Capitol Federal Financial, Inc.

Company Overview

Business Model: Capitol Federal Financial, Inc. operates as a unitary savings and loan holding company, with its primary business conducted through its wholly-owned subsidiary, Capitol Federal Savings Bank. The Bank is a federally chartered and insured savings bank headquartered in Topeka, Kansas. Capitol Federal Savings Bank is transitioning from a retail-oriented financial institution to one with an expanded focus on commercial customers. It generates revenue primarily through net interest income, derived from attracting deposits from the general public and businesses, and investing these funds predominantly in commercial loans (real estate and commercial & industrial) and permanent first mortgage loans on owner-occupied, one- to four-family residences. The Bank also invests in investment securities and mortgage-backed securities, funding its activities through deposits and Federal Home Loan Bank of Topeka borrowings. A comprehensive suite of banking services is offered, including various deposit accounts, treasury management services for commercial clients, tailored small business banking, and an expanding suite of private banking and trust and wealth management products.

Market Position: Capitol Federal Savings Bank operates in a highly competitive environment across its markets. It is recognized as one of the leading originators of conventional one- to four-family loans in Kansas. As of June 30, 2025, Capitol Federal Savings Bank held the second-largest deposit market share in Kansas, at 6.2%, according to the Federal Deposit Insurance Corporation's "Summary of Deposits - Market Share Report." The Bank leverages its established banking network, strong brand reputation, and customer service to attract and retain customers.

Recent Strategic Developments: Capitol Federal Savings Bank is actively executing a strategic transition to become a full-service commercial bank. Key initiatives include:

• Commercial Loan Growth: A significant increase in commercial loan originations and participations, totaling $901.9 million in fiscal year 2025, up from $350.6 million in the prior fiscal year. Commercial loans now comprise 26% of the total loan portfolio as of September 30, 2025, compared to 19% in the prior year.
• Technology and Service Expansion: Ongoing investments in technology, personnel, products, and services to support commercial banking, including the implementation of commercial loan pricing and profitability software. Digital banking enhancements are planned for debit cardholders in the second quarter of fiscal year 2026, and new technology for lockbox services, integrated accounts receivables, purchase cards, and corporate cards is expected in calendar year 2026.
• New Business Lines: Preparation for the implementation of a comprehensive suite of private banking products and services in fiscal year 2026, with customer onboarding beginning in the first quarter of fiscal year 2026. The Bank also added seasoned wealth management professionals in the fourth quarter of fiscal year 2025.
• Securities Strategy: In October 2023, Capitol Federal Financial, Inc. executed a securities strategy involving the sale of $1.30 billion of securities (94% of its portfolio) to redeploy proceeds into higher-yielding market rate securities and deleverage the balance sheet. This resulted in a net loss from securities transactions of $13.3 million in fiscal year 2024.
• One- to Four-Family Loan Strategy: The Bank suspended its one- to four-family correspondent lending channels in June 2024, with future repayments from this portfolio expected to fund commercial loan growth.

Geographic Footprint: Capitol Federal Financial, Inc.'s corporate office is in Topeka, Kansas. As of September 30, 2025, Capitol Federal Savings Bank operated a network of 46 branches (44 traditional and two in-store) across nine counties in Kansas and three counties in Missouri. The Bank primarily serves the metropolitan areas of Topeka, Wichita, Lawrence, Manhattan, Emporia, and Salina, Kansas, and a portion of the greater Kansas City metropolitan area. Commercial lending activities extend beyond its local footprint, with commercial real estate loans located in Kansas, Missouri, Texas, and 19 other states.

