4. Loans Receivable and Allowance for Credit Losses

Loans receivable, net at December 31, 2011 and September 30, 2011 is summarized as follows:


	December 31, 2011			September 30, 2011
	(Dollars in thousands)
Real estate loans:
One- to four-family	$	5,003,708		$	4,918,778
Multi-family and commercial		52,524			57,965
Construction		58,869			47,368
Total real estate loans		5,115,101			5,024,111

Consumer loans:
Home equity		160,029			164,541
Other		7,355			7,224
Total consumer loans		167,384			171,765

Total loans receivable		5,282,485			5,195,876

Less:
Undisbursed loan funds		33,239			22,531
ACL		15,605			15,465
Discounts/unearned loan fees		20,315			19,093
Premiums/deferred costs		(11,616	)		(10,947	)
	$	5,224,942		$	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 throughout the central 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 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 an automated underwriting system developed by a third party. The system's components closely resemble the Bank's manual underwriting standards which are generally in accordance with FHLMC and FNMA manual underwriting guidelines. The automated underwriting system analyzes the applicant's data, with emphasis on credit history, employment and income history, qualifying ratios reflecting the applicant's ability to repay, asset reserves, and LTV ratio. Full documentation to support the applicant's credit, income, and sufficient funds to cover all applicable fees and reserves at closing is 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 secured primarily by properties generally located in the Bank's market areas or surrounding areas. 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. Bank policy permits a limited amount of construction-to-permanent loans secured by multi-family dwellings and commercial real estate.

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 quality indicators – Based on the Bank's lending emphasis and underwriting standards, management has segmented the loan portfolio into three segments: one- to four-family loans, consumer loans, and 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 in accordance with applicable regulations, 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 in accordance with applicable regulations.

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) inclusive of unearned loan fees and deferred costs, of the Company's 30 to 89 day delinquent loans, 90 or more day delinquent loans, total delinquent loans, total current loans, and the total loans receivable balance at December 31, 2011 and September 30, 2011 by class. In the formula analysis model, loans in the 30 to 89 day delinquent category are assigned a higher loss factor than corresponding performing loans. Loans 90 or more days delinquent are considered impaired loans and are individually evaluated for impairment. At December 31, 2011 and September 30, 2011, all loans in the 90 or more days delinquent category were on nonaccrual status and represented the entire balance of nonaccrual loans. At December 31, 2011 and September 30, 2011, there were no loans 90 or more days delinquent that were still accruing interest.


	December 31, 2011
					Total				Total
	30 to 89 Days		90 or More Days		Delinquent		Current		Recorded
	Delinquent		Delinquent		Loans		Loans		Investment
	(Dollars in thousands)
One- to four-family loans - originated	$	18,136	$	13,793	$	31,929	$	4,449,883	$	4,481,812
One- to four-family loans - purchased		6,854		14,220		21,074		516,739		537,813
Multi-family and commercial loans		--		--		--		53,538		53,538
Consumer - home equity		518		520		1,038		158,991		160,029
Consumer - other		225		8		233		7,122		7,355
	$	25,733	$	28,541	$	54,274	$	5,186,273	$	5,240,547

	September 30, 2011
					Total				Total
	30 to 89 Days		90 or More Days		Delinquent		Current		Recorded
	Delinquent		Delinquent		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 borrowers 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 loans without the establishment of specific loss allowance is not warranted.

Special mention loans are included with loans 30 to 89 days delinquent in the formula analysis model, if the loan is not considered impaired. Loans classified as substandard, doubtful, or loss are considered impaired loans and are individually evaluated for impairment.

The following tables set forth the recorded investment in loans, less SVAs and charge-offs, classified as special mention or substandard at December 31, 2011 and September 30, 2011, by class. At December 31, 2011 there were no loans classified as doubtful and $34 thousand of one- to four-family purchased loans classified as loss that were not fully reserved or charged-off. At September 30, 2011, there were no loans classified as doubtful or loss that were not fully reserved or charged-off. In addition to the classified loans discussed above and noted below, at December 31, 2011 and September 30, 2011, the Bank had other assets with a carrying value of $10.2 million and $10.3 million, respectively, comprised of municipal bonds and a trust preferred security, also classified per its asset classification policy.


