Business Wire | Jul 29, 2021 09:01AM EDT

Capitol Federal Financial, Inc.(r) Reports Third Quarter Fiscal Year 2021 Results

Jul. 29, 2021

TOPEKA, Kan.--(BUSINESS WIRE)--Jul. 29, 2021--Capitol Federal Financial, Inc.(r) (NASDAQ: CFFN) (the "Company"), the parent company of Capitol Federal Savings Bank (the "Bank"), announced results today for the quarter ended June 30, 2021. The Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2021 will be filed with the Securities and Exchange Commission ("SEC") on or about August 9, 2021 and posted on our website, http://ir.capfed.com. For best viewing results, please view this release in Portable Document Format (PDF) on our website.

Highlights for the quarter include:

* net income of $18.2 million; * basic and diluted earnings per share of $0.13; * net interest margin of 1.84%; * paid dividends of $65.7 million, or $0.485 per share, including a $0.40 per share True Blue(r) Capitol dividend; and * on July 20, 2021, announced a cash dividend of $0.085 per share, payable on August 20, 2021 to stockholders of record as of the close of business on August 6, 2021.

Comparison of Operating Results for the Three Months Ended June 30, 2021 and March 31, 2021

For the quarter ended June 30, 2021, the Company recognized net income of $18.2 million, or $0.13 per share, compared to net income of $20.4 million, or $0.15 per share, for the quarter ended March 31, 2021. The decrease in net income was due primarily to a decrease in non-interest income due mainly to the prior quarter including a $7.4 million gain on the sale of the Bank's Visa Class B shares, partially offset by a decrease in non-interest expense due mainly to a $4.8 million loss in the prior quarter due to the Bank terminating $200.0 million of its interest rate swaps. The net interest margin decreased four basis points, from 1.88% for the prior quarter to 1.84% for the current quarter. The decrease in the net interest margin was due mainly to a decrease in the loan portfolio average yield, partially offset by a decrease in the average cost of deposits and borrowings. Our net interest margin could continue to decrease if our interest-earning assets continue to reprice to lower market rates at a faster pace than our deposits and borrowings, and if we continue investing in lower yielding securities rather than reinvesting cash flows into the loan portfolio.

Interest and Dividend Income

The weighted average yield on total interest-earning assets decreased 15 basis points, from 2.81% for the prior quarter to 2.66% for the current quarter, while the average balance of interest-earning assets increased $125.8 million between the two periods. The decrease in the weighted average yield was due primarily to a decrease in the one- to four-family loan portfolio yield. The increase in the average balance was due primarily to a $152.1 million increase in the average balance of the mortgage-backed securities ("MBS") and investment securities portfolios and a $38.0 million increase in the average balance of the loans receivable portfolio, partially offset by a $60.7 million decrease in the average balance of cash and cash equivalents. The following table presents the components of interest and dividend income for the time periods presented, along with the change measured in dollars and percent.

For the Three Months Ended

June 30, March 31, Change Expressed in:

2021 2021 Dollars Percent

(Dollars in thousands)

INTEREST AND DIVIDEND INCOME:

Loans receivable $ 54,779 $ 57,285 $ (2,506 ) (4.4 ) %

MBS 5,360 5,429 (69 ) (1.3 )

Federal Home Loan Bank Topeka 944 951 (7 ) (0.7 )("FHLB") stock

Investment securities 763 629 134 21.3

Cash and cash equivalents 26 40 (14 ) (35.0 )

Total interest and dividend $ 61,872 $ 64,334 $ (2,462 ) (3.8 )income

The decrease in interest income on loans receivable was due to a 16 basis point decrease in the weighted average portfolio yield, partially offset by a $38.0 million increase in the average balance. The weighted average yield on the loans receivable portfolio decreased from 3.27% for the prior quarter to 3.11% for the current quarter, due mainly to an increase in one- to four-family correspondent loan endorsement activity, which increased the amount of premium amortization related to these loans, along with a reduction in one- to four-family originated loan endorsement activity, which decreased the amount of deferred fee recognition related to these loans. Additionally, the yield decreased due to the origination and purchase of one- to four-family loans at rates lower than the overall portfolio. One- to four-family correspondent loan payoff activity in the current quarter was lower than the prior quarter; thereby reducing the amount of premium amortization and reduction in the loan portfolio yield. Correspondent loan payoff activity remains at elevated levels compared to historical norms. The yield on the loan portfolio will likely continue to decrease in the near term due to the high levels of prepayments, refinances and endorsements.

The decrease in interest income on MBS was due to a 10 basis point decrease in the weighted average portfolio yield, which was largely offset by an $85.1 million increase in the average balance of the portfolio. The increase in interest income on investment securities was due primarily to a $67.0 million increase in the average balance of the portfolio.

Interest Expense

The weighted average rate paid on interest-bearing liabilities decreased 12 basis points, from 1.06% for the prior quarter to 0.94% for the current quarter, while the average balance of interest-bearing liabilities increased $121.1 million between the two periods due to an increase in the average balance of checking, savings and money market accounts, partially offset by a decrease in the average balance of retail/commercial certificates of deposit. The following table presents the components of interest expense for the time periods presented, along with the change measured in dollars and percent.

For the Three Months Ended

June 30, March 31, Change Expressed in:

2021 2021 Dollars Percent

(Dollars in thousands)

INTEREST EXPENSE:

Deposits $ 11,475 $ 12,529 $ (1,054 ) (8.4 )%

Borrowings 7,826 8,732 (906 ) (10.4 )

Total interest expense $ 19,301 $ 21,261 $ (1,960 ) (9.2 )

The decrease in interest expense on deposits was due primarily to a decrease in the weighted average rate paid on and a decrease in the average balance of the retail/commercial certificate of deposit portfolio. The weighted average rate on the retail/commercial certificate of deposit portfolio decreased 12 basis points, to 1.49% for the current quarter, and the average balance decreased $74.5 million. See the Financial Condition section below for additional information on deposits.

During the prior quarter, the Bank terminated interest rate swaps designated as cash flow hedges with a notional amount of $200.0 million which were tied to variable-rate FHLB advances totaling $200.0 million. During the current quarter, the Bank prepaid the aforementioned variable-rate FHLB advances and replaced them with $200.0 million of fixed-rate FHLB advances. The decrease in interest expense on borrowings compared to the prior quarter was due primarily to a full quarterly impact of this activity and the related reduction in the effective cost of these borrowings.

Provision for Credit Losses

For the quarter ended June 30, 2021, the Bank recorded a negative provision for credit losses of $2.7 million, compared to a negative provision for credit losses of $3.0 million for the prior quarter. The negative provision in the current quarter was composed of a $2.7 million decrease in the allowance for credit losses ("ACL") for loans, partially offset by a $34 thousand increase in reserves for off-balance sheet credit exposures. The $2.7 million negative provision for credit losses in the current quarter was due primarily to more favorable economic conditions at June 30, 2021 compared to March 31, 2021, largely related to commercial loans. See additional discussion regarding the Bank's ACL and reserves for off-balance sheet credit exposures at June 30, 2021 in the Asset Quality section below.

Non-Interest Income

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

For the Three Months Ended

June 30, March 31, Change Expressed in:

2021 2021 Dollars Percent

(Dollars in thousands)

NON-INTEREST INCOME:

Deposit service fees $ 3,227 $ 2,814 $ 413 14.7 %

Gain on sale of Visa Class B - 7,386 (7,386 ) (100.0 )shares

Insurance commissions 723 888 (165 ) (18.6 )

Other non-interest income 1,286 1,389 (103 ) (7.4 )

Total non-interest income $ 5,236 $ 12,477 $ (7,241 ) (58.0 )

The increase in deposit service fees was due primarily to increases in debit card income and service charge income as a result of higher transaction volume in the current quarter. During the prior quarter, the Bank sold all of its Visa Class B shares, resulting in a $7.4 million gain. The decrease in insurance commissions was due primarily to the receipt of annual contingent insurance commissions during the prior quarter, which were higher than what was anticipated and accrued.

Non-Interest Expense

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

For the Three Months Ended

June 30, March 31, Change Expressed in:

2021 2021 Dollars Percent

(Dollars in thousands)

NON-INTEREST EXPENSE:

Salaries and employee benefits $ 13,867 $ 13,397 $ 470 3.5 %

Information technology and 4,736 4,599 137 3.0 related expense

Occupancy, net 3,504 3,523 (19 ) (0.5 )

Loss on interest rate swap - 4,752 (4,752 ) (100.0 )termination

Regulatory and outside services 1,469 1,234 235 19.0

Advertising and promotional 1,407 1,484 (77 ) (5.2 )

Deposit and loan transaction 693 664 29 4.4 costs

Federal insurance premium 633 634 (1 ) (0.2 )

Office supplies and related 402 463 (61 ) (13.2 )expense

Other non-interest expense 891 1,903 (1,012 ) (53.2 )

Total non-interest expense $ 27,602 $ 32,653 $ (5,051 ) (15.5 )

The increase in salaries and employee benefits was due primarily to merit increases during the current quarter. During the prior quarter, the Bank terminated interest rate swaps designated as cash flow hedges with a notional amount of $200.0 million resulting in the reclassification of unrealized losses totaling $4.8 million from accumulated other comprehensive income ("AOCI") into earnings. The increase in regulatory and outside services was due mainly to the timing of external audit expenses. The decrease in other non-interest expense was due primarily to the write-down of a property during the prior quarter that previously served as one of the Bank's branch locations, as management intends to sell the property. During the current quarter there was a partial reversal of the write-down due to receiving updated pricing information for the property.

The Company's efficiency ratio was 57.73% for the current quarter compared to 58.78% for the prior quarter. The improvement in the efficiency ratio was due primarily to lower non-interest expense, partially offset by a decrease in non-interest income. The efficiency ratio is a measure of a financial institution's total non-interest expense as a percentage of the sum of net interest income (pre-provision for credit losses) and non-interest income. A lower value indicates that the financial institution is generating revenue with a proportionally lower level of expense, relative to the net interest margin.

Income Tax Expense

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

For the Three Months Ended

June 30, March 31, Change Expressed in:

2021 2021 Dollars Percent

(Dollars in thousands)

Income before income tax $ 22,896 $ 25,861 $ (2,965 ) (11.5 )%expense

Income tax expense 4,709 5,417 (708 ) (13.1 )

Net income $ 18,187 $ 20,444 $ (2,257 ) (11.0 )



Effective Tax Rate 20.6 % 20.9 %

The decrease in income tax expense was due mainly to a decrease in pretax income. Management anticipates the effective income tax rate for fiscal year 2021 will be approximately 20%.

Comparison of Operating Results for the Nine Months Ended June 30, 2021 and 2020

The Company recognized net income of $57.5 million, or $0.42 per share, for the nine month period ended June 30, 2021 compared to net income of $46.3 million, or $0.34 per share, for the nine month period ended June 30, 2020. The increase in net income was due primarily to recording a $22.3 million provision for credit losses during the prior year period compared to recording a negative provision for credit losses of $7.2 million in the current year period, partially offset by a decrease in net interest income and an increase in income tax expense. Net interest income decreased $14.2 million, or 9.9%, from the prior year period to $129.5 million for the current year period. The net interest margin decreased 27 basis points, from 2.15% for the prior year period to 1.88% for the current year period. The decrease in net interest income and net interest margin was due mainly to a decrease in asset yields, along with a change in asset mix as cash flows from the loan portfolio have been used to purchase lower yielding securities, partially offset by a decrease in the cost of deposits and borrowings.

Interest and Dividend Income

The weighted average yield on total interest-earning assets decreased 66 basis points, from 3.48% for the prior year period to 2.82% for the current year period, while the average balance of interest-earning assets increased $259.3 million. The following table presents the components of interest and dividend income for the time periods presented, along with the change measured in dollars and percent.

For the Nine Months Ended

June 30, Change Expressed in:

2021 2020 Dollars Percent

(Dollars in thousands)

INTEREST AND DIVIDEND INCOME:

Loans receivable $ 172,758 $ 206,179 $ (33,421 ) (16.2 ) %

MBS 16,499 17,584 (1,085 ) (6.2 )

FHLB stock 2,964 4,747 (1,783 ) (37.6 )

Investment securities 2,075 3,736 (1,661 ) (44.5 )

Cash and cash equivalents 117 1,126 (1,009 ) (89.6 )

Total interest and dividend $ 194,413 $ 233,372 $ (38,959 ) (16.7 )income

The decrease in interest income on loans receivable was due mainly to a 41 basis point decrease in the weighted average yield on the portfolio, from 3.67% for the prior year period to 3.26% for the current year period, primarily on correspondent one- to four-family loans related to higher premium amortization due to increases in payoff and endorsement activity, as well as endorsements and refinances of one- to four-family originated loans to lower market rates, adjustable-rate loans repricing to lower market rates, and the origination and purchase of new loans at lower market rates. Additionally, the average balance of the portfolio decreased $420.5 million compared to the prior year period. The majority of the decrease in the average balance of the loan portfolio between periods was due to a reduction in the correspondent one-to four-family loan portfolio. We suspended accepting new applications for these loans from mid-March 2020 to mid-June 2020, in part to manage the influx of refinance requests from existing customers in our local market areas during that time period while also managing underwriting concerns on correspondent loans early in the Coronavirus Disease 2019 ("COVID-19") pandemic. Additionally, after lifting the suspension, there were, and continues to be, historically high levels of prepayments due to refinance activity.

