What changed in this filing

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Item 1. Business

2024-11-27 compared with 2023-11-29 · 87 added, 68 removed, 170 unchanged (48% of the section changed)

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We attract deposits primarily from the general public and from businesses, and invest those funds primarily in permanent loans secured by first mortgages on owner-occupied, one- to four-family residences and in commercial loans, either secured by real estate or for commercial and industrial purposes.

We also participate with other lenders in commercial loans, originate consumer loans primarily secured by mortgages on one- to four-family residences, and invest in certain investment securities and mortgage-backed securities ("MBS") using funding from deposits and Federal Home Loan Bank Topeka ("FHLB") borrowings.

We also participate with other lenders in commercial loans, and have purchased loans primarily secured by mortgages on one- to four-family residences.

The Bank also invests in certain investment securities and mortgage-backed securities ("MBS") using funding from deposits and Federal Home Loan Bank of Topeka ("FHLB") borrowings.

We offer a variety of deposit accounts having a wide range of interest rates and terms, which generally include savings accounts, money market accounts, interest-bearing and non-interest-bearing checking accounts, and certificates of deposit with terms ranging from 91 days to 120 months.

The Bank offers a suite of treasury management services designed to support business customers in managing their financial operations efficiently and securely.

Our treasury management solutions include cash flow optimization, fraud prevention tools, and payment services tailored to meet the needs of commercial clients.

By leveraging these services, we help businesses streamline their operations, reduce financial risk, and maximize liquidity while helping the Bank gather deposit and fee income.

The Company's results of operations are primarily dependent on net interest income, which is the difference between the interest earned on loans, securities, and cash, and the interest paid on deposits and borrowings.

On a weekly basis, management reviews deposit flows, loan demand, cash levels, and changes in several market interest rates to assess all pricing strategies.

The Bank's pricing strategy for first mortgage loan products includes setting interest rates based on secondary market prices and competitor pricing for our local lending markets, and secondary market prices and competitor pricing for our correspondent lending markets.

The Bank's pricing strategy for first mortgage loan products includes setting interest rates based on secondary market prices and competitor pricing for our local lending markets.

Pricing for commercial loans is generally based on competitor pricing and the credit risk of the borrower with consideration given to the overall relationship of the borrower.

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The Company is significantly affected by prevailing economic conditions, including federal monetary and fiscal policies and federal regulation of financial institutions.

Deposit balances are influenced by a number of factors, including interest rates paid on competing investment products, the level of personal income, and the personal rate of savings within our market areas.

Lending activities are influenced by the demand for housing and business activity levels, our loan underwriting guidelines compared to those of our competitors, as well as the interest rate environment and interest rate pricing competition from other lending institutions.

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We originate these loans primarily for our own portfolio, and we service the loans we originate.

Historically, we have purchased one- to four-family loans from correspondent lenders but recently have reduced that activity for balance sheet management purposes.

Historically, we purchased one- to four-family loans from correspondent lenders but recently suspended that activity for balance sheet management purposes.

We offer several commercial lending options and participate in commercial loans with other lenders, both locally and outside our market areas.

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These products include checking, savings, money market, certificates of deposit, and retirement accounts.

We also offer Treasury Management solutions tailored to meet the needs of our commercial clients.

Our deposit services are provided through our network of traditional branches and retail in-store locations, our call center (which operates on extended hours), mobile banking, telephone banking, and online banking and bill payment services.

• Cost Control.

We generally are very effective at controlling our costs of operations.

We generally are effective at controlling our costs of operations.

We centralize our loan servicing and deposit support functions for efficient processing.

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This large average deposit base per branch helps to control costs.

Our one- to four-family lending strategy and our effective management of credit risk allows us to service a large portfolio of loans at efficient levels because it costs less to service a portfolio of performing loans.

Our one- to four-family lending strategy and our effective management of credit risk allow us to service a large portfolio of loans at efficient levels because it costs less to service a portfolio of performing loans.

We recognize it is more expensive to offer a full suite of commercial products and services, but we will continue our efforts to control those costs.

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We strive to provide stockholder value while maintaining a strong capital position.

We continue to generate returns to stockholders through dividend payments.

We continue to generate returns to stockholders through dividend payments and share repurchases.

