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Section 1: 8-K (CURRENT REPORT, ITEMS 2.02, 7.01, AND 9.01)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)
October 27, 2016

 
 
 
 
 
CAPITOL FEDERAL FINANCIAL, INC.
 
(Exact name of Registrant as specified in its Charter)

 
 
 
Maryland
001-34814
27-2631712
(State or other jurisdiction of incorporation)
(Commission File Number)
(IRS Employer Identification Number)


700 Kansas Avenue Topeka, Kansas 66603
(Address of principal executive offices) (Zip Code)


Registrant's telephone number, including area code:
(785) 235-1341

N/A
(Former name or former address, if changed since last report)


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The Registrant’s press release dated October 27, 2016, announcing financial results for fiscal year 2016 is attached hereto as Exhibit 99.1, and is incorporated herein by reference.

ITEM 7.01 REGULATION FD DISCLOSURE
The Registrant’s press release dated October 27, 2016, announcing that its Board of Directors declared a fiscal year 2016 cash true-up dividend of $0.29 per share on outstanding CFFN common stock is attached hereto as Exhibit 99.2, and is incorporated herein by reference. The dividend is payable on December 2, 2016, to stockholders of record as of the close of business on November 18, 2016.

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(d) Exhibits

Exhibit 99.1 – Press release announcing earnings dated October 27, 2016
Exhibit 99.2 – Press release announcing fiscal year 2016 cash true-up dividend dated October 27, 2016







 
 
 
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
 
 
CAPITOL FEDERAL FINANCIAL, INC.
Date: October 27, 2016
By: /s/ Kent G. Townsend
 
 
 
 
 
 
 
 
Kent G. Townsend, Executive Vice-President,
 
 
Chief Financial Officer, and Treasurer
 



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Section 2: EX-99.1 (PRESS RELEASE ANNOUNCING EARNINGS)

Exhibit



36426241_cffnlogo.jpg
NEWS RELEASE
FOR IMMEDIATE RELEASE
October 27, 2016
CAPITOL FEDERAL FINANCIAL, INC.
REPORTS FISCAL YEAR 2016 RESULTS

Topeka, KS - Capitol Federal® Financial, Inc. (NASDAQ: CFFN) (the "Company") announced results today for the fiscal year ended September 30, 2016. Detailed results will be available in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2016, which will be filed with the Securities and Exchange Commission ("SEC") on or about November 29, 2016 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 fourth quarter include:
net income of $20.7 million, including $616 thousand from the daily leverage strategy;
basic and diluted earnings per share of $0.16;
net interest margin of 1.74% (2.09% excluding the effects of the daily leverage strategy); and
dividends paid of $11.3 million, or $0.085 per share.

Highlights for the fiscal year include:
net income of $83.5 million, including $2.3 million from the daily leverage strategy;
basic and diluted earnings per share of $0.63;
loan portfolio growth of 5%;
deposit portfolio growth of 7%;
net interest margin of 1.75% (2.10% excluding the effects of the daily leverage strategy);
dividends paid of $111.8 million, or $0.84 per share; and
declared a fiscal year 2016 cash true-up dividend of $0.29 per share, payable on December 2, 2016.


Comparison of Operating Results for the Years Ended September 30, 2016 and 2015

For fiscal year 2016, the Company recognized net income of $83.5 million, or $0.63 per share, compared to net income of $78.1 million, or $0.58 per share, for fiscal year 2015. The $5.4 million, or 6.9%, increase in net income was due primarily to a $2.4 million increase in net interest income and a $2.2 million increase in non-interest income. The $2.4 million, or 1.3%, increase in net interest income from the prior fiscal year was due primarily to an $8.2 million decrease in interest expense on term borrowings, partially offset by a $4.7 million increase in interest expense on deposits.

Net income attributable to the daily leverage strategy was $2.3 million during the current fiscal year, compared to $2.8 million for the prior fiscal year. The decrease was due to the average borrowings rate on the Federal Home Loan Bank Topeka ("FHLB") line of credit increasing more than the average yield earned on the cash balances held at the Federal Reserve Bank.

The net interest margin increased two basis points, from 1.73% for the prior fiscal year to 1.75% for the current fiscal year. Excluding the effects of the daily leverage strategy, the net interest margin would have increased three basis points, from 2.07% for the prior fiscal year to 2.10% for the current fiscal year. The increase in the net interest margin was due mainly to a decrease in interest expense on term borrowings, partially offset by an increase in interest expense on deposits.


1



Interest and Dividend Income
The weighted average yield on total interest-earning assets increased three basis points, from 2.71% for the prior fiscal year to 2.74% for the current fiscal year, and the average balance of interest-earning assets increased $25.4 million from the prior fiscal year. Absent the impact of the daily leverage strategy, the weighted average yield on total interest-earning assets would have decreased one basis point, from 3.22% for the prior fiscal year to 3.21% for the current fiscal year, while the average balance would have increased $40.5 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 Year Ended
 
 
 
 
 
September 30,
 
Change Expressed in:
 
2016
 
2015
 
Dollars
 
Percent
 
(Dollars in thousands)
 
 
INTEREST AND DIVIDEND INCOME:
 
 
 
 
 
 
 
Loans receivable
$
243,311

 
$
235,500

 
$
7,811

 
3.3
 %
Mortgage-backed securities ("MBS")
29,794

 
36,647

 
(6,853
)
 
(18.7
)
FHLB stock
12,252

 
12,556

 
(304
)
 
(2.4
)
Cash and cash equivalents
9,831

 
5,477

 
4,354

 
79.5

Investment securities
5,925

 
7,182

 
(1,257
)
 
(17.5
)
Total interest and dividend income
$
301,113

 
$
297,362

 
$
3,751

 
1.3


The increase in interest income on loans receivable was due to a $376.4 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 3.60% for the current fiscal year. Loan growth was primarily funded through cash flows from the MBS and investment securities portfolios along with deposit growth. The decrease in the weighted average yield was due primarily to loans repricing to lower market rates and the origination and purchase of loans between periods at rates less than the existing portfolio rate, along with an increase in the amortization of premiums paid for correspondent loans.

