NEWS RELEASE
FOR IMMEDIATE RELEASE
November 9, 2009
CAPITOL FEDERAL FINANCIAL
REPORTS FISCAL YEAR 2009 RESULTS
Topeka, KS - Capitol Federal Financial (NASDAQ: CFFN) (the “Company”) announced results today for the fiscal year ended September 30, 2009. Detailed results will be available in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2009, which will be filed with the Securities and Exchange Commission on or about November 30, 2009 and posted on our website, http://ir.capfed.com/sec.cfm.
Public share information is not calculated in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
Highlights for the fiscal year include:
| · | net income of $66.3 million, a $15.3 million, or 30%, increase from fiscal year 2008, |
| · | diluted earnings per common share of $0.91, a $0.21 per share, or 30%, increase from fiscal year 2008, |
| · | diluted earnings per public share of $3.15, a $0.70 per share, or 29%, increase from fiscal year 2008, |
| · | dividends paid of $2.11 per public share, |
| · | equity to total assets ratio of 11.2% at September 30, 2009, compared to 10.8% at September 30, 2008, |
| · | tangible equity to assets ratio for Capitol Federal Savings Bank (the “Bank”) of 10% at September 30, 2009 which was unchanged from September 30, 2008, and |
| · | non-performing loans to total loans ratio of 0.55% at September 30, 2009, compared to 0.26% at September 30, 2008. |
Results of Operations for the Fiscal Year Ended September 30, 2009
For fiscal year 2009, the Company recognized net income of $66.3 million compared to net income of $51.0 million in fiscal year 2008. The $15.3 million increase in net income was primarily a result of a $40.5 million decrease in interest expense, partially offset by an $11.6 million increase in other expenses, a $9.7 million increase in income tax expense, and a $4.3 million increase in provision for loan loss. The net interest margin for fiscal year 2009 was 2.20% compared to 1.75% for fiscal year 2008. The 45 basis point increase in the net interest margin was primarily a result of a decrease in the weighted average rate on interest-bearing liabilities.
Interest and Dividend Income
Total interest and dividend income for the current fiscal year was $412.8 million compared to $410.8 million for the prior fiscal year. The $2.0 million increase was a result of a $9.5 million increase in interest income on mortgage-backed securities (“MBS”) and a $3.8 million increase in interest income on loans receivable, partially offset by a $4.4 million decrease in interest income on investment securities, a
$3.6 million decrease in dividends on Federal Home Loan Bank of Topeka (“FHLB”) stock and a $3.4 million decrease in interest income on cash and cash equivalents.
Interest income on loans receivable in the current fiscal year was $305.8 million compared to $302.0 million in the prior fiscal year. The $3.8 million increase in loan interest income was a result of a $189.0 million increase in the average balance of the loan portfolio between the two periods, partially offset by a decrease of 12 basis points in the weighted average yield of the portfolio to 5.56% for the current fiscal year. The increase in the average balance was due to originations and loan purchases during fiscal year 2009. The decrease in the weighted average yield was due to purchases and originations at a lower rate than the existing portfolio, interest rate loan modifications and refinances during fiscal year 2009, and the home equity loan portfolio repricing to lower market interest rates, partially offset by an increase in deferred fee amortization as a result of prepayments, modifications, and refinances. Our loan modification program allows existing loan customers, whose loans have not been sold to third parties and who have been current on their contractual loan payments for the previous 12 months, the opportunity to modify, for a fee, their original loan terms to current loan terms being offered (“loan modifications”).
Interest income on MBS in the current fiscal year was $97.9 million compared to $88.4 million in the prior fiscal year. The $9.5 million increase in interest income was primarily due to an increase of $222.5 million in the average balance, slightly offset by a 4 basis point decrease in the weighted average portfolio yield to 4.64% for the current fiscal year. The increase in the average portfolio balance was a result of purchases. The funds for the purchases came from maturities and calls of investment securities and from new borrowings in fiscal year 2008.
Interest income on investment securities in the current fiscal year was $5.5 million compared to $9.9 million in the prior fiscal year. The $4.4 million decrease in interest income was a result of a 168 basis point decrease in the weighted average portfolio yield to 2.41% for the current fiscal year and, to a lesser extent, a decrease of $12.7 million in the average balance of the portfolio. The decrease in the weighted average yield of the portfolio was attributed to maturities and calls of securities with weighted average yields greater than the remaining portfolio, and also due to reinvestments made at lower market yields than the overall portfolio yield. The decrease in the average balance was a result of the timing of calls, maturities and security purchases during fiscal year 2009.
Dividends on FHLB stock in the current fiscal year were $3.3 million compared to $6.9 million in the prior fiscal year. The $3.6 million decrease in dividend income was due primarily to a 278 basis point decrease in the average yield to 2.58% for the current fiscal year. The dividend rate on FHLB stock correlates to the federal funds rate, which decreased during the current fiscal year.
Interest income on cash and cash equivalents in the current fiscal year was $201 thousand compared to $3.6 million in the prior fiscal year. The $3.4 million decrease was due to a 283 basis point decrease in the weighted average yield due to a decrease in short-term interest rates between the two periods, and a decrease in the average balance of $40.3 million. The decrease in the average balance was a result of cash being utilized to purchase MBS and investment securities.