The decrease in interest income on the MBS portfolio was due to a 98 basis point decrease in the weighted average yield to 1.54% for the current year period as a result of new purchases at lower market yields and the repricing of existing adjustable-rate MBS to lower market yields, partially offset by a $495.5 million increase in the average balance of the portfolio.

The decrease in dividend income on FHLB stock was due mainly to a decrease in the dividend rate paid by FHLB, along with a decrease in the average balance of FHLB stock. The average balance decreased as the Bank did not replace certain maturing FHLB advances between periods, which reduced the amount of FHLB stock owned by the Bank per FHLB requirements.

The decrease in interest income on investment securities was due to a 135 basis point decrease in the weighted average yield to 0.58% for the current year period as a result of new purchases at lower market yields, partially offset by a $219.0 million increase in the average balance of the portfolio.

The decrease in interest income on cash and cash equivalents was due primarily to a decrease in the yield earned on cash held at the Federal Reserve Bank of Kansas City.

Interest Expense

The weighted average rate paid on total interest-bearing liabilities decreased 45 basis points, from 1.52% for the prior year period to 1.07% for the current period, while the average balance of interest-bearing liabilities increased $250.8 million. The increase in the average balance was primarily in money market and checking accounts, partially offset by a decrease in the average balance of borrowings. The following table presents the components of interest expense for the time periods presented, along with the change measured in dollars and percent.

For the Nine Months Ended

June 30, Change Expressed in:

2021 2020 Dollars Percent

(Dollars in thousands)

INTEREST EXPENSE:

Deposits $ 38,071 $ 52,299 $ (14,228 ) (27.2 )%

Borrowings 26,885 37,421 (10,536 ) (28.2 )

Total interest expense $ 64,956 $ 89,720 $ (24,764 ) (27.6 )

The decrease in interest expense on deposits was due mainly to a decrease in the weighted average rate paid on retail/commercial certificates of deposit, money market accounts, and wholesale certificates of deposit, which decreased by 46 basis points, 31 basis points, and 133 basis points, respectively. Since the onset of the COVID-19 pandemic, retail/commercial certificates of deposit have been repricing downward as they renew or are replaced at lower offered rates and rates on money market accounts have been lowered.

The decrease in interest expense on borrowings was due primarily to a $494.1 million decrease in the average balance, as certain maturing FHLB advances and repurchase agreements were not replaced and the Bank paid down its FHLB line of credit with liquidity generated from the deposit portfolio. Additionally, the decrease in interest expense on borrowings was due to the impact of prepaying certain FHLB advances during the current and prior periods.

Provision for Credit Losses

The Bank recorded a negative provision for credit losses during the current year period of $7.2 million, compared to a $22.3 million provision for credit losses during the prior year period. See additional discussion regarding the Bank's ACL and reserve for off-balance sheet credit exposures at June 30, 2021 in the Asset Quality section below.

Non-Interest Income

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

For the Nine Months Ended

June 30, Change Expressed in:

2021 2020 Dollars Percent

(Dollars in thousands)

NON-INTEREST INCOME:

Deposit service fees $ 8,988 $ 8,384 $ 604 7.2 %

Gain on sale of Visa Class B 7,386 - 7,386 N/A shares

Insurance commissions 2,249 1,762 487 27.6

Other non-interest income 4,160 4,468 (308 ) (6.9 )

Total non-interest income $ 22,783 $ 14,614 $ 8,169 55.9

The increase in deposit service fees was due primarily to an increase in debit card income as a result of higher transaction volume. During the current year period, the Bank sold its Visa Class B Shares, resulting in a $7.4 million gain. The increase in insurance commissions was due primarily to higher annual contingent insurance commissions received in the current year period compared to the prior year period. The decrease in other non-interest income was mainly the result of lower income from bank-owned life insurance ("BOLI") compared to the prior year period due to a reduction in the yield due to lower market rates and lower death benefit receipts between the two periods.

Non-Interest Expense

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

For the Nine Months Ended

June 30, Change Expressed in:

2021 2020 Dollars Percent

(Dollars in thousands)

NON-INTEREST EXPENSE:

Salaries and employee benefits $ 41,402 $ 39,765 $ 1,637 4.1 %

Information technology and 13,568 12,694 874 6.9 related expense

Occupancy, net 10,406 10,212 194 1.9

Loss on interest rate swap 4,752 - 4,752 N/A termination

Regulatory and outside services 4,288 4,188 100 2.4

Advertising and promotional 3,729 3,773 (44 ) (1.2 )

Deposit and loan transaction 2,123 2,086 37 1.8 costs

Federal insurance premium 1,888 287 1,601 557.8

Office supplies and related 1,289 1,586 (297 ) (18.7 )expense

Other non-interest expense 3,877 4,237 (360 ) (8.5 )

Total non-interest expense $ 87,322 $ 78,828 $ 8,494 10.8

The increase in salaries and employee benefits was due primarily to an increase in officer bonus accruals, as well as an increase in loan commissions related to higher loan origination activity. The increase in information technology and related expense was due mainly to an increase in software licensing expense and information technology professional services expense. As discussed previously, during the current year period, the Bank terminated interest rate swaps designated as cash flow hedges with a notional amount of $200.0 million resulting in the reclassification of unrealized losses totaling $4.8 million from AOCI into earnings. The increase in the federal insurance premium was due mainly to the Bank utilizing an assessment credit from the Federal Deposit Insurance Corporation ("FDIC") during the prior year period.

The Company's efficiency ratio was 57.36% for the current period compared to 49.81% for the prior year period. The change in the efficiency ratio was due to higher non-interest expense and lower net interest income, partially offset by an increase in non-interest income in the current year period compared to the prior year period. Management continues to strive to control operating costs. The increase in the efficiency ratio in the current year period related to higher non-interest expense was due primarily to the loss on the termination of interest rate swaps, which was a unique transaction during the current year period, along with higher federal insurance premium expense as the Bank utilized an assessment credit from the FDIC during the prior year period.

Income Tax Expense

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

For the Nine Months Ended

June 30, Change Expressed in:

2021 2020 Dollars Percent

(Dollars in thousands)



Income before income tax $ 72,105 $ 57,138 $ 14,967 26.2 %expense

Income tax expense 14,576 10,877 3,699 34.0

Net income $ 57,529 $ 46,261 $ 11,268 24.4



Effective Tax Rate 20.2 % 19.0 %

The increase in income tax expense was due primarily to higher pretax income in the current year period, as well as a higher effective tax rate compared to the prior year period. The effective tax rate was lower in the prior year period due primarily to a discrete benefit recognized in the prior year period related to certain BOLI policies that were acquired in fiscal year 2018.

Financial Condition as of June 30, 2021

Most areas of consumer spending have continued to rebound in recent months, but some segments, such as travel and entertainment, are lagging more than the overall economy. We continue to work with both our retail and commercial customers to help them manage their debt during this uneven economic recovery. There is uncertainty about the long-term impact on local business as well as travel and entertainment resulting from the COVID-19 pandemic. This could cause a longer recovery time for some sectors of the economy and could make it challenging for sectors that have had better recoveries to maintain that recovery in the long run.

Total assets were $9.65 billion at June 30, 2021, a decrease of $48.4 million, or 0.5%, from March 31, 2021, due primarily to decreases in securities and cash, partially offset by an increase in loans receivable. The Company paid $65.7 million in dividends during the current quarter which reduced excess operating cash. Cash flows from the securities portfolio were generally used to fund loan growth during the current quarter.

Total loans were $7.03 billion at June 30, 2021, an increase of $60.3 million, or 0.9%, from March 31, 2021. The increase was mainly in the one- to four-family correspondent loan portfolio and commercial real estate portfolio. During the current quarter, the Bank originated and refinanced $299.2 million of one- to four-family and consumer loans with a weighted average rate of 2.85% and purchased $235.8 million of one- to four-family loans from correspondent lenders with a weighted average rate of 2.54%. The Bank also originated $51.2 million of commercial loans with a weighted average rate of 3.48% and entered into commercial loan participations of $17.0 million at a weighted average rate of 6.00%.

Total deposits were $6.64 billion at June 30, 2021, a decrease of $12.6 million, or 0.2%, from March 31, 2021. The decrease was due primarily to a $100.0 million decrease in retail certificates of deposit, partially offset by an $85.8 million increase in money market accounts, as customers are moving some of the funds from maturing certificates to more liquid investment options such as the Bank's retail money market accounts.

Total assets increased $162.4 million, or 1.7% from September 30, 2020 to June 30, 2021, due mainly to an increase in securities, partially offset by decreases in loans receivable and cash and cash equivalents. Securities were purchased with cash flows from the loan portfolio and growth in the deposit portfolio that was not used to pay down maturing borrowings. Total securities increased $454.7 million, or 29.1%, from September 30, 2020 to June 30, 2021, composed of a $338.2 million increase in MBS and a $116.5 million increase in investment securities.

Total loans decreased $169.0 million from September 30, 2020 to June 30, 2021. The decrease was primarily in the one- to four-family correspondent loan portfolio. During the current year nine month period, the Bank originated and refinanced $948.6 million of one- to four-family and consumer loans with a weighted average rate of 2.75% and purchased $505.0 million of one- to four-family loans from correspondent lenders with a weighted average rate of 2.63%. The Bank also originated $208.5 million of commercial loans with a weighted average rate of 3.30% and entered into commercial loan participations of $115.1 million at a weighted average rate of 4.17%. The commercial loan portfolio totaled $815.0 million at June 30, 2021 and was composed of 84% commercial real estate loans, 9% commercial and industrial loans, and 7% commercial construction loans. Total commercial real estate and commercial construction potential exposure, including undisbursed amounts and outstanding commitments totaling $267.0 million, was $1.01 billion at June 30, 2021. Total commercial and industrial potential exposure, including undisbursed amounts and outstanding commitments of $23.7 million, was $97.4 million at June 30, 2021, of which $18.3 million related to Paycheck Protection Program ("PPP") loans.

Total deposits increased $446.9 million, or 7.2%, from September 30, 2020 to June 30, 2021. The increase was in non-maturity deposits, which increased $586.6 million, including a $269.2 million increase in money market accounts, a $238.2 million increase in checking accounts, and a $79.2 million increase in savings accounts. Retail certificates of deposit decreased $210.5 million, partially offset by a $71.8 million increase in commercial certificates of deposit during the current year period.

Total borrowings at June 30, 2021 were $1.58 billion, a decrease of $206.9 million, or 11.6%, from September 30, 2020. The decrease was due to not renewing borrowings that matured during the current year period. Cash flows from deposit growth were used to pay off maturing borrowings.

Stockholders' equity at June 30, 2021 was $1.24 billion, a decrease of $47.2 million, or 3.7%, from September 30, 2020. During the current year nine month period, the Company paid cash dividends totaling $106.4 million and repurchased common stock totaling $1.5 million, partially offset by net income of $57.5 million. The cash dividends paid during the current year nine month period totaled $0.785 per share and consisted of a $0.40 per share True Blue Capitol cash dividend, a $0.13 per share cash true-up dividend related to fiscal year 2020 earnings and three regular quarterly cash dividends of $0.085 per share. Given the state of economic uncertainty, the Company elected to defer the annual True Blue dividend in June 2020. In June 2021, the Company paid a True Blue Capitol cash dividend of $0.40 per share. The $0.40 per share True Blue Capitol cash dividend represents a $0.20 per share cash dividend from fiscal year 2020 and a $0.20 per share cash dividend for fiscal year 2021. On July 20, 2021, the Company announced a regular quarterly cash dividend of $0.085 per share, or approximately $11.5 million, payable on August 20, 2021 to stockholders of record as of the close of business on August 6, 2021. In the long run, management considers the Bank's equity to total assets ratio of at least 9% an appropriate level of capital. At June 30, 2021, this ratio was 11.5%.

At June 30, 2021, Capitol Federal Financial, Inc., at the holding company level, had $84.7 million in cash on deposit at the Bank. For fiscal year 2021, it is the intention of the Board of Directors to continue the payout of 100% of the Company's earnings to the Company's stockholders. Dividend payments depend upon a number of factors including the Company's financial condition and results of operations, regulatory capital requirements, regulatory limitations on the Bank's ability to make capital distributions to the Company, and the amount of cash at the holding company level.

There remains $44.7 million authorized under the existing stock repurchase plan for additional purchases of the Company's common stock. Shares may be repurchased from time to time based upon market conditions, available liquidity and other factors. This plan has no expiration date; however, the Federal Reserve Bank's existing approval for the Company to repurchase shares expires in August 2021.

The following table presents the balance of stockholders' equity and related information as of the dates presented.

June 30, September 30, June 30,

2021 2020 2020

(Dollars in thousands)

Stockholders' equity $ 1,237,624 $ 1,284,859 $ 1,300,520

Equity to total assets at end of 12.8 % 13.5 % 13.6 %period

The following table presents a reconciliation of total to net shares outstanding as of June 30, 2021.

