CFFN 10-Q Quarterly Report June 30, 2016

CAPITOL FEDERAL FINANCIAL, INC.

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10-Q 1 cffn-063016x10q.htm JUNE 30, 2016 FORM 10-Q Document

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, 2016

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

OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-34814

Capitol Federal Financial, Inc.

( Exact name of registrant as specified in its charter)




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

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

(785) 235-1341

Registrant's telephone number, including area code

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

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

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



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

(Do not check if a smaller reporting company)

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

As of August 2, 2016, there were 137,344,222 shares of Capitol Federal Financial, Inc. common stock outstanding.



PART I - FINANCIAL INFORMATION		Page Number
Item 1.	Financial Statements (Unaudited)	3
	Consolidated Balance Sheets at June 30, 2016 and September 30, 2015	3
	Consolidated Statements of Income for the three and nine months ended June 30, 2016 and 2015	4
	Consolidated Statements of Comprehensive Income for the three and nine months ended June 30, 2016 and 2015	5
	Consolidated Statement of Stockholders' Equity for the nine months ended June 30, 2016	6
	Consolidated Statements of Cash Flows for the nine months ended June 30, 2016 and 2015	7
	Notes to Consolidated Financial Statements	9
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	28
	Financial Condition - Loans Receivable	31
	Financial Condition - Asset Quality	39
	Financial Condition - Liabilities	48
	Financial Condition - Stockholders' Equity	51
	Operating Results	52
	Comparison of Operating Results for the nine months ended June 30, 2016 and 2015	53
	Comparison of Operating Results for the three months ended June 30, 2016 and 2015	59
	Comparison of Operating Results for the three months ended June 30, 2016 and March 31, 2016	65
Item 3.	Quantitative and Qualitative Disclosure about Market Risk	76
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,
	2016			2015
ASSETS:
Cash and cash equivalents (includes interest-earning deposits of $145,477 and $764,816)	$	152,831		$	772,632
Securities:
Available-for-sale ("AFS"), at estimated fair value (amortized cost of $655,349 and $744,708)	666,313			758,171
Held-to-maturity ("HTM"), at amortized cost (estimated fair value of $1,214,498 and $1,295,274)	1,188,913			1,271,122
Loans receivable, net (allowance for credit losses ("ACL") of $9,312 and $9,443)	6,839,123			6,625,027
Federal Home Loan Bank Topeka ("FHLB") stock, at cost	114,425			150,543
Premises and equipment, net	81,928			75,810
Income taxes receivable, net	123			1,071
Other assets	198,119			189,785
TOTAL ASSETS	$	9,241,775		$	9,844,161

LIABILITIES:
Deposits	$	5,085,129		$	4,832,520
FHLB borrowings	2,472,026			3,270,521
Repurchase agreements	200,000			200,000
Advance payments by borrowers for taxes and insurance	37,902			61,818
Deferred income tax liabilities, net	25,925			26,391
Accounts payable and accrued expenses	39,978			36,685
Total liabilities	7,860,960			8,427,935

STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; 100,000,000 shares authorized, no shares issued or outstanding	—			—
Common stock, $.01 par value; 1,400,000,000 shares authorized, 137,235,922 and 137,106,822
shares issued and outstanding as of June 30, 2016 and September 30, 2015, respectively	1,372			1,371
Additional paid-in capital	1,153,589			1,151,041
Unearned compensation, Employee Stock Ownership Plan ("ESOP")	(40,060		)	(41,299		)
Retained earnings	259,094			296,739
Accumulated other comprehensive income ("AOCI"), net of tax	6,820			8,374
Total stockholders' equity	1,380,815			1,416,226
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	9,241,775		$	9,844,161

See accompanying notes to consolidated financial statements.



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

	For the Three Months Ended				For the Nine Months Ended
	June 30,				June 30,
	2016		2015		2016		2015
INTEREST AND DIVIDEND INCOME:
Loans receivable	$	60,840	$	58,922	$	181,795	$	175,739
Mortgage-backed securities ("MBS")	7,401		8,849		22,934		28,387
FHLB stock	3,050		3,132		9,208		9,389
Cash and cash equivalents	2,730		1,357		7,057		4,174
Investment securities	1,506		1,914		4,524		5,262
Total interest and dividend income	75,527		74,174		225,518		222,951
INTEREST EXPENSE:
FHLB borrowings	16,361		17,072		48,829		51,258
Deposits	9,749		8,377		27,761		24,729
Repurchase agreements	1,487		1,712		4,478		5,136
Total interest expense	27,597		27,161		81,068		81,123
NET INTEREST INCOME	47,930		47,013		144,450		141,828
PROVISION FOR CREDIT LOSSES	—		323		—		771
NET INTEREST INCOME AFTER
PROVISION FOR CREDIT LOSSES	47,930		46,690		144,450		141,057
NON-INTEREST INCOME:
Retail fees and charges	3,725		3,798		11,097		11,052
Income from bank-owned life insurance ("BOLI")	648		251		2,810		819
Insurance commissions	517		537		2,093		2,059
Loan fees	326		340		1,004		1,071
Other non-interest income	213		219		617		678
Total non-interest income	5,429		5,145		17,621		15,679
NON-INTEREST EXPENSE:
Salaries and employee benefits	10,829		11,038		31,604		31,927
Occupancy, net	2,606		2,557		7,894		7,437
Information technology and communications	2,716		2,573		7,883		7,726
Federal insurance premium	1,377		1,342		4,158		4,092
Deposit and loan transaction costs	1,449		1,435		4,119		4,065
Regulatory and outside services	1,370		1,365		4,000		3,867
Advertising and promotional	1,053		1,069		3,190		2,707
Low income housing partnerships	721		492		2,815		3,404
Office supplies and related expense	545		499		2,016		1,560
Other non-interest expense	661		736		2,664		2,322
Total non-interest expense	23,327		23,106		70,343		69,107
INCOME BEFORE INCOME TAX EXPENSE	30,032		28,729		91,728		87,629
INCOME TAX EXPENSE	9,481		9,127		28,932		28,321
NET INCOME	$	20,551	$	19,602	$	62,796	$	59,308

Basic earnings per share ("EPS")	$	0.15	$	0.14	$	0.47	$	0.43
Diluted EPS	$	0.15	$	0.14	$	0.47	$	0.43
Dividends declared per share	$	0.34	$	0.34	$	0.76	$	0.76

Basic weighted average common shares	133,101,960		135,745,753		132,960,917		136,013,448
Diluted weighted average common shares	133,250,711		135,763,353		133,065,828		136,040,702

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,
	2016			2015			2016			2015
Net income	$	20,551		$	19,602		$	62,796		$	59,308
Other comprehensive income (loss), net of tax:
Changes in unrealized holding gains (losses) on AFS securities,
net of deferred income taxes of $119, $919, $945 and $(754)	(194		)	(1,513		)	(1,554		)	1,241
Comprehensive income	$	20,357		$	18,089		$	61,242		$	60,549

See accompanying notes to consolidated financial statements.



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

			Additional		Unearned									Total
	Common		Paid-In		Compensation			Retained						Stockholders'
	Stock		Capital		ESOP			Earnings			AOCI			Equity
Balance at October 1, 2015	$	1,371	$	1,151,041	$	(41,299	)	$	296,739		$	8,374		$	1,416,226
Net income								62,796						62,796
Other comprehensive loss, net of tax											(1,554		)	(1,554		)
ESOP activity, net			351		1,239									1,590
Restricted stock activity, net	1		40											41
Stock-based compensation			960											960
Stock options exercised			1,197											1,197
Cash dividends to stockholders ($0.76 per share)								(100,441		)				(100,441		)
Balance at June 30, 2016	$	1,372	$	1,153,589	$	(40,060	)	$	259,094		$	6,820		$	1,380,815

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,
	2016			2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	62,796		$	59,308
Adjustments to reconcile net income to net cash provided by operating activities:
FHLB stock dividends	(9,208		)	(9,389		)
Provision for credit losses	—			771
Amortization and accretion of premiums and discounts on securities	3,988			4,217
Depreciation and amortization of premises and equipment	5,288			5,054
Amortization of deferred amounts related to FHLB advances, net	1,505			3,270
Common stock committed to be released for allocation - ESOP	1,590			1,539
Stock-based compensation	960			1,566
Changes in:
Other assets, net	488			2,869
Income taxes payable/receivable	1,467			1,845
Accounts payable and accrued expenses	(6,815		)	(8,847		)
Net cash provided by operating activities	62,059			62,203

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of AFS securities	(99,927		)	(149,937		)
Purchase of HTM securities	(144,392		)	(54,133		)
Proceeds from calls, maturities and principal reductions of AFS securities	189,199			145,663
Proceeds from calls, maturities and principal reductions of HTM securities	222,700			242,958
Proceeds from the redemption of FHLB stock	283,500			202,929
Purchase of FHLB stock	(238,174		)	(146,743		)
Net increase in loans receivable	(217,498		)	(268,769		)
Purchase of premises and equipment	(11,300		)	(7,396		)
Proceeds from sale of other real estate owned ("OREO")	3,799			4,212
Proceeds from BOLI death benefit	783			—
Net cash used in investing activities	(11,310		)	(31,216		)

				(Continued)



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

	For the Nine Months Ended
	June 30,
	2016			2015
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid	(100,441		)	(102,777		)
Deposits, net of withdrawals	252,609			157,916
Proceeds from borrowings	5,900,100			5,400,000
Repayments on borrowings	(6,700,100		)	(6,200,000		)
Change in advance payments by borrowers for taxes and insurance	(23,916		)	(20,674		)
Repurchase of common stock	—			(29,842		)
Other, net	1,198			218
Net cash used in financing activities	(670,550		)	(795,159		)

NET DECREASE IN CASH AND CASH EQUIVALENTS	(619,801		)	(764,172		)

CASH AND CASH EQUIVALENTS:
Beginning of period	772,632			810,840
End of period	$	152,831		$	46,668

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Income tax payments	$	27,464		$	26,476
Interest payments	$	78,957		$	77,861

See accompanying notes to consolidated financial statements.				(Concluded)

Notes to Consolidated Financial Statements (Unaudited)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation - The consolidated financial statements include the accounts of Capitol Federal® Financial, Inc. (the "Company") and its wholly-owned subsidiary, Capitol Federal Savings Bank (the "Bank"). The Bank has a wholly-owned subsidiary, Capitol Funds, Inc. Capitol Funds, Inc. has a wholly-owned subsidiary, Capitol Federal Mortgage Reinsurance Company. All intercompany accounts and transactions have been eliminated in consolidation. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. These statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2015 , filed with the Securities and Exchange Commission ("SEC"). Interim results are not necessarily indicative of results for a full year.

Recent Accounting Pronouncements - In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers . The ASU, 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 is effective for fiscal years beginning after December 15, 2017, including interim reporting periods within that reporting period, which is October 1, 2018 for the Company. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016. The Company has not yet completed its evaluation of ASU 2014-09.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments, Recognition and Measurement of Financial Assets and Liabilities . The ASU supersedes certain accounting guidance related to equity securities with readily determinable fair values and the related impairment assessment. An entity's equity investments that are accounted for under the equity method of accounting or result in consolidation of an investee are not included within the scope of this ASU. The ASU requires public business entities to utilize the exit price notation in determining fair value for financial instruments measured at amortized cost on the balance sheet. The ASU requires additional reporting in other comprehensive income for financial liabilities measured at fair value in accordance with the fair value option. The ASU also requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balances or in the notes to the financial statements. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods with those fiscal years, which is October 1, 2018 for the Company. Early adoption is not permitted except in certain circumstances. The Company has not yet completed its evaluation of ASU 2016-01.

In February 2016, the FASB issued ASU 2016-02, Leases . The ASU amends lease accounting guidance by requiring that lessees recognize the assets and liabilities arising from leases on the balance sheet. Additionally, the ASU requires entities to disclose both quantitative and qualitative information regarding their leasing activities. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, which is October 1, 2019 for the Company. Early adoption is permitted. The Company has not yet completed its evaluation of ASU 2016-02.

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

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 is effective for annual reporting periods beginning after December 15, 2019, including interim periods within those annual reporting periods, which is October 1, 2020 for the Company. Early adoption is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company has not yet completed its evaluation of ASU 2016-13.

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,
	2016			2015			2016			2015
	(Dollars in thousands, except per share amounts)
Net income	$	20,551		$	19,602		$	62,796		$	59,308
Income allocated to participating securities	(11		)	(24		)	(54		)	(93		)
Net income available to common stockholders	$	20,540		$	19,578		$	62,742		$	59,215

Average common shares outstanding	133,018,908			135,662,701			132,919,316			135,971,846
Average committed ESOP shares outstanding	83,052			83,052			41,601			41,602
Total basic average common shares outstanding	133,101,960			135,745,753			132,960,917			136,013,448

Effect of dilutive stock options	148,751			17,600			104,911			27,254

Total diluted average common shares outstanding	133,250,711			135,763,353			133,065,828			136,040,702

Net EPS:
Basic	$	0.15		$	0.14		$	0.47		$	0.43
Diluted	$	0.15		$	0.14		$	0.47		$	0.43

Antidilutive stock options, excluded from the diluted average
common shares outstanding calculation	875,390			1,240,309			906,634			1,253,057

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, 2016
			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(Dollars in thousands)
AFS:
GSE debentures	$	471,143	$	1,570	$	—	$	472,713
MBS	181,903		9,807		4		191,706
Trust preferred securities	2,163		—		410		1,753
Municipal bonds	140		1		—		141
	655,349		11,378		414		666,313
HTM:
MBS	1,152,775		25,888		815		1,177,848
Municipal bonds	36,138		516		4		36,650
	1,188,913		26,404		819		1,214,498
	$	1,844,262	$	37,782	$	1,233	$	1,880,811



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

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



	June 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:
MBS	—		—		667		4
Trust preferred securities	—		—		1,753		410
	$	—	$	—	$	2,420	$	414


HTM:
MBS	$	43,035	$	46	$	89,245	$	769
Municipal bonds	1,462		3		392		1
	$	44,497	$	49	$	89,637	$	770



	September 30, 2015
	Less Than 12 Months				Equal to or Greater Than 12 Months
	Estimated		Unrealized		Estimated		Unrealized
	Fair Value		Losses		Fair Value		Losses
	(Dollars in thousands)
AFS:
GSE debentures	$	39,135	$	15	$	49,955	$	45
MBS	—		—		687		4
Trust preferred securities	—		—		1,916		270
	$	39,135	$	15	$	52,558	$	319


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

The unrealized losses at June 30, 2016 and September 30, 2015 were primarily a result of an increase in market yields from the time the securities were purchased. In general, as market yields rise, the fair value of securities will decrease; as market yields fall, the fair value of securities will increase. Management generally views changes in fair value caused by changes in interest rates as temporary; therefore, these securities have not been classified as other-than-temporarily impaired. The impairment is also considered temporary because scheduled coupon payments have been made, it is anticipated that the entire principal balance will be collected as scheduled, and management neither intends to sell the securities, nor is it more likely than not that the Company will be required to sell the securities before the recovery of the remaining amortized cost amount, which could be at maturity. As a result of the analysis, management has concluded that no other-than-temporary impairments existed at June 30, 2016 or September 30, 2015 .

The amortized cost and estimated fair value of debt securities as of June 30, 2016 , by contractual maturity, are shown below. Actual principal repayments may differ from contractual maturities due to prepayment or early call privileges by the issuer. In the case of MBS, borrowers on the underlying loans generally have the right to prepay their loans without prepayment penalty. For this reason, MBS are not included in the maturity categories.



	AFS				HTM
	Amortized		Estimated		Amortized		Estimated
	Cost		Fair Value		Cost		Fair Value
	(Dollars in thousands)
One year or less	$	25,032	$	25,075	$	6,570	$	6,608
One year through five years	446,251		447,779		23,244		23,561
Five years through ten years	—		—		6,324		6,481
Ten years and thereafter	2,163		1,753		—		—
	473,446		474,607		36,138		36,650
MBS	181,903		191,706		1,152,775		1,177,848
	$	655,349	$	666,313	$	1,188,913	$	1,214,498

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,
	2016		2015		2016		2015
	(Dollars in thousands)
Taxable	$	1,342	$	1,730	$	4,010	$	4,696
Non-taxable	164		184		514		566
	$	1,506	$	1,914	$	4,524	$	5,262

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



	June 30, 2016		September 30, 2015
	(Dollars in thousands)
Public unit deposits	$	391,092	$	343,385
Repurchase agreements	207,261		218,832
Federal Reserve Bank	16,999		20,600
FHLB borrowings	—		216,607
	$	615,352	$	799,424

4. LOANS RECEIVABLE and ALLOWANCE FOR CREDIT LOSSES

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



	June 30, 2016			September 30, 2015
	(Dollars in thousands)
Real estate loans:
One- to four-family:
Originated	$	6,093,743		$	5,856,730
Purchased	439,954			485,682
Construction	78,358			75,152
Total	6,612,055			6,417,564
Commercial:
Permanent	110,601			110,938
Construction	187,705			54,768
Total	298,306			165,706
Total real estate loans	6,910,361			6,583,270

Consumer loans:
Home equity	123,673			125,844
Other	4,568			4,179
Total consumer loans	128,241			130,023

Total loans receivable	7,038,602			6,713,293

Less:
Undisbursed loan funds:
One- to four-family	39,595			45,696
Commercial	166,237			44,869
ACL	9,312			9,443
Discounts/unearned loan fees	24,352			24,213
Premiums/deferred costs	(40,017		)	(35,955		)
	$	6,839,123		$	6,625,027

Lending Practices and Underwriting Standards - Originating and purchasing one- to four-family loans is the Bank's primary lending business, resulting in a loan concentration in residential first mortgage loans. The Bank purchases one- to four-family loans, on a loan-by-loan basis, from a select group of correspondent lenders. 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. The Bank also originates consumer loans and commercial real estate loans and participates in commercial real estate loans.

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

The underwriting standards for loans purchased from correspondent and nationwide lenders are generally similar to the Bank's internal underwriting standards. The underwriting of loans purchased from correspondent lenders on a loan-by-loan basis is performed by the Bank's underwriters. For the tables within this Note, correspondent loans purchased on a loan-by-loan basis are included with originated loans and loans purchased in loan packages ("bulk loans") are reported as purchased loans.

The Bank also originates construction-to-permanent loans secured by one- to four-family residential real estate. Construction loans are obtained by homeowners who will occupy the property when construction is complete. Construction loans to builders for

speculative purposes are not permitted. All construction loans are manually underwritten using the Bank's internal underwriting standards. Construction draw requests and the supporting documentation are reviewed and approved by 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. These loans are underwritten based on the income producing potential of the property, the collateral value, and the financial strength of the borrower. Additionally, the Bank generally requires personal guarantees. At the time of origination, loan-to-value ("LTV") ratios on 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 - purchased, consumer - home equity, and consumer - other.

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 (net of unadvanced funds related to loans in process), less charge-offs and inclusive of unearned loan fees and deferred costs. At June 30, 2016 and September 30, 2015 , all loans 90 or more days delinquent were on nonaccrual status.



	June 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	$	15,517	$	9,156	$	24,673	$	6,121,791	$	6,146,464
One- to four-family - purchased	4,740		8,077		12,817		429,515		442,332
Commercial real estate	—		—		—		131,398		131,398
Consumer - home equity	548		436		984		122,689		123,673
Consumer - other	55		17		72		4,496		4,568
	$	20,860	$	17,686	$	38,546	$	6,809,889	$	6,848,435



	September 30, 2015
			90 or More Days		Total				Total
	30 to 89 Days		Delinquent or		Delinquent		Current		Recorded
	Delinquent		in Foreclosure		Loans		Loans		Investment
	(Dollars in thousands)
One- to four-family - originated	$	19,285	$	7,093	$	26,378	$	5,869,289	$	5,895,667
One- to four-family - purchased	7,305		8,956		16,261		472,114		488,375
Commercial real estate	—		—		—		120,405		120,405
Consumer - home equity	703		497		1,200		124,644		125,844
Consumer - other	17		12		29		4,150		4,179
	$	27,310	$	16,558	$	43,868	$	6,590,602	$	6,634,470

The recorded investment of mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process as of June 30, 2016 was $5.9 million , which is included in loans 90 or more days delinquent or in foreclosure in the table above. The carrying value of residential OREO held as a result of obtaining physical possession upon completion of a foreclosure or through completion of a deed in lieu of foreclosure was $3.1 million at June 30, 2016 .