	December 31, 2011				September 30, 2011
	Special Mention		Substandard		Special Mention		Substandard
	(Dollars in thousands)
One- to four-family - originated	$	28,825	$	22,697	$	32,673	$	18,419
One- to four-family - purchased		435		16,481		447		15,987
Multi-family and commercial		2,864		--		7,683		--
Consumer - home equity		237		631		50		592
Consumer - other		--		9		--		5
	$	32,361	$	39,818	$	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 December 31, 2011 and September 30, 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 the last month of the quarter 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, or the most recent bank appraisal, BPO or AVM, if available. In most cases, the most recent appraisal was obtained at the time of origination.


	December 31, 2011					September 30, 2011
	Weighted					Weighted
	Average		Weighted			Average		Weighted
	Credit		Average			Credit		Average
	Score		LTV			Score		LTV
One- to four-family - originated		763		66	%		762		66	%
One- to four-family - purchased		740		60			740		60
Consumer - home equity		744		19			742		20
		760		64	%		759		64	%

Troubled Debt Restructurings - The following table presents the recorded investment of TDRs at the dates presented, including restructurings granted to borrowers who were experiencing financial difficulties and certain restructurings of loans to current market interest rates through the Bank's loan endorsement program. The endorsed loans classified as TDRs represent loans where there has been a decrease in soft credit scores and/or estimated LTV ratios since the time the loan was originated. As a result of these decreases, the borrower could be experiencing financial difficulties even though they have not been delinquent in the previous 12 months on their existing loan payments.


	December 31, 2011
	Restructurings
	Due to		Loan
	Financial		Endorsement
	Difficulties		Program		Total
	(Dollars in thousands)
One- to four-family loans - originated	$	25,617	$	26,458	$	52,075
One- to four-family loans - purchased		5,998		--		5,998
Multi-family and commercial loans		554		--		554
Consumer - home equity		416		--		416
Consumer - other		2		--		2
	$	32,587	$	26,458	$	59,045


	September 30, 2011
	Restructurings
	Due to		Loan
	Financial		Endorsement
	Difficulties		Program		Total
	(Dollars in thousands)
One- to four-family loans - originated	$	23,534	$	19,624	$	43,158
One- to four-family loans - purchased		6,155		--		6,155
Multi-family and commercial loans		563		--		563
Consumer - home equity		413		--		413
Consumer - other		2		--		2
	$	30,667	$	19,624	$	50,291

The recorded investment of TDRs classified as impaired totaled $44.8 million at December 31, 2011. Impaired loans are individually evaluated for losses. TDRs not classified as impaired, which totaled $14.2 million at December 31, 2011, are included in the formula analysis model in their appropriate loan category. At December 31, 2011, $877 thousand was recorded in the ACL related to TDRs.

The following table presents the recorded investment prior to restructuring and immediately after restructuring for all loans restructured during the quarter ended December 31, 2011. This table does not reflect the recorded investment at December 31, 2011.


	Number		Pre-		Post-
	of		Restructured		Restructured
	Contracts		Outstanding		Outstanding
			(Dollars in thousands)
One- to four-family loans - originated		70	$	10,331	$	10,370
One- to four-family loans - purchased		--		--		--
Multi-family and commercial loans		--		--		--
Consumer - home equity		1		--		10
Consumer - other		--		--		--
		71	$	10,331	$	10,380

As of December 31, 2011, the recorded investment of TDRs 30 to 89 days delinquent and over 90 days delinquent was $2.4 million and $3.1 million, respectively. The following table provides information on TDRs restructured within the last 12 months that subsequently became delinquent during the quarter ended December 31, 2011. Of the two loans in the table that became delinquent during the quarter, one loan, with a recorded investment of $76 thousand as of December 31, 2011, had returned to current status as of December 31, 2011.


	Number
	of		Recorded
	Contracts		Investment
			(Dollars in thousands)
One- to four-family loans - originated		1	$	76
One- to four-family loans - purchased		1		401
Multi-family and commercial loans		--		--
Consumer - home equity		--		--
Consumer - other		--		--
		2	$	477

Impaired loans - Impaired loans are defined as non-accrual loans, loans classified as substandard, loans with SVAs, and TDRs that have not yet performed under the restructured terms for 12 consecutive months or are required by the accounting literature to be classified as a TDR for the life of the loan due to a reduction in the stated interest rate to a rate lower than the current market rate for new debt with similar risk. Substantially all of the impaired loans at December 31, 2011 and September 30, 2011 were secured by residential real estate. Impaired loans related to residential real estate are individually evaluated to ensure that the carrying value of the loan is not in excess of the fair value of the collateral, less estimated selling costs. Fair values of residential real estate are estimated through such methods as current appraisals, AVMs, BPOs, or listing prices. Fair values may be adjusted by management to reflect current economic and market conditions. If the outstanding loan balance is in excess of the estimated fair value determined by management, less estimated costs to sell, then an SVA or charge-off is recorded for the difference.



