Capitol Federal Financial, Inc.® (NASDAQ:CFFN) (the "Company,"
"we" or "our"), the parent company of Capitol Federal Savings Bank
(the "Bank"), announced results today for the quarter ended June
30, 2024. For best viewing results, please view this release in
Portable Document Format (PDF) on our website,
https://ir.capfed.com.
Highlights for the quarter include:
- net income of $9.6 million;
- basic and diluted earnings per share of $0.07;
- net interest margin of 1.77%;
- paid dividends of $0.085 per share; and
- on July 23, 2024, announced a cash dividend of $0.085 per
share, payable on August 16, 2024 to stockholders of record as of
the close of business on August 2, 2024
The Company's Board of Directors is committed to paying the
$0.085 per share cash dividend each quarter for the foreseeable
future. As a result of the income tax on the quarterly earnings
distribution from the Bank to the Company due to the recapture of
the Bank's bad debt reserves, the Company's quarterly earnings may
not be sufficient to fully cover the amount of the quarterly
dividend payment. Because of that, the Company is retaining cash
balances to support future dividend payments. The amount of cash
held by the Company at June 30, 2024 was $49.1 million.
Comparison of Operating Results for the Three Months Ended
June 30, 2024 and March 31, 2024
For the quarter ended June 30, 2024, the Company recognized net
income of $9.6 million, or $0.07 per share, compared to net income
of $13.8 million, or $0.11 per share, for the quarter ended March
31, 2024. The lower net income in the current quarter was due
primarily to higher income tax expense, mainly from income tax
expense on the quarterly earnings distribution from the Bank to the
holding company due to the Bank's pre-1988 bad debt recapture, and
a higher provision for credit losses due largely to commercial loan
growth. The income tax expense associated with the pre-1988 bad
debt recapture negatively impacted earnings by $0.03 per share in
the current quarter. See additional discussion regarding the Bank's
pre-1988 bad debt recapture in the "Income Tax Expense" section
below. The net interest margin decreased five basis points, from
1.82% for the prior quarter to 1.77% for the current quarter due
mainly to increases in the cost and average balance of retail
certificates of deposit outpacing net interest margin improvements
from the securities and loan portfolios.
Interest and Dividend Income
The following table presents the components of interest and
dividend income for the time periods presented, along with the
change measured in dollars and percent.
For the Three Months
Ended
June 30,
March 31,
Change Expressed in:
2024
2024
Dollars
Percent
(Dollars in thousands)
INTEREST AND DIVIDEND INCOME:
Loans receivable
$
76,803
$
76,122
$
681
0.9
%
Mortgage-backed securities ("MBS")
9,585
7,794
1,791
23.0
Cash and cash equivalents
3,875
4,513
(638
)
(14.1
)
Federal Home Loan Bank Topeka ("FHLB")
stock
2,477
2,528
(51
)
(2.0
)
Investment securities
2,255
2,332
(77
)
(3.3
)
Total interest and dividend income
$
94,995
$
93,289
$
1,706
1.8
The increase in interest income on loans receivable was due to
an increase in the weighted average yield, partially offset by a
lower average portfolio balance compared to the prior quarter due
largely to a decrease in the one- to four-family correspondent loan
portfolio. See additional discussion in the "Financial Condition as
of June 30, 2024" section below. The increase in interest income on
MBS was due to an increase in average balance compared to the prior
quarter as a result of the full quarter impact of purchases made
late in the prior quarter as well as purchases made during the
current quarter. The decrease in interest income on cash and cash
equivalents was due to a decrease in the average balance as excess
operating cash during the current quarter was, in part, reinvested
into the MBS portfolio.
Interest Expense
The following table presents the components of interest expense
for the time periods presented, along with the change measured in
dollars and percent.
For the Three Months
Ended
June 30,
March 31,
Change Expressed in:
2024
2024
Dollars
Percent
(Dollars in thousands)
INTEREST EXPENSE:
Deposits
$
36,233
$
33,415
$
2,818
8.4
%
Borrowings
18,438
18,554
(116
)
(0.6
)
Total interest expense
$
54,671
$
51,969
$
2,702
5.2
The increase in interest expense on deposits was due primarily
to increases in the weighted average rate paid and the average
balance of the retail certificate of deposit portfolio.
Provision for Credit Losses
For the quarter ended June 30, 2024, the Bank recorded a
provision for credit losses of $1.5 million, compared to a
provision for credit losses of $301 thousand for the prior quarter.
The provision for credit losses in the current quarter was
comprised of a $1.3 million increase in the allowance for credit
losses ("ACL") for loans, along with a $195 thousand increase in
the reserve for off-balance sheet credit exposures. The provision
for credit losses associated with the ACL was due primarily to
commercial loan growth.
Non-Interest Income
The following table presents the components of non-interest
income for the time periods presented, along with the change
measured in dollars and percent.
For the Three Months
Ended
June 30,
March 31,
Change Expressed in:
2024
2024
Dollars
Percent
(Dollars in thousands)
NON-INTEREST INCOME:
Deposit service fees
$
2,706
$
2,451
$
255
10.4
%
Insurance commissions
905
735
170
23.1
Other non-interest income
1,098
1,457
(359
)
(24.6
)
Total non-interest income
$
4,709
$
4,643
$
66
1.4
The increase in deposit service fees was due primarily to
increased debit card usage, which generated additional interchange
and service charge income during the current quarter. The increase
in insurance commissions was mainly a result of rate increases
within the insurance market on both existing and new business. The
decrease in other non-interest income was due mainly to a decrease
in income on bank-owned life insurance related to the receipt of
death benefits in the prior quarter while none were received in the
current quarter.
Non-Interest Expense
The following table presents the components of non-interest
expense for the time periods presented, along with the change
measured in dollars and percent.
For the Three Months
Ended
June 30,
March 31,
Change Expressed in:
2024
2024
Dollars
Percent
(Dollars in thousands)
NON-INTEREST EXPENSE:
Salaries and employee benefits
$
13,307
$
12,887
$
420
3.3
%
Information technology and related
expense
5,364
4,954
410
8.3
Occupancy, net
3,263
3,481
(218
)
(6.3
)
Federal insurance premium
1,352
1,727
(375
)
(21.7
)
Regulatory and outside services
1,322
1,380
(58
)
(4.2
)
Advertising and promotional
951
1,271
(320
)
(25.2
)
Deposit and loan transaction costs
726
867
(141
)
(16.3
)
Office supplies and related expense
405
419
(14
)
(3.3
)
Other non-interest expense
1,260
1,459
(199
)
(13.6
)
Total non-interest expense
$
27,950
$
28,445
$
(495
)
(1.7
)
The increase in salaries and employee benefits was due mainly to
merit and other salary adjustments during the current quarter and
an increase in loan related commissions due to an increase in one-
to four-family loan origination volume compared to the prior
quarter. The increase in information technology and related expense
was due primarily to higher software related expenses mainly
related to new agreements and agreement renewals at higher costs.
The decrease in the federal insurance premium was due to the actual
Federal Deposit Insurance Corporation ("FDIC") assessment being
lower than projected for the prior quarter, which was reflected in
the current quarter when it was paid. The decrease in advertising
and promotional expense was due mainly to the timing of campaigns
compared to the prior quarter. The decrease in deposit and loan
transaction costs was due primarily to expenses related to calendar
year-end processing being paid in the prior quarter. The decrease
in other non-interest expense was due mainly to a reduction in
customer fraud losses compared to the prior quarter.
The Company's efficiency ratio was 62.07% for the current
quarter compared to 61.89% for the prior quarter. The change in the
efficiency ratio was due to lower net interest income, partially
offset by lower non-interest expense. The efficiency ratio is a
measure of a financial institution's total non-interest expense as
a percentage of the sum of net interest income (pre-provision for
credit losses) and non-interest income. A higher value generally
indicates that it is costing the financial institution more money
to generate revenue, relative to its net interest income and
non-interest income.
Income Tax Expense
The following table presents pretax income, income tax expense,
and net income for the time periods presented, along with the
change measured in dollars and percent and the effective tax
rate.
For the Three Months
Ended
June 30,
March 31,
Change Expressed in:
2024
2024
Dollars
Percent
(Dollars in thousands)
Income before income tax expense
$
15,611
$
17,217
$
(1,606
)
(9.3
)%
Income tax expense
5,963
3,455
2,508
72.6
Net income
$
9,648
$
13,762
$
(4,114
)
(29.9
)
Effective Tax Rate
38.2
%
20.1
%
The increase in income tax expense and the higher effective tax
rate in the current quarter was due primarily to recording $2.9
million of income taxes on the current quarter distribution of
earnings from the Bank to the Company, compared to $508 thousand of
income taxes on the distribution of earnings from the Bank to the
Company during the prior quarter. The distribution of earnings
during the current quarter was consistent with distributions in
prior periods as 100% of the Bank's quarterly earnings were
distributed to the Company.
The income tax on the earnings distribution from the Bank to the
Company was due to the recapture of a portion of the Bank's bad
debt reserves which were established prior to September 30, 1988,
and are included in the Bank's retained earnings ("pre-1988 bad
debt reserves"). It is anticipated that a taxable net loss will be
reported on the Company's September 30, 2024 federal tax return due
to the net losses associated with the strategic securities
transaction ("securities strategy") which will result in the Bank
and Company having a negative current and accumulated earnings and
profit tax position. This requires the Bank to draw upon the
pre-1988 bad debt reserves for any distributions from the Bank to
the Company during the current fiscal year. The Bank is required to
pay taxes on the reductions to the pre-1988 bad debt reserves equal
to the current corporate tax rate at the time of the distribution
of the amount of Bank earnings paid to the Company ("pre-1988 bad
debt recapture"). It is anticipated that the Bank will be required
to record income tax expense on earnings distributions from the
Bank to the Company for the remainder of fiscal year 2024 due to
the amount of remaining pre-1988 bad debt reserves, which was $85.5
million, or $18.0 million tax effected, as of June 30, 2024.
