Capitol Federal Financial, Inc.
For the period ended Dec 31, 2025. Filed Feb 6, 2026.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Dec 31, 2025 · Filed Feb 6, 2026
CFFN$8.43-0.7%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-06-30; filed 2025-08-08.
0001490906-25-000021
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsFinancial Condition - Loans ReceivableFinancial Condition - Asset QualityFinancial Condition - LiabilitiesFinancial Condition - Stockholders' EquityOperating ResultsComparison of Operating Results for the three months ended June 30, 2025 and March 31, 2025Comparison of Operating Results for the nine months ended June 30, 2025 and 2024Comparison of Operating Results for the three months ended June 30, 2025 and 2024Current report: 10-Q
Period ended 2025-12-31; filed 2026-02-06.
0001490906-26-000011
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsFinancial Condition - Loans ReceivableFinancial Condition - Asset QualityFinancial Condition - LiabilitiesFinancial Condition - Stockholders' EquityOperating ResultsComparison of Operating Results for the three months ended December 31, 2025 and September 30, 2025Comparison of Operating Results for the three months ended December 31, 2025 and 2024The baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 211 previous paragraphs and 186 current paragraphs.
70 unchanged; 62 reworded; 47 added; 69 removed; 10 previous and 7 current paragraphs rearranged.
Tables are not compared: 60 previous and 50 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (47)
Current report
•technological changes and the costs thereof;
Current report
The Company recognized net income of $20.3 million, or $0.16 per share, for the quarter ended December 31, 2025 compared to net income of $15.4 million, or $0.12 per share, for the quarter ended December 31, 2024. The increase in net income was due mainly to higher net interest income, partially offset by higher non-interest expense and income tax expense. The net interest margin increased 33 basis points, from 1.86% for the prior year quarter to 2.19% for the current quarter. The increase was due mainly to growth in the higher yielding commercial loan portfolio.
Current report
The Company's efficiency ratio was 53.66% for the current quarter compared to 57.86% for the prior year quarter. The improvement in the efficiency ratio was due primarily to higher net interest income compared to the prior year quarter, partially offset by higher non-interest expense. The Company's operating expense ratio (annualized) for the current quarter was 1.24% compared to 1.14% for the prior year quarter. The operating expense ratio was higher in the current quarter due mainly to higher non-interest expense, partially offset by higher average assets compared to the prior year quarter.
Current report
The loan portfolio totaled $8.18 billion at December 31, 2025, a $64.8 million increase from September 30, 2025. Commercial loans grew $162.6 million, mainly in the commercial real estate portfolio, partially offset by a $98.6 million decrease in one- to four-family loans due primarily to repayments exceeding originations as cash flows from this portfolio are being used to fund commercial loan growth. 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. The Bank expects to fund approximately $60.0 million of undisbursed amounts on existing commercial real estate and commercial construction loans and approximately $5.0 million of commercial real estate and commercial construction commitments during the March 31, 2026 quarter. The near-term projected growth for commercial loan balances is approximately 1% in the quarter ending March 31, 2026, with projected overall commercial loan growth of approximately 18% for the current fiscal year. The weighted average DSCR for commercial loan originations and new participations during the current quarter was 2.52x and the weighted average LTV for commercial real estate and construction loans originated and new participations was 72%. The weighted average DSCR and LTV for our commercial real estate and construction loan portfolio was 1.73x and 63%, respectively, at December 31, 2025.
Current report
The Company continues its progression to a full-service commercial bank by investing in technology, people, products, and services. Our investments in technology have allowed us to launch new services and products, while our seasoned and well-connected commercial bankers and our trust and wealth advisors deliver access to new customer groups. Our expanded product suite of treasury management services enables us to service these new customers. Increased marketing and business development efforts have increased the depth of customer relationships. As we move through the third year of our digital transformation, we are seeing our efforts bear fruit and expect progress to continue.
Current report
Strategic Actions. The long-term success of our transition to a full-service bank is predicated on management's continued focus on deepening relationships with consumer and commercial customers. Management and the Board have committed resources to support the growth of talented, skilled, and experienced bankers, investments in technology, expanded marketing and outreach, as well as the development and increased internal monitoring of performance metrics intended to ensure we are on the path to achieve our performance objectives. 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 customers. We are actively pursuing opportunities to expand our non-interest-bearing, commercial deposit base and diversify fee-based revenue streams through strategic growth in treasury management services, trust and wealth management services, insurance, and small business banking.
Current report
Commercial Lending. During the first quarter of the current fiscal year, we closed on $364.6 million in commercial loans, compared to $263.1 million during the quarter ended September 30, 2025. Commercial loans continue to grow as a percentage of our overall loan portfolio, comprising 28% of our loan portfolio at December 31, 2025, compared to 26% and 21% at September 30, 2025 and December 31, 2024, respectively. To maintain strong credit quality, in addition to disciplined underwriting and ongoing credit administration, we monitor concentration levels by collateral type, geographic location and borrowing relationship. The Bank utilizes commercial loan pricing and profitability software that provides insights on new lending opportunities based on the full customer banking relationship. We utilize software that provides market intelligence regarding competitor pricing to assist loan officers when preparing a loan offering. This enhances our ability to profitably compete with other financial institutions in our markets as well as those outside our markets.
Current report
Treasury Management. The Bank services commercial customers through a competitive suite of treasury management products and 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 immediate market areas, as well as those we lend to outside of our local market areas. In fiscal year 2026, a team of business development officers is also tasked with growing the deposit base within the small business customer segment, focused on serving small businesses in our market areas with a dedicated line of products specifically designed for these customers. Our treasury management officers and business development officers often land depository relationships independent of a lending relationship. This will be a focus area for our sales teams as well as the Bank continues to diversify funding sources and seeks to increase fee revenue tied to depository accounts. During the second 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, integrated accounts receivables, purchase cards, and corporate cards.
Current report
Wealth Management. We have begun to implement private wealth management products and services, with some customers on-boarded during the first quarter of the current fiscal year. We are continuing to expand our comprehensive suite of private banking products and services which is a new line of business for the Bank. Private banking relationships are defined as customers with $5.0 million or more in personal relationships with the Bank by way of loans, deposits, or assets under management. We believe that our private banking 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 corporate trustee opportunities for the Bank.
Current report
Stockholder Value. Delivering long-term sustainable stockholder value continues to be our North Star while also 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. Total dividends declared and paid during fiscal year 2025 were $44.3 million. During the first quarter of fiscal year 2026, the Company repurchased 2,376,633 shares for $16.3 million and paid regular quarterly cash dividends totaling $11.0 million, or $0.085 per share. Since completing our second-step conversion in December 2010, we have returned $2.03 billion to stockholders through $1.58 billion in cash dividends and $456.2 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.
