Capitol Federal Financial, Inc. - Quarter Report: 2017 June (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 June 30, 2017

¨ 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, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.



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

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

As of August 3, 2017, there were 138,212,835 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 June 30, 2017 and September 30, 2016	3
	Consolidated Statements of Income for the three and nine months ended June 30, 2017 and 2016	4
	Consolidated Statements of Comprehensive Income for the three and nine months ended June 30, 2017 and 2016	5
	Consolidated Statement of Stockholders' Equity for the nine months ended June 30, 2017	6
	Consolidated Statements of Cash Flows for the nine months ended June 30, 2017 and 2016	7
	Notes to Consolidated Financial Statements	9
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	29
	Financial Condition - Loans Receivable	32
	Financial Condition - Asset Quality	40
	Financial Condition - Liabilities	49
	Financial Condition - Stockholders' Equity	52
	Operating Results	53
	Comparison of Operating Results for the nine months ended June 30, 2017 and 2016	54
	Comparison of Operating Results for the three months ended June 30, 2017 and 2016	59
	Comparison of Operating Results for the three months ended June 30, 2017 and March 31, 2017	64
Item 3.	Quantitative and Qualitative Disclosure about Market Risk	74
Item 4.	Controls and Procedures	79


PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	80
Item 1A.	Risk Factors	80
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	80
Item 3.	Defaults Upon Senior Securities	80
Item 4.	Mine Safety Disclosures	80
Item 5.	Other Information	80
Item 6.	Exhibits	80


SIGNATURES		81


INDEX TO EXHIBITS		82

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)
	June 30,			September 30,
	2017			2016
ASSETS:
Cash and cash equivalents (includes interest-earning deposits of $115,118 and $267,829)	$	130,249		$	281,764
Securities:
Available-for-sale ("AFS"), at estimated fair value (amortized cost of $447,018 and $517,791)	452,894			527,301
Held-to-maturity ("HTM"), at amortized cost (estimated fair value of $895,542 and $1,122,867)	891,037			1,100,874
Loans receivable, net (allowance for credit losses ("ACL") of $8,486 and $8,540)	7,240,594			6,958,024
Federal Home Loan Bank Topeka ("FHLB") stock, at cost	101,039			109,970
Premises and equipment, net	83,853			83,221
Other assets	203,614			206,093
TOTAL ASSETS	$	9,103,280		$	9,267,247

LIABILITIES:
Deposits	$	5,267,685		$	5,164,018
FHLB borrowings	2,173,472			2,372,389
Repurchase agreements	200,000			200,000
Advance payments by borrowers for taxes and insurance	39,668			62,643
Income taxes payable, net	1,092			310
Deferred income tax liabilities, net	24,512			25,374
Accounts payable and accrued expenses	37,865			49,549
Total liabilities	7,744,294			7,874,283

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, 138,206,835 and 137,486,172
shares issued and outstanding as of June 30, 2017 and September 30, 2016, respectively	1,382			1,375
Additional paid-in capital	1,166,908			1,156,855
Unearned compensation, Employee Stock Ownership Plan ("ESOP")	(38,408		)	(39,647		)
Retained earnings	225,449			268,466
Accumulated other comprehensive income ("AOCI"), net of tax	3,655			5,915
Total stockholders' equity	1,358,986			1,392,964
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	9,103,280		$	9,267,247

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 Nine Months Ended
	June 30,				June 30,
	2017		2016		2017		2016
INTEREST AND DIVIDEND INCOME:
Loans receivable	$	64,013	$	60,840	$	189,064	$	181,795
Mortgage-backed securities ("MBS")	5,821		7,401		18,374		22,934
Cash and cash equivalents	5,619		2,730		12,720		7,057
FHLB stock	3,114		3,050		9,153		9,208
Investment securities	1,063		1,506		3,301		4,524
Total interest and dividend income	79,630		75,527		232,612		225,518
INTEREST EXPENSE:
FHLB borrowings	17,884		16,361		50,772		48,829
Deposits	10,895		9,749		31,655		27,761
Repurchase agreements	1,487		1,487		4,461		4,478
Total interest expense	30,266		27,597		86,888		81,068
NET INTEREST INCOME	49,364		47,930		145,724		144,450
PROVISION FOR CREDIT LOSSES	—		—		—		—
NET INTEREST INCOME AFTER
PROVISION FOR CREDIT LOSSES	49,364		47,930		145,724		144,450
NON-INTEREST INCOME:
Retail fees and charges	3,832		3,725		11,123		11,097
Income from bank-owned life insurance ("BOLI")	573		648		1,669		2,810
Other non-interest income	1,055		1,056		3,509		3,714
Total non-interest income	5,460		5,429		16,301		17,621
NON-INTEREST EXPENSE:
Salaries and employee benefits	11,210		10,829		32,388		31,604
Information technology and communications	2,922		2,716		8,524		7,883
Occupancy, net	2,659		2,606		8,098		7,894
Regulatory and outside services	1,383		1,370		3,994		4,000
Deposit and loan transaction costs	1,304		1,449		3,918		4,119
Advertising and promotional	1,322		1,053		3,275		3,190
Federal insurance premium	879		1,377		2,651		4,158
Office supplies and related expense	492		545		1,470		2,016
Low income housing partnerships	—		721		—		2,815
Other non-interest expense	474		661		1,861		2,664
Total non-interest expense	22,645		23,327		66,179		70,343
INCOME BEFORE INCOME TAX EXPENSE	32,179		30,032		95,846		91,728
INCOME TAX EXPENSE	10,809		9,481		32,311		28,932
NET INCOME	$	21,370	$	20,551	$	63,535	$	62,796

Basic earnings per share ("EPS")	$	0.16	$	0.15	$	0.47	$	0.47
Diluted EPS	$	0.16	$	0.15	$	0.47	$	0.47
Dividends declared per share	$	0.34	$	0.34	$	0.80	$	0.76

Basic weighted average common shares	134,253,690		133,101,960		134,004,281		132,960,917
Diluted weighted average common shares	134,359,770		133,250,711		134,189,758		133,065,828

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 Nine Months Ended
	June 30,						June 30,
	2017			2016			2017			2016
Net income	$	21,370		$	20,551		$	63,535		$	62,796
Other comprehensive income (loss), net of tax:
Changes in unrealized holding gains (losses) on AFS securities,
net of taxes of $345, $119, $1,374 and $945	(567		)	(194		)	(2,260		)	(1,554		)
Comprehensive income	$	20,803		$	20,357		$	61,275		$	61,242

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, 2016	$	1,375	$	1,156,855	$	(39,647	)	$	268,466		$	5,915		$	1,392,964
Net income								63,535						63,535
Other comprehensive income (loss), net of tax											(2,260		)	(2,260		)
ESOP activity, net			621		1,239									1,860
Restricted stock activity, net			51											51
Stock-based compensation			419											419
Stock options exercised	7		8,962											8,969
Cash dividends to stockholders ($0.80 per share)								(106,552		)				(106,552		)
Balance at June 30, 2017	$	1,382	$	1,166,908	$	(38,408	)	$	225,449		$	3,655		$	1,358,986

See accompanying notes to consolidated financial statements.



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

	For the Nine Months Ended
	June 30,
	2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	63,535		$	62,796
Adjustments to reconcile net income to net cash provided by operating activities:
FHLB stock dividends	(9,153		)	(9,208		)
Amortization and accretion of premiums and discounts on securities	3,487			3,988
Depreciation and amortization of premises and equipment	5,784			5,288
Amortization of deferred amounts related to FHLB advances, net	1,083			1,505
Common stock committed to be released for allocation - ESOP	1,860			1,590
Stock-based compensation	419			960
Changes in:
Other assets, net	34			488
Income taxes payable/receivable	1,672			1,467
Accounts payable and accrued expenses	(11,612		)	(6,815		)
Net cash provided by operating activities	57,109			62,059

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of AFS securities	(37,425		)	(99,927		)
Purchase of HTM securities	—			(144,392		)
Proceeds from calls, maturities and principal reductions of AFS securities	108,170			189,199
Proceeds from calls, maturities and principal reductions of HTM securities	206,378			222,700
Proceeds from the redemption of FHLB stock	292,400			283,500
Purchase of FHLB stock	(274,316		)	(238,174		)
Net increase in loans receivable	(284,728		)	(217,498		)
Purchase of premises and equipment	(6,509		)	(11,300		)
Proceeds from sale of other real estate owned ("OREO")	4,297			3,799
Proceeds from BOLI death benefit	—			783
Net cash provided by (used in) investing activities	8,267			(11,310		)

				(Continued)



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

	For the Nine Months Ended
	June 30,
	2017			2016
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends paid	(106,552		)	(100,441		)
Net change in deposits	103,667			252,609
Proceeds from borrowings	2,100,100			5,900,100
Repayments on borrowings	(2,500,100		)	(6,700,100		)
Net change in short-term borrowings	200,000			—
Change in advance payments by borrowers for taxes and insurance	(22,975		)	(23,916		)
Stock options exercised	8,642			1,198
Excess tax benefits from stock options	327			—
Net cash used in financing activities	(216,891		)	(670,550		)

NET DECREASE IN CASH AND CASH EQUIVALENTS	(151,515		)	(619,801		)

CASH AND CASH EQUIVALENTS:
Beginning of period	281,764			772,632
End of period	$	130,249		$	152,831

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, 2016, filed with the Securities and Exchange Commission ("SEC"). Interim results are not necessarily indicative of results for a full year.

Net Presentation of Cash Flows Related to Borrowings - During the current fiscal year, the Bank entered into certain FHLB advances with contractual maturities of 90 days or less. Cash flows related to these advances are reported on a net basis in the "Net change in short-term borrowings" line within the consolidated statements of cash flows.

Low Income Housing Partnerships - As part of the Bank's community reinvestment initiatives, the Bank invests in affordable housing limited partnerships ("low income housing partnerships") that make equity investments in affordable housing properties. The Bank is a limited partner in each partnership in which it invests. A separate, unrelated third party is the general partner. The Bank receives affordable housing tax credits and other tax benefits for these investments. Prior to October 1, 2016, the Bank accounted for its low income housing partnership investments using the equity method of accounting, as two of the Bank's officers were involved in the operational management of the low income housing partnership investment group. On October 1, 2016, due to both officers' resignation from operational management, the Bank began using the proportional method of accounting for its low income housing partnership investments.

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, as amended, 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 will become effective for the Company on October 1, 2018. The scope of the amended ASU explicitly excludes interest income from loans and securities; therefore, the Company anticipates that the majority of its revenue will not be within the scope of the amended ASU. The Company is continuing to evaluate the amended ASU and its impact on the Company's consolidated financial condition, results of operations, and disclosures.

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 will become effective for the Company on October 1, 2018. Early adoption is not permitted except in certain circumstances. The Company is currently evaluating the impact that this ASU may have on the Company's consolidated financial condition, results of operations and disclosures.

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 will become effective for the Company on October 1, 2019. Early adoption is permitted. The Company is currently in the process of accumulating lease data and developing an inventory of leases. The Company expects to recognize right-of-use assets and lease liabilities for substantially all of its operating lease commitments based on the present value of unpaid lease payments as of the date of adoption. The Company is continuing to evaluate the impact this ASU may have on the Company's consolidated financial condition, results of operations and disclosures.

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 will become effective for the Company on October 1, 2017. Upon adoption, the Company intends to elect to account for forfeitures of stock-based compensation awards when they occur. The Company plans to recognize excess tax benefits and tax deficiencies in income tax expense on the consolidated statements of income and present them within operating activities on the consolidated statements of cash flows. While this ASU is not expected to have a material impact on the Company's consolidated financial condition or results of operations at the time of adoption, the impact of tax benefits and the timing of their recognition within income tax expense is unpredictable, as these benefits are recognized primarily as a result of stock options being exercised.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments. The ASU replaces the incurred loss impairment methodology in current GAAP, which requires credit losses to be recognized when it is probable that a loss has incurred, with a new impairment methodology. The new impairment methodology requires an entity to measure, at each reporting date, the expected credit losses of financial assets not measured at fair value, such as loans, HTM debt securities, and loan commitments, over their contractual lives. Under the new impairment methodology, expected credit losses will be measured at each reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Additionally, the ASU amends the current credit loss measurements for AFS debt securities. Credit losses related to AFS debt securities will be recorded through the ACL rather than as a direct write-down as per current GAAP. The ASU also requires enhanced disclosures related to credit quality and significant estimates and judgments used by management when estimating credit losses. The ASU will become effective for the Company on October 1, 2020. Early adoption is permitted for fiscal years beginning after December 15, 2018. The Company is currently evaluating the ASU and is in the process of reviewing its systems and processes to support the data required to implement the ASU.

In March 2017, the FASB issued ASU 2017-08, Premium Amortization on Purchased Callable Debt Securities. The amendments in this ASU shorten the amortization period for certain callable debt securities held at a premium. Specifically, the amendments require the premium to be amortized to the earliest call date. Under current GAAP, premiums on callable debt securities generally are amortized to the maturity date. The Company adopted this ASU during the current quarter. The ASU did not have a material impact on the Company's consolidated financial condition or results of operations.

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 Nine Months Ended
	June 30,						June 30,
	2017			2016			2017			2016
	(Dollars in thousands, except per share amounts)
Net income	$	21,370		$	20,551		$	63,535		$	62,796
Income allocated to participating securities	(11		)	(11		)	(36		)	(54		)
Net income available to common stockholders	$	21,359		$	20,540		$	63,499		$	62,742

Average common shares outstanding	134,170,638			133,018,908			133,962,680			132,919,316
Average committed ESOP shares outstanding	83,052			83,052			41,601			41,601
Total basic average common shares outstanding	134,253,690			133,101,960			134,004,281			132,960,917

Effect of dilutive stock options	106,080			148,751			185,477			104,911

Total diluted average common shares outstanding	134,359,770			133,250,711			134,189,758			133,065,828

Net EPS:
Basic	$	0.16		$	0.15		$	0.47		$	0.47
Diluted	$	0.16		$	0.15		$	0.47		$	0.47

Antidilutive stock options, excluded from the diluted average
common shares outstanding calculation	492,360			875,390			202,718			906,634

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").



	June 30, 2017
			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(Dollars in thousands)
AFS:
GSE debentures	$	296,283	$	25	$	645	$	295,663
MBS	147,129		6,719		52		153,796
Trust preferred securities	2,074		—		173		1,901
Municipal bonds	1,532		3		1		1,534
	$	447,018	$	6,747	$	871	$	452,894
HTM:
MBS	$	863,349	$	10,841	$	6,436	$	867,754
Municipal bonds	27,688		126		26		27,788
	$	891,037	$	10,967	$	6,462	$	895,542



	September 30, 2016
			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(Dollars in thousands)
AFS:
GSE debentures	$	346,226	$	815	$	3	$	347,038
MBS	169,442		9,069		4		178,507
Trust preferred securities	2,123		—		367		1,756
	$	517,791	$	9,884	$	374	$	527,301
HTM:
MBS	$	1,067,571	$	22,862	$	1,219	$	1,089,214
Municipal bonds	33,303		357		7		33,653
	$	1,100,874	$	23,219	$	1,226	$	1,122,867

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.



	June 30, 2017
	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	$	249,388	$	578	$	24,933	$	67
MBS	10,298		48		612		4
Trust preferred securities	—		—		1,901		173
Municipal bonds	765		1		—		—
	$	260,451	$	627	$	27,446	$	244


HTM:
MBS	$	356,066	$	3,686	$	126,724	$	2,750
Municipal bonds	8,552		24		446		2
	$	364,618	$	3,710	$	127,170	$	2,752



	September 30, 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	$	24,997	$	3	$	—	$	—
MBS	—		—		654		4
Trust preferred securities	—		—		1,756		367
	$	24,997	$	3	$	2,410	$	371


HTM:
MBS	$	147,930	$	538	$	66,646	$	681
Municipal bonds	4,771		6		391		1
	$	152,701	$	544	$	67,037	$	682

The unrealized losses at June 30, 2017 and September 30, 2016 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 June 30, 2017 or September 30, 2016.

The amortized cost and estimated fair value of debt securities as of June 30, 2017, 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	$	146,327	$	146,182	$	5,181	$	5,206
One year through five years	151,488		151,015		21,767		21,824
Five years through ten years	—		—		740		758
Ten years and thereafter	2,074		1,901		—		—
	299,889		299,098		27,688		27,788
MBS	147,129		153,796		863,349		867,754
	$	447,018	$	452,894	$	891,037	$	895,542

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 Nine Months Ended
	June 30,				June 30,
	2017		2016		2017		2016
	(Dollars in thousands)
Taxable	$	941	$	1,342	$	2,905	$	4,010
Non-taxable	122		164		396		514
	$	1,063	$	1,506	$	3,301	$	4,524

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



	June 30, 2017		September 30, 2016
	(Dollars in thousands)
Public unit deposits	$	438,051	$	419,282
Repurchase agreements	214,716		217,374
Federal Reserve Bank of Kansas City ("FRB of Kansas City")	12,640		15,938
	$	665,407	$	652,594

4. LOANS RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES

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



	June 30, 2017			September 30, 2016
	(Dollars in thousands)
Real estate loans:
One- to four-family:
Originated	$	4,005,081		$	4,005,615
Correspondent purchased	2,442,557			2,206,072
Bulk purchased	367,353			416,653
Construction	33,854			39,430
Total	6,848,845			6,667,770
Commercial:
Permanent	148,485			110,768
Construction	107,079			43,375
Total	255,564			154,143
Total real estate loans	7,104,409			6,821,913

Consumer loans:
Home equity	119,822			123,345
Other	4,194			4,264
Total consumer loans	124,016			127,609

Total loans receivable	7,228,425			6,949,522

Less:
ACL	8,486			8,540
Discounts/unearned loan fees	25,221			24,933
Premiums/deferred costs	(45,876		)	(41,975		)
	$	7,240,594		$	6,958,024

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 primarily secured by one- to four-family residential properties and originates and participates in commercial real estate 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. Generally, loans are underwritten according to the "ability to repay" and "qualified mortgage" standards, as issued by the Consumer Financial Protection Bureau ("CFPB"). Properties securing one- to four-family loans are appraised by either staff appraisers or fee appraisers, both of which are independent of the loan origination function and approved by our Board of Directors.

The underwriting standards for loans purchased from correspondent 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.

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 by the Bank's lending policies. Construction draw requests and the supporting documentation are reviewed and approved by designated personnel. The Bank also performs regular documented inspections of the construction project to ensure the funds are being used for the intended purpose and the project is being completed according to the plans and specifications provided.

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

At the time of origination, loan-to-value ("LTV") ratios on commercial real estate loans generally do not exceed 80% of the appraised value of the property securing the loans and the minimum debt service coverage ratio is generally 1.25. 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; (2) consumer; and (3) commercial real estate. 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 - originated, one- to four-family - correspondent purchased, one- to four-family - bulk purchased, consumer - home equity, and consumer - other. The one- to four-family - correspondent purchased class was segregated from the one- to four-family originated class in the current fiscal year due to the size of the portfolio along with the loan product composition, geographic locations and inherent credit risks within the portfolio. The prior period information presented within this note has been conformed to the new loan class presentation.

