Capitol Federal® Financial, Inc. Announces The Acquisition Of Capital City Bancshares And Reports Second Quarter Fiscal Year 2018 Results

TOPEKA, Kan., April 30, 2018 /PRNewswire/ -- Capitol Federal^® Financial, Inc. (NASDAQ: CFFN) ("Capitol Federal" or the "Company") announced today the acquisition of Capital City Bancshares, Inc. ("CCB") and results for the quarter ended March 31, 2018.  Detailed results will be available in the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2018, which will be filed with the Securities and Exchange Commission ("SEC") on or about May 10, 2018 and posted on our website, http://ir.capfed.com.  For best viewing results, please view this release in Portable Document Format (PDF) on our website.

Highlights for the quarter include:

• net income of $23.3 million;
• basic and diluted earnings per share of $0.17;
• net interest margin of 1.86% (2.24% excluding the effects of the leverage strategy); and
• dividends paid of $11.4 million, or $0.085 per share.

Capitol Federal, the parent company of Capitol Federal^® Savings Bank ("Capitol Federal Savings" or the "Bank"), and CCB, the parent company of Capital City Bank, a state chartered bank headquartered in Topeka, KS, announced the signing of a definitive agreement and plan of merger pursuant to which CCB will merge with and into Capitol Federal.  Immediately upon closing the merger, Capital City Bank will merge with and into Capitol Federal Savings.  As of March 31, 2018 and excluding purchase accounting, the combined company would have had pro-forma total assets of $9.5 billion, gross loans of $7.5 billion, deposits of $5.7 billion and an equity position of approximately $1.4 billion.

With the acquisition of Capital City Bank, Capitol Federal Savings will enter the commercial banking business, through the origination of commercial lending products and offering of commercial deposit services, for the first time in its 125 year history.  While Capitol Federal Savings has built a small, but meaningful, portfolio of mostly commercial real estate loan participations through its network of correspondent banks over the course of the last five years (which portfolio totaled approximately $462 million in gross loans as of March 31, 2018), this merger with Capital City will enable the Company to offer a full array of commercial lending and deposit products and services.  With the talented and experienced commercial banking teams from Capital City Bank joining Capitol Federal Savings, the Company will be able to introduce these lines of banking into its branches in overlapping communities upon closing of the merger, while working to expand to the other communities served by Capitol Federal.

• Strategically and financially attractive acquisition of a $400 million commercial bank
• Enhances deposit franchise and provides entry into commercial banking business lines
• Delivers scalable banking platform, while remaining under $10 billion in assets

John B. Dicus, Chairman and President of Capitol Federal, stated: "We are pleased to be merging with Capital City Bank to introduce a full commercial banking experience to our customer base and communities.  Capital City Bank has a long history of building a conservative, customer focused community bank, with an overlapping geographic focus in markets highly familiar to us - Topeka, Lawrence and the Overland Park market of Kansas City.  Through the leadership of the Sabatini family, Capital City Bank has built a well-regarded company over the course of many decades, driven by the people and platforms we need to enter the commercial banking business in the right way and in a meaningful way.  Through the many years of knowing the team at Capital City Bank, it is obvious to us that we hold a shared cultural approach to banking, focused on risk management and customer service.  In addition, we are able to complete this merger and remain under $10 billion in assets, allowing us to continue our current dividend policy of paying 100% of earnings, while providing a positive upside."

Comparison of Operating Results for the Three Months Ended March 31, 2018 and December 31, 2017

For the quarter ended March 31, 2018, the Company recognized net income of $23.3 million, or $0.17 per share, compared to net income of $31.8 million, or $0.24 per share, for the quarter ended December 31, 2017.   The decrease in net income was due primarily to higher income tax expense in the current quarter compared to the prior quarter.  The effective income tax rate in the current quarter was 26.5% compared to 2.6% in the prior quarter.  In the prior quarter, the Tax Cuts and Jobs Act (the "Tax Act") was enacted which reduced the federal corporate income tax rate from 35% to 21% effective January 1, 2018.  In accordance with accounting principles generally accepted in the United States of America ("GAAP"), the Company revalued its deferred tax assets and liabilities as of December 22, 2017 to account for the lower corporate income tax rate.  The revaluation of the Company's deferred income tax assets and liabilities reduced income tax expense by $7.5 million in the prior quarter.  The impact of the enactment of the Tax Act was an increase in basic and diluted earnings per share of $0.08 in the prior quarter.  Management estimates the effective tax rate for the third and fourth quarter of fiscal year 2018 to be approximately the same as the current quarter effective income tax rate of 26.5%, resulting in an effective income tax rate of 20% to 21% for fiscal year 2018.  Management estimates the effective income tax rate for fiscal year 2019 will be approximately 22%.