Current report
The loan portfolio increased $64.8 million during the current quarter, as cash flows from the securities portfolio were used to fund loan growth. Commercial loans grew $162.6 million, mainly in the commercial real estate portfolio, partially offset by a $98.6 million decrease in one- to four-family loans. Deposits increased $167.2 million during the current quarter, due mainly to the Bank's high yield savings account offering and retail checking accounts. Borrowings decreased $120.9 million due to borrowings that matured during the current quarter and were not replaced, along with principal payments made on the Bank's amortizing FHLB advances. Cash flows from the increase in the deposit portfolio were used to pay down borrowings. Stockholders' equity decreased $6.4 million during the current quarter, due primarily to strategic share repurchases and dividend payments, partially offset by net income.
Current report
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.
Current report
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.
Current report
(1) This ratio is not presented due to loan recoveries exceeding loan charge-offs during the period.
Current report
During the quarter ended December 31, 2025, the Company repurchased 2,376,633 shares of common stock at an average price of $6.86 per share, or $16.3 million in total. Subsequent to December 31, 2025 and through February 4, 2026, the Company repurchased 108,000 shares at an average price of $7.51 per share. The Company currently has 54.0 million remaining authorized under its existing stock repurchase plan. The Company intends to continue to opportunistically repurchase stock from time to time based 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 Company has notified the FRB of its intent to extend the stock repurchase plan another year.
Current report
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 December 31, 2025, we have returned $2.03 billion in capital to stockholders through dividends totaling $1.58 billion and stock repurchases totaling $456.2 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.
Current report
At December 31, 2025, Capitol Federal Financial, Inc., at the holding company level, had $14.9 million in cash on deposit at the Bank. During the quarter ended December 31, 2025, the Bank distributed $25.0 million from the Bank to the Company. The Bank is expected to continue to have a positive tax accumulated earnings and profit balance during fiscal year 2026, so it is anticipated that the Bank will be in a position to make earnings distributions to the Company during fiscal year 2026. Earnings distributions from the Bank to the Company will be limited to the extent necessary to prevent the Bank from re-entering a negative accumulated earnings and profit position and being required to pay the pre-1988 bad debt recapture tax on earnings moved from the Bank to the Company.
Current report
Currently, the Company's priorities for the use of cash are cash dividends, share repurchases and operations. The amount of cash available for share repurchases and for dividends in excess of the Board's and management's current intention of $0.085 per share per quarter is limited to the earnings distributed from the Bank to the Company less the amount of dividends paid as well as the need to replenish the cash balance at the holding company level to be in compliance with Board policies
Current report
(1)Balances are adjusted for unearned loan fees and deferred costs. Loans that are 90 or more days delinquent are included in the loans receivable average balance with a yield of zero percent.
Current report
(5)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.
Current report
Interest and Dividend Income
Current report
The increase in interest income on loans receivable was due mainly to increases in the average balance and yield of the commercial loan portfolio compared to the prior quarter. The decrease in interest income on MBS and investment securities was due primarily to a decrease in the average balance of each portfolio compared to the prior quarter, as cash flows from those portfolios were used to fund commercial loan growth. The increase in interest income on cash and cash equivalents was due to an increase in the average balance.
Current report
Interest Expense
Current report
The decrease in borrowings expense was due to a decrease in the average balance, due mainly to FHLB borrowings that matured between periods and were not replaced. Deposit growth was used to repay these borrowings.
Current report
Provision for Credit Losses
Current report
The Company recorded a provision for credit losses of $1.1 million during the current quarter compared to a provision for credit losses of $519 thousand for the prior quarter. The provision for credit losses in the current quarter was due primarily to commercial loan growth.
Current report
Non-Interest Income
Current report
The following table presents the components of non-interest income for the periods presented, along with the change measured in dollars and percent.
Current report
Insurance commissions were higher in the prior quarter, due primarily to the receipt of commissions that exceeded accruals, with no similar activity in the current quarter, along with insurance industry changes that reduced commissions on certain lines of business in the current quarter. Due to these industry changes, we are broadening our focus on commercial insurance lines during fiscal year 2026, which aligns with our strategy of expanding our commercial banking services.
Current report
Non-Interest Expense
Current report
The following table presents the components of non-interest expense for the periods presented, along with the change measured in dollars and percent.
Current report
The increase in regulatory and outside 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 advertising and promotional expense was due primarily to the timing of campaigns and seasonal sponsorships compared to the prior quarter.
Current report
Income Tax Expense
Current report
The Company recognized net income of $20.3 million, or $0.16 per share, for the current quarter, compared to net income of $15.4 million, or $0.12 per share, for the prior year quarter. The increase in net income was due mainly to higher net interest income, partially offset by higher non-interest expense and income tax expense. The net interest margin increased 33 basis points, from 1.86% for the prior year quarter to 2.19% for the current quarter. The increase was due mainly to growth in the higher yielding commercial loan portfolio.
Current report
Interest and Dividend Income
Current report
Interest Expense
Current report
Provision for Credit Losses
Current report
Non-Interest Income
Current report
The following table presents the components of non-interest income for the periods presented, along with the change measured in dollars and percent.
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Removed paragraphs (69)
Previous report
•the potential imposition of new or increased tariffs or changes to existing trade policies that would affect economic activity or specific industry sectors;
Previous report
•technological changes;
Previous report
The Company recognized net income of $49.2 million, or $0.38 per share, for the current year period, compared to net income of $26.0 million, or $0.20 per share, for the prior year period. The lower net income in the prior year period was primarily a result of the net losses on the sale of securities associated with the securities strategy. See additional discussion regarding the securities strategy in the "Securities Strategy to Improve Earnings" section below. Excluding the effects of the net loss associated with the securities strategy, EPS would have been $0.28 for the prior year period. The increase in EPS excluding the effects of the net loss associated with the securities strategy was due primarily to higher net interest income in the current year period.
Previous report
The net interest margin increased 15 basis points, from 1.77% for the prior year period to 1.92% for the current year period. The increase was due mainly to higher yields on the loan portfolio due to the continued shift of loan balances from the one- to four-family loan portfolio to the higher yielding commercial loan portfolio, which outpaced the increase in the cost of deposits, largely in high yield savings accounts and retail certificates of deposit.
Previous report
The Company's efficiency ratio was 58.89% for the current year period compared to 69.77% for the prior year period. Excluding the net losses from the securities strategy, the efficiency ratio would have been 62.87% for the prior year period. The improvement in the efficiency ratio, excluding the net losses from the securities strategy, was due primarily to higher net interest income compared to the prior year period. The Company's operating expense ratio (annualized) for the current year period was 1.20% compared to 1.18% for the prior year period, due mainly to higher non-interest expense, largely related to increased expenses due to higher salaries and employee benefits.
Previous report
Total assets were $9.69 billion at June 30, 2025, a $165.1 million increase from September 30, 2024, due mainly to increases in loans and securities which were funded by excess operating cash and deposit growth, largely in the Bank's high yield savings account offering.