Management anticipates the effective tax rate for the fourth
quarter of fiscal year 2024 will be approximately 30% which
includes the pre-1988 bad debt recapture for the quarterly earnings
projected to be paid from the Bank to the Company during the fourth
quarter of fiscal year 2024, assuming regulatory approval is
received for the distribution.
Management is currently evaluating the income tax issues
associated with the pre-1988 bad debt reserves. There is some
uncertainty related to how the Bank's current earnings and profits,
beginning in fiscal year 2025, should be treated in relation to
distributions from the Bank to the Company and the associated
impact, if any, to the pre-1988 bad debt reserves. As of this point
in time, it is more likely than not that the Bank will be required
to record income tax expense on distributions from the Bank to the
Company each time a distribution is made during fiscal year 2025.
Management anticipates the effective tax rate for fiscal year 2025
may be in the 30% to 33% range if the Bank is required to record
income tax expense on distributions from the Bank to the
Company.
Comparison of Operating Results for the Nine Months Ended
June 30, 2024 and 2023
The Company recognized net income of $26.0 million, or $0.20 per
share, for the current year period, compared to net income of $38.7
million, or $0.29 per share, for the prior year period. In the
first quarter of fiscal year 2024, the Bank incurred $13.3 million
($10.0 million net of tax) of net losses related to the securities
strategy discussed in the "Securities Strategy to Improve Earnings"
section below. The lower net income for the current year period was
primarily a result of the net loss associated with the securities
strategy, a decrease in deposit service fees, a decrease in net
interest income, and an increase in income tax expense largely
related to the pre-1988 bad debt recapture, partially offset by a
lower provision for credit losses and a decrease in non-interest
expense. The income tax expense associated with the pre-1988 bad
debt recapture negatively impacted earnings by $0.02 per share in
the current year period. Excluding the effects of the net loss
associated with the securities strategy, earnings per share would
have been $0.28 for the current year period.
Periodically, at management's discretion, we have utilized a
strategy to increase earnings which entails entering into
short-term FHLB borrowings and depositing the proceeds from these
FHLB borrowings, net of the purchases of FHLB stock made to meet
FHLB stock holding requirements, at the Federal Reserve Bank of
Kansas City ("FRB") (the "leverage strategy"). See additional
information regarding the leverage strategy in the "Financial
Condition as of June 30, 2024 - Leverage Strategy" section below.
When the leverage strategy is in place, it reduces the net interest
margin due to the amount of earnings from the transaction in
comparison to the size of the transaction.
The net interest margin increased 27 basis points, from 1.50%
for the prior year period to 1.77% for the current year period, due
primarily to the leverage strategy being in place during the prior
year period but not in the current year period. The leverage
strategy negatively impacted the net interest margin for the prior
year period by 16 basis points. The remaining improvement in the
net interest margin absent the leverage strategy was due to higher
yields on securities and loans which outpaced the increase in the
cost of deposits, largely in retail certificates of deposit.
Securities Strategy to Improve Earnings
In October 2023, the Company initiated a securities strategy by
selling $1.30 billion of securities, representing 94% of its
securities portfolio. Since the Company did not have the intent to
hold the $1.30 billion of securities to maturity at September 30,
2023, the Company recognized an impairment loss on those
securities, $192.6 million of which was reflected in the Company's
financial statements for the quarter ended September 30, 2023. The
securities strategy was designed to allow the Company to improve
its earnings stream going forward, beginning in the current fiscal
year, by redeploying most of the proceeds into current market rate
securities and to provide liquidity to deleverage the balance sheet
utilizing the remaining proceeds. During the quarter ended December
31, 2023 the Company completed the sale of securities and
recognized $13.3 million ($10.0 million net of tax), or $0.08 per
share, of additional loss related to the sale of the securities.
See additional information regarding the impact of the securities
strategy on our financial measurements in "Average Balance Sheets"
below. The $1.30 billion of securities sold had a weighted average
yield of 1.22% and an average duration of 3.6 years. With the
proceeds from the sale of the securities, the Company purchased
$632.0 million of securities yielding 5.75%, paid down $500.0
million of borrowings with a cost of 4.70%, and held the remaining
cash at the FRB earning interest at the reserve balance rate until
such time as it can be used to fund commercial activity or other
Bank operations. See additional discussion related to commercial
loan activity in the "Financial Condition as of June 30, 2024" and
"Supplemental Financial Information - Loan Portfolio" sections
below.
Interest and Dividend Income
The following table presents the components of interest and
dividend income for the time periods presented, along with the
change measured in dollars and percent.
For the Nine Months
Ended
June 30,
Change Expressed in:
2024
2023
Dollars
Percent
(Dollars in thousands)
INTEREST AND DIVIDEND INCOME:
Loans receivable
$
228,866
$
206,056
$
22,810
11.1
%
MBS
23,238
14,121
9,117
64.6
Cash and cash equivalents
13,166
37,657
(24,491
)
(65.0
)
FHLB stock
7,591
11,025
(3,434
)
(31.1
)
Investment securities
7,115
2,671
4,444
166.4
Total interest and dividend income
$
279,976
$
271,530
$
8,446
3.1
The increase in interest income on loans receivable was due
largely to an increase in the weighted average yield and the
average balance of the portfolio. The increase in the weighted
average yield was due primarily to originations and purchases at
higher market rates between periods, as well as disbursements on
commercial construction loans at rates higher than the overall
portfolio rate and upward repricing of existing adjustable-rate
loans due to higher market interest rates. The increase in the
average balance was mainly in the commercial loan portfolio which
was partially offset by a decrease in the average balance of the
one- to four-family loan portfolio. See additional discussion in
the "Financial Condition as of June 30, 2024" and "Supplemental
Financial Information - Loan Portfolio" sections below. The
increase in interest income on MBS and investment securities was
due to an increase in the weighted average yield, partially offset
by a decrease in the average balance, both a result of the
securities strategy. The decrease in interest income on cash and
cash equivalents and the decrease in dividend income on FHLB stock
were due mainly to the leverage strategy being utilized during the
prior year period and not being utilized during the current year
period. Interest income on cash and cash equivalents related to the
leverage strategy decreased $34.7 million and dividend income on
FHLB stock related to the leverage strategy decreased $3.4 million
compared to the prior year period. Interest income on cash and cash
equivalents not associated with the leverage strategy increased
$10.2 million due largely to an increase in the average balance of
cash and cash equivalents as a result of the securities
strategy.
Interest Expense
The following table presents the components of interest expense
for the time periods presented, along with the change measured in
dollars and percent.
For the Nine Months
Ended
June 30,
Change Expressed in:
2024
2023
Dollars
Percent
(Dollars in thousands)
INTEREST EXPENSE:
Deposits
$
102,091
$
52,489
$
49,602
94.5
%
Borrowings
56,648
96,504
(39,856
)
(41.3
)
Total interest expense
$
158,739
$
148,993
$
9,746
6.5
The increase in interest expense on deposits was due almost
entirely to an increase in the weighted average rate paid on the
deposit portfolio, specifically retail certificates of deposit and
money market accounts. Interest expense on borrowings associated
with the leverage strategy decreased $36.5 million compared to the
prior year period due to the leverage strategy being in place
during the prior year period and not being in place during the
current year period. Interest expense on borrowings not associated
with the leverage strategy decreased $3.4 million due mainly to a
reduction in the average outstanding balance of the FHLB line of
credit compared to the prior year period and a decrease in
borrowings under the Federal Reserve's Bank Term Funding Program
("BTFP"), which were repaid during the current year period. The
decrease was partially offset by new borrowings added between
periods at market interest rates higher than the overall portfolio
rate, to replace maturing advances and to fund operational
needs.
Provision for Credit Losses
The Bank recorded a provision for credit losses of $1.9 million
during the current year period, compared to a provision for credit
losses of $5.9 million for the prior year period. The provision for
credit losses in the current year period was comprised of a $2.1
million increase in the ACL for loans, partially offset by a $238
thousand release in the reserve for off-balance sheet credit
exposures. The provision for credit losses associated with the ACL
was due primarily to commercial loan growth.
Non-Interest Income
The following table presents the components of non-interest
income for the time periods presented, along with the change
measured in dollars and percent.
For the Nine Months
Ended
June 30,
Change Expressed in:
2024
2023
Dollars
Percent
(Dollars in thousands)
NON-INTEREST INCOME:
Deposit service fees
$
7,732
$
9,987
$
(2,255
)
(22.6
)%
Insurance commissions
2,503
2,560
(57
)
(2.2
)
Net loss from securities transactions
(13,345
)
—
(13,345
)
N/A
Other non-interest income
3,568
3,702
(134
)
(3.6
)
Total non-interest income
$
458
$
16,249
$
(15,791
)
(97.2
)
The decrease in deposit service fees was due primarily to a
change in the fee structure of certain deposit products after the
Bank's digital transformation project. The net loss from securities
transactions relates to the securities strategy, with no similar
transaction in the prior year period.
Non-Interest Expense
The following table presents the components of non-interest
expense for the time periods presented, along with the change
measured in dollars and percent.
For the Nine Months
Ended
June 30,
Change Expressed in:
2024
2023
Dollars
Percent
(Dollars in thousands)
NON-INTEREST EXPENSE:
Salaries and employee benefits
$
39,186
$
39,687
$
(501
)
(1.3
)%
Information technology and related
expense
15,687
16,977
(1,290
)
(7.6
)
Occupancy, net
10,116
10,598
(482
)
(4.5
)
Federal insurance premium
4,939
3,289
1,650
50.2
Regulatory and outside services
4,345
4,274
71
1.7
Advertising and promotional
3,210
3,613
(403
)
(11.2
)
Deposit and loan transaction costs
2,135
1,916
219
11.4
Office supplies and related expense
1,185
1,810
(625
)
(34.5
)
Other non-interest expense
4,100
3,576
524
14.7
Total non-interest expense
$
84,903
$
85,740
$
(837
)
(1.0
)
The decrease in salaries and employee benefits was a result of a
decrease in full-time equivalent employees between the two periods
as a result of management's decision to not backfill non-critical
employees through natural attrition, along with a reduction in loan
commissions, partially offset by lower capitalized payroll costs
than the prior year due to the digital transformation project in
the prior year. Due to management's decision to not backfill
non-critical employees, during fiscal year 2023 the Bank moved to a
new branch staffing model comprised of decision makers and
well-rounded employees that is intended to add an elevated
experience for customers who choose in-person banking activities.