Interest Expense
Total interest expense for the current fiscal year was $236.1 million, compared to $276.6 million in the prior fiscal year. The $40.5 million decrease in interest expense was due to a decrease in interest expense on deposits of $32.9 million and a decrease in interest expense on FHLB advances of $19.1 million, partially offset by an increase in interest expense on other borrowings of $11.6 million.
Interest expense on deposits in the current fiscal year was $100.5 million compared to $133.4 million in the prior fiscal year. The $32.9 million decrease in interest expense was primarily a result of a decrease in the average rate paid on the certificate of deposit, money market and savings portfolios due to the portfolios repricing to lower market rates. The average rate paid on the deposit portfolio decreased 89 basis points to 2.48% for the current fiscal year.
Interest expense on FHLB advances in the current fiscal year was $106.6 million compared to $125.7 million in the prior fiscal year. The $19.1 million decrease in interest expense was a result of the termination and maturity of the interest rate swap agreements during fiscal year 2008, a decrease in the average balance of FHLB advances, and a decrease in the interest rate due to the refinancing of $875.0 million of advances during the second and third quarters of fiscal year 2009. The decrease in the average balance was a result of maturing advances that were replaced with repurchase agreements during fiscal year 2008.
Interest expense on other borrowings was $29.1 million compared to $17.5 million in the same period in the prior year. The $11.6 million increase was due to an increase in the average balance as a result of the Bank entering into $660.0 million of repurchase agreements during fiscal year 2008. The proceeds from the repurchase agreement funds were used to purchase MBS and to repay maturing FHLB advances.
Provision for Loan Losses
During fiscal year 2009, the Bank experienced an increase in delinquencies, non-performing loans, net loan charge-offs and losses on foreclosed property transactions, primarily on purchased loans, as a result of the decline in housing and real estate markets, as well as the ongoing economic recession. As a result of these conditions, the Bank recorded a provision for loan losses of $6.4 million in the current fiscal year compared to a provision of $2.1 million in the prior fiscal year. The $6.4 million provision primarily reflects an increase in specific valuation allowances on purchased loans, an increase in the balance of non-performing purchased loans, an increase in general valuation allowances primarily on 30 to 89 day delinquent purchased loans, and an increase in charge-offs, also primarily related to purchased loans.
Other Income and Expense
Total other income for the current fiscal year was $28.6 million compared to $30.0 million in the prior fiscal year. The $1.4 million decrease in other income was a result of a $2.0 million decrease in other income, net and a $1.2 million decrease in income from bank-owned life insurance (“BOLI”) as a result of a decrease in the net crediting rate due to a decrease in market interest rates, partially offset by an increase in gains on sale of loans held-for-sale (“LHFS”), net of $1.3 million. The decrease in other income, net was due primarily to the redemption of shares received in the Visa, Inc. initial public offering of $992 thousand in the prior fiscal year and to interest received on a tax refund of $235 thousand also in the prior fiscal year, both with no corresponding item in the current fiscal year.
Total other expenses for the current fiscal year was $93.6 million compared to $82.0 million for the prior fiscal year. The $11.6 million increase was due to a $6.8 million increase in federal insurance premiums, a $2.3 million increase in other expense, net, and a $2.0 million increase in advertising expense. The increase in federal insurance premiums was a result of the FDIC special assessment and increases in the regular quarterly deposit insurance premiums. The increase in other expense, net was due primarily to an impairment and valuation allowances on the mortgage-servicing rights asset due to an increase in prepayment speeds and to an increase in net expense related to real-estate owned operations. These increases were partially offset by the reversal of a portion of the Visa, Inc. litigation liability accrued in the prior fiscal year. The increase in advertising expense was due to expense associated with the Bank’s new debit card rewards program and to advertising campaigns undertaken to inform customers of the Bank’s safety and soundness in response to current economic conditions.
Income Tax Expense
Income tax expense for the current fiscal year was $38.9 million compared to $29.2 million for the prior fiscal year. The increase in income tax expense was primarily due to an increase in earnings compared to the prior year period. The effective tax rate was 37.0% for the current fiscal year, compared to 36.4% for the prior fiscal year. The difference in the effective tax rate between the two fiscal years was primarily a result of a decrease in nontaxable income from BOLI and an increase in pre-tax income which reduced the effective tax rate benefit of nontaxable income.
Comparison of Operating Results for the Three Months Ended September 30, 2009 and June 30, 2009
For the quarter ended September 30, 2009, the Company recognized net income of $16.8 million, compared to net income of $15.5 million for the quarter ended June 30, 2009. The increase in net income between periods was primarily due to the additional FDIC special assessment recorded for the quarter ended June 30, 2009 with no corresponding expense in the current quarter. The net interest margin for the current quarter was 2.13% compared to 2.26% for the quarter ended June 30, 2009. The 13 basis point decrease in the net interest margin was primarily a result of loan modifications in the prior quarter which reduced income in the current quarter.
Interest and Dividend Income
Total interest and dividend income for the current quarter was $100.1 million compared to $103.1 million for the quarter ended June 30, 2009. The decrease of $3.0 million was primarily a result of decreases in interest income on MBS of $2.0 million and loans receivable of $1.8 million, partially offset by an increase in interest income on investment securities of $694 thousand.
Interest income on loans receivable for the current quarter was $74.9 million compared to $76.7 million for the quarter ended June 30, 2009. The $1.8 million decrease in interest income was primarily a result of a decrease of 19 basis points in the weighted average yield to 5.36% for the current quarter, partially offset by a $48.2 million increase in the average balance of the portfolio. The decrease in the weighted average yield was due to a slowdown in deferred fee amortization during the current quarter compared to the prior quarter, as a result of a decrease in loan modifications during the current quarter. The decrease is also due to loan modifications from the previous quarter reducing income for the current quarter.
