Capitol Federal Financial Inc (Form: 10-K, Received: 11/29/2012 16:35:45)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)

þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 30, 20 12

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 00 1-34814

________________

Capitol Federal Financial , Inc.

( Exact name of registrant as specified in its charter)



Maryland	27-2631712
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
700 Kansas Avenue, Topeka, Kansas	66603
(Address of principal executive offic e s)	(Zip Code)

Registrant’s telephone number, including area code:

(785) 235-1341

Securities registered pursuant to Section 12(b) of the Act:

Common Stock, par value $0.01 per share

The NASDAQ Stock Market LLC

(Title of Class)

(Name of Each Exchange on Which Registered)

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes þ No ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15 ( d ) of the Act.

Yes ¨ No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days . Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes þ No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Act. (Check one):

Large accelerated filer þ Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company ¨

(do not check if smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No þ

The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant, computed by reference to the average of the closing bid and asked price of such stock on the NASDAQ Stock Market as of March 31, 2012, was $ 1.93 billion.

As of November 16 , 2012, there were issued and outstanding 152,907,557 shares of the Registrant’s common stock.

DOCUMENTS INCORPORATED BY REFERENCE

Part II of Form 10-K - Portions of the Annual Report to Stockholders for the year ended September 30, 20 12 . Part III of Form 10-K - Portions of the proxy statement for the Annual Meeting of Stockholders for the year ended September 30, 2012.


			Page No.
PART I	Item 1.	Business	4
	Item 1A.	Risk Factors	36
	Item 1B.	Unresolved Staff Comments	40
	Item 2.	Properties	41
	Item 3.	Legal Proceedings	41
	Item 4.	Mine Safety Disclosures	41


PART II	Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	41
	Item 6.	Selected Financial Data	42
	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	42
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	42
	Item 8.	Financial Statements and Supplementary Data	43
	Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	43
	Item 9A.	Controls and Procedures	43
	Item 9B.	Other Information	43


PART III	Item 10.	Directors, Executive Officers, and Corporate Governance	43
	Item 11.	Executive Compensation	44
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	44

	Item 13.	Certain Relationships and Related Transactions, and Director Independence	44
	Item 14.	Principal Account ant Fees and Services	44


PART IV	Item 15.	Exhibits and Financial Statement Schedules	45


SIGNATURES			46


INDEX TO EXHIBITS			47

PRIVATE SECURITIES LITIGATION REFORM ACT—SAFE HARBOR STATEMENT

Capitol Federal Financial, Inc. (the “Company”), and Capitol Federal Savings Bank (“Capitol Federal Savings” or the “Bank”), may from time to time make written or oral “forward - looking statements”, including statements contained in documents filed or furnished by the Company with the Securities and Exchange Commission (“SEC”). These forward-looking statements may be included in this Annual Report on Form 10-K and the exhibits attached to it, in the Company’s reports to stockholders , in the Company’s press releases, and in other communications by the Company, which are made in good faith by us pursuant to the “safe harbor” provisions 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 that are subject to significant risks and uncertainties, and are subject to change based on various factors, some of which are beyond our control. The words “may”, “could”, “should”, “would”, “believe”, “anticipate”, “estimate”, “expect”, “intend”, “plan” and similar expressions are intended to identify forward-looking statements. The following factors, among others, could cause our future results to differ materially from the plans, objectives, goals, expectations, anticipations, estimates and intentions expressed in the forward-looking statements:

·	our ability to continue to maintain overhead costs at reasonable levels;

·	our ability to continue to originate a significant volume of one- to four-family mortgage loans in our market areas or to purchase loans through correspondents ;

·	our ability to acquire funds from or invest funds in wholesale or secondary markets at favorable yields as compared to the related funding source ;

·	our ability to access cost-effective funding;

the future earnings and capital levels of the Bank and the continued non-objection by our primary federal banking regulator s, to the extent required, to distribute capital from the Bank to the Company , which could affect the ability of the Company to pay dividends in accordance with its dividend policies;

·	fluctuations in deposit flows, loan demand, and/or real estate values, as well as unemployment levels, which may adversely affect our business;

·	the credit risks of lending and investing activities, including changes in the level and direction of loan delinquencies and write-offs , changes in property values, and changes in estimates of the adequacy of the allowance for credit losses (“ACL”) ;

·	results of examinations of the Bank and the Company by their respective primary federal banking regulators , including the possibility that the regulators may, among other things, require us to increase our ACL ;

·	the strength of the U.S. economy in general and the strength of the local economies in which we conduct operations;

·	the effects of, and changes in, trade, fiscal policies and laws, and monetary and interest rate policies of the Board of Governors of the Federal Reserve System (“FRB”) ;

·	the effects of, and changes in, foreign and military policies of the United States government;

·	inflation, interest rate, market and monetary fluctuations;

·	the timely development and acceptance of our new products and services and the perceived overall value of these products and services by users, including the features, pricing and quality compared to competitors’ products and services;

·	the willingness of users to substitute competitors’ products and services for our products and services;

·	our success in gaining regulatory approval of our products and services and branching locations, when required;

·	the impact of changes in financial services laws and regulations, including laws concerning taxes, banking , securities and insurance and the impact of other governmental initiatives affecting the financial services industry;

·	implementing business initiatives may be more difficult or expensive than anticipated;

·	technological changes;

·	acquisitions and dispositions;

·	changes in consumer spending and saving habits; and

·	our success at managing the risks involved in our business.

This list of important factors is not all inclusive. We do not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Company or the Bank.

PART I

As used in this Form 10-K, unless we specify otherwise, “the Company,” “we,” “us,” and “our” refer to Capitol Federal Financial, Inc. a Maryland corporation. “Capitol Federal Savings,” and “ the Bank,” refer to Capitol Federal Savings Bank, a federal savings bank and the wholly-owned subsidiary of Capitol Federal Financial , Inc .

Item 1. Business

General

The Company is a Maryland corporation that was incorporated in April 2010 to be the successor corporation upon completion of its conversion from a mutual holding company form of organization to a stock form of organization . The Bank is a wholly-owned subsidiary of the Company. The Company’s common stock is traded on the Global Select tier of the NASDAQ Stock Market under the symbol “CFFN.”

In December 2010, Capitol Federal Financial completed its conversion from a mutual holding company form of organization to a stock form of organization (“the corporate reorganization”). Capitol Federal Financial, which owned 100% of the Bank, was succeeded by Capitol Federal Financial, Inc. As part of the corporate reorganization, Capitol Federal Savings Bank MHC’s (“ MHC ”) ownership interest of Capitol Federal Financial was sold in a public stock offering. Capitol Federal Financial, Inc. sold 118,150,000 shares of common stock at $10.00 per share in the stock offering. In addition, t he publicly held shares of Capitol Federal Financial were exchanged for new shares of common stock of Capitol Federal Financial, Inc. The exchange ratio was 2.26 37 and ensured that immediately after the corporate reorganization the public stockholders of Capitol Federal Financial (meaning those stockholders other than MHC) owned the same aggregate percentage of Capitol Federal Financial, Inc. common stock that they owned of Capitol Federal Financial common stock immediately prior to that time. In lieu of fractional shares, Capitol Federal Financial stockholders were paid in cash. Gross proceeds from the offering were $1.18 billion and related offering expenses were $46.7 million, of which $6.0 million were incurred and deferred in fiscal year 2010. The net proceeds from the stock offering were $1.13 billion, of which 50%, or $567.4 million, was contributed to the Bank as a capital contribution , as required by the regulations of the Office of Thrift Supervision (the “OTS”) , which was succeeded as the Bank’s primary regulator by the Office of the Comptroller of the Currency (the “OCC”) effective July 21, 2011. The other 50%, or $567.4 million, remained at Capitol Federal Financial, Inc., of which $40.0 million was contributed to the Bank’s charitable foundation, Capitol Federal Foundation, and $47.3 million was loaned to the Employee Stock Ownership Plan (“ESOP”) for its purchase of Capitol Federal Financial, Inc. shares in the stock offering. In April 2011, the Company redeemed the outstanding Junior Subordinated Deferrable Interest Debentures (the “ Debentures ”) of $53.6 million using a portion of the offering proceeds from the corporate reorganization.

The Bank is a federally chartered and insured savings bank headquartered in Topeka, Kansas. The Bank is examined and regulated by the OCC, its primary regulator, and its deposits are insured up to applicable limits by the Deposit Insurance Fund (“DIF”), which is administered by the Federal Deposit Insurance Corporation (“FDIC”). We primarily serve the metropolitan areas of Topeka, Wichita, Law rence, Manhattan, Emporia and Salina, Kansas and a portion of the metropolitan area of greater Kansas City through 36 traditional and 10 in-store branches . The Company is examined and regulated by the FRB.

We have been, and intend to continue to be, a community-oriented financial institution offering a variety of financial services to meet the needs of the communities we serve. We attract retail deposits from the general public and invest those funds primarily in permanent loans secured by first mortgages on owner-occupied, one- to four-family residences. To a less er extent, we also originate consumer loans, loans secured by first mortgages on non-owner-occupied one- to four-family residences, multi-family and commercial real estate loans , and construction loans. While our primary business is the origination of one- to four-family mortgage loans funded through retail deposits, we also purchase whole one- to four-family mortgage loans from correspondent and nationwide lenders, and invest in certain investment securities and mortgage-backed securities (“MBS”) using funding from retail deposits, Federal Home Loan Bank (“FHLB”) advances , and repurchase agreements. The Company is significantly affected by prevailing economic conditions including federal monetary and fiscal policies and federal regulation of financial institutions. Retail d eposit balances are influenced by a number of factors including interest rates paid on competing personal investment products, the level of personal income, and the personal rate of savings within our market areas. Lending activities are influenced by the demand for housing and other loans, changing loan underwriting guidelines, as well as interest rate pricing competition from other lending institutions. The primary sources of funds for lending activities include deposits, loan repayments, investment income, borrowings, and funds provided from operations.

Our revenues are derived principally from interest on loans, MBS and investment securities. Our primary sources of funds are retail deposits, borrowings, repayments on and maturities of loans and MBS, calls and maturities of investment securities, and funds generated by operations.

We offer a variety of deposit accounts having a wide range of interest rates and terms, which generally include savings accounts, money market accounts, interest-bearing and non-interest-bearing checking accounts, and certificates of deposit with terms ranging from 91 days to 96 months.

Our executive offices are located at 700 South Kansas Avenue, Topeka, Kansas 66603, and our telephone number at that address is (785) 235-1341.

Available Information

Our Internet website address is www.capfed.com. Financial information, including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports can be obtained free of charge from our website. These reports are available on our website as soon as reasonably practicable after they are electronically filed with or furnished to the SEC. These reports are also available on the SEC’s website at http://www.sec.gov.

Market Area and Competition

Our corporate office is located in Topeka, Kansas. We currently have a network of 46 branches (36 traditional branches and 10 in-store branches) located in nine counties throughout the state of Kansas and two counties in Missouri. We primarily serve the metropolitan areas of Topeka, Wichita, Lawrence, Manhattan, Emporia , and Salina, Kansas and a portion of the metropolitan area of greater Kansas City . In addition to providing full service banking offices, we also provide our customers telephone and internet banking capabilities .

The Bank ranked first in deposit market share , at 7.77% , in the state of Kansas as reported in the FDIC “Summary of Deposits - Market S hare Report” dated June 30, 2012 . T his is an increase fro m our ranking and deposit market share at June 30, 2011 , which was second with a deposit market share of 7.66 %. Deposit market share is measured by total deposits, without consideration for type of deposit . We do not offer commercial deposit accounts, while many of our competitors have both commercial and retail deposits in their total deposit base. Some of our competitors also offer products and services that we do not, such as trust services and private banking, that add to their total deposits . C onsumers also have the ability to utilize online financial institutions and investment brokerages that are not confined to any specific market area . Management considers our well-established retail banking networ k together with our reputation for financial strength and customer service to be major factors in our success at attracting and retaining customers in our market areas.

The Bank is consistently one of the top one- to four-family lenders with regard to loan origination volume in the s tate of Kansas. Through our strong relationships with real estate agents and marketing efforts which reflect our reputation and pricing, we attract mortgage loan business from walk-in customers, customers that apply online, and existing customers. Competition in originating one- to four-family mortgage loans primarily comes from other savings institutions, commercial banks, credit unions, and mortgage bankers. Other savings institutions, commercial banks, credit unions, and finance companies provide vigorous competition in consumer lending.

The Bank currently expects to open one branch in calendar year 201 3 . The branch will be located in our Kansas City market area. Management continues to consider expansion opportunities in all of our market areas.

Lending Practices and Underwriting Standards

General. Originating and purchasing loans secured by one- to four-family residential properties is the Bank’s primary business, resulting in a loan concentration in residential first mortgage loans. One- to four-family loans are purchased on a loan-by-loan basis and in bulk loan packages from correspondent lenders located in our market areas and generally in the central and southern United States. As a result of originating loans in our branches, along with the correspondent lenders in our local markets, the Bank has a concentration of loans secured by real property located in Kansas and Missouri. Additionally, the Bank purchases whole one- to four-family loans in bulk packages from nationwide lenders. The Bank also makes consumer loans, construction loans secured by residential or commercial properties, and real estate loans secured by multi-family or commercial properties .

For a discussion of our market risk associated with loans see “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Quantitative and Qualitative Disclosure about Market Risk” in the Annual Report to Stockholders attached as Exhibit 13 to this Annual Report on Form 10-K.

Loans over $500 thousand must be underwritten by two of our highest class of underwriters. Any loan greater than $750 thousand must be approved by the Asset and Liability Management Committee (“ALCO”) and loans over $1.5 million must be approved by the Board of Directors. For loans requiring ALCO and/or Board of Directors’ approval, lending management is responsible for presenting to ALCO and/or the Board of Directors information about the creditworthiness of the borrower and the value of the subject property. Information pertaining to the creditworthiness of the borrower generally consists of a summary of the borrower’s credit history, employment stability, sources of income, assets, net worth, and debt ratios. The value of the property must be supported by an independent appraisal report prepared in accordance with our appraisal policy. Loans over $500 thousand are priced above the standard mortgage rate.

Under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 , the maximum amount which we could have loaned to any one borrower and the borrower’s related entities at September 30, 2012 was $ 204.9 million. Our largest lending relationship to a single borrower or a group of related borrowers at September 30, 2012 consisted of 11 multi-family real estate projects located in Kansas, one single-family loan located in Colorado and one single-family loan located in Kansas, and five commercial real estate projects with three located in Kansas, one located in Colorado, and one located in Texas. Additionally, d uring fiscal year 2012, the Bank committed to purchasing a commercial participation in the amount of $3. 9 million for a construction-to-permanent project secured by commercial real estate located in Louisiana. Total commitments and loans outstanding to this group of related borrowers was $ 47.9 million as of September 30, 2012 . We have over 30 years of experience with this group of borrowers. Each of the loans to this group of borrowers was current at September 30, 2012 .

The second largest lending re lationship at September 30, 2012 , consisted of 9 loans totaling $ 10.0 million. Five loans are secured by one- to four-family real estate and four loans are secured by multi-family real estate units. We have over 30 years of experience with the borrowers. Each of the loans to this group of borrowers was current at Se ptember 30, 2012 .

One- to Four-Family Residential Real Estate Lending. The Bank originates and services conventional mortgage loans , or loans not insured or guaranteed by a government agency. The Bank also originates Federal Housing Administration (“FHA”) insured loan products which are generally sold, along with the servicing of these loans. New loans are originated through referrals from real estate brokers and builders, our marketing efforts, and our existing and walk-in customers. While the Bank originates both adjustable and fixed-rate loans, our ability to originate loans is dependent upon customer demand for loans in our market areas. Demand is affected by the local housing market, competition , and the interest rate environment. During the 20 12 and 20 11 fiscal years, the Bank originated and refinanced $ 688.5 million and $ 652.3 million of one- to four-family fixed -rate mortgage loans, and $ 117.9 million and $ 107.4 million of one- to four-family adjustable-rate mortgage (“ ARM ”) loans, respectively.

Repayment

The Bank’s one- to four-family loans are primarily fully amortizing fixed- rate or ARM loans . The contractual maturities for fixed-rate loans can be up to 30 y ears and the contractual maturities for ARM loans can be up to 40 years . Our one- to four-family loans are generally not assumable and do not contain prepayment penalties. A “ due on sale ” clause, allowing the Bank to declare the unpaid principal balance due and payable upon the sale of the secured property, is generally included in the security instrument.

Pricing

Our pricing strategy for first mortgage loan products includes setting interest rates based on secondary market prices and competitor pricing within our local lending markets . ARM loans are offered with either a three-year, five-year , or seven-year term to the initial repricing date. After the initial period, the interest rate for each ARM loan generally adjusts annually for the remainder of the term of the loan. Several different indices are used to reprice our ARM loans.

Adjustable - rate loans

Current adjustable-rate one- to four-family conventional mortgage loans originated by the Bank generally provide for a specified rate limit or cap on the periodic adjustment to the interest rate, as well as a specified maximum lifetime cap and minimum rate, or floor. As a consequence of using caps, the interest rates on these loans may not be as rate sensitive as our cost of funds. Negative amortization of principal is not allowed. For three or five year ARM loans, borrowers are qualified based on the principal, interest, taxes and insurance payments at the initial rate plus the life of

loan cap and the initial rate plus the first period cap, respectively. For seven year ARM loans, borrowers are qualified based on the principal, interest, taxes and insurance payments at either the initial rate or the fully indexed accrual rate, whichever is greater. After the initial three, five, or seven year period, the interest rate is repriced annually and the new principal and interest payment is based on the new interest rate , remaining unpaid principal balance, and term of the ARM loan. Our ARM loans are not automatically convertible into fixed-rate loans; however, we do allow borrowers to pay a n endorsement fee to convert an ARM loan to a fixed-rate loan. ARM loans can pose different credit risks than fixed-rate loans, primarily because as interest rates rise , the borrower’s payment also rises, increasing the potential for default. This specific risk type is known as repricing risk.

The Bank no longer offers an interest-only ARM product; however it still hold s in its portfolio originated and purchased interest-only ARM loans. At the time of origination, these loans did not require principal payments for a period of up to ten years. Borrowers were qualified based on a fully amortizing payment at the initial loan rate. The Bank was more restrictive on debt-to-income ratios and credit scores on interest-only ARM loans than on other ARM loans to offset the potential risk of payment shock at the time the loan rate reprices and/or the principal and interest payments begin. At September 30, 2012 , $ 67.0 million, or approximately 1 % of our one- to four-family loan portfolio, consisted of non-amortizing interest-only ARM loans. The majority of these loans were purchased from nationwide lenders during fiscal year 2005.

Underwriting

One- to four-family loans are underwritten manually or by using an internal loan origination auto-underwriting method . Th is method closely resemble s the Bank’s manual underwriting standards which are generally in accordance with Federal Home Loan Mortgage Corporation (“FHLMC”) and Federal National Mortgage Association (“FNMA”) manual underwriting guidelines. Th is method includes, but is not limited to, an emphasis on credit scoring , qualifying ratios reflecting the applicant’s abilit y to repay, asset reserves, loan-to-value (“LTV”) ratio , property , and occupancy type . Full documentation to support the applicant’s credit, income, and sufficient funds to cover all applicable fees and reserves at closing are required on all loans. Loans that do not meet the automated underwriting standards are referred to a staff underwriter for manual underwriting. Properties securing one- to four-family loans are appraised by either staff appraisers or fee appraisers, both of which are independent of the loan origination function and have been approved by the Board of Directors .

Mortgage Insurance

For a conventional mortgage with an LTV ratio in excess of 80% at the time of origination, private mortgage insurance (“PMI”) is required in order to reduce the Bank’s loss exposure to 80% of either the appraised value or the purchase price of the property , whichever is less . The Bank will lend up to 97% of the lesser of the appraised value or purchase pric e for conventional one- to four-family loans, provided PMI is obtained. Management continuously monitors the claim-paying ability of our PMI counterparties. While the mortgage insurance industry as a whole has been weakened, we be lieve that our PMI counterparties have the ability to meet potential claim obligations we may file in the foreseeable future, with the exception of Republic Mortgage Insurance Company (“RMIC”) who is currently paying 50% of the claim s filed and approved as required by its regulator. The amount of loans in our portfolio covered by PMI provided by RMIC as of September 30, 2012 was $ 98.0 million , of which $ 97.5 million was current.

FHA loans have mortgage insurance provided by the federal government. The loans are up to 96.5 % LTV, prior to including the FHA insuring premium, which is calculated using the lesser of the appraised value or purchase price . The loans are originated and underwritten manually according to private investor and FHA guidelines. The Bank offers FHA loans to accommodate customers who may not qualify for a conventional mortgage loan. FHA loans are originated by the Bank with the intention of selling the loans on a flow basis to a private investor, with servicing released.

Purchased loans

The Bank purchases conventional o ne- to four-family loans and the related servicing rights, on a loan-by-loan basis, from correspondent lenders located in our market areas and generally in the central and southern United States. At September 30, 2012 , the Bank had 26 correspondent lending relationships. The loan products offered by our correspondent lenders are underwritten by the Bank’s underwriters to standards that are at least as restrictive as the Bank’s underwriting standards. During fiscal years 2012 and 20 11 , the Bank purchased $ 267.5 million and $ 92.8 million, respectively, of one- to four-family loans from correspondent lenders . We pay a premium of 0.50% to 1.0% of the loan balance and we pay 1.0% of the loan balance to purchase the servicing of these loans.

During fiscal year 2011, the Bank entered into an agreement with a mortgage sub-servicer to provide loan servicing for loans originated by the Bank’s correspondent lenders in certain states . The sub-servicer has experience servicing loans

in the market areas in which we purchase loans and will service the loans according to the Bank’s servicing standards, which is intended to allow the Bank greater control over servicing and help maintain a standard of loan performance.

The Bank also purchases conventional o ne- to four-family loans from correspondent and nationwide lenders in bulk loan packages . The servicing rights are generally retained by the lender/seller for the loans purchased from nationwide lenders ; however, our sub-servicer service s bulk loan packages purchased from nationwide lenders and certain correspondent lenders , when economically feasible. The servicing with nationwide lenders is governed by a servicing agreement, which outlines collection policies and procedures, as well as oversight requirements, such as servicer certifications attesting to and providing proof of compliance with the servic ing agreement. Each loan in a bulk loan package is evaluated on c riteria such as loan amount, credit scores, LTV ratios, geographic location, and debt ratios , and is required to be comparable to loans originated according to the Bank’s internal underwriting standards. Before committing to purchase a bulk loan package , the Bank’s Chief Lending Officer or Secondary Marketing Manager reviews specific underwriting criteria of each loan in the package , and if a loan does not meet the Bank’s underwriting standards without sufficient compensating factors, it will be removed from the p ackage. Once the review of the specific criteria is complete and loans not meeting the Bank’s standards are removed from the package , changes are sent back to the lender /seller for acceptance and pricing . Before the package is funded, an internal Bank underwriter or a third party reviews at least 25% of the loan files to confirm loan terms, credit scores, debt service ratios, property appraisal s, and other underwriting - related documentation. Our standard contractual agreement with the lender /seller includes recourse options for any breach of representation or warranty with respect to the loans purchased. The Bank did not request any lenders /sellers to repurchase loans for breach of repres entation during fiscal year 2012 .

During fiscal year 2012 , the Bank completed bulk loan purchase s of $ 362.7 million of one- to four-family loans , compared to $89.2 million in fisca l year 2011 . The primar y reason for the increase in bulk loan purchases between years was due to a $ 34 2.5 million purchase in August 2012. The Bank has full recourse from the seller if a loan in this package goes 60 days delinquent at any point during the life of the loan. If such an event occurs, t he seller will either replace or buy the loan from the Bank.

Bulk loan purchases enable the Bank to attain some geographic diversification in the loan portfolio. We have experienced some performance issues and losses on some of the loans purchased prior to fiscal year 2008, the majority of which were originated between calendar years 2004 and 2006 . These loans met our underwriting standards at the time of purchase; however, a s a result of the continued elevated levels of unemployment and the declines in real estate values , we have experienced an increase in non-performing purchased loans and charge-offs/losses related to those loans , as compared to historical levels . See additional discussion regarding non-performing purchased loans in “Asset Quality – Loans and Other Real Estate Owned .”

Loan endorsement program

In an effort to offset the impact of repayments and to retain our customers, the Bank offers existing loan customers , including customers whose loan was purchased from a correspondent lender, whose loans have no t been sold to third parties and have not been delinquent on their contractual loan payments during the previous 12 months the opportunity, for a fee, to endorse their original or existing loan terms to curr ent loan terms being offered. Effective during the June 30, 2012 quarter, the Bank no longer offers the option to advance the fee to endorse a loan. The Bank does not solicit customers for this program, but considers it a valuable opportunity to retain customers who, due to our initial underwriting criteria , could likely obtain similar financing elsewhere. During fiscal year s 2012 and 2011 , we endorsed $ 886.9 million and $965.1 million of loans , respectively, the majority of which were one- to four-family loans.

L oan sales

Conventional one- to four-family loans may be sold on a bulk basis for portfolio restructuring or on a flow basis as loans are originated to reduce interest rate risk and/or maintain a certain liquidity position. The Bank generally retains the servicing on these loans. ALCO determines the criteria upon which conventional one- to four-family loans are to be originated as held-for-sale or held-for-investment. Conventional one- to four-family loans originated as held-for-sale are to be sold in accordance with policies set forth by ALCO. Conventional one- to four-family loans originated as held-for-investment are generally not eligible for sale unless a specific segment of the portfolio is identified for asset restructuring purposes. Generally, the Bank will continue to service these loans. The Bank did not sell any conventional one- to four-family loans during fiscal year 2012, compared to $5.1 million of conventional one- to four-famil y loan sales during fiscal year 2011 . In April 2011, we discontinued originating conventional loans for sale under the program that we sold loans under during fiscal year 201 1 .

As noted above, FHA loans are originated with the intention of selling the loans on a flow basis with servicing released. The Bank sold $ 6.3 million and $8.1 million of FHA loans during fiscal year s 2012 and 2011, respectively.

Construction Lending. The Bank also originates construction-to-permanent loans primarily secured by one- to four-family residential real estat e . Bank policy permits a limited amount of construction loans secured by multi-family dwellings and commercial real estate. Multi-family dwelling and commercial real estate underwriting details are presented in the “ Multi-family and Commercial Real Estate Lending ” below. At September 30, 2012 , we had $ 52.3 million in construction-to-permanent loans outstanding, including undisbursed loan funds, representing almost 1% of our total loan portfolio. Of the $ 52.3 million in construction-to-permanent loans outstanding at September 30, 2012, $ 38.3 million, or approximately 73 %, related to one- to four-family residential real estate.

The majority of the one- to four-family construction loans are secured by property located within the Bank’s Kansas City market area. Construction loans are obtained primarily by homeowners who will occupy the property when construction is complete. Construction loans to builders for speculative purposes are not permitted. The application process includes submission of complete plans, specifications, and costs of the project to be constructed. All construction loans are manually underwritten using the Bank’s internal underwriting standards.

The Bank’s one- to four-family construction-to-permanent loan program combines the construction loan and the permanent loan into one loan allowing the borrower to secure the same interest rate throughout the construction period and the permanent loan. The interest rate and loan products offered on the one- to four-family construction-to-permanent loan program are the same as what is offered for non-construction-to-permanent one- to four-family loans. The loan term is longer than the non-construction one- to four-family loans due to consideration for the construction period, which is generally between 12 and 18 months.

Construction draw requests and the supporting documentation are reviewed and approved by management prior to funding . The Bank also performs regular documented inspections of the construction project to ensure the funds are being used for the intended purpose and the project is being completed according to the plans and specifications provided. The Bank charges a 1% fee at closing, based on the loan amount, for these administrative requirements. Interest is billed and collected monthly based on the amount of funds disbursed. Once the construction period is complete, the payment method is changed from interest-only to an amortized principal and interest payment for the remaining term of the loan.

Consumer Lending. The Bank offers a variety of secured consumer loans, including home equity loans and lines of credit, home improvement loans, auto loans, and loans secured by savings deposits. The Bank also originates a very limited amount of unsecured loans. The Bank does not originate any consumer loans on an indirect basis, such as contracts purchased from retailers of goods or services which have extended credit to their customers. All consumer loans are originated in the Bank’s market areas. At September 30, 2012 , our c onsumer loan portfolio totaled $ 155.9 million, or approximately 3% of our total loan portfolio.

The majority of the consumer loan portfolio is comprised of home equity lines of credit, which have interest rates that can adjust monthly based upon changes in the Prime rate, to a maximum of 18%. Home equity lines originated after June 2010 may be originated in amounts, together with the existing first mortgage, of up to 90% of the value of the property. Home equity lines originated prior to June 2010 may have be en originated in amounts, together with the amount of the existing first mortgage, of up to 100% of the value of the collateral . Approximately 84 % of our home equity lines were originated prior to June 2010. Home equity lines of credit originated after June 2010 have a seven year draw period with a 10 year repayment term and generally require a payment of 1.5% of the outstanding loan balance per month during the draw period, with an amortizing payment during the repayment period. The majority of home equity lines of credit originated prior to June 2010 generally require a payment of 1.5% of the outstanding loan balance per month, but have no stated term-to-maturity and no repayment period . Interest-only home equity lines of credit have a maximum term of 12 months, monthly payments of accrued interest, and a balloon payment at maturity. For home equity lines of credit, r epaid principal may be re-advanced at any time, not to exceed the original credit limit of the loan. Closed-end home equity loans may be originated up to 95% of the value of the property securing the loans, taking into consideration the existing first mortgage. The term-to-maturity of closed-end home equity loans may be up to 20 years. Other consumer loan terms vary according to the type of collateral and the length of the contract. Home equity loans, including lines of credit and closed-end loans , comprised approximately 9 6 % of our consumer loan portfolio , or $ 149.3 million, at September 30, 2012 . As of September 30, 201 2 , 79 % of the home equity loan portfolio was adjustable-rate.

The underwriting standards for consumer loans include a determination of the applicant’s credit history and an assessment of their ability to meet existing obligations and payments on the proposed loan. Although creditworthiness of the applicant is a primary consideration, the underwriting process also includes a comparison of the value of the security in relation to the proposed loan amount.

Consumer loans generally have shorter terms to maturity or reprice more frequently, which reduces our exposure to credit risk and changes in interest rates, and usually carry higher rates of interest than do one- to four-family loans. However, c onsumer loans may entail greater credit risk than do one- to four-family loans, particularly in the case of consumer loans that are secured by rapidly depreciable assets, such as automobiles. In addition, consumer loan collections are dependent on the borrower’s continuing financial stability, and thus are likely to be affected by adverse personal circumstances. Furthermore, the application of various federal and state laws, including bankruptcy and state insolvency laws, may limit the amount which can be collected on these loans. M anagement believes that offering consumer loan products helps to expand and create stronger ties to our existing customer base by increasing the number of customer relationships and providing cross-marketing opportunities.

Multi-family and Commercial Real Estate Lending . At September 30, 2012 , multi-family and commercial real estate loans totaled $ 48.6 million, or approximately 1% of our total loan portfolio. The Bank’s multi-family and commercial real estate loans are originated by the Bank or are in participation with a lead bank, and are secured primarily by multi-family dwellings and small commercial buildings . Approximately 5 % of the multi-family and commercial real estate portfolio at September 30, 2012, or $ 2.2 million, represent participations with another bank.

Multi-family and commercial real estate loans are granted based on the income producing potential of the property and the financial strength of the borrower and guarantors . At the time of origination, LTV ratios on multi-family and commercial real estate loans cannot exceed 80% of the appraised value of the property securing the loans. The net operating income, which is the income derived from the operation of the property less all operating expenses, must be sufficient to cover the payments related to the outstanding debt at the time of origination. The Bank generally requires personal guarantees of the borrowers covering a portion of the debt in addition to the security property as collateral for these loans. Appraisals on properties securing these loans are performed by independent state certified fee appraisers approved by the Board of Directors. Our multi-family and commercial real estate loans are originated with either a fixed or adjustable interest rate. The interest rate on ARM loans is based on a variety of indices, generally determined through negotiation with the borrower. While maximum maturities may extend to 30 years, these loans frequently have shorter maturities and may not be fully amortizing, requiring balloon payments of unamortized principal at maturity.

We generally do not maintain a tax or insurance escrow account for multi-family or commercial real estate loans. In order to monitor the adequacy of cash flows on income-producing properties with a principal balance of $1.5 million or more, the borrower is notified annually to provide financial information including rental rates and income, maintenance costs and an update of real estate property tax payments, as well as personal financial information.

Our multi-family and commercial real estate loans are generally large dollar loans and involve a greater degree of credit risk than one- to four-family loans. Such loans typically involve large balances to single borrowers or groups of related borrowers. Because payments on multi-family and commercial real estate loans are often dependent on the successful operation or management of the properties, repayment of such loans may be subject to adverse conditions in the economy or the real estate market. If the cash flow from the project is reduced, or if leases are not obtained or renewed, the borrower’s ability to repay the loan may be impaired.

Loan Portfolio. The following table presents the composition of our loan portfolio as of the dates indicated. Total loans receivable increased $453.3 million, from $5.20 billion at September 30, 2011 to $5.65 billion at September 30, 2012. The increase in the loan portfolio was due primarily to an increase in one- to four-family loans resulting largely from $630.2 million of bulk and correspondent loan purchases during the current fiscal year , which, in turn, increase d premiums/deferred costs. In January 2012, management implemented a loan charge-off policy as OCC Call Report requirements do not permit the use of specific valuation allowances (“ SVAs ”) , which the Bank was previously utilizing for potential loan losses, as permitted by our previous regulator. As a result of the implementation of the charge-off policy, $3.5 million of SVAs were charged-off during the March 31, 2012 quarter, which accounts for the majority of the $4.4 million decrease in ACL between September 30, 2011 and September 30, 2012.


	September 30,
	2012				2011				2010				2009				2008
	Amount		Percent		Amount		Percent		Amount		Percent			Amount	Percent		Amount		Percent
	(Dollars in thousands)
Real Estate Loans:
One- to four-family	$	5,392,429	95.5	%	$	4,918,778	94.7	%	$	4,915,651	94.4	%	$	5,321,935	94.2	%	$	5,026,358	93.4	%
Multi-family and commercial		48,623	0.9			57,965	1.1			66,476	1.3			80,493	1.4			56,081	1.0
Construction		52,254	0.9			47,368	0.9			33,168	0.6			39,535	0.7			85,178	1.6
Total real estate loans		5,493,306	97.3			5,024,111	96.7			5,015,295	96.3			5,441,963	96.3			5,167,617	96.0

Consumer Loans:
Home equity		149,321	2.6			164,541	3.2			186,347	3.6			195,557	3.5			202,956	3.8
Other		6,529	0.1			7,224	0.1			7,671	0.1			9,430	0.2			9,272	0.2
Total consumer loans		155,850	2.7			171,765	3.3			194,018	3.7			204,987	3.7			212,228	4.0
Total loans receivable		5,649,156	100.0	%		5,195,876	100.0	%		5,209,313	100.0	%		5,646,950	100.0	%		5,379,845	100.0	%

Less:
Undisbursed loan funds		22,874				22,531				15,489				20,649				43,186
ACL		11,100				15,465				14,892				10,150				5,791
Discounts/unearned loan fees		21,468				19,093				22,267				23,549				19,252
Premiums/deferred costs		(14,369)				(10,947)				(11,537)				(11,363)				(9,164)
Total loans receivable, net	$	5,608,083			$	5,149,734			$	5,168,202			$	5,603,965			$	5,320,780

The following table presents the contractual maturity of our loan portfolio at September 30, 2012 . Loans which have adjustable or renegotiable interest rates are shown as maturing in the period during which the contract is due. The table does not reflect the effects of possible prepayments or enforcement of due on sale clauses.


	Real Estate												Consumer
					Multi-family and				Construction
	One- to Four-Family				Commercial				and Development ⁽²⁾				Home Equity ⁽³⁾				Other				Total
			Weighted				Weighted				Weighted				Weighted				Weighted				Weighted
			Average				Average				Average				Average				Average				Average
	Amount		Rate		Amount		Rate		Amount		Rate		Amount		Rate		Amount		Rate		Amount		Rate
	(Dollars in thousands)
Amounts due:
Within one year ⁽¹⁾	$	3,447	5.27	%	$	3,545	5.75	%	$	32,507	4.39	%	$	657	5.86	%	$	769	4.65	%	$	40,925	4.61	%

After one year:
Over one to two		3,181	5.63			--	0.00			19,747	3.55			285	5.94			1,167	5.92			24,380	3.97
Over two to three		4,292	5.37			81	4.13			--	--			3,357	4.81			1,280	4.59			9,010	5.04
Over three to five		40,978	5.30			3,543	5.08			--	--			3,052	5.87			2,945	4.25			50,518	5.26
Over five to ten		294,133	4.53			29,405	5.75			--	--			13,410	6.09			368	6.17			337,316	4.70
Over 10 to 15		1,361,946	3.84			9,131	5.21			--	--			39,121	5.76			--	--			1,410,198	3.90
After 15 years		3,684,452	4.15			2,918	6.50			--	--			89,439	5.17			--	--			3,776,809	4.18
Total due after one year		5,388,982	4.10			45,078	5.63			19,747	3.55			148,664	5.42			5,760	4.79			5,608,231	4.15

Totals loans	$	5,392,429	4.10	%	$	48,623	5.64	%	$	52,254	4.08	%	$	149,321	5.42	%	$	6,529	4.77	%		5,649,156	4.15	%

Less:
Undisbursed loan funds																						22,874
ACL																						11,100
Discounts/unearned loan fees																						21,468
Premiums/deferred costs																						(14,369)
Total loans receivable, net																					$	5,608,083

⁽¹⁾ Includes demand loans, loans having no stated maturity , and overdraft loans.

⁽²⁾ Construction loans are presented based upon the term to complete construction .

⁽³⁾ For home equity loans, the maturity date calculated assumes the customer always makes the required minimum payment. The majority of interest-only home equity lines of credit assume a balloon payment of unpaid principal at 120 months. All other home equity lines of credit generally assume a term of 240 months.

The following table pr esents, as of September 30, 2012 , the amount of lo ans due after September 30, 2013 , and whether these loans have fixed or adjustable interest rates .


	Fixed		Adjustable		Total
	(Dollars in thousands)
Real Estate Loans:
One- to four-family	$	4,214,786	$	1,174,196	$	5,388,982
Multi-family and commercial		45,049		29		45,078
Construction		16,684		3,063		19,747
Consumer Loans:
Home equity		30,875		117,789		148,664
Other		2,366		3,394		5,760
Total	$	4,309,760	$	1,298,471	$	5,608,231

The following table shows our loan originations and refinances, loan purchases and participations, transfers, and repayment activity for the periods indicated. Purchased loans include loans purchased from correspondent and nationwide lenders. The table below does not include $ 886.9 million, $965.1 million, and $ 545.1 million of loans that were endorsed during fiscal year s 2012 , 20 11, and 2010 , respectively.


		Year Ended September 30 ,
		2012		2011		2010
		(Dollars in thousands)
Originations and Refinances by type :
Fixed-Rate:
Real estate	- one- to four-family	$	658,495	$	617,510	$	456,620
	- multi-family and commercial		--		892		5,420
	- construction		29,989		34,786		26,241
Home equity			2,153		3,426		5,429
Other consumer			1,514		1,470		1,551
Total fixed-rate			692,151		658,084		495,261

Adjustable-Rate:
Real estate	- one- to four-family		109,502		96,399		60,108
	- multi-family and commercial		--		--		--
	- construction		8,434		10,969		3,492
Home equity			71,400		69,205		83,199
Other consumer			2,459		2,588		3,068
Total adjustable-rate			191,795		179,161		149,867
Total loans originated and refinanced			883,946		837,245		645,128

Purchases and Participations:
Real estate	- one- to four-family		629,841		181,971		110,388
	- multi-family and commercial		13,975		--		7,713
	- construction		339		--		1,000
Other consumer			133		--		--
Total loans purchased /participations			644,288		181,971		119,101
Transfer of loans to loans held-for-sale , net			--		--		(194,759)
Principal charges-offs, net ⁽¹⁾			(6,012)		--		--
Principal repayments			(1,060,324)		(1,019,307)		(989,826)
Net change in other items			(8,618)		(13,346)		(17,281)

Net increase (decrease) in loan s receivable		$	453,280	$	(13,437)	$	(437,637)

⁽¹⁾ Principal charge-offs, net represent potential loss amounts that reduce the unpaid principal balance of a loan.

Asset Quality – Loans and Other Real Estate Owned (“ O REO”)

The Bank’s traditional underwriting guidelines historically have resulted in low levels of delinquencies and non-performing assets compared to national levels. Of particular importance is the complete and full documentation required for each loan the Bank originates and purchases . This allows the Bank to make a n informed credit decision based upon a thorough assessment of the borrower’s ability to repay the loan , as of the time of origination, compared to underwriting methodologies that do not require full documentation.

In the following asset quality discussion, loans purchased from correspondent lenders are included with originated loans and loans purchased from nationwide lenders are reported as purchased loans.

For one- to four-family originated and correspondent loans and home equity loans, when a borrower fails to make a loan payment 15 days after the due date, a late charge is assessed and a notice is mailed. Collection personnel review all delinquent loan balances more than 16 days past due. Attempts to contact the borrower occur by personal letter and, if no response is received, by telephone, with the purpose of establishing repayment arrangements for the borrower to bring the loan current. Repayment arrangements must be approved by a designated bank employee . O nce a loan becomes 90 days delinquent, a demand letter is issued requiring the loan to be brought current or foreclosure procedures will be implemented. Generally, when a loan becomes 120 days delinquent, and an acceptable repayment plan has not been established, the loan is forwarded to legal counsel to initiate foreclosure. We also monitor whether mortgagors who filed for bankruptcy are meeting their obligation to pay the mortgage debt in accordance with the terms of the bankruptcy petition.

For purchased loans we do not service, w e monitor delinquencies using reports we receive from the servicers. We monitor these servicer reports to ensure that the servicer is upholding the terms of the servicing agreement. The reports generally provide total principal and interest due and length of delinquency, and are used to prepare monthly management reports and perform delinquent loan trend analysis. Management also utilizes information from the servicers to monitor property valuations and identify the need to charge-off loan balances . The servicers handle collection efforts per the terms of the servicing agreement.

Delinquent and non-performing loans and O REO

The following table present s the Company’s 30 to 89 day delinquent loans at the dates indicated.



	Loans Delinquent for 30 to 89 Days at September 30,
	2012			2011			2010
	Number	Amount		Number	Amount		Number	Amount
	(Dollars in thousands)
One- to four-family:
Originated	145	$	14,948	178	$	19,710	175	$	17,613
Purchased	39		7,695	34		6,199	34		6,047
Multi-family and commercial	--		--	--		--	--		--
Construction	--		--	--		--	--		--
Consumer Loans:
Home equity	28		521	43		759	50		874
Other	16		106	14		92	16		183
	228	$	23,270	269	$	26,760	275	$	24,717

30 to 89 days delinquent loans
to to t al loans receivable, net			0.41%			0.52%			0.48%

The table below presents the Company’s non-performing assets at the dates indicated . Non-performing assets include non-performing loans and OREO . Non-performing loans are nonaccrual loans that are 90 or more days delinquent, loans that are in the process of foreclosure, or troubled debt restructurings (“TDRs”) that are required to be reported as nonaccrual due to OCC Call Report requirements. In accordance with the OCC Call Report requirements, TDRs that were either nonaccrual at the time of restructuring or did not receive a credit evaluation prior to the restructuring and have not made six consecutive monthly payments per the restructured loan terms are reported as nonaccrual loans at September 30, 2012. This change occurred during the quarter ended March 31, 2012, as it was the first quarter the Bank was required to file a Call Report. During July 2012, the OCC provided guidance to the industry regarding loans that had been discharged under Chapter 7 bankruptcy proceedings where the borrower has not reaffirmed the debt owed to the lender. The OCC requires that these loans be reported as TDRs and nonaccrual, regardless of their delinque ncy status , even if the repayment terms for the loan have not been otherwise modified . Previously, such loans were classified as TDRs only if there had been a change in contractual payment terms that represented a concession to the borrower. As a result of this OCC guidance, the Bank identified $8.9 million of loans where the borrower’s debt to the Bank had been discharged under Chapter 7 bankruptcy and was not reaffirmed. Of the $8.9 million of loans, $929 thousand were already reported as TDRs and $1.8 million were already reported as nonaccrual at September 30, 2012. Of the $8.0 million of newly reported TDRs, $6.0 million were current as of September 30, 2012 but were classified as nonaccrual in accordance with the OCC guidance . Additionally, 51 % of the $8.0 million of newly reported TDRs were discharged in Chapter 7 bankruptcy during fiscal year 2012, and 49 % were discharged during fiscal year 2011. At all dates presented, there w ere no loans 90 or more days delinquent that were still accruing interest. Additional asset quality information can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Loans Receivable ” in the Annual Report to Stockholders attached as Exhibit 13 to this Annual Report on Form 10-K . OREO primarily includes assets acquired in settlement of loans. Over the past 12 months, OREO properties were owned by the Bank, on average, for approximately six months before they were sold.


	September 30,
	2012				2011				2010				2009				2008
	Number	Amount			Number	Amount			Number	Amount			Number	Amount			Number	Amount
	(Dollars in thousands)
Loans 90 or More Days Delinquent or in Foreclosure
One- to four-family:
Originated	91	$	8,607		106	$	12,375		109	$	12,884		99	$	9,248		70	$	6,488
Purchased	43		10,447		46		13,749		60		18,375		70		21,259		25		6,708
Consumer Loans:
Home equity	19		369		21		380		31		685		22		367		19		379
Other	4		27		3		3		6		12		8		45		11		91
	157		19,450		176		26,507		206		31,956		199		30,919		125		13,666

Nonaccrual TDRs less than 90 Days Delinquent ⁽¹⁾
One- to four-family:
Originated	81		9,501		--		--		--		--		--		--		--		--
Purchased	10		2,405		--		--		--		--		--		--		--		--
Consumer Loans:
Home equity	22		456		--		--		--		--		--		--		--		--
Other	1		12		--		--		--		--		--		--		--		--
	114		12,374		--		--		--		--		--		--		--		--
Total non-performing loans	271		31,824		176		26,507		206		31,956		199		30,919		125		13,666

Non-performing loans as a percentage of total loans			0.57	%			0.51	%			0.62	%			0.55	%			0.26	%

OREO:
One- to four-family:
Originated ⁽²⁾	60		5,466		74		6,942		73		6,172		48		5,702		31		2,228
Purchased	6		1,172		12		2,877		17		3,748		8		1,702		12		2,918
Consumer Loans:
Home equity	1		9		--		--		--		--		--		--		--		--
Other ⁽³⁾	1		1,400		1		1,502		--		--		--		--		--		--
	68		8,047		87		11,321		90		9,920		56		7,404		43		5,146
Total non-performing assets	339	$	39,871		263	$	37,828		296	$	41,876		255	$	38,323		168	$	18,812

Non-performing assets as a percentage of total assets			0.43	%			0.40	%			0.49	%			0.46	%			0.23	%

(1)	Included in the nonaccrual amount at September 30, 2012 were $ 1.2 million of TDRs that were also reported in the 30-89 days delinquent category and $ 11.2 million that were current but are required to be reported as nonaccrual per OCC Call Report requirements.

(2)	Real estate related consumer loans where we also hold the first mortgage are included in the one- to four-family category as the underlying collateral is on e- to four-family prope rty.

(3)	Other OREO represents a single property the Bank purchased for a potential branch site but now intends to sell.

Of the $ 10.4 million of purchased one- to four- family loans 90 or more days delinquent or in foreclosure presented in the table above , $ 9.4 million, or 90 %, were originated in calendar year 2004 or 2005. Of the $ 8.6 million of originated one- to four- family loans 90 or more days delinquen t or in foreclosure , $ 7.5 million, or 87 %, were originated in calendar year 2007 or earlier.

The amount of interest income on nonaccrual loans as of September 30, 2012 included in interest income was $ 964 thousand for the year ended September 30, 2012 . The amount of interest income that would have been recorded on such nonaccrual loans if they were not on nonaccrual status was $ 1.6 million for the year ended Sept ember 30, 20 12 .

The following table presents the top 12 states where the properties securing our one- to four-family loans are located and their corresponding balance of 30 to 89 day delinquent loans, 90 or more day delinquent loans or in foreclosure and their corresponding weighted average LTV ratios at September 30, 2012. The LTV ratios were based on the unpaid principal balance and either the lesser of the purchase price or original appraisal or the most recent bank appraisal, if available. At September 30, 2012, losses expected to be realized, after taking into consideration potential PMI proceeds and the costs to sell the property, have been charged-off.


					Loans 30 to 89				Loans 90 or More Days Delinquent or
	One- to Four-Family				Days Delinquent				in Foreclosure
State	Balance		% of Total		Balance		% of Total		Balance		% of Total		Average LTV
	(Dollars in thousands)
Kansas	$	3,712,284	68.8	%	$	11,637	51.4	%	$	7,931	41.6	%	77	%
Missouri		832,335	15.4			3,489	15.5			900	4.7		80
California		348,366	6.5			--	--			--	--		--
Nebraska		43,872	0.8			1,202	5.3			--	--		--
Illinois		43,479	0.8			425	1.9			1,440	7.6		75
Texas		42,049	0.8			1,540	6.8			--	--		--
Florida		29,308	0.5			--	--			2,787	14.6		73
Oklahoma		28,027	0.5			30	0.1			76	0.5		49
New York		24,902	0.5			188	0.8			942	4.9		85
Minnesota		24,658	0.5			314	1.4			594	3.1		83
Alabama		24,511	0.5			--	--			--	--		--
Colorado		22,160	0.4			412	1.8			319	1.7		62
Other states		216,478	4.0			3,406	15.0			4,065	21.3		75
	$	5,392,429	100.0	%	$	22,643	100.0	%	$	19,054	100.0	%	76	%

TDRs . For borrowers experiencing financial difficulties, the Bank may grant a concession to the borrower. Generally, the Bank grants a short-term payment concession to borrowers who are experiencing a temporary cash flow problem. The most frequently used concession is to reduce the monthly payment amount for a period of six to 12 months, often by only requiring payments of interest and escrow during this period. These restructurings result in an extension of the maturity date of the loan. For more severe situations requiring long-term solutions, the Bank also offers interest rate reductions to currently-offered rates and more lengthy extensions of the maturity date . Each such concession is considered a TDR . The Bank does not forgive principal or interest nor does it commit to lend additional funds, except for the capitalization of delinquent interest and/or escrow balances not to exceed the original loan balance, to debtors whose terms have been modified in TDRs. Additionally, e ndorsed loans are classified as TDRs when certain guidelines for soft credit scores and/or estimated LTV ratios are not met. These guidelines reflect changes since origination, signifying the borrower could be experiencing financial difficulties even though the borrower has not been delinquent on his contractual loan payment in the previous 12 months. A TDR is reported as such until it pays off, unless it has been restructured to an interest rate equal to or greater than the rate the Bank was willing to accept at the time of the restructuring for a new loan with comparable risk, and has performed under the new terms of the restructuring agreement for at least 12 consecutive months.

During July 2012, the OCC provided guidance to the industry regarding loans that had been discharged under Chapter 7 bankruptcy proceedings where the borrower has not reaffirmed the debt owed to the lender. The OCC requires that these loans be reported as TDRs, regardless of their delinquency status. These loans will be reported as TDRs for at least four years after the Chapter 7 discharge date.

At September 30, 2012, 2011, 2010, 2009, and 2008 , the Bank had TDRs with principal balances of $ 52.2 million, $50.4 million, $27.2 million, $10.8 million, and $918 thousand, resp ectively. Of the $ 52.2 milli on of TDRs at September 30, 2012, $ 44.3 million were originated loans, and $ 7.9 million were bulk purchased loans. The amount of interest recognized in intere st income on total TDRs was $ 2.3 million for t he year ended September 30, 2012 . The amount of interest income that would have been recorded for the year ended September 30, 2012 if the TDRs had been current was $ 2.4 million.

The following table present s TDR activity , at recorded investment, during fiscal year 2012. Excluded from the restructuring activity in the table below is $ 3.5 million of loans that were restructured in the current fiscal year, as well as in a prior fiscal year, and are therefore already presented in the beginning balance. Additionally, $ 828 thousand of loans were restructured more than once during the current fiscal year. Only the first restructuring of these loans is included in the restructurings line in the table below.


