2014

Capitol Federal Financial, Inc. Reports Second Quarter Fiscal Year 2014 Results

TOPEKA, Kan., April 28, 2014 /PRNewswire/ -- Capitol Federal® Financial, Inc. (NASDAQ: CFFN) (the "Company") announced results today for the quarter ended March 31, 2014.  Detailed results will be available in the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, which will be filed with the Securities and Exchange Commission ("SEC") on or about May 5, 2014 and posted on our website, http://ir.capfed.com.   For best viewing results, please view this release in Portable Document Format (PDF) on our website.

Highlights for the quarter include:

  • net income of $19.7 million,
  • basic and diluted earnings per share of $0.14,
  • net interest margin of 2.07%, and
  • repurchased 4,191,195 shares of common stock at an average price of $11.97 per share.

Comparison of Operating Results for the Three Months Ended March 31, 2014 and December 31, 2013

Net income increased $1.9 million, or 10.5%, from $17.8 million for the quarter ended December 31, 2013 to $19.7 million for the quarter ended March 31, 2014.  The increase in net income was due primarily to a decrease in interest expense on Federal Home Loan Bank ("FHLB") borrowings.  The net interest margin increased nine basis points, from 1.98% for the prior quarter, to 2.07% for the current quarter.  The increase in the net interest margin was largely a result of the partial renewal of a maturing FHLB advance at a lower market rate.

Interest and Dividend Income
The weighted average yield on total interest-earning assets increased two basis points from the prior quarter to 3.25% for the current quarter while the average balance of interest-earning assets decreased $103.2 million between the two periods.  The following table presents the components of interest and dividend income for the time periods presented, along with the change measured in dollars and percent. The decrease in interest income on mortgage-backed securities ("MBS") and investment securities was due largely to a decrease in the average balance of each portfolio as cash flows not reinvested in the portfolios were used to pay dividends and repurchase Company stock, as well as to fund loan growth.  The increase in interest income on loans receivable was due to an increase in the average balance.

 














For the Three Months Ended








March 31,


December 31,


Change Expressed in:


2014


2013


Dollars


Percent


(Dollars in thousands)




INTEREST AND DIVIDEND INCOME:












Loans receivable

$

57,117


$

56,948


$

169


0.3%


MBS


11,597



11,962



(365)


(3.1)


Investment securities


1,869



2,066



(197)


(9.5)


Capital stock of FHLB


1,229



1,196



33


2.8


Cash and cash equivalents


45



62



(17)


(27.4)


Total interest and dividend income

$

71,857


$

72,234


$

(377)


(0.5)


 

The increase in interest income on loans receivable was due to a $44.4 million increase in the average balance of the portfolio, partially offset by a one basis point decrease in the weighted average yield of the portfolio to 3.78% for the current quarter.  Included in interest income on loans receivable for the current quarter was $67 thousand related to the net amortization of premiums/deferred costs and the accretion of discounts/unearned loan fees increasing the average yield of the portfolio by less than one basis point.  During the prior quarter, $47 thousand, net, was accreted and increased the average yield on the portfolio by less than one basis point.   

The decrease in interest income on MBS and investment securities was due primarily to decreases in the average balances of the portfolios of $52.4 million and $66.6 million, respectively.  Included in interest income on MBS for the current quarter was $1.3 million from the net amortization of premiums and the accretion of discounts decreasing the average yield of the portfolio by 26 basis points.  During the prior quarter, $1.4 million of net premiums were amortized and decreased the average yield on the portfolio by 28 basis points.

Interest Expense
The weighted average rate paid on total interest-bearing liabilities decreased seven basis points from the prior quarter to 1.42% for the current quarter, and the average balance of interest-bearing liabilities increased $7.7 million between the two periods.  The following table presents the components of interest expense for the time periods presented, along with the change measured in dollars and percent.  

 














For the Three Months Ended








March 31,


December 31,


Change Expressed in:


2014


2013


Dollars


Percent


(Dollars in thousands)




INTEREST EXPENSE:












FHLB borrowings

$

15,311


$

16,863


$

(1,552)


(9.2)%


Deposits


8,076



8,323



(247)


(3.0)


Repurchase agreements


2,743



2,803



(60)


(2.1)


Total interest expense

$

26,130


$

27,989


$

(1,859)


(6.6)


 

The decrease in interest expense on FHLB borrowings was due primarily to a decrease in the weighted average rate paid on the portfolio.  In early February 2014, a $200.0 million FHLB advance with an effective rate of 5.01% matured and was partially replaced with a $150.0 million FHLB advance with a term of 84 months and a fixed-rate of 2.59%.

The decrease in interest expense on deposits was due primarily to a decrease in the weighted average rate paid on the retail certificate of deposit portfolio.  The weighted average rate paid on the retail certificate of deposit portfolio decreased three basis points, from 1.25% for the prior quarter to 1.22% for the current quarter. 

Provision for Credit Losses
Capitol Federal Savings Bank (the "Bank") recorded a provision for credit losses during the current quarter of $160 thousand compared to a provision for credit losses during the prior quarter of $515 thousand.  The $160 thousand provision for credit losses in the current quarter takes into account net charge-offs of $112 thousand and loan growth during the current quarter.

Non-Interest Income
The following table presents the components of non-interest income for the time periods presented, along with the change measured in dollars and percent.

 














For the Three Months Ended








March 31,


December 31,


Change Expressed in:


2014


2013


Dollars


Percent


(Dollars in thousands)




NON-INTEREST INCOME:












Retail fees and charges

$

3,454


$

3,810


$

(356)


(9.3)%


Insurance commissions


1,204



558



646


115.8


Loan fees


404



450



(46)


(10.2)


Income from bank-owned life insurance ("BOLI")


330



338



(8)


(2.4)


Other non-interest income


335



344



(9)


(2.6)


Total non-interest income

$

5,727


$

5,500


$

227


4.1


 

The increase in insurance commissions was due largely to the receipt of annual commissions from certain insurance providers as a result of favorable claims experience during the prior year.  The decrease in retail fees and charges was due primarily to a decrease in debit card income, due in part to seasonality, and a decrease in service charges earned.  

Non-Interest Expense
The following table presents the components of non-interest expense for the time periods presented, along with the change measured in dollars and percent.

 














For the Three Months Ended








March 31,


December 31,


Change Expressed in:


2014


2013


Dollars


Percent


(Dollars in thousands)




NON-INTEREST EXPENSE:












Salaries and employee benefits

$

10,724


$

10,726


$

(2)


(0.0)%


Occupancy


2,634



2,549



85


3.3


Information technology and communications


2,320



2,292



28


1.2


Regulatory and outside services


1,157



1,396



(239)


(17.1)


Deposit and loan transaction costs


1,263



1,387



(124)


(8.9)


Federal insurance premium


1,103



1,083



20


1.8


Advertising and promotional


877



1,006



(129)


(12.8)


Other non-interest expense


1,750



2,348



(598)


(25.5)


Total non-interest expense

$

21,828


$

22,787


$

(959)


(4.2)


 

The decrease in other non-interest expense was due primarily to a decrease in amortization expenses related to low-income housing partnerships.  The decrease in regulatory and outside services was due primarily to the timing of fees paid for external audit services.

The Company's efficiency ratio was 42.42% for the current quarter compared to 45.81% for the prior quarter.  The decrease in the efficiency ratio was due primarily to a decrease in total non-interest expense and an increase in net interest income.  The efficiency ratio is a measure of a financial institution's total non-interest expense as a percentage of the sum of net interest income (pre-provision for credit losses) and non-interest income.  A lower value indicates that the financial institution is generating revenue with a lower level of expense.

Income Tax Expense
Income tax expense was $9.8 million for the current quarter compared to $8.6 million for the prior quarter.  The increase in expense between periods was due primarily to an increase in pretax income.  The effective income tax rate for the current quarter was 33.2% compared to 32.6% for the prior quarter. 

Comparison of Operating Results for the Six Months Ended March 31, 2014 and 2013

For the six month period ended March 31, 2014, the Company recognized net income of $37.5 million, compared to net income of $35.3 million for the six month period ended March 31, 2013.  The $2.2 million, or 6.3%, increase in net income was largely due to a $3.3 million decrease in non-interest expense, partially offset by a $485 thousand decrease in non-interest income and a $442 thousand increase in provision for credit losses.  The net interest margin increased three basis points, from 1.99% for the prior year six month period to 2.02% for the current year six month period.  Decreases in the cost of funds and a shift in the mix of interest-earning assets from relatively lower yielding securities to higher yielding loans was enough to overcome the negative impact of decreasing asset yields. 

Interest and Dividend Income
The weighted average yield on total interest-earning assets decreased 14 basis points from 3.38% for the prior year six month period to 3.24% for the current year six month period and the average balance of interest-earning assets decreased $142.1 million from the prior year six month period.  The following table presents the components of interest and dividend income for the time periods presented along with the change measured in dollars and percent.  The decrease in interest income on MBS and investment securities was due largely to a decrease in the average balance of each portfolio as cash flows not reinvested in the portfolios were used to fund loan growth, pay dividends, and repurchase Company stock.  The decrease in interest income on loans receivable was due to a decrease in the weighted average yield on the portfolio.

