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Capitol Federal Financial, Inc.® Reports Fiscal Year 2021 Results

Capitol Federal Financial, Inc.® Reports Fiscal Year 2021 Results

Capitol Federal Financial, Inc.® (NASDAQ: CFFN) (the "Company"), the parent company of Capitol Federal Savings Bank (the "Bank"), announced results today for the fiscal year ended September 30, 2021. The Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2021 will be filed with the Securities and Exchange Commission ("SEC") on or about November 24, 2021 and posted on our website, http://ir.capfed.com. For best viewing results, please view this release in Portable Document Format (PDF) on our website.

Highlights for the quarter include:

  • net income of $18.6 million;
  • basic and diluted earnings per share of $0.14;
  • net interest margin of 1.97%;
  • paid dividends of $11.5 million, or $0.085 per share; and
  • on October 19, 2021, announced a cash dividend of $0.085 per share, payable on November 19, 2021 to stockholders of record as of the close of business on November 5, 2021.

Highlights for the fiscal year include:

  • net income of $76.1 million;
  • basic and diluted earnings per share of $0.56;
  • net interest margin of 1.90%;
  • deposit growth of 6.6%;
  • paid dividends of $117.9 million, or $0.87 per share; and
  • on October 28, 2021, announced a fiscal year 2021 cash true-up dividend of $0.22 per share, payable on December 3, 2021 to stockholders of record as of the close of business on November 19, 2021.

Comparison of Operating Results for the Three Months Ended September 30, 2021 and June 30, 2021

For the quarter ended September 30, 2021, the Company recognized net income of $18.6 million, or $0.14 per share, compared to net income of $18.2 million, or $0.13 per share, for the quarter ended June 30, 2021. The net interest margin increased 13 basis points, from 1.84% for the prior quarter to 1.97% for the current quarter, due mainly to a higher loan portfolio average yield.

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

 

 

 

 

 

September 30,

 

June 30,

 

Change Expressed in:

 

2021

 

2021

 

Dollars

 

Percent

 

(Dollars in thousands)

 

 

INTEREST AND DIVIDEND INCOME:

 

 

 

 

 

 

 

Loans receivable

$

57,139

 

 

$

54,779

 

 

$

2,360

 

 

 

4.3

%

Mortgage-backed securities ("MBS")

4,900

 

 

5,360

 

 

(460

)

 

 

(8.6

)

Federal Home Loan Bank Topeka ("FHLB") stock

952

 

 

944

 

 

8

 

 

 

0.8

 

Investment securities

750

 

 

763

 

 

(13

)

 

 

(1.7

)

Cash and cash equivalents

27

 

 

26

 

 

1

 

 

 

3.8

 

Total interest and dividend income

$

63,768

 

 

$

61,872

 

 

$

1,896

 

 

 

3.1

 

The increase in interest income on loans receivable was primarily a result of an increase in the weighted average portfolio yield, from 3.11% for the prior quarter to 3.21% for the current quarter, mainly in the one- to four-family correspondent portfolio due to a reduction in premium amortization related to a slowdown in endorsement and payoff activity. The decrease in interest income on MBS was due primarily to a decrease in the weighted average portfolio yield, from 1.40% for the prior quarter to 1.30% for the current quarter, resulting from an increase in premium amortization related to prepayment activity.

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

 

 

 

 

 

September 30,

 

June 30,

 

Change Expressed in:

 

2021

 

2021

 

Dollars

 

Percent

 

(Dollars in thousands)

 

 

INTEREST EXPENSE:

 

 

 

 

 

 

 

Deposits

$

10,335

 

 

$

11,475

 

 

$

(1,140

)

 

 

(9.9

)%

Borrowings

7,889

 

 

7,826

 

 

63

 

 

 

0.8

 

Total interest expense

$

18,224

 

 

$

19,301

 

 

$

(1,077

)

 

 

(5.6

)

The decrease in interest expense on deposits was due primarily to a decrease in the weighted average rate paid on the portfolio, from 0.69% for the prior quarter to 0.62% for the current quarter, and a decrease in the average balance of the retail certificate of deposit portfolio. See "Financial Condition as of September 30, 2021" below for additional information on deposits.

Provision for Credit Losses

For the quarter ended September 30, 2021, the Bank recorded a negative provision for credit losses of $1.3 million, compared to a negative provision for credit losses of $2.7 million for the prior quarter. The negative provision in the current quarter was composed of a $906 thousand decrease in the allowance for credit losses ("ACL") for loans and a $418 thousand decrease in reserves for off-balance sheet credit exposures. The $1.3 million negative provision for credit losses in the current quarter was due primarily to more favorable forecasted economic conditions at September 30, 2021 compared to June 30, 2021, largely related to commercial loans. However, the negative provision for the current quarter was lower than the prior quarter, as the rate of improvement in the forecasted economic conditions was less significant as compared to June 30, 2021. See additional discussion regarding the Bank's ACL and reserves for off-balance sheet credit exposures at September 30, 2021 in the "Asset Quality" section below.

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:

 

2021

 

2021

 

Dollars

 

Percent

 

(Dollars in thousands)

 

 

NON-INTEREST INCOME:

 

 

 

 

 

 

 

Deposit service fees

$

3,294

 

 

$

3,227

 

 

$

67

 

 

 

2.1

%

Insurance commissions

781

 

 

723

 

 

58

 

 

 

8.0

 

Other non-interest income

1,228

 

 

1,286

 

 

(58

)

 

 

(4.5

)

Total non-interest income

$

5,303

 

 

$

5,236

 

 

$

67

 

 

 

1.3

 

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:

 

2021

 

2021

 

Dollars

 

Percent

 

(Dollars in thousands)

 

 

NON-INTEREST EXPENSE:

 

 

 

 

 

 

 

Salaries and employee benefits

$

14,600

 

 

$

13,867

 

 

$

733

 

 

 

5.3

%

Information technology and related expense

4,354

 

 

4,736

 

 

(382

)

 

 

(8.1

)

Occupancy, net

3,639

 

 

3,504

 

 

135

 

 

 

3.9

 

Regulatory and outside services

1,476

 

 

1,469

 

 

7

 

 

 

0.5

 

Advertising and promotional

1,404

 

 

1,407

 

 

(3

)

 

 

(0.2

)

Deposit and loan transaction costs

638

 

 

693

 

 

(55

)

 

 

(7.9

)

Federal insurance premium

657

 

 

633

 

 

24

 

 

 

3.8

 

Office supplies and related expense

426

 

 

402

 

 

24

 

 

 

6.0

 

Other non-interest expense

1,053

 

 

891

 

 

162

 

 

 

18.2

 

Total non-interest expense

$

28,247

 

 

$

27,602

 

 

$

645

 

 

 

2.3

 

The increase in salaries and employee benefits was due primarily to an increase in incentive compensation. The decrease in information technology and related expense was due mainly to a decrease in professional services expense, primarily as a result of the completion of some projects in the prior quarter, and software licensing expense. Included in other non-interest expense in the prior quarter was a partial reversal of a write-down on a branch property sold by the Bank.

