Capitol Federal Financial, Inc. - FORM 8-K - EX-99 - EARNINGS RELEASE

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EX-99 - PDF OF EARNINGS RELEASE - Capitol Federal Financial, Inc.	CFFNearningsrelease0614.pdf
8-K - CURRENT REPORT, ITEMS 2.02 AND 9.01 - Capitol Federal Financial, Inc.	CFFNearningsrelease8k0714.htm

NEWS RELEASE

FOR IMMEDIATE RELEASE

July 28, 2014

CAPITOL FEDERAL FINANCIAL, INC.
REPORTS THIRD QUARTER FISCAL YEAR 2014 RESULTS

Topeka, KS – Capitol Federal® Financial, Inc. (NASDAQ: CFFN) (the “Company”) announced results today for the quarter ended June 30, 2014. Detailed results will be available in the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014, which will be filed with the Securities and Exchange Commission (“SEC”) on or about August 1, 2014 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 $20.0 million,

basic and diluted earnings per share of $0.14,

net interest margin of 2.09%,

True Blue® Capitol dividend of $0.25 per share, and

repurchased 763,390 shares of common stock at an average price of $11.97 per share.

Comparison of Operating Results for the Three Months Ended June 30, 2014 and March 31, 2014

Net income increased $295 thousand, or 1.5%, from $19.7 million for the quarter ended March 31, 2014 to $20.0 million for the quarter ended June 30, 2014. The increase in net income was due primarily to a decrease in income tax expense, as well as to a decrease in interest expense on Federal Home Loan Bank (“FHLB”) borrowings. The net interest margin increased two basis points, from 2.07% for the prior quarter, to 2.09% for the current quarter. The increase in the net interest margin was largely a result of a decrease in interest expense on FHLB borrowings.

Interest and Dividend Income

The weighted average yield on total interest-earning assets for the current quarter remained unchanged from the prior quarter at 3.25%, while the average balance of interest-earning assets increased $1.2 million 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:
	2014		2014		Dollars		Percent
	(Dollars in thousands)
INTEREST AND DIVIDEND INCOME:
Loans receivable	$	57,474	$	57,117	$	357	0.6	%
Mortgage-backed securities (“MBS”)		11,206		11,597		(391)	(3.4)
Investment securities		1,739		1,869		(130)	(7.0)
FHLB stock		1,452		1,229		223	18.1
Cash and cash equivalents		50		45		5	11.1
Total interest and dividend income	$	71,921	$	71,857	$	64	0.1

The increase in interest income on loans receivable was due to a $50.1 million increase in the average balance of the portfolio, partially offset by a one basis point decrease in the weighted average yield on the portfolio to 3.77% for the current quarter. Included in interest income on loans receivable for the current quarter was $17 thousand related to the net amortization of premiums/deferred costs and the accretion of discounts/unearned loan fees increasing the average yield on the portfolio by less than one basis point. During the prior quarter, $67 thousand, net, was accreted and increased the average yield on the portfolio by less than one basis point.

The decrease in interest income on MBS was due to a nine basis point decrease in the weighted average yield on the portfolio to 2.30% for the current quarter. Included in interest income on MBS for the current quarter was $1.5 million from the net amortization of premiums and the accretion of discounts decreasing the average yield on the portfolio by 32 basis points. During the prior quarter, $1.3 million of net premiums were amortized and decreased the average yield on the portfolio by 26 basis points. The decrease in interest income on investment securities was due to a $52.2 million decrease in the average balance of the portfolio. Cash flows from the MBS and investment securities portfolios not reinvested in the portfolios were used to fund loan growth, pay dividends, and repurchase Company stock.

The increase in dividends on FHLB stock was due to an increase in the FHLB dividend rate during the current quarter.

Interest Expense

The weighted average rate paid on total interest-bearing liabilities decreased four basis points from the prior quarter to 1.38% for the current quarter, and the average balance of interest-bearing liabilities increased $5.0 million 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:
	2014		2014		Dollars		Percent
	(Dollars in thousands)
INTEREST EXPENSE:
FHLB borrowings	$	14,826	$	15,311	$	(485)	(3.2)	%
Deposits		8,124		8,076		48	0.6
Repurchase agreements		2,773		2,743		30	1.1
Total interest expense	$	25,723	$	26,130	$	(407)	(1.6)

The decrease in interest expense on FHLB borrowings was due primarily to a decrease in the weighted average rate paid on the portfolio as a result of maturing FHLB advances being renewed at lower market rates and partially to a decrease in the average balance. The largest contributor to the decrease in interest expense on FHLB borrowings quarter-over-quarter was a $200.0 million advance with an effective rate of 5.01% that matured in early February 2014 being partially replaced with a $150.0 million advance with a fixed-rate of 2.59% and an original term of 84 months. In mid-May 2014, a $100.0 million advance with an effective rate of 2.80% matured and was replaced with a $100.0 million advance with a term of 84 months and a fixed-rate of 2.45%. Subsequent to June 30, 2014, a $100.0 million repurchase agreement with a rate of 4.20% matured and was replaced with a $100.0 million FHLB advance with a term of 60 months at a fixed-rate of 1.96%.

Provision for Credit Losses

Capitol Federal Savings Bank (the “Bank”) recorded a provision for credit losses during the current quarter of $307 thousand compared to a provision for credit losses during the prior quarter of $160 thousand. The $307 thousand provision for credit losses in the current quarter takes into account net charge-offs of $192 thousand.

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:
	2014		2014		Dollars		Percent
	(Dollars in thousands)
NON-INTEREST INCOME:
Retail fees and charges	$	3,792	$	3,454	$	338	9.8	%
Insurance commissions		827		1,204		(377)	(31.3)
Loan fees		367		404		(37)	(9.2)
Income from bank-owned life insurance (“BOLI”)		333		330		3	0.9
Other non-interest income		300		335		(35)	(10.4)
Total non-interest income	$	5,619	$	5,727	$	(108)	(1.9)

The increase in retail fees and charges was due primarily to an increase in debit card income, due in part to seasonality, and an increase in service charges earned. The decrease in insurance commissions was due largely to a decrease in the amount of contingent commissions received from certain insurance providers, compared to the prior quarter.

Non-Interest Expense

The following table presents the components of non-interest expense for the time periods presented, along with the change measured in dollars and percent.


	For the Three Months Ended
	June 30,		March 31,		Change Expressed in:
	2014		2014		Dollars		Percent
	(Dollars in thousands)
NON-INTEREST EXPENSE:
Salaries and employee benefits	$	10,929	$	10,724	$	205	1.9	%
Occupancy		2,479		2,634		(155)	(5.9)
Information technology and communications		2,373		2,320		53	2.3
Regulatory and outside services		1,437		1,157		280	24.2
Deposit and loan transaction costs		1,326		1,263		63	5.0
Federal insurance premium		1,078		1,103		(25)	(2.3)
Advertising and promotional		942		877		65	7.4
Other non-interest expense		1,816		1,750		66	3.8
Total non-interest expense	$	22,380	$	21,828	$	552	2.5

The increase in salaries and employee benefits expense was due primarily to compensation expense on unallocated Employee Stock Ownership Plan (“ESOP”) shares related to the $0.25 per share True Blue Capitol dividend paid in June 2014. It is anticipated that this dividend will result in an additional $558 thousand of compensation expense in the fourth quarter of fiscal year 2014. The increase in regulatory and outside services was due primarily to the timing of fees paid for external audit services.

The Company’s efficiency ratio was 43.19% for the current quarter compared to 42.42% for the prior quarter. The change in the efficiency ratio was due primarily to the increase in total non-interest expense. The efficiency ratio is a measure of a financial institution’s total non-interest expense as a percentage of the sum of net interest income (pre-provision for credit losses) and non-interest income. A lower value indicates that the financial institution is generating revenue with a lower level of expense.

Income Tax Expense

Income tax expense was $9.1 million for the current quarter compared to $9.8 million for the prior quarter. The decrease in expense between periods was due primarily to a decrease in the effective income tax rate from 33.2% for the prior quarter to 31.4% for the current quarter. The decrease in the effective income tax rate between periods was largely a result of a true-up of income tax expense for fiscal year 2014 to account for a lower effective tax rate for the year, primarily a result of higher deductible expenses associated with dividends paid on ESOP shares due to the True Blue Capitol dividend paid in June 2014.

Comparison of Operating Results for the Nine Months Ended June 30, 2014 and 2013

For the nine month period ended June 30, 2014, the Company recognized net income of $57.5 million, compared to net income of $53.3 million for the nine month period ended June 30, 2013. The $4.2 million, or 7.9%, increase in net income was due primarily to a $4.1 million decrease in salaries and employee benefits due primarily to a reduction in ESOP related expenses. The net interest margin increased six basis points, from 1.98% for the prior year nine month period to 2.04% for the current year nine month period. Decreases in the cost of funds and a shift in the mix of interest-earning assets from relatively lower yielding securities to higher yielding loans was enough to overcome the negative impact of decreasing asset yields.

Interest and Dividend Income

The weighted average yield on total interest-earning assets decreased 10 basis points from 3.34% for the prior year nine month period to 3.24% for the current year nine month period, and the average balance of interest-earning assets decreased $162.0 million from the prior year nine month period. 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. The decrease in interest income on loans receivable was due to a decrease in the weighted average yield on the portfolio, partially offset by an increase in the average balance. The decrease in interest income on MBS and investment securities was due largely to a decrease in the average balance of each portfolio as cash flows not reinvested in the portfolios were used to fund loan growth, pay dividends, and repurchase Company stock.