		December 31, 2011
								Current		Current
								Quarter		Quarter
				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	$	48,392	$	48,541	$	--	$	48,051	$	385
	One- to four-family - purchased		7,549		7,512		--		6,812		25
	Multi-family and commercial		554		555		--		558		9
	Consumer - home equity		585		585		--		526		5
	Consumer - other		9		9		--		7		--
			57,089		57,202		--		55,954		424
With an allowance recorded
	One- to four-family - originated		2,705		2,713		280		3,001		25
	One- to four-family - purchased		12,554		12,446		3,154		13,097		30
	Multi-family and commercial		--		--		--		--		--
	Consumer - home equity		110		110		64		187		1
	Consumer - other		--		--		--		--		--
			15,369		15,269		3,498		16,285		56
Total
	One- to four-family - originated		51,097		51,254		280		51,052		410
	One- to four-family - purchased		20,103		19,958		3,154		19,909		55
	Multi-family and commercial		554		555		--		558		9
	Consumer - home equity		695		695		64		713		6
	Consumer - other		9		9		--		7		--
		$	72,458	$	72,471	$	3,498	$	72,239	$	480


		September 30, 2011
				Unpaid
		Recorded		Principal		Related
		Investment		Balance		ACL
		(Dollars in thousands)
With no related allowance recorded
	One- to four-family - originated	$	47,710	$	47,845	$	--
	One- to four-family - purchased		6,075		6,056		--
	Multi-family and commercial		563		565		--
	Consumer - home equity		468		468		--
	Consumer - other		5		5		--
			54,821		54,939		--
With an allowance recorded
	One- to four-family - originated		3,297		3,299		335
	One- to four-family - purchased		13,640		13,546		3,280
	Multi-family and commercial		--		--		--
	Consumer - home equity		264		264		140
	Consumer - other		--		--		--
			17,201		17,109		3,755
Total
	One- to four-family - originated		51,007		51,144		335
	One- to four-family - purchased		19,715		19,602		3,280
	Multi-family and commercial		563		565		--
	Consumer - home equity		732		732		140
	Consumer - other		5		5		--
		$	72,022	$	72,048	$	3,755

Allowance for credit losses - 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.


	For the Three Months Ended December 31, 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	$	4,915		$	9,901		$	14,816		$	254		$	395		$	15,465
Charge-offs		(90	)		(304	)		(394	)		--			(6	)		(400	)
Recoveries		--			--			--			--			--			--
Provision (recovery) for credit losses		96			745			841			(171	)		(130	)		540
Ending balance	$	4,921		$	10,342		$	15,263		$	83		$	259		$	15,605

Ratio of net charge-offs to average loans outstanding during the quarter																	0.01	%
Ratio of net charge-offs during the quarter to average non-performing assets																	1.03	%
ACL for loans collectively
evaluated for impairment	$	4,641		$	7,188		$	11,829		$	83		$	195		$	12,107
ACL for loans individually
evaluated for impairment	$	280		$	3,154		$	3,434		$	--		$	64		$	3,498


	For the Three Months Ended 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	$	4,458		$	9,912		$	14,370		$	272			214		$	14,856
Charge-offs		(115	)		(922	)		(1,037	)		--			(4	)		(1,041	)
Recoveries		--			--			--			--			--			--
Provision (recovery) for credit losses		572			911			1,483			(18	)		185			1,650
Ending balance	$	4,915		$	9,901		$	14,816		$	254		$	395		$	15,465

Ratio of net charge-offs to average loans outstanding during the quarter																	0.02	%
Ratio of net charge-offs during the quarter to average non-performing assets																	2.74	%
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 December 31, 2011 and September 30, 2011 by loan portfolio segment disaggregated by the Company's impairment method.


	December 31, 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	$	4,430,715	$	517,710	$	4,948,425	$	52,984	$	166,680	$	5,168,089

Recorded investment of loans
individually evaluated for impairment		51,097		20,103		71,200		554		704		72,458
	$	4,481,812	$	537,813	$	5,019,625	$	53,538	$	167,384	$	5,240,547


	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 will decrease interest income on loans receivable and will 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 December 31, 2011, 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 differ substantially from the current environment.