TOPEKA, Kan., October 23, 2024–(BUSINESS WIRE)–Capitol Federal Financial, Inc.^® (NASDAQ: CFFN) (the “Company,” “we” or “our”), the parent company of Capitol Federal Savings Bank (the “Bank”), announced results today for the quarter and fiscal year ended September 30, 2024. For best viewing results, please view this release in Portable Document Format (PDF) on our website, https://ir.capfed.com.

Highlights for the quarter include:

• net income of $12.1 million;

• basic and diluted earnings per share of $0.09;

• net interest margin of 1.80%;

• paid dividends of $0.085 per share; and

• on October 22, 2024, announced a cash dividend of $0.085 per share, payable on November 15, 2024 to stockholders of record as of the close of business on November 1, 2024.

Highlights for the fiscal year include:

• net income of $38.0 million;

• basic and diluted earnings per share of $0.29;

• net interest margin of 1.77%; and

• paid dividends of $0.34 per share.

Comparison of Operating Results for the Three Months Ended September 30, 2024 and June 30, 2024

For the quarter ended September 30, 2024, the Company recognized net income of $12.1 million, or $0.09 per share, compared to net income of $9.6 million, or $0.07 per share, for the quarter ended June 30, 2024. The higher net income in the current quarter was due primarily to a release of provision for credit losses in the current quarter compared to provision expense in the prior quarter. The net interest margin increased three basis points, from 1.77% for the prior quarter to 1.80% for the current quarter due mainly to net interest margin improvements from the loan portfolio outpacing the cost of retail certificates of deposit.

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 loans receivable was due to an increase in the weighted average yield of the entire loan portfolio, and an increase in the average balance of the loan portfolio. The increase in the average balance was primarily in the commercial loan portfolio partially offset by a decrease in the average balance of the one- to four-family correspondent loan portfolio. See additional discussion regarding the composition of the loan portfolio in the “Financial Condition as of September 30, 2024” section below. The increase in interest income on MBS was due to an increase in average balance compared to the prior quarter primarily as a result of purchases made during the current quarter. The decrease in interest income on cash and cash equivalents was due primarily to a decrease in the average balance as excess operating cash during the current quarter was, in part, used to fund commercial loan activities, reinvest in the MBS portfolio and pay down borrowings. The decrease in interest income on investment securities was due to a decrease in the average balance as a result of maturities during the current and prior quarter. The majority of the cash flows from the investment securities portfolio was reinvested into the MBS portfolio or used to pay down borrowings.

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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 increase in interest expense on deposits was due primarily to increases in the weighted average rate paid and the average balance of the retail certificate of deposit portfolio, along with an increase in the weighted average rate paid on the savings portfolio as a result of continued growth in the Bank’s high-yield savings account offering that was introduced in early fiscal year 2024. Both were partially offset by a decrease in the weighted average rate and average balance of the money market portfolio.

Provision for Credit Losses

For the quarter ended September 30, 2024, the Bank recorded a provision release of $637 thousand, compared to a provision for credit losses of $1.5 million for the prior quarter. The provision release in the current quarter was comprised of a $2.7 million decrease in the allowance for credit losses (“ACL”) for loans, partially offset by a $2.1 million increase in the reserve for off-balance sheet credit exposures. The decrease in ACL was composed of $1.6 million related to the commercial real estate portfolio and $1.1 million related to the one- to-four family loan portfolio. See discussion regarding the changes in the ACL balance during the current quarter in the “Supplemental Financial Information – Asset Quality – ACL” section below. The increase in the reserves for off-balance sheet credit exposures was due primarily to an increase in the balance of off-balance sheet credit exposures between quarters.

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 primarily due to adjustments to accrued contingent commissions made in anticipation of lower commissions largely related to industry changes in underwriting and loss experience which is adversely impacting new business and projected loss ratios. The industry changes impacting commissions are expected to persist for the foreseeable future, so management is currently evaluating other insurance revenue streams while maintaining our current lines of business. The increase in other non-interest income was due mainly to lower market value losses in the current quarter related to 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 decrease in information technology and related expense was due primarily to lower software related expenses. The increase in occupancy, net, was due mainly to an increase in utilities related to seasonality. The decrease in the federal insurance premium was due primarily to a decrease in the Federal Deposit Insurance Corporation (“FDIC”) assessment rate. Prior to the current quarter, the FDIC assessment rate was higher as a result of the assessment rate being adjusted for the occurrence of the Bank’s net loss during the quarter ending September 30, 2023. Starting with the current quarter, the net loss is no longer impacting the assessment rate. The increase in advertising and promotional expense was due mainly to the timing of campaigns and sponsorships compared to the prior quarter. The decrease in deposit and loan transaction costs was due primarily to a reduction in electronic banking expense compared to the prior quarter due to the timing of invoices.