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

The following tables present the recorded investment, by class, in loans 30 to 89 days delinquent, loans 90 or more days delinquent or in foreclosure, total delinquent loans, current loans, and total recorded investment at the dates presented. The recorded investment in loans is defined as the unpaid principal balance of a loan, less charge-offs and inclusive of unearned loan fees and deferred costs. At June 30, 2017 and September 30, 2016, all loans 90 or more days delinquent were on nonaccrual status.



	June 30, 2017
			90 or More Days		Total				Total
	30 to 89 Days		Delinquent or		Delinquent		Current		Recorded
	Delinquent		in Foreclosure		Loans		Loans		Investment
	(Dollars in thousands)
One- to four-family - originated	$	10,421	$	4,253	$	14,674	$	4,009,442	$	4,024,116
One- to four-family - correspondent	1,296		—		1,296		2,475,966		2,477,262
One- to four-family - bulk purchased	2,524		4,854		7,378		361,802		369,180
Commercial real estate	—		—		—		254,506		254,506
Consumer - home equity	412		484		896		118,926		119,822
Consumer - other	14		10		24		4,170		4,194
	$	14,667	$	9,601	$	24,268	$	7,224,812	$	7,249,080



	September 30, 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 - originated	$	13,545	$	8,153	$	21,698	$	4,007,012	$	4,028,710
One- to four-family - correspondent	3,389		992		4,381		2,233,941		2,238,322
One- to four-family - bulk purchased	5,082		7,380		12,462		406,379		418,841
Commercial real estate	—		—		—		153,082		153,082
Consumer - home equity	635		520		1,155		122,190		123,345
Consumer - other	62		9		71		4,193		4,264
	$	22,713	$	17,054	$	39,767	$	6,926,797	$	6,966,564

The recorded investment of mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process as of June 30, 2017 and September 30, 2016 was $5.0 million and $5.7 million, respectively, which is included in loans 90 or more days delinquent or in foreclosure in the table above. The carrying value of residential OREO held as a result of obtaining physical possession upon completion of a foreclosure or through completion of a deed in lieu of foreclosure was $2.0 million at June 30, 2017 and $2.5 million at September 30, 2016.

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



	June 30, 2017		September 30, 2016
	(Dollars in thousands)
One- to four-family - originated	$	13,721	$	17,086
One- to four-family - correspondent	1,608		3,788
One- to four-family - bulk purchased	5,896		7,411
Commercial real estate	—		—
Consumer - home equity	734		848
Consumer - other	10		10
	$	21,969	$	29,143

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.



	June 30, 2017				September 30, 2016
	Special Mention		Substandard		Special Mention		Substandard
	(Dollars in thousands)
One- to four-family - originated	$	8,087	$	29,641	$	10,242	$	27,818
One- to four-family - correspondent	963		4,423		2,496		5,168
One- to four-family - bulk purchased	811		8,804		1,156		11,480
Commercial real estate	—		—		—		—
Consumer - home equity	39		1,293		54		1,431
Consumer - other	—		18		8		16
	$	9,900	$	44,179	$	13,956	$	45,913

The following table shows the weighted average credit score and weighted average LTV for one- to four-family loans and consumer home equity loans at the dates presented. Borrower credit scores are intended to provide an indication as to the likelihood that a borrower will repay their debts. Credit scores are updated at least semiannually, with the last update in March 2017, 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.



	June 30, 2017			September 30, 2016
	Credit Score	LTV		Credit Score	LTV
One- to four-family - originated	767	63	%	766	63	%
One- to four-family - correspondent	764	68		764	68
One- to four-family - bulk purchased	755	63		753	64
Consumer - home equity	755	20		755	20
	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 Nine Months Ended
	June 30, 2017					June 30, 2017
	Number	Pre-		Post-		Number	Pre-		Post-
	of	Restructured		Restructured		of	Restructured		Restructured
	Contracts	Outstanding		Outstanding		Contracts	Outstanding		Outstanding
	(Dollars in thousands)
One- to four-family - originated	28	$	2,447	$	2,518	109	$	11,735	$	12,195
One- to four-family - correspondent	7	1,435		1,443		10	1,695		1,704
One- to four-family - purchased	1	344		348		3	1,031		1,048
Commercial real estate	—	—		—		—	—		—
Consumer - home equity	3	51		53		17	368		380
Consumer - other	—	—		—		—	—		—
	39	$	4,277	$	4,362	139	$	14,829	$	15,327



	For the Three Months Ended					For the Nine Months Ended
	June 30, 2016					June 30, 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 - originated	26	$	4,051	$	4,154	84	$	10,590	$	10,861
One- to four-family - correspondent	2	437		449		6	1,263		1,282
One- to four-family - bulk purchased	—	—		—		1	123		122
Commercial real estate	—	—		—		—	—		—
Consumer - home equity	8	202		206		13	266		270
Consumer - other	—	—		—		1	8		8
	36	$	4,690	$	4,809	105	$	12,250	$	12,543

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 Nine Months Ended
	June 30, 2017			June 30, 2016			June 30, 2017			June 30, 2016
	Number of	Recorded		Number of	Recorded		Number of	Recorded		Number of	Recorded
	Contracts	Investment		Contracts	Investment		Contracts	Investment		Contracts	Investment
	(Dollars in thousands)
One- to four-family - originated	14	$	1,439	11	$	1,244	36	$	3,486	38	$	3,846
One- to four-family - correspondent	1	119		1	337		1	119		1	337
One- to four-family - bulk purchased	1	354		—	—		1	354		—	—
Commercial real estate	—	—		—	—		—	—		—	—
Consumer - home equity	6	93		—	—		15	432		4	91
Consumer - other	—	—		—	—		—	—		—	—
	22	$	2,005	12	$	1,581	53	$	4,391	43	$	4,274

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.



	June 30, 2017						September 30, 2016
			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	$	25,521	$	26,182	$	—	$	22,982	$	23,640	$	—
One- to four-family - correspondent	2,874		2,850		—		2,963		2,950		—
One- to four-family - bulk purchased	8,854		10,330		—		10,985		12,684		—
Commercial real estate	—		—		—		—		—		—
Consumer - home equity	1,010		1,221		—		1,014		1,230		—
Consumer - other	4		23		—		10		42		—
	38,263		40,606		—		37,954		40,546		—
With an allowance recorded
One- to four-family - originated	11,520		11,556		63		13,430		13,476		125
One- to four-family - correspondent	2,098		2,097		3		2,662		2,664		4
One- to four-family - bulk purchased	685		678		6		1,650		1,627		49
Commercial real estate	—		—		—		—		—		—
Consumer - home equity	451		451		27		548		548		38
Consumer - other	14		14		—		6		6		1
	14,768		14,796		99		18,296		18,321		217
Total
One- to four-family - originated	37,041		37,738		63		36,412		37,116		125
One- to four-family - correspondent	4,972		4,947		3		5,625		5,614		4
One- to four-family - bulk purchased	9,539		11,008		6		12,635		14,311		49
Commercial real estate	—		—		—		—		—		—
Consumer - home equity	1,461		1,672		27		1,562		1,778		38
Consumer - other	18		37		—		16		48		1
	$	53,031	$	55,402	$	99	$	56,250	$	58,867	$	217

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



	For the Three Months Ended								For the Nine Months Ended
	June 30, 2017				June 30, 2016				June 30, 2017				June 30, 2016
	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	$	24,342	$	230	$	11,506	$	110	$	23,478	$	653	$	11,146	$	340
One- to four-family - correspondent	3,497		32		366		4		3,463		91		232		9
One- to four-family - bulk purchased	9,950		49		10,958		47		10,490		144		11,115		147
Commercial real estate	—		—		—		—		—		—		—		—
Consumer - home equity	1,095		12		622		32		1,043		75		598		55
Consumer - other	4		—		22		1		8		—		15		1
	38,888		323		23,474		194		38,482		963		23,106		552
With an allowance recorded
One- to four-family - originated	12,787		117		23,677		232		12,878		367		25,366		740
One- to four-family - correspondent	2,405		20		3,263		29		2,150		52		2,227		58
One- to four-family - bulk purchased	1,136		7		1,805		7		1,358		17		2,348		21
Commercial real estate	—		—		—		—		—		—		—		—
Consumer - home equity	444		4		823		20		525		33		920		46
Consumer - other	12		—		14		—		12		—		15		—
	16,784		148		29,582		288		16,923		469		30,876		865
Total
One- to four-family - originated	37,129		347		35,183		342		36,356		1,020		36,512		1,080
One- to four-family - correspondent	5,902		52		3,629		33		5,613		143		2,459		67
One- to four-family - bulk purchased	11,086		56		12,763		54		11,848		161		13,463		168
Commercial real estate	—		—		—		—		—		—		—		—
Consumer - home equity	1,539		16		1,445		52		1,568		108		1,518		101
Consumer - other	16		—		36		1		20		—		30		1
	$	55,672	$	471	$	53,056	$	482	$	55,405	$	1,432	$	53,982	$	1,417

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 June 30, 2017
	One- to Four-Family
				Correspondent			Bulk						Commercial
	Originated			Purchased			Purchased			Total			Real Estate		Consumer			Total
	(Dollars in thousands)
Beginning balance	$	3,351		$	1,940		$	1,000		$	6,291		$	1,885	$	271		$	8,447
Charge-offs	(4		)	—			(25		)	(29		)	—		(12		)	(41		)
Recoveries	3			—			69			72			—		8			80
Provision for credit losses	(128		)	(24		)	(44		)	(196		)	204		(8		)	—
Ending balance	$	3,222		$	1,916		$	1,000		$	6,138		$	2,089	$	259		$	8,486



	For the Nine Months Ended June 30, 2017
	One- to Four-Family
				Correspondent			Bulk						Commercial
	Originated			Purchased			Purchased			Total			Real Estate		Consumer			Total
	(Dollars in thousands)
Beginning balance	$	3,928		$	2,102		$	1,065		$	7,095		$	1,208	$	237		$	8,540
Charge-offs	(45		)	—			(73		)	(118		)	—		(37		)	(155		)
Recoveries	3			—			69			72			—		29			101
Provision for credit losses	(664		)	(186		)	(61		)	(911		)	881		30			—
Ending balance	$	3,222		$	1,916		$	1,000		$	6,138		$	2,089	$	259		$	8,486



	For the Three Months Ended June 30, 2016
	One- to Four-Family
				Correspondent		Bulk						Commercial
	Originated			Purchased		Purchased			Total			Real Estate		Consumer			Total
	(Dollars in thousands)
Beginning balance	$	4,576		$	2,263	$	1,243		$	8,082		$	837	$	274		$	9,193
Charge-offs	(23		)	—		(54		)	(77		)	—		(49		)	(126		)
Recoveries	17			—		222			239			—		6			245
Provision for credit losses	98			36		(262		)	(128		)	96		32			—
Ending balance	$	4,668		$	2,299	$	1,149		$	8,116		$	933	$	263		$	9,312



	For the Nine Months Ended June 30, 2016
	One- to Four-Family
				Correspondent		Bulk						Commercial
	Originated			Purchased		Purchased			Total			Real Estate		Consumer			Total
	(Dollars in thousands)
Beginning balance	$	4,865		$	2,115	$	1,434		$	8,414		$	742	$	287		$	9,443
Charge-offs	(97		)	—		(267		)	(364		)	—		(87		)	(451		)
Recoveries	59			—		240			299			—		21			320
Provision for credit losses	(159		)	184		(258		)	(233		)	191		42			—
Ending balance	$	4,668		$	2,299	$	1,149		$	8,116		$	933	$	263		$	9,312

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



	June 30, 2017
	One- to Four-Family
			Correspondent		Bulk				Commercial
	Originated		Purchased		Purchased		Total		Real Estate		Consumer		Total
	(Dollars in thousands)
Recorded investment in loans
collectively evaluated for impairment	$	3,997,567	$	2,473,146	$	360,326	$	6,831,039	$	254,506	$	122,845	$	7,208,390

Recorded investment in loans
individually evaluated for impairment	26,549		4,116		8,854		39,519		—		1,171		40,690
	$	4,024,116	$	2,477,262	$	369,180	$	6,870,558	$	254,506	$	124,016	$	7,249,080

ACL for loans collectively
evaluated for impairment	$	3,222	$	1,916	$	1,000	$	6,138	$	2,089	$	259	$	8,486



	September 30, 2016
	One- to Four-Family
			Correspondent		Bulk				Commercial
	Originated		Purchased		Purchased		Total		Real Estate		Consumer		Total
	(Dollars in thousands)
Recorded investment in loans
collectively evaluated for impairment	$	4,003,750	$	2,233,347	$	407,833	$	6,644,930	$	153,082	$	126,504	$	6,924,516

Recorded investment in loans
individually evaluated for impairment	24,960		4,975		11,008		40,943		—		1,105		42,048
	$	4,028,710	$	2,238,322	$	418,841	$	6,685,873	$	153,082	$	127,609	$	6,966,564

ACL for loans collectively
evaluated for impairment	$	3,928	$	2,102	$	1,065	$	7,095	$	1,208	$	237	$	8,540

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 $54.7 million and $58.0 million at June 30, 2017 and September 30, 2016, respectively. The Bank's obligations related to unfunded commitments, which are included in accounts payable and accrued expenses in the consolidated balance sheets, were $20.4 million and $27.2 million at June 30, 2017 and September 30, 2016, respectively. The majority of the commitments at June 30, 2017 are projected to be funded through the end of calendar year 2019.

For the nine months ended June 30, 2017, the net income tax benefit associated with these investments, which consists of proportional amortization expense and affordable housing tax credits and other related tax benefits, was reported in income tax expense in the consolidated statements of income. The amount of proportional amortization expense during the three and nine months ended June 30, 2017 was $1.1 million and $3.3 million, respectively, and the amount of affordable housing tax credits and other related tax benefits was $1.8 million and $5.3 million, respectively, resulting in a net income tax benefit of $677 thousand and $2.0 million, respectively. For the three and nine months ended June 30, 2016, the expenses were reported in the low income housing partnerships line of the consolidated statements of income, and the amount of affordable housing tax credits and other related tax benefits was $1.5 million and $4.5 million, respectively. There were no impairment losses during the nine months ended June 30, 2017 and 2016 resulting from the forfeiture or ineligibility of tax credits or other circumstances.

6. REPURCHASE AGREEMENTS

At both June 30, 2017 and September 30, 2016, 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 June 30, 2017 and September 30, 2016 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 June 30, 2017:



	Amount
	(Dollars in thousands)
2017	$	—
2018	100,000
2019	—
2020	100,000
2021	—
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 June 30, 2017 or September 30, 2016. 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 under current market conditions. The Company maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value.

The following is a description of valuation methodologies used for 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 nine months ended June 30, 2017 or during fiscal year 2016. 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.



	June 30, 2017
			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	$	295,663	$	—	$	295,663	$	—
MBS	153,796		—		153,796		—
Municipal bonds	1,534		—		1,534		—
Trust preferred securities	1,901		—		—		1,901
	$	452,894	$	—	$	450,993	$	1,901



	September 30, 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	$	347,038	$	—	$	347,038	$	—
MBS	178,507		—		178,507		—
Trust preferred securities	1,756		—		—		1,756
	$	527,301	$	—	$	525,545	$	1,756

The Company's Level 3 AFS securities had no activity during the three and nine months ended June 30, 2017, except for principal repayments of $13 thousand and $75 thousand, respectively, an increase in net unrealized losses of $4 thousand for the three months ended June 30, 2017 and a decrease in net unrealized losses of $121 thousand for the nine months ended June 30, 2017, which are included in other comprehensive income. The Company's Level 3 AFS securities had no activity during the three and nine months ended June 30, 2016, except for principal repayments of $13 thousand and $44 thousand, respectively, and increases in net unrealized losses included in other comprehensive income of $19 thousand and $87 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 June 30, 2017 and September 30, 2016 was $40.7 million and $42.0 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 loans individually evaluated for impairment using appraisals to determine the estimated fair value was the appraisal. Fair values of loans individually evaluated for impairment cannot be determined with precision and may not be realized in an actual sale or immediate settlement of the loan, and, as such are classified as Level 3. Based on this evaluation, the Bank charged-off all loss amounts as of June 30, 2017 and September 30, 2016; 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 price, except for the estimated sales costs noted above. The primary significant unobservable input for OREO was the appraisal or listing price. Fair values of foreclosed property

cannot be determined with precision and may not be realized in an actual sale of the property and, as such, are classified as Level 3. The fair value of OREO at June 30, 2017 and September 30, 2016 was $2.0 million and $3.7 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.



	June 30, 2017
			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	$	40,657	$	—	$	—	$	40,657
OREO	1,953		—		—		1,953
	$	42,610	$	—	$	—	$	42,610



	September 30, 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	$	41,995	$	—	$	—	$	41,995
OREO	3,734		—		—		3,734
	$	45,729	$	—	$	—	$	45,729

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

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



	June 30, 2017				September 30, 2016
			Estimated				Estimated
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
	(Dollars in thousands)
Assets:
Cash and cash equivalents	$	130,249	$	130,249	$	281,764	$	281,764
AFS securities	452,894		452,894		527,301		527,301
HTM securities	891,037		895,542		1,100,874		1,122,867
Loans receivable	7,240,594		7,381,322		6,958,024		7,292,971
FHLB stock	101,039		101,039		109,970		109,970
Liabilities:
Deposits	5,267,685		5,278,931		5,164,018		5,204,251
FHLB borrowings	2,173,472		2,187,180		2,372,389		2,434,151
Repurchase agreements	200,000		202,811		200,000		207,303

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 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 June 30, 2017 and September 30, 2016 was $2.44 billion and $2.34 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 June 30, 2017 and September 30, 2016 was $2.84 billion and $2.87 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)

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

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

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


•	our ability to maintain overhead costs at reasonable levels;


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


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


•	our ability to access cost-effective funding;


•	fluctuations in deposit flows;


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


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


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


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


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


•	changes in accounting principles, policies, or guidelines;


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


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


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


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


•	the timely development and acceptance of 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 interpretations of, and 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, borrowing 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 we specify otherwise, "the Company," "we," "us," and "our" refer to Capitol Federal Financial, Inc. a Maryland corporation. "Capitol Federal Savings," and "the Bank," refer to Capitol Federal Savings Bank, a federal savings bank and the wholly-owned subsidiary of Capitol Federal Financial, Inc.

