Capitol Federal Financial, Inc.® (NASDAQ: CFFN) (the "Company"),
the parent company of Capitol Federal Savings Bank (the "Bank"),
announced today a strategic securities transaction and results for
the quarter and fiscal year ended September 30, 2023. For best
viewing results, please view this release in Portable Document
Format (PDF) on our website, https://ir.capfed.com.
Strategic Securities Transaction to Improve Future
Earnings
In October 2023, the Company initiated a strategic securities
transaction (“securities strategy”) by selling $1.30 billion of
securities, representing 94% of the securities portfolio, of which
the net income impact is reflected in our September 30, 2023
financial statements. The securities strategy is designed to allow
the Company to improve its earnings stream going forward, beginning
in fiscal year 2024, and to provide liquidity to deleverage the
balance sheet. The securities strategy is expected to increase our
earnings per share by approximately $0.30 and our net interest
margin by approximately 60 basis points in fiscal year 2024 through
securities reinvestment. This securities strategy also provides
liquidity to pay down borrowings, which should enable the Company
to reduce the size of the balance sheet to under $10 billion in
total assets by December 31, 2023, while keeping the Bank and
Company well-capitalized and with tangible common equity for the
Company of more than 10.0%. Following the execution of the
securities strategy, the Company maintains exceptional asset
quality along with strong liquidity measures, including an unused
$2.11 billion line of credit with the Federal Home Loan Bank Topeka
(“FHLB”), enabling the Company to meet current and expected future
commitments.
Along with the securities strategy, it is anticipated that the
Company will maintain cash and securities in excess of $1.00
billion, reduce borrowings by $500 million, and reduce total assets
to approximately $9.70 billion at December 31, 2023. The yield on
the securities sold was 1.22% and the average duration was 3.6
years. The rate on the borrowings to be repaid during the December
31, 2023 quarter is 4.70%. At the date of this announcement, the
$1.30 billion of securities had been sold. Of the cash received
from the sale and not used to pay down debt, approximately $650
million is expected to be reinvested into fixed rate securities
modeled to yield 5.70%. We have a target date of October 31, 2023
to have the funds reinvested, but the execution of the reinvestment
may extend beyond this date. The remaining cash balance is expected
to be held at the Federal Reserve Bank ("FRB") earning 5.40%, or
the Fed Funds overnight rate, until used to fund commercial loan
commitments or other Bank operations. The Company expects the
earn-back period to be 3.9 years, aligning closely with the average
duration of the securities sold. In association with the securities
strategy, the Company incurred a pre-tax loss of $206.0 million
resulting in an after-tax loss of $155.7 million, which is being
reflected in fiscal year 2023.
The Company's balance sheet is primarily composed of one- to
four-family loans, most of which were refinanced in fiscal years
2020, 2021 and 2022 at then-current market interest rates.
Securities were purchased during the same time period, also at low
market interest rates, as a result of significant cash inflows from
pandemic-related governmental stimulus support. Beginning in March
2022, the Federal Reserve started to raise interest rates at a
record pace which resulted in the Bank increasing rates on deposit
products to retain funds. Some of the Bank's borrowings also
repriced to higher market interest rates during that same time
period. Due to the composition of our loan and securities
portfolios, our assets were not able to reprice as quickly as our
liabilities, resulting in net interest margin compression. The
securities strategy addresses the Company's recent decline in
earnings associated with net interest margin compression driven by
these factors by recognizing a net loss in fiscal year 2023.
Because the securities sold in the securities strategy were held on
our balance sheet as available for sale, the net loss in fiscal
year 2023 had minimal impact to the Company’s tangible book value
per share (“TBVPS”), as most of this loss was already included in
the calculation of our TBVPS.
Fiscal Year 2023 Highlights
The highlights for fiscal year 2023 include:
- On October 24, 2023, announced a cash dividend of $0.085 per
share, payable on November 17, 2023 to stockholders of record as of
the close of business on November 3, 2023;
- successfully implemented new core processing and digital
banking systems to enhance customer experiences and better position
the Bank for the future;
- net interest margin of 1.43% (1.55% excluding the effects of
the leverage strategy);
- loan growth of 6.8%;
- paid dividends of $0.62 per share.
Comparison of Operating Results for the Three Months Ended
September 30, 2023 and June 30, 2023
For the quarter ended September 30, 2023, the Company recognized
a net loss of $150.5 million, or $(1.13) per share, compared to net
income of $8.3 million, or $0.06 per share, for the quarter ended
June 30, 2023. The net loss for the current quarter was due to the
securities strategy. Excluding the securities strategy, earnings
per share would have been $0.04 for the current quarter. The net
interest margin decreased 11 basis points, from 1.32% for the prior
quarter to 1.21% for the current quarter. Excluding the effects of
the leverage strategy discussed in the "Leverage Strategy" section
below, the net interest margin decreased 15 basis points, from
1.39% for the prior quarter to 1.24% for the current quarter. The
decrease in the net interest margin excluding the effects of the
leverage strategy was due mainly to an increase in the cost of
deposits, primarily retail certificates of deposit.
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. The weighted average yield
on loans receivable increased nine basis points and the weighted
average yield on cash and cash equivalents increased 15 basis
points compared to the prior quarter.
For the Three Months
Ended
September 30,
June 30,
Change Expressed in:
2023
2023
Dollars
Percent
(Dollars in thousands)
INTEREST AND DIVIDEND INCOME:
Loans receivable
$
74,031
$
71,918
$
2,113
2.9
%
Cash and cash equivalents
6,139
10,009
(3,870
)
(38.7
)
Mortgage-backed securities ("MBS")
4,399
4,562
(163
)
(3.6
)
FHLB stock
2,796
3,260
(464
)
(14.2
)
Investment securities
894
895
(1
)
(0.1
)
Total interest and dividend income
$
88,259
$
90,644
$
(2,385
)
(2.6
)
The increase in interest income on loans receivable was due to
an increase in the weighted average yield, along with an increase
in the average balance of commercial loans. The increase in the
weighted average yield was due primarily to originations and
purchases/participations at higher market rates, 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
decrease in interest income on cash and cash equivalents was due
mainly to a decrease in the average balance of cash associated with
the leverage strategy compared to the prior quarter due to a
reduction in the leverage strategy usage in the current quarter.
The decrease in dividend income on FHLB stock was due mainly to a
decrease in the average balance of FHLB stock associated with the
leverage strategy, partially offset by an increase in the dividend
rate paid by FHLB.
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. The weighted average rate paid on deposits
increased 37 basis points and the weighted average rate paid on
borrowings not associated with the leverage strategy increased 10
basis points compared to the prior quarter.
For the Three Months
Ended
September 30,
June 30,
Change Expressed in:
2023
2023
Dollars
Percent
(Dollars in thousands)
INTEREST EXPENSE:
Borrowings
$
27,746
$
31,449
$
(3,703
)
(11.8
)%
Deposits
29,778
24,445
5,333
21.8
Total interest expense
$
57,524
$
55,894
$
1,630
2.9
During the current quarter, interest expense on borrowings
associated with the leverage strategy decreased $4.7 million due to
a reduction in usage of the leverage strategy. This was partially
offset by an increase in interest expense on borrowings not
associated with the leverage strategy, specifically the full
quarter impact of borrowings under the Federal Reserve's Bank Term
Funding Program ("BTFP"). The increase in interest expense on
deposits was due primarily to increases in the weighted average
rate paid and average balance of the retail certificate of deposit
portfolio.
Provision for Credit Losses
For the quarter ended September 30, 2023, the Bank recorded a
provision for credit losses of $963 thousand, compared to a
provision for credit losses of $1.3 million for the prior quarter.
The provision for credit losses in the current quarter was
comprised of a $1.4 million increase in the allowance for credit
losses ("ACL") for loans, partially offset by a $477 thousand
decrease in the reserve for off-balance sheet credit exposures. The
provision for credit losses associated with the ACL was due
primarily to the reduction in prepayment speeds related to the
commercial loan portfolio and commercial loan growth. The release
of provision for credit losses associated with the reserve for
off-balance sheet credit exposures was due primarily to a reduction
in commercial construction off-balance sheet credit exposures due
to projects being completed.
