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)
July 30, 2019

 
 
 
 
 
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 No.)


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))

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock,
par value $0.01 per share
CFFN
The NASDAQ Stock Market LLC

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 July 30, 2019, announcing financial results for the quarter ended June 30, 2019 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 July 30, 2019






 
 
 
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: July 30, 2019
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



398959300_cffnlogo.jpg
NEWS RELEASE
FOR IMMEDIATE RELEASE
July 30, 2019
CAPITOL FEDERAL FINANCIAL, INC.® 
REPORTS THIRD QUARTER FISCAL YEAR 2019 RESULTS

Topeka, KS - Capitol Federal Financial, Inc.® (NASDAQ: CFFN) (the "Company"), the parent company of Capitol Federal Savings Bank (the "Bank"), announced results today for the quarter ended June 30, 2019. Detailed results will be available in the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, which will be filed with the Securities and Exchange Commission ("SEC") on or about August 9, 2019 and posted on our website, http://ir.capfed.com. For best viewing results, please view this release in Portable Document Format (PDF) on our website.

Highlights for the quarter include:
net income of $22.9 million;
basic and diluted earnings per share of $0.17;
net interest margin of 2.29%;
paid dividends of $46.2 million, or $0.335 per share, including a $0.25 per share True Blue® Capitol dividend; and
total commercial loans and commitments outstanding of $1.01 billion at quarter-end.

Comparison of Operating Results for the Three Months Ended June 30, 2019 and March 31, 2019

For the quarter ended June 30, 2019, the Company recognized net income of $22.9 million, or $0.17 per share, compared to net income of $24.6 million, or $0.18 per share, for the quarter ended March 31, 2019. The decrease in net income was due primarily to an increase in non-interest expense and interest expense, partially offset by an increase in non-interest income and lower income tax expense.

Net interest income decreased $916 thousand, or 1.7%, from the prior quarter to $51.7 million for the current quarter. The leverage strategy was not in place during the current quarter or the prior quarter. The net interest margin decreased four basis points from 2.33% for the prior quarter to 2.29% for the current quarter. The decrease in the net interest margin was due mainly to an increase in the cost of deposits, primarily retail/business certificates of deposit.

To the extent market rates of interest remain at current levels or go lower during the quarter ending September 30, 2019, the Company expects a decrease in our net interest margin due primarily to lower yields on our loans and securities. If realized, the decrease in the yields on our loans and securities is expected to be from loans originated at lower rates, adjustable-rate loans repricing lower and increased prepayment speeds on our correspondent loans and mortgage-backed securities ("MBS") portfolios, which would accelerate the amortization of the premiums we have paid to acquire these assets. The rates on our certificate of deposit portfolio and borrowings may also decrease if market rates decrease, but likely at a slower pace than interest-earning assets because the majority of those liabilities have stated maturities. It is anticipated that our non-interest income and non-interest expense will remain consistent with prior periods in the upcoming quarter.


1



Interest and Dividend Income
The weighted average yield on total interest-earning assets for the current quarter was 3.64%, unchanged from the prior quarter, while the average balance of interest-earning assets decreased $646 thousand between the two periods. The following table presents the components of interest and dividend income for the time periods presented, along with the change measured in dollars and percent.
 
For the Three Months Ended
 
 
 
 
 
June 30,
 
March 31,
 
Change Expressed in:
 
2019
 
2019
 
Dollars
 
Percent
 
(Dollars in thousands)
 
 
INTEREST AND DIVIDEND INCOME:
 
 
 
 
 
 
 
Loans receivable
$
71,434

 
$
71,657

 
$
(223
)
 
(0.3
)%
MBS
6,613

 
6,301

 
312

 
5.0

Federal Home Loan Bank Topeka ("FHLB") stock
1,865

 
1,831

 
34

 
1.9

Investment securities
1,835

 
1,505

 
330

 
21.9

Cash and cash equivalents
464

 
743

 
(279
)
 
(37.6
)
Total interest and dividend income
$
82,211

 
$
82,037

 
$
174

 
0.2


The decrease in interest income on loans receivable was due primarily to a decrease in interest income on one- to four-family loans, largely offset by an increase in interest income on commercial loans. The increase in interest income on the MBS portfolio was due primarily to a $41.7 million increase in the average balance of the portfolio. The increase in interest income on investment securities was due mainly to a 31 basis point increase in the average yield on the portfolio resulting primarily from discount accretion on securities called during the quarter, along with an $18.5 million increase in the average balance of the portfolio. The decrease in interest income on cash and cash equivalents was due to a $46.8 million decrease in the average balance, as excess operating cash was invested in MBS and investment securities during the current quarter.

Interest Expense
The weighted average rate paid on total interest-bearing liabilities for the current quarter increased three basis points, from 1.51% for the prior quarter to 1.54% for the current quarter, while the average balance of interest-bearing liabilities decreased $796 thousand between the two periods. The following table presents the components of interest expense for the time periods presented, along with the change measured in dollars and percent.
 
For the Three Months Ended
 
 
 
 
 
June 30,
 
March 31,
 
Change Expressed in:
 
2019
 
2019
 
Dollars
 
Percent
 
(Dollars in thousands)
 
 
INTEREST EXPENSE:
 
 
 
 
 
 
 
Deposits
$
16,909

 
$
16,096

 
$
813

 
5.1
 %
FHLB borrowings
12,981

 
12,525

 
456

 
3.6

Other borrowings
640

 
819

 
(179
)
 
(21.9
)
Total interest expense
$
30,530

 
$
29,440

 
$
1,090

 
3.7


The increase in interest expense on deposits was due primarily to a five basis point increase in the weighted average rate paid, to 1.21% for the current quarter. The increase in the weighted average rate paid was due primarily to an eight basis point increase in the average retail/business certificate of deposit portfolio rate.

The increase in interest expense on FHLB borrowings was due to a five basis point increase in the weighted average rate paid, to 2.35% for the current quarter. The increase in the weighted average rate paid was due mainly to the maturity of a $100 million advance that had a rate lower than the overall portfolio rate.

The decrease in interest expense on other borrowings was due to a decrease in the average balance as a result of the redemption of the junior subordinated debentures that were assumed as part of the acquisition of Capital City Bancshares, Inc. ("CCB").

Provision for Credit Losses
The Bank recorded a provision for credit losses during the current quarter of $450 thousand, compared to no provision for credit losses during the prior quarter. The $450 thousand provision for credit losses in the current quarter was primarily a result of commercial loan

2



activities. See additional allowance for credit losses ("ACL") discussion in the Supplemental Financial Information - Asset Quality section of this release.

