Capitol Federal Financial, Inc.^® (NASDAQ:CFFN) (the "Company"), the parent company of Capitol Federal Savings Bank (the "Bank"), announced results today for the fiscal year ended September 30, 2022. For best viewing results, please view this release in Portable Document Format (PDF) on our website, http://ir.capfed.com.

Highlights for the quarter include:

net income of $19.5 million;
basic and diluted earnings per share of $0.14;
net interest margin of 1.71% (2.07% excluding the effects of the leverage strategy);
annualized loan growth of 12.6%;
paid dividends of $0.085 per share; and
on October 25, 2022, announced a cash dividend of $0.085 per share, payable on November 18, 2022 to stockholders of record as of the close of business on November 4, 2022.

Highlights for the fiscal year include:

net income of $84.5 million;
basic and diluted earnings per share of $0.62;
net interest margin of 1.79% (2.04% excluding the effects of the leverage strategy);
loan growth of 5.4%;
paid dividends of $0.76 per share; and
on October 26, 2022, announced a fiscal year 2022 cash true-up dividend of $0.28 per share, payable on December 2, 2022 to stockholders of record as of the close of business on November 18, 2022.

Comparison of Operating Results for the Three Months Ended September 30, 2022 and June 30, 2022

For the quarter ended September 30, 2022, the Company recognized net income of $19.5 million, or $0.14 per share, compared to net income of $21.2 million, or $0.16 per share, for the quarter ended June 30, 2022. The decrease in net income was due primarily to higher non-interest expense in the current quarter. The net interest margin decreased eight basis points, from 1.79% for the prior quarter to 1.71% for the current quarter. When the leverage strategy discussed below is in place, it reduces the net interest margin due to the amount of earnings from the transaction in comparison to the size of the transaction. Excluding the effects of the leverage strategy, the net interest margin would have decreased four basis points, from 2.11% for the prior quarter to 2.07% for the current quarter. The decrease in the net interest margin excluding the effects of the leverage strategy was due mainly to an increase in the cost of borrowings and deposits, partially offset by an increase in loan yield due to higher market interest rates. Management anticipates the cost of borrowings and deposits may continue to increase at a faster pace than increases in asset yields in the near term.

Leverage Strategy

At times, the Bank has utilized a leverage strategy to increase earnings. The leverage strategy during the current quarter involved borrowing up to $2.60 billion by entering into short-term Federal Home Loan Bank Topeka ("FHLB") advances, compared to $2.10 billion during the prior quarter. The leverage strategy was increased during the current quarter in response to the increase in the dividend rate paid by FHLB. The borrowings were repaid prior to each quarter end. The proceeds from the borrowings, net of the required FHLB stock holdings which yielded 7.75% during the current quarter, were deposited at the Federal Reserve Bank of Kansas City ("FRB of Kansas City"). Net income attributable to the leverage strategy is largely derived from the dividends received on FHLB stock holdings, plus the net interest rate spread between the yield on the cash deposited at the FRB of Kansas City and the rate paid on the related FHLB borrowings, less applicable federal insurance premiums and estimated taxes. Net income attributable to the leverage strategy was $1.3 million during the current quarter and $3.1 million during the current year. Management continues to monitor the net interest rate spread and overall profitability of the strategy. It is expected that the strategy will continue to be utilized as long as it remains profitable and/or the borrowing capacity does not need to be used for other operational purposes.

Interest and Dividend Income

The following table presents the components of interest and dividend income for the time periods presented, along with the change measured in dollars and percent. The weighted average yield on loans receivable increased 11 basis points and the weighted average yield on mortgage-backed securities ("MBS") increased four basis points compared to the prior quarter.