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
September 30,
June 30,
Change Expressed in:
2023
2023
Dollars
Percent
(Dollars in thousands)
NON-INTEREST INCOME:
Deposit service fees
$
2,758
$
3,404
$
(646
)
(19.0
)%
Insurance commissions
927
888
39
4.4
Net loss from securities transactions
(205,967
)
—
(205,967
)
N/A
Other non-interest income
1,233
1,522
(289
)
(19.0
)
Total non-interest income
$
(201,049
)
$
5,814
$
(206,863
)
(3,558.0
)
The decrease in deposit service fees was due primarily to
waiving certain fees for several weeks after the implementation of
the Bank's new core processing system ("digital transformation")
and due to changes in the fee structure of certain deposit products
after the digital transformation. The net loss from securities
transactions relates to the securities strategy discussed above.
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 during the prior quarter, with no such
benefits during 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
September 30,
June 30,
Change Expressed in:
2023
2023
Dollars
Percent
(Dollars in thousands)
NON-INTEREST EXPENSE:
Salaries and employee benefits
$
11,804
$
13,200
$
(1,396
)
(10.6
)%
Information technology and related
expense
6,448
6,118
330
5.4
Occupancy, net
3,638
3,556
82
2.3
Regulatory and outside services
1,765
1,436
329
22.9
Federal insurance premium
1,167
1,231
(64
)
(5.2
)
Advertising and promotional
692
1,447
(755
)
(52.2
)
Deposit and loan transaction costs
778
615
163
26.5
Office supplies and related expense
689
546
143
26.2
Other non-interest expense
1,213
1,187
26
2.2
Total non-interest expense
$
28,194
$
29,336
$
(1,142
)
(3.9
)
The decrease in salaries and employee benefits was mainly
related to the provision of our short-term performance plan that
does not allow for the payment of incentive compensation as a
result of the Company's net loss in the current fiscal year. The
increase in information technology and related expense was due
primarily to software licensing expenses associated with the
Company's digital transformation. The increase in regulatory and
outside services was due mainly to the timing of external audit
fees, in addition to expenses related to customer support
associated with the digital transformation. The decrease in
advertising and promotional expense was due mainly to the timing of
campaigns. The increase in deposit and loan transaction costs was
due primarily to new expenses associated with the digital
transformation. The increase in office supplies and related expense
was due mainly to postage expense associated with the digital
transformation mailings.
The Company's efficiency ratio was (16.55)% for the current
quarter compared to 72.32% for the prior quarter. Excluding the
effects of the securities strategy, the efficiency ratio would have
been 79.08% for the current quarter. The change in the efficiency
ratio, excluding the securities strategy, was due primarily to
lower net interest income. 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
September 30,
June 30,
Change Expressed in:
2023
2023
Dollars
Percent
(Dollars in thousands)
(Loss) income before income tax (benefit)
expense
$
(199,471
)
$
9,904
$
(209,375
)
(2,114.0
)%
Income tax (benefit) expense
(48,992
)
1,602
(50,594
)
(3,158.2
)
Net (loss) income
$
(150,479
)
$
8,302
$
(158,781
)
(1,912.6
)
Effective Tax Rate
24.6
%
16.2
%
The income tax benefit in the current quarter was a result of
the pretax loss. The pretax loss, combined with the Company's
permanent differences, contributed to the increase in the effective
tax rate. Generally, the Company's permanent differences lower the
effective tax rate when the Company has pretax income and tax
expense, but as a result of the current quarter pretax loss, the
Company's permanent differences have the impact of raising the
effective tax rate.
Comparison of Operating Results for the Years Ended September
30, 2023 and 2022
The Company recognized net loss of $111.7 million, or $(0.84)
per share, for the current year, compared to net income of $84.5
million, or $0.62 per share, for the prior year. The net loss for
the current year resulted from the securities strategy. Excluding
the effects of the securities strategy, earnings per share would
have been $0.33 for the current year, due primarily to lower net
interest income, along with recording a provision for credit losses
of $6.8 million for the current year compared to a release of
provision of $4.6 million for the prior year. The net interest
margin decreased 36 basis points, from 1.79% for the prior year to
1.43% for the current year. Excluding the effects of the leverage
strategy, the net interest margin decreased 49 basis points, from
2.04% for the prior year to 1.55% for the current year. The
decrease in the net interest margin excluding the effects of the
leverage strategy was due mainly to an increase in the cost of
borrowings and deposits, which exceeded the increase in loan
yields.
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 Year Ended
September 30,
Change Expressed in:
2023
2022
Dollars
Percent
(Dollars in thousands)
INTEREST AND DIVIDEND INCOME:
Loans receivable
$
280,087
$
228,531
$
51,556
22.6
%
Cash and cash equivalents
43,796
18,304
25,492
139.3
MBS
18,520
19,406
(886
)
(4.6
)
FHLB stock
13,821
10,031
3,790
37.8
Investment securities
3,565
3,268
297
9.1
Total interest and dividend income
$
359,789
$
279,540
$
80,249
28.7
The increase in interest income on loans receivable was due to
an increase in the weighted average yield and the average balance
of the loan portfolio. The increase in the average balance was
mainly in the correspondent one-to four-family and commercial real
estate loan portfolios. The increase in the weighted average yield
was due primarily to originations and purchases at higher market
yields, 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 interest income on cash and cash
equivalents was due to a higher yield on cash as a result of an
increase in FRB interest rates. The increase in dividend income on
FHLB stock was due mainly to a higher FHLB dividend rate compared
to the prior year period, along with an increase in the average
balance of FHLB stock due to an increase in FHLB borrowings not
associated with the leverage 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 Year Ended
September 30,
Change Expressed in:
2023
2022
Dollars
Percent
(Dollars in thousands)
INTEREST EXPENSE:
Borrowings
$
124,250
$
52,490
$
71,760
136.7
%
Deposits
82,267
34,456
47,811
138.8
Total interest expense
$
206,517
$
86,946
$
119,571
137.5
The increase in interest expense on borrowings was due primarily
to an increase in the average balance and weighted average rate on
borrowings not associated with the leverage strategy, along with an
increase in the weighted average rate on the borrowings associated
with the leverage strategy compared to the prior year. Interest
expense on borrowings not associated with the leverage strategy
increased due to new borrowings added between periods, at market
interest rates higher than the overall portfolio rate, to replace
maturing advances and to fund operational needs. Interest expense
on borrowings associated with the leverage strategy increased $21.2
million compared to the prior year due to increase usage of the
leverage strategy in the current year. The increase in interest
expense on deposits was due to an increase in the weighted average
rate paid on the deposit portfolio, primarily retail certificates
of deposit and money market accounts.
Provision for Credit Losses
The Bank recorded a provision for credit losses during the
current year of $6.8 million, compared to a release of provision of
$4.6 million during the prior year. The provision for credit losses
in the current year was comprised of a $7.5 million increase in the
ACL for loans and a $656 thousand decrease in reserves for
off-balance sheet credit exposures. The provision for credit losses
associated with the ACL was due primarily to the outlook for
worsening economic forecast conditions in the current fiscal year
compared to the prior fiscal year, along with a reduction in the
projected prepayment speeds used in the model for all loan
categories. The release of provision for credit losses associated
with the reserve for off-balance sheet credit exposures was due
primarily to refining our methodology to account for the estimated
credit losses on unfunded commercial construction-to-permanent
loans and commitments for the time period after construction is
expected to be completed.
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 Year Ended
September 30,
Change Expressed in:
2023
2022
Dollars
Percent
(Dollars in thousands)
NON-INTEREST INCOME:
Deposit service fees
$
12,745
$
13,798
$
(1,053
)
(7.6
)%
Insurance commissions
3,487
2,947
540
18.3
Net loss from securities transactions
(205,967
)
—
(205,967
)
N/A
Other non-interest income
4,935
6,085
(1,150
)
(18.9
)
Total non-interest income
$
(184,800
)
$
22,830
$
(207,630
)
(909.5
)
The decrease in deposit service fees was due primarily to
waiving certain fees for several weeks after the digital
transformation, a change in the fee structure of certain deposit
products after the digital transformation, and an increase in debit
card expenses. The increase in insurance commissions was due
primarily to annual contingent insurance commissions received being
higher than anticipated and the related accrual adjustments, along
with overall commissions being higher in the current year due
mainly to growth and strong retention on personal policies and
continued success growing our commercial policies. The net loss
from securities transactions relates to the Bank's securities
strategy discussed above. The decrease in other non-interest income
was due mainly to the prior year including gains on a loan-related
financial derivative agreement, with no such market value gains in
the current year, along with a decrease in income on bank-owned
life insurance compared to the prior year due to a reduction in the
yield and death benefits received between the two periods.