Interest income on MBS for the current quarter was $22.2 million compared to $24.2 million for the quarter ended June 30, 2009. The $2.0 million decrease was primarily a result of a $109.3 million decrease in the average balance of the portfolio due to principal repayments which were not entirely replaced and a decrease in the weighted average yield of 15 basis points to 4.43% for the current quarter. The weighted average yield decreased between the two periods due to prepayments on MBS with yields higher than the remaining portfolio and to adjustable-rate MBS repricing to lower market rates.
Interest income on investment securities for the current quarter was $2.0 million compared to $1.3 million for the quarter ended June 30, 2009. The $694 thousand increase was primarily a result of a $161.6 million increase in the average balance due to purchases, partially offset by a decrease in the average yield of 14 basis points to 1.93% for the current quarter due to purchases at yields lower than the existing portfolio yield.
Interest Expense
Interest expense decreased $696 thousand to $56.5 million for the current quarter from $57.2 million for the quarter ended June 30, 2009. The decrease was due to a $436 thousand decrease in interest expense on deposits primarily due to a decrease in rates on the certificate of deposit portfolio and a $260 thousand decrease in interest expense on FHLB advances.
Provision for Loan Losses
The Bank recorded a provision for loan losses of $623 thousand during the current quarter, compared to a provision of $3.1 million in the quarter ended June 30, 2009. The provision recorded in the current quarter is primarily due to specific valuation allowances on purchased loans and, to a lesser extent, charge-offs as a result of short sales and loans moving into foreclosure during the quarter.
Other Income and Expense
Total other income was $6.7 million for the current quarter compared to $8.2 million for the quarter ended June 30, 2009. The $1.5 million decrease was due to a decrease of $1.6 million in gains on sale of LHFS, net due to no sales of mortgage loans during the current quarter due to pricing volatility in the secondary loan market.
Total other expenses were $23.0 million for the current quarter compared to $26.4 million for the quarter ended June 30, 2009. The $3.4 million decrease was due primarily to a decrease in federal insurance premiums of $3.4 million. The decrease in federal insurance premium was a result of the FDIC special assessment in the June 30, 2009 quarter.
Income Tax Expense
Income tax expense for the current quarter was $9.9 million compared to $9.2 million for the quarter ended June 30, 2009. The $780 thousand increase was due to an increase in earnings between periods. The effective tax rate for the quarter ended September 30, 2009 was 37.1%, compared to 37.2% for the quarter ended June 30, 2009.
Comparison of Operating Results for the Three Months Ended September 30, 2009 and 2008
Net income for the quarter ended September 30, 2009 was $16.8 million compared to $15.8 million for the same period in the prior fiscal year. The $1.0 million increase in net income was primarily a result of an $8.8 million decrease in interest expense, partially offset by a $5.1 million decrease in interest and dividend income, a $1.2 million increase in other expenses and an $844 thousand decrease in other income. The net interest margin for the current quarter was 2.13% compared to 2.03% for the quarter ended September 30, 2008. The 10 basis point increase in the net interest margin was primarily a result of a decrease in the weighted average rate paid on interest-bearing liabilities.
Interest and Dividend Income
Total interest and dividend income for the current quarter was $100.1 million compared to $105.2 million for the prior year quarter. The $5.1 million decrease was primarily a result of a decrease in interest income on MBS of $3.9 million and a decrease in interest income on loans receivable of $955 thousand. The $3.9 million decrease in interest income on MBS was due to a $186.4 million decrease in the average balance and a 34 basis point decrease in the yield to 4.43% for the current quarter. The $955 thousand decrease in interest income on loans receivable was due to a 33 basis point decrease in the yield to 5.36% for the current quarter due, partially offset by a $252.0 million increase in the average balance.
Interest Expense
Total interest expense for the current quarter was $56.5 million, compared to $65.3 million for the prior year quarter. The $8.8 million decrease in interest expense was due to a decrease in interest expense on deposits of $4.8 million and interest expense on FHLB advances of $4.5 million, partially offset by a $451 thousand increase in interest expense on other borrowings. The $4.8 million decrease in interest expense on deposits was a result of a decrease in the average rate paid on the certificate, money market and savings deposit portfolios due to the portfolios repricing to lower market rates. The $4.5 million decrease in FHLB advance interest expense was primarily a result of a decrease in the average rate as a result of the refinancing of $875.0 million of advances during the current fiscal year, and a decrease in the average balance as maturing advances were replaced with repurchase agreements.
Provision for Loan Losses
The Bank recorded a provision for loan losses of $623 thousand in the current quarter, compared to $330 thousand in the prior year quarter. The provision recorded in the current quarter was primarily due to specific valuation allowances on purchased loans and, to a lesser extent, charge-offs as a result of short sales and loans moving into foreclosure during the quarter.