Total dividends declared and paid during fiscal year 2024 were $44.5 million.

The Company repurchased 3,280,110 shares for $19.3 million during fiscal year 2024, which all occurred in the first half of the year.

The Company's cash dividend payout policy is reviewed quarterly by management and the Board of Directors, and the ability to pay dividends under the policy depends 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.

For fiscal year 2024, it is the current intention of the Board of Directors to pay out the regular quarterly cash dividend of $0.085 per share.

For fiscal year 2025, it is the current intention of the Board of Directors to continue the regular quarterly cash dividend of $0.085 per share.

• Interest Rate Risk Management.

Changes in interest rates are our primary market risk as our balance sheet is almost entirely comprised of interest-earning assets and interest-bearing liabilities.

As such, fluctuations in interest rates have a significant impact not only upon our net income but also upon the cash flows related to those assets and liabilities and the market value of our assets and liabilities.

In order to maintain what we believe to be acceptable levels of net interest income in varying interest rate environments, we actively manage our interest rate risk and assume a moderate amount of interest rate risk consistent with board policies.

Therefore, fluctuations in interest rates have a significant impact not only upon our net income but also upon the cash flows related to those assets and liabilities and the market value of our assets and liabilities.

Market Area and Competition

Our corporate office is located in Topeka, Kansas.

We currently have a network of 51 branches (46 traditional branches and five in-store branches) located in nine counties throughout Kansas and three counties in Missouri.

As of September 30, 2024, we had a network of 48 branches (44 traditional branches and four in-store branches) located in nine counties throughout Kansas and three counties in Missouri.

We primarily serve the metropolitan areas of Topeka, Wichita, Lawrence, Manhattan, Emporia, and Salina, Kansas and a portion of the metropolitan area of greater Kansas City.

The Bank ranked second in deposit market share, at 6.2%, in the state of Kansas as reported in the June 30, 2023 Federal Deposit Insurance Corporation ("FDIC") "Summary of Deposits - Market Share Report." Management considers our well-established banking network together with our reputation for financial strength and customer service to be major factors in our success at attracting and retaining customers in our market areas.

The Bank consistently has been one of the top one- to four-family lenders with regard to mortgage loan origination volume in the state of Kansas.

This has been achieved through strong relationships with real estate agents and our other marketing efforts, which are based on our reputation and competitive pricing.

Competition in originating one- to four-family loans primarily comes from other savings institutions, commercial banks, credit unions, mortgage brokers, and mortgage bankers.

Competition in originating one- to four-family and consumer loans and attracting retail deposits primarily comes from local, regional, and national banks, savings institutions, credit unions, mortgage brokerage firms, investment banking and brokerage firms, and online competitors that are not confined to any specific market area.

The Bank has consistently been one of the top originators of residential one- to four-family loans in the state of Kansas.

This has been achieved through strong relationships with real estate agents and targeted marketing campaigns which emphasize the strength of Capitol Federal's brand, competitive pricing, and the Bank's history as a portfolio lender.

The Bank offers a diversified retail deposit product line, and trust and brokerage services.

Management considers our well-established banking network and our reputation for financial strength and customer service to be major factors in our success at attracting and retaining customers in our market areas.

The Bank ranked third in deposit market share, at 6.1%, in the state of Kansas as reported in the June 30, 2024 Federal Deposit Insurance Corporation ("FDIC") "Summary of Deposits - Market Share Report."

There is similarly intense competition for quality commercial lending relationships in the areas we serve.

Larger national, regional and local financial institutions, as well as credit unions, farm credit lenders, commercial finance companies, insurance companies, and other non-bank lenders have increased their presence in our market areas, ultimately placing downward pressure on pricing.

We also compete with smaller local financial institutions that may have aggressive pricing and unique terms.

We compete in a number of ways including customer service, quality of execution, range of products offered, price and reputation among others.

While we provide competitive interest rates on both deposit and lending products, we believe that we can compete most successfully by focusing on the financial needs of growing companies and small and middle-market businesses, pairing these companies with experienced relationship managers who can offer a broad range of customized services, digital platforms and sophisticated cash management tools tailored to their business through our Treasury Management solutions.

Available Information

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The Company, as a savings and loan holding company, is examined and regulated by the FRB.

