Toggle SGML Header (+)


Section 1: 8-K (CURRENT REPORT, ITEMS 2.02, 7.01, AND 9.01)

cffn-20201028
0001490906false00014909062020-10-282020-10-28

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)
October 28, 2020
CAPITOL FEDERAL FINANCIAL, INC.
(Exact name of Registrant as specified in its Charter)

Maryland001-3481427-2631712
(State or other jurisdiction of incorporation)(Commission File Number)(IRS Employer Identification No.)


700 South Kansas Avenue,TopekaKansas66603
(Address of principal executive offices)(Zip Code)


Registrant's telephone number, including area code
(785) 235-1341

N/A
(Former name or former address, if changed since last report)


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock,
par value $0.01 per share
CFFNThe NASDAQ Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
    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. ☐





ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The Registrant’s press release dated October 28, 2020, announcing financial results for fiscal year 2020 is attached hereto as Exhibit 99.1, and is incorporated herein by reference.

ITEM 7.01 REGULATION FD DISCLOSURE
The Registrant’s press release dated October 28, 2020, announcing that its Board of Directors declared a fiscal year 2020 cash true-up dividend of $0.13 per share on outstanding CFFN common stock is attached hereto as Exhibit 99.2, and is incorporated herein by reference. The dividend is payable on December 4, 2020, to stockholders of record as of the close of business on November 20, 2020.

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(d) Exhibits

Exhibit 99.1 – Press release announcing earnings dated October 28, 2020
Exhibit 99.2 – Press release announcing fiscal year 2020 cash true-up dividend dated October 28, 2020
Exhibit 104 – Cover page interactive data file, formatted in Inline XBRL.






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 hereunto duly authorized.

CAPITOL FEDERAL FINANCIAL, INC.
Date: October 28, 2020By: /s/ Kent G. Townsend
Kent G. Townsend, Executive Vice-President,
Chief Financial Officer, and Treasurer

(Back To Top)

Section 2: EX-99.1 (PRESS RELEASE ANNOUNCING EARNINGS)

Document


405762006_cffnlogo1a.jpg
NEWS RELEASE
FOR IMMEDIATE RELEASE
October 28, 2020
CAPITOL FEDERAL FINANCIAL, INC.®
REPORTS FISCAL YEAR 2020 RESULTS

Topeka, KS - Capitol Federal Financial, Inc.® (NASDAQ: CFFN) (the "Company"), the parent company of Capitol Federal Savings Bank (the "Bank"), announced results today for the fiscal year ended September 30, 2020. Detailed results will be available in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2020, which will be filed with the Securities and Exchange Commission ("SEC") on or about November 25, 2020 and posted on our website, http://ir.capfed.com. For best viewing results, please view this release in Portable Document Format (PDF) on our website.

Highlights for the quarter include:
net income of $18.3 million;
basic and diluted earnings per share of $0.13;
net interest margin of 2.03%;
annualized deposit growth of 8.0%;
repurchased $23.8 million of common stock, or 2,558,100 shares, at an average price of $9.31 per share;
paid dividends of $11.7 million, or $0.085 per share; and
on October 20, 2020, announced a cash dividend of $0.085 per share, payable on November 20, 2020 to stockholders of record as of the close of business on November 6, 2020.

Highlights for the fiscal year include:
net income of $64.5 million;
basic and diluted earnings per share of $0.47;
net interest margin of 2.12%;
deposit growth of 10.9%;
paid dividends of $93.9 million, or $0.68 per share; and
on October 28, 2020, announced a fiscal year 2020 cash true-up dividend of $0.13 per share, payable on December 4, 2020 to stockholders of record as of the close of business on November 20, 2020.

Impact on Operations Due to the Coronavirus Disease 2019 ("COVID-19") Pandemic During the Current Quarter

Management's actions related to COVID-19 and the impact of COVID-19 on certain aspects of the Company's business during the current quarter are summarized below.
Bank operations - Due to the increase in COVID-19 cases in late June into July, management changed lobby services in early July. Lobby services were limited to appointment only while drive-through, mobile, and online banking became the Bank's primary channels of serving customers. Retail loan closings were conducted with customers coming to our drive-through facilities and commercial loans have been closed in person only when necessary. In mid-September 2020, lobbies were reopened once again. Management continues to monitor COVID-19 cases and will adjust operational plans as necessary.

Loan modification programs - In late March 2020, the Bank announced loan modification programs to support and provide relief for its borrowers during the COVID-19 pandemic. Generally, loan modifications under these programs ("COVID-19 loan modifications") for one- to four-family loans and consumer loans consist of a three-month payment forbearance of principal, interest and, in some cases, escrow.  COVID-19 loan modifications of commercial loans mainly consist of a six-month interest-only payment period. See additional discussion regarding COVID-19 loan modifications in the Loan Portfolio section below.
As of September 30, 2020, the Bank had 193 one- to four-family loans totaling $39.8 million and 27 consumer loans totaling $795 thousand that were still in their deferral period. The deferral period concluded by September 30, 2020 for $199.7 million of one- to four-family loans and $1.6 million of consumer loans.

1


As of September 30, 2020, the Bank had 203 commercial loans with a combined gross loan amount of $317.4 million, which includes undisbursed amounts, that were still in their deferral period. The deferral period concluded by September 30, 2020 for $93.5 million, or 23%, of the commercial loans subject to COVID-19 loan modifications. All of these loans were current as of September 30, 2020. The deferral period for the majority of the remaining commercial loans concluded in October 2020.

Small Business Administration ("SBA") Payroll Protection Program ("PPP") loans - As of September 30, 2020, the Bank had originated and funded 791 PPP loans totaling $43.9 million, with a median loan amount of $19 thousand, and received origination fees totaling $1.9 million associated with these loans. These loans are fully guaranteed by the SBA. The program ended August 8, 2020.

On October 8, 2020 the SBA released a streamlined loan forgiveness application for PPP loans in amounts of $50 thousand or less. Of the PPP loans originated by the Bank, 611 loans totaling $9.6 million, or 22% of the Bank's total PPP loan balance, were in amounts less than $50 thousand and will be eligible for the streamlined forgiveness process.

Capital, liquidity, and dividends - Management continues to anticipate being able to manage the economic risks and uncertainties associated with the COVID-19 pandemic and remain well capitalized with sufficient liquidity to serve our customers.

Deposit balances have increased due primarily to the economic stimulus payments, a reduction in consumer spending, and PPP loan proceeds being deposited at the Bank. As a result, management is currently faced with the challenge of excess liquidity. Due to the nature of deposit cash flows, management does not know how long the excess liquidity will continue. As such, management has elected, for the time being, to reduce the Bank's level of borrowings and increase the balance of securities using the excess liquidity from the deposit portfolio.

