Capitol Federal Financial, Inc.

Previous wording

•increases in classified and/or non-performing assets, which may require the Bank to increase the ACL, charge-off loans and incur elevated collection and carrying costs related to such non-performing assets;

Current wording

•increases in classified and/or non-performing assets, which may require the Bank to increase the ACL, charge-off loans and incur elevated collection and carrying costs, or not recognize income for a period of time, related to such non-performing assets;

Previous wording

The Company recognized net income of $30.8 million, or $0.24 per share, for the current year six month period, compared to net income of $16.3 million, or $0.12 per share, for the prior year six month period. The lower net income in the prior year six month period was primarily a result of the net losses on the sale of securities associated with the securities strategy. See additional discussion regarding the securities strategy in the "Securities Strategy to Improve Earnings" section below. Excluding the effects of the net loss associated with the securities strategy, EPS would have been $0.20 for the prior year six month period. The increase in EPS excluding the effects of the net loss associated with the securities strategy was due primarily to higher net interest income in the current year six month period.

Current wording

The Company recognized net income of $49.2 million, or $0.38 per share, for the current year period, compared to net income of $26.0 million, or $0.20 per share, for the prior year period. The lower net income in the prior year period was primarily a result of the net losses on the sale of securities associated with the securities strategy. See additional discussion regarding the securities strategy in the "Securities Strategy to Improve Earnings" section below. Excluding the effects of the net loss associated with the securities strategy, EPS would have been $0.28 for the prior year period. The increase in EPS excluding the effects of the net loss associated with the securities strategy was due primarily to higher net interest income in the current year period.

Previous wording

The net interest margin increased 13 basis points, from 1.76% for the prior year period to 1.89% for the current year period. The increase was due mainly to higher yields on loans and the continued shift of loan balances from the one- to four-family loan portfolio to the higher yielding commercial loan portfolio, which outpaced the increase in the cost of deposits, largely in retail certificates of deposit.

Current wording

The net interest margin increased 15 basis points, from 1.77% for the prior year period to 1.92% for the current year period. The increase was due mainly to higher yields on the loan portfolio due to the continued shift of loan balances from the one- to four-family loan portfolio to the higher yielding commercial loan portfolio, which outpaced the increase in the cost of deposits, largely in high yield savings accounts and retail certificates of deposit.

Previous wording

The Bank continues to transition from a retail oriented financial institution to one with an increasing focus on commercial customers. The Bank is active in local markets for lending, commercial deposit and treasury management relationships, even when the lending opportunity may be for locations outside of the Bank's and the customers' local footprint. For the remainder of fiscal year 2025, it is anticipated that the Bank's net interest margin will continue to improve, assuming the continuation of decreasing deposit costs and increasing yields on our loan portfolio. All areas of the Bank's operations continue to focus on the management of costs.

Current wording

The Bank continues to transition from a retail oriented financial institution to one with an increasing focus on commercial customers by strategically growing all aspects of commercial banking through the alignment of technology, people, products, and services. The Bank is active in local markets for lending, commercial deposit and treasury management relationships, even when the lending opportunity may be for locations outside of the Bank's and the customers' local footprint. For additional discussion, see the "Strategic Banking Initiatives" section below.

Previous wording

The Company's efficiency ratio was 59.23% for the current year six month period compared to 74.29% for the prior year six month period. Excluding the net losses from the securities strategy, the efficiency ratio would have been 63.28% for the prior year six month period. The improvement in the efficiency ratio, excluding the net losses from the securities strategy, was due primarily to higher net interest income compared to the prior year six month period. The Company's operating expense ratio (annualized) for the current year six month period was 1.18%, unchanged from the prior year six month period.

Current wording

The Company's efficiency ratio was 58.89% for the current year period compared to 69.77% for the prior year period. Excluding the net losses from the securities strategy, the efficiency ratio would have been 62.87% for the prior year period. The improvement in the efficiency ratio, excluding the net losses from the securities strategy, was due primarily to higher net interest income compared to the prior year period. The Company's operating expense ratio (annualized) for the current year period was 1.20% compared to 1.18% for the prior year period, due mainly to higher non-interest expense, largely related to increased expenses due to higher salaries and employee benefits.

Previous wording

Total deposits were $6.37 billion at March 31, 2025, a $242.6 million increase from September 30, 2024. The increase was due primarily to the Bank's high yield savings account offering and retail checking accounts, partially offset by a decrease in retail certificates of deposit. Management has continued to focus on retaining and growing deposits through the Bank's high yield savings account product, which as of March 31, 2025 had an annual percentage yield of 4.30% for accounts meeting the account criteria, including a $10 thousand balance minimum.