Set forth below is a description of certain laws and regulations that are applicable to Capitol Federal Financial, Inc.

and the Bank.

This description is intended as a brief summary of selected features of such laws and regulations and is qualified in its entirety by references to the laws and regulations applicable to the Company and the Bank.

The Bank, as a federally chartered savings bank, is subject to regulation and oversight by the OCC extending to all aspects of its operations.

This regulation of the Bank is intended for the protection of depositors and other customers and not for the purpose of protecting the Company's stockholders.

Set forth below is a description of certain laws and regulations that are applicable to the Company and the Bank.

This description is intended as a brief summary of selected features of such laws and regulations and is qualified in its entirety by reference to the laws and regulations applicable to the Company and the Bank.

The Bank, as a federally chartered savings bank, is subject to regulation and oversight by the OCC in all aspects of its operations.

This regulation and oversight of the Bank is intended for the protection of depositors and other customers and not for the purpose of protecting the Company's stockholders.

The investment and lending authority of the Bank is prescribed by federal laws and regulations and the Bank is prohibited from engaging in any activities not permitted by such laws and regulations.

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The Company is a unitary savings and loan holding company within the meaning of the Home Owners' Loan Act ("HOLA").

As such, the Company is registered with the FRB and subject to the FRB regulations, examinations, supervision, and reporting requirements.

As such, the Company is registered with the FRB and subject to FRB regulations, examinations, supervision, and reporting requirements.

In addition, the FRB has enforcement authority over the Company.

Among other things, this authority permits the FRB to restrict or prohibit activities that are determined to be a serious risk to the Bank.

The OCC and FRB enforcement authority includes, among other things, the ability to assess civil monetary penalties, to issue cease-and-desist or removal orders, and to initiate injunctive actions.

Among other things, this authority permits the FRB to restrict or prohibit activities by the Company that are determined to be a serious risk to the Bank.

The enforcement authority of the OCC and of the FRB includes, among other things, the ability to assess civil monetary penalties, to issue cease-and-desist or removal orders, and to initiate injunctive actions.

In general, these enforcement actions may be initiated for violations of laws and regulations and unsafe or unsound practices.

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Except under certain circumstances, public disclosure of final enforcement actions by the OCC or the FRB is required by law.

As a federally chartered savings bank, the Bank is required to maintain a significant portion of its assets in residential housing-related loans and investments.

As a federally chartered savings bank, the Bank is required to maintain a significant portion of its assets in residential housing-related loans and investments in at least nine months of the most recent 12-month period.

An institution that fails to do so is immediately subject to restrictions on its operations, including a prohibition against capital distributions, except with the prior approval of both the OCC and the FRB.

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The Bank is subject to a statutory lending limit on aggregate loans to one person or a group of related persons.

The general limit is 15% of our unimpaired capital and surplus, plus an additional 10% for loans fully secured by readily marketable collateral.

The general limit is 15% of the Bank's unimpaired capital and surplus, plus an additional 10% for loans fully secured by readily marketable collateral.

At September 30, 2024, the Bank's lending limit under this restriction was $135.5 million.

The Bank has no loans or loan relationships in excess of its lending limit.

Total loan commitments and loans outstanding to the Bank's largest borrowing relationship was $76.2 million at September 30, 2023, all of which was current according to its terms.

The OCC has adopted guidelines establishing safety and soundness standards on such matters as loan underwriting and documentation, asset quality, earnings standards, internal controls and audit systems, interest rate risk exposure, and compensation and other employee benefits.

Loan commitments and loans outstanding to the Bank's largest borrowing relationship totaled $113.0 million at September 30, 2024, all of which was current according to its terms.

The OCC has adopted guidelines establishing safety and soundness standards on matters such as loan underwriting and documentation, asset quality, earnings standards, internal controls and audit systems, interest rate risk exposure, and compensation and other employee benefits.

The Bank is subject to periodic examinations by the OCC regarding these and related matters.

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At September 30, 2024, the Bank was considered well capitalized under OCC regulations.

The OCC has the ability to establish individual minimum capital requirements for a particular institution which vary from the capital levels that would otherwise be required under the applicable capital regulations based on such factors as concentrations of credit risk, levels of interest rate risk, the risks of non-traditional activities, and other circumstances.

