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Capitol Federal Financial Posts 1st Quarter Fiscal Year 2014 Results

February 4, 2014

Capitol Federal Financial, Inc. announced results for the quarter ended December 31, 2013 . In a release on January 29 , the Company reported that net income increased $1.7 million , or 10.9 percent, from $16.1 million for the quarter ended September 30, 2013 to $17.8 million for the quarter ended December 31, 2013 . The increase in net income was due primarily to a decrease in salaries and employee benefits due largely to a decrease in Employee Stock Ownership Plan (ESOP) related expenses. The net interest margin increased two basis points, from 1.96 percent for the prior quarter, to 1.98 percent for the current quarter. The continued shift in the mix of interest- earning assets from relatively lower yielding securities to higher yielding loans was the primary driver of the increase in the net interest margin, along with a decrease in the rates on the certificate of deposit and repurchase agreement portfolios. The weighted average yield on total interest-earning assets increased one basis point from the prior quarter to 3.23 percent for the current quarter while the average balance of interest-earning assets decreased $3.9 million between the two periods. The average balance of the securities portfolio decreased $152.7 million , while the average balance of the loans receivable portfolio increased $116.4 million between the two periods. This is a result of management's continued strategy of adjusting the mix of interest- earning assets in order to obtain a higher yield on those assets. The increase in interest income on loans receivable was due to a $116.4 million increase in the average balance of the portfolio, partially offset by a four basis point decrease in the weighted average yield of the portfolio to 3.79 percent for the current quarter. Cash flows from the securities portfolio were used to fund loan growth during the current quarter. The decrease in the weighted average yield was due largely to downward repricing of adjustable- rate loans, as well as to repayments of higher-yielding loans. The decrease in interest income on MBS was due primarily to a $92.5 million decrease in the average balance of the portfolio, partially offset by a three basis point increase in the average yield of the portfolio, from 2.37 percent for the prior quarter to 2.40 percent for the current quarter. The decrease in the average balance was largely a result of principal repayments being invested into the higher yielding loan portfolio. The increase in the average yield of the portfolio was due primarily to a decrease in premium amortization, which is considered an adjustment to the yield, resulting largely from an increase in market interest rates. The weighted average rate paid on total interest-bearing liabilities decreased three basis points from the prior quarter to 1.49 percent for the current quarter, and the average balance of interest-bearing liabilities decreased $14.3 million between the two periods. The decrease in interest expense on deposits was due to a decrease in the weighted average rate paid on the portfolio, specifically a decrease in the weighted average rate paid on the certificate of deposit portfolio. The weighted average rate paid on the certificate of deposit portfolio decreased six basis points, from 1.24 percent for the prior quarter to 1.18 percent for the current quarter. Capitol Federal Savings Bank recorded a provision for credit losses during the current quarter of $515 thousand compared to a negative provision for credit losses during the prior quarter of $500 thousand . The $515 thousand provision for credit losses in the current quarter takes into account net charge-offs of $418 thousand during the quarter, compared to a net recovery of $83 thousand in the prior quarter, along with loan growth during the quarter and a small increase in the balance of delinquent and non-performing loans between periods. Loans 30 to 89 days delinquent increased $328 thousand , or 1.2 percent, from $27.6 million at September 30, 2013 to $27.9 million at December 31, 2013 . The ratio of loans 30 to 89 days delinquent to total loans receivable, net was 0.46 percent at both September 30, 2013 and December 31, 2013 . Non-performing loans increased $1.3 million , or 4.8 percent, from $26.4 million at September 30, 2013 to $27.7 million at December 31, 2013 . The ratio of non-performing loans to total loans receivable, net increased from 0.44 percent at September 30, 2013 to 0.46 percent at December 31, 2013 . For the quarter ended December 31, 2013 , the Company recognized net income of $17.8 million , compared to net income of $17.6 million for the quarter ended December 31, 2012 . The net interest margin decreased three basis points, from 2.01 percent for the prior year quarter to 1.98 percent for the current quarter. Decreases in the cost of funds and a shift in the mix of interest-earning assets from relatively lower yielding securities to higher yielding loans tempered the decrease in the net interest margin, but were not enough to fully offset the impact of decreasing asset yields. The weighted average yield on total interest-earning assets decreased 19 basis points from 3.42 percent for the prior year quarter to 3.23 percent for the current quarter and the average balance of interest-earning assets decreased $126.6 million from the prior year quarter. The decrease in the weighted average balance between the two periods was primarily in the lower yielding MBS and investment securities portfolio, while the average balance of the loan portfolio increased between the two periods. ((Comments on this story may be sent to newsdesk@closeupmedia.com ))


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