 million and interest paid of $39.7 million, at a weighted average rate of 4.24%, and borrowings not related to the leverage strategy with an average outstanding balance of $2.73 billion, and interest paid of $84.5 million, at a weighted average rate of 3.08%. 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 net interest income as a percentage of average interest-earning assets. Management believes the net interest margin is important to investors as it is a profitability measure for financial institutions.

(9)Return on average assets represents net income as a percentage of total average assets. Management believes that the return on average assets is important to investors as it shows the Company's profitability in relation to the Company's average assets.

(10)Return on average equity represents net income as a percentage of total average equity. Management believes that the return on average equity is important to investors as it shows the Company's profitability in relation to the Company's average equity.

(11)The operating expense ratio represents non-interest expense as a percentage of average assets. Management believes the operating expense ratio is important to investors as it provides insight into how efficiently the Company is managing its expenses in relation to its assets. It is a financial measurement ratio that does not take into consideration changes in interest rates.

(12)The efficiency ratio represents non-interest expense as a percentage of the sum of net interest income (pre-provision for credit losses) and non-interest income. Management believes the efficiency ratio is important to investors as it is a measure of a financial institution's total non-interest expense as a percentage of the sum of net interest income (pre-provision for credit losses) and non-interest income. A lower value generally indicates that it is costing the financial institution less money to generate revenue, related to its net interest margin and non-interest income.

(13)The pre-tax yield on the leverage strategy represents pre-tax income resulting from the transaction as a percentage of the average interest-earning assets associated with the transaction. Management believes this ratio is important to investors as it provides the yield the Company is earning on the leverage strategy transaction.

(14)The table below provides a reconciliation between performance measures presented in accordance with accounting standards generally accepted in the United States of America ("GAAP") and the same performance measures excluding the impact of the net loss on the securities transactions associated with the securities strategy, which are not presented in accordance with GAAP. The securities strategy was non-recurring in nature; therefore management believes it is meaningful to investors to present certain financial measures excluding the securities strategy to better evaluate the Company's core operations. See information regarding the securities strategy in the "Executive Summary" discussion above.

[[GREPCENT_TABLE]]
[["","For the Year Ended September 30,"],["","2024","","2023"],["","","","","","Without","","","","","","Without"],["","","","","","Securities","","","","","","Securities"],["","Actual","","Securities","","Strategy","","Actual","","Securities","","Strategy"],["","(GAAP)","","Strategy","","(Non-GAAP)","","(GAAP)","","Strategy","","(Non-GAAP)"],["Return on average assets","0.40","%","","(0.10)","%","","0.50","%","","(0.93)","%","","(1.33)","%","","0.40","%"],["Return on average equity","3.69","","","(0.97)","","","4.66","","","(9.48)","","","(13.58)","","","4.10"],["Efficiency Ratio","66.91","","","4.94","","","61.97","","","(626.63)","","","(691.94)","","","65.31"],["Earnings per share(15)","$","0.29","","","$","(0.08)","","","$","0.37","","","$","(0.76)","","","$","(1.09)","","","$","0.33"]]
[[/GREPCENT_TABLE]]

(15)Earnings per share is calculated as net income divided by average shares outstanding. Management believes earnings per share is an important measure to investors as it shows the Company's earnings in relation to the Company's outstanding shares.

47

Comparison of Operating Results for the Years Ended September 30, 2024 and 2023

The Company recognized net income of $38.0 million, or $0.29 per share, for the current year, compared to net loss of $101.7 million, or $(0.76) per share, for the prior year. The net loss in the prior year resulted from a $192.6 million impairment loss ($145.6 million net of tax) on the securities associated with the securities strategy. See additional discussion regarding the securities strategy in the "Executive Summary" section above. The securities associated with the securities strategy were sold in the first quarter of fiscal year 2024 resulting in $13.3 million ($10.0 million net of tax) of net losses related to the sale. Excluding the effects of the net loss associated with the securities strategy, earnings per share would have been $0.37 for the current year and $0.33 for the prior year. The increase in earnings per share excluding the effects of the net losses associated with the securities strategy was due primarily to higher net interest income and a lower provision for credit losses in the current year, partially offset by higher income tax expense.