 














For the Six Months Ended








March 31,


Change Expressed in:


2014


2013


Dollars


Percent


(Dollars in thousands)




INTEREST AND DIVIDEND INCOME:












Loans receivable

$

114,065


$

115,403


$

(1,338)


(1.2)%


MBS


23,559



29,629



(6,070)


(20.5)


Investment securities


3,935



5,322



(1,387)


(26.1)


Capital stock of FHLB


2,425



2,233



192


8.6


Cash and cash equivalents


107



69



38


55.1


Total interest and dividend income

$

144,091


$

152,656


$

(8,565)


(5.6)


 

The weighted average yield on the loans receivable portfolio decreased 29 basis points, from 4.08% for the prior year six month period to 3.79% for the current year six month period.  The downward repricing of the loan portfolio largely resulted from loan originations and purchases at market rates less than the weighted average rate of the existing portfolio, along with a significant amount of adjustable-rate loans, refinances, and endorsements repricing to lower rates.  The decrease in interest income on loans receivable resulting from the decrease in average yield was partially offset by a $369.1 million increase in the average balance of the portfolio.  Included in interest income on loans receivable for the current year six month period was $114 thousand related to the net amortization of premiums/deferred costs and the accretion of discounts/unearned loan fees increasing the average yield of the portfolio by less than one basis point.  During the prior year six month period, $1.6 million, net, was accreted and increased the average yield on the portfolio by five basis points. 

The average balance of the MBS portfolio decreased $355.7 million between the two periods and the average yield on the MBS portfolio decreased 16 basis points, from 2.55% during the prior year six month period to 2.39% for the current year six month period.  The decrease in the average yield was due primarily to the downward repricing of existing adjustable-rate MBS, as well as purchases of MBS between periods with yields less than the average yield on the existing portfolio.  Included in interest income on MBS for the current year six month period was $2.7 million from the net amortization of premiums and the accretion of discounts decreasing the average yield of the portfolio by 27 basis points.  During the prior year six month period, $4.2 million of net premiums were amortized and decreased the average yield on the portfolio by 36 basis points.

The decrease in interest income on investment securities was due primarily to a $179.4 million decrease in the average balance of the portfolio, along with a nine basis point decrease in the yield, from 1.22% during the prior year six month period, to 1.13% for the current year six month period. 

Interest Expense
The weighted average rate paid on total interest-bearing liabilities decreased 22 basis points from 1.68% for the prior year six month period to 1.46% for the current year six month period, while the average balance of interest-bearing liabilities decreased $21.5 million from the prior year six month period.  The following table presents the components of interest expense for the time periods presented, along with the change measured in dollars and percent.  The decrease in interest expense on FHLB borrowings and deposits was due primarily to a decrease in the weighted average rate paid on the portfolios, while the decrease in interest expense on repurchase agreements was due to both a decrease in the average balance and a decrease in the weighted average rate of the portfolio between the two periods.

 














For the Six Months Ended








March 31,


Change Expressed in:


2014


2013


Dollars


Percent


(Dollars in thousands)




INTEREST EXPENSE:












FHLB borrowings

$

32,174


$

36,537


$

(4,363)


(11.9)%


Deposits


16,399



19,193



(2,794)


(14.6)


Repurchase agreements


5,546



6,976



(1,430)


(20.5)


Total interest expense

$

54,119


$

62,706


$

(8,587)


(13.7)


 

The weighted average rate paid on the FHLB borrowings portfolio decreased 32 basis points, from 2.90% for the prior year six month period to 2.58% for the current year six month period.  The decrease in the average rate paid was primarily a result of maturities and renewals to lower market rates that occurred between periods. 

The decrease in the weighted average rate paid on the deposit portfolio was due primarily to a decrease in the weighted average rate paid on the retail certificate of deposit portfolio.  The weighted average rate paid on the retail certificate of deposit portfolio decreased 20 basis points, from 1.44% for the prior year six month period to 1.24% for the current year six month period.

The decrease in interest expense on repurchase agreements was due to a $40.2 million decrease in the average balance between periods, as well as a 40 basis point decrease in the weighted average rate paid between periods, from 3.83% for the prior year six month period to 3.43% for the current year six month period.  The decrease in the average balance was due to the maturity of agreements between the two periods, some of which were replaced with FHLB borrowings.  The decrease in the average rate paid on repurchase agreements was due to maturities and a new agreement entered into between periods which had a rate less than the existing portfolio.

Provision for Credit Losses
The Bank recorded a provision for credit losses during the current year six month period of $675 thousand, compared to a $233 thousand provision for credit losses for the prior year six month period.  The $675 thousand provision for credit losses in the current year six month period takes into account net charge-offs of $530 thousand and loan growth.

Non-Interest Income
The following table presents the components of non-interest income for the years presented, along with the change measured in dollars and percent.














For the Six Months Ended








March 31,


Change Expressed in:


2014


2013


Dollars


Percent


(Dollars in thousands)




NON-INTEREST INCOME:












Retail fees and charges

$

7,264


$

7,513


$

(249)


(3.3)%


Insurance commissions


1,762



1,550



212


13.7


Loan fees


854



885



(31)


(3.5)


Income from BOLI


668



743



(75)


(10.1)


Other non-interest income


679



1,021



(342)


(33.5)


Total non-interest income

$

11,227


$

11,712


$

(485)


(4.1)


The decrease in other non-interest income was due primarily to a decrease in premium income from Capitol Federal Mortgage Reinsurance Company as it is no longer writing new business.  The decrease in retail fees and charges was due primarily to a decrease in service charges earned.  The increase in insurance commissions was due largely to an increase in annual commissions received from certain insurance providers as a result of favorable claims experience during the prior year.

Non-Interest Expense
The following table presents the components of non-interest expense for the time periods presented, along with the change measured in dollars and percent.

 














For the Six Months Ended








March 31,


Change Expressed in:


2014


2013


Dollars


Percent


(Dollars in thousands)




NON-INTEREST EXPENSE:












Salaries and employee benefits

$

21,450


$

24,336


$

(2,886)


(11.9)%


Occupancy


5,183



4,709



474


10.1


Information technology and communications


4,612



4,430



182


4.1


Regulatory and outside services


2,553



3,055



(502)


(16.4)


Deposit and loan transaction costs


2,650



2,910



(260)


(8.9)


Federal insurance premium


2,186



2,230



(44)


(2.0)


Advertising and promotional


1,883



2,036



(153)


(7.5)


Other non-interest expense


4,098



4,252



(154)


(3.6)


Total non-interest expense

$

44,615


$

47,958


$

(3,343)


(7.0)


 

The decrease in salaries and employee benefits was due primarily to a decrease in Employee Stock Ownership Plan ("ESOP") related expenses resulting largely from the final allocation of ESOP shares acquired in our initial public offering (March 1999) being made at September 30, 2013.  In fiscal year 2014, the only ESOP shares to be allocated will be the shares acquired in the Company's corporate reorganization in December 2010.  The decrease in regulatory and outside services was due largely to the timing of fees paid for our external audit.  The increase in occupancy expense was due largely to an increase in depreciation expense, which was primarily associated with the remodeling of our home office.

The Company's efficiency ratio was 44.09% for the current year six month period compared to 47.17% for the prior year six month period.  The decrease in the efficiency ratio was due primarily to a decrease in total non-interest expense.

Income Tax Expense
Income tax expense was $18.4 million for the current year six month period compared to $18.2 million for the prior year six month period.  The effective tax rate for the current year six month period was 32.9% compared to 34.0% for the prior year six month period.  The decrease in the effective tax rate between periods was due largely to a lower amount of nondeductible ESOP related expenses due to the final ESOP allocation on September 30, 2013, as discussed in the non-interest expense section above, along with higher tax credits related to our low income housing partnerships.  Management anticipates the effective tax rate for fiscal year 2014 will be approximately 33% to 34%, based on fiscal year 2014 estimates as of March 31, 2014.

 

 

 


 

CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(Dollars in thousands)

 


























For the Three Months Ended


For the Six Months Ended


March 31,


December 31,


March 31,


2014


2013


2014


2013

INTEREST AND DIVIDEND INCOME:












Loans receivable

$

57,117


$

56,948


$

114,065


$

115,403

MBS


11,597



11,962



23,559



29,629

Investment securities


1,869



2,066



3,935



5,322

Capital stock of FHLB


1,229



1,196



2,425



2,233

Cash and cash equivalents


45



62



107



69

Total interest and dividend income


71,857



72,234



144,091



152,656













INTEREST EXPENSE:












FHLB borrowings


15,311



16,863



32,174



36,537

Deposits


8,076



8,323



16,399



19,193

Repurchase agreements


2,743



2,803



5,546



6,976

Total interest expense


26,130



27,989



54,119



62,706













NET INTEREST INCOME


45,727



44,245



89,972



89,950













PROVISION FOR CREDIT LOSSES


160



515



675



233

NET INTEREST INCOME AFTER












PROVISION FOR CREDIT LOSSES


45,567



43,730



89,297



89,717













NON-INTEREST INCOME:












Retail fees and charges


3,454



3,810



7,264



7,513

Insurance commissions


1,204



558



1,762



1,550

Loan fees


404



450



854



885

Income from BOLI


330



338



668



743

Other non-interest income


335



344



679



1,021

Total non-interest income


5,727



5,500



11,227



11,712













NON-INTEREST EXPENSE:












Salaries and employee benefits


10,724



10,726



21,450



24,336

Occupancy


2,634



2,549



5,183



4,709

Information technology and communications


2,320



2,292



4,612



4,430

Regulatory and outside services


1,157



1,396



2,553



3,055

Deposit and loan transaction costs


1,263



1,387



2,650



2,910

Federal insurance premium


1,103



1,083



2,186



2,230

Advertising and promotional


877



1,006



1,883



2,036

Other non-interest expense


1,750



2,348



4,098



4,252

Total non-interest expense


21,828



22,787



44,615



47,958

INCOME BEFORE INCOME TAX EXPENSE


29,466



26,443



55,909



53,471

INCOME TAX EXPENSE


9,778



8,630



18,408



18,193

NET INCOME

$

19,688


$

17,813


$

37,501


$

35,278

 

The following is a reconciliation of the basic and diluted earnings per share calculations for the periods noted.
















