Capitol Federal Financial Inc.

05/08/2026 | Press release | Distributed by Public on 05/08/2026 09:28

Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
The Company and the Bank may from time to time make written or oral "forward-looking statements," including statements contained in documents filed or furnished by the Company with the SEC. These forward-looking statements may be included in this Quarterly Report on Form 10-Q and the exhibits attached to it, in the Company's reports to stockholders, in the Company's press releases, and in other communications by the Company, which are made in good faith pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements include statements about our beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions, which are subject to significant risks and uncertainties, and are subject to change based on various factors, some of which are beyond our control. The words "may," "could," "should," "would," "believe," "anticipate," "estimate," "expect," "intend," "plan" and similar expressions are intended to identify forward-looking statements. The following factors, among others, could cause our future results to differ materially from the beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions expressed in the forward-looking statements:
•our ability to maintain overhead costs at reasonable levels;
•our ability to generate a sufficient volume of loans in order to maintain the loan portfolio balance at a level desired by management;
•our ability to invest funds in wholesale or secondary markets at favorable yields;
•our ability to access cost-effective funding and maintain sufficient liquidity;
•our ability to expand our commercial banking, treasury management, and wealth management products and services across our market areas;
•fluctuations in deposit flows;
•transactions or activities that would result in the recapture of base-year, tax basis bad debt reserves;
•the future earnings and capital levels of the Bank, the impact of potential pre-1988 bad debt recapture and the continued non-objection by our primary federal banking regulators, to the extent required, to distribute capital from the Bank to the Company, which could affect the Company's income tax expense and the Company's ability to pay dividends in accordance with its dividend policy and/or repurchase shares;
•the strength of the U.S. economy in general and in the local economies in which we conduct operations, including areas where we have purchased large amounts of correspondent loans, originated commercial loans, and entered into commercial loan participations;
•changes in real estate values, unemployment levels, general economic trends, and the level and direction of loan delinquencies and charge-offs may require changes in the estimates of the adequacy of the ACL and adversely affect our business;
•increases in classified and/or non-performing assets, which may require the Bank to increase the ACL, charge-off loans and incur elevated collection and carrying costs, or not recognize income for a period of time, related to such non-performing assets;
•results of examinations of the Bank and the Company by their respective primary federal banking regulators, including the possibility that the regulators may, among other things, require us to increase our ACL;
•changes in accounting principles, policies, or guidelines;
•the effects of, and changes in, monetary and interest rate policies of the Board of Governors of the Federal Reserve System ("FRB");
•the effects of, and changes in, trade and fiscal policies and foreign and military policies of the United States government;
•inflation, interest rate, market, monetary, and currency fluctuations and the effects of a potential economic recession or slower economic growth;
•the impact of bank failures or adverse developments at other banks and related negative press about the banking industry in general on investor or depositor sentiment;
•the timely development and acceptance of new products and services and the perceived overall value of these products and services by users, including the features, pricing, and quality compared to competitors' products and services;
•the willingness of users to substitute competitors' products and services for our products and services;
•our success in gaining regulatory approval of our products and services and branching locations, when required;
•the impact of interpretations of, and changes in, financial services laws and regulations, including laws concerning taxes, banking, securities, consumer protection, trust and insurance and the impact of other governmental initiatives affecting the financial services industry;
•the ability to attract and retain skilled employees;
•implementing business initiatives may be more difficult or expensive than anticipated;
•significant litigation;
•technological changes and the costs thereof;
•our ability to maintain the security of our financial, accounting, technology, and other operating systems and facilities, including the ability to withstand cyberattacks;
•changes in consumer spending, borrowing, and saving habits; and
•our success at managing the risks involved in our business.
This list of factors is not all inclusive. For a discussion of risks and uncertainties related to our business that could adversely impact our operations and/or financial results, see "Part I, Item 1A. Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2025 and Part II, Item 1A. Risk Factors within this Quarterly Report on Form 10-Q. We do not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Company or the Bank.
As used in this Form 10-Q, unless we specify or the context indicates otherwise, "the Company," "we," "us," and "our" refer to Capitol Federal Financial, Inc. a Maryland corporation, and its subsidiaries. "Capitol Federal Savings," and "the Bank," refer to Capitol Federal Savings Bank, a federal savings bank and the wholly-owned subsidiary of Capitol Federal Financial, Inc.
The following discussion and analysis is intended to assist in understanding the financial condition, results of operations, liquidity, and capital resources of the Company. The Bank comprises almost all of the consolidated assets and liabilities of the Company and the Company is dependent primarily upon the performance of the Bank for the results of its operations. Because of this relationship, references to management actions, strategies and results of actions apply to both the Bank and the Company except where the context indicates otherwise. This discussion and analysis should be read in conjunction with Management's Discussion and Analysis included in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2025, filed with the SEC.
Available Information
Financial and other Company information, including press releases, Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports can be obtained free of charge from our investor relations website, https://ir.capfed.com. SEC filings are available on our website immediately after they are electronically filed with or furnished to the SEC, and are also available on the SEC's website at www.sec.gov.
Critical Accounting Estimates
Our most critical accounting estimate is our methodology used to determine the ACL and reserve for off-balance sheet credit exposures. This estimate is important to the presentation of our financial condition and results of operations, involves a high degree of complexity, and requires management to make difficult and subjective judgments that may require assumptions about highly uncertain matters. The use of different judgments, assumptions, and estimates could affect reported results materially. This critical accounting estimate and its application is reviewed at least annually by the audit committee of our Board of Directors. For a full discussion of our critical accounting estimates, see "Part II, Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates" in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2025.
Executive Summary
The following summary should be read in conjunction with the Management's Discussion and Analysis of Financial Condition and Results of Operations section in its entirety.
The Company recognized net income of $40.5 million, or $0.32 per share, for the current year six-month period compared to net income of $30.8 million, or $0.24 per share, for the prior year six-month period. The increase in net income was due mainly to higher net interest income, partially offset by higher non-interest expense and a higher provision for credit losses. The net interest margin increased 33 basis points, from 1.89% for the prior year six-month period to 2.22% for the current year six-month period. The increase was due mainly to growth in the higher yielding commercial loan portfolio.
The Bank continues its progression from a primarily retail oriented financial institution to a full-service consumer and commercial bank by strategically investing in technology, products and employees, allowing us to offer new products and services and deliver first-in-class service to our customers. For additional discussion, see the "Strategic Banking Initiatives" section below.
The Company's efficiency ratio was 53.05% for the current year six-month period compared to 59.23% for the prior year six-month period. The improvement in the efficiency ratio was due primarily to higher net interest income compared to the prior year period, partially offset by higher non-interest expense. The Company's operating expense ratio (annualized) for the current year six-month period was 1.24% compared to 1.18% for the prior year six-month period. The operating expense ratio was higher in the current year period due mainly to higher non-interest expense, partially offset by higher average assets compared to the prior year period.
The loan portfolio totaled $8.11 billion at March 31, 2026, a $2.2 million increase from September 30, 2025, which was attributable to $201.8 million increase in commercial loans, offset by a $196.8 million decrease in one- to four-family loans, as the Bank continued to redirect cash flows received from the one- to four-family loan portfolio to the commercial loan portfolio. The growth in the
commercial loan portfolio was primarily in commercial real estate loans. The weighted average DSCR for commercial loan originations and new participations during the six months ended March 31, 2026 was 2.35x and the weighted average LTV for commercial real estate and construction loans originated and new participations was 70%. The weighted average DSCR and LTV for our commercial real estate and construction loan portfolio was 1.76x and 63%, respectively, at March 31, 2026.
The Bank's asset quality remains strong, reflected in the continued low level of loan delinquency and charge-off ratios. At March 31, 2026, loans 30 to 89 days delinquent were 0.15% of total loans receivable, net, and loans 90 or more days delinquent or in foreclosure were 0.17% of total loans receivable, net. See "Management's Discussion and Analysis of Financial Condition and Results of Operation - Asset Quality - Delinquent and nonaccrual loans and OREO" below for additional discussion. During the current year six-month period, the Bank had net charge-offs ("NCOs") of $156 thousand.
Total deposits were $6.92 billion at March 31, 2026, an increase of $333.0 million compared to September 30, 2025. The increase was due mainly to growth in the Bank's non-maturity deposit portfolio. Management continues to focus on growing commercial relationships and deposits. During the six months ended March 31, 2026, commercial non-interest-bearing deposits increased $36.1 million, or 18.9%.
Total borrowings were $1.71 billion at March 31, 2026, a decrease of $243.7 million compared to September 30, 2025, due primarily to the maturity of $200.0 million of borrowings that were not replaced, along with principal repayments made on the Bank's amortizing FHLB advances. Cash flows from the deposit portfolio were used, in part, to pay off maturing FHLB borrowings and repay amortizing FHLB advances. Management estimated that the Bank had $4.35 billion in liquidity available at March 31, 2026, based on the Bank's blanket collateral agreement with the FHLB, available brokered and public unit deposit capacity, unencumbered securities, and cash and cash equivalent balances.
Stockholders' equity totaled $1.03 billion at March 31, 2026, a decrease of $22.0 million from September 30, 2025, due to strategic share repurchases and dividend payments, continuing our efforts to enhance stockholder value. During the six months ended March 31, 2026, the Company repurchased 4,532,114 shares of common stock at an average price of $7.00 per share, or $31.7 million in total, and paid cash dividends totaling $26.9 million, or $0.210 per share which consisted of a $0.040 per share special cash dividend and two regular quarterly cash dividends totaling $0.170 per share. As of March 31, 2026, the Bank's capital ratios exceeded the well-capitalized requirements. The Bank's community bank leverage ratio ("CBLR") as of March 31, 2026 was 9.5%.
At March 31, 2026, the gap between the Bank's interest-earning assets and interest-bearing liabilities projected to reprice within one year was $(792.4) million or (8.1%) of total assets, compared to $(983.6) million, or (10.1%) of total assets, at September 30, 2025. See additional discussion in "Part I, Item 3. Quantitative and Qualitative Disclosures About Market Risk." As of March 31, 2026, the Bank was in compliance with its internal policy thresholds for sensitivity to changes in interest rates.
Strategic Banking Initiatives
Our strategic banking initiatives keep us focused on the progression towards becoming a full-service consumer and commercial bank. These initiatives have resulted in investments in technology, allowing us to launch new services and products. Our seasoned and well-connected commercial bankers and trust and wealth advisors deliver access to new customer groups. Our treasury management product suite enables us to deliver first-in-class service to new and existing customers. Our marketing and business development efforts continue to increase, deepen and broaden our customer relationships. The focus on our strategic banking initiatives continues to bear fruit and we expect that progress to continue.
Strategic Actions. The long-term success of our transition to a full-service consumer and commercial bank is predicated on strengthening relationships with consumer and commercial customers. Management and the Board are utilizing committed resources to implement our strategic objectives, as well as enhancing internal monitoring of performance metrics intended to ensure we are on the right path. Through our experienced relationship managers, we deliver customized solutions using advanced digital platforms and sophisticated cash management tools. We are leveraging our centralized organizational structure to respond quickly to our customers' needs and desires.
Commercial Lending. Commercial loans continue to grow as a percentage of our total loan portfolio, comprising 29% of the portfolio at March 31, 2026, compared to 28% and 26% at December 31, 2025 and September 30, 2025, respectively. Our disciplined underwriting, ongoing credit administration and monitoring of concentration levels by collateral type, geographic location and borrowing relationship allow us to maintain strong credit quality. Commercial lending utilizes loan pricing and profitability software that provides insights into lending opportunities based on the full customer banking relationship and market intelligence regarding competitor pricing. This enhances our ability to profitably compete with other financial institutions both inside and outside our market areas.
Treasury Management. The Bank offers a competitive suite of treasury management products to commercial customers who are supported by an experienced team of treasury management officers. This team is focused on the deposit and cash management needs of commercial customers and growing this line of business through the acquisition of new customers located in our local market areas, as well as those we lend to outside those areas. During the current fiscal year, a team of our business development officers have been tasked with growing the deposit base within the small business customer segment and providing product lines specifically designed for these customers. Our treasury management officers and business development officers often create depository relationships with new customers independent of a lending relationship. We expect that this will be a focus area for our sales teams as the Bank continues to diversify funding sources and seeks to increase fee revenue tied to depository accounts. During the third quarter of fiscal year 2026, the Bank expects to introduce digital onboarding for small business customers using industry-leading risk management and screening tools, which will replace many manual verification tasks. We are evaluating additional technology in order to capture a larger share of this business with even more products and services. Within calendar year 2026, we expect to implement new technology for lockbox services and integrated accounts receivables. The Bank implemented new purchase cards and corporate cards in March 2026. Revenue stream projections have not yet been determined as customer acceptance rates are still being evaluated.
Digital Banking. We are advancing towards a seamless digital banking experience for all customers, enhancing the Bank's ability to attract and retain deposits and lower the cost to service our customers. This strategy includes a new deposit account onboarding platform and digital banking enhancements for debit cardholders, which will allow customers to begin using their card immediately online and in digital wallets without waiting for the delivery of a physical card. During the current quarter, the Bank successfully ran live pilots for this technology and published the mobile app to the app store. We are preparing for general release to our customers in the third quarter of fiscal year 2026. The Bank is taking advantage of fintech plug-in technologies that we expect will integrate into our digital banking experience for consumers, small businesses, and commercial customers.
Wealth Management. We have continued to implement enhanced private wealth management products and services, which is a new line of business for the Bank. Trust and financial advisory services are undergoing a transformational upgrade that we expect will lead to improved client and advisor experience, lowered overhead cost, and increased revenue. We are adding experienced advisors to our staff to meet the growing client demand in all the markets we serve.
We continue to expand our extensive suite of private banking products and services and grow our client base in this area. We believe that deliberate and meaningful growth in this line of business will be a gateway to driving revenue growth from off-balance sheet assets and bridge the gap between high-net-worth depository customers, small business owners and key commercial customers and create additional corporate trustee opportunities for the Bank.
Stockholder Value. Delivering long-term sustainable stockholder value continues to be our North Star while maintaining a strong capital position. As part of our historically robust and disciplined approach to capital management, we continue to generate returns to stockholders through dividend payments and share repurchases. At March 31, 2026, Capitol Federal Financial, Inc., at the holding company level, had $10.7 million in cash on deposit at the Bank. Subsequent to March 31, 2026 through May 6, 2026, the Bank distributed $25.0 million from the Bank to the holding company to fund the payment of dividends and share repurchases during the quarter-ending June 30, 2026. Total dividends paid during the second quarter of fiscal year 2026 were $15.9 million, or $0.125 per share. During the six months ended March 31, 2026, the Company paid dividends of $26.9 million, or $0.210 per share, and repurchased 4,532,114 shares for $31.7 million. Subsequent to March 31, 2026, the Company repurchased an additional 1,002,964 shares for $7.6 million through May 6, 2026. Since completing our second-step conversion in December 2010 through March 31, 2026, we have returned $2.06 billion to stockholders through $1.59 billion in cash dividends and $471.6 million in share repurchases. For the remainder of fiscal year 2026, it is the intention of the Board of Directors to continue the regular quarterly cash dividend of $0.085 per share and to seek further opportunities for value-enhancing share repurchases.
