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Capitol Federal® Financial, Inc. Reports Third Quarter Fiscal Year 2018 Results

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Capitol Federal® Financial, Inc. Reports Third Quarter Fiscal Year 2018 Results

PR Newswire

TOPEKA, Kan., July 30, 2018 /PRNewswire/ -- Capitol Federal® Financial, Inc. (NASDAQ:CFFN) (the "Company") announced results today for the quarter ended June 30, 2018.  Detailed results will be available in the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2018, which will be filed with the Securities and Exchange Commission ("SEC") on or about August 9, 2018 and posted on our website, http://ir.capfed.comFor best viewing results, please view this release in Portable Document Format (PDF) on our website.

Financial highlights for the quarter include:

  • net income of $22.4 million;
  • basic and diluted earnings per share of $0.17;
  • net interest margin of 1.92% (2.24% excluding the effects of the leverage strategy); and
  • dividends paid of $45.0 million, or $0.335 per share, including a $0.25 per share True Blue® Capitol dividend.

On April 30, 2018, the Company, the parent company of Capitol Federal Savings Bank (the "Bank"), and Capital City Bancshares, Inc. ("CCB"), the parent company of Capital City Bank, a state chartered bank headquartered in Topeka, KS, announced the signing of a definitive agreement and plan of merger pursuant to which CCB will merge with and into the Company.  Immediately upon closing the merger, Capital City Bank will merge with and into the Bank.  As of June 30, 2018, the Company has recognized approximately $500 thousand in acquisition-related expenses.  The transaction is currently expected to close in the fourth quarter of fiscal year 2018, during which the Company anticipates that approximately $700 thousand of additional acquisition-related expenses will be recognized.

As a result of the merger, the Bank will enter the commercial banking business through the origination of commercial lending products, offering of commercial deposit services, and will begin offering trust services.  The benefits of the commercial banking business may include the following:

  • the ability to change the mix of the loan portfolio by reinvesting repayments of correspondent loans into the commercial loan portfolio,
  • the potential reduction in the cost of funds as a result of having the ability to replace Federal Home Loan Bank Topeka ("FHLB") borrowings with lower-costing commercial deposits,
  • the potential reduction in the Bank's loans-to-deposits ratio as a result of an increase in commercial deposits, and
  • the increased diversification of revenue streams and increased cross-selling opportunities resulting from access to new products and a new customer base.

Comparison of Operating Results for the Three Months Ended June 30, 2018 and March 31, 2018

For the quarter ended June 30, 2018, the Company recognized net income of $22.4 million, or $0.17 per share, compared to net income of $23.3 million, or $0.17 per share, for the quarter ended March 31, 2018.  The decrease in net income was due primarily to an increase in non-interest expense.

Net interest income decreased $456 thousand, or 0.9%, from the prior quarter to $49.4 million for the current quarter.  The net interest margin increased six basis points from 1.86% for the prior quarter to 1.92% for the current quarter.  Excluding the effects of the leverage strategy, the net interest margin would have been 2.24% for the current quarter, unchanged from the prior quarter.  The decrease in net interest income and the increase in net interest margin were due mainly to the leverage strategy being in place for fewer days in the current quarter compared to the prior quarter.  When the leverage strategy is in place, it increases net interest income but 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 quarter 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.

Interest and Dividend Income
The weighted average yield on total interest-earning assets for the current quarter increased 14 basis points from the prior quarter, to 3.20%, while the average balance of interest-earning assets decreased $435.1 million between the two periods.  Absent the impact of the leverage strategy, the weighted average yield on total interest-earning assets would have increased five basis points from the prior quarter, to 3.40%, and the average balance of interest-earning assets would have increased $71.6 million.  The following table presents the components of interest and dividend income for the time periods presented, along with the change measured in dollars and percent.


For the Three Months Ended






June 30,


March 31,


Change Expressed in:


2018


2018


Dollars


Percent


(Dollars in thousands)



INTEREST AND DIVIDEND INCOME:








Loans receivable

$

64,893



$

64,194



$

699



1.1%


Cash and cash equivalents

7,221



7,895



(674)



(8.5)


Mortgage-backed securities ("MBS")

5,921



5,390



531



9.9


FHLB stock

2,819



3,201



(382)



(11.9)


Investment securities

1,307



1,094



213



19.5


Total interest and dividend income

$

82,161



$

81,774



$

387



0.5


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 increased $118 thousand from the prior quarter due to a 28 basis point increase in the weighted average yield, which was related to balances held at the FRB of Kansas City.  Interest income on cash associated with the leverage strategy decreased $791 thousand from the prior quarter and dividend income on FHLB stock associated with the leverage strategy decreased $402 thousand from the prior quarter due to the leverage strategy being in place for fewer days in the current quarter compared to the prior quarter.

The increase in interest income on the MBS portfolio was due to a $47.7 million increase in the average balance of the portfolio, as well as a 10 basis point increase in the weighted average yield on the portfolio to 2.40% for the current quarter.  The increase in the weighted average yield was due primarily to adjustable-rate MBS repricing to higher market rates, as well as a decrease in the impact of net premium amortization.  Net premium amortization of $702 thousand during the current quarter decreased the weighted average yield on the portfolio by 29 basis points.  During the prior quarter, $788 thousand of net premiums were amortized which decreased the weighted average yield on the portfolio by 33 basis points.  As of June 30, 2018, the remaining net balance of premiums on our portfolio of MBS was $6.3 million.

The increase in interest income on investment securities was due to a 34 basis point increase in the weighted average yield on the portfolio to 1.77% for the current quarter, primarily resulting from the replacement of maturing securities at higher market rates.