Current wording

Total deposits were $6.43 billion at June 30, 2025, a $301.2 million increase from September 30, 2024. The increase during the current year period was due primarily to a $311.8 million increase in the Bank's high yield savings account offering and a $98.3 million, or 37.8%, increase in commercial non-maturity deposits. The increases were partially offset by an $85.4 million decrease in retail certificates of deposit and a $60.6 million decrease in retail money market accounts. Management has continued to focus on retaining and growing retail deposits through the Bank's high yield savings account product, which as of June 30, 2025, had an annual percentage yield of 4.00% for accounts meeting the account criteria, including a $10 thousand balance minimum. The annual percentage yield decreased during the current quarter from 4.30% as of March 31, 2025.

Previous wording

Total borrowings were $2.14 billion at March 31, 2025, a $36.6 million decrease from September 30, 2024. The decrease was due to principal payments made on the Bank's amortizing FHLB advances. Management estimates that the Bank had $2.96 billion in liquidity available at March 31, 2025 based on the Bank's blanket collateral agreement with FHLB and unencumbered securities.

Current wording

Total borrowings were $2.07 billion at June 30, 2025, a $108.0 million decrease from September 30, 2024. The decrease was due to principal payments made on the Bank's amortizing FHLB advances, along with borrowings that matured but were not replaced. Management estimates that the Bank had $2.97 billion in liquidity available at June 30, 2025 based on the Bank's blanket collateral agreement with FHLB and unencumbered securities.

Previous wording

Stockholders' equity totaled $1.04 billion at March 31, 2025, an increase of $4.8 million from September 30, 2024. As of March 31, 2025, the Bank's capital ratios exceeded the well-capitalized requirements. The Bank's community bank leverage ratio ("CBLR") as of March 31, 2025 was 9.5%.

Current wording

Stockholders' equity totaled $1.05 billion at June 30, 2025, an increase of $13.9 million from September 30, 2024. As of June 30, 2025, the Bank's capital ratios exceeded the well-capitalized requirements. The Bank's community bank leverage ratio ("CBLR") as of June 30, 2025 was 9.7%.

Previous wording

The Bank's asset quality remains strong, reflected in the continued low level of loan delinquency and charge-off ratios. At March 31, 2025, loans 30 to 89 days delinquent were 0.18% of total loans receivable, net, and loans 90 or more days delinquent or in foreclosure were 0.12% of total loans receivable, net. See "Asset Quality - Delinquent and nonaccrual loans and OREO" below for additional discussion. During the current year six month period, net charge-offs were $107 thousand.

Current wording

The Bank's asset quality remains strong, reflected in the continued low level of loan delinquency and charge-off ratios. At June 30, 2025, loans 30 to 89 days delinquent were 0.20% of total loans receivable, net, and loans 90 or more days delinquent or in foreclosure were 0.10% of total loans receivable, net. See "Financial Condition - Asset Quality - Delinquent and nonaccrual loans and OREO" below for additional discussion. During the current year period, net charge-offs ("NCOs") were $132 thousand.

Previous wording

At March 31, 2025 the gap between the Bank's amount of interest-earning assets and interest-bearing liabilities projected to reprice within one year was $(1.11) billion, or (11.4)% of total assets, compared to $(1.51) billion, or (15.8)% of total assets, at September 30, 2024. As of March 31, 2025, the Bank exceeded internal policy thresholds for sensitivity to changes in interest rates. See additional discussion in "Part I, Item 3. Quantitative and Qualitative Disclosures About Market Risk."

Current wording

At June 30, 2025 the gap between the Bank's amount of interest-earning assets and interest-bearing liabilities projected to reprice within one year was $(963.3) million, or (9.9)% of total assets, compared to $(1.51) billion, or (15.8)% of total assets, at September 30, 2024. As of June 30, 2025, the Bank exceeded internal policy thresholds for sensitivity to changes in interest rates. See additional discussion in "Part I, Item 3. Quantitative and Qualitative Disclosures About Market Risk."

Previous wording

In October 2023, the Company initiated a securities strategy (the "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 allowed the Company to improve its earnings stream going forward, beginning in the quarter ended December 31, 2023, by redeploying most of the proceeds into then 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. 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 of Kansas City earning interest at the reserve balance rate until such time as it could be used to fund commercial activity or for other Bank operations.

Current wording

In October 2023, the Company initiated a securities strategy (the "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 allowed the Company to improve its earnings stream going forward, beginning in the quarter ended December 31, 2023, by redeploying most of the proceeds into then-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. See additional information regarding the impact of the securities strategy on our financial measurements in "Comparison of Operating Results for the Nine Months Ended June 30, 2025 and 2024 - 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.

Previous wording

Management continues to focus on strategically growing commercial banking through the alignment of technology, people, products and services. Management believes we will be successful in this initiative as we are focusing on the financial needs of growing companies and small businesses and pairing these companies with experienced relationship managers who offer a broad range of customized services, digital platforms and sophisticated cash management tools tailored to their businesses. Leveraging our new technology and organizational structure to quickly respond to customer needs in the sales pipeline is central to our growth strategy for commercial deposits. We expect that commercial loan growth will continue to be driven by prospecting for new relationships and maintaining and expanding existing relationships. Strong credit quality remains a priority for the Bank as it seeks to grow commercial lending, and we are now able to offer a full suite of treasury management products to service these new and existing lending relationships.