For the Three Months Ended


For the Six Months Ended



March 31,


December 31,


March 31,



2014


2013


2014


2013



(Dollars in thousands, except per share data)

Net income


$

19,688


$

17,813


$

37,501


$

35,278

Income allocated to participating securities



(44)



(50)



(94)



(111)

Net income available to common stockholders


$

19,644


$

17,763


$

37,407


$

35,167














Average common shares outstanding



139,447,275



142,881,528



141,183,271



146,576,142

Average committed ESOP shares outstanding



41,758



449



20,876



69,757

Total basic average common shares outstanding



139,489,033



142,881,977



141,204,147



146,645,899














Effect of dilutive stock options



291



1,064



604



107














Total diluted average common shares outstanding



139,489,324



142,883,041



141,204,751



146,646,006














Net earnings per share:













Basic


$

0.14


$

0.12


$

0.26


$

0.24

Diluted


$

0.14


$

0.12


$

0.26


$

0.24














Antidilutive stock options, excluded













from the diluted average common shares













outstanding calculation



2,060,216



2,403,917



2,396,610



2,466,339

Financial Condition as of March 31, 2014  

Total assets were $9.12 billion at March 31, 2014 compared to $9.19 billion at September 30, 2013.  The $71.0 million decrease was due primarily to a $172.1 million decrease in the securities portfolio, partially offset by a $95.0 million increase in the loan portfolio.  Loan growth during the current year six month period was funded primarily with cash flows from the securities portfolio.  During the current year six month period, the Bank originated and refinanced $256.8 million of loans with a weighted average rate of 3.93%, purchased $219.4 million of loans from correspondent lenders with a weighted average rate of 3.73%, and participated in $19.4 million of commercial real estate loans with a weighted average rate of 4.25%.  As of March 31, 2014, the Bank had 27 active correspondent lending relationships operating in 24 states. 

Economic conditions in the Bank's local market areas have a significant impact on the ability of borrowers to repay loans and the value of the collateral securing these loans.  As of March 2014, the unemployment rate was 4.9% for Kansas and 6.7% for Missouri, compared to the national average of 6.7% based on information from the Bureau of Economic Analysis.  Our Kansas City market area, which comprises the largest segment of our loan portfolio and deposit base, has an average household income of approximately $80 thousand per annum, based on 2013 estimates from the American Community Survey, which is a statistical survey by the U.S. Census Bureau.  The average household income in our combined market areas is approximately $69 thousand per annum, with 91% of the population at or above the poverty level, also based on the 2013 estimates from the American Community Survey.  The Federal Housing Finance Agency price index for Kansas and Missouri has not experienced significant fluctuations during the past 10 years, unlike other market areas of the United States, which indicates relative stability in property values in our local market areas. 

As a portfolio lender focused on delivering outstanding customer service while acquiring quality assets, the ability of our borrowers to repay has always been paramount in our business model.  Our implementation of the "ability to repay" and "qualified mortgage" rules on January 10, 2014, as issued by the Consumer Financial Protection Bureau, is not anticipated to have a significant impact to our overall book of business.

Total liabilities were $7.59 billion at March 31, 2014 compared to $7.55 billion at September 30, 2013.  The $31.1 million increase was due primarily to an $82.3 million increase in deposits, partially offset by a $46.4 million decrease in FHLB borrowings.  The increase in deposits was comprised of a $60.2 million increase in the checking portfolio, a $15.2 million increase in the savings portfolio, and an $11.2 million increase in the money market portfolio, partially offset by a $4.3 million decrease in the certificate of deposit portfolio.

Stockholders' equity was $1.53 billion at March 31, 2014 compared to $1.63 billion at September 30, 2013.  The $102.1 million decrease was due primarily to the payment of $82.8 million in dividends and the repurchase of $57.2 million of stock, partially offset by net income of $37.5 million.  Additionally, accumulated other comprehensive income ("AOCI") decreased $2.2 million from September 30, 2013 to March 31, 2014 due to a decrease in unrealized gains on available-for-sale ("AFS") securities as a result of an increase in market yields.

The $82.8 million in dividends paid during the current year six month period consisted of a $0.25 per share, or $35.7 million, True Blue® Too dividend; an $0.18 per share, or $25.8 million, true-up dividend related to fiscal year 2013 earnings per the Company's dividend policy; and two regular quarterly dividends of $0.075 per share each quarter, totaling $0.15 per share, or $21.3 million.  The $35.7 million True Blue® Too dividend was funded by a $36.0 million capital distribution from the Bank to the holding company in December 2013.  On April 16, 2014, the Company declared a regular quarterly cash dividend of $0.075 per share, or approximately $10.4 million, payable on May 16, 2014 to stockholders of record as of the close of business on May 2, 2014.  Dividend payments depend upon a number of factors including the Company's financial condition and results of operations, regulatory capital requirements, regulatory limitations on the Bank's ability to make capital distributions to the Company, and the amount of cash at the holding company.  At March 31, 2014, Capitol Federal Financial, Inc., at the holding company level, had $139.8 million of cash and cash equivalents at the Bank.

In November 2012, the Company announced that its Board of Directors approved the repurchase of up to $175.0 million of the Company's common stock.  The Company began repurchasing common stock under this plan during the second quarter of fiscal year 2013 and, as of March 31, 2014, had repurchased 8,596,719 shares at an average price of $11.93 per share, at a total cost of $102.6 million.  There were no shares repurchased subsequent to March 31, 2014 through the date of this release.  This plan, under which $72.4 million remained available as of the date of this release, has no expiration date.

The following table presents the balance of stockholders' equity and related information as of the dates presented.

 














March 31, 2014


September 30, 2013


March 31, 2013


(Dollars in thousands)

Stockholders' equity

$

1,530,005



$

1,632,126



$

1,643,007


Equity to total assets at end of period


16.8%




17.8%




17.5%


 

The following table presents a reconciliation of total and net shares outstanding as of March 31, 2014.  

 





 Total shares outstanding

143,120,893

 Less unallocated ESOP shares and unvested restricted stock

(4,660,423)

 Net shares outstanding

138,460,470

 

Consistent with our goal to operate a sound and profitable financial institution, we actively seek to maintain a "well-capitalized" status for the Bank in accordance with regulatory standards.  As of March 31, 2014, the Bank exceeded all regulatory capital requirements.  The following table presents the Bank's regulatory capital ratios at March 31, 2014 based upon regulatory guidelines.

 










Regulatory





Requirement For



Bank


"Well-Capitalized"



Ratios


 Status

Tier 1 leverage ratio


14.6%


5.0%

Tier 1 risk-based capital


34.6


6.0

Total risk-based capital


34.8


10.0

 

A reconciliation of the Bank's equity under accounting principles generally accepted in the United States of America ("GAAP") to regulatory capital amounts as of March 31, 2014 is as follows (dollars in thousands):

 




Total Bank equity as reported under GAAP

$

1,337,898

Unrealized gains on AFS securities


(5,026)

Total Tier 1 capital


1,332,872

Allowance for credit losses ("ACL")


8,967

Total risk-based capital

$

1,341,839

 

 

 

 

CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS (Unaudited)

(Dollars in thousands)

 








March 31,


September 30,


2014


2013

ASSETS:






Cash and cash equivalents (includes interest-earning deposits of $94,431 and $99,735)

$

114,835


$

113,886

Securities:






AFS at estimated fair value (amortized cost of $887,543 and $1,058,283)


895,623



1,069,967

Held-to-maturity at amortized cost (estimated fair value of $1,735,084 and $1,741,846)


1,720,283



1,718,023

Loans receivable, net (ACL of $8,967 and $8,822)


6,053,897



5,958,868

BOLI


60,163



59,495

Capital stock of FHLB, at cost


125,829



128,530

Accrued interest receivable


23,192



23,596

Premises and equipment, net


70,218



70,112

OREO


3,667



3,882

Other assets


47,710



40,090

TOTAL ASSETS

$

9,115,417


$

9,186,449







LIABILITIES:






Deposits

$

4,693,762


$

4,611,446

FHLB borrowings


2,467,169



2,513,538

Repurchase agreements


320,000



320,000

Advance payments by borrowers for taxes and insurance


50,169



57,392

Income taxes payable


3,021



108

Deferred income tax liabilities, net


20,781



20,437

Accounts payable and accrued expenses


30,510



31,402

Total liabilities


7,585,412



7,554,323







STOCKHOLDERS' EQUITY:






Preferred stock ($0.01 par value) 100,000,000 shares authorized; no shares issued or outstanding


--



--

Common stock ($0.01 par value) 1,400,000,000 shares authorized; 143,120,893 and 147,840,268






shares issued and outstanding as of March 31, 2014 and September 30, 2013, respectively


1,431



1,478

Additional paid-in capital


1,197,668



1,235,781

Unearned compensation, ESOP


(43,777)



(44,603)

Retained earnings


369,657



432,203

AOCI, net of tax


5,026



7,267

Total stockholders' equity


1,530,005



1,632,126

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

9,115,417


$

9,186,449

 

Capitol Federal Financial, Inc. is the holding company for the Bank.  The Bank has 47 branch locations in Kansas and Missouri.  The Bank is one of the largest residential lenders in the State of Kansas.  News and other information about the Company can be found on the Internet at the Bank's website, http://www.capfed.com.

Except for the historical information contained in this press release, the matters discussed may be deemed to be forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties, including changes in economic conditions in the Company's market area, changes in policies by regulatory agencies and other governmental initiatives affecting the financial services industry, fluctuations in interest rates, demand for loans in the Company's market area, the future earnings and capital levels of Capitol Federal Savings Bank, which would affect the ability of the Capitol Federal Financial, Inc. to pay dividends in accordance with its dividend policies, competition, and other risks detailed from time to time in documents filed or furnished by Capitol Federal Financial, Inc. with the SEC.  Actual results may differ materially from those currently expected.  These forward-looking statements represent Capitol Federal Financial, Inc.'s judgment as of the date of this release.  Capitol Federal Financial, Inc. disclaims, however, any intent or obligation to update these forward-looking statements.


