Toggle SGML Header (+)


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

Document


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)
January 29, 2018

 
 
 
 
 
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 South 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:

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

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨
    
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨







ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The Registrant’s press release dated January 29, 2018, announcing financial results for the quarter ended December 31, 2017 is attached hereto as Exhibit 99, and is incorporated herein by reference.

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(d) Exhibits

Exhibit 99 – Press release announcing earnings dated January 29, 2018





 
 
 
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: January 29, 2018
By: /s/ Kent G. Townsend
 
 
 
 
 
 
 
 
Kent G. Townsend, Executive Vice-President,
 
 
Chief Financial Officer, and Treasurer
 


(Back To Top)

Section 2: EX-99 (PRESS RELEASE ANNOUNCING EARNINGS)

Exhibit



391930125_cffnlogo.jpg
NEWS RELEASE
FOR IMMEDIATE RELEASE
January 29, 2018
CAPITOL FEDERAL® FINANCIAL, INC.
REPORTS FIRST QUARTER FISCAL YEAR 2018 RESULTS

Topeka, KS - Capitol Federal Financial, Inc. (NASDAQ: CFFN) (the "Company") announced results today for the quarter ended December 31, 2017. Detailed results will be available in the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 2017, which will be filed with the Securities and Exchange Commission ("SEC") on or about February 8, 2018 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:
dividends paid of $50.4 million, or $0.375 per share;
net income of $31.8 million, including a $7.5 million income tax benefit related to the revaluation of net deferred tax liabilities resulting from the Tax Cuts and Jobs Act (the "Tax Act") enacted in December 2017;
basic and diluted earnings per share of $0.24; and
net interest margin of 1.83% (2.20% excluding the effects of the leverage strategy).

Comparison of Operating Results for the Three Months Ended December 31, 2017 and September 30, 2017

For the quarter ended December 31, 2017, the Company recognized net income of $31.8 million, or $0.24 per share, compared to net income of $20.6 million, or $0.15 per share, for the quarter ended September 30, 2017. The increase in net income was due primarily to a decrease in income tax expense resulting from the enactment of the Tax Act on December 22, 2017, the impact of which was an increase in basic and diluted earnings per share of $0.08 for the current quarter.

The Tax Act made significant changes to the U.S. corporate income tax laws, such as a permanent reduction in the federal corporate income tax rate from 35% to 21% effective January 1, 2018, and changes to and/or limitations on certain income tax deductions. The Company has a fiscal year end of September 30th, so the change in the income tax rate will result in the use of a blended federal income tax rate for fiscal year 2018. In accordance with accounting principles generally accepted in the United States of America ("GAAP"), the Company applied the blended federal income tax rate to pretax income in the current quarter and revalued its deferred tax assets and liabilities as of December 22, 2017 to account for the future impact of a lower income tax rate. The revaluation of the Company's deferred tax assets and liabilities contributed $7.5 million to the decrease in income tax expense in the current quarter. The benefit of the lower income tax rate is partially offset by the Company recognizing more proportional amortization expense related to its low income housing partnerships in fiscal year 2018 resulting from an adjustment to account for a higher portion of those benefits realized prior to the income tax rate change. Management estimates the effective income tax rate for fiscal year 2018 to be between 20% and 21% and approximately 22% for fiscal year 2019.

Net interest income decreased $284 thousand, or 0.6%, from the prior quarter to $49.4 million for the current quarter. The net interest margin decreased one basis point from 1.84% for the prior quarter to 1.83% for the current quarter. Excluding the effects of the leverage strategy, the net interest margin would have decreased one basis point from 2.21% for the prior quarter to 2.20% for the current quarter.

1



Interest and Dividend Income
The weighted average yield on total interest-earning assets for the current quarter was 2.98%, unchanged from the prior quarter, while the average balance of interest-earning assets decreased $26.0 million between the two periods. Absent the impact of the leverage strategy, the weighted average yield on total interest-earning assets would have decreased one basis point from the prior quarter, to 3.31%. 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
 
 
 
 
 
December 31,
 
September 30,
 
Change Expressed in:
 
2017
 
2017
 
Dollars
 
Percent
 
(Dollars in thousands)
 
 
INTEREST AND DIVIDEND INCOME:
 
 
 
 
 
 
 
Loans receivable
$
64,189

 
$
64,329

 
$
(140
)
 
(0.2
)%
Cash and cash equivalents
7,114

 
6,669

 
445

 
6.7

Mortgage-backed securities ("MBS")
5,252

 
5,435

 
(183
)
 
(3.4
)
Federal Home Loan Bank Topeka ("FHLB") stock
3,095

 
3,080

 
15

 
0.5

Investment securities
994

 
1,061

 
(67
)
 
(6.3
)
Total interest and dividend income
$
80,644

 
$
80,574

 
$
70

 
0.1


The increase in interest income on cash and cash equivalents was due primarily to a $70.4 million increase in the average balance, as well as a four basis point increase in the weighted average yield, to 1.29% for the current quarter, resulting from an increase in the yield earned on balances held at the Federal Reserve Bank of Kansas City (the "FRB of Kansas City").

Interest Expense
The weighted average rate paid on total interest-bearing liabilities for the current quarter increased two basis points from the prior quarter, to 1.29%, while the average balance of interest-bearing liabilities decreased $38.0 million between the two periods. Absent the impact of the leverage strategy, the weighted average rate paid on total interest-bearing liabilities for the current quarter would have increased one basis point from the prior quarter, to 1.29%. 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
 
 
 
 
 
December 31,
 
September 30,
 
Change Expressed in:
 
2017
 
2017
 
Dollars
 
Percent
 
(Dollars in thousands)
 
 
INTEREST EXPENSE:
 
 
 
 
 
 
 
FHLB borrowings
$
17,917

 
$
18,099

 
$
(182
)
 
(1.0
)%
Deposits
11,961

 
11,313

 
648

 
5.7

Repurchase agreements
1,392

 
1,504

 
(112
)
 
(7.4
)
Total interest expense
$
31,270

 
$
30,916

 
$
354

 
1.1


The table above includes interest expense on FHLB borrowings both associated and not associated with the leverage strategy. Interest expense on FHLB borrowings not related to the leverage strategy decreased $451 thousand from the prior quarter due mainly to a four basis point decrease in the weighted average rate paid on the portfolio, to 2.08% for the current quarter, along with a $35.5 million decrease in the average balance of the portfolio. Interest expense on FHLB borrowings associated with the leverage strategy increased $268 thousand from the prior quarter due to a five basis point increase in the weighted average rate paid as a result of an increase in interest rates between periods.