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
 
 
 
 
 
June 30,
 
March 31,
 
Change Expressed in:
 
2019
 
2019
 
Dollars
 
Percent
 
(Dollars in thousands)
 
 
NON-INTEREST INCOME:
 
 
 
 
 
 
 
Deposit service fees
$
3,131

 
$
3,091

 
$
40

 
1.3
%
Income from bank-owned life insurance ("BOLI")
590

 
587

 
3

 
0.5

Other non-interest income
1,953

 
1,323

 
630

 
47.6

Total non-interest income
$
5,674

 
$
5,001

 
$
673

 
13.5


The increase in other non-interest income was due primarily to an increase in insurance commissions resulting from the receipt of annual commissions and the related adjustments to accruals, along with miscellaneous loan related income.

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
 
 
 
 
 
June 30,
 
March 31,
 
Change Expressed in:
 
2019
 
2019
 
Dollars
 
Percent
 
(Dollars in thousands)
 
 
NON-INTEREST EXPENSE:
 
 
 
 
 
 
 
Salaries and employee benefits
$
13,454

 
$
12,789

 
$
665

 
5.2
 %
Information technology and related expense
4,652

 
4,284

 
368

 
8.6

Occupancy, net
3,224

 
3,292

 
(68
)
 
(2.1
)
Regulatory and outside services
1,425

 
1,056

 
369

 
34.9

Advertising and promotional
1,447

 
1,390

 
57

 
4.1

Office supplies and related expense
689

 
736

 
(47
)
 
(6.4
)
Deposit and loan transaction costs
681

 
465

 
216

 
46.5

Federal insurance premium
600

 
659

 
(59
)
 
(9.0
)
Other non-interest expense
1,519

 
1,470

 
49

 
3.3

Total non-interest expense
$
27,691

 
$
26,141

 
$
1,550

 
5.9


The increase in salaries and employee benefits expense was due mainly to additional expense on unallocated Employee Stock Ownership Plan ("ESOP") shares arising from the $0.25 per share True Blue Capitol dividend paid on those shares in June 2019. The expense recognized in the current quarter was $453 thousand, and it is expected that $453 thousand will also be recognized during the quarter ending September 30, 2019.  The increase in information technology and related expense was due primarily to costs related to the integration of CCB operations. The increase in regulatory and outside services was due mainly to the timing of external audit billings. The increase in deposit and loan transaction costs was due mainly to loan-related activities and debit card expenses related to the CCB integration.

The Company's efficiency ratio was 48.28% for the current quarter compared to 45.38% for the prior quarter. The increase in the efficiency ratio was due primarily to higher 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.


3



Income Tax Expense
Income tax expense was $6.3 million for the current quarter, compared to $6.9 million for the prior quarter. The effective tax rate was 21.6% for the current quarter compared to 21.9% for the prior quarter. Management estimates the effective income tax rate for fiscal year 2019 will be approximately 22%.

Comparison of Operating Results for the Nine Months Ended June 30, 2019 and 2018

The Company recognized net income of $71.8 million, or $0.52 per share, for the nine month period ended June 30, 2019 compared to net income of $77.5 million, or $0.58 per share, for the nine month period ended June 30, 2018. The decrease in net income was due primarily to an increase in non-interest expense during the current year nine month period, as well as the enactment of the Tax Cuts and Jobs Act (the "Tax Act") positively impacting the prior year nine month period as discussed below. These changes were partially offset by an increase in net interest income due primarily to the higher yielding loans added in the CCB acquisition. The Tax Act reduced the federal corporate income tax rate from 35% to 21% effective January 1, 2018. In accordance with accounting principles generally accepted in the United States of America ("GAAP"), the Company revalued its deferred tax assets and liabilities in December 2017 to account for the lower corporate income tax rate, which reduced income tax expense.

The net interest margin increased 43 basis points, from 1.87% for the prior year nine month period to 2.30% for the current year nine month period. When the leverage strategy is in place, it reduces the net interest margin due to the amount of earnings from the transaction in comparison to the size of the transaction. The leverage strategy was suspended at certain times during the current year nine month period due to the negative interest rate spreads between the related FHLB borrowings and cash held at the Federal Reserve Bank of Kansas City (the "FRB of Kansas City") making the transaction unprofitable. See additional discussion regarding the leverage strategy in the Financial Condition section below. Excluding the effects of the leverage strategy, the net interest margin would have increased nine basis points, from 2.23% for the prior year nine month period to 2.32% for the current year nine month period. The increase in the net interest margin excluding the effects of the leverage strategy was due mainly to the addition of higher yielding commercial loans in the CCB acquisition.

Interest and Dividend Income
The weighted average yield on total interest-earning assets increased 53 basis points, from 3.08% for the prior year nine month period to 3.61% for the current year nine month period, while the average balance of interest-earning assets decreased $1.50 billion from the prior year nine month period. Absent the impact of the leverage strategy, the weighted average yield on total interest-earning assets would have increased 27 basis points, from 3.35% for the prior year nine month period to 3.62% for the current year nine month period, and the average balance of interest-earning assets would have increased $263.7 million. The following table presents the components of interest and dividend income for the time periods presented, along with the change measured in dollars and percent.
 
For the Nine Months Ended
 
 
 
 
 
June 30,
 
Change Expressed in:
 
2019
 
2018
 
Dollars
 
Percent
 
(Dollars in thousands)
 
 
INTEREST AND DIVIDEND INCOME:
 
 
 
 
 
 
 
Loans receivable
$
213,863

 
$
193,276

 
$
20,587

 
10.7
 %
MBS
19,437

 
16,563

 
2,874

 
17.4

FHLB stock
5,667

 
9,115

 
(3,448
)
 
(37.8
)
Investment securities
4,781

 
3,395

 
1,386

 
40.8

Cash and cash equivalents
2,921

 
22,230

 
(19,309
)
 
(86.9
)
Total interest and dividend income
$
246,669

 
$
244,579

 
$
2,090

 
0.9


The increase in interest income on loans receivable was due to a $337.9 million increase in the average balance of the portfolio, as well as a 21 basis point increase in the weighted average yield on the portfolio to 3.78% for the current year nine month period. The increase in the average balance was due mainly to the acquisition of CCB. The increase in the weighted average yield was also due mainly to the addition of higher yielding loans associated with the CCB acquisition, legacy adjustable-rate loans repricing to higher market rates, and the origination and purchase of new loans at higher market rates.