The OCC can establish individual minimum capital requirements for a particular institution which vary from the capital levels that would otherwise be required under the applicable capital regulations based on such factors as concentrations of credit risk, levels of interest rate risk, the risks of non-traditional activities, and other circumstances.

The OCC has not imposed any such requirements on the Bank.

The OCC is authorized and, under certain circumstances, required to take certain actions against federal savings banks that are not adequately capitalized because they fail to meet the minimum requirements associated with their elected capital framework.

Any such institution must submit a capital restoration plan for OCC approval and may be restricted in, among other things, increasing its assets, acquiring another institution, establishing a branch or engaging in any new activities, and may not make capital distributions.

Any such institution must submit a capital restoration plan for OCC approval and may be restricted in, among

other things, increasing its assets, acquiring another institution, establishing a branch or engaging in any new activities, and may not make capital distributions.

Institutions that are deemed by the OCC to be "critically undercapitalized" are subject to the appointment of a conservator or receiver.

As of September 30, 2024, the Bank and the Company met all capital adequacy requirements to which they are subject.

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OCC regulations impose restrictions on savings institutions with respect to their ability to make distributions of capital, which include dividends, stock redemptions or repurchases, cash-out mergers and other transactions charged to the capital account.

Under FRB and OCC safe harbor regulations, savings institutions generally may make capital distributions during any calendar year equal to earnings of the previous two calendar years and current year-to-date earnings (to the extent not previously distributed).

Under FRB and OCC safe harbor regulations, a savings institution generally may make capital distributions during any calendar year equal to net income of the previous two calendar years and current year-to-date net income (to the extent not previously distributed).

A savings institution that is a subsidiary of a savings and loan holding company, such as the Company, that proposes to make a capital distribution must submit written notice to the OCC and FRB 30 days prior to such distribution.

The OCC and FRB may object to the distribution during that 30-day period based on safety and soundness or other concerns.

Savings institutions that desire to make a larger capital distribution, are under special restrictions, or are not, or would not be, sufficiently capitalized following a proposed capital distribution must obtain regulatory non-objection prior to making such a distribution.

Savings institutions that desire to make a larger capital distribution, are under special restrictions, or are not, or would not be, sufficiently capitalized following a proposed capital distribution must file an application and obtain regulatory non-objection prior to making such a distribution.

The long-term ability of the Company to pay dividends to its stockholders is based primarily upon the ability of the Bank to make capital distributions to the Company.

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The Bank also is subject to regulation and examination by the FDIC, which insures the deposits of the Bank to the maximum extent permitted by law.

The DIF of the FDIC insures deposit accounts in the Bank up to applicable limits, with a maximum amount of deposit insurance for banks, savings institutions, and credit unions of $250 thousand per separately insured deposit ownership right or category.

The DIF of the FDIC insures deposit accounts in the Bank up to applicable limits, with a maximum amount of deposit insurance for banks and savings institutions of $250 thousand per separately insured deposit ownership right or category.

The FDIC assesses deposit insurance premiums on all FDIC-insured institutions quarterly based on annualized rates.

Under these rules, assessment rates for an institution with total assets of less than $10 billion are determined by weighted average capital adequacy, asset quality, management, earnings, liquidity, and sensitivity (CAMELS) composite ratings and certain financial ratios, and range from 1.5 to 30.0 basis points, subject to certain adjustments.

Under these rules, assessment rates for an institution with total assets of less than $10 billion are determined by capital adequacy, asset quality, management, earnings, liquidity, and sensitivity (CAMELS) composite ratings and certain financial ratios, and range from 2.5 to 32.0 basis points, subject to certain adjustments.

Assessment rates for an institution with $10 billion or more in total assets are assigned an individual rate based on a scorecard that measures the institution's composite rating, ability to withstand asset-related and funding-related stress and the magnitude of potential losses to the FDIC in the event of failure.

In October 2022, the FDIC adopted a final rule that increased the initial base deposit assessment rate schedule uniformly by two basis points, beginning with the first quarterly assessment period of 2023.

While the Bank exceeded $10 billion in total assets at September 30, 2023, an institution is not considered a large institution under the FDIC assessment regulations until the institution exceeds $10 billion in total assets for four consecutive quarters.