Interest Expense
The weighted average rate paid on total interest-bearing liabilities for the current quarter increased nine basis points from the prior quarter, to 1.44%, while the average balance of interest-bearing liabilities decreased $450.0 million between the two periods.  Absent the impact of the leverage strategy, the weighted average rate paid on total interest-bearing liabilities for the current quarter would have increased four basis points from the prior quarter, to 1.34%, and the average balance of interest-bearing liabilities would have increased $56.6 million.  The following table presents the components of interest expense for the time periods presented, along with the change measured in dollars and percent.


For the Three Months Ended






June 30,


March 31,


Change Expressed in:


2018


2018


Dollars


Percent


(Dollars in thousands)



INTEREST EXPENSE:








FHLB borrowings

$

18,501



$

18,772



$

(271)



(1.4)%


Deposits

13,587



12,480



1,107



8.9


Repurchase agreements

640



633



7



1.1


Total interest expense

$

32,728



$

31,885



$

843



2.6


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 $231 thousand from the prior quarter due primarily to a one basis point increase in the weighted average rate paid, to 2.06% for the current quarter.  Interest expense on FHLB borrowings associated with the leverage strategy decreased $502 thousand from the prior quarter due to the leverage strategy being in place for fewer days in the current quarter compared to the prior quarter, partially offset by an increase in the weighted average rate paid.

The increase in interest expense on deposits was due primarily to a six basis point increase in the weighted average rate paid, to 1.02% for the current quarter.  The increase in the weighted average rate paid was due primarily to increases in the retail certificate of deposit portfolio rate and wholesale certificate portfolio rate, which increased seven basis points and 24 basis points, respectively.

Provision for Credit Losses
The Bank did not record a provision for credit losses during the current quarter or the prior quarter.  Based on management's assessment of the allowance for credit losses ("ACL") formula analysis model and several other factors, it was determined that no provision for credit losses was necessary.  Net loan charge-offs were $46 thousand during the current quarter compared to net recoveries of $20 thousand in the prior quarter.  At June 30, 2018, loans 30 to 89 days delinquent were 0.19% of total loans and loans 90 or more days delinquent or in foreclosure were 0.12% of total loans.  At March 31, 2018, loans 30 to 89 days delinquent were 0.19% of total loans and loans 90 or more days delinquent or in foreclosure were 0.16% of total loans.

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


For the Three Months Ended






June 30,


March 31,


Change Expressed in:


2018


2018


Dollars


Percent


(Dollars in thousands)



NON-INTEREST INCOME:








Retail fees and charges

$

3,915



$

3,670



$

245



6.7%


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

510



276



234



84.8


Other non-interest income

999



1,487



(488)



(32.8)


Total non-interest income

$

5,424



$

5,433



$

(9)



(0.2)


The increase in retail fees and charges was due mainly to an increase in debit card income resulting from an increase in transaction volume, which was related to the seasonality of such activity.  The increase in income from BOLI was due mainly to a one-time adjustment during the prior quarter to the benchmark interest rate associated with one of the policies.  The decrease in other non-interest income was due primarily to a decrease in insurance commissions resulting from the receipt of annual commissions from certain insurance providers during the prior quarter and no such commissions received in the current quarter.

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


For the Three Months Ended






June 30,


March 31,


Change Expressed in:


2018


2018


Dollars


Percent


(Dollars in thousands)



NON-INTEREST EXPENSE:








Salaries and employee benefits

$

11,936



$

11,167



$

769



6.9%


Information technology and related expense

3,363



3,622



(259)



(7.2)


Occupancy, net

2,787



2,839



(52)



(1.8)


Deposit and loan transaction costs

1,437



1,313



124



9.4


Regulatory and outside services

1,628



1,151



477



41.4


Advertising and promotional

1,490



1,337



153



11.4


Federal insurance premium

813



847



(34)



(4.0)


Office supplies and related expense

455



442



13



2.9


Other non-interest expense

602



880



(278)



(31.6)


Total non-interest expense

$

24,511



$

23,598



$

913



3.9


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 2018.  The expense recognized in the current quarter was $344 thousand, and it is expected that $344 thousand will also be recognized during the quarter ending September 30, 2018.  The increase in regulatory and outside services was due primarily to expenses related to the acquisition of CCB, as well as the timing of audit-related expenses.  The decrease in other non-interest expense was due primarily to the timing of various miscellaneous expenses, along with a decrease in other real estate owned ("OREO") operations expense.

The Company's efficiency ratio was 44.68% for the current quarter compared to 42.66% for the prior quarter.  The change 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.

Income Tax Expense
Income tax expense was $8.0 million for the current quarter, compared to $8.4 million for the prior quarter.  The decrease was due mainly to a decrease in pretax income.  The effective tax rate was 26.3% for the current quarter compared to 26.5% for the prior quarter.

Comparison of Operating Results for the Nine Months Ended June 30, 2018 and 2017

The Company recognized net income of $77.5 million, or $0.58 per share, for the nine month period ended June 30, 2018 compared to net income of $63.5 million, or $0.47 per share, for the nine month period ended June 30, 2017.  The increase in net income was due primarily to a decrease in income tax expense.  During the current fiscal year, the Tax Cuts and Jobs Act (the "Tax Act") was enacted which 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 as of December 22, 2017 to account for the lower corporate income tax rate.  The revaluation of the Company's deferred income tax assets and liabilities reduced income tax expense by $7.5 million in the quarter ending December 31, 2017.  The impact of the enactment of the Tax Act was an increase in basic and diluted earnings per share of $0.08 in the quarter ending December 31, 2017.  Management estimates the effective tax rate for the fourth quarter of fiscal year 2018 will be approximately 26% to 27%, resulting in an effective income tax rate of 20% to 21% for fiscal year 2018.  Management estimates the effective income tax rate for fiscal year 2019 will be approximately 22%.

The net interest margin increased nine basis points, from 1.78% for the prior year nine month period to 1.87% for the current year nine month period.  Excluding the effects of the leverage strategy, the net interest margin would have increased 10 basis points, from 2.13% for the prior year nine month period to 2.23% for the current year nine month period.  The increase in the net interest margin was due mainly to an increase in interest-earning asset yields, as well as a shift in the mix of interest-earning assets from relatively lower yielding securities to higher yielding loans.