The Company’s efficiency ratio was 59.29% for the current quarter compared to 62.07% for the prior quarter. The improvement in the efficiency ratio was due to lower 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 lower value generally indicates that it is costing the financial institution less money to generate revenue, relative to its net interest income 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 and the effective tax rate.

The increase in income tax expense in the current quarter was due primarily to higher pretax income in the current quarter compared to the prior quarter.

Included in income tax expense for the current quarter and prior quarter was $2.0 million and $2.9 million, respectively, of income tax expense associated with the Bank’s pre-1988 bad debt recapture. See additional information regarding the pre-1988 bad debt recapture in “Comparison of Operating Results for the Years Ended September 30, 2024 and 2023 – Income Tax Expense”. The income tax expense associated with the pre-1988 bad debt recapture negatively impacted earnings by $0.02 per share in the current quarter and $0.03 per share in the prior quarter.

Comparison of Operating Results for the Years Ended September 30, 2024 and 2023

The Company recognized net income of $38.0 million, or $0.29 per share, for the current year, compared to a net loss of $101.7 million, or $(0.76) per share, for the prior year. The net loss in the prior year resulted from the impairment loss on the securities associated with the securities strategy (defined below). See additional discussion regarding the securities strategy in the “Securities Strategy to Improve Earnings” section below. The securities associated with the securities strategy were sold in the first quarter of fiscal year 2024. The Company incurred $13.3 million ($10.0 million net of tax) of net losses related to the sale of those securities. Excluding the effects of the net loss associated with the securities strategy, earnings per share would have been $0.37 for the current year and $0.33 for the prior year. The increase in earnings per share excluding the effects of the net loss associated with the securities strategy was due primarily to higher net interest income and a lower provision for credit losses in the current year, partially offset by higher income tax expense.

Periodically, at management’s discretion, we have utilized a strategy to increase earnings which entails entering into short-term FHLB borrowings and depositing the proceeds from these FHLB borrowings, net of the purchases of FHLB stock made to meet FHLB stock holding requirements, at the Federal Reserve Bank of Kansas City (“FRB”) (the “leverage strategy”). See additional information regarding the leverage strategy in the “Financial Condition as of September 30, 2024 – Leverage Strategy” section below. 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.

The net interest margin increased 34 basis points, from 1.43% for the prior year to 1.77% for the current year, due primarily to the leverage strategy being in place during the prior year but not in the current year. The leverage strategy negatively impacted the net interest margin for the prior year by 12 basis points. The remaining improvement in the net interest margin absent the leverage strategy was due to higher yields on securities and loans which outpaced the increase in the cost of deposits, largely in retail certificates of deposit.

Securities Strategy to Improve Earnings

In October 2023, the Company initiated a securities strategy by selling $1.30 billion of securities, representing 94% of its securities portfolio. Since the Company did not have the intent to hold the $1.30 billion of securities to maturity at September 30, 2023, the Company recognized an impairment loss on those securities of $192.6 million which was reflected in the Company’s financial statements for the quarter and fiscal year ended September 30, 2023. The securities strategy was designed to allow the Company to improve its earnings stream going forward, beginning in the current fiscal year, by redeploying most of the proceeds into current market rate securities and to provide liquidity to deleverage the balance sheet utilizing the remaining proceeds. During the quarter ended December 31, 2023, the Company completed the sale of securities and recognized $13.3 million ($10.0 million net of tax), or $0.08 per share, of additional loss related to the sale of the securities. See additional information regarding the impact of the securities strategy on our financial measurements in “Average Balance Sheets” below. The $1.30 billion of securities sold had a weighted average yield of 1.22% and an average duration of 3.6 years. With the proceeds from the sale of the securities, the Company purchased $632.0 million of securities yielding 5.75%, paid down $500.0 million of borrowings with a weighted average cost of 4.70%, and held the remaining cash at the FRB earning interest at the reserve balance rate until such time as it could be used to fund commercial activity or for other Bank operations. See additional discussion related to commercial loan activity in the “Financial Condition as of September 30, 2024” and “Supplemental Financial Information – Loan Portfolio” sections below.