The decrease in interest income on the MBS portfolio was due primarily to a $265.5 million decrease in the average balance of the portfolio as cash flows not reinvested were used to fund loan growth. Additionally, the weighted average yield on the MBS portfolio decreased seven basis points, from 2.25% during the prior fiscal year to 2.18% for the current fiscal year. The decrease in the weighted average yield was due primarily to an increase in the impact of net premium amortization. Net premium amortization of $5.0 million during the current fiscal year decreased the weighted average yield on the portfolio by 37 basis points. During the prior fiscal year, $5.4 million of net premiums were amortized, which decreased the weighted average yield on the portfolio by 32 basis points. As of September 30, 2016, the remaining net balance of premiums on our portfolio of MBS was $13.0 million.

The increase in interest income on cash and cash equivalents was due primarily to a 20 basis point increase in the weighted average yield resulting from an increase in the yield earned on balances held at the Federal Reserve Bank. The decrease in interest income on investment securities was due primarily to a $123.8 million decrease in the average balance, partially offset by a four basis point increase in the weighted average yield on the portfolio. Cash flows not reinvested in the portfolio were used to fund loan growth.


2



Interest Expense
The weighted average rate paid on total interest-bearing liabilities decreased one basis point, from 1.12% for the prior fiscal year to 1.11% for the current fiscal year, while the average balance of interest-bearing liabilities increased $138.5 million from the prior year fiscal year. Absent the impact of the daily leverage strategy, the weighted average rate paid on total interest-bearing liabilities would have decreased seven basis points from the prior year fiscal year, to 1.28% for the current fiscal year, due primarily to a decrease in the cost of term borrowings, while the average balance of interest-bearing liabilities would have increased $154.1 million due primarily to growth in deposits. 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:
 
2016
 
2015
 
Dollars
 
Percent
 
(Dollars in thousands)
 
 
INTEREST EXPENSE:
 
 
 
 
 
 
 
FHLB advances
$
54,969

 
$
62,437

 
$
(7,468
)
 
(12.0
)%
FHLB line of credit
10,122

 
5,360

 
4,762

 
88.8

Deposits
37,859

 
33,119

 
4,740

 
14.3

Repurchase agreements
5,981

 
6,678

 
(697
)
 
(10.4
)
Total interest expense
$
108,931

 
$
107,594

 
$
1,337

 
1.2


The decrease in interest expense on FHLB advances was due mainly to a 20 basis point decrease in the weighted average rate paid on the portfolio, to 2.23% for the current fiscal year, along with a $102.4 million decrease in the average balance due to not replacing all of the FHLB advances that matured during the current fiscal year. The decrease in the weighted average rate paid was due primarily to the prepayment of a $175.0 million advance late in the prior fiscal year with an effective rate of 5.08%, which was replaced with a $175.0 million advance with an effective rate of 2.18%. The increase in interest expense on FHLB line of credit borrowings was due primarily to a 23 basis point increase in the weighted average rate paid on the borrowings used to fund the daily leverage strategy.

The increase in interest expense on deposits was due primarily to a five basis point increase in the weighted average rate, to 0.75% for the current fiscal year, along with growth in the portfolio. The increase in weighted average rate was primarily in the retail certificates of deposit portfolio. The average balance of the deposit portfolio increased $270.3 million for the current fiscal year, with the majority of the increase in the retail deposit portfolio, specifically the certificates of deposit and checking portfolios. The decrease in interest expense on repurchase agreements was due to the maturity late in the prior fiscal year of a $20.0 million repurchase agreement at a rate of 4.45% that was not replaced.

Provision for Credit Losses
Capitol Federal Savings Bank (the "Bank") recorded a negative provision for credit losses during the current fiscal year of $750 thousand, compared to a provision for credit losses during the prior year fiscal year of $771 thousand. The negative provision for credit losses during the current fiscal year was due to the continued low level of net loan charge-offs, due partially to improving collateral values, and improving delinquent loan ratios. The collateral value and historical loss factors within our allowance for credit losses ("ACL") formula analysis model decreased during the current fiscal year due to the improvement in collateral values and reduction in net loan charge-offs. Net loan charge-offs were $153 thousand for the current fiscal year, composed of charge-offs totaling $630 thousand, partially offset by recoveries of $477 thousand. Net loan charge-offs were $555 thousand for the prior fiscal year. At September 30, 2016, loans 30 to 89 days delinquent were 0.33% of total loans and loans 90 or more days delinquent or in foreclosure were 0.24% of total loans. At September 30, 2015, loans 30 to 89 days delinquent were 0.41% of total loans and loans 90 or more days delinquent or in foreclosure were 0.25% of total loans.


3



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:
 
2016
 
2015
 
Dollars
 
Percent
 
(Dollars in thousands)
 
 
NON-INTEREST INCOME:
 
 
 
 
 
 
 
Retail fees and charges
$
14,835

 
$
14,897

 
$
(62
)
 
(0.4
)%
Income from bank-owned life insurance ("BOLI")
3,420

 
1,150

 
2,270

 
197.4

Other non-interest income
5,057

 
5,093

 
(36
)
 
(0.7
)
Total non-interest income
$
23,312

 
$
21,140

 
$
2,172

 
10.3


The increase in income from BOLI was due mainly to the purchase of a new BOLI investment late in the prior fiscal year, as well as to the receipt of death benefits in the current fiscal year and no such proceeds in the prior fiscal 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:
 
2016
 
2015
 
Dollars
 
Percent
 
(Dollars in thousands)
 
 
NON-INTEREST EXPENSE:
 
 
 
 
 
 
 
Salaries and employee benefits
$
42,378

 
$
43,309

 
$
(931
)
 
(2.1
)%
Occupancy, net
10,576

 
9,944

 
632

 
6.4

Information technology and communications
10,540

 
10,360

 
180

 
1.7

Federal insurance premium
5,076

 
5,495

 
(419
)
 
