Capitol Federal Financial, Inc. - Quarter Report: 2016 March (Form 10-Q)

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, 2016

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

OF THE SECURITIES EXCHANGE ACT OF 1934

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

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files.) Yes þ No ¨

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



Large accelerated filer þ	Accelerated filer ¨	Non-accelerated filer ¨	Smaller Reporting Company ¨

(Do not check if a smaller reporting company)

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

As of May 3, 2016, there were 137,218,222 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, 2016 and September 30, 2015	3
	Consolidated Statements of Income for the three and six months ended March 31, 2016 and 2015	4
	Consolidated Statements of Comprehensive Income for the three and six months ended March 31, 2016 and 2015	5
	Consolidated Statement of Stockholders' Equity for the six months ended March 31, 2016	6
	Consolidated Statements of Cash Flows for the six months ended March 31, 2016 and 2015	7
	Notes to Consolidated Financial Statements	9
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	28
	Financial Condition - Loans Receivable	31
	Financial Condition - Asset Quality	39
	Financial Condition - Liabilities	47
	Financial Condition - Stockholders' Equity	50
	Operating Results	51
	Comparison of Operating Results for the six months ended March 31, 2016 and 2015	52
	Comparison of Operating Results for the three months ended March 31, 2016 and 2015	57
	Comparison of Operating Results for the three months ended March 31, 2016 and December 31, 2015	63
Item 3.	Quantitative and Qualitative Disclosure about Market Risk	74
Item 4.	Controls and Procedures	77


PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	78
Item 1A.	Risk Factors	78
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	78
Item 3.	Defaults Upon Senior Securities	78
Item 4.	Mine Safety Disclosures	78
Item 5.	Other Information	78
Item 6.	Exhibits	78


SIGNATURES		79


INDEX TO EXHIBITS		80

PART I -- FINANCIAL INFORMATION

Item 1. Financial Statements



CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
	(Unaudited)
	March 31,			September 30,
	2016			2015
ASSETS:
Cash and cash equivalents (includes interest-earning deposits of $196,910 and $764,816)	$	203,811		$	772,632
Securities:
Available-for-sale ("AFS"), at estimated fair value (amortized cost of $666,139 and $744,708)	677,416			758,171
Held-to-maturity ("HTM"), at amortized cost (estimated fair value of $1,293,441 and $1,295,274)	1,270,849			1,271,122
Loans receivable, net (allowance for credit losses ("ACL") of $9,193 and $9,443)	6,769,194			6,625,027
Federal Home Loan Bank Topeka ("FHLB") stock, at cost	114,381			150,543
Premises and equipment, net	80,857			75,810
Income taxes receivable, net	—			1,071
Other assets	200,176			189,785
TOTAL ASSETS	$	9,316,684		$	9,844,161

LIABILITIES:
Deposits	$	5,119,829		$	4,832,520
FHLB borrowings	2,471,656			3,270,521
Repurchase agreements	200,000			200,000
Advance payments by borrowers for taxes and insurance	52,229			61,818
Income taxes payable, net	1,778			—
Deferred income tax liabilities, net	25,924			26,391
Accounts payable and accrued expenses	41,860			36,685
Total liabilities	7,913,276			8,427,935

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, 137,159,138 and 137,106,822
shares issued and outstanding as of March 31, 2016 and September 30, 2015, respectively	1,372			1,371
Additional paid-in capital	1,152,367			1,151,041
Unearned compensation, Employee Stock Ownership Plan ("ESOP")	(40,473		)	(41,299		)
Retained earnings	283,128			296,739
Accumulated other comprehensive income ("AOCI"), net of tax	7,014			8,374
Total stockholders' equity	1,403,408			1,416,226
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	9,316,684		$	9,844,161

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,
	2016		2015		2016		2015
INTEREST AND DIVIDEND INCOME:
Loans receivable	$	60,732	$	58,198	$	120,955	$	116,817
Mortgage-backed securities ("MBS")	7,702		9,537		15,533		19,538
FHLB stock	3,006		3,076		6,158		6,257
Cash and cash equivalents	2,707		1,393		4,327		2,817
Investment securities	1,485		1,673		3,018		3,348
Total interest and dividend income	75,632		73,877		149,991		148,777
INTEREST EXPENSE:
FHLB borrowings	16,394		17,198		32,468		34,186
Deposits	9,213		8,207		18,012		16,352
Repurchase agreements	1,487		1,693		2,991		3,424
Total interest expense	27,094		27,098		53,471		53,962
NET INTEREST INCOME	48,538		46,779		96,520		94,815
PROVISION FOR CREDIT LOSSES	—		275		—		448
NET INTEREST INCOME AFTER
PROVISION FOR CREDIT LOSSES	48,538		46,504		96,520		94,367
NON-INTEREST INCOME:
Retail fees and charges	3,558		3,471		7,372		7,254
Income from bank-owned life insurance ("BOLI")	1,459		252		2,162		568
Insurance commissions	1,060		973		1,576		1,522
Loan fees	336		357		678		731
Other non-interest income	213		224		404		459
Total non-interest income	6,626		5,277		12,192		10,534
NON-INTEREST EXPENSE:
Salaries and employee benefits	10,288		10,412		20,775		20,889
Occupancy, net	2,616		2,461		5,288		4,880
Information technology and communications	2,609		2,585		5,167		5,153
Federal insurance premium	1,399		1,468		2,781		2,750
Deposit and loan transaction costs	1,396		1,256		2,670		2,630
Regulatory and outside services	1,144		1,206		2,630		2,502
Advertising and promotional	983		749		2,137		1,638
Low income housing partnerships	1,321		1,366		2,094		2,912
Office supplies and related expense	584		588		1,471		1,062
Other non-interest expense	1,086		768		2,003		1,585
Total non-interest expense	23,426		22,859		47,016		46,001
INCOME BEFORE INCOME TAX EXPENSE	31,738		28,922		61,696		58,900
INCOME TAX EXPENSE	10,211		9,688		19,451		19,194
NET INCOME	$	21,527	$	19,234	$	42,245	$	39,706

Basic earnings per share ("EPS")	$	0.16	$	0.14	$	0.32	$	0.29
Diluted EPS	$	0.16	$	0.14	$	0.32	$	0.29
Dividends declared per share	$	0.09	$	0.09	$	0.42	$	0.42

Basic weighted average common shares	132,960,030		136,208,029		132,890,781		136,147,295
Diluted weighted average common shares	133,031,042		136,245,785		132,971,254		136,179,622

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,
	2016		2015		2016			2015
Net income	$	21,527	$	19,234	$	42,245		$	39,706
Other comprehensive income (loss), net of tax:
Changes in unrealized holding gains (losses) on AFS securities,
net of deferred income taxes of $(874), $(1,202), $826 and $(1,673)	1,438		1,978		(1,360		)	2,754
Comprehensive income	$	22,965	$	21,212	$	40,885		$	42,460

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)

			Additional		Unearned									Total
	Common		Paid-In		Compensation			Retained						Stockholders'
	Stock		Capital		ESOP			Earnings			AOCI			Equity
Balance at October 1, 2015	$	1,371	$	1,151,041	$	(41,299	)	$	296,739		$	8,374		$	1,416,226
Net income								42,245						42,245
Other comprehensive loss, net of tax											(1,360		)	(1,360		)
ESOP activity, net			213		826									1,039
Restricted stock activity, net	1		31											32
Stock-based compensation			783											783
Stock options exercised			299											299
Cash dividends to stockholders ($0.42 per share)								(55,856		)				(55,856		)
Balance at March 31, 2016	$	1,372	$	1,152,367	$	(40,473	)	$	283,128		$	7,014		$	1,403,408

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,
	2016			2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	42,245		$	39,706
Adjustments to reconcile net income to net cash provided by operating activities:
FHLB stock dividends	(6,158		)	(6,257		)
Provision for credit losses	—			448
Amortization and accretion of premiums and discounts on securities	2,486			2,753
Depreciation and amortization of premises and equipment	3,475			3,312
Amortization of deferred amounts related to FHLB advances, net	1,135			2,342
Common stock committed to be released for allocation - ESOP	1,039			1,036
Stock-based compensation	783			1,051
Changes in:
Other assets, net	353			3,049
Income taxes payable/receivable	3,240			1,922
Accounts payable and accrued expenses	(4,901		)	(5,167		)
Net cash provided by operating activities	43,697			44,195

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of AFS securities	(74,987		)	(99,937		)
Purchase of HTM securities	(144,392		)	(29,153		)
Proceeds from calls, maturities and principal reductions of AFS securities	153,512			102,261
Proceeds from calls, maturities and principal reductions of HTM securities	142,223			155,822
Proceeds from the redemption of FHLB stock	189,000			155,679
Purchase of FHLB stock	(146,680		)	(91,319		)
Net increase in loans receivable	(146,790		)	(135,746		)
Purchase of premises and equipment	(8,446		)	(5,123		)
Proceeds from sale of other real estate owned ("OREO")	1,096			2,784
Proceeds from BOLI death benefit	783			—
Net cash (used in) provided by investing activities	(34,681		)	55,268

				(Continued)




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

	For the Six Months Ended
	March 31,
	2016			2015
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid	(55,856		)	(57,268		)
Deposits, net of withdrawals	287,309			182,002
Proceeds from borrowings	3,600,000			3,900,000
Repayments on borrowings	(4,400,000		)	(3,900,000		)
Change in advance payments by borrowers for taxes and insurance	(9,589		)	(6,684		)
Repurchase of common stock	—			(7,208		)
Other, net	299			5
Net cash (used in) provided by financing activities	(577,837		)	110,847

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	(568,821		)	210,310

CASH AND CASH EQUIVALENTS:
Beginning of period	772,632			810,840
End of period	$	203,811		$	1,021,150

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Income tax payments	$	16,212		$	17,273
Interest payments	$	51,766		$	51,296


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 a wholly-owned subsidiary, Capitol Funds, Inc. Capitol Funds, Inc. has a wholly-owned subsidiary, Capitol Federal Mortgage Reinsurance 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, 2015, filed with the Securities and Exchange Commission ("SEC"). Interim results are not necessarily indicative of results for a full year.

Recent Accounting Pronouncements - In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers. The ASU clarifies principles for recognizing revenue and provides a common revenue standard for GAAP and International Financial Reporting Standards. Additionally, the ASU provides implementation guidance on several topics and requires entities to disclose both quantitative and qualitative information regarding contracts with customers. ASU 2014-09 is effective for fiscal years beginning after December 15, 2016, which is October 1, 2017 for the Company, and can be applied using either a retrospective or cumulative-effect transition method. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers, which deferred the effective date of ASU 2014-09 one year, making the ASU effective for fiscal years beginning after December 15, 2017, including interim reporting periods within that reporting period, which is October 1, 2018 for the Company. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers: Principal versus Agent Considerations, which is intended to clarify the new revenue recognition guidance by specifically addressing principal versus agent considerations. The Company has not yet completed its evaluation of the above noted ASUs.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments, Recognition and Measurement of Financial Assets and 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 notation in determining fair value for financial instruments measured at amortized cost on the balance sheet. The ASU requires additional reporting in other comprehensive income for financial liabilities measured at fair value in accordance with the fair value option. The ASU also requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balances or in the notes to the financial statements. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods with those fiscal years, which is October 1, 2018 for the Company. Early adoption is not permitted except in certain circumstances. The Company has not yet completed its evaluation of ASU 2016-01.

In February 2016, the FASB issued ASU 2016-02, Leases. The ASU amends 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. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, which is October 1, 2019 for the Company. Early adoption is permitted. The Company has not yet completed its evaluation of ASU 2016-02.

In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation: Improvements to Employee Share-Based Payment Accounting. The ASU simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, along with simplifying the classification in the statement of cash flows. The ASU is effective for annual reporting periods beginning after December 15, 2016, including interim periods within those annual reporting periods, which is October 1, 2017 for the Company. The Company has not yet completed its evaluation of ASU 2016-09.

2. EARNINGS PER SHARE

Shares acquired by the ESOP are not considered in the 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,
	2016			2015			2016			2015
	(Dollars in thousands, except per share amounts)
Net income	$	21,527		$	19,234		$	42,245		$	39,706
Income allocated to participating securities	(16		)	(27		)	(43		)	(69		)
Net income available to common stockholders	$	21,511		$	19,207		$	42,202		$	39,637

Average common shares outstanding	132,918,277			136,166,271			132,869,793			136,126,419
Average committed ESOP shares outstanding	41,753			41,758			20,988			20,876
Total basic average common shares outstanding	132,960,030			136,208,029			132,890,781			136,147,295

Effect of dilutive stock options	71,012			37,756			80,473			32,327

Total diluted average common shares outstanding	133,031,042			136,245,785			132,971,254			136,179,622

Net EPS:
Basic	$	0.16		$	0.14		$	0.32		$	0.29
Diluted	$	0.16		$	0.14		$	0.32		$	0.29

Antidilutive stock options, excluded from the diluted average
common shares outstanding calculation	921,199			863,827			898,386			920,365

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, 2016
			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(Dollars in thousands)
AFS:
GSE debentures	$	471,215	$	1,266	$	30	$	472,451
MBS	192,615		10,422		4		203,033
Trust preferred securities	2,169		—		379		1,790
Municipal bonds	140		2		—		142
	666,139		11,690		413		677,416
HTM:
MBS	1,233,741		23,813		1,702		1,255,852
Municipal bonds	37,108		489		8		37,589
	1,270,849		24,302		1,710		1,293,441
	$	1,936,988	$	35,992	$	2,123	$	1,970,857



	September 30, 2015
			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(Dollars in thousands)
AFS:
GSE debentures	$	525,376	$	1,304	$	60	$	526,620
MBS	217,006		12,489		4		229,491
Trust preferred securities	2,186		—		270		1,916
Municipal bonds	140		4		—		144
	744,708		13,797		334		758,171
HTM:
MBS	1,233,048		27,325		3,590		1,256,783
Municipal bonds	38,074		437		20		38,491
	1,271,122		27,762		3,610		1,295,274
	$	2,015,830	$	41,559	$	3,944	$	2,053,445

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, 2016
	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:
GSE debentures	$	74,977	$	22	$	24,993	$	8
MBS	—		—		698		4
Trust preferred securities	—		—		1,790		379
	$	74,977	$	22	$	27,481	$	391


HTM:
MBS	$	156,618	$	485	$	121,029	$	1,217
Municipal bonds	3,525		6		393		2
	$	160,143	$	491	$	121,422	$	1,219



	September 30, 2015
	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:
GSE debentures	$	39,135	$	15	$	49,955	$	45
MBS	—		—		687		4
Trust preferred securities	—		—		1,916		270
	$	39,135	$	15	$	52,558	$	319


HTM:
MBS	$	38,604	$	134	$	302,158	$	3,456
Municipal bonds	3,292		12		1,128		8
	$	41,896	$	146	$	303,286	$	3,464

The unrealized losses at March 31, 2016 and September 30, 2015 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, 2016 or September 30, 2015.

The amortized cost and estimated fair value of debt securities as of March 31, 2016, 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	$	25,075	$	25,167	$	5,545	$	5,603
One year through five years	446,280		447,426		24,422		24,700
Five years through ten years	—		—		7,141		7,286
Ten years and thereafter	2,169		1,790		—		—
	473,524		474,383		37,108		37,589
MBS	192,615		203,033		1,233,741		1,255,852
	$	666,139	$	677,416	$	1,270,849	$	1,293,441

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,
	2016		2015		2016		2015
	(Dollars in thousands)
Taxable	$	1,314	$	1,493	$	2,668	$	2,966
Non-taxable	171		180		350		382
	$	1,485	$	1,673	$	3,018	$	3,348

The following table summarizes the amortized cost and estimated fair value of securities pledged as collateral for the obligations listed below as of the dates presented.



	March 31, 2016				September 30, 2015
	Amortized		Estimated		Amortized		Estimated
	Cost		Fair Value		Cost		Fair Value
	(Dollars in thousands)
Public unit deposits	$	419,018	$	426,084	$	342,620	$	347,505
Repurchase agreements	217,030		225,975		217,073		225,806
FHLB borrowings	190,373		191,616		216,607		218,199
Federal Reserve Bank	17,611		18,274		20,134		20,989
	$	844,032	$	861,949	$	796,434	$	812,499

4. LOANS RECEIVABLE and ALLOWANCE FOR CREDIT LOSSES

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



	March 31, 2016			September 30, 2015
	(Dollars in thousands)
Real estate loans:
One- to four-family:
Originated	$	6,019,559		$	5,856,730
Purchased	456,876			485,682
Construction	76,457			75,152
Total	6,552,892			6,417,564
Multi-family and commercial:
Permanent	112,414			110,938
Construction	153,231			54,768
Total	265,645			165,706
Total real estate loans	6,818,537			6,583,270

Consumer loans:
Home equity	123,565			125,844
Other	4,279			4,179
Total consumer loans	127,844			130,023

Total loans receivable	6,946,381			6,713,293

Less:
Undisbursed loan funds:
One- to four-family	42,906			45,696
Multi-family and commercial	139,495			44,869
ACL	9,193			9,443
Discounts/unearned loan fees	24,347			24,213
Premiums/deferred costs	(38,754		)	(35,955		)
	$	6,769,194		$	6,625,027

Lending Practices and Underwriting Standards - Originating and purchasing one- to four-family loans is the Bank's primary lending business, resulting in a loan concentration in residential first mortgage loans. The Bank purchases one- to four-family loans, on a loan-by-loan basis, from a select group of correspondent lenders. The Bank also originates consumer loans, commercial and multi-family real estate loans, and construction loans secured by residential, multi-family or commercial real estate and participates in commercial and multi-family real estate and construction-to-permanent loans. As a result of our one- to four-family lending activities, the Bank has a concentration of loans secured by real property located 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. 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 and nationwide 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. For the tables within this Note, correspondent loans purchased on a loan-by-loan basis are included with originated loans and loans purchased in loan packages ("bulk loans") are reported as purchased loans.

The Bank also originates construction-to-permanent loans secured by one- to four-family residential real estate. Construction loans are obtained by homeowners who will occupy the property when construction is complete. Construction loans to builders for speculative purposes are not permitted. All construction loans are manually underwritten using the Bank's internal underwriting standards. Construction draw requests and the supporting documentation are reviewed and approved by management. 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.

Multi-family and commercial loans - The Bank's multi-family, commercial real estate, and related construction loans are originated by the Bank or are in participation with a lead bank. These loans are underwritten based on the income producing potential of the property, the collateral value, and the financial strength of the borrower. Additionally, the Bank generally requires personal guarantees. At the time of origination, loan-to-value ("LTV") ratios on multi-family, commercial real estate, and related construction loans generally cannot exceed 80% of the appraised value of the property securing the loans and the minimum debt service coverage ratio is generally 1.25. Appraisals on properties securing these loans are performed by independent state certified fee appraisers.