The Company's efficiency ratio was 55.55% for the current quarter compared to 57.73% for the prior quarter. The improvement in the efficiency ratio was due primarily to higher 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 lower value indicates that the financial institution is generating revenue with a proportionally lower level of expense, relative to the net interest margin 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.

 

For the Three Months Ended

 

 

 

 

 

September 30,

 

June 30,

 

Change Expressed in:

 

2021

 

2021

 

Dollars

 

Percent

 

(Dollars in thousands)

 

 

Income before income tax expense

$

23,923

 

 

$

22,896

 

 

$

1,027

 

 

4.5

%

Income tax expense

5,370

 

 

4,709

 

 

661

 

 

14.0

 

Net income

$

18,553

 

 

$

18,187

 

 

$

366

 

 

2.0

 

 

 

 

 

 

 

 

 

Effective Tax Rate

22.4

%

 

20.6

%

 

 

 

 

The increase in income tax expense was due primarily to higher pretax income, as well as a higher effective tax rate in the current quarter. The higher effective tax rate was due mainly to adjustments of permanent tax differences, specifically the Company's low income housing partnership amounts.

Comparison of Operating Results for the Years Ended September 30, 2021 and 2020

The Company recognized net income of $76.1 million, or $0.56 per share, for fiscal year 2021 compared to net income of $64.5 million, or $0.47 per share, for fiscal year 2020. The increase in net income was due primarily to recording a $22.3 million provision for credit losses during the prior year compared to recording a negative provision for credit losses of $8.5 million in the current year, partially offset by a decrease in net interest income and an increase in income tax expense. Net interest income decreased $14.3 million, or 7.6%, from the prior year to $175.0 million for the current year. The net interest margin decreased 22 basis points, from 2.12% for the prior year to 1.90% for the current year. The decrease in net interest income and net interest margin was due mainly to a decrease in asset yields, along with a change in asset mix as cash flows from the loan portfolio have been used to purchase lower yielding securities, partially offset by a decrease in the cost of deposits and borrowings.

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:

 

2021

 

2020

 

Dollars

 

Percent

 

(Dollars in thousands)

 

 

INTEREST AND DIVIDEND INCOME:

 

 

 

 

 

 

 

Loans receivable

$

229,897

 

 

$

270,494

 

 

$

(40,597

)

 

 

(15.0

)%

MBS

21,399

 

 

23,009

 

 

(1,610

)

 

 

(7.0

)

FHLB Stock

3,916

 

 

5,827

 

 

(1,911

)

 

 

(32.8

)

Investment securities

2,825

 

 

4,467

 

 

(1,642

)

 

 

(36.8

)

Cash and cash equivalents

144

 

 

1,181

 

 

(1,037

)

 

 

(87.8

)

Total interest and dividend income

$

258,181

 

 

$

304,978

 

 

$

(46,797

)

 

 

(15.3

)

The decrease in interest income on loans receivable was due mainly to a decrease in the weighted average yield, primarily in the one- to four-family loan portfolio. The decrease in the weighted average yield on the one- to four-family loan portfolio was due to endorsements and refinances to lower market rates, higher premium amortization related to correspondent one- to four-family loans due to high payoff and endorsement activity, along with adjustable-rate loans repricing to lower market rates, and the origination and purchase of new loans at lower market rates. Additionally, the average balance of the portfolio decreased compared to the prior year due primarily to a reduction in the correspondent one-to four-family loan portfolio. See "Average Balance Sheets" below.

The decrease in interest income on the MBS portfolio was due to a decrease in the weighted average yield as a result of purchases at lower market yields and the repricing of existing adjustable-rate MBS to lower market yields, partially offset by an increase in the average balance of the portfolio. Cash flows from the loan portfolio were used to purchase securities during the current fiscal year.

The decrease in dividend income on FHLB stock was due mainly to a decrease in the average balance of FHLB stock, along with a decrease in the dividend rate paid by FHLB. The average balance decreased as the Bank did not replace certain maturing FHLB advances between periods, which reduced the amount of FHLB stock owned by the Bank per FHLB requirements.

The decrease in interest income on investment securities was due to a decrease in the weighted average yield as a result of purchases at lower market yields, partially offset by an increase in the average balance of the portfolio.

The decrease in interest income on cash and cash equivalents was due primarily to a decrease in the yield earned on cash held at the Federal Reserve Bank of Kansas City.

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:

 

2021

 

2020

 

Dollars

 

Percent

 

(Dollars in thousands)

 

 

INTEREST EXPENSE:

 

 

 

 

 

 

 

Deposits

$

48,406

 

 

$

67,598

 

 

$

(19,192

)

 

 

(28.4

)%

Borrowings

34,774

 

 

48,045

 

 

(13,271

)

 

 

(27.6

)

Total interest expense

$

83,180

 

 

$

115,643

 

 

$

(32,463

)

 

 

(28.1

)

The decrease in interest expense on deposits was due mainly to a decrease in the weighted average rate paid on retail certificates of deposit, money market accounts, and wholesale certificates of deposit. Since the onset of the Coronavirus Disease 2019 ("COVID-19") pandemic, retail certificates of deposit have been repricing downward as they renew or are replaced at lower offered rates, and rates on money market accounts have been lowered.

The decrease in interest expense on borrowings was due primarily to a decrease in the average balance, as certain maturing FHLB advances and repurchase agreements were not replaced and the Bank paid down its FHLB line of credit with liquidity generated from the deposit portfolio. The decrease in interest expense on borrowings was also a result of lowering the cost of FHLB advances by prepaying certain advances during the current and prior years.

Provision for Credit Losses

The Bank recorded a negative provision for credit losses during the current year of $8.5 million, compared to a $22.3 million provision for credit losses during the prior year. The negative provision in the current fiscal year was composed of a $6.5 million decrease in the ACL for loans and a $2.0 million decrease in reserves for off-balance sheet credit exposures. The negative provision for credit losses in the current fiscal year was due primarily to favorable forecasted economic outlooks during the year, largely related to commercial loans. See additional discussion regarding the Bank's ACL and reserve for off-balance sheet credit exposures at September 30, 2021 in the "Asset Quality" section below.

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:

 

2021

 

2020

 

Dollars

 

Percent

 

(Dollars in thousands)

 

 

NON-INTEREST INCOME:

 

 

 

 

 

 

 

Deposit service fees

$

12,282

 

 

$

11,285

 

 

$

997

 

 

 

8.8

%

Gain on sale of Visa Class B shares

7,386

 

 

 

 

7,386

 

 

 

N/A

Insurance commissions

3,030

 

 

2,487

 

 

543

 

 

 

21.8

 

Other non-interest income

5,388

 

 

5,827

 

 

(439

)

 

 

(7.5

)

Total non-interest income

$

28,086

 

 

$

19,599

 

 

$

8,487

 

 

 

43.3

 

The increase in deposit service fees was due primarily to an increase in debit card income as a result of higher transaction volume. During the current year period, the Bank sold its Visa Class B Shares, resulting in a $7.4 million gain. The increase in insurance commissions was due primarily to higher annual contingent insurance commissions received in the current year period compared to the prior year period. The decrease in other non-interest income was primarily related to lower income from bank-owned life insurance ("BOLI"), due to a reduction in the yield as a result of lower market rates and reduced death benefit receipts.