Financial Performance

Revenue Analysis

Profitability Metrics (FY2025):

• Gross Margin (Net Interest Income / Total Interest & Dividend Income): 45.1%
• Operating Margin (Pretax Income / Total Revenue): 19.8%
• Net Margin (Net Income / Total Revenue): 16.2%

Investment in Growth:

• Capital Expenditures: $5.2 million
• Strategic Investments: Capitol Federal Savings Bank is investing in technology, people, products, and services to support its transition to a full-service commercial bank. This includes expanding treasury management services, developing digital banking platforms, and launching private banking and wealth management offerings. Commercial loan originations and participations totaled $901.9 million in fiscal year 2025.

Core Business Line Analysis

Loan Portfolio

Capitol Federal Savings Bank's loan portfolio totaled $8.11 billion, net, as of September 30, 2025, representing a 2.6% increase year-over-year. The portfolio mix is strategically shifting towards commercial loans.

Financial Performance:

• Total Loans Receivable, Net: $8.11 billion (+2.6% YoY)
• Weighted Average Rate (Total Loans): 4.34% (FY2025) vs 4.02% (FY2024)
• Loans 30-89 days delinquent: 0.15% of total loans receivable, net (Sep 30, 2025)
• Loans 90+ days delinquent or in foreclosure: 0.09% of total loans receivable, net (Sep 30, 2025)
• Net Charge-Offs (NCOs): $198 thousand (FY2025)
• Allowance for Credit Losses (ACL) to Loans Receivable, Net: 0.30% (Sep 30, 2025)

Product Portfolio:

• Commercial Loans: $2.12 billion (+40% YoY), comprising 26% of the total loan portfolio (up from 19% in FY2024).
  • Commercial Real Estate: $1.71 billion (5.82% yield)
  • Commercial and Industrial: $210.1 million (6.92% yield)
  • Commercial Construction: $195.9 million (6.42% yield)
• One- to Four-Family Loans: $5.90 billion (-$400.0 million YoY), comprising 72.5% of the total loan portfolio.
  • Originated: $3.77 billion (3.78% yield)
  • Purchased: $2.11 billion (3.49% yield)
  • Construction: $16.1 million (6.17% yield)
• Consumer Loans: $113.2 million (7.96% yield)
  • Home Equity: $104.8 million (8.15% yield)
  • Other: $8.4 million (5.55% yield)

Key Growth Drivers: The significant growth in the commercial loan portfolio is a primary driver, with $901.9 million in commercial loan originations and participations in fiscal year 2025. This growth is supported by disciplined underwriting, with a weighted average debt service coverage ratio (DSCR) of 1.76x for commercial loan originations and purchases, and a weighted average loan-to-value (LTV) of 65% for commercial real estate and construction loans originated and purchased during the year. Repayments from the one- to four-family loan portfolio are being redirected to fund commercial loan expansion.

Market Dynamics: The Bank actively competes in commercial lending markets both locally and outside its traditional footprint. It monitors concentration levels by collateral type, geographic location, tenant brand name, and borrowing/lending relationships.

Deposit Portfolio

Capitol Federal Savings Bank's total deposits increased by $461.5 million, or 7.5%, to $6.59 billion as of September 30, 2025.

Financial Performance:

• Total Deposits: $6.59 billion (+7.5% YoY)
• Weighted Average Rate (Total Deposits): 2.26% (FY2025) vs 2.53% (FY2024)
• Uninsured Deposits: Approximately $990.2 million (15% of Call Report deposit balance) as of September 30, 2025, with $567.3 million related to commercial and retail accounts, and the remainder mainly collateralized public unit deposits and intercompany accounts.

Product Portfolio:

• Non-interest-bearing checking: $601.4 million (9.1% of total deposits)
• Interest-bearing checking: $859.3 million (13.0% of total deposits, 0.21% rate)
• High yield savings: $460.7 million (7.0% of total deposits, 3.88% rate) - significant growth from $96.2 million in FY2024.
• Other savings: $423.9 million (6.5% of total deposits, 0.07% rate)
• Money market: $1.23 billion (18.7% of total deposits, 1.29% rate)
• Certificates of deposit: $3.01 billion (45.7% of total deposits, 3.74% rate)

Key Growth Drivers: The primary driver of deposit growth in fiscal year 2025 was the high yield savings account offering, which increased by $364.5 million. Approximately 50% of this increase came from existing customers bringing in external funds, 40% from internal transfers, and the remainder from new deposit relationships. The Bank is also focused on growing its non-interest-bearing deposit base and diversifying fee-based income through treasury management services and small business banking.