The increase in interest income on the MBS portfolio was due to a 30 basis point increase in the weighted average yield on the portfolio to 2.62% for the current year nine month period, along with a $37.7 million increase in the average balance of the portfolio. The increase in the weighted average yield was due primarily to a decrease in the impact of net premium amortization, as well as adjustable-rate MBS repricing to higher market rates. Net premium amortization of $1.0 million during the current year nine month period decreased the weighted average yield on the portfolio by 14 basis points. During the prior year nine month period, $2.3 million

4



of net premiums were amortized, which decreased the weighted average yield on the portfolio by 33 basis points. As of June 30, 2019, the remaining net balance of premiums on our portfolio of MBS was $2.5 million.

The decrease in dividend income on FHLB stock was due to a decrease in the average balance of FHLB stock as a result of the leverage strategy not being in place as often during the current year nine month period as compared to the prior year nine month period. This was partially offset by a higher dividend rate on FHLB stock during the current year nine month period.

The increase in interest income on the investment securities portfolio was due to a 75 basis point increase in the weighted average yield on the portfolio to 2.26%. The increase in the weighted average yield was primarily a result of replacing maturing securities at higher market rates.

The table above includes interest income on cash and cash equivalents associated and not associated with the leverage strategy. Interest income on cash and cash equivalents not related to the leverage strategy decreased $420 thousand from the prior year nine month period due to a $94.3 million decrease in the average balance, partially offset by an 86 basis point increase in the weighted average yield which was related to cash balances held at the FRB of Kansas City. Interest income on cash associated with the leverage strategy decreased $18.9 million from the prior year nine month period due to a $1.68 billion decrease in the average balance, as the leverage strategy was in place less often during the current year nine month period. See additional discussion regarding the leverage strategy in the Financial Condition section below.

Interest Expense
The weighted average rate paid on total interest-bearing liabilities increased 15 basis points, from 1.36% for the prior year nine month period to 1.51% for the current year nine month period, while the average balance of interest-bearing liabilities decreased $1.44 billion from the prior year nine month period. Absent the impact of the leverage strategy, the weighted average rate paid on total interest-bearing liabilities would have increased 19 basis points, from 1.31% for the prior year nine month period to 1.50% for the current year nine month period, and the average balance of interest-bearing liabilities would have increased $316.7 million. The following table presents the components of interest expense for the time periods presented, along with the change measured in dollars and percent.
 
For the Nine Months Ended
 
 
 
 
 
June 30,
 
Change Expressed in:
 
2019
 
2018
 
Dollars
 
Percent
 
(Dollars in thousands)
 
 
INTEREST EXPENSE:
 
 
 
 
 
 
 
Deposits
$
48,730

 
$
38,028

 
$
10,702

 
28.1
 %
FHLB borrowings
39,036

 
55,190

 
(16,154
)
 
(29.3
)
Other borrowings
2,324

 
2,665

 
(341
)
 
(12.8
)
Total interest expense
$
90,090

 
$
95,883

 
$
(5,793
)
 
(6.0
)

The increase in interest expense on deposits was due primarily to a 21 basis point increase in the weighted average rate, to 1.17% for the current year nine month period. The deposit accounts assumed in the CCB acquisition were at a lower average rate than our legacy deposit portfolio rate and our overall deposit portfolio rate, which partially offset the increase in the deposit portfolio rate in the current year nine month period. The increase in the weighted average rate was due primarily to increases in the average retail/business certificate of deposit portfolio rate and money market portfolio rate, which increased 28 basis points and 36 basis points, respectively, as market interest rates increased between periods. Additionally, the Bank recently increased offered rates on short-term and certain intermediate-term certificates of deposit in an effort to encourage customers to move funds to those terms. See the Financial Condition section below for more information.

The table above includes interest expense on FHLB borrowings associated and not associated with the leverage strategy. Interest expense on FHLB borrowings not related to the leverage strategy increased $4.2 million from the prior year nine month period due to a 23 basis point increase in the weighted average rate paid on the portfolio, to 2.29% for the current year nine month period, and a $30.9 million increase in the average balance of the portfolio. The increase in the weighted average rate paid was due primarily to certain maturing advances being replaced at higher effective market interest rates. Interest expense on FHLB borrowings associated with the leverage strategy decreased $20.4 million from the prior year nine month period due to the leverage strategy not being in place as often during the current year nine month period.

The decrease in interest expense on other borrowings was due mainly to the maturity of a $100.0 million repurchase agreement during the prior fiscal year, which was not replaced with a new repurchase agreement.


5



Provision for Credit Losses
The Bank recorded a provision for credit losses during the current year nine month period of $450 thousand, compared to no provision for credit losses during the prior year nine month period. The $450 thousand provision for credit losses in the current year nine month period is primarily a result of commercial loan activities during the current quarter. See additional ACL discussion in the Supplemental Financial Information - Asset Quality section of this release.

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 Nine Months Ended
 
 
 
 
 
June 30,
 
Change Expressed in:
 
2019
 
2018
 
Dollars
 
Percent
 
(Dollars in thousands)
 
 
NON-INTEREST INCOME:
 
 
 
 
 
 
 
Deposit service fees
$
9,581

 
$
11,550

 
$
(1,969
)
 
(17.0
)%
Income from BOLI
1,812

 
1,320

 
492

 
37.3

Other non-interest income
4,706

 
3,345

 
1,361

 
40.7

Total non-interest income
$
16,099

 
$
16,215

 
$
(116
)
 
(0.7
)

The decrease in deposit service fees was due mainly to a change in the presentation of interchange network charges related to the adoption of a new revenue recognition accounting standard during the current year nine month period. Previously, interchange network charges were reported in deposit and loan expense. Upon adoption of the new revenue recognition accounting standard on October 1, 2018, interchange transaction fee income is reported net of interchange network charges, which totaled $2.5 million during the current year nine month period and $2.2 million during the prior year nine month period.

The increase in income from BOLI was due primarily to a one-time adjustment during the prior year nine month period to the benchmark rate associated with one of the policies which reduced income from BOLI during that period, as well as to an increase in income related to policies acquired in the CCB acquisition.

The increase in other non-interest income was due mainly to revenues from the trust asset management operations acquired from CCB, loan related income mainly related to the CCB acquisition, and insurance commission income. Additionally, the prior year nine month period included a loss on the sale of loans as management tested loan sale processes for liquidity purposes, and there were no loan sales in the current year nine month period.