The decrease in information technology and related expense was due
mainly to lower third-party project management expenses due to the
Bank's digital transformation project during the prior year period
along with the discontinuation of other costs associated with the
previous core system, partially offset by higher software licensing
expenses resulting from new agreements associated with the digital
transformation project. The increase in the federal insurance
premium was due primarily to an increase in the FDIC assessment
rate as a result of the way the rate is adjusted for the occurrence
of a net loss during the quarter ending September 30, 2023. The
decrease in advertising and promotional expense was due primarily
to the timing of campaigns between the periods. The increase in
deposit and loan transaction costs was due primarily to the
outsourcing of statement processing related to the digital
transformation, partially offset by a reduction in other costs due
to the digital transformation. The decrease in office supplies and
related expense was due primarily to the outsourcing of statement
processing related to the digital transformation, and the timing of
office supply purchases between periods. The increase in other
non-interest expense was due mainly to an increase in customer
fraud losses.
The Company's efficiency ratio was 69.77% for the current year
period compared to 61.78% for the prior year period. Excluding the
net losses from the securities strategy, the efficiency ratio would
have been 62.87% for the current year period. The change in the
efficiency ratio, excluding the securities strategy, was due
primarily to lower non-interest income in the current year period
compared to the prior year period.
Income Tax Expense
The following table presents pretax income, income tax expense,
and net income for the time periods presented, along with the
change measured in dollars and percent and effective tax rate.
For the Nine Months
Ended
June 30,
Change Expressed in:
2024
2023
Dollars
Percent
(Dollars in thousands)
Income before income tax expense
$
34,896
$
47,171
$
(12,275
)
(26.0
)%
Income tax expense
8,943
8,440
503
6.0
Net income
$
25,953
$
38,731
$
(12,778
)
(33.0
)
Effective Tax Rate
25.6
%
17.9
%
The increase in income tax expense and the higher effective tax
rate in the current year period was due primarily to recording
income taxes on the current year distributions of earnings from the
Bank to the Company in association with the pre-1988 bad debt
recapture, partially offset by a $3.3 million tax benefit related
to the $13.3 million net loss on the securities sale associated
with the securities strategy.
Financial Condition as of June 30, 2024
The following table summarizes the Company's financial condition
at the dates indicated.
Annualized
Annualized
June 30,
March 31,
Percent
September 30,
Percent
2024
2024
Change
2023
Change
(Dollars and shares in
thousands)
Total assets
$
9,602,757
$
9,721,286
(4.9
)%
$
10,177,461
(7.5
)%
Available-for-sale ("AFS") securities
801,953
842,950
(19.5
)
1,384,482
(56.1
)
Loans receivable, net
7,933,043
7,877,569
2.8
7,970,949
(0.6
)
Deposits
6,129,660
6,141,711
(0.8
)
6,051,220
1.7
Borrowings
2,291,605
2,351,022
(10.1
)
2,879,125
(27.2
)
Stockholders' equity
1,020,676
1,024,903
(1.6
)
1,044,054
(3.0
)
Equity to total assets at end of
period
10.6
%
10.5
%
10.3
%
Average number of basic shares
outstanding
129,866
130,536
(2.1
)
133,225
(3.4
)
Average number of diluted shares
outstanding
129,866
130,536
(2.1
)
133,225
(3.4
)
During the current quarter, total assets decreased $118.5
million, to $9.60 billion at June 30, 2024, due primarily to a
decrease in cash which was used to pay off certain borrowings that
matured and to fund deposit withdrawals and other Bank operations.
The loan portfolio mix continued to shift from one- to four-family
loans to commercial loans during the current quarter, with $115.4
million, 34% annualized, in commercial loan growth, partially
offset by a $59.9 million decrease in one- to four-family loans due
primarily to a $52.1 million decrease in one- to four-family
correspondent loans.
As a result of rising interest rates and lack of housing
inventory, there has been a slowdown in the housing market which
has reduced the demand for residential loans and has directly
impacted the Bank's one- to four-family loan portfolio. Origination
and refinance activity has slowed considerably, and there has been
a reduction in one- to four-family loan balances through scheduled
repayments and loan payoffs. During the current quarter, the Bank
suspended its one- to four-family correspondent lending channels
for the foreseeable future. While the Bank's one- to four-family
loan activity levels are down compared to the prior year period,
partially due to the interest rate environment and seasonality,
management also expects the Bank's one- to four-family loan
portfolio will continue to decrease as cash flows generated from
the one- to four-family portfolio are used to fund commercial loan
growth.
Total liabilities decreased $114.3 million during the current
quarter due primarily to a $59.4 million decrease in borrowings as
not all maturing FHLB borrowings were replaced. Management
estimates that the Bank had $3.00 billion in additional liquidity
available at June 30, 2024 based on the Bank's blanket collateral
agreement with FHLB and unencumbered securities.
Total assets decreased $574.7 million from September 30, 2023
due primarily to the securities strategy. The loan portfolio
decreased $37.9 million from September 30, 2023 due mainly to a
$214.4 million decrease in one- to four-family loans, partially
offset by a $177.9 million increase in commercial loans.
Total liabilities decreased $551.3 million from September 30,
2023 due primarily to a decrease in borrowings as some of the funds
from the securities strategy were used to repay all $500.0 million
of outstanding borrowings under the BTFP. Total deposits increased
$78.4 million from September 30, 2023 primarily in retail
certificates of deposit, all in the 14 months or shorter term
category, partially offset by a decrease in retail money market
accounts as some customers elected to move funds to the Bank's
certificate of deposit offerings or the Bank's higher yielding
savings account offering. Management continues to competitively
price certain short-term retail certificate of deposit products so
that if market rates were to decrease in the near future, the Bank
would be able to more quickly reprice those balances to lower
market rates at maturity.
The following table summarizes loan originations and purchases,
deposit activity, and borrowing activity, along with certain
related weighted average rates, during the periods indicated. The
borrowings presented in the table have original contractual terms
of one year or longer.
For the Three Months
Ended
For the Nine Months
Ended
June 30, 2024
June 30, 2024
Amount
Rate
Amount
Rate
(Dollars in thousands)
Loan originations, purchases, and
participations
One- to four-family and consumer:
Originated
$
117,621
6.79
%
$
252,439
6.91
%
Purchased
—
—
3,497
5.91
Commercial:
Originated
206,503
7.79
259,406
7.67
Participations/Purchased
6,268
8.50
30,715
8.17
$
330,392
7.45
$
546,057
7.33
Deposit Activity
Non-maturity deposits
$
(35,571
)
$
(121,178
)
Retail/Commercial certificates of
deposit
51,583
249,715
Borrowing activity
Maturities and repayments
(109,918
)
2.17
(339,754
)
2.91
New borrowings
50,000
4.61
250,000
4.55
Leverage Strategy
Periodically, the Bank has utilized a leverage strategy to
increase earnings, which entails entering into short-term FHLB
borrowings and depositing the proceeds from these FHLB borrowings,
net of the purchases of FHLB stock made to meet FHLB stock holding
requirements, at the FRB. The leverage strategy is not a core
operating business for the Company. It provides the Company the
ability to utilize excess capital to generate earnings.
Additionally, it is a strategy that can be exited quickly without
additional costs. The profitability of the leverage strategy is
attributable to net income derived from the dividends received on
the increased FHLB stock holdings, plus the net interest rate
spread between the yield on the leverage strategy cash at the FRB
and the rate paid on the leverage strategy FHLB borrowings, less
applicable FDIC premiums and estimated income tax expense. Leverage
strategy borrowings are repaid prior to each quarter end so there
is no impact to quarter end capital ratios. The leverage strategy
was not in place at any time during the current year period due to
the strategy being unprofitable, but it was in place at points
during the prior year period. During the prior year period, the
average balance of cash associated with the leverage strategy was
$1.10 billion and interest earned on that cash was $34.7 million,
the average balance of FHLB stock associated with the leverage
strategy was $52.0 million and dividends earned on that stock were
$3.4 million, and the average balance of FHLB borrowings associated
with the leverage strategy was $1.16 billion and the related
interest expense was $36.5 million. Additionally, the Company
recognized $368 thousand of FDIC premiums and $209 thousand of
income tax expense during the prior year period related to the
leverage strategy. When the leverage strategy is in place, it
reduces the net interest margin due to the amount of earnings from
the transaction in comparison to the size of the transaction.
Management continues to monitor the net interest rate spread and
overall profitability of the leverage strategy.
Stockholders' Equity
Stockholders' equity totaled $1.02 billion at June 30, 2024, a
decrease of $23.4 million from September 30, 2023. During the
current year period, the Company repurchased $19.3 million of
shares and paid regular quarterly cash dividends totaling $33.5
million, or $0.255 per share. On July 23, 2024, the Company
announced a regular quarterly cash dividend of $0.085 per share, or
approximately $11.0 million, payable on August 16, 2024 to
stockholders of record as of the close of business on August 2,
2024.
Based on the Company's accumulated earnings and profits at the
beginning of its tax year and the expected current year tax
earnings and profits deficit as a result of the losses associated
with the securities strategy, all dividends paid to stockholders by
the Company during fiscal year 2024 will be treated as a return of
capital, pursuant to Internal Revenue Code Section 301(c)(2), which
reduces the tax basis in the shares of the holder by the amount of
the dividend received. Stockholders should consult their own tax
advisors to determine the income tax consequences of their specific
situation. The Company is providing this for informational purposes
only and not as legal or tax advice. Based on current tax earnings
and profits projections for fiscal year 2025, the Company
anticipates that the majority, if not all, of the dividend payments
to Company stockholders in fiscal year 2025 will be treated as
dividends for tax purposes.