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



	June 30, 2016		September 30, 2015
	(Dollars in thousands)
One- to four-family - originated	$	18,957	$	16,093
One- to four-family - purchased	8,078		9,038
Commercial real estate	—		—
Consumer - home equity	699		792
Consumer - other	24		12
	$	27,758	$	25,935

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


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


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


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


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

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



	June 30, 2016				September 30, 2015
	Special Mention		Substandard		Special Mention		Substandard
	(Dollars in thousands)
One- to four-family - originated	$	11,303	$	31,162	$	16,149	$	29,282
One- to four-family - purchased	1,257		11,644		1,376		13,237
Commercial real estate	—		—		—		—
Consumer - home equity	57		1,259		151		1,301
Consumer - other	—		26		—		17
	$	12,617	$	44,091	$	17,676	$	43,837

The following table shows the weighted average credit score and weighted average LTV for originated and purchased one- to four-family loans and originated consumer home equity loans at the dates presented. Borrower credit scores are intended to provide an indication as to the likelihood that a borrower will repay their debts. Credit scores are updated at least semiannually, with the last update in March 2016, from a nationally recognized consumer rating agency. The LTV ratios provide an estimate of the extent to which the Bank may incur a loss on any given loan that may go into foreclosure. The consumer - home equity LTV does not take into account the first lien position, if applicable. The LTV ratios were based on the current loan balance and either the lesser of the purchase price or original appraisal, or the most recent Bank appraisal, if available. In most cases, the most recent appraisal was obtained at the time of origination.



	June 30, 2016			September 30, 2015
	Credit Score	LTV		Credit Score	LTV
One- to four-family - originated	765	65	%	765	65	%
One- to four-family - purchased	753	64		752	65
Consumer - home equity	754	20		753	18
	764	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, 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	28	$	4,488	$	4,603	90	$	11,853	$	12,143
One- to four-family - 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



	For the Three Months Ended					For the Nine Months Ended
	June 30, 2015					June 30, 2015
	Number	Pre-		Post-		Number	Pre-		Post-
	of	Restructured		Restructured		of	Restructured		Restructured
	Contracts	Outstanding		Outstanding		Contracts	Outstanding		Outstanding
	(Dollars in thousands)
One- to four-family - originated	30	$	4,125	$	4,190	104	$	13,862	$	14,007
One- to four-family - purchased	2	874		876		4	1,140		1,144
Commercial real estate	—	—		—		—	—		—
Consumer - home equity	7	171		172		13	255		261
Consumer - other	—	—		—		3	12		12
	39	$	5,170	$	5,238	124	$	15,269	$	15,424

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, 2016			June 30, 2015			June 30, 2016			June 30, 2015
	Number of	Recorded		Number of	Recorded		Number of	Recorded		Number of	Recorded
	Contracts	Investment		Contracts	Investment		Contracts	Investment		Contracts	Investment
	(Dollars in thousands)
One- to four-family - originated	12	$	1,581	16	$	1,356	39	$	4,183	44	$	4,234
One- to four-family - purchased	—	—		1	551		—	—		4	890
Commercial real estate	—	—		—	—		—	—		—	—
Consumer - home equity	—	—		2	12		4	91		4	33
Consumer - other	—	—		—	—		—	—		1	5
	12	$	1,581	19	$	1,919	43	$	4,274	53	$	5,162

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, 2016						September 30, 2015
			Unpaid						Unpaid
	Recorded		Principal		Related		Recorded		Principal		Related
	Investment		Balance		ACL		Investment		Balance		ACL
	(Dollars in thousands)
With no related allowance recorded
One- to four-family - originated	$	12,128	$	12,729	$	—	$	11,169	$	11,857	$	—
One- to four-family - purchased	10,895		12,645		—		11,035		13,315		—
Commercial real estate	—		—		—		—		—		—
Consumer - home equity	597		823		—		591		837		—
Consumer - other	17		47		—		13		40		—
	23,637		26,244		—		22,808		26,049		—
With an allowance recorded
One- to four-family - originated	26,825		26,889		337		26,453		26,547		294
One- to four-family - purchased	2,033		2,009		63		3,764		3,731		110
Commercial real estate	—		—		—		—		—		—
Consumer - home equity	768		768		49		869		870		62
Consumer - other	9		9		1		10		10		1
	29,635		29,675		450		31,096		31,158		467
Total
One- to four-family - originated	38,953		39,618		337		37,622		38,404		294
One- to four-family - purchased	12,928		14,654		63		14,799		17,046		110
Commercial real estate	—		—		—		—		—		—
Consumer - home equity	1,365		1,591		49		1,460		1,707		62
Consumer - other	26		56		1		23		50		1
	$	53,272	$	55,919	$	450	$	53,904	$	57,207	$	467

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



	For the Three Months Ended								For the Nine Months Ended
	June 30, 2016				June 30, 2015				June 30, 2016				June 30, 2015
	Average		Interest		Average		Interest		Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income		Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized		Investment		Recognized		Investment		Recognized
	(Dollars in thousands)
With no related allowance recorded
One- to four-family - originated	$	11,872	$	114	$	12,099	$	120	$	11,378	$	349	$	12,727	$	342
One- to four-family - purchased	10,958		47		10,765		48		11,115		147		11,254		147
Commercial real estate	—		—		—		—		—		—		—		—
Consumer - home equity	622		32		455		7		598		55		480		22
Consumer - other	22		1		8		—		15		1		14		—
	23,474		194		23,327		175		23,106		552		24,475		511
With an allowance recorded
One- to four-family - originated	26,940		261		28,420		281		27,593		798		27,223		829
One- to four-family - purchased	1,805		7		3,101		10		2,348		21		2,770		33
Commercial real estate	—		—		—		—		—		—		—		—
Consumer - home equity	823		20		876		9		920		46		741		22
Consumer - other	14		—		17		—		15		—		16		1
	29,582		288		32,414		300		30,876		865		30,750		885
Total
One- to four-family - originated	38,812		375		40,519		401		38,971		1,147		39,950		1,171
One- to four-family - purchased	12,763		54		13,866		58		13,463		168		14,024		180
Commercial real estate	—		—		—		—		—		—		—		—
Consumer - home equity	1,445		52		1,331		16		1,518		101		1,221		44
Consumer - other	36		1		25		—		30		1		30		1
	$	53,056	$	482	$	55,741	$	475	$	53,982	$	1,417	$	55,225	$	1,396

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, 2016
	One- to Four-			One- to Four-			One- to Four-
	Family -			Family -			Family -			Commercial
	Originated			Purchased			Total			Real Estate		Consumer			Total
	(Dollars in thousands)
Beginning balance	$	6,839		$	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	134			(262		)	(128		)	96		32			—
Ending balance	$	6,967		$	1,149		$	8,116		$	933	$	263		$	9,312



	For the Nine Months Ended June 30, 2016
	One- to Four-			One- to Four-			One- to Four-
	Family -			Family -			Family -			Commercial
	Originated			Purchased			Total			Real Estate		Consumer			Total
	(Dollars in thousands)
Beginning balance	$	6,980		$	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	25			(258		)	(233		)	191		42			—
Ending balance	$	6,967		$	1,149		$	8,116		$	933	$	263		$	9,312



	For the Three Months Ended June 30, 2015
	One- to Four-			One- to Four-			One- to Four-
	Family -			Family -			Family -			Commercial
	Originated			Purchased			Total			Real Estate		Consumer			Total
	(Dollars in thousands)
Beginning balance	$	6,711		$	1,858		$	8,569		$	528	$	309		$	9,406
Charge-offs	(108		)	(28		)	(136		)	—		(21		)	(157		)
Recoveries	12			—			12			—		17			29
Provision for credit losses	516			(261		)	255			69		(1		)	323
Ending balance	$	7,131		$	1,569		$	8,700		$	597	$	304		$	9,601



	For the Nine Months Ended June 30, 2015
	One- to Four-			One- to Four-			One- to Four-
	Family -			Family -			Family -			Commercial
	Originated			Purchased			Total			Real Estate		Consumer			Total
	(Dollars in thousands)
Beginning balance	$	6,263		$	2,323		$	8,586		$	400	$	241		$	9,227
Charge-offs	(260		)	(221		)	(481		)	—		(71		)	(552		)
Recoveries	45			58			103			—		52			155
Provision for credit losses	1,083			(591		)	492			197		82			771
Ending balance	$	7,131		$	1,569		$	8,700		$	597	$	304		$	9,601

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



	June 30, 2016
	One- to Four-		One- to Four-		One- to Four-
	Family -		Family -		Family -		Commercial
	Originated		Purchased		Total		Real Estate		Consumer		Total
	(Dollars in thousands)
Recorded investment in loans
collectively evaluated for impairment	$	6,134,336	$	431,437	$	6,565,773	$	131,398	$	127,603	$	6,824,774

Recorded investment in loans
individually evaluated for impairment	12,128		10,895		23,023		—		638		23,661
	$	6,146,464	$	442,332	$	6,588,796	$	131,398	$	128,241	$	6,848,435

ACL for loans collectively
evaluated for impairment	$	6,967	$	1,149	$	8,116	$	933	$	263	$	9,312



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

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

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

5. LOW INCOME HOUSING PARTNERSHIPS

The Bank's investment in low income housing partnerships, which is included in other assets in the consolidated balance sheets, was $49.0 million and $41.8 million at June 30, 2016 and September 30, 2015 , respectively. The Bank's obligations related to unfunded commitments, which are included in accounts payable and accrued expenses in the consolidated balance sheets, were $19.7 million and $14.6 million at June 30, 2016 and September 30, 2015 , respectively. The majority of the commitments are projected to be funded through the end of calendar year 2018 .

Expenses associated with the Bank's investment in the low income housing partnerships are included in low income housing partnerships in the consolidated statements of income. The low income housing partnership expenses resulted in other tax benefits of $286 thousand and $859 thousand for the three and nine months ended June 30, 2016 , respectively, which are a component of income tax expense in the consolidated statements of income. Affordable housing tax credits are recognized as a component of income tax expense in the consolidated statements of income and totaled $1.2 million and $3.6 million for the three and nine months ended June 30, 2016 , respectively. There were no impairment losses during the three and nine months ended June 30, 2016 resulting from the forfeiture or ineligibility of tax credits or other circumstances.

6. REPURCHASE AGREEMENTS

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

The following table presents the scheduled maturity of repurchase agreements by fiscal year as of June 30, 2016 :



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

7. FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair Value Measurements - The Company uses fair value measurements to record fair value adjustments to certain assets and to determine fair value disclosures in accordance with Accounting Standards Codification ("ASC") 820 and ASC 825. The Company did not have any liabilities that were measured at fair value at June 30, 2016 or September 30, 2015 . The Company's AFS securities are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets or liabilities on a non-recurring basis, such as OREO and loans individually evaluated for impairment. These non-recurring fair value adjustments involve the application of lower of cost or fair value accounting or write-downs of individual assets.

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


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


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

•

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

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

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

AFS Securities - The Company's AFS securities portfolio is carried at estimated fair value, with any unrealized gains and losses, net of taxes, reported as AOCI in stockholders' equity. The majority of the securities within the AFS portfolio were issued by GSEs. The Company primarily uses prices obtained from third party pricing services to determine the fair value of its securities. On a quarterly basis, management corroborates a sample of prices obtained from the third party pricing service for Level 2 securities by comparing them to an independent source. If the price provided by the independent source varies by more than a predetermined percentage from the price received from the third party pricing service, then the variance is researched by management. The Company did not have to adjust prices obtained from the third party pricing service when determining the fair value of its securities during the nine months ended June 30, 2016 or during fiscal year 2015. The Company's major security types, based on the nature and risks of the securities, are:


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


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


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


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

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



	June 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	$	472,713	$	—	$	472,713	$	—
MBS	191,706		—		191,706		—
Municipal bonds	141		—		141		—
Trust preferred securities	1,753		—		—		1,753
	$	666,313	$	—	$	664,560	$	1,753



	September 30, 2015
			Quoted Prices		Significant		Significant
			in Active Markets		Other Observable		Unobservable
	Carrying		for Identical Assets		Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3)
	(Dollars in thousands)
AFS Securities:
GSE debentures	$	526,620	$	—	$	526,620	$	—
MBS	229,491		—		229,491		—
Municipal bonds	144		—		144		—
Trust preferred securities	1,916		—		—		1,916
	$	758,171	$	—	$	756,255	$	1,916

The Company's Level 3 AFS securities had no activity during the three and 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 Company's Level 3 AFS securities had no activity during the three months ended June 30, 2015 , except for increases in net unrealized losses included in other comprehensive income of $1 thousand . The Company's Level 3 AFS securities had no activity during the nine months ended June 30, 2015 , except for principal repayments of $193 thousand , and increases in net unrealized losses included in other comprehensive income of $55 thousand .

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, 2016 and September 30, 2015 was $23.6 million and $22.8 million , respectively. Substantially all of these loans were secured by residential real estate and were individually evaluated to determine if the carrying value of the loan was in excess of the fair value of the collateral, less estimated selling costs of 10% . When no impairment is indicated, the carrying amount is considered to approximate fair value. Fair values were estimated through current appraisals or current Federal Housing Finance Agency ("FHFA") housing price indices, which is a broad based measure of the movement of single-family house prices and is a weighted, repeat-sales index. Management does not adjust or apply a discount to the appraised value or FHFA housing price indices, except for the estimated sales costs noted above. The primary significant unobservable input for impaired loans with fair values estimated using appraisals was the appraisal. Fair values of impaired loans cannot be determined with precision and may not be realized in an actual sale or immediate settlement of the loan and, as such, are classified as Level 3. Based on this evaluation, the Bank charged-off any loss amounts as of June 30, 2016 and September 30, 2015 ; therefore, there was no ACL related to these loans.

OREO - OREO primarily represents real estate acquired as a result of foreclosure or by deed in lieu of foreclosure and is carried at lower of cost or fair value. Fair value is estimated through current appraisals or listing prices, less estimated selling costs of 10% . Management does not adjust or apply a discount to the appraised value or listing prices, except for the estimated sales costs noted above. The primary significant unobservable input for OREO was the appraisal or listing price. Fair values of foreclosed property

cannot be determined with precision and may not be realized in an actual sale of the property and, as such, are classified as Level 3. The fair value of OREO at June 30, 2016 and September 30, 2015 was $4.3 million .

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, 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	$	23,610	$	—	$	—	$	23,610
OREO	4,332		—		—		4,332
	$	27,942	$	—	$	—	$	27,942



	September 30, 2015
			Quoted Prices		Significant		Significant
			in Active Markets		Other Observable		Unobservable
	Carrying		for Identical Assets		Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3)
	(Dollars in thousands)
Loans individually evaluated for impairment	$	22,762	$	—	$	—	$	22,762
OREO	4,333		—		—		4,333
	$	27,095	$	—	$	—	$	27,095

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

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



	June 30, 2016				September 30, 2015
			Estimated				Estimated
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
	(Dollars in thousands)
Assets:
Cash and cash equivalents	$	152,831	$	152,831	$	772,632	$	772,632
AFS securities	666,313		666,313		758,171		758,171
HTM securities	1,188,913		1,214,498		1,271,122		1,295,274
Loans receivable	6,839,123		7,170,795		6,625,027		6,870,176
FHLB stock	114,425		114,425		150,543		150,543
Liabilities:
Deposits	5,085,129		5,135,675		4,832,520		4,869,312
FHLB borrowings	2,472,026		2,550,085		3,270,521		3,339,650
Repurchase agreements	200,000		209,278		200,000		209,807

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

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

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

Loans Receivable - The fair value of one- to four-family loans and home equity loans are generally estimated using the present value of expected future cash flows, assuming future prepayments and using discount factors determined by prices obtained from securitization markets, less a discount for the cost of servicing and lack of liquidity. The estimated fair value of the Bank's 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, 2016 and September 30, 2015 was $2.32 billion and $2.20 billion , respectively. (Level 1) The fair value of certificates of deposit is estimated by discounting future cash flows using current London Interbank Offered Rates ("LIBOR"). The estimated fair value of certificates of deposit at June 30, 2016 and September 30, 2015 was $2.82 billion and $2.67 billion , respectively. (Level 2)

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

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

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

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


•	our ability to maintain overhead costs at reasonable levels;


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


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


•	our ability to access cost-effective funding;


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


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


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


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


•	changes in accounting principles, policies, or guidelines;


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


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


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


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


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


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


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


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


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


•	significant litigation;


•	technological changes;


•	acquisitions and dispositions;


•	changes in consumer spending and saving habits; and


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

This list of important factors is not all inclusive. We do not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Company or the Bank.

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

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

analysis should be read in conjunction with Management's Discussion and Analysis included in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2015 , filed with the SEC.

Executive Summary

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

We have been, and intend to continue to be, a community-oriented financial institution offering a variety of financial services to meet the needs of the communities we serve. We attract retail deposits from the general public and invest those funds primarily in permanent loans secured by first mortgages on owner-occupied, one- to four-family residences. We also originate consumer loans primarily secured by mortgages on one- to four-family residences 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 local competitor pricing for our local lending markets, and secondary market prices and national competitor pricing for our correspondent lending markets. Generally, deposit pricing is based upon a survey of competitors in the Bank's market areas, and the need to attract funding and retain maturing deposits. The majority of our loans are fixed-rate products with maturities up to 30 years, while the majority of our retail deposits have maturity or repricing dates of less than two years.

The Company is significantly affected by prevailing economic conditions, including federal monetary and fiscal policies and federal regulation of financial institutions. Retail deposit balances are influenced by a number of factors, including interest rates paid on competing investment products, the level of personal income, and the personal rate of savings within our market areas. Lending activities are influenced by the demand for housing and other loans, our loan underwriting guidelines compared to those of our competitors, as well as interest rate pricing competition from other lending institutions.

Economic conditions in the Bank's local market areas have a significant impact on the ability of borrowers to repay loans and the value of the collateral securing these loans. The industries in our market areas are diversified, especially in the Kansas City metropolitan statistical area, which comprises the largest segment of our loan portfolio and deposit base. As of June 2016 , the unemployment rate was 3.8% for Kansas and 4.5% for Missouri, compared to the national average of 4.9%, based on information from the Bureau of Labor Statistics. The Kansas City market area has an average household income of approximately $75 thousand per annum, based on 2015 estimates from the American Community Survey, which is a statistical survey by the U.S. Census Bureau. The average household income in our combined market areas is approximately $70 thousand per annum, with 90% of the population at or above the poverty level, also based on the 2015 estimates from the American Community Survey. The FHFA price index for Kansas and Missouri has not experienced significant fluctuations during the past 10 years, unlike other market areas of the United States, which indicates relative stability in property values in our local market areas.

For the quarter ended June 30, 2016 , the Company recognized net income of $20.6 million , or $0.15 per share, compared to net income of $19.6 million , or $0.14 per share, for the quarter ended June 30, 2015 . The $949 thousand , or 4.8% , increase in net income was due primarily to a $917 thousand increase in net interest income. Net income attributable to the daily leverage strategy was $532 thousand during the current quarter, compared to $699 thousand for the prior year quarter.

