CFFN - Capitol Federal Financial Inc.® Reports Second Quarter Fiscal Year 2022 Results

Capitol Federal Financial, Inc. ^® (NASDAQ: CFFN) (the "Company"), the parent company of Capitol Federal Savings Bank (the "Bank"), announced results today for the quarter ended March 31, 2022. The Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 will be filed with the Securities and Exchange Commission ("SEC") on or about May 9, 2022 and posted on our website, http://ir.capfed.com . For best viewing results, please view this release in Portable Document Format (PDF) on our website.

Highlights for the quarter include:

• net income of $21.6 million;
• basic and diluted earnings per share of $0.16;
• net interest margin of 1.69% (2.01% excluding the effects of the leverage strategy);
• paid dividends of $11.5 million, or $0.085 per share; and
• on April 20, 2022, announced a cash dividend of $0.085 per share, payable on May 20, 2022 to stockholders of record as of the close of business on May 6, 2022.

Comparison of Operating Results for the Three Months Ended March 31, 2022 and December 31, 2021

For the quarter ended March 31, 2022, the Company recognized net income of $21.6 million, or $0.16 per share, compared to net income of $22.2 million, or $0.16 per share, for the quarter ended December 31, 2021. The decrease in net income was due primarily to higher non-interest expense and income tax expense, partially offset by an increase in net interest income. The net interest margin decreased 30 basis points, from 1.99% for the prior quarter to 1.69% for the current quarter. During the current quarter, the Company's leverage strategy, which had not been in place since 2019, was reimplemented. When the leverage strategy is in place, it reduces the net interest margin due to the amount of earnings from the transaction in comparison to the size of the transaction. Excluding the effects of the leverage strategy, the net interest margin would have increased two basis points, from 1.99% for the prior quarter to 2.01% for the current quarter. The increase in the net interest margin excluding the effects of the leverage strategy was due mainly to a decrease in the cost of retail certificates of deposit.

Leverage Strategy

At times, the Bank has utilized a leverage strategy to increase earnings. The leverage strategy during the current quarter involved borrowing up to $2.10 billion either on the Bank's line of credit with Federal Home Loan Bank Topeka ("FHLB") or by entering into short-term FHLB advances, depending on the rates offered by FHLB. The borrowings were repaid prior to quarter end. The proceeds from the borrowings, net of the required FHLB stock holdings which yielded 5.75% from dividends during the current quarter, were deposited at the Federal Reserve Bank of Kansas City ("FRB of Kansas City"). Net income attributable to the leverage strategy is largely derived from the dividends received on FHLB stock holdings, plus the net interest rate spread between the yield on the cash deposited at the FRB of Kansas City and the rate paid on the related FHLB borrowings, less applicable federal insurance premiums and estimated taxes. Net income attributable to the leverage strategy was $545 thousand during the current quarter. Management continues to monitor the net interest rate spread and overall profitability of the strategy. It is expected that the strategy will continue to be utilized as long as it remains profitable.

Interest and Dividend Income

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.

The increase in interest income on MBS was due to a decrease in premium amortization related to a slowdown in prepayment activity. The increase in dividend income on FHLB stock was due mainly to the leverage strategy being utilized during the current quarter, partially offset by a special 1.00% year-end dividend received in the prior quarter. The increase in interest income on cash and cash equivalents was due mainly to the leverage strategy being utilized during the current quarter.

Interest Expense

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

The decrease in interest expense on deposits was due primarily to a decrease in the weighted average rate and the average balance of the retail certificate of deposit portfolio. The increase in interest expense on borrowings was due to the leverage strategy being utilized during the current quarter.

Provision for Credit Losses

For the quarter ended March 31, 2022, the Bank recorded a negative provision for credit losses of $3.2 million, compared to a negative provision for credit losses of $3.4 million for the prior quarter. The negative provision in the current quarter was comprised of a $2.2 million decrease in the allowance for credit losses ("ACL") for loans and a $952 thousand decrease in reserves for off-balance sheet credit exposures. The negative provision for credit losses associated with the ACL was due primarily to a reduction in model-calculated ACL for commercial loans due to an increase in projected prepayment speeds as a result of recent prepayment activity, as well as a decrease in the commercial loan Coronavirus Disease 2019 ("COVID-19") modification qualitative factor due to loans exiting their deferral time periods and resuming full payments per their original contracts during the current quarter. The negative provision for credit losses associated with the reserve for off-balance sheet credit exposures was due primarily to a reduction in the reserve for commercial construction loans due mainly to a reduction in the model-calculated amount as noted for the ACL.