Financial Condition
The following table summarizes the Company's financial condition at the dates indicated.
Annualized Annualized
March 31, December 31, Percent September 30, Percent
2026 2025 Change 2025 Change
(Dollars and shares in thousands)
Total assets $ 9,829,080 $ 9,778,400 2.1 % $ 9,778,701 1.0 %
AFS securities 809,566 829,704 (9.7) 867,216 (13.3)
Loans receivable, net 8,114,205 8,176,736 (3.1) 8,111,961 0.1
Deposits 6,924,491 6,758,632 9.8 6,591,448 10.1
Borrowings 1,707,055 1,829,914 (26.9) 1,950,770 (25.0)
Stockholders' equity 1,025,726 1,041,320 (6.0) 1,047,677 (4.2)
Equity to total assets at end of period 10.4 % 10.6 % 10.7 %
Tangible book value per share $ 7.96 $ 7.95 0.5 $ 7.85 2.8
Average number of basic and diluted
shares outstanding 		126,631 128,953 (7.2) 129,874 (5.0)
The loan portfolio decreased $62.5 million during the current quarter as the one- to four-family loan portfolio decreased $98.2 million from the prior quarter end, partially offset by commercial loan growth of $39.1 million, or a 1.7% increase, mainly in the commercial real estate portfolio. The Bank expects to fund approximately $60.0 million of undisbursed amounts on existing commercial real estate and commercial construction loans and approximately $84.4 million of commercial real estate and commercial construction commitments during the June 30, 2026 quarter. The near-term outlook for net commercial loan balances is growth of approximately 6% for the quarter-ending June 30, 2026, with overall net commercial loan growth of approximately 20% for the full fiscal year. Total loans receivable, net is anticipated to increase by approximately 1% for the full fiscal year. It is expected that repayments from our one- to four-family loan portfolio will continue to be directed toward supporting commercial loan growth, aligning with our ongoing commitment to expand commercial banking services. Maintaining strong credit quality remains a top priority as we expand our commercial loan portfolio. The weighted average DSCR for commercial loan originations during the current quarter was 1.86x and the weighted average LTV for commercial real estate and construction loans originated was 63%.
Deposits increased $165.9 million during the current quarter, due mainly to the Bank's retail non-maturity deposits. Borrowings decreased $122.9 million from December 31, 2025, due to the maturity of $100.0 million in borrowings that were not replaced, along with principal repayments made on the Bank's amortizing FHLB advances. Cash flows from the deposit portfolio were primarily used to pay down the borrowings during the current quarter. Stockholders' equity decreased $15.6 million during the current quarter, due primarily to strategic share repurchases and dividend payments.
Loans Receivable. The following table presents information related to the composition of our loan portfolio in terms of dollar amounts, weighted average rates, and percentage of total as of the dates indicated. One- to four-family purchased loans in the following tables include correspondent purchased loans and bulk purchased loans.
March 31, 2026 December 31, 2025 September 30, 2025
Amount Rate Amount Rate Amount Rate
(Dollars in thousands)
One- to four-family:
Originated $ 3,676,252 3.84 % $ 3,725,622 3.82 % $ 3,774,134 3.78 %
Purchased 2,015,434 3.50 2,065,179 3.50 2,114,447 3.49
Construction 16,123 6.15 15,228 6.14 16,054 6.17
Total 5,707,809 3.73 5,806,029 3.71 5,904,635 3.68
Commercial:
Commercial real estate 1,896,313 5.80 1,874,506 5.74 1,709,990 5.82
Commercial and industrial 232,182 6.76 219,909 6.74 210,119 6.92
Commercial construction 189,251 6.73 184,227 6.83 195,886 6.42
Total 2,317,746 5.97 2,278,642 5.93 2,115,995 5.98
Consumer loans:
Home equity 106,414 7.55 107,490 7.76 104,809 8.15
Other 7,327 5.71 7,814 5.56 8,436 5.55
Total 113,741 7.43 115,304 7.61 113,245 7.96
Total loans receivable 8,139,296 4.42 8,199,975 4.38 8,133,875 4.34
Less:
ACL 26,599 24,572 24,039
Deferred loan fees/discounts 30,087 31,125 31,268
Premiums/deferred costs (31,595) (32,458) (33,393)
Total loans receivable, net $ 8,114,205 $ 8,176,736 $ 8,111,961
Loan Activity - The following table summarizes activity in the loan portfolio, along with weighted average rates where applicable, for the periods indicated, excluding changes in ACL, deferred loan fees/discounts, and premiums/deferred costs. Loans that were paid off as a result of refinances are included in repayments. Loan endorsements are not included in the activity in the following table because a new loan is not generated at the time of the endorsement. The endorsed balance and rate are included in the ending loan portfolio balance and rate. Commercial loan renewals are not included in the activity presented in the following table unless new funds are disbursed at the time of renewal. The renewal balance and rate are included in the ending loan portfolio balance and rate.
For the Three Months Ended For the Six Months Ended
March 31, 2026 March 31, 2026 March 31, 2025
Amount Rate Amount Rate Amount Rate
(Dollars in thousands)
Beginning balance $ 8,199,975 4.38 % $ 8,133,875 4.34 % $ 7,923,251 4.02 %
Originated and refinanced 199,286 6.35 576,155 6.39 387,721 6.79
Participations - - 83,520 6.37 69,790 7.21
Change in undisbursed loan funds 17,995 (26,041) 71
Repayments (277,923) (627,857) (486,106)
Principal (charge-offs)/recoveries, net (37) (156) (107)
Other - (200) -
Ending balance $ 8,139,296 4.42 $ 8,139,296 4.42 $ 7,894,620 4.10
The following table presents loan origination, refinance, and participation activity for the periods indicated, excluding endorsement activity, along with associated weighted average rates and percent of total. Commercial loan renewals are not included in the activity in the following table except to the extent new funds are disbursed at the time of renewal. Loan originations, participations, and refinances are reported together.
For the Six Months Ended
March 31, 2026 March 31, 2025
Amount Rate % of Total Amount Rate % of Total
(Dollars in thousands)
Commercial:
Commercial real estate
Fixed-rate $ 188,415 6.30 % 28.5 % $ 29,808 7.02 % 6.5 %
Adjustable-rate 83,021 6.31 12.6 141,870 6.82 31.0
271,436 6.30 41.1 171,678 6.85 37.5
Commercial and industrial
Fixed-rate 46,548 6.67 7.1 21,632 7.40 4.7
Adjustable-rate 5,887 6.40 0.9 11,040 7.37 2.4
52,435 6.64 8.0 32,672 7.39 7.1
Commercial construction
Fixed-rate 108,321 6.56 16.4 1,135 8.00 0.3
Adjustable-rate 56,237 6.80 8.5 93,269 7.40 20.4
164,558 6.64 24.9 94,404 7.40 20.7
Total commercial
Fixed-rate 343,284 6.43 52.0 52,575 7.19 11.5
Adjustable-rate 145,145 6.50 22.0 246,179 7.06 53.8
488,429 6.45 74.0 298,754 7.08 65.3
One- to four-family and consumer:
One- to four-family
Fixed-rate 85,145 5.94 12.9 108,697 6.06 23.8
Adjustable-rate 56,449 5.74 8.6 26,223 6.25 5.7
141,594 5.86 21.5 134,920 6.10 29.5
Consumer
Fixed-rate 3,747 8.12 0.6 4,008 8.19 0.9
Adjustable-rate 25,905 7.69 3.9 19,829 8.27 4.3
29,652 7.74 4.5 23,837 8.25 5.2
One- to four-family and consumer
Fixed-rate 88,892 6.04 13.5 112,705 6.14 24.6
Adjustable-rate 82,354 6.35 12.5 46,052 7.12 10.1
171,246 6.19 26.0 158,757 6.42 34.7
Total commercial, one- to four-family, and consumer
Fixed-rate 432,176 6.35 65.5 165,280 6.47 36.1
Adjustable-rate 227,499 6.45 34.5 292,231 7.07 63.9
$ 659,675 6.38 100.0 % $ 457,511 6.85 100.0 %
Commercial participations included above:
Fixed-rate $ 83,520 6.37 % $ 24,500 7.00 %
Adjustable-rate - - 45,290 7.32
$ 83,520 6.37 $ 69,790 7.21
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 rate, weighted average credit score, weighted average LTV, and average balance per loan as of March 31, 2026. Credit scores were updated in September 2025 from a nationally recognized consumer rating agency. The LTVs 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 Rate Score LTV Balance
(Dollars in thousands)
Originated $ 3,676,252 64.4 % 3.84 % 770 57 % $ 171
Purchased 2,015,434 35.3 3.50 768 59 375
Construction 16,123 0.3 6.15 776 45 375
5,707,809 100.0 % 3.73 769 58 212
The following table presents origination and refinance activity for our one- to four-family loan portfolio, excluding endorsement activity, along with the weighted average rate, weighted average LTV and weighted average credit score for the time periods indicated. As of March 31, 2026, the Bank had one- to four-family loan and refinance commitments totaling $37.5 million at a weighted average rate of 5.89%.
For the Three Months Ended For the Six Months Ended
March 31, 2026 March 31, 2026
Credit Credit
Amount Rate LTV Score Amount Rate LTV Score
(Dollars in thousands)
$ 59,207 5.83 % 73 % 767 $ 141,594 5.86 % 73 % 765
Commercial Loans - The tables below summarize commercial loan origination and participation activity for the time periods presented, along with weighted average LTV and weighted average DSCR. For commercial real estate and commercial construction loans, the LTV is calculated using the gross loan amount (comprised of unpaid principal and undisbursed amounts) and the collateral value at the time of origination. For existing real estate, the "as is" value is used. If the property is to be constructed, the "as completed" value of the collateral is utilized. The DSCR is calculated based on historical borrower performance, or projected borrower performance for newly formed entities with no performance history.
For the Three Months Ended March 31, 2026
Originated Participation Total Weighted Weighted
Amount Rate Amount Rate Amount Rate LTV DSCR
(Dollars in thousands)
Commercial real estate $ 63,696 6.31 % $ - - % $ 63,696 6.31 % 57 % 2.12x
Commercial and industrial 18,330 6.74 - - 18,330 6.74 N/A 2.24
Commercial construction 41,802 6.53 - - 41,802 6.53 72 1.30
$ 123,828 6.45 $ - - $ 123,828 6.45 63 1.86
For the Six Months Ended March 31, 2026
Originated Participation Total Weighted Weighted
Amount Rate Amount Rate Amount Rate LTV DSCR
(Dollars in thousands)
Commercial real estate $ 238,926 6.31 % $ 32,510 6.25 % $ 271,436 6.30 % 68 % 2.62x
Commercial and industrial 52,435 6.64 - - 52,435 6.64 N/A 4.27
Commercial construction 113,548 6.73 51,010 6.45 164,558 6.64 72 1.29
$ 404,909 6.47 $ 83,520 6.37 $ 488,429 6.45 70 2.35
The following table presents commercial loan disbursements, excluding lines of credit, during the periods indicated.
For the Three Months Ended For the Six Months Ended
March 31, 2026 December 31, 2025 March 31, 2026 March 31, 2025
Amount Rate Amount Rate Amount Rate Amount Rate
(Dollars in thousands)
Commercial real estate $ 65,228 6.33 % $ 207,243 6.32 % $ 272,471 6.33 % $ 179,930 6.61 %
Commercial and industrial 4,147 6.45 27,585 6.97 31,732 6.90 16,843 7.36
Commercial construction 38,075 6.76 70,004 6.65 108,079 6.69 87,101 6.31
$ 107,450 6.49 $ 304,832 6.46 $ 412,282 6.47 $ 283,874 6.57
The following table presents the Bank's commercial real estate and commercial construction loans by type of primary collateral as of the dates indicated. Management anticipates fully funding the majority of the undisbursed amounts, as most are not cancellable by the Bank.
December 31, September 30,
March 31, 2026 2025 2025
Unpaid Undisbursed Gross Loan Gross Loan Gross Loan
Count Principal Amount Amount Amount Amount
(Dollars in thousands)
Hotel 33 $ 629,684 $ 65,606 $ 695,290 $ 683,919 $ 603,124
Senior housing 53 539,801 21,105 560,906 552,609 483,959
Multi-family 31 301,385 125,974 427,359 412,232 365,316
Retail building 121 278,561 82,416 360,977 402,982 334,665
Office building 75 100,484 3,657 104,141 93,123 136,058
One- to four-family property 288 75,322 5,763 81,085 65,781 70,420
Warehouse/manufacturing 53 65,239 565 65,804 64,768 58,853
Land 24 39,334 413 39,747 34,601 35,605
Single use building 25 32,578 137 32,715 33,083 33,718
Other 28 23,176 551 23,727 25,716 28,192
731 $ 2,085,564 $ 306,187 $ 2,391,751 $ 2,368,814 $ 2,149,910
Weighted average rate 5.89 % 6.59 % 5.98 % 5.95 % 5.99 %
The following table summarizes the unpaid principal balance of non-owner occupied and owner occupied loans within the Bank's commercial real estate loan portfolio, aggregated by primary collateral, along with weighted LTV and weighted DSCR, as of March 31, 2026.
Non-owner Occupied Owner Occupied
Unpaid Weighted Weighted Unpaid Weighted Weighted
Count Principal LTV DSCR Count Principal LTV DSCR
(Dollars in thousands)
Hotel 26 $ 592,841 55 % 1.34x - $ - - % -x
Senior housing 51 509,475 73 1.76 - - - -
Retail building 40 169,503 61 1.89 68 68,793 53 2.03
Office building 21 59,416 65 1.54 51 34,721 62 7.79
Warehouse/manufacturing 16 21,780 58 3.96 33 24,871 63 1.47
Single use building 7 3,230 51 2.82 17 29,295 63 1.67
Other 7 5,817 64 1.42 10 7,469 48 2.16
168 $ 1,362,062 63 1.62 179 $ 165,149 58 3.10
The following table outlines management's funding expectations for the Bank's commercial real estate and commercial construction undisbursed amounts and commitments outstanding as of March 31, 2026. Due to the nature of a revolving line of credit, management is unable to project funding expectations for those balances, so those amounts are presented separately.