Current wording

The Company continues to strategically grow all aspects of commercial banking through the alignment of technology, people, products and services. Management believes we have been and will continue to be successful in this initiative as we focus on meeting the financial needs of growing and established companies and small businesses and pairing them with experienced relationship managers who offer a broad range of customized services, digital platforms and sophisticated cash management tools. Leveraging our new technology and organizational structure to quickly respond to customer needs in the sales pipeline is central to our growth strategy for commercial deposits. We expect that commercial loan growth will continue to be driven by prospecting for new relationships and maintaining and expanding existing relationships. While strong credit quality remains a priority, the Bank is now offering a full suite of treasury management products to service new and existing relationships.

Previous wording

During the current quarter we implemented and began utilizing commercial loan pricing and profitability software which provides pricing and profitability based on the full customer banking relationship. Management intends to implement additional modules associated with the software during the remainder of fiscal year 2025 that should provide market insight regarding competitor pricing to assist loan officers when preparing a loan offering for a customer.

Current wording

During the current quarter, the Bank continued to implement and utilize commercial loan pricing and profitability software which provides pricing and profitability based on the full customer banking relationship. Management is in the process of implementing additional software modules during the remainder of fiscal year 2025 that provide market insight regarding competitor pricing to assist loan officers when preparing a loan offering for a customer.

Previous wording

We see many opportunities to grow our non-interest bearing deposit base and diversify fee-based revenue streams through growth not only in treasury management services, but also trust and wealth management services, and small business banking. We have a team of bankers focused on the deposit and loan needs of small businesses in our market area. Early in the June 30, 2025 quarter, we plan to launch additional new checking products and digital banking services specifically designed for small businesses.

Current wording

We see many opportunities to grow our non-interest-bearing deposit base and diversify fee-based revenue streams through growth in treasury management services, trust and wealth management services, and small business banking. We have a team of bankers focused on the deposit and loan needs of small businesses in our market area. During the current quarter the Bank successfully launched new checking products and digital banking services specifically designed for our small business customers. In the quarter ending September 30, 2025 the Bank expects to introduce digital onboarding for these small business customers using industry-leading risk management and screening tools, which will replace many manual verification tasks. We continue to listen to the needs of our customers as this line of business grows, and as a result of demand within the treasury management pipeline, we are actively evaluating new technology for lockbox services, integrated accounts receivable, integrated accounts payable and purchase cards.

Previous wording

As part of this growth strategy, we intend to create a seamless digital banking experience for all customers, which we believe will better enable the Bank to attract and retain deposits. This includes the new deposit account onboarding platform implemented in November 2024 and digital banking enhancements for debit cardholders which is projected to be implemented in the fourth quarter of fiscal year 2025.

Current wording

As part of this growth strategy, we are creating a seamless digital banking experience for all customers, which we believe will better enable the Bank to attract and retain deposits. This includes a new deposit account onboarding platform implemented in November 2024 and digital banking enhancements for debit cardholders that will allow customers to begin using their card immediately online and in digital wallets without waiting for the physical card in the mail which is projected to be implemented in the fourth quarter of fiscal year 2025.

Previous wording

Loans receivable, net decreased $77.7 million during the current quarter. The loan portfolio mix continued to shift from one- to four-family loans to commercial loans during the current quarter, with a $96.0 million decrease in one- to four-family loans, partially offset by commercial loan growth of $21.8 million. Management expects the Bank's one- to four-family originated loan portfolio will continue to decrease as the affordability of housing remains challenging and there is a limited supply of homes for sale.

Current wording

As a result of continued high interest rates and a lack of housing inventory, which has reduced housing market transactions, our one- to four-family origination and refinance activity has slowed which directly impacts the Bank's one- to four-family loan portfolio. In addition, the Bank suspended its one- to four-family correspondent lending channels during fiscal year 2024 for the foreseeable future. Management expects the Bank's one- to four-family originated loan portfolio will continue to decrease as the affordability of housing remains challenging and there is a limited supply of homes for sale. It is expected that excess repayment cash flows generated from the one- to four-family portfolio will continue to be used to fund commercial loan growth.

Previous wording

The following table presents origination and refinance activity in our one- to four-family loan portfolio, excluding endorsement activity, along with the weighted average rate, weighted average LTV and weighted average credit score for the time periods presented.

Current wording

The following table presents origination and refinance activity in our one- to four-family loan portfolio, excluding endorsement activity, along with the weighted average rate, weighted average LTV and weighted average credit score for the time periods presented. As of June 30, 2025, the Bank had one- to four-family loan and refinance commitments totaling $57.9 million at a weighted average rate of 6.45%.

