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What changed in Capitol Federal Financial, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Capitol Federal Financial, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+457 added−393 removedSource: 10-K (2024-11-27) vs 10-K (2023-11-29)

Top changes in Capitol Federal Financial, Inc.'s 2024 10-K

457 paragraphs added · 393 removed · 297 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

65 edited+19 added−12 removed34 unchanged
Biggest changeIn addition, the Bank may not lend to any affiliate engaged in activities not permissible for a bank holding company or purchase or invest in the securities of affiliates. Taxation Federal Taxation. The Company and the Bank are subject to federal income taxation in the same general manner as other corporations. The Company files a consolidated federal income tax return.
Biggest changeThe Company and the Bank are subject to federal income taxation in the same general manner as other corporations. The Company files a consolidated federal income tax return. The Company has not received notification from the Internal Revenue Service of any potential tax liability for any years still subject to audit.
The Company is a unitary savings and loan holding company within the meaning of the Home Owners' Loan Act ("HOLA"). As such, the Company is registered with the FRB and subject to the FRB regulations, examinations, supervision, and reporting requirements. In addition, the FRB has enforcement authority over the Company.
The Company is a unitary savings and loan holding company within the meaning of the Home Owners' Loan Act ("HOLA"). As such, the Company is registered with the FRB and subject to FRB regulations, examinations, supervision, and reporting requirements. In addition, the FRB has enforcement authority over the Company.
The OCC has adopted guidelines establishing safety and soundness standards on such matters as loan underwriting and documentation, asset quality, earnings standards, internal controls and audit systems, interest rate risk exposure, and compensation and other employee benefits. The Bank is subject to periodic examinations by the OCC regarding these and related matters.
The OCC has adopted guidelines establishing safety and soundness standards on matters such as loan underwriting and documentation, asset quality, earnings standards, internal controls and audit systems, interest rate risk exposure, and compensation and other employee benefits. The Bank is subject to periodic examinations by the OCC regarding these and related matters.
Bank Secrecy Act /Anti-Money Laundering Laws. The Bank is subject to the Bank Secrecy Act and other anti-money laundering laws, including the USA PATRIOT Act of 2001 and regulations thereunder.
The Bank is subject to the Bank Secrecy Act and other anti-money laundering laws, including the USA PATRIOT Act of 2001 and regulations thereunder.
The HOLA prohibits a savings and loan holding company (directly or indirectly, or through one or more subsidiaries) from acquiring another savings association, or holding company thereof, without prior written approval from the FRB; acquiring or retaining, with certain exceptions, more than 5% of a non-subsidiary savings association, a non-subsidiary holding company, or a non-subsidiary company engaged in activities other than those permitted by the HOLA; or acquiring or retaining control of a depository institution that is not federally insured.
The HOLA prohibits a savings and loan holding company (directly or indirectly, or through one or more subsidiaries) from acquiring another savings association, or holding company thereof, without prior written approval from the FRB; acquiring or retaining, with certain exceptions, more than 5% of a non-subsidiary savings association, a non-subsidiary holding company, or a non-subsidiary company engaged in activities other 7 than those permitted by the HOLA; or acquiring or retaining control of a depository institution that is not federally insured.
So long as the Bank remains well capitalized after each capital distribution, and operates in a safe and sound manner, it is management's belief that the OCC and FRB will continue to allow the Bank to distribute its earnings to the Company, although no assurance can be given in this regard. 5 Insurance of Accounts and Regulation by the FDIC.
So long as the Bank remains well capitalized after each capital distribution, and operates in a safe and sound manner, it is management's belief that the OCC and FRB will continue to allow the Bank to distribute its earnings to the Company, although no assurance can be given in this regard. Insurance of Accounts and Regulation by the FDIC.
Our deposit services are provided through our network of traditional branches and retail in-store locations, our call center which operates on extended hours, mobile banking, telephone banking, and online banking and bill payment services. • Cost Control. We generally are very effective at controlling our costs of operations. We centralize our loan servicing and deposit support functions for efficient processing.
Our deposit services are provided through our network of traditional branches and retail in-store locations, our call center (which operates on extended hours), mobile banking, telephone banking, and online banking and bill payment services. • Cost Control. We generally are effective at controlling our costs of operations. We centralize our loan servicing and deposit support functions for efficient processing.
We do not currently know of any practice, condition, or violation that may lead to termination of our deposit insurance. Community Reinvestment and Consumer Protection Laws. In connection with its lending activities, the Bank is subject to a number of federal laws designed to protect borrowers and promote lending to various sectors of the economy and population.
We do not know of any practice, condition, or violation that may lead to termination of our deposit insurance. Community Reinvestment and Consumer Protection Laws. In connection with its lending activities, the Bank is subject to a number of federal laws designed to protect borrowers and promote lending to various sectors of the economy and population.
The Board of Directors annually reviews the Company's diversity recruitment efforts and employment statistics. 8 To assist in expanding diversity, the Company recruits employees through sources and organizations targeted at diverse communities. The Company also provides multiple opportunities for professional development and growth, including continuing education when applicable and specialty education within banking.
The Board of Directors annually reviews the Company's diversity recruitment efforts and employment statistics. To assist in expanding diversity, the Company recruits employees through sources and organizations targeted at diverse communities. The Company also provides multiple opportunities for professional development and growth, including continuing education when applicable and specialty education within banking.
The Company is significantly affected by prevailing economic conditions, including federal monetary and fiscal policies and federal regulation of financial institutions. Deposit balances are influenced by a number of factors, including interest rates paid on competing investment products, the level of personal income, and the personal rate of savings within our market areas.
The Company is significantly affected by prevailing economic conditions, including federal monetary and fiscal policies and federal regulation of financial institutions. Deposit balances are influenced by a number of factors, including interest rates paid on competing investment products, the level of personal income, and the personal rate of savings within our market 2 areas.
These laws and regulations require 6 the Bank to implement policies, procedures, and controls to detect, prevent, and report money laundering and terrorist financing and to verify the identity and source of deposits and wealth of its customers. Violations of these laws and regulations can result in substantial civil and criminal sanctions.
These laws and regulations require the Bank to implement policies, procedures, and controls to detect, prevent, and report money laundering and terrorist financing and to verify the identity and source of deposits and wealth of its customers. Violations of these laws and regulations can result in substantial civil and criminal sanctions.
Any such institution must submit a capital restoration plan for OCC approval and may be restricted in, among other things, increasing its assets, acquiring another institution, establishing a branch or engaging in any new activities, and may not make capital distributions.
Any such institution must submit a capital restoration plan for OCC approval and may be restricted in, among 5 other things, increasing its assets, acquiring another institution, establishing a branch or engaging in any new activities, and may not make capital distributions.
Transactions between the Bank and its affiliates are required to be on terms as favorable to the institution as transactions with non-affiliates, and certain of these transactions are restricted to a percentage of the Bank's 7 capital, and, in the case of loans, require eligible collateral in specified amounts.
Transactions between the Bank and its affiliates are required to be on terms as favorable to the institution as transactions with non-affiliates. Certain of these transactions are restricted to a percentage of the Bank's capital, and, in the case of loans, require eligible collateral in specified amounts.
The Bank is authorized to borrow from the Federal Reserve Bank "discount window." An eligible institution need not exhaust other sources of funds before going to the discount window, nor are there restrictions on the purposes for which the institution can use primary credit. At September 30, 2023, the Bank had no outstanding borrowings from the discount window.
The Bank is authorized to borrow from the Federal Reserve Bank "discount window." An eligible institution need not exhaust other sources of funds before going to the discount window, nor are there restrictions on the purposes for which the institution can use primary credit. At September 30, 2024, the Bank had no outstanding borrowings from the discount window.
The DIF of the FDIC insures deposit accounts in the Bank up to applicable limits, with a maximum amount of deposit insurance for banks, savings institutions, and credit unions of $250 thousand per separately insured deposit ownership right or category. The FDIC assesses deposit insurance premiums on all FDIC-insured institutions quarterly based on annualized rates.
The DIF of the FDIC insures deposit accounts in the Bank up to applicable limits, with a maximum amount of deposit insurance for banks and savings institutions of $250 thousand per separately insured deposit ownership right or category. The FDIC assesses deposit insurance premiums on all FDIC-insured institutions quarterly based on annualized rates.
Changes to the corporate federal income tax rate would result in changes to the Company's effective income tax rate and would require the Company to remeasure its deferred tax assets and liabilities based on the tax rate in the years in which those temporary differences are expected to be recovered or settled. State Taxation.
Changes to the corporate federal income tax rate would result in changes to the Company's effective income tax rate and would require the Company to remeasure its deferred tax assets and liabilities based on the tax rate in the years in which those temporary differences are expected to be recovered or settled.
See "Part II, Item 8. Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 13. Regulatory Capital Requirements" for additional regulatory capital information. At September 30, 2023, the Bank was considered well capitalized under OCC regulations.
See "Part II, Item 8. Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 13. Regulatory Capital Requirements" for additional regulatory capital information. At September 30, 2024, the Bank was considered well capitalized under OCC regulations.
The Bank, as a federally chartered savings bank, is subject to regulation and oversight by the OCC extending to all aspects of its operations. This regulation of the Bank is intended for the protection of depositors and other customers and not for the purpose of protecting the Company's stockholders.
The Bank, as a federally chartered savings bank, is subject to regulation and oversight by the OCC in all aspects of its operations. This regulation and oversight of the Bank is intended for the protection of depositors and other customers and not for the purpose of protecting the Company's stockholders.
Historically, we have purchased one- to four-family loans from correspondent lenders but recently have reduced that activity for balance sheet management purposes. We offer several commercial lending options and participate in commercial loans with other lenders, both locally and outside our market areas. We offer both fixed- and adjustable-rate products with various terms to maturity and pricing options.
Historically, we purchased one- to four-family loans from correspondent lenders but recently suspended that activity for balance sheet management purposes. We offer several commercial lending options and participate in commercial loans with other lenders, both locally and outside our market areas. We offer both fixed- and adjustable-rate products with various terms to maturity and pricing options.
An institution that fails to do so is immediately subject to restrictions on its operations, including a prohibition against capital distributions, except with the prior approval of both the OCC and the FRB. 4 Failure to meet this qualification is a statutory violation subject to enforcement action. As of September 30, 2023, the Bank met the qualification.
An institution that fails to do so is immediately subject to restrictions on its operations, including a prohibition against capital distributions, except with the prior approval of both the OCC and the FRB. Failure to meet this qualification is a statutory violation subject to enforcement action. As of September 30, 2024, the Bank met the qualification.
Our one- to four-family lending strategy and our effective management of credit risk allows us to service a large portfolio of loans at efficient levels because it costs less to service a portfolio of performing loans.
Our one- to four-family lending strategy and our effective management of credit risk allow us to service a large portfolio of loans at efficient levels because it costs less to service a portfolio of performing loans.
Among other things, this authority permits the FRB to restrict or prohibit activities that are determined to be a serious risk to the Bank. The OCC and FRB enforcement authority includes, among other things, the ability to assess civil monetary penalties, to issue cease-and-desist or removal orders, and to initiate injunctive actions.
Among other things, this authority permits the FRB to restrict or prohibit activities by the Company that are determined to be a serious risk to the Bank. The enforcement authority of the OCC and of the FRB includes, among other things, the ability to assess civil monetary penalties, to issue cease-and-desist or removal orders, and to initiate injunctive actions.
In response to the Coronavirus Disease 2019 ("COVID-19") pandemic, the FRB reduced reserve requirement ratios to zero percent effective on March 26, 2020, to support lending to households and businesses. At September 30, 2023, the reserve requirement of zero percent was still in place.
In response to the Coronavirus Disease 2019 ("COVID-19") pandemic, the FRB reduced reserve requirement ratios to zero percent effective March 26, 2020, to support lending to households and businesses. At September 30, 2024, the reserve requirement of zero percent was still in place.
The Federal Home Loan Banks make loans, called advances, to members and provide access to a line of credit in accordance with policies and procedures established by the Board of Directors of FHLB, which are subject to the oversight of the Federal Housing Finance Agency. At September 30, 2023, the Bank had $2.38 billion of FHLB advances, at par.
The Federal Home Loan Banks make loans, called advances, to members and provide access to a line of credit in accordance with policies and procedures established by the Board of Directors of FHLB, which are subject to the oversight of the Federal Housing Finance Agency. At September 30, 2024, the Bank had $2.18 billion of FHLB advances, at par.
The OCC has the ability to establish individual minimum capital requirements for a particular institution which vary from the capital levels that would otherwise be required under the applicable capital regulations based on such factors as concentrations of credit risk, levels of interest rate risk, the risks of non-traditional activities, and other circumstances.
The OCC can establish individual minimum capital requirements for a particular institution which vary from the capital levels that would otherwise be required under the applicable capital regulations based on such factors as concentrations of credit risk, levels of interest rate risk, the risks of non-traditional activities, and other circumstances.
As such, fluctuations in interest rates have a significant impact not only upon our net income but also upon the cash flows related to those assets and liabilities and the market value of our assets and liabilities.
Therefore, fluctuations in interest rates have a significant impact not only upon our net income but also upon the cash flows related to those assets and liabilities and the market value of our assets and liabilities.
For Kansas privilege tax purposes, the minimum tax rate is 4.5% of earnings, which is calculated based on federal taxable income, subject to certain adjustments. The Bank has not received notification from the state of any potential tax liability for any years still subject to audit.
For Kansas privilege tax purposes, the minimum tax rate is 4.5% of earnings during fiscal year 2024, which is calculated based on federal taxable income, subject to certain adjustments. The Bank has not received notification from the state of any potential tax liability for any years still subject to audit.
Assessment rates are applied to an institution's assessment base, which is its average consolidated total assets minus its average tangible equity during the assessment period. The FDIC has authority to further increase insurance assessments in the future, and any significant increases would have an adverse effect on the operating expenses and results of operations of the Company.
Assessment rates are applied to an institution's assessment base, which is its average consolidated total assets minus its average tangible equity during the assessment period. The FDIC has authority to increase insurance assessments in the future, and any significant increases could have a material adverse effect on the operating expenses and results of operations of the Company.
In order to maintain what we believe to be acceptable levels of net interest income in varying interest rate environments, we actively manage our interest rate risk and assume a moderate amount of interest rate risk consistent with board policies. 3 Market Area and Competition Our corporate office is located in Topeka, Kansas.
In order to maintain what we believe to be acceptable levels of net interest income in varying interest rate environments, we actively manage our interest rate risk and assume a moderate amount of interest rate risk consistent with policies approved by the Board of Directors. Market Area and Competition Our corporate office is located in Topeka, Kansas.
Under these rules, assessment rates for an institution with total assets of less than $10 billion are determined by weighted average capital adequacy, asset quality, management, earnings, liquidity, and sensitivity (CAMELS) composite ratings and certain financial ratios, and range from 1.5 to 30.0 basis points, subject to certain adjustments.
Under these rules, assessment rates for an institution with total assets of less than $10 billion are determined by capital adequacy, asset quality, management, earnings, liquidity, and sensitivity (CAMELS) composite ratings and certain financial ratios, and range from 2.5 to 32.0 basis points, subject to certain adjustments.
The federal banking regulators take into account the institution's record of performance under the CRA when considering applications for mergers, acquisitions, and branches. Under the CRA, institutions are assigned a rating of outstanding, satisfactory, needs to improve, or substantial non-compliance. The Bank received a satisfactory rating in its most recently completed CRA evaluation.
The federal banking regulators take into account the institution's record of performance under the CRA when considering applications for mergers, acquisitions, and branches. Under the CRA, institutions are assigned a rating of outstanding, satisfactory, needs to improve, or substantial non-compliance. The Bank received a satisfactory rating in its most recently completed CRA evaluation. Bank Secrecy Act /Anti-Money Laundering Laws.
For fiscal year 2024, it is the current intention of the Board of Directors to pay out the regular quarterly cash dividend of $0.085 per share. • Interest Rate Risk Management. Changes in interest rates are our primary market risk as our balance sheet is almost entirely comprised of interest-earning assets and interest-bearing liabilities.
For fiscal year 2025, it is the current intention of the Board of Directors to continue the regular quarterly cash dividend of $0.085 per share. 3 • Interest Rate Risk Management. Changes in interest rates are our primary market risk as our balance sheet is almost entirely comprised of interest-earning assets and interest-bearing liabilities.
The Bank is subject to a statutory lending limit on aggregate loans to one person or a group of related persons. The general limit is 15% of our unimpaired capital and surplus, plus an additional 10% for loans fully secured by readily marketable collateral. At September 30, 2023, the Bank's lending limit under this restriction was $139.8 million.
The Bank is subject to a statutory lending limit on aggregate loans to one person or a group of related persons. The general limit is 15% of the Bank's unimpaired capital and surplus, plus an additional 10% for loans fully secured by readily marketable collateral. At September 30, 2024, the Bank's lending limit under this restriction was $135.5 million.
Our Company respects, values and encourages diversity in our employees and customers. We seek to recognize and develop the unique contributions each individual brings to our Company, and we are fully committed to maintaining a culture of diversity as a pillar of our values and our success. These efforts are supported by our Board of Directors.
We seek to recognize and develop the unique contributions each individual brings to our Company, and we are fully committed to maintaining a culture of diversity as a pillar of our values and our success. These efforts are supported by our Board of Directors.
In October 2022, the FDIC adopted a final rule that increased the initial base deposit assessment rate schedule uniformly by two basis points, beginning with the first quarterly assessment period of 2023.
The current assessment rates were set in October 2022, when the FDIC adopted a final rule that increased the initial base deposit assessment rate schedule uniformly by two basis points, beginning with the first quarterly assessment period of 2023.
We serve a broad range of customers through relatively few branch locations. Our average deposit base per traditional branch at September 30, 2023 was approximately $123.0 million. This large average deposit base per branch helps to control costs.
We serve a broad range of customers through relatively few branch locations. Our average deposit base per traditional branch at September 30, 2024 was approximately $128.7 million. This large average deposit base per branch helps to control costs.
Under FRB and OCC safe harbor regulations, savings institutions generally may make capital distributions during any calendar year equal to earnings of the previous two calendar years and current year-to-date earnings (to the extent not previously distributed).
Under FRB and OCC safe harbor regulations, a savings institution generally may make capital distributions during any calendar year equal to net income of the previous two calendar years and current year-to-date net income (to the extent not previously distributed).
We also participate with other lenders in commercial loans, originate consumer loans primarily secured by mortgages on one- to four-family residences, and invest in certain investment securities and mortgage-backed securities ("MBS") using funding from deposits and Federal Home Loan Bank Topeka ("FHLB") borrowings.
