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Capitol Federal Financial, Inc. (CFFN) SEC Filing 10-K Annual Report for the fiscal year ending Saturday, September 30, 2023

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Capitol Federal Financial, Inc.

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CIK: 1490906 Ticker: CFFN


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NEWS RELEASE
FOR IMMEDIATE RELEASE
October 25, 2023
CAPITOL FEDERAL FINANCIAL, INC.®
REPORTS STRATEGIC SECURITIES TRANSACTION AND FISCAL YEAR 2023 RESULTS

Topeka, KS - 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;
1
The following information was filed by Capitol Federal Financial, Inc. (CFFN) on Wednesday, October 25, 2023 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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Inside Capitol Federal Financial, Inc.'s 10-K Annual Report:

Financial Statements, Disclosures and Schedules

Inside this 10-K Annual Report

Audit Information
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Consolidated Balance Sheets
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Consolidated Statements Of Cash Flows
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Earnings Per Share
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Employee Stock Ownership Plan
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Employee Stock Ownership Plan (Summary Of Shares Held In The Esop Trust) (Details)
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Income Taxes
Income Taxes (Components Of Net Deferred Income Tax (Liabilities) Assets) (Details)
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Loans Receivable And Allowance For Credit Losses
Loans Receivable And Allowance For Credit Losses (Allowance For Credit Losses) (Details)
Loans Receivable And Allowance For Credit Losses (Classified Loans) (Details)
Loans Receivable And Allowance For Credit Losses (Delinquent Loans) (Details)
Loans Receivable And Allowance For Credit Losses (Loans, Nonaccrual) (Details)
Loans Receivable And Allowance For Credit Losses (Loans, Past Due Aging Analysis) (Details)
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Loans Receivable And Allowance For Credit Losses (Troubled Debt Restructurings On Financing Receivables That Subsequently Defaulted) (Details)
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Low Income Housing Partnerships
Low Income Housing Partnerships (Narrative) (Details)
Parent Company Financial Information (Parent Company Only)
Parent Company Financial Information (Parent Company Only) (Schedule Of Balance Sheets) (Details)
Parent Company Financial Information (Parent Company Only) (Schedule Of Statements Of Cash Flows) (Details)
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Summary Of Significant Accounting Policies (Policies)
Ticker: CFFN
CIK: 1490906
Form Type: 10-K Annual Report
Accession Number: 0001490906-23-000028
Submitted to the SEC: Wed Nov 29 2023 2:29:45 PM EST
Accepted by the SEC: Wed Nov 29 2023
Period: Saturday, September 30, 2023
Industry: Savings Institution Federally Chartered

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