Supplemental Financial Information

Loan Portfolio

The following table presents information related to the composition of our loan portfolio in terms of dollar amounts and percentages (before deductions for undisbursed loan funds, unearned loan fees and deferred costs, and ACL) as of the dates indicated.

 






























March 31, 2014


December 31, 2013


September 30, 2013






% of






% of






% of


Amount


Rate


Total


Amount


Rate


Total


Amount


Rate


Total


(Dollars in thousands)

Real estate loans:



























One- to four-family

$

5,840,337


3.75%



95.5%



$

5,811,216


3.76%



95.3%



$

5,743,047


3.77%



95.5%


Multi-family and commercial


47,505


4.83



0.8




41,745


5.00



0.7




50,358


5.22



0.9


Construction


94,286


3.79



1.5




101,638


3.71



1.7




77,743


3.63



1.3


Total real estate loans


5,982,128


3.75



97.8




5,954,599


3.77



97.7




5,871,148


3.78



97.7





























Consumer loans:



























Home equity


130,321


5.22



2.1




135,023


5.22



2.2




135,028


5.26



2.2


Other


4,991


4.29



0.1




5,467


4.31



0.1




5,623


4.41



0.1


Total consumer loans


135,312


5.18



2.2




140,490


5.19



2.3




140,651


5.23



2.3





























Total loans receivable


6,117,440


3.79



100.0%




6,095,089


3.80



100.0%




6,011,799


3.82



100.0%





























Less:



























Undisbursed loan funds


55,505









61,480









42,807







ACL


8,967









8,919









8,822







Discounts/unearned loan fees


23,653









23,540









23,057







Premiums/deferred costs


(24,582)









(23,439)









(21,755)







Total loans receivable, net

$

6,053,897








$

6,024,589








$

5,958,868







 

The following table presents, for our portfolio of one- to four-family loans, the amount, percentage of total, weighted average credit score, weighted average loan-to-value ("LTV") ratio, and the average balance per loan at the dates presented.  Credit scores are updated at least semiannually, with the last update in March 2014, from a nationally recognized consumer rating agency.  The LTV ratios were based on the current loan balance and either the lesser of the purchase price or original appraisal, or the most recent Bank appraisal.  In most cases, the most recent appraisal was obtained at the time of origination.

 












































March 31, 2014


December 31, 2013


September 30, 2013





% of


Credit





Average





% of


Credit





Average





% of


Credit





Average


Amount


Total


Score


LTV


Balance


Amount


Total


Score


LTV


Balance


Amount


Total


Score


LTV


Balance


(Dollars in thousands)

Originated

$

4,017,833


68.8%



765


64%



$

127


$

4,046,815


69.6%



763


64%



$

127


$

4,054,436


70.6%



763


65%



$

127

Correspondent purchased


1,217,524


20.8



764


67




334



1,144,112


19.7



761


67




336



1,044,127


18.2



761


67




341

Bulk purchased


604,980


10.4



748


67




312



620,289


10.7



748


67




313



644,484


11.2



747


67




316


$

5,840,337


100.0%



763


65




157


$

5,811,216


100.0%



761


65




156


$

5,743,047


100.0%



761


65




155

 

Our portfolio of correspondent purchased loans increased $173.4 million, or 16.6%, from September 30, 2013 to $1.22 billion at March 31, 2014, of which $873.9 million are serviced by the Bank and $343.6 million are serviced by our mortgage sub-servicer.  The mortgage sub-servicer has experience servicing loans in the market areas in which we purchase loans and services the loans according to the Bank's servicing standards, which is intended to allow the Bank greater control over servicing and help maintain a standard of loan performance.

Loan Commitments

The following table summarizes our one- to four-family loan origination, refinance, and correspondent purchase commitments as of March 31, 2014, along with associated weighted average rates.  Commitments generally have fixed expiration dates or other termination clauses and may require the payment of a rate lock fee.  A percentage of the commitments are expected to expire unfunded, so the amounts reflected in the table below are not necessarily indicative of future cash requirements.

















Fixed-Rate











15 years


More than


Adjustable-


Total


or less


15 years


Rate


Amount


Rate



(Dollars in thousands)




Originate:















< 4.00%

$

8,082


$

5,121


$

19,209


$

32,412


3.35%


>= 4.00%


96



29,268



--



29,364


4.42




8,178



34,389



19,209



61,776


3.86

















Correspondent:















< 4.00%


19,521



1,776



52,455



73,752


3.31


>= 4.00%


--



83,738



--



83,738


4.32




19,521



85,514



52,455



157,490


3.85

















Total:















< 4.00%


27,603



6,897



71,664



106,164


3.32


>= 4.00%


96



113,006



--



113,102


4.35



$

27,699


$

119,903


$

71,664


$

219,266


3.85


Rate


3.43%



4.31%



3.22%







 

Loan Activity

The following tables summarize activity in the loan portfolio, along with weighted average rates where applicable, for the periods indicated, excluding changes in undisbursed loan funds, ACL, discounts/unearned loan fees, and premiums/deferred costs.  Loans that were paid-off as a result of refinances are included in repayments.  Purchased loans include purchases from correspondent and nationwide lenders.  Loan endorsements are not included in the activity in the following table because a new loan is not generated at the time of the endorsement.  The endorsed balance and rate are included in the ending loan portfolio balance and rate.  During the six months ended March 31, 2014 and 2013, the Bank endorsed $13.8 million and $375.4 million of one- to four-family loans, respectively, reducing the average rate on those loans by 111 basis points in each period.


























For the Three Months Ended


March 31, 2014


December 31, 2013


September 30, 2013


June 30, 2013


Amount


Rate


Amount


Rate


Amount


Rate


Amount


Rate


(Dollars in thousands)

Beginning balance

$

6,095,089


3.80%



$

6,011,799


3.82%



$

5,839,861


3.86%



$

5,763,055


3.94%


Originated and refinanced:
























Fixed


63,921


4.09




108,829


3.95




217,328


3.70




182,177


3.35


Adjustable


38,790


3.76




45,273


3.76




44,090


3.75




31,713


3.87


Purchased and participations:
























Fixed


65,793


4.00




94,535


4.00




167,490


3.61




132,391


3.36


Adjustable


32,932


3.27




45,541


3.34




41,479


2.75




23,499


2.77


Repayments


(177,411)






(209,931)






(297,318)






(292,110)




Principal (charge-offs) recoveries, net


(112)






(418)






83






(33)




Other


(1,562)






(539)






(1,214)






(831)




Ending balance

$

6,117,440


3.79



$

6,095,089


3.80



$

6,011,799


3.82



$

5,839,861


3.86
















For the Six Months Ended


March 31, 2014


March 31, 2013


Amount


Rate


Amount


Rate



(Dollars in thousands)

Beginning balance

$

6,011,799


3.82%



$

5,649,156


4.15%


Originated and refinanced:












Fixed


172,750


4.01




389,701


3.26


Adjustable


84,063


3.76




62,640


3.71


Purchased and participations:












Fixed


160,328


4.00




208,097


3.32


Adjustable


78,473


3.31




40,579


2.67


Repayments


(387,342)






(581,197)




Principal (charge-offs) recoveries, net


(530)






(1,261)




Other


(2,101)






(4,660)




Ending balance

$

6,117,440


3.79



$

5,763,055


3.94


The following table presents loan origination, refinance, and purchase activity for the periods indicated, excluding endorsement activity, along with associated weighted average rates and percent of total.  Loan originations, purchases and refinances are reported together.  The fixed-rate one- to four-family loans less than or equal to 15 years have an original maturity at origination of less than or equal to 15 years, while fixed-rate one- to four-family loans greater than 15 years have an original maturity at origination of greater than 15 years.  The adjustable-rate one- to four-family loans less than or equal to 36 months have a term to first reset of less than or equal to 36 months at origination and adjustable-rate one- to four-family loans greater than 36 months have a term to first reset of greater than 36 months at origination.

 





















For the Three Months Ended


For the Six Months Ended


March 31, 2014


March 31, 2014


Amount


Rate


% of Total


Amount


Rate


% of Total

Fixed-rate:

(Dollars in thousands)

One- to four-family:


















<= 15 years

$

35,695


3.39%



17.7%



$

87,098


3.35%



17.6%


> 15 years


89,806


4.28



44.6




235,865


4.22



47.6


Multi-family and commercial real estate


3,600


4.13



1.8




8,600


4.05



1.7


Home equity


444


6.17



0.2




1,177


6.10



0.2


Other


169


9.10



0.1




338


10.09



0.1


Total fixed-rate


129,714


4.04



64.4




333,078


4.00



67.2




















Adjustable-rate:


















One- to four-family:


















<= 36 months


1,480


2.78



0.7




3,510


2.77



0.7


> 36 months


53,190


3.20



26.4




111,162


3.14



22.4


Multi-family and commercial real estate


2,595


4.75



1.3




14,358


4.34



2.9


Home equity


13,999


4.66



7.0




32,738


4.65



6.6


Other


458


3.26



0.2




768


3.11



0.2


Total adjustable-rate


71,722


3.54



35.6




162,536


3.54



32.8




















Total originated, refinanced and purchased

$

201,436


3.86



100.0%



$

495,614


3.85



100.0%




















Purchased and participation loans included above:


















Fixed-rate:


















Correspondent - one- to four-family

$

65,793


4.00






$

155,328


4.00





Participations - commercial real estate


--


--







5,000


4.00





Total fixed-rate purchased/participations


65,793


4.00







160,328


4.00























Adjustable-rate:


















Correspondent - one- to four-family


30,337


3.14







64,115


3.08





Participations - commercial real estate


2,595


4.75







14,358


4.34





Total adjustable-rate purchased/participations


32,932


3.27







78,473


3.31























Total purchased/participation loans

$

98,725


3.75






$

238,801


3.77





 

The following table presents originated, refinanced, and correspondent activity in our one- to four-family loan portfolio, excluding endorsement and construction activity, along with associated weighted average LTVs and weighted average credit scores for the periods indicated.

