Capitol Federal Financial, Inc. (Form: 10-Q, Received: 05/10/2019 10:27:30)

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UNITED STATES SECURITIES

AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________________

Form 10-Q

________________________

(Mark One)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2019

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __ to __

Commission file number: 001-34814

Capitol Federal Financial, Inc.

(Exact name of registrant as specified in its charter)



Maryland	27-2631712
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

700 South Kansas Avenue, Topeka, Kansas	66603
(Address of principal executive offices)	(Zip Code)

(785) 235-1341

(Registrant's telephone number, including area code)

_____________________________________

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer þ	Accelerated filer ¨	Non-accelerated filer ¨
Smaller Reporting Company ¨		Emerging Growth Company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	CFFN	The NASDAQ Stock Market LLC

As of May 3, 2019, there were 141,371,539 shares of Capitol Federal Financial, Inc. common stock outstanding.



PART I - FINANCIAL INFORMATION		Page Number
Item 1.	Financial Statements (Unaudited)	3
	Consolidated Balance Sheets at March 31, 2019 and September 30, 2018	3
	Consolidated Statements of Income for the three and six months ended March 31, 2019 and 2018	4
	Consolidated Statements of Comprehensive Income for the three and six months ended March 31, 2019 and 2018	5
	Consolidated Statements of Stockholders' Equity for the three and six months ended March 31, 2019 and 2018	6
	Consolidated Statements of Cash Flows for the six months ended March 31, 2019 and 2018	7
	Notes to Consolidated Financial Statements	9
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	32
	Financial Condition - Loans Receivable	37
	Financial Condition - Asset Quality	45
	Financial Condition - Liabilities	53
	Financial Condition - Stockholders' Equity	56
	Operating Results	57
	Comparison of Operating Results for the six months ended March 31, 2019 and 2018	58
	Comparison of Operating Results for the three months ended March 31, 2019 and 2018	64
	Comparison of Operating Results for the three months ended March 31, 2019 and December 31, 2018	70
Item 3.	Quantitative and Qualitative Disclosure about Market Risk	81
Item 4.	Controls and Procedures	86


PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	87
Item 1A.	Risk Factors	87
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	87
Item 3.	Defaults Upon Senior Securities	87
Item 4.	Mine Safety Disclosures	87
Item 5.	Other Information	87
Item 6.	Exhibits	87


INDEX TO EXHIBITS		88


SIGNATURES		90

PART I -- FINANCIAL INFORMATION

Item 1. Financial Statements



CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollars in thousands, except per share amounts)

	March 31,			September 30,
	2019			2018
ASSETS:
Cash and cash equivalents (includes interest-earning deposits of $199,476 and $122,733)	$	218,051		$	139,055
Securities:
Available-for-sale ("AFS"), at estimated fair value (amortized cost of $741,975 and $718,564)	746,728			714,614
Held-to-maturity ("HTM"), at amortized cost (estimated fair value of $526,099 and $601,071)	527,460			612,318
Loans receivable, net (allowance for credit losses ("ACL") of $8,619 and $8,463)	7,570,806			7,514,485
Federal Home Loan Bank Topeka ("FHLB") stock, at cost	102,631			99,726
Premises and equipment, net	96,492			96,005
Income taxes receivable, net	—			2,177
Other assets	272,383			271,167
TOTAL ASSETS	$	9,534,551		$	9,449,547

LIABILITIES:
Deposits	$	5,701,111		$	5,603,354
FHLB borrowings	2,239,985			2,174,981
Other borrowings	100,000			110,052
Advance payments by borrowers for taxes and insurance	48,301			65,264
Income taxes payable, net	115			—
Deferred income tax liabilities, net	17,375			21,253
Accounts payable and accrued expenses	71,681			83,021
Total liabilities	8,178,568			8,057,925

STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; 100,000,000 shares authorized, no shares issued or outstanding	—			—
Common stock, $.01 par value; 1,400,000,000 shares authorized, 141,279,239 and 141,225,516
shares issued and outstanding as of March 31, 2019 and September 30, 2018, respectively	1,413			1,412
Additional paid-in capital	1,208,665			1,207,644
Unearned compensation, Employee Stock Ownership Plan ("ESOP")	(35,517		)	(36,343		)
Retained earnings	186,838			214,569
Accumulated other comprehensive (loss) income ("AOCI"), net of tax	(5,416		)	4,340
Total stockholders' equity	1,355,983			1,391,622
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	9,534,551		$	9,449,547

See accompanying notes to consolidated financial statements.



CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars in thousands, except per share amounts)

	For the Three Months Ended				For the Six Months Ended
	March 31,				March 31,
	2019		2018		2019		2018
INTEREST AND DIVIDEND INCOME:
Loans receivable	$	71,657	$	64,194	$	142,429	$	128,383
Mortgage-backed securities ("MBS")	6,301		5,390		12,824		10,642
FHLB stock	1,831		3,201		3,802		6,296
Investment securities	1,505		1,094		2,946		2,088
Cash and cash equivalents	743		7,895		2,457		15,009
Total interest and dividend income	82,037		81,774		164,458		162,418
INTEREST EXPENSE:
Deposits	16,096		12,480		31,821		24,441
FHLB borrowings	12,525		18,772		26,055		36,689
Other borrowings	819		633		1,684		2,025
Total interest expense	29,440		31,885		59,560		63,155
NET INTEREST INCOME	52,597		49,889		104,898		99,263
PROVISION FOR CREDIT LOSSES	—		—		—		—
NET INTEREST INCOME AFTER
PROVISION FOR CREDIT LOSSES	52,597		49,889		104,898		99,263
NON-INTEREST INCOME:
Deposit service fees	3,091		3,670		6,443		7,635
Income from bank-owned life insurance ("BOLI")	587		276		1,222		810
Other non-interest income	1,323		1,487		2,760		2,346
Total non-interest income	5,001		5,433		10,425		10,791
NON-INTEREST EXPENSE:
Salaries and employee benefits	12,789		11,167		25,751		21,695
Information technology and related expense	4,284		3,622		8,883		6,953
Occupancy, net	3,292		2,839		6,544		5,604
Regulatory and outside services	1,056		1,151		2,822		2,291
Advertising and promotional	1,390		1,337		2,150		2,022
Deposit and loan transaction costs	465		1,313		1,201		2,720
Office supplies and related expense	736		442		1,195		884
Federal insurance premium	659		847		1,187		1,699
Other non-interest expense	1,470		880		3,190		1,766
Total non-interest expense	26,141		23,598		52,923		45,634
INCOME BEFORE INCOME TAX EXPENSE	31,457		31,724		62,400		64,420
INCOME TAX EXPENSE	6,903		8,394		13,463		9,254
NET INCOME	$	24,554	$	23,330	$	48,937	$	55,166

Basic earnings per share ("EPS")	$	0.18	$	0.17	$	0.36	$	0.41
Diluted EPS	$	0.18	$	0.17	$	0.36	$	0.41

Basic weighted average common shares	137,634,820		134,428,227		137,592,409		134,400,300
Diluted weighted average common shares	137,690,717		134,475,228		137,641,126		134,471,259

See accompanying notes to consolidated financial statements.



CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
(Dollars in thousands)

	For the Three Months Ended						For the Six Months Ended
	March 31,						March 31,
	2019			2018			2019			2018
Net income	$	24,554		$	23,330		$	48,937		$	55,166
Other comprehensive income (loss), net of tax:
Changes in unrealized gains (losses) on AFS securities,
net of taxes of $(982), $610, $(2,115) and $1,319	3,061			(1,898		)	6,588			(3,064		)
Changes in unrealized gains (losses) on cash flow hedges,
net of taxes of $2,118, $(1,063), $5,246 and $(1,867)	(6,600		)	3,316			(16,344		)	4,638
Comprehensive income	$	21,015		$	24,748		$	39,181		$	56,740

See accompanying notes to consolidated financial statements.



CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited)
(Dollars in thousands, except per share amounts)

	For the Six Months Ended March 31, 2019
			Additional		Unearned									Total
	Common		Paid-In		Compensation			Retained						Stockholders'
	Stock		Capital		ESOP			Earnings			AOCI			Equity
Balance at September 30, 2018	$	1,412	$	1,207,644	$	(36,343	)	$	214,569		$	4,340		$	1,391,622
Net income								24,383						24,383
Other comprehensive loss, net of tax											(6,217		)	(6,217		)
Cumulative effect of adopting Accounting Standards Update ("ASU") 2014-09								394						394
ESOP activity			118		413									531
Stock-based compensation			95											95
Stock options exercised	1		466											467
Cash dividends to stockholders ($0.475 per share)								(65,362		)				(65,362		)
Balance at December 31, 2018	1,413		1,208,323		(35,930		)	173,984			(1,877		)	1,345,913
Net income								24,554						24,554
Other comprehensive loss, net of tax											(3,539		)	(3,539		)
ESOP activity			134		413									547
Stock-based compensation			90											90
Stock options exercised	—		118											118
Cash dividends to stockholders ($0.085 per share)								(11,700		)				(11,700		)
Balance at March 31, 2019	$	1,413	$	1,208,665	$	(35,517	)	$	186,838		$	(5,416	)	$	1,355,983



	For the Six Months Ended March 31, 2018
			Additional		Unearned								Total
	Common		Paid-In		Compensation			Retained					Stockholders'
	Stock		Capital		ESOP			Earnings			AOCI		Equity
Balance at September 30, 2017	$	1,382	$	1,167,368	$	(37,995	)	$	234,640		$	2,918	$	1,368,313
Net income								31,836					31,836
Other comprehensive income, net of tax											156		156
Cumulative effect of adopting ASU 2016-09			19					(19		)			—
ESOP activity			165		413								578
Stock-based compensation			94										94
Stock options exercised	—		46										46
Cash dividends to stockholders ($0.375 per share)								(50,412		)			(50,412		)
Balance at December 31, 2017	1,382		1,167,692		(37,582		)	216,045			3,074		1,350,611
Net income								23,330					23,330
Other comprehensive income, net of tax											1,418		1,418
Reclassification of certain tax effects related to adopting ASU 2018-02								(667		)	667		—
ESOP activity			123		413								536
Stock-based compensation			93										93
Stock options exercised			179										179
Cash dividends to stockholders ($0.085 per share)								(11,427		)			(11,427		)
Balance at March 31, 2018	$	1,382	$	1,168,087	$	(37,169	)	$	227,281		$	5,159	$	1,364,740

See accompanying notes to consolidated financial statements.



CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in thousands)

	For the Six Months Ended
	March 31,
	2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	48,937		$	55,166
Adjustments to reconcile net income to net cash provided by operating activities:
FHLB stock dividends	(3,802		)	(6,296		)
Originations of loans receivable held-for-sale ("LHFS")	—			(390		)
Proceeds from sales of LHFS	—			16,035
Amortization and accretion of premiums and discounts on securities	737			1,733
Depreciation and amortization of premises and equipment	4,710			4,180
Amortization of intangible assets	1,189			—
Amortization of deferred amounts related to FHLB advances, net	4			670
Common stock committed to be released for allocation - ESOP	1,078			1,114
Stock-based compensation	185			187
Changes in:
Unrestricted cash collateral (provided to)/received from derivative counterparties, net	(9,970		)	6,711
Other assets, net	1,418			2,257
Income taxes payable, net	2,291			138
Deferred income tax liabilities, net	(745		)	(6,396		)
Accounts payable and accrued expenses	(13,894		)	(8,350		)
Net cash provided by operating activities	32,138			66,759

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of AFS securities	(172,506		)	(223,829		)
Proceeds from calls, maturities and principal reductions of AFS securities	149,524			73,993
Proceeds from calls, maturities and principal reductions of HTM securities	83,692			109,702
Proceeds from sale of AFS securities	—			2,078
Proceeds from the redemption of FHLB stock	97,096			3,045
Purchase of FHLB stock	(96,199		)	(91,421		)
Net increase in loans receivable	(57,073		)	(22,437		)
Purchase of premises and equipment	(4,583		)	(4,214		)
Proceeds from sale of other real estate owned ("OREO")	1,062			1,587
Net cash provided by (used in) investing activities	1,013			(151,496		)

				(Continued)



CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in thousands)

	For the Six Months Ended
	March 31,
	2019			2018
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends paid	(77,062		)	(61,839		)
Net change in deposits	97,757			44,325
Proceeds from borrowings	2,680,000			8,500,000
Repayments on borrowings	(2,625,052		)	(8,600,000		)
Change in advance payments by borrowers for taxes and insurance	(16,963		)	(9,053		)
Stock options exercised	585			225
Net cash provided by (used in) financing activities	59,265			(126,342		)

NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS	92,416			(211,079		)

CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS:
Beginning of period	139,055			351,659
End of period	$	231,471		$	140,580

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Loans transferred to LHFS	$	—		$	15,814

See accompanying notes to consolidated financial statements.				(Concluded)

Notes to Consolidated Financial Statements (Unaudited)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation - The consolidated financial statements include the accounts of Capitol Federal® Financial, Inc. (the "Company") and its wholly-owned subsidiary, Capitol Federal Savings Bank (the "Bank"). The Bank has two wholly-owned subsidiaries, Capitol Funds, Inc. and Capital City Investments, Inc. Capitol Funds, Inc. has a wholly-owned subsidiary, Capitol Federal Mortgage Reinsurance Company. Capital City Investments, Inc. is a real estate and investment holding company. All intercompany accounts and transactions have been eliminated in consolidation. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. These statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2018, filed with the Securities and Exchange Commission ("SEC"). Interim results are not necessarily indicative of results for a full year.

Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents - Cash, cash equivalents, restricted cash and restricted cash equivalents reported in the statement of cash flows include cash and cash equivalents of $218.1 million and $139.1 million at March 31, 2019 and September 30, 2018 and restricted cash and cash equivalents of $13.4 million at March 31, 2019, which was included in other assets on the consolidated balance sheet. There was no restricted cash and cash equivalents at September 30, 2018. The restricted cash and cash equivalents relate to the collateral postings to/from the Bank's derivative counterparties associated with the Bank's interest rate swaps. See additional discussion regarding the interest rate swaps in Note 5. Borrowed Funds.

Net Presentation of Cash Flows Related to Borrowings - At times, the Bank enters into certain FHLB advances with contractual maturities of 90 days or less. Cash flows related to these advances are reported on a net basis in the consolidated statements of cash flows.

Recent Accounting Pronouncements - In May 2014, the Financial Accounting Standards Board ("FASB") issued ASU 2014-09, Revenue from Contracts with Customers. The ASU, as amended, implements a common revenue standard that clarifies the principles for recognizing revenue included in Accounting Standards Codification ("ASC") Topic 606. The core principle of the amended guidance is that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The majority of the Company's revenue is composed of interest income from loans and securities which are explicitly excluded from the amended ASU. The Company elected to implement the amended ASU using the modified retrospective application with a cumulative adjustment to opening retained earnings at October 1, 2018. Upon adoption of the amended ASU, the Company recorded a cumulative adjustment, which increased opening retained earnings by $394 thousand related to contracts that were not complete upon adoption. The amount was related to the change in the recognition of revenue related to certain insurance commissions. Additionally, effective October 1, 2018, interchange network charges are reported as a reduction in deposit service fees. Previously, these charges were reported as expense in deposit and loan transaction costs in the consolidated statements of income. The Company concluded the ASU did not significantly change the Company's revenue recognition methods. This ASU did not have a material impact on the Company's consolidated financial condition or results of operations at the time of adoption. The new disclosure requirements of the ASU are included in Note 8. Revenue Recognition.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. The ASU supersedes certain accounting guidance related to equity securities with readily determinable fair values and the related impairment assessment. An entity's equity investments that are accounted for under the equity method of accounting or result in consolidation of an investee are not included within the scope of this ASU. The ASU requires public business entities to utilize the exit price notion when determining fair value for financial instruments measured at amortized cost on the balance sheet. The ASU also requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or in the notes to the financial statements. ASU 2016-01 became effective for the Company on October 1, 2018. The adoption of this ASU did not have a material impact on the Company's consolidated financial condition or results of operations. The new disclosure requirements of the ASU are included in Note 6. Fair Value of Financial Instruments.

In February 2016, the FASB issued ASU 2016-02, Leases. The ASU, as amended, revises lease accounting guidance by requiring that lessees recognize the assets and liabilities arising from leases on the balance sheet. Additionally, the ASU requires entities to disclose both quantitative and qualitative information regarding their leasing activities. The accounting applied by a lessor is largely unchanged from that applied under the previous guidance. ASU 2016-02 will become effective for the Company on October 1, 2019. In July 2018, the FASB issued ASU 2018-11, Leases, which provides entities with relief from the costs of implementation by allowing the option to not restate comparative periods as part of the transition. The Company expects to select the transition relief provisions.

The Company has completed its development of a lease inventory and an internal lease data collection, organization, and computing platform for compliance with this ASU. The Company is continuing to evaluate the impact this ASU may have on the Company's consolidated financial condition and results of operations. The Company expects to recognize right-of-use assets and lease liabilities for substantially all of its operating lease commitments based on the present value of the minimum commitments under non-cancellable leases as of the date of adoption. The Company is continuing to evaluate the impact this ASU may have to the Company's disclosures.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments. The ASU, as amended, replaces the incurred loss impairment methodology in current GAAP, which requires credit losses to be recognized when it is probable that a loss has been incurred, with a new impairment methodology. The new impairment methodology requires an entity to measure, at each reporting date, the expected credit losses of financial assets not measured at fair value, such as loans, HTM debt securities, and loan commitments, over their contractual lives. Under the new impairment methodology, expected credit losses will be measured at each reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Additionally, the ASU amends the current credit loss measurements for AFS debt securities. Credit losses related to AFS debt securities will be recorded through the ACL rather than as a direct write-down as per current GAAP. The ASU also requires enhanced disclosures related to credit quality and significant estimates and judgments used by management when estimating credit losses. The ASU will become effective for the Company on October 1, 2020. The Company has selected a third-party vendor solution to assist in the application and implementation of the new accounting guidance and will begin loading historical loan and loss data into the third-party software during the third quarter of fiscal year 2019. While we are currently unable to reasonably estimate the impact of adopting this ASU, we expect the impact of adoption will be influenced by the composition of our loan and securities portfolios as well as the economic conditions and forecasts at the time of adoption.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows: Restricted Cash (a consensus of the FASB Emerging Issues Task Force). The ASU addresses diversity in the classification and presentation of changes in restricted cash and cash equivalents on the statement of cash flows. The ASU requires that amounts described as restricted cash and cash equivalents be included with cash and cash equivalents when reconciling the beginning and ending amounts presented on the statement of cash flows, requires disclosures on the nature of restrictions on cash and cash equivalents, and the amount and financial statement line presentation of restricted cash and cash equivalents. The Company adopted this ASU on October 1, 2018 and it did not have a material impact on the Company's consolidated financial condition or results of operations at the time of adoption.

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities. The ASU amends the hedge accounting recognition and presentation requirements in current GAAP. The purpose of the ASU was to improve transparency of hedging relationships in the financial statements and to reduce the complexity of applying hedge accounting for preparers. The ASU will become effective for the Company on October 1, 2019. The Company is currently evaluating the effect of the ASU on the Company's consolidated financial condition, results of operations and disclosures.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement: Disclosure Framework - Changes to the Disclosures Requirements for Fair Value Measurement. This ASU eliminates, modifies and adds certain disclosure requirements for fair value measurements. The ASU adds disclosure requirements for the changes in unrealized gains and losses included in other comprehensive income for recurring Level 3 fair value measurements and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The effective date of this ASU for the Company is October 1, 2020, with early adoption permitted. Entities are allowed to elect early adoption of the eliminated or modified disclosure requirements and delay adoption of the new disclosure requirements until their effective date. Since this ASU only requires disclosure changes, it will not have a significant impact on the Company's consolidated financial condition and results of operations.

In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software: Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include internal-use software license). The effective date of this ASU for the Company is October 1, 2020, with early adoption permitted. The Company is currently evaluating the effect of the ASU on the Company's consolidated financial condition, results of operations and disclosures.

2. EARNINGS PER SHARE

Shares acquired by the ESOP are not included in basic average shares outstanding until the shares are committed for allocation or vested to an employee's individual account. Unvested shares awarded pursuant to the Company's restricted stock benefit plans are treated as participating securities in the computation of EPS pursuant to the two-class method as they contain nonforfeitable rights to dividends. The two-class method is an earnings allocation that determines EPS for each class of common stock and participating security.



	For the Three Months Ended						For the Six Months Ended
	March 31,						March 31,
	2019			2018			2019			2018
	(Dollars in thousands, except per share amounts)
Net income	$	24,554		$	23,330		$	48,937		$	55,166
Income allocated to participating securities	(10		)	(10		)	(19		)	(23		)
Net income available to common stockholders	$	24,544		$	23,320		$	48,918		$	55,143

Average common shares outstanding	137,593,062			134,386,469			137,571,533			134,379,424
Average committed ESOP shares outstanding	41,758			41,758			20,876			20,876
Total basic average common shares outstanding	137,634,820			134,428,227			137,592,409			134,400,300

Effect of dilutive stock options	55,897			47,001			48,717			70,959

Total diluted average common shares outstanding	137,690,717			134,475,228			137,641,126			134,471,259

Net EPS:
Basic	$	0.18		$	0.17		$	0.36		$	0.41
Diluted	$	0.18		$	0.17		$	0.36		$	0.41

Antidilutive stock options, excluded from the diluted average
common shares outstanding calculation	494,395			598,195			529,261			527,642

3. SECURITIES

The following tables reflect the amortized cost, estimated fair value, and gross unrealized gains and losses of AFS and HTM securities at the dates presented. The majority of the MBS and investment securities portfolios are composed of securities issued by United States government-sponsored enterprises ("GSEs").



	March 31, 2019
			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(Dollars in thousands)
AFS:
MBS	$	469,455	$	5,995	$	606	$	474,844
GSE debentures	268,375		274		908		267,741
Municipal bonds	4,145		3		5		4,143
	$	741,975	$	6,272	$	1,519	$	746,728
HTM:
MBS	$	510,450	$	5,107	$	6,461	$	509,096
Municipal bonds	17,010		19		26		17,003
	$	527,460	$	5,126	$	6,487	$	526,099



	September 30, 2018
			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(Dollars in thousands)
AFS:
MBS	$	445,883	$	3,270	$	4,063	$	445,090
GSE debentures	268,525		30		3,157		265,398
Municipal bonds	4,156		—		30		4,126
	$	718,564	$	3,300	$	7,250	$	714,614
HTM:
MBS	$	591,900	$	4,514	$	15,589	$	580,825
Municipal bonds	20,418		—		172		20,246
	$	612,318	$	4,514	$	15,761	$	601,071

The following tables summarize the estimated fair value and gross unrealized losses of those securities on which an unrealized loss at the dates presented was reported and the continuous unrealized loss position for less than 12 months and equal to or greater than 12 months as of the dates presented.



	March 31, 2019
	Less Than 12 Months				Equal to or Greater Than 12 Months
	Estimated		Unrealized		Estimated		Unrealized
	Fair Value		Losses		Fair Value		Losses
	(Dollars in thousands)
AFS:
MBS	$	11,197	$	55	$	67,001	$	551
GSE debentures	27,776		3		99,077		905
Municipal bonds	—		—		1,510		5
	$	38,973	$	58	$	167,588	$	1,461


HTM:
MBS	$	1,551	$	2	$	331,809	$	6,459
Municipal bonds	330		2		7,977		24
	$	1,881	$	4	$	339,786	$	6,483



	September 30, 2018
	Less Than 12 Months				Equal to or Greater Than 12 Months
	Estimated		Unrealized		Estimated		Unrealized
	Fair Value		Losses		Fair Value		Losses
	(Dollars in thousands)
AFS:
MBS	$	324,563	$	3,797	$	8,129	$	266
GSE debentures	101,735		1,231		148,049		1,926
Municipal bonds	4,126		30		—		—
	$	430,424	$	5,058	$	156,178	$	2,192


HTM:
MBS	$	58,233	$	904	$	362,806	$	14,685
Municipal bonds	18,345		171		685		1
	$	76,578	$	1,075	$	363,491	$	14,686

The unrealized losses at March 31, 2019 and September 30, 2018 were primarily a result of an increase in market yields from the time the securities were purchased. In general, as market yields rise, the fair value of securities will decrease; as market yields fall, the fair value of securities will increase. Management generally views changes in fair value caused by changes in interest rates as temporary. Therefore, these securities have not been classified as other-than-temporarily impaired. The impairment is also considered temporary because scheduled coupon payments have been made, it is anticipated that the entire principal balance will be collected as scheduled, and management neither intends to sell the securities, nor is it more likely than not that the Company will be required to sell the securities, before the recovery of the remaining amortized cost amount, which could be at maturity. As a result of the analysis, management has concluded that no other-than-temporary impairments existed at March 31, 2019 or September 30, 2018.

The amortized cost and estimated fair value of debt securities as of March 31, 2019, by contractual maturity, are shown below. Actual principal repayments may differ from contractual maturities due to prepayment or early call privileges by the issuer. In the case of MBS, borrowers on the underlying loans generally have the right to prepay their loans without prepayment penalty. For this reason, MBS are not included in the maturity categories.



	AFS				HTM
	Amortized		Estimated		Amortized		Estimated
	Cost		Fair Value		Cost		Fair Value
	(Dollars in thousands)
One year or less	$	5,400	$	5,398	$	3,842	$	3,837
One year through five years	267,120		266,486		13,168		13,166
	272,520		271,884		17,010		17,003
MBS	469,455		474,844		510,450		509,096
	$	741,975	$	746,728	$	527,460	$	526,099

The following table presents the taxable and non-taxable components of interest income on investment securities for the periods presented.



	For the Three Months Ended				For the Six Months Ended
	March 31,				March 31,
	2019		2018		2019		2018
	(Dollars in thousands)
Taxable	$	1,419	$	998	$	2,767	$	1,878
Non-taxable	86		96		179		210
	$	1,505	$	1,094	$	2,946	$	2,088

The following table summarizes the carrying value of securities pledged as collateral for the obligations indicated below as of the dates presented.



	March 31, 2019		September 30, 2018
	(Dollars in thousands)
Public unit deposits	$	467,812	$	515,553
Repurchase agreements	107,862		108,360
Federal Reserve Bank of Kansas City ("FRB of Kansas City")	7,979		9,529
	$	583,653	$	633,442

4. LOANS RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES

Loans receivable, net at the dates presented is summarized as follows:



	March 31, 2019			September 30, 2018
	(Dollars in thousands)
One- to four-family:
Originated	$	3,922,565		$	3,965,692
Correspondent purchased	2,470,619			2,505,987
Bulk purchased	272,575			293,607
Construction	33,525			33,149
Total	6,699,284			6,798,435
Commercial:
Commercial real estate	547,202			426,243
Commercial and industrial	73,852			62,869
Construction	108,649			80,498
Total	729,703			569,610
Consumer:
Home equity	125,176			129,588
Other	9,913			10,012
Total	135,089			139,600

Total loans receivable	7,564,076			7,507,645

Less:
ACL	8,619			8,463
Discounts/unearned loan fees	32,582			33,933
Premiums/deferred costs	(47,931		)	(49,236		)
	$	7,570,806		$	7,514,485

Lending Practices and Underwriting Standards - Originating and purchasing one- to four-family loans is the Bank's primary lending business. The Bank also originates consumer loans primarily secured by one- to four-family residential properties and originates and participates in commercial loans. The Bank has a loan concentration in one- to four-family loans and a geographic concentration of these loans in Kansas and Missouri.

