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Section 1: 10-Q (DECEMBER 31, 2018 FORM 10-Q)

Document


UNITED STATES SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
Form 10-Q
_________________
(Mark One)
þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2018
or
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __ to __
Commission file number: 001-34814
Capitol Federal Financial, Inc.
(Exact name of registrant as specified in its charter)
 
Maryland    
27-2631712
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
 
 
700 South Kansas Avenue, Topeka, Kansas
66603
(Address of principal executive offices)
(Zip Code)
 
(785) 235-1341
(Registrant's telephone number, including area code)
_____________________________________
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files.) Yes þ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer þ
Accelerated filer ¨
Non-accelerated filer ¨
Smaller Reporting Company ¨
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. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ

As of February 1, 2019, there were 141,279,239 shares of Capitol Federal Financial, Inc. common stock outstanding.





PART I - FINANCIAL INFORMATION
Page Number
Item 1.
 
 
 
 
 
 
Item 2.
 
 
 
 
 
 
 
Item 3.
Item 4.
 
 
 
 
 
 
PART II - OTHER INFORMATION
 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
 
 
 
 
 
 
 
 
 
 
 
 




PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements


CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollars in thousands, except per share amounts)
 
 
 
 
 
December 31,
 
September 30,
 
2018
 
2018
ASSETS:
 
 
 
Cash and cash equivalents (includes interest-earning deposits of $44,027 and $122,733)
$
81,713

 
$
139,055

Securities:
 
 
 
Available-for-sale ("AFS"), at estimated fair value (amortized cost of $667,777 and $718,564)
668,487

 
714,614

Held-to-maturity ("HTM"), at amortized cost (estimated fair value of $563,771 and $601,071)
568,838

 
612,318

Loans receivable, net (allowance for credit losses ("ACL") of $8,558 and $8,463)
7,525,780

 
7,514,485

Federal Home Loan Bank Topeka ("FHLB") stock, at cost
100,521

 
99,726

Premises and equipment, net
96,109

 
96,005

Income taxes receivable, net

 
2,177

Other assets
262,334

 
271,167

TOTAL ASSETS
$
9,303,782

 
$
9,449,547

 
 
 
 
LIABILITIES:
 
 
 
Deposits
$
5,557,864

 
$
5,603,354

FHLB borrowings
2,174,983

 
2,174,981

Other borrowings
106,186

 
110,052

Advance payments by borrowers for taxes and insurance
28,406

 
65,264

Income taxes payable, net
3,413

 

Deferred income tax liabilities, net
18,510

 
21,253

Accounts payable and accrued expenses
68,507

 
83,021

Total liabilities
7,957,869

 
8,057,925

 
 
 
 
STOCKHOLDERS' EQUITY:
 
 
 
Preferred stock, $.01 par value; 100,000,000 shares authorized, no shares issued or outstanding

 

Common stock, $.01 par value; 1,400,000,000 shares authorized, 141,269,239 and 141,225,516
 
 
 
shares issued and outstanding as of December 31, 2018 and September 30, 2018, respectively
1,413

 
1,412

Additional paid-in capital
1,208,323

 
1,207,644

Unearned compensation, Employee Stock Ownership Plan ("ESOP")
(35,930
)
 
(36,343
)
Retained earnings
173,984

 
214,569

Accumulated other comprehensive (loss) income ("AOCI"), net of tax
(1,877
)
 
4,340

Total stockholders' equity
1,345,913

 
1,391,622

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
9,303,782

 
$
9,449,547

 
 
 
 
See accompanying notes to consolidated financial statements.
 
 
 


3


CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars in thousands, except per share amounts)
 
 
 
For the Three Months Ended
 
December 31,
 
2018
 
2017
INTEREST AND DIVIDEND INCOME:
 
 
 
Loans receivable
$
70,772

 
$
64,189

Mortgage-backed securities ("MBS")
6,523

 
5,252

FHLB stock
1,971

 
3,095

Cash and cash equivalents
1,714

 
7,114

Investment securities
1,441

 
994

Total interest and dividend income
82,421

 
80,644

INTEREST EXPENSE:
 
 
 
Deposits
15,725

 
11,961

FHLB borrowings
13,530

 
17,917

Other borrowings
865

 
1,392

Total interest expense
30,120

 
31,270

NET INTEREST INCOME
52,301

 
49,374

PROVISION FOR CREDIT LOSSES

 

NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES
52,301

 
49,374

NON-INTEREST INCOME:
 
 
 
Deposit service fees
3,352

 
3,965

Income from bank-owned life insurance ("BOLI")
635

 
534

Other non-interest income
1,437

 
859

Total non-interest income
5,424

 
5,358

NON-INTEREST EXPENSE:
 
 
 
Salaries and employee benefits
12,962

 
10,528

Information technology and related expense
4,599

 
3,331

Occupancy, net
3,252

 
2,765

Regulatory and outside services
1,766

 
1,140

Advertising and promotional
760

 
685

Deposit and loan transaction costs
736

 
1,407

Federal insurance premium
528

 
852

Office supplies and related expense
459

 
442

Other non-interest expense
1,720

 
886

Total non-interest expense
26,782

 
22,036

INCOME BEFORE INCOME TAX EXPENSE
30,943

 
32,696

INCOME TAX EXPENSE
6,560

 
860

NET INCOME
$
24,383

 
$
31,836

 
 
 
 
Basic earnings per share ("EPS")
$
0.18

 
$
0.24

Diluted EPS
$
0.18

 
$
0.24

 
 
 
 
Basic weighted average common shares
137,550,920

 
134,372,980

Diluted weighted average common shares
137,592,379

 
134,467,309

 
 
 
 
See accompanying notes to consolidated financial statements.
 