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 Year Ended
September 30,
Change Expressed in:
2023
2022
Dollars
Percent
(Dollars in thousands)
NON-INTEREST EXPENSE:
Salaries and employee benefits
$
51,491
$
56,600
$
(5,109
)
(9.0
)%
Information technology and related
expense
23,425
18,311
5,114
27.9
Occupancy, net
14,236
14,370
(134
)
(0.9
)
Regulatory and outside services
6,039
6,192
(153
)
(2.5
)
Federal insurance premium
4,456
3,020
1,436
47.5
Advertising and promotional
4,305
5,178
(873
)
(16.9
)
Deposit and loan transaction costs
2,694
2,797
(103
)
(3.7
)
Office supplies and related expense
2,499
1,951
548
28.1
Other non-interest expense
4,789
4,432
357
8.1
Total non-interest expense
$
113,934
$
112,851
$
1,083
1.0
The decrease in salaries and employee benefits was attributable
mainly to lower incentive compensation in the current fiscal year,
along with a reduction in loan commissions due to lower loan
origination activity, and an increase in capitalized payroll costs
related to the digital transformation project. The increase in
information technology and related expenses was due mainly to
third-party project management expenses associated with the Bank's
digital transformation project, along with higher software
licensing expenses due to agreement renewals at higher costs and
new agreements associated with the digital transformation. The
decrease in advertising and promotional expense was due mainly to
the timing of campaigns. The increase in federal insurance premium
expense was due mainly to an increase in the FDIC assessment rate.
The increase in office supplies and related expense was due
primarily to an increase in postage, along with the write-off of
the Bank's remaining inventory of unissued non-contactless debit
cards, which have now become obsolete. The increase in other
non-interest expense was due mainly to expenses associated with the
collateral received on the Bank's interest rate swap
agreements.
The Company's efficiency ratio was (361.38)% for the current
year compared to 52.39% for the prior year. Excluding the effects
of the securities strategy, the efficiency ratio would have been
65.31% for the current year. The change in the efficiency ratio,
excluding the securities strategy, was due primarily to lower net
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 effective tax rate.
For the Year Ended
September 30,
Change Expressed in:
2023
2022
Dollars
Percent
(Dollars in thousands)
(Loss) income before income tax (benefit)
expense
$
(152,300
)
$
107,203
$
(259,503
)
(242.1
)%
Income tax (benefit) expense
(40,552
)
22,750
(63,302
)
(278.3
)
Net (loss) income
$
(111,748
)
$
84,453
$
(196,201
)
(232.3
)
Effective Tax Rate
26.6
%
21.2
%
The income tax benefit in the current year was a result of the
pretax loss. The pretax loss, combined with the Company's permanent
differences, contributed to the increase in the effective tax rate.
Generally, the Company's permanent differences lower the effective
tax rate when the Company has pretax income and tax expense, but as
a result of the current year pretax loss, the Company's permanent
differences have the impact of raising the effective tax rate.
Management anticipates the effective tax rate for fiscal year 2024
will be approximately 19% to 20%.
Financial Condition as of September 30, 2023
The following table summarizes the Company's financial condition
at the dates indicated.
Annualized
September 30,
June 30,
Percent
September 30,
Percent
2023
2023
Change
2022
Change
(Dollars and shares in
thousands)
Total assets
$
10,167,372
$
10,294,127
(4.9
)%
$
9,624,897
5.6
%
Available-for-sale ("AFS") securities
1,371,136
1,444,867
(20.4
)
1,563,307
(12.3
)
Loans receivable, net
7,970,949
7,963,360
0.4
7,464,208
6.8
Deposits
6,051,220
6,092,840
(2.7
)
6,194,866
(2.3
)
Borrowings
2,879,125
2,986,162
(14.3
)
2,132,154
35.0
Stockholders' equity
1,033,965
1,061,285
(10.3
)
1,096,499
(5.7
)
Equity to total assets at end of
period
10.2
%
10.3
%
11.4
%
Average number of basic shares
outstanding
133,225
133,199
0.1
135,773
(1.9
)
Average number of diluted shares
outstanding
133,225
133,199
0.1
135,773
(1.9
)
As part of the securities strategy, $1.30 billion of AFS
securities were designated for sale as of September 30, 2023. The
$192.7 million of unrealized loss, which includes $11.4 million of
premium write-downs, associated with these securities was
recognized as a net loss from securities transactions in the fiscal
year 2023 consolidated income statement. Subsequent to September
30, 2023 but before the date of this earnings release, the Bank
sold the securities for an additional $13.3 million of net loss
which is also reflected in net loss from securities transactions in
the fiscal year 2023 consolidated income statement. The total net
loss related to the securities transactions was $206.0 million. The
net loss associated with the sale of the securities and the
write-down of premiums is a subsequent event that is required to be
reported in the fiscal year 2023 consolidated income statement.
During the current quarter, total assets decreased $116.3
million as operating cash and cash flows from the securities
portfolio were used to pay off a maturing FHLB advance and fund
deposit outflows. While the total loan portfolio balance remained
relatively unchanged, there was a shift in the portfolio mix as
commercial loans increased $63.4 million while one- to four-family
loans decreased $55.3 million, including a $35.9 million decrease
in one- to four-family correspondent loans. The Bank continues to
reduce purchases of correspondent loans with the intention of
having correspondent purchases near zero, which will result in a
continued decrease in the balance of that portfolio.
Total liabilities decreased $99.4 million during the current
quarter as a maturing $100.0 million FHLB advance was not renewed,
along with a $41.6 million decrease in deposits, partially offset
by an increase in advances by borrowers due to timing of the
receipt of borrower funds and payment of property taxes and an
increase in other liabilities for new commitments to fund low
income housing partnership investments. The decrease in deposits
was primarily in retail non-maturity deposits and public unit
certificates of deposit, partially offset by an increase in retail
certificates of deposit. The increase in retail certificates of
deposit was in terms less than 17 months.
Total assets increased $552.9 million from September 30, 2022 to
September 30, 2023. The increase was mainly composed of a $506.7
million increase in the loan portfolio and a $196.4 million
increase in operating cash, partially offset by a $178.8 million
decrease in securities. The growth in the loan portfolio was
primarily funded with proceeds from borrowings.
Total liabilities increased $605.0 million from September 30,
2022 to September 30, 2023 due to a $747.0 million increase in
borrowings, partially offset by a $143.6 million decrease in
deposits. The increase in borrowings was composed of $500.0 million
in BTFP borrowings at a rate of 4.70% and the remaining amounts
were FHLB advances. The decrease in deposits during the current
year was mainly in non-maturity deposits which decreased $670.1
million, largely retail money market accounts, partially offset by
a $460.4 million increase in retail certificates of deposit and a
$53.6 million increase in public unit certificates of deposit.
During the March 2023 quarter, the Bank held a certificate of
deposit promotional campaign, which resulted in $177.3 million in
new retail certificates of deposit with the majority of the funds
coming from customer transfers from existing deposits within the
Bank. The additional decrease in non-maturity deposit balances was
likely due to depositors moving funds to alternative, higher
yielding investment products and/or withdrawing funds for customer
spending. The majority of the growth in the retail certificate of
deposit portfolio in the current fiscal year were in terms less
than 17 months. Management continues to competitively price certain
short-term retail certificate of deposit products to encourage
customers to move to shorter-term options. If rates were to
decrease in the near future, the Bank would be able to reprice
those balances to lower market rates at maturity.
For short-term liquidity needs, the Bank has access to a line of
credit at the FHLB in addition to the FRB of Kansas City discount
window. The Bank's FHLB borrowing limit was 50% of the Bank's Call
Report total assets as of September 30, 2023. The amount that can
be borrowed from the FRB of Kansas City's discount window is based
upon the fair value of securities pledged as collateral. Management
estimated that the Bank had $2.71 billion in additional liquidity
available at September 30, 2023 based on the Bank's blanket
collateral agreement with FHLB and unencumbered securities.
As of September 30, 2023, approximately $789.0 million of the
Bank's deposit portfolio was uninsured, of which approximately
$425.1 million related to commercial and retail deposit accounts
and the remainder was mainly comprised of fully collateralized
public unit deposits and intercompany accounts. The uninsured
amounts are estimates based on the methodologies and assumptions
used for the Bank's regulatory reporting requirements.
