Business Wire | Oct 28, 2021 09:00AM EDT

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

Oct. 28, 2021

TOPEKA, Kan.--(BUSINESS WIRE)--Oct. 28, 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 fiscal year ended September 30, 2021. The Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2021 will be filed with the Securities and Exchange Commission ("SEC") on or about November 24, 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 $18.6 million; * basic and diluted earnings per share of $0.14; * net interest margin of 1.97%; * paid dividends of $11.5 million, or $0.085 per share; and * on October 19, 2021, announced a cash dividend of $0.085 per share, payable on November 19, 2021 to stockholders of record as of the close of business on November 5, 2021.

Highlights for the fiscal year include:

* net income of $76.1 million; * basic and diluted earnings per share of $0.56; * net interest margin of 1.90%; * deposit growth of 6.6%; * paid dividends of $117.9 million, or $0.87 per share; and * on October 28, 2021, announced a fiscal year 2021 cash true-up dividend of $0.22 per share, payable on December 3, 2021 to stockholders of record as of the close of business on November 19, 2021.

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

For the quarter ended September 30, 2021, the Company recognized net income of $18.6 million, or $0.14 per share, compared to net income of $18.2 million, or $0.13 per share, for the quarter ended June 30, 2021. The net interest margin increased 13 basis points, from 1.84% for the prior quarter to 1.97% for the current quarter, due mainly to a higher loan portfolio average yield.

Interest and Dividend Income

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

For the Three Months Ended

September June 30, Change Expressed in: 30,

2021 2021 Dollars Percent

(Dollars in thousands)

INTEREST AND DIVIDEND INCOME:

Loans receivable $ 57,139 $ 54,779 $ 2,360 4.3 %

Mortgage-backed securities 4,900 5,360 (460 ) (8.6 )("MBS")

Federal Home Loan Bank Topeka 952 944 8 0.8 ("FHLB") stock

Investment securities 750 763 (13 ) (1.7 )

Cash and cash equivalents 27 26 1 3.8

Total interest and dividend $ 63,768 $ 61,872 $ 1,896 3.1 income

The increase in interest income on loans receivable was primarily a result of an increase in the weighted average portfolio yield, from 3.11% for the prior quarter to 3.21% for the current quarter, mainly in the one- to four-family correspondent portfolio due to a reduction in premium amortization related to a slowdown in endorsement and payoff activity. The decrease in interest income on MBS was due primarily to a decrease in the weighted average portfolio yield, from 1.40% for the prior quarter to 1.30% for the current quarter, resulting from an increase in premium amortization related to prepayment activity.

Interest Expense

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

For the Three Months Ended

September 30, June 30, Change Expressed in:

2021 2021 Dollars Percent

(Dollars in thousands)

INTEREST EXPENSE:

Deposits $ 10,335 $ 11,475 $ (1,140 ) (9.9 )%

Borrowings 7,889 7,826 63 0.8

Total interest expense $ 18,224 $ 19,301 $ (1,077 ) (5.6 )

The decrease in interest expense on deposits was due primarily to a decrease in the weighted average rate paid on the portfolio, from 0.69% for the prior quarter to 0.62% for the current quarter, and a decrease in the average balance of the retail certificate of deposit portfolio. See "Financial Condition as of September 30, 2021" below for additional information on deposits.

Provision for Credit Losses

For the quarter ended September 30, 2021, the Bank recorded a negative provision for credit losses of $1.3 million, compared to a negative provision for credit losses of $2.7 million for the prior quarter. The negative provision in the current quarter was composed of a $906 thousand decrease in the allowance for credit losses ("ACL") for loans and a $418 thousand decrease in reserves for off-balance sheet credit exposures. The $1.3 million negative provision for credit losses in the current quarter was due primarily to more favorable forecasted economic conditions at September 30, 2021 compared to June 30, 2021, largely related to commercial loans. However, the negative provision for the current quarter was lower than the prior quarter, as the rate of improvement in the forecasted economic conditions was less significant as compared to June 30, 2021. See additional discussion regarding the Bank's ACL and reserves for off-balance sheet credit exposures at September 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

September 30, June 30, Change Expressed in:

2021 2021 Dollars Percent

(Dollars in thousands)

NON-INTEREST INCOME:

Deposit service fees $ 3,294 $ 3,227 $ 67 2.1 %

Insurance commissions 781 723 58 8.0

Other non-interest income 1,228 1,286 (58 ) (4.5 )

Total non-interest income $ 5,303 $ 5,236 $ 67 1.3

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

September June 30, Change Expressed 30, in:

2021 2021 Dollars Percent

(Dollars in thousands)

NON-INTEREST EXPENSE:

Salaries and employee benefits $ 14,600 $ 13,867 $ 733 5.3 %

Information technology and related 4,354 4,736 (382 ) (8.1 )expense

Occupancy, net 3,639 3,504 135 3.9

Regulatory and outside services 1,476 1,469 7 0.5

Advertising and promotional 1,404 1,407 (3 ) (0.2 )

Deposit and loan transaction costs 638 693 (55 ) (7.9 )

Federal insurance premium 657 633 24 3.8

Office supplies and related expense 426 402 24 6.0

Other non-interest expense 1,053 891 162 18.2

Total non-interest expense $ 28,247 $ 27,602 $ 645 2.3

The increase in salaries and employee benefits was due primarily to an increase in incentive compensation. The decrease in information technology and related expense was due mainly to a decrease in professional services expense, primarily as a result of the completion of some projects in the prior quarter, and software licensing expense. Included in other non-interest expense in the prior quarter was a partial reversal of a write-down on a branch property sold by the Bank.

The Company's efficiency ratio was 55.55% for the current quarter compared to 57.73% for the prior quarter. The improvement in the efficiency ratio was due primarily to higher net interest income. The efficiency ratio is a measure of a financial institution's total non-interest expense as a percentage of the sum of net interest income (pre-provision for credit losses) and non-interest income. A lower value indicates that the financial institution is generating revenue with a proportionally lower level of expense, relative to the net interest margin and non-interest income.

Income Tax Expense

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

For the Three Months Ended

September June 30, Change Expressed 30, in:

2021 2021 Dollars Percent

(Dollars in thousands)

Income before income tax $ 23,923 $ 22,896 $ 1,027 4.5 %expense

Income tax expense 5,370 4,709 661 14.0

Net income $ 18,553 $ 18,187 $ 366 2.0



Effective Tax Rate 22.4 % 20.6 %

The increase in income tax expense was due primarily to higher pretax income, as well as a higher effective tax rate in the current quarter. The higher effective tax rate was due mainly to adjustments of permanent tax differences, specifically the Company's low income housing partnership amounts.

