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CF

Capitol Federal Financial, Inc. (CFFN)·Q3 2025 Earnings Summary

Executive Summary

  • EPS of $0.14 beat Wall Street by $0.02, with revenue modestly ahead of consensus; net interest margin expanded to 1.98% on continued remix toward higher‑yielding commercial loans [Q3 2025 S&P: EPS 0.14 vs 0.12 est; Revenue $51.20m vs $50.51m est]*.
  • Operating revenue (net interest income + non‑interest income) rose 6.1% YoY and 4.0% QoQ; efficiency improved to 58.26% as NII increased and costs remained controlled .
  • Credit quality mixed: allowance ratio dipped (0.28% of loans) after a model update, while nonperforming assets rose to 0.50% of assets due to two hotel participations moved to nonaccrual; management cites strong LTVs, guarantees, and no charge‑offs .
  • Tax tailwind: Kansas apportionment change lowered the quarter’s effective tax rate to 15% and management now guides FY25 ETR to 18–19% (down from earlier expectations), aiding net income .
  • Dividend maintained at $0.085; high‑yield savings balances grew to $408m (APY reduced to 4.00%), supporting funding and lowering borrowing needs .

What Went Well and What Went Wrong

  • What Went Well

    • Margin expansion: NIM increased 6 bps QoQ to 1.98% driven by mix shift toward commercial loans and deposit cost moderation .
    • Cost discipline and operating leverage: Efficiency ratio improved to 58.26% from 60.54% prior quarter on higher NII with stable opex .
    • Strategic execution on commercial banking: “We see many opportunities to grow our non‑interest bearing deposit base and diversify fee‑based revenue streams… treasury management… trust and wealth management… small business banking,” with launches of new small business checking and digital services .

  • What Went Wrong

    • Credit optics: Nonperforming assets rose to 0.50% of assets (from 0.11% prior quarter) as two hotel participation loans (same relationship) were moved to nonaccrual; management points to 45% LTV and expected recap later 2025, but headline risk rose .
    • Allowance ratio fell: ACL/loans declined to 0.28% (from 0.30%) after regression model updates, even as commercial exposure grows, which can raise investor questions on reserve sufficiency (though management defends adequacy) .
    • Deposit mix trade‑off: High‑yield savings growth (+$123.9m QoQ to $408.0m) supports funding but carries a 4.00% APY (down from 4.30%), implying ongoing discipline needed to protect spread as rates evolve .

Financial Results

Income statement and profitability (fiscal quarters; oldest → newest)

MetricQ3 2024Q2 2025Q3 2025
Operating Revenue = Net Interest Income + Non‑Interest Income ($USD Millions)$45.033 (= $40.324 + $4.709) $48.793 (= $43.840 + $4.953) $50.746 (= $45.458 + $5.288)
Net Income ($USD Millions)$9.648 $15.399 $18.382
Diluted EPS ($)$0.07 $0.12 $0.14
Net Interest Margin (%)1.77% 1.92% 1.98%
Efficiency Ratio (%)62.07% 60.54% 58.26%

Consensus vs actual (current quarter)

MetricQ3 2025 ConsensusQ3 2025 ActualSurprise
EPS ($)0.12*0.14*+0.02*
Revenue ($USD Millions)50.51*51.20*+0.69 (+1.4%)*

Values retrieved from S&P Global.

Loan mix (gross) shift toward commercial (oldest → newest)

MetricQ3 2024Q2 2025Q3 2025
One‑ to Four‑Family Loans ($mm, % total)$6,377.5 (80.2%) $6,117.8 (77.5%) $6,018.5 (74.8%)
Commercial Loans ($mm, % total)$1,465.4 (18.5%) $1,668.3 (21.1%) $1,911.8 (23.8%)
Consumer Loans ($mm, % total)$108.4 (1.3%) $108.5 (1.4%) $112.7 (1.4%)

Key balance sheet & credit KPIs (period‑end; oldest → newest)

MetricQ3 2024Q2 2025Q3 2025
Loans Receivable, Net ($mm)$7,933.0 $7,875.9 $8,023.6
Deposits ($mm)$6,129.7 $6,372.5 $6,431.1
Borrowings ($mm)$2,291.6 $2,143.0 $2,071.6
Stockholders’ Equity ($mm)$1,020.7 $1,037.1 $1,046.2
NPAs / Assets (%)0.09% 0.11% 0.50%
ACL / Loans (%)0.33% 0.30% 0.28%
Quarterly Net Charge‑offs ($000)$(57) $(114) $(25)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Effective Tax RateFY 2025Higher earlier commentary implied ~19–20%18%–19% after Kansas apportionment change; Q3 ETR 15% Lowered
Net Interest MarginRemainder FY 2025“Anticipated NIM will continue to improve” (Q2 press) Ongoing margin expansion observed (no numeric range) Maintained directional
DividendFY 2025Intend to pay $0.085 quarterly ($0.34 FY) Intend to pay $0.085 quarterly ($0.34 FY) Maintained
Commercial FundingQ4 FY 2025$136.5m commitments expected to fund in Q3 (from Q2 view) $146.2m commitments expected to fund in Q4 FY25 (mainly July) Updated timing/amount
Small Business Digital OnboardingQ4 FY 2025—Expect to introduce digital onboarding in Q4 FY25 New operational milestone