 

4


CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
(Dollars in thousands)
 
 
 
For the Three Months Ended
 
December 31,
 
2018
 
2017
Net income
$
24,383

 
$
31,836

Other comprehensive income (loss), net of tax:
 
 
 
Changes in unrealized gains (losses) on AFS securities,
 
 
 
net of taxes of $(1,133) and $709
3,527

 
(1,166
)
Changes in unrealized gains (losses) on cash flow hedges,
 
 
 
net of taxes of $3,128 and $(804)
(9,744
)
 
1,322

Comprehensive income
$
18,166

 
$
31,992

 
 
 
 
See accompanying notes to consolidated financial statements.
 
 
 


5


CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited)
(Dollars in thousands, except per share amounts)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional
 
Unearned
 
 
 
 
 
Total
 
Common
 
Paid-In
 
Compensation
 
Retained
 
 
 
Stockholders'
 
Stock
 
Capital
 
ESOP
 
Earnings
 
AOCI
 
Equity
Balance at September 30, 2017
$
1,382

 
$
1,167,368

 
$
(37,995
)
 
$
234,640

 
$
2,918

 
$
1,368,313

Net income
 
 
 
 
 
 
31,836

 
 
 
31,836

Other comprehensive income, net of tax
 
 
 
 
 
 
 
 
156

 
156

Cumulative effect of adopting Accounting Standards Update ("ASU") 2016-09
 
 
19

 
 
 
(19
)
 
 
 

ESOP activity
 
 
165

 
413

 
 
 
 
 
578

Stock-based compensation
 
 
94

 
 
 
 
 
 
 
94

Stock options exercised

 
46

 
 
 
 
 
 
 
46

Cash dividends to stockholders ($0.38 per share)
 
 
 
 
 
 
(50,412
)
 
 
 
(50,412
)
Balance at December 31, 2017
$
1,382

 
$
1,167,692

 
$
(37,582
)
 
$
216,045

 
$
3,074

 
$
1,350,611

 
 
 
 
 
 
 
 
 
 
 
 
Balance at September 30, 2018
$
1,412

 
$
1,207,644

 
$
(36,343
)
 
$
214,569

 
$
4,340

 
$
1,391,622

Net income
 
 
 
 
 
 
24,383

 
 
 
24,383

Other comprehensive loss, net of tax
 
 
 
 
 
 
 
 
(6,217
)
 
(6,217
)
Cumulative effect of adopting ASU 2014-09
 
 
 
 
 
 
394

 
 
 
394

ESOP activity
 
 
118

 
413

 
 
 
 
 
531

Stock-based compensation
 
 
95

 
 
 

 
 
 
95

Stock options exercised
1

 
466

 
 
 
 
 
 
 
467

Cash dividends to stockholders ($0.48 per share)
 
 
 
 
 
(65,362
)
 
 
 
(65,362
)
Balance at December 31, 2018
$
1,413

 
$
1,208,323

 
$
(35,930
)
 
$
173,984

 
$
(1,877
)
 
$
1,345,913

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
See accompanying notes to consolidated financial statements.
 
 
 
 
 
 
 
 


6


CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in thousands)
 
 
 
For the Three Months Ended
 
December 31,
 
2018
 
2017
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net income
$
24,383

 
$
31,836

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
FHLB stock dividends
(1,971
)
 
(3,095
)
Proceeds from sales of loans receivable held-for-sale ("LHFS")

 
15,642

Amortization and accretion of premiums and discounts on securities
388

 
902

Depreciation and amortization of premises and equipment
2,518

 
2,058

Amortization of intangible assets
608

 

Amortization of deferred amounts related to FHLB advances, net
2

 
338

Common stock committed to be released for allocation - ESOP
531

 
578

Stock-based compensation
95

 
94

Changes in:
 
 
 
Unrestricted cash collateral (provided to)/received from derivative counterparties, net
(9,970
)
 
2,211

Other assets, net
1,050

 
(680
)
Income taxes payable, net
5,589

 
5,909

Deferred income tax liabilities, net
(746
)
 
(6,572
)
Accounts payable and accrued expenses
(8,175
)
 
(5,909
)
Net cash provided by operating activities
14,302

 
43,312

 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
Purchase of AFS securities

 
(101,782
)
Proceeds from calls, maturities and principal reductions of AFS securities
51,003

 
11,760

Proceeds from calls, maturities and principal reductions of HTM securities
42,876

 
56,055

Proceeds from sale of AFS securities

 
2,078

Proceeds from the redemption of FHLB stock
94,500

 

Purchase of FHLB stock
(93,324
)
 
(91,421
)
Net increase in loans receivable
(11,898
)
 
(10,979
)
Purchase of premises and equipment
(2,183
)
 
(2,034
)
Proceeds from sale of other real estate owned ("OREO")
631

 
434

Net cash provided by (used in) investing activities
81,605

 
(135,889
)
 
 
 
 
 
 
 
(Continued)


7


CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in thousands)
 
 
 
For the Three Months Ended
 
December 31,
 
2018
 
2017
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
Cash dividends paid
(65,362
)
 
(50,412
)
Net change in deposits
(45,490
)
 
(43,651
)
Proceeds from borrowings
2,615,000

 
4,300,000

Repayments on borrowings
(2,618,866
)
 
(4,400,000
)
Change in advance payments by borrowers for taxes and insurance
(36,858
)
 
(35,945
)
Stock options exercised
467

 
46

Net cash used in financing activities
(151,109
)
 
(229,962
)
 
 
 
 
NET DECREASE IN CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS
(55,202
)
 
(322,539
)
 
 
 
 
CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS:
 
 
Beginning of period
139,055

 
351,659

End of period
$
83,853

 
$
29,120

 
 
 
 
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND
 
 
 
FINANCING ACTIVITIES:
 
 
 
Loans transferred to LHFS
$

 
$
15,814

 
 
 
 
See accompanying notes to consolidated financial statements.
 