Net interest income increased $515 thousand, or 1.0%, from the prior quarter to $49.9 million for the current quarter.  The net interest margin increased three basis points from 1.83% for the prior quarter to 1.86% for the current quarter.  Excluding the effects of the leverage strategy, the net interest margin would have increased four basis points from 2.20% for the prior quarter to 2.24% for the current quarter.  The increase in net interest margin was due mainly to a decrease in the cost of borrowings not related to the leverage strategy, along with a reduction in interest expense resulting from fewer days in the current quarter.

Interest and Dividend Income
The weighted average yield on total interest-earning assets for the current quarter increased eight basis points from the prior quarter, to 3.06%, while the average balance of interest-earning assets decreased $71.5 million between the two periods.  Absent the impact of the leverage strategy, the weighted average yield on total interest-earning assets would have increased four basis points from the prior quarter, to 3.35%, while the average balance of interest-earning assets would have decreased $69.5 million.  The following table presents the components of interest and dividend income for the time periods presented, along with the change measured in dollars and percent.

The table above includes interest income on cash and cash equivalents associated and not associated with the leverage strategy.  Interest income on cash and cash equivalents not related to the leverage strategy decreased $165 thousand from the prior quarter due to a $79.9 million decrease in the average balance primarily resulting from cash being used to pay off certain maturing term borrowings during the prior quarter, partially offset by a 25 basis point increase in the weighted average yield.  Interest income on cash associated with the leverage strategy increased $945 thousand from the prior quarter due to a 23 basis point increase in the weighted average yield.  In both cases, the increase in the weighted average yield was related to balances held at the Federal Reserve Bank of Kansas City (the "FRB of Kansas City").

Interest Expense
The weighted average rate paid on total interest-bearing liabilities for the current quarter increased six basis points from the prior quarter, to 1.35%, while the average balance of interest-bearing liabilities decreased $33.3 million between the two periods.  Absent the impact of the leverage strategy, the weighted average rate paid on total interest-bearing liabilities for the current quarter would have increased one basis point from the prior quarter, to 1.30%, while the average balance of interest-bearing liabilities would have decreased $31.3 million.  The following table presents the components of interest expense for the time periods presented, along with the change measured in dollars and percent. 

The table above includes interest expense on FHLB borrowings associated and not associated with the leverage strategy.  Interest expense on FHLB borrowings not related to the leverage strategy decreased $218 thousand from the prior quarter due to a three basis point decrease in the weighted average rate paid, to 2.05% for the current quarter.  Interest expense on FHLB borrowings associated with the leverage strategy increased $1.1 million from the prior quarter due to a 24 basis point increase in the weighted average rate paid as a result of an increase in interest rates between periods.

The increase in interest expense on deposits was due primarily to a five basis point increase in the weighted average rate paid, to 0.96% for the current quarter.  The increase in the weighted average rate paid was primarily due to increases in the money market deposit portfolio rate and retail certificate of deposit portfolio rate, which increased 12 basis points and five basis points, respectively.

The decrease in interest expense on repurchase agreements was due to the maturity of a $100.0 million repurchase agreement during the prior quarter.

Provision for Credit Losses
The Bank did not record a provision for credit losses during the current quarter or the prior quarter.  Based on management's assessment of the allowance for credit losses ("ACL") formula analysis model and several other factors, it was determined that no provision for credit losses was necessary.  Net loan recoveries were $20 thousand during the current quarter compared to net charge-offs of $28 thousand in the prior quarter.  At March 31, 2018, loans 30 to 89 days delinquent were 0.19% of total loans and loans 90 or more days delinquent or in foreclosure were 0.16% of total loans.  At December 31, 2017, loans 30 to 89 days delinquent were 0.25% of total loans and loans 90 or more days delinquent or in foreclosure were 0.15% of total loans.