Other Income and Expense
Total other income for the current quarter was $6.7 million compared to $7.6 million in the prior year quarter. The $844 thousand decrease was due to a $367 thousand decrease in other income, net, a $326 thousand decrease in gains on LHFS, net and a $242 thousand decrease in income from BOLI. Total other expenses for the current quarter were $23.0 million compared to $21.8 million in the prior year quarter. The $1.2 million increase was due primarily to an increase in federal insurance premium of $1.5 million as a result of an increase in the regular quarterly deposit insurance premiums.
| | | For the Three Months Ended | | | For the Twelve Months Ended | |
| | | September 30, | | | September 30, | |
| | | 2009 (1) | | | 2008 (1) | | | 2009 (1) | | | 2008 | |
| | | (dollars in thousands, except per share amounts) | |
| INTEREST AND DIVIDEND INCOME: | | | | | | | | | | | | |
| Loans receivable | | $ | 74,875 | | | $ | 75,830 | | | $ | 305,782 | | | $ | 302,020 | |
| MBS | | | 22,225 | | | | 26,153 | | | | 97,926 | | | | 88,395 | |
| Investment securities | | | 1,973 | | | | 1,428 | | | | 5,533 | | | | 9,917 | |
| Capital stock of FHLB | | | 993 | | | | 1,475 | | | | 3,344 | | | | 6,921 | |
| Cash and cash equivalents | | | 34 | | | | 291 | | | | 201 | | | | 3,553 | |
| Total interest and dividend income | | | 100,100 | | | | 105,177 | | | | 412,786 | | | | 410,806 | |
| | | | | | | | | | | | | | | | | |
| INTEREST EXPENSE: | | | | | | | | | | | | | | | | |
| Deposits | | | 24,270 | | | | 29,083 | | | | 100,471 | | | | 133,435 | |
| FHLB advances | | | 25,046 | | | | 29,543 | | | | 106,551 | | | | 125,748 | |
| Other borrowings | | | 7,144 | | | | 6,693 | | | | 29,122 | | | | 17,455 | |
| Total interest expense | | | 56,460 | | | | 65,319 | | | | 236,144 | | | | 276,638 | |
| | | | | | | | | | | | | | | | | |
| Provision for loan losses | | | 623 | | | | 330 | | | | 6,391 | | | | 2,051 | |
| | | | | | | | | | | | | | | | | |
| NET INTEREST AND DIVIDEND INCOME | | | 43,017 | | | | 39,528 | | | | 170,251 | | | | 132,117 | |
| | | | | | | | | | | | | | | | | |
| OTHER INCOME | | | 6,745 | | | | 7,589 | | | | 28,594 | | | | 30,027 | |
| | | | | | | | | | | | | | | | | |
| OTHER EXPENSES: | | | | | | | | | | | | | | | | |
| Salaries and employee benefits | | | 10,871 | | | | 11,769 | | | | 43,318 | | | | 43,498 | |
| Occupancy of premises | | | 3,798 | | | | 3,573 | | | | 15,226 | | | | 13,957 | |
| Federal insurance premium | | | 1,858 | | | | 385 | | | | 7,558 | | | | 735 | |
| Advertising | | | 1,525 | | | | 1,492 | | | | 6,918 | | | | 4,925 | |
| Other, net | | | 4,937 | | | | 4,576 | | | | 20,601 | | | | 18,874 | |
| Total other expenses | | | 22,989 | | | | 21,795 | | | | 93,621 | | | | 81,989 | |
| INCOME TAX EXPENSE | | | 9,935 | | | | 9,563 | | | | 38,926 | | | | 29,201 | |
| NET INCOME | | $ | 16,838 | | | $ | 15,759 | | | $ | 66,298 | | | $ | 50,954 | |
| | | | | | | | | | | | | | | | | |
| Basic earnings per common share | | $ | 0.23 | | | $ | 0.22 | | | $ | 0.91 | | | $ | 0.70 | |
| Diluted earnings per common share | | $ | 0.23 | | | $ | 0.22 | | | $ | 0.91 | | | $ | 0.70 | |
| Dividends declared per public share | | $ | 0.50 | | | $ | 0.50 | | | $ | 2.11 | | | $ | 2.00 | |
| | | | | | | | | | | | | | | | | |
| Efficiency ratio | | | 45.63 | % | | | 45.94 | % | | | 45.62 | % | | | 49.93 | % |
| (1) | Information is unaudited. |
Financial Condition as of September 30, 2009
Total assets increased from $8.06 billion at September 30, 2008 to $8.40 billion at September 30, 2009. The $348.4 million increase in assets was primarily attributed to a $283.2 million increase in loans receivable substantially due to loan purchases, primarily funded by growth in deposits. Deposits increased from $3.92 billion at September 30, 2008 to $4.23 billion at September 30, 2009. The $304.7 million increase was primarily in the certificate of deposit and money market portfolios. We believe the turmoil in the credit and equity markets has made deposit products in well-capitalized financial institutions, like the Bank, desirable for many customers. Households have increased their personal savings rate which we believe has also contributed to our growth in deposits.
The balance of our non-performing loans, which are primarily one- to four-family loans, increased from $13.7 million at September 30, 2008 to $30.9 million at September 30, 2009. Despite the increase in non-performing loans at September 30, 2009, our non-performing loans continue to remain at low levels relative to the size of our loan portfolio. Our ratio of non-performing loans to total loans increased from 0.26% at September 30, 2008 to 0.55% at September 30, 2009. At September 30, 2009, our allowance for loan losses was $10.2 million or 0.18% of the total loan portfolio and 33% of total non-performing loans. This compares with an allowance for loan losses of $5.8 million or 0.11% of the total loan portfolio and 42% of total non-performing loans as of September 30, 2008.