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:

 

2021

 

2020

 

Dollars

 

Percent

 

(Dollars in thousands)

 

 

NON-INTEREST EXPENSE:

 

 

 

 

 

 

 

Salaries and employee benefits

$

56,002

 

 

$

52,996

 

 

$

3,006

 

 

 

5.7

%

Information technology and related expense

17,922

 

 

16,974

 

 

948

 

 

 

5.6

 

Occupancy, net

14,045

 

 

13,870

 

 

175

 

 

 

1.3

 

Regulatory and outside services

5,764

 

 

5,762

 

 

2

 

 

 

 

Advertising and promotional

5,133

 

 

4,889

 

 

244

 

 

 

5.0

 

Loss on interest rate swap termination

4,752

 

 

 

 

4,752

 

 

 

N/A

 

Deposit and loan transaction costs

2,761

 

 

2,890

 

 

(129

)

 

 

(4.5

)

Federal insurance premium

2,545

 

 

914

 

 

1,631

 

 

 

178.4

 

Office supplies and related expense

1,715

 

 

2,195

 

 

(480

)

 

 

(21.9

)

Other non-interest expense

4,930

 

 

5,514

 

 

(584

)

 

 

(10.6

)

Total non-interest expense

$

115,569

 

 

$

106,004

 

 

$

9,565

 

 

 

9.0

 

The increase in salaries and employee benefits was due primarily to an increase in incentive compensation, as well as an increase in loan commissions related to higher loan origination activity. The increase in information technology and related expense was due mainly to an increase in software licensing expense and professional services expense. During the current fiscal year, the Bank terminated interest rate swaps designated as cash flow hedges with a notional amount of $200.0 million resulting in the reclassification of unrealized losses totaling $4.8 million from accumulated other comprehensive income ("AOCI") into earnings. The increase in the federal insurance premium was due mainly to the Bank utilizing an assessment credit from the Federal Deposit Insurance Corporation ("FDIC") during the prior year period.

The Company's efficiency ratio was 56.91% for the current year compared to 50.74% for the prior year. The change in the efficiency ratio was due to higher non-interest expense and lower net interest income, partially offset by higher non-interest income. Management continues to strive to control operating costs. The increase in the efficiency ratio in the current year related to higher non-interest expense was due primarily to the loss on the termination of interest rate swaps, which was a unique transaction during the current year, along with higher federal insurance premium expense as the Bank utilized an assessment credit from the FDIC during the prior year.

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.

 

For the Year Ended

 

 

 

 

 

September 30,

 

Change Expressed in:

 

2021

 

2020

 

Dollars

 

Percent

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

Income before income tax expense

$

96,028

 

 

$

80,630

 

 

$

15,398

 

 

19.1

%

Income tax expense

19,946

 

 

16,090

 

 

3,856

 

 

24.0

 

Net income

$

76,082

 

 

$

64,540

 

 

$

11,542

 

 

17.9

 

 

 

 

 

 

 

 

 

Effective Tax Rate

20.8

%

 

20.0

%

 

 

 

 

The increase in income tax expense was due primarily to higher pretax income in the current year, as well as a higher effective tax rate compared to the prior year. The effective tax rate was lower in the prior year due primarily to a discrete benefit recognized in the prior year related to certain previously acquired BOLI policies. Management anticipates the effective income tax rate for fiscal year 2022 will be approximately 21% to 22%.

Financial Condition as of September 30, 2021

The following table summarizes the Company's financial condition at the dates indicated.

 

 

 

 

 

Annualized

 

 

 

 

 

September 30,

 

June 30,

 

Percent

 

September 30,

 

Percent

 

2021

 

2021

 

Change

 

2020

 

Change

 

(Dollars in thousands)

Total assets

$

9,631,246

 

 

$

9,649,665

 

 

(0.8

)%

 

$

9,487,218

 

 

1.5

%

Available-for-sale ("AFS") securities

2,014,608

 

 

2,015,705

 

 

(0.2

)

 

1,560,950

 

 

29.1

 

Loans receivable, net

7,081,142

 

 

7,033,827

 

 

2.7

 

 

7,202,851

 

 

(1.7

)

Deposits

6,597,396

 

 

6,638,294

 

 

(2.5

)

 

6,191,408

 

 

6.6

 

Borrowings

1,582,850

 

 

1,582,400

 

 

0.1

 

 

1,789,313

 

 

(11.5

)

Stockholders' equity

1,242,273

 

 

1,237,624

 

 

1.5

 

 

1,284,859

 

 

(3.3

)

Equity to total assets at end of period

12.9

%

 

12.8

%

 

 

 

13.5

%

 

 

Average number of basic shares outstanding

135,571

 

 

135,505

 

 

0.2

 

 

137,705

 

 

(1.5

)

Average number of diluted shares outstanding

135,571

 

 

135,537

 

 

0.1

 

 

137,705

 

 

(1.5

)

The following table summarizes loan originations and purchases and borrowing activity, along with the related weighted average rates, during the periods indicated.

 

For the Three Months Ended

 

For the Year Ended

 

September 30, 2021

 

September 30, 2021

 

Amount

 

Rate

 

Amount

 

Rate

 

(Dollars in thousands)

Loan originations and purchases

 

 

 

 

 

 

 

One- to four-family and consumer:

 

 

 

 

 

 

 

Originated

$

237,358

 

 

 

2.86

%

 

$

1,185,924

 

 

 

2.78

%

Purchased

184,562

 

 

 

2.68

 

 

689,527

 

 

 

2.64

 

 

 

 

 

 

 

 

 

Commercial:

 

 

 

 

 

 

 

Originated

43,021

 

 

 

4.08

 

 

251,530

 

 

 

3.43

 

Purchased

19,600

 

 

 

4.06

 

 

134,714

 

 

 

4.15

 

 

$

484,541

 

 

 

2.95

 

 

$

2,261,695

 

 

 

2.89

 

Borrowing activity

 

 

 

 

 

 

 

Maturities and prepayments

$

(340,000

)

 

 

2.73

 

 

$

(1,305,000

)

 

 

2.18

 

New borrowings

340,000

 

 

 

2.17

 

 

1,105,000

 

 

 

1.96

 

Comparison of September 30, 2021 to June 30, 2021

The decrease in total assets was due primarily to a decrease in cash and cash equivalents, partially offset by an increase in loans receivable, as excess operating cash was generally used to fund loan growth during the current quarter. The increase in loans receivable was mainly in the one- to four-family correspondent loan portfolio.

The decrease in deposits was due primarily to a decrease in the certificate of deposit portfolio, partially offset by an increase in money market accounts, as customers moved some of the funds from maturing certificates to more liquid investment options such as the Bank's money market accounts.