 


















For the Three Months Ended


For the Six Months Ended


March 31, 2014


March 31, 2014






Credit






Credit


Amount


LTV


Score


Amount


LTV


Score


(Dollars in thousands)

Originated

$

70,125


77%



762


$

185,631


77%



766

Refinanced by Bank customers


13,916


67



763



32,561


69



761

Correspondent purchased


96,130


74



762



219,443


74



761


$

180,171


75



762


$

437,635


75



763

 

The following table presents the amount, percentage of total, and weighted average rate, by state, for one- to four-family loan originations and correspondent purchases where originations and purchases in the state exceeded $1.5 million during the six months ended March 31, 2014.  

 























For the Three Months Ended


For the Six Months Ended



March 31, 2014


March 31, 2014

State


Amount


% of Total


Rate


Amount


% of Total


Rate



(Dollars in thousands)

Kansas


$

85,596


47.5%



3.81%



$

218,510


49.9%



3.78%


Missouri



56,261


31.2



3.79




131,620


30.1



3.77


Texas



13,154


7.3



3.70




27,493


6.3



3.77


Tennessee



5,362


3.0



3.91




16,113


3.7



3.77


Alabama



7,206


4.0



3.72




15,268


3.5



3.48


Oklahoma



3,501


1.9



3.95




9,498


2.2



4.05


North Carolina



1,747


1.0



2.93




5,092


1.1



3.28


Other states



7,344


4.1



3.44




14,041


3.2



3.64




$

180,171


100.0%



3.77



$

437,635


100.0%



3.76


The following tables present the annualized prepayment speeds of our one- to four-family loan portfolio for the monthly and quarterly periods indicated.  The balances represent the unpaid principal balance of one- to four-family loans, and the terms represent the contractual terms for our fixed-rate loans, and current terms to repricing for our adjustable-rate loans.  Loan refinances are considered a prepayment and are included in the prepayment speeds presented below.  The annualized prepayment speeds are presented with and without endorsements.  During the quarters ended March 31, 2014 and December 31, 2013, the Bank endorsed $5.9 million and $7.9 million of one- to four-family loans, respectively, reducing the average rate on those loans by 84 basis points and 131 basis points, respectively.






















March 31, 2014






Monthly Prepayment


Quarterly Prepayment


Net Premiums/






Speeds (annualized)


Speeds (annualized)


Deferred Costs



Unpaid


Including


Excluding


Including


Excluding


 & (Discounts/

Term


Principal


Endorsements


Endorsements


Endorsements


Endorsements


Unearned Loan Fees)



(Dollars in thousands)

Fixed-rate one- to four-family loans:



















15 years or less


$

1,164,141


7.8%



7.8%



7.8%



7.8%



$

213

More than 15 years



3,583,818


5.8



5.4



5.4



5.0




(4,014)




4,747,959


6.3



6.0



6.0



5.7




(3,801)




















Adjustable-rate one- to four-family loans:



















36 months or less



795,695


13.2



10.3



11.3



10.3




2,554

More than 36 months



371,996


6.1



6.1



5.7



5.7




2,293




1,167,691


11.1



9.0



9.6



8.9




4,847

Total one- to four-family loans


$

5,915,650


7.2



6.6



6.7



6.3



$

1,046






















December 31, 2013






Monthly Prepayment


Quarterly Prepayment


Net Premiums/






Speeds (annualized)


Speeds (annualized)


Deferred Costs



Unpaid


Including


Excluding


Including


Excluding


 & (Discounts/

Term


Principal


Endorsements


Endorsements


Endorsements


Endorsements


Unearned Loan Fees)



(Dollars in thousands)

Fixed-rate one- to four-family loans:



















15 years or less


$

1,177,946


7.2%



6.8%



7.2%



7.0%



$

(42)

More than 15 years



3,567,066


6.5



6.0



7.3



6.6




(4,622)




4,745,012


6.7



6.2



7.3



6.7




(4,664)




















Adjustable-rate one- to four-family loans:



















36 months or less



792,578


17.2



16.9



15.1



14.4




2,556

More than 36 months



353,085


12.2



12.2



9.1



9.1




2,095




1,145,663


15.7



15.5



13.3



12.8




4,651

Total one- to four-family loans


$

5,890,675


8.4



8.0



8.4



7.9



$

(13)


Asset Quality

The following tables present loans 30 to 89 days delinquent, non-performing loans, and OREO at the dates indicated.  Of the loans 30 to 89 days delinquent at March 31, 2014, approximately 77% were 59 days or less delinquent.  Non-performing loans are loans that are 90 or more days delinquent or in foreclosure and nonaccrual loans less than 90 days delinquent but are required to be reported as nonaccrual pursuant to Office of the Comptroller of the Currency ("OCC") reporting requirements, even if the loans are current.  Non-performing assets include non-performing loans and OREO.  Over the past 12 months, OREO properties were owned by the Bank, on average, for approximately four months before they were sold.

 





























Loans Delinquent for 30 to 89 Days at:



March 31, 2014


December 31, 2013


September 30,  2013


June 30, 2013


March 31, 2013



Number


Amount


Number


Amount


Number


Amount


Number


Amount


Number


Amount



(Dollars in thousands)


One- to four-family:


























Originated

119


$

13,139


178


$

16,956


164


$

18,225


137


$

12,838


124


$

13,718


Correspondent purchased

5



998


4



2,243


5



709


4



704


5



1,054


Bulk purchased

33



7,272


37



7,858


37



7,733


28



6,012


42



9,190


Consumer Loans:


























Home equity

35



665


41



721


45



848


40



869


40



719


Other

14



52


17



100


13



35


13



158


14



104



206


$

22,126


277


$

27,878


264


$

27,550


222


$

20,581


225


$

24,785


30 to 89 days delinquent loans


























to total loans receivable, net




0.37%





0.46%





0.46%





0.36%





0.43

%

 




























Non-Performing Loans and OREO at:



March 31, 2014


December 31, 2013


September 30,  2013


June 30, 2013


March 31, 2013



Number


Amount


Number


Amount


Number


Amount


Number


Amount


Number


Amount


Loans 90 or More Days Delinquent or in Foreclosure:

(Dollars in thousands)


One- to four-family:


























Originated

95


$

9,508


110


$

9,931


101


$

8,579


91


$

8,017


85


$

7,687


Correspondent purchased

2



443


5



635


5



812


4



609


4



642


Bulk purchased

33



10,301


33



10,134


34



9,608


37



9,535


40



9,408


Consumer loans:


























Home equity

23



305


29



477


29



485


21



295


22



393


Other

4



8


8



11


4



5


7



23


5



26



157



20,565


185



21,188


173



19,489


160



18,479


156



18,156


Nonaccrual loans less than 90 Days Delinquent:(1)


























One- to four-family:


























Originated

66



7,111


65



6,057


57



5,833


62



7,578


61



6,893


Correspondent purchased

1



478


--



--


2



740


--



--


1



433


Bulk purchased

4



472


3



392


2



280


2



168


4



711


Consumer loans:


























Home equity

4



74


6



78


6



101


8



174


7



150



75



8,135


74



6,527


67



6,954


72



7,920


73



8,187


Total non-performing loans

232



28,700


259



27,715


240



26,443


232



26,399


229



26,343




























Non-performing loans as a percentage of total loans(2)




0.47%





0.46%





0.44%





0.46%





0.46%




























OREO:


























One- to four-family:


























Originated(3)

26


$

1,548


22


$

1,531


28


$

2,074


34


$

3,283


51


$

4,219


Correspondent purchased

4



403


1



110


2



71


3



269


2



173


Bulk purchased

4



398


6



647


4



380


4



581


5



830


Consumer loans:


























Home equity

1



18


2



57


2



57


3



66


4



60


Other(4)

1



1,300


1



1,300


1



1,300


1



1,300


1



1,400



36



3,667


32



3,645


37



3,882


45



5,499


63



6,682


Total non-performing assets

268


$

32,367


291


$

31,360


277


$

30,325


277


$

31,898


292


$

33,025




























Non-performing assets as a percentage of total assets




0.36%





0.34%





0.33%





0.35%





0.35%


 

(1)     Represents loans required to be reported as nonaccrual pursuant to OCC reporting requirements, even if the loans are current.  At March 31, 2014, December 31, 2013, September 30, 2013, June 30, 2013 and March 31, 2013, this amount was comprised of $881 thousand, $1.1 million, $1.1 million, $1.1 million, and $975 thousand, respectively, of loans that were 30 to 89 days delinquent and are reported as such, and $7.3 million, $5.4 million, $5.9 million, $6.8 million, and $7.2 million, respectively, of loans that were current.

(2)     Excluding loans required to be reported as nonaccrual pursuant to OCC reporting requirements, even if the loans are current, non-performing loans as a percentage of total loans were 0.34%, 0.35%, 0.33%, 0.32%, and 0.32% at March 31, 2014, December 31, 2013, September 30, 2013, June 30, 2013, and March 31, 2013, respectively.

(3)     Real estate-related consumer loans where we also hold the first mortgage are included in the one- to four-family category as the underlying collateral is one- to four-family property.

(4)     Other represents a single property the Bank purchased for a potential branch site but now intends to sell.

 

 

The following tables present the ACL activity and related ratios at the dates and for the periods indicated.  Of the $1.3 million of net charge-offs during the six months ended March 31, 2013, $372 thousand was due to loans that were primarily discharged in a prior fiscal year under Chapter 7 bankruptcy that had to be, pursuant to OCC reporting requirements, evaluated for collateral value loss, even if they were current.  