Projected Disbursements for the Quarters Ending
June 30,
2026 		September 30,
2026 		December 31,
2026 		Thereafter Revolving Lines of Credit Total
(Dollars in thousands)
Undisbursed amounts $ 59,964 $ 60,109 $ 52,182 $ 126,112 $ 7,820 $ 306,187
Commitments 84,384 13,011 15,128 75,905 2,350 190,778
$ 144,348 $ 73,120 $ 67,310 $ 202,017 $ 10,170 $ 496,965
Weighted average rate 6.26 % 6.66 % 6.62 % 6.67 % 6.75 % 6.54 %
The following table summarizes the Bank's commercial real estate and commercial construction loans by the state in which the collateral is located, as of the dates indicated.
December 31, September 30,
March 31, 2026 2025 2025
Unpaid Undisbursed Gross Loan Gross Loan Gross Loan
Count Principal Amount Amount Amount Amount
(Dollars in thousands)
Kansas 525 $ 861,080 $ 101,727 $ 962,807 $ 910,709 $ 799,827
Missouri 116 312,308 38,942 351,250 352,221 354,772
Texas 17 198,306 46,105 244,411 301,349 312,805
Arizona 7 133,940 19,371 153,311 153,337 122,429
California 7 97,773 25,870 123,643 110,532 96,848
New York 3 112,201 - 112,201 109,482 109,828
Other 56 369,956 74,172 444,128 431,184 353,401
731 $ 2,085,564 $ 306,187 $ 2,391,751 $ 2,368,814 $ 2,149,910
The following table presents the Bank's commercial real estate and commercial construction loans by unpaid principal balance, aggregated by type of primary collateral and state, along with weighted average LTV and weighted average DSCR as of March 31, 2026. The LTV is calculated using the gross loan amount (composed of unpaid principal and undisbursed amounts) as of March 31, 2026 and the most current collateral value available, which is most often the value at origination/purchase. The DSCR is calculated at the time of origination and is updated at the time of subsequent loan renewals, financial reviews (for applicable loans and lending relationships), and any other time management is aware of changes that may impact the DSCR. The DSCR presented in the table below is based on the DSCR at the time of origination unless an updated DSCR has been calculated or the loan has reached the end of its stabilization period. For construction loans, the DSCR is based on projected stabilized cash flows and the contractual loan payments when the project stabilizes. In general, commercial borrowers with total loans of $2.5 million or more are reviewed at least annually to monitor financial performance.
Kansas Missouri Texas Arizona New York California Other Total
(Dollars in thousands)
Hotel $ 41,302 $ 22,289 $ 140,681 $ 111,026 $ 109,084 $ 93,637 $ 111,665 $ 629,684
Senior housing 327,078 141,066 - - - - 71,657 539,801
Multi-family 204,547 56,658 20,000 - - - 20,180 301,385
Retail building 99,809 40,564 37,178 20,162 - - 80,848 278,561
Office building 62,523 7,336 447 131 3,117 - 26,930 100,484
One- to four-family property 56,016 4,148 - 2,248 - 1,620 11,290 75,322
Warehouse/manufacturing 40,753 17,818 - - - - 6,668 65,239
Land 7,258 78 - - - - 31,998 39,334
Single use building 11,635 18,054 - 373 - 2,516 - 32,578
Other 10,159 4,297 - - - - 8,720 23,176
$ 861,080 $ 312,308 $ 198,306 $ 133,940 $ 112,201 $ 97,773 $ 369,956 $ 2,085,564
Weighted LTV 66 % 66 % 59 % 55 % 47 % 51 % 66 % 63 %
Weighted DSCR 2.15x 1.55x 1.21x 1.49x 1.56x 1.47x 1.59x 1.76x
The following table presents the unpaid principal balance of the Bank's commercial real estate and commercial construction loans aggregated by type of primary collateral, along with weighted average rate, LTV, and DSCR as of March 31, 2026.
Unpaid Weighted Weighted Weighted
Count Principal Rate LTV DSCR
(Dollars in thousands)
Hotel 33 $ 629,684 6.21 % 55 % 1.36x
Senior housing 53 539,801 5.19 73 1.73
Multi-family 31 301,385 6.06 64 1.29
Retail building 121 278,561 5.85 61 1.87
Office building 75 100,484 6.41 65 3.68
One- to four-family property 288 75,322 6.10 58 2.69
Warehouse/manufacturing 53 65,239 6.39 65 2.31
Land 24 39,334 6.27 68 3.89
Single use building 25 32,578 6.26 61 1.78
Other 28 23,176 6.21 54 2.08
731 $ 2,085,564 5.89 63 1.76
The following table presents the Bank's commercial construction loans, including unpaid principal and undisbursed amounts, along with outstanding commercial construction loan commitments as of March 31, 2026, aggregated by type of primary collateral, along with weighted average rate, LTV, and DSCR.
Unpaid Undisbursed Gross Loan Commitment Total Weighted
Count Principal Amount Amount Amount Amount Rate LTV DSCR
(Dollars in thousands)
Multi-family 10 $ 63,675 $ 125,948 $ 189,623 $ 100,540 $ 290,163 6.61 % 61% 1.19x
Retail building 10 39,324 60,623 99,947 - 99,947 6.64 75 1.34
Hotel 7 36,844 57,382 94,226 - 94,226 7.10 70 1.47
Senior housing 2 30,327 17,197 47,524 - 47,524 6.38 78 1.32
Warehouse/manufacturing 1 9,360 - 9,360 - 9,360 7.25 80 1.56
Office building 3 6,347 765 7,112 - 7,112 7.09 75 1.20
Single use building 1 - - - 6,112 6,112 7.00 62 1.22
One- to four-family property 8 3,374 487 3,861 - 3,861 7.08 73 2.07
Other 1 - - - 7,294 7,294 6.21 54 1.21
43 $ 189,251 $ 262,402 $ 451,653 $ 113,946 $ 565,599 6.70 67 1.28
Weighted average rate 6.73 % 6.62 % 6.67 % 6.83 % 6.70 %
Weighted LTV 70 % 68 % 69 % 60 % 67 %
Weighted DSCR 1.37x 1.27x 1.31x 1.18x 1.28x
The following table presents the Bank's commercial real estate and construction loans, including unpaid principal and undisbursed amounts, along with outstanding loan commitments as of March 31, 2026, categorized by aggregate gross loan and commitment amount, along with average loan amount, and weighted average rate, LTV, and DSCR. For amounts over $60.0 million, there was $151.8 million secured by hotels in Arizona and California, $143.1 million secured by multi-family properties in Kansas, and $69.6 million secured by a senior housing facility in Kansas. The largest loan included in the table below was $86.0 million, which was fully disbursed as of March 31, 2026, and is collateralized by a hotel in Arizona. Included in the >$20 to $30 million category are five loans with DSCRs below 1.15x. Of those five loans, four of the loans, with a gross loan amount of $99.3 million, are with three of our largest borrowing groups. We have over 20 years of experience with these borrowing groups and the guarantors have expertise in the operation of the properties securing the loans. All of these loans were current as of March 31, 2026 and are being actively monitored by management. The weighted average LTV for these four loans was 68% as of March 31, 2026. The fifth loan, with an unpaid principal balance of $24.3 million, was on nonaccrual and classified as substandard as of March 31, 2026. A specific valuation allowance was established related to this loan as of March 31, 2026. See additional discussion regarding the specific valuation allowance in the "Management's Discussion and Analysis of Financial Condition and Results of Operation - Asset Quality" section below.
Gross Loan
and Commitment Average Weighted Weighted Weighted
Count Amounts Amount Rate LTV DSCR
(Dollars in thousands)
Greater than $60 million 5 $ 364,483 $ 72,897 6.10 % 60 % 1.50x
>$50 to $60 million 3 163,457 54,486 5.59 61 1.45
>$40 to $50 million 3 147,162 49,054 6.29 62 1.45
>$30 to $40 million 11 380,026 34,548 5.81 65 1.29
>$20 to $30 million 17 406,550 23,915 6.30 68 1.14
>$10 to $20 million 30 416,429 13,881 6.35 68 1.56
>$5 to $10 million 43 303,393 7,056 5.89 67 2.56
$1 to $5 million 124 286,171 2,308 5.37 61 2.29
Less than $1 million 513 114,858 224 6.33 53 3.17
749 $ 2,582,529 3,448 6.01 64 1.70
The following table summarizes the Bank's commercial and industrial loans by loan purpose as of the dates indicated, along with DSCR weighted by gross loan amount at March 31, 2026. The Bank had four commercial and industrial loan commitments totaling $36.6 million, with a weighted average rate of 6.83%, at March 31, 2026. Management anticipates growth in the commercial and industrial loan portfolio as the Bank advances its strategy to grow all aspects of commercial banking. However, given the inherent characteristics of these loans, balances will likely fluctuate over time.
December 31, September 30,
March 31, 2026 2025 2025
Unpaid Undisbursed Gross Loan Weighted Gross Loan Gross Loan
Count Principal Amount Amount DSCR Amount Amount
(Dollars in thousands)
Working capital 188 $ 108,915 $ 48,465 $ 157,380 4.69x $ 156,577 $ 153,967
Purchase/refinance business assets 51 53,937 265 54,202 1.63 49,892 49,805
Finance/lease vehicle 61 25,761 7,084 32,845 1.79 34,473 36,406
Purchase equipment 158 29,571 - 29,571 2.25 27,666 54,201
Other 18 13,998 1,283 15,281 1.17 16,815 7,508
476 $ 232,182 $ 57,097 $ 289,279 3.35 $ 285,423 $ 301,887
Weighted average rate 6.76 % 6.68 % 6.74 % 6.75 % 6.97 %
The following table summarizes the Bank's commercial and industrial loans by the state in which the borrower is located, as of March 31, 2026.
Unpaid Undisbursed Gross Loan
Principal Amount Amount
(Dollars in thousands)
Kansas $ 172,271 $ 55,192 $ 227,463
Arizona 11,798 - 11,798
Missouri 10,722 690 11,412
Other 37,391 1,215 38,606
$ 232,182 $ 57,097 $ 289,279
The following table presents the Bank's commercial and industrial loan portfolio, including unpaid principal and undisbursed amounts, along with outstanding loan commitments as of March 31, 2026, categorized by aggregate gross loan and commitment amounts, along with average loan amount, and weighted average DSCR. The largest loan included in the table below was a working capital loan with a gross balance of $36.0 million, of which $11.8 million remained undisbursed as of March 31, 2026. This loan is part of the Bank's largest commercial and industrial lending relationship, which had a total gross loan balance of $84.7 million, representing 29% of the gross commercial and industrial loan portfolio at March 31, 2026. The borrower is located in Kansas and, as of March 31, 2026, also maintained an additional working capital loan with a gross loan balance greater than $15 million, for a total of two loans with a gross loan amount greater than $15 million. Also included in the gross loan and commitment amounts greater than $15 million as of March 31, 2026 was a loan commitment to a borrower located in Georgia for the purchase and refinancing of business assets.
Gross Loan
and Commitment Average Weighted
Count Amounts Amount DSCR
(Dollars in thousands)
Greater than $15 million 3 $ 89,718 $ 29,906 1.59x
>$10 to $15 million 3 34,719 11,573 2.37
>$5 to $10 million 11 82,882 7,535 1.35
>$1 to $5 million 28 55,686 1,989 9.56
>$500 thousand to $1 million 36 27,044 751 4.13
Less than $500 thousand 399 35,795 90 3.66
480 $ 325,844 679 3.41
Asset Quality
Delinquent and nonaccrual loans and OREO. The following table presents the Bank's 30 to 89 day delinquent loans at the dates indicated. The amounts in the table represent the unpaid principal balance of the loans less related charge-offs, if any. Of the loans 30 to 89 days delinquent at March 31, 2026, approximately 60% were 59 days or less delinquent.
March 31, December 31, September 30,
2026 2025 2025
Count Amount Count Amount Count Amount
(Dollars in thousands)
One- to four-family:
Originated 65 $ 6,624 83 $ 9,351 68 $ 7,338
Purchased 10 2,366 21 5,767 13 3,221
Commercial:
Commercial real estate 7 1,554 6 2,584 7 1,236
Commercial and industrial 8 771 5 1,039 1 32
Consumer 22 570 29 635 22 520
112 $ 11,885 144 $ 19,376 111 $ 12,347
Loans 30 to 89 days delinquent
to total loans receivable, net 0.15 % 0.24 % 0.15 %
The following table presents the Bank's nonaccrual loans and OREO at the dates indicated. Non-performing assets consist of nonaccrual loans and OREO. The amounts in the table represent the unpaid principal balance of the loans less related charge-offs, if any. Nonaccrual loans are loans that are 90 or more days delinquent or in foreclosure and other loans required to be reported as nonaccrual pursuant to the Bank's internal policies, even if the loans are current. At all dates presented, there were no loans 90 or more days delinquent that were still accruing interest.
March 31, December 31, September 30,
2026 2025 2025
Count Amount Count Amount Count Amount
(Dollars in thousands)
Loans 90 or More Days Delinquent or in Foreclosure:
One- to four-family:
Originated 31 $ 4,130 29 $ 3,223 29 $ 2,754
Purchased 15 5,606 6 1,469 6 1,524
Commercial:
Commercial real estate 12 2,634 12 3,358 11 3,123
Commercial and industrial 4 999 2 199 2 210
Consumer 9 72 14 218 10 94
71 13,441 63 8,467 58 7,705
Loans 90 or more days delinquent or in foreclosure
as a percentage of total loans 0.17 % 0.10 % 0.09 %
Nonaccrual loans less than 90 Days Delinquent:(1)
Commercial:
Commercial real estate 6 $ 41,057 4 $ 40,338 3 $ 40,249
Commercial and industrial 7 410 1 77 2 109
13 41,467 5 40,415 5 40,358
Total nonaccrual loans 84 54,908 68 48,882 63 48,063
Nonaccrual loans as a percentage of total loans 0.68 % 0.60 % 0.59 %
OREO:
One- to four-family:
Originated(2)
- $ - 2 $ 291 1 $ 62
Consumer 1 135 1 135 1 135
1 135 3 426 2 197
Total non-performing assets 85 $ 55,043 71 $ 49,308 65 $ 48,260
Non-performing assets as a percentage
of total assets 0.56 % 0.50 % 0.49 %
(1)Includes loans required to be reported as nonaccrual pursuant to internal policies, even if the loans are current.
(2)Real estate-related consumer loans where we also hold the first mortgage are included in the one- to four-family category as the underlying collateral is one- to four-family property.
The following table presents the states where the properties securing ten percent or more of the total amount of the Bank's one- to four-family loans, excluding construction loans, are located and the corresponding balance of loans 30 to 89 days delinquent, 90 or more days delinquent or in foreclosure, and weighted average LTV for loans 90 or more days delinquent or in foreclosure at March 31, 2026. The amounts in the table represent the unpaid principal balance of the loans, less related charge-offs, if any. The LTVs 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.
