Capitol Federal Financial, Inc.® Reports Fiscal Year 2020 Results

TOPEKA, Kan.--()--Capitol Federal Financial, Inc.® (NASDAQ: CFFN) (the "Company"), the parent company of Capitol Federal Savings Bank (the "Bank"), announced results today for the fiscal year ended September 30, 2020. Detailed results will be available in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2020, which will be filed with the Securities and Exchange Commission ("SEC") on or about November 25, 2020 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 quarter include:

  • net income of $18.3 million;
  • basic and diluted earnings per share of $0.13;
  • net interest margin of 2.03%;
  • annualized deposit growth of 8.0%;
  • repurchased $23.8 million of common stock, or 2,558,100 shares, at an average price of $9.31 per share;
  • paid dividends of $11.7 million, or $0.085 per share; and
  • on October 20, 2020, announced a cash dividend of $0.085 per share, payable on November 20, 2020 to stockholders of record as of the close of business on November 6, 2020.

Highlights for the fiscal year include:

  • net income of $64.5 million;
  • basic and diluted earnings per share of $0.47;
  • net interest margin of 2.12%;
  • deposit growth of 10.9%;
  • paid dividends of $93.9 million, or $0.68 per share; and
  • on October 28, 2020, announced a fiscal year 2020 cash true-up dividend of $0.13 per share, payable on December 4, 2020 to stockholders of record as of the close of business on November 20, 2020.

Impact on Operations Due to the Coronavirus Disease 2019 ("COVID-19") Pandemic During the Current Quarter

Management's actions related to COVID-19 and the impact of COVID-19 on certain aspects of the Company's business during the current quarter are summarized below.

Bank operations - Due to the increase in COVID-19 cases in late June into July, management changed lobby services in early July. Lobby services were limited to appointment only while drive-through, mobile, and online banking became the Bank's primary channels of serving customers. Retail loan closings were conducted with customers coming to our drive-through facilities and commercial loans have been closed in person only when necessary. In mid-September 2020, lobbies were reopened once again. Management continues to monitor COVID-19 cases and will adjust operational plans as necessary.

Loan modification programs - In late March 2020, the Bank announced loan modification programs to support and provide relief for its borrowers during the COVID-19 pandemic. Generally, loan modifications under these programs ("COVID-19 loan modifications") for one- to four-family loans and consumer loans consist of a three-month payment forbearance of principal, interest and, in some cases, escrow. COVID-19 loan modifications of commercial loans mainly consist of a six-month interest-only payment period. See additional discussion regarding COVID-19 loan modifications in the Loan Portfolio section below.

As of September 30, 2020, the Bank had 193 one- to four-family loans totaling $39.8 million and 27 consumer loans totaling $795 thousand that were still in their deferral period. The deferral period concluded by September 30, 2020 for $199.7 million of one- to four-family loans and $1.6 million of consumer loans.

As of September 30, 2020, the Bank had 203 commercial loans with a combined gross loan amount of $317.4 million, which includes undisbursed amounts, that were still in their deferral period. The deferral period concluded by September 30, 2020 for $93.5 million, or 23%, of the commercial loans subject to COVID-19 loan modifications. All of these loans were current as of September 30, 2020. The deferral period for the majority of the remaining commercial loans concluded in October 2020.

Small Business Administration ("SBA") Payroll Protection Program ("PPP") loans - As of September 30, 2020, the Bank had originated and funded 791 PPP loans totaling $43.9 million, with a median loan amount of $19 thousand, and received origination fees totaling $1.9 million associated with these loans. These loans are fully guaranteed by the SBA. The program ended August 8, 2020.

On October 8, 2020 the SBA released a streamlined loan forgiveness application for PPP loans in amounts of $50 thousand or less. Of the PPP loans originated by the Bank, 611 loans totaling $9.6 million, or 22% of the Bank's total PPP loan balance, were in amounts less than $50 thousand and will be eligible for the streamlined forgiveness process.

Capital, liquidity, and dividends - Management continues to anticipate being able to manage the economic risks and uncertainties associated with the COVID-19 pandemic and remain well capitalized with sufficient liquidity to serve our customers.

Deposit balances have increased due primarily to the economic stimulus payments, a reduction in consumer spending, and PPP loan proceeds being deposited at the Bank. As a result, management is currently faced with the challenge of excess liquidity. Due to the nature of deposit cash flows, management does not know how long the excess liquidity will continue. As such, management has elected, for the time being, to reduce the Bank's level of borrowings and increase the balance of securities using the excess liquidity from the deposit portfolio.

With earnings of $0.47 per share for fiscal year 2020, and a cash balance at the holding company level of $82.5 million, the Company has the resources to continue to pay its regular quarterly dividend of $0.085 per share for the foreseeable future. Given the state of economic uncertainty and how that may play out with the credit risk exposure in the Bank's loan portfolio, the Company elected to defer the annual True Blue dividend in June 2020 and did not ask at that time for a regulatory non-objection to move capital from the Bank to the Company to pay that dividend. It is management's intention to ask for a regulatory non-objection at some point in the future to pay this dividend when economic conditions are more certain. It is currently the Company's intention to pay out 100% of its fiscal year 2021 earnings.

Comparison of Operating Results for the Years Ended September 30, 2020 and 2019

The Company recognized net income of $64.5 million, or $0.47 per share, for the year ended September 30, 2020 compared to net income of $94.2 million, or $0.68 per share, for the year ended September 30, 2019. The decrease in net income was due primarily to a $21.6 million increase in provision for credit losses and a decrease in net interest income, partially offset by a decrease in income tax expense.

Net interest income decreased $17.1 million, or 8.3%, from the prior year to $189.3 million for the current year. The net interest margin decreased 14 basis points, from 2.26% for the prior year to 2.12% for the current year. The leverage strategy was suspended at certain times during the prior year and during all of the current year due to the negative interest rate spreads between the related Federal Home Loan Bank Topeka ("FHLB") borrowings and cash held at the Federal Reserve Bank of Kansas City ("FRB of Kansas City"), making the transaction unprofitable. See additional discussion regarding the leverage strategy in the Financial Condition section below. When the leverage strategy is in place, it increases our net interest income but reduces the net interest margin due to the amount of earnings from the transaction in comparison to the size of the transaction. Excluding the effects of the leverage strategy, the net interest margin would have decreased 18 basis points, from 2.30% for the prior year to 2.12% for the current year. The decrease in the net interest margin, excluding the effects of the leverage strategy, was due mainly to a decrease in the loan portfolio yield, specifically the yield on the correspondent one- to four-family loan portfolio.

Markets responded to the COVID-19 pandemic in many ways, with a dramatic lowering of interest rates in a short period of time having the most impact on the operations and performance of the Bank. Since the onset of the pandemic, the rate paid on our interest-bearing liabilities has decreased. The Bank has lowered its offered rates on all retail deposit products except checking and savings accounts. Changes in the rates paid on money market accounts have an immediate impact on the cost of our deposits, while the impact of reducing rates offered on our certificate of deposit products lower the cost of deposits only as certificates of deposit reprice lower when they mature. As the Bank further monitors rates offered and the cost of borrowings, we anticipate that the average cost of our interest-bearing liabilities will continue to decrease.

We responded to lower market rates for lending by lowering rates offered on our one- to four-family loan products over the course of the year. Given current market interest rates, rates offered on new loans and the recent volume of one- to four-family refinances and endorsements allowing borrowers to take advantage of the lower current market interest rates, the yield on the total loan portfolio is likely to continue to decrease. Additionally, with significant cash inflows realized due to investment securities being called and prepayments on mortgage-backed securities ("MBS") increasing, the yields on reinvested funds into new securities are lower than portfolio yields.

Considering the drastic changes in market rates and the ongoing economic uncertainty, even with the changes the Bank has made to its cost of funding, with the lower rates on new mortgage loans, refinances, endorsements and new securities also at lower rates, our net interest margin could continue to decrease, with further downside risk as a result of high levels of prepayments and premium amortization on correspondent one- to four-family loans and MBS.

Interest and Dividend Income

The weighted average yield on total interest-earning assets decreased 21 basis points, from 3.61% for the prior year to 3.40% for the current year, and the average balance of interest-earning assets decreased $193.4 million. Absent the impact of the leverage strategy, the weighted average yield on total interest-earning assets would have decreased 22 basis points, from 3.62% for the prior year to 3.40% for the current year, and the average balance of interest-earning assets would have decreased $35.6 million. The decrease in the weighted average yield between periods was due primarily to a decrease in the loan portfolio yield. 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:

 

2020

 

2019

 

Dollars

 

Percent

 

(Dollars in thousands)

 

 

INTEREST AND DIVIDEND INCOME:

 

 

 

 

 

 

 

Loans receivable

$

270,494

 

 

$

284,229

 

 

$

(13,735)

 

 

(4.8)

%

MBS

23,009

 

 

25,730

 

 

(2,721)

 

 

(10.6)

 

FHLB stock

5,827

 

 

7,823

 

 

(1,996)

 

 

(25.5)

 

Investment securities

4,467

 

 

6,366

 

 

(1,899)

 

 

(29.8)

 

Cash and cash equivalents

1,181

 

 

5,806

 

 

(4,625)

 

 

(79.7)

 

Total interest and dividend income

$

304,978

 

 

$

329,954

 

 

$

(24,976)

 

 

(7.6)

 

The decrease in interest income on loans receivable was due mainly to a decrease in yield on correspondent loans, including a $5.8 million increase in the amortization of premiums related to increases in payoff and endorsement activity. This was partially offset by a shift in the mix of the loan portfolio, as the average balance of lower-yielding one- to four-family loans decreased $152.2 million, or 2.3%, partially offset by a $64.9 million, or 9.2%, increase in the average balance of higher-yielding commercial loans, excluding PPP loans. The weighted average yield on the loans receivable portfolio decreased 14 basis points, from 3.77% for the prior year to 3.63% for the current year.

The decrease in interest income on the MBS portfolio was due primarily to a 22 basis point decrease in the weighted average yield to 2.41% in the current year as a result of new purchases at lower market yields and the repricing of existing adjustable-rate MBS to lower market yields. The decrease in dividend income on FHLB stock was due mainly to a decrease in the dividend rate paid by FHLB, as well as to the leverage strategy not being in place during the current year. The decrease in interest income on investment securities was due mainly to a 61 basis point decrease in the weighted average yield to 1.65% in the current year as a result of calls and maturities either being replaced at lower market rates or not being replaced. The decrease in interest income on cash and cash equivalents was due primarily to the leverage strategy being in place for a portion of the prior year and not being in place during the current year, along with a decrease in the yield earned on cash held at the FRB of Kansas City.

Interest Expense

The weighted average rate paid on total interest-bearing liabilities decreased eight basis points, from 1.54% for the prior year to 1.46% for the current year, and the average balance of interest-bearing liabilities decreased $126.0 million. Absent the impact of the leverage strategy, the weighted average rate paid on total interest-bearing liabilities would have decreased six basis points, from 1.52% for the prior year to 1.46% for the current year, while the average balance of interest-bearing liabilities would have increased $31.8 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 Year Ended

 

 

 

 

 

September 30,

 

Change Expressed in:

 

2020

 

2019

 

Dollars

 

Percent

 

(Dollars in thousands)

 

 

INTEREST EXPENSE:

 

 

 

 

 

 

 

Deposits

$

67,598

 

 

$

66,201

 

 

$

1,397

 

 

2.1

%

Borrowings

48,045

 

 

57,363

 

 

(9,318)

 

 

(16.2)

 

Total interest expense

$

115,643

 

 

$

123,564

 

 

$

(7,921)

 

 

(6.4)

 

The increase in interest expense on deposits was due to an increase in the cost of the retail/business certificate of deposit portfolio, partially offset by decreases in the cost of wholesale certificates of deposit and money market accounts. The weighted average rate of the retail/business certificate of deposit portfolio increased 11 basis points, to 2.03% for the current year, and the average balance increased $185.0 million, or approximately 7%. In the third quarter of fiscal year 2019, the Bank increased offered rates on short-term and certain intermediate-term certificates of deposit in an effort to encourage customers to move funds to those terms. During the fourth quarter of fiscal year 2019, the Bank held the unTraditional campaign with above-market rates, resulting in growth in the short-term and certain intermediate-term certificates of deposit. Since the onset of the COVID-19 pandemic, the retail/business certificate of deposit portfolio has been gradually repricing down as certificates renew to lower offered rates.