Stockholders’ equity increased $70.1 million from $871.2 million at September 30, 2008 to $941.3 million at September 30, 2009. The increase was primarily a result of net income of $66.3 million and an increase in unrealized gains on available-for-sale (“AFS”) securities of $39.8 million, partially offset by $44.1 million of dividend payments during fiscal year 2009.
| | | Balance at September 30 | |
| | | 2009 (1) | | | 2008 | |
| | | (Dollars in thousands) | |
| Selected Balance Sheet Data: | | | | | | |
| Total assets | | $ | 8,403,680 | | | $ | 8,055,249 | |
| Cash and cash equivalents | | | 41,154 | | | | 87,138 | |
| Investment securities | | | 480,704 | | | | 142,359 | |
| MBS | | | 1,992,467 | | | | 2,234,339 | |
| Loans receivable, net | | | 5,603,965 | | | | 5,320,780 | |
| Capital stock of FHLB | | | 133,064 | | | | 124,406 | |
| Deposits | | | 4,228,609 | | | | 3,923,883 | |
| Advances from FHLB | | | 2,392,570 | | | | 2,447,129 | |
| Other borrowings | | | 713,609 | | | | 713,581 | |
| Stockholders' equity | | | 941,298 | | | | 871,216 | |
| Accumulated other comprehensive gain (loss) | | | 33,870 | | | | (5,968 | ) |
| Equity to total assets at end of period | | | 11.20 | % | | | 10.82 | % |
(1) Information is unaudited. | | | | | | | | |
Consistent with our goal to operate a sound and profitable financial organization, we actively seek to maintain a “well-capitalized” status in accordance with regulatory standards. Total equity under GAAP for the Bank was $869.0 million at September 30, 2009, or 10% of total Bank assets on that date. As of September 30, 2009, the Bank exceeded all capital requirements of the Office of Thrift Supervision (“OTS”). A reconciliation of the Bank’s equity under GAAP to regulatory capital amounts and total Bank assets as of September 30, 2009 is as follows (dollars in thousands):
| Total equity as reported under GAAP | | $ | 869,029 | |
| Unrealized gains on AFS securities | | | (33,870 | ) |
| Other | | | (280 | ) |
| Total tangible and core capital | | | 834,879 | |
| Allowance for loan losses | | | 5,560 | |
| Total risk based capital | | $ | 840,439 | |
| | | | | |
| Total Bank assets (per OTS requirements) | | $ | 8,421,749 | |
The Bank continues to maintain access to additional liquidity by diversifying its funding sources and maintaining a strong portfolio with retail oriented deposit products. The majority of the Bank’s investments are government-agency backed securities which are highly liquid and have not been credit impaired and are therefore available as collateral for additional borrowings or for sale if the need or unforeseen conditions warrant. At September 30, 2009, $1.05 billion of securities were eligible but unused for collateral.
Management's Discussion of Dividends
We strive to enhance stockholder value while maintaining a strong capital position. We continue to provide returns to stockholders through our dividend payments. On October 21, 2009, the board of directors declared a dividend of $0.50 per share which will be paid on November 20, 2009 to stockholders of record on November 6, 2009. Due to Capitol Federal Savings Bank MHC's ("MHC") waiver of dividends, the dividend of $0.50 per share will be paid only on public shares.
Our cash dividend payout policy is continually reviewed by management and the board of directors. Dividend payments depend upon a number of factors including the Company's financial condition and results of operations, the Bank’s regulatory capital requirements, regulatory limitations on the Bank's ability to make capital distributions to the Company, the amount of cash at the holding company and the continued waiver of dividends by MHC. It is expected that MHC will continue to waive future dividends except to the extent dividends are needed to fund its continuing operations. At September 30, 2009, Capitol Federal Financial, at the holding company level, had $114.1 million in deposit accounts held at the Bank, available to further the Company's general corporate and capital management strategies, which could include the payment of dividends.
The Company has a relatively unique corporate structure; therefore reporting of certain information under GAAP is not necessarily reflective of the process considered by the board of directors in connection with its dividend policy. The earnings per share amounts in the following table are presented in accordance with GAAP. Included in the GAAP earnings per share calculations are the average shares held by MHC.
The following is a reconciliation of the denominators of the basic and diluted earnings per share calculations.