Total shares outstanding 138,833,184

Less unallocated Employee Stock Ownership Plan ("ESOP") shares (3,267,063 )and unvested restricted stock

Net shares outstanding 135,566,121

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. In April 2020, the federal bank regulatory agencies announced the issuance of two interim final rules, effective immediately, to provide temporary relief to community banking organizations. Under the interim final rules, the community bank leverage ratio ("CBLR") requirement is a minimum of 8.5% for calendar year 2021 and 9% thereafter. As of June 30, 2021, the Bank's CBLR was 11.5%, which exceeded the minimum requirement.

The following table presents a reconciliation of the Bank's equity under accounting principles generally accepted in the United States of America ("GAAP") to regulatory tier 1 capital as of June 30, 2021 (dollars in thousands):

Total Bank equity as reported under GAAP $ 1,112,326

AOCI 13,338

Goodwill and other intangibles, net of associated deferred (12,651 ) taxes

Total tier 1 capital $ 1,113,013

Capitol Federal Financial, Inc. is the holding company for the Bank. The Bank has 54 branch locations in Kansas and Missouri, and is one of the largest residential lenders in the State of Kansas. News and other information about the Company can be found at the Bank's website, http://www.capfed.com.

Except for the historical information contained in this press release, the matters discussed herein may be deemed to be "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements about our beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions. The words "may," "could," "should," "would," "will," "believe," "anticipate," "estimate," "expect," "intend," "plan," and similar expressions are intended to identify forward-looking statements. Forward-looking statements involve risks and uncertainties, including: potential adverse impacts of the ongoing COVID-19 pandemic and any governmental or societal responses thereto on economic conditions in the Company's local market areas and other market areas where the Bank has lending relationships, on other aspects of the Company's business operations and on financial markets; changes in policies or the application or interpretation of laws and regulations by regulatory agencies and tax authorities; other governmental initiatives affecting the financial services industry; changes in accounting principles, policies or guidelines; fluctuations in interest rates; demand for loans in the Company's market area; the future earnings and capital levels of the Bank, which would affect the ability of the Company to pay dividends in accordance with its dividend policies; competition; and other risks detailed from time to time in documents filed or furnished by the Company with the SEC. Actual results may differ materially from those currently expected. These forward-looking statements represent the Company's judgment as of the date of this release. The Company disclaims, however, any intent or obligation to update these forward-looking statements.

SUPPLEMENTAL FINANCIAL INFORMATION

CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS (Unaudited)

(Dollars in thousands, except per share amounts)

June 30, March 31, September 30,

2021 2021 2020

ASSETS:

Cash and cash equivalents(includes interest-earning $ 95,305 $ 139,472 $ 185,148 deposits of $74,346, $121,430 and $172,430)

Available-for-sale ("AFS")securities, at estimated fairvalue (amortized cost of 2,015,705 2,095,924 1,560,950 $2,002,957, $2,090,720 and$1,529,605)

Loans receivable, net (ACL of 7,033,827 6,973,536 7,202,851 $20,724, $23,397 and $31,527)

FHLB stock, at cost 73,630 74,464 93,862

Premises and equipment, net 99,551 99,088 101,875

Income taxes receivable, net 891 - -

Other assets 330,756 315,535 342,532

TOTAL ASSETS $ 9,649,665 $ 9,698,019 $ 9,487,218



LIABILITIES:

Deposits $ 6,638,294 $ 6,650,865 $ 6,191,408

Borrowings 1,582,400 1,581,955 1,789,313

Advance payments by borrowers 47,330 61,624 65,721 for taxes and insurance

Income taxes payable, net - 67 795

Deferred income tax 7,922 6,530 8,180 liabilities, net

Other liabilities 136,095 118,383 146,942

Total liabilities 8,412,041 8,419,424 8,202,359



STOCKHOLDERS' EQUITY:

Preferred stock, $0.01 parvalue; 100,000,000 shares - - - authorized, no shares issued or outstanding

Common stock, $0.01 par value;1,400,000,000 sharesauthorized, 138,833,184,138,809,796 and 138,956,296 1,388 1,388 1,389 shares issued and outstanding as of June 30, 2021, March 31,2021, and September 30, 2020,respectively

Additional paid-in capital 1,189,466 1,188,926 1,189,853

Unearned compensation, ESOP (31,801 ) (32,214 ) (33,040 )

Retained earnings 91,909 139,448 143,162

AOCI, net of tax (13,338 ) (18,953 ) (16,505 )

Total stockholders' equity 1,237,624 1,278,595 1,284,859

TOTAL LIABILITIES AND $ 9,649,665 $ 9,698,019 $ 9,487,218STOCKHOLDERS' EQUITY

CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(Dollars in thousands)

For the Three Months Ended

For the Nine Months Ended

June 30,

March 31,

June 30,

2021

2021

2021

2020

INTEREST AND DIVIDEND INCOME:

Loans receivable

$

54,779

$

57,285

$

172,758

$

206,179

MBS

5,360

5,429

16,499

17,584

FHLB stock

944

951

2,964

4,747

Investment securities

763

629

2,075

3,736

Cash and cash equivalents

26

40

117

1,126

Total interest and dividend income

61,872

64,334

194,413

233,372

INTEREST EXPENSE:

Deposits

11,475

12,529

38,071

52,299

Borrowings

7,826

8,732

26,885

37,421

Total interest expense

19,301

21,261

64,956

89,720

NET INTEREST INCOME

42,571

43,073

129,457

143,652

PROVISION FOR CREDIT LOSSES

(2,691

)

(2,964

)

(7,187

)

22,300

NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES

45,262

46,037

136,644

121,352

NON-INTEREST INCOME:

Deposit service fees

3,227

2,814

8,988

8,384

Gain on sale of Visa Class B shares

-

7,386

7,386

-

Insurance commissions

723

888

2,249

1,762

Other non-interest income

1,286

1,389

4,160

4,468

Total non-interest income

5,236

12,477

22,783

14,614

NON-INTEREST EXPENSE:

Salaries and employee benefits

13,867

13,397

41,402

39,765

Information technology and related expense

4,736

4,599

13,568

12,694

Occupancy, net

3,504

3,523

10,406

10,212

Loss on interest rate swap termination

-

4,752

4,752

-

Regulatory and outside services

1,469

1,234

4,288

4,188

Advertising and promotional

1,407

1,484

3,729

3,773

Deposit and loan transaction costs

693

664

2,123

2,086

Federal insurance premium

633

634

1,888

287

Office supplies and related expense

402

463

1,289

1,586

Other non-interest expense

891

1,903

3,877

4,237

Total non-interest expense

27,602

32,653

87,322

78,828

INCOME BEFORE INCOME TAX EXPENSE

22,896

25,861

72,105

57,138

INCOME TAX EXPENSE

4,709

5,417

14,576

10,877

NET INCOME

$

18,187

$

20,444

$

57,529

$

46,261

The following is a reconciliation of the basic and diluted earnings per share calculations for the periods indicated.

CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(Dollars in thousands)

For the Three Months For the Nine Months Ended Ended

June 30, March 31, June 30,

2021 2021 2021 2020

INTEREST AND DIVIDEND INCOME:

Loans receivable $ 54,779 $ 57,285 $ 172,758 $ 206,179

MBS 5,360 5,429 16,499 17,584

FHLB stock 944 951 2,964 4,747

Investment securities 763 629 2,075 3,736

Cash and cash equivalents 26 40 117 1,126

Total interest and dividend 61,872 64,334 194,413 233,372income



INTEREST EXPENSE:

Deposits 11,475 12,529 38,071 52,299

Borrowings 7,826 8,732 26,885 37,421

Total interest expense 19,301 21,261 64,956 89,720



NET INTEREST INCOME 42,571 43,073 129,457 143,652



PROVISION FOR CREDIT LOSSES (2,691 ) (2,964 ) (7,187 ) 22,300

NET INTEREST INCOME AFTER 45,262 46,037 136,644 121,352PROVISION FOR CREDIT LOSSES



NON-INTEREST INCOME:

Deposit service fees 3,227 2,814 8,988 8,384

Gain on sale of Visa Class - 7,386 7,386 -B shares

Insurance commissions 723 888 2,249 1,762

Other non-interest income 1,286 1,389 4,160 4,468

Total non-interest income 5,236 12,477 22,783 14,614



NON-INTEREST EXPENSE:

Salaries and employee 13,867 13,397 41,402 39,765benefits

Information technology and 4,736 4,599 13,568 12,694related expense

Occupancy, net 3,504 3,523 10,406 10,212

Loss on interest rate swap - 4,752 4,752 -termination

Regulatory and outside 1,469 1,234 4,288 4,188services

Advertising and promotional 1,407 1,484 3,729 3,773

Deposit and loan 693 664 2,123 2,086transaction costs

Federal insurance premium 633 634 1,888 287

Office supplies and related 402 463 1,289 1,586expense

Other non-interest expense 891 1,903 3,877 4,237

Total non-interest expense 27,602 32,653 87,322 78,828

INCOME BEFORE INCOME TAX 22,896 25,861 72,105 57,138EXPENSE

INCOME TAX EXPENSE 4,709 5,417 14,576 10,877

NET INCOME $ 18,187 $ 20,444 $ 57,529 $ 46,261

The following is a reconciliation of the basic and diluted earnings per share calculations for the periods indicated.

For the Three Months Ended For the Nine Months Ended

June 30, March 31, June 30,

2021 2021 2021 2020

(Dollars in thousands, except per share amounts)

Net income $ 18,187 $ 20,444 $ 57,529 $ 46,261

Incomeallocated to (12 ) (14 ) (39 ) (38 )participating securities

Net incomeavailable to $ 18,175 $ 20,430 $ 57,490 $ 46,223 common stockholders



Average commonshares 135,421,817 135,409,120 135,409,349 137,919,631 outstanding

Averagecommitted ESOP 83,052 41,758 41,602 41,600 shares outstanding

Total basicaverage common 135,504,869 135,450,878 135,450,951 137,961,231 shares outstanding



Effect ofdilutive stock 32,283 47,292 26,615 31,747 options



Total dilutedaverage common 135,537,152 135,498,170 135,477,566 137,992,978 shares outstanding



Net earnings per share:

Basic $ 0.13 $ 0.15 $ 0.42 $ 0.34

Diluted $ 0.13 $ 0.15 $ 0.42 $ 0.34



Antidilutivestock options,excluded fromthe diluted 93,565 125,930 210,529 405,522 average commonsharesoutstandingcalculation

Loan Portfolio

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

June 30, 2021 March 31, 2021 September 30, 2020

% of % of % of

Amount Rate Total Amount Rate Total Amount Rate Total

(Dollars in thousands)

One- to four-family:

Originated $ 3,977,129 3.23 % 56.4 % $ 3,967,008 3.29 % 56.7 % $ 3,937,310 3.50 % 54.5 %

Correspondent purchased 1,953,185 3.09 27.7 1,915,027 3.27 27.4 2,101,082 3.49 29.1

Bulk purchased 179,019 1.90 2.5 188,733 2.09 2.7 208,427 2.41 2.9

Construction 30,325 2.96 0.4 28,582 3.11 0.4 34,593 3.30 0.5

Total 6,139,658 3.14 87.0 6,099,350 3.24 87.2 6,281,412 3.46 87.0

Commercial:

Commercial real estate 680,664 3.99 9.7 664,533 4.04 9.5 626,588 4.29 8.7

Commercial and 73,713 3.24 1.0 77,210 3.08 1.1 97,614 2.79 1.4 industrial

Construction 60,614 4.11 0.9 53,271 4.25 0.8 105,458 4.04 1.4

Total 814,991 3.93 11.6 795,014 3.96 11.4 829,660 4.08 11.5

Consumer loans:

Home equity 88,587 4.63 1.3 90,052 4.64 1.3 103,838 4.66 1.4

Other 8,389 4.26 0.1 8,743 4.36 0.1 10,086 4.40 0.1

Total 96,976 4.60 1.4 98,795 4.61 1.4 113,924 4.64 1.5

Total loans receivable 7,051,625 3.26 100.0 % 6,993,159 3.34 100.0 % 7,224,996 3.55 100.0 %



Less:

ACL 20,724 23,397 31,527

Discounts/unearned loan 30,593 30,295 29,190 fees

Premiums/deferred costs (33,519 ) (34,069 ) (38,572 )

Total loans receivable, $ 7,033,827 $ 6,973,536 $ 7,202,851 net

Loan Activity:The following tables summarize activity in the loan portfolio, along with weighted average rates where applicable, for the periods indicated, excluding changes in ACL, discounts/unearned loan fees, 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. During the current year nine-month period, the Bank endorsed $699.2 million of one- to four-family loans, reducing the average rate on those loans by 93 basis points ($285.2 million were endorsed during the December 31, 2020 quarter, reducing the average rate on those loans by 87 basis points, $242.3 million were endorsed during the March 31, 2021 quarter, reducing the average rate on those loans by 96 basis points, and $171.7 million were endorsed during the June 30, 2021 quarter, reducing the average rate on those loans by 98 basis points). Commercial loan renewals are not included in the activity in the following table unless new funds are disbursed at the time of renewal. The renewal balance and rate are included in the ending loan portfolio balance and rate.