Consistent with our goal to operate a sound and profitable
financial organization, we actively seek to maintain a
well-capitalized status for the Bank in accordance with regulatory
standards. As of June 30, 2024, the Bank's capital ratios exceeded
the well-capitalized requirements and the Bank exceeded all
internal policy thresholds for sensitivity to changes in interest
rates. As of June 30, 2024, the Bank's community bank leverage
ratio was 9.1%.
At June 30, 2024, Capitol Federal Financial, Inc., at the
holding company level, had $49.1 million in cash on deposit at the
Bank. For fiscal year 2024, it is the intention of the Company's
Board of Directors to pay out the regular quarterly cash dividend
of $0.085 per share, totaling $0.34 per share for the year. To the
extent that earnings in fiscal year 2024 exceed $0.34 per share,
the Board of Directors will consider the payment of additional
dividends. Dividend payments depend 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.
During the current year period, the Company repurchased
3,280,110 shares of common stock at an average price of $5.87 per
share. The Company has $77.0 million authorized for repurchase
under existing stock repurchase plans. Shares may be repurchased
from time to time based upon market conditions, available liquidity
and other factors. These plans have no expiration date; however,
the FRB's existing approval for the Company to repurchase shares up
to $2.0 million expires in August 2024 and $75.0 million expires in
February 2025.
During the current quarter no shares were repurchased as the
Company evaluated the impact of the pre-1988 bad debt recapture
requirements at the Bank and the impact that has on the amount of
cash that can be distributed from the Bank to the Company. The
pre-1988 bad debt recapture reduces the amount of earnings that can
be distributed from the Bank to the Company, and to the extent this
amount is less than the amount needed for quarterly dividends to
stockholders, cash balances at the holding company would need to be
used to cover the shortfall. Once the Company fully resolves the
implications of the pre-1988 bad debt recapture, it may resume the
repurchase of shares.
The following table presents a reconciliation of total to net
shares outstanding as of June 30, 2024.
Total shares outstanding
132,733,765
Less unallocated Employee Stock Ownership
Plan ("ESOP") shares and unvested restricted stock
(2,824,577
)
Net shares outstanding
129,909,188
Capitol Federal Financial, Inc. is the holding company for the
Bank. The Bank has 48 branch locations in Kansas and Missouri, and
is one of the largest residential lenders in the State of Kansas.
News and other information about the Company can be found at the
Bank's website, http://www.capfed.com.
Forward-Looking
Statements
Except for the historical information contained in this press
release, the matters discussed herein may be deemed to be
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. These forward-looking
statements include statements about our beliefs, plans, objectives,
goals, expectations, anticipations, estimates and intentions. The
words "may," "could," "should," "would," "will," "believe,"
"anticipate," "estimate," "expect," "intend," "plan," and similar
expressions are intended to identify forward-looking statements.
Forward-looking statements involve risks and uncertainties,
including: changes in policies or the application or interpretation
of laws and regulations by regulatory agencies and tax authorities;
other governmental initiatives affecting the financial services
industry; changes in accounting principles, policies or guidelines;
fluctuations in interest rates and the effects of inflation or a
potential recession, whether caused by Federal Reserve action or
otherwise; the impact of bank failures or adverse developments at
other banks and related negative press about the banking industry
in general on investor or depositor sentiment; demand for loans in
the Company's market areas; the future earnings and capital levels
of the Bank and the impact of the pre-1988 bad debt recapture,
which could affect the ability of the Company to pay dividends in
accordance with its dividend policies; competition; and other risks
detailed from time to time in documents filed or furnished by the
Company with the Securities and Exchange Commission (SEC). Actual
results may differ materially from those currently expected. These
forward-looking statements represent the Company's judgment as of
the date of this release. The Company disclaims, however, any
intent or obligation to update these forward-looking
statements.
SUPPLEMENTAL FINANCIAL INFORMATION
CAPITOL FEDERAL FINANCIAL, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except per
share amounts)
June 30,
March 31,
September 30,
2024
2024
2023
ASSETS:
Cash and cash equivalents (includes
interest-earning deposits of $292,675, $419,332 and $213,830)
$
317,821
$
443,513
$
245,605
AFS securities, at estimated fair value
(amortized cost of $793,556, $831,337 and $1,385,992)
801,953
842,950
1,384,482
Loans receivable, net (ACL of $25,854,
$24,634 and $23,759)
7,933,043
7,877,569
7,970,949
FHLB stock, at cost
106,309
109,070
110,714
Premises and equipment, net
92,089
91,105
91,531
Income taxes receivable, net
129
2,644
8,531
Deferred income tax assets, net
30,128
35,390
29,605
Other assets
321,285
319,045
336,044
TOTAL ASSETS
$
9,602,757
$
9,721,286
$
10,177,461
LIABILITIES:
Deposits
$
6,129,660
$
6,141,711
$
6,051,220
Borrowings
2,291,605
2,351,022
2,879,125
Advances by borrowers
34,851
52,698
62,993
Other liabilities
125,965
150,952
140,069
Total liabilities
8,582,081
8,696,383
9,133,407
STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value;
100,000,000 shares authorized, no shares issued or outstanding
—
—
—
Common stock, $0.01 par value;
1,400,000,000 shares authorized, 132,733,765, 132,685,065 and
135,936,375 shares issued and outstanding as of June 30, 2024,
March 31, 2024, and September 30, 2023, respectively
1,327
1,327
1,359
Additional paid-in capital
1,146,928
1,147,029
1,166,643
Unearned compensation, ESOP
(26,844
)
(27,258
)
(28,083
)
Accumulated deficit
(112,118
)
(110,722
)
(104,565
)
Accumulated other comprehensive income,
net of tax
11,383
14,527
8,700
Total stockholders' equity
1,020,676
1,024,903
1,044,054
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY
$
9,602,757
$
9,721,286
$
10,177,461
CAPITOL FEDERAL FINANCIAL, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands)
For the Three Months
Ended
For the Nine Months
Ended
June 30,
March 31,
June 30,
2024
2024
2024
2023
INTEREST AND DIVIDEND INCOME:
Loans receivable
$
76,803
$
76,122
$
228,866
$
206,056
MBS
9,585
7,794
23,238
14,121
Cash and cash equivalents
3,875
4,513
13,166
37,657
FHLB stock
2,477
2,528
7,591
11,025
Investment securities
2,255
2,332
7,115
2,671
Total interest and dividend income
94,995
93,289
279,976
271,530
INTEREST EXPENSE:
Deposits
36,233
33,415
102,091
52,489
Borrowings
18,438
18,554
56,648
96,504
Total interest expense
54,671
51,969
158,739
148,993
NET INTEREST INCOME
40,324
41,320
121,237
122,537
PROVISION FOR CREDIT LOSSES
1,472
301
1,896
5,875
NET INTEREST INCOME AFTER
PROVISION FOR CREDIT LOSSES
38,852
41,019
119,341
116,662
NON-INTEREST INCOME:
Deposit service fees
2,706
2,451
7,732
9,987
Insurance commissions
905
735
2,503
2,560
Net loss from securities transactions
—
—
(13,345
)
—
Other non-interest income
1,098
1,457
3,568
3,702
Total non-interest income
4,709
4,643
458
16,249
NON-INTEREST EXPENSE:
Salaries and employee benefits
13,307
12,887
39,186
39,687
Information technology and related
expense
5,364
4,954
15,687
16,977
Occupancy, net
3,263
3,481
10,116
10,598
Federal insurance premium
1,352
1,727
4,939
3,289
Regulatory and outside services
1,322
1,380
4,345
4,274
Advertising and promotional
951
1,271
3,210
3,613
Deposit and loan transaction costs
726
867
2,135
1,916
Office supplies and related expense
405
419
1,185
1,810
Other non-interest expense
1,260
1,459
4,100
3,576
Total non-interest expense
27,950
28,445
84,903
85,740
INCOME BEFORE INCOME TAX EXPENSE
15,611
17,217
34,896
47,171
INCOME TAX EXPENSE
5,963
3,455
8,943
8,440
NET INCOME
$
9,648
$
13,762
$
25,953
$
38,731
Average Balance Sheets
The following tables present the average balances of our assets,
liabilities, and stockholders' equity, and the related annualized
weighted average yields and rates on our interest-earning assets
and interest-bearing liabilities for the periods indicated, as well
as selected performance ratios and other information for the
periods shown. Weighted average yields are derived by dividing
income (annualized for the three-month periods) by the average
balance of the related assets, and weighted average rates are
derived by dividing expense (annualized for the three-month
periods) by the average balance of the related liabilities, for the
periods shown. Average outstanding balances are derived from
average daily balances. The weighted average yields and rates
include amortization of fees, costs, premiums and discounts, which
are considered adjustments to yields/rates. Weighted average yields
on tax-exempt securities are not calculated on a fully taxable
equivalent basis.