 



















For the Three Months Ended



March 31,


December 31,


September 30,


June 30,


March 31,



2014


2013


2013


2013


2013



(Dollars in thousands)


Balance at beginning of period

$

8,919


$

8,822


$

9,239


$

10,072


$

10,477


Charge-offs:
















One- to four-family loans - originated


(31)



(88)



(74)



(60)



(282)


One- to four-family loans - correspondent purchased


(21)



--



--



--



(2)


One- to four-family loans - bulk purchased


(60)



(327)



(76)



--



(153)


Multi-family and commercial loans


--



--



--



--



--


Construction


--



--



--



--



--


Home equity


(6)



(10)



(13)



(111)



(19)


Other consumer loans


(3)



--



--



--



(1)


Total charge-offs


(121)



(425)



(163)



(171)



(457)


Recoveries:
















One- to four-family loans - originated


--



1



1



13



--


One- to four-family loans - correspondent purchased


--



--



--



--



--


One- to four-family loans - bulk purchased


--



--



238



118



42


Multi-family and commercial loans


--



--



--



--



--


Construction


--



--



--



--



--


Home equity


9



6



7



7



9


Other consumer loans


--



--



--



--



1


Total recoveries


9



7



246



138



52


Net (charge-offs) recoveries


(112)



(418)



83



(33)



(405)


Provision for credit losses


160



515



(500)



(800)



--


Balance at end of period

$

8,967


$

8,919


$

8,822


$

9,239


$

10,072


















Ratio of net charge-offs during the period
















to average loans outstanding during the period


--%



0.01%



--%



--%



0.01%


Ratio of net charge-offs (recoveries) during
















the period to average non-performing assets


0.35



1.35



(0.27)



0.10



1.19


ACL to non-performing loans at end of period


31.24



32.18



33.36



35.00



38.23


ACL to loans receivable, net at end of period


0.15



0.15



0.15



0.16



0.18



















 










For the Six Months Ended



March 31,



2014


2013



(Dollars in thousands)


Balance at beginning of period

$

8,822


$

11,100


Charge-offs:







One- to four-family loans - originated


(119)



(490)


One- to four-family loans - correspondent purchased


(21)



(13)


One- to four-family loans - bulk purchased


(387)



(685)


Multi-family and commercial loans


--



--


Construction


--



--


Home equity


(16)



(128)


Other consumer loans


(3)



(7)


Total charge-offs


(546)



(1,323)


Recoveries:







One- to four-family loans - originated


1



--


One- to four-family loans - correspondent purchased


--



--


One- to four-family loans - bulk purchased


--



42


Multi-family and commercial loans


--



--


Construction


--



--


Home equity


15



19


Other consumer loans


--



1


Total recoveries


16



62


Net (charge-offs)


(530)



(1,261)


Provision for credit losses


675



233


Balance at end of period

$

8,967


$

10,072









Ratio of net charge-offs during the period







to average loans outstanding during the period


0.01%



0.02%


Ratio of net charge-offs during the







period to average non-performing assets


1.69



3.46


ACL to non-performing loans at end of period


31.24





ACL to loans receivable, net at end of period


0.15





ACL to net charge-offs (annualized)


8.5x



4.0x


 

Securities Portfolio

The following table presents the distribution of our MBS and investment securities portfolio, at amortized cost, at the dates indicated.  The majority of the MBS and investment securities portfolio are composed of securities issued by U.S. government-sponsored enterprises ("GSEs").  Overall, fixed-rate securities comprised 78% of these portfolios at March 31, 2014.  The weighted average life ("WAL") is the estimated remaining maturity (in years) after three-month historical prepayment speeds and projected call option assumptions have been applied.  Weighted average yields on tax-exempt securities are not calculated on a fully taxable equivalent basis.  

 




























March 31, 2014


December 31, 2013


September 30, 2013



Amount


Yield


WAL


Amount


Yield


WAL


Amount


Yield


WAL



(Dollars in thousands)

Fixed-rate securities:

























MBS

$

1,423,363


2.41%



4.1


$

1,384,297


2.46%



4.1


$

1,427,648


2.44%



3.5


GSE debentures


579,853


1.04



3.5



658,834


1.03



3.3



709,118


1.04



2.8


Municipal bonds


36,830


2.55



2.0



36,304


2.68



1.9



35,587


3.02



1.5


Total fixed-rate securities


2,040,046


2.02



3.9



2,079,435


2.01



3.8



2,172,353


1.99



3.3



























Adjustable-rate securities:

























MBS


565,242


2.29



6.3



572,721


2.31



6.0



601,359


2.32



4.9


Trust preferred securities


2,538


1.49



23.2



2,579


1.50



23.5



2,594


1.51



23.7


Total adjustable-rate securities


567,780


2.28



6.4



575,300


2.31



6.1



603,953


2.31



4.9


Total securities portfolio

$

2,607,826


2.08



4.4


$

2,654,735


2.07



4.3


$

2,776,306


2.06



3.7


MBS:  The following tables provide a summary of the activity in our MBS portfolio for the periods presented.  The weighted average yields and WALs for purchases are presented as recorded at the time of purchase.  The yields for the beginning balances are as of the last day of the period previous to the period presented and the yields for the ending balances are as of the last day of the period presented and are generally derived from recent prepayment activity on the securities in the portfolio as of the dates presented.  The beginning and ending WAL is the estimated remaining maturity (in years) after three-month historical prepayment speeds have been applied.  Fixed-rate MBS purchased during the current quarter were generally comprised of loans with contractual terms-to-maturity of 15 years or less to help mitigate exposure to rising interest rates.

 


































For the Three Months Ended


March 31,  2014


December 31, 2013


September 30, 2013


June 30, 2013


Amount


Yield


WAL


Amount


Yield


WAL


Amount


Yield


WAL


Amount


Yield


WAL


(Dollars in thousands)

Beginning balance - carrying value

$

1,975,164


2.42%



4.7


$

2,047,708


2.40%



3.9


$

2,179,539


2.39%



3.6


$

2,358,095


2.45%



3.6

Maturities and repayments


(92,609)








(95,864)








(149,555)








(171,699)






Net amortization of (premiums)/discounts


(1,271)








(1,397)








(1,688)








(2,049)






Purchases:
































Fixed


103,730


1.74



3.9



25,272


1.72



3.7



--


--



--



--


--



--

Adjustable


21,737


1.92



5.2



--


--



--



22,246


1.80



5.1



--


--



--

Change in valuation on AFS securities


(1,613)








(555)








(2,834)








(4,808)






Ending balance - carrying value

$

2,005,138


2.37



4.7


$

1,975,164


2.42



4.7


$

2,047,708


2.40



3.9


$

2,179,539


2.39



3.6

 

 


















For the Six Months Ended


March 31,  2014


March 31,  2013


Amount


Yield


WAL


Amount


Yield


WAL



(Dollars in thousands)

Beginning balance - carrying value

$

2,047,708


2.40%



3.9


$

2,332,942


2.78%



4.0

Maturities and repayments


(188,473)








(382,077)






Net amortization of (premiums)/discounts


(2,668)








(4,248)






Purchases:
















Fixed


129,002


1.73



3.8



420,272


1.24



3.9

Adjustable


21,737


1.92



5.2



--


--



--

Change in valuation on AFS securities


(2,168)








(8,794)






Ending balance - carrying value

$

2,005,138


2.37



4.7


$

2,358,095


2.45



3.6

 

The following table presents the annualized prepayment speeds of our MBS portfolio for the monthly and quarterly periods ended March 31, 2014, along with associated net premium/(discount) information, weighted average rates for the portfolio, and weighted average remaining contractual terms (in years) for the portfolio.  The annualized prepayment speeds are based on actual prepayment activity.  Prepayments impact the amortization/accretion of premiums/discounts on our MBS portfolio.  As prepayments increase, the related premiums/discounts are amortized/accreted at a faster rate.  The amortization of premiums decreases interest income while the accretion of discounts increases interest income.  The balances in the following table represent the amortized cost of MBS, and the terms represent the contractual terms for our fixed-rate MBS and current terms to repricing for our adjustable-rate MBS.

 

















March 31, 2014





Prepayment


Net



Amortized


Speed (annualized)


Premium/

Term


Cost


Monthly


Quarterly


(Discount)



(Dollars in thousands)

Fixed-rate MBS:













15 years or less


$

1,334,109


7.5%



8.0%



$

17,969

More than 15 years



89,254


8.7



10.5




1,012




1,423,363


7.5



8.2




18,981

Rate



3.63%










Remaining contractual term (years)



10.4























Adjustable-rate MBS:













36 months or less


$

481,441


9.3



13.0




935

More than 36 months



83,801


13.1



11.1




1,661




565,242


9.8



12.7




2,596

Rate



2.94%










Remaining contractual term (years)



23.8























Total MBS


$

1,988,605


8.2



9.5



$

21,577

Rate



3.43%










Remaining contractual term (years)



14.2










Investment Securities:  The following tables provide a summary of the activity in investment securities portfolio for the periods presented.  The weighted average yields and WALs for purchases are presented as recorded at the time of purchase.  The yields for the beginning balances are as of the last day of the period previous to the period presented and the yields for the ending balances are as of the last day of the period presented.  The beginning and ending WALs represent the estimated remaining maturity (in years) of the securities after projected call dates have been considered, based upon market rates at each date presented.  Of the $129.8 million of fixed-rate investment securities purchased during the six months ended March 31, 2014, $123.2 million are callable.