For the Three Months Ended

June 30, 2021 March 31, 2021 December 31, 2020 September 30, 2020

Amount Rate Amount Rate Amount Rate Amount Rate

(Dollars in thousands)

Beginning balance $ 6,993,159 3.34 % $ 7,023,626 3.46 % $ 7,224,996 3.55 % $ 7,407,442 3.64 %

Originated and refinanced:

Fixed 279,170 2.78 326,570 2.54 318,690 2.75 265,424 2.98

Adjustable 71,216 3.58 112,483 3.43 48,946 3.60 44,625 3.68

Purchased and participations:

Fixed 232,335 2.54 192,262 2.82 100,518 2.86 61,435 3.07

Adjustable 20,499 5.36 9,150 2.42 65,315 3.89 4,396 2.76

Change inundisbursed loan (33,512 ) (63,925 ) (70,323 ) 13,898 funds

Repayments (511,222 ) (606,937 ) (664,052 ) (572,536 )

Principalrecoveries/ 52 (70 ) (464 ) 312 (charge-offs), net

Other (72 ) - - -

Ending balance $ 7,051,625 3.26 $ 6,993,159 3.34 $ 7,023,626 3.46 $ 7,224,996 3.55

For the Nine Months Ended

June 30, 2021

June 30, 2020

Amount

Rate

Amount

Rate

(Dollars in thousands)

Beginning balance

$

7,224,996

3.55

%

$

7,412,473

3.81

%

Originated and refinanced:

Fixed

924,430

2.69

684,488

3.22

Adjustable

232,645

3.51

171,698

4.04

Purchased and participations:

Fixed

525,115

2.70

380,469

3.50

Adjustable

94,964

4.07

95,296

3.50

Change in undisbursed loan funds

(167,760

)

(17,896

)

Repayments

(1,782,211

)

(1,318,439

)

Principal charge-offs, net

(482

)

(311

)

Other

(72

)

(336

)

Ending balance

$

7,051,625

3.26

$

7,407,442

3.64

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 credit score, weighted average loan-to-value ("LTV") ratio, and average balance per loan as of the dates presented. Credit scores were updated in March 2021 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.

For the Nine Months Ended

June 30, 2021 June 30, 2020

Amount Rate Amount Rate

(Dollars in thousands)

Beginning balance $ 7,224,996 3.55 % $ 7,412,473 3.81 %

Originated and refinanced:

Fixed 924,430 2.69 684,488 3.22

Adjustable 232,645 3.51 171,698 4.04

Purchased and participations:

Fixed 525,115 2.70 380,469 3.50

Adjustable 94,964 4.07 95,296 3.50

Change in undisbursed loan (167,760 ) (17,896 ) funds

Repayments (1,782,211 ) (1,318,439 )

Principal charge-offs, net (482 ) (311 )

Other (72 ) (336 )

Ending balance $ 7,051,625 3.26 $ 7,407,442 3.64

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 credit score, weighted average loan-to-value ("LTV") ratio, and average balance per loan as of the dates presented. Credit scores were updated in March 2021 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.

June 30, 2021 September 30, 2020

% of Credit Average % of Credit Average

Amount Total Score LTV Balance Amount Total Score LTV Balance

(Dollars in thousands)

Originated $ 3,977,129 65.1 % 772 61 % $ 150 $ 3,937,310 63.0 % 771 62 % $ 145

Correspondent 1,953,185 32.0 766 63 396 2,101,082 33.6 765 64 379 purchased

Bulk purchased 179,019 2.9 773 59 295 208,427 3.4 767 60 300

$ 6,109,333 100.0 % 770 62 191 $ 6,246,819 100.0 % 768 63 187

The following table presents originated, refinanced, and correspondent purchased activity in our one- to four-family loan portfolio, excluding endorsement activity, along with associated weighted average LTVs and weighted average credit scores for the periods indicated. Included in the originated line item for the current year period are $287.8 million of loans that were refinanced from other lenders.

For the Three Months Ended For the Nine Months Ended

June 30, 2021 June 30, 2021

Credit Credit

Amount LTV Score Amount LTV Score

(Dollars in thousands)

Originated $ 207,706 73 % 766 $ 613,068 71 % 768

Refinanced by Bank 73,453 67 761 288,408 66 767 customers

Correspondent 235,834 68 773 504,965 69 774 purchased

$ 516,993 70 769 $ 1,406,441 69 770

The following table presents the amount, percent of total, and weighted average rate, by state, of one- to four-family loan originations and correspondent purchases where originations and purchases in the state exceeded five percent of the total amount originated and purchased during the current year period.

For the Three Months Ended For the Nine Months Ended

June 30, 2021 June 30, 2021

State Amount % of Rate Amount % of Rate Total Total

(Dollars in thousands)

Kansas $ 237,868 46.0 % 2.74 % $ 767,443 54.6 % 2.67 %

Missouri 79,200 15.3 2.72 236,666 16.8 2.67

Texas 54,766 10.6 2.50 105,370 7.5 2.61

Pennsylvania 44,959 8.7 2.50 89,420 6.4 2.54

Tennessee 29,063 5.6 2.53 77,992 5.5 2.65

Other states 71,137 13.8 2.53 129,550 9.2 2.61

$ 516,993 100.0 % 2.65 $ 1,406,441 100.0 % 2.65

The following table summarizes our one- to four-family loan origination and refinance commitments and one- to four-family correspondent loan purchase commitments as of June 30, 2021, along with associated weighted average rates. Loan commitments generally have fixed expiration dates or other termination clauses and may require the payment of a rate lock fee. It is expected that some of the loan commitments will expire unfunded, so the amounts reflected in the table below are not necessarily indicative of our future cash needs.

Fixed-Rate

15 years More than Adjustable- Total

or less 15 years Rate Amount Rate

(Dollars in thousands)

Originate/ $ 23,472 $ 77,739 $ 4,617 $ 105,828 2.81 %refinance

Correspondent 23,105 117,205 1,604 141,914 2.63

$ 46,577 $ 194,944 $ 6,221 $ 247,742 2.71



Rate 2.25 % 2.82 % 2.52 %

As of June 30, 2021, there were $5.3 million of one- to-four family loans with modifications under the Bank's program to support and provide relief to borrowers during the COVID-19 pandemic ("COVID-19 loan modifications") that were still in their deferral period. There were $195.5 million of one- to four-family loans with COVID-19 loan modifications that were out of their deferral period by June 30, 2021. See "Asset Quality" below for additional information regarding the performance of loans that have exited the deferral period.

Commercial Loans: During the current year nine-month period, the Bank originated $208.5 million of commercial loans, including $22.8 million of PPP loans, and entered into commercial loan participations totaling $115.1 million. The Bank also processed commercial loan disbursements, excluding lines of credit, of approximately $208.7 million at a weighted average rate of 3.45%. Additionally, during the current year nine-month period, $48.3 million of PPP loans were paid off, primarily by the U.S. Small Business Administration ("SBA") following completion of the loan forgiveness process.

The following table presents the Bank's commercial real estate and commercial construction loans and loan commitments by type of primary collateral, as of June 30, 2021. Because the commitments to pay out undisbursed funds are not cancellable by the Bank, unless the loan is in default, we generally anticipate fully funding the related projects.

Unpaid Undisbursed Gross Loan Outstanding % of

Count Principal Amount Amount Commitments Total Total

(Dollars in thousands)

Senior 34 $ 221,351 $ 43,271 $ 264,622 $ 2,200 $ 266,822 26.5 %housing

Hotel 10 135,255 59,887 195,142 - 195,142 19.3

Retail 130 149,313 43,123 192,436 750 193,186 19.2 building

Office 95 51,200 60,462 111,662 520 112,182 11.1 building

Multi-family 42 52,642 13,431 66,073 14,583 80,656 8.0

One- tofour-family 379 58,298 7,587 65,885 618 66,503 6.6 property

Single use 23 42,383 4,927 47,310 9,005 56,315 5.6 building

Other 100 30,836 3,910 34,746 2,677 37,423 3.7

813 $ 741,278 $ 236,598 $ 977,876 $ 30,353 $ 1,008,229 100.0 %



Weighted 4.00 % 4.03 % 4.01 % 4.15 % 4.01 % average rate

The following table summarizes the Bank's commercial real estate and commercial construction loans and loan commitments by state as of June 30, 2021.

Unpaid Undisbursed Gross Loan Outstanding % of

Count Principal Amount Amount Commitments Total Total

(Dollars in thousands)

Kansas 637 $ 323,816 $ 20,705 $ 344,521 $ 14,541 $ 359,062 35.6 %

Texas 11 126,557 131,063 257,620 - 257,620 25.6

Missouri 138 201,517 30,674 232,191 14,312 246,503 24.4

Colorado 7 14,197 22,000 36,197 - 36,197 3.6

Arkansas 3 9,309 24,539 33,848 - 33,848 3.4

Nebraska 6 33,560 4 33,564 - 33,564 3.3

Other 11 32,322 7,613 39,935 1,500 41,435 4.1

813 $ 741,278 $ 236,598 $ 977,876 $ 30,353 $ 1,008,229 100.0 %

The following table presents the Bank's commercial and industrial loans and loan commitments by business purpose, as of June 30, 2021. Included in the working capital line item are $18.3 million of PPP loans.

Unpaid Undisbursed Gross Loan Outstanding % of

Count Principal Amount Amount Commitments Total Total

(Dollars in thousands)

Working capital 529 $ 29,483 $ 17,140 $ 46,623 $ - $ 46,623 47.9 %

Purchase/lease 249 17,153 49 17,202 - 17,202 17.6 autos

Equipment 116 13,161 406 13,567 1,424 14,991 15.4

Business 57 7,350 214 7,564 450 8,014 8.2 investment

Other 26 6,566 4,017 10,583 - 10,583 10.9

977 $ 73,713 $ 21,826 $ 95,539 $ 1,874 $ 97,413 100.0 %

The following table presents the Bank's commercial loan portfolio and outstanding loan commitments, categorized by gross loan amount (unpaid principal plus undisbursed amounts) or outstanding loan commitment amount, as of June 30, 2021.

Count Amount

(Dollars in thousands)

Greater than $30 million 3 $ 150,000

>$15 to $30 million 15 347,216

>$10 to $15 million 6 69,055

>$5 to $10 million 14 88,662

$1 to $5 million 108 243,940

Less than $1 million 1,644 206,769

1,790 $ 1,105,642

As of June 30, 2021, there were commercial loans with an aggregate gross balance, including undisbursed amounts, of $133.9 million with COVID-19 loan modifications that were still in their deferral period. There were $261.9 million of commercial loans with COVID-19 loan modifications that were out of their deferral period by June 30, 2021. See "Asset Quality" below for additional information regarding the performance of loans that have exited the deferral period.

Asset Quality

Of the one- to four-family COVID-19 loan modifications that had completed the deferral period by June 30, 2021, $4.4 million were 30 to 89 days delinquent and $2.1 million were 90 or more days delinquent as of June 30, 2021. None of the commercial COVID-19 loan modifications that had completed the deferral period by June 30, 2021 were delinquent as of June 30, 2021.

The following tables present loans 30 to 89 days delinquent, non-performing loans, and other real estate owned ("OREO") as of the dates indicated. Loans subject to payment forbearance under the Bank's COVID-19 loan modification program are not reported as delinquent during the forbearance time period. Of the loans 30 to 89 days delinquent at June 30, 2021, approximately 78% were 59 days or less delinquent. Non-performing loans are loans that are 90 or more days delinquent or in foreclosure, and other loans that are less than 90 days delinquent but are required to be reported as nonaccrual pursuant to accounting and/or regulatory reporting requirements and/or internal policies even if the loans are current. Non-performing assets include non-performing loans and OREO. In late March 2020, the Bank suspended the initiation of foreclosure proceedings for owner-occupied one- to four-family loans. At June 30, 2021, there were $7.8 million of non-performing one- to four-family loans for which foreclosure proceedings either had been initiated prior to the foreclosure suspension or would have been initiated if the foreclosure suspension was not in place.