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases: Capitol Federal Financial, Inc. repurchased 618,260 shares for $3.9 million during fiscal year 2025, all in the fourth quarter. Since December 2010, the Company has repurchased $439.9 million worth of common stock. As of September 30, 2025, $71.1 million remained authorized under the existing stock repurchase plan, with Federal Reserve Board non-objection for up to $75.0 million expiring in February 2026. Subsequent to fiscal year-end, an additional 400,000 shares were repurchased for $6.25 per share through November 21, 2025, leaving $68.6 million authorized.
• Dividend Payments: Total dividends declared and paid during fiscal year 2025 were $44.3 million, or $0.34 per share. Since December 2010, Capitol Federal Financial, Inc. has returned $1.57 billion in cash dividends to stockholders. For fiscal year 2026, the Board of Directors intends to pay a regular quarterly cash dividend of $0.085 per share, totaling $0.34 per share for the year.
• Dividend Yield: 5.46% (based on FY2025 dividend per share of $0.34 and average Q4 FY2025 repurchase price of $6.23).
• Future Capital Return Commitments: The Board of Directors will continue to evaluate opportunities for value-enhancing share repurchases and may consider additional dividends if fiscal year 2026 earnings exceed $0.34 per share.

Balance Sheet Position:

• Cash and Equivalents: $252.4 million (September 30, 2025)
• Total Debt: $1.95 billion (September 30, 2025)
• Net Cash Position: -$1.70 billion (Net Debt)
• Debt Maturity Profile: Total borrowings of $1.95 billion as of September 30, 2025, primarily Federal Home Loan Bank of Topeka advances. $509.7 million of these borrowings are scheduled to be repaid or mature in the next 12 months. The weighted average contractual interest rate on Federal Home Loan Bank of Topeka advances was 3.53%, with an effective rate of 3.54% as of September 30, 2025.

Cash Flow Generation:

• Operating Cash Flow: $55.0 million (FY2025)
• Free Cash Flow (Operating Cash Flow - Capital Expenditures): $49.8 million (FY2025)

Operational Excellence

Production & Service Model: Capitol Federal Savings Bank is transitioning to a full-service commercial bank, centralizing loan servicing and deposit support functions for efficient processing. Its operational philosophy emphasizes prudent underwriting and effective credit risk management to maintain a portfolio of performing loans, which reduces servicing costs. The Bank is investing in technology, people, products, and services to enhance its commercial and consumer banking offerings.

Supply Chain Architecture: Key Suppliers & Partners:

• Funding & Liquidity: Federal Home Loan Bank of Topeka (FHLB) - provides advances and a line of credit.
• Data & Analytics: Third-party macroeconomic forecast provider (for ACL model), third-party pricing services (for securities valuation).
• Education: Banktastic - provides leadership development training.
• Audit Services: KPMG LLP (Independent Registered Public Accounting Firm), Deloitte & Touche LLP (Predecessor Auditor). Technology Partners: Capitol Federal Savings Bank changed core and digital providers in August 2023 and is evaluating add-on technologies to integrate into its digital banking experience for consumers, small businesses, and commercial customers.

Facility Network:

• Headquarters: Topeka, Kansas.
• Branches: 46 branches (44 traditional, 2 in-store) across nine counties in Kansas and three counties in Missouri.
• Ownership: Capitol Federal Savings Bank owns its home office and 35 other branch offices; 10 branches are leased or partially owned.
• Distribution: The Bank serves a broad range of customers through a relatively concentrated branch network, with an average deposit base per traditional branch of approximately $128.5 million at September 30, 2025.