The following discussion and analysis is intended to assist in understanding the financial condition, results of operations, liquidity, and capital resources of the Company. The Bank comprises almost all of the consolidated assets and liabilities of the Company and the

Company is dependent primarily upon the performance of the Bank for the results of its operations. Because of this relationship, references to management actions, strategies and results of actions apply to both the Bank and the Company except where the context indicates otherwise. 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, 2016, 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 and originate and participate in commercial real estate loans. We also 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 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 stated maturities or repricing dates of less than two years.

The Company is significantly affected by prevailing economic conditions, including federal monetary and fiscal policies and federal regulation of financial institutions. 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.

Local economic conditions have a significant impact on the ability of borrowers to repay loans and the value of the collateral securing these loans. The industries in the Bank's local market areas, where the properties securing approximately 70% of the Bank's one- to four-family loans are located, are diversified, especially in the Kansas City metropolitan statistical area, which comprises the largest segment of our loan portfolio and deposit base. As of June 2017, the unemployment rate was 3.7% for Kansas and 3.8% for Missouri, compared to the national average of 4.4%, based on information from the Bureau of Labor Statistics. The Kansas City market area has an average household income of approximately $74 thousand per annum, based on 2016 estimates from Nielsen. The average household income in our combined local market areas is approximately $70 thousand per annum, with 90% of the population at or above the poverty level, also based on the 2016 estimates from Nielsen. The FHFA price index for Kansas and Missouri continues to indicate relative stability in property values in our local market areas. Management also monitors broad industry and economic indicators and trends in the states and/or metropolitan statistical areas with the highest concentrations of correspondent purchased loans.

For the quarter ended June 30, 2017, the Company recognized net income of $21.4 million, or $0.16 per share, an increase of $819 thousand from the quarter ended June 30, 2016. The increase was due primarily to an increase in net interest income. The net interest margin increased eight basis points, from 1.73% for the prior year quarter to 1.81% for the current year quarter. Excluding the effects of the leverage strategy, the net interest margin would have increased seven basis points, from 2.09% for the prior year quarter to 2.16% for the current year quarter. The increase in the net interest margin was due primarily to a shift of the mix of interest-earning assets from relatively lower yielding securities to higher yielding loans, partially offset by a decrease in the weighted average yield on loans. The Company's efficiency ratio was 41.30% for the current quarter compared to 43.72% for the prior year quarter.

For the nine month period ended June 30, 2017, the Company recognized net income of $63.5 million, or $0.47 per share, an increase of $739 thousand, or 1.2%, from the nine month period ended June 30, 2016. The net interest margin increased three basis points, from 1.75% for the prior year nine month period to 1.78% for the current year nine month period. Excluding the effects of the leverage strategy, the net interest margin would have increased two basis points, from 2.11% for the prior year nine month period to 2.13% for the current year nine month period. The Company's efficiency ratio was 40.84% for the current year nine month period compared to 43.40% for the prior year nine month period.

Total assets were $9.10 billion at June 30, 2017 compared to $9.27 billion at September 30, 2016. The $164.0 million decrease was due primarily to a $284.2 million decrease in the securities portfolio and a $151.5 million decrease in cash and cash equivalents, partially offset by a $282.6 million increase in the loans receivable portfolio. During the current year nine month period, the Bank originated and refinanced $550.9 million of loans with a weighted average rate of 3.62% and purchased $478.4 million of one- to four-family loans from correspondent lenders with a weighted average rate of 3.55%. The Bank also entered into participations totaling $58.5 million of commercial real estate loans with a weighted average rate of 4.02%, of which $44.6 million had not yet been funded as of June 30, 2017.

The Bank continued to utilize the leverage strategy to increase earnings. The leverage strategy during the current fiscal year involved borrowing up to $2.10 billion either on the Bank's FHLB line of credit or by entering into short-term FHLB advances, depending on the rates offered by FHLB. The borrowings were repaid prior to each quarter end for regulatory purposes. The proceeds from the borrowings, net of the required FHLB stock holdings which yielded approximately 6% during the current nine month period, were deposited at the FRB of Kansas City. The leverage strategy has minimal impact on the Bank's interest rate risk and liquidity and no credit risk impact. Net income attributable to the leverage strategy is largely derived from the dividends from the FHLB stock holdings, net of the interest rate spread between the yield on the cash at the FRB of Kansas City and the rate paid on the related FHLB borrowings, less applicable federal insurance premiums and estimated income taxes. Net income attributable to the leverage strategy was $715 thousand during the current quarter and $2.2 million during the current year nine month period, compared to $532 thousand during the prior year quarter and $1.7 million during the prior year nine month period. The pre-tax yield of the leverage strategy, which is defined as the annualized pre-tax income resulting from the transaction as a percentage of the interest-earning assets associated with the transaction, was 0.21% for the current quarter and 0.22% for the current year nine month period.

Total liabilities were $7.74 billion at June 30, 2017 compared to $7.87 billion at September 30, 2016. FHLB borrowings decreased $198.9 million, to $2.17 billion at June 30, 2017, as certain maturing FHLB advances were not replaced. Deposits increased $103.7 million, to $5.27 billion at June 30, 2017, due largely to an increase in non-maturity retail deposits.

Stockholders' equity was $1.36 billion at June 30, 2017 compared to $1.39 billion at September 30, 2016. The $34.0 million decrease was due primarily to the payment of $106.6 million in cash dividends, partially offset by net income of $63.5 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 affect reported results materially. These critical accounting policies and their application are reviewed at least annually by our audit committee. For a full discussion of our critical accounting policies, see Item 7 - "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies" in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2016.

Financial Condition

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



	June 30,			March 31,			December 31,			September 30,			June 30,
	2017			2017			2016			2016			2016
	(Dollars in thousands)
Total assets	$	9,103,280		$	9,246,390		$	9,139,510		$	9,267,247		$	9,241,775
Cash and cash equivalents	130,249			240,587			150,560			281,764			152,831
AFS securities	452,894			465,083			499,792			527,301			666,313
HTM securities	891,037			954,110			1,022,215			1,100,874			1,188,913
Loans receivable, net	7,240,594			7,193,721			7,071,410			6,958,024			6,839,123
FHLB stock, at cost	101,039			105,475			105,364			109,970			114,425
Deposits	5,267,685			5,269,234			5,192,674			5,164,018			5,085,129
FHLB borrowings	2,173,472			2,273,113			2,272,754			2,372,389			2,472,026
Repurchase agreements	200,000			200,000			200,000			200,000			200,000
Stockholders' equity	1,358,986			1,382,289			1,368,175			1,392,964			1,380,815
Equity to total assets at end of period	14.9		%	14.9		%	15.0		%	15.0		%	14.9		%

Assets. Total assets were $9.10 billion at June 30, 2017 compared to $9.27 billion at September 30, 2016. The $164.0 million decrease was due primarily to a $284.2 million decrease in the securities portfolio and a $151.5 million decrease in cash and cash equivalents, partially offset by an increase in the loans receivable portfolio. Cash flows from the securities portfolio and excess operating cash were largely used to fund loan growth and pay off certain maturing FHLB advances.

Loans Receivable. Loans receivable, net, increased $282.6 million to $7.24 billion at June 30, 2017 from $6.96 billion at September 30, 2016. The increase in the loan portfolio was primarily in the correspondent one- to four-family purchased loan portfolio.

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 June 30, 2017, 58% of this amount had a balance at origination of less than $424 thousand.



	June 30, 2017					September 30, 2016
	Amount			Rate		Amount			Rate
	(Dollars in thousands)
Real estate loans:
One- to four-family:
Originated	$	4,005,081		3.70	%	$	4,005,615		3.74	%
Correspondent purchased	2,442,557			3.51		2,206,072			3.50
Bulk purchased	367,353			2.24		416,653			2.23
Construction	33,854			3.36		39,430			3.45
Total	6,848,845			3.55		6,667,770			3.56
Commercial:
Permanent	148,485			4.18		110,768			4.16
Construction	107,079			3.99		43,375			4.13
Total	255,564			4.10		154,143			4.15
Total real estate loans	7,104,409			3.57		6,821,913			3.58

Consumer loans:
Home equity	119,822			5.27		123,345			5.01
Other	4,194			4.03		4,264			4.21
Total consumer loans	124,016			5.23		127,609			4.99
Total loans receivable	7,228,425			3.60		6,949,522			3.60

Less:
ACL	8,486					8,540
Discounts/unearned loan fees	25,221					24,933
Premiums/deferred costs	(45,876		)			(41,975		)
Total loans receivable, net	$	7,240,594				$	6,958,024

Loan Activity - The following tables summarize activity in the loan portfolio, along with weighted average rates where applicable, for the periods indicated, excluding changes in ACL, discounts/unearned loan fees, and premiums/deferred costs. Loans that were paid-off as a result of refinances are included in repayments. Loan endorsements are not included in the activity in the following table because a new loan is not generated at the time of the endorsement. The endorsed balance and rate are included in the ending loan portfolio balance and rate. During the three and nine months ended June 30, 2017, the Bank endorsed $4.9 million and $44.4 million of one- to four-family loans, respectively, reducing the average rate on those loans by 34 and 77 basis points, respectively.



	For the Three Months Ended
	June 30, 2017					March 31, 2017					December 31, 2016					September 30, 2016
	Amount			Rate		Amount			Rate		Amount			Rate		Amount			Rate
	(Dollars in thousands)
Beginning balance	$	7,182,346		3.59	%	$	7,061,557		3.58	%	$	6,949,522		3.60	%	$	6,832,770		3.63	%
Originated and refinanced:
Fixed	116,422			3.94		115,560			3.66		176,554			3.26		176,534			3.31
Adjustable	59,372			3.87		36,417			3.82		46,566			3.54		48,608			3.53
Purchased and participations:
Fixed	135,041			3.97		143,852			3.69		187,674			3.52		190,830			3.50
Adjustable	17,930			3.24		27,158			2.98		25,262			2.73		65,748			3.79
Change in undisbursed loan funds	13,648					37,862					3,696					(26,760		)
Repayments	(295,988		)			(239,072		)			(326,839		)			(337,779		)
Principal recoveries (charge-offs), net	39					(74		)			(19		)			(22		)
Other	(385		)			(914		)			(859		)			(407		)
Ending balance	$	7,228,425		3.60		$	7,182,346		3.59		$	7,061,557		3.58		$	6,949,522		3.60



	For the Nine Months Ended
	June 30, 2017					June 30, 2016
	Amount			Rate		Amount			Rate
	(Dollars in thousands)
Beginning balance	$	6,949,522		3.60	%	$	6,622,728		3.66	%
Originations and refinances:
Fixed	408,536			3.57		429,831			3.61
Adjustable	142,355			3.75		117,931			3.70
Purchases and participations:
Fixed	466,567			3.70		529,423			3.69
Adjustable	70,350			2.96		77,931			3.00
Change in undisbursed loan funds	55,206					(115,267		)
Repayments	(861,899		)			(826,221		)
Principal charge-offs, net	(54		)			(131		)
Other	(2,158		)			(3,455		)
Ending balance	$	7,228,425		3.60		$	6,832,770		3.63

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
	June 30, 2017						June 30, 2016
	Amount		Rate		% of Total		Amount		Rate		% of Total
	(Dollars in thousands)
Fixed-rate:
One- to four-family:
<= 15 years	$	43,684	3.39	%	13.3	%	$	57,702	2.93	%	14.3	%
> 15 years	180,496		4.07		54.9		240,111		3.66		59.6
Commercial real estate	26,196		4.08		8.0		34,475		4.40		8.6
Home equity	983		5.83		0.3		1,452		5.62		0.4
Other	104		9.78		—		201		8.75		—
Total fixed-rate	251,463		3.96		76.5		333,941		3.62		82.9

Adjustable-rate:
One- to four-family:
<= 36 months	1,140		2.94		0.3		2,433		2.56		0.6
> 36 months	56,487		3.24		17.2		48,049		2.88		11.9
Home equity	19,322		5.19		5.9		17,833		4.72		4.4
Other	353		3.43		0.1		719		3.41		0.2
Total adjustable-rate	77,302		3.72		23.5		69,034		3.35		17.1

Total originated, refinanced and purchased	$	328,765	3.90		100.0	%	$	402,975	3.58		100.0	%

Purchased and participation loans included above:
Fixed-rate:
Correspondent - one- to four-family	$	108,845	3.95				$	144,287	3.55
Participations - commercial real estate	26,196		4.08				34,475		4.40
Total fixed-rate purchased/participations	135,041		3.97				178,762		3.71

Adjustable-rate:
Correspondent - one- to four-family	17,930		3.24				24,715		2.90
Total purchased/participation loans	$	152,971	3.89				$	203,477	3.61



	For the Nine Months Ended
	June 30, 2017						June 30, 2016
	Amount		Rate		% of Total		Amount		Rate		% of Total
	(Dollars in thousands)
Fixed-rate:
One- to four-family:
<= 15 years	$	180,559	3.00	%	16.6	%	$	176,597	3.00	%	15.3	%
> 15 years	633,436		3.78		58.2		605,575		3.73		52.4
Commercial real estate	58,487		4.02		5.4		173,199		4.00		15.0
Home equity	2,323		5.84		0.2		3,230		5.72		0.2
Other	298		10.11		—		653		9.02		0.1
Total fixed-rate	875,103		3.64		80.4		959,254		3.66		83.0

Adjustable-rate:
One- to four-family:
<= 36 months	3,897		2.73		0.4		4,255		2.61		0.4
> 36 months	154,426		3.01		14.2		134,220		2.95		11.6
Commercial real estate	—		—		—		3,376		4.25		0.3
Home equity	52,602		4.95		4.8		51,803		4.63		4.5
Other	1,780		3.39		0.2		2,208		3.45		0.2
Total adjustable-rate	212,705		3.49		19.6		195,862		3.42		17.0

Total originated, refinanced and purchased	$	1,087,808	3.61		100.0	%	$	1,155,116	3.62		100.0	%

Purchased and participation loans included above:
Fixed-rate:
Correspondent - one- to four-family	$	408,080	3.66				$	386,355	3.60
Participations - commercial real estate	58,487		4.02				143,068		3.93
Total fixed-rate purchased/participations	466,567		3.70				529,423		3.69

Adjustable-rate:
Correspondent - one- to four-family	70,350		2.96				74,555		2.94
Participations - commercial real estate	—		—				3,376		4.25
Total adjustable-rate purchased/participations	70,350		2.96				77,931		3.00
Total purchased/participation loans	$	536,917	3.60				$	607,354	3.60

One- to Four-Family Loans - The following table presents, for our portfolio of one- to four-family loans, the amount, percent of total, weighted average credit score, weighted average LTV ratio, and the average balance per loan as of the dates presented. Credit scores are updated at least semiannually, with the latest update in March 2017, 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.



	June 30, 2017									September 30, 2016
			% of		Credit			Average				% of		Credit			Average
	Amount		Total		Score	LTV		Balance		Amount		Total		Score	LTV		Balance
	(Dollars in thousands)
Originated	$	4,005,081	58.8	%	767	63	%	$	135	$	4,005,615	60.4	%	766	63	%	$	132
Correspondent purchased	2,442,557		35.8		764	68		374		2,206,072		33.3		764	68		360
Bulk purchased	367,353		5.4		755	63		305		416,653		6.3		753	64		308
	$	6,814,991	100.0	%	765	65		182		$	6,628,340	100.0	%	765	65		175

The following tables present originated, refinanced, and correspondent purchased activity in our one- to four-family loan portfolio, excluding endorsement activity, along with associated weighted average LTVs and weighted average credit scores for the periods indicated. Of the loans originated during the current quarter and current year nine month period, $19.8 million and $99.1 million, respectively, were refinanced from another lender. Of the loans originated during the prior year nine month period, $62.3 million were refinanced from another lender. Of the loans originated and refinanced during the current year nine month period, 71% had loan values of $424 thousand or less. Of the correspondent loans purchased during the current year nine month period, 13% had loan values of $424 thousand or less.



	For the Three Months Ended
	June 30, 2017					June 30, 2016
					Credit					Credit
	Amount		LTV		Score	Amount		LTV		Score
	(Dollars in thousands)
Originated	$	135,311	77	%	764	$	146,590	80	%	773
Refinanced by Bank customers	19,721		65		751	32,703		69		766
Correspondent purchased	126,775		75		767	169,002		74		761
	$	281,807	75		764	$	348,295	76		766



	For the Nine Months Ended
	June 30, 2017					June 30, 2016
					Credit					Credit
	Amount		LTV		Score	Amount		LTV		Score
	(Dollars in thousands)
Originated	$	390,983	77	%	768	$	361,651	78	%	769
Refinanced by Bank customers	102,905		66		763	98,086		69		768
Correspondent purchased	478,430		74		766	460,910		74		763
	$	972,318	74		767	$	920,647	75		766

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 nine month period ended June 30, 2017.



	For the Three Months Ended						For the Nine Months Ended
	June 30, 2017						June 30, 2017
State	Amount		% of Total		Rate		Amount		% of Total		Rate
	(Dollars in thousands)
Kansas	$	136,937	48.6	%	3.75	%	$	439,677	45.2	%	3.46	%
Texas	53,840		19.1		3.81		189,558		19.5		3.54
Missouri	40,597		14.4		3.83		149,128		15.3		3.56
Other states	50,433		17.9		3.85		193,955		20.0		3.54
	$	281,807	100.0	%	3.79		$	972,318	100.0	%	3.51

One- to Four-Family Loan Commitments - The following table summarizes our one- to four-family loan origination and refinance commitments and one- to four-family correspondent loan purchase commitments as of June 30, 2017, along with associated weighted average rates. Loan commitments generally have fixed expiration dates or other termination clauses and may require the payment of a rate lock fee. It is expected that some of the loan commitments will expire unfunded, so the amounts reflected in the table below are not necessarily indicative of future cash needs.



	Fixed-Rate
	15 years			More than			Adjustable-			Total
	or less			15 years			Rate			Amount		Rate
	(Dollars in thousands)
Originate/refinance	$	7,964		$	35,436		$	14,819		$	58,219	3.72	%
Correspondent	6,105			71,632			10,796			88,533		4.00
	$	14,069		$	107,068		$	25,615		$	146,752	3.89

Rate	3.46		%	4.08		%	3.33		%

Commercial Real Estate Loans - Commercial real estate 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 commercial real estate loans depending on the property type. During the current year nine month period, the Bank entered into commercial real estate loan participations of $58.5 million, which included $52.4 million of commercial real estate construction loans. The majority of the $52.4 million of commercial real estate construction loans had not yet been funded as of June 30, 2017. The Bank intends to continue to grow its commercial real estate loan portfolio through participations with correspondent lenders and other lead banks with which the Bank has commercial real estate lending relationships.

The following table presents the Bank's commercial real estate loans and loan commitments by industry classification, as defined by the North American Industry Classification System, as of June 30, 2017. Based on the terms of the construction loans as of June 30, 2017, of the $129.4 million of undisbursed amounts in the table, approximately $33 million is projected to be disbursed by September 30, 2017, and an additional $65 million is projected to be disbursed by June 30, 2018. It is possible that not all of the funds will be disbursed due to the nature of the funding of construction projects. For outstanding commitments, in certain cases, the weighted average rate presented represents our best estimate.