Loans Delinquent for 30 to 89 Days at:

June 30, 2021 March 31, 2021 December 31, 2020 September 30, 2020 June 30, 2020

Number Amount Number Amount Number Amount Number Amount Number Amount

(Dollars in thousands)

One- to four-family:

Originated 51 $ 5,141 45 $ 4,151 62 $ 5,844 42 $ 3,012 57 $ 5,085

Correspondent 9 3,650 9 2,910 13 4,694 8 3,123 10 2,919 purchased

Bulk 6 958 5 352 9 1,750 12 2,532 19 4,536 purchased

Commercial 1 35 5 806 8 1,047 2 45 9 1,543

Consumer 25 354 17 287 30 515 26 398 21 431

92 $ 10,138 81 $ 8,506 122 $ 13,850 90 $ 9,110 116 $ 14,514

30 to 89 daysdelinquentloans to 0.14 % 0.12 % 0.20 % 0.13 % 0.20 %total loans receivable,net

Non-Performing Loans and OREO at:

June 30, 2021

March 31, 2021

December 31, 2020

September 30, 2020

June 30, 2020

Number

Amount

Number

Amount

Number

Amount

Number

Amount

Number

Amount

(Dollars in thousands)

Loans 90 or More Days Delinquent or in Foreclosure:

One- to four-family:

Originated

53

$

3,696

55

$

4,433

51

$

4,370

51

$

4,362

47

$

4,026

Correspondent purchased

12

4,230

10

3,749

9

3,371

6

2,397

7

2,740

Bulk purchased

7

2,596

10

3,172

13

3,724

12

2,903

3

1,291

Commercial

7

1,278

6

1,068

5

820

5

1,360

4

709

Consumer

23

445

26

531

26

473

14

304

23

278

102

12,245

107

12,953

104

12,758

88

11,326

84

9,044

Loans 90 or more days delinquent or in foreclosure as a percentage of total loans

0.17

%

0.19

%

0.18

%

0.16

%

0.12

%

Nonaccrual loans less than 90 Days Delinquent:(1)

One- to four-family:

Originated

7

$

1,392

9

$

1,646

9

$

968

9

$

691

14

$

1,132

Correspondent purchased

-

-

-

-

-

-

-

-

-

-

Bulk purchased

1

131

-

-

-

-

-

-

-

-

Commercial

3

403

4

642

3

411

3

464

1

6

Consumer

-

-

-

-

1

9

1

9

1

33

11

1,926

13

2,288

13

1,388

13

1,164

16

1,171

Total non-performing loans

113

14,171

120

15,241

117

14,146

101

12,490

100

10,215

Non-performing loans as a percentage of total loans

0.20

%

0.22

%

0.20

%

0.17

%

0.14

%

OREO:

One- to four-family:

Originated(2)

3

$

177

2

$

105

3

$

129

4

$

183

4

$

183

Total non-performing assets

116

$

14,348

122

$

15,346

120

$

14,275

105

$

12,673

104

$

10,398

Non-performing assets as a percentage of total assets

0.15

%

0.16

%

0.15

%

0.13

%

0.11

%

Non-Performing Loans and OREO at:

June 30, 2021 March 31, 2021 December 31, 2020 September 30, 2020 June 30, 2020

Number Amount Number Amount Number Amount Number Amount Number Amount

(Dollars in thousands)

Loans 90 orMore DaysDelinquent or inForeclosure:

One- to four-family:

Originated 53 $ 3,696 55 $ 4,433 51 $ 4,370 51 $ 4,362 47 $ 4,026

Correspondent 12 4,230 10 3,749 9 3,371 6 2,397 7 2,740 purchased

Bulk purchased 7 2,596 10 3,172 13 3,724 12 2,903 3 1,291

Commercial 7 1,278 6 1,068 5 820 5 1,360 4 709

Consumer 23 445 26 531 26 473 14 304 23 278

102 12,245 107 12,953 104 12,758 88 11,326 84 9,044



Loans 90 ormore daysdelinquent orin foreclosure 0.17 % 0.19 % 0.18 % 0.16 % 0.12 %as apercentage oftotal loans



Nonaccrualloans lessthan 90 Days Delinquent:^(1)

One- to four-family:

Originated 7 $ 1,392 9 $ 1,646 9 $ 968 9 $ 691 14 $ 1,132

Correspondent - - - - - - - - - - purchased

Bulk purchased 1 131 - - - - - - - -

Commercial 3 403 4 642 3 411 3 464 1 6

Consumer - - - - 1 9 1 9 1 33

11 1,926 13 2,288 13 1,388 13 1,164 16 1,171

Totalnon-performing 113 14,171 120 15,241 117 14,146 101 12,490 100 10,215 loans



Non-performingloans as a 0.20 % 0.22 % 0.20 % 0.17 % 0.14 %percentage of total loans



OREO:

One- to four-family:

Originated^(2) 3 $ 177 2 $ 105 3 $ 129 4 $ 183 4 $ 183

Totalnon-performing 116 $ 14,348 122 $ 15,346 120 $ 14,275 105 $ 12,673 104 $ 10,398 assets



Non-performingassets as a 0.15 % 0.16 % 0.15 % 0.13 % 0.11 %percentage of total assets

(1)

Includes loans required to be reported as nonaccrual pursuant to accounting and/or regulatory reporting requirements and/or internal policies even if the loans are current.

(2)

Real estate-related consumer loans where we also hold the first mortgage are included in the one- to four-family category as the underlying collateral is one- to four-family property.

The following table presents loans classified as special mention or substandard at the dates presented. The increase in commercial special mention loans at June 30, 2021 compared to September 30, 2020 was due mainly to the addition of two commercial loans totaling $50.0 million for which the borrowers have been impacted by the COVID-19 pandemic. Both of these loans were subject to COVID-19 loan modifications during fiscal year 2020 and have since resumed full payments. There are underlying economic considerations that management is monitoring in association with these loans resulting in the special mention classification.

Includes loans required to be reported as nonaccrual pursuant to(1) accounting and/or regulatory reporting requirements and/or internal policies even if the loans are current.

Real estate-related consumer loans where we also hold the first mortgage(2) are included in the one- to four-family category as the underlying collateral is one- to four-family property.

The following table presents loans classified as special mention or substandard at the dates presented. The increase in commercial special mention loans at June 30, 2021 compared to September 30, 2020 was due mainly to the addition of two commercial loans totaling $50.0 million for which the borrowers have been impacted by the COVID-19 pandemic. Both of these loans were subject to COVID-19 loan modifications during fiscal year 2020 and have since resumed full payments. There are underlying economic considerations that management is monitoring in association with these loans resulting in the special mention classification.

June 30, 2021 September 30, 2020 June 30, 2020

Special Substandard Special Substandard Special Substandard Mention Mention Mention

(Dollars in thousands)

One- to $ 14,885 $ 24,439 $ 11,339 $ 25,630 $ 12,309 $ 26,788 four-family

Commercial 100,019 4,057 52,006 4,914 52,054 5,128

Consumer 237 670 332 589 320 564

$ 115,141 $ 29,166 $ 63,677 $ 31,133 $ 64,683 $ 32,480

Allowance for Credit Losses: Accounting Standard Update ("ASU") 2016-13 became effective for the Company on October 1, 2020. This ASU replaced the incurred loss impairment methodology for calculating ACL under GAAP with a new impairment methodology, commonly known as the current expected credit loss ("CECL") methodology. The new methodology requires the Company to measure, at each reporting date, the expected credit losses for loans and loan commitments over their contractual lives based on historical experience, current conditions, and reasonable and supportable forecasts. Upon adoption of the ASU, the Company recorded a cumulative-effect adjustment to retained earnings of $2.3 million (net of tax of $739 thousand), which reduced the ACL by $4.8 million, to $26.8 million, and established a reserve for off-balance sheet credit exposures of $7.8 million, which is recorded in other liabilities in the consolidated balance sheet. The Bank's off-balance sheet credit exposures are comprised of unfunded portions of existing loans and commitments to originate or purchase new loans that are not unconditionally cancellable by the Bank.

The Bank is utilizing a discounted cash flow approach for estimating expected credit losses for pooled loans and loan commitments. The credit loss estimate for off-balance sheet credit exposures also takes into consideration the likelihood that the commitment will be funded. The economic indices used for the reasonable and supportable forecasted time period are the national unemployment rate, changes in commercial real estate price index, changes in home values, and changes in the United States gross domestic product. Management considers several economic forecast scenarios provided by a third party and selects the scenario(s) believed to be the most appropriate considering the facts and circumstances at quarter end. Management also considers several qualitative factors. The qualitative factors account for items not included in historical loss rates, the macroeconomic forecast, and/or other model inputs/assumptions. Any changes to the ACL and reserves on off-balance sheet credit exposures are recorded through increases/decreases in the provision for credit losses on the consolidated statements of income.

The economic forecast scenarios selected by management improved at June 30, 2021 compared to March 31, 2021 which resulted in a reduction in the ACL calculated by the model. Management applied qualitative factors at both June 30, 2021 and March 31, 2021 to account for the continued economic uncertainties, along with the balance and trending of large-dollar special mention commercial loans. The total ACL amount assigned to these qualitative factors also decreased at June 30, 2021 compared to March 31, 2021. The economic uncertainties were related to (1) the job market, specifically the unemployment rate, labor participation rate and the effectiveness of the latest federal stimulus package to the unemployed and the economic stimulus payments to qualifying households, (2) the impact to the housing market as a result of the foreclosure moratorium and how the housing market may react when the foreclosure moratorium is eventually lifted, and (3) the unevenness of the recovery in certain industries.

The following table presents a summary of changes in ACL and reserve for off-balance sheet credit exposures occurring during the quarter ended June 30, 2021.

Reserve for off- ACL and ACL balance sheet Reserve for off- credit exposures balance sheet credit exposures

(Dollars in thousands)

Balance at March 31, 2021 $ 23,397 $ 6,127 $ 29,524

Charge-offs (19 ) - (19 )

Recoveries 71 - 71

Net charge-offs 52 - 52

Provision for credit losses (2,725 ) 34 (2,691 )

Balance at June 30, 2021 $ 20,724 $ 6,161 $ 26,885

The negative provision for credit losses in the current quarter was due primarily to a reduction in the commercial loan ACL related to a decrease in the commercial loan economic uncertainty qualitative factor due to improved commercial economic conditions compared to March 31, 2021.

The following tables present ACL activity and related ratios at the dates and for the periods indicated.

For the Three Months Ended

June 30, March 31, December September June 30, 31, 30,

2021 2021 2020 2020 2020

(Dollars in thousands)

Balance atbeginning of $ 23,397 $ 26,125 $ 31,527 $ 31,215 $ 31,196 period

Adoption of - - (4,761) - - CECL

Charge-offs:

One- to (18 ) (131 ) (14 ) - - four-family

Commercial - - (515 ) - -

Consumer (1 ) (7 ) (3 ) (15 ) (5 )

Total (19 ) (138 ) (532 ) (15 ) (5 )charge-offs

Recoveries:

One- to 49 57 34 303 - four-family

Commercial 18 8 12 12 17

Consumer 4 3 22 12 7

Total 71 68 68 327 24 recoveries

Net recoveries 52 (70 ) (464 ) 312 19 (charge-offs)

Provision for (2,725 ) (2,658 ) (177 ) - - credit losses

Balance at end $ 20,724 $ 23,397 $ 26,125 $ 31,527 $ 31,215 of period



Ratio of netcharge-offsduring theperiod to - % - % 0.01 % - % - %average loans outstandingduring theperiod

Ratio of netcharge-offs(recoveries)during the (0.35 ) 0.47 3.44 (2.70 ) (0.20 )period to averagenon-performingassets

ACL tonon-performing 146.23 153.51 184.68 252.42 305.58 loans at end of period

ACL to loansreceivable at 0.29 0.33 0.37 0.44 0.42 end of period

ACL to netcharge-offs N/M^(1) 83.8x 14.1x N/M^(1) N/M^(1)(annualized)

For the Nine Months Ended

June 30,

2021

2020

(Dollars in thousands)

Balance at beginning of period

$

31,527

$

9,226

Adoption of CECL

(4,761

)

-

Charge-offs:

One- to four-family

(163

)

(64

)

Commercial

(515

)

(349

)

Consumer

(11

)

(15

)

Total charge-offs

(689

)

(428

)

Recoveries:

One- to four-family

140

3

Commercial

38

98

Consumer

29

16

Total recoveries

207

117

Net (charge-offs) recoveries

(482

)

(311

)

Provision for credit losses

(5,560

)

22,300

Balance at end of period

$

20,724

$

31,215

Ratio of net charge-offs during the period to average loans outstanding during the period

0.01

%

-

%

Ratio of net charge-offs (recoveries) during the period to average non-performing assets

3.56

3.22

ACL to net charge-offs (annualized)

32.3x

75.3x

For the Nine Months Ended

June 30,

2021 2020

(Dollars in thousands)

Balance at beginning of period $ 31,527 $ 9,226

Adoption of CECL (4,761 ) -

Charge-offs:

One- to four-family (163 ) (64 )

Commercial (515 ) (349 )

Consumer (11 ) (15 )

Total charge-offs (689 ) (428 )

Recoveries:

One- to four-family 140 3

Commercial 38 98

Consumer 29 16

Total recoveries 207 117

Net (charge-offs) recoveries (482 ) (311 )

Provision for credit losses (5,560 ) 22,300

Balance at end of period $ 20,724 $ 31,215



Ratio of net charge-offs during the period to average 0.01 % - %loans outstanding during the period

Ratio of net charge-offs (recoveries) during the 3.56 3.22 period to average non-performing assets

ACL to net charge-offs (annualized) 32.3x 75.3x

(1)

This ratio is not presented for the time periods noted due to loan recoveries exceeding loan charge-offs during these periods.

The distribution of our ACL at the dates indicated is summarized below. The October 1, 2020 column represents the ACL at the time the Company adopted ASU 2016-13.

(1) This ratio is not presented for the time periods noted due to loan recoveries exceeding loan charge-offs during these periods.

The distribution of our ACL at the dates indicated is summarized below. The October 1, 2020 column represents the ACL at the time the Company adopted ASU 2016-13.