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 Nine Months Ended
 
 
 
 
 
June 30,
 
Change Expressed in:
 
2019
 
2018
 
Dollars
 
Percent
 
(Dollars in thousands)
 
 
NON-INTEREST EXPENSE:
 
 
 
 
 
 
 
Salaries and employee benefits
$
39,205

 
$
33,631

 
$
5,574

 
16.6
 %
Information technology and related expense
13,535

 
10,316

 
3,219

 
31.2

Occupancy, net
9,768

 
8,391

 
1,377

 
16.4

Regulatory and outside services
4,247

 
3,919

 
328

 
8.4

Advertising and promotional
3,597

 
3,512

 
85

 
2.4

Office supplies and related expense
1,884

 
1,339

 
545

 
40.7

Deposit and loan transaction costs
1,882

 
4,157

 
(2,275
)
 
(54.7
)
Federal insurance premium
1,787

 
2,512

 
(725
)
 
(28.9
)
Other non-interest expense
4,709

 
2,368

 
2,341

 
98.9

Total non-interest expense
$
80,614

 
$
70,145

 
$
10,469

 
14.9


6




The increase in salaries and employee benefits was due primarily to $4.8 million of expense related to former CCB employees during the current year nine month period. The increase in information technology and related expense was due mainly to an increase in software licensing and costs related to the integration of CCB operations. The increase in occupancy, net was due primarily to expenses related to properties acquired in the CCB acquisition. The increase in regulatory and outside services was due mainly to an increase in consulting expenses. The increase in office supplies and related expense was due primarily to costs related to the integration of CCB customers and operations. The decrease in deposit and loan transaction costs was due mainly to the adoption of the new revenue recognition standard discussed above. The decrease in federal insurance premium was due primarily to a decrease in average assets as a result of a reduction in the usage of the leverage strategy in the current year nine month period. The increase in other non-interest expense was due primarily to amortization of deposit intangibles associated with the acquisition of CCB.

The Company's efficiency ratio was 46.68% for the current year nine month period compared to 42.54% for the prior year nine month period. The change in the efficiency ratio was due to higher non-interest expense in the current year nine month period compared to the prior year nine month period.

Income Tax Expense
Income tax expense was $19.8 million for the current year nine month period compared to $17.2 million for the prior year nine month period. The effective tax rate was 21.6% for the current year nine month period compared to 18.2% for the prior year nine month period. The increase in the effective tax rate compared to the prior year nine month period was due mainly to the Tax Act being signed into law in December 2017. In accordance with GAAP, the Company revalued its deferred tax assets and liabilities in December 2017 to account for the lower corporate tax rate which reduced income tax expense.

Financial Condition as of June 30, 2019
Management continues to manage the size and mix of the loan portfolio by utilizing cash flows from the one- to four-family loan portfolio to fund commercial loan growth. Given the current level of total assets, it is unlikely that net loan growth will substantially increase in the current environment. Over the past few 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 costing liabilities, we have been able to maintain our net interest margin.  Additionally, the Bank recently began reducing its balance of public unit certificates of deposit in order to reduce its use of expensive wholesale funds and release securities pledged as collateral, which assists with liquidity levels. Management intends to reduce the balance of public unit certificates of deposit to approximately $300.0 million by September 30, 2019. Management continues to evaluate liquidity levels, as measured by the ratio of securities and cash to total assets, and may consider reducing its target ratio below the current target level of 15%.

Total assets were $9.29 billion at June 30, 2019 compared to $9.53 billion at March 31, 2019. The $248.3 million decrease was spread across all interest-earning asset types. During the current quarter, excess operating cash and cash flows from the payments on securities and loan portfolios were used, in part, to reduce FHLB borrowings by $100.0 million and to fund cash outflows from the deposit portfolio. The loans receivable portfolio decreased by $63.3 million. The decrease in the one- to four-family loan portfolio was partially offset by an increase in the commercial loan portfolio. The commercial loan portfolio was $798.7 million at June 30, 2019, compared to $729.7 million at March 31, 2019 and $569.6 million at September 30, 2018. At June 30, 2019, the commercial loan portfolio was composed of 77% commercial real estate, 15% commercial construction, and 8% commercial and industrial. Total commercial real estate and commercial construction potential exposure, including undisbursed amounts and outstanding commitments totaling $195.3 million, was $925.8 million at June 30, 2019. Total commercial and industrial potential exposure, including undisbursed amounts and outstanding commitments of $19.6 million, was $87.8 million at June 30, 2019, for a total commercial potential exposure of $1.01 billion.

The deposit portfolio decreased $120.2 million during the current quarter due primarily to a $57.2 million decrease in the public unit certificate of deposit portfolio and the typical seasonal reductions in the balance of checking and money market accounts as customers routinely use accumulated balances to pay income taxes during the June quarter. Additionally, money market accounts decreased during the current quarter as certain customers moved money market balances into short-term certificates of deposit. The amount of certificates of deposit scheduled to mature during the current quarter was higher than the previous three quarters, and the Bank retained the maturing certificates of deposit at a higher rate than the previous three quarters. Many of the deposits retained during the current quarter were renewed into shorter term maturities, as customers took advantage of the Bank's higher offered rates on shorter-term and certain intermediate-term certificates of deposit, which will allow the Bank to more quickly reprice deposits lower if market interest rates were to decrease.

While total assets and deposits decreased during the current quarter, when compared to December 31, 2018, total assets are down $17.5 million and the total balance of deposits increased $23.0 million, even after the reduction in public unit certificates of deposit. The increase in deposits during the quarter ended March 31, 2019 appear to have been due to depositors looking to temporarily place money, which was then withdrawn during the quarter ended June 30, 2019. As management considers the changes in the ba

7



lance sheet over the longer term, we recognize that there may be fluctuations from period to period as we work to build sustainable portfolios over time.

Total assets decreased $163.3 million from September 30, 2018 to June 30, 2019. The decrease was largely in operating cash and the securities portfolio. The loans receivable portfolio has been relatively unchanged during the current fiscal year. The one- to four-family loan portfolio decreased $229.1 million while the commercial loan portfolio increased by the same amount as cash flows from the one- to four-family loan portfolio were used to fund commercial loan growth. During the current year nine month period, the Bank originated and refinanced $429.7 million of one- to four-family and consumer loans with a weighted average rate of 4.45% and purchased $122.4 million of one- to four-family loans from correspondent lenders with a weighted average rate of 4.30%. The Bank also originated $147.0 million of commercial loans with a weighted average rate of 5.05% and entered into commercial real estate loan participations totaling $78.5 million at a weighted average rate of 5.44%.