One- to four-family loans - Full documentation to support an applicant's credit and income, and sufficient funds to cover all applicable fees and reserves at closing, are required on all loans. Generally, loans are underwritten according to the "ability to repay" and "qualified mortgage" standards, as issued by the Consumer Financial Protection Bureau ("CFPB"). Properties securing one- to four-family loans are appraised by either staff appraisers or fee appraisers, both of which are independent of the loan origination function and approved by our Board of Directors.

The underwriting standards for loans purchased from correspondent lenders are generally similar to the Bank's internal underwriting standards. The underwriting of loans purchased from correspondent lenders on a loan-by-loan basis is performed by the Bank's underwriters.

The Bank also originates construction and owner-occupied construction-to-permanent loans secured by one- to four-family residential real estate. Construction draw requests and the supporting documentation are reviewed and approved by designated personnel. The Bank also performs regular documented inspections of the construction project to ensure the funds are being used for the intended purpose and the project is being completed according to the plans and specifications provided.

Commercial loans - The Bank's commercial real estate loans are originated by the Bank or are in participation with a lead bank. When underwriting a commercial real estate loan, several factors are considered, such as the income producing potential of the property, cash equity provided by the borrower, the financial strength of the borrower, managerial expertise of the borrower or tenant, feasibility studies, lending experience with the borrower and the marketability of the property. For commercial real estate participation loans, the

Bank performs the same underwriting procedures as if the loan was being originated by the Bank. At the time of origination, loan-to-value ("LTV") ratios on commercial real estate loans generally do not exceed 80% of the appraised value of the property securing the loans and the minimum debt service coverage ratio is generally 1.20. Appraisals on properties securing these loans are performed by independent state certified fee appraisers.

The Bank's commercial and industrial loans are generally made in the Bank's market areas and are underwritten on the basis of the borrower's ability to service the debt from income. Working capital loans are primarily collateralized by short-term assets whereas term loans are primarily collateralized by long-term assets. In general, commercial and industrial loans involve more credit risk than commercial real estate loans due to the type of collateral securing these loans, as well as the expectation that commercial and industrial loans generally will be serviced principally from the operations of the business, and those operations may not be successful. As a result of these additional complexities, variables and risks, these loans require more thorough underwriting and servicing than other types of loans.

Consumer loans - The Bank offers a variety of secured consumer loans, including home equity loans and lines of credit, home improvement loans, vehicle loans, and loans secured by deposits. The Bank also originates a very limited amount of unsecured loans. The majority of the consumer loan portfolio is comprised of home equity lines of credit for which the Bank also has the first mortgage or the home equity line of credit is in the first lien position.

The underwriting standards for consumer loans include a determination of an applicant's payment history on other debts and an assessment of an applicant's ability to meet existing obligations and payments on the proposed loan. Although creditworthiness of an applicant is a primary consideration, the underwriting process also includes a comparison of the value of the security in relation to the proposed loan amount.

Credit Quality Indicators - Based on the Bank's lending emphasis and underwriting standards, management has segmented the loan portfolio into three segments: (1) one- to four-family; (2) consumer; and (3) commercial. These segments are further divided into classes for purposes of providing disaggregated information about the credit quality of the loan portfolio. The classes are: one- to four-family - originated, one- to four-family - correspondent purchased, one- to four-family - bulk purchased, consumer - home equity, consumer - other, commercial - commercial real estate, and commercial - commercial and industrial.

The Bank's primary credit quality indicators for the one- to four-family and consumer - home equity loan portfolios are delinquency status, asset classifications, LTV ratios, and borrower credit scores. The Bank's primary credit quality indicators for the commercial and consumer - other loan portfolios are delinquency status and asset classifications.

The following tables present the recorded investment, by class, in loans 30 to 89 days delinquent, loans 90 or more days delinquent or in foreclosure, total delinquent loans, current loans, and total recorded investment at the dates presented. The recorded investment in loans is defined as the unpaid principal balance of a loan, less charge-offs and inclusive of unearned loan fees and deferred costs. At March 31, 2019 and September 30, 2018, all loans 90 or more days delinquent were on nonaccrual status.



	March 31, 2019
			90 or More Days		Total				Total
	30 to 89 Days		Delinquent or		Delinquent		Current		Recorded
	Delinquent		in Foreclosure		Loans		Loans		Investment
	(Dollars in thousands)
One- to four-family:
Originated	$	8,665	$	5,158	$	13,823	$	3,927,534	$	3,941,357
Correspondent purchased	4,186		932		5,118		2,499,826		2,504,944
Bulk purchased	2,764		2,799		5,563		268,267		273,830
Commercial:
Commercial real estate	64		—		64		651,373		651,437
Commercial and industrial	1,303		—		1,303		71,741		73,044
Consumer:
Home equity	430		514		944		123,999		124,943
Other	51		14		65		9,805		9,870
	$	17,463	$	9,417	$	26,880	$	7,552,545	$	7,579,425



	September 30, 2018
			90 or More Days		Total				Total
	30 to 89 Days		Delinquent or		Delinquent		Current		Recorded
	Delinquent		in Foreclosure		Loans		Loans		Investment
	(Dollars in thousands)
One- to four-family:
Originated	$	10,613	$	5,025	$	15,638	$	3,968,362	$	3,984,000
Correspondent purchased	3,846		458		4,304		2,536,913		2,541,217
Bulk purchased	3,521		3,063		6,584		288,386		294,970
Commercial:
Commercial real estate	76		—		76		501,932		502,008
Commercial and industrial	250		—		250		61,255		61,505
Consumer:
Home equity	472		521		993		128,351		129,344
Other	61		10		71		9,833		9,904
	$	18,839	$	9,077	$	27,916	$	7,495,032	$	7,522,948

The recorded investment in mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process as of March 31, 2019 and September 30, 2018 was $3.1 million and $2.9 million, respectively, which is included in loans 90 or more days delinquent or in foreclosure in the table above. The carrying value of residential OREO held as a result of obtaining physical possession upon completion of a foreclosure or through completion of a deed in lieu of foreclosure was $871 thousand at March 31, 2019 and $1.3 million at September 30, 2018.

The following table presents the recorded investment, by class, in loans classified as nonaccrual at the dates presented.



	March 31, 2019		September 30, 2018
	(Dollars in thousands)
One- to four-family:
Originated	$	6,872	$	6,503
Correspondent purchased	932		863
Bulk purchased	2,799		3,063
Commercial:
Commercial real estate	1,288		—
Commercial and industrial	—		—
Consumer:
Home equity	517		530
Other	20		10
	$	12,428	$	10,969

In accordance with the Bank's asset classification policy, management regularly reviews the problem loans in the Bank's portfolio to determine whether any loans require classification. Loan classifications are defined as follows:


•	Special mention - These loans are performing loans on which known information about the collateral pledged or the possible credit problems of the borrower(s) have caused management to have doubts as to the ability of the borrower(s) to comply with present loan repayment terms and which may result in the future inclusion of such loans in the non-performing loan categories.


•	Substandard - A loan is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard loans include those characterized by the distinct possibility the Bank will sustain some loss if the deficiencies are not corrected.


•	Doubtful - Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses present make collection or liquidation in full on the basis of currently existing facts and conditions and values highly questionable and improbable.


•	Loss - Loans classified as loss are considered uncollectible and of such little value that their continuance as assets on the books is not warranted.

The following table sets forth the recorded investment in loans classified as special mention or substandard, by class, at the dates presented. Special mention and substandard loans are included in the ACL formula analysis model if the loans are not individually evaluated for loss. Loans classified as doubtful or loss are individually evaluated for loss. At the dates presented, there were no loans classified as doubtful, and all loans classified as loss were fully charged-off.



	March 31, 2019				September 30, 2018
	Special Mention		Substandard		Special Mention		Substandard
	(Dollars in thousands)
One- to four-family:
Originated	$	9,522	$	19,247	$	8,660	$	22,409
Correspondent purchased	2,312		3,101		997		3,126
Bulk purchased	69		6,208		—		7,195
Commercial:
Commercial real estate	3,675		1,288		1,251		1,368
Commercial and industrial	1,641		—		1,126		—
Consumer:
Home equity	110		834		298		894
Other	15		3		—		10
	$	17,344	$	30,681	$	12,332	$	35,002

The following table shows the weighted average credit score and weighted average LTV for one- to four-family loans and consumer home equity loans at the dates presented. Borrower credit scores are intended to provide an indication as to the likelihood that a borrower will repay their debts. Credit scores are updated at least semiannually, with the last update in March 2019, from a nationally recognized consumer rating agency. The LTV ratios provide an estimate of the extent to which the Bank may incur a loss on any given loan that may go into foreclosure. The consumer - home equity LTV does not take into account the first lien position, if applicable. The LTV ratios were based on the current loan balance and either the lesser of the purchase price or original appraisal, or the most recent Bank appraisal, if available. In most cases, the most recent appraisal was obtained at the time of origination.



	March 31, 2019			September 30, 2018
	Credit Score	LTV		Credit Score	LTV
One- to four-family - originated	768	62	%	767	63	%
One- to four-family - correspondent	764	66		764	67
One- to four-family - bulk purchased	761	61		758	62
Consumer - home equity	754	21		750	22
	766	63		765	63

Troubled Debt Restructurings ("TDRs") - The following tables present the recorded investment prior to restructuring and immediately after restructuring in all loans restructured during the periods presented. These tables do not reflect the recorded investment at the end of the periods indicated. Any increase in the recorded investment at the time of the restructuring was generally due to the capitalization of delinquent interest and/or escrow balances.



	For the Three Months Ended					For the Six Months Ended
	March 31, 2019					March 31, 2019
	Number	Pre-		Post-		Number	Pre-		Post-
	of	Restructured		Restructured		of	Restructured		Restructured
	Contracts	Outstanding		Outstanding		Contracts	Outstanding		Outstanding
	(Dollars in thousands)
One- to four-family:
Originated	—	$	—	$	—	1	$	117	$	117
Correspondent purchased	—	—		—		—	—		—
Bulk purchased	1	308		308		1	308		308
Commercial:
Commercial real estate	—	—		—		—	—		—
Commercial and industrial	—	—		—		—	—		—
Consumer:
Home equity	—	—		—		—	—		—
Other	—	—		—		—	—		—
	1	$	308	$	308	2	$	425	$	425



	For the Three Months Ended					For the Six Months Ended
	March 31, 2018					March 31, 2018
	Number	Pre-		Post-		Number	Pre-		Post-
	of	Restructured		Restructured		of	Restructured		Restructured
	Contracts	Outstanding		Outstanding		Contracts	Outstanding		Outstanding
	(Dollars in thousands)
One- to four-family:
Originated	2	$	93	$	94	3	$	167	$	176
Correspondent purchased	—	—		—		—	—		—
Bulk purchased	—	—		—		—	—		—
Commercial:
Commercial real estate	—	—		—		—	—		—
Commercial and industrial	—	—		—		—	—		—
Consumer:
Home equity	—	—		—		—	—		—
Other	—	—		—		—	—		—
	2	$	93	$	94	3	$	167	$	176

The following table provides information on TDRs that became delinquent during the periods presented within 12 months after being restructured.



	For the Three Months Ended						For the Six Months Ended
	March 31, 2019			March 31, 2018			March 31, 2019			March 31, 2018
	Number of	Recorded		Number of	Recorded		Number of	Recorded		Number of	Recorded
	Contracts	Investment		Contracts	Investment		Contracts	Investment		Contracts	Investment
	(Dollars in thousands)
One- to four-family:
Originated	1	$	45	7	$	434	1	$	45	19	$	1,254
Correspondent purchased	—	—		1	124		—	—		1	124
Bulk purchased	—	—		—	—		—	—		3	1,040
Commercial:
Commercial real estate	—	—		—	—		—	—		—	—
Commercial and industrial	—	—		—	—		—	—		—	—
Consumer:
Home equity	—	—		—	—		—	—		4	133
Other	—	—		—	—		—	—		—	—
	1	$	45	8	$	558	1	$	45	27	$	2,551

Impaired loans - The following information pertains to impaired loans, by class, as of the dates presented. All impaired loans were individually evaluated for loss and all losses were charged-off, resulting in no related ACL for these loans.



	March 31, 2019				September 30, 2018
			Unpaid				Unpaid
	Recorded		Principal		Recorded		Principal
	Investment		Balance		Investment		Balance
	(Dollars in thousands)
One- to four-family:
Originated	$	15,299	$	15,826	$	18,857	$	19,388
Correspondent purchased	2,170		2,274		2,668		2,768
Bulk purchased	5,131		5,849		6,011		6,976
Commercial:
Commercial real estate	—		—		—		—
Commercial and industrial	—		—		—		—
Consumer:
Home equity	398		548		504		720
Other	—		30		—		25
	$	22,998	$	24,527	$	28,040	$	29,877

The following information pertains to impaired loans, by class, for the periods presented.



	For the Three Months Ended								For the Six Months Ended
	March 31, 2019				March 31, 2018				March 31, 2019				March 31, 2018
	Average		Interest		Average		Interest		Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income		Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized		Investment		Recognized		Investment		Recognized
	(Dollars in thousands)
One- to four-family:
Originated	$	15,928	$	167	$	25,398	$	251	16,980		352		26,896		548
Correspondent purchased	2,177		23		3,362		31		2,251		45		3,530		64
Bulk purchased	5,230		43		6,319		42		5,453		86		6,761		95
Commercial:
Commercial real estate	—		—		—		—		—		—		—		—
Commercial and industrial	—		—		—		—		—		—		—		—
Consumer:
Home equity	436		7		606		9		461		16		637		19
Other	—		—		—		—		—		—		—		—
	$	23,771	$	240	$	35,685	$	333	$	25,145	$	499	$	37,824	$	726

Allowance for Credit Losses - The following is a summary of ACL activity, by loan portfolio segment, for the periods presented, and the ending balance of ACL based on the Company's impairment methodology.



	For the Three Months Ended March 31, 2019
	One- to Four-Family
				Correspondent			Bulk
	Originated			Purchased			Purchased			Total			Commercial		Consumer			Total
	(Dollars in thousands)
Beginning balance	$	2,761		$	1,748		$	836		$	5,345		$	3,034	$	179		$	8,558
Charge-offs	(10		)	—			—			(10		)	—		(2		)	(12		)
Recoveries	2			—			17			19			25		29			73
Provision for credit losses	(580		)	(356		)	(51		)	(987		)	1,029		(42		)	—
Ending balance	$	2,173		$	1,392		$	802		$	4,367		$	4,088	$	164		$	8,619



	For the Six Months Ended March 31, 2019
	One- to Four-Family
				Correspondent			Bulk
	Originated			Purchased			Purchased			Total			Commercial		Consumer			Total
	(Dollars in thousands)
Beginning balance	$	2,953		$	1,861		$	925		$	5,739		$	2,556	$	168		$	8,463
Charge-offs	(30		)	—			(26		)	(56		)	—		(12		)	(68		)
Recoveries	5			—			106			111			27		86			224
Provision for credit losses	(755		)	(469		)	(203		)	(1,427		)	1,505		(78		)	—
Ending balance	$	2,173		$	1,392		$	802		$	4,367		$	4,088	$	164		$	8,619



	For the Three Months Ended March 31, 2018
	One- to Four-Family
				Correspondent			Bulk
	Originated			Purchased			Purchased			Total			Commercial			Consumer			Total
	(Dollars in thousands)
Beginning balance	$	3,115		$	1,902		$	1,000		$	6,017		$	2,157		$	196		$	8,370
Charge-offs	(68		)	(128		)	—			(196		)	—			(4		)	(200		)
Recoveries	17			—			196			213			—			7			220
Provision for credit losses	92			260			(196		)	156			(119		)	(37		)	—
Ending balance	$	3,156		$	2,034		$	1,000		$	6,190		$	2,038		$	162		$	8,390



	For the Six Months Ended March 31, 2018
	One- to Four-Family
				Correspondent			Bulk
	Originated			Purchased			Purchased			Total			Commercial			Consumer			Total
	(Dollars in thousands)
Beginning balance	$	3,173		$	1,922		$	1,000		$	6,095		$	2,112		$	191		$	8,398
Charge-offs	(71		)	(128		)	—			(199		)	—			(35		)	(234		)
Recoveries	17			—			196			213			—			13			226
Provision for credit losses	37			240			(196		)	81			(74		)	(7		)	—
Ending balance	$	3,156		$	2,034		$	1,000		$	6,190		$	2,038		$	162		$	8,390

The following is a summary of the loan portfolio and related ACL balances, at the dates presented, by loan portfolio segment disaggregated by the Company's impairment method. There was no ACL for loans individually evaluated for impairment at either date as all losses were charged-off.



	March 31, 2019
	One- to Four-Family
			Correspondent		Bulk
	Originated		Purchased		Purchased		Total		Commercial		Consumer		Total
	(Dollars in thousands)
Recorded investment in loans
collectively evaluated for impairment	$	3,926,057	$	2,502,775	$	268,699	$	6,697,531	$	724,481	$	134,415	$	7,556,427

Recorded investment in loans
individually evaluated for impairment	15,300		2,169		5,131		22,600		—		398		22,998
	$	3,941,357	$	2,504,944	$	273,830	$	6,720,131	$	724,481	$	134,813	$	7,579,425

ACL for loans collectively
evaluated for impairment	$	2,173	$	1,392	$	802	$	4,367	$	4,088	$	164	$	8,619



	September 30, 2018
	One- to Four-Family
			Correspondent		Bulk
	Originated		Purchased		Purchased		Total		Commercial		Consumer		Total
	(Dollars in thousands)
Recorded investment in loans
collectively evaluated for impairment	$	3,965,143	$	2,538,549	$	288,959	$	6,792,651	$	563,513	$	138,744	$	7,494,908

Recorded investment in loans
individually evaluated for impairment	18,857		2,668		6,011		27,536		—		504		28,040
	$	3,984,000	$	2,541,217	$	294,970	$	6,820,187	$	563,513	$	139,248	$	7,522,948

ACL for loans collectively
evaluated for impairment	$	2,953	$	1,861	$	925	$	5,739	$	2,556	$	168	$	8,463

5. BORROWED FUNDS

FHLB Borrowings and Interest Rate Swaps - At March 31, 2019 and September 30, 2018, the Bank had interest rate swap agreements with a total notional amount of $640.0 million and $475.0 million, respectively, in order to hedge the variable cash flows associated with $640.0 million and $475.0 million, respectively, of adjustable-rate FHLB advances. At March 31, 2019 and September 30, 2018, the interest rate swap agreements had an average remaining term to maturity of 4.9 years and 5.8 years, respectively. The interest rate swaps were designated as cash flow hedges and involve the receipt of variable amounts from a counterparty in exchange for the Bank making fixed-rate payments over the life of the interest rate swap agreements. At March 31, 2019, the interest rate swaps were in a loss position with a total fair value of $11.9 million, which was reported in accounts payable and accrued expenses on the consolidated balance sheet. At September 30, 2018, the interest rate swaps were in a gain position with a total fair value of $9.7 million, which was reported in other assets on the consolidated balance sheet. During the three months ended March 31, 2019, $100 thousand was reclassified from AOCI as a decrease to interest expense. During the six months ended March 31, 2019, $51 thousand was reclassified from AOCI as an increase to interest expense. During the three and six months ended March 31, 2018, $140 thousand and $414 thousand, respectively, were reclassified from AOCI as a decrease to interest expense. There was no hedge ineffectiveness recognized in the consolidated statements of income during either period. At March 31, 2019, the Company estimates that $888 thousand will be reclassified as an increase to interest expense during the next 12 months. The Bank has minimum collateral posting thresholds with its derivative counterparties and posts collateral on a daily basis. The Bank posted cash collateral of $13.4 million at March 31, 2019 and held cash collateral of $10.0 million at September 30, 2018.

Junior Subordinated Debentures and Trust Preferred Securities - In conjunction with the Capital City Bancshares, Inc. ("CCB") acquisition, the Company assumed $10.1 million of junior subordinated debentures relating to mandatorily redeemable capital trust preferred securities that were previously issued by CCB-sponsored trusts to third party investors. The proceeds from the trust preferred securities were invested in the related junior subordinated debentures issued by CCB. The junior subordinated debentures were redeemed during the six months ended March 31, 2019.

6. FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair Value Measurements - The Company uses fair value measurements to record fair value adjustments to certain financial instruments and to determine fair value disclosures in accordance with ASC 820 and ASC 825. The Company's AFS securities and interest rate swaps are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other financial instruments on a non-recurring basis, such as OREO and loans individually evaluated for impairment. These non-recurring fair value adjustments involve the application of lower of cost or fair value accounting or write-downs of individual financial instruments.

The Company groups its financial instruments at fair value in three levels based on the markets in which the financial instruments are traded and the reliability of the assumptions used to determine fair value. These levels are:


•	Level 1 - Valuation is based upon quoted prices for identical instruments traded in active markets.


•	Level 2 - Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

•

Level 3 - Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect the Company's own estimates of assumptions that market participants would use in pricing the financial instrument. Valuation techniques include the use of option pricing models, discounted cash flow models, and similar techniques. The results cannot be determined with precision and may not be realized in an actual sale or immediate settlement of the financial instrument.

The Company bases its fair values on the price that would be received from the sale of a financial instrument in an orderly transaction between market participants at the measurement date under current market conditions. The Company maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value.

The following is a description of valuation methodologies used for financial instruments measured at fair value on a recurring basis.

AFS Securities - The Company's AFS securities portfolio is carried at estimated fair value. The majority of the securities within the AFS portfolio were issued by GSEs. The Company primarily uses prices obtained from third party pricing services to determine the fair value of its securities. On a quarterly basis, management corroborates a sample of prices obtained from the third party pricing service for Level 2 securities by comparing them to an independent source. If the price provided by the independent source varies by more than a predetermined percentage from the price received from the third party pricing service, then the variance is researched by management. The Company did not have to adjust prices obtained from the third party pricing service when determining the fair value of its securities during the six months ended March 31, 2019 or during fiscal year 2018. The Company's major security types, based on the nature and risks of the securities, are:


•	GSE Debentures - Estimated fair values are based on a discounted cash flow method. Cash flows are determined by taking any embedded options into consideration and are discounted using current market yields for similar securities. (Level 2)


•	MBS - Estimated fair values are based on a discounted cash flow method. Cash flows are determined based on prepayment projections of the underlying mortgages and are discounted using current market yields for benchmark securities. (Level 2)


•	Municipal Bonds - Estimated fair values are based on a discounted cash flow method. Cash flows are determined by taking any embedded options into consideration and are discounted using current market yields for securities with similar credit profiles. (Level 2)

Interest Rate Swaps - The Company's interest rate swaps are designated as cash flow hedges and are reported at fair value in other assets on the consolidated balance sheet if in a gain position, and in accounts payable and accrued expenses if in a loss position, with any unrealized gains and losses, net of taxes, reported as AOCI in stockholders' equity. See "Note 5. Borrowed Funds" for additional information. The estimated fair value of the interest rates swaps are obtained from the counterparty and are determined using a discounted cash flow analysis using observable market-based inputs. On a quarterly basis, management corroborates the estimated fair values by internally calculating the estimated fair value using a discounted cash flow analysis with independent observable market-based inputs from a third party. The Company did not make any adjustments to the estimated fair value during the six months ended March 31, 2019 or during fiscal year 2018. (Level 2)

The following tables provide the level of valuation assumption used to determine the carrying value of the Company's financial instruments measured at fair value on a recurring basis at the dates presented. The Company did not have any Level 3 financial instruments measured at fair value on a recurring basis at March 31, 2019 or September 30, 2018. The Company did not have any liabilities measured at fair value at September 30, 2018.



	March 31, 2019
			Quoted Prices		Significant		Significant
			in Active Markets		Other Observable		Unobservable
	Carrying		for Identical Assets		Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3)
	(Dollars in thousands)
Assets:
AFS Securities:
MBS	$	474,844	$	—	$	474,844	$	—
GSE debentures	267,741		—		267,741		—
Municipal bonds	4,143		—		4,143		—
	746,728		—		746,728		—
Interest rate swaps	—		—		—		—
	$	746,728	$	—	$	746,728	$	—

Liabilities:
Interest rate swaps	$	11,907	$	—	$	11,907	$	—



	September 30, 2018
			Quoted Prices		Significant		Significant
			in Active Markets		Other Observable		Unobservable
	Carrying		for Identical Assets		Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3)
	(Dollars in thousands)
Assets:
AFS Securities:
MBS	$	445,090	$	—	$	445,090	$	—
GSE debentures	265,398		—		265,398		—
Municipal bonds	4,126		—		4,126		—
	714,614		—		714,614		—
Interest rate swaps	9,685		—		9,685		—
	$	724,299	$	—	$	724,299	$	—

The following is a description of valuation methodologies used for significant financial instruments measured at fair value on a non-recurring basis.

Loans Receivable - The amount of loans individually evaluated for impairment on a non-recurring basis during the six months ended March 31, 2019 and 2018 that were still held in the portfolio as of March 31, 2019 and 2018 was $2.8 million and $4.6 million, respectively. All of these loans were secured by residential real estate and were individually evaluated to determine if the carrying value of the loan was in excess of the fair value of the collateral, less estimated selling costs of 10%. Fair values were estimated through current appraisals. Management does not adjust or apply a discount to the appraised value, except for the estimated sales cost noted above. The primary significant unobservable input for loans individually evaluated for impairment was the appraisal. Fair values of loans individually evaluated for impairment cannot be determined with precision and may not be realized in an actual sale or immediate settlement of the loan and, as such, are classified as Level 3. Based on this evaluation, the Bank charged-off all loss amounts as of March 31, 2019 and 2018; therefore, the fair value was equal to the carrying value and there was no ACL related to these loans.

OREO - OREO primarily represents real estate acquired as a result of foreclosure or by deed in lieu of foreclosure and is carried at lower of cost or fair value. The fair value for OREO is estimated through current appraisals or listing prices, less estimated selling costs of 10%. Management does not adjust or apply a discount to the appraised value or listing price, except for the estimated sales costs noted above. The primary significant unobservable input for OREO was the appraisal or listing price. Fair values of foreclosed property cannot be determined with precision and may not be realized in an actual sale of the property and, as such, are classified as Level 3. The fair value of OREO measured on a non-recurring basis during the six months ended March 31, 2019 and 2018 that was still held in the portfolio as of March 31, 2019 and 2018 was $582 thousand and $686 thousand, respectively. The carrying value of the properties equaled the fair value of the properties at March 31, 2019 and 2018.

Fair Value Disclosures - The Company determined estimated fair value amounts using available market information and a variety of valuation methodologies as of the dates presented. Considerable judgment is required to interpret market data to develop the estimates of fair value. The estimates presented are not necessarily indicative of amounts the Company would realize from a current market exchange at subsequent dates.

The carrying amounts and estimated fair values of the Company's financial instruments by fair value hierarchy, at the dates presented, were as follows:



	March 31, 2019
	Carrying		Estimated Fair Value
	Amount		Total		Level 1		Level 2		Level 3
	(Dollars in thousands)
Assets:
Cash and cash equivalents	$	218,051	$	218,051	$	218,051	$	—	$	—
AFS securities	746,728		746,728		—		746,728		—
HTM securities	527,460		526,099		—		526,099		—
Loans receivable	7,570,806		7,646,753		—		—		7,646,753
FHLB stock	102,631		102,631		102,631		—		—
Liabilities:
Deposits	5,701,111		5,696,333		2,778,862		2,917,471		—
FHLB borrowings	2,239,985		2,214,700		100,001		2,114,699		—
Other borrowings	100,000		98,843		—		98,843		—
Interest rate swaps	11,907		11,907		—		11,907		—

	September 30, 2018
	Carrying		Estimated Fair Value
	Amount		Total		Level 1		Level 2		Level 3
	(Dollars in thousands)
Assets:
Cash and cash equivalents	$	139,055	$	139,055	$	139,055	$	—	$	—
AFS securities	714,614		714,614		—		714,614		—
HTM securities	612,318		601,071		—		601,071		—
Loans receivable	7,514,485		7,418,026		—		—		7,418,026
FHLB stock	99,726		99,726		99,726		—		—
Interest rate swaps	9,685		9,685		—		9,685		—
Liabilities:
Deposits	5,603,354		5,569,591		2,666,297		2,903,294		—
FHLB borrowings	2,174,981		2,145,477		100,000		2,045,477		—
Other borrowings	110,052		109,465		10,503		98,962		—

7. ACCUMULATED OTHER COMPREHENSIVE INCOME

The following is a summary of changes in the components of AOCI, net of tax, for the periods presented.



