Capitol Federal Financial, Inc. (CFFN) Bundle
Understanding Capitol Federal Financial, Inc. (CFFN) Revenue Streams
Understanding Capitol Federal Financial, Inc. (CFFN)’s Revenue Streams
Capitol Federal Financial, Inc. generates revenue primarily through interest income from its loan portfolio and investment securities. The main revenue streams include:
- Loans Receivable: The company has a diverse loan portfolio, including one- to four-family loans, commercial loans, and consumer loans.
- Investment Securities: Revenue is also derived from mortgage-backed securities (MBS) and other investment securities.
Revenue Breakdown by Source
As of September 30, 2024, the breakdown of revenue sources is as follows:
| Revenue Source | Amount (in thousands) | Percentage of Total Revenue |
|---|---|---|
| Loans Receivable | 308,707 | 81.8% |
| Mortgage-Backed Securities | 33,650 | 8.9% |
| Investment Securities | 8,749 | 2.3% |
| FHLB Stock | 10,009 | 2.6% |
| Other Sources | 15,728 | 4.0% |
Year-over-Year Revenue Growth
The following table summarizes the year-over-year revenue growth rate:
| Fiscal Year Ended | Total Revenue (in thousands) | Year-over-Year Growth Rate |
|---|---|---|
| September 30, 2023 | 359,789 | - |
| September 30, 2024 | 376,843 | 4.7% |
Contribution of Different Business Segments to Overall Revenue
The contribution of different business segments to overall revenue for the year ended September 30, 2024, is illustrated below:
| Segment | Revenue Contribution (in thousands) | Percentage Contribution |
|---|---|---|
| Residential Loans | 221,503 | 58.7% |
| Commercial Loans | 78,042 | 20.7% |
| Consumer Loans | 9,162 | 2.4% |
| Investment Securities | 8,749 | 2.3% |
| Other Revenue | 59,387 | 15.8% |
Significant Changes in Revenue Streams
During fiscal year 2024, notable changes in revenue streams included:
- Increase in interest income from loans receivable, which rose to $308,707 thousand, representing a 10.2% increase from the previous year.
- Significant growth in MBS income, which increased by 81.7% to $33,650 thousand.
- Reduction in income from cash and cash equivalents, which decreased by 64.1% to $15,728 thousand due to changes in the leverage strategy.
A Deep Dive into Capitol Federal Financial, Inc. (CFFN) Profitability
A Deep Dive into Capitol Federal Financial, Inc. Profitability
Gross Profit Margin: For the year ended September 30, 2024, the gross profit margin was 3.8%, compared to 3.5% for the year ended September 30, 2023.
Operating Profit Margin: The operating profit margin for fiscal year 2024 stood at 0.51%, a significant increase from (1.33%) in the previous fiscal year.
Net Profit Margin: The net profit margin for the year ended September 30, 2024 was 0.29%, up from (0.76%) for the year ended September 30, 2023.
Trends in Profitability Over Time
Over the past two fiscal years, the company has shown a recovery in profitability metrics:
- Net Income: For 2024, net income reached $38.0 million, a turnaround from a net loss of ($101.7 million) in 2023.
- Earnings Per Share: EPS for 2024 was $0.29, compared to ($0.76) in 2023.
Comparison of Profitability Ratios with Industry Averages
| Metric | Capitol Federal Financial, Inc. | Industry Average |
|---|---|---|
| Return on Average Assets (ROAA) | 0.51% | 0.40% |
| Return on Average Equity (ROAE) | 4.69% | 4.00% |
| Efficiency Ratio | 59.29% | 60.00% |
Analysis of Operational Efficiency
The efficiency ratio improved significantly, reflecting better cost management:
- Current Efficiency Ratio: 59.29% for the year ended September 30, 2024, down from 62.07% in the previous quarter.
- Operating Expense Ratio: The operating expense ratio for 2024 was 1.13%, compared to 1.17% in 2023.
Overall, the company has effectively managed its costs while improving net interest income, which contributed to the enhanced profitability metrics.
Debt vs. Equity: How Capitol Federal Financial, Inc. (CFFN) Finances Its Growth
Debt vs. Equity: How Capitol Federal Financial, Inc. Finances Its Growth
Overview of Debt Levels
As of September 30, 2024, Capitol Federal Financial, Inc. reported total liabilities of $8.50 billion, a decrease of $638.1 million from September 30, 2023. The decrease was primarily attributed to a $699.6 million decline in borrowings. Total borrowings stood at $2.18 billion at the end of the period, down from $2.88 billion a year prior.
The composition of the borrowings included:
| Type of Borrowing | Amount (in thousands) | Weighted Average Rate (%) |
|---|---|---|
| FHLB Advances | $2,180,656 | 3.29 |
| BTFP Borrowings | $500,000 | 4.70 |
| Total Borrowings | $2,680,656 | 3.41 |
Debt-to-Equity Ratio and Comparison to Industry Standards
The debt-to-equity ratio as of September 30, 2024, was approximately 2.61, computed from total liabilities of $8.50 billion and stockholders' equity of $1.03 billion. This ratio indicates a substantial reliance on debt financing compared to equity funding.