Interest and Dividend Income
The weighted average yield on total interest-earning assets increased 24 basis points, from 2.84% for the prior year nine month period to 3.08% for the current year nine month period, while the average balance of interest-earning assets decreased $328.8 million 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 10 basis points, from 3.25% for the prior year nine month period to 3.35% for the current year nine month period, while the average balance of interest-earning assets would have decreased $144.2 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:


2018


2017


Dollars


Percent


(Dollars in thousands)



INTEREST AND DIVIDEND INCOME:








Loans receivable

$

193,276



$

189,064



$

4,212



2.2%


Cash and cash equivalents

22,230



12,720



9,510



74.8


MBS

16,563



18,374



(1,811)



(9.9)


FHLB stock

9,115



9,153



(38)



(0.4)


Investment securities

3,395



3,301



94



2.8


Total interest and dividend income

$

244,579



$

232,612



$

11,967



5.1


The increase in interest income on loans receivable was due to an $80.6 million increase in the average balance of the portfolio, as well as a three basis point increase in the weighted average yield on the portfolio to 3.57% for the current year nine month period.  The increase in the weighted average yield was due primarily to adjustable-rate loans repricing to higher market rates, along with the origination and purchase of new loans 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 increased $1.0 million from the prior year nine month period due to a 70 basis point increase in the weighted average yield.  Interest income on cash associated with the leverage strategy increased $8.5 million from the prior year nine month period due to a 72 basis point increase in the weighted average yield.  In both cases, the increase in the weighted average yield was related to cash balances held at the FRB of Kansas City.

The decrease in interest income on the MBS portfolio was due to a $173.5 million decrease in the average balance of the portfolio, partially offset by a 14 basis point increase in the weighted average yield on the portfolio to 2.32% for the current year nine month period.  Cash flows not reinvested were used primarily to fund loan growth and pay off certain maturing term borrowings.  The increase in the weighted average yield was due primarily to adjustable-rate MBS repricing to higher market rates, as well as a decrease in the impact of net premium amortization.  Net premium amortization of $2.3 million during the current year nine month period decreased the weighted average yield on the portfolio by 33 basis points.  During the prior year nine month period, $3.3 million of net premiums were amortized which decreased the weighted average yield on the portfolio by 39 basis points.

Interest Expense
The weighted average rate paid on total interest-bearing liabilities increased 17 basis points, from 1.19% for the prior year nine month period to 1.36% for the current year nine month period, while the average balance of interest-bearing liabilities decreased $300.3 million 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 one basis point, from 1.30% for the prior year nine month period to 1.31% for the current year nine month period, while the average balance of interest-bearing liabilities would have decreased $115.7 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:


2018


2017


Dollars


Percent


(Dollars in thousands)



INTEREST EXPENSE:








FHLB borrowings

$

55,190



$

50,772



$

4,418



8.7%


Deposits

38,028



31,655



6,373



20.1


Repurchase agreements

2,665



4,461



(1,796)



(40.3)


Total interest expense

$

95,883



$

86,888



$

8,995



10.4


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 decreased $5.3 million from the prior year nine month period due to a 21 basis point decrease in the weighted average rate paid on the portfolio, to 2.06% for the current year nine month period, and a $113.6 million decrease in the average balance of the portfolio.  The decrease in the weighted average rate paid was due to certain maturing advances being replaced at lower effective interest rates.  Interest expense on FHLB borrowings associated with the leverage strategy increased $9.7 million from the prior year nine month period due to a 77 basis point increase in the weighted average rate paid as a result of an increase in interest rates between periods.

The increase in interest expense on deposits was due primarily to a 15 basis point increase in the weighted average rate, to 0.96% for the current year nine month period.  The increase in the weighted average rate was primarily related to the certificate of deposit portfolio, which increased 22 basis points to 1.58% for the current year nine month period.  The weighted average rate paid on wholesale certificates increased 66 basis points, to 1.48% for the current year nine month period.

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:


2018


2017


Dollars


Percent


(Dollars in thousands)



NON-INTEREST INCOME:








Retail fees and charges

$

11,550



$

11,123



$

427



3.8%


Income from BOLI

1,320



1,669



(349)



(20.9)


Other non-interest income

3,345



3,509



(164)



(4.7)


Total non-interest income

$

16,215



$

16,301



$

(86)



(0.5)


The increase in retail fees and charges was due mainly to increases in debit card income due to higher transaction volume in the current year and a reduction in waived fees as customers and vendors have become more accustomed to the chip card technology.  The decrease in income from BOLI was due mainly to a one-time adjustment, in the second quarter of fiscal year 2018, to the benchmark interest rate associated with one of the policies.

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:


2018


2017


Dollars


Percent


(Dollars in thousands)



NON-INTEREST EXPENSE:








Salaries and employee benefits

$

33,631



$

32,388



$

1,243



3.8%


Information technology and related expense

10,316



8,524



1,792



21.0


Occupancy, net

8,391



8,098



293



3.6


Deposit and loan transaction costs

4,157



3,918



239



6.1


Regulatory and outside services

3,919



3,994



(75)



(1.9)


Advertising and promotional

3,512



3,275



237



7.2


Federal insurance premium

2,512



2,651



(139)



(5.2)


Office supplies and related expense

1,339



1,470



(131)



(8.9)


