Investment Thesis: Recommendation: Illusory Dividend Yield, - - PowerPoint PPT Presentation

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Investment Thesis: Recommendation: Illusory Dividend Yield, - - PowerPoint PPT Presentation

Apr 25, 2023 163 likes •670 views

Investment Thesis: Recommendation: Illusory Dividend Yield, Substantial Dividend Market Capitalization 2.09B Buy Income Shares Outstanding 137.98M Current Price: Regression Beta 0.55 $15.30 (2/17/2017) Pristine Credit and Asset

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SLIDE 1
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SLIDE 2

Investment Thesis:

Recommendation: Buy Current Price: $15.30 (2/17/2017) Target Price: $18.85 (+23%)

  • Illusory Dividend Yield, Substantial Dividend

Income

  • Pristine Credit and Asset Quality
  • Improving ROAE and ROAA year-over-year
  • Efficiency Ratio
  • Loan Portfolio Poised to do Well in Rising-

Rate Environment

  • Asymmetric Risk Profile, Optionality

Market Capitalization 2.09B Shares Outstanding 137.98M Regression Beta 0.55 Below 52-Week High

  • 10.21%

50-Day Moving Average 16.01 200-Day Moving Average 14.71 Short Ratio 11.00 Forward P/E 23.5

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SLIDE 3

Industry Overview & Valuation Drivers

Undervalued Residential Lender well-positioned for rising rate environment, regulatory rollback

  • Industry Growth
  • Economic Growth
  • Interest Rate Behavior
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SLIDE 4

Industry Overview & Valuation Drivers

Undervalued Residential Lender well-positioned for rising rate environment, regulatory rollback

  • Industry Growth
  • Economic Growth
  • Interest Rate Behavior
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SLIDE 5

Industry Overview & Valuation Drivers

Undervalued Residential Lender well-positioned for rising rate environment, regulatory rollback

  • Industry Growth
  • Economic Growth
  • Interest Rate Behavior
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SLIDE 6

Industry Overview: Regulatory Environment

Undervalued Residential Lender well-positioned for rising rate environment, regulatory rollback

  • Regulatory Shake-Up
  • Durbin Amendment (Dodd-

Frank Law)

  • Financial CHOICE Act

Agency Position Status Treasury Department Treasury Secretary Presidential appointment (Steven Mnuchin) Federal Reserve Board (FRB) Chair Chair Yellen’s term expires in February 2018 Federal Deposit Insurance Corporation (FDIC) Chair Chairman Gruenberg’s term expires in November 2017 Office of the Comptroller of the Currency (OCC) Comptroller of the Currency Comptroller Curry’s term expires in March 2017 Consumer Financial Protection Bureau (CFPB) Director Director Cordray’s term expires in July 2018 Securities and Exchange Commission (SEC) Chair Chair White will resign in January 2017 Commodity Futures Trading Commission (CFTC) Chair Chairman Massad’s term expires in April 2017

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SLIDE 7

Company Overview

Undervalued Residential Lender well-positioned for rising rate environment, regulatory rollback

  • Regional residential

savings and loans bank

  • Thrift-conversion and

reorganization

  • Initial Public Offering

in 2010

Source of Revenues Source of Funds

Interest-Earning Assets: 3.27% Interest-Bearing Liabilities: 1.30%

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SLIDE 8

Risk Considerations

Identifiable Operating & Investment Risk Profile

Probability

High Moderate Low Discontinued Daily Leverage Interest Rate Risk Mgmt. Interest Rate Curve Flattens Interest Rates Normalize Competition from E-Lenders Financial CHOICE Act Management Retires Increasing Credit Risk Corporate Tax Rates Cut

  • Chg. In Agency

Leadership Technological

  • bsolescence

Slowing US Economy Acquisition of Another Bank Interest Rates Historic Lows Cyber Security Breach Home Sales Decline Additional Regulation Minor Moderate Major Impact to Profitability

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SLIDE 9

Financial Analysis

$10B Threshold Implications

  • Actual Asset Levels Vs. Average Levels
  • Sound Credit Quality of Assets
  • Judicious Interest Rate Risk Management

8.00 9.00 10.00 11.00 2012 2013 2014 2015 2016 Total Assets Regulatory Threshold Total Assets

Average Credit Score at Origination

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SLIDE 10

Financial Analysis

Net Interest Margin

  • Improving “Spread” Income
  • Cost of Funds
  • Daily Leverage Strategy
  • Balance Sheet Leverage Strategies

Optimal Efficiency Levels

  • Operating Expense Management
  • Homogenous Loan Structures
  • Minimal Net Charge-Offs
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SLIDE 11

Financial Analysis

Interpreting Capital Levels

  • Dividend Longevity
  • Increasing Acquisition Attractiveness
  • Book Value vs. Tangible Book Value
  • Tier 1 and Risk Based Capital

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% Tier 1 Leverage ratio CET1 Capital ratio Tier 1 Capital ratio Total Capital ratio Minimum Well Capitalized Capitol Federal

Amount Per Share Amount Per Share Amount Per Share Amount Per Share Amount Per Share Regular quarterly dividends paid Quarter ended March 31 12,145 0.075 11,023 0.075 10,513 0.075 11,592 0.085 11,305 0.085 Quarter ended June 30 11,883 0.075 10,796 0.075 10,399 0.075 11,585 0.085 11,314 0.085 Quarter ended September 30 11,402 0.075 70,703 0.075 10,318 0.075 11,385 0.085 11,323 0.085 Quarter ended December 31 11,223 0.075 10,754 0.075 10,226 0.075 11,303 0.085 11,363 0.085 True-up dividends paid 26,585 0.18 25,815 0.18 35,450 0.26 33,248 0.25 38,835 0.29 Earnings Dividend 0.48 0.48 0.56 0.59 0.63 True Blue dividends paid (Capital Distribution) 76,494 0.52 35,710 0.25 34,663 0.25 33,924 0.25 33,274 0.25 Calendar year-to-date dividends paid 149,732 1.00 164,801 0.73 111,569 0.81 113,037 0.84 117,414 0.88 Earnings Dividend, % of total dividend 48.00% 65.75% 69.14% 70.24% 71.59% 2012 2013 2014 2015 2016

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SLIDE 12

Valuation: Comparable Method

Comparable Method

  • Peer Group
  • Washington Fed
  • Third Federal
  • Northwest Savings
  • Columbia Banking

Updated 2/15/2017 5-yr Average Operating Name Ticker Share Price Market Cap (B) Price/Earnings Price/Book Price/TBV Dividend Yield Buyback Yield Payout Ratio 1)Washington Federal Inc. WAFD $34.10 3,045 18.33 1.53 1.79 1.95% 3.32% 26.10% 2)Third Federal Savings & Loan TFSL $17.46 4,949 60.21 2.95 3.32 1.70% 2.66% 102.54% 3)Northwest Savings Bank NWBI $17.59 1,789 42.90 1.55 2.15 3.93% 1.91% 91.74% 4)Columbia Banking System Inc COLB $40.84 2,371 23.25 1.86 2.71 1.89% 0.05% 33.63% Average $27.50 3,038 36.17 1.97 2.49 2.37% 1.98% 63.50% Capitol Federal Financial, Inc. CFFN $15.19 2,097 24.48 1.53 1.69 5.79% 4.71% 151.04% CFFN Implied Share Prices: $22.45 $19.58 $22.46 Average: $21.50 % difference: 47.8% 28.9% 47.9% Average: 41.5%

Selection Criteria:

  • Similar levels of Excess Capital
  • Active Dividend
  • Federal Home Loan Bank membership
  • Total Assets near $10 Billion
  • Saving & Loans, not Commercial Banks
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SLIDE 13

Valuation

Recommendation: Buy Current Price: $15.30 (2/17/2017) Target Price: $18.85 (+23%)

$0.00 $5.00 $10.00 $15.00 $20.00 $25.00 $30.00 $35.00 $40.00 $45.00 $50.00 7.00% 6.50% 6.00% 5.50% 5.00%

Cost of Equity

Gordon Growth Model

0 Div Growth 1% Div Growth 2% Div Growth 3% Div Growth

Cost Of Equity Low High Risk Free Rate 2.5% 2.5% Beta 0.49 0.82 Market Risk Premium 5.3% 5.3% 5.1% 6.9% Round 5.0% 7.0%

Dividend Discount Model

Current Price

  • 0-1% div growth

Our Price

  • 1%-2% div growth

Income Growth

  • 1.8% last 3 years
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SLIDE 14

Valuation

Recommendation: Buy Current Price: $15.30 (2/17/2017) Target Price: $18.85 (+23%)

Excess Return Model

Current Price

  • Avg. 8% ROE based on price

Our Price

  • Avg. 10% ROE base price
  • Avg. of US Banks ROE
  • 9.07% (per St. Louis Fed)

$5.00 $10.00 $15.00 $20.00 $25.00 6.00% 7.00% 8.00% 9.00% 10.00%

Return On Equity

Price per ROE

7% COE 6% COE 5% COE

Previous Return on Equity 2014 2015 2016

  • Avg. Inc.

ROE 4.9% 5.1% 5.7% 8.2% Estimated Return on Equity 2017 2018 2019 2020 2021 ROE 5.9% 8.9% 9.4% 10.3% 10.7%

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SLIDE 15

Valuation – Recent Events

  • 11/8/2016 – Presidential Election
  • 12/14/2016 – Fed Raises Rates 25bp
  • 12/28/2016 – Stock Hits All Time High ($16.92)
  • 1/27/2017 – Reported EPS of $0.15 vs. Consensus EPS Forecast of $.16; buying opportunity

Trump Elected President Fed Raises Rates High Missed EPS

$15.29

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SLIDE 16

Decreased Regulations / Lower Compliance Costs

  • “Compliance Costs estimated at 3%-6% of Total Non-Interest

Expense”

  • Paid $112M dividends in 2016, at most increases dividend from

$.84 to $.85 per share.