	Unpaid			Undisbursed			Gross Loan			Outstanding						% of
	Principal			Amount			Amount			Commitments			Total			Total
	(Dollars in thousands)
Accommodation and food services	$	110,401		$	28,908		$	139,309		$	1,600		$	140,909		34.6	%
Health care and social assistance	41,197			58,535			99,732			—			99,732			24.5
Real estate rental and leasing	20,030			38,817			58,847			2,645			61,492			15.1
Arts, entertainment, and recreation	34,345			—			34,345			—			34,345			8.4
Multi-family	10,511			—			10,511			18,000			28,511			7.0
Retail trade	25,211			2,251			27,462			—			27,462			6.8
Other	13,869			883			14,752			—			14,752			3.6
	$	255,564		$	129,394		$	384,958		$	22,245		$	407,203		100.0	%

Weighted average rate	4.10		%	4.25		%	4.15		%	3.56		%	4.12		%

The following table summarizes the Bank's commercial real estate loans by state as of June 30, 2017.



	Unpaid		Undisbursed		Gross Loan		Outstanding				% of
	Principal		Amount		Amount		Commitments		Total		Total
	(Dollars in thousands)
Texas	$	75,494	$	66,971	$	142,465	$	1,600	$	144,065	35.4	%
Missouri	73,806		60,040		133,846		995		134,841		33.1
Kansas	76,272		—		76,272		—		76,272		18.7
Nebraska	—		—		—		18,000		18,000		4.4
Colorado	14,837		—		14,837		1,650		16,487		4.1
Arkansas	8,076		—		8,076		—		8,076		2.0
California	5,617		883		6,500		—		6,500		1.6
Montana	1,462		1,500		2,962		—		2,962		0.7
	$	255,564	$	129,394	$	384,958	$	22,245	$	407,203	100.0	%

The following table presents the Bank's commercial real estate loan portfolio and outstanding loan commitments, categorized by gross loan amount (unpaid principal plus undisbursed amounts) or outstanding loan commitment amount, as of June 30, 2017.



	Count	Amount
	(Dollars in thousands)
Greater than $30 million	4	$	157,581
>$15 to $30 million	5	115,028
>$10 to $15 million	3	37,859
>$5 to $10 million	3	22,799
$1 to $5 million	24	68,409
Less than $1 million	16	5,527
	55	$	407,203

Asset Quality. The Bank's traditional underwriting guidelines have provided the Bank with generally low delinquencies and low levels of non-performing assets compared to national levels. Of particular importance is the complete and full documentation required for each loan the Bank originates, participates in or purchases. Generally, one- to four-family owner occupied loans are underwritten according to the "ability to repay" and "qualified mortgage" standards, as issued by the CFPB, 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, 2016.

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 June 30, 2017, approximately 78% were 59 days or less delinquent. The Bank began receiving more timely correspondent delinquent loan information from our sub-servicer during the March 31, 2017 quarter which is the primary reason for the decrease in the 30 to 89 day delinquent correspondent loan balances compared to dates prior to March 31, 2017.



	Loans Delinquent for 30 to 89 Days at:
	June 30,				March 31,				December 31,				September 30,				June 30,
	2017				2017				2016				2016				2016
	Number	Amount			Number	Amount			Number	Amount			Number	Amount			Number	Amount
	(Dollars in thousands)
One- to four-family:
Originated	120	$	10,455		122	$	10,886		130	$	11,232		143	$	13,593		141	$	12,962
Correspondent purchased	5	1,278			4	739			17	7,809			9	3,329			10	2,561
Bulk purchased	15	2,511			19	3,527			26	4,844			21	5,008			27	4,703
Consumer:
Home equity	30	412			36	761			38	665			36	635			33	548
Other	5	14			7	34			7	17			5	62			11	55
	175	$	14,670		188	$	15,947		218	$	24,567		214	$	22,627		222	$	20,829

Loans 30 to 89 days delinquent
to total loans receivable, net		0.20		%		0.22		%		0.35		%		0.33		%		0.30		%

The table below presents the Company's non-performing loans and OREO at the dates indicated. Non-performing loans are loans that are 90 or more days delinquent or in foreclosure and other loans required to be reported as nonaccrual pursuant to 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 acquired in the settlement of loans were owned by the Bank, on average, for approximately seven months before the properties were sold.



	Non-Performing Loans and OREO at:
	June 30,				March 31,				December 31,				September 30,				June 30,
	2017				2017				2016				2016				2016
	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	50	$	4,264		65	$	5,348		79	$	6,647		73	$	8,190		74	$	8,539
Correspondent purchased	—	—			3	901			2	553			3	985			2	652
Bulk purchased	18	4,805			24	7,097			27	7,982			28	7,323			32	8,017
Consumer:
Home equity	27	484			22	423			29	456			26	520			20	437
Other	2	10			3	7			7	18			5	9			6	17
	97	9,563			117	13,776			144	15,656			135	17,027			134	17,662

Loans 90 or more days delinquent or in foreclosure
as a percentage of total loans		0.13		%		0.19		%		0.22		%		0.24		%		0.24		%

Nonaccrual loans less than 90 Days Delinquent:⁽¹⁾
One- to four-family:
Originated	89	$	9,493		92	$	10,675		82	$	11,393		70	$	8,956		70	$	6,939
Correspondent purchased	9	1,589			4	583			6	1,231			9	2,786			8	2,872
Bulk purchased	3	1,023			3	809			2	147			1	31			—	—
Consumer:
Home equity	12	251			14	346			14	371			12	328			11	263
Other	—	—			—	—			—	—			—	—			1	7
	113	12,356			113	12,413			104	13,142			92	12,101			90	10,081
Total non-performing loans	210	21,919			230	26,189			248	28,798			227	29,128			224	27,743

Non-performing loans as a percentage of total loans		0.30		%		0.36		%		0.41		%		0.42		%		0.41		%

OREO:
One- to four-family:
Originated⁽²⁾	9	$	200		9	$	831		10	$	888		12	$	692		14	$	1,142
Correspondent purchased	—	—			—	—			—	—			1	499			1	499
Bulk purchased	5	1,671			6	1,830			3	1,196			4	1,265			5	1,413
Consumer:
Home equity	1	82			—	—			—	—			—	—			—	—
Other⁽³⁾	—	—			—	—			1	1,278			1	1,278			1	1,278
	15	1,953			15	2,661			14	3,362			18	3,734			21	4,332
Total non-performing assets	225	$	23,872		245	$	28,850		262	$	32,160		245	$	32,862		245	$	32,075

Non-performing assets as a percentage of total assets		0.26		%		0.31		%		0.35		%		0.35		%		0.35		%

(1)

Represents loans required to be reported as nonaccrual pursuant to regulatory reporting requirements even if the loans are current. At June 30, 2017, March 31, 2017, December 31, 2016, September 30, 2016, and June 30, 2016, this amount was comprised of $2.7 million, $2.0 million, $2.0 million, $2.3 million, and $2.8 million, respectively, of loans that were 30 to 89 days delinquent and were reported as such, and $9.7 million, $10.4 million, $11.1 million, $9.8 million, and $7.3 million, respectively, of loans that were current.


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


(3)	Represents a single property the Bank purchased for a potential branch site. The Bank sold the property during the March 31, 2017 quarter.

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 June 30, 2017, $7.4 million, or 82%, 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 June 30, 2017. 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 June 30, 2017, 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	$	3,714,104	54.5	%	$	8,566	60.1	%	$	4,388	48.4	%	66	%
Missouri	1,262,649		18.5		3,022		21.2		697		7.7		49
Texas	659,479		9.7		267		1.9		110		1.2		71
California	222,714		3.3		—		—		—		—		n/a
Tennessee	217,940		3.2		—		—		—		—		n/a
Alabama	107,752		1.6		601		4.2		—		—		n/a
Pennsylvania	95,027		1.4		—		—		—		—		n/a
Georgia	85,923		1.2		413		2.9		538		5.9		65
Oklahoma	70,872		1.0		—		—		—		—		n/a
North Carolina	67,212		1.0		—		—		464		5.1		41
Other states	311,319		4.6		1,375		9.7		2,872		31.7		69
	$	6,814,991	100.0	%	$	14,244	100.0	%	$	9,069	100.0	%	65

TDRs - The following table presents the Company's TDRs, based on accrual status, at the dates indicated. At June 30, 2017, $13.1 million of TDRs were included in the ACL formula analysis model and $35 thousand of the ACL was related to these loans. The remaining $30.2 million of TDRs at June 30, 2017 were individually evaluated for loss and any losses have been charged-off.



	At
	June 30,		March 31,		December 31,		September 30,		June 30,
	2017		2017		2016		2016		2016
	(Dollars in thousands)
Accruing TDRs	$	27,343	$	26,209	$	22,726	$	23,177	$	21,663
Nonaccrual TDRs⁽¹⁾	15,947		16,868		17,983		18,725		16,497
Total TDRs	$	43,290	$	43,077	$	40,709	$	41,902	$	38,160


(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, trends in foreclosed property and short sale transactions and charge-off activity, the current status and trends of local and national employment levels, trends and current conditions in the real estate and housing markets, loan portfolio growth and concentrations, industry and peer charge-off information, and certain ACL ratios. For our commercial real estate portfolio, we also consider qualitative factors such as geographic locations, property types, tenant brand name, borrowing relationships, and lending relationships in the case of participation loans, among other factors. See "Part II, Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies" and "Part II, Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 1. Summary of Significant Accounting Policies" in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2016 for a full discussion of our ACL methodology.

The Bank did not record a provision for credit losses during the current quarter or the nine month period ended June 30, 2017 or during the quarter or nine month period ended June 30, 2016. Based on management's assessment of the ACL formula analysis model and several other factors, management determined that no provision for credit losses was necessary. Net recoveries were $39 thousand during the current quarter and net charge-offs were $54 thousand for the nine month period ended June 30, 2017. Net recoveries were $119 thousand during the prior year quarter and net charge-offs were $131 thousand for the nine month period ended June 30, 2016. At June 30, 2017, loans 30 to 89 days delinquent were 0.20% of total loans and loans 90 or more days delinquent or in foreclosure were 0.13% of total loans.

The distribution of our ACL at the dates indicated is summarized below. Included in bulk purchased loans are $220.7 million of loans, or 60% of the total bulk purchased loan portfolio, at June 30, 2017, for which the seller of the loans has guaranteed to repurchase or replace any delinquent loans. The Bank has not experienced any losses on loans acquired from this seller as all delinquent loans have been repurchased by this seller since the loan package was purchased in fiscal year 2012. For the $146.7 million of bulk purchased loans at June 30, 2017 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
	June 30, 2017								September 30, 2016
			% 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)
Real estate loans:
One- to four-family:
Originated	$	3,196	37.6	%	$	4,005,081	55.4	%	$	3,892	45.6	%	$	4,005,615	57.6	%
Correspondent purchased	1,916		22.6		2,442,557		33.8		2,102		24.6		2,206,072		31.7
Bulk purchased	1,000		11.8		367,353		5.1		1,065		12.5		416,653		6.0
Construction	26		0.3		33,854		0.5		36		0.4		39,430		0.6
Total	6,138		72.3		6,848,845		94.8		7,095		83.1		6,667,770		95.9
Commercial:
Permanent	1,018		12.0		148,485		2.0		774		9.1		110,768		1.6
Construction	1,071		12.6		107,079		1.5		434		5.1		43,375		0.6
Total	2,089		24.6		255,564		3.5		1,208		14.2		154,143		2.2
Total real estate loans	8,227		96.9		7,104,409		98.3		8,303		97.3		6,821,913		98.1
Consumer loans:
Home equity	220		2.6		119,822		1.6		187		2.1		123,345		1.8
Other consumer	39		0.5		4,194		0.1		50		0.6		4,264		0.1
Total consumer loans	259		3.1		124,016		1.7		237		2.7		127,609		1.9
	$	8,486	100.0	%	$	7,228,425	100.0	%	$	8,540	100.0	%	$	6,949,522	100.0	%

The following tables present ACL activity and related ratios at the dates and for the periods indicated. See "Note 4 - Loans Receivable and Allowance for Credit Losses" for additional information related to ACL activity by specific loan categories. Using the Bank's annualized net historical loan losses over the past five years, the Bank would have approximately 10 years of net loan loss coverage based on the ACL balance at June 30, 2017.



	For the Three Months Ended
	June 30, 2017			March 31, 2017			December 31, 2016			September 30, 2016			June 30, 2016
	(Dollars in thousands)
ACL beginning balance	$	8,447		$	8,521		$	8,540		$	9,312		$	9,193
Charge-offs	(41		)	(82		)	(32		)	(179		)	(126		)
Recoveries	80			8			13			157			245
Provision for credit losses	—			—			—			(750		)	—
ACL ending balance	$	8,486		$	8,447		$	8,521		$	8,540		$	9,312

ACL to loans receivable, net at end of period	0.12		%	0.12		%	0.12		%	0.12		%	0.14		%
ACL to non-performing loans at end of period	38.72			32.25			29.59			29.32			33.57
Ratio of net charge-offs (recoveries) during the
period to average loans outstanding	—			—			—			—			—
Ratio of net charge-offs (recoveries) during the
period to average non-performing assets	(0.15		)	0.24			0.06			0.07			(0.38		)
ACL to net charge-offs (annualized)	N/M⁽¹⁾			28.6x			111.5x			95.6x			N/M⁽¹⁾


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



	For the Nine Months Ended
	June 30, 2017			June 30, 2016
	(Dollars in thousands)
ACL beginning balance	$	8,540		$	9,443
Charge-offs	(155		)	(451		)
Recoveries	101			320
Provision for credit losses	—			—
ACL ending balance	$	8,486		$	9,312

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	0.19			0.42
ACL to net charge-offs (annualized)	118.3x			53.4x

Securities. The following table presents the distribution of our securities portfolio, at amortized cost, at the dates indicated. Overall, fixed-rate securities comprised 75% of our securities portfolio at June 30, 2017. 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.



	June 30, 2017					March 31, 2017					September 30, 2016
	Amount		Yield		WAL	Amount		Yield		WAL	Amount		Yield		WAL
	(Dollars in thousands)
Fixed-rate securities:
MBS	$	682,062	2.16	%	3.0	$	731,990	2.17	%	3.0	$	836,852	2.16	%	2.9
GSE debentures	296,283		1.25		1.4	296,266		1.25		1.7	346,226		1.15		0.9
Municipal bonds	29,220		1.65		2.2	30,826		1.62		2.3	33,303		1.69		2.4
Total fixed-rate securities	1,007,565		1.87		2.5	1,059,082		1.90		2.6	1,216,381		1.86		2.3

Adjustable-rate securities:
MBS	328,416		2.49		4.8	351,243		2.42		5.6	400,161		2.25		4.7
Trust preferred securities	2,074		2.50		20.0	2,080		2.39		20.2	2,123		2.11		20.7
Total adjustable-rate securities	330,490		2.49		4.9	353,323		2.42		5.7	402,284		2.24		4.8
Total securities portfolio	$	1,338,055	2.03		3.1	$	1,412,405	2.03		3.4	$	1,618,665	1.95		2.9

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



	June 30, 2017		March 31, 2017		September 30, 2016
	(Dollars in thousands)
Federal National Mortgage Association ("FNMA")	$	620,741	$	664,251	$	752,141
Federal Home Loan Mortgage Corporation ("FHLMC")	330,101		356,029		413,458
Government National Mortgage Association	66,303		70,590		80,479
	$	1,017,145	$	1,090,870	$	1,246,078

Mortgage-Backed Securities - The balance of MBS, which primarily consists of securities of U.S. GSEs, decreased $228.9 million, from $1.25 billion at September 30, 2016, to $1.02 billion at June 30, 2017. The following tables summarize the activity in our portfolio of MBS for the periods presented. The weighted average yields and WALs for purchases are presented as recorded at the time of purchase. The weighted average yields for the beginning balances are as of the last day of the period previous to the period presented and the weighted average yields for the ending balances are as of the last day of the period presented and are generally derived from recent prepayment activity on the securities in the portfolio as of the dates presented. The beginning and ending WAL is the estimated remaining principal repayment term (in years) after three-month historical prepayment speeds have been applied.



	For the Three Months Ended
	June 30, 2017						March 31, 2017						December 31, 2016						September 30, 2016
	Amount			Yield		WAL	Amount			Yield		WAL	Amount			Yield		WAL	Amount			Yield		WAL
	(Dollars in thousands)
Beginning balance - carrying value	$	1,090,870		2.25	%	3.9	$	1,166,326		2.18	%	3.5	$	1,246,078		2.19	%	3.5	$	1,344,481		2.21	%	3.9
Maturities and repayments	(71,763		)				(73,801		)				(88,564		)				(96,320		)
Net amortization of (premiums)/discounts	(992		)				(1,015		)				(1,290		)				(1,345		)
Purchases:
Fixed	—			—		—	—			—		—	10,890			1.99		3.8	—			—		—
Change in valuation on AFS securities	(970		)				(640		)				(788		)				(738		)
Ending balance - carrying value	$	1,017,145		2.26		3.6	$	1,090,870		2.25		3.9	$	1,166,326		2.18		3.5	$	1,246,078		2.19		3.5



	For the Nine Months Ended
	June 30, 2017						June 30, 2016
	Amount			Yield		WAL	Amount			Yield		WAL
	(Dollars in thousands)
Beginning balance - carrying value	$	1,246,078		2.19	%	3.5	$	1,462,539		2.24	%	3.8
Maturities and repayments	(234,128		)				(254,670		)
Net amortization of (premiums)/discounts	(3,297		)				(3,666		)
Purchases:
Fixed	10,890			1.99		3.8	42,827			1.83		4.1
Adjustable	—			—		—	100,133			2.02		5.4
Change in valuation on AFS securities	(2,398		)				(2,682		)
Ending balance - carrying value	$	1,017,145		2.26		3.6	$	1,344,481		2.21		3.9

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 $382.1 million at September 30, 2016, to $326.8 million at June 30, 2017. The following tables summarize 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
	June 30, 2017						March 31, 2017						December 31, 2016						September 30, 2016
	Amount			Yield		WAL	Amount			Yield		WAL	Amount			Yield		WAL	Amount			Yield		WAL
	(Dollars in thousands)
Beginning balance - carrying value	$	328,323		1.29	%	1.9	$	355,681		1.27	%	2.0	$	382,097		1.20	%	1.2	$	510,745		1.21	%	1.1
Maturities and calls	(1,538		)				(28,863		)				(50,019		)				(127,923		)
Net amortization of (premiums)/discounts	(57		)				(61		)				(72		)				(9		)
Purchases:
Fixed	—			—		—	1,535			1.30		3.4	25,000			1.70		4.0	—			—		—
Change in valuation on AFS securities	58						31						(1,325		)				(716		)
Ending balance - carrying value	$	326,786		1.29		1.6	$	328,323		1.29		1.9	$	355,681		1.27		2.0	$	382,097		1.20		1.2



	For the Nine Months Ended
	June 30, 2017						June 30, 2016
	Amount			Yield		WAL	Amount			Yield		WAL
	(Dollars in thousands)
Beginning balance - carrying value	$	382,097		1.20	%	1.2	$	566,754		1.19	%	1.8
Maturities and calls	(80,420		)				(157,229		)
Net amortization of (premiums)/discounts	(190		)				(322		)
Purchases:
Fixed	26,535			1.68		4.0	101,359			1.09		0.8
Change in valuation on AFS securities	(1,236		)				183
Ending balance - carrying value	$	326,786		1.29		1.6	$	510,745		1.21		1.1

Liabilities. Total liabilities were $7.74 billion at June 30, 2017 compared to $7.87 billion at September 30, 2016. FHLB borrowings decreased $198.9 million, to $2.17 billion at June 30, 2017, as certain maturing FHLB advances were not replaced. Cash flows from the deposit portfolio and securities portfolio, along with excess operating cash, were used to pay off the maturing FHLB advances. Deposits increased $103.7 million, to $5.27 billion at June 30, 2017, due largely to an increase in non-maturity retail deposits.