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.

The decrease in insurance commissions was due primarily to the receipt of annual contingent insurance commissions, which was lower than expected, and the related accrual adjustments. The increase in other non-interest income was due mainly to a gain on a loan-related financial derivative agreement.

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.

The increase in advertising and promotional expense was due primarily to the timing of campaigns and sponsorships. The increase in federal insurance premium expense was due mainly to an increase in average assets as a result of the leverage strategy being utilized during the current quarter. The increase in other non-interest expense was due mainly to an increase in debit card and deposit account fraud losses, along with an increase in dues and subscriptions related to annual payments, and an increase in insurance expense due to a premium refund received in the prior quarter.

The Company's efficiency ratio was 53.24% for the current quarter compared to 52.22% for the prior quarter. The change in the efficiency ratio was due primarily to higher non-interest expense. The efficiency ratio is a measure of a financial institution's total non-interest expense as a percentage of the sum of net interest income (pre-provision for credit losses) and non-interest income. A higher value indicates that it is costing the financial institution more money to generate revenue, relative to the net interest margin and non-interest income.

Income Tax Expense

The following table presents pretax income, income tax expense, and net income for the time periods presented, along with the change measured in dollars and percent.

The increase in income tax expense was due primarily to a higher effective tax rate in the current quarter. The lower effective tax rate in the prior quarter was due primarily to true-ups related to the preparation of the September 30, 2021 tax returns. Management anticipates the effective tax rate for fiscal year 2022 will be approximately 21%.

Comparison of Operating Results for the Six Months Ended March 31, 2022 and 2021

The Company recognized net income of $43.8 million, or $0.32 per share, for the current year period compared to net income of $39.3 million, or $0.29 per share, for the prior year period. The increase in net income was due primarily to an increase in net interest income and a higher negative provision for credit losses in the current year period, partially offset by higher income tax expense. The net interest margin decreased seven basis points, from 1.90% for the prior year period to 1.83% for the current year period. Excluding the effects of the leverage strategy, the net interest margin would have increased 10 basis points, from 1.90% for the prior year period to 2.00% for the current year period. The increase in net interest margin excluding the effects of the leverage strategy was due mainly to a reduction in the weighted average cost of retail certificates of deposit and borrowings, which outpaced the decrease in weighted average asset yields.

Interest and Dividend Income

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.

The decrease in interest income on loans receivable was due primarily to a decrease in the weighted average rate on the originated and correspondent one- to four-family loan portfolio, partially offset by the increase in the average balance of the loan portfolio. The decrease in the weighted average rate was due to endorsements and refinances to lower market rates and the origination and purchase of new loans at lower market rates between periods. Premium amortization related to the one- to four-family correspondent loan portfolio decreased significantly compared to the prior year period due to the slow-down in prepayments and endorsements, partially offsetting the decrease in the weighted average rate.

The decrease in interest income on the MBS portfolio was due to a decrease in the weighted average yield as a result of purchases at lower market yields between periods, along with higher premium amortization related to prepayment activity.

The increase in dividend income on FHLB stock and the increase in interest income on cash and cash equivalents were due mainly to the leverage strategy being utilized during the current year period.

The increase in interest income on investment securities was due primarily to an increase in the average balance of the portfolio.

Interest Expense

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

The decrease in interest expense on deposits was due mainly to a decrease in the weighted average rate paid on retail certificates of deposit, wholesale certificates of deposit, and money market accounts. Retail certificates of deposit continue to reprice downward as they renew or are replaced at lower offered rates, and rates on money market accounts were also lowered between periods.

The decrease in interest expense on borrowings was due primarily to lowering the cost of FHLB advances by terminating or not renewing certain interest rate swap agreements, not replacing certain maturing FHLB advances, and prepaying certain advances during fiscal year 2021. Cash flows from the deposit portfolio were used to pay down certain FHLB advances. This was partially offset by the leverage strategy being utilized during the current year period and not being utilized during the prior year period.

