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Capitol Federal Financial Reports Operating Results (10-K)

November 29, 2010 | About:

Capitol Federal Financial (NASDAQ:CFFN) filed Annual Report for the period ended 2010-09-30.

Capitol Federal Financial has a market cap of $1.72 billion; its shares were traded at around $23.29 with a P/E ratio of 25.04 and P/S ratio of 4.22. The dividend yield of Capitol Federal Financial stocks is 8.59%. Capitol Federal Financial had an annual average earning growth of 64.3% over the past 5 years.CFFN is in the portfolios of Jim Simons of Renaissance Technologies LLC, Paul Tudor Jones of The Tudor Group.

Highlight of Business Operations:

The Bank is a federally-chartered and insured savings bank headquartered in Topeka, Kansas. The Bank is examined and regulated by the OTS, 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, Lawrence, Manhattan, Emporia and Salina, Kansas and a portion of the metropolitan area of greater Kansas City through 35 traditional and 11 in-store banking offices. At September 30, 2010, we had total assets of $8.49 billion, loans of $5.17 billion, deposits of $4.39 billion and total equity of $962.0 million.

The ability of financial institutions, including us, to originate or purchase large dollar volumes of one- to four-family real estate loans may be substantially reduced or restricted under certain economic and regulatory conditions, with a resultant decrease in interest income from these assets. At September 30, 2010, our one- to four-family residential real estate loan portfolio totaled $4.92 billion, a decrease of $406.3 million, or 7.6%, from the total portfolio at September 30, 2009. At September 30, 2010, our one- to four-family residential real estate loan portfolio constituted 94% of our loan portfolio and 58% of our total assets. 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, 2010 was $125.3 million. Our largest lending relationship to a single borrower or a group of related borrowers at September 30, 2010 consisted of 15 multi-family real estate projects located in Kansas, one single-family home located in Colorado, and four commercial real estate projects with two located in Kansas, one located in Colorado, and one located in Texas. Total commitments and loans outstanding to this group of related borrowers was $42.9 million as of September 30, 2010. Most of the multi-family real estate loans qualify for the low income housing tax credit program. We have over 30 years of experience with this group of borrowers, who usually build and manage their own properties. Each of the loans to this group of borrowers was current and performing in accordance with the original/refinance repayment terms at September 30, 2010. See additional information under the heading “Multi-family and Commercial Real Estate Lending.”

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 2010 and 2009 fiscal years, the Bank originated and refinanced $482.9 million and $961.5 million of one- to four-family fixed-rate mortgage loans, and $63.6 million and $35.9 million of one- to four-family adjustable-rate mortgage (“ARM”) loans, respectively.

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