	For the Three Months Ended
	September 30,		June 30,		Change Expressed in:
	2022		2022		Dollars			Percent
	(Dollars in thousands)
INTEREST AND DIVIDEND INCOME:
Loans receivable	$	60,445	$	56,886	$	3,559		6.3	%
MBS		4,912		5,048		(136	)	(2.7	)
Cash and cash equivalents		13,373		3,968		9,405		237.0
FHLB stock		3,865		2,695		1,170		43.4
Investment securities		845		815		30		3.7
Total interest and dividend income	$	83,440	$	69,412	$	14,028		20.2

The increase in interest income on loans receivable was due to an increase in the weighted average yield on the loan portfolio, along with an increase in the average balance of one- to four-family loans and commercial loans. The increase in the weighted average yield was due primarily to originations and purchases at higher market yields, as well as disbursements on commercial construction loans at rates higher than the overall portfolio rate and upward repricing of existing adjustable-rate loans due to higher market interest rates. The increase in interest income on cash and cash equivalents was due to an increase in the yield earned on balances held at the FRB of Kansas City, the majority of which were related to the leverage strategy, due to an increase in FRB interest rates. The increase in dividend income on FHLB stock was due to an increase in the dividend rate paid by FHLB, as well as an increase in the average balance of FHLB stock held stemming from an increase in the average balance of FHLB borrowings to support growth in the loan portfolio and replace deposit balances.

Interest Expense

The following table presents the components of interest expense for the time periods presented, along with the change measured in dollars and percent. The weighted average rate paid on deposits increased 10 basis points and the weighted average rate paid on borrowings not associated with the leverage strategy increased 33 basis points compared to the prior quarter.

	For the Three Months Ended
	September 30,		June 30,		Change Expressed in:
	2022		2022		Dollars		Percent
	(Dollars in thousands)
INTEREST EXPENSE:
Borrowings	$	24,529	$	11,644	$	12,885	110.7	%
Deposits		9,013		7,787		1,226	15.7
Total interest expense	$	33,542	$	19,431	$	14,111	72.6

The increase in interest expense on borrowings was due primarily to an increase in the rate paid on the short-term borrowings associated with the leverage strategy during the current quarter, due to higher market interest rates, along with an increase in the average balance of borrowings associated with the leverage strategy. Additionally, the average balance and weighted average rate paid on borrowings not associated with the leverage strategy increased compared to the prior quarter due to new borrowings added near the end of the prior quarter and during the current quarter at higher market interest rates. The additional borrowings not associated with the leverage strategy were utilized to fund operational liquidity needs. See additional discussion in the "Financial Condition" section below. The increase in interest expense on deposits was due primarily to an increase in the weighted average rate paid on money market accounts and certificates of deposit, partially offset by a decrease in the average balance of the deposit portfolio, largely the certificate of deposit portfolio.

Provision for Credit Losses

For the quarter ended September 30, 2022, the Bank recorded a provision for credit losses of $1.1 million, compared to a provision for credit losses of $937 thousand for the prior quarter. The provision for credit losses in the current quarter was comprised of a $122 thousand increase in the allowance for credit losses ("ACL") for loans and a $938 thousand increase in reserves for off-balance sheet credit exposures. The provision for credit losses associated with the ACL was primarily related to the one- to four-family loan portfolio due to a slow-down in prepayment speeds and growth in the correspondent loan portfolio, partially offset by a decrease in commercial loan ACL due primarily to the removal of a large dollar loan from special mention classification during the current quarter. The provision for credit losses associated with reserves for off-balance sheet credit exposures was due primarily to growth in commercial construction exposures. The forecasted economic conditions used in the model were less favorable at September 30, 2022 compared to June 30, 2022, which also contributed to the increase in both ACL and reserves for off-balance sheet credit exposures calculated by the model for all loan categories. Similar to June 30, 2022, a weighted economic forecast was selected at September 30, 2022 which incorporates a recessionary outlook into the model.

Non-Interest Income

The following table presents the components of non-interest income for the time periods presented, along with the change measured in dollars and percent.

	For the Three Months Ended
	September 30,		June 30,		Change Expressed in:
	2022		2022		Dollars			Percent
	(Dollars in thousands)
NON-INTEREST INCOME:
Deposit service fees	$	3,467	$	3,601	$	(134	)	(3.7	)%
Insurance commissions		905		788		117		14.8
Other non-interest income		1,421		1,726		(305	)	(17.7	)
Total non-interest income	$	5,793	$	6,115	$	(322	)	(5.3	)

The decrease in other non-interest income was due mainly to a decrease in income on bank-owned life insurance related to the receipt of death benefits during the prior quarter and no such benefits being received during the current quarter.