Provision for Credit Losses

The Bank recorded a negative provision for credit losses during the current year period of $6.6 million, compared to a negative provision for credit losses of $4.5 million during the prior year period. The negative provision in the current year period was comprised of a $4.5 million decrease in the ACL for loans and a $2.1 million decrease in reserves for off-balance sheet credit exposures. The negative provision for credit losses associated with the ACL in the current year period was due to (1) a reduction in model-calculated ACL for commercial loans due to an increase in projected prepayment speeds as a result of recent prepayment activity, (2) a reduction in the large-dollar special mention commercial loan qualitative factor due to two large-dollar special mention commercial loans moving to the pass classification during the December 31, 2021 quarter, (3) a decrease in the commercial loan COVID-19 modification qualitative factor due to loans exiting their deferral time periods and resuming full payments per their original contracts during the current quarter, and (4) a decrease in the economic uncertainty qualitative factor for commercial loans due to continued improvement in economic conditions. The negative provision for credit losses associated with the reserve for off-balance sheet credit exposures in the current year period was due primarily to a reduction in the commercial loan economic uncertainty qualitative factor and to a reduction in the reserves for commercial construction loans due mainly to a reduction in the model-calculated amount as noted for the ACL.

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.

The increase in deposit service fees was due primarily to an increase in debit card income as a result of higher transaction and settlement volume, in addition to an increase in the average transaction amount. The decrease in insurance commissions was due primarily to the receipt of annual contingent insurance commissions, which was lower than expected, and the related accrual adjustments. During the prior year period, the Bank sold its Visa Class B shares, resulting in a $7.4 million gain, with no similar transaction during the current 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.

The increase in advertising and promotional expense was due mainly to adjustments to advertising schedules during the prior year related to the COVID-19 pandemic. During the prior year period, the Bank terminated $200.0 million of interest rate swaps, resulting in a loss of $4.8 million which was reclassified out of accumulated other comprehensive income ("AOCI") to earnings. The decrease in other non-interest expense was due primarily to the write-down during the prior year period of a property that had previously served as one of the Bank's branch locations.

The Company's efficiency ratio was 52.74% for the current year period compared to 57.19% for the prior year period. The improvement in the efficiency ratio was due primarily to lower non-interest expense and higher net interest income, partially offset by lower non-interest income.

Management intends to implement a new core processing system for the Bank by September 2023. The replacement system will better position the Bank for the future and allow for the introduction of new products and services to enhance customer experiences. The implementation of the new core system and related conversion of data may result in increased third party expenses later in fiscal year 2022 and into fiscal year 2023.

Income Tax Expense

The following table presents pretax income, income tax expense, and net income for the time periods presented, along with the change measured in dollars and percent.

The increase in income tax expense was due primarily to higher pretax income in the current year period. Additionally, the effective tax rate increased slightly compared to the prior year period, and is in line with management's anticipation of an effective tax rate of approximately 21% for fiscal year 2022.

Financial Condition as of March 31, 2022

The following table summarizes the Company's financial condition at the dates indicated.

The decrease in total assets from September 30, 2021 and December 31, 2021 to March 31, 2022 was due primarily to a decrease in securities, partially offset by an increase in cash and cash equivalents. The decrease in stockholders' equity from September 30, 2021 and December 31, 2021 to March 31, 2022 was due mainly to a reduction in AOCI as a result of changes in the fair value of AFS securities.

The following table summarizes loan originations and purchases and borrowing activity, along with the related weighted average rates, during the periods indicated. The borrowings presented in the table have original contractual terms of one year or longer.

Stockholders' Equity

During the six months ended March 31, 2022, the Company paid cash dividends totaling $52.9 million. These cash dividends totaled $0.39 per share and consisted of a $0.22 per share cash true-up dividend related to fiscal year 2021 earnings and two regular quarterly cash dividends of $0.085 per share. On April 20, 2022, the Company announced a regular quarterly cash dividend of $0.085 per share, or approximately $11.5 million, payable on May 20, 2022 to stockholders of record as of the close of business on May 6, 2022. In the long run, management considers the Bank's equity to total assets ratio of at least 9% an appropriate level of capital. At March 31, 2022, this ratio was 11.1%.

At March 31, 2022, Capitol Federal Financial, Inc., at the holding company level, had $81.1 million in cash on deposit at the Bank. For fiscal year 2022, it is the intention of the Board of Directors to continue the payout of 100% of the Company's earnings to the Company's stockholders. Dividend payments depend upon a number of factors, including the Company's financial condition and results of operations, regulatory capital requirements, regulatory limitations on the Bank's ability to make capital distributions to the Company, and the amount of cash at the holding company level.

There remains $44.7 million authorized under the existing stock repurchase plan for additional purchases of the Company's common stock. Shares may be repurchased from time to time based upon market conditions, available liquidity and other factors. This plan has no expiration date; however, the Federal Reserve Bank's existing approval for the Company to repurchase shares expires in August 2022.

The following table presents a reconciliation of total to net shares outstanding as of March 31, 2022.