We also participate with other lenders in commercial loans, and have purchased loans primarily secured by mortgages on one- to four-family residences. The Bank also invests in certain investment securities and mortgage-backed securities ("MBS") using funding from deposits and Federal Home Loan Bank of Topeka ("FHLB") borrowings.
Set forth below is a description of certain laws and regulations that are applicable to Capitol Federal Financial, Inc. and the Bank. This description is intended as a brief summary of selected features of such laws and regulations and is qualified in its entirety by references to the laws and regulations applicable to the Company and the Bank. General.
Set forth below is a description of certain laws and regulations that are applicable to the Company and the Bank. This description is intended as a brief summary of selected features of such laws and regulations and is qualified in its entirety by reference to the laws and regulations applicable to the Company and the Bank. 4 General.
The Bank has no loans or loan relationships in excess of its lending limit. Total loan commitments and loans outstanding to the Bank's largest borrowing relationship was $76.2 million at September 30, 2023, all of which was current according to its terms.
The Bank has no loans or loan relationships in excess of its lending limit. Loan commitments and loans outstanding to the Bank's largest borrowing relationship totaled $113.0 million at September 30, 2024, all of which was current according to its terms.
Leadership development is supported through our Leadership Forum services, on a biannual basis, for mid-level leaders within the organization. Education for this program is currently provided by Banktastic. Annual employee educational requirements include targeted diversity, equity and inclusion training for all managers.
Leadership development is supported through our Leadership Forum services, on a biannual basis, for mid-level leaders within the organization. Education for this program is currently provided by Banktastic. Annual employee educational requirements include targeted diversity, equity and inclusion training for all managers. All employees receive annual training on providing fair, high-quality service and understanding the causes of discrimination.
We strive to enhance stockholder value while maintaining a strong capital position. To achieve these goals, we focus on the following strategies: • Lending. We are one of the leading originators of one- to four-family loans in the state of Kansas. We originate these loans primarily for our own portfolio, and we service the loans we originate.
To achieve these goals, we focus on the following strategies: • Lending. We are one of the leading originators of one- to four-family loans in the state of Kansas. We originate these loans primarily for our own portfolio, and we service the loans we originate.
As a federally chartered savings bank, the Bank is required to maintain a significant portion of its assets in residential housing-related loans and investments.
As a federally chartered savings bank, the Bank is required to maintain a significant portion of its assets in residential housing-related loans and investments in at least nine months of the most recent 12-month period.
The amount that can be borrowed under the BTFP is based upon the par value of the securities pledged as collateral to the FRB. Advances can be requested under the BTFP until at least March 11, 2024. At September 30, 2023, the Bank had $500.0 million of BTFP borrowings.
The amount that could be borrowed under the BTFP was based upon the par value of the securities pledged as collateral to the FRB. At September 30, 2023, the Bank had $500.0 million of BTFP borrowings.
In March 2023, the FRB created a Bank Term Funding Program ("BTFP") to make additional funding available to eligible depository institutions. The BTFP offers loans up to one year in length that can be prepaid without penalty.
In March 2023, the FRB created a Bank Term Funding Program ("BTFP") to make additional funding available to eligible depository institutions. Advances could have been requested under the BTFP until March 11, 2024. The BTFP offered loans up to one year in length that could be prepaid without penalty.
We currently have a network of 51 branches (46 traditional branches and five in-store branches) located in nine counties throughout Kansas and three counties in Missouri. We primarily serve the metropolitan areas of Topeka, Wichita, Lawrence, Manhattan, Emporia, and Salina, Kansas and a portion of the metropolitan area of greater Kansas City.
As of September 30, 2024, we had a network of 48 branches (44 traditional branches and four in-store branches) located in nine counties throughout Kansas and three counties in Missouri. We primarily serve the metropolitan areas of Topeka, Wichita, Lawrence, Manhattan, Emporia, and Salina, Kansas and a portion of the metropolitan area of greater Kansas City.
In addition, provisions of the USA PATRIOT Act require the federal financial institution regulatory agencies to consider the effectiveness of a financial institution's anti-money laundering activities when reviewing mergers and acquisitions. Federal Reserve System. The FRB requires all depository institutions to maintain reserves at specified levels against their transaction accounts, primarily checking accounts.
In addition, provisions of the USA PATRIOT Act require the federal financial institution regulatory agencies to consider the effectiveness of a financial institution's anti-money laundering activities when reviewing mergers and acquisitions. Federal Reserve System.
The minimum required FHLB stock amount is generally 4.5% of the Bank's FHLB advances and outstanding balance against the FHLB line of credit, and 2% of the outstanding principal balance of loans sold into the Mortgage Partnership Finance Program.
The minimum required FHLB stock amount is generally 4.5% of the Bank's FHLB advances and outstanding balance against the FHLB line of credit, and 2% of the outstanding principal balance of loans sold into the Mortgage Partnership Finance Program. At September 30, 2024, the Bank had $101.2 million in FHLB stock, which was in compliance with the FHLB's stock requirement.
We offer a wide array of retail and business deposit products and services. These products include checking, savings, money market, certificates of deposit, and retirement accounts.
We offer a wide array of retail and business deposit products and services. These products include checking, savings, money market, certificates of deposit, and retirement accounts. We also offer Treasury Management solutions tailored to meet the needs of our commercial clients.
The Company has not received notification from the IRS of any potential tax liability for any years still subject to audit. For federal income tax purposes, the Bank currently reports its income and expenses on the accrual method of accounting and uses a fiscal year ending on September 30 for filing its federal income tax return.
For federal income tax purposes, the Bank currently reports its income and expenses on the accrual method of accounting and uses a fiscal year ending on September 30 for filing its federal income tax return.
The OCC and FRB may object to the distribution during that 30-day period based on safety and soundness or other concerns. Savings institutions that desire to make a larger capital distribution, are under special restrictions, or are not, or would not be, sufficiently capitalized following a proposed capital distribution must obtain regulatory non-objection prior to making such a distribution.
Savings institutions that desire to make a larger capital distribution, are under special restrictions, or are not, or would not be, sufficiently capitalized following a proposed capital distribution must file an application and obtain regulatory non-objection prior to making such a distribution.
In October 2023, the Bank paid off the $500.0 million of BTFP borrowings. Federal Home Loan Bank System.
In October 2023, the Bank paid off the $500.0 million of BTFP borrowings and did not enter into additional BTFP borrowings during fiscal year 2024. Federal Home Loan Bank System.
Competition in originating one- to four-family loans primarily comes from other savings institutions, commercial banks, credit unions, mortgage brokers, and mortgage bankers. Available Information Our website address is www.capfed.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports can be obtained free of charge from our website.
Available Information Our website address is www.capfed.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports can be obtained free of charge from our website.
As of September 30, 2023, the Bank and the Company met all capital adequacy requirements to which they are subject. Limitations on Dividends and Other Capital Distributions.
Institutions that are deemed by the OCC to be "critically undercapitalized" are subject to the appointment of a conservator or receiver. As of September 30, 2024, the Bank and the Company met all capital adequacy requirements to which they are subject. Limitations on Dividends and Other Capital Distributions.
The Bank's pricing strategy for first mortgage loan products includes setting interest rates based on secondary market prices and competitor pricing for our local lending markets, and secondary market prices and competitor pricing for our correspondent lending markets.
On a weekly basis, management reviews deposit flows, loan demand, cash levels, and changes in several market interest rates to assess all pricing strategies. The Bank's pricing strategy for first mortgage loan products includes setting interest rates based on secondary market prices and competitor pricing for our local lending markets.
With respect to federal consumer protection laws, regulations are generally promulgated by the Consumer Financial Protection Bureau ("CFPB"), but the OCC examines the Bank for compliance with such laws.
With respect to federal consumer protection laws, regulations are generally promulgated by the Consumer Financial Protection Bureau ("CFPB"), but the OCC, rather than the CFPB, currently 6 examines the Bank for compliance with such laws and regulations because the Bank's regulatory assets have yet to exceed $10 billion for four consecutive quarter-ends.
Lending activities are influenced by the demand for housing and business activity levels, our loan underwriting guidelines compared to those of our competitors, as well as the interest rate environment and interest rate pricing competition from other lending institutions. 2 Management Strategy We seek to provide qualified borrowers the broadest possible access to home ownership through our mortgage lending programs and to offer a complete set of personal and commercial banking products and services to our customers.
Lending activities are influenced by the demand for housing and business activity levels, our loan underwriting guidelines compared to those of our competitors, as well as the interest rate environment and interest rate pricing competition from other lending institutions.
We strive to provide stockholder value while maintaining a strong capital position. We continue to generate returns to stockholders through dividend payments. Total dividends declared and paid during fiscal year 2023 were $83.2 million.
We strive to provide stockholder value while maintaining a strong capital position. We continue to generate returns to stockholders through dividend payments and share repurchases. Total dividends declared and paid during fiscal year 2024 were $44.5 million. The Company repurchased 3,280,110 shares for $19.3 million during fiscal year 2024, which all occurred in the first half of the year.
Physical well-being is supported by the Company's health, dental, vision, life and various other insurances, and a wellness program that incentivizes employees to live a healthy and balanced lifestyle. Volunteer opportunities are provided and encouraged for all employees. Capitol Federal employees recorded over 3,628 hours in volunteer time for local organizations and charities during fiscal year 2023.
Accordingly, we strive to offer competitive salaries and employee benefits to all employees and monitor salaries in our market areas. Physical well-being is supported by the Company's health, dental, vision, life and various other insurances, and a wellness program that encourages employees to live a healthy and balanced lifestyle. Volunteer opportunities are provided and encouraged for all employees.
Financial Statements and Supplementary Data – Notes to Financial Statements – Note 1. Summary of Significant Accounting Policies" for additional information regarding FHLB stock. Federal Savings and Loan Holding Company Regulation.
In past years, the Bank has received dividends on its FHLB stock, although no assurance can be given that these dividends will continue. See "Part II, Item 8. Financial Statements and Supplementary Data – Notes to Financial Statements – Note 1. Summary of Significant Accounting Policies" for additional information regarding FHLB stock. Federal Savings and Loan Holding Company Regulation.
Our employees are not represented by any collective bargaining group. Management considers its employee relations to be good. We believe our ability to attract and retain employees is a key to our success. Accordingly, we strive to offer competitive salaries and employee benefits to all employees and monitor salaries in our market areas.
The full-time equivalent of our total employees at September 30, 2024 was 636, an increase from 632 at September 30, 2023. Our employees are not represented by any collective bargaining group. Management considers its employee relations to be good. We believe our ability to attract and retain employees is a key to our success.
The Bank consistently has been one of the top one- to four-family lenders with regard to mortgage loan origination volume in the state of Kansas. This has been achieved through strong relationships with real estate agents and our other marketing efforts, which are based on our reputation and competitive pricing.
The Bank has consistently been one of the top originators of residential one- to four-family loans in the state of Kansas. This has been achieved through strong relationships with real estate agents and targeted marketing campaigns which emphasize the strength of Capitol Federal's brand, competitive pricing, and the Bank's history as a portfolio lender.
The Bank ranked second in deposit market share, at 6.2%, in the state of Kansas as reported in the June 30, 2023 Federal Deposit Insurance Corporation ("FDIC") "Summary of Deposits - Market Share Report." Management considers our well-established banking network together with our reputation for financial strength and customer service to be major factors in our success at attracting and retaining customers in our market areas.
The Bank offers a diversified retail deposit product line, and trust and brokerage services. Management considers our well-established banking network and our reputation for financial strength and customer service to be major factors in our success at attracting and retaining customers in our market areas.
Additionally, the Bank files state tax returns in various other states where it has significant purchased loans and/or foreclosure activities. In these states, the Bank has either established nexus under an economic nexus theory or has exceeded enumerated nexus thresholds based on the amount of interest derived from sources within the state.
In these states and cities, the Bank has either established a nexus under an economic nexus theory or has exceeded enumerated nexus thresholds based on the amount of interest income derived from loans within the state. 8 Employees and Human Capital Resources At September 30, 2024, we had a total of 659 employees, including 76 part-time employees.
The Company's results of operations are primarily dependent on net interest income, which is the difference between the interest earned on loans, securities, and cash, and the interest paid on deposits and borrowings. On a weekly basis, management reviews deposit flows, loan demand, cash levels, and changes in several market interest rates to assess all pricing strategies.
By leveraging these services, we help businesses streamline their operations, reduce financial risk, and maximize liquidity while helping the Bank gather deposit and fee income. The Company's results of operations are primarily dependent on net interest income, which is the difference between the interest earned on loans, securities, and cash, and the interest paid on deposits and borrowings.
Removed
While the Bank exceeded $10 billion in total assets at September 30, 2023, an institution is not considered a large institution under the FDIC assessment regulations until the institution exceeds $10 billion in total assets for four consecutive quarters.
Added
The Bank offers a suite of treasury management services designed to support business customers in managing their financial operations efficiently and securely. Our treasury management solutions include cash flow optimization, fraud prevention tools, and payment services tailored to meet the needs of commercial clients.
Removed
The Bank's total assets were in excess of $10 billion at March 31, 2023, June 30, 2023 and September 30, 2023, but total assets are anticipated to be below $10 billion at December 31, 2023. For the fiscal year ended September 30, 2023, the Bank paid $4.5 million in FDIC premiums.
Added
Management Strategy We seek to provide qualified borrowers the broadest possible access to home ownership through our mortgage lending programs and to offer a complete set of personal and commercial banking products and services to our customers. We strive to enhance stockholder value while maintaining a strong capital position.
Removed
In addition, federal banking regulators have enacted regulations limiting the ability of banks and other financial institutions to disclose nonpublic consumer information to non-affiliated third parties. The regulations require disclosure of privacy policies and allow consumers to prevent certain personal information from being shared with non-affiliated third parties.
Added
Competition in originating one- to four-family and consumer loans and attracting retail deposits primarily comes from local, regional, and national banks, savings institutions, credit unions, mortgage brokerage firms, investment banking and brokerage firms, and online competitors that are not confined to any specific market area.
Removed
On October 24, 2023, the federal banking agencies, including the OCC, issued a final rule designed to strengthen and modernize the regulations implementing the CRA.
Added
The Bank ranked third in deposit market share, at 6.1%, in the state of Kansas as reported in the June 30, 2024 Federal Deposit Insurance Corporation ("FDIC") "Summary of Deposits - Market Share Report." There is similarly intense competition for quality commercial lending relationships in the areas we serve.
Removed
The changes are designed to encourage banks to expand access to credit, investment and banking services in low- and moderate-income communities, adapt to changes in the banking industry, including mobile and internet banking, provide greater clarity and consistency in the application of the CRA regulations and tailor CRA evaluations and data collection to bank size and type.
Added
Larger national, regional and local financial institutions, as well as credit unions, farm credit lenders, commercial finance companies, insurance companies, and other non-bank lenders have increased their presence in our market areas, ultimately placing downward pressure on pricing. We also compete with smaller local financial institutions that may have aggressive pricing and unique terms.
Removed
At September 30, 2023, the Bank had a balance of $110.7 million in FHLB stock, which was in compliance with the FHLB's stock requirement. In past years, the Bank has received dividends on its FHLB stock, although no assurance can be given that these dividends will continue. See "Part II, Item 8.
Added
We compete in a number of ways including customer service, quality of execution, range of products offered, price and reputation among others.
Removed
Employees and Human Capital Resources At September 30, 2023, we had a total of 649 employees, including 57 part-time employees. The full-time equivalent of our total employees at September 30, 2023 was 632, a decrease from 707 at September 30, 2022.
Added
While we provide competitive interest rates on both deposit and lending products, we believe that we can compete most successfully by focusing on the financial needs of growing companies and small and middle-market businesses, pairing these companies with experienced relationship managers who can offer a broad range of customized services, digital platforms and sophisticated cash management tools tailored to their business through our Treasury Management solutions.
Removed
The decrease was largely attributable to the Bank's improved ability to provide a comprehensive digital experience as a result of its implementation of a new core processing system ("the digital transformation").

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf these vendors encounter any of these types of issues, or if we have difficulty communicating with them, we could be exposed to disruption of operations, loss of service or connectivity to customers, reputational damage, and litigation risk that could have an adverse effect on our business, financial condition and results of operations. 12 The failure of an external vendor to perform in accordance with the contracted arrangements under service level agreements, because of changes in the vendor's organizational structure, financial condition, support for existing products and services or strategic focus or for any other reason, could be disruptive to our operations, which could have an adverse effect on our business and, in turn, our financial condition and results of operations.
Biggest changeThe failure of an external vendor to perform in accordance with the contracted arrangements under service level agreements, because of changes in the vendor's organizational structure, financial condition, support for existing products and services or strategic focus or for any other reason, could be disruptive to our operations, which could have an adverse effect on our business and, in turn, our financial condition and results of operations.
When the yield curve is flat, meaning long-term interest rates and short-term interest rates are essentially the same, or when the yield curve is inverted, meaning long-term interest rates are lower than short-term interest rates, the yield between interest-earning assets and interest-bearing liabilities that reprice is compressed or diminished and would likely negatively impact the Bank's net interest income.
When the yield curve is flat, meaning long-term interest rates and short-term interest rates are essentially the same, or when the yield curve is inverted, meaning long-term interest rates are lower than short-term interest rates, the net yield between interest-earning assets and interest-bearing liabilities that reprice is compressed or diminished and would likely negatively impact the Bank's net interest income.
If conditions or circumstances arise that expose flaws or gaps in our risk management or compliance programs, or if our controls do not function as designed, the performance and value of our business could be adversely affected. 14 The Company may not be able to attract and retain skilled employees.
If conditions or circumstances arise that expose flaws or gaps in our risk management or compliance programs, or if our controls do not function as designed, the performance and value of our business could be adversely affected. The Company may not be able to attract and retain skilled employees.
The CFPB enforces consumer protection laws and regulations for the benefit of the consumer and not the protection or benefit of investors. In addition, new laws and regulations, including those related to environmental, social, and governance initiatives, may continue to increase our costs of regulatory compliance and of doing business, and otherwise affect our operations.
The CFPB enforces consumer protection laws and regulations for the benefit of consumers and not the protection or benefit of investors. In addition, new laws and regulations, including those related to environmental, social, and governance initiatives, may continue to increase our costs of regulatory compliance and of doing business, and otherwise affect our operations.
While we regularly conduct security and risk 11 assessments on our systems and those of our third-party service providers, there can be no assurance that their information security protocols are sufficient to withstand a cyberattack or other security breach.
While we regularly conduct security and risk assessments on our systems and those of our third-party service providers, there can be no assurance that their information security protocols are sufficient to withstand a cyberattack or other security breach.
These regulatory authorities exercise broad discretion in connection with their supervisory and enforcement activities, including the ability to impose restrictions on a bank's operations, reclassify assets, determine the adequacy of a bank's ACL, and determine the level of deposit insurance premiums assessed.