The deposit portfolio decreased $22.5 million, or 0.4%, from September 30, 2018 to June 30, 2019. The public unit certificate of deposit portfolio decreased $64.8 million which was partially offset by an increase in the checking and retail/business certificate of deposit portfolios. Excluding the impact of the runoff of the public unit certificates of deposit, total deposits would have increased $42.3 million over the same period.

At times, the Bank has utilized a leverage strategy to increase earnings. The leverage strategy during the current year nine month period 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, or earlier if the strategy was suspended. The proceeds from the borrowings, net of the required FHLB stock holdings which yielded 7.3% from dividends during the current year nine month period, 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 $14 thousand during the current year nine month period, compared to $1.7 million during the prior year nine month period. The decrease was due mainly to the strategy being suspended for the majority of the current year nine month period due to the large negative interest rate spread, making the strategy unprofitable. Management continues to monitor the net interest rate spread and overall profitability of the strategy. It is expected that the strategy will be reimplemented if it reaches a position that is profitable.

Stockholders' equity was $1.33 billion at June 30, 2019 compared to $1.39 billion at September 30, 2018. The $64.5 million decrease was due primarily to the payment of $123.2 million in cash dividends, partially offset by net income of $71.8 million. In the long run, management considers a ratio of stockholders' equity to total assets at the Bank of at least 10% an appropriate level of capital. At June 30, 2019, this ratio was 12.6%. The cash dividends paid during the current year nine month period totaled $0.895 per share and consisted of a $0.39 per share cash true-up dividend related to fiscal year 2018 earnings per the Company's dividend policy, a $0.25 per share True Blue Capitol dividend, and three regular quarterly cash dividends totaling $0.255 per share. On July 17, 2019, the Company announced a regular quarterly cash dividend of $0.085 per share, or approximately $11.7 million, payable on August 16, 2019 to stockholders of record as of the close of business on August 2, 2019.

At June 30, 2019, Capitol Federal Financial, Inc., at the holding company level, had $112.0 million on deposit at the Bank. For fiscal year 2019, it is the intent of the Board of Directors to continue the payout of 100% of the Company's earnings to the Company's 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.

The Company has authorized the repurchase of up to $70.0 million of its common stock under its stock repurchase plan. Shares may be repurchased from time to time based upon market conditions and available liquidity. There is no expiration for this repurchase plan and no shares have been repurchased under this repurchase plan.

The following table presents the balance of stockholders' equity and related information as of the dates presented.
 
June 30,
 
September 30,
 
June 30,
 
2019
 
2018
 
2018
 
(Dollars in thousands)
Stockholders' equity
$
1,327,099

 
$
1,391,622

 
$
1,341,325

Equity to total assets at end of period
14.3
%
 
14.7
%
 
14.8
%


8



The following table presents a reconciliation of total to net shares outstanding as of June 30, 2019.
Total shares outstanding
141,421,630

Less unallocated ESOP shares and unvested restricted stock
(3,630,959
)
Net shares outstanding
137,790,671


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 June 30, 2019, the Bank and Company exceeded all regulatory capital requirements. The following table presents the Bank's regulatory capital ratios at June 30, 2019.
 
 
 
Regulatory
 
 
 
Requirement For
 
Bank
 
Well-Capitalized
 
Ratios
 
Status
Tier 1 leverage ratio
12.4%
 
5.0
%
Common equity tier 1 capital ratio
23.8
 
6.5

Tier 1 capital ratio
23.8
 
8.0

Total capital ratio
24.0
 
10.0


The following table presents a reconciliation of the Bank's equity under GAAP to regulatory capital amounts as of June 30, 2019 (dollars in thousands):
Total Bank equity as reported under GAAP
$
1,171,199

Accumulated Other Comprehensive Income ("AOCI")
12,532

Goodwill and other intangibles, net of deferred tax liabilities
(15,579
)
Total tier 1 capital
1,168,152

ACL
9,036

Total capital
$
1,177,188


Capitol Federal Financial, Inc. is the holding company for the Bank. The Bank has 54 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 herein 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 involve risks and uncertainties, including the possibility that expected cost savings, synergies and other benefits from the acquisition of CCB might not be realized within the anticipated time frames or at all, 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, 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:
Kent Townsend
Investor Relations
Executive Vice President,
(785) 270-6055
Chief Financial Officer and Treasurer
investorrelations@capfed.com
(785) 231-6360
 
ktownsend@capfed.com
 

9




SUPPLEMENTAL FINANCIAL INFORMATION
 
CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollars in thousands, except per share amounts)
 
June 30,
 
September 30,
 
2019
 
2018
ASSETS:
 
 
 
Cash and cash equivalents (includes interest-earning deposits of $20,204 and $122,733)
$
43,051

 
$
139,055

Securities:
 
 
 
Available-for-sale ("AFS"), at estimated fair value (amortized cost of $759,221 and $718,564)
769,393

 
714,614

Held-to-maturity, at amortized cost (estimated fair value of $486,590 and $601,071)
483,858

 
612,318

Loans receivable, net (ACL of $9,036 and $8,463)
7,507,468

 
7,514,485

FHLB stock, at cost
100,109

 
99,726

Premises and equipment, net
96,170

 
96,005

Income taxes receivable, net
495

 
2,177

Other assets
285,731

 
271,167

TOTAL ASSETS
$
9,286,275

 
$
9,449,547

 
 
 
 
LIABILITIES:
 
 
 
Deposits
$
5,580,871

 
$
5,603,354

FHLB borrowings
2,139,987

 
2,174,981

Other borrowings
100,000

 
110,052

Advance payments by borrowers for taxes and insurance
39,769

 
65,264

Deferred income tax liabilities, net
15,135

 
21,253

Accounts payable and accrued expenses
83,414

 
83,021

Total liabilities
7,959,176

 
8,057,925

 
 
 
 
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, 141,421,630 and 141,225,516
 
 
 shares issued and outstanding as of June 30, 2019 and September 30, 2018, respectively
1,414

 
1,412

Additional paid-in capital
1,209,740

 
1,207,644

Unearned compensation, ESOP
(35,104
)
 
(36,343
)
Retained earnings
163,581

 
214,569

AOCI, net of tax
(12,532
)
 
4,340

Total stockholders' equity
1,327,099

 
1,391,622

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
9,286,275

 
$
9,449,547


10



 
CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars in thousands)
 