Deposits - Deposits were $5.27 billion at June 30, 2017 compared to $5.16 billion at September 30, 2016. We continue to be competitive on deposit rates and, in some cases, our offer rates for longer-term certificates of deposit have been higher than peers. Offering competitive rates 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 percent of total for the components of our deposit portfolio at the dates presented.



	June 30, 2017						March 31, 2017						September 30, 2016
					% of						% of						% of
	Amount		Rate		Total		Amount		Rate		Total		Amount		Rate		Total
	(Dollars in thousands)
Non-interest-bearing checking	$	244,037	—	%	4.6	%	$	240,061	—	%	4.6	%	$	217,009	—	%	4.2	%
Interest-bearing checking	627,905		0.05		11.9		646,634		0.05		12.3		597,319		0.05		11.6
Savings	354,289		0.24		6.8		353,676		0.22		6.7		335,426		0.17		6.5
Money market	1,217,580		0.24		23.1		1,219,499		0.24		23.1		1,186,132		0.24		23.0
Retail certificates of deposit	2,432,867		1.48		46.2		2,461,838		1.46		46.7		2,458,160		1.43		47.6
Public units	391,007		1.08		7.4		347,526		0.83		6.6		369,972		0.70		7.1
	$	5,267,685	0.84		100.0	%	$	5,269,234	0.81		100.0	%	$	5,164,018	0.80		100.0	%

The following tables set forth scheduled maturity information for our certificates of deposit, along with associated weighted average rates, at June 30, 2017.



	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%	$	641,523		$	92,897		$	359		$	—		$	734,779	0.75	%
1.00 – 1.99%	559,682			444,901			486,754			433,813			1,925,150		1.62
2.00 – 2.99%	166			1,335			162,332			—			163,833		2.24
3.00 – 3.99%	112			—			—			—			112		3.06
	$	1,201,483		$	539,133		$	649,445		$	433,813		$	2,823,874	1.43

Percent of total	42.5		%	19.1		%	23.0		%	15.4		%
Weighted average rate	1.03			1.42			1.85			1.91
Weighted average maturity (in years)	0.4			1.5			2.5			3.8			1.6
Weighted average maturity for the retail certificate of deposit portfolio (in years)													1.8



	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	$	169,970	$	174,022	$	286,301	$	880,974	$	1,511,267
Retail certificates of deposit of $100,000 or more	82,682		76,467		130,523		631,928		921,600
Public unit deposits of $100,000 or more	148,654		75,381		57,483		109,489		391,007
	$	401,306	$	325,870	$	474,307	$	1,622,391	$	2,823,874

Borrowings - The following tables present borrowing activity for the periods shown. The borrowings presented in the table have original contractual terms of one year or longer. FHLB advances are presented at par. The 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
	June 30, 2017						March 31, 2017					December 31, 2016						September 30, 2016
				Effective					Effective						Effective						Effective
	Amount			Rate		WAM	Amount		Rate		WAM	Amount			Rate		WAM	Amount			Rate		WAM
	(Dollars in thousands)
Beginning balance	$	2,475,000		2.35	%	2.5	$	2,475,000	2.35	%	2.7	$	2,575,000		2.29	%	2.9	$	2,675,000		2.24	%	3.0
Maturities:
FHLB advances	(300,000		)	3.24			—		—			(100,000		)	0.78			(100,000		)	0.83
Ending balance	$	2,175,000		2.23		2.5	$	2,475,000	2.35		2.5	$	2,475,000		2.35		2.7	$	2,575,000		2.29		2.9



	For the Nine Months Ended
	June 30, 2017						June 30, 2016
				Effective						Effective
	Amount			Rate		WAM	Amount			Rate		WAM
	(Dollars in thousands)
Beginning balance	$	2,575,000		2.29	%	2.9	$	2,775,000		2.29	%	3.3
Maturities:
FHLB advances	(400,000		)	2.62			(300,000		)	2.35
New borrowings:
FHLB advances	—			—		—	200,000			1.64		5.0
Ending balance	$	2,175,000		2.23		2.5	$	2,675,000		2.24		3.0

Maturities - The following table presents the maturity of term borrowings (including FHLB advances, at par, and repurchase agreements), along with associated weighted average contractual and effective rates as of June 30, 2017. During the current quarter, a $100.0 million advance with an effective rate of 3.23% matured and was not replaced. Additionally, a $200.0 million FHLB advance with an effective rate of 3.24% matured and was replaced by FHLB advances with terms of 14 days or less, which are included in fiscal year 2017 in the table below. Subsequent to June 30, 2017, the Bank replaced the advances with a $100.0 million 36-month fixed-rate advance at a rate of 1.85%, and a $100.0 million 12-month adjustable-rate advance at a rate of 1.27%. The Bank then entered into an interest rate swap with a notional amount of $100.0 million in order to hedge the variability in cash flows associated with the 12-month adjustable-rate advance, resulting in an effective cost of 2.14% for this borrowing. The weighted average effective rate of the term borrowings portfolio, adjusted for the activity that occurred subsequent to June 30, 2017, was 2.21%.



	FHLB		Repurchase
Maturity by	Advances		Agreements		Total		Contractual		Effective
Fiscal Year	Amount		Amount		Amount		Rate		Rate⁽¹⁾
	(Dollars in thousands)
2017	$	300,000	$	—	$	300,000	1.87	%	1.87	%
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
2023	100,000		—		100,000		1.82		1.82
	$	2,175,000	$	200,000	$	2,375,000	2.09		2.15


(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 June 30, 2017. The FHLB advances at June 30, 2017 with terms of 14 days or less are included in the September 30, 2017 period in the table below.



	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)
September 30, 2017	$	252,652	1.03	%	$	148,654	0.88	%	$	300,000	1.87	%	$	701,306	1.36	%
December 31, 2017	250,489		1.02		75,381		0.97		200,000		2.94		525,870		1.74
March 31, 2018	214,355		1.12		30,962		1.11		—		—		245,317		1.12
June 30, 2018	202,469		1.06		26,521		1.22		100,000		2.82		328,990		1.61
	$	919,965	1.05		$	281,518	0.96		$	600,000	2.39		$	1,801,483	1.48

Stockholders' Equity. Stockholders' equity was $1.36 billion at June 30, 2017 compared to $1.39 billion at September 30, 2016. The $34.0 million decrease was due primarily to the payment of $106.6 million in cash dividends, partially offset by net income of $63.5 million. The cash dividends paid during the current year nine month period totaled $0.795 per share and consisted of a $0.29 per share cash true-up dividend related to fiscal year 2016 earnings per the Company's dividend policy, a $0.25 per share True Blue Capitol dividend, and three regular quarterly cash dividends totaling $0.255 per share. On July 19, 2017, the Company announced a regular quarterly cash dividend of $0.085 per share, or approximately $11.4 million, payable on August 18, 2017 to stockholders of record as of the close of business on August 4, 2017.

At June 30, 2017, Capitol Federal Financial, Inc., at the holding company level, had $108.3 million on deposit at the Bank. For fiscal year 2017, 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.

Capitol Federal Financial, Inc. works to find multiple ways to provide stockholder value. Primarily this has been through stock buybacks and the payment of cash dividends. The Company has maintained a dividend policy of paying out 100% of its earnings to stockholders in the form of quarterly cash dividends and an annual true-up dividend in December of each year. In addition, due to the excess capital levels at the Company and the Bank, the Company has paid out a True Blue dividend of $0.25 cash per share in June of each of the past four years and in December prior to that. The Company considers various business strategies and their impact on capital and asset measures on both a current and future basis, as well as regulatory considerations, in determining the amount, if any, and timing of the True Blue dividend. Management currently considers a ten-percent equity-to-assets ratio at the Bank as an appropriate level of capital given the interest rate risk the Bank takes.

The following table presents regular quarterly dividends and special dividends paid in calendar years 2017, 2016, and 2015. The amounts represent cash dividends paid during each period. For the quarter ending September 30, 2017, the amount presented represents the dividend payable on August 18, 2017 to stockholders of record as of August 4, 2017.



	Calendar Year
	2017				2016				2015
	Amount		Per Share		Amount		Per Share		Amount		Per Share
	(Dollars in thousands, except per share amounts)
Regular quarterly dividends paid
Quarter ended March 31	$	11,386	$	0.085	$	11,305	$	0.085	$	11,592	$	0.085
Quarter ended June 30	11,409		0.085		11,314		0.085		11,585		0.085
Quarter ended September 30	11,410		0.085		11,323		0.085		11,385		0.085
Quarter ended December 31					11,363		0.085		11,303		0.085
True-up dividends paid					38,835		0.290		33,248		0.250
True Blue dividends paid	33,559		0.250		33,274		0.250		33,924		0.250
Calendar year-to-date dividends paid	$	67,764	$	0.505	$	117,414	$	0.880	$	113,037	$	0.840

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 and no shares have been repurchased under this repurchase plan.

Operating Results

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



	For the Three Months Ended
	June 30,			March 31,			December 31,			September 30,			June 30,
	2017			2017			2016			2016			2016
	(Dollars in thousands, except per share data)
Interest and dividend income:
Loans receivable	$	64,013		$	63,106		$	61,945		$	61,516		$	60,840
MBS	5,821			6,191			6,362			6,860			7,401
Cash and cash equivalents	5,619			4,132			2,969			2,774			2,730
FHLB stock	3,114			3,100			2,939			3,044			3,050
Investment securities	1,063			1,131			1,107			1,401			1,506
Total interest and dividend income	79,630			77,660			75,322			75,595			75,527

Interest expense:
FHLB borrowings	17,884			16,771			16,117			16,262			16,361
Deposits	10,895			10,364			10,396			10,098			9,749
Repurchase agreements	1,487			1,471			1,503			1,503			1,487
Total interest expense	30,266			28,606			28,016			27,863			27,597

Net interest income	49,364			49,054			47,306			47,732			47,930

Provision for credit losses	—			—			—			(750		)	—

Net interest income
(after provision for credit losses)	49,364			49,054			47,306			48,482			47,930

Non-interest income	5,460			5,573			5,268			5,691			5,429
Non-interest expense	22,645			21,937			21,597			23,962			23,327
Income tax expense	10,809			11,103			10,399			9,513			9,481
Net income	$	21,370		$	21,587		$	20,578		$	20,698		$	20,551

Efficiency ratio	41.30		%	40.16		%	41.08		%	44.85		%	43.72		%

Basic EPS	$	0.16		$	0.16		$	0.15		$	0.16		$	0.15
Diluted EPS	0.16			0.16			0.15			0.16			0.15

Comparison of Operating Results for the Nine Months Ended June 30, 2017 and 2016

The Company recognized net income of $63.5 million, or $0.47 per share, for the nine month period ended June 30, 2017, an increase of $739 thousand, or 1.2%, from the nine month period ended June 30, 2016. Net income attributable to the leverage strategy was $2.2 million during the current year nine month period, compared to $1.7 million for the prior year nine month period.

The net interest margin increased three basis points, from 1.75% for the prior year nine month period to 1.78% for the current year nine month period. Excluding the effects of the leverage strategy, the net interest margin would have increased two basis points, from 2.11% for the prior year nine month period to 2.13% for the current year nine month period. The increase in the net interest margin was due mainly to a shift in the mix of interest-earning assets from relatively lower yielding securities to higher yielding loans, partially offset by a decrease in the weighted average yield on loans. Additionally, the positive impact of the decrease in interest expense on borrowings not related to the leverage strategy was more than offset by an increase in interest expense on deposits.

The Company's efficiency ratio was 40.84% for the current year nine month period compared to 43.40% for the prior year nine month period. The change in the efficiency ratio was due primarily to lower non-interest expense in the current year nine month period compared to the prior year nine month period. The efficiency ratio is a measure of a financial institution's total non-interest expense as a percentage of the sum of net interest income (pre-provision for credit losses) and non-interest income. A lower value indicates that the financial institution is generating revenue with a proportionally lower level of expense.

Interest and Dividend Income

The weighted average yield on total interest-earning assets increased 10 basis points, from 2.74% for the prior year nine month period to 2.84% for the current year nine month period, while the average balance of interest-earning assets decreased $68.4 million from the prior year nine month period. Absent the impact of the leverage strategy, the weighted average yield on total interest-earning assets would have increased four basis points, from 3.21% for the prior year nine month period to 3.25% for the current year nine month period, while the average balance would have decreased $37.5 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 Nine Months Ended
	June 30,				Change Expressed in:
	2017		2016		Dollars			Percent
	(Dollars in thousands)
INTEREST AND DIVIDEND INCOME:
Loans receivable	$	189,064	$	181,795	$	7,269		4.0	%
MBS	18,374		22,934		(4,560		)	(19.9	)
Cash and cash equivalents	12,720		7,057		5,663			80.2
FHLB stock	9,153		9,208		(55		)	(0.6	)
Investment securities	3,301		4,524		(1,223		)	(27.0	)
Total interest and dividend income	$	232,612	$	225,518	$	7,094		3.1

The increase in interest income on loans receivable was due to a $404.3 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 3.54% for the current year nine month period. Loan growth was funded through cash flows from the securities portfolio. The decrease in the weighted average yield was due primarily to endorsements and refinances repricing loans to lower market rates, the origination and purchase of loans at rates lower than the overall loan portfolio rate at certain points during each time period, and an increase in the amortization of premiums related to correspondent loans.

The decrease in interest income on the MBS portfolio was due primarily to a $265.8 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 two basis points, from 2.20% during the prior year nine month period to 2.18% for the current year nine month period. The decrease in the weighted average yield was due to an increase in the impact of net premium amortization. Net premium amortization of $3.3 million during the current year nine month period decreased the weighted average yield on the portfolio by 39 basis points. During the prior year nine month period, $3.7 million of net premiums were amortized, which decreased the weighted average yield on the portfolio by 35 basis points.

The increase in interest income on cash and cash equivalents was due to a 36 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 to a $151.8 million decrease in the average balance. 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 increased eight basis points, from 1.11% for the prior year nine month period to 1.19% for the current year nine month period, while the average balance of interest-bearing liabilities decreased $44.8 million from the prior year nine month period. Absent the impact of the leverage strategy, the weighted average rate paid on total interest-bearing liabilities would have increased two basis points, from 1.28% for the prior year nine month period to 1.30% for the current year nine month period, while the average balance of interest-bearing liabilities would have decreased $13.9 million. The following table presents the components of interest expense for the time periods presented, along with the change measured in dollars and percent.



	For the Nine Months Ended
	June 30,				Change Expressed in:
	2017		2016		Dollars			Percent
	(Dollars in thousands)
INTEREST EXPENSE:
FHLB borrowings	$	50,772	$	48,829	$	1,943		4.0	%
Deposits	31,655		27,761		3,894			14.0
Repurchase agreements	4,461		4,478		(17		)	(0.4	)
Total interest expense	$	86,888	$	81,068	$	5,820		7.2

The table above includes interest expense on FHLB borrowings both associated and not associated with the leverage strategy. Interest expense on FHLB borrowings not related to the leverage strategy decreased $2.9 million from the prior year nine month period due to a $218.2 million decrease in the average balance of the portfolio as a result of not replacing all of the advances that matured between periods. Funds generated from deposit growth were largely used to pay off the maturing advances. The weighted average rate paid on FHLB borrowings not related to the leverage strategy increased four basis points, to 2.27% for the current year nine month period, due primarily to maturing advances having a lower rate than the overall advance portfolio rate. Interest expense on FHLB borrowings associated with the leverage strategy increased $4.8 million from the prior year nine month period due to a 33 basis point increase in the weighted average rate paid as a result of an increase in interest rates between periods.

The increase in interest expense on deposits was due primarily to a seven basis point increase in the weighted average rate, to 0.81% for the current year nine month period, along with growth in the portfolio. The increase in the weighted average rate was primarily related to the retail certificate of deposit portfolio, which increased 10 basis points to 1.44% for the current year nine month period. The average balance of the deposit portfolio increased $204.3 million during the current year nine month period, with the majority of the increase in the retail deposit portfolio.

Provision for Credit Losses

The Bank did not record a provision for credit losses during the current year nine month period or the prior year nine month period. Based on management's assessment of the ACL formula analysis model and several other factors, it was determined that no provision for credit losses was necessary. Net loan charge-offs were $54 thousand during the current year nine month period compared to $131 thousand during the prior year nine month period. At June 30, 2017, loans 30 to 89 days delinquent were 0.20% of total loans and loans 90 or more days delinquent or in foreclosure were 0.13% of total loans.

Non-Interest Income

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



	For the Nine Months Ended
	June 30,				Change Expressed in:
	2017		2016		Dollars			Percent
	(Dollars in thousands)
NON-INTEREST INCOME:
Retail fees and charges	$	11,123	$	11,097	$	26		0.2	%
Income from BOLI	1,669		2,810		(1,141		)	(40.6	)
Other non-interest income	3,509		3,714		(205		)	(5.5	)
Total non-interest income	$	16,301	$	17,621	$	(1,320	)	(7.5	)

The decrease in income from BOLI was due mainly to the receipt of a death benefit during the prior year nine month period and no such death benefit in the current year nine month period.

