NEWS
RELEASE
FOR IMMEDIATE
RELEASE
February
4, 2009
CAPITOL
FEDERAL FINANCIAL
REPORTS
FIRST QUARTER 2009 RESULTS
Topeka,
KS - Capitol Federal Financial (NASDAQ: CFFN) (the "Company") announced today
results for the quarter ended December 31, 2008. Detailed results of
the quarter are available in the Company's Quarterly Report on Form 10-Q for the
quarter ended December 31, 2008, which will be filed today and posted on our
website, http://ir.capfed.com/sec.cfm. Highlights for the quarter
include:
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net
income of $15.9 million,
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·
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diluted
earnings per share of $0.22,
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·
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equity
to total assets ratio of 11.00%,
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·
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non-performing
loans to total loans ratio of 0.35%
and
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Capitol
Federal Savings Bank (the “Bank”) continues to maintain substantial access
to liquidity.
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On
January 14, 2009, the board of directors declared a $0.50 per public share
dividend to stockholders of record as of February 6, 2009, payable on February
20, 2009.
Results
of Operations for the Quarter Ended December 31, 2008
Net
income for the quarter ended December 31, 2008 was $15.9 million compared to
$9.1 million for the same period in the prior fiscal year. The $6.8 million
increase in net income was primarily a result of a $10.3 million decrease in
interest expense and a $4.3 million increase in interest and dividend income,
partially offset by a $4.1 million increase in income tax expense and a $2.7
million increase in other expenses.
Total
interest and dividend income for the current quarter was $105.3 million compared
to $101.0 million for the prior year quarter. The $4.3 million
increase was a result of an increase in interest income on mortgage-related
securities of $9.3 million, partially offset by a decrease in interest income on
investments of $2.8 million, a decrease of $1.4 million in interest income on
cash and cash equivalents, and a decrease in dividends on FHLB stock of $1.3
million.
The $10.3
million decrease in interest expense was primarily a result of a decrease in
interest expense on deposits and Federal Home Loan Bank (“FHLB”) advances,
partially offset by an increase in interest expense on other
borrowings. Interest expense on deposits for the current quarter
decreased to $26.8 million from $38.0 million for the prior year quarter,
primarily a result of a decrease in the average rate paid on the certificate of
deposit, money market and retirement savings portfolios. Interest
expense on FHLB advances for the current quarter decreased to $29.5 million from
$34.2 million for the prior year quarter, primarily as a result of a decrease in
the average balance due to maturing advances and a decrease in rate as a result
of the termination and maturity of the interest rate swap agreements during
fiscal year 2008. Interest expense on other borrowings for the
current quarter increased to $7.7 million from $2.2 million for the prior year
quarter due to an increase in the average balance. The proceeds from
the repurchase agreement funds were used to purchase mortgage-related securities
and to fund maturing FHLB advances.
Income
tax expense for the current quarter was $9.3 million compared to $5.2 million in
the prior year quarter. The increase in income tax expense was due to
an increase in earnings compared to the prior year quarter. The
effective tax rate for each quarter was relatively unchanged at 36.9% for the
current year quarter, compared to 36.2% for the prior year quarter.
Financial
Condition as of December 31, 2008
Total
assets increased from $8.06 billion at September 30, 2008 to $8.16 billion at
December 31, 2008. The $102.1 million increase in assets was
primarily attributed to a $135.8 million increase in the loan portfolio as a
result of one- to four-family loan purchases during the current
quarter.
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 $19.2 million at
December 31, 2008. Despite the increase in non-performing loans at
December 31, 2008, 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 0.35% at December 31, 2008. At December 31, 2008, our allowance to
loan losses was $6.1 million or 0.11% of the total loan portfolio and 32% 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.
Total
liabilities increased from $7.18 billion at September 30, 2008 to $7.26 billion
at December 31, 2008. The $75.9 million increase in liabilities was
primarily a result of an increase in FHLB advances of $149.8 million, partially
offset by a decrease in deposits of $56.6 million. The additional
FHLB advance in the current quarter was in anticipation of maturing advances in
January 2009. The new advance was entered into prior to the
maturity of the other advances due to favorable rate and term offerings
available at the time of the new advance.