The borrowings line item in the table above includes interest expense associated and not associated with the leverage strategy. Interest expense on borrowings not related to the leverage strategy decreased $5.4 million from the prior year due primarily to a decrease in the average balance of such borrowings, as certain maturing FHLB advances and repurchase agreements were not replaced and the Bank paid down its FHLB line of credit with funds generated from the increase in deposits. Interest expense on FHLB borrowings associated with the leverage strategy decreased $3.9 million from the prior year due to the leverage strategy being in place for a portion of the prior year and not being in place at all during the current year.

Provision for Credit Losses

The Bank recorded a provision for credit losses during the current year of $22.3 million, compared to $750 thousand during the prior year. The $22.3 million provision for credit losses in the current year was primarily related to the deterioration of economic conditions as a result of COVID-19. See additional discussion regarding management's evaluation of the adequacy of the Bank's allowance for credit losses ("ACL") at September 30, 2020 in the Asset Quality section below.

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:

 

2020

 

2019

 

Dollars

 

Percent

 

(Dollars in thousands)

 

 

NON-INTEREST INCOME:

 

 

 

 

 

 

 

Deposit service fees

$

11,285

 

 

$

12,740

 

 

$

(1,455)

 

 

(11.4)

%

Insurance commissions

2,487

 

 

2,821

 

 

(334)

 

 

(11.8)

 

Other non-interest income

5,827

 

 

6,397

 

 

(570)

 

 

(8.9)

 

Total non-interest income

$

19,599

 

 

$

21,958

 

 

$

(2,359)

 

 

(10.7)

 

The decrease in deposit service fees was due mainly to a decrease in service charge income, primarily resulting from a decrease in consumer activity related to the COVID-19 pandemic, along with the discontinuation of point-of-sale service charges, which the Bank ceased charging in April 2019. The decrease in insurance commissions was due primarily to a decrease in the amount of annual contingent insurance commissions. The decrease in other non-interest income was due mainly to a decrease in loan-related fees, primarily prepayment fees and late charges, compared to the prior 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:

 

2020

 

2019

 

Dollars

 

Percent

 

(Dollars in thousands)

 

 

NON-INTEREST EXPENSE:

 

 

 

 

 

 

 

Salaries and employee benefits

$

52,996

 

 

$

53,145

 

 

$

(149)

 

 

(0.3)

%

Information technology and related expense

16,974

 

 

17,615

 

 

(641)

 

 

(3.6)

 

Occupancy, net

13,870

 

 

13,032

 

 

838

 

 

6.4

 

Regulatory and outside services

5,762

 

 

5,813

 

 

(51)

 

 

(0.9)

 

Advertising and promotional

4,889

 

 

5,244

 

 

(355)

 

 

(6.8)

 

Deposit and loan transaction costs

2,890

 

 

2,478

 

 

412

 

 

16.6

 

Office supplies and related expense

2,195

 

 

2,439

 

 

(244)

 

 

(10.0)

 

Federal insurance premium

914

 

 

1,172

 

 

(258)

 

 

(22.0)

 

Other non-interest expense

5,514

 

 

6,006

 

 

(492)

 

 

(8.2)

 

Total non-interest expense

$

106,004

 

 

$

106,944

 

 

$

(940)

 

 

(0.9)

 

The decrease in information technology and related expense was due mainly to the prior year including costs related to the integration of the operations of Capital City Bancshares, Inc. ("CCB"), which the Company acquired in August 2018. The increase in occupancy, net was due primarily to an increase in facility-related costs resulting from the impact of the COVID-19 pandemic, along with an increase in depreciation expense. The decrease in advertising and promotional expenses was due mainly to adjustments in advertising schedules, postponements of campaigns, and cancellations of certain sponsorships as a result of the COVID-19 pandemic. The increase in deposit and loan transaction costs was due mainly to the timing of loan origination-related costs. The decrease in the federal insurance premium was due mainly to the Bank utilizing an assessment credit from the Federal Deposit Insurance Corporation ("FDIC") during the majority of the current year. The decrease in other non-interest expense was due primarily to a decrease in amortization of deposit intangibles, as well as a decrease in debit card fraud losses.

The Company's efficiency ratio was 50.74% for the current year compared to 46.83% for the prior year. The change in the efficiency ratio was due to lower net interest income in the current year compared to the prior year. 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 higher value indicates that the financial institution is generating revenue with a proportionally higher level of expense, relative to the net interest margin.

Income Tax Expense

The following table presents pretax income, income tax expense, and net income for the time periods presented, along with the change measured in dollars and percent.

 

For the Year Ended

 

 

 

 

 

September 30,

 

Change Expressed in:

 

2020

 

2019

 

Dollars

 

Percent

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

Income before income tax expense

$

80,630

 

 

$

120,654

 

 

$

(40,024)

 

 

(33.2)

%

Income tax expense

16,090

 

 

26,411

 

 

(10,321)

 

 

(39.1)

 

Net income

$

64,540

 

 

$

94,243

 

 

$

(29,703)

 

 

(31.5)

 

 

 

 

 

 

 

 

 

Effective Tax Rate

20.0

%

 

21.9

%

 

 

 

 

The decrease in income tax expense was due primarily to lower pretax income in the current year. The lower effective tax rate in the current year compared to the prior year was due mainly to the Company's permanent differences, such as low income housing partnership tax credits, which generally reduce our tax expense, having a proportionately larger impact given the lower pretax income in the current year period. Additionally, an income tax benefit was recognized during the current year as a result of favorable federal tax guidance issued during the current year related to certain bank-owned life insurance policies added in the CCB acquisition. Management anticipates the effective income tax rate for fiscal year 2021 will be approximately 21% to 22%.

Comparison of Operating Results for the Three Months Ended September 30, 2020 and June 30, 2020

For the quarter ended September 30, 2020, the Company recognized net income of $18.3 million, or $0.13 per share, compared to net income of $19.5 million, or $0.14 per share, for the quarter ended June 30, 2020. The decrease was due primarily to an increase in non-interest expense and a decrease in net interest income compared to the prior quarter. The net interest margin decreased four basis points, from 2.07% for the prior quarter to 2.03% for the current quarter. The decrease in the net interest margin was due mainly to a decrease in the loan portfolio yield and securities portfolio yield, partially offset by a decrease in the cost of deposits and borrowings.

Interest and Dividend Income

The weighted average yield on total interest-earning assets decreased 15 basis points, from 3.32% for the prior quarter to 3.17% for the current quarter, while the average balance of interest-earning assets increased $33.4 million between the two periods. 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:

 

2020

 

2020

 

Dollars

 

Percent

 

(Dollars in thousands)

 

 

INTEREST AND DIVIDEND INCOME:

 

 

 

 

 

 

 

Loans receivable

$

64,315

 

 

$

66,652

 

 

$

(2,337)

 

 

(3.5)

%

MBS

5,425

 

 

5,616

 

 

(191)

 

 

(3.4)

 

FHLB stock

1,080

 

 

1,207

 

 

(127)

 

 

(10.5)

 

Investment securities

731

 

 

847

 

 

(116)

 

 

(13.7)

 

Cash and cash equivalents

55

 

 

59

 

 

(4)

 

 

(6.8)

 

Total interest and dividend income

$

71,606

 

 

$

74,381

 

 

$

(2,775)

 

 

(3.7)

 

The decrease in interest income on loans receivable was due to a decrease in the average balance and weighted average portfolio yield. The decrease in the average balance was primarily in the correspondent loan portfolio, as payoff activity outpaced new purchases during the current quarter. The weighted average yield on the loans receivable portfolio decreased six basis points, from 3.55% for the prior quarter to 3.49% for the current quarter. The decrease in the weighted average yield was due mainly to a decrease in recognition of net purchase discounts and deferred loan fees related to commercial loan activity in the prior quarter, along with the origination and purchase of new loans at yields lower than the existing portfolio.

The decrease in interest income on the MBS portfolio was due to a 29 basis point decrease in the weighted average yield to 2.11% for the current quarter, partially offset by a $93.4 million increase in the average balance due to purchases during the current quarter. The decrease in the weighted average yield was due primarily to new purchases at lower market yields, along with an increase in the impact of net premium amortization.

The decrease in dividend income on FHLB stock was due mainly to a reduction in the dividend rate paid by FHLB compared to the prior quarter.

The decrease in interest income on the investment securities portfolio was due to a 68 basis point decrease in the weighted average yield to 0.95% in the current quarter, partially offset by a $101.6 million increase in the average balance due to purchases during the current quarter. The decrease in the weighted average yield was due primarily to the purchase of securities at market rates lower than the existing portfolio.

Interest Expense

The weighted average rate paid on total interest-bearing liabilities decreased 11 basis points, from 1.41% for the prior quarter to 1.30% for the current quarter, and the average balance of interest-bearing liabilities decreased $35.0 million between the two periods. 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:

 

2020

 

2020

 

Dollars

 

Percent

 

(Dollars in thousands)

 

 

INTEREST EXPENSE:

 

 

 

 

 

 

 

Deposits

$

15,299

 

 

$

16,533

 

 

$

(1,234)

 

 

(7.5)

%

Borrowings

10,624

 

 

11,561

 

 

(937)

 

 

(8.1)

 

Total interest expense

$

25,923

 

 

$

28,094

 

 

$

(2,171)

 

 

(7.7)

 

The decrease in interest expense on deposits was due to a decrease in the weighted average rate paid on retail/business certificates of deposit and wholesale certificates of deposit, partially offset by an increase in the average balance of deposits. Management has generally reduced deposit offer rates as discussed above.

The decrease in interest expense on borrowings was due primarily to not replacing term borrowings that matured during the current quarter and prior quarter. Cash flows from the deposit portfolio were generally utilized to repay maturing term borrowings during the current and prior quarter. The average balance of borrowings decreased $216.0 million compared to the prior quarter, while the weighted average rate paid on borrowings increased slightly, as certain borrowings that matured during the quarter were at rates lower than the rest of the portfolio.

Provision for Credit Losses

The Bank did not record a provision for credit losses during the current quarter or the prior quarter. There was no significant deterioration in credit quality indicators, such as loan delinquencies, asset classification and credit scores, during the current quarter. Loans 30 to 89 days delinquent were 0.13% of total loans at September 30, 2020 and 0.20% of total loans at June 30, 2020. Loans 90 days or more delinquent or in foreclosure were 0.16% of total loans at September 30, 2020 and 0.12% of total loans at June 30, 2020. The ACL to loans receivable ratio was 0.44% at September 30, 2020 and 0.42% at June 30, 2020. See additional discussion regarding management's evaluation of the adequacy of the Bank's ACL at September 30, 2020 in the Asset Quality section below.

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:

 

2020

 

2020

 

Dollars

 

Percent

 

(Dollars in thousands)

 

 

NON-INTEREST INCOME:

 

 

 

 

 

 

 

Deposit service fees

$

2,901

 

 

$

2,539

 

 

$

362

 

 

14.3

%

Insurance commissions

725

 

 

671

 

 

54

 

 

8.0

 

Other non-interest income

1,359

 

 

1,229

 

 

130

 

 

10.6

 

Total non-interest income

$

4,985

 

 

$

4,439

 

 

$

546

 

 

12.3

 

The increase in deposit service fees was due mainly to an increase in service charge income as consumer activity has begun to increase after being negatively impacted by the COVID-19 pandemic.

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:

 

2020

 

2020

 

Dollars

 

Percent

 

(Dollars in thousands)

 

 

NON-INTEREST EXPENSE:

 

 

 

 

 

 

 

Salaries and employee benefits

$

13,231

 

 

$

13,059

 

 

$

172

 

 

1.3

%

Information technology and related expense

4,280

 

 

4,285

 

 

(5)

 

 

(0.1)

 

Occupancy, net

3,658

 

 

3,556

 

 

102

 

 

2.9

 

Regulatory and outside services

1,574

 

 

1,548

 

 

26

 

 

1.7

 

Advertising and promotional

1,116

 

 

1,004

 

 

112

 

 

11.2

 

Deposit and loan transaction costs

804

 

 

697

 

 

107

 

 

15.4

 

Office supplies and related expense

609

 

 

475

 

 

134

 

 

28.2

 

Federal insurance premium

627

 

 

287

 

 

340

 

 

118.5

 

Other non-interest expense

1,277

 

 

1,253

 

 

24

 

 

1.9

 

Total non-interest expense

$

27,176

 

 

$

26,164

 

 

$

1,012

 

 

3.9

 

The increase in the federal insurance premium was due mainly to the Bank recognizing a full quarterly federal insurance premium accrual, as the remaining assessment credit from the FDIC was utilized during the prior quarter.