Comparison of Operating Results for the Years Ended September 30, 2021 and 2020

The Company recognized net income of $76.1 million, or $0.56 per share, for fiscal year 2021 compared to net income of $64.5 million, or $0.47 per share, for fiscal year 2020. The increase in net income was due primarily to recording a $22.3 million provision for credit losses during the prior year compared to recording a negative provision for credit losses of $8.5 million in the current year, partially offset by a decrease in net interest income and an increase in income tax expense. Net interest income decreased $14.3 million, or 7.6%, from the prior year to $175.0 million for the current year. The net interest margin decreased 22 basis points, from 2.12% for the prior year to 1.90% for the current year. 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 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 Year Ended

September 30, Change Expressed in:

2021 2020 Dollars Percent

(Dollars in thousands)

INTEREST AND DIVIDEND INCOME:

Loans receivable $ 229,897 $ 270,494 $ (40,597 ) (15.0 ) %

MBS 21,399 23,009 (1,610 ) (7.0 )

FHLB Stock 3,916 5,827 (1,911 ) (32.8 )

Investment securities 2,825 4,467 (1,642 ) (36.8 )

Cash and cash equivalents 144 1,181 (1,037 ) (87.8 )

Total interest and dividend $ 258,181 $ 304,978 $ (46,797 ) (15.3 )income

The decrease in interest income on loans receivable was due mainly to a decrease in the weighted average yield, primarily in the one- to four-family loan portfolio. The decrease in the weighted average yield on the one- to four-family loan portfolio was due to endorsements and refinances to lower market rates, higher premium amortization related to correspondent one- to four-family loans due to high payoff and endorsement activity, along with 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 compared to the prior year due primarily to a reduction in the correspondent one-to four-family loan portfolio. See "Average Balance Sheets" below.

The decrease in interest income on the MBS portfolio was due to a decrease in the weighted average yield as a result of purchases at lower market yields and the repricing of existing adjustable-rate MBS to lower market yields, partially offset by an increase in the average balance of the portfolio. Cash flows from the loan portfolio were used to purchase securities during the current fiscal year.

The decrease in dividend income on FHLB stock was due mainly to a decrease in the average balance of FHLB stock, along with a decrease in the dividend rate paid by FHLB. 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 decrease in the weighted average yield as a result of purchases at lower market yields, partially offset by an 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 following table presents the components of interest expense for the time periods presented, along with the change measured in dollars and percent.

For the Year Ended

September 30, Change Expressed in:

2021 2020 Dollars Percent

(Dollars in thousands)

INTEREST EXPENSE:

Deposits $ 48,406 $ 67,598 $ (19,192 ) (28.4 )%

Borrowings 34,774 48,045 (13,271 ) (27.6 )

Total interest expense $ 83,180 $ 115,643 $ (32,463 ) (28.1 )

The decrease in interest expense on deposits was due mainly to a decrease in the weighted average rate paid on retail certificates of deposit, money market accounts, and wholesale certificates of deposit. Since the onset of the Coronavirus Disease 2019 ("COVID-19") pandemic, retail 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 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. The decrease in interest expense on borrowings was also a result of lowering the cost of FHLB advances by prepaying certain advances during the current and prior years.

Provision for Credit Losses

The Bank recorded a negative provision for credit losses during the current year of $8.5 million, compared to a $22.3 million provision for credit losses during the prior year. The negative provision in the current fiscal year was composed of a $6.5 million decrease in the ACL for loans and a $2.0 million decrease in reserves for off-balance sheet credit exposures. The negative provision for credit losses in the current fiscal year was due primarily to favorable forecasted economic outlooks during the year, largely related to commercial loans. See additional discussion regarding the Bank's ACL and reserve for off-balance sheet credit exposures at September 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 Year Ended

September 30, Change Expressed in:

2021 2020 Dollars Percent

(Dollars in thousands)

NON-INTEREST INCOME:

Deposit service fees $ 12,282 $ 11,285 $ 997 8.8 %

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

Insurance commissions 3,030 2,487 543 21.8

Other non-interest income 5,388 5,827 (439 ) (7.5 )

Total non-interest income $ 28,086 $ 19,599 $ 8,487 43.3

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 primarily related to lower income from bank-owned life insurance ("BOLI"), due to a reduction in the yield as a result of lower market rates and reduced death benefit receipts.

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 Year Ended

September 30, Change Expressed in:

2021 2020 Dollars Percent

(Dollars in thousands)

NON-INTEREST EXPENSE:

Salaries and employee benefits $ 56,002 $ 52,996 $ 3,006 5.7 %

Information technology and 17,922 16,974 948 5.6 related expense

Occupancy, net 14,045 13,870 175 1.3

Regulatory and outside services 5,764 5,762 2 -

Advertising and promotional 5,133 4,889 244 5.0

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

Deposit and loan transaction 2,761 2,890 (129 ) (4.5 )costs

Federal insurance premium 2,545 914 1,631 178.4

Office supplies and related 1,715 2,195 (480 ) (21.9 )expense

Other non-interest expense 4,930 5,514 (584 ) (10.6 )

Total non-interest expense $ 115,569 $ 106,004 $ 9,565 9.0

The increase in salaries and employee benefits was due primarily to an increase in incentive compensation, 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 professional services expense. During the current fiscal year, 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 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 56.91% for the current year compared to 50.74% for the prior year. The change in the efficiency ratio was due to higher non-interest expense and lower net interest income, partially offset by higher non-interest income. Management continues to strive to control operating costs. The increase in the efficiency ratio in the current year 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, along with higher federal insurance premium expense as the Bank utilized an assessment credit from the FDIC during the prior year.

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 Year Ended

September 30, Change Expressed in:

2021 2020 Dollars Percent

(Dollars in thousands)



Income before income tax expense $ 96,028 $ 80,630 $ 15,398 19.1 %

Income tax expense 19,946 16,090 3,856 24.0

Net income $ 76,082 $ 64,540 $ 11,542 17.9



Effective Tax Rate 20.8 % 20.0 %

The increase in income tax expense was due primarily to higher pretax income in the current year, as well as a higher effective tax rate compared to the prior year. The effective tax rate was lower in the prior year due primarily to a discrete benefit recognized in the prior year related to certain previously acquired BOLI policies. Management anticipates the effective income tax rate for fiscal year 2022 will be approximately 21% to 22%.

Financial Condition as of September 30, 2021

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

Annualized

September 30, June 30, Percent September 30, Percent

2021 2021 Change 2020 Change

(Dollars in thousands)

Total assets $ 9,631,246 $ 9,649,665 (0.8 )% $ 9,487,218 1.5 %

Available-for-sale 2,014,608 2,015,705 (0.2 ) 1,560,950 29.1 ("AFS") securities

Loans receivable, 7,081,142 7,033,827 2.7 7,202,851 (1.7 )net

Deposits 6,597,396 6,638,294 (2.5 ) 6,191,408 6.6

Borrowings 1,582,850 1,582,400 0.1 1,789,313 (11.5 )

Stockholders' 1,242,273 1,237,624 1.5 1,284,859 (3.3 )equity

Equity to totalassets at end of 12.9 % 12.8 % 13.5 % period

Average number ofbasic shares 135,571 135,505 0.2 137,705 (1.5 )outstanding

Average number ofdiluted shares 135,571 135,537 0.1 137,705 (1.5 )outstanding

The following table summarizes loan originations and purchases and borrowing activity, along with the related weighted average rates, during the periods indicated.

For the Three Months For the Year Ended Ended

September 30, 2021 September 30, 2021

Amount Rate Amount Rate

(Dollars in thousands)

Loan originations and purchases

One- to four-family and consumer:

Originated $ 237,358 2.86 % $ 1,185,924 2.78 %

Purchased 184,562 2.68 689,527 2.64



Commercial:

Originated 43,021 4.08 251,530 3.43

Purchased 19,600 4.06 134,714 4.15

$ 484,541 2.95 $ 2,261,695 2.89

Borrowing activity

Maturities and prepayments $ (340,000 ) 2.73 $ (1,305,000 ) 2.18

New borrowings 340,000 2.17 1,105,000 1.96

Comparison of September 30, 2021 to June 30, 2021

The decrease in total assets was due primarily to a decrease in cash and cash equivalents, partially offset by an increase in loans receivable, as excess operating cash was generally used to fund loan growth during the current quarter. The increase in loans receivable was mainly in the one- to four-family correspondent loan portfolio.