The Bank
continues to maintain access to additional liquidity by diversifying its funding
sources and maintaining a strong retail oriented deposit
portfolio. We believe the turmoil in the credit and equity markets
has made deposit products in strong financial institutions desirable for many
customers. In addition, the investments of the Bank 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.
Stockholders’
equity increased $26.2 million to $897.4 million at December 31, 2008, from
$871.2 million at September 30, 2008. The increase was primarily a
result of an increase in unrealized gains on available-for-sale securities of
$20.2 million and net income of $15.9 million partially offset by dividends paid
of $12.7 million.
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 January 14, 2009, the board of directors
declared a dividend of $0.50 per share which will be paid on February 20, 2009
to stockholders of record on February 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, results
of
operations, regulatory capital requirements of the Bank, other regulatory
limitations on the Bank's ability to make capital distributions to the 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 December 31, 2008,
Capitol Federal Financial, at the holding company level, had $110.5 million in
deposit accounts held at the Bank, available to further the Company's general
corporate and capital management strategies, which could include the payment of
dividends.
The
Company has a relatively unique corporate structure; therefore, reporting of
certain information under accounting principles generally accepted in the United
States of America ("GAAP") is not necessarily reflective of the process
considered by the board of directors in connection with its dividend
policy. The earnings per share amounts in the following table are
presented in accordance with GAAP. Included in the GAAP earnings per
share calculations are the average shares held by MHC.
The
following is a reconciliation of the denominations of the basic and diluted
earnings per share calculations.
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Three
Months Ended
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December
31,
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2008
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2007
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(Dollars
in thousands, except per share amounts)
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Net
income
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$
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15,852
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$
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9,113
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Average
common shares outstanding
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73,062,337
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72,955,067
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Average
Employee Stock Ownership Plan
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(“ESOP”)
shares outstanding
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548
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548
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Total
basic average common shares outstanding
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73,062,885
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72,955,615
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Effect
of dilutive Recognition and Retention Plan
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(“RRP”)
shares
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8,716
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6,789
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Effect
of dilutive stock options
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90,443
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55,183
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Total
diluted average common shares outstanding
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73,162,044
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73,017,587
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Net
earnings per share:
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Basic
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$
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0.22
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$
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0.12
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Diluted
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$
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0.22
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$
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0.12
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Three
Months Ended
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December
31,
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2008
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2007
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(Dollars
in thousands, except per share amounts)
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Net
income
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$
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15,852
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$
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9,113
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Basic
average common shares outstanding
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73,062,885
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72,955,615
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Average
shares held by MHC
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(52,192,817
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)
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(52,192,817
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)
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Total
adjusted basic average shares
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held
by public stockholders
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20,870,068
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20,762,798
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Effect
of dilutive RRP shares
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8,716
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6,789
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Effect
of dilutive stock options
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90,443
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55,183
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Total
adjusted diluted average shares
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held
by public stockholders
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20,969,227
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20,824,770
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Net
earnings per share, available
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to
public stockholders:
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Basic
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$
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0.76
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$
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0.44
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Diluted
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$
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0.76
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$
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0.44
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The
following table shows the number of shares eligible to receive dividends at
December 31, 2008. The unvested shares in the ESOP receive dividends
that are recorded through compensation expense. MHC has waived its
right to dividends.
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74,079,868
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Treasury
stock acquisitions
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(19,862
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)
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Options
exercised
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49,075
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Total
voting shares outstanding at December 31, 2008
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74,109,081
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Unvested
shares in ESOP
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(1,008,194
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)
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Shares
held by MHC
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(52,192,817
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)
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Total
shares eligible to receive dividends at December 31, 2008 (public
shares)
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20,908,070
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Capitol
Federal Financial is the holding company for Capitol Federal Savings
Bank. Capitol Federal Savings Bank has 40 branch locations in Kansas,
nine of which are in-store branches. Capitol Federal Savings Bank
employs 669 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:
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Jim
Wempe
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Kent
Townsend
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Vice
President,
Investor
Relations
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Executive
Vice President and
Chief
Financial Officer
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700
S Kansas Ave.
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700
S Kansas Ave.
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Topeka,
KS 66603
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Topeka,
KS 66603
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(785)
270-6055
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(785)
231-6360
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jwempe@capfed.com
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ktownsend@capfed.com
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