 
(Concluded)


8


Notes to Consolidated Financial Statements (Unaudited)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation - The consolidated financial statements include the accounts of Capitol Federal® Financial, Inc. (the "Company") and its wholly-owned subsidiary, Capitol Federal Savings Bank (the "Bank"). The Bank has two wholly-owned subsidiaries, Capitol Funds, Inc. and Capital City Investments, Inc. Capitol Funds, Inc. has a wholly-owned subsidiary, Capitol Federal Mortgage Reinsurance Company. Capital City Investments, Inc. is a real estate and investment holding company. All intercompany accounts and transactions have been eliminated in consolidation. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. These statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2018, filed with the Securities and Exchange Commission ("SEC"). Interim results are not necessarily indicative of results for a full year.

Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents - Cash, cash equivalents, restricted cash and restricted cash equivalents reported in the statement of cash flows include cash and cash equivalents of $81.7 million and $139.1 million at December 31, 2018 and September 30, 2018 and restricted cash and cash equivalents of $2.1 million at December 31, 2018, which was included in other assets on the consolidated balance sheet.  There was no restricted cash and cash equivalents at September 30, 2018.  The restricted cash and cash equivalents relate to the collateral postings to/from the Bank's derivative counterparties associated with the Bank's interest rate swaps.  See additional discussion regarding the interest rate swaps in the Borrowed Funds footnote.

Net Presentation of Cash Flows Related to Borrowings - At times, the Bank enters into certain FHLB advances with contractual maturities of 90 days or less. Cash flows related to these advances are reported on a net basis in the consolidated statements of cash flows.

Recent Accounting Pronouncements - In May 2014, the Financial Accounting Standards Board ("FASB") issued ASU 2014-09, Revenue from Contracts with Customers. The ASU, as amended, implements a common revenue standard that clarifies the principles for recognizing revenue included in Accounting Standards Codification ("ASC") Topic 606. The core principle of the amended guidance is that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The majority of the Company's revenue is composed of interest income from loans and securities which are explicitly excluded from the amended ASU. The Company elected to implement the amended ASU using the modified retrospective application with a cumulative adjustment to opening retained earnings at October 1, 2018. Upon adoption of the amended ASU, the Company recorded a cumulative adjustment to opening retained earnings of $394 thousand related to contracts that were not complete upon adoption. The amount was related to the change in the recognition of revenue related to certain insurance commissions. Additionally, effective October 1, 2018, interchange network charges are reported as a reduction in deposit service fees. Previously, these charges were reported as expense in deposit and loan transaction costs in the consolidated statements of income. The Company concluded the ASU did not significantly change the Company's revenue recognition methods. This ASU did not have a material impact on the Company's consolidated financial condition or results of operations at the time of adoption. The new disclosure requirements of the ASU are included in Note 8. Revenue Recognition.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. The ASU supersedes certain accounting guidance related to equity securities with readily determinable fair values and the related impairment assessment. An entity's equity investments that are accounted for under the equity method of accounting or result in consolidation of an investee are not included within the scope of this ASU. The ASU requires public business entities to utilize the exit price notion when determining fair value for financial instruments measured at amortized cost on the balance sheet. The ASU also requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or in the notes to the financial statements. ASU 2016-01 became effective for the Company on October 1, 2018. The adoption of this ASU did not have a material impact on the Company's consolidated financial condition or results of operations. The new disclosure requirements of the ASU are included in Note 6. Fair Value of Financial Instruments.

In February 2016, the FASB issued ASU 2016-02, Leases. The ASU amends lease accounting guidance by requiring that lessees recognize the assets and liabilities arising from leases on the balance sheet. Additionally, the ASU requires entities to disclose both quantitative and qualitative information regarding their leasing activities. The accounting applied by a lessor is largely unchanged from that applied under the previous guidance. ASU 2016-02 will become effective for the Company on October 1, 2019. In July 2018, the FASB issued ASU 2018-11, Leases, which provides entities with relief from the costs of implementation by allowing the option to not restate comparative periods as part of the transition. The Company expects to select the transition relief provisions. The

9


Company has completed its development of a lease inventory and an internal lease data collection, organization, and computing platform for compliance with this ASU. The Company is continuing to evaluate the impact this ASU may have on the Company's consolidated financial condition and results of operations. The Company expects to recognize right-of-use assets and lease liabilities for substantially all of its operating lease commitments based on the present value of the minimum commitments under non-cancellable leases as of the date of adoption. The Company is continuing to evaluate the impact this ASU may have to the Company's disclosures.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments. The ASU replaces the incurred loss impairment methodology in current GAAP, which requires credit losses to be recognized when it is probable that a loss has been incurred, with a new impairment methodology. The new impairment methodology requires an entity to measure, at each reporting date, the expected credit losses of financial assets not measured at fair value, such as loans, HTM debt securities, and loan commitments, over their contractual lives. Under the new impairment methodology, expected credit losses will be measured at each reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Additionally, the ASU amends the current credit loss measurements for AFS debt securities. Credit losses related to AFS debt securities will be recorded through the ACL rather than as a direct write-down as per current GAAP. The ASU also requires enhanced disclosures related to credit quality and significant estimates and judgments used by management when estimating credit losses. The ASU will become effective for the Company on October 1, 2020. The Company has selected a third-party vendor solution to assist in the application of this ASU and will begin implementation procedures in the first half of calendar year 2019. While we are currently unable to reasonably estimate the impact of adopting this ASU, we expect the impact of adoption will be influenced by the composition of our loan and securities portfolios as well as the economic conditions and forecasts at the time of adoption.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows: Restricted Cash (a consensus of the FASB Emerging Issues Task Force). The ASU addresses diversity in the classification and presentation of changes in restricted cash and cash equivalents on the statement of cash flows. The ASU requires that amounts described as restricted cash and cash equivalents be included with cash and cash equivalents when reconciling the beginning and ending amounts presented on the statement of cash flows, requires disclosures on the nature of restrictions on cash and cash equivalents, and the amount and financial statement line presentation of restricted cash and cash equivalents. The Company adopted this ASU on October 1, 2018 and it did not have a material impact on the Company's consolidated financial condition or results of operations at the time of adoption.

