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 June 30, 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 August 13, 1999
<PAGE>
FORM 10-Q
Capitol Federal Financial
INDEX
<TABLE>
<CAPTION>
Page
PART I -- FINANCIAL INFORMATION Number
<S> <C>
Consolidated Balance Sheets at June 30, 1999 and September 30, 1998 3
Consolidated Statements of Income for the three and nine months ended 4
June 30, 1999 and June 30, 1998
Consolidated Statement of Stockholders' Equity for the nine months
ended June 30, 1999 5
Consolidated Statements of Cash Flows for the nine months ended
June 30, 1999 and June 30, 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
</TABLE>
2
<PAGE>
PART 1 -- FINANCIAL INFORMATION
CAPITOL FEDERAL FINANCIAL AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, September 30,
1999 1998
(unaudited)
-------------- --------------
(dollars in thousands)
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 34,524 $ 24,454
Securities purchased under agreement to resell 0 235,000
Investment securities held to maturity (market value of $14,799 15,100 160,569
and $160,712)
Capital stock of Federal Home Loan Bank 48,606 43,584
Mortgage-related securities:
Available-for-sale 1,273,172 747,991
Held-to-maturity (market value of $636,278 and $319,128) 650,017 320,379
Loans held for sale, net 2,393 14,578
Loans receivable, net 4,024,307 3,711,152
Premises and equipment 24,067 22,785
Real estate owned, net 1,040 1,964
Accrued interest receivable 30,363 27,998
Other assets 4,173 5,347
---------- ----------
TOTAL ASSETS $6,107,762 $5,315,801
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits $3,941,558 $3,894,180
Advances from Federal Home Loan Bank 900,000 500,000
Securities sold under agreement to repurchase 175,000 175,000
Advance payments by borrowers for taxes and insurance 22,092 37,426
Deferred income taxes 14,022 28,995
Accounts payable and accrued expenses 22,214 17,868
---------- ----------
Total liabilities 5,074,886 4,653,469
COMMITMENTS AND CONTINGENCIES (NOTE 11)
STOCKHOLDERS' EQUITY:
Preferred stock ($0.01 par value) 50,000,000 shares 0 0
authorized; none issued
Common stock ($0.01 par value) 450,000,000 authorized; 915 0
91,512,287 shares issued
Additional paid in capital 384,625 0
Retained earnings 670,590 649,199
Unrealized gains on securities available-for-sale 5,417 13,133
Unearned compensation, employee stock ownership plan (28,671) 0
Total stockholders' equity 1,032,876 662,332
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $6,107,762 $5,315,801
========== ==========
See accompanying notes to consolidated interim financial statements.
</TABLE>
3
<PAGE>
CAPITOL FEDERAL FINANCIAL AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
------------------------ --------------------------
1999 1998 1999 1998
------- ------- -------- --------
<S> <C> <C> <C> <C>
INTEREST AND DIVIDEND INCOME:
Loans receivable $70,840 $67,597 $211,022 $199,041
Mortgage-related securities 27,873 16,409 66,943 42,985
Investment securities 200 4,011 965 20,214
Securities purchased under agreement to resell - 2,642 3,894 4,362
Cash and cash equivalents 241 882 2,003 3,280
Capital stock of Federal Home Loan Bank 826 785 2,361 2,377
------- ------- -------- --------
Total interest and dividend income 99,980 92,326 287,188 272,259
INTEREST EXPENSE:
Deposits 48,669 50,821 148,499 152,019
Borrowings 13,388 8,458 35,315 21,478
------- ------- -------- --------
Total interest expense 62,057 59,279 183,814 173,497
------- ------- -------- --------
Net interest and dividend income 37,923 33,047 103,374 98,762
Provision for loan losses - - 135 -
------- ------- -------- --------
Net interest and dividend income after 37,923 33,047 103,239 98,762
provision for loan losses
OTHER INCOME:
Automated teller and debit card transaction fees 1,188 820 2,950 2,409
Checking account transaction fees 720 629 2,109 2,041
Loan fees 438 569 1,434 1,794
Insurance commissions 347 356 1,145 1,043
Other, net 833 777 2,284 2,212
------- ------- -------- --------
Total other income 3,526 3,151 9,922 9,499
OTHER EXPENSES:
Salaries and employee benefits 7,345 6,281 23,538 18,762
Occupancy of premises 1,866 1,690 6,298 5,529
Office supplies and related expenses 849 785 2,419 2,336
Deposit and loan transaction fees 1,014 802 2,942 2,460
Advertising 1,101 619 2,128 1,665
Federal insurance premium 582 602 1,751 1,812
Contribution to Foundation - - 30,231 -
Other, net 1,024 850 2,747 2,517
------- ------- -------- --------
Total other expenses 13,781 11,629 72,054 35,081
------- ------- -------- --------
Income before income tax expense 27,668 24,569 41,107 73,180
Income tax expense 10,395 9,836 15,684 29,314
------- ------- -------- --------
NET INCOME $17,273 $14,733 $ 25,423 $ 43,866
======= ======= ======== ========
</TABLE>
See accompanying notes to consolidated interim financial statements.