(7.6
)
Deposit and loan transaction costs
5,585

 
5,417

 
168

 
3.1

Regulatory and outside services
5,645

 
5,347

 
298

 
5.6

Advertising and promotional
4,609

 
4,547

 
62

 
1.4

Low income housing partnerships
3,872

 
4,572

 
(700
)
 
(15.3
)
Office supplies and related expense
2,640

 
2,088

 
552

 
26.4

Other non-interest expense
3,384

 
3,290

 
94

 
2.9

Total non-interest expense
$
94,305

 
$
94,369

 
$
(64
)
 
(0.1
)

The decrease in salaries and employee benefits was due primarily to a decrease in stock compensation resulting from the final vesting of a large stock grant in the second quarter of the current fiscal year and a decrease in employee benefit expenses. The increase in occupancy, net expense was due mainly to non-capitalizable costs and depreciation associated with the remodel of the Bank's Kansas City market area operations center. The decrease in federal insurance premiums was due primarily to a decrease in the Federal Deposit Insurance Corporation ("FDIC") base assessment rate. The decrease in the FDIC base assessment rate was effective July 1, 2016 and was the result of the FDIC Deposit Insurance Fund reaching 1.15% of total estimated insured deposits of the banking system on June 30, 2016. We anticipate our federal insurance premium expense will decrease approximately $1.5 million in fiscal year 2017, as compared to the current fiscal year, due to the decrease in the FDIC base assessment rate. The decrease in low income housing partnerships expense was due primarily to lower impairments in the current fiscal year as compared to the prior fiscal year. The increase in office supplies and related expense was due primarily to the purchase of cards enabled with chip card technology.

The Company's efficiency ratio was 43.76% for the current fiscal year compared to 44.74% for the prior fiscal year. The change in the efficiency ratio was due primarily to an increase in both net interest income and non-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.


4



The Bank invests in low income housing partnerships that make equity investments in affordable housing properties and is a limited partner in these partnerships. The Bank has been accounting for these partnerships using the equity method of accounting as two of the Bank's officers were involved in the operational management of the low income housing partnership investment group. Effective September 30, 2016, those two Bank officers discontinued their involvement in the operational management of the investment group. Starting October 1, 2016, the Bank began using the proportional method of accounting for its low income housing partnership investments. In fiscal year 2017, the Bank will no longer report low income housing partnership expenses in non-interest expense; rather, the pretax operating losses and related tax benefits from the investments will be reported as a component of income tax expense. If this change would have occurred during fiscal year 2016 our efficiency ratio would have been approximately 180 basis points lower. The change in accounting for low income housing partnerships would have had a negligible impact on the Company's net income for fiscal year 2016.

Income Tax Expense
Income tax expense was $38.4 million for the current fiscal year compared to $37.7 million for the prior fiscal year. The effective tax rate for the current fiscal year was 31.5% compared to 32.5% for the prior fiscal year. The decrease in the effective tax rate was due primarily to an increase in nontaxable income related to BOLI and higher low income housing tax credits in the current fiscal year. Management anticipates the effective tax rate for fiscal year 2017 will be approximately 34%. The increase in the effective tax rate in fiscal year 2017 over the current fiscal year is due mainly to the change in the accounting treatment of our low income housing partnerships, which accounts for approximately 250 basis points of the projected fiscal year 2017 estimated tax rate.

Comparison of Operating Results for the Three Months Ended September 30, 2016 and June 30, 2016

Net income increased $147 thousand, or 0.7%, from the quarter ended June 30, 2016 to $20.7 million, or $0.16 per share, for the quarter ended September 30, 2016, due primarily to a negative provision for credit losses in the current quarter, partially offset by an increase in non-interest expense. Net income attributable to the daily leverage strategy was $616 thousand during the current quarter compared to $532 thousand for the prior quarter. The increase in net income attributable to the daily leverage strategy was due to a decrease in the FDIC base assessment rate effective July 1, 2016, as a portion of federal insurance premiums are attributable to the daily leverage strategy due to the increase in average assets resulting from the strategy. The Company's efficiency ratio was 44.85% for the current quarter compared to 43.72% for the prior quarter. The change in the efficiency ratio was due primarily to a typical fiscal year-end increase in non-interest expense.

Net interest income decreased $198 thousand, or 0.4%, from the prior quarter to $47.7 million for the current quarter. The decrease was due primarily to an increase in interest expense on deposits, specifically an increase in the average cost of our certificate of deposit portfolio. The net interest margin increased one basis point from 1.73% for the prior quarter to 1.74% for the current quarter. Excluding the effects of the daily leverage strategy, the net interest margin would have been 2.09% for the current quarter, unchanged from the prior quarter.

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 2.75%, while the average balance of interest-earning assets decreased $51.6 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 two basis points from the prior quarter, to 3.21%, while the average balance would have decreased $51.9 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:
 
2016
 
2016
 
Dollars
 
Percent
 
(Dollars in thousands)
 
 
INTEREST AND DIVIDEND INCOME:
 
 
 
 
 
 
 
Loans receivable
$
61,516

 
$
60,840

 
$
676

 
1.1
 %
MBS
6,860

 
7,401

 
(541
)
 
(7.3
)
FHLB stock
3,044

 
3,050

 
(6
)
 
(0.2
)
Cash and cash equivalents
2,774

 
2,730

 
44

 
1.6

Investment securities
1,401

 
1,506

 
(105
)
 
(7.0
)
Total interest and dividend income
$
75,595

 
$
75,527

 
$
68

 
0.1



5



The increase in interest income on loans receivable was due to a $101.2 million increase in the average balance of the portfolio, partially offset by a one basis point decrease in the weighted average yield on the portfolio, to 3.57% for the current quarter. The loan growth was largely funded with cash flows from the MBS and investment securities portfolios during the current quarter.

The decrease in interest income on MBS was due mainly to a $93.8 million decrease in the average balance of the portfolio as cash flows were used to fund loan growth and pay off certain maturing FHLB advances. Additionally, the weighted average yield on the MBS portfolio decreased two basis points, to 2.12% for the current quarter due to an increase in the impact of net premium amortization. During the current quarter, $1.3 million of net premiums on MBS were amortized, which decreased the weighted average yield on the portfolio by 42 basis points. During the prior quarter, $1.4 million of net premiums were amortized, which decreased the weighted average yield on the portfolio by 40 basis points.

