Capitol Federal Financial(US:CFFN)2021-11-23 16:00Financial Performance - Net income for fiscal year 2021 increased by $11.5 million, or 17.9%, compared to the prior year, primarily due to a negative provision for credit losses of $8.5 million in the current year [123]. - The company reported net income of $76.1 million, or $0.56 per share, for fiscal year 2021, compared to $64.5 million, or $0.47 per share, for fiscal year 2020, reflecting an increase in net income [220]. - Net income increased by 17.9% to $76.08 million, up from $64.54 million, due to higher pretax income [236]. - Non-interest income increased by 43.3% to $28.09 million, driven by a $7.39 million gain on the sale of Visa Class B shares and higher deposit service fees [231]. Interest Income and Margin - The net interest margin decreased to 1.90% from 2.12% in the prior year, attributed to lower asset yields in a low interest rate environment [124]. - Net interest income decreased by $14.3 million, or 7.6%, to $175.0 million for the current year, primarily due to a decrease in asset yields [220]. - The total interest and dividend income fell to $258.2 million, down $46.8 million or 15.3% from $305.0 million in the previous year [221]. - Interest income from loans receivable decreased by $40.6 million, or 15.0%, primarily due to a decrease in the weighted average yield [221]. Loan and Deposit Activity - The loan portfolio decreased by $121.7 million, or 1.7%, while the securities portfolio increased by $453.7 million, or 29.1% during the current year [125]. - Deposit growth was $406.0 million, or 6.6%, while borrowings decreased by $206.5 million, or 11.5% [125]. - Total loans receivable amounted to $7,096,073 thousand with a yield of 3.23% [159]. - The total amount of one- to four-family loans was $6.133 billion, with 7,287 loans 30 to 89 days delinquent [177]. Credit Losses and Allowance - The allowance for credit losses (ACL) was $19.8 million at September 30, 2021, down from $26.8 million at October 1, 2020, reflecting improved economic conditions [136]. - The allowance for credit losses (ACL) at the end of the period was $19,823 thousand, a decrease from $31,527 thousand in the previous year, reflecting a reduction of 37.3% [185]. - The provision for credit losses for the current year was $(6,465) thousand, significantly lower than the previous year's provision of $22,300 thousand [185]. - The total ACL to loans receivable ratio at the end of the period was 0.28%, down from 0.44% in the previous year [185]. Securities and Investments - The Company primarily uses Level 2 inputs for fair value measurements of its available-for-sale (AFS) securities [139]. - Total fixed-rate securities increased to $1,887,890 thousand with a yield of 1.11% as of September 30, 2021, compared to $1,325,115 thousand and a yield of 1.49% in the previous year [190]. - The total securities portfolio reached $2,008,456 thousand with a yield of 1.16% as of September 30, 2021, up from $1,529,605 thousand and a yield of 1.62% in the prior year [190]. - Fixed-rate securities comprised 94% of the securities portfolio as of September 30, 2021, with a $453.7 million increase in the balance due to purchases exceeding maturities and repayments [189]. Borrowings and Liabilities - Total liabilities rose by $186.6 million, or 2.3%, primarily due to an increase in deposits [195]. - The Bank's total borrowings at par were $1.59 billion, representing approximately 16% of total assets, all from FHLB advances [242]. - Total borrowings decreased from $1,790 million to $1,590 million, with an effective rate dropping from 2.31% to 1.88% [205]. - New FHLB borrowings amounted to $1,105 million at an effective rate of 1.96% [205]. Dividends and Stockholder Returns - Cash dividends paid totaled $117.9 million, equating to $0.87 per share, including a $0.40 True Blue Capitol cash dividend [206]. - The company plans to continue paying out 100% of its earnings to stockholders, with expected regular quarterly cash dividends of $0.085 per share for fiscal year 2022 [210]. - Regular quarterly cash dividends for 2021 totaled $130.1 million, with a per share amount of $0.96 [213]. - The company has $44.7 million authorized for additional stock repurchases, with no expiration date on the plan [209]. Risk Management and Compliance - The Company is exposed to increased lending and credit risks due to a growing portion of commercial loans in its portfolio [76]. - The Company monitors local and national employment levels and trends, as adverse conditions could impact borrowers' ability to repay loans [75]. - The Company has implemented various safeguards to protect against cybersecurity risks, but there is no assurance that breaches will not occur [86]. - Regulatory changes could adversely impact the Company's operations and increase compliance costs, affecting profitability and market activities [99]. Economic Conditions - The average national unemployment rate during the four-quarter macro-economic forecast was 3.8% at September 30, 2021, compared to 10.8% at October 1, 2020 [136]. - The transition from LIBOR to alternative reference rates like SOFR may incur significant expenses and could reduce interest income [84]. - The Company anticipates that the majority of maturing retail certificates of deposit will renew or transfer to other deposit products at prevailing rates [247].