	For the Nine Months Ended
	June 30,				Change Expressed in:
	2014		2013		Dollars		Percent
	(Dollars in thousands)
INTEREST AND DIVIDEND INCOME:
Loans receivable	$	171,539	$	172,030	$	(491)	(0.3)	%
MBS		34,765		43,048		(8,283)	(19.2)
Investment securities		5,674		7,761		(2,087)	(26.9)
FHLB stock		3,877		3,384		493	14.6
Cash and cash equivalents		157		108		49	45.4
Total interest and dividend income	$	216,012	$	226,331	$	(10,319)	(4.6)

The weighted average yield on the loans receivable portfolio decreased 25 basis points, from 4.03% for the prior year nine month period to 3.78% for the current year nine month period. The downward repricing of the loan portfolio was due largely to adjustable-rate loans repricing to lower rates, to loan purchases at market rates less than the weighted average rate of the existing portfolio, and to the current year nine month period reflecting the full impact of the large volume of refinances and endorsements that occurred during the prior year nine month period. Also contributing to the decrease in the weighted average yield for the current year nine month period, compared to the prior year nine month period, was the net amount of premiums/deferred costs amortized and discounts/unearned loan fees accreted to interest income on loans receivable. During the current year nine month period, $131 thousand related to the net amortization of premiums/deferred costs and the accretion of discounts/unearned loan fees was included in interest income, which increased the average yield of the portfolio by less than one basis point. During the prior year nine month period, $2.1 million, net, was accreted and increased the average yield on the portfolio by five basis points. The decrease in interest income on loans receivable resulting from the decrease in average yield was partially offset by a $355.4 million increase in the average balance of the portfolio.

The average balance of the MBS portfolio decreased $340.6 million between the two periods and the average yield on the MBS portfolio decreased 13 basis points, from 2.49% during the prior year nine month period to 2.36% for the current year nine month period. The decrease in the average yield was due primarily to purchases of MBS between periods with yields less than the average yield on the existing portfolio and the downward repricing of existing adjustable-rate MBS. Included in interest income on MBS for the current year nine month period was $4.2 million from the net amortization of premiums and the accretion of discounts decreasing the average yield on the portfolio by 29 basis points. During the prior year nine month period, $6.3 million of net premiums were amortized and decreased the average yield on the portfolio by 37 basis points.

The decrease in interest income on investment securities was due primarily to a $193.0 million decrease in the average balance of the portfolio, along with a seven basis point decrease in the yield, from 1.20% during the prior year nine month period, to 1.13% for the current year nine month period.

Interest Expense

The weighted average rate paid on total interest-bearing liabilities decreased 21 basis points from 1.64% for the prior year nine month period to 1.43% for the current year nine month period, and the average balance of interest-bearing liabilities decreased $50.4 million from the prior year nine month period. The following table presents the components of interest expense for the time periods presented, along with the change measured in dollars and percent. The decrease in interest expense on FHLB borrowings, deposits, and repurchase agreements was due primarily to a decrease in the weighted average rate paid on the portfolios between the two periods.


	For the Nine Months Ended
	June 30,				Change Expressed in:
	2014		2013		Dollars		Percent
	(Dollars in thousands)
INTEREST EXPENSE:
FHLB borrowings	$	47,000	$	53,914	$	(6,914)	(12.8)	%
Deposits		24,523		28,202		(3,679)	(13.0)
Repurchase agreements		8,319		9,861		(1,542)	(15.6)
Total interest expense	$	79,842	$	91,977	$	(12,135)	(13.2)

The weighted average rate paid on the FHLB borrowings portfolio decreased 28 basis points, from 2.81% for the prior year nine month period to 2.53% for the current year nine month period. The decrease in the average rate paid was primarily a result of maturities and renewals to lower market rates that occurred between periods. Additionally, the average balance of FHLB borrowings decreased $71.1 million between periods, due primarily to some maturing advances not being renewed in their entirety.

The decrease in the weighted average rate paid on the deposit portfolio was due primarily to a decrease in the weighted average rate paid on the retail certificate of deposit portfolio. The weighted average rate paid on the retail certificate of deposit portfolio decreased 19 basis points, from 1.42% for the prior year nine month period to 1.23% for the current year nine month period.

The weighted average rate paid on the repurchase agreements decreased 43 basis points, from 3.86% for the prior year nine month period to 3.43% for the current year nine month period. The decrease in the average rate paid on repurchase agreements was due to maturities and a new agreement entered into between periods which had a rate less than the existing portfolio.

Provision for Credit Losses

The Bank recorded a provision for credit losses during the current year nine month period of $982 thousand, compared to a $567 thousand negative provision for credit losses for the prior year nine month period. The $982 thousand provision for credit losses in the current year nine month period takes into account net charge-offs of $722 thousand.

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:
	2014		2013		Dollars		Percent
	(Dollars in thousands)
NON-INTEREST INCOME:
Retail fees and charges	$	11,056	$	11,369	$	(313)	(2.8)	%
Insurance commissions		2,589		2,337		252	10.8
Loan fees		1,221		1,312		(91)	(6.9)
Income from BOLI		1,001		1,120		(119)	(10.6)
Other non-interest income		979		1,395		(416)	(29.8)
Total non-interest income	$	16,846	$	17,533	$	(687)	(3.9)

The decrease in retail fees and charges was due primarily to a decrease in service charges earned. The increase in insurance commissions was due largely to an increase in contingent commissions received from certain insurance providers as a result of favorable claims experience during the prior year. The decrease in other non-interest income was due primarily to a decrease in premium income from Capitol Federal Mortgage Reinsurance Company as it is no longer writing new business.

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:
	2014		2013		Dollars		Percent
	(Dollars in thousands)
NON-INTEREST EXPENSE:
Salaries and employee benefits	$	32,379	$	36,473	$	(4,094)	(11.2)	%
Occupancy		7,662		7,136		526	7.4
Information technology and communications		6,985		6,723		262	3.9
Regulatory and outside services		3,990		4,435		(445)	(10.0)
Deposit and loan transaction costs		3,976		4,207		(231)	(5.5)
Federal insurance premium		3,264		3,337		(73)	(2.2)
Advertising and promotional		2,825		3,222		(397)	(12.3)
Other non-interest expense		5,914		6,027		(113)	(1.9)
Total non-interest expense	$	66,995	$	71,560	$	(4,565)	(6.4)

The decrease in salaries and employee benefits was due primarily to a decrease in ESOP related expenses resulting largely from the final allocation of ESOP shares acquired in our initial public offering (March 1999) being made at September 30, 2013. In fiscal year 2014 the only ESOP shares to be allocated will be the shares acquired in the Company’s corporate reorganization in December 2010. The increase in occupancy expense was due largely to an increase in depreciation expense, which was primarily associated with the remodeling of our home office. The decrease in regulatory and outside services was due largely to the timing of fees paid for our external audit. The decrease in advertising and promotional expense was due primarily to the timing of media campaigns in fiscal year 2013, which included campaigns delayed from fiscal year 2012.

The Company’s efficiency ratio was 43.78% for the current year nine month period compared to 47.11% for the prior year nine month period. The change in the efficiency ratio was due primarily to a decrease in total non-interest expense.

Income Tax Expense

Income tax expense was $27.6 million for both the current and prior year nine month periods. The effective tax rate for the current year nine month period was 32.4% compared to 34.1% for the prior year nine month period. The decrease in the effective tax rate between periods was due largely to a lower amount of nondeductible ESOP related expenses due to the final ESOP allocation on September 30, 2013, as discussed in the non-interest expense section above, along with higher tax credits related to our low income housing partnerships. Additionally, higher pretax income for the current year nine month period, compared to the prior year nine month period, resulted in all of the items that affect the income tax rate having a smaller impact on the overall effective tax rate. Management anticipates the effective tax rate for fiscal year 2014 will be approximately 32% to 33%, based on fiscal year 2014 estimates as of June 30, 2014.

Financial Condition as of June 30, 2014

Total assets were $9.03 billion at June 30, 2014 compared to $9.19 billion at September 30, 2013. The $155.4 million decrease was due primarily to a $293.6 million decrease in the securities portfolio, partially offset by a $173.7 million increase in the loan portfolio. The cash flows from the securities portfolio were used to fund loan growth, pay dividends, and repurchase stock. During the current year nine month period, the Bank originated and refinanced $403.5 million of loans with a weighted average rate of 3.95%, purchased $357.8 million of loans from correspondent lenders with a weighted average rate of 3.74%, and participated in $43.8 million of commercial real estate loans with a weighted average rate of 4.16%. As of June 30, 2014, the Bank had 26 active correspondent lending relationships operating in 26 states.

Economic conditions in the Bank’s local market areas have a significant impact on the ability of borrowers to repay loans and the value of the collateral securing these loans. As of June 2014, the unemployment rate was 4.9% for Kansas and 6.5% for Missouri, compared to the national average of 6.1% based on information from the Bureau of Labor Statistics. Our Kansas City market area, which comprises the largest segment of our loan portfolio and deposit base, had an average household income of approximately $80 thousand per annum, based on 2013 estimates from the American Community Survey, which is a statistical survey by the U.S. Census Bureau. The average household income in our combined market areas was approximately $69 thousand per annum, with 91% of the population at or above the poverty level, also based on the 2013 estimates from the American Community Survey. The Federal Housing Finance Agency (FHFA) price index for Kansas and Missouri has not experienced significant fluctuations during the past 10 years, unlike other market areas of the United States, indicating stability in property values in our local market areas.

Total liabilities were $7.53 billion at June 30, 2014 compared to $7.55 billion at September 30, 2013. The $22.2 million decrease was due primarily to a decrease in advance payments by borrowers for taxes and insurance resulting from the payment of real estate taxes and insurance on behalf of our borrowers. FHLB borrowings decreased $45.1 million, which was primarily offset by a $43.4 million increase in deposits. The increase in deposits was comprised of a $42.6 million increase in the checking portfolio, an $11.9 million increase in the savings portfolio, and a $4.2 million increase in the money market portfolio, partially offset by a $15.3 million decrease in the certificate of deposit portfolio.

