Fair Value Of Financial Instruments

12 Months Ended

Sep. 30, 2025

FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair Value Measurements – The Company uses fair value measurements to record fair value adjustments to certain financial instruments and to determine fair value disclosures in accordance with ASC 820 and ASC 825. The Company's AFS securities and interest rate swaps 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 financial instruments 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 financial instruments.

The Company groups its financial instruments at fair value in three levels based on the markets in which the financial instruments 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 financial instrument. 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 financial instrument.

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

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

AFS Securities - The Company's AFS securities portfolio is carried at estimated fair value. 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 years ended September 30, 2025 and 2024. The Company's major security types, based on the nature and risks of the securities, are:

•MBS - The majority of these securities are issued by GSEs. 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)

•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)

•Corporate Bonds and 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)

Interest Rate Swaps - The Company's interest rate swaps are designated as cash flow hedges and are reported at fair value in other assets on the consolidated balance sheet if in a gain position and in other liabilities if in a loss position, with any unrealized gains and losses, net of taxes, reported as AOCI in stockholders' equity. See "Note 8. Deposits and Borrowed Funds" for additional information. The estimated fair values of the interest rate swaps are obtained from the counterparty and are determined by a discounted cash flow analysis using observable market-based inputs. On a quarterly basis, management corroborates the estimated fair values by internally calculating the estimated fair value using a discounted cash flow analysis with independent observable market-based inputs from a third party. No adjustments were made to the estimated fair values obtained from the counterparty during the years ended September 30, 2025 and 2024. (Level 2)

The following tables provide the level of valuation assumption used to determine the carrying value of the Company's financial instruments measured at fair value on a recurring basis at the dates presented. The Company did not have any Level 3 financial instruments measured at fair value on a recurring basis at September 30, 2025 or 2024.


	September 30, 2025
			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)
Assets:
AFS Securities:
MBS	$	863,500	$	—	$	863,500	$	—

Corporate bonds	3,716		—		3,716		—

	867,216		—		867,216		—
Interest rate swaps	926		—		926		—
	$	868,142	$	—	$	868,142	$	—


	September 30, 2024
			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)
Assets:
AFS Securities:
MBS	$	783,573	$	—	$	783,573	$	—
GSE debentures	69,305		—		69,305		—
Corporate bonds	3,388		—		3,388		—

	$	856,266	$	—	$	856,266	$	—
Interest rate swaps	2,103		—		2,103		—
	$	858,369	$	—	$	858,369	$	—

The following is a description of valuation methodologies used for significant financial instruments measured at fair value on a non-recurring basis. The significant unobservable inputs used in the determination of the fair value of assets classified as Level 3 have an inherent measurement uncertainty that, if changed, could result in higher or lower fair value measurements of these assets as of the reporting date.

Loans Receivable – Collateral dependent assets are assets evaluated on an individual basis. Those collateral dependent assets that are evaluated on an individual basis are considered financial assets measured at fair value on a non-recurring basis. The fair value of collateral dependent loans/loans individually evaluated for loss on a non-recurring basis during fiscal years

2025 and 2024 that were still held in the portfolio as of September 30, 2025 and 2024 was $53.9 million and $8.9 million, respectively. The increase in the balance from September 30, 2024 was due primarily to two commercial real estate loans that were modified during the current fiscal year and were reported as substandard and nonaccrual at September, 30, 2025. Fair values of collateral dependent loans/loans individually evaluated for loss 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.

The one- to four-family loans included in this amount 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%. Fair values were estimated through current appraisals. Management does not adjust or apply a discount to the appraised value of one- to four-family loans, except for the estimated sales cost noted above, and the primary unobservable input for these loans was the appraisal.

For commercial loans, if the most recent appraisal or book value of the collateral does not reflect current market conditions due to the passage of time and/or other factors, management will adjust the existing appraised or book value based on knowledge of local market conditions, recent transactions, and estimated selling costs, if applicable. Adjustments to appraised or book values are generally based on assumptions not observable in the marketplace. The primary significant unobservable inputs for commercial loans individually evaluated during the year ended September 30, 2025 were downward adjustments to the book value of the collateral for lack of marketability. During fiscal year 2025, the adjustments ranged from 10% to 99%, with a weighted average of 23%. During fiscal year 2024, the adjustments ranged from 5% to 100%, with a weighted average of 40%. The basis utilized in calculating the weighted averages for these adjustments was the original unadjusted value of each collateral item.