	Concession
	Granted		Loan
	by the		Endorsement
	Bank		Program		Total
	(Dollars in thousands)
Beginning balance	$	30,667	$	19,624	$	50,291
Restructurings		8,989		16,866		25,855
Chapter 7 bankruptcy ⁽¹⁾		7,998		--		7,998
TDRs no longer reported as such ⁽²⁾		(9,398)		(14,474)		(23,872)
Principal repayments/payoffs		(5,373)		(1,669)		(7,042)
Charge-offs		(1,196)		--		(1,196)
Ending balance	$	31,687	$	20,347	$	52,034

⁽¹⁾ These loans have been discharged under Chapter 7 bankruptcy proceedings and the borrower has not reaffirmed the debt owed to the Bank.

⁽²⁾ These loans have met certain criteria and are no longer required to be reported as TDRs.

The following table present s the asset classification of TDRs , at recorded investment, as of September 30, 2012 .


	Concession
	Granted		Loan
	by the		Endorsement
	Bank		Program		Total
	(Dollars in thousands)
Special mention	$	9,897	$	19,917	$	29,814
Substandard		21,790		430		22,220
	$	31,687	$	20,347	$	52,034

Impaired Loans. A loan is reported as impaired when, based on current information and events, it is probable that the Bank will be unable to collect all amounts due, including principal and interest, according to the contractual terms of the loan agreement. The following types of loans are reported as impaired loans: all nonaccrual loans, loans classified as substandard, loans partially charged-off, and all TDRs except: 1) those that ha ve been restructured to an interest rate equal to or greater than the rate the Bank was willing to accept at the time of the restructuring for a new loan with comparable risk, and has performed under the new terms of the restructuring agreement for at least 12 consecutive months; and 2) those that have been discharged under Chapter 7 bankruptcy proceedings where the borrower has not reaffirmed the debt owed to the Bank but has performed for at least four years since the date of discharge by the bankruptcy court. The unpaid principal balance of loans reported as impaired at September 30, 2012, 2011 and 2010 was $ 70.5 million, $72.0 million and $57.1 million, respective ly .

Classified Assets. In accordance with the Bank’s asset classification policy, management regularly reviews the problem assets in the Bank's portfolio to determine whether any assets require classification. Asset classifications, other than pass, are defined as follows:

Special mention - These assets are performing assets on which known information about the collateral pledged or the possible credit problems of the borrowers have caused management to have doubts as to the ability of the borrower(s) to comply with present loan repayment terms and which may result in the future inclusion of such loans in the non-performing loan categories.

Substandard – An asset is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard assets include those characterized by the distinct possibility the Bank will sustain some loss if the deficiencies are not corrected.

Doubtful - Assets classified as doubtful have all the weaknesses inherent as those classified as substandard, with the added characteristic that the weaknesses present make collection or liquidation in full on the basis of currently existing facts and conditions and values highly questionable and improbable.

·	Loss - Assets classified as loss are considered uncollectible and of such little value that their continuance as assets on the books is not warranted.

The following table sets forth the recorded investment of assets , classified as special mention or substandard , at September 30, 201 2 . At September 30, 201 2 , there were no loans classified as doubtful or loss that were not fully charged-off .


	Special Mention			Substandard
	Number	Amount		Number	Amount
	(Dollars in thousands)
One- to four-family:
Originated	239	$	36,055	200	$	23,153
Purchased	14		2,829	53		14,538
Multi-family and commercial	2		2,578	--		--
Consumer Loans:
Home equity	21		413	42		815
Other	--		--	5		39
Total loans	276		41,875	300		38,545

OREO:
Originated	--		--	61		5,475
Purchased	--		--	6		1,172
Total OREO	--		--	67		6,647

Trust preferred securities (“TRUPs” )	--		--	1		2,298
Municipal bonds	--		--	11		3,558
Total classified assets	276	$	41,875	379	$	51,048

Allowance for credit losses and provision for credit losses . Management maintains an ACL to absorb inherent losses in the loan portfolio based on ongoing quarterly assessments of the loan portfolio. Our ACL methodology considers a number of factors including: the trend and composition of our delinquent and non-performing loans, results of foreclosed property and short sale transactions, the status and trends of the local and national economies, the trends and current conditions of the residential real estate markets, and loan portfolio growth and concentrations. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies” in the Annual Report to Stockholders attach e d as Exhibit 13 to this Annual Report on Form 10-K for a full discussion of our ACL methodology .

The ACL is maintained through provisions for credit losses which are charged to income. The provision for credit losses is established after considering the results of management’s quarterly assessment of the ACL. For the year ended September 30, 2012, the Company recorded a provision for credit losses of $2.0 million .

At September 30, 2012, our ACL was $ 11.1 million, or 0. 20 % of the total loan portfolio and 34.9 % of total non-performing loans. This compares with an ACL of $15.5 million, or 0.30% of the total loan portfolio and 58.3% of total non-performing loans as of September 30, 2011. Our ACL balance decreased from September 30, 2011 due primarily to the implementation of a loan charge-off policy change during the second quarter of fiscal year 2012 as OCC Call Report requirements (to which the Bank became subject beginning with the second fiscal quarter of 2012) do not permit the use of SVAs , which the Bank was previously utilizing for potential loan losses, as permitted by our previous regulator. As a result of the implementation of the charge-off policy change, $3.5 million of SVAs were charged-off during the second fiscal quarter of 2012. These charge-offs did not impact the provision for credit losses, and therefore had no additional income statement impact, as the amounts were expensed in previous periods.

The following table presents the Company’s activity for the ACL and related ratios at the dates and for the periods indicated.


	Year Ended September 30,
	2012			2011			2010			2009			2008
	(Dollars in thousands)
Balance at beginning of period	$	15,465		$	14,892		$	10,150		$	5,791		$	4,181
Charge-offs:
One- to four-family loans--originated		892			414			424			226			86
One- to four-family loans--purchased		5,186			2,928			3,707			1,781			321
Multi-family and commercial loans		--			--			--			--			--
Construction		--			--			--			--			--
Home equity		330			133			28			1			2
Other consumer loans		27			12			17			24			32
Total charge-offs		6,435			3,487			4,176			2,032			441
Recoveries:
One- to four-family loans--originated		16			--			--			--			--
One- to four-family loans--purchased		8			--			172			--			--
Multi-family and commercial loans		--			--			--			--			--
Construction		--			--			--			--			--
Home equity		6			--			--			--			--
Other consumer loans		--			--			--			--			--
Recoveries		30			--			172			--			--
Net charge-offs		6,405			3,487			4,004			2,032			441
ACL on loans in the loan swap transaction		--			--			(135)			--			--
Provision for credit losses		2,040			4,060			8,881			6,391			2,051
Balance at end of period	$	11,100		$	15,465		$	14,892		$	10,150		$	5,791

Ratio of net charge-offs during the period to
average loans outstanding during the period ⁽¹⁾⁽²⁾		0.12	%		0.07	%		0.07	%		0.04	%		--	%

Ratio of net charge-offs during the period to average
non-performing assets ⁽²⁾		16.49	%		8.75	%		9.99	%		7.11	%		3.12	%

ACL to non-performing loans at end of period		34.88	%		58.34	%		46.60	%		32.83	%		42.37	%

ACL to loans receivable, net at end of period		0.20	%		0.30	%		0.29	%		0.18	%		0.11	%

⁽¹⁾ Ratio for the year en ded September 30, 2008 calculate d to be less than 0.01%.

⁽²⁾ Excluding the $3.5 million of SVAs charged-off as a result of implementing the new loan charge-off policy in January 2012 would have reduced the ratio of net charge-offs during the period to average loans outstanding during the period by 0.07%, resulting in a non-GAAP ratio of 0.05%, and the ratio of net charge-offs during the period to average non-performing assets by 9.00%, resulting in a non-GAAP ratio of 7.49%. Management believes it is important to present these ratios excluding the $3.5 million of SVAs charged-off for comparability purposes.

The distribution of our ACL at the dates indicated is summarized as follows:



	September 30,
	2012				2011				2010				2009				2008
			Percent				Percent				Percent				Percent				Percent
			of Loans				of Loans				of Loans				of Loans				of Loans
			in Each				in Each				in Each				in Each				in Each
			Category				Category				Category				Category				Category
	Amount of		to Total		Amount of		to Total		Amount of		to Total		Amount of		to Total		Amount of		to Total
	ACL		Loans		ACL		Loans		ACL		Loans		ACL		Loans		ACL		Loans
	(Dollars in thousands)
One- to four-family:
Originated	$	6,057	81.6	%	$	4,898	84.4	%	$	3,801	83.5	%	$	3,604	81.9	%	$	3,075	80.7	%
Purchased		4,453	13.9			9,899	10.3			10,425	10.8			5,972	12.3			2,307	13.6
Multi-family and commercial		196	0.9			254	1.1			275	1.3			227	1.4			54	1.1
Construction		40	0.9			19	0.9			12	0.6			22	0.7			41	0.6
Consumer:
Home equity		301	2.6			354	3.2			319	3.6			268	3.5			229	3.8
Other consumer		53	0.1			41	0.1			60	0.2			57	0.2			85	0.2
	$	11,100	100.0	%	$	15,465	100.0	%	$	14,892	100.0	%	$	10,150	100.0	%	$	5,791	100.0	%

Investment Activities

Federally chartered savings institutions have the authority to invest in various types of liquid assets, including U.S. Treasury obligations ; securities of various federal agencies ; government-sponsored enterprises (“ GSEs ”) , including callable agency securities and municipal bonds ; certain certificates of deposit of insured banks and savings institutions ; certain bankers’ acceptances ; repurchase agreements; and federal funds. Subject to various restrictions, federally chartered savings institutions may also invest their assets in investment grade commercial paper , corporate debt securities , and mutual funds whose assets conform to the investments that a federally chartered savings institution is otherwise authorized to make directly. As a member of the FHLB, the Bank is required to maintain a specified investment in the capital stock of the FHLB . See “Regulation - Federal Home Loan Bank System ,” “ Capitol Federal Savings Bank , ” and “Qualified Thrift Lender t est” for a discussion of additional restrictions on our investment activities.

The Chief Investment Officer has the primary responsibility for the management of the Bank’s investment portfolio, subject to the direction and guidance of ALCO. The Chief Investment Officer considers various factors when making decisions, including the marketability, maturity , and tax consequences of the proposed investment. The composition of the investment portfolio will be affected by various market conditions, including the slope of the yield curve, the level of interest rates, the impact on the Bank’s interest rate risk, the trend of net deposit flows, the volume of loan sales , the anticipated demand for funds via withdrawals, repayments of borrowings, and loan originations and purchases.

The general objectives of the Bank’s investment portfolio are to provide liquidity when loan demand is high, to assist in maintaining earnings when loan demand is low , and to maximize earnings while satisfactorily managing liquidity risk, interest rate risk, reinvestment risk , and credit risk. The portfolio is also intend ed to create a steady stream of cash flows that can be redeployed into other assets as the Bank grows the loan portfolio, or reinvested into higher yielding assets should interest rates rise. Liquidity may increase or decrease depending upon the availability of funds and comparative yields on investments in relation to the return on loans. Cash flow projections are reviewed regularly and updated to assure that adequate liquidity is maintained.

At September 30, 2012, the h olding company had $ 60.1 million in investment securities with a yield of 0. 70 % and a weighted average life (“ WAL ”) of 0. 2 years. As holding company securities mature, proceeds are deposited at the Bank and generally used to repurchase stock and pay dividends .

We classify securities as trading, available-for-sale (“AFS”) or held-to-maturity (“HTM”) at the date of purchase. S ecurities that are purchased and held principally for resale in the near future are classified as trading securities and are reported at fair value, with unrealized gains and losses reported in the consolidated statements of income. AFS securities a re reported at fair value , with unrealized gains and losses reported as a component of accumulated other comprehensive income (loss) within stockholders’ equity, net of deferred income taxes. HTM securities are reported at cost, adjusted for amortization of premium and accretion of discount. We have both the ability and intent to hold the HTM securities to maturity.

Management monitors the securities portfolio for other-than-temporary impairments on an ongoing basis and performs a formal review quarterly. Management determines whether other-than-temporary impairment losses should be recognized for impaired securities by assessing all known facts and circumstances surrounding the securities. If the Company intends to sell an impaired security or if it is more likely than not that the Company will be required to sell an impaired security before recovery of its amortized cost basis, an other-than-temporary impairment will be recognized and the difference between amortized cost and fair value will be recognized as a loss in earnings. At September 30, 201 2 , no securities had been identified as other-than-temporarily impaired.

Investment Securities . Our investment securities portfolio consists primarily of securities issued by GSEs (primarily FNMA, FHLMC, and FHLB) and taxable and non-taxable municipal bonds. At September 30, 20 12 , our investment sec urities portfolio totaled $ 961.8 million . The portfolio consists of securities classified as either HTM or AFS . See “Notes to Consolidated Financial Statements – Note 3 - Securities ” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition – Investment Securities ” in the Annual Report to Stockholders attached as Exhibit 13 to this Annua l Report on Form 10-K.

During fiscal year 20 12 , our investment securities portfolio decreased $ 482.6 million from $ 1.44 billion at September 30, 20 11 to $ 961.8 millio n at Se ptember 30, 20 12 . The decrease in the balance was primarily a result of maturities and calls of $1.17 billion, including $302.8 million of maturities at the holding company level, partially offset by purchases of $ 691.3 m illion. The purchases dur ing fiscal year 2012 were fixed-rate and had a weighted average yield of 1.09 % and a WAL of approximately 2.8 years at the time of purchase . See “Notes to Consolidated Financial Statements – Note 3 - Securities” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition – Investment Securities” in the Annual Report to Stockholders attached as Exhibit 13 to this Annua l Report on Form 10-K.

Mortgage-Backed Securities . At September 30, 20 12 , our MBS portfolio totaled $ 2.33 billion. Our MBS portfolio consists primarily of securities issued by GSEs . The principal and interest pa yments of MBS issued by GSEs are collateralized by the underlying mortgage assets with principal and interest payments guaranteed by the agencies. The underlying mortgage assets are conforming mortgages that comply with FNMA and FHLMC underwriting guidelines, as applicable, and are therefore not considered subprime.

A t September 30, 2012 , the MBS portfolio included $ 388.7 million of collateralized mortgage obligations (“CMOs”). CMOs are special types of pass-through debt securities in which the stream of principal and interest payments on the underlying mortgages or MBS are used to create investment classes with different maturities and, in some cases, different amortization schedules, as well as a residual interest, with each such class possessing different risk characteristics. Our CMOs are currently classified as either HTM or AFS . We do not purchase residual interest bonds.

During fiscal year 20 12 , our MBS portfolio decreased $ 79.1 million , from $ 2.41 billion at September 30, 20 11 , to $ 2.33 billion at September 30, 20 12 . During fiscal year 2012, $ 557.2 million of MBS were p urchase d of which $ 481.5 million, or approximately 86 %, were fixed-rate and $ 75. 7 million, or approximately 14 %, were adjustable-rate. See “Notes to Consolidated Financial Statements – Note 3 - Securities ” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition – Mortgage-Backed Securities ” in the Annual Report to Stockholders attached as Exhibit 13 to this Annua l Report on Form 10-K.

MBS generally yield less than the loans that underlie such securities because of the servicing fee retained by the servicer and the cost of payment guarantees or credit enhancements that reduce credit risk. However, MBS are generally more liquid than individual mortgage loans and may be used to collateralize certain borrowings and public unit deposits of the Bank. In general, MBS issued or guaranteed by FNMA and FHLMC are weighted at no more than 20% for risk-based capital purposes compared to the 50% risk-weighting assigned to most non-securitized mortgage loans.

When securities are purchased for a price other than par, the difference between the price paid and par is accreted to or amortized against the interest earned over the life of the security, depending on whether a discount or premium to par is paid. Movements in interest rates affect prepayment rates which, in turn, affect the average lives of MBS and the speed at which the discount or premium is accreted to or amortized against earnings.

While MBS issued or backed by FNMA and FHLMC carry a reduced credit risk compared to whole loans, these securities remain subject to the risk that a fluctuating interest rate environment, along with other factors such as the geographic distribution of the underlying mortgage loans, may alter the prepayment rate of the underlying mortgage loans and so affect both the prepayment speed and value of the securities. As noted above, the Bank, on some transactions, pays a premium over par value for MBS purchased. Large premiums may cause significant negative yield adjustments due to accelerated prepayments on the underlying mortgages.

The following table sets forth the composition of our investment and MBS portfolio at the dates indicated. Our investment securities portfolio at September 30, 2012 did not contain securities of any issuer with an aggregate book value in excess of 10% of our stockholders’ equity, excluding those issued by GSEs.



	September 30,
	2012						2011						2010
	Carrying		% of		Fair		Carrying		% of		Fair		Carrying		% of		Fair
	Value		Total		Value		Value		Total		Value		Value		Total		Value
	(Dollars in thousands)
AFS:
GSE debentures	$	861,724	61.3	%	$	861,724	$	748,308	50.3	%	$	748,308	$	50,255	4.7	%	$	50,255
Municipal bonds		2,516	0.2			2,516		2,754	0.2			2,754		2,819	0.3			2,819
TRUPs		2,298	0.1			2,298		2,941	0.2			2,941		2,796	0.3			2,796
MBS		540,306	38.4			540,306		732,436	49.3			732,436		1,004,496	94.7			1,004,496
		1,406,844	100.0			1,406,844		1,486,439	100.0			1,486,439		1,060,366	100.0			1,060,366

HTM:
GSE debentures		49,977	2.6			50,224		633,483	26.7			636,654		1,208,829	64.3			1,213,270
Municipal bonds		45,334	2.4			47,156		56,994	2.4			59,180		67,957	3.6			70,610
MBS		1,792,636	95.0			1,872,519		1,679,640	70.9			1,738,558		603,368	32.1			629,574
		1,887,947	100.0	%		1,969,899		2,370,117	100.0	%		2,434,392		1,880,154	100.0	%		1,913,454
	$	3,294,791			$	3,376,743	$	3,856,556			$	3,920,831	$	2,940,520			$	2,973,820

The composition and maturities of the investment and MBS portfolio at September 30, 20 12 are indicated in the following table by remaining contractual maturity, without consideration of call features or pre-refunding dates. Yields on tax-exempt investments are not calculated on a taxable equivalent basis.



	1 year or less				More than 1 to 5 years				More than 5 to 10 years				Over 10 years				Total Securities
			Weighted				Weighted				Weighted				Weighted				Weighted
	Carrying		Average		Carrying		Average		Carrying		Average		Carrying		Average		Carrying		Average		Fair
	Value		Yield		Value		Yield		Value		Yield		Value		Yield		Value		Yield		Value
	(Dollars in thousands)
AFS:
GSE debentures	$	60,120	0.70	%	$	776,537	1.13	%	$	25,067	1.00	%	$	--	--	%	$	861,724	1.10	%	$	861,724
Municipal bonds		--	--			1,392	3.69			--	--			1,124	3.90			2,516	3.78			2,516
TRUPs		--	--			--	--			--	--			2,298	1.65			2,298	1.65			2,298
MBS		--	--			1,686	5.82			157,216	4.91			381,404	3.53			540,306	3.94			540,306
		60,120	0.70			779,615	1.14			182,283	4.37			384,826	3.52			1,406,844	2.20			1,406,844

HTM:
GSE debentures		--	--			49,977	1.84			--	--			--	--			49,977	1.84			50,224
Municipal bonds		5,456	1.84			27,228	2.94			7,852	3.35			4,798	3.09			45,334	2.88			47,156
MBS		--	--			--	--			350,571	2.75			1,442,065	2.39			1,792,636	2.46			1,872,519
		5,456	1.84			77,205	2.23			358,423	2.76			1,446,863	2.39			1,887,947	2.45			1,969,899
	$	65,576	0.79	%	$	856,820	1.24	%	$	540,706	3.31	%	$	1,831,689	2.63	%	$	3,294,791	2.34	%	$	3,376,743

Sources of Funds

General . Our sources of funds are deposits, borrowings, repayment of principal and interest on loans and MBS, interest earned on and maturities and calls of investment securities, and funds generated from operations.

Deposits . We offer a variety of retail deposit accounts having a wide range of interest rates and terms. Our deposits consist of savings accounts, money market accounts, interest - bearing and non-interest-bearing checking accounts, and certificates of deposit. We rely primarily upon competitive pricing policies, marketing, and customer service to attract and retain deposits. The flow of deposits is influenced significantly by general economic conditions, changes in money market and prevailing interest rates, and competition. The variety of deposit accounts we offer has allowed us to utilize strategic pricing to obtain funds and to respond with flexibility to changes in consumer demand. We endeavor to manage the pricing of our deposits in keeping with our asset and liability management, liquidity, and profitability objectives. Based on our experience, we believe that our deposits are stable sources of funds. Despite this stability, our ability to attract and maintain these deposits and the rates paid on them has been, and will continue to be, significantly affected by market conditions.

The following table sets forth our deposit flows during the periods indicated. Included in the table are brokered and public unit deposits which totaled $ 276.3 million, $1 90.1 million, and $193.6 million at September 30, 2012, 2011, and 2010 , respectively.



	Year Ended September 30,
	2012		2011		2010
	(Dollars in thousands)
Opening balance	$	4,495,173	$	4,386,310	$	4,228,609
Deposits		7,503,541		7,630,259		7,275,590
Withdrawals		7,494,271		7,585,217		7,198,358
Interest credited		46,200		63,821		80,469
Ending balance	$	4,550,643	$	4,495,173	$	4,386,310

Net increase	$	55,470	$	108,863	$	157,701

The following table sets forth the dollar amount of deposits in the various types of deposit programs we offered for the periods indicated.



	Year Ended September 30,
	2012				2011				2010
			Percent				Percent				Percent
	Amount		of Total		Amount		of Total		Amount		of Total
	(Dollars in thousands)
Non-Certificates:
Checking	$	606,504	13.3	%	$	551,632	12.3	%	$	482,428	11.0	%
Savings		260,933	5.8			253,184	5.6			234,285	5.3
Money market		1,110,962	24.4			1,066,065	23.7			942,428	21.5
Total non-certificates		1,978,399	43.5			1,870,881	41.6			1,659,141	37.8

Certificates (by rate) :
0.00 – 0.99%		1,005,724	22.1			339,803	7.6			193,959	4.4
1.00 – 1.99%		800,745	17.6			1,106,957	24.6			1,013,538	23.1
2.00 – 2.99%		663,985	14.6			775,235	17.2			777,687	17.7
3.00 – 3.99%		95,765	2.1			371,682	8.3			576,595	13.2
4.00 – 4.99%		6,025	0.1			30,615	0.7			164,763	3.8
5.00 – 5.99%		--	--			--	--			627	--
Total certificates		2,572,244	56.5			2,624,292	58.4			2,727,169	62.2

	$	4,550,643	100.0	%	$	4,495,173	100.0	%	$	4,386,310	100.0	%

The following table sets forth the maturity and rate range of our certificate of deposit portfolio at September 30, 2012 .



	Amount Due
				More than			More than
	1 year			1 year to			2 to 3			More than			Total
	or less			2 years			years			3 years			Amount		Rate
	(Dollars in thousands)
0.00 – 0.99%	$	793,901		$	179,089		$	27,734		$	5,000		$	1,005,724	0.55	%
1.00 – 1.99%		229,000			91,574			238,002			242,169			800,745	1.44
2.00 – 2.99%		166,680			194,685			259,500			43,120			663,985	2.51
3.00 – 3.99%		70,646			17,349			7,247			523			95,765	3.21
4.00 – 4.99%		5,420			269			255			81			6,025	4.50
	$	1,265,647		$	482,966		$	532,738		$	290,893		$	2,572,244	1.44	%

Weighted average rate		1.07	%		1.67	%		1.95	%		1.71	%
Weighted average maturity (in years)		0.5			1.5			2.5			3.9			1.5
Weighted average maturity for the retail certificate of deposit portfolio (in years)														1.5

The following table sets forth the maturity information for our certificate of deposit po rtfolio as of September 30, 2012 .



	Maturity
			Over		Over
	3 months		3 to 6		6 to 12		Over
	or less		months		months		12 months		Total
	(Dollars in thousands)
Retail certificates of deposit less than $100,000	$	197,886	$	200,764	$	409,467	$	815,051	$	1,623,168
Retail certificates of deposit of $100,000 or more		70,631		69,147		152,704		380,291		672,773
Public units/brokered deposits less than $100,000		--		--		20,057		63,647		83,704
Public units of $100,000 or more		92,445		39,542		13,004		47,608		192,599
Total certificates of deposit	$	360,962	$	309,453	$	595,232	$	1,306,597	$	2,572,244

The Board of Directors has authorized the utilization of brokers to obtain deposits as a source of funds. The Bank has entered into several relationships with nationally recognized wholesale deposit brokerage firms to accept deposits from these firms. Depending on market conditions, the Bank may use brokered deposits to fund asset growth and gather deposits that may help to manage interest rate risk. The Bank’s policies limit the amount of brokered deposits that it may have at any time to 10% o f total deposits. The rates paid on brokered deposits plus fees are generally consistent with rates offered by FHLB on advances and favorable to some rates paid on retail deposits. At both September 30, 2012 and 2011 , t he balance of brokered deposits was $83.7 million, or approximately 2% of total deposits .

The Board of Directors also has authorized the utilization of public unit deposits as a source of funds. The Bank’s policies limit the amount of public unit deposits that it may have at any time to 5% of total deposits. In order to qualify to obtain such deposits, the Bank must have a branch in each county in which it collects public unit deposits, and by law, must pledge securities as collateral for all such balances in excess of the FDIC insurance limits. At September 30, 2012 and 2011 , the balance of public unit deposits was $ 192.6 million, or approximately 4 % of total deposits, and $106.4 million, or approximately 2. 5 % of total deposits , respectively.

Borrowings . We utilize borrowings when, at the time of the borrowing, they can be invested at a positive rate spread relative to current asset yields, when we desire additional capacity to fund loan demand or when they help us meet our asset and liability management objectives. Historically, our borrowings primarily have consisted of FHLB advances. From time to time, we also utilize the line of credit that we maintain at FHLB. The Bank supplements FHLB advances with repurchase agreements, wherein the Bank enters into agreements with selected counterparties to sell securities under agreements to repurchase. These agreements are recorded as financing transactions as the Bank maintains effective control over the transferred securities.

FHLB advances are secured by a blanket pledge of our loan portfolio, as collateral. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources ” in the Annual Report to Stockholders attached as Exhibit 13 to this Annual Report on Form 10-K. FHLB advances may be made pursuant to several different credit programs, each of which has its own interest rate, maturity, repayment, and convertible features, if any. At September 30, 2012, we had $ 2.55 billion in FHLB advances , at par . See “Notes to Consolidated Financial Statements - Note 7” in the Annual Report to Stockholders attached as Exhibit 13 to this Annual Report on Form 10-K.

The Bank may enter into additional repurchase agreements as management deems appropriate, up to 15% of Bank assets, per Ban k policy. At September 30, 2012 , repurchase agreements were $ 365.0 million, or approximately 4 % of total assets. The securities underlying the agreements continue to be carried in the Bank’s securities p ortfolio. At September 30, 2012 , we had securi ties with a fair value of $ 427.9 million pledged as collateral. Repurchase agreements are made at mutually agreed upon terms between counterparties and the Bank. The use of repurchase agreements allows for the diversification of funding sources and the use of securities that were not being leveraged as collateral. See “Notes to Consolidated Financial Statements—Note 7” and “ Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources ” in the Annual Report to Stockholders attached as Exhibit 13 to this Annual Report on Form 10-K.

The following table sets forth certain information relating to each category of borrowings for which the average short-term balance outstanding during the period was more than 29% of stockholders’ equity at the end of the period shown . There were no short-term borrowings outstanding that exceeded 29% of stockholders’ equity during fiscal year 2012 and 2011. The maximum balance, average balance, and weighted average interest rate during fiscal year 2010 reflect all borrowings that were scheduled to mature within one year at any month-end during fiscal year 2010 .



	2010
	(Dollars in thousands)
FHLB Advances:
Balance at end of year	$	276,000
Maximum balance outstanding at any month-
end during fiscal year		550,000
Average balance		423,000
Weighted average interest rate during the year		4.62	%
Weighted average interest rate at end of year		4.87	%

Repurchase Agreements:
Balance at end of year	$	200,000
Maximum balance outstanding at any month-
end during fiscal year		225,000
Average balance		158,750
Weighted average interest rate during the year		3.68	%
Weighted average interest rate at end of year		3.79	%

Subsidiary and Other Activities

As a federally chartered savings bank, we are permitted by federal regulations to invest up to 2% of our Bank assets, as reported to the OCC, or $ 186.4 million at September 30, 201 2 , in the stock of, or as unsecured loans to, service corporation subsidiaries. We may invest an additional 1% of our assets, or $ 93.2 million at September 30, 201 2 , in service corporations where such additional funds are used for inner-city or community development purposes. At September 30, 201 2 , the Bank had one subsidiary, Capitol Funds, Inc. At September 30, 201 2 , Capitol Funds, Inc. had a capital balance of $ 6.7 million. Capitol Funds, Inc. has a wholly owned subsidiary, Capitol Federal Mortgage Reinsurance Company (“CFMRC”). CFMRC serves as a reinsurance company for the PMI companies the Bank uses in its normal course of operations , but stopped writing new business in January 2010 . CFMRC provides mortgage reinsurance on certain one- to four-family loans in the Bank’s portfolio. During f iscal year 201 2 , Capitol Funds, Inc. reported consolidated net income of $ 347 thousand which included net income of $ 3 51 t housand from CFMRC .

REGULATION AND SUPERVISION

Set forth below is a description of certain laws and regulations that are applicable to Capitol Federal Financial, Inc. and the Bank.

General

On July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) was signed into law . This law has significantly changed the current bank regulatory structure and affected the lending, deposit, investment, trading and operating activities of financial institutions and their holding companies. See additional information regarding the Dodd-Frank Act under the heading “Risk Factors – Passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act will increase our operational and compliance costs.”

As of July 21, 2011, the OCC assumed the responsibilities and powers of the OTS with respect to the Bank, and the FRB assumed the responsibilities and powers of the OTS with respect to the Company.

The OCC has extensive enforcement authority over all federal savings associations, including the Bank, and the FRB has enforcement authority over their holding companies, including Capitol Federal Financial, Inc. This enforcement authority includes, among other things, the ability to assess civil money penalties, to issue cease-and-desist or removal orders and to initiate injunctive actions. In general, these enforcement actions may be initiated for violations of laws and regulations and unsafe or unsound practices. Other actions or inactions may provide the basis for enforcement action, including misleading or untimely reports filed. Except under certain circumstances, public disclosure of final enforcement actions by the OCC or the FRB is required by law.

Capitol Federal Financial , Inc.

The purpose and powers of the Company are to pursue any or all of the lawful objectives of a savings and loan holding company and to exercise any of the powers accorded to a savings and loan holding company.

If the Bank fails the Qualified Thrift Lender test, within one year of such failure the Company must register as, and will become subject to, the restrictions applicable to bank holding companies, unless the Bank requalifies within the year. The activities authorized for a bank holding company are more limited than are the activities authorized for a savings and loan holding company. If the Bank fails the test a second time, the Company must immediately register as, and become subject to, the restrictions applicable to a bank holding company. See “ Qualified Thrift Lender Test . ”

The Company must obtain regulatory approval before acquiring control of any other depository institution. Interstate acquisitions are permitted based on specific state authorization or in a supervisory acquisition of a failing institution.

Capitol Federal Savings Bank

The Bank, as a federally chartered savings bank, is subject to regulation and oversight by the OCC extending to all aspects of its operations. This regulation of the Bank is intended for the protection of depositors and not for the purpose of protecting the Company’s stockholders. The Bank is required to maintain minimum levels of regulatory capital and is subject to some limitations on capital distributions to the Company. The Bank also is subject to regulation and examination by the FDIC, which insures the deposits of the Bank to the maximum extent permitted by law.

Office of the Comptroller of the Currency

The investment and lending authority of the Bank is prescribed by federal laws and regulations and the Bank is prohibited from engaging in any activities not permitted by such laws and regulations.

As a federally chartered savings bank, the Bank is required to meet a Qualified Thrift Lender test. This test requires the Bank to have at least 65% of its portfolio assets, as defined by statute, in qualified thrift investments on a monthly average for nine out of every 12 months on a rolling basis. As an alternative, the Bank may maintain 60% of its assets in those assets specified in Section 7701(a) (19) of the Internal Revenue Code. Under either test, the Bank is required to maintain a significant portion of its assets in residential housing related loans and investments. Any institution that fails to meet the Qualified Thrift Lender test must become subject to certain restrictions on its operations, unless within one year it meets the test, and thereafter remains a Qualified Thrift Lender. These restrictions include a prohibition against capital distributions , except, with the prior approval of both the OCC and the FRB, for the purpose of paying obligations of a company controlling the institution. An institution that fails the test a second time must be subjected to the restrictions. Any savings and loan holding company of an institution that fails the test and does not re-qualify within a year must become subject to the same statute and regulations as a bank holding company. Three years after failing the test, an

institution must divest all investments and cease all activities not permissible for both a national bank and a savings association. Failure to meet the Qualified Thrift Lender test is a statutory violation subject to enforcement action. As of September 30, 2012 , the Bank met the Qualified Thrift Lender test.

The Bank is subject to a 35% of total assets limit on consumer loans, commercial paper and corporate debt securities, and a 20% limit on commercial non-mortgage loans. At September 30, 2012 , the Bank had 0. 1 % of its assets in non-real estate consumer loans, commercial paper and corporate debt securities and 0 % of its assets in commercial non-mortgage loans.

The Bank’s relationship with its depositors and borrowers is regulated to a great extent by federal laws and regulations, especially in such matters as the ownership of savings accounts and the form and content of mortgage requirements. In addition, the branching authority of the Bank is regulated by the OCC. The Bank is generally authorized to branch nationwide.

The Bank is subject to a statutory lending limit on aggregate loans to one person or a group of persons combined because of certain common interests. That limit is equal to 15% of our unimpaired capital and surplus, except that for loans fully secured by readily marketable collateral, the limit is increased to 25%. At September 30, 2012 , the Bank's lending limit under this restriction was $ 204.9 million. The Bank has no loans or loan relationships in excess of its lending limit.

The Bank is subject to periodic examinations by the OCC. During these examinations, the examiners may require the Bank to increase the ACL and/or recognize additional charge-offs based on their judgments, which can impact our capital and earnings. As a federally chartered savings bank, the Bank is subject to a semi-annual assessment, based upon its total assets, to fund the operations of the OCC.

The OCC has adopted guidelines establishing safety and soundness standards on such matters as loan underwriting and documentation, asset quality, earnings standards, internal controls and audit systems, interest rate risk exposure and compensation and other employee benefits. Any institution regulated by the OCC that fails to comply with these standards must submit a compliance plan.

In surance of Accounts and Regulation by the FDIC

The DIF of the FDIC insures deposit accounts in the Bank up to applicable limits . Under the Dodd-Frank Act, non-interest bearing transaction accounts receive unlimited deposit insurance coverage through December 31, 2012, and insured institutions pay no separate fee for this coverage. The FDIC assesses deposit insurance premiums on each FDIC-insured institution quarterly based on annualized rates for one of four risk categories applied to its assessment base, which is total assets less tangible equity . As required by the Dodd-Frank Act, the FDIC has adopted rules effective April 1, 2011, under which insurance premium assessments are based on an institution’s total assets minus its tangible equity (defined as Tier 1 capital) instead of its deposits. Under these rules, an institution with total assets of less than $10 billion is assigned to one of four risk categories based on its capital, supervisory ratings , and other factors. Well - capitalized institutions that are financially sound with only a few minor weaknesses are assigned to Risk Category I. Risk Categories II, III and IV present progressively greater risks to the DIF. A range of initial base assessment rates appl ies to each Risk Category , adjusted downward based on unsecured debt issued by the institution and, except for an institution in Risk Category I, adjusted upward if the institution’s brokered deposits exceed 10% of its domestic deposits, to produce total base assessment rates. Total base assessment rates currently range from 2.5 to 9.0 basis points for Risk Category I, 9.0 to 24 basis points for Risk Category II, 18 to 33 basis points for Risk Category III, and 30 to 45 basis points for Risk Category IV, all subject to further adjustment upward if the institution holds more than a de minimis amount of unsecured debt issued by another FDIC-insured institution. An institution with assets of $10 billion or more is assessed under a complex scorecard method employing many factors. The FDIC may increase or decrease its rates by 2.0 basis points without further rulemaking. In an emergency, the FDIC may also impose a special assessment.

FDIC-insured institutions are required to pay an additional quarterly assessment called the FICO assessment in order to fund the interest on bonds issued to resolve thrift failures in the 1980s. This assessment rate is adjusted quarterly to reflect changes in the assessment base, which is average assets less tangible equity, and is the same base as used for the deposit insurance assessment. These assessments are expected to continue until the bonds mature in the years 2017 through 2019. For the fiscal year ended September 30, 2012, the Bank paid $ 517 thousand in FICO assessments.

As a result of a decline in the reserve ratio (the ratio of the net worth of the DIF to estimated insured deposits) and concerns about expected failure costs and available liquid assets in the DIF, the FDIC adopted a rule requiring each insured institution to prepay on December 30, 2009 the estimated amount of its quarterly assessments for the fourth quarter of calendar year 2009 and all quarters through the end of calendar year 2012 (in addition to the regular quarterly assessment for the third quarter of calendar year 2009 due on December 30, 2009). The prepaid amount is recorded as an asset with a zero risk weight and the institution will continue to record quarterly expenses for deposit insurance. For purposes of calculating the prepaid amount, assessments are measured at the institution’s assessment rate as of September 30, 2009, with a uniform increase of three basis points effective January 1, 2011, and are

based on the institution’s assessment base for the third quarter of 2009, with growth assumed quarterly at an annual rate of 5%. If events cause actual assessments during the prepayment period to vary from the prepaid amount, institutions will pay excess assessments in cash, or receive a rebate of prepaid amounts not exhausted after collecti on of assessments due on June 30 , 2013, as applicable. Collection of the prepayment does not preclude the FDIC from changing assessment rates or revising the risk-based assessment system in the future.

Transactions with Affiliates

Transactions between the Bank and its affiliates are required to be on terms as favorable to the institution as transactions with non-affiliates, and certain of these transactions are restricted to a percentage of the Bank's capital, and, in the case of loans, require eligible collateral in specified amounts. In addition, the Bank may not lend to any affiliate engaged in activities not permissible for a bank holding company or purchase or invest in the securities of affiliates.

Regulatory Capital Requirements

The Bank is required to maintain specified levels of regulatory capital under regulations of the OCC. OCC regulations state that to be adequately capitalized, an institution must have a leverage ratio of at least 4.0%, a Tier 1 risk-based capital ratio of at least 4.0% and a total risk-based capital ratio of at least 8.0%. To be well capitalized, an institution must have a leverage ratio of at least 5.0%, a Tier 1 risk-based capital ratio of at least 6.0% and a total risk-based capital ratio of at least 10.0%.

The term leverage ratio means the ratio of Tier 1 capital to adjusted total assets. The term Tier 1 risk-based capital ratio means the ratio of Tier 1 capital to total risk-weighted assets. The term total risk-based capital ratio means the ratio of total risk-based capital to total risk-weighted assets.

The term Tier 1 capital generally consists of common stockholders’ equity , retained earnings , noncumulative perpetual preferred stock and minority interest in the equity accounts of consolidated subsidiaries , excluding goodwill and other non-qualifying intangible assets . At September 30, 2012, the Bank had $ 73 thousand of disallowed servicing assets, which were deducted from Tier 1 capital, and $ 24.2 million of accumulated gains on AFS securities, net of deferred taxes, which wer e subtracted from Tier 1 capital.

Total risk-based capital consists of the sum of an i nstitution’s Tier 1 capital and the amount of its allowable Tier 2 capital up to the amount of its Tier 1 capital. Tier 2 capital consists of all cumulative perpetual and limited-life preferred stock, hybrid capital instruments, including mandatory convertible securities, term debt, ACL up to 1.25% of risk-weighted assets , and certain unrealized gains on equity securities. At September 30, 2012, the Bank had $ 11.1 million of ACL, which was less than 1.25% of risk-weighted assets.

Adjusted total assets consist of total assets as specified in the OCC Call Report less such items as disallowed servicing assets and accumulated gains/losses on AFS securities. At September 30, 201 2 , the Bank had $ 73 thousand of disallowed servicing assets and $ 24.2 million of accumulated gains on AFS securities , net of deferred taxes, which were subtracte d from Call Report total assets of $ 9.32 billion to arrive at adjusted total assets of $ 9.29 billion.

Risk-weighted assets are determined under the OCC capital regulations, which assign to every asset, including certain off-balance sheet items, a risk weight generally ranging from 0% to 100% ba sed on the inherent risk of the asset. Institutions that are not well capitalized are subject to certain restrictions on brokered deposits and interest rates on deposits. At September 30, 201 2 , the Bank had Tier 1 capital of $ 1.36 billion, t otal risk-based capital of $ 1.37 billion, adjusted total assets of $ 9.29 billion, and ri sk-weighted assets of $ 3.72 billion. At September 30, 201 2 , the Bank had a Tier 1 leverage ratio of 14.6 %, a Tier 1 capital to risk-weighted assets ratio of 36. 4 %, and a total risk-based capital to risk-weighted assets ratio of 36. 7 %. At September 30 , 2012 , the Bank was considered a well-capitalized institution under OCC regulations. Regulatory capital is discussed further in “Notes to Consolidated Financial Statements - Note 13 ” in the Annual Report to Stockholders attached as Exhibit 13 to this Annual Report on Form 10-K.

The OCC has the ability to establish an individual minimum capital requirement for a particular institution, which varies from the capital levels that would otherwise be required under the capital regulations based on such factors as concentrations of credit risk, levels of interest rate risk, and the risks of non-traditional activities as well as others . The OCC has not imposed any such requirement on the Bank.

The OCC is authorized and, under certain circumstances, required to take certain actions against savings banks that fail to meet the minimum ratios for an adequately capitalized institution. Any such institution must submit a capital restoration plan and, until such plan is approved by the OCC, may not increase its assets, acquire another institution, establish a branch or engage in any new activities, and generally may not make capital distributions. The plan must include a guaranty by the institution’s holding company limited to the lesser of 5% of the institution’s assets when it became undercapitalized, or the amount necessary to restore the institution to adequately capitalized status. The OCC is authorized to impose the additional restrictions on institutions that are less than adequately capitalized.

Federal regulations state that any institution that fails to comply with its capital plan or has Tier 1 risk-based capital ratios of less than 3.0% or a total risk-based capital ratio of less than 6.0% is considered significantly undercapitalized and must be made subject to one or more additional specified actions and operating restrictions that may cover all aspects of its operations and may include a forced merger or acquisition of the institution. An institution with tangible equity to total assets of less than 2.0% is critically undercapitalized and becomes subject to further mandatory restrictions on its operations. The OCC generally is authorized to reclassify an institution into a lower capital category and impose the restrictions applicable to such category if the institution is engaged in unsafe or unsound practices or is in an unsafe or unsound condition. The imposition by the OCC of any of these measures on the Bank may have a substantial adverse effect on its operations and profitability. In general, the FDIC must be appointed receiver for a critically undercapitalized institution whose capital is not restored within the time provided. When the FDIC as receiver liquidates an institution, the claims of depositors and the FDIC as their successor (for deposits covered by FDIC insurance) have priority over other unsecured claims against the institution.

New Proposed Capital Rules

The federal banking agencies have proposed rules that would substantially amend the regulatory risk-based capital rules applicable to the Company and the Bank. The proposed rules would implement the “Basel III” regulatory capital reforms and changes required by the Dodd-Frank Act. “Basel III” refers to various documents released by the Basel Committee on Banking Supervision. As published, the proposed rules contemplated a general effective date of January 1, 2013, and, for certain provisions, various phase-in periods and later effective dates for specified provisions. Recently, the federal banking agencies have announced that the proposed rules will not be effective on January 1, 2013. The agencies have not adopted final rules or published any modifications to the proposed rules. The proposed rules as published are summarized below. It is not possible to predict when or in what form final regulations may be adopted.

The proposed rules include new minimum risk-based capital and leverage ratios, which would be phased in during 2013 and 2014, and would refine the definitions of what constitutes “capital” for purposes of calculating those ratios. The proposed new minimum capital level requirements applicable to the Company and the Bank under the proposals would be: (i) a new common equity Tier 1 capital ratio of 4.5%; (ii) a Tier 1 capital ratio of 6% (increased from 4%); (iii) a total capital ratio of 8% (unchanged from current rules); and (iv) a Tier 1 leverage ratio of 4%. The proposed rules would also establish a “capital conservation buffer” of 2.5% above each of the new regulatory minimum capital ratios would result in the following minimum ratios: (i) a common equity Tier 1 capital ratio of 7.0%, (ii) a Tier 1 capital ratio of 8.5%, and (iii) a total capital ratio of 10.5%. The new capital conservation buffer requirement would be phased in beginning in January 2016 at 0.625% of risk-weighted assets and would increase each year until fully implemented in January 2019. An institution would be subject to limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses if its capital level falls below the buffer amount. These limitations would establish a maximum percentage of eligible retained income that could be utilized for such actions.

The proposed rules also implement other revisions to the current capital rules such as recognition of all unrealized gains and losses on available for sale debt and equity securities, and provide that instruments that will no longer qualify as capital would be phased out over time.

The federal bank regulatory agencies also proposed revisions to the prompt corrective action framework, which is designed to place restrictions on insured depository institutions, including the Bank, if their capital levels begin to show signs of weakness. These revisions would take effect January 1, 2015. Under the prompt corrective action requirements, insured depository institutions would be required to meet the following increased capital level requirements in order to qualify as “well capitalized:” (i) a new common equity Tier 1 risk-based capital ratio of 6.5%; (ii) a Tier 1 risk-based capital ratio of 8% (increased from 6%); (iii) a total risk-based capital ratio of 10% (unchanged from current rules); and (iv) a Tier 1 leverage ratio of 5% (unchanged from the current rules).

The proposed rules set forth certain changes for the calculation of risk-weighted assets, which we would be required to utilize beginning January 1, 2015. The proposed rule utilizes an increased number of credit risk and other exposure categories and risk weights, and also addresses: (i) a proposed alternative standard of creditworthiness consistent with Section 939A of the Dodd-Frank Act; (ii) revisions to recognition of credit risk mitigation; (iii) rules for risk weighting of equity exposures and past due loans; and (iv) revised capital treatment for derivatives and repo-style transactions.

In particular, the proposed rules would expand the risk-weighting categories from the current four categories (0%, 20%, 50% and 100%) to a much larger and more risk-sensitive number of categories, generally ranging from 0% for U.S. government and agency securities, to 600% for certain equity exposures. Higher risk weights would apply to a variety of exposure categories. Specifics include, among others:

For residential mortgage exposures, changing the current 50% risk weight for high-quality seasoned mortgages and 100% risk-weight for all other mortgages to a risk weight between 35% and 200% depending upon the mortgage’s LTV ratio and whether the mortgage is a “category 1” or “category 2” residential mortgage exposure (based on eight criteria that include, among others, the term, seniority of the lien, use of negative amortization, balloon payments and certain rate increases).

·	Applying a 150% risk weight instead of a 100% risk weight for certain high volatility commercial real estate acquisition, development and construction loans.

·	Assigning a 150% risk weight to exposures (other than residential mortgage exposures) that are 90 days past due.

·	Providing for a 20% credit conversion factor for the unused portion of a commitment with an original maturity of one year or less that is not unconditionally cancellable (currently set at 0%).

·	Providing for a 100% risk weight for claims on securities firms.

·	Eliminating the current 50% cap on the risk weight for over-the-counter derivatives.

Community Reinvestment and Consumer Protection Laws

In connection with its lending activities, the Bank is subject to a number of federal laws designed to protect borrowers and promote lending to various sectors of the economy and population. These include the Equal Credit Opportunity Act, the Truth-in-Lending Act, the Home Mortgage Disclosure Act, the Real Estate Settlement Procedures Act, the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (“SAFE Act”), and the Community Reinvestment Act ( “ CRA ” ). In addition, federal banking regulators, pursuant to the Gramm-Leach-Bliley Act, have enacted regulations limiting the ability of banks and other financial institutions to disclose nonpublic consumer information to non-affiliated third parties. The regulations require disclosure of privacy policies and allow consumers to prevent certain personal information from being shared with non-affiliated parties.

The CRA requires the appropriate federal banking agency, in connection with its examination of an FDIC-insured institution , to assess its record in meeting the credit needs of the communities served by the bank, including low and moderate income neighborhoods. The federal banking regulators take into account the institution’s record of performance under the CRA when considering applications for mergers, acquisitions and branches. Under the CRA, institutions are assigned a rating of outstanding, satisfactory, needs to improve, or substantial non-compliance. The Bank received a satisfactory rating in its most recent CRA evaluation.

Bank Secrecy Act /Anti-Money Laundering Laws

The Bank is subject to the Bank Secrecy Act and other anti-money laundering laws and regulations, including the USA PATRIOT Act of 2001. These laws and regulations require the Bank to implement policies, procedures, and controls to detect, prevent, and report money laundering and terrorist financing and to verify the identity of their customers. Violations of these requirements can result in substantial civil and criminal sanctions. In addition, provisions of the USA PATRIOT Act require the federal financial institution regulatory agencies to consider the effectiveness of a financial institution's anti-money laundering activities when reviewing mergers and acquisitions.

Limitations on Dividends and Other Capital Distributions

Although savings and loan holding companies are not currently subject to regulatory capital requirements or specific restrictions on the payment of dividends or other capital distributions, the OCC does prescribe such restrictions on subsidiary savings associations. The OCC regulations impose restrictions on savings institutions with respect to their ability to make distributions of capital, which include dividends, stock redemptions or repurchases, cash-out mergers and other transactions charged to the capital account.

Generally, savings institutions, such as the Bank, may make capital distributions during any calendar year equal to earnings of the previous two calendar years and current year-to-date earnings. It is generally required that the Bank remain well-capitalized before and after the proposed distribution. However, an institution deemed to be in need of more than normal supervision by the OCC may have its capital distribution authority restricted by the OCC . A savings institution, such as the Bank, that is a subsidiary of a savings and loan holding company and that proposes to make a capital distribution must submit written notice to the OCC and FRB 30 days prior to such distribution. The OCC and FRB may object to the distribution during that 30-day period based on safety and soundness or other concerns. Savings institutions that desire to make a larger capital distribution, or are under special restrictions, or are not, or would not be, well-capitalized following a proposed capital distribution, however, must obtain regulatory approval prior to making such distribution. See “Regulatory Capital Requirements.”

The long-term ability of the Company to pay dividends to its stockholders is based primarily upon the ability of the Bank to make capital distributions to the Company. So long as the Bank continues to remain “well-capitalized” after each capital distribution and operates in a safe and sound manner, it is management’s belief that the OCC and FRB will continue to allow the Bank to distribute its net income to the Company, although no assurance can be given in this regard.

Federal Securities Law

The common stock of the Company is registered with the SEC under the Securities Exchange Act of 1934, as amended. The Company is subject to the information, proxy solicitation, insider trading restrictions and other requirements of the SEC under the Securities Exchange Act of 1934.

The Company stock held by persons who are affiliates of the Company may not be resold without registration or unless sold in accordance with certain resale restrictions. Affiliates are generally considered to be officers, directors and principal stockholders. If the Company meets specified current public information requirements, each affiliate of the Company will be able to sell in the public market, without registration, a limited number of shares in any three-month period.

Federal Reserve System

The FRB requires all depository institutions to maintain reserves at specified levels against their transaction accounts, primarily checking accounts. At September 30, 20 12 , the Bank was in compliance with these reserve requirements. The Bank is authorized to borrow from the Federal Reserve Bank “discount window.” A n eligible institution need not exhaust other sources of funds before coming to the discount window, nor are there restrictions on the purposes for which the borrower can use primary credit . At September 30, 2012 , the Bank had no borrowings from the discount window.