The net interest margin increased two basis points, from 1.71% for the prior year quarter to 1.73% for the current year quarter. Excluding the effects of the daily leverage strategy, the net interest margin would have increased four basis points, from 2.05% for the prior year quarter to 2.09% for the current year quarter. The increase in the net interest margin was due mainly to a decrease in interest expense on term borrowings, partially offset by an increase in interest expense on deposits.

For the nine month period ended June 30, 2016 , the Company recognized net income of $62.8 million , or $0.47 per share, compared to net income of $59.3 million , or $0.43 per share, for the nine month period ended June 30, 2015 . The $3.5 million , or 5.9% , increase in net income was due primarily to a $2.6 million increase in net interest income and a $1.9 million increase in non-interest income, partially offset by a $1.2 million increase in non-interest expense. Net income attributable to the daily leverage strategy was $1.7 million during the current year nine month period , compared to $2.2 million for the prior year nine month period . The decrease in the net income attributable to the daily leverage strategy was due to an increase in the FHLB line of credit borrowings rate, which was larger than the increase in the yield earned on the cash at the Federal Reserve Bank.

The net interest margin increased three basis points, from 1.72% for the prior year nine month period , to 1.75% for the current year nine month period . Excluding the effects of the daily leverage strategy, the net interest margin would have increased four basis points,

from 2.07% for the prior year nine month period to 2.11% for the current year nine month period . The increase in the net interest margin was due mainly to a decrease in interest expense on term borrowings, partially offset by an increase in interest expense on deposits.

Total assets were $9.24 billion at June 30, 2016 compared to $9.84 billion at September 30, 2015 . The $602.4 million decrease was due primarily to decreases in cash and cash equivalents and FHLB stock, both due to the removal of the entire daily leverage strategy at June 30, 2016 compared to $700.0 million of the daily leverage strategy remaining in place at September 30, 2015.

The loans receivable portfolio, net, increased $214.1 million , to $6.84 billion at June 30, 2016 , from $6.63 billion at September 30, 2015 . This growth was primarily funded with cash flows from the securities portfolio and growth in the deposit portfolio. During the current year nine month period , the Bank originated and refinanced $547.8 million of loans with a weighted average rate of 3.63% , purchased $460.9 million of loans from correspondent lenders with a weighted average rate of 3.50% , and purchased participations of $146.4 million in commercial real estate loans with a weighted average rate of 3.94% .

As previously indicated in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2015, we have continued to expand our commercial real estate portfolio through loan participations with our correspondent lenders and other lead banks. These types of loans tend to be larger than and in different geographic regions from most of our existing loan portfolio and are generally considered to have different and greater risks than one- to four-family residential real estate loans. The net amount of commercial real estates loans as of June 30, 2016 was $132.1 million and the combined total of undisbursed loan amounts and commitments as of June 30, 2016 was $217.8 million, resulting in a total commercial real estate loan concentration of $349.9 million at June 30, 2016 . For more information regarding these participations and their potential risks, see "Part I, Item 1. Business - Multi-Family and Commercial Lending" and "Part I, Item 1A - Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2015.

Total liabilities were $7.86 billion at June 30, 2016 compared to $8.43 billion at September 30, 2015 . The $567.0 million decrease was due primarily to a $798.5 million decrease in FHLB borrowings largely as a result of the removal of the entire daily leverage strategy at June 30, 2016 , along with a $100.0 million decrease in FHLB advances, partially offset by a $252.6 million increase in the deposit portfolio. Management intends to continue to remove the entire daily leverage strategy at each quarter end during fiscal year 2016, and reinstate the strategy at the beginning of the following quarter. The growth in deposits during the current year nine month period was primarily in the retail certificate of deposit, checking, and wholesale certificate of deposit portfolios, which increased $79.3 million, $60.3 million, and $55.9 million, respectively.

Stockholders' equity was $1.38 billion at June 30, 2016 compared to $1.42 billion at September 30, 2015 . The $ 35.4 million decrease between dates was due primarily to the payment of $100.4 million in cash dividends, partially offset by net income of $62.8 million .

Available Information

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

Critical Accounting Policies

Our most critical accounting policies are the methodologies used to determine the ACL and fair value measurements. These policies are important to the presentation of our financial condition and results of operations, involve a high degree of complexity, and require management to make difficult and subjective judgments that may require assumptions or estimates about highly uncertain matters. The use of different judgments, assumptions, and estimates could cause reported results to differ materially. These critical accounting policies and their application are reviewed at least annually by the audit committee of our Board of Directors. For a full discussion of our critical accounting policies, see Item 7 - "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies" in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2015 .

Financial Condition

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



	June 30,			March 31,			December 31,			September 30,			June 30,
	2016			2016			2015			2015			2015
	(Dollars in thousands)
Total assets	$	9,241,775		$	9,316,684		$	9,133,422		$	9,844,161		$	9,131,181
Cash and cash equivalents	152,831			203,811			232,354			772,632			46,668
AFS securities	666,313			677,416			636,970			758,171			847,059
HTM securities	1,188,913			1,270,849			1,199,978			1,271,122			1,359,657
Loans receivable, net	6,839,123			6,769,194			6,665,128			6,625,027			6,496,468
FHLB stock, at cost	114,425			114,381			119,027			150,543			166,257
Deposits	5,085,129			5,119,829			4,972,480			4,832,520			4,813,188
FHLB borrowings	2,472,026			2,471,656			2,471,272			3,270,521			2,572,898
Repurchase agreements	200,000			200,000			200,000			200,000			220,000
Stockholders' equity	1,380,815			1,403,408			1,390,833			1,416,226			1,426,723
Equity to total assets at end of period	14.9		%	15.1		%	15.2		%	14.4		%	15.6		%

Assets. Total assets were $9.24 billion at June 30, 2016 compared to $9.84 billion at September 30, 2015. The $602.4 million decrease was due primarily to a $619.8 million decrease in cash and cash equivalents and a $36.1 million decrease in FHLB stock, both due to the removal of the entire daily leverage strategy at June 30, 2016 compared to $700.0 million of the daily leverage strategy remaining in place at September 30, 2015. The entire $2.10 billion daily leverage strategy was reinstated on July 1, 2016. Additionally, loans receivable, net, increased $214.1 million which was partially offset by a $174.1 million decrease in the securities portfolio.

Loans Receivable. Loans receivable, net, increased to $6.84 billion at June 30, 2016 from $6.63 billion at September 30, 2015. The growth in the loan portfolio during the current year nine month period was primarily in the correspondent one- to four-family purchased loan portfolio and was largely funded with cash flows from the securities portfolio and deposit growth.

The following table presents the balance and weighted average rate of our loan portfolio as of the dates indicated. Within the one- to four-family loan portfolio at June 30, 2016 , 61% of the loans had a balance at origination of less than $417 thousand.



	June 30, 2016					September 30, 2015
	Amount			Rate		Amount			Rate
	(Dollars in thousands)
Real estate loans:
One- to four-family:
Originated	$	4,001,135		3.78	%	$	4,010,517		3.84	%
Correspondent purchased	2,092,608			3.51		1,846,213			3.52
Bulk purchased	439,954			2.22		485,682			2.25
Construction	78,358			3.50		75,152			3.57
Total	6,612,055			3.59		6,417,564			3.62
Commercial:
Permanent	110,601			4.16		110,938			4.14
Construction	187,705			4.00		54,768			4.13
Total	298,306			4.06		165,706			4.14
Total real estate loans	6,910,361			3.61		6,583,270			3.64

Consumer loans:
Home equity	123,673			5.04		125,844			5.00
Other	4,568			4.17		4,179			4.03
Total consumer loans	128,241			5.01		130,023			4.97
Total loans receivable	7,038,602			3.64		6,713,293			3.66

Less:
Undisbursed loan funds:
One- to four-family	39,595					45,696
Commercial	166,237					44,869
ACL	9,312					9,443
Discounts/unearned loan fees	24,352					24,213
Premiums/deferred costs	(40,017		)			(35,955		)
Total loans receivable, net	$	6,839,123				$	6,625,027

Loan Activity - The following table summarizes activity in the loan portfolio, along with weighted average rates where applicable, for the periods indicated, excluding changes in undisbursed loan funds, ACL, discounts/unearned loan fees, and premiums/deferred costs. Loans that were paid-off as a result of refinances are included in repayments. Loan endorsements are not included in the activity in the following table because a new loan is not generated at the time of the endorsement. The endorsed balance and rate are included in the ending loan portfolio balance and rate. During the three and nine months ended June 30, 2016 , the Bank endorsed $36.4 million and $80.5 million of one- to four-family loans, respectively, reducing the average rate on those loans by 95 and 89 basis points, respectively.



	For the Three Months Ended
	June 30, 2016					March 31, 2016					December 31, 2015					September 30, 2015
	Amount			Rate		Amount			Rate		Amount			Rate		Amount			Rate
	(Dollars in thousands)
Beginning balance	$	6,946,381		3.65	%	$	6,753,249		3.65	%	$	6,713,293		3.66	%	$	6,547,702		3.67	%
Originated and refinanced:
Fixed	155,179			3.52		117,205			3.65		157,447			3.67		165,646			3.73
Adjustable	44,319			3.61		35,495			3.77		38,117			3.74		51,634			3.59
Purchased and participations:
Fixed	178,762			3.71		249,017			3.68		101,644			3.69		164,397			3.64
Adjustable	24,715			2.90		27,355			2.93		25,861			3.17		65,722			3.69
Repayments	(310,041		)			(235,202		)			(280,978		)			(280,671		)
Principal recoveries (charge-offs), net	119					(8		)			(242		)			(158		)
Other	(832		)			(730		)			(1,893		)			(979		)
Ending balance	$	7,038,602		3.64		$	6,946,381		3.65		$	6,753,249		3.65		$	6,713,293		3.66



	For the Nine Months Ended
	June 30, 2016					June 30, 2015
	Amount			Rate		Amount			Rate
	(Dollars in thousands)
Beginning balance	$	6,713,293		3.66	%	$	6,289,519		3.76	%
Originations and refinances:
Fixed	429,831			3.61		440,697			3.55
Adjustable	117,931			3.70		122,540			3.64
Purchases and participations:
Fixed	529,423			3.69		386,631			3.59
Adjustable	77,931			3.00		94,609			2.94
Repayments	(826,221		)			(781,197		)
Principal charge-offs, net	(131		)			(397		)
Other	(3,455		)			(4,700		)
Ending balance	$	7,038,602		3.64		$	6,547,702		3.67

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, 2016						June 30, 2015
	Amount		Rate		% of Total		Amount		Rate		% of Total
	(Dollars in thousands)
Fixed-rate:
One- to four-family:
<= 15 years	$	57,702	2.93	%	14.3	%	$	106,115	2.90	%	24.5	%
> 15 years	240,111		3.66		59.6		244,947		3.74		56.6
Commercial real estate	34,475		4.40		8.6		3,268		4.11		0.8
Home equity	1,452		5.62		0.4		1,265		6.21		0.3
Other	201		8.75		—		187		7.82		—
Total fixed-rate	333,941		3.62		82.9		355,782		3.50		82.2

Adjustable-rate:
One- to four-family:
<= 36 months	2,433		2.56		0.6		2,757		2.52		0.6
> 36 months	48,049		2.88		11.9		54,285		2.91		12.6
Home equity	17,833		4.72		4.4		19,250		4.58		4.5
Other	719		3.41		0.2		363		2.88		0.1
Total adjustable-rate	69,034		3.35		17.1		76,655		3.31		17.8

Total originated, refinanced and purchased	$	402,975	3.58		100.0	%	$	432,437	3.47		100.0	%

Purchased and participation loans included above:
Fixed-rate:
Correspondent - one- to four-family	$	144,287	3.55				$	146,487	3.50
Participations - commercial real estate	34,475		4.40				1,400		4.25
Total fixed-rate purchased/participations	178,762		3.71				147,887		3.51

Adjustable-rate:
Correspondent - one- to four-family	24,715		2.90				29,046		2.92
Total purchased/participation loans	$	203,477	3.61				$	176,933	3.41



	For the Nine Months Ended
	June 30, 2016						June 30, 2015
	Amount		Rate		% of Total		Amount		Rate		% of Total
	(Dollars in thousands)
Fixed-rate:
One- to four-family:
<= 15 years	$	176,597	3.00	%	15.3	%	$	253,435	2.97	%	24.3	%
> 15 years	605,575		3.73		52.4		543,934		3.82		52.1
Commercial real estate	173,199		4.00		15.0		26,518		3.74		2.5
Home equity	3,230		5.72		0.2		2,812		6.18		0.3
Other	653		9.02		0.1		629		7.72		0.1
Total fixed-rate	959,254		3.66		83.0		827,328		3.57		79.3

Adjustable-rate:
One- to four-family:
<= 36 months	4,255		2.61		0.4		5,197		2.57		0.5
> 36 months	134,220		2.95		11.6		159,092		2.95		15.2
Commercial real estate	3,376		4.25		0.3		—		—		—
Home equity	51,803		4.63		4.5		51,655		4.59		4.9
Other	2,208		3.45		0.2		1,205		3.08		0.1
Total adjustable-rate	195,862		3.42		17.0		217,149		3.33		20.7

Total originated, refinanced and purchased	$	1,155,116	3.62		100.0	%	$	1,044,477	3.52		100.0	%

Purchased and participation loans included above:
Fixed-rate:
Correspondent - one- to four-family	$	386,355	3.60				$	363,661	3.58
Participations - commercial real estate	143,068		3.93				22,970		3.73
Total fixed-rate purchased/participations	529,423		3.69				386,631		3.59

Adjustable-rate:
Correspondent - one- to four-family	74,555		2.94				94,609		2.94
Participations - commercial real estate	3,376		4.25				—		—
Total adjustable-rate purchased/participations	77,931		3.00				94,609		2.94
Total purchased/participation loans	$	607,354	3.60				$	481,240	3.46

One- to Four-Family Loans - The following table presents, for our portfolio of one- to four-family loans, the balance, percentage of total, weighted average credit score, weighted average LTV ratio, and the average balance per loan as of the dates presented. Credit scores are updated at least semiannually, with the latest update in March 2016, from a nationally recognized consumer rating agency. The LTV ratios were based on the current loan balance and either the lesser of the purchase price or original appraisal, or the most recent Bank appraisal, if available. In most cases, the most recent appraisal was obtained at the time of origination.



	June 30, 2016									September 30, 2015
			% of		Credit			Average				% of		Credit			Average
	Amount		Total		Score	LTV		Balance		Amount		Total		Score	LTV		Balance
	(Dollars in thousands)
Originated	$	4,001,135	61.2	%	767	63	%	$	131	$	4,010,517	63.2	%	765	64	%	$	129
Correspondent purchased	2,092,608		32.0		763	68		352		1,846,213		29.1		764	68		344
Bulk purchased	439,954		6.8		753	64		307		485,682		7.7		752	65		310
	$	6,533,697	100.0	%	765	65		172		$	6,342,412	100.0	%	764	65		167

T he following ta ble presents originated, refinanced, and correspondent purchased activity in our one- to four-family loan portfolio, excluding endorsement activity, along with associated weighted average LTVs and weighted average credit scores for the periods indicated. Of the loans originated and refinanced during the current year nine month period , 76% had loan values of $417 thousand or less. Of the correspondent loans purchased during the current year nine month period , 21% had loan values of $417 thousand or less.



	For the Three Months Ended
	June 30, 2016					June 30, 2015
					Credit					Credit
	Amount		LTV		Score	Amount		LTV		Score
	(Dollars in thousands)
Originated	$	146,590	80	%	773	$	188,742	78	%	772
Refinanced by Bank customers	32,703		69		766	43,829		70		767
Correspondent purchased	169,002		74		761	175,533		74		767
	$	348,295	76		766	$	408,104	75		769



	For the Nine Months Ended
	June 30, 2016					June 30, 2015
					Credit					Credit
	Amount		LTV		Score	Amount		LTV		Score
	(Dollars in thousands)
Originated	$	361,651	78	%	769	$	401,357	77	%	771
Refinanced by Bank customers	98,086		69		768	102,031		68		768
Correspondent purchased	460,910		74		763	458,270		74		765
	$	920,647	75		766	$	961,658	74		768

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, 2016 .



	For the Three Months Ended						For the Nine Months Ended
	June 30, 2016						June 30, 2016
State	Amount		% of Total		Rate		Amount		% of Total		Rate
	(Dollars in thousands)
Kansas	$	162,151	46.5	%	3.40	%	$	420,566	45.7	%	3.46	%
Missouri	66,734		19.2		3.45		175,815		19.1		3.50
Texas	57,316		16.5		3.43		146,303		15.9		3.46
Tennessee	16,340		4.7		3.52		47,921		5.2		3.54
Other states	45,754		13.1		3.39		130,042		14.1		3.47
	$	348,295	100.0	%	3.42		$	920,647	100.0	%	3.47

One- to Four-Family Loan Commitments - The following table summarizes our one- to four-family loan origination and refinance commitments and one- to four-family correspondent purchase commitments as of June 30, 2016 , along with associated weighted average rates. Commitments generally have fixed expiration dates or other termination clauses and may require the payment of a rate lock fee. A percentage of the commitments are expected to expire unfunded, so the amounts reflected in the table below are not necessarily indicative of future cash requirements.



	Fixed-Rate
	15 years			More than			Adjustable-			Total
	or less			15 years			Rate			Amount		Rate
	(Dollars in thousands)
Originate/refinance	$	27,392		$	54,321		$	21,306		$	103,019	3.31	%
Correspondent	14,893			126,771			15,244			156,908		3.62
	$	42,285		$	181,092		$	36,550		$	259,927	3.50

Rate	3.11		%	3.71		%	2.90		%

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 quarter, the Bank continued to grow its commercial real estate loan portfolio by purchasing a $34.5 million participation in a commercial real estate construction loan. At June 30, 2016, the Bank had $51.6 million of outstanding commercial real estate loan commitments. 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 already has commercial real estate lending relationships.

The following table presents the Bank's commercial real estate loans and commitments by industry classification, as defined by the North American Industry Classification System, as of June 30, 2016 . Based on the terms of the construction loans as of June 30, 2016, the undisbursed amounts in the table are projected to be disbursed by March, 2018. It is possible that not all of the funds will be disbursed due to the nature of the funding of construction projects.



	Unpaid		Undisbursed		Gross Loan		Outstanding				% of
	Principal		Amount		Amount		Commitments		Total		Total
	(Dollars in thousands)
Accommodation and food services	$	56,984	$	85,302	$	142,286	$	—	$	142,286	40.7	%
Health care and social assistance	11,896		44,857		56,753		—		56,753		16.2
Real estate rental and leasing	14,602		534		15,136		38,000		53,136		15.2
Arts, entertainment, and recreation	—		34,475		34,475		—		34,475		9.8
Multi-family	18,134		1,068		19,202		4,800		24,002		6.9
Retail trade	19,134		—		19,134		4,726		23,860		6.8
Other	11,320		—		11,320		4,086		15,406		4.4
	$	132,070	$	166,236	$	298,306	$	51,612	$	349,918	100.0	%

The following table summarizes the Bank's commercial real estate loans by state as of June 30, 2016 .



	Unpaid		Undisbursed		Gross Loan		Outstanding				% of
	Principal		Amount		Amount		Commitments		Total		Total
	(Dollars in thousands)
Texas	$	28,194	$	86,380	$	114,574	$	38,000	$	152,574	43.6	%
Missouri	33,649		44,857		78,506		9,526		88,032		25.2
Kansas	44,635		34,475		79,110		—		79,110		22.6
Colorado	14,872		524		15,396		—		15,396		4.4
Arkansas	8,306		—		8,306		—		8,306		2.4
California	2,414		—		2,414		4,086		6,500		1.8
	$	132,070	$	166,236	$	298,306	$	51,612	$	349,918	100.0	%

The following table presents the Bank's commercial real estate loan portfolio and outstanding commitments, categorized by gross loan amount (unpaid principal plus undisbursed amounts) or outstanding commitment amount, as of June 30, 2016 .