Periodically, at management's discretion, we have utilized the leverage strategy to increase earnings which entails entering into short-term FHLB borrowings and depositing the proceeds from these FHLB borrowings, net of the purchases of FHLB stock made to meet FHLB stock holding requirements, at the FRB. See additional information regarding the leverage strategy in the "Financial Condition - Borrowings" section above. When the leverage strategy is in place, it reduces the net interest margin due to the amount of earnings from the transaction in comparison to the size of the transaction.

The net interest margin increased 34 basis points, from 1.43% for the prior year to 1.77% for the current year. The leverage strategy negatively impacted the net interest margin for the prior year by 12 basis points. The remaining improvement in the net interest margin absent the leverage strategy was due to higher yields on securities and loans which outpaced the increase in the cost of deposits, largely in retail certificates of deposit.

Interest and Dividend Income

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

[[GREPCENT_TABLE]]
[["","For the Year Ended"],["","September 30,","","Change Expressed in:"],["","2024","","2023","","Dollars","","Percent"],["","(Dollars in thousands)"],["INTEREST AND DIVIDEND INCOME:"],["Loans receivable","$","308,707","","","$","280,087","","","$","28,620","","","10.2","%"],["MBS","33,650","","","18,520","","","15,130","","","81.7"],["Cash and cash equivalents","15,728","","","43,796","","","(28,068)","","","(64.1)"],["FHLB stock","10,009","","","13,821","","","(3,812)","","","(27.6)"],["Investment securities","8,749","","","3,565","","","5,184","","","145.4"],["Total interest and dividend income","$","376,843","","","$","359,789","","","$","17,054","","","4.7"]]
[[/GREPCENT_TABLE]]

The increase in interest income on loans receivable was due largely to an increase in the weighted average yield, along with an increase in the average balance of the portfolio primarily as a result of growth in the commercial loan portfolio as the loan portfolio mix continued to shift from one- to four-family loans to commercial loans. The increase in the weighted average yield was due primarily to originations and purchases at higher market rates between periods, as well as disbursements on commercial construction loans at rates higher than the overall portfolio rate and upward repricing of existing adjustable-rate loans due to higher market interest rates. The increase in the average balance was mainly in the commercial loan portfolio which was partially offset by a decrease in the average balance of the one-to four-family loan portfolio. See additional discussion in the "Financial Condition - Loans Receivable" section above.

The increase in interest income on MBS and investment securities was due to an increase in the weighted average yield, partially offset by a decrease in the average balance, both a result of the securities strategy.

The decrease in interest income on cash and cash equivalents and the decrease in dividend income on FHLB stock were due mainly to the leverage strategy being utilized during the prior year and not being utilized during the current year. Interest income on cash and cash equivalents related to the leverage strategy decreased $37.8 million and dividend income on FHLB

48

stock related to the leverage strategy decreased $3.6 million compared to the prior year. Interest income on cash and cash equivalents not associated with the leverage strategy increased $9.7 million due largely to an increase in the average balance of cash and cash equivalents. The increase in the average balance was mainly a result of the securities strategy as not all of the proceeds from the securities strategy were immediately redeployed due to future anticipated commercial loan fundings and the higher rate paid on amounts held at the FRB.

Interest Expense

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

[[GREPCENT_TABLE]]
[["","For the Year Ended"],["","September 30,","","Change Expressed in:"],["","2024","","2023","","Dollars","","Percent"],["","(Dollars in thousands)"],["INTEREST EXPENSE:"],["Deposits","$","139,549","","","$","82,267","","","$","57,282","","","69.6","%"],["Borrowings","75,233","","","124,250","","","(49,017)","","","(39.5)"],["Total interest expense","$","214,782","","","$","206,517","","","$","8,265","","","4.0"]]
[[/GREPCENT_TABLE]]

The increase in interest expense on deposits was due almost entirely to an increase in the weighted average rate paid on deposits, specifically retail certificates of deposit and money market accounts. To a lesser extent, the average balance of retail certificates of deposit also increased interest expense on deposits, partially offset by a decrease in the average balance of money market accounts. See additional information regarding the deposit portfolio composition in the "Financial Condition - Deposits" section above.

Interest expense on borrowings associated with the leverage strategy decreased $39.7 million compared to the prior year due to the leverage strategy being in place during the prior year and not being in place during the current year. Interest expense on borrowings not associated with the leverage strategy decreased $9.3 million due mainly to a decrease in borrowings under the BTFP, which were repaid during the current year, and a reduction in the average outstanding balance on the Bank's FHLB line of credit compared to the prior year. The decrease in these borrowings was partially offset by new borrowings in the current year at market interest rates higher than the overall portfolio rate, to replace maturing advances and fund operational needs.

