Capitol Federal Financial(CFFN) - 2020 Q2 - Quarterly Report

Financial Performance - For the quarter ended March 31, 2020, the Company reported net income of $4.3 million, or $0.03 per share, a decrease from $24.6 million, or $0.18 per share, in the same quarter of 2019[82]. - The company reported a net income of $4.276 million for the three months ended March 31, 2020, a decrease from $22.511 million in the same period last year, reflecting a significant decline in profitability[148]. - For the six months ended March 31, 2020, net income was $26.8 million, or $0.19 per share, down from $48.9 million, or $0.36 per share, in the same period last year, primarily due to a $22.3 million provision for credit losses[150]. - The return on average assets (annualized) was 0.18%, down from 1.05% in the previous quarter[170]. - The return on average equity (annualized) was 1.30, compared to 7.25 in the previous quarter, reflecting a significant decline in profitability[170]. Credit Losses and Provisions - The provision for credit losses was $22.1 million for the current quarter, increasing the allowance for credit losses (ACL) to $31.2 million, resulting in an ACL to loans receivable ratio of 0.42% compared to 0.12% at September 30, 2019[81]. - The provision for credit losses surged to $22.075 million in the current quarter, compared to only $225 thousand in the previous quarter, highlighting the impact of economic conditions on credit quality[148]. - The allowance for credit losses (ACL) was increased due to the economic impact of COVID-19, reflecting a proactive approach to potential loan losses[122]. - The total ACL increased from $9.435 million at September 30, 2019, to $31.196 million at March 31, 2020[129]. Interest Income and Margin - The net interest margin decreased by 14 basis points from 2.33% in the prior year quarter to 2.19% in the current quarter, primarily due to a decrease in loan portfolio yield and an increase in the cost of deposits[82]. - Net interest income for the three months ended March 31, 2020, was $48.668 million, slightly down from $48.697 million in the previous quarter, indicating a stable interest income despite market challenges[148]. - The weighted average yield on total interest-earning assets decreased four basis points to 3.56% for the current year period, with a decrease in the average balance of interest-earning assets by $221.2 million[150]. - The weighted average yield on loans receivable decreased from 3.75% to 3.72%, while the yield on the MBS portfolio decreased to 2.55%[177]. Loan Portfolio and Originations - Total loans reached $7.48 billion at March 31, 2020, an increase of $47.6 million, or 0.6%, from December 31, 2019, driven mainly by the one- to four-family correspondent loan portfolio[93]. - The total amount of loans originated for one- to four-family properties was $4,517 million, up from $3,552 million, reflecting a 27% increase[119]. - The Bank originated and refinanced $193.6 million of one- to four-family and consumer loans at a weighted average rate of 3.45% during the current quarter[93]. - The total originated loans for the three months ended March 31, 2020, amounted to $321,580 thousand, with a weighted average credit score of 764 and an LTV of 73%[104]. Deposits and Borrowings - Total deposits rose by $188.8 million, or 3.4%, to $5.77 billion from December 31, 2019, with retail/business certificates of deposit increasing by $108.8 million[93]. - The total amount of borrowings as of March 31, 2020, was $2,090,000 thousand, with an effective rate of 2.25%[138]. - The effective rate for new FHLB borrowings was 1.70% with a weighted average maturity of 4.7 years[138]. - The total amount of retail/business certificates was $1.25 billion with a repricing rate of 2.02% as of June 30, 2020[141]. Non-Performing Loans and Delinquency - The delinquency rate for loans 30 to 89 days delinquent is 0.24%, consistent with the previous quarter[117]. - Non-performing loans as a percentage of total loans rose to 0.17%, compared to 0.13% in the previous year, indicating a deterioration in loan quality[119]. - The total amount of loans 90 or more days delinquent or in foreclosure increased to $9,439 million, up from $8,571 million, representing a 10% increase year-over-year[119]. - The Bank's total delinquent loans amount to $17,988 thousand, with a total of 167 loans[117]. Economic Impact and Future Outlook - The Company anticipates being able to manage economic risks associated with the COVID-19 pandemic and remains well capitalized with sufficient liquidity to serve customers[81]. - The Company has deferred the annual True Blue dividend in June 2020 due to economic uncertainty, but intends to pay out 100% of its earnings in the future[81]. - The company will continue to monitor economic conditions closely and may need to increase the ACL if conditions worsen[123]. - The company is actively working with borrowers to assist them through the economic challenges posed by COVID-19[123].