4
<PAGE>
CAPITOL FEDERAL FINANCIAL AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Additional Unrealized Unearned
Common Paid-In Retained gains on 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 nine months
ended June 30, 1999 - - 25,423 - - 25,423
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 - - - - 1,574 1,574
Dividends paid - - (3,932) - - (3,932)
Change in unrealized gain
on securities available for sale - - - (7,716) - (7,716)
---- -------- -------- ------- -------- ----------
TOTAL $915 $384,625 $670,590 $ 5,417 $(28,671) $1,032,876
==== ======== ======== ======= ======== ==========
</TABLE>
See accompanying notes to consolidated interim financial statements.
5
<PAGE>
CAPITOL FEDERAL FINANCIAL AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For Nine Months Ended June 30,
------------------------------
1999 1998
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 25,423 $43,866
Adjustments to reconcile net income to
net cash provided by operating activities:
Federal Home Loan Bank stock dividends (5,021) (2,378)
Amortization of net deferred loan origination fees (7,622) (3,402)
Provision for loan losses 135 -
Provision for losses on real estate owned - (11)
Net loan origination fees capitalized 8,440 3,738
Gain on sales of real estate owned, net (118) (136)
Originations of loans held for sale (854) (16,533)
Proceeds from sales of loans held for sale 12,976 18,782
Amortization and accretion of premiums and discounts on
mortgage related securities and investment securities 3,090 (990)
Depreciation and amortization on premises & equipment 2,479 2,141
Provision (benefit) for deferred income taxes (11,488) -
Termination of Pension Plan 1,600
Amortization of unearned compensation - ESOP 1,574
Changes in:
Accrued interest receivable (2,366) 1,705
Other assets (363) 1,613
Income taxes payable 4,779 2,586
Accounts payable and accrued expenses 2,418 (1,540)
----------- ---------
Net cash provided by operating activities 35,082 49,441
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of investment securities 160,470 550,058
Purchases of investment securities (15,000) (225,000)
Proceeds from maturities of securities under agreement to 1,618,410 -
resell
Purchases of securities under agreement to resell (1,383,410) (782,934)
Principal collected on mortgage-related securities available- 470,178 159,821
for-sale
Purchases of mortgage-related securities available-for-sale (1,010,909) (124,850)
Principal collected on mortgage-related securities held-to- 270,494 68,696
maturity
Purchases of mortgage-related securities held-to-maturity (600,824) (323,321)
Loan originations net of principal collected on loans (210,591) (191,065)
receivable
Purchases of loans receivable (105,527) (95,927)
Purchases of premises and equipment, net (3,762) (3,862)
Proceeds from sales of real estate owned 2,153 3,749
----------- ---------
Net cash used in investing activities (808,318) (964,635)
6
<PAGE>
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (3,932) -
Deposits, net of payments 47,278 106,633
Proceeds from advances from Federal Home Loan Bank 895,000 291,000
Repayments on advances from Federal Home Loan Bank (495,000) (66,000)
Repayments of securities sold under agreement to repurchase - 682,942
Proceeds from stock issuance, net 355,295 -
Advance payments by borrowers for taxes and insurance (15,335) (15,553)
--------- --------
Net cash provided by financing activities 783,306 999,022
NET INCREASE IN CASH AND CASH 10,070 83,828
EQUIVALENTS
CASH AND CASH EQUIVALENTS:
Beginning of period $24,454 $31,188
End of period $34,524 $115,016
========= ========
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
GAAP. However, all normal, recurring adjustments which, in the opinion of