	Count	Amount
	(Dollars in thousands)
Greater than $30 million	4	$	157,710
>$15 to $30 million	2	54,528
>$10 to $15 million	3	38,382
>$5 to $10 million	3	26,812
$1 to $5 million	23	67,869
Less than $1 million	14	4,617
	49	$	349,918

Asset Quality. The Bank's traditional underwriting guidelines have provided the Bank with generally low delinquencies and low levels of non-performing assets compared to national levels. Of particular importance is the complete and full documentation required for each loan the Bank originates, participates in or purchases. One- to four-family owner occupied loans are underwritten according to the "ability to repay" and "qualified mortgage" standards, as issued by the CFPB, with total debt-to-income ratios not exceeding 43% of the borrower's verified income. This allows the Bank to make an informed credit decision based upon a thorough assessment of the borrower's ability to repay the loan. See additional discussion regarding underwriting standards in "Part I, Item 1. Business - Lending Practices and Underwriting Standards" in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2015 . In the following asset quality discussion, unless otherwise noted, correspondent purchased loans are included with originated loans and bulk purchased loans are reported as purchased loans.

Delinquent and non-performing loans and OREO - The following table presents the Company's 30 to 89 day delinquent loans at the dates indicated. Of the loans 30 to 89 days delinquent at June 30, 2016 , approximately 76% were 59 days or less delinquent.



	Loans Delinquent for 30 to 89 Days at:
	June 30,				March 31,				December 31,				September 30,				June 30,
	2016				2,016				2015				2015				2015
	Number	Amount			Number	Amount			Number	Amount			Number	Amount			Number	Amount
	(Dollars in thousands)
One- to four-family:
Originated	141	$	12,962		139	$	14,336		159	$	14,277		158	$	16,955		150	$	16,320
Correspondent purchased	10	2,561			8	2,307			10	3,033			8	2,344			15	4,741
Bulk purchased	27	4,703			26	6,005			35	7,805			32	7,259			30	6,249
Consumer:
Home equity	33	548			33	631			36	730			32	703			34	646
Other	11	55			5	28			13	88			11	17			18	80
	222	$	20,829		211	$	23,307		253	$	25,933		241	$	27,278		247	$	28,036

30 to 89 days delinquent loans
to total loans receivable, net		0.30		%		0.34		%		0.39		%		0.41		%		0.43		%

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



	Non-Performing Loans and OREO at:
	June 30,				March 31,				December 31,				September 30,				June 30,
	2016				2,016				2015				2015				2015
	Number	Amount			Number	Amount			Number	Amount			Number	Amount			Number	Amount
	(Dollars in thousands)
Loans 90 or More Days Delinquent or in Foreclosure:
One- to four-family:
Originated	74	$	8,539		72	$	8,016		75	$	9,900		66	$	6,728		70	$	6,180
Correspondent purchased	2	652			3	864			—	—			1	394			1	67
Bulk purchased	32	8,017			33	7,483			32	7,199			36	8,898			29	7,577
Consumer:
Home equity	20	437			26	622			28	574			24	497			19	443
Other	6	17			8	26			9	25			4	12			5	16
	134	17,662			142	17,011			144	17,698			131	16,529			124	14,283
Nonaccrual loans less than 90 Days Delinquent: ⁽¹⁾
One- to four-family:
Originated	70	6,939			72	7,667			75	7,661			77	9,004			71	9,224
Correspondent purchased	8	2,872			4	825			1	24			1	25			2	398
Bulk purchased	—	—			1	80			1	81			1	82			5	959
Consumer:
Home equity	11	263			9	151			14	259			12	295			10	219
Other	1	7			1	8			—	—			—	—			—	—
	90	10,081			87	8,731			91	8,025			91	9,406			88	10,800
Total non-performing loans	224	27,743			229	25,742			235	25,723			222	25,935			212	25,083

Non-performing loans as a percentage of total loans ⁽²⁾		0.41		%		0.38		%		0.39		%		0.39		%		0.39		%

OREO:
One- to four-family:
Originated ⁽³⁾	14	$	1,142		22	$	1,364		25	$	1,410		29	$	1,752		28	$	1,920
Correspondent purchased	1	499			1	499			1	499			1	499			2	714
Bulk purchased	5	1,413			8	2,694			6	2,247			2	796			4	1,019
Consumer:
Home equity	—	—			1	9			1	26			1	8			2	17
Other ⁽⁴⁾	1	1,278			1	1,278			1	1,278			1	1,278			1	1,278
	21	4,332			33	5,844			34	5,460			34	4,333			37	4,948
Total non-performing assets	245	$	32,075		262	$	31,586		269	$	31,183		256	$	30,268		249	$	30,031

Non-performing assets as a percentage of total assets		0.35		%		0.34		%		0.34		%		0.31		%		0.33		%

(1)

Represents loans required to be reported as nonaccrual pursuant to regulatory reporting requirements even if the loans are current. At June 30, 2016 , March 31, 2016 , December 31, 2015 , September 30, 2015 , and June 30, 2015 , this amount was comprised of $2.8 million, $1.8 million, $2.2 million, $2.2 million, and $3.4 million, respectively, of loans that were 30 to 89 days delinquent and are reported as such, and $7.3 million, $6.9 million, $5.8 million, $7.2 million, and $7.4 million, respectively, of loans that were current.


(2)	Excluding loans required to be reported as nonaccrual pursuant to regulatory reporting requirements even if the loans are current, non-performing loans as a percentage of total loans were 0.26%, 0.25%, 0.27%, 0.25%, and 0.22%, at June 30, 2016 , March 31, 2016 , December 31, 2015 , September 30, 2015 , and June 30, 2015 , respectively.


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


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

Once a one- to four-family loan is generally 180 days delinquent, a new collateral value is obtained through an appraisal, less estimated selling costs and anticipated private mortgage insurance ("PMI") receipts. Any loss amounts identified as a result of this review are charged-off. At June 30, 2016 , $11.5 million, or 67%, 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, 2016 . The LTV ratios were based on the current loan balance and either the lesser of the purchase price or original appraisal, or the most recent Bank appraisal, if available. At June 30, 2016 , potential losses, after taking into consideration anticipated PMI proceeds and estimated selling costs, have been charged-off.



					Loans 30 to 89				Loans 90 or More Days Delinquent
	One- to Four-Family				Days Delinquent				or in Foreclosure
State	Amount		% of Total		Amount		% of Total		Amount		% of Total		LTV
	(Dollars in thousands)
Kansas	$	3,727,539	57.1	%	$	9,824	48.6	%	$	8,226	47.8	%	71	%
Missouri	1,266,730		19.4		4,722		23.4		1,505		8.7		69
Texas	465,108		7.1		1,518		7.5		351		2.1		75
California	251,074		3.8		—		—		—		—		n/a
Tennessee	183,233		2.8		—		—		—		—		n/a
Alabama	101,125		1.5		—		—		—		—		n/a
Oklahoma	73,108		1.1		427		2.1		23		0.1		35
Georgia	62,540		1.0		432		2.1		365		2.1		85
Other states	403,240		6.2		3,303		16.3		6,738		39.2		63
	$	6,533,697	100.0	%	$	20,226	100.0	%	$	17,208	100.0	%	68

TDRs - The following table presents the Company's TDRs, based on accrual status, at the dates indicated. At June 30, 2016 , $24.6 million of TDRs were included in the ACL formula analysis model and $113 thousand of the ACL was related to these loans. The remaining $13.6 million of TDRs at June 30, 2016 were individually evaluated for loss and any potential losses have been charged-off.



	At
	June 30,		March 31,		December 31,		September 30,		June 30,
	2016		2016		2015		2015		2015
	(Dollars in thousands)
Accruing TDRs	$	21,663	$	24,239	$	24,956	$	24,331	$	25,444
Nonaccrual TDRs ⁽¹⁾	16,497		14,986		13,983		15,511		14,653
Total TDRs	$	38,160	$	39,225	$	38,939	$	39,842	$	40,097


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

Allowance for credit losses and Provision for credit losses - Management maintains an ACL to absorb inherent losses in the loan portfolio based on ongoing quarterly assessments of the loan portfolio. The ACL is maintained through provisions for credit losses which are either charged to or credited to income. Our ACL methodology considers a number of factors including the trend and composition of delinquent loans, results of foreclosed property and short sale transactions, charge-off activity and trends, the current status and trends of local and national economies (particularly levels of unemployment), trends and current conditions in the real estate and housing markets, loan portfolio growth and concentrations, and certain ACL ratios such as ACL to loans receivable, net and annualized historical losses to ACL. We continually monitor the level of risk in our commercial real estate loan portfolio, including concentrations in such factors as geographic locations, property types, tenant brand name, borrowing relationships, and lending relationships in the case of participations loans, among other factors. For additional information on the ACL, see "Part II, Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies" in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2015 .

The Bank did not record a provision for credit losses during the current nine month period due to the continued low level of net loan charge-offs and delinquent loan balances. Net loan charge-offs were $131 thousand for the current year nine month period. The improvement in collateral values has assisted in lowering our net charge-off amounts compared to prior years. At June 30, 2016, loans 30 to 89 days delinquent were 0.30% of total loans and loans 90 or more days delinquent or in foreclosure were 0.26% of total loans.

The distribution of our ACL at the dates indicated is summarized below. The loan amount in the table below represents outstanding loan balances net of undisbursed loan funds. Included in bulk purchased loans are $248.5 million loans, or 56% of the total bulk purchased loan portfolio, at June 30, 2016 , for which the seller of the loans has guaranteed, and has the ability, to repurchase or replace any delinquent loans. The Bank has not experienced any loan losses with this group of loans since the loan package was purchased in fiscal year 2012. For the $191.4 million of bulk purchased loans at June 30, 2016 that do not have the above noted guarantee, the Bank has continued to experience a reduction in loan losses due to an improvement in collateral values. A large portion of these loans were originally interest-only loans with interest-only terms up to 10 years. All of the interest-only loans are now fully amortizing loans. Our correspondent purchased loans are purchased on a loan-by-loan basis from a select group of correspondent lenders and are underwritten by the Bank's underwriters based on underwriting standards that are generally the same as for our originated loans.



	At
	June 30, 2016								September 30, 2015
			% of ACL				% of				% of ACL				% of
	Amount		to Total		Total		Loans to		Amount		to Total		Total		Loans to
	of ACL		ACL		Loans		Total Loans		of ACL		ACL		Loans		Total Loans
	(Dollars in thousands)
Real estate loans:
One- to four-family:
Originated	$	4,626	49.7	%	$	4,001,131	58.6	%	$	4,833	51.2	%	$	4,010,439	60.6	%
Correspondent purchased	2,299		24.7		2,092,608		30.6		2,115		22.4		1,846,213		27.9
Bulk purchased	1,149		12.3		439,954		6.4		1,434		15.2		485,682		7.3
Construction	42		0.5		38,766		0.6		32		0.3		29,534		0.4
Total	8,116		87.2		6,572,459		96.2		8,414		89.1		6,371,868		96.2
Commercial real estate:
Permanent	709		7.6		109,873		1.6		604		6.4		109,314		1.6
Construction	224		2.4		22,197		0.3		138		1.5		11,523		0.2
Total	933		10.0		132,070		1.9		742		7.9		120,837		1.8
Total real estate loans	9,049		97.2		6,704,529		98.1		9,156		97.0		6,492,705		98.0
Consumer loans:
Home equity	206		2.2		123,673		1.8		222		2.3		125,844		1.9
Other consumer	57		0.6		4,568		0.1		65		0.7		4,179		0.1
Total consumer loans	263		2.8		128,241		1.9		287		3.0		130,023		2.0
	$	9,312	100.0	%	$	6,832,770	100.0	%	$	9,443	100.0	%	$	6,622,728	100.0	%

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



	For the Three Months Ended
	June 30, 2016				March 31, 2016			December 31, 2015			September 30, 2015			June 30, 2015
	(Dollars in thousands)
ACL beginning balance	$	9,193			$	9,201		$	9,443		$	9,601		$	9,406
Charge-offs	(126		)		(75		)	(250		)	(183		)	(157		)
Recoveries	245				67			8			25			29
Provision for credit losses	—				—			—			—			323
ACL ending balance	$	9,312			$	9,193		$	9,201		$	9,443		$	9,601

ACL to loans receivable, net at end of period	0.14		%		0.14		%	0.14		%	0.14		%	0.15		%
ACL to non-performing loans at end of period	33.57				35.71			35.77			36.41			38.28
Ratio of net charge-offs during the period
to average loans outstanding during the period	—				—			—			—			—
Ratio of net (recoveries) charge-offs during the
period to average non-performing assets	(0.38		)		0.03			0.79			0.52			0.41
ACL to net charge-offs (annualized)	N/M			⁽¹⁾	294.7x			9.5x			15.0x			18.7x


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



	For the Nine Months Ended
	June 30, 2016			June 30, 2015
	(Dollars in thousands)
ACL beginning balance	$	9,443		$	9,227
Charge-offs	(451		)	(552		)
Recoveries	320			155
Provision for credit losses	—			771
ACL ending balance	$	9,312		$	9,601

Ratio of net charge-offs during the period to
average loans outstanding during the period	—		%	0.01		%
Ratio of net charge-offs during the period to
average non-performing assets during the period	0.42			1.34
ACL to net charge-offs (annualized)	53.4x			18.2x

Securities. The following table presents the distribution of our MBS and investment securities portfolios, at amortized cost, at the dates indicated. Overall, fixed-rate securities comprised 77% of these portfolios at June 30, 2016 . The weighted average life ("WAL") is the estimated remaining maturity (in years) after three-month historical prepayment speeds and projected call option assumptions have been applied. Weighted average yields on tax-exempt securities are not calculated on a fully taxable equivalent basis.



	June 30, 2016					March 31, 2016					September 30, 2015
	Amount		Yield		WAL	Amount		Yield		WAL	Amount		Yield		WAL
	(Dollars in thousands)
Fixed-rate securities:
MBS	$	903,550	2.19	%	3.1	$	968,006	2.23	%	3.3	$	1,047,637	2.24	%	3.2
GSE debentures	471,143		1.16		0.8	471,215		1.14		1.3	525,376		1.14		1.6
Municipal bonds	36,278		1.78		2.5	37,248		1.80		2.6	38,214		1.87		2.9
Total fixed-rate securities	1,410,971		1.84		2.3	1,476,469		1.87		2.6	1,611,227		1.87		2.7

Adjustable-rate securities:
MBS	431,128		2.25		5.6	458,350		2.31		5.9	402,417		2.22		5.3
Trust preferred securities	2,163		1.91		21.0	2,169		1.89		21.2	2,186		1.59		21.7
Total adjustable-rate securities	433,291		2.25		5.7	460,519		2.30		6.0	404,603		2.21		5.4
Total securities portfolio	$	1,844,262	1.93		3.1	$	1,936,988	1.97		3.4	$	2,015,830	1.94		3.2

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



	June 30, 2016		September 30, 2015
	(Dollars in thousands)
Federal National Mortgage Association ("FNMA")	$	811,181	$	880,810
Federal Home Loan Mortgage Corporation ("FHLMC")	445,656		469,290
Government National Mortgage Association	87,644		112,439
	$	1,344,481	$	1,462,539

Mortgage-Backed Securities - The balance of MBS, which primarily consists of securities of U.S. GSEs, decreased $118.1 million , from $1.46 billion at September 30, 2015 , to $1.34 billion at June 30, 2016 . 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 yield for the ending balances are as of the last day of the period presented and are generally derived from recent prepayment activity on the securities in the portfolio as of the dates presented. The beginning and ending WAL is the estimated remaining principal repayment term (in years) after three-month historical prepayment speeds have been applied.



	For the Three Months Ended
	June 30, 2016						March 31, 2016						December 31, 2015						September 30, 2015
	Amount			Yield		WAL	Amount			Yield		WAL	Amount			Yield		WAL	Amount			Yield		WAL
	(Dollars in thousands)
Beginning balance - carrying value	$	1,436,774		2.25	%	4.1	$	1,376,119		2.26	%	3.9	$	1,462,539		2.24	%	3.8	$	1,565,184		2.25	%	3.9
Maturities and repayments	(90,291		)				(80,544		)				(83,835		)				(99,840		)
Net amortization of (premiums)/discounts	(1,387		)				(1,091		)				(1,188		)				(1,362		)
Purchases:
Fixed	—			—		—	42,827			1.83		4.1	—			—		—	—			—		—
Adjustable	—			—		—	100,133			2.02		5.4	—			—		—	—			—		—
Change in valuation on AFS securities	(615		)				(670		)				(1,397		)				(1,443		)
Ending balance - carrying value	$	1,344,481		2.21		3.9	$	1,436,774		2.25		4.1	$	1,376,119		2.26		3.9	$	1,462,539		2.24		3.8



	For the Nine Months Ended
	June 30, 2016						June 30, 2015
	Amount			Yield		WAL	Amount			Yield		WAL
	(Dollars in thousands)
Beginning balance - carrying value	$	1,462,539		2.24	%	3.8	$	1,802,547		2.32	%	4.2
Maturities and repayments	(254,670		)				(276,489		)
Net amortization of (premiums)/discounts	(3,666		)				(4,002		)
Purchases:
Fixed	42,827			1.83		4.1	45,669			1.62		4.1
Adjustable	100,133			2.02		5.4	—			—		—
Change in valuation on AFS securities	(2,682		)				(2,541		)
Ending balance - carrying value	$	1,344,481		2.21		3.9	$	1,565,184		2.25		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 $56.1 million, from $566.8 million at September 30, 2015 , to $510.7 million at June 30, 2016 . 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, 2016						March 31, 2016						December 31, 2015						September 30, 2015
	Amount			Yield		WAL	Amount			Yield		WAL	Amount			Yield		WAL	Amount			Yield		WAL
	(Dollars in thousands)
Beginning balance - carrying value	$	511,491		1.19	%	1.5	$	460,829		1.24	%	2.6	$	566,754		1.19	%	1.8	$	641,532		1.18	%	2.5
Maturities and calls	(25,873		)				(27,201		)				(104,155		)				(76,387		)
Net amortization of (premiums)/discounts	(115		)				(106		)				(101		)				(70		)
Purchases:
Fixed	24,940			1.56		0.5	74,987			0.93		0.8	1,432			1.35		5.6	—			—		—
Change in valuation on AFS securities	302						2,982						(3,101		)				1,679
Ending balance - carrying value	$	510,745		1.21		1.1	$	511,491		1.19		1.5	$	460,829		1.24		2.6	$	566,754		1.19		1.8



	For the Nine Months Ended
	June 30, 2016						June 30, 2015
	Amount			Yield		WAL	Amount			Yield		WAL
	(Dollars in thousands)
Beginning balance - carrying value	$	566,754		1.19	%	1.8	$	590,942		1.15	%	3.0
Maturities and calls	(157,229		)				(112,132		)
Net amortization of (premiums)/discounts	(322		)				(215		)
Purchases:
Fixed	101,359			1.09		0.8	158,401			1.21		2.1
Change in valuation on AFS securities	183						4,536
Ending balance - carrying value	$	510,745		1.21		1.1	$	641,532		1.18		2.5

Liabilities. Total liabilities were $7.86 billion at June 30, 2016 compared to $8.43 billion at September 30, 2015. The $567.0 million decrease was due primarily to a $798.5 million decrease in FHLB borrowings, largely as a result of the removal of the entire daily leverage strategy at June 30, 2016, along with a $100.0 million decrease in term FHLB advances, partially offset by a $252.6 million increase in the deposit portfolio.