Previous wording

Commercial Loans -The table below presents commercial loan origination and purchase activity for the time periods presented. For commercial real estate and commercial construction loans, the LTV ratio is calculated using the gross loan amount (composed of unpaid principal and undisbursed amounts) and the collateral value at the time of origination. For existing real estate, the "as is" value is used. If the property is to be constructed, the "as completed" value of the collateral is utilized. The DSCR is calculated based on historical borrower performance, or projected borrower performance for newly formed entities with no performance history.

Current wording

Commercial Loans -The table below presents commercial loan origination and participation activity for the time periods presented, along with weighted average LTV and weighted average DSCR. For commercial real estate and commercial construction loans, the LTV ratio is calculated using the gross loan amount (composed of unpaid principal and undisbursed amounts) and the collateral value at the time of origination. For existing real estate, the "as is" value is used. If the property is to be constructed, the "as completed" value of the collateral is utilized. The DSCR is calculated based on historical borrower performance, or projected borrower performance for newly formed entities with no performance history.

Previous wording

The following table presents commercial loan disbursements, excluding lines of credit, during the six months ended March 31, 2025.

Current wording

The following table presents commercial loan disbursements, excluding lines of credit, during the nine months ended June 30, 2025.

Previous wording

The following table presents the Bank's commercial real estate and commercial construction loans by type of primary collateral as of the dates indicated. Management anticipates fully funding the majority of the undisbursed amounts as most are not cancellable by the Bank. At March 31, 2025, the unpaid principal balance of non-owner occupied commercial real estate loans was $1.01 billion and the unpaid principal balance of owner occupied commercial real estate loans was $163.4 million, both of which are included in the table below.

Current wording

The following table presents the Bank's commercial real estate and commercial construction loans by type of primary collateral as of the dates indicated. Management anticipates fully funding the majority of the undisbursed amounts, as most are not cancellable by the Bank.

Previous wording

The following table presents management's funding expectations for the Bank's commercial real estate and commercial construction undisbursed amounts and commitments outstanding as of March 31, 2025. Due to the nature of a revolving line of credit, management is unable to project funding expectations for those balances so those amounts are presented separately from management's funding expectations. The majority of the $136.5 million of commitments expected to fund during the June 30, 2025 quarter are related to hotel loans. Management has decided that it will continue to lend to existing borrowing relationships secured by hotels but is not taking on new relationships for hotel lending. Existing hotel lending opportunities in our pipeline will continue to be evaluated. Management believes that our intended level of concentration in this category of lending will be met with our existing portfolio and pipeline opportunities.

Current wording

The following table presents management's funding expectations for the Bank's commercial real estate and commercial construction undisbursed amounts and commitments outstanding as of June 30, 2025. Due to the nature of a revolving line of credit, management is unable to project funding expectations for those balances so those amounts are presented separately from management's funding expectations. The majority of the $146.2 million of commitments expected to fund early during the September 30, 2025 quarter are related to senior housing loans.

Previous wording

The following table presents the Bank's commercial real estate and commercial construction loans by unpaid principal balance, aggregated by type of primary collateral and state, along with weighted average LTV ratio and weighted average DSCR as of March 31, 2025. The LTV ratio is calculated using the gross loan amount (composed of unpaid principal and undisbursed amounts) as of March 31, 2025 and the most current collateral value available, which is most often the value at origination/purchase. The DSCR is calculated at the time of origination, and is updated at the time of subsequent loan renewals, financial reviews (for applicable loans and lending relationships), and any other time management is aware of changes that may impact the DSCR. The DSCR presented in the table below is based on the DSCR at the time of origination unless an updated DSCR has been calculated. Commercial loans that have an outstanding balance of $1.5 million or more, or borrowing relationships with a total relationship exposure of $5.0 million or more are reviewed no less often than annually to monitor financial performance.

Current wording

The following table presents the Bank's commercial real estate and commercial construction loans by unpaid principal balance, aggregated by type of primary collateral and state, along with weighted average LTV and weighted average DSCR as of June 30, 2025. The LTV is calculated using the gross loan amount (composed of unpaid principal and undisbursed amounts) as of June 30, 2025 and the most current collateral value available, which is most often the value at origination/purchase. The DSCR is calculated at the time of origination, and is updated at the time of subsequent loan renewals, financial reviews (for applicable loans and lending relationships), and any other time management is aware of changes that may impact the DSCR. The DSCR presented in the table below is based on the DSCR at the time of origination unless an updated DSCR has been calculated or the loan has reached the end of its stabilization period. Commercial loans that have an outstanding balance of $1.5 million or more or borrowing relationships with a total relationship exposure of $5.0 million or more are reviewed no less often than annually to monitor financial performance.