Comparison of September 30, 2021 to September 30, 2020

The increase in total assets was due mainly to an increase in securities, partially offset by decreases in cash and cash equivalents and loans receivable. Securities were purchased with cash flows from the loan portfolio and growth in the deposit portfolio that was not used to pay down maturing borrowings. The decrease in loans receivable was primarily in the one- to four-family correspondent loan portfolio.

The increase in total deposits was in non-maturity deposits, partially offset by a decrease in retail certificates of deposit. The decrease in total borrowings was due to not renewing borrowings that matured during the current year. Cash flows from deposit growth were used to pay off maturing borrowings.

Stockholders' Equity

During the current year, the Company paid cash dividends totaling $117.9 million and repurchased common stock totaling $1.5 million. The cash dividends paid during the current year totaled $0.87 per share and consisted of a $0.40 per share True Blue Capitol cash dividend, a $0.13 per share cash true-up dividend related to fiscal year 2020 earnings and four regular quarterly cash dividends of $0.085 per share. Given the state of economic uncertainty, the Company elected to defer the annual True Blue dividend in June 2020. In June 2021, the Company paid a True Blue Capitol cash dividend of $0.40 per share, which represented a $0.20 per share cash dividend for fiscal year 2020 and a $0.20 per share cash dividend for fiscal year 2021.

On October 19, 2021, the Company announced a regular quarterly cash dividend of $0.085 per share, or approximately $11.5 million, payable on November 19, 2021 to stockholders of record as of the close of business on November 5, 2021. On October 28, 2021, the Company announced a fiscal year 2021 cash true-up dividend of $0.22 per share, or approximately $29.9 million, related to fiscal year 2021 earnings. The $0.22 per share cash true-up dividend was determined by taking the difference between total earnings for fiscal year 2021 and total regular quarterly cash dividends paid during fiscal year 2021, divided by the number of shares outstanding. The cash true-up dividend is payable on December 3, 2021 to stockholders of record as of the close of business on November 19, 2021, and is the result of the Board of Directors' commitment to distribute to stockholders 100% of the annual earnings of the Company for fiscal year 2021. In the long run, management considers the Bank's equity to total assets ratio of at least 9% an appropriate level of capital. At September 30, 2021, this ratio was 11.5%.

At October 1, 2021, Capitol Federal Financial, Inc., at the holding company level, had $93.8 million in cash on deposit at the Bank. For fiscal year 2022, it is the intention of the Board of Directors to continue the payout of 100% of the Company's earnings to the Company's stockholders. 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.

There remains $44.7 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 Federal Reserve Bank's existing approval for the Company to repurchase shares expires in August 2022.

The following table presents a reconciliation of total to net shares outstanding as of September 30, 2021.

Total shares outstanding

138,832,284

 

Less unallocated Employee Stock Ownership Plan ("ESOP") shares and unvested restricted stock

(3,219,012)

 

Net shares outstanding

135,613,272

 

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. In April 2020, the federal bank regulatory agencies announced the issuance of two interim final rules, effective immediately, to provide temporary relief to community banking organizations. Under the interim final rules, the community bank leverage ratio ("CBLR") requirement is a minimum of 8.5% for calendar year 2021 and 9% thereafter. As of September 30, 2021, the Bank's CBLR was 11.5%, which exceeded the minimum requirement.

Capitol Federal Financial, Inc. is the holding company for the Bank. The Bank has 54 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.

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: potential adverse impacts of the ongoing COVID-19 pandemic and any governmental or societal responses thereto on economic conditions in the Company's local market areas and other market areas where the Bank has lending relationships, on other aspects of the Company's business operations and on financial markets; 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; 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 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,

 

2021

 

2021

 

2020

ASSETS:

 

 

 

 

 

Cash and cash equivalents (includes interest-earning deposits of $24,289, $74,346 and $172,430)

$

42,262

 

 

 

$

95,305

 

 

 

$

185,148

 

 

AFS securities, at estimated fair value (amortized cost of $2,008,456, $2,002,957 and $1,529,605)

2,014,608

 

 

 

2,015,705

 

 

 

1,560,950

 

 

Loans receivable, net (ACL of $19,823, $20,724 and $31,527)

7,081,142

 

 

 

7,033,827

 

 

 

7,202,851

 

 

FHLB stock, at cost

73,421

 

 

 

73,630

 

 

 

93,862

 

 

Premises and equipment, net

99,127

 

 

 

99,551

 

 

 

101,875

 

 

Income taxes receivable, net

 

 

 

891

 

 

 

 

 

Other assets

320,686

 

 

 

330,756

 

 

 

342,532

 

 

TOTAL ASSETS

$

9,631,246

 

 

 

$

9,649,665

 

 

 

$

9,487,218

 

 

 

 

 

 

 

 

LIABILITIES:

 

 

 

 

 

Deposits

$

6,597,396

 

 

 

$

6,638,294

 

 

 

$

6,191,408

 

 

Borrowings

1,582,850

 

 

 

1,582,400

 

 

 

1,789,313

 

 

Advance payments by borrowers for taxes and insurance

72,729

 

 

 

47,330

 

 

 

65,721

 

 

Income taxes payable, net

918

 

 

 

 

 

 

795

 

 

Deferred income tax liabilities, net

5,810

 

 

 

7,922

 

 

 

8,180

 

 

Other liabilities

129,270

 

 

 

136,095

 

 

 

146,942

 

 

Total liabilities

8,388,973

 

 

 

8,412,041

 

 

 

8,202,359

 

 

 

 

 

 

 

 

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, 138,832,284, 138,833,184 and 138,956,296 shares issued and outstanding as of September 30, 2021, June 30, 2021, and September 30, 2020, respectively

1,388

 

 

 

1,388

 

 

 

1,389

 

 

Additional paid-in capital

1,189,633

 

 

 

1,189,466

 

 

 

1,189,853

 

 

Unearned compensation, ESOP

(31,387

)

 

 

(31,801

)

 

 

(33,040

)

 

Retained earnings

98,944

 

 

 

91,909

 

 

 

143,162

 

 

AOCI, net of tax

(16,305

)

 

 

(13,338

)

 

 

(16,505

)

 

Total stockholders' equity

1,242,273

 

 

 

1,237,624

 

 

 

1,284,859

 

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

9,631,246

 

 

 

$

9,649,665

 

 

 

$

9,487,218

 

 

 

 

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,

 

2021

 

2021

 

2021

 

2020

INTEREST AND DIVIDEND INCOME:

 

 

 

 

 

 

 

Loans receivable

$

57,139

 

 

 

$

54,779

 

 

 

$

229,897

 

 

 

$

270,494

 

MBS

4,900

 

 

 

5,360

 

 

 

21,399

 

 

 

23,009

 

FHLB stock

952

 

 

 

944

 

 

 

3,916

 

 

 

5,827

 

Investment securities

750

 

 

 

763

 

 

 

2,825

 

 

 

4,467

 

Cash and cash equivalents

27

 

 

 

26

 

 

 

144

 

 

 

1,181

 

Total interest and dividend income

63,768

 

 

 

61,872

 

 

 

258,181

 

 

