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Capitol Federal Financial, Inc. Reports Fiscal Year 2015 Results


News provided by

Capitol Federal Financial, Inc.

Oct 29, 2015, 09:00 ET

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TOPEKA, Kan., Oct. 29, 2015 /PRNewswire/ -- Capitol Federal® Financial, Inc. (NASDAQ: CFFN) (the "Company") announced results today for the fiscal year ended September 30, 2015.  Detailed results will be available in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2015, which will be filed with the Securities and Exchange Commission ("SEC") on or about November 25, 2015 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 $18.8 million, including $669 thousand from the daily leverage strategy;
  • basic and diluted earnings per share of $0.14;
  • net interest margin of 1.75% (2.10% excluding the effects of the daily leverage strategy);
  • paid dividends of $11.4 million, or $0.085 per share; and
  • announced a $70.0 million stock repurchase plan.

Highlights for the fiscal year include:

  • net income of $78.1 million, including $2.8 million from the daily leverage strategy;
  • basic and diluted earnings per share of $0.58;
  • net interest margin of 1.73% (2.07% excluding the effects of the daily leverage strategy);
  • loan portfolio growth of 6%; and
  • declared a fiscal year 2015 cash true-up dividend of $0.25 per share payable on December 4, 2015.

Comparison of Operating Results for the Years Ended September 30, 2015 and 2014

For fiscal year 2015, the Company recognized net income of $78.1 million, or $0.58 per share, compared to net income of $77.7 million, or $0.56 per share, for fiscal year 2014.  The increase in earnings per share was due mainly to the repurchase of shares pursuant to the Company's recently completed $175.0 million stock repurchase plan.  The $399 thousand, or 0.5%, increase in net income was due primarily to the daily leverage strategy.  Net income attributable to the daily leverage strategy was $2.8 million during the current fiscal year, compared to $501 thousand for the prior fiscal year.

Net interest income increased $5.6 million, or 3.1%, from the prior fiscal year to $189.8 million for the current fiscal year due primarily to the daily leverage strategy.  The net interest margin decreased 27 basis points, from 2.00% for the prior fiscal year, to 1.73% for the current fiscal year as a result of the daily leverage strategy.  Excluding the effects of the daily leverage strategy, the net interest margin would have been 2.07% for the current fiscal year and the prior fiscal year.  The positive impact on the net interest margin resulting from the shift in the mix of interest-earning assets from relatively lower yielding securities to higher yielding loans was offset by a decrease in market interest rates.

Interest and Dividend Income
The weighted average yield on total interest-earning assets decreased 44 basis points, from 3.15% for the prior fiscal year, to 2.71% for the current fiscal year, while the average balance of interest-earning assets increased $1.74 billion from the prior fiscal year.  The decrease in the weighted average yield and the increase in the average balance were due primarily to the daily leverage strategy.  Absent the impact of the daily leverage strategy, the weighted average yield on total interest-earning assets would have decreased from 3.25% for the prior fiscal year to 3.22% for the current fiscal year, while the average balance would have increased $18.1 million.  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.


For the Year Ended






September 30,


Change Expressed in:


2015


2014


Dollars


Percent


(Dollars in thousands)



INTEREST AND DIVIDEND INCOME:








Loans receivable

$

235,500



$

229,944



$

5,556



2.4%


Mortgage-backed securities ("MBS")

36,647



45,300



(8,653)



(19.1)


Federal Home Loan Bank Topeka ("FHLB") stock

12,556



6,555



6,001



91.5


Investment securities

7,182



7,385



(203)



(2.7)


Cash and cash equivalents

5,477



1,062



4,415



415.7


Total interest and dividend income

$

297,362



$

290,246



$

7,116



2.5


The increase in interest income on loans receivable was due to a $307.5 million increase in the average balance of the portfolio, partially offset by a nine basis point decrease in the weighted average yield on the portfolio, to 3.69% for the current fiscal year.  The weighted average yield decrease was due primarily to adjustable-rate loans, endorsements, and refinances repricing loans to lower market rates, along with an increase in net deferred premium amortization.

The decrease in interest income on the MBS portfolio was due primarily to a $299.4 million decrease in the average balance of the portfolio as cash flows not reinvested were used largely to fund loan growth.  Additionally, the weighted average yield on the MBS portfolio decreased 10 basis points, from 2.35% during the prior fiscal year, to 2.25% for the current fiscal year.  The decrease in the weighted average yield was due primarily to repayments of MBS with yields greater than the weighted average yield on the existing portfolio, as well as to an increase in the impact of net premium amortization.  Net premium amortization of $5.4 million during the current fiscal year decreased the weighted average yield on the portfolio by 32 basis points.  During the prior fiscal year, $5.7 million of net premiums were amortized, which decreased the weighted average yield on the portfolio by 29 basis points.  As of September 30, 2015, the remaining net balance of premiums on our portfolio of MBS was $14.2 million.

The increase in dividends received on FHLB stock was due primarily to a $70.5 million increase in the average balance as a result of the daily leverage strategy, as well to as an increase in the FHLB dividend rate between the two periods.  The increase in interest income on cash and cash equivalents was due primarily to a $1.71 billion increase in the average balance resulting mainly from the daily leverage strategy.

Interest Expense
The weighted average rate paid on total interest-bearing liabilities decreased 24 basis points, from 1.36% for the prior fiscal year, to 1.12% for the current fiscal year, while the average balance of interest-bearing liabilities increased $1.83 billion from the prior fiscal year due primarily to the daily leverage strategy.  Absent the impact of the daily leverage strategy, the weighted average rate paid on total interest-bearing liabilities would have decreased six basis points from the prior fiscal year, to 1.35%, due primarily to a decrease in the cost of term borrowings while the average balance of interest-bearing liabilities would have increased $108.4 million, primarily as a result of deposit growth.  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 Year Ended






September 30,


Change Expressed in:


2015


2014


Dollars


Percent


(Dollars in thousands)



INTEREST EXPENSE:








FHLB borrowings

$

67,797



$

63,217



$

4,580



7.2%


Deposits

33,119



32,604



515



1.6


Repurchase agreements

6,678



10,282



(3,604)



(35.1)


Total interest expense

$

107,594



$

106,103



$

1,491



1.4


The increase in interest expense on FHLB borrowings was due primarily to a $1.72 billion increase in the average balance on the FHLB line of credit as a result of the daily leverage strategy, partially offset by a six basis point decrease in the weighted average rate paid on FHLB advances, to 2.43% for the current fiscal year.  The decrease in the weighted average rate paid on the FHLB advance portfolio was primarily a result of renewals of advances to lower market rates during the prior fiscal year.

The decrease in interest expense on repurchase agreements was due primarily to the maturity of a $100.0 million agreement at 4.20% during the prior fiscal year.  The repurchase agreement was replaced with an FHLB advance, which was at a lower rate than the maturing repurchase agreement.

Provision for Credit Losses
Capitol Federal Savings Bank (the "Bank") recorded a provision for credit losses during the current fiscal year of $771 thousand compared to a provision for credit losses during the prior fiscal year of $1.4 million.  The $771 thousand provision for credit losses in the current fiscal year takes into account net charge-offs of $555 thousand and loan growth.  Net charge-offs in the prior fiscal year were $1.0 million.

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 Year Ended






September 30,


Change Expressed in:


2015


2014


Dollars


Percent


(Dollars in thousands)



NON-INTEREST INCOME:








Retail fees and charges

$

14,897



$

14,937



$

(40)



(0.3)%


Insurance commissions

2,783



3,151



(368)



(11.7)


Loan fees

1,416



1,568



(152)



(9.7)


Other non-interest income

2,044



3,299



(1,255)



(38.0)


Total non-interest income

$

21,140



$

22,955



$

(1,815)



(7.9)


The decrease in insurance commissions was due primarily to a decrease in annual commissions received from certain insurance providers as a result of less favorable claims experience year-over-year.  The decrease in other non-interest income was due mainly to a decrease in bank-owned life insurance income, largely due to the receipt of death benefits 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 Year Ended






September 30,


Change Expressed in:


2015


2014


Dollars


Percent


(Dollars in thousands)



NON-INTEREST EXPENSE:








Salaries and employee benefits

$

43,309



$

43,757



$

(448)



(1.0)%


Information technology and communications

10,360



9,429



931



9.9


Occupancy, net

9,944



10,268



(324)



(3.2)


Federal insurance premium

5,495



4,536



959



21.1


Deposit and loan transaction costs

5,417



5,329



88



1.7


Regulatory and outside services

5,347



5,572



(225)



(4.0)


Low income housing partnerships

4,572



2,416



2,156



89.2


Advertising and promotional

4,547



4,195



352



8.4


Other non-interest expense

5,378



5,035



343



6.8


Total non-interest expense

$

94,369



$

90,537



$

3,832



4.2


The decrease in salaries and employee benefits expense was due primarily to the prior fiscal year including compensation expense on unallocated Employee Stock Ownership Plan ("ESOP") shares related to two True Blue® Capitol dividends paid compared to one True Blue Capitol dividend paid during the current fiscal year.  The increase in information technology and communications expense was primarily related to continued upgrades to our information technology infrastructure.  The increase in federal insurance premium was due primarily to the daily leverage strategy.  The increase in low income housing partnerships expense was due mainly to impairments, as well as to an increase in amortization expense due to an increase in the overall investment balance as a result of funding new partnerships and the general life cycle of the partnership activities.  We have grown our investments in newly formed low income housing partnerships over the past couple of years.  Generally, losses associated with these partnerships out-pace the tax credit benefit in the early years as they establish their operations.