With earnings of $0.47 per share for fiscal year 2020, and a cash balance at the holding company level of $82.5 million, the Company has the resources to continue to pay its regular quarterly dividend of $0.085 per share for the foreseeable future. Given the state of economic uncertainty and how that may play out with the credit risk exposure in the Bank's loan portfolio, the Company elected to defer the annual True Blue dividend in June 2020 and did not ask at that time for a regulatory non-objection to move capital from the Bank to the Company to pay that dividend. It is management's intention to ask for a regulatory non-objection at some point in the future to pay this dividend when economic conditions are more certain. It is currently the Company's intention to pay out 100% of its fiscal year 2021 earnings.

Comparison of Operating Results for the Years Ended September 30, 2020 and 2019

The Company recognized net income of $64.5 million, or $0.47 per share, for the year ended September 30, 2020 compared to net income of $94.2 million, or $0.68 per share, for the year ended September 30, 2019. The decrease in net income was due primarily to a $21.6 million increase in provision for credit losses and a decrease in net interest income, partially offset by a decrease in income tax expense.

Net interest income decreased $17.1 million, or 8.3%, from the prior year to $189.3 million for the current year. The net interest margin decreased 14 basis points, from 2.26% for the prior year to 2.12% for the current year. The leverage strategy was suspended at certain times during the prior year and during all of the current year due to the negative interest rate spreads between the related Federal Home Loan Bank Topeka ("FHLB") borrowings and cash held at the Federal Reserve Bank of Kansas City ("FRB of Kansas City"), making the transaction unprofitable. See additional discussion regarding the leverage strategy in the Financial Condition section below. When the leverage strategy is in place, it increases our net interest income but reduces the net interest margin due to the amount of earnings from the transaction in comparison to the size of the transaction. Excluding the effects of the leverage strategy, the net interest margin would have decreased 18 basis points, from 2.30% for the prior year to 2.12% for the current year. The decrease in the net interest margin, excluding the effects of the leverage strategy, was due mainly to a decrease in the loan portfolio yield, specifically the yield on the correspondent one- to four-family loan portfolio.

Markets responded to the COVID-19 pandemic in many ways, with a dramatic lowering of interest rates in a short period of time having the most impact on the operations and performance of the Bank. Since the onset of the pandemic, the rate paid on our interest-bearing liabilities has decreased. The Bank has lowered its offered rates on all retail deposit products except checking and savings accounts. Changes in the rates paid on money market accounts have an immediate impact on the cost of our deposits, while the impact of reducing rates offered on our certificate of deposit products lower the cost of deposits only as certificates of deposit reprice lower when they mature. As the Bank further monitors rates offered and the cost of borrowings, we anticipate that the average cost of our interest-bearing liabilities will continue to decrease.

We responded to lower market rates for lending by lowering rates offered on our one- to four-family loan products over the course of the year. Given current market interest rates, rates offered on new loans and the recent volume of one- to four-family refinances and endorsements allowing borrowers to take advantage of the lower current market interest rates, the yield on the total loan portfolio is likely to continue to decrease. Additionally, with significant cash inflows realized due to investment securities being called and
2


prepayments on mortgage-backed securities ("MBS") increasing, the yields on reinvested funds into new securities are lower than portfolio yields.

Considering the drastic changes in market rates and the ongoing economic uncertainty, even with the changes the Bank has made to its cost of funding, with the lower rates on new mortgage loans, refinances, endorsements and new securities also at lower rates, our net interest margin could continue to decrease, with further downside risk as a result of high levels of prepayments and premium amortization on correspondent one- to four-family loans and MBS.

Interest and Dividend Income
The weighted average yield on total interest-earning assets decreased 21 basis points, from 3.61% for the prior year to 3.40% for the current year, and the average balance of interest-earning assets decreased $193.4 million. Absent the impact of the leverage strategy, the weighted average yield on total interest-earning assets would have decreased 22 basis points, from 3.62% for the prior year to 3.40% for the current year, and the average balance of interest-earning assets would have decreased $35.6 million. The decrease in the weighted average yield between periods was due primarily to a decrease in the loan portfolio yield. The following table presents the components of interest and dividend income for the time periods presented, along with the change measured in dollars and percent.
For the Year Ended
September 30, Change Expressed in:
20202019DollarsPercent
(Dollars in thousands)
INTEREST AND DIVIDEND INCOME:
Loans receivable$270,494 $284,229 $(13,735)(4.8)%
MBS23,009 25,730 (2,721)(10.6)
FHLB stock5,827 7,823 (1,996)(25.5)
Investment securities4,467 6,366 (1,899)(29.8)
Cash and cash equivalents1,181 5,806 (4,625)(79.7)
Total interest and dividend income$304,978 $329,954 $(24,976)(7.6)

The decrease in interest income on loans receivable was due mainly to a decrease in yield on correspondent loans, including a $5.8 million increase in the amortization of premiums related to increases in payoff and endorsement activity. This was partially offset by a shift in the mix of the loan portfolio, as the average balance of lower-yielding one- to four-family loans decreased $152.2 million, or 2.3%, partially offset by a $64.9 million, or 9.2%, increase in the average balance of higher-yielding commercial loans, excluding PPP loans. The weighted average yield on the loans receivable portfolio decreased 14 basis points, from 3.77% for the prior year to 3.63% for the current year.

The decrease in interest income on the MBS portfolio was due primarily to a 22 basis point decrease in the weighted average yield to 2.41% in the current year as a result of new purchases at lower market yields and the repricing of existing adjustable-rate MBS to lower market yields. The decrease in dividend income on FHLB stock was due mainly to a decrease in the dividend rate paid by FHLB, as well as to the leverage strategy not being in place during the current year. The decrease in interest income on investment securities was due mainly to a 61 basis point decrease in the weighted average yield to 1.65% in the current year as a result of calls and maturities either being replaced at lower market rates or not being replaced. The decrease in interest income on cash and cash equivalents was due primarily to the leverage strategy being in place for a portion of the prior year and not being in place during the current year, along with a decrease in the yield earned on cash held at the FRB of Kansas City.