 

304,978

 

 

 

 

 

 

 

 

 

INTEREST EXPENSE:

 

 

 

 

 

 

 

Deposits

10,335

 

 

 

11,475

 

 

 

48,406

 

 

 

67,598

 

Borrowings

7,889

 

 

 

7,826

 

 

 

34,774

 

 

 

48,045

 

Total interest expense

18,224

 

 

 

19,301

 

 

 

83,180

 

 

 

115,643

 

 

 

 

 

 

 

 

 

NET INTEREST INCOME

45,544

 

 

 

42,571

 

 

 

175,001

 

 

 

189,335

 

 

 

 

 

 

 

 

 

PROVISION FOR CREDIT LOSSES

(1,323

)

 

 

(2,691

)

 

 

(8,510

)

 

 

22,300

 

NET INTEREST INCOME AFTER

 

 

 

 

 

 

 

PROVISION FOR CREDIT LOSSES

46,867

 

 

 

45,262

 

 

 

183,511

 

 

 

167,035

 

 

 

 

 

 

 

 

 

NON-INTEREST INCOME:

 

 

 

 

 

 

 

Deposit service fees

3,294

 

 

 

3,227

 

 

 

12,282

 

 

 

11,285

 

Gain on sale of Visa Class B shares

 

 

 

 

 

 

7,386

 

 

 

 

Insurance commissions

781

 

 

 

723

 

 

 

3,030

 

 

 

2,487

 

Other non-interest income

1,228

 

 

 

1,286

 

 

 

5,388

 

 

 

5,827

 

Total non-interest income

5,303

 

 

 

5,236

 

 

 

28,086

 

 

 

19,599

 

 

 

 

 

 

 

 

 

NON-INTEREST EXPENSE:

 

 

 

 

 

 

 

Salaries and employee benefits

14,600

 

 

 

13,867

 

 

 

56,002

 

 

 

52,996

 

Information technology and related expense

4,354

 

 

 

4,736

 

 

 

17,922

 

 

 

16,974

 

Occupancy, net

3,639

 

 

 

3,504

 

 

 

14,045

 

 

 

13,870

 

Regulatory and outside services

1,476

 

 

 

1,469

 

 

 

5,764

 

 

 

5,762

 

Advertising and promotional

1,404

 

 

 

1,407

 

 

 

5,133

 

 

 

4,889

 

Loss on interest rate swap termination

 

 

 

 

 

 

4,752

 

 

 

 

Deposit and loan transaction costs

638

 

 

 

693

 

 

 

2,761

 

 

 

2,890

 

Federal insurance premium

657

 

 

 

633

 

 

 

2,545

 

 

 

914

 

Office supplies and related expense

426

 

 

 

402

 

 

 

1,715

 

 

 

2,195

 

Other non-interest expense

1,053

 

 

 

891

 

 

 

4,930

 

 

 

5,514

 

Total non-interest expense

28,247

 

 

 

27,602

 

 

 

115,569

 

 

 

106,004

 

INCOME BEFORE INCOME TAX EXPENSE

23,923

 

 

 

22,896

 

 

 

96,028

 

 

 

80,630

 

INCOME TAX EXPENSE

5,370

 

 

 

4,709

 

 

 

19,946

 

 

 

16,090

 

NET INCOME

$

18,553

 

 

 

$

18,187

 

 

 

$

76,082

 

 

 

$

64,540

 

 

Average Balance Sheets

The following tables present the average balances of our assets, liabilities, and stockholders' equity, and the related weighted average yields and rates (annualized for the three-month periods) 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, 2021

 

June 30, 2021

 

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

$

3,974,876

 

 

$

32,979

 

 

3.32

%

 

$

3,982,990

 

 

$

33,727

 

 

3.39

%

Correspondent purchased

2,024,372

 

 

12,942

 

 

2.56

 

 

1,971,209

 

 

10,367

 

 

2.10

 

Bulk purchased

177,233

 

 

730

 

 

1.65

 

 

185,198

 

 

826

 

 

1.78

 

Total one- to four-family loans

6,176,481

 

 

46,651

 

 

3.02

 

 

6,139,397

 

 

44,920

 

 

2.93

 

Commercial loans

811,731

 

 

9,378

 

 

4.52

 

 

805,721

 

 

8,744

 

 

4.29

 

Consumer loans

95,449

 

 

1,110

 

 

4.61

 

 

96,980

 

 

1,115

 

 

4.61

 

Total loans receivable(1)

7,083,661

 

 

57,139

 

 

3.21

 

 

7,042,098

 

 

54,779

 

 

3.11

 

MBS(2)

1,510,421

 

 

4,900

 

 

1.30

 

 

1,529,679

 

 

5,360

 

 

1.40

 

Investment securities(2)(3)

500,104

 

 

750

 

 

0.60

 

 

533,076

 

 

763

 

 

0.57

 

FHLB stock

72,699

 

 

952

 

 

5.19

 

 

73,689

 

 

944

 

 

5.14

 

Cash and cash equivalents

69,501

 

 

27

 

 

0.15

 

 

97,890

 

 

26

 

 

0.11

 

Total interest-earning assets

9,236,386

 

 

63,768

 

 

2.75

 

 

9,276,432

 

 

61,872

 

 

2.66

 

Other non-interest-earning assets

445,371

 

 

 

 

 

 

430,639

 

 

 

 

 

Total assets

$

9,681,757

 

 

 

 

 

 

$

9,707,071

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and stockholders' equity:

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

Checking

$

1,563,501

 

 

183

 

 

0.05

 

 

$

1,546,665

 

 

182

 

 

0.05

 

Savings

514,253

 

 

71

 

 

0.05

 

 

513,528

 

 

72

 

 

0.06

 

Money market

1,729,080

 

 

907

 

 

0.21

 

 

1,646,970

 

 

998

 

 

0.24

 

Retail/business certificates

2,578,351

 

 

9,003

 

 

1.39

 

 

2,678,914

 

 

9,938

 

 

1.49

 

Wholesale certificates

246,739

 

 

171

 

 

0.27

 

 

251,571

 

 

285

 

 

0.45

 

Total deposits

6,631,924

 

 

10,335

 

 

0.62

 

 

6,637,648

 

 

11,475

 

 

0.69

 

Borrowings(4)

1,582,554

 

 

7,889

 

 

1.97

 

 

1,582,905

 

 

7,826

 

 

1.97

 

Total interest-bearing liabilities

8,214,478

 

 

18,224

 

 

0.88

 

 

8,220,553

 

 

19,301

 

 

0.94

 

Other non-interest-bearing liabilities

220,294

 

 

 

 

 

 

203,532

 

 

 

 

 

Stockholders' equity

1,246,985

 

 

 

 

 

 

1,282,986

 

 

 

 

 

Total liabilities and stockholders' equity

$

9,681,757

 

 

 

 

 

 

$

9,707,071

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income(5)

 

 

$

45,544

 

 

 

 

 

 

$

42,571

 

 

 

Net interest rate spread(6)

 

 

 

 

1.87

 

 

 

 

 