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 Year Ended
September 30, 2023
September 30, 2023
Amount
Rate
Amount
Rate
(Dollars in thousands)
Loan originations, purchases, and
participations
One- to four-family and consumer:
Originated
$
103,713
6.64
%
$
467,269
5.91
%
Purchased
13,598
5.97
415,797
5.02
Commercial:
Originated
46,191
7.57
463,093
6.01
Participations/Purchased
17,200
6.80
228,275
6.62
$
180,702
6.84
$
1,574,434
5.81
Deposit Activity
Non-maturity deposits
$
(131,862
)
$
(670,085
)
Retail/Commercial certificates of
deposit
115,200
472,888
Borrowing activity
Maturities and repayments
(107,418
)
2.28
(329,672
)
2.01
New borrowings
—
—
650,000
4.47
BTFP, net
—
—
500,000
4.70
Leverage Strategy
At times, the Bank has utilized a leverage strategy to increase
earnings which entails entering into short-term FHLB advances and
depositing the proceeds from the borrowings, net of the required
FHLB stock holdings, at the FRB of Kansas City. The borrowings are
repaid prior to quarter end. The average balance of leverage
strategy borrowings was $239.1 million and $604.4 million during
the quarters ended September 30, 2023 and June 30, 2023,
respectively, and $924.4 million for the year ended September 30,
2023. At times during the current quarter, the leverage strategy
was not profitable and therefore was not utilized, resulting in a
decrease in the average outstanding balance of leverage strategy
borrowings compared to the prior quarter. Net income attributable
to the leverage strategy was $38 thousand and $997 thousand for the
quarter and year ended September 30, 2023, respectively. 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 $1.03 billion at September 30,
2023. During the year ended September 30, 2023, the Company paid
cash dividends totaling $83.2 million. These cash dividends totaled
$0.620 per share and consisted of a $0.28 per share cash true-up
dividend related to fiscal year 2022 earnings and four regular
quarterly cash dividends of $0.085 per share.
On October 24, 2023, the Company announced a regular quarterly
cash dividend of $0.085 per share, or approximately $11.3 million,
payable on November 17, 2023 to stockholders of record as of the
close of business on November 3, 2023.
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 September 30, 2023, the Bank's tier 1 leverage
ratio was 8.4%, which exceeded the minimum requirement. The tier 1
leverage ratio is based on average assets. The leverage strategy
increases average assets which in turn reduces the Bank's tier 1
leverage ratio.
At September 30, 2023, Capitol Federal Financial, Inc., at the
holding company level, had $83.4 million in cash on deposit at the
Bank. For fiscal year 2024, it is the intention of the Board of
Directors to pay out the regular quarterly cash dividend of $0.085
per share. 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 quarter, the Company repurchased 250,594
shares of common stock at an average price of $4.97 per share.
There remains $21.2 million authorized under the existing stock
repurchase plan for additional purchases of the Company's common
stock. Shares may be repurchased from time to time based upon
market conditions, available liquidity and other factors. This plan
has no expiration date; however, the FRB of Kansas City's existing
approval for the Company to repurchase shares expires in August
2024.
The following table presents a reconciliation of total to net
shares outstanding as of September 30, 2023.
Total shares outstanding
135,936,375
Less unallocated Employee Stock Ownership
Plan ("ESOP") shares and unvested restricted stock
(2,896,810
)
Net shares outstanding
133,039,565
Fiscal Year 2024 Outlook
Information technology and related expenses are anticipated to
be $3 million lower in fiscal year 2024 as compared to fiscal year
2023 due to a reduction in professional services costs related to
the digital transformation. Now that the digital transformation is
complete, the professional services are no longer necessary.
Additionally, income from deposit service fees is anticipated to be
approximately $1 million lower in fiscal year 2024 as compared to
fiscal year 2023 due to changes in the fee structure of certain
deposit products after the digital transformation, which is in line
with industry trends.
Capitol Federal Financial, Inc. is the holding company for the
Bank. The Bank has 51 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 and its correspondent banks' market areas; the future
earnings and capital levels of the Bank, 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)
September 30,
June 30,
September 30,
2023
2023
2022
ASSETS:
Cash and cash equivalents (includes
interest-earning deposits of $213,830, $308,127 and $27,467)
$
245,605
$
329,409
$
49,194
AFS securities, at estimated fair value
(amortized cost of $1,578,614, $1,624,837 and $1,768,490)
1,371,136
1,444,867
1,563,307
Loans receivable, net (ACL of $23,759,
$22,399 and $16,371)
7,970,949
7,963,360
7,464,208
FHLB stock, at cost
110,714
116,012
100,624
Premises and equipment, net
91,531
91,713
94,820
Income taxes receivable, net
8,531
5,894
1,266
Deferred income tax assets, net
32,861
26,889
33,884
Other assets
336,045
315,983
317,594
TOTAL ASSETS
$
10,167,372
$
10,294,127
$
9,624,897
LIABILITIES:
Deposits
$
6,051,220
$
6,092,840
$
6,194,866
Borrowings
2,879,125
2,986,162
2,132,154
Advances by borrowers
62,993
40,982
80,067
Other liabilities
140,069
112,858
121,311
Total liabilities
9,133,407
9,232,842
8,528,398
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, 135,936,375, 136,158,569 and
138,858,884 shares issued and outstanding as of September 30, 2023,
June 30, 2023, and September 30, 2022, respectively
1,359
1,361
1,388
Additional paid-in capital
1,166,643
1,167,979
1,190,213
Unearned compensation, ESOP
(28,083
)
(28,497
)
(29,735
)
Retained earnings
(114,654
)
47,148
80,266
Accumulated other comprehensive income
(loss), net of tax
8,700
(126,706
)
(145,633
)
Total stockholders' equity
1,033,965
1,061,285
1,096,499
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY
$
10,167,372
$
10,294,127
$
9,624,897
CAPITOL FEDERAL FINANCIAL, INC.
AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars in thousands)
For the Three Months
Ended
For the Year Ended
September 30,
June 30,
September 30,
2023
2023
2023
2022
INTEREST AND DIVIDEND INCOME:
Loans receivable
$
74,031
$
71,918
$
280,087
$
228,531
Cash and cash equivalents
6,139
10,009
43,796
18,304
MBS
4,399
4,562
18,520
19,406
FHLB stock
2,796
3,260
13,821
10,031
Investment securities
894
895
3,565
3,268
Total interest and dividend income
88,259
90,644
359,789
279,540
INTEREST EXPENSE:
Borrowings
27,746
31,449
124,250
52,490
Deposits
29,778
24,445
82,267
34,456
Total interest expense
57,524
55,894
206,517
86,946
NET INTEREST INCOME
30,735
34,750
153,272
192,594
PROVISION FOR CREDIT LOSSES
963
1,324
6,838
(4,630
)
NET INTEREST INCOME AFTER
PROVISION FOR CREDIT LOSSES
29,772
33,426
146,434
197,224
NON-INTEREST INCOME:
Deposit service fees
2,758
3,404
12,745
13,798
Insurance commissions
927
888
3,487
2,947
Net loss from securities transactions
(205,967
)
—
(205,967
)
—
Other non-interest income
1,233
1,522
4,935
6,085
Total non-interest income
(201,049
)
5,814
(184,800
)
22,830
NON-INTEREST EXPENSE:
Salaries and employee benefits
11,804
13,200
51,491
56,600
Information technology and related
expense
6,448
6,118
23,425
18,311
Occupancy, net
3,638
3,556
14,236
14,370
Regulatory and outside services
1,765
1,436
6,039
6,192
Federal insurance premium
1,167
1,231
4,456
3,020
Advertising and promotional
692
1,447
4,305
5,178
Deposit and loan transaction costs
778
615
2,694
2,797
Office supplies and related expense
689
546
2,499
1,951
Other non-interest expense
1,213
1,187
4,789
4,432
Total non-interest expense
28,194
29,336
113,934
112,851
(LOSS) INCOME BEFORE INCOME TAX (BENEFIT)
EXPENSE
(199,471
)
9,904
(152,300
)
107,203
INCOME TAX (BENEFIT) EXPENSE
(48,992
)
1,602
(40,552
)
22,750
NET (LOSS) INCOME
$
(150,479
)
$
8,302
$
(111,748
)
$
84,453
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
September 30, 2023
June 30, 2023
Average
Interest
Average
Interest
Outstanding
Earned/
Yield/
Outstanding
Earned/
Yield/
Amount
Paid
Rate
Amount
Paid
Rate
Assets:
(Dollars in thousands)
Interest-earning assets:
One- to four-family loans:
Originated
$
4,036,609
$
34,584
3.43
%
$
4,052,906
$
34,224
3.38
%
Correspondent purchased
2,454,407
19,794
3.23
2,491,016
19,937
3.20
Bulk purchased
138,922
524
1.51
141,985
527
1.49
Total one- to four-family loans
6,629,938
54,902
3.31
6,685,907
54,688
3.27
Commercial loans
1,249,498
16,930
5.30
1,180,906
15,172
5.08
Consumer loans
104,252
2,199
8.37
102,390
2,058
8.06
Total loans receivable(1)
7,983,688
74,031
3.69
7,969,203
71,918
3.60
MBS(2)
1,080,611
4,399
1.63
1,126,953
4,562
1.62
Investment securities(2)(3)
525,013
894
0.68
525,012
895
0.68
FHLB stock(4)
120,159
2,796
9.23
146,482
3,260
8.93
Cash and cash equivalents(5)
453,486
6,139
5.30
769,434
10,009
5.15
Total interest-earning assets
10,162,957
88,259
3.45
10,537,084
90,644
3.43
Other non-interest-earning assets
268,871
271,898
Total assets
$
10,431,828
$
10,808,982
Liabilities and stockholders' equity:
Interest-bearing liabilities:
Checking
$
900,526
449
0.20
$
949,909
398
0.17
Savings
492,737
145
0.12
521,831
143
0.11
Money market
1,404,496
6,913
1.95
1,485,672
6,295
1.70
Retail certificates
2,498,839
20,268
3.22
2,339,477
15,685
2.69
Commercial certificates
30,735
273
3.53
44,083
307
2.80
Wholesale certificates
158,598
1,730
4.33
155,157
1,617
4.18
Total deposits
5,485,931
29,778
2.15
5,496,129
24,445
1.78
Borrowings(6)
3,150,179
27,746
3.48
3,520,594
31,449
3.57
Total interest-bearing liabilities
8,636,110
57,524
2.64
9,016,723
55,894
2.48
Non-interest-bearing deposits
540,607
556,682
Other non-interest-bearing liabilities
191,978
161,360
Stockholders' equity
1,063,133
1,074,217
Total liabilities and stockholders'
equity
$
10,431,828
$
10,808,982
Net interest income(7)
$
30,735
$
34,750
Net interest-earning assets
$
1,526,847
$
1,520,361
Net interest margin(8)(9)
1.21
1.32
Ratio of interest-earning assets to
interest-bearing liabilities
1.18x
1.17x
Selected performance ratios:
Return on average assets
(annualized)(9)
(5.77
%)
0.31
%
Return on average equity
(annualized)(9)
(56.62
)
3.09
Average equity to average assets
10.19
9.94
Operating expense ratio
(annualized)(10)
1.08
1.09
Efficiency ratio(9)(11)
(16.55
)
72.32
Pre-tax yield on leverage strategy(12)
0.07
0.07
For the Year Ended September
30,
2023
2022
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
$
4,047,209
$
135,873
3.36
%
$
3,985,267
$
129,392
3.25
%
Correspondent purchased
2,428,257
76,335
3.14
2,072,677
55,227
2.66
Bulk purchased
143,105
1,923
1.34
159,152
2,053
1.29
Total one- to four-family loans
6,618,571
214,131
3.24
6,217,096
186,672
3.00
Commercial loans
1,150,831
57,991
4.97
884,126
37,223
4.15
Consumer loans
103,016
7,965
7.73
93,544
4,636
4.96
Total loans receivable(1)
7,872,418
280,087
3.55
7,194,766
228,531
3.17
MBS(2)
1,150,430
18,520
1.61
1,354,080
19,406
1.43
Investment securities(2)(3)
525,030
3,565
0.68
523,170
3,268
0.62
FHLB stock(4)
157,925
13,821
8.75
149,236
10,031
6.72
Cash and cash equivalents(5)
998,793
43,796
4.32
1,562,274
18,304
1.16
Total interest-earning assets
10,704,596
359,789
3.35
10,783,526
279,540
2.59
Other non-interest-earning assets
263,158
343,311
Total assets
$
10,967,754
$
11,126,837
Liabilities and stockholders' equity:
Interest-bearing liabilities:
Checking
$
961,779
1,504
0.16
$
1,056,303
752
0.07
Savings
525,423
488
0.09
543,609
299
0.06
Money market
1,567,540
19,426
1.24
1,840,898
4,578
0.25
Retail certificates
2,266,740
54,724
2.41
2,203,452
27,664
1.26
Commercial certificates
40,258
993
2.47
103,865
666
0.64
Wholesale certificates
134,641
5,132
3.81
150,689
497
0.33
Total deposits
5,496,381
82,267
1.50
5,898,816
34,456
0.58
Borrowings(6)
3,658,015
124,250
3.38
3,288,348
52,490
1.58
Total interest-bearing liabilities
9,154,396
206,517
2.25
9,187,164
86,946
0.94
Non-interest-bearing deposits
562,023
573,954
Other non-interest-bearing liabilities
179,374
178,526
Stockholders' equity
1,071,961
1,187,193
Total liabilities and stockholders'
equity
$
10,967,754
$
11,126,837
Net interest income(7)
$
153,272
$
192,594
Net interest-earning assets
$
1,550,200
$
1,596,362
Net interest margin(8)(9)
1.43
1.79
Ratio of interest-earning assets to
interest-bearing liabilities
1.17x
1.17x
Selected performance ratios:
Return on average assets(9)
(1.02
%)
0.76
%
Return on average equity(9)
(10.42
)
7.11
Average equity to average assets
9.77
10.67
Operating expense ratio(10)
1.04
1.01
Efficiency ratio(9)(11)
(361.38
)
52.39
Pre-tax yield on leverage strategy(12)
0.13
0.25
(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)
The average balance of investment
securities includes an average balance of nontaxable securities of
$1.0 million for each of the quarters ended September 30, 2023 and
June 30, 2023, respectively, and $1.0 million and $1.7 million for
the years ended September 30, 2023 and September 30, 2022,
respectively.
(4)
Included in this line, for the quarters
ended September 30, 2023 and June 30, 2023, respectively, is FHLB
stock related to the leverage strategy with an average outstanding
balance of $10.8 million and $27.2 million, respectively, and
dividend income of $251 thousand and $610 thousand, respectively,
at a weighted average yield of 9.25% and 9.00%, respectively, and
FHLB stock not related to the leverage strategy with an average
outstanding balance of $109.4 million and $119.3 million,
respectively, and dividend income of $2.5 million and $2.7 million,
respectively, at a weighted average yield of 9.23% and 8.91%,
respectively. Included in this line, for the years ended September
30, 2023 and September 30, 2022, respectively, is FHLB stock
related to the leverage strategy with an average outstanding
balance of $41.6 million and $71.0 million, respectively, and
dividend income of $3.6 million and $4.8 million, respectively, at
a weighted average yield of 8.69% and 6.75%, respectively, and FHLB
stock not related to the leverage strategy with an average
outstanding balance of $116.3 million and $78.2 million,
respectively, and dividend income of $10.2 million and $5.2
million, respectively, at a weighted average yield of 8.77% and
6.69%, respectively.
(5)
The average balance of cash and cash
equivalents includes an average balance of cash related to the
leverage strategy of $228.4 million and $577.2 million during the
quarters ended September 30, 2023 and June 30, 2023, respectively,
and an average balance of cash related to the leverage strategy of
$882.8 million and $1.51 billion during the years ended September
30, 2023 and September 30, 2022, respectively.