The increase in interest expense on deposits was due primarily to a five basis point increase in the weighted average rate, to 0.91% for the current quarter. The increase in the weighted average rate was primarily related to the certificate of deposit portfolio, which increased seven basis points to 1.51% for the current quarter.

The decrease in interest expense on repurchase agreements was due to the maturity of a $100.0 million repurchase agreement during the quarter.


2



Provision for Credit Losses
Capitol Federal Savings Bank (the "Bank") did not record a provision for credit losses during the current quarter or the prior quarter. Based on management's assessment of the allowance for credit losses ("ACL") formula analysis model and several other factors, it was determined that no provision for credit losses was necessary. Net loan charge-offs were $28 thousand during the current quarter compared to $88 thousand in the prior quarter. At December 31, 2017, loans 30 to 89 days delinquent were 0.25% of total loans and loans 90 or more days delinquent or in foreclosure were 0.15% of total loans.

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
 
 
 
 
 
December 31,
 
September 30,
 
Change Expressed in:
 
2017
 
2017
 
Dollars
 
Percent
 
(Dollars in thousands)
 
 
NON-INTEREST INCOME:
 
 
 
 
 
 
 
Retail fees and charges
$
3,965

 
$
3,930

 
$
35

 
0.9
 %
Income from bank-owned life insurance ("BOLI")
534

 
564

 
(30
)
 
(5.3
)
Other non-interest income
859

 
1,401

 
(542
)
 
(38.7
)
Total non-interest income
$
5,358

 
$
5,895

 
$
(537
)
 
(9.1
)

The decrease in other non-interest income was due primarily to a loss on the sale of loans during the current quarter compared to a gain on the sale of loans during the prior quarter as management continues to test loan sale processes for liquidity purposes, along with a decrease in insurance commissions resulting from the receipt of annual commissions from certain insurance providers during the prior quarter and no such commissions received 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
 
 
 
 
 
December 31,
 
September 30,
 
Change Expressed in:
 
2017
 
2017
 
Dollars
 
Percent
 
(Dollars in thousands)
 
 
NON-INTEREST EXPENSE:
 
 
 
 
 
 
 
Salaries and employee benefits
$
10,528

 
$
11,049

 
$
(521
)
 
(4.7
)%
Information technology and related expense
3,331

 
2,758

 
573

 
20.8

Occupancy, net
2,765

 
2,716

 
49

 
1.8

Deposit and loan transaction costs
1,407

 
1,366

 
41

 
3.0

Regulatory and outside services
1,140

 
1,827

 
(687
)
 
(37.6
)
Federal insurance premium
852

 
888

 
(36
)
 
(4.1
)
Advertising and promotional
685

 
1,398

 
(713
)
 
(51.0
)
Office supplies and related expense
442

 
511

 
(69
)
 
(13.5
)
Other non-interest expense
886

 
966

 
(80
)
 
(8.3
)
Total non-interest expense
$
22,036

 
$
23,479

 
$
(1,443
)
 
(6.1
)

The decrease in salaries and employee benefits expense was due primarily to the prior quarter including compensation expense on unallocated Employee Stock Ownership Plan ("ESOP") shares related to the True Blue Capitol dividend paid during the prior fiscal year. The increase in information technology and related expense and the decrease in regulatory and outside services were due mainly to a change in the presentation of certain information technology professional and consulting expenses beginning in fiscal year 2018. Information technology professional and consulting expenses are now being reported in information technology and related expenses rather than regulatory and outside services. The decrease in advertising and promotional expense was due primarily to the timing of media campaigns and sponsorships.
 

3



The Company's efficiency ratio was 40.26% for the current quarter compared to 42.26% for the prior quarter. The change in the efficiency ratio was due primarily to lower non-interest expense in the current quarter compared to the prior quarter. 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 proportionally lower level of expense.

Income Tax Expense
Income tax expense was $860 thousand for the current quarter, compared to $11.5 million for the prior quarter. The effective tax rate was 2.6% for the current quarter compared to 35.8% for the prior quarter. The lower effective income tax rate and income tax expense were due primarily to revaluing the Company's deferred tax assets and liabilities, as well as applying a lower corporate income tax rate to the Company's current quarter pretax income. Management estimates the effective income tax rate for fiscal year 2018 to be between 20% and 21% and approximately 22% for fiscal year 2019.

Comparison of Operating Results for the Three Months Ended December 31, 2017 and 2016

The Company recognized net income of $31.8 million, or $0.24 per share, for the current quarter compared to net income of $20.6 million, or $0.15 per share, for the quarter ended December 31, 2016. The increase in net income was due primarily to a decrease in income tax expense resulting from the Tax Act being signed into law during the quarter.

The net interest margin increased 10 basis points, from 1.73% for the prior year quarter to 1.83% for the current quarter. Excluding the effects of the leverage strategy, the net interest margin would have increased 13 basis points, from 2.07% for the prior year quarter to 2.20% for the current quarter. The increase in the net interest margin was due mainly to an increase in interest-earning asset yields, as well as a shift in the mix of interest-earning assets from relatively lower yielding securities to higher yielding loans and a net decrease in the cost of liabilities not related to the leverage strategy.