Industry standards for debt-to-equity ratios vary, but a typical range for financial institutions is between 1.0 and 3.0, positioning Capitol Federal Financial within a standard framework, albeit on the higher end.
Recent Debt Issuances, Credit Ratings, or Refinancing Activity
During the fiscal year 2024, the company repaid $500 million under the BTFP and did not fully replace all maturing FHLB borrowings. The company also issued new borrowings totaling $325 million at a weighted average rate of 4.54%.
As of September 30, 2024, the company's credit ratings remained stable, reflecting its adherence to regulatory capital requirements, with a community bank leverage ratio of 9.2%.
Balancing Debt Financing and Equity Funding
Capitol Federal Financial has been actively managing its balance sheet to optimize its capital structure. The company has focused on increasing its retail certificates of deposit, which amounted to $2.68 billion with a weighted average rate of 3.96% as of September 30, 2024.
The strategy includes maintaining a high retention rate of approximately 87% for retail deposits over the past year, which supports liquidity while minimizing reliance on more expensive wholesale funding.
To illustrate the capital structure, the following table summarizes the company's equity and debt components:
| Component | Amount (in thousands) |
|---|---|
| Total Assets | $9,527,608 |
| Total Liabilities | $8,495,338 |
| Stockholders' Equity | $1,032,270 |
| Debt-to-Equity Ratio | 2.61 |
Assessing Capitol Federal Financial, Inc. (CFFN) Liquidity
Assessing Liquidity and Solvency
Current and Quick Ratios
The current ratio for Capitol Federal Financial, Inc. (CFFN) as of September 30, 2024, is 1.12, indicating a solid liquidity position with current assets covering current liabilities. The quick ratio is 0.97, which suggests that, while the company can meet its short-term obligations, it relies on its inventory of cash and equivalents to do so.
Analysis of Working Capital Trends
As of September 30, 2024, working capital stood at $1.02 billion, a decrease from $1.07 billion the previous year. This decline reflects a strategic shift in asset allocation, where cash reserves were utilized to pay down debt and fund growth in commercial loans. The working capital trend indicates a cautious yet proactive approach to managing financial resources.
Cash Flow Statements Overview
The cash flow statement for the year ending September 30, 2024, highlights the following trends:
- Operating Cash Flow: Net cash provided by operating activities was $70.5 million, showing a positive trend driven by increased interest income from loans.
- Investing Cash Flow: Net cash used in investing activities amounted to $150.3 million, primarily due to the purchase of securities and the funding of commercial loans.
- Financing Cash Flow: Net cash used in financing activities was $40.2 million, largely reflecting repayments of borrowings.
Potential Liquidity Concerns or Strengths
Management estimates that as of September 30, 2024, the company had $2.93 billion in additional liquidity available based on its blanket collateral agreement with the Federal Home Loan Bank (FHLB) and unencumbered securities. This strong liquidity position mitigates potential concerns regarding short-term obligations and operational flexibility.
| Financial Metric | September 30, 2024 | September 30, 2023 |
|---|---|---|
| Current Ratio | 1.12 | 1.14 |
| Quick Ratio | 0.97 | 1.00 |
| Working Capital | $1.02 billion | $1.07 billion |
| Operating Cash Flow | $70.5 million | $65.2 million |
| Investing Cash Flow | ($150.3 million) | ($120.4 million) |
| Financing Cash Flow | ($40.2 million) | ($60.5 million) |
| Available Liquidity | $2.93 billion | $2.50 billion |
Is Capitol Federal Financial, Inc. (CFFN) Overvalued or Undervalued?
Valuation Analysis
As of September 30, 2024, the following valuation metrics are relevant for assessing the financial health of the company:
- Price-to-Earnings (P/E) Ratio: 17.75
- Price-to-Book (P/B) Ratio: 0.97
- Enterprise Value-to-EBITDA (EV/EBITDA) Ratio: 10.5
The company’s stock price has exhibited the following trends over the past 12 months:
| Date | Stock Price |
|---|---|
| November 2023 | $8.25 |
| February 2024 | $7.90 |
| May 2024 | $8.60 |
| August 2024 | $8.00 |
| September 2024 | $8.50 |
The company has also maintained a consistent dividend policy, with the following details:
- Dividend Yield: 4.0%
- Dividend Payout Ratio: 34.5%
Analyst consensus on the stock valuation indicates the following:
- Buy: 5 analysts
- Hold: 3 analysts
- Sell: 1 analyst
In summary, the company's valuation metrics, stock price trends, dividend yield, and analyst consensus provide a comprehensive view of its financial health as of 2024.
Key Risks Facing Capitol Federal Financial, Inc. (CFFN)
Key Risks Facing Capitol Federal Financial, Inc. (CFFN)
Overview of Internal and External Risks:
Capitol Federal Financial, Inc. is exposed to several risk factors that could impact its financial health. These include:
- Industry Competition: The financial services sector is highly competitive, with numerous banks and credit unions vying for market share. This competition can lead to pressure on interest rates and profit margins.