 

1.72

 

Net interest-earning assets

$

1,021,908

 

 

 

 

 

 

$

1,055,879

 

 

 

 

 

Net interest margin(7)

 

 

 

 

1.97

 

 

 

 

 

 

1.84

 

Ratio of interest-earning assets to interest-bearing liabilities

 

1.12

x

 

 

 

 

 

1.13

x

 

 

 

 

 

 

 

 

 

 

 

 

Selected performance ratios:

 

 

 

 

 

 

 

 

 

 

Return on average assets (annualized)

 

 

 

0.77

%

 

 

 

 

 

0.75

%

Return on average equity (annualized)

 

 

 

5.95

 

 

 

 

 

 

5.67

 

Average equity to average assets

 

 

 

 

12.88

 

 

 

 

 

 

13.22

 

Operating expense ratio(8)

 

 

 

 

1.17

 

 

 

 

 

 

1.14

 

Efficiency ratio(9)

 

 

 

55.55

 

 

 

 

 

 

57.73

 

 
 

 

For the Year Ended September 30,

 

2021

 

2020

 

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

$

3,966,059

 

 

$

137,461

 

 

3.47

%

 

$

3,950,425

 

 

$

150,526

 

 

3.81

%

Correspondent purchased

2,010,823

 

 

48,066

 

 

2.39

 

 

2,348,120

 

 

70,112

 

 

2.99

 

Bulk purchased

191,029

 

 

3,601

 

 

1.89

 

 

230,720

 

 

6,065

 

 

2.63

 

Total one- to four-family loans

6,167,911

 

 

189,128

 

 

3.07

 

 

6,529,265

 

 

226,703

 

 

3.47

 

Commercial loans

788,702

 

 

36,085

 

 

4.51

 

 

785,127

 

 

37,320

 

 

4.68

 

Consumer loans

101,277

 

 

4,684

 

 

4.63

 

 

123,334

 

 

6,471

 

 

5.25

 

Total loans receivable(1)

7,057,890

 

 

229,897

 

 

3.25

 

 

7,437,726

 

 

270,494

 

 

3.63

 

MBS(2)

1,446,466

 

 

21,399

 

 

1.48

 

 

954,197

 

 

23,009

 

 

2.41

 

Investment securities(2)(3)

482,641

 

 

2,825

 

 

0.59

 

 

270,683

 

 

4,467

 

 

1.65

 

FHLB stock

77,250

 

 

3,916

 

 

5.07

 

 

100,251

 

 

5,827

 

 

5.81

 

Cash and cash equivalents

131,798

 

 

144

 

 

0.11

 

 

179,142

 

 

1,181

 

 

0.65

 

Total interest-earning assets

9,196,045

 

 

258,181

 

 

2.80

 

 

8,941,999

 

 

304,978

 

 

3.40

 

Other non-interest-earning assets

443,724

 

 

 

 

 

 

461,614

 

 

 

 

 

Total assets

$

9,639,769

 

 

 

 

 

 

$

9,403,613

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and stockholders' equity:

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

Checking

$

1,482,698

 

 

772

 

 

0.05

 

 

$

1,180,110

 

 

762

 

 

0.06

 

Savings

487,146

 

 

280

 

 

0.06

 

 

388,662

 

 

292

 

 

0.08

 

Money market

1,598,838

 

 

4,128

 

 

0.26

 

 

1,252,992

 

 

6,647

 

 

0.53

 

Retail/business certificates

2,688,811

 

 

42,034

 

 

1.56

 

 

2,716,945

 

 

55,238

 

 

2.03

 

Wholesale certificates

252,623

 

 

1,192

 

 

0.47

 

 

282,947

 

 

4,659

 

 

1.65

 

Total deposits

6,510,116

 

 

48,406

 

 

0.74

 

 

5,821,656

 

 

67,598

 

 

1.16

 

Borrowings(4)

1,636,399

 

 

34,774

 

 

2.11

 

 

2,065,966

 

 

48,045

 

 

2.31

 

Total interest-bearing liabilities

8,146,515

 

 

83,180

 

 

1.02

 

 

7,887,622

 

 

115,643

 

 

1.46

 

Other non-interest-bearing liabilities

219,328

 

 

 

 

 

 

203,990

 

 

 

 

 

Stockholders' equity

1,273,926

 

 

 

 

 

 

1,312,001

 

 

 

 

 

Total liabilities and stockholders' equity

$

9,639,769

 

 

 

 

 

 

$

9,403,613

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income(5)

 

 

$

175,001

 

 

 

 

 

 

$

189,335

 

 

 

Net interest rate spread(6)

 

 

 

 

1.78

 

 

 

 

 

 

1.94

 

Net interest-earning assets

$

1,049,530

 

 

 

 

 

 

$

1,054,377

 

 

 

 

 

Net interest margin(7)

 

 

 

 

1.90

 

 

 

 

 

 

2.12

 

Ratio of interest-earning assets to interest-bearing liabilities

 

1.13

x

 

 

 

 

 

1.13

x

 

 

 

 

 

 

 

 

 

 

 

 

Selected performance ratios:

 

 

 

 

 

 

 

 

 

 

 

Return on average assets

 

 

 

0.79

%

 

 

 

 

 

0.69

%

Return on average equity

 

 

 

5.97

 

 

 

 

 

 

4.92

 

Average equity to average assets

 

 

 

 

13.22

 

 

 

 

 

 

13.95

 

Operating expense ratio(8)

 

 

 

 

1.20

 

 

 

 

 

 

1.13

 

Efficiency ratio(9)

 

 

 

 

56.91

 

 

 

 

 

 

50.74

 

 

(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 $4.9 million and $5.1 million for the quarters ended September 30, 2021 and June 30, 2021, respectively, and $6.6 million and $13.8 million for the years ended September 30, 2021 and September 30, 2020, respectively.

(4)

The FHLB advance amounts and rates included in this line include the effect of interest rate swaps and are net of deferred prepayment penalties.

(5)

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.

(6)

Net interest rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.

(7)

Net interest margin represents annualized net interest income as a percentage of average interest-earning assets.

(8)

The operating expense ratio represents annualized non-interest expense as a percentage of average assets.

(9)

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.

Loan Portfolio

The following table presents information related to the composition of our loan portfolio in terms of dollar amounts, weighted average rates, and percentages as of the dates indicated.