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities. The ASU amends the hedge accounting recognition and presentation requirements in current GAAP. The purpose of the ASU was to improve transparency of hedging relationships in the financial statements and to reduce the complexity of applying hedge accounting for preparers. The ASU will become effective for the Company on October 1, 2019. The Company is currently evaluating the effect of the ASU on the Company's consolidated financial condition, results of operations and disclosures.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement: Disclosure Framework - Changes to the Disclosures Requirements for Fair Value Measurement. This ASU eliminates, modifies and adds certain disclosure requirements for fair value measurements. The ASU adds disclosure requirements for the changes in unrealized gains and losses included in other comprehensive income for recurring Level 3 fair value measurements and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The effective date of this ASU for the Company is October 1, 2020, with early adoption permitted. Entities are allowed to elect early adoption of the eliminated or modified disclosure requirements and delay adoption of the new disclosure requirements until their effective date. Since this ASU only requires disclosure changes, it will not have a significant impact on the Company's consolidated financial condition and results of operations.

In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software: Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include internal-use software license). The effective date of this ASU for the Company is October 1, 2020, with early adoption permitted. The Company is currently evaluating the effect of the ASU on the Company's consolidated financial condition, results of operations and disclosures.


10


2. EARNINGS PER SHARE
Shares acquired by the ESOP are not considered in the basic average shares outstanding until the shares are committed for allocation or vested to an employee's individual account. Unvested shares awarded pursuant to the Company's restricted stock benefit plans are treated as participating securities in the computation of EPS pursuant to the two-class method as they contain nonforfeitable rights to dividends. The two-class method is an earnings allocation that determines EPS for each class of common stock and participating security.
 
For the Three Months Ended
 
December 31,
 
2018
 
2017
 
(Dollars in thousands, except per share amounts)
Net income
$
24,383

 
$
31,836

Income allocated to participating securities
(9
)
 
(13
)
Net income available to common stockholders
$
24,374

 
$
31,823

 
 
 
 
Average common shares outstanding
137,550,471

 
134,372,531

Average committed ESOP shares outstanding
449

 
449

Total basic average common shares outstanding
137,550,920

 
134,372,980

 
 
 
 
Effect of dilutive stock options
41,459

 
94,329

 
 
 
 
Total diluted average common shares outstanding
137,592,379

 
134,467,309

 
 
 
 
Net EPS:
 
 
 
Basic
$
0.18

 
$
0.24

Diluted
$
0.18

 
$
0.24

 
 
 
 
Antidilutive stock options, excluded from the diluted average
 
 
common shares outstanding calculation
550,021

 
498,900



11


3. SECURITIES
The following tables reflect the amortized cost, estimated fair value, and gross unrealized gains and losses of AFS and HTM securities at the dates presented. The majority of the MBS and investment securities portfolios are composed of securities issued by United States government-sponsored enterprises ("GSEs").
 
December 31, 2018
 
 
 
Gross
 
Gross
 
Estimated
 
Amortized
 
Unrealized
 
Unrealized
 
Fair
 
Cost
 
Gains
 
Losses
 
Value
 
(Dollars in thousands)
AFS:
 
 
 
 
 
 
 
MBS
$
420,077

 
$
3,792

 
$
1,469

 
$
422,400

GSE debentures
243,550

 
181

 
1,778

 
241,953

Municipal bonds
4,150

 

 
16

 
4,134

 
$
667,777

 
$
3,973

 
$
3,263

 
$
668,487

HTM:
 
 
 
 
 
 
 
MBS
$
550,143

 
$
4,769

 
$
9,744

 
$
545,168

Municipal bonds
18,695

 
2

 
94

 
18,603

 
$
568,838

 
$
4,771

 
$
9,838

 
$
563,771


 
September 30, 2018
 
 
 
Gross
 
Gross
 
Estimated
 
Amortized
 
Unrealized
 
Unrealized
 
Fair
 
Cost
 
Gains
 
Losses
 
Value
 
(Dollars in thousands)
AFS:
 
 
 
 
 
 
 
MBS
$
445,883

 
$
3,270

 
$
4,063

 
$
445,090

GSE debentures
268,525

 
30

 
3,157

 
265,398

Municipal bonds
4,156

 

 
30

 
4,126

 
$
718,564

 
$
3,300

 
$
7,250

 
$
714,614

HTM:
 
 
 
 
 
 
 
MBS
$
591,900

 
$
4,514

 
$
15,589

 
$
580,825

Municipal bonds
20,418

 

 
172

 
20,246

 
$
612,318

 
$
4,514

 
$
15,761

 
$
601,071




12


The following tables summarize the estimated fair value and gross unrealized losses of those securities on which an unrealized loss at the dates presented was reported and the continuous unrealized loss position for less than 12 months and equal to or greater than 12 months as of the dates presented.
 