The Company's efficiency ratio was 44.74% for the current fiscal year compared to 43.72% for the prior fiscal year.  The change in the efficiency ratio was due primarily to an increase in non-interest expense.  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 $37.7 million for the current fiscal year compared to $37.5 million for the prior fiscal year.  The effective tax rate for the current and prior fiscal year was 32.5%.  Management anticipates the effective tax rate for fiscal year 2016 will be approximately 32% based on fiscal year 2016 estimates as of September 30, 2015.

Comparison of Operating Results for the Three Months Ended September 30, 2015 and June 30, 2015

Net income decreased $817 thousand, or 4.2%, from the quarter ended June 30, 2015 to $18.8 million, or $0.14 per share, for the quarter ended September 30, 2015, due primarily to an increase in non-interest expense, partially offset by an increase in net interest income.  Net income attributable to the daily leverage strategy was $669 thousand during the current quarter.

Net interest income increased $927 thousand, or 2.0%, from the prior quarter to $47.9 million for the current quarter.  The increase was due primarily to a decrease in total interest expense resulting largely from a decrease in interest expense on FHLB borrowings.  The net interest margin increased four basis points from 1.71% for the prior quarter to 1.75% for the current quarter.  Excluding the effects of the daily leverage strategy, the net interest margin would have been 2.10% for the current quarter compared to 2.05% for the prior quarter.  The increase in net interest margin, excluding the effects of the daily leverage strategy, was due mainly to the continued shift in the mix of interest-earning assets from relatively lower yielding assets to higher yielding loans and a decrease in the cost of FHLB advances.

Interest and Dividend Income
The weighted average yield on total interest-earning assets for the current quarter increased two basis points from the prior quarter, to 2.71%, while the average balance of interest-earning assets decreased $55.2 million between the two periods.  Absent the impact of the daily leverage strategy, the weighted average yield on total interest-earning assets would have increased three basis points from the prior quarter, to 3.23%, while the average balance would have decreased $61.5 million.  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.


For the Three Months Ended






September 30,


June 30,


Change Expressed in:


2015


2015


Dollars


Percent


(Dollars in thousands)



INTEREST AND DIVIDEND INCOME:








Loans receivable

$

59,761



$

58,922



$

839



1.4%


MBS

8,260



8,849



(589)



(6.7)


FHLB stock

3,167



3,132



35



1.1


Investment securities

1,920



1,914



6



0.3


Cash and cash equivalents

1,303



1,357



(54)



(4.0)


Total interest and dividend income

$

74,411



$

74,174



$

237



0.3


The increase in interest income on loans receivable was due to a $144.3 million increase in the average balance of the portfolio, partially offset by a three basis point decrease in the weighted average yield on the portfolio, to 3.64% for the current quarter.  The decrease in the yield was due primarily to originations and purchases at rates below the existing loan portfolio yield.

The decrease in interest income on MBS was due to a $94.9 million decrease in the average balance of the portfolio, as well as to a two basis point decrease in the weighted average yield on the portfolio.  Cash flows from the portfolio were used to fund loan growth.  During the current quarter, $1.4 million of net premiums were amortized, which decreased the weighted average yield on the portfolio by 36 basis points.  During the prior quarter, $1.4 million of net premiums were amortized, which decreased the weighted average yield on the portfolio by 35 basis points.

Interest Expense
The weighted average rate paid on total interest-bearing liabilities decreased three basis points from the prior quarter, to 1.09%, due mainly to a decrease in the weighted average rate paid on FHLB advances, and the average balance of interest-bearing liabilities decreased $15.0 million between the two periods.  Absent the impact of the daily leverage strategy, the weighted average rate paid on total interest-bearing liabilities would have decreased five basis points from the prior quarter, to 1.31%, and the average balance would have decreased $22.9 million.  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






September 30,


June 30,


Change Expressed in:


2015


2015


Dollars


Percent


(Dollars in thousands)



INTEREST EXPENSE:








FHLB borrowings

$

16,539



$

17,072



$

(533)


(3.1)%

Deposits

8,390



8,377



13


0.2

Repurchase agreements

1,542



1,712



(170)


(9.9)

Total interest expense

$

26,471



$

27,161



$

(690)


(2.5)

The decrease in interest expense on FHLB borrowings was due to an 11 basis point decrease in the weighted average rate paid on FHLB advances during the current quarter, to 2.34%, due primarily to the prepayment of a $175.0 million advance that had an effective rate of 5.08% and a remaining term-to-maturity of just over six months.  The prepaid FHLB advance was replaced with a $175.0 million fixed-rate advance with an effective rate of 2.18% and a term of three years.  The decrease in interest expense on repurchase agreements was due primarily to a $16.5 million decrease in the average balance of the portfolio, as well as to a decrease of 11 basis points in the weighted average rate paid on the portfolio, resulting from the maturity of a $20.0 million repurchase agreement at a rate of 4.45% during the current quarter, which was not replaced.

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






September 30,


June 30,


Change Expressed in:


2015


2015


Dollars


Percent


(Dollars in thousands)



NON-INTEREST INCOME:








Retail fees and charges

$

3,845



$

3,798



$

47



1.2%


Insurance commissions

724



537



187



34.8


Loan fees

345



340



5



1.5


Other non-interest income

547



470



77



16.4


Total non-interest income

$

5,461



$

5,145



$

316



6.1


The increase in insurance commissions was due largely to the receipt of annual commissions from certain insurance providers during the current quarter.

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






September 30,


June 30,


Change Expressed in:


2015


2015


Dollars


Percent


(Dollars in thousands)



NON-INTEREST EXPENSE:








Salaries and employee benefits

$

11,382



$

11,038



$

344



3.1%


Information technology and communications

2,634



2,573



61



2.4


Occupancy, net

2,507



2,557



(50)



(2.0)


Federal insurance premium

1,403



1,342



61



4.5


Deposit and loan transaction costs

1,352



1,435



(83)



(5.8)


Regulatory and outside services

1,480



1,365



115



8.4


Low income housing partnerships

1,168



492



676



137.4


Advertising and promotional

1,840



1,069



771



72.1


Other non-interest expense

1,496



1,235



261



21.1


Total non-interest expense

$

25,262



$

23,106



$

2,156



9.3


The increase in salaries and employee benefits expense was due largely to annual salary increases.  The increase in low income housing partnerships expense was due primarily to impairments.  The increase in advertising and promotional expense was due primarily to the timing of media campaigns and sponsorships.

The Company's efficiency ratio was 47.31% for the current quarter compared to 44.30% for the prior quarter.  The change in the efficiency ratio was due primarily to an increase in non-interest expense.

Income Tax Expense
Income tax expense was $9.4 million for the current quarter compared to $9.1 million for the prior quarter.  The increase between periods was due primarily to an increase in the effective income tax rate, from 31.8% for the prior quarter, to 33.2% for the current quarter.  The prior quarter effective income tax rate was lower than the current quarter effective income tax rate, reflecting reduced income tax expense in the prior quarter, primarily as a result of higher deductible expenses associated with dividends paid on ESOP shares due to the True Blue Capitol dividend paid in June 2015.

Financial Condition as of September 30, 2015

Total assets were $9.84 billion at September 30, 2015 compared to $9.87 billion at September 30, 2014.  Loans receivable, net, increased $391.9 million from September 30, 2014, to $6.63 billion at September 30, 2015.  The majority of the loan growth was funded with cash flows from the MBS portfolio.  During the current fiscal year, the Bank originated and refinanced $780.5 million of loans with a weighted average rate of 3.61%, purchased $651.0 million of loans from correspondent lenders with a weighted average rate of 3.47%, and participated in $60.3 million of commercial real estate loans with a weighted average rate of 4.06%.

Total liabilities were $8.43 billion at September 30, 2015 compared to $8.37 billion at September 30, 2014.  The $55.8 million increase was due primarily to a $177.2 million, or 3.8%, increase in the deposit portfolio, partially offset by a $99.2 million decrease in FHLB borrowings.  The growth in deposits was primarily in the retail certificate of deposit portfolio and checking portfolio, which increased $89.1 million and $47.7 million, respectively.  The decrease in FHLB borrowings was due primarily to the daily leverage strategy activity.