Previous wording

The following table presents the Bank's commercial loan portfolio and outstanding loan commitments, categorized by aggregate gross loan amount (unpaid principal plus undisbursed amounts) or outstanding loan commitment amount and average loan amount, as of March 31, 2025. For loans and commitments over $50.0 million, $267.4 million was related to hotels in Arizona, California, New York, and Texas, $143.1 million was related to multi-family properties in Kansas, and $60.0 million was related to an office building in Texas.

Current wording

The following table presents the Bank's commercial real estate and commercial construction loans, including unpaid principal and undisbursed amounts, along with outstanding loan commitments as of June 30, 2025, categorized by aggregate gross loan and commitment amounts and average loan amount. For loans over $50.0 million, there were $267.0 million related to hotels in Arizona, California, New York, and Texas, $143.1 million related to multi-family properties in Kansas, and $59.7 million related to an office building in Texas.

Previous wording

The following table summarizes the Bank's commercial and industrial loans by loan purpose as of the dates indicated. As of March 31, 2025, the Bank also had four commercial and industrial loan commitments totaling $4.2 million, at a weighted average rate of 7.00%.

Current wording

The following table summarizes the Bank's commercial and industrial loans by loan purpose as of the dates indicated. The commercial and industrial gross loan amount increased $96.6 million, or 52%, during the current quarter. During the current quarter, the Bank originated three loans to two borrower relationships that accounted for $85.3 million of the increase in this portfolio. Of the $281.2 million of commercial and industrial loans at June 30, 2025, 58%, or $164.5 million, had a gross loan balance of $5.0 million or more. The largest commercial and industrial lending relationship at June 30, 2025 had a gross loan balance of $81.8 million, which represented 29% of the gross loan balance at June 30, 2025. In addition, the Bank had three commercial and industrial loan commitments totaling $42.0 million, with a weighted average rate of 6.79%, at June 30, 2025, which are not reflected in the table below. The recent growth in this portfolio aligns with the Bank's strategy to grow all aspects of commercial banking. Management anticipates growth will continue in the commercial and industrial loan portfolio but it will likely fluctuate over time due to the nature of these loans.

Previous wording

Delinquent and nonaccrual loans and OREO. The following table presents the Company's 30 to 89 day delinquent loans at the dates indicated. The amounts in the table represent the unpaid principal balance of the loans less related charge-offs, if any. Of the loans 30 to 89 days delinquent at March 31, 2025, 64% were 59 days or less delinquent. The decrease in 30-89 day delinquent commercial real estate loans as of March 31, 2025 was due primarily to a $15.5 million Community Reinvestment Act loan that was paid current during the current quarter.

Current wording

Delinquent and nonaccrual loans and OREO. The following table presents the Bank's 30 to 89 day delinquent loans at the dates indicated. The amounts in the table represent the unpaid principal balance of the loans less related charge-offs, if any. Of the loans 30 to 89 days delinquent at June 30, 2025, 71% were 59 days or less delinquent.

Previous wording

The following table presents the Company's nonaccrual loans and OREO at the dates indicated. The amounts in the table represent the unpaid principal balance of the loans less related charge-offs, if any. 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. At all dates presented, there were no loans 90 or more days delinquent that were still accruing interest. Non-performing assets include nonaccrual loans and OREO.

Current wording

The following table presents the Bank's nonaccrual loans and OREO at the dates indicated. The amounts in the table represent the unpaid principal balance of the loans less related charge-offs, if any. 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. At all dates presented, there were no loans 90 or more days delinquent that were still accruing interest. Non-performing assets include nonaccrual loans and OREO. The increase in nonaccrual commercial real estate loans as of June 30, 2025 was due primarily to two participation loans related to the same borrowing relationship that were moved to substandard during the current quarter. See the asset classification discussion below for additional information regarding these loans.

Previous wording

The following table presents the states where the properties securing ten percent or more of the total amount of our one- to four-family loans are located and the corresponding balance of loans 30 to 89 days delinquent, 90 or more days delinquent or in foreclosure, and weighted average LTV ratios for loans 90 or more days delinquent or in foreclosure at March 31, 2025. The LTV ratios were based on the current loan balance and either the lesser of the purchase price or original appraisal, or the most recent Bank appraisal, if available. At March 31, 2025, potential losses, after taking into consideration anticipated private mortgage insurance proceeds and estimated selling costs, have been charged-off.

Current wording

The following table presents the states where the properties securing ten percent or more of the total amount of the Bank's one- to four-family loans are located and the corresponding balance of loans 30 to 89 days delinquent, 90 or more days delinquent or in foreclosure, and weighted average LTV for loans 90 or more days delinquent or in foreclosure at June 30, 2025. The LTVs 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.