Loans 30 to 89 Loans 90 or More Days Delinquent
One- to Four-Family Days Delinquent or in Foreclosure
State Amount % of Total Amount % of Total Amount % of Total LTV
(Dollars in thousands)
Kansas $ 3,225,032 56.5 % $ 4,695 52.2 % $ 4,524 46.5 % 56 %
Missouri 976,109 17.1 2,805 31.2 1,700 17.4 60
Other states 1,506,668 26.4 1,490 16.6 3,512 36.1 63
$ 5,707,809 100.0 % $ 8,990 100.0 % $ 9,736 100.0 % 59
The following table presents the unpaid principal balance of commercial real estate loans, aggregated by state, that were 30 to 89 days delinquent or 90 or more days delinquent or in foreclosure, and the weighted average LTV and weighted average DSCR for loans 90 or more days delinquent or in foreclosure at March 31, 2026. See additional discussion regarding the Bank's commercial real estate loan DSCRs and LTVs in the "Management's Discussion and Analysis of Financial Condition and Results of Operation - Loans Receivable - Commercial Loans" section above.
Loans 30 to 89 Loans 90 or More Days Delinquent
Days Delinquent or in Foreclosure
State Amount % of Total Amount % of Total LTV DSCR
(Dollars in thousands)
Kansas $ 1,554 100.0 % $ 2,418 91.8 % 41 % 2.24x
Other states - - 216 8.2 41 1.84
$ 1,554 100.0 % $ 2,634 100.0 % 41 2.21
Classified Loans. The following table presents the amortized cost of loans classified as special mention or substandard at the dates presented. The decrease in commercial real estate special mention loans at March 31, 2026 compared to September 30, 2025 was due mainly to a hotel participation loan being upgraded to pass due to an improvement in the hotel's financial results. The majority of the substandard commercial real estate loan balance at the dates presented in the table below relates to one borrowing relationship. During the current quarter, an updated appraisal was received related to the collateral securing this lending relationship. The updated appraisal was lower than the appraisal received approximately one year ago and as a result, a $4.0 million specific valuation allowance was recorded as of March 31, 2026 related to this lending relationship. The loans associated with this lending relationship were on nonaccrual at all dates presented in the table below.
March 31, 2026 December 31, 2025 September 30, 2025
Special Mention Substandard Special Mention Substandard Special Mention Substandard
(Dollars in thousands)
One- to four-family $ 12,498 $ 24,023 $ 14,236 $ 21,611 $ 13,055 $ 20,616
Commercial:
Commercial real estate 22,352 45,773 22,448 45,801 59,993 45,550
Commercial and industrial 364 1,414 579 277 399 473
Consumer 166 213 106 365 326 322
$ 35,380 $ 71,423 $ 37,369 $ 68,054 $ 73,773 $ 66,961
Allowance for Credit Losses. The Bank utilizes a discounted cash flow model for estimating expected credit losses for pooled loans and loan commitments. Expected credit losses are determined by calculating projected future loss rates, which are dependent upon forecasted economic indices, and applying qualitative factors when deemed appropriate by management. At March 31, 2026, management applied qualitative factors to account for large dollar commercial real estate loan concentrations and potential risk of loss in market value for newer one- to four-family loans. These qualitative factors were applied to account for credit risks not fully reflected in the discounted cash flow model.
See "Part II, Item 8. Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 1. Summary of Significant Accounting Policies" in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2025 and "Part I, Item 1. Note 4. Loans Receivable and Allowance for Credit Losses" within this Quarterly Report on Form 10-Q for additional information related to the key assumptions used in the discounted cash flow model and the qualitative factors.
The distribution of our ACL and the ratio of ACL to loans receivable, by loan type, at the dates indicated is summarized below. The increase in the ACL to loans receivable ratio as of March 31, 2026, compared to December 31, 2025 and September 30, 2025, was due primarily to establishing a specific valuation allowance related to the commercial real estate lending relationship discussed above. Based on management's evaluation of the credit risk within the Bank's commercial loan portfolio, taking into consideration DSCRs and LTVs, management believes the Bank's ACL ratio for commercial loans is appropriate for the credit risk. See additional discussion regarding the Bank's commercial real estate loan DSCRs and LTVs in the "Financial Condition - Loans Receivable - Commercial Loans" section above.
Distribution of ACL Ratio of ACL to Loans Receivable
March 31, December 31, September 30, March 31, December 31, September 30,
2026 2025 2025 2026 2025 2025
(Dollars in thousands)
One- to four-family:
Originated $ 1,587 $ 1,622 $ 1,730 0.04 % 0.04 % 0.05 %
Purchased 1,058 1,203 1,298 0.05 0.06 0.06
Construction 18 17 18 0.11 0.11 0.11
One- to four-family 2,663 2,842 3,046 0.05 0.05 0.05
Commercial:
Commercial real estate 18,973 16,825 15,809 1.00 0.90 0.92
Commercial and industrial 2,046 1,826 2,499 0.88 0.83 1.19
Commercial construction 2,716 2,871 2,468 1.44 1.56 1.26
Total 23,735 21,522 20,776 1.02 0.94 0.98
Consumer 201 208 217 0.18 0.18 0.19
Total $ 26,599 $ 24,572 $ 24,039 0.33 0.30 0.30
Historically, the Bank has maintained very low delinquency ratios and net charge-off rates. Over the past two years, the Bank's highest ratio of commercial loans 90 days or more delinquent to total commercial loans at a quarter end was 0.22%. The highest such ratio for one- to four-family originated and correspondent loans, combined, was 0.17%. During the 10-year period ended March 31, 2026, the Bank recognized total NCOs of $904 thousand. As of March 31, 2026, the ACL balance was $26.6 million and the reserve for off-balance sheet credit exposures totaled $6.3 million, which management believes is adequate for the credit risk characteristics in our loan portfolio.
The following table presents ACL activity and related ratios at the dates and for the periods indicated.
At or For the Six Months Ended
March 31, 2026 March 31, 2025
(Dollars in thousands)
Balance at beginning of period $ 24,039 $ 23,035
Charge-offs (164) (140)
Recoveries 8 33
Net (charge-offs) recoveries (156) (107)
Provision for credit losses 2,716 1,042
Balance at end of period $ 26,599 $ 23,970
Ratio of NCOs during the period
to average non-performing assets 0.30 % 1.02 %
ACL to nonaccrual loans at end of period 48.44 221.27
ACL to loans receivable, net at end of period 0.33 0.30
ACL at end of period to NCOs
during the period (annualized) 85x 112x
The ratio of NCOs to average non-performing assets was lower in the current year period compared to the prior year period due to a higher average balance of non-performing assets during the six months ended March 31, 2026. The ratio of ACL to nonaccrual loans was lower at the end of the current year six-month period compared to the prior year six-month period due to a higher balance of nonaccrual loans at March 31, 2026. The increase in the ratio of the ACL to total loans as of March 31, 2026 from March 31, 2025 was due primarily to establishing a specific valuation allowance related to a nonaccrual commercial lending relationship during the current year period. See Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates" in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2025 for additional information on the regression analysis update that occurred in the prior fiscal year. Additional information related to ACL activity by specific loan categories for the current year period can be found in "Part I, Item 1. Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 4. Loans Receivable and Allowance for Credit Losses" within this Quarterly Report on Form 10-Q. ACL at the end of the period to NCOs during the period (annualized) was lower compared to the prior year six-month period, due primarily to higher NCOs in the current year six-month period.
The following table presents NCOs, average loans, and NCOs as a percentage of average loans, by loan type, for the periods indicated.
For the Six Months Ended
March 31, 2026 March 31, 2025
NCOs Average Loans % of Average Loans NCOs Average Loans % of Average Loans
(Dollars in thousands)
One- to four-family:
Originated $ 11 $ 3,707,661 - % $ (5) $ 3,883,700 - %
Purchased - 2,087,375 - 113 2,313,303 0.09
Construction - 15,216 - - 18,826 -
Total 11 5,810,252 - 108 6,215,829 -
Commercial:
Commercial real estate - 1,835,843 - (20) 1,320,441 -
Commercial and industrial 100 219,711 0.05 (2) 131,315 -
Commercial construction - 187,302 - - 174,574 -
Total 100 2,242,856 - (22) 1,626,330 -
Consumer:
Home equity 27 106,866 0.03 19 101,008 0.02
Other 18 7,919 0.23 2 9,388 0.02
Total 45 114,785 0.04 21 110,396 0.02
$ 156 $ 8,167,893 - $ 107 $ 7,952,555 -
While management utilizes its best judgment and information available, the adequacy of the ACL and reserve for off-balance sheet credit exposures is determined by certain factors outside of the Company's control, such as the performance of our loan portfolio, changes in the economic environment, including economic uncertainty, changes in interest rates, and the view of regulatory authorities toward classification of assets and the level of ACL and reserve for off-balance sheet credit exposures. Additionally, the level of ACL and reserve for off-balance sheet credit exposures may fluctuate based on the balance and mix of the loan portfolio and off-balance sheet credit exposures. If actual results differ significantly from our assumptions, our ACL and reserve for off-balance sheet credit exposures may not be sufficient to cover inherent losses in our loan portfolio, resulting in additions to our ACL and an increase in the provision for credit losses.
Securities. The following table presents the distribution of our securities portfolio, at amortized cost, at the dates indicated. The majority of our securities are government guaranteed or issued by GSEs. Overall, fixed-rate securities comprised 91% of our securities portfolio at March 31, 2026. The WAL is the estimated remaining maturity (in years) after three-month historical prepayment speeds and projected call option assumptions have been applied. Weighted average yields on tax-exempt securities are not calculated on a fully tax-equivalent basis.
March 31, 2026 December 31, 2025 September 30, 2025
Amount Yield WAL Amount Yield WAL Amount Yield WAL
(Dollars in thousands)
MBS $ 791,659 5.44 % 4.0 $ 805,099 5.48 % 4.1 $ 843,369 5.45 % 4.8
Corporate bonds 4,000 5.12 6.1 4,000 5.12 6.4 4,000 5.12 6.6
$ 795,659 5.44 4.0 $ 809,099 5.48 4.1 $ 847,369 5.45 4.8
The following table summarizes the activity in our securities portfolio based on the estimated fair value, which is also the carrying value, for the periods presented. The weighted average yields for the beginning and ending balances are as of the first and last days of the periods presented and are generally derived from recent prepayment activity on the securities in the portfolio. The beginning and ending WALs are the estimated remaining principal repayment terms (in years) after three-month historical prepayment speeds and projected call option assumptions have been applied.
For the Six Months Ended
March 31, 2026 March 31, 2025
Amount Yield WAL Amount Yield WAL
(Dollars in thousands)
Beginning balance - carrying value $ 867,216 5.45 % 4.8 $ 856,266 5.63 % 5.2
Maturities and repayments (76,298) (99,387)
Net amortization of (premiums)/discounts 1,699 1,662
Purchases 22,889 4.53 6.0 209,458 4.96 7.8
Change in valuation on AFS securities (5,940) (6,582)
Ending balance - carrying value $ 809,566 5.44 4.0 $ 961,417 5.46 5.6
Liabilities. Total liabilities were $8.80 billion at March 31, 2026, compared to $8.73 billion at September 30, 2025. The $72.3 million increase was due primarily to a $333.0 million increase in deposits, partially offset by a $243.7 million decrease in borrowings.
Deposits. The following table presents the amount, weighted average rate and percent of total for the components of our deposit portfolio at the dates presented. The decrease in the deposit portfolio rate as of March 31, 2026 compared to December 31, 2025 was due primarily to an increase in retail checking account balances, a reduction in the rate on retail money market accounts, and a decrease in the retail certificate of deposit portfolio rate. The decrease in the deposit portfolio rate as of March 31, 2026 compared to September 30, 2025 was due mainly to a decrease in the rate paid on retail certificates of deposit and retail money market accounts, along with an increase in the balance of retail checking accounts and commercial non-interest bearing checking account.
March 31, 2026 December 31, 2025 September 30, 2025
% of % of % of
Amount Rate Total Amount Rate Total Amount Rate Total
(Dollars in thousands)
Non-interest-bearing checking $ 674,415 - % 9.7 % $ 641,201 - % 9.5 % $ 601,371 - % 9.1 %
Interest-bearing checking 935,193 0.24 13.5 907,684 0.23 13.4 859,256 0.21 13.0
High yield savings 630,923 3.59 9.1 557,559 3.70 8.3 460,712 3.88 7.0
Other savings 438,144 0.07 6.4 424,280 0.07 6.3 423,942 0.07 6.5
Money market 1,231,691 1.12 17.8 1,229,427 1.19 18.2 1,233,487 1.29 18.7
Certificates of deposit 3,014,125 3.60 43.5 2,998,481 3.65 44.3 3,012,680 3.74 45.7
$ 6,924,491 2.13 100.0 % $ 6,758,632 2.18 100.0 % $ 6,591,448 2.26 100.0 %
The following table presents the amount, weighted average rate, and percent of total for the components of our deposit portfolio, split between retail non-maturity deposits, commercial non-maturity deposits, and certificates of deposit at the dates presented.
March 31, 2026 December 31, 2025 September 30, 2025
% of % of % of
Amount Rate Total Amount Rate Total Amount Rate Total
(Dollars in thousands)
Retail non-maturity deposits:
Non-interest-bearing checking $ 446,629 - % 6.4 % $ 431,397 - % 6.4 % $ 409,722 - % 6.2 %
Interest-bearing checking 857,351 0.08 12.4 823,946 0.08 12.2 790,783 0.08 12.0
High yield savings 630,923 3.59 9.1 557,559 3.70 8.3 460,712 3.88 7.0
Other savings 434,042 0.07 6.3 420,756 0.07 6.2 420,330 0.07 6.4
Money market 1,060,519 0.96 15.3 1,060,980 1.03 15.7 1,050,841 1.07 15.9
Total 3,429,464 0.99 49.5 3,294,638 0.99 48.8 3,132,388 0.96 47.5
Commercial non-maturity deposits:
Non-interest-bearing checking 227,786 - 3.3 209,804 - 3.1 191,649 - 2.9
Interest-bearing checking 77,842 2.04 1.1 83,738 1.73 1.2 68,473 1.72 1.0
Savings 4,102 0.05 0.1 3,524 0.05 0.1 3,612 0.05 0.1
Money market 171,172 2.11 2.5 168,447 2.18 2.5 182,646 2.52 2.8
Total 480,902 1.08 7.0 465,513 1.10 6.9 446,380 1.29 6.8
Certificates of deposit:
Retail certificates of deposit 2,872,653 3.60 41.4 2,818,392 3.63 41.7 2,828,982 3.73 43.0
Commercial certificates of deposit 67,169 3.52 1.0 62,178 3.55 0.9 61,819 3.64 0.9
Public unit certificates of deposit 74,303 3.96 1.1 117,911 4.02 1.7 121,879 4.06 1.8
Total 3,014,125 3.60 43.5 2,998,481 3.65 44.3 3,012,680 3.74 45.7
$ 6,924,491 2.13 100.0 % $ 6,758,632 2.18 100.0 % $ 6,591,448 2.26 100.0 %
The following table presents the amount, weighted average rate, and percent of total for total retail deposits, commercial deposits, and public unit certificates of deposit at the dates noted.