Interest and Dividend Income
The weighted average yield on total interest-earning assets increased 22 basis points, from 2.76% for the prior year quarter to 2.98% for the current quarter, while the average balance of interest-earning assets decreased $141.3 million from the prior year quarter. Absent the impact of the leverage strategy, the weighted average yield on total interest-earning assets would have increased 11 basis points, from 3.20% for the prior year quarter to 3.31% for the current quarter. 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
 
 
 
 
 
December 31,
 
Change Expressed in:
 
2017
 
2016
 
Dollars
 
Percent
 
(Dollars in thousands)
 
 
INTEREST AND DIVIDEND INCOME:
 
 
 
 
 
 
 
Loans receivable
$
64,189

 
$
61,945

 
$
2,244

 
3.6
 %
Cash and cash equivalents
7,114

 
2,969

 
4,145

 
139.6

MBS
5,252

 
6,362

 
(1,110
)
 
(17.4
)
FHLB stock
3,095

 
2,939

 
156

 
5.3

Investment securities
994

 
1,107

 
(113
)
 
(10.2
)
Total interest and dividend income
$
80,644

 
$
75,322

 
$
5,322

 
7.1


The increase in interest income on loans receivable was due mainly to a $180.8 million increase in the average balance of the portfolio, as well as a three basis point increase in the weighted average yield on the portfolio to 3.56% for the current quarter. Loan growth was funded through cash flows from the securities portfolio. The increase in the weighted average yield was due primarily to a decrease in the amortization of premiums related to correspondent loans.

The increase in interest income on cash and cash equivalents was due to a 75 basis point increase in the weighted average yield resulting from an increase in the yield earned on balances held at the FRB of Kansas City.

The decrease in interest income on the MBS portfolio was due to a $267.6 million decrease in the average balance of the portfolio, partially offset by a 13 basis point increase in the weighted average yield on the portfolio to 2.25% for the current quarter. Cash flows not reinvested were used primarily to fund loan growth and pay off certain maturing FHLB borrowings. The increase in the weighted average yield was due primarily to adjustable-rate MBS repricing to higher market rates, as well as a decrease in the impact of net premium amortization. Net premium amortization of $854 thousand during the current quarter decreased the weighted average yield

4



on the portfolio by 37 basis points. During the prior year quarter, $1.3 million of net premiums were amortized, which decreased the weighted average yield on the portfolio by 43 basis points. As of December 31, 2017, the remaining net balance of premiums on our portfolio of MBS was $8.8 million.
Interest Expense
The weighted average rate paid on total interest-bearing liabilities increased 14 basis points, from 1.15% for the prior year quarter to 1.29% for the current quarter, while the average balance of interest-bearing liabilities decreased $110.5 million from the prior year quarter. Absent the impact of the leverage strategy, the weighted average rate paid on total interest-bearing liabilities would have decreased one basis point, from 1.30% for the prior year quarter to 1.29% for the current quarter. 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
 
 
 
 
 
December 31,
 
Change Expressed in:
 
2017
 
2016
 
Dollars
 
Percent
 
(Dollars in thousands)
 
 
INTEREST EXPENSE:
 
 
 
 
 
 
 
FHLB borrowings
$
17,917

 
$
16,117

 
$
1,800

 
11.2
 %
Deposits
11,961

 
10,396

 
1,565

 
15.1

Repurchase agreements
1,392

 
1,503

 
(111
)
 
(7.4
)
Total interest expense
$
31,270

 
$
28,016

 
$
3,254

 
11.6


The table above includes interest expense on FHLB borrowings both associated and not associated with the leverage strategy. Interest expense on FHLB borrowings not related to the leverage strategy decreased $2.0 million from the prior year quarter due to a $182.3 million decrease in the average balance of the portfolio and a 19 basis point decrease in the weighted average rate paid on the portfolio, to 2.08% for the current quarter. The decrease in the average balance was a result of using cash flows from the securities portfolio and funds generated from deposit growth to pay off certain advances that matured between periods. The decrease in the weighted average rate paid was due to certain advances maturing between periods being replaced at lower effective rates. Interest expense on FHLB borrowings associated with the leverage strategy increased $3.8 million from the prior year quarter due to a 75 basis point increase in the weighted average rate paid as a result of an increase in interest rates between periods.

The increase in interest expense on deposits was due primarily to an 11 basis point increase in the weighted average rate, to 0.91% for the current quarter. The increase in the weighted average rate was primarily related to the certificate of deposit portfolio, which increased 18 basis points to 1.51% for the current quarter. The weighted average rate paid on wholesale certificates increased 62 basis points, to 1.33% for the current quarter.
 
Non-Interest Income
The following table presents the components of non-interest income for the time periods presented, along with the change measured in dollars and percent.
 
For the Three Months Ended
 
 
 
 
 
December 31,
 
Change Expressed in:
 
2017
 
2016
 
Dollars
 
Percent
 
(Dollars in thousands)
 
 
NON-INTEREST INCOME:
 
 
 
 
 
 
 
Retail fees and charges
$
3,965

 
$
3,709

 
$
256

 
6.9
 %
Income from BOLI
534

 
523

 
11

 
2.1

Other non-interest income
859

 
1,036

 
(177
)
 
(17.1
)
Total non-interest income
$
5,358

 
$
5,268

 
$
90

 
1.7


The increase in retail fees and charges was due mainly to increases in debit card income and service charges earned. The decrease in other non-interest income was due primarily to a loss on the sale of loans during the current quarter as management continues to test loan sale processes for liquidity purposes, compared to no loan sales during the prior year quarter.


5



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
 
 
 
 
 
December 31,
 
Change Expressed in:
 
2017
 
2016
 
Dollars
 
Percent
 
(Dollars in thousands)
 
 
NON-INTEREST EXPENSE:
 
 
 
 
 
 
 
Salaries and employee benefits
$
10,528

 
$
10,634

 
$
(106
)
 
(1.0
)%
Information technology and related expense
3,331

 
2,834

 
497

 
17.5

Occupancy, net
2,765

 
2,675

 
90

 
3.4

Deposit and loan transaction costs
1,407

 
1,386

 
21

 
1.5

Regulatory and outside services
1,140

 
1,346

 
(206
)
 
(15.3
)
Federal insurance premium
852

 
894

 
(42
)
 
(4.7
)
Advertising and promotional
685

 
690

 
(5
)
 
(0.7
)
Office supplies and related expense
442

 
437

 
5

 
1.1

Other non-interest expense
886

 
701

 
185

 
26.4

Total non-interest expense
$
22,036

 
$
21,597

 
$
439

 
2.0


The increase in information technology and related expense and the decrease in regulatory and outside services were due mainly to a change in the presentation of certain information technology professional and consulting expenses beginning in fiscal year 2018, as well as those expenses being higher than the prior year. The increase in other non-interest expense was due mainly to an increase in other real estate owned ("OREO") operations expense.