Other non-interest expense

2,368



1,861



507



27.2


Total non-interest expense

$

70,145



$

66,179



$

3,966



6.0


The increase in salaries and employee benefits expense was due primarily to an increase in payroll expense, as well as a new 2018 Tax Savings Bonus Plan.  The 2018 Tax Savings Bonus plan is a one-time bonus award to qualifying non-officer employees.  The anticipated expense associated with this plan is being recognized in fiscal year 2018 and will total approximately $1.0 million, of which $667 thousand has been recognized during the current year nine month period.  It is expected that the Bank will recognize the remaining $333 thousand of expense in the fourth quarter of fiscal year 2018 related to this plan.  The increase in information technology and related expense was due mainly to a change in the presentation of certain information technology professional and consulting expenses beginning in fiscal year 2018.  Information technology professional and consulting expenses are now being reported in information technology and related expenses rather than regulatory and outside services.  Additionally, these expenses increased compared to the prior year due primarily to ongoing enhancements to the Bank's online banking services, along with increases in information technology expenses related to software licensing and depreciation.  The change in the presentation of expenses resulted in a decrease in the amount of regulatory and outside services expenses for the current year nine month period, but this was partially offset by acquisition-related expenses.  The increase in other non-interest expense was due mainly to an increase in OREO operations expense.

The Company's efficiency ratio was 42.54% for the current year nine month period compared to 40.84% for the prior year nine month period.  The change in the efficiency ratio was due primarily 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 $17.2 million for the current year nine month period compared to $32.3 million for the prior year nine month period.  The effective tax rate was 18.2% for the current year nine month period compared to 33.7% for the prior year nine month period.  The decrease in the effective tax rate was due mainly to the Tax Act being signed into law in December 2017.

Financial Condition as of June 30, 2018

Total assets were $9.05 billion at June 30, 2018 compared to $9.19 billion at September 30, 2017.  The $144.2 million decrease was due primarily to a $169.6 million decrease in cash and cash equivalents.  During the current year nine month period, asset cash flows not reinvested were used mainly to pay off certain maturing term borrowings.

The loans receivable portfolio, net, totaled $7.24 billion at June 30, 2018 compared to $7.20 billion at September 30, 2017.  During the current year nine month period, the Bank originated and refinanced $458.5 million of loans with a weighted average rate of 4.05% and purchased $318.6 million of one- to four-family loans from correspondent lenders with a weighted average rate of 3.70%.  The Bank also entered into participations of $108.6 million of commercial real estate loans with a weighted average rate of 4.15%, of which $93.7 million had not yet been funded as of June 30, 2018.  During the current year nine month period, the Bank funded $73.3 million of new and existing commercial real estate loans.  There are no agricultural loans in the Bank's loan portfolio.

The Bank is continuing to manage the size of its loan portfolio, as it manages its liquidity levels to a target level of approximately 15%.  The size of the loan portfolio has been managed by controlling correspondent loan volume primarily through the rates offered to correspondent lenders.  Management intends to continue to manage the size of the loan portfolio after the merger with Capital City Bank by utilizing cash flows from the correspondent loan portfolio to fund commercial loan growth.  Given the balance of total assets, it is unlikely that loan growth will substantially increase in the current environment.  Generally, 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.  In addition to the repayment of securities, the Bank has emphasized growth in the deposit portfolio in part to pay down term borrowings.  The ratio of securities and cash to total assets was 15.5% at June 30, 2018.  In the long run, management considers a 10% ratio of stockholders' equity to total assets at the Bank an appropriate level of capital.  At June 30, 2018, this ratio was 13.0%.

The Bank continued, at times, to utilize a leverage strategy to increase earnings in fiscal year 2018.  The leverage strategy during the current fiscal year 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 each quarter end.  The proceeds from the borrowings, net of the required FHLB stock holdings, which yielded 6.9% during the current quarter and 6.7% 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 $212 thousand during the current quarter, compared to $713 thousand during the quarter ending March 31, 2018.  The decrease between quarters was due mainly to an increase in the negative 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.  Additionally, management suspended the strategy during the current quarter due to the large negative interest rate spread, which resulted in the strategy not being profitable.  Net income attributable to the leverage strategy was $1.7 million for the current year nine month period, compared to $2.2 million for the prior year nine month period.  Management continues to monitor the net interest rate spread and overall profitability of the strategy.  The strategy will be reimplemented if it reaches a position that is profitable.

Total liabilities were $7.71 billion at June 30, 2018 compared to $7.82 billion at September 30, 2017.  The $117.2 million decrease was due mainly to a decrease in repurchase agreements resulting from the payoff of a maturing repurchase agreement during the current year nine month period.

Stockholders' equity was $1.34 billion at June 30, 2018 compared to $1.37 billion at September 30, 2017.  The $27.0 million decrease was due primarily to the payment of $106.9 million in cash dividends, partially offset by net income of $77.5 million.  The cash dividends paid during the current year nine month period totaled $0.795 per share and consisted of a $0.29 per share cash true-up dividend related to fiscal year 2017 earnings per the Company's dividend policy, a $0.25 per share True Blue Capitol dividend, and three regular quarterly cash dividends totaling $0.255 per share.  On July 18, 2018, the Company announced a regular quarterly cash dividend of $0.085 per share, or approximately $11.4 million, payable on August 17, 2018 to stockholders of record as of the close of business on August 3, 2018.

At June 30, 2018, Capitol Federal Financial, Inc., at the holding company level, had $124.6 million on deposit at the Bank.  For fiscal year 2018, it is the intent of the Board of Directors and management to continue the payout of 100% of the Company's earnings to its stockholders.  Dividend payments depend upon a number of factors including the Company's financial condition and results of operations, regulatory capital requirements, regulatory limitations on the Bank's ability to make capital distributions to the Company, and the amount of cash at the holding company.

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

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


June 30,


September 30,


June 30,


2018


2017


2017


(Dollars in thousands)

Stockholders' equity

$

1,341,325



$

1,368,313



$

1,358,986


Equity to total assets at end of period

14.8%



14.9%



14.9%


The following table presents a reconciliation of total to net shares outstanding as of June 30, 2018.