The Company's efficiency ratio was 53.64% for the current quarter compared to 51.58% for the prior quarter. The change in the efficiency ratio was due primarily to higher non-interest expense in the current quarter compared to the prior quarter.

Income Tax Expense

The following table presents pretax income, income tax expense, and net 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:

 

2020

 

2020

 

Dollars

 

Percent

 

(Dollars in thousands)

 

 

Income before income tax expense

$

23,492

 

 

$

24,562

 

 

$

(1,070)

 

 

(4.4)

%

Income tax expense

5,213

 

 

5,088

 

 

125

 

 

2.5

 

Net income

$

18,279

 

 

$

19,474

 

 

$

(1,195)

 

 

(6.1)

 

 

 

 

 

 

 

 

 

Effective Tax Rate

22.2

%

 

20.7

%

 

 

 

 

The higher effective tax rate in the current quarter was due to adjustments to our low income housing partnership permanent differences as a result of receiving updated information.

Financial Condition as of September 30, 2020

The Federal Reserve, in response to economic risks resulting from the COVID-19 pandemic, returned to a zero-interest rate policy in March 2020. This was after most broader market rates decreased significantly in response to evolving news about COVID-19. Deteriorating economic conditions included more than 20 million people becoming unemployed in the United States in one month's time, with more than 58 million in total filing for unemployment benefits, along with immediate reductions in consumer spending on almost all categories of purchases except groceries and staples, and closure or significantly reduced operations of restaurants, bars, airlines, hotels, and entertainment and hospitality venues, among others, and had a devastating impact on the economy. Since that time, many areas of consumer spending have rebounded, generally locally and not related to travel and entertainment. As previously described, we adjusted our operations in response to the COVID-19 pandemic and have worked with both our retail and commercial customers to help them manage their debt during this period of economic uncertainty as our regulators or the Coronavirus Aid, Relief, and Economic Security ("CARES") Act have allowed. There is increasing concern about the longer lasting impact on local business as well as travel and entertainment resulting from the COVID-19 pandemic. This could cause a longer recovery time for all sectors of the economy and could make it challenging for sectors that have had better recoveries to maintain that recovery in the long run.

We have been responding and expect to continue to respond to local market conditions regarding the loan and deposit rates we offer. Given the current level of the Company's total assets and the economic and interest rate environment, it is unlikely that the total loan portfolio will increase materially in the near future. As previously noted, since the onset of the pandemic the Bank lowered rates paid on money market accounts and certificate of deposit products. Despite this, since March 31, 2020, the Bank's retail deposits increased $237.2 million and business deposits increased $201.8 million. The Bank secured a new business deposit relationship during the year, which between March 31, 2020 and September 30, 2020, brought $163.6 million of new deposit balances. Because some of the deposits received from the new relationship are COVID-19-related payments, we do not expect the full balance of deposits received in fiscal year 2020 to be retained through fiscal year 2021. Retail certificates of deposit decreased $62.7 million between March 31, 2020 and September 30, 2020 while business certificates of deposit increased $64.0 million. As retail certificates of deposit mature, not all are being renewed. Rather, customers are moving some of those funds to more liquid investment options such as the Bank's retail money market accounts, which increased $131.2 million from March 31, 2020 to September 30, 2020. During fiscal year 2020, the Bank's weighted average retention rate of maturing retail certificates of deposit was approximately 80%.

Total assets were $9.49 billion at September 30, 2020, a decrease of $71.6 million, or 0.7%, from June 30, 2020, due to a decrease in cash and cash equivalents and loans receivable, largely offset by an increase in securities. Excess operating cash and cash flows from the loan portfolio were generally used to purchase securities. Total loans were $7.20 billion at September 30, 2020, a decrease of $185.2 million, or 2.5%, from June 30, 2020. The decrease was mainly in the one- to four-family correspondent loan portfolio as payoffs exceeded purchases during the current quarter. During the current quarter, the Bank originated and refinanced $280.7 million of one- to four-family and consumer loans with a weighted average rate of 2.99% and purchased $65.8 million of one- to four-family loans from correspondent lenders with a weighted average rate of 3.04%. The Bank also originated $29.4 million of commercial loans with a weighted average rate of 3.94%.

Total deposits were $6.19 billion at September 30, 2020, an increase of $121.7 million, or 2.0%, from June 30, 2020. The increase was primarily in non-maturity deposits, including a $98.8 million increase in money market accounts and a $22.0 million increase in checking accounts, along with an $21.8 million increase in retail/business certificates of deposit.

Stockholders' equity was $1.28 billion at September 30, 2020, a decrease of $15.7 million from June 30, 2020. The decrease was due primarily to the repurchase of common stock totaling $23.8 million, or 2,558,100 shares, during the current quarter. Subsequent to September 30, 2020, through the date of this release, the Company repurchased an additional $1.5 million, or 164,400 shares, of common stock. There is still $44.7 million authorized under the existing stock repurchase plan for additional purchases of the Company's common stock. Shares may be repurchased from time to time based upon market conditions, available liquidity and other factors. This plan has no expiration date; however, the Federal Reserve Bank's approval for the Company to repurchase shares extends through August 2021.

Total assets increased $147.2 million, or 1.6% from September 30, 2019 to September 30, 2020, due mainly to an increase in securities, partially offset by a decrease in loans receivable. Securities were purchased with cash flows from the loan portfolio and growth in the deposit portfolio. Total loans decreased $213.9 million from September 30, 2019 to September 30, 2020. The decrease was primarily in the one- to four-family correspondent loans and one- to four-family bulk purchased loans, partially offset by an increase in one- to four-family originated loans and commercial loans. During the current year, the Bank originated and refinanced $1.00 billion of one- to four-family and consumer loans with a weighted average rate of 3.27% and purchased $448.0 million of one- to four-family loans from correspondent lenders with a weighted average rate of 3.29%. The Bank also originated $165.5 million of commercial loans with a weighted average rate of 3.52% and entered into commercial real estate loan participations of $93.6 million at a weighted average rate of 4.16%. The commercial loan portfolio totaled $829.7 million at September 30, 2020 and was composed of 76% commercial real estate, 12% commercial and industrial, and 13% commercial construction. Total commercial real estate and commercial construction potential exposure, including undisbursed amounts and outstanding commitments totaling $205.5 million, was $937.5 million at September 30, 2020. Total commercial and industrial potential exposure, including undisbursed amounts and outstanding commitments of $21.7 million, was $119.3 million at September 30, 2020.

Total deposits increased $609.5 million, or 10.9%, from September 30, 2019 to September 30, 2020. Non-maturity deposits increased $575.9 million, including a $242.8 million increase in checking accounts, a $220.8 million increase in money market accounts, and a $112.3 million increase in savings accounts. Retail/business certificates of deposit increased $73.7 million during the current year. These increases were partially offset by a $40.1 million decrease in public unit certificates of deposit.

Total borrowings at September 30, 2020 were $1.79 billion, a decrease of $450.7 million, or 20.1%, from September 30, 2019. The decrease was due to not renewing a portion of the FHLB advances and repurchase agreements that matured during the current year and repaying the FHLB line of credit balance. Cash flows from the deposit portfolio were used to pay off maturing borrowings and the FHLB line of credit.

Stockholders' equity was $1.28 billion at September 30, 2020 compared to $1.34 billion at September 30, 2019. The $51.5 million decrease was due primarily to the payment of cash dividends totaling $93.9 million and the repurchase of common stock totaling $23.8 million, partially offset by net income of $64.5 million during the current year. In the long run, management considers the Bank's equity to total assets ratio of at least 10% an appropriate level of capital. At September 30, 2020, this ratio was 12.3%. The cash dividends paid during the current year totaled $0.68 per share and consisted of a $0.34 per share cash true-up dividend related to fiscal year 2019 earnings, paid in December 2019, per the Company's dividend policy, and four regular quarterly cash dividends of $0.085 per share, totaling $0.34 per share.

At times, the Bank has utilized a leverage strategy to increase earnings. The leverage strategy involves borrowing up to $2.10 billion either on the Bank's FHLB line of credit or by entering into short-term FHLB advances, depending on the rates offered by FHLB. The borrowings are repaid at quarter end, or earlier if the strategy is suspended. The proceeds from the borrowings, net of the required FHLB stock holdings, are deposited at the FRB of Kansas City. Net income attributable to the leverage strategy is largely derived from the dividends received on FHLB stock holdings, plus the net interest rate spread between the yield on the cash at the FRB of Kansas City and the rate paid on the related FHLB borrowings, less applicable federal insurance premiums and estimated taxes. Net income attributable to the leverage strategy was $14 thousand during the prior year. The leverage strategy was not in place during the current year, due to the large negative interest rate spread making the strategy unprofitable. Management continues to monitor the net interest rate spread and overall profitability of the strategy. It is expected that the strategy will be reimplemented if it reaches a position that is profitable.

On October 20, 2020, the Company announced a regular quarterly cash dividend of $0.085 per share, or approximately $11.5 million, payable on November 20, 2020 to stockholders of record as of the close of business on November 6, 2020. On October 28, 2020, the Company announced a fiscal year 2020 cash true-up dividend of $0.13 per share, or approximately $17.6 million, related to fiscal year 2020 earnings. The $0.13 per share cash true-up dividend was determined by taking the difference between total earnings for fiscal year 2020 and total regular quarterly cash dividends paid during fiscal year 2020, divided by the number of shares outstanding as of October 16, 2020. The cash true-up dividend is payable on December 4, 2020 to stockholders of record as of the close of business on November 20, 2020, and is the result of the Board of Directors' commitment to distribute to stockholders 100% of the annual earnings of the Company for fiscal year 2020.

At September 30, 2020, Capitol Federal Financial, Inc., at the holding company level, had $82.5 million on deposit at the Bank. For fiscal year 2021, it is currently the intention of the Board of Directors to continue the payout of 100% of the Company's earnings to the Company's 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 level.

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

 

September 30,

 

June 30,

 

September 30,

 

2020

 

2020

 

2019

 

(Dollars in thousands)

Stockholders' equity

$

1,284,859

 

 

$

1,300,520

 

 

$

1,336,326

 

Equity to total assets at end of period

13.5

%

 

13.6

%

 

14.3

%

The following table presents a reconciliation of total to net shares outstanding as of September 30, 2020.

Total shares outstanding

138,956,296

 

 

Less unallocated Employee Stock Ownership Plan ("ESOP") shares and unvested restricted stock

(3,408,810

)

 

Net shares outstanding

135,547,486

 

 

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. In September 2019, the regulatory agencies, including the Office of the Comptroller of the Currency and Board of Governors of the Federal Reserve System, adopted a final rule, effective January 1, 2020, creating a community bank leverage ratio ("CBLR") for institutions with total consolidated assets of less than $10 billion and that meet other qualifying criteria. The CBLR provides for a simple measure of capital adequacy for qualifying institutions. According to the final rule, qualifying institutions that elect to use the CBLR framework and that maintain a leverage ratio of greater than 9% will be considered to have satisfied the generally applicable risk-based and leverage capital requirements in the regulatory agencies' capital rules and to have met the well-capitalized ratio requirements. In April 2020, the federal bank regulatory agencies announced the issuance of two interim final rules, effective immediately, to provide temporary relief to community banking organizations. Under the interim final rules, the CBLR requirement is a minimum of 8% for the remainder of calendar year 2020, 8.5% for calendar year 2021, and 9% thereafter. The Bank elected to use the CBLR framework beginning with the quarter ended March 31, 2020. As of September 30, 2020, the Bank's CBLR was 12.4%, which exceeded the minimum requirement.

The following table presents a reconciliation of the Bank's equity under accounting principles generally accepted in the United States of America ("GAAP") to regulatory tier 1 capital as of September 30, 2020 (dollars in thousands):

Total Bank equity as reported under GAAP

$

1,165,813

 

 

Accumulated Other Comprehensive Income ("AOCI")

16,505

 

 

Goodwill and other intangibles, net of associated deferred taxes

(13,510

)

 

Total tier 1 capital

$

1,168,808

 

 

Capitol Federal Financial, Inc. is the holding company for the Bank. The Bank has 54 branch locations in Kansas and Missouri, and is one of the largest residential lenders in the State of Kansas. News and other information about the Company can be found at the Bank's website, http://www.capfed.com.