Stockholders’ equity was $1.50 billion at June 30, 2014 compared to $1.63 billion at September 30, 2013. The $133.2 million decrease was due primarily to the payment of $127.9 million in dividends and the repurchase of $66.3 million of stock, partially offset by net income of $57.5 million.

The $127.9 million in dividends paid during the current year nine month period consisted of: (1) two $0.25 per share True Blue dividends, totaling $0.50 per share, or $70.4 million; (2) an $0.18 per share, or $25.8 million, true-up dividend related to fiscal year 2013 earnings per the Company’s dividend policy; and (3) three regular quarterly dividends of $0.075 per share each quarter, totaling $0.225 per share, or $31.7 million. The $70.4 million in True Blue dividends were funded by $72.0 million in capital distributions from the Bank to the holding company. On July 18, 2014, the Company declared a regular quarterly cash dividend of $0.075 per share, or approximately $10.3 million, payable on August 15, 2014 to stockholders of record as of the close of business on August 1, 2014. 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. At June 30, 2014, Capitol Federal Financial, Inc., at the holding company level, had $141.6 million on deposit at the Bank.

In November 2012, the Company announced that its Board of Directors approved the repurchase of up to $175.0 million of the Company’s common stock. The Company began repurchasing common stock under this plan during the second quarter of fiscal year 2013 and, as of June 30, 2014, had repurchased 9,360,109 shares at an average price of $11.93 per share, at a total cost of $111.7 million. Subsequent to June 30, 2014 through the date of this release, the Company repurchased an additional 321,700 shares at an average price of $12.02 per share. This plan, under which $59.4 million remained available as of the date of this release, has no expiration date.

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


	June 30, 2014			September 30, 2013			June 30, 2013
	(Dollars in thousands)
Stockholders’ equity	$	1,498,907		$	1,632,126		$	1,624,502
Equity to total assets at end of period		16.6	%		17.8	%		17.6	%

The following table presents a reconciliation of total and net shares outstanding as of June 30, 2014.



Total shares outstanding	142,359,003
Less unallocated ESOP shares and unvested restricted stock	(4,617,524)
Net shares outstanding	137,741,479

Consistent with our goal to operate a sound and profitable financial institution, we actively seek to maintain a “well-capitalized” status for the Bank in accordance with regulatory standards. As of June 30, 2014, the Bank exceeded all regulatory capital requirements. The following table presents the Bank’s regulatory capital ratios at June 30, 2014 based upon regulatory guidelines.


		Regulatory
		Requirement For
	Bank	“Well-Capitalized”
	Ratios	Status
Tier 1 leverage ratio	14.4%	5.0%
Tier 1 risk-based capital	33.5	6.0
Total risk-based capital	33.7	10.0

A reconciliation of the Bank’s equity under accounting principles generally accepted in the United States of America (“GAAP”) to regulatory capital amounts as of June 30, 2014 is as follows (dollars in thousands):


Total Bank equity as reported under GAAP	$	1,305,210
Unrealized gains on available-for-sale (“AFS”) securities		(7,100)
Total Tier 1 capital		1,298,110
Allowance for credit losses (“ACL”)		9,082
Total risk-based capital	$	1,307,192

Management plans to furnish the Company’s September 30, 2014 annual proxy materials to stockholders via the internet. Stockholders who are eligible to vote at the Fiscal Year 2014 Annual Meeting of Stockholders will receive a notice containing instructions on how to access the proxy materials over the internet and vote online at least 40 days prior to the Annual Meeting. The notice will explain how a stockholder can arrange to have printed materials sent to them, if so desired. Proxy materials include the definitive proxy statement for the Fiscal Year 2014 Annual Meeting of Stockholders, and the September 30, 2014 Annual Report to Stockholders.

Capitol Federal Financial, Inc. is the holding company for the Bank. The Bank has 47 branch locations in Kansas and Missouri. The Bank is one of the largest residential lenders in the State of Kansas. News and other information about the Company can be found on the Internet at the Bank’s website, http://www.capfed.com.

Except for the historical information contained in this press release, the matters discussed may be deemed to be forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties, including changes in economic conditions in the Company’s market area, changes in policies by regulatory agencies and other governmental initiatives affecting the financial services industry, fluctuations in interest rates, demand for loans in the Company’s market area, the future earnings and capital levels of Capitol Federal Savings Bank, which would affect the ability of the Capitol Federal Financial, Inc. to pay dividends in accordance with its dividend policies, competition, and other risks detailed from time to time in documents filed or furnished by Capitol Federal Financial, Inc. with the SEC. Actual results may differ materially from those currently expected. These forward-looking statements represent Capitol Federal Financial, Inc.’s judgment as of the date of this release. Capitol Federal Financial, Inc. disclaims, however, any intent or obligation to update these forward-looking statements.

For further information contact:


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

Supplemental Financial Information

CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS (Unaudited)

(Dollars in thousands)


	June 30,		September 30,
	2014		2013
ASSETS:
Cash and cash equivalents (includes interest-earning deposits of $74,760 and $99,735)	$	88,424	$	113,886
Securities:
AFS at estimated fair value (amortized cost of $845,958 and $1,058,283)		857,372		1,069,967
Held-to-maturity at amortized cost (estimated fair value of $1,663,917 and $1,741,846)		1,637,043		1,718,023
Loans receivable, net (ACL of $9,082 and $8,822)		6,132,520		5,958,868
BOLI		60,496		59,495
FHLB stock, at cost		112,876		128,530
Accrued interest receivable		23,235		23,596
Premises and equipment, net		69,794		70,112
Other assets		49,279		43,972
TOTAL ASSETS	$	9,031,039	$	9,186,449

LIABILITIES:
Deposits	$	4,654,862	$	4,611,446
FHLB borrowings		2,468,420		2,513,538
Repurchase agreements		320,000		320,000
Advance payments by borrowers for taxes and insurance		35,436		57,392
Income taxes payable		2,184		108
Deferred income tax liabilities, net		21,905		20,437
Accounts payable and accrued expenses		29,325		31,402
Total liabilities		7,532,132		7,554,323

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; 142,359,003 and 147,840,268
shares issued and outstanding as of June 30, 2014 and September 30, 2013, respectively		1,424		1,478
Additional paid-in capital		1,191,911		1,235,781
Unearned compensation, ESOP		(43,364)		(44,603)
Retained earnings		341,836		432,203
Accumulated other comprehensive income, net of tax		7,100		7,267
Total stockholders’ equity		1,498,907		1,632,126
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	9,031,039	$	9,186,449

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,
	2014		2014		2014		2013
INTEREST AND DIVIDEND INCOME:
Loans receivable	$	57,474	$	57,117	$	171,539	$	172,030
MBS		11,206		11,597		34,765		43,048
Investment securities		1,739		1,869		5,674		7,761
FHLB stock		1,452		1,229		3,877		3,384
Cash and cash equivalents		50		45		157		108
Total interest and dividend income		71,921		71,857		216,012		226,331

INTEREST EXPENSE:
FHLB borrowings		14,826		15,311		47,000		53,914
Deposits		8,124		8,076		24,523		28,202
Repurchase agreements		2,773		2,743		8,319		9,861
Total interest expense		25,723		26,130		79,842		91,977

NET INTEREST INCOME		46,198		45,727		136,170		134,354

PROVISION FOR CREDIT LOSSES		307		160		982		(567)
NET INTEREST INCOME AFTER
PROVISION FOR CREDIT LOSSES		45,891		45,567		135,188		134,921

NON-INTEREST INCOME:
Retail fees and charges		3,792		3,454		11,056		11,369
Insurance commissions		827		1,204		2,589		2,337
Loan fees		367		404		1,221		1,312
Income from BOLI		333		330		1,001		1,120
Other non-interest income		300		335		979		1,395
Total non-interest income		5,619		5,727		16,846		17,533

NON-INTEREST EXPENSE:
Salaries and employee benefits		10,929		10,724		32,379		36,473
Occupancy		2,479		2,634		7,662		7,136
Information technology and communications		2,373		2,320		6,985		6,723
Regulatory and outside services		1,437		1,157		3,990		4,435
Deposit and loan transaction costs		1,326		1,263		3,976		4,207
Federal insurance premium		1,078		1,103		3,264		3,337
Advertising and promotional		942		877		2,825		3,222
Other non-interest expense		1,816		1,750		5,914		6,027
Total non-interest expense		22,380		21,828		66,995		71,560
INCOME BEFORE INCOME TAX EXPENSE		29,130		29,466		85,039		80,894
INCOME TAX EXPENSE		9,147		9,778		27,555		27,621
NET INCOME	$	19,983	$	19,688	$	57,484	$	53,273

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,
	2014		2014		2014		2013
	(Dollars in thousands, except per share data)
Net income	$	19,983	$	19,688	$	57,484	$	53,273
Income allocated to participating securities		(41)		(44)		(135)		(161)
Net income available to common stockholders	$	19,942	$	19,644	$	57,349	$	53,112

Average common shares outstanding		138,248,629		139,447,275		140,205,057		145,379,101
Average committed ESOP shares outstanding		83,052		41,758		41,601		139,009
Total basic average common shares outstanding		138,331,681		139,489,033		140,246,658		145,518,110

Effect of dilutive stock options		2,723		291		1,136		112

Total diluted average common shares outstanding		138,334,404		139,489,324		140,247,794		145,518,222