Provision for Credit Losses

The Company recorded a provision for credit losses of $1.3 million during the current year, compared to a provision for credit losses of $6.8 million for the prior year. The provision for credit losses in the current year was comprised of a $1.9 million increase in the reserve for off-balance sheet credit exposures, partially offset by a $633 thousand release in the ACL for loans. The increase in the reserve for off-balance sheet credit exposures was due primarily to an increase in the balance of off-balance sheet credit exposures and an increase in the ACL to loan ratio, which is applied to off-balance sheet credit exposures, between periods, specifically for commercial construction loans. The change in the balance of the ACL from the prior fiscal year end to the end of the current fiscal year was a decrease of $724 thousand which differs from the $633 thousand above primarily due to NCOs. The reduction in ACL was due to a decrease in the ACL for our one- to four-family loans as a result of a decrease in the ACL to loan ratio and a decrease in loan balances, partially offset by an increase in the ACL for our commercial loans due to growth in the commercial loan portfolio. See discussion regarding the ACL in the "Management's Discussion and Analysis of Financial Condition and Results of Operation - Critical Accounting Estimates" section above.

49

Non-Interest Income

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

[[GREPCENT_TABLE]]
[["","For the Year Ended"],["","September 30,","","Change Expressed in:"],["","2024","","2023","","Dollars","","Percent"],["","(Dollars in thousands)"],["NON-INTEREST INCOME:"],["Deposit service fees","$","10,562","","","$","12,745","","","$","(2,183)","","","(17.1)","%"],["Insurance commissions","3,257","","","3,487","","","(230)","","","(6.6)"],["Net loss from securities transactions","(13,345)","","","(192,622)","","","179,277","","","93.1"],["Other non-interest income","4,770","","","4,935","","","(165)","","","(3.3)"],["Total non-interest income","$","5,244","","","$","(171,455)","","","$","176,699","","","103.1"]]
[[/GREPCENT_TABLE]]

The decrease in deposit service fees was due primarily to a change in the fee structure of certain deposit products after the Bank's digital transformation. The decrease in insurance commissions was primarily due to adjustments to accrued contingent commissions made in anticipation of lower commissions largely related to industry changes in underwriting and loss experience which is adversely impacting new business and projected loss ratios. The industry changes impacting commissions are expected to persist for the foreseeable future, so management is currently evaluating other insurance revenue streams while maintaining our current lines of business. The net loss from securities transactions in the prior year related to the impairment loss on securities associated with the securities strategy while the $13.3 million loss in the current year related to additional losses incurred on those securities when they were ultimately sold during the first quarter of fiscal year 2024.

Non-Interest Expense

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

[[GREPCENT_TABLE]]
[["","For the Year Ended"],["","September 30,","","Change Expressed in:"],["","2024","","2023","","Dollars","","Percent"],["","(Dollars in thousands)"],["NON-INTEREST EXPENSE:"],["Salaries and employee benefits","$","52,272","","","$","51,491","","","$","781","","","1.5","%"],["Information technology and related expense","20,324","","","23,425","","","(3,101)","","","(13.2)"],["Occupancy, net","13,558","","","14,236","","","(678)","","","(4.8)"],["Federal insurance premium","6,052","","","4,456","","","1,596","","","35.8"],["Regulatory and outside services","5,743","","","6,039","","","(296)","","","(4.9)"],["Advertising and promotional","4,264","","","4,305","","","(41)","","","(1.0)"],["Deposit and loan transaction costs","2,719","","","2,694","","","25","","","0.9"],["Office supplies and related expense","1,691","","","2,499","","","(808)","","","(32.3)"],["Other non-interest expense","5,320","","","4,789","","","531","","","11.1"],["Total non-interest expense","$","111,943","","","$","113,934","","","$","(1,991)","","","(1.7)"]]
[[/GREPCENT_TABLE]]

The increase in salaries and employee benefits was mainly attributable to higher incentive compensation in the current year compared to the prior year, as no incentive compensation was paid in the prior year due to the net loss recognized by the Company. The decrease in information technology and related expense was due mainly to lower third-party project management expenses associated with the Bank's digital transformation during the prior year along with the discontinuation of other costs associated with the previous core system, partially offset by higher software licensing expenses resulting from new agreements associated with the digital transformation. The increase in the federal insurance premium was due primarily

50

to an increase in the FDIC assessment rate as a result of the way the assessment rate was adjusted for the occurrence of the Bank's net loss during the quarter ending September 30, 2023. The decrease in regulatory and outside services was due to the prior year including expenses related to the digital transformation. The decrease in office supplies and related expense was due primarily to the outsourcing of statement processing related to the digital transformation, and the timing of office supply purchases between periods. The increase in other non-interest expense was due mainly to an increase in customer fraud losses.