Non-Interest Income
The following table presents the components of non-interest income for the time periods presented, along with the change measured in dollars and percent.

The decrease in retail fees and charges was due mainly to a decrease in debit card income resulting from a reduction in transaction volume due to the seasonality of such activity.  The decrease in income from BOLI was due mainly to a one-time adjustment to the benchmark interest rate associated with one of the policies.  The increase in other non-interest income was due primarily to an increase in insurance commissions resulting from the receipt of annual commissions from certain insurance providers during the current quarter and no such commissions received during the prior quarter, along with a gain on the sale of loans during the current quarter compared to a loss on the sale of loans during the prior quarter as management continues to test loan sale processes for liquidity purposes.

Non-Interest Expense
The following table presents the components of non-interest expense for the time periods presented, along with the change measured in dollars and percent.

The increase in salaries and employee benefits expense was due primarily to the timing of expenses related to paid time-off usage and accruals, as well as to a new 2018 Tax Savings Bonus Plan.  The 2018 Tax Savings Bonus plan is a one-time bonus award to qualifying non-officer employees.  The anticipated expense associated with this plan will be recognized in fiscal year 2018 and is approximately $1.0 million, of which $333 thousand was recognized during the current quarter.  It is expected that the Bank will recognize approximately $333 thousand of expense per quarter in the third and fourth quarters of fiscal year 2018 related to this plan.  The increase in advertising and promotional expense was due primarily to the timing of media campaigns and sponsorships.

The Company's efficiency ratio was 42.66% for the current quarter compared to 40.26% for the prior quarter.  The change in the efficiency ratio was due primarily to higher non-interest expense in the current quarter compared to the prior quarter.  The efficiency ratio is a measure of a financial institution's total non-interest expense as a percentage of the sum of net interest income (pre-provision for credit losses) and non-interest income.  A lower value indicates that the financial institution is generating revenue with a proportionally lower level of expense.

Income Tax Expense
Income tax expense was $8.4 million for the current quarter, compared to $860 thousand for the prior quarter.  The effective tax rate was 26.5% for the current quarter compared to 2.6% for the prior quarter.  The lower effective income tax rate and income tax expense in the prior quarter were due primarily to revaluing the Company's deferred tax assets and liabilities as a result of the enactment of the Tax Act in December 2017.  Management estimates the effective tax rate for the third and fourth quarter of fiscal year 2018 to be approximately the same as the current quarter effective income tax rate of 26.5%.

Comparison of Operating Results for the Six Months Ended March 31, 2018 and 2017

The Company recognized net income of $55.2 million, or $0.41 per share, for the six month period ended March 31, 2018 compared to net income of $42.2 million, or $0.31 per share, for the six month period ended March 31, 2017.  The increase in net income was due primarily to a decrease in income tax expense resulting from the Tax Act being signed into law in December 2017.

The net interest margin increased eight basis points, from 1.77% for the prior year six month period to 1.85% for the current year six month period.  Excluding the effects of the leverage strategy, the net interest margin would have increased 11 basis points, from 2.11% for the prior year six month period to 2.22% for the current year six month period.  The increase in the net interest margin was due mainly to an increase in interest-earning asset yields, as well as a shift in the mix of interest-earning assets from relatively lower yielding securities to higher yielding loans and a net decrease in the cost of liabilities not related to the leverage strategy.

Interest and Dividend Income
The weighted average yield on total interest-earning assets increased 22 basis points, from 2.80% for the prior year six month period to 3.02% for the current year six month period, while the average balance of interest-earning assets decreased $163.7 million from the prior year six month period.  Absent the impact of the leverage strategy, the weighted average yield on total interest-earning assets would have increased 10 basis points, from 3.23% for the prior year six month period to 3.33% for the current year six month period, while the average balance of interest-earning assets would have decreased $152.2 million.  The following table presents the components of interest and dividend income for the time periods presented along with the change measured in dollars and percent.