Operational Metrics:

• Efficiency Ratio: 58.33% (FY2025) vs. 66.91% (FY2024). Excluding the securities strategy, the efficiency ratio for FY2024 was 61.97%.
• Operating Expense Ratio: 1.22% (FY2025) vs. 1.17% (FY2024).
• Average Deposit Base per Traditional Branch: $128.5 million (September 30, 2025).

Market Access & Customer Relationships

Go-to-Market Strategy: Distribution Channels:

• Direct Sales: Enterprise sales force focused on prospecting new commercial relationships and expanding existing ones; direct customer relationships for one- to four-family loans through local real estate agents and marketing.
• Channel Partners: Participation in commercial loans with other lenders, both locally and outside market areas.
• Digital Platforms: Call center with extended hours, mobile banking, telephone banking, online banking, and bill payment services. A new deposit account onboarding platform was implemented in November 2024, with digital banking enhancements for debit cardholders projected for the second quarter of fiscal year 2026.

Customer Portfolio: Enterprise Customers:

• Tier 1 Clients: Private banking relationships are defined as customers with $5 million or more in personal relationships with the Bank (loans, deposits, or assets under management).
• Strategic Partnerships: Engages in commercial loan participations with other lenders.
• Customer Concentration: The largest borrowing relationship totaled $103.2 million at September 30, 2025, representing a combination of commercial and industrial loans ($85.1 million) and commercial real estate loans ($18.1 million), all current. The largest commercial and industrial lending relationship had a gross loan balance of $81.7 million, representing 27% of the gross commercial and industrial loan balance.

Geographic Revenue Distribution:

• Kansas & Missouri: Primary markets for one- to four-family and consumer loans, and generally for commercial and industrial loans.
• Commercial Real Estate: Loans are diversified across Kansas, Missouri, Texas, and 19 other states.
• Growth Markets: The Bank is active in commercial lending markets outside its local footprint.

Competitive Intelligence

Market Structure & Dynamics

Industry Characteristics: Capitol Federal Savings Bank operates in a highly competitive financial services industry. Competition is intense for quality commercial banking relationships and deposits, driven by a diverse landscape of larger national, regional, and local financial institutions, credit unions, mortgage brokerage firms, investment banking firms, online competitors, farm credit lenders, commercial finance companies, and insurance companies.

Competitive Positioning Matrix:

Direct Competitors

Primary Competitors:

• Large Financial Institutions: National and regional banks offering a broad range of products.
• Local Institutions: Smaller local banks and credit unions, sometimes offering aggressive pricing and specialized services.
• Non-Bank Lenders: Mortgage brokerage firms, investment banking firms, commercial finance companies, insurance companies, and online competitors.

Competitive Response Strategy: Capitol Federal Savings Bank's strategy to maintain competitive advantage includes:

• Offering a comprehensive suite of commercial and consumer banking products and services.
• Providing competitive loan and deposit pricing.
• Leveraging a strong market reputation and customer service.
• Delivering customized treasury management solutions through experienced relationship managers.
• Developing specialized products and services for small businesses.
• Strategically investing in technology, people, products, and services to expand commercial banking offerings.
• Actively expanding private banking and trust and wealth management services through investments in staff and technology.

Risk Assessment Framework

Strategic & Market Risks

Market Dynamics:

• Interest Rate Risk: Primary market risk due to a balance sheet largely comprised of long-term, fixed-rate interest-earning assets and shorter-term, interest-bearing liabilities. Fluctuations in interest rates, including changes in the yield curve, significantly impact net interest income, cash flows, and the market value of assets and liabilities.
• Economic Downturn: Exposure to downturns in regional housing and commercial real estate markets (Kansas, Missouri, Texas, and 19 other states), and to a lesser extent, nationwide markets. Declines in real estate values, increased unemployment, or underemployment could lead to increased delinquencies, non-performing assets, and loan losses.
• Customer Demand Volatility: Interest rate fluctuations and competition affect customer demand for loan and deposit products.