Federal Home Loan Bank System

The Bank is a member of FHLB Topeka, which is one of 12 regional Federal Home Loan Banks. Each FHLB serves as a reserve or central bank for its members within its assigned region and is funded primarily from proceeds derived from the sale of consolidated obligations of the FHLB System. It makes loans or advances to members in accordance with policies and procedures, established by the Board of Directors of FHLB, which are subject to the oversight of the Federal Housing Finance Agency (“ FHFA ”) .

As a member, the Bank is required to purchase and maintain stock in FHLB. The minimum required FHLB stock amount is generally 5% of the Bank’s FHLB advances and outstanding balance on the FHLB line of credit , and 2% of the outstanding principal of loans sold into the Mortgage Partnership Finance ( “ MPF ” ) program. At September 30, 20 12 , the Bank had a balance of $ 133.0 million in FHLB stock, which was in compliance with this requirement. In past years, the Bank has received dividends on its FHLB stock , although no assurance can be given that these dividends will continue . The average yield on FHLB stock was 3.43 % for fiscal year 2012 . For the year ended September 30, 20 12 , dividends paid by FHLB to the Bank totaled $ 4.4 million, which were primarily stock dividends.

Under federal law, FHLBs are required to provide funds for community investment and low- and moderate-income housing. These required contributions could adversely affect the level of FHLB dividends. On a quarterly basis, management conducts a review of FHLB Topeka to determine whether an other-than-temporary impairment of the FHLB stock is present. At September 30, 2012, management concluded ther e was no such impairment .

Federal Savings and Loan Holding Company Regulation

The Company is a unitary savings and loan holding compan y within the meaning of the Home Owners Loan Act (“ HOLA ”) . As such, the Company is registered with the FRB and subject to the FRB regulations, examinations, supervision and reporting requirements. In addition, the FRB has enforcement authority over the Company and the Bank. Among other things, this authority permits the FRB to restrict or prohibit activities that are determined to be a serious risk to the Bank.

The HOLA prohibits a savings and loan holding company (directly or indirectly, or through one or more subsidiaries) from acquiring another savings association or holding company thereof without prior written approval of the FRB ; acquiring or retaining, with certain exceptions, more than 5% of a non-subsidiary savings association, a non-subsidiary holding company, or a non-subsidiary company engaged in activities other than those permitted by the HOLA; or acquiring or retaining control of a depository institution that is not federally insured. In evaluating applications by savings and loan holding companies to acquire savings associations, the FRB must

consider the financial and managerial resources and future prospects of the company and institution involved, the effect of the acquisition on the risk to the insurance funds, the convenience and needs of the community , competitive factors , and other factors .

TAXATION

Federal Taxation

General . The Company and the Bank are subject to federal income taxation in the same general manner as other corporations, with some exceptions discussed below. Neither the Company nor the Bank has been subject to an IRS audit during the past five years.

Method of Accounting . For federal income tax purposes, the Bank currently reports its income and expenses on the accrual method of accounting and uses a fiscal year ending on September 30 for filing its federal income tax return.

Minimum Tax . The Internal Revenue Code imposes an alternative minimum tax at a rate of 20% on a base of regular taxable income plus certain tax preferences, called alternative minimum taxable income. The alternative minimum tax is payable to the extent such alternative minimum taxable income is in excess of the regular tax. Certain payments of alternative minimum tax may be used as credits against regular tax liabilities in future years.

Net Operating Loss Carryovers . A financial institution may carryback net operating losses to the preceding two taxable years and forward to the succeeding 20 taxable years. This provision applies to losses incurred in taxable years b eginning after August 6, 1997.

State Taxation

The earnings/losses of Capitol Federal Financial, Inc. and Capitol Funds, Inc. are combined for purposes of filing a consolidated Kansas corporate tax return. The Kansas corporate tax rate is 4.0%, plus a surcharge of 3.0% on earnings greater than $50 thousand.

The Bank files a Kansas privilege tax return. For Kansas privilege tax purposes, for taxable years beginning after 1997, the minimum tax rate i s 4.5% of earnings, which is calculated based on federal taxable income, subject to certain adjustments. The Bank has not received notification from the state of any potential tax liability for any years still subject to audit.

Additionally, the Bank files state tax returns in various other states where it has significant purchased loan s and/or foreclosure activities. In these states, the Bank has either established nexus under an economic nexus theory or has exceeded enumerated nexus thresholds based on the amount of interest derived from sources within the state.

Employees

At September 30, 2012, we had a total of 738 employees, including 142 part-time employees. The full-time equivalent of our total employees at September 30, 2012 was 677 . Our employees are not represented by any collective bargaining group. Management considers its employee relations to be good.

Executive Officers of the Registrant

John B. Dicus . Age 51 years. Mr. Dicus is Chairman of the Board of Directors, Chief Executive Officer, and President of the Bank and the Company. He has served as Chairman since January, 2009 and Chief Executive Officer since January, 2003. He has served as President of the Bank since 1996 and of the Company since its inception in March 1999. Prior to accepting the responsibilities of CEO, he served as Chief Operating Officer of the Bank and the Company. Prior to that, he served as the Executive Vice President of Corporate Services for the Bank for four years. He has been with the Bank in various other positions since 1985.

R. Joe Aleshire . Age 65 years. Mr. Aleshire has been employed with the Bank since 1973 and currently serves as Executive Vice President for Retail Operations, a position he has held since 1997. Prior to that, he was employed by the Bank as the Wichita Area Manager for 17 years.

Kent G. Townsend. Age 51 years. Mr. Townsend serves as Executive Vice President and C hief Financial Officer of the Bank, its subsidiary, and the Company. Mr. Townsend also serves as Treasurer for the Company, Capitol Funds, Inc. and CFMRC. Mr. Townsend was promoted to Executive Vice President, Chief Financial Officer and Treasurer on September 1, 2005. Prior to that, he s erv ed as Senior Vice President , a position he held since April 1999, and Controller of the Company, a position he held since March 1999. He has served in similar positions with the Bank since September 1995. He served as the Financial Planning and Analysis Officer with the Bank for three years and other financial related positions since joining the Bank in 1984.

Rick C. Jackson. Age 4 7 years . Mr. Jackson currently serves as Executive Vice President, Chief Lending Officer and Community Development Director of the Bank. He also serves as the President of Capitol Funds , Inc., a subsidiary of the Bank and President of CFMRC. He has been with the Bank since 1993 and has held the position of Community Development Director since that time. He has held the position of Chief Lending Officer since February 2010.

Natalie G. Haag . Age 53 years. Ms. Haag currently serves as Executive Vice President and General Counsel of the Bank and the Company. Prior to joining the Bank in August of 2012, Ms. Haag was 2nd Vice President, Director of Governmental Affairs and Assistant General Counsel for Security Benefit Corporation and Security Benefit Life Insurance Company in Topeka, Kansas. Security Benefit provides retirement products and services, including annuities and mutual funds. Ms. Haag was employed by Security Benefit since June 2003. The Security Benefit companies are not parents, subsidiaries or affiliates of the Bank or the Company.

Carlton A. Ricketts . Age 55 years. Mr. Ricketts serves as Executive Vice President, Chief Corporate Services Officer of the Bank. Prior to accepting those responsibilities in 2012, he served as Chief Strategic Planning Officer of the Bank for the previous five years.

Tara D. Van Houweling . Age 3 9 years. Ms. Van Houweling has been employed with the Bank and Company since May 2003 and currently serves as First Vice President, Principal Accounting Officer and Reporting Director. She has held the position of Reporting Director since May 2003.

Item 1A. Risk Factors

The following is a summary of risk factors relating to the operations of the Bank and the Company. These risk factors are not necessarily presented in order of significance.

We may be required to provide remedial consideration to borrowers whose loans we purchase from correspondent and nationwide lenders if it is discovered that the originating company did not properly comply with lending regulations during the origination process.

We purchase whole one- to four-family mortgage loans from correspondent and nationwide lenders. While loans purchased on a loan-by-loan basis from correspondent lenders are underwritten by the Bank’s underwriters and loans purchased in bulk packages from correspondent and nationwide lenders are evaluated on a certain set of criteria before being purchased, we are still subject to some risks associated with the loan origination process itself. By law, loan originators are required to comply with lending regulations at all times during the origination process. Any compliance related risks associated with the origination process itself effectively gets transferred from the originating company to the Bank once the Bank has purchased the asset. Should, at any point, it be discovered that an instance of noncompliance occurred by the originating company during the origination process, the Bank would still be held responsible and required to remedy the issue for the loans it purchased from the originator. Remedial actions can include such actions as refunding interest paid to the borrower and adjusting the contractual interest rate on the loan to the current market rate if advantageous to the borrower.

A prolonged economic downturn, especially one affecting our geographic market area, will adversely affect our business and financial results.

We are particularly exposed to downturns in the U.S. housing market. Unemployment and under-employment, along with d ramatic declines in the housing market over the past four years , falling home prices and increasing foreclosures, have negatively impacted the credit performance of mortgage loans and resulted in significant write-downs of asset values by financial institutions, including GSEs, major commercial and investment banks, and regional financial institutions such as the Bank.

The Bank’s net loan charge-offs during fiscal years 2012, 2011, and 2010, were $ 6.4 million, $3.5 million, and $4.0 million, respectively. During the second quarter of fiscal year 2012, the Bank implemented a loan charge-off policy change as the OCC Call Report requirements do not permit the use of SVAs, which the Bank was previously utilizing for potential loan losses, as permitted by the OTS, which was succeeded by the OCC as the Bank’s regulator effective July 21, 2011 . As a result of the implementation of the charge-off policy change, $3.5 million of SVAs were charged off during the second fiscal quarter of 2012 as it was the first quarter the Bank was required to file a Call Report . Excluding the $3.5 million of SVAs charged-off, net loan charge-offs for fiscal year 2012

were $2.9 million. Historically, the Bank’s net loan charge-offs have been low due to the low level of non-performing loans and the amount of equity in the properties collateralizing the related loans. During fiscal years 2012, 2011, and 2010, the Bank recorded a provision for credit losses of $ 2.0 million, $4.1 million, and $8.9 million, respectively. The overall amount of the provision for credit losses and net loan charge-offs has not been significant to - date because of the Bank’s traditional underwriting standards and the relative economic stability of the geographic areas in our primary lending areas.

The geographic concentration of our loan portfolio and lending activities makes us vulnerable to a downturn in the local economy.

We are one of the largest mortgage loan originators in the state of Kansas . Approximately 7 0 % of our loan portfolio is comprised of loans secured by property located in Kansas, and approximately 15% is comprised of loans secured by property located in Missouri. This makes us vulnerable to a downturn in the local economy and real estate markets. Adverse conditions in the local economy such as inflation, unemployment, recession, natural disasters, or other factors beyond our control could impact the ability of our borrowers to repay their loans, which could impact our net interest income. Decreases in local real estate values could adversely affect the value of the property used as collateral for our loans, which could cause us to realize a loss in the event of a foreclosure. Currently there is not a single employer or industry in the area on which the majority of our customers are dependent.

If our allowance for credit losses is not sufficient to cover actual loan losses, our earnings could decrease.

Our borrowers may not repay their loans according to the terms of the loans, and , as a result of the declines in home prices , the collateral securing the payment of these loans may be insufficient to pay any remaining loan balance. We may experience significant loan losses, which could have a material adverse effect on our operating results. When determining the amount of the ACL, we make various assumptions and judgments about the collectability of our loan portfolio, including the creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for the repayment of many of our loans. In determining the amount of the ACL, we rely on our loan quality reviews, our experience and our evaluation of economic conditions, among other factors. If our assumptions prove to be incorrect, our ACL may not be sufficient to cover losses inherent in our loan portfolio, resulting in additions to our allowance which is maintained through provisions for credit losses. Material additions to our allowance could materially decrease our net income.

Our historical losses on bulk purchased loans require that we generally maintain a higher ACL on these loans than loans we originate or purchase on a loan-by-loan basis from correspondent lenders. Additionally, l oans included in bulk loan packages generally have a higher loan balance than those we originate or purchase on a loan-by-loan basis ; therefore , even small declines in related home prices could result in a magnified adverse impact to the ACL . To the extent we increase our portfolio of bulk purchased loans that have risk characteristics similar to the bulk purchased loans historically in our loan portfolio or do not have guarantees to repurchase/replace delinquent loans, similar to the $342.5 million bulk loan purchase during the fourth quarter of fiscal year 2012 , our ACL will likely increase, through a provision for credit losses, which will have an adverse effect on our net income.

Our ACL at September 30, 2012, 2011, and 2010 was $ 11.1 million, $15.5 million, and $14.9 million, respectively. The decrease in our September 30, 2012 ACL balance compared to September 30, 2011 was due primarily to the implementation of our loan charge-off policy change previously discussed. As a result of the implementation of the charge-off policy change, $3.5 million of SVAs, which were previously reported in the ACL, were charged-off during the second fiscal quarter of 2012. These charge-offs did not impact the provision for credit losses, and therefore had no additional income statement impact, as the amounts were expensed in previous period s .

Changes in interest rates could have an adverse impact on our results of operations and financial condition.

Our results of operations are primarily dependent on net interest income, which is the difference between the interest earned on loans, MBS, and investment securities, and the interest paid on deposits and borrowings. Changes in interest rates could have an adverse impact on our results of operations and financial condition because the majority of our interest-earning assets are long-term, fixed-rate loans, while the majority of our interest-bearing liabilities are shorter term, and therefore subject to a greater degree of interest rate fluctuation. This type of risk is known as interest rate risk, and is affected by prevailing economic and competitive conditions.

The impact of changes in interest rates is generally observed on the income statement. The magnitude of the impact will be determined by the difference between the amount of interest-earning assets and interest-bearing liabilities which either reprice or mature within a given period of time. This difference provides an indication of the extent to which our net interest rate spread will be impacted by changes in interest rates. In addition, changes in interest rates will impact the expected level of repricing of the Bank’s mortgage-related assets and callable debt securities. Generally, as interest rates decline, the amount of interest-earning assets expected to reprice will increase as borrowers have an economic incentive to reduce the cost of their mortgage or debt, which would negatively impact the Bank’s interest income. Conversely, as interest rates rise, the amount of interest-earning assets expected to reprice will decline as the economic incentive to refinance the mortgage or debt is diminished. As this occurs, the amount of interest-earning assets repricing could be diminished to a point where interest-bearing liabilities could reprice to a higher interest rate, at a faster pace, than interest-earning assets, thus negatively impacting the Bank’s net interest income.

Changes in interest rates can also have an adverse effect on our financial condition, as our AFS securities are reported at their estimated fair value. We increase or decrease our stockholders’ equity, specifically accumulated other comprehensive income (loss), by the amount of change in the estimated fair value of the AFS securities, net of deferred taxes. Increases in interest rates generally decrease the fair value of our AFS securities. Decreases in the fair value of AFS securities would, therefore, adversely impact our stockholders’ equity. The balance of accumulated other comprehensive income , net of deferred taxes, at September 30, 2012, 2011, and 2010 was $ 24.2 million, $26.7 million, and $31.9 million, respectively.

Changes in interest rates, as they relate to customers, can also have an adverse impact on our financial condition and results of operations. In times of rising interest rates, default risk may increase among customers with ARM loans as the rates on their loans adjust upward and their payments increase. Fluctuations in interest rates also affect customer demand for deposit products. Local competition for deposit dollars could affect our ability to attract deposits, or could result in us paying more for deposits.

In addition to general changes in interest rates, changes that result in the shape of the yield curve would negatively impact the Bank. The Bank’s interest-bearing liabilities are generally priced based on short-term interest rates while the majority of the Bank’s interest-earning assets are priced based on long-term interest rates. The income for the Bank is primarily driven by the spread between these rates. As a result, a steeper yield curve, meaning long-term interest rates are significantly higher than short-term interest rates, would provide the Bank with a better opportunity to increase net interest income. When the yield curve is flat, meaning long-term interest rates and short-term interest rates are essentially the same, or when the yield curve is inverted, meaning long-term interest rates are lower than short-term interest rate s , the yield between interest-earning assets and interest-bearing liabilities that reprice is compressed or diminished and would likely negatively impact the Bank’s net interest income.

The Bank’s one-year cumulative excess of interest-earning assets over interest-bearing liabilities as a percentage of assets at September 30, 2012 was 22.8 % which signifies a positive gap position, meaning we have more interest-earning assets expected to reprice over the next 12 months than interest-bearing liabilities. In a rising rate environment, a positive gap position would tend to result in an increase in our net interest income. In a decreasing rate environment, a positive gap position would tend to result in a decrease in our net interest income. For additional information about interest rate risk, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Quantitative and Qualitative Disclosures About Market Risk” in the Annual Report to Stockholders attached as Exhibit 13 to this Annual Report on Form 10-K.

Our strategies to modify our interest rate risk profile may be difficult to implement.

Our asset management strategies are designed to decrease our interest rate risk sensitivity. One such strategy is increasing the amount of adjustable-rate and/or short-term assets. We offer ARM loan products and work with correspondent and nationwide lenders to purchase ARM loans as a means to achieve this strategy. However, lower interest rates would generally decrease borrower demand for adjustable-rate assets, and there is no guarantee that any adjustable-rate assets obtained will not prepay. Conventional mortgage loans may be sold on a bulk basis for portfolio restructuring or on a flow basis as loans are originated, which also subjects us to pricing risk in the secondary market. Additionally, we attempt to invest in shorter-term assets in the investment portfolio as a way to reduce our interest rate sensitivity.

We are also managing our interest-bearing liabilities to moderate our interest rate risk sensitivity. We are using FHLB advances and repurchase agreements to mitigate the impact of customer demand for long-term fixed-rate mortgages by lengthening the maturities of these advances and repurchase agreements, depending on the liquidity or investment opportunities at the time we undertake additional FHLB advances or repurchase agreements. These long-term borrowings better match the long-term characteristics of our fixed-rate mortgage portfolio. Because our customers generally prefer long-term fixed - rate assets and short-term deposit products, this creates a mismatch between the repricing characteristics of these portfolios. The long-term fixed - rate borrowings help to reduce the risk of rising interest rates by creating interest-bearing liabilities with repricing characteristics that better match those of the fixed-rate mortgage portfolio. FHLB advances and repurchase agreements will be entered into as needed or to fund the purchase of assets that provide for spreads at levels acceptable to management.

If we are unable to originate or purchase adjustable-rate assets at favorable rates or fund loan originations or securities purchases with long-term funding, we may have difficulty executing this asset management strategy and/or it may result in a reduction in profitability.

We may have unanticipated credit risk in our investment and MBS portfolio.

At September 30, 2012, $ 3. 06 billion, or approximately 33 % , of our assets consisted of investment and MBS securities that were issued by, or had principal and interest payments guaranteed by, FNMA or FHLMC. In September 2008, the FHFA placed FNMA and FHLMC into federal conservatorship. Although the federal government has committed substantial capital to FNMA and FHLMC, there can be no assurance that these credit facilities and other capital infusions will be adequate for their needs. If the financial support is inadequate, or if additional support is not provided when needed, these companies could continue to suffer losses

and could fail to honor their guarantees and other obligations. The U.S. Treasury Secretary has suggested that the guarantee payment structure of FNMA and FHLMC should be re-examined. The future roles of FNMA and FHLMC could be significantly reduced and the nature of their guarantees could be eliminated or considerably limited relative to historical measurements. Any changes to the nature of the guarantees provided by FNMA and FHLMC could have a significant adverse effect on the market value and cash flows of the investment and MBS we hold, resulting in substantial losses.

Passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act has increase d and will continue to increase our operational and compliance costs.

The Dodd-Frank Act has significantly changed, and will continue to significantly change, the current bank regulatory structure and affect the lending, deposit, investment, trading and operating activities of financial institutions and their holding companies. The Bank’s primary federal regulator, the OTS, was eliminated in July 2011. Now, federal thrifts are subject to regulation and supervision by the OCC, which supervises and regulates all national banks. Savings and loan holding companies, such as the Company, are now subject to regulation and supervision by the FRB. The Dodd-Frank Act requires various federal agencies to adopt a broad range of new rules and regulations, and to prepare numerous studies and reports for Congress. The federal agencies are given significant discre tion in drafting the rules and regulations, and consequently, many of the details and much of the impact of the Dodd-Frank Act may not be known for many months or years.

The Dodd-Frank Act created a new Consumer Financial Protection Bureau (“CFPB”) with broad powers to supervise and enforce consumer protection laws. The CFPB has broad rule-making authority for a wide range of consumer protection laws that apply to all banks and savings institutions, including the authority to prohibit “unfair, deceptive or abusive” acts and practices. The CFPB has examination and enforcement authority over all banks with more than $10 billion in assets. Banks with $10 billion or less in assets will continue to be examined for compliance with the consumer laws by their primary bank regulators. The Dodd-Frank Act also weakens the federal preemption rules that have been applicable for national banks and federal savings associations, and gives state attorneys general the ability to enforce federal consumer protection laws. The Company does not currently have assets in excess of $10 billion, but it may at some point in the fu ture.

The Dodd-Frank Act requires minimum leverage (Tier 1) and risk-based capital requirements for savings and loan holding companies and bank holding companies that are no less stringent than those applicable to banks, which will limit our ability to borrow at the holding company level and invest the proceeds from such borrowings as capital in the Bank, and will exclude certain instruments that previously have been eligible for inclusion by bank holding companies as Tier 1 capital, such as trust preferred securities.

The Dodd-Frank Act also broadens the base for FDIC deposit insurance assessments. Assessments are now based on the average consolidated total assets less tangible equity capital of a financial institution, rather than deposits. The Dodd-Frank Act also permanently increases the maximum amount of deposit insurance for banks, savings institutions and credit unions to $250 thousand per depositor, retroactive to January 1, 2008, and non-interest-bearing transaction accounts have unlimited deposit insurance through December 31, 2012. The legislation also increases the required minimum reserve ratio for the DIF, from 1.15% to 1.35% of insured deposits, and directs the FDIC to offset the effects of increased assessments on depository institutions with less than $10 billion in assets.

It is difficult to predict at this time what specific impact the Dodd-Frank Act and the yet to be written implementing rules and regulations will have on community banks. However, it is expected that at a minimum they will increase our operating and compliance costs and could increase our interest expense.

Changes in laws and regulations and the cost of regulatory compliance with new laws and regulations may adversely affect our operations and our income.

We are subject to extensive regulation, supervision and examination by the OCC, FRB, the FDIC and the U.S. Department of Housing and Urban Development “(HUD”). These regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the ability to impose restrictions on a bank’s operations, reclassify assets, determine the adequacy of a bank’s ACL and determine the level of deposit insurance premiums assessed. Our business is highly regulated ; therefore, the laws and applicable regulations are subject to frequent change. Any change in these regulations and oversight, whether in the form of regulatory policy, new regulations or legislation or additional deposit insurance premiums , could have a material impact on our operations.

The potential exists for additional laws and regulations, or changes in policy, affecting lending and funding practices, regulatory capital limits, interest rate risk management, and liquidity standards. Moreover, bank regulatory agencies have been active in responding to concerns and trends identified in examinations, and have issued many formal enforcement orders requiring capital ratios in excess of regulatory requirements. Bank regulatory agencies, such as the OCC and the FDIC, govern the activities in which we may engage, primarily for the protection of depositors, and not for the protection or benefit of investors. In addition, new laws and

regulations may increase our costs of regulatory compliance and of doing business, and otherwise affect our operations. New laws and regulations may significantly affect the markets in which we do business, the markets for and value of our loans and investments, the products we offer, the fees we can charge and our ongoing operations, costs and profitability.

Higher FDIC insurance premiums and special assessments will adversely affect our earnings.

Pursuant to the Dodd-Frank Act, the FDIC has established 2.0% as the designated reserve ratio (“DRR”), that is, the ratio of the DIF to the insured deposit base. The FDIC has adopted a plan under which it will meet the statutory minimum DRR of 1.35% by September 30, 2020, the deadline imposed by the Dodd-Frank Act. The Dodd-Frank Act requires that institutions with assets of more than $10 billion bear the effect of the increase in the statutory minimum DRR to 1.35%, from the former statutory minimum of 1.15%. Although the Bank had less than $10 billion in assets as of September 30, 2012, in the event the Bank’s asset size grows to at least $10 billion for four consecutive quarters, the effect of this provision of the Dodd-Frank Act may be to increase the Bank’s cost of deposit insurance relative to institutions with less than $10 billion in assets.

The FDIC required all insured institutions to prepay their estimated assessments for the fourth quarter of calendar year 2009, and for all of calendar years 2010, 2011, and 2012. This pre-payment was due on December 30, 2009. The assessment rate for the fourth quarter of calendar year 2009 and for calendar year 2010 was based on each institution’s total base assessment rate for the third quarter of calendar year 2009, modified to assume that the assessment rate in effect on September 30, 2009 had been in effect for the entire calendar year third quarter, and the assessment rate for calendar years 2011 and 2012 was calculated as the modified third quarter assessment rate plus an additional three basis points. In addition, every institution’s assessment base for each period was calculated using its third quarter assessment base, adjusted quarterly for an estimated 5% annual growth rate in the assessment base through the end of calendar year 2012. We recorded the pre-payment as a prepaid expense, which will be amortized to expense based upon actual balances insured. Our prepayment amount for calendar years 2012, 2011 and 2010 was $25.7 million. Future increases in our assessment rate or special assessments would decrease our earnings.

The Company’s ability to pay dividends is subject to the ability of the Bank to make capital distributions to the Company.

The long-term ability of the Company to pay dividends to its stockholders is based primarily upon the ability of the Bank to make capital distributions to the Company, and also on the availability of cash at the holding company level in the event earnings are not sufficient to pay dividends according to the cash dividend payout policy. Under FRB and OCC safe harbor regulations, the Bank may distribute to the Company capital not exceeding net income for the current calendar year and the prior two calendar years. At September 30, 2012, the Bank was in compliance with the FRB and OCC safe harbor regulations.

Strong competition may limit growth and profitability.

While we are one of the largest mortgage loan originators in the state of Kansas, we compete in the same market areas as local, regional, and national banks, credit unions, mortgage brokerage firms, investment banking firms, investment brokerage firms and savings institutions. We must also compete with online investment and mortgage brokerages and online banks that are not confined to any specific market area. Many of these competitors operate on a national or regional level, are a conglomerate of various financial services providers housed under one corporation, or otherwise have substantially greater financial or technological resources than the Bank. We compete primarily on the basis of the interest rates offered to depositors and the terms of loans offered to borrowers. Should we face competitive pressure to increase deposit rates or decrease loan rates, our net interest income could be adversely affected. Additionally, our competitors may offer products and services that we do not or cannot provide, as certain deposit and loan products fall outside of our accepted level of risk. Our profitability depends upon our ability to compete in our local market areas.

The Banks's business is dependent on its network and information processing systems, and, in some cases, those of the Bank's third-party vendor s , and the disruption or failure of those systems may adversely affect the Banks's operations, financial performance , or reputation .
The Bank relies heavily on communications and information systems to conduct business. It is also dependent on its network and information processing systems, and, in some cases, those of the Bank's third-party vendors. Disruption or failure of those systems may adversely affect the Bank's operations, financial performance, or reputation. The Bank has implemented a business continuity plan which is reviewed and updated on a regular basis and is tested periodically. The Bank also reviews and evaluates business continuity programs implemented by its third party vendors. While these steps help mitigate this risk, there is no way of guaranteeing that disruption, failure, or breach in security will not occur.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

At Septe mber 30, 2012 , we had 36 traditional branch offices and 10 i n-store branch offices. The Bank owns the office building and related land in which its home office and executive offices are located, and 26 of its other branch offices . The Bank owns the buildings for three of its branch offices and leases the related land. The remaining 16 branch offices, including 10 in-store locations, were leased.

For additional information regarding our lease obligations, see “Notes to Co nsolidated Financial Statements - Note 5 ” in the Annual Report to Stockholders attached as Exhibit 13 to this Annual Report on Form 10-K.

Management believes that our current facilities are adequate to meet our present and immediately foreseeable needs . However, we will continue to monitor customer growth and expand our branching network, if necessary, to serve our customers’ needs.

Item 3. Legal Proceedings

The Company and the Bank are involved as plaintiff or defendant in various legal actions arising in the normal course of business. In our opinion, after consultation with legal counsel, we believe it unlikely that such pending legal actions will have a material adverse effect on our financial condition, results of operations or liquidity.

It em 4. Mine Safety Disclosures

None.

PART II

It em 5. Market for the Registrant’s Common Stock, Related Security Holder Matters and Issuer Purchases of Equity Securities

The section entitled “Stockholder Information” of the attached Annual Report to Stockholders for the year ended September 30, 2012 is incorporated herein by reference.

See “Notes to Consolidated Financial Statements—Note 1” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Regulatory Capital” of the Annual Report to Stockholders attached as Exhibit 13 to this Annual Report on Form 10- K regarding the OCC restrictions on capital distributions from the Bank to the Company.

The following table summarizes our share repurchase activity during the three months ended September 30, 2012 and additional information regarding our share repurchase program. On December 21, 2011, the Company announced that the Board of Directors approved the repurchase of up to $193.0 million of the Company’s common stock. This plan has no expiration date.


					Approximate
	Total			Total Number of	Dollar Value of
	Number of	Average		Shares Purchased as	Shares that May
	Shares	Price Paid		Part of Publicly	Yet Be Purchased
	Purchased	per Share		Announced Plans	Under the Plan
July 1, 2012 through
July 31, 2012	610,712	$	11.91	610,712	$	72,035,042
August 1, 2012 through
August 31, 2012	1,931,493		11.78	1,931,493		49,286,181
September 1, 2012 through
September 30, 2012	441,988		11.91	441,988		44,020,535
Total	2,984,193		11.82	2,984,193		44,020,535

The following table presents quarterly dividends paid in calendar years 2012, 2011, and 2010 . The dollar amounts represent dividends paid during the quarter. The 20 12 special year-end dividend is based upon the number of shares eligible to receive dividends outstanding on the record date of November 23, 2012.


	Calendar Year
	2012		2011		2010
	(Dollars in thousands)
Quarter ended March 31
Total dividends paid	$	12,145	$	12,105	$	10,739
Quarter ended June 30
Total dividends paid		11,883		12,105		10,496
Quarter ended September 30
Total dividends paid		11,402		12,106		10,496
Quarter ended December 31
Total dividends paid		11,223		12,145		10,597
Special year end/welcome dividend
Total dividends paid		26,585		113,031		6,359

Calendar year-to-date dividends paid	$	73,238	$	161,492	$	48,687

Item 6. Selected Financial Data

The section entitled “Selected Consolidated Financial Data” of the attached Annual Report to Stockholders for the fiscal year ended September 30, 2012 is incorporated herein by reference.

Item 7 . Management’s Discussion and Analysis of Financial Condition and Results of Operations

The section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the attached Annual Report to Stockholders for t he fiscal year ended September 30, 2012 is incorporated herein by reference.

Item 7A. Quantitative and Qualitative Disclosure About Market Risk

The section entitled “Management ’s Discussion and Analysis of Financial Condition and Results of Operations - Quantitative and Qualitative Disclosure about Market Risk” of the attached Annual Report to Stockholders for t he fiscal year ended September 30, 2012 is incorporated herein by reference.

Item 8. Financial Statements and Supplementary Data

The section entitled “Consolidated Financial Statements” of the attached Annual Report to Stockholders for the fiscal ye ar ended September 30, 2012 is incorporated herein by reference.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, the “Act”) as of September 30, 2012 . Based upon this evaluation, our Chief Executive Officer and our Chief Financial Officer have conclud ed that as of September 30, 2012 , such disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in the reports it files or submits under the Act is accumulated and communicated to the Company’s management (including the Chief Executive Officer and Chief Financial Officer) to allow timely decisions regarding required disclosure, and is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Internal Control s Over Financial Reporting

Management’s report on our internal control over financial reporting and the attestation report of the independent registered public accounting firm is contained in the attached Annual Report to Stockholders for the fiscal year ended September 30, 20 12 and incorporated herein by reference.

Changes in Internal Control Over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Act) that occurred during the Company’s quarter ended September 30, 2012 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 9 B . Other Information

None.

PART III

Item 10. Directors, Executive Officers, and Corporate Governance

Information required by this item concerning the Company’s directors and compliance with Section 16(a) of the Act is incorporated herein by reference from the definitive proxy statement for the Annual Meeting of Stockho lders to be held in January 2013 , a copy of which will be filed not later than 120 days after the close of the fiscal year.

Pursuant to General Instruction G(3), information concerning executive officers of the Company is included in Part I, under the caption “Executive Officers of the Registrant” of this Form 10-K.

Information required by this item regarding the audit committee of the Company’s Board of Directors , including information regarding the audit committee financial expert serving on the audit committee, is incorporated herein by reference from the definitive proxy statement for the Annual Meeting of S tockholders to be held i n January 2013 , a copy of which wil l be filed not later than 120 days after the close of the fiscal year .

Code of Ethics

We have adopted a written code of ethics within the meaning of Item 406 of SEC Regulation S-K that applies to our principal executive officer and senior financial officers, and to all of our other employees and our directors, a copy of which is available free of charge by contacting Jim Wempe, our Investor Relations Officer, at (785) 270-6055 or from our Internet website (www.capfed.com) .

Item 11. Executive Compensation

Information required by this item concerning compensation is incorporated herein by reference from the definitive proxy statement for the Annual Meeting of Stockho lders to be held in January 2013 , a copy of which will be filed not later than 120 days after the close of the fiscal year .

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Information required by this item concerning security ownership of certain beneficial owners and management is incor porated herein by reference from the definitive proxy statement for the Annual Meeting of Stockho lders to be held in January 2013 , a copy of which will be filed not later than 120 days after the close of the fiscal year.

The following table sets forth info rmation as of September 30, 2012 with respect to compensation plans under which shares of our common stock may be issued .


Equity Compensation Plan Information
				Number of Shares
				Remaining Available
				for Future Issuance
	Number of Shares			Under Equity
	to be issued upon	Weighted Average		Compensation Plans
	Exercise of	Exercise Price of		(Excluding Shares
	Outstanding Options,	Outstanding Options,		Reflected in the
Plan Category	Warrants and Rights	Warrants and Rights		First Column)
Equity compensation plans approved
by stockholders	2,471,825	$	13.06	9,399,868	⁽¹⁾⁽²⁾
Equity compensation plans not approved
by stockholders	N/A		N/A	N/A
	2,471,825	$	13.06	9,399,868

⁽¹⁾ This amount includes 2,206,442 restricted award shar es issuable under the Company’s Restricted Stock Plans .

⁽²⁾ This amount includes 2,879,926 shares associated with the 2000 Stock Option Plan and 358,767 shares associated with the 2000 Recognition and Retention Plan. The Company intends to award all future grants of stock options and restricted stock from the 2012 Equity Incentive Plan.

Item 13. Certain Relationships and Related Transactions, and Director Independence

Information required by this item concerning certain relationships, related transactions and director independence is incorporated herein by reference from the definitive proxy statement for the Annual Meeting of Stockho lders to be held in January 2013 , a copy of which will be filed not later than 120 days after the close of the fiscal year.

Item 14. Principal Account ant Fees and Services

Information required by this item concerning principal accountant fees and services is incorporated herein by reference from the definitive p roxy s tatement for the Annual Meeting of S tock holders to be held in January 2013 , a copy of which will be filed not later than 120 days after the close of the fiscal year.

PART IV

Item 15. Exhibits and Financial Statement Schedules

(a) The following is a list of documents filed as part of this report:

(1) Financial Statements :

The following financial statements are included under Part II, Item 8 of this Form 10-K:

1. Report of Independent Registered Public Accounting Firm.

2. Consolidated Balance Sheets as of September 30, 2012 and 2011 .

3. Consolidated Statements of Income for the Year s Ended September 30, 2012, 2011, and 2010 .

4. Consolidated Statements of Stockholders’ Equity for the Years Ended September 30, 2012, 2011, and 2010.

5. Consolidated Statements of Cash Flows for the Years Ended September 30, 2012, 2011, and 2010 .

6. Notes to Consolidated Financial Statements for the Years Ended September 30, 2012, 2011, and 2010 .

(2) Financial Statement Schedules :

All financial statement schedules have been omitted as the information is not required under the related instructions or is not applicable.

(3) Exhibits:

See Index to Exhibits.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


CAPITOL FEDERAL FINANCIAL, INC.



	Date: November 29, 2012	By:	/s/ John B. Dicus
			John B. Dicus, Chairman, President and
			Chief Executive Officer
			(Principal Executive Officer)



Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the date indicated.


By:	/s/ John B. Dicus	By:	/s/ Reginald L. Robinson
	John B. Dicus, Chairman, President		Reginald L. Robinson, Director
	and Chief Executive Officer		Date: November 29, 2012
	(Principal Executive Officer)
	Date: November 29, 2012	By:	/s/ Michael T. McCoy, M.D.
			Michael T. McCoy, M.D ., Director
By:	/s/ Kent G. Townsend		Date: November 29, 2012
	Kent G. Townsend, Executive Vice President,
	Chief Financial Officer and Treasurer	By:	/s/ Marilyn S. Ward
	(Principal Financial Officer)		Marilyn S. Ward, Director
	Date: November 29, 2012		Date: November 29, 2012

By:	/s/ Jeffrey R. Thompson	By:	/s/ Tara D. Van Houweling
	Jeffrey R. Thompson, Director		Tara D. Van Houweling, First Vice President
	Date: November 29, 2012		and Reporting Director
			(Principal Accounting Officer)
By:	/s/ Jeffrey M. Johnson		Date: November 29, 2012
	Jeffrey M. Johnson, Director
	Date: November 29, 2012

By:	/s/ M orris J. Huey II
	M orris J. Huey II, Director
	Date: November 29, 2012

INDEX TO EXHIBITS



Exhibit
Number		Document
2.0		Amended Plan of Conversion and Reorganization filed on October 27, 2010 as Exhibit 2 to Capitol Federal Financial, Inc.’s Post Effective Amendment No. 2 Registration Statement on Form S-1 (File No. 333-166578) and incorporated herein by reference
3(i)		Charter of Capitol Federal Financial, Inc., as filed on May 6, 2010, as Exhibit 3(i) to Capitol Federal Financial, Inc.’s Registration Statement on Form S-1 (File No. 333-166578) and incorporated herein by reference
3(ii)		Bylaws of Capitol Federal Financial, Inc. as filed on May 6, 2010, as Exhibit 3(ii) to Capitol Federal Financial Inc.’s Registration Statement on Form S-1 (File No. 333-166578) and incorporated herein by reference
10.1(i)		Capitol Federal Financial’s Thrift Plan filed on November 29, 2007 as Exhibit 10.1(i) to the Annual Report on Form 10-K for Capitol Federal Financial and incorporated herein by reference
10.1(ii)		Capitol Federal Financial, Inc.’s Stock Ownership Plan, as amended, filed on May 10, 2011 as Exhibit 10.1(ii) to the March 31, 2011 Form 10-Q for Capitol Federal Financial, Inc., and incorporated herein by reference
10.1(iii)		Form of Change of Control Agreement with each of John B. Dicus, Kent G. Townsend, R. Joe Aleshire, Larry Brubaker, and Rick C. Jackson filed on January 20, 2011 as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K and incorporated herein by reference
10.1(iv)		Form of Change of Control Agreement with each of Natalie G. Haag and Carlton A. Ricketts
10.2		Capitol Federal Financial’s 2000 Stock Option and Incentive Plan (the “Stock Option Plan”) filed on April 13, 2000 as Appendix A to Capitol Federal Financial’s Revised Proxy Statement (File No. 000-25391) and incorporated herein by reference
10.3		Capitol Federal Financial’s 2000 Recognition and Retention Plan (“RRP”) filed on April 13, 2000 as Appendix B to Capitol Federal Financial’s Revised Proxy Statement (File No. 000-25391) and incorporated herein by reference
10.4		Capitol Federal Financial Deferred Incentive Bonus Plan, as amended, filed on May 5, 2009 as Exhibit 10.4 to the March 31, 2009 Form 10-Q for Capitol Federal Financial and incorporated herein by reference
10.5		Form of Incentive Stock Option Agreement under the Stock Option Plan filed on February 4, 2005 as Exhibit 10.5 to the December 31, 2004 Form 10-Q for Capitol Federal Financial and incorporated herein by reference
10.6		Form of Non-Qualified Stock Option Agreement under the Stock Option Plan filed on February 4, 2005 as Exhibit 10.6 to the December 31, 2004 Form 10-Q for Capitol Federal Financial and incorporated herein by reference
10.7		Form of Restricted Stock Agreement under the RRP filed on February 4, 2005 as Exhibit 10.7 to the December 31, 2004 Form 10-Q for Capitol Federal Financial and incorporated herein by reference
10.8		Description of Named Executive Officer Salary and Bonus Arrangements
10.9		Description of Director Fee Arrangements filed on February 9, 2011 as Exhibit 10.9 to the December 31, 2010 Form 10-Q and incorporated herein by reference
10.10		Short-term Performance Plan filed on August 4, 2011 as Exhibit 10.10 to the June 30, 2011 Form 10-Q and incorporated herein by reference
10.11		Capitol Federal Financial, Inc. 2012 Equity Incentive Plan (the “Equity Incentive Plan”) filed on December 22, 2011 as Appendix A to Capitol Federal Financial, Inc.’s Proxy Statement (File No. 001-34814) and incorporated herein by reference
10.12		Form of Incentive Stock Option Agreement under the Equity Incentive Plan filed on February 6, 2012 as Exhibit 10.12 to the December 31, 2011 Form 10-Q and incorporated herein by reference
10.13		Form of Non-Qualified Stock Option Agreement under the Equity Incentive Plan filed on February 6, 2012 as Exhibit 10.13 to the December 31, 2011 Form 10-Q and incorporated herein by reference

10.14		Form of Stock Appreciation Right Agreement under the Equity Incentive Plan filed on February 6, 2012 as Exhibit 10.14 to the December 31, 2011 Form 10-Q and incorporated herein by reference
10.15		Form of Restricted Stock Agreement under the Equity Incentive Plan filed on February 6, 2012 as Exhibit 10.15 to the December 31, 2011 Form 10-Q and incorporated herein by reference
11		Statement re: computation of earnings per share*
13		Annual Report to Stockholders
14		Code of Ethics**
21		Subsidiaries of the Registrant
23		Consent of Independent Registered Public Accounting Firm
31.1		Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002 made by John B. Dicus, Chairman, President and Chief Executive Officer
31.2		Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002 made by Kent G. Townsend, Executive Vice President, Chief Financial Officer and Treasurer
32		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 made by John B. Dicus, Chairman, President and Chief Executive Officer, and Kent G. Townsend, Executive Vice President, Chief Financial Officer and Treasurer
101		The following information from the Company’s Quarterly Report on Form 10-K for the fiscal year ended September 30, 2012, filed with the SEC on November 29, 2012, has been formatted in eXtensible Business Reporting Language: (i) Consolidated Balance Sheets at September 30, 2012 and September 30, 2011, (ii) Consolidated Statements of Operations for the fiscal years ended September 30, 2012, 2011, and 2010, (iii) Consolidated Statement of Stockholders’ Equity for the fiscal years ended September 30, 2012, 2011, and 2010, (iv) Consolidated Statements of Cash Flows for the fiscal years ended September 30, 2012, 2011, and 2010, and (v) Notes to the Unaudited Consolidated Financial Statements ***

*No statement is provided because the computation of per share earnings can be clearly determined from the Financial Statements included in this report.

** May be obtained free of charge from the Registrant’s Investor Relations Officer by calling (785) 270-6055 or from the Registrant’s internet website at www.capfed.com .

***Pursuant to SEC rules, this exhibit will not be deemed filed for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section.

EXHIBIT 10.1(iv)

CHANGE OF CONTROL AGREEMENT

THIS AGREEMENT is entered into as of the 1 2 th day of September , 201 2 (the "Effective Date") by and between Capitol Federal Financial, Inc. ("CFF"), a Maryland corporation, and ________ (the "Executive").

WITNESSETH:

WHEREAS, CFF owns 100% of the outstanding stock of Capitol Federal Savings Bank (the "Bank"), a federally chartered savings bank;

WHEREAS, Executive is an Executive Vice President of the Bank, and as such is a key executive officer whose continued dedication, availability, advice and counsel to CFF and the Bank is deemed important to the Boards of Directors of CFF and the Bank and to the stockholders of CFF;

WHEREAS, CFF wishes to retain the services of Executive free from any distractions or conflicts that could arise as a result of a change in control of CFF or the Bank.

NOW, THEREFORE, to assure CFF of Executive's continued dedication, the availability of his advice and counsel to the Board of Directors of CFF free of any distractions resulting from a change of control, and for other good and valuable consideration, the receipt and adequacy whereof each party hereby acknowledges, CFF and Executive hereby agree as follows:

1. TERM OF AGREEMENT : This Agreement shall remain in effect until cancelled by either party hereto, upon not less than 24 months prior written notice to the other party.

2. CHANGE IN CONTROL : If the Executive's employment by the Bank or CFF shall be terminated by the Bank or CFF, or any successor thereto, other than for Cause or as a result of the Executive's death, disability or retirement, or terminated by the Executive for Good Reason, all as defined in Appendix A attached hereto ("Appendix A"), in either case within six (6) months preceding or twenty-four (24) months following a Change in Control of CFF or the Bank, then CFF shall:

(a) Pay to the Executive in cash upon the later of the date of such Change of Control or the effective date of the Executive's termination with CFF or the Bank, an amount equal to 299% of the Employee's "base amount" as determined under Section 280G of the Internal Revenue Code of 1986, as amended (the "Code").

(b) For purposes of this Agreement, a Change of Control of CFF occurs in any of the following events: (i) the acquisition by any "person" or "group" (as defined in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 ("Exchange Act")), other than CFF, any subsidiary of CFF or their employee benefit plans, directly or indirectly, as "beneficial owner" (as defined in Rule 13d-3, under the Exchange Act) of securities of CFF representing ten percent (10%) or more of either the then outstanding shares or the combined voting power of the then outstanding securities of CFF; (ii) either a majority of the directors of CFF elected at CFF's annual stockholders’ meeting shall have been nominated for election other than by or at the direction of the "incumbent directors" of CFF, or the "incumbent directors" shall cease to constitute a majority of the directors of CFF. The term "incumbent director" shall mean any director who was a director of CFF on the Effective Date and any individual who becomes a director of CFF subsequent to the Effective Date and who is elected or nominated by or at the direction of at least two-thirds of the then incumbent directors; (iii) the stockholders of CFF approve (x) a merger, consolidation or other business combination of CFF with any other "person" or "group" (as defined in Sections 13(d) and 14(d) of the Exchange Act) or affiliate thereof, other than a merger or consolidation that would result in the outstanding common stock of CFF immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into common stock of the surviving entity or a parent or affiliate thereof) at least fifty percent (50%) of the outstanding common stock of CFF or such surviving entity or a parent or affiliate thereof outstanding immediately after such merger, consolidation or other business combination, or (y) a plan of complete liquidation of CFF or an agreement for the sale or disposition by CFF of all or substantially all of CFF's assets; or (iv) any other event or circumstance which is not covered by the foregoing subsections but which the Board of Directors of CFF determines to affect control of CFF and with respect to which the Board of Directors adopts a resolution that the event or circumstance constitutes a Change of Control for purposes of the Agreement.

The Change of Control Date is the date on which an event described in (i), (ii), (iii) or (iv) occurs.

3. LIMITATION OF BENEFITS : It is the intention of the parties that no payment be made or benefit provided to the Executive that would constitute an "excess parachute payment" within the meaning of Section 280G of the Code and any regulations thereunder, thereby resulting in a loss of an income tax deduction by CFF or the imposition of an excise tax on the Executive under Section 4999 of the Code. If the independent accountants serving as auditors for CFF immediately prior to the date of a Change of Control determine that some or all of the payments or benefits scheduled under this Agreement, when combined with any other payments or benefits provided to the Executive on a Change of Control, would constitute nondeductible excess parachute payments by CFF or any affiliate under Section 280G of the Code, then the payments or benefits scheduled under this Agreement will be reduced to one dollar less than the maximum amount which may be paid or provided without causing any such payments or benefits scheduled under this Agreement or otherwise provided on a Change of Control to be nondeductible. The determination made as to the reduction of benefits or payments required hereunder by the independent accountants shall be binding on the parties. The Executive shall have the right to designate within a reasonable period which payments or benefits will be reduced; provided, however, that if no direction is received from the Executive, CFF shall implement the reductions by reducing or eliminating payments required under this Agreement.

4. LITIGATION - OBLIGATIONS - SUCCESSORS :

(a) If litigation shall be brought or arbitration commenced to challenge, enforce or interpret any provision of this Agreement, and such litigation or arbitration does not end with judgment in favor of CFF, CFF hereby agrees to indemnify the Executive for his reasonable attorney's fees and disbursements incurred in such litigation or arbitration.

(b) CFF's obligation to pay the Executive the compensation contemplated herein and to make the arrangements provided herein shall be absolute and unconditional and shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which CFF may have against him or anyone else. All amounts payable by CFF hereunder shall be paid without notice or demand. The Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise.

(c) CFF will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of CFF, by agreement in form and substance satisfactory to the Executive, to expressly assume and agree to perform this Agreement in its entirety. Failure of CFF to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to the compensation described in Section 2. As used in this Agreement, "CFF" shall mean Capitol Federal Financial, Inc. and any successor to its business and/or assets as aforesaid which executes and delivers the agreement provided for in this Section 4 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law.

5. NOTICES : For the purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Executive:

If to CFF:

Capitol Federal Financial, Inc.

700 South Kansas Ave.

Topeka, Kansas 66603

or at such other address as any party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

6. MODIFICATION - WAIVERS - APPLICABLE LAW : No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing, signed by the

Executive and on behalf of CFF by such officer as may be specifically designated by the Board of Directors of CFF. No waiver by either party hereto at any time of any breach by the other party hereto of, or in compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Kansas.

7. INVALIDITY - ENFORCEABILITY : The invalidity or unenforceability of any provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. Any provision in this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective only to the extent of such prohibition or unenforceability without invalidating or affecting the remaining provisions of this Agreement, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

8. SUCCESSOR RIGHTS : This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive should die while any amounts would still be payable to him hereunder, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to his executor or, if there is no such executor, to his estate.

9. HEADINGS : Descriptive headings contained in this Agreement are for convenience only and shall not control or affect the meaning or construction of any provision in this Agreement.

10. ARBITRATION : Any dispute, controversy or claim arising under or in connection with this Agreement shall be settled exclusively by arbitration in Topeka, Kansas (or as close thereto as feasible) in accordance with the Commercial Arbitration Rules of the American Arbitration Association then in effect. CFF shall pay all administrative fees associated with such arbitration. Judgment may be entered on the arbitrator's award in any court having jurisdiction.

11. CONFIDENTIALITY :

(a) The Executive acknowledges that CFF may disclose certain confidential information to the Executive during the term of this Agreement to enable him to perform his duties hereunder. The Executive hereby covenants and agrees that he will not, without the prior written consent of CFF, during the term of this Agreement or at any time thereafter, disclose or permit to be disclosed to any third party by any method whatsoever any of the confidential information of CFF, nor shall Executive use such confidential information to the detriment of CFF, the Bank or their successors. For purposes of this Agreement, "confidential information" shall include, but not be limited to, any and all records, notes, memoranda, data, ideas, processes, methods, techniques, systems, formulas, patents, models, devices, programs, computer software, writings, research, personnel information, customer information, CFF' s financial information, plans, or any other information of whatever nature in the possession or control of CFF which has not been published or disclosed to the general public, or which gives to CFF an opportunity to obtain an advantage over competitors who do not know of or use it. The Executive further agrees that if his employment hereunder is terminated for any reason, he will leave with CFF and will not take originals or copies of any records, papers, programs, computer software and documents and all matter of whatever nature which bears secret or confidential information of CFF.

(b) The foregoing paragraph shall not be applicable if and to the extent the Executive is required to testify in a judicial or regulatory proceeding pursuant to an order of a judge or administrative law judge issued after the Executive and his legal counsel urge that the aforementioned confidentiality be preserved.

(c) The foregoing covenants will not prohibit the Executive from disclosing confidential or other information to other employees of CFF or any third parties to the extent that such disclosure is necessary to the performance of his duties under this Agreement.