At

June 30, March 31, December October 1, September June 30, 31, 30,

2021 2021 2020 2020 2020 2020

(Dollars in thousands)

One- to four-family:

Originated $ 1,515 $ 1,517 $ 1,516 $ 1,609 $ 6,044 $ 6,298

Correspondent 1,739 1,705 1,758 2,324 2,691 3,189 purchased

Bulk purchased 674 747 852 903 467 506

Construction 20 19 22 25 41 48

Total 3,948 3,988 4,148 4,861 9,243 10,041

Commercial:

Commercial real 14,784 17,016 17,813 16,595 16,869 16,353 estate

Commercial and 345 445 553 559 1,451 1,465 industrial

Construction 1,404 1,696 3,341 4,452 3,480 2,886

Total 16,533 19,157 21,707 21,606 21,800 20,704

Consumer 243 252 270 299 484 470

Total $ 20,724 $ 23,397 $ 26,125 $ 26,766 $ 31,527 $ 31,215

The ratio of ACL to loans receivable, by loan type, at the dates indicated is summarized below.

At

June March December October September June 30, 31, 31, 1, 30, 30,

2021 2021 2020 2020 2020 2020

One- to four-family:

Originated 0.04 % 0.04 % 0.04 % 0.04 % 0.15 % 0.16 %

Correspondent 0.09 0.09 0.09 0.11 0.13 0.14 purchased

Bulk purchased 0.38 0.40 0.43 0.43 0.22 0.23

Construction 0.07 0.07 0.07 0.07 0.12 0.13

Total 0.06 0.07 0.07 0.08 0.15 0.16

Commercial:

Commercial real 2.17 2.56 2.92 2.65 2.69 2.62 estate

Commercial and 0.47 0.58 0.80 0.57 1.49 1.47 industrial

Construction 2.32 3.18 3.95 4.22 3.30 3.30

Total 2.03 2.41 2.84 2.60 2.63 2.55

Consumer 0.25 0.26 0.25 0.26 0.42 0.40

Total 0.29 0.33 0.37 0.37 0.44 0.42

The distribution of our reserve for off-balance sheet credit exposures at the dates indicated is summarized below. The amount is reported in the other liabilities line item on the consolidated balance sheet. The October 1, 2020 column represents the reserve at the time the Company adopted ASU 2016-13. Prior to October 1, 2020, no such reserve had been recorded.

At

June 30, March 31, December October 1, 31,

2021 2021 2020 2020

(Dollars in thousands)

One- to four-family $ 229 $ 197 $ 131 $ 144

Commercial 5,880 5,887 6,261 7,584

Consumer 52 43 41 60

$ 6,161 $ 6,127 $ 6,433 $ 7,788

Securities Portfolio

The following table presents the distribution of our securities portfolio, at amortized cost, at the dates indicated. Overall, fixed-rate securities comprised 93% of our securities portfolio at June 30, 2021. 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 taxable equivalent basis.

June 30, 2021 March 31, 2021 September 30, 2020

Amount Yield WAL Amount Yield WAL Amount Yield WAL

(Dollars in thousands)

Fixed-rate securities:

MBS $ 1,365,635 1.39 % 3.9 $ 1,384,982 1.46 % 4.1 $ 945,432 1.82 % 3.7

U.S.government-sponsored 494,968 0.59 3.9 544,966 0.55 3.6 369,967 0.62 1.7 enterprise debentures

Municipal bonds 5,133 1.79 0.4 5,447 1.79 0.5 9,716 1.69 0.7

Total fixed-rate 1,865,736 1.18 3.9 1,935,395 1.20 3.9 1,325,115 1.49 3.1 securities



Adjustable-rate securities:

MBS 137,221 2.05 3.4 155,325 2.24 3.2 204,490 2.49 2.9

Total securities $ 2,002,957 1.24 3.8 $ 2,090,720 1.28 3.9 $ 1,529,605 1.62 3.1 portfolio

MBS The following tables summarize the activity in our portfolio of MBS for the periods presented. The weighted average yields and WALs for purchases are presented as recorded at the time of purchase. The weighted average yields for the beginning balances are as of the last day of the period previous to the period presented and the weighted average yields for the ending balances are as of the last day of the period presented and are generally derived from recent prepayment activity on the securities in the portfolio as of the dates presented. The beginning and ending WALs are the estimated remaining principal repayment terms (in years) after three-month historical prepayment speeds have been applied.

For the Three Months Ended

June 30, 2021 March 31, 2021 December 31, 2020 September 30, 2020

Amount Yield WAL Amount Yield WAL Amount Yield WAL Amount Yield WAL

(Dollars in thousands)

Beginning balance - carrying $ 1,549,901 1.54 % 4.0 $ 1,459,300 1.67 % 4.0 $ 1,180,803 1.94 % 3.5 $ 982,587 2.35 % 3.3 value

Maturities and repayments (110,996 ) (109,141 ) (101,496 ) (95,842 )

Net amortization of (premiums) (1,689 ) (1,572 ) (1,003 ) (608 ) /discounts

Purchases:

Fixed-rate 75,234 1.36 5.5 223,804 1.31 5.9 379,793 1.04 5.4 297,024 1.06 5.9

Change in valuation on AFS 6,578 (22,490 ) 1,203 (2,358 ) securities

Ending balance - carrying $ 1,519,028 1.45 3.8 $ 1,549,901 1.54 4.0 $ 1,459,300 1.67 4.0 $ 1,180,803 1.94 3.5 value

For the Nine Months Ended

June 30, 2021

June 30, 2020

Amount

Yield

WAL

Amount

Yield

WAL

(Dollars in thousands)

Beginning balance - carrying value

$

1,180,803

1.94

%

3.5

$

936,487

2.67

%

3.5

Maturities and repayments

(321,633

)

(213,695

)

Net amortization of (premiums)/discounts

(4,264

)

(890

)

Purchases:

Fixed-rate

678,831

1.16

5.6

240,677

1.71

4.4

Change in valuation on AFS securities

(14,709

)

20,008

Ending balance - carrying value

$

1,519,028

1.45

3.8

$

982,587

2.35

3.3

Investment Securities The following tables summarize the activity of investment securities for the periods presented. The weighted average yields and WALs for purchases are presented as recorded at the time of purchase. The weighted average yields for the beginning balances are as of the last day of the period previous to the period presented and the weighted average yields for the ending balances are as of the last day of the period presented. The beginning and ending WALs represent the estimated remaining principal repayment terms (in years) of the securities after projected call dates have been considered, based upon market rates at each date presented.

For the Nine Months Ended

June 30, 2021 June 30, 2020

Amount Yield WAL Amount Yield WAL

(Dollars in thousands)

Beginning balance - $ 1,180,803 1.94 % 3.5 $ 936,487 2.67 % 3.5 carrying value

Maturities and (321,633 ) (213,695 ) repayments

Net amortization of (4,264 ) (890 ) (premiums)/discounts

Purchases:

Fixed-rate 678,831 1.16 5.6 240,677 1.71 4.4

Change in valuation on (14,709 ) 20,008 AFS securities

Ending balance - $ 1,519,028 1.45 3.8 $ 982,587 2.35 3.3 carrying value

Investment Securities The following tables summarize the activity of investment securities for the periods presented. The weighted average yields and WALs for purchases are presented as recorded at the time of purchase. The weighted average yields for the beginning balances are as of the last day of the period previous to the period presented and the weighted average yields for the ending balances are as of the last day of the period presented. The beginning and ending WALs represent the estimated remaining principal repayment terms (in years) of the securities after projected call dates have been considered, based upon market rates at each date presented.

For the Three Months Ended

June 30, 2021 March 31, 2021 December 31, 2020 September 30, 2020

Amount Yield WAL Amount Yield WAL Amount Yield WAL Amount Yield WAL

(Dollars in thousands)

Beginning balance - carrying $ 546,023 0.56 % 3.6 $ 454,566 0.54 % 1.0 $ 380,147 0.65 % 1.7 $ 237,467 1.23 % 0.8 value

Maturities, calls and sales (100,300 ) (3,325 ) (50,900 ) (102,115 )

Net amortization of (premiums) (12 ) (18 ) (14 ) (54 ) /discounts

Purchases:

Fixed-rate 50,000 0.73 3.2 100,000 0.70 4.6 124,987 0.48 3.2 244,975 0.51 3.2

Change in valuation on AFS 966 (5,200 ) 346 (126 ) securities

Ending balance - carrying $ 496,677 0.60 3.8 $ 546,023 0.56 3.6 $ 454,566 0.54 1.0 $ 380,147 0.65 1.7 value

For the Nine Months Ended

June 30, 2021

June 30, 2020

Amount

Yield

WAL

Amount

Yield

WAL

(Dollars in thousands)

Beginning balance - carrying value

$

380,147

0.65

%

1.7

$

268,376

2.11

%

0.8

Maturities, calls and sales

(154,525

)

(256,300

)

Net amortization of (premiums)/discounts

(44

)

(109

)

Purchases:

Fixed-rate

274,987

0.60

3.7

225,087

1.20

1.2

Change in valuation on AFS securities

(3,888

)

413

Ending balance - carrying value

$

496,677

0.60

3.8

$

237,467

1.23

0.8

Deposit Portfolio

The following table presents the amount, weighted average rate, and percent of total for the components of our deposit portfolio at the dates presented.

For the Nine Months Ended

June 30, 2021 June 30, 2020

Amount Yield WAL Amount Yield WAL

(Dollars in thousands)

Beginning balance - $ 380,147 0.65 % 1.7 $ 268,376 2.11 % 0.8 carrying value

Maturities, calls and (154,525 ) (256,300 ) sales

Net amortization of (44 ) (109 ) (premiums)/discounts

Purchases:

Fixed-rate 274,987 0.60 3.7 225,087 1.20 1.2

Change in valuation on (3,888 ) 413 AFS securities

Ending balance - $ 496,677 0.60 3.8 $ 237,467 1.23 0.8 carrying value

Deposit Portfolio

The following table presents the amount, weighted average rate, and percent of total for the components of our deposit portfolio at the dates presented.

June 30, 2021 March 31, 2021 September 30, 2020

% of % of % of

Amount Rate Total Amount Rate Total Amount Rate Total

(Dollars in thousands)

Non-interest-bearing checking $ 540,669 - % 8.2 % $ 549,158 - % 8.2 % $ 451,394 - % 7.3 %

Interest-bearing checking 1,014,665 0.08 15.3 1,009,096 0.07 15.2 865,782 0.10 14.0

Savings 513,054 0.06 7.7 511,014 0.06 7.7 433,808 0.06 7.0

Money market 1,688,337 0.25 25.4 1,602,573 0.24 24.1 1,419,180 0.37 22.9

Retail certificates of 2,412,806 1.50 36.4 2,512,791 1.62 37.8 2,623,336 1.88 42.4 deposit

Commercial certificates of 214,956 0.71 3.2 217,563 0.77 3.3 143,125 1.05 2.3 deposit

Public unit certificates of 253,807 0.36 3.8 248,670 0.45 3.7 254,783 0.74 4.1 deposit

$ 6,638,294 0.66 100.0 % $ 6,650,865 0.73 100.0 % $ 6,191,408 0.95 100.0 %

The following table presents scheduled maturity information for our certificates of deposit, along with associated weighted average rates, as of June 30, 2021.

Amount Due

More than More than

1 year 1 year to 2 years to More than Total 3

Rate or less 2 years years 3 years Amount Raterange

(Dollars in thousands)

Retail certificates of deposit:

0.00 - $ 550,417 $ 179,058 $ 67,469 $ 84,122 $ 881,066 0.52 %0.99%

1.00 - 343,680 170,719 111,402 77,336 703,137 1.69 1.99%

2.00 - 246,706 388,924 161,803 30,914 828,347 2.40 2.99%

3.00 - - 256 - - 256 3.00 3.99%

Commercial certificates of deposit:

0.00 - 172,807 4,795 464 781 178,847 0.54 0.99%

1.00 - 19,503 10,104 343 907 30,857 1.41 1.99%

2.00 - 2,016 2,401 662 172 5,251 2.31 2.99%

Public unit certificates of deposit:

0.00 - 196,575 25,501 - - 222,076 0.10 0.99%

1.00 - 16,096 - - - 16,096 1.69 1.99%

2.00 - 15,307 - 329 - 15,636 2.65 2.99%

$ 1,563,107 $ 781,758 $ 342,472 $ 194,232 $ 2,881,569 1.34



Percent 54.3 % 27.1 % 11.9 % 6.7 % of total

Weightedaverage 1.07 1.71 1.80 1.25 rate

Weightedaveragematurity 0.5 1.4 2.5 3.8 1.2 (inyears)

Weighted average maturity for the retail portfolio (in years) 1.3

Weighted average maturity for the commercial portfolio (in years) 0.6

Weighted average maturity for the public unit portfolio (in years) 0.4

Borrowings

The following table presents the maturity of term borrowings, which consist entirely of FHLB advances, along with associated weighted average contractual and effective rates as of June 30, 2021.