Technology Disruption:

• Cybersecurity & System Failure: High reliance on information systems for customer relationships, general ledger, deposits, and loans. Risk of system failures, interruptions, security breaches, or cyberattacks (including ransomware, denial of service, data theft) at Capitol Federal Financial, Inc. or its third-party service providers. Such incidents could lead to litigation, regulatory scrutiny, reputational damage, customer loss, and financial losses not covered by insurance.

Operational & Execution Risks

Supply Chain Vulnerabilities:

• Third-Party Vendor Dependency: Operational and information security risks arise from reliance on third-party vendors for data processing, network monitoring, and security services. Vendor failures or breaches could disrupt operations, lead to loss of service, reputational damage, and litigation.
• Capacity Constraints: Implementing new business initiatives may be more difficult or expensive than anticipated.

Financial & Regulatory Risks

Market & Financial Risks:

• Increased Commercial Lending Risk: Strategic growth in the commercial loan portfolio introduces increased lending and credit risks, as commercial loans typically have larger balances and repayment depends on business operations, which are subject to various external factors.
• Capital Distribution Limitations: The ability of Capitol Federal Financial, Inc. to pay dividends and repurchase shares is primarily dependent on Capitol Federal Savings Bank's ability to make capital distributions, which are subject to regulatory approvals and the Bank's earnings and accumulated earnings and profits.
• Pre-1988 Bad Debt Recapture: Capitol Federal Savings Bank has $75.9 million in pre-1988 bad debt reserves, which could be subject to recapture tax if distributions exceed current and accumulated earnings and profits, impacting available capital for distributions.

Regulatory & Compliance Risks:

• Highly Regulated Environment: Subject to extensive regulation, supervision, and examination by the Office of the Comptroller of the Currency (OCC), Federal Reserve Board (FRB), and Federal Deposit Insurance Corporation (FDIC). Changes in laws, regulations, or interpretations could adversely impact operations, increase compliance costs, and affect profitability.
• CFPB Oversight: Potential for increased direct costs and regulatory burdens if Capitol Federal Savings Bank's regulatory assets exceed $10 billion for four consecutive quarter-ends, triggering direct examination and enforcement by the Consumer Financial Protection Bureau (CFPB).
• Compliance Failure: Non-compliance with laws, regulations, or policies could result in civil/criminal sanctions, monetary penalties, and reputational damage.
• Regulatory Capital Requirements: Capitol Federal Savings Bank and Capitol Federal Financial, Inc. must maintain specified levels of regulatory capital. As of September 30, 2025, both met all capital adequacy requirements and Capitol Federal Savings Bank was considered well capitalized with a Community Bank Leverage Ratio (CBLR) of 9.6%.

Geopolitical & External Risks

Geographic Dependencies: Expansion of commercial real estate lending into geographically diverse markets introduces exposure to regional economic downturns and specific market conditions in those areas. Trade Relations: Commercial loan repayments can be affected by changes in trade and fiscal policies, such as the implementation of tariffs.

Innovation & Technology Leadership

Research & Development Focus: Core Technology Areas: Capitol Federal Savings Bank is strategically investing in technology to support its transition to a full-service commercial bank. This includes developing a full suite of commercial products and services, enhancing digital platforms, and expanding private banking and wealth management offerings. Innovation Pipeline:

• Digital Onboarding: A new deposit account onboarding platform was implemented in November 2024.
• Debit Card Enhancements: Digital banking enhancements for debit cardholders, allowing immediate online and digital wallet use, are projected for the second quarter of fiscal year 2026.
• Commercial Services Technology: New technology for lockbox services, integrated accounts receivables, purchase cards, and corporate cards is expected to be implemented within calendar year 2026.
• Artificial Intelligence: Capitol Federal Financial, Inc. and its third-party vendors may develop or incorporate artificial intelligence technology into business processes, services, or products.