Total shares outstanding

138,256,735


Less unallocated ESOP shares and unvested restricted stock

(3,727,507)


Net shares outstanding

134,529,228


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, 2018, the Bank and Company exceeded all regulatory capital requirements.  The following table presents the Bank's regulatory capital ratios at June 30, 2018.




Regulatory




Requirement For


Bank


Well-Capitalized


Ratios


Status

Tier 1 leverage ratio

11.0%


5.0%


Common equity tier 1 capital ratio

26.2


6.5


Tier 1 capital ratio

26.2


8.0


Total capital ratio

26.4


10.0







A reconciliation of the Bank's equity under GAAP to regulatory capital amounts as of June 30, 2018 is as follows (dollars in thousands):

Total Bank equity as reported under GAAP

$

1,172,779


Accumulated Other Comprehensive Income ("AOCI")

(3,763)

Total tier 1 capital

1,169,016

ACL

8,344

Total capital

$

1,177,360







Capitol Federal Financial, Inc. is the holding company for the Bank.  The Bank has 48 branch locations in Kansas and Missouri, and is one of the largest residential lenders in the State of Kansas.  News and other information about the Company can be found at the Bank's website, http://www.capfed.com.

Except for the historical information contained in this press release, the matters discussed may be deemed to be "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995.  These forward-looking statements include statements about our beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions.  The words "may," "could," "should," "would," "will," "believe," "anticipate," "estimate," "expect," "intend," "plan," and similar expressions are intended to identify forward-looking statements.  Forward-looking statements 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, and the possibility that costs or difficulties relating to integration matters might be greater than expected, 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.

SUPPLEMENTAL FINANCIAL INFORMATION


CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS (Unaudited)

(Dollars in thousands, except per share amounts)



June 30,


September 30,


2018


2017

ASSETS:




Cash and cash equivalents (includes interest-earning deposits of $174,490 and $340,748)

$

182,078



$

351,659


Securities:




Available-for-sale ("AFS"), at estimated fair value (amortized cost of $556,257 and $410,541)

555,361



415,831


Held-to-maturity at amortized cost (estimated fair value of $654,965 and $833,009)

664,522



827,738


Loans receivable, net (ACL of $8,344 and $8,398)

7,239,384



7,195,071


FHLB stock, at cost

100,694



100,954


Premises and equipment, net

85,604



84,818


Other assets

221,094



216,845


TOTAL ASSETS

$

9,048,737



$

9,192,916






LIABILITIES:




Deposits

$

5,323,083



$

5,309,868


FHLB borrowings

2,174,816



2,173,808


Repurchase agreements

100,000



200,000


Advance payments by borrowers for taxes and insurance

39,700



63,749


Income taxes payable, net



530


Deferred income tax liabilities, net

18,525



24,458


Accounts payable and accrued expenses

51,288



52,190


Total liabilities

7,707,412



7,824,603






STOCKHOLDERS' EQUITY:




Preferred stock, $0.01 par value; 100,000,000 shares authorized, no shares issued or outstanding




Common stock, $0.01 par value; 1,400,000,000 shares authorized, 138,256,735 and 138,223,835
shares issued and outstanding as of June 30, 2018 and September 30, 2017, respectively

1,383



1,382


Additional paid-in capital

1,168,325



1,167,368


Unearned compensation, ESOP

(36,756)



(37,995)


Retained earnings

204,610



234,640


AOCI, net of tax

3,763



2,918


Total stockholders' equity

1,341,325



1,368,313


TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

9,048,737



$

9,192,916


 


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,


2018


2018


2018


2017

INTEREST AND DIVIDEND INCOME:








Loans receivable

$

64,893



$

64,194



$

193,276



$

189,064


Cash and cash equivalents

7,221



7,895



22,230



12,720


MBS

5,921



5,390



16,563



18,374


FHLB stock

2,819



3,201



9,115



9,153


Investment securities

1,307



1,094



3,395



3,301


Total interest and dividend income

82,161



81,774



244,579



232,612










INTEREST EXPENSE:








FHLB borrowings

18,501



18,772



55,190



50,772


Deposits

13,587



12,480



38,028



31,655


Repurchase agreements

640



633



2,665



4,461


Total interest expense

32,728



31,885



95,883



86,888










NET INTEREST INCOME

49,433



49,889



148,696



145,724










PROVISION FOR CREDIT LOSSES








NET INTEREST INCOME AFTER








   PROVISION FOR CREDIT LOSSES

49,433



49,889



148,696



145,724










NON-INTEREST INCOME:








Retail fees and charges

3,915



3,670



11,550



11,123


Income from BOLI

510



276



1,320



1,669


Other non-interest income

999



1,487



3,345



3,509


Total non-interest income

5,424



5,433



16,215



16,301










NON-INTEREST EXPENSE:








Salaries and employee benefits

11,936



11,167



33,631



32,388


Information technology and related expense

3,363



3,622



10,316



8,524


Occupancy, net

2,787



2,839



8,391



8,098


Deposit and loan transaction costs

1,437



1,313



4,157



3,918


Regulatory and outside services

1,628



1,151



3,919



3,994


Advertising and promotional

1,490



1,337



3,512



3,275


Federal insurance premium

813



847



2,512



2,651


Office supplies and related expense

455



442



1,339



1,470


Other non-interest expense

602



880



2,368



1,861


Total non-interest expense

24,511



23,598



70,145



66,179


INCOME BEFORE INCOME TAX EXPENSE

30,346



31,724



94,766



95,846


INCOME TAX EXPENSE

7,974



8,394



17,228



32,311


NET INCOME

$

22,372



$

23,330



$

77,538



$

63,535


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,


2018


2018


2018


2017


(Dollars in thousands, except per share amounts)

Net income

$

22,372



$

23,330



$

77,538



$

63,535


Income allocated to participating securities

(9)



(10)



(32)



(36)