Previous wording

Classified loans. The following table presents the amortized cost of loans classified as special mention or substandard at the dates presented. The increase in commercial real estate substandard loans at March 31, 2025 and December 31, 2024 compared to September 30, 2024 was due mainly to a participation loan for $39.0 million as of March 31, 2025 related to a hotel in Texas. The property is taking longer than projected to stabilize and the borrower is not meeting the debt service coverage loan covenant required by the loan agreement. The borrower projects improved occupancy and cash flow during the remainder of calendar year 2025 and expects the project to fully stabilize during calendar year 2026. As of March 31, 2025, the LTV on this loan was 47% and the loan was not delinquent.

Current wording

Classified loans. The following table presents the amortized cost of loans classified as special mention or substandard at the dates presented. The increase in commercial real estate substandard loans at June 30, 2025 compared to March 31, 2025 was due mainly to two participation loans related to the same borrowing relationship, totaling $40.2 million as of June 30, 2025 and secured by a hotel. The borrower is working on a recapitalization plan, which is anticipated to be completed later in calendar year 2025, and the Bank entered into an agreement with the borrower during the current quarter which allows the borrower to not make payments during this period. Therefore, these loans were considered nonaccrual at June 30, 2025 and classified as substandard. The loans were not considered delinquent at June 30, 2025 due to the terms of the agreement. As of June 30, 2025, the combined Bank LTV on the loans was 45% based on an appraisal completed in the past three months. The increase in commercial real estate substandard loans since September 30, 2024 has been related to the $40.2 million of participation loans discussed above, along with another $38.9 million participation loan also secured by a hotel. In regard to the $38.9 million participation loan, the property is taking longer than anticipated to stabilize and the borrower is not meeting the debt service coverage loan covenant required by the loan agreement. The borrower projects improved occupancy and cash flow during the remainder of calendar year 2025 and expects to be fully stabilized during calendar year 2026. As of June 30, 2025, the loan was not delinquent and the Bank LTV was 47% based on an appraisal completed approximately two years ago. The Bank has had a participation relationship with the lead bank for all three commercial real estate substandard participation loans discussed above for ten years, and the Bank holds the same percentage interest in these loans as the lead bank. These loans are recourse with a personal guaranty and have strong LTVs. Both borrower groups (developers, owners and guarantors) are seasoned commercial real estate developers with over 40 years of experience each. These loans were individually evaluated for loss as of June 30, 2025. There have been no charge-offs with these loans nor has management set aside a specific valuation allowance associated with these loans as of June 30, 2025 due to the strong LTVs.

Previous wording

Allowance for Credit Losses. The Bank utilizes a discounted cash flow approach for estimating expected credit losses for pooled loans and loan commitments. Expected credit losses are determined by calculating projected future loss rates which are dependent upon forecasted economic indices and applying qualitative factors when deemed appropriate by management. At March 31, 2025, management selected a slightly worse economic scenario to use in the discounted cash flow model than at December 31, 2024 to account for current economic conditions and future economic uncertainty related to recently issued and proposed federal government policies. Management applied qualitative factors at March 31, 2025 to account for large dollar commercial loan concentrations and potential risk of loss in market value for newer one- to four-family loans. These qualitative factors were applied to account for credit risks not fully reflected in the discounted cash flow model. See "Part II, Item 8. Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 1. Summary of Significant Accounting Policies" in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2024 and "Part 1, Item 1. Note 4. Loans Receivable and Allowance for Credit Losses" within this Quarterly Report on Form 10-Q for additional information related to the key assumptions used in the discounted cash flow model and the qualitative factors.

Current wording

Allowance for Credit Losses. The Bank utilizes a discounted cash flow model for estimating expected credit losses for pooled loans and loan commitments. Expected credit losses are determined by calculating projected future loss rates which are dependent upon forecasted economic indices and applying qualitative factors when deemed appropriate by management. At June 30, 2025, management applied qualitative factors to account for large dollar commercial real estate loan concentrations and potential risk of loss in market value for newer one- to four-family loans. These qualitative factors were applied to account for credit risks not fully reflected in the discounted cash flow model.

Previous wording

Historically, the Bank has maintained very low delinquency ratios and net charge-off ("NCO") rates. Over the past two years, the Bank's highest ratio of commercial loans 90 days or more delinquent to total commercial loans at a quarter end was 0.22%. The highest such ratio for one- to four-family originated and correspondent loans, combined, was 0.12%. The amount of total NCOs during the current quarter and current year six month period was $114 thousand and $107 thousand, respectively, the majority of which related to one one- to four- family bulk purchased loan. During the 10-year period ended March 31, 2025, the Bank recognized $1.2 million of total NCOs. As of March 31, 2025, the ACL balance was $24.0 million and the reserve for off-balance sheet credit exposures totaled $5.6 million, which management believes is adequate for the risk characteristics in our loan portfolio.