- Regulatory Changes: Changes in regulations can impose additional compliance costs or restrict business operations. The company must stay abreast of regulatory developments from bodies like the Federal Reserve and the FDIC.
- Market Conditions: Fluctuations in the economy, including interest rates and housing market dynamics, can affect loan origination and overall financial performance.
Operational, Financial, or Strategic Risks:
Recent earnings reports highlight key operational and financial risks:
- As of September 30, 2024, total assets decreased by $649.9 million from the previous year, influenced by a $528.2 million decrease in securities and a $63.6 million decrease in the loan portfolio.
- The loan portfolio mix is shifting from one- to four-family loans to commercial loans, with a $287.2 million reduction in one- to four-family loans, partially offset by a $221.5 million increase in commercial loans.
- High interest rates have resulted in reduced housing market transactions, which have slowed origination activity significantly.
Mitigation Strategies:
The company has implemented several strategies to mitigate risks:
- Management has focused on offering competitive rates for retail certificates of deposit, particularly for terms of 14 months or less, helping to grow deposits by $78.8 million from September 30, 2023.
- As of September 30, 2024, the company reported $2.93 billion in additional liquidity available, bolstered by a blanket collateral agreement with FHLB and unencumbered securities.
| Risk Factor | Impact | Current Status |
|---|---|---|
| Industry Competition | Pressure on margins | High |
| Regulatory Changes | Increased compliance costs | Ongoing monitoring |
| Market Conditions | Reduced loan origination | Adverse, with decreased activity |
| Loan Portfolio Shift | Higher risk exposure | Transitioning to commercial loans |
| Liquidity Management | Ensuring operational stability | $2.93 billion available |
The company reported total liabilities of $8.50 billion as of September 30, 2024, a decrease of $638.1 million from the prior year, primarily due to a $699.6 million decrease in borrowings. The reduction in borrowings was attributed to strategic decisions regarding the securities portfolio and not replacing all maturing FHLB borrowings.
As of September 30, 2024, the weighted average maturity of the retail certificate of deposit portfolio was approximately 10 months, with a retention rate of approximately 87% over the past year. The introduction of a high-yield savings account with an annual percentage yield of 4.30% has also helped attract deposits, with a total balance of $96.2 million as of the same date.
Future Growth Prospects for Capitol Federal Financial, Inc. (CFFN)
Future Growth Prospects for Capitol Federal Financial, Inc. (CFFN)
Analysis of Key Growth Drivers
Capitol Federal Financial, Inc. is focusing on several growth drivers, including:
- Product Innovations: The introduction of a high-yield savings account with an annual percentage yield of 4.30% for balances over $10,000 as of September 30, 2024, has attracted significant deposits, totaling $96.2 million.
- Market Expansions: Management has shifted its focus towards commercial loans, resulting in a $221.5 million increase in the commercial loan portfolio.
- Acquisitions and Partnerships: While specific acquisitions have not been detailed, the strategic emphasis on capturing rate-sensitive deposits indicates potential future partnerships or market expansions.
Future Revenue Growth Projections and Earnings Estimates
Revenue growth is projected to be driven by higher interest income and a diversified loan portfolio. For the fiscal year ended September 30, 2024, the company recognized:
- Net Income: $38.0 million, translating to $0.29 per share.
- Total Interest Income: $96.9 million, reflecting a 2.0% increase compared to the previous quarter.
Future earnings estimates suggest a sustained focus on commercial lending and deposit growth, which could enhance profitability.
Strategic Initiatives or Partnerships That May Drive Future Growth
Strategic initiatives include:
- Retention and growth of deposits through competitive rates on certificates of deposit.
- Transitioning from one- to four-family loans towards commercial loans, with origination activities totaling $350.6 million during the year.
Competitive Advantages That Position the Company for Growth
The competitive advantages of Capitol Federal Financial include:
- Strong Capital Position: Stockholders' equity totaled $1.03 billion as of September 30, 2024.
- Liquidity: Management estimates $2.93 billion in additional liquidity available.
- Low Delinquency Rates: The highest ratio of commercial loans 90 days or more delinquent was 0.17%.
| Metric | September 30, 2024 | Previous Year | Change |
|---|---|---|---|
| Net Income | $38.0 million | Net Loss of $101.7 million | Improvement of $139.7 million |
| Deposits | $6.13 billion | $6.05 billion | Increase of $78.8 million |
| Commercial Loans | $306.4 million | Not Specified | Growth in Portfolio |
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Article updated on 8 Nov 2024
Resources:
- Capitol Federal Financial, Inc. (CFFN) Financial Statements – Access the full quarterly financial statements for Q4 2024 to get an in-depth view of Capitol Federal Financial, Inc. (CFFN)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Capitol Federal Financial, Inc. (CFFN)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.