Net income available to common stockholders

$

22,363



$

23,320



$

77,506



$

63,499










Average common shares outstanding

134,401,188



134,386,469



134,386,678



133,962,680


Average committed ESOP shares outstanding

83,052



41,758



41,602



41,601


Total basic average common shares outstanding

134,484,240



134,428,227



134,428,280



134,004,281










Effect of dilutive stock options

45,713



47,001



62,275



185,477










Total diluted average common shares outstanding

134,529,953



134,475,228



134,490,555



134,189,758










Net earnings per share:








Basic

$

0.17



$

0.17



$

0.58



$

0.47


Diluted

$

0.17



$

0.17



$

0.58



$

0.47










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

578,777



598,195


541,493


202,718

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, 2018


March 31, 2018


September 30, 2017






% of






% of






% of


Amount


Rate


Total


Amount


Rate


Total


Amount


Rate


Total


(Dollars in thousands)

Real estate loans:


















One- to four-family:


















   Originated

$

3,931,251



3.71%



54.4%



$

3,919,353



3.69%



54.5%



$

3,959,232



3.70%



55.1%


   Correspondent purchased

2,514,929



3.56



34.8



2,490,776



3.54



34.6



2,445,311



3.53



34.0


   Bulk purchased

309,837



2.41



4.3



327,611



2.33



4.6



351,705



2.29



4.9


   Construction

27,565



3.54



0.4



28,195



3.49



0.4



30,647



3.45



0.4


   Total

6,783,582



3.59



93.9



6,765,935



3.57



94.1



6,786,895



3.56



94.4


Commercial:


















   Permanent

274,410



4.10



3.8



273,507



4.10



3.8



183,030



4.24



2.6


   Construction

44,645



4.64



0.6



25,995



4.59



0.4



86,952



3.80



1.2


   Total

319,055



4.17



4.4



299,502



4.14



4.2



269,982



4.10



3.8


      Total real estate loans

7,102,637



3.62



98.3



7,065,437



3.59



98.3



7,056,877



3.58



98.2




















Consumer loans:


















   Home equity

119,079



5.79



1.6



117,971



5.57



1.6



122,066



5.40



1.7


   Other

4,453



4.02



0.1



4,334



4.03



0.1



3,808



4.05



0.1


         Total consumer loans

123,532



5.73



1.7



122,305



5.52



1.7



125,874



5.36



1.8


Total loans receivable

7,226,169



3.66



100.0%



7,187,742



3.63



100.0%



7,182,751



3.61



100.0%




















Less:


















   ACL

8,344







8,390







8,398






   Discounts/unearned loan fees

25,124







24,996







24,962






   Premiums/deferred costs

(46,683)







(46,307)







(45,680)






Total loans receivable, net

$

7,239,384







$

7,200,663







$

7,195,071






Loan Activity:  The following table summarizes activity in the loan portfolio, along with weighted average rates where applicable, for the periods indicated, excluding changes in ACL, discounts/unearned loan fees, and premiums/deferred costs.  Loans that were paid-off as a result of refinances and loans that are sold are included in repayments.  Loan endorsements are not included in the activity in the following table because a new loan is not generated at the time of the endorsement.  The endorsed balance and rate are included in the ending loan portfolio balance and rate.  During the nine months ended June 30, 2018, the Bank endorsed $15.4 million of one- to four-family loans, reducing the average rate on those loans by 20 basis points.


For the Three Months Ended


June 30, 2018


March 31, 2018


December 31, 2017


September 30, 2017


Amount


Rate


Amount


Rate


Amount


Rate


Amount


Rate


(Dollars in thousands)

Beginning balance

$

7,187,742



3.63%



$

7,177,504



3.62%



$

7,182,751



3.61%



$

7,228,425



3.60%


Originations and refinances:
















Fixed

143,059



4.21



77,825



3.80



109,102



3.70



102,687



3.82


Adjustable

54,385



4.42



36,612



4.28



37,502



4.26



44,900



4.10


Purchases and participations:
















Fixed

78,650



4.04



120,155



3.85



85,565



3.73



76,906



3.92


Adjustable

30,017



3.49



48,062



3.61



64,689



3.87



17,046



3.33


Change in undisbursed loan funds

19,808





(25,002)





(17,706)





21,823




Repayments

(286,923)





(246,894)





(283,880)





(307,909)




Principal (charge-offs) recoveries, net

(46)





20





(28)





(88)




Other

(523)





(540)





(491)





(1,039)




Ending balance

$

7,226,169



3.66



$

7,187,742



3.63



$

7,177,504



3.62



$

7,182,751



3.61


 


For the Nine Months Ended


June 30, 2018


June 30, 2017


Amount


Rate


Amount


Rate


(Dollars in thousands)

Beginning balance

$

7,182,751



3.61%



$

6,949,522



3.60%


Originations and refinances:








Fixed

329,986



3.94



408,536



3.57


Adjustable

128,499



4.33



142,355



3.75


Purchases and participations:








Fixed

284,370



3.87



466,567



3.70


Adjustable

142,768



3.71



70,350



2.96


Change in undisbursed loan funds

(22,900)





55,206




Repayments

(817,697)





(861,899)




Principal charge-offs, net

(54)





(54)




Other

(1,554)





(2,158)




Ending balance

$

7,226,169



3.66



$

7,228,425



3.60



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, 2018


June 30, 2018


Amount


Rate


% of Total


Amount


Rate


% of Total

Fixed-rate:

(Dollars in thousands)

One- to four-family:












   <= 15 years

$

51,678



3.67%



16.9%



$

131,665



3.40%



14.9%


   > 15 years

167,293



4.27



54.7



440,018



4.02



49.7


Commercial real estate

1,000



4.00



0.3



39,049



4.13



4.4


Home equity

1,631



6.13



0.5



3,250



6.06



0.4


Other

107



11.41





374



9.16




   Total fixed-rate

221,709



4.15



72.4



614,356



3.91



69.4














Adjustable-rate:












One- to four-family:












   <= 36 months

2,568



3.37



0.8



5,111



3.11



0.6


   > 36 months

60,419



3.57



19.8



139,035



3.36



15.7


Commercial real estate

420



4.50



0.1



69,963



4.17



7.9


Home equity

20,190



5.79



6.6



54,809



5.55



6.2


Other

805



2.54



0.3



2,349



3.30



0.2


   Total adjustable-rate

84,402



4.09



27.6



271,267



4.00



30.6














Total originated, refinanced and purchased

$

306,111



4.13



100.0%



$

885,623



3.94



100.0%














Purchased and participation loans included above:












Fixed-rate:












Correspondent - one- to four-family

$

77,650



4.04





$

245,361



3.82




Participations - commercial real estate

1,000



4.00





39,009



4.13




Total fixed-rate purchased/participations

78,650



4.04





284,370



3.87
















Adjustable-rate:












Correspondent - one- to four-family

30,017



3.49





73,225



3.27




Participations - commercial real estate







69,543



4.16




Total adjustable-rate purchased/participations

30,017



3.49





142,768



3.71
















Total purchased/participation loans

$

108,667



3.89





$

427,138



3.81





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 2018, 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, 2018


March 31, 2018


September 30, 2017




% 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

$

3,931,251



58.2%



768



63%



$

137



$

3,919,353



58.2%



768



62%



$

136



$

3,959,232



58.6%



767



63%



$

135


Correspondent purchased

2,514,929



37.2



764



67



378



2,490,776



37.0



764



67



377



2,445,311



36.2



764



68



375


Bulk purchased

309,837



4.6



759



62



305



327,611



4.8



759



62



305



351,705



5.2



757



63



305



$

6,756,017



100.0%



766



64



186



$

6,737,740



100.0%



766



64



185



$

6,756,248



100.0%



765



65



182


One- to Four-Family Loan Commitments - The following table summarizes our one- to four-family loan origination and refinance commitments and one- to four-family correspondent loan purchase commitments as of June 30, 2018, 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

$

10,638



$

31,613



$

15,352



$

57,603



4.09%


Correspondent

4,761



58,655



8,872



72,288



4.30



$

15,399



$

90,268



$

24,224



$

129,891



4.21












Rate

3.80%



4.38%



3.81%






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, $20.6 million and $59.0 million, respectively, were refinanced from other lenders.


For the Three Months Ended


For the Nine Months Ended


June 30, 2018


June 30, 2018






Credit






Credit


Amount


LTV


Score


Amount


LTV


Score


(Dollars in thousands)

Originated

$

159,771



78%



762



$

341,407



77%



762


Refinanced by Bank customers

14,520



66



744



55,836



67



750


Correspondent purchased

107,667



73



766



318,586



73



765



$

281,958



76



763



$

715,829



75



763


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, 2018.



For the Three Months Ended


For the Nine Months Ended



June 30, 2018


June 30, 2018

State


Amount


% of Total


Rate


Amount


% of Total


Rate



(Dollars in thousands)

Kansas


$

150,867



53.5%



4.08%



$

350,282



48.9%



3.83%


Missouri


52,081



18.5



4.05



131,854



18.4



3.80


Texas


40,621



14.4



3.83



128,773



18.0



3.66


Other states


38,389



13.6



3.84



104,920



14.7



3.67




$

281,958



100.0%



4.01



$

715,829



100. 0%



3.77


Commercial Real Estate Loans:  During the current year nine month period, the Bank entered into commercial real estate loan participations of $108.6 million, which included $102.6 million of commercial real estate construction loans.  Substantially all of the $102.6 million of commercial real estate construction loans had not yet been funded as of June 30, 2018.

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, 2018.  Based on the terms of the construction loans as of June 30, 2018, of the $142.5 million of undisbursed amounts in the table, which does not include outstanding commitments, $29.8 million is projected to be disbursed by September 30, 2018, and an additional $88.0 million is projected to be disbursed by June 30, 2019.  It is possible that not all of the funds will be disbursed due to the nature of the funding of construction projects.  Included in the table are fixed-rate loans totaling $347.3 million at a weighted average rate of 4.13% and adjustable-rate loans totaling $201.1 million at a weighted average rate of 4.69%.  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, 2018 having shorter terms to maturity.  Additionally, the credit risk for most of the Bank's commercial real estate borrowing relationships is mitigated due to the amount of equity injected into the projects, strong debt service coverage ratios, and the liquidity, personal cash flow and net worth of the guarantors.  Several of these borrowing relationships have a preference for fixed-rate loans and the market interest rates are typically lower for these types of borrowers.


Unpaid


Undisbursed


Gross Loan


Outstanding




% of


Principal


Amount


Amount


Commitments


Total


Total


(Dollars in thousands)

Accommodation and food services

$

144,640



$

35,416



$

180,056



$

24,000



$

204,056



37.2%


Health care and social assistance

71,871



61,326



133,197



27,941



161,138



29.4


Real estate rental and leasing

35,744



23,813



59,557





59,557



10.9


Multi-family

9,997



20,806



30,803



24,783



55,586



10.1


Arts, entertainment, and recreation

32,700





32,700





32,700



6.0


Retail trade

17,653



1,159



18,812



10,100



28,912



5.3


Manufacturing

6,334





6,334





6,334



1.1


Other

116





116





116





$

319,055



$

142,520



$

461,575



$

86,824



$

548,399



100.0%














Weighted average rate

4.17%



4.53%



4.28%



4.62%



4.34%




The following table summarizes the Bank's commercial real estate loans and loan commitments by state as of June 30, 2018.