Non-Interest Expense

The following table presents the components of non-interest expense for the time periods presented, along with the change measured in dollars and percent.

	For the Three Months Ended
	September 30,		June 30,		Change Expressed in:
	2022		2022		Dollars			Percent
	(Dollars in thousands)
NON-INTEREST EXPENSE:
Salaries and employee benefits	$	14,268	$	14,581	$	(313	)	(2.1	)%
Information technology and related expense		5,043		4,343		700		16.1
Occupancy, net		3,777		3,721		56		1.5
Regulatory and outside services		1,980		1,572		408		26.0
Advertising and promotional		1,552		1,068		484		45.3
Federal insurance premium		820		784		36		4.6
Deposit and loan transaction costs		747		664		83		12.5
Office supplies and related expense		487		494		(7	)	(1.4	)
Other non-interest expense		1,133		1,163		(30	)	(2.6	)
Total non-interest expense	$	29,807	$	28,390	$	1,417		5.0

The decrease in salaries and employee benefits was due mainly to a decrease in incentive compensation. The increase in information technology and related expense was due primarily to increases in software maintenance/licensing and professional services. The increase in regulatory and outside services was due primarily to higher consulting expenses related to the Bank's upcoming digital transformation project. The increase in advertising and promotional expense was due primarily to the timing of campaigns and sponsorships.

The Company's efficiency ratio was 53.52% for the current quarter compared to 50.61% for the prior quarter. The change in the efficiency ratio was due primarily to higher non-interest expense. The efficiency ratio is a measure of a financial institution's total non-interest expense as a percentage of the sum of net interest income (pre-provision for credit losses) and non-interest income. A higher value indicates that it is costing the financial institution more money to generate revenue, relative to the net interest margin and non-interest income.

Income Tax Expense

The following table presents pretax income, income tax expense, and net income for the time periods presented, along with the change measured in dollars and percent and the effective tax rate.

	For the Three Months Ended
	September 30,			June 30,			Change Expressed in:
	2022			2022			Dollars			Percent
	(Dollars in thousands)
Income before income tax expense	$	24,824		$	26,769		$	(1,945	)	(7.3	)%
Income tax expense		5,332			5,617			(285	)	(5.1	)
Net income	$	19,492		$	21,152		$	(1,660	)	(7.8	)

Effective Tax Rate		21.5	%		21.0	%

The decrease in income tax expense was due primarily to lower pretax income in the current quarter.

Comparison of Operating Results for the Years Ended September 30, 2022 and 2021

The Company recognized net income of $84.5 million, or $0.62 per share, for the current year compared to net income of $76.1 million, or $0.56 per share, for the prior year. The increase in net income was due to an increase in net interest income, partially offset by higher income tax expense and a lower negative provision for credit losses. The net interest margin decreased 11 basis points, from 1.90% for the prior year to 1.79% for the current year. Excluding the effects of the leverage strategy, the net interest margin would have increased 14 basis points, from 1.90% for the prior year to 2.04% for the current year. The increase in net interest margin excluding the effects of the leverage strategy was due mainly to a reduction in the weighted average cost of retail certificates of deposit.

Interest and Dividend Income

The following table presents the components of interest and dividend income for the time periods presented, along with the change measured in dollars and percent.

	For the Year Ended
	September 30,				Change Expressed in:
	2022		2021		Dollars			Percent
	(Dollars in thousands)
INTEREST AND DIVIDEND INCOME:
Loans receivable	$	228,531	$	229,897	$	(1,366	)	(0.6	)%
MBS		19,406		21,399		(1,993	)	(9.3	)
Cash and cash equivalents		18,304		144		18,160		12,611.1
FHLB stock		10,031		3,916		6,115		156.2
Investment securities		3,268		2,825		443		15.7
Total interest and dividend income	$	279,540	$	258,181	$	21,359		8.3

The decrease in interest income on loans receivable was due to a lower weighted average rate on the originated and correspondent one- to four-family loan portfolio during the current year, mostly offset by an increase in the average balance of the loan portfolio. The lower weighted average rate was due to endorsements, refinances, originations and purchases at lower market rates at the time of the transactions in the prior fiscal year, which are being fully reflected in the current year. Premium amortization related to the one- to four-family correspondent loan portfolio decreased significantly compared to the prior year due to the slow-down in prepayments and endorsements resulting from the increase in market interest rates during the last half of the fiscal year, partially offsetting the reduction in interest income related to a lower weighted average rate on the one- to four-family portfolio mentioned above.

The decrease in interest income on the MBS portfolio was due primarily to a decrease in the average balance of the portfolio as repayments were primarily used to fund loan growth.

The increase in interest income on cash and cash equivalents and the increase in dividend income on FHLB stock were due mainly to the leverage strategy being utilized during the current year and not being utilized during the prior year. Additionally, market interest rates increased during the year resulting in an increase in the yield on cash, and FHLB increased the dividend rate paid during the year.

The increase in interest income on investment securities was due primarily to an increase in the average balance of the portfolio, along with an increase in the yield due to purchases at higher market yields during the current year.

Interest Expense

The following table presents the components of interest expense for the time periods presented, along with the change measured in dollars and percent.

	For the Year Ended
	September 30,				Change Expressed in:
	2022		2021		Dollars			Percent
	(Dollars in thousands)
INTEREST EXPENSE:
Borrowings	$	52,490	$	34,774	$	17,716		50.9	%
Deposits		34,456		48,406		(13,950	)	(28.8	)
Total interest expense	$	86,946	$	83,180	$	3,766		4.5

The increase in interest expense on borrowings was due to the leverage strategy being utilized during a portion of the current year and not being utilized during the prior year. Interest expense on borrowings associated with the leverage strategy totaled $18.5 million during the current year. Interest expense on FHLB borrowings not associated with the leverage strategy was lower in the current year due to terminating or not renewing certain interest rate swap agreements, not replacing some maturing FHLB advances and prepaying certain advances during fiscal year 2021, partially offset by an increase in the average balance due to a recent increase in FHLB borrowings to fund operational needs.

The decrease in interest expense on deposits was due mainly to a decrease in the weighted average rate paid and the average balance of the retail certificate of deposit portfolio. Retail certificates of deposit repriced downward during the prior year and first half of the current year as they were renewed or were replaced at lower offered rates at the time of the renewal, along with some certificates of deposit not renewing. During the third quarter of fiscal year 2022, management began to increase rates offered on retail certificates of deposit and money market accounts to help reduce the outflow from these portfolios.

Provision for Credit Losses

The Bank recorded a negative provision for credit losses during the current year of $4.6 million, compared to a negative provision for credit losses of $8.5 million during the prior year. The negative provision in the current year was comprised of a $3.6 million decrease in the ACL for loans and a $992 thousand decrease in reserves for off-balance sheet credit exposures. The negative provision for credit losses associated with the ACL in the current year was due primarily to a reduction in commercial loan qualitative factors, partially offset by an increase in ACL related to loan growth during the current year and a less favorable economic forecast compared to the prior year. The negative provision for credit losses associated with the reserve for off-balance sheet credit exposures in the current year was due primarily to a reduction in commercial loan qualitative factors, partially offset by growth in commercial construction exposures.

Non-Interest Income

The following table presents the components of non-interest income for the time periods presented, along with the change measured in dollars and percent.

	For the Year Ended
	September 30,				Change Expressed in:
	2022		2021		Dollars			Percent
	(Dollars in thousands)
NON-INTEREST INCOME:
Deposit service fees	$	13,798	$	12,282	$	1,516		12.3	%
Insurance commissions		2,947		3,030		(83	)	(2.7	)
Gain on sale of Visa Class B shares		—		7,386		(7,386	)	(100.0	)
Other non-interest income		6,085		5,388		697		12.9
Total non-interest income	$	22,830	$	28,086	$	(5,256	)	(18.7	)

The increase in deposit service fees was due primarily to an increase in debit card income and service charges as a result of higher transaction and settlement volume, in addition to an increase in the average transaction amount. During the prior year, the Bank sold its Visa Class B shares, resulting in a $7.4 million gain, with no similar transaction during the current year. The increase in other non-interest income was due primarily to a gain on a loan-related financial derivative agreement.