The Bank's total assets were in excess of $10 billion at March 31, 2023, June 30, 2023 and September 30, 2023, but total assets are anticipated to be below $10 billion at December 31, 2023.

The current assessment rates were set in October 2022, when the FDIC adopted a final rule that increased the initial base deposit assessment rate schedule uniformly by two basis points, beginning with the first quarterly assessment period of 2023.

The increased assessment rate will remain in effect unless and until the reserve ratio meets or exceeds 2%, absent further action by the FDIC's Board of Directors.

For the fiscal year ended September 30, 2024, the Bank paid $6.1 million in FDIC premiums.

Assessment rates are applied to an institution's assessment base, which is its average consolidated total assets minus its average tangible equity during the assessment period.

The FDIC has authority to further increase insurance assessments in the future, and any significant increases would have an adverse effect on the operating expenses and results of operations of the Company.

The FDIC has authority to increase insurance assessments in the future, and any significant increases could have a material adverse effect on the operating expenses and results of operations of the Company.

Management cannot predict what assessment rates will be in the future.

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Insurance of deposits may be terminated by the FDIC upon a finding that an institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC.

We do not currently know of any practice, condition, or violation that may lead to termination of our deposit insurance.

We do not know of any practice, condition, or violation that may lead to termination of our deposit insurance.

Community Reinvestment and Consumer Protection Laws.

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These include the Equal Credit Opportunity Act, the Truth-in-Lending Act, the Home Mortgage Disclosure Act, the Real Estate Settlement Procedures Act, the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 ("SAFE Act"), and the Community Reinvestment Act ("CRA").

In addition, federal banking regulators have enacted regulations limiting the ability of banks and other financial institutions to disclose nonpublic consumer information to non-affiliated third parties.

The regulations require disclosure of privacy policies and allow consumers to prevent certain personal information from being shared with non-affiliated third parties.

With respect to federal consumer protection laws, regulations are generally promulgated by the Consumer Financial Protection Bureau ("CFPB"), but the OCC examines the Bank for compliance with such laws.

With respect to federal consumer protection laws, regulations are generally promulgated by the Consumer Financial Protection Bureau ("CFPB"), but the OCC, rather than the CFPB, currently

examines the Bank for compliance with such laws and regulations because the Bank's regulatory assets have yet to exceed $10 billion for four consecutive quarter-ends.

The CRA requires the appropriate federal banking agency, in connection with its examination of an FDIC-insured institution, to assess its record in meeting the credit needs of the communities served by the institution, including low and moderate income neighborhoods.

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The Bank received a satisfactory rating in its most recently completed CRA evaluation.

On October 24, 2023, the federal banking agencies, including the OCC, issued a final rule designed to strengthen and modernize the regulations implementing the CRA.

The changes are designed to encourage banks to expand access to credit, investment and banking services in low- and moderate-income communities, adapt to changes in the banking industry, including mobile and internet banking, provide greater clarity and consistency in the application of the CRA regulations and tailor CRA evaluations and data collection to bank size and type.

Bank Secrecy Act /Anti-Money Laundering Laws.

The Bank is subject to the Bank Secrecy Act and other anti-money laundering laws, including the USA PATRIOT Act of 2001 and regulations thereunder.

These laws and regulations require

the Bank to implement policies, procedures, and controls to detect, prevent, and report money laundering and terrorist financing and to verify the identity and source of deposits and wealth of its customers.

These laws and regulations require the Bank to implement policies, procedures, and controls to detect, prevent, and report money laundering and terrorist financing and to verify the identity and source of deposits and wealth of its customers.

Violations of these laws and regulations can result in substantial civil and criminal sanctions.

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Federal Reserve System.

The FRB requires all depository institutions to maintain reserves at specified levels against their transaction accounts, primarily checking accounts.

In response to the Coronavirus Disease 2019 ("COVID-19") pandemic, the FRB reduced reserve requirement ratios to zero percent effective on March 26, 2020, to support lending to households and businesses.

In response to the Coronavirus Disease 2019 ("COVID-19") pandemic, the FRB reduced reserve requirement ratios to zero percent effective March 26, 2020, to support lending to households and businesses.