The Company's efficiency ratio was 40.26% for the current quarter compared to 41.08% for the prior year quarter. The improvement in the efficiency ratio was due primarily to higher net interest income in the current quarter compared to the prior year quarter.

Income Tax Expense
Income tax expense was $860 thousand for the current quarter compared to $10.4 million for the prior year quarter. The effective tax rate was 2.6% for the current quarter compared to 33.6% for the prior year quarter. The decrease in effective tax rate was due mainly to the Tax Act being signed into law during the current quarter.

Financial Condition as of December 31, 2017

Total assets were $8.99 billion at December 31, 2017 compared to $9.19 billion at September 30, 2017. The $202.8 million decrease was due primarily to a $322.5 million decrease in cash and cash equivalents, partially offset by an increase in FHLB stock. At December 31, 2017, the Bank was not required by the FHLB to redeem the FHLB stock associated with the leverage strategy. At previous quarter ends, this stock was redeemed.

The loans receivable portfolio, net, decreased $5.3 million to $7.19 billion at December 31, 2017, from $7.20 billion at September 30, 2017. During the current quarter, the Bank originated and refinanced $146.6 million of loans with a weighted average rate of 3.84% and purchased $99.8 million of one- to four-family loans from correspondent lenders with a weighted average rate of 3.59%. The Bank also entered into participations of $50.4 million of commercial real estate loans with a weighted average rate of 4.19%, of which $45.2 million had not yet been funded as of December 31, 2017. During the current quarter, the Bank funded $24.8 million of new and existing commercial real estate loans.

The Bank is continuing to manage the size of its loan portfolio as it manages its liquidity levels.  Loan volume has primarily been maintained through the rates offered to correspondent lenders.  Generally, over the past couple years, cash flows from the securities portfolio have been used primarily to purchase loans and in part to pay down FHLB advances. By moving cash from lower yielding assets to higher yielding assets and repaying higher cost liabilities, we have been able to maintain our net interest margin.  In addition to the repayment of securities, the Bank has emphasized growth in the deposit portfolio in part to pay down FHLB advances. The ratio of securities and cash to total assets was approximately 15% at December 31, 2017, which is approximately where management would like to maintain that percentage. In the long run, management considers a 10% ratio of stockholders' equity to total assets at the Bank an appropriate level of capital. At December 31, 2017, this ratio was 13.5%.


6



The Bank has continued to utilize a leverage strategy to increase earnings in fiscal year 2018. The leverage strategy during the current quarter involved borrowing up to $2.10 billion either on the Bank's FHLB line of credit or by entering into short-term FHLB advances, depending on the rates offered by FHLB. The borrowings were repaid prior to quarter end for regulatory purposes. The proceeds from the borrowings, net of the required FHLB stock holdings, which yielded 6.4% during the current quarter, were deposited at the FRB of Kansas City. Net income attributable to the leverage strategy is largely derived from the dividends received on FHLB stock holdings, plus the net interest rate spread between the yield on the cash at the FRB of Kansas City and the rate paid on the related FHLB borrowings, less applicable federal insurance premiums and estimated taxes. Net income attributable to the leverage strategy was $767 thousand during the current quarter, compared to $642 thousand for the prior year quarter and $633 thousand in the September 30, 2017 quarter. The increase was due primarily to a decrease in the fiscal year 2018 estimated effective tax rate applied to pretax income attributable to the leverage strategy.

Total liabilities were $7.64 billion at December 31, 2017 compared to $7.82 billion at September 30, 2017. The $185.1 million decrease was due mainly to decreases in repurchase agreements and deposits. Repurchase agreements decreased due to the maturity of a $100.0 million repurchase agreement during the quarter. Deposits decreased $43.7 million, to $5.27 billion at December 31, 2017, due mainly to a decrease in wholesale certificates.

Stockholders' equity was $1.35 billion at December 31, 2017 compared to $1.37 billion at September 30, 2017. The $17.7 million decrease was due primarily to the payment of $50.4 million in cash dividends, partially offset by net income of $31.8 million. The cash dividends paid during the current quarter totaled $0.375 per share and consisted of a $0.29 per share cash true-up dividend related to fiscal year 2017 earnings per the Company's dividend policy, and a regular quarterly cash dividend of $0.085 per share. On January 23, 2018, the Company announced a regular quarterly cash dividend of $0.085 per share, or approximately $11.4 million, payable on February 16, 2018 to stockholders of record as of the close of business on February 2, 2018.

At December 31, 2017, Capitol Federal Financial, Inc., at the holding company level, had $90.6 million on deposit at the Bank. For fiscal year 2018, 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.
 
December 31,
 
September 30,
 
December 31,
 
2017
 
2017
 
2016
 
(Dollars in thousands)
Stockholders' equity
$
1,350,611

 
$
1,368,313

 
$
1,368,175

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

The following table presents a reconciliation of total to net shares outstanding as of December 31, 2017.
Total shares outstanding
138,230,735

Less unallocated ESOP shares and unvested restricted stock
(3,814,255
)
Net shares outstanding
134,416,480



7



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 December 31, 2017, the Bank and Company exceeded all regulatory capital requirements. The following table presents the Bank's regulatory capital ratios at December 31, 2017.
 