Previous report
The loans receivable portfolio was $8.02 billion at June 30, 2025, a $116.2 million increase from September 30, 2024 due to a $402.9 million increase in commercial loans, attributable primarily to commercial real estate loan growth, partially offset by a decrease in one- to four-family loans of $286.2 million.
Previous report
Securities Strategy to Improve Earnings
Previous report
In October 2023, the Company initiated a securities strategy (the "securities strategy") by selling $1.30 billion of securities, representing 94% of its securities portfolio. Since the Company did not have the intent to hold the $1.30 billion of securities to maturity at September 30, 2023, the Company recognized an impairment loss on those securities of $192.6 million which was reflected in the Company's financial statements for the quarter and fiscal year ended September 30, 2023. The securities strategy allowed the Company to improve its earnings stream going forward, beginning in the quarter ended December 31, 2023, by redeploying most of the proceeds into then-current market rate securities and to provide liquidity to deleverage the balance sheet utilizing the remaining proceeds. During the quarter ended December 31, 2023, the Company completed the sale of securities and recognized $13.3 million ($10.0 million net of tax), or $0.08 per share, of additional loss. See additional information regarding the impact of the securities strategy on our financial measurements in "Comparison of Operating Results for the Nine Months Ended June 30, 2025 and 2024 - Average Balance Sheets" below. The $1.30 billion of securities sold had a weighted average yield of 1.22% and an average duration of 3.6 years. With the proceeds from the sale of the securities, the Company purchased $632.0 million of securities yielding 5.75%, paid down $500.0 million of borrowings with a weighted average cost of 4.70%, and held the remaining cash at the FRB earning interest at the reserve balance rate until such time as it could be used to fund commercial activity or for other Bank operations.
Previous report
The Company continues to strategically grow all aspects of commercial banking through the alignment of technology, people, products and services. Management believes we have been and will continue to be successful in this initiative as we focus on meeting the financial needs of growing and established companies and small businesses and pairing them with experienced relationship managers who offer a broad range of customized services, digital platforms and sophisticated cash management tools. Leveraging our new technology and organizational structure to quickly respond to customer needs in the sales pipeline is central to our growth strategy for commercial deposits. We expect that commercial loan growth will continue to be driven by prospecting for new relationships and maintaining and expanding existing relationships. While strong credit quality remains a priority, the Bank is now offering a full suite of treasury management products to service new and existing relationships.
Previous report
During the current quarter, the Bank continued to implement and utilize commercial loan pricing and profitability software which provides pricing and profitability based on the full customer banking relationship. Management is in the process of implementing additional software modules during the remainder of fiscal year 2025 that provide market insight regarding competitor pricing to assist loan officers when preparing a loan offering for a customer.
Previous report
We see many opportunities to grow our non-interest-bearing deposit base and diversify fee-based revenue streams through growth in treasury management services, trust and wealth management services, and small business banking. We have a team of bankers focused on the deposit and loan needs of small businesses in our market area. During the current quarter the Bank successfully launched new checking products and digital banking services specifically designed for our small business customers. In the quarter ending September 30, 2025 the Bank expects to introduce digital onboarding for these small business customers using industry-leading risk management and screening tools, which will replace many manual verification tasks. We continue to listen to the needs of our customers as this line of business grows, and as a result of demand within the treasury management pipeline, we are actively evaluating new technology for lockbox services, integrated accounts receivable, integrated accounts payable and purchase cards.
Previous report
We are building a suite of private banking products and services. Subsequent to June 30, 2025, the Bank hired several seasoned and well-connected wealth management professionals to allow us to round out our product offerings, begin managing our first private banking relationships, and transform our trust and wealth management business. With this, private banking will be a new offering to our customer base.
Previous report
Loans receivable, net increased $147.6 million, or 7.5% annualized, during the current quarter. The loan portfolio mix continued to shift from one- to four-family loans to commercial loans. The commercial loan portfolio grew $243.5 million during the current quarter, due mainly to a $221.2 million increase in the commercial real estate portfolio, partially offset by a $99.3 million decrease in one- to four-family loans. As of June 30, 2025, the Bank also had $146.2 million of commercial real estate loan commitments which are expected to fund early during the September 30, 2025 quarter.
Previous report
As a result of continued high interest rates and a lack of housing inventory, which has reduced housing market transactions, our one- to four-family origination and refinance activity has slowed which directly impacts the Bank's one- to four-family loan portfolio. In addition, the Bank suspended its one- to four-family correspondent lending channels during fiscal year 2024 for the foreseeable future. Management expects the Bank's one- to four-family originated loan portfolio will continue to decrease as the affordability of housing remains challenging and there is a limited supply of homes for sale. It is expected that excess repayment cash flows generated from the one- to four-family portfolio will continue to be used to fund commercial loan growth.
Previous report
Borrowings decreased $71.4 million, or 13.3% annualized, due to a $50.0 million borrowing that matured during the current quarter but was not replaced, along with principal payments made on the Bank's amortizing FHLB advances.
Previous report
Deposits increased $58.6 million during the current quarter. Commercial non-maturity deposits increased $44.7 million, or 14.3%, during the current quarter, to $358.0 million as of June 30, 2025, as management continues to find commercial deposit growth opportunities. Management has also maintained its focus on retaining retail deposits through the Bank's high yield savings account product, which increased $123.9 million during the current quarter to $408.0 million at June 30, 2025. The increase in high yield savings accounts was partially offset by a $49.7 million decrease in retail money market accounts and a $45.8 million decrease in retail certificates of deposits.
Previous report
Loans Receivable. The following table presents the balance and weighted average rate of our loan portfolio as of the dates indicated.
Previous report
The following table summarizes the Bank's commercial real estate and commercial construction loans by state as of the dates indicated.
Previous report
In order to model the probabilities of default used in the discounted cash flow model, the model pairs the results of a regression analysis with an economic forecast for each loan pool in the model. The regression analyses are determined by comparing historical loss rates to related economic indices. The historical loss rates are determined by using the Company's historical loss experience, or peer data when the Company's own historical loss rates are not reflective of future loss expectations. During the current quarter, the Company updated the regression analyses used in the model which resulted in some changes to the amounts and levels of ACL calculated by the model for commercial loans. The regression analyses were updated in order to assist management in estimating expected credit losses in the commercial loan portfolio due to growth in this portfolio, including growth in market areas outside of the Bank's local market footprint.
Previous report
Management applied a qualitative factor for large dollar commercial real estate loan concentrations. The Company's commercial real estate loans generally have low LTVs and strong DSCRs which serve as indicators that losses in the commercial real estate loan portfolios might be unlikely; however, because there is uncertainty surrounding the nature, timing and amount of expected losses, management believes that in the event of a realized loss within the large dollar commercial real estate loan pool, the magnitude of such a loss could be significant. The large dollar commercial real estate loan concentration qualitative factor addresses the risk associated with a large dollar relationship deteriorating due to a loss event. As part of its analysis, management considered external data including historical commercial real estate price index trending information from a variety of sources to help determine the amount of this qualitative factor.