	For the Three Months Ended March 31, 2019
	Unrealized		Unrealized
	Gains (Losses)		Gains (Losses)
	on AFS		on Cash Flow			Total
	Securities		Hedges			AOCI
	(Dollars in thousands)
Beginning balance	$	537	$	(2,414	)	$	(1,877	)
Other comprehensive income (loss), before reclassifications	3,061		(6,500		)	(3,439		)
Amount reclassified from AOCI	—		(100		)	(100		)
Other comprehensive income (loss)	3,061		(6,600		)	(3,539		)
Ending balance	$	3,598	$	(9,014	)	$	(5,416	)



	For the Six Months Ended March 31, 2019
	Unrealized			Unrealized
	Gains (Losses)			Gains (Losses)
	on AFS			on Cash Flow			Total
	Securities			Hedges			AOCI
	(Dollars in thousands)
Beginning balance	$	(2,990	)	$	7,330		$	4,340
Other comprehensive income (loss), before reclassifications	6,588			(16,395		)	(9,807		)
Amount reclassified from AOCI	—			51			51
Other comprehensive income (loss)	6,588			(16,344		)	(9,756		)
Ending balance	$	3,598		$	(9,014	)	$	(5,416	)



	For the Three Months Ended March 31, 2018
	Unrealized			Unrealized
	Gains (Losses)			Gains (Losses)
	on AFS			on Cash Flow			Total
	Securities			Hedges			AOCI
	(Dollars in thousands)
Beginning balance	$	2,124		$	950		$	3,074
Other comprehensive income (loss), before reclassifications	(1,898		)	3,456			1,558
Amount reclassified from AOCI	—			(140		)	(140		)
Other comprehensive income (loss)	(1,898		)	3,316			1,418
Reclassification of certain income tax effects related to adoption of ASU 2018-02	461			206			667
Ending balance	$	687		$	4,472		$	5,159



	For the Six Months Ended March 31, 2018
	Unrealized			Unrealized
	Gains (Losses)			Gains (Losses)
	on AFS			on Cash Flow			Total
	Securities			Hedges			AOCI
	(Dollars in thousands)
Beginning balance	$	3,290		$	(372	)	$	2,918
Other comprehensive income (loss), before reclassifications	(3,064		)	5,052			1,988
Amount reclassified from AOCI	—			(414		)	(414		)
Other comprehensive income (loss)	(3,064		)	4,638			1,574
Reclassification of certain income tax effects related to adoption of ASU 2018-02	461			206			667
Ending balance	$	687		$	4,472		$	5,159

8. REVENUE RECOGNITION

On October 1, 2018, the Company adopted ASU 2014-09, Revenue from Contracts with Customers, and all subsequent ASUs that modified the principles for recognizing revenue. The Company's primary sources of revenue consist of net interest income on financial assets and liabilities, which are not within the scope of the amended ASU. In addition, certain non-interest income revenue streams, such as loan servicing fees, derivatives, and BOLI, are not in-scope of the amended ASU. Based on an assessment of non-interest income revenue streams and a review of the related contracts with customers, the Company concluded the amended ASU did not significantly change the Company's revenue recognition methods. The Company elected to implement the amended ASU using the modified retrospective application with a cumulative adjustment, which increased opening retained earnings at October 1, 2018 by $394 thousand related to contracts that were not complete upon adoption. The amount was related to the change in the recognition of revenue related to certain insurance commissions.

Details of the Company's primary types of non-interest income revenue streams by financial statement line reported in the consolidated statements of income that are within the scope of the amended ASU and ASC Topic 606 are below. During the current year six month period, revenue from contracts with customers totaled $8.1 million.

Deposit Service Fees

Interchange Transaction Fees - Interchange transaction fee income primarily consists of interchange fees earned on a transactional basis through card payment networks. The performance obligation for these types of transactions is satisfied as services are rendered for each transaction and revenue is recognized daily concurrently with the transaction processing services provided to the cardholder.

In order to participate in the card payment networks, the Company must pay various transaction related costs established by the networks ("interchange network charges"), including membership fees and a per unit charge for each transaction. The Company determined it is acting as an agent for its debit card customers when they are utilizing the card payment networks; therefore, upon adoption of the amended ASU, interchange transaction fee income is reported net of interchange network charges. Previously, interchange network charges were reported in deposit and loan expense. Interchange network charges totaled $1.7 million and $1.5 million for the six months ended March 31, 2019 and 2018, respectively.

Service Charges on Deposit Accounts - Service charges on deposit accounts consist of account maintenance and transaction-based fees such as overdrafts, insufficient funds, wire transfers and the use of out-of-network ATMs. The Company's performance obligation is satisfied over a period of time, generally a month, for account maintenance and at the time of service for transaction-based fees. Revenue is recognized after the performance obligation is satisfied. Payments are typically collected from the customer's deposit account at the time the transaction is processed and/or at the end of the customer's statement cycle (typically monthly).

Other Non-Interest Income

Trust Asset Management Income - The Company provides trust asset management services to customers. The Company primarily earns fees for these services over time as the monthly services are provided and the Company assesses revenue at each month end. Fees are charged based on a tiered scale of the market value of the individual trust asset accounts at the end of the month.

Insurance Commissions - Commissions are received on insurance product sales. The Company acts in the capacity of an agent between the Company's customer and the insurance carrier. The Company's performance obligation is satisfied when the terms of the policy have been agreed upon and the insurance policy becomes effective. Additionally, the Company earns performance-based incentives ("contingent insurance commissions") based on certain criteria established by the insurance carriers. Upon adoption of the amended ASU, contingent insurance commissions are accrued based upon management's expectations. Previously, contingent insurance commissions were recognized when the funds were received.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The Company and the Bank may from time to time make written or oral "forward-looking statements," including statements contained in documents filed or furnished by the Company with the SEC. These forward-looking statements may be included in this Quarterly Report on Form 10-Q and the exhibits attached to it, in the Company's reports to stockholders, in the Company's press releases, and in other communications by the Company, which are made in good faith by us pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements include statements about our beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions, which are subject to significant risks and uncertainties, and are subject to change based on various factors, some of which are beyond our control. The words "may," "could," "should," "would," "believe," "anticipate," "estimate," "expect," "intend," "plan" and similar expressions are intended to identify forward-looking statements. The following factors, among others, could cause our future results to differ materially from the beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions expressed in the forward-looking statements:


•	our ability to maintain overhead costs at reasonable levels;


•	our ability to originate and purchase a sufficient volume of one- to four-family loans in order to maintain the balance of that portfolio at a level desired by management;


•	our ability to invest funds in wholesale or secondary markets at favorable yields compared to the related funding source;


•	our ability to access cost-effective funding;


•	the expected cost savings, synergies and other benefits from the acquisition of CCB might not be realized within the anticipated time frames or at all, and costs or difficulties relating to integration matters might be greater than expected;


•	our ability to extend the commercial banking and trust asset management expertise acquired from CCB through our existing branch footprint;


•	fluctuations in deposit flows;


•	the future earnings and capital levels of the Bank and the continued non-objection by our primary federal banking regulators, to the extent required, to distribute capital from the Bank to the Company, which could affect the ability of the Company to pay dividends in accordance with its dividend policy;


•	the strength of the U.S. economy in general and the strength of the local economies in which we conduct operations, including areas where we have purchased large amounts of correspondent loans;


•	changes in real estate values, unemployment levels, and the level and direction of loan delinquencies and charge-offs may require changes in the estimates of the adequacy of the ACL, which may adversely affect our business;


•	increases in non-performing assets, which may require the Bank to increase the ACL, charge-off loans and incur elevated collection and carrying costs related to such non-performing assets;


•	results of examinations of the Bank and the Company by their respective primary federal banking regulators, including the possibility that the regulators may, among other things, require us to increase our ACL;


•	changes in accounting principles, policies, or guidelines;


•	the effects of, and changes in, monetary and interest rate policies of the Board of Governors of the Federal Reserve System ("FRB");


•	the effects of, and changes in, trade and fiscal policies and laws of the United States government;


•	the effects of, and changes in, foreign and military policies of the United States government;


•	inflation, interest rate, market, monetary, and currency fluctuations;


•	the timely development and acceptance of new products and services and the perceived overall value of these products and services by users, including the features, pricing, and quality compared to competitors' products and services;


•	the willingness of users to substitute competitors' products and services for our products and services;


•	our success in gaining regulatory approval of our products and services and branching locations, when required;


•	the impact of interpretations of, and changes in, financial services laws and regulations, including laws concerning taxes, banking, securities, consumer protection, trust and insurance and the impact of other governmental initiatives affecting the financial services industry;


•	implementing business initiatives may be more difficult or expensive than anticipated;


•	significant litigation;


•	technological changes;


•	our ability to maintain the security of our financial, accounting, technology, and other operating systems and facilities, including the ability to withstand cyber-attacks;


•	acquisitions and dispositions;


•	changes in consumer spending, borrowing and saving habits; and


•	our success at managing the risks involved in our business.

This list of important factors is not all inclusive. For a discussion of risks and uncertainties related to our business that could adversely impact our operations and/or financial results, see "Part I, Item 1A. Risk Factors" in the Company's Annual Report on Form

10-K for the fiscal year ended September 30, 2018. We do not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Company or the Bank.

As used in this Form 10-Q, unless we specify otherwise, "the Company," "we," "us," and "our" refer to Capitol Federal Financial, Inc. a Maryland corporation. "Capitol Federal Savings," and "the Bank," refer to Capitol Federal Savings Bank, a federal savings bank and the wholly-owned subsidiary of Capitol Federal Financial, Inc.

The following discussion and analysis is intended to assist in understanding the financial condition, results of operations, liquidity, and capital resources of the Company. The Bank comprises almost all of the consolidated assets and liabilities of the Company and the Company is dependent primarily upon the performance of the Bank for the results of its operations. Because of this relationship, references to management actions, strategies and results of actions apply to both the Bank and the Company. This discussion and analysis should be read in conjunction with Management's Discussion and Analysis included in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2018, filed with the SEC.

Executive Summary

The following summary should be read in conjunction with the Management's Discussion and Analysis of Financial Condition and Results of Operations section in its entirety.

The Company provides a full range of banking services through the Bank, which is a wholly-owned subsidiary of the Company, headquartered in Topeka, Kansas. The Bank has 44 traditional and 10 in-store banking offices serving primarily the metropolitan areas of Topeka, Wichita, Lawrence, Manhattan, Emporia and Salina, Kansas and portions of the Kansas City metropolitan area. We have been, and intend to continue to be, a community-oriented financial institution offering a variety of financial services to meet the needs of the communities we serve.

During April 2019, the Bank completed the integration of the operations of Capital City Bank into the Bank's operations. The Company completed its acquisition of Capital City Bank and its parent company, CCB, on August 31, 2018. The acquisition of Capital City Bank, a commercial bank with $450 million in assets, allows us to advance our commercial banking strategy through enhanced commercial deposit and lending products while managing to stay under $10 billion in assets. The acquisition allows the Bank to compete for commercial banking business through a wide variety of commercial deposit services and expanded commercial lending products, as well as trust and brokerage services. A few of the potential benefits of expanding the commercial banking business include the following:


•	the ability to reinvest correspondent loan repayments into higher yielding commercial loans;


•	the ability to reduce the cost of funds by replacing FHLB borrowings and wholesale deposits with lower-costing commercial deposits;


•	the ability to reduce the Bank's loans-to-deposits ratio as a result of an increase in commercial deposits;


•	the ability to diversify the Bank's revenue streams and increase cross-selling opportunities by leveraging access to new products for existing customers and expanding our new customer base; and


•	the ability to increase earnings through a remix of assets, diversified revenue sources and lower cost funding.

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 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, and secondary market prices and competitor pricing for our correspondent lending markets. Pricing for commercial loans is generally based on competitor pricing and the credit risk of the borrower with consideration given to the overall relationship of the borrower. Generally, deposit pricing is based upon a survey of competitors in the Bank's market areas, and the need to attract funding and retain maturing deposits. The majority of our loans are fixed-rate products with maturities up to 30 years, while the majority of our retail deposits have stated maturities or repricing dates of less than two years.

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. Lending activities are influenced by the demand for housing and other loans, our loan underwriting guidelines compared to those of our competitors, as well as interest rate pricing competition from other lending institutions.

Local economic conditions have a significant impact on the ability of borrowers to repay loans and the value of the collateral securing these loans. The industries in the Bank's local market areas, where the properties securing approximately 66% of the Bank's one- to four-family loans are located, are diversified, especially in the Kansas City metropolitan statistical area, which comprises the largest segment of our one- to four-family loan portfolio and deposit base. As of March 2019, the unemployment rate was 3.5% for Kansas

and 3.3% for Missouri, compared to the national average of 3.8%, based on information from the Bureau of Labor Statistics. The Kansas City market area has an average household income of approximately $87 thousand per annum, based on 2018 estimates from Claritas Pop-Facts Premier. The average household income in our combined local market areas is approximately $81 thousand per annum, with 91% of the population at or above the poverty level, based on 2018 estimates from Claritas Pop-Facts Premier. The Federal Housing Finance Agency price index for Kansas and Missouri continues to indicate relative stability in property values in our local market areas. Management also monitors broad industry and economic indicators and trends in the states and/or metropolitan statistical areas with the highest concentrations of correspondent purchased loans and commercial real estate loans.

For the quarter ended March 31, 2019, the Company recognized net income of $24.6 million, or $0.18 per share, compared to net income of $23.3 million, or $0.17 per share for the quarter ended March 31, 2018. The $1.2 million increase in net income was due primarily to an increase in net interest income and a decrease in income tax expense, partially offset by an increase in non-interest expense.

For the six month period ended March 31, 2019, the Company recognized net income of $48.9 million, or $0.36 per share, a decrease of $6.2 million, or 11.3%, from the six month period ended March 31, 2018. The decrease in net income was due primarily to the prior year six month period including the impact of the enactment of the Tax Cuts and Jobs Act (the "Tax Act"), as well as an increase in non-interest expense during the current year six month period. These changes were partially offset by an increase in net interest income due primarily to the higher yielding loans added in the CCB acquisition. The Tax Act reduced the federal corporate income tax rate from 35% to 21% effective January 1, 2018. In accordance with GAAP, the Company revalued its deferred tax assets and liabilities in December 2017 to account for the lower corporate income tax rate. The revaluation reduced income tax expense by $7.5 million.

The net interest margin increased 45 basis points, from 1.85% for the prior year six month period to 2.30% for the current year six month period. When the leverage strategy is in place, it reduces the net interest margin due to the amount of earnings from the transaction in comparison to the size of the transaction. The leverage strategy was suspended at certain times during the current year six month period due to the negative interest rate spreads between the related FHLB borrowings and cash held at the FRB of Kansas City, making the transaction unprofitable. Excluding the effects of the leverage strategy, the net interest margin would have increased 11 basis points, from 2.22% for the prior year six month period to 2.33% for the current year six month period. The increase in the net interest margin, excluding the effects of the leverage strategy, was due mainly to the addition of higher yielding commercial loans in the CCB acquisition.

The loans receivable portfolio, net, totaled $7.57 billion at March 31, 2019 compared to $7.51 billion at September 30, 2018. During the current year six month period, the Bank originated and refinanced $268.8 million of one- to four-family and consumer loans with a weighted average rate of 4.63% and purchased $88.9 million of one- to four-family loans from correspondent lenders with a weighted average rate of 4.32%. The Bank also originated $122.7 million of commercial loans with a weighted average rate of 4.94% and entered into commercial real estate loan participations totaling $72.6 million, of which $37.9 million had not yet been funded as of March 31, 2019, at a weighted average rate of 5.44%.

The Bank is continuing to manage the size and mix of its loan portfolio, while managing liquidity levels as measured by the ratio of securities and cash to total assets, to a target level of approximately 15%. The ratio of securities and cash to total assets was 15.7% at March 31, 2019. Management intends to continue to manage the size and mix of the loan portfolio by utilizing cash flows from the correspondent one- to four-family loan portfolio to fund commercial loan growth. Given the balance of total assets, it is unlikely that net loan growth will substantially increase in the current environment. Generally, over the past few years, cash flows from the securities portfolio have been used primarily to purchase loans and in part to pay down FHLB advances. By moving cash from lower yielding assets to higher yielding assets and repaying higher costing liabilities, we have been able to maintain our net interest margin. In addition to the repayment of securities, the Bank has emphasized growth in the deposit portfolio in part to pay down term borrowings.

At times, the Bank has utilized a leverage strategy to increase earnings. The leverage strategy during the current year six month period involved borrowing up to $2.10 billion either on the Bank's FHLB line of credit or by entering into short-term FHLB advances, depending on the rates offered by FHLB. The borrowings were repaid prior to quarter end, or earlier if the strategy was suspended. The proceeds from the borrowings, net of the required FHLB stock holdings which yielded 7.3% during the current year six month period, were deposited at the FRB of Kansas City. Net income attributable to the leverage strategy is largely derived from the dividends received on FHLB stock holdings, plus the net interest rate spread between the yield on the cash at the FRB of Kansas City and the rate paid on the related FHLB borrowings, less applicable federal insurance premiums and estimated taxes. Net income attributable to the leverage strategy was $14 thousand during the current year six month period, compared to $1.5 million during the prior year six month period. The decrease was due mainly to the strategy being suspended for the majority of the current year six month period due to the large negative interest rate spread making the strategy unprofitable. Management continues to monitor the net interest rate spread and overall profitability of the strategy. It is expected that the strategy will be reimplemented if it reaches a position that is profitable.

Stockholders' equity was $1.36 billion at March 31, 2019 compared to $1.39 billion at September 30, 2018. The $35.6 million decrease was due primarily to the payment of $77.1 million in cash dividends, partially offset by net income of $48.9 million. In the long run, management considers a ratio of stockholders' equity to total assets at the Bank of at least 10% an appropriate level of capital. At March 31, 2019, this ratio was 12.8%.

Available Information

Financial and other Company information, including press releases, Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports can be obtained free of charge from our investor relations website, http://ir.capfed.com. SEC filings are available on our website immediately after they are electronically filed with or furnished to the SEC, and are also available on the SEC's website at www.sec.gov.

Critical Accounting Policies

Our most critical accounting policies are the methodologies used to determine the ACL and fair value measurements. These policies 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 or estimates about highly uncertain matters. The use of different judgments, assumptions, and estimates could affect reported results materially. These critical accounting policies and their application are reviewed at least annually by our audit committee. For a full discussion of our critical accounting policies, see Item 7 - "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies" in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2018.

Financial Condition

The following table presents selected balance sheet information as of the dates indicated.



	March 31,			December 31,			September 30,			June 30,			March 31,
	2019			2018			2018			2018			2018
	(Dollars in thousands)
Total assets	$	9,534,551		$	9,303,782		$	9,449,547		$	9,048,737		$	9,116,461
Cash and cash equivalents	218,051			81,713			139,055			182,078			140,580
AFS securities	746,728			668,487			714,614			555,361			559,146
HTM securities	527,460			568,838			612,318			664,522			716,372
Loans receivable, net	7,570,806			7,525,780			7,514,485			7,239,384			7,200,663
FHLB stock, at cost	102,631			100,521			99,726			100,694			195,626
Deposits	5,701,111			5,557,864			5,603,354			5,323,083			5,354,193
Borrowings	2,339,985			2,281,169			2,285,033			2,274,816			2,274,478
Stockholders' equity	1,355,983			1,345,913			1,391,622			1,341,325			1,364,740
Equity to total assets at end of period	14.2		%	14.5		%	14.7		%	14.8		%	15.0		%

Loans Receivable. The following table presents the balance and weighted average rate of our loan portfolio as of the dates indicated. Approximately 64% of the loans in the one- to four-family loan portfolio at March 31, 2019 had a balance of $484 thousand or less at the time of origination.



	March 31, 2019					September 30, 2018
	Amount			Rate		Amount			Rate
	(Dollars in thousands)
One- to four-family:
Originated	$	3,922,565		3.78	%	$	3,965,692		3.74	%
Correspondent purchased	2,470,619			3.63		2,505,987			3.59
Bulk purchased	272,575			2.77		293,607			2.60
Construction	33,525			4.38		33,149			4.03
Total	6,699,284			3.68		6,798,435			3.64
Commercial:
Commercial real estate	547,202			4.48		426,243			4.33
Commercial and industrial	73,852			5.25		62,869			5.00
Construction	108,649			4.76		80,498			4.59
Total	729,703			4.60		569,610			4.44
Consumer loans:
Home equity	125,176			6.38		129,588			5.97
Other	9,913			4.52		10,012			4.59
Total	135,089			6.24		139,600			5.87
Total loans receivable	7,564,076			3.82		7,507,645			3.74

Less:
ACL	8,619					8,463
Discounts/unearned loan fees	32,582					33,933
Premiums/deferred costs	(47,931		)			(49,236		)
Total loans receivable, net	$	7,570,806				$	7,514,485

Loan Activity - The following table summarizes activity in the loan portfolio, along with weighted average rates where applicable, for the periods indicated, excluding changes in ACL, discounts/unearned loan fees, and premiums/deferred costs. Loans that were paid-off as a result of refinances and loans that were sold are included in repayments. Loan endorsements are not included in the activity in the following table because a new loan is not generated at the time of the endorsement. The endorsed balance and rate are included in the ending loan portfolio balance and rate. Commercial loan renewals are not included in the activity in the following table unless new funds are disbursed at the time of renewal.



	For the Three Months Ended
	March 31, 2019					December 31, 2018					September 30, 2018					June 30, 2018
	Amount			Rate		Amount			Rate		Amount			Rate		Amount			Rate
	(Dollars in thousands)
Beginning balance	$	7,518,887		3.78	%	$	7,507,645		3.74	%	$	7,226,169		3.66	%	$	7,187,742		3.63	%
Originated and refinanced:
Fixed	78,678			4.58		116,032			4.59		117,904			4.44		143,059			4.21
Adjustable	123,006			4.80		73,711			4.98		56,996			4.55		54,385			4.42
Purchased and participations:
Fixed	35,387			5.46		72,140			4.60		80,138			4.40		78,650			4.04
Adjustable	11,331			4.01		42,651			4.88		20,105			3.92		30,017			3.49
Loans added in CCB acquisition, net	—			—		—			—		299,659			4.77		—			—
Change in undisbursed loan funds	30,500					(25,315		)			(8,104		)			19,808
Repayments	(233,625		)			(267,469		)			(284,927		)			(286,923		)
Principal recoveries (charge-offs), net	61					95					119					(46		)
Other	(149		)			(603		)			(414		)			(523		)
Ending balance	$	7,564,076		3.82		$	7,518,887		3.78		$	7,507,645		3.74		$	7,226,169		3.66



	For the Six Months Ended
	March 31, 2019					March 31, 2018
	Amount			Rate		Amount			Rate
	(Dollars in thousands)
Beginning balance	$	7,507,645		3.74	%	$	7,182,751		3.61	%
Originations and refinances:
Fixed	194,710			4.58		186,927			3.74
Adjustable	196,717			4.87		74,114			4.27
Purchases and participations:
Fixed	107,527			4.88		205,720			3.80
Adjustable	53,982			4.70		112,751			3.76
Change in undisbursed loan funds	5,185					(42,708		)
Repayments	(501,094		)			(530,774		)
Principal recoveries (charge-offs), net	156					(8		)
Other	(752		)			(1,031		)
Ending balance	$	7,564,076		3.82		$	7,187,742		3.63

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. 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. The fixed-rate one- to four-family loans less than or equal to 15 years have an original maturity at origination of less than or equal to 15 years, while fixed-rate one- to four-family loans greater than 15 years have an original maturity at origination of greater than 15 years. The adjustable-rate one- to four-family loans less than or equal to 36 months have a term to first reset of less than or equal to 36 months at origination, and adjustable-rate one- to four-family loans greater than 36 months have a term to first reset of greater than 36 months at origination.



	For the Three Months Ended
	March 31, 2019						March 31, 2018
	Amount		Rate		% of Total		Amount		Rate		% of Total
	(Dollars in thousands)
Fixed-rate:
One- to four-family:
<= 15 years	$	13,873	4.25	%	5.5	%	$	41,484	3.29	%	14.6	%
> 15 years	66,993		4.45		27.0		116,571		3.92		41.2
One- to four-family construction	11,801		4.56		4.8		5,835		3.84		2.1
Commercial:
Commercial real estate	15,027		7.23		6.0		156		5.50		0.1
Commercial and industrial	3,956		5.29		1.6		—		—		—
Commercial construction	—		—		—		33,101		4.13		11.7
Home equity	1,189		5.83		0.5		669		6.03		0.2
Other	1,226		4.67		0.5		164		7.58		0.1
Total fixed-rate	114,065		4.85		45.9		197,980		3.83		70.0

Adjustable-rate:
One- to four-family:
<= 36 months	2,459		3.83		1.0		1,776		2.87		0.6
> 36 months	30,068		4.03		12.1		38,723		3.20		13.7
One- to four-family construction	3,467		3.87		1.4		3,923		3.48		1.4
Commercial:
Commercial real estate	72,879		4.69		29.3		—		—		—
Commercial and industrial	11,615		5.35		4.7		—		—		—
Commercial construction	—		—		—		23,893		4.10		8.5
Home equity	13,450		6.42		5.4		15,793		5.53		5.6
Other	399		3.50		0.2		566		3.52		0.2
Total adjustable-rate	134,337		4.73		54.1		84,674		3.90		30.0

Total originated, refinanced and purchased	$	248,402	4.79		100.0	%	$	282,654	3.85		100.0	%

Purchased and participation loans included above:
Fixed-rate:
Correspondent - one- to four-family	$	24,611	4.35				$	86,938	3.74
Participations - commercial	10,776		8.00				33,217		4.13
Total fixed-rate purchased/participations	35,387		5.46				120,155		3.85

Adjustable-rate:
Correspondent - one- to four-family	11,331		4.01				24,169		3.12
Participations - commercial	—		—				23,893		4.10
Total adjustable-rate purchased/participations	11,331		4.01				48,062		3.61
Total purchased/participation loans	$	46,718	5.11				$	168,217	3.78



	For the Six Months Ended
	March 31, 2019						March 31, 2018
	Amount		Rate		% of Total		Amount		Rate		% of Total
	(Dollars in thousands)
Fixed-rate:
One- to four-family:
<= 15 years	$	36,928	4.21	%	6.7	%	$	77,219	3.23	%	13.3	%
> 15 years	173,127		4.53		31.3		260,520		3.86		45.0
One- to four-family construction	28,279		4.53		5.1		14,973		3.75		2.6
Commercial:
Commercial real estate	22,829		6.40		4.1		4,948		4.17		0.9
Commercial and industrial	6,358		5.31		1.2		—		—		—
Commercial construction	29,919		4.78		5.4		33,101		4.13		5.7
Home equity	2,383		6.16		0.4		1,619		5.98		0.3
Other	2,414		4.68		0.5		267		8.27		—
Total fixed-rate	302,237		4.69		54.7		392,647		3.77		67.8

Adjustable-rate:
One- to four-family:
<= 36 months	7,687		3.76		1.4		2,543		2.84		0.4
> 36 months	63,147		4.03		11.4		70,657		3.17		12.1
One- to four-family construction	11,712		4.23		2.1		7,959		3.39		1.4
Commercial:
Commercial real estate	93,583		4.79		16.9		—		—		—
Commercial and industrial	13,950		5.46		2.5		—		—		—
Commercial construction	28,650		5.35		5.2		69,543		4.16		12.0
Home equity	30,876		6.36		5.6		34,619		5.41		6.0
Other	1,094		3.15		0.2		1,544		3.69		0.3
Total adjustable-rate	250,699		4.83		45.3		186,865		3.96		32.2

Total originated, refinanced and purchased	$	552,936	4.75		100.0	%	$	579,512	3.83		100.0	%

Purchased and participation loans included above:
Fixed-rate:
Correspondent - one- to four-family	$	63,550	4.46				$	167,711	3.72
Participations - commercial	43,977		5.49				38,009		4.13
Total fixed-rate purchased/participations	107,527		4.88				205,720		3.80

Adjustable-rate:
Correspondent - one- to four-family	25,332		3.97				43,208		3.11
Participations - commercial	28,650		5.35				69,543		4.16
Total adjustable-rate purchased/participations	53,982		4.70				112,751		3.76
Total purchased/participation loans	$	161,509	4.82				$	318,471	3.79

One- to Four-Family Loans - The following table presents, for our portfolio of one- to four-family loans, the amount, percent of total, weighted average credit score, weighted average LTV ratio, and average balance per loan as of the dates presented. Credit scores are updated at least semiannually, with the latest update in March 2019, from a nationally recognized consumer rating agency. The LTV ratios were based on the current loan balance and either the lesser of the purchase price or original appraisal, or the most recent Bank appraisal, if available. In most cases, the most recent appraisal was obtained at the time of origination.