For the Three Months Ended
 
For the Nine Months Ended
 
June 30,
 
March 31,
 
June 30,
 
2019
 
2019
 
2019
 
2018
INTEREST AND DIVIDEND INCOME:
 
 
 
 
 
 
 
Loans receivable
$
71,434

 
$
71,657

 
$
213,863

 
$
193,276

MBS
6,613

 
6,301

 
19,437

 
16,563

FHLB stock
1,865

 
1,831

 
5,667

 
9,115

Investment securities
1,835

 
1,505

 
4,781

 
3,395

Cash and cash equivalents
464

 
743

 
2,921

 
22,230

Total interest and dividend income
82,211

 
82,037

 
246,669

 
244,579

 
 
 
 
 
 
 
 
INTEREST EXPENSE:
 
 
 
 
 
 
 
Deposits
16,909

 
16,096

 
48,730

 
38,028

FHLB borrowings
12,981

 
12,525

 
39,036

 
55,190

Other borrowings
640

 
819

 
2,324

 
2,665

Total interest expense
30,530

 
29,440

 
90,090

 
95,883

 
 
 
 
 
 
 
 
NET INTEREST INCOME
51,681

 
52,597

 
156,579

 
148,696

 
 
 
 
 
 
 
 
PROVISION FOR CREDIT LOSSES
450

 

 
450

 

NET INTEREST INCOME AFTER
 
 
 
 
 
 
 
PROVISION FOR CREDIT LOSSES
51,231

 
52,597

 
156,129

 
148,696

 
 
 
 
 
 
 
 
NON-INTEREST INCOME:
 
 
 
 
 
 
 
Deposit service fees
3,131

 
3,091

 
9,581

 
11,550

Income from BOLI
590

 
587

 
1,812

 
1,320

Other non-interest income
1,953

 
1,323

 
4,706

 
3,345

Total non-interest income
5,674

 
5,001

 
16,099

 
16,215

 
 
 
 
 
 
 
 
NON-INTEREST EXPENSE:
 
 
 
 
 
 
 
Salaries and employee benefits
13,454

 
12,789

 
39,205

 
33,631

Information technology and related expense
4,652

 
4,284

 
13,535

 
10,316

Occupancy, net
3,224

 
3,292

 
9,768

 
8,391

Regulatory and outside services
1,425

 
1,056

 
4,247

 
3,919

Advertising and promotional
1,447

 
1,390

 
3,597

 
3,512

Office supplies and related expense
689

 
736

 
1,884

 
1,339

Deposit and loan transaction costs
681

 
465

 
1,882

 
4,157

Federal insurance premium
600

 
659

 
1,787

 
2,512

Other non-interest expense
1,519

 
1,470

 
4,709

 
2,368

Total non-interest expense
27,691

 
26,141

 
80,614

 
70,145

INCOME BEFORE INCOME TAX EXPENSE
29,214

 
31,457

 
91,614

 
94,766

INCOME TAX EXPENSE
6,317

 
6,903

 
19,780

 
17,228

NET INCOME
$
22,897

 
$
24,554

 
$
71,834

 
$
77,538


11



The following is a reconciliation of the basic and diluted earnings per share calculations for the periods indicated.
 
For the Three Months Ended
 
For the Nine Months Ended
 
June 30,
 
March 31,
 
June 30,
 
2019
 
2019
 
2019
 
2018
 
(Dollars in thousands, except per share amounts)
Net income
$
22,897

 
$
24,554

 
$
71,834

 
$
77,538

Income allocated to participating securities
(16
)
 
(10
)
 
(35
)
 
(32
)
Net income available to common stockholders
$
22,881

 
$
24,544

 
$
71,799

 
$
77,506

 
 
 
 
 
 
 
 
Average common shares outstanding
137,637,428

 
137,593,062

 
137,593,497

 
134,386,678

Average committed ESOP shares outstanding
83,052

 
41,758

 
41,602

 
41,602

Total basic average common shares outstanding
137,720,480

 
137,634,820

 
137,635,099

 
134,428,280

 
 
 
 
 
 
 
 
Effect of dilutive stock options
67,048

 
55,897

 
55,335

 
62,275

 
 
 
 
 
 
 
 
Total diluted average common shares outstanding
137,787,528

 
137,690,717

 
137,690,434

 
134,490,555

 
 
 
 
 
 
 
 
Net earnings per share:
 
 
 
 
 
 
 
Basic
$
0.17

 
$
0.18

 
$
0.52

 
$
0.58

Diluted
$
0.17

 
$
0.18

 
$
0.52

 
$
0.58

 
 
 
 
 
 
 
 
Antidilutive stock options, excluded from the diluted
 
 
 
 
 
 
average common shares outstanding calculation
457,486

 
494,395

 
491,669

 
541,493




12



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.
 
June 30, 2019
 
March 31, 2019
 
September 30, 2018
 
 
 
 
 
% of
 
 
 
 
 
% of
 
 
 
 
 
% of
 
Amount
 
Rate
 
Total
 
Amount
 
Rate
 
Total
 
Amount
 
Rate
 
Total
 
(Dollars in thousands)
One- to four-family:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Originated
$
3,853,289

 
3.77
%
 
51.4
%
 
$
3,922,565

 
3.78
%
 
51.9
%
 
$
3,965,692

 
3.74
%
 
52.8
%
Correspondent purchased
2,417,307

 
3.64

 
32.2

 
2,470,619

 
3.63

 
32.7

 
2,505,987

 
3.59

 
33.4

Bulk purchased
264,256

 
2.85

 
3.5

 
272,575

 
2.77

 
3.6

 
293,607

 
2.60

 
3.9

Construction
34,481

 
4.16

 
0.5

 
33,525

 
4.38

 
0.4

 
33,149

 
4.03

 
0.4

Total
6,569,333

 
3.69

 
87.6

 
6,699,284

 
3.68

 
88.6

 
6,798,435

 
3.64

 
90.5

Commercial:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial real estate
612,287

 
4.53

 
8.2

 
547,202

 
4.48

 
7.2

 
426,243

 
4.33

 
5.7

Commercial and industrial
68,243

 
5.20

 
0.9

 
73,852

 
5.25

 
1.0

 
62,869

 
5.00

 
0.9

Construction
118,218

 
4.94

 
1.6

 
108,649

 
4.76

 
1.4

 
80,498

 
4.59

 
1.1

Total
798,748

 
4.65

 
10.7

 
729,703

 
4.60

 
9.6

 
569,610

 
4.44

 
7.7

Consumer loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Home equity
122,696