The decrease in deposits was due primarily to a decrease in the certificate of deposit portfolio, partially offset by an increase in money market accounts, as customers moved some of the funds from maturing certificates to more liquid investment options such as the Bank's money market accounts.

Comparison of September 30, 2021 to September 30, 2020

The increase in total assets was due mainly to an increase in securities, partially offset by decreases in cash and cash equivalents and loans receivable. 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. The decrease in loans receivable was primarily in the one- to four-family correspondent loan portfolio.

The increase in total deposits was in non-maturity deposits, partially offset by a decrease in retail certificates of deposit. The decrease in total borrowings was due to not renewing borrowings that matured during the current year. Cash flows from deposit growth were used to pay off maturing borrowings.

Stockholders' Equity

During the current year, the Company paid cash dividends totaling $117.9 million and repurchased common stock totaling $1.5 million. The cash dividends paid during the current year totaled $0.87 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 four 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, which represented a $0.20 per share cash dividend for fiscal year 2020 and a $0.20 per share cash dividend for fiscal year 2021.

On October 19, 2021, the Company announced a regular quarterly cash dividend of $0.085 per share, or approximately $11.5 million, payable on November 19, 2021 to stockholders of record as of the close of business on November 5, 2021. On October 28, 2021, the Company announced a fiscal year 2021 cash true-up dividend of $0.22 per share, or approximately $29.9 million, related to fiscal year 2021 earnings. The $0.22 per share cash true-up dividend was determined by taking the difference between total earnings for fiscal year 2021 and total regular quarterly cash dividends paid during fiscal year 2021, divided by the number of shares outstanding. The cash true-up dividend is payable on December 3, 2021 to stockholders of record as of the close of business on November 19, 2021, and is the result of the Board of Directors' commitment to distribute to stockholders 100% of the annual earnings of the Company for fiscal year 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 September 30, 2021, this ratio was 11.5%.

At October 1, 2021, Capitol Federal Financial, Inc., at the holding company level, had $93.8 million in cash on deposit at the Bank. For fiscal year 2022, 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 2022.

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

Total shares outstanding 138,832,284

Less unallocated Employee Stock Ownership Plan ("ESOP") shares (3,219,012) and unvested restricted stock

Net shares outstanding 135,613,272

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 September 30, 2021, the Bank's CBLR was 11.5%, which exceeded the minimum requirement.

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 and its correspondent banks' market areas; the future earnings and capital levels of the Bank, which could 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)

September 30, June 30, September 30,

2021 2021 2020

ASSETS:

Cash and cash equivalents(includes interest-earning $ 42,262 $ 95,305 $ 185,148 deposits of $24,289,$74,346 and $172,430)

AFS securities, atestimated fair value(amortized cost of 2,014,608 2,015,705 1,560,950 $2,008,456, $2,002,957 and$1,529,605)

Loans receivable, net (ACLof $19,823, $20,724 and 7,081,142 7,033,827 7,202,851 $31,527)

FHLB stock, at cost 73,421 73,630 93,862

Premises and equipment, net 99,127 99,551 101,875

Income taxes receivable, - 891 - net

Other assets 320,686 330,756 342,532

TOTAL ASSETS $ 9,631,246 $ 9,649,665 $ 9,487,218



LIABILITIES:

Deposits $ 6,597,396 $ 6,638,294 $ 6,191,408

Borrowings 1,582,850 1,582,400 1,789,313

Advance payments byborrowers for taxes and 72,729 47,330 65,721 insurance

Income taxes payable, net 918 - 795

Deferred income tax 5,810 7,922 8,180 liabilities, net

Other liabilities 129,270 136,095 146,942

Total liabilities 8,388,973 8,412,041 8,202,359



STOCKHOLDERS' EQUITY:

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

Common stock, $0.01 parvalue; 1,400,000,000 sharesauthorized, 138,832,284,138,833,184 and 138,956,296shares issued and 1,388 1,388 1,389 outstanding as of September30, 2021, June 30, 2021,and September 30, 2020,respectively

Additional paid-in capital 1,189,633 1,189,466 1,189,853

Unearned compensation, ESOP (31,387 ) (31,801 ) (33,040 )

Retained earnings 98,944 91,909 143,162

AOCI, net of tax (16,305 ) (13,338 ) (16,505 )

Total stockholders' equity 1,242,273 1,237,624 1,284,859

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 9,631,246 $ 9,649,665 $ 9,487,218

CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(Dollars in thousands)

For the Three Months Ended

For the Year Ended

September 30,

June 30,

September 30,

2021

2021

2021

2020

INTEREST AND DIVIDEND INCOME:

Loans receivable

$

57,139

$

54,779

$

229,897

$

270,494

MBS

4,900

5,360

21,399

23,009

FHLB stock

952

944

3,916

5,827

Investment securities

750

763

2,825

4,467

Cash and cash equivalents

27

26

144

1,181

Total interest and dividend income

63,768

61,872

258,181

304,978

INTEREST EXPENSE:

Deposits

10,335

11,475

48,406

67,598

Borrowings

7,889

7,826

34,774

48,045

Total interest expense

18,224

19,301

83,180

115,643

NET INTEREST INCOME

45,544

42,571

175,001

189,335

PROVISION FOR CREDIT LOSSES

(1,323

)

(2,691

)

(8,510

)

22,300

NET INTEREST INCOME AFTER

PROVISION FOR CREDIT LOSSES

46,867

45,262

183,511

167,035

NON-INTEREST INCOME:

Deposit service fees

3,294

3,227

12,282

11,285

Gain on sale of Visa Class B shares

-

-

7,386

-

Insurance commissions

781

723

3,030

2,487

Other non-interest income

1,228

1,286

5,388

5,827

Total non-interest income

5,303

5,236

28,086

19,599

NON-INTEREST EXPENSE:

Salaries and employee benefits

14,600

13,867

56,002

52,996

Information technology and related expense

4,354

4,736

17,922

16,974

Occupancy, net

3,639

3,504

14,045

13,870

Regulatory and outside services

1,476

1,469

5,764

5,762

Advertising and promotional

1,404

1,407

5,133

4,889

Loss on interest rate swap termination

-

-

4,752

-

Deposit and loan transaction costs

638

693

2,761

2,890

Federal insurance premium

657

633

2,545

914

Office supplies and related expense

426

402

1,715

2,195

Other non-interest expense

1,053

891

4,930

5,514

Total non-interest expense

28,247

27,602

115,569

106,004

INCOME BEFORE INCOME TAX EXPENSE

23,923

22,896

96,028

80,630

INCOME TAX EXPENSE

5,370

4,709

19,946

16,090

NET INCOME

$

18,553

$

18,187

$

76,082

$

64,540

Average Balance Sheets

The following tables present the average balances of our assets, liabilities, and stockholders' equity, and the related weighted average yields and rates (annualized for the three-month periods) 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 income (annualized for the three-month periods) by the average balance of the related assets, and weighted average rates are derived by dividing expense (annualized for the three-month periods) 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.

CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(Dollars in thousands)

For the Three Months Ended For the Year Ended

September June 30, September 30, 30,

2021 2021 2021 2020

INTEREST AND DIVIDEND INCOME:

Loans receivable $ 57,139 $ 54,779 $ 229,897 $ 270,494

MBS 4,900 5,360 21,399 23,009

FHLB stock 952 944 3,916 5,827

Investment securities 750 763 2,825 4,467

Cash and cash 27 26 144 1,181 equivalents

Total interest and 63,768 61,872 258,181 304,978 dividend income



INTEREST EXPENSE:

Deposits 10,335 11,475 48,406 67,598

Borrowings 7,889 7,826 34,774 48,045

Total interest 18,224 19,301 83,180 115,643 expense



NET INTEREST INCOME 45,544 42,571 175,001 189,335



PROVISION FOR CREDIT (1,323 ) (2,691 ) (8,510 ) 22,300 LOSSES

NET INTEREST INCOME AFTER

PROVISION FOR CREDIT 46,867 45,262 183,511 167,035 LOSSES



NON-INTEREST INCOME:

Deposit service fees 3,294 3,227 12,282 11,285

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

Insurance commissions 781 723 3,030 2,487

Other non-interest 1,228 1,286 5,388 5,827 income

Total non-interest 5,303 5,236 28,086 19,599 income



NON-INTEREST EXPENSE:

Salaries and employee 14,600 13,867 56,002 52,996 benefits

Informationtechnology and 4,354 4,736 17,922 16,974 related expense

Occupancy, net 3,639 3,504 14,045 13,870

Regulatory and 1,476 1,469 5,764 5,762 outside services

Advertising and 1,404 1,407 5,133 4,889 promotional

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

Deposit and loan 638 693 2,761 2,890 transaction costs

Federal insurance 657 633 2,545 914 premium

Office supplies and 426 402 1,715 2,195 related expense

Other non-interest 1,053 891 4,930 5,514 expense

Total non-interest 28,247 27,602 115,569 106,004 expense

INCOME BEFORE INCOME 23,923 22,896 96,028 80,630 TAX EXPENSE

INCOME TAX EXPENSE 5,370 4,709 19,946 16,090

NET INCOME $ 18,553 $ 18,187 $ 76,082 $ 64,540

Average Balance Sheets

The following tables present the average balances of our assets, liabilities, and stockholders' equity, and the related weighted average yields and rates (annualized for the three-month periods) 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 income (annualized for the three-month periods) by the average balance of the related assets, and weighted average rates are derived by dividing expense (annualized for the three-month periods) by the average balance of the related liabilities, for the periods shown. Average outstanding balances are derived from average daily balances. The weighted average yields and rates include amortization of fees, costs, premiums and discounts, which are considered adjustments to yields/rates. Weighted average yields on tax-exempt securities are not calculated on a fully taxable equivalent basis.

For the Three Months Ended

September 30, 2021 June 30, 2021

Average Interest Average Interest

Outstanding Earned/ Yield/ Outstanding Earned/ Yield/

Amount Paid Rate Amount Paid Rate

Assets: (Dollars in thousands)

Interest-earning assets:

One- to four-family loans:

Originated $ 3,974,876 $ 32,979 3.32 % $ 3,982,990 $ 33,727 3.39 %

Correspondent purchased 2,024,372 12,942 2.56 1,971,209 10,367 2.10

Bulk purchased 177,233 730 1.65 185,198 826 1.78

Total one- to four-family 6,176,481 46,651 3.02 6,139,397 44,920 2.93 loans

Commercial loans 811,731 9,378 4.52 805,721 8,744 4.29

Consumer loans 95,449 1,110 4.61 96,980 1,115 4.61

Total loans receivable^(1) 7,083,661 57,139 3.21 7,042,098 54,779 3.11

MBS^(2) 1,510,421 4,900 1.30 1,529,679 5,360 1.40

Investment securities^(2)(3) 500,104 750 0.60 533,076 763 0.57

FHLB stock 72,699 952 5.19 73,689 944 5.14

Cash and cash equivalents 69,501 27 0.15 97,890 26 0.11

Total interest-earning 9,236,386 63,768 2.75 9,276,432 61,872 2.66 assets

Other non-interest-earning 445,371 430,639 assets

Total assets $ 9,681,757 $ 9,707,071



Liabilities and stockholders' equity:

Interest-bearing liabilities:

Checking $ 1,563,501 183 0.05 $ 1,546,665 182 0.05

Savings 514,253 71 0.05 513,528 72 0.06

Money market 1,729,080 907 0.21 1,646,970 998 0.24

Retail/business certificates 2,578,351 9,003 1.39 2,678,914 9,938 1.49

Wholesale certificates 246,739 171 0.27 251,571 285 0.45

Total deposits 6,631,924 10,335 0.62 6,637,648 11,475 0.69

Borrowings^(4) 1,582,554 7,889 1.97 1,582,905 7,826 1.97

Total interest-bearing 8,214,478 18,224 0.88 8,220,553 19,301 0.94 liabilities

Other non-interest-bearing 220,294 203,532 liabilities

Stockholders' equity 1,246,985 1,282,986

Total liabilities and $ 9,681,757 $ 9,707,071 stockholders' equity



Net interest income^(5) $ 45,544 $ 42,571

Net interest rate spread^(6) 1.87 1.72

Net interest-earning assets $ 1,021,908 $ 1,055,879

Net interest margin^(7) 1.97 1.84

Ratio of interest-earning assets to interest-bearing 1.12 1.13liabilities x x



Selected performance ratios:

Return on average assets (annualized) 0.77 % 0.75 %

Return on average equity (annualized) 5.95 5.67

Average equity to average 12.88 13.22 assets

Operating expense ratio^(8) 1.17 1.14

Efficiency ratio^(9) 55.55 57.73

For the Year Ended September 30,

2021

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

$

3,966,059

$

137,461

3.47

%

$

3,950,425

$

150,526

3.81

%

Correspondent purchased

2,010,823

48,066

2.39

2,348,120

70,112

2.99

Bulk purchased

191,029

3,601

1.89

230,720

6,065

2.63

Total one- to four-family loans

6,167,911

189,128

3.07

6,529,265

226,703

3.47

Commercial loans

788,702

36,085

4.51

785,127

37,320

4.68

Consumer loans

101,277

4,684

4.63

123,334

6,471

5.25

Total loans receivable(1)

7,057,890

229,897

3.25

7,437,726

270,494

3.63

MBS(2)

1,446,466

21,399

1.48

954,197

23,009

2.41

Investment securities(2)(3)

482,641

2,825

0.59

270,683

4,467

1.65

FHLB stock

77,250

3,916

5.07

100,251

5,827

5.81

Cash and cash equivalents

131,798

144

0.11

179,142

1,181

0.65

Total interest-earning assets

9,196,045

258,181

2.80

8,941,999

304,978

3.40

Other non-interest-earning assets

443,724

461,614

Total assets

$

9,639,769

$

9,403,613

Liabilities and stockholders' equity:

Interest-bearing liabilities:

Checking

$

1,482,698

772

0.05

$

1,180,110

762

0.06

Savings

487,146

280

0.06

388,662

292

0.08

Money market

1,598,838

4,128

0.26

1,252,992

6,647

0.53

Retail/business certificates

2,688,811

42,034

1.56

2,716,945

55,238

2.03

Wholesale certificates

252,623

1,192

0.47

282,947

4,659

1.65

Total deposits

6,510,116

48,406

0.74

5,821,656

67,598

1.16

Borrowings(4)

1,636,399

34,774

2.11

2,065,966

48,045

2.31

Total interest-bearing liabilities

8,146,515

83,180

1.02

7,887,622

115,643

1.46

Other non-interest-bearing liabilities

219,328

203,990

Stockholders' equity

1,273,926

1,312,001

Total liabilities and stockholders' equity

$

9,639,769

$

9,403,613

Net interest income(5)

$

175,001

$

189,335

Net interest rate spread(6)

1.78

1.94

Net interest-earning assets

$

1,049,530

$

1,054,377

Net interest margin(7)

1.90

2.12

Ratio of interest-earning assets to interest-bearing liabilities

1.13

x1.13

xSelected performance ratios:

Return on average assets

0.79

%

0.69

%

Return on average equity

5.97

4.92

Average equity to average assets

13.22

13.95

Operating expense ratio(8)

1.20

1.13

Efficiency ratio(9)

56.91

50.74

For the Year Ended September 30,

2021 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 $ 3,966,059 $ 137,461 3.47 % $ 3,950,425 $ 150,526 3.81 %

Correspondent purchased 2,010,823 48,066 2.39 2,348,120 70,112 2.99

Bulk purchased 191,029 3,601 1.89 230,720 6,065 2.63

Total one- to four-family 6,167,911 189,128 3.07 6,529,265 226,703 3.47 loans

Commercial loans 788,702 36,085 4.51 785,127 37,320 4.68

Consumer loans 101,277 4,684 4.63 123,334 6,471 5.25

Total loans receivable^(1) 7,057,890 229,897 3.25 7,437,726 270,494 3.63

MBS^(2) 1,446,466 21,399 1.48 954,197 23,009 2.41

Investment securities^(2)(3) 482,641 2,825 0.59 270,683 4,467 1.65

FHLB stock 77,250 3,916 5.07 100,251 5,827 5.81

Cash and cash equivalents 131,798 144 0.11 179,142 1,181 0.65

Total interest-earning assets 9,196,045 258,181 2.80 8,941,999 304,978 3.40

Other non-interest-earning 443,724 461,614 assets

Total assets $ 9,639,769 $ 9,403,613



Liabilities and stockholders' equity:

Interest-bearing liabilities:

Checking $ 1,482,698 772 0.05 $ 1,180,110 762 0.06

Savings 487,146 280 0.06 388,662 292 0.08

Money market 1,598,838 4,128 0.26 1,252,992 6,647 0.53

Retail/business certificates 2,688,811 42,034 1.56 2,716,945 55,238 2.03

Wholesale certificates 252,623 1,192 0.47 282,947 4,659 1.65

Total deposits 6,510,116 48,406 0.74 5,821,656 67,598 1.16

Borrowings^(4) 1,636,399 34,774 2.11 2,065,966 48,045 2.31

Total interest-bearing 8,146,515 83,180 1.02 7,887,622 115,643 1.46 liabilities

Other non-interest-bearing 219,328 203,990 liabilities

Stockholders' equity 1,273,926 1,312,001

Total liabilities and $ 9,639,769 $ 9,403,613 stockholders' equity



Net interest income^(5) $ 175,001 $ 189,335

Net interest rate spread^(6) 1.78 1.94

Net interest-earning assets $ 1,049,530 $ 1,054,377

Net interest margin^(7) 1.90 2.12

Ratio of interest-earning assets to interest-bearing 1.13 1.13liabilities x x



Selected performance ratios:

Return on average assets 0.79 % 0.69 %

Return on average equity 5.97 4.92

Average equity to average 13.22 13.95 assets

Operating expense ratio^(8) 1.20 1.13

Efficiency ratio^(9) 56.91 50.74

(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 $4.9 million and $5.1 million for the quarters ended September 30, 2021 and June 30, 2021, respectively, and $6.6 million and $13.8 million for the years ended September 30, 2021 and September 30, 2020, 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. 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.

(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.

The average balance of investment securities includes an average balance of(3) nontaxable securities of $4.9 million and $5.1 million for the quarters ended September 30, 2021 and June 30, 2021, respectively, and $6.6 million and $13.8 million for the years ended September 30, 2021 and September 30, 2020, 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. Net interest income represents the difference between interest income(5) 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. 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.

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

% of % of % of

Amount Rate Total Amount Rate Total Amount Rate Total

(Dollars in thousands)

One- to four-family:

Originated $ 3,956,064 3.18 % 55.8 % $ 3,977,129 3.23 % 56.4 % $ 3,937,310 3.50 % 54.5 %

Correspondent purchased 2,003,477 3.02 28.2 1,953,185 3.09 27.7 2,101,082 3.49 29.1

Bulk purchased 173,662 1.65 2.4 179,019 1.90 2.5 208,427 2.41 2.9

Construction 39,142 2.82 0.6 30,325 2.96 0.4 34,593 3.30 0.5

Total 6,172,345 3.09 87.0 6,139,658 3.14 87.0 6,281,412 3.46 87.0

Commercial:

Commercial real estate 676,908 4.00 9.6 680,664 3.99 9.7 626,588 4.29 8.7

Commercial and 66,497 3.83 0.9 73,713 3.24 1.0 97,614 2.79 1.4 industrial

Construction 85,963 4.03 1.2 60,614 4.11 0.9 105,458 4.04 1.4

Total 829,368 3.99 11.7 814,991 3.93 11.6 829,660 4.08 11.5

Consumer loans:

Home equity 86,274 4.60 1.2 88,587 4.63 1.3 103,838 4.66 1.4

Other 8,086 4.19 0.1 8,389 4.26 0.1 10,086 4.40 0.1

Total 94,360 4.57 1.3 96,976 4.60 1.4 113,924 4.64 1.5

Total loans receivable 7,096,073 3.21 100.0 % 7,051,625 3.26 100.0 % 7,224,996 3.55 100.0 %



Less:

ACL 19,823 20,724 31,527

Discounts/unearned loan 29,556 30,593 29,190 fees

Premiums/deferred costs (34,448 ) (33,519 ) (38,572 )

Total loans receivable, $ 7,081,142 $ 7,033,827 $ 7,202,851 net

Loan Activity: The following table summarizes activity in the loan portfolio, along with weighted average rates where applicable, for the periods indicated, excluding changes in ACL, 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. 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 For the Year Ended Ended

September 30, 2021 September 30, 2021

Amount Rate Amount Rate

(Dollars in thousands)

Beginning balance $ 7,051,625 3.26 % $ 7,224,996 3.55 %

Originated and refinanced 280,379 3.05 1,437,454 2.89

Purchased and participations 204,162 2.81 824,241 2.89

Change in undisbursed loan (6,656 ) (174,416 ) funds

Repayments (433,374 ) (2,215,585 )

Principal recoveries/ 4 (478 ) (charge-offs), net

Other (67 ) (139 )

Ending balance $ 7,096,073 3.21 $ 7,096,073 3.21

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 September 30, 2021. Credit scores were updated in September 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.

% of Credit Average

Amount Total Score LTV Balance

(Dollars in thousands)

Originated $ 3,956,064 64.5 % 771 61 % $ 152

Correspondent purchased 2,003,477 32.7 765 64 407

Bulk purchased 173,662 2.8 771 58 294

$ 6,133,203 100.0 % 769 62 194

The following table presents originated and correspondent purchased activity in our one- to four-family loan portfolio, excluding endorsement activity, along with associated weighted average rates, weighted average LTVs and weighted average credit scores for the periods indicated.

For the Three Months Ended For the Year Ended

September 30, 2021 September 30, 2021

Credit Credit

Amount Rate LTV Score Amount Rate LTV Score

(Dollars in thousands)

Originated $ 220,353 2.74 % 72 % 763 $ 1,121,829 2.68 % 70 % 767

Correspondent 184,562 2.68 71 767 689,527 2.64 69 772 purchased

$ 404,915 2.71 71 765 $ 1,811,356 2.66 70 769

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 September 30, 2021, along with associated weighted average rates.

Amount Rate

(Dollars in thousands)

Originate/refinance $ 87,117 2.78 %

Correspondent 95,395 2.54

$ 182,512 2.65

As of September 30, 2021, there were $2.7 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. See "Asset Quality" below for additional information regarding the performance of loans that have exited the deferral period.

Commercial Loans: During the current year, the Bank originated $251.5 million of commercial loans, including $22.8 million of Paycheck Protection Program ("PPP") loans, and entered into commercial loan participations totaling $134.7 million. The Bank also processed commercial loan disbursements, excluding lines of credit, of approximately $270.0 million at a weighted average rate of 3.59%. Additionally, during the current year, $63.5 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 September 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 $ 229,082 $ 36,202 $ 265,284 $ 30,500 $ 295,784 27.8 %housing

Retail 135 158,834 49,705 208,539 11,622 220,161 20.7 building

Hotel 10 137,301 57,364 194,665 - 194,665 18.3

Office 92 49,608 60,379 109,987 - 109,987 10.3 building

One- tofour-family 385 61,717 7,457 69,174 1,453 70,627 6.6 property

Single use 25 42,155 4,873 47,028 21,300 68,328 6.4 building

Multi-family 38 53,173 13,026 66,199 690 66,889 6.3

Other 101 31,001 5,166 36,167 1,502 37,669 3.6

820 $ 762,871 $ 234,172 $ 997,043 $ 67,067 $ 1,064,110 100.0 %



Weighted 4.00 % 4.03 % 4.01 % 3.73 % 3.99 % average rate

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

Unpaid Undisbursed Gross Loan Outstanding % of

Count Principal Amount Amount Commitments Total Total

(Dollars in thousands)

Kansas 636 $ 327,419 $ 21,416 $ 348,835 $ 44,302 $ 393,137 36.9 %

Texas 11 135,644 137,480 273,124 - 273,124 25.7

Missouri 146 205,989 26,052 232,041 21,265 253,306 23.8

Colorado 7 16,087 20,012 36,099 - 36,099 3.4

Arkansas 3 12,143 21,620 33,763 - 33,763 3.2

Nebraska 6 33,464 4 33,468 - 33,468 3.1

Other 11 32,125 7,588 39,713 1,500 41,213 3.9

820 $ 762,871 $ 234,172 $ 997,043 $ 67,067 $ 1,064,110 100.0 %

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 September 30, 2021.

Count Amount

(Dollars in thousands)

Greater than $30 million 4 $ 180,500

>$15 to $30 million 16 363,129

>$10 to $15 million 7 85,141

>$5 to $10 million 15 96,776

$1 to $5 million 111 251,794

Less than $1 million 1,324 194,423

1,477 $ 1,171,763

As of September 30, 2021, there were commercial loans with an aggregate gross balance, including undisbursed amounts, of $146.4 million with COVID-19 loan modifications that were still in their deferral period. There were $237.2 million of commercial loans with COVID-19 loan modifications that were out of their deferral period by September 30, 2021. See "Asset Quality" below for additional information regarding the performance of loans that have exited the deferral period.

Asset Quality

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 September 30, 2021, approximately 61% were 59 days or less delinquent. Nonaccrual loans are loans that are 90 or more days delinquent or in foreclosure and other loans required to be reported as nonaccrual pursuant to accounting and/or regulatory reporting requirements and/or internal policies, even if the loans are current. Non-performing assets include nonaccrual loans and OREO. In late March 2020, the Bank suspended the initiation of foreclosure proceedings for owner-occupied one- to four-family loans. At September 30, 2021, there were $7.4 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 were not in place.

Loans Delinquent for 30 to 89 Days at:

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

Number Amount Number Amount Number Amount Number Amount Number Amount

(Dollars in thousands)

One- to four-family:

Originated 48 $ 4,156 51 $ 5,141 45 $ 4,151 62 $ 5,844 42 $ 3,012

Correspondent 7 2,590 9 3,650 9 2,910 13 4,694 8 3,123 purchased

Bulk purchased 4 541 6 958 5 352 9 1,750 12 2,532

Commercial 2 37 1 35 5 806 8 1,047 2 45

Consumer 25 498 25 354 17 287 30 515 26 398

86 $ 7,822 92 $ 10,138 81 $ 8,506 122 $ 13,850 90 $ 9,110

30 to 89 days delinquent loans

to total loans 0.11 % 0.14 % 0.12 % 0.20 % 0.13 %receivable, net

Non-Performing Loans and OREO at:

September 30, 2021

June 30, 2021

March 31, 2021

December 31, 2020

September 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

50

$

3,693

53

$

3,696

55

$

4,433

51

$

4,370

51

$

4,362

Correspondent purchased

10

3,210

12

4,230

10

3,749

9

3,371

6

2,397

Bulk purchased

9

2,974

7

2,596

10

3,172

13

3,724

12

2,903

Commercial

6

1,214

7

1,278

6

1,068

5

820

5

1,360

Consumer

21

498

23

445

26

531

26

473

14

304

96

11,589

102

12,245

107

12,953

104

12,758

88

11,326

Loans 90 or more days delinquent or in foreclosure

as a percentage of total loans

0.16

%

0.17

%

0.19

%

0.18

%

0.16

%

Nonaccrual loans less than 90 Days Delinquent:(1)

One- to four-family:

Originated

7

$

1,288

7

$

1,392

9

$

1,646

9

$

968

9

$

691

Correspondent purchased

-

-

-

-

-

-

-

-

-

-

Bulk purchased

1

131

1

131

-

-

-

-

-

-

Commercial

4

419

3

403

4

642

3

411

3

464

Consumer

1

9

-

-

-

-

1

9

1

9

13

1,847

11

1,926

13

2,288

13

1,388

13

1,164

Total nonaccrual loans

109

13,436

113

14,171

120

15,241

117

14,146

101

12,490

Nonaccrual loans as a percentage of total loans

0.19

%

0.20

%

0.22

%

0.20

%

0.17

%

OREO:

One- to four-family:

Originated(2)

3

$

170

3

$

177

2

$

105

3

$

129

4

$

183

Total non-performing assets

112

$

13,606

116

$

14,348

122

$

15,346

120

$

14,275

105

$

12,673

Non-performing assets as a percentage of total assets

0.14

%

0.15

%

0.16

%

0.15

%

0.13

%

Non-Performing Loans and OREO at:

September 30, 2021 June 30, 2021 March 31, 2021 December 31, 2020 September 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 50 $ 3,693 53 $ 3,696 55 $ 4,433 51 $ 4,370 51 $ 4,362

Correspondent 10 3,210 12 4,230 10 3,749 9 3,371 6 2,397 purchased

Bulk purchased 9 2,974 7 2,596 10 3,172 13 3,724 12 2,903

Commercial 6 1,214 7 1,278 6 1,068 5 820 5 1,360

Consumer 21 498 23 445 26 531 26 473 14 304

96 11,589 102 12,245 107 12,953 104 12,758 88 11,326



Loans 90 ormore days delinquent orin foreclosure

as apercentage of 0.16 % 0.17 % 0.19 % 0.18 % 0.16 %total loans



Nonaccrualloans lessthan 90 Days Delinquent:^(1)

One- to four-family:

Originated 7 $ 1,288 7 $ 1,392 9 $ 1,646 9 $ 968 9 $ 691

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

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

Commercial 4 419 3 403 4 642 3 411 3 464

Consumer 1 9 - - - - 1 9 1 9

13 1,847 11 1,926 13 2,288 13 1,388 13 1,164

Totalnonaccrual 109 13,436 113 14,171 120 15,241 117 14,146 101 12,490 loans



Nonaccrualloans as a 0.19 % 0.20 % 0.22 % 0.20 % 0.17 %percentage oftotal loans



OREO:

One- to four-family:

Originated^(2) 3 $ 170 3 $ 177 2 $ 105 3 $ 129 4 $ 183

Totalnon-performing 112 $ 13,606 116 $ 14,348 122 $ 15,346 120 $ 14,275 105 $ 12,673 assets



Non-performingassets as a 0.14 % 0.15 % 0.16 % 0.15 % 0.13 %percentage oftotal 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.

Of the one- to four-family COVID-19 loan modifications that had completed the deferral period by September 30, 2021, $2.2 million were 30 to 89 days delinquent and $2.8 million were 90 or more days delinquent as of September 30, 2021. Of the commercial COVID-19 loan modifications that had completed the deferral period by September 30, 2021, $3 thousand were 30 to 89 days delinquent and none were 90 or more days delinquent as of September 30, 2021.

The following table presents loans classified as special mention or substandard at the dates presented. The increase in commercial special mention loans at September 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 accounting(1) 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.

Of the one- to four-family COVID-19 loan modifications that had completed the deferral period by September 30, 2021, $2.2 million were 30 to 89 days delinquent and $2.8 million were 90 or more days delinquent as of September 30, 2021. Of the commercial COVID-19 loan modifications that had completed the deferral period by September 30, 2021, $3 thousand were 30 to 89 days delinquent and none were 90 or more days delinquent as of September 30, 2021.

The following table presents loans classified as special mention or substandard at the dates presented. The increase in commercial special mention loans at September 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.

September 30, 2021 September 30, 2020

Special Substandard Special Substandard Mention Mention

(Dollars in thousands)

One- to $ 14,332 $ 23,458 $ 11,339 $ 25,630 four-family

Commercial 99,729 3,259 52,006 4,914

Consumer 135 718 332 589

$ 114,196 $ 27,435 $ 63,677 $ 31,133

Allowance for Credit Losses: The Bank is utilizing a discounted cash flow approach for estimating expected credit losses for pooled loans and loan commitments. The economic forecast scenarios selected by management improved at September 30, 2021 compared to June 30, 2021 which resulted in a reduction in the ACL calculated by the model. Management applied qualitative factors at September 30, 2021 to account for the continued economic uncertainties, along with the balance and trending of large-dollar special mention commercial loans and commercial loan COVID-19 modifications. The economic uncertainties were related to (1) the job market, specifically the unemployment rate and labor participation rate and how the significant federal assistance may be impacting those measures and (2) the unevenness of the recovery in certain industries in which the Bank has lending relationships. The ACL related to the commercial loans qualitative factors decreased during the current quarter due to improvement in forecasted economic conditions at September 30, 2021 compared to June 30, 2021.

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

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

(Dollars in thousands)

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

Charge-offs (26 ) - (26 )

Recoveries 30 - 30

Net recoveries 4 - 4

Provision for credit (905 ) (418 ) (1,323 ) losses

Balance at September $ 19,823 $ 5,743 $ 25,566 30, 2021

The following tables present ACL activity and related ratios at the dates and for the periods indicated. On October 1, 2020, the Company adopted Accounting Standards Update ("ASU") 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments ("CECL").

For the Three Months For the Year Ended Ended

September 30, 2021 September 30, 2021

(Dollars in thousands)

Balance at beginning of period $ 20,724 $ 31,527

Adoption of CECL - (4,761)

Charge-offs:

One- to four-family (22) (185)

Commercial - (515)

Consumer (4) (15)

Total charge-offs (26) (715)

Recoveries:

One- to four-family 4 144

Commercial 12 50

Consumer 14 43

Total recoveries 30 237

Net recoveries (charge-offs) 4 (478)

Provision for credit losses (905) (6,465)

Balance at end of period $ 19,823 $ 19,823



Ratio of net charge-offs during the period

to average loans outstanding during the - % 0.01 %period

Ratio of net charge-offs (recoveries) during the

period to average non-performing assets (0.03) 3.63

ACL to non-performing loans at end of 147.54 147.54 period

ACL to loans receivable at end of 0.28 0.28 period

ACL to net charge-offs (annualized) N/M ^(1) 41.5 x

(1)

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

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

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

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

At

September 30, June 30, October 1,

2021 2021 2020

(Dollars in thousands)

One- to four-family:

Originated $ 1,590 $ 1,515 $ 1,609

Correspondent purchased 2,062 1,739 2,324

Bulk purchased 304 674 903

Construction 22 20 25

Total 3,978 3,948 4,861

Commercial:

Commercial real estate 13,706 14,784 16,595

Commercial and industrial 344 345 559

Construction 1,602 1,404 4,452

Total 15,652 16,533 21,606

Consumer 193 243 299

Total $ 19,823 $ 20,724 $ 26,766

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

At

September 30, June 30, October 1,

2021 2021 2020

One- to four-family:

Originated 0.04 % 0.04 % 0.04 %

Correspondent purchased 0.10 0.09 0.11

Bulk purchased 0.18 0.38 0.43

Construction 0.06 0.07 0.07

Total 0.06 0.06 0.08

Commercial:

Commercial real estate 2.02 2.17 2.65

Commercial and industrial 0.52 0.47 0.57

Construction 1.86 2.32 4.22

Total 1.89 2.03 2.60

Consumer 0.20 0.25 0.26

Total 0.28 0.29 0.37

Securities Portfolio

The following table presents the distribution of our securities portfolio, at amortized cost, at September 30, 2021. Overall, fixed-rate securities comprised 94% of our securities portfolio at September 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 tax-equivalent basis.

Amount Yield WAL

(Dollars in thousands)

MBS $ 1,484,211 1.35 % 3.5

U.S. government-sponsored enterprise debentures 519,971 0.61 3.7

Municipal bonds 4,274 1.81 0.3

Total securities portfolio $ 2,008,456 1.16 3.5

The following tables summarize the activity in our securities portfolio for the periods presented. The weighted average yields and WALs for purchases are presented as recorded at the time of purchase. The weighted average yields for the beginning 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 For the Year Ended

September 30, 2021 September 30, 2021

Amount Yield WAL Amount Yield WAL

(Dollars in thousands)

Beginningbalance - $ 2,015,705 1.24 % 3.8 $ 1,560,950 1.63 % 3.1 carrying value

Maturities and (118,136 ) (594,294 ) repayments

Netamortization (1,898 ) (6,206 ) of (premiums)/discounts

Purchases 125,533 1.05 4.6 1,079,351 1.01 5.0

Change invaluation on (6,596 ) (25,193 ) AFS securities

Ending balance- carrying $ 2,014,608 1.16 3.5 $ 2,014,608 1.16 3.5 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.

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

% of % of % of

Amount Rate Total Amount Rate Total Amount Rate Total

(Dollars in thousands)

Non-interest-bearing checking $ 543,849 - % 8.2 % $ 540,669 - % 8.2 % $ 451,394 - % 7.3 %

Interest-bearing checking 1,037,362 0.07 15.7 1,014,665 0.08 15.3 865,782 0.10 14.0

Savings 519,069 0.05 7.9 513,054 0.06 7.7 433,808 0.06 7.0

Money market 1,753,525 0.19 26.6 1,688,337 0.25 25.4 1,419,180 0.37 22.9

Retail certificates of 2,341,531 1.41 35.5 2,412,806 1.50 36.4 2,623,336 1.88 42.4 deposit

Commercial certificates of 190,215 0.66 2.9 214,956 0.71 3.2 143,125 1.05 2.3 deposit

Public unit certificates of 211,845 0.21 3.2 253,807 0.36 3.8 254,783 0.74 4.1 deposit

$ 6,597,396 0.59 100.0 % $ 6,638,294 0.66 100.0 % $ 6,191,408 0.95 100.0 %

The following table sets forth the weighted average maturity ("WAM") information for our certificates of deposit, in years, as of September 30, 2021.

Retail certificates of deposit 1.3

Commercial certificates of deposit 0.5

Public unit certificates of deposit 0.5

Total certificates of deposit 1.1

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 September 30, 2021.

Term Borrowings Amount

Maturity by FHLB Interest rate Contractual Effective

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

(Dollars in thousands)

2022 $ 75,000 $ 100,000 0.26 % 1.92 %

2023 300,000 - 1.70 1.81

2024 150,000 165,000 1.32 2.46

2025 300,000 100,000 1.33 2.09

2026 250,000 - 0.96 1.27

2027 150,000 - 0.93 1.24

$ 1,225,000 $ 365,000 1.18 1.88

(1)

Represents adjustable-rate FHLB advances for which the Bank has entered into interest rate swaps with a notional amount of $365.0 million to hedge the variability in cash flows associated with the advances. 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 4.1 years at September 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 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 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.

Represents adjustable-rate FHLB advances for which the Bank has entered into interest rate swaps with a notional amount of $365.0 million to hedge the variability in cash flows associated with the advances. These advances(1) 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 4.1 years at September 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 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 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 For the Year Ended

September 30, 2021 September 30, 2021

Effective Effective

Amount Rate WAM Amount Rate WAM

(Dollars in thousands)

Beginning balance $ 1,590,000 2.00 % 3.5 $ 1,790,000 2.31 % 3.0

Maturities and (340,000 ) 2.73 (1,305,000 ) 2.18 prepayments

New FHLB 340,000 2.17 2.8 1,105,000 1.96 3.7 borrowings

Ending balance $ 1,590,000 1.88 3.3 $ 1,590,000 1.88 3.3

Maturities of Interest-Bearing Liabilities

The following table presents the maturity and weighted average repricing rate, which is also the weighted average effective rate, of certificates of deposit, split between retail/commercial and public unit amounts, and term borrowings for the next four quarters as of September 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)

December $ 385,038 1.09 % $ 69,063 0.26 % $ - - % $ 454,101 0.96 %31, 2021

March 31, 329,419 1.15 70,776 0.28 - - 400,195 0.99 2022

June 30, 314,758 1.15 32,175 0.09 - - 346,933 1.05 2022

September 432,378 1.40 21,501 0.09 75,000 0.29 528,879 1.19 30, 2022

$ 1,461,593 1.21 $ 193,515 0.22 $ 75,000 0.29 $ 1,730,108 1.06

(1)

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

Average Rates and Lives

At September 30, 2021, the Bank's gap between the amount of interest-earning assets and interest-bearing liabilities projected to reprice within one year was $(664.1) million, or (6.9)% of total assets, compared to $(478.2) million, or (5.0)% of total assets, at June 30, 2021. The change in the one-year gap amount was due primarily to an increase in the amount of deposits projected to reprice at September 30, 2021 compared to June 30, 2021. In addition, the amount of assets projected to reprice decreased due to a lower balance of cash at September 30, 2021 compared to June 30, 2021.

The majority of interest-earning assets anticipated to reprice in the coming year are repayments and prepayments on one- to four-family loans and mortgage-backed securities, 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 September 30, 2021, the Bank's one-year gap is projected to be $(1.29) billion, or (13.4)% 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 $(1.12) billion, or (11.7)% of total assets, if interest rates were to have increased 200 basis points as of June 30, 2021.

The following table presents the weighted average yields/rates and WALs (in years), after applying prepayment, call assumptions, and decay rates for our interest-earning assets and interest-bearing liabilities as of September 30, 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.

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

Average Rates and Lives

At September 30, 2021, the Bank's gap between the amount of interest-earning assets and interest-bearing liabilities projected to reprice within one year was $(664.1) million, or (6.9)% of total assets, compared to $(478.2) million, or (5.0)% of total assets, at June 30, 2021. The change in the one-year gap amount was due primarily to an increase in the amount of deposits projected to reprice at September 30, 2021 compared to June 30, 2021. In addition, the amount of assets projected to reprice decreased due to a lower balance of cash at September 30, 2021 compared to June 30, 2021.

The majority of interest-earning assets anticipated to reprice in the coming year are repayments and prepayments on one- to four-family loans and mortgage-backed securities, 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 September 30, 2021, the Bank's one-year gap is projected to be $(1.29) billion, or (13.4)% 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 $(1.12) billion, or (11.7)% of total assets, if interest rates were to have increased 200 basis points as of June 30, 2021.

The following table presents the weighted average yields/rates and WALs (in years), after applying prepayment, call assumptions, and decay rates for our interest-earning assets and interest-bearing liabilities as of September 30, 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.

Amount Yield/ WAL % of % of Rate Category Total

(Dollars in thousands)

Securities $ 2,014,608 1.16 % 3.9 21.8 %

Loans receivable:

Fixed-rate one- to 5,553,556 3.14 5.4 78.3 % 60.2 four-family

Fixed-rate commercial 451,166 4.21 3.8 6.3 4.9

All other fixed-rate 53,793 3.73 6.4 0.8 0.6 loans

Total fixed-rate loans 6,058,515 3.23 5.3 85.4 65.7

Adjustable-rate one- to 579,647 2.46 4.0 8.2 6.3 four-family

Adjustable-rate 378,202 4.12 7.2 5.3 4.1 commercial

All other adjustable-rate 79,709 4.25 2.5 1.1 0.8 loans

Total adjustable-rate 1,037,558 3.20 5.1 14.6 11.2 loans

Total loans receivable 7,096,073 3.23 5.2 100.0 % 76.9

FHLB stock 73,421 5.21 2.9 0.8

Cash and cash equivalents 42,262 0.09 - 0.5

Total interest-earning $ 9,226,364 2.78 4.9 100.0 %assets



Non-maturity deposits $ 3,853,805 0.11 5.9 58.4 % 47.1 %

Retail certificates of 2,341,531 1.41 1.3 35.5 28.6 deposit

Commercial certificates 190,215 0.66 0.5 2.9 2.3 of deposit

Public unit certificates 211,845 0.21 0.5 3.2 2.6 of deposit

Total deposits 6,597,396 0.59 3.9 100.0 % 80.6

Term borrowings 1,590,000 1.88 3.3 19.4

Total interest-bearing $ 8,187,396 0.84 3.8 100.0 %liabilities

View source version on businesswire.com: https://www.businesswire.com/news/home/20211028005123/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