<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________________ to ______________________
Commission File Number 333-68363
CAPITOL FEDERAL FINANCIAL
- - --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
United States 48-1212142
------------------------------- ----------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
700 Kansas Avenue, Topeka, Kansas 66603
- - ----------------------------------------------- -------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (785) 235-1341
Indicate by check mark whether the issuer (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the issuer
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Transitional Small Business Format: Yes [ ] No [X]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock 91,512,287
- - --------------------------- --------------------------
Class Shares Outstanding
as of May 12, 1999
<PAGE>
FORM 10-Q
Capitol Federal Financial
INDEX
<TABLE>
<CAPTION>
Page
PART I -- FINANCIAL INFORMATION Number
------
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets at March 31, 1999 and September 30, 1998 3
Consolidated Statements of Income for the three and six months ended
March 31, 1999 and March 31, 1998 4
Consolidated Statement of Stockholders' Equity for the six months
ended March 31, 1999 5
Consolidated Statements of Cash Flows for the six months ended
March 31, 1999 and March 31, 1998 6
Notes to Consolidated Interim Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 13
Item 3. Quantitative and Qualitative Disclosures about Market Risk 20
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 2. Changes in Securities and Use of Proceeds 21
Item 3. Defaults Upon Senior Securities 21
Item 4. Submission of Matters to a Vote of Security Holders 21
Item 5. Other Information 21
Item 6. Exhibits and Reports on Form 8-K 21
Signature Page 22
2
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART 1 -- FINANCIAL INFORMATION
CAPITOL FEDERAL FINANCIAL AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
March 31, September 30,
1999 1998
-------------- -------------
(Unaudited)
(dollars in thousands)
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 16,070 $ 24,454
Securities purchased under agreement to resell 0 235,000
Investment securities held to maturity (market value of $100
and $160,712) 100 160,569
Capital stock of Federal Home Loan Bank 45,119 43,584
Mortgage-related securities:
Available-for-sale 1,436,162 747,991
Held-to-maturity (market value of $280,567 and $319,128) 282,771 320,379
Loans held for sale, net 1,098 14,578
Loans receivable, net 3,871,958 3,711,152
Premises and equipment 23,904 22,785
Real estate owned, net 1,756 1,964
Accrued interest receivable 29,030 27,998
Deferred tax asset 11,488 0
Other assets 11,435 5,347
----------- ----------
Total Assets $5,730,891 $5,315,801
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits $3,950,384 $3,894,180
Advances from Federal Home Loan Bank 500,000 500,000
Securities sold under agreement to repurchase 175,000 175,000
Advance payments by borrowers for taxes and insurance 37,064 37,426
Deferred income taxes 26,793 28,995
Accounts payable and accrued expenses 17,364 17,868
----------- ----------
Total liabilities 4,706,605 4,653,469
COMMITMENTS AND CONTINGENCIES (NOTE 11)
STOCKHOLDERS' EQUITY:
Preferred stock ($0.01 par value) 50,000,000 shares
authorized; none issued 0 0
Common stock ($0.01 par value) 450,000,000 authorized;
91,512,287 shares issued 915 0
Additional paid in capital 384,625 0
Retained earnings 657,250 649,199
Unrealized gains on mortgage-related securities available-for-sale 10,692 13,133
Unearned compensation, employee stock ownership plan (29,196) 0
----------- ----------
Total stockholders' equity 1,024,286 662,332
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $5,730,891 $5,315,801
=========== ==========
</TABLE>
See accompanying notes to consolidated interim financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
CAPITOL FEDERAL FINANCIAL AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
March 31, March 31,
------------------------ --------------------------
1999 1998 1999 1998
------- ------- -------- --------
<S> <C> <C> <C> <C>
INTEREST AND DIVIDEND INCOME:
Loans receivable $70,236 $66,186 $140,182 $131,444
Mortgage-related securities 22,827 12,732 39,070 26,576
Investment securities --- 7,392 765 16,204
Securities purchased under agreement to resell 1,206 1,720 3,894 1,720
Cash and cash equivalents 662 946 1,763 2,397
Capital stock of Federal Home Loan Bank 859 762 1,535 1,592
------- ------- -------- --------
Total interest and dividend income 95,790 89,738 187,209 179,933
INTEREST EXPENSE:
Deposits 49,498 50,110 99,830 101,198
Borrowings 12,048 6,444 21,928 13,021
------- ------- -------- --------
Total interest expense 61,546 56,554 121,758 114,219
------- ------- -------- --------
Net interest and dividend income 34,244 33,184 65,451 65,714
Provision for loan losses 135 --- 135 ---
------- ------- -------- --------
Net interest and dividend income after
provision for loan losses 34,109 33,184 65,316 65,714
OTHER INCOME:
Automated teller and debit card transaction fees 889 819 1,762 1,590
Checking account transaction fees 637 577 1,389 1,411
Loan fees 467 596 996 1,225
Insurance commissions 455 356 799 686
Other, net 840 668 1,451 1,435
------- ------- -------- --------
Total other income 3,288 3,016 6,397 6,347
OTHER EXPENSES:
Salaries and employee benefits 9,833 6,474 16,193 12,481
Occupancy of premises 2,066 1,726 4,431 3,838
Office supplies and related expenses 820 834 1,570 1,551
Deposit and loan transaction fees 977 922 1,928 1,657
Advertising 652 669 1,028 1,045
Federal insurance premium 599 601 1,169 1,211
Contribution to Foundation 30,231 30,231
Other, net 826 900 1,723 1,667
------- ------- -------- --------
Total other expenses 46,004 12,126 58,273 23,450
------- ------- -------- --------
Income (loss) before income tax expense (8,607) 24,074 13,440 48,611
Income tax expense (benefit) (3,266) 9,663 5,289 19,478
-------- ------- -------- --------
NET INCOME (LOSS) $(5,341) $14,411 $ 8,151 $ 29,133
======== ======= ======== ========
</TABLE>
See accompanying notes to consolidated interim financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