(6)
Included in this line, for the quarters
ended September 30, 2023 and June 30, 2023, are FHLB borrowings
related to the leverage strategy with an average outstanding
balance of $239.1 million and $604.4 million, respectively, and
interest paid of $3.3 million and $7.9 million, respectively, at a
weighted average rate of 5.33% and 5.20%, respectively, and
borrowings not related to the leverage strategy with an average
outstanding balance of $2.91 billion and $2.92 billion,
respectively, and interest paid of $24.5 million and $23.5 million,
respectively, at a weighted average rate of 3.33% and 3.23%,
respectively. Included in this line, for the years ended September
30, 2023 and September 30, 2022, are FHLB borrowings related to the
leverage strategy with an average outstanding balance of $924.4
million and $1.58 billion, respectively, and interest paid of $39.7
million and $18.5 million, respectively, at a weighted average rate
of 4.24% and 1.15%, respectively, and borrowings not related to the
leverage strategy with an average outstanding balance of $2.73
billion and $1.71 billion, respectively, and interest paid of $84.5
million and $34.0 million, respectively, at a weighted average rate
of 3.08% and 1.98%, respectively. 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.
(9)
The tables below provide 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
effects of the leverage strategy and the net loss on securities
transactions associated with the securities strategy, which are not
presented in accordance with GAAP. Management believes it is
important for comparability purposes to provide the performance
measures without the leverage strategy because of the unique nature
of the leverage strategy and the net loss on securities
transactions due to the non-recurring nature of the securities
strategy. The leverage strategy reduces some of our performance
measures due to the amount of earnings associated with the
transaction in comparison to the size of the transaction, while
increasing our net income. The net loss on securities associated
with the securities strategy is non-recurring and resulted in the
Company reporting a net loss for the current fiscal year.
For the Three Months
Ended
September 30, 2023
June 30, 2023
Actual
Leverage
Adjusted
Securities
Adjusted
Actual
Leverage
Adjusted
(GAAP)
Strategy
(Non-GAAP)
Strategy
(Non-GAAP)
(GAAP)
Strategy
(Non-GAAP)
Yield on interest-earning assets
3.45
%
0.05
%
3.40
%
3.43
%
0.11
%
3.32
%
Cost of interest-bearing liabilities
2.64
0.08
2.56
2.48
0.20
2.28
Return on average assets (annualized)
(5.77
)
0.14
(5.91
)
(5.97
)%
0.20
%
0.31
(0.01
)
0.32
Return on average equity (annualized)
(56.62
)
0.01
(56.63
)
(58.58
)
1.97
3.09
0.03
3.06
Net interest margin
1.21
(0.03
)
1.24
1.32
(0.07
)
1.39
Efficiency Ratio
(16.55
)
(0.03
)
(16.52
)
(95.63
)
79.08
72.32
(0.12
)
72.44
Earnings per share
$
(1.13
)
$
(1.17
)
$
0.04
For the Year Ended September
30,
2023
2022
Actual
Leverage
Adjusted
Securities
Adjusted
Actual
Leverage
Adjusted
(GAAP)
Strategy
(Non-GAAP)
Strategy
(Non-GAAP)
(GAAP)
Strategy
(Non-GAAP)
Yield on interest-earning assets
3.35
%
0.10
%
3.25
%
2.59
%
(0.19
)%
2.78
%
Cost of interest-bearing liabilities
2.25
0.23
2.02
0.94
0.04
0.90
Return on average assets
(1.02
)
0.10
(1.12
)
(1.42
)%
0.40
%
0.76
(0.09
)
0.85
Return on average equity
(10.42
)
0.10
(10.52
)
(14.53
)
4.10
7.11
0.26
6.85
Net interest margin
1.43
(0.12
)
1.55
1.79
(0.25
)
2.04
Efficiency Ratio
(361.38
)
(18.86
)
(342.52
)
(426.70
)
65.31
52.39
(0.87
)
53.26
Earnings per share
$
(0.84
)
$
(1.17
)
$
0.33
(10)
The operating expense ratio represents
annualized non-interest expense as a percentage of average
assets.
(11)
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.
(12)
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.
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. The loan portfolio rate increased nine basis points and
43 basis points during the current quarter and current fiscal year,
respectively, due primarily to one- to four-family correspondent
and commercial loan growth at interest rates higher than the
existing portfolios, disbursements on higher rate commercial
construction loans, and repricing of existing commercial loans to
higher market interest rates.
September 30, 2023
June 30, 2023
September 30, 2022
% of
% of
% of
Amount
Rate
Total
Amount
Rate
Total
Amount
Rate
Total
(Dollars in thousands)
One- to four-family:
Originated
$
3,978,837
3.39
%
49.9
%
$
3,992,730
3.33
%
50.1
%
$
3,988,469
3.20
%
53.4
%
Correspondent purchased
2,405,911
3.44
30.1
2,441,772
3.41
30.6
2,201,886
3.10
29.4
Bulk purchased
137,193
1.85
1.7
139,571
1.60
1.8
147,939
1.24
2.0
Construction
69,974
3.68
0.9
73,166
3.42
0.9
66,164
2.90
0.9
Total
6,591,915
3.38
82.6
6,647,239
3.33
83.4
6,404,458
3.12
85.7
Commercial:
Commercial real estate
995,788
5.29
12.5
924,142
5.00
11.6
745,301
4.30
10.0
Commercial and industrial
112,953
6.36
1.4
106,609
6.07
1.3
79,981
4.30
1.1
Construction
178,746
5.01
2.2
193,308
5.54
2.4
141,062
5.34
1.9
Total
1,287,487
5.35
16.1
1,224,059
5.18
15.3
966,344
4.45
13.0
Consumer loans:
Home equity
95,723
8.83
1.2
94,810
8.60
1.2
92,203
6.28
1.2
Other
9,256
5.20
0.1
8,632
4.96
0.1
8,665
4.21
0.1
Total
104,979
8.51
1.3
103,442
8.30
1.3
100,868
6.10
1.3
Total loans receivable
7,984,381
3.76
100.0
%
7,974,740
3.67
100.0
%
7,471,670
3.33
100.0
%
Less:
ACL
23,759
22,399
16,371
Deferred loan fees/discounts
31,335
31,557
29,736
Premiums/deferred costs
(41,662
)
(42,576
)
(38,645
)
Total loans receivable, net
$
7,970,949
$
7,963,360
$
7,464,208
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 Year Ended
September 30, 2023
September 30, 2023
Amount
Rate
Amount
Rate
(Dollars in thousands)
Beginning balance
$
7,974,740
3.67
%
$
7,471,670
3.33
%
Originated and refinanced
149,904
6.93
930,362
5.96
Purchased and participations
30,798
6.43
644,072
5.59
Change in undisbursed loan funds
46,609
(99,179
)
Repayments
(217,370
)
(956,562
)
Principal (charge-offs)/recoveries,
net
(80
)
(106
)
Other
(220
)
(5,876
)
Ending balance
$
7,984,381
3.76
$
7,984,381
3.76
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 September 30, 2023. 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
$
3,978,837
61.0
%
3.39
%
772
60
%
$
164
Correspondent purchased
2,405,911
36.9
3.44
767
64
416
Bulk purchased
137,193
2.1
1.85
772
55
288
$
6,521,941
100.0
3.37
770
61
213
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. The majority of the correspondent
loans purchased during the current quarter were from applications
in the pipeline at June 30, 2023 as the Bank continues to reduce
correspondent purchases to near zero.
For the Three Months
Ended
For the Year Ended
September 30, 2023
September 30, 2023
Credit
Credit
Amount
Rate
LTV
Score
Amount
Rate
LTV
Score
(Dollars in thousands)
Originated
$
89,564
6.31
%
72
%
759
$
399,038
5.51
%
75
%
764
Correspondent purchased
13,598
5.97
70
765
415,797
5.02
76
769
$
103,162
6.27
72
759
$
814,835
5.26
76
767
The following table summarizes our one- to four-family loan
origination and refinance commitments and one- to four-family
correspondent loan purchase commitments as of September 30, 2023,
along with associated weighted average rates.
Amount
Rate
(Dollars in thousands)
Originate/refinance
$
53,497
6.62
%
Correspondent
1,765
5.81
$
55,262
6.60
Commercial Loans: During the year ended September 30, 2023, the
Bank originated $463.1 million of commercial loans and entered into
commercial loan participations totaling $228.3 million. The Bank
also processed commercial loan disbursements, excluding lines of
credit, of approximately $474.6 million at a weighted average rate
of 6.09%.
As of September 30, 2023, June 30, 2023, and September 30, 2022,
the Bank's commercial and industrial gross loan amounts (unpaid
principal plus undisbursed amounts) totaled $158.5 million, $144.8
million, and $100.4 million, respectively, and commitments totaled
$2.6 million at September 30, 2023.