The increase in interest income on loans receivable was due mainly to a $118.3 million increase in the average balance of the portfolio, as well as a four basis point increase in the weighted average yield on the portfolio to 3.57% for the current year six month period.  The increase in the weighted average yield was due primarily to adjustable-rate loans repricing to higher market rates, along with the origination and purchase of new loans at higher market rates.

The table above includes interest income on cash and cash equivalents associated and not associated with the leverage strategy.  Interest income on cash and cash equivalents not related to the leverage strategy increased $794 thousand from the prior year six month period due to a 72 basis point increase in the weighted average yield.  Interest income on cash associated with the leverage strategy increased $7.1 million from the prior year six month period due to a 74 basis point increase in the weighted average yield.  In both cases, the increase in the weighted average yield was related to balances held at the FRB of Kansas City. 

The decrease in interest income on the MBS portfolio was due to a $227.4 million decrease in the average balance of the portfolio, partially offset by a 12 basis point increase in the weighted average yield on the portfolio to 2.28% for the current year six month period.  Cash flows not reinvested were used primarily to fund loan growth and pay off certain maturing term borrowings.  The increase in the weighted average yield was due primarily to adjustable-rate MBS repricing to higher market rates, as well as a decrease in the impact of net premium amortization.  Net premium amortization of $1.6 million during the current year six month period decreased the weighted average yield on the portfolio by 35 basis points.  During the prior year six month period, $2.3 million of net premiums were amortized which decreased the weighted average yield on the portfolio by 40 basis points.  As of March 31, 2018, the remaining net balance of premiums on our portfolio of MBS was $7.4 million.

Interest Expense
The weighted average rate paid on total interest-bearing liabilities increased 15 basis points, from 1.17% for the prior year six month period to 1.32% for the current year six month period, while the average balance of interest-bearing liabilities decreased $134.6 million from the prior year six month period.  Absent the impact of the leverage strategy, the weighted average rate paid on total interest-bearing liabilities would have decreased one basis point, from 1.30% for the prior year six month period to 1.29% for the current year six month period, and the average balance of interest-bearing liabilities would have decreased $123.0 million.  The following table presents the components of interest expense for the time periods presented, along with the change measured in dollars and percent.

The table above includes interest expense on FHLB borrowings associated and not associated with the leverage strategy.  Interest expense on FHLB borrowings not related to the leverage strategy decreased $3.9 million from the prior year six month period due to a 22 basis point decrease in the weighted average rate paid on the portfolio, to 2.06% for the current year six month period, and a $140.9 million decrease in the average balance of the portfolio.  The decrease in the weighted average rate paid was due to certain advances maturing between periods being replaced at lower effective interest rates.  The decrease in the average balance was a result of using cash flows from the securities portfolio and funds generated from deposit growth to pay off certain advances that matured between periods.  Interest expense on FHLB borrowings associated with the leverage strategy increased $7.7 million from the prior year six month period due to a 77 basis point increase in the weighted average rate paid as a result of an increase in interest rates between periods.

The increase in interest expense on deposits was due primarily to a 13 basis point increase in the weighted average rate, to 0.93% for the current year six month period.  The increase in the weighted average rate was primarily related to the certificate of deposit portfolio, which increased 19 basis points to 1.53% for the current year six month period.  The weighted average rate paid on wholesale certificates increased 64 basis points, to 1.38% for the current year six month period.

Non-Interest Income
The following table presents the components of non-interest income for the time periods presented, along with the change measured in dollars and percent.

The increase in retail fees and charges was due mainly to increases in debit card income due to higher transaction volume in the current year and a reduction in waived fees as customers and vendors have become more accustomed to the chip card technology.  The decrease in income from BOLI was due mainly to a one-time adjustment to the benchmark interest rate associated with one of the policies.

Non-Interest Expense
The following table presents the components of non-interest expense for the time periods presented, along with the change measured in dollars and percent.

The increase in salaries and employee benefits expense was due primarily to the 2018 Tax Savings Bonus Plan as previously discussed.  The increase in information technology and related expense and the decrease in regulatory and outside services were due mainly to a change in the presentation of certain information technology professional and consulting expenses beginning in fiscal year 2018.  Information technology professional and consulting expenses are now being reported in information technology and related expenses rather than regulatory and outside services.  Additionally, these expenses increased compared to the prior year due primarily to ongoing enhancements to the Bank's online banking services, along with increases in information technology expenses related to software licensing and depreciation.  The increase in other non-interest expense was due mainly to an increase in other real estate owned ("OREO") operations expense.