Consumer loans - The Bank offers a variety of secured consumer loans, including home equity loans and lines of credit, home improvement loans, auto loans, and loans secured by savings deposits. The Bank also originates a very limited amount of unsecured loans. The Bank does not originate any consumer loans on an indirect basis, such as contracts purchased from retailers of goods or services which have extended credit to their customers. 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 loans; (2) consumer loans; and (3) multi-family and commercial loans. The one- to four-family and consumer loan portfolios are further segmented into classes for purposes of providing disaggregated information about the credit quality of the loan portfolio. The classes are: one- to four-family loans - originated, one- to four-family loans - purchased, consumer loans - home equity, and consumer loans - other.

The Bank's primary credit quality indicators for the one- to four-family loan 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 multi-family and commercial loan 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 (net of unadvanced funds related to loans in process), less charge-offs and inclusive of unearned loan fees and deferred costs. At March 31, 2016 and September 30, 2015, all loans 90 or more days delinquent were on nonaccrual status.



	March 31, 2016
			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 loans - originated	$	16,625	$	8,861	$	25,486	$	6,040,139	$	6,065,625
One- to four-family loans - purchased	6,045		7,534		13,579		445,800		459,379
Multi-family and commercial loans	—		—		—		125,539		125,539
Consumer - home equity	631		622		1,253		122,312		123,565
Consumer - other	28		26		54		4,225		4,279
	$	23,329	$	17,043	$	40,372	$	6,738,015	$	6,778,387



	September 30, 2015
			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 loans - originated	$	19,285	$	7,093	$	26,378	$	5,869,289	$	5,895,667
One- to four-family loans - purchased	7,305		8,956		16,261		472,114		488,375
Multi-family and commercial loans	—		—		—		120,405		120,405
Consumer - home equity	703		497		1,200		124,644		125,844
Consumer - other	17		12		29		4,150		4,179
	$	27,310	$	16,558	$	43,868	$	6,590,602	$	6,634,470

The recorded investment of mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process as of March 31, 2016 was $5.9 million, 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 $4.6 million at March 31, 2016.

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



	March 31, 2016		September 30, 2015
	(Dollars in thousands)
One- to four-family loans - originated	$	17,338	$	16,093
One- to four-family loans - purchased	7,615		9,038
Multi-family and commercial loans	—		—
Consumer - home equity	774		792
Consumer - other	33		12
	$	25,760	$	25,935

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, 2016				September 30, 2015
	Special Mention		Substandard		Special Mention		Substandard
	(Dollars in thousands)
One- to four-family - originated	$	13,625	$	30,222	$	16,149	$	29,282
One- to four-family - purchased	1,369		11,672		1,376		13,237
Multi-family and commercial	—		—		—		—
Consumer - home equity	55		1,397		151		1,301
Consumer - other	—		35		—		17
	$	15,049	$	43,326	$	17,676	$	43,837

The following table shows the weighted average credit score and weighted average LTV for originated and purchased one- to four-family loans and originated 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 2016, 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, 2016			September 30, 2015
	Credit Score	LTV		Credit Score	LTV
One- to four-family - originated	766	65	%	765	65	%
One- to four-family - purchased	753	65		752	65
Consumer - home equity	754	19		753	18
	765	64		764	64

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, 2016					March 31, 2016
	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 loans - originated	32	$	4,259	$	4,375	62	$	7,365	$	7,540
One- to four-family loans - purchased	—	—		—		1	123		122
Multi-family and commercial loans	—	—		—		—	—		—
Consumer - home equity	1	3		3		5	64		64
Consumer - other	1	8		8		1	8		8
	34	$	4,270	$	4,386	69	$	7,560	$	7,734



	For the Three Months Ended					For the Six Months Ended
	March 31, 2015					March 31, 2015
	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 loans - originated	31	$	4,413	$	4,445	74	$	9,737	$	9,817
One- to four-family loans - purchased	—	—		—		2	266		268
Multi-family and commercial loans	—	—		—		—	—		—
Consumer - home equity	2	20		24		6	84		89
Consumer - other	—	—		—		3	12		12
	33	$	4,433	$	4,469	85	$	10,099	$	10,186

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, 2016			March 31, 2015			March 31, 2016			March 31, 2015
	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 loans - originated	16	$	1,802	9	$	1,121	27	$	2,602	28	$	2,878
One- to four-family loans - purchased	—	—		1	71		—	—		3	339
Multi-family and commercial loans	—	—		—	—		—	—		—	—
Consumer - home equity	2	13		1	6		4	91		2	21
Consumer - other	—	—		—	—		—	—		1	5
	18	$	1,815	11	$	1,198	31	$	2,693	34	$	3,243

Impaired loans - The following information pertains to impaired loans, by class, as of the dates presented. A loan is considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect all amounts due, including principal and interest, according to the contractual terms of the loan agreement.



	March 31, 2016						September 30, 2015
			Unpaid						Unpaid
	Recorded		Principal		Related		Recorded		Principal		Related
	Investment		Balance		ACL		Investment		Balance		ACL
	(Dollars in thousands)
With no related allowance recorded
One- to four-family - originated	$	12,273	$	12,887	$	—	$	11,169	$	11,857	$	—
One- to four-family - purchased	11,213		13,121		—		11,035		13,315		—
Multi-family and commercial	—		—		—		—		—		—
Consumer - home equity	671		863		—		591		837		—
Consumer - other	24		55		—		13		40		—
	24,181		26,926		—		22,808		26,049		—
With an allowance recorded
One- to four-family - originated	26,933		26,995		364		26,453		26,547		294
One- to four-family - purchased	1,941		1,925		60		3,764		3,731		110
Multi-family and commercial	—		—		—		—		—		—
Consumer - home equity	835		835		63		869		870		62
Consumer - other	11		11		1		10		10		1
	29,720		29,766		488		31,096		31,158		467
Total
One- to four-family - originated	39,206		39,882		364		37,622		38,404		294
One- to four-family - purchased	13,154		15,046		60		14,799		17,046		110
Multi-family and commercial	—		—		—		—		—		—
Consumer - home equity	1,506		1,698		63		1,460		1,707		62
Consumer - other	35		66		1		23		50		1
	$	53,901	$	56,692	$	488	$	53,904	$	57,207	$	467

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, 2016				March 31, 2015				March 31, 2016				March 31, 2015
	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)
With no related allowance recorded
One- to four-family - originated	$	11,584	$	122	$	13,223	$	110	$	11,224	$	235	$	13,109	$	222
One- to four-family - purchased	11,637		49		11,286		47		11,218		100		11,475		99
Multi-family and commercial	—		—		—		—		—		—		—		—
Consumer - home equity	636		15		486		7		595		23		497		15
Consumer - other	14		—		20		—		12		—		17		—
	23,871		186		25,015		164		23,049		358		25,098		336
With an allowance recorded
One- to four-family - originated	27,653		272		27,039		277		27,872		537		26,569		549
One- to four-family - purchased	1,515		7		2,878		11		2,601		14		2,642		22
Multi-family and commercial	—		—		—		—		—		—		—		—
Consumer - home equity	957		15		746		7		963		26		661		13
Consumer - other	17		—		16		—		14		—		15		1
	30,142		294		30,679		295		31,450		577		29,887		585
Total
One- to four-family - originated	39,237		394		40,262		387		39,096		772		39,678		771
One- to four-family - purchased	13,152		56		14,164		58		13,819		114		14,117		121
Multi-family and commercial	—		—		—		—		—		—		—		—
Consumer - home equity	1,593		30		1,232		14		1,558		49		1,158		28
Consumer - other	31		—		36		—		26		—		32		1
	$	54,013	$	480	$	55,694	$	459	$	54,499	$	935	$	54,985	$	921

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, 2016
	One- to Four-			One- to Four-			One- to Four-			Multi-family
	Family -			Family -			Family -			and
	Originated			Purchased			Total			Commercial		Consumer			Total
	(Dollars in thousands)
Beginning balance	$	6,832		$	1,290		$	8,122		$	801	$	278		$	9,201
Charge-offs	(17		)	(38		)	(55		)	—		(20		)	(75		)
Recoveries	39			18			57			—		10			67
Provision for credit losses	(15		)	(27		)	(42		)	36		6			—
Ending balance	$	6,839		$	1,243		$	8,082		$	837	$	274		$	9,193



	For the Six Months Ended March 31, 2016
	One- to Four-			One- to Four-			One- to Four-			Multi-family
	Family -			Family -			Family -			and
	Originated			Purchased			Total			Commercial		Consumer			Total
	(Dollars in thousands)
Beginning balance	$	6,980		$	1,434		$	8,414		$	742	$	287		$	9,443
Charge-offs	(74		)	(213		)	(287		)	—		(38		)	(325		)
Recoveries	42			18			60			—		15			75
Provision for credit losses	(109		)	4			(105		)	95		10			—
Ending balance	$	6,839		$	1,243		$	8,082		$	837	$	274		$	9,193



	For the Three Months Ended March 31, 2015
	One- to Four-			One- to Four-			One- to Four-			Multi-family
	Family -			Family -			Family -			and
	Originated			Purchased			Total			Commercial		Consumer			Total
	(Dollars in thousands)
Beginning balance	$	6,484		$	1,994		$	8,478		$	505	$	314		$	9,297
Charge-offs	(94		)	(80		)	(174		)	—		(15		)	(189		)
Recoveries	12			4			16			—		7			23
Provision for credit losses	309			(60		)	249			23		3			275
Ending balance	$	6,711		$	1,858		$	8,569		$	528	$	309		$	9,406



	For the Six Months Ended March 31, 2015
	One- to Four-			One- to Four-			One- to Four-			Multi-family
	Family -			Family -			Family -			and
	Originated			Purchased			Total			Commercial		Consumer			Total
	(Dollars in thousands)
Beginning balance	$	6,263		$	2,323		$	8,586		$	400	$	241		$	9,227
Charge-offs	(152		)	(193		)	(345		)	—		(50		)	(395		)
Recoveries	33			58			91			—		35			126
Provision for credit losses	567			(330		)	237			128		83			448
Ending balance	$	6,711		$	1,858		$	8,569		$	528	$	309		$	9,406

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 potential losses were charged-off.



	March 31, 2016
	One- to Four-		One- to Four-		One- to Four-		Multi-family
	Family -		Family -		Family -		and
	Originated		Purchased		Total		Commercial		Consumer		Total
	(Dollars in thousands)
Recorded investment in loans
collectively evaluated for impairment	$	6,053,352	$	448,166	$	6,501,518	$	125,539	$	127,124	$	6,754,181

Recorded investment in loans
individually evaluated for impairment	12,273		11,213		23,486		—		720		24,206
	$	6,065,625	$	459,379	$	6,525,004	$	125,539	$	127,844	$	6,778,387

ACL for loans collectively
evaluated for impairment	$	6,839	$	1,243	$	8,082	$	837	$	274	$	9,193



	September 30, 2015
	One- to Four-		One- to Four-		One- to Four-		Multi-family
	Family -		Family -		Family -		and
	Originated		Purchased		Total		Commercial		Consumer		Total
	(Dollars in thousands)
Recorded investment in loans
collectively evaluated for impairment	$	5,884,498	$	477,340	$	6,361,838	$	120,405	$	129,419	$	6,611,662

Recorded investment in loans
individually evaluated for impairment	11,169		11,035		22,204		—		604		22,808
	$	5,895,667	$	488,375	$	6,384,042	$	120,405	$	130,023	$	6,634,470

ACL for loans collectively
evaluated for impairment	$	6,980	$	1,434	$	8,414	$	742	$	287	$	9,443

5. LOW INCOME HOUSING PARTNERSHIPS

The Bank's investment in low income housing partnerships, which is included in other assets in the consolidated balance sheets, was $49.7 million and $41.8 million at March 31, 2016 and September 30, 2015, respectively. The Bank's obligations related to unfunded commitments, which are included in accounts payable and accrued expenses in the consolidated balance sheets, were $21.6 million and $14.6 million at March 31, 2016 and September 30, 2015, respectively. The majority of the commitments are projected to be funded through the end of calendar year 2018.

Expenses associated with the Bank's investment in the low income housing partnerships are included in low income housing partnerships in the consolidated statements of income. The low income housing partnership expenses resulted in other tax benefits of $500 thousand and $792 thousand for the three and six months ended March 31, 2016, respectively, which are a component of income tax expense in the consolidated statements of income. Affordable housing tax credits are recognized as a component of income tax expense in the consolidated statements of income and totaled $1.2 million and $2.4 million for the three and six months ended March 31, 2016, respectively. There were no impairment losses during the three and six months ended March 31, 2016 resulting from the forfeiture or ineligibility of tax credits or other circumstances.

6. REPURCHASE AGREEMENTS

At both March 31, 2016 and September 30, 2015, the Company had repurchase agreements outstanding in the amount of $200.0 million with a weighted average contractual rate of 2.94%. All of the Company's repurchase agreements at March 31, 2016 and September 30, 2015 were fixed-rate. See Note 3 for information regarding the amount of securities pledged as collateral in conjunction with repurchase agreements. Securities are delivered to the party with whom each transaction is executed and the party agrees to resell the same securities to the Bank at the maturity of the agreement. The Bank retains the right to substitute similar or like securities throughout the terms of the agreements. The repurchase agreements and collateral are subject to valuation at current market levels and the Bank may ask for the return of excess collateral or be required to post additional collateral due to changes in the market values of these items. The Bank may also be required to post additional collateral as a result of principal payments received on the securities pledged.

The following table presents the scheduled maturity of repurchase agreements by fiscal year as of March 31, 2016:



	Amount
	(Dollars in thousands)
2016	$	—
2017	—
2018	100,000
2019	—
2020	100,000
Thereafter	—
	$	200,000

7. FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair Value Measurements - The Company uses fair value measurements to record fair value adjustments to certain assets and to determine fair value disclosures in accordance with Accounting Standards Codification ("ASC") 820 and ASC 825. The Company did not have any liabilities that were measured at fair value at March 31, 2016 or September 30, 2015. The Company's AFS securities 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 assets or liabilities 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 assets.

The Company groups its assets at fair value in three levels based on the markets in which the assets 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 asset or liability. 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 asset or liability.

The Company bases its fair values on the price that would be received from the sale of an asset in an orderly transaction between market participants at the measurement date. 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 assets measured at fair value on a recurring basis.

AFS Securities - The Company's AFS securities portfolio is carried at estimated fair value, with any unrealized gains and losses, net of taxes, reported as AOCI in stockholders' equity. 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, 2016 or during fiscal year 2015. 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)


•	Trust Preferred Securities - Estimated fair values are based on a discounted cash flow method. Cash flows are determined by taking prepayment and underlying credit considerations into account. The discount rates are derived from secondary trades and bid/offer prices. (Level 3)

The following tables provide the level of valuation assumption used to determine the carrying value of the Company's assets measured at fair value on a recurring basis at the dates presented.



	March 31, 2016
			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)
AFS Securities:
GSE debentures	$	472,451	$	—	$	472,451	$	—
MBS	203,033		—		203,033		—
Municipal bonds	142		—		142		—
Trust preferred securities	1,790		—		—		1,790
	$	677,416	$	—	$	675,626	$	1,790



	September 30, 2015
			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)
AFS Securities:
GSE debentures	$	526,620	$	—	$	526,620	$	—
MBS	229,491		—		229,491		—
Municipal bonds	144		—		144		—
Trust preferred securities	1,916		—		—		1,916
	$	758,171	$	—	$	756,255	$	1,916

The Company's Level 3 AFS securities had no activity during the three and six months ended March 31, 2016, except for principal repayments of $26 thousand and $31 thousand, respectively, and increases in net unrealized losses included in other comprehensive income of $29 thousand and $68 thousand, respectively. The Company's Level 3 AFS securities had no activity during the three and six months ended March 31, 2015, except for principal repayments of $167 thousand and $193 thousand, respectively, and increases in net unrealized losses included in other comprehensive income of $3 thousand and $54 thousand, respectively.

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

Loans Receivable - The balance of loans individually evaluated for impairment at March 31, 2016 and September 30, 2015 was $24.2 million and $22.8 million, respectively. Substantially 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%. When no impairment is indicated, the carrying amount is considered to approximate fair value. Fair values were estimated through current appraisals or current Federal Housing Finance Agency ("FHFA") housing price indices, which is a broad based measure of the movement of single-family house prices and is a weighted, repeat-sales index. Management does not adjust or apply a discount to the appraised value or FHFA housing price indices, except for the estimated sales costs noted above. The primary significant unobservable input for impaired loans with fair values estimated using appraisals was the appraisal. Fair values of impaired loans 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 any loss amounts as of March 31, 2016 and September 30, 2015; therefore, 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. Fair value 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 prices, 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 at March 31, 2016 and September 30, 2015 was $5.8 million and $4.3 million, respectively.

The following tables provide the level of valuation assumptions used to determine the carrying value of the Company's assets measured at fair value on a non-recurring basis at the dates presented.



	March 31, 2016
			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)
Loans individually evaluated for impairment	$	24,156	$	—	$	—	$	24,156
OREO	5,844		—		—		5,844
	$	30,000	$	—	$	—	$	30,000



	September 30, 2015
			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)
Loans individually evaluated for impairment	$	22,762	$	—	$	—	$	22,762
OREO	4,333		—		—		4,333
	$	27,095	$	—	$	—	$	27,095

Fair Value Disclosures - The Company determined estimated fair value amounts using available market information and from a variety of valuation methodologies. However, considerable judgment is required to interpret market data to develop the estimates of fair value. Accordingly, the estimates presented are not necessarily indicative of the amount the Company could realize in a current market exchange. The use of different market assumptions and estimation methodologies may have a material impact on the estimated fair value amounts. The fair value estimates presented herein were based on pertinent information available to management as of the dates presented.