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 September 30, 2023, the Bank had
three commercial real estate and commercial construction loan
commitments totaling $14.0 million, at a weighted average rate of
7.57%. Because the commitments to pay out undisbursed funds are not
cancellable by the Bank, unless the loan is in default, we
generally anticipate fully funding the related projects. Of the
total commercial real estate and commercial construction
undisbursed amounts and commitments outstanding as of September 30,
2023, management anticipates funding approximately $86 million
during the December 2023 quarter, $75 million during the March 2024
quarter, $52 million during the June 2024 quarter, and $172 million
during the September 2024 quarter or later.
September 30, 2023
June 30, 2023
September 30, 2022
Unpaid
Undisbursed
Gross Loan
Gross Loan
Gross Loan
Count
Principal
Amount
Amount
Amount
Amount
(Dollars in thousands)
Retail building
141
$
265,336
$
87,163
$
352,499
$
343,229
$
230,153
Senior housing
36
308,765
22,442
331,207
310,592
328,259
Multi-family
42
83,614
225,232
308,846
309,623
122,735
Hotel
13
214,019
18,993
233,012
234,863
181,546
Office building
81
122,132
8,789
130,921
134,317
109,653
One- to four-family property
365
62,733
7,532
70,265
70,986
68,907
Single use building
30
33,990
13,203
47,193
46,477
41,908
Other
112
83,945
5,050
88,995
85,535
53,054
820
$
1,174,534
$
388,404
$
1,562,938
$
1,535,622
$
1,136,215
Weighted average rate
5.25
%
6.12
%
5.47
%
5.35
%
4.56
%
The following table summarizes the Bank's commercial real estate
and commercial construction loans by state as of the dates
indicated.
September 30, 2023
June 30, 2023
September 30, 2022
Unpaid
Undisbursed
Gross Loan
Gross Loan
Gross Loan
Count
Principal
Amount
Amount
Amount
Amount
(Dollars in thousands)
Kansas
607
$
471,114
$
199,384
$
670,498
$
645,435
$
423,797
Texas
17
269,718
78,989
348,707
334,064
280,840
Missouri
163
261,761
70,849
332,610
338,368
296,443
Colorado
8
42,766
6,619
49,385
55,113
34,377
Tennessee
2
26,391
15,745
42,136
42,539
—
Nebraska
8
35,571
2,038
37,609
37,749
32,992
Other
15
67,213
14,780
81,993
82,354
67,766
820
$
1,174,534
$
388,404
$
1,562,938
$
1,535,622
$
1,136,215
The following table presents the Bank's commercial loan
portfolio and outstanding loan commitments, categorized by gross
loan amount (unpaid principal plus undisbursed amounts) or
outstanding loan commitment amount, as of September 30, 2023.
Count
Amount
(Dollars in thousands)
Greater than $30 million
9
$
436,940
>$15 to $30 million
20
418,355
>$10 to $15 million
10
122,580
>$5 to $10 million
32
234,433
$1 to $5 million
143
339,856
Less than $1 million
1,217
185,888
1,431
$
1,738,052
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 September 30, 2023,
approximately 72% 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. The increase in loans 30 to 89
days delinquent and in nonaccrual loans was due mainly to
delinquencies returning to more historical levels as government
payment assistance programs expire.
Loans Delinquent for 30 to 89
Days at:
September 30, 2023
June 30, 2023
March 31, 2023
December 31, 2022
September 30, 2022
Number
Amount
Number
Amount
Number
Amount
Number
Amount
Number
Amount
(Dollars in thousands)
One- to four-family:
Originated
88
$
9,078
67
$
6,377
45
$
4,116
56
$
4,708
48
$
4,134
Correspondent purchased
17
5,192
20
6,704
10
3,436
4
1,216
7
1,104
Bulk purchased
1
149
—
—
3
287
3
865
3
913
Construction
4
1,123
—
—
—
—
—
—
—
—
Commercial
5
94
6
573
5
389
6
191
—
—
Consumer
30
730
22
469
22
352
24
626
24
345
145
$
16,366
115
$
14,123
85
$
8,580
93
$
7,606
82
$
6,496
30 to 89 days delinquent loans
to total loans receivable, net
0.21
%
0.18
%
0.11
%
0.10
%
0.09
%
Non-Performing Loans and OREO
at:
September 30, 2023
June 30, 2023
March 31, 2023
December 31, 2022
September 30, 2022
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
$
2,246
16
$
1,582
15
$
1,084
13
$
1,034
29
$
2,919
Correspondent purchased
9
3,410
8
1,854
7
1,803
14
4,126
12
3,737
Bulk purchased
2
942
3
1,149
3
1,212
4
1,492
3
1,148
Commercial
12
2,183
8
1,225
7
1,152
7
1,152
8
1,167
Consumer
9
113
3
51
7
51
11
126
9
154
56
8,894
38
5,861
39
5,302
49
7,930
61
9,125
Loans 90 or more days delinquent or in
foreclosure
as a percentage of total loans
0.11
%
0.07
%
0.07
%
0.10
%
0.12
%
Nonaccrual loans less than 90 Days
Delinquent:(1)
One- to four-family:
Originated
2
$
215
3
$
295
2
$
187
3
$
219
3
$
222
Correspondent purchased
1
282
—
—
—
—
—
—
—
—
Bulk purchased
—
—
1
257
1
257
—
—
—
—
Commercial
1
18
2
29
3
104
2
84
1
77
Consumer
—
—
1
37
—
—
—
—
1
19
4
515
7
618
6
548
5
303
5
318
Total nonaccrual loans
60
9,409
45
6,479
45
5,850
54
8,233
66
9,443
Nonaccrual loans as a percentage of total
loans
0.12
%
0.08
%
0.07
%
0.11
%
0.13
%
OREO:
One- to four-family:
Originated(2)
—
$
—
—
$
—
2
$
160
2
$
161
4
$
307
Correspondent purchased
1
219
—
—
—
—
—
—
—
—
Consumer
—
—
—
—
—
—
1
21
1
21
1
219
—
—
2
160
3
182
5
328
Total non-performing assets
61
$
9,628
45
$
6,479
47
$
6,010
57
$
8,415
71
$
9,771
Non-performing assets as a percentage of
total assets
0.09
%
0.06
%
0.06
%
0.08
%
0.10
%
(1)
Includes 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.
(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 decrease in commercial
special mention loans at September 30, 2023 compared to June 30,
2023 was due mainly to two loans in a single commercial
relationship that were removed from special mention due to the
borrower pledging additional collateral for the loan which provided
cash flow support and reduced the LTV to appropriate levels. The
increase in commercial special mention loans at September 30, 2023
compared to September 30, 2022 was due mainly to three loans in a
single commercial relationship where the borrower has experienced
some performance issues, but is trending in a positive direction.
Management continues to closely monitor the borrower's
performance.
September 30, 2023
June 30, 2023
September 30, 2022
Special Mention
Substandard
Special Mention
Substandard
Special Mention
Substandard
(Dollars in thousands)
One- to four-family
$
18,603
$
19,314
$
17,935
$
15,747
$
12,950
$
19,953
Commercial
16,407
1,293
45,377
1,265
565
2,733
Consumer
327
190
358
269
306
354
$
35,337
$
20,797
$
63,670
$
17,281
$
13,821
$
23,040
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 September 30, 2023 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. The reserve for
off-balance sheet credit exposures totaled $4.1 million at
September 30, 2023.
For the Three Months
Ended
For the Year Ended
September 30, 2023
September 30, 2023
(Dollars in thousands)
Balance at beginning of period
$
22,399
$
16,371
Charge-offs:
One- to four-family
—
—
Commercial
(75
)
(75
)
Consumer
(9
)
(40
)
Total charge-offs
(84
)
(115
)
Recoveries:
One- to four-family
4
6
Commercial
—
1
Consumer
—
2
Total recoveries
4
9
Net (charge-offs) recoveries
(80
)
(106
)
Provision for credit losses
1,440
7,494
Balance at end of period
$
23,759
$
23,759
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
1.01
1.09
ACL to non-performing loans at end of
period
252.51
252.51
ACL to loans receivable at end of
period
0.30
0.30
ACL to net charge-offs (annualized)
73x
223x
The distribution of our ACL and the ratio of ACL to loans
receivable, by loan type, at the dates indicated is summarized
below.