CAPITOL FEDERAL FINANCIAL AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
Unrealized
Additional gains on Unearned
Common Paid-In Retained mortgage-related Compensation
Stock Capital Earnings securities (ESOP) Total
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at October 1, 1998 $ - $ - $649,199 $13,133 $ - $662,332
Capitalization of Mutual Holding
Company - - (100) - - (100)
Net income for six months ended
March 31, 1999 - - 8,151 - - 8,151
Unearned Compensation (ESOP) - - - - (30,245) (30,245)
Issuance of 91,512,287 shares of
$.01 par value common stock in
initial public offering, net of
conversion related expenses 915 384,625 - - - 385,540
Amortization of unearned
compensation, ESOP - - - - 1,049 1,049
Change in unrealized gain or loss
on securities available for sale - - - (2,441) - (2,441)
--------------------------------------------------------------------------------------
TOTAL $915 $384,625 $657,250 $10,692 $(29,196) $1,024,286
=======================================================================================
</TABLE>
See accompanying notes to consolidated interim financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
CAPITOL FEDERAL FINANCIAL AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For Six Months Ended March 31,
---------------------------------
1999 1998
------------ -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 8,151 $ 29,133
Adjustments to reconcile net income to net cash provided
by operating activities:
Federal Home Loan Bank stock dividends (1,535) (1,593)
Amortization of net deferred loan origination fees (5,255) (858)
Provision for loan losses 135 0
Provision for losses on real estate owned 0 (11)
Net loan origination fees capitalized 5,954 1,252
Gain on sales of real estate owned, net 57 (65)
Originations of loans held for sale 500 (9,985)
Proceeds from sales of loans held for sale 12,976 18,782
Amortization and accretion of premiums and discounts 2,023 (270)
on mortgage related securities and investment securities
Depreciation and amortization on premises & equipment 1,637 1,421
Provision (benefit) for deferred income taxes (11,488) 0
Termination of Pension Plan 1,600
Amortization of unearned compensation - ESOP 1,049
Changes in:
Accrued interest receivable (1,033) 2,725
Other assets (7,618) 1,410
Income taxes payable (1,468) (836)
Accounts payable and accrued expenses 1,863 (1,527)
---------- ---------
Net cash provided by (used in) operating activities 7,548 39,578
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of investment securities 160,470 408,918
Purchases of investment securities 0 (200,000)
Purchases of securities under agreement to resell (1,383,410) (271,910)
Principal collected on mortgage-related securities available-
for-sale 316,571 52,849
Purchases of mortgage-related securities available-for-sale (1,010,909) 58,547
Principal collected on mortgage-related securities held-to-
maturity 216,068 26,669
Purchases of mortgage-related securities held-to-maturity (178,960) 0
Loan originations net of principal collected on loans
receivable (112,083) (106,084)
Purchases of loans receivable (50,731) (65,114)
Purchases of premises and equipment, net (2,756) (2,584)
Proceeds from sales of real estate owned 361 2,178
---------- ---------
Net cash used in investing activities (2,045,379) (96,531)
6
<PAGE>
CASH FLOWS FROM FINANCING ACTIVITIES:
Deposits, net of payments 56,104 89,842
Proceeds from advances from Federal Home Loan Bank (300,000) (66,000)
Repayments on advances from Federal Home Loan Bank 300,000 66,000
Proceeds from securities sold under agreement to repurchase 1,618,410 0
Repayments of securities sold under agreement to repurchase 0 72,934
Proceeds from stock issuance, net 355,295 0
Advance payments by borrowers for taxes and insurance (362) (9,082)
---------- ---------
Net cash provided by financing activities 2,029,447 153,694
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (8,384) 96,741
CASH AND CASH EQUIVALENTS:
Beginning of Period $24,454 $31,188
End of Period $16,070 $127,929
========== =========
SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING AND FINANCING TRANSACTIONS:
Note received from ESOP in exchange for stock $30,245
==========
</TABLE>
See accompanying notes to consolidated interim financial statements.
7
<PAGE>
Notes to Consolidated Interim Financial Statements
1. Basis of Financial Statement Presentation
The accompanying consolidated financial statements were prepared in accordance
with generally accepted accounting principles ("GAAP"). Accordingly, they do not
include information or footnotes necessary for a complete presentation of
financial position, results of operations and cash flows in conformity with
generally accepted accounting principles. However, all normal, recurring
adjustments which, in the opinion of management, are necessary for a fair
presentation of financial statements, have been included. These financial
statements should be read in conjunction with the audited financial statements
and the notes thereto for the period ended September 30, 1998 contained in the
Company's Prospectus dated February 11, 1999. The results for the three and six
months ended March 31, 1999 are not necessarily indicative of the results that
may be expected for the year ended September 30, 1999. In particular, it is
noted that during the second quarter of fiscal year 1999, the Company recorded a
pre-tax expense of $30.2 million in conjunction with the formation of the
Foundation and $2.6 million in conjunction with the termination of the existing
pension plan and the implementation of the Employee Stock Ownership Plan
("ESOP").
In preparing the financial statements, management is required to make estimates
and assumptions that affect the reported amounts of assets and liabilities as of
the date of the balance sheet and revenues and expenses for the period. Material
estimates that are particularly susceptible to significant change in the
near-term relate to the determination of the allowances for losses on loans and
real estate owned. While management believes that these allowances are adequate,
future additions to the allowances may be necessary based on changes in economic
conditions.