3


Interest Expense
The weighted average rate paid on total interest-bearing liabilities decreased eight basis points, from 1.54% for the prior year to 1.46% for the current year, and the average balance of interest-bearing liabilities decreased $126.0 million. Absent the impact of the leverage strategy, the weighted average rate paid on total interest-bearing liabilities would have decreased six basis points, from 1.52% for the prior year to 1.46% for the current year, while the average balance of interest-bearing liabilities would have increased $31.8 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 Year Ended
September 30, Change Expressed in:
20202019DollarsPercent
(Dollars in thousands)
INTEREST EXPENSE:
Deposits$67,598 $66,201 $1,397 2.1 %
Borrowings48,045 57,363 (9,318)(16.2)
Total interest expense$115,643 $123,564 $(7,921)(6.4)

The increase in interest expense on deposits was due to an increase in the cost of the retail/business certificate of deposit portfolio, partially offset by decreases in the cost of wholesale certificates of deposit and money market accounts. The weighted average rate of the retail/business certificate of deposit portfolio increased 11 basis points, to 2.03% for the current year, and the average balance increased $185.0 million, or approximately 7%. In the third quarter of fiscal year 2019, the Bank increased offered rates on short-term and certain intermediate-term certificates of deposit in an effort to encourage customers to move funds to those terms. During the fourth quarter of fiscal year 2019, the Bank held the unTraditional campaign with above-market rates, resulting in growth in the short-term and certain intermediate-term certificates of deposit. Since the onset of the COVID-19 pandemic, the retail/business certificate of deposit portfolio has been gradually repricing down as certificates renew to lower offered rates.

The borrowings line item in the table above includes interest expense associated and not associated with the leverage strategy. Interest expense on borrowings not related to the leverage strategy decreased $5.4 million from the prior year due primarily to a decrease in the average balance of such borrowings, as certain maturing FHLB advances and repurchase agreements were not replaced and the Bank paid down its FHLB line of credit with funds generated from the increase in deposits. Interest expense on FHLB borrowings associated with the leverage strategy decreased $3.9 million from the prior year due to the leverage strategy being in place for a portion of the prior year and not being in place at all during the current year.

Provision for Credit Losses
The Bank recorded a provision for credit losses during the current year of $22.3 million, compared to $750 thousand during the prior year. The $22.3 million provision for credit losses in the current year was primarily related to the deterioration of economic conditions as a result of COVID-19. See additional discussion regarding management's evaluation of the adequacy of the Bank's allowance for credit losses ("ACL") at September 30, 2020 in the Asset Quality section below.

Non-Interest Income
The following table presents the components of non-interest income for the time periods presented, along with the change measured in dollars and percent.
For the Year Ended
September 30, Change Expressed in:
20202019DollarsPercent
(Dollars in thousands)
NON-INTEREST INCOME:
Deposit service fees$11,285 $12,740 $(1,455)(11.4)%
Insurance commissions2,487 2,821 (334)(11.8)
Other non-interest income5,827 6,397 (570)(8.9)
Total non-interest income$19,599 $21,958 $(2,359)(10.7)

4


The decrease in deposit service fees was due mainly to a decrease in service charge income, primarily resulting from a decrease in consumer activity related to the COVID-19 pandemic, along with the discontinuation of point-of-sale service charges, which the Bank ceased charging in April 2019. The decrease in insurance commissions was due primarily to a decrease in the amount of annual contingent insurance commissions. The decrease in other non-interest income was due mainly to a decrease in loan-related fees, primarily prepayment fees and late charges, compared to the prior year.

Non-Interest Expense
The following table presents the components of non-interest expense for the time periods presented, along with the change measured in dollars and percent.
For the Year Ended
September 30, Change Expressed in:
20202019DollarsPercent
(Dollars in thousands)
NON-INTEREST EXPENSE:
Salaries and employee benefits$52,996 $53,145 $(149)(0.3)%
Information technology and related expense16,974 17,615 (641)(3.6)
Occupancy, net13,870 13,032 838 6.4 
Regulatory and outside services5,762 5,813 (51)(0.9)
Advertising and promotional4,889 5,244 (355)(6.8)
Deposit and loan transaction costs2,890 2,478 412 16.6 
Office supplies and related expense2,195 2,439 (244)(10.0)
Federal insurance premium914 1,172 (258)(22.0)
Other non-interest expense5,514 6,006 (492)(8.2)
Total non-interest expense$106,004 $106,944 $(940)(0.9)

The decrease in information technology and related expense was due mainly to the prior year including costs related to the integration of the operations of Capital City Bancshares, Inc. ("CCB"), which the Company acquired in August 2018. The increase in occupancy, net was due primarily to an increase in facility-related costs resulting from the impact of the COVID-19 pandemic, along with an increase in depreciation expense. The decrease in advertising and promotional expenses was due mainly to adjustments in advertising schedules, postponements of campaigns, and cancellations of certain sponsorships as a result of the COVID-19 pandemic. The increase in deposit and loan transaction costs was due mainly to the timing of loan origination-related costs. The decrease in the federal insurance premium was due mainly to the Bank utilizing an assessment credit from the Federal Deposit Insurance Corporation ("FDIC") during the majority of the current year. The decrease in other non-interest expense was due primarily to a decrease in amortization of deposit intangibles, as well as a decrease in debit card fraud losses.

The Company's efficiency ratio was 50.74% for the current year compared to 46.83% for the prior year. The change in the efficiency ratio was due to lower net interest income in the current year compared to the prior year. 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 higher value indicates that the financial institution is generating revenue with a proportionally higher level of expense, relative to the net interest margin.

5


Income Tax Expense
The following table presents pretax income, income tax expense, and net income for the time periods presented, along with the change measured in dollars and percent.
For the Year Ended
September 30, Change Expressed in:
20202019DollarsPercent
(Dollars in thousands)
Income before income tax expense$80,630 $120,654 $(40,024)(33.2)%
Income tax expense16,090 26,411 (10,321)(39.1)
Net income$64,540 $94,243 $(29,703)(31.5)
Effective Tax Rate20.0 %21.9 %

The decrease in income tax expense was due primarily to lower pretax income in the current year. The lower effective tax rate in the current year compared to the prior year was due mainly to the Company's permanent differences, such as low income housing partnership tax credits, which generally reduce our tax expense, having a proportionately larger impact given the lower pretax income in the current year period. Additionally, an income tax benefit was recognized during the current year as a result of favorable federal tax guidance issued during the current year related to certain bank-owned life insurance policies added in the CCB acquisition. Management anticipates the effective income tax rate for fiscal year 2021 will be approximately 21% to 22%.

Comparison of Operating Results for the Three Months Ended September 30, 2020 and June 30, 2020

For the quarter ended September 30, 2020, the Company recognized net income of $18.3 million, or $0.13 per share, compared to net income of $19.5 million, or $0.14 per share, for the quarter ended June 30, 2020. The decrease was due primarily to an increase in non-interest expense and a decrease in net interest income compared to the prior quarter. The net interest margin decreased four basis points, from 2.07% for the prior quarter to 2.03% for the current quarter. The decrease in the net interest margin was due mainly to a decrease in the loan portfolio yield and securities portfolio yield, partially offset by a decrease in the cost of deposits and borrowings.