Valuation: Factors (Post Election)

Post election biggest factors

1. Decreased regulations 2. Potential corporate tax cut

3% 6% Estimated Compliance Costs $2,829,150 $5,658,300 25% Cut $2,121,862 $4,243,725 Savings Per Year $707,287 $1,414,575

Corporate Tax Cuts

  • Average Tax Rate = 32.2% last 3 years
  • Potential Tax Cuts from 35% to 25%, 20%, or 15%
  • Tax Cuts to 25% = $7.96m or 10% increase to 2016 Income
  • Tax Cuts to 15% = $20.154m or 24% increase to 2016 Income

Effects on DDM/Excess Return Valuation

*If maintain current 100% payout (Base Case – 6% COE) Corporate Tax Change 25% 20% 15% DDM +$1.98 +$3.36 +$4.74 Excess Return +$2.03 +$3.46 +$4.92

20000 40000 60000 80000 100000 120000 Current 25% Tax 15% Tax Net Income *in thousands

Tax Cut Affect on 2016 Income

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SLIDE 17

Valuation: Factors (Other)

Other Factors

  • 3. Acceleration of Fed rate rises
  • 4. Balance Sheet Shift
  • 5. Potential for Future Acquisitions
  • 30.0%
  • 20.0%
  • 10.0%

0.0% 10.0% 20.0% 30.0%

One to Four Family Commercial Loans Consumer Loans Investments FHLB Stock

Rate Use of Funds

Past Quarter Past Year

Potential Fed Rate Hikes

Fed has left the door open for 3 potential rate hikes in 2017.

0.00% 0.25% 0.50% 0.75% 1.00% 1.25% 1.50% 1.75% 2.00% Actual Q1 Q2 Q3 Q4

Balance Sheet Shift Potential For Future Acquisition

  • 1,000,000

2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 Deposits Borrowings + Repurchase Agreements

Source of Funds

2014 2015 2016

8.00 9.00 10.00 11.00 12.00 13.00 14.00 2012 2013 2014 2015 2016 2017 Total Assets(in billions) Regulatory Threshold Total Assets

  • Break Even = 13B - 14B in

assets Acquisition Characteristics

  • Similar Culture and Credit Risk

appetite

  • Commercial Deposit Focused
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SLIDE 18

Summary & Conclusion

Bear Case

  • No corporate tax cuts
  • Interest rates spike
  • Loan growth slows
  • Deposits slow as customers want higher yields
  • No change in regulations

Base Case

  • Corporate tax rate cut to 25%
  • Interest Rates follow predicted rise
  • Loan growth continues at current pace
  • Deposits increase at current pace
  • Slow decrease of regulations

Bull Case

  • Corporate tax cut to 15%
  • Interest rates slowly tick up
  • Higher yielding commercial loans rapidly grow
  • Rapid increase in deposits changes cost of funds
  • Elimination of 10B threshold

$15.29

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SLIDE 19

Appendix

  • Financial Statements
  • Loan Portfolio
  • Mortgage-Backed Securities
  • Dividends
  • Key Ratios
  • IBISWorld Reports (Industry)
  • IBISWorld Reports (Financials)
  • Capital Requirements
  • Comparable Criteria
  • Cost of Equity
  • Precedent Transaction
  • Mergers
  • Excess Return
  • Recommendation Slide
  • Industry Overview Slide
  • Company Overview Slide
  • Risk Matrix Slide
  • Financial Analysis Slide
  • Valuation: Comps
  • Valuation GGM DDM Slide
  • Valuation: Excess Return Slide
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SLIDE 20

Appendix: Financial Statements (1 of 3)

Back to Appendix

Statement of Cash Flow

2014 2015 2016 2017 (est) 2018 (est) 2019 (est) 2020 (est) 2021 (est) Cash Flow from Operating Activities: Net income 77,694 78,093 83,494 82,344 104,522 110,439 115,050 120,657

  • Adj. to reconcile N.I. to net cash provided by Operating Activities:

FHLB stock dividends (6,555) (12,556) (12,252) (11,633) (11,596) (11,573) (11,546) (11,496) Provision for credit losses 1,409 771 (750)

  • 890

921 948 972 Originations of loans receivable held-for-sale ("LHFS") (1,325)

  • Proceeds from sales of LHFS

1,998

  • Amortization and accretion of premiums and discounts on securities

6,053 5,649 5,342 5,342 5,342 5,342 5,342 5,342 Depreciation and amortization of premises and equipment 6,316 6,844 7,141 7,381 7,338 7,413 7,537 7,626 Amortization of deferred amounts related to FHLB advances, net 6,139 4,196 1,868 1,868 1,868 1,868 1,868 1,868 Common stock committed to be released for allocation - ESOP 2,014 2,036 2,174 1,995 1,952 1,910 1,869 1,829 Stock-based compensation 2,134 2,086 1,121 1,103 1,401 1,480 1,542 1,617 Provision for deferred income taxes 2,106 3,201 470 478 426 450 469 492 Changes in: Other assets, net 1,606 3,878 1,807 1,807 1,826 1,845 1,875 1,898 Income taxes payable/receivable 382 (1,374) 1,381

  • Accounts payable and accrued expenses

(8,184) (6,840) (3,008) (2,344)

  • Net cash provided by operating activities

$91,787 $86,609 $84,956 $87,677 $111,625 $120,094 $124,953 $130,804 Cash Flow from Investing Activities: Purchase of AFS securities (120,817) (149,937) (99,927) (100,000) (100,000) (100,000) (100,000) (100,000) Purchase of HTM securities (168,830) (54,133) (144,392) (145,000) (145,000) (145,000) (145,000) (145,000) Proceeds from calls, maturities and principal reductions of AFS securities 349,210 234,794 326,814 175,081 164,390 155,222 147,359 147,359 Proceeds from calls, maturities and principal reductions of HTM securities 328,433 330,054 309,328 223,659 218,039 212,820 207,974 207,974 Proceeds from the redemption of FHLB stock 22,387 265,929 382,450 364,915 362,306 362,240 362,256 362,256 Purchase of FHLB stock (100,356) (190,862) (329,625) (347,160) (349,769) (349,835) (349,819) (349,819) Net increase in loans receivable (280,105) (398,307) (336,056) (373,539) (318,708) (262,298) (235,338) (204,830) Purchase of premises and equipment (7,227) (12,022) (14,854) (5,895) (4,792) (6,127) (6,682) (6,298) Proceeds from sale of other real estate owned ("OREO") 4,875 5,987 4,973 5,278 5,278 5,278 5,278 5,278 Purchase of BOLI

  • (50,000)
  • (50,000)
  • (50,000)
  • Proceeds from BOLI death benefit

405

  • 783
  • Net cash provided by (used in) investing activities

$27,975

  • $18,497

$99,494

  • $202,661
  • $218,256
  • $127,699
  • $163,972
  • $83,081

Cash Flow from Financing Activities: Dividends paid (138,172) (114,162) (111,767) (107,757) (133,644) (137,896) (140,203) (143,416) Net change in deposits 43,826 177,248 331,498 154,921 159,568 164,355 169,286 174,364 Proceeds from borrowings 2,944,577 7,575,100 8,000,100 8,000,100 8,000,100 8,000,100 8,000,100 8,000,100 Repayments on borrowings (2,194,577) (7,695,100) (8,900,100) (8,052,048) (8,007,480) (8,004,557) (8,005,246) (8,010,029) Change in advance payments by borrowers for taxes and insurance 713 3,713 825 1,750 1,750 1,750 1,750 1,750 Payment of FHLB prepayment penalties

  • (3,352)
  • Repurchase of common stock

(79,633) (50,034)

  • Stock options exercised

458 267 4,070 1,598 1,576 2,001 2,114 2,202 Excess tax benefits from stock options

  • 56
  • Net cash (used in) provided by financing activities

$577,192

  • $106,320
  • $675,318
  • $1,436

$21,871 $25,753 $27,801 $24,972 NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS $696,954

  • $38,208
  • $490,868
  • $116,420
  • $84,760

$18,148

  • $11,218

$72,695 Beginning of year $113,886 $810,840 $772,632 $281,764 $165,344 $80,584 $98,732 $87,514 End of year $810,840 $772,632 $281,764 $165,344 $80,584 $98,732 $87,514 $160,210 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Income tax payments 34,969 35,849 36,483 Interest payments 100,581 103,784 106,182

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SLIDE 21

Appendix: Financial Statements (2 of 3)

Back to Appendix

Balance Sheet

2014 2015 2016 2017 (est) 2018 (est) 2019 (est) 2020 (est) 2021 (est) Cash and cash equivalents 810,840 772,632 281,764 165,344 80,584 98,732 87,514 160,210 Securities: Available-for-sale ("AFS") 840,790 758,171 527,301 452,220 387,830 332,608 285,248 244,633 Held-to-maturity ("HTM") 1,552,699 1,271,122 1,100,874 1,022,215 949,176 881,356 818,382 759,908 Loans receivable 6,242,397 6,634,470 6,966,564 7,340,103 7,658,811 7,921,108 8,156,447 8,361,277 Allowance for credit losses "ACL" (9,227) (9,443) (8,540) (9,060) (9,434) (9,804) (10,181) (10,578) Federal Home Loan Bank Topeka ("FHLB") stock, at cost 213,054 150,543 109,970 104,415 104,079 103,874 103,638 103,186 Premises and equipment, net 70,530 75,810 83,221 83,838 83,352 84,200 85,604 86,624 Income taxes receivable, net

  • 1,071
  • Other assets

143,945 189,785 206,093 206,331 206,331 206,331 206,331 206,331 Total Assets $9,865,028 $9,844,161 $9,267,247 $9,365,407 $9,460,728 $9,618,405 $9,732,982 $9,911,590 Liabilities: Deposits 4,655,272 4,832,520 5,164,018 5,318,939 5,478,507 5,642,862 5,812,148 5,986,512 FHLB borrowings 3,369,677 3,270,521 2,372,389 2,320,341 2,312,861 2,308,304 2,303,058 2,293,029 Repurchase agreements 220,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 Advance payments by borrowers for taxes and insurance 58,105 61,818 62,643 62,643 62,643 62,643 62,643 62,643 Income taxes payable, net 368

  • 310
  • 300
  • 300
  • Deferred income tax liabilities, net

22,367 26,391 25,374 24,594 25,811 22,995 24,297 25,311 Accounts payable and accrued expenses 46,357 36,685 49,549 46,541 44,197 44,197 44,197 44,197 Total Liabilities $8,372,146 $8,427,935 $7,874,283 $7,973,058 $8,124,319 $8,281,001 $8,446,643 $8,611,693 Stockholders' Equity: Preferred stock