Technology Partnerships: Capitol Federal Savings Bank changed core and digital providers in August 2023 and is leveraging open-source platforms to evaluate and integrate add-on technologies for its digital banking experience across consumer, small business, and commercial customers.

Leadership & Governance

Executive Leadership Team

Board Composition: The Boards of Directors of Capitol Federal Financial, Inc. and Capitol Federal Savings Bank are identical. The Board is composed of members with diverse backgrounds, education, and experiences. Since 1977, at least one woman has served as a director of Capitol Federal Savings Bank, and since 1999, at least one woman has served on the Board of Directors of Capitol Federal Financial, Inc. Since 2012, at least one underrepresented minority has served as a director of both entities. The Board oversees cybersecurity risk management and strategy through regular management updates and annual evaluations of enterprise risk.

Human Capital Strategy

Workforce Composition:

• Total Employees: 678 (as of September 30, 2025), including 74 part-time employees.
• Full-time Equivalent: 655 (as of September 30, 2025), an increase from 636 at September 30, 2024.
• Skill Mix: The Bank has added seasoned commercial bankers and trust and wealth advisors. Its IT and Compliance & Risk Management teams hold various relevant certifications (e.g., Certified Information Systems Security Professional, Certified Information Security Manager).

Talent Management: Acquisition & Retention: Capitol Federal Financial, Inc. prioritizes attracting and retaining skilled employees by offering competitive salaries and benefits, and monitoring market compensation levels. Employee Value Proposition: Comprehensive benefits include health, dental, vision, life, and other insurances, along with a wellness program.

Diversity & Development:

• Diversity Metrics: Capitol Federal Financial, Inc. aims for a workforce reflective of the communities it serves. Its Board of Directors includes women (since 1977/1999) and underrepresented minorities (since 2012).
• Development Programs: Provides professional development opportunities, including continuing education and specialized banking education. Leadership development is supported through biannual Leadership Forum services provided by Banktastic for mid-level leaders.
• Culture & Engagement: Employees are encouraged to participate in volunteer opportunities, contributing over 4,976 hours to local organizations and charities in fiscal year 2025. Annual training covers respectful treatment of employees and customers, fair service, and discrimination awareness.

Environmental & Social Impact

Social Impact Initiatives:

• Community Investment: Capitol Federal Financial, Inc.'s employees and the Capitol Federal Foundation contribute to programs promoting educational opportunities and housing in low- and moderate-income communities.
• Product Impact: Capitol Federal Savings Bank received a "satisfactory" rating in its most recently completed Community Reinvestment Act (CRA) evaluation, demonstrating its record in meeting the credit needs of its communities, including low- and moderate-income neighborhoods.

Business Cyclicality & Seasonality

Demand Patterns:

• Economic Sensitivity: Capitol Federal Financial, Inc. is significantly influenced by prevailing economic conditions, federal monetary and fiscal policies, and financial institution regulations. Deposit balances are affected by interest rates on competing investments, personal income levels, and savings rates. Lending activities are influenced by business and housing activity, underwriting standards, and competitive interest rate environments.
• Industry Cycles: Changes in interest rates are the primary market risk, as the majority of interest-earning assets are long-term, fixed-rate loans, while most interest-bearing liabilities are shorter-term. This creates sensitivity to interest rate fluctuations.

Planning & Forecasting: Capitol Federal Savings Bank manages short-term liquidity needs through routine 10-, 30-, and 365-day forecasts. Monthly liquidity stress tests are performed in accordance with the Interagency Policy Statement on Funding and Liquidity Risk Management to identify and quantify liquidity risk across short-term and long-term scenarios.