 
 
Regulatory
 
 
 
Requirement For
 
Bank
 
"Well-Capitalized"
 
Ratios
 
Status
Tier 1 leverage ratio
10.9%
 
5.0
%
Common equity tier 1 capital ratio
27.3
 
6.5

Tier 1 capital ratio
27.3
 
8.0

Total capital ratio
27.5
 
10.0


A reconciliation of the Bank's equity under GAAP to regulatory capital amounts as of December 31, 2017 is as follows (dollars in thousands):
Total Bank equity as reported under GAAP
$
1,216,888

Accumulated Other Comprehensive Income ("AOCI")
(3,074
)
Total tier 1 capital
1,213,814

ACL
8,370

Total capital
$
1,222,184


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 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 or the application or interpretation of laws and regulations by regulatory agencies and tax authorities, other governmental initiatives affecting the financial services industry, changes in accounting principles, policies or guidelines, 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, changes in deferred tax liability and asset activity, 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:
Investor Relations
Kent Townsend
700 S Kansas Ave
Executive Vice President,
Topeka, KS 66603
Chief Financial Officer and Treasurer
(785) 270-6055
700 S Kansas Ave
investorrelations@capfed.com
Topeka, KS 66603
 
(785) 231-6360
 
ktownsend@capfed.com

8




SUPPLEMENTAL FINANCIAL INFORMATION
 
CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollars in thousands, except per share amounts)
 
December 31,
 
September 30,
 
2017
 
2017
ASSETS:
 
 
 
Cash and cash equivalents (includes interest-earning deposits of $9,582 and $340,748)
$
29,120

 
$
351,659

Securities:
 
 
 
Available-for-sale ("AFS"), at estimated fair value (amortized cost of $498,469 and $410,541)
501,884

 
415,831

Held-to-maturity at amortized cost (estimated fair value of $770,425 and $833,009)
770,806

 
827,738

Loans receivable, net (ACL of $8,370 and $8,398)
7,189,744

 
7,195,071

FHLB stock, at cost
195,470

 
100,954

Premises and equipment, net
84,591

 
84,818

Other assets
218,544

 
216,845

TOTAL ASSETS
$
8,990,159

 
$
9,192,916

 
 
 
 
LIABILITIES:
 
 
 
Deposits
$
5,266,217

 
$
5,309,868

FHLB borrowings
2,174,146

 
2,173,808

Repurchase agreements
100,000

 
200,000

Advance payments by borrowers for taxes and insurance
27,804

 
63,749

Income taxes payable, net
6,440

 
530

Deferred income tax liabilities, net
17,981

 
24,458

Accounts payable and accrued expenses
46,960

 
52,190

Total liabilities
7,639,548

 
7,824,603

 
 
 
 
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, 138,230,735 and 138,223,835
 
 
 
 shares issued and outstanding as of December 31, 2017 and September 30, 2017, respectively
1,382

 
1,382

Additional paid-in capital
1,167,692

 
1,167,368

Unearned compensation, ESOP
(37,582
)
 
(37,995
)
Retained earnings
216,045

 
234,640

AOCI, net of tax
3,074

 
2,918

Total stockholders' equity
1,350,611

 
1,368,313

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
8,990,159

 
$
9,192,916


9



 
CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars in thousands)
 
For the Three Months Ended
 
December 31,
 
September 30,
 
December 31,
 
2017
 
2017
 
2016
INTEREST AND DIVIDEND INCOME:
 
 
 
 
 
Loans receivable
$
64,189

 
$
64,329

 
$
61,945

Cash and cash equivalents
7,114

 
6,669

 
2,969

MBS
5,252

 
5,435

 
6,362

FHLB stock
3,095

 
3,080

 
2,939

Investment securities
994

 
1,061

 
1,107

Total interest and dividend income
80,644

 
80,574

 
75,322

 
 
 
 
 
 
INTEREST EXPENSE:
 
 
 
 
 
FHLB borrowings
17,917

 
18,099

 
16,117

Deposits
11,961

 
11,313

 
10,396

Repurchase agreements
1,392

 
1,504

 
1,503

Total interest expense
31,270

 
30,916

 
28,016

 
 
 
 
 
 
NET INTEREST INCOME
49,374

 
49,658

 
47,306

 
 
 
 
 
 
PROVISION FOR CREDIT LOSSES

 

 

NET INTEREST INCOME AFTER
 
 
 
 
 
PROVISION FOR CREDIT LOSSES
49,374

 
49,658

 
47,306

 
 
 
 
 
 
NON-INTEREST INCOME:
 
 
 
 
 
Retail fees and charges
3,965

 
3,930

 
3,709

Income from BOLI
534

 
564

 
523

Other non-interest income
859

 
1,401

 
1,036

Total non-interest income
5,358

 
5,895

 
5,268

 
 
 
 
 
 
NON-INTEREST EXPENSE:
 
 
 
 
 
Salaries and employee benefits
10,528

 
11,049

 
10,634

Information technology and related expense
3,331

 
2,758

 
2,834

Occupancy, net
2,765

 
2,716

 
2,675

Deposit and loan transaction costs
1,407

 
1,366

 
1,386

Regulatory and outside services
1,140

 
1,827

 
1,346

Federal insurance premium
852

 
888

 
894

Advertising and promotional
685

 
1,398

 
690

Office supplies and related expense
442

 
511

 
437

Other non-interest expense
886

 
966

 
701

Total non-interest expense
22,036

 
23,479

 
21,597

INCOME BEFORE INCOME TAX EXPENSE
32,696

 
32,074

 
30,977

INCOME TAX EXPENSE
860

 
11,472

 
10,399

NET INCOME
$
31,836

 
$
20,602

 
$
20,578


10



The following is a reconciliation of the basic and diluted earnings per share calculations for the periods indicated.
 