These regulatory authorities exercise broad discretion in connection with their supervisory and enforcement activities, including the ability to 13 impose restrictions on a bank's operations, reclassify assets, determine the adequacy of a bank's ACL, and determine the level of deposit insurance premiums assessed.
We monitor the current status and trends of local and national employment levels and trends and current conditions in the real estate and housing markets, as well as commercial real estate markets, in our local market areas and certain areas where we have correspondent loans and commercial real estate participation loans.
We monitor the current status and trends of local and national employment levels and trends and current conditions in the real estate and housing markets, as well as commercial real estate markets, in our local market areas and certain areas where we have commercial real estate loans and correspondent loans.
Management's Discussion and Analysis of Financial Condition and Results of Operations - Strategic Securities Transaction," "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Stockholders' Equity" and "Part II, Item 8. Financial Statements 9 and Supplementary Data – Notes to Consolidated Financial Statements – Note 15.
Management's Discussion and Analysis of Financial Condition and Results of Operations - Strategic Securities Transaction," "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Stockholders' Equity" and "Part II, Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 15.
Adverse conditions in our local economies and in certain areas where we have correspondent loans and commercial real estate participation loans, such as inflation, unemployment, supply chain disruptions, recession, natural disasters or pandemics, or other factors beyond our control, could impact the ability of our borrowers to repay their loans.
Adverse conditions in our local economies and in certain areas where we have commercial real estate loans and correspondent loans, such as inflation, unemployment, supply chain disruptions, recession, natural disasters or pandemics, or other factors beyond our control, could adversely impact the ability of our borrowers to repay their loans.
Risks Related to Competition Strong competition may limit growth and profitability. While we are one of the largest mortgage loan originators in the state of Kansas, we compete in the same market areas as local, regional, and national banks, credit unions, mortgage brokerage firms, investment banking firms, investment brokerage firms, mortgage bankers, and savings institutions.
Risks Related to Competition Strong competition may limit our growth and profitability. While we are one of the largest mortgage loan originators in the state of Kansas, we compete in the same market areas as local, regional, and national banks, savings institutions, credit unions, mortgage brokerage firms, investment banking and brokerage firms, mortgage bankers and online competitors.
Business - Regulation and Supervision" for more information about the regulations to which the Company is subject. Other Risks The Company's ability to pay dividends is subject to the ability of the Bank to make capital distributions to the Company.
Business - Regulation and Supervision" for more information about the regulations to which the Company is subject. Other Risks The Company's ability to pay dividends and repurchase shares is subject to the ability of the Bank to make capital distributions to the Company.
As a result, we are particularly exposed to downturns in regional housing and commercial real estate markets and, to a lesser extent, the U.S. housing and commercial real estate markets, along with changes in the levels of unemployment or underemployment.
As a result, we are particularly exposed to downturns in regional housing and commercial real estate markets and, to a lesser extent, housing and commercial real estate markets nationwide, along with changes in the levels of unemployment or underemployment.
The long-term ability of the Company to pay dividends to its stockholders is based primarily upon the ability of the Bank to generate earnings and to, therefore, make capital distributions to the Company, and on the availability of cash at the holding company level in the event earnings are not sufficient to pay dividends.
The long-term ability of the Company to pay dividends to its stockholders and repurchase shares is based primarily upon the ability of the Bank to generate sufficient earnings to make capital distributions to the Company and on the availability of cash at the holding company level in the event the Bank's earnings are not sufficient to make capital distributions to the Company.
An economic downturn, especially one affecting our geographic market areas and certain regions of the country where we have correspondent loans secured by one- to four-family properties or commercial real estate participation loans, could have an adverse impact on our business and financial results.
An economic downturn, including a decline in real estate values, especially affecting our geographic market areas and certain regions of the country where we have commercial real estate loans or correspondent loans secured by one- to four-family properties, could have an adverse impact on our business and financial results.
These loan types tend to be larger than and in different geographic regions from most of our existing loan portfolio and are generally considered to have different and greater risks than one- to four-family residential real estate loans and may involve multiple loans to groups of related borrowers. A growing commercial loan portfolio also subjects us to greater regulatory scrutiny.
A growing portion of our loan portfolio consists of commercial loans. These loan types tend to be larger than and in different geographic regions from most of our existing loan portfolio and are generally considered to have different and greater risks than one- to four-family residential real estate loans and may involve multiple loans to groups of related borrowers.
Third-party vendors subject the Company to potential business, reputation and financial risks. Third-party vendors are sources of operational and information security risk to the Company, including risks associated with operations errors, information system interruptions or breaches, and unauthorized disclosures of sensitive or confidential customer information.
Third-party vendors are sources of operational and information security risk to the Company, including risks associated with operations errors, information system interruptions or breaches, and unauthorized disclosures of sensitive or confidential customer information.
The unexpected loss of the services of one or more of the Company's key personnel could have an adverse impact on the Company's business because of their skills, knowledge of the Company's market, and years of industry experience, as well as the difficulty of promptly finding qualified replacement personnel. Item 1B. Unresolved Staff Comments None.
The unexpected loss of the services of one or more of the Company's key personnel could have an adverse impact on the Company's business because of their skills, knowledge of the Company's market, and years of industry experience, as well as the difficulty of promptly finding qualified replacement personnel.
In addition, changes in interest rates will impact the expected level of repricing of the Bank's mortgage-related assets and callable debt securities. Generally, as interest rates decline, the amount of interest-earning assets expected to reprice will increase as borrowers have an economic incentive to reduce the cost of their mortgage or debt, which would negatively impact the Bank's interest income.
Generally, as interest rates decline, the amount of interest-earning assets expected to reprice will increase as borrowers have an economic incentive to reduce the cost of their mortgage or debt, which would negatively impact the Bank's interest income.
This type of risk is known as interest rate risk and is affected by prevailing economic and competitive conditions that are beyond the Company's control, including general economic conditions, inflationary trends and/or monetary policies of the FRB and fiscal policies of the United States federal government. The impact of changes in interest rates is generally observed on the income statement.
This type of risk is known as interest rate risk and is affected by prevailing economic and competitive conditions that are beyond the 9 Company's control, including general economic conditions, inflationary trends and/or monetary policies of the FRB and fiscal policies of the United States federal government.
Income for the Bank is primarily driven by the spread between these rates. As a result, a steeper yield curve, meaning long-term interest rates are significantly higher than short-term interest rates, would provide the Bank with a better opportunity to increase net interest income.
As a result, a steeper yield curve, meaning long-term interest rates are significantly higher than short-term interest rates, would provide the Bank with a better opportunity to increase net interest income.
The occurrence of a security breach involving our customers' information, regardless of its origin, could damage our reputation and result in a loss of customers and business, subject us to additional regulatory scrutiny, and expose us to litigation and possible financial liability. Any of these events could have an adverse effect on our business, financial condition and results of operations.
The occurrence of a security breach involving our customers' information, regardless of its origin, could damage our reputation and result in a loss of customers and business, subject us to additional 12 regulatory scrutiny, and expose us to litigation and possible financial liability.
While we assess and improve these programs on an ongoing basis, there can be no assurance that our risk management or compliance programs, along with other related controls, will effectively mitigate all risk and limit losses in our business.
We also maintain a compliance program to identify, measure, assess, and report on our adherence to applicable laws, policies and procedures. While we assess and improve these programs on an ongoing basis, there can be no assurance that our risk management or compliance programs, along with other related controls, will effectively mitigate all risk and limit losses in our business.
The borrowers' cash flow may prove to be unpredictable, and collateral securing these loans may fluctuate in value. Most often, this collateral consists of accounts receivable, inventory and equipment.
Commercial and industrial loans are primarily made based on the identified cash flow of the borrower and secondarily on the collateral underlying the loans. The borrowers' cash flow may prove to be unpredictable, and collateral securing these loans may fluctuate in value. Most often, this collateral consists of accounts receivable, inventory and equipment.
The CFPB also has examination and enforcement authority over all banks with regulatory assets exceeding $10 billion at four consecutive quarter-ends. The Bank exceeded $10 billion in 13 regulatory assets at March 31, 2023, June 30, 2023 and September 30, 2023.
The CFPB also has examination and enforcement authority over all banks with regulatory assets exceeding $10 billion at four consecutive quarter-ends.
The magnitude of the impact will be determined by the difference between the amount of interest-earning assets and interest-bearing liabilities, both of which either reprice or mature within a given period of time. This difference provides an indication of the extent to which our net interest rate spread will be impacted by changes in interest rates.
The magnitude of the impact will be determined by the difference between the amount of interest-earning assets and interest-bearing liabilities, both of which either reprice or mature within a given period of time, in addition to the yields earned on interest-earning assets and rates paid on interest-bearing liabilities.
We maintain an enterprise risk management program that is designed to identify, quantify, monitor, report, and control the risks that we face. These risks include: interest-rate, credit, liquidity, operations, reputation, compliance and litigation. We also maintain a compliance program to identify, measure, assess, and report on our adherence to applicable laws, policies and procedures.
Our risk management and compliance programs and functions may not be effective in mitigating risk and loss. We maintain an enterprise risk management program that is designed to identify, quantify, monitor, report, and control the risks that we face. These risks include: interest-rate, credit, liquidity, operations, reputation, compliance and litigation.
Information security risks for financial institutions continue to increase in part because of evolving technologies, the use of the internet and telecommunications technologies (including mobile devices) to conduct financial and other business transactions and the increased sophistication and activities of organized crime, perpetrators of fraud, hackers, terrorists and others.
In addition to confidential information regarding our customers, employees and others, we, and in some cases a third party, compile, process, transmit and store proprietary, non-public information concerning our business, operations, plans and strategies. 11 Information security risks for financial institutions continue to increase in part because of evolving technologies, the use of the internet and telecommunications technologies (including mobile devices) to conduct financial and other business transactions and the increased sophistication and activities of organized crime, perpetrators of fraud, hackers, terrorists and others.
Fluctuations in interest rates also affect customer demand for loan and deposit products. Competition from other financial institutions and/or brokerage firms could affect our ability to attract and retain deposits and could result in us paying more for deposits.
Fluctuations in interest rates also affect customer demand for loan and deposit products. Competition from financial institutions and others could affect our ability to attract and retain deposits and could result in the Bank paying more for deposits. In addition to general changes in interest rates, changes that affect the shape of the yield curve could negatively impact the Bank.
Risks Related to Lending Activities The increase in commercial loans in our loan portfolio exposes us to increased lending and credit risks, which could adversely impact our financial condition and results of operations. A growing portion of our loan portfolio consists of commercial loans.
Declines in collateral values and adverse economic conditions could result in increased delinquencies, non-performing assets, loan losses, and future loan loss provisions. Risks Related to Lending Activities The increase in commercial loans in our loan portfolio exposes us to increased lending and credit risks, which could adversely impact our financial condition and results of operations.
Under certain circumstances, capital distributions from the Bank to the Company may be subject to regulatory approvals. See "Item 1. Business – Regulation and Supervision" for additional information. Our risk management and compliance programs and functions may not be effective in mitigating risk and loss.
Under certain circumstances, capital distributions from the Bank to the Company may be subject to regulatory approvals. See "Item 1. Business – Regulation and Supervision" for additional information. The Bank's bad debt recapture amount may impact the amount and timing of capital distributions to the Company.
We also outsource certain aspects of our data processing, data processing operations, remote network monitoring, engineering and managed security services to third-party service providers. In addition to confidential information regarding our customers, employees and others, we, and in some cases a third party, compile, process, transmit and store proprietary, non-public information concerning our business, operations, plans and strategies.
We also outsource certain aspects of our data processing, data processing operations, remote network monitoring, engineering and managed security services to third-party service providers.
Also, there are risks inherent in commercial real estate construction lending as the value of the project is uncertain prior to the completion of construction and subsequent lease-up.
Also, there are risks inherent in commercial real estate construction lending as the value of the project is uncertain prior to the completion of construction and subsequent lease-up. A sudden downturn in the economy, labor and/or supply chain issues, or other unforeseen events could result in stalled projects or collateral shortfalls, thus exposing us to increased credit risk.
In addition to general changes in interest rates, changes that affect the shape of the yield curve could negatively impact the Bank. The Bank's interest-bearing liabilities are generally priced based on short-term interest rates while the majority of the Bank's interest-earning assets are priced based on long-term interest rates.
The Bank's interest-bearing liabilities are generally priced based on short-term interest rates while the majority of the Bank's interest-earning assets are priced based on long-term interest rates. Income for the Bank is primarily driven by the spread between these rates.
Removed
Our primary lending emphasis is the origination of one- to four-family first mortgage loans secured by residential properties. We have also purchased one- to four-family first mortgage loans, secured by properties that are typically outside our local market areas, from correspondent lenders.
Added
The impact of changes in interest rates is generally observed on the income statement.
Removed
Any one or a combination of these events may have an adverse impact on borrowers' ability to repay their loans, which could result in increased delinquencies, non-performing assets, loan losses, and future loan loss provisions.
Added
This difference provides an indication of the extent to which our net interest rate spread will be impacted by changes in interest rates. In addition, changes in interest rates will impact the expected level of repricing of the Bank's mortgage-related assets and callable debt securities.
Removed
A sudden downturn in the economy, labor and/or supply chain issues, or other unforeseen events could result in stalled projects or collateral shortfalls, thus exposing us to increased credit risk. 10 Commercial and industrial loans are primarily made based on the identified cash flow of the borrower and secondarily on the collateral underlying the loans.
Added
Additionally, if insurance obtained by our 10 borrowers is insufficient to cover any losses sustained to the collateral, the decreases in the value of collateral securing our loans as a result of natural disasters or other related events could adversely impact our financial condition and results of operations.
Removed
During June 2023, a third-party service provider (the "Service Provider") to the Bank advised the Bank that files with personally identifiable information related to Bank customers had been compromised during a security incident experienced by the Service Provider (the "Incident"). The Bank used the Service Provider to process transactions.
Added
If insurance coverage is unavailable to our borrowers due to the reluctance of insurance companies to renew policies covering the collateral or due to other factors, the resulting increase in cost of home ownership could affect the ability of borrowers to repay loans.
Removed
The Incident resulted from a zero-day vulnerability in a managed file sharing software called MOVEit. MOVEit is used by thousands of organizations around the world for securely transferring sensitive and confidential information and other data. The vulnerability was exploited in a large-scale, cyber campaign that impacted government agencies, universities, and corporations around the world.
Added
In addition, a decline in commercial real estate values would likewise adversely affect the value of collateral securing commercial real estate loans.
Removed
As a result of the Incident, an unauthorized party was able to obtain access to certain Bank customers' data in the Service Provider's possession that contained social security numbers, account numbers, and other personally identifiable information.
Added
A growing commercial loan portfolio also subjects us to greater regulatory scrutiny.
Removed
The Bank confirmed the Service Provider has fixed the vulnerability noted above and the Bank has implemented additional security procedures when sharing files with the Service Provider. When the Bank received notice of the Incident from the Service Provider, the Bank promptly enacted response protocols. The Service Provider has provided appropriate notifications to potentially affected customers.
Added
Any of these events could have an adverse effect on our business, financial condition and results of operations. See "Part I, Item 1C. Cybersecurity" for additional discussion related to cybersecurity. Third-party vendors subject the Company to potential business, reputation and financial risks.
Removed
The Bank worked with the Service Provider to identify any others potentially impacted by the Incident. The Bank is not aware of any other third-party incidents related to the MOVEit vulnerability that has affected personally identifiable information associated with Bank customers.
Added
If these vendors encounter any of these types of issues, or if we have difficulty communicating with them, we could be exposed to disruption of operations, loss of service or connectivity to customers, reputational damage, and litigation risk that could have an adverse effect on our business, financial condition and results of operations.
Removed
In August 2023, the Company implemented a new core processing system ("digital transformation"). While the digital transformation was completed successfully, the Company may face operational risks, such as disruptions in technology systems, which may impact customers.
Added
The Bank will report a net loss for tax purposes for fiscal year 2024 due to the sale of securities in October 2023 associated with the securities strategy and will therefore have negative current and accumulated earnings and profits for fiscal year 2024.
Removed
The Company will work to remediate any such disruptions, if they occur, but no assurance can be given that a potential adverse development will be quickly or completely remediated.
Added
As a result of the negative current and accumulated earnings and profits, capital distributions from the Bank to the holding company during fiscal year 2024 were deemed to be drawn out of the Bank's pre-1988 bad debt reserves and resulted in the recognition of income tax expense based on the amount of the capital distribution multiplied by the then-current Bank income tax rate.
Removed
If an adverse development arising from the digital transformation is not sufficiently remediated or is not remediated in a timely fashion, the Company's reputation could be significantly impacted, which could result in loss of customer business, subject the Company to regulatory scrutiny, or expose the Company to litigation, any of which could have a material impact on the Company's financial condition and results of operations.
Added
This additional tax expense reduced the amount of earnings available to be distributed to the holding company 14 during fiscal year 2024. The Bank had $75.9 million in pre-1988 bad debt reserves at September 30, 2024, which equates to an unrecorded deferred tax liability of $15.9 million.
Removed
The Bank intends to be below $10 billion in regulatory assets at December 31, 2023 so it will not exceed $10 billion in regulatory assets at four consecutive quarter-ends.
Added
Given the amount of cash at the holding company level ($50.1 million as of September 30, 2024), and in an effort to minimize the tax associated with the bad debt recapture, it is currently the intention of management and the Board of Directors to not distribute earnings from the Bank to the Company during fiscal year 2025.
Added
It is anticipated that the Bank will have sufficient taxable income during fiscal year 2025 to replenish tax accumulated earnings and profits to a positive level, allowing the Bank to make capital distributions to the Company during fiscal year 2026 and not be taxed on those distributions. See additional discussion regarding the Bank's pre-1988 bad debt recapture in "Part II.
Added
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Comparison of Operating Results for the Years Ended September 30, 2024 and 2023" and "Part II, Item 8. Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 9. Income Taxes".
Added
The Company may be adversely affected by an increasing prevalence of fraud and other financial crimes. Reported instances of fraud and related financial crimes are rising nationwide. Like all financial institutions, the Company is vulnerable to increasing fraud losses as fraud schemes perpetrated against the Company and its customers continue to evolve and become more sophisticated.
Added
While the Company has procedures and systems in place to detect, prevent, and mitigate fraud losses, fraud losses may still occur and could be material to the Company's results of operations. Item 1B. Unresolved Staff Comments None.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties At September 30, 2023, we had 46 traditional branch offices and five in-store branch offices. The Bank owns the office building and related land in which its home office and executive offices are located, and 35 of its other branch offices. The remaining 15 branches are either leased or partially owned.