For the Three Months
Ended
June 30, 2024
March 31, 2024
Average
Interest
Average
Interest
Outstanding
Earned/
Yield/
Outstanding
Earned/
Yield/
Amount
Paid
Rate
Amount
Paid
Rate
(Dollars in thousands)
Assets:
Interest-earning assets:
One- to four-family loans:
Originated
$
3,970,881
$
35,612
3.59
%
$
3,987,323
$
35,151
3.53
%
Correspondent purchased
2,317,550
18,854
3.25
2,369,131
19,274
3.25
Bulk purchased
130,876
731
2.23
133,832
735
2.20
Total one- to four-family loans
6,419,307
55,197
3.44
6,490,286
55,160
3.40
Commercial loans
1,371,631
19,311
5.57
1,351,574
18,708
5.48
Consumer loans
107,793
2,295
8.56
106,267
2,254
8.53
Total loans receivable(1)
7,898,731
76,803
3.88
7,948,127
76,122
3.82
MBS(2)
675,506
9,585
5.68
538,882
7,794
5.78
Investment securities(2)(3)
163,765
2,255
5.51
175,832
2,332
5.31
FHLB stock(4)
106,122
2,477
9.39
107,562
2,528
9.45
Cash and cash equivalents(5)
283,939
3,875
5.40
330,751
4,513
5.40
Total interest-earning assets
9,128,063
94,995
4.15
9,101,154
93,289
4.09
Other non-interest-earning assets
451,143
467,949
Total assets
$
9,579,206
$
9,569,103
Liabilities and stockholders' equity:
Interest-bearing liabilities:
Checking
$
874,477
508
0.23
$
878,243
438
0.20
Savings
494,614
491
0.40
471,239
224
0.19
Money market
1,268,261
5,259
1.67
1,335,269
5,706
1.72
Retail certificates
2,751,521
28,106
4.11
2,623,613
25,297
3.88
Commercial certificates
58,059
623
4.31
51,304
510
4.00
Wholesale certificates
106,680
1,246
4.70
112,077
1,240
4.45
Total deposits
5,553,612
36,233
2.62
5,471,745
33,415
2.46
Borrowings(6)
2,297,228
18,438
3.22
2,360,776
18,554
3.15
Total interest-bearing liabilities
7,850,840
54,671
2.80
7,832,521
51,969
2.67
Non-interest-bearing deposits
534,901
528,278
Other non-interest-bearing liabilities
169,555
172,042
Stockholders' equity
1,023,910
1,036,262
Total liabilities and stockholders'
equity
$
9,579,206
$
9,569,103
Net interest income(7)
$
40,324
$
41,320
Net interest-earning assets
$
1,277,223
$
1,268,633
Net interest margin(8)
1.77
1.82
Ratio of interest-earning assets to
interest-bearing liabilities
1.16
x
1.16
x
Selected performance ratios:
Return on average assets
(annualized)(9)(14)
0.40
%
0.58
%
Return on average equity
(annualized)(10)(14)
3.77
5.31
Average equity to average assets
10.69
10.83
Operating expense ratio
(annualized)(11)
1.17
1.19
Efficiency ratio(12)(14)
62.07
61.89
For the Nine Months
Ended
June 30, 2024
June 30, 2023
Average
Interest
Average
Interest
Outstanding
Earned/
Yield/
Outstanding
Earned/
Yield/
Amount
Paid
Rate
Amount
Paid
Rate
(Dollars in thousands)
Assets:
Interest-earning assets:
One- to four-family loans:
Originated
$
3,994,694
$
105,823
3.53
%
$
4,051,068
$
101,249
3.33
%
Correspondent purchased
2,367,032
57,788
3.26
2,419,202
56,578
3.12
Bulk purchased
133,783
2,160
2.15
144,514
1,374
1.27
Total one- to four-family loans
6,495,509
165,771
3.40
6,614,784
159,201
3.21
Commercial loans
1,343,241
56,285
5.51
1,117,549
41,089
4.85
Consumer loans
106,670
6,810
8.53
102,600
5,766
7.51
Total loans receivable(1)
7,945,420
228,866
3.83
7,834,933
206,056
3.50
MBS(2)
580,178
23,238
5.34
1,173,959
14,121
1.60
Investment securities(2)(3)
202,392
7,115
4.69
525,035
2,671
0.68
FHLB stock(4)
107,448
7,591
9.44
170,652
11,025
8.64
Cash and cash equivalents(5)
320,398
13,166
5.40
1,182,559
37,657
4.20
Total interest-earning assets
9,155,836
279,976
4.06
10,887,138
271,530
3.32
Other non-interest-earning assets
461,030
261,221
Total assets
$
9,616,866
$
11,148,359
Liabilities and stockholders' equity:
Interest-bearing liabilities:
Checking
$
879,536
1,389
0.21
$
982,372
1,056
0.14
Savings
480,656
854
0.24
536,363
343
0.09
Money market
1,322,851
17,702
1.79
1,622,486
12,513
1.03
Retail certificates
2,643,182
76,603
3.87
2,193,096
34,567
2.11
Commercial certificates
52,961
1,596
4.02
38,970
608
2.09
Wholesale certificates
116,590
3,947
4.52
126,567
3,402
3.59
Total deposits
5,495,776
102,091
2.48
5,499,854
52,489
1.28
Borrowings(6)
2,375,474
56,648
3.18
3,829,154
96,504
3.35
Total interest-bearing liabilities
7,871,250
158,739
2.69
9,329,008
148,993
2.13
Non-interest-bearing deposits
533,454
569,239
Other non-interest-bearing liabilities
179,929
175,176
Stockholders' equity
1,032,233
1,074,936
Total liabilities and stockholders'
equity
$
9,616,866
$
11,148,359
Net interest income(7)
$
121,237
$
122,537
Net interest-earning assets
$
1,284,586
$
1,558,130
Net interest margin(8)
1.77
1.50
Ratio of interest-earning assets to
interest-bearing liabilities
1.16
x
1.17
x
Selected performance ratios:
Return on average assets
(annualized)(9)(14)
0.36
%
0.46
%
Return on average equity
(annualized)(10)(14)
3.35
4.80
Average equity to average assets
10.73
9.64
Operating expense ratio
(annualized)(11)
1.18
1.03
Efficiency ratio(12)(14)
69.77
61.78
Pre-tax yield on leverage strategy(13)
—
0.13
(1)
Balances are adjusted for unearned loan
fees and deferred costs. Loans that are 90 or more days delinquent
are included in the loans receivable average balance with a yield
of zero percent.
(2)
AFS securities are adjusted for
unamortized purchase premiums or discounts.
(3)
There were no nontaxable securities
included in the average balance of investment securities for the
quarters ended June 30, 2024 or March 31, 2024. The average balance
of investment securities includes an average balance of nontaxable
securities of $68 thousand and $1.1 million for the nine-month
periods ended June 30, 2024 and June 30, 2023, respectively.
(4)
There was no FHLB stock related to the
leverage strategy for the quarter and nine-month period ended June
30, 2024 or the quarter ended March 31, 2024. Included in this
line, for the nine-month period ended June 30, 2023, is FHLB stock
related to the leverage strategy with an average outstanding
balance of $52.0 million and dividend income of $3.4 million, at a
weighted average yield of 8.65%, and FHLB stock not related to the
leverage strategy with an average outstanding balance of $118.7
million, and dividend income of $7.7 million, at a weighted average
yield of 8.63%.
(5)
There was no cash and cash equivalents
related to the leverage strategy during the quarter and nine-month
period ended June 30, 2024 or the quarter ended March 31, 2024. The
average balance of cash and cash equivalents includes an average
balance of cash related to the leverage strategy of $1.10 billion
and interest income of $34.7 million, at a weighted average yield
of 4.14% during the nine-month period ended June 30, 2023.
(6)
There were no borrowings related to the
leverage strategy during the quarter and nine-month period ended
June 30, 2024 or the quarter ended March 31, 2024. Included in this
line, for the nine-month period ended June 30, 2023 are FHLB
borrowings related to the leverage strategy with an average
outstanding balance of $1.16 billion and interest paid of $36.5
million, at a weighted average rate of 4.17%, and borrowings not
related to the leverage strategy with an average outstanding
balance of $2.67 billion, and interest paid of $60.0 million, at a
weighted average rate of 2.99%. The FHLB advance amounts and rates
included in this line include the effect of interest rate swaps and
are net of deferred prepayment penalties.
(7)
Net interest income represents the
difference between interest income earned on interest-earning
assets and interest paid on interest-bearing liabilities. Net
interest income depends on the average balance of interest-earning
assets and interest-bearing liabilities, and the interest rates
earned or paid on them.
(8)
Net interest margin represents annualized
net interest income as a percentage of average interest-earning
assets. Management believes the net interest margin is important to
investors as it is a profitability measure for financial
institutions.
(9)
Return on average assets represents
annualized net income as a percentage of total average assets.
Management believes that the return on average assets is important
to investors as it shows the Company's profitability in relation to
the Company's average assets.
(10)
Return on average equity represents
annualized net income as a percentage of total average equity.
Management believes that the return on average equity is important
to investors as it shows the Company's profitability in relation to
the Company's average equity.
(11)
The operating expense ratio represents
annualized non-interest expense as a percentage of average assets.
Management believes the operating expense ratio is important to
investors as it provides insight into how efficiently the Company
is managing its expenses in relation to its assets. It is a
financial measurement ratio that does not take into consideration
changes in interest rates.
(12)
The efficiency ratio represents
non-interest expense as a percentage of the sum of net interest
income (pre-provision for credit losses) and non-interest income.
Management believes the efficiency ratio is important to investors
as it is a measure of a financial institution's total non-interest
expense as a percentage of the sum of net interest income
(pre-provision for credit losses) and non-interest income. A higher
value generally indicates that it is costing the financial
institution more money to generate revenue, related to its net
interest margin and non-interest income.
(13)
The pre-tax yield on the leverage strategy
represents annualized pre-tax income resulting from the transaction
as a percentage of the average interest-earning assets associated
with the transaction. Management believes this ratio is important
to investors as it provides the yield the Company is earning on the
leverage strategy transaction.
(14)
The table below provides a reconciliation
between performance measures presented in accordance with
accounting standards generally accepted in the United States of
America ("GAAP") and the same performance measures excluding the
impact of the net loss on the securities transactions associated
with the securities strategy, which are not presented in accordance
with GAAP. The securities strategy was non-recurring in nature;
therefore management believes it is meaningful to investors to
present certain financial measures excluding the securities
strategy to better evaluate the Company's core operations. See
information regarding the securities strategy in "Comparison of
Operating Results for the Nine Months Ended June 30, 2024 and June
30, 2023 - Securities Strategy".