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



	March 31, 2016				September 30, 2015
			Estimated				Estimated
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
	(Dollars in thousands)
Assets:
Cash and cash equivalents	$	203,811	$	203,811	$	772,632	$	772,632
AFS securities	677,416		677,416		758,171		758,171
HTM securities	1,270,849		1,293,441		1,271,122		1,295,274
Loans receivable	6,769,194		7,057,287		6,625,027		6,870,176
FHLB stock	114,381		114,381		150,543		150,543
Liabilities:
Deposits	5,119,829		5,163,254		4,832,520		4,869,312
FHLB borrowings	2,471,656		2,541,045		3,270,521		3,339,650
Repurchase agreements	200,000		208,779		200,000		209,807

The following methods and assumptions were used to estimate the fair value of the financial instruments:

Cash and Cash Equivalents - The carrying amounts of cash and cash equivalents are considered to approximate their fair value due to the nature of the financial assets. (Level 1)

HTM Securities - Estimated fair values of securities are based on one of three methods: (1) quoted market prices where available; (2) quoted market prices for similar instruments if quoted market prices are not available; (3) unobservable data that represents the Bank's assumptions about items that market participants would consider in determining fair value where no market data is available. HTM securities are carried at amortized cost. (Level 2)

Loans Receivable - The fair value of one- to four-family loans and home equity loans are generally estimated using the present value of expected future cash flows, assuming future prepayments and using discount factors determined by prices obtained from securitization markets, less a discount for the cost of servicing and lack of liquidity. The estimated fair value of the Bank's multi-family, commercial, and consumer loans are based on the expected future cash flows assuming future prepayments and discount factors based on current offering rates. (Level 3)

FHLB stock - The carrying value and estimated fair value of FHLB stock equals cost, which is based on redemption at par value. (Level 1)

Deposits - The estimated fair value of demand deposits, savings, and money market accounts is the amount payable on demand at the reporting date. The estimated fair value of these deposits at March 31, 2016 and September 30, 2015 was $2.31 billion and $2.20 billion, respectively. (Level 1) The fair value of certificates of deposit is estimated by discounting future cash flows using current London Interbank Offered Rates ("LIBOR"). The estimated fair value of certificates of deposit at March 31, 2016 and September 30, 2015 was $2.85 billion and $2.67 billion, respectively. (Level 2)

FHLB borrowings and Repurchase Agreements - The fair value of fixed-maturity borrowed funds is estimated by discounting estimated future cash flows using current offer rates. (Level 2) The carrying value of FHLB line of credit is considered to approximate its fair value due to the nature of the financial liability. (Level 1)

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

The Company and its wholly-owned subsidiary 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, 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 other similar expressions are intended to identify forward-looking statements. The following factors, among others, could cause our future results to differ materially from the 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 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;


•	fluctuations in deposit flows, loan demand, and/or real estate values, as well as unemployment levels, which may adversely affect our business;


•	the credit risks of lending and investing activities, including changes in the level and direction of loan delinquencies and charge-offs, changes in home values, and changes in estimates of the adequacy of the ACL;


•	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 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 and loan participations;


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


•	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 our 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 changes in financial services laws and regulations, including laws concerning taxes, banking, securities, consumer protection 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;


•	acquisitions and dispositions;


•	changes in consumer spending and saving habits; and


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

This list of important factors is not all inclusive. 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 the context indicates otherwise, "the Company," "we," "us," and "our" refer to Capitol Federal Financial, Inc. a Maryland corporation, and its consolidated subsidiaries. "Capitol Federal Savings," and "the Bank," refer to Capitol Federal Savings Bank, a federal savings bank and the wholly-owned subsidiary of Capitol Federal Financial, Inc.

The following discussion and analysis is intended to assist in understanding the financial condition, results of operations, liquidity, and capital resources of the Company. The Bank comprises almost all of the consolidated assets and liabilities of the Company and the Company is dependent primarily upon the performance of the Bank for the results of its operations. Because of this relationship, references to management actions, strategies and results of actions apply to both the Bank and the Company. 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, 2015, 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.

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. We attract retail deposits from the general public and invest those funds primarily in permanent loans secured by first mortgages on owner-occupied, one- to four-family residences. We also originate consumer loans primarily secured by mortgages on one- to four-family residences, commercial and multi-family real estate loans, and construction loans secured by residential, multi-family, or commercial real estate. While our primary business is the origination of one- to four-family mortgage loans funded through retail deposits, we also purchase whole one- to four-family mortgage loans from correspondent and nationwide lenders, participate in loans with other lenders that are secured by multi-family or commercial real estate, and invest in certain investment securities and MBS using funding from deposits, FHLB borrowings, and repurchase agreements.

The Company's results of operations are primarily dependent on net interest income, which is the difference between the interest earned on loans, MBS, investment 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 local competitor pricing for our local lending markets, and secondary market prices and national competitor pricing for our correspondent lending markets. 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 maturity 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. Retail 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.

Economic conditions in the Bank's local market areas have a significant impact on the ability of borrowers to repay loans and the value of the collateral securing these loans. The industries in our market areas are diversified, especially in the Kansas City metropolitan statistical area, which comprises the largest segment of our loan portfolio and deposit base. As of March 2016, the unemployment rate was 3.9% for Kansas and 4.2% for Missouri, compared to the national average of 5.0%, based on information from the Bureau of Labor Statistics. The Kansas City market area has an average household income of approximately $75 thousand per annum, based on 2015 estimates from the American Community Survey, which is a statistical survey by the U.S. Census Bureau. The average household income in our combined market areas is approximately $70 thousand per annum, with 90% of the population at or above the poverty level, also based on the 2015 estimates from the American Community Survey. The FHFA price index for Kansas and Missouri has not experienced significant fluctuations during the past 10 years, unlike other market areas of the United States, which indicates relative stability in property values in our local market areas.

For the quarter ended March 31, 2016, the Company recognized net income of $21.5 million, or $0.16 per share, compared to net income of $19.2 million, or $0.14 per share, for the quarter ended March 31, 2015. The $2.3 million, or 11.9%, increase in net income was due primarily to a $1.8 million increase in net interest income and a $1.3 million increase in non-interest income, specifically an increase in income from BOLI. Net income attributable to the daily leverage strategy was $561 thousand during the current quarter, compared to $682 thousand for the prior year quarter.

The net interest margin increased seven basis points, from 1.71% for the prior year quarter to 1.78% for the current year quarter. Excluding the effects of the daily leverage strategy, the net interest margin would have increased nine basis points, from 2.04% for the prior year quarter to 2.13% for the current year quarter. The increase in the net interest margin was due mainly to a decrease in interest expense on term borrowings.

For the six month period ended March 31, 2016, the Company recognized net income of $42.2 million, or $0.32 per share, compared to net income of $39.7 million, or $0.29 per share, for the six month period ended March 31, 2015. The $2.5 million, or 6.4%, increase in net income was due primarily to a $1.7 million increase in net interest income and a $1.7 million increase in non-interest income, partially offset by a $1.0 million increase in non-interest expense. Net income attributable to the daily leverage strategy was $1.1 million during the current year six month period, compared to $1.5 million for the prior year six month period. The decrease in

the net income attributable to the daily leverage strategy was due to an increase in the FHLB line of credit borrowings rate, which was larger than the increase in the average yield earned on the cash at the Federal Reserve Bank.

The net interest margin increased three basis points, from 1.73% for the prior year six month period, to 1.76% for the current year six month period. Excluding the effects of the daily leverage strategy, the net interest margin would have increased four basis points, from 2.08% for the prior year six month period to 2.12% for the current year six month period. The increase in the net interest margin was due mainly to a decrease in interest expense on term borrowings.

Total assets were $9.32 billion at March 31, 2016 compared to $9.84 billion at September 30, 2015. The $527.5 million decrease was due primarily to a $568.8 million decrease in cash and cash equivalents and $36.2 million decrease in FHLB stock, both due to the removal of the entire daily leverage strategy at March 31, 2016 compared to $700.0 million of the daily leverage strategy being in place at September 30, 2015.

The loans receivable portfolio, net, increased $144.2 million, to $6.77 billion at March 31, 2016, from $6.63 billion at September 30, 2015. This growth was primarily funded with cash flows from the securities portfolio and growth in the deposit portfolio. During the current year six month period, the Bank originated and refinanced $348.3 million of loans with a weighted average rate of 3.68%, purchased $291.9 million of loans from correspondent lenders with a weighted average rate of 3.52%, and purchased participations of $112.0 million of multi-family and commercial real estate and construction-to-permanent loans with a weighted average rate of 3.80%.

As previously indicated in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2015, we have continued to expand our multi-family and commercial real estate portfolio, especially commercial construction-to-permanent loans, through loan participations with our correspondent lenders and other lead banks. These types of loans tend to be larger and in different geographic regions from most of our existing loan portfolio and are generally considered to have different and greater risks than one- to four-family residential real estate loans. The net amount of multi-family and commercial loans as of March 31, 2016 was $126.1 million and the undisbursed loan amounts and total commitments as of March 31, 2016 were $208.0 million, resulting in a total concentration of $334.1 million at March 31, 2016. For more information regarding these participations and their potential risks, see "Part I, Item 1. Business - Multi-Family and Commercial Lending” and "Part I, Item 1A - Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2015.

Total liabilities were $7.91 billion at March 31, 2016 compared to $8.43 billion at September 30, 2015. The $514.7 million decrease was due primarily to a $798.9 million decrease in FHLB borrowings largely as a result of the removal of the entire daily leverage strategy at March 31, 2016, along with a $100.0 million decrease in FHLB advances, partially offset by a $287.3 million increase in the deposit portfolio. Management intends to continue to remove the entire daily leverage strategy at each quarter end during fiscal year 2016, and reinstate the strategy at the beginning of the next quarter. The growth in deposits during the current year six month period was primarily in the retail certificate of deposit, checking, and wholesale certificate of deposit portfolios, which increased $100.8 million, $77.1 million, and $73.9 million, respectively.

Stockholders' equity was $1.40 billion at March 31, 2016 compared to $1.42 billion at September 30, 2015. The $12.8 million decrease between dates was due primarily to the payment of $55.9 million in cash dividends, partially offset by net income of $42.2 million.

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 cause reported results to differ materially. These critical accounting policies and their application are reviewed at least annually by the audit committee of our Board of Directors. 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, 2015.

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,
	2016			2015			2015			2015			2015
	(Dollars in thousands)
Total assets	$	9,316,684		$	9,133,422		$	9,844,161		$	9,131,181		$	10,023,099
Cash and cash equivalents	203,811			232,354			772,632			46,668			1,021,150
AFS securities	677,416			636,970			758,171			847,059			842,856
HTM securities	1,270,849			1,199,978			1,271,122			1,359,657			1,425,383
Loans receivable, net	6,769,194			6,665,128			6,625,027			6,496,468			6,365,320
FHLB stock	114,381			119,027			150,543			166,257			154,951
Deposits	5,119,829			4,972,480			4,832,520			4,813,188			4,837,274
FHLB borrowings	2,471,656			2,471,272			3,270,521			2,572,898			3,371,970
Repurchase agreements	200,000			200,000			200,000			220,000			220,000
Stockholders' equity	1,403,408			1,390,833			1,416,226			1,426,723			1,476,656
Equity to total assets at end of period	15.1		%	15.2		%	14.4		%	15.6		%	14.7		%

Assets. Total assets were $9.32 billion at March 31, 2016 compared to $9.84 billion at September 30, 2015. The $527.5 million decrease was due primarily to a $568.8 million decrease in cash and cash equivalents and a $36.2 million decrease in FHLB stock, both due to the removal of the entire daily leverage strategy at March 31, 2016 compared to $700.0 million of the daily leverage strategy being in place at September 30, 2015. The entire $2.10 billion daily leverage strategy was reinstated on April 1, 2016.

Loans Receivable. Loans receivable, net, increased $144.2 million, to $6.77 billion at March 31, 2016, from $6.63 billion at September 30, 2015. The growth in the loan portfolio during the current year six month period was primarily in the correspondent one- to four-family purchased loan portfolio and was largely funded with cash flows from the securities portfolio and deposit growth.

The following table presents the balance and weighted average rate of our loan portfolio as of the dates indicated. Within the one- to four-family loan portfolio at March 31, 2016, 62% of the loans had a balance at origination of less than $417 thousand.



	March 31, 2016					September 30, 2015
	Amount			Rate		Amount			Rate
	(Dollars in thousands)
Real estate loans:
One- to four-family:
Originated	$	4,002,874		3.81	%	$	4,010,517		3.84	%
Correspondent purchased	2,016,685			3.52		1,846,213			3.52
Bulk purchased	456,876			2.23		485,682			2.25
Construction	76,457			3.51		75,152			3.57
Total	6,552,892			3.61		6,417,564			3.62
Multi-family and commercial:
Permanent	112,414			4.15		110,938			4.14
Construction	153,231			3.91		54,768			4.13
Total	265,645			4.01		165,706			4.14
Total real estate loans	6,818,537			3.62		6,583,270			3.64

Consumer loans:
Home equity	123,565			5.07		125,844			5.00
Other	4,279			4.17		4,179			4.03
Total consumer loans	127,844			5.04		130,023			4.97
Total loans receivable	6,946,381			3.65		6,713,293			3.66

Less:
Undisbursed loan funds:
One- to four-family	42,906					45,696
Multi-family and commercial	139,495					44,869
ACL	9,193					9,443
Discounts/unearned loan fees	24,347					24,213
Premiums/deferred costs	(38,754		)			(35,955		)
Total loans receivable, net	$	6,769,194				$	6,625,027

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 undisbursed loan funds, 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 three and six months ended March 31, 2016, the Bank endorsed $20.6 million and $44.1 million of one- to four-family loans, respectively, reducing the average rate on those loans by 77 and 84 basis points, respectively.



	For the Three Months Ended
	March 31, 2016					December 31, 2015					September 30, 2015					June 30, 2015
	Amount			Rate		Amount			Rate		Amount			Rate		Amount			Rate
	(Dollars in thousands)
Beginning balance	$	6,753,249		3.65	%	$	6,713,293		3.66	%	$	6,547,702		3.67	%	$	6,418,780		3.71	%
Originated and refinanced:
Fixed	117,205			3.65		157,447			3.67		165,646			3.73		207,895			3.50
Adjustable	35,495			3.77		38,117			3.74		51,634			3.59		47,609			3.55
Purchased and participations:
Fixed	249,017			3.68		101,644			3.69		164,397			3.64		147,887			3.51
Adjustable	27,355			2.93		25,861			3.17		65,722			3.69		29,046			2.92
Repayments	(235,202		)			(280,978		)			(280,671		)			(301,835		)
Principal charge-offs, net	(8		)			(242		)			(158		)			(128		)
Other	(730		)			(1,893		)			(979		)			(1,552		)
Ending balance	$	6,946,381		3.65		$	6,753,249		3.65		$	6,713,293		3.66		$	6,547,702		3.67



	For the Six Months Ended
	March 31, 2016					March 31, 2015
	Amount			Rate		Amount			Rate
	(Dollars in thousands)
Beginning balance	$	6,713,293		3.66	%	$	6,289,519		3.76	%
Originations and refinances:
Fixed	274,652			3.66		232,802			3.60
Adjustable	73,612			3.75		74,931			3.69
Purchases and participations:
Fixed	350,661			3.68		238,744			3.63
Adjustable	53,216			3.05		65,563			2.94
Repayments	(516,180		)			(479,362		)
Principal charge-offs, net	(250		)			(269		)
Other	(2,623		)			(3,148		)
Ending balance	$	6,946,381		3.65		$	6,418,780		3.71

The following tables present loan origination, refinance, and purchase activity for the periods indicated, excluding endorsement activity, along with associated weighted average rates and percent of total. 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, 2016						March 31, 2015
	Amount		Rate		% of Total		Amount		Rate		% of Total
	(Dollars in thousands)
Fixed-rate:
One- to four-family:
<= 15 years	$	58,468	3.05	%	13.6	%	$	87,435	2.96	%	24.7	%
> 15 years	199,081		3.77		46.4		181,668		3.79		51.3
Multi-family and commercial real estate	107,560		3.80		25.1		5,900		3.45		1.7
Home equity	885		5.94		0.2		659		6.08		0.2
Other	228		9.85		0.1		240		7.34		0.1
Total fixed-rate	366,222		3.67		85.4		275,902		3.53		78.0

Adjustable-rate:
One- to four-family:
<= 36 months	918		2.70		0.2		1,073		2.62		0.3
> 36 months	45,074		2.97		10.5		61,277		2.94		17.3
Multi-family and commercial real estate	—		—		—		—		—		—
Home equity	15,911		4.67		3.7		15,144		4.57		4.3
Other	947		3.48		0.2		417		2.99		0.1
Total adjustable-rate	62,850		3.40		14.6		77,911		3.26		22.0

Total originated, refinanced and purchased	$	429,072	3.63		100.0	%	$	353,813	3.47		100.0	%

Purchased and participation loans included above:
Fixed-rate:
Correspondent - one- to four-family	$	145,957	3.62				$	138,470	3.57
Participations - multi-family and commercial real estate	103,060		3.76				5,900		3.45
Total fixed-rate purchased/participations	249,017		3.68				144,370		3.56

Adjustable-rate:
Correspondent - one- to four-family	27,355		2.93				41,858		2.94
Total purchased/participation loans	$	276,372	3.60				$	186,228	3.42



	For the Six Months Ended
	March 31, 2016						March 31, 2015
	Amount		Rate		% of Total		Amount		Rate		% of Total
	(Dollars in thousands)
Fixed-rate:
One- to four-family:
<= 15 years	$	118,895	3.03	%	15.8	%	$	147,320	3.03	%	24.1	%
> 15 years	365,464		3.78		48.6		298,987		3.88		48.9
Multi-family and commercial real estate	138,724		3.90		18.4		23,250		3.69		3.8
Home equity	1,778		5.79		0.2		1,547		6.16		0.2
Other	452		9.14		0.1		442		7.68		0.1
Total fixed-rate	625,313		3.67		83.1		471,546		3.62		77.1

Adjustable-rate:
One- to four-family:
<= 36 months	1,822		2.68		0.2		2,440		2.63		0.4
> 36 months	86,171		2.99		11.6		104,807		2.97		17.1
Multi-family and commercial real estate	3,376		4.25		0.4		—		—		—
Home equity	33,970		4.59		4.5		32,405		4.60		5.3
Other	1,489		3.46		0.2		842		3.17		0.1
Total adjustable-rate	126,828		3.46		16.9		140,494		3.34		22.9

Total originated, refinanced and purchased	$	752,141	3.64		100.0	%	$	612,040	3.55		100.0	%

Purchased and participation loans included above:
Fixed-rate:
Correspondent - one- to four-family	$	242,068	3.64				$	217,174	3.63
Participations - multi-family and commercial real estate	108,593		3.79				21,570		3.70
Total fixed-rate purchased/participations	350,661		3.68				238,744		3.63

Adjustable-rate:
Correspondent - one- to four-family	49,840		2.96				65,563		2.94
Participations - multi-family and commercial real estate	3,376		4.25				—		—
Total adjustable-rate purchased/participations	53,216		3.05				65,563		2.94
Total purchased/participation loans	$	403,877	3.60				$	304,307	3.49

One- to Four-Family Loans - The following table presents, for our portfolio of one- to four-family loans, the balance, percentage of total, weighted average credit score, weighted average LTV ratio, and the average balance per loan as of the dates presented. Credit scores are updated at least semiannually, with the latest update in March 2016, 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, 2016									September 30, 2015
			% of		Credit			Average				% of		Credit			Average
	Amount		Total		Score	LTV		Balance		Amount		Total		Score	LTV		Balance
	(Dollars in thousands)
Originated	$	4,002,874	61.8	%	765	63	%	$	130	$	4,010,517	63.2	%	765	64	%	$	129
Correspondent purchased	2,016,685		31.1		764	68		348		1,846,213		29.1		764	68		344
Bulk purchased	456,876		7.1		753	65		308		485,682		7.7		752	65		310
	$	6,476,435	100.0	%	764	65		170		$	6,342,412	100.0	%	764	65		167

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 and refinanced during the current year six month period, 76% had loan values of $417 thousand or less. Of the correspondent loans purchased during the current year six month period, 24% had loan values of $417 thousand or less.