March 31, 2026 December 31, 2025 September 30, 2025
% of % of % of
Amount Rate Total Amount Rate Total Amount Rate Total
(Dollars in thousands)
Total retail deposits $ 6,302,117 2.18 % 90.9 % $ 6,113,030 2.21 % 90.5 % $ 5,961,370 2.28 % 90.5 %
Total commercial deposits 548,071 1.38 8.0 527,691 1.39 7.8 508,199 1.58 7.7
Public unit certificates of deposit 74,303 3.96 1.1 117,911 4.02 1.7 121,879 4.06 1.8
$ 6,924,491 2.13 100.0 % $ 6,758,632 2.18 100.0 % $ 6,591,448 2.26 100.0 %
As of March 31, 2026, approximately $779.2 million (or approximately 11%) of the Bank's Call Report deposit balance was uninsured, of which approximately $645.8 million (or approximately 9% of the Bank's Call Report deposit balance) related to commercial and retail deposit accounts, with the remainder mainly comprised of fully collateralized public unit deposits and intercompany accounts. The uninsured amounts are estimates based on the methodologies and assumptions used for the Bank's regulatory reporting requirements.
Borrowings. Total borrowings at March 31, 2026 were $1.71 billion, which was comprised of $1.61 billion in fixed-rate FHLB advances, $100.0 million in variable-rate FHLB advances tied to an interest rate swap, and $1.2 million in finance leases. Borrowings decreased $243.7 million from September 30, 2025 due primarily to the maturity of $200.0 million of borrowings that were not replaced, along with principal repayments made on the Bank's amortizing FHLB advances. Cash flows from the deposit portfolio were used, in part, to pay off maturing FHLB borrowings and repay amortizing FHLB advances. Management will continue to monitor opportunities for wholesale funding and may pay down FHLB advances in future periods. The Bank may also renew certain fixed-rate advances in the future using adjustable-rate advances in order to better match the repricing characteristics of its increasing commercial loan portfolio.
The following table presents the maturity of term borrowings, which consist of FHLB advances, along with the associated weighted average contractual and effective rates as of March 31, 2026. Amortizing FHLB advances totaling $233.6 million are presented based on their maturity dates versus their quarterly scheduled repayment dates.
Maturity by Contractual Effective
Fiscal Year Amount Rate
Rate(1)
(Dollars in thousands)
2026 $ 175,000 2.89 % 2.89 %
2027 362,500 2.59 2.73
2028 856,148 4.00 4.00
2029 240,000 4.00 4.14
2030 75,000 4.20 4.20
$ 1,708,648 3.59 3.65
(1)The effective rate includes the impact of the interest rate swap and the amortization of deferred prepayment penalties resulting from FHLB advances previously prepaid.
The following table presents borrowing activity for the periods shown. The borrowings presented in the table have original contractual terms of one year or longer or are tied to the interest rate swap which has an original contractual term longer than one year. Line of credit borrowings and finance leases are excluded from the table. The effective rate is shown as a weighted average and includes the impact of the interest rate swap 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 as of the first and last days of the period presented.
For the Three Months Ended For the Six Months Ended
March 31, 2026 March 31, 2026 March 31, 2025
Effective Effective Effective
Amount Rate WAM Amount Rate WAM Amount Rate WAM
(Dollars in thousands)
Beginning balance $ 1,829,816 3.65 % 1.4 $ 1,950,984 3.54 % 1.5 $ 2,180,656 3.29 % 1.6
Maturities and repayments (496,168) 3.80 (667,336) 3.43 (387,336) 2.89
New FHLB borrowings 375,000 3.81 2.4 425,000 3.79 2.3 350,000 4.30 3.2
Ending balance $ 1,708,648 3.65 1.6 $ 1,708,648 3.65 1.6 $ 2,143,320 3.54 1.6
During the current quarter, the Bank prepaid $375.0 million of fixed-rate advances with a weighted average effective rate of 4.36% and a WAM of 0.9 years and replaced them with $375.0 million of fixed-rate advances with a weighted average effective rate of 3.81% and a WAM of 2.4 years. This transaction resulted in prepayment fees of $2.1 million, which will be recognized in interest expense over the life of the new FHLB advances. During the quarter ended December 31, 2025, the Bank prepaid a $50.0 million fixed-rate advance with a weighted average effective rate of 4.03% and a WAM of 0.5 years and replaced it with a $50.0 million fixed-rate advance with a weighted average effective rate of 3.64% and a WAM of 2.0 years. This transaction resulted in prepayment fees of $11 thousand, which will be recognized in interest expense over the life of the new FHLB advance. These prepayment activities are reflected through the effective rates in the table above. Management will continue to monitor opportunities for wholesale funding and may pay down FHLB advances in future periods.
Maturities of Interest-Bearing Liabilities. The following table presents the maturity and weighted average repricing rate, which is also the weighted average effective rate, of certificates of deposit, split between retail/commercial and public unit amounts, and non-amortizing FHLB advances for the next four quarters as of March 31, 2026.
June 30, September 30, December 31, March 31,
2026 2026 2026 2027 Total
(Dollars in thousands)
Retail/Commercial Certificates:
Amount $ 638,250 $ 626,018 $ 675,294 $ 295,325 $ 2,234,887
Repricing Rate 3.78 % 3.64 % 3.57 % 3.40 % 3.63 %
Public Unit Certificates:
Amount $ 8,001 $ 17,379 $ 18,673 $ 19,000 $ 63,053
Repricing Rate 4.24 % 3.95 % 3.63 % 4.14 % 3.95 %
Term Borrowings:
Amount $ 50,000 $ 125,000 $ - $ 100,000 $ 275,000
Repricing Rate 0.98 % 3.66 % - % 1.24 % 2.29 %
Total
Amount $ 696,251 $ 768,397 $ 693,967 $ 414,325 $ 2,572,940
Repricing Rate 3.59 % 3.65 % 3.57 % 2.91 % 3.49 %
The following table sets forth the WAM information for our certificates of deposit, in years, as of March 31, 2026.
Retail certificates of deposit 0.7
Commercial certificates of deposit 0.5
Public unit certificates of deposit 0.7
Total certificates of deposit 0.7
Stockholders' Equity. Stockholders' equity totaled $1.03 billion at March 31, 2026. Consistent with our goal to operate a sound and profitable financial organization that delivers long-term stockholder value, we actively seek to maintain a well-capitalized status for the Bank in accordance with regulatory standards. As of March 31, 2026, all of the Bank's capital ratios exceeded the well-capitalized requirements, and the Bank exceeded internal policy thresholds for sensitivity to changes in interest rates. As of March 31, 2026, the Bank's community bank leverage ratio was 9.5%. Excluding the impact of deferred tax assets related to the Bank's net operating loss carryforward and federal tax credits, the Bank's CBLR was 9.8% as of March 31, 2026. See "Liquidity and Capital Resources" below for additional information regarding the Bank's regulatory capital requirements.
During the six months ended March 31, 2026, the Company repurchased 4,532,114 shares of common stock at an average price of $7.00 per share, or $31.7 million in total. Subsequent to March 31, 2026 through May 6, 2026, the Company repurchased an additional 1,002,964 shares of common stock at an average price of $7.56 per share, or $7.6 million in total, bringing total share repurchases during fiscal year 2026 through May 6, 2026 to 5,535,078 shares for $39.3 million. As of May 6, 2026, total shares outstanding was 126,694,827. The Company intends to opportunistically repurchase stock from time to time depending upon market conditions, available liquidity, and other factors. Although our existing repurchase plan has no expiration date, we are required to annually seek the FRB of Kansas City's non-objection for the buyback amount. The FRB's current non-objection for the Company to repurchase up to $75 million of stock expires in February 2027. As of May 6, 2026 the Company had $31.8 million remaining authorized under its existing stock repurchase plan.
During the six months ended March 31, 2026, the Company paid cash dividends totaling $26.9 million, or $0.21 per share, which consisted of a $0.04 per share special cash dividend and two regular quarterly cash dividends of $0.085 per share, totaling $0.17 per share for the quarterly cash dividends. On April 28, 2026, the Company announced a regular quarterly cash dividend of $0.085 per share, or approximately $10.6 million, payable on May 15, 2026 to stockholders of record as of the close of business on May 1, 2026. The special cash dividend paid in January 2026, in addition to the Company's history of regular quarterly dividends and opportunistic share repurchases, demonstrates the Company's multi-channel focus on delivering stockholder value through disciplined capital allocation which balances investments in the future of the Company with incremental opportunities to return capital to stockholders. For the remainder of fiscal year 2026, it is the intention of the Company's Board of Directors to pay out a regular quarterly cash dividend of $0.085 per share, totaling $0.34 per share for the year. Dividend payments depend upon a number of factors, including the Company's financial condition and results of operations, regulatory capital compliance, regulatory limitations on the Bank's ability to
make capital distributions to the Company, the Bank's current tax earnings and accumulated earnings and profits, and the amount of cash at the holding company level.
The Board of Directors continues to evaluate various alternatives for capital allocation to enhance stockholder value, including the repurchase of stock, the payment of additional cash dividends, or retaining earnings to support future growth. Since our second-step conversion in December 2010 through March 31, 2026, we have returned $2.06 billion in capital to stockholders through dividends totaling $1.59 billion and stock repurchases totaling $471.6 million. This is supported by our holistic approach to managing the balance sheet through continuous modeling of the Bank's performance, risk management, our commitment to credit quality and periodic stress testing.
At March 31, 2026, Capitol Federal Financial, Inc., at the holding company level, had $10.7 million in cash on deposit at the Bank. During the six months ended March 31, 2026, the Bank distributed $53.0 million from the Bank to the Company. Subsequent to March 31, 2026 through May 6, 2026, the Bank distributed $25.0 million from the Bank to the holding company to fund the payment of dividends and share repurchases during the quarter-ending June 30, 2026. The Bank is expected to stay in a positive tax accumulated earnings and profit balance during the remainder of fiscal year 2026.
The following table presents regular quarterly cash dividends and special cash dividends paid in calendar years 2026, 2025, and 2024. The amounts represent cash dividends paid during each period shown. For the quarter ending June 30, 2026, the amount presented represents the estimated dividend payable on May 15, 2026 to stockholders of record as of the close of business on May 1, 2026.
Calendar Year
2026 2025 2024
Amount Per Share Amount Per Share Amount Per Share
(Dollars in thousands, except per share amounts)
Regular quarterly dividends paid
Quarter ended March 31 $ 10,815 $ 0.085 $ 11,062 $ 0.085 $ 11,127 $ 0.085
Quarter ended June 30 10,565 0.085 11,063 0.085 11,044 0.085
Quarter ended September 30 - - 11,066 0.085 11,043 0.085
Quarter ended December 31 - - 11,017 0.085 11,061 0.085
Special dividends paid 5,094 0.040 - - - -
Calendar year-to-date dividends paid $ 26,474 $ 0.210 $ 44,208 $ 0.340 $ 44,275 $ 0.340
Operating Results
The following table presents selected income statement and other information for the quarters indicated.
For the Three Months Ended
March 31, December 31, September 30, June 30, March 31,
2026 2025 2025 2025 2025
(Dollars in thousands, except per share data)
Interest and dividend income:
Loans receivable $ 89,323 $ 89,792 $ 87,343 $ 82,914 $ 80,867
MBS 10,853 11,341 11,808 12,163 11,264
Cash and cash equivalents 2,474 2,773 2,148 1,620 2,729
FHLB stock 1,858 2,032 2,163 2,197 2,285
Investment securities 52 51 582 784 1,030
Total interest and dividend income 104,560 105,989 104,044 99,678 98,175
Interest expense:
Deposits 36,299 37,500 37,204 35,860 35,853
Borrowings 15,995 17,172 18,057 18,360 18,482
Total interest expense 52,294 54,672 55,261 54,220 54,335
Net interest income 52,266 51,317 48,783 45,458 43,840
Provision for credit losses 2,372 1,106 519 (451) -
Net interest income
(after provision for credit losses) 49,894 50,211 48,264 45,909 43,840
Non-interest income 5,459 5,479 5,791 5,288 4,953
Non-interest expense 30,274 30,476 31,018 29,564 29,540
Income tax expense 4,931 4,910 4,224 3,251 3,854
Net income $ 20,148 $ 20,304 $ 18,813 $ 18,382 $ 15,399
Efficiency ratio 52.45 % 53.66 % 56.84 % 58.26 % 60.54 %
Operating expense ratio (annualized) 1.24 1.24 1.27 1.23 1.23
Basic EPS $ 0.16 $ 0.16 $ 0.14 $ 0.14 $ 0.12
Diluted EPS 0.16 0.16 0.14 0.14 0.12
Comparison of Operating Results for the Three Months Ended March 31, 2026 and December 31, 2025
For the quarter ended March 31, 2026, the Company recognized net income of $20.1 million, or $0.16 per share, compared to net income of $20.3 million, or $0.16 per share, for the quarter ended December 31, 2025. The slight decrease in net income was due primarily to a higher provision for credit losses, partially offset by higher net interest income and lower non-interest expense. The net interest margin increased five basis points, from 2.19% for the prior quarter to 2.24% for the current quarter due to a decrease in the amount of borrowings outstanding during the quarter.
Interest and Dividend Income
The following table presents the components of interest and dividend income for the periods presented, along with the change measured in dollars and percent.
For the Three Months Ended
March 31, December 31, Change Expressed in:
2026 2025 Dollars Percent
(Dollars in thousands)
INTEREST AND DIVIDEND INCOME:
Loans receivable $ 89,323 $ 89,792 $ (469) (0.5 %)
MBS 10,853 11,341 (488) (4.3)
Cash and cash equivalents 2,474 2,773 (299) (10.8)
FHLB stock 1,858 2,032 (174) (8.6)
Investment securities 52 51 1 2.0
Total interest and dividend income $ 104,560 $ 105,989 $ (1,429) (1.3)
The decrease in interest income on loans receivable was mainly related to the commercial loan portfolio, largely due to two fewer calendar days during the current quarter, along with lower deferred fee recognition in the current quarter related to commercial loan payoff activity. The average balance of the commercial loan portfolio increased during the current quarter, which partially offset the impact of the items noted above. The decrease in interest income on MBS was due to a decrease in the average balance of the portfolio compared to the prior quarter as not all of the portfolio repayments were reinvested back into the portfolio. The decrease in interest income on cash and cash equivalents was due primarily to a decrease in the weighted average yield compared to the prior quarter. The decrease in dividend income on FHLB stock was due primarily to a reduction in the Bank's balance of FHLB stock following the payoff of $200.0 million of maturing FHLB borrowings and repayments on amortizing FHLB borrowings, which reduced the Bank's required FHLB stock holdings.