The decrease in interest income on investment securities was due to a $69.9 million decrease in the average balance of the portfolio as cash flows were used to fund loan growth and pay off certain maturing FHLB advances, partially offset by a 10 basis point increase in the weighted average yield on the portfolio, to 1.30% for the current quarter. The increase in weighted average yield was due to an increase in the impact of net discount accretion resulting from the call of securities during the current quarter.

Interest Expense
The weighted average rate paid on total interest-bearing liabilities for the current quarter was 1.13%, unchanged from the prior quarter, and the average balance of interest-bearing liabilities decreased $36.9 million between the two periods. Absent the impact of the daily leverage strategy, the weighted average rate paid on total interest-bearing liabilities for the current quarter would have been 1.29%, unchanged from the prior quarter, and the average balance would have decreased $37.1 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:
 
2016
 
2016
 
Dollars
 
Percent
 
(Dollars in thousands)
 
 
INTEREST EXPENSE:
 
 
 
 
 
 
 
FHLB advances
$
13,400

 
$
13,515

 
$
(115
)
 
(0.9
)%
FHLB line of credit
2,862

 
2,846

 
16

 
0.6

Deposits
10,098

 
9,749

 
349

 
3.6

Repurchase agreements
1,503

 
1,487

 
16

 
1.1

Total interest expense
$
27,863

 
$
27,597

 
$
266

 
1.0


The decrease in interest expense on FHLB advances was due to a $61.5 million decrease in the average balance of the portfolio. During the current quarter, a $100.0 million advance with an effective rate of 0.83% matured and was not renewed or replaced.

The increase in interest expense on deposits was due primarily to a two basis point increase in the weighted average rate paid on the deposit portfolio, to 0.79% for the current quarter, due mainly to an increase in the weighted average rate paid on the certificate of deposit portfolio, as well as a $32.1 million increase in the average balance of the deposit portfolio.

Provision for Credit Losses
The Bank recorded a negative provision for credit losses during the current quarter of $750 thousand compared to no provision for credit losses recorded during the prior quarter. The negative provision for credit losses during the current quarter was due to the continued improvement in loan performance and collateral value trends, which is being reflected in our ACL formula analysis model. Net loan charge-offs were $22 thousand for the current quarter. At September 30, 2016, loans 30 to 89 days delinquent were 0.33% of total loans and loans 90 or more days delinquent or in foreclosure were 0.24% of total loans.

6




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:
 
2016
 
2016
 
Dollars
 
Percent
 
(Dollars in thousands)
 
 
NON-INTEREST INCOME:
 
 
 
 
 
 
 
Retail fees and charges
$
3,738

 
$
3,725

 
$
13

 
0.3
 %
Income from BOLI
610

 
648

 
(38
)
 
(5.9
)
Other non-interest income
1,343

 
1,056

 
287

 
27.2

Total non-interest income
$
5,691

 
$
5,429

 
$
262

 
4.8


The increase in other non-interest income was due primarily to an increase in insurance commissions resulting from 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:
 
2016
 
2016
 
Dollars
 
Percent
 
(Dollars in thousands)
 
 
NON-INTEREST EXPENSE:
 
 
 
 
 
 
 
Salaries and employee benefits
$
10,774

 
$
10,829

 
$
(55
)
 
(0.5
)%
Occupancy, net
2,682

 
2,606

 
76

 
2.9

Information technology and communications
2,657

 
2,716

 
(59
)
 
(2.2
)
Federal insurance premium
918

 
1,377

 
(459
)
 
(33.3
)
Deposit and loan transaction costs
1,466

 
1,449

 
17

 
1.2

Regulatory and outside services
1,645

 
1,370

 
275

 
20.1

Advertising and promotional
1,419

 
1,053

 
366

 
34.8

Low income housing partnerships
1,057

 
721

 
336

 
46.6

Office supplies and related expense
624

 
545

 
79

 
14.5

Other non-interest expense
720

 
661

 
59

 
8.9

Total non-interest expense
$
23,962

 
$
23,327

 
$
635

 
2.7


The decrease in federal insurance premiums was due to a decrease in the FDIC base assessment rate effective July 1, 2016. The increase in regulatory and outside services was due primarily to the timing of external audit fees. The increase in advertising and promotional expense was due mainly to the timing of media campaigns and sponsorships. The increase in low income housing partnerships expense was due primarily to an increase in amortization expense.

Income Tax Expense
Income tax expense was $9.5 million for the current quarter, unchanged from the prior quarter. The effective tax rate for the current quarter was 31.5% compared to 31.6% for the prior quarter.


7



Financial Condition as of September 30, 2016

Total assets were $9.27 billion at September 30, 2016 compared to $9.84 billion at September 30, 2015. The $576.9 million decrease was due primarily to a $490.9 million decrease in cash and cash equivalents and a $40.6 million decrease in FHLB stock, both due primarily to the removal of the entire daily leverage strategy at September 30, 2016 compared to $700.0 million of the daily leverage strategy that remained in place at September 30, 2015. The entire $2.10 billion daily leverage strategy was reinstated on October 3, 2016. Additionally, the securities portfolio decreased $401.1 million, which was partially offset by a $333.0 million increase in loans receivable, net.

The loans receivable portfolio, net, increased to $6.96 billion at September 30, 2016, from $6.63 billion at September 30, 2015. This growth was primarily funded with cash flows from the securities portfolio and growth in deposits. During the current fiscal year, the Bank originated and refinanced $772.9 million of loans with a weighted average rate of 3.55% and purchased $662.8 million of loans from correspondent lenders with a weighted average rate of 3.47%. The Bank also entered into participations of $201.1 million of commercial real estate loans with a weighted average rate of 4.02%, the majority of which had not yet been funded as of September 30, 2016.