Deposits - Deposits were $5.09 billion at June 30, 2016 compared to $4.83 billion at September 30, 2015 . The $252.6 million increase was due primarily to a $79.3 million increase in the retail certificate of deposit portfolio, a $60.3 million increase in the checking portfolio, and a $55.9 million increase in the wholesale certificate of deposit portfolio. We continue to be competitive on deposit rates and, in some cases, our offer rates for certificates of deposit have been higher than peers. Increasing rates offered on longer-term certificates of deposit has been an on-going balance sheet strategy by management in anticipation of higher interest rates. If short-term interest rates continue to rise, our customers may move funds from their checking, savings and money market accounts to higher yielding deposit products within the Bank or withdraw their funds from these accounts, including certificates of deposit, to invest in higher yielding investments outside of the Bank.

The following table presents the amount, weighted average rate and percentage of total for the components of our deposit portfolio at the dates presented.



	June 30, 2016						March 31, 2016						September 30, 2015
					% of						% of						% of
	Amount		Rate		Total		Amount		Rate		Total		Amount		Rate		Total
	(Dollars in thousands)
Noninterest-bearing checking	$	209,358	—	%	4.1	%	$	211,068	—	%	4.1	%	$	188,007	—	%	3.9	%
Interest-bearing checking	589,668		0.05		11.6		604,790		0.05		11.8		550,741		0.05		11.4
Savings	335,403		0.20		6.6		330,467		0.17		6.5		311,670		0.16		6.4
Money market	1,182,255		0.24		23.3		1,165,592		0.23		22.8		1,148,935		0.23		23.8
Retail certificates of deposit	2,400,141		1.41		47.2		2,421,622		1.38		47.3		2,320,804		1.29		48.0
Public units	368,304		0.65		7.2		386,290		0.56		7.5		312,363		0.40		6.5
	$	5,085,129	0.78		100.0	%	$	5,119,829	0.77		100.0	%	$	4,832,520	0.72		100.0	%

The following tables set forth scheduled maturity information for our certificates of deposit, along with associated weighted average rates, at June 30, 2016 .



	Amount Due
				More than			More than
	1 year			1 year to			2 years to 3			More than			Total
Rate range	or less			2 years			years			3 years			Amount		Rate
	(Dollars in thousands)
0.00 – 0.99%	$	784,762		$	193,979		$	966		$	—		$	979,707	0.66	%
1.00 – 1.99%	301,156			463,960			369,817			483,457			1,618,390		1.60
2.00 – 2.99%	7,166			162			1,494			161,210			170,032		2.24
3.00 – 3.99%	207			109			—			—			316		3.12
	$	1,093,291		$	658,210		$	372,277		$	644,667		$	2,768,445	1.31

Percent of total	39.5		%	23.8		%	13.4		%	23.3		%
Weighted average rate	0.85			1.26			1.58			1.96
Weighted average maturity (in years)	0.5			1.4			2.5			3.8			1.7
Weighted average maturity for the retail certificate of deposit portfolio (in years)													1.9



	Amount Due
			Over		Over
	3 months		3 to 6		6 to 12		Over
	or less		months		months		12 months		Total
	(Dollars in thousands)
Retail certificates of deposit less than $100,000	$	138,939	$	152,301	$	250,306	$	983,443	$	1,524,989
Retail certificates of deposit of $100,000 or more	56,944		74,364		126,711		617,133		875,152
Public unit deposits of $100,000 or more	124,753		93,505		75,468		74,578		368,304
	$	320,636	$	320,170	$	452,485	$	1,675,154	$	2,768,445

Borrowings - The following tables present term borrowing activity for the periods shown, which includes FHLB advances, at par, and repurchase agreements. Line of credit activity is excluded from the following tables. The weighted average effective rate includes the impact of the amortization of deferred prepayment penalties resulting from FHLB advances previously prepaid. Rates on new borrowings are fixed-rate. The weighted average maturity ("WAM") is the remaining weighted average contractual term in years. The beginning and ending WAMs represent the remaining maturity at each date presented. For new borrowings, the WAMs presented are as of the date of issue.



	For the Three Months Ended
	June 30, 2016						March 31, 2016					December 31, 2015						September 30, 2015
				Effective					Effective						Effective						Effective
	Amount			Rate		WAM	Amount		Rate		WAM	Amount			Rate		WAM	Amount			Rate		WAM
	(Dollars in thousands)
Beginning balance	$	2,675,000		2.29	%	3.0	$	2,675,000	2.29	%	3.2	$	2,775,000		2.29	%	3.3	$	2,795,000		2.49	%	3.3
Maturities and prepayments:
FHLB advances	(100,000		)	3.17			—		—			(200,000		)	1.94			(175,000		)	5.08
Repurchase agreements	—			—			—		—			—			—			(20,000		)	4.45
New borrowings:
FHLB advances	100,000			1.82		7.0	—		—		—	100,000			1.45		3.0	175,000			2.18		3.0
Ending balance	$	2,675,000		2.24		3.0	$	2,675,000	2.29		3.0	$	2,675,000		2.29		3.2	$	2,775,000		2.29		3.3



	For the Nine Months Ended
	June 30, 2016						June 30, 2015
				Effective						Effective
	Amount			Rate		WAM	Amount			Rate		WAM
	(Dollars in thousands)
Beginning balance	$	2,775,000		2.29	%	3.3	$	2,795,000		2.45	%	2.8
Maturities and prepayments:
FHLB advances	(300,000		)	2.35			(600,000		)	1.88
New borrowings:
FHLB advances	200,000			1.64		5.0	600,000			2.06		6.0
Ending balance	$	2,675,000		2.24		3.0	$	2,795,000		2.49		3.3

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, 2016 . Subsequent to June 30, 2016, a $100.0 million FHLB advance with an effective rate of 0.83% matured. The advance was not renewed or replaced.



	FHLB		Repurchase
Maturity by	Advances		Agreements		Total		Contractual		Effective
Fiscal year	Amount		Amount		Amount		Rate		Rate ⁽¹⁾
	(Dollars in thousands)
2016	$	100,000	$	—	$	100,000	0.83	%	0.83	%
2017	500,000		—		500,000		2.69		2.72
2018	375,000		100,000		475,000		2.35		2.64
2019	400,000		—		400,000		1.62		1.62
2020	250,000		100,000		350,000		2.18		2.18
2021	550,000		—		550,000		2.27		2.27
2022	200,000		—		200,000		2.23		2.23
2023	100,000		—		100,000		1.82		1.82
	$	2,475,000	$	200,000	$	2,675,000	2.18		2.24


(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, 2016 .



	Retail				Public Unit				Term
Maturity by	Certificate		Repricing		Deposit		Repricing		Borrowings		Repricing				Repricing
Quarter End	Amount		Rate		Amount		Rate		Amount		Rate		Total		Rate
	(Dollars in thousands)
September 30, 2016	$	195,883	0.90	%	$	124,753	0.48	%	$	100,000	0.83	%	$	420,636	0.76	%
December 31, 2016	226,665		0.97		93,505		0.53		100,000		0.78		420,170		0.83
March 31, 2017	153,509		0.91		35,038		0.68		—		—		188,547		0.87
June 30, 2017	223,508		1.05		40,430		0.70		300,000		3.24		563,938		2.19
	$	799,565	0.97		$	293,726	0.55		$	500,000	2.26		$	1,593,291	1.30

Stockholders' Equity. Stockholders' equity was $1.38 billion at June 30, 2016 compared to $1.42 billion at September 30, 2015. The $35.4 million decrease between periods was due primarily to the payment of $100.4 million in cash dividends, partially offset by net income of $62.8 million. The cash dividends paid during the current year nine month period consisted of a $0.25 per share cash true-up dividend related to fiscal year 2015 earnings per the Company's dividend policy, a $0.25 per share True Blue® Capitol dividend, and three regular quarterly cash dividends totaling $0.255 per share. On July 21, 2016, the Company declared a regular quarterly cash dividend of $0.085 per share, or approximately $11.3 million, payable on August 19, 2016 to stockholders of record as of the close of business on August 5, 2016.

In October 2015, the Company announced a stock repurchase plan for up to $70.0 million of common stock. It is anticipated that shares will be purchased from time to time based upon market conditions and available liquidity. There is no expiration for this repurchase plan. The Company did not repurchase any shares during the nine month period ended June 30, 2016 .

At June 30, 2016 , Capitol Federal Financial, Inc., at the holding company level, had $93.6 million on deposit at the Bank. For fiscal year 2016, it is the intent of the Board of Directors and management to continue with the payout of 100% of the Company's earnings to its stockholders, in addition to the True Blue Capitol dividend paid in June 2016 which was funded with a $36.0 million capital contribution from the Bank. Dividend payments depend upon a number of factors including the Company's financial condition and results of operations, regulatory capital requirements, regulatory limitations on the Bank's ability to make capital distributions to the Company, and the amount of cash at the holding company.

The following table presents regular quarterly dividends and special dividends paid in calendar years 2016, 2015, and 2014. The amounts represent cash dividends paid during each period. For the quarter ending September 30, 2016, the amount presented represents the dividend payable on August 19, 2016 to stockholders of record as of August 5, 2016.



	Calendar Year
	2016				2015				2014
	Amount		Per Share		Amount		Per Share		Amount		Per Share
	(Dollars in thousands, except per share amounts)
Regular quarterly dividends paid
Quarter ended March 31	$	11,305	$	0.085	$	11,592	$	0.085	$	10,513	$	0.075
Quarter ended June 30	11,311		0.085		11,585		0.085		10,399		0.075
Quarter ended September 30	11,323		0.085		11,385		0.085		10,318		0.075
Quarter ended December 31					11,303		0.085		10,226		0.075
True-up dividends paid					33,248		0.250		35,450		0.260
True Blue dividends paid	33,274		0.250		33,924		0.250		34,663		0.250
Calendar year-to-date dividends paid	$	67,213	$	0.505	$	113,037	$	0.840	$	111,569	$	0.810

Operating Results

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



	For the Three Months Ended
	June 30,			March 31,			December 31,			September 30,			June 30,
	2016			2016			2015			2015			2015
	(Dollars in thousands, except per share data)
Interest and dividend income:
Loans receivable	$	60,840		$	60,732		$	60,223		$	59,761		$	58,922
MBS	7,401			7,702			7,831			8,260			8,849
FHLB stock	3,050			3,006			3,152			3,167			3,132
Cash and cash equivalents	2,730			2,707			1,620			1,303			1,357
Investment securities	1,506			1,485			1,533			1,920			1,914
Total interest and dividend income	75,527			75,632			74,359			74,411			74,174

Interest expense:
FHLB borrowings	16,361			16,394			16,074			16,539			17,072
Deposits	9,749			9,213			8,799			8,390			8,377
Repurchase agreements	1,487			1,487			1,504			1,542			1,712
Total interest expense	27,597			27,094			26,377			26,471			27,161

Net interest income	47,930			48,538			47,982			47,940			47,013

Provision for credit losses	—			—			—			—			323

Net interest income
(after provision for credit losses)	47,930			48,538			47,982			47,940			46,690

Non-interest income	5,429			6,626			5,566			5,461			5,145
Non-interest expense	23,327			23,426			23,590			25,262			23,106
Income tax expense	9,481			10,211			9,240			9,354			9,127
Net income	$	20,551		$	21,527		$	20,718		$	18,785		$	19,602

Efficiency ratio	43.72		%	42.46		%	44.05		%	47.31		%	44.30		%

Basic EPS	$	0.15		$	0.16		$	0.16		$	0.14		$	0.14
Diluted EPS	0.15			0.16			0.16			0.14			0.14

Comparison of Operating Results for the Nine Months Ended June 30, 2016 and 2015

For the nine month period ended June 30, 2016, the Company recognized net income of $62.8 million, or $0.47 per share, compared to net income of $59.3 million, or $0.43 per share, for the nine month period ended June 30, 2015. The $3.5 million, or 5.9%, increase in net income was due primarily to a $2.6 million increase in net interest income and a $1.9 million increase in non-interest income, partially offset by a $1.2 million increase in non-interest expense. The $2.6 million, or 1.9%, increase in net interest income from the prior year nine month period was due primarily to a $6.4 million decrease in interest expense on term borrowings, partially offset by a $3.0 million increase in interest expense on deposits.

Net income attributable to the daily leverage strategy was $1.7 million during the current year nine month period, compared to $2.2 million for the prior year nine month period. The decrease in net income attributable to the daily leverage strategy was due to an increase in the average FHLB line of credit borrowings rate, which was a larger increase than the increase in the average yield earned on the cash balances held at the Federal Reserve Bank.

The net interest margin increased three basis points, from 1.72% for the prior year nine month period to 1.75% for the current year nine month period. Excluding the effects of the daily leverage strategy, the net interest margin would have increased four basis points, from 2.07% for the prior year nine month period, to 2.11% for the current year nine month period. The increase in the net interest margin was due mainly to a decrease in interest expense on term borrowings, partially offset by an increase in interest expense on deposits. The Company's efficiency ratio was 43.40% for the current year nine month period compared to 43.88% for the prior year nine month period.

Interest and Dividend Income

The weighted average yield on total interest-earning assets increased three basis points, from 2.71% for the prior year nine month period to 2.74% for the current year nine month period, and the average balance of interest-earning assets increased $19.9 million from the prior year nine month period. Absent the impact of the daily leverage strategy, the weighted average yield on total interest-earning assets would have decreased one basis point, from 3.22% for the prior year nine month period to 3.21% for the current year nine month period, while the average balance would have increased $38.0 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:
	2016		2015		Dollars			Percent
	(Dollars in thousands)
INTEREST AND DIVIDEND INCOME:
Loans receivable	$	181,795	$	175,739	$	6,056		3.4	%
MBS	22,934		28,387		(5,453		)	(19.2	)
FHLB stock	9,208		9,389		(181		)	(1.9	)
Cash and cash equivalents	7,057		4,174		2,883			69.1
Investment securities	4,524		5,262		(738		)	(14.0	)
Total interest and dividend income	$	225,518	$	222,951	$	2,567		1.2

The increase in interest income on loans receivable was due to a $391.4 million increase in the average balance of the portfolio, partially offset by a nine basis point decrease in the weighted average yield on the portfolio, to 3.61% for the current year nine month period. Loan growth was funded through cash flows from the securities portfolio along with deposit growth. The decrease in the weighted average yield was due primarily to loans repricing to lower market rates and the origination and purchase of loans between periods at rates less than the existing portfolio rate, along with an increase in the amortization of premiums paid for correspondent loans as a result of prepayment activity.

The decrease in interest income on the MBS portfolio was due primarily to a $282.8 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 six basis points, from 2.26% during the prior year nine month period to 2.20% 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, as well as the purchase of MBS with yields lower than the weighted average yield on the existing portfolio. Net premium amortization of $3.7 million during the current year nine month period decreased the weighted average yield on the portfolio by 35 basis points. During the prior year nine month period, $4.0 million of net premiums were amortized, which decreased the weighted average yield on the portfolio by 32 basis points. As of June 30, 2016, the remaining net balance of premiums on our portfolio of MBS was $14.4 million.

The increase in interest income on cash and cash equivalents was due primarily to a 17 basis point increase in the weighted average yield resulting from an increase in the yield earned on balances held at the Federal Reserve Bank.

The decrease in interest income on investment securities was due primarily to a $95.5 million decrease in the average balance, partially offset by a three basis point increase in the weighted average yield on the portfolio. Cash flows not reinvested in the portfolio were used to fund loan growth.

Interest Expense

The weighted average rate paid on total interest-bearing liabilities decreased two basis points, from 1.13% for the prior year nine month period to 1.11% for the current year nine month period, while the average balance of interest-bearing liabilities increased $142.7 million from the prior year nine month period. Absent the impact of the daily leverage strategy, the weighted average rate paid on total interest-bearing liabilities would have decreased nine basis points from the prior year nine month period, to 1.28% for the current year nine month period, due primarily to a decrease in the cost of term borrowings, while the average balance of interest-bearing liabilities would have increased $160.8 million due primarily to growth in deposits. 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:
	2016		2015		Dollars			Percent
	(Dollars in thousands)
INTEREST EXPENSE:
FHLB advances	$	41,569	$	47,300	$	(5,731	)	(12.1	)%
FHLB line of credit	7,260		3,958		3,302			83.4
Deposits	27,761		24,729		3,032			12.3
Repurchase agreements	4,478		5,136		(658		)	(12.8	)
Total interest expense	$	81,068	$	81,123	$	(55	)	(0.1	)

The decrease in interest expense on FHLB advances was due primarily to a 23 basis point decrease in the weighted average rate paid on the portfolio, to 2.23% for the current year nine month period, mainly resulting from the prepayment of a $175.0 million advance between periods with an effective rate of 5.08%, which was replaced with a $175.0 million advance with an effective rate of 2.18%. The increase in interest expense on FHLB line of credit borrowings was due primarily to a 21 basis point increase in the weighted average rate paid on the borrowings.

The increase in interest expense on deposits was due to growth in the portfolio, and a four basis point increase in the weighted average rate, to 0.74% for the current year nine month period. The average balance of the deposit portfolio increased $258.3 million for the current year nine month period, with the majority of the increase in the retail deposit portfolio, specifically the certificates of deposit and checking portfolios.

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

Provision for Credit Losses

The Bank did not record a provision for credit losses during the current year nine month period, compared to a provision for credit losses during the prior year nine month period of $771 thousand, due to the continued low level of net loan charge-offs and delinquent loan balances. Net loan charge-offs were $131 thousand for the current year nine month period compared to $397 thousand for the prior year nine month period. The improvement in collateral values has assisted in lowering our net charge-off amounts compared to prior years. At June 30, 2016, loans 30 to 89 days delinquent were 0.30% of total loans and loans 90 or more days delinquent or in foreclosure were 0.26% 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:
	2016		2015		Dollars			Percent
	(Dollars in thousands)
NON-INTEREST INCOME:
Retail fees and charges	$	11,097	$	11,052	$	45		0.4	%
Income from BOLI	2,810		819		1,991			243.1
Insurance commissions	2,093		2,059		34			1.7
Loan fees	1,004		1,071		(67		)	(6.3	)
Other non-interest income	617		678		(61		)	(9.0	)
Total non-interest income	$	17,621	$	15,679	$	1,942		12.4

The increase in income from BOLI was due mainly to the purchase of a new BOLI investment between periods, as well as to the receipt of death benefits in the current year period with no such proceeds in the prior year 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:
	2016		2015		Dollars			Percent
	(Dollars in thousands)
NON-INTEREST EXPENSE:
Salaries and employee benefits	$	31,604	$	31,927	$	(323	)	(1.0	)%
Occupancy, net	7,894		7,437		457			6.1
Information technology and communications	7,883		7,726		157			2.0
Federal insurance premium	4,158		4,092		66			1.6
Deposit and loan transaction costs	4,119		4,065		54			1.3
Regulatory and outside services	4,000		3,867		133			3.4
Advertising and promotional	3,190		2,707		483			17.8
Low income housing partnerships	2,815		3,404		(589		)	(17.3	)
Office supplies and related expense	2,016		1,560		456			29.2
Other non-interest expense	2,664		2,322		342			14.7
Total non-interest expense	$	70,343	$	69,107	$	1,236		1.8

The increase in occupancy, net expense was due mainly to non-capitalizable costs and depreciation associated with the remodel of the Bank's Kansas City market area operations center. The increase in advertising and promotional expense was due primarily to the timing of media campaigns and sponsorships. The decrease in low income housing partnerships expense was due primarily to impairments of $611 thousand in the prior year period, compared to $85 thousand in the current year period. The increase in office supplies and related expense was due primarily to the purchase of cards enabled with chip card technology. The increase in other non-interest expense was due largely to higher deposit account charge-offs related to debit card fraud in the current year, along with an increase in expenses related to OREO operations due to an increase in properties with deferred maintenance and damage issues.