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 loans receivable was due largely to an increase in the weighted average yield, along with an increase in the average balance of the portfolio primarily as a result of growth in the commercial loan portfolio as the loan portfolio mix continued to shift from one- to four-family loans to commercial loans. The increase in the weighted average yield was due primarily to originations and purchases at higher market rates between periods, as well as disbursements on commercial construction loans at rates higher than the overall portfolio rate and upward repricing of existing adjustable-rate loans due to higher market interest rates. The increase in the average balance was mainly in the commercial loan portfolio which was partially offset by a decrease in the average balance of the one-to four-family loan portfolio. See additional discussion in the “Financial Condition as of September 30, 2024” and “Supplemental Financial Information – Loan Portfolio” sections below.

The increase in interest income on MBS and investment securities was due to an increase in the weighted average yield, partially offset by a decrease in the average balance, both a result of the securities strategy.

The decrease in interest income on cash and cash equivalents and the decrease in dividend income on FHLB stock were due mainly to the leverage strategy being utilized during the prior year and not being utilized during the current year. Interest income on cash and cash equivalents related to the leverage strategy decreased $37.8 million and dividend income on FHLB stock related to the leverage strategy decreased $3.6 million compared to the prior year. Interest income on cash and cash equivalents not associated with the leverage strategy increased $9.7 million due largely to an increase in the average balance of cash and cash equivalents. The increase in the average balance was mainly a result of the securities strategy as not all of the proceeds from the securities strategy were immediately redeployed due to future anticipated commercial loan fundings and the higher rate paid on reserves held at the FRB.

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 increase in interest expense on deposits was due almost entirely to an increase in the weighted average rate paid on deposits, specifically retail certificates of deposit and money market accounts. To a lesser extent, the average balance of retail certificates of deposit also increased interest expense on deposits, partially offset by a decrease in the average balance of money market accounts. See additional information regarding the deposit portfolio composition in the “Financial Condition as of September 30, 2024” section below.

Interest expense on borrowings associated with the leverage strategy decreased $39.7 million compared to the prior year due to the leverage strategy being in place during the prior year and not being in place during the current year. Interest expense on borrowings not associated with the leverage strategy decreased $9.3 million due mainly to a decrease in borrowings under the Federal Reserve’s Bank Term Funding Program (“BTFP”), which were repaid during the current year, and a reduction in the average outstanding balance on the Bank’s FHLB line of credit compared to the prior year. The decrease in these borrowings was partially offset by new borrowings in the current year at market interest rates higher than the overall portfolio rate, to replace maturing advances and fund operational needs.

Provision for Credit Losses

The Company recorded a provision for credit losses of $1.3 million during the current year, compared to a provision for credit losses of $6.8 million for the prior year. The provision for credit losses in the current year was comprised of a $1.9 million increase in the reserve for off-balance sheet credit exposures, partially offset by a $633 thousand release in the ACL for loans. The increase in the reserve for off-balance sheet credit exposures was due primarily to an increase in the balance of off-balance sheet credit exposures and an increase in the ACL to loan ratio, which is applied to off-balance sheet credit exposures, between periods, specifically for commercial construction loans. The change in the balance of the ACL from the prior fiscal year end to the end of the current fiscal year was a decrease of $723 thousand which differs from the $633 thousand above primarily due to net charge-offs. The reduction in ACL was due to a decrease in the ACL for our one- to four-family loans as a result of a decrease in the ACL to loan ratio and a decrease in loan balances, partially offset by an increase in the ACL for our commercial loans due to growth in the commercial loan portfolio. See discussion regarding the ACL in the “Supplemental Financial Information – Asset Quality – ACL” section below.