management, are necessary for a fair presentation of these interim 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 Capitol Federal Financial and
subsidiary's (the "Company") Prospectus dated February 11, 1999. The results for
the three and nine months ended June 30, 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 pre-tax expenses of $30.2 million in conjunction with the
formation of the Capitol Federal Foundation (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, 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 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>
June 30, 1999 September 30, 1998
------------------------------ ----------------------------
Amount Percent Amount Percent
---------- -------- ---------- --------
<S> <C> <C> <C> <C>
Real Estate Loans:
- ------------------
One- to four-family $3,826,180 94.02% $3,504,799 93.47%
Multi-family 31,495 0.77 40,361 1.08
Commercial 12,121 0.30 9,069 0.24
Construction or development 48,506 1.19 52,086 1.39
---------- ------ ---------- -------
Total real estate loans 3,918,302 96.28 3,606,315 96.18
Other Loans:
- ------------
Consumer loans:
Savings loans 15,779 0.39 16,446 0.44
Student 19,055 0.47 20,120 0.54
Home improvement 2,105 0.05 2,776 0.07
Automobile 6,737 0.17 5,758 0.15
Home equity 107,413 2.64 97,829 2.61
Other 350 0.01 420 0.01
---------- ------ ----------
Total consumer loans 151,439 3.72 143,349 3.82
Commercial business loans 0 0.00 10 0.00
---------- ------ ----------
Total other loans 151,439 3.72 143,359 3.82
---------- ------ ----------
Total loans receivable 4,069,741 100.00% 3,749,674 100.00%
Less:
- -----
Loans in process 27,316 21,690
Deferred fees and discounts 13,953 12,751
Allowance for losses 4,165 4,081
---------- ----------
Total loans receivable, net $4,024,307 $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.
June 30, September 30,
1999 1998
------- ------------
Non-accruing loans:
One-to four-family $5,300 $6,048
Multi-family --- ---
Commercial real estate --- ---
Construction or development --- ---
Consumer 62 181
Commercial business --- ---
------- ------
Total $5,362 $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 $1,040 $1,964
Multi-family --- ---
Commercial real estate --- ---
Construction or development --- ---
Consumer --- ---
Commercial business --- ---
------- ------
Total $1,040 $1,964
======= ======
Total non-performing assets $6,402 $8,193
======= ======
Total as a percentage of total assets 0.10% 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.
<TABLE>
<CAPTION>
For the quarter ending For the nine months ending
June 30, June 30,
--------------------------- --------------------------
1999 1998 1999 1998
-------- -------- ------- --------
<S> <C> <C> <C> <C>
Balance at the beginning of period $4,175 $1,639 $4,081 $1,634
Charge offs:
One- to four-family --- --- 33 ---
Multi-family --- --- --- ---
Commercial real estate --- --- --- ---
Construction or development --- --- --- ---
Consumer 10 --- 20 ---
Commercial business --- --- --- ---
------ ------ ------ ------
Total charge-offs 10 --- 53 ---
====== ====== ====== ======
Recoveries:
One- to four-family --- --- --- ---
Multi-family --- --- --- ---
Commercial real estate --- --- --- ---
Construction or development --- --- --- ---
Consumer --- --- --- ---
Commercial business --- --- --- ---
------ ------ ------ ------
Total charge offs --- --- --- ---
====== ====== ====== ======
Net charge-offs 10 --- 53 ---
Additions charged to operations --- --- 135 ---
Balance at end of period $4,165 $1,639 $4,163 $1,639
====== ====== ====== ======
</TABLE>
6. Savings Portfolio
The table below presents the Company's savings portfolio at the dates indicated.