 


































For the Three Months Ended


March 31,  2014


December 31, 2013


September 30, 2013


June 30, 2013


Amount


Yield


WAL


Amount


Yield


WAL


Amount


Yield


WAL


Amount


Yield


WAL


(Dollars in thousands)

Beginning balance - carrying value

$

686,913


1.11%



3.3


$

740,282


1.14%



2.9


$

807,399


1.14%



3.2


$

841,127


1.14%



2.3

Maturities and calls


(177,805)








(79,860)








(69,838)








(50,864)






Net amortization of (premiums)/discounts


(84)








(114)








(117)








(76)






Purchases:
































Fixed


99,393


0.91



2.0



30,392


1.29



4.4



--


--



--



29,310


1.48



4.8

Change in valuation of AFS securities


2,351








(3,787)








2,838








(12,098)






Ending balance - carrying value

$

610,768


1.13



3.5


$

686,913


1.11



3.3


$

740,282


1.14



2.9


$

807,399


1.14



3.2


































For the Six Months Ended


March 31,  2014


March 31,  2013


Amount


Yield


WAL


Amount


Yield


WAL


(Dollars in thousands)

Beginning balance - carrying value

$

740,282


1.14%



2.9


$

961,849


1.23%



1.0

Maturities and calls


(257,665)








(498,332)






Net amortization of (premiums)/discounts


(198)








(267)






Purchases:
















Fixed


129,785


1.00



2.6



379,416


0.96



1.9

Change in valuation of AFS securities


(1,436)








(1,539)






Ending balance - carrying value

$

610,768


1.13



3.5


$

841,127


1.14



2.3

















Deposit Portfolio

The following table presents the amount, weighted average rate and percentage of total deposits for noninterest-bearing checking, interest-bearing checking, savings, money market, retail certificates of deposit, and public units/brokered deposits at the dates presented. 

 






























March 31, 2014


December 31, 2013


September 30, 2013







% of






% of






% of



Amount


Rate


 Total


Amount


Rate


 Total


Amount


Rate


 Total



(Dollars in thousands)

Noninterest-bearing checking

$

168,276


--%



3.5%



$

155,446


--%



3.3%



$

150,171


--%



3.2%



Interest-bearing checking


547,872


0.05



11.7




525,363


0.05



11.4




505,762


0.05



11.0



Savings


298,324


0.10



6.4




285,906


0.10



6.2




283,169


0.13



6.1



Money market


1,139,836


0.23



24.3




1,149,229


0.23



24.9




1,128,604


0.23



24.5



Retail certificates of deposit


2,240,792


1.23



47.7




2,203,775


1.24



47.7




2,242,909


1.27



48.7



Public units/brokered deposits


298,662


0.80



6.4




301,189


0.79



6.5




300,831


0.80



6.5




$

4,693,762


0.71



100.0%



$

4,620,908


0.71



100.0%



$

4,611,446


0.74



100.0%



 

The following table presents scheduled maturities of our certificates of deposit, along with associated weighted average rates, as of March 31, 2014: 

 























Amount Due













More than



More than













1 year



1 year to



2 years to



More than


Total

Rate range



or less



2 years



3 years



3 years



Amount


Rate




(Dollars in thousands)




0.00 – 0.99%


$

841,603


$

204,367


$

64,570


$

27,217


$

1,137,757


0.46%


1.00 – 1.99%



220,407



184,985



245,123



314,285



964,800


1.40


2.00 – 2.99%



205,617



181,766



16,255



1,722



405,360


2.52


3.00 – 3.99%



13,246



17,287



257



268



31,058


3.06


4.00 – 4.99%



222



257



--



--



479


4.40




$

1,281,095


$

588,662


$

326,205


$

343,492


$

2,539,454


1.18





















Percent of total



50.5%



23.2%



12.8%



13.5%







Weighted average rate



0.93



1.47



1.41



1.36







Weighted average maturity (in years)



0.5



1.4



2.4



3.7



1.4




Weighted average maturity for the retail certificate of deposit portfolio (in years)




1.5




Borrowings

The following table presents the maturity of FHLB advances, at par, and repurchase agreements, along with associated weighted average contractual and weighted average effective rates as of March 31, 2014. 

 
















FHLB


Repurchase





Maturity by


Advances


Agreements


Contractual


Effective

Fiscal Year


Amount


Amount


Rate


Rate(1)



(Dollars in thousands)







2014


$

100,000


$

100,000


3.42%



3.50%


2015



600,000



20,000


1.73



1.96


2016



575,000



--


2.29



2.91


2017



500,000



--


2.69



2.72


2018



200,000



100,000


2.90



2.90


2019



100,000



--


1.29



1.29


2020



250,000



100,000


2.18



2.18


2021



150,000



--


2.59



2.59




$

2,475,000


$

320,000


2.35



2.54


(1)     The effective rate includes the net impact of the amortization of deferred prepayment penalties resulting from the prepayment of certain FHLB advances and deferred gains related to terminated interest rate swaps.

 

The following table presents the maturity and weighted average repricing rate, which is also the weighted average effective rate, of borrowings and certificates of deposit, split between retail and public unit/brokered deposit amounts, for the next four quarters as of March 31, 2014.

 







































Public Unit/















Retail




Brokered








Maturity by


Borrowings


Repricing


Certificate


Repricing


Deposit


Repricing





Repricing

Quarter End


Amount


Rate


Amount


Rate


Amount


Rate


Total


Rate



(Dollars in thousands)

June 30, 2014


$

100,000


2.80%



$

238,471


0.83%



$

101,815


0.63%



$

440,286


1.23%


September 30, 2014



100,000


4.20




356,767


1.06




54,619


0.27




511,386


1.59


December 31, 2014



250,000


0.84




246,226


1.06




32,909


0.29




529,135


0.91


March 31, 2015



250,000


2.46




231,957


1.16




18,331


0.27




500,288


1.78




$

700,000


2.18



$

1,073,421


1.03



$

207,674


0.45



$

1,981,095


1.38


The following tables present FHLB advance activity, at par, and repurchase agreement activity for the periods shown.  Line of credit activity is excluded from the following table due to the short-term nature of the borrowings.  The weighted average effective rate includes the net impact of the amortization of deferred prepayment penalties resulting from the prepayment of certain FHLB advances and deferred gains related to interest rate swaps previously terminated.  Rates on new borrowings are fixed-rate.  The weighted average maturity ("WAM") is the remaining weighted average contractual term in years.  The beginning and ending WAMs represent the remaining maturity at each date presented.  For new borrowings, the WAMs presented are as of the date of issue. 

 


































For the Three Months Ended


March 31, 2014


December 31, 2013


September 30, 2013


June 30, 2013





Effective







Effective







Effective







Effective




Amount


Rate


WAM


Amount


Rate


WAM


Amount


Rate


WAM


Amount


Rate


WAM


(Dollars in thousands)

Beginning balance

$

2,845,000


2.71%



2.7


$

2,845,000


2.75%



2.6


$

2,815,000


2.80%



2.7


$

2,965,000


2.92%



2.5

Maturities and prepayments:
































FHLB advances


(200,000)


5.01






(150,000)


3.16






--


--






(225,000)


3.86




Repurchase agreements


--


--






--


--






(70,000)


4.23






(25,000)


3.33




New borrowings:
































FHLB advances


150,000


2.59



7.0



150,000


2.32



6.0



--


--



--



100,000


1.61



7.0

Repurchase agreements


--


--



--



--


--



--



100,000


2.53



7.0



--


--



--

Ending balance

$

2,795,000


2.54



2.9


$

2,845,000


2.71



2.7


$

2,845,000


2.75



2.6


$

2,815,000


2.80



2.7

 


















For the Six Months Ended


March 31, 2014


March 31, 2013





Effective







Effective




Amount


Rate


WAM


Amount


Rate


WAM



(Dollars in thousands)

Beginning balance

$

2,845,000


2.75%



2.6


$

2,915,000


3.13%



2.7

Maturities and prepayments:
















FHLB advances


(350,000)


4.22






(100,000)


4.85




Repurchase agreements


--


--






(50,000)


3.48




New borrowings:
















FHLB advances


300,000


2.46



6.5



200,000


1.04



5.0

Ending balance

$

2,795,000


2.54



2.9


$

2,965,000


2.92



2.5

Average Rates and Lives

The following table presents the weighted average yields/rates and WALs (in years), after applying prepayment, call assumptions, and decay rates for major categories of our assets and liabilities as of the dates presented.  Yields presented for interest-earning assets include the amortization of fees, costs, premiums and discounts which are considered adjustments to the yield.  The interest rate presented for borrowings is the effective rate, which includes the net impact of the amortization of deferred prepayment penalties resulting from the prepayment of certain FHLB advances and deferred gains related to interest rate swaps previously terminated.

 
















March 31, 2014


Amount


Yield/Rate


WAL


% of Category


% of Total


(Dollars in thousands)

Investment securities

$

610,768


1.13%



3.5


23.4%



6.8%


MBS - fixed


1,431,243


2.41



4.1


54.7



15.9


MBS - adjustable


573,895


2.29



6.3


21.9



6.4


Total investment securities and MBS


2,615,906


2.08



4.4


100.0%



29.1


Loans receivable:














Fixed-rate one- to four-family:














<= 15 years


1,164,135


3.49



4.2


19.0%



13.0


> 15 years


3,531,611


4.15



6.7


57.8



39.4


All other fixed-rate loans


128,899


4.87



4.6


2.1



1.4


Total fixed-rate loans


4,824,645


4.01



6.0


78.9



53.8


Adjustable-rate one- to four-family:














<= 36 months


393,135


2.39



3.8


6.4



4.4


> 36 months


751,456


2.91



3.4


12.3



8.4


All other adjustable-rate loans


148,204


4.45



1.5


2.4



1.6


Total adjustable-rate loans


1,292,795


2.93



3.3


21.1



14.4


Total loans receivable


6,117,440


3.78



5.5


100.0%



68.2


Capital stock of FHLB


125,829


3.96



2.8





1.4


Cash and cash equivalents


114,835


0.25



--





1.3


Total interest-earning assets

$

8,974,010


3.24



5.0





100.0%
















Transaction deposits

$

2,154,308


0.15



6.8


45.9%



28.8%


Certificates of deposit


2,539,454


1.18



1.4


54.1



33.9


Total deposits


4,693,762


0.71



3.9


100.0%



62.7


Borrowings


2,795,000


2.54



2.9





37.3


Total interest-bearing liabilities

$

7,488,762


1.39



3.5





100.0%


 