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 deposit service fees was due primarily to a change in the fee structure of certain deposit products after the Bank’s digital transformation project. The decrease in insurance commissions was primarily due to adjustments to accrued contingent commissions made in anticipation of lower commissions largely related to industry changes in underwriting and loss experience which is adversely impacting new business and projected loss ratios. The industry changes impacting commissions are expected to persist for the foreseeable future, so management is currently evaluating other insurance revenue streams while maintaining our current lines of business. The net loss from securities transactions in the prior year related to the impairment loss on securities associated with the securities strategy while the $13.3 million loss in the current year related to additional losses incurred on those securities when they were ultimately sold during the first quarter of fiscal year 2024.

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 salaries and employee benefits was mainly attributable to higher incentive compensation in the current year compared to the prior year, as no incentive compensation was paid in the prior year due to the net loss recognized by the Company. The decrease in information technology and related expense was due mainly to lower third-party project management expenses associated with the Bank’s digital transformation project during the prior year along with the discontinuation of other costs associated with the previous core system, partially offset by higher software licensing expenses resulting from new agreements associated with the digital transformation project. The increase in the federal insurance premium was due primarily to an increase in the FDIC assessment rate as a result of the way the assessment rate is adjusted for the occurrence of the Bank’s net loss during the quarter ending September 30, 2023. The decrease in regulatory and outside services was due to the prior year including expenses related to the digital transformation project. The decrease in office supplies and related expense was due primarily to the outsourcing of statement processing related to the digital transformation, and the timing of office supply purchases between periods. The increase in other non-interest expense was due mainly to an increase in customer fraud losses.

The Company’s efficiency ratio was 66.91% for the current year compared to (626.63)% for the prior year. Excluding the net losses from the securities strategy, the efficiency ratio would have been 61.97% for the current year and 65.31% for the prior year. The improvement in the efficiency ratio, excluding the net losses from the securities strategy, was due primarily to higher net interest income and lower non-interest expense in the current year compared to the prior year.

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 and effective tax rate.

In the prior year, absent the net loss, the effective income tax rate for that year would have been 18.1%. The higher effective tax rate in the current year was due primarily to recording $5.4 million of income tax expense on the current year distributions of earnings from the Bank to the Company in association with the pre-1988 bad debt recapture, along with higher state income tax expense mainly related to the tax treatment of the bad debt recapture, partially offset by a $3.3 million tax benefit related to the $13.3 million net loss on the securities sale associated with the securities strategy.

The income tax on the earnings distribution from the Bank to the Company was due to the recapture of a portion of the Bank’s bad debt reserves which were established prior to September 30, 1988, and are included in the Bank’s retained earnings (“pre-1988 bad debt reserves”). A taxable net loss will be reported on the Company’s September 30, 2024 federal tax return due to the net losses associated with the strategic securities transaction (“securities strategy”), which resulted in the Bank and Company having a negative current and accumulated earnings and profit tax position. This requires the Bank to draw upon the pre-1988 bad debt reserves for any distributions from the Bank to the Company during the current fiscal year. The Bank has been required to pay taxes on the reductions to the pre-1988 bad debt reserves equal to the current corporate tax rate at the time of the distribution of the amount of Bank earnings paid to the Company (“pre-1988 bad debt recapture”). The Bank recorded $5.4 million of income tax expense on earnings distributions from the Bank to the Company during fiscal year 2024 due to the pre-1988 bad debt recapture. As of September 30, 2024, the amount of the Bank’s remaining pre-1988 bad debt reserves was $75.9 million, or $15.9 million tax effected, as of September 30, 2024.

Management anticipates the effective tax rate for fiscal year 2025 will be 19% to 20%. The effective tax rate is anticipated to be lower than fiscal year 2024 as it is currently the intention of management and the Board of Directors to make no distributions from the Bank to the Company during fiscal year 2025. By not making distributions during fiscal year 2025, the Bank will not incur income tax expense related to the bad debt recapture as occurred during fiscal year 2024. See “Financial Condition – Stockholders’ Equity” section below for additional discussion.

Financial Condition as of September 30, 2024

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

During the current quarter, total assets decreased $75.1 million, to $9.53 billion at September 30, 2024, due primarily to a decrease in cash which was used to pay off certain borrowings that matured and to fund securities purchases. The loan portfolio mix continued to shift from one- to four-family loans to commercial loans during the current quarter, with $43.6 million, 12% annualized, in commercial loan growth, offset by a $72.9 million decrease in one- to four-family loans due primarily to a $49.8 million decrease in one- to four-family correspondent loans.