Stockholders' equity was $1.42 billion at September 30, 2015 compared to $1.49 billion at September 30, 2014.  The $76.7 million decrease between periods was due primarily to the payment of $114.2 million in cash dividends and the repurchase of $46.4 million of common stock, partially offset by net income of $78.1 million.  The $114.2 million in cash dividends paid during the current fiscal year consisted of a $0.26 per share, or $35.5 million, cash true-up dividend related to fiscal year 2014 earnings per the Company's dividend policy, a $0.25 per share, or $33.9 million, True Blue Capitol Dividend, and four regular quarterly cash dividends totaling $0.33 per share, or $44.8 million.  The $33.9 million True Blue Capitol Dividend was funded by a $36.0 million capital distribution from the Bank to the holding company.

On October 21, 2015, the Company announced a regular quarterly cash dividend of $0.085 per share, or approximately $11.3 million, payable on November 20, 2015 to stockholders of record as of the close of business on November 6, 2015.  On October 29, 2015, the Company announced a fiscal year 2015 cash true-up dividend of $0.25 per share, or approximately $33.2 million, related to fiscal year 2015 earnings per the Company's dividend policy.  The $0.25 per share cash true-up dividend was determined by taking the difference between total earnings for fiscal year 2015 and total regular quarterly cash dividends paid during fiscal year 2015, divided by the number of shares outstanding as of October 26, 2015.  The cash true-up dividend is payable on December 4, 2015 to stockholders of record as of the close of business on November 20, 2015, and is the result of the Board of Directors' commitment to distribute to stockholders 100% of the annual earnings of Capitol Federal Financial, Inc. for fiscal year 2015.  Beginning with the second quarter of fiscal year 2015, the Company increased the amount of its regular quarterly cash dividend from $0.075 per share to $0.085 per share and paid a total of $0.84 per share in dividends during fiscal year 2015.

At September 30, 2015, Capitol Federal Financial, Inc., at the holding company level, had $96.2 million on deposit at the Bank.  For fiscal year 2016, it is the intent of the Board of Directors and management to continue with the payout of 100% of the Company's earnings to its stockholders.  The payout is expected to be in the form of regular quarterly cash dividends of $0.085 per share, totaling $0.34 for the year, and a cash true-up dividend equal to fiscal year 2016 earnings in excess of the amount paid as regular quarterly cash dividends during fiscal year 2016.  It is anticipated that the fiscal year 2016 cash true-up dividend will be paid in December 2016.  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.

The Company completed its stock repurchase plan during the current quarter.  The plan, announced in November 2012, authorized the repurchase of up to $175.0 million in stock.  In total, the Company repurchased 14.6 million shares at an average price of $11.95 per share, or $175.0 million.  The Company repurchased $46.4 million of the total $175.0 million of shares during the current fiscal year at an average price of $11.99 per share.  On October 28, 2015, the Company announced a stock repurchase plan for up to $70.0 million of common stock, or approximately 5% of the balance of total stockholders' equity at September 30, 2015.  It is anticipated that shares will be purchased from time to time in the open-market based upon market conditions and available liquidity.  There is no expiration for this repurchase plan.

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


September 30,


June 30,


September 30,


2015


2015


2014


(Dollars in thousands)

Stockholders' equity

$

1,416,226



$

1,426,723



$

1,492,882


Equity to total assets at end of period

14.4%



15.6%



15.1%


The following table presents a reconciliation of total and net shares outstanding as of September 30, 2015.

Total shares outstanding

137,106,822

Less unallocated ESOP shares and unvested restricted stock

(4,296,498)

Net shares outstanding

132,810,324

Consistent with our goal to operate a sound and profitable financial organization, we actively seek to maintain a "well-capitalized" status for the Bank and the Company in accordance with regulatory standards.  As of September 30, 2015, the Bank and Company exceeded all regulatory capital requirements.  The following table presents the Bank's regulatory capital ratios at September 30, 2015.




Regulatory




Requirement For


Bank


"Well-Capitalized"


Ratios


Status

Tier 1 leverage ratio

11.3%


5.0%

Common equity tier 1 capital ratio

30.0


6.5

Tier 1 capital ratio

30.0


8.0

Total capital ratio

30.3


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 September 30, 2015 is as follows (dollars in thousands):

Total Bank equity as reported under GAAP

$

1,274,428


Unrealized gains on available-for-sale ("AFS") securities

(8,374)

Total tier 1 capital

1,266,054

Allowance for credit losses ("ACL")

9,443

Total capital

$

1,275,497


The Fiscal Year 2015 Annual Meeting of Stockholders will be held on January 26, 2016, and the voting record date will be December 4, 2015.  Management plans to furnish the Company's September 30, 2015 annual proxy materials to stockholders via the internet.  Stockholders who are eligible to vote at the Fiscal Year 2015 Annual Meeting of Stockholders will receive a notice containing instructions on how to access the proxy materials over the internet and vote online at least 40 days prior to the Annual Meeting.  The notice will explain how a stockholder can arrange to have printed materials sent to them, if so desired.  Proxy materials will include the definitive proxy statement for the Fiscal Year 2015 Annual Meeting of Stockholders, and the September 30, 2015 Annual Report to Stockholders.

Capitol Federal Financial, Inc. is the holding company for the Bank.  The Bank has 47 branch locations in Kansas and Missouri, and 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.  These forward-looking statements include statements about our beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions.  The words "may," "could," "should," "would," "will," "believe," "anticipate," "estimate," "expect," "intend," "plan" and similar expressions are intended to identify forward-looking statements.  Forward-looking statements 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 the Bank, which would affect the ability of the Company to pay dividends in accordance with its dividend policies, competition, and other risks detailed from time to time in documents filed or furnished by the Company with the SEC.  Actual results may differ materially from those currently expected.  These forward-looking statements represent the Company's judgment as of the date of this release.  The Company disclaims, however, any intent or obligation to update these forward-looking statements.

SUPPLEMENTAL FINANCIAL INFORMATION

CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS (Unaudited)

(Dollars in thousands, except per share amounts)



September 30,


September 30,


2015


2014

ASSETS:




Cash and cash equivalents (includes interest-earning deposits of $764,816 and $799,340)

$

772,632



$

810,840


Securities:




AFS at estimated fair value (amortized cost of $744,708 and $829,558)

758,171



840,790


Held-to-maturity at amortized cost (estimated fair value of $1,295,274 and $1,571,524)

1,271,122



1,552,699


Loans receivable, net (ACL of $9,443 and $9,227)

6,625,027



6,233,170


FHLB stock, at cost

150,543



213,054


Premises and equipment, net

75,810



70,530


Income taxes receivable, net

1,071



—


Other assets

189,785



143,945


TOTAL ASSETS

$

9,844,161



$

9,865,028






LIABILITIES:




Deposits

$

4,832,520



$

4,655,272


FHLB borrowings

3,270,521



3,369,677


Repurchase agreements

200,000



220,000


Advance payments by borrowers for taxes and insurance

61,818



58,105


Income taxes payable, net

—



368


Deferred income tax liabilities, net

26,391



22,367


Accounts payable and accrued expenses

36,685



46,357


Total liabilities

8,427,935



8,372,146






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, 137,106,822 and 140,951,203




shares issued and outstanding as of September 30, 2015 and 2014, respectively

1,371



1,410


Additional paid-in capital

1,151,041



1,180,732


Unearned compensation, ESOP

(41,299)



(42,951)


Retained earnings

296,739



346,705


Accumulated other comprehensive income, net of tax

8,374



6,986


Total stockholders' equity

1,416,226



1,492,882


TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

9,844,161



$

9,865,028


CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(Dollars in thousands)



For the Three Months Ended


For the Year Ended


September 30,


June 30,


September 30,


2015


2015


2015


2014

INTEREST AND DIVIDEND INCOME:








Loans receivable

$

59,761



$

58,922



$

235,500



$

229,944


MBS

8,260



8,849



36,647



45,300


FHLB stock

3,167



3,132



12,556



6,555


Investment securities

1,920



1,914



7,182



7,385


Cash and cash equivalents

1,303



1,357



5,477



1,062


Total interest and dividend income

74,411



74,174



297,362



290,246










INTEREST EXPENSE:








FHLB borrowings

16,539



17,072



67,797



63,217


Deposits

8,390



8,377



33,119



32,604


Repurchase agreements

1,542



1,712



6,678



10,282


Total interest expense

26,471



27,161



107,594



106,103










NET INTEREST INCOME

47,940



47,013



189,768



184,143










PROVISION FOR CREDIT LOSSES

—



323



771



1,409


NET INTEREST INCOME AFTER








PROVISION FOR CREDIT LOSSES

47,940



46,690



188,997



182,734










NON-INTEREST INCOME:








Retail fees and charges

3,845



3,798



14,897



14,937


Insurance commissions

724



537



2,783



3,151


Loan fees

345



340



1,416



1,568


Other non-interest income

547



470



2,044



3,299


Total non-interest income

5,461



5,145



21,140



22,955










NON-INTEREST EXPENSE:








Salaries and employee benefits

11,382



11,038



43,309



43,757


Information technology and communications

2,634



2,573



10,360



9,429


Occupancy, net

2,507



2,557



9,944



10,268


Federal insurance premium

1,403



1,342



5,495



4,536


Deposit and loan transaction costs

1,352



1,435



5,417



5,329


Regulatory and outside services

1,480



1,365



5,347



5,572


Low income housing partnerships

1,168



492



4,572



2,416


Advertising and promotional

1,840



1,069



4,547



4,195


Other non-interest expense

1,496



1,235



5,378



5,035


Total non-interest expense

25,262



23,106



94,369



90,537


INCOME BEFORE INCOME TAX EXPENSE

28,139



28,729



115,768



115,152


INCOME TAX EXPENSE

9,354



9,127



37,675



37,458


NET INCOME

$

18,785



$

19,602



$

78,093



$

77,694


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


For the Three Months Ended


For the Year Ended


September 30,


June 30,


September 30,


2015


2015


2015


2014


(Dollars in thousands, except per share amounts)

Net income

$

18,785



$

19,602



$

78,093



$

77,694


Income allocated to participating securities

(23)



(24)



(116)



(176)


Net income available to common stockholders

$

18,762



$

19,578



$

77,977



$

77,518










Average common shares outstanding

133,390,617



135,662,701



135,321,235



139,377,615


Average committed ESOP shares outstanding

124,346



83,052



62,458



62,458


Total basic average common shares outstanding

133,514,963



135,745,753



135,383,693



139,440,073










Effect of dilutive stock options

18,497



17,600



24,810



1,891










Total diluted average common shares outstanding

133,533,460



135,763,353



135,408,503



139,441,964










Net earnings per share:








Basic

$

0.14



$

0.14



$

0.58



$

0.56


Diluted

$

0.14



$

0.14



$

0.58



$

0.56










Antidilutive stock options, excluded








from the diluted average common shares








outstanding calculation

1,870,471



1,240,309



1,248,744



2,060,748


Loan Portfolio

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


September 30, 2015


June 30, 2015


September 30, 2014






% of






% of






% of


Amount


Rate


Total


Amount


Rate


Total


Amount


Rate


Total


(Dollars in thousands)

Real estate loans:


















One-to four-family

$

6,342,412



3.63%



94.5%



$

6,222,818



3.64%



95.0%



$

5,972,031



3.72%



95.0%


Multi-family and commercial

110,938



4.14



1.6



108,576



4.14



1.7



75,677



4.39



1.2


Construction:


















  One- to four-family

75,152



3.57



1.1



68,748



3.54



1.0



72,113



3.66



1.1


  Multi-family and commercial

54,768



4.13



0.8



17,420



3.85



0.3



34,677



4.01



0.6


Total construction

129,920



3.80



1.9



86,168



3.60



1.3



106,790



3.77



1.7


Total real estate loans

6,583,270



3.64



98.0



6,417,562



3.65



98.0



6,154,498



3.73



97.9




















Consumer loans:


















Home equity

125,844



5.00



1.9



125,907



5.04



1.9



130,484



5.14



2.0


Other

4,179



4.03



0.1



4,233



4.08



0.1



4,537



4.16



0.1


  Total consumer loans

130,023



4.97



2.0



130,140



5.01



2.0



135,021



5.11



2.1


Total loans receivable

6,713,293



3.66



100.0%



6,547,702



3.67



100.0%



6,289,519



3.76



100.0%




















Less:


















Undisbursed loan funds

90,565







51,523







52,001






ACL

9,443







9,601







9,227






Discounts/unearned loan fees

24,213







23,850







23,687






Premiums/deferred costs

(35,955)







(33,740)







(28,566)






Total loans receivable, net

$

6,625,027







$

6,496,468







$

6,233,170






The following table presents, for our portfolio of one- to four-family loans, the amount, percent of total, weighted average credit score, weighted average loan-to-value ("LTV") ratio, and average balance per loan at the dates presented.  Credit scores are updated at least semiannually, with the last update in September 2015, 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, if available.  In most cases, the most recent appraisal was obtained at the time of origination.


September 30, 2015


September 30, 2014




% of


Credit




Average




% of


Credit




Average


Amount


Total


Score


LTV


Balance


Amount


Total


Score


LTV


Balance


(Dollars in thousands)

Originated

$

4,010,517



63.2%



765



64%



$

129



$

3,978,396



66.6%



764



64%



$

127


Correspondent purchased

1,846,213



29.1



764



68



344



1,431,745



24.0



764



68



332


Bulk purchased

485,682



7.7



752



65



310



561,890



9.4



749



67



311



$

6,342,412



100.0%



764



65



167



$

5,972,031



100.0%



763



65



159


Loan Commitments

The following table summarizes our one- to four-family loan origination, refinance, and correspondent purchase commitments as of September 30, 2015, 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/refinance

$

13,955



$

47,027



$

16,054



$

77,036



3.57%


Correspondent

7,106



60,643



13,786



81,535



3.81



$

21,061



$

107,670



$

29,840



$

158,571



3.69












Rate

3.11%



3.96%



3.15%






Loan Activity

The following tables summarize activity in our 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 lenders and participations with other lead banks.  There were no bulk loan purchases from nationwide lenders during the periods presented.  Loan endorsements are not included in the activity in the following tables 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 fiscal years ended September 30, 2015 and 2014, the Bank endorsed $121.6 million and $36.4 million of one- to four-family loans, respectively, reducing the average rate on those loans by 98 and 113 basis points, respectively.


For the Three Months Ended


September 30, 2015


June 30, 2015


March 31, 2015


December 31, 2014


Amount


Rate


Amount


Rate


Amount


Rate


Amount


Rate


(Dollars in thousands)

Beginning balance

$

6,547,702



3.67%



$

6,418,780



3.71%



$

6,317,251



3.74%



$

6,289,519



3.76%


Originated and refinanced:
















Fixed

165,646



3.73



207,895



3.50



131,532



3.49



101,270



3.74


Adjustable

51,634



3.59



47,609



3.55



36,053



3.63



38,878



3.75


Purchased and participations:
















Fixed

164,397



3.64



147,887



3.51



144,370



3.56



94,374



3.74


Adjustable

65,722



3.69



29,046



2.92



41,858



2.94



23,705



2.96


Repayments

(280,671)





(301,835)





(250,422)





(228,940)




Principal charge-offs, net

(158)





(128)





(166)





(103)




Other

(979)





(1,552)





(1,696)





(1,452)




Ending balance

$

6,713,293



3.66



$

6,547,702



3.67



$

6,418,780



3.71



$

6,317,251



3.74



For the Year Ended


September 30, 2015


September 30, 2014


Amount


Rate


Amount


Rate


(Dollars in thousands)

Beginning balance

$

6,289,519



3.76%



$

6,011,799



3.82%


Originated and refinanced:








Fixed

606,343



3.60



387,714



4.00


Adjustable

174,174



3.62



179,194



3.74


Purchased and participations:








Fixed

551,028



3.60



410,549



3.93


Adjustable

160,331



3.25



163,234



3.20


Repayments

(1,061,868)





(857,573)




Principal charge-offs, net

(555)





(1,004)




Other

(5,679)





(4,394)




Ending balance

$

6,713,293



3.66



$

6,289,519



3.76


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.  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 Year Ended


September 30, 2015


September 30, 2015


Amount


Rate


% of Total


Amount


Rate


% of Total

Fixed-rate:

(Dollars in thousands)

One- to four-family:












<= 15 years

$

81,627



3.06%



18.2%



$

335,062



2.99%



22.4%


> 15 years

241,356



3.87



53.9



785,290



3.83



52.6


Multi-family and commercial real estate

6,062



4.38



1.4



32,580



3.86



2.2


Home equity

858



5.85



0.2



3,670



6.10



0.2


Other

140



9.65



—



769



8.07



0.1


  Total fixed-rate

330,043



3.68



73.7



1,157,371



3.60



77.5














Adjustable-rate:












One- to four-family:












<= 36 months

1,674



2.73



0.4



6,871



2.61



0.5


> 36 months

61,794



3.07



13.8



220,886



2.98



14.8


Multi-family and commercial real estate

35,236



4.25



7.9



35,236



4.25



2.4


Home equity

18,320



4.55



4.1



69,975



4.58



4.7


Other

332



3.21



0.1



1,537



3.11



0.1


  Total adjustable-rate

117,356



3.65



26.3



334,505



3.44



22.5














Total originated, refinanced and purchased

$

447,399



3.67



100.0%



$

1,491,876



3.57



100.0%














Purchased and participation loans included above:












Fixed-rate:












Correspondent - one- to four-family

$

162,285



3.63





$

525,946



3.59




Participations - commercial real estate

2,112



4.40





25,082



3.79




Total fixed-rate purchased/participations

164,397



3.64





551,028



3.60
















Adjustable-rate:












Correspondent - one- to four-family

30,486



3.05





125,095



2.96




Participations - commercial real estate

35,236



4.25





35,236



4.25




Total adjustable-rate purchased/participations

65,722



3.69





160,331



3.25
















Total purchased/participation loans

$

230,119



3.65





$

711,359



3.52




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


For the Three Months Ended


For the Year Ended


September 30, 2015


September 30, 2015






Credit






Credit


Amount


LTV


Score


Amount


LTV


Score


(Dollars in thousands)

Originated

$

161,750



77%



769



$

563,107



77%



770


Refinanced by Bank customers

31,930



68



767



133,961



68



768


Correspondent purchased

192,771



75



765



651,041



74



765



$

386,451



75



767



$

1,348,109



75



768


The following table presents the amount, percent 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 five percent of the total amount originated and purchased during the fiscal year ended September 30, 2015.