The Company's efficiency ratio was 66.91% for the current year compared to (626.63)% for the prior year. Excluding the net losses from the securities strategy, the efficiency ratio would have been 61.97% for the current year and 65.31% for the prior year. The improvement in the efficiency ratio, excluding the net losses from the securities strategy, was due primarily to higher net interest income and lower non-interest expense in the current year compared to the prior year.

Income Tax Expense

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

[[GREPCENT_TABLE]]
[["","For the Year Ended"],["","September 30,","","Change Expressed in:"],["","2024","","2023","","Dollars","","Percent"],["","(Dollars in thousands)"],["Income (loss) before income tax expense (benefit)","$","54,103","","","$","(138,955)","","","$","193,058","","","138.9","%"],["Income tax expense (benefit)","16,093","","","(37,296)","","","53,389","","","143.1"],["Net income (loss)","$","38,010","","","$","(101,659)","","","$","139,669","","","137.4"],["Effective Tax Rate","29.7","%","","26.8","%"]]
[[/GREPCENT_TABLE]]

For the prior year, absent the net loss, the effective income tax rate would have been 18.1%. The higher effective tax rate in the current year was due primarily to recording $5.4 million of income tax expense on the current year distributions of earnings from the Bank to the Company in association with the pre-1988 bad debt recapture ($0.04/share reduction in earnings per share), along with higher state income tax expense mainly related to the tax treatment of the bad debt recapture, partially offset by a $3.3 million tax benefit related to the $13.3 million net loss on the securities sale associated with the securities strategy.

Fiscal Year 2025 Outlook

Salaries and employee benefits expense is expected to be $5.7 million higher in fiscal year 2025 compared to fiscal year 2024 due to an anticipated increase in incentive compensation, merit increases, and the filling of vacant positions. Information technology and related expenses are anticipated to be $1.4 million higher in fiscal year 2025 compared to fiscal year 2024 due to these expenses returning to a more normal run rate and implementation of new banking technologies. We anticipate that the federal deposit insurance premium will be approximately $1.7 million less in fiscal year 2025 compared to fiscal year 2024 because there is no longer an increase in our assessment rate due to the net loss in fiscal year 2023. Overall, management is expecting a 4.8% increase in operating expenses for fiscal year 2025 compared to fiscal year 2024.

Management anticipates the effective income tax rate for fiscal year 2025 will be 19% to 20%. The effective income tax rate is anticipated to be lower than fiscal year 2024 as it is currently the intention of management and the Board of Directors to not make capital distributions from the Bank to the Company during fiscal year 2025. By not making capital distributions during fiscal year 2025, the Bank will not incur income tax expense related to the bad debt recapture as occurred during fiscal year 2024. See "Financial Condition - Stockholders' Equity" section above for additional discussion.

Comparison of Operating Results for the Years Ended September 30, 2023 and 2022

For this discussion, see "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Comparison of Operating Results for the Years Ended September 30, 2023 and 2022" in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2023.

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Liquidity and Capital Resources

Liquidity refers to our ability to generate sufficient cash to fund ongoing operations, to repay maturing certificates of deposit and other deposit withdrawals, to repay maturing borrowings, and to fund loan commitments. Liquidity management is both a daily and long-term function of our business management. The Company's most available liquid assets are represented by cash and cash equivalents and AFS securities. The Bank's primary sources of funds are deposits, FHLB borrowings, repayments and maturities of outstanding loans and MBS and other short-term investments, and funds provided by operations. The Bank's long-term borrowings primarily have been used to manage long-term liquidity needs and the Bank's interest rate risk with the intention to improve the earnings of the Bank while maintaining capital ratios that meet or exceed the regulatory standards for well-capitalized financial institutions. In addition, the Bank's focus on managing risk has provided additional liquidity capacity by maintaining a balance of MBS and investment securities available as collateral for borrowings.