Consistent with our goal to operate a sound and profitable financial organization, we actively seek to maintain a well-capitalized status for the Bank in accordance with regulatory standards. As of March 31, 2022, the Bank's community bank leverage ratio ("CBLR") was 9.7%, which exceeded the minimum requirement of 9%. The CBLR decreased from 11.6% as of December 31, 2021 due to the reimplementation of the leverage strategy during the current quarter, which increased average assets and decreased the CBLR.

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

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

Average Balance Sheets

The following tables present 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, as well as selected performance ratios and other information for the periods shown. 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.

Loan Portfolio

The following table presents information related to the composition of our loan portfolio in terms of dollar amounts, weighted average rates, and percentages as of the dates indicated.

Loan Activity: The following table summarizes activity in the loan portfolio, along with weighted average rates where applicable, for the periods indicated, excluding changes in ACL, deferred loan fees/discounts, 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. Commercial loan renewals are not included in the activity in the following table unless new funds are disbursed at the time of renewal. The renewal balance and rate are included in the ending loan portfolio balance and rate.

One- to Four-Family Loans: The following table presents, for our portfolio of one- to four-family loans, the amount, weighted average rate, percent of total, weighted average credit score, and weighted average loan-to-value ("LTV") ratio as of March 31, 2022. Credit scores were updated in March 2022 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.

The following table presents originated and correspondent purchased activity in our one- to four-family loan portfolio, excluding endorsement activity, along with associated weighted average rates, weighted average LTVs and weighted average credit scores for the periods indicated.

The following table summarizes our one- to four-family loan origination and refinance commitments and one- to four-family correspondent loan purchase commitments as of March 31, 2022, along with associated weighted average rates.

Commercial Loans: During the six months ended March 31, 2022, the Bank originated $137.3 million of commercial loans and entered into commercial loan participations totaling $74.1 million. The Bank also processed commercial loan disbursements, excluding lines of credit, of approximately $174.1 million at a weighted average rate of 3.93%.

As of March 31, 2022, December 31, 2021, and September 30, 2021, the Bank's commercial and industrial gross loan amount (unpaid principal plus undisbursed amounts) totaled $101.3 million, $99.8 million, and $90.7 million, respectively, and commitments totaled $1.4 million at March 31, 2022.

The following table presents the Bank's commercial real estate and commercial construction loans by type of primary collateral as of the dates indicated. As of March 31, 2022, the Bank had commercial real estate and commercial construction loan commitments totaling $28.7 million, at a weighted average rate of 4.35%. Because the commitments to pay out undisbursed funds are not cancellable by the Bank, unless the loan is in default, we generally anticipate fully funding the related projects.

The following table summarizes the Bank's commercial real estate and commercial construction loans and loan commitments by state as of the dates indicated.

The following table presents the Bank's commercial loan portfolio and outstanding loan commitments, categorized by gross loan amount (unpaid principal plus undisbursed amounts) or outstanding loan commitment amount, as of March 31, 2022.

As of March 31, 2022 and December 31, 2021, there were commercial loans with a gross loan amount (unpaid principal plus undisbursed amounts) of $74.3 million and $143.5 million, respectively, with modifications under the Bank's program to support and provide relief to borrowers during the COVID-19 pandemic ("COVID-19 loan modifications") that were still in their deferral period.

Asset Quality

The following tables present loans 30 to 89 days delinquent, non-performing loans, and other real estate owned ("OREO") as of the dates indicated. The amounts in the table represent the unpaid principal balance of the loans less related charge-offs, if any. Loans subject to payment forbearance under the Bank's COVID-19 loan modification program are not reported as delinquent during the forbearance time period. Of the loans 30 to 89 days delinquent at March 31, 2022, approximately 64% were 59 days or less delinquent. Nonaccrual loans are loans that are 90 or more days delinquent or in foreclosure and other loans required to be reported as nonaccrual pursuant to accounting and/or regulatory reporting requirements and/or internal policies, even if the loans are current. Non-performing assets include nonaccrual loans and OREO. Of the one- to four-family COVID-19 loan modifications that had completed the deferral period by March 31, 2022, $2.9 million were 30 to 89 days delinquent and $2.8 million were 90 or more days delinquent as of March 31, 2022 and are included in the tables below.

The following table presents loans classified as special mention or substandard at the dates presented. The decrease in commercial special mention loans at March 31, 2022 compared to September 30, 2021 was due mainly to two commercial loans moving to the pass classification during the December 31, 2021 quarter as the underlying economic considerations being monitored by management improved to levels deemed appropriate by the Company.