	March 31, 2019									September 30, 2018
			% of		Credit			Average				% of		Credit			Average
	Amount		Total		Score	LTV		Balance		Amount		Total		Score	LTV		Balance
	(Dollars in thousands)
Originated	$	3,922,565	58.8	%	768	62	%	$	138	$	3,965,692	58.6	%	767	62	%	$	138
Correspondent purchased	2,470,619		37.1		764	66		375		2,505,987		37.1		764	67		378
Bulk purchased	272,575		4.1		761	61		303		293,607		4.3		758	62		304
	$	6,665,759	100.0	%	766	64		186		$	6,765,286	100.0	%	765	64		186

The following table presents originated, refinanced, and correspondent purchased activity in our one- to four-family loan portfolio, excluding endorsement activity, along with associated weighted average LTVs and weighted average credit scores for the periods indicated. Of the loans originated during the current quarter and current year six month period, $9.5 million and $24.9 million, respectively, were refinanced from other lenders. Of the loans originated and refinanced during the current year six month period, 76% had loan values of $484 thousand or less. Of the correspondent loans purchased during the current year six month period, 31% had loan values of $484 thousand or less.



	For the Three Months Ended
	March 31, 2019					March 31, 2018
					Credit					Credit
	Amount		LTV		Score	Amount		LTV		Score
	(Dollars in thousands)
Originated	$	83,101	77	%	755	$	80,216	76	%	760
Refinanced by Bank customers	9,618		67		749	16,989		70		751
Correspondent purchased	35,942		74		761	111,107		72		764
	$	128,661	76		756	$	208,312	74		761



	For the Six Months Ended
	March 31, 2019					March 31, 2018
					Credit					Credit
	Amount		LTV		Score	Amount		LTV		Score
	(Dollars in thousands)
Originated	$	209,426	77	%	755	$	181,636	77	%	762
Refinanced by Bank customers	22,572		67		746	41,316		67		753
Correspondent purchased	88,882		74		762	210,919		74		765
	$	320,880	75		756	$	433,871	74		763

The following table presents the amount, percent of total, and weighted average rate, by state, of one- to four-family loan originations and correspondent purchases where originations and purchases in the state exceeded five percent of the total amount originated and purchased during the six month period ended March 31, 2019.



	For the Three Months Ended						For the Six Months Ended
	March 31, 2019						March 31, 2019
State	Amount		% of Total		Rate		Amount		% of Total		Rate
	(Dollars in thousands)
Kansas	$	81,867	63.6	%	4.34	%	$	203,627	63.4	%	4.39	%
Missouri	17,106		13.3		4.34		49,314		15.4		4.40
Texas	21,913		17.0		4.14		39,434		12.3		4.18
Other states	7,775		6.1		4.44		28,505		8.9		4.38
	$	128,661	100.0	%	4.31		$	320,880	100.0	%	4.37

One- to Four-Family Loan Commitments - The following table summarizes our one- to four-family loan origination and refinance commitments and one- to four-family correspondent loan purchase commitments as of March 31, 2019, along with associated weighted average rates. Loan commitments generally have fixed expiration dates or other termination clauses and may require the payment of a rate lock fee. It is expected that some of the loan commitments will expire unfunded, so the amounts reflected in the table below are not necessarily indicative of future cash needs.



	Fixed-Rate
	15 years			More than			Adjustable-			Total
	or less			15 years			Rate			Amount		Rate
	(Dollars in thousands)
Originate/refinance	$	6,346		$	27,123		$	15,135		$	48,604	4.07	%
Correspondent	805			45,730			5,475			52,010		4.51
	$	7,151		$	72,853		$	20,610		$	100,614	4.30

Rate	3.86		%	4.48		%	3.81		%

Commercial Loans - During the current year six month period, the Bank originated $122.7 million of commercial loans and entered into commercial real estate loan participations totaling $72.6 million, which included $58.6 million of commercial real estate construction loans. The majority of the $58.6 million of commercial real estate construction loans had not yet been funded as of March 31, 2019. During the current year six month period, the Bank funded $62.1 million of commercial real estate construction participation loans.

The following table presents the Bank's commercial real estate loans and loan commitments by industry classification, as defined by the North American Industry Classification System, as of March 31, 2019. Based on the terms of the construction loans as of March 31, 2019, of the $156.8 million of undisbursed amounts in the table, which does not include outstanding commitments, $40.4 million is projected to be disbursed by June 30, 2019, and an additional $80.9 million is projected to be disbursed by March 31, 2020. It is possible that not all of the funds will be disbursed due to the nature of the funding of construction projects. Included in the gross loan amounts in the table, which does not include outstanding commitments, are fixed-rate loans totaling $439.0 million at a weighted average rate of 4.37% and adjustable-rate loans totaling $373.6 million at a weighted average rate of 4.91%. The weighted average rate of fixed-rate loans is lower than that of adjustable-rate loans due primarily to the majority of the fixed-rate loans in the portfolio at March 31, 2019 having shorter terms to maturity.



	Unpaid			Undisbursed			Gross Loan			Outstanding						% of
	Principal			Amount			Amount			Commitments			Total			Total
	(Dollars in thousands)
Health care and social assistance	$	194,571		$	54,405		$	248,976		$	—		$	248,976		30.4	%
Real estate rental and leasing	144,881			43,160			188,041			40			188,081			23.0
Accommodation and food services	158,439			27,006			185,445			—			185,445			22.7
Multi-family	41,538			28,848			70,386			184			70,570			8.6
Retail trade	38,872			2,092			40,964			5,900			46,864			5.7
Arts, entertainment, and recreation	35,568			—			35,568			—			35,568			4.3
Other	41,982			1,257			43,239			—			43,239			5.3
	$	655,851		$	156,768		$	812,619		$	6,124		$	818,743		100.0	%

Weighted average rate	4.53		%	5.01		%	4.62		%	5.13		%	4.63		%

The following table summarizes the Bank's commercial real estate loans and loan commitments by state as of March 31, 2019.



	Unpaid		Undisbursed		Gross Loan		Outstanding				% of
	Principal		Amount		Amount		Commitments		Total		Total
	(Dollars in thousands)
Kansas	$	251,540	$	18,188	$	269,728	$	164	$	269,892	33.0	%
Missouri	184,615		52,014		236,629		60		236,689		28.9
Texas	148,354		56,981		205,335		5,900		211,235		25.8
Nebraska	22,295		11,604		33,899		—		33,899		4.1
Kentucky	9,167		16,392		25,559		—		25,559		3.1
Colorado	9,046		—		9,046		—		9,046		1.1
Other	30,834		1,589		32,423		—		32,423		4.0
	$	655,851	$	156,768	$	812,619	$	6,124	$	818,743	100.0	%

The following table presents the Bank's commercial and industrial loans and loan commitments by business purpose, as of March 31, 2019.



	Unpaid		Undisbursed		Gross Loan		Outstanding				% of
	Principal		Amount		Amount		Commitments		Total		Total
	(Dollars in thousands)
Working capital	$	46,768	$	17,001	$	63,769	$	7,819	$	71,588	70.5	%
Equipment	17,409		931		18,340		895		19,235		18.9
Small Business Administration	4,187		353		4,540		—		4,540		4.5
Auto lease	3,589		309		3,898		—		3,898		3.8
Other	1,899		399		2,298		—		2,298		2.3
	$	73,852	$	18,993	$	92,845	$	8,714	$	101,559	100.0	%

The following table presents the Bank's commercial loan portfolio and outstanding loan commitments, categorized by gross loan amount (unpaid principal plus undisbursed amounts) or outstanding loan commitment amount, as of March 31, 2019.



	Amount
	(Dollars in thousands)
Greater than $30 million	$	186,298
>$15 to $30 million	242,096
>$10 to $15 million	59,429
>$5 to $10 million	94,324
$1 to $5 million	188,600
Less than $1 million	149,555
	$	920,302

Asset Quality. The Bank's traditional underwriting guidelines have provided the Bank with generally low delinquencies and low levels of non-performing assets compared to national levels. Of particular importance is the complete and full documentation required for each loan the Bank originates, participates in or purchases. Generally, one- to four-family owner occupied loans are underwritten according to the "ability to repay" and "qualified mortgage" standards, as issued by the CFPB. This allows the Bank to make an informed credit decision based upon a thorough assessment of the borrower's ability to repay the loan. See additional discussion regarding underwriting standards in "Part I, Item 1. Business - Lending Practices and Underwriting Standards" in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2018.

Delinquent and non-performing loans and OREO - The following table presents the Company's 30 to 89 day delinquent loans at the dates indicated. Of the loans 30 to 89 days delinquent at March 31, 2019, approximately 67% were 59 days or less delinquent.



	Loans Delinquent for 30 to 89 Days at:
	March 31,				December 31,				September 30,				June 30,				March 31,
	2019				2018				2018				2018				2018
	Number	Amount			Number	Amount			Number	Amount			Number	Amount			Number	Amount
	(Dollars in thousands)
One- to four-family:
Originated	79	$	8,694		118	$	9,765		129	$	10,647		104	$	7,639		106	$	8,476
Correspondent purchased	13	4,133			10	1,969			18	3,803			6	1,757			5	744
Bulk purchased	13	2,722			15	2,780			15	3,502			16	3,773			17	4,182
Commercial	13	1,361			2	64			6	322			1	40			—	—
Consumer	37	481			42	744			38	533			30	363			24	356
	155	$	17,391		187	$	15,322		206	$	18,807		157	$	13,572		152	$	13,758

Loans 30 to 89 days delinquent
to total loans receivable, net		0.23		%		0.20		%		0.25		%		0.19		%		0.19		%

The table below presents the Company's non-performing loans and OREO at the dates indicated. Non-performing loans are loans that are 90 or more days delinquent or in foreclosure and other loans required to be reported as nonaccrual pursuant to accounting and/or regulatory reporting requirements, even if the loans are current. At all dates presented, there were no loans 90 or more days delinquent that were still accruing interest. Non-performing assets include non-performing loans and OREO. OREO primarily includes assets acquired in settlement of loans. Over the past 12 months, one- to four-family OREO properties acquired in settlement of one- to four-family loans were owned by the Bank, on average, for approximately four months before the properties were sold.



	Non-Performing Loans and OREO at:
	March 31,				December 31,				September 30,				June 30,				March 31,
	2019				2018				2018				2018				2018
	Number	Amount			Number	Amount			Number	Amount			Number	Amount			Number	Amount
	(Dollars in thousands)
Loans 90 or More Days Delinquent or in Foreclosure:
One- to four-family:
Originated	67	$	5,172		69	$	5,301		67	$	5,040		64	$	5,043		67	$	6,434
Correspondent purchased	3	918			5	1,093			1	449			4	863			4	1,151
Bulk purchased	10	2,782			10	3,137			11	3,045			8	2,597			12	3,325
Commercial	—	—			—	—			—	—			—	—			—	—
Consumer	27	567			28	513			30	569			27	425			28	428
	107	9,439			112	10,044			109	9,103			103	8,928			111	11,338

Loans 90 or more days delinquent or in foreclosure
as a percentage of total loans		0.12		%		0.13		%		0.12		%		0.12		%		0.16		%

Nonaccrual loans less than 90 Days Delinquent:⁽¹⁾
One- to four-family:
Originated	18	$	1,761		17	$	1,584		19	$	1,482		24	$	2,469		27	$	2,961
Correspondent purchased	—	—			1	298			2	396			1	95			—	—
Bulk purchased	—	—			—	—			—	—			1	340			1	342
Commercial	2	1,712			2	1,776			—	—			—	—			—	—
Consumer	3	14			3	13			2	9			4	68			3	55
	23	3,487			23	3,671			23	1,887			30	2,972			31	3,358
Total non-performing loans	130	12,926			135	13,715			132	10,990			133	11,900			142	14,696

Non-performing loans as a percentage of total loans		0.17		%		0.18		%		0.15		%		0.16		%		0.20		%

OREO:
One- to four-family:
Originated⁽²⁾	5	$	549		4	$	588		8	$	843		4	$	208		2	$	232
Bulk purchased	1	322			1	322			1	454			2	689			1	454
Commercial	1	600			1	600			1	600			—	—			—	—
Consumer	—	—			—	—			—	—			—	—			—	—
	7	1,471			6	1,510			10	1,897			6	897			3	686
Total non-performing assets	137	$	14,397		141	$	15,225		142	$	12,887		139	$	12,797		145	$	15,382

Non-performing assets as a percentage of total assets		0.15		%		0.16		%		0.14		%		0.14		%		0.17		%


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


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

The following table presents the states where the properties securing one percent or more of the total amount of our one- to four-family loans are located and the corresponding balance of loans 30 to 89 days delinquent, 90 or more days delinquent or in foreclosure, and weighted average LTV ratios for loans 90 or more days delinquent or in foreclosure at March 31, 2019. 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. At March 31, 2019, potential losses, after taking into consideration anticipated private mortgage insurance proceeds and estimated selling costs, have been charged-off.



					Loans 30 to 89				Loans 90 or More Days Delinquent
	One- to Four-Family				Days Delinquent				or in Foreclosure
State	Amount		% of Total		Amount		% of Total		Amount		% of Total		LTV
	(Dollars in thousands)
Kansas	$	3,589,476	53.8	%	$	8,398	54.0	%	$	4,420	49.8	%	65	%
Missouri	1,211,486		18.2		2,672		17.2		1,918		21.6		62
Texas	747,758		11.2		703		4.5		520		5.9		46
Tennessee	225,852		3.4		—		—		—		—		n/a
California	187,347		2.8		—		—		—		—		n/a
Pennsylvania	104,950		1.6		514		3.3		—		—		n/a
Georgia	92,203		1.4		—		—		383		4.3		42
Alabama	89,844		1.3		425		2.7		—		—		n/a
Other states	416,843		6.3		2,837		18.3		1,631		18.4		60
	$	6,665,759	100.0	%	$	15,549	100.0	%	$	8,872	100.0	%	61

Allowance for credit losses and Provision for credit losses - Management maintains an ACL to absorb inherent losses in the loan portfolio based on quarterly assessments of the loan portfolio. The ACL is maintained through provisions for credit losses which are either charged to or credited to income. Each quarter, we prepare a formula analysis model which segregates the loan portfolio into categories based on certain risk characteristics. Historical loss factors and qualitative factors are applied to each loan category in the formula analysis model. The factors are reviewed by management quarterly to assess whether the factors adequately cover probable and estimable losses inherent in the loan portfolio. The historical loss factors and qualitative factors continue to improve for our one- to four-family portfolio. To the extent the commercial loan portfolio continues to grow and the inherent loss factors remain relatively constant, the related ACL amounts are expected to increase as well. In addition to the formula analysis model, management considers several other internal and external data elements when evaluating the overall adequacy of the ACL. Management considers the overall ACL to be adequate for the loan portfolio at March 31, 2019.

See "Part II, Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies - Allowance for Credit Losses" and "Part II, Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 1. Summary of Significant Accounting Policies" in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2018 for a full discussion of our ACL methodology. See "Note 4. Loans Receivable and Allowance for Credit Losses" for additional information on the ACL.

The Bank did not record a provision for credit losses during the six month period ended March 31, 2019. Based on management's assessment of the ACL formula analysis model and several other factors, management determined that no provision for credit losses was necessary. Net recoveries were $156 thousand during the current year six month period. At March 31, 2019, loans 30 to 89 days delinquent were 0.23% of total loans and loans 90 or more days delinquent or in foreclosure were 0.12% of total loans. At September 30, 2018, loans 30 to 89 days delinquent were 0.25% of total loans and loans 90 or more days delinquent or in foreclosure were 0.12% of total loans.

The distribution of our ACL at the dates indicated is summarized below.



	At
	March 31, 2019								September 30, 2018
			% of ACL				% of				% of ACL				% of
	Amount		to Total		Total		Loans to		Amount		to Total		Total		Loans to
	of ACL		ACL		Loans		Total Loans		of ACL		ACL		Loans		Total Loans
	(Dollars in thousands)
One- to four-family:
Originated	$	2,157	25.0	%	$	3,922,565	51.9	%	$	2,933	34.7	%	$	3,965,692	52.8	%
Correspondent purchased	1,392		16.2		2,470,619		32.7		1,861		22.0		2,505,987		33.4
Bulk purchased	802		9.3		272,575		3.6		925		10.9		293,607		3.9
Construction	16		0.2		33,525		0.4		20		0.2		33,149		0.4
Total	4,367		50.7		6,699,284		88.6		5,739		67.8		6,798,435		90.5
Commercial:
Commercial real estate	2,783		32.3		547,202		7.2		1,801		21.3		426,243		5.7
Commercial and industrial	224		2.6		73,852		1.0		21		0.2		62,869		0.8
Construction	1,081		12.5		108,649		1.4		734		8.7		80,498		1.1
Total	4,088		47.4		729,703		9.6		2,556		30.2		569,610		7.6
Consumer loans:
Home equity	104		1.2		125,176		1.7		129		1.5		129,588		1.8
Other consumer	60		0.7		9,913		0.1		39		0.5		10,012		0.1
Total consumer loans	164		1.9		135,089		1.8		168		2.0		139,600		1.9
	$	8,619	100.0	%	$	7,564,076	100.0	%	$	8,463	100.0	%	$	7,507,645	100.0	%

Loans added in the CCB acquisition are included in the table above. The majority of these loans were not deemed purchased credit impaired ("PCI") as of the acquisition date ("non-PCI loans"). The net purchase discounts associated with non-PCI loans were compared to the amount of hypothetical ACL estimated for these loans at March 31, 2019. See "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies – Allowance for Credit Losses" in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2018 for additional information regarding management's estimation of the hypothetical ACL for non-PCI loans. As a result of this analysis, management determined the net purchase discounts were sufficient and no ACL was required on those loans at March 31, 2019.

The following tables present ACL activity and related ratios at the dates and for the periods indicated. See "Note 4 - Loans Receivable and Allowance for Credit Losses" for additional information related to ACL activity by specific loan categories.



	For the Three Months Ended
	March 31, 2019			December 31, 2018			September 30, 2018			June 30, 2018			March 31, 2018
	(Dollars in thousands)
ACL beginning balance	$	8,558		$	8,463		$	8,344		$	8,390		$	8,370
Charge-offs	(12		)	(56		)	(14		)	(54		)	(200		)
Recoveries	73			151			133			8			220
Provision for credit losses	—			—			—			—			—
ACL ending balance	$	8,619		$	8,558		$	8,463		$	8,344		$	8,390

ACL to loans receivable, net at end of period	0.11		%	0.11		%	0.11		%	0.12		%	0.12		%
ACL to non-performing loans at end of period	66.68			62.40			77.01			70.12			57.09
Ratio of net charge-offs (recoveries) during the
period to average loans outstanding	—			—			—			—			—
Ratio of net charge-offs (recoveries) during the
period to average non-performing assets	(0.41		)	(0.68		)	(0.93		)	0.33			(0.13		)
ACL to net charge-offs (annualized)	N/M⁽¹⁾			N/M⁽¹⁾			N/M⁽¹⁾			45.3x			N/M⁽¹⁾



	For the Six Months Ended
	March 31, 2019			March 31, 2018
	(Dollars in thousands)
ACL beginning balance	$	8,463		$	8,398
Charge-offs	(68		)	(234		)
Recoveries	224			226
Provision for credit losses	—			—
ACL ending balance	$	8,619		$	8,390

Ratio of net charge-offs during the period to
average loans outstanding during the period	—		%	—		%
Ratio of net charge-offs during the period to
average non-performing assets during the period	(1.14		)	0.04
ACL to net charge-offs (annualized)	N/M⁽¹⁾			560.5x


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

Securities. The following table presents the distribution of our securities portfolio, at amortized cost, at the dates indicated. Overall, fixed-rate securities comprised 76% of our securities portfolio at March 31, 2019. The weighted average life ("WAL") is the estimated remaining maturity (in years) after three-month historical prepayment speeds and projected call option assumptions have been applied. Weighted average yields on tax-exempt securities are not calculated on a fully taxable equivalent basis.



	March 31, 2019					December 31, 2018					September 30, 2018
	Amount		Yield		WAL	Amount		Yield		WAL	Amount		Yield		WAL
	(Dollars in thousands)
Fixed-rate securities:
MBS	$	671,771	2.47	%	3.2	$	685,636	2.44	%	3.1	$	732,095	2.43	%	3.0
GSE debentures	268,375		2.44		1.0	243,550		2.20		1.8	268,525		2.09		2.3
Municipal bonds	21,155		1.61		1.3	22,845		1.57		1.6	24,574		1.56		1.8
Total fixed-rate securities	961,301		2.44		2.6	952,031		2.35		2.8	1,025,194		2.32		2.8

Adjustable-rate securities:
MBS	308,134		3.12		4.9	284,584		3.07		4.9	305,688		2.89		4.5
Total securities portfolio	$	1,269,435	2.61		3.1	$	1,236,615	2.52		3.3	$	1,330,882	2.45		3.2

The following table presents the carrying value of MBS in our portfolio by issuer at the dates presented.



	March 31, 2019		December 31, 2018		September 30, 2018
	(Dollars in thousands)
Federal National Mortgage Association ("FNMA")	$	675,220	$	640,760	$	680,717
Federal Home Loan Mortgage Corporation ("FHLMC")	228,990		245,796		265,441
Government National Mortgage Association	81,084		85,987		90,832
	$	985,294	$	972,543	$	1,036,990

Mortgage-Backed Securities - The balance of MBS, which primarily consists of securities of U.S. GSEs, decreased $51.7 million, from $1.04 billion at September 30, 2018, to $985.3 million at March 31, 2019. The following table summarizes the activity in our portfolio of MBS for the periods presented. The weighted average yields and WALs for purchases are presented as recorded at the time of purchase. The weighted average yields for the beginning balances are as of the last day of the period previous to the period presented and the weighted average yields for the ending balances are as of the last day of the period presented and are generally derived from recent prepayment activity on the securities in the portfolio as of the dates presented. The beginning and ending WAL is the estimated remaining principal repayment term (in years) after three-month historical prepayment speeds have been applied.



	For the Three Months Ended
	March 31, 2019						December 31, 2018						September 30, 2018						June 30, 2018
	Amount			Yield		WAL	Amount			Yield		WAL	Amount			Yield		WAL	Amount			Yield		WAL
	(Dollars in thousands)
Beginning balance - carrying value	$	972,543		2.62	%	3.6	$	1,036,990		2.57	%	3.4	$	958,269		2.46	%	3.7	$	982,405		2.39	%	3.8
Maturities and repayments	(62,702		)				(67,214		)				(77,985		)				(69,843		)
Net amortization of (premiums)/discounts	(310		)				(349		)				(624		)				(702		)
Purchases:
Fixed	28,921			2.89		5.1	—			—		—	74,178			3.11		3.7	24,348			2.90		3.7
Adjustable	43,776			2.69		4.3	—			—		—	—			—		—	23,544			2.35		3.0
Securities added in CCB acquisition, net	—			—		—	—			—		—	85,741			3.13		2.5	—			—		—
Change in valuation on AFS securities	3,066						3,116						(2,589		)				(1,483		)
Ending balance - carrying value	$	985,294		2.67		3.7	$	972,543		2.62		3.6	$	1,036,990		2.57		3.4	$	958,269		2.46		3.7



	For the Six Months Ended
	March 31, 2019						March 31, 2018
	Amount			Yield		WAL	Amount			Yield		WAL
	(Dollars in thousands)
Beginning balance - carrying value	$	1,036,990		2.57	%	3.4	$	942,447		2.28	%	3.5
Maturities and repayments	(129,916		)				(129,636		)
Net amortization of (premiums)/discounts	(659		)				(1,642		)
Purchases:
Fixed	28,921			2.89		5.1	103,345			2.80		4.5
Adjustable	43,776			2.69		4.3	70,484			2.44		4.6
Securities added in CCB acquisition, net	—			—		—	—			—		—
Change in valuation on AFS securities	6,182						(2,593		)
Ending balance - carrying value	$	985,294		2.67		3.7	$	982,405		2.39		3.8

Investment Securities - Investment securities, which consist of U.S. GSE debentures (primarily issued by FNMA, FHLMC, or Federal Home Loan Banks) and municipal investments, decreased $1.0 million, from $289.9 million at September 30, 2018, to $288.9 million at March 31, 2019. The following table summarizes the activity of investment securities for the periods presented. The weighted average yields and WALs for purchases are presented as recorded at the time of purchase. The weighted average yields for the beginning balances are as of the last day of the period previous to the period presented and the weighted average yields for the ending balances are as of the last day of the period presented. The beginning and ending WALs represent the estimated remaining principal repayment terms (in years) of the securities after projected call dates have been considered, based upon market rates at each date presented.