Unpaid


Undisbursed


Gross Loan


Outstanding




% of


Principal


Amount


Amount


Commitments


Total


Total


(Dollars in thousands)

Texas

$

124,175



$

48,453



$

172,628



$

29,900



$

202,528



36.9%


Missouri

97,931



71,378



169,309



32,141



201,450



36.8


Kansas

73,474



383



73,857





73,857



13.5


Kentucky







24,783



24,783



4.5


Nebraska

144



20,806



20,950





20,950



3.8


Colorado

7,798





7,798





7,798



1.4


Arkansas

7,789





7,789





7,789



1.4


California

6,334





6,334





6,334



1.2


Montana

1,410



1,500



2,910





2,910



0.5



$

319,055



$

142,520



$

461,575



$

86,824



$

548,399



100.0%


The following table presents the Bank's commercial real estate loan portfolio and outstanding loan commitments, categorized by gross loan amount (unpaid principal plus undisbursed amounts) or outstanding loan commitment amount, as of June 30, 2018.


Count


Amount


(Dollars in thousands)

Greater than $30 million

4



$

155,742


>$15 to $30 million

11



264,155


>$10 to $15 million

3



37,152


>$5 to $10 million

3



20,023


$1 to $5 million

22



63,079


Less than $1 million

19



8,248



62



$

548,399


Asset Quality

The following tables present loans 30 to 89 days delinquent, non-performing loans, and OREO as of the dates indicated.  Of the loans 30 to 89 days delinquent at June 30, 2018, approximately 68% were 59 days or less delinquent.  Non-performing loans are loans that are 90 or more days delinquent or in foreclosure, and nonaccrual loans that are less than 90 days delinquent but are required to be reported as nonaccrual pursuant to Office of the Comptroller of the Currency ("OCC") reporting requirements even if the loans are current.  Non-performing assets include non-performing loans and OREO.  Over the past 12 months, OREO properties acquired in settlement of loans were owned by the Bank, on average, for approximately five months before they were sold.


Loans Delinquent for 30 to 89 Days at:


June 30, 2018


March 31, 2018


December 31, 2017


September 30, 2017


June 30, 2017


Number


Amount


Number


Amount


Number


Amount


Number


Amount


Number


Amount


(Dollars in thousands)

One- to four-family:




















   Originated

104



$

7,639



106



$

8,476



129



$

11,435



129



$

13,257



120



$

10,455


   Correspondent purchased

6



1,757



5



744



4



1,118



8



1,827



5



1,278


   Bulk purchased

16



3,773



17



4,182



21



4,691



22



3,194



15



2,511


Commercial

1



40


















Consumer:




















   Home equity

21



341



21



349



32



604



30



467



30



412


   Other

9



22



3



7



6



33



5



33



5



14



157



$

13,572



152



$

13,758



192



$

17,881



194



$

18,778



175



$

14,670


30 to 89 days delinquent loans
to total loans receivable, net



0.19%





0.19%





0.25%





0.26%





0.20%


 


Non-Performing Loans and OREO at:


June 30, 2018


March 31, 2018


December 31, 2017


September 30, 2017


June 30, 2017


Number


Amount


Number


Amount


Number


Amount


Number


Amount


Number


Amount


(Dollars in thousands)

Loans 90 or More Days Delinquent or in Foreclosure:



















One- to four-family:




















   Originated

64



$

5,043



67



$

6,434



67



$

5,981



67



$

5,515



50



$

4,264


   Correspondent purchased

4



863



4



1,151



2



553



1



91






   Bulk purchased

8



2,597



12



3,325



14



3,693



13



3,371



18



4,805


Consumer:




















   Home equity

25



423



24



423



25



511



21



406



27



484


   Other

2



2



4



5



1



3



1



4



2



10



103



8,928



111



11,338



109



10,741



103



9,387



97



9,563






















Loans 90 or more days delinquent or in foreclosure as a percentage of total loans



0.12%





0.16%





0.15%





0.13%





0.13%






















Nonaccrual loans less than 90 Days Delinquent:(1)




















One- to four-family:




















   Originated

24



$

2,469



27



$

2,961



32



$

3,385



50



$

4,567



89



$

9,493


   Correspondent purchased

1



95







3



768



8



1,690



9



1,589


   Bulk purchased

1



340



1



342



2



442



4



846



3



1,023


Consumer:




















   Home equity

4



68



3



55



5



86



7



113



12



251



30



2,972



31



3,358



42



4,681



69



7,216



113



12,356


Total non-performing loans

133



11,900



142



14,696



151



15,422



172



16,603



210



21,919






















Non-performing loans as a percentage of total loans


0.16%





0.20%





0.21%





0.23%





0.30%






















OREO:




















One- to four-family:




















   Originated(2)

4



$

208



2



$

232



2



$

40



4



$

58



9



$

200


   Bulk purchased

2



689



1



454



2



768



5



1,279



5



1,671


Consumer:




















   Home equity









1



67



1



67



1



82



6



897



3



686



5



875



10



1,404



15



1,953


Total non-performing assets

139



$

12,797



145



$

15,382



156



$

16,297



182



$

18,007



225



$

23,872






















Non-performing assets as a percentage of total assets


0.14%





0.17%





0.18%





0.20%





0.26%



(1)

Represents loans required to be reported as nonaccrual pursuant to regulatory reporting requirements even if the loans are current.  At June 30, 2018, March 31, 2018, December 31, 2017, September 30, 2017, and June 30, 2017, this amount was comprised of $990 thousand, $935 thousand, $1.8 million, $1.8 million, and $2.7 million, respectively, of loans that were 30 to 89 days delinquent and were reported as such, and $2.0 million, $2.4 million, $2.9 million, $5.4 million, and $9.7 million, respectively, of loans that were current.

(2)

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.

The following tables present ACL activity and related ratios at the dates and for the periods indicated.


For the Three Months Ended


June 30,


March 31,


December 31,


September 30,


June 30,


2018


2018


2017


2017


2017


(Dollars in thousands)

Balance at beginning of period

$

8,390



$

8,370



$

8,398



$

8,486



$

8,447


Charge-offs: