Capitol Federal Financial, Inc.

Capitol Federal Financial, Inc. (CFFN) operates as a federally chartered and insured savings bank, Capitol Federal Savings Bank, headquartered in Topeka, Kansas, with its common stock traded on the Global Select tier of the NASDAQ Stock Market. The company is actively transitioning from a retail-oriented financial institution to one with an expanded focus on commercial customers, achieved through strategic investments in technology, personnel, products, and services ¹. The core business model involves attracting deposits primarily from the general public and businesses, and investing these funds predominantly in commercial loans (secured by real estate or for commercial and industrial purposes) and permanent loans secured by first mortgages on owner-occupied, one-to four-family residences ¹. The company's revenue is primarily driven by net interest income, which is the difference between interest earned on loans, securities, and cash, and interest paid on deposits and borrowings ¹.

The company offers a comprehensive suite of commercial and consumer banking products and services. For commercial customers, this includes a full suite of treasury management services designed to optimize cash flow, prevent fraud, and streamline payment operations, aiming to grow the non-interest-bearing deposit base and diversify fee-based income ¹. Specialized products are also offered for small business customers, supported by a team of business development officers ¹. On the consumer side, the company offers various deposit accounts such as savings, money market, interest-bearing and non-interest-bearing checking, and certificates of deposit with terms ranging from 91 days to 120 months ¹. Lending products include commercial real estate, commercial and industrial, commercial construction, one-to four-family residential loans (both originated and previously purchased), and consumer loans, predominantly home equity loans and lines of credit ¹.

For the fiscal year ended September 30, 2025, Capitol Federal Financial, Inc. reported total assets of $9.778 billion ⁴, an increase of $251.093 million ⁴ or 2.6% ⁴ from September 30, 2024. Total liabilities stood at $8.731 billion ⁴, up $235.7 million ⁴ from the prior year. Stockholders' equity increased by $15.407 million ⁴ to $1.047 billion ⁴. Net income for fiscal year 2025 was $68.025 million ⁵, or $0.52 per diluted share ⁵, a significant increase from $38.010 million ⁵, or $0.29 per diluted share ⁵, in fiscal year 2024. The net interest margin improved by 19 basis points to 1.96% ⁶ from 1.77% ⁶ in the prior fiscal year. The efficiency ratio for the current fiscal year was 58.33% ⁶, an improvement from 66.91% ⁶ in fiscal year 2024. The operating expense ratio increased to 1.22% ⁶ from 1.17% ⁶. The allowance for credit losses (ACL) on loans was $24.039 million ⁴ at September 30, 2025, compared to $23.035 million ⁴ at September 30, 2024.

Year-over-year, total loans receivable, net, increased by $204.623 million ⁴ or 2.6% ⁴ to $8.111 billion ⁴. This growth was primarily driven by a $607.0 million ⁶ increase in the commercial loan portfolio, which now comprises 26% ⁶ of the total loan portfolio, up from 19% ⁶ in the prior fiscal year. This was partially offset by a $400.0 million ⁶ decrease in one-to four-family loans. Deposits increased by $461.466 million ⁴ or 7.5% ⁴ to $6.591 billion ⁴, largely due to the success of the Bank's high-yield savings account offering, which grew by $364.5 million ⁶ to $460.712 million ⁷. Borrowings decreased by $228.794 million ⁴ or 10.5% ⁴ to $1.950 billion ⁴, as principal repayments were made on amortizing FHLB advances and some matured borrowings were not replaced ⁶. Interest and dividend income increased by $22.676 million ⁸ or 6.0% ⁸ to $399.519 million ⁸, while interest expense increased by $4.426 million ⁹ or 2.1% ⁹ to $219.208 million ⁹. Non-interest income saw a substantial increase of $15.481 million ¹⁰ or 295.2% ¹⁰ to $20.725 million ¹⁰, primarily due to the absence of the $13.345 million ¹⁰ net loss from securities transactions recorded in the prior fiscal year. Non-interest expense increased by $5.327 million ¹¹ or 4.8% ¹¹ to $117.270 million ¹¹, mainly due to higher salaries and employee benefits ¹¹.

During fiscal year 2025, the company continued its strategic shift towards commercial banking. It closed $901.9 million ⁶ in commercial loans, a significant increase from $350.6 million ⁶ in the prior fiscal year. The Bank implemented commercial loan pricing and profitability software and new technology for lockbox services, integrated accounts receivables, purchase cards, and corporate cards are expected to be implemented in calendar year 2026 ⁶. A new deposit account onboarding platform was implemented in November 2024 ⁶, and digital banking enhancements for debit cardholders are projected for the second quarter of fiscal year 2026 ⁶. The Bank also added several wealth management professionals in the fourth quarter of fiscal year 2025 to support a new private banking line of business, with customer onboarding beginning in the first quarter of fiscal year 2026 ⁶. The company repurchased 618,260 shares ⁶ for $3.9 million ⁶ during fiscal year 2025, all in the fourth quarter ⁶. Total dividends declared and paid during fiscal year 2025 were $44.3 million ⁶, or $0.34 per share ⁶.

For fiscal year 2026, management anticipates an approximate 9% ¹² increase in salary and employee benefit expense compared to fiscal year 2025. This projected increase is attributed to the expected hiring of additional professionals, merit increases, ongoing staff compensation alignment with market levels, and the impact of a full year of compensation for recently hired sales professionals ¹². Information technology expense, which was lower than anticipated in fiscal year 2025 due to project postponements, is now projected to increase by approximately 11% ¹² from fiscal year 2025. This increase is due to these postponed projects being rescheduled for fiscal year 2026, along with several new initiatives planned for implementation during the year ¹². Overall, total non-interest expense is projected to increase by 6% ¹² in fiscal year 2026 from the fiscal year 2025 amount ¹².

Management anticipates that the Federal Reserve Board (FRB) will continue to reduce interest rates during the company's 2026 fiscal year ¹². This is expected to result in a reduction in the Bank's deposit interest expense ¹². Concurrently, the loan portfolio yield is expected to remain stable or increase, driven by the ongoing remixing of the loan portfolio towards higher-yielding commercial loans ¹².

A significant growth area for the company is its strategic progression to a full-service commercial bank. This involves continued investments in technology, people, products, and services ⁶. The company has already seen positive results from its digital transformation efforts, which are expected to accelerate ⁶. Key initiatives include expanding the product suite of treasury management services, which enables the company to service new commercial customer groups and is expected to drive off-balance sheet revenue and increase fee-based income ⁶. The Bank expects to introduce digital onboarding for small business customers using industry-leading risk management and screening tools, replacing manual verification tasks ⁶. Furthermore, new technology for lockbox services, integrated accounts receivables, purchase cards, and corporate cards is expected to be implemented within calendar year 2026 ⁶.

Another major growth vector is the implementation of a comprehensive suite of private banking products and services, a new line of business for the Bank ⁶. During the fourth quarter of fiscal year 2025, the Bank added several seasoned wealth management professionals to focus on these offerings ⁶. Private banking customers began onboarding during the first quarter of fiscal year 2026 ⁶. This initiative is expected to be a gateway for driving off-balance sheet revenue and bridging the gap between high-net-worth depository customers, small business owners or key commercial customers, and corporate trustee opportunities for the Bank ⁶.

The company's capital allocation plans for fiscal year 2026 include the Board of Directors' intention to continue paying a regular quarterly cash dividend of $0.085 per share ⁶, totaling $0.34 per share for the year ⁶. Additionally, the company will seek further opportunities for value-enhancing share repurchases ⁶. As of November 21, 2025, the company had $68.6 million ⁶ remaining authorized under its existing stock repurchase plan, with the FRB's current non-objection for repurchasing up to $75.0 million ⁶ of stock expiring in February 2026 ⁶. To the extent that earnings in fiscal year 2026 exceed $0.34 per share ⁶, the Board of Directors may consider the payment of additional dividends ⁶.

Management anticipates that the company could grow past $10 billion ¹² in total assets in the coming fiscal years as a result of its strategic initiatives ¹². The Bank's borrowing limit approved by FHLB senior management became 44% ¹³ starting November 1, 2025 ¹³. Earnings distributions from the Bank to the Company will be limited to the extent necessary to prevent the Bank from re-entering a negative accumulated earnings and profit position, which would require the payment of the pre-1988 bad debt recapture tax on earnings moved from the Bank to the Company ⁶.

The company faces significant risks from changes in interest rates, as its net interest income is highly dependent on the spread between interest earned on long-term, fixed-rate assets and interest paid on shorter-term, interest-bearing liabilities ¹⁴. A flat or inverted yield curve could compress this spread, negatively impacting net interest income ¹⁴. Economic downturns, particularly in real estate markets, could adversely affect loan collateral values, leading to increased delinquencies, non-performing assets, and loan losses ¹⁴. The strategic growth in the commercial loan portfolio exposes the company to increased lending and credit risks, as these loans typically have larger balances and repayment depends on business operations, which are susceptible to economic conditions, supply chain disruptions, and regulatory changes ¹⁴. Cybersecurity threats, including system failures, data breaches, and cyberattacks on the company or its third-party service providers, pose risks to business operations, reputation, and financial condition, potentially leading to litigation, regulatory scrutiny, and financial losses not covered by insurance ¹⁴. The company operates in a highly competitive environment for commercial banking relationships and deposits, facing competition from various financial institutions and non-bank lenders that may offer more aggressive pricing or specialized products ¹⁴. Regulatory changes or new interpretations of existing laws could significantly impact business activities, increase compliance costs, and restrict product offerings ¹⁴. The company's ability to pay dividends and repurchase shares is primarily dependent on the Bank's ability to make capital distributions, which are subject to regulatory approvals and the Bank's tax accumulated earnings and profits, with potential tax implications from pre-1988 bad debt recapture if earnings are insufficient ¹⁴. The company also faces risks related to attracting and retaining skilled employees, the effectiveness of its risk management and compliance programs, and increasing instances of fraud and other financial crimes ¹⁴.

Management's message to shareholders emphasizes a commitment to enhancing stockholder value while maintaining a sound asset quality and strong capital position, driven by a strategic transition to a full-service commercial bank ¹. The company aims to achieve these goals through a comprehensive suite of commercial and consumer banking products and services, including investments in technology, people, products, and services ¹. For fiscal year 2026, the Board of Directors intends to continue paying a regular quarterly cash dividend of $0.085 per share ⁶, totaling $0.34 per share for the year ⁶, and will seek further opportunities for value-enhancing share repurchases ⁶. Management and the Board of Directors believe that a Tier 1 leverage ratio of about 9% ⁶ is appropriate to manage the company's risk profile. The three strategic priorities highlighted for the period ahead include: first, the continued strategic growth of the commercial loan portfolio and expansion of commercial banking services, supported by new technology and experienced commercial bankers ⁶; second, the active pursuit of opportunities to expand the non-interest-bearing deposit base and diversify fee-based revenue streams through treasury management, trust and wealth management services, insurance, and small business banking ⁶; and third, the implementation of a comprehensive suite of private banking products and services, which is a new line of business expected to drive off-balance sheet revenue and bridge relationships with high-net-worth customers ⁶.