  • Common stock

1,410 1,371 1,375 1,379 1,375 1,375 1,375 1,375 Additional paid-in capital 1,180,732 1,151,041 1,156,855 1,188,758 1,169,538 1,200,381 1,176,332 1,214,913 Unearned compensation, Employee Stock Ownership Plan ("ESOP") (42,951) (41,299) (39,647) (39,235) (49,632) (52,442) (54,631) (57,294) Retained earnings 346,705 296,739 268,466 236,846 207,724 180,266 155,114 132,355 Accumulated other comprehensive income ("AOCI"), net of tax 6,986 8,374 5,915 4,601 7,405 7,824 8,151 8,548 Total stockholders' Equity $1,492,882 $1,416,226 $1,392,964 $1,392,349 $1,336,410 $1,337,404 $1,286,340 $1,299,897 Total Liabilities & Stockholders' Equity $9,865,028 $9,844,161 $9,267,247 $9,365,407 $9,460,729 $9,618,405 $9,732,982 $9,911,589 2014 2015 2016 2017(est) 2018(est) 2019(est) 2020(est) 2021(est) Loans receivable 6,242,397 6,634,470 6,966,564 7,340,103 7,658,811 7,921,108 8,156,447 8,361,277 6.28% 5.01% 5.80% 5.32% 4.97% 3.96% 3.25% Deposits $4,655,272 $4,832,520 $5,164,018 $5,318,939 $5,478,507 $5,642,862 $5,812,148 $5,986,512 3.81% 6.86% 5.46% 5.03% 3.05% 3.05% 3.05%

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SLIDE 22

Appendix: Financial Statements (3 of 3)

Back to Appendix

Income Statement

2014 2015 2016 2017 (est) 2018 (est) 2019 (est) 2020 (est) 2021 (est) Interest and Dividend Income: Loans receivable $229,944 $235,500 $243,311 $257,839 $277,138 $295,317 $312,558 $329,014 Mortgage-backed securities ("MBS") $45,300 $36,647 $29,794 $30,998 $31,146 $29,574 $28,002 $26,431 FHLB stock $6,555 $12,556 $12,252 $11,633 $11,596 $11,573 $11,546 $11,496 Cash and cash equivalents $1,062 $5,477 $9,831 $9,831 $9,831 $9,831 $9,831 $9,831 Investment securities $7,385 $7,182 $5,925 $5,925 $5,925 $5,925 $5,925 $5,925 Total interest and dividend income $290,246 $297,362 $301,113 $316,227 $335,636 $352,220 $367,863 $382,697 Interest Expense: FHLB borrowings $63,217 $67,797 $65,091 $67,376 $68,218 $70,311 $72,481 $72,316 Deposits $32,604 $33,119 $37,859 $47,870 $49,307 $56,429 $63,934 $71,838 Repurchase agreements $10,282 $6,678 $5,981 $6,012 $6,012 $6,012 $6,012 $6,012 Total interest expense $106,103 $107,594 $108,931 $121,258 $123,537 $132,752 $142,426 $150,166 Net Interest Income $184,143 $189,768 $192,182 $194,968 $212,099 $219,469 $225,437 $232,531 Provision for Credit Losses $1,409 $771

  • $750

$0 $890 $921 $948 $972 N.I.I. after provision for Credit Loss $182,734 $188,997 $192,932 $194,968 $211,209 $218,548 $224,489 $231,559 Non-Interest Income: Retail fees and charges $14,937 $14,897 $14,835 $14,836 $14,937 $14,937 $14,937 $14,937 Income from bank-owned life insurance ("BOLI") $1,993 $1,150 $3,420 $2,092 $2,188 $2,188 $2,188 $2,188 Other non-interest income $6,025 $5,093 $5,057 $4,144 $5,057 $5,057 $5,057 $5,057 Total non-interest income $22,955 $21,140 $23,312 $21,072 $22,182 $22,182 $22,182 $22,182 Non-Interest Expense: Salaries and employee benefits $43,757 $43,309 $42,378 $41,467 $40,576 $39,703 $38,850 $38,015 Occupancy, net $10,268 $9,944 $10,576 $11,336 $11,456 $11,573 $11,766 $11,906 Information technology and communications $9,429 $10,360 $10,540 $10,651 $10,764 $10,873 $11,054 $11,186 Regulatory and outside services $5,572 $5,347 $5,645 $5,704 $5,533 $5,367 $5,206 $5,050 Deposit and loan transaction costs $5,329 $5,417 $5,585 $5,644 $5,704 $5,762 $5,858 $5,927 Federal insurance premium $4,536 $5,495 $5,076 $5,129 $5,184 $5,236 $5,324 $5,387 Advertising and promotional $4,195 $4,547 $4,609 $4,657 $4,707 $4,755 $4,834 $4,892 Low income housing partnerships $2,416 $4,572 $3,872 $3,913 $3,954 $3,994 $4,061 $4,109 Office supplies and related expense $2,096 $2,088 $2,640 $2,668 $2,696 $2,724 $2,769 $2,802 Other non-interest expense $2,939 $3,290 $3,384 $3,420 $3,456 $3,491 $3,549 $3,592 Total non-interest expense $90,537 $94,369 $94,305 $94,589 $94,029 $93,478 $93,271 $92,866 Income Before Income Tax-Expense $115,152 $115,768 $121,939 $121,451 $139,362 $147,252 $153,400 $160,876 Income Tax Expense $37,458 $37,675 $38,445 $39,108 $34,840.55 $36,812.92 $38,350.08 $40,218.95 Net Income $77,694 $78,093 $83,494 $82,344 $104,522 $110,439 $115,050 $120,657 Changes in unrealized holding gains on AFS securities

  • $110

$545

  • $965

$0 $0 $0 $0 $0 Taxes $171

  • $843

$1,494 $0 $0 $0 $0 $0 Other comprehensive income (loss), net of tax

  • $281

$1,388

  • $2,459

$0 $0 $0 $0 $0 Comprehensive income $77,413 $79,481 $81,035 $82,344 $104,522 $110,439 $115,050 $120,657 2014 2015 2016 2017(est) 2018(est) 2019(est) 2020(est) 2021(est) Shares issued and outstanding 140,951 137,107 137,486 137,486 137,486 137,486 137,486 137,486 Average number of basic shares outstanding 139,440 135,384 133,045 133,045 133,045 133,045 133,045 133,045 Basic earnings per share ("EPS") $0.5512 $0.5696 $0.6073 $0.5989 $0.7602 $0.8033 $0.8368 $0.8776

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SLIDE 23

Appendix: Loan Portfolio (1 of 6)

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2015 2016 2017 (est) 2018 (est) 2019 (est) 2020 (est) 2021 (est) Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Amount Rate Amount Rate Amount Rate Amount Rate Amount Rate Amount Rate Amount Rate Real Estate Loans Originated 4,010,424 3.84% 4,005,615 3.74% 4,095,119 3.80% 4,177,021 3.90% 4,260,562 4.00% 4,345,773 4.10% 4,432,689 4.20% Correspondent Purchased 1,846,210 3.52% 2,206,072 3.50% 2,539,378 3.48% 2,800,049 3.58% 3,003,304 3.68% 3,156,966 3.78% 3,267,852 3.88% Bulk Purchased 485,682 2.25% 416,653 2.23% 352,065 2.24% 302,027 2.34% 259,100 2.44% 222,275 2.54% 190,683 2.64% Construction 29,552 3.64% 39,430 3.45% 37,459 3.44% 41,204 3.54% 45,325 3.64% 49,857 3.74% 54,843 3.84% Total Real Estate 6,371,868 3.56% 6,667,770 3.56% 7,024,020 3.60% 7,320,302 3.71% 7,568,291 3.82% 7,774,871 3.92% 7,946,067 4.03% Commercial Permanent 109,314 4.15% 110,768 4.16% 104,323 4.15% 106,409 4.25% 108,538 4.35% 110,708 4.45% 112,923 4.55% Construction 11,523 3.82% 43,375 4.13% 76,254 4.10% 91,505 4.20% 109,806 4.30% 131,767 4.40% 158,120 4.50% Total Commercial 120,837 4.12% 154,143 4.15% 180,577 4.13% 197,914 4.23% 218,343 4.32% 242,475 4.42% 271,043 4.52% Consumer Loans Home Equity 125,844 5.01% 123,345 5.01% 122,378 4.99% 124,826 5.09% 126,698 5.19% 128,598 5.29% 130,527 5.39% Other 4,179 4.21% 4,264 4.21% 4,213 4.19% 4,234 4.29% 4,255 4.39% 4,277 4.49% 4,298 4.59% Total Consumer Loans 130,023 4.99% 127,609 4.99% 126,591 4.96% 129,060 5.06% 130,953 5.16% 132,875 5.26% 134,825 5.36% Total Loans Receivable 6,622,728 3.66% 6,949,522 3.60% 7,331,188 3.58% 7,647,275 3.66% 7,917,587 3.66% 8,150,221 3.66% 8,351,935 3.66% 7,331,043 7,648,629 7,921,108 8,156,447 8,361,277 Less: ACL 9443 8,540.00 9,059.54 9,434.14 9,804.09 10,181.34 10,577.58 Discounts/unearned loan fees 24213 26,238.12 26,238.12 26,238.12 26,238.12 26,238.12 Premiumns/deferred costs (35,955) (41,975) (44,172.18) (44,172.18) (44,172.18) (44,172.18) (44,172.18) Total loans receivable 6,625,027 6,958,024 7,322,168 7,640,129 7,912,979 8,148,694 8,353,920 Interest: Originated 154,000.28 3.84% 149,810.00 3.74% 155,614.52 3.80% 162,903.83 3.90% 170,422.47 4.00% 178,176.69 4.10% 186,172.92 4.20% Correspondent Purchased 64,986.59 3.52% 77,212.52 3.50% 88,370.34 3.48% 100,241.76 3.58% 110,521.57 3.68% 119,333.32 3.78% 126,792.66 3.88% Bulk Purchased 10,927.85 2.25% 9,291.36 2.23% 7,886.26 2.24% 7,067.43 2.34% 6,322.05 2.44% 5,645.78 2.54% 5,034.04 2.64% Construction 1,075.69 3.64% 1,360.34 3.45% 1,288.57 3.44% 1,458.63 3.54% 1,649.82 3.64% 1,864.66 3.74% 2,105.97 3.84% Total Interest 230,990 3.56% 237,674 3.56% 253,160 3.60% 271,672 3.71% 288,916 3.82% 305,020 3.92% 320,106 4.03% Commercial Permanent 4,536.53 4.15% 4,607.95 4.16% 4,329.40 4.15% 4,522.40 4.25% 4,721.39 4.35% 4,926.52 4.45% 5,137.98 4.55% Construction 440.18 3.82% 1,791.39 4.13% 3,126.41 4.10% 3,843.20 4.20% 4,721.65 4.30% 5,797.74 4.40% 7,115.41 4.50% Total Commercial 4,977 4.12% 6,399 4.15% 7,456 4.13% 8,366 4.23% 9,443 4.32% 10,724 4.42% 12,253 4.52% Consumer Loans Home Equity 6,304.78 5.01% 6,179.58 5.01% 6,106.66 4.99% 6,353.62 5.09% 6,575.62 5.19% 6,802.86 5.29% 7,035.43 5.39% Other 175.94 4.21% 179.51 4.21% 176.52 4.19% 181.64 4.29% 4.39% 192.02 4.49% 197.27 4.59% Total Consumer 6,481 4.99% 6,359 4.99% 6,283 4.96% 6,535 5.06% 6,762 5.16% 6,995 5.26% 7,233 5.36% Total Interest Receivable 233,005 3.66% 241,893 3.60% 257,839 3.66% 277,138 3.66% 295,317 3.66% 312,558 3.66% 329,014 3.66%