	For the Three Months Ended
	March 31, 2019						December 31, 2018						September 30, 2018						June 30, 2018
	Amount			Yield		WAL	Amount			Yield		WAL	Amount			Yield		WAL	Amount			Yield		WAL
	(Dollars in thousands)
Beginning balance - carrying value	$	264,782		2.14	%	1.8	$	289,942		2.05	%	2.2	$	261,614		1.95	%	2.2	$	293,113		1.61	%	1.5
Maturities, calls and sales	(76,635		)				(26,665		)				(2,010		)				(71,700		)
Net amortization of (premiums)/discounts	(39		)				(39		)				(48		)				(43		)
Purchases:
Fixed	99,809			2.67		0.7	—			—		—	24,996			3.01		3.0	40,564			3.02		2.1
Securities added in CCB acquisition, net	—			—		—	—			—		—	5,855			2.12		1.0	—			—		—
Change in valuation on AFS securities	977						1,544						(465		)				(320		)
Ending balance - carrying value	$	288,894		2.38		1.0	$	264,782		2.14		1.8	$	289,942		2.05		2.2	$	261,614		1.95		2.2



	For the Six Months Ended
	March 31, 2019						March 31, 2018
	Amount			Yield		WAL	Amount			Yield		WAL
	(Dollars in thousands)
Beginning balance - carrying value	$	289,942		2.05	%	2.2	$	301,122		1.33	%	1.5
Maturities, calls and sales	(103,300		)				(56,128		)
Net amortization of (premiums)/discounts	(78		)				(91		)
Purchases:
Fixed	99,809			2.67		0.7	50,000			2.63		1.0
Change in valuation on AFS securities	2,521						(1,790		)
Ending balance - carrying value	$	288,894		2.38		1.0	$	293,113		1.61		1.5

Liabilities

Deposits - Deposits were $5.70 billion at March 31, 2019 compared to $5.60 billion at September 30, 2018. We continue to be competitive on deposit rates, especially for longer-term certificates of deposit. Offering competitive rates on longer-term certificates of deposit has been an on-going balance sheet strategy by management to manage our interest rate risk profile. Additionally, as we expand the commercial banking business, we will have the ability to obtain lower-costing commercial deposits, which could be used to reduce the cost of funds by replacing FHLB borrowings and wholesale deposits.

The following table presents the amount, weighted average rate and percent of total for the components of our deposit portfolio at the dates presented. Total deposits increased $143.2 million, or 2.6%, during the current quarter. The deposit growth during the current quarter was primarily in retail/business certificates of deposit, due mainly to the President's Day certificate of deposit campaign in February, along with increases in interest-bearing checking and money market accounts.



	March 31, 2019						December 31, 2018						September 30, 2018
					% of						% of						% of
	Amount		Rate		Total		Amount		Rate		Total		Amount		Rate		Total
	(Dollars in thousands)
Non-interest-bearing checking	$	361,126	—	%	6.3	%	$	348,867	—	%	6.3	%	$	336,454	—	%	6.0	%
Interest-bearing checking	768,856		0.08		13.5		729,712		0.07		13.1		724,066		0.08		12.9
Savings	361,204		0.06		6.3		350,089		0.06		6.3		352,896		0.07		6.3
Money market	1,287,753		0.72		22.6		1,256,302		0.72		22.6		1,252,881		0.47		22.4
Retail/business certificates of deposit	2,522,044		1.93		44.3		2,479,614		1.86		44.6		2,529,368		1.79		45.1
Public unit certificates of deposit	400,128		2.22		7.0		393,280		2.07		7.1		407,689		1.89		7.3
	$	5,701,111	1.19		100.0	%	$	5,557,864	1.15		100.0	%	$	5,603,354	1.06		100.0	%

The following tables set forth scheduled maturity information for our certificates of deposit, including public unit certificates of deposit, along with associated weighted average rates, as of March 31, 2019.



	Amount Due
				More than			More than
	1 year			1 year to			2 years to 3			More than			Total
Rate range	or less			2 years			years			3 years			Amount		Rate
	(Dollars in thousands)
0.00 – 0.99%	$	87,392		$	2,760		$	1,782		$	14		$	91,948	0.71	%
1.00 – 1.99%	839,010			453,054			256,789			112,435			1,661,288		1.72
2.00 – 2.99%	446,257			227,832			119,053			375,555			1,168,697		2.43
3.00 – 3.99%	—			—			—			239			239		3.00
	$	1,372,659		$	683,646		$	377,624		$	488,243		$	2,922,172	1.97

Percent of total	47.0		%	23.4		%	12.9		%	16.7		%
Weighted average rate	1.83			1.97			2.04			2.34
Weighted average maturity (in years)	0.5			1.4			2.5			3.6			1.5
Weighted average maturity for the retail/business certificate of deposit portfolio (in years)													1.6



	Amount Due
			Over		Over
	3 months		3 to 6		6 to 12		Over
	or less		months		months		12 months		Total
	(Dollars in thousands)
Retail/business certificates of deposit less than $100,000	$	150,213	$	160,371	$	314,935	$	866,864	$	1,492,383
Retail/business certificates of deposit of $100,000 or more	87,265		117,275		218,656		606,465		1,029,661
Public unit certificates of deposit of $100,000 or more	152,706		82,022		89,216		76,184		400,128
	$	390,184	$	359,668	$	622,807	$	1,549,513	$	2,922,172

Borrowings - The following tables present borrowing activity for the periods shown. The borrowings presented in the table have original contractual terms of one year or longer. FHLB advances are presented at par. The effective rate is shown as a weighted average and includes the impact of interest rate swaps and the amortization of deferred prepayment penalties resulting from FHLB advances previously prepaid. The weighted average maturity ("WAM") is the remaining weighted average contractual term in years. The beginning and ending WAMs represent the remaining maturity at each date presented. For new borrowings, the WAMs presented are as of the date of issue.



	For the Three Months Ended
	March 31, 2019						December 31, 2018						September 30, 2018						June 30, 2018
				Effective						Effective						Effective						Effective
	Amount			Rate		WAM	Amount			Rate		WAM	Amount			Rate		WAM	Amount			Rate		WAM
	(Dollars in thousands)
Beginning balance	$	2,181,186		2.31	%	3.0	$	2,185,052		2.17	%	2.9	$	2,175,000		2.10	%	2.7	$	2,175,000		2.09	%	2.4
Maturities:
FHLB advances	—			—			(300,000		)	1.73			(275,000		)	2.17			(100,000		)	2.82
CCB acquisition - junior subordinated debentures assumed (redeemed)	(6,186		)	10.60		11.5	(3,866		)	5.82		13.5	10,052			8.75		12.7	—			—		—
New FHLB borrowings:
Fixed-rate	—			—		—	100,000			3.39		5.0	—			—		—	—			—		—
Interest rate swaps⁽¹⁾	65,000			2.57		5.0	200,000			2.46		3.5	275,000			2.53		5.6	100,000			2.92		10.0
Ending balance	$	2,240,000		2.29		2.8	$	2,181,186		2.31		3.0	$	2,185,052		2.17		2.9	$	2,175,000		2.10		2.7



	For the Six Months Ended
	March 31, 2019						March 31, 2018
				Effective						Effective
	Amount			Rate		WAM	Amount			Rate		WAM
	(Dollars in thousands)
Beginning balance	$	2,185,052		2.17	%	2.9	$	2,375,000		2.16	%	2.7
Maturities:
FHLB advances	(300,000		)	1.73			(100,000		)	2.53
Repurchase agreements	—			—			(100,000		)	3.35
CCB acquisition - junior subordinated debentures assumed (redeemed)	(10,052		)	8.76		12.3	—			—		—
New FHLB borrowings:
Fixed-rate	100,000			3.39		5.0	—			—		—
Interest rate swaps⁽¹⁾	265,000			2.49		3.9	—			—		—
Ending balance	$	2,240,000		2.29		2.8	$	2,175,000		2.09		2.4


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

Maturities - The following table presents the maturity of term borrowings (including FHLB advances, at par, and repurchase agreements), along with associated weighted average contractual and effective rates as of March 31, 2019.



	FHLB Advances Amount				Repurchase
Maturity by			Interest rate		Agreements		Total		Contractual	Effective
Fiscal Year	Fixed-rate		swaps⁽¹⁾		Amount		Amount		Rate	Rate⁽²⁾
	(Dollars in thousands)
2019	$	200,000	$	375,000	$	—	$	575,000	2.25	2.29
2020	350,000		265,000		100,000		715,000		2.32	2.25
2021	550,000		—		—		550,000		2.27	2.27
2022	200,000		—		—		200,000		2.23	2.23
2023	100,000		—		—		100,000		1.82	1.82
2024	100,000		—		—		100,000		3.39	3.39
	$	1,500,000	$	640,000	$	100,000	$	2,240,000	2.31	2.29

(1)

Represents 12-month adjustable-rate FHLB advances for which the Bank has entered into interest rate swaps with a notional amount of $640.0 million to hedge the variability in cash flows associated with the advances. These advances are presented based on their contractual maturity dates and will be renewed each year until the maturity or termination of the interest rate swaps. The expected WAL of the interest rate swaps was 4.9 years at March 31, 2019.


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

As of March 31, 2019, the Bank had $100.0 million outstanding on its FHLB line of credit, which was not related to the leverage strategy. The average rate paid on FHLB line of credit borrowings during the current year six month period was 2.55%.

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/business and public unit amounts, and term borrowings for the next four quarters as of March 31, 2019.



	Retail/Business				Public Unit				Term
Maturity by	Certificate		Repricing		Certificate		Repricing		Borrowings		Repricing				Repricing
Quarter End	Amount		Rate		Amount		Rate		Amount		Rate		Total		Rate
	(Dollars in thousands)
June 30, 2019	$	237,478	1.36	%	$	152,706	2.13	%	$	200,000	2.11	%	$	590,184	1.81	%
September 30, 2019	277,646		1.71		82,022		2.00		375,000		2.38		734,668		2.09
December 31, 2019	321,600		1.91		59,450		2.23		350,000		2.40		731,050		2.17
March 31, 2020	211,991		1.84		29,766		2.71		65,000		2.57		306,757		2.08
	$	1,048,715	1.72		$	323,944	2.17		$	990,000	2.35		$	2,362,659	2.04

Stockholders' Equity. Stockholders' equity was $1.36 billion at March 31, 2019 compared to $1.39 billion at September 30, 2018. The $35.6 million decrease was due primarily to the payment of $77.1 million in cash dividends, partially offset by net income of $48.9 million. The cash dividends paid during the current year six month period totaled $0.56 per share and consisted of a $0.39 per share cash true-up dividend related to fiscal year 2018 earnings per the Company's dividend policy, and two regular quarterly cash dividends totaling $0.17 per share. On April 17, 2019, the Company announced a regular quarterly cash dividend of $0.085 per share, or approximately $11.7 million, payable on May 17, 2019 to stockholders of record as of the close of business on May 3, 2019.

At March 31, 2019, Capitol Federal Financial, Inc., at the holding company level, had $102.7 million on deposit at the Bank. For fiscal year 2019, it is the intent of the Board of Directors to continue the payout of 100% of the Company's earnings to the Company's stockholders. Dividend payments depend upon a number of factors including the Company's financial condition and results of operations, regulatory capital requirements, regulatory limitations on the Bank's ability to make capital distributions to the Company, and the amount of cash at the holding company.

The Company works to find multiple ways to provide stockholder value. Recently, this has primarily been through the payment of cash dividends and historically the Company has also utilized stock buybacks. The Company has maintained a dividend policy of paying out 100% of its earnings to stockholders in the form of quarterly cash dividends and an annual cash true-up dividend in December of each year. In order to provide additional stockholder value, the Company has paid a True Blue cash dividend of $0.25 per share in June of each of the past five years, and in December prior to that. The Company has paid the True Blue dividend primarily due to excess capital levels at the Company and Bank. The Company considers various business strategies and their impact on capital and asset measures on both a current and future basis, as well as regulatory capital levels and requirements, in determining the amount, if any, and timing of the True Blue dividend.

The following table presents regular quarterly cash dividends and special cash dividends paid in calendar years 2019, 2018, and 2017. The amounts represent cash dividends paid during each period. For the quarter ending June 30, 2019, the amount presented represents the dividend payable on May 17, 2019 to stockholders of record as of May 3, 2019.



	Calendar Year
	2019				2018				2017
	Amount		Per Share		Amount		Per Share		Amount		Per Share
	(Dollars in thousands, except per share amounts)
Regular quarterly dividends paid
Quarter ended March 31	$	11,700	$	0.085	$	11,427	$	0.085	$	11,386	$	0.085
Quarter ended June 30	11,708		0.085		11,429		0.085		11,409		0.085
Quarter ended September 30					11,430		0.085		11,411		0.085
Quarter ended December 31					11,696		0.085		11,427		0.085
True-up dividends paid					53,666		0.390		38,985		0.290
True Blue dividends paid					33,614		0.250		33,559		0.250
Calendar year-to-date dividends paid	$	23,408	$	0.170	$	133,262	$	0.980	$	118,177	$	0.880

The Company has authorized the repurchase of up to $70.0 million of its common stock under its stock repurchase plan. Shares may be repurchased from time to time based upon market conditions and available liquidity. There is no expiration for this repurchase plan and no shares have been repurchased under this repurchase plan.

Operating Results

The following table presents selected income statement and other information for the quarters indicated.



	For the Three Months Ended
	March 31,			December 31,			September 30,			June 30,			March 31,
	2019			2018			2018			2018			2018
	(Dollars in thousands, except per share data)
Interest and dividend income:
Loans receivable	$	71,657		$	70,772		$	66,922		$	64,893		$	64,194
MBS	6,301			6,523			6,056			5,921			5,390
FHLB stock	1,831			1,971			1,847			2,819			3,201
Investment securities	1,505			1,441			1,275			1,307			1,094
Cash and cash equivalents	743			1,714			1,213			7,221			7,895
Total interest and dividend income	82,037			82,421			77,313			82,161			81,774

Interest expense:
Deposits	16,096			15,725			14,597			13,587			12,480
FHLB borrowings	12,525			13,530			11,930			18,501			18,772
Other borrowings	819			865			709			640			633
Total interest expense	29,440			30,120			27,236			32,728			31,885

Net interest income	52,597			52,301			50,077			49,433			49,889

Provision for credit losses	—			—			—			—			—

Net interest income
(after provision for credit losses)	52,597			52,301			50,077			49,433			49,889

Non-interest income	5,001			5,424			5,820			5,424			5,433
Non-interest expense	26,141			26,782			26,757			24,511			23,598
Income tax expense	6,903			6,560			7,751			7,974			8,394
Net income	$	24,554		$	24,383		$	21,389		$	22,372		$	23,330

Efficiency ratio	45.38		%	46.40		%	47.87		%	44.68		%	42.66		%

Basic EPS	$	0.18		$	0.18		$	0.16		$	0.17		$	0.17
Diluted EPS	0.18			0.18			0.16			0.17			0.17

Comparison of Operating Results for the Six Months Ended March 31, 2019 and 2018

The Company recognized net income of $48.9 million, or $0.36 per share, for the six month period ended March 31, 2019 compared to net income of $55.2 million, or $0.41 per share, for the six month period ended March 31, 2018. The decrease in net income was due primarily to the prior year six month period including the impact of the enactment of the Tax Act as discussed below, as well as an increase in non-interest expense during the current year six month period. These changes were partially offset by an increase in net interest income due primarily to the higher yielding loans added in the CCB acquisition. The Tax Act reduced the federal corporate income tax rate from 35% to 21% effective January 1, 2018. In accordance with GAAP, the Company revalued its deferred tax assets and liabilities in December 2017 to account for the lower corporate income tax rate. The revaluation reduced income tax expense by $7.5 million.

The net interest margin increased 45 basis points, from 1.85% for the prior year six month period to 2.30% for the current year six month period. When the leverage strategy is in place, it reduces the net interest margin due to the amount of earnings from the transaction in comparison to the size of the transaction. The leverage strategy was suspended at certain times during the current year six month period due to the negative interest rate spreads between the related FHLB borrowings and cash held at the FRB of Kansas City making the transaction unprofitable. Excluding the effects of the leverage strategy, the net interest margin would have increased 11 basis points, from 2.22% for the prior year six month period to 2.33% for the current year six month period. The increase in the net interest margin excluding the effects of the leverage strategy was due mainly to the addition of higher yielding commercial loans in the CCB acquisition.

Interest and Dividend Income

The weighted average yield on total interest-earning assets increased 58 basis points, from 3.02% for the prior year six month period to 3.60% for the current year six month period, while the average balance of interest-earning assets decreased $1.62 billion from the prior year six month period. Absent the impact of the leverage strategy, the weighted average yield on total interest-earning assets would have increased 29 basis points, from 3.33% for the prior year six month period to 3.62% for the current year six month period, and the average balance of interest-earning assets would have increased $272.1 million. The following table presents the components of interest and dividend income for the time periods presented, along with the change measured in dollars and percent.



	For the Six Months Ended
	March 31,				Change Expressed in:
	2019		2018		Dollars			Percent
	(Dollars in thousands)
INTEREST AND DIVIDEND INCOME:
Loans receivable	$	142,429	$	128,383	$	14,046		10.9	%
MBS	12,824		10,642		2,182			20.5
FHLB stock	3,802		6,296		(2,494		)	(39.6	)
Investment securities	2,946		2,088		858			41.1
Cash and cash equivalents	2,457		15,009		(12,552		)	(83.6	)
Total interest and dividend income	$	164,458	$	162,418	$	2,040		1.3

The increase in interest income on loans receivable was due to a $347.4 million increase in the average balance of the portfolio, as well as a 20 basis point increase in the weighted average yield on the portfolio to 3.77% for the current year six month period. The increase in the average balance was due mainly to the acquisition of CCB. The increase in the weighted average yield was also due mainly to the addition of higher yielding loans associated with the CCB acquisition, as well as legacy adjustable-rate loans repricing to higher market rates and the origination and purchase of new loans at higher market rates.

The increase in interest income on the MBS portfolio was due to a 33 basis point increase in the weighted average yield on the portfolio to 2.61% for the current year six month period, along with a $48.6 million increase in the average balance of the portfolio. The increase in the weighted average yield was due primarily to a decrease in the impact of net premium amortization, as well as adjustable-rate MBS repricing to higher market rates. Net premium amortization of $659 thousand during the current year six month period decreased the weighted average yield on the portfolio by 13 basis points. During the prior year six month period, $1.6 million of net premiums were amortized, which decreased the weighted average yield on the portfolio by 35 basis points. As of March 31, 2019, the remaining net balance of premiums on our portfolio of MBS was $2.4 million.

The decrease in dividend income on FHLB stock was due to a decrease in the average balance of FHLB stock as a result of the leverage strategy not being in place as often during the current year six month period as compared to the prior year six month period. This was partially offset by a higher dividend rate on FHLB stock during the current year six month period.

The increase in interest income on the investment securities portfolio was due to a 75 basis point increase in the weighted average yield on the portfolio to 2.13%. The increase in the weighted average yield was primarily a result of replacing maturing securities at higher market rates.

The table above includes interest income on cash and cash equivalents associated and not associated with the leverage strategy. Interest income on cash and cash equivalents not related to the leverage strategy decreased $155 thousand from the prior year six month period due to a $98.9 million decrease in the average balance, partially offset by a 97 basis point increase in the weighted average yield which was related to cash balances held at the FRB of Kansas City. Interest income on cash associated with the leverage strategy decreased $12.4 million from the prior year six month period due to a $1.80 billion decrease in the average balance, as the leverage strategy was in place less often during the current year six month period.

Interest Expense

The weighted average rate paid on total interest-bearing liabilities increased 17 basis points, from 1.32% for the prior year six month period to 1.49% for the current year six month period, while the average balance of interest-bearing liabilities decreased $1.58 billion from the prior year six month period. Absent the impact of the leverage strategy, the weighted average rate paid on total interest-bearing liabilities would have increased 19 basis points, from 1.29% for the prior year six month period to 1.48% for the current year six month period, and the average balance of interest-bearing liabilities would have increased $315.2 million. The following table presents the components of interest expense for the time periods presented, along with the change measured in dollars and percent.



	For the Six Months Ended
	March 31,				Change Expressed in:
	2019		2018		Dollars			Percent
	(Dollars in thousands)
INTEREST EXPENSE:
Deposits	$	31,821	$	24,441	$	7,380		30.2	%
FHLB borrowings	26,055		36,689		(10,634		)	(29.0	)
Other borrowings	1,684		2,025		(341		)	(16.8	)
Total interest expense	$	59,560	$	63,155	$	(3,595	)	(5.7	)

The increase in interest expense on deposits was due primarily to a 22 basis point increase in the weighted average rate, to 1.15% for the current year six month period. The deposit accounts assumed in the CCB acquisition were at a lower average rate than our legacy deposit portfolio rate and our overall deposit portfolio rate, which partially offset the increase in the deposit portfolio rate in the current year six month period. The increase in the weighted average rate was due primarily to increases in the average retail/business certificate of deposit portfolio rate and wholesale certificate of deposit portfolio rate, which increased 28 basis points and 68 basis points, respectively.

The table above includes interest expense on FHLB borrowings associated and not associated with the leverage strategy. Interest expense on FHLB borrowings not related to the leverage strategy increased $2.5 million from the prior year six month period due to a 19 basis point increase in the weighted average rate paid on the portfolio, to 2.25% for the current year six month period, and a $33.5 million increase in the average balance of the portfolio. The increase in the weighted average rate paid was due primarily to certain maturing advances being replaced at higher effective interest rates. Interest expense on FHLB borrowings associated with the leverage strategy decreased $13.1 million from the prior year six month period due to the leverage strategy not being in place as often during the current year six month period.

The decrease in interest expense on other borrowings was due mainly to the maturity of a $100.0 million repurchase agreement during the prior fiscal year, which was not replaced with a new repurchase agreement.

Provision for Credit Losses

The Bank did not record a provision for credit losses during the current year six month period or the prior year six month period. Based on management's assessment of the ACL formula analysis model and several other factors, it was determined that no provision for credit losses was necessary. Net loan recoveries were $156 thousand during the current year six month period and net charge-offs were $8 thousand in the prior year six month period. At March 31, 2019, loans 30 to 89 days delinquent were 0.23% of total loans and loans 90 or more days delinquent or in foreclosure were 0.12% of total loans. At March 31, 2018, loans 30 to 89 days delinquent were 0.19% of total loans and loans 90 or more days delinquent or in foreclosure were 0.16% of total loans.

Non-Interest Income

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



	For the Six Months Ended
	March 31,				Change Expressed in:
	2019		2018		Dollars			Percent
	(Dollars in thousands)
NON-INTEREST INCOME:
Deposit service fees	$	6,443	$	7,635	$	(1,192	)	(15.6	)%
Income from BOLI	1,222		810		412			50.9
Other non-interest income	2,760		2,346		414			17.6
Total non-interest income	$	10,425	$	10,791	$	(366	)	(3.4	)

The decrease in deposit service fees was due mainly to a change in the presentation of interchange network charges related to the adoption of a new revenue recognition accounting standard during the current year six month period. Previously, interchange network charges were reported in deposit and loan expense. Upon adoption of the new revenue recognition accounting standard on October 1, 2018, interchange transaction fee income is reported net of interchange network charges, which totaled $1.7 million during the current year six month period and $1.5 million during the prior year six month period.

The increase in income from BOLI was due primarily to a one-time adjustment during the prior year six month period to the benchmark rate associated with one of the policies which reduced income from BOLI during that period, as well as to an increase in income related to policies acquired in the CCB acquisition.

The increase in other non-interest income was due mainly to revenues from the trust asset management operations acquired in the CCB acquisition. Additionally, the prior year six month period included a loss on the sale of loans as management tested loan sale processes for liquidity purposes, and there were no loan sales in the current year six month period.

Non-Interest Expense

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



	For the Six Months Ended
	March 31,				Change Expressed in:
	2019		2018		Dollars			Percent
	(Dollars in thousands)
NON-INTEREST EXPENSE:
Salaries and employee benefits	$	25,751	$	21,695	$	4,056		18.7	%
Information technology and related expense	8,883		6,953		1,930			27.8
Occupancy, net	6,544		5,604		940			16.8
Regulatory and outside services	2,822		2,291		531			23.2
Advertising and promotional	2,150		2,022		128			6.3
Deposit and loan transaction costs	1,201		2,720		(1,519		)	(55.8	)
Office supplies and related expense	1,195		884		311			35.2
Federal insurance premium	1,187		1,699		(512		)	(30.1	)
Other non-interest expense	3,190		1,766		1,424			80.6
Total non-interest expense	$	52,923	$	45,634	$	7,289		16.0

The increase in salaries and employee benefits was due primarily to $3.2 million of expense related to former CCB employees during the current year six month period, as well as an increase due to salary adjustments. The increase in information technology and related expense was due mainly to an increase in software licensing, costs related to the integration of CCB operations, and accelerated depreciation related to the implementation of enhancements to the Bank's information technology infrastructure. The increase in occupancy, net was due primarily to expenses related to properties acquired in the CCB acquisition. The increase in regulatory and outside services was due mainly to an increase in consulting expenses as well as expenses related to the acquisition of CCB. The

decrease in deposit and loan transaction costs was due mainly to the adoption of the new revenue recognition standard discussed above. The decrease in federal insurance premium was due primarily to a decrease in average assets as a result of a reduction in the usage of the leverage strategy in the current year six month period. The increase in other non-interest expense was due primarily to amortization of deposit intangibles associated with the acquisition of CCB.

The Company's efficiency ratio was 45.89% for the current year six month period compared to 41.47% for the prior year six month period. The change in the efficiency ratio was due to higher non-interest expense in the current year six month period compared to the prior year six month period. The efficiency ratio is a measure of a financial institution's total non-interest expense as a percentage of the sum of net interest income (pre-provision for credit losses) and non-interest income. A lower value indicates that the financial institution is generating revenue with a proportionally lower level of expense.

Income Tax Expense

Income tax expense was $13.5 million for the current year six month period compared to $9.3 million for the prior year six month period. The effective tax rate was 21.6% for the current year six month period compared to 14.4% for the prior year six month period. The increase in the effective tax rate compared to the prior year six month period was due mainly to the Tax Act being signed into law in December 2017. In accordance with GAAP, the Company revalued its deferred tax assets and liabilities in December 2017 to account for the lower corporate tax rate which reduced income tax expenses by $7.5 million. Management estimates the effective income tax rate for fiscal year 2019 will be approximately 22%.

Average Balance Sheet

The following table presents the average balances of our assets, liabilities, and stockholders' equity, and the related annualized weighted average yields and rates on our interest-earning assets and interest-bearing liabilities for the periods indicated, along with the ending balances of our assets, liabilities, and stockholders' equity at March 31, 2019 and the weighted average yield/rate on our interest-earning assets and interest-bearing liabilities at March 31, 2019, as well as selected performance ratios and other information as of the dates and for the periods shown. The leverage strategy was not in place at March 31, 2019, so the end of period information presented at March 31, 2019 in the table below does not reflect this strategy. Weighted average yields are derived by dividing annualized income by the average balance of the related assets, and weighted average rates are derived by dividing annualized expense by the average balance of the related liabilities, for the periods shown. Average outstanding balances are derived from average daily balances. The weighted average yields and rates include amortization of fees, costs, premiums and discounts, which are considered adjustments to yields/rates. Weighted average yields on tax-exempt securities are not calculated on a fully taxable equivalent basis.