2. Summary of Significant Accounting Policies
On March 31, 1999, Capitol Federal Financial (the "Company") completed the
reorganization of Capitol Federal Savings and Loan Association, a federally
chartered mutual savings and loan ("Capitol Federal Savings" or the "Bank"),
into the federal mutual holding company form of ownership, whereby the Bank
converted into a federally chartered stock savings bank as a wholly owned
subsidiary of the Company, and the Company became a majority-owned subsidiary of
Capitol Federal Savings MHC, a federally chartered mutual holding company (the
"MHC") (the "Reorganization"). In connection with the Reorganization, the
Company sold 37,807,183 shares of Company common stock, par value $0.01 per
share ("Company Common Stock") at $10.00 per share, which net of issuance costs
generated proceeds of $355.3 million, including shares issued to the ESOP. The
Company also issued 52,192,817 shares of Company Common Stock to the MHC. As an
integral part of the Reorganization and in furtherance of Capitol Federal
Savings' commitment to the communities that it serves, Capitol Federal Savings
and the Company established a charitable foundation known as the Capitol Federal
Savings Foundation (the "Foundation") and contributed $15.1 million in cash and
1,512,287 shares to the Foundation. The Foundation will provide funding to
support education, affordable housing, the United Way, and other charitable
causes that will complement Capitol Federal Savings' existing community
activities. In addition, the Company established an ESOP for the employees of
the Company and the Bank which became effective with the completion of the
Reorganization.
Additional information regarding the Reorganization is included in the Company's
Registration Statement on Form S-1 filed on December 4, 1998, as amended.
8
<PAGE>
3. Loan Portfolio
The following table presents the Company's loan portfolio at the dates
indicated.
<TABLE>
<CAPTION>
March 31, 1999 September 30, 1998
-------------------------- ------------------------
Amount Percent Amount Percent
----------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
Real Estate Loans:
One- to four-family $3,662,927 93.65% $3,504,799 93.47%
Multi-family 36,748 0.94 40,361 1.08
Commercial 13,508 0.35 9,069 0.24
Construction or development 52,468 1.34 52,086 1.39
---------- ------ ---------- --------
Total real estate loans 3,765,651 96.28 3,606,315 96.18
Other Loans:
Consumer loans:
Savings loans 15,502 0.40 16,446 0.44
Student 19,481 0.50 20,120 0.54
Home improvement 2,131 0.05 2,776 0.07
Automobile 6,624 0.17 5,758 0.15
Home equity 101,306 2.59 97,829 2.61
Other 350 0.01 420 0.01
---------- ------ ---------- -------
Total consumer loans 145,394 3.72 143,349 3.82
Commercial business loans 8 0.00 10 0.00
---------- ------ ---------- -------
Total other loans 145,402 3.72 143,359 3.82
---------- ------ ---------- -------
Total loans receivable 3,911,053 100.00% 3,749,674 100.00%
Less:
Loans in process 21,148 21,690
Deferred fees and discounts 13,772 12,751
Allowance for losses 4,175 4,081
---------- ----------
Total loans receivable, net $3,871,958 $3,711,152
</TABLE>
9
<PAGE>
4. Non-Performing Loans
The following table presents the Company's non-performing loans, including
non-accrual loans and real estate owned, at the dates indicated.
March 31, September 30,
1999 1998
----------- -------------
Non-accruing loans:
One-to four-family $6,488 $6,048
Multi-family --- ---
Commercial real estate --- ---
Construction or development --- ---
Consumer 22 181
Commercial business --- ---
------ ------
Total $6,510 $6,229
====== ======
Accruing loans delinquent more than 90 days:
One- to four-family --- ---
Multi-family --- ---
Commercial real estate --- ---
Construction or development --- ---
Consumer --- ---
Commercial business --- ---
------ ------
Total --- ---
====== ======
Real Estate Owned:
One- to four-family $1,893 $1,964
Multi-family --- ---
Commercial real estate --- ---
Construction or development --- ---
Consumer --- ---
Commercial business --- ---
------ ------
Total $1,893 $1,964
====== ======
Total non-performing assets $8,403 $8,193
====== ======
Total as a percentage of total assets 0.15% 0.15%
====== ======
10
<PAGE>
5. Allowance for Loan Losses
The following table presents the Company's activity for loan losses at the dates
and for the periods indicated.
For the quarter For the six
ending months ending
March 31, March 31,
---------------- ----------------
1999 1998 1999 1998
------- ------ ------ ------
Balance at the beginning of period $4,081 $1,639 $4,081 $1,639
Charge offs:
One- to four-family 33 --- 33 ---
Multi-family --- --- --- ---
Commercial real estate --- --- --- ---
Construction or development --- --- --- ---
Consumer 8 --- 8 ---
Commercial business --- --- --- ---
------- ------ ------ ------
Total charge-offs 41 --- 41 ---
======= ====== ====== ======
Recoveries:
One- to four-family --- --- --- ---
Multi-family --- --- --- ---
Commercial real estate --- --- --- ---
Construction or development --- --- --- ---
Consumer --- --- --- ---
Commercial business --- --- --- ---
------- ------ ------ ------
Total charge offs --- --- --- ---
======= ====== ====== ======
Net charge-offs 41 --- 41 ---
Additions charged to operations 135 --- 135 ---
Balance at end of period $4,175 $1,639 $4,175 $1,639
======= ====== ====== ======
6. Savings Portfolio
The table below presents the Company's savings portfolio at the dates indicated.
<TABLE>
<CAPTION>
March 31, 1999 September 30, 1998
----------------------------------- ---------------------------------
Amount Percent of Total Amount Percent of Total
------------ ----------------- ----------- -------------------
<S> <C> <C> <C> <C>
Demand deposits $ 283,835 7.18% $ 260,440 6.69%
Passbook and passcard 131,481 3.33 129,180 3.32
Money market select 293,945 7.44 213,181 5.47
Cash fund 218,740 5.54 225,356 5.79
Certificates 3,022,383 76.51 3,066,023 78.73
---------- ----------
Total deposits $3,954,669 100.00% $3,898,854 100.00%
========== ====== ========== ======
</TABLE>
7. Earnings Per Share
Earnings per share for quarters current and prior to March 31, 1999 are not
meaningful, as the Bank's Reorganization was not completed until March 31, 1999.