<TABLE>
<CAPTION>
June 30, 1999 September 30, 1998
------------------------------- --------------------------------
Amount Percent of Total Amount Percent of Total
---------- ----------------- ---------- ----------------
<S> <C> <C> <C> <C>
Demand deposits $286,526 7.27% $ 260,440 6.69%
Passbook and passcard 130,640 3.31 129,180 3.32
Money market select 313,705 7.96 213,181 5.47
Cash fund 212,271 5.39 225,356 5.79
Certificates 2,998,416 76.07 3,066,023 78.73
---------- ----------
Total deposits $3,941,558 100.00% $3,894,180 100.00%
========== ====== ========== ======
</TABLE>
11
<PAGE>
7. Earnings Per Share
Earnings per share for the quarter ended June 30, 1999 were $0.19 per share.
Earnings per share for quarters prior to March 31, 1999 are not meaningful, as
the Bank's Reorganization was not completed until March 31, 1999.
8. Stock Holders' Equity
At June 30, 1999, the Bank exceeded all minimum regulatory requirements for a
well capitalized institution, with tangible capital at 15.35% and risk-based
capital of 35.12%. The Company declared a $0.10 per share dividend on July 20,
1999 to holders of record on August 6, 1999 payable on August 20, 1999.
9. Recent Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board (the "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 consolidated financial statements for the fiscal year ending September
30, 1999. The Company is prepared to comply with the additional disclosure
requirements of this Statement.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments 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 consolidated financial statements for the fiscal
year ending September 30, 2001. The adoption of this Statement is not expected
to have a material impact on the Company's consolidated financial position or
results of operations.
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 was first
effective for the Company's consolidated interim financial statements as of
March 31, 1999. The implementation of this Statement had no material impact on
these consolidated interim financial statements, and it is not expected that
such statement will have a material impact on the consolidated year-end
financial position or results of operations.
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. This component of
other comprehensive income was ($5.3) million for the three months ended June
30, 1999 and ($7.7) million for the nine months ended June 30, 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's operations.
12
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Except for the historical information contained in this 10-Q, the matters
discussed may be deemed to be forward-looking statements, within the meaning of
the Private Securities Litigation Reform Act of 1995, that involve risks and
uncertainties, including changes in economic conditions in the Company's market
area, changes in policies by regulatory agencies, fluctuations in interest
rates, demand for loans in the Company's market area, competition, and other
risks. Actual strategies and results in future periods may differ materially
from those currently expected. These forward-looking statements represent the
Company's judgment as of the date of this 10-Q. The Company disclaims, however,
any intent or obligation to update these forward-looking statements.
The following discussion is intended to assist in understanding the financial
condition and results of operations of Capitol Federal Financial. The discussion
includes comments relating to Capitol Federal Savings Bank since the Bank is
wholly owned by Capitol Federal Financial and comprises the majority of assets
and sources of income for the Company.
Financial Condition
Assets. For the nine month period ended June 30, 1999, total assets of the
Company increased $791.9 million, or 14.9%, from $5.32 billion at September 30,
1998 to $6.11 billion at June 30, 1999. The increase from September 30, 1998 was
primarily due to the growth in the Company's loan and mortgage-related
securities portfolios, partially offset by the reduction in the Company's
investment securities portfolio. This increase in total assets was distributed
as follows:
- - $313.2 million, or 8.4%, increase in net loans receivable which increased
from $3.71 billion at September 30, 1998 to $4.02 billion at June 30, 1999,
- - $854.8 million increase in mortgage-related securities, or 79.4%, which
increased from $1.07 billion at September 30, 1998 to $1.92 billion at June
30, 1999.