					For the Six Months Ended
					March 31, 2019						March 31, 2018
	At March 31, 2019				Average		Interest				Average		Interest
			Yield/		Outstanding		Earned/		Yield/		Outstanding		Earned/		Yield/
	Amount		Rate		Amount		Paid		Rate		Amount		Paid		Rate
Assets:	(Dollars in thousands)
Interest-earning assets:
One- to four-family loans	$	6,720,131	3.66	%	$	6,770,175	$	122,309	3.61	%	$	6,787,491	$	119,006	3.51	%
Commercial loans	724,481		4.88		634,229		15,787		4.92		282,730		5,973		4.18
Consumer loans	134,813		6.30		138,369		4,333		6.28		125,182		3,404		5.45
Total loans receivable⁽¹⁾	7,579,425		3.82		7,542,773		142,429		3.77		7,195,403		128,383		3.57
MBS⁽²⁾	985,294		2.67		984,033		12,824		2.61		935,442		10,642		2.28
Investment securities⁽²⁾⁽³⁾	288,894		2.38		277,292		2,946		2.13		302,669		2,088		1.38
FHLB stock	102,631		7.47		104,023		3,802		7.33		192,469		6,296		6.56
Cash and cash equivalents⁽⁴⁾	218,051		2.39		215,660		2,457		2.25		2,118,019		15,009		1.40
Total interest-earning assets⁽¹⁾⁽²⁾	9,174,295		3.66		9,123,781		164,458		3.60		10,744,002		162,418		3.02
Other non-interest-earning assets	360,256				368,864						307,596
Total assets	$	9,534,551			$	9,492,645					$	11,051,598

Liabilities and stockholders' equity:
Interest-bearing liabilities:
Checking	$	1,129,982	0.06		$	1,063,346	294		0.06		$	856,773	153		0.04
Savings	361,204		0.06		357,243		113		0.06		354,457		569		0.32
Money market	1,287,753		0.72		1,260,999		4,441		0.71		1,192,571		1,897		0.32
Retail/business certificates	2,522,044		1.93		2,495,475		22,947		1.84		2,431,173		18,954		1.56
Wholesale certificates	400,128		2.22		392,693		4,026		2.06		415,907		2,868		1.38
Total deposits	5,701,111		1.19		5,569,756		31,821		1.15		5,250,881		24,441		0.93
FHLB borrowings⁽⁵⁾	2,239,985		2.30		2,304,818		26,055		2.26		4,163,650		36,689		1.75
Other borrowings	100,000		2.53		107,087		1,684		3.11		144,242		2,025		2.78
Total borrowings	2,339,985		2.31		2,411,905		27,739		2.29		4,307,892		38,714		1.79
Total interest-bearing liabilities	8,041,096		1.51		7,981,661		59,560		1.49		9,558,773		63,155		1.32
Other non-interest-bearing liabilities	137,472				142,060						130,219
Stockholders' equity	1,355,983				1,368,924						1,362,606
Total liabilities and stockholders' equity	$	9,534,551			$	9,492,645					$	11,051,598
													(Continued)



					For the Six Months Ended
					March 31, 2019						March 31, 2018
	At March 31, 2019				Average		Interest				Average		Interest
			Yield/		Outstanding		Earned/		Yield/		Outstanding		Earned/		Yield/
	Amount		Rate		Amount		Paid		Rate		Amount		Paid		Rate
	(Dollars in thousands)

Net interest income⁽⁶⁾							$	104,898					$	99,263
Net interest rate spread⁽⁷⁾⁽⁸⁾			2.15	%					2.11	%					1.70	%
Net interest-earning assets	$	1,133,199			$	1,142,120					$	1,185,229
Net interest margin⁽⁸⁾⁽⁹⁾									2.30						1.85
Ratio of interest-earning assets to interest-bearing liabilities									1.14x						1.12x

Selected performance ratios:
Return on average assets (annualized)⁽⁸⁾									1.03	%					1.00	%
Return on average equity (annualized)⁽⁸⁾									7.15						8.10
Average equity to average assets									14.42						12.33
Operating expense ratio⁽¹⁰⁾									1.12						0.83
Efficiency ratio^(8)(11)									45.89						41.47
Pre-tax yield on leverage strategy⁽¹²⁾									0.03						0.19

													(Concluded)


(1)	Balances are adjusted for unearned loan fees and deferred costs. Loans that are 90 or more days delinquent are included in the loans receivable balance with a yield of zero percent.


(2)	Average balances of AFS securities are adjusted for unamortized purchase premiums or discounts. Ending balances of AFS securities are adjusted for unamortized purchase premiums or discounts and unrealized gains/losses.


(3)	The average balance of investment securities includes an average balance of nontaxable securities of $22.8 million and $26.1 million for the six months ended March 31, 2019 and March 31, 2018, respectively.


(4)	The average balance of cash and cash equivalents includes an average balance of cash related to the leverage strategy of $110.2 million and $1.91 billion for the six months ended March 31, 2019 and March 31, 2018, respectively.

(5)

Included in this line, for the six months ended March 31, 2019 and March 31, 2018, are FHLB borrowings related to the leverage strategy with an average outstanding balance of $115.4 million and $2.01 billion, respectively, and interest paid of $1.4 million and $14.5 million, respectively, at a weighted average rate of 2.36% and 1.43%, respectively, and FHLB borrowings not related to the leverage strategy with an average outstanding balance of $2.19 billion and $2.16 billion, respectively, and interest paid of $24.7 million and $22.2 million, respectively, at a weighted average rate of 2.25% and 2.06%, respectively. The FHLB advance amounts and rates included in this line include the effect of interest rate swaps and are net of deferred prepayment penalties.


(6)	Net interest income represents the difference between interest income earned on interest-earning assets and interest paid on interest-bearing liabilities. Net interest income depends on the average balance of interest-earning assets and interest-bearing liabilities, and the interest rates earned or paid on them.


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

(8)

The table below provides a reconciliation between certain performance ratios presented in accordance with GAAP and the performance ratios excluding the effects of the leverage strategy, which are not presented in accordance with GAAP. Management believes it is important for comparability purposes to provide the performance ratios without the leverage strategy because of the unique nature of the leverage strategy. The leverage strategy reduces some of our performance ratios due to the amount of earnings associated with the transaction in comparison to the size of the transaction, while increasing our net income.



	For the Six Months Ended
	March 31, 2019						March 31, 2018
	Actual		Leverage		Adjusted		Actual		Leverage		Adjusted
	(GAAP)		Strategy		(Non-GAAP)		(GAAP)		Strategy		(Non-GAAP)
Return on average assets (annualized)	1.03	%	(0.01	)%	1.04	%	1.00	%	(0.19	)%	1.19	%
Return on average equity (annualized)	7.15		—		7.15		8.10		0.22		7.88
Net interest margin	2.30		(0.03	)	2.33		1.85		(0.37	)	2.22
Net interest rate spread	2.11		(0.03	)	2.14		1.70		(0.34	)	2.04
Efficiency Ratio	45.89		—		45.89		41.47		(0.52	)	41.99


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


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


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


(12)	The pre-tax yield on the leverage strategy represents annualized pre-tax income resulting from the transaction as a percentage of the average interest-earning assets associated with the transaction.

Rate/Volume Analysis

The table below presents the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities, comparing the six months ended March 31, 2019 to the six months ended March 31, 2018. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (1) changes in volume, which are changes in the average balance multiplied by the previous year's average rate, and (2) changes in rate, which are changes in the average rate multiplied by the average balance from the previous year period. The net changes attributable to the combined impact of both rate and volume have been allocated proportionately to the changes due to volume and the changes due to rate.



	For the Six Months Ended
	March 31, 2019 vs. March 31, 2018
	Increase (Decrease) Due to
	Volume			Rate			Total
	(Dollars in thousands)
Interest-earning assets:
Loans receivable	$	8,381		$	5,665		$	14,046
MBS	574			1,608			2,182
Investment securities	(188		)	1,046			858
FHLB stock	(3,164		)	670			(2,494		)
Cash and cash equivalents	(18,367		)	5,815			(12,552		)
Total interest-earning assets	(12,764		)	14,804			2,040

Interest-bearing liabilities:
Checking	43			98			141
Savings	5			(461		)	(456		)
Money market	115			2,429			2,544
Certificates of deposit	319			4,832			5,151
FHLB borrowings	(18,570		)	7,936			(10,634		)
Other borrowings	(188		)	(153		)	(341		)
Total interest-bearing liabilities	(18,276		)	14,681			(3,595		)

Net change in net interest income	$	5,512		$	123		$	5,635

Comparison of Operating Results for the Three Months Ended March 31, 2019 and 2018

The net interest margin increased 47 basis points, from 1.86% for the prior year quarter to 2.33% for the current year quarter. The leverage strategy was in place at certain times during the prior year quarter, but was not utilized during the current quarter. Excluding the effects of the leverage strategy, the net interest margin would have increased nine basis points, from 2.24% for the prior year quarter to 2.33% for the current year quarter. The increase in the net interest margin excluding the effects of the leverage strategy was due mainly to the addition of higher yielding commercial loans in the CCB acquisition.

Interest and Dividend Income

The weighted average yield on total interest-earning assets increased 58 basis points, from 3.06% for the prior year quarter to 3.64% for the current quarter, while the average balance of interest-earning assets decreased $1.69 billion from the prior year quarter. Absent the impact of the leverage strategy, the weighted average yield on total interest-earning assets would have increased 29 basis points, from 3.35% for the prior year quarter to 3.64% for the current quarter, and the average balance of interest-earning assets would have increased $319.1 million. The following table presents the components of interest and dividend income for the time periods presented along with the change measured in dollars and percent.



	For the Three Months Ended
	March 31,				Change Expressed in:
	2019		2018		Dollars			Percent
	(Dollars in thousands)
INTEREST AND DIVIDEND INCOME:
Loans receivable	$	71,657	$	64,194	$	7,463		11.6	%
MBS	6,301		5,390		911			16.9
FHLB stock	1,831		3,201		(1,370		)	(42.8	)
Investment securities	1,505		1,094		411			37.6
Cash and cash equivalents	743		7,895		(7,152		)	(90.6	)
Total interest and dividend income	$	82,037	$	81,774	$	263		0.3

The increase in interest income on loans receivable was due to a $369.2 million increase in the average balance of the portfolio, as well as a 22 basis point increase in the weighted average yield on the portfolio to 3.79% for the current quarter. The increase in the average balance was due mainly to the acquisition of CCB. The increase in the weighted average yield was also due mainly to the addition of higher yielding loans associated with the CCB acquisition, as well as legacy adjustable-rate loans repricing to higher market rates and the origination and purchase of new loans at higher market rates.

The increase in interest income on the MBS portfolio was due to a 33 basis point increase in the weighted average yield on the portfolio to 2.63% for the current quarter, along with a $21.8 million increase in the average balance of the portfolio. The increase in the weighted average yield was due primarily to a decrease in the impact of net premium amortization, as well as adjustable-rate MBS repricing to higher market rates. Net premium amortization of $309 thousand during the current quarter decreased the weighted average yield on the portfolio by 12 basis points. During the prior year quarter, $788 thousand of net premiums were amortized, which decreased the weighted average yield on the portfolio by 33 basis points.

The decrease in dividend income on FHLB stock was due to a decrease in the average balance of FHLB stock as a result of the leverage strategy not being in place during the current quarter. This was partially offset by a higher dividend rate on FHLB stock during the current quarter.

The increase in interest income on the investment securities portfolio was due to a 78 basis point increase in the weighted average yield on the portfolio to 2.21%. The increase in the weighted average yield was primarily a result of replacing maturing securities at higher market rates.

The table above includes interest income on cash and cash equivalents associated and not associated with the leverage strategy. Interest income on cash and cash equivalents not related to the leverage strategy increased $132 thousand from the prior year quarter due to a 90 basis point increase in the weighted average yield, which was related to balances held at the FRB of Kansas City. Interest income on cash associated with the leverage strategy decreased $7.3 million from the prior year quarter due to the leverage strategy not being in place during the current quarter.

Interest Expense

The weighted average rate paid on total interest-bearing liabilities increased 16 basis points, from 1.35% for the prior year quarter to 1.51% for the current quarter, while the average balance of interest-bearing liabilities decreased $1.63 billion. Absent the impact of the leverage strategy, the weighted average rate paid on total interest-bearing liabilities would have increased 21 basis points, from 1.30% for the prior year quarter to 1.51% for the current quarter, and the average balance of interest-bearing liabilities would have increased $377.3 million. The following table presents the components of interest expense for the periods presented, along with the change measured in dollars and percent.



	For the Three Months Ended
	March 31,				Change Expressed in:
	2019		2018		Dollars			Percent
	(Dollars in thousands)
INTEREST EXPENSE:
Deposits	$	16,096	$	12,480	$	3,616		29.0	%
FHLB borrowings	12,525		18,772		(6,247		)	(33.3	)
Other borrowings	819		633		186			29.4
Total interest expense	$	29,440	$	31,885	$	(2,445	)	(7.7	)

The increase in interest expense on deposits was due primarily to a 20 basis point increase in the weighted average rate, to 1.16% for the current quarter. The deposit accounts assumed in the CCB acquisition were at a lower average rate than our legacy deposit portfolio rate and our overall deposit portfolio rate, which partially offset the increase in the deposit portfolio rate in the current quarter. The increase in the weighted average rate was due primarily to increases in the average retail/business certificate of deposit portfolio rate and money market portfolio rate, which increased 28 basis points and 34 basis points, respectively.

The table above includes interest expense on FHLB borrowings associated and not associated with the leverage strategy. Interest expense on FHLB borrowings not related to the leverage strategy increased $1.5 million from the prior year quarter due to a 25 basis point increase in the weighted average rate paid, to 2.30% for the current quarter. The increase in the weighted average rate paid was due mainly to advances that matured between periods being replaced at higher market rates. Interest expense on FHLB borrowings associated with the leverage strategy decreased $7.8 million from the prior year quarter due to the leverage strategy not being in place during the current quarter.

Non-Interest Income

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



	For the Three Months Ended
	March 31,				Change Expressed in:
	2019		2018		Dollars			Percent
	(Dollars in thousands)
NON-INTEREST INCOME:
Deposit service fees	$	3,091	$	3,670	$	(579	)	(15.8	)%
Income from BOLI	587		276		311			112.7
Other non-interest income	1,323		1,487		(164		)	(11.0	)
Total non-interest income	$	5,001	$	5,433	$	(432	)	(8.0	)

The decrease in deposit service fees was due primarily to a change in the presentation of interchange network charges related to the adoption of a new revenue recognition accounting standard during the current fiscal year, as discussed above. Interchange network charges totaled $787 thousand for the current quarter and $708 thousand for the prior year quarter. The increase in income from BOLI was due mainly to a one-time adjustment during the prior year quarter to the benchmark rate associated with one of the policies, which reduced income from BOLI during that period, as well as to an increase in income related to policies acquired in the CCB acquisition.

Non-Interest Expense

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



	For the Three Months Ended
	March 31,				Change Expressed in:
	2019		2018		Dollars			Percent
	(Dollars in thousands)
NON-INTEREST EXPENSE:
Salaries and employee benefits	$	12,789	$	11,167	$	1,622		14.5	%
Information technology and related expense	4,284		3,622		662			18.3
Occupancy, net	3,292		2,839		453			16.0
Regulatory and outside services	1,056		1,151		(95		)	(8.3	)
Advertising and promotional	1,390		1,337		53			4.0
Deposit and loan transaction costs	465		1,313		(848		)	(64.6	)
Office supplies and related expense	736		442		294			66.5
Federal insurance premium	659		847		(188		)	(22.2	)
Other non-interest expense	1,470		880		590			67.0
Total non-interest expense	$	26,141	$	23,598	$	2,543		10.8

The increase in salaries and employee benefits was due primarily to expenses related to former CCB employees. The increase in information technology and related expense was due mainly to an increase in software licensing expense. The increase in occupancy, net was due primarily to expenses related to properties acquired in the CCB acquisition. The decrease in deposit and loan transaction costs was due mainly to the adoption of the new revenue recognition standard discussed above. The increase in office supplies and related expense was due mainly to the timing of such expenses. The increase in other non-interest expense was due primarily to amortization of deposit intangibles associated with the acquisition of CCB.

The Company's efficiency ratio was 45.38% for the current quarter compared to 42.66% for the prior year quarter. The change in the efficiency ratio was due mainly to an increase in non-interest expense.

Income Tax Expense

Income tax expense was $6.9 million for the current quarter compared to $8.4 million for the prior year quarter. The effective tax rate for the current quarter was 21.9% compared to 26.5% for the prior year quarter. The difference in the effective tax rates between periods was due mainly to the Tax Act being signed into law in December 2017, which resulted in the Company using a blended statutory income tax rate of 24.5% for fiscal year 2018 compared to the current fiscal year statutory income tax rate of 21%.

Average Balance Sheet

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



	For the Three Months Ended
	March 31, 2019						March 31, 2018
	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	$	6,746,611	$	61,325	3.64	%	$	6,782,122	$	59,469	3.51	%
Commercial loans	680,110		8,186		4.80		288,956		3,033		4.20
Consumer loans	137,342		2,146		6.33		123,778		1,692		5.54
Total loans receivable⁽¹⁾	7,564,063		71,657		3.79		7,194,856		64,194		3.57
MBS⁽²⁾	959,897		6,301		2.63		938,143		5,390		2.30
Investment securities⁽²⁾⁽³⁾	272,218		1,505		2.21		305,285		1,094		1.43
FHLB stock	99,725		1,831		7.45		193,477		3,201		6.71
Cash and cash equivalents⁽⁴⁾	124,444		743		2.39		2,076,109		7,895		1.52
Total interest-earning assets⁽¹⁾⁽²⁾	9,020,347		82,037		3.64		10,707,870		81,774		3.06
Other non-interest-earning assets	370,396						310,401
Total assets	$	9,390,743					$	11,018,271

Liabilities and stockholders' equity:
Interest-bearing liabilities:
Checking	$	1,076,504	149		0.06		$	868,878	76		0.04
Savings	358,733		56		0.06		360,471		321		0.36
Money market	1,275,504		2,269		0.72		1,195,699		1,106		0.38
Retail/business certificates	2,491,814		11,492		1.87		2,432,667		9,541		1.59
Wholesale certificates	401,722		2,130		2.15		403,293		1,436		1.44
Total deposits	5,604,277		16,096		1.16		5,261,008		12,480		0.96
FHLB borrowings⁽⁵⁾	2,203,872		12,525		2.30		4,180,927		18,772		1.81
Other borrowings	104,399		819		3.14		100,000		633		2.53
Total borrowings	2,308,271		13,344		2.33		4,280,927		19,405		1.83
Total interest-bearing liabilities	7,912,548		29,440		1.51		9,541,935		31,885		1.35
Other non-interest-bearing liabilities	123,280						115,505
Stockholders' equity	1,354,915						1,360,831
Total liabilities and stockholders' equity	$	9,390,743					$	11,018,271
									(Continued)



	For the Three Months Ended
	March 31, 2019						March 31, 2018
	Average		Interest				Average		Interest
	Outstanding		Earned/		Yield/		Outstanding		Earned/		Yield/
	Amount		Paid		Rate		Amount		Paid		Rate
	(Dollars in thousands)

Net interest income⁽⁶⁾			$	52,597					$	49,889
Net interest rate spread⁽⁷⁾⁽⁸⁾					2.13	%					1.71	%
Net interest-earning assets	$	1,107,799					$	1,165,935
Net interest margin⁽⁸⁾⁽⁹⁾					2.33						1.86
Ratio of interest-earning assets to interest-bearing liabilities					1.14x						1.12x

Selected performance ratios:
Return on average assets (annualized)⁽⁸⁾					1.05	%					0.85	%
Return on average equity (annualized)⁽⁸⁾					7.25						6.86
Average equity to average assets					14.43						12.35
Operating expense ratio⁽¹⁰⁾					1.11						0.86
Efficiency ratio^(8)(11)					45.38						42.66
Pre-tax yield on leverage strategy⁽¹²⁾					—						0.18

									(Concluded)


(1)	Balances are adjusted for unearned loan fees and deferred costs. Loans that are 90 or more days delinquent are included in the loans receivable average balance with a yield of zero percent.


(2)	AFS securities are adjusted for unamortized purchase premiums or discounts.


(3)	The average balance of investment securities includes an average balance of nontaxable securities of $22.0 million and $24.8 million for the three months ended March 31, 2019 and March 31, 2018, respectively.


(4)	There were no cash and cash equivalents related to the leverage strategy during the quarter ended March 31, 2019. The average balance of cash and cash equivalents includes an average balance of cash related to the leverage strategy of $1.91 billion for the three months ended March 31, 2018.

(5)

There were no FHLB borrowings related to the leverage strategy during the quarter ended March 31, 2019. Included in this line, for the quarter ended March 31, 2018, are FHLB borrowings related to the leverage strategy with an average outstanding balance of $2.01 billion and interest paid of $7.8 million, at a weighted average rate of 1.55%, and FHLB borrowings not related to the leverage strategy with an average outstanding balance of $2.17 billion and interest paid of $11.0 million, at a weighted average rate of 2.05%. The FHLB advance amounts and rates included in this line include the effect of interest rate swaps and are net of deferred prepayment penalties.


(6)	Net interest income represents the difference between interest income earned on interest-earning assets and interest paid on interest-bearing liabilities. Net interest income depends on the average balance of interest-earning assets and interest-bearing liabilities, and the interest rates earned or paid on them.


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

(8)



	For the Three Months Ended
	March 31, 2019						March 31, 2018
	Actual		Leverage		Adjusted		Actual		Leverage		Adjusted
	(GAAP)		Strategy		(Non-GAAP)		(GAAP)		Strategy		(Non-GAAP)
Return on average assets (annualized)	1.05	%	—	%	1.05	%	0.85	%	(0.15	)%	1.00	%
Return on average equity (annualized)	7.25		—		7.25		6.86		0.21		6.65
Net interest margin	2.33		—		2.33		1.86		(0.38	)	2.24
Net interest rate spread	2.13		—		2.13		1.71		(0.34	)	2.05
Efficiency Ratio	45.38		—		45.38		42.66		(0.52	)	43.18


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


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


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


(12)	The pre-tax yield on the leverage strategy represents annualized pre-tax income resulting from the transaction as a percentage of the average interest-earning assets associated with the transaction.

Rate/Volume Analysis

The table below presents the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities, comparing the three months ended March 31, 2019 to the three months ended March 31, 2018. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (1) changes in volume, which are changes in the average balance multiplied by the previous year's average rate and (2) changes in rate, which are changes in the average rate multiplied by the average balance from the previous year period. The net changes attributable to the combined impact of both rate and volume have been allocated proportionately to the changes due to volume and the changes due to rate.



	For the Three Months Ended March 31,
	2019 vs. 2018
	Increase (Decrease) Due to
	Volume			Rate			Total
	(Dollars in thousands)
Interest-earning assets:
Loans receivable	$	4,373		$	3,090		$	7,463
MBS	128			783			911
Investment securities	(129		)	540			411
FHLB stock	(1,690		)	320			(1,370		)
Cash and cash equivalents	(10,058		)	2,906			(7,152		)
Total interest-earning assets	(7,376		)	7,639			263

Interest-bearing liabilities:
Checking	21			52			73
Savings	(1		)	(264		)	(265		)
Money market	78			1,085			1,163
Certificates of deposit	227			2,418			2,645
FHLB borrowings	(7,636		)	1,389			(6,247		)
Other borrowings	186			—			186
Total interest-bearing liabilities	(7,125		)	4,680			(2,445		)

Net change in net interest income	$	(251	)	$	2,959		$	2,708

Comparison of Operating Results for the Three Months Ended March 31, 2019 and December 31, 2018

For the quarter ended March 31, 2019, the Company recognized net income of $24.6 million, or $0.18 per share, compared to net income of $24.4 million, or $0.18 per share, for the quarter ended December 31, 2018.

Net interest income increased $296 thousand, or 0.6%, from the prior quarter to $52.6 million for the current quarter. The net interest margin increased six basis points from 2.27% for the prior quarter to 2.33% for the current quarter. The leverage strategy was in place at certain times during the prior quarter, but was not utilized during the current quarter. Excluding the effects of the leverage strategy, the net interest margin would have increased one basis point from 2.32% for the prior quarter to 2.33% for the current quarter.

Interest and Dividend Income

The weighted average yield on total interest-earning assets for the current quarter increased eight basis points, from 3.56% for the prior quarter to 3.64% for the current quarter, while the average balance of interest-earning assets decreased $204.6 million between the two periods. Absent the impact of the leverage strategy, the weighted average yield on total interest-earning assets would have increased five basis points, from 3.59% for the prior quarter to 3.64% for the current quarter, and the average balance of interest-earning assets would have increased $23.6 million. The following table presents the components of interest and dividend income for the time periods presented, along with the change measured in dollars and percent.



	For the Three Months Ended
	March 31,		December 31,		Change Expressed in:
	2019		2018		Dollars			Percent
	(Dollars in thousands)
INTEREST AND DIVIDEND INCOME:
Loans receivable	$	71,657	$	70,772	$	885		1.3	%
MBS	6,301		6,523		(222		)	(3.4	)
FHLB stock	1,831		1,971		(140		)	(7.1	)
Investment securities	1,505		1,441		64			4.4
Cash and cash equivalents	743		1,714		(971		)	(56.7	)
Total interest and dividend income	$	82,037	$	82,421	$	(384	)	(0.5	)

The increase in interest income on loans receivable was due to a $42.1 million increase in the average balance of the portfolio, as well as a four basis point increase in the weighted average yield on the portfolio to 3.79% for the current quarter. The increase in the weighted average yield was due primarily to the origination of loans at higher market rates and legacy adjustable-rate loans repricing to higher market rates.

The decrease in interest income on the MBS portfolio was due to a $47.7 million decrease in the average balance of the portfolio, partially offset by a four basis point increase in the weighted average yield on the portfolio to 2.63% for the current quarter. The increase in the weighted average yield was due primarily to a decrease in net premium amortization in the current quarter, as well as adjustable-rate MBS repricing to higher market rates. Net premium amortization of $309 thousand during the current quarter decreased the weighted average yield on the portfolio by 12 basis points. During the prior quarter, $349 thousand of net premiums were amortized which decreased the weighted average yield on the portfolio by 14 basis points.

The table above includes interest income on cash and cash equivalents associated and not associated with the leverage strategy. Interest income on cash and cash equivalents not related to the leverage strategy increased $255 thousand from the prior quarter due to a $37.5 million increase in the average balance, as well as a 19 basis point increase in the weighted average yield, which was related to balances held at the FRB of Kansas City. Interest income on cash associated with the leverage strategy decreased $1.2 million from the prior quarter due to the leverage strategy not being in place during the current quarter.

Interest Expense

The weighted average rate paid on total interest-bearing liabilities for the current quarter increased three basis points, from 1.48% for the prior quarter to 1.51% for the current quarter, while the average balance of interest-bearing liabilities decreased $130.3 million between the two periods. Absent the impact of the leverage strategy, the weighted average rate paid on total interest-bearing liabilities for the current quarter would have increased five basis points, from 1.46% for the prior quarter to 1.51% for the current quarter, and the average balance of interest-bearing liabilities would have increased $97.9 million. The following table presents the components of interest expense for the time periods presented, along with the change measured in dollars and percent.



	For the Three Months Ended
	March 31,		December 31,		Change Expressed in:
	2019		2018		Dollars			Percent
	(Dollars in thousands)
INTEREST EXPENSE:
Deposits	$	16,096	$	15,725	$	371		2.4	%
FHLB borrowings	12,525		13,530		(1,005		)	(7.4	)
Other borrowings	819		865		(46		)	(5.3	)
Total interest expense	$	29,440	$	30,120	$	(680	)	(2.3	)

The increase in interest expense on deposits was due primarily to a three basis point increase in the weighted average rate paid, to 1.16% for the current quarter, as well as a $74.7 million increase in the average balance of the portfolio. The increase in the weighted average rate paid was due primarily to increases in the average retail/business certificate of deposit portfolio rate and wholesale certificate of deposit portfolio rate, which increased five basis points and 19 basis points, respectively.

The table above includes interest expense on FHLB borrowings associated and not associated with the leverage strategy. Interest expense on FHLB borrowings not related to the leverage strategy increased $372 thousand from the prior quarter due to a 10 basis point increase in the weighted average rate paid, to 2.30% for the current quarter. The increase in the weighted average rate paid was due mainly to a full quarter impact of advances that matured in the prior quarter being replaced at higher market rates. Interest expense on FHLB borrowings associated with the leverage strategy decreased $1.4 million from the prior quarter due to the leverage strategy not being in place during the current quarter.