For the Three Months Ended


For the Year Ended



September 30, 2015


September 30, 2015

State


Amount


% of Total


Rate


Amount


% of Total


Rate



(Dollars in thousands)

Kansas


$

178,896



46.3%



3.60%



$

639,537



47.4%



3.50%


Missouri


83,772



21.7



3.59



310,935



23.1



3.46


Texas


53,004



13.7



3.55



175,562



13.0



3.44


Other states


70,779



18.3



3.47



222,075



16.5



3.47




$

386,451



100.0%



3.56



$

1,348,109



100.0%



3.48


The Bank has recently been, and intends to continue, participating in high-quality commercial construction-to-permanent loans through our correspondent lending channel.  The Bank generally requires a minimum debt service coverage ratio of 1.25 and limits LTV ratios to 80% for multi-family and commercial real estate loans, depending on the property type.  Multi-family and commercial real estate permanent and construction loans are originated or participated in based on the income producing potential of the property and the financial strength of the borrower and/or guarantors.  The following table presents multi-family and commercial real estate permanent and construction loans and commitments by industry classification, as defined by the North American Industry Classification System, as of September 30, 2015.


Unpaid


Undisbursed


Gross Loan


Outstanding




% of


Principal


Amount


Amount


Commitments


Total


Total


(Dollars in thousands)

Accommodation and food services

$

50,772



$

40,518



$

91,290



$

—



$

91,290



40.2%


Health care and social assistance

8,917



3,084



12,001



26,680



38,681



17.0


Arts, entertainment, and recreation

—



—



—



34,480



34,480



15.2


Real estate rental and leasing

21,162



1,267



22,429



—



22,429



9.9


Retail trade

11,711



—



11,711



—



11,711



5.2


Multi-family

15,900



—



15,900



—



15,900



7.0


Other

12,375



—



12,375



—



12,375



5.5



$

120,837



$

44,869



$

165,706



$

61,160



$

226,866



100.0%


The following table summarizes multi-family and commercial real estate permanent and construction loans by state as of September 30, 2015.


Unpaid


Undisbursed


Gross Loan


Outstanding




% of


Principal


Amount


Amount


Commitments


Total


Total


(Dollars in thousands)

Kansas

$

45,454



$

162



$

45,616



$

34,480



$

80,096



35.3%


Texas

23,540



40,441



63,981



—



63,981



28.2


Missouri

28,626



3,083



31,709



26,680



58,389



25.7


Colorado

13,940



1,183



15,123



—



15,123



6.7


Arkansas

6,800



—



6,800



—



6,800



3.0


California

2,477



—



2,477



—



2,477



1.1



$

120,837



$

44,869



$

165,706



$

61,160



$

226,866



100.0%


The following table presents the Bank's multi-family and commercial real estate permanent and construction loan portfolio and outstanding commitments, categorized by gross loan amount (unpaid principal plus undisbursed amounts) or outstanding commitment amount, as of September 30, 2015.


Count


Amount


(Dollars in thousands)

Greater than $15 million

3


$

96,396


>$10 to $15 million

4


48,878


>$5 to $10 million

3


22,293


$1 to $5 million

21


55,796


Less than $1 million

14


3,503



45


$

226,866


Asset Quality

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 September 2015, the unemployment rate was 4.4% for Kansas and 5.3% for Missouri, compared to the national average of 5.1%, based on information from the Bureau of Labor Statistics.

The following tables present loans 30 to 89 days delinquent, non-performing loans, and other real estate owned ("OREO") as of the dates indicated.  Of the loans 30 to 89 days delinquent at September 30, 2015, approximately 75% were 59 days or less delinquent.  Non-performing loans are loans that are 90 or more days delinquent or in foreclosure, and nonaccrual loans that are 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:


September 30, 2015


June 30, 2015


March 31, 2015


December 31, 2014


September 30, 2014


Number


Amount


Number


Amount


Number


Amount


Number


Amount


Number


Amount


(Dollars in thousands)

One- to four-family:




















Originated

158



$

16,955



150



$

16,320



128



$

13,097



164



$

16,638



138



$

13,074


Correspondent purchased

8



2,344



15



4,741



7



2,206



6



1,280



9



2,335


Bulk purchased

32



7,259



30



6,249



35



8,137



46



10,047



37



7,860


Consumer loans:




















Home equity

32



703



34



646



30



681



41



916



33



770


Other

11



17



18



80



9



36



14



29



18



69



241



$

27,278



247



$

28,036



209



$

24,157



271



$

28,910



235



$

24,108


30 to 89 days delinquent loans




















to total loans receivable, net



0.41%





0.43%





0.38%





0.46%





0.39%



Non-Performing Loans and OREO at:


September 30, 2015


June 30, 2015


March 31, 2015


December 31, 2014


September 30, 2014


Number


Amount


Number


Amount


Number


Amount


Number


Amount


Number


Amount


(Dollars in thousands)

Loans 90 or More Days Delinquent or in Foreclosure:



















One- to four-family:




















  Originated

66



$

6,728



70



$

6,180



79



$

8,047



75



$

7,762



82



$

7,880


  Correspondent purchased

1



394



1



67



1



490



3



1,039



2



709


  Bulk purchased

36



8,898



29



7,577



27



8,040



24



7,191



28



7,120


Consumer loans:




















  Home equity

24



497



19



443



23



366



20



354



25



397


  Other

4



12



5



16



6



19



5



28



4



13



131



16,529



124



14,283



136



16,962



127



16,374



141



16,119


Nonaccrual loans less than 90 Days Delinquent:(1)




















One- to four-family:




















  Originated

77



9,004



71



9,224



80



9,709



89



9,636



67



7,473


  Correspondent purchased

1



25



2



398



2



401



3



492



4



553


  Bulk purchased

1



82



5



959



5



732



6



872



5



724


Consumer loans:




















  Home equity

12



295



10



219



6



108



5



91



2



45


Other

—



—



—



—



3



11



3



12



—



—



91



9,406



88



10,800



96



10,961



106



11,103



78



8,795


Total non-performing loans

222



25,935



212



25,083



232



27,923



233



27,477



219



24,914






















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


0.39%





0.39%





0.44%





0.44%





0.40%






















OREO:




















One- to four-family:




















Originated(3)

29



$

1,752



28



$

1,920



36



$

1,989



26



$

2,551



25



$

2,040


Correspondent purchased

1



499



2



714



1



216



—



—



1



179


Bulk purchased

2



796



4



1,019



5



1,162



5



685



2



575


Consumer loans:




















Home equity

1



8



2



17



—



—



—



—



—



—


Other(4)

1



1,278



1



1,278



1



1,278



1



1,300



1



1,300



34



4,333



37



4,948



43



4,645



32



4,536



29



4,094


Total non-performing assets

256



$

30,268



249



$

30,031



275



$

32,568



265



$

32,013



248



$

29,008






















Non-performing assets as a percentage of total assets


0.31%





0.33%





0.32%





0.35%





0.29%




























(1)

Represents loans required to be reported as nonaccrual pursuant to OCC reporting requirements even if the loans are current.  At September 30, 2015, June 30, 2015, March 31, 2015, December 31, 2014, and September 30, 2014, this amount was comprised of $2.2 million, $3.4 million, $1.2 million, $2.7 million, and $1.1 million, respectively, of loans that were 30 to 89 days delinquent and are reported as such, and $7.2 million, $7.4 million, $9.8 million, $8.4 million, and $7.7 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 0.25%, 0.22%, 0.27%, 0.26%, and 0.26%, at September 30, 2015, June 30, 2015, March 31, 2015, December 31, 2014, and September 30, 2014, 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)

Represents a single property the Bank purchased for a potential branch site but now intends to sell.