11
<PAGE>
8. Equity
At March 31, 1999, the Bank exceeded all minimum regulatory requirements for a
well capitalized institution as of March 31, 1999, with GAAP capital at 16.00%
and risk-based capital of 35.30%. The Company declared a $0.10 per share
dividend on April 21st to holders of record on May 5th payable on May 21st.
9. Recent Accounting Pronouncements
In June 1997, FASB issued SFAS No. 131 "Disclosures about Segments of an
Enterprise and Related Information". The Statement establishes standards for the
way that public business enterprises report information about operating segments
in annual financial statements and requires that those enterprises report
selected information about operating segments in interim financial reports
issued to shareholders. It also establishes standards for related disclosures
about products and services, geographic areas, and major customers. The
statement is effective for the Company's financial statements for the fiscal
year ending September 30, 1999. The Company is prepared to comply with the
additional reporting requirements of this Statement and does not anticipate that
the implementation of this Statement will have a material impact on the
consolidated financial statements.
In June 1998, the FASB issued SFAS No. 133. "Accounting for Derivative
Instruments and instruments including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives) and hedging
activities. The Statement requires an entity to recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. The Statement is effective for the Company's
financial statements for the fiscal year ending September 30, 2000. The adoption
of this Statement is not expected to have material impact on the Company's
consolidated financial statements.
In October 1998, the FASB issued SFAS No.134 "Accounting for Mortgage-Backed
Securities Retained after the Securitization of Mortgage Loans Held for Sale by
a Mortgage Banking Enterprise." The Statement changes the way mortgage banking
firms account for certain securities and other interests they retain after
securitizing mortgage loans that were held for sale. The statement is effective
for the Company's financial statements as of January 1, 1999. The implementation
of this Statement had no material impact on the consolidated financial
statements.
10. Comprehensive Income
The only component of other comprehensive income is the change in the estimated
fair value of mortgage- related securities available-for-sale. Comprehensive
income (loss) was ($2.0) million for the three months ended March 31, 1999 and
income of $5.7 million for the six months ended March 31, 1999.
11. Commitments and Contingencies
In the normal course of business, the Company and its Subsidiaries are named
defendants in various lawsuits and counter claims. In the opinion of management,
after consultation with legal counsel, none of the suits will have a materially
adverse effect on the financial position or results of the Company.
12
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Capitol Federal Financial ("Company"), headquartered in Topeka, Kansas is a
federally chartered savings and loan holding company incorporated in March 1999.
The Company was organized at the direction of Capitol Federal Savings ("Bank")
for the purpose of acquiring all of the common stock of the Bank issued in
connection with the conversion of the Bank from mutual to stock form
("Conversion"). On March 31, 1999, the Bank completed its Conversion, and the
Company sold 37,807,183 shares of its common stock at a price of $10.00 per
share in a subscription offering ("Offering") to certain depositors of the Bank.
At that time, the Company also issued 52,192,817 of its common stock to the MHC.
The Conversion, the Offering and the issuance of Company common stock to the MHC
are referred to collectively as the "Reorganization." In connection with the
Reorganization, the Company established the Capitol Federal Savings Foundation
("Foundation") and made a charitable contribution of $15.1 million in cash and
1,512,287 shares of the Company's common stock to the Foundation, which resulted
in a one-time charge relating to the funding of the Foundation of $30.2 million
($18.7 million net of tax). The net proceeds from the Offering, excluding shares
issued to the ESOP, amounted to $355.3 million. The Company contributed $275.0
million of the remaining $325.1 of the proceeds from the Offering to the Bank in
exchange for all of the issued and outstanding shares of common stock of the
Bank. The Company had no significant assets or operations prior to March 31,
1999. Per share data is not applicable. The period ended March 31, 1999 is the
Company's first earnings report as a public company. Presently, the only
significant assets of the Company are the capital stock of the Bank, the
Company's loan to the Employee Stock Ownership Plan and the investments of the
net proceeds from the Offering retained by the Company. The Company is subject
to the financial reporting requirements of the Securities Exchange Act of 1934,
as amended.
Financial Condition
Assets. For the six month period ended March 31, 1999, total assets of the
company increased $415.1 million, or 7.8%, from $5.32 billion at September 30,
1998 to $5.73 billion at March 31, 1999. This increase in total assets was
primarily attributable to a $160.8 million, or 4.3%, increase in net loans
receivable which increased from $3.71 billion at September 30, 1998 to $3.87
billion at March 31, 1999, and a $650.6 million increase in mortgage-related
securities, or 60.9%, which increased from $1.07 billion at September 30, 1998
to $1.72 billion at March 31, 1999. These increases resulted from continued
growth in the loan portfolio, particularly mortgage loans, and from the
investment of Conversion proceeds and the use of proceeds from the maturity of
$235.0 million of securities sold under agreement to resell. Total one- to
four-family loan originations and purchase for the quarter ended March 31, 1999
were $329.7 million. Total originations of consumer loans for the quarter ended
March 31, 1999 were $29.7 million.
Liabilities. Deposits increased $56.2 million, or 1.4%, from $3.89 billion at
September 30, 1998, to $3.95 billion at March 31, 1999. This increase was
attributable to $86.5 million of interest credits during the period. Borrowings,
at the end of the period, remained unchanged from September 30, 1998.
Equity. Total stockholders' equity increased $361.9 million, or 54.6%, from
$662.3 million at September 30, 1998, to $1.02 billion at March 31, 1999. The
increase was primarily attributable to the funds raised by the Company in its
Offering in connection with the Bank's Conversion.
Comparison of Operating Results for the Three Months Ended March 31, 1999 and
1998 General. For the three months ended March 31, 1999, the Company recognized
a net loss of $5.3 million, compared to net income of $14.4 million for the
three months ended March 31, 1998. Excluding the effect of the Reorganization
related items, net income was $15.0 million for the quarter ended March 31,
1999.
13
<PAGE>
The Company's efficiency ratio, exclusive of the Reorganization related
expenses, for the three months ended March 31, 1999 was 35.83% compared to
34.26% for the quarter ended March 31, 1998.