December 31, 2018
 
Less Than 12 Months
 
Equal to or Greater Than 12 Months
 
Estimated
 
Unrealized
 
Estimated
 
Unrealized
 
Fair Value
 
Losses
 
Fair Value
 
Losses
 
(Dollars in thousands)
AFS:
 
 
 
 
 
 
 
MBS
$
82,110

 
$
319

 
$
69,586

 
$
1,150

GSE debentures
52,822

 
158

 
148,358

 
1,620

Municipal bonds
2,429

 
3

 
1,503

 
13

 
$
137,361

 
$
480

 
$
219,447

 
$
2,783

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
HTM:
 
 
 
 
 
 
 
MBS
$
25,997

 
$
81

 
$
368,581

 
$
9,663

Municipal bonds
5,445

 
28

 
11,498

 
66

 
$
31,442

 
$
109

 
$
380,079

 
$
9,729


 
September 30, 2018
 
Less Than 12 Months
 
Equal to or Greater Than 12 Months
 
Estimated
 
Unrealized
 
Estimated
 
Unrealized
 
Fair Value
 
Losses
 
Fair Value
 
Losses
 
(Dollars in thousands)
AFS:
 
 
 
 
 
 
 
MBS
$
324,563

 
$
3,797

 
$
8,129

 
$
266

GSE debentures
101,735

 
1,231

 
148,049

 
1,926

Municipal bonds
4,126

 
30

 

 

 
$
430,424

 
$
5,058

 
$
156,178

 
$
2,192

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
HTM:
 
 
 
 
 
 
 
MBS
$
58,233

 
$
904

 
$
362,806

 
$
14,685

Municipal bonds
18,345

 
171

 
685

 
1

 
$
76,578

 
$
1,075

 
$
363,491

 
$
14,686


The unrealized losses at December 31, 2018 and September 30, 2018 were primarily a result of an increase in market yields from the time the securities were purchased. In general, as market yields rise, the fair value of securities will decrease; as market yields fall, the fair value of securities will increase. Management generally views changes in fair value caused by changes in interest rates as temporary. Therefore, these securities have not been classified as other-than-temporarily impaired. The impairment is also considered temporary because scheduled coupon payments have been made, it is anticipated that the entire principal balance will be collected as scheduled, and management neither intends to sell the securities, nor is it more likely than not that the Company will be required to sell the securities before the recovery of the remaining amortized cost amount, which could be at maturity. As a result of the analysis, management has concluded that no other-than-temporary impairments existed at December 31, 2018 or September 30, 2018.

13


The amortized cost and estimated fair value of debt securities as of December 31, 2018, by contractual maturity, are shown below.  Actual principal repayments may differ from contractual maturities due to prepayment or early call privileges by the issuer. In the case of MBS, borrowers on the underlying loans generally have the right to prepay their loans without prepayment penalty. For this reason, MBS are not included in the maturity categories.
 
AFS
 
HTM
 
Amortized
 
Estimated
 
Amortized
 
Estimated
 
Cost
 
Fair Value
 
Cost
 
Fair Value
 
(Dollars in thousands)
One year or less
$
29,636

 
$
29,590

 
$
2,480

 
$
2,476

One year through five years
218,064

 
216,497

 
16,215

 
16,127

 
247,700

 
246,087

 
18,695

 
18,603

MBS
420,077

 
422,400

 
550,143

 
545,168

 
$
667,777

 
$
668,487

 
$
568,838

 
$
563,771



The following table presents the taxable and non-taxable components of interest income on investment securities for the periods presented.
 
For the Three Months Ended
 
December 31,
 
2018
 
2017
 
(Dollars in thousands)
Taxable
$
1,348

 
$
881

Non-taxable
93

 
113

 
$
1,441

 
$
994



The following table summarizes the carrying value of securities pledged as collateral for the obligations indicated below as of the dates presented.
 
December 31, 2018
 
September 30, 2018
 
(Dollars in thousands)
Public unit deposits
$
460,260

 
$
515,553

Repurchase agreements
105,960

 
108,360

Federal Reserve Bank of Kansas City ("FRB of Kansas City")
8,768

 
9,529

 
$
574,988

 
$
633,442



14


4. LOANS RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES
Loans receivable, net at the dates presented is summarized as follows:
 
December 31, 2018
 
September 30, 2018
 
(Dollars in thousands)
One- to four-family:
 
 
 
Originated
$
3,955,975

 
$
3,965,692

Correspondent purchased
2,491,692

 
2,505,987

Bulk purchased
279,719

 
293,607

Construction
33,443

 
33,149

Total
6,760,829

 
6,798,435

Commercial:
 
 
 
Commercial real estate
463,317

 
426,243

Commercial and industrial
61,221

 
62,869

Construction
93,244

 
80,498

Total
617,782

 
569,610

Consumer:
 
 
 
Home equity
129,795

 
129,588

Other
10,481

 
10,012

Total
140,276

 
139,600

 
 
 
 
Total loans receivable
7,518,887

 
7,507,645

 
 
 
 
Less:
 
 
 
ACL
8,558

 
8,463

Discounts/unearned loan fees
33,139

 
33,933

Premiums/deferred costs
(48,590
)
 
(49,236
)
 
$
7,525,780

 
$
7,514,485


Lending Practices and Underwriting Standards - Originating and purchasing one- to four-family loans is the Bank's primary lending business. The Bank also originates consumer loans primarily secured by one- to four-family residential properties and originates and participates in commercial loans. The Bank has a loan concentration in one- to four-family loans and a geographic concentration of these loans in Kansas and Missouri.

One- to four-family loans - Full documentation to support an applicant's credit and income, and sufficient funds to cover all applicable fees and reserves at closing, are required on all loans. Generally, loans are underwritten according to the "ability to repay" and "qualified mortgage" standards, as issued by the Consumer Financial Protection Bureau ("CFPB"). Properties securing one- to four-family loans are appraised by either staff appraisers or fee appraisers, both of which are independent of the loan origination function and approved by our Board of Directors.