Interest and Dividend Income
The weighted average yield on total interest-earning assets decreased 15 basis points, from 3.32% for the prior quarter to 3.17% for the current quarter, while the average balance of interest-earning assets increased $33.4 million between the two periods. The following table presents the components of interest and dividend income for the time periods presented, along with the change measured in dollars and percent.
For the Three Months Ended
September 30, June 30, Change Expressed in:
20202020DollarsPercent
(Dollars in thousands)
INTEREST AND DIVIDEND INCOME:
Loans receivable$64,315 $66,652 $(2,337)(3.5)%
MBS5,425 5,616 (191)(3.4)
FHLB stock1,080 1,207 (127)(10.5)
Investment securities731 847 (116)(13.7)
Cash and cash equivalents55 59 (4)(6.8)
Total interest and dividend income$71,606 $74,381 $(2,775)(3.7)

The decrease in interest income on loans receivable was due to a decrease in the average balance and weighted average portfolio yield. The decrease in the average balance was primarily in the correspondent loan portfolio, as payoff activity outpaced new purchases during the current quarter. The weighted average yield on the loans receivable portfolio decreased six basis points, from 3.55% for the prior quarter to 3.49% for the current quarter. The decrease in the weighted average yield was due mainly to a decrease in recognition of net purchase discounts and deferred loan fees related to commercial loan activity in the prior quarter, along with the origination and purchase of new loans at yields lower than the existing portfolio.

6


The decrease in interest income on the MBS portfolio was due to a 29 basis point decrease in the weighted average yield to 2.11% for the current quarter, partially offset by a $93.4 million increase in the average balance due to purchases during the current quarter. The decrease in the weighted average yield was due primarily to new purchases at lower market yields, along with an increase in the impact of net premium amortization. .

The decrease in dividend income on FHLB stock was due mainly to a reduction in the dividend rate paid by FHLB compared to the prior quarter.

The decrease in interest income on the investment securities portfolio was due to a 68 basis point decrease in the weighted average yield to 0.95% in the current quarter, partially offset by a $101.6 million increase in the average balance due to purchases during the current quarter. The decrease in the weighted average yield was due primarily to the purchase of securities at market rates lower than the existing portfolio.

Interest Expense
The weighted average rate paid on total interest-bearing liabilities decreased 11 basis points, from 1.41% for the prior quarter to 1.30% for the current quarter, and the average balance of interest-bearing liabilities decreased $35.0 million between the two periods. The following table presents the components of interest expense for the time periods presented, along with the change measured in dollars and percent.
For the Three Months Ended
September 30, June 30, Change Expressed in:
20202020DollarsPercent
(Dollars in thousands)
INTEREST EXPENSE:
Deposits$15,299 $16,533 $(1,234)(7.5)%
Borrowings10,624 11,561 (937)(8.1)
Total interest expense$25,923 $28,094 $(2,171)(7.7)

The decrease in interest expense on deposits was due to a decrease in the weighted average rate paid on retail/business certificates of deposit and wholesale certificates of deposit, partially offset by an increase in the average balance of deposits. Management has generally reduced deposit offer rates as discussed above.

The decrease in interest expense on borrowings was due primarily to not replacing term borrowings that matured during the current quarter and prior quarter. Cash flows from the deposit portfolio were generally utilized to repay maturing term borrowings during the current and prior quarter. The average balance of borrowings decreased $216.0 million compared to the prior quarter, while the weighted average rate paid on borrowings increased slightly, as certain borrowings that matured during the quarter were at rates lower than the rest of the portfolio.

Provision for Credit Losses
The Bank did not record a provision for credit losses during the current quarter or the prior quarter. There was no significant deterioration in credit quality indicators, such as loan delinquencies, asset classification and credit scores, during the current quarter. Loans 30 to 89 days delinquent were 0.13% of total loans at September 30, 2020 and 0.20% of total loans at June 30, 2020. Loans 90 days or more delinquent or in foreclosure were 0.16% of total loans at September 30, 2020 and 0.12% of total loans at June 30, 2020. The ACL to loans receivable ratio was 0.44% at September 30, 2020 and 0.42% at June 30, 2020. See additional discussion regarding management's evaluation of the adequacy of the Bank's ACL at September 30, 2020 in the Asset Quality section below.

7


Non-Interest Income
The following table presents the components of non-interest income for the time periods presented, along with the change measured in dollars and percent.
For the Three Months Ended
September 30, June 30, Change Expressed in:
20202020DollarsPercent
(Dollars in thousands)
NON-INTEREST INCOME:
Deposit service fees$2,901 $2,539 $362 14.3 %
Insurance commissions725 671 54 8.0 
Other non-interest income1,359 1,229 130 10.6 
Total non-interest income$4,985 $4,439 $546 12.3 

The increase in deposit service fees was due mainly to an increase in service charge income as consumer activity has begun to increase after being negatively impacted by the COVID-19 pandemic.

Non-Interest Expense
The following table presents the components of non-interest expense for the time periods presented, along with the change measured in dollars and percent.
For the Three Months Ended
September 30, June 30, Change Expressed in:
20202020DollarsPercent
(Dollars in thousands)
NON-INTEREST EXPENSE:
Salaries and employee benefits$13,231 $13,059 $172 1.3 %
Information technology and related expense4,280 4,285 (5)(0.1)
Occupancy, net3,658 3,556 102 2.9 
Regulatory and outside services1,574 1,548 26 1.7 
Advertising and promotional1,116 1,004 112 11.2 
Deposit and loan transaction costs804 697 107 15.4 
Office supplies and related expense609 475 134 28.2 
Federal insurance premium627 287 340 118.5 
Other non-interest expense1,277 1,253 24 1.9 
Total non-interest expense$27,176 $26,164 $1,012 3.9 

The increase in the federal insurance premium was due mainly to the Bank recognizing a full quarterly federal insurance premium accrual, as the remaining assessment credit from the FDIC was utilized during the prior quarter.

The Company's efficiency ratio was 53.64% for the current quarter compared to 51.58% for the prior quarter. The change in the efficiency ratio was due primarily to higher non-interest expense in the current quarter compared to the prior quarter.

8


Income Tax Expense
The following table presents pretax income, income tax expense, and net income for the time periods presented, along with the change measured in dollars and percent.
For the Three Months Ended
September 30, June 30,Change Expressed in:
20202020DollarsPercent
(Dollars in thousands)
Income before income tax expense$23,492 $24,562 $(1,070)(4.4)%
Income tax expense5,213 5,088 125 2.5 
Net income$18,279 $19,474 $(1,195)(6.1)
Effective Tax Rate22.2 %20.7 %

The higher effective tax rate in the current quarter was due to adjustments to our low income housing partnership permanent differences as a result of receiving updated information.

