Capitol Federal Extends Ninth Quarter of Margin Expansion

The Tip Desk · November 10, 2026 · 4 min read

Net interest income rose $1.3 million to $54.8 million as the net interest margin reached 2.39%.

Capitol Federal Financial, Inc. (CFFN), the parent of Capitol Federal Savings Bank, reported net interest income of $54.8 million for the quarter ended September 30, 2026, up $1.3 million from the prior quarter, and a net interest margin of 2.39%, the ninth consecutive quarter of expansion in both measures.

The company said the lift came primarily from continued growth in the higher-yielding commercial loan portfolio. Commercial loans increased $111.8 million in the quarter to $2.58 billion at September 30, 2026, from $2.12 billion a year earlier, and made up 31% of the loan portfolio versus 26% a year earlier. Management said it continues to grow commercial loans primarily by redeploying cash from single-family loan repayments that are not used to replace local originations.

Interest and dividend income on loans receivable rose $2.5 million to $93.07 million, which the company attributed to commercial growth and a higher average yield on one- to four-family loans, offsetting a $0.5 million decline in mortgage-backed securities interest income. Deposit interest expense fell $108 thousand to $36.17 million on lower average cost and average balance of retail certificates of deposit, offset by higher average balances of high-yield savings. Borrowings interest expense fell $103 thousand to $15.26 million after amortizing FHLB repayments and a full-quarter effect of $50.0 million of FHLB borrowings that matured in the prior quarter and were not replaced.

Net income was $22.4 million, or $0.18 a share, down from $23.6 million, or $0.19 a share, in the quarter ended June 30, 2026. The company said the decline was due primarily to higher non-interest expenses and a decrease in non-interest income, partially offset by the increase in net interest income. The effective tax rate rose to 20.4% from 19.4% on a Kansas tax true-up.

Non-interest income declined $634 thousand to $6.03 million. Bank-owned life insurance income fell $330 thousand after death benefits received in the prior quarter. Other non-interest income fell $155 thousand on fewer one-time account-closure and distribution fees as the company transitioned service providers; the company said recurring fee revenue remained strong.

Non-interest expense rose $1.39 million to $32.74 million. Information technology and related expense increased $934 thousand after credits and reimbursements from a vendor in the prior quarter. Professional and other services rose $205 thousand on consulting and controls testing. The efficiency ratio was 53.79%, compared with 52.10% in the prior quarter. The annualized operating expense ratio was 1.35%.

No provision for credit losses was recorded in the quarter. The company said an increase tied to off-balance-sheet credit exposures was offset by an allowance release tied to a more favorable forecast for some commercial-related economic indices, primarily commercial real estate price indices. The prior quarter had a $433 thousand release.

Total assets were $9.67 billion and stockholders’ equity $1.01 billion at September 30, 2026. Tangible book value was $8.02 a share. The company repurchased 1,684,276 shares at an average $8.74 in the quarter and paid a $10.5 million cash dividend of $0.085 a share. On October 27, 2026, it announced the same $0.085 dividend payable November 20, 2026.

For the fiscal year ended September 30, 2026, net income was $86.4 million, or $0.69 a share, compared with $68.0 million, or $0.52 a share, a year earlier. The net interest margin was 2.28% for the year, up 32 basis points from 1.96%, which the company attributed mainly to commercial loan growth, lower average borrowings and CD costs, partially offset by higher average deposits including high-yield savings. Commercial loans grew $468.8 million, or 22.2%, since September 30, 2025. Deposits grew $267.7 million, primarily in retail, while borrowings decreased $335.3 million. The fiscal-year provision for credit losses was $3.0 million, including a $4.0 million specific valuation allowance on a nonaccrual commercial relationship. The company repurchased 8,054,222 shares for $60.6 million in the fiscal year and an additional 827,920 shares for $7.0 million through October 23, 2026.

For fiscal year 2027, the company said commercial loan balances are expected to increase approximately 17%, total loans receivable net up approximately 2.5%, and deposits up 6.2%, with an effective tax rate of 20.0% to 21.0%. It said it is likely to exceed $10 billion in total assets in coming fiscal years and intends to continue the $0.085 quarterly dividend and seek further share repurchases.