As a result of continued high interest rates and lack of housing inventory which has reduced housing market transactions, our single-family origination activity has slowed which directly impacted the Bank’s one- to four-family loan portfolio. Origination and refinance activity has slowed considerably, and there has been a reduction in one- to four-family loan balances through scheduled repayments and loan payoffs. During the June 30, 2024 quarter, the Bank suspended its one- to four-family correspondent lending channels for the foreseeable future. Management expects the Bank’s one- to four-family loan portfolio will continue to decrease as cash flows generated from the one- to four-family portfolio are used to fund commercial loan growth.

Total liabilities decreased $86.7 million during the current quarter due primarily to a $112.0 million decrease in borrowings mainly as a result of not replacing all maturing FHLB borrowings. Management estimates that the Bank had $2.93 billion in additional liquidity available at September 30, 2024 based on the Bank’s blanket collateral agreement with FHLB and unencumbered securities.

Total assets decreased $649.9 million from September 30, 2023, due primarily to a $528.2 million decrease in securities mainly as a result of the securities strategy, along with a $63.6 million decrease in the loan portfolio and a $28.3 million decrease in cash. The decrease in the loan portfolio was due mainly to a $287.2 million decrease in one- to four-family loans, partially offset by a $221.5 million increase in commercial loans.

Total liabilities at September 30, 2024 were $8.50 billion, a decrease of $638.1 million from September 30, 2023. The decrease was due primarily to a $699.6 million decrease in borrowings as some of the funds from the securities strategy were used to repay all $500.0 million of outstanding borrowings under the BTFP and not all maturing FHLB borrowings were replaced during the current fiscal year. The decrease in borrowings was partially offset by an increase in deposits. Total deposits increased $78.8 million from September 30, 2023, primarily in retail certificates of deposit, all in the 14 months or shorter term category, partially offset by a decrease in retail money market accounts as some customers elected to move funds to the Bank’s certificate of deposit offerings or the Bank’s higher yielding savings account offering.

During fiscal year 2024, management sought to grow certificates of deposit with terms of 14 months or less by offering market competitive rates. We focused on terms that should allow us to price down certificates of deposit as and when the FRB reduces overnight rates, which first occurred in September 2024. The weighted average maturity (“WAM”) of our retail certificate of deposit portfolio as of September 30, 2024 was approximately 10 months. Our retail certificate of deposit retention rate has been approximately 87% over the past 12-months. Additionally, management has focused on retaining and growing deposits through the introduction of a high-yield savings account early in fiscal year 2024 which had an annual percentage yield of 4.30% for balances over $10 thousand as of September 30, 2024. The high-yield savings account balance was $96.2 million as of September 30, 2024. Of this amount, approximately 45% relates to existing Bank customers increasing their balances during the year by bringing in funds from outside of the Bank, approximately 40% is from internal Bank transfers from other deposit products, largely the money market portfolio, and the remaining 15% is composed of new deposit relationships. While there is an immediate reprice and increase in cost on internal transfers within the Bank, we believe we have captured rate sensitive money by offering this product, rather than having those funds leave the Bank.

Stockholders’ equity decreased $11.8 million from September 30, 2023 due primarily to stock buybacks early in fiscal year 2024, partially offset by an increase in accumulated other comprehensive income, net of tax. The improvement in accumulated other comprehensive income, net of tax, was mainly a result of the securities strategy.

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

Leverage Strategy

Periodically, the Bank has utilized a leverage strategy to increase earnings, which entails entering into short-term FHLB borrowings and depositing the proceeds from these FHLB borrowings, net of the purchases of FHLB stock made to meet FHLB stock holding requirements, at the FRB. The leverage strategy is not a core operating business for the Company. It provides the Company the ability to utilize excess capital to generate earnings. Additionally, it is a strategy that can be exited quickly without additional costs. The profitability of the leverage strategy is attributable to net income derived from the dividends received on the increased FHLB stock holdings, plus the net interest rate spread between the yield on the leverage strategy cash at the FRB and the rate paid on the leverage strategy FHLB borrowings, less applicable FDIC premiums and estimated income tax expense. Leverage strategy borrowings are repaid prior to each quarter end so there is no impact to quarter end capital ratios. The leverage strategy was not in place at any time during the current year due to the strategy being unprofitable, but it was in place at points during the prior year. During the prior year, the average balance of cash associated with the leverage strategy was $882.8 million and interest earned on that cash was $37.7 million, the average balance of FHLB stock associated with the leverage strategy was $41.6 million and dividends earned on that stock were $3.6 million, and the average balance of FHLB borrowings associated with the leverage strategy was $924.4 million and the related interest expense was $39.7 million. Additionally, the Company recognized $406 thousand of FDIC premiums and $215 thousand of income tax expense during the prior year related to the leverage strategy. 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. Management continues to monitor the net interest rate spread and overall profitability of the leverage strategy.