At September 30, 2024, the reserve requirement of zero percent was still in place.

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In March 2023, the FRB created a Bank Term Funding Program ("BTFP") to make additional funding available to eligible depository institutions.

The BTFP offers loans up to one year in length that can be prepaid without penalty.

The amount that can be borrowed under the BTFP is based upon the par value of the securities pledged as collateral to the FRB.

Advances can be requested under the BTFP until at least March 11, 2024.

Advances could have been requested under the BTFP until March 11, 2024.

The BTFP offered loans up to one year in length that could be prepaid without penalty.

The amount that could be borrowed under the BTFP was based upon the par value of the securities pledged as collateral to the FRB.

At September 30, 2023, the Bank had $500.0 million of BTFP borrowings.

In October 2023, the Bank paid off the $500.0 million of BTFP borrowings.

In October 2023, the Bank paid off the $500.0 million of BTFP borrowings and did not enter into additional BTFP borrowings during fiscal year 2024.

Federal Home Loan Bank System.

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The minimum required FHLB stock amount is generally 4.5% of the Bank's FHLB advances and outstanding balance against the FHLB line of credit, and 2% of the outstanding principal balance of loans sold into the Mortgage Partnership Finance Program.

At September 30, 2023, the Bank had a balance of $110.7 million in FHLB stock, which was in compliance with the FHLB's stock requirement.

At September 30, 2024, the Bank had $101.2 million in FHLB stock, which was in compliance with the FHLB's stock requirement.

In past years, the Bank has received dividends on its FHLB stock, although no assurance can be given that these dividends will continue.

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The HOLA prohibits a savings and loan holding company (directly or indirectly, or through one or more subsidiaries) from acquiring another savings association, or holding company thereof, without prior written approval from the FRB;

acquiring or retaining, with certain exceptions, more than 5% of a non-subsidiary savings association, a non-subsidiary holding company, or a non-subsidiary company engaged in activities other than those permitted by the HOLA;

acquiring or retaining, with certain exceptions, more than 5% of a non-subsidiary savings association, a non-subsidiary holding company, or a non-subsidiary company engaged in activities other

than those permitted by the HOLA;

or acquiring or retaining control of a depository institution that is not federally insured.

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Transactions with Affiliates.

Transactions between the Bank and its affiliates are required to be on terms as favorable to the institution as transactions with non-affiliates, and certain of these transactions are restricted to a percentage of the Bank's

capital, and, in the case of loans, require eligible collateral in specified amounts.

In addition, the Bank may not lend to any affiliate engaged in activities not permissible for a bank holding company or purchase or invest in the securities of affiliates.

Transactions between the Bank and its affiliates are required to be on terms as favorable to the institution as transactions with non-affiliates.

Certain of these transactions are restricted to a percentage of the Bank's capital, and, in the case of loans, require eligible collateral in specified amounts.

The Bank may not lend to any affiliate engaged in activities not permissible for a bank holding company or purchase or invest in the securities of affiliates.

In addition, transactions with affiliates must be consistent with safe and sound banking practices and not involve the purchase of low-quality assets.

Federal Taxation.

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The Company files a consolidated federal income tax return.

The Company has not received notification from the IRS of any potential tax liability for any years still subject to audit.

The Company has not received notification from the Internal Revenue Service of any potential tax liability for any years still subject to audit.

For federal income tax purposes, the Bank currently reports its income and expenses on the accrual method of accounting and uses a fiscal year ending on September 30 for filing its federal income tax return.

Changes to the corporate federal income tax rate would result in changes to the Company's effective income tax rate and would require the Company to remeasure its deferred tax assets and liabilities based on the tax rate in the years in which those temporary differences are expected to be recovered or settled.

Prior to the enactment of the Small Business Job Protection Act (the "1996 Act"), the Bank was permitted to deduct, up to a specified formula limit, a certain percentage of income as bad debts, for which the Bank was not required to establish a deferred tax liability.

The difference between actual bad debts and the formula limit bad debt amount ("excess reserves") was recorded in the Bank's retained earnings.

As a result of the 1996 Act, savings institutions, like the Bank, were required to use the specific charge-off method in computing bad debts on their tax returns beginning with their 1996 Federal tax returns.