Biggest changeItem 2. Properties At September 30, 2024, we had 44 traditional branch offices and four in-store branch offices. As of September 30, 2024, the Bank owned the office building and related land in which its home office and executive offices are located, and 35 of its other branch offices. The remaining 12 branches are either leased or partially owned.
For additional information regarding our lease obligations, see "Part II, Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 5. Premises, Equipment and Leases." Management believes that our number of current facilities meet the present and immediately foreseeable needs of our customers.
For additional information regarding our lease obligations, see "Part II, Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 5. Premises, Equipment and Leases." Management believes that the number of branch offices we currently have meets the present and immediately foreseeable needs of our customers.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeThe plaintiffs have appealed this decision. The Company assesses the liabilities and loss contingencies in connection with pending or threatened legal and regulatory proceedings on at least a quarterly basis and establishes accruals when it is believed to be probable that a loss may be incurred and that the amount of such loss can be reasonably estimated. Item 4.
Biggest changeThe Company assesses the liabilities and loss contingencies in connection with pending or threatened legal and regulatory proceedings on at least a quarterly basis and establishes accruals when it is believed to be probable that a loss may be incurred and that the amount of such loss can be reasonably estimated.
Item 3. Legal Proceedings In the normal course of business, the Company and the Bank are involved as parties to various legal actions. In our opinion, after consultation with legal counsel, we believe it is unlikely that any such pending legal actions will have a material adverse effect on our financial condition, results of operations or liquidity.
Item 3. Legal Proceedings In the normal course of business, the Company and the Bank are involved as parties to various routine legal actions. In our opinion, after consultation with legal counsel, we believe it is unlikely that any such pending legal actions will have a material adverse effect on our financial condition, results of operations or liquidity.
The complaint asserts a breach of contract claim (including breach of an implied covenant of good faith and fair dealing) for each practice and seeks restitution for alleged improper fees, alleged actual damages, costs and disbursements, and injunction relief. On April 5, 2023, the court granted the Bank's motion to dismiss the complaint, with prejudice.
The complaint asserts a breach of contract claim (including breach of an implied covenant of good faith and fair dealing) for each practice and seeks restitution for alleged improper fees, alleged actual damages, costs and disbursements, and injunctive relief. On April 5, 2023, the court granted the Bank's motion to dismiss the complaint, with prejudice.
Removed
Mine Safety Disclosures Not applicable. 15 PART II
Added
The plaintiffs appealed this decision to the Kansas Court of Appeals, which issued an opinion on October 4, 2024 reversing the district court's ruling. In response, the Bank filed a petition for review with the Kansas Supreme Court on November 1, 2024. The review is currently pending.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeShare Repurchases The following table summarizes our share repurchase activity during the three months ended September 30, 2023 and additional information regarding our share repurchase program. As of September 30, 2023, the Company had $21.2 million of common stock that could be repurchased under its existing stock repurchase plan.
Biggest changeShare Repurchases The following table summarizes our share repurchase activity during the three months ended September 30, 2024 and additional information regarding our share repurchase program.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Stock Listing Capitol Federal Financial, Inc. common stock is traded on the Global Select tier of the NASDAQ Stock Market under the symbol "CFFN". At November 22, 2023, there were approximately 7,495 holders of record of Capitol Federal Financial, Inc. common stock.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Stock Listing Capitol Federal Financial, Inc. common stock is traded on the Global Select tier of the NASDAQ Stock Market under the symbol "CFFN". At November 21, 2024, there were approximately 7,040 holders of record of Capitol Federal Financial, Inc. common stock.
This plan has no expiration date; however, the Federal Reserve Bank's approval for the Company to repurchase shares extends through August 2024. Shares may be repurchased from time to time in the open market or in privately negotiated transactions based upon market conditions and available liquidity.
This plan has no expiration date; however, the Federal Reserve Bank's approval for the Company to repurchase shares extends through February 2025. Shares may be repurchased from time to time in the open market or in privately negotiated transactions based upon market conditions, available liquidity and other factors.
Total Number of Approximate Dollar Total Shares Purchased as Value of Shares Number of Average Part of Publicly that May Yet Be Shares Price Paid Announced Plans Purchased Under the Purchased per Share or Programs Plans or Programs July 1, 2023 through July 31, 2023 — $ — — $ 22,469,207 August 1, 2023 through August 31, 2023 — — — 22,469,207 September 1, 2023 through September 30, 2023 250,594 4.97 250,594 21,222,929 Total 250,594 4.97 250,594 21,222,929 Stockholders and General Inquiries Copies of our Annual Report on Form 10-K for the fiscal year ended September 30, 2023 are available to stockholders at no charge in the Investor Relations section of our website, www.capfed.com. 16 Stockholder Return Performance Presentation The information presented below assumes $100 invested on September 30, 2018 in the Company's common stock and in each of the indices, and assumes the reinvestment of all dividends.
Total Number of Approximate Dollar Total Shares Purchased as Value of Shares Number of Average Part of Publicly that May Yet Be Shares Price Paid Announced Plans Purchased Under the Purchased per Share or Programs Plans or Programs July 1, 2024 through July 31, 2024 — $ — — $ 75,000,000 August 1, 2024 through August 31, 2024 — — — 75,000,000 September 1, 2024 through September 30, 2024 — — — 75,000,000 Total — — — 75,000,000 Stockholders and General Inquiries Copies of our Annual Report on Form 10-K for the fiscal year ended September 30, 2024 are available to stockholders at no charge in the Investor Relations section of our website, www.capfed.com. 19 Stockholder Return Performance Presentation The information presented below assumes $100 invested on September 30, 2019 in the Company's common stock and in each of the indices, and assumes the reinvestment of all dividends.
BMI Banks Index 100.00 100.32 73.65 134.01 102.95 99.73 Source: S&P Global Market Intelligence Restrictions on the Payment of Dividends The Company's ability to pay dividends is dependent, in part, upon its ability to obtain capital distributions from the Bank.
BMI Banks Index 100.00 73.42 133.58 102.63 99.42 146.57 Source: S&P Global Market Intelligence Restrictions on the Payment of Dividends The Company's ability to pay dividends is dependent, in part, upon its ability to obtain capital distributions from the Bank.
From December 2010 through September 30, 2023, $417.0 million worth of common stock was repurchased.
From December 2010 through September 30, 2024, $436.1 million worth of common stock was repurchased.
Historical stock price performance is not necessarily indicative of future stock price performance. Period Ending Index 9/30/2018 9/30/2019 9/30/2020 9/30/2021 9/30/2022 9/30/2023 Capitol Federal Financial, Inc. 100.00 116.58 82.57 109.88 85.20 53.25 NASDAQ Composite Index 100.00 100.52 141.70 184.58 136.12 171.65 S&P U.S.
Historical stock price performance is not necessarily indicative of future stock price performance. Period Ending Index 9/30/2019 9/30/2020 9/30/2021 9/30/2022 9/30/2023 9/30/2024 Capitol Federal Financial, Inc. 100.00 70.83 94.25 73.08 45.68 59.46 NASDAQ Composite Index 100.00 140.96 183.61 135.41 170.76 236.74 S&P U.S.
Added
In February 2024, the Company notified the FRB of its intent to authorize the repurchase of up to $75.0 million in common stock over a period of time, depending upon market conditions and cash balances at the holding company level.
Added
See "Part I, Item 1. Business - Limitations on Dividends and Other Capital Distributions" and "Part I, Item 1A. Risk Factors - Other Risks" for additional discussion on the Bank's ability to make capital distributions to the Company. Item 6. [Reserved] 20

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

154 edited+108 added−58 removed48 unchanged
Biggest changeFor the Year Ended September 30, 2023 2022 Average Interest Average Interest Outstanding Earned/ Yield/ Outstanding Earned/ Yield/ Amount Paid Rate Amount Paid Rate Assets: (Dollars in thousands) Interest-earning assets: One- to four-family loans: Originated $ 4,047,209 $ 135,873 3.36 % $ 3,985,267 $ 129,392 3.25 % Correspondent purchased 2,428,257 76,335 3.14 2,072,677 55,227 2.66 Bulk purchased 143,105 1,923 1.34 159,152 2,053 1.29 Total one- to four-family loans 6,618,571 214,131 3.24 6,217,096 186,672 3.00 Commercial loans 1,150,831 57,991 4.97 884,126 37,223 4.15 Consumer loans 103,016 7,965 7.73 93,544 4,636 4.96 Total loans receivable (1) 7,872,418 280,087 3.55 7,194,766 228,531 3.17 MBS (2) 1,150,013 18,520 1.61 1,354,080 19,406 1.43 Investment securities (2)(3) 524,919 3,565 0.68 523,170 3,268 0.62 FHLB stock (4) 157,925 13,821 8.75 149,236 10,031 6.72 Cash and cash equivalents (5) 998,793 43,796 4.32 1,562,274 18,304 1.16 Total interest-earning assets 10,704,068 359,789 3.35 10,783,526 279,540 2.59 Other non-interest-earning assets 263,713 343,311 Total assets $ 10,967,781 $ 11,126,837 Liabilities and stockholders' equity: Interest-bearing liabilities: Checking $ 961,779 1,504 0.16 $ 1,056,303 752 0.07 Savings 525,423 488 0.09 543,609 299 0.06 Money market 1,567,540 19,426 1.24 1,840,898 4,578 0.25 Retail certificates 2,266,740 54,724 2.41 2,203,452 27,664 1.26 Commercial certificates 40,258 993 2.47 103,865 666 0.64 Wholesale certificates 134,641 5,132 3.81 150,689 497 0.33 Total deposits 5,496,381 82,267 1.50 5,898,816 34,456 0.58 Borrowings (6) 3,658,015 124,250 3.38 3,288,348 52,490 1.58 Total interest-bearing liabilities 9,154,396 206,517 2.25 9,187,164 86,946 0.94 Non-interest-bearing deposits 562,023 573,954 Other non-interest-bearing liabilities 179,373 178,526 Stockholders' equity 1,071,989 1,187,193 Total liabilities and stockholders' equity $ 10,967,781 $ 11,126,837 Net interest income (7) $ 153,272 $ 192,594 Net interest-earning assets $ 1,549,672 $ 1,596,362 Net interest margin (8)(9) 1.43 1.79 Ratio of interest-earning assets to interest-bearing liabilities 1.17x 1.17x Operating expense ratio (10) 1.04 % 1.01 % 42 (1) Balances are adjusted for unearned loan fees and deferred costs.
Biggest changeWeighted average yields on tax-exempt securities are not calculated on a fully taxable equivalent basis. 45 For the Year Ended September 30, 2024 2023 Average Interest Average Interest Outstanding Earned/ Yield/ Outstanding Earned/ Yield/ Amount Paid Rate Amount Paid Rate Assets: (Dollars in thousands) Interest-earning assets: One- to four-family loans: Originated $ 3,984,971 $ 142,011 3.56 % $ 4,047,209 $ 135,873 3.36 % Correspondent purchased 2,340,841 76,493 3.27 2,428,257 76,335 3.14 Bulk purchased 132,460 2,999 2.26 143,105 1,923 1.34 Total one- to four-family loans 6,458,272 221,503 3.43 6,618,571 214,131 3.24 Commercial loans 1,378,421 78,042 5.57 1,150,831 57,991 4.97 Consumer loans 107,357 9,162 8.53 103,016 7,965 7.73 Total loans receivable (1) 7,944,050 308,707 3.87 7,872,418 280,087 3.55 MBS (2) 619,521 33,650 5.43 1,150,013 18,520 1.61 Investment securities (2)(3) 180,640 8,749 4.84 524,919 3,565 0.68 FHLB stock (4) 106,064 10,009 9.44 157,925 13,821 8.75 Cash and cash equivalents (5) 286,988 15,728 5.39 998,793 43,796 4.32 Total interest-earning assets 9,137,263 376,843 4.11 10,704,068 359,789 3.35 Other non-interest-earning assets 460,278 263,713 Total assets $ 9,597,541 $ 10,967,781 Liabilities and stockholders' equity: Interest-bearing liabilities: Checking $ 873,097 1,978 0.23 $ 961,779 1,504 0.16 Savings 493,456 1,826 0.37 525,423 488 0.09 Money market 1,302,817 22,333 1.71 1,567,540 19,426 1.24 Retail certificates 2,680,003 106,204 3.96 2,266,740 54,724 2.41 Commercial certificates 54,484 2,247 4.12 40,258 993 2.47 Wholesale certificates 109,217 4,961 4.54 134,641 5,132 3.81 Total deposits 5,513,074 139,549 2.53 5,496,381 82,267 1.50 Borrowings (6) 2,338,222 75,233 3.21 3,658,015 124,250 3.38 Total interest-bearing liabilities 7,851,296 214,782 2.73 9,154,396 206,517 2.25 Non-interest-bearing deposits 533,821 562,023 Other non-interest-bearing liabilities 180,979 179,373 Stockholders' equity 1,031,445 1,071,989 Total liabilities and stockholders' equity $ 9,597,541 $ 10,967,781 Net interest income (7) $ 162,061 $ 153,272 Net interest-earning assets $ 1,285,967 $ 1,549,672 Net interest margin (8) 1.77 1.43 Ratio of interest-earning assets to interest-bearing liabilities 1.16x 1.17x Selected performance ratios: Return on average assets (9)(14) 0.40 % (0.93) % Return on average equity (10)(14) 3.69 (9.48) Average equity to average assets 10.75 9.77 Operating expense ratio (11) 1.17 1.04 Efficiency ratio (12)(14) 66.91 (626.63) Pre-tax yield on leverage strategy (13) — 0.13 46 (1) Balances are adjusted for unearned loan fees and deferred costs.
If signs of weakness are identified, the Bank may begin performing more frequent financial and/or collateral reviews or will initiate contact with the borrower, or the lead bank will contact the borrower if the loan is a participation loan, to ensure cash flows from operations are maintained at a satisfactory level to meet the debt requirements.
If signs of weakness are identified, the Bank may begin performing more frequent financial and/or collateral reviews or initiate contact with the borrower, or the lead bank will contact the borrower if the loan is a participation loan, to ensure cash flows from operations are maintained at a satisfactory level to meet the debt requirements.
The effective rate is shown as a weighted average and includes the impact of interest rate swaps and the amortization of deferred prepayment penalties resulting from FHLB advances previously prepaid. The weighted average maturity ("WAM") is the remaining weighted average contractual term in years. The beginning and ending WAMs represent the remaining maturity at each date presented.
The effective rate is shown as a weighted average and includes the impact of interest rate swaps and the amortization of deferred prepayment penalties resulting from FHLB advances previously prepaid. The WAM is the remaining weighted average contractual term in years. The beginning and ending WAMs represent the remaining maturity at each date presented.
The FHLB advance amounts and rates included in this line item include the effect of interest rate swaps and are net of deferred prepayment penalties. (7) Net interest income represents the difference between interest income earned on interest-earning assets and interest paid on interest-bearing liabilities.
The FHLB advance amounts and rates included in this line include the effect of interest rate swaps and are net of deferred prepayment penalties. (7) Net interest income represents the difference between interest income earned on interest-earning assets and interest paid on interest-bearing liabilities.
We generally pay a premium of 0.50% to 1.00% of the loan balance to purchase these loans, and 1.00% of the loan balance to purchase the servicing of these loans. The premium paid is amortized against the interest earned over the life of the loan, which reduces the loan yield.
We generally paid a premium of 0.50% to 1.00% of the loan balance to purchase these loans, and 1.00% of the loan balance to purchase the servicing of these loans. The premium paid is amortized against the interest earned over the life of the loan, which reduces the loan yield.
Commercial loan renewals are not included in the activity in the following table except to the extent new funds are disbursed at the time of renewal. Loan originations, purchases, and refinances are reported together.
Commercial loan renewals are not included in the activity in the following table except to the extent new funds are disbursed at the time of renewal. Loan originations, purchases/participations, and refinances are reported together.
See "Part II, Item 8. Financial Statements and Supplementary Data – 48 Notes to Consolidated Financial Statements – Note 6. Low Income Housing Partnerships and Note 12. Commitments and Contingencies" for additional information regarding these commitments.
See "Part II, Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 6. Low Income Housing Partnerships and Note 12. Commitments and Contingencies" for additional information regarding these commitments.
Financial Statements and Supplementary Data – Notes to Financial Statements – Note 1. Summary of Significant Accounting Policies." 21 Financial Condition The following table summarizes the Company's financial condition at the dates indicated.
Financial Statements and Supplementary Data – Notes to Financial Statements – Note 1. Summary of Significant Accounting Policies." Financial Condition The following table summarizes the Company's financial condition at the dates indicated.
The following table presents the distribution of our securities portfolio, at amortized cost, at the dates indicated. Overall, fixed-rate securities comprised 95% of our securities portfolio at September 30, 2023. 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.
The following table presents the distribution of our securities portfolio, at amortized cost, at the dates indicated. Overall, fixed-rate securities comprised 95% of our securities portfolio at September 30, 2024. The weighted average life ("WAL") is the estimated remaining maturity (in years) after three-month historical prepayment speeds and projected call option assumptions have been applied.
The evaluation of qualitative factors is inherently imprecise and requires significant management judgment. See "Part II, Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 4. Loans Receivable and Allowance for Credit Losses - Allowance for Credit Losses" for additional information regarding the qualitative factors applied at September 30, 2023.
The evaluation of qualitative factors is inherently imprecise and requires significant management judgment. See "Part II, Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 4. Loans Receivable and Allowance for Credit Losses - Allowance for Credit Losses" for additional information regarding the qualitative factors applied at September 30, 2024.
The following table presents the maturity and weighted average repricing rate, which is also the weighted average effective rate, of certificates of deposit, split between retail/commercial and public unit amounts, and non-amortizing term borrowings for the next four quarters as of September 30, 2023.
The following table presents the maturity and weighted average repricing rate, which is also the weighted average effective rate, of certificates of deposit, split between retail/commercial and public unit amounts, and non-amortizing term borrowings for the next four quarters as of September 30, 2024.
The table below presents the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities, comparing fiscal years 2023 to 2022. For the comparison of fiscal years 2022 to 2021, see "Part II, Item 7.
The table below presents the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities, comparing fiscal years 2024 to 2023. For the comparison of fiscal years 2023 to 2022, see "Part II, Item 7.
The following table presents the average balances of our assets, liabilities, and stockholders' equity, and the related weighted average yields and rates on our interest-earning assets and interest-bearing liabilities for the periods indicated. For fiscal year 2021 information, see "Part II, Item 7.
The following table presents the average balances of our assets, liabilities, and stockholders' equity, and the related weighted average yields and rates on our interest-earning assets and interest-bearing liabilities for the periods indicated. For fiscal year 2022 information, see "Part II, Item 7.