 
6.38

 
1.6

 
125,176

 
6.38

 
1.7

 
129,588

 
5.97

 
1.7

Other
10,964

 
4.51

 
0.1

 
9,913

 
4.52

 
0.1

 
10,012

 
4.59

 
0.1

Total
133,660

 
6.22

 
1.7

 
135,089

 
6.24

 
1.8

 
139,600

 
5.87

 
1.8

Total loans receivable
7,501,741

 
3.83

 
100.0
%
 
7,564,076

 
3.82

 
100.0
%
 
7,507,645

 
3.74

 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Less:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ACL
9,036

 
 
 
 
 
8,619

 
 
 
 
 
8,463

 
 
 
 
Discounts/unearned loan fees
31,748

 
 
 
 
 
32,582

 
 
 
 
 
33,933

 
 
 
 
Premiums/deferred costs
(46,511
)
 
 
 
 
 
(47,931
)
 
 
 
 
 
(49,236
)
 
 
 
 
Total loans receivable, net
$
7,507,468

 
 
 
 
 
$
7,570,806

 
 
 
 
 
$
7,514,485

 
 
 
 




13



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 were 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. Commercial loan renewals are not included in the activity in the following table unless new funds are disbursed at the time of renewal.
 
For the Three Months Ended
 
June 30, 2019
 
March 31, 2019
 
December 31, 2018
 
September 30, 2018
 
Amount
 
Rate
 
Amount
 
Rate
 
Amount
 
Rate
 
Amount
 
Rate
 
(Dollars in thousands)
Beginning balance
$
7,564,076

 
3.82
%
 
$
7,518,887

 
3.78
%
 
$
7,507,645

 
3.74
%
 
$
7,226,169

 
3.66
%
Originated and refinanced:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed
121,871

 
4.09

 
78,678

 
4.58

 
116,032

 
4.59

 
117,904

 
4.44

Adjustable
63,341

 
4.87

 
123,006

 
4.80

 
73,711

 
4.98

 
56,996

 
4.55

Purchased and participations:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed
29,447

 
4.65

 
35,387

 
5.46

 
72,140

 
4.60

 
80,138

 
4.40

Adjustable
10,018

 
3.85

 
11,331

 
4.01

 
42,651

 
4.88

 
20,105

 
3.92

Loans added in CCB acquisition, net

 

 

 

 

 

 
299,659

 
4.77

Change in undisbursed loan funds
34,742

 
 
 
30,500

 
 
 
(25,315
)
 
 
 
(8,104
)
 
 
Repayments
(321,439
)
 
 
 
(233,625
)
 
 
 
(267,469
)
 
 
 
(284,927
)
 
 
Principal (charge-offs)/recoveries, net
(33
)
 
 
 
61

 
 
 
95

 
 
 
119

 
 
Other
(282
)
 
 
 
(149
)
 
 
 
(603
)
 
 
 
(414
)
 
 
Ending balance
$
7,501,741

 
3.83

 
$
7,564,076

 
3.82

 
$
7,518,887

 
3.78

 
$
7,507,645

 
3.74

 
For the Nine Months Ended
 
June 30, 2019
 
June 30, 2018
 
Amount
 
Rate
 
Amount
 
Rate
 
(Dollars in thousands)
Beginning balance
$
7,507,645

 
3.74
%
 
$
7,182,751

 
3.61
%
Originated and refinanced:
 
 
 
 
 
 
 
Fixed
316,581

 
4.39

 
329,986

 
3.94

Adjustable
260,058

 
4.87

 
128,499

 
4.33

Purchased and participations:
 
 
 
 
 
 
 
Fixed
136,974

 
4.83

 
284,370

 
3.87

Adjustable
64,000

 
4.57

 
142,768

 
3.71

Change in undisbursed loan funds
39,927

 
 
 
(22,900
)
 
 
Repayments
(822,533
)
 
 
 
(817,697
)
 
 
Principal recoveries/(charge-offs), net
123

 
 
 
(54
)
 
 
Other
(1,034
)
 
 
 
(1,554
)
 
 
Ending balance
$
7,501,741

 
3.83

 
$
7,226,169

 
3.66


14



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. Commercial loan renewals are not included in the activity in the following table except to the extent new funds are disbursed at the time of renewal. Loan originations, purchases, and refinances are reported together. The fixed-rate one- to four-family loans less than or equal to 15 years have an original maturity at origination of less than or equal to 15 years, while fixed-rate one- to four-family loans greater than 15 years have an original maturity at origination of greater than 15 years. The adjustable-rate one- to four-family loans less than or equal to 36 months have a term to first reset of less than or equal to 36 months at origination, and adjustable-rate one- to four-family loans greater than 36 months have a term to first reset of greater than 36 months at origination.
 
For the Three Months Ended
 
For the Nine Months Ended 
 
June 30, 2019
 
June 30, 2019
 
Amount
 
Rate
 
% of Total
 
Amount
 
Rate
 
% of Total
Fixed-rate:
(Dollars in thousands)
One- to four-family:
 
 
 
 
 
 
 
 
 
 
 
<= 15 years
$
21,097

 
3.62
%
 
9.4
%
 
$
58,025

 
4.00
%
 
7.4
%
> 15 years
103,515

 
4.13

 
46.1

 
276,642

 
4.38

 
35.6

One- to four-family construction
9,362

 
3.92

 
4.2

 
37,641

 
4.38

 
4.8

Commercial:
 
 
 
 
 
 
 
 
 
 
 
Commercial real estate
2,813

 
5.42

 
1.2

 
25,642

 
6.29

 
3.3

Commercial and industrial
5,058

 
4.98

 
2.3

 
11,416

 
5.16

 
1.5

Commercial construction
7,061

 
5.57

 
3.1

 
36,980

 
4.94

 
4.8

Home equity
1,317

 
6.44

 
0.6

 
3,700

 
6.26

 
0.5

Other
1,095

 
5.94

 
0.5

 
3,509

 
5.07

 
0.5

Total fixed-rate
151,318

 
4.20

 
67.4

 
453,555

 
4.53

 
58.4

 
 
 
 
 
 
 
 
 
 
 
 
Adjustable-rate:
 
 
 
 
 
 
 
 
 
 
 
One- to four-family:
 
 
 
 
 
 
 
 
 
 
 