Financial Condition as of September 30, 2020
The Federal Reserve, in response to economic risks resulting from the COVID-19 pandemic, returned to a zero-interest rate policy in March 2020. This was after most broader market rates decreased significantly in response to evolving news about COVID-19. Deteriorating economic conditions included more than 20 million people becoming unemployed in the United States in one month's time, with more than 58 million in total filing for unemployment benefits, along with immediate reductions in consumer spending on almost all categories of purchases except groceries and staples, and closure or significantly reduced operations of restaurants, bars, airlines, hotels, and entertainment and hospitality venues, among others, and had a devastating impact on the economy. Since that time, many areas of consumer spending have rebounded, generally locally and not related to travel and entertainment. As previously described, we adjusted our operations in response to the COVID-19 pandemic and have worked with both our retail and commercial customers to help them manage their debt during this period of economic uncertainty as our regulators or the Coronavirus Aid, Relief, and Economic Security ("CARES") Act have allowed. There is increasing concern about the longer lasting impact on local business as well as travel and entertainment resulting from the COVID-19 pandemic. This could cause a longer recovery time for all sectors of the economy and could make it challenging for sectors that have had better recoveries to maintain that recovery in the long run.

We have been responding and expect to continue to respond to local market conditions regarding the loan and deposit rates we offer. Given the current level of the Company's total assets and the economic and interest rate environment, it is unlikely that the total loan portfolio will increase materially in the near future. As previously noted, since the onset of the pandemic the Bank lowered rates paid on money market accounts and certificate of deposit products. Despite this, since March 31, 2020, the Bank's retail deposits increased $237.2 million and business deposits increased $201.8 million. The Bank secured a new business deposit relationship during the year, which between March 31, 2020 and September 30, 2020, brought $163.6 million of new deposit balances. Because some of the deposits received from the new relationship are COVID-19-related payments, we do not expect the full balance of deposits received in fiscal year 2020 to be retained through fiscal year 2021. Retail certificates of deposit decreased $62.7 million between March 31, 2020 and September 30, 2020 while business certificates of deposit increased $64.0 million. As retail certificates of deposit mature, not all are being renewed. Rather, customers are moving some of those funds to more liquid investment options such as the Bank's retail money market accounts, which increased $131.2 million from March 31, 2020 to September 30, 2020. During fiscal year 2020, the Bank's weighted average retention rate of maturing retail certificates of deposit was approximately 80%.

Total assets were $9.49 billion at September 30, 2020, a decrease of $71.6 million, or 0.7%, from June 30, 2020, due to a decrease in cash and cash equivalents and loans receivable, largely offset by an increase in securities. Excess operating cash and cash flows from the loan portfolio were generally used to purchase securities. Total loans were $7.20 billion at September 30, 2020, a decrease of $185.2 million, or 2.5%, from June 30, 2020. The decrease was mainly in the one- to four-family correspondent loan portfolio as payoffs exceeded purchases during the current quarter. During the current quarter, the Bank originated and refinanced $280.7 million of one- to four-family and consumer loans with a weighted average rate of 2.99% and purchased $65.8 million of one- to four-family loans from correspondent lenders with a weighted average rate of 3.04%. The Bank also originated $29.4 million of commercial loans with a weighted average rate of 3.94%.

Total deposits were $6.19 billion at September 30, 2020, an increase of $121.7 million, or 2.0%, from June 30, 2020. The increase was primarily in non-maturity deposits, including a $98.8 million increase in money market accounts and a $22.0 million increase in checking accounts, along with an $21.8 million increase in retail/business certificates of deposit.

9


Stockholders' equity was $1.28 billion at September 30, 2020, a decrease of $15.7 million from June 30, 2020. The decrease was due primarily to the repurchase of common stock totaling $23.8 million, or 2,558,100 shares, during the current quarter. Subsequent to September 30, 2020, through the date of this release, the Company repurchased an additional $1.5 million, or 164,400 shares, of common stock. There is still $44.7 million authorized under the existing stock repurchase plan for additional purchases of the Company's common stock. Shares may be repurchased from time to time based upon market conditions, available liquidity and other factors. This plan has no expiration date; however, the Federal Reserve Bank's approval for the Company to repurchase shares extends through August 2021.

Total assets increased $147.2 million, or 1.6% from September 30, 2019 to September 30, 2020, due mainly to an increase in securities, partially offset by a decrease in loans receivable. Securities were purchased with cash flows from the loan portfolio and growth in the deposit portfolio. Total loans decreased $213.9 million from September 30, 2019 to September 30, 2020. The decrease was primarily in the one- to four-family correspondent loans and one- to four-family bulk purchased loans, partially offset by an increase in one- to four-family originated loans and commercial loans. During the current year, the Bank originated and refinanced $1.00 billion of one- to four-family and consumer loans with a weighted average rate of 3.27% and purchased $448.0 million of one- to four-family loans from correspondent lenders with a weighted average rate of 3.29%. The Bank also originated $165.5 million of commercial loans with a weighted average rate of 3.52% and entered into commercial real estate loan participations of $93.6 million at a weighted average rate of 4.16%. The commercial loan portfolio totaled $829.7 million at September 30, 2020 and was composed of 76% commercial real estate, 12% commercial and industrial, and 13% commercial construction. Total commercial real estate and commercial construction potential exposure, including undisbursed amounts and outstanding commitments totaling $205.5 million, was $937.5 million at September 30, 2020. Total commercial and industrial potential exposure, including undisbursed amounts and outstanding commitments of $21.7 million, was $119.3 million at September 30, 2020.

Total deposits increased $609.5 million, or 10.9%, from September 30, 2019 to September 30, 2020. Non-maturity deposits increased $575.9 million, including a $242.8 million increase in checking accounts, a $220.8 million increase in money market accounts, and a $112.3 million increase in savings accounts. Retail/business certificates of deposit increased $73.7 million during the current year. These increases were partially offset by a $40.1 million decrease in public unit certificates of deposit.

Total borrowings at September 30, 2020 were $1.79 billion, a decrease of $450.7 million, or 20.1%, from September 30, 2019. The decrease was due to not renewing a portion of the FHLB advances and repurchase agreements that matured during the current year and repaying the FHLB line of credit balance. Cash flows from the deposit portfolio were used to pay off maturing borrowings and the FHLB line of credit.

Stockholders' equity was $1.28 billion at September 30, 2020 compared to $1.34 billion at September 30, 2019. The $51.5 million decrease was due primarily to the payment of cash dividends totaling $93.9 million and the repurchase of common stock totaling $23.8 million, partially offset by net income of $64.5 million during the current year. In the long run, management considers the Bank's equity to total assets ratio of at least 10% an appropriate level of capital. At September 30, 2020, this ratio was 12.3%. The cash dividends paid during the current year totaled $0.68 per share and consisted of a $0.34 per share cash true-up dividend related to fiscal year 2019 earnings, paid in December 2019, per the Company's dividend policy, and four regular quarterly cash dividends of $0.085 per share, totaling $0.34 per share.