Management anticipates that salaries and employee benefits will decrease approximately $500 thousand from fiscal year 2015, a change from our estimate in the previous quarter of a $500 thousand increase from fiscal year 2015. The change in our projection was due mainly to lower than anticipated employee benefit expenses.

The Bank invests in low income housing partnerships that make equity investments in affordable housing properties and is a limited partner in these partnerships. Currently the Bank accounts for these partnerships using the equity method of accounting as two of the Bank's officers are involved in the operational management of the low income housing partnership investment group. It is anticipated that, effective September 30, 2016, those two Bank officers will discontinue their involvement in the operational management of the investment group. This will allow the Bank to report the results of the investments utilizing the proportional method of accounting, beginning October 1, 2016, which will better reflect the economics of our investment in the partnerships. In fiscal year 2017, the Bank will no longer report low income housing partnership expenses in non-interest expense. Rather, the pretax operating losses and related tax benefits of the investments will be reported as a component of income tax expense. If this change would have occurred during fiscal year 2016, the effective income tax rate would have been approximately 250 basis points higher and the efficiency ratio would have been approximately 175 basis points lower.

Income Tax Expense

Income tax expense was $28.9 million for the current year nine month period compared to $28.3 million for the prior year nine month period. The effective tax rate for the current year nine month period was 31.5% compared to 32.3% for the prior year nine month period. The decrease in the effective tax rate was due primarily to an increase in nontaxable income related to BOLI and higher low income housing tax credits in the current fiscal year. Management anticipates the effective tax rate for fiscal year 2016 will be approximately 32%, based on fiscal year 2016 estimates as of June 30, 2016.

Average Balance Sheet

The following table presents the average balances of our assets, liabilities, and stockholders' equity, and the related annualized weighted average yields and rates on our interest-earning assets and interest-bearing liabilities for the periods indicated and the weighted average yield/rate on our interest-earning assets and interest-bearing liabilities at June 30, 2016 . As previously discussed, the daily leverage strategy was not in place at June 30, 2016 , so the end of period yields/rates presented at June 30, 2016 in the table below do not reflect the effects of this strategy. Weighted average yields are derived by dividing annualized income by the average balance of the related assets, and weighted average rates are derived by dividing annualized expense by the average balance of the related liabilities, for the periods shown. Average outstanding balances are derived from average daily balances. The weighted average yields and rates include amortization of fees, costs, premiums and discounts, which are considered adjustments to yields/rates. Weighted average yields on tax-exempt securities are not calculated on a fully taxable equivalent basis.



	At	For the Nine Months Ended
	June 30,	June 30, 2016						June 30, 2015
	2016	Average		Interest				Average		Interest
	Yield/	Outstanding		Earned/		Yield/		Outstanding		Earned/		Yield/
	Rate	Amount		Paid		Rate		Amount		Paid		Rate
Assets:		(Dollars in thousands)
Interest-earning assets:
Loans receivable ⁽¹⁾	3.61%	$	6,721,845	$	181,795	3.61	%	$	6,330,461	$	175,739	3.70	%
MBS ⁽²⁾	2.21	1,391,441		22,934		2.20		1,674,246		28,387		2.26
Investment securities ⁽²⁾⁽³⁾	1.21	497,794		4,524		1.21		593,268		5,262		1.18
FHLB stock	5.98	205,434		9,208		5.99		209,749		9,389		5.98
Cash and cash equivalents	0.49	2,167,680		7,057		0.43		2,156,567		4,174		0.26
Total interest-earning assets ⁽¹⁾⁽²⁾	3.25	10,984,194		225,518		2.74		10,964,291		222,951		2.71
Other noninterest-earning assets		290,854						231,154
Total assets		$	11,275,048					$	11,195,445

Liabilities and stockholders' equity:
Interest-bearing liabilities:
Checking	0.04	$	781,509	218		0.04		$	723,699	204		0.04
Savings	0.20	323,300		464		0.19		304,716		335		0.15
Money market	0.24	1,168,086		2,054		0.23		1,147,014		1,999		0.23
Retail certificates	1.41	2,356,566		23,628		1.34		2,251,608		20,840		1.24
Wholesale certificates	0.65	370,784		1,397		0.50		314,942		1,351		0.57
Total deposits	0.78	5,000,245		27,761		0.74		4,741,979		24,729		0.70
FHLB advances ⁽⁴⁾	2.18	2,491,414		41,569		2.23		2,571,417		47,300		2.46
FHLB line of credit	—	2,056,570		7,260		0.46		2,072,162		3,958		0.25
FHLB borrowings	2.18	4,547,984		48,829		1.43		4,643,579		51,258		1.47
Repurchase agreements	2.94	200,000		4,478		2.94		220,000		5,136		3.08
Total borrowings	2.24	4,747,984		53,307		1.49		4,863,579		56,394		1.55
Total interest-bearing liabilities	1.28	9,748,229		81,068		1.11		9,605,558		81,123		1.13
Other noninterest-bearing liabilities		118,180						107,457
Stockholders' equity		1,408,639						1,482,430
Total liabilities and stockholders' equity		$	11,275,048					$	11,195,445

								(Continued)



	At	For the Nine Months Ended
	June 30,	June 30, 2016						June 30, 2015
	2016	Average		Interest				Average		Interest
	Yield/	Outstanding		Earned/		Yield/		Outstanding		Earned/		Yield/
	Rate	Balance		Paid		Rate		Balance		Paid		Rate
		(Dollars in thousands)

Net interest income ⁽⁵⁾				$	144,450					$	141,828
Net interest rate spread ^(6)(11)	1.97%					1.63	%					1.58	%
Net interest-earning assets		$	1,235,965					$	1,358,733
Net interest margin ^(7)(11)						1.75						1.72
Ratio of interest-earning assets
to interest-bearing liabilities						1.13x						1.14x

Selected performance ratios:
Return on average assets (annualized) ⁽¹¹⁾						0.74	%					0.71	%
Return on average equity (annualized) ⁽¹¹⁾						5.94						5.33
Average equity to average assets						12.49						13.24
Operating expense ratio ⁽⁸⁾						0.83						0.82
Efficiency ratio ⁽⁹⁾						43.40						43.88
Pre-tax yield on daily leverage strategy ⁽¹⁰⁾						0.16						0.21

								(Concluded)


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


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


(3)	The average balance of investment securities includes an average balance of nontaxable securities of $37.6 million and $36.6 million for the nine months ended June 30, 2016 and 2015 , respectively.


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


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


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


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


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


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


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

(11)

The table below presents certain financial ratios showing the financial results of the daily leverage strategy, along with financial ratios without the effects of the daily leverage strategy. Since the daily leverage strategy only involves assets and liabilities, there is no direct equity impact of the daily leverage strategy, outside of generating additional earnings. Therefore, the return on average equity of the daily leverage strategy is not applicable (N/A). Management believes it is important for comparability purposes to provide the financial ratios without the daily leverage strategy because of the unique nature of the daily leverage strategy.



	For the Nine Months Ended
	June 30, 2016				June 30, 2015
	Daily		Reported without		Daily		Reported without
	Leverage		the Daily		Leverage		the Daily
	Strategy		Leverage Strategy		Strategy		Leverage Strategy
Return on average assets (annualized)	0.11	%	0.88	%	0.14	%	0.84	%
Return on average equity (annualized)	N/A		5.79		N/A		5.14
Net interest margin	0.22		2.11		0.26		2.07
Average net interest rate spread	0.22		1.93		0.27		1.85

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, 2016 to the nine months ended June 30, 2015 . For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (1) changes in volume, which are changes in the average balance multiplied by the previous year's average rate and (2) changes in rate, which are changes in the average rate multiplied by the average balance from the previous year period. The net changes attributable to the combined impact of both rate and volume have been allocated proportionately to the changes due to volume and the changes due to rate.



	For the Nine Months Ended
	June 30, 2016 vs. June 30, 2015
	Increase (Decrease) Due to
	Volume			Rate			Total
	(Dollars in thousands)
Interest-earning assets:
Loans receivable	$	10,563		$	(4,507	)	$	6,056
MBS	(4,680		)	(773		)	(5,453		)
Investment securities	(865		)	127			(738		)
FHLB stock	(163		)	(18		)	(181		)
Cash and cash equivalents	22			2,861			2,883
Total interest-earning assets	4,877			(2,310		)	2,567

Interest-bearing liabilities:
Checking	17			(3		)	14
Savings	22			107			129
Money market	42			13			55
Certificates of deposit	1,480			1,354			2,834
FHLB borrowings	(1,349		)	(1,080		)	(2,429		)
Repurchase agreements	(442		)	(216		)	(658		)
Total interest-bearing liabilities	(230		)	175			(55		)

Net change in net interest and dividend income	$	5,107		$	(2,485	)	$	2,622

Comparison of Operating Results for the Three Months Ended June 30, 2016 and 2015

For the quarter ended June 30, 2016 , the Company recognized net income of $20.6 million , or $0.15 per share, compared to net income of $19.6 million , or $0.14 per share, for the quarter ended June 30, 2015 . The $949 thousand , or 4.8% , increase in net income was due primarily to a $917 thousand increase in net interest income resulting from a decrease in interest expense on term borrowings, partially offset by an increase in interest expense on deposits.

Net income attributable to the daily leverage strategy was $532 thousand during the current year quarter, compared to $699 thousand for the prior year quarter. The decrease in the net income attributable to the daily leverage strategy was due to an increase in the FHLB line of credit borrowings rate, which was larger than the increase in the yield earned on the cash at the Federal Reserve Bank.

Interest and Dividend Income

The weighted average yield on total interest-earning assets increased four basis points, from 2.69% for the prior year quarter to 2.73% for the current year quarter, and the average balance of interest-earning assets increased $38.3 million from the prior year quarter. Absent the impact of the daily leverage strategy, the weighted average yield on total interest-earning assets would have decreased one basis point, from 3.20% for the prior year quarter to 3.19% for the current year quarter. 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:
	2016		2015		Dollars			Percent
	(Dollars in thousands)
INTEREST AND DIVIDEND INCOME:
Loans receivable	$	60,840	$	58,922	$	1,918		3.3	%
MBS	7,401		8,849		(1,448		)	(16.4	)
FHLB stock	3,050		3,132		(82		)	(2.6	)
Cash and cash equivalents	2,730		1,357		1,373			101.2
Investment securities	1,506		1,914		(408		)	(21.3	)
Total interest and dividend income	$	75,527	$	74,174	$	1,353		1.8

The increase in interest income on loans receivable was due to a $375.4 million increase in the average balance of the portfolio, partially offset by a nine basis point decrease in the weighted average yield on the portfolio, to 3.58% for the current year quarter. Loan growth was funded through cash flows from the securities portfolio along with deposit growth. The decrease in the weighted average yield was due primarily to loans repricing to lower market rates and the origination and purchase of loans between periods at rates less than the existing portfolio rate, along with an increase in the amortization of premiums paid for correspondent loans as a result of prepayment activity.

The decrease in interest income on the MBS portfolio was due primarily to a $215.6 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 seven basis points, from 2.21% during the prior year quarter to 2.14% for the current year quarter. The decrease in the weighted average yield was due mainly to an increase in the impact of net premium amortization. During the current year quarter, $1.4 million of net premiums on MBS were amortized, which decreased the weighted average yield on the portfolio by 40 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 35 basis points.

The increase in interest income on cash and cash equivalents was due primarily to a 25 basis point increase in the weighted average yield resulting from an increase in yield earned on balances held at the Federal Reserve Bank. The decrease in interest income on investment securities was due primarily to a $134.6 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 one basis point, from 1.12% for the prior year quarter to 1.13% for the current year quarter, and the average balance of interest-bearing liabilities increased $148.3 million from the prior year quarter due to deposit growth. Absent the impact of the daily leverage strategy, the weighted average rate paid on total interest-bearing liabilities would have decreased seven basis points from the prior year quarter to 1.29%, due primarily to a decrease in the cost of term borrowings. 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:
	2016		2015		Dollars			Percent
	(Dollars in thousands)
INTEREST EXPENSE:
FHLB advances	$	13,515	$	15,718	$	(2,203	)	(14.0	)%
FHLB line of credit	2,846		1,354		1,492			110.2
Deposits	9,749		8,377		1,372			16.4
Repurchase agreements	1,487		1,712		(225		)	(13.1	)
Total interest expense	$	27,597	$	27,161	$	436		1.6

The decrease in interest expense on FHLB advances was due primarily to a 24 basis point decrease in the weighted average rate paid on the portfolio to 2.21% for the current year quarter, mainly as a result of the prepayment of a $175.0 million advance between periods with an effective rate of 5.08%, which was replaced with a $175.0 million advance with an effective rate of 2.18%. The increase in interest expense on FHLB line of credit borrowings was due primarily to a 28 basis point increase in the weighted average rate paid on the borrowings.

The increase in interest expense on deposits was due primarily to a seven basis point increase in the weighted average rate to 0.77% for the current year quarter, along with growth in deposits. The average balance of the deposit portfolio increased $268.8 million compared to the prior year quarter, with the majority of the increase in the higher costing retail certificate of deposit portfolio.

Provision for Credit Losses

The Bank did not record a provision for credit losses during the current year quarter, compared to a provision for credit losses during the prior year quarter of $323 thousand, due to the continued low level of net loan charge-offs and delinquent loan balances. The Bank recognized a net recovery of $119 thousand for the current year quarter, compared to net charge-offs of $128 thousand for the prior year quarter. At June 30, 2016, loans 30 to 89 days delinquent were 0.30% of total loans and loans 90 or more days delinquent or in foreclosure were 0.26% 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 Three Months Ended
	June 30,				Change Expressed in:
	2016		2015		Dollars			Percent
	(Dollars in thousands)
NON-INTEREST INCOME:
Retail fees and charges	$	3,725	$	3,798	$	(73	)	(1.9	)%
Income from BOLI	648		251		397			158.2
Insurance commissions	517		537		(20		)	(3.7	)
Loan fees	326		340		(14		)	(4.1	)
Other non-interest income	213		219		(6		)	(2.7	)
Total non-interest income	$	5,429	$	5,145	$	284		5.5

The increase in income from BOLI was due mainly to the purchase of a new BOLI investment between periods.

Non-Interest Expense

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



	For the Three Months Ended
	June 30,				Change Expressed in:
	2016		2015		Dollars			Percent
	(Dollars in thousands)
NON-INTEREST EXPENSE:
Salaries and employee benefits	$	10,829	$	11,038	$	(209	)	(1.9	)%
Occupancy, net	2,606		2,557		49			1.9
Information technology and communications	2,716		2,573		143			5.6
Federal insurance premium	1,377		1,342		35			2.6
Deposit and loan transaction costs	1,449		1,435		14			1.0
Regulatory and outside services	1,370		1,365		5			0.4
Advertising and promotional	1,053		1,069		(16		)	(1.5	)
Low income housing partnerships	721		492		229			46.5
Office supplies and related expense	545		499		46			9.2
Other non-interest expense	661		736		(75		)	(10.2	)
Total non-interest expense	$	23,327	$	23,106	$	221		1.0

The increase in low income housing partnerships expense was due primarily to an increase in amortization expense.

The Company's efficiency ratio was 43.72% for the current year quarter compared to 44.30% for the prior year quarter. The change in the efficiency ratio was due primarily to an increase in net interest income.

Income Tax Expense

Income tax expense was $9.5 million for the current year quarter compared to $9.1 million for the prior year quarter. The $354 thousand increase was due to an increase in pre-tax income. The effective tax rate for the current year quarter was 31.6% compared to 31.8% for the prior year quarter.

Average Balance Sheet

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



	For the Three Months Ended
	June 30, 2016						June 30, 2015
	Average		Interest				Average		Interest
	Outstanding		Earned/		Yield/		Outstanding		Earned/		Yield/
	Amount		Paid		Rate		Amount		Paid		Rate
Assets:	(Dollars in thousands)
Interest-earning assets:
Loans receivable ⁽¹⁾	$	6,797,602	$	60,840	3.58	%	$	6,422,240	$	58,922	3.67	%
MBS ⁽²⁾	1,386,470		7,401		2.14		1,602,047		8,849		2.21
Investment securities ⁽²⁾⁽³⁾	501,757		1,506		1.20		636,368		1,914		1.20
FHLB stock	204,870		3,050		5.99		209,890		3,132		5.98
Cash and cash equivalents	2,160,016		2,730		0.50		2,141,864		1,357		0.25
Total interest-earning assets ⁽¹⁾⁽²⁾	11,050,715		75,527		2.73		11,012,409		74,174		2.69
Other noninterest-earning assets	290,258						229,657
Total assets	$	11,340,973					$	11,242,066

Liabilities and stockholders' equity:
Interest-bearing liabilities:
Checking	$	801,782	74		0.04		$	751,078	70		0.04
Savings	333,067		156		0.19		311,504		115		0.15
Money market	1,174,471		686		0.23		1,146,468		665		0.23
Retail certificates	2,401,381		8,287		1.39		2,283,125		7,158		1.26
Wholesale certificates	360,026		546		0.61		309,765		369		0.48
Total deposits	5,070,727		9,749		0.77		4,801,940		8,377		0.70
FHLB advances ⁽⁴⁾	2,464,094		13,515		2.21		2,572,293		15,718		2.45
FHLB line of credit	2,084,616		2,846		0.54		2,076,924		1,354		0.26
FHLB borrowings	4,548,710		16,361		1.44		4,649,217		17,072		1.47
Repurchase agreements	200,000		1,487		2.94		220,000		1,712		3.08
Total borrowings	4,748,710		17,848		1.51		4,869,217		18,784		1.54
Total interest-bearing liabilities	9,819,437		27,597		1.13		9,671,157		27,161		1.12
Other noninterest-bearing liabilities	111,382						89,052
Stockholders' equity	1,410,154						1,481,857
Total liabilities and stockholders' equity	$	11,340,973					$	11,242,066
									(Continued)



	For the Three Months Ended
	June 30, 2016						June 30, 2015
	Average		Interest				Average		Interest
	Outstanding		Earned/		Yield/		Outstanding		Earned/		Yield/
	Amount		Paid		Rate		Amount		Paid		Rate
	(Dollars in thousands)

Net interest income ⁽⁵⁾			$	47,930					$	47,013
Net interest rate spread ^(6)(11)					1.60	%					1.57	%
Net interest-earning assets	$	1,231,278					$	1,341,252
Net interest margin ^(7)(11)					1.73						1.71
Ratio of interest-earning assets
to interest-bearing liabilities					1.13x						1.14x

Selected performance ratios:
Return on average assets (annualized) ⁽¹¹⁾					0.72	%					0.70	%
Return on average equity (annualized) ⁽¹¹⁾					5.83						5.29
Average equity to average assets					12.43						13.18
Operating expense ratio ⁽⁸⁾					0.82						0.82
Efficiency ratio ⁽⁹⁾					43.72						44.30
Pre-tax yield on daily leverage strategy ⁽¹⁰⁾					0.15						0.20

									(Concluded)


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


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


(3)	The average balance of investment securities includes an average balance of nontaxable securities of $36.6 million and $37.9 million for the three months ended June 30, 2016 and June 30, 2015 , respectively.


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


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


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


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


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


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


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

(11)



	For the Three Months Ended
	June 30, 2016				June 30, 2015
	Daily		Reported without		Daily		Reported without
	Leverage		the Daily		Leverage		the Daily
	Strategy		Leverage Strategy		Strategy		Leverage Strategy
Return on average assets (annualized)	0.10	%	0.86	%	0.13	%	0.83	%
Return on average equity (annualized)	N/A		5.68		N/A		5.10
Net interest margin	0.21		2.09		0.25		2.05
Average net interest rate spread	0.21		1.90		0.25		1.84

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, 2016 to the three months ended June 30, 2015 . For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (1) changes in volume, which are changes in the average balance multiplied by the previous year's average rate and (2) changes in rate, which are changes in the average rate multiplied by the average balance from the previous year period. The net changes attributable to the combined impact of both rate and volume have been allocated proportionately to the changes due to volume and the changes due to rate.