	For the Three Months Ended
	March 31, 2016					March 31, 2015
					Credit					Credit
	Amount		LTV		Score	Amount		LTV		Score
	(Dollars in thousands)
Originated	$	101,405	77	%	766	$	115,606	76	%	769
Refinanced by Bank customers	28,824		69		768	35,519		68		772
Correspondent purchased	173,312		74		765	180,328		73		764
	$	303,541	75		766	$	331,453	74		767



	For the Six Months Ended
	March 31, 2016					March 31, 2015
					Credit					Credit
	Amount		LTV		Score	Amount		LTV		Score
	(Dollars in thousands)
Originated	$	215,061	76	%	766	$	212,615	76	%	769
Refinanced by Bank customers	65,383		69		769	58,202		67		769
Correspondent purchased	291,908		74		764	282,737		74		765
	$	572,352	74		766	$	553,554	74		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 six month period ended March 31, 2016.



	For the Three Months Ended						For the Six Months Ended
	March 31, 2016						March 31, 2016
State	Amount		% of Total		Rate		Amount		% of Total		Rate
	(Dollars in thousands)
Kansas	$	125,779	41.5	%	3.50	%	$	258,415	45.2	%	3.49	%
Missouri	51,389		16.9		3.53		109,081		19.1		3.53
Texas	58,282		19.2		3.47		88,987		15.5		3.48
Tennessee	16,418		5.4		3.60		31,581		5.5		3.55
Other states	51,673		17.0		3.51		84,288		14.7		3.52
	$	303,541	100.0	%	3.51		$	572,352	100.0	%	3.50

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 purchase commitments as of March 31, 2016, along with associated weighted average rates. Commitments generally have fixed expiration dates or other termination clauses and may require the payment of a rate lock fee. A percentage of the commitments are expected to expire unfunded, so the amounts reflected in the table below are not necessarily indicative of future cash requirements.



	Fixed-Rate
	15 years			More than			Adjustable-			Total
	or less			15 years			Rate			Amount		Rate
	(Dollars in thousands)
Originate/refinance	$	12,584		$	49,661		$	17,612		$	79,857	3.46	%
Correspondent	10,958			85,669			11,178			107,805		3.73
	$	23,542		$	135,330		$	28,790		$	187,662	3.62

Rate	3.08		%	3.83		%	3.02		%

Multi-Family and Commercial Real Estate Loans - Multi-family and commercial real estate permanent and construction loans are originated or participated in based on the income producing potential of the property, the collateral value, and the financial strength of the borrower. Additionally, the Bank generally requires personal guarantees. The Bank generally requires a minimum debt service coverage ratio of 1.25 and limits LTV ratios to 80% for multi-family and commercial real estate loans depending on the property type.

During the current quarter, the Bank continued to grow the commercial construction-to-permanent and permanent loan portfolio through the correspondent lending channel by purchasing participations of $103.1 million, including $94.8 million of commercial construction-to-permanent loans with gross loan amounts ranging from $14.8 million to $50.0 million and funding periods of up to three years. At March 31, 2016, the Bank also had $68.5 million of outstanding commercial construction-to-permanent loan commitments. The Bank intends to continue to grow its commercial construction-to-permanent and permanent loan portfolio, largely through participations with correspondent lenders and other lead banks with which the Bank already has commercial construction-to-permanent and permanent loan relationships.

The following table presents multi-family and commercial real estate and construction loans and commitments by industry classification, as defined by the North American Industry Classification System, as of March 31, 2016.



	Unpaid		Undisbursed		Gross Loan		Outstanding				% of
	Principal		Amount		Amount		Commitments		Total		Total
	(Dollars in thousands)
Accommodation and food services	$	51,209	$	91,358	$	142,567	$	—	$	142,567	42.7	%
Health care and social assistance	11,200		45,554		56,754		—		56,754		17.0
Real estate rental and leasing	14,805		581		15,386		34,000		49,386		14.8
Arts, entertainment, and recreation	—		—		—		34,480		34,480		10.3
Multi-family	17,378		2,002		19,380		—		19,380		5.8
Retail trade	19,277		—		19,277		—		19,277		5.7
Other	12,281		—		12,281		—		12,281		3.7
	$	126,150	$	139,495	$	265,645	$	68,480	$	334,125	100.0	%

The following table summarizes multi-family and commercial real estate and construction loans and commitments by state as of March 31, 2016.



	Unpaid		Undisbursed		Gross Loan		Outstanding				% of
	Principal		Amount		Amount		Commitments		Total		Total
	(Dollars in thousands)
Texas	$	21,318	$	93,407	$	114,725	$	34,000	$	148,725	44.5	%
Kansas	45,138		—		45,138		34,480		79,618		23.9
Missouri	34,008		45,554		79,562		—		79,562		23.8
Colorado	14,945		534		15,479		—		15,479		4.6
Arkansas	8,306		—		8,306		—		8,306		2.5
California	2,435		—		2,435		—		2,435		0.7
	$	126,150	$	139,495	$	265,645	$	68,480	$	334,125	100.0	%

The following table presents the Bank's multi-family and commercial real estate and construction loan portfolio and outstanding commitments, categorized by gross loan amount (unpaid principal plus undisbursed amounts) or outstanding commitment amount, as of March 31, 2016.



	Count	Amount
	(Dollars in thousands)
Greater than $30 million	4	153,716
>$15 to $30 million	2	54,668
>$10 to $15 million	3	38,483
>$5 to $10 million	3	23,705
$1 to $5 million	21	58,797
Less than $1 million	14	4,756
	47	$	334,125

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. One- to four-family owner occupied loans are underwritten according to the "ability to repay" and "qualified mortgage" standards, as issued by the CFPB, with total debt-to-income ratios not exceeding 43% of the borrower's verified income. 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, 2015. In the following asset quality discussion, unless otherwise noted, correspondent purchased loans are included with originated loans and bulk purchased loans are reported as purchased loans.

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, 2016, approximately 69% were 59 days or less delinquent.



	Loans Delinquent for 30 to 89 Days at:
	March 31,				December 31,				September 30,				June 30,				March 31,
	2016				2015				2015				2015				2015
	Number	Amount			Number	Amount			Number	Amount			Number	Amount			Number	Amount
	(Dollars in thousands)
One- to four-family:
Originated	139	$	14,336		159	$	14,277		158	$	16,955		150	$	16,320		128	$	13,097
Correspondent purchased	8	2,307			10	3,033			8	2,344			15	4,741			7	2,206
Bulk purchased	26	6,005			35	7,805			32	7,259			30	6,249			35	8,137
Consumer loans:
Home equity	33	631			36	730			32	703			34	646			30	681
Other	5	28			13	88			11	17			18	80			9	36
	211	$	23,307		253	$	25,933		241	$	27,278		247	$	28,036		209	$	24,157

30 to 89 days delinquent loans
to total loans receivable, net		0.34		%		0.39		%		0.41		%		0.43		%		0.38		%

The table below presents the Company's non-performing loans and OREO as of the dates indicated. Non-performing loans are loans that are 90 or more days delinquent or in foreclosure and nonaccrual loans less than 90 days delinquent but required to be reported as nonaccrual pursuant to 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, OREO properties 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,
	2016				2015				2015				2015				2015
	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	72	$	8,016		75	$	9,900		66	$	6,728		70	$	6,180		79	$	8,047
Correspondent purchased	3	864			—	—			1	394			1	67			1	490
Bulk purchased	33	7,483			32	7,199			36	8,898			29	7,577			27	8,040
Consumer loans:
Home equity	26	622			28	574			24	497			19	443			23	366
Other	8	26			9	25			4	12			5	16			6	19
	142	17,011			144	17,698			131	16,529			124	14,283			136	16,962
Nonaccrual loans less than 90 Days Delinquent:⁽¹⁾
One- to four-family:
Originated	72	7,667			75	7,661			77	9,004			71	9,224			80	9,709
Correspondent purchased	4	825			1	24			1	25			2	398			2	401
Bulk purchased	1	80			1	81			1	82			5	959			5	732
Consumer loans:
Home equity	9	151			14	259			12	295			10	219			6	108
Other	1	8			—	—			—	—			—	—			3	11
	87	8,731			91	8,025			91	9,406			88	10,800			96	10,961
Total non-performing loans	229	25,742			235	25,723			222	25,935			212	25,083			232	27,923

Non-performing loans as a percentage of total loans⁽²⁾		0.38		%		0.39		%		0.39		%		0.39		%		0.44		%

OREO:
One- to four-family:
Originated⁽³⁾	22	$	1,364		25	$	1,410		29	$	1,752		28	$	1,920		36	$	1,989
Correspondent purchased	1	499			1	499			1	499			2	714			1	216
Bulk purchased	8	2,694			6	2,247			2	796			4	1,019			5	1,162
Consumer loans:
Home equity	1	9			1	26			1	8			2	17			—	—
Other⁽⁴⁾	1	1,278			1	1,278			1	1,278			1	1,278			1	1,278
	33	5,844			34	5,460			34	4,333			37	4,948			43	4,645
Total non-performing assets	262	$	31,586		269	$	31,183		256	$	30,268		249	$	30,031		275	$	32,568

Non-performing assets as a percentage of total assets		0.34		%		0.34		%		0.31		%		0.33		%		0.32		%

(1)

Represents loans required to be reported as nonaccrual pursuant to regulatory reporting requirements even if the loans are current. At March 31, 2016, December 31, 2015, September 30, 2015, June 30, 2015, and March 31, 2015, this amount was comprised of $1.8 million, $2.2 million, $2.2 million, $3.4 million, and $1.2 million, respectively, of loans that were 30 to 89 days delinquent and are reported as such, and $6.9 million, $5.8 million, $7.2 million, $7.4 million, and $9.8 million, respectively, of loans that were current.


(2)	Excluding loans required to be reported as nonaccrual pursuant to regulatory reporting requirements even if the loans are current, non-performing loans as a percentage of total loans were 0.25%, 0.27%, 0.25%, 0.22%, and 0.27%, at March 31, 2016, December 31, 2015, September 30, 2015, June 30, 2015, and March 31, 2015, respectively.


(3)	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.


(4)	Represents a single property the Bank purchased for a potential branch site but now intends to sell.

Once a one- to four-family loan is generally 180 days delinquent, a new collateral value is obtained through an appraisal, less estimated selling costs and anticipated private mortgage insurance ("PMI") receipts. Any loss amounts identified as a result of this review are charged-off. At March 31, 2016, $11.1 million, or 68%, of the one- to four-family loans 90 or more days delinquent or in foreclosure had been individually evaluated for loss and any related losses have been charged-off.

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, 2016. 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, 2016, potential losses, after taking into consideration anticipated PMI 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	$	3,733,980	57.6	%	$	10,917	48.2	%	$	7,599	46.4	%	73	%
Missouri	1,268,267		19.6		4,754		21.0		1,281		7.8		71
Texas	424,545		6.6		579		2.6		—		—		n/a
California	256,011		4.0		—		—		—		—		n/a
Tennessee	175,513		2.7		—		—		—		—		n/a
Alabama	98,126		1.5		254		1.1		—		—		n/a
Oklahoma	72,998		1.1		429		1.9		23		0.1		35
Other states	446,995		6.9		5,715		25.2		7,460		45.7		63
	$	6,476,435	100.0	%	$	22,648	100.0	%	$	16,363	100.0	%	68

TDRs - The following table presents the Company's TDRs, based on accrual status, at the dates indicated. At March 31, 2016, $24.6 million of TDRs were included in the ACL formula analysis model and $98 thousand of the ACL was related to these loans. The remaining $14.6 million of TDRs at March 31, 2016 were individually evaluated for loss and any potential losses have been charged-off.



	At
	March 31,		December 31,		September 30,		June 30,		March 31,
	2016		2015		2015		2015		2015
	(Dollars in thousands)
Accruing TDRs	$	24,239	$	24,956	$	24,331	$	25,444	$	23,861
Nonaccrual TDRs⁽¹⁾	14,986		13,983		15,511		14,653		15,337
Total TDRs	$	39,225	$	38,939	$	39,842	$	40,097	$	39,198


(1)	Nonaccrual TDRs are included in the non-performing loan table above.

Allowance for credit losses and Provision for Credit Losses - Management maintains an ACL to absorb inherent losses in the loan portfolio based on ongoing quarterly assessments of the loan portfolio. The ACL is maintained through provisions for credit losses which are either charged to or credited to income. Our ACL methodology considers a number of factors including the trend and composition of delinquent loans, results of foreclosed property and short sale transactions, charge-off activity and trends, the current status and trends of local and national economies (particularly levels of unemployment), trends and current conditions in the real estate and housing markets, loan portfolio growth and concentrations, and certain ACL ratios such as ACL to loans receivable, net and annualized historical losses to ACL. We continually monitor the level of risk in our multi-family and commercial real estate and construction loan portfolio, including concentrations in such factors as geographic locations, property types, tenant brand name, borrowing relationships, and lending relationships in the case of participations loans, among other factors. For additional information on the ACL, see "Part II, 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, 2015.

The Bank did not record a provision for credit losses during the current six month period due to the continued low level of net loan charge-offs and stabilization of delinquent loan balances. Net loan charge-offs were $250 thousand for the current year six month period and the ACL to net charge-offs (annualized) was 18.3 times at March 31, 2016. The improvement in collateral values has assisted in lowering our net charge-off amounts compared to prior years.

The distribution of our ACL at the dates indicated is summarized below. The loan amount in the table below represents outstanding loan balances net of undisbursed loan funds. Included in bulk purchased loans are $253.4 million loans, or 55% of the total bulk purchased loan portfolio, at March 31, 2016, for which the seller of the loans has guaranteed, and has the ability, to repurchase or replace delinquent loans. The Bank has not experienced any loan losses with this group of loans since the loan package was purchased in fiscal year 2012. For the $203.5 million of bulk purchased loans at March 31, 2016 that do not have the above noted guarantee, the Bank has continued to experience a reduction in loan losses due to an improvement in collateral values. A large portion of these loans were originally interest-only loans with interest-only terms up to 10 years. All of the interest-only loans are now fully amortizing loans. Our correspondent purchased loans are purchased on a loan-by-loan basis from a select group of correspondent lenders and are underwritten by the Bank's underwriters based on underwriting standards that are generally the same as for our originated loans.



	At
	March 31, 2016								September 30, 2015
			% 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	$	4,542	49.4	%	$	4,002,811	59.1	%	$	4,833	51.2	%	$	4,010,439	60.6	%
Correspondent purchased	2,262		24.6		2,016,685		29.8		2,115		22.4		1,846,213		27.9
Bulk purchased	1,243		13.5		456,877		6.8		1,434		15.2		485,682		7.3
Multi-family and commercial	652		7.1		111,638		1.7		604		6.4		109,314		1.6
Construction	220		2.4		48,125		0.7		170		1.8		41,057		0.6
Consumer:
Home equity	216		2.4		123,565		1.8		222		2.3		125,844		1.9
Other consumer	58		0.6		4,279		0.1		65		0.7		4,179		0.1
	$	9,193	100.0	%	$	6,763,980	100.0	%	$	9,443	100.0	%	$	6,622,728	100.0	%

The following tables present ACL activity and selected ACL ratios for the periods or at the dates presented. 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, 2016			December 31, 2015			September 30, 2015			June 30, 2015			March 31, 2015
	(Dollars in thousands)
ACL beginning balance	$	9,201		$	9,443		$	9,601		$	9,406		$	9,297
Charge-offs	(75		)	(250		)	(183		)	(157		)	(189		)
Recoveries	67			8			25			29			23
Provision for credit losses	—			—			—			323			275
ACL ending balance	$	9,193		$	9,201		$	9,443		$	9,601		$	9,406

ACL to loans receivable, net at end of period	0.14		%	0.14		%	0.14		%	0.15		%	0.15		%
ACL to non-performing loans at end of period	35.71			35.77			36.41			38.28			33.69
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	0.03			0.79			0.52			0.41			0.51
ACL to net charge-offs (annualized)	294.7x			9.5x			15.0x			18.7x			14.2x



	For the Six Months Ended
	March 31, 2016			March 31, 2015
	(Dollars in thousands)
ACL beginning balance	$	9,443		$	9,227
Charge-offs	(325		)	(395		)
Recoveries	75			126
Provision for credit losses	—			448
ACL ending balance	$	9,193		$	9,406

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	0.81			0.87
ACL to net charge-offs (annualized)	18.3x			17.5x

Securities. The following table presents the distribution of our MBS and investment securities portfolios, at amortized cost, at the dates indicated. Overall, fixed-rate securities comprised 76% of these portfolios at March 31, 2016. 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, 2016					December 31, 2015					September 30, 2015
	Amount		Yield		WAL	Amount		Yield		WAL	Amount		Yield		WAL
	(Dollars in thousands)
Fixed-rate securities:
MBS	$	968,006	2.23	%	3.3	$	985,287	2.26	%	3.2	$	1,047,637	2.24	%	3.2
GSE debentures	471,215		1.14		1.3	421,231		1.18		2.4	525,376		1.14		1.6
Municipal bonds	37,248		1.80		2.6	39,534		1.85		2.7	38,214		1.87		2.9
Total fixed-rate securities	1,476,469		1.87		2.6	1,446,052		1.93		3.0	1,611,227		1.87		2.7

Adjustable-rate securities:
MBS	458,350		2.31		5.9	379,745		2.26		5.6	402,417		2.22		5.3
Trust preferred securities	2,169		1.89		21.2	2,186		1.77		21.5	2,186		1.59		21.7
Total adjustable-rate securities	460,519		2.30		6.0	381,931		2.25		5.7	404,603		2.21		5.4
Total securities portfolio	$	1,936,988	1.97		3.4	$	1,827,983	2.00		3.6	$	2,015,830	1.94		3.2