Except for the historical information contained in this press release, the matters discussed herein may be deemed to be "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements about our beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions. The words "may," "could," "should," "would," "will," "believe," "anticipate," "estimate," "expect," "intend," "plan," and similar expressions are intended to identify forward-looking statements. Forward-looking statements involve risks and uncertainties, including: potential adverse impacts of the ongoing COVID-19 pandemic and any governmental or societal responses thereto on economic conditions in the Company's local market areas and other market areas where the Bank has lending relationships, on other aspects of the Company's business operations and on financial markets; changes in policies or the application or interpretation of laws and regulations by regulatory agencies and tax authorities; other governmental initiatives affecting the financial services industry; changes in accounting principles, policies or guidelines; fluctuations in interest rates; demand for loans in the Company's market area, the future earnings and capital levels of the Bank, which would affect the ability of the Company to pay dividends in accordance with its dividend policies; competition; and other risks detailed from time to time in documents filed or furnished by the Company with the SEC. Actual results may differ materially from those currently expected. These forward-looking statements represent the Company's judgment as of the date of this release. The Company disclaims, however, any intent or obligation to update these forward-looking statements.

 

SUPPLEMENTAL FINANCIAL INFORMATION

 

CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS (Unaudited)

(Dollars in thousands, except per share amounts)

 

 

September 30,

 

September 30,

 

2020

 

2019

ASSETS:

 

 

 

Cash and cash equivalents (includes interest-earning deposits of $185,148 and $198,809)

$

185,148

 

 

 

$

220,370

 

 

Available-for-sale ("AFS") securities, at estimated fair value

1,560,950

 

 

 

1,204,863

 

 

Loans receivable, net (ACL of $31,527 and $9,226)

7,202,851

 

 

 

7,416,747

 

 

FHLB stock, at cost

93,862

 

 

 

98,456

 

 

Premises and equipment, net

101,875

 

 

 

96,784

 

 

Income taxes receivable, net

 

 

 

2

 

 

Other assets

342,532

 

 

 

302,796

 

 

TOTAL ASSETS

$

9,487,218

 

 

 

$

9,340,018

 

 

 

 

 

 

LIABILITIES:

 

 

 

Deposits

$

6,191,408

 

 

 

$

5,581,867

 

 

Borrowings

1,789,313

 

 

 

2,239,989

 

 

Advance payments by borrowers for taxes and insurance

65,721

 

 

 

65,686

 

 

Income taxes payable, net

795

 

 

 

 

 

Deferred income tax liabilities, net

8,180

 

 

 

14,282

 

 

Accounts payable and accrued expenses

146,942

 

 

 

101,868

 

 

Total liabilities

8,202,359

 

 

 

8,003,692

 

 

 

 

 

 

STOCKHOLDERS' EQUITY:

 

 

 

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

 

 

 

 

 

Common stock, $0.01 par value; 1,400,000,000 shares authorized, 138,956,296 and 141,440,030

 

 

shares issued and outstanding as of September 30, 2020 and 2019, respectively

1,389

 

 

 

1,414

 

 

Additional paid-in capital

1,189,853

 

 

 

1,210,226

 

 

Unearned compensation, ESOP

(33,040

)

 

 

(34,692

)

 

Retained earnings

143,162

 

 

 

174,277

 

 

AOCI, net of tax

(16,505

)

 

 

(14,899

)

 

Total stockholders' equity

1,284,859

 

 

 

1,336,326

 

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

9,487,218

 

 

 

$

9,340,018

 

 

 

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,

 

2020

 

2020

 

2020

 

2019

INTEREST AND DIVIDEND INCOME:

 

 

 

 

 

 

 

Loans receivable

$

64,315

 

 

$

66,652

 

 

$

270,494

 

 

$

284,229

 

MBS

5,425

 

 

5,616

 

 

23,009

 

 

25,730

 

FHLB stock

1,080

 

 

1,207

 

 

5,827

 

 

7,823

 

Investment securities

731

 

 

847

 

 

4,467

 

 

6,366

 

Cash and cash equivalents

55

 

 

59

 

 

1,181

 

 

5,806

 

Total interest and dividend income

71,606

 

 

74,381

 

 

304,978

 

 

329,954

 

 

 

 

 

 

 

 

 

INTEREST EXPENSE:

 

 

 

 

 

 

 

Deposits

15,299

 

 

16,533

 

 

67,598

 

 

66,201

 

Borrowings

10,624

 

 

11,561

 

 

48,045

 

 

57,363

 

Total interest expense

25,923

 

 

28,094

 

 

115,643

 

 

123,564

 

 

 

 

 

 

 

 

 

NET INTEREST INCOME

45,683

 

 

46,287

 

 

189,335

 

 

206,390

 

 

 

 

 

 

 

 

 

PROVISION FOR CREDIT LOSSES

 

 

 

 

22,300

 

 

750

 

NET INTEREST INCOME AFTER

 

 

 

 

 

 

 

PROVISION FOR CREDIT LOSSES

45,683

 

 

46,287

 

 

167,035

 

 

205,640

 

 

 

 

 

 

 

 

 

NON-INTEREST INCOME:

 

 

 

 

 

 

 

Deposit service fees

2,901

 

 

2,539

 

 

11,285

 

 

12,740

 

Insurance commissions

725

 

 

671

 

 

2,487

 

 

2,821

 

Other non-interest income

1,359

 

 

1,229

 

 

5,827

 

 

6,397

 

Total non-interest income

4,985

 

 

4,439

 

 

19,599

 

 

21,958

 

 

 

 

 

 

 

 

 

NON-INTEREST EXPENSE:

 

 

 

 

 

 

 

Salaries and employee benefits

13,231

 

 

13,059

 

 

52,996

 

 

53,145

 

Information technology and related expense

4,280

 

 

4,285

 

 

16,974

 

 

17,615

 

Occupancy, net

3,658

 

 

3,556

 

 

13,870

 

 

13,032

 

Regulatory and outside services

1,574

 

 

1,548

 

 

5,762

 

 

5,813

 

Advertising and promotional

1,116

 

 

1,004

 

 

4,889

 

 

5,244

 

Deposit and loan transaction costs

804

 

 

697

 

 

2,890

 

 

2,478

 

Office supplies and related expense

609

 

 

475

 

 

2,195

 

 

2,439

 

Federal insurance premium

627

 

 

287

 

 

914

 

 

1,172

 

Other non-interest expense

1,277

 

 

1,253

 

 

5,514

 

 

6,006

 

Total non-interest expense

27,176

 

 

26,164

 

 

106,004

 

 

106,944

 

INCOME BEFORE INCOME TAX EXPENSE

23,492

 

 

24,562

 

 

80,630

 

 

120,654

 

INCOME TAX EXPENSE

5,213

 

 

5,088

 

 

16,090

 

 

26,411

 

NET INCOME

$

18,279

 

 

$

19,474

 

 

$

64,540

 

 

$

94,243

 

 

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,

 

2020

 

2020

 

2020

 

2019

 

(Dollars in thousands, except per share amounts)

Net income

$

18,279

 

 

 

$

19,474

 

 

 

$

64,540

 

 

 

$

94,243

 

 

Income allocated to participating securities

(14

)

 

 

(16

)

 

 

(52

)

 

 

(55

)

 

Net income available to common stockholders

$

18,265

 

 

 

$

19,458

 

 

 

$

64,488

 

 

 

$

94,188

 

 

 

 

 

 

 

 

 

 

Average common shares outstanding

137,580,179

 

 

 

137,935,000

 

 

 

137,834,304

 

 

 

137,614,465

 

 

Average committed ESOP shares outstanding

124,346

 

 

 

83,052

 

 

 

62,400

 

 

 

62,458

 

 

Total basic average common shares outstanding

137,704,525

 

 

 

138,018,052

 

 

 

137,896,704

 

 

 

137,676,923

 

 

 

 

 

 

 

 

 

 

Effect of dilutive stock options

 

 

 

 

 

 

4,484

 

 

 

58,478

 

 

 

 

 

 

 

 

 

 

Total diluted average common shares outstanding

137,704,525

 

 

 

138,018,052

 

 

 

137,901,188

 

 

 

137,735,401

 

 

 

 

 

 

 

 

 

 

Net earnings per share:

 

 

 

 

 

 

 

Basic

$

0.13

 

 

 

$

0.14

 

 

 

$

0.47

 

 

 

$

0.68

 

 

Diluted

$

0.13

 

 

 

$

0.14

 

 

 

$

0.47

 

 

 

$

0.68

 

 

 

 

 

 

 

 

 

 

Antidilutive stock options, excluded from the diluted

 

 

 

 

 

 

average common shares outstanding calculation

813,645

 

 

 

813,645

 

 

 

437,731

 

 

 

470,938

 

 

 

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, 2020

 

June 30, 2020

 

September 30, 2019

 

 

 

 

 

% of

 

 

 

 

 

% of

 

 

 

 

 

% of

 

Amount

 

Rate

 

Total

 

Amount

 

Rate

 

Total

 

Amount

 

Rate

 

Total

 

(Dollars in thousands)

One- to four-family:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated

$

3,937,310

 

 

 

3.50

%

 

54.5

%

 

$

3,955,668

 

 

 

3.61

%

 

53.4

%

 

$

3,873,851

 

 

 

3.74

%

 

52.2

%

Correspondent purchased

2,101,082

 

 

 

3.49

 

 

29.1

 

 

2,268,031

 

 

 

3.54

 

 

30.6

 

 

2,349,877

 

 

 

3.64

 

 

31.7

 

Bulk purchased

208,427

 

 

 

2.41

 

 

2.9

 

 

217,652

 

 

 

2.73

 

 

3.0

 

 

252,347

 

 

 

2.94

 

 

3.4

 

Construction

34,593

 

 

 

3.30

 

 

0.5

 

 

36,595

 

 

 

3.46

 

 

0.5

 

 

36,758

 

 

 

4.00

 

 

0.5

 

Total

6,281,412

 

 

 

3.46

 

 

87.0

 

 

6,477,946

 

 

 

3.56

 

 

87.5

 

 

6,512,833

 

 

 

3.68

 

 

87.8

 

Commercial:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

626,588

 

 

 

4.29

 

 

8.7

 

 

625,106

 

 

 

4.32

 

 

8.4

 

 

583,617

 

 

 

4.48

 

 

7.9

 

Commercial and industrial

97,614

 

 

 

2.79

 

 

1.4

 

 

99,735

 

 

 

2.92

 

 

1.4

 

 

61,094

 

 

 

5.14

 

 

0.8

 

Construction

105,458

 

 

 

4.04

 

 

1.4

 

 

87,448

 

 

 

3.98

 

 

1.2

 

 

123,159

 

 

 

4.81

 

 

1.7

 

Total

829,660

 

 

 

4.08

 

 

11.5

 

 

812,289

 

 

 

4.11

 

 

11.0

 

 

767,870

 

 

 

4.58

 

 

10.4

 

Consumer loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Home equity

103,838

 

 

 

4.66

 

 

1.4

 

 

107,174

 

 

 

4.68

 

 

1.4

 

 

120,587

 

 

 

6.15

 

 

1.6

 

Other

10,086

 

 

 

4.40

 

 

0.1

 

 

10,033

 

 

 

4.46

 

 

0.1

 

 

11,183

 

 

 

4.57

 

 

0.2

 

Total

113,924

 

 

 

4.64

 

 

1.5

 

 

117,207

 

 

 

4.66

 

 

1.5

 

 

131,770

 

 

 

6.02

 

 

1.8

 

Total loans receivable

7,224,996

 

 

 

3.55

 

 

100.0

%

 

7,407,442

 

 

 

3.64

 

 

100.0

%

 

7,412,473

 

 

 

3.81

 

 

100.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ACL

31,527

 

 

 

 

 

 

 

31,215

 

 

 

 

 

 

 

9,226

 

 

 

 

 

 

Discounts/unearned loan fees

29,190

 

 

 

 

 

 

 

30,312

 

 

 

 

 

 

 

31,058

 

 

 

 

 

 

Premiums/deferred costs

(38,572

)

 

 

 

 

 

 

(42,175

)

 

 

 

 

 

 

(44,558

)

 

 

 

 

 

Total loans receivable, net

$

7,202,851

 

 

 

 

 

 

 

$

7,388,090

 

 

 

 

 

 

 

$

7,416,747

 

 

 

 

 

 

 

Loan Activity: The following tables summarize activity in the loan portfolio, along with weighted average rates where applicable, for the periods indicated, excluding changes in ACL, discounts/unearned loan fees, and premiums/deferred costs. Loans that were paid off as a result of refinances are included in repayments. Loan endorsements are not included in the activity in the following table because a new loan is not generated at the time of the endorsement. The endorsed balance and rate are included in the ending loan portfolio balance and rate. During the current year, the Bank endorsed $695.4 million of one- to four-family loans, reducing the average rate on those loans by 83 basis points. Commercial loan renewals are not included in the activity in the following table unless new funds are disbursed at the time of renewal. During the initial days of the COVID-19 pandemic, correspondent one- to four-family loan application acceptance was suspended by the Bank but existing correspondent applications and commitments continued to progress through the approval and funding process. One- to four-family correspondent new loan application acceptance was resumed in mid-June 2020.