Net earnings per share:
Basic	$	0.14	$	0.14	$	0.41	$	0.37
Diluted	$	0.14	$	0.14	$	0.41	$	0.37

Antidilutive stock options, excluded
from the diluted average common shares
outstanding calculation		2,052,485		2,060,216		2,064,175		2,465,393

Loan Portfolio

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


	June 30, 2014						March 31, 2014						September 30, 2013
					% of						% of						% of
	Amount		Rate		Total		Amount		Rate		Total		Amount		Rate		Total
	(Dollars in thousands)
Real estate loans:
One- to four-family	$	5,890,819	3.74	%	95.0	%	$	5,840,337	3.75	%	95.5	%	$	5,743,047	3.77	%	95.5	%
Multi-family and commercial		62,038	4.66		1.0			47,505	4.83		0.8			50,358	5.22		0.9
Construction:
One- to four-family		73,975	3.70		1.2			71,608	3.66		1.2			63,208	3.51		1.1
Multi-family and commercial		34,677	4.01		0.6			22,678	4.19		0.3			14,535	4.17		0.2
Total real estate loans		6,061,509	3.75		97.8			5,982,128	3.75		97.8			5,871,148	3.78		97.7

Consumer loans:
Home equity		130,645	5.18		2.1			130,321	5.22		2.1			135,028	5.26		2.2
Other		4,960	4.21		0.1			4,991	4.29		0.1			5,623	4.41		0.1
Total consumer loans		135,605	5.14		2.2			135,312	5.18		2.2			140,651	5.23		2.3

Total loans receivable		6,197,114	3.78		100.0	%		6,117,440	3.79		100.0	%		6,011,799	3.82		100.0	%

Less:
Undisbursed loan funds		58,067						55,505						42,807
ACL		9,082						8,967						8,822
Discounts/unearned loan fees		23,812						23,653						23,057
Premiums/deferred costs		(26,367)						(24,582)						(21,755)
Total loans receivable, net	$	6,132,520					$	6,053,897					$	5,958,868

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 the average balance per loan at the dates presented. Credit scores are updated at least semiannually, with the last update in March 2014, 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, 2014									March 31, 2014									September 30, 2013
			% of		Credit			Average				% of		Credit			Average				% of		Credit			Average
	Amount		Total		Score	LTV		Balance		Amount		Total		Score	LTV		Balance		Amount		Total		Score	LTV		Balance
	(Dollars in thousands)
Originated	$	3,987,912	67.7	%	765	64	%	$	127	$	4,017,833	68.8	%	765	64	%	$	127	$	4,054,436	70.6	%	763	65	%	$	127
Correspondent purchased		1,321,527	22.4		764	67			332		1,217,524	20.8		764	67			334		1,044,127	18.2		761	67			341
Bulk purchased		581,380	9.9		749	67			311		604,980	10.4		748	67			312		644,484	11.2		747	67			316
	$	5,890,819	100.0	%	763	65			158	$	5,840,337	100.0	%	763	65			157	$	5,743,047	100.0	%	761	65			155

Loan Commitments

The following table summarizes our one- to four-family loan origination, refinance, and correspondent purchase commitments as of June 30, 2014, along with associated weighted average rates. Commitments generally have fixed expiration dates or other termination clauses and may require the payment of a rate lock fee. A percentage of the commitments are expected to expire unfunded, so the amounts reflected in the table below are not necessarily indicative of future cash requirements.


	Fixed-Rate
	15 years			More than			Adjustable-			Total
	or less			15 years			Rate			Amount		Rate
		(Dollars in thousands)
Originate/refinance	$	12,211		$	36,984		$	20,525		$	69,720	3.72	%
Correspondent		15,346			40,863			22,816			79,025	3.76
	$	27,557		$	77,847		$	43,341		$	148,745	3.74

Rate		3.22	%		4.20	%		3.25	%

Loan Activity

The following tables summarize activity in our loan portfolio, along with weighted average rates where applicable, for the periods indicated, excluding changes in undisbursed loan funds, ACL, discounts/unearned loan fees, and premiums/deferred costs. Loans that were paid-off as a result of refinances are included in repayments. Purchased loans include purchases from correspondent lenders. There were no loan purchases from nationwide lenders during the periods presented. Loan endorsements are not included in the activity in the following table because a new loan is not generated at the time of the endorsement. The endorsed balance and rate are included in the ending loan portfolio balance and rate. During the nine months ended June 30, 2014 and 2013, the Bank endorsed $21.7 million and $470.3 million of one- to four-family loans, respectively, reducing the average rate on those loans by 106 basis points and 112 basis points, respectively.


	For the Three Months Ended
	June 30, 2014				March 31, 2014				December 31, 2013				September 30, 2013
	Amount		Rate		Amount		Rate		Amount		Rate		Amount		Rate
	(Dollars in thousands)
Beginning balance	$	6,117,440	3.79	%	$	6,095,089	3.80	%	$	6,011,799	3.82	%	$	5,839,861	3.86	%
Originated and refinanced:
Fixed		98,668	4.11			63,921	4.09			108,829	3.95			217,328	3.70
Adjustable		48,106	3.75			38,790	3.76			45,273	3.76			44,090	3.75
Purchased and participations:
Fixed		122,407	4.03			65,793	4.00			94,535	4.00			167,490	3.61
Adjustable		40,344	3.12			32,932	3.27			45,541	3.34			41,479	2.75
Repayments		(228,911)				(177,411)				(209,931)				(297,318)
Principal (charge-offs) recoveries, net		(192)				(112)				(418)				83
Other		(748)				(1,562)				(539)				(1,214)
Ending balance	$	6,197,114	3.78		$	6,117,440	3.79		$	6,095,089	3.80		$	6,011,799	3.82


	For the Nine Months Ended
	June 30, 2014				June 30, 2013
	Amount		Rate		Amount		Rate
		(Dollars in thousands)
Beginning balance	$	6,011,799	3.82	%	$	5,649,156	4.15	%
Originated and refinanced:
Fixed		271,418	4.04			571,878	3.29
Adjustable		132,169	3.76			94,353	3.76
Purchased and participations:
Fixed		282,735	4.01			340,488	3.33
Adjustable		118,817	3.25			64,078	2.71
Repayments		(616,253)				(873,307)
Principal (charge-offs) recoveries, net		(722)				(1,294)
Other		(2,849)				(5,491)
Ending balance	$	6,197,114	3.78		$	5,839,861	3.86

The following table presents loan origination, refinance, and purchase activity for the periods indicated, excluding endorsement activity, along with associated weighted average rates and percent of total. Loan originations, purchases, and refinances are reported together. The fixed-rate one- to four-family loans less than or equal to 15 years have an original maturity at origination of less than or equal to 15 years, while fixed-rate one- to four-family loans greater than 15 years have an original maturity at origination of greater than 15 years. The adjustable-rate one- to four-family loans less than or equal to 36 months have a term to first reset of less than or equal to 36 months at origination, and adjustable-rate one- to four-family loans greater than 36 months have a term to first reset of greater than 36 months at origination.


	For the Three Months Ended						For the Nine Months Ended
	June 30, 2014						June 30, 2014
	Amount		Rate		% of Total		Amount		Rate		% of Total
Fixed-rate:	(Dollars in thousands)
One- to four-family:
<= 15 years	$	43,359	3.34	%	14.0	%	$	130,457	3.35	%	16.2	%
> 15 years		148,570	4.26		48.0			384,435	4.24		47.8
Multi-family and commercial real estate		27,850	4.09		9.0			36,450	4.08		4.5
Home equity		635	6.36		0.2			1,812	6.19		0.2
Other		661	5.54		0.2			999	7.08		0.1
Total fixed-rate		221,075	4.07		71.4			554,153	4.03		68.8

Adjustable-rate:
One- to four-family:
<= 36 months		2,472	2.76		0.8			5,982	2.76		0.8
> 36 months		66,656	3.15		21.5			177,818	3.15		22.1
Multi-family and commercial real estate		--	--		--			14,358	4.34		1.8
Home equity		19,053	4.66		6.2			51,791	4.65		6.4
Other		269	3.37		0.1			1,037	3.17		0.1
Total adjustable-rate		88,450	3.46		28.6			250,986	3.52		31.2

Total originated, refinanced and purchased	$	309,525	3.90		100.0	%	$	805,139	3.87		100.0	%

Purchased and participation loans included above:
Fixed-rate:
Correspondent - one- to four-family	$	98,007	4.02				$	253,335	4.01
Participations - commercial real estate		24,400	4.08					29,400	4.07
Total fixed-rate purchased/participations		122,407	4.03					282,735	4.01

Adjustable-rate:
Correspondent - one- to four-family		40,344	3.12					104,459	3.10
Participations - commercial real estate		--	--					14,358	4.34
Total adjustable-rate purchased/participations		40,344	3.12					118,817	3.25

Total purchased/participation loans	$	162,751	3.81				$	401,552	3.79

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


	For the Three Months Ended					For the Nine Months Ended
	June 30, 2014					June 30, 2014
					Credit					Credit
	Amount		LTV		Score	Amount		LTV		Score
	(Dollars in thousands)
Originated	$	112,219	79	%	768	$	297,850	78	%	766
Refinanced by Bank customers		10,487	68		759		43,048	69		760
Correspondent purchased		138,351	76		765		357,794	75		763
	$	261,057	77		766	$	698,692	76		764

The following table presents the amount, percent of total, and weighted average rate, by state, for one- to four-family loan originations and correspondent purchases where originations and purchases in the state exceeded 1% of the total amount originated and purchased during the nine months ended June 30, 2014.