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SLIDE 24

Appendix: Loan Portfolio (2 of 6)

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2015 2016 2017 (est) 2018 (est) 2019 (est) 2020 (est) 2021 (est) ACL Rate ACL Rate ACL Rate ACL Rate ACL Rate ACL Rate Real Estate Loans Originated 3,892.00 0.000972 3,979 0.000972 4,059 0.000972 4,140 0.000972 4,223 0.000972 4,307 0.000971636 Correspondent Purchased 2102 0.000953 2,420 0.000953 2,668 0.000953 2,862 0.000953 3,008 0.000953 3,114 0.000952825 Bulk Purchased 1065 0.002556 900 0.002556 772 0.002556 662 0.002556 568 0.002556 487 0.002556084 Construction 36 0.000913 34 0.000913 38 0.000913 41 0.000913 46 0.000913 50 0.00091301 Commercial Permanent 774 0.006988 729 0.006988 744 0.006988 758 0.006988 774 0.006988 789 0.006987578 Construction 434 0.010006 763 0.010006 916 0.010006 1,099 0.010006 1,318 0.010006 1,582 0.010005764 Total Consumer Loans Home Equity 187 0.001516 186 0.001516 189 0.001516 192 0.001516 195 0.001516 198 0.001516073 Other 50 0.011726 49 0.011726 50 0.011726 50 0.011726 50 0.011726 50 0.011726079 Total Total ALC 8,540.00 9,059.54 9,434.14 9,804.09 10,181.34 10,577.58

ALC

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SLIDE 25

Appendix: Loan Portfolio (3 of 6)

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Loan Growth Rates

2016 2017 2018 2019 2020 2021 Average Inc Per Year Real Estate Loans Originated

  • 0.12%

2.23% 2.00% 2.00% 2.00% 2.00% 2.05% Correspondent Purchased 19.49% 15.11% 10.27% 7.26% 5.12% 3.51% 8.25% Bulk Purchased

  • 14.21% -15.50% -14.21% -14.21% -14.21% -14.21%
  • 14.47%

Construction 33.43%

  • 5.00%

10.00% 10.00% 10.00% 10.00% 7.00% Commercial Permanent 1.33%

  • 5.82%

2.00% 2.00% 2.00% 2.00% 0.44% Construction 276.42% 20.00% 20.00% 20.00% 20.00% 20.00% 20.00% Consumer Loans Home Equity

  • 1.99%
  • 1.99%

2.00% 1.50% 1.50% 1.50% 0.90% Other 2.03% 2.03% 0.50% 0.50% 0.50% 0.50% 0.81% Total Loan Growth 4.93% 5.5% 4.3% 3.5% 2.9% 2.5% 3.75%

Interest Rates

2016 2017 2018 2019 2020 2021 Average Int Rate Real Estate Loans Originated 3.74% 3.80% 3.90% 4.00% 4.10% 4.20% 4.00% Correspondent Purchased 3.50% 3.48% 3.58% 3.68% 3.78% 3.88% 3.68% Bulk Purchased 2.23% 2.24% 2.34% 2.44% 2.54% 2.64% 2.44% Construction 3.45% 3.44% 3.54% 3.64% 3.74% 3.84% 3.64% 3.56% 3.60% 3.71% 3.82% 3.92% 4.03% Commercial Permanent 4.16% 4.15% 4.25% 4.35% 4.45% 4.55% 4.35% Construction 4.13% 4.10% 4.20% 4.30% 4.40% 4.50% 4.30% 4.15% 4.13% 4.23% 4.32% 4.42% 4.52% 4.33% Consumer Loans Home Equity 5.01% 4.99% 5.09% 5.19% 5.29% 5.39% 5.19% Other 4.21% 4.19% 4.29% 4.39% 4.49% 4.59% 4.39% 3.60% 4.96% 5.06% 5.16% 5.26% 5.36% 5.16%

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SLIDE 26

Appendix: Loan Portfolio (4 of 6)

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Originations and Refinances

2014 2015 2016 2017 (est) 2018 (est) 2019 (est) 2020 (est) 2021 (est) New Loans New Loans New Loans New Loans New Loans New Loans New Loans New Loans Amount Rate Amount Rate Amount Rate Amount Rate Amount Rate Amount Rate Amount Rate Amount Rate Beginning balance 6,011,799 3.82% 6,237,518 3.76% 6,622,728 3.66% 6,949,522 7,322,168 7,640,129 7,912,979 8,148,694 Originations and refinances Fixed-rate: One-to-four-family 376,660 ? 594,406 ? 465,013 ? 474,313 ? 483,800 ? 493,476 ? 503,345 ? 513,412 ? Commercial real estate 7,050 ? 7,498 ? 136,277 ? 139,003 ? 141,783 ? 144,618 ? 147,511 ? 150,461 ? Home Equity 2,863 6.16% 3,670 6.10% 4,247 5.71% 4,332 5.71% 4,419 5.71% 4,507 5.71% 4,597 5.71% 4,689 5.71% Other 1,141 7.44% 769 8.07% 828 8.73% 845 8.73% 861 8.73% 879 8.73% 896 8.73% 914 8.73% Originated Refinanced by Bank customers Fixed 387,714 4.00% 606,343 3.60% 606,365 3.52% 618,492 3.52% 630,862 3.52% 643,479 3.52% 656,349 3.52% 669,476 3.52% Adjustable-rate: One- to four-family 107,659 ? 102,662 ? 92,874 ? 86,497 ? 80,557 ? 75,026 ? 69,874 ? 65,076 ? Commercial real estate

  • 0%
  • 0%
  • 0%
  • 0%
  • 0%
  • 0%
  • 0%
  • 0%

Home equity 70,066 4.64% 69,975 4.58% 71,013 4.65% 71,013 4.65% 71,013 4.65% 71,013 4.65% 71,013 4.65% 71,013 4.65% Other 1,469 3.17% 1,537 3.11% 2,652 3.36% 3.36% 2,652 3.36% 2,652 3.36% 2,652 3.36% 2,652 3.36% Adjustable 179,194 3.74% 174,174 3.62% 166,539 3.65% 160,162 3.65% 154,222 3.65% 148,691 3.65% 143,539 3.65% 138,741 3.65% Fixed 387,714 4.00% 606,343 3.60% 606,365 3.59% 618,492 3.52% 630,862 3.52% 643,479 3.52% 656,349 3.52% 669,476 3.52% Adjustable 179,194 3.74% 174,174 3.44% 166,539 3.52% 160,162 3.65% 154,222 3.65% 148,691 3.65% 143,539 3.65% 138,741 3.65% Total Originations and Refinances 566,908 780,517 772,904 778,654 785,084 792,170 799,888 808,217

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SLIDE 27

Appendix: Loan Portfolio (5 of 6)

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Purchases and Participations

2014 2015 2016 2017 (est) 2018 (est) 2019 (est) 2020 (est) 2021 (est) New Loans New Loans New Loans New Loans New Loans New Loans New Loans New Loans Amount Rate Amount Rate Amount Rate Amount Rate Amount Rate Amount Rate Amount Rate Amount Rate Beginning balance 6,011,799 3.82% 6,237,518 3.76% 6,622,728 3.66% 6,949,522 7,322,168 7,640,129 7,912,979 8,148,694 Purchases and participations Fixed-rate: Correspondent - one- to four-family 366,599 3.95% 525,946 3.59% 567,014 3.56% 567,014 3.56% 567,014 3.56% 567,014 3.56% 567,014 3.56% 567,014 3.56% Participations - commercial real estate 43,950 3.81% 25,082 3.79% 153,239 3.94% 153,239 3.94% 153,239 3.94% 153,239 3.94% 153,239 3.94% 153,239 3.94% Total fixed-rate purchased/participations 410,549 3.93% 551,028 3.60% 720,253 3.64% 720,253 3.64% 720,253 3.64% 720,253 3.64% 720,253 3.64% 720,253 3.64% Adjustable-rate: Correspondent - one- to four-family 148,876 3.09% 125,095 2.96% 95,803 2.90% 95,803 2.90% 95,803 2.90% 95,803 2.90% 95,803 2.90% 95,803 2.90% Participations - commercial real estate 14,358 4.34% 35,236 4.25% 47,876 4.29% 47,876 4.29% 47,876 4.29% 47,876 4.29% 47,876 4.29% 47,876 4.29% Total adjustable-rate purchased/participations 163,234 3.20% 160,331 3.25% 143,679 3.36% 143,679 3.36% 143,679 3.36% 143,679 3.36% 143,679 3.36% 143,679 3.36% Total purchased/participation loans 573,783 3.72% 711,359 3.52% 863,932 3.60% 863,932 3.60% 863,932 3.60% 863,932 3.60% 863,932 3.60% 863,932 3.60%