While management utilizes its best judgment and information available, the adequacy of the ACL and reserve for off-balance sheet credit exposures is determined by certain factors outside of the Company's control, such as the performance of our portfolios, changes in the economic environment including economic uncertainty, changes in interest rates, and the view of the regulatory authorities toward classification of assets and the level of ACL and reserve for off-balance sheet credit exposures.
While management utilizes its best judgment and information available, the adequacy of the ACL and reserve for off-balance sheet credit exposures is determined by certain factors outside of the Company's control, such as the performance of our loan portfolio, changes in the economic environment including economic uncertainty, changes in interest rates, and the view of the regulatory authorities toward classification of assets and the level of ACL and reserve for off-balance sheet credit exposures.
The macroeconomic forecast is applied for a reasonable and supportable time period before reverting to long-term historical averages for each economic index. The forecast and reversion to mean time period used for each economic index at September 30, 2023 was four quarters.
The macroeconomic forecast is applied for a reasonable and supportable time period before reverting to long-term historical averages for each economic index. The forecast and reversion to mean time period used for each economic index at September 30, 2024 was four quarters.
Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 4. Loans Receivable and Allowance for Credit Losses - Allowance for Credit Losses" for additional information regarding the assumptions used in the Company's September 30, 2023 estimate of ACL.
Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 4. Loans Receivable and Allowance for Credit Losses - Allowance for Credit Losses" for additional information regarding the assumptions used in the Company's September 30, 2024 estimate of ACL.
The qualitative factors applied at September 30, 2023, and the importance and levels of the qualitative factors applied, may change in future periods depending on the level of changes 20 to items such as the uncertainty of economic conditions and management's assessment of the level of credit risk within the loan portfolio as a result of such changes, compared to the amount of ACL calculated by the model.
The qualitative factors applied at September 30, 2024, and the importance and levels of the qualitative factors applied, may change in future periods depending on the level of changes to items such as the uncertainty of economic conditions and management's assessment of the level of credit risk within the loan portfolio as a result of such changes, compared to the amount of ACL calculated by the model.
The Bank's commercial loan portfolio is composed of commercial real estate loans, commercial construction loans and commercial and industrial loans. Our commercial real estate loans include a variety of property types, including retail buildings, senior housing facilities, multi-family dwellings, hotels, and office buildings located in Kansas, Texas, and 22 Missouri, and 13 other states.
The Bank's commercial loan portfolio is composed of commercial real estate loans, commercial construction loans and commercial and industrial loans. Our commercial real estate loans include a variety of property types, including multi-family dwellings, senior housing facilities, hotels, retail buildings, and office buildings located in Kansas, Texas, and Missouri, and 15 other states.
Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2022.
Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2023.
Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2022.
Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2023.
The increase in the weighted average yield was due primarily to originations and purchases at higher market yields, as well as disbursements on commercial construction loans at rates higher than the overall portfolio rate and upward repricing of existing adjustable-rate loans due to higher market interest rates.
The increase in the weighted average yield was due primarily to originations and purchases at higher market rates between periods, as well as disbursements on commercial construction loans at rates higher than the overall portfolio rate and upward repricing of existing adjustable-rate loans due to higher market interest rates.
For fiscal year 2024, it is the intention of the Board of Directors to pay out the regular quarterly cash dividend of $0.085 per share, totaling $0.34 per share for the year. To the extent that earnings in fiscal year 2024 exceed $0.34 per share, the Board of Directors will consider the payment of additional dividends.
For fiscal year 2025, it is the intention of the Company's Board of Directors to pay out the regular quarterly cash dividend of $0.085 per share, totaling $0.34 per share for the year. To the extent that earnings in fiscal year 2025 exceed $0.34 per share, the Board of Directors will consider the payment of additional dividends.
The ACL and reserve for off-balance sheet credit exposures may be materially affected by qualitative factors, especially during periods of economic uncertainty, for items not reflected in the economic forecast and/or discounted cash flow model, but which are deemed appropriate by management's current assessment of the risks related to the loan portfolio and/or external factors.
The ACL and reserve for off-balance sheet credit exposures may be materially affected by qualitative factors, for items not reflected in the economic forecast and/or discounted cash flow model, but which are deemed appropriate by management's current assessment of the risks related to the loan portfolio and/or external factors.
The following table presents borrowing activity for the periods shown. The borrowings presented in the table have original contractual terms of one year or longer or are tied to interest rate swaps with original contractual terms of one year or longer, and line of credit borrowings are excluded.
The following table presents borrowing activity for the periods shown. The borrowings presented in the table have original contractual terms of one year or longer or are tied to interest rate swaps with original contractual terms of one year or longer. Line of credit borrowings and finance leases are excluded from the table.
Per FHLB's lending guidelines, total FHLB borrowings cannot exceed 40% of Bank Call Report total assets without the pre-approval of FHLB senior management. The Bank's FHLB borrowing limit was 50% of Bank Call Report total assets as of September 30, 2023, as approved by the president of FHLB.
Per FHLB's lending guidelines, total FHLB borrowings cannot exceed 40% of Bank Call Report total assets without the pre-approval of FHLB senior management. The Bank's FHLB borrowing limit approved by FHLB senior management was 50% of Bank Call Report total assets as of September 30, 2024.
(2) Real estate-related consumer loans where we also hold the first mortgage are included in the one- to four-family category as the underlying collateral is one- to four-family property. 31 The following table presents the states where the properties securing five percent or more of the total amount of our one- to four-family loans, excluding construction loans, are located and the corresponding balance of loans 30 to 89 days delinquent, 90 or more days delinquent or in foreclosure, and weighted average LTV ratios for loans 90 or more days delinquent or in foreclosure at September 30, 2023.
(2) Real estate-related consumer loans where we also hold the first mortgage are included in the one- to four-family category as the underlying collateral is one- to four-family property. 35 The following table presents the states where the properties securing ten percent or more of the total amount of our one- to four-family loans, excluding construction loans, are located and the corresponding balance of loans 30 to 89 days delinquent, 90 or more days delinquent or in foreclosure, and weighted average LTV ratios for loans 90 or more days delinquent or in foreclosure at September 30, 2024.
Non-Interest Income The following table presents the components of non-interest income for the years presented, along with the change measured in dollars and percent.
Non-Interest Expense The following table presents the components of non-interest expense for the years presented, along with the change measured in dollars and percent.
Comparison of Operating Results for the Years Ended September 30, 2022 and 2021 For this discussion, see "Part II, Item 7.
Comparison of Operating Results for the Years Ended September 30, 2023 and 2022 For this discussion, see "Part II, Item 7.
The following table presents the Company's 30 to 89 day delinquent loans at the dates indicated. The amounts in the table represent the unpaid principal balance of the loans less related charge-offs, if any. Of the loans 30 to 89 days delinquent at September 30, 2023 and 2022, approximately 72% and 73%, respectively, were 59 days or less delinquent.
The following table presents the Company's 30 to 89 day delinquent loans at the dates indicated. The amounts in the table represent the unpaid principal balance of the loans less related charge-offs, if any. Of the loans 30 to 89 days delinquent at September 30, 2024 and 2023, approximately 66% and 72%, respectively, were 59 days or less delinquent.
The majority of home equity loans assume a maximum term of 240 months. 25 The following table presents, as of September 30, 2023, the amount of loans due after September 30, 2024, and whether these loans have fixed or adjustable interest rates.
The majority of home equity loans assume a maximum term of 240 months. 28 The following table presents, as of September 30, 2024, the amount of loans due after September 30, 2025, and whether these loans have fixed or adjustable interest rates.
As of September 30, 2023, the Bank's policy allowed for combined brokered and public unit certificates of deposit up to 15% of total deposits. At September 30, 2023, the Bank did not have any brokered certificates of deposit and public unit certificates of deposit were approximately 2% of total deposits.
As of September 30, 2024, the Bank's policy allowed for combined brokered and public unit certificates of deposit up to 15% of total deposits. At September 30, 2024, the Bank did not have any brokered certificates of deposit, and public unit certificates of deposit were approximately 1% of total deposits.
Dividend payments depend upon a number of factors including the Company's financial condition and results of operations, regulatory capital requirements, regulatory limitations on the Bank's ability to make capital distributions to the Company, and the amount of cash at the holding company level.
Dividend payments depend upon a number of factors, including the Company's financial condition and results of operations, regulatory capital requirements, regulatory limitations on the Bank's ability to make capital distributions to the Company, the Bank's taxable current earnings and accumulated earnings and profits, and the amount of cash at the holding company level.
(9) The table below provides a reconciliation between performance measures presented in accordance with accounting standards generally accepted in the United States of America ("GAAP") and the same performance measures excluding the effects of the leverage strategy and without the net loss on securities transactions associated with the securities strategy, which are not presented in accordance with GAAP.
(14) The table below provides a reconciliation between performance measures presented in accordance with accounting standards generally accepted in the United States of America ("GAAP") and the same performance measures excluding the impact of the net loss on the securities transactions associated with the securities strategy, which are not presented in accordance with GAAP.
The Bank had pledged securities with an estimated fair value of $178.4 million as collateral for public unit certificates of deposit at September 30, 2023. The securities pledged as collateral for public unit certificates of deposit are held under joint custody with FHLB and generally will be released upon deposit maturity.
The Bank had pledged securities with an estimated fair value of $108.7 million as collateral for public unit certificates of deposit at September 30, 2024. The securities pledged as collateral for public unit certificates of deposit are held under joint custody with FHLB and generally will be released upon deposit maturity.
One of the most significant judgments used in projecting loss rates when estimating the ACL and reserves for off-balance sheet credit exposures is the macroeconomic forecast provided by a third party.
Summary of Significant Accounting Policies" for additional information. 23 One of the most significant judgments used in projecting loss rates when estimating the ACL and reserves for off-balance sheet credit exposures is the macroeconomic forecast provided by a third party.
The ACL and the reserve for off-balance sheet credit exposures were $23.8 million and $4.1 million, respectively at September 30, 2023, compared to $16.4 million and $4.8 million, respectively, at September 30, 2022.
The ACL and the reserve for off-balance sheet credit exposures were $23.0 million and $6.0 million, respectively at September 30, 2024, compared to $23.8 million and $4.1 million, respectively, at September 30, 2023.
These critical accounting estimates and their application are reviewed at least annually by our audit committee. The following is a description of our critical accounting estimates and an explanation of the methods and assumptions underlying their application. Allowance for Credit Losses and Reserve for Off-Balance Sheet Credit Exposures.
This critical accounting estimate and its application is reviewed at least annually by our audit committee. The following is a description of our critical accounting estimate and an explanation of the methods and assumptions underlying its application. Allowance for Credit Losses and Reserve for Off-Balance Sheet Credit Exposures.
These estimates are important to the presentation of our financial condition and results of operations, involve a high degree of complexity, and require management to make difficult and subjective judgments that may require assumptions about highly uncertain matters. The use of different judgments, assumptions, and estimates could affect reported results materially.
This estimate is important to the presentation of our financial condition and results of operations, involves a high degree of complexity, and requires management to make difficult and subjective judgments that may require assumptions about highly uncertain matters. The use of different judgments, assumptions, and estimates could affect reported results materially.
(4) Included in this line, for the years ended September 30, 2023 and September 30, 2022, respectively, is FHLB stock related to the leverage strategy with an average outstanding balance of $41.6 million and $71.0 million, respectively, dividend income of $3.6 million and $4.8 million, respectively, at a weighted average yield of 8.69% and 6.75%, respectively, and FHLB stock not related to the leverage strategy with an average outstanding balance of $116.3 million and $78.2 million, respectively, and dividend income of $10.2 million and $5.2 million, respectively, at a weighted average yield of 8.77% and 6.69%, respectively.
Included in this line, for the year ended September 30, 2023, is FHLB stock related to the leverage strategy with an average outstanding balance of $41.6 million and dividend income of $3.6 million, at a weighted average yield of 8.69%, and FHLB stock not related to the leverage strategy with an average outstanding balance of $116.3 million, and dividend income of $10.2 million, at a weighted average yield of 8.77%.
At September 30, 2023, the Bank's gap between the amount of interest-earning assets and interest-bearing liabilities projected to reprice within one year was $(1.19) billion, or (11.7)% of total assets, meaning the amount of interest-bearing liabilities exceeded the amount of interest-earning assets maturing or repricing during the same period. See additional discussion in "Part II, Item 7A.
At September 30, 2024, the Bank's gap between the amount of interest-earning assets and interest-bearing liabilities projected to reprice within one year was $(1.51) billion, or (15.8)% of total assets, meaning the amount of interest-bearing liabilities exceeded the amount of interest-earning assets maturing or expected to reprice during the same period. See additional discussion in "Part II, Item 7A.
See "Allowance for Credit Losses on Loans Receivable" and "Reserve for Off-Balance Sheet Credit Exposures" within "Part II, Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 1. Summary of Significant Accounting Policies" for additional information.
See "Allowance for Credit Losses on Loans Receivable" and "Reserve for Off-Balance Sheet Credit Exposures" within "Part II, Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 1.
September 30, 2023 September 30, 2022 Amount Yield WAL Amount Yield WAL (Dollars in thousands) MBS $ 901,440 1.71 % 4.7 $ 1,243,270 1.57 % 4.7 Government-sponsored enterprises ("GSE") debentures 479,610 0.64 1.9 519,977 0.61 2.9 Corporate bonds 4,000 5.12 8.6 4,000 5.12 9.6 Municipal bonds 942 2.55 6.9 1,243 2.63 6.5 $ 1,385,992 1.35 3.8 $ 1,768,490 1.29 4.2 35 The composition and maturities of the securities portfolio at September 30, 2023 is indicated in the following table by remaining contractual maturity, without consideration of call features or pre-refunding dates, along with associated weighted average yields.
September 30, 2024 September 30, 2023 Amount Yield WAL Amount Yield WAL (Dollars in thousands) MBS $ 756,775 5.63 % 5.7 $ 901,440 1.71 % 4.7 Government-sponsored enterprises ("GSE") debentures 69,077 5.63 0.4 479,610 0.64 1.9 Corporate bonds 4,000 5.12 7.6 4,000 5.12 8.6 Municipal bonds — — — 942 2.55 6.9 $ 829,852 5.63 5.2 $ 1,385,992 1.35 3.8 39 The composition and maturities of the securities portfolio at September 30, 2024 is indicated in the following table by remaining contractual maturity, without consideration of call features or pre-refunding dates, along with associated weighted average yields.
Credit scores are updated at least annually, with the latest update in September 2023, 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.
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.
Consistent with our goal to operate a sound and profitable financial organization, we actively seek to maintain a well-capitalized status for the Bank in accordance with regulatory standards. As of September 30, 2023, the Bank's capital ratios exceeded the well-capitalized requirements.
Consistent with our goal to operate a sound and profitable financial organization, we actively seek to maintain a well-capitalized status for the Bank in accordance with regulatory standards. As of September 30, 2024, the Bank's capital ratios exceeded the well-capitalized requirements and the Bank exceeded all internal policy thresholds for sensitivity to changes in rates.
These borrowings were repaid prior to September 30, 2023 and 2022. 37 The following table presents the maturity of term borrowings, which consist of FHLB advances and BTFP borrowings, along with associated weighted average contractual and effective rates as of September 30, 2023. Amortizing FHLB advances are presented based on their maturity dates versus their quarterly scheduled repayment dates.
The following table presents the maturity of term borrowings, which consist of FHLB advances, along with associated weighted average contractual and effective rates as of September 30, 2024. Amortizing FHLB advances are presented based on their maturity dates versus their quarterly scheduled repayment dates.
(6) Included in this line, for the years ended September 30, 2023 and September 30, 2022, are FHLB borrowings related to the leverage strategy with an average outstanding balance of $924.4 million and $1.58 billion, respectively, and interest paid of $39.7 million and $18.5 million, respectively, at a weighted average rate of 4.24% and 1.15%, respectively, and borrowings not related to the leverage strategy with an average outstanding balance of $2.73 billion and $1.71 billion, respectively, and interest paid of $84.5 million and $34.0 million, respectively, at a weighted average rate of 3.08% and 1.98%, respectively.
Included in this line, for the year ended September 30, 2023 are FHLB borrowings related to the leverage strategy with an average outstanding balance of $924.4 million and interest paid of $39.7 million, at a weighted average rate of 4.24%, and borrowings not related to the leverage strategy with an average outstanding balance of $2.73 billion, and interest paid of $84.5 million, at a weighted average rate of 3.08%.
On October 24, 2023, the Company announced a regular quarterly cash dividend of $0.085 per share, or approximately $11.3 million, payable on November 17, 2023 to stockholders of record as of the close of business on November 3, 2023.
On October 22, 2024, the Company announced a regular quarterly cash dividend of $0.085 per share, or approximately $11.1 million, payable on November 15, 2024 to stockholders of record as of the close of business on November 1, 2024.
Of the $789.0 million at September 30, 2023, $425.1 million related to commercial and retail deposit accounts and the remainder was 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.
Of the $766.8 million at September 30, 2024, approximately $460.1 million related to commercial and retail deposit accounts, with the remainder mainly comprised of fully collateralized public unit deposits and intercompany accounts. The uninsured amounts are estimates based on the methodologies and assumptions used for the Bank's regulatory reporting requirements.
The Company's most available liquid assets are represented by cash and cash equivalents and AFS securities. The Bank's primary sources of funds are deposits, FHLB borrowings, repayments and maturities of outstanding loans and MBS and other short-term investments, and funds provided by operations.
Liquidity management is both a daily and long-term function of our business management. The Company's most available liquid assets are represented by cash and cash equivalents and AFS securities. The Bank's primary sources of funds are deposits, FHLB borrowings, repayments and maturities of outstanding loans and MBS and other short-term investments, and funds provided by operations.
The Bank's asset quality remained strong, reflected in low loan delinquency and charge-off ratios. At September 30, 2023, loans 30 to 89 days delinquent were 0.21% of total loans receivable, net, and loans 90 or more days delinquent or in foreclosure were 0.11% of total loans receivable, net.
The Bank's asset quality remains strong, reflected in the continued low level of loan delinquency and charge-off ratios. At September 30, 2024, loans 30 to 89 days delinquent were 0.20% of total loans receivable, net, and loans 90 or more days delinquent or in foreclosure were 0.12% of total loans receivable, net.
The Bank regularly monitors the level of risk in the entire commercial loan portfolio, including concentrations in such factors as geographic locations, collateral types, tenant brand name, borrowing relationships, and lending relationships in the case of participation loans, among other factors. 23 The following table presents the balance and weighted average rate of our loan portfolio as of the dates indicated.
The Bank regularly monitors the level of risk in the entire commercial loan portfolio, including concentrations in such factors as geographic locations, collateral types, tenant brand name, borrowing relationships, and lending relationships in the case of participation loans, among other factors. 26 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.