	For the Three Months Ended June 30,
	2016 vs. 2015
	Increase (Decrease) Due to
	Volume			Rate			Total
	(Dollars in thousands)
Interest-earning assets:
Loans receivable	$	3,350		$	(1,432	)	$	1,918
MBS	(1,159		)	(289		)	(1,448		)
Investment securities	(404		)	(4		)	(408		)
FHLB stock	(75		)	(7		)	(82		)
Cash and cash equivalents	12			1,361			1,373
Total interest-earning assets	1,724			(371		)	1,353

Interest-bearing liabilities:
Checking	5			(1		)	4
Savings	8			34			42
Money market	16			4			20
Certificates of deposit	509			797			1,306
FHLB borrowings	(601		)	(110		)	(711		)
Repurchase agreements	(151		)	(74		)	(225		)
Total interest-bearing liabilities	(214		)	650			436

Net change in net interest and dividend income	$	1,938		$	(1,021	)	$	917

Comparison of Operating Results for the Three Months Ended June 30, 2016 and March 31, 2016

Net income decreased $976 thousand, or 4.5%, from the quarter ended March 31, 2016 to $20.6 million, or $0.15 per share, for the quarter ended June 30, 2016, due primarily to a decrease in non-interest income. Net income attributable to the daily leverage strategy was $532 thousand during the current quarter compared to $561 thousand for the prior quarter.

Net interest income decreased $608 thousand, or 1.3%, from the prior quarter to $47.9 million for the current quarter. The decrease was due primarily to an increase in interest expense on deposits, specifically an increase in the cost of our certificate of deposit portfolio. The net interest margin decreased five basis points from 1.78% for the prior quarter to 1.73% for the current quarter. Excluding the effects of the daily leverage strategy, the net interest margin would have been 2.09% for the current quarter compared to 2.13% for the prior quarter. The four basis point decrease was due mainly to a decrease in yield on loans receivable and the MBS portfolio, along with an increase in the cost of retail certificates of deposit, partially offset by a shift in the mix of interest-earning assets.

Interest and Dividend Income

The weighted average yield on total interest-earning assets for the current quarter decreased four basis points from the prior quarter, to 2.73%, while the average balance of interest-earning assets increased $125.8 million between the two periods. Absent the impact of the daily leverage strategy, the weighted average yield on total interest-earning assets would have decreased three basis points from the prior quarter, to 3.19%, while the average balance would have increased $56.6 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:
	2016		2016		Dollars			Percent
	(Dollars in thousands)
INTEREST AND DIVIDEND INCOME:
Loans receivable	$	60,840	$	60,732	$	108		0.2	%
MBS	7,401		7,702		(301		)	(3.9	)
FHLB stock	3,050		3,006		44			1.5
Cash and cash equivalents	2,730		2,707		23			0.8
Investment securities	1,506		1,485		21			1.4
Total interest and dividend income	$	75,527	$	75,632	$	(105	)	(0.1	)

The increase in interest income on loans receivable was due to a $80.4 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 3.58% for the current quarter. The loan growth was largely funded with cash flows from the securities portfolio during the current quarter. The decrease in yield was due primarily to an increase in the amortization of premiums paid for correspondent loans as a result of increased prepayment activity, mainly related to fixed-rate loans in this portfolio.

The decrease in interest income on MBS was due to a 10 basis point decrease in the weighted average yield on the portfolio, to 2.14% for the current quarter. The decrease in the weighted average yield was due mainly to an increase in net premium amortization. During the current quarter, $1.4 million of net premiums on MBS were amortized, which decreased the weighted average yield on the portfolio by 40 basis points. During the prior quarter, $1.1 million of net premiums were amortized, which decreased the weighted average yield on the portfolio by 32 basis points.

Interest Expense

The weighted average rate paid on total interest-bearing liabilities increased one basis point from the prior quarter, to 1.13%, and the average balance of interest-bearing liabilities increased $111.3 million between the two periods. Absent the impact of the daily leverage strategy, the weighted average rate paid on total interest-bearing liabilities would have increased two basis points from the prior quarter, to 1.29%, and the average balance would have increased $42.0 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:
	2016		2016		Dollars			Percent
	(Dollars in thousands)
INTEREST EXPENSE:
FHLB advances	$	13,515	$	13,729	$	(214	)	(1.6	)%
FHLB line of credit	2,846		2,665		181			6.8
Deposits	9,749		9,213		536			5.8
Repurchase agreements	1,487		1,487		—			—
Total interest expense	$	27,597	$	27,094	$	503		1.9

The decrease in interest expense on FHLB advances was due primarily to a two basis point decrease in the average rate paid on the portfolio, to 2.21% for the current quarter. During the current quarter, a $100.0 million advance with an effective rate of 3.17% matured and was replaced with a $100.0 million advance with a rate of 1.82%. The increase in interest expense on FHLB line of credit borrowings was due mainly to a $76.9 million increase in the average balance, as well as a one basis point increase in the average rate paid on the borrowings, to 0.54% for the current quarter.

The increase in interest expense on deposits was due primarily to a three basis point increase in the weighted average rate paid on the deposit portfolio, to 0.77% for the current quarter, due mainly to an increase in the weighted average rate paid on the certificate of deposit portfolio, as well as a $41.6 million increase in the average balance of the deposit portfolio. The weighted average rate of the retail certificate of deposit portfolio increased six basis points during the current quarter, to 1.39%, due primarily to a full quarter impact of a promotional campaign on Presidents' Day during the prior quarter.

Non-Interest Income

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



	For the Three Months Ended
	June 30,		March 31,		Change Expressed in:
	2016		2016		Dollars			Percent
	(Dollars in thousands)
NON-INTEREST INCOME:
Retail fees and charges	$	3,725	$	3,558	$	167		4.7	%
Income from BOLI	648		1,459		(811		)	(55.6	)
Insurance commissions	517		1,060		(543		)	(51.2	)
Loan fees	326		336		(10		)	(3.0	)
Other non-interest income	213		213		—			—
Total non-interest income	$	5,429	$	6,626	$	(1,197	)	(18.1	)

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 income from BOLI was due primarily to the receipt of death benefits during the prior quarter and no such proceeds in the current quarter. The decrease in insurance commissions was due largely to the receipt of annual commissions from certain insurance providers during the prior quarter and no such commissions 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:
	2016		2016		Dollars			Percent
	(Dollars in thousands)
NON-INTEREST EXPENSE:
Salaries and employee benefits	$	10,829	$	10,288	$	541		5.3	%
Occupancy, net	2,606		2,616		(10		)	(0.4	)
Information technology and communications	2,716		2,609		107			4.1
Federal insurance premium	1,377		1,399		(22		)	(1.6	)
Deposit and loan transaction costs	1,449		1,396		53			3.8
Regulatory and outside services	1,370		1,144		226			19.8
Advertising and promotional	1,053		983		70			7.1
Low income housing partnerships	721		1,321		(600		)	(45.4	)
Office supplies and related expense	545		584		(39		)	(6.7	)
Other non-interest expense	661		1,086		(425		)	(39.1	)
Total non-interest expense	$	23,327	$	23,426	$	(99	)	(0.4	)

The increase in salaries and employee benefits expense was due primarily to compensation expense on unallocated ESOP shares related to the $0.25 per share True Blue Capitol dividend paid in June 2016. During the current quarter, $407 thousand of ESOP compensation expense was recognized related to the True Blue Capitol dividend. Similar to the current quarter, this dividend will result in $407 thousand of ESOP compensation expense in the fourth quarter of fiscal year 2016. The increase in regulatory and outside services was due primarily to the timing of external audit fees. The decrease in low income housing partnerships expense was

due primarily to a decrease in amortization expense. The decrease in other non-interest expenses was due mainly to a decrease in expenses related to OREO operations, as well as a decrease in deposit account charge-offs related to debit card fraud.

The Company's efficiency ratio was 43.72% for the current quarter compared to 42.46% for the prior quarter. The change in the efficiency ratio was due primarily to a decrease in non-interest income and net interest income. The efficiency ratio is a measure of a financial institution's total non-interest expense as a percentage of the sum of net interest income (pre-provision for credit losses) and non-interest income. A lower value indicates that the financial institution is generating revenue with a lower level of expense.

Income Tax Expense

Income tax expense was $9.5 million for the current quarter compared to $10.2 million for the prior quarter. The decrease between periods was due primarily to a decrease in pre-tax income, as well as to a decrease in the effective income tax rate, from 32.2% for the prior quarter, to 31.6% for the current quarter. The decrease in the effective income tax rate between quarters was primarily a result of higher deductible expenses associated with dividends paid on allocated ESOP shares due to the True Blue Capitol dividend paid in June 2016.

Average Balance Sheet

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



	For the Three Months Ended
	June 30, 2016						March 31, 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⁾	$	6,797,602	$	60,840	3.58	%	$	6,717,174	$	60,732	3.62	%
MBS ⁽²⁾	1,386,470		7,401		2.14		1,374,917		7,702		2.24
Investment securities ⁽²⁾⁽³⁾	501,757		1,506		1.20		488,493		1,485		1.22
FHLB stock	204,870		3,050		5.99		202,006		3,006		5.98
Cash and cash equivalents	2,160,016		2,730		0.50		2,142,320		2,707		0.50
Total interest-earning assets ⁽¹⁾⁽²⁾	11,050,715		75,527		2.73		10,924,910		75,632		2.77
Other noninterest-earning assets	290,258						295,430
Total assets	$	11,340,973					$	11,220,340

Liabilities and stockholders' equity:
Interest-bearing liabilities:
Checking	$	801,782	74		0.04		$	785,149	72		0.04
Savings	333,067		156		0.19		323,572		168		0.21
Money market	1,174,471		686		0.23		1,170,684		683		0.23
Retail certificates	2,401,381		8,287		1.39		2,357,389		7,805		1.33
Wholesale certificates	360,026		546		0.61		392,286		485		0.50
Total deposits	5,070,727		9,749		0.77		5,029,080		9,213		0.74
FHLB advances ⁽⁴⁾	2,464,094		13,515		2.21		2,471,404		13,729		2.23
FHLB line of credit	2,084,616		2,846		0.54		2,007,692		2,665		0.53
FHLB borrowings	4,548,710		16,361		1.44		4,479,096		16,394		1.47
Repurchase agreements	200,000		1,487		2.94		200,000		1,487		2.94
Total borrowings	4,748,710		17,848		1.51		4,679,096		17,881		1.53
Total interest-bearing liabilities	9,819,437		27,597		1.13		9,708,176		27,094		1.12
Other noninterest-bearing liabilities	111,382						110,635
Stockholders' equity	1,410,154						1,401,529
Total liabilities and stockholders' equity	$	11,340,973					$	11,220,340
									(Continued)



	For the Three Months Ended
	June 30, 2016						March 31, 2016
	Average		Interest				Average		Interest
	Outstanding		Earned/		Yield/		Outstanding		Earned/		Yield/
	Amount		Paid		Rate		Amount		Paid		Rate
	(Dollars in thousands)

Net interest income ⁽⁵⁾			$	47,930					$	48,538
Net interest rate spread ^(6)(11)					1.60	%					1.65	%
Net interest-earning assets	$	1,231,278					$	1,216,734
Net interest margin ^(7)(11)					1.73						1.78
Ratio of interest-earning assets
to interest-bearing liabilities					1.13x						1.13x

Selected performance ratios:
Return on average assets (annualized) ⁽¹¹⁾					0.72	%					0.77	%
Return on average equity (annualized) ⁽¹¹⁾					5.83						6.14
Average equity to average assets					12.43						12.49
Operating expense ratio ⁽⁸⁾					0.82						0.84
Efficiency ratio ⁽⁹⁾					43.72						42.46
Pre-tax yield on daily leverage strategy ⁽¹⁰⁾					0.15						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 $36.6 million and $37.9 million for the three months ended June 30, 2016 and March 31, 2016 , respectively.


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


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


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


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


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


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


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

(11)



	For the Three Months Ended
	June 30, 2016				March 31, 2016
	Daily		Reported without		Daily		Reported without
	Leverage		the Daily		Leverage		the Daily
	Strategy		Leverage Strategy		Strategy		Leverage Strategy
Return on average assets (annualized)	0.10	%	0.86	%	0.11	%	0.91	%
Return on average equity (annualized)	N/A		5.68		N/A		5.98
Net interest margin	0.21		2.09		0.22		2.13
Average net interest rate spread	0.21		1.90		0.22		1.95

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, 2016 to the three months ended March 31, 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 quarter's average rate and (2) changes in rate, which are changes in the average rate multiplied by the average balance from the previous quarter. The net changes attributable to the combined impact of both rate and volume have been allocated proportionately to the changes due to volume and the changes due to rate.



	For the Three Months Ended
	June 30, 2016 vs. March 31, 2016
	Increase (Decrease) Due to
	Volume		Rate			Total
	(Dollars in thousands)
Interest-earning assets:
Loans receivable	$	713	$	(605	)	$	108
MBS	64		(365		)	(301		)
Investment securities	40		(19		)	21
FHLB stock	42		2			44
Cash and cash equivalents	23		—			23
Total interest-earning assets	882		(987		)	(105		)

Interest-bearing liabilities:
Checking	2		—			2
Savings	4		(16		)	(12		)
Money market	2		—			2
Certificates of deposit	36		508			544
FHLB borrowings	62		(95		)	(33		)
Repurchase agreements	—		—			—
Total interest-bearing liabilities	106		397			503

Net change in net interest and dividend income	$	776	$	(1,384	)	$	(608	)

Liquidity and Capital Resources

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

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

In the event short-term liquidity needs exceed available cash, the Bank has access to a line of credit at FHLB and the Federal Reserve Bank discount window. When the daily leverage strategy is in place, the Bank maintains the resulting excess cash reserves from the borrowings on the FHLB line of credit at the Federal Reserve Bank, which can be used to meet any short-term liquidity needs. Per FHLB's lending guidelines, total FHLB borrowings cannot exceed 40% of regulatory total assets without the pre-approval of FHLB senior management. In June 2016, the president of FHLB approved an increase, through July 2017, in the Bank's borrowing limit to 55% of Bank Call Report total assets. The amount that can be borrowed from the Federal Reserve Bank discount window is based upon the fair value of securities pledged as collateral and certain other characteristics of those securities, and is used only when other sources of short-term liquidity are unavailable. Management tests the Bank's access to the Federal Reserve Bank discount window annually with a nominal, overnight borrowing.

If management observes a trend in the amount and frequency of line of credit utilization that is not in conjunction with a planned strategy, such as the daily leverage strategy, the Bank will likely utilize long-term wholesale borrowing sources such as FHLB advances and/or repurchase agreements to provide permanent fixed-rate funding. The maturities of these borrowings are generally staggered in order to mitigate the risk of a highly negative cash flow position at maturity.

The Bank's internal policy limits total borrowings to 55% of total assets. At June 30, 2016 , the Bank had term borrowings, at par, of $2.68 billion, or approximately 29% of total assets.

The amount of FHLB advances outstanding at June 30, 2016 was $2.48 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, 2016 , the Bank's ratio of the par value of FHLB borrowings to Call Report total assets was 27%. When the full daily leverage strategy is in place, FHLB borrowings are in excess of 40% of the Bank's Call Report total assets, and are expected to be in excess of 40% as long as the Bank continues its daily leverage strategy and FHLB senior management continues to approve the Bank's borrowing limit being in excess of 40% of Call Report total assets. All or a portion of the borrowings against the FHLB line of credit in conjunction with the daily leverage strategy could be repaid at any point in time while the strategy is in effect, if necessary. Additionally, the Bank could utilize the repayment and maturity of outstanding loans, MBS, and other investments for liquidity needs rather than reinvesting such funds into the related portfolios. At June 30, 2016 , the Bank had $1.12 billion of securities that were eligible but unused as collateral for borrowing or other liquidity needs.

At June 30, 2016 , the Bank had repurchase agreements of $200.0 million, or approximately 2% of total assets, none of which was scheduled to mature in the next 12 months. The Bank may enter into additional repurchase agreements as management deems appropriate, not to exceed 15% of total assets, and subject to a total borrowings limit of 55% discussed above. The Bank has pledged securities with an estimated fair value of $214.2 million as collateral for repurchase agreements as of June 30, 2016 . The securities pledged for the repurchase agreements will be delivered back to the Bank when the repurchase agreements mature.

The Bank has access to other sources of funds for liquidity purposes, such as brokered and public unit deposits. As of June 30, 2016 , the Bank's policy allowed for combined brokered and public unit deposits up to 15% of total deposits. At June 30, 2016 , the Bank had public unit deposits totaling $368.3 million, which had an average remaining term to maturity of eight 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 $399.0 million as collateral for public unit deposits at June 30, 2016 . The securities pledged as collateral for public unit deposits are held under joint custody by FHLB and generally will be released upon deposit maturity.

At June 30, 2016 , $1.09 billion of the Bank's $2.77 billion of certificates of deposit was scheduled to mature within one year. Included in the $1.09 billion was $293.7 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 $293.7 million of maturing public unit deposits will be replaced with similar wholesale funding products.

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

At June 30, 2016 , cash and cash equivalents totaled $152.8 million, compared to $105.6 million at September 30, 2015 , excluding cash related to the daily leverage strategy. The increase in operating cash between periods was due primarily to the redemption of FHLB stock in conjunction with the removal of the entire daily leverage strategy at June 30, 2016 . A majority of the cash received from the redemption of the FHLB stock was used to reacquire FHLB stock when the full daily leverage strategy was reinstated on July 1, 2016.

The following table presents the contractual maturities of our loan, MBS, and investment securities portfolios at June 30, 2016 , along with associated weighted average yields. Loans and securities which have adjustable interest rates are shown as maturing in the period during which the contract is due. The table does not reflect the effects of possible prepayments or enforcement of due on sale clauses. As of June 30, 2016 , the amortized cost of investment securities in our portfolio which are callable or have pre-refunding dates within one year was $326.7 million.



	Loans ⁽¹⁾				MBS				Investment Securities				Total
	Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield
	(Dollars in thousands)
Amounts due:
Within one year	$	130,083	3.84	%	$	2	4.12	%	$	31,645	1.50	%	$	161,730	3.38	%

After one year:
Over one to two years	167,892		3.90		1,575		3.80		253,023		1.12		422,490		2.23
Over two to three years	22,783		4.68		21,943		4.32		80,609		1.10		125,335		2.31
Over three to five years	39,887		4.43		69,609		3.04		137,391		1.34		246,887		2.32
Over five to ten years	457,995		3.93		449,050		2.17		6,324		1.67		913,369		3.05
Over ten to fifteen years	1,420,710		3.26		358,867		1.86		—		—		1,779,577		2.98
After fifteen years	4,799,252		3.66		443,435		2.29		1,753		1.91		5,244,440		3.54
Total due after one year	6,908,519		3.61		1,344,479		2.21		479,100		1.19		8,732,098		3.26

	$	7,038,602	3.61		$	1,344,481	2.21		$	510,745	1.21		$	8,893,828	3.26


(1)	Demand loans, loans having no stated maturity, and overdraft loans are included in the amounts due within one year. Construction loans are presented based on the term to complete construction. The maturity date for home equity loans assumes the customer always makes the required minimum payment.

Limitations on Dividends and Other Capital Distributions

Office of the Comptroller of the Currency ("OCC") regulations impose restrictions on savings institutions with respect to their ability to make distributions of capital, which include dividends, stock redemptions or repurchases, cash-out mergers and other transactions charged to the capital account. Under FRB and OCC safe harbor regulations, savings institutions generally may make capital distributions during any calendar year equal to earnings of the previous two calendar years and current year-to-date earnings. 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, 2015. For additional information, see "Part II, Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Off-Balance Sheet Arrangements, Commitments and Contractual Obligations" in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2015. We anticipate that we will continue to have sufficient funds, through repayments and maturities of loans and securities, deposits and borrowings, to meet our current commitments.

