NEWS
RELEASE
FOR IMMEDIATE
RELEASE
May
5, 2009
CAPITOL
FEDERAL FINANCIAL
REPORTS
SECOND QUARTER 2009 RESULTS
Topeka,
KS - Capitol Federal Financial (NASDAQ: CFFN) (the "Company") announced today
results for the quarter ended March 31, 2009. Detailed results of the
quarter are available in the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2009, 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 $18.1 million,
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·
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diluted
earnings per share of $0.25,
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·
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equity
to total assets ratio of 11.08%,
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·
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tangible
equity to assets ratio of 9.9% for Capitol Federal Savings Bank (the
“Bank”),
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·
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non-performing
loans to total loans ratio of 0.42%
and
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·
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the
Bank continues to maintain substantial access to
liquidity.
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On April
21, 2009, the board of directors declared a $0.50 per public share dividend to
stockholders of record as of May 1, 2009, payable on May 15, 2009.
Results
of Operations for the Quarter Ended March 31, 2009
Net
income for the quarter ended March 31, 2009 was $18.1 million compared to $11.7
million for the same period in the prior fiscal year. The $6.4 million increase
in net income was primarily a result of a $12.3 million decrease in interest
expense, partially offset by a $4.3 million increase in income tax
expense.
Total
interest and dividend income for the quarter was $104.3 million compared to
$101.8 million for the prior year quarter. The $2.5 million increase
was a result of an increase in interest income on mortgage-backed securities
(“MBS”) of $4.9 million and an increase in interest income on loans receivable
of $2.2 million, partially offset by a decrease in interest income on investment
securities of $2.1 million, a decrease in interest income on cash and cash
equivalents of $1.3 million, and a decrease in dividends received on Federal
Home Loan Bank (“FHLB”) stock of $1.1 million.
The $12.3
million decrease in interest expense was primarily a result of a decrease in
interest expense on deposits and FHLB advances, partially offset by an increase
in interest expense on other borrowings. Interest expense on deposits
for the current quarter decreased to $24.7 million from $35.1 million for the
prior year quarter. Interest expense on FHLB advances for the current
quarter decreased to $26.7 million from $31.8 million for the prior year
quarter, primarily as a result of a decrease in the average rate due to
refinancing $575.0 million of advances during the current quarter and 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 $7.1 million from $3.9 million in the prior year quarter due to an
increase in the average balance.
The Bank
recorded a provision for loan losses of $2.1 million in the current quarter,
which reflects the change in the Bank’s allowance for loan loss
methodology and accounts for charge-offs during the quarter, primarily
related to purchased loans.
Income
tax expense for the current quarter was $10.6 million compared to $6.2 million
in the prior year quarter. The increase in income tax expense was
primarily due to an increase in earnings compared to the prior year
quarter. The effective tax rate was 36.8% for the current year
quarter, compared to 34.7% for the prior year quarter.
Results
of Operations for the Six Months Ended March 31, 2009
Net
income for the six months ended March 31, 2009 was $34.0 million compared to
$20.8 million for the same period in the prior fiscal year. The $13.2 million
increase in net income was primarily a result of a $22.7 million decrease in
interest expense and a $6.8 million increase in interest and dividend income,
partially offset by an $8.4 million increase in income tax expense, a $3.8
million increase in other expenses, and a $2.5 million increase in provision for
loan loss.
Total
interest and dividend income for the six months ended March 31, 2009 was $209.6
million compared to $202.8 million for the prior year period. The
$6.8 million increase was a result of an increase in interest income on MBS of
$14.1 million and an increase in interest income on loans receivable of $2.7
million, partially offset by a decrease in interest income on investment
securities of $4.9 million, a decrease in interest income on cash and cash
equivalents of $2.7 million, and a decrease in dividends received on FHLB stock
of $2.4 million.
The $22.7
million decrease in interest expense was primarily due to a decrease in interest
expense on deposits of $21.7 million. Interest expense on deposits
for the six months ended March 31, 2009 was $51.5 million compared to $73.2
million for the prior year period.
Income
tax expense for the current six month period was $19.8 million compared to $11.4
million in the prior year period. 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 36.9% for the current year period,
compared to 35.4% for the prior year period.