At times, the Bank has utilized a leverage strategy to increase earnings. The leverage strategy involves 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 are repaid at quarter end, or earlier if the strategy is suspended. The proceeds from the borrowings, net of the required FHLB stock holdings, are 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 prior year. The leverage strategy was not in place during the current year, 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.

On October 20, 2020, the Company announced a regular quarterly cash dividend of $0.085 per share, or approximately $11.5 million, payable on November 20, 2020 to stockholders of record as of the close of business on November 6, 2020. On October 28, 2020, the Company announced a fiscal year 2020 cash true-up dividend of $0.13 per share, or approximately $17.6 million, related to fiscal year 2020 earnings. The $0.13 per share cash true-up dividend was determined by taking the difference between total earnings for fiscal year 2020 and total regular quarterly cash dividends paid during fiscal year 2020, divided by the number of shares outstanding as of October 16, 2020. The cash true-up dividend is payable on December 4, 2020 to stockholders of record as of the close of business on November 20, 2020, and is the result of the Board of Directors' commitment to distribute to stockholders 100% of the annual earnings of the Company for fiscal year 2020.

10


At September 30, 2020, Capitol Federal Financial, Inc., at the holding company level, had $82.5 million on deposit at the Bank. For fiscal year 2021, it is currently the intention of the Board of Directors to continue the payout of 100% of the Company's earnings to the Company's stockholders. Dividend payments depend upon a number of factors including the Company's financial condition and results of operations, regulatory capital requirements, regulatory limitations on the Bank's ability to make capital distributions to the Company, and the amount of cash at the holding company level.

The following table presents the balance of stockholders' equity and related information as of the dates presented.
September 30, June 30, September 30,
202020202019
(Dollars in thousands)
Stockholders' equity$1,284,859 $1,300,520 $1,336,326 
Equity to total assets at end of period13.5 %13.6 %14.3 %

The following table presents a reconciliation of total to net shares outstanding as of September 30, 2020.
Total shares outstanding 138,956,296 
Less unallocated Employee Stock Ownership Plan ("ESOP") shares and unvested restricted stock(3,408,810)
Net shares outstanding 135,547,486 

Consistent with our goal to operate a sound and profitable financial organization, we actively seek to maintain a well-capitalized status for the Bank in accordance with regulatory standards. In September 2019, the regulatory agencies, including the Office of the Comptroller of the Currency and Board of Governors of the Federal Reserve System, adopted a final rule, effective January 1, 2020, creating a community bank leverage ratio ("CBLR") for institutions with total consolidated assets of less than $10 billion and that meet other qualifying criteria. The CBLR provides for a simple measure of capital adequacy for qualifying institutions. According to the final rule, qualifying institutions that elect to use the CBLR framework and that maintain a leverage ratio of greater than 9% will be considered to have satisfied the generally applicable risk-based and leverage capital requirements in the regulatory agencies' capital rules and to have met the well-capitalized ratio requirements. In April 2020, the federal bank regulatory agencies announced the issuance of two interim final rules, effective immediately, to provide temporary relief to community banking organizations. Under the interim final rules, the CBLR requirement is a minimum of 8% for the remainder of calendar year 2020, 8.5% for calendar year 2021, and 9% thereafter. The Bank elected to use the CBLR framework beginning with the quarter ended March 31, 2020. As of September 30, 2020, the Bank's CBLR was 12.4%, which exceeded the minimum requirement.

The following table presents a reconciliation of the Bank's equity under accounting principles generally accepted in the United States of America ("GAAP") to regulatory tier 1 capital as of September 30, 2020 (dollars in thousands):
Total Bank equity as reported under GAAP$1,165,813 
Accumulated Other Comprehensive Income ("AOCI")16,505 
Goodwill and other intangibles, net of associated deferred taxes(13,510)
Total tier 1 capital$1,168,808 

11


Capitol Federal Financial, Inc. is the holding company for the Bank. The Bank has 54 branch locations in Kansas and Missouri, and is one of the largest residential lenders in the State of Kansas. News and other information about the Company can be found at the Bank's website, http://www.capfed.com.

Except for the historical information contained in this press release, the matters discussed herein may be deemed to be "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements about our beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions. The words "may," "could," "should," "would," "will," "believe," "anticipate," "estimate," "expect," "intend," "plan," and similar expressions are intended to identify forward-looking statements. Forward-looking statements involve risks and uncertainties, including: potential adverse impacts of the ongoing COVID-19 pandemic and any governmental or societal responses thereto on economic conditions in the Company's local market areas and other market areas where the Bank has lending relationships, on other aspects of the Company's business operations and on financial markets; changes in policies or the application or interpretation of laws and regulations by regulatory agencies and tax authorities; other governmental initiatives affecting the financial services industry; changes in accounting principles, policies or guidelines; fluctuations in interest rates; demand for loans in the Company's market area, the future earnings and capital levels of the Bank, which would affect the ability of the Company to pay dividends in accordance with its dividend policies; competition; and other risks detailed from time to time in documents filed or furnished by the Company with the SEC. Actual results may differ materially from those currently expected. These forward-looking statements represent the Company's judgment as of the date of this release. The Company disclaims, however, any intent or obligation to update these forward-looking statements.

For further information contact:
Kent TownsendInvestor Relations
Executive Vice President,(785) 270-6055
Chief Financial Officer and Treasurerinvestorrelations@capfed.com
(785) 231-6360
ktownsend@capfed.com
12



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

September 30, September 30,
20202019
ASSETS:
Cash and cash equivalents (includes interest-earning deposits of $185,148 and $198,809)$185,148 $220,370 
Available-for-sale ("AFS") securities, at estimated fair value1,560,950 1,204,863 
Loans receivable, net (ACL of $31,527 and $9,226)7,202,851 7,416,747 
FHLB stock, at cost93,862 98,456 
Premises and equipment, net101,875 96,784 
Income taxes receivable, net— 
Other assets342,532 302,796 
TOTAL ASSETS$9,487,218 $9,340,018 
LIABILITIES:
Deposits$6,191,408 $5,581,867 
Borrowings1,789,313 2,239,989 
Advance payments by borrowers for taxes and insurance65,721 65,686 
Income taxes payable, net795 — 
Deferred income tax liabilities, net8,180 14,282 
Accounts payable and accrued expenses146,942 101,868 
Total liabilities8,202,359 8,003,692 
STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value; 100,000,000 shares authorized, no shares issued or outstanding— — 
Common stock, $0.01 par value; 1,400,000,000 shares authorized, 138,956,296 and 141,440,030
shares issued and outstanding as of September 30, 2020 and 2019, respectively1,389 1,414 
Additional paid-in capital1,189,853 1,210,226 
Unearned compensation, ESOP(33,040)(34,692)
Retained earnings143,162 174,277 
AOCI, net of tax(16,505)(14,899)
Total stockholders' equity1,284,859 1,336,326 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$9,487,218 $9,340,018 
13