For the Three Months Ended
 
December 31,
 
September 30,
 
December 31,
 
2017
 
2017
 
2016
 
(Dollars in thousands, except per share amounts)
Net income
$
31,836

 
$
20,602

 
$
20,578

Income allocated to participating securities
(13
)
 
(8
)
 
(13
)
Net income available to common stockholders
$
31,823

 
$
20,594

 
$
20,565

 
 
 
 
 
 
Average common shares outstanding
134,372,531

 
134,189,943

 
133,696,125

Average committed ESOP shares outstanding
449

 
124,346

 
449

Total basic average common shares outstanding
134,372,980

 
134,314,289

 
133,696,574

 
 
 
 
 
 
Effect of dilutive stock options
94,329

 
89,747

 
253,222

 
 
 
 
 
 
Total diluted average common shares outstanding
134,467,309

 
134,404,036

 
133,949,796

 
 
 
 
 
 
Net earnings per share:
 
 
 
 
 
Basic
$
0.24

 
$
0.15

 
$
0.15

Diluted
$
0.24

 
$
0.15

 
$
0.15

 
 
 
 
 
 
Antidilutive stock options, excluded from the diluted
 
 
 
 
average common shares outstanding calculation
498,900

 
506,539

 
236,400




11



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.
 
December 31, 2017
 
September 30, 2017
 
December 31, 2016
 
 
 
 
 
% of
 
 
 
 
 
% of
 
 
 
 
 
% of
 
Amount
 
Rate
 
Total
 
Amount
 
Rate
 
Total
 
Amount
 
Rate
 
Total
 
(Dollars in thousands)
Real estate loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
One- to four-family:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Originated
$
3,940,288

 
3.69
%
 
54.9
%
 
$
3,959,232

 
3.70
%
 
55.1
%
 
$
4,027,991

 
3.70
%
 
57.0
%
Correspondent purchased
2,453,625

 
3.54

 
34.2

 
2,445,311

 
3.53

 
34.0

 
2,288,368

 
3.48

 
32.4

Bulk purchased
338,084

 
2.31

 
4.7

 
351,705

 
2.29

 
4.9

 
400,506

 
2.24

 
5.7

Construction
33,063

 
3.47

 
0.4

 
30,647

 
3.45

 
0.4

 
37,524

 
3.44

 
0.5

Total
6,765,060

 
3.57

 
94.2

 
6,786,895

 
3.56

 
94.4

 
6,754,389

 
3.54

 
95.6

Commercial:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Permanent
205,020

 
4.22

 
2.9

 
183,030

 
4.24

 
2.6

 
104,323

 
4.15

 
1.5

Construction
80,062

 
3.89

 
1.1

 
86,952

 
3.80

 
1.2

 
76,254

 
4.10

 
1.1

Total
285,082

 
4.13

 
4.0

 
269,982

 
4.10

 
3.8

 
180,577

 
4.13

 
2.6

Total real estate loans
7,050,142

 
3.59

 
98.2

 
7,056,877

 
3.58

 
98.2

 
6,934,966

 
3.55

 
98.2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consumer loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Home equity
123,124

 
5.40

 
1.7

 
122,066

 
5.40

 
1.7

 
122,378

 
4.99

 
1.7

Other
4,238

 
4.04

 
0.1

 
3,808

 
4.05

 
0.1

 
4,213

 
4.19

 
0.1

Total consumer loans
127,362

 
5.36

 
1.8

 
125,874

 
5.36

 
1.8

 
126,591

 
4.96

 
1.8

Total loans receivable
7,177,504

 
3.62

 
100.0
%
 
7,182,751

 
3.61

 
100.0
%
 
7,061,557

 
3.58

 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Less:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ACL
8,370

 
 
 
 
 
8,398

 
 
 
 
 
8,521

 
 
 
 
Discounts/unearned loan fees
25,110

 
 
 
 
 
24,962

 
 
 
 
 
25,028

 
 
 
 
Premiums/deferred costs
(45,720
)
 
 
 
 
 
(45,680
)
 
 
 
 
 
(43,402
)
 
 
 
 
Total loans receivable, net
$
7,189,744

 
 
 
 
 
$
7,195,071

 
 
 
 
 
$
7,071,410

 
 
 
 




12



Loan Activity: The following table summarizes activity in the loan portfolio, along with weighted average rates where applicable, for the periods indicated, excluding changes in ACL, discounts/unearned loan fees, and premiums/deferred costs. Loans that were paid-off as a result of refinances and loans that are sold are included in repayments. Loan endorsements are not included in the activity in the following table because a new loan is not generated at the time of the endorsement. The endorsed balance and rate are included in the ending loan portfolio balance and rate. During the quarter ended December 31, 2017, the Bank endorsed $8.9 million of one- to four-family loans, reducing the average rate on those loans by 49 basis points.
 
For the Three Months Ended
 
December 31, 2017
 
September 30, 2017
 
June 30, 2017
 
March 31, 2017
 
Amount
 
Rate
 
Amount
 
Rate
 
Amount
 
Rate
 
Amount
 
Rate
 
(Dollars in thousands)
Beginning balance
$
7,182,751

 
3.61
%
 
$
7,228,425

 
3.60
%
 
$
7,182,346

 
3.59
%
 
$
7,061,557

 
3.58
%
Originations and refinances:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed
109,102

 
3.70

 
102,687

 
3.82

 
116,422

 
3.94

 
115,560

 
3.66

Adjustable
37,502

 
4.26

 
44,900

 
4.10

 
59,372

 
3.87

 
36,417

 
3.82

Purchases and participations:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed
85,565

 
3.73

 
76,906

 
3.92

 
135,041

 
3.97

 
143,852

 
3.69

Adjustable
64,689

 
3.87

 
17,046

 
3.33

 
17,930

 
3.24

 
27,158

 
2.98

Change in undisbursed loan funds
(17,706
)
 
 
 
21,823

 
 
 
13,648

 
 
 
37,862

 
 
Repayments
(283,880
)
 
 
 
(307,909
)
 
 
 
(295,988
)
 
 
 
(239,072
)
 
 
Principal (charge-offs) recoveries, net
(28
)
 
 
 
(88
)
 
 
 
39

 
 
 
(74
)
 
 
Other
(491
)
 
 
 
(1,039
)
 
 
 
(385
)
 
 
 
(914
)
 
 
Ending balance
$
7,177,504

 
3.62

 
$
7,182,751

 
3.61

 
$
7,228,425

 
3.60

 
$
7,182,346

 
3.59

 
 
 
 
 
 
 
 

13



The following table presents loan origination, refinance, and purchase activity for the periods indicated, excluding endorsement activity, along with associated weighted average rates and percent of total. Loan originations, purchases, and refinances are reported together. The fixed-rate one- to four-family loans less than or equal to 15 years have an original maturity at origination of less than or equal to 15 years, while fixed-rate one- to four-family loans greater than 15 years have an original maturity at origination of greater than 15 years. The adjustable-rate one- to four-family loans less than or equal to 36 months have a term to first reset of less than or equal to 36 months at origination, and adjustable-rate one- to four-family loans greater than 36 months have a term to first reset of greater than 36 months at origination.
 