The maximum balance of short-term FHLB borrowings outstanding at any month-end during the nine months ended June 30, 2016 was $2.60 billion, and the average balance of short-term FHLB borrowings outstanding during this period was $2.41 billion at a weighted average contractual rate of 0.63%. The majority of the short-term FHLB borrowings amount related to borrowings on the FHLB line of credit in conjunction with the daily leverage strategy. This compares to a balance of short-term FHLB borrowings outstanding at June 30, 2016 of $500.0 million at a weighted average contractual rate of 2.24%.

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, 2016 , or future periods.

Capital

Consistent with our goal to operate a sound and profitable financial organization, we actively seek to maintain a "well-capitalized" status for the Bank and Company in accordance with regulatory standards. As of June 30, 2016 , 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, 2016 .



							Regulatory
					Minimum		Requirement For
	Bank		Company		Regulatory		"Well-Capitalized"
	Ratios		Ratios		Requirement		Status of Bank
Tier 1 leverage ratio	10.9	%	12.1	%	4.0	%	5.0	%
Common equity tier 1 capital ratio	28.8		32.0		4.5		6.5
Tier 1 capital ratio	28.8		32.0		6.0		8.0
Total capital ratio	29.0		32.3		8.0		10.0

The following table presents a reconciliation of equity under GAAP to regulatory capital amounts, as of June 30, 2016 , for the Bank and the Company (dollars in thousands):



	Bank			Company
Total equity as reported under GAAP	$	1,240,932		$	1,380,815
Unrealized gains on AFS securities	(6,820		)	(6,820		)
Total tier 1 capital	1,234,112			1,373,995
ACL	9,312			9,312
Total capital	$	1,243,424		$	1,383,307

Item 3. Quantitative and Qualitative Disclosure about Market Risk

Asset and Liability Management and Market Risk

For a complete discussion of the Bank's asset and liability management policies, as well as the potential impact of interest rate changes upon the market value of the Bank's portfolios, see "Part II, Item 7A. Quantitative and Qualitative Disclosures about Market Risk" in the Company's Annual Report on Form 10-K for the year ended September 30, 2015. The analysis presented in the tables below reflects the level of market risk at the Bank, including the cash the holding company has 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.

For each date presented in the following table, the estimated change in the Bank's net interest income is based on the indicated instantaneous, parallel and permanent change in interest rates presented. The change in each interest rate environment represents the difference between estimated net interest income in the 0 basis point interest rate environment ("base case," assumes the forward market and product interest rates implied by the yield curve are realized) and the estimated net interest income in each alternative interest rate environment (assumes market and product interest rates have a parallel shift in rates across all maturities by the indicated change in rates). At all dates presented, the three-month Treasury bill yield was less than one percent, so the -100 basis points scenario was not applicable. Estimations of net interest income used in preparing the table below were based upon the assumptions that the total composition of interest-earning assets and interest-bearing liabilities does not change materially and that any repricing of assets or liabilities occurs at anticipated product and market rates for the alternative rate environments as of the dates presented. The estimation of net interest income does not include any projected gains or losses related to the sale of loans or securities, or income derived from non-interest income sources, but does include the use of different prepayment assumptions in the alternative interest rate environments. It is important to consider that estimated changes in net interest income are for a cumulative four-quarter period. These do not reflect the earnings expectations of management.



Change	Net Interest Income At
(in Basis Points)	June 30, 2016						September 30, 2015
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	$	189,156	$	—	—	%	$	190,776	$	—		—	%
+100 bp	192,114		2,958		1.56		189,248		(1,528		)	(0.80	)
+200 bp	192,522		3,366		1.78		186,443		(4,333		)	(2.27	)
+300 bp	191,116		1,960		1.04		181,652		(9,124		)	(4.78	)


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

During the quarter ending June 30, 2016, management began using the results of a new deposit study that analyzed historical behavior of the Bank's non-maturity deposits, and also analyzed historical correlation of the Bank's deposit rates to market interest rates. This information is used in the Bank's interest rate risk model to predict the future balances of non-maturity deposit accounts, as well as future offering rates on certificates of deposit. The change in net interest income projections at June 30, 2016 compared to September 30, 2015 was due primarily to the utilization of the new deposit study in the Bank's interest rate risk model, specifically related to certificates of deposit. The new deposit study indicated a reduction in the correlation of interest rates offered by the Bank on certificates of deposit to market interest rates, compared to the previous methodology. As a result, the Bank's projected offering rates on certificates of deposit do not respond as quickly to changes in market interest rates so interest expense on certificates of deposit in the rising interest rate scenarios over the 12-month horizon was significantly lower at June 30, 2016 compared to September 30, 2015, which increased net interest income projections.

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



Change	Market Value of Portfolio Equity At
(in Basis Points)	June 30, 2016							September 30, 2015
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	$	1,410,892	$	—		—	%	$	1,457,514	$	—		—	%
+100 bp	1,330,245		(80,647		)	(5.72	)	1,343,864		(113,650		)	(7.80	)
+200 bp	1,176,900		(233,992		)	(16.58	)	1,189,194		(268,320		)	(18.41	)
+300 bp	986,994		(423,898		)	(30.04	)	1,021,380		(436,134		)	(29.92	)


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

As interest rates rise, the market value of the Bank's assets decreases at a faster pace than the market value of the Bank's liabilities, which results in a decrease to the Bank's MVPE. As interest rates decrease, the opposite is true. Lower interest rates at June 30, 2016, as compared to September 30, 2015, decreased the Bank's risk to higher interest rates. The new deposit study discussed above did not have a material impact on the MVPE at June 30, 2016.

The following gap table summarizes the anticipated maturities or repricing periods of the Bank's interest-earning assets and interest-bearing liabilities based on the information and assumptions set forth in the notes below. Cash flow projections for mortgage-related assets are calculated based on current interest rates. Prepayment projections are subjective in nature, involve uncertainties and assumptions and, therefore, cannot be determined with a high degree of accuracy. Although certain assets and liabilities may have similar maturities or periods to repricing, they may react differently to changes in market interest rates. Assumptions may not reflect how actual yields and costs respond to market interest rate changes. The interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types of assets and liabilities may lag behind changes in market interest rates. Certain assets, such as adjustable-rate mortgage ("ARM") loans, have features that restrict changes in interest rates on a short-term basis and over the life of the asset. In the event of a change in interest rates, prepayment and early withdrawal levels would likely deviate significantly from those assumed in calculating the gap table below. For additional information regarding the impact of changes in interest rates, see the preceding Percentage Change in Net Interest Income and Percentage Change in MVPE discussions and tables.



				More Than			More Than
	Within			One Year to			Three Years			Over
	One Year			Three Years			to Five Years			Five Years			Total
Interest-earning assets	(Dollars in thousands)
Loans receivable ⁽¹⁾	$	2,015,888		$	2,043,015		$	1,090,822		$	1,871,215		$	7,020,940
Securities ⁽²⁾	939,195			529,867			206,754			168,446			1,844,262
Other interest-earning assets	142,176			—			—			—			142,176
Total interest-earning assets	3,097,259			2,572,882			1,297,576			2,039,661			9,007,378

Interest-bearing liabilities
Non-maturity deposits ⁽³⁾	348,154			378,273			288,622			1,395,226			2,410,275
Certificates of deposit	1,098,239			1,025,539			643,536			1,131			2,768,445
Borrowings ⁽⁴⁾	500,000			875,000			1,000,000			344,984			2,719,984
Total interest-bearing liabilities	1,946,393			2,278,812			1,932,158			1,741,341			7,898,704

Excess (deficiency) of interest-earning assets over
interest-bearing liabilities	$	1,150,866		$	294,070		$	(634,582	)	$	298,320		$	1,108,674

Cumulative excess of interest-earning assets over
interest-bearing liabilities	$	1,150,866		$	1,444,936		$	810,354		$	1,108,674

Cumulative excess of interest-earning assets over interest-bearing
liabilities as a percent of total Bank assets at:
June 30, 2016	12.45		%	15.63		%	8.77		%	11.99		%
September 30, 2015	7.48

Cumulative one-year gap - interest rates +200 bps at:
June 30, 2016	2.11
September 30, 2015	0.26

(1)

ARM loans are included in the period in which the rate is next scheduled to adjust or in the period in which repayments are expected to occur, or prepayments are expected to be received, prior to their next rate adjustment, rather than in the period in which the loans are due. Fixed-rate loans are included in the periods in which they are scheduled to be repaid, based on scheduled amortization and prepayment assumptions. Balances are net of deferred fees and exclude loans 90 or more days delinquent or in foreclosure.


(2)	MBS reflect projected prepayments at amortized cost. Investment securities are presented based on contractual maturities, term to call dates or pre-refunding dates as of June 30, 2016 , at amortized cost.

(3)

Although the Bank's checking, savings, and money market accounts are subject to immediate withdrawal, management considers a substantial amount of these accounts to be core deposits having significantly longer effective maturities. The decay rates (the assumed rates at which the balances of existing accounts decline) used on these accounts is based on assumptions developed from our actual experiences with these accounts. If all of the Bank's checking, savings, and money market accounts had been assumed to be subject to repricing within one year, interest-bearing liabilities which were estimated to mature or reprice within one year would have exceeded interest-earning assets with comparable characteristics by $911.3 million, for a cumulative one-year gap of -9.9% of total assets.


(4)	Borrowings exclude deferred prepayment penalty costs.

The increase in the one-year gap at June 30, 2016 compared to September 30, 2015 was largely a result of lower interest rates at June 30, 2016 than at September 30, 2015. In addition, the utilization of the new deposit study discussed above increased the expected average lives of non-maturity deposits which reduced the amount of deposits repricing over the 12-month horizon and increased the one-year gap at June 30, 2016 compared to September 30, 2015.

The following table presents the weighted average yields/rates and WALs (in years), after applying prepayment, call assumptions, and decay rates for our interest-earning assets and interest-bearing liabilities as of the date presented. Yields presented for interest-earning assets include the amortization of fees, costs, premiums and discounts which are considered adjustments to the yield. The interest rate presented for term borrowings is the effective rate, which includes the net impact of the amortization of deferred prepayment penalties resulting from FHLB advances previously prepaid. The maturity and repricing terms presented for one- to four-family loans represent the contractual terms of the loan.



	June 30, 2016
	Amount		Yield/Rate		WAL	% of Category		% of Total
	(Dollars in thousands)
Investment securities	$	510,745	1.21	%	1.1	27.5	%	5.6	%
MBS - fixed	906,775		2.19		3.1	48.9		9.9
MBS - adjustable	437,706		2.25		5.6	23.6		4.8
Total investment securities and MBS	1,855,226		1.93		3.1	100.0	%	20.3
Loans receivable:
Fixed-rate one- to four-family:
<= 15 years	1,239,954		3.18		3.7	17.6	%	13.5
> 15 years	4,104,395		3.95		5.3	58.3		44.8
All other fixed-rate loans	338,380		4.11		2.9	4.8		3.7
Total fixed-rate loans	5,682,729		3.79		4.8	80.7		62.0
Adjustable-rate one- to four-family:
<= 36 months	303,600		1.82		3.6	4.3		3.3
> 36 months	885,748		2.95		2.7	12.6		9.7
All other adjustable-rate loans	166,525		4.42		1.6	2.4		1.8
Total adjustable-rate loans	1,355,873		2.87		2.7	19.3		14.8
Total loans receivable	7,038,602		3.61		4.4	100.0	%	76.8
FHLB stock	114,425		5.98		3.0			1.2
Cash and cash equivalents	152,831		0.49		—			1.7
Total interest-earning assets	$	9,161,084	3.25		4.0			100.0	%

Non-maturity deposits	$	2,316,684	0.16		8.4	45.6	%	29.8	%
Certificates of deposit	2,768,445		1.31		1.7	54.4		35.7
Total deposits	5,085,129		0.78		4.8	100.0	%	65.5
Term borrowings	2,675,000		2.24		3.0			34.5
Total interest-bearing liabilities	$	7,760,129	1.28		4.2			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, 2016 . Based upon this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that, as of June 30, 2016 , such disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in the reports it files or submits under the Act is accumulated and communicated to the Company's management (including the Chief Executive Officer and Chief Financial Officer) to allow timely decisions regarding required disclosure, and is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms.

Changes in Internal Control Over Financial Reporting

There have been no changes in the Company's internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Act) that occurred during the Company's quarter ended June 30, 2016 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

There have been no material changes to our risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2015 .

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

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

The following table summarizes our share repurchase activity during the three months ended June 30, 2016 and additional information regarding our share repurchase program. In October 2015, the Company announced a stock repurchase plan for up to $70.0 million of common stock. It is anticipated that shares will be purchased from time to time in the open-market based upon market conditions and available liquidity. There is no expiration for this repurchase plan.



					Approximate
	Total			Total Number of	Dollar Value of
	Number of	Average		Shares Purchased as	Shares that May
	Shares	Price Paid		Part of Publicly	Yet Be Purchased
	Purchased	per Share		Announced Plans	Under the Plan
April 1, 2016 through
April 30, 2016	—	$	—	—	$	70,000,000
May 1, 2016 through
May 31, 2016	—	—		—	70,000,000
June 1, 2016 through
June 30, 2016	—	—		—	70,000,000
Total	—	—		—	70,000,000

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

Item 6. Exhibits

See Index to Exhibits.

SIGNATURES

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



CAPITOL FEDERAL FINANCIAL, INC.



	Date: August 9, 2016	By:	/s/ John B. Dicus
			John B. Dicus, Chairman, President and Chief Executive Officer

	Date: August 9, 2016	By:	/s/ Kent G. Townsend
			Kent G. Townsend, Executive Vice President,
			Chief Financial Officer and Treasurer

INDEX TO EXHIBITS



Exhibit Number		Document
3(i)		Charter of Capitol Federal Financial, Inc., as filed on May 6, 2010, as Exhibit 3(i) to Capitol Federal Financial, Inc.'s Registration Statement on Form S-1 (File No. 333-166578) and incorporated herein by reference
3(ii)		Bylaws of Capitol Federal Financial, Inc. as filed on May 6, 2010, as Exhibit 3(ii) to Capitol Federal Financial Inc.'s Registration Statement on Form S-1 (File No. 333-166578) and incorporated herein by reference
10.1(i)		Capitol Federal Financial, Inc.'s Employee Stock Ownership Plan, as amended, filed on May 10, 2011 as Exhibit 10.1(ii) to the March 31, 2011 Form 10-Q for Capitol Federal Financial, Inc., and incorporated herein by reference
10.1(ii)		Form of Change of Control Agreement with each of John B. Dicus, Kent G. Townsend, and Rick C. Jackson filed on January 20, 2011 as Exhibit 10.1 to the Registrant's Current Report on Form 8-K and incorporated herein by reference
10.1(iii)		Form of Change of Control Agreement with each of Natalie G. Haag and Carlton A. Ricketts filed on November 29, 2012 as Exhibit 10.1(iv) to the Registrant's Annual Report on Form 10-K and incorporated herein by reference
10.1(iv)		Form of Change of Control Agreement with Frank H. Wright filed on November 29, 2013 as Exhibit 10.1(v) to the Registrant's Annual Report on Form 10-K and incorporated herein by reference
10.2		Capitol Federal Financial's 2000 Stock Option and Incentive Plan (the "Stock Option Plan") filed on April 13, 2000 as Appendix A to Capitol Federal Financial's Revised Proxy Statement (File No. 000-25391) and incorporated herein by reference
10.3		Capitol Federal Financial Deferred Incentive Bonus Plan, as amended, filed on May 5, 2009 as Exhibit 10.4 to the March 31, 2009 Form 10-Q for Capitol Federal Financial and incorporated herein by reference
10.4		Form of Incentive Stock Option Agreement under the Stock Option Plan filed on February 4, 2005 as Exhibit 10.5 to the December 31, 2004 Form 10-Q for Capitol Federal Financial and incorporated herein by reference
10.5		Form of Non-Qualified Stock Option Agreement under the Stock Option Plan filed on February 4, 2005 as Exhibit 10.6 to the December 31, 2004 Form 10-Q for Capitol Federal Financial and incorporated herein by reference
10.6		Description of Named Executive Officer Salary and Bonus Arrangements filed on November 25, 2015 as Exhibit 10.6 to the Registrant's Annual Report on Form 10-K and incorporated herein by reference
10.7		Description of Director Fee Arrangements filed on August 1, 2014 as Exhibit 10.9 to the Registrant's June 30, 2014 Form 10-Q and incorporated herein by reference
10.8		Short-term Performance Plan filed on August 4, 2015 as Exhibit 10.10 to the Registrant's June 30, 2015 Form 10-Q and incorporated herein by reference
10.9		Capitol Federal Financial, Inc. 2012 Equity Incentive Plan (the "Equity Incentive Plan") filed on December 22, 2011 as Appendix A to Capitol Federal Financial, Inc.'s Proxy Statement (File No. 001-34814) and incorporated herein by reference
10.10		Form of Incentive Stock Option Agreement under the Equity Incentive Plan filed on February 6, 2012 as Exhibit 10.12 to the Registrant's December 31, 2011 Form 10-Q and incorporated herein by reference
10.11		Form of Non-Qualified Stock Option Agreement under the Equity Incentive Plan filed on February 6, 2012 as Exhibit 10.13 to the Registrant's December 31, 2011 Form 10-Q and incorporated herein by reference
10.12		Form of Stock Appreciation Right Agreement under the Equity Incentive Plan filed on February 6, 2012 as Exhibit 10.14 to the Registrant's December 31, 2011 Form 10-Q and incorporated herein by reference
10.13		Form of Restricted Stock Agreement under the Equity Incentive Plan filed on February 6, 2012 as Exhibit 10.15 to the Registrant's December 31, 2011 Form 10-Q and incorporated herein by reference
11		Calculations of Basic and Diluted EPS (See "Part I, Item 1. Financial Statements – Notes to Consolidated Financial Statements – Note 2 – Earnings Per Share")
31.1		Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002 made by John B. Dicus, Chairman, President and Chief Executive Officer
31.2		Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002 made by Kent G. Townsend, Executive Vice President, Chief Financial Officer and Treasurer
32		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 made by John B. Dicus, Chairman, President and Chief Executive Officer, and Kent G. Townsend, Executive Vice President, Chief Financial Officer and Treasurer



101		The following information from the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2016, filed with the Securities and Exchange Commission on August 9, 2016, has been formatted in eXtensible Business Reporting Language: (i) Consolidated Balance Sheets at June 30, 2016 and September 30, 2015, (ii) Consolidated Statements of Income for the three and nine months ended June 30, 2016 and 2015, (iii) Consolidated Statements of Comprehensive Income for the three and nine months ended June 30, 2016 and 2015, (iv) Consolidated Statement of Stockholders' Equity for the nine months ended June 30, 2016, (v) Consolidated Statements of Cash Flows for the nine months ended June 30, 2016 and 2015, and (vi) Notes to the Unaudited Consolidated Financial Statements

TABLE OF CONTENTS

Part I -- Financial Information Item 1. Financial Statements Item 2. Management's Discussion and Analysis Of Financial Condition and Results Of Operations Item 3. Quantitative and Qualitative Disclosure About Market Risk Item 4. Controls and Procedures Part II - Other Information Item 1. Legal Proceedings Item 1A. Risk Factors Item 2. Unregistered Sales Of Equity Securities and Use Of Proceeds Item 3. Defaults Upon Senior Securities Item 4. Mine Safety Disclosures Item 5. Other Information Item 6. Exhibits

CFFN 10-Q Quarter ended June 30, 2016