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SLIDE 28

Appendix: Loan Portfolio (6 of 6)

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Total Loans

2014 2015 2016 2017 est 2018 est 2019 est 2020 est 2021 est New Loans New Loans New Loans New Loans New Loans New Loans New Loans New Loans Amount Rate Amount Rate Amount Rate Amount Rate Amount Rate Amount Rate Amount Rate Amount Rate Beginning Balance 6,011,7993.82% 6,237,518 3.76% 6,622,728 3.66% 6,949,522 7,322,168 7,640,129 7,912,979 8,148,694 Total New Loans 1,140,691 1,491,876 1,636,836 3.57% 1,642,586 1,649,016 1,656,102 1,663,820 1,672,149 Change in undisbursed loan funds (38,564) (142,027) (142,027) (142,027) (142,027) (142,027) (142,027) Repayments (857,573) (1,061,868 ) (1,164,000 ) (1,132,772.09 ) (1,193,513.46) (1,245,341.10 ) (1,289,815.50 ) (1,328,237.09 ) Principal charge-offs, net (1,004) (555) (153) (153) (153) (153) (153) (153) Other (4,394) (5,679) (3,862) (3,862) (3,862) (3,862) (3,862) (3,862) Ending balance 6,289,519 3.76% 6,622,728 3.66% 6,949,522 3.60% 7,313,294 7,631,630 7,904,849 8,140,941 8,346,564 Repayments as % of Beginning Balance

  • 14.3%
  • 17.0%
  • 17.6%
  • 16.3%
  • 16.3%
  • 16.3%
  • 16.3%
  • 16.3%

Less: ACL 9,443 8,540 9,059.54 9,434.14 9,804.09 10,181.34 10,577.58 Discounts/unearned loan fees 24,213 24,933 26,238.12 26,238.12 26,238.12 26,238.12 26,238.12 Premiums/deferred costs (35,955) (41,975) (44,172.18) (44,172.18) (44,172.18) (44,172.18) (44,172.18) 6,625,027 6,958,024 7,322,168 7,640,129 7,912,979 8,148,694 8,353,920

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SLIDE 29

Appendix: Mortgage-Backed Securities (1 of 1)

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2016 2017 2018 2019 2020 2021 AFS Carrying Value % of TotalInterest Carrying Value Yield Interest Carrying Value Yield Interest Carrying Value Yield Interest Carrying Value Yield Interest Carrying Value Yield Interest GSE debentures 347,038.00 65.81% 3,990.94 271,957.00 1.18% 3,209.09 191,467.75 1.18% 2,259.32 110,978.50 1.18% 1,309.55 30,489.25 1.18% 359.77 (50,000.00)1.18% (590.00) MBS 178,507.00 33.85% 5,712.22 178,507.00 3.20% 5,712.22 173,008.25 3.20% 5,536.26 167,509.50 3.20% 5,360.30 162,010.75 3.20% 5,184.34 156,512.00 3.20% 5,008.38 TRUPs 1,756.00 0.33% 37.05 1,756.00 2.11% 37.05 1,756.00 2.11% 1,756.00 1,756.00 2.11% 1,756.00 1,756.00 2.11% 1,756.00 1,756.00 2.11% 1,756.00 Munis 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

  • 527,301.00

9,740.21 452,220.00 8,958.37 366,232.00 9,551.58 280,244.00 8,425.85 194,256.00 7,300.12 108,268.00 6,174.38 HT M MBS 1,067,571.00 96.97%21,564.93 1,067,571.00 2.02% 21,564.93 1,050,132.00 2.02% 21,212.67 1,032,693.00 2.02% 20,860.40 1,015,254.00 2.02% 20,508.13 997,815.00 2.02% 20,155.86 Municipal Bonds 33,303.00 3.03% 562.82 28,107.00 1.69% 475.01 22,569.00 1.69% 381.42 17,031.00 1.69% 287.82 11,493.00 1.69% 194.23 5,955.00 1.69% 100.64 1,100,874.00 22,127.75 1,095,678.00 22,039.94 1,072,701.00 21,594.08 1,049,724.00 21,148.22 1,026,747.00 20,702.36 1,003,770.00 20,256.50 1,628,175.00 31,867.97 1,547,898.00 30,998.31 1,438,933.00 31,145.67 1,329,968.00 29,574.07 1,221,003.00 28,002.48 1,112,038.00 26,430.89

1 year or less More than 1 to 5 yearsMore than 5 to 10 years Over 10 years Total Securities AFS Carrying Value Yield Carrying Value Yield Carrying Value Yield Carrying Value Yield Carrying Value Yield GSE debentures 25,081.00 0.84% 321,957.00 1.18% 0.00% 0.00% 347,038.00 1.15% MBS 0.00% 21,995.00 4.74% 23,311.00 4.54% 133,201.00 2.75% 178,507.00 3.20% TRUPs 0.00% 0.00% 0.00% 1,756.00 2.11% 1,756.00 2.11% 25,081.00 0.84% 343,952.00 1.40% 23,311.00 4.54% 134,957.00 2.71% 527,301.00 1.83% HTM MBS 0.00% 69,756.00 2.71% 388,995.00 2.02% 608,820.00 1.95% 1,067,571.00 2.02% Municipal Bonds 5,196.00 2.00% 22,152.00 1.62% 5,955.00 1.69% 0.00% 33,303.00 1.69% 5,196.00 2.00% 91,908.00 2.45% 394,950.00 2.02% 608,820.00 1.95% 1,100,874.00 2.01% 30,277.00 1.04% 435,860.00 1.62% 418,261.00 2.16% 743,777.00 2.09% 1,628,175.00 1.95%

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SLIDE 30

Appendix: Dividends (1 of 1)

Back to Appendix 2016 2017(est) 2018(est) 2019(est) 2020(est) 2021(est) Net Income 83,494.00 82,343.53 104,521.64 110,438.76 115,050.25 120,656.84 Payout Ratio Decrease Rate Payout Rate 133.86% 130.86% 127.86% 124.86% 121.86% 118.86% 3.0% Dividend 111,767.00 107,756.64 133,643.79 137,896.39 140,202.90 143,415.51

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SLIDE 31

TTM 2016-09 2015-09 2014-09 2013-09 2012-09 2011-09 2010-09 2009-09 2008-09 2007-09 Revenue USD Mil 215 215 211 207 201 209 194 204 205 164 130 Gross Margin % Operating Income USD Mil 122 122 116 115 106 116 57 105 105 80 53 Operating Margin % 56.6 56.6 54.9 55.6 52.4 55.5 29.6 51.7 51.3 48.8 40.6 Net Income USD Mil 83 83 78 78 69 75 38 68 66 51 32 Earnings Per Share USD 0.63 0.63 0.58 0.56 0.48 0.47 0.24 0.41 0.4 0.31 0.19 Dividends USD 0.34 0.34 0.33 0.3 0.3 0.3 0.36 0.88 0.88 0.88 0.88 Payout Ratio % * 53.9 54.8 55.2 57.6 61.2 65.2 148.9 215.1 219.8 285.7 408.2 Shares Mil 133 133 135 139 145 158 163 166 166 165 165 Book Value Per Share * USD 10.1 10.04 10.41 10.63 10.99 11.79 11.58 5.74 5.61 5.2 5.18 Operating Cash Flow USD Mil 85 85 87 92 102 106 66 59 191 82 447 Cap Spending USD Mil

  • 15
  • 15
  • 12
  • 7
  • 19
  • 13
  • 13
  • 8
  • 13
  • 9
  • 5

Free Cash Flow USD Mil 70 70 75 85 83 94 53 51 178 73 442 Free Cash Flow Per Share * USD 0.53 0.57 0.57 0.61 0.56 0.33 0.31 1.07 0.44 2.73

Appendix: Key Ratios (1 of 6)

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Financials

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SLIDE 32

Appendix: Key Ratios (2 of 6)

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Profitability

Margins % of Sales TTM 2016-09 2015-09 2014-09 2013-09 2012-09 2011-09 2010-09 2009-09 2008-09 2007-09 Revenue 100 100 100 100 100 100 100 100 100 100 100 COGS Gross Margin SG&A 32.9 32.9 33.73 33.6 36.42 31.31 34.22 35.15 36.86 29.49 34.96 R&D Other 10.87 10.87 11.01 10.12 11.7 12.24 34.08 8.84 8.75 20.44 24.65 Operating Margin 56.59 56.59 54.89 55.6 52.4 55.47 29.6 51.66 51.27 48.82 40.57 Net Int Inc & Other 0.35 0.35

  • 0.37
  • 0.68

0.53

  • 0.98
  • 2.1
  • 4.35
  • 3.11
  • 1.25

0.17 EBT Margin 56.59 56.59 54.89 55.6 52.4 55.47 29.6 51.66 51.27 48.82 40.57 Profitability TTM 2016-09 2015-09 2014-09 2013-09 2012-09 2011-09 2010-09 2009-09 2008-09 2007-09 Tax Rate % 31.53 31.53 32.54 32.53 34.32 35.76 33.04 35.61 36.99 36.43 38.96 Net Margin % 38.71 38.71 36.97 37.43 34.42 35.63 19.82 33.26 32.3 31.03 24.77 Asset Turnover (Average) 0.02 0.02 0.02 0.02 0.02 0.02 0.02 0.02 0.02 0.02 0.02 Return on Assets % 0.87 0.87 0.79 0.81 0.75 0.79 0.43 0.8 0.81 0.65 0.41 Financial Leverage (Average) 6.65 6.65 6.95 6.6 5.63 5.19 4.87 8.82 8.93 9.25 8.85 Return on Equity % 5.94 5.94 5.36 4.96 4.03 3.98 2.65 7.13 7.32 5.86 3.73

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SLIDE 33

Latest Qtr 2016-09 2015-09 2014-09 2013-09 2012-09 2011-09 2010-09 2009-09 2008-09 2007-09 Revenue % Year over Year 0.04 2.17 1.84 2.8