For the Three Months Ended
 
December 31, 2017
 
December 31, 2016
 
Amount
 
Rate
 
% of Total
 
Amount
 
Rate
 
% of Total
Fixed-rate:
(Dollars in thousands)
One- to four-family:
 
 
 
 
 
 
 
 
 
 
 
<= 15 years
$
36,915

 
3.15
%
 
12.5
%
 
$
84,347

 
2.78
%
 
19.3
%
> 15 years
151,907

 
3.82

 
51.2

 
246,730

 
3.52

 
56.6

Commercial real estate
4,792

 
4.13

 
1.6

 
32,291

 
3.96

 
7.4

Home equity
950

 
5.94

 
0.3

 
733

 
6.09

 
0.2

Other
103

 
9.36

 

 
127

 
9.90

 

Total fixed-rate
194,667

 
3.71

 
65.6

 
364,228

 
3.39

 
83.5

 
 
 
 
 
 
 
 
 
 
 
 
Adjustable-rate:
 
 
 
 
 
 
 
 
 
 
 
One- to four-family:
 
 
 
 
 
 
 
 
 
 
 
<= 36 months
767

 
2.75

 
0.3

 
1,427

 
2.42

 
0.3

> 36 months
35,970

 
3.14

 
12.1

 
52,031

 
2.76

 
12.0

Commercial real estate
45,650

 
4.20

 
15.4

 

 

 

Home equity
18,826

 
5.31

 
6.3

 
17,933

 
4.77

 
4.1

Other
978

 
3.79

 
0.3

 
437

 
3.30

 
0.1

Total adjustable-rate
102,191

 
4.02

 
34.4

 
71,828

 
3.25

 
16.5

 
 
 
 
 
 
 
 
 
 
 
 
Total originated, refinanced and purchased
$
296,858

 
3.82

 
100.0
%
 
$
436,056

 
3.37

 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
Purchased and participation loans included above:
 
 
 
 
 
 
 
 
 
 
 
Fixed-rate:
 
 
 
 
 
 
 
 
 
 
 
Correspondent - one- to four-family
$
80,773

 
3.71

 
 
 
$
155,383

 
3.43

 
 
Participations - commercial real estate
4,792

 
4.13

 
 
 
32,291

 
3.96

 
 
Total fixed-rate purchased/participations
85,565

 
3.73

 
 
 
187,674

 
3.52

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjustable-rate:
 
 
 
 
 
 
 
 
 
 
 
Correspondent - one- to four-family
19,039

 
3.10

 
 
 
25,262

 
2.73

 
 
Participations - commercial real estate
45,650

 
4.20

 
 
 

 

 
 
Total adjustable-rate purchased/participations
64,689

 
3.87

 
 
 
25,262

 
2.73

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total purchased/participation loans
$
150,254

 
3.79

 
 
 
$
212,936

 
3.43

 
 




14



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 as of the dates presented. Credit scores are updated at least semiannually, with the latest update in September 2017, 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.
 
December 31, 2017
 
September 30, 2017
 
December 31, 2016
 
 
 
% 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
$
3,940,288

 
58.5
%
 
767

 
63
%
 
$
135

 
$
3,959,232

 
58.6
%
 
767

 
63
%
 
$
135

 
$
4,027,991

 
60.0
%
 
766

 
63
%
 
$
133

Correspondent purchased
2,453,625

 
36.5

 
764

 
68

 
377

 
2,445,311

 
36.2

 
764

 
68

 
375

 
2,288,368

 
34.0

 
764

 
68

 
366

Bulk purchased
338,084

 
5.0

 
757

 
62

 
304

 
351,705

 
5.2

 
757

 
63

 
305

 
400,506

 
6.0

 
753

 
64

 
307

 
$
6,731,997

 
100.0
%
 
765

 
64

 
183

 
$
6,756,248

 
100.0
%
 
765

 
65

 
182

 
$
6,716,865

 
100.0
%
 
765

 
65

 
178


One- to Four-Family Loan Commitments - The following table summarizes our one- to four-family loan origination and refinance commitments and one- to four-family correspondent loan purchase commitments as of December 31, 2017, along with associated weighted average rates. Loan commitments generally have fixed expiration dates or other termination clauses and may require the payment of a rate lock fee. It is expected that some of the loan commitments will expire unfunded, so the amounts reflected in the table below are not necessarily indicative of future cash needs.
 
Fixed-Rate
 
 
 
 
 
 
 
15 years
 
More than
 
Adjustable-
 
Total
 
or less
 
15 years
 
Rate
 
Amount
 
Rate
 
(Dollars in thousands)
Originate/refinance
$
8,408

 
$
25,039

 
$
7,891

 
$
41,338

 
3.58
%
Correspondent
5,511

 
70,994

 
16,002

 
92,507

 
3.82

 
$
13,919

 
$
96,033

 
$
23,893

 
$
133,845

 
3.75

 
 
 
 
 
 
 
 
 
 
Rate
3.21
%
 
3.95
%
 
3.24
%
 
 
 
 


15



The following table presents originated, refinanced, and correspondent purchased 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. Of the loans originated during the current quarter, $20.3 million were refinanced from another lender.
 