<= 36 months
333

 
3.18

 
0.1

 
8,020

 
3.73

 
1.0

> 36 months
35,922

 
3.59

 
16.0

 
99,069

 
3.87

 
12.7

One- to four-family construction
3,079

 
3.48

 
1.4

 
14,791

 
4.08

 
1.9

Commercial:
 
 
 
 
 
 
 
 
 
 
 
Commercial real estate
3,347

 
5.73

 
1.5

 
96,930

 
4.83

 
12.5

Commercial and industrial
10,896

 
5.80

 
4.8

 
24,846

 
5.61

 
3.2

Commercial construction
1,049

 
6.38

 
0.5

 
29,699

 
5.39

 
3.8

Home equity
18,020

 
6.35

 
8.0

 
48,896

 
6.35

 
6.3

Other
713

 
3.74

 
0.3

 
1,807

 
3.38

 
0.2

Total adjustable-rate
73,359

 
4.73

 
32.6

 
324,058

 
4.81

 
41.6

 
 
 
 
 
 
 
 
 
 
 
 
Total originated, refinanced and purchased
$
224,677

 
4.37

 
100.0
%
 
$
777,613

 
4.64

 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
Purchased and participation loans included above:
 
 
 
 
 
 
 
 
 
 
 
Fixed-rate:
 
 
 
 
 
 
 
 
 
 
 
Correspondent - one- to four-family
$
23,547

 
4.43

 
 
 
$
87,097

 
4.45

 
 
Participations - commercial
5,900

 
5.50

 
 
 
49,877

 
5.49

 
 
Total fixed-rate purchased/participations
29,447

 
4.65

 
 
 
136,974

 
4.83

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjustable-rate:
 
 
 
 
 
 
 
 
 
 
 
Correspondent - one- to four-family
10,018

 
3.85

 
 
 
35,350

 
3.93

 
 
Participations - commercial

 

 
 
 
28,650

 
5.35

 
 
Total adjustable-rate purchased/participations
10,018

 
3.85

 
 
 
64,000

 
4.57

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total purchased/participation loans
$
39,465

 
4.44

 
 
 
$
200,974

 
4.75

 
 

15



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 March 2019, 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.
 
June 30, 2019
 
September 30, 2018
 
 
 
% of
 
Credit
 
 
 
Average
 
 
 
% of
 
Credit
 
 
 
Average
 
Amount
 
Total
 
Score
 
LTV
 
Balance
 
Amount
 
Total
 
Score
 
LTV
 
Balance
 
(Dollars in thousands)
Originated
$
3,853,289

 
59.0
%
 
768

 
62
%
 
$
139

 
$
3,965,692

 
58.6
%
 
767

 
62
%
 
$
138

Correspondent purchased
2,417,307

 
37.0

 
764

 
66

 
373

 
2,505,987

 
37.1

 
764

 
67

 
378

Bulk purchased
264,256

 
4.0

 
762

 
61

 
305

 
293,607

 
4.3

 
758

 
62

 
304

 
$
6,534,852

 
100.0
%
 
766

 
63

 
186

 
$
6,765,286

 
100.0
%
 
765

 
64

 
186


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 and current year nine month period, $14.0 million and $38.9 million, respectively, were refinanced from other lenders.
 
For the Three Months Ended
 
For the Nine Months Ended
 
June 30, 2019
 
June 30, 2019
 
 
 
 
 
Credit
 
 
 
 
 
Credit
 
Amount
 
LTV
 
Score
 
Amount
 
LTV
 
Score
 
(Dollars in thousands)
Originated
$
119,600

 
80
%
 
761

 
$
329,026

 
78
%
 
757

Refinanced by Bank customers
20,143

 
67

 
748

 
42,715

 
67

 
747

Correspondent purchased
33,565

 
74

 
760

 
122,447

 
74

 
762

 
$
173,308

 
77

 
759

 
$
494,188

 
76

 
757


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 nine month period ended June 30, 2019.
 
 
For the Three Months Ended
 
For the Nine Months Ended
 
 
June 30, 2019
 
June 30, 2019
State
 
Amount
 
% of Total
 
Rate
 
Amount
 
% of Total
 
Rate
 
 
(Dollars in thousands)
Kansas
 
$
125,156

 
72.2
%
 
3.87
%
 
$
328,783

 
66.5
%
 
4.19
%
Missouri
 
28,413

 
16.4

 
3.99

 
77,727

 
15.7

 
4.25

Texas
 
11,932

 
6.9

 
4.22

 
51,366

 
10.4

 
4.19

Other states
 
7,807

 
4.5

 
4.31

 
36,312

 
7.4

 
4.36

 
 
$
173,308

 
100.0
%
 
3.93

 
$
494,188

 
100.0
%
 
4.21


16



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 June 30, 2019, 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
$
9,567

 
$
38,271

 
$
23,201

 
$
71,039

 
3.73
%
Correspondent
1,978

 
35,238

 
7,307

 
44,523

 
4.33

 
$
11,545

 
$
73,509

 
$
30,508

 
$
115,562

 
3.96

 
 
 
 
 
 
 
 
 
 
Rate
3.50
%
 
4.21
%
 
3.54
%
 
 
 
 


Commercial Loans: During the current year nine month period, the Bank originated $147.0 million of commercial loans and entered into commercial real estate loan participations totaling $78.5 million, which included $64.5 million of commercial real estate construction loans.

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 June 30, 2019. Included in the gross loan amounts in the table, which does not include outstanding commitments, are fixed-rate loans totaling $483.2 million at a weighted average rate of 4.40% and adjustable-rate loans totaling $378.9 million at a weighted average rate of 5.03%. The weighted average rate of fixed-rate loans is lower than that of adjustable-rate loans due primarily to the majority of the fixed-rate loans in the portfolio at June 30, 2019 having shorter terms to maturity.
 
Unpaid
 
Undisbursed
 
Gross Loan
 
Outstanding
 
 
 
% of
 
Principal
 
Amount
 
Amount
 
Commitments
 
Total
 
Total
 
(Dollars in thousands)
Real estate rental and leasing
$
247,817

 
$
52,334

 
$
300,151

 
$
8,899

 
$
309,050

 
33.4
%
Health care and social assistance
210,921

 
43,316

 
254,237

 
5,000

 
259,237

 
28.0

Accommodation and food services
161,503

 
30,371

 
191,874

 
40,000

 
231,874

 
25.0

Arts, entertainment, and recreation
35,068

 

 
35,068

 

 
35,068

 
3.8

Retail trade
27,610

 
2,585

 
30,195

 

 
30,195

 
3.3