Non-Interest Expense

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



	For the Nine Months Ended
	June 30,				Change Expressed in:
	2017		2016		Dollars			Percent
	(Dollars in thousands)
NON-INTEREST EXPENSE:
Salaries and employee benefits	$	32,388	$	31,604	$	784		2.5	%
Information technology and communications	8,524		7,883		641			8.1
Occupancy, net	8,098		7,894		204			2.6
Regulatory and outside services	3,994		4,000		(6		)	(0.2	)
Deposit and loan transaction costs	3,918		4,119		(201		)	(4.9	)
Advertising and promotional	3,275		3,190		85			2.7
Federal insurance premium	2,651		4,158		(1,507		)	(36.2	)
Office supplies and related expense	1,470		2,016		(546		)	(27.1	)
Low income housing partnerships	—		2,815		(2,815		)	(100.0	)
Other non-interest expense	1,861		2,664		(803		)	(30.1	)
Total non-interest expense	$	66,179	$	70,343	$	(4,164	)	(5.9	)

The increase in salaries and employee benefits was due primarily to an increase in employee health care costs. The increase in information technology and communications was due largely to software licensing and communication network expenses. The decrease in federal insurance premiums was due primarily to a decrease in the Federal Deposit Insurance Corporation ("FDIC") base assessment rate effective July 1, 2016. The decrease in office supplies and related expense was due primarily to lower debit card expenses compared to the prior year nine month period, during which time the Bank began issuing debit cards enabled with chip card technology. The decrease in low income housing partnerships expense was due to a change in the Bank's method of accounting for those investments. The Bank had been accounting for these partnerships using the equity method of accounting as two of the Bank's officers were involved in the operational management of the low income housing partnership investment group. Effective September 30, 2016, those two Bank officers discontinued their involvement in the operational management of the investment group. On October 1, 2016, the Bank began using the proportional method of accounting for those investments rather than the equity method. As a result, the Bank no longer reports low income housing partnership expenses in non-interest expense; rather, the pretax operating losses and related tax benefits from the investments are reported as a component of income tax expense. The decrease in other non-interest expense was due mainly to a decrease in OREO operations expense, along with lower deposit account charge-offs related to debit card fraud in the current year nine month period.

Income Tax Expense

Income tax expense was $32.3 million for the current year nine month period compared to $28.9 million for the prior year nine month period. The effective tax rate for the current year nine month period was 33.7% compared to 31.5% for the prior year nine month period. The increase in effective tax rate was due mainly to the change in accounting method for low income housing partnerships as discussed above. Management anticipates the effective tax rate for fiscal year 2017 will be approximately 34%, based on fiscal year 2017 estimates as of June 30, 2017.

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 June 30, 2017. The leverage strategy was not in place at June 30, 2017, so the end of period yields/rates presented at June 30, 2017 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 Nine Months Ended
	June 30,	June 30, 2017						June 30, 2016
	2017	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⁾	3.58%	$	7,126,112	$	189,064	3.54	%	$	6,721,845	$	181,795	3.61	%
MBS⁽²⁾	2.26	1,125,689		18,374		2.18		1,391,441		22,934		2.20
Investment securities⁽²⁾⁽³⁾	1.29	346,035		3,301		1.27		497,794		4,524		1.21
FHLB stock	6.47	194,422		9,153		6.29		205,434		9,208		5.99
Cash and cash equivalents⁽⁴⁾	1.23	2,123,529		12,720		0.79		2,167,680		7,057		0.43
Total interest-earning assets⁽¹⁾⁽²⁾	3.34	10,915,787		232,612		2.84		10,984,194		225,518		2.74
Other non-interest-earning assets		297,478						290,854
Total assets		$	11,213,265					$	11,275,048

Liabilities and stockholders' equity:
Interest-bearing liabilities:
Checking	0.04	$	824,150	226		0.04		$	781,509	218		0.04
Savings	0.24	344,874		567		0.22		323,300		464		0.19
Money market	0.24	1,209,279		2,141		0.24		1,168,086		2,054		0.23
Retail certificates	1.48	2,439,370		26,352		1.44		2,356,566		23,628		1.34
Wholesale certificates	1.08	386,860		2,369		0.82		370,784		1,397		0.50
Total deposits	0.84	5,204,533		31,655		0.81		5,000,245		27,761		0.74
FHLB borrowings⁽⁵⁾	2.07	4,298,883		50,772		1.57		4,547,984		48,829		1.43
Repurchase agreements	2.94	200,000		4,461		2.94		200,000		4,478		2.94
Total borrowings	2.15	4,498,883		55,233		1.63		4,747,984		53,307		1.49
Total interest-bearing liabilities	1.25	9,703,416		86,888		1.19		9,748,229		81,068		1.11
Other non-interest-bearing liabilities		122,534						118,180
Stockholders' equity		1,387,315						1,408,639
Total liabilities and stockholders' equity		$	11,213,265					$	11,275,048
										(Continued)



	At	For the Nine Months Ended
	June 30,	June 30, 2017						June 30, 2016
	2017	Average		Interest				Average		Interest
	Yield/	Outstanding		Earned/		Yield/		Outstanding		Earned/		Yield/
	Rate	Amount		Paid		Rate		Amount		Paid		Rate
		(Dollars in thousands)
Net interest income⁽⁶⁾				$	145,724					$	144,450
Net interest rate spread⁽⁷⁾⁽⁸⁾	2.09%					1.65	%					1.63	%
Net interest-earning assets		$	1,212,371					$	1,235,965
Net interest margin⁽⁸⁾⁽⁹⁾						1.78						1.75
Ratio of interest-earning assets to interest-bearing liabilities						1.12x						1.13x

Selected performance ratios:
Return on average assets (annualized)⁽⁸⁾						0.76	%					0.74	%
Return on average equity (annualized)⁽⁸⁾						6.11						5.94
Average equity to average assets						12.37						12.49
Operating expense ratio⁽¹⁰⁾						0.79						0.83
Efficiency ratio⁽¹¹⁾						40.84						43.40
Pre-tax yield on leverage strategy⁽¹²⁾						0.22						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 $31.3 million and $37.6 million for the nine months ended June 30, 2017 and 2016, respectively.


(4)	The average balance of cash and cash equivalents includes an average balance of cash related to the leverage strategy of $1.93 billion and $1.96 billion for the nine months ended June 30, 2017 and 2016, respectively.

(5)

Included in this line are FHLB borrowings related to the leverage strategy with an average outstanding amount of $2.02 billion and $2.05 billion, interest paid of $12.1 million and $7.2 million, at a rate of 0.79% and 0.46% for the nine months ended June 30, 2017 and 2016, respectively. The FHLB advance amounts and rates included in this line are net of deferred gains and deferred prepayment penalties.


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


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

(8)

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



	For the Nine Months Ended
	June 30, 2017						June 30, 2016
	Actual		Leverage		Adjusted		Actual		Leverage		Adjusted
	(GAAP)		Strategy		(Non-GAAP)		(GAAP)		Strategy		(Non-GAAP)
Return on average assets (annualized)	0.76	%	(0.13	)%	0.89	%	0.74	%	(0.14	)%	0.88	%
Return on average equity (annualized)	6.11		0.21		5.90		5.94		0.15		5.79
Net interest margin	1.78		(0.35	)	2.13		1.75		(0.36	)	2.11
Net interest rate spread	1.65		(0.30	)	1.95		1.63		(0.30	)	1.93


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


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


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


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

Rate/Volume Analysis

The table below presents the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities, comparing the nine months ended June 30, 2017 to the nine months ended June 30, 2016. 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 Nine Months Ended
	June 30, 2017 vs. June 30, 2016
	Increase (Decrease) Due to
	Volume			Rate			Total
	(Dollars in thousands)
Interest-earning assets:
Loans receivable	$	10,635		$	(3,366	)	$	7,269
MBS	(4,339		)	(221		)	(4,560		)
Investment securities	(1,438		)	215			(1,223		)
FHLB stock	(522		)	467			(55		)
Cash and cash equivalents	(147		)	5,810			5,663
Total interest-earning assets	4,189			2,905			7,094

Interest-bearing liabilities:
Checking	11			(3		)	8
Savings	32			71			103
Money market	67			19			86
Certificates of deposit	906			2,791			3,697
FHLB borrowings	(3,995		)	5,938			1,943
Repurchase agreements	(9		)	(8		)	(17		)
Total interest-bearing liabilities	(2,988		)	8,808			5,820

Net change in net interest income	$	7,177		$	(5,903	)	$	1,274

Comparison of Operating Results for the Three Months Ended June 30, 2017 and 2016

For the quarter ended June 30, 2017, the Company recognized net income of $21.4 million, or $0.16 per share, an increase of $819 thousand from the quarter ended June 30, 2016. The increase in net income was due primarily to an increase in net interest income. Net interest income increased $1.4 million, or 3.0%, from the prior year quarter to $49.4 million for the current quarter. The net interest margin increased eight basis points, from 1.73% for the prior year quarter to 1.81% for the current quarter. Excluding the effects of the leverage strategy, the net interest margin would have increased seven basis points, from 2.09% for the prior year quarter to 2.16% for the current quarter. The increase was due primarily to a shift of the mix of interest-earning assets from relatively lower yielding securities to higher yielding loans, partially offset by a decrease in the weighted average yield on loans. Additionally, the positive impact of the decrease in interest expense on borrowings not related to the leverage strategy was more than offset by an increase in interest expense on deposits.

Net income attributable to the leverage strategy was $715 thousand during the current quarter, compared to $532 thousand for the prior year quarter. The increase was due mainly to an increase in the dividend yield on the FHLB stock holdings, along with a decrease in federal insurance premiums and a more positive interest rate spread between the yield earned on the cash held at the FRB of Kansas City and the rate paid on the related FHLB borrowings than in the prior year quarter.

The Company's efficiency ratio was 41.30% for the current quarter compared to 43.72% for the prior year quarter. The change in the efficiency ratio was due to a decrease in non-interest expense, as well as to an increase in net interest income.

Interest and Dividend Income

The weighted average yield on total interest-earning assets increased 18 basis points, from 2.73% for the prior year quarter to 2.91% for the current quarter, while the average balance of interest-earning assets decreased $118.8 million from the prior year quarter. Absent the impact of the leverage strategy, the weighted average yield on total interest-earning assets would have increased nine basis points, from 3.19% for the prior year quarter to 3.28% for the current quarter, while the average balance of interest-earning assets would have decreased $72.6 million. The following table presents the components of interest and dividend income for the time periods presented along with the change measured in dollars and percent.



	For the Three Months Ended
	June 30,				Change Expressed in:
	2017		2016		Dollars			Percent
	(Dollars in thousands)
INTEREST AND DIVIDEND INCOME:
Loans receivable	$	64,013	$	60,840	$	3,173		5.2	%
MBS	5,821		7,401		(1,580		)	(21.3	)
Cash and cash equivalents	5,619		2,730		2,889			105.8
FHLB stock	3,114		3,050		64			2.1
Investment securities	1,063		1,506		(443		)	(29.4	)
Total interest and dividend income	$	79,630	$	75,527	$	4,103		5.4

The increase in interest income on loans receivable was due to a $426.5 million increase in the average balance of the portfolio, partially offset by a four basis point decrease in the weighted average yield on the portfolio, to 3.54% for the current quarter. Loan growth was funded through cash flows from the securities portfolio. The decrease in the weighted average yield was due primarily to endorsements and refinances repricing loans to lower market rates and the origination and purchase of loans at certain points between periods at rates less than the existing portfolio rate.

The decrease in interest income on the MBS portfolio was due to a $335.0 million decrease in the average balance of the portfolio as cash flows not reinvested were used to fund loan growth. The weighted average yield on the portfolio increased seven basis points, to 2.21% for the current quarter. The increase in the weighted average yield was due primarily to adjustable-rate MBS repricing to higher market rates, along with a decrease in the impact of net premium amortization. During the current quarter, $992 thousand of net premiums on MBS were amortized, which decreased the weighted average yield on the portfolio by 38 basis points. During the prior year quarter, $1.4 million of net premiums were amortized, which decreased the weighted average yield on the portfolio by 40 basis points.

The increase in interest income on cash and cash equivalents was due primarily to a 54 basis point increase in the weighted average yield resulting from an increase in yield earned on balances held at the FRB of Kansas City. The decrease in interest income on investment securities was due to a $174.0 million decrease in the average balance of the portfolio as cash flows not reinvested were used to fund loan growth.

Interest Expense

The weighted average rate paid on total interest-bearing liabilities increased 11 basis points, from 1.13% for the prior year quarter to 1.24% for the current quarter, while the average balance of interest-bearing liabilities decreased $95.9 million. Absent the impact of the leverage strategy, the weighted average rate paid on total interest-bearing liabilities would have increased one basis point, from 1.29% for the prior year quarter to 1.30% for the current quarter, while the average balance of interest-bearing liabilities would have decreased $49.7 million. The following table presents the components of interest expense for the periods presented, along with the change measured in dollars and percent.



	For the Three Months Ended
	June 30,				Change Expressed in:
	2017		2016		Dollars		Percent
	(Dollars in thousands)
INTEREST EXPENSE:
FHLB borrowings	$	17,884	$	16,361	$	1,523	9.3	%
Deposits	10,895		9,749		1,146		11.8
Repurchase agreements	1,487		1,487		—		—
Total interest expense	$	30,266	$	27,597	$	2,669	9.7

The table above includes interest expense on FHLB borrowings both associated and not associated with the leverage strategy. Interest expense on FHLB advances not related to the leverage strategy decreased $981 thousand due primarily to a $238.1 million decrease in the average balance of the portfolio as a result of not replacing all of the advances that matured between periods. The weighted average rate paid on FHLB borrowings not related to the leverage strategy increased five basis points, to 2.25% for the current year quarter, due to certain maturing advances having a lower rate than the overall portfolio rate. Interest expense on FHLB borrowings associated with the leverage strategy increased $2.5 million from the prior year quarter due to a 50 basis point increase in the weighted average rate paid resulting from an increase in interest rates between periods.

The increase in interest expense on deposits was due primarily to a six basis point increase in the weighted average rate, to 0.83% for the current quarter, along with growth in deposits. The average balance of the deposit portfolio increased $188.4 million compared to the prior year 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
	June 30,				Change Expressed in:
	2017		2016		Dollars			Percent
	(Dollars in thousands)
NON-INTEREST EXPENSE:
Salaries and employee benefits	$	11,210	$	10,829	$	381		3.5	%
Information technology and communications	2,922		2,716		206			7.6
Occupancy, net	2,659		2,606		53			2.0
Regulatory and outside services	1,383		1,370		13			0.9
Deposit and loan transaction costs	1,304		1,449		(145		)	(10.0	)
Advertising and promotional	1,322		1,053		269			25.5
Federal insurance premium	879		1,377		(498		)	(36.2	)
Office supplies and related expense	492		545		(53		)	(9.7	)
Low income housing partnerships	—		721		(721		)	(100.0	)
Other non-interest expense	474		661		(187		)	(28.3	)
Total non-interest expense	$	22,645	$	23,327	$	(682	)	(2.9	)

The increase in advertising and promotional expense was due primarily to the timing of media campaigns and sponsorships. The decrease in federal insurance premiums was due primarily to a decrease in the FDIC base assessment rate effective July 1, 2016. The

decrease in low income housing partnerships expense was due to a change in the Bank's method of accounting for those investments as previously discussed. The decrease in other non-interest expense was due mainly to a decrease in OREO operations expense.

Income Tax Expense

Income tax expense was $10.8 million for the current quarter compared to $9.5 million for the prior year quarter. The effective tax rate for the current quarter was 33.6% compared to 31.6% for the prior year quarter. The increase in effective tax rate was due mainly to the change in accounting method for low income housing partnerships as discussed above.

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
	June 30, 2017						June 30, 2016
	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⁾	$	7,224,131	$	64,013	3.54	%	$	6,797,602	$	60,840	3.58	%
MBS⁽²⁾	1,051,440		5,821		2.21		1,386,470		7,401		2.14
Investment securities⁽²⁾⁽³⁾	327,727		1,063		1.30		501,757		1,506		1.20
FHLB stock	193,617		3,114		6.45		204,870		3,050		5.99
Cash and cash equivalents⁽⁴⁾	2,135,014		5,619		1.04		2,160,016		2,730		0.50
Total interest-earning assets⁽¹⁾⁽²⁾	10,931,929		79,630		2.91		11,050,715		75,527		2.73
Other non-interest-earning assets	295,602						290,258
Total assets	$	11,227,531					$	11,340,973

Liabilities and stockholders' equity:
Interest-bearing liabilities:
Checking	$	843,997	77		0.04		$	801,782	74		0.04
Savings	354,835		213		0.24		333,067		156		0.19
Money market	1,218,900		720		0.24		1,174,471		686		0.23
Retail certificates	2,444,620		8,932		1.47		2,401,381		8,287		1.39
Wholesale certificates	396,737		953		0.96		360,026		546		0.61
Total deposits	5,259,089		10,895		0.83		5,070,727		9,749		0.77
FHLB borrowings⁽⁵⁾	4,264,448		17,884		1.67		4,548,710		16,361		1.44
Repurchase agreements	200,000		1,487		2.94		200,000		1,487		2.94
Total borrowings	4,464,448		19,371		1.73		4,748,710		17,848		1.51
Total interest-bearing liabilities	9,723,537		30,266		1.24		9,819,437		27,597		1.13
Other non-interest-bearing liabilities	113,031						111,382
Stockholders' equity	1,390,963						1,410,154
Total liabilities and stockholders' equity	$	11,227,531					$	11,340,973
									(Continued)



	For the Three Months Ended
	June 30, 2017						June 30, 2016
	Average		Interest				Average		Interest
	Outstanding		Earned/		Yield/		Outstanding		Earned/		Yield/
	Amount		Paid		Rate		Amount		Paid		Rate
	(Dollars in thousands)
Net interest income⁽⁶⁾			$	49,364					$	47,930
Net interest rate spread⁽⁷⁾⁽⁸⁾					1.67	%					1.60	%
Net interest-earning assets	$	1,208,392					$	1,231,278
Net interest margin⁽⁸⁾⁽⁹⁾					1.81						1.73
Ratio of interest-earning assets to interest-bearing liabilities					1.12x						1.13x

Selected performance ratios:
Return on average assets (annualized)⁽⁸⁾					0.76	%					0.72	%
Return on average equity (annualized)⁽⁸⁾					6.15						5.83
Average equity to average assets					12.39						12.43
Operating expense ratio⁽¹⁰⁾					0.81						0.82
Efficiency ratio⁽¹¹⁾					41.30						43.72
Pre-tax yield on leverage strategy⁽¹²⁾					0.21						0.15

									(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 $29.4 million and $36.6 million for the quarters ended June 30, 2017 and 2016, respectively.


(4)	The average balance of cash and cash equivalents includes an average balance of cash related to the leverage strategy of $1.94 billion and $1.98 billion for the quarters ended June 30, 2017 and 2016, respectively.

(5)

Included in this line are FHLB borrowings related to the leverage strategy with an average outstanding amount of $2.03 billion and $2.08 billion, interest paid of $5.3 million and $2.8 million, at a rate of 1.04% and 0.54% for the quarters ended June 30, 2017 and 2016, respectively. The FHLB advance amounts and rates included in this line are net of deferred gains and deferred prepayment penalties.