Total one- to four-family loan originations for the quarter ended June 30, 1999
were a record $307.5 million; and were $884.3 million year to date. Refinancing
of loans already serviced by the Bank were 17.7% of loan originations for the
quarter and 25.4% for the year to date. Fixed-rate loan originations accounted
for 75.1% of originations for the quarter and 80.5% for the year to date. Loans
purchased totaled $54.8 million for the quarter ending June 30, 1999 and $105.5
million for the year to date, all of which were adjustable rate. Total
originations of consumer loans for the quarter ended June 30, 1999 were $32.9
million, and $90.0 million for the year to date. The Company expanded its
capital utilization plan, or its leverage strategy, during the quarter ended
June 30, 1999 by purchasing $420.1 million of mortgage-related securities at a
spread of 102 basis points over the cost of funding. Mortgage-related securities
purchased during the quarter were all fixed rate, and 39.7% of mortgage-relat
securities purchased during the year to date were fixed rated. Subsequent to
June 30, 1999 the Company purchased $335.8 million of fixed rate
mortgage-related securities at a spread of 116 basis points over the cost of
funding by borrowing $325.0 million of fixed rate, callable advances.
Liabilities. Deposits increased $47.4 million, or 1.2%, from $3.89 billion at
September 30, 1998, to $3.94 billion at June 30, 1999. This increase was
attributable to $130.1 million of interest credits during the nine month period.
Certificate accounts decreased in balance over the period by $67.6 million.
Certificates maturing with rates generally above current offering rates
decreased $132.6 million while certificate balances at current offering rates
increased $65.0 million. Borrowings increased from September 30, 1998 by $400.0
million, or 80.0% and were all advanced during the quarter ended June 30, 1999,
funding the purchase of mortgage-related securities during the quarter.
Equity. Total stockholders' equity increased $370.5 million, or 55.9%, from
$662.3 million at September 30, 1998, to $1.03 billion at June 30, 1999. The
increase was attributable to the funds raised by the Company in its Offering in
connection with the Bank's Conversion, with the increase in retained earnings
partially offset by dividends paid and the decrease in the unrealized gain on
available for sale securities.
13
<PAGE>
Comparison of Operating Results for the
Three Months Ended June 30, 1999 and 1998
General. For the three months ended June 30, 1999, the Company recognized net
income of $17.3 million, compared to net income of $14.7 million for the three
months ended June 30, 1998. The Company's efficiency ratio for the three months
ended June 30, 1999 was 33.96% compared to 32.90% for the quarter ended June 30,
1998. There were no charges to the allowance for loan losses for the current
quarter or the same quarter one year ago.
Net Interest Income. Net interest income for the three months ended June 30,
1999 was $37.9 million, an increase of $4.9 million, or 14.8% from the same
period last year. The increase was primarily the result of an increase of $1.25
billion in the balance of loans receivable and mortgage-related securities from
$4.70 billion at June 30, 1998 to $5.95 billion at June 30, 1999 while total
interest bearing liabilities increased $447.8 million from $4.57 billion at June
30 , 1998 to $5.02 billion at June 30 1999. The net interest margin for the
quarter ended June 30, 1999 remained unchanged from 2.59% for the quarter ended
June 30, 1998. The net interest rate spread decreased from 1.92% for the quarter
ended June 30, 1998 to 1.69% for the quarter ended June 30, 1999. The additional
increase in earning assets over costing liabilities, which was primarily
responsible for maintaining the net interest margin and increasing net interest
income, is attributed to the proceeds received from the mutual-to-stock
conversion and the increase in retained earnings. The Company's net interest
rate spread at June 30, 1999 was 1.86% which is unchanged from June 30, 1998.