We generally intend to manage cash reserves sufficient to meet short-term liquidity needs, which are routinely forecasted for 10, 30, and 365 days. Additionally, on a monthly basis, we perform a liquidity stress test in accordance with the Interagency Policy Statement on Funding and Liquidity Risk Management. The liquidity stress test incorporates both short-term and long-term liquidity scenarios in order to identify and to quantify liquidity risk. Management also monitors key liquidity statistics related to items such as wholesale funding gaps, borrowings capacity, and available unpledged collateral, as well as various liquidity ratios.

In the event short-term liquidity needs exceed available cash, the Bank has access to a line of credit at the FHLB, in addition to the FRB of Kansas City's discount window. Per FHLB's lending guidelines, total FHLB borrowings cannot exceed 40% of Bank Call Report total assets without the pre-approval of FHLB senior management. The Bank's FHLB borrowing limit approved by FHLB senior management was 50% of Bank Call Report total assets as of September 30, 2024. The Bank's FHLB borrowing limit approved by FHLB senior management became 45% of Bank Call Report total assets effective November 1, 2024. The reduction in the percentage from 50% to 45% was related to FHLB's internal lending limit guidelines. FHLB borrowings are secured by certain qualifying loans pursuant to a blanket collateral agreement with 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 exceed 40% of Bank Call Report total assets if 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. At September 30, 2024, the amount of securities pledged for the discount window was $111.3 million. At September 30, 2024, there were no borrowings from the FRB of Kansas City's discount window. Management tests the Bank's access to the FRB of Kansas City's discount window annually with a nominal overnight borrowing.

If management observes unusual trends in the amount and frequency of line of credit utilization and/or short-term borrowings that is not in conjunction with a planned strategy, such as the leverage strategy, the Bank will likely utilize long-term wholesale borrowing sources such as FHLB advances and/or repurchase agreements to provide long-term, fixed-rate funding. The maturities of these long-term borrowings are generally staggered in order to mitigate the risk of a highly negative cash flow position at maturity. Recently, the Bank started entering into fully-amortizing FHLB advances that require periodic payments of principal over the term of the advance. This type of advance allows the Bank the opportunity to start repricing its liability cash flows sooner in a down-rate environment and generally provides for favorable pricing when compared to similar long term bullet advances with comparable average lives as a result of the current term structure of interest rates. The Bank's internal policy limits total borrowings to 55% of total assets. At September 30, 2024, the Bank had total borrowings, at par, of $2.18 billion, or approximately 23% of total assets. The borrowings balance was composed primarily of FHLB advances, of which, $714.7 million is scheduled to be repaid (amortizing advances) or mature in the next 12 months. Management estimated that the Bank had $2.93 billion in additional liquidity available at September 30, 2024 based on the Bank's blanket collateral agreement with FHLB and unencumbered securities.

At September 30, 2024, 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.

52

The Bank has the ability to utilize the repayment and maturity of outstanding loans, MBS, and other investments for liquidity needs rather than reinvesting such funds into the related portfolios. At September 30, 2024, the Bank had $744.2 million of securities that were eligible but unused as collateral for borrowing or other liquidity needs. The Bank also has access to other sources of funds for liquidity purposes, such as brokered and public unit certificates of deposit. As of September 30, 2024, the Bank's policy allowed for combined brokered and public unit certificates of deposit up to 15% of total deposits. At September 30, 2024, the Bank did not have any brokered certificates of deposit, and public unit certificates of deposit were approximately 1% of total deposits. The Bank had pledged securities with an estimated fair value of $108.7 million as collateral for public unit certificates of deposit at September 30, 2024. The securities pledged as collateral for public unit certificates of deposit are held under joint custody with FHLB and generally will be released upon deposit maturity.

At September 30, 2024, $2.20 billion of the Bank's certificate of deposit portfolio was scheduled to mature within the next 12 months, including $59.2 million of public unit certificates of deposit and $49.0 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.

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of customers. These financial instruments consist primarily of commitments to originate, purchase, or participate in loans or fund lines of credit. Additionally, the Company has investments in several low-income housing partnerships and, under the terms of the agreements, the Company has a commitment to fund a specified amount that will be due in installments over the life of the agreements. See "Part II, Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 6. Low Income Housing Partnerships and Note 12. Commitments and Contingencies" for additional information regarding these commitments.

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