Term Borrowings Amount

Maturity by FHLB Interest rate Contractual Effective

Fiscal Year Advances swaps^(1) Rate Rate^(2)

(Dollars in thousands)

2021 $ - $ 340,000 0.28 % 2.73 %

2022 - 100,000 0.24 3.14

2023 300,000 - 1.70 1.81

2024 150,000 - 2.44 2.44

2025 300,000 - 1.66 1.75

2026 250,000 - 0.96 1.27

2027 150,000 - 0.93 1.24

$ 1,150,000 $ 440,000 1.18 2.00

(1)

Represents adjustable-rate FHLB advances for which the Bank has entered into interest rate swaps with a notional amount of $440.0 million to hedge the variability in cash flows associated with the advances. These advances are presented based on their contractual maturity dates and will be renewed periodically until the maturity or termination of the interest rate swaps. The expected WAL of the interest rate swaps was 3.6 years at June 30, 2021.

(2)

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

The following table presents 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 term borrowings for the next four quarters as of June 30, 2021.

Represents adjustable-rate FHLB advances for which the Bank has entered into interest rate swaps with a notional amount of $440.0 million to hedge the variability in cash flows associated with the advances. These(1) advances are presented based on their contractual maturity dates and will be renewed periodically until the maturity or termination of the interest rate swaps. The expected WAL of the interest rate swaps was 3.6 years at June 30, 2021.

The effective rate includes the impact of interest rate swaps and the(2) amortization of deferred prepayment penalties resulting from FHLB advances previously prepaid.

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 term borrowings for the next four quarters as of June 30, 2021.

Retail/ Public Unit Term Commercial

Maturity Certificate Repricing Certificate Repricing Borrowings Repricing Repricingby

Quarter Amount Rate Amount Rate Amount^(1) Rate Total RateEnd

(Dollars in thousands)

September $ 339,552 1.26 % $ 98,464 0.51 % $ 75,000 2.99 % $ 513,016 1.37 %30, 2021

December 376,966 1.12 74,062 0.26 - - 451,028 0.98 31, 2021

March 31, 299,872 1.24 24,876 0.65 - - 324,748 1.19 2022

June 30, 318,740 1.15 30,575 0.09 - - 349,315 1.06 2022

$ 1,335,130 1.19 $ 227,977 0.39 $ 75,000 2.99 $ 1,638,107 1.16

(1)

The maturity date for FHLB advances tied to interest rate swaps is based on the maturity date of the related interest rate swap.

The following tables present 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. FHLB advances are presented at par. The effective rate is shown as a weighted average and includes the impact of interest rate swaps and the amortization of deferred prepayment penalties resulting from FHLB advances previously prepaid. The weighted average maturity ("WAM") is the remaining weighted average contractual term in years. The beginning and ending WAMs represent the remaining maturity at each date presented. For new borrowings, the WAMs presented are as of the date of issue.

(1) The maturity date for FHLB advances tied to interest rate swaps is based on the maturity date of the related interest rate swap.

The following tables present 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. FHLB advances are presented at par. The effective rate is shown as a weighted average and includes the impact of interest rate swaps and the amortization of deferred prepayment penalties resulting from FHLB advances previously prepaid. The weighted average maturity ("WAM") is the remaining weighted average contractual term in years. The beginning and ending WAMs represent the remaining maturity at each date presented. For new borrowings, the WAMs presented are as of the date of issue.

For the Three Months Ended

June 30, 2021 March 31, 2021 December 31, 2020 September 30, 2020

Effective Effective Effective Effective

Amount Rate WAM Amount Rate WAM Amount Rate WAM Amount Rate WAM

(Dollars in thousands)

Beginning balance $ 1,590,000 1.94 % 3.3 $ 1,740,000 2.26 % 3.0 $ 1,790,000 2.31 % 3.0 $ 1,990,000 2.29 % 2.9

Maturities and prepayments:

FHLB advances (300,000 ) 1.30 (315,000 ) 2.20 (350,000 ) 2.40 (440,000 ) 2.49

Repurchase agreements - - - - - - (100,000 ) 2.53

New FHLB borrowings:

Fixed-rate 200,000 0.90 4.5 100,000 1.24 6.0 100,000 1.09 5.0 - - -

Interest rate swaps^(1) 100,000 3.14 7.0 65,000 2.65 3.1 200,000 2.63 1.5 340,000 2.73 3.5

Ending balance $ 1,590,000 2.00 3.5 $ 1,590,000 1.94 3.3 $ 1,740,000 2.26 3.0 $ 1,790,000 2.31 3.0

For the Nine Months Ended

June 30, 2021

June 30, 2020

Effective

Effective

Amount

Rate

WAM

Amount

Rate

WAM

(Dollars in thousands)

Beginning balance

$

1,790,000

2.31

%

3.0

$

2,140,000

2.38

%

2.6

Maturities and prepayments:

FHLB advances

(965,000

)

1.99

(965,000

)

2.41

New FHLB borrowings:

Fixed-rate

400,000

1.03

5.0

450,000

1.76

4.8

Interest rate swaps(1)

365,000

2.77

3.3

365,000

2.75

4.3

Ending balance

$

1,590,000

2.00

3.5

$

1,990,000

2.29

2.9

For the Nine Months Ended

June 30, 2021 June 30, 2020

Effective Effective

Amount Rate WAM Amount Rate WAM

(Dollars in thousands)

Beginning balance $ 1,790,000 2.31 % 3.0 $ 2,140,000 2.38 % 2.6

Maturities and prepayments:

FHLB advances (965,000 ) 1.99 (965,000 ) 2.41

New FHLB borrowings:

Fixed-rate 400,000 1.03 5.0 450,000 1.76 4.8

Interest rate 365,000 2.77 3.3 365,000 2.75 4.3 swaps^(1)

Ending balance $ 1,590,000 2.00 3.5 $ 1,990,000 2.29 2.9

(1)

Represents adjustable-rate FHLB advances for which the Bank has entered into interest rate swaps to hedge the variability in cash flows associated with the advances. The effective rate and WAM presented include the effect of the interest rate swaps.

Average Rates and Lives

At June 30, 2021, the Bank's gap between the amount of interest-earning assets and interest-bearing liabilities projected to reprice within one year was $(478.2) million, or (5.0)% of total assets, compared to $(652.3) million, or (6.7)% of total assets, at March 31, 2021. The change in the one-year gap amount was due primarily to a decrease in the amount of liabilities projected to reprice at June 30, 2021. During the current quarter, the Bank replaced $200.0 million of adjustable-rate FHLB advances with long-term fixed-rate advances with maturities greater than one year. In addition, the amount of assets projected to reprice decreased due to a lower balance of cash and investment securities at June 30, 2021 compared to March 31, 2021. This was somewhat offset by lower interest rates as of June 30, 2021 compared to March 31, 2021. As interest rates decrease, borrowers have more economic incentive to refinance their mortgages, resulting in higher projected cash flows on these assets.

The majority of interest-earning assets anticipated to reprice in the coming year are repayments and prepayments on one- to four-family loans and MBS, both of which include the option to prepay without a fee being paid by the contract holder. The amount of interest-bearing liabilities expected to reprice in a given period is not typically significantly impacted by changes in interest rates, because the Bank's borrowings and certificate of deposit portfolios have contractual maturities and generally cannot be terminated early without a prepayment penalty. If interest rates were to increase 200 basis points, as of June 30, 2021, the Bank's one-year gap is projected to be $(1.12) billion, or (11.7)% of total assets. The change in the gap compared to when there is no change in rates is due to lower anticipated net cash flows primarily due to lower repayments on mortgage-related assets in the higher rate environment. This compares to a one-year gap of $(1.32) billion, or (13.6)% of total assets, if interest rates were to have increased 200 basis points as of March 31, 2021.

During the current quarter, loan repayments totaled $511.2 million and cash flows from the securities portfolio totaled $211.3 million. The majority of these cash flows were reinvested into new loans and securities at current market interest rates. Total cash flows from term liabilities that matured and/or repriced into current market interest rates during the current quarter were $457.3 million. These offsetting cash flows allow the Bank to manage its interest rate risk and gap position more precisely than if the Bank did not have offsetting cash flows due to its mix of assets or maturity structure of liabilities.

The Bank primarily uses long-term fixed-rate borrowings with no embedded options to lengthen the average life of the Bank's liabilities. The fixed-rate characteristics of these borrowings lock-in the cost until maturity and thus decrease the amount of liabilities repricing as interest rates move higher compared to funding with lower-cost short-term borrowings. These borrowings are laddered in order to prevent large amounts of liabilities repricing in any one period. The WAL of the Bank's term borrowings as of June 30, 2021 was 2.6 years. However, including the impact of interest rate swaps related to $440.0 million of adjustable-rate FHLB advances, the WAL of the Bank's term borrowings as of June 30, 2021 was 3.5 years. The interest rate swaps effectively convert the adjustable-rate borrowings into long-term, fixed-rate liabilities.

In addition to these wholesale strategies, the Bank has benefited from an increase in non-maturity deposits. As market interest rates rise, rates paid on non-maturity deposits are not expected to increase as quickly. Specifically, checking accounts and savings accounts have had minimal interest rate fluctuations throughout previous interest rate cycles, though no assurance can be given that this will be the case in future interest rate cycles. The balances and rates of these accounts have historically tended to remain very stable over time, giving them the characteristic of long-term liabilities. The Bank uses historical data pertaining to these accounts to estimate their future balances. Additionally, as we expand the commercial banking business, we expect to have the ability to obtain lower-costing commercial deposits, which could be used to reduce the cost of funds by replacing FHLB borrowings and wholesale deposits.

With the significant decrease in interest rates during calendar year 2020, the Bank decreased its rates on certificates of deposit and money market accounts on pace with competitors in its market areas, and the low rate environment has continued midway through calendar year 2021. The Bank will continue to adjust rates as market conditions allow.

The following table presents the weighted average yields/rates and WALs (in years), after applying prepayment, call assumptions, and decay rates for our interest-earning assets and interest-bearing liabilities as of June 30, 2021. Yields presented for interest-earning assets include the amortization of fees, costs, premiums and discounts, which are considered adjustments to the yield. The interest rate presented for term borrowings is the effective rate, which includes the impact of interest rate swaps and the amortization of deferred prepayment penalties resulting from FHLB advances previously prepaid. The WAL presented for term borrowings includes the effect of interest rate swaps. The maturity and repricing terms presented for one- to four-family loans represent the contractual terms of the loan.

Represents adjustable-rate FHLB advances for which the Bank has entered(1) into interest rate swaps to hedge the variability in cash flows associated with the advances. The effective rate and WAM presented include the effect of the interest rate swaps.

Average Rates and Lives

At June 30, 2021, the Bank's gap between the amount of interest-earning assets and interest-bearing liabilities projected to reprice within one year was $(478.2) million, or (5.0)% of total assets, compared to $(652.3) million, or (6.7)% of total assets, at March 31, 2021. The change in the one-year gap amount was due primarily to a decrease in the amount of liabilities projected to reprice at June 30, 2021. During the current quarter, the Bank replaced $200.0 million of adjustable-rate FHLB advances with long-term fixed-rate advances with maturities greater than one year. In addition, the amount of assets projected to reprice decreased due to a lower balance of cash and investment securities at June 30, 2021 compared to March 31, 2021. This was somewhat offset by lower interest rates as of June 30, 2021 compared to March 31, 2021. As interest rates decrease, borrowers have more economic incentive to refinance their mortgages, resulting in higher projected cash flows on these assets.

The majority of interest-earning assets anticipated to reprice in the coming year are repayments and prepayments on one- to four-family loans and MBS, both of which include the option to prepay without a fee being paid by the contract holder. The amount of interest-bearing liabilities expected to reprice in a given period is not typically significantly impacted by changes in interest rates, because the Bank's borrowings and certificate of deposit portfolios have contractual maturities and generally cannot be terminated early without a prepayment penalty. If interest rates were to increase 200 basis points, as of June 30, 2021, the Bank's one-year gap is projected to be $(1.12) billion, or (11.7)% of total assets. The change in the gap compared to when there is no change in rates is due to lower anticipated net cash flows primarily due to lower repayments on mortgage-related assets in the higher rate environment. This compares to a one-year gap of $(1.32) billion, or (13.6)% of total assets, if interest rates were to have increased 200 basis points as of March 31, 2021.

During the current quarter, loan repayments totaled $511.2 million and cash flows from the securities portfolio totaled $211.3 million. The majority of these cash flows were reinvested into new loans and securities at current market interest rates. Total cash flows from term liabilities that matured and/or repriced into current market interest rates during the current quarter were $457.3 million. These offsetting cash flows allow the Bank to manage its interest rate risk and gap position more precisely than if the Bank did not have offsetting cash flows due to its mix of assets or maturity structure of liabilities.

The Bank primarily uses long-term fixed-rate borrowings with no embedded options to lengthen the average life of the Bank's liabilities. The fixed-rate characteristics of these borrowings lock-in the cost until maturity and thus decrease the amount of liabilities repricing as interest rates move higher compared to funding with lower-cost short-term borrowings. These borrowings are laddered in order to prevent large amounts of liabilities repricing in any one period. The WAL of the Bank's term borrowings as of June 30, 2021 was 2.6 years. However, including the impact of interest rate swaps related to $440.0 million of adjustable-rate FHLB advances, the WAL of the Bank's term borrowings as of June 30, 2021 was 3.5 years. The interest rate swaps effectively convert the adjustable-rate borrowings into long-term, fixed-rate liabilities.