Net Interest Income. Net interest income for the three months ended March 31,
1999 was $34.2 million, an increase of $1.1 million from the same period last
year. The increase was primarily the result of an increase of $1.36 billion in
the balance of loans receivable and mortgage-related securities from $4.23
billion at March 31, 1998 to $5.59 billion at March 31, 1999 while total
interest bearing liabilities increased $298.4 million from $4.33 billion at
March 31, 1998 to $4.63 billion at March 31, 1999. The net interest rate spread
for the quarter ended March 31, 1999 decreased 23 basis points. The Company's
net interest rate spread at March 31, 1999 was 1.70%, down 17 basis points from
1.87% at March 31, 1998.
Interest Income. Interest income for the three months ended March 31, 1999 was
$95.8 million, up from $89.7 million for the same period in 1998. The largest
component of interest income is interest on loans. Interest on loans increased
from $66.2 million for the three months ended March 31, 1998 to $70.2 million
for the three months ended March 31, 1999. This increase of $4.0 million was the
result of an increase in the average balance of loans which was partially offset
by a decrease in the average yield earned. The average balance of loans
receivable increased $423.6 million to $3.87 billion for the three months ended
March 31, 1999 compared to $3.45 billion for the three months ended March 31,
1998, while the average yield on loans decreased 33 basis points to 7.34% for
the quarter ended March 31, 1999 from 7.67% for the quarter ended March 31,
1998. The yield on loans receivable at March 31, 1999 was 7.17%. The increase in
interest on loans was supplemented by an increase in interest on
mortgage-related securities. Interest income on the mortgage-related securities
increased $10.1 million from $12.7 million for the quarter ended March 31, 1998
to $22.8 million for the quarter ended March 31, 1999. The average balance of
mortgage-related securities increased $877.5 million from $646.8 million at
March 31, 1998 to $1.52 billion at March 31, 1999, while the average yield
decreased from 7.03% for the quarter ended March 31, 1998 to 6.49% for the
quarter ended March 31, 1999. The yield on mortgage-related securities at March
31, 1999 was 6.58%. The increase in interest income on loans and
mortgage-related securities was offset by a reduction in interest income on
investment securities. Investment security income for the quarter ended March
31, 1999 was less than $1,000 compared to $7.4 million for the quarter ended
March 31, 1998. Investment securities were allowed to mature and were replaced
with higher rate mortgage-backed securities and CMO's.
Interest Expense. Interest expense increased during the quarter ended March 31,
1999 to $61.5 million, up from $56.5 million for the same period in 1998.
Substantially all of the Bank's interest expense is from the Bank's
interest-bearing deposits. For the quarter ended March 31, 1999 interest expense
on deposits was $49.5 million compared to $50.1 million for the quarter ended
March 31, 1998, a decrease of $612,000. The decrease was due to a reduction in
interest rates paid on short-term deposits, a reduction in the rate paid on
money market accounts, and certificates of deposit maturing and renewing into
lower rate accounts. The average balance of deposits increased during the
quarter ended March 31, 1999 to $3.95 billion compared to $3.86 billion for the
quarter ended March 31, 998, an increase of $89.1 million, or 2.3%. At March 31,
1999, the average cost of deposits was 5.19%. Interest expense on borrowings for
the quarter ended March 31, 1999 was $12.0 million compared to $6.4 million for
the quarter ended March 31, 1998, an increase of $5.6 million, or 87.5%. The
average balance of borrowings for the quarter ended March 31, 1999 was $875.0
million compared to $450.0 million for the quarter ended March 31, 1998, and
increase of 425.0 million, or 94.4%. The increase is due to additional long-term
fixed rate advances from the Federal Home Loan Bank and short-term advances
taken out during the quarter to pre-fund the investment of the proceeds from the
Offering prior to completing the Reorganization. The average cost of the
borrowings for the quarter ended March 31, 1999 was 5.54% compared to 5.31% for
the quarter ended March 31, 1998. The average rate paid on borrowings at March
31, 1999 was 5.73%.
14
<PAGE>
Provision for Loan Losses. The provision for loan losses of $135,000 resulted
from the assessment of the estimated losses inherent in the loan portfolio
resulting from the formula allowance, specific allowances for identified problem
loans and portfolio segments. There were no charges to the provision for loan
losses for the quarter ended March 31, 1998.
Noninterest Income. Total noninterest income for the quarter ended March 31,
1999 was $3.3 million, up from $3.0 million for the quarter ended March 31,
1998. There were no significant changes in noninterest income for any category
for the quarter ended March 31, 1998 compared to the quarter ended March 31,
1999.
Noninterest Expense. Total noninterest expense increased $33.9 million to $46.0
million for the quarter ended March 31, 1999 compared to $12.1 million for the
same period in 1998. The increase in noninterest expense was primarily due to
Reorganization related activities including the contribution to the Capitol
Federal Foundation of cash and stock totalling $30.2 million, the termination of
the existing pension plan of $1.6 million and the establishment of the ESOP and
accrued ESOP benefits of $1.0 million. Excluding the Reorganization related
items, noninterest expense was $13.2 million for the quarter ended March 31,
1999 compared to $12.1 million for the quarter ended March 31, 1998, or an
increase of 9.1%. This increase, exclusive of the Reorganization related
expense, is due to increases in personnel expense as a result of adding two new
limited service branches, one full service branch and other staff increases in
support departments and increased occupancy costs associated with the new
locations.
Income Tax Expense. Income tax expense decreased from $9.7 million for the
quarter ended March 31, 1998 to a benefit of $3.3 million for the quarter ended
March 31, 1999. The reduction is primarily the result of the tax benefit
associated with the contribution to the Foundation and the other Reorganization
related expenses.