12. COMPLIANCE WITH SECTION 409A OF THE CODE : Notwithstanding anything herein to the contrary, any payments to be made in accordance with this Agreement shall not be made prior to the date that is 185 calendar days from the date of termination of employment of the Executive if it is determined by CFF in good faith that such payments are subject to the limitations set forth at Section 409A of the Code and regulations promulgated thereunder,

and payments made in advance of such date would result in the requirement that Executive pay additional interest and taxes in accordance with Section 409A(a)(1)(B) of the Code.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective Date referred to above.

EXECUTIVE

ATTEST:

CAPITOL FEDERAL FINANCIAL, INC .

ATTEST: By:

APPENDIX A TO CHANGE OF CONTROL AGREEMENT

Definitions:

"Cause" shall mean personal dishonesty, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule, or regulation (other than traffic violations or similar offenses) or final cease-and-desist order, or material breach of any provision of the Change of Control Agreement.

"Good Reason" shall mean:

(i) The assignment of duties to the Executive by CFF or the Bank or any successor thereto which (A) are materially different from the Executive's duties on the date hereof, or (B) result in the Executive having significantly less authority and/or responsibility than he has on the date hereof, without his express written consent;

(ii) The removal of the Executive from or any failure to re-elect him to the position of Executive Vice President except in connection with a termination of his employment by CFF for Cause or by reason of the Executive's disability;

(iii) A reduction by CFF or the Bank of the Executive's then current base salary;

(iv) The failure of CFF or the Bank to provide the Executive with substantially the same fringe benefits (including paid vacations) that were provided to him immediately prior to the date hereof; or

(v) The failure of CFF to obtain the assumption of and agreement to perform this Agreement by any successor as contemplated in Section 4(c) of the Change of Control Agreement.

Capitol Federal Financial, Inc.

Exhibit 10.8

Named Executive Officer Salary and Bonus Arrangements

Base Salaries

The base salaries, effective June 29, 2012, for the executive officers (the "named executive officers") of Capitol Federal Financial, Inc. who will be named in the compensation table that appears in the Company's annual meeting proxy statement for the fiscal year ended September 30, 2012 are as follows:


Name and Title	Base Salary

John B. Dicus Chairman, President and Chief Executive Officer	$525,000

R. Joe Aleshire Executive Vice President	$242,200

Larry K. Brubaker Executive Vice President ⁽¹⁾	$242,200

Kent G. Townsend Executive Vice President, Chief Financial Officer and Treasurer	$280,000

Rick C. Jackson Executive Vice President	$205,000

⁽¹⁾ Mr. Brubaker served as an executive officer through his retirement date of September 30, 2012.

Bonus Plans

The Compensation Committee of the Company’s Board of Directors has approved a short-term performance plan (the “STPP”). The STPP provides for annual bonus awards, as a percentage of base salary, to selected management personnel based on the achievement of pre-established corporate and individual performance criteria. Awards, if any, are typically made in January for the fiscal year ended the preceding September 30th. The STPP will expire following the payment of bonuses for fiscal year 2015. The STPP was filed on August 4, 2011 and is incorporated by reference as Exhibit 10.10 to the Quarterly Report on Form 10-Q for the quarter ended June 30, 2011.

The corporate performance criteria under the STPP are comprised of targeted levels of the Company’s return on average equity, basic earnings per share and efficiency ratio.

Under the STPP, the maximum potential annual bonus awards for the executive officers whom the Company believes are likely to be named in the summary compensation table in the Company’s proxy statement for its annual meeting of stockholders following the end of fiscal year 2012 are as follows: John B. Dicus, Chairman, President and Chief Executive Officer, 60% of base salary; Larry K. Brubaker, Executive Vice President for Corporate Services, 40% of base salary; Kent G. Townsend, Executive Vice President, Chief Financial Officer, and Treasurer, 40% of base salary; Richard J. Aleshire, Executive Vice President for Retail Operations, 40% of base salary, and Rick C. Jackson, Executive Vice President and Chief Lending Officer, 40% of base salary.

The Compensation Committee of the Company’s Board of Directors has approved a deferred incentive bonus plan (the “DIBP”). Under the DIBP, a portion of the bonus awarded under the STPP (from $2 thousand to as much as 50% of the award, up to a maximum of $100 thousand) to an officer eligible to participate in the DIBP may be deferred under the DIBP for a three year period. The total amount of the deferred bonus, plus up to a 50% Company match, is deemed to be invested in the Company’s common stock at the closing price as of the December 31st immediately preceding the deferral date. If the participant is still employed at the end of the deferral period, the participant will receive a cash payment equal to the sum of: (1) the deferred amount, (2) the Company match, (3) the value of all dividend equivalents paid during the deferral period on the Company common stock in which the participant is deemed to have invested and (4) the appreciation, if any, during the deferral period on the Company common stock in which the participant is deemed to have invested. The DIBP was filed on May 5, 2009 and is incorporated by reference as Exhibit 10.4 to the Quarterly Report on Form 10-Q for the quarter ended March 31, 2009.

SELECTED CONSOLIDATED FINANCIAL DATA

The summary information presented below under “Selected Balance Sheet Data” and “Selected Operations Data” for, and as of the end of, each of the years ended September 30 is derived from our audited consolidated financial statements. The following information is only a summary and you should read it in conjunction with our consolidated financial statements and notes beginning on page 50 . All share information prior to the second step conversion and stock offering completed in December 2010 (“the corporate reorganization”) has been revised to reflect the 2.2637 exchange ratio.


	September 30,
	2012		2011			2010				2009				2008
		(Dollars in thousands, except per share amounts)
Selected Balance Sheet Data:
Total assets	$	9,378,304	$	9,450,799			$		8,487,130		$		8,403,680	$	8,055,249
Loans receivable, net		5,608,083		5,149,734					5,168,202				5,603,965		5,320,780
Securities:
Available-for-sale (“AFS”)		1,406,844		1,486,439					1,060,366				1,623,995		1,533,641
Held-to-maturity (“HTM”)		1,887,947		2,370,117					1,880,154				849,176		843,057
Capital stock of Federal Home Loan Bank (“FHLB”)		132,971		126,877					120,866				133,064		124,406
Deposits		4,550,643		4,495,173					4,386,310				4,228,609		3,923,883
Advances from FHLB		2,530,322		2,379,462					2,348,371				2,392,570		2,447,129
Other borrowings		365,000		515,000					668,609				713,609		713,581
Stockholders’ equity		1,806,458		1,939,529					961,950				941,298		871,216


	For the Year Ended September 30,
	2012			2011				2010				2009			2008
		(Dollars and counts in thousands, except per share amounts)
Selected Operations Data:
Total interest and dividend income	$	328,051	$	346,865		$		374,051		$		412,786		$	410,806
Total interest expense		143,170		178,131				204,486				236,144			276,638
Net interest and dividend income		184,881		168,734				169,565				176,642			134,168
Provision for credit losses		2,040		4,060				8,881				6,391			2,051
Net interest and dividend income after provision
for credit losses		182,841		164,674				160,684				170,251			132,117
Retail fees and charges		15,915		15,509				17,789				18,023			17,805
Other income		8,318		9,486				16,622				10,571			12,222
Total other income		24,233		24,995				34,411				28,594			30,027
Total other expenses		91,075		132,317				89,730				93,621			81,989
Income before income tax expense		115,999		57,352				105,365				105,224			80,155
Income tax expense		41,486		18,949				37,525				38,926			29,201
Net income		74,513		38,403				67,840				66,298			50,954

Basic earnings per share	$	0.47	$	0.24	⁽¹⁾	$		0.41		$		0.40		$	0.31
Average basic shares outstanding		157,913		162,625				165,862				165,576			165,112
Diluted earnings per share	$	0.47	$	0.24	⁽¹⁾	$		0.41		$		0.40		$	0.31
Average diluted shares outstanding		157,916		162,633				165,899				165,721			165,279


	2012			2011			2010			2009			2008
Selected Performance and Financial Ratios
and Other Data:
Performance Ratios:
Return on average assets		0.79	%		0.41	% ⁽¹⁾		0.80	%		0.81	%		0.65	%
Return on average equity		3.93			2.20	⁽¹⁾		7.09			7.27			5.86
Dividends paid per share ⁽²⁾	$	0.40		$	1.63		$	2.29		$	2.11		$	2.00
Dividend payout ratio		85.58	%		390.88	%		71.34	%		66.47	%		81.30	%
Ratio of operating expense to
average total assets		0.97			1.40	⁽¹⁾		1.06			1.14			1.04
Efficiency ratio		43.55			68.30	⁽¹⁾		43.99			45.62			49.93
Ratio of average interest-earning assets
to average interest-bearing liabilities		1.24	x		1.22	x		1.11	x		1.12	x		1.12	x
Interest rate spread information:
Average during period		1.64	%		1.42	%		1.78	%		1.86	%		1.35	%
End of period		1.68			1.60			1.76			1.89			1.70
Net interest margin		2.01			1.84			2.06			2.20			1.75
Asset Quality Ratios:
Non-performing assets to total assets		0.43	⁽³⁾		0.40			0.49			0.46			0.23
Non-performing loans to total loans		0.57	⁽³⁾		0.51			0.62			0.55			0.26
Allowance for credit losses ("ACL") to
non-performing loans		34.88	⁽³⁾		58.34			46.60			32.83			42.37
ACL to loans receivable, net		0.20			0.30			0.29			0.18			0.11
Capital Ratios:
Equity to total assets at end of period		19.26			20.52			11.33			11.20			10.82
Average equity to average assets		20.11			18.50			11.30			11.08			11.05

Regulatory Capital Ratios of Bank:
Tier 1 leverage ratio		14.6			15.1			9.8			10.0			10.0
Tier 1 risk-based capital		36.4			37.9			23.5			23.2			23.1
Total risk-based capital		36.7			38.3			23.8			23.3			23.0

Other Data:
Number of traditional offices		36			35			35			33			30
Number of in-store offices		10			10			11			9			9

(1)

Excluding the $40.0 million ($26.0 million, net of income tax benefit) contribution to the Capitol Federal Foundation (“ the F oundation”) in connection with Capitol Federal Financial’s conversion from a mutual holding company form of organization to a stock form of organization , basic and diluted earnings per share would have been $0.40, return on average assets would have been 0.68%, return on average equity would have been 3.69%, ratio of operating expense to average total assets would have been 0.98%, and the efficiency ratio would have been 47.65%. This adjusted financial data is not presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”). See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Comparison of Results of Operations for the Years Ended September 30, 2012 and 2011 – Non-GAAP Presentation.”

(2)

For fiscal years 200 8 through 2010, Capitol Federal Savings Bank MHC (“MHC”) owned a majority of the outstanding shares of Capitol Federal Financial common stock and waived its right to receive dividends paid on the common stock with the exception of the $0.50 per share dividend paid on 500,000 shares in February 2010. Public shares exclude d shares held by MHC, as well as unallocated shares held in the Capitol Federal Financial Employee Stock Ownership Plan (“ESOP”). In December 2010, Capitol Federal Financial completed its conversion from a mutual holding company form of organization to a stock form of organization and all shares owned by MHC were sold in a public offering. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Executive Summary” for additional information.

(3)	See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition – Loans Receivable” for additional information regarding non-performing loans and non-performing assets.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General Overview

Capitol Federal Financial, Inc. (the “Company”) is the holding company and the sole shareholder of Capitol Federal Savings Bank (the “Bank”). The Company’s common stock is traded on the NASDAQ Global Select Market under the symbol “CFFN.”

Private Securities Litigation Reform Act— Safe Harbor Statement

We may from time to time make written or oral “forward ‑looking statements”, including statements contained in our filings with the Securities and Exchange Commission (“SEC”). These forward-looking statements may be included in this annual report to stockholders and in other communications by the Company, which are made in good faith by us pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995.

·	our ability to continue to maintain overhead costs at reasonable levels;

·	our ability to continue to originate a significant volume of one- to four-family mortgage loans in our market areas or to purchase loans through correspondents;

·	our ability to acquire funds from or invest funds in wholesale or secondary markets at favorable yields as compared to the related funding source ;

·	our ability to access cost-effective funding;

the future earnings and capital levels of the Bank and the continued non-objection by our primary federal banking regulators, to the extent required, to distribute capital from the Bank to the Company, which could affect the ability of the Company to pay dividends in accordance with its dividend policies;

·	fluctuations in deposit flows, loan demand, and/or real estate values, as well as unemployment levels, which may adversely affect our business;

·	the credit risks of lending and investing activities, including changes in the level and direction of loan delinquencies and write-offs, changes in property values, and changes in estimates of the adequacy of the ACL;

·	results of examinations of the Bank and the Company by their respective primary federal banking regulators, including the possibility that the regulators may, among other things, require us to increase our ACL;

·	the strength of the U.S. economy in general and the strength of the local economies in which we conduct operations;

·	the effects of, and changes in, trade, fiscal policies and laws, and monetary and interest rate policies of the Board of Governors of the Federal Reserve System (“FRB”);

·	the effects of, and changes in, foreign and military policies of the United States government;

·	inflation, interest rate, market and monetary fluctuations;

·	the timely development and acceptance of our new products and services and the perceived overall value of these products and services by users, including the features, pricing and quality compared to competitors’ products and services;

·	the willingness of users to substitute competitors’ products and services for our products and services;

·	our success in gaining regulatory approval of our products and services and branching locations, when required;

·	the impact of changes in financial services laws and regulations, including laws concerning taxes, banking, securities and insurance and the impact of other governmental initiatives affecting the financial services industry;

·	implementing business initiatives may be more difficult or expensive than anticipated;

·	technological changes;

·	acquisitions and dispositions;

·	changes in consumer spending and saving habits; and

·	our success at managing the risks involved in our business.

This list of important factors is not exclusive. We do not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Company or the Bank.

The following discussion is intended to assist in understanding the financial condition and results of operations of the Company. The Bank comprises almost all of the consolidated assets and liabilities of the Company and the Company is dependent primarily upon the performance of the Bank for the results of its operations. Because of this relationship, references to management actions, strategies and results of actions apply to both the Bank and the Company.

Executive Summary

The following summary should be read in conjunction with our Management’s Discussion and Analysis of Financial Condition and Results of Operations in its entirety.

In December 2010, Capitol Federal Financial completed its conversion from a mutual holding company form of organization to a stock form of organization. Capitol Federal Financial, which owned 100% of the Bank, was succeeded by Capitol Federal Financial, Inc . , a new Maryland corporation. As part of the corporate reorganization, MHC’s ownership interest of Capitol Federal Financial was sold in a public stock offering. Capitol Federal Financial, Inc. sold 118,150,000 shares of common stock at $10.00 per share in the stock offering. The publicly held shares of Capitol Federal Financial were exchanged for new shares of common stock of Capitol Federal Financial, Inc. The exchange ratio was 2.2637 and ensured that immediately after the corporate reorganization the public stockholders of Capitol Federal Financial owned the same aggregate percentage of Capitol Federal Financial, Inc. common stock that they owned of Capitol Federal Financial common stock immediately prior to that time. In lieu of fractional shares, Capitol Federal Financial stockholders were paid in cash. Gross proceeds from the offering were $1.18 billion and related offering expenses were $46.7 million. The net proceeds from the stock offering were $1.13 billion, of which 50%, or $567.4 million, was contributed to the Bank as a capital contribution, as required by the Office of Thrift Supervision (the “OTS”) regulations. The other 50%, or $567.4 million, remained at Capitol Federal Financial, Inc., of which $40.0 million was contributed to the Bank’s charitable foundation, Capitol Federal Foundation , and $47.3 million was loaned to the ESOP for its purchase of Capitol Federal Financial, Inc. shares in the stock offering. In April 2011, the Company redeemed the outstanding Junior Subordinated Deferrable Interest Debentures (the “Debentures”) of $53.6 million using a portion of the offering proceeds from the corporate reorganization.

On July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) was signed into law. The Dodd-Frank Act, among other things, required the OTS to be merged into the Office of the Comptroller of the Currency (the “ OCC ”) . On July 21, 2011, the OCC assumed all functions and authority from the OTS relating to federally charted savings banks, and the FRB assumed all functions and authority from the OTS relating to savings and loan holding companies. Accordingly, effective July 21, 2011, the Bank became regulated by the OCC and the Company became regulated by the FRB. Prior to that date, the Bank and Company were regulated by the OTS. All references to the OTS in this document on or after that date will refer to the successor regulator (i.e., the OCC for the Bank and the FRB for the Company), as appropriate.

We have been, and intend to continue to be, a community-oriented financial institution offering a variety of financial services to meet the needs of the communities we serve. We attract retail deposits from the general public and invest those funds primarily in permanent loans secured by first mortgages on owner-occupied, one- to four-family residences. To a lesser extent, we also originate consumer loans, loans secured by first mortgages on non-owner-occupied one- to four-family residences, multi-family and commercial real estate loans, and construction loans. While our primary business is the origination of one- to four-family mortgage loans funded through retail deposits, we also purchase whole one- to four-family mortgage loans from correspondent and nationwide lenders, and invest in certain investment securities and mortgage-backed securities (“ MBS ”) using funding from retail deposits, advances from FHLB, and repurchase agreements. The Company is significantly affected by prevailing economic conditions including federal monetary and fiscal policies and federal regulation of financial institutions. Retail deposit balances are influenced by a number of factors including interest rates paid on competing personal investment products, the level of personal income, and the personal rate of savings within our market areas. Lending activities are influenced by the demand for housing and other loans, changing loan underwriting guidelines, as well as interest rate pricing competition from other lending institutions. The primary sources of funds for lending activities include deposits, loan repayments, investment income, borrowings, and funds provided from operations.

The Company’s results of operations are primarily dependent on net interest income, which is the difference between the interest earned on loans, MBS, investment securities, and cash, and the interest paid on deposits and borrowings. On a weekly basis, management reviews deposit flows, loan demand, cash levels, and changes in several market rates to assess all pricing strategies. The Bank generally prices its first mortgage loan products based on secondary market and competitor pricing. Generally, deposit pricing is based upon a survey of competitors in the Bank’s market areas, and the need to attract funding and retain maturing deposits. The majority of our loans are fixed-rate products with maturities up to 30 years, while the majority of ou r deposits have maturity or repricing dates of less than two years.

The Federal Open Market Committee of the Federal Reserve (the “FOMC”) noted in their October 2012 statement that the economy continues to expand at a moderate pace. Growth in employment has been slow , and the level of unemployment remains elevated. The FOMC noted that household spending has advanced a bit more quickly in recent months ; however, business fixed investment has waned . The housing sector has shown signs of improvement, albeit from a depressed level, and inflation has recently picked up somewhat reflecting higher energy

prices . The FOMC decided to continue , through the end of the year , its program to extend the average maturity of its holdings of Treasury securities , as announced in September 2011 , by purchasing Treasury securities with remaining maturities of six to 30 years and maintain its existing policy of reinvesting principal payments from its holdings of agency debt and agency MBS in agency MBS . Additionally, the FOMC stated that they will continue their program, announced in September 2012, of purchasing agency MBS at a pace of $40 billion per month . There is no definitive end date to this program. The FOMC believes these actions will put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative. The FOMC also decided to maintain the overnight lending rate at zero to 0.25% and it believes the low rates will be warranted through at least mid- 201 5 .

Economic conditions in the Bank’s local market areas have a significant impact on the ability of borrowers to repay loans and the value of the collateral securing these loans. As of September 2012, the unemployment rate was 5.9 % for Kansas and 6.9 % for Missouri, compared to the national average of 7.8 %. The unemployment rate remains relatively low in our market areas , compared to the national average, due to diversified industries within our market areas, primarily in the Kansas City metropolitan statistical area, but it is higher than the historical average. Our Kansas City market area , which comprises the largest segment of our loan portfolio and deposit base, has an average household income of approximately $79 thousand per a nnum, based o n 201 2 estimates from the Am erican Community Survey , which is a statistical survey by the U.S. Census Bureau . The average household income in our combined market areas is approximately $68 thousand per annum, with 92% of the population at or above the poverty level, also based on the 201 2 estimates from the American Community Survey . The Federal Housing Finance Agency (“FHFA”) price index for Kansas and Missouri has not experienced significant fluctuations during the past 10 years, unlike several other segments of the United States, which indicates relative stability in property values in our local market areas .

Total assets decreased $72.5 million, from $9.45 billion at September 30, 2011 to $9.38 billion at September 30, 2012, due primarily to a $561.8 million decrease in the securities portfolio, partially offset by an increase of $458.3 million in loans receivable, net, and an increase in cash and cash equivalents of $20.6 million. The decrease in securities was due primarily to called and matured investment securities not being fully replaced, including $300.0 million at Capitol Federal Financial, Inc., at the holding company level. The increase in loans receivable was due primarily to an increase in one- to four-family loans resulting largely from $630.2 million of bulk and correspondent loan purchases during the current fiscal year.

The performance of our loan portfolio continues to improve as evidenced by a decline in delinquent loan balances and the level of loan charge-offs. Loans 30 to 8 9 days delinquent decreased $ 3.5 million from $26.8 millio n at September 30, 2011 to $ 23.3 million at September 30, 2012. Loans more than 9 0 days delinquent or in foreclosure decreased $ 7.0 million from $26.5 millio n at September 30, 2011 to $ 19.5 million at September 30, 2012. Additionally, net loan charge-offs during the current fiscal year were $2.9 million, excluding the $3.5 million of specific valuation allowances (“SVAs”) charged-off during the year as the OCC Call Report requirements do not permit the use of SVAs , compared to $3.5 million of net loan charge-offs during the prior fiscal year.

Total liabilities increased $60.6 million, from $7.51 billion at September 30, 2011 to $7.57 billion at September 30, 2012. The increase was due primarily to a $55.5 million increase in deposits. The increase in the deposit portfolio was due primarily to a $54.9 million increase in the checking portfolio and a $44.9 million increase in the money market portfolio, partially offset by a $52.0 million decrease in the certificate of deposit portfolio.

Stockholders’ equity decreased $133.1 million, from $1.94 billion at September 30, 2011 to $1.81 billion at September 30, 2012. The decrease was due primarily to the repurchase of $149.0 million of common stock and the payment of $63.8 million of dividends, partially offset by net income of $74.5 million.

Net income for fiscal year 2012 was $74.5 million, compared to $38.4 million for fiscal year 2011. The $36.1 million, or 94.0%, increase for the current year was due primarily to the prior year including a $40.0 million ($26.0 million, net of income tax benefit) contribution to the Foundation in connection with the corporate reorganization . Additionally, net interest income increased $16.2 million, or 9.6%, from $168.7 million for the prior year to $184.9 million for the current year. The increase in net interest income was due primarily to a decrease in interest expense of $34.9 million, or 19.6%, partially offset by a decrease in interest income of $18.8 million, or 5.4%. The net interest margin increased 17 basis points to 2.01% for the current year, up from 1.84% for the prior year. The increase was largely due to a decrease in the cost of the certificate of deposit portfolio, along with a decrease in costs on FHLB advances and other borrowings, partially offset by a decrease in interest income on loans receivable.

Critical Accounting Policies

Our most critical accounting policies are the methodologies used to determine the ACL and fair value measurements. These policies are important to the presentation of our financial condition and results of operations, involve a high degree of complexity, and require management to make difficult and subjective judgments that may require assumptions or estimates about highly uncertain matters. The use of different judgments, assumptions, and estimates could cause reported results to differ materially. These critical accounting policies and their application are reviewed at least annually by our audit committee. The following is a description of our critical accounting policies and an explanation of the methods and assumptions underlying their application.

Allowance for Credit Losses . The Company maintains an ACL to absorb inherent losses in the loan portfolio based upon ongoing quarterly assessments of the loan portfolio. The ACL is maintained through provisions for credit losses which are charged to income. The methodology for determining the ACL is considered a critical accounting policy by management because of the high degree of judgment involved, the subjectivity of the assumptions used, and the potential for changes in the economic environment that could result in changes to the amount of the recorded ACL. Additionally, bank regulators have the ability to require the Bank, as they can require all banks, to increase the ACL or recognize additional charge-offs based upon their judgments, which may differ from management’s judgments. Although management believes that the Bank has established and maintained the ACL at appropriate levels, additions may be necessary if economic and other conditions continue or worsen substantially from the current operating environment, and/or if bank regulators require the Bank to increase the ACL and/or recognize additional charge-offs.

Our primary lending emphasis is the origination and purchase of one- to four-family mortgage loans on residential properties, and, to a lesser extent, home equity and second mortgages on one- to four-family residential properties, resulting in a loan concentration in residential first mortgage loans. As a result of our lending practices, we also have a concentration of loans secured by real property located in Kansas and Missouri. At September 30, 2012, approximately 7 0 % and 15% of t he Bank’s loans were secured by real property located in Kansas and Missouri, respectively. We believe the primary risks inherent in our one- to four-family and consumer portfolios are the continued weakened economic conditions, continued high levels of unemployment or underemployment, and a continuing decline in home real estate values. Any one or a combination of these events may adversely affect borrowers’ ability or desire to repay their loans, resulting in increased delinquencies, non-performing assets, loan losses, and future loan loss provisions. Although the multi-family and commercial loan portfolio also shares the risk of continued weakened economic conditions, the primary risks for the portfolio include the ability of the borrower to sustain sufficient cash flows from leases and to control expenses to satisfy their contractual debt payments, or the ability to utilize personal and/or business resources to pay their contractual debt payments if the cash flows are not sufficient.

Generally, when a one- to four-family secured loan is 180 days delinquent, new collateral values are obtained through appraisals. If the estimated fair value of the collateral, less estimated costs to sell, is less than the current loan balance, the difference is charged-off. Anticipated private mortgage insurance (“ PMI ”) proceeds are taken into consideration when calculating the amount of the charge-off. An updated appraisal is requested, at a minimum, every six months thereafter that a purchased loan remains a classified asset and every 12 months thereafter that an originated loan remains 180 days or more delinquent . If the Bank holds the first and second mortgage, both loans are combined when evaluating whether there is a potential loss on the loan. However, charge-offs for real estate-secured loans may also occur at any time if we have knowledge of the existence of a potential loss. For all other real estate loans that are not secured by one- to four-family property, losses are charged-off when we believe the collection of such amounts is unlikely. When a non-real estate secured loan is 120 days delinquent, any identified losses are charged-off.

Each quarter, we prepare a formula analysis which segregates our loan portfolio into categories based on certain risk characteristics such as loan type (one- to four-family, multi-family, etc.), interest payments (fixed-rate, adjustable-rate), loan source (originated or bulk purchased), loan -to-value (“ LTV ”) ratios, borrower’s credit score and payment status (i.e. current or number of days delinquent). Consumer loans, such as second mortgages and home equity lines of credit, with the same underlying collateral as a one- to four-family loan are combined with the one- to four-family loan in the formula analysis to calculate a combined LTV ratio. All loans that are not individually evaluated for impairment are included in the formula analysis. Quantitative loss factors are applied to each loan category in the formula analysis based on the historical net loss experience for each respective loan category. Additionally, qualitative loss factors that management believes impact the collectability of the loan portfolio as of the evaluation date are applied to certain loan categories. Such qualitative factors include changes in collateral values, unemployment rates, credit scores and delinquent loan trends. Loss factors increase as loans are classified or become delinquent. Additionally, troubled debt restructurings (“TDRs”) that have not been partially charged-off are included in a category within the formula analysis model with an overall higher qualitative loss factor than corresponding performing loans, for the life of the loan.

The factors applied in the formula analysis are reviewed quarterly by management to assess whether the factors adequately cover probable and estimable losses inherent in the loan portfolio. Our ACL methodology permits modifications to the formula analysis in the event that, in management’s judgment, significant factors which affect the collectability of the portfolio or any category of the loan portfolio, as of the evaluation date, have changed from the current formula analysis. Management’s evaluation of the qualitative factors with respect to these conditions is subject to a higher degree of uncertainty because they are not identified with a specific problem loan or portfolio segment.

Management utilizes the formula analysis, along with several other factors, when evaluating the adequacy of the ACL. Such factors include the trend and composition of delinquent loans, results of foreclosed property and short sale transactions, the current status and trends of local and national economies, particularly levels of unemployment, trends and current conditions in the real estate and housing markets, and loan portfolio growth and concentrations. Since our loan portfolio is primarily concentrated in one- to four-family real estate, we monitor one- to four-family real estate market value trends in our local market areas and geographic sections of the U.S. by reference to various industry and market reports, economic releases and surveys, and our general and specific knowledge of the real estate markets in which we lend, in order to determine what impact, if any, such trends may have on the level of our ACL. We seek to apply ACL methodology in a consistent manner; however, the methodology can be modified in response to changing conditions. In addition, the adequacy of the Company’s ACL is reviewed during bank regulatory examinations. We consider any comments from our regulator when assessing the appropriateness of our ACL. Reviewing these quantitative and qualitative factors assists management in evaluating the overall reasonableness of the ACL and whether changes need to be made to our assumptions.

Fair Value Measurements. The Company uses fair value measurements to record fair value adjustments to certain assets and to determine fair value disclosures, per the provisions of Accounting Standards Codification (“ ASC ”) 820, Fair Value Measurements and Disclosures . In accordance with ASC 820, the Company groups its assets at fair value in three levels, based on the markets in which the assets are traded and the reliability of the underlying assumptions used to determine fair value, with Level 1 (quoted prices for identical assets in an active market) being considered the most reliable, and Level 3 having the most unobservable inputs and therefore being considered the least reliable. The Company bases its fair values on the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. As required by ASC 820, the Company maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. The Company did not have any liabilities that were measured at fair value at September 30, 2012.

The Company’s AFS securities are its most significant assets measured at fair value on a recurring basis. Changes in the fair value of AFS securities are recorded, net of tax, in accumulated other comprehensive income (“AOCI”) which is a component of stockholders’ equity. As part of determining fair value, the Company obtains fair values for all AFS securities from independent nationally recognized pricing services. Various modeling techniques are used to determine pricing for the Company’s securities, including option pricing and discounted cash flow models. The inputs to these models may include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, benchmark securities, bids, offers and reference data. There is a security in the AFS portfolio that has significant unobservable inputs requiring the independent pricing services to use some judgment in pricing the related securities. This AFS security is classified as Level 3. All other AFS securities are classified as Level 2.

Loans receivable individually evaluated for impairment and other real estate owned (“OREO”) are the Company’s significant assets measured at fair value on a non-recurring basis. These non-recurring fair value adjustments involve the application of lower-of-cost-or-fair value accounting or write-downs of individual assets. Fair value for these assets is estimated using current appraisals or listing prices. Fair values may be adjusted by management to reflect current economic and market conditions and, as such, are classified as Level 3.

Recent Accounting Pronouncements. For a discussion of Recent Accounting Pronouncements, see “ Notes to Financial Statements - Note 1 - Summary of Significant Accounting Policies.”

Management Strategy

We are a retail-oriented financial institution dedicated to serving the needs of customers in our market areas. Our commitment is to provide qualified borrowers the broadest possible access to home ownership through our mortgage lending programs and to offer a complete set of personal banking products and services to our customers. We strive to enhance stockholder value while maintaining a strong capital position. To achieve these goals, we focus on the following strategies:

Residential Portfolio Lending. We are one of the leading originators of one- to four-family loans in the state of Kansas. We originate these loans primarily for our own portfolio, and we s ervice the loans we originate. We also purchase one- to four-family loans from correspondent and nationwide lenders. We offer both fixed- and adjustable-rate products with various terms to maturity and pricing options. We also offer government-sponsored programs directed towards first time home buyers, low or moderate income borrowers, or borrowers with certain credit risk concerns. We maintain strong relationships with local real estate agents to attract mortgage loan business. We rely on our marketing efforts and reputation to attract mortgage business from walk-in customers, customers that apply online, and existing customers.

Retail Financial Services. We offer a wide array of deposit products and retail services for our customers. These products include checking, savings, money market, certificates of deposit, and retirement accounts. These products and services are provided through a branch network of 46 locations, including traditional branches and retail in-store locations, our call center which operates on extended hours, mobile banking, telephone banking and bill payment services, and online banking and bill payment services.

Cost Control. We generally are very effective at controlling our costs of operations. By using technology, we are able to centralize our lending and deposit support functions for efficient processing. We have located our branches to serve a broad range of customers through relatively few branch locations. Our average deposit base per traditional branch at September 30, 2012 was approximately $ 112.8 million. This large average deposit base per branch helps to control costs. Our one- to four-family lending strategy and our effective management of credit risk allows us to service a large portfolio of loans at efficient levels because it costs less to service a portfolio of performing loans.

Asset Quality. We utilize underwriting standards for our lending products that are designed to limit our exposure to credit risk. We require complete documentation for both originated and purchased loans, and make credit decisions based on our assessment of the borrower’s ability to repay the loan in accordance with its terms. See additional discussion of asset quality in Part I, Item 1 of the Annual Report on Form 10-K.

Capital Position. Our policy has always been to protect the safety and soundness of the Bank through credit and operational risk management, balance sheet strength, and sound operations. The end result of these activities has been a capital ratio in excess of the well-capitalized standards set by the OCC. We believe that maintaining a strong capital position safeguards the long-term interests of the Bank, the Company and our stockholders.

Stockholder Value. We strive to enhance stockholder value while maintaining a strong capital position. One way that we continue to provide returns to stockholders is through our dividend payments. Total dividends declared and paid during fiscal year 2012 were $ 63.8 million . The Company’s cash dividend payout policy is reviewed quarterly by management and the Board of Directors, and the ability to pay dividends under the policy depends upon a number of factors, including the Company’s financial condition and results of operations, the Bank’s 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. It is the Board of Directors’ intentions to continue to pay regular quarterly and special cash dividends each year. For fiscal year 2013, it is the intent of the Board of Directors and management to continue with the payout of 100% of the Company’s earnings to its stockholders.

Interest Rate Risk Management. Changes in interest rates are our primary market risk as our balance sheet is almost entirely comprised of interest-earning assets and interest-bearing liabilities. As such, fluctuations in interest rates have a significant impact not only upon our net income but also upon the cash flows related to those assets and liabilities and the market value of our assets and liabilities. In order to maintain acceptable levels of net interest income in varying interest rate environments, we actively manage our interest rate risk and assume a moderate amount of interest rate risk consistent with board policies.

Quantitative and Qualitative Disclosure about Market Risk

Asset and Liability Management and Market Risk

The risk associated with changes in interest rates on the earnings of the Bank and the market value of its financial assets and liabilities is known as interest rate risk. Interest rate risk is our most significant market risk and our ability to adapt to changes in interest rates is known as interest rate risk management. The rates of interest the Bank earns on assets and pays on liabilities generally are established contractually for a period of time. Fluctuations in interest rates have a significant impact not only upon our net income, but also upon the cash flows of those assets and liabilities and the market value of our assets and liabilities. Our results of operations, like those of other financial institutions, are impacted by these changes in interest rates and the interest rate sensitivity of our interest-earning assets and interest-bearing liabilities. The analysis presented in the tables below reflects the level of market risk at the Bank and does not include the assets of the Company. The inclusion of assets at the holding company would not materially change the results of the analysis provided.

The general objective of our interest rate risk management program is to determine and manage an appropriate level of interest rate risk while maximizing net interest income in a manner consistent with our policy to reduce, to the extent possible, the exposure of our net interest income to changes in market interest rates. The Asset and Liability Committee (“ALCO”) regularly reviews the interest rate risk exposure of the Bank by forecasting the impact of hypothetical, alternative interest rate environments on net interest income and market value of portfolio equity (“MVPE”) at various dates. The MVPE is defined as the net of the present value of the cash flows of existing assets, liabilities and off-balance sheet instruments. The present values are determined based upon market conditions as of the date of the analysis as well as in alternative interest rate environments providing potential changes in MVPE under those alternative interest rate environments. Net interest income is projected in the same alternative interest rate environments as well, both with a static balance sheet and with management strategies considered. MVPE and net interest income analyses are also conducted to estimate our sensitivity to rates for future time horizons based upon market conditions as of the date of the analysis. In addition to the interest rate environments presented below, management also reviews the impact of non-parallel rate shock scenarios on a quarterly basis. These scenarios consist of flattening and steepening the yield curve by changing short-term and long-term interest rates independent of each other, and simulating cash flows and valuations as a result of the simulated changes in rates. This analysis helps management quantify the Bank’s exposure to changes in the shape of the yield curve.

Based upon management’s recommendations, the Board of Directors sets the asset and liability management policies of the Bank. These policies are implemented by ALCO. The purpose of ALCO is to communicate, coordinate and control asset and liability management consistent with board-approved policies. ALCO’s objectives are to manage assets and funding sources to produce the highest profitability balanced against liquidity, capital adequacy and risk management objectives. At each monthly meeting, ALCO recommends appropriate strategy changes. The Chief Financial Officer, or his designee, is responsible for executing, reviewing and reporting on the results of the policy recommendations and strategies to the Board of Directors, generally on a monthly basis.

The ability to maximize net interest income is dependent largely upon the achievement of a positive interest rate spread that can be sustained despite fluctuations in prevailing interest rates. The asset and liability repricing gap is a measure of the difference between the amount of interest-earning assets and interest-bearing liabilities which either reprice or mature within a given period of time. The difference provides an indication of the extent to which an institution's interest rate spread will be affected by changes in interest rates. A gap is considered positive when the amount of interest-earning assets exceeds the amount of interest-bearing liabilities maturing or repricing during the same period. A gap is considered negative when the amount of interest-bearing liabilities exceeds the amount of interest-earning assets maturing or repricing during the same period. Generally, during a period of rising interest rates, a negative gap within shorter repricing periods adversely affects net interest income, while a positive gap within shorter repricing periods results in an increase in net interest income. During a period of falling interest rates, the opposite would generally be true.

Management recognizes that dramatic changes in interest rates within a short period of time can cause an increase in our interest rate risk relative to the balance sheet. At times, ALCO may recommend increasing our interest rate risk exposure in an effort to increase our net interest margin, while maintaining compliance with established board limits for interest rate risk sensitivity. Management believes that maintaining and improving earnings is the best way to preserve a strong capital position. Management recognizes the need, in certain interest rate environments, to limit the Bank's exposure to changing interest rates and may implement strategies to reduce our interest rate risk which could, as a result, reduce earnings in the short-term. To minimize the potential for adverse effects of material and prolonged changes in interest rates on our results of operations, we have adopted asset and liability management policies to better balance the maturities and repricing terms of our interest-earning assets and interest-bearing liabilities based on existing local and national interest rates.

During periods of economic uncertainty, rising interest rates, or extreme competition for loans, the Bank’s ability to originate or purchase loans may be adversely affected. In such situations, the Bank alternatively may invest its funds into investment securities or MBS. These investments may have rates of interest lower than rates we could receive on loans, if we were able to originate or purchase them, potentially reducing the Bank’s interest income.

At September 30, 2012, the Bank’s one-year gap between interest-earning assets and interest-bearing liabilities was $2.13 billion, or 22.82% of total assets. Interest-earning assets repricing to lower rates at a faster pace than interest-bearing liabilities will generally result in net interest margin compression. Should interest rates rise, the amount of interest-earning assets that are expected to reprice will likely decrease as borrowers and agency debt issuers will have less economic incentive or ability to lower their cost. The amount of interest-bearing liabilities expected to reprice in a given period, however, is not usually impacted by changes in market interest rates because the maturities within the Bank’s borrowings and certificate of deposit portfolios are contractual and generally cannot be terminated early without penalty. If rates were to increase 200 basis points, the Bank’s one-year gap would be $241.9 million, or 2.6% of total assets. The majority of interest-earning assets anticipated to reprice in fiscal year 2013 are mortgages and MBS, both of which may prepay and/or be refinanced or endorsed. As interest rates decrease, borrowers have an economic incentive to refinance or endorse loans to lower market interest rates. This significantly increases the amount of cash flows anticipated to reprice to lower market interest rates during fiscal year 2013, as evidenced by the volume of mortgages that were endorsed and refinanced during fiscal year 2012 as a result of the decrease in market interest rates. In addition, cash flows from the Bank’s callable investment securities are anticipated to remain elevated during fiscal year 2013 as the issuers of these securities will likely continue to exercise their option to call the securities in order to issue new debt securities at lower market rates. Any decrease in the net interest margin due to interest-earning assets repricing will likely be at least partially offset by a decrease in our cost of funds.

The shape of the yield curve also has an impact on our net interest income and, therefore, the Bank’s net interest margin. Historically, the Bank has benefited from a steeper yield curve as the Bank’s mortgage loans are generally priced off of long-term rates while deposits are priced off of short-term rates. A steeper yield curve (one with a greater difference between short-term rates and long-term rates) allows the Bank to receive a higher rate of interest on its mortgage-related assets relative to the rate paid for the funding of those assets, which generally results in a higher net interest margin. As the yield curve flattens, the spread between rates received on assets and paid on liabilities becomes compressed, which generally leads to a decrease in net interest margin.

We manage the reinvestment risk of loan prepayments through our interest rate risk and asset management strategies. In recent periods, principal repayments in excess of loan originations and purchases have been reinvested in shorter-term MBS and investment securities at lower market rates than our loan portfolio, which reduces our interest rate spread. If, however, market rates were to rise, the shorter-term nature of the securities provides management with the opportunity to reinvest the maturing funds at the higher rates.

General assumptions used by management to evaluate the sensitivity of our financial performance to changes in interest rates presented in the tables below are utilized in, and set forth under, the gap table and related notes . Although management finds these assumptions reasonable given the constraints described above , the interest rate sensitivity of our assets and liabilities and the estimated effects of changes in interest rates on our net interest income and MVPE indicated in the below tables could vary substantially if different assumptions were used or actual experience differs from these assumptions. To illustrate this point, the projected cumulative excess (deficiency) of interest-earning assets over interest-bearing liabilities within the three to 12 months category as a percent of total assets (“one-year gap”) is also provided for an up 200 basis point scenario, as of September 30, 2012.

Qualitative Disclosure about Market Risk

Percentage Change in Net Interest Income. For each period presented in the following table, the estimated percentage change in the Bank’s net interest income based on the indicated instantaneous, parallel and permanent change in interest rates is presented. The percentage change in each interest rate environment represents the difference between estimated net interest income in a 0 basis point interest rate environment (“base case”, assumes the forward market and product interest rates implied by the yield curve are realized) and estimated net interest income in alternative interest rate environments (assumes market and product interest rates have a parallel shift in rates across all maturities by the indicated change in rates). Estimations of net interest income used in preparing the table below are based upon the assumptions that the total composition of interest-earning assets and interest-bearing liabilities does not change materially and that any repricing of assets or liabilities occurs at anticipated product and market rates for the alternative rate environments as of the dates presented. The estimation of net interest income does not include any projected gains or losses related to the sale of loans or securities, or income derived from non-interest income sources, but does include the use of different prepayment assumptions in the alternative interest rate environments. It is important to consider that the estimated changes in net interest income are for a cumulative four-quarter period. These do not reflect the earnings expectations of management.


Change	Percentage Change in Net Interest Income
(in Basis Points)	At September 30,
in Interest Rates ⁽¹⁾	2012		2011
-100 bp	N/A		N/A
000 bp	--		--
+100 bp	5.00	%	4.46	%
+200 bp	3.79	%	3.75	%
+300 bp	1.54	%	(0.33)	%

⁽¹⁾ Assumes an instantaneous, permanent and parallel change in interest rates at all maturities.

The projected percentage change in the net interest income was higher at September 30, 2012 than September 30, 2011 due primarily to an increase in mortgage-related assets projected to reprice in the next 12 months, as compared to the prior year. Mortgage rates were lower at September 30, 2012 than at September 30, 2011; therefore, borrowers’ economic incentive to refinance or endorse their mortgage to a lower interest rate was higher at September 30, 2012, resulting in more asset cash flows. Additionally, a bulk purchase of $342.5 million of ARM loans during the fourth quarter of fiscal year 2012 increased the amount of assets repricing within the next 12 months as a portion of the funds used to purchase the loans would have been used to buy securities with longer repricing characteristics than the loans purchased .

The Bank’s net interest income projections are directly correlated to the amount of assets and liabilities that are expected to reprice over the next year. Repricing can occur as a result of variable interest rate characteristics of the Bank’s assets or liabilities, or as a result of cash flows that are received on assets or due on liabilities and are replaced at current market interest rates. The Bank’s liabilities generally have stated maturities and the related cash flows do not generally fluctuate as a result of changes in interest rates. Conversely, on the asset side, cash flows from mortgage-related assets and callable agency debentures can vary significantly as a result of changes in interest rates. As interest rates decrease, borrowers have an economic incentive to lower their cost of debt by refinancing or endorsing their mortgage to a lower interest rate. Similarly, agency debt issuers are more likely to exercise embedded call options for agency securities and issue new securities at a lower interest rate. As of September 30, 2011 and 2012, interest rates were at historically low levels, which resulted in a greater amount of cash flows from assets projected to reprice compared to liabilities. As interest rates rise , assets reprice to a higher interest rate at a faster pace than liabilities, thus increasing net interest income projections compared to the base case. However, the further interest rates rise, the less economic incentive and ability borrowers and agency debt issuers have to modify their cost of debt ; thus , cash flows become significantly reduced. The benefit of rising interest rates to net interest income diminishes due to lower asset cash flow projections as interest rates rise . At September 30, 2012, in the +300 basis point interest rate environment, cash flows related to assets diminished such that the benefit of reinvesting cash flows at higher yields was more than offset by the cash flows from liabilities repricing to higher levels. See the Gap analysis discussion below for additional information .

Percentage Change in MVPE. The following table sets forth the estimated percentage change in the MVPE at each period presented based on the indicated instantaneous, parallel and permanent change in interest rates. The percentage change in each interest rate environment represents the difference between MVPE in the base case and MVPE in each alternative interest rate environment. The estimations of MVPE used in preparing the table below are based upon the assumptions that the total composition of interest-earning assets and interest-bearing liabilities does not change, that any repricing of assets or liabilities occurs at current product or market rates for the alternative rate environments as of the dates presented, and that different prepayment rates are used in each alternative interest rate environment. The estimated MVPE results from the valuation of cash flows from financial assets and liabilities over the anticipated lives of each for each interest rate environment. The table below presents the effects of the change in interest rates on our assets and liabilities as they mature, repay, or reprice, as shown by the change in the MVPE in changing interest rate environments.


Change	Percentage Change in MVPE
(in Basis Points)	At September 30,
in Interest Rates ⁽¹⁾	2012		2011
-100 bp	N/A		N/A
000 bp	--		--
+100 bp	3.09	%	0.61	%
+200 bp	(3.72)	%	(5.69)	%
+300 bp	(13.79)	%	(14.91)	%

⁽¹⁾ Assumes an instantaneous, permanent and parallel change in interest rates at all maturities.

Changes in the estimated market values of our financial assets and liabilities drive changes in estimates of MVPE. The market value of an asset or liability reflects the present value of all the projected cash flows over its remaining life, discounted at current market interest rates. As interest rates rise, the market value for both assets and liabilities decrease. The opposite is generally true as interest rates fall. The MVPE represents the theoretical market value of capital that is calculated by netting the market value of assets and liabilities. If the market values of assets increase at a faster pace than the market value s of liabilities, or if the market values of liabilities decrease at a faster pace than the market value s of assets, the MVPE will increase. The magnitude of the changes in the Bank’s MVPE represents the Bank’s interest rate risk. The market value of shorter term-to-maturity financial instruments are less sensitive to changes in interest rates than are longer term-to-maturity financial instruments. Because of this, our certificates of deposit (which generally have relatively short average lives) tend to display less sensitivity to changes in interest rates than do our mortgage-related assets (which generally have relatively long average lives). The average life expected on our mortgage-related assets varies under different interest rate environments because borrowers have the ability to prepay their mortgage loans. Therefore, as interest rates decrease, the average life of mortgage-related assets decrease as well. As interest rates increase, the average life would be expected to increase as well.

At September 30, 2012, the average life of the Bank’s mortgage-related assets were shorter than the average life of the Bank’s long-term borrowings and core deposits due to the historical low level of interest rates. Because the level of interest rates at both September 30, 2012 and 2011 were at historical lows, prepayment projections for mortgage-related assets and call projections for callable agency debentures were high, thereby significantly reducing the average life for these assets. As interest rates rise, the market values of the Bank’s liabilities decrease at a faster pace than that of its assets. As a result, the Bank’s MVPE increases in the +100 basis point interest rate environment .

As interest rates move higher in the +200 and +300 basis point interest rate environments, prepayment projections for mortgage-related assets, in general, are expected to decrease significantly. As interest rates rise to these levels, projected prepayments would likely only be realized through normal changes in borrowers’ lives, such as divorce, death, job-related relocations, or other life changing events, resulting in an increase in the average life of these assets. Call projections for the Bank’s callable agency debentures would also decrease significantly as interest rates rise to these levels, which would result in the cash flows for these assets to move to their contractual maturity. The longer expected average lives of these assets, relative to the assumptions in the base case environment , increases their sensitivity to changes in interest rates. As a result, the Bank’s sensitivity to rising interest rates increases to such a point that the expected decrease in the market value of the Bank’s assets more than offsets the decrease in the market value of liabilities, resulting in a decrease in the MVPE in these interest rate environments .

The sensitivity of the MVPE improved in all interest rate environments from September 30, 2011 to September 30, 2012. This was due to the decrease in interest rates between periods, primarily mortgage rates. This decrease resulted in a decrease in the weighted average life (“ WAL ”) of all mortgage-related assets compared to the prior fiscal year. This resulted in a decrease in the price sensitivity of all mortgage-related assets, and, as a result, of interest-earning assets as a whole. Since the price sensitivity of all assets is reduced in the base case, the adverse impact to rising interest rates is thereby reduced in all interest rate environments presented.

Gap Table. The gap table summarizes the anticipated maturities or repricing of the Bank’s interest-earning assets and interest-bearing liabilities as of September 30, 2012, based on the information and assumptions set forth in the notes below.


	Within		Three to		More Than		More Than
	Three		Twelve		One Year to		Three Years		Over
	Months		Months		Three Years		to Five Years		Five Years		Total
Interest-earning assets:		(Dollars in thousands)
Loans receivable: ⁽¹⁾
Mortgage loans:
Fixed	$	389,435	$	1,216,094	$	1,288,642	$	485,581	$	902,174	$	4,281,926
Adjustable		97,009		732,781		281,560		58,419		15,570		1,185,339
Other loans		118,945		14,101		13,474		4,502		4,320		155,342
Investment securities ⁽²⁾		271,424		267,067		248,312		109,605		1,585		897,993
MBS ⁽³⁾		299,250		882,746		630,745		230,397		254,667		2,297,805
Other interest-earning assets		117,483		--		--		--		--		117,483
Total interest-earning assets		1,293,546		3,112,789		2,462,733		888,504		1,178,316		8,935,888

Interest-bearing liabilities:
Deposits:
Checking ⁽⁴⁾		95,417		44,422		95,327		76,633		294,705		606,504
Savings ⁽⁴⁾		80,711		12,010		27,692		21,478		119,042		260,933
Money market ⁽⁴⁾		62,379		241,973		364,922		180,345		569,991		1,419,610
Certificates		379,267		890,522		1,011,563		289,020		1,872		2,572,244
Borrowings ⁽⁵⁾		100,000		372,827		1,170,000		975,000		347,260		2,965,087
Total interest-bearing liabilities		717,774		1,561,754		2,669,504		1,542,476		1,332,870		7,824,378

Excess (deficiency) of interest-earning assets over
interest-bearing liabilities	$	575,772	$	1,551,035	$	(206,771)	$	(653,972)	$	(154,554)	$	1,111,510

Cumulative excess of interest-earning
assets over interest-bearing liabilities	$	575,772	$	2,126,807	$	1,920,036	$	1,266,064	$	1,111,510

Cumulative excess of interest-earning
assets over interest-bearing liabilities as a
percent of total assets (one-year gap) at September 30, 2012		6.18%		22.82%		20.61%		13.59%		11.93%

Cumulative one-year gap - interest rates +200 bp
at September 30, 2012				2.60%
Cumulative one-year gap at September 30, 2011				18.60%
Cumulative one-year gap at September 30, 2010				20.69%

(1)

Adjustable-rate mortgage (“ ARM ”) loans are included in the period in which the rate is next scheduled to adjust or in the period in which repayments are expected to occur, or prepayments are expected to be received, prior to their next rate adjustment, rather than in the period in which the loans are due. Fixed-rate loans are included in the periods in which they are scheduled to be repaid, based on scheduled amortization and prepayment assumptions. Balances have been reduced for loans 90 or more days delinquent or in foreclosure , which totaled $ 19.5 million at September 30, 2012 .