| | | For the Three Months Ended | | | For the Year Ended | |
| | | September 30, | | | September 30, | |
| | | 2009 | | | 2008 | | | 2009 | | | 2008 | |
| | | (Dollars in thousands, except per share amounts) | |
| Net income | | $ | 16,838 | | | $ | 15,759 | | | $ | 66,298 | | | $ | 50,954 | |
| | | | | | | | | | | | | | | | | |
| Average common shares outstanding | | | 73,075,141 | | | | 72,838,598 | | | | 73,067,880 | | | | 72,862,705 | |
Average committed Employee Stock Ownership Plan (“ESOP”) shares outstanding | | | 151,778 | | | | 151,778 | | | | 76,236 | | | | 76,166 | |
| Total basic average common shares outstanding | | | 73,226,919 | | | | 72,990,376 | | | | 73,144,116 | | | | 72,938,871 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Effect of dilutive Recognition and Retention Plan (“RRP”) shares | | | 4,876 | | | | 7,648 | | | | 5,378 | | | | 5,460 | |
| Effect of dilutive stock options | | | 30,577 | | | | 94,847 | | | | 58,607 | | | | 68,335 | |
| | | | | | | | | | | | | | | | | |
| Total diluted average common shares outstanding | | | 73,262,372 | | | | 73,092,871 | | | | 73,208,101 | | | | 73,012,666 | |
| | | | | | | | | | | | | | | | | |
| Net earnings per share: | | | | | | | | | | | | | | | | |
| Basic | | $ | 0.23 | | | $ | 0.22 | | | $ | 0.91 | | | $ | 0.70 | |
| Diluted | | $ | 0.23 | | | $ | 0.22 | | | $ | 0.91 | | | $ | 0.70 | |
| | | For the Three Months Ended | | | For the Year Ended | |
| | | September 30, | | | September 30, | |
| | | 2009 | | | 2008 | | | 2009 | | | 2008 | |
| | | (Dollars in thousands, except per share amounts) | |
| Net income | | $ | 16,838 | | | $ | 15,759 | | | $ | 66,298 | | | $ | 50,954 | |
| | | | | | | | | | | | | | | | | |
| Basic average common shares outstanding | | | 73,226,919 | | | | 72,990,376 | | | | 73,144,116 | | | | 72,938,871 | |
| Average shares held by MHC | | | (52,192,817 | ) | | | (52,192,817 | ) | | | (52,192,817 | ) | | | (52,192,817 | ) |
| Total adjusted basic average shares held | | | | | | | | | | | | | | | | |
| by public stockholders | | | 21,034,102 | | | | 20,797,559 | | | | 20,951,299 | | | | 20,746,054 | |
| | | | | | | | | | | | | | | | | |
| Effect of dilutive RRP shares | | | 4,876 | | | | 7,648 | | | | 5,378 | | | | 5,460 | |
| Effect of dilutive stock options | | | 30,577 | | | | 94,847 | | | | 58,607 | | | | 68,335 | |
| Total adjusted diluted average shares held | | | | | | | | | | | | | | | | |
| by public stockholders | | | 21,069,555 | | | | 20,900,054 | | | | 21,015,284 | | | | 20,819,849 | |
| | | | | | | | | | | | | | | | | |
| Net earnings per share, available to public stockholders: | | | | | | | | | | | | | | | | |
| Basic | | $ | 0.80 | | | $ | 0.76 | | | $ | 3.16 | | | $ | 2.46 | |
| Diluted | | $ | 0.79 | | | $ | 0.76 | | | $ | 3.15 | | | $ | 2.45 | |
The following table shows the number of shares eligible to receive dividends at September 30, 2009. The unvested shares in the ESOP receive dividends which are recorded through compensation expense. MHC has waived its right to dividends.
| | | 74,079,868 | |
| Treasury stock acquisitions | | | (56,063 | ) |
| RRP grants | | | 2,500 | |
| Options exercised | | | 73,050 | |
| Total voting shares outstanding at September 30, 2009 | | | 74,099,355 | |
| Unvested shares in ESOP | | | (806,556 | ) |
| Shares held by MHC | | | (52,192,817 | ) |
| Total shares eligible to receive dividends at September 30, 2009 (public shares) | | | 21,099,982 | |
On November 5, 2009, the board of directors, in accordance with its previously announced dividend policy, approved a special year end dividend of $0.29 per share payable on December 4, 2009 to shareholders of record as of the close of business on November 20, 2009. The special dividend will be paid only on public shares. Based upon publicly held shares outstanding on November 4, 2009, the following is the calculation determining the amount of the special year end dividend for fiscal year 2009.
| Capitol Federal Financial Fiscal Year 2009 Net Income | | $ | 66,297,854 | |
| Regular Quarterly Dividends Paid during Fiscal Year 2009 | | | 41,772,907 | |
| Net Income in Excess of Regular Quarterly Dividends Paid | | | 24,524,947 | |
| | | | | |
| Amount Available for Special Year End Dividend (25% of excess) | | | 6,131,237 | |
| | | | | |
| Shares Eligible to Receive Dividends on November 4, 2009 | | | 21,099,982 | |
| Per Share Amount of Special Year End Dividend | | $ | 0.29 | |
Capitol Federal Financial is the holding company for Capitol Federal Savings Bank. Capitol Federal Savings Bank has 42 branch locations in Kansas, nine of which are in-store branches. Capitol Federal Savings Bank employs 676 full time equivalent employees in the operation of its business and is one of the largest residential lenders in the State of Kansas.