Current wording

Historically, the Bank has maintained very low delinquency ratios and NCO rates. Over the past two years, the Bank's highest ratio of commercial loans 90 days or more delinquent to total commercial loans at a quarter end was 0.22%. The highest such ratio for one- to four-family originated and correspondent loans, combined, was 0.12%. The amount of total NCOs during the current quarter and current year period was $25 thousand and $132 thousand, respectively. The majority of the NCOs during the current year period related to one single-family bulk purchased loan. During the 10-year period ended June 30, 2025, the Bank recognized $1.1 million of total NCOs. As of June 30, 2025, the ACL balance was $22.8 million and the reserve for off-balance sheet credit exposures totaled $6.3 million, which management believes is adequate for the credit risk characteristics in our loan portfolio.

Previous wording

The ratio of NCOs to average non-performing assets was higher in the current year six month period compared to the prior year six month period, due primarily to higher NCOs in the current year six month period. As noted above, the majority of the NCOs in the current year six month period related to one one- to four- family bulk purchased loan. The ratio of ACL to nonaccrual loans was lower at the end of the current year six month period compared to the end of the prior year period due mainly to a higher balance of nonaccrual loans in the current year six month period compared to the prior year six month period, along with a lower ACL balance at March 31, 2025. The ratio of ACL to loans receivable, net was lower at the end of the current year six month period compared to the end of the prior year six month period due primarily to a reduction in the ACL/loan ratio for commercial real estate loans, partially offset by changes in the loan portfolio mix, specifically commercial loan growth which is at a higher ACL/loan ratio than one- to four-family loans. See "Note 4. Loans Receivable and Allowance for Credit Losses" for additional information related to ACL activity by specific loan categories. ACL at the end of period to NCOs during the period (annualized) was lower compared to the prior year six month period, due primarily to higher NCOs in the current year six month period.

Current wording

The ratio of NCOs to average non-performing assets was lower at June 30, 2025 compared to June 30, 2024, due to an increase in average non-performing assets in the current year period compared to the prior year period, which was partially offset by higher NCOs. As noted above, the majority of the NCOs in the current year period related to one single-family bulk purchased loan and the increase in average non-performing assets was due primarily to two commercial participation loans that were nonaccrual at June 30, 2025, as discussed above, and thereby considered non-performing assets. The ratio of ACL to nonaccrual loans was lower at the end of the current year period compared to the end of the prior year period due mainly to a higher balance of nonaccrual loans in the current year period compared to the prior year period, largely related to two commercial participation loans that were nonaccrual at June 30, 2025 as discussed above, along with a lower ACL balance at June 30, 2025. The ratio of ACL to loans receivable, net was lower at the end of the current year period compared to the end of the prior year period due primarily to a reduction in the ACL/loan ratio for commercial real estate loans due mainly to the regression analyses update discussed above. See "Part I, Item 1. Note 4. Loans Receivable and Allowance for Credit Losses" within this Quarterly Report on Form 10-Q for additional information related to ACL activity by specific loan categories. ACL at the end of period to NCOs during the period (annualized) was lower compared to the prior year period, due primarily to higher NCOs in the current year period, partially offset by a lower ACL balance at June 30, 2025.

Previous wording

Liabilities. Total liabilities were $8.68 billion at March 31, 2025, compared to $8.50 billion at September 30, 2024. The increase was due primarily to a $242.6 million increase in deposits, partially offset by a $36.6 million decrease in borrowings due to principal payments made on the Bank's amortizing advances.

Current wording

Liabilities. Total liabilities were $8.65 billion at June 30, 2025, compared to $8.50 billion at September 30, 2024. The increase was due primarily to a $301.2 million increase in deposits, partially offset by a $108.0 million decrease in borrowings due to principal payments made on the Bank's amortizing advances, along with borrowings that matured but were not replaced.

Previous wording

The following table presents the amount, weighted average rate, and percent of total for the components of our deposit portfolio, split between retail non-maturity deposits, commercial non-maturity deposits, and certificates of deposit at the dates presented.

Current wording

The following table presents the amount, weighted average rate, and percent of total for the components of our deposit portfolio, split between retail non-maturity deposits, commercial non-maturity deposits, and certificates of deposit at the dates presented. Total deposits increased $301.2 million, or 4.9%, from September 30, 2024. The increase was primarily in retail non-maturity deposits which increased $246.6 million, or 8.5%, due mainly to an increase in high yield savings accounts, along with a $98.3 million, or 37.8%, increase in commercial non-maturity deposits, and a $40.2 million, or 52.5%, increase in public unit certificates from September 30, 2024. The increases noted above were partially offset by an $85.4 million, or 3.0%, decrease in retail certificates of deposit from September 30, 2024.

Previous wording

As of March 31, 2025, approximately $802.4 million (or approximately 12%) of the Bank's Call Report deposit balance was uninsured, of which approximately $475.3 million related to commercial and retail deposit accounts, with the remainder mainly comprised of fully collateralized public unit deposits and intercompany accounts. The uninsured amounts are estimates based on the methodologies and assumptions used for the Bank's regulatory reporting requirements.