Total liabilities were $7.87 billion at September 30, 2016 compared to $8.43 billion at September 30, 2015. The $553.7 million decrease was due primarily to a $898.1 million decrease in FHLB borrowings, largely as a result of the removal of the entire daily leverage strategy at September 30, 2016, along with a $200.0 million decrease in term FHLB advances, partially offset by a $331.5 million increase in the deposit portfolio. The growth in deposits was primarily in the retail certificates of deposit, checking, and wholesale certificates of deposit portfolios, which increased $137.4 million, $75.6 million, and $57.6 million, respectively. Cash flows received from the deposit portfolio were used to pay off certain maturing FHLB advances.

Stockholders' equity was $1.39 billion at September 30, 2016 compared to $1.42 billion at September 30, 2015. The $23.3 million decrease was due primarily to the payment of $111.8 million in cash dividends, partially offset by net income of $83.5 million. The cash dividends paid during the current fiscal year totaled $0.84 per share and consisted of a $0.25 per share cash true-up dividend related to fiscal year 2015 earnings per the Company's dividend policy, a $0.25 per share True Blue Capitol Dividend, and four regular quarterly cash dividends totaling $0.34 per share.

On October 19, 2016, the Company announced a regular quarterly cash dividend of $0.085 per share, or approximately $11.3 million, payable on November 18, 2016 to stockholders of record as of the close of business on November 4, 2016. On October 27, 2016, the Company announced a fiscal year 2016 cash true-up dividend of $0.29 per share, or approximately $38.7 million, related to fiscal year 2016 earnings. The $0.29 per share cash true-up dividend was determined by taking the difference between total earnings for fiscal year 2016 and total regular quarterly cash dividends paid during fiscal year 2016, divided by the number of shares outstanding as of October 24, 2016. The cash true-up dividend is payable on December 2, 2016 to stockholders of record as of the close of business on November 18, 2016, 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 2016.

At September 30, 2016, Capitol Federal Financial, Inc., at the holding company level, had $108.2 million on deposit at the Bank. For fiscal year 2017, 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. 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.

In October 2015, the Company announced a stock repurchase plan for up to $70.0 million of common stock. The repurchase plan does not have an expiration date. The Company has not repurchased any shares under the repurchase plan through the date of this release.

The following table presents the balance of stockholders' equity and related information as of the dates presented.
 
September 30,
 
June 30,
 
September 30,
 
2016
 
2016
 
2015
 
(Dollars in thousands)
Stockholders' equity
$
1,392,964

 
$
1,380,815

 
$
1,416,226

Equity to total assets at end of period
15.0
%
 
14.9
%
 
14.4
%

8




The following table presents a reconciliation of total to net shares outstanding as of September 30, 2016.
Total shares outstanding
137,486,172

Less unallocated Employee Stock Ownership Plan ("ESOP") shares and unvested restricted stock
(4,039,277
)
Net shares outstanding
133,446,895


Consistent with our goal to operate a sound and profitable financial organization, we actively seek to maintain a "well-capitalized" status for the Bank in accordance with regulatory standards. As of September 30, 2016, the Bank and Company exceeded all regulatory capital requirements. The following table presents the Bank's regulatory capital ratios at September 30, 2016.
 
 
 
Regulatory
 
 
 
Requirement For
 
Bank
 
"Well-Capitalized"
 
Ratios
 
Status
Tier 1 leverage ratio
10.9%
 
5.0
%
Common equity tier 1 capital ratio
28.5
 
6.5

Tier 1 capital ratio
28.5
 
8.0

Total capital ratio
28.7
 
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, 2016 is as follows (dollars in thousands):
Total Bank equity as reported under GAAP
$
1,240,827

Unrealized gains on available-for-sale ("AFS") securities
(5,915
)
Total tier 1 capital
1,234,912

ACL
8,540

Total capital
$
1,243,452


The Fiscal Year 2016 Annual Meeting of Stockholders will be held on January 24, 2017, and the voting record date will be December 2, 2016. Management plans to furnish the Company's September 30, 2016 annual proxy materials to stockholders via the internet. Stockholders who are eligible to vote at the Fiscal Year 2016 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 2016 Annual Meeting of Stockholders, and the September 30, 2016 Annual Report to Stockholders.

9




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.

For further information contact:
Jim Wempe
Kent Townsend
Vice President,
Executive Vice President,
Investor Relations
Chief Financial Officer and Treasurer
700 S Kansas Ave.
700 S Kansas Ave.
Topeka, KS 66603
Topeka, KS 66603
(785) 270-6055
(785) 231-6360
jwempe@capfed.com
ktownsend@capfed.com

10




SUPPLEMENTAL FINANCIAL INFORMATION
 
CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollars in thousands, except per share amounts)
 
September 30,
 
September 30,
 
2016
 
2015
ASSETS:
 
 
 
Cash and cash equivalents (includes interest-earning deposits of $267,829 and $764,816)
$
281,764

 
$
772,632

Securities:
 
 
 
AFS at estimated fair value (amortized cost of $517,791 and $744,708)
527,301

 
758,171

Held-to-maturity at amortized cost (estimated fair value of $1,122,867 and $1,295,274)
1,100,874

 
1,271,122

Loans receivable, net (ACL of $8,540 and $9,443)
6,958,024

 
6,625,027

FHLB stock, at cost
109,970

 
150,543

Premises and equipment, net
83,221

 
75,810

Income taxes receivable, net

 
1,071

Other assets
206,093

 
189,785

TOTAL ASSETS
$
9,267,247

 
$
9,844,161

 
 
 
 
LIABILITIES:
 
 
 
Deposits
$
5,164,018

 
$
4,832,520

FHLB borrowings
2,372,389

 
3,270,521

Repurchase agreements
200,000

 
200,000

Advance payments by borrowers for taxes and insurance
62,643

 
61,818

Income taxes payable, net
310

 

Deferred income tax liabilities, net
25,374

 
26,391

Accounts payable and accrued expenses
49,549

 
36,685

Total liabilities
7,874,283

 
8,427,935

 
 
 
 
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, 137,486,172 and 137,106,822
 
 
 
shares issued and outstanding as of September 30, 2016 and 2015, respectively
1,375