Interest Income. Interest income for the three months ended June 30, 1999 was
$100.0 million, up from $92.3 million for the same period in 1998. The largest
component of interest income is interest on loans. Interest on loans increased
from $67.6 million for the three months ended June 30, 1998 to $70.8 million for
the three months ended June 30, 1999. This increase of $3.2 million was the
result of an increase in the average balance of loans which was partially offset
by a decrease in the average yiel earned. The average balance of loans
receivable increased $367.9 million to $3.93 billion for the three months ended
June 30, 1999 compared to $3.56 billion for the same period one year ago, while
the average yield on loans decreased 39 basis points to 7.20% for the quarter
ended June 30, 1999 from 7.59% for the quarter ended June 30, 1998. Interest
income on mortgage-related securities increased $11.5 million from $16.4 million
for the quarter ended June 30, 1998 to $27.9 million for the quarter ended June
30, 1999. The average balance of mortgage-related securities increased $820.5
million from $1.02 billion at June 30, 1998 to $1.84 billion at June 30, 1999,
while the average yield decreased from 6.45% for the quarter ended June 30, 1998
to 6.07% for the quarter ended June 30, 1999. The increase in interest income on
loans and mortgage-related securities was partially offset by a reduction in
interest income on investment securities. Income on investment securities and
securities purchased under agreement to resell for the quarter ended June 30,
1999 was $200,000 compared to $6.7 million for the quarter ended June 30, 1998.
The balance of investment securities and securities purchased under agreement to
resell at June 30, 1999 was reduced to $15.1 million compared to $360.6 million
at June 30, 1998. Investment securities were allowed to mature and were replaced
with higher rate mortgage-related securities and collateralized mortgage
obligations (CMO's).
14
<PAGE>
Interest Expense. Interest expense increased during the quarter ended June 30,
1999 to $62.1 million from $59.3 million for the same period in 1998. For the
quarter ended June 30, 1999 interest expense on deposits was $48.7 million
compared to $50.8 million for the quarter ended June 30, 1998, a decrease of
$2.1 million. 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, shorter term
accounts. The average balance of deposits increased during the quarter ended
June 30, 1999 to $3.93 billion compared to $3.86 billion for the quarter ended
June 30, 1998, an increase of $56.2 million, or 1.5%. The average rate paid on
deposits for the quarter ended June 30, 1999 was 4.95% compared to 5.25% for the
quarter ended June 30, 1998, a decrease of 30 basis points. Interest expense on
borrowings for the quarter ended June 30, 1999 was $13.4 million compared to
$8.5 million for the quarter ended June 30, 1998, an increase of $4.9 million,
or 57.6%. The average balance of borrowings for the quarter ended June 30, 1999
was $911.8 million compared to $600.0 million for the quarter ended June 30,
1998, an increase of 311.8 million, or 52.0%. The increase is due to additional
long-term fixed rate, callable advances and short-term advances from the Federal
Home Loan Bank which were taken out during the quarter to fund the origination
and purchase of loans and mortgage related securities. The average cost of the
borrowings for the quarter ended June 30, 1999 was 5.87% compared to 5.64% for
the quarter ended June 30, 1998.
Provision for Loan Losses. For quarters ended June 30, 1999 and June 30, 1998
there were no charges to the provision for loan losses. 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 indicated that for the current quarter no additions were required.
Noninterest Income. Total noninterest income for the quarter ended June 30, 1999
was $3.5 million, up from $3.2 million for the quarter ended June 30, 1998.
There were no significant changes in noninterest income for any category for the
quarter ended June 30, 1998 compared to the quarter ended June 30, 1999.
Noninterest Expense. Total noninterest expense increased $2.2 million to $13.8
million for the quarter ended June 30, 1999 compared to $11.6 million for the
same period in 1998. The increase in noninterest expense was primarily due to
increases in personnel and advertising expense. Personnel increases were a
result of costs associated with the ESOP, three new branch locations, and
increased loan production and back office support staff.
Income Tax Expense. Income tax expense increased from $9.8 million for the
quarter ended June 30, 1998 to $10.4 million for the quarter ended June 30,
1999. The increase was due primarily to an increase in pre-tax earnings. The
increase was partially offset by a reduction in the State of Kansas tax by 2%
which lowered the effective tax rate from 40% to 38%.