Except for the historical information contained in this press release, the matters discussed may be deemed to be forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties, including changes in economic conditions in the Company's market area, changes in policies by regulatory agencies and other governmental initiatives affecting the financial services industry, fluctuations in interest rates, demand for loans in the Company's market area, the future earnings and capital levels of Capitol Federal Savings Bank, which could 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 the Company's SEC reports. Actual strategies and results in future periods 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, Investor Relations | | Executive Vice President, Chief Financial Officer |
| 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 Tables:
| | | | |
| | | At September 30, | |
| | | 2009 | | | 2008 | |
| | | Number | | | Amount | | | Number | | | Amount | |
| | | (Dollars in thousands) | |
| Loans 30-89 days delinquent | | | | | | | | | | | | |
| Originated | | | 214 | | | $ | 16,285 | | | | 179 | | | $ | 14,026 | |
| Purchased | | | 41 | | | | 10,556 | | | | 37 | | | | 7,083 | |
| | | | 255 | | | $ | 26,841 | | | | 216 | | | $ | 21,109 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | |
| | | At September 30, | |
| | | | 2009 | | | | 2008 | |
| | | Number | | | Amount | | | Number | | | Amount | |
| | | (Dollars in thousands) | |
| Non-performing loans | | | | | | | | | | | | | | | | |
| Originated | | | 129 | | | $ | 9,660 | | | | 100 | | | $ | 6,958 | |
| Purchased | | | 70 | | | | 21,259 | | | | 25 | | | | 6,708 | |
| | | | 199 | | | | 30,919 | | | | 125 | | | | 13,666 | |
| REO | | | | | | | | | | | | | | | | |
| Originated | | | 51 | | | | 5,702 | | | | 36 | | | | 2,228 | |
| Purchased | | | 8 | | | | 1,702 | | | | 12 | | | | 2,918 | |
| | | | 59 | | | | 7,404 | | | | 48 | | | | 5,146 | |
| | | | | | | | | | | | | | | | | |
| Total non-performing assets | | | 258 | | | $ | 38,323 | | | | 173 | | | $ | 18,812 | |
| | | | | | | | | | | | | | | | | |
| Non-performing assets as a percentage | | | | | | | | | | | | | | | | |
| of total assets | | | | | | | 0.46 | % | | | | | | | 0.23 | % |
| Non-performing loans as a percentage | | | | | | | | | | | | | | | | |
| of total loans | | | | | | | 0.55 | % | | | | | | | 0.26 | % |
| | | For the Year Ended | | | For the Year Ended | |
| | | September 30, 2009 | | | September 30, 2008 | |
| | | Average | | | | | | Average | | | | |
| | | Outstanding | | | Yield/ | | | Outstanding | | | Yield/ | |
| | | Balance | | | Rate(4) | | | Balance | | | Rate(4) | |
| Assets: | | (Dollars in thousands) | |
| Interest-earning assets: | | | | | | | | | | | | |
Loans receivable (1) | | $ | 5,504,549 | | | | 5.56 | % | | $ | 5,315,551 | | | | 5.68 | % |
MBS(2) | | | 2,110,701 | | | | 4.64 | | | | 1,888,186 | | | | 4.68 | |
Investment securities(2) | | | 229,766 | | | | 2.41 | | | | 242,426 | | | | 4.09 | |
| Capital stock of FHLB | | | 129,716 | | | | 2.58 | | | | 129,216 | | | | 5.36 | |
| Cash and cash equivalents | | | 72,184 | | | | 0.28 | | | | 112,522 | | | | 3.11 | |
| Total interest-earning assets | | | 8,046,916 | | | | 5.13 | | | | 7,687,901 | | | | 5.34 | |
| Other noninterest-earning assets | | | 181,829 | | | | | | | | 186,312 | | | | | |
| Total assets | | $ | 8,228,745 | | | | | | | $ | 7,874,213 | | | | | |
| | | | | | | | | | | | | | | | | |
| Liabilities and stockholders' equity: | | | | | | | | | | | | | | | | |
| Interest-bearing liabilities: | | | | | | | | | | | | | | | | |
| Savings | | $ | 228,879 | | | | 0.82 | % | | $ | 230,818 | | | | 1.77 | % |
| Checking | | | 426,976 | | | | 0.21 | | | | 398,430 | | | | 0.20 | |
| Money market | | | 814,898 | | | | 1.04 | | | | 804,612 | | | | 2.08 | |
| Certificates | | | 2,585,560 | | | | 3.45 | | | | 2,507,036 | | | | 4.44 | |
| Total deposits | | | 4,056,313 | | | | 2.48 | | | | 3,940,896 | | | | 3.37 | |
FHLB advances (3) | | | 2,437,978 | | | | 4.36 | | | | 2,552,883 | | | | 4.89 | |
| Other borrowings | | | 713,601 | | | | 4.03 | | | | 391,009 | | | | 4.39 | |
| total borrowings | | | 3,151,579 | | | | 4.29 | | | | 2,943,893 | | | | 4.82 | |
| Total interest-bearing liabilities | | | 7,207,892 | | | | 3.27 | | | | 6,884,788 | | | | 3.99 | |
| Other noninterest-bearing liabilities | | | 108,940 | | | | | | | | 119,353 | | | | | |
| Stockholders' equity | | | 911,913 | | | | | | | | 870,072 | | | | | |
| Total liabilities and | | | | | | | | | | | | | | | | |
| stockholders' equity | | $ | 8,228,745 | | | | | | | $ | 7,874,213 | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Net interest rate spread | | | | | | | 1.86 | % | | | | | | | 1.35 | % |
| Net interest-earning assets | | $ | 839,024 | | | | | | | $ | 803,112 | | | | | |
| Net interest margin | | | | | | | 2.20 | % | | | | | | | 1.75 | % |
| Ratio of interest-earning assets | | | | | | | | | | | | | | | | |