Comparison of Operating Results for the Six Months Ended March 31, 1999 and 1998
General. For the six months ended March 31, 1999, the Company recognized net
income of $8.1 compared to net income of $29.1 million for the six months ended
March 31, 1998. Noninterest expense increased $34.9 million for the six months
ended March 31, 1999 compared to the same period last year. This increase was in
part offset by a reduction in income tax expense of $14.2 million. The
efficiency ratio, exclusive of the Reorganization related expenses, for the six
months ended March 31, 1999 was 36.15% compared to 33.29% for the six months
ended March 31, 1998.
Net Interest Income. Net interest income for the six months ended March 31, 1999
was $65.5 million compared to $65.7 million for the six months ended March 31,
1999, an decrease of $263,000, or 0.4%. The average net interest rate spread
decreased 14 basis points from 2.00% for the six month period ending March 31,
1998 to 1.86% for the six month period ended March 31, 1999.
Interest Income. Interest income for the six months ended March 31, 1999 was
$187.2 million, up from $179.9 million for the six months ended March 31, 1998.
The largest component of interest income is interest on loans receivable.
Interest on loans increased from $131.4 million for the six months ended March
31, 1998 to $140.2 million for the six months ended March 31, 1999. This
increase of $8.8 million is the result of an increase in the average balance of
loans receivable which was partially offset by a decrease in the average
yield earned. The average balance of loans increased $363.9 million to $3.78
billion for the six months ended March 31, 1999 from $3.41 billion for the six
months ended March 31, 1998. The average yield on loans decreased 32 basis
points from 7.71% for the six months ended March 31, 1998 to 7.39% for the six
months ended March 31, 1999. The increase in interest on loans was supplemented
by an increase in the average balance of mortgage-related securities. The
average balance of mortgage-related securities increased $634.6 million, or
15
<PAGE>
93.8%, from $676.2 million for the six months ended March 31, 1998 to $1.31
billion for the six months ended March 31, 1999, while the average yield for the
six months ended March 31, 1999 was 6.54% down from 7.00% for the quarter ended
March 31, 1998. Interest on investment securities was $16.2 million for the six
months ended March 31, 1998 compared to $765,000 for the six months ended March
31, 1999. Investment securities were allowed to mature and were replaced with
higher rate mortgage-backed securities and CMO's.
Interest Expense. Interest expense increased during the six month period ended
March 31, 1999 to $121.7 million from $114.2 million for the six months ending
March 31, 1998. Substantially all of the Bank's interest expense is from the
Bank's interest-bearing deposits. Interest expense on deposits decreased from
$101.2 million for the six months ended March 31, 1998 to $99.8 million for the
six months ended March 31, 1999, a $1.4 million decrease, or 1.4%. The average
cost of deposits decreased to 5.08% for the six months ended March 31, 1999 from
5.28% for the six months ended March 31, 1998, or 20 basis points. Interest
expense on borrowings increased to $21.9 million from $13.0 million, an $8.9
million increase, or 68.5%. The average balance of borrowings increased from
$450.0 million for the six months ended March 31, 1998 to $774.0 million for the
six months ended March 31, 1999. The average cost of borrowings dropped from
5.75% for the six months ended March 31, 1998 to 5.64% for the six months ended
March 31, 1999. Additional borrowings during the year between March 31, 1998 and
March 31, 1999 lowered the average cost of borrowings while at the same time
increasing the amount of borrowed money.
Provision for Loan Losses. The provision for loan losses of $135,000 resulted
from the assessment of the estimated losses inherent in the loan portfolio
resulting from the formula allowance, specific allowances for identified problem
loans and portfolio segments. There were no charges to the provision for loan
losses for the six months ended March 31, 1998.
Noninterest Income. Total noninterest income for the six month period ended
March 31, 1999 was $6.4 million, up slightly from the $6.3 million for the six
month period ended March 31, 1998. There were no significant changes in
noninterest income between the periods.
Noninterest Expense. Total noninterest expense increased $34.8 million to $58.3
million for the six months ended March 31, 1999, up from $23.4 million for the
six months ended March 31, 1998. The increase in noninterest expense was
primarily due to Conversion related activities including the contribution to the
Capitol Federal Foundation of cash and stock totalling $30.2 million, the
termination of the existing pension plan of $1.6 million and the establishment
of the ESOP and accrued ESOP benefits of $1.0 million. Exclusive of the
Reorganization related expenses, noninterest expense was up $2.1 million to
$25.5 million for the six months ended March 31, 1999 compared to $23.4 million
for the six months ended March 31, 1998, or 9.0%. The increase is due to a $1.1
million increase in compensation related expenses and $593,000 increase in
occupancy expense. The increase in compensation related expenses is due
primarily to the opening of two limited service branches, one full service
branch, and an increase in support staff. The increase in occupancy related
expenses is primarily related to the cost of operating three new locations.
Income Tax Expense. Income tax expense decreased from $19.5 million for the six
month period ended March 31, 1998 to $5.3 million for the six months ended March
31, 1999. The reduction is primarily the result of less income before income tax
expense and the tax benefit associated with the contribution to the Foundation.
Impact of the Year 2000 Issues
General. The Year 2000 issue confronting Capitol Federal Savings and its
suppliers, customers, customers suppliers and competitors, centers on the
inability of computer systems to recognize the year 2000 ("Y2K").
16
<PAGE>
Many existing computer programs and systems originally were programmed with six
digit dates that provided only two digits to identify the calendar year in the
date field. With the impending new millennium, these programs and computers will
recognize "00" as the year 1900 rather than the year 2000.
Financial institution regulators recently have increased their focus upon Y2K
compliance issues and have issued guidance concerning the responsibilities of
senior management and directors. The Federal Financial Institution Examination
Council has issued several interagency statements on Y2K Project Management
Awareness. These statements require financial institutions to, among other
things, examine the Y2K implications of their reliance on vendors with respect
to data exchange and the potential impact of the Y2K issue on their customers,
suppliers and borrowers. These statements also require each federally regulated
financial institution to survey its exposure, measure its risk and prepare a
plan to address the Y2K issue. In addition, the federal banking regulators have
issued safety and soundness guidelines to be followed by insured depository
institutions to assure resolution of any Y2K problems. The federal banking
agencies have assured that Y2K testing and certification is a key safety and
soundness issue in conjunction with regulatory exams and thus, that an
institution's failure to address appropriately the Y2K issue could result in
supervisory action, including the reduction of the institution's supervisory
ratings, the denial of applications for approval of mergers or acquisitions or
the imposition of civil money penalties.