For the Nine Months
Ended
June 30, 2024
Excluding
Securities
Actual
Securities
Strategy
(GAAP)
Strategy
(Non-GAAP)
Return on average assets (annualized)
0.36
%
(0.14
)%
0.50
%
Return on average equity (annualized)
3.35
(1.31
)
4.66
Efficiency Ratio
69.77
6.90
62.87
Earnings per share(15)
$
0.20
$
(0.08
)
$
0.28
(15)
Earnings per share is calculated as net
income divided by average shares outstanding. Management believes
earnings per share is an important measure to investors as it shows
the Company's earnings in relation to the Company's outstanding
shares.
Loan Portfolio
The following table presents information related to the
composition of our loan portfolio in terms of dollar amounts,
weighted average rates, and percentage of total as of the dates
indicated.
June 30, 2024
March 31, 2024
September 30, 2023
% of
% of
% of
Amount
Rate
Total
Amount
Rate
Total
Amount
Rate
Total
(Dollars in thousands)
One- to four-family:
Originated
$
3,961,407
3.54
%
49.8
%
$
3,950,097
3.47
%
50.1
%
$
3,978,837
3.39
%
49.9
%
Correspondent purchased
2,262,371
3.47
28.5
2,314,448
3.46
29.3
2,405,911
3.44
30.1
Bulk purchased
129,102
2.52
1.6
132,284
2.28
1.7
137,193
1.85
1.7
Construction
24,642
5.94
0.3
40,628
4.84
0.5
69,974
3.68
0.9
Total
6,377,522
3.50
80.2
6,437,457
3.45
81.6
6,591,915
3.38
82.6
Commercial:
Commercial real estate
1,119,295
5.43
14.1
1,035,634
5.32
13.1
995,788
5.29
12.5
Commercial and industrial
131,848
6.69
1.7
112,123
6.53
1.4
112,953
6.36
1.4
Construction
214,240
5.76
2.7
202,201
5.54
2.6
178,746
5.01
2.2
Total
1,465,383
5.59
18.5
1,349,958
5.46
17.1
1,287,487
5.35
16.1
Consumer loans:
Home equity
98,736
8.90
1.2
96,114
8.86
1.2
95,723
8.83
1.2
Other
9,637
5.65
0.1
9,203
5.50
0.1
9,256
5.20
0.1
Total
108,373
8.61
1.3
105,317
8.57
1.3
104,979
8.51
1.3
Total loans receivable
7,951,278
3.96
100.0
%
7,892,732
3.86
100.0
%
7,984,381
3.76
100.0
%
Less:
ACL
25,854
24,634
23,759
Deferred loan fees/discounts
30,777
30,007
31,335
Premiums/deferred costs
(38,396
)
(39,478
)
(41,662
)
Total loans receivable, net
$
7,933,043
$
7,877,569
$
7,970,949
Loan Activity: The following table summarizes activity in the
loan portfolio, along with weighted average rates where applicable,
for the periods indicated, excluding changes in ACL, deferred loan
fees/discounts, and premiums/deferred costs. Loans that were paid
off as a result of refinances are included in repayments. Loan
endorsements are not included in the activity in the following
table because a new loan is not generated at the time of the
endorsement. The endorsed balance and rate are included in the
ending loan portfolio balance and rate. Commercial loan renewals
are not included in the activity presented in the following table
unless new funds are disbursed at the time of renewal. The renewal
balance and rate are included in the ending loan portfolio balance
and rate.
For the Three Months
Ended
For the Nine Months
Ended
June 30, 2024
June 30, 2024
Amount
Rate
Amount
Rate
(Dollars in thousands)
Beginning balance
$
7,892,732
3.86
%
$
7,984,381
3.76
%
Originated and refinanced
324,124
7.43
511,845
7.29
Purchased and participations
6,268
8.50
34,212
7.94
Change in undisbursed loan funds
8,303
126,191
Repayments
(260,092
)
(685,068
)
Principal (charge-offs)/recoveries,
net
(57
)
(58
)
Other
(20,000
)
(20,225
)
Ending balance
$
7,951,278
3.96
$
7,951,278
3.96
One- to Four-Family Loans: The following table presents, for our
portfolio of one- to four-family loans, the amount, percent of
total, weighted average rate, weighted average credit score,
weighted average loan-to-value ("LTV") ratio, and average balance
per loan as of June 30, 2024. Credit scores were updated in
September 2023 from a nationally recognized consumer rating agency.
The LTV ratios were based on the current loan balance and either
the lesser of the purchase price or original appraisal, or the most
recent Bank appraisal, if available. In most cases, the most recent
appraisal was obtained at the time of origination.
% of
Credit
Average
Amount
Total
Rate
Score
LTV
Balance
(Dollars in thousands)
Originated
$
3,961,407
62.1
%
3.54
%
771
59
%
$
167
Correspondent purchased
2,262,371
35.5
3.47
767
63
406
Bulk purchased
129,102
2.0
2.52
772
54
282
Construction
24,642
0.4
5.94
770
46
368
$
6,377,522
100.0
3.50
770
60
214
The following table presents originated and correspondent
purchased activity in our one- to four-family loan portfolio,
excluding endorsement activity, along with associated weighted
average rates, weighted average LTVs and weighted average credit
scores for the periods indicated.
For the Three Months
Ended
For the Nine Months
Ended
June 30, 2024
June 30, 2024
Credit
Credit
Amount
Rate
LTV
Score
Amount
Rate
LTV
Score
(Dollars in thousands)
Originated
$
101,341
6.44
%
75
%
770
$
212,689
6.53
%
74
%
769
Correspondent purchased
—
—
—
—
3,497
5.91
70
765
$
101,341
6.44
75
770
$
216,186
6.52
74
768
As of June 30, 2024 the Bank had one- to four-family loan
origination and refinance commitments of $58.6 million at a
weighted average rate of 6.57%. There were no one- to four-family
correspondent loan purchase commitments at June 30, 2024, as during
the current quarter the Bank suspended purchasing one- to
four-family loans from correspondent lenders for the foreseeable
future.
Commercial Loans: During the nine months ended June 30, 2024,
the Bank originated and entered into commercial loan participations
totaling $290.1 million, including $135.4 million in commercial
construction loans, $87.5 million in commercial real estate loans,
and $67.2 million in commercial and industrial loans. During that
period, the Bank also processed commercial loan disbursements,
excluding lines of credit, of approximately $241.0 million at a
weighted average rate of 6.42%, which included $194.3 million,
$29.5 million, and $17.2 million of disbursements on new and
existing commercial construction, commercial real estate, and
commercial and industrial loans, respectively.
As of June 30, 2024, March 31, 2024, and September 30, 2023, the
Bank's commercial and industrial gross loan amounts (unpaid
principal plus undisbursed amounts) totaled $169.0 million, $164.8
million, and $158.5 million, respectively, and commitments totaled
$1.1 million at June 30, 2024.
The following table presents the Bank's commercial real estate
and commercial construction loans by type of primary collateral as
of the dates indicated. As of June 30, 2024, the Bank had six
commercial real estate and commercial construction loan commitments
totaling $59.1 million, at a weighted average rate of 7.57%. We
anticipate fully funding the majority of the undisbursed amounts as
most are not cancellable by the Bank. Of the total commercial real
estate and commercial construction undisbursed amounts and
commitments outstanding as of June 30, 2024, management anticipates
funding approximately $98 million during the September 2024
quarter, $70 million during the December 2024 quarter, $66 million
during the March 2025 quarter, and $128 million during the June
2025 quarter or later.
June 30, 2024
March 31, 2024
Unpaid
Undisbursed
Gross Loan
Gross Loan
Count
Principal
Amount
Amount
Amount
(Dollars in thousands)
Multi-family
41
$
164,318
$
217,459
$
381,777
$
301,285
Retail building
139
268,734
58,744
327,478
342,713
Senior housing
34
305,386
5,792
311,178
313,362
Hotel
17
282,176
22,046
304,222
245,336
Office building
79
128,201
627
128,828
129,599
One- to four-family property
340
59,899
3,998
63,897
63,661
Single use building
31
43,143
593
43,736
43,834
Warehouse/manufacturing
42
32,173
560
32,733
32,660
Other
63
49,505
7,596
57,101
60,991
786
$
1,333,535
$
317,415
$
1,650,950
$
1,533,441
Weighted average rate
5.48
%
6.71
%
5.72
%
5.53
%
The following table summarizes the Bank's commercial real estate
and commercial construction loans by state as of the dates
indicated.
June 30, 2024
March 31, 2024
Unpaid
Undisbursed
Gross Loan
Gross Loan
Count
Principal
Amount
Amount
Amount
(Dollars in thousands)
Kansas
580
$
522,486
$
167,445
$
689,931
$
658,576
Texas
19
295,655
48,396
344,051
344,349
Missouri
149
272,232
60,805
333,037
301,969
Colorado
8
40,194
10,293
50,487
54,751
New York
1
60,000
—
60,000
—
Tennessee
1
33,397
946
34,343
34,520
Arkansas
4
33,181
253
33,434
33,529
Nebraska
7
32,564
4
32,568
37,634
Other
17
43,826
29,273
73,099
68,113
786
$
1,333,535
$
317,415
$
1,650,950
$
1,533,441
The following table presents the Bank's commercial loan
portfolio and outstanding loan commitments, categorized by
aggregate gross loan amount (unpaid principal plus undisbursed
amounts) or outstanding loan commitment amount and average loan
amount, as of June 30, 2024. For loans over $50.0 million, $143.1
million were multi-family loans located in Kansas and Missouri,
$116.0 million were related to hotel loans in New York and Texas,
and $60.0 million was related to an office building in Texas. The
current weighted average LTV based on the total projected disbursed
loan amounts and the weighted average actual/projected debt service
coverage ratios for loans over $50 million was 57% and 1.37x
respectively, at June 30, 2024.