Previous report
For one- to four-family loans, management believes there is potential risk of loss in market value in an economic downturn related to, in particular, newer originations where property values have not experienced price appreciation like more seasoned loans in our portfolio and applied a qualitative factor to account for this risk. To determine the appropriate amount of the one- to four-family loan qualitative factor as of June 30, 2025, management considered external historical home price index trending information, along with historical loan loss experience and portfolio balance trending, the one-to four-family loan portfolio composition with regard to loan size, and management's knowledge of the Bank's loan portfolio and the one- to four-family lending industry.
Previous report
It has been the intention of management and the Board of Directors to not make distributions from the Bank to the Company during fiscal year 2025 to limit the tax associated with the pre-1988 bad debt recapture which is related to the Bank's tax accumulated earnings and profits. It is currently anticipated that the Bank will have sufficient taxable income during fiscal year 2025 to replenish the Bank's tax accumulated earnings and profits to a positive level, allowing the Bank to make earnings distributions to the Company during fiscal year 2026 and not have those distributions subject to the pre-1988 bad debt recapture tax.
Previous report
The Company currently has $75.0 million authorized under an existing stock repurchase plan. Shares may be repurchased from time to time based upon market conditions, available liquidity and other factors. This plan has no expiration date; however, the FRB's current approval for the Company to repurchase shares expires in February 2026. There were no share repurchases during the current year period. Because the cash at the holding company is limited based on our capital management plan, the Company does not expect to repurchase shares until such time that the holding company has a sufficient cash balance.
Previous report
The following table presents the components of interest and dividend income for the time periods presented, along with the change measured in dollars and percent.
Previous report
The increase in interest income on loans receivable was due mainly to an increase in the average balance of the commercial loan portfolio as the loan portfolio continued to shift from one-to four-family loans to commercial loans. See additional discussion regarding the composition of the loan portfolio and management's strategy to shift from one- to four-family loans to commercial loans in the "Executive Summary" section above. The increase in interest income on MBS was due to a higher average balance compared to the prior quarter due to securities purchases between periods. The decrease in interest income on cash and cash equivalents was due to a decrease in the average balance as operating cash was utilized during the current quarter to accommodate funding needs for commercial loan activities and to repay borrowings. The decrease in interest income on investment securities was due mainly to a lower average balance compared to the prior quarter, primarily as a result of investments that matured or were called and not replaced.
Previous report
The following table presents the components of interest expense for the time periods presented, along with the change measured in dollars and percent.
Previous report
Within the deposit portfolio, the increased interest expense associated with the Bank's high yield savings account, which was the result of growth in these accounts, was almost entirely offset by a decrease in the cost of retail certificates of deposits due to a decrease in the weighted average rate and balance of that portfolio. Management has continued to focus on retaining and growing deposits through its high yield savings account product. See additional discussion in "Financial Condition - Deposits" above.
Previous report
The Company recorded a release of provision for credit losses of $451 thousand during the current quarter. The release was comprised of a $1.1 million decrease in the ACL for loans, partially offset by a $686 thousand increase in the reserve for off-balance sheet credit exposures. The $1.1 million decrease in the ACL was mainly related to the commercial loan portfolio as the increase in ACL related to growth in this portfolio was more than offset by an update to the ACL model's regression analyses implemented during the current quarter which also mainly impacted the commercial loan portfolio. See additional details in the "Financial Condition - Allowance for Credit Losses" discussion above. The increase in the reserve for off-balance sheet credit exposures was due primarily to an increase in commercial and industrial off-balance sheet credit exposures. The Company did not record a provision for credit losses during the prior quarter as the decrease in the ACL was entirely offset by the increase in the reserve for off-balance sheet credit exposures.
Previous report
The increase in deposit service fees was due primarily to an increase in debit card usage, which generated additional interchange and service charge income in the current quarter.
Previous report
The increase in advertising and promotional expense was due primarily to the timing of seasonal sponsorships and campaigns compared to the prior quarter. The decrease in other non-interest expense was due primarily to lower customer fraud losses in the current quarter, along with lower costs associated with a loss on a property acquired in 2018, which was sold during the prior quarter, and OREO property.
Previous report
The following table presents pretax income, income tax expense, and net income for the time periods presented, along with the change measured in dollars and percent and the effective tax rate.
Previous report
During the current quarter, the State of Kansas enacted a change in the tax law that is effective October 1, 2027 for the Company and the Bank. The State of Kansas is changing the way it attributes taxable income to the State, specifically changing from a three-factor apportionment (property, payroll and receipts) to a single, revenue-based method. Most of the Bank's property and payroll are located in Kansas, though a large amount of its revenue generating activities, predominantly loan interest income, are outside of Kansas. Therefore, the Bank is expecting a decrease in income apportioned to Kansas starting in fiscal year 2028 due to the tax law change. As a result, as of June 30, 2025, the Bank remeasured its state deferred tax assets and liabilities expected as of October 1, 2027. The Bank recorded an $857 thousand reduction in net state income tax expense related to this law change, which is the primary reason for the lower effective tax rate and income tax expense for the current quarter as compared to the prior quarter. Management anticipates the effective tax rate for fiscal year 2025 will be 18% to 19% which is lower than was originally expected primarily due to the Kansas law change.
Previous report
Average Balance Sheet
Previous report
The following table presents the average balances of our assets, liabilities, and stockholders' equity, and the related annualized weighted average yields and rates on our interest-earning assets and interest-bearing liabilities for the periods indicated, as well as selected performance ratios and other information for the periods shown. Weighted average yields are derived by dividing annualized income by the average balance of the related assets, and weighted average rates are derived by dividing annualized expense by the average balance of the related liabilities, for the periods shown. Average outstanding balances are derived from average daily balances. The weighted average yields and rates include amortization of fees, costs, premiums and discounts, which are considered adjustments to yields/rates. Weighted average yields on tax-exempt securities are not calculated on a fully taxable equivalent basis.
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(5)Net interest margin represents annualized net interest income as a percentage of average interest-earning assets. Management believes the net interest margin is important to investors as it is a profitability measure for financial institutions.
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(9)The efficiency ratio represents non-interest expense as a percentage of the sum of net interest income (pre-provision for credit losses) and non-interest income. Management believes the efficiency ratio is important to investors as it is a measure of a financial institution's total non-interest expense as a percentage of the sum of net interest income (pre-provision for credit losses) and non-interest income. A higher value generally indicates that it is costing the financial institution more money to generate revenue, related to its net interest margin and non-interest income.
Previous report
The table below presents the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities, comparing the three months ended June 30, 2025 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.