For the Three Months Ended
 
December 31, 2017
 
December 31, 2016
 
 
 
 
 
Credit
 
 
 
 
 
Credit
 
Amount
 
LTV
 
Score
 
Amount
 
LTV
 
Score
 
(Dollars in thousands)
Originated
$
101,420

 
77
%
 
763

 
$
144,737

 
76
%
 
771

Refinanced by Bank customers
24,327

 
66

 
754

 
59,153

 
66

 
768

Correspondent purchased
99,812

 
75

 
766

 
180,645

 
72

 
767

 
$
225,559

 
75

 
764

 
$
384,535

 
73

 
769


The following table presents the amount, percent of total, and weighted average rate, by state, of 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 quarter ended December 31, 2017.
 
 
For the Three Months Ended
 
 
December 31, 2017
State
 
Amount
 
% of Total
 
Rate
 
 
(Dollars in thousands)
Kansas
 
$
111,798

 
49.5
%
 
3.60
%
Texas
 
40,960

 
18.2

 
3.55

Missouri
 
39,261

 
17.4

 
3.60

Other states
 
33,540

 
14.9

 
3.63

 
 
$
225,559

 
100.0
%
 
3.60


Commercial Real Estate Loans: During the current quarter, the Bank entered into commercial real estate loan participations of $50.4 million, which included $45.7 million of commercial real estate construction loans. Substantially all of the $45.7 million of commercial real estate construction loans had not yet been funded as of December 31, 2017. The Bank intends to continue to grow its commercial real estate loan portfolio through participations with correspondent lenders and other select lead banks.


16



The following table presents the Bank's commercial real estate loans and loan commitments by industry classification, as defined by the North American Industry Classification System, as of December 31, 2017. Included in the table are fixed-rate loans totaling $323.6 million at a weighted average rate of 4.07% and adjustable-rate loans totaling $128.3 million at a weighted average rate of 4.54%. The weighted average rate of fixed-rate loans is lower than that of adjustable-rate loans due to the majority of the fixed-rate loans in the portfolio at December 31, 2017 having shorter terms. Based on the terms of the construction loans as of December 31, 2017, of the $131.3 million of undisbursed amounts in the table, approximately $24.4 million is projected to be disbursed by March 31, 2018, and an additional $77.2 million is projected to be disbursed by December 31, 2018. It is possible that not all of the funds will be disbursed due to the nature of the funding of construction projects. For outstanding commitments, in certain cases, the weighted average rate presented represents our best estimate.
 
Unpaid
 
Undisbursed
 
Gross Loan
 
Outstanding
 
 
 
% of
 
Principal
 
Amount
 
Amount
 
Commitments
 
Total
 
Total
 
(Dollars in thousands)
Accommodation and food services
$
135,904

 
$
33,663

 
$
169,567

 
$
11,631

 
$
181,198

 
40.1
%
Health care and social assistance
46,868

 
40,969

 
87,837

 
23,892

 
111,729

 
24.7

Real estate rental and leasing
26,603

 
34,375

 
60,978

 

 
60,978

 
13.5

Arts, entertainment, and recreation
33,534

 

 
33,534

 

 
33,534

 
7.4

Multi-family
10,168

 
20,950

 
31,118

 

 
31,118

 
6.9

Retail trade
25,577

 
1,374

 
26,951

 

 
26,951

 
6.0

Manufacturing
6,428

 

 
6,428

 

 
6,428

 
1.4

 
$
285,082

 
$
131,331

 
$
416,413

 
$
35,523

 
$
451,936

 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average rate
4.13
%
 
4.40
%
 
4.21
%
 
4.07
%
 
4.20
%
 
 

The following table summarizes the Bank's commercial real estate loans and loan commitments by state as of December 31, 2017.
 
Unpaid
 
Undisbursed
 
Gross Loan
 
Outstanding
 
 
 
% of
 
Principal
 
Amount
 
Amount
 
Commitments
 
Total
 
Total
 
(Dollars in thousands)
Texas
$
105,618

 
$
67,646

 
$
173,264

 
$

 
$
173,264

 
38.3
%
Missouri
74,562

 
41,235

 
115,797

 
35,523

 
151,320

 
33.5

Kansas
74,481

 

 
74,481

 

 
74,481

 
16.5

Nebraska

 
20,950

 
20,950

 

 
20,950

 
4.6

Colorado
14,622

 

 
14,622

 

 
14,622

 
3.2

Arkansas
7,934

 

 
7,934

 

 
7,934

 
1.8

California
6,428

 

 
6,428

 

 
6,428

 
1.4

Montana
1,437

 
1,500

 
2,937

 

 
2,937

 
0.7

 
$
285,082

 
$
131,331

 
$
416,413

 
$
35,523

 
$
451,936

 
100.0
%

The following table presents the Bank's commercial real estate loan portfolio and outstanding loan commitments, categorized by gross loan amount (unpaid principal plus undisbursed amounts) or outstanding loan commitment amount, as of December 31, 2017.
 
Count
 
Amount
 
(Dollars in thousands)
Greater than $30 million
4

 
$
156,770

>$15 to $30 million
7

 
166,271

>$10 to $15 million
3

 
37,376

>$5 to $10 million
2

 
14,363

$1 to $5 million
24

 
70,181

Less than $1 million
15

 
6,975

 
55

 
$
451,936



17


Asset Quality
The following tables present loans 30 to 89 days delinquent, non-performing loans, and OREO as of the dates indicated. Of the loans 30 to 89 days delinquent at December 31, 2017, approximately 60% 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 acquired in settlement of loans were owned by the Bank, on average, for approximately seven months before they were sold.
 
Loans Delinquent for 30 to 89 Days at:
 
December 31, 2017
 
September 30, 2017
 
June 30, 2017
 
March 31, 2017
 
December 31, 2016
 
Number
 
Amount
 
Number
 
Amount
 
Number
 
Amount
 
Number
 
Amount
 
Number
 
Amount
 
(Dollars in thousands)
One- to four-family:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Originated
129

 
$
11,435

 
129

 
$
13,257

 
120

 
$
10,455

 
122

 
$
10,886

 
130