Capitol Federal Financial : Annual Report - 2021

Capitol Federal Financial, Inc.

Annual Report 2021

• Notice and Proxy Statement 2022

DEAR STOCKHOLDERS,

Capitol Federal® Financial, Inc. (the "Company") completed fiscal year 2021 with earnings higher than the previous year, a continued strong capital position, and continued strong asset quality. We achieved these successful results during fiscal year 2021 while dealing with the COVID-19 pandemic and the working environment it created for our daily operations. The adaptability of our employees allowed us to continue to serve our customers through every delivery channel. We find ourselves at the end of fiscal year 2021 in full swing and competitive in all aspects of our business.

In fiscal year 2021 the Company earned $76.1 million, compared to $64.5 million the prior fiscal year. Earnings increased primarily because of the reversal of some of the allowance for credit loss we booked in fiscal year 2020 when asset quality was uncertain. This was offset by a decreased net interest margin as a lower rate environment allowed home owners to purchase homes with a lower cost to borrow and allowed existing borrowers to refinance loans to lower rates. The lower net interest margin resulted in lower net interest income.

During calendar year 2021 we paid $0.96 per share in cash dividends compared to $0.47 per share in calendar year 2020. The increase in dividends was due not only to an increase in earnings but also to reinstating the True Blue® dividend in June of 2021. In fiscal year 2020 we deferred the dividend when considering the uncertainty of the effects of the pandemic on the financial condition of Capitol Federal. When we reinstated the dividend, we paid $0.20 per share for fiscal year 2020 and $0.20 per share for fiscal year 2021 as we reset the level of the True Blue dividend.

We ended the fiscal year at $9.6 billion in total assets, an increase of $144 million from the prior year. This was driven largely by increases in deposits that resulted from economic assistance from the U.S. Government and a higher savings rate among our depositors. Deposits increased from $6.2 billion at the end of fiscal year 2020 to $6.6 billion at the end of fiscal year 2021. The decrease in our loan portfolio from $7.2 billion to $7.1 billion was a result of a decrease in our correspondent loans.

Asset quality remained strong despite economic headwinds for many borrowers. Almost all of our single- family borrowers who took a deferral on mortgage payments came through that deferral period with their loans still current. Our commercial customers who took deferral options are performing equally strong. Our loans 90 days or more delinquent were just $12 million, or 0.16% of total loans at the end of our fiscal year.

Capital remained strong with an equity to total assets ratio of 12.9% at September 30, 2021. The decrease from the prior year was due to both an increase in total assets and the payment of the True Blue dividend in June 2021.

The Capitol Federal Foundation® continued to focus its support of organizations in our communities funding grants totaling just over $4.9 million during fiscal year 2021. These gifts bring total giving by the Foundation since 1999 to $83.2 million. At September 30, 2021 the Foundation had total assets of approximately $105.8 million.

The Company's board and management wish to thank our employees for their continuing hard work and dedication during the past several years. It is because of their ability to adapt that we have been able to meet our customers' expectations for services and products. We want to thank our stockholders for their continued commitment to Capitol Federal.

Sincerely,

John B. Dicus

Chairman, President & CEO

December 14, 2021

Dear Fellow Stockholder:

On behalf of the Board of Directors and management of Capitol Federal Financial, Inc.® we cordially invite you to attend our annual meeting of stockholders. The meeting will be held at 10:00 a.m. local time on Tuesday, January 25, 2022, at the Topeka Performing Arts Center, 214 S.E. 8th Avenue, in Topeka, Kansas. As part of our precautions regarding the COVID-19 pandemic, we are planning for the possibility that the annual meeting may be held solely by means of remote communication (commonly referred to as a "virtual" meeting). If we determine to make the annual meeting virtual, we will announce the decision to do so in advance, and provide information on how to participate, in a press release, which will be filed with the Securities and Exchange Commission as additional proxy soliciting material.

Regardless of whether you plan to attend the annual meeting, please read the enclosed proxy statement and then vote by the Internet, telephone or mail as promptly as possible. Your prompt response will save us additional expense in soliciting proxies and will ensure that your shares are represented at the meeting.

This year we are using a Securities and Exchange Commission rule to furnish our proxy statement, Annual Report and proxy card over the Internet to stockholders. This means that stockholders will not receive paper copies of these documents. Instead, stockholders will receive only a notice containing instructions on how to access the proxy materials over the Internet. This rule enables us to lower the costs of delivering the annual meeting materials and reduce the environmental impact of the meeting. If you would like to receive a copy of the printed materials, the notice contains instructions on how you can request copies of these documents.

Your Board of Directors and management are committed to the success of Capitol Federal Financial, Inc. and the enhancement of your investment. As Chairman of the Board, I want to express my appreciation for your confidence and support.

Very truly yours,

JOHN B. DICUS

Chairman of the Board, President and Chief Executive

Officer