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

For the Three Months EndedFor the Year Ended
September 30, June 30, September 30,
2020202020202019
INTEREST AND DIVIDEND INCOME:
Loans receivable$64,315 $66,652 $270,494 $284,229 
MBS5,425 5,616 23,009 25,730 
FHLB stock1,080 1,207 5,827 7,823 
Investment securities731 847 4,467 6,366 
Cash and cash equivalents55 59 1,181 5,806 
Total interest and dividend income71,606 74,381 304,978 329,954 
INTEREST EXPENSE:
Deposits15,299 16,533 67,598 66,201 
Borrowings10,624 11,561 48,045 57,363 
Total interest expense25,923 28,094 115,643 123,564 
NET INTEREST INCOME45,683 46,287 189,335 206,390 
PROVISION FOR CREDIT LOSSES— — 22,300 750 
NET INTEREST INCOME AFTER
PROVISION FOR CREDIT LOSSES45,683 46,287 167,035 205,640 
NON-INTEREST INCOME:
Deposit service fees2,901 2,539 11,285 12,740 
Insurance commissions725 671 2,487 2,821 
Other non-interest income1,359 1,229 5,827 6,397 
Total non-interest income4,985 4,439 19,599 21,958 
NON-INTEREST EXPENSE:
Salaries and employee benefits13,231 13,059 52,996 53,145 
Information technology and related expense4,280 4,285 16,974 17,615 
Occupancy, net3,658 3,556 13,870 13,032 
Regulatory and outside services1,574 1,548 5,762 5,813 
Advertising and promotional1,116 1,004 4,889 5,244 
Deposit and loan transaction costs804 697 2,890 2,478 
Office supplies and related expense609 475 2,195 2,439 
Federal insurance premium627 287 914 1,172 
Other non-interest expense1,277 1,253 5,514 6,006 
Total non-interest expense27,176 26,164 106,004 106,944 
INCOME BEFORE INCOME TAX EXPENSE23,492 24,562 80,630 120,654 
INCOME TAX EXPENSE5,213 5,088 16,090 26,411 
NET INCOME$18,279 $19,474 $64,540 $94,243 

14


The following is a reconciliation of the basic and diluted earnings per share calculations for the periods indicated.
For the Three Months EndedFor the Year Ended
September 30, June 30, September 30,
2020202020202019
(Dollars in thousands, except per share amounts)
Net income$18,279 $19,474 $64,540 $94,243 
Income allocated to participating securities(14)(16)(52)(55)
Net income available to common stockholders$18,265 $19,458 $64,488 $94,188 
Average common shares outstanding137,580,179 137,935,000 137,834,304 137,614,465 
Average committed ESOP shares outstanding124,346 83,052 62,400 62,458 
Total basic average common shares outstanding137,704,525 138,018,052 137,896,704 137,676,923 
Effect of dilutive stock options — — 4,484 58,478 
Total diluted average common shares outstanding137,704,525 138,018,052 137,901,188 137,735,401 
Net earnings per share:
Basic$0.13 $0.14 $0.47 $0.68 
Diluted$0.13 $0.14 $0.47 $0.68 
Antidilutive stock options, excluded from the diluted
average common shares outstanding calculation 813,645 813,645 437,731 470,938 


15


Loan Portfolio

The following table presents information related to the composition of our loan portfolio in terms of dollar amounts, weighted average rates, and percentages as of the dates indicated.
September 30, 2020June 30, 2020September 30, 2019
% of % of % of
AmountRateTotalAmountRateTotalAmountRateTotal
(Dollars in thousands)
One- to four-family:
Originated$3,937,310 3.50 %54.5 %$3,955,668 3.61 %53.4 %$3,873,851 3.74 %52.2 %
Correspondent purchased2,101,082 3.49 29.1 2,268,031 3.54 30.6 2,349,877 3.64 31.7 
Bulk purchased208,427 2.41 2.9 217,652 2.73 3.0 252,347 2.94 3.4 
Construction34,593 3.30 0.5 36,595 3.46 0.5 36,758 4.00 0.5 
Total6,281,412 3.46 87.0 6,477,946 3.56 87.5 6,512,833 3.68 87.8 
Commercial:
Commercial real estate626,588 4.29 8.7 625,106 4.32 8.4 583,617 4.48 7.9 
Commercial and industrial 97,614 2.79 1.4 99,735 2.92 1.4 61,094 5.14 0.8 
Construction105,458 4.04 1.4 87,448 3.98 1.2 123,159 4.81 1.7 
Total829,660 4.08 11.5 812,289 4.11 11.0 767,870 4.58 10.4 
Consumer loans:
Home equity103,838 4.66 1.4 107,174 4.68 1.4 120,587 6.15 1.6 
Other10,086 4.40 0.1 10,033 4.46 0.1 11,183 4.57 0.2 
Total113,924 4.64 1.5 117,207 4.66 1.5 131,770 6.02 1.8 
Total loans receivable7,224,996 3.55 100.0 %7,407,442 3.64 100.0 %7,412,473 3.81 100.0 %
Less:
ACL31,527 31,215 9,226 
Discounts/unearned loan fees 29,190 30,312 31,058 
Premiums/deferred costs(38,572)(42,175)(44,558)
Total loans receivable, net$7,202,851 $7,388,090 $7,416,747 

16


Loan Activity: The following tables summarize activity in the loan portfolio, along with weighted average rates where applicable, for the periods indicated, excluding changes in ACL, discounts/unearned loan fees, and premiums/deferred costs. Loans that were paid off as a result of refinances are included in repayments. Loan endorsements are not included in the activity in the following table because a new loan is not generated at the time of the endorsement. The endorsed balance and rate are included in the ending loan portfolio balance and rate. During the current year, the Bank endorsed $695.4 million of one- to four-family loans, reducing the average rate on those loans by 83 basis points. Commercial loan renewals are not included in the activity in the following table unless new funds are disbursed at the time of renewal. During the initial days of the COVID-19 pandemic, correspondent one- to four-family loan application acceptance was suspended by the Bank but existing correspondent applications and commitments continued to progress through the approval and funding process. One- to four-family correspondent new loan application acceptance was resumed in mid-June 2020.
For the Three Months Ended
September 30, 2020June 30, 2020March 31, 2020December 31, 2019
AmountRateAmountRateAmountRateAmountRate
(Dollars in thousands)
Beginning balance $7,407,442 3.64 %$7,493,280 3.74 %$7,424,834 3.77 %$7,412,473 3.81 %
Originated and refinanced:
Fixed265,424 2.98 277,904 2.83 172,891 3.44 233,693 3.52 
Adjustable44,625 3.68 60,626 3.75 55,946 4.11 55,126 4.30 
Purchased and participations:
Fixed61,435 3.07 131,739 3.28 125,612 3.46 123,118 3.77 
Adjustable4,396 2.76 62,510 3.76 18,985 2.96 13,801 3.06 
Change in undisbursed loan funds13,898 (32,202)24,049 (9,743)
Repayments(572,536)(586,434)(328,644)(403,361)
Principal recoveries/(charge-offs), net312 19 (314)(16)
Other— — (79)(257)
Ending balance$7,224,996 3.55 $7,407,442 3.64 $7,493,280 3.74 $7,424,834 3.77 