At March 31, 2014, the Bank's one-year gap between the amount of interest-earning assets and interest-bearing liabilities projected to reprice was negative $(39.4) million, or (0.4)% of total assets, compared to $65.5 million, or 0.7% of total assets, at December 31, 2013.  The amount of interest-bearing liabilities expected to reprice in a given period is not typically impacted by changes in interest rates because the Bank's borrowings and certificate of deposit portfolios have contractual maturities and generally cannot be terminated early without a prepayment penalty.  The majority of interest-earning assets anticipated to reprice in the coming year are repayments and prepayments on mortgage loans and MBS, both of which include the option to prepay without a fee being paid by the contract holder.  As interest rates rise, the amount of interest-earning assets expected to reprice will likely decrease from estimated levels as borrowers and agency debt issuers will have less economic incentive to modify their cost of borrowings.  If interest rates were to increase 200 basis points, as of March 31, 2014, the Bank's one-year gap is projected to be negative $(384.5) million, or (4.2)% of total assets, meaning more liabilities are anticipated to reprice than assets.  This compares to a negative one-year gap of $(355.5) million, or (3.9)% of total assets, if interest rates were to increase 200 basis points, as of December 31, 2013.  The change in the one-year gap amount in both the base case and +200 basis point scenarios between periods is primarily due to a decrease in anticipated cash flows in the Bank's investment portfolio, caused by a decrease in the amount of callable investment securities with call options during the upcoming year.  This was somewhat offset by an anticipated increase in cash flows on fixed-rate mortgage related assets due to lower interest rates at March 31, 2014 compared to interest rates at December 31, 2013.  In addition, the Bank is projecting more liabilities to reprice over the next twelve months due to the timing of borrowings scheduled to mature compared to the previous quarter.  Any decrease in our net interest margin due to liabilities repricing to higher market interest rates will likely be partially offset by an increase in income on interest-earning assets as cash flows are reinvested at higher market interest rates.


Average Balance Sheets 

The following tables present the average balances of our assets, liabilities and stockholders' equity and the related annualized weighted average yields and rates on our interest-earning assets and interest-bearing liabilities for the periods indicated and the weighted average yield/rate on our interest-earning assets and interest-bearing liabilities at March 31, 2014.  Weighted average yields are derived by dividing annualized income by the average balance of the related assets and weighted average rates are derived by dividing annualized expense by the average balance of the related liabilities, for the periods shown.  Average outstanding balances are derived from average daily balances.  The weighted average yields and rates include amortization of fees, costs, premiums and discounts which are considered adjustments to yields/rates.  Weighted average yields on tax-exempt securities were not calculated on a fully taxable equivalent basis.

 























At



For the Six Months Ended



March 31, 2014


March 31, 2014


March 31, 2013




Average


Interest





Average


Interest





Yield/


Outstanding


Earned/


Yield/


Outstanding


Earned/


Yield/


Rate


Balance


Paid


Rate


Balance


Paid


Rate

Assets:




(Dollars in thousands)


Interest-earning assets:




















Loans receivable(1)

3.78%


$

6,023,062


$

114,065


3.79%



$

5,653,923


$

115,403


4.08%


MBS(2)

2.37



1,968,835



23,559


2.39




2,324,497



29,629


2.55


Investment securities(2)(3)

1.13



695,925



3,935


1.13




875,321



5,322


1.22


Capital stock of FHLB

3.96



129,685



2,425


3.75




131,662



2,233


3.40


Cash and cash equivalents

0.25



85,286



107


0.25




59,506



69


0.23


Total interest-earning assets(1)(2)

3.25



8,902,793



144,091


3.24




9,044,909



152,656


3.38


Other noninterest-earning assets




221,562









237,402







Total assets



$

9,124,355








$

9,282,311



























Liabilities and stockholders' equity:




















Interest-bearing liabilities:




















Checking

0.04


$

662,600



127


0.04



$

617,686



119


0.04


Savings

0.10



287,642



148


0.10




267,401



133


0.10


Money market

0.23



1,135,843



1,310


0.23




1,131,513



1,266


0.22


Retail certificates

1.23



2,219,493



13,671


1.24




2,264,723



16,302


1.44


Wholesale certificates

0.80



303,788



1,143


0.75




278,829



1,373


0.99


Total deposits

0.71



4,609,366



16,399


0.71




4,560,152



19,193


0.84


FHLB borrowings(4)

2.42



2,500,530



32,174


2.58




2,531,094



36,537


2.90


Repurchase agreements

3.43



320,000



5,546


3.43




360,192



6,976


3.83


Total borrowings

2.54



2,820,530



37,720


2.68




2,891,286



43,513


3.01


Total interest-bearing liabilities

1.39



7,429,896



54,119


1.46




7,451,438



62,706


1.68


Other noninterest-bearing liabilities




108,070









112,121







Stockholders' equity




1,586,389









1,718,752







Total liabilities and stockholders' equity



$

9,124,355








$

9,282,311



























Net interest income(5)






$

89,972








$

89,950




Net interest rate spread(6)

1.86%








1.78%









1.70%


Net interest-earning assets



$

1,472,897








$

1,593,471







Net interest margin(7)









2.02









1.99


Ratio of interest-earning assets




















to interest-bearing liabilities









1.20x









1.21x






















Selected performance ratios:




















Return on average assets (annualized)









0.82%









0.76%


Return on average equity (annualized)









4.73









4.11


Average equity to average assets









17.39









18.52


Operating expense ratio (annualized)(8)









0.98









1.03


Efficiency ratio(9)









44.09









47.17


 





















For the Three Months Ended


March 31, 2014


December 31, 2013


Average


Interest





Average


Interest





Outstanding


Earned/


Yield/


Outstanding


Earned/


Yield/


Balance


Paid


Rate


Balance


Paid


Rate

Assets:


(Dollars in thousands)

Interest-earning assets:


















Loans receivable(1)

$

6,045,516


$

57,117


3.78%



$

6,001,095


$

56,948


3.79%


MBS(2)


1,942,336



11,597


2.39




1,994,759



11,962


2.40


Investment securities(2)(3)


662,266



1,869


1.13




728,853



2,066


1.13


Capital stock of FHLB


128,859



1,229


3.87




130,492



1,196


3.63


Cash and cash equivalents


71,652



45


0.25




98,624



62


0.25


Total interest-earning assets(1)(2)


8,850,629



71,857


3.25




8,953,823



72,234


3.23


Other noninterest-earning assets


222,552









220,628







Total assets

$

9,073,181








$

9,174,451

























Liabilities and stockholders' equity:


















Interest-bearing liabilities:


















Checking

$

674,447



63


0.04



$

651,011



63


0.04


Savings


291,106



77


0.11




284,252



72


0.10


Money market


1,139,010



650


0.23




1,132,744



660


0.23


Retail certificates


2,217,967



6,699


1.22




2,220,986



6,972


1.25


Wholesale certificates


305,848



587


0.78




301,773



556


0.73


Total deposits


4,628,378



8,076


0.71




4,590,766



8,323


0.72


FHLB borrowings(4)


2,485,393



15,311


2.50




2,515,339



16,863


2.66


Repurchase agreements


320,000



2,743


3.43




320,000



2,803


3.43


Total borrowings


2,805,393



18,054


2.60




2,835,339



19,666


2.75


Total interest-bearing liabilities


7,433,771



26,130


1.42




7,426,105



27,989


1.49


Other noninterest-bearing liabilities


96,460









119,463







Stockholders' equity


1,542,950









1,628,883







Total liabilities and stockholders' equity

$

9,073,181








$

9,174,451

























Net interest income(5)




$

45,727








$

44,245




Net interest rate spread(6)







1.83









1.74


Net interest-earning assets

$

1,416,858








$

1,527,718







Net interest margin(7)







2.07









1.98


Ratio of interest-earning assets


















to interest-bearing liabilities







1.19x









1.21x




















Selected performance ratios:


















Return on average assets (annualized)







0.87%









0.78%


Return on average equity (annualized)







5.10









4.37


Average equity to average assets







17.01









17.75


Operating expense ratio (annualized)(8)







0.96









0.99


Efficiency ratio(9)







42.42









45.81


 

(1)   Calculated net of unearned loan fees, deferred costs, and undisbursed loan funds.  Loans that are 90 or more days delinquent are included in the loans receivable average balance with a yield of zero percent.  Balance includes mortgage loans receivable held-for-sale.

(2)   MBS and investment securities classified as AFS are stated at amortized cost, adjusted for unamortized purchase premiums or discounts.

(3)   The average balance of investment securities includes an average balance of nontaxable securities of $36.4 million and $44.0 million for the six months ended March 31, 2014 and 2013, respectively, and $36.4 million and $36.5 million for the quarters ended March 31, 2014 and December 31, 2013, respectively.

(4)   The balance and rate of FHLB borrowings are stated net of deferred gains and deferred prepayment penalties.

(5)   Net interest income represents the difference between interest income earned on interest-earning assets such as mortgage loans, investment securities, and MBS, and interest paid on interest-bearing liabilities such as deposits, FHLB borrowings, and other borrowings.  Net interest income depends on the balance of interest-earning assets and interest-bearing liabilities, and the interest rates earned or paid on them.

(6)   Net interest rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.

(7)   Net interest margin represents net interest income as a percentage of average interest-earning assets.

(8)   The operating expense ratio represents annualized non-interest expense as a percentage of average assets.

(9)   The efficiency ratio represents non-interest expense as a percentage of the sum of net interest income (pre-provision for credit losses) and non-interest income.

 

SOURCE Capitol Federal Financial, Inc.



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