 
1,371

Additional paid-in capital
1,156,855

 
1,151,041

Unearned compensation, ESOP
(39,647
)
 
(41,299
)
Retained earnings
268,466

 
296,739

Accumulated other comprehensive income, net of tax
5,915

 
8,374

Total stockholders' equity
1,392,964

 
1,416,226

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
9,267,247

 
$
9,844,161


11



 
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,
 
2016
 
2016
 
2016
 
2015
INTEREST AND DIVIDEND INCOME:
 
 
 
 
 
 
 
Loans receivable
$
61,516

 
$
60,840

 
$
243,311

 
$
235,500

MBS
6,860

 
7,401

 
29,794

 
36,647

FHLB stock
3,044

 
3,050

 
12,252

 
12,556

Cash and cash equivalents
2,774

 
2,730

 
9,831

 
5,477

Investment securities
1,401

 
1,506

 
5,925

 
7,182

Total interest and dividend income
75,595

 
75,527

 
301,113

 
297,362

 
 
 
 
 
 
 
 
INTEREST EXPENSE:
 
 
 
 
 
 
 
FHLB borrowings
16,262

 
16,361

 
65,091

 
67,797

Deposits
10,098

 
9,749

 
37,859

 
33,119

Repurchase agreements
1,503

 
1,487

 
5,981

 
6,678

Total interest expense
27,863

 
27,597

 
108,931

 
107,594

 
 
 
 
 
 
 
 
NET INTEREST INCOME
47,732

 
47,930

 
192,182

 
189,768

 
 
 
 
 
 
 
 
PROVISION FOR CREDIT LOSSES
(750
)
 

 
(750
)
 
771

NET INTEREST INCOME AFTER
 
 
 
 
 
 
 
PROVISION FOR CREDIT LOSSES
48,482

 
47,930

 
192,932

 
188,997

 
 
 
 
 
 
 
 
NON-INTEREST INCOME:
 
 
 
 
 
 
 
Retail fees and charges
3,738

 
3,725

 
14,835

 
14,897

Income from BOLI
610

 
648

 
3,420

 
1,150

Other non-interest income
1,343

 
1,056

 
5,057

 
5,093

Total non-interest income
5,691

 
5,429

 
23,312

 
21,140

 
 
 
 
 
 
 
 
NON-INTEREST EXPENSE:
 
 
 
 
 
 
 
Salaries and employee benefits
10,774

 
10,829

 
42,378

 
43,309

Occupancy, net
2,682

 
2,606

 
10,576

 
9,944

Information technology and communications
2,657

 
2,716

 
10,540

 
10,360

Regulatory and outside services
1,645

 
1,370

 
5,645

 
5,347

Deposit and loan transaction costs
1,466

 
1,449

 
5,585

 
5,417

Federal insurance premium
918

 
1,377

 
5,076

 
5,495

Advertising and promotional
1,419

 
1,053

 
4,609

 
4,547

Low income housing partnerships
1,057

 
721

 
3,872

 
4,572

Office supplies and related expense
624

 
545

 
2,640

 
2,088

Other non-interest expense
720

 
661

 
3,384

 
3,290

Total non-interest expense
23,962

 
23,327

 
94,305

 
94,369

INCOME BEFORE INCOME TAX EXPENSE
30,211

 
30,032

 
121,939

 
115,768

INCOME TAX EXPENSE
9,513

 
9,481

 
38,445

 
37,675

NET INCOME
$
20,698

 
$
20,551

 
$
83,494

 
$
78,093


12



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,
 
2016
 
2016
 
2016
 
2015
 
(Dollars in thousands, except per share amounts)
Net income
$
20,698

 
$
20,551

 
$
83,494

 
$
78,093

Income allocated to participating securities
(12
)
 
(11
)
 
(66
)
 
(116
)
Net income available to common stockholders
$
20,686

 
$
20,540

 
$
83,428

 
$
77,977

 
 
 
 
 
 
 
 
Average common shares outstanding
133,171,931

 
133,018,908

 
132,982,815

 
135,321,235

Average committed ESOP shares outstanding
124,346

 
83,052

 
62,400

 
62,458

Total basic average common shares outstanding
133,296,277

 
133,101,960

 
133,045,215

 
135,383,693

 
 
 
 
 
 
 
 
Effect of dilutive stock options
196,922

 
148,751

 
131,161

 
24,810

 
 
 
 
 
 
 
 
Total diluted average common shares outstanding
133,493,199

 
133,250,711

 
133,176,376

 
135,408,503

 
 
 
 
 
 
 
 
Net earnings per share:
 
 
 
 
 
 
 
Basic
$
0.16

 
$
0.15

 
$
0.63

 
$
0.58

Diluted
$
0.16

 
$
0.15

 
$
0.63

 
$
0.58

 
 
 
 
 
 
 
 
Antidilutive stock options, excluded from the diluted
 
 
 
 
 
 
average common shares outstanding calculation
711,827

 
875,390

 
886,417

 
1,248,744




13



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 as of the dates indicated.
 
September 30, 2016
 
June 30, 2016
 
September 30, 2015
 
 
 
 
 
% of
 
 
 
 
 
% of
 
 
 
 
 
% of
 
Amount
 
Rate
 
Total
 
Amount
 
Rate
 
Total
 
Amount
 
Rate
 
Total
 
(Dollars in thousands)
Real estate loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
One- to four-family:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Originated
$
4,005,615

 
3.74
%
 
57.6
%
 
$
4,001,131

 
3.78
%
 
58.6
%
 
$
4,010,424

 
3.84
%
 
60.6
%
Correspondent purchased
2,206,072

 
3.50

 
31.7

 
2,092,608

 
3.51

 
30.6

 
1,846,210

 
3.52

 
27.9

Bulk purchased
416,653

 
2.23

 
6.0

 
439,954

 
2.22

 
6.4

 
485,682

 
2.25

 
7.3

Construction
39,430

 
3.45

 
0.6

 
38,766

 
3.52

 
0.6

 
29,552

 
3.64

 
0.4

Total
6,667,770

 
3.56

 
95.9

 
6,572,459

 
3.59

 
96.2

 
6,371,868

 
3.63

 
96.2

Commercial:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Permanent
110,768