Non-Interest Income

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



	For the Three Months Ended
	March 31,		December 31,		Change Expressed in:
	2019		2018		Dollars			Percent
	(Dollars in thousands)
NON-INTEREST INCOME:
Deposit service fees	$	3,091	$	3,352	$	(261	)	(7.8	)%
Income from BOLI	587		635		(48		)	(7.6	)
Other non-interest income	1,323		1,437		(114		)	(7.9	)
Total non-interest income	$	5,001	$	5,424	$	(423	)	(7.8	)

The decrease in deposit service fees was due mainly to a decrease in debit card and service charge income resulting from a reduction in transaction volume due to the seasonality of such activity, partially offset by lower interchange network charges in the current quarter.

Non-Interest Expense

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



	For the Three Months Ended
	March 31,		December 31,		Change Expressed in:
	2019		2018		Dollars			Percent
	(Dollars in thousands)
NON-INTEREST EXPENSE:
Salaries and employee benefits	$	12,789	$	12,962	$	(173	)	(1.3	)%
Information technology and related expense	4,284		4,599		(315		)	(6.8	)
Occupancy, net	3,292		3,252		40			1.2
Regulatory and outside services	1,056		1,766		(710		)	(40.2	)
Advertising and promotional	1,390		760		630			82.9
Deposit and loan transaction costs	465		736		(271		)	(36.8	)
Office supplies and related expense	736		459		277			60.3
Federal insurance premium	659		528		131			24.8
Other non-interest expense	1,470		1,720		(250		)	(14.5	)
Total non-interest expense	$	26,141	$	26,782	$	(641	)	(2.4	)

The decrease in information technology and related expense was due primarily to the prior quarter including accelerated depreciation related to the implementation of enhancements in the Bank's information technology infrastructure. The decrease in regulatory and outside services was due mainly to a decrease in audit fees. The increase in advertising and promotional was due primarily to the timing of advertising campaigns and sponsorships. The decrease in deposit and loan transaction costs was due mainly to a reduction

in costs associated with the Bank's online banking services. The increase in office supplies and related expense was due mainly to the timing of such expenses. The decrease in other non-interest expense was due primarily to a decrease in OREO operations expense.

The Company's efficiency ratio was 45.38% for the current quarter compared to 46.40% for the prior quarter. The improvement in the efficiency ratio was due primarily to lower non-interest expense in the current quarter compared to the prior quarter.

Income Tax Expense

Income tax expense was $6.9 million for the current quarter, compared to $6.6 million for the prior quarter. The effective tax rate was 21.9% for the current quarter compared to 21.2% for the prior quarter.

Average Balance Sheet



	For the Three Months Ended
	March 31, 2019						December 31, 2018
	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	$	6,746,611	$	61,325	3.64	%	$	6,793,226	$	60,983	3.59	%
Commercial loans	680,110		8,186		4.80		589,346		7,602		5.05
Consumer loans	137,342		2,146		6.33		139,373		2,187		6.23
Total loans receivable⁽¹⁾	7,564,063		71,657		3.79		7,521,945		70,772		3.75
MBS⁽²⁾	959,897		6,301		2.63		1,007,645		6,523		2.59
Investment securities⁽²⁾⁽³⁾	272,218		1,505		2.21		282,256		1,441		2.04
FHLB stock	99,725		1,831		7.45		108,227		1,971		7.23
Cash and cash equivalents⁽⁴⁾	124,444		743		2.39		304,893		1,714		2.20
Total interest-earning assets⁽¹⁾⁽²⁾	9,020,347		82,037		3.64		9,224,966		82,421		3.56
Other non-interest-earning assets	370,396						367,755
Total assets	$	9,390,743					$	9,592,721

Liabilities and stockholders' equity:
Interest-bearing liabilities:
Checking	$	1,076,504	149		0.06		$	1,050,474	144		0.05
Savings	358,733		56		0.06		349,406		57		0.06
Money market	1,275,504		2,269		0.72		1,246,809		2,172		0.69
Retail/business certificates	2,491,814		11,492		1.87		2,499,056		11,455		1.82
Wholesale certificates	401,722		2,130		2.15		383,860		1,897		1.96
Total deposits	5,604,277		16,096		1.16		5,529,605		15,725		1.13
FHLB borrowings⁽⁵⁾	2,203,872		12,525		2.30		2,403,568		13,530		2.22
Other borrowings	104,399		819		3.14		109,716		865		3.08
Total borrowings	2,308,271		13,344		2.33		2,513,284		14,395		2.26
Total interest-bearing liabilities	7,912,548		29,440		1.51		8,042,889		30,120		1.48
Other non-interest-bearing liabilities	123,280						167,205
Stockholders' equity	1,354,915						1,382,627
Total liabilities and stockholders' equity	$	9,390,743					$	9,592,721
									(Continued)



	For the Three Months Ended
	March 31, 2019						December 31, 2018
	Average		Interest				Average		Interest
	Outstanding		Earned/		Yield/		Outstanding		Earned/		Yield/
	Amount		Paid		Rate		Amount		Paid		Rate
	(Dollars in thousands)

Net interest income⁽⁶⁾			$	52,597					$	52,301
Net interest rate spread⁽⁷⁾⁽⁸⁾					2.13	%					2.08	%
Net interest-earning assets	$	1,107,799					$	1,182,077
Net interest margin⁽⁸⁾⁽⁹⁾					2.33						2.27
Ratio of interest-earning assets to interest-bearing liabilities					1.14x						1.15x

Selected performance ratios:
Return on average assets (annualized)⁽⁸⁾					1.05	%					1.02	%
Return on average equity (annualized)⁽⁸⁾					7.25						7.05
Average equity to average assets					14.43						14.41
Operating expense ratio⁽¹⁰⁾					1.11						1.12
Efficiency ratio^(8)(11)					45.38						46.40
Pre-tax yield on leverage strategy⁽¹²⁾					—						0.03

									(Concluded)


(1)	Balances are adjusted for unearned loan fees and deferred costs. Loans that are 90 or more days delinquent are included in the loans receivable average balance with a yield of zero percent.


(2)	AFS securities are adjusted for unamortized purchase premiums or discounts.


(3)	The average balance of investment securities includes an average balance of nontaxable securities of $22.0 million and $23.5 million for the three months ended March 31, 2019 and December 31, 2018, respectively.


(4)	There were no cash and cash equivalents related to the leverage strategy during the quarter ended March 31, 2019. The average balance of cash and cash equivalents includes an average balance of cash related to the leverage strategy of $218.0 million for the quarter ended December 31, 2018.

(5)

There were no FHLB borrowings related to the leverage strategy during the quarter ended March 31, 2019. Included in this line, for the quarter ended December 31, 2018, are FHLB borrowings related to the leverage strategy with an average outstanding balance of $228.3 million and interest paid of $1.4 million, at a weighted average rate of 2.36%, and FHLB borrowings not related to the leverage strategy with an average outstanding balance of $2.18 billion and interest paid of $12.2 million, at a weighted average rate of 2.20%. The FHLB advance amounts and rates included in this line include the effect of interest rate swaps and are net of deferred prepayment penalties.


(6)	Net interest income represents the difference between interest income earned on interest-earning assets and interest paid on interest-bearing liabilities. Net interest income depends on the average balance of interest-earning assets and interest-bearing liabilities, and the interest rates earned or paid on them.


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

(8)



	For the Three Months Ended
	March 31, 2019						December 31, 2018
	Actual		Leverage		Adjusted		Actual		Leverage		Adjusted
	(GAAP)		Strategy		(Non-GAAP)		(GAAP)		Strategy		(Non-GAAP)
Return on average assets (annualized)	1.05	%	—	%	1.05	%	1.02	%	(0.02	)%	1.04	%
Return on average equity (annualized)	7.25		—		7.25		7.05		—		7.05
Net interest margin	2.33		—		2.33		2.27		(0.05	)	2.32
Net interest rate spread	2.13		—		2.13		2.08		(0.05	)	2.13
Efficiency Ratio	45.38		—		45.38		46.40		0.01		46.39


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


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


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


(12)	The pre-tax yield on the leverage strategy represents annualized pre-tax income resulting from the transaction as a percentage of the average interest-earning assets associated with the transaction.

Rate/Volume Analysis

The table below presents the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities, comparing the three months ended March 31, 2019 to the three months ended December 31, 2018. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (1) changes in volume, which are changes in the average balance multiplied by the previous year's average rate and (2) changes in rate, which are changes in the average rate multiplied by the average balance from the previous year period. The net changes attributable to the combined impact of both rate and volume have been allocated proportionately to the changes due to volume and the changes due to rate.



	For the Three Months Ended
	March 31, 2019 vs. December 31, 2018
	Increase (Decrease) Due to
	Volume			Rate			Total
	(Dollars in thousands)
Interest-earning assets:
Loans receivable	$	536		$	349		$	885
MBS	(312		)	90			(222		)
Investment securities	(53		)	117			64
FHLB stock	(186		)	46			(140		)
Cash and cash equivalents	(1,100		)	129			(971		)
Total interest-earning assets	(1,115		)	731			(384		)

Interest-bearing liabilities:
Checking	2			4			6
Savings	1			(2		)	(1		)
Money market	34			63			97
Certificates of deposit	23			246			269
FHLB borrowings	(1,320		)	315			(1,005		)
Other borrowings	(164		)	118			(46		)
Total interest-bearing liabilities	(1,424		)	744			(680		)

Net change in net interest income	$	309		$	(13	)	$	296

Liquidity and Capital Resources

Liquidity refers to our ability to generate sufficient cash to fund ongoing operations, to repay maturing certificates of deposit and other deposit withdrawals, to repay maturing borrowings, and to fund loan commitments. Liquidity management is both a daily and long-term function of our business management. The Company's most available liquid assets are represented by cash and cash equivalents, AFS securities, and short-term investment securities. The Bank's primary sources of funds are deposits, FHLB borrowings, repurchase agreements, repayments and maturities of outstanding loans and MBS and other short-term investments, and funds provided by operations. The Bank's long-term borrowings primarily have been used to manage the Bank's interest rate risk with the intent to improve the earnings of the Bank while maintaining capital ratios in excess of regulatory standards for well-capitalized financial institutions. In addition, the Bank's focus on managing risk has provided additional liquidity capacity by maintaining a balance of MBS and investment securities available as collateral for borrowings.

We generally intend to manage cash reserves sufficient to meet short-term liquidity needs, which are routinely forecasted for 10, 30, and 365 days. Additionally, on a monthly basis, we perform a liquidity stress test in accordance with the Interagency Policy Statement on Funding and Liquidity Risk Management. The liquidity stress test incorporates both short-term and long-term liquidity scenarios in order to identify and to quantify liquidity risk. Management also monitors key liquidity statistics related to items such as wholesale funding gaps, borrowings capacity, and available unpledged collateral, as well as various liquidity ratios.

In the event short-term liquidity needs exceed available cash, the Bank has access to a line of credit at FHLB and the FRB of Kansas City's discount window. Per FHLB's lending guidelines, total FHLB borrowings cannot exceed 40% of regulatory total assets without the pre-approval of FHLB senior management. The president of FHLB has approved an increase, through July 2019, in the Bank's borrowing limit to 55% of Bank Call Report total assets. 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.

The amount that can be borrowed from the FRB of Kansas City's discount window is based upon the fair value of securities pledged as collateral and certain other characteristics of those securities, and is used only when other sources of short-term liquidity are unavailable. Management tests the Bank's access to the FRB of Kansas City's discount window annually with a nominal, overnight borrowing.

If management observes a trend in the amount and frequency of line of credit utilization and/or short-term borrowings that is not in conjunction with a planned strategy, such as the leverage strategy, the Bank will likely utilize long-term wholesale borrowing sources such as FHLB advances and/or repurchase agreements to provide long-term, fixed-rate funding. The maturities of these long-term borrowings are generally staggered in order to mitigate the risk of a highly negative cash flow position at maturity. The Bank's internal policy limits total borrowings to 55% of total assets. At March 31, 2019, the Bank had total borrowings, at par, of $2.34 billion, or approximately 25% of total assets.

The amount of FHLB advances outstanding at March 31, 2019 was $2.14 billion, of which $990.0 million was scheduled to mature in the next 12 months, including $640.0 million of FHLB advances tied to interest rate swaps. All FHLB borrowings are secured by certain qualifying loans pursuant to a blanket collateral agreement with FHLB. At March 31, 2019, the ratio of the par value of the Bank's FHLB borrowings to Call Report total assets was 23%. When the full leverage strategy is in place, FHLB borrowings may be in excess of 40% of the Bank's Call Report total assets, and may be in excess of 40% as long as the Bank continues its leverage strategy and FHLB senior management continues to approve the Bank's borrowing limit being in excess of 40% of Call Report total assets. All or a portion of the FHLB borrowings in conjunction with the leverage strategy can be repaid at any point in time while the strategy is in effect, if necessary or desired.

At March 31, 2019, the Bank had repurchase agreements of $100.0 million, or approximately 1% of total assets, none of which were scheduled to mature in the next 12 months. The Bank may enter into additional repurchase agreements as management deems appropriate, not to exceed 15% of total assets, and subject to the total borrowings limit of 55% as discussed above. The Bank has pledged securities with an estimated fair value of $108.7 million as collateral for repurchase agreements as of March 31, 2019. The securities pledged for the repurchase agreements will be delivered back to the Bank when the repurchase agreements mature.

The Bank could utilize the repayment and maturity of outstanding loans, MBS, and other investments for liquidity needs rather than reinvesting such funds into the related portfolios. At March 31, 2019, the Bank had $668.6 million of securities that were eligible but unused as collateral for borrowing or other liquidity needs.

The Bank has access to other sources of funds for liquidity purposes, such as brokered and public unit deposits. As of March 31, 2019, the Bank's policy allowed for combined brokered and public unit deposits up to 15% of total deposits. At March 31, 2019, the Bank did not have any brokered deposits and public unit deposits were approximately 7% of total deposits. Management continuously monitors the wholesale deposit market for opportunities to obtain funds at attractive rates. The Bank had pledged securities with an estimated fair value of $465.2 million as collateral for public unit deposits at March 31, 2019. The securities pledged as collateral for public unit deposits are held under joint custody with FHLB and generally will be released upon deposit maturity.

At March 31, 2019, $1.37 billion of the Bank's certificate of deposit portfolio was scheduled to mature within one year, including $324.9 million of public unit certificates of deposit. Based on our deposit retention experience and our current pricing strategy, we anticipate the majority of the maturing retail certificates of deposit will renew or transfer to other deposit products of the Bank at the prevailing rate, although no assurance can be given in this regard. We also anticipate the majority of the maturing public unit certificates of deposit will be replaced with similar wholesale funding products.

While scheduled payments from the amortization of loans and MBS and payments on short-term investments are relatively predictable sources of funds, deposit flows, prepayments on loans and MBS, and calls of investment securities are greatly influenced by general interest rates, economic conditions, and competition, and are less predictable sources of funds. To the extent possible, the Bank manages the cash flows of its loan and deposit portfolios by the rates it offers customers.

The following table presents the contractual maturities of our loan, MBS, and investment securities portfolios at March 31, 2019, along with associated weighted average yields. Loans and securities which have adjustable interest rates are shown as maturing in the period during which the contract is due. The table does not reflect the effects of possible prepayments or enforcement of due on sale clauses. As of March 31, 2019, the amortized cost of investment securities in our portfolio which are callable or have pre-refunding dates within one year was $245.4 million.



	Loans⁽¹⁾				MBS				Investment Securities				Total
	Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield
	(Dollars in thousands)
Amounts due:
Within one year	$	213,027	5.18	%	$	565	4.19	%	$	9,240	1.79	%	$	222,832	5.04	%

After one year:
Over one to two years	133,741		4.65		13,813		2.79		81,813		1.58		229,367		3.44
Over two to three years	62,944		4.88		10,364		2.62		79,664		2.70		152,972		3.59
Over three to five years	103,163		4.87		87,536		1.72		118,177		2.76		308,876		3.17
Over five to ten years	692,187		3.74		329,638		2.35		—		—		1,021,825		3.29
Over ten to fifteen years	1,251,826		3.61		232,856		3.06		—		—		1,484,682		3.52
After fifteen years	5,107,188		3.77		310,522		2.99		—		—		5,417,710		3.73
Total due after one year	7,351,049		3.78		984,729		2.67		279,654		2.40		8,615,432		3.61

	$	7,564,076	3.82		$	985,294	2.67		$	288,894	2.38		$	8,838,264	3.65

(1)

Demand loans, loans having no stated maturity, and overdraft loans are included in the amounts due within one year. Construction loans are presented based on the estimated term to complete construction. The maturity date for home equity loans that were not added in the CCB acquisition assumes the customer always makes the required minimum payment. For home equity loans acquired in the CCB acquisition, the maturity date is based on the contractual maturity date.

Limitations on Dividends and Other Capital Distributions

Office of the Comptroller of the Currency ("OCC") regulations impose restrictions on savings institutions with respect to their ability to make distributions of capital, which include dividends, stock redemptions or repurchases, cash-out mergers and other transactions charged to the capital account. Under FRB and OCC safe harbor regulations, savings institutions generally may make capital distributions during any calendar year equal to earnings of the previous two calendar years and current year-to-date earnings. Savings institutions must also maintain an applicable capital conservation buffer above minimum risk-based capital requirements in order to avoid restrictions on capital distributions, including dividends. A savings institution that is a subsidiary of a savings and loan holding company, such as the Company, that proposes to make a capital distribution must submit written notice to the OCC and FRB 30 days prior to such distribution. The OCC and FRB may object to the distribution during that 30-day period based on safety and soundness or other concerns. Savings institutions that desire to make a larger capital distribution, are under special restrictions, or are not, or would not be, sufficiently capitalized following a proposed capital distribution must obtain regulatory non-objection prior to making such a distribution.

The long-term ability of the Company to pay dividends to its stockholders is based primarily upon the ability of the Bank to make capital distributions to the Company. So long as the Bank remains well capitalized after each capital distribution, operates in a safe and sound manner, and maintains an applicable capital conservation buffer above its minimum risk-based capital requirements, 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.

Off-Balance Sheet Arrangements, Commitments and Contractual Obligations

The Company, in the normal course of business, makes commitments to buy or sell assets, extend credit, or to incur or fund liabilities. There have been no material changes in commitments, contractual obligations or off-balance sheet arrangements from September 30, 2018. For additional information, see "Part II, Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Off-Balance Sheet Arrangements, Commitments and Contractual Obligations" in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2018. We anticipate we will continue to have sufficient funds, through repayments and maturities of loans and securities, deposits and borrowings, to meet our current commitments.

The maximum balance of short-term FHLB borrowings outstanding at any month-end during the six months ended March 31, 2019 was $1.09 billion, and the average balance of short-term FHLB borrowings outstanding during this period was $1.11 billion at a weighted average contractual rate of 2.31%. Short-term FHLB borrowings for this disclosure are defined as those with maturity dates within the next 12 months. This compares to a balance of short-term FHLB borrowings outstanding at March 31, 2019 of $1.09 billion at a weighted average contractual rate of 2.40%.

Contingencies

In the normal course of business, the Company and its subsidiary are named defendants in various lawsuits and counter claims. In the opinion of management, after consultation with legal counsel, none of the currently pending suits are expected to have a materially adverse effect on the Company's consolidated financial statements for the quarter ended March 31, 2019, or future periods.

Capital

Consistent with our goal to operate a sound and profitable financial organization, we actively seek to maintain a well-capitalized status for the Bank per the regulatory framework for prompt corrective action ("PCA"). As of March 31, 2019, the Bank and Company exceeded all regulatory capital requirements. The following table presents the regulatory capital ratios of the Bank and the Company at March 31, 2019.



							Regulatory
							Requirement For
					Minimum		Well-Capitalized
	Bank		Company		Regulatory		Status of Bank
	Ratios		Ratios		Requirement		Under PCA Provisions
Tier 1 leverage ratio	12.9	%	14.3	%	4.0	%	5.0	%
Common Equity Tier 1 capital ratio	24.7		27.5		4.5		6.5
Tier 1 capital ratio	24.7		27.5		6.0		8.0
Total capital ratio	24.8		27.7		8.0		10.0

The following table presents a reconciliation of equity under GAAP to regulatory capital amounts, as of March 31, 2019, for the Bank and the Company (dollars in thousands):



	Bank			Company
Total equity as reported under GAAP	$	1,216,532		$	1,355,983
AOCI	5,416			5,415
Goodwill and other intangibles, net of deferred tax liabilities	(14,641		)	(14,641		)
Total tier 1 capital	1,207,307			1,346,757
ACL	8,619			8,619
Total capital	$	1,215,926		$	1,355,376

Item 3. Quantitative and Qualitative Disclosure about Market Risk

Asset and Liability Management and Market Risk

For a complete discussion of the Bank's asset and liability management policies, as well as the potential impact of interest rate changes upon the market value of the Bank's portfolios, see "Part II, Item 7A. Quantitative and Qualitative Disclosures about Market Risk" in the Company's Annual Report on Form 10-K for the year ended September 30, 2018. The analysis presented in the tables below reflects the level of market risk at the Bank, including the cash the holding company has on deposit at the Bank.

The rates of interest the Bank earns on its assets and pays on its liabilities are generally established contractually for a period of time. 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. Risk associated with changes in interest rates on the earnings of the Bank and the market value of its financial assets and liabilities is known as interest rate risk. Interest rate risk is our most significant market risk, and our ability to adapt to changes in interest rates is known as interest rate risk management.

The general objective of our interest rate risk management program is to determine and manage an appropriate level of interest rate risk while maximizing net interest income in a manner consistent with our policy to manage, to the extent practicable, the exposure of net interest income to changes in market interest rates. The Board of Directors and Asset and Liability Management Committee ("ALCO") regularly review the Bank's interest rate risk exposure by forecasting the impact of hypothetical, alternative interest rate environments on net interest income and the market value of portfolio equity ("MVPE") at various dates. The MVPE is defined as the net of the present value of cash flows from existing assets, liabilities, and off-balance sheet instruments. The present values are determined based upon market conditions as of the date of the analysis, as well as in alternative interest rate environments providing potential changes in the MVPE under those alternative interest rate environments. Net interest income is projected in the same alternative interest rate environments with both a static balance sheet and 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. In addition to the interest rate environments presented below, management also reviews the impact of non-parallel rate shock scenarios on a quarterly basis. These scenarios consist of flattening and steepening the yield curve by changing short-term and long-term interest rates independent of each other, and simulating cash flows and determining valuations as a result of these hypothetical changes in interest rates to identify rate environments that pose the greatest risk to the Bank. This analysis helps management quantify the Bank's exposure to changes in the shape of the yield curve.

Qualitative Disclosure about Market Risk

At March 31, 2019, the Bank's gap between the amount of interest-earning assets and interest-bearing liabilities projected to reprice within one year was $433.5 million, or 4.54% of total assets, compared to $100.6 million, or 1.08% of total assets, at December 31, 2018. The increase in the one-year gap amount was due primarily to an expected increase in cash flows from mortgage-related assets compared to December 31, 2018 as a result of lower interest rates. As interest rates fall, borrowers have more economic incentive to refinance their mortgages and agency debt issuers have more economic incentive or 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.

The majority of interest-earning assets anticipated to reprice in the coming year are repayments and prepayments on one- to four-family loans and MBS, both of which include the option to prepay without a fee being paid by the contract holder. The amount of interest-bearing liabilities expected to reprice in a given period is not typically 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. If interest rates were to increase 200 basis points, as of March 31, 2019, the Bank's one-year gap is projected to be $(271.1) million, or (2.84)% of total assets. This compares to a one-year gap of $(419.2) million, or (4.51)% of total assets, if interest rates were to have increased 200 basis points as of December 31, 2018. The decrease in the gap compared to no change in rates is due to lower anticipated cash flows in the higher interest rate environment.

During the current quarter, loan repayments totaled $233.6 million and cash flows from the securities portfolio totaled $139.3 million. The majority of these cash flows were reinvested into new loans and securities at current market interest rates. Total cash flows from fixed-rate liabilities that matured and repriced into current market interest rates during the current quarter were $293.8 million. These offsetting cash flows allow the Bank to manage its interest rate risk and gap position more precisely than if the Bank did not have offsetting cash flows due to its mix of assets or maturity structure of liabilities.

Other strategies include managing the Bank's wholesale assets and liabilities. The Bank primarily uses long-term fixed-rate borrowings with no embedded options to lengthen the average life of the Bank's liabilities. The fixed-rate characteristics of these borrowings lock-in the cost until maturity and thus decrease the amount of liabilities repricing as interest rates move higher compared to funding with lower-cost short-term borrowings. These borrowings are laddered in order to prevent large amounts of liabilities repricing in any one period. The WAL of the Bank's term borrowings as of March 31, 2019 was 1.5 years. However, including the

impact of interest rate swaps related to $640.0 million of adjustable-rate FHLB advances, the WAL of the Bank's term borrowings as of March 31, 2019 was 2.8 years. The interest rate swaps effectively convert the adjustable-rate borrowings into long-term, fixed-rate liabilities.

The Bank uses the securities portfolio to shorten the average life of the Bank's assets. Security purchases over the past few years have primarily been focused on callable agency debentures with maturities no longer than five years, shorter duration MBS, and adjustable-rate MBS. These securities have a shorter average life and provide a steady source of cash flow that can be reinvested as interest rates rise into higher-yielding assets.

In addition to the wholesale strategies, the Bank has sought to increase non-maturity deposits and long-term certificates of deposit. Non-maturity deposits are expected to reduce the risk of higher interest rates because their interest rates are not expected to increase significantly as market interest rates rise. Specifically, checking accounts and savings accounts have had minimal interest rate fluctuations throughout historical interest rate cycles, though no assurance can be given that this will be the case in future interest rate cycles. The balances and rates of these accounts have historically tended to remain very stable over time, giving them the characteristic of long-term liabilities. The Bank uses historical data pertaining to these accounts to estimate their future balances.

Over the last few years, the Bank has priced long-term certificates of deposit more aggressively than short-term certificates of deposit with the goal of giving customers incentive to move funds into longer-term certificates of deposit when interest rates were lower. Since December 2015, when short-term interest rates began to rise, the Bank's portfolio of retail/business certificates of deposit with terms of four years or longer has increased approximately 25%, while the Bank's portfolio of retail/business certificates of deposit with terms of one year to four years has decreased approximately 15%. Long-term certificates of deposit reduce the amount of liabilities repricing as interest rates rise in a given time period.

Gap Table. The following gap table summarizes the anticipated maturities or repricing periods of the Bank's interest-earning assets and interest-bearing liabilities based on the information and assumptions set forth in the notes below. Cash flow projections for mortgage-related assets are calculated based in part on prepayment assumptions at current and projected interest rates. Prepayment projections are subjective in nature, involve uncertainties and assumptions and, therefore, cannot be determined with a high degree of accuracy. Although certain assets and liabilities may have similar maturities or periods to repricing, they may react differently to changes in market interest rates. Assumptions may not reflect how actual yields and costs respond to market interest rate changes. The interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types of assets and liabilities may lag behind changes in market interest rates. Certain assets, such as adjustable-rate loans, have features that restrict changes in interest rates on a short-term basis and over the life of the asset. In the event of a change in interest rates, prepayment and early withdrawal levels would likely deviate significantly from those assumed in calculating the gap table below. A positive gap indicates more cash flows from assets are expected to reprice than cash flows from liabilities and would indicate, in a rising rate environment, that earnings should increase. A negative gap indicates more cash flows from liabilities are expected to reprice than cash flows from assets and would indicate, in a rising rate environment, that earnings 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.