The following tables present ACL activity and related ratios at the dates and for the periods indicated.


For the Three Months Ended


September 30,


June 30,


March 31,


December 31,


September 30,


2015


2015


2015


2014


2014


(Dollars in thousands)

Balance at beginning of period

$

9,601



$

9,406



$

9,297



$

9,227



$

9,082


Charge-offs:










One- to four-family loans:










  Originated

(175)



(108)



(83)



(58)



(56)


  Correspondent purchased

—



—



(11)



—



(40)


  Bulk purchased

(7)



(28)



(80)



(113)



(117)


Multi-family and commercial loans

—



—



—



—



—


Construction

—



—



—



—



—


Home equity

(1)



(7)



(11)



(10)



(74)


Other consumer loans

—



(14)



(4)



(25)



(1)


  Total charge-offs

(183)



(157)



(189)



(206)



(288)


Recoveries:










One- to four-family loans:










  Originated

11



12



12



21



—


  Correspondent purchased

—



—



—



—



—


  Bulk purchased

—



—



4



54



—


Multi-family and commercial loans

—



—



—



—



—


Construction

—



—



—



—



—


Home equity

14



17



6



27



6


Other consumer loans

—



—



1



1



—


  Total recoveries

25



29



23



103



6


Net charge-offs

(158)



(128)



(166)



(103)



(282)


Provision for credit losses

—



323



275



173



427


Balance at end of period

$

9,443



$

9,601



$

9,406



$

9,297



$

9,227












Ratio of net charge-offs during the period










to average loans outstanding during the period

—%



—%



—%



—%



—%


Ratio of net charge-offs during the period










to average non-performing assets

0.52



0.41



0.51



0.34



0.97


ACL to non-performing loans at end of period

36.41



38.28



33.69



33.84



37.04


ACL to loans receivable, net at end of period

0.14



0.15



0.15



0.15



0.15


ACL to net charge-offs (annualized)

15.0x



18.7x



14.2x



22.6x



8.2x



For the Year Ended


September 30,


2015


2014


(Dollars in thousands)

Balance at beginning of period

$

9,227



$

8,822


Charge-offs:




One- to four-family loans:




  Originated

(424)



(284)


  Correspondent purchased

(11)



(96)


  Bulk purchased

(228)



(653)


Multi-family and commercial loans

—



—


Construction

—



—


Home equity

(29)



(103)


Other consumer loans

(43)



(6)


  Total charge-offs

(735)



(1,142)


Recoveries:




One- to four-family loans:




  Originated

56



1


  Correspondent purchased

—



—


  Bulk purchased

58



64


Multi-family and commercial loans

—



—


Construction

—



—


Home equity

64



72


Other consumer loans

2



1


  Total recoveries

180



138


Net charge-offs

(555)



(1,004)


Provision for credit losses

771



1,409


Balance at end of period

$

9,443



$

9,227






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

1.87



3.38


ACL to non-performing loans at end of period

36.41



37.04


ACL to loans receivable, net at end of period

0.14



0.15


ACL to net charge-offs

17.0x


9.2x

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 our MBS and investment securities portfolio are composed of securities issued by U.S. government-sponsored enterprises ("GSEs").  Overall, fixed-rate securities comprised 80% of these portfolios at September 30, 2015.  The weighted average life ("WAL") is the estimated remaining principal repayment term (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.


September 30, 2015


June 30, 2015


September 30, 2014


Amount


Yield


WAL


Amount


Yield


WAL


Amount


Yield


WAL


(Dollars in thousands)

Fixed-rate securities:


















MBS

$

1,047,637



2.24%



3.2


$

1,120,019



2.26%



3.3


$

1,279,990



2.35%



3.7

GSE debentures

525,376



1.14



1.6


600,376



1.13



2.3


554,811



1.06



2.9

Municipal bonds

38,214



1.87



2.9


39,505



1.91



3.1


38,874



2.29



2.8

  Total fixed-rate securities

1,611,227



1.87



2.7


1,759,900



1.87



3.0


1,873,675



1.97



3.4



















Adjustable-rate securities:


















MBS

402,417



2.22



5.3


431,238



2.22



5.3


506,089



2.24



5.4

Trust preferred securities

2,186



1.59



21.7


2,351



1.54



22.0


2,493



1.49



22.7

  Total adjustable-rate securities

404,603



2.21



5.4


433,589



2.21



5.4


508,582



2.24



5.5

Total securities portfolio

$

2,015,830



1.94



3.2


$

2,193,489



1.93



3.4


$

2,382,257



2.02



3.9

MBS:  The following tables summarize 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 principal repayment term (in years) after three-month historical prepayment speeds have been applied.


For the Three Months Ended


September 30, 2015


June 30, 2015


March 31, 2015


December 31, 2014


Amount


Yield


WAL


Amount


Yield


WAL


Amount


Yield


WAL


Amount


Yield


WAL


(Dollars in thousands)

Beginning balance - carrying value

$

1,565,184



2.25%



3.9



$

1,648,046



2.30%



4.3



$

1,711,231



2.32%



4.5



$

1,802,547



2.32%



4.2


Maturities and repayments

(99,840)







(100,538)







(86,156)







(89,795)






Net amortization of (premiums)/discounts

(1,362)







(1,412)







(1,258)







(1,332)






Purchases:
























Fixed

—



—



—



20,532



1.74



4.5



25,137



1.53



3.8



—



—



—


Change in valuation on AFS securities

(1,443)







(1,444)







(908)







(189)






Ending balance - carrying value

$

1,462,539



2.24



3.8



$

1,565,184



2.25



3.9



$

1,648,046



2.30



4.3



$

1,711,231



2.32



4.5



For the Year Ended


September 30, 2015


September 30, 2014


Amount


Yield


WAL


Amount


Yield


WAL


(Dollars in thousands)

Beginning balance - carrying value

$

1,802,547



2.32%



4.2



$

2,047,708



2.40%



3.9


Maturities and repayments

(376,329)







(387,994)






Net amortization of (premiums)/discounts

(5,364)







(5,674)






Purchases:












Fixed

45,669



1.62



4.1



129,002



1.74



3.8


Adjustable

—



—



—



21,737



1.92



5.2


Change in valuation on AFS securities

(3,984)







(2,232)






Ending balance - carrying value

$

1,462,539



2.24



3.8



$

1,802,547



2.32



4.2


Investment Securities:  The following tables summarize the activity in our 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 principal repayment terms (in years) of the securities after projected call dates have been considered, based upon market rates at each date presented.


For the Three Months Ended


September 30, 2015


June 30, 2015


March 31, 2015


December 31, 2014


Amount


Yield


WAL


Amount


Yield


WAL


Amount


Yield


WAL


Amount


Yield


WAL


(Dollars in thousands)

Beginning balance - carrying value

$

641,532



1.18%



2.5



$

620,193



1.18%



2.2



$

539,012



1.18%



2.9



$

590,942



1.15%



3.0


Maturities and calls

(76,387)







(30,000)







(28,051)







(54,081)






Net amortization of (premiums)/discounts

(70)







(52)







(68)







(95)






Purchases:
























Fixed

—



—



—



52,379



1.31



3.1



105,212



1.16



1.7



810



1.22



5.0


Change in valuation on AFS securities

1,679







(988)







4,088







1,436






Ending balance - carrying value

$

566,754



1.19



1.8



$

641,532



1.18



2.5



$

620,193



1.18



2.2



$

539,012



1.18



2.9



For the Year Ended


September 30, 2015


September 30, 2014


Amount


Yield


WAL


Amount


Yield


WAL


(Dollars in thousands)

Beginning balance - carrying value

$

590,942



1.15%



3.0



$

740,282



1.14%



2.9


Maturities and calls

(188,519)







(289,649)






Net amortization of (premiums)/discounts

(285)







(379)






Purchases:












Fixed

158,401



1.21



2.1



138,908



1.04



2.8


Change in valuation on AFS securities

6,215







1,780






Ending balance - carrying value

$

566,754



1.19



1.8



$

590,942



1.15



3.0


Deposit Portfolio

The following table presents the amount, weighted average rate, and percent of total for the components of our deposit portfolio at the dates presented.