Previous report
Comparison of Operating Results for the Nine Months Ended June 30, 2025 and 2024
Previous report
The Company recognized net income of $49.2 million, or $0.38 per share, for the current year period, compared to net income of $26.0 million, or $0.20 per share, for the prior year period. The lower net income in the prior year period was primarily a result of the net losses on the sale of securities associated with the securities strategy. See additional discussion regarding the securities strategy in the "Executive Summary - Securities Strategy to Improve Earnings" section above. The securities associated with the securities strategy were sold in the prior year period, and in that period the Company incurred $13.3 million ($10.0 million net of tax) of net losses related to the sale of those securities. Excluding the effects of the net loss associated with the securities strategy, EPS would have been $0.28 for the prior year period. The increase in EPS excluding the effects of the net loss associated with the securities strategy was due primarily to higher net interest income in the current year period.
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Reworded paragraphs (62)
Previous wording
•our ability to extend our commercial banking and trust asset management expertise across our market areas;
Current wording
•our ability to expand our commercial banking and trust asset management expertise across our market areas;
Previous wording
•the future earnings and capital levels of the Bank, the impact of the 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;
Current wording
•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;
Previous wording
•the strength of the U.S. economy in general and the strength and/or the availability of labor in the local economies in which we conduct operations, including areas where we have purchased large amounts of correspondent loans, originated commercial loans, and entered into commercial loan participations;
Current wording
•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;
Previous wording
•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 may adversely affect our business;
Current wording
•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;
Previous wording
•the effects of, and changes in, trade and fiscal policies and laws of the United States government;
Current wording
•the effects of, and changes in, trade and fiscal policies and foreign and military policies of the United States government;
Previous wording
The Bank continues to transition from a retail oriented financial institution to one with an increasing focus on commercial customers by strategically growing all aspects of commercial banking through the alignment of technology, people, products, and services. The Bank is active in local markets for lending, commercial deposit and treasury management relationships, even when the lending opportunity may be for locations outside of the Bank's and the customers' local footprint. For additional discussion, see the "Strategic Banking Initiatives" section below.
Current wording
The Bank continues its progression from a primarily retail oriented financial institution to a full-service commercial bank by strategically growing all aspects of commercial banking through investments in technology, people, products, and services. For additional discussion, see the "Strategic Banking Initiatives" section below.
Previous wording
The Bank's asset quality remains strong, reflected in the continued low level of loan delinquency and charge-off ratios. At June 30, 2025, loans 30 to 89 days delinquent were 0.20% of total loans receivable, net, and loans 90 or more days delinquent or in foreclosure were 0.10% of total loans receivable, net. See "Financial Condition - Asset Quality - Delinquent and nonaccrual loans and OREO" below for additional discussion. During the current year period, net charge-offs ("NCOs") were $132 thousand.
Current wording
The Bank's asset quality remains strong, reflected in the continued low level of loan delinquency and charge-off ratios. At December 31, 2025, loans 30 to 89 days delinquent were 0.24% of total loans receivable, net, and loans 90 or more days delinquent or in foreclosure were 0.10% 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 quarter, the Bank had net charge-offs ("NCOs") of $119 thousand.
Previous wording
Total deposits were $6.43 billion at June 30, 2025, a $301.2 million increase from September 30, 2024. The increase during the current year period was due primarily to a $311.8 million increase in the Bank's high yield savings account offering and a $98.3 million, or 37.8%, increase in commercial non-maturity deposits. The increases were partially offset by an $85.4 million decrease in retail certificates of deposit and a $60.6 million decrease in retail money market accounts. Management has continued to focus on retaining and growing retail deposits through the Bank's high yield savings account product, which as of June 30, 2025, had an annual percentage yield of 4.00% for accounts meeting the account criteria, including a $10 thousand balance minimum. The annual percentage yield decreased during the current quarter from 4.30% as of March 31, 2025.
Current wording
Total deposits were $6.76 billion at December 31, 2025, an increase of $167.2 million compared to September 30, 2025. The increase in deposits was due mainly to increases in the Bank's high yield savings account offering and retail checking accounts. Management has continued to focus on retaining and growing deposits through the Bank's high yield savings account product, which, as of December 31, 2025, had an annual percentage yield of 3.80% for accounts that meet the $10 thousand balance minimum. The annual percentage yield on the high yield savings account product decreased to 3.70% mid-January 2026.
Previous wording
Total borrowings were $2.07 billion at June 30, 2025, a $108.0 million decrease from September 30, 2024. The decrease was due to principal payments made on the Bank's amortizing FHLB advances, along with borrowings that matured but were not replaced. Management estimates that the Bank had $2.97 billion in liquidity available at June 30, 2025 based on the Bank's blanket collateral agreement with FHLB and unencumbered securities.
Current wording
Total borrowings were $1.83 billion at December 31, 2025, a decrease of $120.9 million compared to September 30, 2025. The decrease was due primarily to the maturity of $100.0 million in borrowings that were not replaced, along with principal payments made on the Bank's amortizing FHLB advances. Cash flows from the deposit portfolio were used to pay down borrowings during the current quarter. Management estimated that the Bank had $4.09 billion in liquidity available at December 31, 2025, 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.
Previous wording
Stockholders' equity totaled $1.05 billion at June 30, 2025, an increase of $13.9 million from September 30, 2024. As of June 30, 2025, the Bank's capital ratios exceeded the well-capitalized requirements. The Bank's community bank leverage ratio ("CBLR") as of June 30, 2025 was 9.7%.
Current wording
Stockholders' equity totaled $1.04 billion at December 31, 2025, a decrease of $6.4 million from September 30, 2025 due to strategic share repurchases and dividend payments, continuing our efforts to enhance stockholder value. During the current quarter, the Company repurchased 2,376,633 shares of common stock at an average price of $6.86 per share, or $16.3 million in total, and paid regular quarterly dividends totaling $11.0 million, or $0.085 per share. As of December 31, 2025, the Bank's capital ratios exceeded the well-capitalized requirements. The Bank's community bank leverage ratio ("CBLR") as of December 31, 2025 was 9.5%.
Previous wording
At June 30, 2025 the gap between the Bank's amount of interest-earning assets and interest-bearing liabilities projected to reprice within one year was $(963.3) million, or (9.9)% of total assets, compared to $(1.51) billion, or (15.8)% of total assets, at September 30, 2024. As of June 30, 2025, the Bank exceeded internal policy thresholds for sensitivity to changes in interest rates. See additional discussion in "Part I, Item 3. Quantitative and Qualitative Disclosures About Market Risk."
Current wording
At December 31, 2025, the gap between the Bank's interest-earning assets and interest-bearing liabilities projected to reprice within one year was $(1.23) billion, or (12.6%) 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 December 31, 2025, the Bank was in compliance with its internal policy thresholds for sensitivity to changes in interest rates.
Previous wording
As part of this growth strategy, we are creating a seamless digital banking experience for all customers, which we believe will better enable the Bank to attract and retain deposits. This includes a new deposit account onboarding platform implemented in November 2024 and digital banking enhancements for debit cardholders that will allow customers to begin using their card immediately online and in digital wallets without waiting for the physical card in the mail which is projected to be implemented in the fourth quarter of fiscal year 2025.