Risk. Like most financial service providers, Capitol Federal Savings and its
operations may be significantly affected by the Y2K issue due to its dependence
on technology and date-sensitive data. Computer software, hardware and other
equipment, both within and outside Capitol Federal Savings' direct control and
third parties with whom Capitol Federal Savings electronically or operationally
interfaces are likely to be affected. If computer systems are not modified in
order to be able to identify the year 2000, many computer applications could
fail or create erroneous results. As a result, many calculations which rely on
date field information, such as interest, payment or due dates and other
operating functions, could generate results which are significantly misstated,
consequently Capitol Federal Savings could experience an inability to process
transactions, prepare statements or engage in similar normal business
activities. Likewise, under certain circumstances a failure to adequately
address the Y2K issue could adversely affect the viability of Capitol Federal
Savings' suppliers and creditors and the creditworthiness of its borrowers.
Thus, if not adequately addressed, the Y2K issue could result in a significant
adverse impact on Capitol Federal Savings' operations and, in turn, its
financial condition and results of operations.
State of Readiness. During April 1997, Capitol Federal Savings formulated
its plan to address the Y2K issue. Since that time, Capitol Federal Savings has
taken the following steps:
o Established senior management advisory and review responsibilities;
o Completed a company-wide inventory of application and system software;
o Built an internal tracking database for application and vendor software;
o Developed compliance plans and schedules for all lines of business;
o Remediated or replaced all mission critical applications;
o Began computer code testing;
o Initiated vendor compliance verification;
17
<PAGE>
o Began awareness and education activities for employees through existing
internal communication channels; and
o Developed a process to help educate customers on the Y2K issue as well as
respond to customer inquiries.
The following paragraphs summarize the phases of Capitol Federal Savings'
Y2K plan:
Awareness Phase. Capitol Federal Savings' senior management
formally established a Y2K plan, and a project team was assembled for
management of the Y2K project. The project team created a plan of
action that includes milestones, budget estimates, strategies, and
methodologies to track and report the status of the project. Members of
the project team also attended conferences and information sharing
sessions to gain more insight into the Y2K issue and potential
strategies for addressing it. This stage is substantially complete.
Assessment Phase. Capitol Federal Savings' strategies were
further developed with respect to how the objectives of the Y2K plan
would be achieved, and a Y2K business risk assessment was made to
quantify the extent of Capitol Federal Savings' Y2K exposure. A
corporate inventory, which is periodically updated as new technology is
acquired and as systems progress through subsequent phases, was
developed to identify and monitor Y2K readiness for information systems
(hardware, software, utilities, and vendors) as well as environmental
systems (security systems, facilities, etc.). Systems were prioritized
based on business impact and available alternatives. As part of this
process, 118 vendors and 2,458 programs were identified as mission
critical. Mission critical systems supplied by vendors were researched
to determine Y2K readiness. As of March 31, 1999, all mission critical
programs were identified as or determined to be Y2K-ready. As of March
31, 1999, all mission critical vendors had indicated they would be
Y2K-ready. If Y2K-ready versions were not available, Capitol Federal
Savings began identifying functional replacements which were upgradable
or are currently Y2K-ready, and a formal plan was developed to repair,
upgrade or replace all mission critical systems. This phase is
substantially complete.
Capitol Federal Savings' larger borrowers have been evaluated
for Y2K exposure using a questionnaire developed by Capitol Federal
Savings' Y2K Business Systems Team. As part of the current credit
approval process, all new and renewed loans are evaluated for Y2K risk.
Capitol Federal Savings' loan policy clearly states that all loans,
especially commercial real estate loans, require an analysis of the
impact of Y2K issues on the creditworthiness of the borrower prior to
approval. Commercial real estate loans represent only 0.35% of total
loans at March 31, 1999, and all are secured by real estate. No
commercial real estate borrower was identified as mission critical
during the assessment process due to the size, nature, and collateral
of commercial real estate loans at Capitol Federal Savings. While
Capitol Federal Savings will continue to monitor the progress being
made by its larger borrowers in addressing their own Y2K issues, to
date Capitol Federal Savings is generally satisfied with these
customers' responses to Capitol Federal Savings' inquiries.
Renovation Phase. Capitol Federal Savings' corporate inventory
revealed that Y2K upgrades were available for all vendor supplied
mission critical systems, and these Y2K-ready versions have been
delivered, installed and have entered the validation process. Capitol
Federal Savings has substantially renovated all mission critical
proprietary software.
18
<PAGE>
Validation Phase. The validation phase is designed to test the
ability of hardware and software to accurately process date sensitive
data. Capitol Federal Savings currently is in the process of validation
testing of each mission critical system. Capitol Federal Savings has
created a test environment comprised of an IBM Multiprise 2000
dedicated to Y2K testing which is virtually insulated from production
and development environments. Capitol Federal Savings anticipates that
the validation phase will follow the estimated industry norm in that it
will absorb at least 50% of the total Y2K resources (computer and
personnel) over the life cycle of the project. Capitol Federal Savings
has increased staff in anticipation of that work effort. As of March
31, 1999, the validation phase is complete for all mission critical
applications. During the validation testing process to date, no
significant Y2K problems have been identified relating to any modified
or upgraded mission critical systems.
Implementation Phase. Capitol Federal Savings' plan calls for
putting Y2K-ready code into production before having actually completed
Y2K validation testing. Y2K-ready modified or upgraded versions have
been installed and placed into production with respect to all
proprietary mission critical systems.