For the Year Ended
September 30, 2020September 30, 2019
AmountRateAmountRate
(Dollars in thousands)
Beginning balance $7,412,473 3.81 %$7,507,645 3.74 %
Originated and refinanced:
Fixed949,912 3.15 505,334 4.10 
Adjustable216,323 3.97 319,608 4.77 
Purchased and participations:
Fixed441,904 3.44 186,135 4.64 
Adjustable99,692 3.47 76,305 4.40 
Change in undisbursed loan funds(3,998)52,220 
Repayments(1,890,975)(1,233,157)
Principal recoveries, net13 
Other(336)(1,630)
Ending balance$7,224,996 3.55 $7,412,473 3.81 
17


One- to Four-Family Loans: The following table presents, for our portfolio of one- to four-family loans, the amount, percent of total, weighted average credit score, weighted average loan-to-value ("LTV") ratio, and average balance per loan as of the dates presented. Credit scores were updated in September 2020 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.
September 30, 2020September 30, 2019
% ofCreditAverage% ofCreditAverage
AmountTotalScoreLTVBalanceAmountTotalScoreLTVBalance
(Dollars in thousands)
Originated$3,937,310 63.0 %771 62 %$145 $3,873,851 59.8 %768 62 %$140 
Correspondent purchased2,101,082 33.6 765 64 379 2,349,877 36.3 765 65 371 
Bulk purchased208,427 3.4 767 60 300 252,347 3.9 762 61 304 
$6,246,819 100.0 %768 63 187 $6,476,075 100.0 %767 63 186 

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. Included in the originated line item for the current year are $300.4 million of loans that were refinanced from other lenders.
For the Three Months Ended For the Year Ended
September 30, 2020September 30, 2020
Credit Credit
AmountLTVScoreAmountLTVScore
(Dollars in thousands)
Originated$182,927 74 %772 $662,678 74 %767 
Refinanced by Bank customers78,427 65 771 268,590 67 765 
Correspondent purchased65,831 71 768 447,970 71 768 
$327,185 71 771 $1,379,238 72 767 

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 current year period.
For the Three Months Ended For the Year Ended
September 30, 2020September 30, 2020
StateAmount% of TotalRateAmount% of TotalRate
(Dollars in thousands)
Kansas$220,298 67.3 %2.87 %$804,919 58.4 %3.15 %
Missouri51,327 15.7 2.89 234,730 17.0 3.20 
Texas28,980 8.9 3.04 177,752 12.9 3.23 
Other states26,580 8.1 3.08 161,837 11.7 3.32 
$327,185 100.0 %2.91 $1,379,238 100.0 %3.19 
18


The following table summarizes our one- to four-family loan origination and refinance commitments and one- to four-family correspondent loan purchase commitments as of September 30, 2020, 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 our future cash needs.
Fixed-Rate
15 yearsMore thanAdjustable-Total
or less15 yearsRateAmountRate
(Dollars in thousands)
Originate/refinance$35,869 $56,110 $11,300 $103,279 2.87 %
Correspondent15,687 49,912 5,080 70,679 2.89 
$51,556 $106,022 $16,380 $173,958 2.88 
Rate2.49 %3.08 %2.79 %

Through September 30, 2020, the Bank had processed COVID-19 loan modifications for 942 one- to four-family loans totaling $239.5 million. Of this amount, $39.8 million, or 17%, were still in the deferral period as of September 30, 2020, while 83% had completed the deferral period by September 30, 2020. Of the COVID-19 loan modifications that had completed the deferral period by September 30, 2020 and were not delinquent prior to requesting assistance, $1.4 million were 30 to 89 days delinquent and none were 90 or more days delinquent as of September 30, 2020. The modifications still in the deferral period as of September 30, 2020 are summarized in the table below, along with the weighted average credit score and weighted average LTV as of September 30, 2020. Credit scores were updated in September 2020 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.
Credit
CountAmountScoreLTV
(Dollars in thousands)
Originated159 $26,859 715 67 %
Correspondent purchased34 12,984 749 67 
193 $39,843 727 67 


Commercial Loans: During the current year, the Bank originated $165.5 million of commercial loans, of which $43.9 million were PPP loans, entered into commercial real estate loan participations totaling $93.6 million, and processed commercial loan disbursements, excluding lines of credit, of approximately $228.7 million at a weighted average rate of 3.78%.

19


The following table presents the Bank's commercial real estate and commercial construction loans and loan commitments by type of primary collateral, as of September 30, 2020. Included in the gross loan amounts in the table, which does not include outstanding commitments, are fixed-rate loans totaling $534.6 million at a weighted average rate of 4.15% and adjustable-rate loans totaling $331.1 million at a weighted average rate of 4.38%. 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 September 30, 2020 having shorter terms to maturity. Because the commitments to pay out undisbursed funds are not cancellable by the Bank, unless the loan is in default, we anticipate fully funding the related projects.
UnpaidUndisbursedGross LoanOutstanding% of
CountPrincipalAmountAmountCommitmentsTotalTotal
(Dollars in thousands)
Senior housing25 $225,062 $32,638 $257,700 $— $257,700 27.5 %
Hotel129,488 49,686 179,174 — 179,174 19.1 
Retail building133 126,439 11,960 138,399 1,771 140,170 14.9 
Office building98 56,131 4,745 60,876 60,875 121,751 13.0 
Multi-family40 63,115 18,801 81,916 2,800 84,716 9.0 
One- to four-family property391 57,754 7,251 65,005 215 65,220 7.0 
Single use building21 43,596 5,163 48,759 1,500 50,259 5.4 
Other91 30,461 3,459 33,920 4,598 38,518 4.1 
808 $732,046 $133,703 $865,749 $71,759 $937,508 100.0 %
Weighted average rate4.25 %