 

For the Three Months Ended

 

September 30, 2020

 

June 30, 2020

 

March 31, 2020

 

December 31, 2019

 

Amount

 

Rate

 

Amount

 

Rate

 

Amount

 

Rate

 

Amount

 

Rate

 

(Dollars in thousands)

Beginning balance

$

7,407,442

 

 

 

3.64

%

 

$

7,493,280

 

 

 

3.74

%

 

$

7,424,834

 

 

 

3.77

%

 

$

7,412,473

 

 

 

3.81

%

Originated and refinanced:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed

265,424

 

 

 

2.98

 

 

277,904

 

 

 

2.83

 

 

172,891

 

 

 

3.44

 

 

233,693

 

 

 

3.52

 

Adjustable

44,625

 

 

 

3.68

 

 

60,626

 

 

 

3.75

 

 

55,946

 

 

 

4.11

 

 

55,126

 

 

 

4.30

 

Purchased and participations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed

61,435

 

 

 

3.07

 

 

131,739

 

 

 

3.28

 

 

125,612

 

 

 

3.46

 

 

123,118

 

 

 

3.77

 

Adjustable

4,396

 

 

 

2.76

 

 

62,510

 

 

 

3.76

 

 

18,985

 

 

 

2.96

 

 

13,801

 

 

 

3.06

 

Change in undisbursed loan funds

13,898

 

 

 

 

 

(32,202

)

 

 

 

 

24,049

 

 

 

 

 

(9,743

)

 

 

 

Repayments

(572,536

)

 

 

 

 

(586,434

)

 

 

 

 

(328,644

)

 

 

 

 

(403,361

)

 

 

 

Principal recoveries/(charge-offs), net

312

 

 

 

 

 

19

 

 

 

 

 

(314

)

 

 

 

 

(16

)

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

(79

)

 

 

 

 

(257

)

 

 

 

Ending balance

$

7,224,996

 

 

 

3.55

 

 

$

7,407,442

 

 

 

3.64

 

 

$

7,493,280

 

 

 

3.74

 

 

$

7,424,834

 

 

 

3.77

 

 

 

For the Year Ended

 

September 30, 2020

 

September 30, 2019

 

Amount

 

Rate

 

Amount

 

Rate

 

(Dollars in thousands)

Beginning balance

$

7,412,473

 

 

 

3.81

%

 

$

7,507,645

 

 

 

3.74

%

Originated and refinanced:

 

 

 

 

 

 

 

Fixed

949,912

 

 

 

3.15

 

 

505,334

 

 

 

4.10

 

Adjustable

216,323

 

 

 

3.97

 

 

319,608

 

 

 

4.77

 

Purchased and participations:

 

 

 

 

 

 

 

Fixed

441,904

 

 

 

3.44

 

 

186,135

 

 

 

4.64

 

Adjustable

99,692

 

 

 

3.47

 

 

76,305

 

 

 

4.40

 

Change in undisbursed loan funds

(3,998

)

 

 

 

 

52,220

 

 

 

 

Repayments

(1,890,975

)

 

 

 

 

(1,233,157

)

 

 

 

Principal recoveries, net

1

 

 

 

 

 

13

 

 

 

 

Other

(336

)

 

 

 

 

(1,630

)

 

 

 

Ending balance

$

7,224,996

 

 

 

3.55

 

 

$

7,412,473

 

 

 

3.81

 

One- to Four-Family Loans: The following table presents, for our portfolio of one- to four-family loans, the amount, percent of total, weighted average credit score, weighted average loan-to-value ("LTV") ratio, and average balance per loan as of the dates presented. Credit scores were updated in September 2020 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, 2020

 

September 30, 2019

 

 

 

% of

 

Credit

 

 

 

Average

 

 

 

% of

 

Credit

 

 

 

Average

 

Amount

 

Total

 

Score

 

LTV

 

Balance

 

Amount

 

Total

 

Score

 

LTV

 

Balance

 

(Dollars in thousands)

Originated

$

3,937,310

 

 

63.0

%

 

771

 

 

62

%

 

$

145

 

 

$

3,873,851

 

 

59.8

%

 

768

 

 

62

%

 

$

140

 

Correspondent purchased

2,101,082

 

 

33.6

 

 

765

 

 

64

 

 

379

 

 

2,349,877

 

 

36.3

 

 

765

 

 

65

 

 

371

 

Bulk purchased

208,427

 

 

3.4

 

 

767

 

 

60

 

 

300

 

 

252,347

 

 

3.9

 

 

762

 

 

61

 

 

304

 

 

$

6,246,819

 

 

100.0

%

 

768

 

 

63

 

 

187

 

 

$

6,476,075

 

 

100.0

%

 

767

 

 

63

 

 

186

 

The following table presents originated, refinanced, and correspondent purchased activity in our one- to four-family loan portfolio, excluding endorsement activity, along with associated weighted average LTVs and weighted average credit scores for the periods indicated. Included in the originated line item for the current year are $300.4 million of loans that were refinanced from other lenders.

 

For the Three Months Ended

 

For the Year Ended

 

September 30, 2020

 

September 30, 2020

 

 

 

 

 

Credit

 

 

 

 

 

Credit

 

Amount

 

LTV

 

Score

 

Amount

 

LTV

 

Score

 

(Dollars in thousands)

Originated

$

182,927

 

 

74

%

 

772

 

 

$

662,678

 

 

74

%

 

767

 

Refinanced by Bank customers

78,427

 

 

65

 

 

771

 

 

268,590

 

 

67

 

 

765

 

Correspondent purchased

65,831

 

 

71

 

 

768

 

 

447,970

 

 

71

 

 

768

 

 

$

327,185

 

 

71

 

 

771

 

 

$

1,379,238

 

 

72

 

 

767

 

The following table presents the amount, percent of total, and weighted average rate, by state, of one- to four-family loan originations and correspondent purchases where originations and purchases in the state exceeded five percent of the total amount originated and purchased during the current year period.

 

 

For the Three Months Ended

 

For the Year Ended

 

 

September 30, 2020

 

September 30, 2020

State

 

Amount

 

% of Total

 

Rate

 

Amount

 

% of Total

 

Rate

 

 

(Dollars in thousands)

Kansas

 

$

220,298

 

 

67.3

%

 

2.87

%

 

$

804,919

 

 

58.4

%

 

3.15

%

Missouri

 

51,327

 

 

15.7

 

 

2.89

 

 

234,730

 

 

17.0

 

 

3.20

 

Texas

 

28,980

 

 

8.9

 

 

3.04

 

 

177,752

 

 

12.9

 

 

3.23

 

Other states

 

26,580

 

 

8.1

 

 

3.08

 

 

161,837

 

 

11.7

 

 

3.32

 

 

 

$

327,185

 

 

100.0

%

 

2.91

 

 

$

1,379,238

 

 

100.0

%

 

3.19

 

The following table summarizes our one- to four-family loan origination and refinance commitments and one- to four-family correspondent loan purchase commitments as of September 30, 2020, along with associated weighted average rates. Loan commitments generally have fixed expiration dates or other termination clauses and may require the payment of a rate lock fee. It is expected that some of the loan commitments will expire unfunded, so the amounts reflected in the table below are not necessarily indicative of our future cash needs.

 

Fixed-Rate

 

 

 

 

 

 

 

15 years

 

More than

 

Adjustable-

 

Total

 

or less

 

15 years

 

Rate

 

Amount

 

Rate

 

(Dollars in thousands)

Originate/refinance

$

35,869

 

 

$

56,110

 

 

$

11,300

 

 

$

103,279

 

 

2.87

%

Correspondent

15,687

 

 

49,912

 

 

5,080

 

 

70,679

 

 

2.89

 

 

$

51,556

 

 

$

106,022

 

 

$

16,380

 

 

$

173,958

 

 

2.88

 

 

 

 

 

 

 

 

 

 

 

Rate

2.49

%

 

3.08

%

 

2.79

%

 

 

 

 

Through September 30, 2020, the Bank had processed COVID-19 loan modifications for 942 one- to four-family loans totaling $239.5 million. Of this amount, $39.8 million, or 17%, were still in the deferral period as of September 30, 2020, while 83% had completed the deferral period by September 30, 2020. Of the COVID-19 loan modifications that had completed the deferral period by September 30, 2020 and were not delinquent prior to requesting assistance, $1.4 million were 30 to 89 days delinquent and none were 90 or more days delinquent as of September 30, 2020. The modifications still in the deferral period as of September 30, 2020 are summarized in the table below, along with the weighted average credit score and weighted average LTV as of September 30, 2020. Credit scores were updated in September 2020 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.

 

 

 

 

 

Credit

 

 

 

Count

 

Amount

 

Score

 

LTV

 

(Dollars in thousands)

Originated

159

 

 

$

26,859

 

 

715

 

 

67

%

Correspondent purchased

34

 

 

12,984

 

 

749

 

 

67

 

 

193

 

 

$

39,843

 

 

727

 

 

67

 

Commercial Loans: During the current year, the Bank originated $165.5 million of commercial loans, of which $43.9 million were PPP loans, entered into commercial real estate loan participations totaling $93.6 million, and processed commercial loan disbursements, excluding lines of credit, of approximately $228.7 million at a weighted average rate of 3.78%.

The following table presents the Bank's commercial real estate and commercial construction loans and loan commitments by type of primary collateral, as of September 30, 2020. Included in the gross loan amounts in the table, which does not include outstanding commitments, are fixed-rate loans totaling $534.6 million at a weighted average rate of 4.15% and adjustable-rate loans totaling $331.1 million at a weighted average rate of 4.38%. The weighted average rate of fixed-rate loans is lower than that of adjustable-rate loans due primarily to the majority of the fixed-rate loans in the portfolio at September 30, 2020 having shorter terms to maturity. Because the commitments to pay out undisbursed funds are not cancellable by the Bank, unless the loan is in default, we anticipate fully funding the related projects.

 

 

 

Unpaid

 

Undisbursed

 

Gross Loan

 

Outstanding

 

 

 

% of

 

Count

 

Principal

 

Amount

 

Amount

 

Commitments

 

Total

 

Total

 

 

 

(Dollars in thousands)

Senior housing

25

 

 

$

225,062

 

 

$

32,638

 

 

$

257,700

 

 

$

 

 

$

257,700

 

 

27.5

%

Hotel

9

 

 

129,488

 

 

49,686

 

 

179,174

 

 

 

 

179,174

 

 

19.1

 

Retail building

133

 

 

126,439

 

 

11,960

 

 

138,399

 

 

1,771

 

 

140,170

 

 

14.9

 

Office building

98

 

 

56,131

 

 

4,745

 

 

60,876

 

 

60,875

 

 

121,751

 

 

13.0

 

Multi-family

40

 

 

63,115

 

 

18,801

 

 

81,916

 

 

2,800

 

 

84,716

 

 

9.0

 

One- to four-family property

391

 

 

57,754

 

 

7,251

 

 

65,005

 

 

215

 

 

65,220

 

 

7.0

 

Single use building

21

 

 

43,596

 

 

5,163

 

 

48,759

 

 

1,500

 

 

50,259

 

 

5.4

 

Other

91

 

 

30,461

 

 

3,459

 

 

33,920

 

 

4,598

 

 

38,518

 

 

4.1

 

 

808

 

 

$

732,046

 

 

$

133,703

 

 

$

865,749

 

 

$

71,759

 

 

$

937,508

 

 

100.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average rate

 

 

4.25

%

 

4.19

%

 

4.24

%

 

4.05

%

 

4.23

%

 

 

 

The following table summarizes the Bank's commercial real estate and commercial construction loans and loan commitments by state as of September 30, 2020.