Current wording

As of June 30, 2025, approximately $899.4 million (or approximately 14%) of the Bank's Call Report deposit balance was uninsured, of which approximately $509.4 million (or approximately 8% of the Bank's Call Report deposit balance) related to commercial and retail deposit accounts, with the remainder mainly comprised of fully collateralized public unit deposits and intercompany accounts. The uninsured amounts are estimates based on the methodologies and assumptions used for the Bank's regulatory reporting requirements.

Previous wording

Borrowings. Total borrowings at March 31, 2025 were $2.14 billion, which was comprised of $1.94 billion in fixed-rate FHLB advances, $200.0 million in FHLB variable-rate advances tied to interest rate swaps, and $1.1 million in finance leases.

Current wording

Borrowings. Total borrowings at June 30, 2025 were $2.07 billion, which was comprised of $1.87 billion in fixed-rate FHLB advances, $200.0 million in FHLB variable-rate advances tied to interest rate swaps, and $1.1 million in finance leases.

Previous wording

The following table presents the maturity of term borrowings, which consist of FHLB advances, along with associated weighted average contractual and effective rates as of March 31, 2025. Amortizing FHLB advances totaling $318.3 million as of March 31, 2025 are presented based on their maturity dates versus their quarterly scheduled repayment dates.

Current wording

The following table presents the maturity of term borrowings, which consist of FHLB advances, along with associated weighted average contractual and effective rates as of June 30, 2025. Amortizing FHLB advances totaling $297.2 million as of June 30, 2025 are presented based on their maturity dates versus their quarterly scheduled repayment dates.

Previous wording

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. Line of credit borrowings and finance leases are excluded from the table. 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. The beginning and ending WAMs represent the remaining maturity at each date presented. During the prior year six month period, Federal Reserve's Bank Term Funding Program ("BTFP") borrowings were paid off with the proceeds received from the securities strategy.

Current wording

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. Line of credit borrowings and finance leases are excluded from the table. 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. The beginning and ending WAMs represent the remaining maturity as of the first and last days of the period presented. During the current quarter, the Bank prepaid fixed-rate FHLB advances with a weighted average remaining term of 0.6 years totaling $200.0 million and a weighted average contractual interest rate of 4.70%, and replaced these advances with $200.0 million of fixed-rate FHLB advances with a weighted average contractual interest rate of 3.83% and a weighted average term of 2.5 years. The weighted average effective interest rate of the new advances was 3.93%, which includes the impact of deferred prepayment penalties being recognized over the life of the new advances. This activity is reflected in the table below. During the prior year period, Federal Reserve's Bank Term Funding Program ("BTFP") borrowings were paid off with a portion of the proceeds received from the securities strategy.

Previous wording

Stockholders' Equity. Stockholders' equity totaled $1.04 billion at March 31, 2025, an increase of $4.8 million from September 30, 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 March 31, 2025, the Bank's capital ratios exceeded the well-capitalized requirements and the Bank exceeded internal policy thresholds for sensitivity to changes in interest rates. See "Liquidity and Capital Resources" below for additional information regarding the Bank's regulatory capital requirements. As of March 31, 2025, the Bank's CBLR was 9.5%.

Current wording

Stockholders' Equity. Stockholders' equity totaled $1.05 billion at June 30, 2025, an increase of $13.9 million from September 30, 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 June 30, 2025, the Bank's capital ratios exceeded the well-capitalized requirements and the Bank exceeded internal policy thresholds for sensitivity to changes in interest rates. See "Liquidity and Capital Resources" below for additional information regarding the Bank's regulatory capital requirements. As of June 30, 2025, the Bank's CBLR was 9.7%.

Previous wording

During the six months ended March 31, 2025, the Company paid regular quarterly cash dividends totaling $22.1 million, or $0.17 per share. On April 22, 2025, the Company announced a regular quarterly cash dividend of $0.085 per share, or approximately $11.5 million, payable on May 16, 2025 to stockholders of record as of the close of business on May 2, 2025.

Current wording

During the nine months ended June 30, 2025, the Company paid regular quarterly cash dividends totaling $33.2 million, or $0.255 per share. On July 22, 2025, the Company announced a regular quarterly cash dividend of $0.085 per share, or approximately $11.1 million, payable on August 15, 2025 to stockholders of record as of the close of business on August 1, 2025.

Previous wording

At March 31, 2025, Capitol Federal Financial, Inc., at the holding company level, had $27.3 million in cash on deposit at the Bank. 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 tax current earnings and accumulated earnings and profits, and the amount of cash at the holding company level.

Current wording

At June 30, 2025, Capitol Federal Financial, Inc., at the holding company level, had $16.1 million in cash on deposit at the Bank. 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 tax current earnings and accumulated earnings and profits, and the amount of cash at the holding company level. Through the payment of the True Blue dividend in prior years, the Company was able to reduce its excess capital. Management and the Board of Directors believe that the current capital levels are appropriate. The last True Blue dividend occurred in fiscal year 2022.