The underwriting standards for loans purchased from correspondent lenders are generally similar to the Bank's internal underwriting standards. The underwriting of loans purchased from correspondent lenders on a loan-by-loan basis is performed by the Bank's underwriters.

The Bank also originates construction and owner-occupied construction-to-permanent loans secured by one- to four-family residential real estate. Construction draw requests and the supporting documentation are reviewed and approved by designated personnel. The Bank also performs regular documented inspections of the construction project to ensure the funds are being used for the intended purpose and the project is being completed according to the plans and specifications provided.

Commercial loans - The Bank's commercial real estate loans are originated by the Bank or are in participation with a lead bank. When underwriting a commercial real estate loan, several factors are considered, such as the income producing potential of the property, cash equity provided by the borrower, the financial strength of the borrower, managerial expertise of the borrower or tenant, feasibility studies, lending experience with the borrower and the marketability of the property. For commercial real estate participation loans, the

15


Bank performs the same underwriting procedures as if the loan was being originated by the Bank. At the time of origination, loan-to-value ("LTV") ratios on commercial real estate loans generally do not exceed 80% of the appraised value of the property securing the loans and the minimum debt service coverage ratio is generally 1.20. Appraisals on properties securing these loans are performed by independent state certified fee appraisers.

The Bank's commercial and industrial loans are generally made in the Bank's market areas and are underwritten on the basis of the borrower's ability to service the debt from income. Working capital loans are primarily collateralized by short-term assets whereas term loans are primarily collateralized by long-term assets. In general, commercial and industrial loans involve more credit risk than commercial real estate loans due to the type of collateral securing these loans, as well as the expectation that commercial and industrial loans generally will be serviced principally from the operations of the business, and those operations may not be successful. As a result of these additional complexities, variables and risks, these loans require more thorough underwriting and servicing than other types of loans.

Consumer loans - The Bank offers a variety of secured consumer loans, including home equity loans and lines of credit, home improvement loans, vehicle loans, and loans secured by deposits. The Bank also originates a very limited amount of unsecured loans. The majority of the consumer loan portfolio is comprised of home equity lines of credit for which the Bank also has the first mortgage or the home equity line of credit is in the first lien position.

The underwriting standards for consumer loans include a determination of an applicant's payment history on other debts and an assessment of an applicant's ability to meet existing obligations and payments on the proposed loan. Although creditworthiness of an applicant is a primary consideration, the underwriting process also includes a comparison of the value of the security in relation to the proposed loan amount.

Credit Quality Indicators - Based on the Bank's lending emphasis and underwriting standards, management has segmented the loan portfolio into three segments: (1) one- to four-family; (2) consumer; and (3) commercial. These segments are further divided into classes for purposes of providing disaggregated information about the credit quality of the loan portfolio. The classes are: one- to four-family - originated, one- to four-family - correspondent purchased, one- to four-family - bulk purchased, consumer - home equity, consumer - other, commercial - commercial real estate, and commercial - commercial and industrial.

The Bank's primary credit quality indicators for the one- to four-family and consumer - home equity loan portfolios are delinquency status, asset classifications, LTV ratios, and borrower credit scores. The Bank's primary credit quality indicators for the commercial and consumer - other loan portfolios are delinquency status and asset classifications.


16


The following tables present the recorded investment, by class, in loans 30 to 89 days delinquent, loans 90 or more days delinquent or in foreclosure, total delinquent loans, current loans, and total recorded investment at the dates presented. The recorded investment in loans is defined as the unpaid principal balance of a loan, less charge-offs and inclusive of unearned loan fees and deferred costs. At December 31, 2018 and September 30, 2018, all loans 90 or more days delinquent were on nonaccrual status.
 
December 31, 2018
 
 
 
90 or More Days
 
Total
 
 
 
Total
 
30 to 89 Days
 
Delinquent or
 
Delinquent
 
Current
 
Recorded
 
Delinquent
 
in Foreclosure
 
Loans
 
Loans
 
Investment
 
(Dollars in thousands)
One- to four-family:
 
 
 
 
 
 
 
 
 
Originated
$
9,720

 
$
5,285

 
$
15,005

 
$
3,959,520

 
$
3,974,525

Correspondent purchased
1,992

 
1,109

 
3,101

 
2,523,416

 
2,526,517

Bulk purchased
2,810

 
3,154

 
5,964

 
275,042

 
281,006

Commercial:
 
 
 
 
 
 
 
 
 
Commercial real estate
64

 

 
64

 
551,997

 
552,061

Commercial and industrial

 

 

 
60,244

 
60,244

Consumer:
 
 
 
 
 
 
 
 
 
Home equity
651

 
472

 
1,123

 
128,458

 
129,581

Other
92

 
3

 
95

 
10,309

 
10,404

 
$
15,329

 
$
10,023

 
$
25,352

 
$
7,508,986

 
$
7,534,338

 
September 30, 2018
 
 
 
90 or More Days
 
Total
 
 
 
Total
 
30 to 89 Days
 
Delinquent or
 
Delinquent
 
Current
 
Recorded
 
Delinquent
 
in Foreclosure
 
Loans
 
Loans
 
Investment
 
(Dollars in thousands)
One- to four-family:
 
 
 
 
 
 
 
 
 
Originated
$
10,613

 
$
5,025

 
$
15,638

 
$
3,968,362

 
$
3,984,000

Correspondent purchased
3,846

 
458

 
4,304

 
2,536,913

 
2,541,217

Bulk purchased
3,521

 
3,063

 
6,584

 
288,386

 
294,970

Commercial:
 