Earnings Call Themes & Trends

(No Q3 FY2025 earnings call transcript was available in our document system.)

TopicQ1 FY25 (Dec 31, 2024)Q2 FY25 (Mar 31, 2025)Q3 FY25 (Jun 30, 2025)Trend
Technology / DigitalContinued digital transformation benefits; lower IT third‑party costs YoY N/A on new launchesNew SMB checking products; digital services launched; digital onboarding planned for Q4 FY25 Increasing focus on SMB/treasury tech
Loan Mix ShiftCommercial portfolio +$137.5m QoQ; suspended 1‑4 family correspondent channels Mix continued to shift to commercial Commercial +$243.5m QoQ; strong CRE growth Accelerating shift to commercial
Deposits / PricingHigh‑yield savings introduced; balances $171.7m; APY 4.30% High‑yield savings $284.1m; APY 4.30% High‑yield savings $408.0m; APY trimmed to 4.00% Growth with pricing discipline
Regulatory / TaxPre‑1988 bad debt recapture impacted prior quarter; no similar tax in Q1 ETR ~19.6% YTD; outlook commentary on NIM improving Kansas apportionment change lowers ETR; FY25 guide 18–19% Improving tax outlook
Credit QualityNPAs 0.12% assets; ACL 0.31% NPAs 0.11%; ACL 0.30% NPAs 0.50%; two hotel participations to nonaccrual; ACL 0.28% Higher NPA due to specific CRE

Management Commentary

  • Strategic focus: “The Company continues to strategically grow all aspects of commercial banking through the alignment of technology, people, products and services… leveraging our new technology and organizational structure to quickly respond to customer needs… We see many opportunities to grow our non‑interest bearing deposit base and diversify fee‑based revenue streams…” .
  • Product/segment expansion: “During the current quarter the Bank successfully launched new checking products and digital banking services specifically designed for our small business customers… In the quarter ending September 30, 2025 the Bank expects to introduce digital onboarding…” .
  • Wealth/private banking: “Subsequent to June 30, 2025, the Bank hired several seasoned and well‑connected wealth management professionals… With this, private banking will be a new offering…” .
  • Funding and pricing: High‑yield savings grew to $408.0m; APY reduced to 4.00% to balance growth and funding cost .

Q&A Highlights

No earnings call transcript for Q3 FY2025 was available in our document system; therefore, Q&A themes are not reported for this quarter.

Estimates Context

  • EPS beat: $0.14 vs $0.12 consensus (+$0.02); Revenue beat: $51.20m vs $50.51m (+1.4%). Drivers: higher NII from commercial remix and stable costs; ETR tailwind from Kansas apportionment change [Q3 2025 S&P: EPS and Revenue lines]*.
  • Potential estimate revisions: Lower FY25 ETR guidance (18–19%) likely supports upward revisions to net income/EPS absent adverse credit migration; NIM trajectory remains positive directionally .

Values retrieved from S&P Global.

Key Takeaways for Investors

  • Margin trajectory improving: NIM rose to 1.98% with further commercial remix and deposit repricing discipline—supportive for near‑term EPS momentum .
  • Credit watch: NPA spike to 0.50% from hotel participations (nonaccrual) increases headline risk; strong LTVs/guarantees and no charge‑offs so far mitigate severity, but loan‑specific headlines can move the stock .
  • Tax tailwind: Kansas apportionment change lowers FY25 ETR to 18–19%, a non‑trivial boost to net income vs prior expectations .
  • Funding mix improving: High‑yield savings growth offsets CDs and reduced borrowings; APY cuts show management discipline on funding costs .
  • Capital return steady: Regular dividend maintained at $0.085/share with Board intent to pay $0.34 for FY25; buybacks on hold pending holding‑company cash rebuild .
  • Near‑term catalysts: Continued NIM expansion, funding of $146.2m CRE commitments in Q4 FY25, and SMB digital onboarding rollout .
  • Medium‑term thesis: Transition toward a more commercial‑oriented bank with treasury/wealth cross‑sell and technology enablement; monitoring CRE concentrations (hotels, senior housing, multi‑family) remains key .