Current wording
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. These enhancements are on track to be implemented in the second 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.
Previous wording
One- to Four-Family Loans- The following table presents, for our portfolio of one- to four-family loans, the amount, percent of total, weighted average rate, weighted average credit score, weighted average LTV ratio, and average balance per loan as of June 30, 2025. Credit scores were updated in September 2024 from a nationally recognized consumer rating agency. The LTV ratios were based on the current loan balance and either the lesser of the purchase price or original appraisal, or the most recent Bank appraisal, if available. In most cases, the most recent appraisal was obtained at the time of origination.
Current wording
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 December 31, 2025. 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.
Previous wording
The following table presents origination and refinance activity in 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 presented. As of June 30, 2025, the Bank had one- to four-family loan and refinance commitments totaling $57.9 million at a weighted average rate of 6.45%.
Current wording
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 quarter ended December 31, 2025. As of December 31, 2025, the Bank had one- to four-family loan and refinance commitments totaling $24.7 million at a weighted average rate of 5.97%.
Previous wording
Commercial Loans -The table below presents 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 ratio is calculated using the gross loan amount (composed 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.
Current wording
Commercial Loans -The table below presents commercial loan origination and participation activity for the quarter ended December 31, 2025, 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 (composed 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.
Previous wording
The following table presents commercial loan disbursements, excluding lines of credit, during the nine months ended June 30, 2025.
Current wording
The following table presents commercial loan disbursements, excluding lines of credit, during the periods indicated.
Previous wording
The following table presents the unpaid principal balance of non-owner occupied and owner occupied loans within the Bank's commercial real estate loan portfolio as of the dates indicated.
Current wording
The following table presents the unpaid principal balance of loans secured by non-owner occupied and owner occupied properties within the Bank's commercial real estate loan portfolio as of the dates indicated.
Previous wording
The following table presents management's funding expectations for the Bank's commercial real estate and commercial construction undisbursed amounts and commitments outstanding as of June 30, 2025. 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 from management's funding expectations. The majority of the $146.2 million of commitments expected to fund early during the September 30, 2025 quarter are related to senior housing loans.
Current wording
The following table presents management's funding expectations for the Bank's commercial real estate and commercial construction undisbursed amounts and commitments outstanding as of December 31, 2025. 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.
Previous wording
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 June 30, 2025. The LTV is calculated using the gross loan amount (composed of unpaid principal and undisbursed amounts) as of June 30, 2025 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. Commercial loans that have an outstanding balance of $1.5 million or more or borrowing relationships with a total relationship exposure of $5.0 million or more are reviewed no less often than annually to monitor financial performance.
Current wording
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 December 31, 2025. The LTV is calculated using the gross loan amount (composed of unpaid principal and undisbursed amounts) as of December 31, 2025 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. In general, commercial borrowers with total loans of $2.5 million or more are reviewed at least annually to monitor financial performance.
Previous wording
The following table presents the Bank's commercial real estate and commercial construction loans, including unpaid principal and undisbursed amounts, along with outstanding loan commitments as of June 30, 2025, categorized by aggregate gross loan and commitment amounts and average loan amount. For loans over $50.0 million, there were $267.0 million related to hotels in Arizona, California, New York, and Texas, $143.1 million related to multi-family properties in Kansas, and $59.7 million related to an office building in Texas.
Current wording
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 December 31, 2025, categorized by aggregate gross loan and commitment amount, along with average loan amount, weighted average rate, LTV, and DSCR. For loans over $60.0 million, there was $152.2 million of such loans related to hotels in Arizona and California, $143.1 million related to multi-family properties in Kansas, and $69.6 million related to senior housing in Kansas. The largest loan included in the table below was $86.0 million, which was fully disbursed as of December 31, 2025, and is collateralized by a hotel in Arizona.
Previous wording
The following table summarizes the Bank's commercial and industrial loans by loan purpose as of the dates indicated. The commercial and industrial gross loan amount increased $96.6 million, or 52%, during the current quarter. During the current quarter, the Bank originated three loans to two borrower relationships that accounted for $85.3 million of the increase in this portfolio. Of the $281.2 million of commercial and industrial loans at June 30, 2025, 58%, or $164.5 million, had a gross loan balance of $5.0 million or more. The largest commercial and industrial lending relationship at June 30, 2025 had a gross loan balance of $81.8 million, which represented 29% of the gross loan balance at June 30, 2025. In addition, the Bank had three commercial and industrial loan commitments totaling $42.0 million, with a weighted average rate of 6.79%, at June 30, 2025, which are not reflected in the table below. The recent growth in this portfolio aligns with the Bank's strategy to grow all aspects of commercial banking. Management anticipates growth will continue in the commercial and industrial loan portfolio but it will likely fluctuate over time due to the nature of these loans.
Current wording
The following table summarizes the Bank's commercial and industrial loans by loan purpose as of the dates indicated. Of the $285.4 million of commercial and industrial loans at December 31, 2025, 59%, or $168.2 million, had a gross loan balance of $5.0 million or more. The largest commercial and industrial lending relationship at December 31, 2025 had a gross loan balance of $81.6 million, which represented 29% of the gross commercial and industrial loan balance at December 31, 2025. The Bank had no commercial and industrial loan commitments at December 31, 2025. 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.
Previous wording
The following table summarizes the Bank's commercial and industrial loans by state as of June 30, 2025.
Current wording
The following table summarizes the Bank's commercial and industrial loans by the state in which the borrower is located, as of December 31, 2025.
Previous wording
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 June 30, 2025, categorized by aggregate gross loan and commitment amounts and average loan amount. For loans and commitments over $15.0 million, there were $79.7 million related to working capital loans in Kansas with a weighted DSCR of 1.63x and $30.6 million related to a loan to purchase equipment in Missouri with a DSCR of 1.56x.
Current wording
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 December 31, 2025, categorized by aggregate gross loan and commitment amounts and average loan amount. Both loans greater than $15.0 million related to working capital loans in Kansas. The largest loan included in the table below was $36.0 million, of which $16.3 million was undisbursed as of December 31, 2025. This loan is part of the $81.6 million commercial and industrial lending relationship mentioned above.
Previous wording
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 June 30, 2025, 71% were 59 days or less delinquent.
Current wording
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 December 31, 2025 and September 30, 2025, approximately 59% and 49%, respectively, were 59 days or less delinquent.
Previous wording
The following table presents the Bank's nonaccrual loans and OREO at the dates indicated. The amounts in the table represent the unpaid principal balance of the loans less related charge-offs, if any. Nonaccrual loans are loans that are 90 or more days delinquent or in foreclosure and other loans required to be reported as nonaccrual pursuant to accounting and/or regulatory reporting requirements and/or internal policies, even if the loans are current. At all dates presented, there were no loans 90 or more days delinquent that were still accruing interest. Non-performing assets include nonaccrual loans and OREO. The increase in nonaccrual commercial real estate loans as of June 30, 2025 was due primarily to two participation loans related to the same borrowing relationship that were moved to substandard during the current quarter. See the asset classification discussion below for additional information regarding these loans.