Regulatory Environment & Compliance

Regulatory Framework: Industry-Specific Regulations:

• Primary Regulators: Capitol Federal Savings Bank is regulated by the Office of the Comptroller of the Currency (OCC) and its deposits are insured by the Federal Deposit Insurance Corporation (FDIC). Capitol Federal Financial, Inc., as a savings and loan holding company, is regulated by the Federal Reserve Board (FRB).
• Lending Limits: Capitol Federal Savings Bank's statutory lending limit to a single borrower or group of related persons was $144.7 million at September 30, 2025, with no current loans exceeding this limit.
• Capital Requirements: Both Capitol Federal Savings Bank and Capitol Federal Financial, Inc. are required to maintain specified regulatory capital levels and met all applicable requirements as of September 30, 2025. Capitol Federal Savings Bank's Community Bank Leverage Ratio (CBLR) was 9.6%.
• Community Reinvestment Act (CRA): Capitol Federal Savings Bank received a "satisfactory" rating in its most recent CRA evaluation.
• Anti-Money Laundering (AML): Subject to the Bank Secrecy Act and USA PATRIOT Act, requiring policies and controls to detect and prevent money laundering and terrorist financing.
• Regulatory Changes: The OCC announced regulatory changes effective January 1, 2026, to reduce burdens and tailor oversight for community banks, allowing for adjusted exam scope and frequency based on risk profiles.

Legal Proceedings: Capitol Federal Savings Bank is a defendant in a putative class action lawsuit (Jennifer Harding, et al. vs. Capitol Federal Savings Bank) regarding overdraft fees. The Kansas Supreme Court affirmed a ruling remanding the case to the District Court for further proceedings on October 17, 2025. Management believes it is unlikely to have a material adverse effect on financial condition, results of operations, or liquidity.

Tax Strategy & Considerations

Tax Profile:

• Effective Tax Rate: Capitol Federal Financial, Inc.'s effective tax rate was 18.1% for fiscal year 2025, compared to 29.7% in fiscal year 2024. Management anticipates an effective tax rate of 19% to 20% for fiscal year 2026.
• Geographic Tax Planning: Capitol Federal Financial, Inc. files a consolidated federal income tax return. Capitol Federal Savings Bank files a Kansas privilege tax return (4.0% rate plus 3.0% surcharge on earnings over $50 thousand, with a minimum tax rate of 4.18% of federal taxable income for privilege tax). The Bank also files state tax returns in 16 other states and two cities due to significant loan balances.
• Tax Reform Impact:
  • Kansas Tax Law Change: Kansas enacted a tax law change effective October 1, 2027, shifting to a single, revenue-based apportionment method. This is expected to decrease income apportioned to Kansas for the Bank, resulting in an $857 thousand reduction in net state income tax expense in fiscal year 2025 due to remeasurement of deferred tax assets and liabilities.
  • One Big Beautiful Bill Act (OBBBA): Enacted July 4, 2025, this act includes provisions for permanent extension of certain Tax Cuts and Jobs Act provisions and restoration of favorable business tax treatment. Capitol Federal Financial, Inc. is evaluating its impact.
  • Pre-1988 Bad Debt Recapture: Capitol Federal Savings Bank holds $75.9 million in pre-1988 bad debt reserves, equating to an unrecorded deferred tax liability of $15.9 million. In fiscal year 2024, $5.4 million in income tax expense was recognized due to distributions from these reserves. In fiscal year 2025, sufficient taxable income replenished accumulated earnings and profits, preventing further recapture tax on distributions.

Insurance & Risk Transfer

Risk Management Framework: Capitol Federal Financial, Inc. maintains an enterprise risk management program to identify, quantify, monitor, report, and control risks including interest-rate, credit, liquidity, operations, compliance, and litigation. A compliance program ensures adherence to applicable laws, policies, and procedures.

• Risk Transfer Mechanisms: Capitol Federal Financial, Inc. uses interest rate swaps to hedge variable cash outflows associated with certain borrowings, managing interest rate risk.