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


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

(8)



	For the Three Months Ended
	June 30, 2017						June 30, 2016
	Actual		Leverage		Adjusted		Actual		Leverage		Adjusted
	(GAAP)		Strategy		(Non-GAAP)		(GAAP)		Strategy		(Non-GAAP)
Return on average assets (annualized)	0.76	%	(0.14	)%	0.90	%	0.72	%	(0.14	)%	0.86	%
Return on average equity (annualized)	6.15		0.21		5.94		5.83		0.15		5.68
Net interest margin	1.81		(0.35	)	2.16		1.73		(0.36	)	2.09
Net interest rate spread	1.67		(0.31	)	1.98		1.60		(0.30	)	1.90


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


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


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


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

Rate/Volume Analysis

The table below presents the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities, comparing the three months ended June 30, 2017 to the three months ended June 30, 2016. 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 June 30,
	2017 vs. 2016
	Increase (Decrease) Due to
	Volume			Rate			Total
	(Dollars in thousands)
Interest-earning assets:
Loans receivable	$	3,740		$	(567	)	$	3,173
MBS	(1,846		)	266			(1,580		)
Investment securities	(556		)	113			(443		)
FHLB stock	(173		)	237			64
Cash and cash equivalents	(32		)	2,921			2,889
Total interest-earning assets	1,133			2,970			4,103

Interest-bearing liabilities:
Checking	4			(1		)	3
Savings	11			46			57
Money market	26			8			34
Certificates of deposit	261			791			1,052
FHLB borrowings	(1,529		)	3,052			1,523
Repurchase agreements	—			—			—
Total interest-bearing liabilities	(1,227		)	3,896			2,669

Net change in net interest income	$	2,360		$	(926	)	$	1,434

Comparison of Operating Results for the Three Months Ended June 30, 2017 and March 31, 2017

For the quarter ended June 30, 2017, the Company recognized net income of $21.4 million, or $0.16 per share, compared to net income of $21.6 million, or $0.16 per share, for the quarter ended March 31, 2017. Net interest income increased $310 thousand, or 0.6%, from the prior quarter to $49.4 million for the current quarter. The net interest margin increased one basis point from 1.80% for the prior quarter to 1.81% for the current quarter. Excluding the effects of the leverage strategy, the net interest margin would have increased one basis point from 2.15% for the prior quarter to 2.16% for the current quarter. The increase in the net interest margin was due mainly to a decrease in interest expense on borrowings not related to the leverage strategy and a shift in the mix of interest-earning assets from relatively lower yielding securities to higher yielding loans, partially offset by an increase in interest expense related to deposits.

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 2.91%, while the average balance of interest-earning assets increased $37.4 million between the two periods. Absent the impact of the leverage strategy, the weighted average yield on total interest-earning assets would have increased one basis point from the prior quarter, to 3.28%, while the average balance would have increased $36.6 million. The following table presents the components of interest and dividend income for the time periods presented, along with the change measured in dollars and percent.



	For the Three Months Ended
	June 30,		March 31,		Change Expressed in:
	2017		2017		Dollars			Percent
	(Dollars in thousands)
INTEREST AND DIVIDEND INCOME:
Loans receivable	$	64,013	$	63,106	$	907		1.4	%
MBS	5,821		6,191		(370		)	(6.0	)
Cash and cash equivalents	5,619		4,132		1,487			36.0
FHLB stock	3,114		3,100		14			0.5
Investment securities	1,063		1,131		(68		)	(6.0	)
Total interest and dividend income	$	79,630	$	77,660	$	1,970		2.5

The increase in interest income on loans receivable was due primarily to a $83.7 million increase in the average balance of the portfolio. The loan growth was funded with cash flows from the securities portfolio during the quarter. The weighted average yield on the portfolio was 3.54% for the current quarter, unchanged from the prior quarter.

The decrease in interest income on MBS was due mainly to a $72.9 million decrease in the average balance of the portfolio as cash flows were used to fund loan growth. The weighted average yield on the portfolio increased one basis point, to 2.21% for the current quarter. During the current quarter, $992 thousand of net premiums on MBS were amortized, which decreased the weighted average yield on the portfolio by 38 basis points. During the prior quarter, $1.0 million of net premiums were amortized, which decreased the weighted average yield on the portfolio by 36 basis points. As of June 30, 2017, the remaining net balance of premiums on our portfolio of MBS was $9.9 million.

The increase in interest income on cash and cash equivalents was due primarily to a 25 basis point increase in the weighted average yield, to 1.04% for the current quarter, resulting from an increase in the yield earned on balances held at the Federal Reserve Bank of Kansas City (the "Federal Reserve Bank").

Interest Expense

The weighted average rate paid on total interest-bearing liabilities for the current quarter increased five basis points from the prior quarter, to 1.24%, and the average balance of interest-bearing liabilities increased $22.4 million between the two periods. Absent the impact of the leverage strategy, the weighted average rate paid on total interest-bearing liabilities for the current quarter would have decreased one basis point from the prior quarter, to 1.30%, while the average balance would have increased $21.7 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
	June 30,		March 31,		Change Expressed in:
	2017		2017		Dollars		Percent
	(Dollars in thousands)
INTEREST EXPENSE:
FHLB borrowings	$	17,884	$	16,771	$	1,113	6.6	%
Deposits	10,895		10,364		531		5.1
Repurchase agreements	1,487		1,471		16		1.1
Total interest expense	$	30,266	$	28,606	$	1,660	5.8

leverage strategy during the current quarter was 2.25%, a decrease of five basis points from the prior quarter. During the current quarter, $300.0 million of advances with an effective rate of 3.24% matured. Of that amount, $200.0 million was replaced by advances with terms of 14 days or less during June. Interest expense on FHLB borrowings associated with the leverage strategy increased $1.5 million from the prior quarter due to a 28 basis point increase in the weighted average rate paid as a result of an increase in interest rates between periods.

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
	June 30,		March 31,		Change Expressed in:
	2017		2017		Dollars			Percent
	(Dollars in thousands)
NON-INTEREST INCOME:
Retail fees and charges	$	3,832	$	3,582	$	250		7.0	%
Income from BOLI	573		573		—			—
Other non-interest income	1,055		1,418		(363		)	(25.6	)
Total non-interest income	$	5,460	$	5,573	$	(113	)	(2.0	)

The increase in retail fees and charges was due primarily to an increase in debit card income, due in part to seasonality, and an increase in service charges earned. The decrease in other non-interest income was due primarily to a decrease in insurance commissions resulting from the receipt of annual commissions from certain insurance providers during the prior quarter and no such commissions being received in the current quarter.

Non-Interest Expense

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



	For the Three Months Ended
	June 30,		March 31,		Change Expressed in:
	2017		2017		Dollars			Percent
	(Dollars in thousands)
NON-INTEREST EXPENSE:
Salaries and employee benefits	$	11,210	$	10,544	$	666		6.3	%
Information technology and communications	2,922		2,768		154			5.6
Occupancy, net	2,659		2,764		(105		)	(3.8	)
Regulatory and outside services	1,383		1,265		118			9.3
Deposit and loan transaction costs	1,304		1,228		76			6.2
Advertising and promotional	1,322		1,263		59			4.7
Federal insurance premium	879		878		1			0.1
Office supplies and related expense	492		541		(49		)	(9.1	)
Other non-interest expense	474		686		(212		)	(30.9	)
Total non-interest expense	$	22,645	$	21,937	$	708		3.2

The increase in salaries and employee benefits expense was due primarily to additional expense on unallocated ESOP shares arising from the $0.25 per share True Blue Capitol dividend paid on those shares in June 2017. The expense recognized in the current quarter was $417 thousand and in the quarter ending September 30, 2017 we will recognize an expense of $417 thousand. The decrease in other non-interest expense was due to a decrease in OREO operations expense.

The Company's efficiency ratio was 41.30% for the current quarter compared to 40.16% for the prior quarter. The change in the efficiency ratio was due primarily to higher non-interest expense in the current quarter compared to the prior quarter.

Income Tax Expense

Income tax expense was $10.8 million for the current quarter, compared to $11.1 million for the prior quarter. The effective tax rate was 33.6% for the current quarter and 34.0% for the prior quarter.

Average Balance Sheet



	For the Three Months Ended
	June 30, 2017						March 31, 2017
	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⁾	$	7,224,131	$	64,013	3.54	%	$	7,140,433	$	63,106	3.54	%
MBS⁽²⁾	1,051,440		5,821		2.21		1,124,367		6,191		2.20
Investment securities⁽²⁾⁽³⁾	327,727		1,063		1.30		353,722		1,131		1.28
FHLB stock	193,617		3,114		6.45		193,826		3,100		6.49
Cash and cash equivalents⁽⁴⁾	2,135,014		5,619		1.04		2,082,180		4,132		0.79
Total interest-earning assets⁽¹⁾⁽²⁾	10,931,929		79,630		2.91		10,894,528		77,660		2.85
Other non-interest-earning assets	295,602						300,795
Total assets	$	11,227,531					$	11,195,323

Liabilities and stockholders' equity:
Interest-bearing liabilities:
Checking	$	843,997	77		0.04		$	828,420	75		0.04
Savings	354,835		213		0.24		344,699		199		0.23
Money market	1,218,900		720		0.24		1,218,058		712		0.24
Retail certificates	2,444,620		8,932		1.47		2,428,497		8,652		1.44
Wholesale certificates	396,737		953		0.96		378,546		726		0.78
Total deposits	5,259,089		10,895		0.83		5,198,220		10,364		0.81
FHLB borrowings⁽⁵⁾	4,264,448		17,884		1.67		4,302,878		16,771		1.57
Repurchase agreements	200,000		1,487		2.94		200,000		1,471		2.94
Total borrowings	4,464,448		19,371		1.73		4,502,878		18,242		1.64
Total interest-bearing liabilities	9,723,537		30,266		1.24		9,701,098		28,606		1.19
Other non-interest-bearing liabilities	113,031						115,547
Stockholders' equity	1,390,963						1,378,678
Total liabilities and stockholders' equity	$	11,227,531					$	11,195,323
									(Continued)



	For the Three Months Ended
	June 30, 2017						March 31, 2017
	Average		Interest				Average		Interest
	Outstanding		Earned/		Yield/		Outstanding		Earned/		Yield/
	Amount		Paid		Rate		Amount		Paid		Rate
	(Dollars in thousands)
Net interest income⁽⁶⁾			$	49,364					$	49,054
Net interest rate spread⁽⁷⁾⁽⁸⁾					1.67	%					1.66	%
Net interest-earning assets	$	1,208,392					$	1,193,430
Net interest margin⁽⁸⁾⁽⁹⁾					1.81						1.80
Ratio of interest-earning assets to interest-bearing liabilities					1.12x						1.12x

Selected performance ratios:
Return on average assets (annualized)⁽⁸⁾					0.76	%					0.77	%
Return on average equity (annualized)⁽⁸⁾					6.15						6.26
Average equity to average assets					12.39						12.31
Operating expense ratio⁽¹⁰⁾					0.81						0.78
Efficiency ratio⁽¹¹⁾					41.30						40.16
Pre-tax yield on leverage strategy⁽¹²⁾					0.21						0.25

									(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 $29.4 million and $31.2 million for the quarters ended June 30, 2017 and March 31, 2017, respectively.


(4)	The average balance of cash and cash equivalents includes an average balance of cash related to the leverage strategy of $1.94 billion for each of the quarters ended June 30, 2017 and March 31, 2017.

(5)

Included in this line are FHLB borrowings related to the leverage strategy with an average outstanding amount of $2.03 billion and $2.03 billion, interest paid of $5.3 million and $3.9 million, at a rate of 1.04% and 0.76% for the quarters ended June 30, 2017 and March 31, 2017, respectively. The FHLB advance amounts and rates included in this line are net of deferred gains and deferred prepayment penalties.


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


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

(8)



	For the Three Months Ended
	June 30, 2017						March 31, 2017
	Actual		Leverage		Adjusted		Actual		Leverage		Adjusted
	(GAAP)		Strategy		(Non-GAAP)		(GAAP)		Strategy		(Non-GAAP)
Return on average assets (annualized)	0.76	%	(0.14	)%	0.90	%	0.77	%	(0.14	)%	0.91	%
Return on average equity (annualized)	6.15		0.21		5.94		6.26		0.24		6.02
Net interest margin	1.81		(0.35	)	2.16		1.80		(0.35	)	2.15
Net interest rate spread	1.67		(0.31	)	1.98		1.66		(0.30	)	1.96


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


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


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


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

Rate/Volume Analysis

The table below presents the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities, comparing the three months ended June 30, 2017 to the three months ended March 31, 2017. 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 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
	June 30, 2017 vs. March 31, 2017
	Increase (Decrease) Due to
	Volume			Rate			Total
	(Dollars in thousands)
Interest-earning assets:
Loans receivable	$	748		$	159		$	907
MBS	(404		)	34			(370		)
Investment securities	(84		)	16			(68		)
FHLB stock	2			12			14
Cash and cash equivalents	112			1,375			1,487
Total interest-earning assets	374			1,596			1,970

Interest-bearing liabilities:
Checking	2			—			2
Savings	7			7			14
Money market	7			1			8
Certificates of deposit	147			360			507
FHLB borrowings	(288		)	1,401			1,113
Repurchase agreements	8			8			16
Total interest-bearing liabilities	(117		)	1,777			1,660

Net change in net interest income	$	491		$	(181	)	$	310

Liquidity and Capital Resources

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

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

In the event short-term liquidity needs exceed available cash, the Bank has access to a line of credit at FHLB and the FRB of Kansas City's discount window. Per FHLB's lending guidelines, total FHLB borrowings cannot exceed 40% of regulatory total assets without the pre-approval of FHLB senior management. In July 2017, the president of FHLB approved an increase, through July 2018, in the Bank's borrowing limit to 55% of Bank Call Report total assets. When the leverage strategy is in place, the Bank maintains the resulting excess cash reserves from the FHLB borrowings at the FRB of Kansas City, which can be used to meet any short-term liquidity needs. The amount that can be borrowed from the FRB of Kansas City's discount window is based upon the fair value of securities pledged as collateral and certain other characteristics of those securities, and is used only when other sources of short-term liquidity are unavailable. Management tests the Bank's access to the FRB of Kansas City's discount window annually with a nominal, overnight borrowing.

If management observes a trend in the amount and frequency of line of credit utilization and/or short-term borrowings that is not in conjunction with a planned strategy, such as the leverage strategy, the Bank will likely utilize long-term wholesale borrowing sources such as FHLB advances and/or repurchase agreements to provide long-term, fixed-rate funding. The maturities of these long-term borrowings are generally staggered in order to mitigate the risk of a highly negative cash flow position at maturity. The Bank's internal policy limits total borrowings to 55% of total assets. At June 30, 2017, the Bank had total borrowings, at par, of $2.38 billion, or approximately 26% of total assets.

The amount of FHLB advances outstanding at June 30, 2017 was $2.18 billion, of which $500.0 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. At June 30, 2017, the Bank's ratio of the par value of FHLB borrowings to Call Report total assets was 24%. When the full 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 leverage strategy and FHLB senior management continue to approve the Bank's borrowing limit being in excess of 40% of Call Report total assets. All or a portion of the FHLB borrowings in conjunction with the leverage strategy 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 June 30, 2017, the Bank had $582.3 million of securities that were eligible but unused as collateral for borrowing or other liquidity needs.

At June 30, 2017, the Bank had repurchase agreements of $200.0 million, or approximately 2% of total assets, of which $100.0 million 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 the total borrowings limit of 55% discussed above. The Bank has pledged securities with an estimated fair value of $218.7 million as collateral for repurchase agreements as of June 30, 2017. The securities pledged for the repurchase agreements will be delivered back to the Bank when the repurchase agreements mature.

The Bank has access to other sources of funds for liquidity purposes, such as brokered and public unit deposits. As of June 30, 2017, the Bank's policy allowed for combined brokered and public unit deposits up to 15% of total deposits. At June 30, 2017, the Bank had public unit deposits totaling $391.0 million, which had an average remaining term to maturity of nine months, or approximately 7% 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 $438.1 million as collateral for public unit deposits at June 30, 2017. The securities pledged as collateral for public unit deposits are held under joint custody with FHLB and generally will be released upon deposit maturity.

At June 30, 2017, $1.20 billion of the Bank's certificate of deposit portfolio was scheduled to mature within one year, including $281.5 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 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.

The following table presents the contractual maturities of our loan, MBS, and investment securities portfolios at June 30, 2017, 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 June 30, 2017, the amortized cost of investment securities in our portfolio which are callable or have pre-refunding dates within one year was $126.6 million.



	Loans⁽¹⁾				MBS				Investment Securities				Total
	Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield
	(Dollars in thousands)
Amounts due:
Within one year	$	100,135	3.93	%	$	464	3.36	%	$	151,363	1.12	%	$	251,962	2.24	%

After one year:
Over one to two years	66,859		4.01		10,041		4.20		55,085		1.26		131,985		2.88
Over two to three years	20,371		4.45		5,056		4.71		55,748		1.52		81,175		2.45
Over three to five years	39,727		4.27		52,553		2.73		61,949		1.49		154,229		2.63
Over five to ten years	542,676		3.78		474,553		2.11		740		1.94		1,017,969		3.00
Over ten to fifteen years	1,428,481		3.25		138,870		1.80		—		—		1,567,351		3.12
After fifteen years	5,030,176		3.62		335,608		2.51		1,901		2.50		5,367,685		3.55
Total due after one year	7,128,290		3.57		1,016,681		2.26		175,423		1.44		8,320,394		3.37

	$	7,228,425	3.58		$	1,017,145	2.26		$	326,786	1.29		$	8,572,356	3.33


(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. Savings institutions must also maintain an applicable capital conservation buffer above minimum risk-based capital requirements in order to avoid restrictions on capital distributions, including dividends. A savings institution that is a subsidiary of a savings and loan holding company, such as the Company, that proposes to make a capital distribution must submit written notice to the OCC and FRB 30 days prior to such distribution. The OCC and FRB may object to the distribution during that 30-day period based on safety and soundness or other concerns. Savings institutions that desire to make a larger capital distribution, are under special restrictions, or are not, or would not be, sufficiently capitalized following a proposed capital distribution must obtain regulatory non-objection prior to making such a distribution.

The long-term ability of the Company to pay dividends to its stockholders is based primarily upon the ability of the Bank to make capital distributions to the Company. So long as the Bank remains well capitalized after each capital distribution, operates in a safe and sound manner, and maintains an applicable capital conservation buffer above its minimum risk-based capital requirements, it is management's belief that the OCC and FRB will continue to allow the Bank to distribute its earnings to the Company, although no assurance can be given in this regard.

