Capitol Federal Financial, Inc. - FORM 8-K - EX-99.1 - PRESS RELEASE ANNOUNCING EARNINGS

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EX-99.2 - PRESS RELEASE ANNOUNCING CASH TRUE-UP DIVIDEND - Capitol Federal Financial, Inc.	true-updividendrelease1016.htm
8-K - CURRENT REPORT, ITEMS 2.02, 7.01, AND 9.01 - Capitol Federal Financial, Inc.	erandtrue-updividend8k1016.htm

NEWS RELEASE

FOR IMMEDIATE RELEASE

October 27, 2016

CAPITOL FEDERAL FINANCIAL, INC.

REPORTS FISCAL YEAR 2016 RESULTS

Topeka, KS - Capitol Federal® Financial, Inc. (NASDAQ: CFFN) (the "Company") announced results today for the fiscal year ended September 30, 2016. Detailed results will be available in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2016, which will be filed with the Securities and Exchange Commission ("SEC") on or about November 29, 2016 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 fourth quarter include:


•	net income of $20.7 million, including $616 thousand from the daily leverage strategy;


•	basic and diluted earnings per share of $0.16;


•	net interest margin of 1.74% (2.09% excluding the effects of the daily leverage strategy); and


•	dividends paid of $11.3 million, or $0.085 per share.

Highlights for the fiscal year include:


•	net income of $83.5 million, including $2.3 million from the daily leverage strategy;


•	basic and diluted earnings per share of $0.63;


•	loan portfolio growth of 5%;


•	deposit portfolio growth of 7%;


•	net interest margin of 1.75% (2.10% excluding the effects of the daily leverage strategy);


•	dividends paid of $111.8 million, or $0.84 per share; and


•	declared a fiscal year 2016 cash true-up dividend of $0.29 per share, payable on December 2, 2016.

Comparison of Operating Results for the Years Ended September 30, 2016 and 2015

For fiscal year 2016, the Company recognized net income of $83.5 million, or $0.63 per share, compared to net income of $78.1 million, or $0.58 per share, for fiscal year 2015. The $5.4 million, or 6.9%, increase in net income was due primarily to a $2.4 million increase in net interest income and a $2.2 million increase in non-interest income. The $2.4 million, or 1.3%, increase in net interest income from the prior fiscal year was due primarily to an $8.2 million decrease in interest expense on term borrowings, partially offset by a $4.7 million increase in interest expense on deposits.

Net income attributable to the daily leverage strategy was $2.3 million during the current fiscal year, compared to $2.8 million for the prior fiscal year. The decrease was due to the average borrowings rate on the Federal Home Loan Bank Topeka ("FHLB") line of credit increasing more than the average yield earned on the cash balances held at the Federal Reserve Bank.

The net interest margin increased two basis points, from 1.73% for the prior fiscal year to 1.75% for the current fiscal year. Excluding the effects of the daily leverage strategy, the net interest margin would have increased three basis points, from 2.07% for the prior fiscal year to 2.10% for the current fiscal year. The increase in the net interest margin was due mainly to a decrease in interest expense on term borrowings, partially offset by an increase in interest expense on deposits.

Interest and Dividend Income

The weighted average yield on total interest-earning assets increased three basis points, from 2.71% for the prior fiscal year to 2.74% for the current fiscal year, and the average balance of interest-earning assets increased $25.4 million from the prior fiscal year. Absent the impact of the daily leverage strategy, the weighted average yield on total interest-earning assets would have decreased one basis point, from 3.22% for the prior fiscal year to 3.21% for the current fiscal year, while the average balance would have increased $40.5 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 Year Ended
	September 30,				Change Expressed in:
	2016		2015		Dollars			Percent
	(Dollars in thousands)
INTEREST AND DIVIDEND INCOME:
Loans receivable	$	243,311	$	235,500	$	7,811		3.3	%
Mortgage-backed securities ("MBS")	29,794		36,647		(6,853		)	(18.7	)
FHLB stock	12,252		12,556		(304		)	(2.4	)
Cash and cash equivalents	9,831		5,477		4,354			79.5
Investment securities	5,925		7,182		(1,257		)	(17.5	)
Total interest and dividend income	$	301,113	$	297,362	$	3,751		1.3

The increase in interest income on loans receivable was due to a $376.4 million increase in the average balance of the portfolio, partially offset by a nine basis point decrease in the weighted average yield on the portfolio, to 3.60% for the current fiscal year. Loan growth was primarily funded through cash flows from the MBS and investment securities portfolios along with deposit growth. The decrease in the weighted average yield was due primarily to loans repricing to lower market rates and the origination and purchase of loans between periods at rates less than the existing portfolio rate, along with an increase in the amortization of premiums paid for correspondent loans.

The decrease in interest income on the MBS portfolio was due primarily to a $265.5 million decrease in the average balance of the portfolio as cash flows not reinvested were used to fund loan growth. Additionally, the weighted average yield on the MBS portfolio decreased seven basis points, from 2.25% during the prior fiscal year to 2.18% for the current fiscal year. The decrease in the weighted average yield was due primarily to an increase in the impact of net premium amortization. Net premium amortization of $5.0 million during the current fiscal year decreased the weighted average yield on the portfolio by 37 basis points. During the prior fiscal year, $5.4 million of net premiums were amortized, which decreased the weighted average yield on the portfolio by 32 basis points. As of September 30, 2016, the remaining net balance of premiums on our portfolio of MBS was $13.0 million.

The increase in interest income on cash and cash equivalents was due primarily to a 20 basis point increase in the weighted average yield resulting from an increase in the yield earned on balances held at the Federal Reserve Bank. The decrease in interest income on investment securities was due primarily to a $123.8 million decrease in the average balance, partially offset by a four basis point increase in the weighted average yield on the portfolio. Cash flows not reinvested in the portfolio were used to fund loan growth.

Interest Expense

The weighted average rate paid on total interest-bearing liabilities decreased one basis point, from 1.12% for the prior fiscal year to 1.11% for the current fiscal year, while the average balance of interest-bearing liabilities increased $138.5 million from the prior year fiscal year. Absent the impact of the daily leverage strategy, the weighted average rate paid on total interest-bearing liabilities would have decreased seven basis points from the prior year fiscal year, to 1.28% for the current fiscal year, due primarily to a decrease in the cost of term borrowings, while the average balance of interest-bearing liabilities would have increased $154.1 million due primarily to growth in deposits. 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 Year Ended
	September 30,				Change Expressed in:
	2016		2015		Dollars			Percent
	(Dollars in thousands)
INTEREST EXPENSE:
FHLB advances	$	54,969	$	62,437	$	(7,468	)	(12.0	)%
FHLB line of credit	10,122		5,360		4,762			88.8
Deposits	37,859		33,119		4,740			14.3
Repurchase agreements	5,981		6,678		(697		)	(10.4	)
Total interest expense	$	108,931	$	107,594	$	1,337		1.2

The decrease in interest expense on FHLB advances was due mainly to a 20 basis point decrease in the weighted average rate paid on the portfolio, to 2.23% for the current fiscal year, along with a $102.4 million decrease in the average balance due to not replacing all of the FHLB advances that matured during the current fiscal year. The decrease in the weighted average rate paid was due primarily to the prepayment of a $175.0 million advance late in the prior fiscal year with an effective rate of 5.08%, which was replaced with a $175.0 million advance with an effective rate of 2.18%. The increase in interest expense on FHLB line of credit borrowings was due primarily to a 23 basis point increase in the weighted average rate paid on the borrowings used to fund the daily leverage strategy.

The increase in interest expense on deposits was due primarily to a five basis point increase in the weighted average rate, to 0.75% for the current fiscal year, along with growth in the portfolio. The increase in weighted average rate was primarily in the retail certificates of deposit portfolio. The average balance of the deposit portfolio increased $270.3 million for the current fiscal year, with the majority of the increase in the retail deposit portfolio, specifically the certificates of deposit and checking portfolios. The decrease in interest expense on repurchase agreements was due to the maturity late in the prior fiscal year of a $20.0 million repurchase agreement at a rate of 4.45% that was not replaced.

Provision for Credit Losses

Capitol Federal Savings Bank (the "Bank") recorded a negative provision for credit losses during the current fiscal year of $750 thousand, compared to a provision for credit losses during the prior year fiscal year of $771 thousand. The negative provision for credit losses during the current fiscal year was due to the continued low level of net loan charge-offs, due partially to improving collateral values, and improving delinquent loan ratios. The collateral value and historical loss factors within our allowance for credit losses ("ACL") formula analysis model decreased during the current fiscal year due to the improvement in collateral values and reduction in net loan charge-offs. Net loan charge-offs were $153 thousand for the current fiscal year, composed of charge-offs totaling $630 thousand, partially offset by recoveries of $477 thousand. Net loan charge-offs were $555 thousand for the prior fiscal year. At September 30, 2016, loans 30 to 89 days delinquent were 0.33% of total loans and loans 90 or more days delinquent or in foreclosure were 0.24% of total loans. At September 30, 2015, loans 30 to 89 days delinquent were 0.41% of total loans and loans 90 or more days delinquent or in foreclosure were 0.25% 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 Year Ended
	September 30,				Change Expressed in:
	2016		2015		Dollars			Percent
	(Dollars in thousands)
NON-INTEREST INCOME:
Retail fees and charges	$	14,835	$	14,897	$	(62	)	(0.4	)%
Income from bank-owned life insurance ("BOLI")	3,420		1,150		2,270			197.4
Other non-interest income	5,057		5,093		(36		)	(0.7	)
Total non-interest income	$	23,312	$	21,140	$	2,172		10.3

The increase in income from BOLI was due mainly to the purchase of a new BOLI investment late in the prior fiscal year, as well as to the receipt of death benefits in the current fiscal year and no such proceeds in the prior fiscal year.

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 Year Ended
	September 30,				Change Expressed in:
	2016		2015		Dollars			Percent
	(Dollars in thousands)
NON-INTEREST EXPENSE:
Salaries and employee benefits	$	42,378	$	43,309	$	(931	)	(2.1	)%
Occupancy, net	10,576		9,944		632			6.4
Information technology and communications	10,540		10,360		180			1.7
Federal insurance premium	5,076		5,495		(419		)	(7.6	)
Deposit and loan transaction costs	5,585		5,417		168			3.1
Regulatory and outside services	5,645		5,347		298			5.6
Advertising and promotional	4,609		4,547		62			1.4
Low income housing partnerships	3,872		4,572		(700		)	(15.3	)
Office supplies and related expense	2,640		2,088		552			26.4
Other non-interest expense	3,384		3,290		94			2.9
Total non-interest expense	$	94,305	$	94,369	$	(64	)	(0.1	)

The decrease in salaries and employee benefits was due primarily to a decrease in stock compensation resulting from the final vesting of a large stock grant in the second quarter of the current fiscal year and a decrease in employee benefit expenses. The increase in occupancy, net expense was due mainly to non-capitalizable costs and depreciation associated with the remodel of the Bank's Kansas City market area operations center. The decrease in federal insurance premiums was due primarily to a decrease in the Federal Deposit Insurance Corporation ("FDIC") base assessment rate. The decrease in the FDIC base assessment rate was effective July 1, 2016 and was the result of the FDIC Deposit Insurance Fund reaching 1.15% of total estimated insured deposits of the banking system on June 30, 2016. We anticipate our federal insurance premium expense will decrease approximately $1.5 million in fiscal year 2017, as compared to the current fiscal year, due to the decrease in the FDIC base assessment rate. The decrease in low income housing partnerships expense was due primarily to lower impairments in the current fiscal year as compared to the prior fiscal year. The increase in office supplies and related expense was due primarily to the purchase of cards enabled with chip card technology.

The Company's efficiency ratio was 43.76% for the current fiscal year compared to 44.74% for the prior fiscal year. The change in the efficiency ratio was due primarily to an increase in both net interest income and non-interest income. 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.

The Bank invests in low income housing partnerships that make equity investments in affordable housing properties and is a limited partner in these partnerships. The Bank has been accounting for these partnerships using the equity method of accounting as two of the Bank's officers were involved in the operational management of the low income housing partnership investment group. Effective September 30, 2016, those two Bank officers discontinued their involvement in the operational management of the investment group. Starting October 1, 2016, the Bank began using the proportional method of accounting for its low income housing partnership investments. In fiscal year 2017, the Bank will no longer report low income housing partnership expenses in non-interest expense; rather, the pretax operating losses and related tax benefits from the investments will be reported as a component of income tax expense. If this change would have occurred during fiscal year 2016 our efficiency ratio would have been approximately 180 basis points lower. The change in accounting for low income housing partnerships would have had a negligible impact on the Company's net income for fiscal year 2016.

Income Tax Expense

Income tax expense was $38.4 million for the current fiscal year compared to $37.7 million for the prior fiscal year. The effective tax rate for the current fiscal year was 31.5% compared to 32.5% for the prior fiscal year. The decrease in the effective tax rate was due primarily to an increase in nontaxable income related to BOLI and higher low income housing tax credits in the current fiscal year. Management anticipates the effective tax rate for fiscal year 2017 will be approximately 34%. The increase in the effective tax rate in fiscal year 2017 over the current fiscal year is due mainly to the change in the accounting treatment of our low income housing partnerships, which accounts for approximately 250 basis points of the projected fiscal year 2017 estimated tax rate.

Comparison of Operating Results for the Three Months Ended September 30, 2016 and June 30, 2016

Net income increased $147 thousand, or 0.7%, from the quarter ended June 30, 2016 to $20.7 million, or $0.16 per share, for the quarter ended September 30, 2016, due primarily to a negative provision for credit losses in the current quarter, partially offset by an increase in non-interest expense. Net income attributable to the daily leverage strategy was $616 thousand during the current quarter compared to $532 thousand for the prior quarter. The increase in net income attributable to the daily leverage strategy was due to a decrease in the FDIC base assessment rate effective July 1, 2016, as a portion of federal insurance premiums are attributable to the daily leverage strategy due to the increase in average assets resulting from the strategy. The Company's efficiency ratio was 44.85% for the current quarter compared to 43.72% for the prior quarter. The change in the efficiency ratio was due primarily to a typical fiscal year-end increase in non-interest expense.

Net interest income decreased $198 thousand, or 0.4%, from the prior quarter to $47.7 million for the current quarter. The decrease was due primarily to an increase in interest expense on deposits, specifically an increase in the average cost of our certificate of deposit portfolio. The net interest margin increased one basis point from 1.73% for the prior quarter to 1.74% for the current quarter. Excluding the effects of the daily leverage strategy, the net interest margin would have been 2.09% for the current quarter, unchanged from the prior quarter.

Interest and Dividend Income

The weighted average yield on total interest-earning assets for the current quarter increased two basis points from the prior quarter, to 2.75%, while the average balance of interest-earning assets decreased $51.6 million between the two periods. Absent the impact of the daily leverage strategy, the weighted average yield on total interest-earning assets would have increased two basis points from the prior quarter, to 3.21%, while the average balance would have decreased $51.9 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
	September 30,		June 30,		Change Expressed in:
	2016		2016		Dollars			Percent
	(Dollars in thousands)
INTEREST AND DIVIDEND INCOME:
Loans receivable	$	61,516	$	60,840	$	676		1.1	%
MBS	6,860		7,401		(541		)	(7.3	)
FHLB stock	3,044		3,050		(6		)	(0.2	)
Cash and cash equivalents	2,774		2,730		44			1.6
Investment securities	1,401		1,506		(105		)	(7.0	)
Total interest and dividend income	$	75,595	$	75,527	$	68		0.1

The increase in interest income on loans receivable was due to a $101.2 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 3.57% for the current quarter. The loan growth was largely funded with cash flows from the MBS and investment securities portfolios during the current quarter.

The decrease in interest income on MBS was due mainly to a $93.8 million decrease in the average balance of the portfolio as cash flows were used to fund loan growth and pay off certain maturing FHLB advances. Additionally, the weighted average yield on the MBS portfolio decreased two basis points, to 2.12% for the current quarter due to an increase in the impact of net premium amortization. During the current quarter, $1.3 million of net premiums on MBS were amortized, which decreased the weighted average yield on the portfolio by 42 basis points. During the prior quarter, $1.4 million of net premiums were amortized, which decreased the weighted average yield on the portfolio by 40 basis points.

The decrease in interest income on investment securities was due to a $69.9 million decrease in the average balance of the portfolio as cash flows were used to fund loan growth and pay off certain maturing FHLB advances, partially offset by a 10 basis point increase in the weighted average yield on the portfolio, to 1.30% for the current quarter. The increase in weighted average yield was due to an increase in the impact of net discount accretion resulting from the call of securities during the current quarter.

Interest Expense

The weighted average rate paid on total interest-bearing liabilities for the current quarter was 1.13%, unchanged from the prior quarter, and the average balance of interest-bearing liabilities decreased $36.9 million between the two periods. Absent the impact of the daily leverage strategy, the weighted average rate paid on total interest-bearing liabilities for the current quarter would have been 1.29%, unchanged from the prior quarter, and the average balance would have decreased $37.1 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
	September 30,		June 30,		Change Expressed in:
	2016		2016		Dollars			Percent
	(Dollars in thousands)
INTEREST EXPENSE:
FHLB advances	$	13,400	$	13,515	$	(115	)	(0.9	)%
FHLB line of credit	2,862		2,846		16			0.6
Deposits	10,098		9,749		349			3.6
Repurchase agreements	1,503		1,487		16			1.1
Total interest expense	$	27,863	$	27,597	$	266		1.0

The decrease in interest expense on FHLB advances was due to a $61.5 million decrease in the average balance of the portfolio. During the current quarter, a $100.0 million advance with an effective rate of 0.83% matured and was not renewed or replaced.

The increase in interest expense on deposits was due primarily to a two basis point increase in the weighted average rate paid on the deposit portfolio, to 0.79% for the current quarter, due mainly to an increase in the weighted average rate paid on the certificate of deposit portfolio, as well as a $32.1 million increase in the average balance of the deposit portfolio.

Provision for Credit Losses

The Bank recorded a negative provision for credit losses during the current quarter of $750 thousand compared to no provision for credit losses recorded during the prior quarter. The negative provision for credit losses during the current quarter was due to the continued improvement in loan performance and collateral value trends, which is being reflected in our ACL formula analysis model. Net loan charge-offs were $22 thousand for the current quarter. At September 30, 2016, loans 30 to 89 days delinquent were 0.33% of total loans and loans 90 or more days delinquent or in foreclosure were 0.24% 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
	September 30,		June 30,		Change Expressed in:
	2016		2016		Dollars			Percent
	(Dollars in thousands)
NON-INTEREST INCOME:
Retail fees and charges	$	3,738	$	3,725	$	13		0.3	%
Income from BOLI	610		648		(38		)	(5.9	)
Other non-interest income	1,343		1,056		287			27.2
Total non-interest income	$	5,691	$	5,429	$	262		4.8

The increase in other non-interest income was due primarily to an increase in insurance commissions resulting from the receipt of annual commissions from certain insurance providers during the current quarter.

Non-Interest Expense

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



	For the Three Months Ended
	September 30,		June 30,		Change Expressed in:
	2016		2016		Dollars			Percent
	(Dollars in thousands)
NON-INTEREST EXPENSE:
Salaries and employee benefits	$	10,774	$	10,829	$	(55	)	(0.5	)%
Occupancy, net	2,682		2,606		76			2.9
Information technology and communications	2,657		2,716		(59		)	(2.2	)
Federal insurance premium	918		1,377		(459		)	(33.3	)
Deposit and loan transaction costs	1,466		1,449		17			1.2
Regulatory and outside services	1,645		1,370		275			20.1
Advertising and promotional	1,419		1,053		366			34.8
Low income housing partnerships	1,057		721		336			46.6
Office supplies and related expense	624		545		79			14.5
Other non-interest expense	720		661		59			8.9
Total non-interest expense	$	23,962	$	23,327	$	635		2.7

The decrease in federal insurance premiums was due to a decrease in the FDIC base assessment rate effective July 1, 2016. The increase in regulatory and outside services was due primarily to the timing of external audit fees. The increase in advertising and promotional expense was due mainly to the timing of media campaigns and sponsorships. The increase in low income housing partnerships expense was due primarily to an increase in amortization expense.

Income Tax Expense

Income tax expense was $9.5 million for the current quarter, unchanged from the prior quarter. The effective tax rate for the current quarter was 31.5% compared to 31.6% for the prior quarter.

Financial Condition as of September 30, 2016

Total assets were $9.27 billion at September 30, 2016 compared to $9.84 billion at September 30, 2015. The $576.9 million decrease was due primarily to a $490.9 million decrease in cash and cash equivalents and a $40.6 million decrease in FHLB stock, both due primarily to the removal of the entire daily leverage strategy at September 30, 2016 compared to $700.0 million of the daily leverage strategy that remained in place at September 30, 2015. The entire $2.10 billion daily leverage strategy was reinstated on October 3, 2016. Additionally, the securities portfolio decreased $401.1 million, which was partially offset by a $333.0 million increase in loans receivable, net.

The loans receivable portfolio, net, increased to $6.96 billion at September 30, 2016, from $6.63 billion at September 30, 2015. This growth was primarily funded with cash flows from the securities portfolio and growth in deposits. During the current fiscal year, the Bank originated and refinanced $772.9 million of loans with a weighted average rate of 3.55% and purchased $662.8 million of loans from correspondent lenders with a weighted average rate of 3.47%. The Bank also entered into participations of $201.1 million of commercial real estate loans with a weighted average rate of 4.02%, the majority of which had not yet been funded as of September 30, 2016.

Total liabilities were $7.87 billion at September 30, 2016 compared to $8.43 billion at September 30, 2015. The $553.7 million decrease was due primarily to a $898.1 million decrease in FHLB borrowings, largely as a result of the removal of the entire daily leverage strategy at September 30, 2016, along with a $200.0 million decrease in term FHLB advances, partially offset by a $331.5 million increase in the deposit portfolio. The growth in deposits was primarily in the retail certificates of deposit, checking, and wholesale certificates of deposit portfolios, which increased $137.4 million, $75.6 million, and $57.6 million, respectively. Cash flows received from the deposit portfolio were used to pay off certain maturing FHLB advances.

Stockholders' equity was $1.39 billion at September 30, 2016 compared to $1.42 billion at September 30, 2015. The $23.3 million decrease was due primarily to the payment of $111.8 million in cash dividends, partially offset by net income of $83.5 million. The cash dividends paid during the current fiscal year totaled $0.84 per share and consisted of a $0.25 per share cash true-up dividend related to fiscal year 2015 earnings per the Company's dividend policy, a $0.25 per share True Blue Capitol Dividend, and four regular quarterly cash dividends totaling $0.34 per share.

On October 19, 2016, the Company announced a regular quarterly cash dividend of $0.085 per share, or approximately $11.3 million, payable on November 18, 2016 to stockholders of record as of the close of business on November 4, 2016. On October 27, 2016, the Company announced a fiscal year 2016 cash true-up dividend of $0.29 per share, or approximately $38.7 million, related to fiscal year 2016 earnings. The $0.29 per share cash true-up dividend was determined by taking the difference between total earnings for fiscal year 2016 and total regular quarterly cash dividends paid during fiscal year 2016, divided by the number of shares outstanding as of October 24, 2016. The cash true-up dividend is payable on December 2, 2016 to stockholders of record as of the close of business on November 18, 2016, and is the result of the Board of Directors' commitment to distribute to stockholders 100% of the annual earnings of Capitol Federal Financial, Inc. for fiscal year 2016.

At September 30, 2016, Capitol Federal Financial, Inc., at the holding company level, had $108.2 million on deposit at the Bank. For fiscal year 2017, it is the intent of the Board of Directors and management to continue with the payout of 100% of the Company's earnings to its stockholders. Dividend payments depend upon a number of factors including the Company's financial condition and results of operations, regulatory capital requirements, regulatory limitations on the Bank's ability to make capital distributions to the Company, and the amount of cash at the holding company.

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

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



	September 30,			June 30,			September 30,
	2016			2016			2015
	(Dollars in thousands)
Stockholders' equity	$	1,392,964		$	1,380,815		$	1,416,226
Equity to total assets at end of period	15.0		%	14.9		%	14.4		%

The following table presents a reconciliation of total to net shares outstanding as of September 30, 2016.



Total shares outstanding	137,486,172
Less unallocated Employee Stock Ownership Plan ("ESOP") shares and unvested restricted stock	(4,039,277	)
Net shares outstanding	133,446,895

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 September 30, 2016, the Bank and Company exceeded all regulatory capital requirements. The following table presents the Bank's regulatory capital ratios at September 30, 2016.



		Regulatory
		Requirement For
	Bank	"Well-Capitalized"
	Ratios	Status
Tier 1 leverage ratio	10.9%	5.0	%
Common equity tier 1 capital ratio	28.5	6.5
Tier 1 capital ratio	28.5	8.0
Total capital ratio	28.7	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 September 30, 2016 is as follows (dollars in thousands):



Total Bank equity as reported under GAAP	$	1,240,827
Unrealized gains on available-for-sale ("AFS") securities	(5,915		)
Total tier 1 capital	1,234,912
ACL	8,540
Total capital	$	1,243,452

The Fiscal Year 2016 Annual Meeting of Stockholders will be held on January 24, 2017, and the voting record date will be December 2, 2016. Management plans to furnish the Company's September 30, 2016 annual proxy materials to stockholders via the internet. Stockholders who are eligible to vote at the Fiscal Year 2016 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 will include the definitive proxy statement for the Fiscal Year 2016 Annual Meeting of Stockholders, and the September 30, 2016 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, and 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. These forward-looking statements include statements about our beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions. The words "may," "could," "should," "would," "will," "believe," "anticipate," "estimate," "expect," "intend," "plan," and similar expressions are intended to identify forward-looking statements. Forward-looking statements that involve risks and uncertainties, including changes in economic conditions in the Company's market area, changes in policies 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 the Bank, which would affect the ability of the Company to pay dividends in accordance with its dividend policies, competition, and other risks detailed from time to time in documents filed or furnished by the Company with the SEC. Actual results may differ materially from those currently expected. These forward-looking statements represent the Company's judgment as of the date of this release. The Company disclaims, however, any intent or obligation to update these forward-looking statements.

For further information contact:



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, except per share amounts)



	September 30,			September 30,
	2016			2015
ASSETS:
Cash and cash equivalents (includes interest-earning deposits of $267,829 and $764,816)	$	281,764		$	772,632
Securities:
AFS at estimated fair value (amortized cost of $517,791 and $744,708)	527,301			758,171
Held-to-maturity at amortized cost (estimated fair value of $1,122,867 and $1,295,274)	1,100,874			1,271,122
Loans receivable, net (ACL of $8,540 and $9,443)	6,958,024			6,625,027
FHLB stock, at cost	109,970			150,543
Premises and equipment, net	83,221			75,810
Income taxes receivable, net	—			1,071
Other assets	206,093			189,785
TOTAL ASSETS	$	9,267,247		$	9,844,161

LIABILITIES:
Deposits	$	5,164,018		$	4,832,520
FHLB borrowings	2,372,389			3,270,521
Repurchase agreements	200,000			200,000
Advance payments by borrowers for taxes and insurance	62,643			61,818
Income taxes payable, net	310			—
Deferred income tax liabilities, net	25,374			26,391
Accounts payable and accrued expenses	49,549			36,685
Total liabilities	7,874,283			8,427,935

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, 137,486,172 and 137,106,822
shares issued and outstanding as of September 30, 2016 and 2015, respectively	1,375			1,371
Additional paid-in capital	1,156,855			1,151,041
Unearned compensation, ESOP	(39,647		)	(41,299		)
Retained earnings	268,466			296,739
Accumulated other comprehensive income, net of tax	5,915			8,374
Total stockholders' equity	1,392,964			1,416,226
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	9,267,247		$	9,844,161

CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(Dollars in thousands)



	For the Three Months Ended					For the Year Ended
	September 30,			June 30,		September 30,
	2016			2016		2016			2015
INTEREST AND DIVIDEND INCOME:
Loans receivable	$	61,516		$	60,840	$	243,311		$	235,500
MBS	6,860			7,401		29,794			36,647
FHLB stock	3,044			3,050		12,252			12,556
Cash and cash equivalents	2,774			2,730		9,831			5,477
Investment securities	1,401			1,506		5,925			7,182
Total interest and dividend income	75,595			75,527		301,113			297,362

INTEREST EXPENSE:
FHLB borrowings	16,262			16,361		65,091			67,797
Deposits	10,098			9,749		37,859			33,119
Repurchase agreements	1,503			1,487		5,981			6,678
Total interest expense	27,863			27,597		108,931			107,594

NET INTEREST INCOME	47,732			47,930		192,182			189,768

PROVISION FOR CREDIT LOSSES	(750		)	—		(750		)	771
NET INTEREST INCOME AFTER
PROVISION FOR CREDIT LOSSES	48,482			47,930		192,932			188,997

NON-INTEREST INCOME:
Retail fees and charges	3,738			3,725		14,835			14,897
Income from BOLI	610			648		3,420			1,150
Other non-interest income	1,343			1,056		5,057			5,093
Total non-interest income	5,691			5,429		23,312			21,140

NON-INTEREST EXPENSE:
Salaries and employee benefits	10,774			10,829		42,378			43,309
Occupancy, net	2,682			2,606		10,576			9,944
Information technology and communications	2,657			2,716		10,540			10,360
Regulatory and outside services	1,645			1,370		5,645			5,347
Deposit and loan transaction costs	1,466			1,449		5,585			5,417
Federal insurance premium	918			1,377		5,076			5,495
Advertising and promotional	1,419			1,053		4,609			4,547
Low income housing partnerships	1,057			721		3,872			4,572
Office supplies and related expense	624			545		2,640			2,088
Other non-interest expense	720			661		3,384			3,290
Total non-interest expense	23,962			23,327		94,305			94,369
INCOME BEFORE INCOME TAX EXPENSE	30,211			30,032		121,939			115,768
INCOME TAX EXPENSE	9,513			9,481		38,445			37,675
NET INCOME	$	20,698		$	20,551	$	83,494		$	78,093

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 Year Ended
	September 30,			June 30,			September 30,
	2016			2016			2016			2015
	(Dollars in thousands, except per share amounts)
Net income	$	20,698		$	20,551		$	83,494		$	78,093
Income allocated to participating securities	(12		)	(11		)	(66		)	(116		)
Net income available to common stockholders	$	20,686		$	20,540		$	83,428		$	77,977

Average common shares outstanding	133,171,931			133,018,908			132,982,815			135,321,235
Average committed ESOP shares outstanding	124,346			83,052			62,400			62,458
Total basic average common shares outstanding	133,296,277			133,101,960			133,045,215			135,383,693

Effect of dilutive stock options	196,922			148,751			131,161			24,810

Total diluted average common shares outstanding	133,493,199			133,250,711			133,176,376			135,408,503

Net earnings per share:
Basic	$	0.16		$	0.15		$	0.63		$	0.58
Diluted	$	0.16		$	0.15		$	0.63		$	0.58

Antidilutive stock options, excluded from the diluted
average common shares outstanding calculation	711,827			875,390			886,417			1,248,744

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.



	September 30, 2016							June 30, 2016							September 30, 2015
						% of							% of							% of
	Amount			Rate		Total		Amount			Rate		Total		Amount			Rate		Total
	(Dollars in thousands)
Real estate loans:
One- to four-family:
Originated	$	4,005,615		3.74	%	57.6	%	$	4,001,131		3.78	%	58.6	%	$	4,010,424		3.84	%	60.6	%
Correspondent purchased	2,206,072			3.50		31.7		2,092,608			3.51		30.6		1,846,210			3.52		27.9
Bulk purchased	416,653			2.23		6.0		439,954			2.22		6.4		485,682			2.25		7.3
Construction	39,430			3.45		0.6		38,766			3.52		0.6		29,552			3.64		0.4
Total	6,667,770			3.56		95.9		6,572,459			3.59		96.2		6,371,868			3.63		96.2
Commercial:
Permanent	110,768			4.16		1.6		109,873			4.17		1.6		109,314			4.15		1.6
Construction	43,375			4.13		0.6		22,197			3.97		0.3		11,523			3.82		0.2
Total	154,143			4.15		2.2		132,070			4.13		1.9		120,837			4.12		1.8
Total real estate loans	6,821,913			3.58		98.1		6,704,529			3.60		98.1		6,492,705			3.64		98.0

Consumer loans:
Home equity	123,345			5.01		1.8		123,673			5.04		1.8		125,844			5.00		1.9
Other	4,264			4.21		0.1		4,568			4.17		0.1		4,179			4.03		0.1
Total consumer loans	127,609			4.99		1.9		128,241			5.01		1.9		130,023			4.97		2.0
Total loans receivable	6,949,522			3.60		100.0	%	6,832,770			3.63		100.0	%	6,622,728			3.66		100.0	%

Less:
ACL	8,540							9,312							9,443
Discounts/unearned loan fees	24,933							24,352							24,213
Premiums/deferred costs	(41,975		)					(40,017		)					(35,955		)
Total loans receivable, net	$	6,958,024						$	6,839,123						$	6,625,027

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. Loan endorsements are not included in the activity in the following tables 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 fiscal years ended September 30, 2016 and 2015, the Bank endorsed $160.0 million and $121.6 million of one- to four-family loans, respectively, reducing the average rate on those loans by 91 and 98 basis points, respectively.



	For the Three Months Ended
	September 30, 2016					June 30, 2016					March 31, 2016					December 31, 2015
	Amount			Rate		Amount			Rate		Amount			Rate		Amount			Rate
	(Dollars in thousands)
Beginning balance	$	6,832,770		3.63	%	$	6,763,980		3.64	%	$	6,661,648		3.65	%	$	6,622,728		3.66	%
Originated and refinanced:
Fixed	176,534			3.31		155,179			3.52		117,205			3.65		157,447			3.67
Adjustable	48,608			3.53		44,319			3.61		35,495			3.77		38,117			3.74
Purchased and participations:
Fixed	190,830			3.50		178,762			3.71		249,017			3.68		101,644			3.69
Adjustable	65,748			3.79		24,715			2.90		27,355			2.93		25,861			3.17
Change in undisbursed loan funds	(26,760		)			(23,431		)			(90,800		)			(1,036		)
Repayments	(337,779		)			(310,041		)			(235,202		)			(280,978		)
Principal (charge-offs) recoveries, net	(22		)			119					(8		)			(242		)
Other	(407		)			(832		)			(730		)			(1,893		)
Ending balance	$	6,949,522		3.60		$	6,832,770		3.63		$	6,763,980		3.64		$	6,661,648		3.65



	For the Year Ended
	September 30, 2016					September 30, 2015
	Amount			Rate		Amount			Rate
	(Dollars in thousands)
Beginning balance	$	6,622,728		3.66	%	$	6,237,518		3.76	%
Originated and refinanced:
Fixed	606,365			3.52		606,343			3.60
Adjustable	166,539			3.65		174,174			3.62
Purchased and participations:
Fixed	720,253			3.64		551,028			3.60
Adjustable	143,679			3.36		160,331			3.25
Change in undisbursed loan funds	(142,027		)			(38,564		)
Repayments	(1,164,000		)			(1,061,868		)
Principal charge-offs, net	(153		)			(555		)
Other	(3,862		)			(5,679		)
Ending balance	$	6,949,522		3.60		$	6,622,728		3.66

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. 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 Year Ended
	September 30, 2016						September 30, 2016
	Amount		Rate		% of Total		Amount		Rate		% of Total
Fixed-rate:	(Dollars in thousands)
One- to four-family:
<= 15 years	$	89,124	2.91	%	18.5	%	$	265,721	2.97	%	16.2	%
> 15 years	266,094		3.54		55.2		871,669		3.67		53.3
Commercial real estate	10,954		4.10		2.3		184,153		4.01		11.2
Home equity	1,017		5.71		0.2		4,247		5.71		0.3
Other	175		7.66		—		828		8.73		0.1
Total fixed-rate	367,364		3.41		76.2		1,326,618		3.59		81.1

Adjustable-rate:
One- to four-family:
<= 36 months	725		2.38		0.2		4,980		2.58		0.3
> 36 months	49,477		2.76		10.3		183,697		2.90		11.2
Commercial real estate	44,500		4.29		9.2		47,876		4.29		2.9
Home equity	19,210		4.69		4.0		71,013		4.65		4.3
Other	444		2.96		0.1		2,652		3.36		0.2
Total adjustable-rate	114,356		3.68		23.8		310,218		3.52		18.9

Total originated, refinanced and purchased	$	481,720	3.48		100.0	%	$	1,636,836	3.57		100.0	%

Purchased and participation loans included above:
Fixed-rate:
Correspondent - one- to four-family	$	180,659	3.47				$	567,014	3.56
Participations - commercial real estate	10,171		4.05				153,239		3.94
Total fixed-rate purchased/participations	190,830		3.50				720,253		3.64

Adjustable-rate:
Correspondent - one- to four-family	21,248		2.74				95,803		2.90
Participations - commercial real estate	44,500		4.29				47,876		4.29
Total adjustable-rate purchased/participations	65,748		3.79				143,679		3.36

Total purchased/participation loans	$	256,578	3.58				$	863,932	3.60

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 at the dates presented. Credit scores are updated at least semiannually, with the last update in September 2016, 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.



	September 30, 2016									June 30, 2016									September 30, 2015
			% 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	$	4,005,615	60.4	%	766	63	%	$	132	$	4,001,131	61.3	%	767	63	%	$	131	$	4,010,424	63.2	%	765	64	%	$	129
Correspondent purchased	2,206,072		33.3		764	68		360		2,092,608		32.0		763	68		352		1,846,210		29.1		764	68		344
Bulk purchased	416,653		6.3		753	64		308		439,954		6.7		753	64		307		485,682		7.7		752	65		310
	$	6,628,340	100.0	%	765	65		175		$	6,533,693	100.0	%	765	65		172		$	6,342,316	100.0	%	764	65		167

The following table summarizes our one- to four-family loan origination, refinance, and correspondent purchase commitments as of September 30, 2016, 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	$	26,386		$	58,000		$	13,288		$	97,674	3.20	%
Correspondent	14,355			120,690			19,155			154,200		3.58
	$	40,741		$	178,690		$	32,443		$	251,874	3.43

Rate	2.83		%	3.67		%	2.90		%

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 Year Ended
	September 30, 2016					September 30, 2016
					Credit					Credit
	Amount		LTV		Score	Amount		LTV		Score
	(Dollars in thousands)
Originated	$	153,744	77	%	774	$	515,395	78	%	770
Refinanced by Bank customers	49,769		60		759	147,855		66		765
Correspondent purchased	201,907		74		765	662,817		74		763
	$	405,420	74		767	$	1,326,067	75		766

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 five percent of the total amount originated and purchased during the fiscal year ended September 30, 2016.



	For the Three Months Ended						For the Year Ended
	September 30, 2016						September 30, 2016
State	Amount		% of Total		Rate		Amount		% of Total		Rate
	(Dollars in thousands)
Kansas	$	196,217	48.4	%	3.24	%	$	616,783	46.5	%	3.39	%
Missouri	67,960		16.8		3.34		243,775		18.4		3.46
Texas	67,233		16.6		3.36		213,536		16.1		3.43
Other states	74,010		18.2		3.40		251,973		19.0		3.46
	$	405,420	100.0	%	3.31		$	1,326,067	100.0	%	3.42

Commercial Real Estate Loans: During the current quarter the Bank entered into commercial real estate loan participations of $54.7 million, which included $49.1 million of commercial real estate construction loans. The majority of the $49.1 million of commercial real estate construction loans had not yet been funded at September 30, 2016. The Bank intends to continue to grow its commercial real estate loan portfolio through participations with correspondent lenders and other lead banks with which the Bank already has commercial real estate lending relationships.

The following table presents the Bank's commercial real estate loans and commitments by industry classification, as defined by the North American Industry Classification System, as of September 30, 2016.



	Unpaid		Undisbursed		Gross Loan		Outstanding				% of
	Principal		Amount		Amount		Commitments		Total		Total
	(Dollars in thousands)
Accommodation and food services	$	63,778	$	79,090	$	142,868	$	—	$	142,868	40.6	%
Health care and social assistance	14,044		42,709		56,753		—		56,753		16.1
Real estate rental and leasing	16,784		37,793		54,577		—		54,577		15.5
Arts, entertainment, and recreation	8,053		26,422		34,475		—		34,475		9.8
Multi-family	19,685		135		19,820		—		19,820		5.6
Retail trade	19,561		4,023		23,584		4,350		27,934		8.0
Other	12,238		3,155		15,393		—		15,393		4.4
	$	154,143	$	193,327	$	347,470	$	4,350	$	351,820	100.0	%

The following table summarizes the Bank's commercial real estate loans by state as of September 30, 2016.



	Unpaid		Undisbursed		Gross Loan		Outstanding				% of
	Principal		Amount		Amount		Commitments		Total		Total
	(Dollars in thousands)
Texas	$	34,945	$	119,034	$	153,979	$	—	$	153,979	43.8	%
Missouri	38,265		42,709		80,974		4,350		85,324		24.2
Kansas	53,005		26,421		79,426		—		79,426		22.6
Colorado	14,798		508		15,306		—		15,306		4.3
Arkansas	8,284		—		8,284		—		8,284		2.4
California	3,346		3,155		6,501		—		6,501		1.8
Montana	1,500		1,500		3,000		—		3,000		0.9
	$	154,143	$	193,327	$	347,470	$	4,350	$	351,820	100.0	%

The following table presents the Bank's commercial real estate loan portfolio and outstanding commitments, categorized by gross loan amount (unpaid principal plus undisbursed amounts) or outstanding commitment amount, as of September 30, 2016.



	Count	Amount
	(Dollars in thousands)
Greater than $30 million	4	$	157,711
>$15 to $30 million	2	54,387
>$10 to $15 million	3	38,280
>$5 to $10 million	4	29,172
$1 to $5 million	23	67,918
Less than $1 million	14	4,352
	50	$	351,820

Asset Quality

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 September 2016, the unemployment rate was 4.4% for Kansas and 5.2% for Missouri, compared to the national average of 5.0%, based on information from the Bureau of Labor Statistics.

The following tables present loans 30 to 89 days delinquent, non-performing loans, and other real estate owned ("OREO") as of the dates indicated. Of the loans 30 to 89 days delinquent at September 30, 2016, approximately 75% 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 were owned by the Bank, on average, for approximately five months before they were sold.



	Loans Delinquent for 30 to 89 Days at:
	September 30, 2016				June 30, 2016				March 31, 2016				December 31, 2015				September 30, 2015
	Number	Amount			Number	Amount			Number	Amount			Number	Amount			Number	Amount
	(Dollars in thousands)
One- to four-family:
Originated	143	$	13,593		141	$	12,962		139	$	14,336		159	$	14,277		158	$	16,955
Correspondent purchased	9	3,329			10	2,561			8	2,307			10	3,033			8	2,344
Bulk purchased	21	5,008			27	4,703			26	6,005			35	7,805			32	7,259
Consumer:
Home equity	36	635			33	548			33	631			36	730			32	703
Other	5	62			11	55			5	28			13	88			11	17
	214	$	22,627		222	$	20,829		211	$	23,307		253	$	25,933		241	$	27,278
30 to 89 days delinquent loans
to total loans receivable, net		0.33		%		0.30		%		0.34		%		0.39		%		0.41		%



	Non-Performing Loans and OREO at:
	September 30, 2016				June 30, 2016				March 31, 2016				December 31, 2015				September 30, 2015
	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	73	$	8,190		74	$	8,539		72	$	8,016		75	$	9,900		66	$	6,728
Correspondent purchased	3	985			2	652			3	864			—	—			1	394
Bulk purchased	28	7,323			32	8,017			33	7,483			32	7,199			36	8,898
Consumer:
Home equity	26	520			20	437			26	622			28	574			24	497
Other	5	9			6	17			8	26			9	25			4	12
	135	17,027			134	17,662			142	17,011			144	17,698			131	16,529
Nonaccrual loans less than 90 Days Delinquent:⁽¹⁾
One- to four-family:
Originated	70	8,956			70	6,939			72	7,667			75	7,661			77	9,004
Correspondent purchased	9	2,786			8	2,872			4	825			1	24			1	25
Bulk purchased	1	31			—	—			1	80			1	81			1	82
Consumer:
Home equity	12	328			11	263			9	151			14	259			12	295
Other	—	—			1	7			1	8			—	—			—	—
	92	12,101			90	10,081			87	8,731			91	8,025			91	9,406
Total non-performing loans	227	29,128			224	27,743			229	25,742			235	25,723			222	25,935

Non-performing loans as a percentage of total loans⁽²⁾		0.42		%		0.41		%		0.38		%		0.39		%		0.39		%

OREO:
One- to four-family:
Originated⁽³⁾	12	$	692		14	$	1,142		22	$	1,364		25	$	1,410		29	$	1,752
Correspondent purchased	1	499			1	499			1	499			1	499			1	499
Bulk purchased	4	1,265			5	1,413			8	2,694			6	2,247			2	796
Consumer:
Home equity	—	—			—	—			1	9			1	26			1	8
Other⁽⁴⁾	1	1,278			1	1,278			1	1,278			1	1,278			1	1,278
	18	3,734			21	4,332			33	5,844			34	5,460			34	4,333
Total non-performing assets	245	$	32,862		245	$	32,075		262	$	31,586		269	$	31,183		256	$	30,268

Non-performing assets as a percentage of total assets		0.35		%		0.35		%		0.34		%		0.34		%		0.31		%

(1)

Represents loans required to be reported as nonaccrual pursuant to OCC reporting requirements even if the loans are current. At September 30, 2016, June 30, 2016, March 31, 2016, December 31, 2015, and September 30, 2015, this amount was comprised of $2.3 million, $2.8 million, $1.8 million, $2.2 million, and $2.2 million, respectively, of loans that were 30 to 89 days delinquent and are reported as such, and $9.8 million, $7.3 million, $6.9 million, $5.8 million, and $7.2 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 0.24%, 0.26%, 0.25%, 0.27%, and 0.25%, at September 30, 2016, June 30, 2016, March 31, 2016, December 31, 2015, and September 30, 2015, 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)	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.



	For the Three Months Ended
	September 30,			June 30,				March 31,			December 31,			September 30,
	2016			2016				2016			2015			2015
	(Dollars in thousands)
Balance at beginning of period	$	9,312		$	9,193			$	9,201		$	9,443		$	9,601
Charge-offs:
One- to four-family:
Originated	(103		)	(23		)		(17		)	(57		)	(175		)
Bulk purchased	(75		)	(54		)		(38		)	(175		)	(7		)
Total	(178		)	(77		)		(55		)	(232		)	(182		)
Consumer:
Home equity	—			(49		)		(16		)	(18		)	(1		)
Other	(1		)	—				(4		)	—			—
Total	(1		)	(49		)		(20		)	(18		)	(1		)
Total charge-offs	(179		)	(126		)		(75		)	(250		)	(183		)
Recoveries:
One- to four-family:
Originated	18			17				39			3			11
Bulk purchased	134			222				18			—			—
Total	152			239				57			3			11
Consumer:
Home equity	4			6				10			5			14
Other	1			—				—			—			—
Total	5			6				10			5			14
Total recoveries	157			245				67			8			25
Net (charge-offs) recoveries	(22		)	119				(8		)	(242		)	(158		)
Provision for credit losses	(750		)	—				—			—			—
Balance at end of period	$	8,540		$	9,312			$	9,193		$	9,201		$	9,443

Ratio of net charge-offs during the period
to average loans outstanding during the period	—		%	—		%		—		%	—		%	—		%
Ratio of net charge-offs (recoveries) during the
period to average non-performing assets	0.07			(0.38		)		0.03			0.79			0.52
ACL to non-performing loans at end of period	29.32			33.57				35.71			35.77			36.41
ACL to loans receivable, net at end of period	0.12			0.14				0.14			0.14			0.14
ACL to net charge-offs (annualized)	95.6x			N/M			⁽¹⁾	294.7x			9.5x			15.0x


(1)	The ACL coverage ratio is not presented for the time period noted due to loan recoveries exceeding loan charge-offs for the period presented.



	For the Year Ended
	September 30,
	2016			2015
	(Dollars in thousands)
Balance at beginning of period	$	9,443		$	9,227
Charge-offs:
One- to four-family:
Originated	(200		)	(424		)
Correspondent	—			(11		)
Bulk purchased	(342		)	(228		)
Total	(542		)	(663		)
Consumer:
Home equity	(83		)	(29		)
Other	(5		)	(43		)
Total	(88		)	(72		)
Total charge-offs	(630		)	(735		)
Recoveries:
One- to four-family:
Originated	77			56
Bulk purchased	374			58
Total	451			114
Consumer:
Home equity	25			64
Other	1			2
Total	26			66
Total recoveries	477			180
Net charge-offs	(153		)	(555		)
Provision for credit losses	(750		)	771
Balance at end of period	$	8,540		$	9,443

Ratio of net charge-offs during the period
to average loans outstanding during the period	—		%	0.01		%
Ratio of net charge-offs during the
period to average non-performing assets	0.48			1.87
ACL to non-performing loans at end of period	29.32			36.41
ACL to loans receivable, net at end of period	0.12			0.14
ACL to net charge-offs	55.8x			17.0x

The distribution of ACL by loan category is summarized below at the dates indicated. The decrease in one- to four-family ACL from September 30, 2015 was due to improvements in the collateral value and historical loss factors within our ACL formula analysis model, as well as to the continued low levels of net loan charge-offs and delinquent loan ratios, partially offset by growth in the portfolio. The increase in the commercial real estate ACL was due primarily to growth in the portfolio during the current fiscal year.



	September 30,
	2016		2015
	(Dollars in thousands)
One- to four-family	$	7,095	$	8,414
Commercial real estate	1,208		742
Consumer	237		287
	$	8,540	$	9,443

Troubled Debt Restructurings ("TDRs") - The following table presents the Company's TDRs, based on accrual status, at the dates indicated.



	At
	September 30,		June 30,		March 31,		December 31,		September 30,
	2016		2016		2016		2015		2015
	(Dollars in thousands)
Accruing TDRs	$	23,177	$	21,663	$	24,239	$	24,956	$	24,331
Nonaccrual TDRs⁽¹⁾	18,725		16,497		14,986		13,983		15,511
Total TDRs	$	41,902	$	38,160	$	39,225	$	38,939	$	39,842


(1)	Nonaccrual TDRs are included in the non-performing loan table above.

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 75% of these portfolios at September 30, 2016. The weighted average life ("WAL") is the estimated remaining principal repayment term (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.



	September 30, 2016					June 30, 2016					September 30, 2015
	Amount		Yield		WAL	Amount		Yield		WAL	Amount		Yield		WAL
	(Dollars in thousands)
Fixed-rate securities:
MBS	$	836,852	2.16	%	2.9	$	903,550	2.19	%	3.1	$	1,047,637	2.24	%	3.2
GSE debentures	346,226		1.15		0.9	471,143		1.16		0.8	525,376		1.14		1.6
Municipal bonds	33,303		1.69		2.4	36,278		1.78		2.5	38,214		1.87		2.9
Total fixed-rate securities	1,216,381		1.86		2.3	1,410,971		1.84		2.3	1,611,227		1.87		2.7

Adjustable-rate securities:
MBS	400,161		2.25		4.7	431,128		2.25		5.6	402,417		2.22		5.3
Trust preferred securities	2,123		2.11		20.7	2,163		1.91		21.0	2,186		1.59		21.7
Total adjustable-rate securities	402,284		2.24		4.8	433,291		2.25		5.7	404,603		2.21		5.4
Total securities portfolio	$	1,618,665	1.95		2.9	$	1,844,262	1.93		3.1	$	2,015,830	1.94		3.2

MBS: The following tables summarize 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 principal repayment term (in years) after three-month historical prepayment speeds have been applied.



	For the Three Months Ended
	September 30, 2016						June 30, 2016						March 31, 2016						December 31, 2015
	Amount			Yield		WAL	Amount			Yield		WAL	Amount			Yield		WAL	Amount			Yield		WAL
	(Dollars in thousands)
Beginning balance - carrying value	$	1,344,481		2.21	%	3.9	$	1,436,774		2.25	%	4.1	$	1,376,119		2.26	%	3.9	$	1,462,539		2.24	%	3.8
Maturities and repayments	(96,320		)				(90,291		)				(80,544		)				(83,835		)
Net amortization of (premiums)/discounts	(1,345		)				(1,387		)				(1,091		)				(1,188		)
Purchases:
Fixed	—			—		—	—			—		—	42,827			1.83		4.1	—			—		—
Adjustable	—			—		—	—			—		—	100,133			2.02		5.4	—			—		—
Change in valuation on AFS securities	(738		)				(615		)				(670		)				(1,397		)
Ending balance - carrying value	$	1,246,078		2.19		3.5	$	1,344,481		2.21		3.9	$	1,436,774		2.25		4.1	$	1,376,119		2.26		3.9



	For the Year Ended
	September 30, 2016						September 30, 2015
	Amount			Yield		WAL	Amount			Yield		WAL
	(Dollars in thousands)
Beginning balance - carrying value	$	1,462,539		2.24	%	3.8	$	1,802,547		2.32	%	4.2
Maturities and repayments	(350,990		)				(376,329		)
Net amortization of (premiums)/discounts	(5,011		)				(5,364		)
Purchases:
Fixed	42,827			1.83		4.1	45,669			1.62		4.1
Adjustable	100,133			2.02		5.4	—			—		—
Change in valuation on AFS securities	(3,420		)				(3,984		)
Ending balance - carrying value	$	1,246,078		2.19		3.5	$	1,462,539		2.24		3.8

Investment Securities: The following tables summarize 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 principal repayment terms (in years) of the securities after projected call dates have been considered, based upon market rates at each date presented.



	For the Three Months Ended
	September 30, 2016						June 30, 2016						March 31, 2016						December 31, 2015
	Amount			Yield		WAL	Amount			Yield		WAL	Amount			Yield		WAL	Amount			Yield		WAL
	(Dollars in thousands)
Beginning balance - carrying value	$	510,745		1.21	%	1.1	$	511,491		1.19	%	1.5	$	460,829		1.24	%	2.6	$	566,754		1.19	%	1.8
Maturities and calls	(127,923		)				(25,873		)				(27,201		)				(104,155		)
Net amortization of (premiums)/discounts	(9		)				(115		)				(106		)				(101		)
Purchases:
Fixed	—			—		—	24,940			1.56		0.5	74,987			0.93		0.8	1,432			1.35		5.6
Change in valuation on AFS securities	(716		)				302						2,982						(3,101		)
Ending balance - carrying value	$	382,097		1.20		1.2	$	510,745		1.21		1.1	$	511,491		1.19		1.5	$	460,829		1.24		2.6



	For the Year Ended
	September 30, 2016						September 30, 2015
	Amount			Yield		WAL	Amount			Yield		WAL
	(Dollars in thousands)
Beginning balance - carrying value	$	566,754		1.19	%	1.8	$	590,942		1.15	%	3.0
Maturities and calls	(285,152		)				(188,519		)
Net amortization of (premiums)/discounts	(331		)				(285		)
Purchases:
Fixed	101,359			1.09		0.8	158,401			1.21		2.1
Change in valuation on AFS securities	(533		)				6,215
Ending balance - carrying value	$	382,097		1.20		1.2	$	566,754		1.19		1.8

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.



	September 30, 2016						June 30, 2016						September 30, 2015
					% of						% of						% of
	Amount		Rate		Total		Amount		Rate		Total		Amount		Rate		Total
	(Dollars in thousands)
Noninterest-bearing checking	$	217,009	—	%	4.2	%	$	209,358	—	%	4.1	%	$	188,007	—	%	3.9	%
Interest-bearing checking	597,319		0.05		11.6		589,668		0.05		11.6		550,741		0.05		11.4
Savings	335,426		0.17		6.5		335,403		0.20		6.6		311,670		0.16		6.4
Money market	1,186,132		0.24		23.0		1,182,255		0.24		23.3		1,148,935		0.23		23.8
Retail certificates of deposit	2,458,160		1.43		47.6		2,400,141		1.41		47.2		2,320,804		1.29		48.0
Public units	369,972		0.70		7.1		368,304		0.65		7.2		312,363		0.40		6.5
	$	5,164,018	0.80		100.0	%	$	5,085,129	0.78		100.0	%	$	4,832,520	0.72		100.0	%

The following table presents scheduled maturities of our certificates of deposit, along with associated weighted average rates, as of September 30, 2016:



	Amount Due
				More than			More than
	1 year			1 year to			2 years to 3			More than			Total
Rate range	or less			2 years			years			3 years			Amount		Rate
	(Dollars in thousands)
0.00 – 0.99%	$	778,040		$	153,673		$	605		$	—		$	932,318	0.67	%
1.00 – 1.99%	394,039			407,238			442,270			488,546			1,732,093		1.60
2.00 – 2.99%	—			1,096			49,816			112,490			163,402		2.24
3.00 – 3.99%	319			—			—			—			319		3.12
	$	1,172,398		$	562,007		$	492,691		$	601,036		$	2,828,132	1.33

Percent of total	41.4		%	19.9		%	17.4		%	21.3		%
Weighted average rate	0.90			1.27			1.67			1.97
Weighted average maturity (in years)	0.5			1.4			2.6			3.8			1.7
Weighted average maturity for the retail certificate of deposit portfolio (in years)													1.9

Borrowings

The following table presents the maturity of term borrowings (including FHLB advances, at par, and repurchase agreements), along with associated weighted average contractual and effective rates as of September 30, 2016. A $100.0 million FHLB advance with an effective rate of 0.78% is scheduled to mature in November 2016. The Bank does not intend to renew or replace this advance.



	FHLB		Repurchase
Maturity by	Advances		Agreements		Contractual		Effective
Fiscal year	Amount		Amount		Rate		Rate⁽¹⁾
	(Dollars in thousands)
2017	$	500,000	$	—	2.69	%	2.72	%
2018	375,000		100,000		2.35		2.64
2019	400,000		—		1.62		1.62
2020	250,000		100,000		2.18		2.18
2021	550,000		—		2.27		2.27
2022	200,000		—		2.23		2.23
2023	100,000		—		1.82		1.82
	$	2,375,000	$	200,000	2.23		2.29


(1)	The effective rate includes the impact of the amortization of deferred prepayment penalties resulting from FHLB advances previously prepaid.

The following table presents the maturity and weighted average repricing rate, which is also the weighted average effective rate, of certificates of deposit, split between retail and public unit deposit amounts, and term borrowings for the next four quarters as of September 30, 2016.



	Retail				Public Unit				Term
Maturity by	Certificate		Repricing		Deposit		Repricing		Borrowings		Repricing				Repricing
Quarter End	Amount		Rate		Amount		Rate		Amount		Rate		Total		Rate
	(Dollars in thousands)
December 31, 2016	$	229,673	0.95	%	$	138,505	0.54	%	$	100,000	0.78	%	$	468,178	0.79	%
March 31, 2017	159,672		0.87		104,800		0.62		—		—		264,472		0.77
June 30, 2017	227,479		1.03		32,430		0.71		300,000		3.24		559,909		2.19
September 30, 2017	246,221		1.08		33,618		0.85		100,000		3.12		379,839		1.60
	$	863,045	0.99		$	309,353	0.62		$	500,000	2.72		$	1,672,398	1.44

The following tables present term borrowing activity for the periods shown, which includes FHLB advances, at par, and repurchase agreements. Line of credit activity is excluded from the following tables. The weighted average effective rate includes the impact of the amortization of deferred prepayment penalties resulting from FHLB advances previously prepaid. 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
	September 30, 2016						June 30, 2016						March 31, 2016					December 31, 2015
				Effective						Effective					Effective						Effective
	Amount			Rate		WAM	Amount			Rate		WAM	Amount		Rate		WAM	Amount			Rate		WAM
	(Dollars in thousands)
Beginning balance	$	2,675,000		2.24	%	3.0	$	2,675,000		2.29	%	3.0	$	2,675,000	2.29	%	3.2	$	2,775,000		2.29	%	3.3
Maturities and prepayments:
FHLB advances	(100,000		)	0.83			(100,000		)	3.17			—		—			(200,000		)	1.94
New borrowings:
FHLB advances	—			—		—	100,000			1.82		7.0	—		—		—	100,000			1.45		3.0
Ending balance	$	2,575,000		2.29		2.9	$	2,675,000		2.24		3.0	$	2,675,000	2.29		3.0	$	2,675,000		2.29		3.2



	For the Year Ended
	September 30, 2016						September 30, 2015
				Effective						Effective
	Amount			Rate		WAM	Amount			Rate		WAM
	(Dollars in thousands)
Beginning balance	$	2,775,000		2.29	%	3.3	$	2,795,000		2.45	%	2.8
Maturities and prepayments:
FHLB advances	(400,000		)	1.97			(775,000		)	2.60
Repurchase agreements	—			—			(20,000		)	4.45
New borrowings:
FHLB advances	200,000			1.64		5.0	775,000			2.09		5.3
Ending balance	$	2,575,000		2.29		2.9	$	2,775,000		2.29		3.3

Average Rates and Lives

At September 30, 2016, the Bank's one-year gap between the amount of interest-earning assets and interest-bearing liabilities projected to reprice was $1.07 billion, or 11.5% of total assets, compared to $1.15 billion, or 12.5% of total assets, at June 30, 2016. The decrease in the one-year gap amount was due primarily to a decrease in projected cash flows from the investment securities portfolio and an increase in the amount of certificates of deposit expected to reprice over the 12-month horizon, partially offset by an increase in operating cash. The decrease in the amount of projected cash flows from the investment securities portfolio was due primarily to agency debentures being called during the current quarter which were not replaced, resulting in a decrease in the balance of the investment securities portfolio.

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. 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. As interest rates rise, the amount of interest-earning assets expected to reprice will likely decrease from estimated levels as borrowers have less economic incentive to modify their cost of borrowings. If interest rates were to increase 200 basis points, as of September 30, 2016, the Bank's one-year gap is projected to be $208.7 million, or 2.3% of total assets. This compares to a one-year gap of $195.1 million, or 2.1% of total assets, if interest rates were to have increased 200 basis points as of June 30, 2016.

Management continues to manage the Bank's gap position in preparation for rising interest rates. Because of the on-balance sheet strategies implemented over the past several years, management believes the Bank is well-positioned to move into a market rate environment where interest rates are higher.

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 term borrowings is the effective rate, which includes the impact of the amortization of deferred prepayment penalties resulting from FHLB advances previously prepaid. The maturity and repricing terms presented for one- to four-family loans represent the contractual terms of the loan.



	September 30, 2016
	Amount		Yield/Rate		WAL	% of Category		% of Total
	(Dollars in thousands)
Investment securities	$	382,097	1.20	%	1.2	23.5	%	4.3	%
MBS - fixed	839,755		2.16		2.9	51.6		9.4
MBS - adjustable	406,323		2.25		4.7	24.9		4.5
Total investment securities and MBS	1,628,175		1.95		2.9	100.0	%	18.2
Loans receivable:
Fixed-rate one- to four-family:
<= 15 years	1,258,122		3.14		3.7	18.1	%	14.0
> 15 years	4,204,430		3.89		5.3	60.5		46.9
All other fixed-rate loans	182,496		4.32		2.9	2.6		2.0
Total fixed-rate loans	5,645,048		3.74		4.9	81.2		62.9
Adjustable-rate one- to four-family:
<= 36 months	293,375		1.79		3.4	4.2		3.3
> 36 months	872,414		2.96		2.5	12.6		9.7
All other adjustable-rate loans	138,685		4.49		2.0	2.0		1.6
Total adjustable-rate loans	1,304,474		2.86		2.7	18.8		14.6
Total loans receivable	6,949,522		3.58		4.4	100.0	%	77.5
FHLB stock	109,970		5.98		2.9			1.2
Cash and cash equivalents	281,764		0.49		—			3.1
Total interest-earning assets	$	8,969,431	3.22		4.0			100.0	%

Non-maturity deposits	$	2,335,886	0.16		8.3	45.2	%	30.2	%
Retail certificates of deposit	2,458,160		1.43		1.9	47.6		31.7
Public units	369,972		0.70		0.6	7.2		4.8
Total deposits	5,164,018		0.80		4.7	100.0	%	66.7
Term borrowings	2,575,000		2.29		2.9			33.3
Total interest-bearing liabilities	$	7,739,018	1.30		4.1			100.0	%

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 September 30, 2016. At September 30, 2016, the daily leverage strategy was not in place, so the yields/rates presented at September 30, 2016 in the tables below do not reflect the effects of the daily leverage strategy. 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 Year Ended September 30,
	September 30, 2016	2016						2015
		Average		Interest				Average		Interest
	Yield/	Outstanding		Earned/		Yield/		Outstanding		Earned/		Yield/
	Rate	Amount		Paid		Rate		Amount		Paid		Rate
Assets:		(Dollars in thousands)
Interest-earning assets:
Loans receivable⁽¹⁾	3.58%	$	6,766,317	$	243,311	3.60	%	$	6,389,964	$	235,500	3.69	%
MBS⁽²⁾	2.19	1,366,605		29,794		2.18		1,632,117		36,647		2.25
Investment securities⁽²⁾⁽³⁾	1.20	481,223		5,925		1.23		604,999		7,182		1.19
FHLB stock	5.98	204,894		12,252		5.98		209,743		12,556		5.99
Cash and cash equivalents	0.49	2,168,896		9,831		0.45		2,125,693		5,477		0.25
Total interest-earning assets⁽¹⁾⁽²⁾	3.22	10,987,935		301,113		2.74		10,962,516		297,362		2.71
Other noninterest-earning assets		293,692						232,234
Total assets		$	11,281,627					$	11,194,750

Liabilities and stockholders' equity:
Interest-bearing liabilities:
Checking	0.04	$	784,303	291		0.04		$	727,533	274		0.04
Savings	0.17	326,744		603		0.18		306,456		462		0.15
Money market	0.24	1,173,983		2,762		0.24		1,149,203		2,679		0.23
Retail certificates	1.43	2,370,286		32,181		1.36		2,259,645		28,085		1.24
Wholesale certificates	0.70	370,707		2,022		0.55		312,857		1,619		0.52
Total deposits	0.80	5,026,023		37,859		0.75		4,755,694		33,119		0.70
FHLB advances⁽⁴⁾	2.24	2,469,086		54,969		2.23		2,571,439		62,437		2.43
FHLB line of credit	—	2,061,749		10,122		0.48		2,075,343		5,360		0.25
FHLB borrowings	2.24	4,530,835		65,091		1.43		4,646,782		67,797		1.46
Repurchase agreements	2.94	200,000		5,981		2.94		215,835		6,678		3.05
Total borrowings	2.29	4,730,835		71,072		1.50		4,862,617		74,475		1.53
Total interest-bearing liabilities	1.30	9,756,858		108,931		1.11		9,618,311		107,594		1.12
Other noninterest-bearing liabilities		120,636						108,522
Stockholders' equity		1,404,133						1,467,917
Total liabilities and stockholders' equity		$	11,281,627					$	11,194,750


Net interest income⁽⁵⁾				$	192,182					$	189,768
Net interest rate spread⁽⁶⁾	1.92					1.63						1.59
Net interest-earning assets		$	1,231,077					$	1,344,205
Net interest margin⁽⁷⁾						1.75						1.73
Ratio of interest-earning assets
to interest-bearing liabilities						1.13x						1.14x

Selected performance ratios:
Return on average assets						0.74	%					0.70	%
Return on average equity						5.95						5.32
Average equity to average assets						12.45						13.11
Operating expense ratio⁽⁸⁾						0.84						0.84
Efficiency ratio⁽⁹⁾						43.76						44.74
Pre-tax yield on daily leverage strategy⁽¹⁰⁾						0.16						0.20

Selected performance ratios, excluding the effects of the daily leverage strategy:
Net interest margin						2.10						2.07
Return on average assets						0.88						0.83
Return on average equity						5.78						5.13



	For the Three Months Ended
	September 30, 2016						June 30, 2016
	Average		Interest				Average		Interest
	Outstanding		Earned/		Yield/		Outstanding		Earned/		Yield/
	Amount		Paid		Rate		Amount		Paid		Rate
Assets:	(Dollars in thousands)
Interest-earning assets:
Loans receivable⁽¹⁾	$	6,898,769	$	61,516	3.57	%	$	6,797,602	$	60,840	3.58	%
MBS⁽²⁾	1,292,636		6,860		2.12		1,386,470		7,401		2.14
Investment securities⁽²⁾⁽³⁾	431,871		1,401		1.30		501,757		1,506		1.20
FHLB stock	203,285		3,044		5.96		204,870		3,050		5.99
Cash and cash equivalents	2,172,519		2,774		0.50		2,160,016		2,730		0.50
Total interest-earning assets⁽¹⁾⁽²⁾	10,999,080		75,595		2.75		11,050,715		75,527		2.73
Other noninterest-earning assets	302,142						290,258
Total assets	$	11,301,222					$	11,340,973

Liabilities and stockholders' equity:
Interest-bearing liabilities:
Checking	$	792,622	73		0.04		$	801,782	74		0.04
Savings	337,002		139		0.16		333,067		156		0.19
Money market	1,191,544		708		0.24		1,174,471		686		0.23
Retail certificates	2,411,150		8,553		1.41		2,401,381		8,287		1.39
Wholesale certificates	370,477		625		0.67		360,026		546		0.61
Total deposits	5,102,795		10,098		0.79		5,070,727		9,749		0.77
FHLB advances⁽⁴⁾	2,402,586		13,400		2.22		2,464,094		13,515		2.21
FHLB line of credit	2,077,174		2,862		0.54		2,084,616		2,846		0.54
FHLB borrowings	4,479,760		16,262		1.44		4,548,710		16,361		1.44
Repurchase agreements	200,000		1,503		2.94		200,000		1,487		2.94
Total borrowings	4,679,760		17,765		1.50		4,748,710		17,848		1.51
Total interest-bearing liabilities	9,782,555		27,863		1.13		9,819,437		27,597		1.13
Other noninterest-bearing liabilities	127,952						111,382
Stockholders' equity	1,390,715						1,410,154
Total liabilities and stockholders' equity	$	11,301,222					$	11,340,973

Net interest income⁽⁵⁾			$	47,732					$	47,930
Net interest rate spread⁽⁶⁾					1.62						1.60
Net interest-earning assets	$	1,216,525					$	1,231,278
Net interest margin⁽⁷⁾					1.74						1.73
Ratio of interest-earning assets
to interest-bearing liabilities					1.12x						1.13x

Selected performance ratios:
Return on average assets (annualized)					0.73	%					0.72	%
Return on average equity (annualized)					5.95						5.83
Average equity to average assets					12.31						12.43
Operating expense ratio⁽⁸⁾					0.85						0.82
Efficiency ratio⁽⁹⁾					44.85						43.72
Pre-tax yield on daily leverage strategy⁽¹⁰⁾					0.17						0.15

Selected performance ratios, excluding the effects of the daily leverage strategy:
Net interest margin					2.09						2.09
Return on average assets (annualized)					0.87						0.86
Return on average equity (annualized)					5.78						5.68


(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.


(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 $37.0 million and $37.2 million for the fiscal years ended September 30, 2016 and 2015, respectively, and $35.1 million and $36.6 million for the quarters ended September 30, 2016 and June 30, 2016, respectively.


(4)	The balance and rate of FHLB advances are stated net of deferred prepayment penalties.


(5)	Net interest income represents the difference between interest income earned on interest-earning assets and interest paid on interest-bearing liabilities. 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 (annualized for the three month periods) as a percentage of average interest-earning assets.


(8)	The operating expense ratio represents non-interest expense (annualized for the three month periods) 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.


(10)	The pre-tax yield on the daily leverage strategy represents pre-tax income (annualized for the three month periods) resulting from the transaction as a percentage of the average interest-earning assets associated with the transaction.

Capitol Federal Financial, Inc. - FORM 8-K - EX-99.1 - PRESS RELEASE ANNOUNCING EARNINGS - October 27, 2016

Attached files

Capitol Federal Financial, Inc. Reports