Non-Interest Expense

The following table presents the components of non-interest expense for the time periods presented, along with the change measured in dollars and percent.

	For the Year Ended
	September 30,				Change Expressed in:
	2022		2021		Dollars			Percent
	(Dollars in thousands)
NON-INTEREST EXPENSE:
Salaries and employee benefits	$	56,600	$	56,002	$	598		1.1	%
Information technology and related expense		18,311		17,922		389		2.2
Occupancy, net		14,370		14,045		325		2.3
Regulatory and outside services		6,192		5,764		428		7.4
Advertising and promotional		5,178		5,133		45		0.9
Federal insurance premium		3,020		2,545		475		18.7
Deposit and loan transaction costs		2,797		2,761		36		1.3
Office supplies and related expense		1,951		1,715		236		13.8
Loss on interest rate swap termination		—		4,752		(4,752	)	(100.0	)
Other non-interest expense		4,432		4,930		(498	)	(10.1	)
Total non-interest expense	$	112,851	$	115,569	$	(2,718	)	(2.4	)

The increase in salaries and employee benefits was due primarily to merit increases and higher benefits expense, partially offset by a lower employee count during the current year. The increase in regulatory and outside services was due to higher consulting expenses related to the Bank's upcoming digital transformation project. The increase in federal insurance premium expense was due mainly to an increase in average assets as a result of the leverage strategy being utilized during the current year. During the prior year, the Bank terminated $200.0 million of interest rate swaps, resulting in a loss of $4.8 million, with no similar transaction in the current fiscal year. The decrease in other non-interest expense was due primarily to the write-down during the prior year of a property that had previously served as one of the Bank's branch locations, partially offset by higher fraud losses in the current year.

The Company's efficiency ratio was 52.39% for the current year compared to 56.91% for the prior year. The improvement in the efficiency ratio was due primarily to higher net interest income.

Management intends to implement a new core processing system ("digital transformation") for the Bank by September 2023. The digital transformation is expected to better position the Bank for the future and allow for the introduction of new products and services to enhance customer experiences. Management is still negotiating the related agreements, but anticipates information technology and related expenses will be approximately $6 million higher in fiscal year 2023. In addition, it is expected there will be approximately $1 million more of information technology and related expenses in fiscal year 2023 related to projects outside of the digital transformation and due to general cost increases. Overall, it is anticipated information technology and related expenses will be approximately $7 million higher in fiscal year 2023, or approximately $25 million for the year.

In fiscal year 2024, information technology and related expense is expected to decrease approximately $3 million from fiscal year 2023 levels due to a reduction in professional service costs.

Income Tax Expense

The following table presents pretax income, income tax expense, and net income for the time periods presented, along with the change measured in dollars and percent and effective tax rate.

	For the Year Ended
	September 30,						Change Expressed in:
	2022			2021			Dollars		Percent
	(Dollars in thousands)

Income before income tax expense	$	107,203		$	96,028		$	11,175	11.6	%
Income tax expense		22,750			19,946			2,804	14.1
Net income	$	84,453		$	76,082		$	8,371	11.0

Effective Tax Rate		21.2	%		20.8	%

The increase in income tax expense was due primarily to higher pretax income in the current year. Management anticipates the effective tax rate for fiscal year 2023 will be approximately 20% to 21%.

Financial Condition as of September 30, 2022

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

							Annualized
	September 30,			June 30,			Percent		September 30,			Percent
	2022			2022			Change		2021			Change
	(Dollars in thousands)
Total assets	$	9,624,897		$	9,476,053		6.3	%	$	9,631,246		(0.1	)%
Available-for-sale ("AFS") securities		1,563,307			1,694,160		(30.9	)		2,014,608		(22.4	)
Loans receivable, net		7,464,208			7,236,196		12.6			7,081,142		5.4
Deposits		6,194,866			6,329,883		(8.5	)		6,597,396		(6.1	)
Borrowings		2,132,154			1,869,897		56.1			1,582,850		34.7
Stockholders' equity		1,096,499			1,131,740		(12.5	)		1,242,273		(11.7	)
Equity to total assets at end of period		11.4	%		11.9	%				12.9	%
Average number of basic shares outstanding		135,773			135,725		0.1			135,571		0.1
Average number of diluted shares outstanding		135,773			135,725		0.1			135,571		0.1