	For the Three Months Ended						For the Nine Months Ended
	June 30, 2014						June 30, 2014
State	Amount		% of Total		Rate		Amount		% of Total		Rate
	(Dollars in thousands)
Kansas	$	119,650	45.8	%	3.86	%	$	338,159	48.4	%	3.81	%
Missouri		71,696	27.5		3.82			203,316	29.1		3.79
Texas		29,498	11.3		3.79			56,991	8.2		3.78
Tennessee		13,901	5.3		3.60			30,014	4.3		3.69
Alabama		4,105	1.6		3.50			19,372	2.8		3.49
Oklahoma		4,734	1.8		3.99			14,233	2.0		4.03
North Carolina		3,871	1.5		3.56			8,963	1.3		3.40
Massachusetts		4,146	1.6		3.55			7,805	1.1		3.51
Other states		9,456	3.6		3.70			19,839	2.8		3.70
	$	261,057	100.0	%	3.81		$	698,692	100.0	%	3.78

The following tables present annualized prepayment speeds of our one- to four-family loan portfolio for the monthly and quarterly periods indicated. The balances represent the unpaid principal balance of one- to four-family loans, and the terms represent the contractual terms for our fixed-rate loans, and current terms to repricing for our adjustable-rate loans. Loan refinances are considered a prepayment and are included in the prepayment speeds presented below. The annualized prepayment speeds are presented with and without endorsements. During the quarters ended June 30, 2014 and March 31, 2014, the Bank endorsed $8.0 million and $5.9 million of one- to four-family loans, respectively, reducing the average rate on those loans by 98 basis points and 84 basis points, respectively.


	June 30, 2014
			Monthly Prepayment				Quarterly Prepayment				Net Premiums/
			Speeds (annualized)				Speeds (annualized)				Deferred Costs
	Unpaid		Including		Excluding		Including		Excluding		& (Discounts/
Term	Principal		Endorsements		Endorsements		Endorsements		Endorsements		Unearned Loan Fees)
	(Dollars in thousands)
Fixed-rate one- to four-family loans:
15 years or less	$	1,152,003	12.2	%	12.1	%	10.4	%	9.9	%	$	563
More than 15 years		3,630,740	10.2		9.3		8.6		8.1			(3,008)
		4,782,743	10.7		10.0		9.0		8.5			(2,445)

Adjustable-rate one- to four-family loans:
36 months or less		778,031	28.2		26.0		17.1		16.0			2,533
More than 36 months		407,592	9.4		9.4		12.4		12.4			2,664
		1,185,623	22.0		20.5		15.6		14.9			5,197
Total one- to four-family loans	$	5,968,366	12.9		12.1		10.3		9.8		$	2,752


	March 31, 2014
			Monthly Prepayment				Quarterly Prepayment				Net Premiums/
			Speeds (annualized)				Speeds (annualized)				Deferred Costs
	Unpaid		Including		Excluding		Including		Excluding		& (Discounts/
Term	Principal		Endorsements		Endorsements		Endorsements		Endorsements		Unearned Loan Fees)
	(Dollars in thousands)
Fixed-rate one- to four-family loans:
15 years or less	$	1,164,141	7.8	%	7.8	%	7.8	%	7.8	%	$	213
More than 15 years		3,583,818	5.8		5.4		5.4		5.0			(4,014)
		4,747,959	6.3		6.0		6.0		5.7			(3,801)

Adjustable-rate one- to four-family loans:
36 months or less		795,695	13.2		10.3		11.3		10.3			2,554
More than 36 months		371,996	6.1		6.1		5.7		5.7			2,293
		1,167,691	11.1		9.0		9.6		8.9			4,847
Total one- to four-family loans	$	5,915,650	7.2		6.6		6.7		6.3		$	1,046

Asset Quality

The following tables present loans 30 to 89 days delinquent, non-performing loans, and other real estate owned (“OREO”) at the dates indicated. Of the loans 30 to 89 days delinquent at June 30, 2014, approximately 81% were 59 days or less delinquent. Non-performing loans are loans that are 90 or more days delinquent or in foreclosure and nonaccrual loans less than 90 days delinquent but are required to be reported as nonaccrual pursuant to Office of the Comptroller of the Currency (“OCC”) reporting requirements, even if the loans are current. Non-performing assets include non-performing loans and OREO. Over the past 12 months, OREO properties were owned by the Bank, on average, for approximately three months before they were sold.


	Loans Delinquent for 30 to 89 Days at:
	June 30, 2014				March 31, 2014				December 31, 2013				September 30, 2013				June 30, 2013
	Number	Amount			Number	Amount			Number	Amount			Number	Amount			Number	Amount
	(Dollars in thousands)
One- to four-family:
Originated	130	$	14,435		119	$	13,139		178	$	16,956		164	$	18,225		137	$	12,838
Correspondent purchased	5		1,301		5		998		4		2,243		5		709		4		704
Bulk purchased	36		6,826		33		7,272		37		7,858		37		7,733		28		6,012
Consumer Loans:
Home equity	33		628		35		665		41		721		45		848		40		869
Other	11		40		14		52		17		100		13		35		13		158
	215	$	23,230		206	$	22,126		277	$	27,878		264	$	27,550		222	$	20,581
30 to 89 days delinquent loans
to total loans receivable, net			0.38	%			0.37	%			0.46	%			0.46	%			0.36	%


	Non-Performing Loans and OREO at:
	June 30, 2014				March 31, 2014				December 31, 2013				September 30, 2013				June 30, 2013
	Number	Amount			Number	Amount			Number	Amount			Number	Amount			Number	Amount
Loans 90 or More Days Delinquent or in Foreclosure:	(Dollars in thousands)
One- to four-family:
Originated	83	$	8,130		95	$	9,508		110	$	9,931		101	$	8,579		91	$	8,017
Correspondent purchased	2		314		2		443		5		635		5		812		4		609
Bulk purchased	29		8,322		33		10,301		33		10,134		34		9,608		37		9,535
Consumer loans:
Home equity	23		345		23		305		29		477		29		485		21		295
Other	6		24		4		8		8		11		4		5		7		23
	143		17,135		157		20,565		185		21,188		173		19,489		160		18,479
Nonaccrual loans less than 90 Days Delinquent:(1)
One- to four-family:
Originated	66		8,379		66		7,111		65		6,057		57		5,833		62		7,578
Correspondent purchased	2		134		1		478		--		--		2		740		--		--
Bulk purchased	3		630		4		472		3		392		2		280		2		168
Consumer loans:
Home equity	3		61		4		74		6		78		6		101		8		174
	74		9,204		75		8,135		74		6,527		67		6,954		72		7,920
Total non-performing loans	217		26,339		232		28,700		259		27,715		240		26,443		232		26,399

Non-performing loans as a percentage of total loans(2)			0.43	%			0.47	%			0.46	%			0.44	%			0.46	%

OREO:
One- to four-family:
Originated(3)	24	$	1,430		26	$	1,548		22	$	1,531		28	$	2,074		34	$	3,283
Correspondent purchased	1		179		4		403		1		110		2		71		3		269
Bulk purchased	2		369		4		398		6		647		4		380		4		581
Consumer loans:
Home equity	--		--		1		18		2		57		2		57		3		66
Other(4)	1		1,300		1		1,300		1		1,300		1		1,300		1		1,300
	28		3,278		36		3,667		32		3,645		37		3,882		45		5,499
Total non-performing assets	245	$	29,617		268	$	32,367		291	$	31,360		277	$	30,325		277	$	31,898

Non-performing assets as a percentage of total assets			0.33	%			0.36	%			0.34	%			0.33	%			0.35	%

(1)

Represents loans required to be reported as nonaccrual pursuant to OCC reporting requirements, even if the loans are current. At June 30, 2014, March 31, 2014, December 31, 2013, September 30, 2013, and June 30, 2013, this amount was comprised of $2.5 million, $881 thousand, $1.1 million, $1.1 million and $1.1 million, respectively, of loans that were 30 to 89 days delinquent and are reported as such, and $6.7 million, $7.3 million, $5.4 million, $5.9 million, and $6.8 million, respectively, of loans that were current.

(2)

Excluding loans required to be reported as nonaccrual pursuant to OCC reporting requirements, even if the loans are current, non-performing loans as a percentage of total loans were 0.28%, 0.34%, 0.35%, 0.33%, and 0.32%, at June 30, 2014, March 31, 2014, December 31, 2013, September 30, 2013, and June 30, 2013, respectively.

(3)

Real estate-related consumer loans where we also hold the first mortgage are included in the one- to four-family category as the underlying collateral is one- to four-family property.

(4)

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

The following tables present ACL activity and related ratios at the dates and for the periods indicated. Of the $1.3 million of net charge-offs during the nine months ended June 30, 2013, $378 thousand was due to loans that were primarily discharged in a prior fiscal year under Chapter 7 bankruptcy that had to be, pursuant to OCC reporting requirements, evaluated for collateral value loss, even if they were current.