Provision for Credit Losses The Bank recorded a provision for credit losses during the current year of $6.8 million, compared to a release of provision of $4.6 million during the prior year.
Provision for Credit Losses The Company recorded a provision for credit losses of $1.3 million during the current year, compared to a provision for credit losses of $6.8 million for the prior year.
FHLB borrowings are secured by certain qualifying loans pursuant to a blanket collateral agreement with FHLB. When the leverage strategy is in place, the Bank maintains the resulting excess cash reserves from the FHLB borrowings at the FRB of Kansas City, which can be used to meet any short-term liquidity needs.
When the leverage strategy is in place, the Bank maintains the resulting excess cash reserves from the FHLB borrowings at the FRB of Kansas City, which can be used to meet any short-term liquidity needs.
At September 30, 2023, $1.49 billion of the Bank's certificate of deposit portfolio was scheduled to mature within the next 12 months, including $121.8 million of public unit certificates of deposit and $32.8 million of commercial certificates of deposit.
At September 30, 2024, $2.20 billion of the Bank's certificate of deposit portfolio was scheduled to mature within the next 12 months, including $59.2 million of public unit certificates of deposit and $49.0 million of commercial certificates of deposit.
The weighted average yields were calculated by multiplying each estimated fair value by its yield and dividing the sum of these results by the total estimated fair value.
The weighted average yields are current yields and includes the amortization of premiums or discounts and are calculated by multiplying each estimated fair value by its current yield and dividing the sum of these results by the total estimated fair value.
The ratio of net charge-offs (recoveries) ("NCOs") during the current year to average loans outstanding during the current year was 0.00%.
The ratio of net charge-offs (recoveries) ("NCOs") during the current year to average loans outstanding during the current year was 0% as there were only $111 thousand of NCOs during the current year.
The Bank's commercial and industrial loan portfolio consists largely of loans secured by accounts receivable, inventory and equipment. Commercial borrowers are generally required to provide financial information annually, including borrower financial statements, subject property rental rates and income, maintenance costs, updated real estate property tax and insurance payments, and personal financial information for the guarantor(s).
Commercial borrowers are generally required to provide financial information annually, including borrower financial statements, subject property rental rates and income, maintenance costs, updated real estate property tax and insurance payments, and personal financial information for the guarantor(s).
The following table presents regular quarterly cash dividends and special cash dividends paid in calendar years 2023, 2022, and 2021. The amounts represent cash dividends paid during each period.
The following table presents regular quarterly cash dividends and special cash dividends paid in calendar years 2024, 2023, and 2022.
If actual results differ significantly from our assumptions, our ACL and reserve for off-balance sheet credit exposures may not be sufficient to cover inherent losses in our loan portfolio, resulting in additions to our ACL and an increase in the provision for credit losses. Fair Value Measurements.
If actual results differ significantly from our assumptions, our ACL and reserve for off-balance sheet credit exposures may not be sufficient to cover inherent losses in our loan portfolio, resulting in additions to our ACL and an increase in the provision for credit losses. 24 Recent Accounting Pronouncements For a discussion of Recent Accounting Pronouncements, see "Part II, Item 8.
Fiscal Year 2024 Outlook Salaries and employee benefits expense is expected to be $5 million higher in fiscal year 2024 as compared to fiscal year 2023 due to an anticipated increase in incentive compensation, merit increases, the filling of vacant positions, and a reduction in capitalized payroll costs which were related to the digital transformation in fiscal year 2023.
Fiscal Year 2025 Outlook Salaries and employee benefits expense is expected to be $5.7 million higher in fiscal year 2025 compared to fiscal year 2024 due to an anticipated increase in incentive compensation, merit increases, and the filling of vacant positions.
Calendar Year 2023 2022 2021 Amount Per Share Amount Per Share Amount Per Share (Dollars in thousands, except per share amounts) Regular quarterly dividends paid Quarter ended March 31 $ 11,319 $ 0.085 $ 11,535 $ 0.085 $ 11,518 $ 0.085 Quarter ended June 30 11,321 0.085 11,534 0.085 11,516 0.085 Quarter ended September 30 11,323 0.085 11,534 0.085 11,518 0.085 Quarter ended December 31 11,310 0.085 11,508 0.085 11,535 0.085 True-up dividends paid — — 37,701 0.280 29,850 0.220 True Blue Capitol dividends paid — — 27,143 0.200 54,210 0.400 Calendar year-to-date dividends paid $ 45,273 $ 0.340 $ 110,955 $ 0.820 $ 130,147 $ 0.960 40 Rate/Volume Analysis.
Calendar Year 2024 2023 2022 Amount Per Share Amount Per Share Amount Per Share (Dollars in thousands, except per share amounts) Regular quarterly dividends paid Quarter ended March 31 $ 11,127 $ 0.085 $ 11,319 $ 0.085 $ 11,535 $ 0.085 Quarter ended June 30 11,044 0.085 11,321 0.085 11,534 0.085 Quarter ended September 30 11,043 0.085 11,323 0.085 11,534 0.085 Quarter ended December 31 11,061 0.085 11,308 0.085 11,508 0.085 True-up dividends paid — — — — 37,701 0.280 True Blue Capitol dividends paid — — — — 27,143 0.200 Calendar year-to-date dividends paid $ 44,275 $ 0.340 $ 45,271 $ 0.340 $ 110,955 $ 0.820 44 Rate/Volume Analysis.
Net interest income depends on the average balance of interest-earning assets and interest-bearing liabilities, and the interest rates earned or paid on them. (8) Net interest margin represents net interest income as a percentage of average interest-earning assets.
Net interest income depends on the average balance of interest-earning assets and interest-bearing liabilities, and the interest rates earned or paid on them. (8) Net interest margin represents net interest income as a percentage of average interest-earning assets. Management believes the net interest margin is important to investors as it is a profitability measure for financial institutions.
For the Year Ended September 30, 2023 September 30, 2022 Amount Rate Amount Rate (Dollars in thousands) Beginning balance $ 7,471,670 3.33 % $ 7,096,073 3.21 % Originated and refinanced 930,362 5.96 1,065,373 3.74 Purchased and participations 644,072 5.59 701,674 3.46 Change in undisbursed loan funds (99,179) (53,811) Repayments (956,562) (1,337,034) Principal (charge-offs)/recoveries, net (106) 186 Other (5,876) (791) Ending balance $ 7,984,381 3.76 $ 7,471,670 3.33 26 The following table presents loan origination, refinance, and purchase activity for the periods indicated, excluding endorsement activity, along with associated weighted average rates and percent of total.
For the Year Ended September 30, 2024 September 30, 2023 Amount Rate Amount Rate (Dollars in thousands) Beginning balance $ 7,984,381 3.76 % $ 7,471,670 3.33 % Originated and refinanced 660,937 7.21 930,362 5.96 Purchased and participations 47,712 7.80 644,072 5.59 Change in undisbursed loan funds 168,483 (99,179) Repayments (917,871) (956,562) Principal (charge-offs)/recoveries, net (111) (106) Other (20,280) (5,876) Ending balance $ 7,923,251 4.02 $ 7,984,381 3.76 29 The following table presents loan origination, refinance, and purchase/participation activity for the periods indicated, excluding endorsement activity, along with associated weighted average rates and percent of total.
September 30, 2023 2022 Number Amount Number Amount (Dollars in thousands) Loans 90 or More Days Delinquent or in Foreclosure: One- to four-family: Originated 24 $ 2,246 29 $ 2,919 Correspondent purchased 9 3,410 12 3,737 Bulk purchased 2 942 3 1,148 Commercial 12 2,183 8 1,167 Consumer 9 113 9 154 56 8,894 61 9,125 Loans 90 or more days delinquent or in foreclosure as a percentage of total loans 0.11 % 0.12 % Nonaccrual loans less than 90 Days Delinquent: (1) One- to four-family: Originated 2 $ 215 3 $ 222 Correspondent purchased 1 282 — — Bulk purchased — — — — Commercial 1 18 1 77 Consumer — — 1 19 4 515 5 318 Total nonaccrual loans 60 9,409 66 9,443 Nonaccrual loans as a percentage of total loans 0.12 % 0.13 % OREO: One- to four-family: Originated (2) — $ — 4 $ 307 Correspondent purchased 1 219 — — Consumer — — 1 21 1 219 5 328 Total non-performing assets 61 $ 9,628 71 $ 9,771 Non-performing assets as a percentage of total assets 0.09 % 0.10 % (1) Includes loans required to be reported as nonaccrual pursuant to accounting and/or regulatory reporting requirements and/or internal policies, even if the loans are current.
September 30, 2024 2023 Number Amount Number Amount (Dollars in thousands) Loans 90 or More Days Delinquent or in Foreclosure: One- to four-family: Originated 29 $ 2,274 24 $ 2,246 Correspondent purchased 8 4,024 9 3,410 Bulk purchased 5 1,535 2 942 Commercial: Commercial real estate 7 1,163 8 1,966 Commercial and industrial 2 82 4 217 Consumer 20 436 9 113 71 9,514 56 8,894 Loans 90 or more days delinquent or in foreclosure as a percentage of total loans 0.12 % 0.11 % Nonaccrual loans less than 90 Days Delinquent: (1) One- to four-family: Originated — $ — 2 $ 215 Correspondent purchased — — 1 282 Bulk purchased — — — — Commercial: Commercial real estate 3 326 1 18 Commercial and industrial 2 252 — — Consumer — — — — 5 578 4 515 Total nonaccrual loans 76 10,092 60 9,409 Nonaccrual loans as a percentage of total loans 0.13 % 0.12 % OREO: One- to four-family: Originated (2) 1 $ 55 — $ — Correspondent purchased — — 1 219 1 55 1 219 Total non-performing assets 77 $ 10,147 61 $ 9,628 Non-performing assets as a percentage of total assets 0.11 % 0.09 % (1) Includes loans required to be reported as nonaccrual pursuant to accounting and/or internal policies, even if the loans are current.
Total borrowings at September 30, 2023 were $2.88 billion, which was comprised of $2.02 billion in fixed-rate FHLB advances, $365.0 million in variable-rate advances tied to interest rate swaps, and $500.0 million in BTFP borrowings.
Total borrowings at September 30, 2024 were $2.18 billion, which was comprised of $1.98 billion in fixed-rate FHLB advances, $200.0 million in FHLB variable-rate advances tied to interest rate swaps, and $1.1 million in finance leases.
For the Year Ended September 30, 2023 2022 2021 NCOs Average Loans % of Average Loans NCOs Average Loans % of Average Loans NCOs Average Loans % of Average Loans (Dollars in thousands) One- to four-family: Originated $ (6) $ 3,981,468 — % $ (129) $ 3,937,188 — % $ 20 $ 3,936,166 — % Correspondent — 2,428,257 — — 2,072,677 — — 2,010,823 — Bulk purchased — 143,105 — — 159,152 — 21 191,029 0.01 Construction — 65,741 — — 48,079 — — 29,893 — Total (6) 6,618,571 — (129) 6,217,096 — 41 6,167,911 — Commercial: Real estate (1) 875,850 — (101) 692,115 (0.01) 465 637,712 0.07 Commercial and industrial 75 93,840 0.08 40 74,133 0.05 — 75,219 — Construction — 181,141 — — 117,878 — — 75,771 — Total 74 1,150,831 0.01 (61) 884,126 (0.01) 465 788,702 0.06 Consumer: Home equity 21 94,131 0.02 1 85,514 — (26) 92,495 (0.03) Other 17 8,885 0.19 3 8,030 0.04 (2) 8,782 (0.02) Total 38 103,016 0.04 4 93,544 — (28) 101,277 (0.03) $ 106 $ 7,872,418 — $ (186) $ 7,194,766 — $ 478 $ 7,057,890 0.01 Securities.
For the Year Ended September 30, 2024 2023 2022 NCOs Average Loans % of Average Loans NCOs Average Loans % of Average Loans NCOs Average Loans % of Average Loans (Dollars in thousands) One- to four-family: Originated $ (28) $ 3,951,870 — % $ (6) $ 3,981,468 — % $ (129) $ 3,937,188 — % Correspondent — 2,340,841 — — 2,428,257 — — 2,072,677 — Bulk purchased — 132,460 — — 143,105 — — 159,152 — Construction — 33,101 — — 65,741 — — 48,079 — Total (28) 6,458,272 — (6) 6,618,571 — (129) 6,217,096 — Commercial: Real estate 80 1,073,219 0.01 (1) 875,850 — (101) 692,115 (0.01) Commercial and industrial (5) 120,354 — 75 93,840 0.08 40 74,133 0.05 Construction — 184,848 — — 181,141 — — 117,878 — Total 75 1,378,421 0.01 74 1,150,831 0.01 (61) 884,126 (0.01) Consumer: Home equity 46 97,694 0.05 21 94,131 0.02 1 85,514 — Other 18 9,663 0.19 17 8,885 0.19 3 8,030 0.04 Total 64 107,357 0.06 38 103,016 0.04 4 93,544 — $ 111 $ 7,944,050 — $ 106 $ 7,872,418 — $ (186) $ 7,194,766 — Securities.
The net loss for the current year resulted from the securities strategy, specifically, the recognition of the impairment loss on the securities sold in October 2023. Excluding the effects of the securities strategy, earnings per share would have been $0.33 for the current year.
The net loss in the prior year resulted from the impairment loss on securities associated with the securities strategy. Excluding the net loss associated with the securities strategy, earnings per share would have been $0.37 for the current year and $0.33 for the prior year.
The provision for credit losses in the current year was comprised of a $7.5 million increase in the ACL for loans and a $656 thousand decrease in reserve for off-balance sheet credit exposures.
The provision for credit losses in the current year was comprised of a $1.9 million increase in the reserve for off-balance sheet credit exposures, partially offset by a $633 thousand release in the ACL for loans.
Of the total commercial undisbursed amounts and commitments outstanding as of September 30, 2023, management anticipates funding approximately $86 million during the December 2023 quarter, $75 million during the March 2024 quarter, $52 million during the June 2024 quarter, and $172 million during the September 2024 quarter or later.
Of the total commercial real estate and commercial construction undisbursed amounts and commitments outstanding as of September 30, 2024, management anticipates funding approximately $150 million during the December 2024 quarter, $78 million during the March 2025 quarter, $83 million during the June 2025 quarter, and $149.7 million during the September 2025 quarter or later.
The change in the efficiency ratio, excluding the securities strategy, was due primarily to lower net interest income. The efficiency ratio is a measure of a financial institution's total non-interest expense as a percentage of the sum of net interest income (pre-provision for credit losses) and non-interest income.
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.
The Bank originates owner-occupied construction-to-permanent loans secured by one- to four-family residential real estate. The majority of these loans are secured by property located within the Bank's Kansas City market area.
The Bank has not experienced any losses with this group of loans since the loan package was purchased in August 2012. 25 The Bank originates owner-occupied construction-to-permanent loans secured by one- to four-family residential real estate. The majority of these loans are secured by property located within the Bank's Kansas City market area.
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, $192.6 million of which is reflected in our financial statements for the fiscal year ended September 30, 2023 and $13.3 million of which will be recorded in the first quarter of fiscal year 2024.
Since the Company had the intent to sell the $1.30 billion of securities to maturity at September 30, 2023, the Company recognized an impairment loss on those securities of $192.6 million which was reflected in the Company's financial statements for the fiscal year ended September 30, 2023.
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.
The weighted average yields and rates include amortization of fees, costs, premiums and discounts, which are considered adjustments to yields/rates.
Maturity by Contractual Effective Fiscal Year Amount Rate Rate (1) (Dollars in thousands) 2024 $ 990,000 4.30 % 3.79 % 2025 650,000 3.30 2.96 2026 575,000 2.81 2.95 2027 437,500 3.02 3.13 2028 230,328 4.94 3.91 $ 2,882,828 3.63 3.34 (1) The effective rate includes the impact of interest rate swaps and the amortization of deferred prepayment penalties resulting from FHLB advances previously prepaid.
Maturity by Contractual Effective Fiscal Year Amount Rate Rate (1) (Dollars in thousands) 2025 650,000 3.23 2.94 2026 575,000 2.81 2.95 2027 477,500 3.14 3.24 2028 310,656 4.78 4.13 2029 167,500 4.44 4.44 $ 2,180,656 3.41 3.29 (1) The effective rate includes the impact of interest rate swaps and the amortization of deferred prepayment penalties resulting from FHLB advances previously prepaid.
The Bank purchases one- to four-family loans, on a loan-by-loan basis, from a select group of correspondent lenders ("correspondent purchased"). Loan purchases enable the Bank to attain geographic diversification in the one- to four-family loan portfolio.
As noted above, the Bank suspended its one- to four-family correspondent lending channels for the foreseeable future during the current year. The Bank previously purchased one- to four-family loans, on a loan-by-loan basis, from a select group of correspondent lenders ("correspondent purchased"). Loan purchases enabled the Bank to attain geographic diversification in the one- to four-family loan portfolio.
Retail certificates of deposit 1.3 Commercial certificates of deposit 1.0 Public unit certificates of deposit 0.6 Total certificates of deposit 1.2 Stockholders' Equity. Stockholders' equity totaled $1.04 billion at September 30, 2023. During the year ended September 30, 2023, the Company paid cash dividends totaling $83.2 million.
Retail certificates of deposit 0.8 Commercial certificates of deposit 0.6 Public unit certificates of deposit 0.6 Total certificates of deposit 0.8 Stockholders' Equity. Stockholders' equity totaled $1.03 billion at September 30, 2024. During the year ended September 30, 2024, the Company repurchased $19.3 million of shares and paid regular quarterly cash dividends totaling $44.5 million, or $0.34 per share.
September 30, 2023 September 30, 2022 Amount Rate Amount Rate (Dollars in thousands) One- to four-family: Originated $ 3,978,837 3.39 % $ 3,988,469 3.20 % Correspondent purchased 2,405,911 3.44 2,201,886 3.10 Bulk purchased 137,193 1.85 147,939 1.24 Construction 69,974 3.68 66,164 2.90 Total 6,591,915 3.38 6,404,458 3.12 Commercial: Commercial real estate 995,788 5.29 745,301 4.30 Commercial and industrial 112,953 6.36 79,981 4.30 Construction 178,746 5.01 141,062 5.34 Total 1,287,487 5.35 966,344 4.45 Consumer loans: Home equity 95,723 8.83 92,203 6.28 Other 9,256 5.20 8,665 4.21 Total 104,979 8.51 100,868 6.10 Total loans receivable 7,984,381 3.76 7,471,670 3.33 Less: ACL 23,759 16,371 Deferred loan fees/discounts 31,335 29,736 Premiums/deferred costs (41,662) (38,645) Total loans receivable, net $ 7,970,949 $ 7,464,208 24 The following table presents the contractual maturity of our loan portfolio, along with associated weighted average yields, at September 30, 2023.