Average
Count
Amount
Amount
(Dollars in thousands)
Greater than $50 million
5
$
319,146
$
63,829
>$30 to $50 million
7
241,624
34,518
>$20 to $30 million
11
266,942
24,267
>$15 to $20 million
9
153,790
17,088
>$10 to $15 million
14
169,472
12,105
>$5 to $10 million
32
233,458
7,296
$1 to $5 million
135
308,176
2,283
Less than $1 million
1,190
187,592
158
1,403
$
1,880,200
1,340
Asset Quality
The following tables present loans 30 to 89 days delinquent,
non-performing loans, and other real estate owned ("OREO") as of
the dates indicated. The amounts in the table represent the unpaid
principal balance of the loans less related charge-offs, if any. Of
the loans 30 to 89 days delinquent at June 30, 2024, approximately
56% were 59 days or less delinquent. Nonaccrual loans are loans
that are 90 or more days delinquent or in foreclosure and other
loans required to be reported as nonaccrual pursuant to accounting
and/or regulatory reporting requirements and/or internal policies,
even if the loans are current. Non-performing assets include
nonaccrual loans and OREO.
Loans Delinquent for 30 to 89
Days at:
June 30, 2024
March 31, 2024
December 31, 2023
September 30, 2023
June 30, 2023
Number
Amount
Number
Amount
Number
Amount
Number
Amount
Number
Amount
(Dollars in thousands)
One- to four-family:
Originated
70
$
7,148
72
$
6,803
77
$
7,746
88
$
9,078
67
$
6,377
Correspondent purchased
13
5,278
10
3,144
16
6,049
17
5,192
20
6,704
Bulk purchased
1
277
5
856
4
583
1
149
—
—
Construction
—
—
—
—
—
—
4
1,123
—
—
Commercial
15
2,781
11
3,354
14
3,809
5
94
6
573
Consumer
40
926
35
601
40
766
30
730
22
469
139
$
16,410
133
$
14,758
151
$
18,953
145
$
16,366
115
$
14,123
30 to 89 days delinquent loans
to total loans receivable, net
0.21
%
0.19
%
0.24
%
0.21
%
0.18
%
Non-Performing Loans and OREO
at:
June 30, 2024
March 31, 2024
December 31, 2023
September 30, 2023
June 30, 2023
Number
Amount
Number
Amount
Number
Amount
Number
Amount
Number
Amount
(Dollars in thousands)
Loans 90 or More Days Delinquent or in
Foreclosure:
One- to four-family:
Originated
24
$
2,046
23
$
2,380
29
$
3,749
24
$
2,246
16
$
1,582
Correspondent purchased
7
3,860
8
3,969
10
4,164
9
3,410
8
1,854
Bulk purchased
4
1,271
3
962
2
942
2
942
3
1,149
Commercial
8
1,160
11
1,203
8
1,198
12
2,183
8
1,225
Consumer
13
236
10
250
5
116
9
113
3
51
56
8,573
55
8,764
54
10,169
56
8,894
38
5,861
Loans 90 or more days delinquent or in
foreclosure
as a percentage of total loans
0.11
%
0.11
%
0.13
%
0.11
%
0.07
%
Nonaccrual loans less than 90 Days
Delinquent:(1)
One- to four-family:
Originated
—
$
—
—
$
—
—
$
—
2
$
215
3
$
295
Correspondent purchased
—
—
—
—
—
—
1
282
—
—
Bulk purchased
—
—
—
—
—
—
—
—
1
257
Commercial
1
30
1
25
1
18
1
18
2
29
Consumer
—
—
—
—
—
—
—
—
1
37
1
30
1
25
1
18
4
515
7
618
Total nonaccrual loans
57
8,603
56
8,789
55
10,187
60
9,409
45
6,479
Nonaccrual loans as a percentage of total
loans
0.11
%
0.11
%
0.13
%
0.12
%
0.08
%
OREO:
One- to four-family:
Originated(2)
—
$
—
1
$
67
2
$
225
—
$
—
—
$
—
Correspondent purchased
—
—
—
—
1
219
1
219
—
—
—
—
1
67
3
444
1
219
—
—
Total non-performing assets
57
$
8,603
57
$
8,856
58
$
10,631
61
$
9,628
45
$
6,479
Non-performing assets as a percentage of
total assets
0.09
%
0.09
%
0.11
%
0.09
%
0.06
%
(1)
Includes loans required to be reported as
nonaccrual pursuant to accounting and/or internal policies even if
the loans are current.
(2)
Real estate-related consumer loans where
we also hold the first mortgage are included in the one- to
four-family category as the underlying collateral is one- to
four-family property.
The following table presents loans classified as special mention
or substandard at the dates presented. The increase in commercial
special mention loans at June 30, 2024 compared to September 30,
2023 was due mainly to two loans moving to special mention during
the current year period as certain underlying economic
considerations related to the loans are being monitored by
management.
June 30, 2024
March 31, 2024
September 30, 2023
Special Mention
Substandard
Special Mention
Substandard
Special Mention
Substandard
(Dollars in thousands)
One- to four-family
$
20,362
$
21,623
$
21,531
$
21,033
$
18,603
$
19,314
Commercial
23,212
2,531
19,886
1,969
16,407
1,293
Consumer
270
345
263
309
327
190
$
43,844
$
24,499
$
41,680
$
23,311
$
35,337
$
20,797
Allowance for Credit Losses: The Bank is utilizing a discounted
cash flow approach for estimating expected credit losses for pooled
loans and loan commitments. Management applied qualitative factors
at June 30, 2024 to account for economic uncertainty that may not
be adequately captured in the third-party economic forecast
scenarios and other management considerations related to commercial
loans to account for credit risks not fully reflected in the
discounted cash flow model.
The following table presents ACL activity and related ratios at
the dates and for the periods indicated. On October 1, 2023, the
Bank adopted Accounting Standards Update ("ASU") 2022-02, Financial
Instruments - Credit Losses (Topic 326): Troubled Debt
Restructurings and Vintage Disclosures ("ASU 2022-02"), which
eliminated the accounting guidance for troubled debt restructurings
by creditors. The Company applied a modified retrospective approach
when adopting ASU 2022-02, resulting in a cumulative-effect
adjustment which is reflected in the table below ("ASU 2022-02
Adoption"). The reserve for off-balance sheet credit exposures
totaled $3.9 million at June 30, 2024.
For the Three
Months Ended
For the Nine
Months Ended
June 30, 2024
June 30, 2024
(Dollars in thousands)
Balance at beginning of period
$
24,634
$
23,759
ASU 2022-02 Adoption
—
20
Charge-offs:
One- to four-family
—
—
Commercial
(50
)
(60
)
Consumer
(26
)
(41
)
Total charge-offs
(76
)
(101
)
Recoveries:
One- to four-family
17
25
Commercial
2
3
Consumer
—
15
Total recoveries
19
43
Net (charge-offs) recoveries
(57
)
(58
)
Provision for credit losses
1,277
2,133
Balance at end of period
$
25,854
$
25,854
Ratio of net charge-offs during the
period
to average loans outstanding during the
period
—
%
—
%
Ratio of net charge-offs (recoveries)
during the
period to average non-performing
assets
0.65
0.64
ACL to non-performing loans at end of
period
300.52
300.52
ACL to loans receivable at end of
period
0.33
0.33
ACL to net charge-offs (annualized)
113
x
332
x
The distribution of our ACL and the ratio of ACL to loans
receivable, by loan type, at the dates indicated is summarized
below. The increase in the ratio of ACL to loans receivable at June
30, 2024 compared to March 31, 2024 and September 30, 2023 was due
primarily to changes in the loan portfolio mix due to the continued
shift from one- to four-family loans to commercial loans. One- to
four-family loans have a lower ACL/loan ratio than commercial
loans.
Distribution of ACL
Ratio of ACL to Loans
Receivable
June 30,
March 31,
September 30,
June 30,
March 31,
September 30,
2024
2024
2023
2024
2024
2023
(Dollars in thousands)
One- to four-family
$
4,808
$
5,060
$
5,328
0.08
%
0.08
%
0.08
%
Commercial:
Commercial real estate
17,616
16,605
15,589
1.57
1.60
1.57
Commercial and industrial
1,134
1,019
1,104
0.86
0.91
0.98
Construction
2,045
1,706
1,487
0.95
0.84
0.83
Total commercial
20,795
19,330
18,180
1.42
1.43
1.41
Consumer
251
244
251
0.23
0.23
0.24
Total
$
25,854
$
24,634
$
23,759
0.33
0.31
0.30
Securities Portfolio
The following table presents the distribution of our securities
portfolio, at amortized cost, at June 30, 2024. Overall, fixed-rate
securities comprised 94% of our securities portfolio at June 30,
2024. The weighted average life ("WAL") is the estimated remaining
maturity (in years) after three-month historical prepayment speeds
and projected call option assumptions have been applied. Weighted
average yields on tax-exempt securities are not calculated on a
fully tax-equivalent basis.
Amount
Yield
WAL
(Dollars in thousands)
MBS
$
672,754
5.69
%
5.7
U.S. government-sponsored enterprise
debentures
116,802
5.60
5.6
Corporate bonds
4,000
5.12
7.9
$
793,556
5.68
5.7
The following table summarizes the activity in our securities
portfolio for the periods presented. The weighted average yields
for the beginning and ending balances are as of the first and last
days of the period presented and are generally derived from recent
prepayment activity on the securities in the portfolio. The
beginning and ending WALs are the estimated remaining principal
repayment terms (in years) after three-month historical prepayment
speeds and projected call option assumptions have been applied.
For the Three Months
Ended
For the Nine Months
Ended
June 30, 2024
June 30, 2024
Amount
Yield
WAL
Amount
Yield
WAL
(Dollars in thousands)
Beginning balance - carrying value
$
842,950
5.63
%
5.4
$
1,384,482
1.35
%
3.8
Maturities and repayments
(118,206
)
(373,739
)
Proceeds from sale
—
(1,272,512
)
Net amortization of
(premiums)/discounts
1,586
7,327
Purchases
78,839
5.53
6.3
1,059,833
5.59
4.5
Net loss from securities transactions
—
(13,345
)
Change in valuation on AFS securities
(3,216
)
9,907
Ending balance - carrying value
$
801,953
5.68
5.7
$
801,953
5.68
5.7
Deposit Portfolio
The following table presents the amount, weighted average rate,
and percent of total for the components of our deposit portfolio at
the dates presented. The amount of commercial non-maturity deposits
included in the table below at June 30, 2024, March 31, 2024, and
September 30, 2023 was $247.5 million, $251.8 million, and $267.3
million, respectively. The increase in the deposit portfolio rate
at June 30, 2024 compared to March 31, 2024, and September 30, 2023
was due mainly to higher rates on retail certificates of
deposit.