	For the Three Months Ended
	June 30,			March 31,			December 31,			September 30,			June 30,
	2014			2014			2013			2013			2013
	(Dollars in thousands)
Balance at beginning of period	$	8,967		$	8,919		$	8,822		$	9,239		$	10,072
Charge-offs:
One- to four-family loans - originated		(109)			(31)			(88)			(74)			(60)
One- to four-family loans - correspondent purchased		(35)			(21)			--			--			--
One- to four-family loans - bulk purchased		(149)			(60)			(327)			(76)			--
Multi-family and commercial loans		--			--			--			--			--
Construction		--			--			--			--			--
Home equity		(13)			(6)			(10)			(13)			(111)
Other consumer loans		(2)			(3)			--			--			--
Total charge-offs		(308)			(121)			(425)			(163)			(171)
Recoveries:
One- to four-family loans - originated		--			--			1			1			13
One- to four-family loans - correspondent purchased		--			--			--			--			--
One- to four-family loans - bulk purchased		64			--			--			238			118
Multi-family and commercial loans		--			--			--			--			--
Construction		--			--			--			--			--
Home equity		51			9			6			7			7
Other consumer loans		1			--			--			--			--
Total recoveries		116			9			7			246			138
Net (charge-offs) recoveries		(192)			(112)			(418)			83			(33)
Provision for credit losses		307			160			515			(500)			(800)
Balance at end of period	$	9,082		$	8,967		$	8,919		$	8,822		$	9,239

Ratio of net charge-offs during the period
to average loans outstanding during the period		--	%		--	%		0.01	%		--	%		--	%
Ratio of net charge-offs (recoveries) during
the period to average non-performing assets		0.62			0.35			1.35			(0.27)			0.10
ACL to non-performing loans at end of period		34.48			31.24			32.18			33.36			35.00
ACL to loans receivable, net at end of period		0.15			0.15			0.15			0.15			0.16


	For the Nine Months Ended
	June 30,
	2014			2013
	(Dollars in thousands)
Balance at beginning of period	$	8,822		$	11,100
Charge-offs:
One- to four-family loans - originated		(228)			(550)
One- to four-family loans - correspondent purchased		(56)			(13)
One- to four-family loans - bulk purchased		(536)			(685)
Multi-family and commercial loans		--			--
Construction		--			--
Home equity		(29)			(239)
Other consumer loans		(5)			(7)
Total charge-offs		(854)			(1,494)
Recoveries:
One- to four-family loans - originated		1			13
One- to four-family loans - correspondent purchased		--			--
One- to four-family loans - bulk purchased		64			160
Multi-family and commercial loans		--			--
Construction		--			--
Home equity		66			26
Other consumer loans		1			1
Total recoveries		132			200
Net (charge-offs)		(722)			(1,294)
Provision for credit losses		982			(567)
Balance at end of period	$	9,082		$	9,239

Ratio of net charge-offs during the period
to average loans outstanding during the period		0.01	%		0.02	%
Ratio of net charge-offs during the
period to average non-performing assets		2.41			3.61
ACL to non-performing loans at end of period		34.48			35.00
ACL to loans receivable, net at end of period		0.15			0.16
ACL to net charge-offs (annualized)		9.4	x		5.4	x

Securities Portfolio

The following table presents the distribution of our MBS and investment securities portfolio, at amortized cost, at the dates indicated. The majority of our MBS and investment securities portfolio are composed of securities issued by U.S. government-sponsored enterprises (“GSEs”). Overall, fixed-rate securities comprised 78% of these portfolios at June 30, 2014. The weighted average life (“WAL”) is the estimated remaining maturity (in years) after three-month historical prepayment speeds and projected call option assumptions have been applied. Weighted average yields on tax-exempt securities are not calculated on a fully taxable equivalent basis.


	June 30, 2014					March 31, 2014					September 30, 2013
	Amount		Yield		WAL	Amount		Yield		WAL	Amount		Yield		WAL
	(Dollars in thousands)
Fixed-rate securities:
MBS	$	1,353,424	2.38	%	3.9	$	1,423,363	2.41	%	4.1	$	1,427,648	2.44	%	3.5
GSE debentures		554,821	1.06		3.4		579,853	1.04		3.5		709,118	1.04		2.8
Municipal bonds		37,593	2.38		2.4		36,830	2.55		2.0		35,587	3.02		1.5
Total fixed-rate securities		1,945,838	2.00		3.7		2,040,046	2.02		3.9		2,172,353	1.99		3.3

Adjustable-rate securities:
MBS		534,639	2.20		5.8		565,242	2.29		6.3		601,359	2.32		4.9
Trust preferred securities		2,524	1.49		23.0		2,538	1.49		23.2		2,594	1.51		23.7
Total adjustable-rate securities		537,163	2.19		5.9		567,780	2.28		6.4		603,953	2.31		4.9
Total securities portfolio	$	2,483,001	2.04		4.2	$	2,607,826	2.08		4.4	$	2,776,306	2.06		3.7

MBS: The following tables provide a summary of the activity in our MBS portfolio for the periods presented. The weighted average yields and WALs for purchases are presented as recorded at the time of purchase. The yields for the beginning balances are as of the last day of the period previous to the period presented and the yields for the ending balances are as of the last day of the period presented and are generally derived from recent prepayment activity on the securities in the portfolio as of the dates presented. The beginning and ending WAL is the estimated remaining maturity (in years) after three-month historical prepayment speeds have been applied. Fixed-rate MBS purchased during the current year nine month period were generally comprised of loans with contractual terms-to-maturity of 15 years or less to help mitigate exposure to rising interest rates.


	For the Three Months Ended
	June 30, 2014					March 31, 2014					December 31, 2013					September 30, 2013
	Amount		Yield		WAL	Amount		Yield		WAL	Amount		Yield		WAL	Amount		Yield		WAL
	(Dollars in thousands)
Beginning balance - carrying value	$	2,005,138	2.37	%	4.7	$	1,975,164	2.42	%	4.7	$	2,047,708	2.40	%	3.9	$	2,179,539	2.39	%	3.6
Maturities and repayments		(99,000)					(92,609)					(95,864)					(149,555)
Net amortization of (premiums)/discounts		(1,542)					(1,271)					(1,397)					(1,688)
Purchases:
Fixed		--	--		--		103,730	1.74		3.9		25,272	1.72		3.7		--	--		--
Adjustable		--	--		--		21,737	1.92		5.2		--	--		--		22,246	1.80		5.1
Change in valuation on AFS securities		(586)					(1,613)					(555)					(2,834)
Ending balance - carrying value	$	1,904,010	2.32		4.4	$	2,005,138	2.37		4.7	$	1,975,164	2.42		4.7	$	2,047,708	2.40		3.9


	For the Nine Months Ended
	June 30, 2014					June 30, 2013
	Amount		Yield		WAL	Amount		Yield		WAL
		(Dollars in thousands)
Beginning balance - carrying value	$	2,047,708	2.40	%	3.9	$	2,332,942	2.78	%	4.0
Maturities and repayments		(287,473)					(553,776)
Net amortization of (premiums)/discounts		(4,210)					(6,297)
Purchases:
Fixed		129,002	1.73		3.8		420,272	1.24		3.9
Adjustable		21,737	1.92		5.2		--	--		--
Change in valuation on AFS securities		(2,754)					(13,602)
Ending balance - carrying value	$	1,904,010	2.32		4.4	$	2,179,539	2.39		3.6

The following table presents annualized prepayment speeds of our MBS portfolio for the monthly and quarterly periods ended June 30, 2014, along with associated net premium/(discount) information, weighted average rates for the portfolio, and weighted average remaining contractual terms (in years) for the portfolio. The annualized prepayment speeds are based on actual prepayment activity. Prepayments impact the amortization/accretion of premiums/discounts on our MBS portfolio. As prepayments increase, the related premiums/discounts are amortized/accreted at a faster rate. The amortization of premiums decreases interest income while the accretion of discounts increases interest income. The balances in the following table represent the amortized cost of MBS, and the terms represent the contractual terms for our fixed-rate MBS, and current terms to repricing for our adjustable-rate MBS.


	June 30, 2014
				Prepayment				Net
	Amortized			Speed (annualized)				Premium/
Term	Cost			Monthly		Quarterly		(Discount)
	(Dollars in thousands)
Fixed-rate MBS:
15 years or less	$	1,268,586		10.1	%	9.2	%	$	16,709
More than 15 years		84,838		8.7		9.6			955
		1,353,424		10.0		9.2			17,664
Rate		3.62	%
Remaining contractual term		10.2

Adjustable-rate MBS:
36 months or less	$	455,657		14.4		15.7			825
More than 36 months		78,982		21.5		18.3			1,546
		534,639		15.4		16.1			2,371
Rate		2.90	%
Remaining contractual term		23.5

Total MBS	$	1,888,063		11.5		11.2		$	20,035
Rate		3.41	%
Remaining contractual term		13.9

Investment Securities: The following tables provide a summary of the activity in our investment securities portfolio for the periods presented. The weighted average yields and WALs for purchases are presented as recorded at the time of purchase. The yields for the beginning balances are as of the last day of the period previous to the period presented and the yields for the ending balances are as of the last day of the period presented. The beginning and ending WALs represent the estimated remaining maturity (in years) of the securities after projected call dates have been considered, based upon market rates at each date presented. Of the $134.2 million of fixed-rate investment securities purchased during the nine months ended June 30, 2014, $123.2 million are callable.


