Shares of Capitol Federal Financial, Inc. ( CFFN ) fell 1.2% despite the company's better-than-expected fiscal second-quarter 2014 results. On Apr 28, the company reported earnings per share of 14 cents, which beat the Zacks Consensus Estimate by a penny. The reported figure also compared favorably with 12 cents earned in the previous quarter.
Results benefited from a rise in net interest income and decline in both operating expenses and provision for credit losses. These were partly offset by a fall in total interest and dividend income. Further, while credit quality was a mixed bag, active capital deployment activities reflected the company's robust liquidity level.
Capitol Federal Financial's net income increased 10.5% sequentially to $19.7 million.
Total revenue for the reported quarter came in at $77.6 million, almost flat compared with the previous quarter. However, it outpaced the Zacks Consensus Estimate of $51.0 million.
Net interest income increased 3.3% from the previous quarter to $45.7 million. The rise was mainly due to fall in interest expense, partially offset by rise in both interest and dividend income. Also, net interest margin increased 9 basis points to 2.07%.
Non-interest income increased 4.1% from the previous quarter to $5.7 million. The rise was mainly due to increase in insurance commissions, partially offset by lower retail fees and charges.
Non-interest expense decreased 4.2% from the last quarter to $21.8 million. The fall was mainly due to decline in regulatory and outside services, deposit and loan transaction costs, advertising and promotional costs as well as other non-interest expenses.
Asset quality was a mixed bag during the quarter. Total nonperforming assets increased 3.2% sequentially to $32.4 million as of Mar 31, 2014.
However, provision for credit losses declined significantly from $0.5 million in the previous quarter to $0.2 million.
Capital and Profitability Ratios
Capitol Federal Financial's capital ratios were well above the required regulatory requirements. As of Mar 31, 2014, Tier 1 risk-based capital ratio was 34.6%. Total risk-based capital ratio was 34.8% and Tier 1 leverage capital ratio was 14.6%.
The company's profitability ratios were strong during the quarter. Return on average assets rose to 0.87% from 0.78% in the prior quarter. As of Mar 31, 2014, return on average common equity ratio was 5.10%, up from 4.37% in the previous quarter.
Capital Deployment Activities
Capitol Federal Financial continued with its share repurchase plan of $175.0 million, which was approved in Nov 2012. As of Mar 31, 2014, the company bought back 8.6 million shares for $102.6 million at an average price of $11.93 per share.
Since Mar 31, 2014, the company has not repurchased any shares.
Capitol Federal Financial's solid capital position and strong profitability will expectedly act as catalysts going forward. However, a still weak interest rate scenario is likely to restrict any significant bottom-line improvement in the near term.
Currently, Capitol Federal Financial carries a Zacks Rank #3 (Hold).
Performance of Other Banks
Washington Federal Inc. 's ( WAFD ) fiscal second-quarter 2014 earnings of 38 cents per share came in line with the Zacks Consensus Estimate.
People's United Financial Inc. ( PBCT ) reported first-quarter 2014 operating earnings per share of 19 cents, which missed the Zacks Consensus Estimate by a penny.
First Niagara Financial Group Inc. ( FNFG ) reported first-quarter 2014 operating earnings of 17 cents per share, in line with the Zacks Consensus Estimate.