June 30, 2024
March 31, 2024
September 30, 2023
% of
% of
% of
Amount
Rate
Total
Amount
Rate
Total
Amount
Rate
Total
(Dollars in thousands)
Non-interest-bearing checking
$
548,760
—
%
9.0
%
$
549,818
—
%
8.9
%
$
558,326
—
%
9.2
%
Interest-bearing checking
872,462
0.27
14.2
902,848
0.19
14.7
901,994
0.19
14.9
Savings
515,399
0.56
8.4
482,503
0.27
7.9
480,091
0.12
7.9
Money market
1,263,229
1.67
20.6
1,300,252
1.67
21.2
1,380,617
1.96
22.8
Retail certificates of deposit
2,773,048
4.18
45.2
2,725,110
4.01
44.4
2,533,954
3.47
41.9
Commercial certificates of deposit
59,372
4.35
1.0
55,727
4.19
0.9
48,751
3.56
0.8
Public unit certificates of deposit
97,390
4.67
1.6
125,453
4.61
2.0
147,487
4.44
2.5
$
6,129,660
2.44
100.0
%
$
6,141,711
2.32
100.0
%
$
6,051,220
2.07
100.0
%
Management has focused on retaining and growing deposits through
the introduction of a high-yield savings account early in fiscal
year 2024 which has a current rate of 4.21% for balances over $10
thousand. The high-yield savings account balance was $58.2 million
as of June 30, 2024. A portion of the decrease in the money market
portfolio during the current fiscal year has been attributable to
the growth in this product, along with the growth in retail
certificates of deposit. Management has sought to grow certificates
of deposit with terms of 14 months or less by offering market
competitive rates. We have focused on terms that will allow us to
price down certificates of deposit if the FRB reduces overnight
rates. Our certificate of deposit retention rate has been
approximately 90% over the past 12 months.
Borrowings
The following table presents the maturity of term borrowings,
which consist of FHLB advances, along with associated weighted
average contractual and effective rates as of June 30, 2024.
Amortizing FHLB advances are presented based on their maturity
dates versus their quarterly scheduled repayment dates.
Maturity by
Contractual
Effective
Fiscal Year
Amount
Rate
Rate(1)
(Dollars in thousands)
2024
$
175,000
4.79
%
2.92
%
2025
650,000
3.30
2.96
2026
575,000
2.81
2.95
2027
480,000
3.14
3.25
2028
315,574
4.93
4.18
2029
97,500
4.40
4.40
$
2,293,074
3.53
3.24
(1)
The effective rate includes the impact of
interest rate swaps and the amortization of deferred prepayment
penalties resulting from FHLB advances previously prepaid.
The following table presents borrowing activity for the periods
shown. The borrowings presented in the table have original
contractual terms of one year or longer or are tied to interest
rate swaps with original contractual terms of one year or longer.
Line of credit borrowings and finance leases are excluded from the
table. The effective rate is shown as a weighted average and
includes the impact of interest rate swaps and the amortization of
deferred prepayment penalties resulting from FHLB advances
previously prepaid. The weighted average maturity ("WAM") is the
remaining weighted average contractual term in years. The beginning
and ending WAMs represent the remaining maturity at each date
presented. During the current year period, management paid down
BTFP borrowings with the proceeds received from the securities
strategy.
For the Three Months
Ended
For the Nine Months
Ended
June 30, 2024
June 30, 2024
Effective
Effective
Amount
Rate
WAM
Amount
Rate
WAM
(Dollars in thousands)
Beginning balance
$
2,352,992
3.16
%
1.9
$
2,882,828
3.34
%
1.8
Maturities and repayments
(109,918
)
2.17
(339,754
)
2.91
New FHLB borrowings
50,000
4.61
5.0
250,000
4.55
4.2
BTFP, net
—
—
—
(500,000
)
4.70
—
Ending balance
$
2,293,074
3.24
1.7
$
2,293,074
3.24
1.7
Maturities of Interest-Bearing Liabilities
The following table presents the maturity and weighted average
repricing rate, which is also the weighted average effective rate,
of certificates of deposit, split between retail/commercial and
public unit amounts, and non-amortizing FHLB advances for the next
four quarters as of June 30, 2024.
September 30,
December 31,
March 31,
June 30,
2024
2024
2025
2025
Total
(Dollars in thousands)
Retail/Commercial Certificates:
Amount
$
494,748
$
684,174
$
531,227
$
404,517
$
2,114,666
Repricing Rate
4.44
%
4.50
%
4.51
%
4.49
%
4.49
%
Public Unit Certificates:
Amount
$
34,985
$
30,026
$
17,526
$
1,250
$
83,787
Repricing Rate
4.63
%
4.68
%
4.90
%
4.90
%
4.71
%
Non-Amortizing FHLB Advances:
Amount
$
175,000
$
200,000
$
150,000
$
200,000
$
725,000
Repricing Rate
2.92
%
3.35
%
1.93
%
3.27
%
2.93
%
Total
Amount
$
704,733
$
914,200
$
698,753
$
605,767
$
2,923,453
Repricing Rate
4.07
%
4.26
%
3.97
%
4.09
%
4.11
%
The following table sets forth the WAM information for our
certificates of deposit, in years, as of June 30, 2024.
Retail certificates of deposit
0.9
Commercial certificates of deposit
0.6
Public unit certificates of deposit
0.5
Total certificates of deposit
0.9
Average Rates and Lives
At June 30, 2024, the gap between the Bank's amount of
interest-earning assets and interest-bearing liabilities projected
to reprice within one year was $(1.40) billion, or (14.6)% of total
assets, compared to $(1.10) billion, or (11.3)% of total assets, at
March 31, 2024. The change in the one-year gap amount was due to
both a decrease in the amount of asset cash flows coming due in one
year, at June 30, 2024, and an increase in the amount of liability
cash flows coming due during the same time period, as compared to
March 31, 2024. The decrease in asset cash flows was due primarily
to a decrease in the balance of cash from March 31, 2024 to June
30, 2024, as well as to a decrease in short-term securities as a
result of maturities during the current quarter. The increase in
liability cash flows was due primarily to an increase in borrowings
scheduled to mature, due to the passage of time, as well as to an
increase in certificates of deposit scheduled to mature within one
year as of June 30, 2024, compared to March 31, 2024, as the Bank
continued to offer competitive rates on shorter-term certificates
of deposit.
The amount of interest-bearing liabilities expected to reprice
in a given period is not typically significantly impacted by
changes in interest rates because the Bank's borrowings and
certificates of deposit portfolios have contractual maturities and
generally cannot be terminated early without a prepayment penalty.
If interest rates were to increase 200 basis points, as of June 30,
2024, the Bank's one-year gap would have been projected to be
$(1.59) billion, or (16.5)% of total assets. The change in the gap
compared to when there is no change in rates was due to lower
anticipated net cash flows primarily as a result of lower
prepayments on mortgage-related assets and call options on
investment securities not getting exercised by agency issuers in
the higher rate environment. This compares to a projected one-year
gap of $(1.21) billion, or (12.5)% of total assets, if interest
rates were to have increased 200 basis points as of March 31,
2024.
The following table presents the weighted average yields/rates
and WALs (in years), after applying prepayment, call assumptions,
and decay rates for our interest-earning assets and
interest-bearing liabilities as of June 30, 2024. Yields presented
for interest-earning assets include the amortization of fees,
costs, premiums and discounts, which are considered adjustments to
the yield. The interest rate presented for term borrowings is the
effective rate, which includes the impact of interest rate swaps
and the amortization of deferred prepayment penalties resulting
from FHLB advances previously prepaid. The WAL presented for term
borrowings includes the effect of interest rate swaps.
Amount
Yield/Rate
WAL
% of Category
% of Total
(Dollars in thousands)
Securities
$
801,953
5.68
%
3.3
8.7
%
Loans receivable:
Fixed-rate one- to four-family
5,434,393
3.38
6.7
68.3
%
59.2
Fixed-rate commercial
497,635
4.68
2.9
6.3
5.4
All other fixed-rate loans
38,112
6.84
6.5
0.5
0.4
Total fixed-rate loans
5,970,140
3.51
6.4
75.1
65.0
Adjustable-rate one- to four-family
918,487
4.12
4.0
11.5
10.0
Adjustable-rate commercial
967,748
6.05
5.5
12.2
10.6
All other adjustable-rate loans
94,903
8.59
3.0
1.2
1.0
Total adjustable-rate loans
1,981,138
5.27
4.7
24.9
21.6
Total loans receivable
7,951,278
3.95
5.9
100.0
%
86.6
FHLB stock
106,309
9.47
1.9
1.2
Cash and cash equivalents
317,821
4.97
—
3.5
Total interest-earning assets
$
9,177,361
4.20
5.4
100.0
%
Non-maturity deposits
$
2,651,090
1.00
6.5
47.5
%
33.7
%
Retail certificates of deposit
2,773,048
4.18
0.9
49.7
35.2
Commercial certificates of deposit
59,372
4.35
0.6
1.1
0.8
Public unit certificates of deposit
97,390
4.67
0.5
1.7
1.2
Total interest-bearing deposits
5,580,900
2.68
3.5
100.0
%
70.9
Term borrowings
2,294,165
3.24
1.7
29.1
Total interest-bearing liabilities
$
7,875,065
2.84
3.0
100.0
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240724350822/en/
Kent Townsend Executive Vice President, Chief Financial Officer
and Treasurer (785) 231-6360 ktownsend@capfed.com
Investor Relations (785) 270-6055
investorrelations@capfed.com
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