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Mar 31, 2023
Capitol Federal Q2 2023 Earnings Report
Capitol Federal Financial's financial performance decreased due to lower net interest income and net interest margin compression.
Key Takeaways
Capitol Federal Financial, Inc. reported a net income of $14.2 million, or $0.11 per share, for the quarter ended March 31, 2023. The decrease in net income was primarily due to lower net interest income. The net interest margin decreased to 1.56%. Annualized loan growth was 9.0%.
Net income was $14.2 million.
Basic and diluted earnings per share were $0.11.
Net interest margin was 1.56% (1.71% excluding the effects of the leverage strategy).
Annualized loan growth was 9.0%.
Capitol Federal
Capitol Federal
Forward Guidance
Net interest margin compression is anticipated to continue, and the margin is expected to compress more in the near term. Management intends to implement a new core processing system for the Bank by September 2023.
Positive Outlook
- Loan growth is occurring at market interest rates that are higher than the overall loan portfolio rate.
- Management continues to evaluate funding options and plans to continue using shorter term advances, as necessary, with the anticipation that when rates begin to decrease, those borrowings can be repaid or repriced to lower cost alternatives.
- Management intends to implement a new core processing system for the Bank by September 2023.
- The digital transformation is expected to better position the Bank for the future and allow for the introduction of new products and services to enhance customer experiences.
- In fiscal year 2024, information technology and related expense is expected to decrease approximately $3 million from fiscal year 2023 levels due to a reduction in professional service costs.
Challenges Ahead
- Net interest margin compression is anticipated to continue, and the margin is expected to compress more in the near term, due to the shape of the yield curve and the pace at which liabilities are repricing compared to assets.
- Lower costing deposits being replaced with higher costing borrowings in order to fund loan growth.
- Deposit funds moving from lower costing deposit accounts to certificates of deposit.
- Subsequent to March 31, 2023, management increased the rates offered on the Bank's money market accounts in response to competitor pricing, is expected to reduce the net interest margin by approximately 20 basis points during the June 2023 quarter, excluding the impact of the leverage strategy.
- Management anticipates information technology and related expenses will be approximately $5 million higher in fiscal year 2023 compared to fiscal year 2022 due to the digital transformation.