Current wording
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.
Previous wording
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 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 June 30, 2025. 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.
Current wording
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 December 31, 2025. 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.
Previous wording
The following table presents the unpaid principal balance of commercial real estate loans, aggregated by state, that were 30 to 89 days delinquent, 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 June 30, 2025. See additional discussion regarding the Bank's commercial real estate loan DSCRs and LTVs in the "Financial Condition - Loans Receivable - Commercial Loans" section above.
Current wording
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 December 31, 2025. 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.
Previous wording
Classified loans. The following table presents the amortized cost of loans classified as special mention or substandard at the dates presented. The increase in commercial real estate substandard loans at June 30, 2025 compared to March 31, 2025 was due mainly to two participation loans related to the same borrowing relationship, totaling $40.2 million as of June 30, 2025 and secured by a hotel. The borrower is working on a recapitalization plan, which is anticipated to be completed later in calendar year 2025, and the Bank entered into an agreement with the borrower during the current quarter which allows the borrower to not make payments during this period. Therefore, these loans were considered nonaccrual at June 30, 2025 and classified as substandard. The loans were not considered delinquent at June 30, 2025 due to the terms of the agreement. As of June 30, 2025, the combined Bank LTV on the loans was 45% based on an appraisal completed in the past three months. The increase in commercial real estate substandard loans since September 30, 2024 has been related to the $40.2 million of participation loans discussed above, along with another $38.9 million participation loan also secured by a hotel. In regard to the $38.9 million participation loan, the property is taking longer than anticipated to stabilize and the borrower is not meeting the debt service coverage loan covenant required by the loan agreement. The borrower projects improved occupancy and cash flow during the remainder of calendar year 2025 and expects to be fully stabilized during calendar year 2026. As of June 30, 2025, the loan was not delinquent and the Bank LTV was 47% based on an appraisal completed approximately two years ago. The Bank has had a participation relationship with the lead bank for all three commercial real estate substandard participation loans discussed above for ten years, and the Bank holds the same percentage interest in these loans as the lead bank. These loans are recourse with a personal guaranty and have strong LTVs. Both borrower groups (developers, owners and guarantors) are seasoned commercial real estate developers with over 40 years of experience each. These loans were individually evaluated for loss as of June 30, 2025. There have been no charge-offs with these loans nor has management set aside a specific valuation allowance associated with these loans as of June 30, 2025 due to the strong LTVs.
Current wording
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 December 31, 2025 compared to September 30, 2025 was due mainly to a $36.1 million hotel participation loan being upgraded to pass, due to an improvement in the hotel's financial results.
Previous wording
The distribution of our ACL and the ratio of ACL to loans receivable, by loan type, at the dates indicated is summarized below. The decrease in the ratio of the ACL to total loans as of June 30, 2025 from March 31, 2025 was due primarily to a decrease in the commercial real estate ACL to total loans. The changes in the commercial ratios in the current quarter from the prior quarters were due primarily to the regression analyses update discussed above. Based on management's evaluation of the credit risk within the Bank's commercial real estate loan portfolio, taking into consideration DSCRs and LTVs, management believes the Bank's ACL ratio for commercial real estate 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.
Current wording
The distribution of our ACL and the ratio of ACL to loans receivable, by loan type, at the dates indicated is summarized below. The decrease in the commercial ACL to loans receivable ratio as of December 31, 2025, compared to September 30, 2025, was primarily driven by changes in the composition of the commercial and industrial and commercial construction loan portfolios. These shifts affected the weighted average lives of the respective portfolios, which in turn influenced the discounted cash flow results compared to September 30, 2025. 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.
Previous wording
Historically, the Bank has maintained very low delinquency ratios and NCO rates. Over the past two years, the Bank's highest ratio of commercial loans 90 days or more delinquent to total commercial loans at a quarter end was 0.22%. The highest such ratio for one- to four-family originated and correspondent loans, combined, was 0.12%. The amount of total NCOs during the current quarter and current year period was $25 thousand and $132 thousand, respectively. The majority of the NCOs during the current year period related to one single-family bulk purchased loan. During the 10-year period ended June 30, 2025, the Bank recognized $1.1 million of total NCOs. As of June 30, 2025, the ACL balance was $22.8 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.
Current wording
Historically, the Bank has maintained very low delinquency ratios and NCO rates. Over the past two years, the Bank's highest ratio of commercial loans 90 days or more delinquent to total commercial loans at a quarter end was 0.22%. The highest such ratio for one- to four-family loans was 0.12%. Total NCOs during the current quarter were $119 thousand. During the 10-year period ended December 31, 2025, the Bank recognized $875 thousand of total NCOs. As of December 31, 2025, the ACL balance was $24.6 million and the reserve for off-balance sheet credit exposures totaled $6.0 million, which management believes is adequate for the credit risk characteristics in our loan portfolio.
Previous wording
The following table presents ACL activity and related ratios at the dates and for the periods indicated. On October 1, 2023, the Bank adopted ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures("ASU 2022-02"), which eliminated the accounting guidance for troubled debt restructurings by creditors. The Company applied a modified retrospective approach when adopting ASU 2022-02, resulting in a cumulative-effect adjustment which is reflected in the table below ("ASU 2022-02 Adoption").
Current wording
The following table presents ACL activity and related ratios at the dates and for the periods indicated.
Previous wording
The ratio of NCOs to average non-performing assets was lower at June 30, 2025 compared to June 30, 2024, due to an increase in average non-performing assets in the current year period compared to the prior year period, which was partially offset by higher NCOs. As noted above, the majority of the NCOs in the current year period related to one single-family bulk purchased loan and the increase in average non-performing assets was due primarily to two commercial participation loans that were nonaccrual at June 30, 2025, as discussed above, and thereby considered non-performing assets. The ratio of ACL to nonaccrual loans was lower at the end of the current year period compared to the end of the prior year period due mainly to a higher balance of nonaccrual loans in the current year period compared to the prior year period, largely related to two commercial participation loans that were nonaccrual at June 30, 2025 as discussed above, along with a lower ACL balance at June 30, 2025. The ratio of ACL to loans receivable, net was lower at the end of the current year period compared to the end of the prior year period due primarily to a reduction in the ACL/loan ratio for commercial real estate loans due mainly to the regression analyses update discussed above. See "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 ACL activity by specific loan categories. ACL at the end of period to NCOs during the period (annualized) was lower compared to the prior year period, due primarily to higher NCOs in the current year period, partially offset by a lower ACL balance at June 30, 2025.