(2)	Based on contractual maturities, term to call date s or pre-refunding dates as of September 30, 2012 , and excludes the unrealized gain adjustment of $ 3.7 million on AFS investment securities.

(3)	Reflects estimated prepayments of MBS in our portfolio, and excludes the unrealized gain adjustment of $ 35.1 million on AFS MBS.

(4)

Although the Bank’s checking, savings and money market accounts are subject to immediate withdrawal, management considers a substantial amount of these accounts to be core deposits having significantly longer effective maturities. The decay rates (the assumed rate at which the balance of existing accounts would decline) used on these accounts are based on assumptions developed from our actual experience with these accounts. If all of the Bank’s checking, savings and money market accounts had been assumed to be subject to repricing within one year, interest-bearing assets which were estimated to mature or reprice within one year would have exceeded interest-earning liabilities with comparable characteris tics by $ 376.7 million, for a cumulative one-year gap of 4.0 % of total assets.

(5)	Borrowings exclude $ 20.0 million of deferred prepayment penalty costs and $ 274 thousa nd of deferred gain on the terminated interest rate swap agreements.

Cash flow projections for mortgage loans and MBS are calculated based on current interest rates. Prepayment projections are subjective in nature, involve uncertainties and assumptions and, therefore, cannot be determined with a high degree of accuracy. Although certain assets and liabilities may have similar maturities or periods to repricing, they may react differently to changes in market interest rates. Assumptions may not reflect how actual yields and costs respond to market changes. The interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types of assets and liabilities may lag behind changes in market interest rates. Certain assets, such as ARM loans, have features that restrict changes in interest rates on a short-term basis and over the life of the asset. In the event of a change in interest rates, prepayment and early withdrawal levels would likely deviate significantly from those assumed in calculating the gap table. For additional information regarding the impact of changes in interest rates, see the “Percentage Change in Net Interest Income” and “Percentage Change in MVPE” discussion and tables within this section.

The increase in the one-year gap to 22.82% at September 30, 2012, from 18.60% at September 30, 2011, was due primarily to an increase in the amount of assets expected to reprice in fiscal year 2013 as compared to fiscal year 2012 . The increase was due primarily to a decrease in mortgage rates at September 30, 2012 as compared to September 30, 2011. The decrease in mortgage rates increased prepayment expectations and thus increased the amount of assets expected to reprice in fiscal year 2013 , as compared to fiscal year 2012. Additionally, a $342.5 million bulk loan ARM purchase during the fourth quarter of fiscal year 2012 increased the amount of assets repricing within the next 12 months as a portion the funds used to purchase these loans would have been used to purchase securities with longer repricing characteristics.

As noted above, changes in interest rates have a material impact on the amount of cash flows expected to reprice in a given period, primarily on the asset side of the balance sheet. In the +200 basis point interest rate environment , the cash flows from mortgage-related assets and callable agency debentures decreased significantly as borrowers and issuers no longer have an economic incentive to refinance their mortgages or debentures. In this interest rate environment , the Bank’s assets would reprice at a significantly slower pace than the base case environment .

Financial Condition

Assets. Total assets decreased $72.5 million, from $9.45 billion at September 30, 2011 to $9.38 billion at September 30, 2012, due primarily to a $561.8 million decrease in the securities portfolio, partially offset by an increase of $458.3 million in loans receivable, net and an increase in cash and cash equivalents of $20.6 million.

Loans Receivable. The net loans receivable portfolio increased $458.3 million, or 8.9%, to $5.61 billion at September 30, 2012, from $5.15 billion at September 30, 2011. The increase in the portfolio was due primarily to an increase in one- to four-family loans resulting largely from $630.2 million of bulk and correspondent loan purchases during the current fiscal year. Included in the $630.2 million of total purchases wa s $342.5 million related to one bulk loan purchase in the fourth quarter of the current fiscal year. The purchase was funded with cash flows from the Bank’s securities portfolio, using the FHLB line-of-credit to temporarily fund the purchase due to the timing of those cash flows. The FHLB line-of-credit was repaid before September 30, 2012. The loans are ARM loans that reprice annually at various times throughout the year. The weighted average rate of the loans was 2.48% at the time of purchase, which was higher than the yield available on similar duration securities. The seller of the loans has guaranteed, and has the ability, to repurchase or replace delinquent loans.

The following table presents characteristics of our loan portfolio as of September 30, 2012 and September 30, 2011. The weighted average rate of the loan portfolio decreased 54 basis points from 4.69% at September 30, 2011 to 4. 15% at September 30, 2012. The decrease in the weighted average portfolio rate was due primarily to the endorsement of loans at current market rates, as well as the purchase and origination of loans during the year with rates less than the average rate of the existing portfolio . Within the one- to four-family loan portfolio at September 30, 2012, 70 % of the loans had a balance at origination of less than $417 thousand.


	September 30, 2012				September 30, 2011
			Average				Average
	Amount		Rate		Amount		Rate
	(Dollars in thousands)
Real Estate Loans:
One-to four-family :
Originated	$	4,032,581	4.34	%	$	3,986,957	4.82	%
Correspondent purchased		575,502	4.04			396,063	4.75
Bulk purchased		784,346	2.94			535,758	3.37
Multi-family and commercial		48,623	5.64			57,965	6.13
Construction		52,254	4.08			47,368	4.27
Total real estate loans		5,493,306	4.11			5,024,111	4.66

Consumer Loans:
Home equity		149,321	5.42			164,541	5.48
Other		6,529	4.77			7,224	5.10
Total consumer loans		155,850	5.39			171,765	5.46

Total loans receivable		5,649,156	4.15	%		5,195,876	4.69	%

Less:
Undisbursed loan funds		22,874				22,531
ACL		11,100				15,465
Discounts/unearned loan fees		21,468				19,093
Premiums/deferred costs		(14,369)				(10,947)
Total loans receivable, net	$	5,608,083			$	5,149,734

Included in the loan portfolio at September 30, 2012 were $136.2 million, or 2.4% of the total loan portfolio, of ARM loans that were originated as interest-only. Of these interest-only loans, $113.6 million were purchased in bulk loan packages from nationwide lenders, primarily during fiscal year 2005. Interest-only ARM loans do not typically require principal payments during their initial term, and have initial interest-only terms of either five or 10 years. The $113.6 million of purchased interest-only ARM loans held as of September 30, 2012, had a weighted average credit score of 724 and a weighted average LTV ratio of 71 % at September 30, 2012. At September 30, 2012, $67.0 million, or 49%, of the interest-only loans were still in their interest-only payment term. At September 30, 2012, $6.2 million, or 19% of non-performing loans, were interest-only ARMs.

The following tables present the weighted average credit score, LTV ratio, and average unpaid principal balance for our one- to four-family loans as of the dates presented. Credit scores were updated in September of each year presented and obtained from a nationally recognized consumer rating agency. The LTV ratios were based on the current loan balance and either the lesser of the purchase price or original appraisal , the most recent bank appraisal or broker price opinion (“ BPO ”) . In most cases, the most recent appraisal was obtained at the time of origination.


	September 30, 2012					September 30, 2011
	Credit			Average		Credit			Average
	Score	LTV		Balance		Score	LTV		Balance
	(Dollars in thousands)
Originated	763	65	%	$	124	763	66	%	$	123
Correspondent purchased	761	65			326	759	64			290
Bulk purchased	749	67			316	740	60			252
	761	65	%	$	147	760	65	%	$	137

The following table presents the rates and WAL in years, which reflects prepayment assumptions, of our loan portfolio as of September 30, 2012. The terms listed under fixed-rate one- to four-family loans represent original terms-to-maturity and t he terms listed under adjustable-rate one- to four- family loans represent initial terms-to-repricing.


	September 30, 2012
	Amount		Rate		WAL
	(Dollars in thousands)
Fixed-rate one- to four-family:
<= 15 years	$	1,059,416	4.00	%	2.6
> 15 years		3,157,909	4.53		3.6
Adjustable-rate one- to four-family:
<= 36 months		460,444	2.73		3.6
> 36 months		714,660	3.26		2.7
All other loans		256,727	5.17		1.4
Total loans receivable	$	5,649,156	4.15	%	3.2

The Bank generally prices its one- to four-family loan products based upon prices available in the secondary market and competitor pricing. During fiscal year 2012, the average daily spread between the Bank’s 30-year fixed-rate one- to four-family loan offer rate, with no points paid by the borrower, and the 10-year Treasury rate was approximately 210 basis points, while the average daily spread between the Bank’s 15-year fixed-rate one- to four-family loan offer rate and the 10-year Treasury rate was approximately 130 basis points.

The following tables present the annualized prepayment speeds of our one- to four-family loan portfolio for the quarter ended September 30, 2012, by interest rate tier. The balances represent unpaid principal balances, excluding charge-offs, and including LIP, construction loans and non-performing loans. The terms presented in the tables below represent the original terms for our fixed-rate one-to four-family loans, and current terms to repricing for our adjustable-rate one- to four-family loans. Loan endorsements and refinances are considered prepayments and therefore are included in the prepayment speeds below. During the quarter ended September 30, 2012, $4.5 million of adjustable-rate one- to four-family loans were endorsed to fixed-rate loan s . The annualized prepayment speeds are presented with and without endorsements. Additionally, annualized prepayment speeds for our originated, correspondent purchased and bulk purchased portfolios for the quarter ended September 30, 2012, is also presented below.


	Original Term
	15 years or less						More than 15 years
			Prepayment Speed (annualized)						Prepayment Speed (annualized)
Rate	Principal		Including		Excluding		Principal		Including		Excluding
Range	Balance		Endorsements		Endorsements		Balance		Endorsements		Endorsements
		(Dollars in thousands)

< = 3.50%	$	398,789	6.85	%	4.50	%	$	311,767	4.72	%	4.47	%
3.51 - 3.99%		247,243	34.60		21.98			475,367	20.51		13.59
4.00 - 4.50%		136,821	51.99		30.78			1,159,859	27.84		16.17
4.51 - 4.99%		113,292	40.19		28.46			260,554	61.98		24.08
5.00 - 5.50%		118,740	42.44		32.78			613,398	50.89		28.01
5.51 - 5.99%		25,784	25.52		17.20			171,406	47.83		29.24
>= 6.00%		18,753	24.42		20.09			197,047	34.30		22.42
	$	1,059,422	29.74	%	19.81	%	$	3,189,398	34.79	%	19.36	%

Originated	$	912,130	25.32	%	17.70	%	$	2,810,905	34.04	%	19.11	%
Correspondent		113,414	56.18		22.35			325,334	38.65		15.70
Bulk		33,878	63.63		63.63			53,159	52.34		49.66
	$	1,059,422	29.74	%	19.81	%	$	3,189,398	34.79	%	19.36	%


	Current Term to Reset Term
	36 months or less							More than 36 months
			Prepayment Speed (annualized)							Prepayment Speed (annualized)
Rate	Principal		Including			Excluding		Principal		Including		Excluding
Range	Balance		Endorsements			Endorsements		Balance		Endorsements		Endorsements
		(Dollars in thousands)

<= 2.50%	$	322,793		11.66	%	11.66	%	$	26,954	3.66	%	3.66	%
2.51 - 2.99%		319,874		19.77		19.77			99,626	12.73		8.54
3.00 - 3.50%		76,963		31.30		21.23			118,396	43.24		27.87
3.51 - 4.49%		39,343		38.38		23.20			46,774	32.49		27.50
4.50 - 5.49%		94,910		25.46		17.01			5,475	86.75		75.01
>= 5.50%		33,608		33.50		16.98			1,011	0.39		0.39
	$	887,491		21.38	%	17.58	%	$	298,236	31.50	%	22.14	%

Originated	$	155,111		38.88	%	26.94	%	$	192,673	30.30	%	23.08	%
Correspondent		49,495		19.66		6.39			87,598	33.21		16.50
Bulk		682,885		15.56		15.56			17,965	35.89		35.89
	$	887,491		21.38	%	17.58	%	$	298,236	31.50	%	22.14	%

The following table summarizes the activity in the loan portfolio for the periods indicated, excluding changes in loans in process, deferred fees, and ACL. Loans that were paid-off as a result of refinances are included in repayments. Purchased loans include purchases from correspondent and nationwide lenders. Loan endorsement activity is not included in the activity in the following table because a new loan is not generated at the time of endorsement. During fiscal year 2012 and 2011 , the Bank endorsed $ 886.9 million and $ 965.1 million of loans, respectively, with a weighted average decrease in rate of 113 basis points and 101 basis points, respectively. The endorsed balance and rate are included in the ending loan portfolio balance and rate.


	For the Three Months Ended
	September 30, 2012				June 30, 2012				March 31, 2012				December 31, 2011
	Amount		Rate		Amount		Rate		Amount		Rate		Amount		Rate
		(Dollars in thousands)
Beginning balance	$	5,256,803	4.37	%	$	5,275,296	4.45	%	$	5,282,485	4.53	%	$	5,195,876	4.69	%
Originations and refinances:
Fixed		220,934	3.51			151,724	3.78			139,295	3.79			180,198	3.77
Adjustable		50,533	3.50			42,802	3.74			41,139	3.67			57,321	3.52
Purchases and participations:
Fixed		90,939	3.62			34,567	3.94			31,165	4.29			44,800	4.03
Adjustable		360,463	2.49			12,722	3.00			16,426	3.07			53,206	3.79
Repayments		(327,972)				(256,221)				(228,203)				(247,928)
Principal charge-offs, net ⁽¹⁾		(677)				(782)				(4,546)				(7)
Other ⁽²⁾		(1,867)				(3,305)				(2,465)				(981)
Ending balance	$	5,649,156	4.15	%	$	5,256,803	4.37	%	$	5,275,296	4.45	%	$	5,282,485	4.53	%

	For the Year Ended September 30,
	2012				2011
	Amount		Rate		Amount		Rate
		(Dollars in thousands)
Beginning balance	$	5,195,876	4.69	%	$	5,209,313	5.07	%
Originations and refinances:
Fixed		692,151	3.69			658,084	4.23
Adjustable		191,795	3.60			179,161	3.92
Purchases and participations:
Fixed		201,471	3.87			153,060	5.15
Adjustable		442,817	2.68			28,911	3.60
Repayments		(1,060,324)				(1,019,307)
Principal charge-offs, net ⁽¹⁾		(6,012)				--
Other ⁽²⁾		(8,618)				(13,346)
Ending balance	$	5,649,156	4.15	%	$	5,195,876	4.69	%

⁽¹⁾ Principal charge-offs, net represent potential loss amounts that reduce the unpaid principal balance of a loan.

⁽²⁾ C onsists of transfers to O REO, endorsement fees advanced , and reductions in commitments .

The following table presents the origination and purchase activity in our one- to four-family loan portfolio for fiscal year 2012 and 2011 , excluding endorsement activity, and the LTV and credit score at the time of origination.


	For the Year Ended
	September 30, 2012					September 30, 2011
					Credit					Credit
	Amount		LTV		Score	Amount		LTV		Score
	(Dollars in thousands)
Loans originated	$	470,634	75	%	765	$	466,845	74	%	770
Refinanced by Bank customers		335,786	67		771		292,819	67		768
Correspondent loans purchased		267,459	69		768		92,781	65		767
Bulk loans purchased		362,721	79		757		89,190	69		740
	$	1,436,600	72	%	767	$	941,635	70	%	766

Historically, the Bank’s underwriting guidelines have generally provided the Bank with loans of high quality and low delinquencies, and low levels of non-performing assets compared to national levels. Of particular importance is the complete documentation required for each loan the Bank originates, refinances, and purchases. This allows the Bank to make an informed credit decision based upon a thorough assessment of the borrower’s ability to repay the loan, compared to underwriting methodologies that do not require full documentation.

The following table presents the principal balance of delinquent and non-performing loans, OREO , ACL, and related ratios as of the dates presented. In accordance with the OCC Call Report requirements, TDRs that were either nonaccrual or did not receive a credit evaluation prior to the restructuring and have not made six consecutive monthly payments per the restructured loan terms are repo rted as nonaccrual loans at September 30, 2012. This c hange occurred during the quarter ended March 31, 2012, as it was the first quarter the Bank was required to file a Call Report. During July 2012, the OCC provided guidance to the industry regarding loans that had been discharged under Chapter 7 bankruptcy proceedings where the borrower has not reaffirmed the debt owed to the lender. The OCC requires that these loans be reported as TDRs and nonaccrual, regardless of their delinquency status. As a result of this OCC guidance, the Bank identified $ 8.9 million of loans where the borrower’s debt to the Bank had been discharged under Chapter 7 bankruptcy and was not reaffirmed. Of the $ 8.9 million of loans, $ 929 thousand were already reported as TDRs and $ 1.8 million were al ready reported as nonaccrual at September 30, 2012 . Of the $8.0 million of newly reported TDRs, $6. 0 million were current as of September 30, 2012 but were classified as nonaccrual in accordance with the OCC guidance. The amount of nonaccrual loans reported as such due to the OCC Chapter 7 guidance is more than what was originally reported in the Company’s earnings release, dated October 31, 2012, as the Bank was still in the process of evaluating the impact of the OCC guidance on its loan portfolio , as was noted in the earnings release . See additional discussion of asset quality in Part I, Item 1 of the Annual Report on Form 10-K.


	September 30, 2012			September 30, 2011
	(Dollars in thousands)
Loans 30 to 89 days delinquent	$	23,270		$	26,760

Loans 90 or more days delinquent or in foreclosure		19,450			26,507
Nonaccrual TDRs less than 90 days delinquent ⁽¹⁾		12,374			--
Total non-performing loans		31,824			26,507
OREO		8,047			11,321
Total non-performing assets		39,871			37,828

ACL balance ⁽²⁾		11,100			15,465

Non-performing loans to total loans		0.57	%		0.51	%
Non-performing assets to total assets		0.43	%		0.40	%
ACL as a percentage of total loans		0.20	%		0.30	%
ACL as a percentage of total non-performing		34.88	%		58.34	%

⁽¹⁾ Included in the non accrual amount at September 30, 2012 were $ 1. 2 million of TDRs that were also reported in the 30 to 89 days delinquent category, and $ 11.2 million that were current but were required to be reported as nonaccrual per OCC Call Report requirements .
⁽²⁾ In January 2012, management implemented a loan charge-off policy as OCC Call Report requirements do not permit the use of SVAs, which the Bank was previously utilizing for potential loan losses, as permitted by the Bank’s previous regulator. As a result of the implementation of the charge-off policy, $3.5 million of SVAs were charged-off during the March 31, 2012 quarter, which accounts for the majority of the $4.4 million decrease in ACL between September 30, 2011 and September 30, 2012.

Securities . The following table presents the distribution of our MBS and investment securities portfolios, at amortized cost, at the dates indicated. The majority of the MBS and investment portfolios are comprised of securities issued by U.S. government-sponsored enterprises (“GSEs”). Overall, fixed-rate securities comprised 7 6 % of these portfolios at September 30, 2012. The WAL is the estimated remaining maturity (in years) after projected prepayment speeds and projected call option assumptions have been applied. The decrease in the WAL between September 30, 2011 and September 30 , 2012 was due primarily to a decrease in market interest rates between the two periods , which resulted in faster prepayments . The decrease in the yield between September 30, 2011 and September 30 , 2012 was primarily a result of purchases of securities with yields l ower than the existing portfolio , and repayments of MBS with yields higher than that of the existing portfolio, including adjustable-rate MBS whose rates repriced downward due to a decline in related indices, partially offset by matured investment securities with yields lower than the overall portfolio yield . Yields on tax-exempt securities are not calculated on a taxable equivalent basis.


	September 30, 2012					September 30, 2011
	Balance		Yield		WAL	Balance		Yield		WAL
		(Dollars in thousands)
Fixed-rate securities:
MBS	$	1,505,480	2.85	%	3.1	$	1,476,660	3.51	%	4.2
GSE debentures		907,386	1.14		0.8		1,380,028	1.09		0.9
Municipal bonds		47,769	2.94		2.0		59,622	3.02		2.3
Total fixed-rate securities		2,460,635	2.22		2.2		2,916,310	2.36		2.6
Adjustable-rate securities:
MBS		792,325	2.65		5.8		893,655	2.85		7.1
Trust preferred securities		2,912	1.65		24.7		3,681	1.60		25.7
Total adjustable-rate securities		795,237	2.64		5.9		897,336	2.85		7.2
Total securities portfolio	$	3,255,872	2.33	%	3.1	$	3,813,646	2.47	%	3.7

At September 30, 2012, Capitol Federal Financial, Inc., at the holding company level, had $ 60.1 million in investment securities with a n average yield of 0. 70 % and a WAL of 0. 2 years. All of the securities are classified as AFS. The average yields on these securities are less than the average yields on the Bank’s current investment portfolio due to the short-term nature of the securities.

Mortgage-Backed Securities. The balance of MBS, which primarily consists of securities of U.S. GSEs, decreased $ 79.1 million from $2.41 billion at September 30, 2011 to $2. 33 billion at September 30, 2012. The following table provides a summary of the activity in our portfolio of MBS for the periods presented. The yields and WALs for purchases are presented as recorded at the time of purchase. The yields for the beginning balances are as of the last day of the period previous to the period presented and the yield for the ending balances are as of the last day of the period presented and are generally derived from recent prepayment activity on the securities in the portfolio as of the dates presented . The yield of the MBS portfolio decreased from September 30, 2011 to September 30, 2012 as a result of purchases of securities with yields lower than the existing portfolio, and repayments of MBS with yields higher than that of the existing portfolio, including adjustable-rate MBS whose rates repriced downward due to a decline in related indices . The beginning and ending WAL is the estimated remaining maturity (in years) after projected prepayment speeds have been applied. The decrease in the WAL at September 30, 2012 compared to September 30, 2011 was due primarily to a decrease in market interest rates between the two periods , which increased prepayments .


	For the Three Months Ended
	September 30, 2012					June 30, 2012					March 31, 2012					December 31, 2011
	Amount		Yield		WAL	Amount		Yield		WAL	Amount		Yield		WAL	Amount		Yield		WAL
	(Dollars in thousands)
Beginning balance - carrying value	$	2,510,659	2.86	%	4.6	$	2,626,544	2.91	%	5.1	$	2,405,685	3.10	%	5.0	$	2,412,076	3.26	%	5.3
Maturities and repayments		(175,776)					(152,162)					(142,937)					(152,322)
Net amortization of premiums/(discounts)		(1,875)					(1,625)					(1,550)					(1,507)
Purchases:
Fixed		--	--		--		41,510	1.91		4.4		313,481	1.86		4.5		126,498	2.12		4.2
Adjustable		--	--		--		--	--		--		52,867	1.69		6.3		22,887	2.20		4.5
Change in valuation on AFS securities		(66)					(3,608)					(1,002)					(1,947)
Ending balance - carrying value	$	2,332,942	2.78	%	4.0	$	2,510,659	2.86	%	4.6	$	2,626,544	2.91	%	5.1	$	2,405,685	3.10	%	5.0


	For the Year Ended September 30,
	2012					2011
	Amount		Yield		WAL	Amount		Yield		WAL
		(Dollars in thousands)
Beginning balance - carrying value	$	2,412,076	3.26	%	5.3	$	1,607,864	4.00	%	3.6
Maturities and repayments		(623,197)					(480,139)
Net amortization of premiums/(discounts)		(6,557)					(3,270)
Purchases:
Fixed		481,489	1.93		4.4		919,778	2.87		4.3
Adjustable		75,754	1.84		5.7		377,957	2.49		5.1
Change in valuation on AFS securities		(6,623)					(10,114)
Ending balance - carrying value	$	2,332,942	2.78	%	4.0	$	2,412,076	3.26	%	5.3

The following table presents our fixed-rate MBS portfolio, at amortized cost, based on the underlying weighted average loan rate, the annualized prepayment speeds for the quarter ended September 30, 2012, and the net premium/discount by interest rate tier. Our fixed-rate MBS portfolio is somewhat less sensitive than our fixed-rate one- to four-family loan portfolio to repricing risk due to external refinancing barriers such as unemployment, income changes, and decreases in property values, which are generally more pronounced outside of our local market areas. However, we are unable to control the interest rates and/or governmental programs that could impact the loans in our fixed-rate MBS portfolio, and are therefore more likely to experience reinvestment risk due to principal prepayments. Additionally, prepayments impact the amortization/accretion of premiums/discounts on our MBS portfolio. As prepayments increase, the related premiums/discounts are amortized/accreted at a faster rate. The amortization of premiums decreases interest income while the accretion of discounts increases interest income. As noted in the table below, the fixed-rate MBS portfolio had a net premium of $ 14.2 million as of September 30, 2012. Given that the weighted average coupon on the underlying loans in this portfolio are above current market rates, the Bank could experience an increase in the premium amortization should prepayment speeds increase significantly, potentially reducing future interest income.


	Original Term
	15 years or less					More than 15 years
				Prepayment					Prepayment					Net
	Amortized			Speed		Amortized			Speed					Premium/
Rate Range	Cost			(annualized)		Cost			(annualized)		Total			(Discount)
	(Dollars in thousands)

< = 3.50%	$	361,849		12.89	%	$	--		--	%	$	361,849		$	6,485
3.51 - 3.99%		556,458		21.07			41,839		24.40			598,297			4,779
4.00 - 4.50%		150,458		21.66			42,158		21.62			192,616			3,017
4.51 - 4.99%		146,935		20.77			4,745		25.69			151,680			(242)
5.00 - 5.50%		79,157		22.93			5,662		31.25			84,819			(29)
5.51 - 5.99%		52,449		22.28			28,624		28.08			81,073			12
>= 6.00%		9,938		23.30			25,208		22.44			35,146			147
	$	1,357,244		19.09	%	$	148,236		24.29	%	$	1,505,480		$	14,169

Average Rate		3.96	%				4.89	%				4.05	%
Average remaining
contractual term (years)		11.1					17.7					11.7

Investment Securities. Investment securities, which consist of U.S. GSE debentures (primarily issued by Federal National Mortgage Association (“ FNMA ”) , Federal Home Loan Mortgage Corporation (“ FHLMC ”) , or FHLB ) and municipal investments, decreased $ 482.6 million, from $1.44 billion at September 30, 2011 to $ 961.8 million at September 30, 2012. The decrease in the portfolio was due , in part , to the maturity of $ 300.0 million of securities at the holding company. The cash flow from the maturities of this portfolio was used to repurchase Company stock or was retained in a deposit account at the Bank. The following tables provide a summary of the activity of investment securities for the periods presented. The yields for the beginning balances are as of the last day of the period previous to the period presented and the yield for the ending balances are as of the last day of the period presented. The increase in the yield at September 30, 2012 compared to September 30, 2011 was due primarily to the maturity of securities held at the holding company level, which had yields lower than the overall portfolio yield. The beginning and ending WALs represent the estimated remaining maturity (in years) of the securities after projected call dates have been considered, based upon market rates at each date presented. The WAL at September 30, 2012 remained generally unchanged from September 30, 2011 .


	For the Three Months Ended
	September 30, 2012					June 30, 2012					March 31, 2012					December 31, 2011
	Amount		Yield		WAL	Amount		Yield		WAL	Amount		Yield		WAL	Amount		Yield		WAL
	(Dollars in thousands)
Beginning balance - carrying value	$	1,195,589	1.23	%	0.9	$	1,253,937	1.22	%	1.5	$	1,294,462	1.25	%	1.0	$	1,444,480	1.17	%	1.0
Maturities and calls		(309,012)					(112,150)					(328,306)					(424,991)
Net amortization of premiums/(discounts)		(331)					(553)					(663)					(558)
Purchases:
Fixed		75,190	0.80		2.2		52,141	0.98		3.0		290,015	1.00		3.4		273,955	1.29		2.2
Change in valuation on AFS securities		413					2,214					(1,571)					1,576
Ending balance - carrying value	$	961,849	1.23	%	1.0	$	1,195,589	1.23	%	0.9	$	1,253,937	1.22	%	1.5	$	1,294,462	1.25	%	1.0


	For the Year Ended September 30,
	2012					2011
	Amount		Yield		WAL	Amount		Yield		WAL
		(Dollars in thousands)
Beginning balance - carrying value	$	1,444,480	1.17	%	1.0	$	1,332,656	1.47	%	0.8
Maturities and calls		(1,174,459)					(1,357,283)
Net amortization of premiums/(discounts)		(2,105)					(4,830)
Purchases:
Fixed		691,301	1.09		2.8		1,472,137	1.11		1.5
Change in valuation on AFS securities		2,632					1,800
Ending balance - carrying value	$	961,849	1.23	%	1.0	$	1,444,480	1.17	%	1.0

Liabilities. Total liabilities increased $60.6 million, from $7.51 billion at September 30, 2011 to $7.57 billion at September 30, 2012. The increase was due primarily to a $55.5 million increase in deposits. Additionally, during the current fiscal year , a $150.0 million repurchase agreement matured and was replaced with a $150.0 million fixed-rate FHLB advance, which accounts for the majority of the balance change between periods in both portfolios. Subsequent to September 30, 2012, a $100.0 million FHLB advance matured and was renewed for a term of four years at a fixed-rate of 0. 78 %.

Deposits. Deposits increased $ 55.5 million between September 30, 2011 and September 30, 2012, due to growth primarily in the checking and money market portfolios , partially offset by a decrease in the certificate of deposit portfolio . The ch ecking portfolio increased $ 54.9 million from $551.6 million at Sept ember 30, 2011 to $ 606.5 million at September 30, 2012. The increase in our checking portfolio was due to customers keeping more cash readily a vailable, as reflected by a 9.5 % increase in the average customer checking account balance between period ends. The money market portfolio increased $ 44.9 million from $1.07 billio n at September 30, 2011 to $1 .11 billion at September 30, 2012. If interest rates were to rise, it is possible that our money market and checking account customers may move those funds to higher-yielding deposit products within the Bank or withdraw their funds to invest in higher yielding investments outside of the Bank.

The following table presents the amount, average rate and percentage of total deposits for checking, savings, money market and certificates (including public units and brokered deposits) at the dates presented.


	At September 30,
	2012						2011
			Average		% of				Average		% of
	Amount		Rate		Total		Amount		Rate		Total
		(Dollars in thousands)
Checking	$	606,504	0.04	%	13.3	%	$	551,632	0.08	%	12.3	%
Savings		260,933	0.11		5.8			253,184	0.41		5.6
Money market		1,110,962	0.25		24.4			1,066,065	0.35		23.7
Certificates		2,572,244	1.44		56.5			2,624,292	1.87		58.4
	$	4,550,643	0.89	%	100.0	%	$	4,495,173	1.21	%	100.0	%

At September 30, 2012 , $ 83.7 million in certificates were brokered deposits, unchanged from September 30, 2011 , and had a weighted average rate of 2.58 % and a remaining term to maturity of 1.9 years. The Bank regularly considers brokered deposits as a source of funding, provided that investment opportunities are balanced with the funding cost. As of September 30, 2012 , $ 192.6 million in certificates were public unit deposits, compared to $ 106.4 million in public unit deposits at September 30, 2011 , and had a weighted average rate of 0. 29 % and a remaining term to maturity of eight months. Management will continue to monitor the wholesale deposit market for attractive opportunities relative to the yield received from investing the proceeds.

Borrowings. The following table presents FHLB advance activity, at par, and repurchase agreement activity for the periods shown. Line of credit activity is excluded from the following table due to the short-term nature of the borrowings. The effective rate includes the net impact of the amortization of deferred prepayment penalties resulting from the prepayment of certain FHLB advances and deferred gains related to the termination of interest rate swaps in prior fiscal years . Rates on new borrowings are fixed-rate. The weighted average maturity (“WAM”) is the remaining weighted average contractual term in years. The beginning and ending WAMs represent the remaining maturity at each date presented. For new borrowings, the WAMs presented are as of the date of issue.


	For the Three Months Ended
	September 30, 2012					June 30, 2012					March 31, 2012					December 31, 2011
			Effective					Effective					Effective					Effective
	Amount		Rate		WAM	Amount		Rate		WAM	Amount		Rate		WAM	Amount		Rate		WAM
	(Dollars in thousands)
Beginning principal balance	$	2,915,000	3.25	%	2.8	$	2,915,000	3.24	%	3.1	$	2,915,000	3.46	%	3.0	$	2,915,000	3.76	%	3.0
Maturities and prepayments:
FHLB advances		(100,000)	4.27		--		--	--		--		(350,000)	3.22		--		(100,000)	3.94		--
Repurchase agreements		--	--		--		--	--		--		--	--		--		(150,000)	4.41		--
New borrowings:
FHLB advances		100,000	0.83		4.0		--	--		--		350,000	1.36		3.3		250,000	0.84		2.9
Ending principal balance	$	2,915,000	3.13	%	2.7	$	2,915,000	3.25	%	2.8	$	2,915,000	3.24	%	3.1	$	2,915,000	3.46	%	3.0


	For the Year Ended
	2012					2011
			Effective					Effective
	Amount		Rate		WAM	Amount		Rate		WAM
		(Dollars in thousands)
Beginning principal balance	$	2,915,000	3.76	%	3.0	$	2,991,000	3.97	%	3.0
Maturities and prepayments:
FHLB advances		(550,000)	3.54				(276,000)	4.87
Repurchase agreements		(150,000)	4.41				(200,000)	3.79
New borrowings:
FHLB advances		700,000	1.10		3.3		300,000	2.82		6.9
Repurchase agreements		--	--		--		100,000	3.35		7.0
Ending principal balance	$	2,915,000	3.13	%	2.7	$	2,915,000	3.76	%	3.0

The following table presents the maturity of FHLB advances, at par, and repurchase agreements as of September 30, 2012. Management will continue to monitor the Bank’s investment opportunities and balance those opportunities with the cost of FHLB advances and other funding sources.


					Weighted		Weighted
	FHLB		Repurchase		Average		Average
Maturity by	Advances		Agreements		Contractual		Effective
Fiscal year	Amount		Amount		Rate		Rate ⁽¹⁾
	(Dollars in thousands)
2013	$	325,000	$	145,000	3.68	%	4.06	%
2014		450,000		100,000	3.33		3.95
2015		600,000		20,000	1.73		1.95
2016		575,000		--	2.29		2.91
2017		400,000		--	3.17		3.21
2018		200,000		100,000	2.90		2.90
	$	2,550,000	$	365,000	2.77	%	3.13	%

⁽¹⁾ The effective rate includes the net impact of the amortization of deferred prepayment penalties resulting from the prepayment of certain FHLB advances and deferred gains related to terminated interest rate swaps.

The following table presents the maturity and weighted average repricing rate , which is the weighted average effective rate, of FHLB advances and repurchase agreements for the next four quarters as of September 30, 2012.


			Weighted
			Average
Maturity by			Repricing
Quarter End	Amount		Rate
	(Dollars in thousands)
December 31, 2012	$	100,000	4.84	%
March 31, 2013		50,000	3.48
June 30, 2013		250,000	3.81
September 30, 2013		70,000	4.23
	$	470,000	4.06	%

Stockholders’ Equity. Stockholders’ equity decreased $133.1 million, from $1.94 billion at September 30, 2011 to $1.81 billion at September 30, 2012. The decrease was due primarily to the repurchase of $149.0 million of common stock and to the payment of $63.8 million of dividends, partially offset by net income of $74.5 million.

In December 2011, the Company announced that the Board of Directors approved the repurchase of up to $193.0 million of the Company’s common stock. The Company began repurchasing common stock during the second fiscal quarter and, as of September 30, 2012, had repurchased 12,642,502 shares at an average price of $11.78, or $149.0 million. Subsequent to September 30, 2012 through November 23 , 2012, the Company repurchased 2,931,682 shares at an average price of $ 11.84 per share, bringing the total number of shares repurchased through November 23, 2012 to 15,574,184 at an average price paid of $ 11.79 pe r share, or $ 183.7 million in total.

The $63.8 million of dividends paid during fiscal year 2012 consisted of four regular quarterly dividends totaling $47.6 million and a special year-end dividend of $16.2 million, per the Company’s dividend policy. On October 18, 2012, the Company declared a regular quarterly cash dividend of $0.075 per share , or $11.2 million, payable on November 16, 2012. On October 30, 2012, the Company declared a special year-end dividend of $0.18 per share, or approximately $26. 6 million , payable on December 7, 2012 to stockholders of record as of the close of business on November 23, 2012. The special year-end dividend is the result of the Board of Directors’ commitment to distribute to stockholders 100% of the annual earnings of Capitol Federal Financial, Inc. for fiscal years 2012 and 2011, the first two years after the corporate reorganization . The $0.18 per share special year-end dividend was determined by taking the difference between total earnings for fiscal year 2012 and total regular quarterly dividends paid during fiscal year 2012, divided by the number of shares outstanding as of October 30, 2012. For fiscal year 2013, it is the intent of the Board of Directors and management to continue with the payout of 100% of the Company’s earnings to its stockholders. The payout is expected to be in the form of regular quarterly cash dividends of $0.075 per share, totaling $0.30 for the year, and a special year-end cash dividend equal to fiscal year 2013 earnings in excess of the amount paid as regular quarterly cash dividends during fiscal year 2013. It is anticipated that the fiscal year 2013 special year-end cash dividend will be paid in December 2013. Dividend payments depend upon a number of factors including the Company's financial condition and results of operations, the Bank’s 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.

During fiscal year 2012, grants of stock options and restricted stock were made under the 2012 Equity Incentive Plan. The following table presents the future compensation expense expected to be recognized during each fiscal year presented as a result of the grants during the 2012 fiscal year. The Company recognized $1.1 million of compensation expense during the current fiscal year related to grants during the current fiscal year.


	Stock		Restricted
Fiscal Year	Options		Stock		Total
	(Dollars in thousands)
2013	$	719	$	1,782	$	2,501
2014		570		1,401		1,971
2015		570		1,401		1,971
2016		239		601		840
2017		51		132		183
	$	2,149	$	5,317	$	7,466

Weighted Average Yields and Rates. The following table presents the weighted average yields earned on loans, securities and other interest-earning assets, the weighted average rates paid on deposits and borrowings and the resultant interest rate spreads at the dates indicated. Yields on tax-exempt securities are not calculated on a tax-equivalent basis.


	At September 30,
	2012		2011		2010

Weighted average yield on:
Loans receivable	4.16	%	4.87	%	5.23	%
MBS	2.78		3.26		4.00
Investment securities	1.23		1.17		1.47
Capital stock of FHLB	3.40		3.39		2.98
Cash and cash equivalents	0.25		0.24		0.22
Combined weighted average yield on
interest-earning assets	3.44		3.81		4.33

Weighted average rate paid on:
Checking deposits	0.04		0.08		0.13
Savings deposits	0.11		0.41		0.54
Money market deposits	0.25		0.35		0.65
Certificate of deposit	1.44		1.87		2.29
FHLB advances ⁽¹⁾	3.03		3.71		3.96
Other borrowings	3.83		4.00		3.97
Combined weighted average rate paid on
interest-bearing liabilities	1.76		2.21		2.57

Net interest rate spread	1.68	%	1.60	%	1.76	%

⁽¹⁾ Rates include the net impact of the deferred prepayment penalties related to the prepayment of certain FHLB advances and deferred gains associated with the interest rate swap terminations in prior years.

A verage Balance Sheet . The following table presents the average balances of our assets, liabilities and stockholders’ equity and the related annualized yields and rates on our interest-earning assets and interest-bearing liabilities for the periods indicated. Average yields are derived by dividing annual income by the average balance of the related assets and average rates are derived by dividing annual expense by the average balance of the related liabilities, for the periods shown. Average outstanding balances are derived from average daily balances . The yields and rates include amortization of fees, costs, premiums and discounts which are considered adjustments to yields/rates. Yields on tax-exempt securities were not calculated on a tax-equivalent basis.


	Year Ended September 30,
	2012						2011						2010
	Average		Interest				Average		Interest				Average		Interest
	Outstanding		Earned/		Yield/		Outstanding		Earned/		Yield/		Outstanding		Earned/		Yield/
	Balance		Paid		Rate		Balance		Paid		Rate		Balance		Paid		Rate
Assets								(Dollars in thousands)
Interest-earning assets:
Mortgage loans ⁽¹⁾	$	5,096,537	$	227,422	4.46	%	$	4,966,905	$	242,057	4.87	%	$	5,198,175	$	271,154	5.22	%
Other loans		162,470		8,803	5.42			179,048		9,852	5.50			199,244		11,153	5.60
Total loans receivable		5,259,007		236,225	4.49			5,145,953		251,909	4.90			5,397,419		282,307	5.23
MBS ⁽²⁾		2,445,953		71,156	2.91			2,044,897		71,332	3.49			1,710,074		71,859	4.20
Investment securities ⁽²⁾⁽³⁾		1,243,073		15,944	1.28			1,566,937		19,077	1.22			887,955		15,682	1.77
Capital stock of FHLB		129,687		4,446	3.43			123,817		3,791	3.06			133,817		3,966	2.96
Cash and cash equivalents		113,120		280	0.25			306,958		756	0.25			100,411		237	0.24
Total interest-earning assets ⁽¹⁾⁽²⁾		9,190,840		328,051	3.57			9,188,562		346,865	3.77			8,229,676		374,051	4.55
Other noninterest-earning assets		235,852						234,315						235,324
Total assets	$	9,426,692					$	9,422,877					$	8,465,000

Liabilities and stockholders' equity
Interest-bearing liabilities:
Checking	$	568,262	$	421	0.07	%	$	518,526	$	441	0.09	%	$	471,397	$	622	0.13	%
Savings		258,626		408	0.16			245,994		1,225	0.49			232,651		1,323	0.57
Money market		1,096,133		3,457	0.32			1,024,523		5,307	0.52			914,382		6,522	0.71
Certificates		2,610,204		41,884	1.60			2,776,293		56,595	2.04			2,672,364		70,749	2.65
Total deposits		4,533,225		46,170	1.02			4,565,336		63,568	1.39			4,290,794		79,216	1.85
FHLB advances ⁽⁴⁾		2,507,648		82,044	3.28			2,386,380		90,298	3.79			2,389,597		97,212	4.07
Repurchase agreements		382,350		14,956	3.85			581,507		23,410	3.97			654,987		26,378	3.97
Other borrowings		--		--	--			27,612		855	3.05			53,609		1,680	3.09
Total borrowings		2,889,998		97,000	3.35			2,995,499		114,563	3.82			3,098,193		125,270	4.03
Total interest-bearing liabilities		7,423,223		143,170	1.93			7,560,835		178,131	2.35			7,388,987		204,486	2.77
Other noninterest-bearing liabilities		108,142						118,603						119,441
Stockholders’ equity		1,895,327						1,743,439						956,572
Total liabilities and stockholders' equity	$	9,426,692					$	9,422,877					$	8,465,000

Net interest income ⁽⁵⁾			$	184,881					$	168,734					$	169,565
Net interest rate spread ⁽⁶⁾					1.64	%					1.42	%					1.78	%
Net earning assets	$	1,767,617					$	1,627,727					$	840,689
Net interest margin ⁽⁷⁾					2.01	%					1.84	%					2.06	%
Ratio of interest-earning assets to
interest-bearing liabilities					1.24	x					1.22	x					1.11	x

(1)	Calculated net of unearned loan fees, deferred costs, and undisbursed loan funds. Loans that are 90 or more days delinquent are included in the loans receivable average balance with a yield of zero percent. Balances include loans receivable held-for-sale.

(2)	MBS and investment securities classified as AFS are stated at amortized cost, adjusted for unamortized purchase premiums or discounts.

(3)	The average balance of investment securities includes an average balance of nontaxable securities of $54.5 million, $63.9 million, and $72.0 million for the years ended September 30, 2012, 2011, and 2010, respectively.

(4)	The balance and rate of FHLB advances are stated net of deferred gains and deferred prepayment penalties.

(5)

Net interest income represents the difference between interest income earned on interest-earning assets, such as mortgage loans, investment securities, and MBS, and interest paid on interest-bearing liabilities, such as deposits, FHLB advances, and other borrowings. Net interest income depends on the balance of interest-earning assets and interest-bearing liabilities, and the interest rates earned or paid on them.

(6)	Net interest rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.

(7)	Net interest margin represents net interest income as a percentage of average interest-earning assets.

Rate/Volume Analysis. The table below presents the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities, comparing fiscal years 2012 to 2011 and fiscal years 2011 to 2010 . For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (1) changes in volume, which are changes in the average balance multiplied by the previous year’s average rate and (2) changes in rate, which are changes in the average rate multiplied by the average balance from the previous year. The net changes attributable to the combined impact of both rate and volume have been allocated proportionately to the changes due to volume and the changes due to rate.


	Year Ended September 30,
	2012 vs. 2011							2011 vs. 2010
	Increase (Decrease) Due to						Increase (Decrease) Due to
	Volume		Rate		Total		Volume		Rate		Total
	(Dollars in thousands)
Interest-earning assets:
Loans receivable	$	5,301	$	(20,985)	$	(15,684)	$	(12,703)	$	(17,695)	$	(30,398)
MBS		12,732		(12,908)		(176)		12,749		(13,276)		(527)
Investment securities		(4,111)		978		(3,133)		9,359		(5,964)		3,395
Capital stock of FHLB		189		466		655		(305)		130		(175)
Cash and cash equivalents		(477)		1		(476)		509		10		519
Total interest-earning assets		13,634		(32,448)		(18,814)		9,609		(36,795)		(27,186)

Interest-bearing liabilities:
Checking		41		(61)		(20)		56		(203)		(147)
Savings		60		(877)		(817)		73		(194)		(121)
Money market		352		(2,203)		(1,851)		716		(1,883)		(1,167)
Certificates		(3,201)		(11,509)		(14,710)		2,658		(16,871)		(14,213)
FHLB advances		4,188		(12,442)		(8,254)		(686)		(6,228)		(6,914)
Other borrowings		(8,606)		(703)		(9,309)		(3,772)		(21)		(3,793)
Total interest-bearing liabilities		(7,166)		(27,795)		(34,961)		(955)		(25,400)		(26,355)

Net change in net interest and dividend income	$	20,800	$	(4,653)	$	16,147	$	10,564	$	(11,395)	$	(831)

Comparison of Results of Operations for the Years Ended September 30, 2012 and 2011

Non-GAAP Presentation
The following table presents selected financial results and performance ratios for the Company for fiscal years 2012 and 2011. Because of the magnitude and non-recurring nature of the $40.0 million ($26.0 million, net of income tax benefit) contribution to the Foundation in connection with the corporate reorganization, management believes it is important for comparability purposes to present selected financial results and performance ratios excluding the contribution to the Foundation. The adjusted financial results and ratios for fiscal year 2011 are not presented in accordance with GAAP.



	For the Fiscal Year Ended
				September 30, 2011
	September 30,			Actual			Contribution			Adjusted ⁽¹⁾
	2012			(GAAP)			to Foundation			(Non-GAAP)
	(Dollars in thousands, except per share data)

Net income (loss)	$	74,513		$	38,403		$	(26,000)		$	64,403
Operating expenses		91,075			132,317			40,000			92,317
Basic earnings (loss) per share		0.47			0.24			(0.16)			0.40
Diluted earnings (loss) per share		0.47			0.24			(0.16)			0.40

Return on average assets		0.79	%		0.41	%		(0.27)	%		0.68	%
Return on average equity		3.93			2.20			(1.49)			3.69
Operating expense ratio		0.97			1.40			0.42			0.98
Efficiency ratio		43.55	%		68.30	%		20.65	%		47.65	%

⁽¹⁾ The adjusted financial results and ratios are not presented in accordance with GAAP as the amounts and ratios exclude the effect of the contribution to the Foundation, net of income tax benefit.

Interest and Dividend Income

Total interest and dividend income for fiscal year 2012 was $328.1 million, compared to $346.9 million for fiscal year 2011. The $18.8 million, or 5.4%, decrease was primarily a result of decreases in interest income on loans receivable of $15.7 million and interest income on investment securities of $3.1 million while interest income on MBS remained relatively unchanged year-over-year. The average yield on total interest-earning assets decreased 20 basis points, from 3.77% for the prior fiscal year to 3.57% for the current fiscal year, primarily as a result of a decrease in the yield on the loans receivable portfolio.

Interest income on loans receivable decreased $15.7 million, or 6.2%, from $251.9 million for the prior fiscal year to $236.2 million for current fiscal year. The decrease was the result of a 41 basis point decrease in the weighted average yield of the portfolio to 4.49% for the current fiscal year, partially offset by a $113.1 million increase in the average balance of the portfolio. The decrease in the weighted average yield was due primarily to loan endorsements and refinances at current market rates, along with originations and purchases at rates lower than the average yield of the existing portfolio. The increase in the average balance of the portfolio was due primarily to purchases of bulk and correspondent loans exceeding principal repayments.

Interest income on MBS decreased slightly from $71.3 million for the prior fiscal year to $71.1 million for the current fiscal year. The $176 thousand, or 0.3%, decrease was due to a 58 basis point decrease in the weighted average yield of the portfolio to 2.91% for the current fiscal year. The decrease in the weighted average yield between the two periods was due primarily to the purchase of MBS at market rates which were at a lower average yield than the existing portfolio and also due to repayments of MBS with yields higher than that of the existing portfolio . The impact of the decrease in the weighted average yield of the portfolio was almost entirely offset by a $401.1 million increase in the average balance of the portfolio between periods . The increase in the average balance was a result of purchases , funded primarily by the proceeds from the corporate reorganization and partially by cash flows from the investment securities portfolio.

Interest income on investment securities decreased $3. 2 million, or 16.4%, from $19.1 million for the prior fiscal year to $15.9 million for the current fiscal year. The decrease in interest income on investment securities was a result of a $323.9 million decrease in the average balance of the portfolio between periods , partially offset by an increase in the average yield of six basis points to 1.28% for the current fiscal year. The decrease in the average balance was due to calls and maturities during the current fiscal year not being replaced in their entirety; rather, the proceeds were used primarily to fund loan and MBS purchases and repurchase common stock. The increase in the average yield was due primarily to the maturity of lower yielding investment securities at the holding-company during the current fiscal year .

Interest Expense

Interest expense decreased $ 34.9 million, or 19.6%, from $178.1 million for the prior fiscal year to $143.2 million for the curr e nt fiscal year. The decrease in interest expense was due primarily to a $17.4 million decrease in interest expense on deposits, primarily the certificate of deposit portfolio, as well as to a $9.3 million decrease in interest expense on other borrowings and an $8.3 million decrease in interest expense on FHLB advance s . The average rate paid on interest-bearing liabilities decreased 42 basis points, from 2.35% for the prior fiscal year to 1.93% for the current fiscal year. The decrease was due primarily to a continued decrease in the cost of our certificate of deposit portfolio, as well as to the renewal/prepayment of FHLB advances to lower rates and repurchase agreements maturing and being replaced with lower rate FHLB advances.

Interest expense on deposits decreased $17.4 million, or 27.4%, from $63.6 million for the prior fiscal year to $46.2 million for the current fiscal year. The decrease was due primarily to a 44 basis point decrease in the average rate paid on the certificate of deposit portfolio, to 1.60% for the current fiscal year, as the portfolio continued to reprice to lower market rates, as well as to a $166.1 million decrease in the average balance of the certificate of deposit portfolio for the current fiscal year. The decrease in the average balance of the certificate of deposit portfolio was due primarily to a decrease in certificates with original term s -to-maturit y of 35 months or less, including the maturity and payout of one retail certificate of deposit related to a legal settlement to which the Bank was not a party, partially offset by an increase in certificates with original term s -to-maturity of 36 months or greater. Additionally, the average rate paid on our money market portfolio decreased 20 basis points to 0.32% for the current fiscal year, and the average rate paid on our savings portfolio decreased 33 basis points to 0.16% for the current fiscal year.

Interest expense on FHLB advances decreased $8.3 million, or 9.1%, from $90.3 million for the prior fiscal year to $82.0 million for the current fiscal year. The decrease in expense was due to a decrease of 51 basis points in the average rate paid to 3.28% for the current fiscal year, partially offset by a $121.3 million increase in the average balance. The decrease in the average rate paid was due primarily to advances that were renewed/prepaid during the year . The increase in the average balance was a result of $150.0 million of maturing repurchase agreements being replaced with advances during the current fiscal year , as rates for FHLB advances were more favorable than rates for comparable repurchase agreements.