 

 

 

Unpaid

 

Undisbursed

 

Gross Loan

 

Outstanding

 

 

 

% of

 

Count

 

Principal

 

Amount

 

Amount

 

Commitments

 

Total

 

Total

 

 

 

(Dollars in thousands)

Kansas

627

 

 

$

285,184

 

 

$

15,744

 

 

$

300,928

 

 

$

8,254

 

 

$

309,182

 

 

33.0

%

Missouri

149

 

 

227,101

 

 

56,545

 

 

283,646

 

 

2,005

 

 

285,651

 

 

30.5

 

Texas

9

 

 

117,675

 

 

53,107

 

 

170,782

 

 

60,000

 

 

230,782

 

 

24.6

 

Nebraska

6

 

 

33,820

 

 

16

 

 

33,836

 

 

 

 

33,836

 

 

3.6

 

Kentucky

1

 

 

25,450

 

 

109

 

 

25,559

 

 

 

 

25,559

 

 

2.7

 

California

3

 

 

5,843

 

 

4,300

 

 

10,143

 

 

1,500

 

 

11,643

 

 

1.2

 

Other

13

 

 

36,973

 

 

3,882

 

 

40,855

 

 

 

 

40,855

 

 

4.4

 

 

808

 

 

$

732,046

 

 

$

133,703

 

 

$

865,749

 

 

$

71,759

 

 

$

937,508

 

 

100.0

%

The following table presents the Bank's commercial and industrial loans and loan commitments by business purpose, as of September 30, 2020. Including in the working capital loan category are $43.9 million of PPP loans.

 

 

 

Unpaid

 

Undisbursed

 

Gross Loan

 

Outstanding

 

 

 

% of

 

Count

 

Principal

 

Amount

 

Amount

 

Commitments

 

Total

 

Total

 

 

 

(Dollars in thousands)

Working capital

942

 

 

$

56,348

 

 

$

17,237

 

 

$

73,585

 

 

$

331

 

 

$

73,916

 

 

62.0

%

Equipment

119

 

 

14,184

 

 

303

 

 

14,487

 

 

850

 

 

15,337

 

 

12.9

 

Purchase/lease autos

178

 

 

11,275

 

 

97

 

 

11,372

 

 

 

 

11,372

 

 

9.5

 

Business investment

70

 

 

11,029

 

 

80

 

 

11,109

 

 

 

 

11,109

 

 

9.3

 

Other

22

 

 

4,778

 

 

2,785

 

 

7,563

 

 

 

 

7,563

 

 

6.3

 

 

1,331

 

 

$

97,614

 

 

$

20,502

 

 

$

118,116

 

 

$

1,181

 

 

$

119,297

 

 

100.0

%

The following table presents the Bank's commercial loan portfolio and outstanding loan commitments, categorized by gross loan amount (unpaid principal plus undisbursed amounts) or outstanding loan commitment amount, as of September 30, 2020.

 

Count

 

Amount

 

(Dollars in thousands)

Greater than $30 million

4

 

 

$

181,677

 

>$15 to $30 million

13

 

 

314,054

 

>$10 to $15 million

3

 

 

34,761

 

>$5 to $10 million

13

 

 

81,202

 

$1 to $5 million

103

 

 

217,178

 

Less than $1 million

2,003

 

 

227,933

 

 

2,139

 

 

$

1,056,805

 

 

The Bank's commercial lending team is working proactively with our commercial customers as the COVID-19 pandemic continues to present challenging operating conditions. As discussed previously, through September 30, 2020, we have modified $410.9 million of commercial loans under our COVID-19 loan modification program. Of this amount, $317.4 million, or 77%, were still in the deferral period as of September 30, 2020. We have also processed 791 PPP loans for $43.9 million, for which we received approximately $1.9 million in fees. Approximately 60% of PPP loans processed were in the following industries: construction, professional/scientific/technical, health care/social assistance, and retail trade.

The following table presents the gross loan amount, including undisbursed balances, of the Bank's commercial real estate loans by type of primary collateral, and commercial and industrial loans by business purpose, that have been modified per the Bank's COVID-19 loan modification program, and had not completed the deferral period as of September 30, 2020. The information is broken down by type of modification and presented as a percentage of total modifications, as well as by a percentage of the total gross loan amount and undisbursed balances of the related property type or business purpose category. Included in the table are $57.3 million of loans that were paid off in October 2020.

 

Modification Type

 

 

 

% of

 

Interest

 

Payment

 

 

 

% of

 

Property Type/

 

Only

 

Deferral

 

Total

 

Total

 

Business Purpose

 

(Dollars in thousands)

 

 

Commercial real estate

 

 

 

 

 

 

 

 

 

Senior Housing

$

115,082

 

 

$

57,258

 

 

$

172,340

 

 

54.3

%

 

66.9

%

Hotel

26,208

 

 

10,049

 

 

36,257

 

 

11.4

 

 

20.2

 

Retail Building

27,197

 

 

5,815

 

 

33,012

 

 

10.4

 

 

23.9

 

Single Use Building

30,304

 

 

1,625

 

 

31,929

 

 

10.1

 

 

65.5

 

Office Building

14,618

 

 

4,375

 

 

18,993

 

 

6.0

 

 

31.2

 

One- to four-family Property

7,643

 

 

336

 

 

7,979

 

 

2.5

 

 

12.3

 

Multi-family

7,390

 

 

 

 

7,390

 

 

2.3

 

 

9.0

 

Other

2,318

 

 

 

 

2,318

 

 

0.7

 

 

6.8

 

 

230,760

 

 

79,458

 

 

310,218

 

 

97.7

 

 

35.8

 

Commercial and industrial

 

 

 

 

 

 

 

 

 

Equipment

4,136

 

 

 

 

4,136

 

 

1.3

 

 

32.7

 

Working Capital

848

 

 

 

 

848

 

 

0.3

 

 

1.2

 

Business Investment

719

 

 

 

 

719

 

 

0.2

 

 

5.5

 

Purchase/lease autos

651

 

 

 

 

651

 

 

0.2

 

 

5.7

 

Other

786

 

 

 

 

786

 

 

0.3

 

 

32.6

 

 

7,140

 

 

 

 

7,140

 

 

2.3

 

 

6.0

 

Total

$

237,900

 

 

$

79,458

 

 

$

317,358

 

 

100.0

%

 

32.3

 

 

Of the loans presented in the table above, $189.4 million were scheduled to complete their deferral period in October 2020. Overall, of the commercial loans modified per the Bank's COVID-19 loan modification program, seven loans with a combined gross loan amount, including undisbursed balances, of $79.7 million have requested additional assistance. We have either completed or are in the process of completing a second modification for these loans.

Asset Quality

The following tables present loans 30 to 89 days delinquent, non-performing loans, and other real estate owned ("OREO") as of the dates indicated. Loans subject to payment forbearance under the Bank's COVID-19 loan modification program are not reported as delinquent during the forbearance time period. Of the loans 30 to 89 days delinquent at September 30, 2020, approximately 70% were 59 days or less delinquent. Non-performing loans are loans that are 90 or more days delinquent or in foreclosure, and other loans that are less than 90 days delinquent but are required to be reported as nonaccrual pursuant to accounting and/or regulatory reporting requirements and/or internal policies even if the loans are current. Non-performing assets include non-performing loans and OREO. Over the past 12 months, OREO properties acquired in settlement of one- to four-family loans were owned by the Bank, on average, for approximately four months before they were sold.

 

Loans Delinquent for 30 to 89 Days at:

 

September 30, 2020

 

June 30, 2020

 

March 31, 2020

 

December 31, 2019

 

September 30, 2019

 

Number

 

Amount

 

Number

 

Amount

 

Number

 

Amount

 

Number

 

Amount

 

Number

 

Amount

 

(Dollars in thousands)

One- to four-family:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated

42

 

 

$

3,012

 

 

57

 

 

$

5,085

 

 

92

 

 

$

8,360

 

 

96

 

 

$

9,004

 

 

90

 

 

$

7,223

 

Correspondent purchased

8

 

 

3,123

 

 

10

 

 

2,919

 

 

13

 

 

4,531

 

 

13

 

 

4,117

 

 

9

 

 

2,721

 

Bulk purchased

12

 

 

2,532

 

 

19

 

 

4,536

 

 

12

 

 

2,914

 

 

14

 

 

3,307

 

 

16

 

 

3,581

 

Commercial

2

 

 

45

 

 

9

 

 

1,543

 

 

7

 

 

1,555

 

 

7

 

 

1,192

 

 

8

 

 

826

 

Consumer

26

 

 

398

 

 

21

 

 

431

 

 

43

 

 

628

 

 

40

 

 

488

 

 

42

 

 

525

 

 

90

 

 

$

9,110

 

 

116

 

 

$

14,514

 

 

167

 

 

$

17,988

 

 

170

 

 

$

18,108

 

 

165

 

 

$

14,876

 

30 to 89 days delinquent loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

to total loans receivable, net

 

0.13

%

 

 

 

0.20

%

 

 

 

0.24

%

 

 

 

0.24

%

 

 

 

0.20

%

 

Non-Performing Loans and OREO at:

 

September 30, 2020

 

June 30, 2020

 

March 31, 2020

 

December 31, 2019

 

September 30, 2019

 

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

51

 

 

$

4,362

 

 

47

 

 

$

4,026

 

 

53

 

 

$

4,517

 

 

44

 

 

$

3,552

 

 

44

 

 

$

3,268

 

Correspondent purchased

6

 

 

2,397

 

 

7

 

 

2,740

 

 

4

 

 

1,342

 

 

4

 

 

1,376

 

 

4

 

 

1,008

 

Bulk purchased

12

 

 

2,903

 

 

3

 

 

1,291

 

 

1

 

 

630

 

 

2

 

 

689

 

 

6

 

 

1,465

 

Commercial

5

 

 

1,360

 

 

4

 

 

709

 

 

4

 

 

716

 

 

 

 

 

 

4

 

 

170

 

Consumer

14

 

 

304

 

 

23

 

 

278

 

 

17

 

 

326

 

 

20

 

 

340

 

 

25

 

 

362

 

 

88

 

 

11,326

 

 

84

 

 

9,044

 

 

79

 

 

7,531

 

 

70

 

 

5,957

 

 

83

 

 

6,273

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans 90 or more days delinquent or in foreclosure

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

as a percentage of total loans

 

 

0.16

%

 

 

 

0.12

%

 

 

 

0.10

%

 

 

 

0.08

%

 

 

 

0.08

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonaccrual loans less than 90 Days Delinquent:(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

One- to four-family:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated

9

 

 

$

691

 

 

14

 

 

$

1,132

 

 

13

 

 

$

811

 

 

11

 

 

$

634

 

 

16

 

 

$

1,183

 

Correspondent purchased

 

 

 

 

 

 

 

 

1

 

 

189

 

 

 

 

 

 

 

 

 

Bulk purchased

 

 

 

 

 

 

 

 

1

 

 

134

 

 

1

 

 

134

 

 

1

 

 

65

 

Commercial

3

 

 

464

 

 

1

 

 

6

 

 

2

 

 

129

 

 

6

 

 

363

 

 

1

 

 

7

 

Consumer

1

 

 

9

 

 

1

 

 

33

 

 

2

 

 

43

 

 

 

 

 

 

2

 

 

35

 

 

13

 

 

1,164

 

 

16

 

 

1,171

 

 

19

 

 

1,306

 

 

18

 

 

1,131

 

 

20

 

 

1,290

 

Total non-performing loans

101

 

 

12,490

 

 

100

 

 

10,215

 

 

98

 

 

8,837

 

 

88

 

 

7,088

 

 

103

 

 

7,563

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-performing loans as a percentage of total loans

 

0.17

%

 

 

 

0.14

%

 

 

 

0.12

%

 

 

 

0.10

%

 

 

 

0.10

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OREO:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

One- to four-family:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated(2)

4

 

 

$

183

 

 

4

 

 

$

183

 

 

5

 

 

$

187

 

 

8

 

 

$

414

 

 

8

 

 

$

745

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

 

600

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

1

 

 

98

 

 

 

 

 

 

4

 

 

183

 

 

4

 

 

183

 

 

5

 

 

187

 

 

9

 

 

512

 

 

9

 

 

1,345

 

Total non-performing assets

105

 

 

$

12,673

 

 

104

 

 

$

10,398

 

 

103

 

 

$

9,024

 

 

97

 

 

$

7,600

 

 

112

 

 

$

8,908

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-performing assets as a percentage of total assets

 

0.13

%

 

 

 

0.11

%

 

 

 

0.10

%

 

 

 

0.08

%

 

 

 

0.10

%

(1)

Includes loans required to be reported as nonaccrual pursuant to accounting and/or regulatory reporting requirements and/or internal policies even if the loans are current.

(2)

Real estate-related consumer loans where we also hold the first mortgage are included in the one- to four-family category as the underlying collateral is one- to four-family property.

 

The following table presents loans classified as special mention or substandard at the dates presented.