 
4.16

 
1.6

 
109,873

 
4.17

 
1.6

 
109,314

 
4.15

 
1.6

Construction
43,375

 
4.13

 
0.6

 
22,197

 
3.97

 
0.3

 
11,523

 
3.82

 
0.2

Total
154,143

 
4.15

 
2.2

 
132,070

 
4.13

 
1.9

 
120,837

 
4.12

 
1.8

Total real estate loans
6,821,913

 
3.58

 
98.1

 
6,704,529

 
3.60

 
98.1

 
6,492,705

 
3.64

 
98.0

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consumer loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Home equity
123,345

 
5.01

 
1.8

 
123,673

 
5.04

 
1.8

 
125,844

 
5.00

 
1.9

Other
4,264

 
4.21

 
0.1

 
4,568

 
4.17

 
0.1

 
4,179

 
4.03

 
0.1

Total consumer loans
127,609

 
4.99

 
1.9

 
128,241

 
5.01

 
1.9

 
130,023

 
4.97

 
2.0

Total loans receivable
6,949,522

 
3.60

 
100.0
%
 
6,832,770

 
3.63

 
100.0
%
 
6,622,728

 
3.66

 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Less:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ACL
8,540

 
 
 
 
 
9,312

 
 
 
 
 
9,443

 
 
 
 
Discounts/unearned loan fees
24,933

 
 
 
 
 
24,352

 
 
 
 
 
24,213

 
 
 
 
Premiums/deferred costs
(41,975
)
 
 
 
 
 
(40,017
)
 
 
 
 
 
(35,955
)
 
 
 
 
Total loans receivable, net
$
6,958,024

 
 
 
 
 
$
6,839,123

 
 
 
 
 
$
6,625,027

 
 
 
 




14



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. 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, 2016 and 2015, the Bank endorsed $160.0 million and $121.6 million of one- to four-family loans, respectively, reducing the average rate on those loans by 91 and 98 basis points, respectively.
 
For the Three Months Ended
 
September 30, 2016
 
June 30, 2016
 
March 31, 2016
 
December 31, 2015
 
Amount
 
Rate
 
Amount
 
Rate
 
Amount
 
Rate
 
Amount
 
Rate
 
(Dollars in thousands)
Beginning balance
$
6,832,770

 
3.63
%
 
$
6,763,980

 
3.64
%
 
$
6,661,648

 
3.65
%
 
$
6,622,728

 
3.66
%
Originated and refinanced:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed
176,534

 
3.31

 
155,179

 
3.52

 
117,205

 
3.65

 
157,447

 
3.67

Adjustable
48,608

 
3.53

 
44,319

 
3.61

 
35,495

 
3.77

 
38,117

 
3.74

Purchased and participations:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed
190,830

 
3.50

 
178,762

 
3.71

 
249,017

 
3.68

 
101,644

 
3.69

Adjustable
65,748

 
3.79

 
24,715

 
2.90

 
27,355

 
2.93

 
25,861

 
3.17

Change in undisbursed loan funds
(26,760
)
 
 
 
(23,431
)
 
 
 
(90,800
)
 
 
 
(1,036
)
 
 
Repayments
(337,779
)
 
 
 
(310,041
)
 
 
 
(235,202
)
 
 
 
(280,978
)
 
 
Principal (charge-offs) recoveries, net
(22
)
 
 
 
119

 
 
 
(8
)
 
 
 
(242
)
 
 
Other
(407
)
 
 
 
(832
)
 
 
 
(730
)
 
 
 
(1,893
)
 
 
Ending balance
$
6,949,522

 
3.60

 
$
6,832,770

 
3.63

 
$
6,763,980

 
3.64

 
$
6,661,648

 
3.65

 
For the Year Ended
 
September 30, 2016
 
September 30, 2015
 
Amount
 
Rate
 
Amount
 
Rate
 
(Dollars in thousands)
Beginning balance
$
6,622,728

 
3.66
%
 
$
6,237,518

 
3.76
%
Originated and refinanced:
 
 
 
 
 
 
 
Fixed
606,365

 
3.52

 
606,343

 
3.60

Adjustable
166,539

 
3.65

 
174,174

 
3.62

Purchased and participations:
 
 
 
 
 
 
 
Fixed
720,253

 
3.64

 
551,028

 
3.60

Adjustable
143,679

 
3.36

 
160,331

 
3.25

Change in undisbursed loan funds
(142,027
)
 
 
 
(38,564
)
 
 
Repayments
(1,164,000
)
 
 
 
(1,061,868
)
 
 
Principal charge-offs, net
(153
)
 
 
 
(555
)
 
 
Other
(3,862
)
 
 
 
(5,679
)
 
 
Ending balance
$
6,949,522

 
3.60

 
$
6,622,728

 
3.66


15



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, 2016
 
September 30, 2016
 
Amount
 
Rate
 
% of Total
 
Amount
 
Rate
 
% of Total
Fixed-rate:
(Dollars in thousands)
One- to four-family:
 
 
 
 
 
 
 
 
 
 
 
<= 15 years
$
89,124

 
2.91
%
 
18.5
%
 
$
265,721

 
2.97
%
 
16.2
%
> 15 years
266,094

 
3.54

 
55.2

 
871,669

 
3.67

 
53.3

Commercial real estate
10,954

 
4.10

 
2.3

 
184,153

 
4.01

 
11.2

Home equity
1,017

 
5.71

 
0.2

 
4,247

 
5.71

 
0.3

Other
175

 
7.66

 

 
828

 
8.73

 
0.1

Total fixed-rate
367,364

 
3.41

 
76.2

 
1,326,618

 
3.59

 
81.1

 
 
 
 
 
 
 
 
 
 
 
 
Adjustable-rate:
 
 
 
 
 
 
 
 
 
 
 
One- to four-family:
 
 
 
 
 
 
 
 
 
 
 