Current wording
The ratio of NCOs to average non-performing assets was positive this quarter, compared to a negative ratio in the prior year quarter, due to a NCO this quarter versus a net recovery in the prior year quarter. The ratio of ACL to nonaccrual loans was lower at the end of the current quarter compared to the prior year quarter due to a higher balance of nonaccrual loans at December 31, 2025. The decrease in the ratio of the ACL to total loans as of December 31, 2025 from December 31, 2024 was due primarily to the regression analysis update that occurred in the second half of the prior fiscal year, partially offset by the changes in the loan portfolio mix due to continued growth in commercial loans, which have a higher ACL to loan ratio than one- to four-family loans. 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 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.
Previous wording
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 92% of our securities portfolio at June 30, 2025. The weighted average life ("WAL") is the estimated remaining maturity (in years) after three month historical prepayment speeds and projected call option assumptions have been applied. Weighted average yields on tax-exempt securities are not calculated on a fully tax-equivalent basis.
Current wording
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 December 31, 2025. 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.
Previous wording
The following table summarizes the activity in our securities portfolio for the periods presented. The weighted average yields for the beginning and ending balances are as of the first and last days of the periods presented and are generally derived from recent prepayment activity on the securities in the portfolio. The beginning and ending WALs are the estimated remaining principal repayment terms (in years) after three month historical prepayment speeds and projected call option assumptions have been applied.
Current wording
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.
Previous wording
Liabilities. Total liabilities were $8.65 billion at June 30, 2025, compared to $8.50 billion at September 30, 2024. The increase was due primarily to a $301.2 million increase in deposits, partially offset by a $108.0 million decrease in borrowings due to principal payments made on the Bank's amortizing advances, along with borrowings that matured but were not replaced.
Current wording
Liabilities. Total liabilities were $8.74 billion at December 31, 2025, compared to $8.73 billion at September 30, 2025. The $6.1 million increase was due primarily to a $167.2 million increase in deposits, partially offset by a $120.9 million decrease in borrowings and a $36.9 million decrease in advances by borrowers due to the timing of semi-annual real estate payments.
Previous wording
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 at June 30, 2025 compared to March 31, 2025 and September 30, 2024 was due mainly to lower rates on retail certificates of deposit.
Current wording
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 increase in deposits from September 30, 2025 was due mainly to a $96.8 million increase in the Bank's high yield savings account offering and a $54.8 million increase in retail checking accounts. The decrease in the deposit portfolio rate at December 31, 2025 compared to September 30, 2025 and December 31, 2024 was due mainly to lower rates on retail certificates of deposit.
Previous wording
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. Total deposits increased $301.2 million, or 4.9%, from September 30, 2024. The increase was primarily in retail non-maturity deposits which increased $246.6 million, or 8.5%, due mainly to an increase in high yield savings accounts, along with a $98.3 million, or 37.8%, increase in commercial non-maturity deposits, and a $40.2 million, or 52.5%, increase in public unit certificates from September 30, 2024. The increases noted above were partially offset by an $85.4 million, or 3.0%, decrease in retail certificates of deposit from September 30, 2024.
Current wording
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.
Previous wording
As of June 30, 2025, approximately $899.4 million (or approximately 14%) of the Bank's Call Report deposit balance was uninsured, of which approximately $509.4 million (or approximately 8% 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.
Current wording
As of December 31, 2025, approximately $776.8 million (or approximately 11%) of the Bank's Call Report deposit balance was uninsured, of which approximately $599.4 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.
Previous wording
Borrowings. Total borrowings at June 30, 2025 were $2.07 billion, which was comprised of $1.87 billion in fixed-rate FHLB advances, $200.0 million in FHLB variable-rate advances tied to interest rate swaps, and $1.1 million in finance leases.
Current wording
Borrowings. Total borrowings at December 31, 2025 were $1.83 billion, which was comprised of $1.73 billion in fixed-rate FHLB advances, $100.0 million in variable-rate FHLB advances tied to an interest rate swap, and $1.1 million in finance leases. Borrowings decreased $120.9 million from September 30, 2025 due to the maturity of $100.0 million in borrowings during the current quarter that were not replaced, along with principal payments made on the Bank's amortizing FHLB advances. Cash flows from the increase in the deposit portfolio were used to pay down the borrowings portfolio during the current quarter. 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.
Previous wording
The following table presents the maturity of term borrowings, which consist of FHLB advances, along with associated weighted average contractual and effective rates as of June 30, 2025. Amortizing FHLB advances totaling $297.2 million as of June 30, 2025 are presented based on their maturity dates versus their quarterly scheduled repayment dates.
Current wording
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 December 31, 2025. Amortizing FHLB advances totaling $254.8 million are presented based on their maturity dates versus their quarterly scheduled repayment dates.
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Current report — wording carried from elsewhere
The following table presents the average balances of our assets, liabilities, and stockholders' equity, and the related annualized weighted average yields and rates on our interest-earning assets and interest-bearing liabilities for the periods indicated, as well as selected performance ratios and other information for the periods shown. Weighted average yields are derived by dividing annualized income by the average balance of the related assets, and weighted average rates are derived by dividing annualized expense by the average balance of the related liabilities, for the periods shown. Average outstanding balances are derived from average daily balances. The weighted average yields and rates include amortization of fees, costs, premiums and discounts, which are considered adjustments to yields/rates.
Current report — wording carried from elsewhere
(9)The efficiency ratio represents non-interest expense as a percentage of the sum of net interest income (pre-provision for credit losses) and non-interest income. Management believes the efficiency ratio is important to investors as it is a measure of a financial institution's total non-interest expense as a percentage of the sum of net interest income (pre-provision for credit losses) and non-interest income. A lower value generally indicates that it is costing the financial institution less money to generate revenue, related to its net interest margin and non-interest income.
Current report — wording carried from elsewhere
The following table presents the components of interest and dividend income for the periods presented, along with the change measured in dollars and percent.
Current report — wording carried from elsewhere
The following table presents the components of interest and dividend income for the periods presented, along with the change measured in dollars and percent.
Current report — wording carried from elsewhere
The following table presents the components of interest expense for the periods presented, along with the change measured in dollars and percent.
Current report — wording carried from elsewhere
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.
Current report — wording carried from elsewhere
Income tax expense was higher in the current quarter due mainly to higher pretax income.
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Previous report — wording carried elsewhere
•the effects of, and changes in, foreign and military policies of the United States government;
Previous report — wording carried elsewhere
(2)AFS security yields are based upon amortized cost which is adjusted for premiums and discounts.
Previous report — wording carried elsewhere
(4)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.
Previous report — wording carried elsewhere
(6)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.
Previous report — wording carried elsewhere
(7)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.
Previous report — wording carried elsewhere
(8)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.
Previous report — wording carried elsewhere
(4)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.
Previous report — wording carried elsewhere
(6)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.
Previous report — wording carried elsewhere
(7)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.
Previous report — wording carried elsewhere
(8)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.