 

September 30, 2021

 

June 30, 2021

 

September 30, 2020

 

 

 

 

 

% of

 

 

 

 

 

% of

 

 

 

 

 

% of

 

Amount

 

Rate

 

Total

 

Amount

 

Rate

 

Total

 

Amount

 

Rate

 

Total

 

(Dollars in thousands)

One- to four-family:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated

$

3,956,064

 

 

 

3.18

%

 

55.8

%

 

$

3,977,129

 

 

 

3.23

%

 

56.4

%

 

$

3,937,310

 

 

 

3.50

%

 

54.5

%

Correspondent purchased

2,003,477

 

 

 

3.02

 

 

28.2

 

 

1,953,185

 

 

 

3.09

 

 

27.7

 

 

2,101,082

 

 

 

3.49

 

 

29.1

 

Bulk purchased

173,662

 

 

 

1.65

 

 

2.4

 

 

179,019

 

 

 

1.90

 

 

2.5

 

 

208,427

 

 

 

2.41

 

 

2.9

 

Construction

39,142

 

 

 

2.82

 

 

0.6

 

 

30,325

 

 

 

2.96

 

 

0.4

 

 

34,593

 

 

 

3.30

 

 

0.5

 

Total

6,172,345

 

 

 

3.09

 

 

87.0

 

 

6,139,658

 

 

 

3.14

 

 

87.0

 

 

6,281,412

 

 

 

3.46

 

 

87.0

 

Commercial:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

676,908

 

 

 

4.00

 

 

9.6

 

 

680,664

 

 

 

3.99

 

 

9.7

 

 

626,588

 

 

 

4.29

 

 

8.7

 

Commercial and industrial

66,497

 

 

 

3.83

 

 

0.9

 

 

73,713

 

 

 

3.24

 

 

1.0

 

 

97,614

 

 

 

2.79

 

 

1.4

 

Construction

85,963

 

 

 

4.03

 

 

1.2

 

 

60,614

 

 

 

4.11

 

 

0.9

 

 

105,458

 

 

 

4.04

 

 

1.4

 

Total

829,368

 

 

 

3.99

 

 

11.7

 

 

814,991

 

 

 

3.93

 

 

11.6

 

 

829,660

 

 

 

4.08

 

 

11.5

 

Consumer loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Home equity

86,274

 

 

 

4.60

 

 

1.2

 

 

88,587

 

 

 

4.63

 

 

1.3

 

 

103,838

 

 

 

4.66

 

 

1.4

 

Other

8,086

 

 

 

4.19

 

 

0.1

 

 

8,389

 

 

 

4.26

 

 

0.1

 

 

10,086

 

 

 

4.40

 

 

0.1

 

Total

94,360

 

 

 

4.57

 

 

1.3

 

 

96,976

 

 

 

4.60

 

 

1.4

 

 

113,924

 

 

 

4.64

 

 

1.5

 

Total loans receivable

7,096,073

 

 

 

3.21

 

 

100.0

%

 

7,051,625

 

 

 

3.26

 

 

100.0

%

 

7,224,996

 

 

 

3.55

 

 

100.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ACL

19,823

 

 

 

 

 

 

 

20,724

 

 

 

 

 

 

 

31,527

 

 

 

 

 

 

Discounts/unearned loan fees

29,556

 

 

 

 

 

 

 

30,593

 

 

 

 

 

 

 

29,190

 

 

 

 

 

 

Premiums/deferred costs

(34,448

)

 

 

 

 

 

 

(33,519

)

 

 

 

 

 

 

(38,572

)

 

 

 

 

 

Total loans receivable, net

$

7,081,142

 

 

 

 

 

 

 

$

7,033,827

 

 

 

 

 

 

 

$

7,202,851

 

 

 

 

 

 

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, discounts/unearned loan fees, 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 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, 2021

 

September 30, 2021

 

Amount

 

Rate

 

Amount

 

Rate

 

(Dollars in thousands)

Beginning balance

$

7,051,625

 

 

 

3.26

%

 

$

7,224,996

 

 

 

3.55

%

Originated and refinanced

280,379

 

 

 

3.05

 

 

1,437,454

 

 

 

2.89

 

Purchased and participations

204,162

 

 

 

2.81

 

 

824,241

 

 

 

2.89

 

Change in undisbursed loan funds

(6,656

)

 

 

 

 

(174,416

)

 

 

 

Repayments

(433,374

)

 

 

 

 

(2,215,585

)

 

 

 

Principal recoveries/(charge-offs), net

4

 

 

 

 

 

(478

)

 

 

 

Other

(67

)

 

 

 

 

(139

)

 

 

 

Ending balance

$

7,096,073

 

 

 

3.21

 

 

$

7,096,073

 

 

 

3.21

 

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 credit score, weighted average loan-to-value ("LTV") ratio, and average balance per loan as of September 30, 2021. Credit scores were updated in September 2021 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

 

Score

 

LTV

 

Balance

 

(Dollars in thousands)

Originated

$

3,956,064

 

 

64.5

%

 

771

 

 

61

%

 

$

152

 

Correspondent purchased

2,003,477

 

 

32.7

 

 

765

 

 

64

 

 

407

 

Bulk purchased

173,662

 

 

2.8

 

 

771

 

 

58

 

 

294

 

 

$

6,133,203

 

 

100.0

%

 

769

 

 

62

 

 

194

 

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 Year Ended

 

September 30, 2021

 

September 30, 2021

 

 

 

 

 

 

 

Credit

 

 

 

 

 

 

 

Credit

 

Amount

 

Rate

 

LTV

 

Score

 

Amount

 

Rate

 

LTV

 

Score

 

(Dollars in thousands)

Originated

$

220,353

 

 

2.74

%

 

72

%

 

763

 

 

$

1,121,829

 

 

2.68

%

 

70

%

 

767

 

Correspondent purchased

184,562

 

 

2.68

 

 

71

 

 

767

 

 

689,527

 

 

2.64

 

 

69

 

 

772

 

 

$

404,915

 

 

2.71

 

 

71

 

 

765

 

 

$

1,811,356

 

 

2.66

 

 

70

 

 

769

 

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, 2021, along with associated weighted average rates.

 

Amount

 

Rate

 

(Dollars in thousands)

Originate/refinance

$

87,117

 

 

2.78

%

Correspondent

95,395

 

 

2.54

 

 

$

182,512

 

 

2.65

 

As of September 30, 2021, there were $2.7 million of one- to-four family loans with modifications under the Bank's program to support and provide relief to borrowers during the COVID-19 pandemic ("COVID-19 loan modifications") that were still in their deferral period. See "Asset Quality" below for additional information regarding the performance of loans that have exited the deferral period.

Commercial Loans: During the current year, the Bank originated $251.5 million of commercial loans, including $22.8 million of Paycheck Protection Program ("PPP") loans, and entered into commercial loan participations totaling $134.7 million. The Bank also processed commercial loan disbursements, excluding lines of credit, of approximately $270.0 million at a weighted average rate of 3.59%. Additionally, during the current year, $63.5 million of PPP loans were paid off, primarily by the U.S. Small Business Administration ("SBA") following completion of the loan forgiveness process.

The following table presents the Bank's commercial real estate and commercial construction loans and loan commitments by type of primary collateral, as of September 30, 2021. 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.