In addition to these wholesale strategies, the Bank has benefited from an increase in non-maturity deposits. As market interest rates rise, rates paid on non-maturity deposits are not expected to increase as quickly. Specifically, checking accounts and savings accounts have had minimal interest rate fluctuations throughout previous interest rate cycles, though no assurance can be given that this will be the case in future interest rate cycles. The balances and rates of these accounts have historically tended to remain very stable over time, giving them the characteristic of long-term liabilities. The Bank uses historical data pertaining to these accounts to estimate their future balances. Additionally, as we expand the commercial banking business, we expect to have the ability to obtain lower-costing commercial deposits, which could be used to reduce the cost of funds by replacing FHLB borrowings and wholesale deposits.

With the significant decrease in interest rates during calendar year 2020, the Bank decreased its rates on certificates of deposit and money market accounts on pace with competitors in its market areas, and the low rate environment has continued midway through calendar year 2021. The Bank will continue to adjust rates as market conditions allow.

The following table presents the weighted average yields/rates and WALs (in years), after applying prepayment, call assumptions, and decay rates for our interest-earning assets and interest-bearing liabilities as of June 30, 2021. Yields presented for interest-earning assets include the amortization of fees, costs, premiums and discounts, which are considered adjustments to the yield. The interest rate presented for term borrowings is the effective rate, which includes the impact of interest rate swaps and the amortization of deferred prepayment penalties resulting from FHLB advances previously prepaid. The WAL presented for term borrowings includes the effect of interest rate swaps. The maturity and repricing terms presented for one- to four-family loans represent the contractual terms of the loan.

Amount Yield/ WAL % of % of Rate Category Total

(Dollars in thousands)

Investment securities $ 496,677 0.60 % 4.0 24.7 % 5.4 %

MBS - fixed 1,377,325 1.39 4.0 68.3 14.9

MBS - adjustable 141,703 2.05 3.7 7.0 1.5

Total securities 2,015,705 1.24 3.9 100.0 % 21.8

Loans receivable:

Fixed-rate one- to four-family:

<= 15 years 1,266,125 2.71 3.6 18.0 % 13.7

> 15 years 4,219,769 3.35 5.6 59.8 45.7

Fixed-rate commercial 437,323 4.30 4.1 6.2 4.8

All other fixed-rate 43,150 4.09 6.1 0.6 0.5 loans

Total fixed-rate loans 5,966,367 3.29 5.1 84.6 64.7

Adjustable-rate one- to four-family:

<= 36 months 168,705 1.81 4.9 2.4 1.8

> 36 months 454,734 2.86 3.2 6.4 4.9

Adjustable-rate 377,668 4.08 6.7 5.4 4.1 commercial

All other adjustable-rate 84,151 4.25 2.5 1.2 0.9 loans

Total adjustable-rate 1,085,258 3.23 4.6 15.4 11.7 loans

Total loans receivable 7,051,625 3.28 5.0 100.0 % 76.4

FHLB stock 73,630 5.20 2.6 0.8

Cash and cash equivalents 95,305 0.12 - 1.0

Total interest-earning $ 9,236,265 2.82 4.7 100.0 %assets



Non-maturity deposits $ 3,756,725 0.14 5.8 56.6 % 45.7 %

Retail certificates of 2,412,806 1.50 1.3 36.4 29.3 deposit

Commercial certificates 214,956 0.71 0.6 3.2 2.6 of deposit

Public unit certificates 253,807 0.36 0.4 3.8 3.1 of deposit

Total deposits 6,638,294 0.66 3.8 100.0 % 80.7

Term borrowings 1,590,000 2.00 3.5 19.3

Total interest-bearing $ 8,228,294 0.92 3.7 100.0 %liabilities

Average Balance Sheets

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

For the Nine Months Ended

June 30, 2021 June 30, 2020

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 $ 3,963,088 $ 104,482 3.52 % $ 3,946,543 $ 113,228 3.83 %

Correspondent 2,006,257 35,124 2.33 2,386,194 54,780 3.06 purchased

Bulk purchased 195,678 2,870 1.96 235,928 4,837 2.73

Total one- to 6,165,023 142,476 3.08 6,568,665 172,845 3.51 four-family loans

Commercial loans 780,941 26,707 4.51 775,021 28,228 4.79

Consumer loans 103,241 3,575 4.63 126,049 5,106 5.41

Total loans 7,049,205 172,758 3.26 7,469,735 206,179 3.67 receivable^(1)

MBS^(2) 1,424,914 16,499 1.54 929,458 17,584 2.52

Investment 476,755 2,075 0.58 257,778 3,736 1.93 securities^(2)(3)

FHLB stock 78,784 2,964 5.03 99,945 4,747 6.34

Cash and cash 152,792 117 0.10 166,272 1,126 0.89 equivalents

Totalinterest-earning 9,182,450 194,413 2.82 8,923,188 233,372 3.48 assets

Othernon-interest-earning 443,370 459,877 assets

Total assets $ 9,625,820 $ 9,383,065



Liabilities andstockholders' equity:

Interest-bearing liabilities:

Checking $ 1,455,468 588 0.05 $ 1,141,682 550 0.06

Savings 478,011 209 0.06 375,858 222 0.08

Money market 1,554,947 3,220 0.28 1,216,377 5,395 0.59

Retail/commercial 2,726,035 33,032 1.62 2,702,272 42,096 2.08 certificates

Wholesale 254,606 1,022 0.54 287,977 4,036 1.87 certificates

Total deposits 6,469,067 38,071 0.79 5,724,166 52,299 1.22

Borrowings^(4) 1,654,544 26,885 2.16 2,148,687 37,421 2.31

Totalinterest-bearing 8,123,611 64,956 1.07 7,872,853 89,720 1.52 liabilities

Othernon-interest-bearing 219,204 195,957 liabilities

Stockholders' equity 1,283,005 1,314,255

Total liabilitiesand stockholders' $ 9,625,820 $ 9,383,065 equity



Net interest income^ $ 129,457 $ 143,652 (5)

Net interest rate 1.75 1.96 spread^(6)

Net interest-earning $ 1,058,839 $ 1,050,335 assets

Net interest margin^ 1.88 2.15 (7)

Ratio ofinterest-earningassets to 1.13x 1.13xinterest-bearingliabilities



Selected performance ratios:

Return on average 0.80 % 0.66 %assets (annualized)

Return on average 5.98 4.69 equity (annualized)

Average equity to 13.33 14.01 average assets

Operating expense 1.21 1.12 ratio^(8)

Efficiency ratio^(9) 57.36 49.81

For the Three Months Ended

June 30, 2021

March 31, 2021

Average

Interest

Average

Interest

Outstanding

Earned/

Yield/

Outstanding

Earned/

Yield/

Amount

Paid

Rate

Amount

Paid

Rate

Assets:

(Dollars in thousands)

Interest-earning assets:

One- to four-family loans:

Originated

$

3,982,990

$

33,727

3.39

%

$

3,956,867

$

34,794

3.52

%

Correspondent purchased

1,971,209

10,367

2.10

1,981,735

11,826

2.39

Bulk purchased

185,198

826

1.78

195,925

932

1.90

Total one- to four-family loans

6,139,397

44,920

2.93

6,134,527

47,552

3.10

Commercial loans

805,721

8,744

4.29

766,972

8,559

4.46

Consumer loans

96,980

1,115

4.61

102,613

1,174

4.64

Total loans receivable(1)

7,042,098

54,779

3.11

7,004,112

57,285

3.27

MBS(2)

1,529,679

5,360

1.40

1,444,554

5,429

1.50

Investment securities(2)(3)

533,076

763

0.57

466,077

629

0.54

FHLB stock

73,689

944

5.14

77,391

951

4.98

Cash and cash equivalents

97,890

26

0.11

158,544

40

0.10

Total interest-earning assets

9,276,432

61,872

2.66

9,150,678

64,334

2.81

Other non-interest-earning assets

430,639

446,265

Total assets

$

9,707,071

$

9,596,943

Liabilities and stockholders' equity:

Interest-bearing liabilities:

Checking

$

1,546,665

182

0.05

$

1,459,964

183

0.05

Savings

513,528

72

0.06

477,985

69

0.06

Money market

1,646,970

998

0.24

1,543,911

1,038

0.27

Retail/commercial certificates

2,678,914

9,938

1.49

2,753,439

10,917

1.61

Wholesale certificates

251,571

285

0.45

260,712

322

0.50

Total deposits

6,637,648

11,475

0.69

6,496,011

12,529

0.78

Borrowings(4)

1,582,905

7,826

1.97

1,603,459

8,732

2.19

Total interest-bearing liabilities

8,220,553

19,301

0.94

8,099,470

21,261

1.06

Other non-interest-bearing liabilities

203,532

213,602

Stockholders' equity

1,282,986

1,283,871

Total liabilities and stockholders' equity

$

9,707,071

$

9,596,943

Net interest income(5)

$

42,571

$

43,073

Net interest rate spread(6)

1.72

1.75

Net interest-earning assets

$

1,055,879

$

1,051,208

Net interest margin(7)

1.84

1.88

Ratio of interest-earning assets to interest-bearing liabilities

1.13x

1.13x

Selected performance ratios:

Return on average assets (annualized)

0.75

%

0.85

%

Return on average equity (annualized)

5.67

6.37

Average equity to average assets

13.22

13.38

Operating expense ratio(8)

1.14

1.36

Efficiency ratio(9)

57.73

58.78

For the Three Months Ended

June 30, 2021 March 31, 2021

Average Interest Average Interest

Outstanding Earned/ Yield/ Outstanding Earned/ Yield/

Amount Paid Rate Amount Paid Rate

Assets: (Dollars in thousands)

Interest-earning assets:

One- to four-family loans:

Originated $ 3,982,990 $ 33,727 3.39 % $ 3,956,867 $ 34,794 3.52 %

Correspondent 1,971,209 10,367 2.10 1,981,735 11,826 2.39 purchased

Bulk purchased 185,198 826 1.78 195,925 932 1.90

Total one- to 6,139,397 44,920 2.93 6,134,527 47,552 3.10 four-family loans

Commercial loans 805,721 8,744 4.29 766,972 8,559 4.46

Consumer loans 96,980 1,115 4.61 102,613 1,174 4.64

Total loans 7,042,098 54,779 3.11 7,004,112 57,285 3.27 receivable^(1)

MBS^(2) 1,529,679 5,360 1.40 1,444,554 5,429 1.50

Investment 533,076 763 0.57 466,077 629 0.54 securities^(2)(3)

FHLB stock 73,689 944 5.14 77,391 951 4.98

Cash and cash 97,890 26 0.11 158,544 40 0.10 equivalents

Totalinterest-earning 9,276,432 61,872 2.66 9,150,678 64,334 2.81 assets

Othernon-interest-earning 430,639 446,265 assets

Total assets $ 9,707,071 $ 9,596,943



Liabilities andstockholders' equity:

Interest-bearing liabilities:

Checking $ 1,546,665 182 0.05 $ 1,459,964 183 0.05

Savings 513,528 72 0.06 477,985 69 0.06

Money market 1,646,970 998 0.24 1,543,911 1,038 0.27

Retail/commercial 2,678,914 9,938 1.49 2,753,439 10,917 1.61 certificates

Wholesale 251,571 285 0.45 260,712 322 0.50 certificates

Total deposits 6,637,648 11,475 0.69 6,496,011 12,529 0.78

Borrowings^(4) 1,582,905 7,826 1.97 1,603,459 8,732 2.19

Totalinterest-bearing 8,220,553 19,301 0.94 8,099,470 21,261 1.06 liabilities

Othernon-interest-bearing 203,532 213,602 liabilities

Stockholders' equity 1,282,986 1,283,871

Total liabilitiesand stockholders' $ 9,707,071 $ 9,596,943 equity



Net interest income^ $ 42,571 $ 43,073 (5)

Net interest rate 1.72 1.75 spread^(6)

Net interest-earning $ 1,055,879 $ 1,051,208 assets

Net interest margin^ 1.84 1.88 (7)

Ratio ofinterest-earningassets to 1.13x 1.13xinterest-bearingliabilities



Selected performance ratios:

Return on average 0.75 % 0.85 %assets (annualized)

Return on average 5.67 6.37 equity (annualized)

Average equity to 13.22 13.38 average assets

Operating expense 1.14 1.36 ratio^(8)

Efficiency ratio^(9) 57.73 58.78

(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 $7.2 million and $14.7 million for the nine months ended June 30, 2021 and June 30, 2020, respectively, and $5.1 million and $7.5 million for the quarters ended June 30, 2021 and March 31, 2021, respectively.

(4)

The FHLB advance amounts and rates included in this line include the effect of interest rate swaps and are net of deferred prepayment penalties.

(5)

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.

(6)

Net interest rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.

(7)

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

(8)

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

(9)

The efficiency ratio represents non-interest expense as a percentage of the sum of net interest income (pre-provision for credit losses) and non-interest income.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210729005274/en/

CONTACT: Kent Townsend Executive Vice President, Chief Financial Officer and Treasurer (785) 231-6360 ktownsend@capfed.com

CONTACT: Investor Relations (785) 270-6055 investorrelations@capfed.com