				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⁾	$	1,763,040		$	2,010,180		$	1,281,935		$	2,491,673		$	7,546,828
Securities⁽²⁾	539,720			432,531			161,623			135,561			1,269,435
Other interest-earning assets	196,112			—			—			—			196,112
Total interest-earning assets	2,498,872			2,442,711			1,443,558			2,627,234			9,012,375

Interest-bearing liabilities:
Non-maturity deposits⁽³⁾	241,981			359,654			287,723			1,945,412			2,834,770
Certificates of deposit	1,373,243			1,060,054			487,107			494			2,920,898
Borrowings⁽⁴⁾	450,000			1,125,000			465,000			341,285			2,381,285
Total interest-bearing liabilities	2,065,224			2,544,708			1,239,830			2,287,191			8,136,953

Excess (deficiency) of interest-earning assets over
interest-bearing liabilities	$	433,648		$	(101,997	)	$	203,728		$	340,043		$	875,422

Cumulative excess of interest-earning assets over
interest-bearing liabilities	$	433,648		$	331,651		$	535,379		$	875,422

Cumulative (deficiency) excess of interest-earning assets over interest-bearing
liabilities as a percent of total Bank assets at:
March 31, 2019	4.54		%	3.48		%	5.61		%	9.17		%
September 30, 2018	(0.16		)

Cumulative one-year gap - interest rates +200 bps at:
March 31, 2019	(2.84		)
September 30, 2018	(4.18		)

(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. Fixed-rate loans are included in the periods in which they are scheduled to be repaid, based on scheduled amortization and prepayment assumptions. Balances are net of undisbursed amounts and deferred fees and exclude loans 90 or more days delinquent or in foreclosure.


(2)	MBS reflect projected prepayments at amortized cost. Investment securities are presented based on contractual maturities, term to call dates or pre-refunding dates as of March 31, 2019, 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. 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. 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 $2.16 billion, for a cumulative one-year gap of (22.6)% of total assets.


(4)	Borrowings exclude deferred prepayment penalty costs. Included in this line are $640.0 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.

Change in Net Interest Income. For each date presented in the following table, the estimated change in the Bank's net interest income is based on the indicated instantaneous, parallel and permanent change in interest rates is presented. The change in each interest rate environment represents the difference between estimated net interest income in the 0 basis point interest rate environment ("base case," assumes the forward market and product interest rates implied by the yield curve are realized) and the estimated net interest income in each alternative interest rate environment (assumes market and product interest rates have a parallel shift in rates across all maturities by the indicated change in rates). Projected cash flows for each scenario are based upon varying prepayment assumptions to model likely customer behavior changes as market rates change. 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. 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. It is important to consider that estimated changes in net interest income are for a cumulative four-quarter period. These do not reflect the earnings expectations of management.



Change	Net Interest Income At
(in Basis Points)	March 31, 2019							September 30, 2018
in Interest Rates⁽¹⁾	Amount ($)		Change ($)			Change (%)		Amount ($)		Change ($)			Change (%)
	(Dollars in thousands)
-100 bp	$	198,623	$	(2,761	)	(1.37	)%	$	201,434	$	1,221		0.61	%
000 bp	201,384		—			—		200,213		—			—
+100 bp	199,036		(2,348		)	(1.17	)	196,272		(3,941		)	(1.97	)
+200 bp	194,681		(6,703		)	(3.33	)	190,872		(9,341		)	(4.67	)
+300 bp	188,820		(12,564		)	(6.24	)	184,603		(15,610		)	(7.80	)


(1)	Assumes an instantaneous, parallel, and permanent change in interest rates at all maturities.

The net interest income projection was higher in the base case scenario at March 31, 2019 compared to September 30, 2018 due mainly to an increase in the loan portfolio yield at March 31, 2019. The net interest income projections decreased from the base case in all rising rate scenarios at March 31, 2019 and September 30, 2018. The net interest income projection was less adversely impacted in the rising interest rate scenarios at March 31, 2019 compared to September 30, 2018, due primarily to lower interest rates at March 31, 2019. Lower interest rates increased the projected cash flows from the Bank's mortgage-related assets, thus reducing the negative impact of rising interest rates. At March 31, 2019, the net interest income was also negatively impacted in the decreasing interest rate scenario. In this scenario, as interest rates decrease, asset cash flows increase to such a point that assets reprice at a faster pace than liabilities.

Change in MVPE. 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. The change in each interest rate environment represents the difference between the MVPE in the base case (assumes the forward market interest rates implied by the yield curve are realized) and the MVPE in each alternative interest rate environment (assumes market interest rates have a parallel shift in rates). Projected cash flows for each scenario are based upon varying prepayment assumptions to model likely customer behavior as market rates change. 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 estimated MVPE results from the valuation of cash flows from financial assets and liabilities over the anticipated lives of each for each interest rate environment. 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.



Change	Market Value of Portfolio Equity At
(in Basis Points)	March 31, 2019							September 30, 2018
in Interest Rates⁽¹⁾	Amount ($)		Change ($)			Change (%)		Amount ($)		Change ($)			Change (%)
	(Dollars in thousands)
-100 bp	$	1,460,906	$	(11,582	)	(0.79	)%	$	1,498,631	$	53,683		3.72	%
000 bp	1,472,488		—			—		1,444,948		—			—
+100 bp	1,378,492		(93,996		)	(6.38	)	1,281,910		(163,038		)	(11.28	)
+200 bp	1,201,896		(270,592		)	(18.38	)	1,087,644		(357,304		)	(24.73	)
+300 bp	1,004,144		(468,344		)	(31.81	)	888,611		(556,337		)	(38.50	)


(1)	Assumes an instantaneous, parallel, and permanent change in interest rates at all maturities.

The percentage change in the Bank's MVPE at March 31, 2019 was less adversely impacted in the increasing interest rate scenarios than at September 30, 2018. This was due primarily to a decrease in interest rates between the two periods. As interest rates fall, borrowers have more economic incentive to refinance their mortgages and agency debt issuers have more economic incentive or 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. As interest rates increase in the rising rate scenarios, repayments 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. 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 higher expected average lives of these assets, relative to the assumptions in the base case interest rate environment, increases the sensitivity of their market value to changes in interest rates. At March 31, 2019, the MVPE was also negatively impacted in the decreasing interest rate scenario. In this scenario, as interest rates decrease, the market value of liabilities increases at a faster pace than the market value of assets.

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 March 31, 2019. Yields presented for interest-earning assets include the amortization of fees, costs, premiums and discounts, which are considered adjustments to the yield. The interest rate presented for term borrowings is the effective rate, which includes the impact of interest rate swaps and the amortization of deferred prepayment penalties resulting from FHLB advances previously prepaid. The WAL presented for term borrowings includes the effect of interest rate swaps. The maturity and repricing terms presented for one- to four-family loans represent the contractual terms of the loan.



	Amount		Yield/Rate		WAL	% of Category		% of Total
	(Dollars in thousands)
Investment securities	$	288,894	2.38	%	0.8	22.7	%	3.2	%
MBS - fixed	674,696		2.47		3.2	52.9		7.4
MBS - adjustable	310,598		3.12		2.7	24.4		3.4
Total securities	1,274,188		2.61		2.5	100.0	%	14.0
Loans receivable:
Fixed-rate one- to four-family:
<= 15 years	1,087,536		3.16		3.8	14.4	%	11.9
> 15 years	4,475,937		3.89		6.1	59.2		48.9
Fixed-rate commercial	398,455		4.61		6.2	5.3		4.4
All other fixed-rate loans	49,927		5.38		3.2	0.6		0.4
Total fixed-rate loans	6,011,855		3.82		5.6	79.5		65.6
Adjustable-rate one- to four-family:
<= 36 months	238,789		2.37		3.1	3.1		2.6
> 36 months	863,497		3.40		2.4	11.4		9.4
Adjustable-rate commercial	331,248		5.20		6.4	4.4		3.6
All other adjustable-rate loans	118,687		6.16		1.5	1.6		1.3
Total adjustable-rate loans	1,552,221		3.84		3.3	20.5		16.9
Total loans receivable	7,564,076		3.82		5.2	100.0	%	82.5
FHLB stock	102,631		7.47		1.5			1.1
Cash and cash equivalents	218,051		2.39		—			2.4
Total interest-earning assets	$	9,158,946	3.66		4.6			100.0	%

Non-maturity deposits	$	2,778,939	0.36		13.6	48.8	%	34.6	%
Retail/business certificates of deposit	2,522,044		1.93		1.6	44.2		31.4
Public unit certificates of deposit	400,128		2.22		0.6	7.0		5.0
Total deposits	5,701,111		1.19		7.4	100.0	%	71.0
Term borrowings	2,240,000		2.29		2.8	95.7	%	27.8
FHLB line of credit	100,000		2.64		—	4.3		1.2
Total borrowings	2,340,000		2.31		2.6	100.0	%	29.0
Total interest-bearing liabilities	$	8,041,111	1.51		6.0			100.0	%

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, the "Act") as of March 31, 2019. Based upon this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that, as of March 31, 2019, such disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in the reports it files or submits under the Act is accumulated and communicated to the Company's management (including the Chief Executive Officer and Chief Financial Officer) to allow timely decisions regarding required disclosure, and is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms.

Changes in Internal Control Over Financial Reporting

There have been no changes in the Company's internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Act) that occurred during the Company's quarter ended March 31, 2019 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

The Company and the Bank are involved as plaintiff or defendant in various legal actions arising in the normal course of business. In our opinion, after consultation with legal counsel, we believe it unlikely that such pending legal actions will have a material adverse effect on our financial condition, results of operations or liquidity.

Item 1A. Risk Factors

There have been no material changes to our risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2018.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

See "Liquidity and Capital Resources - Capital" in "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" regarding OCC restrictions on dividends from the Bank to the Company.

The following table summarizes our stock repurchase activity during the three months ended March 31, 2019 and additional information regarding our stock repurchase program. The Company has $70.0 million of common stock authorized under its stock repurchase plan. There is no expiration for this repurchase plan. Shares may be repurchased from time to time in the open-market based upon market conditions and available liquidity.



					Approximate
	Total			Total Number of	Dollar Value of
	Number of	Average		Shares Purchased as	Shares that May
	Shares	Price Paid		Part of Publicly	Yet Be Purchased
	Purchased	per Share		Announced Plans	Under the Plan
January 1, 2019 through
January 31, 2019	—	$	—	—	$	70,000,000
February 1, 2019 through
February 28, 2019	—	—		—	70,000,000
March 1, 2019 through
March 31, 2019	—	—		—	70,000,000
Total	—	—		—	70,000,000

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

Item 6. Exhibits

See Index to Exhibits.

INDEX TO EXHIBITS



Exhibit Number		Document
3(i)		Charter of Capitol Federal Financial, Inc., as filed on May 6, 2010, as Exhibit 3(i) to Capitol Federal Financial, Inc.'s Registration Statement on Form S-1 (File No. 333-166578) and incorporated herein by reference
3(ii)		Bylaws of Capitol Federal Financial, Inc., as amended, filed on September 30, 2016, as Exhibit 3.2 to Form 8-K for Capitol Federal Financial Inc. and incorporated herein by reference
10.1(i)		Form of Change of Control Agreement with each of John B. Dicus, Kent G. Townsend, and Rick C. Jackson filed on January 20, 2011 as Exhibit 10.1 to the Registrant's Current Report on Form 8-K and incorporated herein by reference
10.1(ii)		Form of Change of Control Agreement with each of Natalie G. Haag and Carlton A. Ricketts filed on November 29, 2012 as Exhibit 10.1(iv) to the Registrant's Annual Report on Form 10-K and incorporated herein by reference
10.1(iii)		Form of Change of Control Agreement with Daniel L. Lehman filed on November 29, 2016 as Exhibit 10.1(v) to the Registrant's Annual Report on Form 10-K and incorporated herein by reference
10.1(iv)		Form of Change of Control Agreement with Robert D. Kobbeman filed on November 29, 2018 as Exhibit 10.1(iv) to the Registrant's Annual Report on Form 10-K and incorporated herein by reference
10.1(v)		Employment Agreement with Robert D. Kobbeman filed on November 29, 2018 as Exhibit 10.1(v) to the Registrant's Annual Report on Form 10-K and incorporated herein by reference
10.1(vi)		Form of Change of Control Agreement with Anthony S. Barry
10.2		Capitol Federal Financial's 2000 Stock Option and Incentive Plan (the "Stock Option Plan") filed on April 13, 2000 as Appendix A to Capitol Federal Financial's Revised Proxy Statement (File No. 000-25391) and incorporated herein by reference
10.3		Capitol Federal Financial Deferred Incentive Bonus Plan, as amended, filed on November 29, 2018 as Exhibit 10.3 to the Registrant's September 30, 2018 Form 10-K and incorporated herein by reference
10.4		Form of Incentive Stock Option Agreement under the Stock Option Plan filed on February 4, 2005 as Exhibit 10.5 to the December 31, 2004 Form 10-Q for Capitol Federal Financial and incorporated herein by reference
10.5		Form of Non-Qualified Stock Option Agreement under the Stock Option Plan filed on February 4, 2005 as Exhibit 10.6 to the December 31, 2004 Form 10-Q for Capitol Federal Financial and incorporated herein by reference
10.6		Description of Director Fee Arrangements filed on November 29, 2018 as Exhibit 10.6 to the Registrant's September 30, 2018 Form 10-K and incorporated herein by reference
10.7		Short-term Performance Plan filed on August 4, 2015 as Exhibit 10.10 to the Registrant's June 30, 2015 Form 10-Q and incorporated herein by reference
10.8		Capitol Federal Financial, Inc. 2012 Equity Incentive Plan (the "Equity Incentive Plan") filed on December 22, 2011 as Appendix A to Capitol Federal Financial, Inc.'s Proxy Statement (File No. 001-34814) and incorporated herein by reference
10.9		Form of Incentive Stock Option Agreement under the Equity Incentive Plan filed on February 6, 2012 as Exhibit 10.12 to the Registrant's December 31, 2011 Form 10-Q and incorporated herein by reference
10.10		Form of Non-Qualified Stock Option Agreement under the Equity Incentive Plan filed on February 6, 2012 as Exhibit 10.13 to the Registrant's December 31, 2011 Form 10-Q and incorporated herein by reference
10.11		Form of Stock Appreciation Right Agreement under the Equity Incentive Plan filed on February 6, 2012 as Exhibit 10.14 to the Registrant's December 31, 2011 Form 10-Q and incorporated herein by reference
10.12		Form of Restricted Stock Agreement under the Equity Incentive Plan filed on February 6, 2012 as Exhibit 10.15 to the Registrant's December 31, 2011 Form 10-Q and incorporated herein by reference
31.1		Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002 made by John B. Dicus, Chairman, President and Chief Executive Officer
31.2		Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002 made by Kent G. Townsend, Executive Vice President, Chief Financial Officer and Treasurer
32		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 made by John B. Dicus, Chairman, President and Chief Executive Officer, and Kent G. Townsend, Executive Vice President, Chief Financial Officer and Treasurer



101		The following information from the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2019, filed with the Securities and Exchange Commission on May 10, 2019, has been formatted in eXtensible Business Reporting Language ("XBRL"): (i) Consolidated Balance Sheets at March 31, 2019 and September 30, 2018, (ii) Consolidated Statements of Income for the three and six months ended March 31, 2019 and 2018, (iii) Consolidated Statements of Comprehensive Income for the three and six months ended March 31, 2019 and 2018, (iv) Consolidated Statements of Stockholders' Equity for the three and six months ended March 31, 2019 and 2018, (v) Consolidated Statements of Cash Flows for the six months ended March 31, 2019 and 2018, and (vi) Notes to the Unaudited Consolidated Financial Statements. The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



CAPITOL FEDERAL FINANCIAL, INC.



	Date: May 10, 2019	By:	/s/ John B. Dicus
			John B. Dicus, Chairman, President and Chief Executive Officer

	Date: May 10, 2019	By:	/s/ Kent G. Townsend
			Kent G. Townsend, Executive Vice President,
			Chief Financial Officer and Treasurer

Exhibit 10.1(vi)

CHANGE OF CONTROL AGREEMENT

THIS AGREEMENT is entered into as of the ___ day of March, 2019 (the "Effective Date") by and between Capitol Federal® Financial, Inc. ("CFF"), a Maryland corporation, and Anthony S. Barry (the "Executive").

WITNESSETH:

WHEREAS, CFF owns 100% of the outstanding stock of Capitol Federal® Savings Bank (the "Bank"), a federally chartered savings bank;

WHEREAS, Executive is an Executive Vice President of the Bank, and as such is a key executive officer whose continued dedication, availability, advice and counsel to CFF and the Bank is deemed important to the Boards of Directors of CFF and the Bank and to the stockholders of CFF;

WHEREAS, CFF wishes to retain the services of Executive free from any distractions or conflicts that could arise as a result of a change in control of CFF or the Bank.

NOW, THEREFORE, to assure CFF of Executive's continued dedication, the availability of his advice and counsel to the Board of Directors of CFF free of any distractions resulting from a change of control, and for other good and valuable consideration, the receipt and adequacy whereof each party hereby acknowledges, CFF and Executive hereby agree as follows:

1. TERM OF AGREEMENT: This Agreement shall remain in effect until cancelled by either party hereto, upon not less than 24 months prior written notice to the other party.

2. CHANGE IN CONTROL: If the Executive's employment by the Bank or CFF shall be terminated by the Bank or CFF, or any successor thereto, other than for Cause or as a result of the Executive's death, disability or retirement, or terminated by the Executive for Good Reason, all as defined in Appendix A attached hereto ("Appendix A"), in either case within six (6) months preceding or twenty-four (24) months following a Change in Control of CFF or the Bank, then CFF shall:

(a) Pay to the Executive in cash upon the later of the date of such Change of Control or the effective date of the Executive's termination with CFF or the Bank, an amount equal to 299% of the Employee's "base amount" as determined under Section 280G of the Internal Revenue Code of 1986, as amended (the "Code").

(b) For purposes of this Agreement, a Change of Control of CFF occurs in any of the following events: (i) the acquisition by any "person" or "group" (as defined in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 ("Exchange Act")), other than CFF, any subsidiary of CFF or their employee benefit plans, directly or indirectly, as "beneficial owner" (as defined in Rule 13d-3, under the Exchange Act) of securities of CFF representing ten percent (10%) or more of either the then outstanding shares or the combined voting power of the then outstanding securities of CFF; (ii) either a majority of the directors of CFF elected at CFF's annual stockholders’ meeting shall have been nominated for election other than by or at the direction of the "incumbent directors" of CFF, or the "incumbent directors" shall cease to constitute a majority of the directors of CFF. The term "incumbent director" shall mean any director who was a director of CFF on the Effective Date and any individual who becomes a director of CFF subsequent to the Effective Date and who is elected or nominated by or at the direction of at least two-thirds of the then incumbent directors; (iii) the stockholders of CFF approve (x) a merger, consolidation or other business combination of CFF with any other "person" or "group" (as defined in Sections 13(d) and 14(d) of the Exchange Act) or affiliate thereof, other than a merger or consolidation that would result in the outstanding common stock of CFF immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into common stock of the surviving entity or a parent or affiliate thereof) at least fifty percent (50%) of the outstanding common stock of CFF or such surviving entity or a parent or affiliate thereof outstanding immediately after such merger, consolidation or other business combination, or (y) a plan of complete liquidation of CFF or an agreement for the sale or disposition by CFF of all or substantially all of CFF's assets; or (iv) any other event or circumstance which is not covered by the foregoing subsections but which the Board of Directors of CFF determines to affect control of CFF and with respect to which the Board of Directors adopts a resolution that the event or circumstance constitutes a Change of Control for purposes of the Agreement.

The Change of Control Date is the date on which an event described in (i), (ii), (iii) or (iv) occurs.

3. LIMITATION OF BENEFITS: It is the intention of the parties that no payment be made or benefit provided to the Executive that would constitute an "excess parachute payment" within the meaning of Section 280G of the Code and any regulations thereunder, thereby resulting in a loss of an income tax deduction by CFF or the imposition of an excise tax on the Executive under Section 4999 of the Code. If the independent accountants serving as auditors for CFF immediately prior to the date of a Change of Control determine that some or all of the payments or benefits scheduled under this Agreement, when combined with any other payments or benefits provided to the Executive on a Change of Control, would constitute nondeductible excess parachute payments by CFF or any affiliate under Section 280G of the Code, then the payments or benefits scheduled under this Agreement will be reduced to one dollar less than the maximum amount which may be paid or provided without causing any such payments or benefits scheduled under this Agreement or otherwise provided on a Change of Control to be nondeductible. The determination made as to the reduction of benefits or payments required hereunder by the independent accountants shall be binding on the parties. The Executive shall have the right to designate within a reasonable period which payments or benefits will be reduced; provided, however, that if no direction is received from the Executive, CFF shall implement the reductions by reducing or eliminating payments required under this Agreement.

4. LITIGATION - OBLIGATIONS - SUCCESSORS:

(a) If litigation shall be brought or arbitration commenced to challenge, enforce or interpret any provision of this Agreement, and such litigation or arbitration does not end with judgment in favor of CFF, CFF hereby agrees to indemnify the Executive for his reasonable attorney's fees and disbursements incurred in such litigation or arbitration.

(b) CFF's obligation to pay the Executive the compensation contemplated herein and to make the arrangements provided herein shall be absolute and unconditional and shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which CFF may have against him or anyone else. All amounts payable by CFF hereunder shall be paid without notice or demand. The Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise.

(c) CFF will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of CFF, by agreement in form and substance satisfactory to the Executive, to expressly assume and agree to perform this Agreement in its entirety. Failure of CFF to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to the compensation described in Section 2. As used in this Agreement, "CFF" shall mean Capitol Federal Financial, Inc. and any successor to its business and/or assets as aforesaid which executes and delivers the agreement provided for in this Section 4 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law.

5. NOTICES: For the purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows:



If to the Executive: If to CFF:	Anthony S. Barry Capitol Federal Financial, Inc. 700 South Kansas Ave. Topeka, Kansas 66603

or at such other address as any party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

6. MODIFICATION - WAIVERS - APPLICABLE LAW: No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing, signed by the Executive and on behalf of CFF by such officer as may be specifically designated by the Board of Directors of CFF. No waiver by either party hereto at any time of any breach by the other party hereto of, or in compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Kansas.

7. INVALIDITY - ENFORCEABILITY: The invalidity or unenforceability of any provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. Any provision in this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective only to the extent of such prohibition or unenforceability without invalidating or affecting the remaining provisions of this Agreement, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

8. SUCCESSOR RIGHTS: This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive should die while any amounts would still be payable to him hereunder, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to his executor or, if there is no such executor, to his estate.

9. HEADINGS: Descriptive headings contained in this Agreement are for convenience only and shall not control or affect the meaning or construction of any provision in this Agreement.

10. ARBITRATION: Any dispute, controversy or claim arising under or in connection with this Agreement shall be settled exclusively by arbitration in Topeka, Kansas (or as close thereto as feasible) in accordance with the Commercial Arbitration Rules of the American Arbitration Association then in effect. CFF shall pay all administrative fees associated with such arbitration. Judgment may be entered on the arbitrator's award in any court having jurisdiction.

11. CONFIDENTIALITY:

(a) The Executive acknowledges that CFF may disclose certain confidential information to the Executive during the term of this Agreement to enable him to perform his duties hereunder. The Executive hereby covenants and agrees that he will not, without the prior written consent of CFF, during the term of this Agreement or at any time thereafter, disclose or permit to be disclosed to any third party by any method whatsoever any of the confidential information of CFF, nor shall Executive use such confidential information to the detriment of CFF, the Bank or their successors. For purposes of this Agreement, "confidential information" shall include, but not be limited to, any and all records, notes, memoranda, data, ideas, processes, methods, techniques, systems, formulas, patents, models, devices, programs, computer software, writings, research, personnel information, customer information, CFF' s financial information, plans, or any other information of whatever nature in the possession or control of CFF which has not been published or disclosed to the general public, or which gives to CFF an opportunity to obtain an advantage over competitors who do not know of or use it. The Executive further agrees that if his employment hereunder is terminated for any reason, he will leave with CFF and will not take originals or copies of any records, papers, programs, computer software and documents and all matter of whatever nature which bears secret or confidential information of CFF.

(b) The foregoing paragraph shall not be applicable if and to the extent the Executive is required to testify in a judicial or regulatory proceeding pursuant to an order of a judge or administrative law judge issued after the Executive and his legal counsel urge that the aforementioned confidentiality be preserved.

(c) The foregoing covenants will not prohibit the Executive from disclosing confidential or other information to other employees of CFF or any third parties to the extent that such disclosure is necessary to the performance of his duties under this Agreement.

12. COMPLIANCE WITH SECTION 409A OF THE CODE: Notwithstanding anything herein to the contrary, any payments to be made in accordance with this Agreement shall not be made prior to the date that is 185 calendar days from the date of termination of employment of the Executive if it is determined by CFF in good faith that such payments are subject to the limitations set forth at Section 409A of the Code and regulations promulgated thereunder, and payments made in advance of such date would result in the requirement that Executive pay additional interest and taxes in accordance with Section 409A(a)(1)(B) of the Code.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective Date referred to above.

EXECUTIVE

ATTEST:

CAPITOL FEDERAL FINANCIAL, INC.

ATTEST: By:

APPENDIX A TO CHANGE OF CONTROL AGREEMENT

Definitions:

"Cause" shall mean personal dishonesty, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule, or regulation (other than traffic violations or similar offenses) or final cease-and-desist order, or material breach of any provision of the Change of Control Agreement.

"Good Reason" shall mean:

(i) The assignment of duties to the Executive by CFF or the Bank or any successor thereto which (A) are materially different from the Executive's duties on the date hereof, or (B) result in the Executive having significantly less authority and/or responsibility than he has on the date hereof, without his express written consent;

(ii) The removal of the Executive from or any failure to re-elect him to the position of Executive Vice President except in connection with a termination of his employment by CFF for Cause or by reason of the Executive's disability;

(iii) A reduction by CFF or the Bank of the Executive's then current base salary;

(iv) The failure of CFF or the Bank to provide the Executive with substantially the same fringe benefits (including paid vacations) that were provided to him immediately prior to the date hereof; or

(v) The failure of CFF to obtain the assumption of and agreement to perform this Agreement by any successor as contemplated in Section 4(c) of the Change of Control Agreement.

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, John B. Dicus, certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q of Capitol Federal Financial, Inc.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c.	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d.	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and


5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):


a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and


b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.



Date: May 10, 2019	By:	/s/ John B. Dicus
	John B. Dicus
	Chairman, President and Chief Executive Officer

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Kent G. Townsend, certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q of Capitol Federal Financial, Inc.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c.	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d.	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and


5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):


a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and


b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.



Date: May 10, 2019	By:	/s/ Kent G. Townsend
	Kent G. Townsend
	Executive Vice President, Chief Financial Officer and Treasurer

EXHIBIT 32

CERTIFICATE PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Capitol Federal Financial, Inc. (the "Company") on Form 10-Q for the quarterly period ended March 31, 2019, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, John B. Dicus, Chairman, President and Chief Executive Officer of the Company, and I, Kent G. Townsend, Executive Vice President, Chief Financial Officer and Treasurer of the Company, certify, in my capacity as an officer of the Company, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:


1.	the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and


2.	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the financial statements included in such Report.



Date: May 10, 2019	By:	/s/ John B. Dicus
	John B. Dicus
	Chairman, President and Chief Executive Officer


Date: May 10, 2019	By:	/s/ Kent G. Townsend
	Kent G. Townsend
	Executive Vice President, Chief Financial Officer and Treasurer