Allowance for Credit Losses: The Bank is utilizing a discounted cash flow approach for estimating expected credit losses for pooled loans and loan commitments. Management applied qualitative factors at March 31, 2022 to account for economic uncertainty that may not be adequately captured in the third party economic forecast scenarios, along with the balance of large-dollar special mention commercial loans, and commercial loan COVID-19 modifications. The main economic uncertainties associated with the economic uncertainty qualitative factor were related to (1) the unemployment rate, which is a key economic index in the Bank's model, and (2) the unevenness of the recovery in certain industries in which the Bank has lending relationships.

The following tables present ACL activity and related ratios at the dates and for the periods indicated. The reserve for off-balance sheet credit exposures totaled $3.7 million at March 31, 2022, $4.6 million at December 31, 2021, and $5.7 million at September 30, 2021.

The distribution of our ACL and the ratio of ACL to loans receivable, by loan type, at the dates indicated is summarized below.

Securities Portfolio

The following table presents the distribution of our securities portfolio, at amortized cost, at March 31, 2022. Overall, fixed-rate securities comprised 95% of our securities portfolio at March 31, 2022. 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 tax-equivalent basis.

The following table summarizes the activity in our securities portfolio 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 and ending balances are as of the first and last days of the period presented and are generally derived from recent prepayment activity on the securities in the portfolio. The beginning and ending WALs are the estimated remaining principal repayment terms (in years) after three-month historical prepayment speeds have been applied.

Deposit Portfolio

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

Borrowings

The following table presents the maturity of term borrowings, which consist entirely of FHLB advances, along with associated weighted average contractual and effective rates as of March 31, 2022.

The following table presents borrowing activity for the periods shown. The borrowings presented in the table have original contractual terms of one year or longer or are tied to interest rate swaps with original contractual terms of one year or longer. The effective rate is shown as a weighted average and includes the impact of interest rate swaps and the amortization of deferred prepayment penalties resulting from FHLB advances previously prepaid. The weighted average maturity ("WAM") is the remaining weighted average contractual term in years and includes the impact of interest rate swaps. 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.

Maturities of Interest-Bearing Liabilities

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/commercial and public unit amounts, and term borrowings for the next four quarters as of March 31, 2022.

The following table sets forth the WAM information for our certificates of deposit, in years, as of March 31, 2022.

Average Rates and Lives

At March 31, 2022, the Bank's gap between the amount of interest-earning assets and interest-bearing liabilities projected to reprice within one year was $(1.46) billion, or (15.3)% of total assets, compared to $(928.0) million, or (9.7)% of total assets, at December 31, 2021. The change in the one-year gap amount was due primarily to a decrease in the amount of asset cash flows projected at March 31, 2022 compared to December 31, 2021. As interest rates rise, borrowers have less economic incentive to refinance their mortgages and agency debt issuers have less economic incentive or opportunity to exercise their call options in order to issue new debt at lower interest rates, resulting in lower projected cash flows on these assets.

The amount of interest-bearing liabilities expected to reprice in a given period is not typically significantly impacted by changes in interest rates, because the Bank's borrowings and certificate of deposit portfolios have contractual maturities and generally cannot be terminated early without a prepayment penalty. If interest rates were to increase 200 basis points, as of March 31, 2022, the Bank's one-year gap is projected to be $(1.54) billion, or (16.2)% of total assets. The change in the gap compared to when there is no change in rates is due to lower anticipated net cash flows primarily due to lower repayments on mortgage-related assets in the higher rate environment. This compares to a one-year gap of $(1.44) billion, or (15.0)% of total assets, if interest rates were to have increased 200 basis points as of December 31, 2021.

The following table presents the weighted average yields/rates and WALs (in years), after applying prepayment, call assumptions, and decay rates for our interest-earning assets and interest-bearing liabilities as of March 31, 2022. Yields presented for interest-earning assets include the amortization of fees, costs, premiums and discounts, which are considered adjustments to the yield. The interest rate presented for term borrowings is the effective rate, which includes the impact of interest rate swaps and the amortization of deferred prepayment penalties resulting from FHLB advances previously prepaid. The WAL presented for term borrowings includes the effect of interest rate swaps.

View source version on businesswire.com: https://www.businesswire.com/news/home/20220427005146/en/

Kent Townsend
Executive Vice President,
Chief Financial Officer and Treasurer
(785) 231-6360
ktownsend@capfed.com

Investor Relations
(785) 270-6055
investorrelations@capfed.com