September 30, 2024 September 30, 2023 Amount Rate Amount Rate (Dollars in thousands) One- to four-family: Originated $ 3,941,952 3.60 % $ 3,978,837 3.39 % Correspondent purchased 2,212,587 3.48 2,405,911 3.44 Bulk purchased 127,161 2.80 137,193 1.85 Construction 22,970 6.05 69,974 3.68 Total 6,304,670 3.55 6,591,915 3.38 Commercial: Commercial real estate 1,191,624 5.43 995,788 5.29 Commercial and industrial 129,678 6.66 112,953 6.36 Construction 187,676 6.40 178,746 5.01 Total 1,508,978 5.65 1,287,487 5.35 Consumer loans: Home equity 99,988 8.90 95,723 8.83 Other 9,615 5.72 9,256 5.20 Total 109,603 8.62 104,979 8.51 Total loans receivable 7,923,251 4.02 7,984,381 3.76 Less: ACL 23,035 23,759 Deferred loan fees/discounts 30,336 31,335 Premiums/deferred costs (37,458) (41,662) Total loans receivable, net $ 7,907,338 $ 7,970,949 27 The following table presents the contractual maturity of our loan portfolio, along with associated weighted average yields, at September 30, 2024.
The following table sets forth the portion of the Bank's certificates of deposit portfolio, by account, that are in excess of the FDIC insurance limit, by remaining time until maturity, as of September 30, 2023 (dollars in thousands). 3 months or less $ 72,983 Over 3 through 6 months 53,884 Over 6 through 12 months 196,181 Over 12 months 197,993 $ 521,041 Borrowings.
The following table sets forth the portion of the Bank's certificate of deposit portfolio, by account, that are in excess of the FDIC insurance limit, by remaining time until maturity, as of September 30, 2024 (dollars in thousands). 3 months or less $ 139,686 Over 3 through 6 months 124,002 Over 6 through 12 months 137,847 Over 12 months 114,722 $ 516,257 41 Borrowings.
For the Year Ended September 30, 2023 September 30, 2022 Amount Rate % of Total Amount Rate % of Total (Dollars in thousands) Fixed-rate: One- to four-family $ 404,598 5.47 % 25.7 % $ 926,274 3.41 % 52.5 % One- to four-family construction 39,599 5.72 2.5 120,615 3.19 6.8 Commercial: Real estate 43,408 7.48 2.7 50,620 4.08 2.9 Commercial and industrial 40,238 7.81 2.6 23,846 4.14 1.3 Construction 149,046 5.89 9.5 86,023 3.47 4.9 Home equity 6,080 8.20 0.4 6,771 5.76 0.4 Other 4,620 6.93 0.3 3,923 5.66 0.2 Total fixed-rate 687,589 5.87 43.7 1,218,072 3.45 69.0 Adjustable-rate: One- to four-family 342,093 4.97 21.7 230,640 3.51 13.0 One- to four-family construction 28,545 5.22 1.8 26,080 3.31 1.5 Commercial: Real estate 223,910 5.60 14.2 137,150 4.21 7.8 Commercial and industrial 57,295 7.28 3.6 32,430 3.87 1.8 Construction 177,471 6.22 11.3 58,080 4.94 3.3 Home equity 55,896 8.43 3.6 62,832 4.97 3.5 Other 1,635 4.25 0.1 1,763 3.03 0.1 Total adjustable-rate 886,845 5.75 56.3 548,975 4.01 31.0 Total originated, refinanced and purchased $ 1,574,434 5.81 100.0 % $ 1,767,047 3.63 100.0 % Purchased and participation loans included above: Fixed-rate: Correspondent purchased - one- to four-family $ 199,858 5.20 $ 452,093 3.35 Participations and purchases - commercial 19,016 9.43 87,365 3.47 Total fixed-rate purchased/participations 218,874 5.57 539,458 3.37 Adjustable-rate: Correspondent purchased - one- to four-family 215,939 4.86 129,216 3.49 Participations and purchases - commercial 209,259 6.36 33,000 4.87 Total adjustable-rate purchased/participations 425,198 5.60 162,216 3.77 Total purchased/participation loans $ 644,072 5.59 $ 701,674 3.46 27 One- to Four-Family Loans - The following table presents, for our portfolio of one- to four-family loans, the amount, percent of total, weighted average rate, weighted average credit score, weighted average loan-to-value ("LTV") ratio, and average balance per loan as of September 30, 2023.
For the Year Ended September 30, 2024 September 30, 2023 Amount Rate % of Total Amount Rate % of Total (Dollars in thousands) Fixed-rate: One- to four-family $ 207,757 6.39 % 29.3 % $ 404,598 5.47 % 25.7 % One- to four-family construction 24,578 6.56 3.5 39,599 5.72 2.5 Commercial: Real estate 7,920 7.63 1.1 43,408 7.48 2.7 Commercial and industrial 22,251 6.96 3.1 40,238 7.81 2.6 Construction 3,632 7.07 0.5 149,046 5.89 9.5 Home equity 8,402 9.00 1.2 6,080 8.20 0.4 Consumer other 2,975 7.22 0.4 4,620 6.93 0.3 Total fixed-rate 277,515 6.58 39.1 687,589 5.87 43.7 Adjustable-rate: One- to four-family 53,910 6.37 7.6 342,093 4.97 21.7 One- to four-family construction 16,875 6.51 2.4 28,545 5.22 1.8 Commercial: Real estate 114,502 7.56 16.2 223,910 5.60 14.2 Commercial and industrial 49,593 7.65 7.0 57,295 7.28 3.6 Construction 152,739 7.96 21.5 177,471 6.22 11.3 Home equity 40,248 9.39 5.7 55,896 8.43 3.6 Consumer other 3,267 5.42 0.5 1,635 4.25 0.1 Total adjustable-rate 431,134 7.68 60.9 886,845 5.75 56.3 Total originated, refinanced and purchased/participations $ 708,649 7.25 100.0 % $ 1,574,434 5.81 100.0 % Purchased and participation loans included above: Fixed-rate: Correspondent purchased - one- to four-family $ 2,978 6.43 $ 199,858 5.20 Participations and purchases - commercial 4,400 7.08 19,016 9.43 Total fixed-rate purchased/participations 7,378 6.82 218,874 5.57 Adjustable-rate: Correspondent purchased - one- to four-family 519 2.93 215,939 4.86 Participations and purchases - commercial 39,815 8.04 209,259 6.36 Total adjustable-rate purchased/participations 40,334 7.98 425,198 5.60 Total purchased/participation loans $ 47,712 7.80 $ 644,072 5.59 30 One- to Four-Family Loans - The following table presents, for our portfolio of one- to four-family loans, the amount, percent of total, weighted average rate, weighted average credit score, weighted average loan-to-value ("LTV") ratio, and average balance per loan as of September 30, 2024.
For the Year Ended September 30, 2023 September 30, 2022 Amount Yield WAL Amount Yield WAL (Dollars in thousands) Beginning balance - carrying value $ 1,563,307 1.29 % 4.2 $ 2,014,608 1.16 % 3.5 Maturities and repayments (186,860) (323,025) Net amortization of (premiums)/discounts (3,016) (4,967) Purchases — — — 88,026 2.56 4.3 Change in valuation on AFS securities 11,051 (211,335) Ending balance - carrying value $ 1,384,482 1.35 3.8 $ 1,563,307 1.29 4.2 36 Liabilities.
For the Year Ended September 30, 2024 September 30, 2023 Amount Yield WAL Amount Yield WAL (Dollars in thousands) Beginning balance - carrying value $ 1,384,482 1.35 % 3.8 $ 1,563,307 1.29 % 4.2 Maturities and repayments (455,110) (186,860) Proceeds from sale (1,272,512) — Net amortization of (premiums)/discounts 8,182 (3,016) Purchases 1,176,645 5.55 5.1 — — — Net loss from securities sales (13,345) — Change in valuation on AFS securities 27,924 11,051 Ending balance - carrying value $ 856,266 5.63 5.2 $ 1,384,482 1.35 3.8 Liabilities.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

33 edited+14 added−13 removed29 unchanged
Biggest changeAmount Yield/Rate WAL % of Category % of Total (Dollars in thousands) Securities $ 1,384,482 1.35 % 4.2 14.3 % Loans receivable: Fixed-rate one- to four-family 5,605,281 3.29 6.9 70.2 % 57.6 Fixed-rate commercial 456,087 4.44 3.1 5.7 4.7 All other fixed-rate loans 78,005 4.48 7.3 1.0 0.8 Total fixed-rate loans 6,139,373 3.39 6.7 76.9 63.1 Adjustable-rate one- to four-family 916,660 3.73 4.5 11.5 9.4 Adjustable-rate commercial 831,400 5.92 7.6 10.4 8.5 All other adjustable-rate loans 96,948 8.26 3.1 1.2 1.0 Total adjustable-rate loans 1,845,008 4.95 5.8 23.1 18.9 Total loans receivable 7,984,381 3.75 6.5 100.0 % 82.0 FHLB stock 110,714 9.22 2.1 1.2 Cash and cash equivalents 245,605 4.70 — 2.5 Total interest-earning assets $ 9,725,182 3.50 5.9 100.0 % Non-maturity deposits $ 2,762,702 1.06 6.7 50.3 % 33.0 % Retail certificates of deposit 2,533,954 3.47 1.3 46.1 30.2 Commercial certificates of deposit 48,751 3.56 1.0 0.9 0.6 Public unit certificates of deposit 147,487 4.44 0.6 2.7 1.8 Total interest-bearing deposits 5,492,894 2.28 4.0 100.0 % 65.6 Term borrowings 2,882,828 3.34 1.8 34.4 Total interest-bearing liabilities $ 8,375,722 2.65 3.2 100.0 % 54
Biggest changeAmount Yield/Rate WAL % of Category % of Total (Dollars in thousands) Securities $ 856,266 5.63 % 2.9 9.4 % Loans receivable: Fixed-rate one- to four-family 5,376,460 3.41 6.6 67.9 % 59.1 Fixed-rate commercial 506,754 4.82 2.8 6.4 5.6 All other fixed-rate loans 36,321 6.93 6.2 0.5 0.4 Total fixed-rate loans 5,919,535 3.55 6.3 74.8 65.1 Adjustable-rate one- to four-family 905,240 4.18 3.9 11.4 9.9 Adjustable-rate commercial 1,002,224 6.13 5.1 12.6 11.0 All other adjustable-rate loans 96,252 8.33 2.8 1.2 1.1 Total adjustable-rate loans 2,003,716 5.35 4.5 25.2 22.0 Total loans receivable 7,923,251 4.01 5.8 100.0 % 87.1 FHLB stock 101,175 9.47 1.9 1.1 Cash and cash equivalents 217,307 4.60 — 2.4 Total interest-earning assets $ 9,097,999 4.24 5.4 100.0 % Non-maturity deposits $ 2,615,076 0.93 5.8 46.9 % 33.7 % Retail certificates of deposit 2,830,579 4.23 0.8 50.7 36.5 Commercial certificates of deposit 58,236 4.40 0.6 1.0 0.7 Public unit certificates of deposit 76,495 4.62 0.6 1.4 1.0 Total interest-bearing deposits 5,580,386 2.69 3.2 100.0 % 71.9 Term borrowings 2,181,738 3.29 1.6 28.1 Total interest-bearing liabilities $ 7,762,124 2.86 2.7 100.0 % 59
Fluctuations in interest rates have a significant impact not only upon our net income, but also upon the cash flows and market values of our financial assets and liabilities. Our results of operations, like those of other financial institutions, are impacted by changes in interest rates and the interest rate sensitivity of our interest-earning assets and interest-bearing liabilities.
Fluctuations in interest rates have a significant impact not only upon our net income, but also upon the cash flows and market values of our assets and liabilities. Our results of operations, like those of other financial institutions, are impacted by changes in interest rates and the interest rate sensitivity of our interest-earning assets and interest-bearing liabilities.
Although management finds these assumptions reasonable, the interest rate sensitivity of our assets and liabilities and the estimated effects of changes in interest rates on our net interest income and MVPE indicated in the below tables could vary substantially if different assumptions were used or actual experience differs from these assumptions.
Although management finds these assumptions reasonable, the interest rate sensitivity of our assets and liabilities and the estimated effects of changes in interest rates on our net interest income and MVPE indicated in the below tables could vary substantially if different assumptions were used or actual experience differs from the assumptions.
Net interest income is projected in the same alternative interest rate environments with both a static balance sheet and with management strategies considered. The MVPE and net interest income analyses are also conducted to estimate our sensitivity to rates for future time horizons based upon market conditions as of the date of the analysis.
Net interest income is projected in the same alternative interest rate environments with both a static balance sheet and with management strategies considered. The MVPE and net interest income analyses are also conducted to estimate our sensitivity to rates for future time horizons based upon market conditions as of the date of the 53 analysis.
The amount of interest-bearing liabilities expected to reprice in a given period is not typically impacted significantly by changes in interest rates, because the Bank's borrowings and certificate of deposit portfolios have contractual maturities and generally cannot be terminated early without a prepayment penalty.
The amount of interest-bearing liabilities expected to reprice in a given period is not typically significantly impacted by changes in interest rates because the Bank's borrowings and certificate of deposit portfolios have contractual maturities and generally cannot be terminated early without a penalty.
Similarly, call projections for the Bank's callable agency debentures decrease as interest rates rise, which results in cash flows related to these assets moving closer to the contractual maturity dates. The longer expected average lives of these assets increases the sensitivity of their market value to changes in interest rates.
Similarly, call projections for callable agency debentures decrease as interest rates rise, which results in cash flows related to these assets moving closer to their contractual maturity dates. The longer expected average lives of these assets increases the sensitivity of their market value to changes in interest rates.
As interest rates decrease, borrowers have an economic incentive to lower their cost of debt by refinancing or endorsing their mortgage to a lower interest rate. Similarly, agency debt issuers are more likely to exercise embedded call options for agency securities and issue new securities at a lower interest rate.
As interest rates decrease, borrowers have an economic incentive to lower their cost of debt by refinancing or endorsing their mortgage to a lower interest rate. Similarly, agency debt issuers are more likely to exercise embedded call options and issue new securities at a lower interest rate.
The Bank's borrowings and certificate of deposit portfolios have stated maturities and the cash flows related to the Bank's liabilities do not generally fluctuate as a result of changes in interest rates. Cash flows from mortgage-related assets and callable agency debentures can vary significantly as a result of changes in interest rates.
The Bank's borrowings and certificate of deposit portfolios have stated maturities, and the cash flows related to those liabilities do not generally fluctuate as a result of changes in interest rates. Cash flows from mortgage-related assets and callable agency debentures can vary significantly as a result of changes in interest rates.
The estimation of net interest income does not include any projected gains or losses related to the sale of loans or securities, or income derived from non-interest income sources, but does include the use of different prepayment assumptions in the alternative interest rate 51 environments.
The estimation of net interest income does not include any projected gains or losses related to the sale of loans or securities, or income derived from non-interest income sources, but does include the use of different prepayment assumptions in the alternative interest rate environments.
As interest rates increase in the rising interest rate scenarios, prepayments on mortgage-related assets are more likely to decrease and only be realized through significant changes in borrowers' lives such as divorce, death, job-related relocations, or other events as there is less economic incentive for borrowers to prepay their debt, resulting in an increase in the average life of mortgage-related assets.
As interest rates increase in the rising interest rate scenarios, prepayments on mortgage-related assets are more likely to decrease and only be realized through significant changes in borrowers' lives such as divorce, death, job-related relocations, or other major events as there is less economic incentive for borrowers to prepay their debt, resulting in an increase in the average lives of mortgage-related assets.
All other securities are presented based on contractual maturities, term to call dates or pre-refunding dates as of September 30, 2023, at amortized cost. (3) Although the Bank's checking, savings, and money market accounts are subject to immediate withdrawal, management considers a substantial amount of these accounts to be core deposits having significantly longer effective maturities.
All other securities are presented based on contractual maturities, term to call dates or pre-refunding dates as of September 30, 2024, at amortized cost. (3) Although the Bank's checking, savings, and money market accounts are subject to immediate withdrawal, management considers a substantial amount of these accounts to be core deposits having significantly longer effective maturities.
Estimations of net interest income used in preparing the table below were based upon the assumptions that the total composition of interest-earning assets and interest-bearing liabilities does not change materially and that any repricing of assets or liabilities occurs at anticipated product and market rates for the alternative rate environments as of the dates presented.
Estimations of net interest income used in preparing the table below were based upon the assumptions that the total composition of interest-earning assets and interest-bearing liabilities do not change materially and that any repricing of assets or liabilities occurs at anticipated product and market rates for the alternative rate environments as of the dates presented.
As interest rates increase, the WAL would be expected to increase, as well as increasing the sensitivity of these assets in higher rate environments. 52 The following table sets forth the estimated change in the MVPE for each date presented based on the indicated instantaneous, parallel, and permanent change in interest rates.
As interest rates increase, the WAL would be expected to increase, as well as increasing the sensitivity of these assets in higher rate environments. 57 The following table sets forth the estimated change in the MVPE for each date presented based on the indicated instantaneous, parallel, and permanent change in interest rates.
To illustrate this point, the projected cumulative excess (deficiency) of interest-earning assets over interest-bearing liabilities within the next 12 months as a percent of total assets ("one-year gap") is also provided for an up 200 basis point scenario, as of September 30, 2023. 49 Qualitative Disclosure about Market Risk Gap Table.
To illustrate this point, the projected cumulative excess (deficiency) of interest-earning assets over interest-bearing liabilities within the next 12 months as a percent of total assets ("one-year gap") is also provided for an up 200 basis point scenario, as of September 30, 2024. Qualitative Disclosure about Market Risk Gap Table.
This is because the Bank's mortgage-related assets continue to have a longer duration in these interest rate scenarios which results in greater sensitivity in market value as interest rates change. 53 The following table presents the weighted average yields/rates and WALs (in years), after applying prepayment, call assumptions, and decay rates for our interest-earning assets and interest-bearing liabilities as of September 30, 2023.
This is because the Bank's mortgage-related assets continue to have a longer duration in these interest rate scenarios which results in greater sensitivity in market value as interest rates change. 58 The following table presents the weighted average yields/rates and WALs (in years), after applying prepayment, call assumptions, and decay rates for our interest-earning assets and interest-bearing liabilities as of September 30, 2024.
Change in Net Interest Income. The Bank's net interest income projections are a reflection of the response to interest rates of assets and liabilities that are expected to mature or reprice over the next year.