Comparison of Operating Results for the
Nine Months Ended June 30, 1999 and 1998
General. For the nine months ended June 30, 1999, the Company recognized net
income of $25.4 million compared to net income of $43.9 million for the nine
months ended June 30, 1998. The primary reason for the reduction was noninterest
expense increasing $37.0 million for the nine months ended June 30, 1999
compared to the same period last year as a result of conversion related charges.
This increase in noninterest expense was partially offset by a reduction in
income tax expense of $13.6 million. The efficiency ratio, exclusive of the
conversion related expenses, for the nine months ended June 30, 1999 was 35.35%
compared to 33.16% for the nine months ended June 30, 1998.
15
<PAGE>
Net Interest Income. Net interest income for the nine months ended June 30, 1999
was $103.4 million compared to $98.8 million for the nine months ended June 30,
1998, an increase of $4.6 million, or 4.6%. The net interest margin spread
decreased 17 basis points from 2.65% at June 30, 1998 to 2.48% at June 30, 1999.
Interest Income. Interest income for the nine months ended June 30, 1999 was
$287.2 million, up from $272.3 million for the nine months ended June 30, 1998.
The largest component of interest income is interest on loans receivable.
Interest on loans increased from $199.0 million for the nine months ended June
30, 1998 to $211.0 million for the nine months ended June 30, 1999. This
increase of $12.0 million was 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 $365.3 million to $3.83
billion for the nine months ended June 30, 1999 from $3.46 billion for the nine
months ended June 30, 1998. The average yield on loans decreased 31 basis points
from 7.66% for the nine months ended June 30, 1998 to 7.35% for the nine months
ended June 30, 1999. Interest on mortgage-related securities increased by $24.0
million, or 55.8%, from $43.0 million for the nine months ended June 30, 1998 to
$67.0 million for the nine months ended June 30, 1999, primarily as a result of
an increase in the average balance of mortgage-related securities. The average
balance of mortgage-related securities increased $625.6 million, or 72.7%, from
$861.0 million for the nine months ended June 30, 1998 to $1.49 billion for the
nine months ended June 30, 1999, while the average yield for the nine months
ended June 30, 1999 was 6.00%, down from 6.66% for the nine-months ended June
30, 1998. Interest on investment securities was $20.2 million for the nine
months ended June 30, 1998 compared to $965,000 for the nine months ended June
30, 1999. Investment securities were allowed to mature and were replaced with
higher rate mortgage-related securities.
Interest Expense. Interest expense increased during the nine month period ended
June 30, 1999 to $183.8 million from $173.5 million for the nine months ending
June 30, 1998. Interest expense on deposits decreased from $152.0 million for
the nine months ended June 30, 1998 to $148.5 million for the nine months ended
June 30, 1999, a $3.5 million decrease, or 2.3%. The average cost of deposits
decreased to 5.04% for the nine months ended June 30, 1999 from 5.26% for the
nine months ended June 30, 1998, or 22 basis points, which was partially offset
by an increase in the average balance of deposits of $69.3 million, from $3.86
billion for the nine months ended June 30, 1998 to $3.93 billion for the nine
months ended June 30, 1999. Interest expense on borrowings increased to $35.3
million from $21.5 million, a $13.8 million increase, or 64.2%. The average
balance of borrowings increased from $500.0 million for the nine months ended
June 30, 1998 to $819.9 million for the nine months ended June 30, 1999. The
average cost of borrowings increased from 5.73% for the nine months ended June
30, 1998 to 5.74% for the nine months ended June 30, 1999.
Provision for Loan Losses. The provision for loan losses for the nine months
ended June 30, 1999 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 nine months ended June
30, 1998.
16
<PAGE>
Noninterest Income. Total noninterest income for the nine month period ended
June 30, 1999 was $9.9 million, up slightly from the $9.5 million for the nine
month period ended June 30, 1998, resulting from increased fees charged for ATM
usage.