  • 3.67

7.94

  • 5.02
  • 0.61

25 25.91

  • 14.37

3-Year Average 2.27 0.29 2.25

  • 0.41

0.63 5.67 16.08 10.46

  • 2.88
  • 2.29

5-Year Average 2.15 0.67 0.18 4.17 9.9 4.93 2.62 7.99 0.79

  • 9.59

10-Year Average 3.53 1.64 4.01 2.47

  • 0.32

0.37 1.09 2.73 26.82 Operating Income % Year over Year 7.36 5.33 0.53 9.08

  • 8.99

102.26

  • 45.57

0.13 31.28 51.5

  • 32.78

3-Year Average 4.92

  • 0.07

26.16 0.06 3.3

  • 10.56

25.81 10.16

  • 8.72

5-Year Average 16.28 1.9 1.82 5.66 17

  • 6.13
  • 1.23
  • 18.49

10-Year Average 4.48 0.95 2.16

  • 2.34
  • 7.37
  • 1.36

4.23 Net Income % Year over Year 6.92 0.51 12.05

  • 6.94

94.03

  • 43.39

2.33 30.11 57.77

  • 32.88

3-Year Average 6.39 1.58 26.48 0.73 3.97

  • 9

28.07 11.28

  • 7.82

5-Year Average 16.8 2.86 3.22 6.36 18.2

  • 4.41

0.84

  • 0.42
  • 18.46

10-Year Average 5.67 1.84 2.91

  • 1.83
  • 6.81
  • 1.17

4.45

  • 0.58

EPS % Year over Year 6.67 8.62 3.57 16.67 2.13 95.83

  • 41.58

2.2 30 59.09

  • 33.33

3-Year Average 9.49 7.26 32.64 5.32 5.35

  • 8.1

28.33 11.3

  • 7.69

5-Year Average 21.29 7.14 6.85 9.19 19.31

  • 3.82

0.88

  • 0.56
  • 18.45

10-Year Average 8.01 3.96 4.2

  • 1.36
  • 5.82

0.33 8.84

Appendix: Key Ratios (3 of 6)

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Growth

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SLIDE 34

Appendix: Key Ratios (4 of 6)

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Cash Flow

TTM 2016-09 2015-09 2014-09 2013-09 2012-09 2011-09 2010-09 2009-09 2008-09 2007-09 Operating Cash Flow Growth % YOY

  • 191
  • 564
  • 977
  • 425

Free Cash Flow Growth % YOY

  • 601

194 403 Cap Ex as a % of Sales 6.89 6.89 5.7 3.49 9.32 6.03 6.58 4.01 6.36 5.31 3.55 Free Cash Flow/Sales % 32.53 32.53 35.36 40.83 41.18 44.77 27.38 24.99 86.57 44.46 339.01 Free Cash Flow/Net Income 0.84 0.84 0.96 1.09 1.2 1.26 1.38 0.75 2.68 1.43 13.69

Liquidity & Financial Health

Latest Qtr 2016-09 2015-09 2014-09 2013-09 2012-09 2011-09 2010-09 2009-09 2008-09 2007-09 Current Ratio Quick Ratio Financial Leverage 6.65 6.65 6.95 6.6 5.63 5.19 4.87 8.82 8.93 9.25 8.85 Debt/Equity 1.7 1.7 2.31 2.26 1.54 1.6 1.49 3.14 3.3 3.63 3.21

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SLIDE 35

Appendix: Key Ratios (5 of 6)

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Financial Health

Balance Sheet Items (in %) Latest Qtr 2016-09 2015-09 2014-09 2013-09 2012-09 2011-09 2010-09 2009-09 2008-09 2007-09 Cash & Short-Term Investments 3.04 3.04 7.85 8.22 1.24 1.51 1.28 0.77 0.49 1.08 2.12 Accounts Receivable 0.01 0.26 0.28 0.31 0.36 0.39 0.42 0.55 Inventory Other Current Assets Total Current Assets Net PP&E 0.9 0.9 0.77 0.71 0.76 0.62 0.51 0.49 0.45 0.37 0.35 Intangibles 0.07 Other Long-Term Assets Total Assets 100 100 100 100 100 100 100 100 100 100 100 Accounts Payable 0.01 0.02 0.07 0.53 0.63 Short-Term Debt Taxes Payable 0.01 0.02 0.07 Accrued Liabilities Other Short-Term Liabilities Total Current Liabilities Long-Term Debt 25.6 25.6 33.22 34.16 27.36 30.87 30.63 35.55 36.96 39.24 36.29 Other Long-Term Liabilities Total Liabilities 84.97 84.97 85.61 84.87 82.23 80.74 79.48 88.67 88.8 89.18 88.7 Total Stockholders' Equity 15.03 15.03 14.39 15.13 17.77 19.26 20.52 11.33 11.2 10.82 11.3 Total Liabilities & Equity 100 100 100 100 100 100 100 100 100 100 100

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SLIDE 36

Appendix: Key Ratios (6 of 6)

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Efficiency

TTM 2016-09 2015-09 2014-09 2013-09 2012-09 2011-09 2010-09 2009-09 2008-09 2007-09 Days Sales Outstanding Days Inventory Payables Period Cash Conversion Cycle Receivables Turnover Inventory Turnover Fixed Assets Turnover 2.71 2.71 2.88 2.94 3.15 3.94 4.32 5.17 6.07 5.81 4.91 Asset Turnover 0.02 0.02 0.02 0.02 0.02 0.02 0.02 0.02 0.02 0.02 0.02

slide-37
SLIDE 37

Appendix: IBISWorld Reports – Industry (1 of 3)

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Industry Data

Year Revenue ($M) Industry Value Added ($M) Establishments Enterprises Employment Exports Imports Wages ($M) Domestic Demand 30-Year Conv. Mortgage Rate (%) 2008 74,315.20 18,231.40 15,601 1,237 243,876--

  • 13,830.50

N/A 6 2009 56,104.60 19,641.60 14,172 1,179 216,358--

  • 13,034.70

N/A 5 2010 52,646.10 18,517.40 13,621 1,153 191,799--

  • 11,334.60

N/A 4.7 2011 47,287.50 16,346.40 13,163 1,123 181,908--

  • 10,231.50

N/A 4.5 2012 40,504.70 15,913.90 13,131 1,061 179,284--

  • 10,590.30

N/A 3.7 2013 37,609.60 15,823.30 12,529 975 172,836--

  • 10,811.70

N/A 4 2014 42,429.80 15,229.70 12,290 955 149,016--

  • 9,292.70

N/A 4.2 2015 45,703.10 15,385.70 12,516 967 140,649--

  • 9,090.50

N/A 3.9 2016 45,931.20 15,425.80 12,445 959 139,514--

  • 9,045.30

N/A 3.8 2017 48,993.90 16,388.90 12,587 966 144,102--

  • 9,464.20

N/A 4.2 2018 50,039.60 16,693.40 12,595 964 144,390--

  • 9,539.90

N/A 4.3 2019 49,892.00 16,618.90 12,435 950 142,682--

  • 9,441.20

N/A 4.3 2020 49,294.80 16,394.10 12,288 937 139,803--

  • 9,254.90

N/A 4.3 2021 49,319.50 16,375.00 12,101 922 138,323--

  • 9,178.00

N/A 4.3 2022 48,172.60 15,977.40 11,895 906 134,576--

  • 8,915.00

N/A 4.3 Sector Rank 24/31 23/31 17/31 23/31 14/31 N/A N/A 18/31 N/A N/A Economy Rank 224/1546 199/1546 400/1546 853/1546 295/1546 N/A N/A 201/1546 N/A N/A

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SLIDE 38

Appendix: IBISWorld Reports – Industry (2 of 3)

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Annual Change

Year Revenue (%) Industry Value Added (%) Establishments (%) Enterprises (%) Employment (%) Exports (%) Imports (%)Wages (%) Domestic Demand (%) 30-Year Conv. Mortgage Rate (%) 2009

  • 24.5

7.7

  • 9.2
  • 4.7
  • 11.3

N/A N/A

  • 5.8

N/A

  • 16.5

2010

  • 6.2
  • 5.7
  • 3.9
  • 2.2
  • 11.4

N/A N/A

  • 13

N/A

  • 7

2011

  • 10.2
  • 11.7
  • 3.4
  • 2.6
  • 5.2

N/A N/A

  • 9.7

N/A

  • 5

2012

  • 14.3
  • 2.6
  • 0.2
  • 5.5
  • 1.4

N/A N/A 3.5 N/A

  • 18

2013

  • 7.1
  • 0.6
  • 4.6
  • 8.1
  • 3.6

N/A N/A 2.1 N/A 8.9 2014 12.8

  • 3.8
  • 1.9
  • 2.1
  • 13.8

N/A N/A

  • 14

N/A 4.7 2015 7.7 1 1.8 1.3

  • 5.6

N/A N/A

  • 2.2

N/A

  • 7.7

2016 0.5 0.3

  • 0.6
  • 0.8
  • 0.8

N/A N/A

  • 0.5

N/A

  • 0.3

2017 6.7 6.2 1.1 0.7 3.3 N/A N/A 4.6 N/A 8.1 2018 2.1 1.9 0.1

  • 0.2

0.2 N/A N/A 0.8 N/A 3.6 2019

  • 0.3
  • 0.4
  • 1.3
  • 1.5
  • 1.2

N/A N/A

  • 1

N/A 0.2 2020

  • 1.2
  • 1.4
  • 1.2
  • 1.4
  • 2

N/A N/A

  • 2

N/A

  • 0.7

2021 0.1

  • 0.1
  • 1.5
  • 1.6
  • 1.1

N/A N/A

  • 0.8

N/A 0.5 2022

  • 2.30
  • 2.40
  • 2
  • 1.7
  • 3

N/A N/A

  • 2.90

N/A Sector Rank 3/31 8/31 17/31 16/31 9/31 N/A N/A 6/31 N/A N/A Economy Rank 147/1546 178/1546 795/1546 841/1546 329/1546 N/A N/A 241/1546 N/A N/A

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SLIDE 39

Appendix: IBISWorld Reports – Industry (3 of 3)