 
 
 
 
 
 
 
 
Commercial real estate
76

 

 
76

 
501,932

 
502,008

Commercial and industrial
250

 

 
250

 
61,255

 
61,505

Consumer:
 
 
 
 
 
 
 
 
 
Home equity
472

 
521

 
993

 
128,351

 
129,344

Other
61

 
10

 
71

 
9,833

 
9,904

 
$
18,839

 
$
9,077

 
$
27,916

 
$
7,495,032

 
$
7,522,948


The recorded investment in mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process as of December 31, 2018 and September 30, 2018 was $2.9 million, which is included in loans 90 or more days delinquent or in foreclosure in the table above.   The carrying value of residential OREO held as a result of obtaining physical possession upon completion of a foreclosure or through completion of a deed in lieu of foreclosure was $910 thousand at December 31, 2018 and $1.3 million at September 30, 2018.

17



The following table presents the recorded investment, by class, in loans classified as nonaccrual at the dates presented.
 
December 31, 2018
 
September 30, 2018
 
(Dollars in thousands)
One- to four-family:
 
 
 
Originated
$
6,822

 
$
6,503

Correspondent purchased
1,415

 
863

Bulk purchased
3,154

 
3,063

Commercial:
 
 
 
Commercial real estate
1,351

 

Commercial and industrial

 

Consumer:
 
 
 
Home equity
480

 
530

Other
3

 
10

 
$
13,225

 
$
10,969


In accordance with the Bank's asset classification policy, management regularly reviews the problem loans in the Bank's portfolio to determine whether any loans require classification. Loan classifications are defined as follows:

Special mention - These loans are performing loans on which known information about the collateral pledged or the possible credit problems of the borrower(s) have caused management to have doubts as to the ability of the borrower(s) to comply with present loan repayment terms and which may result in the future inclusion of such loans in the non-performing loan categories.
Substandard - A loan is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard loans include those characterized by the distinct possibility the Bank will sustain some loss if the deficiencies are not corrected.
Doubtful - Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses present make collection or liquidation in full on the basis of currently existing facts and conditions and values highly questionable and improbable.
Loss - Loans classified as loss are considered uncollectible and of such little value that their continuance as assets on the books is not warranted.

The following table sets forth the recorded investment in loans classified as special mention or substandard, by class, at the dates presented. Special mention and substandard loans are included in the ACL formula analysis model if the loans are not individually evaluated for loss. Loans classified as doubtful or loss are individually evaluated for loss. At the dates presented, there were no loans classified as doubtful, and all loans classified as loss were fully charged-off.
 
December 31, 2018
 
September 30, 2018
 
Special Mention
 
Substandard
 
Special Mention
 
Substandard
 
(Dollars in thousands)
One- to four-family:
 
 
 
 
 
 
 
Originated
$
9,089

 
$
20,244

 
$
8,660

 
$
22,409

Correspondent purchased
1,287

 
3,292

 
997

 
3,126

Bulk purchased
70

 
7,009

 

 
7,195

Commercial:
 
 
 
 
 
 
 
Commercial real estate
3,824

 
1,351

 
1,251

 
1,368

Commercial and industrial
1,801

 

 
1,126

 

Consumer:
 
 
 
 
 
 
 
Home equity
194

 
805

 
298

 
894

Other
17

 
4

 

 
10

 
$
16,282

 
$
32,705

 
$
12,332

 
$
35,002



18


The following table shows the weighted average credit score and weighted average LTV for one- to four-family loans and consumer home equity loans at the dates presented. Borrower credit scores are intended to provide an indication as to the likelihood that a borrower will repay their debts. Credit scores are updated at least semiannually, with the last update in September 2018, from a nationally recognized consumer rating agency. The LTV ratios provide an estimate of the extent to which the Bank may incur a loss on any given loan that may go into foreclosure. The consumer - home equity LTV does not take into account the first lien position, if applicable.  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, 2018
 
September 30, 2018
 
Credit Score
 
LTV
 
Credit Score
 
LTV
One- to four-family - originated
767
 
62
%
 
767
 
63
%
One- to four-family - correspondent
764
 
66

 
764
 
67

One- to four-family - bulk purchased
758
 
62

 
758
 
62

Consumer - home equity
753
 
21

 
750
 
22

 
765
 
63

 
765
 
63






19


Troubled Debt Restructurings ("TDRs") - The following tables present the recorded investment prior to restructuring and immediately after restructuring in all loans restructured during the periods presented. These tables do not reflect the recorded investment at the end of the periods indicated. Any increase in the recorded investment at the time of the restructuring was generally due to the capitalization of delinquent interest and/or escrow balances.
 
For the Three Months Ended
 
December 31, 2018
 
Number
 
Pre-
 
Post-
 
of
 
Restructured
 
Restructured
 
Contracts
 
Outstanding
 
Outstanding
 
(Dollars in thousands)
One- to four-family:
 
 
 
 
 
Originated
1

 
$
117

 
$
117

Correspondent purchased

 

 

Bulk purchased

 

 

Commercial:
 
 
 
 
 
Commercial real estate

 

 

Commercial and industrial

 

 

Consumer:
 
 
 
 
 
Home equity

 

 

Other

 

 

 
1

 
$
117

 
$
117

 
For the Three Months Ended
 
December 31, 2017
 
Number
 
Pre-
 
Post-
 
of
 
Restructured
 
Restructured
 
Contracts
 
Outstanding
 
Outstanding
 
(Dollars in thousands)
One- to four-family:
 
 
 
 
 
Originated
1

 
$
74

 
$
82

Correspondent purchased

 

 

Bulk purchased

 

 

Commercial:
 
 
 
 
 
Commercial real estate

 

 

Commercial and industrial

 

 

Consumer:
 
 
 
 
 
Home equity

 

 

Other

 

 

 
1

 
$
74

 
$
82



20


The following table provides information on TDRs that became delinquent during the periods presented within 12 months after being restructured.
 