	For the Three Months Ended
	June 30, 2014					March 31, 2014					December 31, 2013					September 30, 2013
	Amount		Yield		WAL	Amount		Yield		WAL	Amount		Yield		WAL	Amount		Yield		WAL
	(Dollars in thousands)
Beginning balance - carrying value	$	610,768	1.13	%	3.5	$	686,913	1.11	%	3.3	$	740,282	1.14	%	2.9	$	807,399	1.14	%	3.2
Maturities and calls		(28,610)					(177,805)					(79,860)					(69,838)
Net amortization of (premiums)/discounts		(94)					(84)					(114)					(117)
Purchases:
Fixed		4,421	1.53		6.3		99,393	0.91		2.0		30,392	1.29		4.4		--	--		--
Change in valuation of AFS securities		3,920					2,351					(3,787)					2,838
Ending balance - carrying value	$	590,405	1.15		3.4	$	610,768	1.13		3.5	$	686,913	1.11		3.3	$	740,282	1.14		2.9



	For the Nine Months Ended
	June 30, 2014					June 30, 2013
	Amount		Yield		WAL	Amount		Yield		WAL
	(Dollars in thousands)
Beginning balance - carrying value	$	740,282	1.14	%	2.9	$	961,849	1.23	%	1.0
Maturities and calls		(286,275)					(549,196)
Net amortization of (premiums)/discounts		(292)					(343)
Purchases:
Fixed		134,206	1.01		2.7		408,726	1.00		2.1
Change in valuation of AFS securities		2,484					(13,637)
Ending balance - carrying value	$	590,405	1.15		3.4	$	807,399	1.14		3.2

Deposit Portfolio

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


	June 30, 2014						March 31, 2014						September 30, 2013
					% of						% of						% of
	Amount		Rate		Total		Amount		Rate		Total		Amount		Rate		Total
	(Dollars in thousands)
Noninterest-bearing checking	$	166,083	--	%	3.6	%	$	168,276	--	%	3.5	%	$	150,171	--	%	3.2	%
Interest-bearing checking		532,459	0.05		11.5			547,872	0.05		11.7			505,762	0.05		11.0
Savings		295,027	0.12		6.3			298,324	0.10		6.4			283,169	0.13		6.1
Money market		1,132,813	0.23		24.3			1,139,836	0.23		24.3			1,128,604	0.23		24.5
Retail certificates of deposit		2,225,132	1.23		47.8			2,240,792	1.23		47.7			2,242,909	1.27		48.7
Public units/brokered deposits		303,348	0.65		6.5			298,662	0.80		6.4			300,831	0.80		6.5
	$	4,654,862	0.70		100.0	%	$	4,693,762	0.71		100.0	%	$	4,611,446	0.74		100.0	%

The following table presents scheduled maturities of our certificates of deposit, along with associated weighted average rates, as of June 30, 2014:


		Amount Due
					More than			More than
		1 year			1 year to			2 years to			More than		Total
Rate range		or less			2 years			3 years			3 years			Amount	Rate
		(Dollars in thousands)
0.00 – 0.99%	$	824,011		$	239,153		$	61,430		$	8,600		$	1,133,194	0.47	%
1.00 – 1.99%		228,458			247,736			207,348			335,810			1,019,352	1.40
2.00 – 2.99%		243,579			93,898			7,710			1,711			346,898	2.51
3.00 – 3.99%		28,181			115			312			102			28,710	3.06
4.00 – 4.99%		198			128			--			--			326	4.40
	$	1,324,427		$	581,030		$	276,800		$	346,223		$	2,528,480	1.16

Percent of total		52.4	%		23.0	%		10.9	%		13.7	%
Weighted average rate		1.01			1.22			1.36			1.42
Weighted average maturity (in years)		0.4			1.5			2.5			3.6			1.3
Weighted average maturity for the retail certificate of deposit portfolio (in years)														1.4

Borrowings

The following table presents the maturity of FHLB advances, at par, and repurchase agreements, along with associated weighted average contractual and effective rates as of June 30, 2014.


	FHLB		Repurchase
Maturity by	Advances		Agreements		Contractual		Effective
Fiscal Year	Amount		Amount		Rate		Rate(1)
	(Dollars in thousands)
2014	$	--	$	100,000	4.20	%	4.20	%
2015		600,000		20,000	1.73		1.96
2016		575,000		--	2.29		2.91
2017		500,000		--	2.69		2.72
2018		200,000		100,000	2.90		2.90
2019		100,000		--	1.29		1.29
2020		250,000		100,000	2.18		2.18
2021		250,000		--	2.53		2.53
	$	2,475,000	$	320,000	2.34		2.53

(1)

The effective rate includes the net impact of the amortization of deferred prepayment penalties resulting from the prepayment of certain FHLB advances and deferred gains related to terminated interest rate swaps.

The following table presents the maturity and weighted average repricing rate, which is also the weighted average effective rate, of borrowings and certificates of deposit, split between retail and public unit/brokered deposit amounts, for the next four quarters as of June 30, 2014. Subsequent to June 30, 2014, a $100.0 million repurchase agreement with a rate of 4.20% matured and was replaced with a $100.0 million FHLB advance with a term of 60 months at a fixed-rate of 1.96%.


									Public Unit/
					Retail				Brokered
Maturity by	Borrowings		Repricing		Certificate		Repricing		Deposit		Repricing				Repricing
Quarter End	Amount		Rate		Amount		Rate		Amount		Rate		Total		Rate
	(Dollars in thousands)
September 30, 2014	$	100,000	4.20	%	$	359,754	1.04	%	$	111,619	0.19	%	$	571,373	1.43	%
December 31, 2014		250,000	0.84			255,774	1.02			39,909	0.26			545,683	0.88
March 31, 2015		250,000	2.47			240,523	1.11			34,331	0.22			524,854	1.70
June 30, 2015		100,000	3.01			226,659	1.21			55,858	2.25			382,517	1.83
	$	700,000	2.21		$	1,082,710	1.09		$	241,717	0.68		$	2,024,427	1.43

The following tables present FHLB advance activity, at par, and repurchase agreement activity for the periods shown. Line of credit activity is excluded from the following table due to the short-term nature of the borrowings. The weighted average effective rate includes the net impact of the amortization of deferred prepayment penalties resulting from the prepayment of certain FHLB advances and deferred gains related to interest rate swaps previously terminated. Rates on new borrowings are fixed-rate. The weighted average maturity (“WAM”) is the remaining weighted average contractual term in years. The beginning and ending WAMs represent the remaining maturity at each date presented. For new borrowings, the WAMs presented are as of the date of issue.


	For the Three Months Ended
	June 30, 2014					March 31, 2014					December 31, 2013					September 30, 2013
			Effective					Effective					Effective					Effective
	Amount		Rate		WAM	Amount		Rate		WAM	Amount		Rate		WAM	Amount		Rate		WAM
	(Dollars in thousands)
Beginning balance	$	2,795,000	2.54	%	2.9	$	2,845,000	2.71	%	2.7	$	2,845,000	2.75	%	2.6	$	2,815,000	2.80	%	2.7
Maturities and prepayments:
FHLB advances		(100,000)	2.80				(200,000)	5.01				(150,000)	3.16				--	--
Repurchase agreements		--	--				--	--				--	--				(70,000)	4.23
New borrowings:
FHLB advances		100,000	2.45		7.0		150,000	2.59		7.0		150,000	2.32		6.0		--	--		--
Repurchase agreements		--	--		--		--	--		--		--	--		--		100,000	2.53		7.0
Ending balance	$	2,795,000	2.53		2.9	$	2,795,000	2.54		2.9	$	2,845,000	2.71		2.7	$	2,845,000	2.75		2.6


	For the Nine Months Ended
	June 30, 2014					June 30, 2013
			Effective					Effective
	Amount		Rate		WAM	Amount		Rate		WAM
		(Dollars in thousands)
Beginning balance	$	2,845,000	2.75	%	2.6	$	2,915,000	3.13	%	2.7
Maturities and prepayments:
FHLB advances		(450,000)	3.90				(325,000)	4.17
Repurchase agreements		--	--				(75,000)	3.43
New borrowings:
FHLB advances		400,000	2.45		6.6		300,000	1.23		5.7
Ending balance	$	2,795,000	2.53		2.9	$	2,815,000	2.80		2.7

Average Rates and Lives

The following table presents the weighted average yields/rates and WALs (in years), after applying prepayment, call assumptions, and decay rates for our interest-earning assets and interest-bearing liabilities as of the date presented. Yields presented for interest-earning assets include the amortization of fees, costs, premiums and discounts which are considered adjustments to the yield. The interest rate presented for borrowings is the effective rate, which includes the net impact of the amortization of deferred prepayment penalties resulting from the prepayment of certain FHLB advances and deferred gains related to interest rate swaps previously terminated.


	June 30, 2014
	Amount		Yield/Rate		WAL	% of Category		% of Total
	(Dollars in thousands)
Investment securities	$	590,405	1.15	%	3.4	23.6	%	6.6	%
MBS - fixed		1,361,139	2.38		3.9	54.6		15.3
MBS - adjustable		542,871	2.20		5.8	21.8		6.1
Total investment securities and MBS		2,494,415	2.05		4.2	100.0	%	28.0
Loans receivable:
Fixed-rate one- to four-family:
<= 15 years		1,151,997	3.47		4.0	18.6	%	13.0
> 15 years		3,578,784	4.15		6.4	57.7		40.2
All other fixed-rate loans		142,926	4.80		4.2	2.3		1.6
Total fixed-rate loans		4,873,707	4.01		5.8	78.6		54.8
Adjustable-rate one- to four-family:
<= 36 months		378,905	2.26		3.9	6.1		4.3
> 36 months		781,133	2.92		3.3	12.6		8.8
All other adjustable-rate loans		163,369	4.35		1.5	2.7		1.8
Total adjustable-rate loans		1,323,407	2.91		3.3	21.4		14.9
Total loans receivable		6,197,114	3.77		5.2	100.0	%	69.7
FHLB stock		112,876	4.98		2.8			1.3
Cash and cash equivalents		88,424	0.24		--			1.0
Total interest-earning assets	$	8,892,829	3.27		4.9			100.0	%

Transaction deposits	$	2,126,382	0.15		6.8	45.7	%	28.5	%
Certificates of deposit		2,528,480	1.16		1.3	54.3		34.0
Total deposits		4,654,862	0.70		3.8	100.0	%	62.5
Borrowings		2,795,000	2.53		2.9			37.5
Total interest-bearing liabilities	$	7,449,862	1.38		3.5			100.0	%