Bank Resources Invested. Capitol Federal Savings' Y2K project team has
completed the task of ensuring that all mission critical systems across Capitol
Federal Savings are identified, analyzed for Y2K compliance, corrected if
necessary, tested, and changes implemented. The Y2K project team members
represent all functional areas of Capitol Federal Savings, including branches,
data processing, loan administration, accounting, item processing and
operations, compliance, internal audit, human resources, and marketing. The team
is headed by an Executive Vice President who reports directly to the President.
Capitol Federal Savings' board of directors oversees the Y2K plan and provides
guidance and resources to and receives monthly updates from the Y2K project team
leader.
Capitol Federal Savings is expensing all costs associated with required
system changes as those costs are incurred, and such costs are being funded
through operating cash flows. The total cost of the Y2K conversion project for
Capitol Federal Savings is estimated to be $2.3 million. Expenses of
approximately $1.1 million were incurred and expensed through March 31, 1999.
Y2K expenses are not expected to exceed the budget, and Capitol Federal Savings
does not expect significant increases in future data processing costs relating
to Y2K compliance.
Contingency Plans. During the assessment phase, Capitol Federal Savings
began to develop back-up or contingency plans for each of its mission critical
systems. A few of Capitol Federal Savings' mission critical systems are
dependent upon third party vendors or service providers, therefore, contingency
plans include selecting a new vendor or service provider and converting to their
system. In the event a current vendor's system fails during the validation
phase, and it is determined that the vendor is unable or unwilling to correct
the failure, Capitol Federal Savings will convert to a new system from a
pre-selected list of prospective vendors. In each case, realistic trigger dates
have been established to allow for orderly and successful conversions. For some
systems, contingency plans consist of using or reverting to manual systems until
system problems can be corrected.
Capitol Federal Savings has identified a worst case scenario that envisions
the possibility of the lack of power and/or communication services for a period
of time in excess of one day. Contingency planning is an integral part of
Capitol Federal Savings' Y2K readiness plan. Key operating personnel are
actively analyzing services that will be supported during extended outages and
preparing written plans and procedures to train Bank personnel. The contingency
plans are tested when practical to validate the effectiveness of contingent
procedures.
19
<PAGE>
Virtually all of Capitol Federal Savings' mission critical systems are
written and maintained by Capitol Federal Savings' Information Systems
Department. During 1998, Capitol Federal Savings hired additional programmers to
assist in completing the project on time. Contingency plans have been adopted
which includes hiring more programmers or to contract with programmers to speed
the renovation process, if necessary. As of March 31, 1999, 100% of all mission
critical proprietary software has been renovated. Although there can be no
assurances, Capitol Federal Savings does not anticipate any material adverse
effect on its operations as a result of the impact of the Y2K issue.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
For a discussion of the Company's asset and liability management policies as
well as the potential impact of interest rate changes upon the market value of
the Company's portfolio, see "Management's Discussion and Analysis of Financial
Condition and Results of Operations, Asset and Liability Management and Market
Risk" in the Company's prospectus dated February 11, 1999.
20
<PAGE>
Part 2 -- OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable
Item 2. Use of Proceeds From Registered Securities
The Company's initial registration statement (No. 333-68363) on Form S-1 was
declared effective on February 11, 1999. The subscription offering commenced on
February 12, 1999 and terminated on March 17, 1999. Charles Webb & Co., a
division of Keefe, Bruyette & Woods, Inc., assisted the Company, on a best
efforts basis, in the offering. The sale in the offering of 37,807,183 of the
Company's common stock closed on March 31, 1999 for gross proceeds of
$378,071,830. Net of offering costs and expenses of approximately $7,654,385,
the offering generated net proceeds of $370.4 million. Of such proceeds, $30.2
million was loaned to the Company's ESOP for the purchase by the ESOP of
3,024,574 shares of Common Stock, $275.0 million was paid to the Bank in
exchange for all of the common stock of the Bank issued in its reorganization
from a federally-chartered mutual savings and loan to a federally-chartered
stock savings and loan. A total of $50.0 million was retained by the Company.
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
21
<PAGE>
Signatures
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CAPITOL FEDERAL FINANCIAL
Date: May 14, 1999 By: /s/ John C. Dicus
------------------------- -----------------------------------------
John C. Dicus, Chairman and
Chief Executive Officer
Date: May 14, 1999 By: /s/ Neil F.M. McKay
------------------------- -----------------------------------------
Neil F.M. McKay, Executive Vice President
and Chief Financial Officer
22
<PAGE>
Index to Exhibits
Sequentially
Numbered Page
Exhibit Where Attached
Number Exhibits are Located
27 Financial Data Schedule 24
23
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE QUARTERLY
REPORT ON FORM 10-Q FOR THE FISCAL QUARTER ENDED MARCH 31, 1999 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> MAR-31-1999
<CASH> (13,459)
<INT-BEARING-DEPOSITS> 29,529
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 100
<INVESTMENTS-MARKET> 100
<LOANS> 3,873,056
<ALLOWANCE> 4,175
<TOTAL-ASSETS> 5,730,891
<DEPOSITS> 3,950,384
<SHORT-TERM> 0
<LIABILITIES-OTHER> 81,221
<LONG-TERM> 675,000
0
0
<COMMON> 915
<OTHER-SE> 384,625
<TOTAL-LIABILITIES-AND-EQUITY> 5,730,891
<INTEREST-LOAN> 140,182
<INTEREST-INVEST> 45,264
<INTEREST-OTHER> 1,763
<INTEREST-TOTAL> 187,209
<INTEREST-DEPOSIT> 99,830
<INTEREST-EXPENSE> 121,758
<INTEREST-INCOME-NET> 65,451
<LOAN-LOSSES> 135
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 58,273
<INCOME-PRETAX> 13,440
<INCOME-PRE-EXTRAORDINARY> 13,440
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,151
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 4.00
<LOANS-NON> 6,510
<LOANS-PAST> 15,991
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4,081
<CHARGE-OFFS> 41
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 4,175
<ALLOWANCE-DOMESTIC> 4,175
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