 

September 30, 2020

 

June 30, 2020

 

September 30, 2019

 

Special Mention

 

Substandard

 

Special Mention

 

Substandard

 

Special Mention

 

Substandard

 

(Dollars in thousands)

One- to four-family

$

11,339

 

 

$

25,630

 

 

$

12,309

 

 

$

26,788

 

 

$

15,428

 

 

$

23,783

 

Commercial

52,006

 

 

4,914

 

 

52,054

 

 

5,128

 

 

54,134

 

 

5,543

 

Consumer

332

 

 

589

 

 

320

 

 

564

 

 

283

 

 

758

 

 

$

63,677

 

 

$

31,133

 

 

$

64,683

 

 

$

32,480

 

 

$

69,845

 

 

$

30,084

 

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,

 

2020

 

2020

 

2020

 

2019

 

2019

 

(Dollars in thousands)

Balance at beginning of period

$

31,215

 

 

 

$

31,196

 

 

 

$

9,435

 

 

 

$

9,226

 

 

 

$

9,036

 

 

Charge-offs:

 

 

 

 

 

 

 

 

 

One- to four-family

 

 

 

 

 

 

(46

)

 

 

(18

)

 

 

 

 

Commercial

 

 

 

 

 

 

(325

)

 

 

(24

)

 

 

(124

)

 

Consumer

(15

)

 

 

(5

)

 

 

(4

)

 

 

(6

)

 

 

(9

)

 

Total charge-offs

(15

)

 

 

(5

)

 

 

(375

)

 

 

(48

)

 

 

(133

)

 

Recoveries:

 

 

 

 

 

 

 

 

 

One- to four-family

303

 

 

 

 

 

 

3

 

 

 

 

 

 

14

 

 

Commercial

12

 

 

 

17

 

 

 

54

 

 

 

27

 

 

 

5

 

 

Consumer

12

 

 

 

7

 

 

 

4

 

 

 

5

 

 

 

4

 

 

Total recoveries

327

 

 

 

24

 

 

 

61

 

 

 

32

 

 

 

23

 

 

Net recoveries (charge-offs)

312

 

 

 

19

 

 

 

(314

)

 

 

(16

)

 

 

(110

)

 

Provision for credit losses

 

 

 

 

 

 

22,075

 

 

 

225

 

 

 

300

 

 

Balance at end of period

$

31,527

 

 

 

$

31,215

 

 

 

$

31,196

 

 

 

$

9,435

 

 

 

$

9,226

 

 

 

 

 

 

 

 

 

 

 

 

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

(2.70

)

 

 

(0.20

)

 

 

3.78

 

 

 

0.19

 

 

 

1.09

 

 

ACL to non-performing loans at end of period

252.42

 

 

 

305.58

 

 

 

353.02

 

 

 

133.11

 

 

 

121.99

 

 

ACL to loans receivable at end of period

0.44

 

 

 

0.42

 

 

 

0.42

 

 

 

0.13

 

 

 

0.12

 

 

ACL to net charge-offs (annualized)

N/M(1)

 

N/M(1)

 

24.9x

 

144.5x

 

21.1x

 

For the Year Ended

 

September 30,

 

2020

 

 

2019

 

 

(Dollars in thousands)

Balance at beginning of period

$

9,226

 

 

 

$

8,463

 

 

Charge-offs:

 

 

 

One- to four-family

(64

)

 

 

(101

)

 

Commercial

(349

)

 

 

(124

)

 

Consumer

(30

)

 

 

(37

)

 

Total charge-offs

(443

)

 

 

(262

)

 

Recoveries:

 

 

 

One- to four-family

306

 

 

 

128

 

 

Commercial

110

 

 

 

49

 

 

Consumer

28

 

 

 

98

 

 

Total recoveries

444

 

 

 

275

 

 

Net recoveries

1

 

 

 

13

 

 

Provision for credit losses

22,300

 

 

 

750

 

 

Balance at end of period

$

31,527

 

 

 

$

9,226

 

 

 

 

 

 

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

(0.01

)

 

 

(0.12

)

 

ACL to net charge-offs

N/M(1)

 

N/M (1) 

(1)

This ratio is not presented for the time periods noted due to loan recoveries exceeding loan charge-offs during these periods.

 

Management considered several factors when evaluating the adequacy of the ACL at September 30, 2020, such as: economic conditions including the impact of additional unemployment benefits provided by the government, our commercial lending team's ongoing evaluation of commercial loans, the Bank's COVID-19 loan modification programs and the performance of loans leaving the programs, and certain loan credit quality indicators.

There was significant deterioration of economic conditions at March 31, 2020 due to the COVID-19 pandemic which carried through the remainder of our fiscal year. Many of the stay-at-home orders issued in March and April have been lifted or significantly reduced which resulted in some people returning to work, while not necessarily at the same level as prior to March 2020. Consumer spending has continued to gradually rebound, but generally not related to travel and entertainment. Unemployment benefit claims continue to be at high levels, but the level at which individuals are filing initial unemployment benefit claims has decreased significantly from the late March/early April timeframe. Individuals that are unemployed have benefited from the Federal Pandemic Unemployment Compensation Program ("FPUC") which the CARES Act created. FPUC provided an additional $600 per week to individuals collecting regular unemployment compensation. The FPUC expired in late July 2020. There were other unemployment compensation benefits created under the CARES Act which have benefited individuals that have exhausted their regular unemployment insurance benefits and that are generally not eligible for regular unemployment compensation, like self-employed individuals. In early August 2020, President Trump signed an executive memorandum authorizing the Federal Emergency Management Agency to provide $300 per week in extra unemployment benefits for six weeks, starting retroactively on August 1, 2020. The financial assistance provided by the government, which had tapered off significantly by September 30, 2020, may be masking our actual credit exposure.

The Bank's commercial lending team has closely analyzed the Bank's largest commercial relationships. Approximately 91% of all commercial loans, excluding PPP loans, had been evaluated through September 30, 2020. The commercial lending team primarily focused on the lending relationships considered most at risk of short-term operational cash flow issues and/or collateral concerns, which had an aggregate unpaid principal balance of $201.2 million at September 30, 2020, and was primarily in the following categories: senior housing facilities, hotels, retail buildings, office buildings and single use buildings. These loan categories were among the categories with the highest usage of the Bank's COVID-19 loan modification program. The weighted average LTV ratios based on the aggregate unpaid principal balances of senior housing, hotel, retail building, office building, and single use building loans were 69%, 58%, 67%, 75%, and 69%, respectively, at September 30, 2020. The commercial lending team also considered the largest credits in these loan categories. The evaluation of most of our commercial and industrial loans concluded that many of these loans are to businesses that are deemed essential, which we believe reduces the risk of loss on these loans at this time. Management was not aware of any construction delays or other issues that would significantly delay or impact funding of the commercial construction loans at September 30, 2020.

In late March 2020, the Bank began offering COVID-19 loan modifications for one- to four-family loans and consumer loans consistent with the CARES Act or interagency guidance. This provides for a three-month payment deferral of principal, interest and, in some cases, escrow payments. Through September 30, 2020, the Bank processed COVID-19 loan modifications for $239.5 million of one- to four-family loans, with $39.8 million still in their deferral period at September 30, 2020. While the intent of the CARES Act was to keep customers current on their payments and therefore in their homes during the worst of the economic downturn, it may be masking our actual credit exposure on these loans. Because of this, it is possible that in the months following the end of the deferral time periods, the Bank's credit quality indicators may worsen, which may increase the need for additional provisions for credit losses and decrease earnings. However, to date, the vast majority of borrowers whose deferral periods were concluded by September 30, 2020 have made their scheduled payments.

Through September 30, 2020, the Bank processed COVID-19 loan modifications of $410.9 million for commercial loans, including undisbursed amounts, with $317.4 million still in their deferral period at September 30, 2020. The COVID-19 loan modifications for commercial loans mainly consist of a six-month interest-only payment period, but a three-month deferral of principal and interest was also offered to our borrowers. Some of the borrowers who requested and received a three-month deferral of principal and interest have requested an additional three-month deferral. We have either completed or are in the process of completing those second payment deferral requests. We believe the Bank's COVID-19 loan modification program has been very beneficial to the majority of our borrowers; however, as is the case with one- to four-family loans, the modifications may be masking our actual credit exposure which could result in worsening credit quality indicators once the payment relief time period ends. Through September 30, 2020, all of the commercial loan borrowers whose deferral periods were concluded by September 30, 2020 have made their scheduled payments.

There was no significant deterioration in credit quality indicators, such as loan delinquencies, asset classification and credit scores, during the current fiscal year; however, as noted above, the financial assistance provided by the government and our COVID-19 loan modifications may be masking our actual credit exposure which could result in worsening credit quality indicators in the coming months. Loans 30 to 89 days delinquent were 0.13% of total loans at September 30, 2020 and 0.20% of total loans at September 30, 2019. Loans 90 days or more delinquent or in foreclosure were 0.16% of total loans at September 30, 2020 and 0.08% of total loans at September 30, 2019. Loans classified as special mention were $63.7 million at September 30, 2020 compared to $69.8 million at September 30, 2019. Loans classified as substandard were $31.1 million at September 30, 2020 compared to $30.1 million at September 30, 2019. The weighted average credit score for our one- to four-family loan portfolio was 768 at September 30, 2020 compared to 767 at September 30, 2019. We completed a credit score update from a nationally recognized consumer rating agency during the current quarter.

Management believes the ACL at September 30, 2020 was adequate to absorb inherent losses in the loan portfolio at that point in time based on the known facts and circumstances of the economic environment at September 30, 2020. Management will continue to closely monitor economic conditions and will work with borrowers as necessary to assist them through this challenging economic climate. If economic conditions worsen or do not improve in the near term, and if future government programs, if any, do not provide adequate relief to borrowers, it is possible the Bank's ACL will need to increase in future periods.

The distribution of our ACL at the dates indicated is summarized below. The increase in the ACL from June 30, 2020 to September 30, 2020 was due to net recoveries.

 

At

 

September 30,

 

June 30,

 

March 31,

 

December 31,

 

September 30,

 

2020

 

2020

 

2020

 

2019

 

2019

 

(Dollars in thousands)

One- to four-family:

 

 

 

 

 

 

 

 

 

Originated

$

6,044

 

 

$

6,298

 

 

$

6,420

 

 

$

2,027

 

 

$

1,982

 

Correspondent purchased

2,691

 

 

3,189

 

 

3,355

 

 

1,200

 

 

1,203

 

Bulk purchased

467

 

 

506

 

 

557

 

 

612

 

 

687

 

Construction

41

 

 

48

 

 

47

 

 

20

 

 

18

 

Total

9,243

 

 

10,041

 

 

10,379

 

 

3,859

 

 

3,890

 

Commercial:

 

 

 

 

 

 

 

 

 

Commercial real estate

16,869

 

 

16,353

 

 

14,672

 

 

3,608

 

 

3,448

 

Commercial and industrial

1,451

 

 

1,465

 

 

1,489

 

 

710

 

 

472

 

Construction

3,480

 

 

2,886

 

 

4,167

 

 

1,100

 

 

1,251

 

Total

21,800

 

 

20,704

 

 

20,328

 

 

5,418

 

 

5,171

 

Consumer

484

 

 

470

 

 

489

 

 

158

 

 

165

 

Total

$

31,527

 

 

$

31,215

 

 

$

31,196

 

 

$

9,435

 

 

$

9,226

 

The ratio of ACL to loans receivable, by loan type, at the dates indicated is summarized below. The reduction in the ACL to loans ratio at June 30, 2020 and September 30, 2020 compared to March 31, 2020 for commercial and industrial loans was due primarily to PPP loans. PPP loans are 100% guaranteed by the SBA so the Bank did not record ACL on those loans at June 30, 2020 or September 30, 2020. The increase in the overall commercial ACL to total commercial loans from June 30, 2020 to September 30, 2020 was due to a change in the product mix within the portfolio.