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Key Ratios

Year IVA/Revenue (%) Imports/Demand (%) Exports/Revenue (%) Revenue per Employee ($000) Wages/Revenue (%) Employees per Est. Average Wage ($) Share of the Economy (%) 2008 24.53 N/A N/A 304.73 18.61 15.63 56,711.20 0.12 2009 35.01 N/A N/A 259.31 23.23 15.27 60,245.98 0.14 2010 35.17 N/A N/A 274.49 21.53 14.08 59,096.24 0.13 2011 34.57 N/A N/A 259.95 21.64 13.82 56,245.46 0.11 2012 39.29 N/A N/A 225.92 26.15 13.65 59,069.97 0.1 2013 42.07 N/A N/A 217.6 28.75 13.79 62,554.68 0.1 2014 35.89 N/A N/A 284.73 21.9 12.12 62,360.42 0.1 2015 33.66 N/A N/A 324.94 19.89 11.24 64,632.52 0.09 2016 33.58 N/A N/A 329.22 19.69 11.21 64,834.35 0.09 2017 33.45 N/A N/A 339.99 19.32 11.45 65,677.09 0.1 2018 33.36 N/A N/A 346.56 19.06 11.46 66,070.36 0.1 2019 33.31 N/A N/A 349.67 18.92 11.47 66,169.52 0.09 2020 33.26 N/A N/A 352.6 18.77 11.38 66,199.58 0.09 2021 33.2 N/A N/A 356.55 18.61 11.43 66,351.94 0.09 2022 33.17 N/A N/A 357.96 18.51 11.31 66245.10 0.09 Sector Rank 19/31 N/A N/A 25/31 13/31 13/31 26/31 23/31 Economy Rank 704/1546 N/A N/A 646/1546 740/1546 821/1546 428/1546 199/1546

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SLIDE 40

Appendix: IBISWorld Reports – Financials (1 of 3)

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Key Ratios

Apr 2015-Mar 2016 by company revenue Apr 2012-Mar 2013 Apr 2013-Mar 2014 Apr 2014- Mar2015 Apr 2015- Mar2016 Small (<$10m) Medium ($10- 50m) Large ((>$50m) Liquidity Ratios Current Ratio 1.4 1.4 1.4 1.3 1.6 1.2 1.2 Quick Ratio 1.2 1.2 1.3 1.2 1.4 1 0.9 Sales / Receivables (Trade Receivables Turnover) 8.6 8.7 4 8.9 4.6 10.2 14.4 Days' Receivables 42.4 42 91.3 41 79.3 35.8 25.3 Cost of Sales/Inventory Turnover) N/A N/A N/A N/A N/A N/A N/A Days' Inventory N/A N/A N/A N/A N/A N/A N/A Cost of Sales / Payables (Payable Turnover) N/A N/A N/A N/A N/A N/A N/A Days' Payables N/A N/A N/A N/A N/A N/A N/A Sales / Working Capital 2 2.1 1.8 2.4 1.5 3.3 5.3 Coverage Ratios Earnings Before Interest & Taxes (EBIT) / Interest 3.8 3.4 3.2 3.7 3.3 3.8 5 Net Profit + Dep. Depletion. Amort. / Current Maturities LT Debt 3.9 2.8 3.5 5.6 0.9 17 N/A Leverage Ratios Fixed Assets / Net Worth N/A N/A N/A N/A N/A N/A 0.1 Debt / Net Worth 3.4 2.7 2.9 3.3 2.4 4.3 4.8 Tangible Net Worth 27.8 31.8 31.2 27.9 30.4 25.4 19.5

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SLIDE 41

Appendix: IBISWorld Reports – Financials (2 of 3)

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Key Ratios

Apr 2015-Mar 2016 by company revenue Apr 2012-Mar 2013 Apr 2013-Mar 2014 Apr 2014-Mar2015 Apr 2015-Mar2016 Small (<$10m) Medium ($10-50m) Large ((>$50m) Operating Ratios Profit before Taxes / Net worth, % 25.8 21.6 17.5 21 15.9 24.7 45.6 Profit before Taxes / Total Assets, % 5.5 5.1 4.2 4.7 4.1 5 7.8 Sales / Net Fixed Assets 52.7 51.8 46.3 57.2 69.1 50.7 44.5 Sales / Total Assets (Asset Turnover) 0.4 0.4 0.3 0.4 0.3 0.4 0.6 Cash Flow & Debt Service Ratios (% of sales) Cash from Trading N/A N/A N/A N/A N/A N/A N/A Cash after Operations 15.4 31.7 12.8 16 23.4 8.3 14.2 Net Cash after Operations 14.2 30.9 11.2 13.9 20.6 6.4 12.5 Cash after Debt Amortization

  • 3.2

7.2

  • 5
  • 0.2

0.2

  • 2.7

3.8 Debt Service P&I Coverage 1.2 3.1 0.8 1.1 1.2 0.8 2.6 Interest Coverage (Operating Cash) 1.6 4.1 1.2 1.8 2 0.9 2.7

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SLIDE 42

Appendix: IBISWorld Reports – Financials (3 of 3)

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Key Ratios

Apr 2015-Mar 2016 by company revenue Apr 2012-Mar 2013 Apr 2013-Mar 2014 Apr 2014-Mar2015 Apr 2015-Mar2016 Small (<$10m) Medium ($10-50m) Large ((>$50m) Assets, % Cash & Equivalents 16 15.4 14.9 14.9 17 11.3 14.3 Trade Receivables (net) 37.8 37.2 40.7 37.1 37.9 37.1 30.7 Inventory 13.4 13.6 12.7 13.1 8 20.9 18.1 All Other Current Assets 9.4 7.5 8.2 10.5 8.5 12.9 15.4 Total Current Assets 76.6 73.6 76.5 75.6 71.4 82.3 78.5 Fixed Assets (net) 7.2 6.4 7 6.4 8.1 4 4.4 Intangibles (net) 2.3 2.6 2.2 2.3 2.1 2 5.4 All Other Non-Current Assets 13.9 17.3 14.2 15.7 18.4 11.8 11.7 Total Assets 100 100 100 100 100 100 100 Total Assets ($m) 45,971.00 43,045.30 49,879.20 58,190.60 12,202.20 30,344.10 15,644.40 Liabilities, % Notes Payable-Short Term 36.3 33.2 36.4 35.9 31.9 43.2 35.9 Current Maturities L/T/D 2 2.1 1.9 2.5 2.6 2.4 2.6 Trade Payables 3.6 2.5 2.4 4.3 2.5 6.3 9.3 Income Taxes Payable 0.1 0.2 0.2 0.2 0.1 0.2 0.5 All Other Current Liabilities 9.2 9.2 8.3 8.1 7.2 8.5 12.6 Total Current Liabilities 51.2 47.3 49.1 51.1 44.3 60.7 60.9 Long Term Debt 10.4 11.2 10.6 12.6 16.2 7.6 8 Deferred Taxes 0.2 0.2 0.1 0.2 0.1 0.2 0.8 All Other Non-Current Liabilities 8.2 7 6.8 5.9 6.9 4.1 5.4 Net Worth 30.1 34.4 33.4 30.2 32.5 27.4 24.9 Total Liabilities & Net Worth ($m) 45,971.00 43,045.30 49,879.20 58,190.60 12,202.20 30,344.10 15,644.40 Maximum Number of Statements Used 1,275 1,162 1,242 1,286 756 423 107

slide-43
SLIDE 43

Appendix: Capital Requirements (1 of 2)

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Key Ratios

9/30/2016 Actual For Capital Adequacy(Minimum) Well Capitalized Amount Ratio Amount Ratio Amount Ratio Tier 1 Leverage ratio 1,387,049.00 12.3% 452,248.00 4.0% 565,424.00 5.0% CET1 Capital ratio 1,387,049.00 32.0% 195,094.00 4.5% 281,783.00 6.5% Tier 1 Capital ratio 1,387,049.00 32.0% 260,126.00 6.0% 346,809.00 8.0% Total Capital ratio 1,395,589.00 32.2% 346,835.00 8.0% 433,512.00 10.0% 2016 2017 (est) 2018 (est) 2019 (est) 2020 (est) 2021 (est) Risk Weighted Assets 4,335,274.00 4,499,628.51 4,653,739.02 4,778,599.24 4,890,628.16 4,987,473.07 Quarterly Average Assets 11,307,340.00 11,405,499.78 11,500,821.38 11,658,498.48 11,773,075.41 11,951,682.89 2,040,093.00 From Balance Sheet Tier 1 Capital Total Capital Common stock 1,375 1,375 Additional paid-in capital 1,156,855 1,156,855 Unearned compensation, ESOP (39,647) (39,647) Retained earnings 268,466 268,466 ACL 8,500 Total Tier 1 Capital 1,387,049 1,395,549

slide-44
SLIDE 44

Appendix: Capital Requirements (2 of 2)

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Key Ratios

Estimates 2017 (est) 2018 (est) 2019 (est) 2020 (est) 2021 (est) Tier 1 Leverage Ratio 1,387,748.00 12.3% 1,329,004.91 11.7% 1,329,580.55 11.4% 1,278,189.14 10.9% 1,291,349.18 10.8% Minimum 456,219.99 4.0% 460,032.86 4.0% 466,339.94 4.0% 470,923.02 4.0% 478,067.32 4.0% Well Capitalized 570,274.99 5.0% 575,041.07 5.0% 582,924.92 5.0% 588,653.77 5.0% 597,584.14 5.0% CET1 Capital Ratio 1,387,748.00 32.0% 1,329,004.91 29.5% 1,329,580.55 27.8% 1,278,189.14 26.1% 1,291,349.18 25.9% Minimum 202,483.28 4.5% 209,418.26 4.5% 215,036.97 4.5% 220,078.27 4.5% 224,436.29 4.5% Well Capitalized 292,475.85 6.5% 302,493.04 6.5% 310,608.95 6.5% 317,890.83 6.5% 324,185.75 6.5% Tier 1 Capital Ratio 1,387,748.00 32.0% 1,329,004.91 29.5% 1,329,580.55 27.8% 1,278,189.14 26.1% 1,291,349.18 25.9% Minimum 269,977.71 6.0% 279,224.34 6.0% 286,715.95 6.0% 293,437.69 6.0% 299,248.38 6.0% Well Capitalized 359,970.28 8.0% 372,299.12 8.0% 382,287.94 8.0% 391,250.25 8.0% 398,997.85 8.0% Total Capital Ratio 1,396,248 32.2% 1,337,505 29.7% 1,338,081 28.0% 1,286,689 26.3% 1,299,849 26.1% Minimum 359,970.28 8.0% 372,299.12 8.0% 382,287.94 8.0% 391,250.25 8.0% 398,997.85 8.0% Well Capitalized 449,962.85 10.0% 465,373.90 10.0% 477,859.92 10.0% 489,062.82 10.0% 498,747.31 10.0%

slide-45
SLIDE 45

Appendix: Comparable Criteria (1 of 2)