During the current quarter, total assets increased due to growth in the loan portfolio which was largely funded with cash flows from the securities portfolio and additional FHLB borrowings. As a result of loan growth and a slow-down in loan prepayment speeds due to an increase in market interest rates, as well as continued deposit outflows, the Bank increased FHLB borrowings during the quarter to provide sufficient liquidity for operations. The deposit portfolio decreased $135.0 million, or 8.5% annualized, during the quarter. The decrease was primarily in retail certificates of deposit ($56.2 million), money market accounts ($48.2 million), and commercial certificates of deposit ($18.8 million). The Bank continued to increase rates offered on certificates of deposit and money market accounts during the current quarter, which has slowed the runoff in these portfolios. Even with the increase in offered rates, management anticipates continued retail deposit outflows in future periods, primarily in transaction accounts, due to strong customer spending, along with competition from other financial institutions and/or brokerage firms that may offer alternative higher yielding investment options. If deposit outflows continue, the Bank will likely enter into additional FHLB borrowings. If that occurs, the leverage strategy transaction amount may decrease due to borrowing and collateral capacity levels. The decrease in stockholders' equity from September 30, 2021 and June 30, 2022 to September 30, 2022 was due mainly to a reduction in accumulated other comprehensive income (loss) ("AOCI") as a result of changes in the fair value of AFS securities due to an increase in market interest rates. During the current year, unrealized losses on AFS securities increased $211.3 million, resulting in a $159.8 million reduction in AOCI, net of tax.

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

	For the Three Months Ended					For the Year Ended
	September 30, 2022					September 30, 2022
	Amount			Rate		Amount			Rate
	(Dollars in thousands)
Loan originations, purchases, and participations
One- to four-family and consumer:
Originated	$	184,879		4.55	%	$	797,589		3.57	%
Purchased		187,298		4.17			581,309		3.38

Commercial:
Originated		92,859		4.67			267,784		4.22
Participations/Purchased		38,308		4.94			120,365		3.85
	$	503,344		4.46		$	1,767,047		3.63
Borrowing activity
Maturities and repayments	$	(77,500	)	0.39		$	(177,500	)	1.94
New borrowings		300,000		3.90			650,000		3.68

Stockholders' Equity

During the year ended September 30, 2022, the Company paid cash dividends totaling $103.1 million. These cash dividends totaled $0.76 per share and consisted of a $0.22 per share cash true-up dividend related to fiscal year 2021 earnings, a $0.20 per share True Blue Capitol cash dividend, and four regular quarterly cash dividends of $0.085 per share.

On October 25, 2022, the Company announced a regular quarterly cash dividend of $0.085 per share, or approximately $11.6 million, payable on November 18, 2022 to stockholders of record as of the close of business on November 4, 2022. On October 26, 2022, the Company announced a fiscal year 2022 cash true-up dividend of $0.28 per share, or approximately $38.0 million, related to fiscal year 2022 earnings. The $0.28 per share cash true-up dividend was determined by taking the difference between total earnings for fiscal year 2022 and total regular quarterly cash dividends paid during fiscal year 2022, divided by the number of shares outstanding. The cash true-up dividend is payable on December 2, 2022 to stockholders of record as of the close of business on November 18, 2022, and is the result of the Board of Directors' commitment to distribute to stockholders 100% of the annual earnings of the Company for fiscal year 2022. In the long run, management considers the Bank's equity to total assets ratio of at least 9% an appropriate level of capital. At September 30, 2022, this ratio was 9.9%. During the current year, the increase in unrealized losses on AFS securities and the related impact on AOCI reduced the Bank's ratio of equity to total assets by approximately 150 basis points.