September 30, 2015


June 30, 2015


September 30, 2014






% of






% of






% of


Amount


Rate


 Total


Amount


Rate


 Total


Amount


Rate


 Total


(Dollars in thousands)

Noninterest-bearing checking

$

188,007



—%



3.9%



$

188,127



—%



3.9%



$

167,045



—%



3.6%


Interest-bearing checking

550,741



0.05



11.4



559,428



0.05



11.6



523,959



0.05



11.2


Savings

311,670



0.16



6.4



311,658



0.16



6.5



296,187



0.15



6.4


Money market

1,148,935



0.23



23.8



1,148,490



0.23



23.8



1,135,915



0.23



24.4


Retail certificates of deposit

2,320,804



1.29



48.0



2,285,046



1.27



47.5



2,231,737



1.22



47.9


Public units/brokered deposits

312,363



0.40



6.5



320,439



0.31



6.7



300,429



0.63



6.5



$

4,832,520



0.72



100.0%



$

4,813,188



0.70



100.0%



$

4,655,272



0.70



100.0%


Public unit deposits were $312.4 million at September 30, 2015 compared to $258.6 million at September 30, 2014.  There were no brokered deposits at September 30, 2015 compared to $41.9 million at September 30, 2014.

The following table presents scheduled maturities of our certificates of deposit, along with associated weighted average rates, as of September 30, 2015:



Amount Due









More than


More than









1 year


1 year to


2 years to 3


More than


Total

Rate range


or less


2 years


years


3 years


Amount


Rate



(Dollars in thousands)



0.00 – 0.99%


$

824,853



$

191,214



$

4,957



$

—



$

1,021,024



0.57%


1.00 – 1.99%


228,212



404,500



398,223



492,040



1,522,975



1.54


2.00 – 2.99%


38,120



—



951



49,576



88,647



2.20


3.00 – 3.99%


114



327



—



—



441



3.20


4.00 – 4.99%


80



—



—



—



80



4.40




$

1,091,379



$

596,041



$

404,131



$

541,616



$

2,633,167



1.18















Percent of total


41.4%



22.6%



15.4%



20.6%






Weighted average rate


0.75



1.22



1.44



1.84






Weighted average maturity (in years)


0.5



1.5



2.4



3.9



1.7




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




1.8




Borrowings

The following table presents the maturity of FHLB advances, at par, and repurchase agreements, along with associated weighted average contractual and effective rates as of September 30, 2015.  In August 2015, the Bank prepaid a $175.0 million fixed-rate FHLB advance with a contractual rate of 4.32% (effective rate of 5.08%) and a remaining term-to-maturity of just over six months.  The prepaid FHLB advance was replaced with a $175.0 million fixed-rate FHLB advance with a contractual rate of 1.41% (effective rate of 2.18%) and a term of three years.  At September 30, 2015, the Bank had $700.0 million outstanding on the FHLB line of credit, at a rate of 0.29%, in conjunction with the daily leverage strategy, that is not included in the following table.



FHLB


Repurchase





Maturity by


Advances


Agreements


Contractual


Effective

Fiscal year


Amount


Amount


Rate


Rate(1)



(Dollars in thousands)





2016


$

400,000



$

—



1.40%



1.97%


2017


500,000



—



2.69



2.72


2018


375,000



100,000



2.35



2.64


2019


300,000



—



1.68



1.68


2020


250,000



100,000



2.18



2.18


2021


550,000



—



2.27



2.27


2022


200,000



—



2.23



2.23




$

2,575,000



$

200,000



2.16



2.29



















(1)

The effective rate includes the impact of the amortization of deferred prepayment penalties resulting from FHLB advances previously prepaid.

The following table presents the maturity and weighted average repricing rate, which is also the weighted average effective rate, of certificates of deposit, split between retail and public unit deposit amounts, and term borrowings for the next four quarters as of September 30, 2015.



Retail




Public Unit




Term







Maturity by


Certificate


Repricing


Deposit


Repricing


Borrowings


Repricing




Repricing

Quarter End


Amount


Rate


Amount


Rate


Amount


Rate


Total


Rate



(Dollars in thousands)

December 31, 2015


$

188,140



0.71%



$

149,654



0.19%



$

200,000



1.94%



$

537,794



1.02%


March 31, 2016


220,117



0.85



21,253



0.23



—



—



241,370



0.79


June 30, 2016


260,831



0.99



45,035



0.40



100,000



3.17



405,866



1.46


September 30, 2016


181,353



0.99



24,996



0.47



100,000



0.83



306,349



0.89




$

850,441



0.89



$

240,938



0.26



$

400,000



1.97



$

1,491,379



1.08


The following tables present term borrowing activity for the periods shown, which includes FHLB advances, at par, and repurchase agreements.  Line of credit activity is excluded from the following tables.  At September 30, 2015, the Bank had $700.0 million outstanding on the FHLB line of credit, at a rate of 0.29%, in conjunction with the daily leverage strategy.  The weighted average effective rate includes the impact of the amortization of deferred prepayment penalties resulting from FHLB advances previously prepaid.  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


September 30, 2015


June 30, 2015


March 31, 2015


December 31, 2014




Effective






Effective






Effective






Effective




Amount


Rate


WAM


Amount


Rate


WAM


Amount


Rate


WAM


Amount


Rate


WAM


(Dollars in thousands)

Beginning balance

$

2,795,000



2.49%



3.3



$

2,795,000



2.51%



3.3



$

2,795,000



2.55%



3.0



$

2,795,000



2.45%



2.8


Maturities and prepayments:























FHLB advances

(175,000)



5.08





(100,000)



3.01





(250,000)



2.48





(250,000)



0.84




Repurchase agreements

(20,000)



4.45





—



—





—



—





—



—




New borrowings:
























FHLB advances

175,000



2.18



3.0



100,000



2.25



7.0



250,000



2.06



6.4



250,000



1.99



5.2


Ending balance

$

2,775,000



2.29



3.3



$

2,795,000



2.49



3.3



$

2,795,000



2.51



3.3



$

2,795,000



2.55



3.0



For the Year Ended


September 30, 2015


September 30, 2014




Effective






Effective




Amount


Rate


WAM


Amount


Rate


WAM


(Dollars in thousands)

Beginning balance

$

2,795,000



2.45%



2.8



$

2,845,000



2.75%



2.6


Maturities and prepayments:











FHLB advances

(775,000)



2.60





(450,000)



3.90




Repurchase agreements

(20,000)



4.45





(100,000)



4.20




New borrowings:












FHLB advances

775,000



2.09



5.3



500,000



2.36



6.3


Ending balance

$

2,775,000



2.29



3.3



$

2,795,000



2.45



2.8


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 our interest-earning assets and interest-bearing liabilities as of the date 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 term borrowings is the effective rate, which includes the impact of the amortization of deferred prepayment penalties resulting from FHLB advances previously prepaid.  The terms presented for one- to four-family loans represent the contractual terms of the loan.


September 30, 2015


Amount


Yield/Rate


WAL


% of Category


% of Total


(Dollars in thousands)

Investment securities

$

566,754



1.19%



1.8



27.9%



5.9%


MBS - fixed

1,052,009



2.24



3.2



51.8



10.9


MBS - adjustable

410,530



2.22



5.3



20.3



4.2


Total investment securities and MBS

2,029,293



1.94



3.2



100.0%



21.0


Loans receivable:










Fixed-rate one- to four-family:










<= 15 years

1,256,611



3.25



3.9



18.7%



13.0


> 15 years

3,877,233



4.02



5.7



57.8



40.1


All other fixed-rate loans

191,142



4.28



3.3



2.8



2.0


Total fixed-rate loans

5,324,986



3.85



5.2



79.3



55.1


Adjustable-rate one- to four-family:










<= 36 months

329,800



1.91



3.8



4.9



3.4


> 36 months

878,768



2.91



2.8



13.1



9.1


All other adjustable-rate loans

179,739



4.34



1.4



2.7



1.8


Total adjustable-rate loans

1,388,307



2.86



2.9



20.7



14.3


Total loans receivable

6,713,293



3.65



4.7



100.0%



69.4


FHLB stock

150,543



5.98



2.5





1.6


Cash and cash equivalents

772,632



0.25



—





8.0


Total interest-earning assets

$

9,665,761



3.06



4.0





100.0%












Transaction deposits

$

2,199,353



0.16



6.5



45.5%



26.5%


Certificates of deposit

2,633,167



1.18



1.7



54.5



31.7


Total deposits

4,832,520



0.72



3.9



100.0%



58.2


Term borrowings

2,775,000



2.29



3.3



79.9%



33.4


FHLB line of credit

700,000



0.29



—



20.1



8.4


Total borrowings

3,475,000



1.89



2.6



100.0%



41.8


Total interest-bearing liabilities

$

8,307,520



1.21



3.3





100.0%


At September 30, 2015, the Bank's one-year gap between the amount of interest-earning assets and interest-bearing liabilities projected to reprice was $735.9 million, or 7.48% of total assets, compared to $166.2 million, or 1.8% of total assets, at June 30, 2015.  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 would have less economic incentive to modify their cost of borrowings.  If interest rates were to increase 200 basis points, as of September 30, 2015, the Bank's one-year gap is projected to be $25.2 million, or 0.3% of total assets.  This compares to a one-year gap of -$271.2 million, or -3.0% of total assets, if interest rates were to have increased 200 basis points as of June 30, 2015.  The change in the one-year gap amount in both the base case and +200 basis point scenarios between periods was due primarily to lower interest rates at September 30, 2015 than at June 30, 2015, resulting in an increase in prepayment projections on the Bank's mortgage loan and MBS portfolios, as well as an increase in the amount of securities projected to be called, resulting in an increase in the amount of assets expected to reprice over the 12-month horizon.  In addition, during the current quarter, the Bank prepaid a $175.0 million FHLB advance that was scheduled to mature in February 2016.  The prepaid advance was replaced with a new $175.0 million fixed-rate FHLB advance with a term of three years, resulting in a decrease in the amount of liabilities expected to reprice in the 12-month horizon compared to the prior quarter.