Interest expense on other borrowings decreased $9.3 million, or 38.4%, from $24.3 million for the prior fiscal year to $15.0 million for the current fiscal year. The decrease was primarily the result of a $226.8 million decrease in the average balance due primarily to maturing repurchase agreements , the majority of which were replaced with FHLB advances.

Net Interest Margin

The net interest margin, which is calculated as the difference between interest income and interest expense divided by average interest-earning assets, increased 17 basis points to 2.01% for the current fiscal year, up from 1.84% for the prior fiscal year. The increase was largely due to a decrease in the cost of the certificate of deposit portfolio, along with a decrease in costs on FHLB advances and other borrowings, partially offset by a decrease in interest income on loans receivable.

Provision for Credit Losses

The Bank recorded a provision for credit losses of $2.0 million for the current fiscal year, compared to a provision for credit losses of $4.1 million for the prior fiscal year. The $2.1 million decrease in the provision for credit losses between fiscal years was due to the continued improvement in the performance of our loan portfolio as evidenced by the decline in our loans 90 or more days delinquent or in foreclosure, and a continued decline in the level of charge-offs. Loans 90 or more days delinquent or in foreclosure decreased $7.0 million, or 26.6%, from $26.5 million at September 30, 2011 to $19.5 million at September 30, 2012. Net charge-offs during the current fiscal year were $2.9 million, excluding the $3.5 million of SVAs charged-off during the second quarter of fiscal year 2012 as a result of implementing a loan charge-off policy change as the requirements for the OCC Call Reports do not permit the use of SVAs, compared to $3.5 million of net charge-offs during the prior fiscal year.

Other Expense

Total other expense for the current fiscal year was $91.1 million, compared to $132.3 million for the prior fiscal year. The $41.2 million, or 31.2%, decrease was due primarily to the $40.0 million cash contribution made to the Foundation in connection with the corporate reorganization in December 2010. OREO operations expense was $3.1 million for the current fiscal year, compared to $3.0 million for the prior fiscal year. Over the past 12 months, OREO properties were owned by the Bank, on average, for approximately six months before they were sold. We currently anticipate the following increases in other expenses during fiscal year 2013: a) a $2.0 million increase in salaries and

employee benefits as fiscal year 2013 primarily includes a full year impact of the equity plan awards made in May 2012 and September 2012, b) a $1.8 million increase in occupancy, information technology, and communications expense as a result of an increase in licensing and maintenance expenses related to upgrades to our information technology infrastructure, and an increase in depreciation expense associated with the remodel of our Home Office, and c) a $600 thousand increase in advertising expense, which is due primarily to media campaigns that were delayed until fiscal year 2013 .

Income Tax Expense

Income tax expense for the current fiscal year was $41.5 million, compared to $18.9 million for the prior fiscal year. The $22.6 million, or 118.9%, increase in income tax expense during the current fiscal year was due primarily to the $40.0 million contribution made to the Foundation during the prior fiscal year, which resulted in $14.0 million of income tax benefit, as well as to overall higher pretax income during the current fiscal year. The effective tax rate for the current fiscal year was 35.8% compared to 33.0% for the prior fiscal year. Excluding a $686 thousand tax return to tax provision adjustment in the prior fiscal year, the effective tax rate for the prior fiscal year would have been 34.2%. The additional difference in the effective tax rate between years was primarily due to the prior fiscal year having higher deductible expenses associated with the ESOP, due to the new ESOP loan in December 2010 and the $0.60 per share “welcome” dividend paid in March 2011.

Comparison of Results of Operations for the Years Ended September 30, 2011 and 2010

Net income for fiscal year 2011 was $38.4 million, compared to $67.8 million for fiscal year 2010. The $29.4 million, or 43.4%, decrease for fiscal year 2011 was due primarily to the $40.0 million ($26.0 million, net of income tax benefit) contribution to the Foundation in connection with the corporate reorganization. Additionally, other income decreased $9.4 million, or 27 .4%, from $34.4 million for fiscal year 2010 to $25.0 million for fiscal year 2011 . These reductions to income were partially offset by a $4.8 million decrease in the provision for credit losses between fiscal years. Interest income for fiscal year 2011 decreased by $27.2 million, or 7.3%, compared to fiscal year 2010, but was almost entirely offset by a decrease in interest expense of $26.4 million, or 12.9%, between fiscal years. The net interest margin decreased 22 basis points, from 2.06% for fiscal year 2010 to 1.84% for fiscal year 2011, largely due to the decrease in interest income on loans receivable.

Interest and Dividend Income

Total interest and dividend income for fiscal year 2011 was $346.9 million, compared to $374.1 million for fiscal year 2010. The $27.2 million decrease was primarily a result of a decrease in interest income on loans receivable of $30.4 million, partially offset by an increase in interest income on investment securities of $3.4 million. The average yield on total interest-earning assets decreased 78 basis points year over year, from 4.55% for fiscal year 2010 to 3.77% for fiscal year 2011, primarily as a result of a decrease in the yield on the loans receivable portfolio, but also partially due to decreases in the yields on the MBS and investment securities portfolios.

Interest income on loans receivable in fiscal year 2011 was $251.9 million compared to $282.3 million in fiscal year 2010 . The $30.4 million decrease in interest income on loans receivable was the result of a decrease of 33 basis points in the weighted average yield to 4.90% for fiscal year 2011 and a decrease of $251.5 million in the average balance of the portfolio. The decrease in the weighted average yield was due to loan endorsements, loan originations at current market rates below that of the existing portfolio, refinances, and ARMs repricing down to lower market rates. The decrease in the average balance of the loan portfolio was due to principal repayments exceeding originations and purchases, especially during the first half of fiscal year 2011.

Interest income on MBS in fiscal year 2011 was $71.3 million compare d to $71.9 million in the fiscal year 2010 . The $527 thousand decrease in interest income on MBS was due to a decrease of 71 basis points in the weighted average yield to 3.49% for fiscal year 2011, partially offset by an increase of $334.8 million in the average balance of the portfolio. The decrease in the weighted average yield was due to purchases of MBS at a lower average yield than the existing portfolio between the two periods, repayments on MBS with yields higher than the existing portfolio, and adjustable-rate securities repricing to lower market rates. The increase in the average balance of the portfolio was due to purchases of MBS securities, primarily with proceeds from the corporate reorganization.

Interest income on investment securities in fiscal year 2011 was $19.1 million compar ed to $15.7 million in fiscal year 2010 . The $3.4 million increase in interest income on investment securities was due to a $679.0 million increase in the average balance, partially offset by a decrease of 55 basis points in the weighted average yield to 1.22% for fiscal year 2011. The increase in the average balance was primarily a result of purchases funded with stock offering proceeds from the corporate reorganization. The average yield decreased due to purchases at yields lower than the overall portfolio yield, and to calls and maturities of higher yielding securities.

Interest Expense

Interest expense decreased $26.4 million to $178.1 million for fiscal year 2011 from $204.5 million for fiscal year 2010. The decrease was due primarily to a decrease in interest expense on deposits of $15.6 million, and partially to a decrease in FHLB advances of $6.9 million and other borrowings of $3.8 million. The average rate paid on interest-bearing liabilities decreased 42 basis points between years, from 2.77% for fiscal year 2010 to 2.35% for fiscal year 2011, primarily as a result of repricing in the certificate of deposit portfolio.

Interest expense on deposits for fiscal year 2011 was $63.6 million compare d to $79.2 million in fiscal year 2010 . The $15.6 million decrease was due primarily to a decrease in interest expense on certificates, as the weighted average rate paid on the certificate of deposit portfolio decreased 61 basis points between the two years, from 2.65% for fiscal year 2010 to 2.04% fiscal year 2011. The decrease in the rate was a result of the portfolio continuing to reprice to lower market rates.

Interest expense on FHLB advances for fiscal year 2011 was $90.3 million compare d to $97.2 million in fiscal year 2010 . The $6.9 million decrease was due primarily to a 28 basis point decrease in the weighted average rate of the portfolio to 3.79% for fiscal year 2011. The decrease in the weighted average rate was a result of the renewal of maturing FHLB advances at lower rates, maturing advances that were not renewed, and the refinance of $200.0 million of advances in the third quarter of fiscal year 2010.

Interest expense on other borrowings for fiscal year 2011 was $24.3 million compare d to $28.1 million in fiscal year 2010 . The $3.8 million decrease was due primarily to a $99.5 million decrease in the average balance, primarily as a result of not replacing all maturing repurchase agreements.

Net Interest Margin

The net interest margin was 1.84% for fiscal year 2011 compared to 2.06% for fiscal year 2010. The 22 basis point decrease was due primarily to a decrease in net interest income between fiscal years. The average balance of interest-earning assets increased $958.9 million, or 11.7%, between years, while net interest income decreased $831 thousand, or 0.5%, between years. The primary reason for the decrease in net interest income between years was a decrease in interest income on loans receivable due to loan endorsements, loans originated at market rates below that of the existing portfolio, refinances, and ARMs repricing down to lower market rates.

Provision for Credit Losses

The Bank recorded a provision for credit losses of $4.1 million during fiscal year 2011, compared to a provision of $8.9 million for fiscal year 2010. The provision recorded in fiscal year 2011 was primarily a result of the incre ase in and establishment of SVAs , primarily on purchased loans, and partially due to an increase in the general valuation allowance due to an increase in historical losses, a decline in the current FHFA home price index, primarily in Kansas and Missouri, and an increase in the recent unemployment rate trends compared to historical trends, also primarily in Kansas and Missouri.

Other Income and Expense

Total other income was $25.0 million for fiscal year 2011 compared to $34.4 million for fiscal year 2010. The $9.4 million, or 27.4%, decrease was due primarily to no gains on the sale of securities in fiscal year 2011 , compared to a $6.5 million gain in fiscal year 2010 . Additionally, retail fees decreased $2.3 million between fiscal years as a result of the amendments to Regulation E that prohibit automatic enrollment in overdraft protection programs without the customer’s consent, and other income, net decreased by $1.8 million due primarily to a decrease in net gains on loan sales.

Total other expenses for fiscal year 2011 were $132.3 million, compared to $89.7 million in fiscal year 2010. The $42.6 million, or 47.5%, increase was due primarily to a $40.0 million cash contribution to the Foundation in connection w ith the corporate reorganization . Additionally, salaries and employee benefits and other expenses, net, both increased $2.2 million and mortgage servicing activity, net, increased $1.8 million from fiscal year 2010. The increase in salaries and employee benefits was due to $2.7 million of compensation expense related to the welcome dividend paid on unallocated ESOP shares. The increase in other expenses, net, was primarily related to O REO operations, which increased $1.7 million compared to fiscal year 2010. The increase in mortgage servicing activity, net, was due to impairment and valuation allowances during fiscal year 2011 as a result of an increase in prepayment speeds. The increases in the expenses noted above, were partially offset by decreases of $2.3 million in advertising and promotional expense and $2.2 million in federal insurance premium expense.

Effective October 31, 2010, the Bank discontinued its debit card rewards program. The discontinuation of the program resulted in a $1.5 million decrease in advertising and promotional expense for fiscal year 2011 compared to fiscal year 2010. The remaining decrease in advertising and promotional expense was due to an overall decrease in advertising in fiscal year 2011 as compared to fiscal year 2010.

Income Tax Expense

Income tax expense for fiscal year 2011 was $18.9 million compared to $37.5 million for fiscal year 2010. The decrease in income tax expense between years was primarily a result of the $40.0 million contribution to the Foundation, which resulted in $14.0 million of income tax benefit. The effective income tax rate for fiscal year 2011 was 33.0% compared to 35.6% for fiscal year 2010. The decrease in the effective tax rate between periods was due primarily to a $686 thousand adjustment related to income tax expense recognized in the prior years. Excluding that adjustment, the effective income tax rate would have been 34.2% for fiscal year 2011. The remaining difference between the effective income tax rates was due primarily to an increase in low income housing credits in fiscal year 2011 and in deductible expenses associated with the ESOP in fiscal year 2011 as a result of the $0.60 per share welcome dividend. Due to pre-tax income being lower than fiscal year 2010 , all of the items impacting the income tax rate had a larger impact to the overall effective tax rate than in fiscal year 2010 .

Liquidity and Capital Resources

Liquidity refers to our ability to generate sufficient cash to fund ongoing operations, to pay maturing certificates of deposit and other deposit withdrawals, to repay maturing borrowings, and to fund loan commitments. Liquidity management is both a daily and long-term function of our business management. The Company’s most available liquid assets are represented by cash and cash equivalents, AFS MBS and investment securities, and short-term investment securities. The Bank’s primary sources of funds are deposits, FHLB advances, other borrowings, repayments and maturities of outstanding loans and MBS and other short-term investments, an d funds provided by operations. The Bank’s borrowings primarily have been used to invest in U.S. GSE debentures and MBS securities in an effort to manage the Bank’s interest rate risk with the intent to improve the earnings of the Bank while maintaining capital ratios in excess of regulatory standards for well-capi talized financial institutions. In addition, the Bank’s focus on managing risk has provided additional liquidity capacity by remaining below FHLB borrowing limits and by increasing the balance of MBS and investment securities available as collateral for borrowings.

We generally intend to maintain cash reserves sufficient to meet short-term liquidity needs, which are routinely forecasted for 10, 30, and 365 days. Additionally, on a monthly basis, we perform a liquidity stress test in accordance with the Interagency Policy Statement on Funding and Liquidity Risk Management. The liquidity stress test incorporates both short-term and long-term liquidity scenarios in order to identify periods of, and to quantify, liquidity risk. In the event short-term liquidity needs exceed available cash, the Bank has access to lines of credit at the FHLB and the Federal Reserve Bank. The FHLB line of credit, when combined with FHLB advances, may generally not exceed 40% of total assets. Our excess capacity at the FHLB as of September 30, 2012 was $1. 15 billion . The Federal Reserve Bank line of credit is based upon the fair values of the securities pledged as collateral and certain other characteristics of those securities, and is used only when other sources of short-term li quidity are unavailable. At September 30, 2012, the Bank had $ 1.83 billion of securities that were eligible but unused as collateral for borrowing or other liquidity needs. This collateral amount is comprised of AFS and HTM securities with individual fair values greater than $10.0 million, which is then reduced by a collateralization ratio of 10% to account for potential market value fluctuations. Borrowings on the lines of credit are outstanding until replaced by cash flows from long-term sources of liquidity, and are generally outstanding no longer than 30 days.

If management observes a trend in the amount and frequency of lines of credit utilization, the Bank will likely utilize long-term wholesale borrowing sources, such as FHLB advances and/or repurchase agreements, to provide permanent fixed-rate funding. The maturity of these borrowings is generally structured in such a way as to stagger maturities in order to reduce the risk of a highly negative cash flow position at maturity. Additionally, the Bank could utilize the repayment and maturity of outstanding loans, MBS and other investments for liquidity needs rather than reinvesting such funds into the related portfolios.

While scheduled payments from the amortization of loans and MBS and payments on short-term investments are relatively predictable sources of funds, deposit flows, prepayments on loans and MBS, and calls of investment securities are greatly influenced by general interest rates, economic conditions and competition, and are less predictable sources of funds. To the extent possible, the Bank manages the cash flows of its loan and deposit portfolios by the rates it offers customers.

At September 30, 2012, cash and cash equivalents totaled $ 141.7 million, an increase of $ 20.6 million from September 30, 2011.

During fiscal year 2012, loan originations and purchases, net of principal repayments and related loan activity, res ulted in a cash outflow of $ 471.1 million, co mpared to loan originations and purchases being almost entirely offset by principal repayments an d related loan activity in fiscal year 2011 . The majority of the cash outflow in the current fiscal year related to one bulk loan purchase of $342.5 million in the fourth quarter. See additional discussion regarding loan activity in “Financial Condition – Loans Receivable.”

During fiscal year 2012 , principal payments on MBS were $ 623.2 million and proceeds from called or m atured investment securities w ere $ 1.17 b illion, which were largely reinvested into the investment securities and MBS portfolios but were also utilized to purchase loans and repurchase Company stock . Of the $ 1.17 billion of called and matur ed investment securities, $ 300.0 million were securities at the holding company level. The proceeds from the holding company securities portfolio were used to repurchase common stock or retained in a deposit account at the Bank. During fiscal year 2012 , the Company purchased $ 691 .3 million of investment securities and $557.2 million of MBS.

The following table presents the contractual maturity of our loan, MBS, and investment securities portfolios at September 30, 2012. Loans and securities which have adjustable interest rates are shown as maturing in the period during which the contract is due. The table does not reflect the effects of possible prepayments or enforcement of due on sale clauses.


	Loans ⁽¹⁾				MBS				Investment Securities				Total
			Weighted				Weighted				Weighted				Weighted
			Average				Average				Average				Average
	Amount		Rate		Amount		Rate		Amount		Rate		Amount		Rate
		(Dollars in thousands)
Amounts due:
Within one year	$	40,925	4.61	%	$	--	--	%	$	65,576	1.45	%	$	106,501	2.66	%

After one year:
Over one to two years		24,380	3.97			--	--			8,337	3.08			32,717	3.74
Over two to three years		9,010	5.04			--	--			111,650	1.23			120,660	1.52
Over three to five years		50,518	5.26			1,686	6.00			735,147	1.30			787,351	1.56
Over five to ten years		337,316	4.70			507,787	3.86			32,919	1.69			878,022	4.10
Over 10 to 15 years		1,410,198	3.90			904,235	2.89			2,556	5.28			2,316,989	3.51
After 15 years		3,776,809	4.18			919,234	2.98			5,664	3.36			4,701,707	3.94
Total due after one year		5,608,231	4.15			2,332,942	3.14			896,273	1.34			8,837,446	3.60

	$	5,649,156	4.15	%	$	2,332,942	3.14	%	$	961,849	1.35	%	$	8,943,947	3.59	%

⁽¹⁾ Demand loans, loans having no stated maturity, and overdraft loans are included in the amounts due within one year. Construction loans are presented ba sed on the term to complete construction. The maturity date for home equity loans assumes the customer always makes the required minimum payment.

The Bank utilizes FHLB advances to provide funds for lending and investment activities. The Bank’s policies and FHLB lending guidelines allow total FHLB borrowings up to 40% of total Bank assets. At September 30, 2012, the Bank’s ratio of the face amount of advances to total assets, as reported to the OCC, was 27 %. The advances are secured by a blanket pledge of our loan portfolio, as collateral, supported by quarterly reporting to the FHLB. Currently, the blanket pledge is sufficient collateral for the FHLB advances. It is possible that increases in our borrowings or decreases in our loan portfolio or changes in FHLB lending guidelines could require the Bank to pledge securities as collateral on the FHLB advances. The Bank relies on FHLB advances as a primary source of borrowings. The outstanding a mount of FHLB advances was $2. 55 billion at September 30, 2012, of which $ 325.0 million is scheduled to mature in the next 12 months. Maturing advances will likely be replaced with borrowings with terms between 36 and 60 months.

The Bank has access to and utilizes other sources for liquidity, such as secondary market repurchase agreements, brokered deposits, and public unit deposits. The Bank’s internal policy limits total borrowings to 55% of total assets. At September 30, 2012, the Bank had repurchase agreements of $365.0 million , or approximately 4 % of assets, $ 145.0 million of which were scheduled to mature in the next 12 months. The Bank may enter into additional repurchase agreements as management deems appropriate, not to exceed 15% of total assets. The Bank has pledged securities with an estimated fair value of $ 427.9 million as collateral for repurchase agreements at September 30, 2012. The securities pledged for the repurchase agreements will be delivered back to the Bank when the repurchase agreements mature.

As of September 30, 2012, the Bank’s policy allows for brokered deposits up to 10% of total deposits and public unit deposits up to 5% of total deposits. At September 30, 2012, the Bank had brokered deposits of $83.7 million, or approximately 2% of total deposits and public un it deposits of $192. 6 million, or approximately 4% of total deposits. Management continuously monitors the wholesale deposit market for opportunities to obtain brokered and public unit deposits at attractive rates. The Bank has pledged securities with an estimated fair value of $ 232.5 million as collateral for public unit deposits. The securities pledged as collateral for public unit deposits are held in joint custody at the FHLB and generally will be released upon deposit maturity.

At September 30, 2012, $1. 27 billion of the Bank’s $2. 57 billion of certificates of deposit were scheduled to mature within one year. Included in the $1. 27 billion were $ 165.0 million of public unit and brokered deposits scheduled to mature within the same time period. Based on our deposit retention experience and our current pricing strategy, we anticipate the majority of the maturing retail certificates of deposit will renew or transfer to other deposit products at the prevailing rate, although no assurance can be given in this regard.

Limitations on Dividends and Other Capital Distributions

Generally, savings institutions, such as the Bank, may make capital distributions during any calendar year equal to earnings of the previous two calendar years and current year-to-date earnings. It is generally required that the Bank remain well capitalized before and after the proposed distribution. However, an institution deemed to be in need of more than normal supervision by the OCC may have its capital distribution authority restricted. A savings institution, such as the Bank, that is a subsidiary of a savings and loan holding company and that proposes to make a capital distribution must submit written notice to the OCC and FRB 30 days prior to such distribution. The OCC and FRB may object to the distribution during that 30-day period based on safety and soundness or other concerns. Savings institutions that desire to make a larger capital distribution, or are under special restrictions, or are not, or would not be, well capitalized following a proposed capital distribution, however, must obtain regulatory approval prior to making such distribution.

The long-term ability of the Company to pay dividends to its stockholders is based primarily upon the ability of the Bank to make capital distributions to the Company. So long as the Bank continues to remain “well capitalized” after each capital distribution and operates in a safe and sound manner, it is management’s belief that the OCC and FRB will continue to allow the Bank to distribute its net income to the Company, although no assurance can be given in this regard.

In connection with the corporate reorganization, a “liquidation account” was established for the benefit of certain depositors of the Bank in an amount equal to Capitol Federal Savings Bank MHC’s ownership interest in the retained earnings of Capitol Federal Financial as of June 30, 2010. Under applicable federal banking regulations, neither the Company nor the Bank is permitted to pay dividends on its capital stock to its stockholders if stockholders’ equity would be reduced below the amount of the liquidation account at that time.

The Company paid cash dividends of $ 63.8 million during fiscal year 2012. The $ 63.8 million of dividend payments consisted of four quarterly dividends totaling $ 47.6 million and a special year-end dividend of $16.2 million , per the Company’s dividend policy. Dividend payments depend upon a number of factors including the Company's financial condition and results of operations, the Bank’s 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 December 2011, the Company announced that the Board of Directors approved the repurchase of up to $193.0 million of the Company’s common stock. During fiscal year 2012, t he Company repurchased 12,642,502 shares of common sto ck at an average price of $ 11.78 per share , or $ 149.0 million . See additional discussion regarding common stock repurchase activity in “Financial Condition – Stockholders’ Equity.”

Contingencies

In the normal course of business, the Company and its subsidiary are named defendants in various lawsuits and counter claims. In the opinion of management, after consultation with legal counsel, none of the currently pending suits are expected to have a materially adverse effect on the Company’s consolidated financial statements for the year ended September 30, 2012 or future periods.

Regulatory Capital

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 September 30, 2012, the Bank exceeded all regulatory capital requirements. The Company currently does not have any regulatory capital requirements. The following table presents the Bank’s regulatory capital ratios at September 30, 2012 based upon regulatory guidelines.


		Regulatory
		Requirement
	Bank	For “Well-
	Ratios	Capitalized” Status
Tier 1 leverage ratio	14.6%	5.0%
Tier 1 risk-based capital	36.4%	6.0%
Total risk-based capital	36.7%	10.0%

Off-Balance Sheet Arrangements, Commitments and Contractual Obligations

The Company, in the normal course of business, makes commitments to buy or sell assets or to incur or fund liabilities. Commitments may include, but are not limited to:

·	the origination, purchase, or sale of loans;

·	the purchase or sale of investment securities and MBS;

·	extensions of credit on home equity loans, construction loans, and commercial loans;

·	terms and conditions of operating leases; and

·	funding withdrawals of deposit accounts at maturity.

The following table summarizes our contractual obligations and other material commitments as of September 30, 2012 .


	Maturity Range
				Less than			1 - 3			3 - 5			More than
	Total			1 year			years			years			5 years
		(Dollars in thousands)

Operating leases	$	12,324		$	1,247		$	2,109		$	1,780		$	7,188

Certificates of Deposit	$	2,572,244		$	1,265,647		$	1,015,704		$	289,012		$	1,881
Weighted average rate		1.44	%		1.07	%		1.82	%		1.71	%		2.64	%

FHLB Advances	$	2,550,000		$	325,000		$	1,050,000		$	975,000		$	200,000
Weighted average rate		2.62	%		3.62	%		2.28	%		2.65	%		2.68	%

Repurchase Agreements	$	365,000		$	145,000		$	120,000		$	--		$	100,000
Weighted average rate		3.83	%		3.81	%		4.24	%		--	%		3.35	%

Commitments to originate/refinance
and purchase/participate in loans	$	233,143		$	233,143		$	--		$	--		$	--
Weighted average rate		3.40	%		3.40	%		--	%		--	%		--	%

Commitments to fund unused
home equity lines of credit and
unadvanced commercial loans	$	262,042		$	262,042		$	--		$	--		$	--
Weighted average rate		4.55	%		4.55	%		--	%		--	%		--	%

Unadvanced portion of
construction loans	$	22,874		$	22,874		$	--		$	--		$	--
Weighted average rate		3.79	%		3.79	%		--	%		--	%		--	%

Excluded from the table above are income tax liabilities of $ 138 thousand related to uncertain income tax positions. The amounts are excluded as management is unable to estimate the period of cash settlement as it is contingent on the statute of limitations expiring without examination by the respective taxing authority.

A percentage of commitments to originate mortgage loans are expected to expire unfunded, so the amounts reflected in the table above are not necessarily indicative of future liquidity requirements. Additionally, the Bank is not obligated to honor commitments to fund unused home equity lines of credit if a customer is delinquent or otherwise in violation of the loan agreement.

We anticipate we will continue to have sufficient funds, through repayments and maturities of loans and securities, deposits and borrowings, to meet our current commitments. We had no material off-balance sheets arrangements as of September 30, 2012.

Stockholder Return Performance Presentation

The line graph below compares the cumulative total stockholder return on the Company’s common stock to the cumulative total return of a broad index of the Na sdaq Stock Market and the SNL Midcap Bank and Thrift industry index for the period September 30, 2007 through September 30, 2012 . The information presented below assumes $100 invested on September 30, 2007 in the Company’s common stock and in each of the indices, and assumes the reinvestment of all dividends. Historical stock price performance is not necessarily indicative of future stock price performance.



	Period Ending
Index	9/30/2007	9/30/2008	9/30/2009	9/30/2010	9/30/2011	9/30/2012
Capitol Federal Financial, Inc.	100.00	137.12	107.11	86.22	92.41	108.38
NASDAQ Composite	100.00	78.08	80.06	90.26	92.97	121.46
SNL Midcap Bank & Thrift I ndex	100.00	58.37	38.12	40.10	32.66	43.91

Management’s Report on Internal Control Over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(e) and 15(d)-15(e) under the Securities Exchange Act of 1934, as amended, the “Act”). The Company’s internal control system is a process designed to provide reasonable assurance to the Company’s management and Board of Directors regarding the preparation and fair presentation of published financial statements.

The Company’s internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; provide reasonable assurances that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures are being made only in accordance with authorizations of management and the directors of the Company; and provide reasonable assurance regarding prevention or untimely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the Company’s financial statements.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial reporting. Further, because of changes in conditions, the effectiveness of any system of internal control may vary over time. The design of any internal control system also factors in resource constraints and consideration for the benefit of the control relative to the cost of implementing the control. Because of these inherent limitations in any system of internal control, management cannot provide absolute assurance that all control issues and instances of fraud within the Company have been detected.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of September 30, 2012 . In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control - Integrated Framework . Management has concluded that the Company maintained an effective system of internal control over financial reporting based on these criteria as of September 30, 2012 .

The Company’s independent registered public accounting firm, Deloitte & Touche LLP, who audited the consolidated financial statements included in the Company’s annual report, has issued an audit report on the Company’s internal control over financial reporting as of September 30, 2012 and it is included herein.

John B. Dicus, Chairman, President

and Chief Executive Officer

Kent G. Townsend, Executive Vice President,

Chief Financial Officer and Treasurer

rEPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Capitol Federal Financial, Inc. and subsidiary

Topeka, Kansas

We have audited the internal control over financial reporting of Capitol Federal Financial, Inc. and subsidiary (the “Company”) as of September 30, 2012 , based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Because management’s assessment and our audit were conducted to meet the reporting requirements of Section 112 of the Federal Deposit Insurance Corporation Improvement Act (FDICIA), management’s assessment and our audit of the Company’s internal control over financial reporting included controls over the preparation of the schedules equivalent to the basic consolidated financial statements in accordance with the instructions for the Consolidated Financial Statements for Bank Holding Companies (Form FR Y-9C). The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's Board of Directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the consolidated financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

rEPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2012 , based on the criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended September 30, 2012 of the Company and our report dated November 29, 2012 expressed an unqualified opinion on those consolidated financial statements.

Kansas City, Missouri

November 29, 2012

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Capitol Federal Financial , Inc. and subsidiary

Topeka, Kansas

We have audited the accompanying consolidated balance sheets of Capitol Federal Financial , Inc. and subsidiary ( the “ Company ” ) as of September 30, 2012 and 2011 , and the related consolidated statements of income, stockholders ’ equity, and cash flows for each of the three years in the period ended September 30, 2012 . These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the consolidated financial position of Capitol Federal Financial, Inc. and subsidiary a s of September 30, 2012 and 2011 , and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2012 , in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of September 30, 2012 , based on the criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission , and our report dated November 29, 2012 expressed an unqualified opinion on the Company's internal control over financial reporting .

Kansas City, Missouri

November 29, 2012


CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2012 and 2011 (Dollars in thousands)



ASSETS		2012		2011

CASH AND CASH EQUIVALENTS (includes interest-earning deposits of
$127,544 and $105,292)	$	141,705	$	121,070

SECURITIES:
Available-for-sale (“AFS”), at estimated fair value (amortized cost of $1,367,925 and $1,443,529)		1,406,844		1,486,439
Held-to-maturity (“HTM”), at amortized cost (estimated fair value of $1,969,899 and $2,434,392)		1,887,947		2,370,117

LOANS RECEIVABLE, net (allowance for credit losses (“ACL”) of
$11,100 and $15,465)		5,608,083		5,149,734

BANK-OWNED LIFE INSURANCE (“BOLI”)		58,012		56,534

CAPITAL STOCK OF FEDERAL HOME LOAN BANK (“FHLB”), at cost		132,971		126,877

ACCRUED INTEREST RECEIVABLE		26,092		29,316

PREMISES AND EQUIPMENT, net		57,766		48,423

OTHER REAL ESTATE OWNED (“OREO”)		8,047		11,321

OTHER ASSETS		50,837		50,968

TOTAL ASSETS	$	9,378,304	$	9,450,799

(Continued)


CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2012 and 2011 (Dollars in thousands)

LIABILITIES AND STOCKHOLDERS’ EQUITY		2012		2011

LIABILITIES:
Deposits	$	4,550,643	$	4,495,173
Advances from FHLB		2,530,322		2,379,462
Other borrowings		365,000		515,000
Advance payments by borrowers for taxes and insurance		55,642		55,138
Income taxes payable		918		2,289
Deferred income tax liabilities, net		25,042		20,447
Accounts payable and accrued expenses		44,279		43,761

Total liabilities		7,571,846		7,511,270

COMMITMENTS AND CONTINGENCIES (NOTE 12)

STOCKHOLDERS’ EQUITY:
Preferred stock, $.01 par value; 100,000,000 shares authorized,
no shares issued or outstanding		--		--
Common stock, $.01 par value; 1,400,000,000 shares authorized,
155,379,739 and 167,498,133 shares issued and outstanding
as of September 30, 2012 and 2011, respectively		1,554		1,675
Additional paid-in capital		1,292,122		1,392,567
Unearned compensation, Employee Stock Ownership Plan (“ESOP”)		(47,575)		(50,547)
Retained earnings		536,150		569,127
Accumulated other comprehensive income (“AOCI”), net of tax		24,207		26,707

Total stockholders’ equity		1,806,458		1,939,529

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	9,378,304	$	9,450,799


See notes to consolidated financial statements	(Concluded)


CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED SEPTEMBER 30, 2012, 2011, and 2010 (Dollars in thousands, except per share data)

		2012		2011		2010
INTEREST AND DIVIDEND INCOME:
Loans receivable	$	236,225	$	251,909	$	282,307
Mortgage-backed securities (“MBS”)		71,156		71,332		71,859
Investment securities		15,944		19,077		15,682
Capital stock of FHLB		4,446		3,791		3,966
Cash and cash equivalents		280		756		237
Total interest and dividend income		328,051		346,865		374,051

INTEREST EXPENSE:
FHLB advances		82,044		90,298		97,212
Deposits		46,170		63,568		79,216
Other borrowings		14,956		24,265		28,058
Total interest expense		143,170		178,131		204,486

NET INTEREST INCOME		184,881		168,734		169,565

PROVISION FOR CREDIT LOSSES		2,040		4,060		8,881

NET INTEREST INCOME AFTER
PROVISION FOR CREDIT LOSSES		182,841		164,674		160,684

OTHER INCOME:
Retail fees and charges		15,915		15,509		17,789
Insurance commissions		2,772		3,071		2,476
Loan fees		2,113		2,449		2,592
Income from BOLI		1,478		1,824		1,202
Gains on securities, net		--		--		6,454
Other income, net		1,955		2,142		3,898
Total other income		24,233		24,995		34,411

						(Continued)


CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED SEPTEMBER 30, 2012, 2011, and 2010 (Dollars in thousands, except per share data)

		2012		2011		2010
OTHER EXPENSES:
Salaries and employee benefits		44,235		44,913		42,666
Occupancy, information technology, and communications		16,334		16,051		15,554
Deposit and loan transaction costs		5,381		5,157		5,300
Regulatory and outside services		5,291		5,224		4,769
Federal insurance premium		4,444		5,222		7,452
Advertising and promotional		3,931		3,723		6,027
Contribution to Capitol Federal Foundation (“Foundation“)		--		40,000		--
Other expenses, net		11,459		12,027		7,962
Total other expenses		91,075		132,317		89,730

INCOME BEFORE INCOME TAX EXPENSE		115,999		57,352		105,365

INCOME TAX EXPENSE		41,486		18,949		37,525

NET INCOME	$	74,513	$	38,403	$	67,840


Basic earnings per share	$	0.47	$	0.24	$	0.41
Diluted earnings per share	$	0.47	$	0.24	$	0.41
Dividends declared per share	$	0.40	$	1.63	$	2.29

Basic weighted average common shares		157,912,978		162,625,274		165,862,176
Diluted weighted average common shares		157,916,400		162,632,665		165,899,445


See notes to consolidated financial statements						(Concluded)

CAPITOL FEDERAL FINANCIAL , INC. AND SUBSIDIAR Y

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

YEARS ENDED SEPTEMBER 30, 2012, 2011, and 2010 (Dollars in thousands, except per share data)


			Additional		Unearned								Total
	Common		Paid-In		Compensation		Retained				Treasury		Stockholders'
	Stock		Capital		ESOP		Earnings		AOCI		Stock		Equity
Balance at October 1, 2009	$	915	$	452,542	$	(8,066)	$	781,604	$	33,870	$	(319,567)	$	941,298

Comprehensive Income:
Net income, fiscal year 2010								67,840						67,840
Changes in unrealized gain/losses on
securities AFS, net of deferred
income tax $1,221										(2,008)				(2,008)
Total comprehensive income														65,832

ESOP activity, net				4,465		2,016								6,481
Restricted stock activity, net				(40)								47		7
Stock based compensation				452										452
Repurchase of common stock												(4,019)		(4,019)
Stock options exercised				121								178		299
Dividends on common stock to
stockholders ($2.29 per public share)								(48,400)						(48,400)
Balance at September 30, 2010		915		457,540		(6,050)		801,044		31,862		(323,361)		961,950

Comprehensive Income:
Net income, fiscal year 2011								38,403						38,403
Changes in unrealized gain/losses on
securities AFS, net of deferred
income tax $3,159										(5,155)				(5,155)
Total comprehensive income														33,248

ESOP activity, net				3,259		2,763								6,022
Restricted stock activity, net				(4)										(4)
Stock based compensation				262										262
Stock options exercised				42										42
Dividends on common stock to
stockholders ($1.63 per public share)								(150,110)						(150,110)

Corporate reorganization:
Merger of Capitol Federal
Savings Bank MHC		(522)		1,997				(1,223)						252
Retirement of treasury stock		(175)		(204,199)				(118,987)				323,361		--
Exchange of common stock		276		(323)										(47)
Proceeds from stock offering,
net of offering expenses		1,181		1,133,993										1,135,174

Purchase of common stock by ESOP						(47,260)								(47,260)

Balance at September 30, 2011		1,675		1,392,567		(50,547)		569,127		26,707		--		1,939,529

(Continued)

CAPITOL FEDERAL FINANCIAL , INC. AND SUBSIDIAR Y

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

YEARS ENDED SEPTEMBER 30, 2012, 2011, and 2010 (Dollars in thousands, except per share data)


			Additional		Unearned						Total
	Common		Paid-In		Compensation		Retained				Stockholders’
	Stock		Capital		ESOP		Earnings		AOCI		Equity
Comprehensive Income:
Net income, fiscal year 2012								74,513				74,513
Changes in unrealized gain/losses on
securities AFS, net of deferred
income tax $1,491										(2,500)		(2,500)
Total comprehensive income												72,013

ESOP activity, net				3,434		2,972						6,406
Restricted stock activity, net		5		(5)								--
Stock based compensation				1,196								1,196
Repurchase of common stock		(126)		(105,131)				(43,722)				(148,979)
Stock options exercised				61								61
Dividends on common stock to
stockholders ($0.40 per share)								(63,768)				(63,768)

Balance at September 30, 2012	$	1,554	$	1,292,122	$	(47,575)	$	536,150	$	24,207	$	1,806,458

See notes to consolidated financial statements (Concluded)


CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 2012, 2011, and 2010 (Dollars in thousands)
	2012		2011		2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	74,513	$	38,403	$	67,840
Adjustments to reconcile net income to net cash provided by
operating activities:
FHLB stock dividends		(4,446)		(3,791)		(3,966)
Provision for credit losses		2,040		4,060		8,881
Originations of loans receivable held-for-sale (“LHFS”)		(6,008)		(11,715)		(47,488)
Proceeds from sales of LHFS		6,524		13,483		46,140
Amortization and accretion of premiums and discounts on securities		8,662		8,100		5,940
Depreciation and amortization of premises and equipment		4,951		4,397		4,584
Amortization of deferred amounts related to FHLB advances, net		8,797		7,091		6,676
Common stock committed to be released for allocation - ESOP		6,406		6,022		6,481
Stock based compensation		1,196		262		452
Provision for deferred income taxes		6,089		(9,647)		3,466
Gain on the sale of trading securities received in the loan swap transaction		--		--		(6,454)
Changes in:
Prepaid federal insurance premium, net		3,927		4,718		(20,447)
Accrued interest receivable		3,224		904		2,420
Other assets, net		2,493		637		(7,035)
Income taxes payable/receivable		(1,398)		3,004		(6,697)
Accounts payable and accrued expenses		(10,732)		(143)		(1,631)
Net cash provided by operating activities		106,238		65,785		59,162

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of trading securities received in the loan swap transaction		--		--		199,144
Purchase of AFS securities		(688,520)		(790,083)		--
Purchase of HTM securities		(560,024)		(1,979,789)		(1,662,009)
Proceeds from calls, maturities and principal reductions of AFS securities		761,535		351,636		557,141
Proceeds from calls, maturities and principal reductions of HTM securities		1,036,121		1,485,786		628,350
Proceeds from the redemption of capital stock of FHLB		4,048		4,942		16,185
Purchases of capital stock of FHLB		(5,696)		(7,162)		(21)
Net (increase) decrease in loans receivable		(471,144)		(105)		219,628
Purchases of premises and equipment		(12,617)		(12,751)		(8,183)
Proceeds from sales of OREO		13,145		14,205		11,273
Net cash provided by (used in) investing activities		76,848		(933,321)		(38,492)

(Continued)


CAPITOL FEDERAL FINANCIAL, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 2012, 2011, and 2010 (Dollars in thousands)

	2012		2011		2010
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid		(63,768)		(150,110)		(48,400)
Deposits, net of withdrawals		55,470		126,553		157,701
Proceeds from borrowings		957,768		644,162		300,000
Repayments on borrowings		(957,768)		(773,771)		(395,000)
Deferred FHLB prepayment penalty		(7,937)		--		(875)
Change in advance payments by borrowers for taxes and insurance		504		102		(331)
Net proceeds from common stock offering (deferred offering costs)		--		1,076,411		(5,982)
Repurchase of common stock		(146,781)		--		(4,019)
Stock options exercised		36		35		210
Excess tax benefits from stock options		25		7		89
Net cash (used in) provided by financing activities		(162,451)		923,389		3,393

NET INCREASE IN CASH AND CASH EQUIVALENTS		20,635		55,853		24,063

CASH AND CASH EQUIVALENTS:
Beginning of Period		121,070		65,217		41,154

End of Period	$	141,705	$	121,070	$	65,217

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Income tax payments	$	36,791	$	25,517	$	40,664

Interest payments	$	135,444	$	172,332	$	199,433

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Note received from ESOP in exchange for common stock	$	--	$	47,260	$	--

Customer deposit holds related to common stock offering	$	--	$	17,690	$	--

Loans transferred to OREO	$	11,296	$	15,048	$	13,717

Swap of loans for trading securities	$	--	$	--	$	193,889

See notes to consol idated financial statements (Concluded)

CAPITOL FEDERAL FINANCIAL , INC. and SUBSIDIAR Y

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2012, 2011, and 2010

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business - Capitol Federal Financial, Inc. (the “Company”) provides a full range of retail banking services through its wholly-owned subsidiary, Capitol Federal Savings Bank (the “Bank”) which has 36 traditional and 10 in-store banking offices serv ing primarily the metropolitan areas of Topeka, Wichita, Lawrence, Manhattan, Emporia and Salina, Kansas and portions of the metropolitan area of greater Kansas City. The Bank emphasizes mortgage lending, primarily originating and purchasing one- to four-family mortgage loans and providing personal retail financial services. The Bank is subject to competition from other financial institutions and other companies that provide financial services.

On July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) was signed into law. The Dodd-Frank Act, among other things, required the Office of Thrift Supervision (the “OTS”) to be merged into the Office of the Comptroller of the Currency (the “OCC”). On July 21, 2011, the OCC assumed all functions and authority from the OTS relating to federally chartered savings banks, and the Board of Governors of the Federal Reserve System (“FRB”) assumed all functions and authority from the OTS relating to savings and loan holding companies. Effective July 21, 2011, the Bank is regulated by the OCC and the Company is regulated by the FRB. Prior to that date, the Bank and Company were regulated by the OTS. The Bank is also regulated by the Federal Deposit Insurance Corporation (the “FDIC”). The Bank and Company are subject to periodic examinations by the above noted regulatory authorities.

The Bank has an expense sharing agreement with the Company that covers the reimbursement of certain expenses that are allocable to the Company. These expenses include compensation, rent for leased office space, and general overhead expenses.

The Company and its subsidiary have a tax allocation agreement. The Bank is the paying agent to the taxing authorities for the group for all periods presented. Each company is liable for taxes as if separate tax returns were filed and reimburses the Bank for its pro rat a share of the tax liability. If any entity has a tax benefit, the Bank reimburses the entity for its tax benefit.

The Company’s ability to pay dividends is dependent, in part, upon its ability to obtain capital distributions from the Bank. The dividend policy of the Company is subject to the discretion of the Board of Directors and will depend upon a number of factors, including the Company’s financial condition and results of operations, the Bank’s 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. Holders of common stock will be entitled to receive dividends as of and when declared by the Board of Directors of the Company out of funds legally available for that purpose.

Basis of Presentation - In December 2010, Capitol Federal Financial completed its conversion from a mutual holding company form of organization to a stock form of organization (“ the corporate reorganization”). Capitol Federal Financial, which owned 100% of the Bank, was succeeded by the Company, a new Maryland corporation. As part of the corporate reorganization, Capitol Federal Savings Bank MHC’s (“MHC”) ownership interest in Capitol Federal Financial was sold in a public offering. Gross proceeds from the offering were $ 1.18 billion and related offering expenses were $ 46.7 million, of which $ 6.0 million were incurred and deferred in fiscal year 2010. The publicly held shares of Capitol Federal Financial were exchanged for new shares of common stock of the Company. The exchange ratio was 2.2637 and ensured that immediately after the corporate reorganization the public stockholders of Capitol Federal Financial owned the same aggregate percentage of the Company’s common stock that they owned of Capitol Federal Financial’s common stock immediately prior to the reorganization. All share information used in the consolidated financial statements and notes to consolidated financial statements prior to the corporate reorganization has been revised to reflect the exchange ratio. In conjunction with the corporate reorganization, the Company contributed $ 40.0 million of cash to the Bank’s charitable foundation, Capitol Federal Foundati on. Additionally, a “liquidation account” was established for the benefit of certain depositors of the Bank in an amount equal to MHC’s ownership interest in the retained earnings of Capitol Federal Financial as of June 30, 2010. As of September 30, 2012, the balance of the liquidation account was $ 339.3 million. Under OCC and FRB regulations, neither the Company nor the Bank is permitted to pay dividends on its capital stock to its stockholders if stockholders’ equity would be reduced below the current amount of the liquidation account at that time.

The consolidated financial statements after the corporate reorganization in December 2010 include the accounts of the Company and its wholly owned subsidiary, the Bank. The consolidated financial statements prior to the corporate reorganization include the accounts of Capitol Federal Financial and its wholly owned subsidiary, the Bank. The Bank has a wholly owned subsidiary, Capitol Funds, Inc. Capitol Funds, Inc. has a wholly owned

subsidiary, Capitol Federal Mortgage Reinsurance Company. All intercompany accounts and transactions have been eliminated.

These consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), and require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. The ACL is a significant estimate that involves a high degree of complexity and requires management to make difficult and subjective judgments and assumptions about highly uncertain matters. The use of different judgments and assumptions could cause reported results to differ significantly. In addition, bank regulators periodically review the Bank’s ACL. The bank regulators have the ability to require the Bank, as they can require all banks, to increase the ACL or recognize additional charge-offs based upon their judgments, which may differ from management’s judgments. Any increases in the ACL or recognition of additional charge-offs required by bank regulators could adversely affect the Company’s financial condition and results of operations.

Cash and Cash Equivalents - Cash and cash equivalents include cash on hand and amounts due from banks. The Bank has an acknowledged informal agreement with another bank where it maintains a deposit account . Under this agreement, service fees charged to the Bank are waived provided certain average compensating balances are maintained throughout each month. FRB regulations require federally chartered savings banks to maintain cash reserves against their transaction accounts. Required reserves must be maintained in the form of vault cash, an account at a Federal Reserve Bank, or a pass-through account as defined by the FRB. The amount of interest-earning deposits held at the FRB as of September 30, 2012 and 2011 was $ 122.4 million and $ 99.9 million, respectively. The Bank is in compliance with the FRB requirements . For the years ended September 30, 2012 and 2011, the average daily balance of required reserves at the Federal Reserve Bank was $ 9.2 million and $ 9.3 mi llion, respectively.

Securities - Securities include mortgage-backed and agency securities issued primarily by United States Government-Sponsored Enterprises (“GSE”), including Federal National Mortgage Association (“FNMA”), Federal Home Loan Mortgage Corporation (“FHLMC”) and FHLB , United States Government agencies, including Government National Mortgage Association (“GNMA”), and municipal bonds. Securities are classified as HTM, AFS, or trading based on management’s intention on the date of purchase. Generally, classifications are made in response to liquidity needs, asset/liability management strategies, and the market interest rate environment at the time of purchase.

Securities that management has the intent and ability to hold to maturity are classified as HTM and reported at amortized cost. Such securities are adjusted for the amortization of premiums and discounts which are recognized as adjustments to interest income over the life of the securities using the level-yield method.

Securities that management may sell if necessary for liquidity or asset management purposes are classified as AFS and reported at fair value, with unrealized gains and losses reported as a component of AOCI within stockholders’ equity, net of deferred income taxes. The amortization of premiums and discounts are recognized as adjustments to interest income over the life of the securities using the level-yield method. Gains or losses on the disposition of AFS securities are recognized using the specific identification method. Estimated fair values of AFS securities are based on one of three methods: 1) quoted market prices where available, 2) quoted market prices for similar instruments if quoted market prices are not available, and 3) unobservable data that represents the Bank’s assumptions about items that market participants would consider in determining fair value where no market data is available. See additional discussion of fair value of AFS securities in Note 14.

Securities that are purchased and held principally for resale in the near future are classified as trading securities and are reported at fair value, with unrealized gains and losses included in other income in the consolidated statements of income. During the fiscal years ended September 30, 2012 and 2011, neither the Company nor the Bank maintained a trading securities portfolio.

Management monitors the securities portfolio for impairment on an ongoing basis and performs a formal review quarterly. The process involves monitoring market events and other items that could impact issuers. The evaluation includes, but is not limited to, such factors as: the nature of the investment, the length of time the security has had a fair value less than the amortized cost basis, the cause(s) and severity of the loss, expectation of an anticipated recovery period, recent events specific to the issuer or industry including the issuer’s financial condition and current ability to make future payments in a timely manner, external credit ratings and recent downgrades in such ratings, management’s intent to sell and whether it is more likely than not management would be required to sell prior to recovery for debt securities. Management determines whether other-than-temporary losses should be recognized for impaired securities by assessing all known facts and circumstances surrounding the securities. If management intends to sell an impaired security or if it is more likely than not that management will be required to sell an impaired security before recovery of its amortized cost basis, an other-than-temporary impairment has occurred and the difference between amortized cost and fair value will be recognized as a loss in earnings and the security will be written down to fair value. Such losses would be included in other income in the consolidated statements of income.

Loans Receivable - Loans receivable that management has the intent and ability to hold for the foreseeable future are carried at the amount of unpaid principal, net of ACL, undisbursed loan funds, unamortized premiums and discounts, and deferred loan origination fees and costs. Net loan origination fees and costs and premiums and discounts are amortized as yield adjustments to interest income using the level-yield method, adjusted for the estimated prepayment speeds of the related loans when applicable. Interest on loans is credited to income as earned and accrued only if deemed collectible.

Endorsed loans - Existing loan customers, whose loans have not been sold to third parties, who have not been delinquent on their contractual loan payments during the previous 12 months and who are not currently in bankruptcy, have the opportunity for a cash fee to endorse their original loan terms to current loan terms being offered. The fee assessed for endorsing the mortgage loan is deferred and amortized over the remaining life of the endorsed loan using the level-yield method and is reflected as an adjustment to interest income. Each endorsement is examined on a loan-by-loan basis and if the new loan terms represent more than a minor change to the loan, then the unamortized balance of the pre-endorsement deferred fees and/or costs associated with the mortgage loan are recognized in interest income at the time of the endorsement. If the endorsement of terms does not represent more than a minor change to the loan, then the unamortized balance of the pre-endorsement deferred fees and/or costs continue to be deferred.

Troubled debt restructurings (“TDRs”) - For borrowers experiencing financial difficulties, the Bank may grant a concession to the borrower. Generally, the Bank grants a short-term payment concession to borrowers who are experiencing a temporary cash flow problem. The most frequently used concession is to reduce the monthly payment amount for a period of six to 12 months, often by requiring payments of only interest and escrow during this period , result ing in an extension of the maturity date of the loan. For more severe situations requiring long-term solutions, the Bank also offers interest rate reductions to currently-offered rates and more lengthy extensions of the maturity date. The Bank does not forgive principal or interest nor does it commit to lend additional funds, except for the capitalization of delinquent interest and/or escrow balances not to exceed the original loan balance, to these borrowers.

Endorsed loans are classified as TDRs when certain guidelines for soft credit scores and/or estimated loan-to-value (“LTV”) ratios are not met. T hese guidelines reflect changes since origination, signifying the borrower could be experiencing financial difficulties even though the borrower has not been delinquent on his contractual loan payment in the previous 12 months.