Noninterest Expense. Total noninterest expense increased $37.0 million to $72.1
million for the nine months ended June 30, 1999, up from $35.1 million for the
nine months ended June 30, 1998. The increase in noninterest expense was
primarily due to conversion related expenses. However, exclusive of the
conversion related expenses, noninterest expense was up $4.1 million to $39.2
million for the nine months ended June 30, 1999 compared to $35.1 million for
the nine months ended June 30, 1998, or 11.7%. The increase was due to a $2.1
million increase in compensation related expenses and a $769,000 increase in
occupancy expense. Compensation related expenses increased primarily from ESOP
charges, operating three new branch locations, and additional loan and support
staff. The increase in occupancy related expenses is primarily related to the
cost of leasing three new locations, and upgrades to computer systems.
Income Tax Expense. Income tax expense decreased from $29.3 million for the nine
month period ended June 30, 1998 to $15.7 million for the nine months ended June
30, 1999. The reduction is primarily the result of 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"). 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 have remained focused 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 issu 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.
17
<PAGE>
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 yea 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:
- Established senior management advisory and review
responsibilities;
- Completed a company-wide inventory of application and system
software;
- Built an internal tracking database for application and vendor
software;
- Developed compliance plans and schedules for all lines of
business;
- Remediated or replaced all mission critical applications;
- Tested remediated computer code;
- Surveyed for vendor compliance verification, testing when
appropriate;
- Provided awareness and education activities for employees through
existing internal communication channels; and
- 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 addressin it. This stage is complete.
18
<PAGE>
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. By June 30, 1999,
all mission critical programs were identified as or determined to be
Y2K-ready. By June 30, 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 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 0.30% of
total loans at June 30, 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 renovated all mission critical proprietary
software. This phase is complete.
Validation Phase. The validation phase is designed to test the
ability of hardware and software to accurately process date sensitive
data. Capitol Federal Savings has completed the process of validation
testing of each mission critical system. Capitol Federal Savings
created a test environment comprised of an IBM Multiprise 2000
dedicated to Y2K testing which is virtually insulated from production
and development environments. The validation phase is complete for all
mission critical applications. During the validation testing process
to date, no significant Y2K problems were identified relating to any
modified or upgraded mission critical systems. This phase is complete.
19
<PAGE>
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. This phase is complete.
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 $1.2 million were incurred and expensed through June 30, 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 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 were actively used
in analyzing services that will be supported during extended outages and
preparing written plans and procedures to train Bank personnel. The contingency
plans have been tested when practical to validate the effectiveness of
contingent procedures.
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. Change in Securities and Use of Proceeds
Not Applicable
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: August 13, 1999 By: /s/ John C. Dicus
-----------------------------------------
John C. Dicus, Chairman and
Chief Executive Officer
Date: August 13, 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> 9-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> JUN-30-1999
<CASH> 1,697
<INT-BEARING-DEPOSITS> 32,827
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 15,100
<INVESTMENTS-MARKET> 14,779
<LOANS> 4,026,700
<ALLOWANCE> 4,163
<TOTAL-ASSETS> 6,107,762
<DEPOSITS> 3,941,558
<SHORT-TERM> 0
<LIABILITIES-OTHER> 58,329
<LONG-TERM> 1,075,000
0
0
<COMMON> 915
<OTHER-SE> 384,625
<TOTAL-LIABILITIES-AND-EQUITY> 6,107,762
<INTEREST-LOAN> 211,022
<INTEREST-INVEST> 74,163
<INTEREST-OTHER> 2,003
<INTEREST-TOTAL> 287,188
<INTEREST-DEPOSIT> 148,499
<INTEREST-EXPENSE> 183,814
<INTEREST-INCOME-NET> 103,374
<LOAN-LOSSES> 135
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 72,054
<INCOME-PRETAX> 41,107
<INCOME-PRE-EXTRAORDINARY> 41,107
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,423
<EPS-BASIC> 0.19
<EPS-DILUTED> 0.19
<YIELD-ACTUAL> 3.87
<LOANS-NON> 5,362
<LOANS-PAST> 12,710
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4,175
<CHARGE-OFFS> 10
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 4,163
<ALLOWANCE-DOMESTIC> 4,163
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 52
</TABLE>