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



	March 31, 2016		September 30, 2015
	(Dollars in thousands)
Federal National Mortgage Association ("FNMA")	$	863,968	$	880,810
Federal Home Loan Mortgage Corporation ("FHLMC")	477,101		469,290
Government National Mortgage Association	95,705		112,439
	$	1,436,774	$	1,462,539

Mortgage-Backed Securities - The balance of MBS, which primarily consists of securities of U.S. GSEs, decreased $25.8 million from $1.46 billion at September 30, 2015 to $1.44 billion at March 31, 2016. 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 yield 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, 2016						December 31, 2015						September 30, 2015						June 30, 2015
	Amount			Yield		WAL	Amount			Yield		WAL	Amount			Yield		WAL	Amount			Yield		WAL
	(Dollars in thousands)
Beginning balance - carrying value	$	1,376,119		2.26	%	3.9	$	1,462,539		2.24	%	3.8	$	1,565,184		2.25	%	3.9	$	1,648,046		2.30	%	4.3
Maturities and repayments	(80,544		)				(83,835		)				(99,840		)				(100,538		)
Net amortization of (premiums)/discounts	(1,091		)				(1,188		)				(1,362		)				(1,412		)
Purchases:
Fixed	42,827			1.83		4.1	—			—		—	—			—		—	20,532			1.74		4.5
Adjustable	100,133			2.02		5.4	—			—		—	—			—		—	—			—		—
Change in valuation on AFS securities	(670		)				(1,397		)				(1,443		)				(1,444		)
Ending balance - carrying value	$	1,436,774		2.25		4.1	$	1,376,119		2.26		3.9	$	1,462,539		2.24		3.8	$	1,565,184		2.25		3.9



	For the Six Months Ended
	March 31, 2016						March 31, 2015
	Amount			Yield		WAL	Amount			Yield		WAL
	(Dollars in thousands)
Beginning balance - carrying value	$	1,462,539		2.24	%	3.8	$	1,802,547		2.32	%	4.2
Maturities and repayments	(164,379		)				(175,951		)
Net amortization of (premiums)/discounts	(2,279		)				(2,590		)
Purchases:
Fixed	42,827			1.83		4.1	25,137			1.53		3.8
Adjustable	100,133			2.02		5.4	—			—		—
Change in valuation on AFS securities	(2,067		)				(1,097		)
Ending balance - carrying value	$	1,436,774		2.25		4.1	$	1,648,046		2.30		4.3

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 $55.3 million, from $566.8 million at September 30, 2015 to $511.5 million at March 31, 2016. 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, 2016						December 31, 2015						September 30, 2015						June 30, 2015
	Amount			Yield		WAL	Amount			Yield		WAL	Amount			Yield		WAL	Amount			Yield		WAL
	(Dollars in thousands)
Beginning balance - carrying value	$	460,829		1.24	%	2.6	$	566,754		1.19	%	1.8	$	641,532		1.18	%	2.5	$	620,193		1.18	%	2.2
Maturities and calls	(27,201		)				(104,155		)				(76,387		)				(30,000		)
Net amortization of (premiums)/discounts	(106		)				(101		)				(70		)				(52		)
Purchases:
Fixed	74,987			0.93		0.8	1,432			1.35		5.6	—			—		—	52,379			1.31		3.1
Change in valuation on AFS securities	2,982						(3,101		)				1,679						(988		)
Ending balance - carrying value	$	511,491		1.19		1.5	$	460,829		1.24		2.6	$	566,754		1.19		1.8	$	641,532		1.18		2.5



	For the Six Months Ended
	March 31, 2016						March 31, 2015
	Amount			Yield		WAL	Amount			Yield		WAL
	(Dollars in thousands)
Beginning balance - carrying value	$	566,754		1.19	%	1.8	$	590,942		1.15	%	3.0
Maturities and calls	(131,356		)				(82,132		)
Net amortization of (premiums)/discounts	(207		)				(163		)
Purchases:
Fixed	76,419			0.94		0.9	106,022			1.16		1.7
Change in valuation on AFS securities	(119		)				5,524
Ending balance - carrying value	$	511,491		1.19		1.5	$	620,193		1.18		2.2

Liabilities. Total liabilities were $7.91 billion at March 31, 2016 compared to $8.43 billion at September 30, 2015. The $514.7 million decrease was due primarily to a $798.9 million decrease in FHLB borrowings largely as a result of the removal of the daily leverage strategy at March 31, 2016, along with a $100.0 million decrease in term advances, partially offset by a $287.3 million increase in the deposit portfolio.

Deposits - Deposits were $5.12 billion at March 31, 2016 compared to $4.83 billion at September 30, 2015. The $287.3 million increase was due primarily to a $100.8 million increase in the retail certificate of deposit portfolio, a $77.1 million increase in the checking portfolio, and a $73.9 million increase in the wholesale certificate of deposit portfolio. We continue to be competitive on deposit rates and, in some cases, our offer rates for certificates of deposit have been higher than peers. Increasing rates offered on longer-term certificates of deposit has been an on-going balance sheet strategy by management in anticipation of higher interest rates. If short-term interest rates continue to rise, our customers may move funds from their checking, savings and money market accounts to higher yielding deposit products within the Bank or withdraw their funds from these accounts, including certificates of deposit, to invest in higher yielding investments outside of the Bank.

The following table presents the amount, weighted average rate and percentage of total for the components of our deposit portfolio at the dates presented. The $116.8 million increase in the retail certificate of deposit portfolio from December 31, 2015 to March 31, 2016 was due mainly to a promotion deposit campaign on President's Day.



	March 31, 2016						December 31, 2015						September 30, 2015
					% of						% of						% of
	Amount		Rate		Total		Amount		Rate		Total		Amount		Rate		Total
	(Dollars in thousands)
Noninterest-bearing checking	$	211,068	—	%	4.1	%	$	205,374	—	%	4.1	%	$	188,007	—	%	3.9	%
Interest-bearing checking	604,790		0.05		11.8		612,656		0.05		12.3		550,741		0.05		11.4
Savings	330,467		0.17		6.5		317,384		0.21		6.4		311,670		0.16		6.4
Money market	1,165,592		0.23		22.8		1,183,050		0.24		23.8		1,148,935		0.23		23.8
Retail certificates of deposit	2,421,622		1.38		47.3		2,304,865		1.31		46.4		2,320,804		1.29		48.0
Public units	386,290		0.56		7.5		349,151		0.43		7.0		312,363		0.40		6.5
	$	5,119,829	0.77		100.0	%	$	4,972,480	0.71		100.0	%	$	4,832,520	0.72		100.0	%

At March 31, 2016, public unit deposits totaled $386.3 million, compared to $312.4 million at September 30, 2015, and had a weighted average rate of 0.56% and an average remaining term to maturity of seven months. There were no brokered deposits at March 31, 2016 or September 30, 2015. Management will continue to monitor the wholesale deposit market for attractive opportunities relative to the use of proceeds.

The following tables set forth scheduled maturity information for our certificates of deposit, along with associated weighted average rates, at March 31, 2016.



	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%	$	824,170		$	191,686		$	1,536		$	—		$	1,017,392	0.62	%
1.00 – 1.99%	290,964			501,933			367,029			452,320			1,612,246		1.57
2.00 – 2.99%	15,300			80			1,516			160,947			177,843		2.24
3.00 – 3.99%	175			256			—			—			431		3.19
	$	1,130,609		$	693,955		$	370,081		$	613,267		$	2,807,912	1.27

Percent of total	40.3		%	24.7		%	13.2		%	21.8		%
Weighted average rate	0.82			1.26			1.54			1.95
Weighted average maturity (in years)	0.4			1.5			2.5			3.9			1.7
Weighted average maturity for the retail certificate of deposit portfolio (in years)													1.9



	Amount Due
			Over		Over
	3 months		3 to 6		6 to 12		Over
	or less		months		months		12 months		Total
	(Dollars in thousands)
Retail certificates of deposit less than $100,000	$	178,240	$	137,032	$	249,099	$	974,668	$	1,539,039
Retail certificates of deposit of $100,000 or more	87,023		54,646		117,071		623,843		882,583
Public unit deposits of $100,000 or more	149,907		82,253		75,338		78,792		386,290
	$	415,170	$	273,931	$	441,508	$	1,677,303	$	2,807,912

Borrowings - The following table presents term borrowing activity for the periods shown, which includes FHLB advances, at par, and repurchase agreements. Line of credit activity is excluded from the following tables. The weighted average effective rate includes the impact of the amortization of deferred prepayment penalties resulting from FHLB advances previously prepaid. Rates on new borrowings are fixed-rate. 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, 2016					December 31, 2015						September 30, 2015						June 30, 2015
			Effective						Effective						Effective						Effective
	Amount		Rate		WAM	Amount			Rate		WAM	Amount			Rate		WAM	Amount			Rate		WAM
	(Dollars in thousands)
Beginning balance	$	2,675,000	2.29	%	3.2	$	2,775,000		2.29	%	3.3	$	2,795,000		2.49	%	3.3	$	2,795,000		2.51	%	3.3
Maturities and prepayments:
FHLB advances	—		—			(200,000		)	1.94			(175,000		)	5.08			(100,000		)	3.01
Repurchase agreements	—		—			—			—			(20,000		)	4.45			—			—
New borrowings:
FHLB advances	—		—		—	100,000			1.45		3.0	175,000			2.18		3.0	100,000			2.25		7.0
Ending balance	$	2,675,000	2.29		3.0	$	2,675,000		2.29		3.2	$	2,775,000		2.29		3.3	$	2,795,000		2.49		3.3



	For the Six Months Ended
	March 31, 2016						March 31, 2015
				Effective						Effective
	Amount			Rate		WAM	Amount			Rate		WAM
	(Dollars in thousands)
Beginning balance	$	2,775,000		2.29	%	3.3	$	2,795,000		2.45	%	2.8
Maturities and prepayments:
FHLB advances	(200,000		)	1.94			(500,000		)	1.66
New borrowings:
FHLB advances	100,000			1.45		3.0	500,000			2.03		5.8
Ending balance	$	2,675,000		2.29		3.0	$	2,795,000		2.51		3.3

Maturities - The following table presents the maturity of FHLB advances, at par, and repurchase agreements, along with associated weighted average contractual and effective rates as of March 31, 2016.



	FHLB		Repurchase
Maturity by	Advances		Agreements		Total		Contractual		Effective
Fiscal year	Amount		Amount		Amount		Rate		Rate⁽¹⁾
	(Dollars in thousands)
2016	$	200,000	$	—	$	200,000	1.94	%	2.00	%
2017	500,000		—		500,000		2.69		2.72
2018	375,000		100,000		475,000		2.35		2.64
2019	400,000		—		400,000		1.62		1.62
2020	250,000		100,000		350,000		2.18		2.18
2021	550,000		—		550,000		2.27		2.27
2022	200,000		—		200,000		2.23		2.23
	$	2,475,000	$	200,000	$	2,675,000	2.23		2.29


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

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 and public unit amounts, and term borrowings for the next four quarters as of March 31, 2016.



	Retail				Public Unit				Term
Maturity by	Certificate		Repricing		Deposit		Repricing		Borrowings		Repricing				Repricing
Quarter End	Amount		Rate		Amount		Rate		Amount		Rate		Total		Rate
	(Dollars in thousands)
June 30, 2016	$	265,263	0.93	%	$	149,907	0.38	%	$	100,000	3.17	%	$	515,170	1.21	%
September 30, 2016	191,678		0.93		82,253		0.48		100,000		0.83		373,931		0.80
December 31, 2016	219,393		1.00		51,500		0.54		100,000		0.78		370,893		0.88
March 31, 2017	146,777		0.94		23,838		0.70		—		—		170,615		0.91
	$	823,111	0.95		$	307,498	0.46		$	300,000	1.59		$	1,430,609	0.98

Stockholders' Equity. Stockholders' equity was $1.40 billion at March 31, 2016 compared to $1.42 billion at September 30, 2015. The $12.8 million decrease between periods was due primarily to the payment of $55.9 million in cash dividends, partially offset by net income of $42.2 million. The cash dividends paid during the current year six month period consisted of a $0.25 per share cash true-up dividend related to fiscal year 2015 earnings per the Company's dividend policy, and two regular quarterly cash dividends totaling $0.17 per share. On April 20, 2016, the Company declared a regular quarterly cash dividend of $0.085 per share, or approximately $11.3 million, payable on May 20, 2016 to stockholders of record as of the close of business on May 6, 2016.

In October 2015, the Company announced a stock repurchase plan for up to $70.0 million of common stock. It is anticipated that shares will be purchased from time to time based upon market conditions and available liquidity. There is no expiration for this repurchase plan. The Company did not repurchase any shares during the six month period ended March 31, 2016.

At March 31, 2016, Capitol Federal Financial, Inc., at the holding company level, had $80.1 million on deposit at the Bank. For fiscal year 2016, it is the intent of the Board of Directors and management to continue with the payout of 100% of the Company's earnings to its 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 following table presents regular quarterly dividends and special dividends paid in calendar years 2016, 2015, and 2014. The amounts represent cash dividends paid during each period. For the quarter ending June 30, 2016, the amount presented represents the dividend payable on May 20, 2016 to stockholders of record as of May 6, 2016.



	Calendar Year
	2016				2015				2014
	Amount		Per Share		Amount		Per Share		Amount		Per Share
	(Dollars in thousands, except per share amounts)
Regular quarterly dividends paid
Quarter ended March 31	$	11,305	$	0.085	$	11,592	$	0.085	$	10,513	$	0.075
Quarter ended June 30	11,312		0.085		11,585		0.085		10,399		0.075
Quarter ended September 30					11,385		0.085		10,318		0.075
Quarter ended December 31					11,303		0.085		10,226		0.075
True-up dividends paid					33,248		0.250		35,450		0.260
True Blue dividends paid					33,924		0.250		34,663		0.250
Calendar year-to-date dividends paid	$	22,617	$	0.170	$	113,037	$	0.840	$	111,569	$	0.810

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,
	2016			2015			2015			2015			2015
	(Dollars in thousands, except per share data)
Interest and dividend income:
Loans receivable	$	60,732		$	60,223		$	59,761		$	58,922		$	58,198
MBS	7,702			7,831			8,260			8,849			9,537
FHLB stock	3,006			3,152			3,167			3,132			3,076
Cash and cash equivalents	2,707			1,620			1,303			1,357			1,393
Investment securities	1,485			1,533			1,920			1,914			1,673
Total interest and dividend income	75,632			74,359			74,411			74,174			73,877

Interest expense:
FHLB borrowings	16,394			16,074			16,539			17,072			17,198
Deposits	9,213			8,799			8,390			8,377			8,207
Repurchase agreements	1,487			1,504			1,542			1,712			1,693
Total interest expense	27,094			26,377			26,471			27,161			27,098

Net interest income	48,538			47,982			47,940			47,013			46,779

Provision for credit losses	—			—			—			323			275

Net interest income
(after provision for credit losses)	48,538			47,982			47,940			46,690			46,504

Non-interest income	6,626			5,566			5,461			5,145			5,277
Non-interest expense	23,426			23,590			25,262			23,106			22,859
Income tax expense	10,211			9,240			9,354			9,127			9,688
Net income	$	21,527		$	20,718		$	18,785		$	19,602		$	19,234

Efficiency ratio	42.46		%	44.05		%	47.31		%	44.30		%	43.91		%

Basic EPS	$	0.16		$	0.16		$	0.14		$	0.14		$	0.14
Diluted EPS	0.16			0.16			0.14			0.14			0.14

Comparison of Operating Results for the Six Months Ended March 31, 2016 and 2015

For the six month period ended March 31, 2016, the Company recognized net income of $42.2 million, or $0.32 per share, compared to net income of $39.7 million, or $0.29 per share, for the six month period ended March 31, 2015. The $2.5 million, or 6.4%, increase in net income was due primarily to a $1.7 million increase in net interest income and a $1.7 million increase in non-interest income, partially offset by a $1.0 million increase in non-interest expense. The $1.7 million, or 1.8%, increase in net interest income from the prior year six month period was due primarily to a $3.5 million decrease in interest expense on term borrowings, partially offset by a $1.7 million increase in interest expense on deposits.

Net income attributable to the daily leverage strategy was $1.1 million during the current year six month period, compared to $1.5 million for the prior year six month period. The decrease in net income attributable to the daily leverage strategy was due to an increase in the average FHLB line of credit borrowings rate, which was larger than the increase in the average yield earned on the cash at the Federal Reserve Bank. The Company's efficiency ratio was 43.25% for the current year six month period compared to 43.66% for the prior year six month period.

The net interest margin increased three basis points, from 1.73% for the prior year six month period to 1.76% for the current year six month period. Excluding the effects of the daily leverage strategy, the net interest margin would have increased four basis points, from 2.08% for the prior year six month period, to 2.12% for the current year six month period. The increase in the net interest margin was due mainly to a decrease in interest expense on term borrowings.

Interest and Dividend Income

The weighted average yield on total interest-earning assets increased two basis points, from 2.72% for the prior year six month period to 2.74% for the current year six month period, while the average balance of interest-earning assets increased $10.9 million from the prior year six month period. Absent the impact of the daily leverage strategy, the weighted average yield on total interest-earning assets would have decreased one basis point, from 3.23% for the prior year six month period to 3.22% for the current year six month period, while the average balance would have increased $38.1 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:
	2016		2015		Dollars			Percent
	(Dollars in thousands)
INTEREST AND DIVIDEND INCOME:
Loans receivable	$	120,955	$	116,817	$	4,138		3.5	%
MBS	15,533		19,538		(4,005		)	(20.5	)
FHLB stock	6,158		6,257		(99		)	(1.6	)
Cash and cash equivalents	4,327		2,817		1,510			53.6
Investment securities	3,018		3,348		(330		)	(9.9	)
Total interest and dividend income	$	149,991	$	148,777	$	1,214		0.8

The increase in interest income on loans receivable was due to a $399.6 million increase in the average balance of the portfolio, partially offset by a 10 basis point decrease in the weighted average yield on the portfolio, to 3.62% for the current six month period. Loan growth was funded through cash flows from the securities portfolio along with deposit growth. The decrease in the weighted average yield was due primarily to endorsements and refinances repricing loans to lower market rates, along with the origination and purchase of loans between periods at rates less than the existing portfolio rate.

The decrease in interest income on the MBS portfolio was due primarily to a $316.4 million decrease in the average balance of the portfolio as cash flows not reinvested were used to fund loan growth. Additionally, the weighted average yield on the MBS portfolio decreased five basis points, from 2.28% during the prior year six month period to 2.23% for the current year six month period. Net premium amortization of $2.3 million during the current year six month period decreased the weighted average yield on the portfolio by 33 basis points. During the prior year six month period, $2.6 million of net premiums were amortized, which decreased the weighted average yield on the portfolio by 31 basis points. As of March 31, 2016, the remaining net balance of premiums on our portfolio of MBS was $15.8 million.

The increase in interest income on cash and cash equivalents was due primarily to a 13 basis point increase in the weighted average yield resulting from an increase in the yield earned on balances held at the Federal Reserve Bank.

The decrease in interest income on investment securities was due primarily to a $75.9 million decrease in the average balance, partially offset by a five basis point increase in the weighted average yield on the portfolio. Cash flows not reinvested in the portfolio were used to fund loan growth.

Interest Expense

The weighted average rate paid on total interest-bearing liabilities decreased three basis points, from 1.13% for the prior year six month period to 1.10% for the current year six month period, while the average balance of interest-bearing liabilities increased $140.1 million from the prior year six month period. Absent the impact of the daily leverage strategy, the weighted average rate paid on total interest-bearing liabilities would have decreased nine basis points from the prior year six month period, to 1.28% for the current year six month period, due primarily to a decrease in the cost of term borrowings, while the average balance of interest-bearing liabilities would have increased $167.2 million due to deposit growth. 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:
	2016		2015		Dollars			Percent
	(Dollars in thousands)
INTEREST EXPENSE:
FHLB advances	$	28,053	$	31,582	$	(3,529	)	(11.2	)%
FHLB line of credit	4,415		2,604		1,811			69.5
Deposits	18,012		16,352		1,660			10.2
Repurchase agreements	2,991		3,424		(433		)	(12.6	)
Total interest expense	$	53,471	$	53,962	$	(491	)	(0.9	)

The decrease in interest expense on FHLB advances was due primarily to a 22 basis point decrease in the weighted average rate paid on the portfolio, to 2.24% for the current year six month period, resulting from the prepayment of a $175.0 million advance between periods with an effective rate of 5.08%, which was replaced with a $175.0 million advance with an effective rate of 2.18%. The increase in interest expense on FHLB line of credit borrowings was due primarily to an 18 basis point increase in the weighted average rate paid on the borrowings.

The increase in interest expense on deposits was primarily a result of deposit growth, along with a three basis point increase in the weighted average rate, to 0.73% for the current year six month period. The average balance of the deposit portfolio increased $253.2 million for the current year six month period, with the majority of the increase in the retail deposit portfolio, specifically the certificates of deposit and checking portfolios.

The decrease in interest expense on repurchase agreements was due to the maturity between periods of a $20.0 million repurchase agreement at a rate of 4.45%, which was not replaced.

Provision for Credit Losses

The Bank did not record a provision for credit losses during the current year six month period, compared to a provision for credit losses during the prior year six month period of $448 thousand. No provision for credit losses was recorded during the current year six month period due to the continued low level of net loan charge-offs and stabilization of delinquent loan balances. Net loan charge-offs were $250 thousand for the current year six month period and the ACL to net charge-offs (annualized) was 18.3 times at March 31, 2016. The improvement in collateral values has assisted in lowering our net charge-off amounts compared to prior years. At March 31, 2016, loans 90 or more days delinquent or in foreclosure were 0.25% of total loans, down slightly from 0.27% at March 31, 2015.

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:
	2016		2015		Dollars			Percent
	(Dollars in thousands)
NON-INTEREST INCOME:
Retail fees and charges	$	7,372	$	7,254	$	118		1.6	%
Income from BOLI	2,162		568		1,594			280.6
Insurance commissions	1,576		1,522		54			3.5
Loan fees	678		731		(53		)	(7.3	)
Other non-interest income	404		459		(55		)	(12.0	)
Total non-interest income	$	12,192	$	10,534	$	1,658		15.7

The increase in income from BOLI was due mainly to the purchase of a new BOLI investment between periods, as well as to the receipt of death benefits in the current 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 Six Months Ended
	March 31,				Change Expressed in:
	2016		2015		Dollars			Percent
	(Dollars in thousands)
NON-INTEREST EXPENSE:
Salaries and employee benefits	$	20,775	$	20,889	$	(114	)	(0.5	)%
Occupancy, net	5,288		4,880		408			8.4
Information technology and communications	5,167		5,153		14			0.3
Federal insurance premium	2,781		2,750		31			1.1
Deposit and loan transaction costs	2,670		2,630		40			1.5
Regulatory and outside services	2,630		2,502		128			5.1
Advertising and promotional	2,137		1,638		499			30.5
Low income housing partnerships	2,094		2,912		(818		)	(28.1	)
Office supplies and related expense	1,471		1,062		409			38.5
Other non-interest expense	2,003		1,585		418			26.4
Total non-interest expense	$	47,016	$	46,001	$	1,015		2.2

The increase in occupancy, net expense was due mainly to non-capitalizable costs associated with the remodel of the Bank's Kansas City market area operations center. The increase in advertising and promotional expense was due primarily to the timing of media campaigns and sponsorships. The decrease in low income housing partnerships expense was due primarily to impairments in the prior year six month period. The increase in office supplies and related expense was due primarily to the purchase of cards enabled with chip card technology. The increase in other non-interest expense was due largely to higher deposit account charge-offs related to debit card fraud in the current year, along with an increase in expenses related to OREO operations due to a recent increase in properties with deferred maintenance and damage issues.

Management anticipates that salaries and employee benefits will increase $500 thousand from fiscal year 2015, a decrease from our original estimate of a $1.4 million increase, due mainly to lower than anticipated employee benefit expenses. Additionally, management anticipates information technology and communications expense will increase $700 thousand from fiscal year 2015, a decrease from our original estimate of a $1.5 million increase.

Income Tax Expense

Income tax expense was $19.5 million for the current year six month period compared to $19.2 million for the prior year six month period, due to an increase in pre-tax income. The effective tax rate for the current year six month period was 31.5% compared to 32.6% for the prior year six month period. The decrease in the effective tax rate was due primarily to an increase in nontaxable income related to BOLI and higher low income housing tax credits in the current fiscal year. Management anticipates the effective tax rate for fiscal year 2016 will be approximately 32%, based on fiscal year 2016 estimates as of March 31, 2016.

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 and the weighted average yield/rate on our interest-earning assets and interest-bearing liabilities at March 31, 2016. As previously discussed, the daily leverage strategy was not in place at March 31, 2016, so the end of period yields/rates presented at March 31, 2016 in the table below do not reflect the effects of 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.



	At	For the Six Months Ended
	March 31,	March 31, 2016						March 31, 2015
	2016	Average		Interest				Average		Interest
	Yield/	Outstanding		Earned/		Yield/		Outstanding		Earned/		Yield/
	Rate	Amount		Paid		Rate		Amount		Paid		Rate
Assets:		(Dollars in thousands)
Interest-earning assets:
Loans receivable⁽¹⁾	3.63%	$	6,684,173	$	120,955	3.62	%	$	6,284,572	$	116,817	3.72	%
MBS⁽²⁾	2.25	1,393,913		15,533		2.23		1,710,345		19,538		2.28
Investment securities⁽²⁾⁽³⁾	1.19	495,824		3,018		1.22		571,717		3,348		1.17
FHLB stock	5.98	205,714		6,158		5.99		209,679		6,257		5.98
Cash and cash equivalents	0.49	2,171,491		4,327		0.39		2,163,918		2,817		0.26
Total interest-earning assets⁽¹⁾⁽²⁾	3.24	10,951,115		149,991		2.74		10,940,231		148,777		2.72
Other noninterest-earning assets		291,151						231,904
Total assets		$	11,242,266					$	11,172,135

Liabilities and stockholders' equity:
Interest-bearing liabilities:
Checking	0.04	$	771,428	144		0.04		$	710,009	134		0.04
Savings	0.17	318,444		308		0.19		301,322		220		0.15
Money market	0.23	1,164,912		1,368		0.23		1,147,287		1,334		0.23
Retail certificates	1.38	2,334,281		15,341		1.31		2,235,850		13,682		1.23
Wholesale certificates	0.56	376,133		851		0.45		317,531		982		0.62
Total deposits	0.77	4,965,198		18,012		0.73		4,711,999		16,352		0.70
FHLB advances⁽⁴⁾	2.23	2,504,999		28,053		2.24		2,570,980		31,582		2.46
FHLB line of credit	—	2,042,623		4,415		0.43		2,069,780		2,604		0.25
FHLB borrowings	2.23	4,547,622		32,468		1.43		4,640,760		34,186		1.47
Repurchase agreements	2.94	200,000		2,991		2.94		220,000		3,424		3.08
Total borrowings	2.29	4,747,622		35,459		1.49		4,860,760		37,610		1.55
Total interest-bearing liabilities	1.29	9,712,820		53,471		1.10		9,572,759		53,962		1.13
Other noninterest-bearing liabilities		121,560						116,659
Stockholders' equity		1,407,886						1,482,717
Total liabilities and stockholders' equity		$	11,242,266					$	11,172,135

								(Continued)



	At	For the Six Months Ended
	March 31,	March 31, 2016						March 31, 2015
	2016	Average		Interest				Average		Interest
	Yield/	Outstanding		Earned/		Yield/		Outstanding		Earned/		Yield/
	Rate	Balance		Paid		Rate		Balance		Paid		Rate
		(Dollars in thousands)

Net interest income⁽⁵⁾				$	96,520					$	94,815
Net interest rate spread^(6)(11)	1.95%					1.64	%					1.59	%
Net interest-earning assets		$	1,238,295					$	1,367,472
Net interest margin^(7)(11)						1.76						1.73
Ratio of interest-earning assets
to interest-bearing liabilities						1.13x						1.14x

Selected performance ratios:
Return on average assets (annualized)⁽¹¹⁾						0.75	%					0.71	%
Return on average equity (annualized)⁽¹¹⁾						6.00						5.36
Average equity to average assets						12.52						13.27
Operating expense ratio⁽⁸⁾						0.84						0.82
Efficiency ratio⁽⁹⁾						43.25						43.66
Pre-tax yield on daily leverage strategy⁽¹⁰⁾						0.16						0.21

								(Concluded)


(1)	Calculated net of unearned loan fees, deferred costs, and undisbursed loan funds. Loans that are 90 or more days delinquent are included in the loans receivable average balance with a yield of zero percent.


(2)	MBS and investment securities classified as AFS are stated at amortized cost, adjusted for unamortized purchase premiums or discounts.


(3)	The average balance of investment securities includes an average balance of nontaxable securities of $38.0 million and $36.0 million for the six month period March 31, 2016 and 2015, respectively.


(4)	The balance and rate of FHLB advances are stated net of deferred gains and deferred prepayment penalties.


(5)	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 balance of interest-earning assets and interest-bearing liabilities, and the interest rates earned or paid on them.


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


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


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


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


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


(11)	The table below presents a reconciliation of actual financial ratios to adjusted financial ratios excluding the effects of the daily leverage strategy. The adjusted financial ratios are not presented in accordance with GAAP. Management believes it is important for comparability purposes to provide these adjusted financial ratios because of the unique nature of the daily leverage strategy.



	For the Six Months Ended
	March 31, 2016						March 31, 2015
			Daily Leverage						Daily Leverage
	Actual		Strategy		Adjusted		Actual		Strategy		Adjusted
Return on average assets (annualized)	0.75	%	(0.14	)%	0.89	%	0.71	%	(0.13	)%	0.84	%
Return on average equity (annualized)	6.00		0.16		5.84		5.36		0.20		5.16
Net interest margin	1.76		(0.36	)	2.12		1.73		(0.35	)	2.08
Average net interest rate spread	1.64		(0.30	)	1.94		1.59		(0.27	)	1.86

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 month period March 31, 2016 to the six month period March 31, 2015. 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, 2016 vs. March 31, 2015
	Increase (Decrease) Due to
	Volume			Rate			Total
	(Dollars in thousands)
Interest-earning assets:
Loans receivable	$	7,219		$	(3,081	)	$	4,138
MBS	(3,537		)	(468		)	(4,005		)
Investment securities	(458		)	128			(330		)
FHLB stock	(88		)	(11		)	(99		)
Cash and cash equivalents	10			1,500			1,510
Total interest-earning assets	3,146			(1,932		)	1,214

Interest-bearing liabilities:
Checking	12			(2		)	10
Savings	13			74			87
Money market	26			9			35
Certificates of deposit	978			550			1,528
FHLB borrowings	(752		)	(966		)	(1,718		)
Repurchase agreements	(291		)	(142		)	(433		)
Total interest-bearing liabilities	(14		)	(477		)	(491		)

Net change in net interest and dividend income	$	3,160		$	(1,455	)	$	1,705

Comparison of Operating Results for the Three Months Ended March 31, 2016 and 2015

For the quarter ended March 31, 2016, the Company recognized net income of $21.5 million, or $0.16 per share, compared to net income of $19.2 million, or $0.14 per share, for the quarter ended March 31, 2015. The $2.3 million, or 11.9%, increase in net income was due primarily to a $1.8 million increase in net interest income and a $1.3 million increase in non-interest income due mainly to income from BOLI. The $1.8 million, or 3.8%, increase in net interest income was due primarily to a $2.4 million decrease in interest expense on term borrowings.

Net income attributable to the daily leverage strategy was $561 thousand during the current quarter, compared to $682 thousand for the prior year quarter. The decrease in the net income attributable to the daily leverage strategy was due to an increase in the FHLB line of credit borrowings rate, which was larger than the increase in the average yield earned on the cash at the Federal Reserve Bank.

Interest and Dividend Income

The weighted average yield on total interest-earning assets increased seven basis points, from 2.70% for the prior year quarter to 2.77% for the current quarter, while the average balance of interest-earning assets decreased $34.9 million from the prior year quarter. Absent the impact of the daily leverage strategy, the weighted average yield on total interest-earning assets would have increased one basis point, from 3.21% for the prior year quarter to 3.22% for the current year quarter, while the average balance would have increased $19.7 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:
	2016		2015		Dollars			Percent
	(Dollars in thousands)
INTEREST AND DIVIDEND INCOME:
Loans receivable	$	60,732	$	58,198	$	2,534		4.4	%
MBS	7,702		9,537		(1,835		)	(19.2	)
FHLB stock	3,006		3,076		(70		)	(2.3	)
Cash and cash equivalents	2,707		1,393		1,314			94.3
Investment securities	1,485		1,673		(188		)	(11.2	)
Total interest and dividend income	$	75,632	$	73,877	$	1,755		2.4

The increase in interest income on loans receivable was due to a $403.9 million increase in the average balance of the portfolio, partially offset by a seven basis point decrease in the weighted average yield on the portfolio, to 3.62% for the current quarter. Loan growth was funded through cash flows from the securities portfolio along with deposit growth. The decrease in the weighted average yield was due primarily to endorsements and refinances repricing loans to lower market rates, along with the origination and purchase of loans between periods at rates less than the existing portfolio rate.

The decrease in interest income on the MBS portfolio was due primarily to a $300.1 million decrease in the average balance of the portfolio as cash flows not reinvested were used to fund loan growth. Additionally, the weighted average yield on the MBS portfolio decreased four basis points, from 2.28% during the prior year quarter to 2.24% for the current year quarter. Net premium amortization of $1.1 million during the current year quarter decreased the weighted average yield on the portfolio by 32 basis points. During the prior year quarter, $1.3 million of net premiums were amortized, which decreased the weighted average yield on the portfolio by 30 basis points.

The increase in interest income on cash and cash equivalents was due primarily to a 25 basis point increase in the weighted average yield resulting from an increase in yield earned on balances held at the Federal Reserve Bank.

The decrease in interest income on investment securities was due primarily to a $71.9 million decrease in the average balance. Cash flows not reinvested into the portfolio were used to fund loan growth.

Interest Expense

The weighted average rate paid on total interest-bearing liabilities decreased two basis points, from 1.14% for the prior year quarter to 1.12% for the current year quarter, while the average balance of interest-bearing liabilities increased $96.1 million from the prior year quarter. Absent the impact of the daily leverage strategy, the weighted average rate paid on total interest-bearing liabilities would have decreased 12 basis points from the prior year quarter, to 1.27%, due primarily to a decrease in the cost of term borrowings, while the average balance of interest-bearing liabilities would have increased $150.7 million due to deposit growth. 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:
	2016		2015		Dollars			Percent
	(Dollars in thousands)
INTEREST EXPENSE:
FHLB advances	$	13,729	$	15,900	$	(2,171	)	(13.7	)%
FHLB line of credit	2,665		1,298		1,367			105.3
Deposits	9,213		8,207		1,006			12.3
Repurchase agreements	1,487		1,693		(206		)	(12.2	)
Total interest expense	$	27,094	$	27,098	$	(4	)	—

The decrease in interest expense on FHLB advances was due primarily to a 28 basis point decrease in the weighted average rate paid on the portfolio, to 2.23% for the current year quarter, resulting from the prepayment of a $175.0 million advance between periods, with an effective rate of 5.08%, which was replaced with a $175.0 million advance with an effective rate of 2.18%. The increase in interest expense on FHLB line of credit borrowings was due primarily to a 28 basis point increase in the weighted average rate paid on the borrowings.

The increase in interest expense on deposits was primarily a result of deposit growth, along with a four basis point increase in the weighted average rate, to 0.74% for the current quarter. The average balance of the deposit portfolio increased $270.6 million compared to the prior year quarter, with the majority of the increase in the higher costing certificate of deposit portfolio.

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:
	2016		2015		Dollars			Percent
	(Dollars in thousands)
NON-INTEREST INCOME:
Retail fees and charges	$	3,558	$	3,471	$	87		2.5	%
Income from BOLI	1,459		252		1,207			479.0
Insurance commissions	1,060		973		87			8.9
Loan fees	336		357		(21		)	(5.9	)
Other non-interest income	213		224		(11		)	(4.9	)
Total non-interest income	$	6,626	$	5,277	$	1,349		25.6

The increase in income from BOLI was due mainly to the receipt of a death benefit during the current quarter, as well as to the purchase of a new BOLI investment between periods.

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:
	2016		2015		Dollars			Percent
	(Dollars in thousands)
NON-INTEREST EXPENSE:
Salaries and employee benefits	$	10,288	$	10,412	$	(124	)	(1.2	)%
Occupancy, net	2,616		2,461		155			6.3
Information technology and communications	2,609		2,585		24			0.9
Federal insurance premium	1,399		1,468		(69		)	(4.7	)
Deposit and loan transaction costs	1,396		1,256		140			11.1
Regulatory and outside services	1,144		1,206		(62		)	(5.1	)
Advertising and promotional	983		749		234			31.2
Low income housing partnerships	1,321		1,366		(45		)	(3.3	)
Office supplies and related expense	584		588		(4		)	(0.7	)
Other non-interest expense	1,086		768		318			41.4
Total non-interest expense	$	23,426	$	22,859	$	567		2.5

The increase in advertising and promotional expense was due primarily to the timing of media campaigns and sponsorships. The increase in other non-interest expense was due mainly to an increase in expenses related to OREO operations due to a recent increase in properties with deferred maintenance and damage issues, as well as to an increase in deposit account charge-offs related to debit card fraud.

The Company's efficiency ratio was 42.46% for the current quarter compared to 43.91% for the prior year quarter. The change in the efficiency ratio was due primarily to an increase in net interest income, as well as to an increase in non-interest income.

Income Tax Expense

Income tax expense was $10.2 million for the current quarter compared to $9.7 million for the prior year quarter, due to an increase in pre-tax income. The effective tax rate for the current quarter was 32.2% compared to 33.5% for the prior year quarter. The decrease in the effective tax rate was due primarily to an increase in nontaxable income related to BOLI and higher low income housing tax credits in the current quarter.

Average Balance Sheet

Average yields are derived by dividing annualized income by the average balance of the related assets and 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 yields and rates include amortization of fees, costs, premiums and discounts which are considered adjustments to yields/rates. Yields on tax-exempt securities were not calculated on a fully taxable equivalent basis.



	For the Three Months Ended
	March 31, 2016						March 31, 2015
	Average		Interest				Average		Interest
	Outstanding		Earned/		Yield/		Outstanding		Earned/		Yield/
	Amount		Paid		Rate		Amount		Paid		Rate
Assets:	(Dollars in thousands)
Interest-earning assets:
Loans receivable⁽¹⁾	$	6,717,174	$	60,732	3.62	%	$	6,313,311	$	58,198	3.69	%
MBS⁽²⁾	1,374,917		7,702		2.24		1,674,986		9,537		2.28
Investment securities⁽²⁾⁽³⁾	488,493		1,485		1.22		560,434		1,673		1.19
FHLB stock	202,006		3,006		5.98		208,770		3,076		5.98
Cash and cash equivalents	2,142,320		2,707		0.50		2,202,290		1,393		0.25
Total interest-earning assets⁽¹⁾⁽²⁾	10,924,910		75,632		2.77		10,959,791		73,877		2.70
Other noninterest-earning assets	295,430						233,237
Total assets	$	11,220,340					$	11,193,028

Liabilities and stockholders' equity:
Interest-bearing liabilities:
Checking	$	785,149	72		0.04		$	724,637	67		0.04
Savings	323,572		168		0.21		305,182		115		0.15
Money market	1,170,684		683		0.23		1,153,612		664		0.23
Retail certificates	2,357,389		7,805		1.33		2,246,166		6,862		1.24
Wholesale certificates	392,286		485		0.50		328,910		499		0.61
Total deposits	5,029,080		9,213		0.74		4,758,507		8,207		0.70
FHLB advances⁽⁴⁾	2,471,404		13,729		2.23		2,571,309		15,900		2.51
FHLB line of credit	2,007,692		2,665		0.53		2,062,222		1,298		0.25
FHLB borrowings	4,479,096		16,394		1.47		4,633,531		17,198		1.50
Repurchase agreements	200,000		1,487		2.94		220,000		1,693		3.08
Total borrowings	4,679,096		17,881		1.53		4,853,531		18,891		1.58
Total interest-bearing liabilities	9,708,176		27,094		1.12		9,612,038		27,098		1.14
Other noninterest-bearing liabilities	110,635						105,621
Stockholders' equity	1,401,529						1,475,369
Total liabilities and stockholders' equity	$	11,220,340					$	11,193,028
									(Continued)



	For the Three Months Ended
	March 31, 2016						March 31, 2015
	Average		Interest				Average		Interest
	Outstanding		Earned/		Yield/		Outstanding		Earned/		Yield/
	Amount		Paid		Rate		Amount		Paid		Rate
	(Dollars in thousands)

Net interest income⁽⁵⁾			$	48,538					$	46,779
Net interest rate spread^(6)(11)					1.65	%					1.56	%
Net interest-earning assets	$	1,216,734					$	1,347,753
Net interest margin^(7)(11)					1.78						1.71
Ratio of interest-earning assets
to interest-bearing liabilities					1.13x						1.14x

Selected performance ratios:
Return on average assets (annualized)⁽¹¹⁾					0.77	%					0.69	%
Return on average equity (annualized)⁽¹¹⁾					6.14						5.21
Average equity to average assets					12.49						13.18
Operating expense ratio⁽⁸⁾					0.84						0.82
Efficiency ratio⁽⁹⁾					42.46						43.91
Pre-tax yield on daily leverage strategy⁽¹⁰⁾					0.16						0.20

									(Concluded)


(1)	Calculated net of unearned loan fees, deferred costs, and undisbursed loan funds. Loans that are 90 or more days delinquent are included in the loans receivable average balance with a yield of zero percent.


(2)	MBS and investment securities classified as AFS are stated at amortized cost, adjusted for unamortized purchase premiums or discounts.


(3)	The average balance of investment securities includes an average balance of nontaxable securities of $37.9 million and $35.1 million for the quarters ended March 31, 2016 and March 31, 2015, respectively.


(4)	The balance and rate of FHLB advances are stated net of deferred gains and deferred prepayment penalties.


(5)	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 balance of interest-earning assets and interest-bearing liabilities, and the interest rates earned or paid on them.


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


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


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


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


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


(11)	The table below presents a reconciliation of actual financial ratios to adjusted financial ratios excluding the effects of the daily leverage strategy. The adjusted financial ratios are not presented in accordance with GAAP. Management believes it is important for comparability purposes to provide these adjusted financial ratios because of the unique nature of the daily leverage strategy.



	For the Three Months Ended
	March 31, 2016						March 31, 2015
			Daily Leverage						Daily Leverage
	Actual		Strategy		Adjusted		Actual		Strategy		Adjusted
Return on average assets (annualized)	0.77	%	(0.14	)%	0.91	%	0.69	%	(0.12	)%	0.81	%
Return on average equity (annualized)	6.14		0.16		5.98		5.21		0.18		5.03
Net interest margin	1.78		(0.35	)	2.13		1.71		(0.33	)	2.04
Average net interest rate spread	1.65		(0.30	)	1.95		1.56		(0.26	)	1.82

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, 2016 to the three months ended March 31, 2015. 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,
	2016 vs. 2015
	Increase (Decrease) Due to
	Volume			Rate			Total
	(Dollars in thousands)
Interest-earning assets:
Loans receivable	$	3,641		$	(1,108	)	$	2,533
MBS	(1,683		)	(152		)	(1,835		)
Investment securities	(218		)	31			(187		)
FHLB stock	(67		)	(3		)	(70		)
Cash and cash equivalents	(39		)	1,353			1,314
Total interest-earning assets	1,634			121			1,755

Interest-bearing liabilities:
Checking	6			(1		)	5
Savings	7			45			52
Money market	16			4			20
Certificates of deposit	568			361			929
FHLB borrowings	(567		)	(237		)	(804		)
Repurchase agreements	(138		)	(68		)	(206		)
Total interest-bearing liabilities	(108		)	104			(4		)

Net change in net interest and dividend income	$	1,742		$	17		$	1,759

Comparison of Operating Results for the Three Months Ended March 31, 2016 and December 31, 2015

Net income increased $809 thousand, or 3.9%, from the quarter ended December 31, 2015 to $21.5 million, or $0.16 per share, for the quarter ended March 31, 2016, due primarily to an increase in non-interest income. Net income attributable to the daily leverage strategy was $561 thousand during the current quarter compared to $583 thousand in the prior quarter.

Net interest income increased $556 thousand, or 1.2%, from the prior quarter to $48.5 million for the current quarter. The increase was due primarily to a decrease in interest expense on FHLB advances. The net interest margin increased three basis points from 1.75% for the prior quarter to 1.78% for the current quarter. Excluding the effects of the daily leverage strategy, the net interest margin would have been 2.13% for the current quarter compared to 2.11% for the prior quarter. The two basis point increase was due mainly to a decrease in interest expense on FHLB advances.

Interest and Dividend Income

The weighted average yield on total interest-earning assets for the current quarter increased six basis points from the prior quarter, to 2.77%, while the average balance of interest-earning assets decreased $52.1 million between the two periods. Absent the impact of the daily leverage strategy, the weighted average yield on total interest-earning assets would have increased one basis point from the prior quarter, to 3.22%, while the average balance would have increased $17.4 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:
	2016		2015		Dollars			Percent
	(Dollars in thousands)
INTEREST AND DIVIDEND INCOME:
Loans receivable	$	60,732	$	60,223	$	509		0.8	%
MBS	7,702		7,831		(129		)	(1.6	)
FHLB stock	3,006		3,152		(146		)	(4.6	)
Cash and cash equivalents	2,707		1,620		1,087			67.1
Investment securities	1,485		1,533		(48		)	(3.1	)
Total interest and dividend income	$	75,632	$	74,359	$	1,273		1.7

The increase in interest income on loans receivable was due to a $65.6 million increase in the average balance of the portfolio. The loan growth was largely funded with deposit growth during the current quarter. The weighted average yield on the portfolio was 3.62% for the current quarter, unchanged from the prior quarter.

The decrease in interest income on MBS was due to a $37.8 million decrease in the average balance of the portfolio, partially offset by a two basis point increase in the weighted average yield on the portfolio. During the current quarter, $1.1 million of net premiums on MBS were amortized, which decreased the weighted average yield on the portfolio by 32 basis points. During the prior quarter, $1.2 million of net premiums were amortized, which decreased the weighted average yield on the portfolio by 33 basis points.

The increase in interest income on cash and cash equivalents was due primarily to a 21 basis point increase in the weighted average yield resulting from a full quarter impact, in the current quarter, of the increase in yield earned on balances held at the Federal Reserve Bank.

Interest Expense

The weighted average rate paid on total interest-bearing liabilities increased four basis point from the prior quarter, to 1.12%, while the average balance of interest-bearing liabilities decreased $9.2 million between the two periods. Absent the impact of the daily leverage strategy, the weighted average rate paid on total interest-bearing liabilities would have decreased one basis point from the prior quarter, to 1.27%, and the average balance would have increased $60.2 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 Three Months Ended
	March 31,		December 31,		Change Expressed in:
	2016		2015		Dollars			Percent
	(Dollars in thousands)
INTEREST EXPENSE:
FHLB advances	$	13,729	$	14,325	$	(596	)	(4.2	)%
FHLB line of credit	2,665		1,749		916			52.4
Deposits	9,213		8,799		414			4.7
Repurchase agreements	1,487		1,504		(17		)	(1.1	)
Total interest expense	$	27,094	$	26,377	$	717		2.7

The decrease in interest expense on FHLB advances was due primarily to a $66.8 million decrease in the average balance of the portfolio. Late in the prior quarter, a $200.0 million advance with an effective rate of 1.94% matured and was partially replaced with a $100.0 million advance with a contractual rate of 1.45%. The increase in interest expense on FHLB line of credit borrowings was due largely to a 20 basis point increase in the average rate paid on the borrowings, to 0.53% for the current quarter.

The increase in interest expense on deposits was due primarily to a three basis point increase in the average rate paid on the deposit portfolio, to 0.74% for the current quarter, as well as to deposit growth. The average balance of the deposit portfolio increased by $127.1 million, which was largely in the certificates of deposit and checking portfolios.

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:
	2016		2015		Dollars			Percent
	(Dollars in thousands)
NON-INTEREST INCOME:
Retail fees and charges	$	3,558	$	3,814	$	(256	)	(6.7	)%
Income from BOLI	1,459		703		756			107.5
Insurance commissions	1,060		516		544			105.4
Loan fees	336		342		(6		)	(1.8	)
Other non-interest income	213		191		22			11.5
Total non-interest income	$	6,626	$	5,566	$	1,060		19.0

The decrease in retail fees and charges was due primarily to a decrease in service fees earned and debit card income, due in part to seasonality. The increase in income from BOLI was due primarily to the receipt of death benefits during the current quarter. The increase in insurance commissions was due largely to the receipt of annual contingent commissions from certain insurance providers during 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:
	2016		2015		Dollars			Percent
	(Dollars in thousands)
NON-INTEREST EXPENSE:
Salaries and employee benefits	$	10,288	$	10,487	$	(199	)	(1.9	)%
Occupancy, net	2,616		2,672		(56		)	(2.1	)
Information technology and communications	2,609		2,558		51			2.0
Federal insurance premium	1,399		1,382		17			1.2
Deposit and loan transaction costs	1,396		1,274		122			9.6
Regulatory and outside services	1,144		1,486		(342		)	(23.0	)
Advertising and promotional	983		1,154		(171		)	(14.8	)
Low income housing partnerships	1,321		773		548			70.9
Office supplies and related expense	584		887		(303		)	(34.2	)
Other non-interest expense	1,086		917		169			18.4
Total non-interest expense	$	23,426	$	23,590	$	(164	)	(0.7	)

The decrease in regulatory and outside services was due primarily to a decrease in external audit fees. The decrease in advertising and promotional expense was due primarily to the timing of media campaigns and sponsorships. The decrease in office supplies and related expense was due primarily to the purchase of cards enabled with chip card technology during the prior quarter. The increase in low income housing partnerships expense was due primarily to an increase in amortization expense.

The Company's efficiency ratio was 42.46% for the current quarter compared to 44.05% for the prior quarter. The change in the efficiency ratio was due primarily to an increase in non-interest income, as well as to an increase in net interest income. The efficiency ratio is a measure of a financial institution's total non-interest expense as a percentage of the sum of net interest income (pre-provision for credit losses) and non-interest income. A lower value indicates that the financial institution is generating revenue with a lower level of expense.

Income Tax Expense

Income tax expense was $10.2 million for the current quarter compared to $9.2 million for the prior quarter. The increase between periods was due primarily to an increase in pre-tax income as well as to an increase in the effective income tax rate from 30.8% for the prior quarter to 32.2% for the current quarter. The increase in the effective income tax rate between quarters was due primarily to the prior quarter including favorable discrete items related to state income tax liabilities.

Average Balance Sheet

As previously mentioned, average yields are derived by dividing annualized income by the average balance of the related assets and 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 yields and rates include amortization of fees, costs, premiums and discounts which are considered adjustments to yields/rates. Yields on tax-exempt securities were not calculated on a fully taxable equivalent basis.



	For the Three Months Ended
	March 31, 2016						December 31, 2015
	Average		Interest				Average		Interest
	Outstanding		Earned/		Yield/		Outstanding		Earned/		Yield/
	Amount		Paid		Rate		Amount		Paid		Rate
Assets:	(Dollars in thousands)
Interest-earning assets:
Loans receivable⁽¹⁾	$	6,717,174	$	60,732	3.62	%	$	6,651,531	$	60,223	3.62	%
MBS⁽²⁾	1,374,917		7,702		2.24		1,412,702		7,831		2.22
Investment securities⁽²⁾⁽³⁾	488,493		1,485		1.22		503,075		1,533		1.22
FHLB stock	202,006		3,006		5.98		209,382		3,152		5.97
Cash and cash equivalents	2,142,320		2,707		0.50		2,200,345		1,620		0.29
Total interest-earning assets⁽¹⁾⁽²⁾	10,924,910		75,632		2.77		10,977,035		74,359		2.71
Other noninterest-earning assets	295,430						286,920
Total assets	$	11,220,340					$	11,263,955

Liabilities and stockholders' equity:
Interest-bearing liabilities:
Checking	$	785,149	72		0.04		$	757,857	72		0.04
Savings	323,572		168		0.21		313,372		140		0.18
Money market	1,170,684		683		0.23		1,159,201		685		0.23
Retail certificates	2,357,389		7,805		1.33		2,311,424		7,536		1.29
Wholesale certificates	392,286		485		0.50		360,156		366		0.40
Total deposits	5,029,080		9,213		0.74		4,902,010		8,799		0.71
FHLB advances⁽⁴⁾	2,471,404		13,729		2.23		2,538,230		14,325		2.24
FHLB line of credit	2,007,692		2,665		0.53		2,077,174		1,749		0.33
FHLB borrowings	4,479,096		16,394		1.47		4,615,404		16,074		1.38
Repurchase agreements	200,000		1,487		2.94		200,000		1,504		2.94
Total borrowings	4,679,096		17,881		1.53		4,815,404		17,578		1.44
Total interest-bearing liabilities	9,708,176		27,094		1.12		9,717,414		26,377		1.08
Other noninterest-bearing liabilities	110,635						132,368
Stockholders' equity	1,401,529						1,414,173
Total liabilities and stockholders' equity	$	11,220,340					$	11,263,955
									(Continued)



	For the Three Months Ended
	March 31, 2016						December 31, 2015
	Average		Interest				Average		Interest
	Outstanding		Earned/		Yield/		Outstanding		Earned/		Yield/
	Amount		Paid		Rate		Amount		Paid		Rate
	(Dollars in thousands)

Net interest income⁽⁵⁾			$	48,538					$	47,982
Net interest rate spread^(6)(11)					1.65	%					1.63	%
Net interest-earning assets	$	1,216,734					$	1,259,621
Net interest margin^(7)(11)					1.78						1.75
Ratio of interest-earning assets
to interest-bearing liabilities					1.13x						1.13x

Selected performance ratios:
Return on average assets (annualized)⁽¹¹⁾					0.77	%					0.74	%
Return on average equity (annualized)⁽¹¹⁾					6.14						5.86
Average equity to average assets					12.49						12.55
Operating expense ratio⁽⁸⁾					0.84						0.84
Efficiency ratio⁽⁹⁾					42.46						44.05
Pre-tax yield on daily leverage strategy⁽¹⁰⁾					0.16						0.16

									(Concluded)


(1)	Calculated net of unearned loan fees, deferred costs, and undisbursed loan funds. Loans that are 90 or more days delinquent are included in the loans receivable average balance with a yield of zero percent.


(2)	MBS and investment securities classified as AFS are stated at amortized cost, adjusted for unamortized purchase premiums or discounts.


(3)	The average balance of investment securities includes an average balance of nontaxable securities of $37.9 million and $38.2 million for the quarters ended March 31, 2016 and December 31, 2015, respectively.


(4)	The balance and rate of FHLB advances are stated net of deferred gains and deferred prepayment penalties.


(5)	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 balance of interest-earning assets and interest-bearing liabilities, and the interest rates earned or paid on them.


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


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


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


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


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


(11)	The table below presents a reconciliation of actual financial ratios to adjusted financial ratios excluding the effects of the daily leverage strategy. The adjusted financial ratios are not presented in accordance with GAAP. Management believes it is important for comparability purposes to provide these adjusted financial ratios because of the unique nature of the daily leverage strategy.



	For the Three Months Ended
	March 31, 2016						December 31, 2015
			Daily Leverage						Daily Leverage
	Actual		Strategy		Adjusted		Actual		Strategy		Adjusted
Return on average assets (annualized)	0.77	%	(0.14	)%	0.91	%	0.74	%	(0.14	)%	0.88	%
Return on average equity (annualized)	6.14		0.16		5.98		5.86		0.16		5.70
Net interest margin	1.78		(0.35	)	2.13		1.75		(0.36	)	2.11
Average net interest rate spread	1.65		(0.30	)	1.95		1.63		(0.30	)	1.93

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, 2016 to the three months ended December 31, 2015. 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 quarter's average rate and (2) changes in rate, which are changes in the average rate multiplied by the average balance from the previous quarter. 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, 2016 vs. December 31, 2015
	Increase (Decrease) Due to
	Volume			Rate			Total
	(Dollars in thousands)
Interest-earning assets:
Loans receivable	$	567		$	(59	)	$	508
MBS	(211		)	82			(129		)
Investment securities	(45		)	(2		)	(47		)
FHLB stock	(143		)	(3		)	(146		)
Cash and cash equivalents	(44		)	1,131			1,087
Total interest-earning assets	124			1,149			1,273

Interest-bearing liabilities:
Checking	2			(1		)	1
Savings	4			24			28
Money market	—			(1		)	(1		)
Certificates of deposit	190			196			386
FHLB borrowings	(551		)	871			320
Repurchase agreements	(8		)	(9		)	(17		)
Total interest-bearing liabilities	(363		)	1,080			717

Net change in net interest and dividend income	$	487		$	69		$	556

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 term borrowings primarily have been used to invest in debentures and MBS in an effort 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 continuously 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 Federal Reserve Bank discount window. When the daily leverage strategy is in place, the Bank maintains the resulting excess cash reserves from the borrowings on the FHLB line of credit at the Federal Reserve Bank, which can be used to meet any short-term liquidity needs. Per FHLB's lending guidelines, total FHLB borrowings cannot exceed 40% of regulatory total assets without the pre-approval of FHLB senior management. In July 2015, the president of FHLB approved an increase for one year in the Bank's borrowing limit to 55% of Bank Call Report total assets. The amount that can be borrowed from the Federal Reserve Bank 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 Federal Reserve Bank discount window annually with a nominal, overnight borrowing.

If management observes a trend in the amount and frequency of line of credit utilization that is not in conjunction with a planned strategy, such as the daily leverage strategy, the Bank will likely utilize long-term wholesale borrowing sources such as FHLB advances and/or repurchase agreements to provide permanent fixed-rate funding. The maturities of these 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, 2016, the Bank had term borrowings, at par, of $2.68 billion or approximately 29% of total assets.

The amount of FHLB advances outstanding at March 31, 2016 was $2.48 billion, of which $300.0 million was scheduled to mature in the next 12 months. All FHLB borrowings are secured by certain qualifying loans pursuant to a blanket collateral agreement with FHLB along with certain securities. The Bank pledged securities with an estimated fair value of $191.6 million as collateral for FHLB borrowings at March 31, 2016. At March 31, 2016, the Bank's ratio of the par value of FHLB borrowings to Call Report total assets was 27%. When the full daily leverage strategy is in place, FHLB borrowings are in excess of 40% of the Bank's Call Report total assets, and are expected to be in excess of 40% as long as the Bank continues its daily 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 borrowings against the FHLB line of credit in conjunction with the daily leverage strategy could be repaid at any point in time while the strategy is in effect, if necessary. Additionally, 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, 2016, the Bank had $992.7 million of securities that were eligible but unused as collateral for borrowing or other liquidity needs.

At March 31, 2016, the Bank had repurchase agreements of $200.0 million, or approximately 2% of total assets, none of which was 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 a total borrowings limit of 55% discussed above. The Bank has pledged securities with an estimated fair value of $226.0 million as collateral for repurchase agreements as of March 31, 2016. The securities pledged for the repurchase agreements will be delivered back to the Bank when the repurchase agreements mature.

The Bank has access to and utilizes other sources of funds for liquidity purposes, such as brokered and public unit deposits. As of March 31, 2016, the Bank's policy allowed for combined brokered and public unit deposits up to 15% of total deposits. At March 31, 2016, the Bank had public unit deposits totaling $386.3 million, or approximately 8% of total deposits, and no brokered 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 $426.1 million as collateral for public unit deposits at March 31, 2016. The securities pledged as collateral for public unit deposits are held under joint custody by FHLB and generally will be released upon deposit maturity.

At March 31, 2016, $1.13 billion of the Bank's $2.81 billion of certificates of deposit was scheduled to mature within one year. Included in the $1.13 billion was $307.5 million of public unit deposits. 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 at the prevailing rate, although no assurance can be given in this regard. We also anticipate the majority of the $307.5 million of maturing public unit deposits 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.

At March 31, 2016, cash and cash equivalents totaled $203.8 million, compared to $105.6 million at September 30, 2015, excluding cash related to the daily leverage strategy. The increase in operating cash between periods was due primarily to the Bank maintaining cash for seasonal operational needs, as well as the redemption of FHLB stock in conjunction with the removal of the daily leverage strategy at March 31, 2016. A majority of the cash received from the redemption of the FHLB stock was used to acquire FHLB stock when the full daily leverage strategy was reinstated on April 1, 2016.

As of March 31, 2016, the Bank had $2.3 million of agreements outstanding in connection with the remodeling of the Bank's Kansas City market area operations center. The project scope includes replacement of all mechanical and electrical systems, interior finishes, and exterior building components. The completed project will result in a more energy efficient building which is expected to lower our utility and maintenance expenses. There may be additional agreements and expenses related to the project through late fiscal year 2016, which is when the project is expected to be completed. Costs related to the project will be capitalized and depreciated according to the estimated useful life of the assets as they are placed in service.

The following table presents the contractual maturities of our loan, MBS, and investment securities portfolios at March 31, 2016, 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, 2016, the amortized cost of investment securities in our portfolio which are callable or have pre-refunding dates within one year was $301.7 million.



	Loans⁽¹⁾				MBS				Investment Securities				Total
	Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield
	(Dollars in thousands)
Amounts due:
Within one year	$	93,613	3.69	%	$	27	4.49	%	$	30,712	1.53	%	$	124,352	3.16	%

After one year:
Over one to two years	166,948		3.88		1,044		4.53		157,290		1.06		325,282		2.52
Over two to three years	20,405		4.66		16,343		4.21		203,030		1.16		239,778		1.67
Over three to five years	43,755		4.51		80,553		3.28		111,528		1.29		235,836		2.57
Over five to ten years	469,820		3.94		483,578		2.21		7,141		1.69		960,539		3.05
Over ten to fifteen years	1,419,746		3.28		383,993		1.88		—		—		1,803,739		2.98
After fifteen years	4,732,094		3.67		471,236		2.35		1,790		1.89		5,205,120		3.55
Total due after one year	6,852,768		3.62		1,436,747		2.25		480,779		1.17		8,770,294		3.26

	$	6,946,381	3.63		$	1,436,774	2.25		$	511,491	1.19		$	8,894,646	3.26


(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 term to complete construction. The maturity date for home equity loans assumes the customer always makes the required minimum payment.

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. Beginning March 31, 2016, savings institutions must also maintain an applicable capital conservation buffer above minimum risk-based capital requirements in order to distribute 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 or to incur or fund liabilities. There have been no material changes in commitments, contractual obligations or off-balance sheet arrangements from September 30, 2015. 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, 2015. We anticipate that 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, 2016 was $2.60 billion, and the average balance of short-term FHLB borrowings outstanding during this period was $2.39 billion at a weighted average contractual rate of 0.58%. The majority of the short-term FHLB borrowings amount related to borrowings on the FHLB line of credit in conjunction with the daily leverage strategy. This compares to a balance of short-term FHLB borrowings outstanding at March 31, 2016 of $300.0 million at a weighted average contractual rate of 1.55%.

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, 2016, 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 and Company in accordance with regulatory standards. As of March 31, 2016, the Company and Bank exceeded all regulatory capital requirements. The following table presents the regulatory capital ratios of the Bank and the Company at March 31, 2016.



							Regulatory
					Minimum		Requirement For
	Bank		Company		Regulatory		"Well-Capitalized"
	Ratios		Ratios		Requirement		Status of Bank
Tier 1 leverage ratio	11.3	%	12.4	%	4.0	%	5.0	%
Common equity tier 1 capital ratio	29.8		32.8		4.5		6.5
Tier 1 capital ratio	29.8		32.8		6.0		8.0
Total capital ratio	30.0		33.0		8.0		10.0

The following table presents a reconciliation of equity under GAAP to regulatory capital amounts, as of March 31, 2016, for the Bank and the Company (dollars in thousands):



	Bank			Company
Total equity as reported under GAAP	$	1,277,427		$	1,403,408
Unrealized gains on AFS securities	(7,014		)	(7,014		)
Total tier 1 capital	1,270,413			1,396,394
ACL	9,193			9,193
Total capital	$	1,279,606		$	1,405,587

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, 2015. The analysis presented in the tables below reflects the level of market risk at the Bank, including the cash the holding company has deposited 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 interest rate risk exposure of the Bank 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 analysis 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.

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 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). At all dates presented, the three-month Treasury bill yield was less than one percent, so the -100 basis points scenario was not applicable. 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, 2016							September 30, 2015
in Interest Rates⁽¹⁾	Amount ($)		Change ($)			Change (%)		Amount ($)		Change ($)			Change (%)
-100 bp	N/A		N/A			N/A		N/A		N/A			N/A
000 bp	$	190,499	$	—		—	%	$	190,776	$	—		—	%
+100 bp	190,721		222			0.12		189,248		(1,528		)	(0.80	)
+200 bp	188,771		(1,728		)	(0.91	)	186,443		(4,333		)	(2.27	)
+300 bp	184,485		(6,014		)	(3.16	)	181,652		(9,124		)	(4.78	)


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

As interest rates rise, cash flows from the Bank's mortgage related assets and callable investment securities decrease to such a level that the Bank's liabilities are projected to reprice to higher interest rates at a faster pace over the 12-month horizon than the Bank's assets, which decreases the net interest income projection. Lower interest rates at March 31, 2016, as compared to September 30, 2015, increased the amount of assets expected to reprice over the 12-month horizon, which reduced the Bank's exposure to higher interest rates at March 31, 2016 compared to September 30, 2015. See the gap table below for additional information.

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). At all dates presented, the three-month Treasury bill yield was less than one percent, so the -100 basis points scenario was not applicable. 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, 2016							September 30, 2015
in Interest Rates⁽¹⁾	Amount ($)		Change ($)			Change (%)		Amount ($)		Change ($)			Change (%)
-100 bp	N/A		N/A			N/A		N/A		N/A			N/A
000 bp	$	1,462,752	$	—		—	%	$	1,457,514	$	—		—	%
+100 bp	1,364,170		(98,582		)	(6.74	)	1,343,864		(113,650		)	(7.80	)
+200 bp	1,213,248		(249,504		)	(17.06	)	1,189,194		(268,320		)	(18.41	)
+300 bp	1,042,343		(420,409		)	(28.74	)	1,021,380		(436,134		)	(29.92	)


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

As interest rates rise, the market value of the Bank's assets decreases at a faster pace than the market value of the Bank's liabilities, which results in a decrease to the Bank's MVPE. As interest rates decrease, the opposite is true. Lower interest rates at March 31, 2016, as compared to September 30, 2015, decreased the Bank's risk to higher interest rates.

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 on current 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 mortgage ("ARM") 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. For additional information regarding the impact of changes in interest rates, see the preceding Percentage Change in Net Interest Income and Percentage 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⁾	$	2,037,244		$	1,967,534		$	1,062,921		$	1,861,671		$	6,929,370
Securities⁽²⁾	939,289			577,971			228,484			191,244			1,936,988
Other interest-earning assets	194,325			—			—			—			194,325
Total interest-earning assets	3,170,858			2,545,505			1,291,405			2,052,915			9,060,683

Interest-bearing liabilities
Transaction deposits⁽³⁾	685,008			422,631			284,161			1,000,174			2,391,974
Certificates of deposit	1,135,533			1,059,112			612,418			849			2,807,912
Borrowings⁽⁴⁾	300,000			1,075,000			1,000,000			344,984			2,719,984
Total interest-bearing liabilities	2,120,541			2,556,743			1,896,579			1,346,007			7,919,870

Excess (deficiency) of interest-earning assets over
interest-bearing liabilities	$	1,050,317		$	(11,238	)	$	(605,174	)	$	706,908		$	1,140,813

Cumulative excess of interest-earning assets over
interest-bearing liabilities	$	1,050,317		$	1,039,079		$	433,905		$	1,140,813

Cumulative excess of interest-earning assets over interest-bearing
liabilities as a percent of total Bank assets at:
March 31, 2016	11.27		%	11.15		%	4.66		%	12.25		%
September 30, 2015	7.48

Cumulative one-year gap - interest rates +200 bps at:
March 31, 2016	2.42
September 30, 2015	0.26

(1)

ARM 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 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, 2016, 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 $656.6 million, for a cumulative one-year gap of -7.0% of total assets.


(4)	Borrowings exclude deferred prepayment penalty costs.

The change in the one-year gap of 11.27% at March 31, 2016 compared to the one-year gap of 7.48% at September 30, 2015 was largely a result of lower interest rates at March 31, 2016 than at September 30, 2015.

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 the date presented. 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 net impact of the amortization of deferred prepayment penalties resulting from FHLB advances previously prepaid. The maturity and repricing terms presented for one- to four-family loans represent the contractual terms of the loan.



	March 31, 2016
	Amount		Yield/Rate		WAL	% of Category		% of Total
	(Dollars in thousands)
Investment securities	$	511,491	1.19	%	1.5	26.2	%	5.6	%
MBS - fixed	971,651		2.23		3.3	49.9		10.5
MBS - adjustable	465,123		2.31		5.9	23.9		5.0
Total investment securities and MBS	1,948,265		1.97		3.4	100.0	%	21.1
Loans receivable:
Fixed-rate one- to four-family:
<= 15 years	1,251,410		3.20		3.7	18.0	%	13.6
> 15 years	4,026,012		3.98		5.1	57.9		43.7
All other fixed-rate loans	303,988		4.09		2.8	4.4		3.3
Total fixed-rate loans	5,581,410		3.81		4.7	80.3		60.6
Adjustable-rate one- to four-family:
<= 36 months	309,822		1.84		3.5	4.5		3.4
> 36 months	889,191		2.93		2.6	12.8		9.7
All other adjustable-rate loans	165,958		4.42		1.4	2.4		1.8
Total adjustable-rate loans	1,364,971		2.86		2.7	19.7		14.9
Total loans receivable	6,946,381		3.63		4.3	100.0	%	75.5
FHLB stock	114,381		5.98		2.9			1.2
Cash and cash equivalents	203,811		0.49		—			2.2
Total interest-earning assets	$	9,212,838	3.24		4.0			100.0	%

Transaction deposits	$	2,311,917	0.16		6.5	45.2	%	29.7	%
Certificates of deposit	2,807,912		1.27		1.7	54.8		36.0
Total deposits	5,119,829		0.77		3.9	100.0	%	65.7
Term borrowings	2,675,000		2.29		3.0			34.3
Total interest-bearing liabilities	$	7,794,829	1.29		3.6			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, 2016. Based upon this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that, as of March 31, 2016, 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, 2016 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, 2015.

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 share repurchase activity during the three months ended March 31, 2016 and additional information regarding our share repurchase program. In October 2015, the Company announced a stock repurchase plan for up to $70.0 million of common stock. It is anticipated that shares will be purchased from time to time in the open-market based upon market conditions and available liquidity. There is no expiration for this repurchase plan.



					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, 2016 through
January 31, 2016	—	$	—	—	$	70,000,000
February 1, 2016 through
February 29, 2016	—	—		—	70,000,000
March 1, 2016 through
March 31, 2016	—	—		—	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.

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, 2016	By:	/s/ John B. Dicus
			John B. Dicus, Chairman, President and Chief Executive Officer

	Date: May 10, 2016	By:	/s/ Kent G. Townsend
			Kent G. Townsend, Executive Vice President,
			Chief Financial Officer and Treasurer

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 filed on May 6, 2010, as Exhibit 3(ii) to Capitol Federal Financial Inc.'s Registration Statement on Form S-1 (File No. 333-166578) and incorporated herein by reference
10.1(i)		Capitol Federal Financial, Inc.'s Employee Stock Ownership Plan, as amended, filed on May 10, 2011 as Exhibit 10.1(ii) to the March 31, 2011 Form 10-Q for Capitol Federal Financial, Inc., and incorporated herein by reference
10.1(ii)		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(iii)		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(iv)		Form of Change of Control Agreement with Frank H. Wright filed on November 29, 2013 as Exhibit 10.1(v) to the Registrant's Annual Report on Form 10-K and incorporated herein by reference
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 May 5, 2009 as Exhibit 10.4 to the March 31, 2009 Form 10-Q for Capitol Federal Financial 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 Named Executive Officer Salary and Bonus Arrangements filed on November 25, 2015 as Exhibit 10.6 to the Registrant's Annual Report on Form 10-K and incorporated herein by reference
10.7		Description of Director Fee Arrangements filed on August 1, 2014 as Exhibit 10.9 to the Registrant's June 30, 2014 Form 10-Q and incorporated herein by reference
10.8		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
10.9		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
10.10		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
10.11		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
10.12		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
10.13		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
11		Calculations of Basic and Diluted EPS (See "Part I, Item 1. Financial Statements – Notes to Consolidated Financial Statements – Note 2 – Earnings Per Share")
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, 2016, filed with the Securities and Exchange Commission on May 10, 2016, has been formatted in eXtensible Business Reporting Language: (i) Consolidated Balance Sheets at March 31, 2016 and September 30, 2015, (ii) Consolidated Statements of Income for the three and six months ended March 31, 2016 and 2015, (iii) Consolidated Statements of Comprehensive Income for the three and six months ended March 31, 2016 and 2015, (iv) Consolidated Statement of Stockholders' Equity for the six months ended March 31, 2016, (v) Consolidated Statements of Cash Flows for the six months ended March 31, 2016 and 2015, and (vi) Notes to the Unaudited Consolidated Financial Statements