Financial
Condition as of March 31, 2009
Total
assets increased from $8.06 billion at September 30, 2008 to $8.27 billion at
March 31, 2009. The $214.6 million increase in assets was primarily
attributed to a $202.3 million increase in loans receivable and loans receivable
held-for-sale.
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 $22.4 million at
March 31, 2009. Despite the increase in non-performing loans at March
31, 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 0.42% at March 31,
2009. At March 31, 2009, our allowance to loan losses was $7.5
million or 0.14% 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.
Total
liabilities increased from $7.18 billion at September 30, 2008 to $7.35 billion
at March 31, 2009. The $169.5 million increase in liabilities was
primarily a result of an increase in deposits of $192.6 million, 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 strong
financial institutions, like the Bank, desirable for many
customers.
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 March 31, 2009, $1.02 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 April 21, 2009, the board of directors declared
a dividend of $0.50 per share which will be paid on May 15, 2009 to stockholders
of record on May 1, 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 March 31,
2009, Capitol Federal Financial, at the holding company level, had $113.9
million in deposit accounts held at the Bank, available to further the Company's
general corporate and capital management strategies, which could include the
payment of dividends.
The
Company has a relatively unique corporate structure; therefore, reporting of
certain information under accounting principles generally accepted in the United
States of America ("GAAP") is not necessarily reflective of the process
considered by the board of directors in connection with its dividend
policy. The earnings per share amounts in the following table are
presented in accordance with GAAP. Included in the GAAP earnings per
share calculations are the average shares held by MHC.
The
following is a reconciliation of the basic and diluted earnings per share
calculations.
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Three
Months Ended
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Six
Months Ended
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March
31,
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March
31,
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2009
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2008
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2009
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2008
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(Dollars
in thousands, except per share amounts)
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Net
income
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$
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18,132
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$
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11,727
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$
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33,984
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$
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20,840
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Average
common shares outstanding
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73,062,516
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72,824,366
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73,062,425
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72,890,074
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Average
committed Employee Stock Ownership Plan
(“ESOP”) shares outstanding
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50,970
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50,964
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25,482
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25,618
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Total
basic average common shares outstanding
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73,113,486
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72,875,330
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73,087,907
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72,915,692
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Effect
of dilutive Recognition and Retention Plan (“RRP”)
shares
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4,269
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2,663
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6,535
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4,457
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Effect
of dilutive stock options
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57,074
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50,953
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73,628
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53,100
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Total
diluted average common shares outstanding
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73,174,829
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72,928,946
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73,168,070
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72,973,249
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Net
earnings per share:
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Basic
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$
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0.25
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$
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0.16
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$
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0.46
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$
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0.29
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Diluted
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$
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0.25
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$
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0.16
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$
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0.46
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$
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0.29
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Three
Months Ended
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Six
Months Ended
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March
31,
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March
31,
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2009
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2008
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2009
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2008
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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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18,132
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$
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11,727
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$
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33,984
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$
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20,840
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Basic
average common shares outstanding
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73,113,486
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72,875,330
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73,087,907
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72,915,692
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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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(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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20,920,669
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20,682,513
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20,895,090
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20,722,875
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Effect
of dilutive RRP shares
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4,269
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2,663
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6,535
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4,457
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Effect
of dilutive stock options
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57,074
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50,953
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73,628
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53,100
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Total
adjusted diluted average shares
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held
by public stockholders
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20,982,012
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20,736,129
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20,975,253
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20,780,432
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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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0.87
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$
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0.57
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$
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1.63
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$
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1.01
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Diluted
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$
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0.86
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$
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0.57
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$
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1.62
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$
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1.00
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The
following table shows the number of shares eligible to receive dividends at
March 31, 2009. 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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(56,063
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)
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Options
exercised
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67,250
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Total
voting shares outstanding at March 31, 2009
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74,091,055
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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 March 31, 2009 (public
shares)
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20,890,044
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Capitol
Federal Financial is the holding company for Capitol Federal Savings
Bank. Capitol Federal Savings Bank has 41 branch locations in Kansas,
nine of which are in-store branches. Capitol Federal Savings Bank
employs 674 full time equivalent employees in the operation of its business 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, that involve risks and
uncertainties, including changes in economic conditions in the Company’s market
area, changes in policies by regulatory agencies, fluctuations in interest
rates, demand for loans in the Company’s market area, 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 the 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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