The Company's efficiency ratio was 41.47% for the current year six month period compared to 40.61% for the prior year six month period.  The change in the efficiency ratio was due primarily to higher non-interest expense in the current year six month period compared to the prior year six month period. 

Income Tax Expense
Income tax expense was $9.3 million for the current year six month period compared to $21.5 million for the prior year six month period.  The effective tax rate was 14.4% for the current year six month period compared to 33.8% for the prior year six month period. The decrease in effective tax rate was due mainly to the Tax Act being signed into law in December 2017.

Financial Condition as of March 31, 2018 

Total assets were $9.12 billion at March 31, 2018 compared to $9.19 billion at September 30, 2017.  The $76.5 million decrease was due primarily to a $211.1 million decrease in cash and cash equivalents, partially offset by an increase in FHLB stock.  At March 31, 2018, the Bank was not required by the FHLB to redeem the FHLB stock associated with the leverage strategy.  At September 30, 2017, this stock was redeemed.

The loans receivable portfolio, net, totaled $7.20 billion at March 31, 2018 and at September 30, 2017.  During the current year six month period, the Bank originated and refinanced $261.0 million of loans with a weighted average rate of 3.89% and purchased $210.9 million of one- to four-family loans from correspondent lenders with a weighted average rate of 3.60%.  The Bank also entered into participations of $107.6 million of commercial real estate loans with a weighted average rate of 4.15%, of which $97.8 million had not yet been funded as of March 31, 2018.  During the current year six month period, the Bank funded $52.0 million of new and existing commercial real estate loans.  There are no agricultural loans in the Bank's loan portfolio.

The Bank is continuing to manage the size of its loan portfolio as it manages its liquidity levels to a target level of 15%.  The size of the loan portfolio has been managed by controlling correspondent loan volume primarily through the rates offered to correspondent lenders.  Given the balance of total assets, it is unlikely that loan growth will substantially increase in the current environment.  Generally, over the past few years, cash flows from the securities portfolio have been used primarily to purchase loans and in part to pay down FHLB advances.  By moving cash from lower yielding assets to higher yielding assets and repaying higher cost liabilities, we have been able to maintain our net interest margin.  In addition to the repayment of securities, the Bank has emphasized growth in the deposit portfolio in part to pay down FHLB advances.  The ratio of securities and cash to total assets was 15.5% at March 31, 2018.  In the long run, management considers a 10% ratio of stockholders' equity to total assets at the Bank an appropriate level of capital.  At March 31, 2018, this ratio was 13.3%.

The Bank has continued to utilize a leverage strategy to increase earnings in fiscal year 2018.  The leverage strategy during the current quarter involved borrowing up to $2.10 billion either on the Bank's FHLB line of credit or by entering into short-term FHLB advances, depending on the rates offered by FHLB.  The borrowings were repaid prior to quarter end for regulatory purposes.  The proceeds from the borrowings, net of the required FHLB stock holdings, which yielded 6.7% during the current quarter and 6.6% during the current year six month period, were deposited at the FRB of Kansas City.  Net income attributable to the leverage strategy is largely derived from the dividends received on FHLB stock holdings, plus the net interest rate spread between the yield on the cash at the FRB of Kansas City and the rate paid on the related FHLB borrowings, less applicable federal insurance premiums and estimated taxes.  Net income attributable to the leverage strategy was $713 thousand during the current quarter, compared to $767 thousand during the prior quarter.  The decrease between quarters was due to a decrease in the net interest rate spread between the yield on the cash at the FRB of Kansas City and the rate paid on the related FHLB borrowings, partially offset by an increase in the yield on the related FHLB stock.  Net income attributable to the leverage strategy was $1.5 million for both the current year six month period and the prior year six month period.  Management continues to monitor the net interest rate spread and overall profitability of the strategy.  The net interest rate spread from the leverage strategy is currently negative and, based on current interest rates, it is anticipated that the net interest rate spread will continue to be negative for some time.  If the negative net interest rate spread worsens, management will likely suspend the strategy until it is in a position that generates income.