Distribution of ACL
Ratio of ACL to Loans
Receivable
September 30,
June 30,
September 30,
June 30,
2023
2023
2023
2023
(Dollars in thousands)
One- to four-family
$
5,328
$
5,474
0.08
%
0.08
%
Commercial:
Commercial real estate
15,589
13,436
1.57
1.45
Commercial and industrial
1,104
929
0.98
0.87
Construction
1,487
2,321
0.83
1.20
Total
18,180
16,686
1.41
1.36
Consumer
251
239
0.24
0.23
Total
$
23,759
$
22,399
0.30
0.28
Securities Portfolio
The following table presents the distribution of our securities
portfolio, at amortized cost, at September 30, 2023. Overall,
fixed-rate securities comprised 96% of our securities portfolio at
September 30, 2023. 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
$
1,053,600
1.65
%
4.7
U.S. government-sponsored enterprise
debentures
519,985
0.64
1.9
Corporate bonds
4,000
5.12
8.6
Municipal bonds
1,029
2.55
6.9
$
1,578,614
1.33
3.8
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 periods 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 Year Ended
September 30, 2023
September 30, 2023
Amount
Yield
WAL
Amount
Yield
WAL
(Dollars in thousands)
Beginning balance - carrying value
$
1,444,867
1.33
%
4.0
$
1,563,307
1.29
%
4.2
Maturities and repayments
(45,503
)
(186,860
)
Net amortization of
(premiums)/discounts
(720
)
(3,016
)
Net loss from securities transactions
(13,346
)
(13,346
)
Change in valuation on AFS securities
(14,162
)
11,051
Ending balance - carrying value
$
1,371,136
1.33
3.8
$
1,371,136
1.33
3.8
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 increase in the deposit portfolio rate
during the current quarter and current year period was due mainly
to higher rates on money market accounts and retail certificates of
deposit.
September 30, 2023
June 30, 2023
September 30, 2022
% of
% of
% of
Amount
Rate
Total
Amount
Rate
Total
Amount
Rate
Total
(Dollars in thousands)
Non-interest-bearing checking
$
558,326
—
%
9.2
%
$
567,764
—
%
9.3
%
$
591,387
—
%
9.5
%
Interest-bearing checking
901,994
0.19
14.9
938,722
0.19
15.4
1,027,222
0.07
16.6
Savings
480,091
0.12
7.9
509,975
0.12
8.4
552,743
0.06
8.9
Money market
1,380,617
1.96
22.8
1,436,429
1.94
23.6
1,819,761
0.47
29.4
Retail certificates of deposit
2,533,954
3.47
41.9
2,423,665
3.00
39.8
2,073,542
1.34
33.5
Commercial certificates of deposit
48,751
3.56
0.8
43,840
3.25
0.7
36,275
0.97
0.6
Public unit certificates of deposit
147,487
4.44
2.5
172,445
4.26
2.8
93,936
1.61
1.5
$
6,051,220
2.07
100.0
%
$
6,092,840
1.83
100.0
%
$
6,194,866
0.63
100.0
%
Borrowings
The following table presents the maturity of term borrowings,
which consist of FHLB advances and BTFP borrowings, along with
associated weighted average contractual and effective rates as of
September 30, 2023. 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
990,000
4.30
3.79
2025
650,000
3.30
2.96
2026
575,000
2.81
2.95
2027
437,500
3.02
3.13
2028
230,328
4.94
3.91
$
2,882,828
3.63
3.34
(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,
and line of credit borrowings are excluded. 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. For new borrowings,
the WAMs presented are as of the date of issue. The new FHLB
borrowings added during the current year had a WAM of 3.2 years,
which is generally a shorter term than what management has selected
in prior periods. During the current year, management periodically
paid off BTFP borrowings and borrowed new BTFP funds to take
advantage of lower rates. Because of these transactions, BTFP
activity is presented on a net basis in the table below.
For the Three Months
Ended
For the Year Ended
September 30, 2023
September 30, 2023
Effective
Effective
Amount
Rate
WAM
Amount
Rate
WAM
(Dollars in thousands)
Beginning balance
$
2,990,246
3.30
%
2.0
$
2,062,500
2.44
%
2.5
Maturities and repayments
(107,418
)
2.28
(329,672
)
2.01
New FHLB borrowings
—
—
—
650,000
4.47
3.2
BTFP, net
—
—
—
500,000
4.70
1.0
Ending balance
$
2,882,828
3.34
1.8
$
2,882,828
3.34
1.8
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 term borrowings for the
next four quarters as of September 30, 2023.
December 31,
March 31,
June 30,
September 30,
2023
2024
2024
2024
Total
(Dollars in thousands)
Retail/Commercial Certificates:
Amount
$
264,988
$
270,160
$
409,119
$
423,970
$
1,368,237
Repricing Rate
2.60
%
2.89
%
3.84
%
4.37
%
3.58
%
Public Unit Certificates:
Amount
$
42,718
$
16,750
$
30,420
$
31,898
$
121,786
Repricing Rate
4.30
%
4.29
%
4.42
%
4.61
%
4.41
%
Term Borrowings:
Amount
$
150,000
$
65,000
$
600,000
$
175,000
$
990,000
Repricing Rate
3.42
%
2.70
%
4.25
%
2.92
%
3.79
%
Total
Amount
$
457,706
$
351,910
$
1,039,539
$
630,868
$
2,480,023
Repricing Rate
3.03
%
2.93
%
4.09
%
3.98
%
3.70
%
The following table sets forth the WAM information for our
certificates of deposit, in years, as of September 30, 2023.
Retail certificates of deposit
1.3
Commercial certificates of deposit
1.0
Public unit certificates of deposit
0.6
Total certificates of deposit
1.2
Average Rates and Lives
At September 30, 2023, the Bank's gap between the amount of
interest-earning assets and interest-bearing liabilities projected
to reprice within one year was $(1.21) billion, or (11.9)% of total
assets, compared to $(1.00) billion, or (9.7)% of total assets, at
June 30, 2023. The change in the one-year gap amount was due
primarily to an increase in the amount of liability cash flows
coming due in one year at September 30, 2023 compared to June 30,
2023, partially offset by an increase in the amount of asset cash
flows coming due for the same time period. This was due primarily
to an increase in the amount of certificates of deposit scheduled
to mature within one year as of September 30, 2023 compared to June
30, 2023 as a result of the Bank offering higher 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
certificate 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
September 30, 2023, the Bank's one-year gap is projected to be
$(1.24) billion, or (12.2)% of total assets. This compares to a
one-year gap of $(1.19) billion, or (11.6)% of total assets, if
interest rates were to have increased 200 basis points as of June
30, 2023.
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 September 30, 2023. 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
$
1,371,136
1.33
%
4.2
14.1
%
Loans receivable:
Fixed-rate one- to four-family
5,605,281
3.29
6.9
70.2
%
57.7
Fixed-rate commercial
456,087
4.44
3.1
5.7
4.7
All other fixed-rate loans
78,005
4.48
7.3
1.0
0.8
Total fixed-rate loans
6,139,373
3.39
6.7
76.9
63.2
Adjustable-rate one- to four-family
916,660
3.73
4.5
11.5
9.4
Adjustable-rate commercial
831,400
5.92
7.6
10.4
8.6
All other adjustable-rate loans
96,948
8.26
3.1
1.2
1.0
Total adjustable-rate loans
1,845,008
4.95
5.8
23.1
19.0
Total loans receivable
7,984,381
3.75
6.5
100.0
%
82.2
FHLB stock
110,714
9.22
2.1
1.2
Cash and cash equivalents
245,605
4.70
—
2.5
Total interest-earning assets
$
9,711,836
3.50
5.9
100.0
%
Non-maturity deposits
$
2,762,702
1.06
6.7
50.3
%
33.0
%
Retail certificates of deposit
2,533,954
3.47
1.3
46.1
30.2
Commercial certificates of deposit
48,751
3.56
1.0
0.9
0.6
Public unit certificates of deposit
147,487
4.44
0.6
2.7
1.8
Total interest-bearing deposits
5,492,894
2.28
4.0
100.0
%
65.6
Term borrowings
2,882,828
3.34
1.8
34.4
Total interest-bearing liabilities
$
8,375,722
2.65
3.2
100.0
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231025262554/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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