The Bank's net interest income projections are a reflection of the response to interest rates of assets and liabilities that are expected to mature or reprice over the next year.
The decay rates (the assumed rates at which the balances of existing accounts decline) used on these accounts is based on assumptions developed from our actual experiences with these accounts.
The decay rates (the assumed rates at which the balances of existing accounts decline) used on these accounts are based on assumptions developed from our actual experiences with these accounts.
The estimations of the MVPE used in preparing the table below were based upon the assumptions that the total composition of interest-earning assets and interest-bearing liabilities does not change, that any repricing of assets or liabilities occurs at current product or market rates for the alternative rate environments as of the dates presented, and that different prepayment rates were used in each alternative interest rate environment.
The estimations of the MVPE used in preparing the table below were based upon the assumption that the total composition of interest-earning assets and interest-bearing liabilities do not change, that any repricing of assets or liabilities occurs at current product or market rates for the alternative rate environments as of the dates presented, and that different prepayment rates were used in each alternative interest rate environment.
Projected cash flows for each scenario are based upon varying prepayment assumptions in an effort to model anticipated customer behavior changes as market rates change.
Projected cash flows for each scenario are based upon varying prepayment assumptions to model anticipated customer behavior changes as market rates change.
The market value of shorter term-to-maturity financial instruments is less sensitive to changes in interest rates than are longer term-to-maturity financial instruments.
The market value of shorter term-to-maturity financial instruments is less sensitive to changes in interest rates than is the case with longer term-to-maturity financial instruments.
A positive gap generally means more cash flows from assets are expected to reprice than cash flows from liabilities and suggests in a rising rate environment, that net interest income should increase.
A positive gap generally means more cash flows from assets are expected to reprice than cash flows from liabilities and suggests that in a rising rate environment, earnings should increase. A negative gap generally means more cash flows from liabilities are expected to reprice than cash flows from assets and suggests, in a rising rate environment, that earnings should decrease.
If all of the Bank's checking, savings, and money market accounts had been assumed to be subject to repricing within one year, interest-bearing liabilities which were estimated to mature or reprice within one year would have exceeded interest-earning assets with comparable characteristics by $3.94 billion, for a cumulative one-year gap of (38.7)% of total assets.
If all of the Bank's checking, savings, and money market accounts had been assumed to be subject to repricing within one year, interest-bearing liabilities estimated to mature or reprice within one year would have exceeded interest-earning assets with comparable characteristics by $4.01 billion, for a cumulative one-year gap of (42.1)% of total assets. (4) Borrowings exclude deferred prepayment penalty costs.
If interest rates were to increase 200 basis points, as of September 30, 2023, the Bank's one-year gap is projected to be $(1.21) billion, or (11.9)% of total assets. This compares to a one-year gap of $(1.17) billion, or (12.1)% of total assets, if interest rates were to have increased 200 basis points as of September 30, 2022.
If interest rates were to increase 200 basis points, as of September 30, 2024, the Bank's one-year gap is projected to be $(1.71) billion, or (17.9)% of total assets.
The table below presents the effects of the changes in interest rates on our assets and liabilities as they mature, repay, or reprice, as shown by the change in the MVPE for alternative interest rates.
The table below presents the effects of the changes in interest rates on our assets and liabilities as they mature, repay, or reprice, as shown by the change in the MVPE for alternative interest rates. Estimates for the -300 basis point scenario were not prepared at September 30, 2023.
The change in the one-year gap amount was due primarily to an increase in the amount of liability cash flows coming due in one year at September 30, 2023 compared to September 30, 2022, partially offset by an increase in the amount of asset cash flows coming due for the same time period.
The change in the one-year gap amount was due to a net increase in the amount of liability cash flows coming due in one year, partially offset by an increase in the amount of interest-earning asset cash flows coming due in one year, as of September 30, 2024, compared to September 30, 2023.
At September 30, 2023, the Bank's gap between the amount of interest-earning assets and interest-bearing liabilities projected to reprice within one year was $(1.19) billion, or (11.7)% of total assets, compared to $(1.14) billion, or (11.9)% of total assets, at September 30, 2022.
The repricing for these liabilities is projected to occur at the maturity date of each interest rate swap. 55 At September 30, 2024, the Bank's gap between the amount of interest-earning assets and interest-bearing liabilities projected to reprice within one year was $(1.51) billion, or (15.8)% of total assets, compared to $(1.19) billion, or (11.7)% of total assets, at September 30, 2023.
In the increasing rate scenarios, the sensitivity reflects the negative impacts of rates on the value of the Bank's loan and securities portfolios more so than on its deposit and borrowings portfolios. In the decreasing interest rate scenarios, the Bank's MVPE increased due to a larger increase in the market value of the Bank's assets than the Bank's liabilities.
The then shorter expected average lives of these assets decrease the sensitivity of their market value to changes in interest rates. In the increasing interest rate scenarios, the sensitivity reflects the negative impacts of rates on the value of the Bank's loan and securities portfolios more so than on its deposit and borrowings portfolios.
Change Net Interest Income At September 30, (in Basis Points) 2023 2022 in Interest Rates (1) Amount ($) Change ($) Change (%) Amount ($) Change ($) Change (%) (Dollars in thousands) -200 bp $ 126,495 $ (6,963) (5.2) % $ 182,458 $ (775) (0.4) % -100 bp 130,374 (3,084) (2.3) 183,363 130 0.1 000 bp 133,458 — — 183,233 — — +100 bp 136,147 2,689 2.0 182,737 (496) (0.3) +200 bp 138,804 5,346 4.0 182,081 (1,152) (0.6) +300 bp 141,494 8,036 6.0 181,394 (1,839) (1.0) (1) Assumes an instantaneous, parallel, and permanent change in interest rates at all maturities.
Estimates for the -300 basis point scenario were not prepared at September 30, 2023. 56 Change Net Interest Income At September 30, (in Basis Points) 2024 2023 in Interest Rates (1) Amount ($) Change ($) Change (%) Amount ($) Change ($) Change (%) (Dollars in thousands) -300 bp $ 188,322 $ 11,696 6.6 % N/A N/A N/A -200 bp 183,769 7,143 4.0 126,495 (6,963) (5.2) -100 bp 180,936 4,310 2.4 130,374 (3,084) (2.3) 000 bp 176,626 — — 133,458 — — +100 bp 171,222 (5,404) (3.1) 136,147 2,689 2.0 +200 bp 165,422 (11,204) (6.3) 138,804 5,346 4.0 +300 bp 158,758 (17,868) (10.1) 141,494 8,036 6.0 (1) Assumes an instantaneous, parallel, and permanent change in interest rates at all maturities.
Change Market Value of Portfolio Equity At September 30, (in Basis Points) 2023 2022 in Interest Rates (1) Amount ($) Change ($) Change (%) Amount ($) Change ($) Change (%) (Dollars in thousands) -200 bp $ 1,302,781 $ 283,093 27.8 % $ 1,299,340 $ 404,353 45.2 % -100 bp 1,145,404 125,716 12.3 1,024,167 129,180 14.4 000 bp 1,019,688 — — 894,987 — — +100 bp 888,642 (131,046) (12.9) 759,165 (135,822) (15.2) +200 bp 757,870 (261,818) (25.7) 625,864 (269,123) (30.1) +300 bp 632,716 (386,972) (38.0) 500,730 (394,257) (44.1) (1) Assumes an instantaneous, parallel, and permanent change in interest rates at all maturities.
Change Market Value of Portfolio Equity At September 30, (in Basis Points) 2024 2023 in Interest Rates (1) Amount ($) Change ($) Change (%) Amount ($) Change ($) Change (%) (Dollars in thousands) -300 bp $ 1,460,440 $ 359,922 32.7 % N/A N/A N/A -200 bp 1,345,708 245,190 22.3 1,302,781 283,093 27.8 -100 bp 1,218,938 118,420 10.8 1,145,404 125,716 12.3 000 bp 1,100,518 — — 1,019,688 — — +100 bp 962,354 (138,164) (12.6) 888,642 (131,046) (12.9) +200 bp 797,497 (303,021) (27.5) 757,870 (261,818) (25.7) +300 bp 634,145 (466,373) (42.4) 632,716 (386,972) (38.0) (1) Assumes an instantaneous, parallel, and permanent change in interest rates at all maturities.
(4) Borrowings exclude deferred prepayment penalty costs. Included in this line item are $365.0 million of FHLB adjustable-rate advances tied to interest rate swaps. The repricing for these liabilities is projected to occur at the maturity date of each interest rate swap.
Included in this line item are $200.0 million of FHLB adjustable-rate advances tied to interest rate swaps.
The net interest income projection was lower in the base case scenario at September 30, 2023 compared to September 30, 2022 due primarily to higher interest expense projections on the Bank's liabilities compared to the increase in the interest income projections on the Bank's assets.
The net interest income projection was higher in the base case scenario at September 30, 2024 compared to September 30, 2023, due primarily to transactions associated with the securities strategy, which resulted in a decrease in interest expense on borrowings due to the Bank repaying its BTFP borrowing and an increase in interest income on securities due to reinvestment of proceeds into higher-yielding securities.
The percentage change in the Bank's MVPE at both September 30, 2023 and September 30, 2022 was negative in all rising interest rate scenarios. The Bank's MVPE increased from $895.0 million at September 30, 2022 to $1.02 billion at September 30, 2023.
The Bank's MVPE increased from $1.02 billion at September 30, 2023 to $1.10 billion at September 30, 2024.
More generally, however, increases in net interest income in the rising rate scenarios are due to the degree to which loan repayments that are projected to reprice upward are greater than the projected increase in deposit rates in the next 12 months.
In general, increases/(decreases) in the Bank's net interest income projections under the various interest rate scenarios presented are due to the degree in which cash flows are realized and the rates projected to be earned on funds received through loan and securities repayments, in each scenario, are greater/(less) than the rates projected to be paid on deposits and borrowings in the next 12 months.
Removed
A negative gap generally means more cash flows from liabilities are expected to reprice than cash flows from assets and suggests, in a rising rate environment, that net interest income should decrease. For additional information regarding the impact of changes in interest rates, see the following Change in Net Interest Income and Change in MVPE discussions and tables.
Added
For additional information regarding the impact of changes in interest rates, see the following Change in Net Interest Income and Change in MVPE discussions and tables. 54 More Than More Than Within One Year to Three Years Over One Year Three Years to Five Years Five Years Total Interest-earning assets: (Dollars in thousands) Loans receivable (1) $ 1,678,859 $ 1,846,594 $ 1,417,793 $ 2,977,546 $ 7,920,792 Securities (2) 260,983 270,581 151,144 147,144 829,852 Other interest-earning assets 192,251 — — — 192,251 Total interest-earning assets 2,132,093 2,117,175 1,568,937 3,124,690 8,942,895 Interest-bearing liabilities: Non-maturity deposits (3) 716,264 487,721 368,611 1,642,186 3,214,782 Certificates of deposit 2,204,475 654,578 106,060 197 2,965,310 Borrowings (4) 721,264 1,157,685 310,331 25,188 2,214,468 Total interest-bearing liabilities 3,642,003 2,299,984 785,002 1,667,571 8,394,560 Excess (deficiency) of interest-earning assets over interest-bearing liabilities $ (1,509,910) $ (182,809) $ 783,935 $ 1,457,119 $ 548,335 Cumulative excess (deficiency) of interest-earning assets over interest-bearing liabilities $ (1,509,910) $ (1,692,719) $ (908,784) $ 548,335 Cumulative excess (deficiency) of interest-earning assets over interest-bearing liabilities as a percent of total Bank assets at: September 30, 2024 (15.9) % (17.8) % (9.5) % 5.8 % September 30, 2023 (11.7) Cumulative one-year gap - interest rates +200 bps at: September 30, 2024 (17.9) September 30, 2023 (11.9) (1) Adjustable-rate loans are included in the period in which the rate is next scheduled to adjust or in the period in which repayments are expected to occur, or prepayments are expected to be received, prior to their next rate adjustment, rather than in the period in which the loans are due.
Removed
More Than More Than Within One Year to Three Years Over One Year Three Years to Five Years Five Years Total Interest-earning assets: (Dollars in thousands) Loans receivable (1) $ 1,432,766 $ 1,764,668 $ 1,405,268 $ 3,383,068 $ 7,985,770 Securities (2) 341,362 648,456 195,313 200,861 1,385,992 Other interest-earning assets 213,967 — — — 213,967 Total interest-earning assets 1,988,095 2,413,124 1,600,581 3,583,929 9,585,729 Interest-bearing liabilities: Non-maturity deposits (3) 653,670 407,782 351,235 1,991,741 3,404,428 Certificates of deposit 1,499,018 1,037,730 193,262 182 2,730,192 Borrowings (4) 1,021,214 1,287,580 582,261 26,046 2,917,101 Total interest-bearing liabilities 3,173,902 2,733,092 1,126,758 2,017,969 9,051,721 Excess (deficiency) of interest-earning assets over interest-bearing liabilities $ (1,185,807) $ (319,968) $ 473,823 $ 1,565,960 $ 534,008 Cumulative excess (deficiency) of interest-earning assets over interest-bearing liabilities $ (1,185,807) $ (1,505,775) $ (1,031,952) $ 534,008 Cumulative excess (deficiency) of interest-earning assets over interest-bearing liabilities as a percent of total Bank assets at: September 30, 2023 (11.7) % (14.8) % (10.1) % 5.3 % September 30, 2022 (11.9) Cumulative one-year gap - interest rates +200 bps at: September 30, 2023 (11.9) September 30, 2022 (12.1) 50 (1) Adjustable-rate loans are included in the period in which the rate is next scheduled to adjust or in the period in which repayments are expected to occur, or prepayments are expected to be received, prior to their next rate adjustment, rather than in the period in which the loans are due.
Added
The net increase in liability cash flows coming due in one year primarily related to the Bank's retail certificate of deposit portfolio, partially offset by a net decrease in borrowings coming due in one year as the Bank repaid its BTFP amount outstanding in conjunction with the securities strategy during the current year.
Removed
This was due primarily to an increase in the amount of certificates of deposit and borrowings scheduled to mature within one year as of September 30, 2023 compared to September 30, 2022.
Added
The increase in the one-year cash flow for retail certificates of deposit was due to the Bank continuing to offer higher rates on shorter-term certificates of deposit.
Removed
The majority of interest-earning assets anticipated to reprice in the coming year are repayments and prepayments on one- to four-family loans and MBS, both of which include the option to prepay without a fee being paid by the contract holder.
Added
The increase in interest-earning assets projected to mature or reprice within one year was due primarily to an increase in the amount of loans expected to mature or reprice, partially offset by decreases in securities in conjunction with the securities strategy and the balance of cash between periods.
Removed
This was primarily driven by faster increases in the cost of liabilities during fiscal year 2023, compared to the increase in asset yields.
Added
The change in the gap compared to when there is no change in rates was due to lower anticipated net cash flows primarily as a result of lower prepayments on mortgage-related assets in the higher rate environment.
Removed
The increase in the cost of liabilities was due mainly to an increase in the balance and rate of the certificate of deposit portfolio, an increase in the rates paid on money market accounts, and an increase in the balance of higher-costing borrowings during the current year.
Added
This compares to a one-year gap of $(1.21) billion, or (11.9)% of total assets, if interest rates were to have increased 200 basis points as of September 30, 2023. Change in Net Interest Income.
Removed
This was partially offset by higher projected income on loans receivable due to a higher balance and yield on the portfolio compared to September 30, 2022. In the rising and declining interest rate scenarios, the variability of net interest income projections has become more significant due to the composition of the balance sheet and the elevated interest rate environment.
Added
During the current fiscal year, growth in the Bank's deposit portfolio was almost entirely within its certificate of deposit portfolio; more specifically, in short-term certificates of deposit as the Bank's highest offer rates were on products in this category.
Removed
At September 30, 2023, the Bank's balance of cash and cash equivalents was $245.6 million with an average yield of 4.70% compared to a balance of $49.2 million with an average yield of 1.75% at September 30, 2022.
Added
The WAM of the Bank's retail certificate of deposit portfolio decreased from 1.3 years as of September 30, 2023, to 0.8 years as of September 30, 2024, due in part to the passage of time, but primarily due to growth in the balance of shorter-term certificates of deposit.
Removed
As a result, in each interest rate scenario, there was a greater impact on net interest income at September 30, 2023 compared to September 30, 2022 due to the higher cash balance.
Added
The current Federal Open Market Committee ("FOMC") tightening cycle reached its peak during the prior year and expectations of easing have now become the consensus. By shortening the WAL of its certificate of deposit portfolio, the Bank will be better positioned to reprice its highest-costing deposits as short-term market interest rates decrease.
Removed
Additionally, due to compositional changes in the Bank's deposit portfolio between periods (increase in certificates of deposit and decrease in non-maturity deposits), the impact from instantaneous, parallel and permanent changes in the various interest rate scenarios was less pronounced at September 30, 2023.
Added
This dynamic, when coupled with the growth in the certificate of deposit portfolio and increases in deposit betas, is the primary driver of the change in the Bank's net interest income profile projections between September 30, 2023 and 2024. Change in MVPE. Changes in the estimated market values of our financial assets and liabilities drive changes in estimates of MVPE.
Removed
In the declining rate scenarios, loan repayments are repriced at rates that do not fully offset the higher cost of liabilities that are expected to reprice in the next 12 months. Change in MVPE. Changes in the estimated market values of our financial assets and liabilities drive changes in estimates of MVPE.
Added
The increase was due primarily to a decrease in market interest rates between the two periods, most notably across the intermediate and long-term tenors of the yield curve, as well as to the Bank's balance sheet composition changes resulting from the securities strategy.
Removed
The increase was primarily a result of refinements made during the current year in calculating the estimated fair value of the Bank's balance sheet; specifically, related to the treatment of unrealized gains and losses associated with its AFS securities portfolio.
Added
The decrease in market interest rates resulted in an increase in the value of the Bank's interest-earning assets more than it increased the value of its interest-bearing liabilities.
Removed
Previously, at September 30, 2022, net unrealized losses associated with the Bank's AFS securities portfolio were included in both the calculation of the estimated market value of assets and the estimated market value of securities. Unrealized gains and losses associated with the Bank's AFS securities portfolio are now only reflected in the estimated market value of its securities.
Added
Conversely, as interest rates decrease, borrowers who obtained or issued credit in a higher rate environment have more economic incentive to prepay or to refinance their mortgages and agency debt issuers have more economic incentive and opportunity to exercise their call options in order to issue new debt at lower interest rates, resulting in higher projected cash flows on these assets.
Added
In the decreasing interest rate scenarios, the Bank's MVPE increased due to a larger increase in the market value of the Bank's assets than the Bank's liabilities.

Other CFFN 10-K year-over-year comparisons