The gap position of the Bank has been managed over the past several years in anticipation of higher interest rates.  Because of the on-balance sheet strategies implemented over the past several years of lengthening FHLB advances, increasing rates offered on longer-term certificate of deposit products, purchasing shorter term agency debentures, and focusing on the long-term value of the balance sheet through the measurement and management of our market value of portfolio equity, management believes the Bank is well-positioned to move into a market rate environment where interest rates are higher.

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 September 30, 2015.  At September 30, 2015, $700.0 million of the daily leverage strategy was in place, so the yields/rates presented at September 30, 2015 in the tables below do not reflect the full effects of the daily leverage strategy.  Weighted average yields are derived by dividing income (annualized for the three month periods) by the average balance of the related assets, and weighted average rates are derived by dividing expense (annualized for the three month periods) 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 are not calculated on a fully taxable equivalent basis.


At


For the Year Ended September 30,


September 30, 2015


2015


2014




Average


Interest




Average


Interest




Yield/


Outstanding


Earned/


Yield/


Outstanding


Earned/


Yield/


Rate


Amount


Paid


Rate


Amount


Paid


Rate

Assets:



(Dollars in thousands)

Interest-earning assets:














  Loans receivable(1)

3.65%


$

6,389,964



$

235,500



3.69%



$

6,082,505



$

229,944



3.78%


  MBS(2)

2.24


1,632,117



36,647



2.25



1,931,477



45,300



2.35


  Investment securities(2)(3)

1.19


604,999



7,182



1.19



648,939



7,385



1.14


  FHLB stock

5.98


209,743



12,556



5.99



139,197



6,555



4.71


  Cash and cash equivalents

0.25


2,125,693



5,477



0.25



420,194



1,062



0.25


Total interest-earning assets(1)(2)

3.06


10,962,516



297,362



2.71



9,222,312



290,246



3.15


Other noninterest-earning assets



232,234







221,229






Total assets



$

11,194,750







$

9,443,541




















Liabilities and stockholders' equity:














Interest-bearing liabilities:














  Checking

0.04


$

727,533



274



0.04



$

676,773



259



0.04


  Savings

0.16


306,456



462



0.15



291,957



353



0.12


  Money market

0.23


1,149,203



2,679



0.23



1,137,734



2,635



0.23


  Retail certificates

1.29


2,259,645



28,085



1.24



2,220,436



27,205



1.23


  Wholesale certificates

0.40


312,857



1,619



0.52



303,528



2,152



0.71


Total deposits

0.72


4,755,694



33,119



0.70



4,630,428



32,604



0.70


  FHLB advances(4)

2.24


2,571,439



62,437



2.43



2,499,888



62,348



2.49


  FHLB line of credit

0.29


2,075,343



5,360



0.25



356,890



869



0.24


FHLB borrowings

1.82


4,646,782



67,797



1.46



2,856,778



63,217



2.21


  Repurchase agreements

2.94


215,835



6,678



3.05



300,274



10,282



3.38


Total borrowings

1.89


4,862,617



74,475



1.53



3,157,052



73,499



2.32


Total interest-bearing liabilities

1.21


9,618,311



107,594



1.12



7,787,480



106,103



1.36


Other noninterest-bearing liabilities



108,522







102,638






Stockholders' equity



1,467,917







1,553,423






Total liabilities and stockholders' equity



$

11,194,750







$

9,443,541




















Net interest income(5)





$

189,768







$

184,143




Net interest rate spread(6)

1.85






1.59







1.79


Net interest-earning assets



$

1,344,205







$

1,434,832






Net interest margin(7)







1.73







2.00


Ratio of interest-earning assets














to interest-bearing liabilities







1.14x






1.18x















Selected performance ratios:














Return on average assets







0.70%







0.82%


Return on average equity







5.32







5.00


Average equity to average assets







13.11







16.45


Operating expense ratio(8)







0.84







0.96


Efficiency ratio(9)







44.74







43.72


Pre-tax yield on daily leverage strategy(10)






0.20







0.21
















Selected performance ratios, excluding the effects of the daily leverage strategy:







Net interest margin







2.07







2.07


Return on average assets







0.83







0.85


Return on average equity







5.13







4.97



For the Three Months Ended


September 30, 2015


June 30, 2015


Average


Interest




Average


Interest




Outstanding


Earned/


Yield/


Outstanding


Earned/


Yield/


Amount


Paid


Rate


Amount


Paid


Rate

Assets:

(Dollars in thousands)

Interest-earning assets:












  Loans receivable(1)

$

6,566,534



$

59,761



3.64%



$

6,422,240



$

58,922



3.67%


  MBS(2)

1,507,104



8,260



2.19



1,602,047



8,849



2.21


  Investment securities(2)(3)

639,809



1,920



1.20



636,368



1,914



1.20


  FHLB stock

209,725



3,167



5.99



209,890



3,132



5.98


  Cash and cash equivalents

2,034,079



1,303



0.25



2,141,864



1,357



0.25


Total interest-earning assets(1)(2)

10,957,251



74,411



2.71



11,012,409



74,174



2.69


Other noninterest-earning assets

235,435







229,657






Total assets

$

11,192,686







$

11,242,066


















Liabilities and stockholders' equity:












Interest-bearing liabilities:












  Checking

$

738,912



69



0.04



$

751,078



70



0.04


  Savings

311,620



128



0.16



311,504



115



0.15


  Money market

1,155,701



680



0.23



1,146,468



665



0.23


  Retail certificates

2,283,492



7,245



1.26



2,283,125



7,158



1.26


  Wholesale certificates

306,667



268



0.35



309,765



369



0.48


Total deposits

4,796,392



8,390



0.69



4,801,940



8,377



0.70


  FHLB advances(4)

2,571,503



15,137



2.34



2,572,293



15,718



2.45


  FHLB line of credit

2,084,783



1,402



0.26



2,076,924



1,354



0.26


FHLB borrowings

4,656,286



16,539



1.41



4,649,217



17,072



1.47


Repurchase agreements

203,478



1,542



2.97



220,000



1,712



3.08


Total borrowings

4,859,764



18,081



1.47



4,869,217



18,784



1.54


Total interest-bearing liabilities

9,656,156



26,471



1.09



9,671,157



27,161



1.12


Other noninterest-bearing liabilities

111,678







89,052






Stockholders' equity

1,424,852







1,481,857






Total liabilities and stockholders' equity

$

11,192,686







$

11,242,066


















Net interest income(5)



$

47,940







$

47,013




Net interest rate spread(6)





1.62







1.57


Net interest-earning assets

$

1,301,095







$

1,341,252






Net interest margin(7)





1.75







1.71


Ratio of interest-earning assets












to interest-bearing liabilities





1.13x






1.14x













Selected performance ratios:












Return on average assets (annualized)





0.67%







0.70%


Return on average equity (annualized)





5.27







5.29


Average equity to average assets





12.73







13.18


Operating expense ratio(8)





0.90







0.82


Efficiency ratio(9)





47.31







44.30


Pre-tax yield on daily leverage strategy(10)





0.19







0.20














Selected performance ratios, excluding the effects of the daily leverage strategy:







Net interest margin





2.10







2.05


Return on average assets (annualized)





0.80







0.83


Return on average equity (annualized)





5.09







5.10


















(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.

(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 $37.2 million and $36.8 million for the fiscal years ended September 30, 2015 and 2014 respectively, and $39.0 million and $37.9 million for the quarters ended September 30, 2015 and June 30, 2015, respectively.

(4)

The balance and rate of FHLB advances are stated net of deferred prepayment penalties.

(5)

Net interest income represents the difference between interest income earned on interest-earning assets and interest paid on interest-bearing liabilities.  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 (annualized for the three month periods) as a percentage of average interest-earning assets.

(8)

The operating expense ratio represents non-interest expense (annualized for the three month periods) 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.

(10)

The pre-tax yield on the daily leverage strategy represents pre-tax income (annualized for the three month periods) resulting from the transaction as a percentage of the average interest-earning assets associated with the transaction.

SOURCE Capitol Federal Financial, Inc.

Related Links

http://www.capfed.com

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