<= 36 months
725

 
2.38

 
0.2

 
4,980

 
2.58

 
0.3

> 36 months
49,477

 
2.76

 
10.3

 
183,697

 
2.90

 
11.2

Commercial real estate
44,500

 
4.29

 
9.2

 
47,876

 
4.29

 
2.9

Home equity
19,210

 
4.69

 
4.0

 
71,013

 
4.65

 
4.3

Other
444

 
2.96

 
0.1

 
2,652

 
3.36

 
0.2

Total adjustable-rate
114,356

 
3.68

 
23.8

 
310,218

 
3.52

 
18.9

 
 
 
 
 
 
 
 
 
 
 
 
Total originated, refinanced and purchased
$
481,720

 
3.48

 
100.0
%
 
$
1,636,836

 
3.57

 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
Purchased and participation loans included above:
 
 
 
 
 
 
 
 
 
 
 
Fixed-rate:
 
 
 
 
 
 
 
 
 
 
 
Correspondent - one- to four-family
$
180,659

 
3.47

 
 
 
$
567,014

 
3.56

 
 
Participations - commercial real estate
10,171

 
4.05

 
 
 
153,239

 
3.94

 
 
Total fixed-rate purchased/participations
190,830

 
3.50

 
 
 
720,253

 
3.64

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjustable-rate:
 
 
 
 
 
 
 
 
 
 
 
Correspondent - one- to four-family
21,248

 
2.74

 
 
 
95,803

 
2.90

 
 
Participations - commercial real estate
44,500

 
4.29

 
 
 
47,876

 
4.29

 
 
Total adjustable-rate purchased/participations
65,748

 
3.79

 
 
 
143,679

 
3.36

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total purchased/participation loans
$
256,578

 
3.58

 
 
 
$
863,932

 
3.60

 
 




16



One- to Four-Family Loans: 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 2016, 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, 2016
 
June 30, 2016
 
September 30, 2015
 
 
 
% 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
$
4,005,615

 
60.4
%
 
766

 
63
%
 
$
132

 
$
4,001,131

 
61.3
%
 
767

 
63
%
 
$
131

 
$
4,010,424

 
63.2
%
 
765

 
64
%
 
$
129

Correspondent purchased
2,206,072

 
33.3

 
764

 
68

 
360

 
2,092,608

 
32.0

 
763

 
68

 
352

 
1,846,210

 
29.1

 
764

 
68

 
344

Bulk purchased
416,653

 
6.3

 
753

 
64

 
308

 
439,954

 
6.7

 
753

 
64

 
307

 
485,682

 
7.7

 
752

 
65

 
310

 
$
6,628,340

 
100.0
%
 
765

 
65

 
175

 
$
6,533,693

 
100.0
%
 
765

 
65

 
172

 
$
6,342,316

 
100.0
%
 
764

 
65

 
167


The following table summarizes our one- to four-family loan origination, refinance, and correspondent purchase commitments as of September 30, 2016, 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
$
26,386

 
$
58,000

 
$
13,288

 
$
97,674

 
3.20
%
Correspondent
14,355

 
120,690

 
19,155

 
154,200

 
3.58

 
$
40,741

 
$
178,690

 
$
32,443

 
$
251,874

 
3.43

 
 
 
 
 
 
 
 
 
 
Rate
2.83
%
 
3.67
%
 
2.90
%
 
 
 
 


17



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, 2016
 
September 30, 2016
 
 
 
 
 
Credit
 
 
 
 
 
Credit
 
Amount
 
LTV
 
Score
 
Amount
 
LTV
 
Score
 
(Dollars in thousands)
Originated
$
153,744

 
77
%
 
774

 
$
515,395

 
78
%
 
770

Refinanced by Bank customers
49,769

 
60

 
759

 
147,855

 
66

 
765

Correspondent purchased
201,907

 
74

 
765

 
662,817

 
74

 
763

 
$
405,420

 
74

 
767

 
$
1,326,067

 
75

 
766


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, 2016.
 
 
For the Three Months Ended
 
For the Year Ended
 
 
September 30, 2016
 
September 30, 2016
State
 
Amount
 
% of Total
 
Rate
 
Amount
 
% of Total
 
Rate
 
 
(Dollars in thousands)
Kansas
 
$
196,217

 
48.4
%
 
3.24
%
 
$
616,783

 
46.5
%
 
3.39
%
Missouri
 
67,960

 
16.8

 
3.34

 
243,775

 
18.4

 
3.46

Texas
 
67,233

 
16.6

 
3.36

 
213,536

 
16.1

 
3.43

Other states
 
74,010

 
18.2

 
3.40

 
251,973

 
19.0

 
3.46

 
 
$
405,420

 
100.0
%
 
3.31

 
$
1,326,067

 
100.0
%
 
3.42


Commercial Real Estate Loans: During the current quarter the Bank entered into commercial real estate loan participations of $54.7 million, which included $49.1 million of commercial real estate construction loans. The majority of the $49.1 million of commercial real estate construction loans had not yet been funded at September 30, 2016. The Bank intends to continue to grow its commercial real estate loan portfolio through participations with correspondent lenders and other lead banks with which the Bank already has commercial real estate lending relationships.

The following table presents the Bank's commercial real estate loans and commitments by industry classification, as defined by the North American Industry Classification System, as of September 30, 2016.
 
Unpaid
 
Undisbursed
 
Gross Loan
 
Outstanding
 
 
 
% of
 
Principal
 
Amount
 
Amount
 
Commitments
 
Total
 
Total
 
(Dollars in thousands)
Accommodation and food services
$
63,778

 
$
79,090

 
$
142,868

 
$

 
$
142,868

 
40.6
%
Health care and social assistance
14,044

 
42,709

 
56,753

 

 
56,753

 
16.1

Real estate rental and leasing
16,784

 
37,793

 
54,577

 

 
54,577

 
15.5

Arts, entertainment, and recreation
8,053

 
26,422

 
34,475

 

 
34,475

 
9.8

Multi-family
19,685

 
135

 
19,820

 

 
19,820

 
5.6