Off-Balance Sheet Arrangements, Commitments and Contractual Obligations

The Company, in the normal course of business, makes commitments to buy or sell assets or to incur or fund liabilities. There have been no material changes in commitments, contractual obligations or off-balance sheet arrangements from September 30, 2016. 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, 2016. 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 nine months ended June 30, 2017 was $2.60 billion, and the average balance of short-term FHLB borrowings outstanding during this period was $2.52 billion at a weighted average contractual rate of 1.21%. Short-term FHLB borrowings for this disclosure are defined as those with maturity dates within the next 12 months. The majority of the short-term FHLB borrowings amount related to borrowings associated with the leverage strategy. This compares to a balance of short-term FHLB borrowings outstanding at June 30, 2017 of $500.0 million at a weighted average contractual rate of 2.19%.

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 June 30, 2017, or future periods.

Capital

Consistent with our goal to operate a sound and profitable financial organization, we actively seek to maintain a well-capitalized status for the Bank per the regulatory framework for prompt corrective action ("PCA"). As of June 30, 2017, the Bank and Company exceeded all regulatory capital requirements. The following table presents the regulatory capital ratios of the Bank and the Company at June 30, 2017.



							Regulatory
							Requirement For
					Minimum		Well-Capitalized
	Bank		Company		Regulatory		Status of Bank
	Ratios		Ratios		Requirement		Under PCA Provisions
Tier 1 leverage ratio	10.7	%	12.1	%	4.0	%	5.0	%
Common Equity Tier 1 capital ratio	27.2		30.7		4.5		6.5
Tier 1 capital ratio	27.2		30.7		6.0		8.0
Total capital ratio	27.4		30.9		8.0		10.0

The following table presents a reconciliation of equity under GAAP to regulatory capital amounts, as of June 30, 2017, for the Bank and the Company (dollars in thousands):



	Bank			Company
Total equity as reported under GAAP	$	1,205,633		$	1,358,986
Unrealized gains on AFS securities	(3,655		)	(3,655		)
Total tier 1 capital	1,201,978			1,355,331
ACL	8,486			8,486
Total capital	$	1,210,464		$	1,363,817

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, 2016. The analysis presented in the tables below reflects the level of market risk at the Bank, including the cash the holding company has on deposit at the Bank.

The rates of interest the Bank earns on its assets and pays on its liabilities are generally established contractually for a period of time. Fluctuations in interest rates have a significant impact not only upon our net income, but also upon the cash flows and market values of our assets and liabilities. Our results of operations, like those of other financial institutions, are impacted by changes in interest rates and the interest rate sensitivity of our interest-earning assets and interest-bearing liabilities. Risk associated with changes in interest rates on the earnings of the Bank and the market value of its financial assets and liabilities is known as interest rate risk. Interest rate risk is our most significant market risk, and our ability to adapt to changes in interest rates is known as interest rate risk management.

The general objective of our interest rate risk management program is to determine and manage an appropriate level of interest rate risk while maximizing net interest income in a manner consistent with our policy to manage, to the extent practicable, the exposure of net interest income to changes in market interest rates. The Board of Directors and Asset and Liability Management Committee ("ALCO") regularly review the Bank's interest rate risk exposure by forecasting the impact of hypothetical, alternative interest rate environments on net interest income and the market value of portfolio equity ("MVPE") at various dates. The MVPE is defined as the net of the present value of cash flows from existing assets, liabilities, and off-balance sheet instruments. The present values are determined based upon market conditions as of the date of the analysis, as well as in alternative interest rate environments providing potential changes in the MVPE under those alternative interest rate environments. Net interest income is projected in the same alternative interest rate environments with both a static balance sheet and management strategies considered. The MVPE and net interest income 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.

Qualitative Disclosure about Market Risk

At June 30, 2017, the Bank's gap between the amount of interest-earning assets and interest-bearing liabilities projected to reprice within one year was $226.3 million, or 2.49% of total assets, compared to $269.2 million, or 2.91% of total assets, at March 31, 2017, and $1.07 billion, or 11.54% of total assets, at September 30, 2016. Market rates of interest increased between September 30, 2016 and June 30, 2017. As interest rates rise, borrowers have less economic incentive to refinance their mortgages and debt issuers have less economic incentive or opportunity to exercise their call options in order to issue new debt at lower interest rates. This increase in interest rates resulted in lower projected cash flows on these assets over the next year compared to September 30, 2016. In addition, lower cash balances and an increase in borrowings repricing within one year reduced the one-year gap compared to September 30, 2016. The decrease in the one-year gap amount at June 30, 2017 compared to March 31, 2017 was due primarily to a decrease in the amount of cash held at June 30, 2017.

The majority of interest-earning assets anticipated to reprice in the coming year are repayments and prepayments on mortgage loans and MBS, both of which include the option to prepay without a fee being paid by the contract holder. The amount of interest-bearing liabilities expected to reprice in a given period is not typically impacted significantly by changes in interest rates because the Bank's borrowings and certificate of deposit portfolios have contractual maturities and generally cannot be terminated early without a prepayment penalty. If interest rates were to increase 200 basis points, as of June 30, 2017, the Bank's one-year gap is projected to be $(295.9) million, or (3.25)% of total assets. This compares to a one-year gap of $(215.4) million, or (2.33)% of total assets, if interest rates were to have increased 200 basis points as of March 31, 2017, and $208.7 million, or 2.25% of total assets, if interest rates were to have increased 200 basis points as of September 30, 2016.

During the current quarter, loan repayments totaled $296.0 million and cash flows from the securities portfolio totaled $73.3 million. The asset cash flows of $369.3 million were reinvested into new assets at current market interest rates. Total cash flows from fixed-rate liabilities that matured or repriced during the current quarter were approximately $699.7 million, including $300.0 million of FHLB advances. These offsetting cash flows allow the Bank to manage its interest rate risk and gap position more precisely than if the Bank did not have offsetting cash flows due to its mix of assets or maturity structure of liabilities.

Other strategies include managing the Bank's wholesale assets and liabilities. The Bank uses long-term fixed-rate borrowings with no embedded options to lengthen the average life of the Bank's liabilities. The fixed-rate characteristics of these borrowings lock-in the cost until maturity and thus decrease the amount of liabilities repricing as interest rates move higher compared to funding with lower-cost short-term borrowings. These borrowings are laddered in order to prevent large amounts of liabilities repricing in any one period. The WAL of the Bank's term borrowings as of June 30, 2017 was 2.3 years.

The Bank uses the securities portfolio to shorten the average life of the Bank's assets. Purchases in the securities portfolio over the past couple of years have primarily been focused on callable agency debentures with maturities no longer than five years, shorter duration MBS, and adjustable-rate MBS. These securities have a shorter average life and provide a steady source of cash flow that can be reinvested as interest rates rise or used to purchase higher-yielding assets. The WAL of the Bank's securities portfolio as of June 30, 2017 was 2.6 years.

In addition to the wholesale strategies, the Bank has sought to increase core deposits and long-term certificates of deposit. Core deposits are expected to reduce the risk of higher interest rates because their interest rates are not expected to increase significantly as market interest rates rise. Specifically, checking accounts and savings accounts have had minimal interest rate fluctuations throughout historical interest rate cycles, though no assurance can be given that this will be the case in future interest rate cycles. The balances and rates of these accounts have historically tended to remain very stable over time, giving them the characteristic of long-term liabilities. The Bank uses historical data pertaining to these accounts to estimate their future balances. At June 30, 2017 the WAL of the Bank's transaction accounts was 7.8 years.

Over the last couple years, the Bank has priced long-term certificates of deposit more aggressively than short-term certificates of deposit with the goal of giving customers incentive to move funds into longer-term certificates of deposit when interest rates were lower. Long-term certificates of deposit reduce the amount of liabilities repricing as interest rates rise.

Because of the on-balance sheet strategies implemented over the past several years, management believes the Bank is well-positioned to move into a market rate environment where interest rates are higher.

Gap Table. The following gap table summarizes the anticipated maturities or repricing periods of the Bank's interest-earning assets and interest-bearing liabilities based on the information and assumptions set forth in the notes below. Cash flow projections for mortgage-related assets are calculated based in part on prepayment assumptions at current and projected interest rates. Prepayment projections are subjective in nature, involve uncertainties and assumptions and, therefore, cannot be determined with a high degree of accuracy. Although certain assets and liabilities may have similar maturities or periods to repricing, they may react differently to changes in market interest rates. Assumptions may not reflect how actual yields and costs respond to market interest rate changes. The interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types of assets and liabilities may lag behind changes in market interest rates. Certain assets, such as adjustable-rate 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. A positive gap indicates more cash flows from assets are expected to reprice than cash flows from liabilities and would indicate, in a rising rate environment, that earnings should increase. A negative gap indicates more cash flows from liabilities are expected to reprice than cash flows from assets and would indicate, in a rising rate environment, that earnings should decrease. For additional information regarding the impact of changes in interest rates, see the following Change in Net Interest Income and Change in MVPE discussions and tables.



				More Than			More Than
	Within			One Year to			Three Years			Over
	One Year			Three Years			to Five Years			Five Years			Total
Interest-earning assets:	(Dollars in thousands)
Loans receivable⁽¹⁾	$	1,764,413		$	1,840,846		$	1,118,089		$	2,495,514		$	7,218,862
Securities⁽²⁾	623,167			400,436			191,225			123,227			1,338,055
Other interest-earning assets	111,991			—			—			—			111,991
Total interest-earning assets	2,499,571			2,241,282			1,309,314			2,618,741			8,668,908

Interest-bearing liabilities:
Non-maturity deposits⁽³⁾	459,532			446,630			315,380			1,330,530			2,552,072
Certificates of deposit	1,213,716			1,177,320			431,495			1,343			2,823,874
Borrowings⁽⁴⁾	600,000			825,000			850,000			143,790			2,418,790
Total interest-bearing liabilities	2,273,248			2,448,950			1,596,875			1,475,663			7,794,736

Excess (deficiency) of interest-earning assets over
interest-bearing liabilities	$	226,323		$	(207,668	)	$	(287,561	)	$	1,143,078		$	874,172

Cumulative excess of interest-earning assets over
interest-bearing liabilities	$	226,323		$	18,655		$	(268,906	)	$	874,172

Cumulative excess of interest-earning assets over interest-bearing
liabilities as a percent of total Bank assets at:
June 30, 2017	2.49		%	0.20		%	(2.95		)%	9.60		%
March 31, 2017	2.91
September 30, 2016	11.54

Cumulative one-year gap - interest rates +200 bps at:
June 30, 2017	(3.25		)
March 31, 2017	(2.33		)
September 30, 2016	2.25

(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 undisbursed amounts and deferred fees and exclude loans 90 or more days delinquent or in foreclosure.


(2)	MBS reflect projected prepayments at amortized cost. Investment securities are presented based on contractual maturities, term to call dates or pre-refunding dates as of June 30, 2017, 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 $1.87 billion, for a cumulative one-year gap of (20.5)% of total assets.


(4)	Borrowings exclude deferred prepayment penalty costs.

Change in Net Interest Income. For each date presented in the following table, the estimated change in the Bank's net interest income is based on the indicated instantaneous, parallel and permanent change in interest rates presented. The change in each interest rate environment represents the difference between estimated net interest income in the 0 basis point interest rate environment ("base case," assumes the forward market and product interest rates implied by the yield curve are realized) and the estimated net interest income in each alternative interest rate environment (assumes market and product interest rates have a parallel shift in rates across all maturities by the indicated change in rates). Projected cash flows for each scenario are based upon varying prepayment assumptions to model likely customer behavior changes as market rates change. 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)	June 30, 2017							September 30, 2016
in Interest Rates⁽¹⁾	Amount ($)		Change ($)			Change (%)		Amount ($)		Change ($)		Change (%)
	(Dollars in thousands)
-100 bp	N/A		N/A			N/A		N/A		N/A		N/A
000 bp	$	191,871	$	—		—	%	$	188,696	$	—	—	%
+100 bp	191,242		(629		)	(0.33	)	192,921		4,225		2.24
+200 bp	188,430		(3,441		)	(1.79	)	194,919		6,223		3.30
+300 bp	184,033		(7,838		)	(4.09	)	195,187		6,491		3.44


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

The increase in net interest income projection in the base case scenario at June 30, 2017 as compared to September 30, 2016 was due primarily to the increase in market interest rates, specifically long-term interest rates. The Bank's one-year gap amount was positive for both periods. Therefore, as market interest rates rise, the Bank's assets are projected to reprice higher at a faster pace than liabilities. The net interest income projections were negative in the rising rate scenarios at June 30, 2017 compared to being positive at September 30, 2016. This change was due primarily to higher market interest rates at June 30, 2017, which resulted in a decrease in the Bank's one-year gap. As interest rates rise, the one-year gap will eventually become negative due to a reduction in cash flows from the Bank's mortgage-related assets and callable agency debentures. At June 30, 2017, as interest rates move higher, liabilities would reprice to higher interest rates at a faster pace than assets and have a negative impact on the Bank's net interest income projection.

Change in MVPE. The following table sets forth the estimated change in the MVPE for each date presented based on the indicated instantaneous, parallel, and permanent change in interest rates. The change in each interest rate environment represents the difference between the MVPE in the base case (assumes the forward market interest rates implied by the yield curve are realized) and the MVPE in each alternative interest rate environment (assumes market interest rates have a parallel shift in rates). At the dates presented, the three-month Treasury bill yield was less than one percent, so the -100 basis points scenario was not applicable. Projected cash flows for each scenario are based upon varying prepayment assumptions to model likely customer behavior changes as market rates change. The estimations of the MVPE used in preparing the table below were based upon the assumptions that the total composition of interest-earning assets and interest-bearing liabilities does not change, that any repricing of assets or liabilities occurs at current product or market rates for the alternative rate environments as of the dates presented, and that different prepayment rates were used in each alternative interest rate environment. The estimated MVPE results from the valuation of cash flows from financial assets and liabilities over the anticipated lives of each for each interest rate environment. The table below presents the effects of the changes in interest rates on our assets and liabilities as they mature, repay, or reprice, as shown by the change in the MVPE for alternative interest rates.



Change	Market Value of Portfolio Equity At
(in Basis Points)	June 30, 2017							September 30, 2016
in Interest Rates⁽¹⁾	Amount ($)		Change ($)			Change (%)		Amount ($)		Change ($)			Change (%)
	(Dollars in thousands)
-100 bp	N/A		N/A			N/A		N/A		N/A			N/A
000 bp	$	1,387,596	$	—		—	%	$	1,448,758	$	—		—	%
+100 bp	1,216,158		(171,438		)	(12.36	)	1,364,879		(83,879		)	(5.79	)
+200 bp	996,770		(390,826		)	(28.17	)	1,208,130		(240,628		)	(16.61	)
+300 bp	764,970		(622,626		)	(44.87	)	1,014,446		(434,312		)	(29.98	)


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

The percentage change in the Bank's MVPE at June 30, 2017 was more adversely impacted in the increasing interest rate scenarios than at September 30, 2016 due primarily to market interest rates being higher at June 30, 2017. As interest rates increase, repayments on mortgage-related assets are more likely to decrease and only be realized through significant changes in borrowers' lives such as divorce, death, job-related relocations, or other events as there is less economic incentive for borrowers to prepay their debt. This results in an increase in the average life of mortgage-related assets. Similarly, call projections for the Bank's callable agency debentures decrease as interest rates rise, which results in cash flows related to these assets moving closer to the contractual maturity dates. The higher expected average lives of these assets, relative to the assumptions in the base case interest rate environment, increases the sensitivity of their market value to changes in interest rates. As a result, the projected decrease in the market value of the Bank's financial assets was more significant than the projected decrease in the market value of its financial liabilities, which resulted in a projected decrease in MVPE in all of the rising interest rate scenarios presented.

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.



	June 30, 2017
	Amount		Yield/Rate		WAL	% of Category		% of Total
	(Dollars in thousands)
Investment securities	$	326,786	1.29	%	1.6	24.3	%	3.7	%
MBS - fixed	683,698		2.16		3.0	50.9		7.8
MBS - adjustable	333,447		2.49		4.8	24.8		3.8
Total securities	1,343,931		2.03		3.1	100.0	%	15.3
Loans receivable:
Fixed-rate one- to four-family:
<= 15 years	1,244,468		3.09		4.1	17.2	%	14.1
> 15 years	4,428,752		3.85		6.2	61.3		50.3
All other fixed-rate loans	260,920		4.19		4.2	3.6		3.0
Total fixed-rate loans	5,934,140		3.71		5.7	82.1		67.4
Adjustable-rate one- to four-family:
<= 36 months	270,722		1.75		3.6	3.7		3.1
> 36 months	871,049		3.04		2.8	12.1		9.9
All other adjustable-rate loans	152,514		4.79		3.0	2.1		1.7
Total adjustable-rate loans	1,294,285		2.98		3.0	17.9		14.7
Total loans receivable	7,228,425		3.58		5.2	100.0	%	82.1
FHLB stock	101,039		6.47		2.4			1.1
Cash and cash equivalents	130,249		1.23		—			1.5
Total interest-earning assets	$	8,803,644	3.34		4.8			100.0	%

Non-maturity deposits	$	2,443,811	0.17		7.8	46.4	%	32.0	%
Retail certificates of deposit	2,432,867		1.48		1.8	46.2		31.8
Public units	391,007		1.08		0.8	7.4		5.1
Total deposits	5,267,685		0.84		4.5	100.0	%	68.9
Term borrowings	2,375,000		2.15		2.3			31.1
Total interest-bearing liabilities	$	7,642,685	1.25		3.8			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 June 30, 2017. Based upon this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that, as of June 30, 2017, 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 June 30, 2017 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, 2016.

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 June 30, 2017 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
April 1, 2017 through
April 30, 2017	—	$	—	—	$	70,000,000
May 1, 2017 through
May 31, 2017	—	—		—	70,000,000
June 1, 2017 through
June 30, 2017	—	—		—	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: August 9, 2017	By:	/s/ John B. Dicus
			John B. Dicus, Chairman, President and Chief Executive Officer

	Date: August 9, 2017	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 amended, filed on September 30, 2016, as Exhibit 3.2 to Form 8-K for Capitol Federal Financial Inc. and incorporated herein by reference
10.1(i)		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 Daniel L. Lehman filed on November 29, 2016 as Exhibit 10.1(v) to the Registrant's Annual Report on Form 10-K and incorporated herein by reference
10.2		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 June 30, 2017, filed with the Securities and Exchange Commission on August 9, 2017, has been formatted in eXtensible Business Reporting Language: (i) Consolidated Balance Sheets at June 30, 2017 and September 30, 2016, (ii) Consolidated Statements of Income for the three and nine months ended June 30, 2017 and 2016, (iii) Consolidated Statements of Comprehensive Income for the three and nine months ended June 30, 2017 and 2016, (iv) Consolidated Statement of Stockholders' Equity for the nine months ended June 30, 2017, (v) Consolidated Statements of Cash Flows for the nine months ended June 30, 2017 and 2016, and (vi) Notes to the Unaudited Consolidated Financial Statements