 

 

 

Unpaid

 

Undisbursed

 

Gross Loan

 

Outstanding

 

 

 

% of

 

Count

 

Principal

 

Amount

 

Amount

 

Commitments

 

Total

 

Total

 

 

 

(Dollars in thousands)

Senior housing

34

 

 

$

229,082

 

 

$

36,202

 

 

$

265,284

 

 

$

30,500

 

 

$

295,784

 

 

27.8

%

Retail building

135

 

 

158,834

 

 

49,705

 

 

208,539

 

 

11,622

 

 

220,161

 

 

20.7

 

Hotel

10

 

 

137,301

 

 

57,364

 

 

194,665

 

 

 

 

194,665

 

 

18.3

 

Office building

92

 

 

49,608

 

 

60,379

 

 

109,987

 

 

 

 

109,987

 

 

10.3

 

One- to four-family property

385

 

 

61,717

 

 

7,457

 

 

69,174

 

 

1,453

 

 

70,627

 

 

6.6

 

Single use building

25

 

 

42,155

 

 

4,873

 

 

47,028

 

 

21,300

 

 

68,328

 

 

6.4

 

Multi-family

38

 

 

53,173

 

 

13,026

 

 

66,199

 

 

690

 

 

66,889

 

 

6.3

 

Other

101

 

 

31,001

 

 

5,166

 

 

36,167

 

 

1,502

 

 

37,669

 

 

3.6

 

 

820

 

 

$

762,871

 

 

$

234,172

 

 

$

997,043

 

 

$

67,067

 

 

$

1,064,110

 

 

100.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average rate

 

 

4.00

%

 

4.03

%

 

4.01

%

 

3.73

%

 

3.99

%

 

 

The following table summarizes the Bank's commercial real estate and commercial construction loans and loan commitments by state as of September 30, 2021.

 

 

 

Unpaid

 

Undisbursed

 

Gross Loan

 

Outstanding

 

 

 

% of

 

Count

 

Principal

 

Amount

 

Amount

 

Commitments

 

Total

 

Total

 

 

 

(Dollars in thousands)

Kansas

636

 

 

$

327,419

 

 

$

21,416

 

 

$

348,835

 

 

$

44,302

 

 

$

393,137

 

 

36.9

%

Texas

11

 

 

135,644

 

 

137,480

 

 

273,124

 

 

 

 

273,124

 

 

25.7

 

Missouri

146

 

 

205,989

 

 

26,052

 

 

232,041

 

 

21,265

 

 

253,306

 

 

23.8

 

Colorado

7

 

 

16,087

 

 

20,012

 

 

36,099

 

 

 

 

36,099

 

 

3.4

 

Arkansas

3

 

 

12,143

 

 

21,620

 

 

33,763

 

 

 

 

33,763

 

 

3.2

 

Nebraska

6

 

 

33,464

 

 

4

 

 

33,468

 

 

 

 

33,468

 

 

3.1

 

Other

11

 

 

32,125

 

 

7,588

 

 

39,713

 

 

1,500

 

 

41,213

 

 

3.9

 

 

820

 

 

$

762,871

 

 

$

234,172

 

 

$

997,043

 

 

$

67,067

 

 

$

1,064,110

 

 

100.0

%

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, 2021.

 

Count

 

Amount

 

(Dollars in thousands)

Greater than $30 million

4

 

 

$

180,500

 

>$15 to $30 million

16

 

 

363,129

 

>$10 to $15 million

7

 

 

85,141

 

>$5 to $10 million

15

 

 

96,776

 

$1 to $5 million

111

 

 

251,794

 

Less than $1 million

1,324

 

 

194,423

 

 

1,477

 

 

$

1,171,763

 

As of September 30, 2021, there were commercial loans with an aggregate gross balance, including undisbursed amounts, of $146.4 million with COVID-19 loan modifications that were still in their deferral period. There were $237.2 million of commercial loans with COVID-19 loan modifications that were out of their deferral period by September 30, 2021. See "Asset Quality" below for additional information regarding the performance of loans that have exited the deferral period.

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. Loans subject to payment forbearance under the Bank's COVID-19 loan modification program are not reported as delinquent during the forbearance time period. Of the loans 30 to 89 days delinquent at September 30, 2021, approximately 61% 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. In late March 2020, the Bank suspended the initiation of foreclosure proceedings for owner-occupied one- to four-family loans. At September 30, 2021, there were $7.4 million of non-performing one- to four-family loans for which foreclosure proceedings either had been initiated prior to the foreclosure suspension or would have been initiated if the foreclosure suspension were not in place.

 

Loans Delinquent for 30 to 89 Days at:

 

September 30, 2021

 

June 30, 2021

 

March 31, 2021

 

December 31, 2020

 

September 30, 2020

 

Number

 

Amount

 

Number

 

Amount

 

Number

 

Amount

 

Number

 

Amount

 

Number

 

Amount

 

(Dollars in thousands)

One- to four-family:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated

48

 

 

$

4,156

 

 

51

 

 

$

5,141

 

 

45

 

 

$

4,151

 

 

62

 

 

$

5,844

 

 

42

 

 

$

3,012

 

Correspondent purchased

7

 

 

2,590

 

 

9

 

 

3,650

 

 

9

 

 

2,910

 

 

13

 

 

4,694

 

 

8

 

 

3,123

 

Bulk purchased

4

 

 

541

 

 

6

 

 

958

 

 

5

 

 

352

 

 

9

 

 

1,750

 

 

12

 

 

2,532

 

Commercial

2

 

 

37

 

 

1

 

 

35

 

 

5

 

 

806

 

 

8

 

 

1,047

 

 

2

 

 

45

 

Consumer

25

 

 

498

 

 

25

 

 

354

 

 

17

 

 

287

 

 

30

 

 

515

 

 

26

 

 

398

 

 

86

 

 

$

7,822

 

 

92

 

 

$

10,138

 

 

81

 

 

$

8,506

 

 

122

 

 

$

13,850

 

 

90

 

 

$

9,110

 

30 to 89 days delinquent loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

to total loans receivable, net

 

0.11

%

 

 

 

0.14

%

 

 

 

0.12

%

 

 

 

0.20

%

 

 

 

0.13

%

 

 

Non-Performing Loans and OREO at:

 

September 30, 2021

 

June 30, 2021

 

March 31, 2021

 

December 31, 2020

 

September 30, 2020

 

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

50

 

 

$

3,693

 

 

53

 

 

$

3,696

 

 

55

 

 

$

4,433

 

 

51

 

 

$

4,370

 

 

51

 

 

$

4,362

 

Correspondent purchased

10

 

 

3,210

 

 

12

 

 

4,230

 

 

10

 

 

3,749

 

 

9

 

 

3,371

 

 

6

 

 

2,397

 

Bulk purchased

9

 

 

2,974

 

 

7

 

 

2,596

 

 

10

 

 

3,172

 

 

13

 

 

3,724

 

 

12

 

 

2,903

 

Commercial

6

 

 

1,214

 

 

7

 

 

1,278

 

 

6

 

 

1,068

 

 

5

 

 

820

 

 

5

 

 

1,360

 

Consumer

21

 

 

498

 

 

23

 

 

445

 

 

26

 

 

531

 

 

26

 

 

473

 

 

14

 

 

304

 

 

96

 

 

11,589

 

 

102

 

 

12,245

 

 

107

 

 

12,953

 

 

104

 

 

12,758

 

 

88

 

 

11,326

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans 90 or more days delinquent or in foreclosure