At June 30, 2014, the Bank’s one-year gap between the amount of interest-earning assets and interest-bearing liabilities projected to reprice was negative $(124.1) million, or (1.4)% of total assets, compared to negative $(39.4) million, or (0.4)% of total assets, at March 31, 2014. The amount of interest-bearing liabilities expected to reprice in a given period is not typically impacted by changes in interest rates because the Bank’s borrowings and certificate of deposit portfolios have contractual maturities and generally cannot be terminated early without a prepayment penalty. The majority of interest-earning assets anticipated to reprice in the coming year are repayments and prepayments on mortgage loans and MBS, both of which include the option to prepay without a fee being paid by the contract holder. As interest rates rise, the amount of interest-earning assets expected to reprice will likely decrease from estimated levels as borrowers and agency debt issuers will have less economic incentive to modify their cost of borrowings. If interest rates were to increase 200 basis points, as of June 30, 2014, the Bank’s one-year gap is projected to be negative $(512.6) million, or (5.7)% of total assets, meaning more liabilities are anticipated to reprice than assets. This compares to a negative one-year gap of $(384.5) million, or (4.2)% of total assets, if interest rates were to increase 200 basis points, as of March 31, 2014. The change in the one-year gap amount in both the base case and +200 basis point scenarios between periods was due primarily to an increase in the amount of certificates of deposit repricing over the 12 month horizon, a decrease in adjustable-rate mortgages repricing, and the transition of assets from cash and investments, which generally creates greater short-term cash flows, to the mortgage portfolio, which has longer cash flow projections. This was somewhat offset by an anticipated increase in cash flows on fixed-rate mortgage related assets due to lower interest rates at June 30, 2014 compared to interest rates at March 31, 2014. The gap position of the Bank has been managed over the past several years as increasing interest rates have been anticipated. Because of the on-balance sheet strategies implemented over the past several years of lengthening FHLB advances, increasing rates offered on longer-term certificate of deposit products,

purchasing shorter term maturities of agency debentures, and focusing on the long-term value of the balance sheet through the measurement and management of our market value of portfolio equity, management believes the Bank is well-positioned to move into a market rate environment where interest rates are higher than one year ago.

Average Balance Sheets

The following tables present the average balances of our assets, liabilities, and stockholders’ equity, and the related annualized weighted average yields and rates on our interest-earning assets and interest-bearing liabilities for the periods indicated and the weighted average yield/rate on our interest-earning assets and interest-bearing liabilities at June 30, 2014. Weighted average yields are derived by dividing annualized income by the average balance of the related assets, and weighted average rates are derived by dividing annualized expense by the average balance of the related liabilities, for the periods shown. Average outstanding balances are derived from average daily balances. The weighted average yields and rates include amortization of fees, costs, premiums and discounts, which are considered adjustments to yields/rates. Weighted average yields on tax-exempt securities are not calculated on a fully taxable equivalent basis.


	At		For the Nine Months Ended
	June 30, 2014	June 30, 2014						June 30, 2013
		Average		Interest				Average		Interest
	Yield/	Outstanding		Earned/		Yield/		Outstanding		Earned/		Yield/
	Rate	Balance		Paid		Rate		Balance		Paid		Rate
Assets:			(Dollars in thousands)
Interest-earning assets:
Loans receivable(1)	3.77%	$	6,047,247	$	171,539	3.78	%	$	5,691,814	$	172,030	4.03	%
MBS(2)	2.32		1,961,441		34,765	2.36			2,302,058		43,048	2.49
Investment securities(2)(3)	1.15		667,317		5,674	1.13			860,295		7,761	1.20
FHLB stock	4.98		125,821		3,877	4.12			132,111		3,384	3.43
Cash and cash equivalents	0.24		83,988		157	0.25			61,534		108	0.24
Total interest-earning assets(1)(2)	3.27		8,885,814		216,012	3.24			9,047,812		226,331	3.34
Other noninterest-earning assets			220,029						234,427
Total assets		$	9,105,843					$	9,282,239

Liabilities and stockholders’ equity:
Interest-bearing liabilities:
Checking	0.04	$	672,218		193	0.04		$	629,436		182	0.04
Savings	0.12		290,569		240	0.11			272,339		196	0.10
Money market	0.23		1,135,195		1,964	0.23			1,135,356		1,815	0.21
Retail certificates	1.23		2,222,808		20,454	1.23			2,263,644		23,970	1.42
Wholesale certificates	0.65		302,711		1,672	0.74			285,114		2,039	0.96
Total deposits	0.70		4,623,501		24,523	0.71			4,585,889		28,202	0.82
FHLB borrowings(4)	2.41		2,489,338		47,000	2.53			2,560,389		53,914	2.81
Repurchase agreements	3.43		320,000		8,319	3.43			336,978		9,861	3.86
Total borrowings	2.53		2,809,338		55,319	2.63			2,897,367		63,775	2.94
Total interest-bearing liabilities	1.38		7,432,839		79,842	1.43			7,483,256		91,977	1.64
Other noninterest-bearing liabilities			103,376						107,218
Stockholders’ equity			1,569,628						1,691,765
Total liabilities and stockholders’ equity		$	9,105,843					$	9,282,239

Net interest income(5)				$	136,170					$	134,354
Net interest rate spread(6)	1.89					1.81						1.70
Net interest-earning assets		$	1,452,975					$	1,564,556
Net interest margin(7)						2.04						1.98
Ratio of interest-earning assets
to interest-bearing liabilities						1.20	x					1.21	x

Selected performance ratios:
Return on average assets (annualized)						0.84	%					0.77	%
Return on average equity (annualized)						4.88						4.20
Average equity to average assets						17.24						18.23
Operating expense ratio (annualized)(8)						0.98						1.03
Efficiency ratio(9)						43.78						47.11


	For the Three Months Ended
	June 30, 2014						March 31, 2014
	Average		Interest				Average		Interest
	Outstanding		Earned/		Yield/		Outstanding		Earned/		Yield/
	Balance		Paid		Rate		Balance		Paid		Rate
Assets:		(Dollars in thousands)
Interest-earning assets:
Loans receivable(1)	$	6,095,618	$	57,474	3.77	%	$	6,045,516	$	57,117	3.78	%
MBS(2)		1,946,653		11,206	2.30			1,942,336		11,597	2.39
Investment securities(2)(3)		610,101		1,739	1.14			662,266		1,869	1.13
FHLB stock		118,095		1,452	4.93			128,859		1,229	3.87
Cash and cash equivalents		81,393		50	0.25			71,652		45	0.25
Total interest-earning assets(1)(2)		8,851,860		71,921	3.25			8,850,629		71,857	3.25
Other noninterest-earning assets		216,959						222,552
Total assets	$	9,068,819					$	9,073,181

Liabilities and stockholders’ equity:
Interest-bearing liabilities:
Checking	$	691,454		66	0.04		$	674,447		63	0.04
Savings		296,424		92	0.13			291,106		77	0.11
Money market		1,133,901		653	0.23			1,139,010		650	0.23
Retail certificates		2,229,439		6,784	1.22			2,217,967		6,699	1.22
Wholesale certificates		300,557		529	0.71			305,848		587	0.78
Total deposits		4,651,775		8,124	0.70			4,628,378		8,076	0.71
FHLB borrowings(4)		2,466,954		14,826	2.41			2,485,393		15,311	2.50
Repurchase agreements		320,000		2,773	3.43			320,000		2,743	3.43
Total borrowings		2,786,954		17,599	2.53			2,805,393		18,054	2.60
Total interest-bearing liabilities		7,438,729		25,723	1.38			7,433,771		26,130	1.42
Other noninterest-bearing liabilities		93,984						96,460
Stockholders’ equity		1,536,106						1,542,950
Total liabilities and stockholders’ equity	$	9,068,819					$	9,073,181

Net interest income(5)			$	46,198					$	45,727
Net interest rate spread(6)					1.87						1.83
Net interest-earning assets	$	1,413,131					$	1,416,858
Net interest margin(7)					2.09						2.07
Ratio of interest-earning assets
to interest-bearing liabilities					1.19	x					1.19	x

Selected performance ratios:
Return on average assets (annualized)					0.88	%					0.87	%
Return on average equity (annualized)					5.20						5.10
Average equity to average assets					16.94						17.01
Operating expense ratio (annualized)(8)					0.99						0.96
Efficiency ratio(9)					43.19						42.42

(1)

Calculated net of unearned loan fees, deferred costs, and undisbursed loan funds. Loans that are 90 or more days delinquent are included in the loans receivable average balance with a yield of zero percent. Balance includes mortgage loans receivable held-for-sale.

(2)

MBS and investment securities classified as AFS are stated at amortized cost, adjusted for unamortized purchase premiums or discounts.

(3)

The average balance of investment securities includes an average balance of nontaxable securities of $36.6 million and $42.8 million for the nine months ended June 30, 2014 and 2013, respectively, and $37.1 million and $36.4 million for the quarters ended June 30, 2014 and March 31, 2014, respectively.

(4)

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

(5)

Net interest income represents the difference between interest income earned on interest-earning assets such as mortgage loans, investment securities, and MBS, and interest paid on interest-bearing liabilities such as deposits, FHLB borrowings, and repurchase agreements. Net interest income depends on the balance of interest-earning assets and interest-bearing liabilities, and the interest rates earned or paid on them.

(6)

Net interest rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.

(7)

Net interest margin represents net interest income as a percentage of average interest-earning assets.

(8)

The operating expense ratio represents annualized non-interest expense as a percentage of average assets.

(9)

The efficiency ratio represents non-interest expense as a percentage of the sum of net interest income (pre-provision for credit losses) and non-interest income.

Capitol Federal Financial, Inc. - FORM 8-K - EX-99 - EARNINGS RELEASE - July 28, 2014

Attached files

Capitol Federal Financial, Inc. Reports