Consistent with our goal to operate a sound and profitable financial organization, we actively seek to maintain a well-capitalized status for the Bank in accordance with regulatory standards. As of September 30, 2022, the Bank's community bank leverage ratio ("CBLR") was 9.0%, which met the minimum requirement of 9.0%. The CBLR is based on average assets. The leverage strategy increases average assets which reduces the Bank's CBLR.

At September 30, 2022, Capitol Federal Financial, Inc., at the holding company level, had $104.0 million in cash on deposit at the Bank. For fiscal year 2023, it is the intention of the Board of Directors to continue the payout of 100% of the Company's earnings to the Company's stockholders. 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, and the amount of cash at the holding company level.

There remains $44.7 million authorized under the existing stock repurchase plan for additional purchases of the Company's common stock. Shares may be repurchased from time to time based upon market conditions, available liquidity and other factors. This plan has no expiration date; however, the Federal Reserve Bank's existing approval for the Company to repurchase shares expires in August 2023.

The following table presents a reconciliation of total to net shares outstanding as of September 30, 2022.

Total shares outstanding	138,858,884
Less unallocated Employee Stock Ownership Plan ("ESOP") shares and unvested restricted stock	(3,043,514	)
Net shares outstanding	135,815,370

Capitol Federal Financial, Inc. is the holding company for the Bank. The Bank has 54 branch locations in Kansas and Missouri, and is one of the largest residential lenders in the State of Kansas. News and other information about the Company can be found at the Bank's website, http://www.capfed.com.

Forward-Looking Statements

Except for the historical information contained in this press release, the matters discussed herein may be deemed to be "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements about our beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions. The words "may," "could," "should," "would," "will," "believe," "anticipate," "estimate," "expect," "intend," "plan," and similar expressions are intended to identify forward-looking statements. Forward-looking statements involve risks and uncertainties, including: potential adverse impacts of the ongoing COVID-19 pandemic and any governmental or societal responses thereto on economic conditions in the Company's local market areas and other areas where the Bank has lending relationships, on other aspects of the Company's business operations and on financial markets; changes in policies or the application or interpretation of laws and regulations by regulatory agencies and tax authorities; other governmental initiatives affecting the financial services industry; changes in accounting principles, policies or guidelines; fluctuations in interest rates and the effects of inflation or a potential recession; demand for loans in the Company's and its correspondent banks' market areas; the future earnings and capital levels of the Bank, which could affect the ability of the Company to pay dividends in accordance with its dividend policies; competition; and other risks detailed from time to time in documents filed or furnished by the Company with the Securities and Exchange Commission ("SEC"). Actual results may differ materially from those currently expected. These forward-looking statements represent the Company's judgment as of the date of this release. The Company disclaims, however, any intent or obligation to update these forward-looking statements.

SUPPLEMENTAL FINANCIAL INFORMATION

CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollars in thousands, except per share amounts)

	September 30,			June 30,			September 30,
	2022			2022			2021
ASSETS:
Cash and cash equivalents (includes interest-earning deposits of $27,467, $31,589 and $24,289)	$	49,194		$	54,789		$	42,262
AFS securities, at estimated fair value (amortized cost of $1,768,490, $1,830,262 and $2,008,456)		1,563,307			1,694,160			2,014,608
Loans receivable, net (ACL of $16,371, $16,283 and $19,823)		7,464,208			7,236,196			7,081,142
FHLB stock, at cost		100,624			87,696			73,421
Premises and equipment, net		94,820			96,008			99,127
Income taxes receivable, net		1,266			1,993			—
Deferred income tax assets, net		33,884			19,636			—
Other assets		317,594			285,575			320,686
TOTAL ASSETS	$	9,624,897		$	9,476,053		$	9,631,246

LIABILITIES:
Deposits	$	6,194,866		$	6,329,883		$	6,597,396
Borrowings		2,132,154			1,869,897			1,582,850
Advances by borrowers		80,067			55,955			72,729
Income taxes payable, net		—			—			918
Deferred income tax liabilities, net		—			—			5,810
Other liabilities		121,311			88,578			129,270
Total liabilities		8,528,398			8,344,313			8,388,973

STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value; 100,000,000 shares authorized, no shares issued or outstanding		—			—			—
Common stock, $0.01 par value; 1,400,000,000 shares authorized, 138,858,884, 138,854,084 and 138,832,284 shares issued and outstanding as of September 30, 2022, June 30, 2022, and September 30, 2021, respectively		1,388			1,388			1,388
Additional paid-in capital		1,190,213			1,190,117			1,189,633
Unearned compensation, ESOP		(29,735	)		(30,148	)		(31,387	)
Retained earnings		80,266			72,308			98,944
Accumulated other comprehensive (loss) income, net of tax		(145,633	)		(101,925	)		(16,305	)
Total stockholders' equity		1,096,499			1,131,740			1,242,273
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	9,624,897		$	9,476,053		$	9,631,246


CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars in thousands)

	For the Three Months Ended				For the Year Ended
	September 30,		June 30,		September 30,
	2022		2022		2022			2021
INTEREST AND DIVIDEND INCOME:
Loans receivable	$	60,445	$	56,886	$	228,531		$	229,897
MBS		4,912		5,048		19,406			21,399
Cash and cash equivalents		13,373		3,968		18,304			144
FHLB stock		3,865		2,695		10,031			3,916
Investment securities		845		815		3,268			2,825
Total interest and dividend income		83,440		69,412		279,540			258,181

INTEREST EXPENSE:
Borrowings		24,529		11,644		52,490			34,774
Deposits		9,013		7,787		34,456			48,406
Total interest expense		33,542		19,431		86,946			83,180

NET INTEREST INCOME		49,898		49,981		192,594			175,001

PROVISION FOR CREDIT LOSSES		1,060		937		(4,630	)		(8,510	)
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES		48,838		49,044		197,224			183,511

NON-INTEREST INCOME:
Deposit service fees		3,467		3,601		13,798			12,282
Insurance commissions		905		788		2,947			3,030
Gain on sale of Visa Class B shares		—		—		—			7,386
Other non-interest income		1,421		1,726		6,085			5,388
Total non-interest income		5,793		6,115		22,830			28,086

NON-INTEREST EXPENSE:
Salaries and employee benefits		14,268		14,581		56,600			56,002
Information technology and related expense		5,043		4,343		18,311			17,922
Occupancy, net		3,777		3,721		14,370			14,045
Regulatory and outside services		1,980		1,572		6,192			5,764
Advertising and promotional		1,552		1,068		5,178			5,133
Federal insurance premium		820		784		3,020			2,545
Deposit and loan transaction costs		747		664		2,797			2,761
Office supplies and related expense		487		494		1,951			1,715
Loss on interest rate swap termination		—		—		—			4,752
Other non-interest expense		1,133		1,163		4,432			4,930
Total non-interest expense		29,807		28,390		112,851			115,569
INCOME BEFORE INCOME TAX EXPENSE		24,824		26,769		107,203			96,028
INCOME TAX EXPENSE		5,332		5,617		22,750			19,946
NET INCOME	$	19,492	$	21,152	$	84,453		$	76,082

Average Balance Sheets

The following tables present the average balances of our assets, liabilities, and stockholders' equity, and the related weighted average yields and rates (annualized for the three-month periods) on our interest-earning assets and interest-bearing liabilities for the periods indicated, as well as selected performance ratios and other information for the periods shown. Weighted average yields are derived by dividing income (annualized for the three-month periods) by the average balance of the related assets, and weighted average rates are derived by dividing expense (annualized for the three-month periods) by the average balance of the related liabilities, for the periods shown. Average outstanding balances are derived from average daily balances. The weighted average yields and rates include amortization of fees, costs, premiums and discounts, which are considered adjustments to yields/rates. Weighted average yields on tax-exempt securities are not calculated on a fully taxable equivalent basis.

For the Three Months Ended

September 30, 2022

June 30, 2022

Average

Interest

Average

Interest

Outstanding

Earned/

Yield/

Outstanding

Earned/

Yield/

Amount

Paid

Rate

Amount

Paid

Rate

Assets:

(Dollars in thousands)

Interest-earning assets:

One- to four-family loans:

Originated

Capitol Federal Financial, Inc.® Reports Fiscal Year 2022 Results