For the Three Months Ended
 
December 31, 2018
 
December 31, 2017
 
Number of
 
Recorded
 
Number of
 
Recorded
 
Contracts
 
Investment
 
Contracts
 
Investment
 
(Dollars in thousands)
One- to four-family:
 
 
 
 
 
 
 
Originated

 
$

 
12

 
$
820

Correspondent purchased

 

 

 

Bulk purchased

 

 
3

 
1,040

Commercial:
 
 
 
 
 
 
 
Commercial real estate

 

 

 

Commercial and industrial

 

 

 

Consumer:
 
 
 
 
 
 
 
Home equity

 

 
4

 
133

Other

 

 

 

 

 
$

 
19

 
$
1,993



Impaired loans - The following information pertains to impaired loans, by class, as of the dates presented. All impaired loans were individually evaluated for loss and all losses were charged-off, resulting in no related ACL for these loans.
 
December 31, 2018
 
September 30, 2018
 
 
 
Unpaid
 
 
 
Unpaid
 
Recorded
 
Principal
 
Recorded
 
Principal
 
Investment
 
Balance
 
Investment
 
Balance
 
(Dollars in thousands)
One- to four-family:
 
 
 
 
 
 
 
Originated
$
17,051

 
$
17,576

 
$
18,857

 
$
19,388

Correspondent purchased
2,184

 
2,288

 
2,668

 
2,768

Bulk purchased
5,277

 
6,012

 
6,011

 
6,976

Commercial:
 
 
 
 
 
 
 
Commercial real estate

 

 

 

Commercial and industrial

 

 

 

Consumer:
 
 
 
 
 
 
 
Home equity
474

 
638

 
504

 
720

Other

 
32

 

 
25

 
$
24,986

 
$
26,546

 
$
28,040

 
$
29,877


21


The following information pertains to impaired loans, by class, for the periods presented.
 
For the Three Months Ended
 
December 31, 2018
 
December 31, 2017
 
Average
 
Interest
 
Average
 
Interest
 
Recorded
 
Income
 
Recorded
 
Income
 
Investment
 
Recognized
 
Investment
 
Recognized
 
(Dollars in thousands)
One- to four-family:
 
 
 
 
 
 
 
Originated
$
18,049

 
$
185

 
$
28,461

 
$
297

Correspondent purchased
2,309

 
22

 
3,717

 
33

Bulk purchased
5,632

 
43

 
7,210

 
53

Commercial:
 
 
 
 
 
 
 
Commercial real estate

 

 

 

Commercial and industrial

 

 

 

Consumer:
 
 
 
 
 
 
 
Home equity
489

 
9

 
668

 
10

Other

 

 

 

 
$
26,479

 
$
259

 
$
40,056

 
$
393



22


Allowance for Credit Losses - The following is a summary of ACL activity, by loan portfolio segment, for the periods presented, and the ending balance of ACL based on the Company's impairment methodology.

 
For the Three Months Ended December 31, 2018
 
One- to Four-Family
 
 
 
 
 
 
 

 
Correspondent
 
Bulk
 

 

 
 
 
 
 
Originated
 
Purchased
 
Purchased
 
Total
 
Commercial
 
Consumer
 
Total
 
(Dollars in thousands)
Beginning balance
$
2,953

 
$
1,861

 
$
925

 
$
5,739

 
$
2,556

 
$
168

 
$
8,463

Charge-offs
(20
)
 

 
(26
)
 
(46
)
 

 
(10
)
 
(56
)
Recoveries
3

 

 
89

 
92

 
2

 
57

 
151

Provision for credit losses
(175
)
 
(113
)
 
(152
)
 
(440
)
 
476

 
(36
)
 

Ending balance
$
2,761

 
$
1,748

 
$
836

 
$
5,345

 
$
3,034

 
$
179

 
$
8,558

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Three Months Ended December 31, 2017
 
One- to Four-Family
 
 
 
 
 
 
 

 
Correspondent
 
Bulk
 

 

 
 
 
 
 
Originated
 
Purchased
 
Purchased
 
Total
 
Commercial
 
Consumer
 
Total
 
(Dollars in thousands)
Beginning balance
$
3,173

 
$
1,922

 
$
1,000

 
$
6,095

 
$
2,112

 
$
191

 
$
8,398

Charge-offs
(3
)
 

 

 
(3
)
 

 
(31
)
 
(34
)
Recoveries

 

 

 

 

 
6

 
6

Provision for credit losses
(55
)
 
(20
)
 

 
(75
)
 
45

 
30

 

Ending balance
$
3,115

 
$
1,902

 
$
1,000

 
$
6,017

 
$
2,157

 
$
196

 
$
8,370

 
 
 
 
 
 
 
 
 
 
 
 
 
 


23


The following is a summary of the loan portfolio and related ACL balances, at the dates presented, by loan portfolio segment disaggregated by the Company's impairment method. There was no ACL for loans individually evaluated for impairment at either date as all losses were charged-off.

 
December 31, 2018
 
One- to Four-Family
 

 
 
 
 
 

 
Correspondent
 
Bulk
 

 

 
 
 
 
 
Originated
 
Purchased
 
Purchased
 
Total
 
Commercial
 
Consumer
 
Total
 
(Dollars in thousands)
Recorded investment in loans
 
 
 
 
 
 
 
 
 
 
 
 
 
collectively evaluated for impairment
$
3,957,474

 
$