Stockholders’ Equity

Stockholders’ equity totaled $1.03 billion at September 30, 2024 a decrease of $11.8 million from September 30, 2023. During the current year, the Company repurchased $19.3 million of shares and paid regular quarterly cash dividends totaling $44.5 million, or $0.34 per share. On October 22, 2024, the Company announced a regular quarterly cash dividend of $0.085 per share, or approximately $11.1 million, payable on November 15, 2024 to stockholders of record as of the close of business on November 1, 2024.

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 September 30, 2024, the Bank’s capital ratios exceeded the well-capitalized requirements and the Bank exceeded all internal policy thresholds for sensitivity to changes in interest rates. As of September 30, 2024, the Bank’s community bank leverage ratio was 9.2%.

Based on the Company’s accumulated earnings and profits at the beginning of its 2024 tax year and the current year tax earnings and profits deficit as a result of the losses associated with the securities strategy, all dividends paid to stockholders by the Company during fiscal year 2024 should be treated as a return of capital, pursuant to Internal Revenue Code Section 301(c)(2), which reduced the tax basis in the shares of the holder by the amount of the dividend received. Stockholders should consult their own tax advisors to determine the income tax consequences of their specific situation. The Company is providing this for informational purposes only and not as legal or tax advice. Based on the Company’s proposed actions for fiscal year 2025 (as discussed further below), the Company anticipates that the majority, if not all, of the dividend payments to Company stockholders in fiscal year 2025 will be treated as dividends for tax purposes.

At September 30, 2024, Capitol Federal Financial, Inc. at the holding company level, had $50.1 million in cash on deposit at the Bank. Given the amount of cash at the holding company level, and in an effort to minimize the tax associated with the bad debt recapture, it is currently the intention of management and the Board of Directors to not distribute earnings from the Bank to the Company during fiscal year 2025. It is currently anticipated that the Bank will have sufficient taxable income during fiscal year 2025 to replenish tax accumulated earnings and profits to a positive level allowing the Bank to make earnings distributions to the Company during fiscal year 2026 and not be taxed on those distributions. For fiscal year 2025, it is the intention of the Company’s Board of Directors to pay out the regular quarterly cash dividend of $0.085 per share, totaling $0.34 per share for the year. To the extent that earnings in fiscal year 2025 exceed $0.34 per share, the Board of Directors will consider the payment of additional dividends. 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, the Bank’s taxable current earning and accumulated earnings and profits, and the amount of cash at the holding company level.

During the current year, the Company repurchased 3,280,110 shares of common stock at an average price of $5.87 per share. There were no shares repurchased during the current quarter. The Company currently has $75.0 million authorized for repurchase under existing stock repurchase plans. The FRB’s current approval for the Company to repurchase shares up to the $75.0 million authorization expires in February 2025. Shares may be repurchased from time to time based upon market conditions, available liquidity and other factors.

The following table presents a reconciliation of total to net shares outstanding as of September 30, 2024.

Capitol Federal Financial, Inc. is the holding company for the Bank. The Bank has 47 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.

Forward-Looking Statements

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: 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 and the effects of inflation or a potential recession, whether caused by Federal Reserve action or otherwise; the impact of bank failures or adverse developments at other banks and related negative press about the banking industry in general on investor or depositor sentiment; demand for loans in the Company’s market areas; the future earnings and capital levels of the Bank and the impact of the pre-1988 bad debt recapture, 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 Securities and Exchange Commission (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.

SUPPLEMENTAL FINANCIAL INFORMATION

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 income (annualized for the three-month periods) by the average balance of the related assets, and weighted average rates are derived by dividing expense (annualized for the three-month periods) 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.