An aforementioned loan will be reported as a TDR until it pays off, unless it has been restructured to an interest rate equal to or greater than the rate the Bank was willing to accept at the time of the restructuring for a new loan with comparable risk, and has performed under the new terms of the restructuring agreement for at least 12 consecutive months. TDRs are reported as nonaccrual if the loan was either nonaccrual at the time of restructuring or if the borrower(s) did not receive a credit evaluation prior to the restructuring and has not made six consecutive monthly payments per the restructured loan terms.

During July 2012, the OCC provided guidance to the industry regarding loans that had been discharged under Chapter 7 bankruptcy proceedings where the borrower has not reaffirmed the debt owed to the lender. The OCC requires that these loans be reported as TDRs and nonaccrual, regardless of their delinquency status. These loans will be reported as TDRs for at least four years after the Chapter 7 discharge date.

Delinquent loans - A loan is considered delinquent when payment has not been received within 30 days of its contractual due date.

Nonaccrual loans - The accrual of income on loans is discontinued when interest or principal payments are 90 days in arrears, until a nonaccrual TDR has made six consecutive monthly payments per the restructured loan terms, or for at least four years after the discharge date for loans discharged under Chapter 7 bankruptcy proceedings where the borrower did not reaffirm the debt. Loans on which the accrual of income has been discontinued are designated as nonaccrual and outstanding interest previously credited beyond 90 days delinquent is reversed. A nonaccrual loan is returned to accrual status once the contractual payments have been made to bring the loan less than 90 days past due or , in the case of a TDR, the borrower has made six consecutive payments under the restructured terms or it has been at least four years after the discharge date for loans discharged under Chapter 7 bankruptcy proceedings where the borrower did not reaffirm the debt.

Impaired loans - A loan is considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect all amounts due, including principal and interest, according to the contractual terms of the loan agreement. Interest income on impaired loans is recognized in the period collected unless the ultimate collection of principal is considered doubtful. The following types of loans are reported as impaired loans: all nonaccrual loans, loans classified as substandard, loans partially charged-off, and all TDRs except : 1) those that ha ve been restructured to an interest rate equal to or greater than the rate the Bank was willing to accept at the time of the restructuring for a new loan with comparable risk, and has performed under the new terms of the restructuring agreement for at least 12 consecutive months; and 2) those that have been discharged under Chapter 7 bankruptcy proceedings where the borrower has not reaffirmed the debt owed to the Bank but has performed for at least four years since the date of discharge by the bankruptcy court.

The majority of the Bank’s impaired loans are related to one- to four-family properties. Impaired loans related to one- to four-family properties are individually evaluated for loss when the loan becomes 180 days delinquent or at any time management has knowledge of the existence of a potential loss to ensure that the carrying value of the loan is not in excess of the fair value of the collateral, less estimated selling costs.

Allowance for Credit Losses - The ACL represents management’s best estimate of the amount of inherent losses in the loan portfolio as of the balance sheet date. Management’s methodology for assessing the appropriateness of the ACL consists of an analysis (“formula analysis”) model, along with analyzing several other factors. Management maintains the ACL through provisions for credit losses that are charged to income.

For one- to four-family secured loans, losses are charged-off when the loan is generally 180 days delinquent. Losses are based on new collateral values obtained through appraisals, less estimated costs to sell. Anticipated private mortgage insurance (“PMI”) proceeds are taken into consideration when calculating the loss amount. An updated appraisal is requested, at a minimum, every six months thereafter that a purchased loan remains a classified asset and every 12 months thereafter that an originated loan remains 180 days or more delinquent. If the Bank holds the first and second mortgage, both loans are combined when evaluating whether there is a potential loss on the loan. However, charge-offs for real estate-secured loans may also occur at any time if the Bank has knowledge of the existence of a potential loss. For all other real estate loans that are not secured by one- to four-family property, losses are charged-off when the collection of such amounts is unlikely. When a non-real estate secured loan is 120 days delinquent, any identified losses are charged-off.

The Bank’s primary lending emphasis is the origination and purchase of one- to four-family first mortgage loans on residential properties and, to a lesser extent, second mortgage loans on one- to four-family residential properties, resulting in a loan concentration in residential mortgage loans. The Bank has a concentration of loans secured by residential property located in Kansas and Missouri. Based on the composition of the Bank’s loan portfolio, the primary risks inherent in the one- to four-family and consumer loan portfolios are the continued weakened economic conditions, continued high levels of unemployment or underemployment, and a continuing decline in residential real estate values. Any one or a combination of these events may adversely affect borrowers’ ability to repay their loans, resulting in increased delinquencies, non-performing assets, loan losses, and future loan loss provisions. Although the multi-family and commercial loan portfolio is subject to the same risk of continued weakened economic conditions, the primary risks for this portfolio include s the ability of the borrower to sustain sufficient cash flows from leases and to control expenses to satisfy their contractual debt payments, and/or the ability to utilize personal and/or business resources to pay their contractual debt payments if the cash flows are not sufficient. Additionally, if the Bank were to repossess the secured collateral of a multi-family or commercial loan, the pool of potential buyers is limited more than that for a residential property. Therefore, the Bank could hold the property for an extended period of time and/or potentially be forced to sell at a discounted price, resulting in additional losses.

Each quarter, a formula analysis is prepared which segregates the loan portfolio into categories based on certain risk characteristics. The categories include the following: one- to four-family loans; multi-family and commercial loans; consumer home equity loans; and other consumer loans. Home equity loans with the same underlying collateral as a one- to four-family loan are combined with the one- to four-family loan in the formula analysis model to calculate a combined LTV ratio. Loans individually evaluated for loss are excluded from the formula analysis model. The one- to four-family loan portfolio and related home equity loans are segregated into additional categories based on the following risk characteristics: originated or bulk purchased; interest payments (fixed-rate, adjustable-rate, and interest-only); LTV ratios; borrower’s credit scores; and geographic location. The categories were derived by management based on reviewing the historical performance of the one- to four-family loan portfolio and taking into consideration current economic conditions, such as trends in residential real estate values in certain areas of the U.S. and unemployment rates. The geographic location category pertains primarily to certain states in which the Bank has experienced measurable loan losses.

Quantitative loss factors are applied to each loan category in the formula analysis model based on the historical loss experience for each respective loan category. Each quarter, management reviews the historical loss time periods and utilizes the historical loss time periods believed to be the most reflective of the current economic conditions and recent charge-off experience for each respective loan category.

Qualitative loss factors are applied to each loan category in the formula analysis model. The qualitative factors for the one- to four-family and consumer loan portfolios are: unemployment rate trends; collateral value trends; credit score trends; and delinquent loan trends. The qualitative factors for the multi-family and commercial loan portfolio are: unemployment rate trends; credit score trends; delinquent loan trends and other factors related to the higher risk level for this category of loan . As loans are classif ied or become delinquent, the qualitative loss factors increase. Additionally, TDRs that have not been partially charged-off are included in a category within the formula analysis model with an overall higher qualitative loss factor than corresponding performing loans, for the life of the loan. The qualitative factors were derived by management based on a review of the historical performance of the respective loan portfolios and consideration of current economic conditions and their likely impact to the loan portfolio.

Management utilizes the formula analysis, along with analyzing several other factors, when evaluating the adequacy of the ACL. Such factors include the trend and composition of delinquent loans, results of foreclosed property and short sale transactions, the current status and trends of local and national economies, particularly levels of unemployment, trends and current conditions in the real estate and housing markets, and loan portfolio growth and concentrations. Since the Bank’s loan portfolio is primarily concentrated in one- to four-family real estate, management monitors residential real estate market value trends in the Bank’s local market areas and geographic sections of the U.S. by reference to various industry and market reports, economic releases and surveys, and management’s general and specific knowledge of the real estate markets in which the Bank lends, in order to determine what impact, if any, such trends may have on the level of ACL. Reviewing these factors assists management in evaluating the overall credit quality of the loan portfolio and the reasonableness of the ACL on an ongoing basis, and whether changes need to be made to the Bank’s ACL methodology. Management seeks to apply the ACL methodology in a consistent manner; however, the methodology can be modified in response to changing conditions.

Assessing the adequacy of the ACL is inherently subjective. Actual results could differ from estimates as a result of changes in economic or market conditions. Changes in estimates could result in a material change in the ACL. In the opinion of management, the ACL, when taken as a whole, is adequate to absorb estimated losses inherent in the loan portfolio. However, future adjustments may be necessary if loan portfolio performance or economic or market conditions differ substantially from the conditions that existed at the time of the initial determinations.

Bank-Owned Life Insurance - BOLI is an insurance investment designed to help offset costs associated with the Bank’s compensation and benefit programs. In the event of the death of an insured individual, the Bank would receive a death benefit. If the insured individual is employed by the Bank at the time of death, a death benefit will be paid to the insured individual’s designated beneficiary equal to the insured individual’s base compensation at the time BOLI was approved by the Bank’s Board of Directors. If the individual is not employed by the Bank at the time of death, no death benefits will be paid to the insured individual’s designated beneficiary.

The cash surrender value of the policies is reported in BOLI in the consolidated balance sheets. Changes in the cash surrender value are recorded in income from BOLI in the consolidated statements of income.

Capital Stock of Federal Home Loan Bank - As a member of FHLB Topeka, the Bank is required to acquire and hold shares of FHLB stock. The Bank’s holding requirement varies based on the Bank’s activities, primarily the Bank’s outstanding advances, with FHLB. FHLB stock is carried at cost. Management conducts a periodic review and evaluation of the Bank’s investment in FHLB stock to determine if any impairment exists. Dividends received on FHLB stock are reflected as dividend income in the consolidated statements of income.

Premises and Equipment - Land is carried at cost. Buildings, leasehold improvements and furniture, fixtures and equipment are carried at cost less accumulated depreciation and leasehold amortization. Buildings, furniture, fixtures and equipment are depreciated over their estimated useful lives using the straight-line method. Buildings have an estimated useful life of 39 years . Structural components of the buildings have an estimate d life of 15 years . Furniture, fixtures and equipment have an estimated useful life of three to seven years . Leasehold improvements are amortized over the shorter of their estimated useful lives or the term of the respective leases, which is generally three to 15 years. The costs for major improvements and renovations are capitalized, while maintenance, repairs and minor improvements are charged to operating expenses as incurred. Gains and losses on dispositions are recorded as other income or other expense as incurred.

Other Real Estate Owned - OREO primarily represents foreclosed assets held for sale. OREO is reported at the lower of cost or estimated fair value less estimated selling costs (“realizable value.”) At acquisition, write downs to realizable value are charged to the ACL. After acquisition, any additional write downs are charged to operations in the period they are identified and are recorded in other expenses on the consolidated statements of income. Costs and expenses related to major additions and improvements are capitalized while maintenance and repairs which do not improve or extend the lives of the respective assets are expensed. Gains and losses on the sale of OREO are recognized upon disposition of the property and are recorded in other expenses in the consolidated statements of income.

Income Taxes - The Company utilizes the asset and liability method of accounting for income taxes. Under this method, deferred income tax assets and liabilities are recognized for the tax consequences of temporary differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities. The provision for deferred income taxes represents the change in deferred income tax assets and liabilities excluding the tax effects of the change in net unrealized gain (loss) on AFS securities and changes in the market value of restricted stock between the grant date and vesting date .

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Certain tax benefits attributable to stock options and restricted stock are credited to additional paid-in capital. A valuation allowance is recorded to reduce deferred income tax assets when there is uncertainty regarding the ability to realize their benefit.

Certain accounting literature prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of an uncertain tax position taken, or expected to be taken, in a tax return. Accruals of interest and penalties related to unrecognized tax benefits are recognized in income tax expense.

Employee Stock Ownership Plan - The funds borrowed by the ESOP from the Company to purchase the Company’s common stock are being repaid from the Bank’s contributions and dividends paid on unallocated ESOP shares. The shares pledged as collateral are reported as a reduction of stockholders’ equity at cost. As ESOP shares are committed to be released from collateral each quarter, the Company records compensation expense based on the average market price of the Company’s stock during the quarter. Additionally, the shares become outstanding for earnings per share (“ EPS ”) computations once they are committed to be released.

Stock-based Compensation - The Company has Stock Option and Restricted Stock Plans, both of which are considered share-based plans. Compensation expense is recognized over the service period of the share-based payment award. The Company utilizes a fair-value-based measurement method in accounting for the share-based payment transactions with employees, except for equity instruments held by the ESOP. The Company applies the modified prospective method in which compensation cost is recognized over the service period for all awards granted.

Borrowed Funds - The Bank enters into sales of securities under agreements to repurchase with selected brokers (“repurchase agreements”). These agreements are recorded as financing transactions as the Bank maintains effective control over the transferred securities. The dollar amount of the securities underlying the agreements continues to be carried in the Bank’s securities portfolio. The obligations to repurchase the securities are reported as a liability in the consolidated balance sheet. The securities underlying the agreements are delivered to the party with whom each trans action is executed. They agree to resell to the Bank the same securities at the maturity of the agreement. The Bank retains the right to substitute similar or like securities throughout the terms of the agreements. The collateral is subject to valuation at current market levels and the Bank may ask for the return of excess collateral or be required to post additional collateral due to market value changes or as a result of principal payments received .

The Bank has obtained advances from FHLB. FHLB advances are secured by certain qualifying mortgage loans pursuant to a blanket collateral agreement with FHLB and all of the capital stock of FHLB owned by the Bank. Per the FHLB lending guidelines, total FHLB borrowings cannot exceed 40% of total Bank assets, as reported on the Bank’s Call Report to the OCC, without pre-approval from the FHLB president.

The Bank is authorized to borrow from the Federal Reserve Bank’s “discount window.” The Bank had no outstanding Federal Reserve Bank borrowings at September 30, 2012 or 2011.

Comprehensive Income - Comprehensive income is comprised of net income and other comprehensive income. Other comprehensive income includes changes in unrealized gains and losses on securities AFS, net of tax. Comprehensive income is presented in the consolidated statements of changes in stockholders’ equity.

Segment Information - As a community-oriented financial institution, substantially all of the Bank’s operations involve the delivery of loan and deposit products to customers. Management makes operating decisions and assesses performance based on an ongoing review of these community banking operations, which constitute the Company’s only operating segment for financial reporting purposes.

Earnings Per Share - Basic EPS is computed by dividing income available to common stockholders by the weighted average number of shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock (such as stock options) were exercised or resulted in the issuance of common stock. These potentially dilutive shares would then be included in the weighted average number of shares outstanding for the period using the treasury stock method. Shares issued and shares reacquired during any period are weighted for the portion of the period that they were outstanding.

In computing both basic and diluted EPS, the weighted average number of common shares outstanding includes the ESOP shares previously allocated to participants and shares committed to be released for allocation to participants and restricted stock shares which have vested or have been allocated to participants. ESOP and restricted stock shares that have not been committed to be released or have not vested are excluded from the computation of basic and diluted EPS. Unvested restricted stock awards contain nonforfeitable rights to dividends and are treated as participating securities in the computation of EPS pursuant to the two-class method for fiscal year 2012.

Recent Accounting Pronouncements - In April 2011, the Financial Accounting Standards Board (“ FASB ”) issued Accounting Standard Update (“ ASU ”) 2011-03, Reconsideration of Effective Control for Repurchase Agreements . The primary objective of this ASU is to improve the accounting for repurchase agreements and other agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity. This ASU eliminates the requirement for entities to consider whether a transferor has the ability to repurchase the financial assets in a repurchase agreement, which may result in more repurchase agreements to be accounted for as secured borrowings rather than as a sale. ASU 2011-03 was effective for the Company on January 1, 2012. The Company accounts for its repurchase agreements as secured borrowings; therefore, the adoption of ASU 2011-03 did not have a n impact on the Company’s financial condition or results of operations.

In May 2011, the FASB issued ASU 2011-04, Amendments to Achieve Common Fair Value Measurements and Disclosure Requirements in U.S. GAAP and IFRSs . This ASU is a result of joint efforts by the FASB and the International Accounting Standards Board (“IASB”) to develop a single, converged fair value framework for measuring fair value and for disclosing information about fair value measurements in accordance with GAAP and International Financial Reporting Standards (“IFRSs”). This ASU is largely consistent with existing fair value measurement principles in U.S. GAAP. For many of the requirements of ASU 2011-04, the FASB did not intend for the ASU to result in a change in the application of the requirements in Topic 820. This ASU explains how to measure fair value, but does not require additional fair value measurements and is not intended to establish valuation standards or affect valuation practices outside of financial reporting. ASU 2011-04 was effective for the Company on January 1, 2012, and was applied prospectively. The provisions of ASU 2011-04 applicable to the Company are disclosure related; therefore, the adoption of ASU 2011-04 did not have a material impact on the Company’s financial condition or results of operations.

In June 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive Income , which revises how entities present comprehensive income in their financial statements. The ASU requires entities to report components of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements. In a continuous statement of comprehensive income, an entity would be required to present the components of the income statement as presented today, along with the components of other comprehensive income. In the two-statement approach, an entity would be required to present a statement that is consistent with the income statement format used today, along with a second statement, which would immediately follow the income statement, that would include the components of other comprehensive income. The ASU does not change the items that an entity must report in other comprehensive income. ASU 2011-05 i s effective October 1, 2012 for the Company, and should be applied retrospectively for all periods presented in the financial statements. The Company intends to elect the two-statement approach upon adoption on October 1, 2012.

In December 2011, the FASB issued ASU 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities . The ASU requires new disclosures regarding the nature of an entity’s rights of setoff and related arrangements associated with its financial instruments and derivative instruments. The new disclosures are designed to make GAAP financial statements more comparable to those prepared under International Financial Reporting Standards. The new disclosures entail presenting information about both gross and net exposures. The new disclosure requirements are effective for annual reporting periods beginning on or after January 1, 2013, which is October 1, 2013 for the Company, and interim periods therein; retrospective application is required. The Company has not yet completed its evaluation of this standard; however, since the provisions of ASU 2011-11 are disclosure-related, the Company’s adoption of this ASU is not expected to have an impact on its financial condition or results of operations.

In December 2011, the FASB issued ASU 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05, which defers certain provisions of ASU 2011-05, Presentation of Comprehensive Income . One of ASU 2011-05’s provisions , which was deferred by ASU 2011-12, requires entities to present reclassification adjustments out of AOCI by component in both the statement in which net income is presented and the statement in which other comprehensive income is presented (for both interim and annual financial statements). The FASB is currently deliberating how to present reclassification adjustments and its goal is to give users of financial statements better information about the effect of such reclassification adjustments without imposing a significant burden on financial statement preparers. The pending guidance focuses solely on new disclosures. Thus, it would not amend the current requirements for the reporting of net income or other comprehensive income in the financial statements .

2. EARNINGS PER SHARE

The Company accounts for the shares acquired by its ESOP and the shares awarded pursuant to its restricted stock benefit plans in accordance with ASC 260, which requires that unvested restricted stock awards be treated as participating securities in the computation of EPS pursuant to the two-class method as they contain nonforfeitable rights to dividends . The two-class method is an earnings allocation that determines EPS for each class of common stock and participating security. Shares acquired by the ESOP are not considered in the basic average shares outstanding until the shares are committed for allocation or vested to an employee’s individual account.


		2012		2011		2010
	(Dollars in thousands, except per share amounts)
Net income	$	74,513	$	38,403	$	67,840
Income allocated to participating
securities (unvested restricted stock)		(69)		--		--
Net income available to common stockholders		74,444		38,403		67,840

Average common shares outstanding		157,704,473		162,432,315		165,689,601
Average committed ESOP shares outstanding		208,505		192,959		172,575
Total basic average common shares outstanding		157,912,978		162,625,274		165,862,176

Effect of dilutive restricted stock		--		2,747		6,492
Effect of dilutive stock options		3,422		4,644		30,777

Total diluted average common shares outstanding		157,916,400		162,632,665		165,899,445

Net EPS:
Basic	$	0.47	$	0.24	$	0.41
Diluted	$	0.47	$	0.24	$	0.41

Antidilutive stock options and restricted stock,
excluded from the diluted average common shares
outstanding calculation		1,308,925		898,415		642,777

3. SECURITIES

The following tables reflect the amortized cost, estimated fair value, and gross unrealized gains and losses of AFS and HTM securities at September 30, 2012 and 2011. The majority of the MBS and investment securities portfolios are composed of securities issued by GSEs.


	September 30, 2012
			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
		(Dollars in thousands)
AFS:
GSE debentures	$	857,409	$	4,317	$	2	$	861,724
Municipal bonds		2,435		81		--		2,516
Trust preferred securities		2,912		--		614		2,298
MBS		505,169		35,137		--		540,306
		1,367,925		39,535		616		1,406,844

HTM:
GSE debentures		49,977		247		--		50,224
Municipal bonds		45,334		1,822		--		47,156
MBS		1,792,636		79,883		--		1,872,519
		1,887,947		81,952		--		1,969,899
	$	3,255,872	$	121,487	$	616	$	3,376,743



	September 30, 2011
			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
		(Dollars in thousands)
AFS:
GSE debentures	$	746,545	$	1,996	$	233	$	748,308
Municipal bonds		2,628		126		--		2,754
Trust preferred securities		3,681		--		740		2,941
MBS		690,675		41,764		3		732,436
		1,443,529		43,886		976		1,486,439

HTM:
GSE debentures		633,483		3,171		--		636,654
Municipal bonds		56,994		2,190		4		59,180
MBS		1,679,640		59,071		153		1,738,558
		2,370,117		64,432		157		2,434,392
	$	3,813,646	$	108,318	$	1,133	$	3,920,831

The following tables summarize the estimated fair value and gross unrealized losses of those securities on which an unrealized loss at September 30, 2012 and 2011 was reported and the continuous unrealized loss position for at least 12 months or less than 12 months as of September 30, 2012 and 2011 .


	September 30, 2012
	Less Than					Equal to or Greater
	12 Months					Than 12 Months
		Estimated					Estimated
		Fair		Unrealized			Fair		Unrealized
	Count	Value		Losses		Count	Value		Losses
	(Dollars in thousands)
AFS:
GSE debentures	2	$	42,733	$	2	--	$	--	$	--
Trust preferred securities	--		--		--	1		2,298		614
MBS	--		--		--	--		--		--
	2	$	42,733	$	2	1	$	2,298	$	614

HTM:
GSE debentures	--	$	--	$	--	--	$	--	$	--
Municipal bonds	--		--		--	--		--		--
MBS	--		--		--	--		--		--
	--	$	--	$	--	--	$	--	$	--


	September 30, 2011
	Less Than					Equal to or Greater
	12 Months					Than 12 Months
		Estimated					Estimated
		Fair		Unrealized			Fair		Unrealized
	Count	Value		Losses		Count	Value		Losses
	(Dollars in thousands)
AFS:
GSE debentures	7	$	230,848	$	233	--	$	--	$	--
Trust preferred securities	--		--		--	1		2,941		740
MBS	5		1,189		3	--		--		--
	12	$	232,037	$	236	1	$	2,941	$	740

HTM:
GSE debentures	--	$	--	$	--	--	$	--	$	--
Municipal bonds	2		615		4	--		--		--
MBS	1		25,142		153	--		--		--
	3	$	25,757	$	157	--	$	--	$	--

On a quarterly basis, management conducts a formal review of securities for the presence of an other-than-temporary impairment. Management assesses whether an other-than-temporary impairment is present when the fair value of a security is less than its amortized cost basis at the balance sheet date. For such securities, other-than-temporary impairment is considered to have occurred if the Company intends to sell the security, if it is more likely than not the Company will be required to sell the security before recovery of its amortized cost basis, or if the present value of expected cash flows is not sufficient to recover the entire amortized cost.

The unrealized losses at September 30, 2012 and 2011 are primarily a result of a decrease in the credit rating of the Bank’s trust preferred security since the time of purchase. Management reviews the underlying cash flows of this security on a quarterly basis. As of September 30, 2012, the analysis indicated the present value of future expected cash flows are adequate to recover the entire amortized cost. In addition, management neither intends to sell this security, nor is it more likely than not that the Company will be required to sell the security before the recovery of the remaining amortized cost amount, which could be at maturity. As a result, management does not believe an other-than-temporary impairment exists at September 30, 2012.

Over time, market yields may rise and result in a decrease in the market value of securities within our portfolio. Management generally views changes in fair value caused by changes in interest rates as temporary; therefore, these securities would not be classified as other-than-temporarily impaired. Additionally, this type of impairment would also be considered temporary if scheduled coupon payments are made, if it is anticipated that the entire principal balance would be collected as scheduled, and management neither intends to sell the securities, nor is it more likely than not that the Company will be required to sell the securities before the recovery of the remaining amortized cost amount, which could be at maturity.

The amortized cost and estimated fair value of securities by remaining contractual maturity without consideration for call features or pre-refunding dates as of September 30, 2012 are shown below. Actual maturities of MBS may differ from contractual maturities because borrowers have the right to call or prepay obligations, generally without penalties. As of September 30, 2012, the amortized cost of the securities in our portfolio which are callable or have pre-refunding dates within one year totaled $ 607.0 million . Maturities of MBS depend on the repayment characteristics and experience of the underlying financial instruments. Issuers of certain investment securities have the right to call and prepay obligations with or without prepayment penalties .


	AFS				HTM				Total
			Estimated				Estimated				Estimated
	Amortized		Fair			Amortized	Fair		Amortized		Fair
	Cost		Value			Cost	Value		Cost		Value
		(Dollars in thousands)

One year or less	$	60,075	$	60,120	$	5,456	$	5,500	$	65,531	$	65,620
One year through five years		775,223		779,615		77,205		78,701		852,428		858,316
Five years through ten years		169,555		182,283		358,423		377,900		527,978		560,183
Ten years and thereafter		363,072		384,826		1,446,863		1,507,798		1,809,935		1,892,624
	$	1,367,925	$	1,406,844	$	1,887,947	$	1,969,899	$	3,255,872	$	3,376,743

The following table presents the carrying value of the MBS in our portfolio by issuer as of the dates indicated.


	At September 30,
	2012		2011
		(Dollars in thousands)
FNMA	$	1,324,293	$	1,384,396
FHLMC		824,197		823,728
GNMA		183,778		202,340
Private Issuer		674		1,612
	$	2,332,942	$	2,412,076

The following table presents the taxable and non-taxable components of interest income on investment securities for the fiscal years ended September 30, 2012, 2011, and 2010.


	For the Year Ended
	September 30,
	2012		2011		2010
	(Dollars in thousands)
Taxable	$	14,309	$	17,180	$	13,547
Non-taxable		1,635		1,897		2,135
	$	15,944	$	19,077	$	15,682

The following table summarizes the amortized cost and estimated fair value of securities pledged as collateral as of the dates indicated.


	September 30,
	2012				2011
			Estimated				Estimated
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
		(Dollars in thousands)

Repurchase agreements	$	400,827	$	427,864	$	571,016	$	597,286
Retail deposits		--		--		44,429		44,991
Public unit deposits		219,913		232,514		116,472		124,785
Federal Reserve Bank		49,472		52,122		26,666		27,939
	$	670,212	$	712,500	$	758,583	$	795,001

During fiscal year 2010 , the Bank swapped originated fixed-rate mortgage loans with the FHLMC for MBS (“loan swap transaction ”). The $192.7 million of MBS received, at amortized cost, in the loan swap transaction were classified as trading securities prior to their subsequent sale by the Bank. Proceeds from the sale of these securities were $199.1 million, resulting in a gross realized gain of $6.5 million. The gain was included in gain on securities, net in the consolidated statements of income for the year ended September 30, 2010. All other dispositions of securities during 2012, 2011, and 2010 were the result of principal repayments , calls or maturities.

4. LOANS RECEIVABLE and ALLOWANCE FOR CREDIT LOSSES

Loans receivable, net at September 30, 2012 and 2011 is summarized as follows:


	2012		2011
	(Dollars in thousands)
Real Estate Loans:
One- to four-family	$	5,392,429	$	4,918,778
Multi-family and commercial		48,623		57,965
Construction		52,254		47,368
Total real estate loans		5,493,306		5,024,111

Consumer Loans:
Home equity		149,321		164,541
Other		6,529		7,224
Total consumer loans		155,850		171,765

Total loans receivable		5,649,156		5,195,876

Less:
Undisbursed loan funds		22,874		22,531
ACL		11,100		15,465
Discounts/unearned loan fees		21,468		19,093
Premiums/deferred costs		(14,369)		(10,947)
	$	5,608,083	$	5,149,734

Lending Practices and Underwriting Standards - Originating and purchasing loans secured by one- to four-family residential properties is the Bank’s primary business, resulting in a loan concentration in residential first mortgage loans. The Bank purchases one- to four-family loans, on a loan-by-loan basis, from a select group of correspondent lenders located generally throughout the central and southern United States. As a result of originating loans in our branches, along with the correspondent lenders in our local markets, the Bank has a concentration of loans secured by real property located in Kansas and Missouri. Additionally, the Bank periodically purchases whole one- to four-family loans in bulk packages from nationwide and correspondent lenders. The Bank also makes consumer loans, construction loans secured by residential or commercial properties, and real estate loans secured by multi-family dwellings.

One- to four-family loans - One- to four-family loans are underwritten manually or by using an internal loan origination auto- underwriting method. The method closely resembles the Bank’s manual underwriting standards which are generally in accordance with FHLMC and FNMA manual underwriting guidelines. The method includes, but is not limited to, an emphasis on credit scoring, qualifying ratios reflecting the applicant’s ability to repay, asset reserves, LTV ratio, property, and occupancy type. Full documentation to support the applicant’s credit, income, and sufficient funds to cover all applicable fees and reserves at closing are required on all loans. Loans that do not meet the automated underwriting standards are referred to a staff underwriter for manual underwriting. Properties securing one- to four-family loans are appraised by either staff appraisers or fee appraisers, both of which are independent of the loan origination function.

The underwriting standards for loans purchased from correspondent and nationwide lenders are generally similar to the Bank’s internal underwriting standards. The underwriting of correspondent loans is generally performed by the Bank’s underwriters. Before committing to a bulk loan purchase, the Bank’s Chief Lending Officer or Secondary Marketing Manager reviews specific criteria such as loan amount, credit scores, LTV ratios, geographic location, and debt ratios of each loan in the pool. If the specific criteria do not meet the Bank’s underwriting standards and compensating factors are not sufficient, then a loan will be removed from the population. Before the bulk loan purchase is funded, an internal Bank underwriter or a third party reviews at least 25% of the loan files to confirm loan terms, credit scores, debt service ratios, property appraisals, and other underwriting related documentation. For the tables within this footnote, correspondent loans are included with originated loans, and bulk loan purchases are reported as purchased loans.

The Bank also originates construction-to-permanent loans secured by one- to four-family residential real estate. The majority of the one- to four-family construction loans are secured by property located within the Bank’s Kansas City market area. Construction loans are obtained by homeowners who will occupy the property when construction is complete. Construction loans to builders for speculative purposes are not permitted. The application process includes submission of complete plans, specifications, and costs of the project to be constructed. All construction loans are manually underwritten using the Bank’s internal underwriting standards. Construction draw requests and the supporting documentation are reviewed and approved by management. The Bank also performs regular documented inspections of the construction project to ensure the funds are being used for the intended purpose and the project is being completed according to the plans and specifications provided.

Multi-family and commercial loans - The Bank’s multi-family and commercial real estate loans are originated by the Bank or are in participation with a lead bank, and are secured primarily by multi-family dwellings and small commercial buildings. These loans are granted based on the income producing potential of the property and the financial strength of the borrower. At the time of origination, LTV ratios on multi-family and commercial real estate loans cannot exceed 80% of the appraised value of the property securing the loans. The net operating income, which is the income derived from the operation of the property less all operating expenses, must be sufficient to cover the payments related to the outstanding debt at the time of origination. The Bank generally requires personal guarantees of the borrowers covering a portion of the debt in addition to the security property as collateral for these loans. Appraisals on properties securing these loans are performed by independent state certified fee appraisers.

Consumer loans - The Bank offers a variety of secured consumer loans, including home equity loans and lines of credit, home improvement loans, auto loans, and loans secured by savings deposits. The Bank also originates a very limited amount of unsecured loans. The Bank does not originate any consumer loans on an indirect basis, such as contracts purchased from retailers of goods or services which have extended credit to their customers. The majority of the consumer loan portfolio is comprised of home equity lines of credit.

The underwriting standards for consumer loans include a determination of the applicant’s payment history on other debts and an assessment of their ability to meet existing obligations and payments on the proposed loan. Although creditworthiness of the applicant is a primary consideration, the underwriting process also includes a comparison of the value of the security in relation to the proposed loan amount.

Credit Q uality I ndicators - Based on the Bank’s lending emphasis and underwriting standards, management has segmented the loan portfolio into three segments: 1) one- to four-family loans ; 2) consumer loans ; and 3) multi-family and commercial loans. The one- to four-family and consumer segments are further grouped into classes for purposes of providing disaggregated information about the credit quality of the loan portfolio. The classes are: one- to four-family loans – originated, one- to four-family loans – purchased, consumer loans – home equity, and consumer loans – other.

The Bank’s primary credit quality indicators for the one- to four-family loan and consumer - home equity loan portfolios are delinquency status, asset classifications, LTV ratios and borrower credit scores. The Bank’s primary credit quality indicators for the multi-family and commercial loan and consumer – other loan portfolios are delinquency status and asset classifications.

The following table presents the recorded investment of loans, defined as the unpaid loan principal balance (net of unadvanced funds related to loans in process and charge-offs) inclusive of unearned loan fees and deferred costs, of the Company's loans 30 to 89 days delinquent, loans 90 or more days delinquent or in foreclosure , total

delinquent loans, total current loans, and the total loans receivable balance at September 30, 2012 and 2011 by class. In the formula analysis model, delinquent loans not individually evaluated for impairment are assigned a higher loss factor than corresponding performing loans. At September 30, 2012 and 2011, all loans 90 or more days delinquent were on nonaccrual status . In addition to loans 90 or more days delinquent, the Bank also had $ 10.0 million of originated and $ 2.4 million of purchased TDRs classified as nonaccrual at September 30, 2012 , as required by the OCC Call Report requirements . O f these amounts, $ 11.2 million were current at September 30, 2012 . As of September 30, 2012 and 2011, loans with unpaid principal amounts totaling $31.8 million and $26.5 million, respectiv ely, were on nonaccrual status.


	September 30, 2012
			90 or More Days		Total				Total
	30 to 89 Days		Delinquent or		Delinquent		Current		Recorded
	Delinquent		in Foreclosure		Loans		Loans		Investment
		(Dollars in thousands)
One- to four-family loans - originated	$	14,902	$	8,602	$	23,504	$	4,590,194	$	4,613,698
One- to four-family loans - purchased		7,788		10,530		18,318		771,755		790,073
Multi-family and commercial loans		--		--		--		59,562		59,562
Consumer - home equity		521		369		890		148,431		149,321
Consumer - other		106		27		133		6,396		6,529
	$	23,317	$	19,528	$	42,845	$	5,576,338	$	5,619,183


	September 30, 2011
			90 or More Days		Total				Total
	30 to 89 Days		Delinquent or		Delinquent		Current		Recorded
	Delinquent		in Foreclosure		Loans		Loans		Investment
		(Dollars in thousands)
One- to four-family loans - originated	$	19,682	$	12,363	$	32,045	$	4,362,498	$	4,394,543
One- to four-family loans - purchased		6,243		13,836		20,079		520,876		540,955
Multi-family and commercial loans		--		--		--		57,936		57,936
Consumer - home equity		759		380		1,139		163,402		164,541
Consumer - other		92		3		95		7,129		7,224
	$	26,776	$	26,582	$	53,358	$	5,111,841	$	5,165,199

In accordance with the Bank’s asset classification policy, management regularly reviews the problem loans in the Bank's portfolio to determine whether any assets require classification. Loan classifications, other than pass loans, are defined as follows:

Special mention - These loans are performing loans on which known information about the collateral pledged or the possible credit problems of the borrowers have caused management to have doubts as to the ability of the borrower(s) to comply with present loan repayment terms and which may result in the future inclusion of such loans in the non-performing loan categories.

Substandard - A loan is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard loans include those characterized by the distinct possibility the Bank will sustain some loss if the deficiencies are not corrected.

Doubtful - Loans classified as doubtful have all the weaknesses inherent as those classified as substandard, with the added characteristic that the weaknesses present make collection or liquidation in full on the basis of currently existing facts and conditions and values highly questionable and improbable.

·	Loss - Loans classified as loss are considered uncollectible and of such little value that their continuance as assets on the books is not warranted.

Special mention and substandard loans are included in the formula analysis model, if the loan is not individually evaluated for impairment. Loans classified as doubtful or loss are individually evaluated for impairment.

The following tables set forth the recorded investment in loans, less charge-offs and specific valuation allowances (“SVAs”), classified as special mention or substandard at September 30, 2012 and 2011, by class. At September 30, 2012 and 2011, there were no loans classified as doubtful or loss that were not fully charged-off or reserved.


	September 30,
	2012				2011
	Special Mention		Substandard		Special Mention		Substandard
	(Dollars in thousands)
One- to four-family - originated	$	36,055	$	23,153	$	32,673	$	18,419
One- to four-family - purchased		2,829		14,538		447		15,987
Multi-family and commercial		2,578		--		7,683		--
Consumer - home equity		413		815		50		592
Consumer - other		--		39		--		5
	$	41,875	$	38,545	$	40,853	$	35,003

The following table shows the weighted average LTV and credit score information for originated and purchased one- to four-family loans and originated consumer home equity loans at September 30, 2012 and 2011. Borrower credit scores are intended to provide an indication as to the likelihood that a borrower will repay their debts. Credit scores are typically updated in September and are obtained from a nationally recognized consumer rating agency. The LTV ratios provide an estimate of the extent to which the Bank may incur a loss on any given loan that may go into foreclosure. The LTV ratios were based on the current loan balance and either the lesser of the purchase price or original appraisal, the most recent bank appraisal, or broker price opinion ( “ BPO ”) , if available. In most cases, the most recent appraisal was obtained at the time of origination.


	September 30,
	2012			2011
	Weighted A verage			Weighted A verage
	Credit Score	LTV		Credit Score	LTV
One- to four-family - originated	763	65	%	762	66	%
One- to four-family - purchased	749	67		740	60
Consumer - home equity	747	19		742	20
	761	64	%	759	64	%

TDRs – The following table s present the recorded investment prior to restructuring and immediately after restructuring for all loans restructured during the years ended September 30, 2012 and 2011. These table s do not reflect the recorded investment at September 30, 2012 and 2011 . The increase in the balance from pre- to post- at the time of the restructuring was generally due to the capitalization of delinquent amounts due.


	For the Year Ended September 30, 2012
	Number	Pre-		Post-
	of	Restructured		Restructured
	Contracts	Outstanding		Outstanding
	(Dollars in thousands)
One- to four-family loans - originated	232	$	33,683	$	33,815
One- to four-family loans - purchased	14		3,878		3,877
Multi-family and commercial loans	--		--		--
Consumer - home equity	23		466		475
Consumer - other	1		12		12
	270	$	38,039	$	38,179

	For the Year Ended September 30, 2011
	Number	Pre-		Post-
	of	Restructured		Restructured
	Contracts	Outstanding		Outstanding
	(Dollars in thousands)
One- to four-family loans - originated	158	$	27,250	$	26,936
One- to four-family loans - purchased	4		1,563		1,555
Multi-family and commercial loans	--		--		--
Consumer - home equity	5		224		227
Consumer - other	--		--		--
	167	$	29,037	$	28,718

The following table s provide information on TDRs restructured within each period presented that subsequently became delinquent during the same time period .


	For the Year Ended
	September 30, 2012			September 30, 2011
	Number			Number
	of	Recorded		of	Recorded
	Contracts	Investment		Contracts	Investment
	(Dollars in thousands)
One- to four-family loans - originated	14	$	2,340	13	$	1,353
One- to four-family loans - purchased	--		--	--		--
Multi-family and commercial loans	--		--	--		--
Consumer - home equity	--		--	--		--
Consumer - other	--		--	--		--
	14	$	2,340	13	$	1,353

Impaired loans - The following is a summary of information pertaining to impaired loans by class as of September 30, 2012 and 2011.


September 30, 2012								Fiscal		Fiscal
								Year-to-Date		Year-to-Date
				Unpaid				Average		Interest
		Recorded		Principal		Related		Recorded		Income
		Investment		Balance		ACL		Investment		Recognized
			(Dollars in thousands)
With no related allowance recorded
	One- to four-family - originated	$	10,729	$	10,765	$	--	$	41,396	$	176
	One- to four-family - purchased		15,340		15,216		--		12,296		126
	Multi-family and commercial		--		--		--		223		--
	Consumer - home equity		882		881		--		543		6
	Consumer - other		27		27		--		11		--
			26,978		26,889		--		54,469		308
With an allowance recorded
	One- to four-family - originated		41,125		41,293		268		10,886		1,330
	One- to four-family - purchased		2,028		2,016		54		6,138		51
	Multi-family and commercial		--		--		--		--		--
	Consumer - home equity		307		307		52		226		4
	Consumer - other		12		12		1		6		--
			43,472		43,628		375		17,256		1,385
Total
	One- to four-family - originated		51,854		52,058		268		52,282		1,506
	One- to four-family - purchased		17,368		17,232		54		18,434		177
	Multi-family and commercial		--		--		--		223		--
	Consumer - home equity		1,189		1,188		52		769		10
	Consumer - other		39		39		1		17		--
		$	70,450	$	70,517	$	375	$	71,725	$	1,693


September 30, 2011								Fiscal		Fiscal
								Year-to-Date		Year-to-Date
				Unpaid				Average		Interest
		Recorded		Principal		Related		Recorded		Income
		Investment		Balance		ACL		Investment		Recognized
			(Dollars in thousands)
With no related allowance recorded
	One- to four-family - originated	$	47,710	$	47,845	$	--	$	41,401	$	1,467
	One- to four-family - purchased		6,075		6,056		--		7,381		58
	Multi-family and commercial		563		565		--		578		36
	Consumer - home equity		468		468		--		672		14
	Consumer - other		5		5		--		46		--
			54,821		54,939		--		50,078		1,575
With an allowance recorded
	One- to four-family - originated		3,297		3,299		335		2,419		102
	One- to four-family - purchased		13,640		13,546		3,280		14,576		156
	Multi-family and commercial		--		--		--		--		--
	Consumer - home equity		264		264		140		80		3
	Consumer - other		--		--		--		--		--
			17,201		17,109		3,755		17,075		261
Total
	One- to four-family - originated		51,007		51,144		335		43,820		1,569
	One- to four-family - purchased		19,715		19,602		3,280		21,957		214
	Multi-family and commercial		563		565		--		578		36
	Consumer - home equity		732		732		140		752		17
	Consumer - other		5		5		--		46		--
		$	72,022	$	72,048	$	3,755	$	67,153	$	1,836

Allowance for C redit L osses - The following is a summary of the activity in the ACL by segment and the ending balance of the ACL based on the Company’s impairment methodology for and at the periods presented. In January 2012, management implemented a loan charge-off policy as OCC Call Report requirements do not permit the use of SVAs, which the Bank was previously utilizing for potential loan losses, as permitted by the Bank’s previous regulator. As a result of the implementation of the charge-off policy change, $3.5 million of SVAs were charged-off during the year ended September 30, 2012. These charge-offs did not impact the provision for credit losses, and therefore had no additional income statement impact, as the amounts were expensed in previous periods. There was no ACL for loans individually evaluated for impairment at September 30, 2012, as all potential losses were charged-off.


September 30, 2012	One- to Four-		One- to Four-		One- to Four-		Multi-family
	Family -		Family -		Family -		and
	Originated		Purchased		Total		Commercial		Consumer		Total
	(Dollars in thousands)

Beginning balance	$	4,915	$	9,901	$	14,816	$	254	$	395	$	15,465
Charge-offs		(892)		(5,186)		(6,078)		--		(357)		(6,435)
Recoveries		16		8		24		--		6		30
Provision for credit losses		2,035		(270)		1,765		(35)		310		2,040
Ending balance	$	6,074	$	4,453	$	10,527	$	219	$	354	$	11,100


Ratio of net charge-offs to average loans outstanding year-to-date												0.12	%
Ratio of net charge-offs year-to-date to average non-performing assets												16.49	%

ACL for loans collectively
evaluated for impairment	$	6,074	$	4,453	$	10,527	$	219	$	354	$	11,100

ACL for loans individually
evaluated for impairment	$	--	$	--	$	--	$	--	$	--	$	--


September 30, 2011	One- to Four-		One- to Four-		One- to Four-		Multi-family
	Family -		Family -		Family -		and
	Originated		Purchased		Total		Commercial		Consumer		Total
	(Dollars in thousands)

Beginning balance	$	3,813	$	10,425	$	14,238	$	275	$	379	$	14,892
Charge-offs		(414)		(2,928)		(3,342)		--		(145)		(3,487)
Recoveries		--		--		--		--		--		--
Provision for credit losses		1,516		2,404		3,920		(21)		161		4,060
Ending balance	$	4,915	$	9,901	$	14,816	$	254	$	395	$	15,465


Ratio of net charge-offs to average loans outstanding year-to-date												0.07	%
Ratio of net charge-offs year-to-date to average non-performing assets												8.75	%

ACL for loans collectively
evaluated for impairment	$	4,580	$	6,621	$	11,201	$	254	$	255	$	11,710

ACL for loans individually
evaluated for impairment	$	335	$	3,280	$	3,615	$	--	$	140	$	3,755

The following is a summary of the loan portfolio at September 30, 2012 and 2011 by loan portfolio segment disaggregated by the Company’s impairment method. The decrease in the recorded investment of loans individually evaluated for impairment between September 30, 2011 and 2012 was due primarily to a change in our process of evaluating TDRs for impairment . At September 30, 2012, generally only TDRs that were 180 days or more delinquent were individually evaluated for impairment, compared to all TDRs being individually evaluated for impairment at September 30, 2011. This change was primarily driven by the implementation of a new loan charge-off policy during the year ended September 30, 2012 in order to conform to OCC Call Report requirements.


	September 30, 2012
	One- to Four-		One- to Four-		One- to Four-		Multi-family
	Family -		Family -		Family -		and
	Originated		Purchased		Total		Commercial		Consumer		Total
	(Dollars in thousands)
Recorded investment of loans
collectively evaluated for impairment	$	4,602,969	$	774,734	$	5,377,703	$	59,562	$	154,940	$	5,592,205

Recorded investment of loans
individually evaluated for impairment		10,729		15,339		26,068		--		910		26,978
	$	4,613,698	$	790,073	$	5,403,771	$	59,562	$	155,850	$	5,619,183



		September 30, 2011
	One- to Four-		One- to Four-		One- to Four-		Multi-family
	Family -		Family -		Family -		and
	Originated		Purchased		Total		Commercial		Consumer		Total
	(Dollars in thousands)
Recorded investment of loans
collectively evaluated for impairment	$	4,343,536	$	521,240	$	4,864,776	$	57,373	$	171,028	$	5,093,177

Recorded investment of loans
individually evaluated for impairment		51,007		19,715		70,722		563		737		72,022
	$	4,394,543	$	540,955	$	4,935,498	$	57,936	$	171,765	$	5,165,199

As noted above, the Bank has a loan concentration in residential first mortgage loans. Continued declines in residential real estate values could adversely impact the property used as collateral for the Bank’s loans. Adverse changes in the economic conditions and increasing unemployment rates may have a negative effect on the ability of the Bank’s borrowers to make timely loan payments, which would likely increase delinquencies and have an adverse impact on the Bank’s earnings. Further increases in delinquencies would decrease interest income on loans receivable and would likely adversely impact the Bank’s loan loss experience, resulting in an increase in the Bank’s ACL and provision for credit losses. Although management believes the ACL was at an adequate level to absorb known and inherent losses in the loan portfolio at September 30, 2012, the level of the ACL remains an estimate that is subject to significant judgment and short-term changes. Additions to the ACL may be necessary if future economic and other conditions worsen substantially from the current environment.

The Bank originated , participated in and refinanced $14.0 million, $892 thousand, and $13.1 million of commercial real estate and business loan s during the years ended September 30, 2012, 2011, and 2010, respectively.

The Bank is subject to numerous lending-related regulations. Under the Financial Institutions Reform, Recovery, and Enforcement Act, the limit of aggregate loans to one borrower is the greater of 15% of the Bank’s unimpaired capital and surplus , and $500 thousand. As of Septem ber 30, 2012, the Bank was in compliance with this limitation.

Aggregate loans to executive officers, directors and their associates did not exceed 5% of stockholders’ equity as of September 30, 2012 and 2011. Such loans were made under terms and conditions substantially the same as loans made to parties not affiliated with the Bank.

The Bank recognized net gains of $248 thousand, $298 thousand, and $1.8 million for the years ended September 30, 2012, 2011, and 2010, respectively, as a result of selling LHFS. The net gains are included in other income, net in the consolidated statements of inc ome.

As of September 30, 2012 and 2011, the Bank serviced loans for others aggregating approximately $349.7 million and $526.3 million, respect ively. Such loans are not included in the accompanying consolidated balance sheets. Servicing loans for others generally consists of collecting mortgage payments, maintaining escrow accounts, disbursing payments to investors and foreclosure processing. Loan servicing income includes servicing fees withheld from investors and certain charges collected from borrowers, such as late payment fees. The Bank held borrowers’ escrow balances on loans serviced for others of $5.5 million and $7.5 million as of September 30, 2012 and 2011, respectively.

5. PREMISES AND EQUIPMENT , Net

A summary of the net carrying value of banking premises and equipment at September 30, 2012 and 2011 is as follows:


	2012		2011
		(Dollars in thousands)
Land	$	9,337	$	8,684
Building and improvements		63,684		53,822
Furniture, fixtures and equipment		41,304		38,069
		114,325		100,575
Less accumulated depreciation		56,559		52,152
	$	57,766	$	48,423

Depreciation and amortization expense for the years ended September 30, 2012, 2011, and 2010 was $ 5.0 million, $ 4.4 million, and $ 4.6 million , respectively.

The Bank has entered into non-cancelable operating lease agreements with respect to banking premises and equipment. It is expected that many agreements will be renewed at expiration in the normal course of business. Rental expense was $ 1.3 million for the yea rs ended September 30, 2012 and 2011, respectively and $ 1.2 million for the year ended Septembe r 30, 2010 .

As of September 30, 2012, future minimum rental commitments , rounded to the nearest thousand, required under operating leases that have initial or remaining non-cancelable lease terms in excess of one year were as follows (dollars in thousands) :


2013	$	1,247
2014		1,116
2015		993
2016		906
2017		874
Thereafter		7,188
	$	12,324

6. DEPOSITS

Deposits at September 30, 2012 and 2011 are summarized as follows:


	2012						2011
			Weighted						Weighted
			Average		% of				Average		% of
	Amount		Rate		Total		Amount		Rate		Total
	(Dollars in thousands)
Non-certificates:
Checking	$	606,504	0.04	%	13.3	%	$	551,632	0.08	%	12.3	%
Savings		260,933	0.11		5.8			253,184	0.41		5.6
Money market		1,110,962	0.25		24.4			1,066,065	0.35		23.7
Total non-certificates		1,978,399	0.17		43.5			1,870,881	0.28		41.6

Certificates of deposit:
0.00 – 0.99%		1,005,724	0.55		22.1			339,803	0.50		7.6
1.00 – 1.99%		800,745	1.44		17.6			1,106,957	1.27		24.6
2.00 – 2.99%		663,985	2.51		14.6			775,235	2.49		17.2
3.00 – 3.99%		95,765	3.21		2.1			371,682	3.42		8.3
4.00 – 4.99%		6,025	4.50		0.1			30,615	4.40		0.7
Total certificates of deposit		2,572,244	1.44		56.5			2,624,292	1.87		58.4
	$	4,550,643	0.89	%	100.0	%	$	4,495,173	1.21	%	100.0	%

As of September 30, 2012 , certificates of deposit were scheduled to mature as follows:


				Weighted
				Average
		Amount		Rate
	(Dollars in thousands)
2013	$		1,265,647	1.07	%
2014			482,966	1.67
2015			532,738	1.95
2016			192,218	1.68
2017			96,794	1.76
Thereafter			1,881	2.64
	$		2,572,244	1.44	%

Interest expense on deposits for the periods presented was as follows :


		Year Ended September 30,
		2012		2011		2010
	(Dollars in thousands)
Checking	$	421	$	441	$	622
Savings		408		1,225		1,323
Money market		3,457		5,307		6,522
Certificates		41,884		56,595		70,749
	$	46,170	$	63,568	$	79,216

The amount of non interest- bearing deposits was $ 132.5 million and $ 97.6 million as of September 30, 2012 and 2011 , respectively . Certificates of deposit with a minimum denomination of $100 thousand w ere $ 865.4 million and $ 882.8 million as of September 30, 2012 and 2011 , respectively. Deposits in excess of $250 thousand may not be fully insured by the FDIC . The aggregate amount of deposits that were reclassified as loan s receivable due to customer overdrafts was $ 123 thousand and $ 124 thousa nd as of September 30, 2012 and 2011 , respectively.