| to interest-bearing liabilities | | | | | | | 1.12 | | | | | | | | 1.12 | |
| | | | | | | | | | | | | | | | | |
| Selected performance ratios: | | | | | | | | | | | | | | | | |
| Return on average assets (annualized) | | | | | | | 0.81 | % | | | | | | | 0.65 | % |
| Return on average equity (annualized) | | | | | | | 7.27 | % | | | | | | | 5.86 | % |
| Average equity to average assets | | | | | | | 11.08 | % | | | | | | | 11.05 | % |
| | | For the Three Months Ended | |
| | | September 30, 2009 | | | June 30, 2009 | | | September 30, 2008 | |
| | | Average | | | | | | Average | | | | | | Average | | | | |
| | | Outstanding | | | Yield/ | | | Outstanding | | | Yield/ | | | Outstanding | | | Yield/ | |
| | | Balance | | | Rate(4) | | | Balance | | | Rate(4) | | | Balance | | | Rate(4) | |
| Assets: | | (Dollars in thousands) | |
| Interest-earning assets: | | | | | | | | | | | | | | | | | | |
Loans receivable (1) | | $ | 5,580,785 | | | | 5.36 | % | | $ | 5,532,573 | | | | 5.55 | % | | $ | 5,328,776 | | | | 5.69 | % |
MBS (2) | | | 2,005,892 | | | | 4.43 | | | | 2,115,159 | | | | 4.58 | | | | 2,192,268 | | | | 4.77 | |
Investment securities (2) | | | 408,176 | | | | 1.93 | | | | 246,588 | | | | 2.07 | | | | 144,718 | | | | 3.95 | |
| Capital stock of FHLB | | | 132,082 | | | | 2.98 | | | | 131,287 | | | | 2.42 | | | | 124,365 | | | | 4.72 | |
| Cash and cash equivalents | | | 59,825 | | | | 0.23 | | | | 84,360 | | | | 0.23 | | | | 59,351 | | | | 1.92 | |
| Total interest-earning assets | | | 8,186,760 | | | | 4.89 | | | | 8,109,967 | | | | 5.08 | | | | 7,849,478 | | | | 5.36 | |
| Other noninterest-earning assets | | | 192,638 | | | | | | | | 219,154 | | | | | | | | 151,695 | | | | | |
| Total assets | | $ | 8,379,398 | | | | | | | $ | 8,329,121 | | | | | | | $ | 8,001,173 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Liabilities and stockholders' equity: | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest-bearing liabilities: | | | | | | | | | | | | | | | | | | | | | | | | |
| Savings | | $ | 227,667 | | | | 0.74 | | | $ | 230,869 | | | | 0.73 | | | $ | 231,986 | | | | 1.66 | |
| Checking | | | 436,863 | | | | 0.21 | | | | 442,227 | | | | 0.21 | | | | 403,327 | | | | 0.20 | |
| Money market | | | 845,703 | | | | 0.88 | | | | 838,281 | | | | 0.93 | | | | 799,408 | | | | 1.45 | |
| Certificates | | | 2,699,398 | | | | 3.20 | | | | 2,639,347 | | | | 3.36 | | | | 2,485,619 | | | | 3.99 | |
| Total deposits | | | 4,209,631 | | | | 2.29 | | | | 4,150,724 | | | | 2.39 | | | | 3,920,340 | | | | 2.94 | |
FHLB advances (3) | | | 2,411,077 | | | | 4.12 | | | | 2,410,956 | | | | 4.21 | | | | 2,469,082 | | | | 4.73 | |
| Other borrowings | | | 713,609 | | | | 3.92 | | | | 713,609 | | | | 3.97 | | | | 638,463 | | | | 4.10 | |
| Total borrowings | | | 3,124,686 | | | | 4.08 | | | | 3,124,565 | | | | 4.16 | | | | 3,107,545 | | | | 4.60 | |
| Total interest-bearing liabilities | | | 7,334,317 | | | | 3.05 | | | | 7,275,289 | | | | 3.15 | | | | 7,027,885 | | | | 3.67 | |
| Other noninterest-bearing liabilities | | | 109,651 | | | | | | | | 127,389 | | | | | | | | 103,332 | | | | | |
| Stockholders' equity | | | 935,430 | | | | | | | | 926,443 | | | | | | | | 869,956 | | | | | |
| Total liabilities and | | | | | | | | | | | | | | | | | | | | | | | | |
| stockholders' equity | | $ | 8,379,398 | | | | | | | $ | 8,329,121 | | | | | | | $ | 8,001,173 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Net interest rate spread | | | | | | | 1.84 | % | | | | | | | 1.93 | % | | | | | | | 1.68 | % |
| Net interest-earning assets | | $ | 852,443 | | | | | | | $ | 834,678 | | | | | | | $ | 821,593 | | | | | |
| Net interest margin | | | | | | | 2.13 | % | | | | | | | 2.26 | % | | | | | | | 2.03 | % |
| Ratio of interest-earning assets | | | | | | | | | | | | | | | | | | | | | | | | |
| to interest-bearing liabilities | | | | | | | 1.12 | | | | | | | | 1.11 | | | | | | | | 1.12 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Selected performance ratios: | | | | | | | | | | | | | | | | | | | | | | | | |
| Return on average assets (annualized) | | | | | | | 0.80 | % | | | | | | | 0.74 | % | | | | | | | 0.79 | % |
| Return on average equity (annualized) | | | | | | | 7.20 | % | | | | | | | 6.68 | % | | | | | | | 7.25 | % |
| Average equity to average assets | | | | | | | 11.16 | % | | | | | | | 11.12 | % | | | | | | | 10.87 | % |
(1) Calculated net of deferred loan fees, loan discounts, and loans in process. Non-accruing loans 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) FHLB advances are stated net of deferred gains and deferred prepayment penalties.
(4) Average yields are derived by dividing annualized income by the average balance of the related assets and 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, except as noted. The yields and rates include amortization of fees, costs, premiums and discounts which are considered adjustments to yields/rates. Yields on tax-exempt securities were not calculated on a tax-equivalent basis.