Interest Expense
The following table presents the components of interest expense for the periods presented, along with the change measured in dollars and percent.
For the Three Months Ended
March 31, December 31, Change Expressed in:
2026 2025 Dollars Percent
(Dollars in thousands)
INTEREST EXPENSE:
Deposits $ 36,299 $ 37,500 $ (1,201) (3.2 %)
Borrowings 15,995 17,172 (1,177) (6.9)
Total interest expense $ 52,294 $ 54,672 $ (2,378) (4.3)
The decrease in interest expense on deposits between periods was due primarily to a decrease in the cost of retail certificates of deposit and money market accounts compared to the prior quarter. The reduction in the cost of retail certificates of deposit was due to existing higher rate certificates of deposit renewing at lower rates and the decrease in the rate on money market accounts was due to management lowering the rates on some money market tiers during the current quarter. Interest expense on borrowings was lower compared to the prior quarter due to a decrease in the average balance, attributable mainly to FHLB borrowings that matured between periods and were not replaced. Deposit growth, along with cash flows from the securities portfolio, were used to repay these borrowings.
Provision for Credit Losses
The Company recorded a provision for credit losses of $2.4 million during the current quarter compared to a provision for credit losses of $1.1 million for the prior quarter. The provision for credit losses in the current quarter was due primarily to establishing a $4.0 million specific valuation allowance related to a nonaccrual commercial lending relationship, partially offset by an increase in projected prepayment speeds for certain commercial loan categories and improvement between quarters in some of the commercial-related forecasted economic indices applied in the ACL model.
Non-Interest Income
The following table presents the components of non-interest income for the periods presented, along with the change measured in dollars and percent.
For the Three Months Ended
March 31, December 31, Change Expressed in:
2026 2025 Dollars Percent
(Dollars in thousands)
NON-INTEREST INCOME:
Deposit service fees $ 2,690 $ 2,872 $ (182) (6.3 %)
Income from BOLI 1,151 965 186 19.3
Insurance commissions 512 789 (277) (35.1)
Other non-interest income 1,106 853 253 29.7
Total non-interest income $ 5,459 $ 5,479 $ (20) (0.4)
Income from BOLI was higher in the current quarter due primarily to the purchase of $45.0 million in BOLI policies during the current quarter. Insurance commissions were lower compared to the prior quarter due primarily to the receipt of commissions that were lower than accruals, along with insurance industry changes that continued to reduce income on certain lines of business. The increase in other non-interest income was due mainly to prepayment fees related to commercial loan payoffs during the current quarter.
Non-Interest Expense
The following table presents the components of non-interest expense for the periods presented, along with the change measured in dollars and percent.
For the Three Months Ended
March 31, December 31, Change Expressed in:
2026 2025 Dollars Percent
(Dollars in thousands)
NON-INTEREST EXPENSE:
Salaries and employee benefits $ 15,828 $ 15,747 $ 81 0.5 %
Information technology and related expense 5,425 5,134 291 5.7
Occupancy, net 3,265 3,450 (185) (5.4)
Professional and other services 1,579 1,789 (210) (11.7)
Federal insurance premium 1,110 1,111 (1) (0.1)
Advertising and promotional 645 1,056 (411) (38.9)
Deposit and loan transaction costs 768 716 52 7.3
Office supplies and related expense 511 481 30 6.2
Other non-interest expense 1,143 992 151 15.2
Total non-interest expense $ 30,274 $ 30,476 $ (202) (0.7)
The decrease in professional and other services was due primarily to nonrecurring services in the prior quarter. The decrease in advertising and promotional expense was due primarily to the timing of marketing campaigns compared to the prior quarter.
The Company's efficiency ratio was 52.45% for the current quarter compared to 53.66% for the prior quarter. 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 generally indicates that it is costing the financial institution less money to generate revenue. The Company's operating expense ratio (annualized) for the current quarter was 1.24%, unchanged from the prior quarter. The operating expense ratio is a measure of a financial institution's total non-interest expense as a percentage of average assets,
providing insight into how efficiently the Company is managing its expenses in relation to its assets and does not take into consideration changes in interest rates.
Income Tax Expense
The following table presents pretax income, income tax expense, and net income for the periods presented, along with the change measured in dollars and percent and effective tax rate.
For the Three Months Ended
March 31, December 31, Change Expressed in:
2026 2025 Dollars Percent
(Dollars in thousands)
Income before income tax expense $ 25,079 $ 25,214 $ (135) (0.5 %)
Income tax expense 4,931 4,910 21 0.4
Net income $ 20,148 $ 20,304 $ (156) (0.8)
Effective tax rate 19.7 % 19.5 %
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. All amounts are presented on a fully taxable basis for the periods presented. The weighted average yields and rates include amortization of fees, costs, premiums and discounts, which are considered adjustments to yields/rates.
For the Three Months Ended
March 31, 2026 December 31, 2025
Average Interest Average Interest
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Amount Paid Rate Amount Paid Rate
(Dollars in thousands)
Assets:
Interest-earning assets:
One- to four-family loans:
Originated $ 3,697,174 $ 36,229 3.92 % $ 3,748,022 $ 36,490 3.89 %
Purchased 2,061,101 17,055 3.31 2,113,076 17,469 3.31
Total one- to four-family loans 5,758,275 53,284 3.70 5,861,098 53,959 3.68
Commercial loans:
Commercial real estate 1,896,666 27,150 5.73 1,776,342 26,456 5.83
Commercial and industrial 224,311 3,791 6.76 215,211 3,868 7.03
Commercial construction 176,061 3,001 6.82 198,300 3,316 6.54
Total commercial loans 2,297,038 33,942 5.91 2,189,853 33,640 6.01
Consumer loans 114,986 2,097 7.39 114,588 2,193 7.59
Total loans receivable(1)
8,170,299 89,323 4.37 8,165,539 89,792 4.36
MBS(2)
789,899 10,853 5.50 826,320 11,341 5.49
Investment securities(2)
4,000 52 5.13 4,000 51 5.13
FHLB stock 82,855 1,858 9.10 88,223 2,032 9.14
Cash and cash equivalents 271,032 2,474 3.65 274,154 2,773 3.96
Total interest-earning assets 9,318,085 104,560 4.49 9,358,236 105,989 4.49
Other non-interest-earning assets 486,394 468,876
Total assets $ 9,804,479 $ 9,827,112
Liabilities and stockholders' equity:
Interest-bearing liabilities:
Checking $ 905,915 542 0.24 $ 881,139 503 0.23
High yield savings 587,450 5,262 3.63 507,126 4,970 3.89
Other savings 428,633 78 0.07 422,933 79 0.07
Money market 1,232,468 3,578 1.18 1,241,106 3,925 1.25
Retail certificates 2,842,406 25,342 3.62 2,823,991 26,213 3.68
Commercial certificates 64,107 557 3.52 61,917 555 3.56
Wholesale certificates 95,699 940 3.98 124,247 1,255 4.01
Total deposits 6,156,678 36,299 2.39 6,062,459 37,500 2.45
Borrowings 1,782,567 15,995 3.64 1,911,552 17,172 3.56
Total interest-bearing liabilities 7,939,245 52,294 2.67 7,974,011 54,672 2.72
Non-interest-bearing deposits 647,305 609,471
Other non-interest-bearing liabilities 176,382 192,207
Stockholders' equity 1,041,547 1,051,423
Total liabilities and stockholders' equity $ 9,804,479 $ 9,827,112
Net interest income(3)
$ 52,266 $ 51,317
Net interest-earning assets $ 1,378,840 $ 1,384,225
Net interest margin(4)
2.24 2.19
Ratio of interest-earning assets to interest-bearing liabilities 1.17x 1.17x
Selected performance ratios:
Return on average assets (annualized)(5)
0.82 % 0.83 %
Return on average equity (annualized)(6)
7.74 7.72
Average equity to average assets 10.62 10.70
Operating expense ratio (annualized)(7)
1.24 1.24
Efficiency ratio(8)
52.45 53.66
(1)Balances are adjusted for unearned loan fees and deferred costs. Nonaccrual loans are included in the loans receivable average balance with a yield of zero percent.
(2)AFS security yields are based upon amortized cost which is adjusted for premiums and discounts.
(3)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.
(4)Net interest margin represents annualized net interest income as a percentage of average interest-earning assets. Management believes that the net interest margin is important to investors as it is a profitability measure for financial institutions.
(5)Return on average assets represents annualized net income as a percentage of total average assets. Management believes that the return on average assets is important to investors as it shows the Company's profitability in relation to the Company's average assets.
(6)Return on average equity represents annualized net income as a percentage of total average equity. Management believes that the return on average equity is important to investors as it shows the Company's profitability in relation to the Company's average equity.
(7)The operating expense ratio represents annualized non-interest expense as a percentage of average assets. Management believes the operating expense ratio is important to investors as it provides insight into how efficiently the Company is managing its expenses in relation to its assets. It is a financial measurement ratio that does not take into consideration changes in interest rates.
(8)The efficiency ratio represents non-interest expense as a percentage of the sum of net interest income (pre-provision for credit losses) and non-interest income. Management believes the efficiency ratio is important to investors as it is a measure of a financial institution's cost to generate income. A lower value generally indicates that it is costing the financial institution less money to generate revenue, related to its net interest margin and non-interest income.
Rate/Volume Analysis. The table below presents the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities, comparing the three months ended March 31, 2026 to the three months ended December 31, 2025. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (1) changes in volume, which are changes in the average balance multiplied by the previous year's average rate, and (2) changes in rate, which are changes in the average rate multiplied by the average balance from the previous year period. The net changes attributable to the combined impact of both rate and volume have been allocated proportionately to the changes due to volume and the changes due to rate.
For the Three Months Ended
March 31, 2026 vs. December 31, 2025
Increase (Decrease) Due to
Volume Rate Total
(Dollars in thousands)
Interest-earning assets:
Loans receivable $ 123 $ (592) $ (469)
MBS (500) 12 (488)
Investment securities - 1 1
FHLB stock (162) (12) (174)
Cash and cash equivalents (39) (260) (299)
Total interest-earning assets (578) (851) (1,429)
Interest-bearing liabilities:
Checking 11 28 39
Savings 354 (63) 291
Money market (35) (312) (347)
Certificates of deposit (149) (1,035) (1,184)
Borrowings (1,410) 233 (1,177)
Total interest-bearing liabilities (1,229) (1,149) (2,378)
Net change in net interest income $ 651 $ 298 $ 949
Comparison of Operating Results for the Six Months Ended March 31, 2026 and 2025
The Company recognized net income of $40.5 million, or $0.32 per share, for the current year period, compared to net income of $30.8 million, or $0.24 per share, for the prior year period. The increase in net income was due mainly to higher net interest income, partially offset by higher non-interest expense and a higher provision for credit losses. The net interest margin increased 33 basis points, from 1.89% for the prior year period to 2.22% for the current year period. The increase was due mainly to growth in the higher yielding commercial loan portfolio. The net interest margin improvement associated with the reduction in the cost of deposits, largely related to a decrease in rates on the retail certificate of deposit portfolio, was more than offset by an increase in the average balance of the deposit portfolio, mainly due to growth in the high yield savings account.
Interest and Dividend Income
The following table presents the components of interest and dividend income for the periods presented, along with the change measured in dollars and percent.
For the Six Months Ended
March 31, Change Expressed in:
2026 2025 Dollars Percent
(Dollars in thousands)
INTEREST AND DIVIDEND INCOME:
Loans receivable $ 179,115 $ 162,261 $ 16,854 10.4 %
MBS 22,194 22,288 (94) (0.4)
Cash and cash equivalents 5,247 4,600 647 14.1
FHLB stock 3,890 4,637 (747) (16.1)
Investment securities 103 2,011 (1,908) (94.9)
Total interest and dividend income $ 210,549 $ 195,797 $ 14,752 7.5
The increase in interest income on loans receivable was due primarily to growth in the commercial loan portfolio, as cash flows from the one-to four-family loan portfolio continued to be redirected into the higher yielding commercial loan portfolio. Interest income on cash and cash equivalents increased due to an increase in the average balance compared to the prior year period, partially offset by a decrease in the weighted average yield. The increase in the average balance was driven primarily by carrying more cash during the current year period to support anticipated commercial loan activities and operational needs. The decrease in FHLB stock dividend income was due primarily to a reduction in the balance of FHLB stock due to paying off maturing FHLB borrowings between periods and repayments on amortizing FHLB borrowings, which reduced the Bank's required FHLB stock holdings. The decrease in interest income on investment securities was due primarily to a lower average balance, due mainly to securities that were called or matured between periods and were not replaced in their entirety.
Interest Expense
The following table presents the components of interest expense for the periods presented, along with the change measured in dollars and percent.
For the Six Months Ended
March 31, Change Expressed in:
2026 2025 Dollars Percent
(Dollars in thousands)
INTEREST EXPENSE:
Deposits $ 73,799 $ 73,198 $ 601 0.8 %
Borrowings 33,167 36,529 (3,362) (9.2)
Total interest expense $ 106,966 $ 109,727 $ (2,761) (2.5)
Interest expense on deposits was higher during the current year period due primarily to growth in the Bank's high yield savings account offering, partially offset by a decrease in the cost of retail certificates of deposit. The decrease in interest expense on borrowings was due to a decrease in the average balance, which was partially offset by a higher weighted average interest rate. The decrease in the average balance of borrowings was due mainly to FHLB borrowings that matured between periods and were not renewed, along with continued repayments on amortizing FHLB advances. Cash flows from the deposit portfolio were used, in part, to pay off maturing FHLB borrowings and repay amortizing FHLB advances. The increase in the weighted average interest rate was due primarily to FHLB borrowings that matured and were renewed between periods at market interest rates higher than the overall portfolio rate, along with paying off lower rate advances that matured between periods, which increased the overall interest rate of the remaining FHLB advances.
Provision for Credit Losses
The Company recorded a provision for credit losses of $3.5 million during the current year period compared to a provision for credit losses of $677 thousand for the prior year period. The provision for credit losses in the current year period was due primarily to establishing a $4.0 million specific valuation allowance related to a nonaccrual commercial lending relationship, along with commercial loan/commitment growth, partially offset by improvement between periods in some of the commercial-related forecasted economic indices applied in the ACL model.
Non-Interest Income
The following table presents the components of non-interest income for the periods presented, along with the change measured in dollars and percent.
For the Six Months Ended
March 31, Change Expressed in:
2026 2025 Dollars Percent
(Dollars in thousands)
NON-INTEREST INCOME:
Deposit service fees $ 5,562 $ 5,303 $ 259 4.9 %
Income from BOLI 2,116 1,295 821 63.4
Insurance commissions 1,301 1,703 (402) (23.6)
Other non-interest income 1,959 1,345 614 45.7
Total non-interest income $ 10,938 $ 9,646 $ 1,292 13.4
Income from BOLI was higher in the current year period due mainly to a change in rates and an increase in the crediting rate as a result of updates to certain policies that were executed in the second half of the prior fiscal year, along with $45.0 million in new BOLI policies being purchased during the current year period. Insurance commissions were lower compared to the prior year period due primarily to contingent commissions, specifically, contingent commissions received versus accrued in the current year compared to the prior year, along with a reduction in income in the current year period related to personal lines of business caused by some carriers imposing underwriting restrictions in our market areas. Recently, several carriers began to ease their restrictions in our market areas, which should improve our income opportunities. Other non-interest income was higher in the current year period due mainly to higher commercial loan fee activity.
Non-Interest Expense
The following table presents the components of non-interest expense for the periods presented, along with the change measured in dollars and percent.
For the Six Months Ended
March 31, Change Expressed in:
2026 2025 Dollars Percent
(Dollars in thousands)
NON-INTEREST EXPENSE:
Salaries and employee benefits $ 31,575 $ 29,170 $ 2,405 8.2 %
Information technology and related expense 10,559 9,474 1,085 11.5
Occupancy, net 6,715 6,835 (120) (1.8)
Professional and other services 3,368 2,582 786 30.4
Federal insurance premium 2,221 2,133 88 4.1
Advertising and promotional 1,701 1,582 119 7.5
Deposit and loan transaction costs 1,484 1,470 14 1.0
Office supplies and related expense 992 836 156 18.7
Other non-interest expense 2,135 2,606 (471) (18.1)
Total non-interest expense $ 60,750 $ 56,688 $ 4,062 7.2
The increase in salaries and employee benefits was mainly attributable to an increase in full-time equivalent employees between periods, as well as merit increases and salary adjustments to remain market competitive. The increase in information technology and related expense was due mainly to an increase in software licensing expense related to new agreements and applications. The increase in professional and other services was due primarily to an increase in new relationships with outside service providers and additional services provided by current providers, of which approximately $325 thousand is not expected to recur in future periods. The decrease in other non-interest expense was due mainly to higher customer fraud losses in the prior year period.
The Company's efficiency ratio was 53.05% for the current year period compared to 59.23% for the prior year period. The improvement in the efficiency ratio was due primarily to higher net interest income compared to the prior year period, partially offset by higher non-interest expense. The Company's operating expense ratio (annualized) for the current year period was 1.24% compared to 1.18% for the prior year period. The operating expense ratio was higher in the current year period due mainly to higher non-interest expense, partially offset by higher average assets compared to the prior year period.
Income Tax Expense
The following table presents pretax income, income tax expense, and net income for the periods presented, along with the change measured in dollars and percent and effective tax rate.
For the Six Months Ended
March 31, Change Expressed in:
2026 2025 Dollars Percent
(Dollars in thousands)
Income before income tax expense $ 50,293 $ 38,351 $ 11,942 31.1 %
Income tax expense 9,841 7,521 2,320 30.8
Net income $ 40,452 $ 30,830 $ 9,622 31.2
Effective tax rate 19.6 % 19.6 %
Income tax expense was higher in the current year period due to higher pretax income.
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. All amounts are presented on a fully taxable basis for the periods presented. The weighted average yields and rates include amortization of fees, costs, premiums and discounts, which are considered adjustments to yields/rates.
For the Six Months Ended
March 31, 2026 March 31, 2025
Average Interest Average Interest
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Amount Paid Rate Amount Paid Rate
(Dollars in thousands)
Assets:
Interest-earning assets:
One- to four-family loans:
Originated $ 3,722,877 $ 72,719 3.91 % $ 3,902,526 $ 72,686 3.73 %
Purchased 2,087,375 34,524 3.31 2,313,303 37,816 3.27
Total one- to four-family loans 5,810,252 107,243 3.69 6,215,829 110,502 3.56
Commercial loans:
Commercial real estate 1,835,843 53,606 5.78 1,319,992 37,440 5.61
Commercial and industrial 219,711 7,659 6.89 131,764 4,403 6.61
Commercial construction 187,302 6,317 6.67 174,574 5,504 6.24
Total commercial loans 2,242,856 67,582 5.96 1,626,330 47,347 5.76
Consumer loans 114,785 4,290 7.49 110,396 4,412 8.01
Total loans receivable(1)
8,167,893 179,115 4.37 7,952,555 162,261 4.07
MBS(2)
808,309 22,194 5.49 795,969 22,288 5.60
Investment securities(2)
4,000 103 5.13 74,507 2,011 5.40
FHLB stock 85,569 3,890 9.12 98,696 4,637 9.42
Cash and cash equivalents 272,610 5,247 3.81 200,895 4,600 4.53
Total interest-earning assets 9,338,381 210,549 4.49 9,122,622 195,797 4.28
Other non-interest-earning assets 477,539 458,858
Total assets $ 9,815,920 $ 9,581,480
Liabilities and stockholders' equity:
Interest-bearing liabilities:
Checking $ 893,391 1,045 0.23 $ 872,404 1,016 0.23
High yield savings 546,847 10,232 3.75 176,304 3,657 4.16
Other savings 425,752 156 0.07 442,122 177 0.08
Money market 1,236,834 7,504 1.22 1,242,744 7,906 1.28
Retail certificates 2,833,097 51,555 3.65 2,800,744 57,736 4.13
Commercial certificates 63,000 1,112 3.54 57,227 1,208 4.23
Wholesale certificates 110,130 2,195 4.00 67,886 1,498 4.42
Total deposits 6,109,051 73,799 2.42 5,659,431 73,198 2.59
Borrowings 1,847,768 33,167 3.60 2,161,309 36,529 3.39
Total interest-bearing liabilities 7,956,819 106,966 2.70 7,820,740 109,727 2.81
Non-interest-bearing deposits 628,180 548,010
Other non-interest-bearing liabilities 184,382 180,034
Stockholders' equity 1,046,539 1,032,696
Total liabilities and stockholders' equity $ 9,815,920 $ 9,581,480
Net interest income(3)
$ 103,583 $ 86,070
Net interest-earning assets $ 1,381,562 $ 1,301,882
Net interest margin(4)
2.22 1.89
Ratio of interest-earning assets to interest-bearing liabilities 1.17x 1.17x
Selected performance ratios:
Return on average assets (annualized)(5)
0.82 % 0.64 %
Return on average equity (annualized)(6)
7.73 5.97
Average equity to average assets 10.66 10.78
Operating expense ratio(7)
1.24 1.18
Efficiency ratio(8)
53.05 59.23
(1)Balances are adjusted for unearned loan fees and deferred costs. Nonaccrual loans are included in the loans receivable average balance with a yield of zero percent.
(2)AFS security yields are based upon amortized cost which is adjusted for premiums and discounts.
(3)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.
(4)Net interest margin represents annualized net interest income as a percentage of average interest-earning assets. Management believes that the net interest margin is important to investors as it is a profitability measure for financial institutions.
(5)Return on average assets represents annualized net income as a percentage of total average assets. Management believes that the return on average assets is important to investors as it shows the Company's profitability in relation to the Company's average assets.
(6)Return on average equity represents annualized net income as a percentage of total average equity. Management believes that the return on average equity is important to investors as it shows the Company's profitability in relation to the Company's average equity.
(7)The operating expense ratio represents annualized non-interest expense as a percentage of average assets. Management believes the operating expense ratio is important to investors as it provides insight into how efficiently the Company is managing its expenses in relation to its assets. It is a financial measurement ratio that does not take into consideration changes in interest rates.
(8)The efficiency ratio represents non-interest expense as a percentage of the sum of net interest income (pre-provision for credit losses) and non-interest income. Management believes the efficiency ratio is important to investors as it is a measure of a financial institution's cost to generate income. A lower value generally indicates that it is costing the financial institution less money to generate revenue, related to its net interest margin and non-interest income.
Rate/Volume Analysis.
The table below presents the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities, comparing the six months ended March 31, 2026 to the six months ended March 31, 2025. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (1) changes in volume, which are changes in the average balance multiplied by the previous period's average rate, and (2) changes in rate, which are changes in the average rate multiplied by the average balance from the previous period. The net changes attributable to the combined impact of both rate and volume have been allocated proportionately to the changes due to volume and the changes due to rate.
For the Six Months Ended
March 31, 2026 vs. March 31, 2025
Increase (Decrease) Due to
Volume Rate Total
(Dollars in thousands)
Interest-earning assets:
Loans receivable $ 11,141 $ 5,713 $ 16,854
MBS 343 (437) (94)
Investment securities (1,811) (97) (1,908)
FHLB stock (601) (146) (747)
Cash and cash equivalents 1,461 (814) 647
Total interest-earning assets 10,533 4,219 14,752
Interest-bearing liabilities:
Checking 25 4 29
Savings 2,898 3,656 6,554
Money market (37) (365) (402)
Certificates of deposit 1,623 (7,203) (5,580)
Borrowings (5,432) 2,070 (3,362)
Total interest-bearing liabilities (923) (1,838) (2,761)
Net change in net interest income $ 11,456 $ 6,057 $ 17,513
Comparison of Operating Results for the Three Months Ended March 31, 2026 and 2025
The Company recognized net income of $20.1 million, or $0.16 per share, for the quarter ended March 31, 2026, compared to net income of $15.4 million, or $0.12 per share, for the quarter ended March 31, 2025. The increase in net income was due mainly to higher net interest income, partially offset by a higher provision for credit losses and higher income tax expense. The net interest margin increased 32 basis points, from 1.92% for the prior year quarter to 2.24% for the current year quarter. The increase was due primarily to the continued redirection of cash flows from the one- to four-family loan portfolio to the higher yielding commercial loan portfolio.
Interest and Dividend Income
The following table presents the components of interest and dividend income for the periods presented, along with the change measured in dollars and percent.
For the Three Months Ended
March 31, Change Expressed in:
2026 2025 Dollars Percent
(Dollars in thousands)
INTEREST AND DIVIDEND INCOME:
Loans receivable $ 89,323 $ 80,867 $ 8,456 10.5 %
MBS 10,853 11,264 (411) (3.6)
Cash and cash equivalents 2,474 2,729 (255) (9.3)
FHLB stock 1,858 2,285 (427) (18.7)
Investment securities 52 1,030 (978) (95.0)
Total interest and dividend income $ 104,560 $ 98,175 $ 6,385 6.5
The increase in interest income on loans receivable was due primarily to growth in the commercial loan portfolio, which was funded in part with cash flows from the one- to four-family loan portfolio. The decrease in interest income on MBS was due to a lower average balance of the portfolio compared to the prior year quarter as not all portfolio repayments were reinvested back into the portfolio, along with lower yields. The decrease in interest income on cash and cash equivalents was due to a decrease in the weighted average yield compared to the prior year quarter, partially offset by an increase in the average balance during the current year quarter driven primarily by carrying more cash to support anticipated commercial loan activities and operational needs. The decrease in FHLB stock dividend income was due primarily to a reduction in the balance of FHLB stock due to paying off maturing FHLB borrowings between periods and repayments on amortizing FHLB borrowings, which reduced the Bank's required FHLB stock holdings. The decrease in interest income on investment securities was due primarily to a decrease in average balance, due mainly to securities that were called or matured between periods and were not replaced in their entirety.
Interest Expense
The following table presents the components of interest expense for the periods presented, along with the change measured in dollars and percent.
For the Three Months Ended
March 31, Change Expressed in:
2026 2025 Dollars Percent
(Dollars in thousands)
INTEREST EXPENSE:
Deposits $ 36,299 $ 35,853 $ 446 1.2 %
Borrowings 15,995 18,482 (2,487) (13.5)
Total interest expense $ 52,294 $ 54,335 $ (2,041) (3.8)
Interest expense on deposits was higher during the current year period due primarily to growth in the Bank's high yield savings account offering, partially offset by a decrease in the cost of retail certificates of deposit. The decrease in interest expense on borrowings was due to a decrease in the average balance compared to the prior year quarter, due mainly to FHLB borrowings that matured between periods and were not renewed, along with continued repayments on amortizing FHLB advances.
Provision for Credit Losses
The Company recorded a provision for credit losses of $2.4 million during the current year quarter. See "Comparison of Operating Results for the Three Months Ended March 31, 2026 and December 31, 2025" above for additional discussion regarding the provision for credit losses during the current year quarter. The Company did not record a provision for credit losses during the prior year quarter as the decrease in the ACL was entirely offset by the increase in the reserve for off-balance sheet credit exposures.
Non-Interest Income
The following table presents the components of non-interest income for the periods presented, along with the change measured in dollars and percent.
For the Three Months Ended
March 31, Change Expressed in:
2026 2025 Dollars Percent
(Dollars in thousands)
NON-INTEREST INCOME:
Deposit service fees $ 2,690 $ 2,596 $ 94 3.6 %
Income from BOLI 1,151 747 404 54.1
Insurance commissions 512 927 (415) (44.8)
Other non-interest income 1,106 683 423 61.9
Total non-interest income $ 5,459 $ 4,953 $ 506 10.2
Income from BOLI was higher in the current year quarter due mainly to a change in rates and an increase in the crediting rate as a result of updates to certain policies that were executed in the second half of the prior fiscal year, along with $45.0 million in new BOLI policies added during the current year quarter. Insurance commissions were lower compared to the prior year period due primarily to contingent commissions, specifically, contingent commissions received versus accrued in the current year quarter compared to the prior year quarter. The increase in other non-interest income was due mainly to prepayment fees related to commercial loan payoffs during the current quarter.
Non-Interest Expense
The following table presents the components of non-interest expense for the periods presented, along with the change measured in dollars and percent.
For the Three Months Ended
March 31, Change Expressed in:
2026 2025 Dollars Percent
(Dollars in thousands)
NON-INTEREST EXPENSE:
Salaries and employee benefits $ 15,828 $ 14,938 $ 890 6.0 %
Information technology and related expense 5,425 4,924 501 10.2
Occupancy, net 3,265 3,502 (237) (6.8)
Professional and other services 1,579 1,469 110 7.5
Federal insurance premium 1,110 1,095 15 1.4
Advertising and promotional 645 760 (115) (15.1)
Deposit and loan transaction costs 768 879 (111) (12.6)
Office supplies and related expense 511 437 74 16.9
Other non-interest expense 1,143 1,536 (393) (25.6)
Total non-interest expense $ 30,274 $ 29,540 $ 734 2.5
The increase in salaries and employee benefits was mainly attributable to a net increase in full-time equivalent employees between periods. The increase in information technology and related expense was due primarily to an increase in software licensing expense. The decrease in other non-interest expense was due mainly to higher customer fraud losses in the prior year quarter, higher OREO costs in the prior year quarter largely related to a one- to four-family bulk purchased OREO, and a loss on a property sold during the prior year quarter related to an acquisition in 2018.