Total liabilities were $7.75 billion at March 31, 2018 compared to $7.82 billion at September 30, 2017.  The $72.9 million decrease was due mainly to a decrease in repurchase agreements, partially offset by an increase in deposits.  Repurchase agreements decreased due to the maturity of a $100.0 million repurchase agreement during the current year six month period.  Deposits increased $44.3 million, to $5.35 billion at March 31, 2018, due mainly to an increase in checking accounts.

Stockholders' equity was $1.36 billion at March 31, 2018 compared to $1.37 billion at September 30, 2017.  The $3.6 million decrease was due primarily to the payment of $61.8 million in cash dividends, partially offset by net income of $55.2 million.  The cash dividends paid during the current year six month period totaled $0.46 per share and consisted of a $0.29 per share cash true-up dividend related to fiscal year 2017 earnings per the Company's dividend policy, and two regular quarterly cash dividends totaling $0.17 per share.  On April 18, 2018, the Company announced a regular quarterly cash dividend of $0.085 per share, or approximately $11.4 million, payable on May 18, 2018 to stockholders of record as of the close of business on May 4, 2018.

At March 31, 2018, Capitol Federal Financial, Inc., at the holding company level, had $110.8 million on deposit at the Bank.  For fiscal year 2018, it is the intent of the Board of Directors and management to continue the payout of 100% of the Company's earnings to its stockholders.  Dividend payments depend upon a number of factors including the Company's financial condition and results of operations, regulatory capital requirements, regulatory limitations on the Bank's ability to make capital distributions to the Company, and the amount of cash at the holding company.

In October 2015, the Company announced a stock repurchase plan for up to $70.0 million of common stock.  The repurchase plan does not have an expiration date.  The Company has not repurchased any shares under the repurchase plan through the date of this release.

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

The following table presents a reconciliation of total to net shares outstanding as of March 31, 2018. 

Consistent with our goal to operate a sound and profitable financial organization, we actively seek to maintain a well-capitalized status for the Bank in accordance with regulatory standards.  As of March 31, 2018, the Bank and Company exceeded all regulatory capital requirements.  The following table presents the Bank's regulatory capital ratios at March 31, 2018.

A reconciliation of the Bank's equity under GAAP to regulatory capital amounts as of March 31, 2018 is as follows (dollars in thousands):

Capitol Federal Financial, Inc. is the holding company for the Bank.  The Bank has 47 branch locations in Kansas and Missouri, and is one of the largest residential lenders in the State of Kansas.  News and other information about the Company can be found at the Bank's website, http://www.capfed.com.

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

SUPPLEMENTAL FINANCIAL INFORMATION

The following is a reconciliation of the basic and diluted earnings per share calculations for the periods indicated.

Loan Portfolio

The following table presents information related to the composition of our loan portfolio in terms of dollar amounts, weighted average rates, and percentages as of the dates indicated.

Loan Activity:  The following table summarizes activity in the loan portfolio, along with weighted average rates where applicable, for the periods indicated, excluding changes in ACL, discounts/unearned loan fees, and premiums/deferred costs.  Loans that were paid-off as a result of refinances and loans that are sold are included in repayments.  Loan endorsements are not included in the activity in the following table because a new loan is not generated at the time of the endorsement.  The endorsed balance and rate are included in the ending loan portfolio balance and rate.  During the six months ended March 31, 2018, the Bank endorsed $12.8 million of one- to four-family loans, reducing the average rate on those loans by 33 basis points.  The amount of originations and refinances was lower in the current quarter than in prior quarters due to seasonality and a reduction in refinance opportunities.

The following table presents loan origination, refinance, and purchase activity for the periods indicated, excluding endorsement activity, along with associated weighted average rates and percent of total.  Loan originations, purchases, and refinances are reported together.  The fixed-rate one- to four-family loans less than or equal to 15 years have an original maturity at origination of less than or equal to 15 years, while fixed-rate one- to four-family loans greater than 15 years have an original maturity at origination of greater than 15 years.  The adjustable-rate one- to four-family loans less than or equal to 36 months have a term to first reset of less than or equal to 36 months at origination, and adjustable-rate one- to four-family loans greater than 36 months have a term to first reset of greater than 36 months at origination.