OREO – OREO primarily represents real estate acquired as a result of foreclosure or by deed in lieu of foreclosure and is carried at the lower of cost or fair value. The fair value for one- to four-family OREO is estimated through current appraisals or listing prices, less estimated selling costs of 10%. Management does not adjust or apply a discount to the appraised value or listing price, except for the estimated sales costs noted above. The primary significant unobservable input for one- to four-family OREO was the appraisal or listing price. The fair value of one- to four-family OREO measured on a non-recurring basis during fiscal years 2025 and 2024 that was still held in the portfolio as of September 30, 2025 and 2024 was $197 thousand and $55 thousand, respectively. The carrying value of the properties equaled the fair value of the properties at September 30, 2025 and 2024.

For commercial OREO, if the most recent appraisal or book value of the collateral does not reflect current market conditions due to the passage of time and/or other factors, management will adjust the existing appraised or book value based on knowledge of local market conditions, recent transactions, and estimated selling costs, if applicable. Adjustments to appraised or book values are generally based on assumptions not observable in the marketplace. The primary significant unobservable input for commercial OREO is downward adjustments to book value of the collateral for lack of marketability. 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. There was no commercial OREO measured on a non-recurring basis during the years ended September 30, 2025 and 2024.

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

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


	September 30, 2025
	Carrying		Estimated Fair Value
	Amount		Total		Level 1		Level 2		Level 3
	(Dollars in thousands)
Assets:
Cash and cash equivalents	$	252,443	$	252,443	$	252,443	$	—	$	—
AFS securities	867,216		867,216		—		867,216		—

Loans receivable	8,111,961		7,902,077		—		—		7,902,077

FHLB stock	90,662		90,662		90,662		—		—

Interest rate swaps	926		926		—		926		—
Liabilities:
Deposits	6,591,448		6,597,102		3,578,768		3,018,334		—
Borrowings	1,950,770		1,952,458		—		1,952,458		—


	September 30, 2024
	Carrying		Estimated Fair Value
	Amount		Total		Level 1		Level 2		Level 3
	(Dollars in thousands)
Assets:
Cash and cash equivalents	$	217,307	$	217,307	$	217,307	$	—	$	—
AFS securities	856,266		856,266		—		856,266		—

Loans receivable	7,907,338		7,660,535		—		—		7,660,535

FHLB stock	101,175		101,175		101,175		—		—

Interest rate swaps	2,103		2,103		—		2,103		—
Liabilities:
Deposits	6,129,982		6,135,652		3,164,672		2,970,980		—
Borrowings	2,179,564		2,169,403		—		2,169,403		—

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 820
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (bbb)(1)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482106/820-10-50-2

Reference 2: http://www.xbrl.org/2003/role/exampleRef
-Topic 820
-SubTopic 10
-Name Accounting Standards Codification
-Section 55
-Paragraph 107
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482078/820-10-55-107

Reference 3: http://www.xbrl.org/2003/role/exampleRef
-Topic 820
-SubTopic 10
-Name Accounting Standards Codification
-Section 55
-Paragraph 100
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482078/820-10-55-100

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Topic 820
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (c)(3)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482106/820-10-50-2

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 820
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 6A
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 820
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 2E
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482106/820-10-50-2E

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 820
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 6A
-Subparagraph (h)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 820
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 6A
-Subparagraph (f)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 820
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 6A
-Subparagraph (e)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Topic 820
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 6A
-Subparagraph (d)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Topic 820
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (h)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482106/820-10-50-2

Reference 12: http://www.xbrl.org/2003/role/disclosureRef
-Topic 820
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (g)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482106/820-10-50-2

Reference 13: http://www.xbrl.org/2003/role/disclosureRef
-Topic 940
-SubTopic 820
-Name Accounting Standards Codification
-Section 50
-Paragraph 1
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147478119/940-820-50-1

+ Details

Capitol Federal Financial, Inc. 10-K