The Company's efficiency ratio was 52.45% for the current year quarter compared to 60.54% for the prior year quarter. The improvement in the efficiency ratio was due primarily to higher net interest income during the current year quarter. The Company's operating expense ratio (annualized) for the current year quarter was 1.24% compared to 1.23% for the prior year quarter.
Income Tax Expense
The following table presents pretax income, income tax expense, and net income for the periods presented, along with the change measured in dollars and percent and effective tax rate.
For the Three Months Ended
March 31, Change Expressed in:
2026 2025 Dollars Percent
(Dollars in thousands)
Income before income tax expense $ 25,079 $ 19,253 $ 5,826 30.3 %
Income tax expense 4,931 3,854 1,077 27.9
Net income $ 20,148 $ 15,399 $ 4,749 30.8
Effective tax rate 19.7 % 20.0 %
Income tax expense was higher in the current year quarter due to higher pretax income.
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. All amounts are presented on a fully taxable basis for the periods presented. The weighted average yields and rates include amortization of fees, costs, premiums and discounts, which are considered adjustments to yields/rates.
For the Three Months Ended
March 31, 2026 March 31, 2025
Average Interest Average Interest
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Amount Paid Rate Amount Paid Rate
(Dollars in thousands)
Assets:
Interest-earning assets:
One- to four-family loans:
Originated $ 3,697,174 $ 36,229 3.92 % $ 3,879,115 $ 36,311 3.74 %
Purchased 2,061,101 17,055 3.31 2,287,653 18,832 3.29
Total one- to four-family loans 5,758,275 53,284 3.70 6,166,768 55,143 3.58
Commercial loans:
Commercial real estate 1,896,666 27,150 5.73 1,337,264 18,685 5.59
Commercial and industrial 224,311 3,791 6.76 131,497 2,186 6.65
Commercial construction 176,061 3,001 6.82 177,586 2,720 6.13
Total commercial loans 2,297,038 33,942 5.91 1,646,347 23,591 5.73
Consumer loans 114,986 2,097 7.39 110,126 2,133 7.86
Total loans receivable(1)
8,170,299 89,323 4.37 7,923,241 80,867 4.08
MBS(2)
789,899 10,853 5.50 811,013 11,264 5.56
Investment securities(2)
4,000 52 5.13 76,497 1,030 5.39
FHLB stock 82,855 1,858 9.10 98,231 2,285 9.43
Cash and cash equivalents 271,032 2,474 3.65 248,063 2,729 4.40
Total interest-earning assets 9,318,085 104,560 4.49 9,157,045 98,175 4.29
Other non-interest-earning assets 486,394 454,295
Total assets $ 9,804,479 $ 9,611,340
Liabilities and stockholders' equity:
Interest-bearing liabilities:
Checking $ 905,915 542 0.24 $ 879,218 485 0.22
High yield savings 587,450 5,262 3.63 227,677 2,335 4.16
Other savings 428,633 78 0.07 442,773 77 0.07
Money market 1,232,468 3,578 1.18 1,239,709 3,694 1.21
Retail certificates 2,842,406 25,342 3.62 2,789,206 27,981 4.07
Commercial certificates 64,107 557 3.52 56,580 572 4.10
Wholesale certificates 95,699 940 3.98 66,249 709 4.34
Total deposits 6,156,678 36,299 2.39 5,701,412 35,853 2.55
Borrowings 1,782,567 15,995 3.64 2,150,917 18,482 3.48
Total interest-bearing liabilities 7,939,245 52,294 2.67 7,852,329 54,335 2.81
Non-interest-bearing deposits 647,305 551,549
Other non-interest-bearing liabilities 176,382 173,700
Stockholders' equity 1,041,547 1,033,762
Total liabilities and stockholders' equity $ 9,804,479 $ 9,611,340
Net interest income(3)
$ 52,266 $ 43,840
Net interest-earning assets $ 1,378,840 $ 1,304,716
Net interest margin(4)
2.24 1.92
Ratio of interest-earning assets to interest-bearing liabilities 1.17x 1.17x
Selected performance ratios:
Return on average assets (annualized)(5)
0.82 % 0.64 %
Return on average equity (annualized)(6)
7.74 5.96
Average equity to average assets 10.62 10.76
Operating expense ratio (annualized)(7)
1.24 1.23
Efficiency ratio(8)
52.45 60.54
(1)Balances are adjusted for unearned loan fees and deferred costs. Nonaccrual loans are included in the loans receivable average balance with a yield of zero percent.
(2)AFS security yields are based upon amortized cost which is adjusted for premiums and discounts.
(3)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.
(4)Net interest margin represents annualized net interest income as a percentage of average interest-earning assets. Management believes that the net interest margin is important to investors as it is a profitability measure for financial institutions.
(5)Return on average assets represents annualized net income as a percentage of total average assets. Management believes that the return on average assets is important to investors as it shows the Company's profitability in relation to the Company's average assets.
(6)Return on average equity represents annualized net income as a percentage of total average equity. Management believes that the return on average equity is important to investors as it shows the Company's profitability in relation to the Company's average equity.
(7)The operating expense ratio represents annualized non-interest expense as a percentage of average assets. Management believes the operating expense ratio is important to investors as it provides insight into how efficiently the Company is managing its expenses in relation to its assets. It is a financial measurement ratio that does not take into consideration changes in interest rates.
(8)The efficiency ratio represents non-interest expense as a percentage of the sum of net interest income (pre-provision for credit losses) and non-interest income. Management believes the efficiency ratio is important to investors as it is a measure of a financial institution's cost to generate income. A lower value generally indicates that it is costing the financial institution less money to generate revenue, related to its net interest margin and non-interest income.
Rate/Volume Analysis.
The table below presents the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities, comparing the three months ended March 31, 2026 to the three months ended March 31, 2025. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (1) changes in volume, which are changes in the average balance multiplied by the previous year's average rate and (2) changes in rate, which are changes in the average rate multiplied by the average balance from the previous year period. The net changes attributable to the combined impact of both rate and volume have been allocated proportionately to the changes due to volume and the changes due to rate.
For the Three Months Ended March 31,
2026 vs. 2025
Increase (Decrease) Due to
Volume Rate Total
(Dollars in thousands)
Interest-earning assets:
Loans receivable $ 5,876 $ 2,580 $ 8,456
MBS (290) (121) (411)
Investment securities (931) (47) (978)
FHLB stock (347) (80) (427)
Cash and cash equivalents 237 (492) (255)
Total interest-earning assets 4,545 1,840 6,385
Interest-bearing liabilities:
Checking 15 42 57
Savings 1,546 1,381 2,927
Money market (21) (94) (115)
Certificates of deposit 884 (3,307) (2,423)
Borrowings (3,214) 727 (2,487)
Total interest-bearing liabilities (790) (1,251) (2,041)
Net change in net interest income $ 5,335 $ 3,091 $ 8,426
Liquidity and Capital Resources
Liquidity refers to our ability to generate sufficient cash to fund ongoing operations, to repay maturing certificates of deposit and other deposit withdrawals, to repay maturing borrowings, and to fund loan commitments. Liquidity management is both a daily and long-term function of our business management. The Company's most available liquid assets are represented by cash and cash equivalents and AFS securities. The Bank's primary sources of funds are deposits, FHLB borrowings, repayments and maturities of outstanding loans and MBS and other short-term investments, and funds provided by operations. The Bank's long-term borrowings primarily have been used to manage long-term liquidity needs and the Bank's interest rate risk with the intention to improve the earnings of the Bank while maintaining capital ratios that meet or exceed the regulatory standards for well-capitalized financial institutions. In addition, the Bank's focus on managing risk has provided additional liquidity capacity by maintaining a balance of MBS and investment securities available as collateral for borrowings.
We generally intend to manage cash reserves sufficient to meet short-term liquidity needs, which are routinely forecasted for 10, 60, and 365 days. Additionally, on a monthly basis, we perform a liquidity stress test in accordance with the Interagency Policy Statement on Funding and Liquidity Risk Management. The liquidity stress test incorporates both short-term and long-term liquidity scenarios in order to identify and to quantify liquidity risk. Management also monitors key liquidity statistics related to items such as wholesale funding gaps, borrowings capacity, and available unpledged collateral, as well as various liquidity ratios. In the event short-term liquidity needs exceed available cash, the Bank has access to a line of credit at the FHLB, in addition to the FRB of Kansas City's discount window.
Per FHLB's lending guidelines, total FHLB borrowings cannot exceed 40% of Bank Call Report total assets without the pre-approval of FHLB senior management. The Bank's FHLB borrowing limit was 44% of Bank Call Report total assets as of March 31, 2026, as approved by FHLB senior management. The Bank's internal policy limits total borrowings to 55% of total assets. At March 31, 2026, the Bank had total borrowings, at par, of $1.71 billion, or approximately 17% of the Bank's Call Report total assets. The borrowings balance was comprised of FHLB advances, of which $634.7 million is scheduled to be repaid (amortizing advances) or mature in the next 12 months. FHLB borrowings are secured by certain qualifying loans pursuant to a blanket collateral agreement with FHLB.
The amount that can be borrowed from the FRB of Kansas City's discount window is based upon the fair value of securities pledged as collateral. At March 31, 2026, the amount of securities pledged for the discount window was $103.8 million. At March 31, 2026, there were no borrowings from the FRB of Kansas City's discount window. Management tests the Bank's access to the FRB of Kansas City's discount window at least annually with a nominal overnight borrowing.
The Bank is a member of the American Finance Exchange ("AFX"), through which it may borrow funds on an overnight or short-term basis with other member institutions. The availability of funds changes daily. At March 31, 2026, the Bank did not have any such borrowings outstanding through the AFX.
If management observes unusual trends in the amount and frequency of line of credit utilization and/or short-term borrowings that are not in conjunction with a planned strategy, the Bank will likely utilize term wholesale borrowing sources such as FHLB advances to provide term funding. The maturities of our borrowings are generally staggered in order to mitigate the risk of a highly negative cash flow position at maturity. The Bank has used fully-amortizing FHLB advances that require periodic payments of principal over the term of the advance. This type of advance enables the Bank to start repricing its liability cash flows sooner in a down-rate environment and generally provides for favorable pricing when compared to similar long-term bullet advances with comparable average lives as a result of the current term structure of interest rates.
At March 31, 2026, the Bank had no repurchase agreements. The Bank may enter into repurchase agreements as management deems appropriate, not to exceed 15% of total assets, and subject to the total borrowings internal policy limit of 55% as discussed above.
The Bank has the ability to utilize the repayment and maturity of outstanding loans, MBS, and other investments for liquidity needs rather than reinvesting such funds into the related portfolios. At March 31, 2026, the Bank had $707.4 million of securities that were eligible but unused as collateral for borrowing or other liquidity needs. The Bank also has access to other sources of funds for liquidity purposes, such as brokered and public unit certificates of deposit. As of March 31, 2026, the Bank's policy allowed for combined brokered and public unit certificates of deposit up to 15% of total deposits. At March 31, 2026, the Bank did not have any brokered certificates of deposit, and public unit certificates of deposit were approximately 1% of total deposits. The Bank had pledged securities with an estimated fair value of $99.0 million as collateral for public unit certificates of deposit at March 31, 2026. The securities pledged as collateral for public unit certificates of deposit are held under joint custody with FHLB and generally will be released upon deposit maturity.
Management estimated that the Bank had $4.35 billion in liquidity available at March 31, 2026, based on the Bank's blanket collateral agreement with the FHLB, available brokered and public unit deposit capacity, unencumbered securities, and cash and cash equivalent balances.
At March 31, 2026, $2.30 billion of the Bank's certificate of deposit portfolio was scheduled to mature within the next 12 months, including $63.1 million of public unit certificates of deposit and $58.9 million of commercial certificates of deposit. Based on our deposit retention experience and our current pricing strategy, we anticipate the majority of the maturing retail certificates of deposit will renew or transfer to other deposit products of the Bank at prevailing rates, although no assurance can be given in this regard. Due to the nature of public unit certificates of deposit and commercial certificates of deposit, retention rates are not as predictable as retail certificates of deposit.
While scheduled payments from the amortization of loans and MBS and payments on short-term investments are relatively predictable sources of funds, deposit flows, prepayments on loans and MBS, and calls of investment securities are greatly influenced by general interest rates, economic conditions, and competition, and are less predictable sources of funds. To the extent possible, the Bank manages the cash flows of its loan and deposit portfolios by the rates it offers customers. We anticipate we will continue to have sufficient funds, through the repayments and maturities of loans and securities, deposits and borrowings, to meet our current commitments.
Limitations on Dividends and Other Capital Distributions
Office of the Comptroller of the Currency ("OCC") regulations impose restrictions on savings institutions with respect to their ability to make distributions of capital, which include dividends and other transactions charged to the capital account. Under FRB and OCC safe harbor regulations, savings institutions generally may make capital distributions during any calendar year equal to earnings of the previous two calendar years and current year-to-date earnings (to the extent not previously distributed). A savings institution that is a subsidiary of a savings and loan holding company, such as the Company, that proposes to make a capital distribution must submit written notice to the OCC and FRB 30 days prior to such distribution. The OCC and FRB may object to the distribution during that 30-day period based on safety and soundness or other concerns. Savings institutions that desire to make a larger capital distribution, are under special restrictions, or are not, or would not be, sufficiently capitalized following a proposed capital distribution must obtain regulatory non-objection prior to making such a distribution.
The long-term ability of the Company to pay dividends to its stockholders is based primarily upon the ability of the Bank to make capital distributions to the Company. So long as the Bank remains well capitalized after each capital distribution (as evidenced by maintaining regulatory capital ratios greater than the required percentages) and operates in a safe and sound manner, it is management's belief that the OCC and FRB will continue to allow the Bank to distribute its earnings to the Company, although no assurance can be given in this regard. Management continues to evaluate the timing and amount of capital distributions to be made from the Bank to the holding company during the current fiscal year and in future periods to the extent necessary to prevent the Bank from re-entering a negative accumulated earnings and profit position in connection with the Bank's pre-1988 bad debt recapture.
Regulatory Capital
Consistent with our goal to operate a sound and profitable financial organization, we actively seek to maintain a well-capitalized status for the Bank per the regulatory framework for prompt corrective action ("PCA"). Qualifying institutions that elect to use the CBLR framework, such as the Bank and the Company, that maintain the required minimum leverage ratio of 9.0% will be considered to have satisfied the generally applicable risk-based and leverage capital requirements in the regulatory agencies' capital rules, and to have met the capital requirements for the well-capitalized category under the agencies' PCA framework. As of March 31, 2026, the Bank's CBLR was 9.5% and the Company's CBLR was 10.0%, which exceeded the minimum requirements. The Bank's risk-based tier 1 capital ratio at March 31, 2026 was 16.1%.
Capitol Federal Financial Inc. published this content on May 08, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on May 08, 2026 at 15:28 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]