 

At

 

September 30,

 

June 30,

 

March 31,

 

December 31,

 

September 30,

 

2020

 

2020

 

2020

 

2019

 

2019

One- to four-family:

 

 

 

 

 

 

 

 

 

Originated

0.15

%

 

0.16

%

 

0.16

%

 

0.05

%

 

0.05

%

Correspondent purchased

0.13

 

 

0.14

 

 

0.14

 

 

0.05

 

 

0.05

 

Bulk purchased

0.22

 

 

0.23

 

 

0.24

 

 

0.26

 

 

0.27

 

Construction

0.12

 

 

0.13

 

 

0.13

 

 

0.05

 

 

0.05

 

Total

0.15

 

 

0.16

 

 

0.16

 

 

0.06

 

 

0.06

 

Commercial:

 

 

 

 

 

 

 

 

 

Commercial real estate

2.69

 

 

2.62

 

 

2.51

 

 

0.62

 

 

0.59

 

Commercial and industrial

1.49

 

 

1.47

 

 

2.40

 

 

1.25

 

 

0.77

 

Construction

3.30

 

 

3.30

 

 

3.30

 

 

1.02

 

 

1.02

 

Total

2.63

 

 

2.55

 

 

2.63

 

 

0.72

 

 

0.67

 

Consumer

0.42

 

 

0.40

 

 

0.39

 

 

0.12

 

 

0.13

 

Total

0.44

 

 

0.42

 

 

0.42

 

 

0.13

 

 

0.12

 

Accounting Standards Update ("ASU") 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments, replaces the current incurred loss impairment methodology in GAAP. The new impairment methodology requires an entity to measure, at each reporting date, the expected credit losses of financial assets not measured at fair value, such as loans and loan commitments, over their contractual lives. This ASU is effective for the Company on October 1, 2020. The Company has been working with a software provider on the application and implementation of the new accounting guidance and model. At September 30, 2020, the Company ran the new model using various assumptions and forecast scenarios. Preliminary results indicate the Bank's ACL and reserves on unfunded commitments would be between $28 million and $35 million. The ACL calculated under the new accounting methodology could be lower than that under the existing incurred loss methodology due to having the ability to forecast improvements in economic conditions over a loan's contractual life rather than only being able to consider current conditions as is required under the incurred loss methodology.

Securities Portfolio

The following table presents the distribution of our securities portfolio, at amortized cost, at the dates indicated. Overall, fixed-rate securities comprised 87% of our securities portfolio at September 30, 2020. The weighted average life ("WAL") is the estimated remaining maturity (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, 2020

 

June 30, 2020

 

September 30, 2019

 

Amount

 

Yield

 

WAL

 

Amount

 

Yield

 

WAL

 

Amount

 

Yield

 

WAL

 

(Dollars in thousands)

Fixed-rate securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MBS

$

945,432

 

 

1.82

%

 

3.7

 

 

$

714,730

 

 

2.22

%

 

3.2

 

 

$

625,840

 

 

2.46

%

 

2.9

 

U.S. government-sponsored enterprise debentures

369,967

 

 

0.62

 

 

1.7

 

 

225,020

 

 

1.20

 

 

0.8

 

 

249,828

 

 

2.15

 

 

0.7

 

Municipal bonds

9,716

 

 

1.69

 

 

0.7

 

 

11,857

 

 

1.68

 

 

0.7

 

 

18,371

 

 

1.63

 

 

1.0

 

Total fixed-rate securities

1,325,115

 

 

1.49

 

 

3.1

 

 

951,607

 

 

1.97

 

 

2.6

 

 

894,039

 

 

2.35

 

 

2.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustable-rate securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MBS

204,490

 

 

2.49

 

 

2.9

 

 

234,618

 

 

2.73

 

 

3.9

 

 

297,416

 

 

3.10

 

 

4.7

 

Total securities portfolio

$

1,529,605

 

 

1.62

 

 

3.1

 

 

$

1,186,225

 

 

2.12

 

 

2.8

 

 

$

1,191,455

 

 

2.54

 

 

2.9

 

MBS: The following tables summarize the activity in our portfolio of MBS for the periods presented. The weighted average yields and WALs for purchases are presented as recorded at the time of purchase. The weighted average yields for the beginning balances are as of the last day of the period previous to the period presented and the weighted average 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 are the estimated remaining principal repayment term (in years) after three-month historical prepayment speeds have been applied.

 

For the Three Months Ended

 

September 30, 2020

 

June 30, 2020

 

March 31, 2020

 

December 31, 2019

 

Amount

 

Yield

 

WAL

 

Amount

 

Yield

 

WAL

 

Amount

 

Yield

 

WAL

 

Amount

 

Yield

 

WAL

 

(Dollars in thousands)

Beginning balance - carrying value

$

982,587

 

 

 

2.35

%

 

3.3

 

 

$

973,318

 

 

 

2.50

%

 

3.6

 

 

$

937,317

 

 

 

2.61

%

 

3.3

 

 

$

936,487

 

 

 

2.67

%

 

3.5

 

Maturities and repayments

(95,842

)

 

 

 

 

 

 

(75,293

)

 

 

 

 

 

 

(65,767

)

 

 

 

 

 

 

(72,635

)

 

 

 

 

 

Net amortization of (premiums)/discounts

(608

)

 

 

 

 

 

 

(363

)

 

 

 

 

 

 

(279

)

 

 

 

 

 

 

(248

)

 

 

 

 

 

Purchases:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed

297,024

 

 

 

1.06

 

 

5.9

 

 

77,455

 

 

 

1.29

 

 

5.0

 

 

88,863

 

 

 

1.80

 

 

4.5

 

 

74,359

 

 

 

2.05

 

 

3.8

 

Change in valuation on AFS securities

(2,358

)

 

 

 

 

 

 

7,470

 

 

 

 

 

 

 

13,184

 

 

 

 

 

 

 

(646

)

 

 

 

 

 

Ending balance - carrying value

$

1,180,803

 

 

 

1.94

 

 

3.5

 

 

$

982,587

 

 

 

2.35

 

 

3.3

 

 

$

973,318

 

 

 

2.50

 

 

3.6

 

 

$

937,317

 

 

 

2.61

 

 

3.3

 

 

For the Year Ended

 

September 30, 2020

 

September 30, 2019

 

Amount

 

Yield

 

WAL

 

Amount

 

Yield

 

WAL

 

(Dollars in thousands)

Beginning balance - carrying value

$

936,487

 

 

 

2.67

%

 

3.5

 

 

$

1,036,990

 

 

 

2.57

%

 

3.4

 

Maturities and repayments

(309,537

)

 

 

 

 

 

 

(275,116

)

 

 

 

 

 

Net amortization of (premiums)/discounts

(1,498

)

 

 

 

 

 

 

(1,304

)

 

 

 

 

 

Purchases:

 

 

 

 

 

 

 

 

 

 

 

Fixed

537,701

 

 

 

1.35

 

 

5.2

 

 

77,755

 

 

 

2.53

 

 

4.1

 

Adjustable

 

 

 

 

 

 

 

84,138

 

 

 

2.74

 

 

4.4

 

Valuation transferred from held-to-maturity ("HTM") to AFS

 

 

 

 

 

 

 

3,039

 

 

 

 

 

 

Change in valuation on AFS securities

17,650

 

 

 

 

 

 

 

10,985

 

 

 

 

 

 

Ending balance - carrying value

$

1,180,803

 

 

 

1.94

 

 

3.5

 

 

$

936,487

 

 

 

2.67

 

 

3.5

 

Investment Securities: The following tables summarize the activity of investment securities for the periods presented. The weighted average yields and WALs for purchases are presented as recorded at the time of purchase. The weighted average yields for the beginning balances are as of the last day of the period previous to the period presented and the weighted average 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, 2020

 

June 30, 2020

 

March 31, 2020

 

December 31, 2019

 

Amount

 

Yield

 

WAL

 

Amount

 

Yield

 

WAL

 

Amount

 

Yield

 

WAL

 

Amount

 

Yield

 

WAL

 

(Dollars in thousands)

Beginning balance - carrying value

$

237,467

 

 

 

1.23

%

 

0.8

 

 

$

262,719

 

 

 

1.87

%

 

0.3

 

 

$

292,270

 

 

 

2.00

%

 

0.8

 

 

$

268,376

 

 

 

2.11

%

 

0.8

 

Maturities, calls and sales

(102,115

)

 

 

 

 

 

 

(125,000

)

 

 

 

 

 

 

(80,125

)

 

 

 

 

 

 

(51,175

)

 

 

 

 

 

Net amortization of (premiums)/discounts

(54

)

 

 

 

 

 

 

(80

)

 

 

 

 

 

 

(49

)

 

 

 

 

 

 

20

 

 

 

 

 

 

Purchases:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed

244,975

 

 

 

0.51

 

 

3.2

 

 

99,990

 

 

 

0.58

 

 

1.2

 

 

50,097

 

 

 

1.42

 

 

0.4

 

 

75,000

 

 

 

1.90

 

 

1.7

 

Change in valuation on AFS securities

(126

)

 

 

 

 

 

 

(162

)

 

 

 

 

 

 

526

 

 

 

 

 

 

 

49

 

 

 

 

 

 

Ending balance - carrying value

$

380,147

 

 

 

0.65

 

 

1.7

 

 

$

237,467

 

 

 

1.23

 

 

0.8

 

 

$

262,719

 

 

 

1.87

 

 

0.3

 

 

$

292,270

 

 

 

2.00

 

 

0.8

 

 

For the Year Ended

 

September 30, 2020

 

September 30, 2019

 

Amount

 

Yield

 

WAL

 

Amount

 

Yield

 

WAL

 

(Dollars in thousands)

Beginning balance - carrying value

$

268,376

 

 

 

2.11

%

 

0.8

 

 

$

289,942

 

 

 

2.05

%

 

2.2

 

Maturities, calls and sales

(358,415

)

 

 

 

 

 

 

(249,771

)

 

 

 

 

 

Net amortization of (premiums)/discounts

(163

)

 

 

 

 

 

 

62

 

 

 

 

 

 

Purchases:

 

 

 

 

 

 

 

 

 

 

 

Fixed

470,062

 

 

 

0.84

 

 

2.3

 

 

224,809

 

 

 

2.44

 

 

0.9

 

Valuation transferred from HTM to AFS

 

 

 

 

 

 

 

47

 

 

 

 

 

 

Change in valuation on AFS securities

287

 

 

 

 

 

 

 

3,287

 

 

 

 

 

 

Ending balance - carrying value

$

380,147

 

 

 

0.65

 

 

1.7

 

 

$

268,376

 

 

 

2.11

 

 

0.8

 

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, 2020

 

June 30, 2020

 

September 30, 2019

 

 

 

 

 

% of

 

 

 

 

 

% of

 

 

 

 

 

% of

 

Amount

 

Rate

 

Total

 

Amount

 

Rate

 

Total

 

Amount

 

Rate

 

Total

 

(Dollars in thousands)

Non-interest-bearing checking

$

451,394

 

 

%

 

7.3

%

 

$

457,917

 

 

%

 

7.5

%

 

$

357,284

 

 

%

 

6.4

%

Interest-bearing checking

865,782

 

 

0.10

 

 

14.0

 

 

837,304

 

 

0.10

 

 

13.8

 

 

717,121

 

 

0.09

 

 

12.8

 

Savings

433,808

 

 

0.06

 

 

7.0

 

 

420,924

 

 

0.07

 

 

6.9

 

 

321,494

 

 

0.05

 

 

5.8

 

Money market

1,419,180

 

 

0.37

 

 

22.9

 

 

1,320,379

 

 

0.39

 

 

21.8

 

 

1,198,343

 

 

0.70

 

 

21.5

 

Retail/business certificates of deposit

2,766,461

 

 

1.83

 

 

44.7

 

 

2,744,661

 

 

1.97

 

 

45.2

 

 

2,692,770

 

 

2.08

 

 

48.2

 

Public unit certificates of deposit

254,783

 

 

0.74

 

 

4.1

 

 

288,499

 

 

1.09

 

 

4.8

 

 

294,855

 

 

2.29

 

 

5.3

 

 

$

6,191,408

 

 

0.95

 

 

100.0

%

 

$

6,069,684

 

 

1.05

 

 

100.0

%

 

$

5,581,867

 

 

1.29

 

 

100.0

%

The following table presents scheduled maturity information for our certificates of deposit, including public unit certificates of deposit, along with associated weighted average rates, as of September 30, 2020.

 

 

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%

 

$

449,875

 

 

$

55,037

 

 

$

8,103

 

 

$

1,374

 

 

$

514,389

 

 

0.55

%

1.00 – 1.99%

 

713,300

 

 

355,888

 

 

104,335

 

 

186,939

 

 

1,360,462

 

 

1.65

 

2.00 – 2.99%

 

342,326

 

 

362,353

 

 

313,831

 

 

127,632

 

 

1,146,142

 

 

2.38

 

3.00 – 3.99%

 

 

 

 

 

251

 

 

 

 

251

 

 

3.00

 

 

 

$

1,505,501

 

 

$

773,278

 

 

$

426,520

 

 

$

315,945

 

 

$

3,021,244

 

 

1.74

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Percent of total

 

49.8

%

 

25.6

%

 

14.1

%

 

10.5

%