Back to Appendix Each of the 4 peers identified as best-fit cases for CFFN were chosen based on all having met the following criteria: Saving & Loans, not Commercial Banks

  • Thrifts like CFFN hold loan portfolios that are typically dominated by residential RE. To qualify as a thrift charter in the eyes of regulators and the

Federal Home Loan Bank, these depository institutions must have 65% of its assets in “qualified thrift investments”. These assets can include mixes of SFR RE mortgages, multifamily RE mortgages, and MBS which gives some leeway to the type of loans extended by each S&L. Total Assets near $10 Billion

  • Our sample peer group includes two S&L institutions just under $10 billion in assets, as is this case with CFFN, and two additional S&Ls who have

crossed over the $10 Billion in assets mark. Federal Home Loan Bank membership

  • Each of the 4 peers analyzed are qualifying members of the FHLB. In exchange for receiving FHLB advances at or near comparable treasury rates,

these members must own a portion of FHLB stock and remain recognized as a qualified thrift charter. Active Dividend

  • Each of the 4 peers are dividend paying stocks with an average dividend yield of 2.37% compared to CFFN’s fallacious 2.22% dividend advertised on
  • Bloomberg. It is noteworthy that no identifiable S&L firms with similar capital structure to CFFN pay biannual special dividends on a regular basis that

result in a regular payout ratio of 100%+. Similar levels of Excess Capital

  • It is critically important to look at relative capital levels when comparing Price/Book Value multiples to ensure that an apples-to-apples comparison is

being made because most investors are unwilling to pay a premium for a bank’s ‘excess equity’. The peer group identified holds excess capital twice the required minimum set forth by regulatory authorities with an average Tier 1 Leverage ratio of 12.0%.

slide-46
SLIDE 46

Appendix: Comparable Criteria (2 of 2)

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Return on Average Assets (ROAA) 2012 2013 2014 2015 2016 Equity-to-Asset Ratio 2012 2013 2014 2015 2016 WAFD 1.07% 1.19% 1.13% 1.09% 1.11% WAFD 15.2% 14.8% 13.4% 13.4% 13.3% TFSL 0.10% 0.50% 0.57% 0.57% 0.65% TFSL 16.0% 16.4% 16.3% 14.1% 13.6% NWBI 0.79% 0.84% 0.79% 0.73% 0.55% NWBI 14.2% 14.7% 13.7% 13.0% 12.2% COLB 0.96% 0.92% 1.09% 1.14% 1.13% COLB 15.8% 14.9% 14.9% 14.4% 13.6% Peer Average 0.73% 0.86% 0.90% 0.88% 0.86% Average 15.3% 15.2% 14.5% 13.7% 13.2% CFFN 0.79% 0.75% 0.85% 0.83% 0.88% CFFN 19.3% 17.8% 15.1% 14.4% 15.0% Return on Average Equity (ROAE) 2012 2013 2014 2015 2016 Bank - Tier 1 Leverage Ratio 2012 2013 2014 2015 2016 WAFD 7.26% 7.90% 8.05% 8.16% 8.35% WAFD 12.5% 12.0% 11.3% 11.7% 11.5% TFSL 0.64% 3.05% 3.52% 4.04% 4.73% TFSL 13.3% 14.2% 13.5% 12.8% 11.7% NWBI 5.48% 5.87% 5.69% 5.49% 4.28% NWBI 12.2% 12.7% 11.6% 10.3% 9.0% COLB 6.06% 6.14% 7.36% 7.93% 8.27% COLB 11.1% 9.3% 9.8% 9.9% 8.9% Peer Average 4.86% 5.74% 6.16% 6.41% 6.41% Average 12.3% 12.0% 11.6% 11.2% 10.3% CFFN 3.93% 4.14% 4.97% 5.13% 5.78% CFFN 14.6% 14.8% 13.2% 12.6% 12.3% Net Interest Margin (NIM) 2012 2013 2014 2015 2016 Loan-to-Deposit Ratio 2012 2013 2014 2015 2016 WAFD 3.18% 3.17% 3.05% 3.08% 3.11% WAFD 94% 86% 77% 81% 90% TFSL 2.39% 2.46% 2.42% 2.17% 2.23% TFSL 114% 119% 123% 135% 141% NWBI 3.63% 3.51% 3.47% 3.49% 3.73% NWBI 98% 101% 105% 108% 95% COLB 5.77% 5.16% 4.76% 4.35% 4.12% COLB 72% 76% 77% 78% 78% Peer Average 3.74% 3.58% 3.43% 3.27% 3.30% Average 94% 96% 96% 101% 101% CFFN 2.01% 1.97% 2.07% 2.07% 2.10% CFFN 123% 129% 134% 137% 135% Loan Loss Ratio (NCOs/Avg. Loans) 2012 2013 2014 2015 2016 Average Borrowings/Deposits 2012 2013 2014 2015 2016 WAFD 0.87% 0.23%

  • 0.18%
  • 0.06%
  • 0.14%

WAFD 31.2% 21.4% 19.4% 17.8% 19.3% TFSL 1.54% 0.44% 0.29% 0.06% 0.02% TFSL 5.4% 8.8% 11.3% 27.9% 27.4% NWBI 0.43% 0.36% 0.41% 0.23% 0.21% NWBI 14.7% 15.3% 15.6% 14.00% 7.52% COLB 0.52% 0.24% 0.20% 0.18% 0.15% COLB 1.6% 1.6% 1.4% 2.2% 2.0% Average 0.84% 0.32% 0.18% 0.10% 0.06% Average 13.24% 11.78% 11.92% 15.50% 14.06% CFFN 0.12% 0.02% 0.02% 0.01% 0.00% CFFN 63.6% 61.4% 77.1% 71.8% 49.8% Efficiency Ratio 2012 2013 2014 2015 2016 WAFD 34.54% 40.85% 46.76% 49.54% 50.39% TFSL 59.67% 59.81% 59.82% 63.86% 61.28% NWBI 63.86% 64.99% 67.44% 66.98% 64.78% COLB 69.17% 70.87% 63.33% 62.12% 60.04% Peer Average 56.81% 59.13% 59.34% 60.62% 59.12% CFFN 43.55% 48.13% 43.72% 44.74% 43.76% Profitability Ratios (by FYE) Balance Sheet Ratios (by FYE)

slide-47
SLIDE 47

Appendix: Cost of Equity

Cost Of Equity Low High Risk Free Rate 2.51% 2.51% Beta 0.49 0.82 Market Risk Premium 5.30% 5.30% 5.11% 6.86% Round 5.00% 7.00% Risk Free Rate = 10yr Treasury Beta = Pulled from multiple sources (Yahoo, Bloomberg, industry averages, etc.) Market Risk Premium = 2016 premium based on research by Pablo Fernandez

Historical Market Risk Profile Category# Firms Beta Peer Beta Avg. Volume Investment Banks 45 1.08 WAFD 1.14 461,748 Large Money Center Banks 10 0.86 TFSL 0.4 185,009 Financial Svcs. (Non-bank ) 258 0.65 NWBI 0.62 590,495 Regional Bank 645 0.47 COLB 1.2 400,148 Avg. 0.84 409,350 CFFN 0.55 707,524 Industry data provided is as of January 2017, as provided by NYU Stern website, credit A. Damodaran. Peer data credit Morningstar.

Where Derived?

Back to Appendix

slide-48
SLIDE 48

Appendix: Precedent Transactions

Acquirer Target Announced Acquired Deal Value(M) Price per share Deal Equity Value to Net Income Branch Banking and Trust Company National Penn Bank 08/17/2015 04/01/2016 $ 1,822.69 $ 13.00 17.57 Busey Bank Pulaski Bank National Association 12/03/2015 05/02/2016 $ 217.67 $ 17.46 15.41 Wesbanco Bank Your Community Bank 05/03/2016 09/09/2016 $ 212.94 $ 39.05 14.16 Great Western Bank Home Federal Bank 11/30/2015 05/16/2016 $ 139.49 $ 19.77 24.62 Bank of the Ozarks C1 11/09/2015 07/21/2016 $ 402.52 $ 25.00 28.22 Yadkin Bank NewBridge Bank 10/13/2015 03/01/2016 $ 449.42 $ 11.40 22.92 Pinnacle Bank Avenue Bank 01/28/2016 07/01/2016 $ 206.78 $ 20.03 29.74 Towne Bank Monarch Bank 12/17/2015 06/24/2016 $ 220.21 $ 18.57 17.35 Univest Bank and Trust Fox Chase Bank 12/08/2015 07/01/2016 $ 251.99 $ 21.00 25.53 AVERAGES $ 435.97 $ 20.59 21.72 Net Income 83.30 Implied Equity 1,809.65 Shares 133.05 Implied Price $ 13.60 Implied High $ 18.62 Implied Low $ 8.87

Why Didn’t Use

  • Used Mergers that had been completed
  • Things have changed since mergers went through
  • Financial Sector jumped 17% since election (per Bloomberg)
  • Capitol Federal stronger banks acquired (demands higher multiples)

Back to Appendix

slide-49
SLIDE 49

Appendix: Mergers

Acquirer Target Premium week Premium 4 week Branch Banking and Trust Company National Penn Bank 18.8% 13.0% Busey Bank Pulaski Bank National Association 8.1% 15.2% Wesbanco Bank Your Community Bank 18.4% 23.2% Great Western Bank Home Federal Bank 22.5% 22.7% Bank of the Ozarks C1 19.5% 26.6% Yadkin Bank NewBridge Bank 32.4% 34.5% Pinnacle Bank Avenue Bank 51.1% 39.4% Towne Bank Monarch Bank 45.7% 43.2% Univest Bank and Trust Fox Chase Bank 14.2% 19.5% Average Premium 25.6% 26.4% Capitol Federal Price $15.30 $15.30 Implied Price $19.22 $19.33 Implied Low $16.54 $17.30 Implied High $23.11 $21.91

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SLIDE 50

Appendix: Excess Return

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