7. BORROWED FUNDS

At September 30, 2012 and 2011, the Company’s borrowed funds consisted of FHLB advances and repurchase agreements.

FHLB Advances – FHLB advances at September 30, 2012 and 2011 were comprised of the following:


	2012			2011
		(Dollars in thousands)
Fixed-rate FHLB advances	$	2,550,000	$	2,400,000
Deferred prepayment penalty		(19,952)		(20,995)
Deferred gain on terminated interest rate swaps		274		457
	$	2,530,322	$	2,379,462

Weighted average contractual interest rate on FHLB advances		2.62%		3.37%
Weighted average effective interest rate on FHLB advances ⁽¹⁾		3.03%		3.71%

⁽¹⁾ The effective rate includes the net impact of the amortization of deferred prepayment penalties related to the prepayment of certain FHLB advances and deferred gains related to the termination of interest rate swaps.

During fiscal year 2012, the Bank prepaid a $ 200.0 million fixed-rate FHLB advance with a contractual interest rate of 3.88 % and a remaining term-to-maturity of 15 months. The prepaid FHLB advance was replaced with a $ 200.0 million fixed-rate FHLB advance, with a contractual interest rate of 0.86 % and a term of 46 months. The Bank paid a $ 7.9 million penalty to the FHLB as a result of prepaying the FHLB advance. The prepayment penalty was deferred and will be recognized in interest expense over the life of the new advance and thereby effectively increased the interest rate on the new advance 108 basis points, to 1.94 %, at the time of the transaction. During fiscal year 2010, the Bank prepaid $ 200.0 million of fixed-rate FHLB advances with a weighted average interest rate of 4.63 % and a weighted average remaining term to maturity of approximately one month. The prepaid FHLB advances were replaced with $ 200.0 million of fixed-rate FHLB advances with a weighted average contractual interest rate of 3.17 % and an average term of 84 months. The Bank paid an $ 875 thousand prepayment penalty to the FHLB as a result of prepaying the FHLB advances. The prepayment penalty was deferred and will be recognized in interest expense over the life of the new advance and thereby effectively increased the interest rate on the new advance seven basis points at the time of the transaction . The present value of the cash flows under the terms of the new FHLB advance s were not more than 10 % diff erent from the present value of the cash flows under the terms of the prepaid FHLB advances (including the prepayment penalty) and there were no embedded conversion options in any of the prepaid advances or in any of the new FHLB advances and therefore were accounted for as debt modification s . The benefit of prepaying the se advances was an immediate decrease in interest expense and a decrease in interest rate sensitivity as the maturity of each of the refinanced advances was extended at a lower rate.

The FHLB advances are secured by certain qualifying mortgage loans pursuant to a blanket collateral agreement with the FHLB and all of the capital stock of FHLB owned by the Bank . Per the FHLB’s lending guidelines, total FHLB borrowings cannot exceed 40 % of total Bank assets without the pre-approval of the FHLB president . At September 30, 2012 , the Bank’s ratio of FHLB advances , at par, to total assets, as reported to the Bank’s regulators , was 27 %.

At September 30, 2012 , the Bank had access to a line of credit with the FHLB set to expire on November 23, 2012, at w hich time the line of credit is expected to be renewed automatically by the FHLB for a one year period. At September 30, 2012 , there were no outstanding borrowings on the FHLB line of credit. Any borrowings on the line of cre dit would be included in total FHLB borrowings in calculating the ratio of FHLB borrowings to total Bank assets, which generally could not exceed 4 0 % of total Bank assets at September 30, 2012 .

Other Borrowings – At September 30, 2012 and 2011, the Company’s other borrowings consisted of repurchase agreements in the amount s of $ 365.0 million and $ 515.0 million, with weighted average contractual rates of 3.83 % and 4.00 %, respectively. The Bank has pledged MBS with a n estimated fair value of $ 427.9 million at September 30, 2012 as collateral for the repurchase agreements .

Maturit y of Borrowed Funds – At September 30, 2012 , the maturities of FHLB advances and repurchase agreements were as follows:


								Weighted		Weighted
		FHLB		Repurchase		Total		Average		Average
		Advances		Agreements		Borrowings		Contractual		Effective
		Amount		Amount		Amount		Rate		Rate
	(Dollars in thousands)
2013		$	325,000	$	145,000	$	470,000	3.68	%	4.06	%
2014			450,000		100,000		550,000	3.33		3.95
2015			600,000		20,000		620,000	1.73		1.95
2016			575,000		--		575,000	2.29		2.91
2017			400,000		--		400,000	3.17		3.21
Thereafter			200,000		100,000		300,000	2.90		2.90
		$	2,550,000	$	365,000	$	2,915,000	2.77	%	3.13	%

Of the $ 325.0 million FHLB advances maturing in fiscal year 2013 , $ 100.0 million is due in the first quarter of fiscal year 2013 and $ 225.0 million is due in the third quarter of fiscal year 2013 . Of the $145.0 million of repurchase agreements maturing in fiscal year 2013, $ 50.0 million is due in the second quarter of fiscal year 2013, $ 25.0 million is due in the third quarter of fiscal year 2013, and $ 70.0 million is due in the fourth quarter of fiscal year 2013 .

8 . INCOME TAXES

Income tax expense (benefit) for the years ended September 30, 2012, 2011, and 2010 consisted of the following:


		2012		2011		2010
Current	(Dollars in thousands)
Federal	$	32,353	$	25,889	$	31,252
State		3,044		2,707		2,807
		35,397		28,596		34,059
Deferred
Federal		5,638		(8,933)		3,209
State		451		(714)		257
		6,089		(9,647)		3,466
	$	41,486	$	18,949	$	37,525

The Company’s effective tax rates were 35.8 %, 33.0 %, and 35.6% for the years ended September 30, 2012, 2011, and 2010, respectively. The differences between such effective rates and the statutory Federal income tax rate computed on income before income tax expense result from the following:


	2012				2011				2010
	Amount		%		Amount		%		Amount		%
	(Dollars in thousands)
Federal income tax expense
computed at statutory Federal rate	$	40,600	35.0	%	$	20,073	35.0	%	$	36,878	35.0	%
Increases (Decreases) in taxes resulting from:
State taxes, net of Federal tax effect		3,495	3.0			1,993	3.4			3,064	2.9
Net tax-exempt interest income		(513)	(0.4)			(577)	(1.0)			(624)	(0.6)
Change in cash surrender value of BOLI		(517)	(0.4)			(638)	(1.1)			(421)	(0.4)
Low income housing tax credits		(2,081)	(1.8)			(1,397)	(2.4)			(1,209)	(1.1)
Other		502	0.4			(505)	(0.9)			(163)	(0.2)
	$	41,486	35.8	%	$	18,949	33.0	%	$	37,525	35.6	%

Deferred income tax (benefit) expense results from temporary differences in the recognition of revenue and expenses for tax and financial statement purposes. The sources of these differences and the tax effect of each as of September 30, 2012, 2011, and 2010 were as follows:


		2012		2011		2010
	(Dollars in thousands)
Foundation contribution	$	5,422	$	(12,824)	$	--
Mortgage servicing rights		(521)		(885)		774
ACL		1,617		(197)		(1,771)
FHLB prepayment penalty		--		--		1,283
FHLB stock dividends		1,650		1,432		2,206
Other, net		(2,079)		2,827		974
	$	6,089	$	(9,647)	$	3,466

The components of the net deferred income tax liabilities as of September 30, 2012 and 2011 were as follows:


		2012		2011
	(Dollars in thousands)
Deferred income tax assets:
Foundation contribution	$	7,402	$	12,824
ACL		2,246		3,863
Salaries and employee benefits		1,612		1,219
ESOP compensation		949		836
Other		4,194		2,630
Gross deferred income tax assets		16,403		21,372

Valuation allowance		(1,926)		(2,060)
Gross deferred income tax asset, net of valuation allowance		14,477		19,312

Deferred income tax liabilities:
FHLB stock dividends		20,478		18,828
Unrealized gain on AFS securities		14,712		16,203
Other		4,329		4,728
Gross deferred income tax liabilities		39,519		39,759

Net deferred tax liabilities	$	25,042	$	20,447

The Company assesses the available positive and negative evidence surrounding the recoverability of its deferred tax assets and applies its judgment in estimating the amount of valuation allowance necessary under the circumstances. As of September 30, 2012, the Company had a valuation allowance of $ 1.9 million related to the net op erating losses generated by the Company's consolidated Kansas corporate income tax return. The Company's consolidated Kansas corporate income tax return at September 30, 2012 and 2011 does not include the Bank, as the Bank files a Kansas privilege tax return. Based on the nature of the operations of the companies included in the consolidated Kansas corporate return, management believes there will not be sufficient taxable income to fully utilize the deferred tax assets noted above; therefore a valuation allowance has been recorded for the related amounts at September 30, 2012 and 2011.

ASC 740 Income Taxes prescribes a process by which the likelihood of a tax position is gauged based upon the technical merits of the position, and then a subsequent measurement relates the maximum benefit and the degree of likelihood to determine the amount of benefit to recognize in the financial statements. A reconciliation of the beginning and ending amounts of unrecognized tax benefits for the years ended September 30, 2012, 2011, and 2010 is provided below . The amounts have not been reduced by the federal deferred tax effects of unrecognized tax benefits.


		2012		2011		2010
	(Dollars in thousands)
Balance at beginning of year	$	68	$	114	$	2,848
Additions for tax positions of prior years		5		3		28
Increases (Reductions) for tax positions of prior years		65		(49)		(195)
Lapse of statute of limitations		--		--		(2,567)
Balance at end of year	$	138	$	68	$	114

The unrecognized tax benefits at September 30, 2012, 2011 and 2010 that would impact the effective tax rate if realized would b e $25 thousand, $20 thousand and $10 thousand, respectively. Included in the unrecognized tax benefits in the table above were accrued penalties and interest of $ 25 thousand, $20 thousand, and $17 thousand for the years ended September 30, 2012, 2011, and 2010, respectively. Estimated penalties and interest for the years ended September 30, 2012 , and 2011 , were $ 3 thousand and $2 thousand , respectively . The net reversal of penalties and interest expense due to the lapse of statute of limitations for the years ended September 30, 2010 was $463 thousand. Estimated penalties and interest are included in income tax expense in the consolidated statements of income. It is reasonably possible that decreases in gross unrecognized tax benefits totaling less than $ 10 thousand may occur in fiscal year 201 3 as a result of a lapse in the applicable statute of limitations.

The Company file s income tax returns in the U.S. federal jurisdiction and the state of Kansas , as well as other states where it has either established nexus under an economic nexus theory or has exceeded enumerated nexus thresholds based on the amount of interest income derived from sources within the state . In many cases, uncertain tax positions are related to tax year s that remain subject to examination by the relevant taxing authorities. With few exceptions, the Company is no longer subject to U.S. federal and state examinations by tax authorities for fiscal years before 2009.

9. EMPLOYEE BENEFIT PLANS

The Company has a profit sharing plan (“PIT”) and a n ESOP . The p lan s cover all employees with a minimum of one year of service, at least age 21 , and at least 1,000 hours of employment in each plan year .

Profit Sharing Plan – The PIT provides for two types of discretionary contributions. The first type is an optional Bank contribution and may be 0 % or any percentage above that, as determined by the Board of Directors , of an eligible employee’s eligible compensation during the fiscal year. The second contribution may be 0 % or any percentage above that, as determined by the Board of Directors , of an eligible employee’s eligible compensation during the fiscal year if the employee matches 50.0 % (on an after-tax basis) of the Bank’s second contribution . The PIT qualifies as a thrift and profit sharing plan for purposes of Internal Revenue C ode s 401(a), 402, 412, and 417. Total Bank contributions to the PIT amounted to $ 105 thousand for each of the years ended September 30, 2012 and 2011, and $ 101 thousand for the year ended September 30, 2010 .

ESOP – The ESOP Trust acquired 3,024,574 shares ( 6,846,728 shares post corporate reorgan iza tion) of common stock in the Company’s initial public offering and 4,726,000 shares of common stock in the Company’s corporate reorganization in December of 2010 . Both acquisitions of common stock were made with proceeds from loan s from the Company. The loans are secured by shares of the Company ’s stock purchased in each offering . The Bank has agreed to make cash contributions to the ESOP Trust on an annual basis sufficient to enable the ESOP Trust to make the required annual loan payments to the Company on September 30 of each year .

The loan for the shares acquired in the initial public offering bears interest at a fixed-rate of 5.80 %, with one remaining principal and interest payment of $ 3.0 million on September 30, 2013 . Payments of $ 3.0 million consisting of principal of $ 2.7 million, $ 2.5 million, and $ 2.4 million and interest of $ 319 thousand, $ 465 thousand, and $ 604 thousa nd were made on September 30, 2012, 2011, and 2010 , respectively.

The loan for the shares acquired in the corporate reorganization bears interest at a fixed-rate of 3.25 % and has a 30 year term. The loan requires interest-only payments the first three years. The second interest payment of $ 1.5 million was paid on September 30, 2012. T he next interest payment of $ 1.5 million is payable on September 30, 2013. Beginning in fiscal year 2014, principal and interest payments of $ 2.7 million will be payable annually. The loan matures on September 30, 2040 .

As the annual loan payments are made, shares are released from collateral at September 30 and allocated to qualified employees based on the proportion of their qualifying compensation to total qualifying compensation. On September 30, 2012 , 551,991 shares were released from collateral . On September 30, 2013 , 551,990 shares will be released from collateral. As ESOP shares are committed to be released from col lateral, the Company records compensation expense. Dividends on unallocated ESOP shares are only applied to the debt service payments of the loan secured by the unallocated shares. Dividends on unallocated ESOP shares in excess of the debt service payment are recorded as compensation expense and distributed to participants or participants' ESOP accounts. During the years ended September 30, 2012, 2011, and 2010 , the Bank paid $ 2.6 million, $ 1.4 million, and $ 1.1 million , respectively, of the ESOP debt payment because dividends on unallocated shares were insufficient to pay the scheduled debt payment , specifically on the loan for the shares acquired in the initial public offering . Compensation expense related to the ESOP was $ 6.7 million for the year ended September 30, 2012 , $ 8.7 million for the year ended September 30, 2011 , and $ 6.5 million for the year ended September 30, 2010 . Of these amounts, $ 3.4 million , $ 3.3 million, and $ 4.5 million related to the difference between the market price of the Company’s stock when the shares were acquired by the ESOP Trust and the average market price of the Company’s stock during the years ended September 30, 2012, 2011, and 2010, respectively. The amount included in compensation expense for dividends on unallocated ESOP shares in excess of the debt service payments w as $ 325 thousand and $ 2.7 million for the year s ended September 30, 2012 and 2011 , which was related to the loan for the shares acquired in the corporate reorganization. There w as no such amount for the year ended September 30, 2010 .

Participants have the option to receive the dividends on allocated shares and unallocated shares in excess of debt service payments, in cash or leave the dividend in the ESOP. Dividends are reinvested in Company stock for those participants who choose to leave their dividends in the ESOP or who do not make an election. The purchase of Company stock for reinvestment of dividends is made in the open market on or about the date of the cash disbursement to the participants who opt to take dividends in cash .

Shares may be withdrawn from the ESOP Trust due to retirement, termination or death of the participant. Additionally, a participant may begin to diversify at least 25 % of their ESOP shares at age 50 . The f ollowing is a summary of shares held in the ESOP Trust a s of September 30, 2012 and 2011 :


	2012		2011
	(Dollars in thousands)
Allocated ESOP shares		4,723,590		4,393,908
Unreleased ESOP shares		5,012,336		5,564,328
Total ESOP shares		9,735,926		9,958,236

Fair value of unreleased ESOP shares	$	59,948	$	58,759

10. STOCK - BASED COMPENSATION

The Company has Stock Option and Restricted Stock Plans, both of which are considered share-based plans.

Stock Option Plans – The Company currently has two plans outstanding which provide for the granting of stock option awards, the 2000 Stock Option Plan and the 2012 Equity Incentive Plan. The objective of both plans is to provide additional incentive to certain officers, directors and key employees by facilitating their purchase of a stock interest in the Company. The total number of shares originally eligible to be granted as stock options under the 2000 Stock Option Plan was 8,558,411 . Prior to stockholder approval of the 2012 Equity Incentive Plan, the 2000 Stock Option Plan still had 2,867,859 shares available for future grants. The 200 0 Stock Option Plan will expire in April 2015 and no additional grants may be made after expiration, but outstanding grants continue until they are individually vested, forfeited, or expire. The Company does not intend to issue any additional stock option grants from the 2000 Stock Option Plan; instead, all future grants will be awarded from the 2012 Equity Incentive Plan , which had 5,907,500 shares originally eligible to be granted as stock options. The Company may issue incentive and nonqualified stock options under the 2012 Equity Incentive Plan. The Company may also award stock appreciation rights, although to date no stock appreciation rights have been awarded . T he incentive stock options expire no later than 10 years and the nonqualified stock options expire no later than 15 y ears from the date of grant. The date on which the options are first exercisable is determined by the Stock Benefits Committee (“sub-committee”), a sub-committee of the Compensation Committee (“committee”) of the Board of Directors. The vesting period of the options under the 2012 Equity Incentive Plan generally ranges from three -to- five years . The option price is equal to the market value at the date of the grant as defined by each plan.

At September 30, 2012, the Company had 4,313,500 shares still available for future grants of stock options under the 2012 Equity Incentive Plan. This plan will expire in January 2027 and no additional grants may be made after expiration, but outstanding grants continue until they are individually vested, forfeited, or expire. The following provisions generally apply: 1) if a holder of such stock options terminates service for reasons other than death, disability or termination for cause, the holder forfeits all rights to the non-vested stock options and all outstanding vested options granted to the holder will remain exercisable for three months following the termination date, but not beyond the expiration date of the options; 2) if the participant’s service terminates as a result of death or disability, all outstanding stock options vest and all outstanding stock options will remain exercisable for one year following such event, but not beyond the expiration date of the options; 3) if the participant’s service is terminated for cause, all outstanding stock options expire immediately; and 4) if a change in control of the Company occurs, all outstanding unvested stock options vest in full.

The Stock Option Plans are administered by the sub-committee, which selects the employees and non-employee directors to whom options are to be granted and the number of shares to be granted. The exercise price may be paid in cash, shares of the common stock, or a combination of both. The option price may not be less than 100 % of the fair market value of the shares on the date of the grant. In the case of any employee who is granted an incentive stock option who owns more than 10 % of the outstanding common stock at the time the option is granted, the option price may not be less than 110 % of the fair market value of the shares on the date of the grant, and the option shall not be exercisable after the expiration of five years from the grant date. Prior to the corporate reorganization in December 2010, the Company issued shares held in treasury upon the exercise of stock options. After the corporate reorganization, new shares are issued by the Company upon the exercise of stock options.

The fair value of stock option grants is estimated on the date of grant using the Black-Scholes option pricing model. The weighted average grant-date fair value of stock options granted during the fiscal years ended September 30, 2012, 2011, and 2010 was $ 1.59 , $ 0.78 , and $ 1.52 per share, respectively. Compensation expense attributable to stock option awards during the year s ended September 30, 201 2, 2011 , and 20 10 totaled $ 369 thousand ($ 320 thousand, net of tax), $ 131 thousand ($ 122 thousand, net of tax), and $ 214 thousand ($ 189 thousand, net of tax), respectively. The following weighted average assumptions were used for valuing stock option grants for the years ended :


	September 30,
	2012		2011		2010
Risk-free interest rate	0.5	%	1.3	%	2.1	%
Expected life (years)	4		5		4
Expected volatility	24	%	25	%	25	%
Dividend yield	2.5	%	8.1	%	6.2	%
Estimated forfeitures	4.5	%	12.9	%	3.3	%

The risk-free interest rate was determined using the yield available on the option grant date for a zero-coupon U.S. Treasury security with a term nearest to the equivalent of the expected life of the option. The expected life for options granted was based upon historical experience. The expected volatility was determined using historical volatilities based on historical stock prices. The dividend yield was determined based upon historical quarterly dividends and the Company’s stock price on the option grant date. Estimated forfeitures were determined based upon voluntary termination behavior and actual option forfeitures.

A summary of option activity for the years ended September 30, 2012, 2011, and 2010 follows:


	2012			2011			2010
			Weighted			Weighted			Weighted
			Average			Average			Average
	Number		Exercise	Number		Exercise	Number		Exercise
	of Options		Price	of Options		Price	of Options		Price

Options outstanding
at beginning of year	906,964	$	15.09	919,639	$	15.08	841,991	$	14.69
Granted	1,594,000		11.89	2,030		10.86	119,945		14.25
Forfeited	(16,966)		16.70	(10,180)		16.59	--		--
Expired	(3,390)		11.33	--		--	--		--
Exercised	(8,783)		4.07	(4,525)		8.23	(42,297)		4.96
Options outstanding
at end of year	2,471,825	$	13.06	906,964	$	15.09	919,639	$	15.08

During the years ended September 30, 2012, 2011, and 2010 , the total pretax intrinsic value of stock options exercised was $ 68 thousand, $ 19 thousand, and $ 361 thousand , respectively, and the tax benefits realized from the exercise of stock options were $ 25 thousand, $ 7 thousand, and $ 89 thous and, respectively. The fair value of stock options vested during the year s ended September 30, 2012, 2011, and 2010 was $ 141 thousand, $ 150 thousand, and $ 264 thousand, respecti vely.

The following summarizes information about the stock options outstanding and exercisable as of September 30, 2012 :


				Options Outstanding
					Weighted		Weighted
					Average		Average
				Number	Remaining		Exercise		Aggregate
Exercise				of Options	Contractual		Price per		Intrinsic
Price				Outstanding	Life (in years)		Share		Value
				(Dollars in thousands, except per share amounts)
$	10.86	-	12.71	1,597,160	10.8	$	11.89	$	112
	13.33	-	17.59	827,160	6.5		14.97		--
	19.19			47,505	6.1		19.19		--
				2,471,825	9.3	$	13.06	$	112


				Options Exercisable
					Weighted		Weighted
					Average		Average
				Number	Remaining		Exercise		Aggregate
Exercise				of Options	Contractual		Price per		Intrinsic
Price				Exercisable	Life (in years)		Share		Value
				(Dollars in thousands, except per share amounts)
$	10.86	-	12.71	32,342	5.9	$	11.91	$	2
	13.33	-	17.59	772,958	6.3		14.99		--
	19.19			38,004	6.1		19.19		--
				843,304	6.3	$	15.06	$	2

The aggregate intrinsic value in the preceding table represents the total pre-tax intrinsic value, based on the Company’s closing stock price of $ 11.96 as of September 30, 2012, which would have been received by the option holders had all option holders exercised their options as of that date. The total number of in-the-money options exercisable as of September 30, 2012 was 31,212 .

As of September 30, 2012, the total future compensation cost related to non-vested stock options not yet recognized in the consolidated statements of income was $ 2.2 million , net of estimated forfeitures, and the weighted average period over which these awards are expected to be recognized was 3.5 years.

Restricted Stock Plans – The Company currently has two plans outstanding which provide for the granting of restricted stock awards, the 2000 Recognition and Retention Plan and the 2012 Equity Incentive Plan. The objective of both plans is to enable the Bank to retain personnel of experience and ability in key positions of responsibility. Employees and directors are eligible to receive benefits under these plans at the sole discretion of the sub-committee. The total number of shares originally eligible to be granted as restricted stock under the 2000 Recognition and Retention Plan was 3,423,364 . Prior to stockholder approval of the 2012 Equity Incentive Plan, the 2000 Recognition and Retention Plan still had 358,767 shares available for future restricted stock grants. The 2000 Recognition and Retention Plan plan will expire in April 2015 and no additional grants may be made after expiration, but outstanding grants continue until they are individually vested, forfeited, or expire. The Company does not intend to award any additional grants from the 2000 Recognition and Retention Plan; instead, all futu re grants of restricted stock will be awarded from the 2012 Equity Incentive Plan , which had 2,363,000 shares originally eligible to be grante d as restricted stock. At September 30, 2012, the Company had 1,847,675 shares available for future grants of restricted stock under the 2012 Equity Incentive Plan. Thi s plan will expire in January 2027 and no additional grants may be made after expiration, but outstanding grants continue until they are individually vested, forfeited, or expire. The vesting period of the restricted stock awards under the 2012 Equity Incentive Plan generally ranges from three to five years.

Compensation expense in the amount of the fair market value of the common stock at the date of the grant, as defined by the plans, to the employee is recognized over the period during which the shares vest. Compensation expense attributable to restricted stock awards during the years ended September 30, 2012 , 2011, and 2010 totaled $ 827 thousand ($ 531 thousand, net of tax) , $ 131 thousand ($ 88 thousand, net of tax), and $ 238 thousand ($ 153 thousand, net of tax), respectively . The following provisions generally apply: 1) a recipient of such restricted stock will be entitled to all voting and other stockholder rights (including the right to receive dividends on vested and non-vested shares), except that the shares, while restricted, may not be sold, pledged

or otherwise disposed of and are required to be held in escrow by the Company; 2) if a holder of such restricted stock terminates service for reasons other than death or disability, the holder forfeits all rights to the non-vested shares under restriction; and 3) if a participant’s service terminates as a result of death or disability, or if a change in control of the Company occurs, all restrictions expire and all non-vested shares become unrestricted.

A summary of restricted stock activity for the years ended September 30, 2012 , 2011, and 2010 follows:


	2012			2011			2010
		Weighted			Weighted			Weighted
		Average			Average			Average
	Number	Grant Date		Number	Grant Date		Number	Grant Date
	of Shares	Fair Value		of Shares	Fair Value		of Shares	Fair Value
Unvested restricted stock
at beginning of year	13,582	$	14.90	23,762	$	15.07	34,177	$	15.17
Granted	515,325		11.89	--		--	11,317		14.42
Vested	(18,046)		13.17	(10,180)		15.30	(21,732)		14.88
Unvested restricted stock
at end of year	510,861	$	11.93	13,582	$	14.90	23,762	$	15.07

The estimated forfeiture rate for the restricted stock granted during the year ended September 30, 2012 was 0.88 % and 0 % during the years ended September 30, 2011 and 2010, respectively, based upon voluntary termination behavior and actual forfeitures. The fair value of restricted stock that vested during the years ended September 30, 2012 , 2011, and 2010 totaled $ 212 thousand , $ 120 thousand, and $ 324 thousand, respectively . As of September 30, 2012, there was $ 5.4 million , net of estimated forfeitures, of unrecognized compensation cost related to non-vested restricted stock to be recognized over a weighted average period of 3.6 years.

11. PERFORMANCE BASED COMPENSATION

The Company and the Bank have a short-term performance plan for all officers and a deferred incentive bonus plan for senior and executive officers. The short-term performance plan has a component tied to Company performance and a component tied to individual participant performance. Individual performance criteria are established by executive management for eligible non-executive employees of the Bank; individual performance of executive officers is reviewed by the committee. Company performance criteria are approved by the committee. Short-term performance plan awards are granted based upon a performance review by the committee. The committee may exercise its discretion and reduce or not grant awards. The deferred incentive bonus plan is intended to operate in conjunction with the short-term performance plan. A participant in the deferred incentive bonus plan can elect to defer into an account between $ 2 thousand and up to 50 % (executive officers can defer up to 50 %, while senior officers can elect to defer up to 35 %) of the short-term performance plan award up to but not exceeding $ 100 thousand. The amount deferred receives an employer match of up to 50 % that is accrued over a three year mandatory deferral period. The amount deferred, plus up to a 50 % match, is deemed to have been invested in Company stock on the last business day of the calendar year preceding the receipt of the short-term performance plan award, in the form of phantom stock. The number of shares deemed purchased in phantom stock receives dividend equivalents as if the stock were owned by the officer. At the end of the mandatory deferral period, the deferred incentive bonus plan award is paid out in cash and is comprised of the initial amount deferred, the match amount, dividend equivalents on the phantom shares over the deferral period and the increase in the market value of the Company’s stock over the deferral period, if any, on the phantom shares. There is no provision for the reduction of the deferred incentive bonus plan award if the market value of the Company’s stock at the time is lower than the market value at the time of the deemed investment.

The total amount of short-term performance plan awards provided for during the years ended September 30, 2012, 2011, and 2010 amounted to $ 2.0 million, $ 1.8 million and $ 1.7 million, re spectively, of which $ 386 thousand, $ 345 thousand, and $ 332 thousand, respectively, was deferred under the deferred i ncentive bonus plan. The deferrals, any earnings on those deferrals and increases in the market value of the phantom shares, if any, will be paid in 2014 , 2015 , and 2016 . During fiscal years 2012, 2011, and 2010 , the amount expensed in conjunction with the deferred amounts was $ 162 thousand, $ 153 thousand, and $ 86 thousand , respectively.

12. COMMITMENTS AND CONTINGENCIES

The Bank had commitments outstanding to originate , refinance , purchase , or participate in loans as of September 30, 2012 and 2011 as follows:


	2012			2011
	(Dollars in thousands)
Originate/refinance fixed-rate	$	102,449	$	89,059
Originate/refinance adjustable-rate		18,272		24,047
Purchase/participate fixed-rate		81,107		30,650
Purchase/participate adjustable-rate		31,315		26,556
	$	233,143	$	170,312

As of September 30, 2012 and 2011 , the Bank had approved but unadvanced home equity lines of credit of $ 261.8 million and $ 264.6 million, respectively. As of September 30, 2012 and 2011, the Bank had unadvanced commitments on commercial loans of $ 239 thousand and $ 957 thousand , respectively.

Commitments to originate mortgage and non-mortgage loans are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require the payment of a rate lock fee. Some of the commitments are expected to expire without being fully drawn upon ; therefore the amount of total commitments disclosed above does not necessarily represent future cash requirements. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if considered necessary by the Bank, upon extension of credit is based on management’s credit evaluation of the customer . As of September 30, 2012 and 2011 , there were no significant loan-related commitments that met the definition of derivatives or commitments to sell mortgage loans.

In the normal course of business, the Company and its subsidiary are named defendants in various lawsuits and counter claims. In the opinion of management, after consultation with legal counsel, none of the currently pending suits are expected to have a material adverse effect on the Company’s consolidated financial statements for the year ended September 30, 2012 or future periods.

13. REGULATORY CAPITAL REQUIREMENTS

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by regulators that, if undertaken, could have a material adverse effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk weightings, and other factors.

The Bank was required to start filing a Call Report with the OCC starting with the quarter ended March 31, 2012. Prior to that date, the Bank filed a Thrift Financial Report with the OTS. The capital ratios presented in the Call Report differ from that of the Thrift Financial Report. The September 30, 2011 capital ratios presented in the table below are based on Thrift Financial Report guidelines while the September 30, 2012 capital ratios are based on the Call Report guidelines. As of September 30, 2012 and 2011, the most recent regulatory guidelines categorized the Bank as “well capitalized” under the regulatory framework for prompt corrective action. To be categorized as “well capitalized,” the Bank must maintain minimum capital ratios as set forth in the table below. Management believes, as of September 30, 2012, that the Bank meets all capital adequacy requirements to which it is subject and there were no conditions or events subsequent to September 30, 2012 that would change the Bank’s category. There are currently no regulatory capital requirements at the Company.


									To Be Well
									Capitalized
									Under Prompt
					For Capital				Corrective Action
	Actual				Adequacy Purposes				Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
		(Dollars in thousands)
As of September 30, 2012:
Tier 1 leverage ratio	$	1,355,105	14.6	%	$	371,747	4.0	%	$	464,684	5.0	%
Tier 1 risk-based capital		1,355,105	36.4			148,744	4.0			223,116	6.0
Total risk-based capital		1,366,205	36.7			297,489	8.0			371,861	10.0

As of September 30, 2011:
Tangible equity	$	1,369,143	15.1	%	$	135,926	1.5	%		N/A	N/A
Tier 1 (core) capital		1,369,143	15.1			362,469	4.0		$	453,086	5.0	%
Tier 1 (core) risk-based capital		1,369,143	37.9			N/A	N/A			216,551	6.0
Total risk-based capital		1,380,853	38.3			288,734	8.0			360,918	10.0

A reconciliation of the Bank’s equity under GAAP to regulatory capital amounts as of September 30, 2012 and 2011 is as follows:


		2012		2011
	(Dollars in thousands)
Total Bank equity as reported under GAAP	$	1,379,357	$	1,395,708
Unrealized gains on AFS securities		(24,179)		(26,314)
Other		(73)		(251)
Total Tier 1 capital		1,355,105		1,369,143
ACL ⁽¹⁾		11,100		11,710
Total risk-based capital	$	1,366,205	$	1,380,853

⁽¹⁾ The September 30, 2011 ACL amount represents the general valuation allowances calculated using the formula analysis. SVAs were netted against the related loan balance on the Thrift Financial Report and are therefore not included in this amount.

1 4. FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair Value Measurements – ASC 820, Fair Value Measurements and Disclosures , defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. ASC 820 applies only to fair value measurements already required or permitted by other accounting standards and does not impose requirements for additional fair value measures. ASC 820 was issued to increase consistency and comparability in reporting fair values.

The Company uses fair value measurements to record fair value adjustments to certain assets and to determine fair value disclosures. The Company did not have any liabilities that were measured at fair value at September 30, 2012 and 2011 . The Company’s AFS securities are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets or liabilities on a non-recurring basis, such as O REO, LHFS, and loans individually evaluated for impairment . These non -recurring fair value adjustments involve the application of lower-of-cost-or-fair value accounting or write-downs of individual assets .

In accordance with ASC 820, t he Company groups its assets at fair value in three levels, based on the markets in which the assets are traded and the reliability of the assumptions used to determine fair value. These levels are:

·	Level 1 — Valuation is based upon quoted prices for identical instruments traded in active markets.

·	Level 2 — Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

Level 3 — Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect the Company’s own estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include the use of option pricing models, discounted cash flow models, and similar techniques. The results cannot be determined with precision and may not be realized in an actual sale or immediate settlement of the asset or liability.

The Company bases its fair values on the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. As required by ASC 820, t he Company maximizes the use of observable inputs and minimize s the use of unobservable inputs when measuring fair value.

The following is a description of valuation methodologies used for assets measured at fair value on a recurring basis.

AFS Securities - The Company’s AFS securities portfolio is carried at estimated fair value, with any unrealized gains and losses, net of taxes, reported as AOCI in stockholders’ equity. The majority of the securities within the AFS portfolio are issued by U.S. GSEs. The Company’s major security types based on the nature and risks of the securities are:

·	GSE Debentures – Estimated f air values are based on a discounted cash flow method. Cash flows are determined by taking any embedded options into consideration and are discounted using current market yields for similar securities (Level 2).

·	Municipal Bonds – Estimated f air values are based on a discounted cash flow method. Cash flows are determined by taking any embedded options into consideration and are discounted using current market yields for securities with similar credit profiles (Level 2).

·	Trust Preferred Securities – Estimated f air values are based on a discounted cash flow method. Cash flows are determined by taking prepayment and underlying credit considerations into account . The discount rates are derived from secondary trades and bid/offer prices (Level 3).

·	MBS – Estimated f air values are based on a discounted cash flow method. Cash flows are determined based on prepayment projections of the underlying mortgages and are discounted using current market yields for benchmark securities (Level 2).

The following table s provide the level of valuation assumption used to determine the carrying value of the Company’s AFS securities measured at fair value on a recurring basis at September 30, 2012 and 2011 .


	September 30, 2012
			Quoted Prices		Significant		Significant
			in Active Markets		Other Observable		Unobservable
	Carrying		for Identical Assets		Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3) ⁽¹⁾
	(Dollars in thousands)
AFS Securities:
GSE debentures	$	861,724	$	--	$	861,724	$	--
Municipal bonds		2,516		--		2,516		--
Trust preferred securities		2,298		--		--		2,298
MBS		540,306		--		540,306		--
	$	1,406,844	$	--	$	1,404,546	$	2,298

	September 30, 2011
			Quoted Prices		Significant		Significant
			in Active Markets		Other Observable		Unobservable
	Carrying		for Identical Assets		Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3) ⁽²⁾
	(Dollars in thousands)
AFS Securities:
GSE debentures	$	748,308	$	--	$	748,308	$	--
Municipal bonds		2,754		--		2,754		--
Trust preferred securities		2,941		--		--		2,941
MBS		732,436		--		732,436		--
	$	1,486,439	$	--	$	1,483,498	$	2,941

⁽¹⁾ The Company’s Level 3 AFS securities had no activity from September 30, 2011 to September 30, 2012 , except for principal repayments of $ 996 thousand and reductions in net unrealized losses recognized in other comprehensive income. Reductions of net unrealized losses included in other comprehensive income for the year ended September 30, 2012 were $ 78 thousand .

⁽²⁾ The Company’s Level 3 AFS securities had no activity from September 30, 2010 to September 30, 2011 , except for principal repayments of $ 87 thousand and reductions in net unrealized losses recognized in other comprehensive income. Reductions of net unrealized losses included in other comprehensive income for the year ended September 30, 2011 were $ 115 thousand .

The following is a description of valuation methodologies used for significant assets measured at fair value on a non-recurring basis.

Loans Receivable – The unpaid principal balance of loans individually evaluated for impairment at September 30, 2012 and 2011 was $ 26.9 million and $72.0 million, respectively. T he decrease in the recorded investment of loans individually evaluated for impairment between September 30, 2011 and 2012 was due primarily to a change in our process of evaluating TDRs for impairment , as a result of the implementation of a new loan charge-off policy during the year ended September 30, 2012 in order to conform to OCC Call Report requirements as previously discussed in Note 4, Loans Receivable and Allowance for Credit Losses . Substantially all of the loans individually evaluated for impairment were secured by residential real estate. Fair values were estimated through current appraisals , BPOs , or listing prices to ensure that the carrying value of the loan was not in excess of the fair value of the collateral, less estimated selling costs . Fair values may be adjusted by management to reflect current economic and market conditions and, as such, are classified as Level 3. Based on this evaluation, the Bank charged-off any loss amounts at September 30, 2012 per the Bank’s new loan charge-off policy implemented in January 2012 ; therefore there was no ACL related to these loans at September 30, 2012. The ACL related to these loans at September 30, 2011 was $ 3.8 million.

O REO – O REO primarily represents residential real estate acquired as a result of foreclosure or by deed in lieu of foreclosure and is carried at lower-of-cost or fair value. Fair value is estimated through current appraisals , BPOs or listing prices. As these properties are actively marketed, estimated fair values may be adjusted by management to reflect current economic and market conditions and, as such, are classified as Level 3. The fair value of O REO at September 30, 2012 and 2011 was $ 8.0 million and $ 11.3 million, respectively .

The following table s provide the level of valuation assumption used to determine the carrying value of the Company’s assets measured at fair value on a non-recurring basis at September 30, 2012 and 2011 .


	September 30, 2012
			Quoted Prices		Significant		Significant
			in Active Markets		Other Observable		Unobservable
	Carrying		for Identical Assets		Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3)
	(Dollars in thousands)
Loans individually evaluated for impairment	$	26,890	$	--	$	--	$	26,890
OREO		8,047		--		--		8,047
	$	34,937	$	--	$	--	$	34,937

		September 30, 2011
			Quoted Prices		Significant		Significant
			in Active Markets		Other Observable		Unobservable
	Carrying		for Identical Assets		Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3)
	(Dollars in thousands)
Loans individually evaluated for impairment	$	72,048	$	--	$	--	$	72,048
OREO		11,321		--		--		11,321
	$	83,369	$	--	$	--	$	83,369

Fair Value Disclosures – The Company determined estimated fair value amounts using available market information and a selection from a variety of valuation methodologies. However, considerable judgment is required to interpret market data to develop the estimates of fair value. Accordingly, the estimates presented are not necessarily indicative of the amount the Company could realize in a current market exchange. The use of different market assumptions and estimation methodologies may have a material impact on the estimated fair value amounts. The fair value estimates presented herein are based on pertinent information available to management as of September 30, 2012 and 2011. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since those dates. The carrying amounts and estimated fair values of the Company’s financial instruments as of September 30, 2012 and 2011 were as follows:


	2012				2011
			Estimated				Estimated
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
	(Dollars in thousands)
Assets:
Cash and cash equivalents	$	141,705	$	141,705	$	121,070	$	121,070
AFS securities		1,406,844		1,406,844		1,486,439		1,486,439
HTM securities		1,887,947		1,969,899		2,370,117		2,434,392
Loans receivable		5,608,083		5,978,872		5,149,734		5,475,150
BOLI		58,012		58,012		56,534		56,534
Capital stock of FHLB		132,971		132,971		126,877		126,877
Liabilities :
Deposits		4,550,643		4,607,732		4,495,173		4,553,516
FHLB Advances		2,530,322		2,701,142		2,379,462		2,569,958
Other borrowings		365,000		388,761		515,000		545,096

The following methods and assumptions were used to estimate the fair value of the financial instruments:

Cash and Cash Equivalents – The carrying amounts of cash and cash equivalents are considered to approximate their fair value due to the nature of the financial asset (Level 1).

AFS and HTM Securities – Estimated fair values of securities are based on one of three methods: 1) quoted market prices where available, 2) quoted market prices for similar instruments if quoted market prices are not available, 3) unobservable data that represents the Bank’s assumptions about items that market participants would consider in determining fair value where no market data is available. AFS securities are carried at estimated fair value. HTM securities are carried at amortized cost. (Level 2 ).

Loans Receivable – The fair value of one- to four-family mortgages and home equity loans are generally estimated using the present value of expected future cash flows, assuming future prepayments and using discount factors determined by prices obtained from securitization markets, less a discount for the cost of servicing and lack of liquidity. The estimated fair value of the Bank’s multi-family and consumer loans are based on the expected future cash flows assuming future prepayments and discount factors based on current offering rates . (Level 3).

BOLI – The carrying value of BOLI is considered to approximate its fair value due to the nature of the financial asset (Level 1).

Capital Stock of FHLB – The carrying value of FHLB stock equals cost. The fair value is based on redemption at par value (Level 1).

Deposits – The estimated fair value of demand deposits, savings and money market accounts is the amount payable on demand at the reporting date. The estimated fair value of these deposits at September 30, 2012 was $ 1.98 billion (Level 1). The fair value of certificates of deposit is estimated by discounting future cash flows using current LIBOR rates. The estimated fair value of certificates of deposit at September 30, 2012 was $2.63 billion (Level 2).

Advances from FHLB and Other Borrowings – The fair value of fixed-maturity borrowed funds is estimated by discounting estimated future cash flows using currently offered rates (Level 2).

15. SUBSEQUENT EVENTS

In preparing these financial statements, management has evaluated events occurring subsequent to September 30, 2012 , for potential recognition and disclosure. The re have been no material events or transactions which would require adjustments to the consolidated financial statements at September 30, 2012 .

16. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

The following tables present summarized quarterly data for each of the years indicated for the Company.


	First		Second		Third		Fourth
	Quarter		Quarter		Quarter		Quarter		Total
	(Dollars and counts in thousands, except per share amounts)
2012
Total interest and dividend income	$	84,827	$	83,274	$	80,645	$	79,305	$	328,051
Net interest and dividend income		45,374		47,466		46,188		45,853		184,881
Provision for credit losses		540		1,500		--		--		2,040
Net income		18,789		19,315		18,673		17,736		74,513
Basic earnings per share		0.12		0.12		0.12		0.11		0.47
Diluted earnings per share		0.12		0.12		0.12		0.11		0.47
Dividends declared per share		0.175		0.075		0.075		0.075		0.400
Average number of basic shares outstanding		161,923		161,722		156,962		151,077		157,913
Average number of diluted shares outstanding		161,931		161,728		156,966		151,079		157,916

2011
Total interest and dividend income	$	87,247	$	84,941	$	88,083	$	86,594	$	346,865
Net interest and dividend income		40,005		40,556		44,308		43,865		168,734
Provision for credit losses		650		520		1,240		1,650		4,060
Net income (loss)		(11,258)		15,636		17,259		16,766		38,403
Basic earnings (loss) per share		(0.07)		0.10		0.10		0.10		0.24
Diluted earnings (loss) per share		(0.07)		0.10		0.10		0.10		0.24
Dividends declared per share		0.800		0.675		0.075		0.075		1.625
Average number of basic shares outstanding		165,541		161,500		161,642		161,784		162,625
Average number of diluted shares outstanding		165,541		161,507		161,648		161,791		162,633

17. PARENT COMPANY FINANCIAL INFORMATION (PARENT COMPANY ONLY)

The Company serves as the holding company for the Bank ( see Note 1). The Company’s (parent company only) balance sheets a s of September 30, 2012 and 2011 , and the related statements of income and cash flows for each of the three years in the period ended September 30, 2012 are as follows:


BALANCE SHEETS
SEPTEMBER 30, 2012 and 2011
(Dollars in thousands, except share amounts)

	2012			2011
ASSETS
Cash and cash equivalents	$	308,648	$	113,101
Investment in the Bank		1,379,357		1,395,708
AFS securities, at fair value (amortized cost of $60,074 and $362,271)		60,120		362,875
Note receivable - ESOP		50,087		52,759
Other assets		84		75
Accrued interest		263		1,812
Income tax receivable		3,092		2,855
Deferred income tax assets		7,103		10,409
TOTAL ASSETS	$	1,808,754	$	1,939,594

LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIES:
Accounts payable and accrued expenses	$	2,296	$	65

STOCKHOLDERS’ EQUITY:
Preferred stock, $.01 par value; 100,000,000 shares authorized,
no shares issued or outstanding		--		--
Common stock, $.01 par value; 1,400,000,000 shares authorized,
155,379,739 and 167,498,133 shares issued and outstanding
as of September 30, 2012 and 2011, respectively		1,554		1,675
Additional paid-in capital		1,292,122		1,392,567
Unearned compensation - ESOP		(47,575)		(50,547)
Retained earnings		536,150		569,127
AOCI, net of tax		24,207		26,707
Total stockholders’ equity		1,806,458		1,939,529

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,808,754	$	1,939,594


STATEMENTS OF INCOME
YEARS ENDED SEPTEMBER 30, 2012, 2011 and 2010
(Dollars in thousands)

		2012		2011		2010

INTEREST AND DIVIDEND INCOME:
Dividend income from the Bank	$	88,871	$	45,643	$	84,869
Interest income from other investments		2,835		3,221		2,927
Interest income from securities		1,062		1,093		--
Total interest and dividend income		92,768		49,957		87,796

INTEREST EXPENSE		--		855		1,680

NET INTEREST AND DIVIDEND INCOME		92,768		49,102		86,116

OTHER INCOME		--		26		50

OTHER EXPENSES:
Contribution to Foundation		--		40,000		--
Salaries and employee benefits		838		856		929
Regulatory and outside services		276		337		493
Other, net		694		650		270
Total other expenses		1,808		41,843		1,692

INCOME BEFORE INCOME TAX EXPENSE (BENEFIT) AND EQUITY
IN (EXCESS OF DISTRIBUTION OVER) UNDISTRIBUTED
EARNINGS OF SUBSIDIARY		90,960		7,285		84,474

INCOME TAX EXPENSE (BENEFIT)		731		(13,425)		(138)

INCOME BEFORE EQUITY IN (EXCESS OF DISTRIBUTION OVER)
UNDISTRIBUTED EARNINGS OF SUBSIDIARY		90,229		20,710		84,612

EQUITY IN (EXCESS OF DISTRIBUTION OVER)
UNDISTRIBUTED EARNINGS OF SUBSIDIARY		(15,716)		17,693		(16,772)

NET INCOME	$	74,513	$	38,403	$	67,840


STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 2012, 2011 and 2010
(Dollars in thousands)

		2012		2011		2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	74,513	$	38,403	$	67,840
Adjustments to reconcile net income to net cash provided by
operating activities:
Equity in excess of distribution over/(undistributed)
earnings of subsidiary		15,716		(17,693)		16,772
Amortization/accretion of premiums/discounts		2,196		3,529		--
Other, net		1,549		(1,812)		1
Provis i on for deferred income taxes		5,422		(10,409)		--
Changes in:
Other assets		(9)		1,547		--
Income taxes receivable/payable		(2,160)		(2,927)		24
Accounts payable and accrued expenses		33		(355)		3
Net cash flows provided by operating activities		97,260		10,283		84,640

CASH FLOWS FROM INVESTING ACTIVITIES:
Offering proceeds downstreamed to Bank		--		(567,422)		--
Purchase of AFS investment securities		--		(405,800)		--
Proceeds from maturities of AFS securities		300,000		40,000		--
Proceeds from maturities of Bank certificates		--		55,000		5,000
Purchase of Capitol Federal Financial, Inc. stock		--		--		(1)
Principal collected on notes receivable from ESOP		2,672		2,525		2,387
Net cash flows provided by/(used in) investing activities		302,672		(875,697)		7,386

CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from stock offering (d eferred offering costs)		--		1,094,101		(5,982)
Payment from subsidiary for purchase of common stock related to
restricted stock awards		6,128		--		162
Dividends paid		(63,768)		(150,110)		(48,400)
Repayment of other borrowings		--		(53,609)		--
Repurchase of common stock		(146,781)		--		(4,019)
Stock options exercised		36		35		210
Net cash flows ( used in )/provided by financing activities		(204,385)		890,417		(58,029)

NET INCREASE IN CASH AND CASH EQUIVALENTS		195,547		25,003		33,997

CASH AND CASH EQUIVALENTS:
Beginning of year		113,101		88,098		54,101

End of year	$	308,648	$	113,101	$	88,098

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest payments	$	--	$	1,274	$	1,678

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:

Note to ESOP in exchange for common stock	$	--	$	47,260	$	--

100

EXHIBIT 21

SUBSIDIARIES OF THE REGISTRANT

			State of
		Percentage	Incorporation
		of	or
Parent	Subsidiary	Ownership	Organization


Capitol Federal	Capitol Federal	100%	Maryland
Financial, Inc.	Savings Bank

Capitol Federal	Capitol Funds, Inc.	100%	Kansas
Savings Bank

Capitol Funds,	Capitol Federal	100%	Vermont
Inc.	Mortgage Reinsurance
	Company

EXHIBIT 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statements Nos. 333-174890, 333-174891 and 333-180926 on Form S-8 of our reports dated November 29, 2012 , relating to the consolidated financial statements of Capitol Federal Financial, Inc. and subsidiary, and the effectiveness of Capitol Federal Financial, Inc.’s internal control over financial reporting appearing in this Annual Report on Form 10-K of Capitol Federal Financial, Inc. for the year ended September 30, 2012.

Kansas City, Missouri

November 29, 2012

EXHIBIT 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, John B. Dicus, certify that:

1.	I have reviewed this Annual Report on Form 10-K of Capitol Federal Financial, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-l5(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: November 29, 2012	By: /s/ John B. Dicus
	John B. Dicus
	Chairman, President and Chief Executive Officer

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Kent G. Townsend, certify that:

1.	I have reviewed this Annual Report on Form 10-K of Capitol Federal Financial, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of and for, the periods presented in this report;

c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date: November 29, 2012	By: /s/ Kent G. Townsend
	Kent G. Townsend
	Executive Vice President, Chief Financial Officer and Treasurer

EXHIBIT 32
CERTIFICATE PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Capitol Federal Financial, Inc. (the “Company”) on Form 10-K for the fiscal year ended September 30, 2012, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John B. Dicus, Chief Executive Officer of the Company, and I, Kent G. Townsend, Executive Vice President, Chief Financial Officer and Treasurer of the Company, certify, in my capacity as an officer of the Company, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.	the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.	the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company as of the dates and for the periods presented in the financial statements included in such Report.




Date: November 29, 2012	By: /s/ John B. Dicus
	John B. Dicus
	Chairman, President and Chief Executive Officer


Date: November 29, 2012	By: /s/ Kent G. Townsend
	Kent G. Townsend
	Executive Vice President, Chief Financial Officer and Treasurer