The 1996 Act required the recapture of excess reserves over the base year, which was September 30, 1988 for the Bank.

The excess reserves established prior to September 30, 1988 remain in retained earnings ("pre-1988 bad debt reserves") subject to recapture by the Bank on the occurrence of certain distributions in excess of current earnings and profits accumulated in tax years beginning after December 31, 1951 ("accumulated earnings and profits").

The Bank had $75.9 million in pre-1988 bad debt reserves at September 30, 2024, which equates to an unrecorded deferred tax liability of $15.9 million.

See additional discussion regarding the Bank's pre-1988 bad debt recapture in "Part IA.

Risk Factors - Other Risks", "Part II.

Management's Discussion and Analysis of Financial Condition and Results of Operations - Comparison of Operating Results for the Years Ended September 30, 2024 and 2023" and "Part II, Item 8.

Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 9.

Income Taxes".

State Taxation.

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The Bank files a Kansas privilege tax return.

For Kansas privilege tax purposes, the minimum tax rate is 4.5% of earnings, which is calculated based on federal taxable income, subject to certain adjustments.

For Kansas privilege tax purposes, the minimum tax rate is 4.5% of earnings during fiscal year 2024, which is calculated based on federal taxable income, subject to certain adjustments.

The Bank has not received notification from the state of any potential tax liability for any years still subject to audit.

Additionally, the Bank files state tax returns in various other states where it has significant purchased loans and/or foreclosure activities.

In these states, the Bank has either established nexus under an economic nexus theory or has exceeded enumerated nexus thresholds based on the amount of interest derived from sources within the state.

The Bank's minimum rate for the Kansas privilege tax return will be reduced to 4.18% of earnings starting in fiscal year 2025.

Additionally, the Bank files state tax returns in 16 other states and two cities where it has significant loan balances.

In these states and cities, the Bank has either established a nexus under an economic nexus theory or has exceeded enumerated nexus thresholds based on the amount of interest income derived from loans within the state.

Employees and Human Capital Resources

At September 30, 2024, we had a total of 659 employees, including 76 part-time employees.

The full-time equivalent of our total employees at September 30, 2023 was 632, a decrease from 707 at September 30, 2022.

The decrease was largely attributable to the Bank's improved ability to provide a comprehensive digital experience as a result of its implementation of a new core processing system ("the digital transformation").

A large majority of our customers became comfortable carrying out daily transactions through the adoption of our technology efforts, resulting in decreased walk-in traffic and management's ability to more efficiently staff our branches.

Our new staffing model includes officer-level decision makers at each of our locations, as well as narrowly focused efforts to hire and develop a more universal employee who can not only execute basic teller transactions, but also participate in consumer loan activity.

The overall decrease in headcount was not achieved through layoffs, but rather management's decision to not backfill non-essential employees through natural attrition.

We believe the new staffing model comprised of decision makers and well-rounded employees will add an elevated customer experience for those who still choose to bank with us in-person.

The full-time equivalent of our total employees at September 30, 2024 was 636, an increase from 632 at September 30, 2023.

Our employees are not represented by any collective bargaining group.

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Accordingly, we strive to offer competitive salaries and employee benefits to all employees and monitor salaries in our market areas.

Physical well-being is supported by the Company's health, dental, vision, life and various other insurances, and a wellness program that incentivizes employees to live a healthy and balanced lifestyle.

Physical well-being is supported by the Company's health, dental, vision, life and various other insurances, and a wellness program that encourages employees to live a healthy and balanced lifestyle.

Volunteer opportunities are provided and encouraged for all employees.

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Annual employee educational requirements include targeted diversity, equity and inclusion training for all managers.

All employees receive annual training on providing fair service, which is targeted at addressing implicit bias in providing customer service.

All employees receive annual training on providing fair, high-quality service and understanding the causes of discrimination.

The Company actively participates in initiatives to promote diversity and inclusion, both internally and externally.

The Company has an Inclusion Task Force that promotes diversity and inclusion.

During the current fiscal year, the Inclusion Task Force hosted events such as book and documentary discussions and developed an internal community webpage.

Our employees, together with the Capitol Federal Foundation, contribute to programs that promote educational opportunities in all communities as well as housing in low-and-moderate income communities, including scholarships specifically for diverse candidates.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business