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Capitol Federal Financial(CFFN) - 2023 Q2 - Quarterly Report
CFFNCapitol Federal Financial(CFFN)2023-05-09 16:00

Financial Performance - Net income for March 2023 was 14,189,000,adecreasefrom14,189,000, a decrease from 21,623,000 in March 2022, representing a decline of approximately 34.4%[187]. - For the quarter ended March 31, 2023, the company reported net income of 14,189thousand,comparedto14,189 thousand, compared to 21,623 thousand for the same period in 2022, reflecting a decrease of 34.3%[216]. - The company reported total non-interest expense of 28,631thousandforthequarterendedMarch31,2023,comparedto28,631 thousand for the quarter ended March 31, 2023, compared to 27,960 thousand for the same period in 2022, an increase of 2.4%[216]. - The company experienced a decrease in salaries and employee benefits primarily due to a reduction in incentive compensation[99]. - The company experienced a significant decrease in unrealized losses on AFS securities, with an ending balance of (71,776)thousandforthesixmonthsendedMarch31,2022[239].AssetandLiabilityManagement−Totalassetsincreasedto(71,776) thousand for the six months ended March 31, 2022[239]. Asset and Liability Management - Total assets increased to 10.09 billion as of March 31, 2023, representing a 6.3% increase from 9.93billionasofDecember31,2022[46].−Totalliabilitiesincreasedto9.93 billion as of December 31, 2022[46]. - Total liabilities increased to 9,013,736 thousand as of March 31, 2023, up from 8,528,398thousandasofSeptember30,2022,reflectingagrowthof5.78,528,398 thousand as of September 30, 2022, reflecting a growth of 5.7%[215]. - Total stockholders' equity as of March 31, 2023, was 1,072,034, a decrease from 1,096,499asofDecember31,2022[203].−TheBank′sborrowingcapacityfromtheFHLBwaslimitedto501,096,499 as of December 31, 2022[203]. - The Bank's borrowing capacity from the FHLB was limited to 50% of total assets as of March 31, 2023[44]. - Total deposits decreased to 6.14 billion at March 31, 2023, a decline of 50.4millionfromSeptember30,2022,mainlydrivenbya50.4 million from September 30, 2022, mainly driven by a 284.5 million decrease in money market account balances[241]. Loan Portfolio - Total loans receivable increased to 7,966,125thousandasofMarch31,2023,upfrom7,966,125 thousand as of March 31, 2023, up from 7,471,670 thousand as of September 30, 2022, representing an increase of approximately 6.6%[211]. - The total amount of commercial loans reached 1,181,603thousandwithaweightedaveragerateof4.891,181,603 thousand with a weighted average rate of 4.89%[78]. - The total loans reported for commercial real estate were 881,081, with "Pass" loans at 366,794[227].−Loansreceivable,netroseto366,794[227]. - Loans receivable, net rose to 7.96 billion, a 9.0% increase from 7.78billionasofDecember31,2022[46].−Thetotalamountofnon−accrualloanswasreportedwithnoloans90ormoredaysdelinquentaccruinginterest[83].CreditQuality−Theprovisionforcreditlosseswas7.78 billion as of December 31, 2022[46]. - The total amount of non-accrual loans was reported with no loans 90 or more days delinquent accruing interest[83]. Credit Quality - The provision for credit losses was 427 million for the six months ended March 31, 2023, with an ending balance of 19.889billionintheallowanceforcreditlosses[63].−Theratioofnetcharge−offs(NCOs)toaveragenon−performingassetswas0.2019.889 billion in the allowance for credit losses[63]. - The ratio of net charge-offs (NCOs) to average non-performing assets was 0.20% for the current period, compared to (0.35)% for the prior period[116]. - Non-performing assets as a percentage of total assets decreased to 0.06% from 0.08% year-over-year, reflecting improved asset quality[181]. - The provision for credit losses for the current year period was 4.6 million, compared to a release of provision of 6.6millionduringtheprioryearperiod,reflectinggrowthinthecommercialloanportfolio[161].−Theallowanceforcreditlosses(ACL)increasedto6.6 million during the prior year period, reflecting growth in the commercial loan portfolio[161]. - The allowance for credit losses (ACL) increased to 19,889 thousand as of March 31, 2023, from 16,371thousandasofSeptember30,2022,indicatingariseof21.516,371 thousand as of September 30, 2022, indicating a rise of 21.5%[215]. Income and Expenses - Total interest and dividend income for the quarter was 89.5 million, a decrease of 2.0% from 91.3millioninthepriorquarter[96].−Thenetinterestmargindecreasedby24basispoints,from1.8391.3 million in the prior quarter[96]. - The net interest margin decreased by 24 basis points, from 1.83% for the prior year period to 1.59% for the current year period, primarily due to an increase in the cost of borrowings and deposits[105]. - Total interest expense for the six months ended March 31, 2023, was 93.099 million, an increase of 59.126millionor174.059.126 million or 174.0% from 33.973 million in the prior year[160]. - The company anticipates continued net interest margin compression due to the current yield curve dynamics and the pace of liability repricing[1]. - The efficiency ratio for the current quarter was 60.86%, compared to 54.27% for the prior quarter, indicating increased costs relative to revenue generation[131]. Dividends and Shareholder Returns - Cash dividends paid totaled 60.53millionforthesixmonthsendedMarch31,2023,comparedto60.53 million for the six months ended March 31, 2023, compared to 52.92 million for the same period in 2022[50]. - The company announced a regular quarterly cash dividend of 0.085pershare,totalingapproximately0.085 per share, totaling approximately 11.3 million, payable on May 19, 2023[92]. - The company’s total dividends paid year-to-date reached 22,640,000,comparedto22,640,000, compared to 110,955,000 in the previous year, indicating a significant decrease in total dividends paid[196]. - The average number of basic and diluted shares outstanding decreased by 4.4% to 133,150 as of March 31, 2023[46]. - There remains 22.5millionauthorizedundertheexistingstockrepurchaseplanforadditionalpurchasesofthecompany′scommonstock[124].StrategicInitiatives−Managementanticipatesanincreaseininformationtechnologyandrelatedexpensesinfiscalyear2023duetotheongoingdigitaltransformationinitiative[75].−ManagementisimplementinganewcoreprocessingsystemexpectedtoenhanceproductofferingsandcustomerexperiencebySeptember2023[75].−ThecompanyplanstoimplementanewcoreprocessingsystembySeptember2023aspartofitsdigitaltransformationstrategy[165].−Theaveragebalanceofcashandcashequivalentsrelatedtotheleveragestrategywas22.5 million authorized under the existing stock repurchase plan for additional purchases of the company's common stock[124]. Strategic Initiatives - Management anticipates an increase in information technology and related expenses in fiscal year 2023 due to the ongoing digital transformation initiative[75]. - Management is implementing a new core processing system expected to enhance product offerings and customer experience by September 2023[75]. - The company plans to implement a new core processing system by September 2023 as part of its digital transformation strategy[165]. - The average balance of cash and cash equivalents related to the leverage strategy was 935.1 million for the quarter ended March 31, 2023, down from $1.79 billion in the previous quarter[5]. - The company experienced an increase in interest expense on borrowings due to a higher average balance and weighted average rate, alongside a reduction in deposits[149].